Dissolution

SEC. 133. Methods of Dissolution.

- A corporation formed or organized under the provisions of this Code may be dissolved voluntarily
or involuntarily.

Modes of dissolution
1. Voluntary dissolution
a. By the vote of the board of directors or trustees and the resolution adopted by the stockholders
or members where no creditors are affected;
b. By the judgment of the SEC after hearing of petition for voluntary dissolution where creditors are
affected;
c. By amending the articles of incorporation to shorten the corporate term;
d. In case of a corporation sole, by submitting to the SEC a verified declaration of the dissolution for
approval; and
e. In case of merger or consolidation.

2. Involuntary dissolution
a. By expiration of corporate term provided for in the articles of incorporation.
b. By legislative enactment; (laws, rules, ordinances, regulations that must be followed)
c. Upon receipt of a lawful court order dissolving the corporation.
d. By failure to formally organize and commence its business within 5 years from the date of
incorporation;
e. If a corporation has commenced its business but subsequently becomes inoperative for a period
of at least five (5) consecutive years, the SEC may, after due notice and hearing, place the
corporation under delinquent status. A delinquent corporation shall have a period of two (2) years
to resume operations and comply with all requirements that the SEC shall prescribe. Failure to
comply with the requirements and resume operations within the period given by the SEC shall
cause the revocation of the corporation’s certificate of incorporation; and
f. By order of the SEC on grounds under existing laws.

Note:
The requirements for dissolution mandated by the Corporation Code should be strictly complied
with.

SEC. 134. Voluntary Dissolution Where No Creditors are Affected.

Procedures:
1. A meeting must be held upon call of the directors or trustees;
2. At least 20 days prior to the meeting, notice shall be given to each shareholder or member of
record personally, by registered mail, or by any means authorized under its bylaws, whether or not
entitled to vote at the meeting. Notice of the time, place, and object of the meeting shall be
published once prior to the date of the meeting in a newspaper published in the place where the
principal office of said corporation is located, or if no newspaper is published in such place, in a
newspaper of general circulation in the Philippines;
3. A resolution to dissolve must be approved by majority vote of the board of directors or trustees,
and by a resolution duly adopted by the affirmative vote of the stockholders owning at least majority
of the outstanding capital stock or of at least majority of the members;
4. A verified request for dissolution shall be filed with the Commission stating: (a) the reason for the
dissolution; (b) the form, manner, and time when the notices were given; (c) names of the
stockholders and directors or members and trustees who approved the dissolution; (d) the date,
place, and time of the meeting in which the vote was made; and (e) details of publication.
5. The corporation shall submit the following to the Commission: (1) a copy of the resolution
authorizing the dissolution, certified by a majority of the board of directors or trustees and
countersigned by the secretary of the corporation; (2) proof of publication; and (3) favorable
recommendation from the appropriate regulatory agency, when necessary; and
6. The SEC shall thereupon issue the certificate of dissolution.

SEC. 135. Voluntary Dissolution Where Creditors are Affected; Procedure and
Contents of Petition.
Procedures:
1. The petition for dissolution Exchange Commission; shall be filed with the Securities and
2. The petition shall be signed by a majority of its board of directors or trustees and that its
dissolution was resolved upon by the affirmative vote of the stockholders representing at least 2/3
of the outstanding capital stock or by at least 2/3 of the members at a meeting of its stockholders
or members called for that purpose.;
3. The SEC shall, by an order reciting the purpose of the petition, fix a date on or before which
objections thereto may be filed by any person, which date shall not be less than 30 days nor more
than 60 days after the entry of the order;
4. The copy of the order shall be published at least once a week for 3 consecutive weeks in a
newspaper of general circulation published in the municipality or city where the principal office of
the corporation is situated, or if there be no such newspaper, then in a newspaper of general
circulation in the Philippines, and a similar copy shall be posted for 3 consecutive weeks in 3 public
places in such municipality or city;
5. The SEC shall proceed to hear the petition and try any issue made by the objections filed;
6. If no such objection is sufficient, and the material allegations of the petition are true, the SEC
shall render judgment dissolving the corporation and directing such disposition of its assets as
justice requires, and may appoint a receiver to collect such assets and pay the debts of the
corporation; and
7. The dissolution shall take effect only upon the issuance by the Commission of a certificate of
dissolution.

Contents of the Petition

1. The reason for the dissolution;
2. The form, manner, and time when the notices were given; and
3. The date, place, and time of the meeting in which the vote was made.

Note:
In the case of dissolution where creditors are affected, the SEC may appoint a receiver to take
charge of the liquidation of the corporation.

SEC. 136. Dissolution by Shortening Corporate Term.

Procedures:
1. A voluntary dissolution may be effected by amending the articles of incorporation;
2. A copy of the amended articles of incorporation shall be submitted to the SEC; and
3. Approval of the SEC of the amended articles of incorporation.

SEC. 137. Withdrawal of Request and Petition for Dissolution.

– A withdrawal of the request for dissolution shall be made in writing, duly verified by any
incorporator, director, trustee, shareholder, or member and signed by the same number of
incorporators, directors, trustees, shareholders, or members necessary to request for
 –

dissolution as set forth in the foregoing sections.

– The withdrawal shall be submitted no later than fifteen (15) days from receipt by the
Commission of the request for dissolution.
– Upon receipt of a withdrawal of request for dissolution, the Commission shall withhold action
on the request for dissolution and shall, after investigation: (a) make a pronouncement that
the request for dissolution is deemed withdrawn; (b) direct a joint meeting of the board of
directors or trustees and the stockholders or members for the purpose of ascertaining
whether to proceed with dissolution; or (c) issue such other orders as it may deem
appropriate.

A withdrawal of the petition for dissolution shall be in the form of a motion and similar in substance
to a withdrawal of request for dissolution but shall be verified and filed prior to publication of the
order setting the deadline for filing objections to the petition.

SEC. 138. Involuntary Dissolution.

Grounds for Involuntary Dissolution
.
Non-use of corporate charter;
.
Continuous inoperation ofa corporation;
Upon receipt ofa lawful court order dissolving the corporation;
.
.
Upon finding by final judgment that the corporation procured its incorporation through fraud;
and
. Upon finding by final judgment that the corporation:
– Was created for the purpose of committing, concealing or aiding the commission of securities
violations, smuggling, tax evasion, money laundering, or graft and corrupt practices;
– Committed or aided in the commission of securities violations, smuggling, tax evasion, money
laundering, or graft and corrupt practices, and its stockholders knew of the same; and
– Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other
fraudulent or illegal acts by its directors, trustees, officers, or employees.

If the corporation is ordered dissolved by final judgment pursuant to the grounds set forth in
subparagraph (e) hereof, its assets, after payment of its liabilities, shall, upon petition of the
Commission with the appropriate court, be forfeited in favor of the national government. Such
forfeiture shall be without prejudice to the rights of innocent stockholders and employees for
services rendered, and to the application of other penalty or sanction under this Code or other laws,

The Commission shall give reasonable notice to, and coordinate with, the appropriate regulatory
agency prior to the involuntary dissolution of companies under their special regulatory jurisdiction.

SEC. 139. Corporate Liquidation.

General Rule:
Every corporation whose charter expires pursuant to its articles of incorporation, is annulled by
forfeiture, or whose corporate existence is terminated in any other manner, shall nevertheless
remain as a body corporate for three years after the effective date of dissolution, for the purpose of
prosecuting and defending suits by or against it and enabling it to settle and close its affairs,
dispose of and convey its property, and distribute its assets, but not for the purpose of continuing
the business for which it was established.

Exception:
Except for banks, which shall be covered by the applicable provisions of Republic Act No. 7653,
otherwise known as the “New Central Bank Act”, as amended, and Republic Act No. 3591, otherwise
known as the “Philippine Deposit Insurance Corporation Charter”, as amended.
Note:
Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall
distribute any of its assets or property except upon lawful dissolution and after payment of all its
debts and liabilities.

General rule:
Upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or
member who is unknown or cannot be found shall be escheated in favor of the national government.

Exception:
In case of distribution of assets in non-stock corporations.

FOREIGN CORPORATIONS
SEC. 140. Definition and Rights of Foreign Corporations.
Foreign corporation
– It is one formed, organized orexisting under any laws other than those of the Philippines and
whose laws allow Filipino citizens and corporations to do business in its own country or State.

Requisites:
1. It must be formed, organized, or existing under any laws other than those of the Philippines; and
2. The laws of the country where the corporation was organized allow Filipino citizens and
corporations to do business in its own country or state.

Under Article 123 of the Corporation Code (Now section 140, Revised Corporation Code), a foreign
corporation must first obtain a license and a certificate from the appropriate government agency
before it can transact business in the Philippines. Where a foreign corporation does business in the
Philippines without the proper license, it cannot maintain any action or proceeding before Philippine
courts as provided under Section 133 of the Corporation Code (Now section 150, Revised
Corporation Code).

Note:
By securing a license, which is a legal requirement to lawfully engage in business in the Philippines,
the foreign entity would be giving assurance that it will abide by the decisions of our courts, even if
adverse to it.

SEC. 141. Application to Existing Foreign Corporations.

- Every foreign corporation which, on the date of the effectivity of this Code, is authorized to do
business in the Philippines under a license issued to it shall continue to have such authority under
the terms and conditions of its license, subject to the provisions of this Code and other special
laws.

SEC. 142. Application for a License.

A foreign corporation doesn't need a license to go to court in the Philippines if it's not doing
business there. The key is whether it's actively engaged in business in the country. If it is, then it
needs a license. If it's not, it can still file a lawsuit in Philippine courts as long as the case falls under
their jurisdiction. So, having the license isn't the issue; it's whether the foreign corporation is
conducting business in the Philippines that matters.

Meaning of “doing”, “engaging in”, or “transacting” business in the Philippines.

There are no fixed rules to determine what "doing business" means for a foreign corporation in a
particular situation. Each case is unique and depends on its own circumstances. However, the main
tests involve whether the foreign corporation is actively continuing its intended business or has
mostly handed it over to someone else.

"Doing business" implies ongoing commercial activities and the regular performance of tasks
related to the corporation's purpose. In general, a foreign corporation is considered to be "doing
business" in a state when its agents are actively engaged in a significant part of its regular
operations there, as opposed to occasional or isolated activities.

Not doing business

In most cases, a foreign corporation won't be considered as doing business in a state just because
it enters into contracts with residents of that state, especially if the contracts are finalized outside
the state. It's also important to note that a foreign corporation isn't typically seen as doing business
in a state if sales of its products occur there or if other activities benefiting the corporation are
conducted by an agent (whether a company or an individual) who operates independently and isn't
directly controlled by the foreign corporation.

For instance, when independent dealers purchase products from the foreign corporation and then
sell them to customers in the state, this usually doesn't qualify as the foreign corporation "doing
business" in the state. Similarly, if the foreign corporation sells its products to so-called
"distributing agents" in the state, as long as the agreement specifies that these agents must
exclusively buy and sell the corporation's goods at set trade prices, this typically doesn't make the
foreign corporation subject to legal processes within the state.

Right of a foreign corporation to bring suit

The principles regarding the right of a foreign corporation to bring suit in Philippine courts may thus
be condensed in four statements:

1. If a foreign corporation does business in the Philippines without a license, it cannot sue before the
Philippine courts;
2. If a foreign corporation is not doing business in the Philippines, it needs no license to sue before
Philippine courts on an isolated transaction or on a cause of action entirely independent of any
business transaction;
3. If a foreign corporation does business in the Philippines without a license, a Philippine citizen or
entity which has contracted with said corporation may be estopped from challenging the foreign
corporation’s corporate personality in a suit brought before Philippine courts; and
4. If a foreign corporation does business in the Philippines with the required license, it can sue
before Philippine courts on any transaction.

Doctrine of Isolated Transactions

– Foreign corporations, even unlicensed ones, can sue or be sued on a transaction or series of
transactions set apart from their common business in the sense that there is a no intention to
engage in a progressive pursuit of the purpose and object of business transaction.

SEC. 143. Issuance of a License.

A foreign corporations’ by-laws effective in the Philippines Section 125 of the same Code (Now
Section 142, Revised Corporation Code) requires that a foreign corporation applying for a license to
transact business in the Philippines must submit, among other documents, to the SEC, a copy of its
articles of incorporation and by-laws, certified in accordance with law. Unless these documents are
submitted, the application cannot be acted upon by the SEC. In Section 126, the Code (Now Section
143, Revised Corporation Code) specifies when the SEC can grant the license applied for. Section
126 provides in part:

"SEC. 126. Issuance of a license. — If the Securities and Exchange Commission is satisfied that the
applicant has complied with all the requirements of this Code and other special laws, rules and
regulations, the Commission shall issue a license to the applicant to transact business in the
Philippines for the purpose or purposes specified in such license..."

Since the SEC will grant a license only when the foreign corporation has complied with all the
requirements oflaw, itfollows that when it decides to issue such license, it is satisfied that the
applicant's by-laws, among the other documents, meet the legal requirements. This, in effect, is an
approval of the foreign corporations’ by-laws. It may not have been made in express terms, still it is
clearly an approval. Therefore, a foreign corporation’s bylaws, though originating from a foreign
jurisdiction, are valid and effective in the Philippines.

SEC. 144. Who May be a Resident Agent.

Resident agent
1. An individual residing in the Philippines and he must be of good moral character and of sound
financial standing.
2. A domestic corporation lawfully transacting business in the Philippines and must likewise be of
sound financial standing and must show proof that it is in good standing as certified by the SEC.

Purpose of appointing a resident agent

For the purpose of accepting and receiving on behalf of the foreign corporation:
1. Notice affecting the corporation pending the establishment of its local office; and
2. Summons and other legal processes in al proceedings for or against the corporation.

Note:
The appointment of a resident agent of a foreign corporation is revocable at any time at the
instance of the corporation.

SEC. 145. Resident Agent; Service of Process.

Ways of serving summons
When summons is served on a foreign juridical entity, there are three prescribed ways:
1. Service on its resident agent designated in accordance with law for that purpose;
2. Service on the government official designated by law to receive summons if the corporation does
not have a resident agent; and
3. Service on any of the corporation’s officers or agents within the Philippines.

Purpose of summons
The purpose of summons is not only to acquire jurisdiction over the person of the defendant, but
also to give notice to the defendant that an action has been commenced against it and to afford it
an opportunity to be heard on the claim made against it.

Note:
The requirements of the rule on summons must be strictly followed; otherwise, the trial court will
not acquire jurisdiction over the defendant.

SEC. 146. Law Applicable.

General rule:
A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and
regulations applicable to domestic corporations of the same class.

Exceptions:
. Except those which provide for the creation, formation, organization or dissolution of
corporations; or
. Except those which fix the relations, liabilities, responsibilities, or duties of stockholders,
members, or officers of corporations to each other or to the corporation.

SEC. 147. Amendments to Articles of Incorporation or Bylaws of Foreign

Corporations.
- Whenever the articles of incorporation or bylaws of a foreign corporation authorized to transact
business in the Philippines are amended, such foreign corporation shall, within sixty (60) days after
the amendment becomes effective, file with the Commission, and in proper cases, with the
appropriate government agency, a duly authenticated copy of the amended articles of incorporation
or bylaws, indicating clearly in capital letters or underscoring the change or changes made, duly
certified by the authorized official or officials of the country or state of incorporation. Such filing
shall not in itself enlarge or alter the purpose or purposes for which such corporation is authorized
to transact business in the Philippines.

SEC. 148. Amended License.

- A foreign corporation authorized to transact business in the Philippines shall obtain an amended
license in the event it changes its corporate name, or desires to pursue other or additional purposes
in the Philippines, by submitting an application with the Commission, favorably endorsed by the
appropriate government agency in the proper cases.

Note:
A foreign corporation authorized to transact business In the Philippines shall obtain an amended
license:
. In the event it changes its corporate name; or
. Desires to pursue gther or additional purposes in the Philippines.

SEC. 149. Merger or Consolidation Involving a Foreign Corporation Licensed in the

Philippines.
- One or more foreign corporations authorized to transact business in the Philippines may merge or
consolidate with any domestic corporation or corporations ifpermitted under Philippine laws and by
the law of its incorporation: Provided, That the requirements on merger or consolidation as provided
in this Code are followed.

Whenever a foreign corporation authorized to transact business in the Philippines shall be a party to
a merger or consolidation in its home country or state as permitted by the law authorizing its
incorporation, such foreign corporation shall, within sixty (60) days after the effectivity of such
merger or consolidation, file with the Commission, and in proper cases, with the appropriate
government agency, a copy of the articles of merger or consolidation duly authenticated by the
proper official or officials of the country or state under whose laws the merger or consolidation was
effected: Provided, however, That if the absorbed corporation is the foreign corporation doing
business in the Philippines, the latter shall at the same time file a petition for withdrawal of its
license in accordance with this Title.

Note:
One or more foreign corporations authorized to transact business in the Philippines may merge or
consolidate with any domestic corporation or corporations if permitted under Philippine laws and by
the law of its incorporation.

SEC. 150. Doing Business Without a License.

- No foreign corporation transacting business in the Philippines without a license, or its successors
or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court
or administrative agency of the Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of action recognized under
Philippine laws.

To be doing or "transacting business in the Philippines" for purposes of Section 133 of the
Corporation Code (Now Section 150, Revised Corporation Code), the foreign corporation must
actually transact business in the Philippines, that is, perform specific business transactions within
the Philippine territory on a continuing basis in its own name and for its own account. Actual
transaction of business within the Philippine territory is an essential requisite for the Philippines to
acquire jurisdiction over a foreign corporation and thus require the foreign corporation to secure a
Philippine business license. If a foreign corporation does not transact such kind of business in the
Philippines, even ifitexports its products to thePhilippines, the Philippines has no jurisdiction to
require such foreign corporation to secure a Philippine business license.

A foreign corporation withoutalicense is not ipsofacto incapacitated from bringing an action in

Philippine courts. A license is necessary only if a foreign corporation is "transacting" or "doing
business" in the country.

General Rule:
The aforementioned provision prevents an unlicensed foreign corporation "doing business" in the
Philippines from accessing our courts.

Exception:
The exception to this rule is the doctrine of estoppel.

In a number of cases, however, we have held that an unlicensed foreign corporation doing business
in the Philippines may bring suit in Philippine courts against a Philippine citizen or entity who had
contracted with and benefited from said corporation. Such a suit is premised on the doctrine of
estoppel. A party is estopped from challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. This doctrine of estoppel to deny
corporate existence and capacity applies to foreign as well as domestic corporations. The
application of this principle prevents a person contracting with a foreign corporation from later
taking advantage of its noncompliance with the statutes chiefly in cases where such person has
received the benefits of the contract.

SEC. 151. Revocation of License.

Without prejudice to other grounds provided under special laws, the license of a foreign corporation
to transact business in the Philippines may be revoked or suspended by the Commission upon any
of the following grounds:
(a) Failure to file its annual report or pay any fees as required by this Code;
(b) Failure to appoint and maintain a resident agent in the Philippines as required by this Title;
(c) Failure, after change of its resident agent or address, to submit to the Commission a statement
of such change as required by this Title;
(d) Failure to submit to the Commission an authenticated copy of any amendment to its articles of
incorporation or bylaws or of any articles of merger or consolidation within the time prescribed by
this Title;
(e) A misrepresentation of any material matter in any application, report, affidavit or other document
submitted by such corporation pursuant to this Title;
(f) Failure to pay any and all taxes, imposts, assessments or penalties, ifany, lawfully due to the
Philippine Government or any of its agencies or political subdivisions;
(g) Transacting business in the Philippines outside of the purpose or purposes for which such
corporation is authorized under its license;
(h) Transacting business in the Philippines as agent of or acting on behalf of any foreign corporation
or entity not duly licensed to do business in the Philippines; or
(i) | Any other ground as would render it unfit to transact business in the Philippines.

SEC. 152. Issuance of Certificate of Revocation.

Procedure:
1. The SEC shall issue a corresponding certificate of revocation, furnishing a copy thereof to the
appropriate government agency in the proper cases; and
2. The SEC shall also mail to the corporation at its registered office in the Philippines a notice of
such revocation accompanied by a copy of the certificate of revocation.

SEC. 153. Withdrawal of Foreign Corporations.

- Subject to existing laws and regulations, a foreign corporation licensed to transact business in the
Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of
license. No certificate ofwithdrawal shall be issued by the Commission unless all the following
requirements are met:
(a) All claims which have accrued in the Philippines have been paid, compromised or settled;
(b) All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine Government
or any of its agencies or political subdivisions, have been paid; and
(c) The petition for withdrawal of license has been published once a week for three (3) consecutive
weeks in a newspaper of general circulation in the Philippines.

INVESTIGATIONS, OFFENSES, AND PENALTIES

SEC. 154. Investigation and Prosecution of Offenses.
- The Commission may investigate an alleged violation of this Code, or of a rule, regulation, or order
of the Commission.

The Commission may publish its findings, orders, opinions, advisories, or information concerning
any such violation, as may be relevant to the general public or to the parties concerned, subject to
the provisions of Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”, and
other pertinent laws.

The Commission shall give reasonable notice to and coordinate with the appropriate regulatory
agency prior to any such publication involving companies under their regulatory jurisdiction.

Note:
The SEC may investigate an alleged violation of the Revised Corporation Code, or of a rule,
regulation, or order of the SEC.

SEC. 155. Administration of Oaths, Subpoena of Witnesses and Documents.

- The Commission, through its designated officer, may administer oaths and affirmations, issue
subpoena and subpoena duces tecum, take testimony in any inquiry or investigation, and may
perform other acts necessary to the proceedings or to the investigation.

Note:
The SEC, through its designated officer, may:
1. Administer oaths and affirmations;
2. Issue subpoena and subpoena duces tecum;
3. Take testimony in any inquiry or investigation; and
4, May perform other acts necessary to the proceedings or to the investigation.

SEC. 156. Cease and Desist Orders.

Whenever the Commission has reasonable basis to believe that a person has violated, or is about to
violate this Code, a rule, regulation, or order of the Commission, it may direct such person to desist
from committing the act constituting the violation.

The Commission may issue a cease and desist order ex parte to enjoin an act or practice which is
fraudulent or can be reasonably expected to cause significant, imminent, and irreparable danger or
injury to public safety or welfare. The ex parte order shall be valid for a maximum period of twenty
(20) days, without prejudice to the order being made permanent after due notice and hearing.

Thereafter, the Commission may proceed administratively against such person in accordance with
Section 158 of this Code, and/or transmit evidence to the Department of Justice for preliminary
investigation or criminal prosecution and/or initiate criminal prosecution for any violation of this
Code, rule, or regulation.

Note:
The SEC may issue a cease and desist order ex parte to enjoin an act or practice which is fraudulent
or can be reasonably expected to cause significant, imminent, and irreparable danger or injury to
public safety or welfare.

SEC. 157. Contempt.

- Any person who, without justifiable cause, fails or refuses to comply with any lawful order,
decision, or subpoena issued by the Commission shall, after due notice and hearing, be held in
contempt and fined in an amount not exceeding Thirty thousand pesos (P30,000.00). When the
refusal amounts to clear and open defiance of the Commission’s order, decision, or subpoena, the
Commission may impose a daily fine of One thousand pesos (P1,000.00) until the order, decision, or
subpoena is complied with.

SEC. 158. Administrative Sanctions.

- If, after due notice and hearing, the Commission finds that any provision of this Code, rules or
regulations, or any of the Commission’s orders has been violated, the Commission may impose any
or all of the following sanctions, taking into consideration the extent of participation, nature, effects,
frequency and seriousness of the violation:

(a) Imposition of a fine ranging from Five thousand pesos (P5,000.00) to Two million pesos
(P2,000,000.00), and not more than One thousand pesos (P1,000.00) for each day of continuing
violation but in no case to exceed Two million
pesos (P2,000,000.00);
(b) Issuance of a permanent cease and desist order;

(c) Suspension or revocation of the certificate of incorporation; and

(d) Dissolution of the corporation and forfeiture of its assets

under the conditions in Title XIV of this Code.

SEC. 159. Unauthorized Use of Corporate

Name; Penalties.
- The unauthorized use of a corporate name shall be punished with a fine ranging from Ten
thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00).

SEC. 160. Violation of Disqualification Provision; Penalties.

- When, despite the knowledge of the existence of a ground for disqualification as provided in
Section 26 of this Code, a director, trustee or officer willfully holds office, or willfully conceals such
disqualification, such director, trustee or officer shall be punished with a fine ranging from Ten
thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00) at the discretion of
the court, and shall be permanently disqualified from being a director, trustee or officer of any
corporation. When the violation of this provision is injurious or detrimental to the public, the penalty
shall be a fine ranging from Twenty thousand pesos (P20,000.00) to Four hundred thousand pesos
(P400,000.00).

Section 26, Revised Corporation Code, provides; thus:

SEC. 26. Disqualification of Directors, Trustees or Officers.
- A person shall be disqualified from being a director, trustee or officer of any corporation if, within
five (5) years prior to the election or appointment as such, the person was:
(a) Convicted by final judgment:
. Of an offense punishable by imprisonment for a period exceeding six (6) years;
. For violating this Code; and
. For violating Republic Act No. 8799, otherwise known as “The Securities Regulation Code”;
(b) Found administratively liable for any offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct
similar to those enumerated in paragraphs (a) and (b) above.

The foregoing is without prejudice to qualifications or other disqualifications, which the

Commission, the primary regulatory agency, or the Philippine Competition Commission may impose
in its promotion of good corporate governance or as a sanction in its administrative proceedings.

SEC. 161. Violation of Duty to Maintain Records, to Allow their Inspection or

Reproduction; Penalties.
- The unjustified failure or refusal by the corporation, or by those responsible for keeping and
maintaining corporate records, to comply with Sections 45, 73, 92, 128, 177 and other pertinent
rules and provisions of this Code on inspection and reproduction of records shall be punished with a
fine ranging from Ten thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00),
at the discretion of the court, taking into consideration the seriousness of the violation and its
implications. When the violation of this provision is injurious or detrimental to the public, the penalty
is a fine ranging from Twenty thousand pesos (P20,000.00) to Four hundred thousand pesos
(P400,000.00).

The penalties imposed under this section shall be without prejudice to the Commission’s exercise of
its contempt powers under Section 157 hereof.

SEC. 162. Willful Certification of Incomplete, Inaccurate, False, or Misleading

Statements or Reports; Penalties.
- Any person who willfully certifies a report required under this Code, knowing that the same
contains incomplete, inaccurate, false, or misleading information or statements, shall be punished
with a fine ranging from Twenty thousand pesos (P20,000.00) to Two hundred thousand pesos
(P200,000.00). When the wrongful certification is injurious or detrimental to the public, the auditor
or the responsible person may also be punished with a fine ranging from Forty thousand pesos
(P40,000.00) to Four hundred thousand pesos (P400,000.00).

SEC. 163. Independent Auditor Collusion; Penalties.

- An independent auditor who, in collusion with the corporation’s directors or representatives,
certifies the corporation’s financial statements despite
its incompleteness or inaccuracy, its failure to give a fair and accurate presentation of the
corporation’s condition, or despite containing false or misleading statements, shall be punished with
a fine ranging from Eighty thousand pesos (P80,000.00) to Five hundred thousand pesos
(P500,000.00). When the statement or report certified is fraudulent, or has the effect of causing
injury to the general public, the auditor or responsible officer may be punished with a fine ranging
from One hundred thousand pesos (P100,000.00) to Six hundred thousand pesos (P600,000.00).

Note:
An independent auditor who, in collusion with the corporation’s directors or representatives,
certifies the corporation’s financial statements despite its incompleteness or inaccuracy, its failure
to give a fair and accurate presentation of the corporation’s condition, or despite containing false or
misleading statements, shall be punished with a fine ranging from P80,000.00 to P500,000.00.

SEC. 164. Obtaining Corporate Registration Through Fraud; Penalties.

- Those responsible for the formation of a corporation through fraud, or who assisted directly or
indirectly therein, shall be punished with a fine ranging from Two hundred thousand pesos
(P200,000.00) to Two million pesos (P2,000,000.00). When the violation of this provision is injurious
or detrimental to the public, the penalty is a fine ranging from Four hundred thousand pesos
(P400,000.00) to Five million pesos (P5,000,000.00).

SEC. 165. Fraudulent Conduct of Business; Penalties.

- A corporation that conducts its business through fraud shall be punished with a fine ranging from
Two hundred thousand pesos (P200,000.00) to Two million pesos (P2,000,000.00). When the
violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from
Four hundred thousand pesos (P400,000.00) to Five million pesos (P5,000,000.00).

SEC. 166. Acting as Intermediaries for Graft and Corrupt Practices; Penalties.
- A corporation used for fraud, or for committing or concealing graft and corrupt practices as
defined under pertinent statutes, shall be liable for a fine ranging from One hundred thousand
pesos (P100,000.00) to Five million pesos (P5,000,000.00).

When there is a finding that any of its directors, officers, employees, agents, or representatives are
engaged in graft and corrupt practices, the corporation’s failure to install: (a) safeguards for the
transparent and lawful delivery of services; and (b) policies, code of ethics, and procedures against
graft and corruption shall be prima facie evidence of corporate liability under this section.
SEC. 167. Engaging Intermediaries for Graft and Corrupt Practices; Penalties.
- A corporation that appoints an intermediary who engages in graft and corrupt practices for the
corporation’s benefit or interest shall be punished with a fine ranging from One hundred thousand
pesos (P100,000.00) to One million pesos (P1,000,000.00).

SEC. 168. Tolerating Graft and Corrupt Practices; Penalties.

- A director, trustee, or officer who knowingly fails to sanction, report, or file the appropriate action
with proper agencies, allows or tolerates the graft and corrupt practices or fraudulent acts
committed by a corporation’s directors, trustees, officers, or employees shall be punished with a
fine ranging from Five hundred thousand pesos (P500,000.00) to One million pesos
(P1,000,000.00).

SEC. 169. Retaliation Against Whistleblowers.

- A whistleblower refers to any person who provides truthful information relating to the commission
or possible commission of any offense or violation under this Code. Any person who, knowingly and
with intent to retaliate, commits acts detrimental to a whistleblower such as interfering with the
lawful employment or livelihood of the whistleblower, shall, at the discretion of the court, be
punished with a fine ranging from One hundred thousand pesos (P100,000.00) to One million pesos
(P1,000,000.00).

Whistleblower
– A whistleblower refers to any person who provides truthful information relating to the
commission or possible commission of any offense or violation under the Revised Corporation
Code.

SEC. 170. Other Violations of the Code; Separate Liability.

- Violations of any of the other provisions of this Code or its amendments not otherwise specifically
penalized therein shall be punished by a fine of not less than Ten thousand pesos (P10,000.00) but
not more than One million pesos (P1,000,000.00). If the violation is committed by a corporation, the
same may, after notice and hearing, be dissolved in appropriate proceedings before the
Commission: Provided, That such dissolution shall not preclude the institution of appropriate action
against the director, trustee, or officer of the corporation responsible for said violation: Provided,
further, That nothing in this section shall be construed to repeal the other causes for dissolution of
a corporation provided in this Code.

Liability for any of the foregoing offenses shall be separate from any other administrative, civil, or
criminal liability under this Code and other laws.

SEC. 171. Liability of Directors, Trustees, Officers, or Other Employees.

- If the offender is a corporation, the penalty may, at the discretion of the court, be imposed upon
such corporation and/or upon its directors, trustees, stockholders, members, officers, or employees
responsible for the violation or indispensable to its commission.

SEC. 172. Liability of Aiders and Abettors and Other Secondary Liability.
- Anyone who shall aid, abet, counsel, command, induce, or cause any violation of this Code, or any
rule, regulation, or order of the Commission shall be punished with a fine not exceeding that
imposed on the principal offenders, at the discretion of the court, after taking into account their
participation in the offense.