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THE CORPORATION CODE BP 68 BASIS: Art.

46 Juridical persons may acquire and possess property of all kinds as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization. Corporations are NOT LIABLE but its

2. Unity of incompatible and conflicting elements in view of transferability of shares; 3 Minority stockholders usually become subservient to majority stockholders. 4. Stockholders right to vote merely becomes theoretical in view of the widespread of ownership, disinterest in management, inertia and inaccessible meeting places; 5. Management or control has been separated from ownership as in large corporation. 6. Corporations are subject to many legal controls and restrictions; 7. Corporate form involves double taxation on corporate income. CORPORATION vs. PARTNERSHIP

officers may be held criminally responsible; except when the employees violate Article 103 of RPC, and the corporate charter may be subject to FORFEITURE. Section 1: WHAT IS A CORPORATION:

/ATTRIBUTES OF A CORPORATION: (P-A-C-E) 1. has Powers, attributes and properties expressly authorized by law or incident to its existence; 2. Artificial being; 3. Created by law; 4. Enjoys the right of succession; Doctrine of Piercing the Corporate Entity Separate personality of the corporation may be disregarded if the same was availed to defeat public convenience, justify a wrong, protect fraud or defend a crime. CONSEQUENCES of the SEPARATE JURIDICAL PERSONALITY of A CORPORATION: 1. Corporate debt is NOT the debt of the stockholder NOR is the stockholders debt that of the corporation; 2. Stockholders are NOT OWNERS , but only have INDIRECT INTEREST over corporate assets. 3. Shareholders have no right to recover possession of property belonging to the corporation or to recover damages for its injury; 4. In taxation, the income of the corporation is NOT that of the shareholders , who may still be taxed on dividends, that may be derived from such income. ADVANTAGES OF A CORPORATION may be summarized as follow (FE-LI-CON CAP-CENTS_ 1. Feasibility of greater and bigger undertaking; 2. Limited shareholders liability; 3. Continuity of Existence; 4. Capacity to act as a Legal unit; 5. Transferability of shares; 6. Centralized management; 7. Standardized Method; DISADVANTAGES of CORPORATION: 1. Credit is limited in view of the shareholders limited liability;

Corporation
-created by law; -shares are transferrable even without the consent of other shareholders; -managed by BOD; -death of a SH does not dissolve a corporation; -SH is not liable to corporate creditors with his separate property; -may exist for 50 years subject to extension; -governed by the corporation code;

Partnership:
-created by AGREEMENT of the parties; -cannot transfer shares/interest without the Consent of the other partners; -managed by ALL of the parties except when They appointed a Managing Partner; -death of a GENERAL partner DISSOLVES The partnership; -general partners are liable for Debts of the Partnership BEYOND his capital investment; -may exist indefinitely, beyond fifty years; -governed by the CIVIL CODE; SECTION 3: CLASSES OF CORPORATION: General Classification: a. STOCK CORPORATIONS with stocks divided into shares; -authorized to distribute to the stockholders dividends or allotments of the surplus for profits on the basis of the shares held. b. NON-STOCK CORPORATIONS no stocks to be divided; no dividends or allotments to be distributed; Other classification: a. Open or Close Corporations; b. De Jure or De Facto;

c. By estoppels or by Prescription; d. Foreign or Domestic; e. Lay/Regligious/Eleemosynary; DE FACTO CORPORATION -can be attacked only by a quo warranto proceeding; -may exist under the following conditions: (L-A-A-C) 1. valid LAW under which it was incorporated 2.ATTEMPT to incorporate; 3.Assumption of corporate powers; 4.Certificate of Incorporation was issued Despite defect in its incorporation. SECTION 4: CORPORATIONS SPECIAL LAWS or CHARTERS: CREATED by

1.Shares shall not be deprived of voting, except PREFERRED or REDEEMABLE SHARES; -non-voting shares must still be entitled to vote on matters specified in the last paragraph of the provision such as amendment of the AOI and dissolution of the corporation. 2. There must always be a class or series of shares with complete voting rights where non-voting shares are provided for, 3. Non-issuance of no-par value shares for banks, trust companies, insurance companies, Public utilities and building, and loan associations. 4. PREFERRED stocks must be issued with stated Par Value. 5. Terms and conditions of PREFERRED shares may be fixed by the BOD only when so authorized and is effectivity shall take place only upon filling with the SEC; 6. No par value shares shall not be issued for a consideration of less than 5.00; 7. Rights, Privileges or restrictions on the shares of the SH must be stated in the AOI and in the Certificate of Stock unless otherwise provided by law. SITUS OF SHARES of STOCK generally at the domicile of the owner. -or at the DOMICILE of the CORPORATION for purposes of Attachment, Garnishment or Execution; -or at the PROVINCE in which the ciporation has its principal place of business for purposes of registering a chattel mortgage over shares of stock. -or at the DOMICILE of the Corporation generally controlling for purposes of Taxation. Shares of stock maybe pledged in accordance with Art. 2095 of the New Civil Code which provides: Incorporeal rights, evidenced by negotiable instruments, bills of lading, shares of stock, bonds, warehouse receipts and similar documents may also be pledged. The instrument proving the right pledged shall be delivered to the creditor, and if negotiable must be indorsed.

-governed primarily by the provisions of the Special Law or charter creating them or applicable to them, supplemented by the provisions of the Corporation Code, insofar as they are applicable. SECTION 5: CORPORATORS and INCORPORATORS STOCKHOLDERS and MEMBERS -Corporators those who come to the corporation whether as stockholders or member. Incorporators stockholders or members mentioned in the articles of incorporation as finally forming and composing the corporation and who are signatories thereof. Corporators in a STOCK CORPORATION are called STOCKHOLDERS/SHAREHOLDERS; -all incorporators in a STOCK CORPORATION must now subscribe to or own a stock in such corporation; Corporators in a NON-STOCK CORP are called MEMBERS. GENERAL RULE: - only capacitated NATURAL PERSONS may be incorporators UNLESS JURIDICAL PERSONS are otherwise permitted.

Sunset View vs. Campos non-payment of the full price of a condo unit is NOT as stockholder of a condominium corporation, and thus will not give rise to an intra-corporate conflict cognizable by the Corporation Code. SECTION 6: CLASSIFICATION OF SHARES: GR shares may be divided into such classes possessing rights, privileges or restrictions as the articles of incorporation may provided, subject to legal limitations; LEGAL LIMITATIONS on CLASSIFICATION OF SHARES:

1. Merger or consolidation of the corporation with another corporation or other corporation. 2. Amendment of the Articles of Incorporation; 3. Adoption and Amendment of by-laws; 4. Incurring, creating or increasing bonded indebtedness;

5. Investment of Corporate funds with another corporation; 6. Increase or decrease of capital stocks; 7. Dissolution of the corporation; 8. Sale, lease, exchange mortgage, pledge or other disposition of all or substantially all of the corporate property. SECTION 7: FOUNDERs SHARES -may give certain rights and privileges not enjoyed by other owners of stock; -may be given preference not only as to voting rights but also to dividend payments; -if the exclusive privilege is to vote and be voted for as directors, this must be for a period of NOT EXCEEDING 5 years subject to the approval of the SEC. SECTION 8: REDEEMABLE SHARES -may be issued by the corporation when expressly so provided in the AOI; -may be PURCHASED or TAKEN UP by the corporation upon the expiration of the fixed period, REGARDLESS of the existence of unrestricted retained earnings in the stocks of the corporation, and upon such terms and conditions in the AOI, which must also be stated in the Certificate of Stock representing the said shares; -Upon MATURITY of Redeemable Shares, they should be PAID by the corporation, even if the latter has no unrestricted retained earnings. SECTION 9: TREASURY SHARES: -are shares of stock which have been issued and fully paid for, subsequently REACQUIRED by the issuing corporation by PURCHASE, REDEMPTION, DOATION or through some other Lawful means. -some may be again disposed for reasonable price fixed by the BOD; -if the price is LOWER, there will be a violation of the law, and the stockholder can complain; -cannot be VOTED upon; -not entitled to dividends for it is absurd for a corporation to pay dividends to itself. INCORPORATION and ORGANIZATION PRIVATE CORPORATIONS OF

-incorporators must own at least one share of the corporations capital stock; therefore, a member can no longer exist as incorporator in a stock corporation. JURIDICAL PERSONS cannot be incorporators, but can be CORPORATORS.

SECTION 11: CORPORATE TERM: -shall exist for a period not exceeding 50 years from the date of incorporation UNLESS sooner dissolved, or unless such period is EXTENDED. -extension of period can be made in any single instance by Amendment of the Articles of Incorporation, in accordance with the Code; -no extension can be made EARLIER than 5 years prior to the original or subsequent expiry date unless there are justifiable reasons for an earlier extension as may be determined by the SEC. -no extension can be done AFTER EXPIRATION of the corporate life because there is no life to be extended in such case. SECTION 12 MINIMUM CAPITAL STOCK REQUIRED OF STOCKS CORPORATIONS: -Stock Corporations incorporated under this Code, shall not be required to have any MINIMUM authorized Capital Stock except as otherwise specifically provided for by special law; -as long as the paid-up capital should NOT BE LESS than 5,000.00 SECTION 13 AMOUNT OF CAPITAL STOCK to be SUBSCRIBED and PAID for purposes of INCORPORATION -at least 25% of the authorized capital stock (deemed to be the total capital stock in case of several shares with different par values, or the total number of shares in the case of no Par value shares) SHALL BE SUBSCRIBED -at LEAST 25% of the subscribed ACS shall be paid Upon subscription, the balance to be payable on the dates fixed in the contract of subscription, WITHOUT NEED of CALL; -in the absence thereof, upon CALL for payment by the BOD; -paid-up capital SHALL NOT be less than 5,000.00; -Special Laws may provide for bigger paid-up capital.

Section 10: NUMBER and QUALIFICATIONS of INCORPORATION: -only NATURAL PERSONS can incorporate; -not less than 5 nor more than 15 natural persons may incorporate unless otherwise permitted by law.

ARTICLE 14 CONTENTS INCORPORATION

of

ARTICLES

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SECTION 15: FORM INCORPORATION

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ARTICLES

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-substantial compliance is sufficient -ALL Corporations organized under the Corporation Code shall file with the SEC articles of Incorporation, in any of the official language, signed and acknowledged by all of the incorporators, containing the following, except as otherwise prescribed by the Code or Special Law; a. Name of the Corporation b. Specific Purpose -if there be more than one purpose, it shall be indicated as primary, secondary -non-stock corporation shall not include a purpose which would contradict to its nature as such; c. Place where the principal office of the Operation is to be located, which must be within the Philippines; d. Term of Existence of the Corporation; e. Names, nationalities and residences of the incorporators; f. Number of directors and trustees which MUST NOT be less 5 nor more than 15 ; g. names, nationalities, and residents of the person who shall act as directors or trustees until the first regular directors and trustees are duly elected and qualified in accordance with this Code; h. If STOCK CORPORATION: -amount of ACS in lawful Phil. Money; -number of shares into w/c it was divided; -in case of par value shares, the par value of each; -names and nationalities of the subscribers and the amount subscribed and paid by each; -if some of the shares are without par value, it must be stated; If NON-STOCK CORPORATION: -amount of its capital; -names, nationalities and residences of the contributors and the amount contributed by each; i. other matters not inconsistent with law, and which the incorporators may deem Necessary and Convenient; SEC shall not accept the AOI of any stock corporation unless accompanied by a SS of the Treasurer elected by the subscribers showing that at least 25% of the ACS of the corporation has been subscribed and the at least 25% of the total subscription has been paid in actual cash or in property, the fair valuation of which is equal to at least 25% of the said subscription , where such paidup capital is NOT less than P5,000.00 *How AMENDMENT is DONE? -by a Majority Vote of the BOD and Trustees And the vote or written ASSENT of the stockholders representing at least 2/3 of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the providsions of this Code; -by the VOTE or written ASSENT of 2/3 of the MEMBERS if it be a NON-STOCK CORPORATION. *How to Identity the Amended Articles? -indicated by UNDERSCORING the changes made; -copy of the Amended AOI shall be certified under oath by the Corp. Secretary and the majority of the Directors and Trustee stating the fact that the said amendment have been duly approved by the required vote of the stockholders and members and shall be submitted to the SEC. *WHEN AMENDMENT shall take Effect? -upon approval of the SEC ; With the Treasurers Affidavit; Accompanied by a Favorable recommendation from the appropriate government agency to the effect that the such AOI or the amendment thereof are in accordance with law. -from the date of filing with the SEC if NOT ACTED upon within 6 months from the date of the filing for a cause not attributable to the Corporation. SECTION 17: GROUNDS for REJECTION DISAPPROVAL OF AOI: (R-A-P-A) or SECTION 16: AMENDMENT OF THE ARTICLES OF INCORPORATION *When AMENDMENT can be done? -unless otherwise provided by the Code; -for legitimate purposes only;

1. Required percentage of ownership of the capital stock to be owned by the Citizens of the Phils. Has not been complied; 2. Amendment is NOT SUBSTANTIALLY in accordance with the prescribed form; 3. Patently unconstitutional, illegal and immoral purpose; 4. Affidavit of the Treasurer concerning the amount of the CS subscribed and/or paid is FALSE. SEC- shall give incorporators reasonable time within which to CORRECT or MODIFY the objectionable portions of the Articles or Amendment.

Incorporators shall be given NOTICE of the grounds or causes for rejection or disapproval;

SECTION 18: The CORPORATE NAME -must not be Confusing, illegal, identical or similar to an existing business or corporate name; -done by amendment in compliance with Section 16; -when approved the Commission must issue an AMENDED Certificate of Incorporation indicating the Amended Name. SECTION 19 EXISTENCE COMMENCE OF COPORATE

-failure to formally organize (elect new board of directors, trustees or corporate officers) and commence transaction of business or construction of corporate works (purchase or sale of properties to be used as business of the corporation and other preparatory acts) within 2 years from the date of incorporation will result to the AUTOMATIC DISSOLUTION of the CORPORATION. -if corporation has commenced transaction of its business, but subsequently becomes continuously inoperative for a period of at least 5 years, the same shall be a ground for the SUSPENSION, or REVOCATION Of its corporate franchise or Certificate of Incorporation. -not applicable if the failure to transact or operate is due to causes beyond the control of the Corporation as may be determined by the SEC. BOARD OF DIRECTORS/TRUSTEES/ OFFICERS SECTION 23 BOD/TRUSTEES: -are the one who managed the corporation; -BOD represents the corporate body, and the DIRECTORS are the Executive Representative of the Corporation; -to be elected from the holders of stocks, or if there is no stock, from among the members of the corporation; -shall hold office for 1 year and until their successors are elected and qualified. -must own at least one share of the capital stock of the corporation of which he is the director; -trustees of a non-stock corporation must be members thereof. -majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines. NATURE of the POWERS OF THE BOD -original and undelegated; -not conferred by the stockholders, nor can be revoked or be sterilized; -exercised by the BOD according to their best judgment ; -stockholders DO NOT HAVE the management and control of the affairs of the corporation as they are deemed to have consented thereto. -the Board may appoint an Executive Committee to conduct ordinary business of the corporation which must be members of the board;

-corporate or juridical existence COMMENCES/BEGINS from the date of issuance of the Certificate of Incorporation; -from that time, the Corporation can exercise corporate powers authorized by law or incident to its existence; -thereupon, the incorporators, stockholders and members shall constitute a body politic and corporate under the name stated in the AOI. SECTION 20 DE FACTO CORPORATION DE FACTO CORPORATION -can be attacked only by a quo warranto proceeding; -may exist under the following conditions: (L-A-A-C) 1. valid LAW under which it was incorporated 2.ATTEMPT to incorporate; 3.Assumption of corporate powers; 4.Certificate of Incorporation was issued Despite defect in its incorporation. -shall NOT be inquired into COLLATERALLY in any private suit to which such corporation may be a party. -inquiry may be made by the SOLGEN in a Quo Warranto proceeding; SECTION 21: CORPORATION by ESTOPPEL -composed of persons who assume to act as a corporation knowing it to be without authority to do so; -liability of incorporators of a CBE shall be that of GENERAL PARTNERS, so that their separate properties shall be answerable for valid claims against them. -defense on ground that no such corporation existed is not a valid defense by the one who assumes such ostensible corporation. SECTION 22 EFFECTS OF NON-USE of CORPORATE CHARTER and CONTINUOUS INOPERATION of the CORPORATION

-A director or officer of the corporation will not be permitted to make private or secret profit out of his official position; -A director is NOT LIABLE for the acts or omissions of co-directors or other officers UNLESS: a. he connives at or participate therein; b. he is NEGLIGENT in not discovering or acting to prevent it; QUALIFICATIONS OF A DIRECTOR: (O-R-M) 1. Owns at least one share of the capital stock of the corporation in his name; 2. Residents of the Phils. 3. Must not have been convicted by final judgment of an offense carrying an imprisonment exceeding 6 years, or an offense constituting a violation of the Corporation Code. By-Laws may validly provide that directors must own at least five or more shares of the Capital Stock; By-Laws may validly provide that stockholder is ineligible to be director is he be also a director of a company who is in competition with that of the other corporation. SECTION 24: ELECTION OF DIRECTORS or TRUSTEES -presence of the owners or their representatives or proxy, of the majority of the outstanding capital stock is required at all elections of directors or trustees; -if non-stock, presence of the members entitled to vote; -election is done by BALLOT, if requested; FOR STOCK CORPORATIONS: -every SH shall have the right to vote in person or by proxy according to the number of shares of stock standing, at the time fixed in the by-laws, in his own name, or at the time of the election; -may vote such number of shares for as many persons as there are directors to be elected or he may CUMULATE said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal; -or may distribute them among as many candidates as he may deem fit; -shall not exceed the number of his shares as shown in the books of the corporation; -NO DELINQUENT stock shall be voted. NON-STOCK CORPORATIONS: - may cast as many votes as there are trustees to be elected BUT MAY NOT CAST MORE THAN ONE vote for one candidate, unless otherwise provided in the AOI or by-laws;

CUMULATIVE VOTING allowed only for Stock Corporations, except if the AOI or bylaws of non-stock corporations provide otherwise. -mandatory for stock corporation and cannot be dispense with in the by-laws; -SH cannot be deprived of CUMULATIVE VOTING is being a statutory right.

SECTION 25: CORPORATE OFFICERS/ QUOROM -President -Director -Treasurer/may or may not be a Director; -Secretary -such other officers as may be provided for in the by-laws; Any two or more positions may be held concurrently by the same person, except that no one shall act as a President and a Secretary or as President-Treasurer at the same time.

WHAT CONSTITUTES QUORUM? -a majority of the number of directors or trustees as fixed in the AOI shall constitute a quorum for the transaction of corporate business and -every decision of at least a majority of the directors or trustees at a meeting at which there is quorum shall be a valid CORPORATE ACT, except for the election of officers which shall REQUIRE the vote of a majority of ALL the members of the board. -Directors or trustees CANNOT ATTEND or VOTE by proxy at board meetings. De Tavera vs. Phil Tuberculosis Society -an appointment which does not contain a term, it was held that the implication is that the appointee held an appointment at the pleasure of the appointing authority, which in essence is TEMPORARY in NATURE, hence co-extensive with the desire of the BOD. -replacement of an incumbent appointed without a term is not a REMOVAL but simply an EXPIRATION of the term, which requires no prior notice , due hearing or sufficient grounds before the incumbent can be separated from office. REQUISITES for a BOARD MEETING: (M-E-D) 1. Meeting of the Board duly assembled;

2. Existence of a quorum; 3.Decision of the majority of the quorum duly assembled; Directors are NOT ENTITLED to compensation except: a. when Authorized by the by-laws or stockholders resolution before services are rendered b.when the Directors render extraordinary or unusual service to the corporation.

if a non-stock corporation, on written DEMAND of the members entitled to vote; -should the Secretary fail or refuse to give notice, the call of the meeting may be addressed directly to the SH or members by any SH or member of the corporation signing the demand. -removal may be with or without cause, provided it will not be used to deprive minority SH or members of the right of representation to which they may be entitled , otherwise, the REMOVAL is INVALID. -Notice must be given by PUBLICATION or by written notice as may be provided in this Code. *Effects of REMOVAL -vacancy may be filled by election at the same meeting without further notice or at any special meeting called for such purpose, after giving notice as provided in this Code. SECTION 29 VACANCIES in the OFFICE OF DIRECTOR or TRUSTEE -Vacancies that may be filled by the remaining members of the Board if still constituting a quorum, and only for the unexpired term of the predecessor: 1. death of a BOD 2. resignation 3. disqualification -Vacancies due to the increase in the number of the Directors or Trustees shall be filled only by an election at a regular or special meeting called for such purpose, or in the same meeting authorizing the increase of directors or trustees. -Vacancies to be filled by a vote of the SH or members: (V-E-R-N) 1. Removal of a member of the BOD or trustees; 2. No quorum as to the remaining Directors and Trustees, and the vacancy was created by the death, resignation or disqualification of a director or a trustee; 3. Expiration of the term of the director; 4. Vacancy was created due to the increase in the number of the BOD at any time of the year.

SECTION 26 REPORT OF ELECTION DIRECTORS, TRUSTEES and OFFICERS

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-to be submitted by the Secretary or any other officer of the corporation within 30 days after the election to the SEC; -death, resignation or cessation in the office of the Directors, Trustees and Officers must likewise be reported to the SEC.

SECTION 27 DISQUALIFICATION DIRECTORS, TRUSTEES or OFFICERS

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GROUNDS: 1. Conviction by final judgment of an offense punishable by imprisonment for a period exceeding 6 years; 2. Violation of the Corporation Code committed within 5 years prior to the date of his election or appointment; It is the COMMISSION (not the conviction) that must take place within 5 years prior to the election or appointment under this provision. SECTION 28 TRUSTEES: *HOW: -by a vote of the SH holding or representing 2/3 of the OCS; -if non-stock corporation, by a vote of 2/3 of the members entitled to vote; -shall take place either at a regular meeting of the corporation or at a special meeting called for such purpose; -after notice to the SH or members of the corporation of the intention to propose such removal at the meeting; -special meeting shall be called by the SECRETARY on : order of the President written demand of the SH representing or holding at least a majority of the OCS; REMOVAL of DIRECTORS or

SECTION 30 COMPENSATION OF DIRECTORS: -no compensation, except reasonable per diems, unless otherwise provided in the by-laws;

*When per diems are allowed? 1. when authorized by the by-laws; 2. by a vote of the SH representing at least a majority of the OCS; -total yearly compensation of the directors shall not exceed 10% of the net income before the income tax of the corporation during the preceding year. SECTION 31 LIABILITY TRUSTEES, or OFFICERS of DIRECTORS,

-stockholdings exceeding 20% of the OCS shall be considered substantial for the purpose of interlocking director;

SECTION 34 DISLOYALTY of a DIRECTOR -when director of a corporation competes in the business in which his corporation is engage; HOW? -acquiring for himself business opportunity which should belong to the corporation; -obtain profits to the prejudice of the corporation; -must be accounted and refunded, unless such acts have been ratified by at least 2/3 of the outstanding capital stock. -applicable notwithstanding the fact that the director risked his own funds in the venture; SECTION 35 EXECUTIVE COMMITTEE -compose of not less than 3 members of the Board to be appointed by Board; -may act by majority vote of all its members on specific matters within the competence of the Board as may be delegated to it in the by-laws or on majority vote of the board , except: (F-A-R-A-D) Filling vacancies in the Board; Approval of any action which also requires approval of SH; Repeal, or amendment of by-laws or adoption of new by-laws; Amendment of repeal of any resolution of Board which by express terms not amendable or repealable; Distribution of cash dividends to shareholders.

*GROUNDS: (G-A-B-A) 1. Gross Negligence 2.Assenting to patently unlawful acts of the corporation; 3. Bad faith; 4. Acquire any personal or pecuniary interest in conflict with their duty; 5. Tax evasion perpetrated through illegal manipulation of devices or practices; *Liability : joint and several for all damages resulting therefrom;

SECTION 32 DEALINGS of DIRECTORS, TRUSTEES, or OFFICERS with the Corporation -contract of corporation with one or more of its directors or trustees is VOIDABLE at the option of such corporation UNLESS ALL of the following conditions are present: 1. Presence of such director or trustee in the board meeting in which the contract was approved was not Necessary to constitute a quorum; 2. vote of such director or trustee was not necessary for the approval of the contract; 3. contract is FAIR and REASONABLE under the circumstances; 4. in case of an officer, the contract with the officer has been previously authorized by the BOD; *That if the first two conditions are absent, such contract can be ratified by the vote of the SH representing at least 2/3 of the OCS or 2/3 of the members in the meeting called for the purpose. SECTION 33 CONTRACTS between CORPORATIONS with interlocking Directors: -contracts between corporations with interlocking directorates are valid as long as there is no FRAUD and the contract is fair and reasonable, under the existing facts. -provided that if the interest of the interlocking director in one corporation is merely NOMINAL;

the the the so the

WHAT is the CONCEPT OF MODERN DAY CORPORATION? -the Board creates and delegates corporate powers to an Executive Committee to meet immediate problems and give prompt solutions, unfettered by the need for directors meetings where some directors could not be easily contacted. EXECUTIVE COMMITTEE POWERS: (P-E-A-A-A) 1. Protect debts owing to the Corporation; 2.Embarking on different business for the Corporation; 3. Acts in the usual course of business; 4. Acts designed partially or wholly to protect or aid the employees; 5. Acts to increase the business; ULTRA VIRES ACTS of a CORPORATION

-when it commits acts outside its express, incidental or implied powers, but can be ratified under certain conditions; Corporations are now authorized to merge or consolidate with other corporations, or to make reasonable donations except for political or partisan purposes. SECTION 37 POWER TO EXTEND or SHORTEN CORPORATE TERM -when approved by the majority vote of the BOD or trustees and ratified at a meeting of the SH representing at least 2/3 of the OCS or by at least 2/3 of the members of a non-stock corporation. -each SH or member must be notified; -any dissenting SH may exercise his appraisal right under the conditions provided in this Code, although written assent is NOT NECESSARY. SECTION 38 POWER TO INCREASE OR DECREASE CAPITAL STOCK; INCUR, CREATE or INCREASE BONDED INDEBTEDNESS -must be approved by a majority vote of the BOD, and favored by 2/3 of the OCS; -notice to all SH or members is necessary; -there must be certification in duplicate to be signed by the majority of the BOD, countersigned by the Chairman and Secretary, accompanied by sworn statement from the Treasurer showing that at least 25 % of the increased CS has been subscribed and at least 25% has been paid in actual cash or transferred property equal to 25%; -requires PRIOR APPROVAL from the SEC; -no DECREASE of the capital stock shall be approved by the SEC if it will prejudice the rights of the corporate creditors. FOR NON-STOCK CORPORATION: -requires majority vote of the BOT and of at least 2/3 of the members in a meeting duly called for such purpose. -Bonds issued by a corporation shall be registered with the SEC which shall have the authority to determine the sufficiency of the terms thereof. SECTION 39 POWER TO DENY PRE-EMPTIVE RIGHT -PRE-EMPTIVE RIGHT is the SH right to subscribe to all issues or disposition of shares of any class in proportion to their present stockholding, to enable the SH to retain his proportionate control in the corporation and to retain his equity in the surplus. -is a property right, that is, transferrable or assignable ;

-enjoyed by all SH unless denied by the AOI, -NOT AVAILABLE TO: to shares to be issued in compliance with the laws requiring stock offering or minimum stock ownership by the public; to shares to be issued in good faith with the approval of the SH representing 2/3 of the OCS in exchange of the property needed for corporate purposes or ; in payment of a previously contracted debt. To shares issued to obtain loans or to obtain the services of technical men; SECTION 40 SALE OR OTHER DISPOSITION OF ASSETS> (P-L-E-M-S) How Pledge, Lease, Exchange, Mortgage, Sell -shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of continuing the business or accomplishing the purpose to which it was established. BOD/BOT may abandon such disposition subject to the rights of third parties, without further action or approval from the SH or members. When NO authorization of the SH/Members is necessary? (for stock corporation) a. if the property or assets is necessary in the usual and regular course of business of the corporation; b. if the proceeds of the disposition be appropriated for the conduct of the remaining business of the corporation.; for non-stock corporation: -if there are no members with voting rights, the vote of at least majority of the trustees in office will be sufficient; -done by majority vote of the BOD/BOT; -upon terms and conditions and for such consideration which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration as its BOD/BOT may deem expedient; -authorized by the vote of SH representing at least 2/3 of the OCS for stock corporation; -for non-stock corporation, by the vote of at least 2/3 of the members in a meeting duly called for such purpose.

-notice is necessary; -any dissenting SH may exercise his right of appraisal; SECTION SHARES 41 POWER TO ACQUIRE OWN

2.agreements on loans made with any financial institutions prohibits the corporation to do so without their consent; 3. retention is necessary under special circumstances obtaining in the corporation, as when there is a need for a special reserve for probable contingencies; NOTES: No dividends can be issued to Non-stock corporation even for services rendered; No dividends can be declared out of capital except liquidating dividends and the so-called dividends from investment in a wasting asset corporation; Cash dividends are REVOCABLE before announcement to the SH; Stock Dividends declaration may be REVOKED prior to actual issuance ; SEC may compel the corporation to declare dividends of its SH if the same retains surplus profits in excess of 100% of its paidup capital. SECTION 44 POWER TO ENTER into MANAGEMENT CONTRACT; -must have been approved by the BOD and the SH owning at least the majority of the OCS, or majority of the members in a non-stock corporation, of both the managing or the managed corporation, at a meeting duly called for the purpose provided: 1.SH owning more than 1/3 of the total OCS is entitled to vote of the managing corporation; 2. Approval of the Management Contract by the SH of the Managed Corporation owning at least 2/3 of the total OCS, or at least 2/3 of the members in a non-stock corporation, when majority of the BOD of the Managing Corporation also constitutes majority of the members of the BOD of the Managed Corporation. *No Management Contract shall be entered into for a period longer than 5 years for any one term. -provision is applicable to : any contract whereby corporation undertakes to manage or operate all or substantially all of the business of another corporation, whether such contracts are called service contracts, operating agreements or otherwise; SECTION 45 CORPORATIONS ULTRA VIRES ACTS of

-a stock corporation shall have the power to purchase or acquire its own shares for a LEGITIMATE CORPORATE PURPOSE, subject to the condition that there be unrestricted retained earnings to cover the shares purchased or acquired, such as: (P-E-C) 1. Pay dissenting/withdrawing SH entitled to payment for their shares under the Code; 2. Eliminate fractional shares arising out of stock dividends; 3. Collect or compromise indebtedness to the corporation arising out of the unpaid subscription in a delinquency sale, and to purchase delinquent shares sold during the sale.

SECTION 42 POWER TO INVEST CORPORATE FUNDS in another CORPORATION or BUSINESS or for any other purpose. -when approved by the majority of the BOD/BOT and ratified by the SH representing at least 2/3 of the OCS, or by at least 2/3 of the members in case of a non-stock corporation. -there must be notice of investment to the SH or members; -any dissenting SH shall have the appraisal right as provided in this Code; -where the investment is reasonably necessary to accomplish the primary purpose, Board action or majority vote of the BOD/BOT is still necessary, even without ratification by the SH or members. SECTION 43: POWER TO DECLARE DIVIDENDS -the BOD of Stock Corporation may declare dividends out of the UNRESTRITED RETAINED EARNINGS; -may be payable in cash, in property or in stocks to all SH on the basis of the OCS held by them; -Cash dividend is declared by the BOARD only; while STOCK DIVIDEND is declared by the BOARD and approved by the SH representing not less than 2/3 of the OCS at a regular or special meeting called for such purpose. -stock corporations are prohibited from retaining surplus profits in excess of 100% of their paid-in capital stock except: (J-A-R) 1. justified by a definite corporate expansion projects approved by the BOD;

-Ultra Vires Act is an act which although NOT PROHIBITED by law, the corporation cannot perform because it is NOT WITHIN its express, incidental or implied powers; -not necessarily illegal although an illegal act is always ultra vires; *REQUISITES FOR THE RATIFICATION OF AN ULTRA VIRES ACT: (C I C-A) 1. Consummated act; not executor; 2. Involved no public rights or of the State; 3. Creditors are NOT prejudiced or all of them have given their consent; 4. All of the SH give their consent; *Courts must be CAUTIOUS in dissolving a corporation by quo warranto proceedings for doing ultra vires acts except in two cases: 1. Willful or fraudulent violation by the Corporation ; 2. Acts adversely affect public Interest. *Well-settled RULES on the Effects of Ultra Vires Acts: 1. A wholly executory contract which is Ultra Vires cannot be enforced not can damages be recovered for its breach, except on Principle of Unjust Enrichment; 2. A wholly executed ultra vires contract or act shall NOT BE INTERFERRED with as between the parties or persons whose rights are derived therefrom; but the STATE can always question such contract or act; 3. When Ultra vires act is executed on one side, but executory on the other who received benefits therefrom, RECOVERY can be had by the FORMER. 4.The title of a corporation to property cannot be questioned on the ground that it acquired the property through an Ultra Vires contract of transfer. TITLE V BY LAWS SECTION 46 Adoption of by-laws -must be done within one month after receipt of official notice of its Certificate of Incorporation by the SEC, consistent with the Code. -may be filed and adopted PRIOR TO INCORPORATION but shall be approved and signed by ALL INCORPORATORS and submitted to the SEC, together with the AOI; -affirmative vote of the SH representing the majority of the OCS, or at least majority of the members in a non-stock corporation shall be necessary.

-shall be signed by the SH/members , kept in the principal office of the corporation , subject to the inspection of the SH/members during office hours,; -certified copy thereof by the majority of the directors or trustees, countersigned by the secretary shall be filed with the SEC, which shall be attached to the original AOI; *When By-Laws are effective? -upon issuance by the SEC of a certification that the by-laws are not inconsistent with the Code, which must be accompanied by a certificate of an appropriate government agency to the effect that such by-laws or amendments are in accordance with law. *REQUISITES OF A VALID BY-LAWS: (C-U-R-I) 1. Consistent with Law, AOI, charter, or public policy; 2. Uniform and general; 3. Reasonable[ 4. Impairs no vested rights;

SECTION 47 CONTENTS of the BY-LAWS 1. Time, place and manner of calling and conducting regular or special meetings of the director or trustees; 2. Time and manner of calling or holding special meeting; (no place because the regular meeting is in the place of the principal office of the corporation); 3. Required quorum and the manner of voting therein; 4. Form for proxies of SH and members and the manner of voting them; 5. Qualifications, duties, ad compensation of directors, trustees, officers and employees; 6. Time of holding annual election of directors or trustees, and the mode or manner of giving notice thereof; 7. The manner of election or appointment and the term of office of all officers other than directors or trustees; 8. the Penalties for violation of the by-laws; 9. Manner of issuing certificates for stock corporations; 10. other matters as may be necessary for the proper or convenient transaction of its corporate business and affairs. *The remedy of MANDAMUS is generally available to compel officers of a corporation to perform duties imposed on them by the by-laws;

*Corporations have the power to waive provisions of their by-laws introduced for the protection of the company, expressly or impliedly; *Corporate by-laws may be waived by a continued disregard thereof, by the parties for whose benefit they were enacted. SECTION 48 AMENDMENTS to by BY-LAWS -BOD/BOT may amend , repeal or adopt new by-laws by a majority vote thereof, and that of the owners of at least a majority of the OCS, or at least a majority of the members if a non-stock corporation. -power to amend or repeal may be delegated to the BOD/BOT by the owners of 2/3 of the OCS, or 2/3 if the members of a non-stock corporation; -delegated power may be REVOKED by the SH representing majority of the OCS, or majority of the members of the non-stock corporation; -the vote for the delegation (2/3) is greater than the vote for revocation which, in the case of stock corporation, is now based on shareholding, not merely a numeral majority, which the old Corporation Law indicated. -amended or new by-laws shall be attached to the original by-laws in the office of the corporation; - and a copy thereof, duly certified under oath by the Corporate secretary and a majority of the directors or trustees, shall be filed with the SEC; -amended by-laws shall be effective only upon the issuance of the SEC that it is not inconsistent with the Corporation Code. *The power to adopt the first ORIGINAL by-laws cannot be delegated to the BOD/BOT; SECTION 49 KINDS OF MEETINGS a. REGULAR fixed in the by-laws; generally no notice is required; b. SPECIAL called specially other than the regular meeting; notice is required. SECTION 50 REGULAR or SPECIAL MEETINGS of STOCKHOLDERS or MEMBERS a. STOCKHOLDERS -shall be held annually on the date fixed in the bylaws, or if not fixed, on any date of April of every year as determined by the BOD/BOT; -notice: 2 weeks prior to the meeting, unless the different period is required by the by-laws;

SPECIAL MEETINGS of SH shall be held at any time deemed necessary or as provided in the by-laws, provided that at least one week written notice shall be sent to all SH or members , unless otherwise provided in the by-laws; -notice of any meeting may be waived expressly, or impliedly, by any SH or members; -for a GOOD CAUSE, a meeting may be called on by order of the SEC upon petition by any SH or member, and will be presided by the latter until at least a majority of the SH or members present, have chosen one of their members as presiding officer. SECTION51 PLACE ANDTIME OF MEETINGS OF SH or MEMBERS: -shall be held where the PRINCIPAL OFFICE where the corporation is located whether it is Regular of Special; or if practicable , in the principal office of the corporation. -notice of meetings shall be in WRITING; -all proceedings or business transacted in ANY meeting of the SH or members, within the powers and authority of the corporation, SHALL BE VALID even if the meetings is IMPROPERLY CALLED, provided all SH or members have been properly notified, present or properly represented, and that the business transacted is not ULTRA VIRES.

SECTION 52 : QUORUM in the MEETINGS: -shall consists of the SH representing the majority of the OCS(2/3) or majority of the members in case of non-stock corporation, unless otherwise provided in this Code or the by-laws; -for BOD, shall be majority of the ALL members of the BOD/BOT; SECTION 53 REGULAR and SPECIAL MEETINGS OF THE DIRECTORS and TRUSTEES (no proxy allowed; personal presence is necessary) -shall be held MONTHLY unless the by-laws provides otherwise. -SPECIAL MEETINGS may be held ANY TIME upon the call of the president or as provided in the by-laws; -PLACE: -anywhere in or outside the Philippines unless the by-laws provide otherwise. -NOTICES: - must be sent to every director or trustee at least one(1) day prior to the scheduled meeting, unless otherwise provided by the by-laws.

-can be waived by the Director or trustee expressly or impliedly. SECTION 54 MEETINGS WHO SHALL PRESIDE at

-the PRESIDENT or the CHAIRMAN of the BOD/BOT unless otherwise provided in the by-laws. SECTION 55 RIGHT TO VOTE OF PLEDGORS, MORTGAGORS and ADMINISTRATORS: -. Right to Attend and vote at the meetings, unless the pledgee/mortgagee is given the right in writing; -Executors, Administrators or Receivers and other legal representatives duly appointed by the Court may ATTEND and VOTE in behalf of the SH or Members WITHOUT NEED OF ANY WRITTEN PROXY.

-may be created by one or more of the SH/Members; -PURPOSE: to confer upon the trustee the right to vote and other rights pertaining to the shares for a period NOT EXCEEDING five(5) years at any one time. -EXCEPT: if the VOTING TRUST is made as a CONDITION in a loan agreement, Voting Trust may be for a period exceeding five(5) years but shall AUTOMATICALLY expire upon full payment of the loan. VTA must be in writing; notarized and shall specify the terms and conditions thereof. -certified copy must be filed with the Corporation and the SEC, otherwise, it is INEFFECTIVE and UNENFORCEABLE. -designed to enable SH to dispose their shares and still retain control of the corporation. EFFECT OF VTA: -Certificates or shares of stocks covered by the VTA shall be CANCELLED and new ones shall be issued in the name of the Trustee/Trustees stating that they are issued pursuant to said agreement in the books of the Corporation. VTA shall be subject to examination by any SH provided that both the transferor and trustee may exercise the RIGHT of INSPECTION of all corporate books and records in accordance with the provisions of the Code. -Unless expressly renewed, ALL rights granted in a VTA shall automatically expire at the end of the agreed period.

SECTION 56: VOTING IN THE CASE OF JOINT OWNERSHIP of STOCK -consent of ALL the co-owners shall be NECESSARY unless there is a WRITTEN PROXY signed by all the co-owners authorizing one or some of them or any other person to vote such share or shares; -Shares owned by and/or can be voted by anyone of the co-owners and anyone of them may appoint a proxy for said shares so owned. SECTION 57 VOTING RIGHTS for TREASURY SHARES: -NO voting rights as long as the treasury shares remain in the treasury, for to rule otherwise would be to enable the directors or the trustees to perpetuate themselves in the office. SECTION 58 PROXIES: -voting of SH or members may be in PERSON or by PROXY; -proxies must be in writing and signed by the SH or member and filed before the scheduled meeting with the Corporate Secretary. -proxies are valid only for the meeting for which it is intended; -not valid for period longer than five(5) years at any time. NOTE: But, Board Meetings of BOD or BOT, cannot be voted by PROXIES. SECTION 59 VOTING TRUSTS

*LIMITATIONS OF VOTING TRUSTS: 1. Period is only for five(5) years except if made as a condition for a loan agreement. 2. Must be in writing and duly notarized; 3. Must not be entered into to circumvent laws against monopolies and restraints of trade, nor shall it be used for purposes of fraud. 4. Certified true copy must be filed with the Corporation and the SEC. STOCKS and STOCKHOLDERS SECTION 60 SUBSCRIPTION CONTRACT -contract for the acquisition of unissued stock in an existing corporation or a corporation that

still to be formed, even if the parties denominate the same as a sale or purchase; *WHAT is CONSIDERED as a SALE: Disposal for consideration of treasury shares is sale by the corporation; Transfer of fully paid shares by one subscriber to a third person *Assignment by a subscriber of his UNPAID SUBSCRIBED STOCK to another is equivalent to a release from subscription and therefore, requisites for a valid release from subscription must be COMPLIED WITH. SECTION 61 PRE-INCORPORATION SUBSCRIPTION -is a contract that must be complied with in good faith and therefore, withdrawal by a SUBSCRIBER or REVOCATION of his subscription can be done only UNDER the conditions set forth in this provision. -irrevocable for a period of at least 6 months from the date of subscription, if the corporation is still be formed: a. UNLESS all of the other subscribers consent to the revocation, or b. UNLESS the incorporation of said corporation fails to materialize within said period. -revocation of Pre-Incorporation Subscription cannot be revoked after the submission of the AOI to the SEC.

**If Consideration is INTANGIBLE PROPERTY (patents, copyright) -valuation shall be initially determined by the incorporators of the BOD subject to the approval of the SEC. **Issued price or no-par value shares may be FIXED in the AOI, or by the BOD as conferred to them by in the AOI or the bylaws; In the absence thereof, in a meeting duly held for the purpose representing the majority of the OCS. PROMISSORY NOTES even if negotiable CANNOT be used for paying SHARES except when used to pay STOCKS subject to the rules that they shall produce the effect of payment only when they have been cashed.

SECTION 63 Certificate of Stock and Transfer of shares: -divided into shares; -certificates are signed by the president or the VP, countersigned by the secretary or the asst. secretary, and sealed with the seal of the corporation. -are PERSONAL PROPERTY; transferred only by delivery of the Certificates indorsed by the owner, his atty-in-fact or other legally authorized person. -TRANSFER is valid only when recorded in the Books of the Corporation, except as between the parties; -No shares of stock against which the corporation holds any unpaid claim shall be transferrable in the Books of the Corporation. SECTION 64 CERTIFICATES: ISSUANCE of STOCK

SECTION 62 CONSIDERATION for STOCKS -shall NOT be less than the PAR (face value of the stock in the corporation) or issued price thereof. *WHAT can be USED as CONSIDERATION? (A-P-L-A-P-O) 1. Actual Cash 2.Property Tangible or Intangible, actually received by the Corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued; 3.Labor Performed for or services actually rendered to the Corporation. 4. Amounts transferred from unrestricted retained earnings to stated capital; 5. Previously incurred indebtedness by the corporation; 6. Outstanding shares exchanged for stocks in the event of reclassification or conversion.

-COSS shall be issued only until full payment of the amount of subscription together with the interest and expenses, if any is due, has been paid. SECTION 65 LIABILITY of DIRECTORS in WATERED STOCKS; -shall be SOLIDARILY LIABLE with the SH and its credits for the difference between the fair value received at the time of its issuance of the stock and the par or issued value of the stock; WATERED STOCK -consideration paid is less than the par or issued value thereof; -or the consideration is in any form other than cash valued in excess of its fair value , which

was not objected to in writing by the Directors, and filed the same with the Corporate Secretary. -referred to the difference between the fair market value at the time of the issuance of the stock (NOT AT THE TIME OF DISCOVERY OF THE INADEQUATE CONSIDERATION or AT THE TIME PAYMENT IS DEMANDED), and the par or the issued value of the said stock. SECTION 66 SUBSCRIPTION INTEREST on UNPAID

**The HIGHEST bidder is the one who pays the subscription plus interest, cost and expenses for the smallest number of shares; **The remaining shares shall be credited in favor of the DSH, who shall likewise be entitled to the issuance of the CS covering such shares. **NO BIDDER for the DS the Corporation may bid for the same and the total amount due shall be credited as paid in full in the books of the corporation.; and title shall be vested in the corporation as TREASURY SHARES and may be disposed of by said corporation in accordance with the provisions in this Code. SECTION 69 QUESTIONED WHEN SALE MAY BE

-payment of interest is from the date of subscription, if so required and at the rate of interest fixed in the by-laws; if NOT indicated, interest shall be deemed in the legal rate (12%). -may be waived if no creditors will be prejudiced or in the absence of fraud. SECTION 67 SUBSCRIPTION PAYMENT OF BALANCE OF

-declared to be due and payable by the BOD in the Stock Corporation and may collect the same or such percentage thereof, in either case with interest accrued , or if it may deem necessary; -payment shall be made on the date specified in the contract of subscription, or on the date stated in the call made by the Board. -failure to pay renders the entire balance due and payable, with interest in the legal rate on such balance, unless a different interest rate is provided in the by-laws; NOTE: Non-payment within 30 days shall make the whole stocks covered by such subscription, become DELINQUENT , and shall be subject to sale as hereinafter provided, unless the BOD orders otherwise. SECTION 68 DELIQUENCY SALE *HOW MADE? -may be ordered by the BOD, which shall specifically state the amount due on each subscription, plus accrued interest, and the date, time and place; -sale shall be made not less than 30 days nor more than 60 days from the date the stock become delinquent; -can no longer be voted; but can still receive dividend; -NOTICE of SALE will be sent to every delinquent SH, either personally or by registered mail, which shall be PUBLISHED once a week for two consecutive weeks in a newspaper of general circulation in the province or city where the principal office of the corporation is located.

-when the party seeking such action first pays or tenders to the party holding the stock the sum for which it was sold, with interest from the date of sale at the legal rate, within 6 months from the date of the sale, otherwise, action can no longer be maintained. -POSSIBLE GROUNDS: a. Irregularity or Defect in the Notice of Sale or b. in the sale of the Delinquent Stock itself; SECTION 70 COURT ACTION TO RECOVER UNPAID SUBSCRIPTION *REMEDIES for the ENFORCEMENT of STOCK SUBSCRIPTION: 1. Judicial Action- Collection of Sum of Money; 2. by Call 3. Denying the Stock the right to Vote or to be represented in meetings; SECTION 71 EFFECT OF DELINQUENCY -declared delinquent stock shall be deprived of: -right to vote; -right to be represented; -right to examine books; -pre-emptive right or any other right. EXCEPTION: -right to dividends UNLESS he pays the amount due on subscription and in such manner as may be provided by law.. SECTION 72 RIGHTS of UNPAID SHARES -unpaid shares but NOT DECLARED delinquent shall have the right of a SH for the subscriber did not violate any agreement with the corporation, and he is expected to pay the unpaid shares with interest at maturity or upon call.

SECTION 73 CERTIFICATES

LOST/DESTROYED

-if refusal is by Board Resolution, the liability shall be imposed upon the Directors and Trustees who voted for such refusal. -DEFENSE: that the person demanding excerpts has improperly used any information , or was not acting in GOOD FAITH or has no LEGITIMATE PURPOSE in making his demand. STOCK TRANSFER AGENT -engaged principally in the business of registering transfer of stocks in behalf of stock corporation; -must secure license with the SEC to be allowed to operate which shall be renewed annually. Provided, that a stock corporation shall not be PRECLUDED from performing or making a transfer of its own stock in which case, all the rules and regulations imposed on STOCK TRANSFER AGENTS, except the payment for license fee shall be applicable. *Philpotts vs. PMC the right to inspect cannot extend ot a formula or process not generally known which has proved of utility to the corporation. -it cannot extend to purely private communications or correspondence of corporate directors or officers. SECTION 75 STATEMENT RIGHT TO FINANCIAL

*Procedure: 1. Submission in triplicate of Affidavit stating the circumstances of loss, destruction or stolen; 2. Publication of the affidavit after Verification, in a newspaper of general circulation in the place where the corporation has its principal office, once a week for 3 consecutive weeks, at the expense of the registered owners of the Cert. of Stock which have been stolen, lost or destroyed. -no contest within 1 year after the last publication, the right to do so will be barred and said corporation shall cancel the same in the books of the corporation.

3. Issuance of new Cert. of Stock ; -new CS can be issued even before one year if the SH filed a bond or other security in lieu thereof; -if a CONTEST has been presented, or an action is filed in Court, issuance of CS shall be suspended until the final decision by the Court regarding the ownership of such CS. -No action can be filed against the issuing corporation for the lost, stolen or destroyed CS, except in case of FRAUD, BAD FAITH or NEGLIGENCE.

-shall be furnish within 10 days from receipt of a written request of the SH, which shall include the Balance Sheet, and the profit or loss statement, assets and liabilities, and the result of operations. -financial statement shall be duly signed and certified by an independent CPA; if less than 50K capital paid-up, can be certified by the Corporate Treasurer. MERGER AND CONSOLIDATION SECTION 76 - Plan of Merger or Consolidation -initiated by the BOD/BOT MERGER two or more corporations merged into a single corporation which shall be one of the constituent corporation; CONSOLIDATION two or more corporations will consolidate into a new corporation SECTION 77 STOCKHOLDERs or MEMBERs APPROVAL

CORPORATE BOOKS and RECORDS SECTION 74 BOOKS TO BE KEPT; TRANSFER AGENT STOCK

1. Records of ALL business transactions; 2. Minutes of ALL meetings; 3. Stock and Transfer Book (for stock corp) -shall be kept in the Principal Office -shall be open for Inspection to any SH or director at reasonable hours on business days -shall be open to inspection of any director, trustee, SH or member of the corporation at reasonable hours of business; -may demand copy of excerpts from said records in Minutes at his expense. -refusal to do so shall be punishable under Sec. 144 of this Code; compellable by MANDAMUS.

-requires notice to all SH/members, at least two weeks prior to the date of the meeting, either personal or registered mail. -requires 2/3 votes of the majority of the SH/members for approval. (same with Amendment) -dissenting SH/member shall the right of APPRAISAL which will be extinguished should the BOD/BOT abandon the plan. SECTION 78 ARTICLES CONSOLIDATION OF MERGER or

transferred or vested in such surviving or consolidated corporation e. Claims or actions against Constituent Corporation may be prosecuted against the surviving corporation as the case may be. f. Non-impairment of the rights of creditors or any lien upon the property of any of each of the constituent corporation. Difference between Merger and Consolidation -In Merger one of the CC survives, and is referred as the Surviving Corporation; while in Consolidation, the CC shall Disappear or is dissolved, and a new corporation emerged and is known as Consolidated Corporation. APPRAISAL RIGHT SECTION 81 INSTANCES of APPRAISAL RIGHT -is consist of the right to dissent and demand payment of the fair value of his shares because of a substantial change in organizational set-up of the corporation, not contemplated by him, during the time he made his investment in the corporation. Availed in the following instances: a. Amendment of the AI which changes or restricts the right of the SH; b. In case of Sale, Lease, Exchange, Transfer, Mortgage, Pledge or Disposition of corporate property and assets; c. Merger or Consolidation; d. Investing funds with other corporations. SECTION 82 HOW RIGHT OF APPRAISAL IS EXERCISED: -by a written demand, within 30 days after the date on which the vote was taken for payment of the fair market value of his shares. *What is the Effect of the Failure to Make a Demand? -shall be deemed as a waiver of his appraisal right; *What is the DUTY of the Corporation if the Proposed corporate action is effected? -pays the SH; -upon surrender of the CS; -w/c shall be based on the fair value as of the day prior to the date on which the vote was taken;

-executed by EACH of the constituent corporation, to be signed by the President, or vice-President and Certified by the Secretary or Asst. Secretary of each corporation, setting forth: a. Plan of Merger/Consolidation; b. Number of Shares outstanding/number of members; c. Number of shares, or members voting for and against such plan; SECTION 79 SEC APPROVAL and EFFECTIVITY OF MERGER and CONSOLIDATION -submission of AOM/AOC in quadruplicate to the SEC; -special corporations governed by Special Laws shall be required to first obtain favorable recommendation of appropriate government agency; -upon satisfaction of SEC as to the compliance, Certificate of Merger or of Consolidation shall be issued, at which time the MERGER or CONSOLIDATION shall be effective. -if the merger or consolidation is inconsistent, SEC shall set a hearing to give corporations opportunity to be heard.; -written notice is required at least two weeks before the said hearing; Section 80 MERGER/CONSOLIDATION EFFECTS of

#. Merger/Consolidation a. Become a single corporation which shall become the SURVIVING CORPORATION, designated in the plan of merger; b. Separate existence shall cease, except that of the surviving corporation or consolidated corporation; c. Possession of rights, privileges immunities and powers subject to the duties and liabilities of a corporation under this Code; d. Interests belonging to, or due to each constituent corporations shall be deemed

*What if the corporation and the SH cannot agree to the fair value of the shares? -shall be determined and appraised by 3 disinterested person, whose finding shall be final; -award shall be paid by the corporation w/in 30 days after such award was made; -no payment shall be made, unless the corporation has UNRESTRICTED RETAINED EARNINGS to cover such payment; -transfer shall be made upon payment of the agreed price; *What are the conditions for a Valid exercise of Appraisal Right? (D-M-A-P-T) 1.Demand for Payment must arise; 2. made in writing by the Dissenting SH within 30 days from the date the vote is taken; 3. appraised value is determined ; 4. payment of shares; 5. Transfer of Shares to the Corporation. SECTION 83 TERMINATION EFFECT OF OF DEMAND and RIGHT

SECTION 86 NOTATION on CERTIFICATE(s); RIGHT OF THE TRANSFEREE; -CS of the Dissenting SH shall be submitted for Notation within 10 days after Demanding payment of his shares; -failure to do so shall TERMINATE his rights at the option of the Corporation; RIGHT OF TRANSFEREE becomes a regular SH and the appraisal right of the Dissenting SH shall legally CEASE> NON-STOCK CORPORATION

SECTION 87: CORPORATION?

What

is

NON-STOCK

-one where no part of its income is DISTRIBUTABLE to the members , trustees, or officers subject to the Provisions of this Code, on Dissolution. -profits obtained shall be used for the FURTHERANCE of the purposes upon which it was organized. SECTION 88 PURPOSES -may be for Charitable, Religious, Educational, Professional, Cultural, Recreational, Fraternal, Literary, Scientific, Social, Civic Service, or similar purposes, like Trade, Industry, Agriculture, or any combination thereof. SECTION 89 RIGHT TO VOTE -may be limited, broadened, or denied to the extent specified in the articles of Incorporation or the bylaws, otherwise, each member is entitled only to ONE VOTE> -VOTING By MAIL may be authorized under the AOI or the By-Laws subject to the approval and under the conditions prescribed by the SEC; -Unless otherwise provided in the AOI/By-laws, a member may vote by PROXY in accordance with the provisions of this Code. -CUMULATIVE VOTING if there are seven trustees to be voted, a Member is entitled to Seven Votes and he may cumulate the seven votes for One Candidate or divide the same among several Candidates. SECTION 90 MEMBERSHIP NON-TRANSFERABILITY of

-all rights accruing to the SH shares, including voting and dividends rights shall be SUSPENDED, except the right of the SH to receive payment of the fair value thereof. -if dissenting SH is not paid within 30 days after the award, his voting and dividend rights shall be immediately RESTORED; SECTION 84 WHEN RIGHT OF PAYMENT CEASES: D-A-D 1. demand for payment is withdrawn with the consent of the corporation; 2. abandonment, rescission, or disapproval of the proposed Corporate action; 3. Determined by the SEC SECTIOn 85 WHO BEARS THE COST OF APPRAISAL 1. By the Corporation if the value determined by the appraisers is HIGHER than what was offered by the Corporation to the dissenting Stock Holder; -and, if action to recover the fair value is filed and the refusal of the SH to receive payment is Justified. 2. By the Dissenting SH if the value offered by the appraisers is APPROXIMATELY the same as the price offered by the Corporation; -and if an action to recover shares is filed and the refusal of the SH to receive payment is Unjustified;

-membership in NSCorp is a personal right and nontransferable, Unless the AOI or the by-laws provide otherwise.

SECTION 91 TERMINATION OF MEMBERSHIP -in the manner and causes provided in the By-laws or AOI; -shall have the EFFECT of EXTINGUISHING all rights of the member unless otherwise provided in the AOI or the by-laws. TRUSTEES and OFFICERS SECTION 92 Election and Term of Trustees -BOT of Non-stock Corporation may be more than 15 in number, as may be fixed in the AOI/By-laws; -shall classify themselves that the term of office of 1/3 of the number of the BOT shall expire every year; -election shall be held annually and the term of the trustees so elected will be 3 years; -trustees thereafter elected to fill vacancies before the expiration of the period shall hold office only for the unexpired term. -non-member of the corporation shall not be elected as trustee; -may be directly elected by the members unless otherwise provided in the by-laws or in the AOI; SECTION 93 Place of Meetings -regular or special meetings may be held at any place even outside the place where the principal office of the corporation is Located; -requires proper notice to all members and provided that the meeting be within the Philippines; DISTRIBUTION of ASSETS in a NON-STOCK CORPORATION Section 94 RULES for the DISTRIBUTION 1. Liabilities and obligation shall be paid, satisfied and discharged; 2. Assets held by the Corporation under a condition of returning, transferring or conveying upon dissolution shall be returned, transferred or conveyed. 3. Assets received and held by the Corporation with the use limited for purposes of charitable, religious, educational, or similar purposes, but not held upon a condition requiring return, transfer or conveyance upon dissolution, SHALL be TRANSFERRED OR CONVEYED to one or more corporations, engaged in similar activities in the Philippines; 4. Other assets shall be distributed in accordance with the provisions of the AOI or the By-laws;

5. Other assets may be distributed to persons, societies , organizations, or corporations whether or not organized for profit as may be specified in a plan of distribution as provided in the Code. SECTION 95 PLAN OF DISTRIBUTION of ASSETS *Manner of Adopting the Plan of Distribution of Assets: 1. Recommended by the majority of the BOT through a resolution; 2. To be voted by the members in a regular or special meeting; 3. Written Notice is required and given to each member entitled to vote. 4. Adoption of the PDA upon approval of at least 2/3 of the members having voting rights present or represented by proxy in a meeting called for the purpose. CLOSE CORPORATIONS SECTION 96 DEFINITION and APPLICABILITY of TITLE -are those whose AOI provides that: 1. Issued stocks shall be held of record by not more than 20 members; 2. Stocks are subject to specified restrictions on transfer; 3. No public offering of stocks; *When at least 2/3 of the Voting Stock/Right is owned or controlled by another corporation which is NOT a close corporation, it shall be deemed to be NOT a CLOSE CORPORATION> *Any corporation may be incorporated as CLOSE CORPORATION, except: (M-E-P-S-B-I-C) a. Mining/oil Companies; b. Educational Institutions; c. Public Utilities c. Stock Exchanges; d. Banks; e. Insurance Companies; f. Corporations declared vested with Public Interest SECTION 97 ARTICLES OF INCORPORATION -shall provide: a. Classification of Shares or rights and the Qualifications of owning or holding the same; b. Classifications of Directors into one or more classes,; may be voted for and elected solely by a particular class of stock; c. Greater Quorum or voting requirements in meetings of SH or directors;

d. May provide that the SH may elect or appoint officers or employees instead of the BOD; -may provide that business of the Corporation may be managed by the SH rather than the BOD, with the following provisions: 1. No meeting of SH need be called to elect directors; 2. SH shall be deemed to be DIRECTORS unless the context requires otherwise. 3.SH shall be subject to all liabilities of Directors; SECTION 98 VALIDITY of RESTRICTION on TRANSFER of SHARES -restriction on the right to transfer shares MUST APPEAR in the AOI, otherwise shall not be binding for any purpose in GOOD FAITH. -shall not be more ONEROUS than granting the existing SH the option to purchase; -if upon the expiration of a period, the Existing SH or the corporation fails to exercise the option to purchase, the Transferring SH may sell the his shares to ANY THIRD PERSON> SECTION 99 ISSUANCE OR TRANSFER OF STOCK OF A CLOSE CORPORATION in BREACH OF QUALIFYING CONDITION 1. If issued to a person NOT ENTITLED: -is conclusively PRESUMED to be notified of the fact of his ineligibility to be a SH; 2. If the AOI states that the Corporation should not exceed 20 members: -person is conclusively presumed to be NOTIFIED of such fact; 3. If Restriction of Share Transfer is shown: -the transferee is conclusively presumed that his acquisition of stock is in violation of the restriction; 4. By reason of the above-mentioned, Corporation may REFUSE to REGISTER transfer of the stock in the name of transferee. the the the

*Right of Transferee to rescind the transaction or to recover under applicable warranty, express or implied shall not be IMPAIRED>

SECTION 100 STOCKHOLDERS

AGREEMENTS

by

the

1. Agreements before the Formation/Organization of a Close Corporation: -survives the incorporation of the CCorp; -continues to be valid and binding if such be their intent, provided it is not inconsistent with the AOI; 2. Agreements may be made by two or more SH in writing and signed by the parties; 3. The following agreements cannot be INVALIDATED: a. Written agreements to the effect that the parties will make each other partners among themselves; b. agreements which relate to the conduct or affairs of the corporation as to restrict or interfere with the discretion of the BOD; 4. SH shall be held to strict FIDUCIARY DUTIES among each other in the management of the business of the Corporation; -shall be personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance.

SECTION 101 WHEN BOARD MEETING IS UNNECESSARY or IMPROPERLY HELD? (B-A-A-D) 1. Before or after such action is taken, written consent is signed by all of the BOD; 2. Actual or implied knowledge by all of the SH and no prompt objection was interposed; 3. Accustomation of the BOD of informal action with express or implied acquiescence of all of the SH; 4. Directors have express or implied knowledge of the action questioned but did not make any prompt objection thereto; *IN CASE of ABSENCE OF PROPER NOTICE OR CALL: -actions are deemed RATIFIED by the absent DIRECTOR, unless he promptly filed an objection with the secretary of the Corporation after having knowledge thereof. SECTION 102 PRE-EMPTIVE RIGHT In CLOSE CORPORATION -shall extend to ALL STOCKS issued , including the reissuance of treasury shares whether for money,

-except if the causes are CONSENTED To by all of the Stockholders of the Close Corporation or if the Close Corp. has amended the AOI in accordance with this Title. *Transfer is NOT LIMITED to a transfer for Value;

property or personal services or in payment of corporate debts, unless the AOI provides otherwise. SECTION 103 AMENDMENT OF THE AOI -purposes: 1. delete or remove any provision; 2. to reduce the quorum or voting requirement; -AMENDING requires the approval of at least 2/3 of the OCS, with or without voting rights; OR of such greater proportion of shares as may be specifically provided in the AOI, in the meeting called for such purpose. SECTION 104 DEADLOCK -business and affairs of the corporation can no longer be conducted to the advantage of the SH; -SEC shall have the power to arbitrate upon written petition by any SH, and may order to: (C-A-R-D-D-A-G) a. Cancel/Alter the provisions in the AOI; b. Altering/Cancelling or Enjoining any Resolutions; c. Requiring the purchase at the fair value of shares of any SH either by the Corporation or other SH, regardless of the availability of the unrestricted retained earnings d. f. g.

*Dissolution of the Corporation -may be compelled by any SH by a written petition to the SEC, when: a. the acts of the Directors, et.al, who controlled the corporations is illegal, Fraudulent, Dishonest, oppressive or Unfairly Prejudicial to the Corporation or the SH; b. the corporate assets are misapplied or wasted.

SPECIAL CORPORATIONS SECTION 106 EDUCATIONAL CORPORATIONS Incorporation governed by Special Laws (Education Act of 1982, BP 232) and the Corporation Code. SECTION 107 INCORPORATION PRE-REQUISITES to

-Favorable Recommendation of the Secretary of Education; SECTION 108 BOARD Educational Corporation of TRUSTEES

Directing or Prohibiting any act of the corp e. Dissolving the Corporation;;

-shall not be less than five(5) , nor more than 15 ; provided that the number of trustees shall be in MULTIPLES of five. -shall classify themselves that the term of office of 1/5 of their number shall expire every year. -term of office is five(5) years; -A majority of the trustees shall CONSTITUTE a quorum for the transaction of business. SECTION 109 RELIGIOUS CORPORATION KINDS: -sole -religious societies governed by the Chapter II Sec. 109 of the Corporation Code. -formed by religious society, group or any religious denominations, sect or church after getting an approval of 2/3 of its members. -must be composed of 60% religious flock, if the incorporator is an alien, he being a mere administrator of the temporalities of the church. SECTION 110 Corporation Sole -usually associated with the clergy, consists of one person ONLY and his successors, incorporated by law to give some legal capacities and advantages.

Appointing a Provisional Director


Granting such other relief as the
circumstances may warrant.

PROVISIONAL DIRECTOR: -an impartial person who is neither a SH or a creditor of the corporation, and whose other qualifications may be determined by the SEC; -not a RECEIVER; -shall have all the RIGHTS and POWERS of a duly elected director of the Corporation, until such time he shall be removed by the SEC or by all of the SH. SECTION 105 WITHDRAWAL STOCKHOLDER OR DISSOLUTION CORPORATION:of a close corporation! OF OF THE THE

*Withdrawal of the SH: -by COMPELLING the corporation to purchase his shares at their Fair Value, which shall not be less than their par or issued value, and when the Corporation has SUFFICIENT assets in its books to cover its debts and liabilities Exclusive of the Capital Stock.

-may be formed by the Archbishop, Bishop, or priest of other presiding elder to administer or manage the affairs, property and temporalities of the church. -NATIONALITY OF CORPORATION SOLE: -determine by the Nationality of its members constituting the Sect. -can acquire land if its members are 60% Filipinos. *Effect of Separation of Members: -not entitled to any right over the properties; *HOW CONVERSION be MADE -by amending its AOI, with the concurrence of 2/3 of the members of the corporation sole; *DISSOLUTION? -by filing a verified dissolution stating :

SECTION 114 FILLING of VACANCIES of Religious Corporation. -successors of Religious Corps., shall become Corporation Sole on their ACCESSION to OFFICE, and shall be permitted to transact business upon submission to the SEC the COE, or LOA duly certified by a NOTARY PUBLIC. SECTION 115 DISSOLUTION of RELIGIOUS CORPORATION

verified Declaration of Dissolution., setting forth: (C-A-R-N)


-done by submitting to the SEC a a. Corporations Name; b. Authorization of Dissolution by a Particular Religious Denomination; c. Reason for Dissolution or winding Up; d. Names and Addresses of persons who are to supervise the winding up of the affairs of the corporation. -upon approval of the DOD, the corporation shall cease to carry its operation except for the purpose of winding up its affairs. SECTION 116 RELIGIOUS SOCIETIES -incorporation for administration of its temporalities

declaration

for

a. Name of the Corpo. b/ authorization for the Diss. c. Names and addresses of the persons who will supervise the dissolution and the winding up; d. Reasons for the Dissolution. SECTION 111 ARTICLES OF INCORPORATION OF RELIGIOUS CORPORATION -must be filed with a SEC; SECTION 112 SUBMISSION OF AOI -must be verified by an Affidavit or Affirmation by the church elder, accompanied by the Certificate of Election or Letter of Appointment. SECTON 113 ACQUISITION and ALIENATION of PROPERTY -may purchase, and hold real estate or personal property for its church, charitable, benevolent or educational purposes; -may mortgage or sell its property upon a Court Order for such purpose. -requires publication of the notice of application to mortgage or sell. -application to mortgage is one by a verified petition by the church elder acting as the Corporate Sole, and may be opposed by any member of the religious denomination. -provided that if the transaction is regulated by such corporation, their rules, regulation and discipline shall control, and the intervention of the Court shall not be necessary.

requires written consent and /or an affirmative vote of 2/3 of its membership, by
filing with the SEC a verified AOI. DISSOLUTION of RELIGIOUS CORPORATION

SECTION 117 METHODS OF DISSOLUTION -the extinguishment of a corporation s charter or the termination of corporate existence; -may be dissolved by: (F-L-I-E-V-S) a. Failure to organize and commence business within 2 years from date of issuance of Certificate of Incorporation; b. Legislative Dissolution; c. Involuntarily by a verified complaint filed with the SEC on grounds authorized by law, such as Serious Dissension in the Corporation, or non-user of Franchise etc; d. Expiration of the Term; e. Voluntary by filing proper papers with the SEC; no hearing is REQUIRED if there are NO CREDITORS affected; f. Shortening of the Corporate Term.

SECTION 118 Voluntary Dissolution where NO CREDITOR is AFFECTED: -effected by Majority vote of the BOD/BOT, and by a RESOLUTION duly adopted by the affirmative vote of the SH of at least 2/3 of the OCS of the members at a meeting , after publication of the notice for 3 consecutive weeks; -if there is no publication, notice shall be sent either by registered mail or personal service within 30 days prior to the said Meeting. SECTION 119 VOLUNTARY DISSOLUTION where CREDITORS are AFFECTED; petition shall be filed with the SEC; signed by the Majority of the BOD/BOT; verified by the President or one of its Directors/Trustees; shall set forth claims and demands; resolved by the AFFIRMATIVE vote of the SH representing at least 2/3 of the OCS at a meeting called for the purpose.

6. Refusal to Adopt/Approve by-laws.

SECTION 122 CORPORATE LIQUIDATION *When shall it takes place? Expiration of charter; Charter is annulled or forfeited; *Corporation continued to exist for a period of 3 years for the purpose of: (P-E-D-D) Prosecuting/Defending Suits; Enabling the Corporation to settle and close its affairs; Dispose and convey its properties; Distribute its assets; *EFFECT: -all interests in the Corporate property TERMINATES; the legal interest vests in the TRUSTEES; Beneficial Interest to the SH, members, creditors or other persons in interest. -interest Not distributed by reason of the fact of an unknown member, or that the said member cannot be found, the same shall be ESCHEATED to the city or municipality where such assets are located. *No Corporation shall be DISSOLVED except upon Lawful Dissolution and after the payment of all its debts and liabilities, except in case of a decrease of the Capital Stocks and as otherwise allowed in the Code. *Dissolution PRECEDES Liquidation. *Liquidation may be by: Board Action Trusteeship Receivership *Corporate Term CANNOT be extended during the 3 year period of liquidation, for there is no CORPORATE TERM to extend in such situation.

-Commission shall fix a date on or before objections are filed which shall not be less than 30 days nor more than 60 days after the entry of the order. -publication of the order once a week for three consecutive weeks in the newspaper of general circulation in the municipality or city where the principal office of the corporation is located. -hearing by the SEC shall be conducted upon 5 days after the given date to which the right to file objections is fixed; -if petition is sufficient, the Commission shall render judgment dissolving the corporation. SECTION 120 DISSOLUTION by SHORTENING THE CORPORATE TERM: -done by amending the AOI, submitted to the SEC. -effect to the creditors is NOT MATERIAL, because the amendment is designed to attain dissolution by Expiration of the Corporate Term. SECTION 121 INVOLUNTARY DISSOLUTION -done upon filing of a verified complaint and after proper notice, and hearing on grounds provided by existing laws, rules and regulations. -GROUNDS: (C-U-C-S-F-R) 1. Continuous inactivity of the corporation for a period of at least 5 years; 2. Ultra vires or illegal Acts; 3. Corporation was illegally organized; 4. Serious Dissesion in the Corporation 5. Fraud/Misrepresentation of the Paid-up Capital

FOREIGN CORPORATION SECTION 123 Definition -one formed , organized or existing under any laws other than those of the Philippines, whose laws allow Filipino citizens and corporations to do business in its own country or state. -have the right to transact business in the Philippines after it shall have obtained a LICENSE to transact and a Certificate of Authority from the appropriate Government Authority.

-can be licensed only under the Principle of Reciprocity after securing the Certicate of Authority from the Board of Investments under EO 226. -after license is secure, a DEPOSIT of acceptable securities to protect future creditors is required. -A resident agent of the corporation may be an INDIVIDUAL or a DOMESTIC CORPORATION. -A foreign corporation may transact business in the Philippines by Organizing a DOMESTIC CORPORATION and by complying with the law on Foreign Equity (foreign corp cannot transact business if it is organized with 40% or more of the OCS is owned by aliens). SECTION 124 APPLICATION FOREIGN CORPORATION to EXISTING

TRANSACTING BUSINESS means continuity of commercial dealings and arrangements. ISOLATED TRANSACTIONs is not transacting business; *A single act of a Foreign Corp. may constitute transacting business if such act appertains to the ordinary business in the Philippines. *WHEN FOREIGN CORPORATIONS DEEMED TO TRANSACT BUSINESS IN THE PHILS>? (S-O-A-P-A) 1.Soliciting Orders, Purchases, and Service Contracts; 2. Opening Offices whether called liaison or branches; 3.Appointing representatives or Distributors domiciled in the Phils. Or who stayed in the Phils. For a period of 180 days or more; 4.Participating in the management, supervision or control of domestic business, firm or corp. In the Phils. 5. Any other act(s) implying continuity of dealings or arrangements for commercial gain or for the purpose of the business organization SECTION 127 WHO MAY BE RESIDENT AGENT? -either be an INDIVIDUAL RESIDING in the Phils. Or a Domestic Corporation lawfully transacting in the Phils. -of good moral character and of sound financial standing; SECTION 128 RESIDENT AGENT; SERVICE OF PROCESS -to whom summons and other legal processes may be served in all legal proceedings against the corporation; -if there be none, summons may be served upon the SEC, which shall have the same force and effect as if made upon the duly authorized officers of the corporation. -SEC shall then transmit within 10days the summons to the principal office of the corporation. *A foreign corporation doing business in the Philippines WITHOUT the REQUIRED LICENSE< can be SUED in the PHIL. COURTS , but it cannot SUE or maintain suits in OUR JURISDICTION. *A foreign Corporation not doing business in the Phils. And therefore not required to secure a license, can sue and be sued before our Courts. *A foreign Corporation NOT DOING BUSINESS, UNLICENSED and UNREGISTERED , but is widely known in the Phils. For the use of its products under

SECTION 125 APPLICATION for A LICENSE a. Submission of AOI to the SEC; -translated in the official language; b. Application shall be under Oath; c. Certification under Oath by the authorized official of the State of the Foreign Corp. that its state allows Filipino Citizens and corporations to do business therein. d. Certification from the President or any authorized person of the corporation stating that the applicant is SOLVENT and in Sound Financial Condition. e. Prior authority from Appropriate Government Agency; SECTION 126 ISSUANCE OF LICENSE -Foreign Corp. can COMMENCE to transact its business and continue to do so, for as long as it retains the authority to act as a corporation under the laws of the country or state of its incorporation unless revoked, suspended or annulled in accordance with this Code or other Special Laws. -depositing of Bonds within 60 days after issuance of the license to the SEC, in the actual market value of at least 100,000; -which, within 6 months after each fiscal year, the SEC shall REQUIRE the licensee to deposit ADDITIONAL SECURITIES equivalent in actual market value of 2% of the when the Licensees Gross income for that fiscal year EXCEEDS 5M. -if the Gross income decreases, SEC requires a deposit 10% of the actual market value; -deposit shall be released by the SEC in the event the Licensee ceases to do business in the Phils.

its TRADE NAME< has the legal right to maintain an ACTION in the Phils., because a Trade Name is a Property Right, a right in Rem, which it may assert in any of the Courts in the WORLD, even in the jurisdiction where it does not transact business.

SECTION 129 LAW APPLICABLE -to any foreign corporations lawfully doing business in the Philippines; SECTION 130 AMENDMENTS to the AOI and BY-Laws of Foreign Corporation -shall be submitted to the SEC within 60 days after such amendment shall take effect; -filing duly authenticated copy thereof to the appropriate government agency, underscoring the change/changes made; SECTION 131 AMENDED LICENSE -obtained when: Change of name of the FCorp.; Desires to pursue in the Phils. Other or additional purposes By submitting application to the SEC, accompanied by a favorable indorsement from the appropriate government agency. SECTION 132 MERGER or CONSOLIDATION involving a FOREIGN CORPORATION Licensed in the PHILIPPINES -if permitted under Philippine Law -or by the Laws of Incorporation -shall submit to the SEC within 60 days after the Merger or consolidation AOM/AOC, duly authenticated; -if the absorbed corporation is a foreign corporation doing business in the Phils., the ACorp. Shall petition for the withdrawal of its license, in accordance with this Title. SECTION 133 DOING BUSINESS WITHOUT LICENSE> -cannot maintain or intervene in any action; -but can be sued or proceeded against before the Philippine Courts. SECTION 134 REVOCATION OF LICENSE -by the SEC upon the following grounds: Failure to Pay ANNUAL REPORT or to pay annual fee required by the Code; Appointment of a Resident Agent was not done; Failure to Submit to the SEC the new address of the Resident Agent; Amended AOI or By-laws was not submitted to the SEC within the time prescribed;

Misrepresentation of any material fact in its application; Failure to pay Taxes, impost or assessment; Transacting Business outside the authority under its issued License. Representing foreign corporation NOT DULY licensed to do business in the Phils. Any other ground as would render the corporation UNFIT to do business in the Phils.

SECTIOn 135; ISSUANCE OF CERTIFICATE of REVOCATION -issued by the SEC furnishing a copy thereof to the appropriate government agency. SECTION 136 CORPORATION WITHDRAWAL of FOREIGN

-by Filing a Petition for Withdrawal of License and upon compliance of the following: Payment of accrued claims; Payment of Taxes, Impost or penalties lawfully due to the Phils. Publication of the Petition for Withdrawal once a week for three consecutive in a newspaper of general circulation; SECTION 137 : OUTSTANDING CAPITAL STOCK -means the TOTAL SHARES OF STOCK issued to subscribers or stockholders whether or not fully or partially paid, except in Treasury Sales; SECTION 138 : DESIGNATION of GOVERNING BOARDS -done as provided in the AOI, or the by-laws; SECTION 139 INCORPORATION and other FEES -SEC is authorized; SECTION 140 : STOCK OWNERSHIP in CERTAIN CORPORATION -maximum limits may be set by the Batasang Pambansa, for corporations declared to be vested with public interest to: a. achieve national objectives; b. prevent illegal monopolies; c. restraint of trade, d. implement regulations designed to foster economic developments. NEDA shall consider the type , nature, size . economies of the sale, geographic location, extent of Filipino Ownership, the labor intensity, and such

other factors germane to the rationalization and promotion of business. SECTION 141 ORGANIZATION ANNUAL REPORT OF

-shall be submitted to the SEC, certified by any independent certified Public Accountant; within a period prescribed by SEC: SECTION 142 EXAMINATION CONFIDENTAL NATURE OF

-except insofar as the laws may require the same to be made in public, or when such interrogatories are necessary to be presented in Court.. SECTION 143 RULE MAKING POWER of the SEC a. to Implement provisions of the Code; b. Promulgate rules and regulations

SECTION 144 VIOLATIONS of the CODE -punishable by NOT LESS THAN 1,000.000 but not more than 10,000.00 OR by an imprisonment of not less than 30 days but not more than 5 years of both, in the discretion of the Court. -requires notice and hearing. SECTION 145 AMENDMENT or REPEAL -no right , remedy or liability for or against the corporation or the officers, shall be REMOVED, or IMPAIRED in a SUBSEQUENT DISSOLUTION or AMENDMENT, or REPEAL by this Code; SECTION 146 REPEALING CLAUSE. SECTION 148 existing corporations and doing business in the Philippiines, on the date of the effectivity of the Code, shall be DEEMED authorized and licensed in accordance with the same; -if affected by the new requirements, SHALL be given a period of NOT MORE THAN 2 years from effectivity of the Code to comply the same.

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