CORPORATION CODE OF THE PHILIPPINES

By Hector s De Leon Jr.

ATTRIBUTES OF A
CORPORATION
1. It is an artificial being
2. It is created by operation of
law
3. It has the right of
succession
4. It has only the powers,
attributes, and properties
expressly authorized by law or
incident to its existence
DISTINCTION BETWEEN A
PARTNERSHIP AND
CORPORATION
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

Manner of creation
Number of incorporators
Commencement of
juridical personality
Powers
Management
Effect of
mismanagement
Right of succession
Extent of liability
Transferability of interest
Term of existence
Firm name
Dissolution
Laws which govern

PRIVATE CORPORATIONS
ARE
1.
2.

PUBLIC CORPORATION
ARE:
1.
2.
3.
4.

Provinces
Cities
Municipalities
Barangays

CORPORATION WITH
MAJORITY OWNERS MUST
BE FILIPINO

COMPONENTS OF
CORPORATION
1.
2.
3.
4.

Corporators
Incorporators
Stockholders
Members

2.
3.
4.
5.

THREE OTHER
COMPONENTS
1.
2.
3.

Promoters
Subscribers
Underwriter

CAPITAL STOCKS
1.
Authorized capital stock
2.
Subscribed capital stock
3.
Outstanding capital stock
4.
Paid-up capital stock
5.
Unissued capital stock
6.
Legal capital

6.
7.
8.
9.

1.
2.
3.
4.
5.
6.
7.
8.
9.

1.
2.

Par value /no par

value
Voting/non- voting
Common/preferred
#
Promotion share
Share in escrow
Convertible stock
Founders share
Redeemable share
Treasury share

3.
4.
5.

6.
7.

KINDS OF PREFERRED
SHARE
1.
2.

8.

Preferred as to assets in
case of liquidation
Preferred as to dividends

9.

KINDS OF PREFERRED
SHARE AS TO DIVIDENDS
1.
2.
3.
4.
5.

Cumulative PS
Non-cumulative PS
Participating PS
Non-participating PS
Cumulative-participating
PS

Promotion
Incorporation
Normal organization and
commencement of
business operations
QUALIFICATION OF
INCORPORATORS

1.
2.
3.
4.

Natural person
Capacity to contract
Residents of the
Philippines
Citizens of the
Philippines

Name of
corporation
Purpose of
corporation
Principal office of
corporation
Term of corporation
Names,
nationalities,
residences of
incorporators
Number of directors
Names,
nationalities,
residences of
directors
If stock corporationAmount of
authorized stock
if non-stock
corporation-amount
of capital and
Names,
nationalities,
residences of
contributor

If non-stock corporation:
1.
2.

must be a member
majority of the directors
must be a resident of the
Philippines
METHODS OF VOTING
1.
2.
3.

1.
2.
3.

governing body of
the corporation
binding effect of
stockholders action
extent of judicial
review

QUALIFICATION OF
DIRECTORS OR TRUSTEES
If stock corporation:
1.
2.
3.
4.

must owned at least one

share
share must be registered
in his name
must continuously own
at least one share during
his term
majority of directors
must be resident of the
Philippines

Straight voting
Cumulative voting
for one candidate
Cumulative voting
for distribution

CORPORATE OFFICERS
1.
2.
3.
4.
5.

President
Vice-president
Secretary
Treasurer
General manager

REQUISITES OF BOAR
MEETING
1.

2.
3.

4.

Meeting of directors
or trustees duly
assembled as a
board
Presence of quorum
Decision of majority
of quorum or
majority of entire
board
Meeting at the
place, time, manner
provided by the bylaws

QUORUM DEFINED
1.
2.
3.

Number required for

presence of quorum
Number required for
approval of
corporate acts
Number provided
greater than
majority

DISQUALIFICATION OF
DIRECTORS/TRUSTEES
1.

POWERS OF BOARD OF
DIRECTORS

STEP IN THE CREATION OF

CORPORATION
1.
2.
3.

Corporation for
exploration,
development and
utilization of natural
resources
Public service
corporation
Educational
corporation
Banking corporation
Corporation
engaged in retail
trade
Rural banks
Corporation
engaged in
coastwise shipping
Corporation
engaged in the
pawnshop business
Under the flag law

CONTENTS OF ARTICLES
OF INCORPORATION

CLASSES OF SHARES IN
GENERAL

Stock corporation
Non-stock corporation

OTHER CLASSIFICATION OF
CORPORATION
1. Number Of Person Who
Composed
-Corporation
Aggregate
-Corporation Sole
2.Religious or not
-Ecclesiastical
-Lay
3.Charitable or not
-Eleemosynary
-civil
4.Which Country
-Domestic
-foreign
5.Legal right to corporate
existence
-De jure
-De facto
6.Open to public or not
-Close
-Open
7.Relation to other
Corporation
-Parent or Holding
-Subsidiary
8.True sense or Limited sense
-True
-Quasi
-Corporation by prescription
-corporation by estoppels
9.Public or Private
-Public
-Private

Owner/subscriber of
atleast one share

1.

CLASSIFICATION OF
CORPORATIONS
1.
2.

Governmentowned/controlled
corporation
Quasi-public corporations

5.

2.

Not convicted by
final judgment of an
offense punishable
by imprisonment for
a period exceeding
six years
Do not violate
corporation code for
prior 5 years from
election

WHO CAN FILL VACANCIES?

1.
2.

Shareholders/memb
ers*
Member of directors

CONTRACT OF
CORPORATION WITH THE
DIRECTOR OR TRUSTEES IS
VALID IF:
1. That the presence of such
director or trustee in the
board meeting in which the
contract was approved was
not necessary to constitute a
quorum for such meeting;

2. That the vote of such

director or trustee was not
necessary for the approval of
the contract;
3. That the contract is fair and
reasonable under the
circumstances; and
4. That in case of an officer,
the contract has been
previously authorized by the
board of directors.
CORPORATE POWERS AND
CAPACITY
1. To sue and be sued in its
corporate name;
2. Of succession by its corporate
name for the period of time stated
in the articles of incorporation and
the certificate of incorporation;
3. To adopt and use a corporate
seal;
4. To amend its articles of
incorporation in accordance with
the provisions of this Code;
5. To adopt by-laws, not contrary to
law, morals, or public policy, and to
amend or repeal the same in
accordance with this Code;
6. In case of stock corporations, to
issue or sell stocks to subscribers
and to sell stocks to subscribers
and to sell treasury stocks in
accordance with the provisions of
this Code; and to admit members
to the corporation if it be a nonstock corporation;
7. To purchase, receive, take or
grant, hold, convey, sell, lease,
pledge, mortgage and otherwise
deal with such real and personal
property
8. To enter into merger or
consolidation with other
corporations as provided in this
Code;
9. To make reasonable donations,
10. To establish pension,
retirement, and other plans for the
benefit of its directors, trustees,
officers and employees; and
11. To exercise such other powers
as may be essential or necessary
to carry out its purpose or purposes
as stated in the articles of
incorporation.

RELATIVE POWERS OF
CORPORATION
1.
2.

Any act not prohibited

Only powers those
granted

CLASSIFICATION OF
CORPORATE POWERS
1. Those expressly grated or
authorized by law
2. Those that is necessary to
the exercise of the express or
incidental power
3. Those incidental to its
existence
IMPLIED POWERS OF
CORPORATION

1.
2.
3.
4.
5.

Acts in the usual course

of business
Acts to protect the debts
owing to a corporation
Embarking in different
business
Acts in part or wholly to
protect or aid employees
Acts to increase business

WHY CORPORATION
ACQUIRES ITS OWN
SHARE?
1.
2.
3.
4.

Elimination of fractional
share
Satisfaction of
indebtedness to
corporation
Payment of share of
dissenting or
withdrawing stockholders
Other cases

CONDITIONS IN ACQUIRING
OWN SHARES
1.
2.
3.

4.

5.

That its capital is not

thereby impaired
That it be for a legitimate
and proper purpose
That there shall be
unrestricted retained
earnings to purchase the
same and its capital is
thereby impaired
That the corporation acts
in good faith and without
prejudice to the right of
the creditor and
stockholder
That the condition for
corporate affairs warrant
it

CLASSES OF DIVIDENDS
1.
2.
3.
4.
5.
6.
7.
8.

Cash dividend
Property dividend
Stock dividend
Optional dividend
Composite dividend
Scrip dividend
Bond dividend
Cumulative
dividend
9.
Liquidating dividend
10. Preferred dividend

3.

The required quorum in

meetings of stockholders
or members and the
manner of voting therein;
4.
The form for proxies of
stockholders and
members and the
manner of voting them;
5.
The qualifications, duties
and compensation of
directors or trustees,
officers and employees;
6.
The time for holding the
annual election of
directors of 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.
In the case of stock
corporations, the manner
of issuing stock
certificates; and
10. Such other matters as
may be necessary for the
proper or convenient
transaction of its
corporate business and
affairs.

2.
3.
4.

5.
6.

They must not be

contrary to existing law
and inconsistent with the
code
They must not be
contrary to morals and
public policy
They must not impair
obligation of contract
They must be general
and uniform in their
operation and not
directed against
particular individual
They must be consistent
with the articles of
incorporation
They must be reasonable

1.
2.

1.

2.

The time, place and

manner of calling and
conducting regular or
special meetings of the
directors or trustees;
The time and manner of
calling and conducting
regular or special
meetings of the
stockholders or
members;

4.

5.

6.

7.

8.

9.

10.

11.

Regular
Special
12.

REQUISITES OF VALID
MEETINGS
1.
2.

3.
4.
5.

It must be held at the

proper place
It must be held at the
stated date and at the
appointed time or at a
reasonable time
It must be called by t
proper person
There must be a previous
notice
There must be a quorum

13.
14.

15.

16.

REQUISITES OF NOTICE OF
MEETINGS
1.

2.
3.

4.
CONTENTS OF BY-LAWS

3.

KINDS OF MEETING

VALIDITY OF BY-LAWS
1.

2.

5.

6.

Must be issued by one

who has authority to
issue it
Must be In writing
Must state the date,
time, place of the
meeting
Must state the business
to be transacted thereat
Must be sent at a certain
time before the
scheduled meeting
Must comply with any
other requirements
prescribed by laws/bylaws

MATTERS AT WHICH THE

LAW REQUIRES SPECIFIC
NUMBER OF VOTES
1.

To amend the
articles of

17.

18.

19.

20.

incorporation B/TM & M/OCS-2/3

To elect directors or
trustees-M/OCS-M
To remove directors
or trustees- M/OCS2/3
To call a special
meeting to remove
director or trusteesM/OCS-M
To ratify a contract
of a director or
trustees with the
corporation- M/OCS2/3
To extend /shorten
corporate termsB/T-M & M/OCS-2/3
To increase or
decrease the capital
stock -B/T-M &
M/OCS-2/3
To incur, create, or
increase bonded
indebtedness- B/T-M
& M/OCS-2/3
To sell, lease,
exchange,
mortgage, pledge
substantial assetsB/T-M & M/OCS-2/3
To invest corporate
funds in other
business- B/T-M &
M/OCS-2/3
To issue stock
dividends-Q-M &
M/OCS-2/3
To enter into a
management
contract- Q-M &
M/SH-M/2/3
To adopt by-lawsOCS-M
To amend, repeal or
adopt new by-lawsB/T-M & OCS-M
To delegate to
board of director
the power to amend
or repeal the bylaws-OCS-2/3
To revoke the
preceding power
delegated to the
board of directorsOCS-M
To fix the issued
price of no par
value share-Q-M or
OCS-M
To effect or amend
the plan of merger
or consolidationB/T-M & M/OCS-2/3
To dissolve the
corporation- B/T-M
& M/OCS-2/3
To adopt a plan of
distribution of
assets of NSC- B/TM & M-2/3

PRESIDING OFFICER AT
MEETINGS
1.

President/chairman/vicechairman

2.

Stockholder or member
in a temporary capacity
3.
Stockholder or member
chosen
MANNER OF VOTING
1.
2.

Directly
Indirectly
By means of proxies
By a trustee under a
voting trust agreement
By executors,
administrators, receivers,
or other legal
representative appointed
by court

HOW PARTICIPATION IN
CORPORATION ACQUIRED
If stock corporation

By subscription contract
with an existing
corporation for the

acquisition of unissued
share
By purchase from the
corporation of treasury
share
By transfer from a
previous stockholder of
the outstanding share or
existing subscription to
share

If non-stock corporation

By contract with the

corporation the modes of
entering into which vary
according to the charter
CONSIDERATION FOR
STOCKS
1.
2.

Actual cash paid to the

corporation;
Property, tangible or intangible,
actually received by the
corporation and necessary or
convenient for its use and lawful

3.

4.
5.

6.

purposes at a fair valuation equal

to the par or issued value of the
stock issued;
Labor performed for or services
actually rendered to the
corporation;
Previously incurred indebtedness
of the corporation;
Amounts transferred from
unrestricted retained earnings to
stated capital; and
Outstanding shares exchanged
for stocks in the event of
reclassification or conversion.

SOURCE OF CORPORATE
CAPITAL
1.
2.
3.

Funds furnish by
shareholder
Borrowings
Profits and stock
dividends
DIFFERENT MODE BY
SHARE MAY ISSUED
1.

By subscription
before and after

2.

3.
4.

incorporation, to
original, unissued
stock
By sale of treasury
stock after
incorporation for
money, property, or
service
By subscription to
new stock
By making a stock
dividend

MODES OF STOCK
TRANSFER
1.

2.
3.

Endorsement and
delivery of stock
certificate
Transfer in a
separate instrument
Judicial or extrajudicial settlement
of the estate