Notes on the Revised Corporation Code1 - Shares that may be given to incorporators

- Exclusive right to vote and be voted for in the elections of directors limited for a period
What is a corporation? (Sec. 2) not exceeding five years from the date of incorporation
• It is an artificial being created by operation of law, having the right of succession and the powers, - Such right is not available if its exercise will violate Anti-dummy law; Foreign
attributes and properties expressly authorized by law or incidental to its existence. Investments Act; and other pertinent laws

What are the elements of a corporation? (Sec. 2) o Treasury Shares

a) It is an artificial being; - Shares of stock which have been issued and fully paid for but subsequently reacquired
b) It is created by operation of law; by the issuing corporation
c) It has the right of succession; and - The reacquisition may be done through: purchase, redemption, donation or some other
d) It has the powers, attributes and properties expressly authorized by law or incidental or its lawful means
existence - May be again be disposed of for a reasonable price fixed by the board of directors
- If not issued again, it does not form part of the outstanding capital stock and has not
What are the classes of corporations? (Sec. 3 and Sec 5) voting rights
1. Stock -
• Which have capital stock divided into shares and are authorized to distribute to the holders • Classification, rights, privileges or restrictions and their stated par value, if any, must be indicated
of such shares, dividends, or allotments of the surplus profits on the basis of the shares in the Articles of Incorporation (AOI).
held. • Each share must have equal rights unless otherwise provided in the AOI and in the certificate of
• It is composed of corporator stock.
2. Non-stock • There shall always be a class or series of shares with complete voting rights.
• All other corporations that do not fit the definition mentioned above. • No shares may be deprived of voting rights except preferred or redeemable shares, unless
otherwise provided in the RCC.
What law governs corporation? (Sec. 4) • However, holders of nonvoting shares shall still be entitled to vote on the following matters:
• Special Law or charters- if a corporation is created by special law or charter, it shall be governed
by the provisions of the law or charters creating them or applicable to them, RCC applies (fundamental business of corporation)
suppletorily insofar as they are applicable. o Amendment of the AOI;
o Adoption and amendment of by laws;
• Revised Corporation Code- all other corporations not included above. o Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all
of the corporate property;
Who are the incorporators? (Sec. 5) o Incurring, creating, or increasing bonded indebtedness;
• Incorporators are those stockholders or members mentioned in the articles of incorporation as o Increase or decrease of authorized capital stock
originally forming and composing the corporation and who are signatories thereof. o Merger or consolidation of the corporation with another corporation or other
corporations;
What are the classifications of shares? (Secs. 6-9) o Investment of corporate funds in another corporation or business in accordance with this
• Shares may be divided into classes or series or both Code; and
o Common o Dissolution of the corporation

o Preferred Is par value required in issuing certificate of stock? (Sec 6)

- may be given preference in the distribution of dividends and in the distribution of • No, shares or series of shares may or may not have a par value.
corporate assets in case of liquidation, or such other preferences. • Exception: The following shall not be permitted to issue no-par value shares of stock:
- may be issued only with a stated par value o Banks;
- terms and conditions of these shares may be provided by the Board if there are o Trust;
authorized in the AOI o insurance and preneed companies;
- such terms and conditions shall be effective upon filing of a certificate with the SEC. o public utilities;
o building and loan associations; and
o Redeemable o other corporations authorized to obtain or access funds from the public, whether publicly
- May only be issued when expressly provided in the AOI listed or not
- These are shares which may be purchased by the corporation form the holders upon the
expiration of a fixed period What are the legal effects of shares of capital stock issued without par value? (Sec 6)
- Such redemption upon the expiration of the period is without regard to the existence of • shall be deemed fully paid and nonassessable
unrestricted retained earnings in the books of the corporation. In other words, it is • the holder of such shares shall not be liable to the corporation or its creditors in respect thereto
mandatory, and capital may be used for its payment. • must be issued for a consideration of at least five pesos per share
• the entire payment receive for such shares shall be treated as capital and shall not be available
for distribution as dividends.
o Founders’ Shares

1 Disclaimer: Use this as supplement only. It is not exhaustive but may serve as good reviewer the night/hours

before the exam.

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 1
Who may form corporations? (Sec 10) • It takes effect upon the approval of the Commission; or
Incorporators may be any: • If from the date of filing if not acted upon within 6 months for cause not attributable to the
• Person (One Person Corporation) corporation
• Partnership
• Association What are the grounds for disapproval of amendment? (Sec 16)
• Corporation • SEC may disapprove the AOI or any amendments if there are not compliant with the requirement
of this code. However, SEC must give the incorporators, directors, trustees, or officers a reasonable
(singly or jointly with others, but not more than 15 in number; must be of legal age; must time from receipt of disapproval within which to modify the objectionable portions
own or be a subscriber to at least one share of capital stock) • The grounds are:
§ The AOI or amendment is not substantially in accordance with the form prescribed herein;
Who may not form a corporation? (Sec 10) § The purpose/s are patently unconstitutional, illegal, immoral or contrary to government rules
• Natural persons who are licensed to practice a profession and regulations
• Partnerships or associations organized for the purpose of practicing a profession § The certification concerning the amount of capital stock subscribed and/or paid is false; and
§ The required percentage of Filipino ownership of the capital stock under existing laws or the
How long is the corporate term? (Sec 11) Constitution has not been complied with.
• Perpetual unless AOI provides otherwise
• This includes all existing corporation upon the effectivity of the code (March 2019) unless upon What are the rules on corporate name? (Sec 17)
a vote of its stockholders representing a majority of its outstanding capital stocks (OCS) notifies • No corporate name shall be registered if it not distinguishable from that already reserved or
the Commission that it elects to retain its specific corporate term. Moreover, dissenting registered for another corporation or if such name is already protected by law, or when its use is
stockholders may exercise its appraisal right contrary to existing law, rules and regulations
• A name is not distinguishable even if it contains one or more of the following:
How does a corporation extend or shorten its existence? (Sec 11) § The word “corporation,” “company,” “incorporated.” “limited,” “limited liability” or an
• It may be done by amending the AOI abbreviation of one of such words; and
• No extension may be made earlier than 3 years prior to the original or subsequent expiry dates, § Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different
unless there are justifiable reasons for an earlier extension as may be determined by the tenses, spacing, or number of the same word or phrase.
Commission • If the SEC finds a corporate name is not registrable, it may summarily order the corporation to
• The extension shall take effect only on the day following the original or subsequent expiry dates. immediate cease and deist from using such name and require the corporation to register a new one.
• SEC shall also cause the removal of all visible signages, advertisement, etc bearing such corporate
Is revival of corporation possible? (Sec 11) name.
• Yes, unlike in the old code, a corporation which expired term may now apply for a revival of its • If approved, the SEC shall issue a certification of incorporation under the amended name.
corporate existence together with the rights and privileges and subject to all duties and debts • If the corporation fails to comply, SEC may hold the corporation, and its responsible officers in
existing prior to its revival. contempt and/or hold them administratively, civilly, and/or criminally liable under this code or
other law and/or revoke the registration of the corporation.
Is revival available to all corporations? (Sec 11)
• Yes, but for banks, banking and quasi-banking institutions, preened, insurance and trust companies, How do you register your corporate name? (Sec 18)
nonstock saving and loans associations, pawnshops, corporations engaged in money service • Any person or group desiring to incorporate shall submit its intended name to the SEC for
business and other financial intermediaries shall have a favorable recommendation of the verification. IF the SEC determines that it may be registered, the name shall be reserved to that
appropriate government agency. corporation.
• The same group mentioned above also needs to have favorable recommendation of the appropriate • The incorporators then shall submit its AOI and by laws.
government agency if they wish to amend their AOI. • If SEC finds the submitted documents in compliant with the RCC and other relevant laws, rules,
and regulations, it shall issue the certificate of incorporation.
Is minimum capital stock still required? (Sec 12)
• Not anymore, except as provided by special law. When does the life of a corporation commence? (Sec 18)
• A private corporation organized under RCC commences it corporate existence and juridical
Is Treasurer’s Affidavit still required in AOI? (Sec 14) personality from the date the SEC issues the certificate of incorporation under its seal
• Yes, but he/she does not need to certify the 25%-25% rule since the latter is not needed anymore. • Thereupon, the incorporators, stockholders/members and their successors shall constitute a body
corporate under the name stated in the AOI and period provided therein.
How to amend Articles of Incorporation? (Sec 15)
• Any amendment must be assented by Majority vote of the board of directors/trustees plus assent of What are de facto corporations (Sec 19)
stockholders representing 2/3 votes of the OCS; for nonstock, 2/3 of the members • Due incorporation of any corporation claiming in good faith to be a corporation under this Code.
• Original and amended articles shall be filed before the Sec. • Its existence can only be attacked directly and by the Solicitor General in a quo warranto
• All amendments shall be indicated by underscoring them. proceeding
• A copy of the original and amended AOI shall be duly certified under oath by corporate secretary
and a majority of the directors or trustees, with a statement that it was approved by the required What are corporations by estoppel? (Sec 20)
number of stockholders/ members • All persons who assume to act as a corporation knowing it to be w/o authority to do so
• These persons shall be liable as general partners for all debts, liabilities and damages incurred or
When does the amendment take effect? (Sec 15) arising as a result

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 2

 • Such corporation may not also take refuge to its lack of corporate personality when being sued for o Other corporations engaged in businesses vested with public interest similar to the
torts or any transaction entered by it as a corporation above, as may be determined by the Commission, after taking into account relevant
• Moreover, third party who knew such ostensible corporation cannot resist performance of an factors which are germane to the objective and purpose of requiring the election of
obligation on the ground that there was in fact no corporation an independent director, such as the extent of minority ownership, type of financial
products or securities issued or offered to investors, public interest involved in the
What happens if a corporation fails to operate? (Sec 21) nature of business operations, and other analogous factors.
• If a corporation fails to operate within five years from the date of its incorporation, its certificate
of incorporation is deemed revoked as of the day following the end of the 5-year period. Who may nominate director or trustee? (Sec 23)
• If a corporation commenced its business but subsequently becomes inoperative for a period of at • Each stockholder or member shall have the right to nominate
least 5 consecutive years, the Commission may, after due notice and hearing, place it under
delinquent status What is the needed vote for the election? (Sec 23)
• A delinquent corporation has then two-year period to resume operations and comply with all the • Majority of the OCS, or majority of the members entitled to vote
requirements of SEC.
• If SEC is satisfied, the delinquent status shall be lifted. Otherwise, the SEC shall cause the When can stockholders or members vote thru remote communication or in abstentia? (Sec 23)
revocation of the corporation’s certificate of incorporation. • When authorized in the by-laws; or
• A majority of the board of directors allows it
What is the mandate of the board of directors/trustees? (Sec 22) • Corporations vested w/ public interest may also allow this practice
• Exercise corporate powers, conduct all business and control all properties of the corporation
Is there a prescribed form of election? (sec 23)
What is the term of office of a director? (Sec 22) • By ballot if requested by any voting stockholder or member
• One year
• He shall hold office until the successor is elected and qualified What is the voting right of a stockholder? (Sec 23)
• He may:
What is the term of office of a trustee? (Sec 22) 1. Vote such number of shares for as many persons as there are directors to be elected
• Three years 2. Cumulate said shares and give one candidate as many votes as the number of directed
• He shall hold office until the successor is elected and qualified to be elected multiplied by the numbers of the shares owned;
3. Distribute them on the same principle among s many candidates as may be seen fit
Are directors/trustees required to have shares of stock/ member of the corporation? (Sec 22) • The limitations are: a) the total number of votes shall not exceed the number of shares owned by
• Yes, for directors must be owner of at least one stock; for trustees must be a member the stockholders multiplied by the whole number of directors to be elected; b) no delinquent
stock shall be voted
What happened if the cease to possess the above requirement? (Sec 22)
What is the voting right of a member? (Sec23)
• They shall cease to be such.
• Unless otherwise provided in its AOI or by-laws, members may cast as many votes as there are
What is an independent director? (Sec 22) trusteed to be elected but may not case more than one vote for one candidate
• A person who, apart from shareholdings and fees received form the corporation, is independent
What is the vote needed to be elected? (Sec 23)
of management and free from any business or other relationship which could, reasonably be
perceived to materially interfere with exercise of independent judgment in carrying out the • The highest number of votes shall be elected
responsibilities of a director.
What is the recourse if no elected is held? (Sec 23 and 25)
How is an independent director elected? (Sec 22) • Such meeting shall be adjourned and the corporation shall report to the SEC within 30 days from
• He must be elected by the shareholders present or entitled to vote in absentia during the election the date of the scheduled election. The report shall specify a new date for the election, which
of directors. shall not be later than 60 days from the scheduled date.
• They shall be subject to rules and regulations governing their qualifications, disqualifications, • If no new date has been designated, or if the rescheduled election is likewise not held, the SEC
voting requirements, duration of term and term limit, maximum number of board membership may, upon the application of a stockholder, member, director or trustees, and after the
and other requirements that the SEC will prescribe to strengthen their independence and align verification of the unjustified non-holing of the election, summarily order that an election be
with international best practices. held.
• The SEC shall have the power to issue such orders as may be appropriate, including orders
Do all corporations need to have independent directors? (Sec 22) directing the issuance of a notice stating the time and place of the election, designated presiding
• No, only corporations vested with public interest are required to have independent directors officer, and the record date or dates for the determination of stockholders or members entitled to
constituting at least 20% of such board. vote.
• The following are corporations vested with public interest: • On this meeting then, notwithstanding any contrary provisions in the AOI or by-laws, the quorum
o Corporations covered by Sec. 17.2 of Securities Regulation Code—these are whose will be the shares of stock and members represented at such meeting and entitled to vote.
securities are registered with SEC, corporations listed with an exchange or with assets
of at least P50 million and having 200 or more holders of shares, each holding at least What are the theories on source of powers?
100 shares of a class of its equity shares; o Agency Theory
o Banks and quasi-banks, nonstock savings and loan associations, pawnshops, § All powers reside in the stockholders and are just delegated to the directors as agents.
corporations engaged in money service business, preneed, trust and insurance o Concession Theory
companies, and other financial intermediaries; and
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 3
 § The powers of directors is derived from the state. It is the state that permits the directors • Notice of the time and place of such meeting, as well as of the intention to propose such removal,
to perform only such functions as the State allows. must be given by publication or by written notice prescribed in this Code.
o Platonic Guardian Theory
§ Every corporation under this theory must have a board and “the board is an aristocracy What is the ground for removal? (Sec 27)
or group of Platonic guardians created by legislative ordainment.” The board is not a • It may be with or without cause
mere caretaker but it exercises control over corporate affairs. The board is considered • the representative of minority stockholder or member may not be removed without cause.
an inviolable institution.
o Sui Generis Theory What will order the removal? (Sec 27)
§ The directors are not agents of the stockholders who elect them; they are fiduciaries • The SEC shall, on its own, or upon verified complaint, and after due notice and hearing, order
whose duties run primarily to the corporation. They are not trustees in the strict sense. the removal of a director or trustee elected despite the disqualification, or whose disqualification
Their powers are derived from the state thought the statute under which the corporation arose or is discovered subsequent to an election. The removal is w/o prejudice to other sanctions
is organized, yet they do not qualify solely as Platonic guardians. They are indeed sui Sec may impose on the board of directors or trustees who, w/ knowledge of the disqualification,
generis. failed to remove such director or trustee.
What if the director, trustee, or officer die, resign or in any manner cease to hold office? (Sec 25) How vacancies are filled? (Sec 28)
• The secretary, or the director, trustee or officer of the corporation, shall within 7 days from • Vacancy occurring in the board other than by removal or expiration of term may be filled by the
knowledge thereof, report inn writing such fact to SEC. vote of at least a majority of the remaining directors or trustees, if still constituting a quorum;
otherwise, by stockholders or members in a regular or special meeting called for that purpose
Who are the corporate officers? (Sec 24)
• Vacancy due to term expiration, election shall be held the day after the expiration at a meeting
• The board of directors after their election must formally organize and elect: called for that purpose.
o A president, who must be a director;
• When vacancy is a result of removal, the election shall be held on the same day of the meeting
o A treasurer, who must be a resident;
authorizing the removal and this fact must be so sated in the agenda and notice of said meeting.
o A secretary, who must be a citizen and resident of the Philippines; and
o Such other officers as may be provided in the by-laws • In all other cases, election must be held no later than 45 days from the time the vacancy arose
o Compliance officer (only for corporations vested w/ public interest
What is then the term of the replacement director/trustee? (Sec 28)
• Same person may hold two or more positions concurrently, except no one shall act as
o president and secretary; or • He shall serve only for the unexpired term of the predecessor in office.
o president and treasurer at the same time, unless otherwise allowed in this Code.
Is election of a replacement director/trustee always necessary? (Sec 28)
Who may be disqualified from holding positions? (Sec 26) • No, when the vacancy prevents the remaining directors from constituting a quorum and
• Any persons, if within 5 years prior to the election or appointment as such was: emergency actions is required to prevent grave, substantial and irreparable loss or damage to the
a. Convicted by final judgment: corporation, the vacancy may be temporarily filled from among the officers of the corporation
i. Of an offense punishable by imprisonment of more than 6 years by unanimous vote of the remaining directors or trustees.
ii. For violating this Code; and • The action of the designated director/trustee shall be limited to the emergency action necessary
iii. For violating The Securities Regulation Code and the term shall cease within a reasonable time from the termination of the emergency or upon
b. Found Administratively liable for any offense involving fraudulent acts; and the election of the replacement director/trustee whichever is earlier.
c. By a foreign court or equivalent foreign regulatory authority for acts, violations or • The corporation must notify the SEC w/in 3 days from the creation of the emergency board,
misconduct similar to those enumerated in paragraphs (a) and (b) above. stating therein the reason for its creation
• The SEC or the Philippine Competition Commission may impose in its promotion of good
corporate governance or as a sanction in its administrative proceedings other qualifications or Can the corporation increase the directors/trustee? (Sec 28)
disqualifications. • Yes, but the filling of the additional director/trustee must be in an election at a regular or at a
special meeting of stockholder/members duly called for the purpose, or in the same meeting
How is a director/trustee remove? (Sec 27) authorizing the increase of directors/trustees if so stated in the notice of the meeting.
• By a vote of the stockholders holding or representing at least 2/3 of the OCS; or in a nonstock, • In all elections under Sec 28, the procedure in Sec 23 and 25 shall be followed.
by a vote of at least 2/3 of the members entitled to vote
Are the directors/trustees allowed to receive compensation? (Sec 29)
When can the removal take place? (Sec 27) • Only if it is provided in the by-laws. Otherwise, they are not allowed to receive compensation
• Such removal shall take place either at a regular meeting or at a special meeting call for the except for reasonable per diems.
purpose, and in either case, there must be previous notice to stockholders or members of the • But if the stockholders representing at least a majority of the OCS or majority of the members
corporation for the intention to propose such removal at the meeting may grant directors or trustees with compensation and approve the amount thereof at a regular
or special meeting.
Who may call the special meeting on removal? (Sec 27) What are the limitations for the compensation, if allowed? (Sec 29)
• The secretary, upon order of the president, or upon written demand of the stockholders • The total yearly compensation of directors shall not exceed 10% of the net income before the
representing or holding at least a majority of the OCS, or a majority of the members entitled to income tax of the corporation during the preceding year
vote. • Directors/trustees shall not participate in the determination of their own per diems or
• If there’s no secretary, or if he refuses, despite demand, fails or refuses to call the special meeting compensation
or to give notice thereof, the stockholder or member of the corporation signing the demand may • Corporations vested w/ public interest shall submit to their shareholders and the SEC, an annual
call for the meeting by directly addressing the stockholders or members. report of the total compensation of each of their directors or trustees.

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 4

What is the liability of the director/trustees or officers in cases of unlawful acts? (Sec 30) • Yes, the board may create special committees of temporary or permanent nature and determine
• Directors who willfully and knowingly vote for or assent to patently unlawful acts or who are the members’ term, composition, compensation, powers and responsibilities.
guilty of gross negligence or bad faith in directing the affair sof the corporation or acquire any
personal or pecuniary interest in conflict w/ their duty as such director or trustees shall be liable Can the board create an executive committee? (Sec 34)
jointly and severally. • Only if the by-laws so provide. Take note that there must be an express provision providing for
such.
What is the consequence if a director, trustee/ officer, in performing task entrusted to them, attempt • This executive committee shall be composed of at least three directors.
to acquire any interest adverse to the corporation? (Sec 30)
• A director, trustee or officer shall not attempt to acquire, or acquire any interest adverse to the What are the powers of the executive committee? (Sec 34)
corporation in respect of any matter which has been reposed in them in confidence, and upon • The committee may act, by majority vote of all its members, on such specific matters within the
which, equity imposes a disability upon themselves to deal in their own behalf; otherwise, they competence of the board, as may be delegated to it in the by-laws or by majority vote of the
shall be liable as a trustee for the corporation and must account for the profits which otherwise board. Except with respect to the (memorize said Atty. Ampil):
would have accrued to the corporation. 1. Approval of any action for which shareholders’ approval is also required
2. Filling of vacancies in the board
Can the corporation enter into a contract with any of its directors, trustees or officers? ( Sec 31) 3. Amendment or repeal of by laws or the adoption of new by-laws
• Yes, provided the following conditions are present: 4. Amendment or repeal of any resolution of the board which by its express terms is not
1. The presence of such director or trustee in the board meeting in which the contract amendable or repealable; and
was approved was not necessary to constitute a quorum for such meeting; 5. Distribution of cash dividends to the shareholders.
2. The vote of such director or trustee was not necessary for the approval of the contract;
3. The contract is fair and reasonable under the circumstances; What are the powers of the corporation? (Sec 31)
o Where any of the first three conditions is absent, in case of a contract with a director • Express
or trustee, such contract may be ratified by the vote of the stockholders representing - Those provided in the RCC and other laws
at least 2/3 OCS or at least 2/3 of the members in a meeting called for the purpose. • Implied
Provided, that full disclosure of the adverse interest of the directors or trustees - Necessary to carry out its purpose
involved is made at such meeting and the contract is fair and reasonable under the • Incidental
circumstances. - Deemed conferred pursuant to corporation’s existence (i.e. succession, corporate name,
4. In case of corporations vested with public interest, material contracts are approved make by-laws)
by at least 2/3 of the entire membership of the board, with at least a majority of the 1. To sue and be sued in its corporate name;
independent directors voting to approve the material contract; and 2. To have perpetual existence unless the certificate of incorporation provides otherwise;
5. In case of an officer, the contract has been previously authorized by the board of 3. To adopt and use a corporate seal;
directors 4. To amend its articles of incorporation in according with the provisions of RCC
5. To adopt by-laws, not contrary to law, morals or public policy and to amend or repeal the
What is the status of the contract mentioned above if the conditions are absent? (Sec 31) same in accordance with RCC;
• It is voidable, at the option of the corporation 6. For stock corporations, to issue or sell stock to subscribers and to sell treasury stocks in
accordance with the provisions of RCC; and for nonstock, to admit members to the
Who are the parties involved in the contract contemplated by Sec 31? corporation;
• Between the corporation and one or more of its directors, trustees, officers or their spouses and 7. To purchase, receive, take or grant, hold convey, sell, lease, pledge, mortgage, and
relatives within 4th civil consanguinity or affinity otherwise deal with such real and personal property including securities and bonds other
corporations, as the transaction of the lawful business of the corporation ma reasonable and
Can corporations with interlocking directors enter into a contract? (Sec 32) necessarily require subject to the limitations prescribed by law and the Constitution;
• Yes, provided that there’s no fraud and the contract is fair and reasonable. 8. To enter into a partnership, joint venture, merger, consolidation or any other commercial
agreement with natural and juridical persons;
What if the interlocking director has substantial interest on one corporation and nominal interest on 9. To make reasonable donations, including those for the public welfare or for hospital,
the other/s? (Sec 32) charitable, cultural, scientific, civic or similar purposes: Provided, that no foreign
• The corporation in which the director has nominal share must fulfill the conditions in Sec 31. corporation shall give donations in aid of any political party or candidate or for purposes
of partisan political activity;
What is considered substantial interest? (Sec 32) 10. To establish pension, retirement, and other plans for the benefits of its directors, trustees,
• For the purposes of interlocking directors, stockholdings exceeding 20% of the OCS 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 AOI.
When is a director considered disloyal? (Sec 33)
• Where a director, by virtue of such office, acquires a business opportunity which should belong Who may sign verification and certification against non-forum shopping w/o board resolution or
to the corporation thereby obtaining profits to the prejudice of such corporation, the director mus corporate secretary’s certificate? (jurisprudence; exception)
account for refund to the latter all profits, unless the act has been ratified by a vote of the 1. Chairperson of the Board of Directors
stockholders owning or representing at least 2/3 of the OCS. 2. President of the Corporation
• This applies even if the director risked his own funds in the venture. 3. General Manager or Acting General Manager
4. Personnel Officer
Can the board create committees? (Sec 34) 5. Employment Specialist for labor cases

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 5

What is a derivative suit? (developed only by jurisprudence) par stock subscribed by each, and the amount paid by each on the subscription in cash
• A complaint filed by a stockholder/s for the protection of the rights of the corporation. In this or property, or the amount of capital stock or number of shares of no-par stock allotted
case, the board failed to act to protect the interest of the corporation. to each stockholder if such increase is for the purpose of making effective stock
• The real party-in interest here is the corporation. Hence, the complaint must be filed under its dividend therefor authorized;
name. The suing stockholder has only nominal interest. The name/s not required to be impleaded. o Any bonded indebtedness to be incurred, created or increased;
• The relief of the complaint inures to the corporation and not to the stockholder suing. o The amount of stock represented at the meeting; and
• The action may be filed even if at the time of filing the suing private person is no longer member/ o The vote authorizing the increase or decrease of the capital stock, or the incurring or
stockholder of a corporation. creating or increasing of any bonded indebtedness.
• Its requisites: • The copies of the certificate shall be kept on file in the office of the corporation and filed with
1. The party brining suit should be a shareholder as of the time of the act or the SEC and attached to the original AOI.
transaction complained of, the number of his shares not being material; • No decrease in the capital stock shall be allowed if its effect shall prejudice the rights of corporate
2. He has tried to exhaust intra-corporate remedies, i.e., made a demand on the board creditors
but to no avail; and • Bonds issued by a corporation shall be registered with the SEC which shall have the authority to
3. The cause of action actually devolves on the corporation, the wrongdoing or harm determine the sufficiency of the terms thereof.
having been, or being caused to the corporation and not to the particular stockholder
bring the suit. Is there additional requirement for the incurring, creating or increasing any bonded indebtedness?
(Sec 37)
What is the doctrine of apparent authority? (Jurisprudence) • Yes, such action shall require prior approval of the SEC and when appropriate, of the Philippine
• The doctrine of apparent authority provides that a corporation will be estopped from denying the Competition Commission
agent’s authority if it knowingly permits one of its officers or any other agent to act within the • The application for approval shall be made within 6 months from the date of approval of the
scope of an apparent authority, and it holds him out to the public as possessing the power to do board of directors and stockholders, which period may be extended for justifiable reasons.
those acts.
• The doctrine of apparent authority does not apply if the principal did not commit any acts or Is there additional requirement for the increase of capital stock? (Sec 37)
conduct which a third party knew and relied upon in good faith as a result of the exercise of • The SEC shall not accept for filling any certificate of increase of capital stock unless
reasonable prudence. Moreover, the agent’s acts or conduct must have produced a change of accompanied by a sworn statement of the treasurer of the corporation lawfully holding office at
position to the third party’s detriment. the time of the filing of the certificate, showing at least 25% of the increase in capital stock has
been subscribed and that at least 25% of the amount subscribed has been paid in actual cash to
Who may receive summons? the corporation or that property, the valuation of which is equal to 25% of the subscription , has
• President, Managing Partner, General Manager, Corporate Secretary, treasurer, or in-house been transferred to the corporation
counsel
• This list is exclusive When does the change take effect?(Sec 37)
• After approval of the SEC and Issuance by the SEC of its certificate of filing, the capital stock
May a corporation extend or shorten its existence? (Sec 36) shall be deemed increased or decreased and the incurring, creating or increasing of any bonded
• Yes, it may do so by amending its AOI with the approval of a majority of the vote of the board indebtedness authorized, as the certificate may declare
of directors/trustees and ratified at a meeting by the stockholders/ members representing at least • Prior to the approval, all payment received shall be held in trust.
2/3 of the OCS or of its members.
• There must be written notice of the proposed action and the time and place of the meeting sent What’s the rule for non-stock corporation? (Sec 37)
to the stockholders or members at their residence and must be deposited to the addressee in the • They may also do the above acts only if approved by a majority of the board of trustees and of
post office with postage prepaid, served personally or when allowed in the bylaws or done with at least 2/3 of the members in a meeting duly called for the purpose.
the consent of the stockholder, sent electronically in accordance with the rules and regulations
of the SEC. Compare Bonded indebtedness v. debentures (SEC OPINION)
• The two principal elements of distinction are time element and division of the whole debt into
What is the rule on increasing or decreasing capital stock, incurring, creating or increasing Bonded like aliquot part units of round denominations.
Indebtedness? (Sec 37)
• The action must be approved by a majority vote of the board of directors and by 2/3 of the OCS Bonds Debentures
at a stockholder’s meeting duly called for the purpose. Written notice must likewise be sent in Secured by mortgage on corporate Not ordinarily secured by any specific
accordance with the rule set forth in Sec 36 except the rule regarding the addressee. property (personal or real) mortgage, lien or pledge of security
They are negotiable They are not negotiable
They require the approval of the They do not require the approval of the
What then would be the proof the compliance? (Sec 37) stockholders stockholders
• A certificate must then be signed by a majority of the BOD and countersigned by the chairperson More of long term More of short term
and secretary of the stockholders’ meeting. ---- Issued on the basis of the general credit
• The following must be contained in the certificate: of the corporation
o That the requirements of this section and have been complied with; ---- Usually issued under indenture which
o The amount of the increase or decrease of the capital stock; means a trust company agrees to
o In case of an increase of the capital stock, the amount of capital stock or number of supervise the execution of the
shares of no-par stock thereof actually subscribed, the names, nationalities and covenants of the debtor for the benefit
addresses of the persons subscribing, the amount of capital stock or number of no- of all the holders.
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 6
 o To eliminate fractional shares arising out of stock dividends;
What is preemptive right? (Sec 38) o To collect or compromise an indebtedness to the corporation, arising out of unpaid
• All stockholders of a stock corporation shall enjoy preemptive right to subscribe to all issues or subscription, in a delinquency sale, and to purchase delinquent shares sold during said
disposition of shares of any class, in proportion to their respective shareholdings, unless such sale; and
right is denied in the AOI or an amendment thereto. o To pay dissenting or withdrawing stockholders entitled to payment for their shares
• Such right shall not extend to shares issued: under the provisions of RCC.
o in compliance with laws requiring stock offerings or minimum stock ownership by • Not exclusive list
the public; • Donation is contemplated under this
o or to shares issued in good faith with the approval of the stockholder representing
2/3 of the OCS, in exchange for property needed for corporate purposes or in payment Can the corporation invest its funds in another corporation or business for any other purpose? (Sec
of a previously contracted debt. 41)
• Covers all issuances and dispositions even unsubscribed previously issued shares • Yes, provided that it is approved by majority of the board of directors/trustees and ratified by
• Not applicable for change of shares resulting of a merger stockholders representing 2/3 of OCS/ members, at a meeting duly called for such purpose.
• Waiver of this right is personal and is transferrable (notice must be sent regarding this meeting)
• May be denied in the AOI except in breach of trust or to “free out” the minority interest. • If the investment is in line with the primary purpose of the corporation, the ratification is not
anymore needed.
What’s the rule on sale and disposition of corporate assets? (Sec 39)
• Subject to Ph Competition Act and other pertinent laws, corporation may sell, lease, exchange, What are the rules in the power to declare dividends? (Sec 42)
mortgage, pledge, or dispose of its property and assets provided it is approved by a majority vote • The Board of directors may declare dividends out of the unrestricted retained earnings which
of its board of directors or trustees. shall be payable in case, property or in stock to all stockholders on the basis of the outstanding
• If the sale all or substantially all of the corporation’s properties and assets, including its goodwill, stock hold by them.
it must be authorized by the vote of the stockholders representing at least 2/3 of the OCS or at • No stock dividend may be declared unless approved by the stockholders representing 2/3 of the
least 2/3 of the members in a stockholders’ meeting duly called for the purpose. OCS at a regular or special meeting called for that purpose.
• In nonstock where there are no members with voting rights, the vote of at least a majority of the • When cash dividend is declared, it must first be applied to the unpaid balance on the subscription
trustees in office will be sufficient authorization for the corporation to enter into any transaction plus cost and expenses of a delinquent share.
authorized by this section. • When stock dividend is declared, the dividend shall then be withheld from the delinquent
• There must be written notice of the proposed action and the of the time and place for the meeting shareholders until their unpaid subscription is fully paid.
shall be addressed to stockholders/members at their places of residence as shown in the book of • The distribution is pro rata based on the number of shares and not on the amount paid for.
corporation and deposited to the addressee in the post office with postage prepaid, served
personally, or when allowed by the bylaws or done with the consent of the shareholder, sent Is a corporation mandated to declare dividends? (Sec 42)
electronically. • No, unless its retaining surplus profits are in excess of 100% of their paid-in capital stock.
• Any dissenting stockholder may exercise the right of appraisal • Except:
o When justified by definite corporate expansion projects or programs approved by the
What’s the test if the sale is all or substantially all of the assets? (Sec 39) board of directors; or
• It must be computed based on its net asset value as shown in its latest financial statements. o When the corporation is prohibited under any loan agreement with financial
(Quantitative test) institutions or creditors, whether local or foreign, from declaring dividends without
• It is deemed to cover substantially all the corporate property and assets if thereby the corporation their consent, and such consent has not yet been secured; or
would be rendered incapable of continuing the business or accomplishing the purpose for which o When it can be clearly shown that such retention is necessary under special
it was incorporated. (Qualitative test) circumstances obtaining in the corporation, such as when there is need for special
reserve for probable contingencies.
Is the sale, lease, etc. binding after the needed authorization is acquired? (Sec 39)
• No, the board may, in its discretion, abandon such sale, lease, exchange, mortgage, pledge, or What are stock dividends?
other disposition of property and assets, subject to the rights of third parties under any contract • Earnings are distributed to the stockholders in the form of shares of stock
relating thereto, w/o further action or approval from stockholders or members.

What are unrestricted retained earnings?

Is sec 39 applicable to all sale, lease, etc? 1. Not appropriated for corporation expansion or programs duly approved by the board of directors
• The section does not restrict corporations right to sale, lease, dispose etc. its assets if the same is 2. Not covered by loan agreement
necessary in the usual and regular course of business or if the proceeds of the sale or other 3. Not retained for a special reserve for probable contingencies
disposition of such property and assets shall be appropriated for the conduct of its remaining
business. What are paid-in surplus?
• Difference between the par value and issued value of selling price
Can the corporation acquire its own shares? (Sec 40) • Part of capital not dividends
• Yes, but the corporation must have unrestricted retained earning in tis books to cover the shares
to be purchased or acquired. What is the rule when the declaration is partly cash and partly property?
• A stock corporation shall have the power to purchase or acquire its own shares for a legitimate • Prevailing market value as agreed upon by the stockholders shall be considered in determining
corporate purpose or purposes, including the following cases: the equitable distribution of the total dividends.
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 7
 • By-laws or its amendments of any bank, banking institution, building and loan association, trust
When is property may be declared as dividend? company, insurance company, public utility, educational institution or other special corporations
• When it is no longer intended to be used in the operation of the business and are practicable to governed by special laws must be accompanied by a certificate of the appropriate agency to the
be distributed effect that such by-laws or amendments are in accordance with law.
• Shall not result in an inequitable distribution of property to the stockholders in terms of book
value and market value, if any. When does by-laws take effect? (Sec 45)
• It is effective only upon the issuance of SEC of a certification that the bylaws are in accordance
Can a corporation enter into a management contract? (Sec 43) with RCC.
• Yes, provided that it is approved by the majority of the board of directors/trustees and by
stockholders owning at least majority of the OCS or members of both the managing and the What are the contents of by-laws? (Sec 46)
managed corporation at a meeting duly called for the purpose. • The corporation may provide:
• However, 2/3 of the OCS or members entitled to vote is required if either: o The time, place, manner of the calling and conducting regular or special meetings of
o When a stockholder/s representing the same interest of both the managing and the directors or trustees;
managed corporations own or control more than 1/3 of the OCS entitled to vote of o The time and manner of calling and conducting regular or special meetings and mode
the managing corporation; or of notifying the stockholders or members thereof;
o Where a majority of the members of the board of directors of the managing o The modes by which a stockholder, member, director, or trustee may attend meetings
corporation also constitute a majority of the board of directors of the managed and cast their votes;
corporation o The form of proxies of stockholders and members and the manner of voting them;
• These shall apply to contracts where the managing corporation undertakes to manage or operate o The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines
all or substantially all of the business of the managed corporation such as service contract, for setting the compensation of directors or trustees and officers, and the maximum
operating agreements. number of other board representations that an independent director or trustee may
• Provided that service contracts or operating agreement which relate to the exploitation, have which shall, in no case, be more than the number prescribed by the SEC;
development, exploration or utilization of natural resources may be entered into for such periods o The time for holding the annual election of directors or trustees and the mode or
as may be provided by pertinent laws or regulations manner of giving notice thereof;
• Contract here is with another corporation not natural person. o The manner of election or appointment and the term of office of all officers other
than directors or trustees;
What is the allowed period for such management contract? (Sec 43) o The penalties for violation of the by-laws;
o In the case of stock corporations, the manner of issuing stock certificates; and
• It shall not be for a period longer than five years for any one term.
o Such other matters as may be necessary for the proper or convenient transaction of
tis corporate affairs for the promotion of good governance and anti-graft and
What are the ultra vires acts of corporations? (Sec 44)
corruption measures
• Powers not conferred by RCC or its AOI and except as necessary and incidental to the exercise
• An arbitration agreement may be provided in the by-laws pursuant to Sec. 181 of RCC.
of the powers conferred.
• There are two kinds: How to amend the by-laws? (Sec 47)
o Acts committed contrary to law
• Affirmative vote of the majority of the board of directors/trustees and the owners of at least
o Acts committed without authority
majority of the OCS or members, at a regular or special meeting dully called for the purpose is
• Can be maintained on the basis of estoppel needed to amend, repeal or adopt new bylaws.
• Ultra vires acts are violation of contract between the state and the corporation. • 2/3 of the OCS/ members may delegate to the board of directors/trustees the power to amend,
repeal or adopt new by-laws. However, such power is deemed revoked whenever stockholders
What are by-laws? (Sec 45) owning or representing a majority of the OCS or members shall so vote at a regular of special
• Rules and regulations or private laws enacted to regulate, govern and control its own action, meeting.
affairs and concerns and of it stockholders or members and directors and officers in relation • The amended or new by-laws shall be filled with the SEC, and if applicable, the stockholder’s
thereto and among themselves in their relation to the corporation. or member’s resolution authorizing the delegation of the power, duly certified under oath by the
• It is an inherent power corporate secretary and a majority of the directors/ trustees.
• It is permanent and continuing rule • It shall take effect only upon the issuance of the SEC of a certification that the same is in
• Corporations may still adopt internal rules not contrary to its by-laws accordance with RCC and other relevant laws.
• Stockholders/members meeting is required whenever they decide to delegate or revoke such
How is it adopted? (Sec 45) delegation.
• It is adopted by the affirmative vote of the stockholders representing at least a majority of the • For meetings of stockholder/ members, a different quorum may be provided in its by-laws.
OCS, or at least majority of the members. • The approval of the SEC enjoys presumption of regularity
• It shall be signed by the stockholders or members voting for them and shall be kept in the
principal office of the corporation, subject to the inspection of the stockholder o members during What are kinds of meetings? (Sec 48)
office hours. • It may be regular or special.
• A copy, duly certified by a majority of the directors or trustees and countersigned by the secretary
of the corporation, shall be filed with the SEC and attached to the original AOI. When are regular meetings of stockholders/members held? (Sec 49)
• If the by-laws is filed prior to incorporation, the by-laws shall be approved and signed by all the • They are held annually on a date fixed in the by-laws or it not so fixed, on any date after
incorporated and submit to the SEC together with the AOI. April 15 of every year as determined by the board of directors/trustee

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 8

How and when should notice be sent? (Sec 49 and 50) Can written notice be waived? (Sec 49)
• Written notice shall be sent at least 21 days prior to the meeting unless a different period is • Yes, it may be waived either expressly or impliedly.
required in the bylaws, law or regulation • General waiver of notice shall not be allowed in the AOI or bylaws
• Written notice may likewise be sent through electronic mail or such other manner as the • Attendance at a meeting is a waiver of notice unless when the person attends a meeting for the
SEC shall allow under its guidelines (Take note the law did not mention that notice thru express purpose of objection to the transaction of any business because the meeting is not
email shall be in the bylaws) lawfully called or convened.
• Each notice of meeting shall further be accompanied by the following:
o The agenda for the meeting; Who may call for a meeting if the authorized person fails or refuses to call for meeting? (Sec 49)
o A proxy from which shall be submitted to the corporate secretary within a • When there is no authorized or the same unjustly refuses, any stockholder may petition the SEC,
reasonable time prior to the meeting; after showing good cause, to issue an order directing the petitioning stockholder/member to call
o When attendance, participation, and voting are allowed by remote a meeting by giving proper notice required by RCC or the bylaws.
communication or in abstentia, the requirements and procedures to be followed • The petitioning stockholder/member shall preside thereat until at least a majority of the
when a stockholder or member elects either option; and stockholders/members present have chosen from among themselves, a presiding officer.
o When the meeting is for the election of directors or trustees, the requirements • By-laws may provide for a person who may call for a meeting. In the absence thereof, BOD may
and procedure for nomination and election. call for a meeting.
What is the prescribed content of annual report of the board of directors/trustee? (Sec 49) How do you determine who may attend the meeting? (Sec 49)
a) The minutes of the most recent regular meeting which shall include among others: • Unless the bylaws provide for a longer period, the stock and transfer book or membership book
1. A description of the voting and vote tabulation procedures used in the previous shall be closed at least 20 days for regular meetings and 7 days for special meetings before the
meeting; schedules date of such meeting
2. A description of the opportunity given to stockholders or members to ask questions
• All persons registered in the record shall be entitled to attend. But for stock, delinquent shares
and a record of the questions asked and answers given;
may not be voted. (My comment only haha)
3. The matters discussed, and resolutions reached;
4. A record of the voting results for each agenda item;
What happens if the regular meetings are postponed? (Sec 49)
5. A list of the directors or trustees, officers and stockholders or members who attended
the meeting; and • Written notice and the reason therefor shall be sent to all stockholders or members of record at
6. Such other items that the Commission may require in the interest of good corporate least two weeks prior to the date of the meeting, unless a different period is required under the
governance and the protection of minority stockholders; by-laws, law or regulation
b) A member’s list for non-stock corporations and, for stock corporations, material information on
the current stockholders, and their voting rights; Can stockholder/member vote thru proxy or electronic mediated communication? (Sec 49)
c) A detailed, descriptive, balanced and comprehensible assessment of the corporation’s • Yes, stockholder/member may vote in person, thru a proxy, or when so authorized in the bylaws,
performance, which shall include information on any material change in the corporation’s through remote communication or in abstentia.
business, strategy, and other affairs; • The SEC shall issue the rules and regulations governing participation and voting through remote
d) A financial report for the preceding year, which shall include financial statement duly signed and communication or in abstentia, taking into account the company’s scale, number of shareholders
certified in accordance with RCC and the rules of the SEC may prescribe, a statement on the or members, structure, and other factors consistent with the protection and promotion of
adequacy of the corporation’s internal controls or risk management systems, and a statement of shareholders’ or members’ meetings.
all external audit and non-audit fees.
e) An explanation of the dividend policy and the fact of payment of dividends or the reasons for Where can meetings of stockholders or member be held? (Sec 50)
nonpayment thereof; • Whether regular or special, it shall be held in the principal office of the corporation as set forth
f) Director or trustee profiles which shall include, among others, their qualifications and relevant in the AOI or, if not practicable, in the city or municipality where the principal office is located.
experience, length of service in the corporation, trainings and continuing education attended, and o Exception: any city or municipality in the Metro Manila, Metro Cebu and Metro
their board representations in other corporations; Davao, and other Metropolitan areas shall, for purposes of this section, be considered
g) A director/trustee attendance report, indicating the attendance of each director or trustee at each a city or municipality
of the meetings of the board and its committees and in regular or special stockholder meetings
h) Appraisals and performance reports for the board and the criteria and procedure for assessment
i) A director or trustee compensation report prepared in accordance with the RCC and the rules the
SEC may prescribe; What is the effect if the meeting is improperly held or called? (Sec 50)
j) Director disclosures on self-dealings and related party transactions; and/or; • All proceedings and any business transacted at a meeting of the stockholders or members, if
k) The profiles of directors nominated or seeking election or reelection within the powers or authority of the corporation, shall be valid provided that all
• A director, trustee, stockholder, or member may propose any other matter for inclusion in the stockholders or members of the corporation are present or duly represented at the meeting and
agenda at any regular meeting of stockholders/members not one of them expressly state at the beginning of the meeting that the purpose of their
attendance is to object to the transaction of any business because the meeting is not lawfully
When can special meetings of the stockholder/members be held? (Sec 49) called or convened.
• They can be held at any time deemed necessary or as provided in the by laws
• The notice, however, must be sent at least one week prior to the said meeting unless a different KIND OF METING DATE OF MEETIGN REQUIRED NOTICE
period is provided in the bylaws, law or regulation Regular Meeting 1. The date in the By-laws 1. Within the period provided
• Stockholder/member may propose the holding of a special meeting and items to be included in or in the By-laws or
the agenda 2. In the absence— after 2. In the absence—at least 21
April 15 of every year as days prior to the meeting
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 9
 determined by the board • Executors, administrators, receivers, and other legal representatives duly appointed by the court
of directors/trustee may attend and vote in behalf of the stockholders or members without need of any written
proxy.
Special Meeting 1. Any time deemed 1. Within the period provided What if the shares are owned jointly by two or more persons? (Sec 55)
necessary; or in the By-laws; or • The consent of all the co-owners shall be necessary unless there is a written proxy, signed by all
2. As provided in the By- 2. In the absence, at least one the co-owners, authorizing one or some of them or any other person to vote such share or shares.
laws week prior to the said Provided, when the shares are owned in an “and/or” capacity by the holders thereof, any one of
meeting the joint owners can vote said shares or appoint a proxy therefor.
Do treasury shares entitled to a vote? (Sec 56)
• As long as they remain in the Treasury, they shall have no voting right.
What are the rules on proxy and in abstentia voting? (Sec 57)
What is a quorum? • Stockholder/member may vote in all meetings of stockholders or members through proxy
• Number of members of the corporation who must be present in order to take action • When authorized in the bylaws or by a majority of the board, the stockholders or members of
What constitutes quorum? (Sec 51) corporations may also vote through remote communication or in abstentia. Provided, that the
• Unless otherwise provided in RCC or in the by-laws, quorum shall consist of the stockholders votes are received before the corporation finishes the tally of vote. Stockholders voting through
representing a majority of the OCS or members. remote communication is counted in the quorum
• This section refers to stockholder/members’ meetings. • The corporation shall establish the appropriate requirements and procedures for voting through
• For stockholder’s meetings we count number of shares and not people. The opposite applies to remote communication and in abstentia, taking into account the company’s scale, number of
board’s meetings shareholders or members, structure and other factors consistent with the basic right of corporate
• Less than majority may be provided in the bylaws for stockholder’s meeting only. suffrage.
• For board/trustee, it needs to always be the majority or greater majority if it is provided in the • Proxies shall be:
AOI or bylaws. o in writing
What are the rules for regular and special meetings of directors/trustees? (Sec 52) o signed and filed by the stockholder or member, in any form authorized in the bylaws;
• Unless the AOI or the bylaws provides for a greater majority, a majority of the director/trustee o and received by the corporate secretary within a reasonable time before the scheduled
as stated in the AOI shall constitute quorum to transact business, and every decision reached by meeting
at least majority of the directors or trustees constituting a quorum, except for the lection of • Proxy shall be valid only for the meeting for which it is intended except a contrary appears in
officers which shall require the vote of a majority of all the members of the board, shall be the proxy form.
valid as corporate act. • No proxy shall be valid and effective for a period longer than five years at any one time.
• In other words, so long as there is quorum and assented by majority of those who are present, What is a voting trust agreement (VTA) (Sec 58)?
the acts are valid. However, when it comes to the elections of the board, majority of all the • One or more stockholders of a stock corporation may create a voting trust for the purpose of
members of the board must vote in the affirmative. conferring upon a trustee/trustees the right to vote and other rights pertaining to the shares for a
o Supposed a corporation has 7 directors, the quorum is 4. If 4 members are present in period not exceeding five years at any time.
the meeting, 3 votes will be enough for a decision be held as a valid corporate act. What are the rules on voting trusts? (Sec 58)
However, the vote of all the 4 is needed if the board will elect any officer. • The five-year limit does not apply to trust agreement made pursuant to a loan. In such a case, the
When regular and special meetings of the boards be held? (Sec 52) voting trust may be for a period exceeding 5 years but shall automatically expire upon full
• Regular meetings of the board shall be held monthly, unless the bylaws, provide otherwise payment of the loan.
• Special meetings of the board may be held at any time upon the call of the president or as • A voting trust agreement:
provided in the bylaws. o Must be in writing and notarized; and
• Meetings may be held anywhere in or outside the Philippines, unless the bylaws provide o Shall specify the terms and conditions thereof.
otherwise. (A wise philosopher (Streegan) once said, it may actually be held anywhere in the • A certified copy of such agreement must be filed with the corporation and with the SEC,
universe) otherwise the same is ineffective and unenforceable.
• Notice must be sent at least two days prior to the schedules meeting, unless a longer time is • The certificate of or certificates of stock covered by the voting trust agreement shall be cancelled
provided in the bylaws. Such notice may be waived either expressly or impliedly and new ones shall be issued in the name of the trustee/s, stating that they are issued in pursuant
• Director/trustee who cannot physically attend or vote can participate and vote thru remote to the said agreement.
communication such as videoconferencing, teleconferencing, or other alternative modes of • The books of the corporation shall state that the transfer in the name of the trustee/s is made
communication that allow them reasonable opportunities to participate. pursuant to the VTA.
• Directors or trustees cannot attend or vote by proxy at board meetings. • The trustee/s, shall, thereafter, execute and deliver to the transferors, voting trust certificates,
• Director/trustee who has a potential interest in any related party transaction must recuse from which shall be transferable in the same manner and with the same effect as certificates of stock.
voting on the approval of the related party transaction without prejudice to compliance with the • The VTA filed with the corporation shall be subject to examination by any stockholder of the
requirements of Sec. 31 of RCC corporation in the same manner as any other corporate book or record. Provided, both the trustor
Who shall preside at meetings? (Sec 53) and the trustee/s may exercise the right of inspection of all corporate books and records in
• The chairman or, in his absence, the president shall preside at all meetings of the directors or accordance with the provisions of the RCC.
trustees as well as of the stockholders or members, unless the bylaws provide otherwise. • Any other stockholder may transfer shares to the same trustee/s upon the terms and conditions
What is the right enjoyed by secured creditors and administrators? (Sec 54) stated in the VTA, and thereupon shall be bound by all the provisions of said agreement.
• If a share is used as a security interest, the stockholder-grantor shall have the right to attend and • No VTA shall be entered into if it is done to circumvent the laws against anti-competitive
vote at meetings of stockholders, unless the secured creditor is expressly given by the agreements, abuse of dominant position, anti-competitive mergers and acquisitions, violation of
stockholder-grantor such right in writing which is recorded in the appropriate books. nationality and capital requirements, or for the perpetuation of fraud.

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 10

 • Unless expressly renewed, all rights under the VTA shall automatically expire at the end of the o Outstanding shares changed for stocks in the event of reclassification or conversion
agreed period. The Voting trust certificates as well as the certificates of stock in the name of the (outstanding shares)
trustee or trustees shall thereby deemed cancelled and new certificates of stock shall be reissued o Shares of stock in another corporation; and/or
in the name of trustors. o Other generally accepted form of consideration
• The voting trustee/s may vote by proxy or in any manner authorized under the by-laws, unless o When the consideration is other than actual cash or consists of intangible property
the agreement provides otherwise. such as copyrights, the valuation of which shall initially be determined by the
What are the other rights and limitations on the VTA? stockholders/ the BOD, subject to the approval of the SEC
• Does not entitle to possession and control of the properties of the corporation What can’t be used as consideration (Sec 61)
• Does not vest the management of the corporation • Promissory notes or future service
• The legal title is transferred. Hence, trustee can be elected as a director What’s the rule on the price of stocks? (Sec 61)
• There can be group of stockholders entering into a VTA • Stocks shall not be issued for a consideration less than the par or issued price.
• The issued price of par value shares may be fixed in the AOI or the bylaws, or if not so fixed, by
VOTING TRUST AGREEMENT PROXY the stockholders representing at least a majority of the OCS at a meeting duly called for that
Irrevocable Generally revocable purpose.
What is a certificate of stock and who signs it? (Sec 62)
Legal title is transferred to the trustee No transfer of title
The share certificate shall be cancelled and No cancellation of the certificate shall be made • Certificate of shares are issued to represent the shares in a corporation
transferred to the trustee • It is signed by the President or vice president
It must be notarized It need not be notarized • countersigned by the Secretary or its assistant secretary,
The trustor-shareholder cannot vote The shareholder retains his right to vote • and sealed with the seal of the corporation
It cannot be for a specific meeting It can be for a specific meeting Is the share transferable? How? (Sec 62)
The trustee can vote by proxy The proxy cannot further delegate his authority • Yes, shares are personal property and are thus transferable.
to vote and must therefore vote in person • It may be transferred by delivery of the certificate/s indorsed by the owner, his attorney-in-fact,
The trustee votes in his own right as holder of The proxy is the agent of the shareholder or any other person legally authorized to make the transfer.
legal title • No transfer shall be valid except as between the parties, until the transfer is recorded in the books
The trustee can be elected as a director The proxy, as such, cannot be elected as a of the corporation showing:
director. o the names of the parties to the transaction;
o the date of the transfer;
What is a subscription contract? (Sec 59) o the number of the certificate/s; and
• Any contract for the acquisition of unissued stock in an existing corporation or a corporation still o the number of shares transferred.
to be bearded, this is notwithstanding that parties refer to it as a purchase or some other contract. • The SEC may require corporations whose securities are traded in trading markets and which can
• Subscriber agrees to take certain # of shares of the capital stock of a corporation reasonably demonstrate their capability do so to issue their securities or shares of stocks in
• It is between the corporation and the subscriber uncertificated or scripless form in accordance with the rules of the SEC.
• In a sense, it can also be among shareholders such that original subscriber can’t withdraw from • No shares of stock against which the corporation holds any unpaid claim shall be transferable in
the pre-incorporation subscription agreement w/o the consent of all shareholders. the books of the corporation.
When is the perfection of such contract? When can certificate of stocks may be issued? (Sec 63)
• As soon as offer is accepted. • It will only be issued after the full amount of the subscription together with the interest and
What is the mode of acquiring ownership? expenses (in case of delinquent shares), if any is due, has been paid.
What is the liability of the directors for watered stocks? (Sec 64)
• There’s no formality
• A director/officer of a corporation who:
• The title is the contract and the mode is tradition/deliver
o Consents to the issuance of stocks for a consideration less than its par or issued value;
• Under the Corporation Code, there is tradition through the use of the vendee of his rights it is o Consents to the issuance of stocks for a consideration other than cash, valued in
when the contract takes effect; it can be from the moment the certificate of incorporation is issued excess of its fair value; or
• It is not covered by statute of fraud o Having knowledge of the insufficient consideration, does not file a written objection
What is a preincorporation subscription? (Sec 62) with the corporate secretary
• Subscription of shares in a corporation still to be formed Shall be liable to the corporation or its creditors, solidarily with the stockholder concerned for
• Such shall be irrevocable for a period of at least 6 months from the date of subscription, unless the difference between the value received at the time of issuance of the stock and the par or
all of the other subscribers consent to the revocation, or the corporation fails to incorporation issued value of the same.
within the same period or within a longer period stipulated in the contract of subscription. Can there be interest on the unpaid subscriptions? (Sec 65)
• After the AOI has been submitted to the SEC, no preincorporation contract may be revoked. • If so required in the subscription contract.
What may be the consideration for stocks and in some cases issuance of bonds? (sec 61) • It shall start to accrue from the date of the subscription contract and at the rate provided therein.
o Actual cash paid to the corporation; • Should there be no stipulated rate, the prevailing legal rate shall apply.
o Property, tangible or intangible, actually received by the corporation and necessary or What’s the rule on the payment of balance of subscription? (Sec 66)
convenient for its use and lawful purposes at a fair valuation equal to the par or issued • The stipulations in the subscription contract will govern.
value of the stock issued;
• The BOD, unless the subscription contract provides otherwise, may, at any time declare due and
o Labor performed for or services actually rendered to the corporation;
payable to the corporation unpaid subscriptions and may collect the same or such percentage
o Previously incurred indebtedness of the corporation;
thereof, in either case, with accrued interest, if any, as it may deem necessary.
o Amounts transferred from unrestricted retained earnings to stated capital (net income)

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 11

 • The payment must be made on the date specified in the contract or on the date stated in the call o The circumstances as to how the certificate was lost, stolen or destroyed
made by the board. o The number of shares represented by such certificate,
• Failure to pay on such date will make the entire balance due and payable and shall make the o The serial number of the certificate and the name of the corporation which issued the
stockholder liable for interest at the legal rate on such balance, unless a different interest rate is same.
provided in the contract. o Other information and evidence as may be deemed necessary.
• The interest shall be computed from the date specified, until full payment of the subscription. • After verifying the affidavit and evidence presented, the corporation shall publish a notice in a
• Failure to pay within 30 days from the said date, all stock covered by the subscription shall newspaper of general circulation in the place where the corporation has its principal office once
become delinquent and shall be subject to sale, unless the BOD orders otherwise. for 3 consecutive weeks at the expense of the registered owner of the certificate of stock which
What’s the rule on delinquency sale? (Sec 67) has been lost, stolen or destroyed.
• Through a resolution, the board may order the sale of delinquent stock which shall specify the • The notice shall state:
amount due on each subscription plus all accrued interest, and the date, time and place of the sale o the name of the corporation,
which shall not be less than 30days or more than 60 days from the date the stocks become o the name of the registered owner,
delinquent. o the serial number of the certificate,
• Notice of sale, with a copy of the resolution, shall be sent to every delinquent stockholder either o the number of shares represented by such certificate, and
personally, by registered mail, or through other means provided by the bylaws. o shall state that after the expiration of 1 year from the date of the last publication, if
no contest has been presented to the corporation regarding the cert of stock, the right
• The same shall be published once a week for 2 consecutive weeks in a newspaper of general
to make such contest shall be barred and the corporation shall cancel the lost,
circulation in the province or city where the principal office of the corporation is located.
destroyed or stolen cert in its books.
• The shareholder may pay the amount due on or before the date specified for the sale of the
• The corporation shall then issue a new certificate of stock one year from publication.
delinquent stock.
Can a new certificate of stock be issued even prior the expiration of the one year period? (Sec 72)
• If he fails to pay, the balance due, plus accrued interest, costs of advertisement and expenses of
• Yes, provided that the registered owner files a bond or other security as may be required effective
sale, or unless the bod otherwise orders, said delinquent stock shall be sold at a public auction to
for a period of one year for such amount and in such form and with such sureties as may be
such bidder who shall offer to pay the full amount of the balance on the subscription together
satisfactory to the BOD
with accrued interest, costs of advertisements and expenses of sale, for the smallest number of
shares or faction of a share. • If there’s a contest or an action is pending in court regarding the ownership of the certificate of
stock, the issuance of the new certificate shall be suspended until the court renders a final
• The stock purchased shall be transferred to such purchaser in the books of the corporation and a
decision regarding the ownership of the certificate of stock which has been lost, destroyed or
certificate for such stock shall be issued in his favor.
stolen.
• The remaining shares, if any, shall be credited in favor of the delinquent stockholder who shall Can the issuance of new certificate of stocks be questioned? (Sec 72)
likewise be entitled to the issuance of a certificate of stock covering such shares.
• No, unless there is fraud, bad faith, or negligence on the part of the corporation and its officers.
• If there is no bidder who offers to pay the full amount together with the interest etc, the What does the book of corporation contain? (Sec 73)
corporation may, subject to the provisions of this Code, bid for the same, and the total amount
• Corporations shall keep and preserve at its principal office all information relation to the
due shall be credited as fully paid in the books of the corporation.
corporation including but not limited to:
• Title to all the shares of stock covered by the subscription shall be vested in the corporation as o The articles of incorporation and bylaws of the corporation and all their amendments;
treasury shares and may be disposed of by said corporation in accordance with the provisions of o The current ownership structure and voting rights of the corporation, including lists
this Code. of stockholders or members, group structures, intra-group relations, ownership data,
Can the sale be questioned? (Sec 68) and beneficial ownership;
• Yes, subject to the following rule: no action to recover delinquent stock sold can be sustained o The names and addresses of all the members of the board of directors or trustees and
upon the ground of irregularity or defect in the notice of sale, or in the sale itself of the delinquent the executive officers;
stock, unless the party seeking to maintain such action first pays or tenders to the party holding o A record of all business transactions;
the stock the sum for which the same was sold, with interest from the date of sale at the legal o A record of the resolutions of the board of directors or trustees and of the stockholders
rate. or members;
• No action shall be maintained unless a complaint is filed within 6 months from the date of sale. o Copies of the latest reportorial requirements submitted to the Commission; and
Can the Corporation collect unpaid subscription other than public sale? (Sec 69) o The minutes of all meetings of stockholders or members, or of the board of directors
• Yes, the Corporation is not prevented from collecting through court action any amount due on or trustees. Such minutes shall set forth in detail, among others:
any unpaid subscription, with accrued interest, costs, and expenses. § the time and place of the meeting held,
What is the effect of delinquency? (Sec 70) § how it was authorized, the notice given,
• No delinquent stock shall be voted for, be entitled to vote, or be represented at any stockholder’s § the agenda therefor, whether the meeting was regular or special,
meeting, nor shall the holder thereof be entitle to any of the rights of a stockholder until and § its object if special,
unless payment is made by the holder of such delinquent stock for the amount due on the § those present and absent, and every act done or ordered done at the
subscription with accrued interest, and the costs and expenses of advertisement if any. meeting.
• However, right to dividends in accordance with the provisions of this code, shall not be § Upon the demand of a director, trustee, stockholder or member, the time
suspended. when any director, trustee, stockholder or member entered or left the
What is the status of unpaid shares but non-delinquent? (Sec 71) meeting must be noted in the minutes;
• Holders shall have all the rights of a stock holder. § and on a similar demand, the yeas and nays must be taken on any motion
What can a corporation do if certificates of stock are lost/destroyed? (Sec 72) or proposition,
• the registered owner of a certificate of stock in a corporation or such a person’s legal rep. shall § and a record thereof carefully made.
file an affidavit in triplicate. § The protest of a director, trustee, stockholder or member on any action or
• The affidavit shall contain, if possible: proposed action must be recorded in full upon their demand.
Whose signature is necessary for the a minutes have probative value?
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 12
 • Corporate Secretary • Stock corporation may perform or make transfers of its own stocks, in which case all the rules
• It is only the secretary who may insert changes. and regulations imposed on stock transfer agents, except the payment of a license fee herein
What is the right of inspection of the shareholders etc? (Sec 73) provided, shall be applicable:
• Corporate records, regardless of the form in which they are stored, shall be open to inspection • Provided, that the Commission may require stock corporations which transfer and/or trade stocks
by any director, trustee, stockholder or member of the corporation in person or by a in secondary markets to have an independent transfer agent.
representative at reasonable hours on business days, Is the stockholder/member has right to financial statement? (Sec 74)
• and a demand in writing may be made by such director, trustee or stockholder at their expense, • Yes, in fact the corporation shall furnish within 10 days from receipt of written request, its most
for copies of such records or excerpts from said records. recent financial statement
• The right to inspect is mandatory. • At the regular meeting of stockholders or members, the board of directors or trustees shall present
• Right to inspect does not include the right to bring the document out. to such stockholders or members a financial report of the operations of the corporation for the
• STB prevails over GIS; preceding year, which shall include financial statements, duly signed and certified in accordance
• GIS is filed within 30 days after the annual shareholder’s meeting with this Code, and the rules the Commission may prescribe.
Can the corporation deprive some shareholders their right to inspect? (Sec 73) Is it required that the financial statements must be certified under oath by the treasurer and the
president? (Sec 74)
• Yes, a requesting party who is not a stockholder or member of record, or is a competitor, director,
officer, controlling stockholder or otherwise represents the interests of a competitor shall have • Under the law, it may be required if the total assets or total liabilities of the corporation is less
no right to inspect or demand reproduction of corporate records. than Six hundred thousand pesos (P600,000.00), or such other amount as may be determined
What happens if a stockholder abuses its rights under this provision? (Sec 73) appropriate by the Department of Finance
What is a merger? (Sec 75)
• He shall be penalized under Section 158 of this Code, without prejudice to the provisions of
Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines” • Two (2) or more corporations may merge into a single corporation which shall be one of the
What happens if an officer or agent of the corporation refuse to allow the inspection/and or constituent corporations
reproduction of records? (Sec 73) What is a consolidation? (Sec 75)
• He shall be liable to such director, trustee, stockholder or member for damages • may consolidate into a new single corporation which shall be the consolidated corporation
What is the procedure for such merger or consolidation? (Secs 75;76;78)
• He shall likewise be guilty of an offense which shall be punishable under Section 161 of this
Code • The board of directors or trustees of each corporation, party to the merger or consolidation, shall
approve (via majority vote) a plan of merger or consolidation setting forth the following:
• if such refusal is made pursuant to a resolution or order of the board of directors or trustees, the
o The names of the corporations proposing to merge or consolidate, hereinafter referred
liability under this section for such action shall be imposed upon the directors or trustees who
to as the constituent corporations;
voted for such refusal
o The terms of the merger or consolidation and the mode of carrying the same into
What is the possible defense of the accused? (Sec 73)
effect;
• The person demanding to examine and copy excerpts from the corporation’s records and minutes o A statement of the changes, if any, in the articles of incorporation of the surviving
has improperly used any information secured through any prior examination of the records or corporation in case of merger; and, in case of consolidation, all the statements
minutes of such corporation or of any other corporation; required to be set forth in the articles of incorporation for corporations organized
• or was not acting in good faith or for a legitimate purpose in making the demand to examine or under this Code; and
reproduce corporate records; o Such other provisions with respect to the proposed merger or consolidation as are
• or is a competitor, director, officer, controlling stockholder or otherwise represents the interests deemed necessary or desirable.
of a competitor. • The approved plan shall be submitted for approval by the stockholders or members of each of
What is the remedy of a shareholder who has been denied of its rights to inspection? (Sec 73) such corporations at separate corporate meetings duly called for the purpose.
• the aggrieved party may report such to the Commission. o Notice of such meetings shall be given to all stockholders or members of the
• Within five (5) days from receipt of such report, the Commission shall conduct a summary respective corporations in the same manner as giving notice of regular or special
investigation and issue an order directing the inspection or reproduction of the requested records. meetings under Section 49 of this Code. The notice shall state the purpose of the
What is a stock and transfer book? (Sec 73) meeting and include a copy or a summary of the plan of merger or consolidation.
• It’s book kept by the corporation which shall contain: • The affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding
o a record of all stocks in the names of the stockholders alphabetically arranged; capital stock of each corporation in the case of stock corporations or at least two-thirds (2/3) of
o the installments paid and unpaid on all stocks for which subscription has been made, the members in the case of nonstock corporations shall be necessary for the approval of such
and the date of payment of any installment; plan.
o a statement of every alienation, sale or transfer of stock made, the date thereof, by • After which, articles of merger or articles of consolidation shall be executed by each of the
and to whom made; and constituent corporations, to be signed by the president or vice president and certified by the
o such other entries as the bylaws may prescribe. secretary or assistant secretary of each corporation
• The stock and transfer book shall be kept in the principal office of the corporation or in the office • The corporation shall then submit the articles or merger or of consolidation, signed and certified
of its stock transfer agent and shall be open for inspection by any director or stockholder of the as required in RCC. If it’s involves banks/banking institutions, loan associations, trust
corporation at reasonable hours on business days companies, insurance companies, public utilities, educational institutions and other special
Who may be a stock transfer agent?(Sec 73) corporations governed by special laws, there must first be a favorable recommendation from
• A stock transfer agent or one engaged principally in the business of registering transfers of stocks appropriate agency
in behalf of a stock corporation shall be allowed to operate in the Philippines upon securing a • If the Commission is satisfied that the merger or consolidation of the corporations concerned is
license from the Commission and the payment of a fee to be fixed by the Commission, which consistent with the provisions of this Code and existing laws, it shall issue a certificate approving
shall be renewable annually: the articles and plan of merger or of consolidation, at which time the merger or consolidation
shall be effective.

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 13

 • If, upon investigation, the Commission has reason to believe that the proposed merger or When can a stockholder exercise its Right of Appraisal? (Sec 80)
consolidation is contrary to or inconsistent with the provisions of this Code or existing laws, it • When sanctioned by law.
shall set a hearing to give the corporations concerned the opportunity to be heard. Written notice • The list in sec 80 is not exclusive
of the date, time, and place of hearing shall be given to each constituent corporation at least two • Nevertheless, it provides that stockholder shall have the right to dissent and demand payment of
(2) weeks before said hearing. The Commission shall thereafter proceed as provided in this Code. the fair value of the shares in the following instances: (A-S-I-M, but take not this is not
What is there’s dissenting stockholder/member? (Sec 76) exclusive)
• He may exercise the right of appraisal in accordance with this Code: Provided, That if after the o Amendment to the articles of incorporation has the effect of changing or restricting
approval by the stockholders of such plan, the board of directors decides to abandon the plan, the rights of any stockholder or class of shares, or of authorizing preferences in any
the right of appraisal shall be extinguished. respect superior to those of outstanding shares of any class, or of extending or
Can there be any amendment to the plan of merger or consolidation? (Sec 76) shortening the term of corporate existence;
• Yes, provided, That such amendment is approved by a majority vote of the respective boards of o Sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
directors or trustees of all the constituent corporations and ratified by the affirmative vote of substantially all of the corporate property and assets as provided in this Code;
stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two- o Investment of corporate funds for any purpose other than the primary purpose of
thirds (2/3) of the members of each of the constituent corporations. Such plan, together with any the corporation; and
amendment, shall be considered as the agreement of merger or consolidation. o Merger or consolidation
What does Articles of Merger or Consolidation contain? (Sec 77) How can this right be exercised? (Sec. 81)
• It must contain the following: • Stockholder must vote against a proposed corporate action
o The plan of the merger or the plan of consolidation; • He should make a written demand on the corporation for the payment of the fair value of shares
o As to stock corporations, the number of shares outstanding, or in the case of nonstock held within thirty (30) days from the date on which the vote was taken; failure to make the
corporations, the number of members; demand within such period shall be deemed a waiver of the appraisal right.
o As to each corporation, the number of shares or members voting for or against such • If the proposed corporate action is implemented, the corporation shall pay the stockholder, upon
plan, respectively; surrender of the certificate or certificates of stock representing the stockholder’s shares, the fair
o The carrying amounts and fair values of the assets and liabilities of the respective value thereof as of the day before the vote was taken, excluding any appreciation or depreciation
companies as of the agreed cut-off date; in anticipation of such corporate action.
o The method to be used in the merger or consolidation of accounts of the companies; • If, within sixty (60) days from the approval of the corporate action by the stockholders, the
o The provisional or pro forma values, as merged or consolidated, using the accounting withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall
method; and be determined and appraised by three (3) disinterested persons,
o Such other information as may be prescribed by the Commission o one of whom shall be named by the stockholder, another by the corporation, and the
What are the effects of merger or consolidation? (Sec 79) third by the two (2) thus chosen.
• Merger or consolidation shall have the following effects: o The findings of the majority of the appraisers shall be final, and their award shall be
o The constituent corporations shall become a single corporation which, in case of paid by the corporation within thirty (30) days after such award is made:
merger, shall be the surviving corporation designated in the plan of merger; and, in o No payment shall be made to any dissenting stockholder unless the corporation has
case of consolidation, shall be the consolidated corporation designated in the plan of unrestricted retained earnings in its books to cover such payment;
consolidation; • Upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith
o The separate existence of the constituent corporations shall cease, except that of the transfer the shares to the corporation.
surviving or the consolidated corporation; Insert jurisprudence regarding the effect when Corp does not have unrestricted retained earnings at
o The surviving or the consolidated corporation shall possess all the rights, privileges, the time the SH filed the case
immunities, and powers and shall be subject to all the duties and liabilities of a What is the effect of demand and when is the right terminated? (Sec 82)
corporation organized under this Code; • All rights accruing to such shares, including voting and dividend rights, shall be suspended in
o The surviving or the consolidated corporation shall possess all the rights, privileges, accordance with the provisions of this Code,
immunities and franchises of each constituent corporation; and all real or personal
• Except the right of such stockholder to receive payment of the fair value thereof:
property, all receivables due on whatever account, including subscriptions to shares
What happens if the dissenting stockholder is not paid the value of the said shares within thirty (30)
and other choses in action, and every other interest of, belonging to, or due to each
days after the award? (Sec 82)
constituent corporation, shall be deemed transferred to and vested in such surviving
or consolidated corporation without further act or deed; and • The voting and dividend rights shall immediately be restored.
o The surviving or consolidated corporation shall be responsible for all the liabilities May a dissenting stockholder withdraw the demand for payment? (Sec 83)
and obligations of each constituent corporation as though such surviving or • General rule: no.
consolidated corporation had itself incurred such liabilities or obligations; and any • Exception: When the corporation consents
pending claim, action or proceeding brought by or against any constituent corporation What does the right of appraisal cease? (Sec 83)
may be prosecuted by or against the surviving or consolidated corporation. The rights • When such demand for payment is withdrawn with the consent of the corporation, or if the
of creditors or liens upon the property of such constituent corporations shall not be proposed corporate action is abandoned or rescinded by the corporation or disapproved by the
impaired by the merger or consolidation. Commission where such approval is necessary, or if the Commission determines that such
Are corporations undergoing merger or consolidation need to wind up their business? stockholder is not entitled to the appraisal right, then the right of the stockholder to be paid the
• No, even if there’s dissolution there is no winding up because the surviving corporations shall fair value of the shares shall cease.
assume all responsibilities • The status as the stockholder shall be restored, and all dividend distributions which would have
• In a merger, there’s no sale of property involved accrued on the shares shall be paid to the stockholder
• The reckoning of the tenure of the employees are not affected. Who bears the costs of appraisal? (Sec 84)
What does Atty. Ampil say about this? • General rule: Corporation
• Loosely speaking there is transfer or acquisition. Technically, there is absorption/consumption.
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 14
 • Exception: Stockholder if the fair value ascertained by the appraiser is approximately the same How many trustees can there be and how long is their term? (Sec 91)
price which the corporation may have offered to pay the stockholder. • The number shall be fixed in the AOI or bylaws which may not be more than 15.
• In the case of an action to recover such fair value, all costs and expenses shall be assessed against • The term shall not be for more than 3 years until their successors are elected and qualified.
the corporation, unless the refusal of the stockholder to receive payment was unjustified. • Trustees elected to fill vacancies occurring before the expiration of a particular term shall hold
What are the rights of the transferee when the dissenting shares he obtained is cancelled and how office only for the unexpired term.
notation is made? (Sec 85) • A trustee needs to be a member of the nonstock. Except with respect to independent trustees of
• Within ten (10) days after demanding payment for shares held, a dissenting stockholder shall nonstock corporation vested with public interest.
submit the certificates of stock representing the shares to the corporation for notation that such • The members may directly elect officers of a nonstock corporation, unless otherwise provided
shares are dissenting shares. in the AOI or by laws.
• Failure to do so shall, at the option of the corporation, terminate the rights under this Title. What can nonstock corporation may use as record of its members? (Sec 92)
• If shares represented by the certificates bearing such notation are transferred, and the certificates • The corporation shall, at all times, keep a list of its members and their proxies in the form the
consequently cancelled, the rights of the transferor as a dissenting stockholder under this Title Commission may require. The list shall be updated to reflect the members and proxies of record
shall cease and the transferee shall have all the rights of a regular stockholder; and twenty (20) days prior to any scheduled election.
• All dividend distributions which would have accrued on such shares shall be paid to the Where can nonstock corporation hold its meetings? (Sec 92)
transferee • The bylaws may provide that the members of a nonstock corporation may hold their regular or
What is a nonstock corporation? (Sec 86) special meetings at any place even outside the place where the principal office of the
• a nonstock corporation is one where no part of its income is distributable as dividends to its corporation is located but it shall only be held within the Philippine territory.
members, trustees, or officers • Proper notice must be sent to all members indicating the date, time and place of the meeting
• The provisions governing stock corporations, when pertinent, shall be applicable to nonstock What’re the rules in the distribution of assets? (Sec 93)
corporations, except as may be covered by specific provisions of this Title. • The assets of a nonstock corporation undergoing the process of dissolution for reasons other
Does this mean nonstock corporation may not earn profit? (Sec 86) than those set forth in Section 139 of this Code, shall be applied and distributed as follows:
• No, any profit which a nonstock corporation may obtain incidental to its operations shall, o All liabilities and obligations of the corporation shall be paid, satisfied and
whenever necessary or proper, be used for the furtherance of the purpose or purposes for which discharged, or adequate provision shall be made therefor;
the corporation was organized, subject to the provisions of this Title. o Assets held by the corporation upon a condition requiring return, transfer or
What can be the purposes of a nonstock corporation? (Sec 87) conveyance, and which condition occurs by reason of the dissolution, shall be
• Nonstock corporations may be formed or organized for: returned, transferred or conveyed in accordance with such requirements;
o charitable, o Assets received and held by the corporation subject to limitations permitting their use
o religious, only for charitable, religious, benevolent, educational or similar purposes, but not
o educational, held upon a condition requiring return, transfer or conveyance by reason of the
o professional, dissolution, shall be transferred or conveyed to one (1) or more corporations, societies
o cultural, or organizations engaged in activities in the Philippines substantially similar to those
o fraternal, of the dissolving corporation according to a plan of distribution adopted pursuant to
o literary, this Chapter;
o scientific, o Assets other than those mentioned in the preceding paragraphs, if any, shall be
o social, distributed in accordance with the provisions of the articles of incorporation or the
o civic service, or bylaws, to the extent that the articles of incorporation or the bylaws determine the
o similar purposes, like trade, industry, agricultural and like chambers, or distributive rights of members, or any class or classes of members, or provide for
o any combination thereof, subject to the special provisions of this Title governing distribution; and
particular classes of nonstock corporations. o In any other case, assets may be distributed to such persons, societies, organizations
Can members of nonstock corporation maybe deprived of their right to vote? (Sec 88) or corporations, whether or not organized for profit, as may be specified in a plan of
• Yes, the right of the members of any class or classes to vote may be limited, broadened, or denied distribution adopted pursuant to this Chapter.
to the extent specified in the articles of incorporation or the bylaws. Can a corporation adopt a plant of distribution of assets? (Sec 94)
• However, if there is no stipulation in the AOI or bylaws with regard to limitations, each member, • Yes, it may and the process of adopting it provides:
regardless of class, shall be entitled to one (1) vote. o The board of trustees shall, by majority vote, adopt a resolution recommending a plan
May a member vote via proxy? (Sec 88) of distribution and directing the submission thereof to a vote at a regular or special
• Yes, a member may vote by proxy, in accordance with the provisions of this Code. The bylaws meeting of members having voting rights;
may likewise authorize voting through remote communication and/or in absentia. o Each member entitled to vote shall be given a written notice setting forth the proposed
• However, the contrary may be provided for in the articles of incorporation or the bylaws plan of distribution or a summary thereof and the date, time and place of such meeting
May membership be transferred? (Sec 89) within the time and in the manner provided in this Code for the giving of notice of
meetings; and
• General Rule: Membership in a nonstock corporation and all rights arising therefrom are personal
o Such plan of distribution shall be adopted upon approval of at least two-thirds (2/3)
and non-transferable
of the members having voting rights present or represented by proxy at such meeting.
• Exception: When the contrary is provided for in the articles of incorporation or the bylaws. What is a close corporation? (Sec 95)
When is membership terminated? (Sec 90)
• Close corporation is one whose articles of incorporation provides that:
• Membership shall be terminated in the manner and for the causes provided in the articles of o all the corporation’s issued stock of all classes, exclusive of treasury shares, shall be
incorporation or the bylaws. held of record by not more than a specified number of persons, not exceeding twenty
• Termination shall extinguish all rights of a member in the corporation or in its property, unless (20);
otherwise provided in the articles of incorporation or the bylaws.
Insert discretion on the corp for membership and due process
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 15
 o all the issued stock of all classes shall be subject to one or more specified restrictions • The corporation may, at its option, refuse to register the transfer in the name of the transferee
on transfer permitted by this Title; and whenever a person to whom stock of a close corporation has been issued or transferred has or is
o the corporation shall not list in any stock exchange or make any public offering of its conclusively presumed under this section to have notice of:
stocks of any class. o The person’s ineligibility to be a stockholder of the corporation; or
• Even if it has the following elements as stated above, a corporation shall not be deemed a close o that the transfer of stock would cause the stock of the corporation to be held by more
corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or than the number of persons permitted under its articles of incorporation; or
controlled by another corporation which is not a close corporation within the meaning of RCC. o that the transfer violates a restriction on transfer of stock,
• Other titles under the RCC may suppletorily apply to close corporations. • The above mentioned consequence is not be applicable if the transfer of stock if such transfer
What type of corporation cannot incorporate as a close corporation (Sec 95) has been consented to by all the stockholders of the close corporation, or if the close
• Mining or oil companies, stock exchanges, banks, insurance companies, public utilities, corporation has amended its articles of incorporation in accordance with this Title.
educational institutions and corporations declared to be vested with public interest in accordance • The term “transfer”, as used in this section, is not limited to a transfer for value.
with the provisions of RCC cannot incorporate as a close corporation • The provisions of this section shall not impair any right which the transferee may have to either
What is the content of the AOI of a close corporation? (Sec 96) rescind the transfer or recover the stock under any express or implied warranty.
• It may provide for: What are the rules on agreements entered into by the stockholders? (Sec 99)
o A classification of shares or rights, the qualifications for owning or holding the same, • Agreements duly signed and executed by and among all stockholders before the formation and
and restrictions on their transfers, subject to the provisions of the following section; organization of a close corporation
o A classification of directors into one (1) or more classes, each of whom may be voted It shall survive the incorporation and shall continue to be valid and binding between such
for and elected solely by a particular class of stock; and stockholders, if such be their intent, to the extent that such agreements are consistent with the
o Greater quorum or voting requirements in meetings of stockholders or directors than articles of incorporation, irrespective of where the provisions of such agreements are contained,
those provided in this Code. except those required by this Title to be embodied in said articles of incorporation.
• It may likewise provide that the business of the corporation shall be managed by the stockholders • A written agreement signed by two (2) or more stockholders may provide that in exercising any
of the corporation rather than by a board of directors. So long as this provision continues in voting right, the shares held by them shall be voted as provided or as agreed, or in accordance
effect, no meeting of stockholders need be called to elect directors. with a procedure agreed upon by them.
• In such a case, stockholders of the corporation shall be deemed to be directors for the purpose of • No provision in a written agreement signed by the stockholders, relating to any phase of
applying the provisions of the RCC, unless the context clearly requires otherwise: Provided, corporate affairs, shall be invalidated between the parties on the ground that its effect is to make
further, That the stockholders of the corporation shall be subject to all liabilities of directors. them partners among themselves.
• The articles of incorporation may likewise provide that all officers or employees or that • A written agreement among some or all of the stockholders in a close corporation shall not be
specified officers or employees shall be elected or appointed by the stockholders, instead of by invalidated on the ground that it relates to the conduct of the business and affairs of the
the board of directors. corporation as to restrict or interfere with the discretion or powers of the board of directors:
What can be imposed as restriction in the transfer of shares? (Sec 97) Provided, That such agreement shall impose on the stockholders who are parties thereto the
• Restrictions on the right to transfer shares must appear in the articles of incorporation, in the liabilities for managerial acts imposed on directors by the RCC.
bylaws, as well as in the certificate of stock; otherwise, the same shall not be binding on any • Stockholders actively engaged in the management or operation of the business and affairs of a
purchaser in good faith. close corporation shall be held to strict fiduciary duties to each other and among themselves.
• The restrictions shall not be more onerous than granting the existing stockholders or the The stockholders shall be personally liable for corporate torts unless the corporation has
corporation the option to purchase the shares of the transferring stockholder with such reasonable obtained reasonably adequate liability insurance.
terms, conditions or period stated. What is the effect when a Board Meeting is Unnecessary or Improperly Held? (Sec 100)
• Should the existing stockholders/ corporation fail to exercise the option to purchase upon the • Unless the bylaws provides contrary, any action taken by the directors of a close corporation
restriction of the period, the transferring stockholder may sell their shares to any third person. without a meeting called properly and with due notice shall nevertheless be deemed valid if:
What are the effects of issuance or transfer of stock in breach of qualifying conditions? (Sec 98) o Before or after such action is taken, a written consent thereto is signed by all the
• Not eligible to be a holder directors; or
If a stock of a close corporation is issued or transferred to any person who is not eligible to be a o All the stockholders have actual or implied knowledge of the action and make no
holder thereof under any provision of the articles of incorporation, and if the certificate for such prompt objection in writing; or
stock conspicuously shows the qualifications of the persons entitled to be holders of record o The directors are accustomed to take informal action with the express or implied
thereof, such person is conclusively presumed to have notice of the fact of the ineligibility to be acquiescence of all the stockholders; or
a stockholder. o All the directors have express or implied knowledge of the action in question and
• Number of people exceeds the maximum allowed none of them makes a prompt objection in writing.
If the articles of incorporation of a close corporation states the number of persons, not exceeding • An action within the corporate powers taken at a meeting held without proper call or notice, is
twenty (20), who are entitled to be stockholders of record, and if the certificate for such stock deemed ratified by a director who failed to attend, unless after having knowledge thereof, the
conspicuously states such number, and the issuance or transfer of stock to any person would director promptly files his written objection with the secretary of the corporation.
cause the stock to be held by more than such number of persons, the person to whom such stock Who may enjoy preemptive right in close corporations? (Sec 101)
is issued or transferred is conclusively presumed to have notice of this fact. • Unless the AOI provide otherwise, it shall extend to all stock to be issued including treasury
• Restriction on the transfer of stock shares, whether for money, property or personal services, or in payment of corporate debts
If a stock certificate of a close corporation conspicuously shows a restriction on transfer of the How to amend the AOI? (Sec 102)
corporation’s stock and the transferee acquires the stock in violation of such restriction, the • Any amendment to the AOI shall require the affirmative vote of at least two-thirds (2/3) of the
transferee is conclusively presumed to have notice of the fact that the stock was acquired in outstanding capital stock, whether with or without voting rights, or of such greater proportion of
violation of the restriction. shares as may be specifically provided in the articles of incorporation for amending, deleting or
removing any of the aforesaid provisions, at a meeting duly called for the purpose.

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 • Amendments may pertain to deletion or removal of any provision required by this Title or to a quorum for the transaction of business. The powers and authority of trustees shall be defined
reduce a quorum or voting requirement stated in said articles of incorporation in the bylaws.
What happens if there’s deadlock? (Sec 103) • For institutions organized as stock corporations, the number and term of directors shall be
• Regardless of any stipulation in the AOI, Bylaws, or stockholder’s agreements, if the directors governed by the provisions on stock corporations.
or stockholders are so divided on the management of the corporation’s business and affairs that Who may form religions corporations (Sec 107)
the votes required for a corporate action cannot be obtained, with the consequence that the • Religious corporations may be incorporated by one or more persons. The former is a corporation
business and affairs of the corporation can no longer be conducted to the advantage of the sole and the latter is a religious society.
stockholders generally, any stockholder may submit a written petition to the SEC. The SEC then What law governs religious corporation (Sec 107)
shall have the power to arbitrate the dispute. In the exercise of such power, the Commission shall • Religious corporations shall be governed by the chapter of Religious Corp in the RCC and by
have authority to make appropriate orders, such as: the general provisions on nonstock corporations insofar as applicable.
o cancelling or altering any provision contained in the articles of incorporation, bylaws, What is a corporation sole? (Sec 108)
or any stockholder’s agreement; • A corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or
o cancelling, altering or enjoining a resolution or act of the corporation or its board of other presiding elder of such religious denomination, sect, or church.
directors, stockholders, or officers; • It may be formed for the purpose of administering and managing, as trustee, the affairs, property
o directing or prohibiting any act of the corporation or its board of directors, and temporalities of any religious denomination, sect or church.
stockholders, officers, or other persons party to the action; What does the corporation need to submit with the SEC? (Sec 109)
o requiring the purchase at their fair value of shares of any stockholder, either by the • The chief archbishop etc must file with the SEC its AOI setting forth the following:
corporation regardless of the availability of unrestricted retained earnings in its books, o That the applicant chief archbishop, bishop, priest, minister, rabbi, or presiding elder
or by the other stockholders; represents the religious denomination, sect, or church which desires to become a
o appointing a provisional director; corporation sole;
o dissolving the corporation; or o That the rules, regulations and discipline of the religious denomination, sect or church
o granting such other relief as the circumstances may warrant. are consistent with becoming a corporation sole and do not forbid it;
o That such chief archbishop, bishop, priest, minister, rabbi, or presiding elder is
charged with the administration of the temporalities and the management of the
Who is the provisional director contemplated in Sec 103? affairs, estate and properties of the religious denomination, sect or church within the
• A provisional director shall be an impartial person who is neither a stockholder nor a creditor of territorial jurisdiction, so described succinctly in the articles of incorporation;
the corporation or any of its subsidiaries or affiliates, and whose further qualifications, if any, o The manner by which any vacancy occurring in the office of chief archbishop, bishop,
may be determined by the Commission. priest, minister, rabbi, or presiding elder is required to be filled, according to the rules,
• A provisional director is not a receiver of the corporation and does not have the title and powers regulations or discipline of the religious denomination, sect or church; and
of a custodian or receiver. He/she shall have all the rights and powers of a duly elected director, o The place where the principal office of the corporation sole is to be established and
including the right to be notified of and to vote at meetings of directors until removed by order located, which place must be within the territory of the Philippines.
of the Commission or by all the stockholders. o The articles of incorporation may include any other provision not contrary to law for
• His/her compensation shall be determined by agreement between such director and the the regulation of the affairs of the corporation.
corporation, subject to approval of the Commission, which may fix the compensation absent an What is the rule for the submission of the AOI? (Sec 110)
agreement or in the event of disagreement between the provisional director and the corporation. • The AOI must be verified, by affidavit or affirmation of the chief archbishop, bishop, priest,
When can a shareholder withdraw/ or order the dissolution of corporation? (Sec 104) minister, rabbi, or presiding elder, as the case may be, and accompanied by a copy of the
• Any stockholder of a close corporation may, for any reason, compel the corporation to purchase commission, certificate of election or letter of appointment of such chief archbishop, bishop,
shares held at fair value, which shall not be less than the par or issued value, when the corporation priest, minister, rabbi, or presiding elder, duly certified to be correct by any notary public.
has sufficient assets in its books to cover its debts and liabilities exclusive of capital stock • From and after filing with the SEC of the said requirements, such chief archbishop, bishop,
• Any stockholder of a close corporation may, by written petition to the Commission, compel the priest, minister, rabbi, or presiding elder shall become a corporation sole.
dissolution of such corporation whenever any of acts of the directors, officers, or those in control • All temporalities, estate and properties of the religious denomination, sect or church theretofore
of the corporation is illegal, fraudulent, dishonest, oppressive or unfairly prejudicial to the administered or managed as such chief archbishop, bishop, priest, minister, rabbi, or presiding
corporation or any stockholder, or whenever corporate assets are being misapplied or wasted. elder shall be personally held in trust as a corporation sole, for the use, purpose, exclusive benefit
What law governs educational corporations? (Sec 105) and on behalf of the religious denomination, sect or church, including hospitals, schools,
• Educational corporations shall be governed by special laws and by the general provisions of this colleges, orphan asylums, parsonages, and cemeteries thereof.
Code. Can a corporation sole acquire and alienate property? (Sec 111)
What is the composition of Board of Trustees of Educational Corporations? (Sec 106) • It may purchase and hold real estate and personal property for its church, charitable, benevolent,
• Trustees of educational institutions organized as nonstock corporations shall not be less than five or educational purposes, and may receive bequests or gifts for such purpose.
(5) nor more than fifteen (15): Provided, That the number of trustees shall be in multiples of five • For it to sell or mortgage real property held by it, it must obtain an order for that purpose from
(5). the Regional Trial Court of the province where the property is situated upon proof that the notice
What is the staggering term of educational corporations? (Sec 106) of the application for leave to sell or mortgage has been made through publication or as directed
• Unless otherwise provided in the articles of incorporation or bylaws, the board of trustees of by the Court, and that it is in the interest of the corporation that leave to sell or mortgage be
incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so granted.
classify themselves that the term of office of one-fifth (1/5) of their number shall expire every • The application for leave to sell or mortgage must be made by petition, duly verified, by the chief
year. archbishop, etc acting as corporation sole, and may be opposed by any member of the religious
• Trustees thereafter elected to fill vacancies, occurring before the expiration of a particular term, denomination, sect or church represented by the corporation sole:
shall hold office only for the unexpired period. Trustees elected thereafter to fill vacancies caused • In cases where the rules, regulations, and discipline of the religious denomination, sect or church,
by expiration of term shall hold office for five (5) years. A majority of the trustees shall constitute religious society, or order concerned represented by such corporation sole regulate the method
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 17
 of acquiring, holding, selling, and mortgaging real estate and personal property, such rules, What provisions in the RCC apply to OPC? (Sec 115)
regulations and discipline shall govern, and the intervention of the courts shall not be necessary. • The provisions from Sec 115-132 shall primarily apply to One Person Corporations. Other
How are vacancies filled? (Sec 112) provisions of this Code apply suppletorily, except as otherwise provided in this Title.
• The successors in office of any chief archbishop, etc in a corporation sole shall become the Is the OPC required to have minimum capital stock? (Sec 117)
corporation sole on their accession to office and shall be permitted to transact business as such. • No, OPC shall not be required to have a minimum authorized capital stock except as otherwise
• The successors in office must file a copy of their commission, certificate of election, or letters of provided by special law.
appointment, duly certified by any notary public with the SEC What are in the AOI of OPC? (Sec 118)
• During the vacancy, the person or persons authorized by the rules, regulations or discipline of • OPC shall file articles of incorporation in accordance with the requirements under Section 14 of
the religious denomination, sect or church represented by the corporation sole to administer the this Code. It shall likewise substantially contain the following:
temporalities and manage the affairs, estate, and properties of the corporation sole shall exercise o If the single stockholder is a trust or an estate, the name, nationality, and residence of
all the powers and authority of the corporation sole. the trustee, administrator, executor, guardian, conservator, custodian, or other person
What’s the rule on dissolution of religious corporation? (Sec 113) exercising fiduciary duties together with the proof of such authority to act on behalf
• A corporation sole may be dissolved and its affairs settled voluntarily by submitting to the SEC of the trust or estate; and
a verified declaration of dissolution, setting forth: o Name, nationality, residence of the nominee and alternate nominee, and the extent,
o The name of the corporation; coverage and limitation of the authority.
o The reason for dissolution and winding up; Is the OPC required to submit and file bylaws? (Sec 119)
o The authorization for the dissolution of the corporation by the particular religious • No, OPC is not required to submit and file corporate bylaws.
denomination, sect or church; and What must OPC indicate in its corporate name? (Sec 120)
o The names and addresses of the persons who are to supervise the winding up of the • OPC shall indicate the letters “OPC” either below or at the end of its corporate name
affairs of the corporation. What other positions can the single stockholder hold? (Sec 121)
• Upon approval of SEC, the corporation shall cease to carry on its operations except for the • The single stockholder shall be the sole director and president of the OPC.
purpose of winding up its affairs. What are other positions may be in a OPC and who may fill them? (Sec 122)
What’re the rules on religious societies? (Sec 114) • Within fifteen (15) days from the issuance of its certificate of incorporation, OPC shall appoint
• Any religious society, religious order, diocese, synod, or district organization of any religious a treasurer, corporate secretary, and other officers as it may deem necessary, and notify the SEC
denomination, sect or church, may, upon written consent and/or by an affirmative vote at a thereof within five (5) days from appointment.
meeting called for the purpose of at least two-thirds (2/3) of its membership, incorporate for the • The single stockholder may not be appointed as the corporate secretary.
administration of its temporalities or for the management of its affairs, properties, and estate by • If a single stockholder who is likewise the self-appointed treasurer of the corporation, he/she
filing with the SEC, AOI verified by the affidavit of the presiding elder, secretary, or clerk or shall give a bond to the SEC in such a sum as may be required: Provided, That the said
other member of such religious society or religious order, or diocese, synod, or district stockholder/treasurer shall undertake in writing to faithfully administer the OPC’s funds to be
organization of the religious denomination, sect or church, setting forth the following: received as treasurer, and to disburse and invest the same according to the AOI as approved by
o That the religious society or religious order, or diocese, synod, or district organization the SEC. The bond shall be renewed every two (2) years or as often as may be required.
is a religious organization of a religious denomination, sect or church; What are the special functions of the Corporate Secretary? (Sec 123)
o That at least two-thirds (2/3) of its membership has given written consent or has voted • In addition to the functions designated by the OPC, the corporate secretary shall:
to incorporate, at a duly convened meeting of the body; o Be responsible for maintaining the minutes book and/or records of the corporation;
o That the incorporation of the religious society or religious order, or diocese, synod, o Notify the nominee or alternate nominee of the death or incapacity of the single
or district organization is not forbidden by competent authority or by the Constitution, stockholder, which notice shall be given no later than five (5) days from such
rules, regulations or discipline of the religious denomination, sect or church of which occurrence;
it forms part; o Notify the Commission of the death of the single stockholder within five (5) days
o That the religious society or religious order, or diocese, synod, or district organization from such occurrence and stating in such notice the names, residence addresses, and
desires to incorporate for the administration of its affairs, properties and estate; contact details of all known legal heirs; and
o The place within the Philippines where the principal office of the corporation is to be o Call the nominee or alternate nominee and the known legal heirs to a meeting and
established and located; and advise the legal heirs with regard to, among others, the election of a new director,
o The names, nationalities, and residence addresses of the trustees, not less than five (5) amendment of the articles of incorporation, and other ancillary and/or consequential
nor more than fifteen (15), elected by the religious society or religious order, or the matters.
diocese, synod, or district organization to serve for the first year or such other period Who are nominee and alternate nominee? (Sec 124)
as may be prescribed by the laws of the religious society or religious order, or of the
• The single stockholder shall designate a nominee and an alternate nominee who shall, in the
diocese, synod, or district organization.
event of the single stockholder’s death or incapacity, take the place of the single stockholder as
• Religious societies may be incorporated provided that it is not forbidden by competent authority, director and shall manage the corporation’s affairs.
the Constitution, pertinent rules, regulations, or discipline of the religious denomination, sect or
• The AOI shall state the names, residence addresses and contact details of the nominee and
church of which it is a part
alternate nominee, as well as the extent and limitations of their authority in managing the affairs
What is a one person corporation (OPC) (Sec 116)
of the OPC.
• It is a corporation with a single stockholder.
• The written consent of the nominee and alternate nominee shall be attached to the application
• Only a natural person, trust, or an estate may form a OPC. for incorporation. Such consent may be withdrawn in writing any time before the death or
Who are also not qualified to form OPC? (Sec 116) incapacity of the single stockholder.
• Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and What is the term of the nominee and alternate nominee? (Sec 125)
non-chartered government-owned and -controlled corporations may not incorporate as OPC • When the incapacity of the single stockholder is temporary, the nominee shall sit as director and
• Natural person who is licensed to exercise a profession may not organize as a OPC for the manage the affairs of the OPC until the stockholder, by self-determination, regains the capacity
purpose of exercising such profession except as otherwise provided under special laws. to assume such duties.
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 18
 • In case of death or permanent incapacity of the single stockholder, the nominee shall sit as have been complied with, the SEC shall issue a certificate of filing of amended articles of
director and manage the affairs of the OPC until the legal heirs of the single stockholder have incorporation reflecting the conversion.
been lawfully determined, and the heirs have designated one of them or have agreed that the • In case of death of the single stockholder, the nominee or alternate nominee shall transfer the
estate shall be the single stockholder of the OPC. shares to the duly designated legal heir or estate within seven (7) days from receipt of either an
• The alternate nominee shall sit as director and manage the OPC in case of the nominee’s affidavit of heirship or self-adjudication executed by a sole heir, or any other legal document
inability, incapacity, death, or refusal to discharge the functions as director and manager of the declaring the legal heirs of the single stockholder and notify the SEC of the transfer.
corporation, and only for the same term and under the same conditions applicable to the nominee • Within sixty (60) days from the transfer of the shares, the legal heirs shall notify the SEC of their
May the single stockholder change his nominee or alternate nominee? (Sec 126) decision to either wind up and dissolve the OPC or convert it into an ordinary stock corporation.
• Yes, the single stockholder may, at any time, change its nominee and alternate nominee by • The ordinary stock corporation converted from a OPC shall succeed the latter and be legally
submitting to the SEC the names of the new nominees and their corresponding written consent. responsible for all the latter’s outstanding liabilities as of the date of conversion.
For this purpose, the AOI need not be amended. What are the method of dissolution for all corporations? (Sec 133)
Is the OPC required to keep minutes book? (Sec 127) • Corporations may be dissolved either voluntarily or involuntarily.
• Yes, it shall maintain a minutes book which shall contain all actions, decisions, and resolutions What’s the rule when there is voluntary dissolution and no creditors are affected? (Sec 134)
taken by the OPC. • The dissolution may be effected by majority vote of the board of directors or trustees, and by a
Is the OPC required to take minutes of the meeting? (Sec 128) resolution adopted by the affirmative vote of the stockholders owning at least majority of the
• No, when action is needed on any matter, it shall be sufficient to prepare a written resolution, outstanding capital stock or majority of the members of a meeting to be held upon the call of the
signed and dated by the single stockholder, and recorded in the minutes book of the OPC. directors or trustees.
• The date of recording in the minutes book shall be deemed to be the date of the meeting for all When does notice need to be given? (Sec 134)
purposes under the RCC. • At least twenty (20) days prior to the meeting, notice shall be given to each shareholder or
What are the reportorial requirements of OPC? (Sec 129) member of record personally, by registered mail, or by any means authorized under its bylaws
• OPC shall submit the following within such period as the Commission may prescribe: whether or not entitled to vote at the meeting, in the manner provided in Section 50 of this
o Annual financial statements audited by an independent certified public accountant: Code and shall state that the purpose of the meeting is to vote on the dissolution of the
Provided, That if the total assets or total liabilities of the corporation are less than Six corporation.
Hundred Thousand Pesos (P600,000.00), the financial statements shall be certified Does it need to be published? (Sec 134)
under oath by the corporation’s treasurer and president. • Yes. Notice of the time, place, and object of the meeting shall be published once prior to the date
o A report containing explanations or comments by the president on every qualification, of the meeting in a newspaper published in the place where the principal office of said
reservation, or adverse remark or disclaimer made by the auditor in the latter’s report; corporation is located, or if no newspaper is published in such place, in a newspaper of general
o A disclosure of all self-dealings and related party transactions entered into between circulation in the Philippines.
the One Person Corporation and the single stockholder; and What needs to be filed before the SEC? (Sec 134)
o Other reports as the Commission may require. • A verified request for dissolution shall be filed with the SEC stating:
• For purposes of this provision, the fiscal year of a OPC shall be that set forth in its AOI or, in o the reason for the dissolution;
the absence thereof, the calendar year. o the form, manner, and time when the notices were given;
What’s the consequence if the OPC fail to submit reportorial requirements? (Sec 129) o names of the stockholders and directors or members and trustees who approved the
• The SEC may place the corporation under delinquent status should the corporation fail to submit dissolution;
the reportorial requirements three (3) times, consecutively or intermittently, within a period of o the date, place, and time of the meeting in which the vote was made; and
five (5) years. o details of publication.
What is the liability of the single stockholder? (Sec 130) • The corporation shall submit the following to the SEC:
• If a sole shareholder claims limited liability, he/she has the burden of affirmatively showing that o a copy of the resolution authorizing the dissolution, certified by a majority of the
the corporation was adequately financed. board of directors or trustees and countersigned by the secretary of the corporation;
• Where the single stockholder cannot prove that the property of the OPC is independent of the o proof of publication; and
stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts o favorable recommendation from the appropriate regulatory agency, when necessary.
and other liabilities of the OPC. • Within fifteen (15) days from receipt of the verified request for dissolution, and in the absence
• The principles of piercing the corporate veil applies with equal force to OPCs as with other of any withdrawal within said period, the SEC shall approve the request and issue the certificate
corporations. of dissolution.
What’s the process if an ordinary corporation converts into OPC? (sec 131) When does dissolution take effect? (Sec 134)
• When a single stockholder acquires all the stocks of an ordinary stock corporation, the latter may • The dissolution shall take effect only upon the issuance by the Commission of a certificate of
apply for conversion into a OPC, subject to the submission of such documents as the SEC may dissolution.
require. • No application for dissolution of banks, banking and quasi-banking institutions, preneed,
• If the application for conversion is approved, the SEC shall issue a certificate of filing of insurance and trust companies, NSSLAs, pawnshops, and other financial intermediaries shall be
amended articles of incorporation reflecting the conversion. approved by the Commission unless accompanied by a favorable recommendation of the
• The OPC converted from an ordinary stock corporation shall succeed the latter and be legally appropriate government agency.
responsible for all the latter’s outstanding liabilities as of the date of conversion What’s the rule when there is voluntary dissolution and there are creditors affected? (Sec 135)
What’s the process if an OPC converts into an ordinary stock corporation? (Sec 132) • There should be a verified petition for dissolution filed with the SEC.
• OPC may be converted into an ordinary stock corporation after due notice to the SEC of such • The petition shall be:
fact and of the circumstances leading to the conversion, and after compliance with all other o signed by a majority of the corporation’s board of directors or trustees,
requirements for stock corporations under RCC and applicable rules. o verified by its president or secretary or one of its directors or trustees
• Such notice shall be filed with the SEC within sixty (60) days from the occurrence of the • The petition shall also set forth all claims and demands against it, and that its dissolution was
circumstances leading to the conversion into an ordinary stock corporation. If all requirements resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3)
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 19
 of the outstanding capital stock or at least two-thirds (2/3) of the members at a meeting of its • Yes, A corporation may be dissolved by the SEC motu proprio or upon filing of a verified
stockholders or members called for that purpose. complaint by any interested party.
• The petition shall likewise state: • The following may be grounds for dissolution of the corporation:
o the reason for the dissolution; o Non-use of corporate charter as provided under Section 21 of the RCC;
o the form, manner, and time when the notices were given; and o Continuous inoperation of a corporation as provided under Section 21 of the RCC;
o the date, place, and time of the meeting in which the vote was made. o Upon receipt of a lawful court order dissolving the corporation;
• The corporation shall submit to the SEC the following: o Upon finding by final judgment that the corporation procured its incorporation
o a copy of the resolution authorizing the dissolution, certified by a majority of the through fraud;
board of directors or trustees and countersigned by the secretary of the corporation; o Upon finding by final judgment that the corporation:
and § Was created for the purpose of committing, concealing or aiding the
o a list of all its creditors. commission of securities violations, smuggling, tax evasion, money
What happens if the petition is sufficient in form and substance? (Sec 135) laundering, or graft and corrupt practices;
• The SEC shall, by an order reciting the purpose of the petition, fix a deadline for filing objections § Committed or aided in the commission of securities violations,
to the petition which date shall not be less than thirty (30) days nor more than sixty (60) days smuggling, tax evasion, money laundering, or graft and corrupt practices,
after the entry of the order. and its stockholders knew; and
• Before such date, a copy of the order shall be published at least once a week for three (3) § Repeatedly and knowingly tolerated the commission of graft and corrupt
consecutive weeks in a newspaper of general circulation published in the municipality or city practices or other fraudulent or illegal acts by its directors, trustees,
where the principal office of the corporation is situated, or if there be no such newspaper, then officers, or employees.
in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for • The SEC shall give reasonable notice to, and coordinate with, the appropriate regulatory agency
three (3) consecutive weeks in three (3) public places in such municipality or city. prior to the involuntary dissolution of companies under their special regulatory jurisdiction.
• Upon five (5) days’ notice, given after the date on which the right to file objections as fixed in What happens if the corporation is ordered dissolved by final judgment? (Sec 138)
the order has expired, the SEC shall proceed to hear the petition and try any issue raised in the • Its assets, after payment of its liabilities, shall, upon petition of the SEC with the appropriate
objections filed; and if no such objection is sufficient, and the material allegations of the petition court, be forfeited in favor of the national government.
are true, it shall render judgment dissolving the corporation and directing such disposition of its • Such forfeiture shall be without prejudice to the rights of innocent stockholders and employees
assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of for services rendered, and to the application of other penalty or sanction under the RCC or other
the corporation. laws.
When does dissolution take effect? (Sec 135)
• The dissolution shall take effect only upon the issuance by the SEC of a certificate of dissolution.
Can a dissolution be effected by shortening corporate term? (Sec 136) Except for banks, which shall be covered by the applicable provisions of Republic Act No. 7653,
• Yes, it may be effected by amending the AOI to shorten the corporate term pursuant to the otherwise known as the “New Central Bank Act”, as amended, and Republic Act No. 3591,
provisions of the RCC. otherwise known as the Philippine Deposit Insurance Corporation Charter, as amended
• A copy of the amended AOI shall be submitted to the SEC in accordance with the RCC. What happens after the dissolution? (Sec 139)
• Upon the expiration of the shortened term, as stated in the approved amended articles of • Every corporation whose charter expires pursuant to its AOI, is annulled by forfeiture, or whose
incorporation, the corporation shall be deemed dissolved without any further proceedings, corporate existence is terminated in any other manner, shall nevertheless remain as a body
subject to the provisions of this Code on liquidation. corporate for three (3) years after the effective date of dissolution, for the purpose of prosecuting
When does the dissolution take effect? (Sec 136) and defending suits by or against it and enabling it to settle and close its affairs, dispose of and
• Dissolution shall automatically take effect on the day following the last day of the corporate term convey its property, and distribute its assets, but not for the purpose of continuing the business
stated in the AOI, without the need for the issuance by the SEC of a certificate of dissolution. for which it was established.
What’s the procedure if the corporation withdraws its petition for dissolution? (Sec 137) • At any time during said three (3) years, the corporation is authorized and empowered to convey
• A withdrawal of the request for dissolution shall be: all of its property to trustees for the benefit of stockholders, members, creditors and other persons
o made in writing, in interest.
o duly verified by any incorporator, director, trustee, shareholder, or member; • After any such conveyance by the corporation of its property in trust for the benefit of its
o and signed by the same number of incorporators, directors, trustees, shareholders, or stockholders, members, creditors and others in interest, all interest which the corporation had in
members necessary to request for dissolution as set forth in the foregoing sections the property terminates, the legal interest vests in the trustees, and the beneficial interest in the
• The withdrawal shall be submitted no later than fifteen (15) days from receipt by the SEC of the stockholders, members, creditors or other persons-in-interest.
request for dissolution. • This provision does not apply to banks because it is covered by a special law.
• Upon receipt of a withdrawal of request for dissolution, the SEC shall withhold action on the What may be escheated in favor of the government? (Sec 139)
request for dissolution and shall, after investigation: • Except as otherwise provided for in Sections 93 and 94 of the RCC, upon the winding up of
o make a pronouncement that the request for dissolution is deemed withdrawn; corporate affairs, any asset distributable to any creditor or stockholder or member who is
o direct a joint meeting of the board of directors or trustees and the stockholders or unknown or cannot be found shall be escheated in favor of the national government.
members for the purpose of ascertaining whether to proceed with dissolution; or What’s the limitation in the distribution of assets of a corporation? (Sec 139)
o issue such other orders as it may deem appropriate. • Except by decrease of capital stock and as otherwise allowed by the RCC, no corporation shall
Is there a form required for a withdrawal of the petition for dissolution? (Sec 137) distribute any of its assets or property except upon lawful dissolution and after payment of all its
• It shall be in the form of a motion and similar in substance to a withdrawal of request for debts and liabilities.
dissolution but shall be verified and filed prior to publication of the order setting the deadline for Insert cases on the capacity to sue of dissolved corporations
filing objections to the petition. Action filed, pending case, dissolved. Even corp did not appoint trustee beyond 3
When can there be involuntary dissolution? (Sec 138) year period, the case will prosper, BOD deemed to be appointed as trustee
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The 3 year limit does not apply to trustees. They may file suits even beyond the o Foreign banking, financial, and insurance corporations shall, in addition to the above
said period. requirements, comply with the provisions of existing laws applicable to them.
o In the case of all other foreign corporations, no application for license to transact
A dissolved corporation may file a case/ within the 3 year period if it is consistent business in the Philippines shall be accepted by the Commission without previous
with the liquidation. (See willie ong case) authority from the appropriate government agency, whenever required by law.
What is a foreign corporation? (Sec 140) When can license be issued? (Sec 143)
• For the purposes of RCC, it is one formed, organized or existing under laws other than those of • It shall be issued after the SEC has been satisfied that the applicant has complied with all the
the Philippines’ and whose laws allow Filipino citizens and corporations to do business in its requirements under the RCC and other laws, rules and regulations.
own country or State. • The license to do business shall be limited to the purpose/purposes indicated in the license.
• It shall have the right to transact business in the Philippines after obtaining a license for that When can foreign corporation start to do business? (Sec 143)
purpose in accordance with the RCC and a certificate of authority from the appropriate • Upon the issuance of the license.
government agency. • The license may continue so long as it retains its authority to act as a corporation under the laws
What’s the effect of this Revised Code to the existing foreign corporation? (Sec 141) of the country or State of its incorporation, unless such license is sooner surrendered, revoked,
• Every foreign corporation which is authorized to do business in the Philippines under a license suspended, or annulled in accordance with RCC or other special laws.
issued to it shall continue to have such authority under the terms and conditions of its license, • Within sixty (60) days after the issuance of the license, the licensee shall deposit with the SEC
subject to the provisions of the RCC and other special laws. for the benefit of present and future creditors of the licensee in the Philippines, securities
How can a foreign corporation apply for a license? (Sec 142) satisfactory to the SEC,
• A foreign corporation applying for a license to transact business in the Philippines shall submit o This may be in the forms of bonds or other evidence of indebtedness of the
to the SEC a copy of its articles of incorporation and bylaws, certified in accordance with law, Government of the Philippines, its political subdivisions and instrumentalities, or of
and their translation to an official language of the Philippines, if necessary. government-owned or -controlled corporations and entities, shares of stock or debt
• The application shall be under oath. securities that are registered under “The Securities Regulation Code”, shares of stock
What does the application must contain? (Sec 142) in domestic corporations listed in the stock exchange, shares of stock in domestic
• Unless the following are already stated in the AOI, the application must set forth the following: insurance companies and banks, any financial instrument determined suitable by the
o The date and term of incorporation; SEC, or any combination thereof with an actual market value of at least Five hundred
o The address, including the street number, of the principal office of the corporation in thousand pesos (P500,000.00) or such other amount that may be set by the SEC:
the country or State of incorporation; • Within six (6) months after each fiscal year of the licensee, the Commission shall require the
o The name and address of its resident agent authorized to accept summons and process licensee to deposit additional securities or financial instruments equivalent in actual market value
in all legal proceedings and all notices affecting the corporation, pending the to two percent (2%) of the amount by which the licensee’s gross income for that fiscal year
establishment of a local office; exceeds Ten million pesos (P10,000,000.00).
o The place in the Philippines where the corporation intends to operate; Do foreign corporation have legal standing?
o The specific purpose or purposes which the corporation intends to pursue in the • No, except:
transaction of its business in the Philippines: Provided, That said purpose or purposes o It is licensed to do business in the Philippines
are those specifically stated in the certificate of authority issued by the appropriate o The other party is estopped from denying its existence in the country
government agency; o It is not engaged in business?
o The names and addresses of the present directors and officers of the corporation; What happens if the deposited securities has decreased at least 10% of their actual value at the time
o A statement of its authorized capital stock and the aggregate number of shares which they were deposited? (Sec 143)
the corporation has authority to issue, itemized by class, par value of shares, shares • The SEC shall require the deposit of additional securities or financial instruments if the actual
without par value, and series, if any; market value of the deposited securities or financial instruments.
o A statement of its outstanding capital stock and the aggregate number of shares which What happens if the license’s gross income has decreased or if the actual market value of the total
the corporation has issued, itemized by class, par value of shares, shares without par deposit has increased, by more than ten percent (10%) of their actual market value at the time they
value, and series, if any; were deposited? (Sec 143)
o A statement of the amount actually paid in; and • The SEC may, at its discretion, release part of the additional deposit.
o Such additional information as may be necessary or appropriate in order to enable the May the corporation substitute deposits? (Sec 143)
Commission to determine whether such corporation is entitled to a license to transact • Yes, the SEC may, from time to time, allow the licensee to make substitute deposits for those
business in the Philippines, and to determine and assess the fees payable. already on deposit as long as the licensee is solvent.
What are other documents needed to be submitted? (Sec 142)
• Such licensee shall be entitled to collect the interest or dividends on such deposits.
• The following must be attached to the petition: What happens if the licensee ceases to do business in the Philippines? (Sec 143)
o A certificate under oath duly executed by the authorized official or officials of the
• Its deposits shall be returned, upon the licensee’s application and upon proof to the satisfaction
jurisdiction of its incorporation, attesting to the fact that the laws of the country or
of the SEC that the licensee has no liability to Philippine residents, including the Government of
State of the applicant allow Filipino citizens and corporations to do business therein,
the Republic of the Philippines.
and that the applicant is an existing corporation in good standing.
o If the certificate is in a foreign language, a translation thereof in English under oath • For purposes of computing the securities deposit, the composition of gross income and allowable
of the translator shall be attached to the application. deductions therefrom shall be in accordance with the rules of the SEC.
o A statement under oath of the president or any other person authorized by the Does Sec 143 apply to all types of corporations? (Sec 143)
corporation, showing to the satisfaction of the SEC and when appropriate, other • No, the above rule does not apply to foreign banking or insurance corporations.
governmental agencies that the applicant is solvent and in sound financial condition, Who may be a resident agent? (Sec 144)
setting forth the assets and liabilities of the corporation as of the date not exceeding • A resident agent may be either an individual residing in the Philippines or a domestic corporation
one (1) year immediately prior to the filing of the application. lawfully transacting business in the Philippines

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 • In case of an individual resident agent, he/she must be of good moral character and of sound a copy of the articles of merger or consolidation duly authenticated by the proper official or
financial standing: officials of the country or State under whose laws the merger or consolidation was effected:
• In case of a domestic corporation who will act as a resident agent, it must likewise be of sound • Provided, however, That if the absorbed corporation is the foreign corporation doing business in
financial standing and must show proof that it is in good standing as certified by the Commission. the Philippines, the latter shall at the same time file a petition for withdrawal of its license in
Who may be served summons etc? (Sec 145) accordance with this Title.
• The Corporation shall file with the SEC a written power of attorney designating a person who • If the surviving corporation wishes to continue the absorbed corporation’s business in the
must be a resident of the Philippines, on whom summons and other legal processes may be Philippines, it shall obtain a license from the SEC. (Jurisprudence)
served in all actions or other legal proceedings against such corporation, and consenting that What’s the effect if the foreign corporation does business without license? (Sec 150)
service upon such resident agent shall be admitted and held as valid as if served upon the duly • It shall not be permitted to maintain or intervene in any action, suit or proceeding in any
authorized officers of the foreign corporation at its home office. court or administrative agency of the Philippines; but such corporation may be sued or
• Such foreign corporation shall likewise execute and file with the SEC an agreement or proceeded against before Philippine courts or administrative tribunals on any valid cause
stipulation, executed by the proper authorities of said corporation, in form and substance as of action recognized under Philippine laws.
follows: What are the grounds for the revocation of license? (Sec 151)
o “The (name of foreign corporation) hereby stipulates and agrees, in consideration of • Without prejudice to other grounds provided under special laws, the license of a foreign
being granted a license to transact business in the Philippines, that if the corporation corporation to transact business in the Philippines may be revoked or suspended by the
shall cease to transact business in the Philippines, or shall be without any resident SEC upon any of the following grounds:
agent in the Philippines on whom any summons or other legal processes may be o Failure to file its annual report or pay any fees as required by this Code;
served, then service of any summons or other legal process may be made upon the o Failure to appoint and maintain a resident agent in the Philippines as required
Commission in any action or proceeding arising out of any business or transaction by this Title;
which occurred in the Philippines and such service shall have the same force and o Failure, after change of its resident agent or address, to submit to the SEC a
effect as if made upon the duly authorized officers of the corporation at its home statement of such change as required by this Title;
office.” o Failure to submit to the SEC an authenticated copy of any amendment to its
What’s the rule if the service of summons or other process is made upon the SEC? (Sec 145) articles of incorporation or bylaws or of any articles of merger or consolidation
• The SEC shall, within ten (10) days thereafter, transmit by mail a copy of such summons or other within the time prescribed by this Title;
legal process to the corporation at its home or principal office. o A misrepresentation of any material matter in any application, report, affidavit
• The sending of such copy by the SEC shall be a necessary part of and shall complete such service. or other document submitted by such corporation pursuant to this Title;
• All expenses incurred by the SEC for such service shall be paid in advance by the party at whose o Failure to pay any and all taxes, imposts, assessments or penalties, if any,
instance the service is made. lawfully due to the Philippine Government or any of its agencies or political
• It shall be the duty of the resident agent to immediately notify the SEC in writing of any change subdivisions;
in the resident agent’s address. o Transacting business in the Philippines outside of the purpose or purposes for
What are the laws applicable to foreign corporation? (Sec 146) which such corporation is authorized under its license;
o Transacting business in the Philippines as agent of or acting on behalf of any
• A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules
foreign corporation or entity not duly licensed to do business in the Philippines;
and regulations applicable to domestic corporations of the same class, except those which
or
provide for the creation, formation, organization or dissolution of corporations or those which
o Any other ground as would render it unfit to transact business in the Philippines.
fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of
What does the SEC issue to support such revocation? (Sec 152)
corporations to each other or to the corporation.
What happens if the AOI/bylaws of the foreign corporation is amended? (Sec 147) • the SEC shall issue a corresponding certificate of revocation, furnishing a copy thereof to
the appropriate government agency in the proper cases.
• Whenever the AOI or bylaws of a foreign corporation are amended, such foreign corporation
shall, within sixty (60) days after the amendment becomes effective, file with the SEC, and in • The SEC shall also mail the notice and copy of the certificate of revocation to the
the proper cases, with the appropriate government agency, a duly authenticated copy of the corporation, at its registered office in the Philippines.
amended articles of incorporation or bylaws, indicating clearly in capital letters or underscoring Do foreign corporations allowed to withdraw license? (Sec 153)
the change or changes made, duly certified by the authorized official or officials of the country • Yes, subject to existing laws and regulations, a foreign corporation may be allowed to withdraw
or State of incorporation. from the Philippines by filing a petition for withdrawal of license.
• Such filing shall not in itself enlarge or alter the purpose or purposes for which such corporation • No certificate of withdrawal shall be issued by the SEC unless all the following requirements are
is authorized to transact business in the Philippines. met:
When is foreign corporation need to amend its license? (Sec 148)? o All claims which have accrued in the Philippines have been paid, compromised or
• In the event it changes its corporate name, or desires to pursue other or additional purposes in settled;
the Philippine, it shall obtain an amended license by submitting an application with the SEC, o All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine
favorably endorsed by the appropriate government agency in the proper cases. Government or any of its agencies or political subdivisions, have been paid; and
Can a foreign corporation merge/consolidate in the Philippines? (Sec 149) o The petition for withdrawal of license has been published once a week for three (3)
consecutive weeks in a newspaper of general circulation in the Philippines.
• Yes, one or more foreign corporations may merge or consolidate with any domestic corporation
What are the control test and grandfather rule?
or corporations if permitted under Philippine laws and by the law of its incorporation: Provided,
What is the twin characterization test?
That the requirements on merger or consolidation as provided in the RCC are followed.
Who is engaged in business?
What happens if the foreign corporation has undergone merger or consolidation in its home
Can the SEC investigate and prosecute offenses under RCC? (Sec 154)
country?(Sec 149)
• Yes, The SEC may investigate an alleged violation of this Code, or of rule, regulation, or order
• Foreign corporation shall, within sixty (60) days after the effectivity of such merger or
of the SEC.
consolidation, file with the SEC, and in proper cases, with the appropriate government agency,

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 • The SEC may publish its findings, orders, opinions, advisories, or information concerning any • When the violation of this provision is injurious or detrimental to the public, the penalty shall be
such violation, as may be relevant to the general public or to the parties concerned, subject to the a fine ranging from Twenty thousand pesos (P20,000.00) to Four hundred thousand pesos
provisions of the “Data Privacy Act of 2012”, and other pertinent laws. (P400,000.00).
• The Commission shall give reasonable notice to and coordinate with the appropriate regulatory What is the penalty when a corporation fails to maintain records, or refuses to allow inspection and
agency prior to any such publication involving companies under their special regulatory reproduction of such record? (Sec 161)
jurisdiction. • The unjustified failure or refusal by the corporation, or by those responsible for keeping and
Can the SEC Administer oaths, and issue subpoena of Witnesses and Documents? (Sec 155) maintaining corporate records, to comply with Sections 45, 73, 92, 128, 177 and other pertinent
• Yes, the SEC, through its designated officer, may administer oaths and affirmations, issue rules and provisions of the RCC on inspection and reproduction of records shall be punished
subpoena and subpoena duces tecum, take testimony in any inquiry or investigation, and may with a fine ranging from Ten thousand pesos (P10,000.00) to Two hundred thousand pesos
perform other acts necessary to the proceedings or to the investigation. (P200,000.00), at the discretion of the court, taking into consideration the seriousness of the
violation and its implications.
What can SEC do if it is informed that a corporation is likely to violate RCC etc? (Sec 156) • When the violation of this provision is injurious or detrimental to the public, the penalty is a fine
• Whenever the SEC has reasonable basis to believe that a person has violated, or is about to ranging from Twenty thousand pesos (P20,000.00) to Four hundred thousand pesos
violate this Code, a rule, regulation, or order of the SEC, it may direct such person to desist from (P400,000.00).
committing the act constituting the violation. • The penalties imposed under this section shall be without prejudice to the Commission’s exercise
• The SEC may issue a cease and desist order ex parte to enjoin an act or practice which is of its contempt powers under Section 157 hereof.
fraudulent or can be reasonably expected to cause significant, imminent, and irreparable danger What is the penalty for willful Certification of Incomplete, Inaccurate, False, or Misleading
or injury to public safety or welfare. Statements or Reports? (sec 162)
• The ex parte order shall be valid for a maximum period of twenty (20) days, without prejudice • Any person who willfully certifies a report required under the RCC, knowing that the same
to the order being made permanent after due notice and hearing. contains incomplete, inaccurate, false, or misleading information or statements, shall be punished
• Thereafter, the SEC may proceed administratively against such person in accordance with with a fine ranging from Twenty thousand pesos (P20,000.00) to Two hundred thousand pesos
Section 158 of this Code, and/or transmit evidence to the Department of Justice for preliminary (P200,000.00).
investigation or criminal prosecution and/or initiate criminal prosecution for any violation of this • When the wrongful certification is injurious or detrimental to the public, the auditor or the
Code, rule, or regulation. responsible person may also be punished with a fine ranging from Forty thousand pesos
Can SEC hold people in contempt? (Sec 157) (P40,000.00) to Four hundred thousand pesos (P400,000.00)
• Yes, any person who, without justifiable cause, fails or refuses to comply with any lawful order, What is the penalty when there is collusion with an independent auditor? (Sec 163)
decision, or subpoena issued by the SEC shall, after due notice and hearing, be held in • An independent auditor who, in collusion with the corporation’s directors or representatives,
contempt and fined in an amount not exceeding Thirty thousand pesos (P30,000.00). certifies the corporation’s financial statements despite its incompleteness or inaccuracy, its
What can SEC do if the person refuses to abide by the order? (Sec 157) failure to give a fair and accurate presentation of the corporation’s condition, or despite
• When the refusal amounts to clear and open defiance of the SEC’s order, decision, or subpoena, containing false or misleading statements, shall be punished with a fine ranging from Eighty
the SEC may impose a daily fine of One thousand pesos (P1,000.00) until the order, decision, or thousand pesos (P80,000.00) to Five hundred thousand pesos (P500,000.00).
subpoena is complied with. • When the statement or report certified is fraudulent, or has the effect of causing injury to the
What are the administrative sanctions SEC may impose? (Sec 158) general public, the auditor or responsible officer may be punished with a fine ranging from One
• If after hearing, SEC finds that any provision of this Code, rules or regulations, or any of the hundred thousand pesos (P100,000.00) to Six hundred thousand pesos (P600,000.00).
SEC’s orders has been violated, the SEC may impose any or all of the following sanctions, What is the penalty if the corporate registration is obtained through fraud? (Sec 164)
taking into consideration the extent of participation, nature, effects, frequency and seriousness • Those responsible for the formation of a corporation through fraud, or who assisted directly or
of the violation: indirectly therein, shall be punished with a fine ranging from Two hundred thousand pesos
o Imposition of a fine ranging from Five thousand pesos (P5,000.00) to Two million (P200,000.00) to Two million pesos (P2,000,000.00).
pesos (P2,000,000.00), and not more than One thousand pesos (P1,000.00) for each • When the violation of this provision is injurious or detrimental to the public, the penalty is a fine
day of continuing violation but in no case to exceed Two million pesos ranging from Four hundred thousand pesos (P400,000.00) to Five million pesos (P5,000,000.00).
(P2,000,000.00); What is the penalty if the corporation does fraudulent conduct of business? (Sec 165)
o Issuance of a permanent cease and desist order; • A corporation that conducts its business through fraud shall be punished with a fine ranging from
o Suspension or revocation of the certificate of incorporation; and Two hundred thousand pesos (P200,000.00) to Two million pesos (P2,000,000.00).
o Dissolution of the corporation and forfeiture of its assets under the conditions in Title • When the violation of this provision is injurious or detrimental to the public, the penalty is a fine
XIV of this Code. ranging from Four hundred thousand pesos (P400,000.00) to Five million pesos (P5,000,000.00).
What is the sanction for the unauthorized use of corporate name? (Sec 159) What is the penalty is the corporation acted as intermediaries for graft and corrupt practices? (Sec
• The unauthorized use of a corporate name shall be punished with a fine ranging from Ten 166)
thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00). • A corporation used for fraud, or for committing or concealing graft and corrupt practices as
What is the penalty if despite knowledge of disqualification director/trustee/officer still willfully hold defined under pertinent statutes, shall be liable for a fine ranging from One hundred thousand
office or willfully conceal the same? (Sec 160) pesos (P100,000.00) to Five million pesos (P5,000,000.00).
• When, despite the knowledge of the existence of a ground for disqualification as provided in Is there a prima facie evidence under this section? (Sec 166)
Section 26 of the RCC, a director, trustee or officer willfully holds office, or willfully conceals • Yes, when there is a finding that any of its directors, officers, employees, agents, or
such disqualification, such director, trustee or officer shall be punished with a fine ranging from representatives are engaged in graft and corrupt practices, the corporation’s failure to install:
Ten thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00) at the discretion o safeguards for the transparent and lawful delivery of services; and
of the court, and shall be permanently disqualified from being a director, trustee or officer of o policies, code of ethics, and procedures against graft and corruption
any corporation. What is the penalty if the corporation is engaging intermediaries for graft and corrupt practices act?
(Sec 167)

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 • A corporation that appoints an intermediary who engages in graft and corrupt practices for the hold such
corporation’s benefit or interest shall be punished with a fine ranging from One hundred thousand positions from
pesos (P100,000.00) to One million pesos (P1,000,000.00). any corporation
What is the penalty if the corporation is tolerating graft and corrupt practices? (Sec 168) Violation of duty Unjustified Corporation, or Fine from 10,000 Aggravated when
• A director, trustee, or officer who knowingly fails to sanction, report, or file the appropriate to maintain failure or refusal those responsible to 200,000 injurious to
action with proper agencies, allows or tolerates the graft and corrupt practices or fraudulent acts records, to allow for keeping and public
committed by a corporation’s directors, trustees, officers, or employees shall be punished with a their inspection or maintaining
fine ranging from Five hundred thousand pesos (P500,000.00) to One million pesos reproduction corporate records This is likewise a
(P1,000,000.00). penal offense?
Willful Willfully certifies Any person Fine from 20,000- Aggravated when
Certification of knowing the 200,000 injurious to
Incomplete, incompleteness, public
Who is a whistleblower? (Sec 169) Inaccurate, False, inaccuracy or
• A whistleblower refers to any person who provides truthful information relating to the or Misleading misleadingness
commission or possible commission of any offense or violation of RCC Statements or
What is the penalty for retaliation against whistleblower? (Sec 169) Reports;
• Any person who, knowingly and with intent to retaliate, commits acts detrimental to a Penalties.
whistleblower such as interfering with the lawful employment or livelihood of the whistleblower,
shall, at the discretion of the court, be punished with a fine ranging from One hundred thousand Collusion with Certifying Independent Fine 80,000- Aggravated when
pesos (P100,000.00) to One million pesos (P1,000,000.00). independent documents Auditor 500,000 injurious to
What are penalties for other violations of RCC? (Sec 170) auditor knowing its public
• Violations of any of the other provisions of RCC or its amendments not otherwise specifically inaccuracy…with
penalized therein shall be punished by a fine of not less than Ten thousand pesos (P10,000.00) the corporation’s
but not more than One million pesos (P1,000,000.00). directors or
• If the violation is committed by a corporation, the same may, after notice and hearing, be representatives
dissolved in appropriate proceedings before the SEC. Such dissolution shall not preclude the Obtaining N/A Those responsible Fine 200,000- Aggravated when
institution of appropriate action against the director, trustee, or officer of the corporation corporate for the formation 2,000,000 injurious to
responsible for said violation. registration of a corporation public
• Nothing in this section shall be construed to repeal the other causes for dissolution of a through fraud through fraud, or
corporation provided in this Code. who assisted
directly or
• Liability for any of the foregoing offenses shall be separate from any other administrative, civil,
indirectly
or criminal liability under the RCC and other laws.
What is the liability of directors, trustees, officers, or other employees? (Sec 171)
Fraudulent N/A Corporation Fine from Aggravated when
• If the offender is a corporation, the penalty may, at the discretion of the court, be imposed upon conduct of 200,000- injurious to
such corporation and/or upon its directors, trustees, stockholders, members, officers, or business 2,000,000 public
employees responsible for the violation or indispensable to its commission.
Acting as N/A Corporation Fine from
What is the liability of aiders and abettors and other secondary liability? (Sec 172)
intermediaries for 100,000-
• Anyone who shall aid, abet, counsel, command, induce, or cause any violation of the RCC, or Graft and Corrupt 5,000,000
any rule, regulation, or order of the SEC shall be punished with a fine not exceeding that imposed Practices
on the principal offenders, at the discretion of the court, after taking into account their Engaging appointing of Corporation Fine from
participation in the offense. Intermediaries for intermediary who 100,000 to
Prohibited Act Qualifiers Liable Penalty Comments Graft and Corrupt engages in graft 1,000,000
Contempt Without Any person fined in an Practices and corrupt
justifiable cause, amount not practices act for
fails or refuses to exceeding Thirty the corporation’s
comply with any thousand pesos benefits
lawful order of (P30,000.00) Tolerating Graft Knowingly fails Director, trustee, Fine from
SEC (Daily fine of and Corrupt to sanction, or officer 500,000 to
1,000 until the Practices report, or file 1,000,000
order is complied appropriate action
with. with proper
Unauthorized use N/A Corporation? Fine from 10,000- agencies; allows
of corporate name 200,000 or tolerates…
Violation of Willfully holds Director, trustee, Fine from 10,000- Aggravated when Retaliation Knowingly and Any person Fine from
Disqualification office/willfully officer 200,000; injurious to Against with intent to 100,000 to
Provision conceals despite Discretion of the public Whistleblowers retaliate 1,000,000
knowledge of court: permanent Other violations Any violations of Fine not less than
disqualification disqualification to of RCC RCC or its 10,000 but not
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 24
 amendments not more than • The SEC may place the corporation under delinquent status in case of failure to submit the
otherwise 1,000,000 reportorial requirements three (3) times, consecutively or intermittently, within a period of five
specifically (5) years.
penalized • The SEC shall give reasonable notice to and coordinate with the appropriate regulatory agency
What is outstanding capital stock? (Sec 173) prior to placing under delinquent status companies under their special regulatory jurisdiction.
• It shall mean the total shares of stock issued under binding subscription contracts to subscribers • Any person required to file a report with the SEC may redact confidential information from such
or stockholders, whether fully or partially paid, except treasury shares. required report.
Can nonstock or special corporation may designate name to their governing board other than what • However, such confidential information shall be filed in a supplemental report prominently
is provided in the RCC? (Sec 174) labelled “confidential”, together with a request for confidential treatment of the report and the
• Yes, they may, through their articles of incorporation or their bylaws, designate their specific grounds for the grant thereof.
governing boards by any name other than as board of trustees. Can SEC do random visits to corporations to inspect their records? (Sec 178)
Can SEC collect fees? (Sec 175) • Yes, the SEC shall exercise visitorial powers over all corporations.
• Yes, SEC is authorized to collect, retain, and use fees, fines, and other charges pursuant to this • Such powers shall include the examination and inspection of records, regulation and supervision
Code and its rules and regulations. of activities, enforcement of compliance, and imposition of sanctions in accordance with this
• The amount collected shall be deposited and maintained in a separate account which shall form Code.
a fund for its modernization and to augment its operational expenses such as, but not limited to, What if the corporation refuse or obstruct to the SEC’s order? (Sec 178)
capital outlay, increase in compensation and benefits comparable with prevailing rates in the • Should the corporation, without justifiable cause, refuse or obstruct the Commission’s exercise
private sector, reasonable employee allowance, employee health care services, and other of its visitorial powers, the SEC may revoke its certificate of incorporation, without prejudice to
insurance, employee career advancement and professionalization, legal assistance, seminars, and the imposition of other penalties and sanctions under this Code.
other professional fees. • All interrogatories propounded by the Commission and the answers thereto, as well as the results
What did the Code empower NEDA to do regarding the implementation of the RCC? (Sec 176) of any examination made by the Commission or by any other official authorized by law to make
• Pursuant to the duties specified by Article XIV of the Constitution, the National Economic and an examination of the operations, books, and records of any corporation, shall be kept strictly
Development Authority (NEDA) shall, from time to time, determine if the corporate vehicle has confidential, except:
been used by any corporation, business, or industry to frustrate the provisions of the RCC or o when the law requires the same to be made public;
applicable laws, and shall submit to Congress, whenever deemed necessary, a report of its o when necessary for the Commission to take action to protect the public or to issue
findings, including recommendations for their prevention or correction. orders in the exercise of its powers under this Code; or
• In recommending to the Congress which corporations, businesses and industries will be declared o where such interrogatories, answers or results are necessary to be presented as
as vested with public interest, and in formulating proposals for limitations on stock ownership, evidence before any court.
the NEDA shall consider the type and nature of the industry, size of the enterprise, economies of What are the powers, functions and jurisdiction of the SEC? (Sec 179)
scale, geographic location, extent of Filipino ownership, labor intensity of the activity, export • The Commission shall have the power and authority to:
potential, as well as other factors which are germane to the realization and promotion of business o Exercise supervision and jurisdiction over all corporations and persons acting on their
and industry. behalf, except as otherwise provided under this Code;
What did the Code empower the Congress to do regarding stock ownership in corporations? (Sec 176) o Pursuant to Presidential Decree No. 902-A, retain jurisdiction over pending cases
• The Congress of the Philippines may set maximum limits for stock ownership of individuals involving intra-corporate disputes submitted for final resolution. The Commission
or groups of individuals related to each other by consanguinity, affinity, or by close shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed
business interests, in corporations declared to be vested with public interest pursuant to the as of 30 June 2000 until finally disposed;
provisions of this section, or whenever necessary to prevent anti-competitive practices as o Impose sanctions for the violation of this Code, its implementing rules and orders of
provided in the “Philippine Competition Act”, or to implement national economic policies the Commission;
designed to promote general welfare and economic development, as declared in laws, rules, and o Promote corporate governance and the protection of minority investors, through,
regulations. among others, the issuance of rules and regulations consistent with international best
What are the reportorial requirements of corporations? (Sec 177) practices;
• Except if contrary is provided in the RCC or other rules issued by SEC, every corporation, o Issue opinions to clarify the application of laws, rules, and regulations;
domestic or foreign, doing business in the Philippines shall submit to the Commission: o Issue cease and desist orders ex parte to prevent imminent fraud or injury to the public;
o Annual financial statements audited by an independent certified public accountant: o Hold corporations in direct and indirect contempt;
Provided, That if the total assets or total liabilities of the corporation are less than Six o Issue subpoena duces tecum and summon witnesses to appear in proceedings before
hundred thousand pesos (P600,000.00), the financial statements shall be certified the Commission;
under oath by the corporation’s treasurer or chief financial officer; and o In appropriate cases, order the examination, search and seizure of documents, papers,
o A general information sheet (This must be submitted within 30 days from the holding files and records, and books of accounts of any entity or person under investigation
of annual stockholder’s meeting as may be necessary for the proper disposition of the cases, subject to the provisions
• Corporations vested with public interest must also submit the following: of existing laws;
o A director or trustee compensation report; and o Suspend or revoke the certificate of incorporation after proper notice and hearing;
o A director or trustee appraisal or performance report and the standards or criteria used o Dissolve or impose sanctions on corporations, upon final court order, for committing,
to assess each director or trustee. aiding in the commission of, or in any manner furthering securities violations,
• The reportorial requirements shall be submitted annually and within such period as may be smuggling, tax evasion, money laundering, graft and corrupt practices, or other
prescribed by the SEC. fraudulent or illegal acts;
What is the effect if the corporation failed to submit reportorial requirements? (Sec 177) o Issue writs of execution and attachment to enforce payment of fees, administrative
fines, and other dues collectible under this Code;
o Prescribe the number of independent directors and the minimum criteria in
determining the independence of a director;
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 o Impose or recommend new modes by which a stockholder, member, director, or • SEC transfers al powers, authorities, and responsibilities involving party-list organizations to the
trustee may attend meetings or cast their votes, as technology may allow, taking into COMELEC.
account the company’s scale, number of shareholders or members, structure, and • Within six (6) months after the effectivity of this Act, the monitoring, supervision, and regulation
other factors consistent with the basic right of corporate suffrage; of such corporations shall be deemed automatically transferred to the COMELEC.
o Formulate and enforce standards, guidelines, policies, rules and regulations to carry • For this purpose, the COMELEC, in coordination with the SEC, shall promulgate the
out the provisions of this Code; and corresponding implementing rules for the transfer of jurisdiction over the abovementioned
o Exercise such other powers provided by law or those which may be necessary or corporations.
incidental to carrying out the powers expressly granted to the Commission. What is the extent of the applicability of RCC? (Sec 183)
• In imposing penalties and additional monitoring and supervision requirements, the Commission • Nothing in this law shall be construed as amending existing provisions of special laws governing
shall take into consideration the size, nature of the business, and capacity of the corporation. the registration, regulation, monitoring and supervision of special corporations such as banks,
Which court has the power to restrain SEC’s orders? (Sec 179) nonbank financial institutions and insurance companies.
• No court below the Court of Appeals shall have jurisdiction to issue a restraining order, • Notwithstanding any provision to the contrary, regulators such as the Bangko Sentral ng Pilipinas
preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy and the Insurance Commission shall exercise primary authority over special corporations such
that directly or indirectly interferes with the exercise of the powers, duties and responsibilities as banks, nonbank financial institutions, and insurance companies under their supervision and
of the SEC that falls exclusively within its jurisdiction. regulation.
Can there be electronic filing of documents? (Sec 180) What is the effect of amendment or repeal of the RCC, or the dissolution of a corporation? (Sec 184)
• Yes, the SEC shall develop and implement an electronic filing and monitoring system. • No right or remedy in favor of or against any corporation, its stockholders, members, directors,
• The SEC shall promulgate rules to facilitate and expedite, among others, corporate name trustees, or officers, nor any liability incurred by any such corporation, stockholders, members,
reservation and registration, incorporation, submission of reports, notices, and documents directors, trustees, or officers, shall be removed or impaired either by the subsequent
required under RCC, and sharing of pertinent information with other government agencies. dissolution of said corporation or by any subsequent amendment or repeal of the RCC or of any
Can Corporation opt for arbitration? (Sec 181) part thereof.
• Yes, an arbitration agreement may be provided in the articles of incorporation or bylaws of an What is the applicability of RCC to existing corporations? (Sec 185)
unlisted corporation. • A corporation lawfully existing and doing business in the Philippines affected by the new
When can corporation refer to arbitration? (Sec 181) requirements of the RCC shall be given a period of not more than two (2) years from the
• When such an agreement is in place, disputes between the corporation, its stockholders or effectivity of this Act within which to comply.
members, which arise from the implementation of the articles of incorporation or bylaws, or from What did RCC repeal? (Sec 187)
intra-corporate relations, shall be referred to arbitration. • Batas Pambansa Blg. 68, otherwise known as “The Corporation Code of the Philippines”, is
• A dispute shall be nonarbitrable when it involves criminal offenses and interests of third parties. hereby repealed.
• The arbitration agreement shall be binding on the corporation, its directors, trustees, officers, and • Any law, presidential decree or issuance, executive order, letter of instruction, administrative
executives or managers. order, rule or regulation contrary to or inconsistent with any provision of this Act is hereby
How can the arbitration agreement be enforceable? (Sec 181) repealed or modified accordingly.
• To be enforceable, the arbitration agreement should indicate the number of arbitrators and the When is the effectivity of the RCC? (Sec 188)
procedure for their appointment. • The RCC shall take effect upon completion of its publication in the Official Gazette or in at least
Who may appoint the arbitrators forming the arbitral tribunal? (Sec 181) two (2) newspapers of general circulation.
• It shall be granted to a designated independent third party. Case Doctrines
What happens if the third party fail to appoint the arbitrators in the manner and within the period Velasco v. Poizat
specified in the arbitration agreement? (Sec 181) • When insolvency supervenes, all unpaid subscriptions at once become at once due and
• The parties may request the SEC to appoint the arbitrators. enforceable.
• In any case, arbitrators must be accredited or must belong to organizations accredited for the PHILIPPINE TRUST COMPANY v. MARCIANO RIVERA
purpose of arbitration. • A corporation has no power to release an original subscriber to its capital stock from the
What are the powers of the arbitral tribunal? (Sec 181) obligation of paying for his shares, without a valuable consideration for such release; and as
• The arbitral tribunal shall have the power to rule on its own jurisdiction and on questions relating against creditors a reduction of the capital stock can take place only in the manner an under the
to the validity of the arbitration agreement. conditions prescribed by the statute or the charter or the articles of incorporation.
• When an intra-corporate dispute is filed with a Regional Trial Court, the court shall dismiss the Garcia vs. Suarez
case before the termination of the pretrial conference, if it determines that an arbitration • Section 37 of the Corporation Law, amended by Act No. 3518, provides when the obligation to
agreement is written in the corporation’s articles of incorporation, bylaws, or in a separate pay interest arises and when payment should be made, but it is absolutely silent as to when the
agreement. subscription to a stock should be paid. Of course, the obligation to pay arises from the date of
• The arbitral tribunal shall have the power to grant interim measures necessary to ensure the subscription, but the coming into being of an obligation should not be confused with the time
enforcement of the award, prevent a miscarriage of justice, or otherwise protect the rights of the when it becomes demandable.
parties. • The subscription to the capital stock of a corporation, unless otherwise stipulated, is not payable
When is the arbitral award deemed effective? (Sec 181) at the moment of the subscription but on a subsequent date which may be fixed by the
• A final arbitral award under this section shall be executory after the lapse of fifteen (15) days corporation. Hence, section 38 of the Corporation Law, amended by Act No. 3518, provides that:
from receipt thereof by the parties and shall be stayed only by the filing of a bond or the issuance "The board of directors or trustees of any stock corporation formed, organized, or existing under
by the appellate court of an injunctive writ. this Act may at any time declare due and payable to the corporation unpaid subscriptions to the
• The SEC shall formulate the rules and regulations, which shall govern arbitration under this capital stock
section, subject to existing laws on arbitration. ONG YONG v. TIU
Who has jurisdiction over party-list organizations? (Sec 182) • A subscription contract necessarily involves the corporation as one of the contracting parties
since the subject matter of the transaction is property owned by the corporation—its shares of
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 26
 stock. Hence, civil case for rescission on the ground of breach of contract filed by the corporate Code is when the corporation holds any unpaid claim against the shares intended to be
offiials in their personal capacities will not prosper. transferred.
• Trust Fund Doctrine provides that subscriptions to the capital stock of a corporation constitute a • Restrictions in the traffic of stock must have their source in legislative enactment, as the
fund to which the creditors have a right to look for the satisfaction of their claims. It is the corporation itself cannot create such impediment.
underlying principle in the procedure for the distribution of capital assets, which allows the Ponce v. Alsons Cement Corporation
distribution of corporate capital only in three instances: (1) amendment of the Articles of • Where a transferee is not yet recognized as a stockholder, the corporation is under no specific
Incorporation to reduce the authorized capital stock; (2) purchase of redeemable shares by the legal duty to issue stock certificates in the transferee’s name.
corporation, regardless of the existence of unrestricted retained earnings; (3) dissolution and Pacific Basin Securities v. Oriental Petroleum
eventual liquidation of the corporation. • Clearly, the right of a transferee/assignee to have stocks transferred to his name is an inherent
Yamamoto v. Nishino Leather Industries, Inc. right owing from his ownership of the stocks. In transferring stock, the secretary of a corporation
• Under the doctrine of promissory estoppel, x x x estoppel may arise from the making of a acts in purely ministerial capacity, and does not try to decide the question of ownership. The duty
promise, even though without consideration, if it was intended that the promise should be relied of the corporation to transfer is a ministerial one and if it refuses to make such transaction without
upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction good cause, it may be compelled to do so by mandamus.
the perpetration of fraud or would result in other injustice. NEUGENE MKTG vs. CA
Henry Fleischer v. Botica Nolasco Co., Inc. • To constitute a valid transfer, a stock certificate must be delivered and its delivery must be
• As a general rule, the by-laws of a corporation are valid if they are reasonable and are not coupled with an intention of constituting the person to whom the stock is delivered the transferred
contradictory to the general policy of the laws of the land. thereof. The person to whom the stock certificates are endrosed must be a bona fide transferee
Republic vs Sandiganbayan and for value
• The purpose of the notice requirement in Article 10 of the ETPI Articles of Incorporation is to TEE LING KIAT v. AYALA CORPORATION
give the stockholders knowledge of the intended sale of shares of stock of the corporation, in • No transfer, shall be valid, except as between the parties, until the transfer is recorded in the
order that they may exercise their preemptive right. Where it is shown that a stockholder had books of the corporation showing the names of the parties to the transaction, the date of the
actual knowledge of the intended sale within the period prescribed to exercise the right, the notice transfer, the number of the certificate or certificates and the number of shares transferred. Even
requirement had been sufficiently met, which is what happened in this case when PCGG found if it could be assumed that the sale of shares of stock contained in the photocopies had indeed
out about the sale as early as June (even if it wasn’t according to the AoI requirements). transpired, such transfer is only valid as to the parties thereto, but is not binding on the
Bitong v CA corporation if the same is not recorded in the books of the corporation.
• Requisites to a valid issuance of a stock certificate: Lingayen Gulf Electric Power Company, Inc. v. Baltazar
o First, the certificates must be signed by the president, countersigned by the secretary • Under the [Old] Corporation Law, notice of call for payment for unpaid subscribed stock must
or asst. secretary, and sealed with the seal of the corporation. A mere typewritten be published, except when the corporation is insolvent, in which case, payment is immediately
statement advising a stockholder of the extent of his ownership in a corporation demandable. It also ruled that release from such payment must be made by all the stockholders.
without qualification and/or authentication cannot be considered as a formal DE SILVA v. ABOITIZ & CO
certificate of stock. • The law does not give stockholders any right in connection with the determination of the question
o Second, delivery of the certificate is an essential elemtn of its issuance. Hence, there whether or not there should be deducted from the 70% of the profit distributable among the
is no issuance of a stock certificate where it is never detached from the stock books stockholders such amount as may be deemed fit for the payment of subscriptions due and unpaid.
although blanks therein are properly filled up if the person whose name is inserted BALTAZAR v. LINGAYEN GULF
therein has no control over the books of the company. • Stockholders of fully paid shares are entitled to vote but for the unpaid subscriptions where
o Third, the par value, as to par value shares or the full subscription as to no par value certificates were issued, it shall have no voting rights. (DIVISIBLE) (PN: Check Codal)
shares, must be first fully paid. LANUZA v CA
o Fourth, the original certificate must be surrendered where the person requesting the • A stock and transfer book, like other corporate books and records, is not in any sense a public
issuance of the certificate is a transferee from a stockholder. record, and this is not exclusive evidence of the matters and things which ordinarily are or should
• Stock issued without authority and in violation of law is void and confers no rights on the person be written therein. It is generally held that the records and minutes of a corporation are not
to whom it is issued and subjects him to no liabilities. Where there is an inherent lack of power conclusive even against the corporation but are prima facie evidence only. thus, parol evidence
in the corporation to issue the stock, neither the corporation nor the person to whom the stock is may be admitted to supply omissions in the records or explain ambiguities, or to contradict such
issued is estopped to question its validity since an estoppel cannot operate to create stock which records.
under the law cannot have existence. Lao v. Lao
RURAL BANK OF LIPA CITY V. CA • While it may be true that petitioners were named as shareholders in the General Information
• For a valid transfer of stocks, there must be strict compliance with the mode of Sheet submitted to the SEC, that document alone does not conclusively prove that they are
• transfer prescribed by law. The requirements are: shareholders of PFSC. The information in the document will still have to be correlated with the
o There must be delivery of the stock certificate corporate books of PFSC.
o The certificate must be endorsed by the owner or his attorney-in-fact or other persons COJUANGCO v. SANDIGANBAYAN
legally authorized to make the transfer • Ownership includes jus utendi (i think this should be jus fruendi) or the right to receive from the
o To be valid against third parties, the transfer must be recorded in the books of the thing what it produces.
corporation. W.G. PHILPOTTS v. PHIL. MANUFACTURING COMPANY
Rural Bank of Salinas vs. CA • In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable
• Sec 63. contemplates no restriction as to whom the stocks may be transferred. It does not suggest to say that there are some things which a corporation may undoubtedly keep secret,
that any discrimination may be created by the corporation in favor of, or against a certain notwithstanding the right of inspection given by law to the stockholder; as for instance, where a
purchaser. The owner of shares, as owner of personal property, is at liberty, under said section corporation, engaged in the business of manufacture, has acquired a formula or process, not
to dispose them in favor of whomever he pleases, without limitation in this respect, other than generally known, which has proved of utility to it in the manufacture of its products.
the general provisions of law. The only limitation imposed by Section 63 of the Corporation Pardo v. Hercules
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 27
 • Our statute declares that the right of inspection can be exercised "at reasonable hours." This its rights and properties, as well as liabilities, shall be taken and deemed transferred to and vested
means at reasonable hours on business days throughout the year, and not merely during some in the surviving corporation. The same rule applies to consolidation.
arbitrary period of a few days chosen by the directors. CHINA BANKING CORPORATION V. DYNE-SEM ELECTRONICS CORPORATION
NAUTICA CANNING CORP. VS. YUMUL • Merger is legally distinct from a sale of assets. Where one corporation (transferor) sells or
• All transfers NOT recorded in the STB is non-existent. As between the corporation, shareholders, otherwise transfers all its assets to another corporation (transferee) for value, the transferee is
and third parties, the corporation looks only to its books for the purpose of determining who the not, by that fact alone, liable for the debts and liabilities of the transferor.
shareholders are. JIAO v. NLRC
TERELAY v. YULO • As a rule, a corporation that purchases the assets of another will not be liable for the debts of the
• The Corporation Code has granted to all stockholders the right to inspect the corporate books selling corporation, provided the former acted in good faith and paid adequate consideration for
and records, and in so doing has not required any specific amount of interest for the exercise of such assets, except when any of the following circumstances is present: (1) where the purchaser
the right to inspect. expressly or impliedly agrees to assume the debts; (2) where the transaction amounts to a
• The right of the shareholder to inspect the books and records of the petitioner should not be made consolidation or merger of the corporations; (3) where the purchasing corporation is merely a
subject to the condition of a showing of any particular dispute or of proving any mismanagement continuation of the selling corporation; and (4) where the selling corporation fraudulently enters
or other occasion rendering an examination proper, but if the right is to be denied, the burden of into the transaction to escape liability for those debts.
proof is upon the corporation to show that the purpose of the shareholder is improper, by way of BPI v. CARLITO LEE
defense. • it should be emphasized that a merger of two corporations produces, among others,:
PUNO V. PUNO ENTERPRISES, INC. o The constituent corporations shall become a single corporation which, in case of
• Upon the death of a shareholder, the heirs do not automatically become stockholders of the merger, shall be the surviving corporation designated in the plan of merger; and in
corporation and acquire the rights and privileges of the deceased as shareholder of the case of consolidation, shall be the consolidated corporation designated in the plan of
corporation. The stocks must be distributed first to the heirs in estate proceedings, and the consolidation;
transfer of the stocks must be recorded in the books of the corporation. Until a settlement and o The separate existence of the constituent corporation shall cease, except that of the
division of the estate is effected, the stocks of the decedent are held by the administrator or surviving or the consolidated corporation;
executor. o The surviving or the consolidated corporation shall possess all the rights, privileges,
ANG-ABAYA v. ANG immunities and powers and shall be subject to all the duties and liabilities of a
• The defense of improper use or motive is in the nature of a justifying circumstance that would corporation organized under this Code;
exonerate those who raise and are able to prove the same. o The surviving or the consolidated corporation shall thereupon and thereafter possess
• The following elements must be present for the exercise of the right to inspect corporate books: all the rights, privileges, immunities and franchises of each of the constituent
prior demand in writing for a copy of excerpts from the corporation's records or minutes; Any corporations; and all property, real or personal, and all receivables due on whatever
officer or agent refuse to allow the said director, trustee, stockholder or member; If such refusal account, including subscriptions to shares and other choses in action, and all and
is made pursuant to a resolution the liability shall be imposed upon the directors or trustees who every other interest of, or belonging to, or due to each constituent corporation, shall
voted for such refusal; and, Where the officer or agent of the corporation sets up the defense that be deemed transferred to and vested in such surviving or consolidated corporation
the person has improperly used any information secured or was not acting in good faith or for a without further act or deed; and
legitimate purpose in making his demand, the contrary must be shown or proved. o The surviving or consolidated corporation shall be responsible and liable for all the
YUJUICO v. QUIAMBAO liabilities and obligations of each of the constituent corporations in the same manner
as if such surviving or consolidated corporation had itself incurred such liabilities or
• While Section 74 of the Corporation Code expressly mentions the application of Section 144
obligations; and any pending claim, action or proceeding brought by or against any
only in relation to the act of “refusing to allow any director, trustees, stockholder or member of
of such constituent corporations may be prosecuted by or against the surviving or
the corporation to examine and copy excerpts from [the corporation’s] records or minutes,” the
consolidated corporation. The rights of creditors or liens upon the property of any of
same does not mean that the latter section no longer applies to any other possible violations of
such constituent corporations shall not be impaired by such merger or consolidation.
the former section. It must be emphasized that Section 144 already purports to penalize
SPOUSES ONG v. BPI FAMILY SAVINGS BANK
“violations” of “any provision” of the Corporation Code “not otherwise specifically penalized
therein.” Hence, we find inconsequential the fact that Section 74 expressly mentions the • The surviving or consolidated corporation shall be responsible and liable for all the liabilities
application of Section 144 only to a specific act, but not with respect to the other possible and obligations of each of the constituent corporations in the same manner as if such surviving
violations of the former section. or consolidated corporation had itself incurred such liabilities or obligations. In this case, BPI
LORELI LIM PO v. DEPARTMENT OF JUSTICE did not only acquire all the rights, privileges and assets of BSA but likewise acquired the
liabilities and obligations of the latter as if BPI itself incurred it.
• For criminal violation of Section 74 in relation to Section 144 to apply, the following must be
Bank of Commerce v. Heirs of Rodolfo Dela Cruz
present:
o A director, trustee, stockholder or member has made a prior demand in writing for a • The terms of merger between two corporations, when determinative of their joint or respective
copy of excerpts from the corporation’s records or minutes; liabilities towards third parties, cannot be assumed. The party alleging the corporations' joint
o Any officer or agent of the concerned corporation shall refuse to allow the said liabilities should establish the allegation. Otherwise, the liabilities of each of them shall be
director, trustee, stockholder or member of the corporation to examine and copy said separate.
excerpts • It is plain enough, therefore, that there were several specific facts whose existence must be shown
• The settled policy is that the courts will not interfere with the executive determination of probable (not assumed) before the merger of two or more corporations can be declared as established.
cause for the purpose of filing an information, in the absence of grave abuse of discretion. Among such facts are the plan of merger that includes the terms and mode of carrying out the
MINDANAO SAVINGS AND LOAN ASSOC. INC, V. WILLKOM merger and the statement of the changes, if any, of the present articles of the surviving
corporation; the approval of the plan of merger by majority vote of each of the boards of directors
• The merger shall only be effective upon the issuance of a certificate of merger by the SEC.
of the concerned corporations at separate meetings; the submission of the plan of merger for the
• The issuance of the certificate of merger is crucial because not only does it bear our SEC’s approval of the stockholders or members of each of the corporations at separate corporate
approval, but it also marks the moment when the consequences of a merger take place. By meetings duly called for the purpose; the affirmative vote of 2/3 of the outstanding capital in
operation of law, upon the effectivity of the merger, the absorbed corporation ceases to exist but case of stock corporations, or 2/3 of the members in case of non-stock corporations; the
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 28
 submission of the approved articles of merger executed by each of the constituent corporations SAN JUAN STRUCTURAL AND STEEL FABRICATORS v. CA
to the SEC; and the issuance of the certificate by the SEC on the approval of the merger. • The "[m]ere ownership by a single stockholder or by another corporation of all or nearly all of
CIR v. La Tondena Distillers Inc. the capital stock of a corporation is not of itself sufficient ground for disregarding the separate
• DST does not apply to a merger because mergers do not involve a sale or purchase transaction. corporate personalities."[ Furthermore, A narrow distribution of ownership does not, by itself,
Turner v Lorenzo make a close corporation.
• No payment shall be made to any dissenting stockholder unless the corporation has unrestricted BUSTOS v. MILLIANS SHOE, INC.
retained earnings in its books to cover the payment. In case the corporation has no available • A narrow distribution of ownership does not, by itself, make a close corporation. Courts must
unrestricted retained earnings in its books, the Corporation Code provides that if the dissenting look into the articles of incorporation to find provisions expressly stating that (1) the number of
stockholder is not paid the value of his shares within 30 days after the award, his voting and stockholders shall not exceed 20; or (2) a preemption of shares is restricted in favor of any
dividend rights shall immediately be restored. stockholder or of the corporation; or (3) the listing of the corporate stocks in any stock exchange
TAN v SYCIP or making a public offering of those stocks is prohibited.
• For stock corporations, the "quorum" referred to in Section 52 of the Corporation Code is based FLORETE v. FLORETE
on the number of outstanding voting stocks. For nonstock corporations, only those who are • Even if the transfer of stocks is made in violation of the restrictions enumerated under Section
actual, living members with voting rights shall be counted in determining the existence of a 99, such transfer is still valid if it has been consented to by all the stockholders of the close
quorum during members' meetings. Dead members shall not be counted. corporation and the corporation cannot refuse to register the transfer of stock in the name of the
Grace Christian High School v. CA transferee.
• Sec. 22 of the Revised Corporation Code mandates that the board of directors of corporations be BARAYUGA v. ADVENTIST UNIVERSITY
elected from among the stockholders or members and any provisions of the by-laws contrary to • Although the Corporation Code sets the term of the members of the Board of Trustees at 5 years,
such is considered ineffective. it contains a proviso expressly subjecting the duration to what is otherwise provided in the
• A provision that is contrary to law can never be adopted nor ratified. articles of incorporation or by-laws of the educational corporation. That contrary provision
• Practice, no matter how long continued, cannot give rise to any vested right if it is contrary to controls on the term of office.
law. Roman Catholic v LRC
Cebu Country Club Inc. v. Elizagaque • A corporation sole does not have any nationality but for purposes of applying nationalization
• The General Rule is that the Board of a non-stock and non-profit corporation has the right under laws, nationality is determined not by the nationality of its presiding elder but by the nationality
its Articles of Incorporation to approve or disapprove the application of membership. The of its members, constituting the sect in the Philippines. Thus, the Roman Catholic Church can
exception to this rule is when the disapproval was done arbitrarily or in Bad Faith (Abuse of acquire lands in the Philippines even if it is headed by the Pope.
Right Doctrine) • The framers of the Constitution intended said provisions (Sections 1 and 5 of Article XIII) as
• Abuse of Right Doctrine: in the exercise of one’s right, one cannot exercise it in a manner that barrier for foreigners or corporations financed by such foreigners to acquire, exploit and develop
doesn’t conform with the norms enshrined in Art. 19 and 21, resulting in damage to another our natural resources, saving these undeveloped wealth for our people to clear and enrich when
person. they are already prepared and capable of doing so. But that is not the case of corporations sole
Valley Golf & Country Club, Inc. v. Vda De Caram in the Philippines, for, We repeat, they are mere administrators of the “temporalities" or
• A share can only be deemed delinquent and sold at public auction only upon the failure of the properties titled in their name and for the benefit of the members of their respective religion
stockholder to pay the unpaid subscription. Delinquency in monthly club dues was merely an composed of an overwhelming majority of Filipinos.
ordinary debt enforceable by judicial action in a civil case. ANG MGA KAANIB SA IGLESIA NG DIOS v. IGLESIA NG DIOS KAY CRISTO JESUS
Valley Golf and Country Club, Inc. v. Dr. Victor Reyes • The fact that there are other non-stock religious societies or corporations using the names Church
• When the property right of a person is at stake and he stands to lose his share to the corporation of the Living God, Inc., Church of God Jesus Christ the Son of God the Head, etc., does not
due to non payment of dues, receipt of notice of delinquency cannot be lightly inferred from an authorize the use of the petitioner of the essential and distinguishing feature of respondent’s
incomplete, unreadable and unverified copy of the registry receipt without impinging the rule on registered and protected corporate name.
non deprivation of property rights without the benefit substantial justice. IGLESIA EVANGELICA METODISTA v. LAZARO
CALATAGAN GOLF CLUB INC. v. CLEMENTE JR. • A corporation sole may be converted into a corporation aggregate by a mere amendment of its
• Membership in a non-stock corporation "shall be terminated in the manner and for the causes AOI. Although the Corporation Code does not provide for a manner by which a corporation sole
provided in the articles or the by-laws." may amend its AOI, Sec. 109 allows the application to religious corporations of the general
Manuel R. Dulay Enterprises Inc v. CA provisions governing non-stock corporations. Thus, a corporation sole may amend its AOI by a
• In a close corporation, a board resolution authorizing the sale or mortgage of the subject property decision of its lone member with the concurrence of 2/3 of its membership.
is not necessary to bind it for the action of its president. At any rate, a corporate action taken at REPUBLIC VS. VILLANUEVA
a board meeting without proper call or notice in a close corporation is deemed ratified by the • The said church is not entitled to avail itself of the benefits of section 48(b) which applies only
absent director unless the latter promptly files his written objection with the secretary of the to Filipino citizens or natural persons.
corporation after having knowledge of the meeting REPUBLIC V. GONONG
International Academy v. Litton and Company • A corporation sole or a juridical person is disqualified to acquire or hold alienable lands of the
• The law does not make a distinction between a stock and non-stock corporation, neither should public domain because of the constitutional prohibition and Sec48(b) of the Public Land Act
there be a distinction in case the doctrine of piercing the veil of corporate fiction has to be applied. applies only to Filipino citizens or natural persons. A corporation sole has no nationality.
• The concept of equitable ownership, for stock or non-stock corporations, in piercing of the REPUBLIC v. IGLESIA NI CRISTO
corporate veil scenarios, may also be considered. An equitable owner is an individual who is a • A corporation sole or a juridical person is disqualified to acquire or hold alienable lands of the
non-shareholder defendant, who exercises sufficient control or considerable authority over the public domain, like the two lots in question, because of the constitutional prohibition already
corporation to the point of completely disregarding the corporate form and acting as though its mentioned and because the said church is not entitled to avail itself of the benefits of Section
assets are his or her alone to manage and distribute. 48(b) which applies only to Filipino citizens or natural persons.
• In a reverse piercing action, the plaintiff seeks to reach the assets of a corporation to satisfy • A corporation sole has no nationality.
claims against a corporate insider." REPUBLIC v. INTERMEDIATE APPEALLATE COURT
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 29
 • A corporation sole by the nature of its Incorporation is vested with the right to purchase and
hold real estate and personal property. It need not therefore be treated as an ordinary private RICH v PALOMA
corporation because whether or not it be so treated as such, the Constitutional provision involved • A corporation which has already been dissolved, be it voluntarily or involuntarily, retains no
will, nevertheless, be not applicable. juridical personality to conduct its business save for those directed towards corporate liquidation.
Twin Towers Condominium Corporation v. Court of Appeals Yu v. Yukayguan
• As a member of the condominium corporation, the unit owner is legally bound to pay the • Glaringly, a derivative suit is fundamentally distinct and independent from liquidation
corporation its assessments and dues to maintain the common areas and facilities of the proceedings. They are neither part of each other nor the necessary consequence of the other.
Condominium. Its obligation arises from both the law and its contract with the Condominium There is totally no justification for courts to convert what was supposedly a derivative suit
developer and other unit owners. instituted by the parties, on their own behalf and on behalf of the corporation against another
MANILA BANKERS LIFE INSURANCE CORPORATION V. EDDY NG KOK WEI party, to a proceeding for the liquidation of the corporation.
• In the exercise of its functions to regulate the real estate trade and business the HLURB shall • Winding up the affairs of the corporation means the collection of all assets, the payment of all
have exclusive jurisdiction to hear and decide cases involving specific performance of its creditors, and the distribution of the remaining assets, if any among the stockholders thereof
contractual and statutory obligations filed by buyers of subdivision lots or condominium units in accordance with their contracts, or if there be no special contract, on the basis of their
against the owner, developer, dealer, broker or salesman. respective interests. The manner of liquidation or winding up may be provided for in the
LIM v. MOLDEX LAND corporate by-laws and this would prevail unless it is inconsistent with law.
• Section 2 of the condominium act (excerpt): . Title to the common areas, including the land, or • It may be undertaken by the corporation itself, through its Board of Directors; or by trustees to
the appurtenant interests in such areas, may be held by a corporation specially formed for the whom all corporate assets are conveyed for liquidation; or by a receiver appointed by the SEC
purpose (hereinafter known as the "condominium corporation") in which the holders of separate upon its decree dissolving the corporation.
interest shall automatically be members or shareholders, to the exclusion of others, in proportion Gelano v. CA
to the appurtenant interest of their respective units in the common areas • A corporation that has a pending action and which cannot be terminated within the three-year
VESAGAS V. CA period after its dissolution is authorized under Section 78 to convey all its property to trustees to
• The requirements under the law should have been strictly complied with by the members of the enable it to prosecute and defend suits by or against the corporation beyond the three-year period.
club. • "Trustee" as used in the corporation statute must be understood in its general concept which
• The records reveal that no proof was offered by the petitioners with regard to the notice and could include the counsel to whom was entrusted in the instant case, the prosecution of the suit
publication requirements. Similarly wanting is the proof of the board members' certification. filed by the corporation.
Lastly, and most important of all, the SEC Order of Dissolution was never submitted as Reburiano v. CA
evidence. Hence, there was no dissolution that was validly effected. • When a corporation liquidates its assets, the corporation has 3 years after the time when it would
Alhambra Cigar v. SEC have been so dissolved to prosecute and defend suits by or against it and enable it to settle and
• A corporation may not extend its life during the 3-year statutory period for liquidation when its close its affairs, to dispose of and convey its property and to distribute its assets. Furthermore, at
original term of existence had already expired. any time during said 3 years, the corporation is authorized and empowered to convey all of its
• the moment a corporation's right to exist as an "artificial person" ceases, its corporate powers are property to trustees for the benefit of stockholders, members, creditors, and other persons in
terminated "just as the powers of a natural person to take part in mundane affairs cease to exist interest.
upon his death". There is nothing left but to conduct, as it were, the settlement of the estate of a • A corporation that has a pending action and which cannot be terminated within the three-year
deceased juridical person. period after its dissolution is authorized under Sec. 122 (Sec. 139 of RCC) of the Corporation
• the moment a corporation's right to exist as an "artificial person" ceases, its corporate powers are Code to convey all its property to trustees to enable it to prosecute and defend suits by or against
terminated "just as the powers of a natural person to take part in mundane affairs cease to exist the corporation beyond the three-year period.
upon his death". There is nothing left but to conduct, as it were, the settlement of the estate of a REYES V. BANCOM
deceased juridical person. • General Rule: A defunct corporation loses the right to sue and be sued in its name upon the
Loyola Grand Villas v. CA expiration of the three-year period provided by law. (See: Section 122 of the Corporation Code)
• Failure to file by-laws within the required period is only a ground for suspension or revocation • Exception: When a corporation is dissolved and the liquidation of its assets is placed in the hands
of the certificate of registration of corporations, and NOT A CAUSE FOR ITS AUTOMATIC of a receiver or assignee, the three-year period shall not apply and the assignee may institute
DISSOLUTION. all actions leading to the liquidation of the assets of the corporation even after the
Aguirre II vs FQB+7 expiration of three years. (Based on jurisprudence)
• A corporation’s board of directors is not rendered functus officio by its dissolution. Since Section • The mere revocation of the charter of a corporation does not result in the abatement of
122 allows a corporation to continue its existence for a limited purpose, necessarily there must proceedings. Directors are considered trustees by legal implication and the fact that a
be a board that will continue acting for and on behalf of the dissolved corporation for that corporation did not convey its assets to a receiver or assignee was of no consequence.
purpose. In fact, Section 122 authorizes the dissolved corporation’s board of directors to conduct • Under Section 145 of the Corporation Code, dissolution of a creditor- corporation does not
its liquidation within three years from its dissolution. Jurisprudence has even recognized the extinguish any right or remedy in its favor.
board’s authority to act as trustee for persons in interest beyond the said three-year period Republic v. Tancinco
• Existing intra corporate dispute which does not constitute a corporate business is not affected by • The termination of the life of a juridical entity does not by itself cause the extinction or
the subsequent dissolution of the corp. diminution of the rights and liabilities of such entity; specially in this case where, pursuant to the
Alabang Development Corporation v. Alabang Hills Village Association and Rafael Tinio transitory provision of EO 18, Philsucom, under the supervision of SRA, was allowed to continue
• The trustee of a corporation may continue to prosecute a case commenced by the corporation as a juridical entity for 3 years for the purpose of prosecuting and defending suits by or against
within three years from its dissolution until rendition of the final judgment, even if such judgment it and enabling it to settle and close its affairs, to dispose of and convey its property; and to
is rendered beyond the three-year period allowed by Section 122 of the Corporation Code. distribute its assets. When a pending action cannot be terminated within said 3 yr period, SRA,
However, an already defunct corporation cannot initiate a suit after the lapse of the said three- which has been appointed by law to supervise the closing affairs of Philsucom, is considered a
year period. trustee which shall continue to prosecute and defend suits filed by or against it.
Paramount Insurance Corp. v. A.C. Ordonez Corporation
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 30
 • Dissolution or even the expiration of the three-year liquidation period should not be a bar to a • For purposes of the rule on summons, the fact of doing business must first be "established by
corporation's enforcement of its rights as a corporation. appropriate allegations in the complaint" and the court in determining such fact need not go
Gamboa v. Teves beyond the allegations therein.
• The term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock • Under the Rules of Court, if the defendant is a foreign corporation doing business in the
entitled to vote in the election of directors, and thus in the present case only to common shares, Philippines, summons may be served on (a) its resident agent designated in accordance with law;
and not to the total outstanding capital stock comprising both common and non-voting preferred (b) if there is no resident agent the government official designated by law to that effect or (c) any
shares. of its officer or agent within the Philippines.
HEIRS OF WILSON P. GAMBOA v. TEVES • For purposes of the rules on summons, the determination of principal-agent relationship from
• One must not stop until the citizenships of the individual or natural stockholders of layer after the allegations in the complaint is only preliminary and is not even conclusive as to liability
layer of investing corporations have been established, the very essence of the Grandfather Rule. Luzon Iron Development Corp v. BRIDESTONE Mining
Jose M. Roy III v Chairperson Tersita Herbosa • A wholly-owned subsidiary of a private foreign juridical entity which have transacted business
• Capital = 60% of OCS entitled to vote in the BOD and in the Philippines may not be considered as the latter’s resident agent if it was never registered
B. VAN ZUIDEN BROS., LTD. v. GTVL MANUFACTURING INDUSTRIES INC to be such before the SEC.
• Actual transaction of business within the Philippine territory is an essential requisite for the • A wholly-owned subsidiary is a distinct and separate entity from its mother corporation and the
Philippines to acquire jurisdiction over a foreign corporation and thus require the foreign fact that the latter exercises control over the former does not justify disregarding their separate
corporation to secure a Philippine business license. If a foreign corporation does not transact personality.
such kind of business in the Philippines, even if it exports its products to the Philippines, the EXPERTRAVEL & TOURS, INC. v. CA
Philippines has no jurisdiction to require such foreign corporation to secure a Philippine business
license.
CARGILL, INC. v. INTRA STRATA ASSURANCE CORPORATION • The authority of the resident agent of a foreign corporation with license to do business in the
• Most of activities that do not bring any direct receipts or profits to the foreign corporation are Philippines is to receive, for and in behalf of the foreign corporation, services and other legal
excluded from the term “doing business”. Activities within Philippine jurisdiction that do not processes in all actions and other legal proceedings against such corporation. However, such
create earnings or profits to the foreign corporation do not constitute doing business in the does not extend to filing of actions for and in behalf of the foreign corporation.
Philippines. • While a resident agent may be aware of actions filed against his principal (a foreign corporation
• Foreign Corporation not engaged in business has the standing to sue because it is not required to doing business in the Philippines), such resident may not be aware of actions initiated by its
obtain license for an isolated business transactions. There is no showing of intent to establish a principal, whether in the Philippines against a domestic corporation or private individual, or in
continuous business or extend operations in the Philippines. the country where such corporation was organized and registered, against a Philippine registered
Global Business Holding Inc. v. Surecomp Software BV corporation or a Filipino citizen.
Atrium Management Corporation v. Court of Appeals
• A foreign corporation doing business in the Philippines without license may sue in Philippine
courts a Filipino citizen or a Philippine entity that had contracted with and benefited from it. • An ultra vires act is one committed outside the object for which a corporation is created as
defined by the law of its organization and therefore beyond the power conferred upon it by law.
• A party is estopped from challenging the personality of a corporation after having acknowledged
the same by entering into a contract with it. The principle is applied to prevent a person • It is distinguished from an illegal act for the former is merely voidable which may be enforced
contracting with a foreign corporation from later taking advantage of its noncompliance with the by performance, ratification, or estoppel, while the latter is void and cannot be validated.
statutes, chiefly in cases where such person has received the benefits of the contract. ARATEA V SUICO
STEELCASE, INC V. DESIGN INTERNATIONAL • General rule: obligations incurred by the corporation are its sole liabilities.
• The appointment of a distributor in the Philippines is not sufficient to constitute "doing business" • Exception: When directors/ trustees/ officers of a corporation:
unless it is under the full control of the foreign corporation. o vote for or assent to patently unlawful acts of the corporation;
• Domestic corporations are estopped from denying the legal capacity to sue of foreign o act in bad faith or with gross negligence in directing the corporate affairs; (Court
corporations doing business in the Philippines without license if they have transacted with them applied this one)
and aware that the latter do not have license. The doctrine of corporation by estoppel is applicable o are guilty of conflict of interest to the prejudice of the corporation, its stockholders
even to foreign corporations. or members, and other persons
ERIKS PTE. LTD. V. COURT OF APPEALS AND DELFIN F. ENRIQUEZ, JR. Ong v CA
• What is determinative of “doing business” is not really the number or the quantity of the • The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the proceeds of
transactions, but, more importantly, the intention of an entity to continue the body of its business the sale of the goods, or (2) return the goods covered by the trust receipts if the goods are not
in the country. The number and quantity are merely evidence of such intention. sold. The mere failure to account or return gives rise to the crime which is malum prohibitum.
RIMBUNAN HIJAU v. ORIENTAL • There is no requirement to prove intent to defraud.
• The rule is that a party is estopped to challenge the personality of a corporation after having • The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment
acknowledged the same by entering into a contract with it. And the "doctrine of estoppel to deny on a corporation.
corporate existence applies to foreign as well as to domestic corporations;" "one who has dealt • Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons
with a corporation of foreign origin as a corporate entity is estopped to deny its existence and responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious:
capacity." corporations, partnerships, associations and other juridical entities cannot be put to jail. Hence,
FBA AIRCRAFT v. HON. SEGUNDO SOZA the criminal liability falls on the human agent responsible for the violation of the Trust Receipts
• If a foreign corporation, not engaged in business in the Philippines, is not barred from seeking Law.
redress from courts in the Philippines the same corporation cannot claim exemption from being ESPIRITU v PETRON CORPORATION
sued in Philippine courts for acts done against a person or persons in the Philippines. • Corporate officers or employees through whose acts the corporation commits a crime, may
FRENCH OIL MILL MACHINERY CO., INC. v. CA themselves be individually held answerable for a crime. However, before a stockholder may be
held criminally liable for acts committed by the corporation, it must be shown that he had

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 31

 knowledge of the criminal act committed in the name of the corporation and that he took part in both prescribe the "penalties" for their violation; namely, damages, accounting and restitution of
the same or gave his consent to its commission. profits.
MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (MSMG-UWP) v. JACINTO VS. FIRST WOMEN’S CREDIT CORP
RAMOS • The SEC can create an interim management committee upon petition or motu propio when there
• Solidary liabilities may at times be incurred but only when exceptional circumstances warrant is imminent danger of dissipation, loss, wastage or destruction of assets or other properties or
such as, generally, in the following cases: paralization of business operations of such corporations or entities which may be prejudicial to
o When directors and trustees or, in appropriate cases, the officers of a corporation the interest of minority stockholders, parties-litigants or the general public.
§ Vote for or assent to patently unlawful acts of the corporation; • Mere disagreement among stockholders would not in itself suffice as a ground for the creation
§ act in bad faith or with gross negligence in directing the corporate affairs; of an IMC but when the dissension among stockholders is such that the corporation cannot
§ are guilty of conflict of interest to the prejudice of the corporation, its successfully carry on itscorporate functions – the appointment of an IMC is imperative.
stockholders or members, and other persons. • Imminent means impending. Danger means peril or exposure to loss or injury.
o When a director or officer has consented to the issuance of watered stocks or who, PUNONGBAYAN V. PUNONGBAYAN
having knowledge thereof, did not forthwith file with the corporate secretary his • On management committee: A management committee is tasked to manage, take custody of and
written objection thereto; control all existing assets, funds and records of the corporation, and to determine the best way to
o When a director, trustee or officer as contractually agreed or stipulated to hold himself protect the interest of its stockholders and creditors.
personally and solidarily liable with the Corporation. • On SEC jurisdiction: RTC assumed powers of the SEC pursuant to the enactment of RA 8799.
o When a director, trustee or officer is made, by specific provision of law, personally As such, it has the discretion to grant or deny an application for the creation of a management
liable for his corporate action. committee. Having the power to create a management committee, it follows that the RTC can
Pamplona Plantation Co. v. Acosta order the reorganization of an existing management committee.
• As a general rule, the officers of a corporation are not personally liable for their official acts RUBBERWORLD [PHILS.] INC. v. NLRC
unless it is shown that they have exceeded their authority or he acted with evident malice and • The power to hear and decide labor disputes is deemed suspended when the Securities and
bad faith in terminating their employment. Exchange Commission puts the corporation under rehabilitation.
HEIRS OF FE TAN UY v. INTERNAYIONAL EXCHANGE BANK
• "The justification for the automatic stay of all pending actions for claims is to enable the
• Before a director or officer of a corporation can be held personally liable for corporate management committee or the rehabilitation receiver to effectively exercise its/his powers free
obligations, however, the following requisites must concur: from any judicial or extrajudicial interference that might unduly hinder or prevent the 'rescue' of
o The complainant must allege in the complaint that the director or officer assented to the debtor company.
patently unlawful acts of the corporation, or that the officer was guilty of gross ALEMAR’S SIBAL & SONS, INC V. NLRC
negligence or bad faith; and
• Jurisprudence has established that a stay of execution may be warranted by the fact that a
o The complainant must clearly and convincingly prove such unlawful acts, negligence
petitioner corporation has been placed under rehabilitation.
or bad faith.
• However, when a corporation is in it liquidation proceeding then there’s no legal impediment to
• When two business enterprises are owned, conducted and controlled by the same parties, both
execute order.
law and equity will, when necessary to protect the rights of third parties, disregard the legal
TYSON'S SUPER CONCRETE, INC. v. CA
fiction that the two corporations are distinct entities and treat them as identical or one and the
same. The following are some probative factors of identity: • The fact that a management committee had already been created by the SEC does not divest the
o Stock ownership by one or common ownership of both corporations; first level courts of their exclusive jurisdiction on forcible entry cases.
o Identity of directors and officers; • A member of the Management Committee is an agent of the corporation under Section 13, Rule
o Manner of keeping corporate books and records; and 14 of the Revised Rules of Court. Like the chairman of a Management Committee, its members
o Methods of conducting business. are also authorized to receive summons since they are also considered “responsible officers” as
SECOSA v. HEIRS OF FRANCISCO contemplated by the Rules of Court.
• When an injury is caused by the negligence of an employee, there instantly arises a presumption • Even if the SEC or the Management Committee has adopted a rule to the effect that only the
that there was negligence on the part of the employer either in the selection of his employee or chairman of the latter may receive summons, such rule cannot amend or alter the Rules of Court
in the supervision over him after such selection. The presumption, however, may be rebutted by promulgated by the Supreme Court, pursuant to Section 5(5), Article VIII of the Constitution,
a clear showing on the part of the employer that it exercised the care and diligence of a good which allows officers of a corporation to receive summons on its behalf.
father of a family in the selection and supervision of his employee. Hence, to evade solidary ROSARIO V. CO
liability for quasi-delict committed by an employee, the employer must adduce sufficient proof • The provisions P.D. No. 902-A should not interfere with the prosecution of a case for violation
that it exercised such degree of care. of B.P. 22, even if restitution, reparation or indemnification could be ordered because the filing
• Jurisprudentially, the employer must not merely present testimonial evidence to prove that he of the case for violation of B.P. 22 is not a “claim” that can be enjoined.
observed the diligence of a good father of a family in the selection and supervision of his Union Motors Corporation v. NLRC
employee, but he must also support such testimonial evidence with concrete or documentary • To determine which body has jurisdiction over this case requires considering not only the
evidence. The reason for this is to obviate the biased nature of the employer’s testimony or that relationship of the parties, but also the nature of the question that is the subject of their
of his witnesses. controversy.
Marigomen v People • For the SEC to take cognizance of a case, the controversy must pertain to any of the following
• If the drawer or maker is an officer of a corporation, the notice of dishonor to the said corporation relationships: (a) between the corporation, partnership or association and the public; (b) between
is not notice to the employee or officer who drew or issued the check for an in its behalf. Personal the corporation, partnership or association and its stockholders, partners, members, or officers;
notice of dishonor is necessary. (c) between the corporation, partnership, or association and the state so far as its franchise,
IENT V. PREBON permit, or license to operate is concerned; and (d) among the stockholders, partners, or associates
• Section 144 only applies to the provisions of the Corporation Code or its amendments "not themselves.
otherwise specifically penalized" by said statute and should not cover Sections 31 and 34 which Velarde v. Lopez, Inc.

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 32

 • The question of remuneration involving a person who is not a mere employee but a stockholder the SEC has jurisdiction to entertain the complaint before it. The SEC has absolute jurisdiction,
and officer of the corporation is not a simple labor problem but a matter that comes within the supervision and control over all corporations that are enfranchised to act as corporate entities.
area of corporate affairs and management, and is in fact a corporate controversy in contemplation Yujuico v. Quiambao
of the Corporation Code. • The RTC has the power to hear and decide the intra-corporate controversy of the parties, as well
• Corporate Officers in the context of PD 902-A are those officers of a corporation who are given as to order a special meeting of stockholders or members of a corporation involving an intra-
that character either by the Corporation Code or by the corporation's by-laws. corporate dispute under its supervision. An intra-corporate controversy is one pertains to the ff
EASYCALL COMMUNICATIONS PHIL., INC. v. KING relationships:
• Under the Corporation Code, the corporate officers are the president, secretary, treasurer and o between the corporation, partnership or association and the public;
such other officers as may be provided for in the by-laws. Such being the case, removal of o between the corporation, partnership or association and the State in so far as its
corporate officers controversies should be lodged with the SEC and not with the NLRC. If not franchise, permit or license to operate is concerned;
corporate officers case should be filed before NLRC pursuant to the Labor Code. o between the corporation, partnership or association and its stockholders partners,
Matling Industrial and Commercial Corp. v. Coros members or officers; and
• A position must be expressly mentioned in the By-Laws in order to be considered as a corporate o among the stockholders, partners or associates themselves.
office. Thus, the creation of an office pursuant to or under a By-Law enabling the Board to create WESTERN INSTITUTE OF TECHNOLOGY, INC. V. SALAS
office is not enough to make a position a corporate office. Unless expressly provided in the by- • Under the law (before) SEC shall have original and exclusive jurisdiction to hear and decide
laws, such officer will only be deemed as employee. intracorporate disputes
• An "office" is created by the charter of the corporation and the officer is elected by the directors • Once the case is decided by the SEC, the losing party may file a petition for review before the
or stockholders. On the other hand, an employee occupies no office and generally is employed Court of Appeals raising questions of fact, of law, or mixed questions of fact and law.
not by the action of the directors or stockholders but by the managing officer of the corporation o After the case has ran this course, it can be brought to the Court via a petition for
who also determines the compensation to be paid to such employee. review on certiorari under Rule 45 raising only pure questions of law.
Marc II Marketing, Inc. v. Joson o Petitioners, in pleading that we treat the instant petition as a derivative suit, are trying
• The dismissal of a corporate officer is always regarded as a corporate act and/or an intracorporate to short-circuit the entire process.
controversy. TCL Sales Corporatiom v. CA
• A position must be expressly mentioned in the Corporation Code or by the bylaws in order to be • Jurisdiction over an action for mandamus lies with the SEC even if the proponent thereof is not
considered as a corporate office. yet a stockholder of record. Even if he is not yet a stockholder, he is nonetheless a member of
• The general rule is that a corporation has a separate and distinct liability from its officers – which the public whose investment in the corporation the law seeks to protect and encourage, as his
means that corporate officers are not personally liable for their official acts unless it is shown purchase of the shares of stock has been established. Hence, would fall under the jurisdiction of
that they have exceeded their authority. the SEC being the agency which exercises the supervision and control of corporations,
partnerships and associations.
• However, this corporate veil can be pierced when the notion of the legal entity is used as a means
PROVIDENT INTERNATION RESOURCES CORP. v. VENUS
to perpetrate fraud, an illegal act, as a vehicle for the evasion of an existing obligation, and to
confuse legitimate issues • The SEC’s regulatory authority over private corporations encompasses a wide margin of areas,
Barba vs Liceo De Cagayan University touching nearly all of a corporation’s concerns. This authority more vividly springs from the fact
that a corporation owes its existence to the concession of its corporate franchise from the state.
• For one to be a corporate officer under “such other officers as may be provided by the by-laws”,
Considering that the SEC, after due notice and hearing, has the regulatory power to revoke the
a position must be EXPRESSLY MENTIONED in the by-laws in order to be considered a
corporate franchise—from which a corporation owes its legal existence—the SEC must likewise
corporate office.
have the lesser power of merely recalling and cancelling a STB that was erroneously registered.
• If not expressly mentioned in the by-laws, the person is only an EMPLOYEE of the corporation. BELO MEDICAL v. SANTOS
• The Board may create appointive positions other than the positions of corporate Officers, but the • A conflict between 2 stockholders (1st test) of a corporation does not automatically render their
persons occupying such positions are NOT considered as corporate officers within the meaning dispute as intra-corporate. The nature of the controversy (2nd test) must also be examined.
of Section 25 of the Corporation Code and are not empowered to exercise the functions of the
• This Court now uses both the relationship test and the nature of the controversy test to determine
corporate Officers, except those functions lawfully delegated to them.
if an intra-corporate controversy is present.
Orendain v. BF Homes, Inc
Consuelo Metal Corporation v. Planters Development Bank
• SEC retained its administrative, regulatory, and oversight powers over all corporations,
• SEC assumed jurisdiction over CMC’s petition for suspension of payment. However, the SEC’s
partnerships, and associations who are grantees of primary franchises, and/or a license or permit
jurisdiction does not extend to the liquidation of a corporation as this pertains to the RTC as per
issued by the Government. But when there is a controversy arising out of intra-corporate
RA 8799. RA 8799 transferred to
relations, it is the RTC, not SEC, which has jurisdiction over the case.
Philippine Stock Exchange vs. CA • the appropriate regional trial court the SEC’s jurisdiction defined under Section 5d of PD 902-
A.
• The state will generally not interfere with the corporate and management decision of PSE.
PASCUAL v. CA
Questions of policy and of management are left to the honest decision of its officers and directors,
and the courts are without authority to substitute their judgment for the judgment of the board of • The regulatory and adjudicatory functions of the SEC, insofar as intra-corporate controversies
directors. are concerned, comes into play only if a corporation still exists.
CMH AGRICULTURAL CORP V. CA
• The board is the business manager of the corporation, and so long as it acts in good faith, its
orders are not reviewable by the courts. • Recent jurisprudence, has established that in determining which body has jurisdiction over a case
(whether courts or SEC), the better policy would be to consider not only the status or relationship
• Thus, notwithstanding the regulatory power of the SEC over the PSE, and the resultant authority
of the parties but also the nature of the question that is the subject of the controversy.
to reverse the PSEs decision in matters of application for listing in the market, the SEC may
Reyes v. RTC of Makati
exercise such power only if the PSEs judgment is attended by bad faith.
Pilipinas Loan Company, Inc. v. SEC • Relationship Test: Types of relationships embraced under Section 5(b) are:
o between the corporation, partnership, or association and the public;
• When the thrust of a complaint is on the ultra vires act of a corporation, that is the complained
act of a corporation is contrary to its declared corporate purposes in the articles of incorporation,
MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 33
 o between the corporation, partnership, or association and its stockholders, partners,
members, or officers;
o between the corporation, partnership, or association and the State as far as its
franchise, permit or license to operate is concerned; and
o among the stockholders, partners, or associates themselves.
• Nature of the controversy Test: the incidents of that relationship must also be considered for
the purpose of ascertaining whether the controversy itself is intra- corporate. The controversy
must not only be rooted in the existence of an intra- corporate relationship, but must as well
pertain to the enforcement of the parties’ correlative rights and obligations under the Corporation
Code and the internal and intra-corporate regulatory rules of the corporation.
UNILONGO VS. COURT OF APPEALS
• The jurisdiction of the SEC over intra-corporate matters concerning homeowner’s associations,
including their dissolution has now been transferred to the HIGC.

“Be patient, we’ll get there.”-Atty. Ampil

-End-

MEDINA, YVES PETER CARLO DE RIVERA | C2021 |Atty. Francis Ampil 34