SUBSCRIPTION CONTRACT (a) Actual cash paid to the corporation

(b) Property, intangible or tangible, actually

SUBSCRIPTION CONTRACT – any contract for the received by the corporation and necessary or
acquisition of unissued stock, notwithstanding the fact convenient for its use and lawful purposes at a
that the parties refer to it as a purchase or some other fair value equal to the par or issued value of
contract. the stock issued
 a contract by which the subscriber agrees to take a (c) Labor performed for or services actually
certain number of shares of the capital stock rendered to the corporation
corporation, paying the consideration therefore or (d) Previously incurred indebtedness of the
expressly or impliedly promising to pay the same corporation
(e) Amounts transferred from unrestricted retained
 once Subscription Contract is perfected, SH becomes earnings to stated capital
the debtor of the corporation. Hence, he is liable to pay (f) Outstanding shares exchanged for stocks in the
any unpaid portion of the subscription. He can also be event of reclassification or conversion
made personally liable to the creditors of the (g) Shares of stock in another corporation; and/or
corporation to the extent of his unpaid subscription. (h) Other generally accepted form of consideration

GR: SH is not liable to pay interest on his unpaid *** where the consideration is other than actual cash,
subscription or consists of intangible property such as patents or
ER: if required by the by-laws copyrights, the valuation thereof shall initially be
determined by the incorporators or the board of
WAYS TO BECOME A STOCKHOLDER OF A directors, subject to approval by the SEC.
CORPORATION AFTER INCORPORATION **** Shares of stock shall not be issued in exchange for
1. By subscribing to the unsubscribed and promissory notes or future service
unissued shares either from the original capital
stock or from the increase in capital stock DOCTRINE OF INDIVISIBILITY OF
2. By purchasing treasure sales from the SUBSCRIPTION CONTRACT
corporation; or  no certificate of stock shall be issued to a subscriber
3. By buying shares of stock from another until the full amount of his subscription together with
stockholder of the same corporation interest and expenses, if any is due, has been paid. The
failure to pay any of the installments due would
KINDS OF SUBSCRIPTION necessarily affect all the other installments, because the
1. Pre-incorporation contract – one entered subscription is to be treated as one, whole, entire, and
before incorporation indivisible contract.
2. Post-incorporation contract – entered into  the default of any of the installments results to entire
after the issuance of the certificate of subscription becoming due and demandable.
incorporation
PAYMENT OF SUBSCRIPTION
PRE-INCORPORATION SUBSCRIPTION – a  subject to the provisions of the contract of
subscription for shares of stock of a corporation still to subscription, the BOD of any stock corporation may at
be formed. any time declare due and payable to the corporation
unpaid subscriptions to the capital stock and collect the
 irrevocable for a period of 6 months from the date same or such percentage thereof, in either case, with
of subscription accrued interest, if any, as it may deem necessary.
 cannot be revoked after the submission of the AOI to
the SEC. (Sec. 60 RCC)  if no payment is made within 30 days form the date
specified, all stocks covered by said subscription shall
Can only be revoked when: thereupon become delinquent and shall be subject to
1. All the other subscribers consent to the sale as hereinafter provided, unless the board of
revocation, or directors orders otherwise. (par. 2, Sec. 66, RCC)
2. When the incorporation of the corporation fails
to materialize within six months or within a DELINQUENCY; Remedies to enforce payment of
longer period as may be stipulated in the subscription
contract of subscription
First Remedy: Permitting the corporation to put up the
CONSIDERATION FOR THE ISSUANCE OF unpaid shares for sale and dispose of it in a
SHARES delinquency sale for the account of the delinquent
Stocks shall not be issued for a consideration less than subscriber.
the par or issued price thereof. Consideration for the Second Remedy: Court action
issuance of stock may be:
*** there should be cash dividends, the amount thereof Requisites for valid transfer:
can be applied to the unpaid balance of the subscription. (a) There must be delivery of the stock certificate
(b) The certificate must be endorsed by the owner
CERTIFICATE OF STOCK – the paper or his attorney-in-fact or other persons legally
representation or tangible evidence of the stock itself authorized to make the transfer; and
and of the various interests therein; merely evidence of (c) To be valid against third parties, the transfer
the holder’s interest and status in the corporation. must be recorded in the books of the
corporation
 While a certificate of stock is not a condition
precedent to render one a stockholder, every Effect of failure to record
stockholder has a right to have a proper certificate (a) The transfer cannot be effective as against the
issued to him by the corporation, upon demand, as soon corporation or as to third persons
as he has complied with the conditions which entitle (b) The owner of shares of stock cannot be
him to the certificate. accorded the rights pertaining to a stockholder
 the corporation is duty-bound to issue stock i.e. to call for a meeting and the right to vote,
certificates to its stockholders as soon as their or be voted for
subscription prices are fully paid.
 the capital stock of stock corporations shall be *** a mere indorsement cannot be the basis of an
divided into shares for which certificates signed by the action for mandamus and that the rights if the parties
president or vice-president, countersigned by the have to be threshed out in an ordinary action
secretary or assistant secretary, and sealed with the seal  a corporate secretary may not be compelled to
of the corporation shall be issued in accordance with the register transfers of shares in the basis merely of an
by-laws. indorsement of stock certificates

*** No transfer shall be valid, except as between the When recording is dispensed with
barties, until the transfer is recorded in the books of the  when the corporation unduly refused to recognize the
corporation showing the names of the parties to the assignment of shares
transaction, date of the transfer, no. of the certificate or
certificates and the no. of shares transferred. Purposes of Recording:
Two-Fold
STOCK CERTIFICATE NOT A NEGOTIABLE 1. To enable the transferee to exercise all the
INSTRUMENT right of a stockholder, including the right to
 because the holder thereof takes it without prejudice vote and to be voted for, and
to such rights or defenses as the registered owner or 2. To inform the corporation of any change in
creditor may have under the law, except insofar as such share ownership that it can ascertain the
rights or defenses are subject to the limitations imposed persons entitled to the rights and subject to the
by the principles governing estoppel. liabilities of stockholder.

ISSUANCE OF STOCKS ** Until challenged in a proper proceeding, a

stockholder of record has the right to participate in any
Who has the power to issue stocks? The Board of meeting
Directors
GIS LIST OF STOCKHOLDERS NOT
 no meeting is required to consider it because CONCLUSIVE
additional issuances of stock do not need approval of  The contents of the General Information Sheet (GIS)
the stockholders. shall not be deemed conclusive as to the identities of the
 what is only required is the board resolution registered stockholders of the corporation, as well as
approving the additional issuance of sales. their respective ownership of shares of stock, the
controlling document should be the corporate books
TRANSFER OF SHARES specifically the Stock and Transfer Book.

 by delivery of the certificate or certificates indorsed SURRENDER OF STOCK CERTIFICATE

by the owner, or his attorney-in-fact or other person  not a requisite before Registration of the transfer
legally authorized to make the transfer may be made in the corporate books
 BUT, the surrender of the original certificate of stock
Effect of failure of stockholder to deliver the stock is necessary before the issuance of a new one so that the
certificate within reasonable time  substantial breach old certificate may be cancelled
that entitles the buyer to rescind the sale under Art. 119
of the NCC. *** registration of a transfer of shares of stock is a
ministerial duty on the part of the corporation.
Aggrieved parties may resort to the remedy of (c) Must operate uniformly upon all shareholders
mandamus to compel corporations that wrongfully or
unjustifiable refuse to record the transfer or to isse new
certificates of stock.
When call is not necessary:
WATERED STOCKS 1. When the date of payment is specified in the
subscription
WATERED STOCK – shares issued as fully paid-up 2. When the corporation becomes insolvent
when in fact the consideration agreed to and accepted (Velasco v Poizat)
by the directors of the corporation was something
known to be much less than the par value or issued *** the unpaid subscription are not due and payable
value of the shares. without a call
**** a corporation cannot file an action to recover the
Water in Stock – refers to the difference between the unpaid price if the action is not preceded by a call
fair market value at the time of the issuance and the par (Lingayen Gulf Electric Power Company v Baltazar).
or issued value of said stock.
Payment of Balance of Subscription
Evils: deprives corporation of needed capital; dilutes  Made on the date specified on the subscription
proportionate interest of existing and failure SH; injures contract or on the date stated in the call made by the
present and future creditors because it reduces value of board
corporate assets.
EFFECT OF FAILURE TO PAY BALANCE
Liability of Directors for Watered Stock 1. The entire balance shall be due and payable
 solidarily liable with the stockholder concerned to 2. The stockholder shall be liable for interest
the corporation and its creditors for the difference 3. If no payment is made within 30 days form the
between the fair value received at the time of the said date, all stocks covered by the
issuance of the stock and the par or issued value of the subscription shall thereupon become
same if such director: delinquent and shall be subject to sale as
1. Consents to the issuance of stocks for a hereinafter provided, unless the BOD orders
consideration less than the par or issued value otherwise
2. Consents to the issuance of stocks for a *** prescriptive period begins to run only from the
consideration other than cash, valued in excess time the BOD declares the balance is due and payable
of its fair value
3. Having knowledge of the insufficient UNPAID SUBSCRIPTIONS
consideration does not file a written objection a. There will be an interest imposed on unpaid
with the corporate secretary subscriptions
b. Payable to the corporation from date of
TRUST FUND DOCTRINE ON WATERED subscription
STOCKS c. If required by and interest fixed in the By-laws
 the basis for the prohibition on issuing watered stock d. If interest is required but not fixed – legal rate
 a corporation has no power to release an original e. Therefore, no interest on unpaid subscription is
subscriber of its capital stock from the obligation of required if not required by by-laws or by
paying for his shares, without a valuable consideration subscription contract
for such release; and as against creditors, a reduction of
the capital stock can take place only in the manner and
under the conditions prescribed by the statute or the METHODS OF COLLECTION OF UNPAID
charter or the articles of incorporation (Philippine Trust SUBSCRIPTIONS
Corp. v Rivera, 1923). a. Call for payment
b. Declaration of delinquency and sale at public
PAYMENT OF BALANCE OF SUBSCRIPTION auction of delinquent shares
c. Ordinary civil action
Call by BOD d. Collection from cash dividends and other
 the BOD may, at any time, declare due and payable amounts due to stockholders if allowed by by-
to the corporation unpaid subscriptions and may collect laws/agreed to by him
the same or such percentage thereof, in either case, with
accrued interest, if any, as it may deem necessary SALE OF DELINQUENT SHARES

Requisites: The board of directors which may, at

(a) Must be made in the manner prescribed by law
(b) Must be made by the BOD; and
any time, declare due and payable to
the corporation unpaid subscriptions c. Advertising costs and expenses of the
sale
and order a sale on the delinquent 2. The Board orders otherwise, on any of the
stocks. following grounds:
a. Defect in the Notice of Sale; or
DELINQUENT STOCKS – stocks not paid within 30 b. Defect in sale itself
days from the date fixed in the contract of subscription
or from the date stated in the call made by the BOD. ISSUANCE OF CERTIFICATE
 once full payment for the stocks have been
Effect of Delinquency: tendered to the corporation in any of the valid forms of
a. They shall be subject to delinquency sale consideration for the issuance of stocks, the purchaser
b. The stock shall not be voted or be entitled to or the subscribers entitled to be issued the
vote or to representation at any stockholder’s corresponding certificate of stock which evidences
meeting their ownership of shares in a particular
c. The holder shall not be entitled to any of the corporation.
rights of a stockholder except on the right to
dividends Apocada v NLRC: Set-off is not proper. Unpaid
d. The corporation has the right to apply cash subscriptions are not yet due and payable. They become
dividends due to the unpaid balance plus cost due and payable when a call is made by the
and expenses and to withhold stock dividends corporation. Set-off against wages is not valid under
until the unpaid subscription is fully paid the Labor Code.

PROCEDURE FOR DELINQUENCY SALE “Over-Issue” of shares occurs when certificates are
1. The BOD must make a call by resolution issued for more than the number of shares authorized by
demanding the payment of the balance of the the articles; VOID.
subscription (notice of the call)
2. The notice shall be served on each stockholder GR: entire subscription must be paid first before the
either personally or by registered mail. At this certificates of stock can be issued.
point, there is no need for publication
3. If the stockholder does not pay the amount on Exception: in the Baltazar v Linagayen Gulf Electric
the date designated, the Board shall issue, by Power Co case, it was the practice of the corp to issue
resolution, a “notice of delinquency” certificates of stock to its individual SHs for unpaid
4. Notice of delinquency shall be served on the shares of stock and to give full voting power to shares
non-paying subscriber either personally or by fully paid.
registered mail, PLUS publication in a
newspaper in the province or city where the RIGHTS AND OBLIGATIONS OF HOLDERS OF
principal office of the corporation is located, UNPAID BUT NON-DELINQUENT STOCKS
once a week for two consecutive weeks
5. The amount due in the notice must include all 1. Shall have ALL the rights of a stockholder
expenses (notices are jurisdictional) 2. Subscribers for stock shall pay to the
6. In the Public Auction, the corporation will corporation interest on all unpaid
give the highest bidder the certificate of stock subscriptions from the date of subscription,
in the number of his bid; the remaining number if so required by, and at the rate fixed in the
will be issued a certificate of stock in favor of by-laws (if no interest is fixed, such rate shall
the subscriber as fully paid. be deemed to be the legal rate).
7. If there are no bidders, the corporation must 3. No certificate of stock shall be issued until
bid for the whole number of shares regardless the full amount of his subscription, together
of how much the SH has paid. Such stocks will with the interest and the expenses (in case of
pertain to the corporation as fully paid treasury delinquent shares) if any is due, has been
stocks. paid.

AUCTION SALE LOST AND DESTROYED STOCK CERTIFICATE

 conducted not less than 30 days nor more than 60
days from the date the stocks become delinquent PROCEDURE:
1. The registered owner of a certificate of stock in
There shall be no public auction if: a corporation or his legal representative shall
1. The delinquent stockholder pays on or before file with the corporation an affidavit in
the sale: triplicate setting forth, if possible, the
a. The balance due circumstances as to how the certificate was
b. Accrued interest; or lost, stolen, or destroyed, the number of
 shares represented by such certificate, the 1. Where the AOI provides for classification of
serial number of the certificate, and the name shares, non-voting shares are not entitled to
of the corporation which issued the same. vote except as provided for in Sec. 6 of the
2. After verifying the affidavit and other RCC
information with the books of the corporation, 2. Preferred or redeemable shares may be
the said corporation shall publish a notice in a deprived of the right to vote unless otherwise
newspaper of general circulation published provided in the Code
in the place where the corporation has its 3. Fractional shares of stock cannot vote as they
principal office, once a week for three do not constitute at least one full share
consecutive weeks, at the expense of the 4. Treasury shares have no voting rights as long
registered owner of the certificate of stock as they remain treasury
which has been lost, stolen, or destroyed. 5. Holders of stock declared delinquent by the
BOD for unpaid subscription are not entitled to
Contents of Notice: vote or a representation at any stockholder’s
1. Name of said corporation meeting
2. Serial number of said certificate 6. A transferee of stock cannot vote if his transfer
3. Shall state that after the expiration of 1 year is not registered in the stock and transfer book
from the date of publication, of no contests has of the corporation
been presented to the corporation, the right to 7. A stockholder is still entitled to vote even if
make such contest shall be barred and the the shares are mortgaged or pledged unless he
corporation shall cancel the lost, destroyed or authorizes the creditor in writing to vote the
stolen certificate and shall issue a new one. shares
8. Holders of escrow shares or sequestered shares
RIGHTS OF STOCKHOLDERS AND MEMBERS are not entitled to vote, as a rule

RIGHT TO ATTEND MEETINGS When non-voting shares can vote

1. Must be held on the date fixed in the by-laws 1. Amendment of the AOI
or in accordance with law 2. Adoption and amendment of By-laws
2. Prior written notice of such meeting must be 3. Sale, lease, exchange, mortgage, pledge or
sent to all stockholders or members on record other disposition of all or substantially all of
3. It must be called by the proper party the corporate property
a. Person authorized by the by-laws 4. Incurring, creating or increasing bonded
b. President, in the absence of by-laws indebtedness
provision 5. Increase or decrease of capital stock
c. Secretary, on order of the president or 6. Merger or consolidation of the corporation
on written demand of the stockholders with another corporation or other corporations
representing or holding at least a 7. Investment of corporate funds, in another
majority of the outstanding capital corporation or business in accordance with the
stock or majority of the members RCC; and
entitled to vote in a non-stock 8. Dissolution of the corporation
corporation
d. The stockholder or member making RIGHT OF INSPECTION
the demand, if there is no secretary or  all stockholders have the right to inspect the
if the secretary refuses to do so corporate books and records.
e. On order of the SEC
4. Must be held at the proper place CORPORATE BOOKS AND RECORDS
a. Principal office of the corporation, or,
if not practicable, in the city or Corporate Records to be kept at principal office:
municipality where the principal 1. The AOI and By-laws of the corporation and
office of the corporation is located their amendments
5. Quorum and voting requirements must be met 2. The current ownership structure and voting
(crucial requirement) rights of the corporation, including lists of
stockholders or members, group structures,
RIGHT TO VOTE intra-group relations, ownership data, and
 necessary to approve a particular corporate act beneficial ownership
 may be exercised in person, through a proxy, or 3. Names and addresses of all the members of the
when authorized in the by-laws, through remote BOD or Trustees and the Executive Officers
communication or in absentia 4. A record of all business transactions
5. A record of the resolutions of the BOD or
When right to vote not available: Trustees and of the stockholders or members
 6. Copies of the latest reportorial requirements 2. Shall be guilty of an offense which shall be
submitted to the SEC; and punishable under Sec. 161 of the RCC
7. The minutes of all meetings of stockholders or
members, or of the board of directors or ** if such refusal is made pursuant to a resolution or
trustees. order of the board of directors or trustees, the liability
shall be imposed upon the directors or trustees who
*** this is not an exclusive list. Sec. 73 states that voted for such refusal
Every corporation shall keep and carefully preserve at
its principal office all information relating to the REMEDIES IN CASE OF DENIAL OF RIGHT TO
corporation including, but not limited to the above- INSPECT
mentioned. 1. Action for specific performance
2. Petition for mandamus
RIGHT TO INSPECT CORPORATE RECORDS 3. Damages; or
4. Criminal suit
Includes:
1. Right to inspect corporate records Defenses which may be used by officer/ agent/
2. Right to demand for their reproduction director/ trustee:
provided that: 1. Requesting party improperly used any
a. Demand is made by the requesting information secured through any prior
party in writing examination of the records or minutes
b. Copies are reproduced at the 2. Requesting party was not acting in good faith
requesting party’s expense or for a legitimate purpose
c. The inspecting or reproducing party 3. Requesting party is a competitor, director,
shall remain bound by the officer, controlling stockholder or otherwise
confidentiality rules under prevailing represents the interests of a competitor
rules, such as the rules on trade
secrets or process under RA 8293 MERGER AND CONSOLIDATION
(IPC), as amended, RA 10173 (Data
Privacy Act), RA 8799 (Securities MERGER – a union whereby one or more existing
Regulation Code) corporations are absorbed by another corporation that
survives and continues the combined business
WHO MAY INSPECT CORPORATE RECORDS
 a director, trustee, stockholder or member of the CONSOLIDATION – the union of two or more
corporation in person or by a representative has the existing corporations. A new corporation is created, and
right to inspect corporate records. (sec. 73) consolidating corporations are extinguished.

The following may NOT inspect or demand MERGER CONSOLIDATION

reproduction of corporate records (Sec. 73) A corporation absorbs A new corporation is
1. One who is not a stockholder or member of another corporation and created, and constituent
record remains in existence corporations are
2. A competitor, director, officer, controlling while the other is extinguished
stockholder or otherwise represents the dissolved
interests of a competitor shall have no right to
inspect or demand reproduction of corporate *** not within the inherent powers of the corporations;
records must be expressly granted by law

Requisites for exercise of right to inspect:  merger or consolidation does not become effective
1. Must be exercised at reasonable hours on by mere agreement of the constituent corporations.
business days Approval of the SEC is required.
2. The stockholder has not improperly used any
information he secured through any previous Mere Acquisition/Transfer (3 levels)
examination MERGER/ TRANSFER OF
3. The demand is made in good faith and for CONSOLIDATION PROPERTY
legitimate purpose Loss of separate existence by no loss of separate
the absorbed corporation or existence
Effect of refusal to inspect the constituent corporations
Any officer or agent who shall refuse to allow
inspection and/or reproduction of records shall be liable 1. ASSETS-ONLY LEVEL
for: GR: a corporation that purchases the assets of another
1. Damages will not be liable for the debts and liabilities of the
selling corporation provided the former acted in good The plan or merger of consolidation hall set forth the
faith following:
Except, when the following circumstances are present: 1. The names of the constituent corporations
1. Where the purchasers expressly or impliedly 2. Terms of the merger or consolidation and the
agrees to assume the debts mode of carrying the same into effect
2. Where the selling corporation fraudulently 3. A statement of the changes, if any, in the AOI
enters into the transactions to escape liability of the surviving corporation in case of merger;
for those debts and in case of consolidation, all the statements
3. Where the purchasing corporation is merely a required to be set forth in the AOI for
continuation of the selling corporation corporations organized under the RCC; and
4. Where the transaction amounts to a 4. Such other provisions with respect to the
consolidation or merger of the corporations proposed merger or consolidation as are
deemed necessary or desirable.
2. BUSINESS ENTERPRISE LEVEL
 Purchase of substantially all the assets of the STEP 2: Board Approval
corporation extending it its “going concern” (ability to  by majority vote of each of the boards of the
do business and make money, goodwill, clientele, corporations involved at separate meetings
stock-in-trade, etc.). There is case law, based on equity,  plan of merger has to be approved by majority of
that holds the transferee liable for the debts and the board of each constituent corporation; it has to be
liabilities of the transferor. approved by affirmative vote of stockholders
representing 2/3 of the outstanding capital stock or 2/3
However, not every transfer of the entire corporate of the members in case of a non-stock corporation
assets would qualify under Sec. 39. It does not apply:
1. If the sale of the entire property and assets is STEP 3: Stockholders’ or Members’ Approval
necessary in the usual and regular course of 1. Notice of such meeting should be given to all
business of corporation, or stockholders or members at least 1 week
2. If the proceeds of the sale or other disposition before the meeting
of such property and assets will be 2. The plan has to be approved by a vote of
appropriated for the conduct of its remaining stockholders representing 2/3 of the
business outstanding capital stock, if a stock
corporation, or 2/3 of the members of the non-
3. EQUITY LEVEL stock corporation
 purchaser takes control of the business by purchasing 3. Dissenting stockholders may exercise their
the shareholdings. Purchasing corporation is still right of appraisal. However, if the board
protected by the limited liability feature but the same abandons the plan, such right is extinguishable
can be pierced. 4. Any amendment to the plan must be approved
by the members or trustees and stockholders or
*** in order to transfer ownership of shares of stock members required for the original plan
not traded in the Stock Exchange, it is necessary to
secure a Certificate of Authorizing Registration (CAR) STEP 4: Articles of Merger or Consolidation
pursuant to the process laid down in RMO no. 15-03.  must be signed by the president or vice-president and
The receipts of the payment of the tax shall also be filed certified by the secretary or assistant secretary setting
with and recorded by the secretary of the corporation forth:
pursuant to Sec. 11 of RR no. 06-08. 1. Plan of the merger or the plan of consolidation
2. As to stock corporations, the number of shares
Constituent corporation Consolidated outstanding, or in the case of non-stock
corporation corporations, the number of members
The corporations that The corporation formed 3. As to each corporation, the number of shares
shall cease to exist after after the consolidation or members voting for or against such plan,
joining together through of two constituent respectively
consolidation corporations 4. The carrying amounts and fair values of the
assets and liabilities of the respective
companies as of the agreed cut-off date
PROCEDURE OF CONSOLDIATION OR 5. The method of accounts of the companies
MERGER 6. The provisional or pro-forma values, as
merged or consolidated, using the accounting
STEP 1: Drawing up of the Plan of Merger or method; and
Consolidation 7. Such other information as may be prescribed
by the SEC
STEP 5: Approval by the SEC e. Real or personal property
 the Articles of Merger or Articles of Consolidation f. Receivables due on whatever account
shall be submitted to the SEC for approval. (hence surviving/ consolidated
 HOWEVER, in the case of special corporations, corporation has the power to file an
like banks, insurance companies, building and loan action for recovery) including:
associations, etc., the favorable recommendation of the i. Subscriptions to shares and
appropriate government agency shall first be obtained other choses in action
ii. And every other interest of,
If the SEC is it shall issue a certificate of merger belonging to, or due to each
satisfied that or consolidation, at which time the constituent corporation
the merger or merger or consolidation shall be 5. Regarding liabilities and pending claims:
consolidation effective a. Liabilities and obligations of
is legal constituent corporation:
it shall set a hearing to give the i. Surviving or consolidated
corporations concerned the corporation shall be
opportunity to be heard. Written responsible
If the SEC is b. Pending claim, action or proceeding
notice of the date, time and place
not satisfied brought by or against any constituent
of hearing shall be given to each
constituent at least 2 weeks before corporation
said hearing i. May be prosecuted by or
against the surviving or
EFFECTIVITY OF MERGER OR consolidated corporation
CONSOLDIATION c. The rights of creditors or liens upon
 A merger does not become effective upon the mere the property or such constituent
agreement of the constituent corporations, but through corporations are not impaired
open approval of the articles of merger by the SEC
issuing the certificate of merger as required (Bank of R.A. 10667 (PHILIPPINE COMPETITION ACT)
Commerce v Heirs of Rodolfo dela Cruz).
“Acquisition” refers to the purchase of securities or
LIMITATIONS OF MERGER AND assets, through contract or other means, for the purpose
CONSOLIDATION of obtaining control by:
1. Should not create monopolies 1. One entity of the whole or part of another
2. Should not eliminate free and healthy 2. Two or more entities over another; or
competition 3. One or more entities over one or more entities
3. Act 3518 Sec 20 inhibits illegal combinations
“Merger” refers to the joining of two or more entities
EFFECTS OF MERGER OR CONSOLIDATION into an existing entity or to form a new entity

1. Constituent corporations become a single  the Philippine Competition Commisison can review
corporation the mergers and acquisitions of a corporation/s based on
a. Merger: surviving corporation the factors it deems relevant (Sec. 16 RA 10667).
b. Consolidation: consolidated
corporation under the plan of  parties to a merger or acquisition agreement without
consolidation complying with the thresholds are prohibited from
2. Separate existence of constituent corporations consummating their agreement until 30 days after
cease, except that of the surviving or providing notification to the Commission in the form
consolidated corporation and containing the information specified in the
3. Surviving or consolidated corporation regulations issued by the Commission.
possesses the rights and privileges immunities;  a transaction that meets the thresholds and does not
and powers and is subject to all duties and comply with the notification requirements and waiting
liabilities of a corporation organized under the period set out in Sec. 5 shall be considered void and
RCC will subject the parties to an administrative fine of 1%
4. ALL of the following are deemed transferred to five percent of the value of the transaction. (Sec. 17
to and vested in such surviving or consolidated RA no. 100667).
corporation (by operation of law)
a. Rights Thresholds for compulsory notification
b. Privileges M&A transactions whose definitive agreements are
c. Immunities executed on or after 1 March 2020 will be subject to
d. Franchises of each constituent mandatory notification to the PCC if they meet the
corporation following thresholds:
 SIZE OF i.
The aggregate annual gross
PARTY revenues in, into or from the
Philippines, or
ii. The value of the assets in the
Philippines of the ultimate
parent entity (UPE) of either
the acquiring or acquired
entities exceeds Php6B
SIZE OF The size of the transaction will be
TRANSACTIO met if the transaction value, as
N determined below, exceeds
Php2.4B

GR: merger or acquisition that substantially prevent,

restrict or lessen competition in the relevant market or
in the market of goods or services shall be prohibited

Exemptions:
i. The concentration has brought about or is
likely to bring about gains in efficiencies
that are greater than the effects of any
limitation on competition that result or likely
to result from the merger or acquisition
agreement; or
ii. A party to the merger or acquisition agreement
is faced with actual or imminent financial
failure and the agreement represents the least
anti-competitive arrangement among the
known alternative uses for the failing entity’s
assets.

PROHIBITED ACTS

Agreements between or among competitors that are

per se prohibited
1. Restricting competition as to price, or
components thereof, or other terms of trade
2. Fixing price at an auction or in form of bidding
including cover bidding, bid suppression, bid
rotation and market allocation and other
analogous practices of bid manipulation

The following agreements, between or among

competitors, which have the object or effect of
substantially preventing, restricting or lessening
competition shall be prohibited:
1. Settling, limiting, or controlling production,
markets, technical development, or investment
2. Dividing or sharing the market, whether by
volume of sales or purchases, territory, type of
goods or services, buyers or sellers or any
other means

*** an entity that controls, is controlled by, or is under

common control with another entity or entities, have
common economic interests, and are not otherwise able
to decide or act independently of each other, shall not
be considered competitors for purposes of Sec. 14 of
RA 10667.
 APPRAISAL RIGHTS *** if the dissenting stockholder is not paid within 30
days from the award, he shall automatically be
APPRAISAL RIGHT – a remedy available to a restored of all his rights as a stockholder.
stockholder who dissented and voted against certain
extraordinary matters to withdraw or get out of the INSTANCES WHEN RIGHT TO PAYMENT
corporation by demanding payment of the value of his CEASES:
shares, as provided in the case. 1. If such demand for payment is withdrawn with
the consent of the corporation
When available: 2. If the proposed corporate action is abandoned
1. Extension or shortening of corporate term or rescinded by the corporation
2. In case any amendment to the articles of 3. If the proposed corporate action disapproved
incorporation has the effect of: by the SEC where such approval is necessary
a. changing or restricting the rights of 4. If the SEC determines that such stockholder is
any stockholders or class of shares, or not entitled to the appraisal right
b. of authorizing preferences in any
respect superior to those of WHO BEARS COSTS OF APRAISAL
outstanding shares of any class; GR: it shall be borne by the corporation
3. Investing of corporate funds for any purpose Exception: by the stockholder, when the fair value
other than the primary purpose ascertained by the appraisers is approximately the same
4. Sell or dispose all or substantially all assets of as the price which the corporation may have offered to
corporation pay the stockholder.
5. Merger or consolidation
*** in the case of an action to recover such fair value,
MANNER OF EXERCISE OF RIGHT: all costs and expenses shall be assessed against the
1. A written demand on the corporation within corporation, unless the refusal of the SH to receive
30 days after the vote was taken (failure to payment was unjustified.
do so means waiver)
2. From the time of demand, all rights accruing to EFFECT OF EXERCISING APPRAISAL RIGHT:
such shares (including voting and dividend  from the time of demand for payment of the fair
rights) shall be suspended except the right of value of a stockholders’ shares until either the
such stockholder to receive payment of the fair abandonment of the corporate action involved or the
value of stockholders’ shares purchase of the said shares by the corporation, all
3. 10 days from demand, the dissenting rights accruing to such shares, including voting and
stockholder must submit his certificates of dividend rights, shall be suspended in accordance
stocks for notation that such certificates with the RCC, except the right of such stockholder to
represent dissenting shares receive payment of the fair value thereof.
4. The price to be paid is the fair value of the
shares on the date the vote was taken EFFECT OF TRANSFER OF CERTIFICATES
5. The fair value shall be agreed upon by the BEARING NOTATION:
corporation and the dissenting stockholders a. The rights of the transferor as a dissenting
within 60 days from the date the vote was stockholder shall cease
taken. In case there is no agreement, the fair b. The transferee shall have all the rights of a
value shall be determined by a majority of the regular stockholder; and
3 distinguished persons one of whom shall be c. All dividend distributions which would have
named by the stockholder another by the accrued on such shares shall be paid to the
corporation and the third by the two who were transferee
chosen
DIFFERENCE BETWEEN FAIR VALUE v FMV
When Extinguished  Fair value only because it can consider any other
When: type of value, par value, fmv, etcc.
1. He withdraws the demand with the
corporation’s consent
2. The proposed action is abandoned NON-STOCK CORPORATIONS
3. The SEC disapproves of such action where
approval is necessary NON-STOCK CORPORATION – one where no part
4. The SEC determines that such dissenting of its income is distributable as dividends to its
stockholder is not entitled to the appraisal right members, trustees, or officers, subject to the provisions
of the Corporation Code on dissolution.

Requisites:
 1. Does not have a capital stock divided into Membership:
share  personal and non-transferable, unless the AOI or the
2. No part of its income is distributable as bylaws otherwise provide
dividends as to its member  only those who are actual, living members with
3. They must be formed or organized for voting rights shall be counted in determining the
purposes specified under Sec. 87 existence of a quorum

Purposes: Recit Question: Kinds of Members

 may be formed or organized for charitable, religious,
educational, professional, cultural, fraternal, literary, Right to Vote:
scientific, social, civic service, or similar purposes like  may be limited, broadened, or denied to the extent
trade, industry, agricultural and like chambers, or any specified in the AOI or bylaws. Unless so limited,
combination thereof, subject to the special provisions of broadened or denied, each member, regardless of class,
Title. shall be entitled to one vote.

STOCK CORP NON-STOCK CORP Determining quorum:

Nature  the numerical equivalent of all the members who are
Has capital stock divided No part of its income is entitled to vote, unless some other basis is provided by
into shares and is dividends to its members the bylaws.
authorized to distribute during its term of
dividends to its existence TRUSTEES AND OFFICERS
stockholders  no provision on corporate officers
Manner of Voting  go to sec. 24 (choosing corporate officers); even if
Cumulative Voting is Cumulative Voting is only corporate director is mentioned, the rules likewise
available in the election not available unless apply to corporate officers
of directors allowed in the AOI or  the members may directly elect officers to a non-
by-laws stock corporation (Sec. 91)
Proxy
May vote by proxy Members may be * See independent trustees of non-stock corporations
deprived of the right to vested with public interest
vote by proxy in the AOI ** take note of the word “may” under Sec. 92.
or bylaws
Non-transferability of membership QUALIFICATIONS OF TRUSTEES
Stockholders may freely Membership is personal  only one qualification.
transfer their shares and non-transferable  a trustee who ceases to be a member of a corporation
unless allowed in the can no longer act as a trustee
AOI and bylaws
Directors/Trustees *** an independent trustee of a non-stock corporation
vested of public interest need not be a member of such
Directors cannot exceed Trustees may exceed 15
non-stock corporation (Sec. 91)
15 in number
Term of Office
TREATMENT OF PROFITS
One year Not more than 3 years
 Non-stock, non-profit corporations may actually earn
for trustees profits incidentally form its operations, provided that
Election of Officers the profits are devoted to their purpose.
Elected by the BOD Officers may be directly
elected by the members *** the essence of a non-stock non-profit corporation is
unless otherwise not the non-existence of shares of stock to cover its
provided in the AOI or capital, but that:
bylaws  Its primary purpose should be any of those
Place of Meeting under Sec. 88 of the RCC; and
In the principal office of The bylaws may provide  There is a prohibition in the AOI and by-laws
the corporation, if that members of a non- that no part of the income or any form of
practicable, or anywhere stock corporation may dividend is distributable to the members,
within the city or hold their meetings at trustees, and officers of the corporation.
municipality where the any place within the
principal office of the Philippines RULES ON DISTRIBUTION OF ASSETS UPON
corporation is located DISSOLUTION
 1. All liabilities and obligations of the will be under Sec. 94 (majority of the board 2/3 of
corporation shall be paid, satisfied and voting members)
discharged, or adequate provision shall be
made therefore
2. Assets held by the corporation upon a CLOSE CORPORATION
condition requiring return, transfer or
conveyance, and which condition occurs by CLOSE CORPORATION – one whose AOI provide
reason of the dissolution, shall be returned, that:
transferred or conveyed in accordance with 1. All the corporation’s issued stock of all
such requirements classes, exclusive of treasury sales, shall be of
3. Assets received and held by the corporation record by not more than a specified number of
subject to limitations permitting their use only persons not exceeding 20
for charitable, religious, benevolent, 2. All issued stock of all classes shall be subject
educational or similar purposes, but not held to one or more specified restrictions on transfer
upon a condition requiring return, transfer or permitted by the RCC; and
conveyance by reason of the dissolution, shall 3. The corporation shall not list in any stock
be transferred or conveyed to one or more exchange or make any public offering of any
corporations, societies or organizations of its stock of any class
engaged in activities in the Philippines
substantially similar to those of the dissolving *** a corporation shall not be deemed a close
corporation according to a plan of distribution corporation when at least 2/3 of its voting stock or
adopted pursuant to this Chapter voting rights is owned or controlled by another
4. Assets other than those mentioned in the corporation which is not a close corporation within the
preceding paragraphs, if any, shall be meaning of the RCC
distributed in accordance with the provisions
of the articles of incorporation or the by-laws, Companies that cannot be close corporations:
to the extent that the articles of incorporation 1. Mining companies
or the by-laws, determine the distributive 2. Insurance companies
rights of members, or any class or classes of 3. Public utilities
members, or provide for distribution; and 4. Educational institutions
5. In any other case, assets may be distributed to 5. Stock exchanges
such persons, societies, organizations or 6. Banks
corporations, whether or not organized for 7. Oil companies
profit, as may be specified in a plan of 8. Other corporations declared to be vested with
distribution adopted pursuant to this Chapter. public interest

PLAN OF DISTRIBUTION OF ASSETS OPEN CORP CLOSE CORP

A non-stock corporation in the process of dissolution Articles of Incorporation
may adopt a plan providing for the distribution of Should only contain the Must contain the special
assets, not inconsistent with the RCC, in the following general matters provisions prescribed in
manner: enumerated in Sec. 13 of Sec. 95 aside from
the RCC general matters in Sec.
1. The board of trustees shall, by majority vote, 14
adopt a resolution recommending a plan of Management
distribution and directing the submission Managed by the board of May be managed
thereof to a vote at a regular or special meeting directors directly by the
of members having voting rights stockholders if the AOI
2. Each member entitled to vote shall be given a so provide, but they are
written notice setting forth the proposed plan liable as directors
of distribution or a summary thereof and the Officers
date, time and place of such meeting within the Elected by a majority AOI may provide that
time and in the manner provided in this Code vote of all the members any or all of the officers
for the giving of notice of meetings; and of the BOD may be elected or
3. Such plan of distribution shall be adopted upon appointed by the
approval of at least two-thirds (2/3) of the stockholders
members having voting rights present or Pre-Emptive Right
represented by proxy at such meeting. Pre-emptive right is Pre-emptive right is not
subject to the exceptions available only if so
*** Read Sec. 93 and 94 together; if it does not fall found in Sec. 38 of the denied by the AOI
under b, c, d of Sec. 93, then the voting requirement
 RCC 2. If the AOI of a close corporation states the
Appraisal Right number of persons, not exceeding 20, who are
May be exercised by a May be exercised by a entitled to be stockholders of record, and if the
stockholder only the stockholder for any certificate of such stock conspicuously states
cases provided in Sec. 80 reason such number, and the issuance or transfer of
of the RCC stock to any person would cause the number of
Purchase of Shares stock to be held by more than such number of
except as regards In case of an arbitration persons  the person to whom such stock is
redeemable shares, the of an intra-corporate issued or transferred is conclusively
purchase by the deadlock by the SEC, the presumed to have notice of this fact
corporation of its own corporation may be 3. If a stock certificate of a close corporation
stock must always be ordered to purchase its conspicuously shows a restriction on transfer
made from the own shares from the of the corporation’s stock and the transferee
unrestricted retained stockholders regardless acquires the stock in violation of such
earnings of the availability of restriction  the transferee is conclusively
unrestricted retained presumed to have notice of the fact that the
earnings stock was acquired in violation of the
restriction
PERMISSIVE PROVISIONS IN THE AOI 4. Whenever a person to whom stock of a
corporation has or is conclusively presumed
The AOI of a close corporation may provide for: under this section to have notice of:
1. A classification of shares or rights and the a. The person’s ineligibility to be a
qualifications for owning or holding the same stockholder of the corporation; or
and restrictions on their transfers as may be b. The transfer of stock would cause the
stated therein, subject to the provisions of the stock of the corporation to be held by
following section more than the number of persons
2. A classification of directors into one or more permitted under its AOI; or
classes, each of whom may be voted for and c. That the transfer violates a restriction
elected solely by a particular class of stock; on transfer of stock and the
and corporation may, at its option, refuse
3. A greater quorum or voting requirements in to register the transfer in the name of
meetings of stockholders or directors than the transferee
those provided in Sec. 96 of this Code.
WHEN BOARD MEETING IS UNECCESSARY
VALIDITY OF RESTRICTIONS ON TRANSFERS OR IMPROPERLY HELD
OF SHARES
Restrictions on the right to transfer shares must appear GR: any action taken by the directors without a board
in: meeting shall be deemed INVALID
1. The AOI Exception: the following shall nonetheless be valid
2. The by-laws; and despite the lack of a valid board meeting, unless the by-
3. In the Certificates of Stock laws provide otherwise
1. Before or after such action is taken, a written
What’s the rational for Sec. 97? consent thereto is assigned by all the
directors; or
Recit Q: a close corporation can be a family 2. All the stockholders have actual or implied
corporation but all family corporations are not close knowledge of the action and make no prompt
corporations. T or F? objection in writing; or
3. The directors are accustomed to take informal
EFFECTS OF ISSUANCE OR TRANSFER OF action with the express or implied
STOCK IN BREACH OF QUALIFYING acquiescence of all the stockholders; or
CONDITIONS 4. All the directors have express or implied
1. If shares of stock of a close corporation are knowledge of the action in question and none
issued or transferred to any person who is not of them makes a prompt objection in writing.
eligible to be a holder thereof under any
provision of the AOI, and if the certificate of *** an action within the corporate powers taken at a
stock conspicuously shows the qualifications meeting held without proper call or notice, is deemed
of the persons entitled to be holders of record ratified by a director who failed to attend, unless after
thereof  such person is conclusively having knowledge thereof, the director promptly files
presumed to have notice of the fact of the his written objection with the secretary of the
ineligibility of the stockholder corporation.
Explain ‘A meeting improperly held but deemed PROVISIONAL DIRECTOR
valid’: improperly held if a director has not been  an impartial person who is neither a stockholder nor
notified of the meeting, may be valid if such director a creditor of the corporation or of any subsidiary or
ratifies. Such director may also file a written objection affiliate of the corporation, and whose further
to invalidate the meeting. qualifications, if any, may be determined by the
Commission
Q: Compare Sec. 102 from Sec. 15  not a receiver of the corporation and does not have
the title and powers of a custodian or receiver
PRE-EMPTIVE RIGHTS OF STOCKHOLDERS  a provisional director shall have all the rights and
IN CLOSE CORPORATIONS powers of a duly elected director of the corporation,
including the right to notice of and to vote at meetings
GR: it shall extend to all stock to be issued, including of directors, until such time as he shall be removed by
reissuance of treasure shares, whether for money, order of the Commission or by all the stockholders
property or personal services, or in payment of  his compensation shall be determined by agreement
corporate debts between him and the corporation subject to approval of
the Commission, which may fix his compensation in the
Exception: unless the AOI provide otherwise. absence of agreement or in the event of disagreement
between the provisional director and the corporation.
AMENDMENT OF THE AOI
 affirmative vote of at least 2/3 of the outstanding
capital stock, whether with or without voting rights, or SPECIAL CORPORATIONS
of such greater proportion of shares as may be
specifically provided in the AOI for amending, deleting
or removing any of the aforesaid provisions, at a EDUCATIONAL CORPORATION
meeting duly called for the purpose
Educational corporations shall be governed by:
DEADLOCKS 1. Special laws (e.g. education act of 1982)
2. General provisions of the RCC
Deadlocks – the directors or stockholders are so
divided respecting the management of the corporation’s Board of Trustees of Educational Corporations
business and affairs and the votes required for any  shall not be less than 5 nor more than 15, provided,
corporate action cannot be obtained and as a that the number of trustees shall be in multiples of 5
consequence thereof, the business and affairs of the
corporation can no longer be conducted to the Term of Office
advantage of the stockholders generally.  unless otherwise provided in the AOI or bylaws, the
Board of Trustees of incorporated schools, colleges, or
Resolution: other institutions of learning shall, as soon as organized,
 the SEC, upon written petition by any stockholder, so classify themselves that the term of office of 1/5 of
shall have the power to arbitrate the dispute their number shall expire every year.
 the Commission shall have authority to make such  Trustees thereafter elected to fill vacancies,
order as it deems appropriate, including an order: occurring before the expiration of a particular term,
 Cancelling or altering any provision contained shall hold office for the unexpired period.
in the AOI, bylaws, or any stockholder’s  trustees elected thereafter to fill vacancies caused by
agreement expiration of term shall hold office for 5 years.
 Cancelling, altering or enjoining any resolution
or act of the corporation or its BOD, Quorum: majority of the trustees; the power and
stockholders, or officers authority of trustees shall be defined in the bylaws.
 Directing or prohibiting any act of the
corporation or its BOD, stockholders, officers, 1987 CONSTITUTION PROVISIONS
or other persons part to the action
 Requiring the purchase at their fair value of Art. XIV Sec. 4:
shares of any stockholder, either by the 1. That educational institutions shall be:
corporation regardless of the availability of a. Solely owned by Filipino citizens; OR
unrestricted retained earnings in its books, or b. Of owned by a corporation, at least
by the other stockholders 60% of the capital must be owned by
 Appointing a provisional director Filipino citizens
 Dissolving the corporation; or 2. Control and administration shall be vested in
 Granting such other relief as the circumstances citizens of the Philippines
warrant.
 3. No educational institution shall be established a copy of their commission, certificate of
exclusively for aliens. The 60% ownership election, or letters of appointment, duly
requirement does not apply to the following: certified by a notary public
a. Educational institutions established 2. During a vacancy in the office, the person/s
by religious groups and mission authorized and empowered by the rules,
boards regulations or discipline of the religious
b. Schools established for foreign denomination, sect, or church represented by
diplomatic personnel and their the corporation sole to administer the
dependents temporalities and manage the affairs, estate
c. Other foreign temporary residents and properties of the corporation sole during
(unless otherwise provided by law) the vacancy shall exercise all the powers and
4. No group of aliens shall comprise more than authority of the corporation sole during such
1/3 of the enrollment in any school vacancy.

DISSOLUTION OF A CORPORATION SOLE

RELIGIOUS CORPORATIONS May be dissolved and its affairs settled voluntarily by
submitting to the SEC a verified declaration of
CORPORATION SOLE – special form of dissolution, setting forth:
corporation, usually associated with the clergy and 1. The name of the corporation
consists of one person only and his successors, who are 2. The reason for dissolution and winding up
incorporated by law to give some legal capacities and 3. The authorization for the dissolution of the
advantages. corporation by the particular religious
denomination, sect or church and
*** a corporation sole does not have any nationality but 4. The names and addresses of the persons who
for purposes of applying our nationalization laws, are to supervise the winding up of the affairs of
nationality is determined by the nationality of its the corporation
members (Roman Catholic Apostolic Churc v LRC)
Effect of approval of dissolution: the corporation shall
PURPOSE: administering and managing, as trustee, cease to carry on its operations except for the purpose
the affairs, property and temporalities of any religious of winding up its affairs.
denomination, sect, or church.

Composition RELIGIOUS SOCIETIES

 formed by the chief archbishop, bishop, priest,
minister, rabbi or other presiding elder of such religious Who may form: any religious society or religious
denomination, sect or church, for the purpose of order, or any diocese, synod, or district organization of
administering and managing, as trustee. The affairs, any religious denomination, sect or church, unless
property and temporalities of any religious forbidden by the Constitution, rules, regulations, or
denomination, sect or church discipline of the religious denomination, sect or church
of which it is a part, or by competent authority.
Effect of filing AOI:
1. Such archbishop, bishop, priest, minister, rabbi Purpose: for the administration of its temporalities or
or presiding elder shall become a corporation for the management of its affairs, properties and estate.
sole
2. All temporalities, estate and properties of the Internal Requirement: upon written consent and/or by
religious denomination, sect or church an affirmative vote at a meeting called for the purpose
theretofore administered or managed by him as of at least 2/3 of its membership
such chief archbishop, bishop, priest, minister,
rabbi or presiding elder shall be held in trust by SEC REQUIREMENT:
him as a corporation sole, for the use, purpose, 1. Filing with the SEC, AOI verified by the
behalf and sole benefit of his religious affidavit of the presiding elder, secretary, or
denomination, sect or church, including clerk or other member of such religious society
hospitals, schools, colleges, orphan asylums, or religious order, or diocese, synod, or district
parsonages and cemeteries thereof. organization of the religious denomination,
sect or church
FILLING OF VACANCIES
1. The successors in office concerned shall CONTENTS OF AOI:
become the corporation sole on their accession 1. that the religious society or religious order, or
to office and shall be permitted to transact diocese, synod, or district organization is a
business as such on the filing with the SEC of
 religious organization of a religious proof of such authority to act on behalf of the
denomination, sect or church trust or estate
2. That at least two-thirds (2/3) of its membership 3. Name, nationality, residence of the nominee
have given their written consent or have voted and alternate nominee, and the extent,
to incorporate, at a duly convened meeting of coverage and limitation of the authority
the body
3. That the incorporation of the religious society ** OPCs are not required to file their corporate
or religious order, or diocese, synod, or district bylaws.
organization desiring to incorporate is not
forbidden by competent authority or by the Corporate Name: should indicate the letters “OPC”
constitution, rules, regulations or discipline of either below or at the end of their corporate name.
the religious denomination, sect, or church of
which it forms a part WHO MAY FORM:
4. That the religious society or religious order, or 1. Natural Person
diocese, synod, or district organization desires a. A foreign natural person may put up
to incorporate for the administration of its an OPC subject to applicable capital
affairs, properties and estate requirement
5. The place where the principal office of the b. Trust – does not refer to a trust
corporation is to be established and located, entity, but the subject being managed
which place must be within the Philippines by a trustee. If the single stockholder
6. The names, nationalities, and residences of the is a trustee, administrator, executor,
trustees elected by the religious society or guardian, conservator, custodian, or
religious order, or the diocese, synod, or other person exercising fiduciary
district organization to serve for the first year duties
or such other period as may be prescribed by i. Proof of authority to act on
the laws of the religious society or religious behalf of the trust or estate
order, or of the diocese, synod, or district must be submitted at the
organization, the board of trustees to be not time of incorporation
less than five (5) nor more than fifteen (15). c. Estate

WHO MAY NOT FORM:

ONE PERSON CORPORATIONS (1) Banks and quasi-banks, non-bank financial
institutions
Excepted corporations (2) Pre-need, trust, insurance, public and publicly-
The following are not allowed to incorporate as OPC: listed companies
1. Banks (3) Non-chartered GOCC
2. Non-bank financial institutions (4) Natural person who is licensed to exercise a
3. Quasi-banks profession to form an OPC for the purpose of
4. Pre-need exercising such profession
5. Trust
6. Insurance public and publicly listed companies Exception: as provided under special laws
7. Non-chartered GOCCs; and
8. Natural person who is licensed to exercise a *** the single stockholder shall be the sole director
profession for the purpose of exercising such and president of the OPC (Sec 121).
profession, unless otherwise provided by
special laws. When to appoint officers: Within 15 days from the
issuance of its certificate of incorporation
Capital Stock Requirement
GR: not required to have a minimum authorized capital Who to appoint:
stock (1) Treasurer
Exception: as otherwise provided by special law (2) Corporate secretary
(3) Other officers as may be deemed necessary
AOI AND BY-LAWS
Requirements for filing AOI: Who and when to notify:
1. In accordance with Sec. 14 of the RCC (1) SEC
2. If single stockholder is a trust or an estate  a. Within 5 days from appointment
the name, nationality, and residence of the b. Using the Appointment Form as may
trustee, administrator, executor, guardian, be prescribed by the SEC
conservator, custodian, or other person
exercising fiduciary duties together with the Single stockholder allowed?
  Corporate Secretary – NO
 Treasurer – YES
Conditions:
a. Give bond to the SEC in such a sum
as may be required
b. Undertake in writing to faithfully
administer the OPCs funds to be
received as treasurer
c. To disburse and invest the same
according to the AOI approved by the
SEC

BOND REQUIREMENT as per SEC Memo 7-2019

ACS SECURITY BOND
COVERAGE
1 to 1,000,000 1,000,000
1,000,001 to 2,000,000 2,000,000
2,000,001 to 3,000,000 3,000,000
3,000,001 to 4,000,000 4,000,000
4,000,001 to 5,000,000 5,000,000
5,000,001 and above Equal to the OPCs and
ACS

 bond shall be renewed every 2 years or as often as

may be required, upon review of the Audited Financial
Statements/ Financial Statements certified under oath
by the company’s President/ Treasurer
Bond is a continuing requirement as long as the
single stockholder is the self-appointed Treasurer of the
OPC
 bond may be cancelled upon proof of appointment of
another person as the Treasurer and Filing of Amended
Form of Appointment of Officers
 DISSOLUTION AND WINDING UP existing laws.

Dissolution – the extinguishment of the corporation of

its franchise and the termination of its corporate EXPIRATION OF CORPORATE TERM
existence or business purpose. (involuntary)

However, for the purpose only of winding up its affairs GR: a corporation shall have perpetual existence. The
and liquidating its assets, its corporate existence AOIs of existing corporations shall be deemed amended
continues for a period of 3 years from such dissolution. to reflect their perpetual term.

 upon dissolution, the corporation ceases to be a ER: when the AOIs of corporations created under the
juridical person and consequently can no longer effectivity of the RCC provide for a specific period.
continue transacting its business
*** petition for revival of corporate existence may be
*** if no dissolution papers are filed with the SEC by filed
the corporation claiming dissolution, such corporation is
still deemed legally existing, notwithstanding the fact VOLUNTARY DISSOLUTION
that it has ceased to operate.
i. Where no creditors are affected
MODES OF DISSOLUTION
 a corporation cannot be dissolved except in the Procedure:
manner prescribed by law 1. Meeting must be held on the call of directors
or trustees
VOLUNTARY INVOLUNTARY 2. Notice of the meeting given to the stockholders
Voluntary surrender of its Expiration of the by personal delivery or registered mail at least
charter by the vote of the shortened corporate 20 days prior to the meeting
BOD/T and the term 3. Notice of the meeting should also be published
1 stockholders/members once in a newspaper published in the principal
where no creditors are place of business, otherwise, in a newspaper of
affected general circulation
By the judgment of the By legislative 4. The resolution to dissolve must be approved by
SEC after hearing of a enactment the majority of the directors/trustees and
2 petition for voluntary approved by the stockholders representing at
dissolution, where least majority of the outstanding capital stock
creditors are affected or majority of members
Amending the AOI to Failure to organize 5. A verified reques for dissolution is then filed
shorten its term and commence with the SEC stating:
3 business within 2 a. The reason for the dissolution
years from b. The form, manner and time when the
incorporation notices were given
In case of a corporation Cessation of c. Names of the stockholders and
sole, by submitting to the business for 5 years directors or members and trustees
4 SEC a verified who approved the dissolution
declaration of the d. The date, place, and time of the
dissolution for approval meeting in which the vote was made;
By merger or By order of the and
consolidation SEC on the grounds e. Details of the publication
5 under existing laws 6. In addition, the following shall be submitted to
(Sec. 138) the SEC:
By order of the a. Copy of the resolution authorizing the
Courts following a dissolution, certified by a majority of
quo warranto the board and countersigned by the
proceeding, a secretary
proceeding b. Proof of publication
6 involving a c. Favorable recommendation from the
financially appropriate regulatory agency, when
distressed necessary
corporation, or for 7.
grounds under