ACCOUNTING FOR CORPORATIONS

Basic Considerations

REVISED CORPORATION CODE

• Republic Act 11232, or otherwise known as the
Revised Corporation Code of the Philippines (RCCP)
• Signed into law by former president Rodrigo
Duterte on Feb. 20, 2019 and became effective on
Feb. 23,2019.
• Its predecessor was Batas Pambansa (BP) Blg. 68
or the Corporation Code of the Philippines, which
have been in effect since May 1, 1980 until it was
replaced by its successor.

DEFINITION
A corporation is an artificial being created by the
operation of law, having the right of succession
and the powers, attributes and properties expressly
authorized by law or incident to its existence.

ATTRIBUTES OF A CORPORATION
1. Artificial being - personality separate and
apart from its individual shareholders or members
2. Created by operation of law - cannot come into
existence by mere agreement; requires special
authority or grant from the State, either by a
special incorporation law or a general corporation
law, such as the RCCP.
3. Right of succession - perpetual existence unless
AOI provides otherwise; changes in the individual
shareholders does not dissolve the corporation, nor
does the transfer of ownership of shares of stock.
4. It has the powers, attributes and properties
expressly authorized by law or incident to its
existence.

ADVANTAGES OF A CORPORATION
1. Legal capacity to act as a legal entity
2. Shareholders have limited liability
3. Perpetual existence
4. Stock can be transferred without consent of
other shareholders
5. Management is centralized in the BOD
6. Shareholders are not general agents of the
business
7. Greater ability to acquire funds

DISADVANTAGES OF A CORPORATION
1. Relatively complicated in formation and
management
2. Greater degree if government control and
supervision
3. Relatively high cost of formation and
operation
4. Subject to heavier taxation
5. Minority shareholders are subservient to the
wishes of the majority
6.

CLASSES OF CORPORATION
1. STOCK CORPORATION – Corporations which have
share capital divided into shares and are
authorized to distribute to the holders of such
shares, dividends or allotments of the surplus
profits on the basis of the shares held
2. NON-STOCK CORPORATION – one where no part of its
income is distributable as dividends to its
members, trustees or officers

OTHER CLASSIFICATIONS OF CORPORATIONS

1. ACCORDING TO NUMBER OF PERSONS:
a. Corporation aggregate – consisting of
more than one corporator
b. Corporation sole
2. ACCORDING TO NATIONALITY:
a. Domestic corporation – organized under
Philippine laws
b. Foreign corporation – formed, organized
or existing under laws other than the
Philippines’ and whose laws allow Filipino
citizens and corporations to do business in
its own country or State
3. ACCORDING TO WHETHER FOR PUBLIC OR PRIVATE
PURPOSE:
a. Public corporation – formed or organized
for the government of a portion of the state
b. Private corporation – created for
private aim, benefit or purpose
4. ACCORDING TO WHETHER FOR CHARITABLE PURPOSE OR
NOT:
a. Ecclesiastical corporation – organized
for religious purposes
b. Eleemosynary corporation – established
for public charity
c. Civil corporation – established for
business or profit
5. ACCORDING TO THEIR LEGAL RIGHT TO CORPORATE
EXISTENCE:
 a. De jure corporation – existing in fact
and in law; strictly in conformity with the
law
b. De facto corporation – existing in fact
but not in law
6. ACCORDING TO DEGREE OF PUBLIC PARTICIPATION WITH
REGARD TO SHARE OWNERSHIP:
a. Close corporation – ownership is limited
to selected persons or members of a family
not exceeding 20 persons
b. Open corporation – share is available
for subscription or purchase by any person
c. Publicly-held corporation – corporation
with a class of equity securities listed on
an exchange OR with assets in excess of
P50,000,000 and having 200 or more holders,
at least 200 of which are holding at least
100 shares of a class of its equity
securities
7. ACCORDING TO THEIR RELATION TO ANOTHER
CORPORATION:
a. Parent or holding corporation – has the
power to either directly or indirectly elect
the majority of the directors of a
subsidiary corporation
b. Subsidiary corporation – controlled by
another corporation known as a parent
corporation

COMPONENTS OF A CORPORATION
1. CORPORATORS – those who compose a corporation.
a. Stockholders/shareholders > stock corp
b. Members > non-stock corp
2. INCORPORATORS – stockholders or members
mentioned in the AOI as originally forming and
composing the corporation and who are
signatories to said AOI
3. SHAREHOLDERS
4. MEMBERS
5. SUBSCRIBERS

CLASSES OF SHARES
1. PAR VALUE SHARES – specific amount is fixed in
the AOI; minimum issue price of the shares
Example: Ordinary shares, P100 par, 5 000
shares issued and outstanding
2. NO-PAR VALUE SHARES – one without any value
appearing on the face of the certificate of
stock
a. MINIMUM STATED VALUE – by law, P5.00.
3. VOTING SHARES
4. NON-VOTING SHARES
5. ORDINARY SHARES
6. PREFERENCE SHARES
a. Example:10% Preference shares, P50 par,
10 000 issued and outstanding
7. FOUNDERS’ SHARES
8. REDEEMABLE SHARES
9. TREASURY SHARES
10. PROMOTION SHARES
11. CONVERTIBLE SHARES

ARTICLES OF INCORPORATION (AOI)

All corporations shall file with the
Commission articles of incorporation in any of the
official languages, duly signed and
acknowledged or authenticated, in such form and
manner as may be allowed by the Commission,
containing substantially the following matters,
except as otherwise prescribed by this Code or by
special law:
(a) The name of the corporation;
(b) The specific purpose or purposes for which the
corporation is being formed. Where a
corporation has more than one stated purpose, the
articles of incorporation shall indicate the
primary purpose and the secondary purpose or
purposes: Provided, That a nonstock corporation
may not include a purpose which would change or
contradict its nature as such;
(c) The place where the principal office of the
corporation is to be located, which must be
within the Philippines;
(d) The term for which the corporation is to exist,
if the corporation has not elected
perpetual existence;
(e) The names, nationalities, and residence
addresses of the incorporators;
(f) The number of directors, which shall not be
more than fifteen (15) or the number of
trustees which may be more than fifteen (15);
(g) The names, nationalities, and residence
addresses of persons who shall act as directors
or trustees until the first regular directors or
trustees are duly elected and qualified in
accordance
with this Code;
(h) If it be a stock corporation, the amount of its
authorized capital stock, number of shares
into which it is divided, the par value of each,
names, nationalities, and residence addresses of
the
original subscribers, amount subscribed and paid by
each on the subscription, and a statement that
some or all of the shares are without par value, if
applicable;
(i) If it be a nonstock corporation, the amount of
its capital, the names, nationalities, and
residence addresses of the contributors, and amount
contributed by each; and
(j)Such other matters consistent with law and which
the incorporators may deem necessary
and convenient

REGISTRATION, INCORPORATION AND COMMENCEMENT OF

CORPORATE EXISTENCE
- Submission of intended corporate name to
the SEC for verification
- Name shall be reserved by the SEC in
favor of incorporators if found
distinguishable from a name already
reserved or registered for the use of
another corporation, not protected by
law and not contrary to law, rules and
regulations
- Submission of AOI and by-laws to the SEC
- Issuance of the Certificate of
Incorporation (COI) by SEC (on this date
-> commencement of the corporation’s
corporate existence and juridical
personality)
NON-USE OF CORPORATE CHARTER AND CONTINOUS
OPERATION
 If the corp does not formally organize and
commence its business within five (5) years from
the date of its incorporation
 Its COI shall be deemed revoked as of the day
following the end of the five-year period
 If the corp has commenced its business but
subsequently becomes inoperative for a period of
at least five consecutive years
 The SEC may, after due notice and hearing,
place the corp under delinquent status
 Delinquent corporation shall have a period of
two years to resume operations and comply
with all the requirements that the SEC shall
prescribe

BY-LAWS
A private corporation may provide the following in
its
bylaws:
(a) The time, place and manner of calling and
conducting regular or special meetings of
the directors or trustees;
(b) The time and manner of calling and conducting
regular or special meetings and mode
of notifying the stockholders or members thereof;
(c) The required quorum in meetings of stockholders
or members and the manner of voting
therein;
(d) The modes by which a stockholder, member,
director, or trustee may attend meetings
and cast their votes;
(e) The form for proxies of stockholders and
members and the manner of voting them;
(f) The directors’ or trustees’ qualifications,
duties and responsibilities, the guidelines for
setting the compensation of directors or trustees
and officers, and the maximum number of other
board representations that an independent director
or trustee may have which shall, in no case, be
more than the number prescribed by the Commission;
(g) The time for holding the annual election of
directors or trustees and the mode or manner
of giving notice thereof;
(h) The manner of election or appointment and the
term of office of all officers other than
directors or trustees;
(i) The penalties for violation of the bylaws;
(j) In the case of stock corporations, the manner
of issuing stock certificates; and
(k) Such other matters as may be necessary for the
proper or convenient transaction of its
corporate affairs for the promotion of good
governance and anti-graft and corruption measures.

NO MINIMUM CAPITAL STOCK

Stock corporations shall not be required to have a
minimum capital stock, except as otherwise
specifically provided by special laws.

RIGHTS OF A SHAREHOLDER
1. Right – certificate of stock; transfer such
shares
2. Vote via remote communication or in absentia
3. Elect and remove directors
4. Adopt, amend, or repeal the by-laws
5. Pre-emptive right
6. Receive dividends when declared
7. Inspect corporate books and records and to
receive financial reports of the corporation’s
operations
8. Participate in the distribution of the
corporate assets upon dissolution