Batas Pambansa Bilang 68 Section 6.

 Classification of shares. – The shares of stock of stock corporations

may be divided into classes or series of shares, or both, any of which classes or
THE CORPORATION CODE OF THE PHILIPPINES series of shares may have such rights, privileges or restrictions as may be stated in
the articles of incorporation: Provided, That no share may be deprived of voting
Be it enacted by the Batasang Pambansa in session assembled: rights except those classified and issued as “preferred” or “redeemable” shares,
unless otherwise provided in this Code: Provided, further, That there shall always
TITLE I – GENERAL PROVISIONS be a class or series of shares which have complete voting rights. Any or all of the
shares or series of shares may have a par value or have no par value as may be
DEFINITIONS AND CLASSIFICATIONS provided for in the articles of incorporation: Provided, however, That banks, trust
companies, insurance companies, public utilities, and building and loan
Section 1. Title of the Code. – This Code shall be known as “The Corporation associations shall not be permitted to issue no-par value shares of stock.
Code of the Philippines.” (n)
Preferred shares of stock issued by any corporation may be given preference in the
Section 2. Corporation defined. – A corporation is an artificial being created by distribution of the assets of the corporation in case of liquidation and in the
operation of law, having the right of succession and the powers, attributes and distribution of dividends, or such other preferences as may be stated in the articles
properties expressly authorized by law or incident to its existence. (2) of incorporation which are not violative of the provisions of this Code: Provided,
That preferred shares of stock may be issued only with a stated par value. The
Section 3. Classes of corporations. – Corporations formed or organized under this board of directors, where authorized in the articles of incorporation, may fix the
Code may be stock or non-stock corporations. Corporations which have capital terms and conditions of preferred shares of stock or any series thereof: Provided,
stock divided into shares and are authorized to distribute to the holders of such That such terms and conditions shall be effective upon the filing of a certificate
shares dividends or allotments of the surplus profits on the basis of the shares held thereof with the Securities and Exchange Commission.
are stock corporations. All other corporations are non-stock corporations. (3a)
Shares of capital stock issued without par value shall be deemed fully paid and
Section 4. Corporations created by special laws or charters. – Corporations non-assessable and the holder of such shares shall not be liable to the corporation
created by special laws or charters shall be governed primarily by the provisions or to its creditors in respect thereto: Provided; That shares without par value may
of the special law or charter creating them or applicable to them, supplemented by not be issued for a consideration less than the value of five (P5.00) pesos per
the provisions of this Code, insofar as they are applicable. (n) share: Provided, further, That the entire consideration received by the corporation
for its no-par value shares shall be treated as capital and shall not be available for
Section 5. Corporators and incorporators, stockholders and members. – distribution as dividends.
Corporators are those who compose a corporation, whether as stockholders or as
members. Incorporators are those stockholders or members mentioned in the A corporation may, furthermore, classify its shares for the purpose of insuring
articles of incorporation as originally forming and composing the corporation and compliance with constitutional or legal requirements.
who are signatories thereof.
Except as otherwise provided in the articles of incorporation and stated in the
Corporators in a stock corporation are called stockholders or shareholders. certificate of stock, each share shall be equal in all respects to every other share.
Corporators in a non-stock corporation are called members. (4a)
Where the articles of incorporation provide for non-voting shares in the cases be purchased or taken up by the corporation upon the expiration of a fixed period,
allowed by this Code, the holders of such shares shall nevertheless be entitled to regardless of the existence of unrestricted retained earnings in the books of the
vote on the following matters: corporation, and upon such other terms and conditions as may be stated in the
articles of incorporation, which terms and conditions must also be stated in the
1. Amendment of the articles of incorporation; certificate of stock representing said shares. (n)

2. Adoption and amendment of by-laws; Section 9. Treasury shares. – Treasury shares are shares of stock which have been
issued and fully paid for, but subsequently reacquired by the issuing corporation
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or by purchase, redemption, donation or through some other lawful means. Such
substantially all of the corporate property; shares may again be disposed of for a reasonable price fixed by the board of
directors. (n)
4. Incurring, creating or increasing bonded indebtedness;
TITLE II
5. Increase or decrease of capital stock;
INCORPORATION AND ORGANIZATION OF PRIVATE
6. Merger or consolidation of the corporation with another corporation or other CORPORATIONS
corporations;
Section 10. Number and qualifications of incorporators. – Any number of natural
7. Investment of corporate funds in another corporation or business in accordance persons not less than five (5) but not more than fifteen (15), all of legal age and a
with this Code; and majority of whom are residents of the Philippines, may form a private corporation
for any lawful purpose or purposes. Each of the incorporators of s stock
8. Dissolution of the corporation. corporation must own or be a subscriber to at least one (1) share of the capital
stock of the corporation. (6a)
Except as provided in the immediately preceding paragraph, the vote necessary to
approve a particular corporate act as provided in this Code shall be deemed to Section 11. Corporate term. – A corporation shall exist for a period not exceeding
refer only to stocks with voting rights. (5a) fifty (50) years from the date of incorporation unless sooner dissolved or unless
said period is extended. The corporate term as originally stated in the articles of
Section 7. Founders’ shares. – Founders’ shares classified as such in the articles incorporation may be extended for periods not exceeding fifty (50) years in any
of incorporation may be given certain rights and privileges not enjoyed by the single instance by an amendment of the articles of incorporation, in accordance
owners of other stocks, provided that where the exclusive right to vote and be with this Code; Provided, That no extension can be made earlier than five (5)
voted for in the election of directors is granted, it must be for a limited period not years prior to the original or subsequent expiry date(s) unless there are justifiable
to exceed five (5) years subject to the approval of the Securities and Exchange reasons for an earlier extension as may be determined by the Securities and
Commission. The five-year period shall commence from the date of the aforesaid Exchange Commission. (6)
approval by the Securities and Exchange Commission. (n)
Section 12. Minimum capital stock required of stock corporations. – Stock
Section 8. Redeemable shares. – Redeemable shares may be issued by the corporations incorporated under this Code shall not be required to have any
corporation when expressly so provided in the articles of incorporation. They may
minimum authorized capital stock except as otherwise specifically provided for by 7. The names, nationalities and residences of persons who shall act as directors or
special law, and subject to the provisions of the following section. trustees until the first regular directors or trustees are duly elected and qualified in
accordance with this Code;
Section 13. Amount of capital stock to be subscribed and paid for the purposes of
incorporation. – At least twenty-five percent (25%) of the authorized capital stock 8. If it be a stock corporation, the amount of its authorized capital stock in lawful
as stated in the articles of incorporation must be subscribed at the time of money of the Philippines, the number of shares into which it is divided, and in
incorporation, and at least twenty-five (25%) per cent of the total subscription case the share are par value shares, the par value of each, the names, nationalities
must be paid upon subscription, the balance to be payable on a date or dates fixed and residences of the original subscribers, and the amount subscribed and paid by
in the contract of subscription without need of call, or in the absence of a fixed each on his subscription, and if some or all of the shares are without par value,
date or dates, upon call for payment by the board of directors: Provided, however, such fact must be stated;
That in no case shall the paid-up capital be less than five Thousand (P5,000.00)
pesos. (n) 9. If it be a non-stock corporation, the amount of its capital, the names,
nationalities and residences of the contributors and the amount contributed by
Section 14. Contents of the articles of incorporation. – All corporations organized each; and
under this code shall file with the Securities and Exchange Commission articles of
incorporation in any of the official languages duly signed and acknowledged by 10. Such other matters as are not inconsistent with law and which the
all of the incorporators, containing substantially the following matters, except as incorporators may deem necessary and convenient.
otherwise prescribed by this Code or by special law:
The Securities and Exchange Commission shall not accept the articles of
1. The name of the corporation; incorporation of any stock corporation unless accompanied by a sworn statement
of the Treasurer elected by the subscribers showing that at least twenty-five (25%)
2. The specific purpose or purposes for which the corporation is being percent of the authorized capital stock of the corporation has been subscribed, and
incorporated. Where a corporation has more than one stated purpose, the articles at least twenty-five (25%) of the total subscription has been fully paid to him in
of incorporation shall state which is the primary purpose and which is/are the actual cash and/or in property the fair valuation of which is equal to at least
secondary purpose or purposes: Provided, That a non-stock corporation may not twenty-five (25%) percent of the said subscription, such paid-up capital being not
include a purpose which would change or contradict its nature as such; less than five thousand (P5,000.00) pesos.

3. The place where the principal office of the corporation is to be located, which Section 15. Forms of Articles of Incorporation. – Unless otherwise prescribed by
must be within the Philippines; special law, articles of incorporation of all domestic corporations shall comply
substantially with the following form:
4. The term for which the corporation is to exist;
ARTICLES OF INCORPORATION OF
5. The names, nationalities and residences of the incorporators;
__________________________
6. The number of directors or trustees, which shall not be less than five (5) nor
more than fifteen (15); (Name of Corporation)
KNOW ALL MEN BY THESE PRESENTS: SIXTH: That the number of directors or trustees of the corporation shall be
_______; and the names, nationalities and residences of the first directors or
The undersigned incorporators, all of legal age and a majority of whom are trustees of the corporation are as follows:
residents of the Philippines, have this day voluntarily agreed to form a (stock)
(non-stock) corporation under the laws of the Republic of the Philippines; NAME NATIONALITY RESIDENCE

AND WE HEREBY CERTIFY: ___________________ ___________________ ___________________

FIRST: That the name of said corporation shall be “_____________________, ___________________ ___________________ ___________________
INC. or CORPORATION”;
___________________ ___________________ ___________________
SECOND: That the purpose or purposes for which such corporation is
incorporated are: (If there is more than one purpose, indicate primary and ___________________ ___________________ ___________________
secondary purposes);
___________________ ___________________ ___________________
THIRD: That the principal office of the corporation is located in the
City/Municipality of ________________________, Province of SEVENTH: That the authorized capital stock of the corporation is
_______________________, Philippines; ______________________ (P___________) PESOS in lawful money of the
Philippines, divided into __________ shares with the par value of
FOURTH: That the term for which said corporation is to exist is _____________ ____________________ (P_____________) Pesos per share.
years from and after the date of issuance of the certificate of incorporation;
(In case all the share are without par value):
FIFTH: That the names, nationalities and residences of the incorporators of the
corporation are as follows: That the capital stock of the corporation is ______________ shares without par
value. (In case some shares have par value and some are without par value): That
NAME NATIONALITY RESIDENCE the capital stock of said corporation consists of _____________ shares of which
______________ shares are of the par value of _________________
___________________ ___________________ ___________________ (P____________) PESOS each, and of which _________________ shares are
without par value.
___________________ ___________________ ___________________
EIGHTH: That at least twenty five (25%) per cent of the authorized capital stock
___________________ ___________________ ___________________ above stated has been subscribed as follows:

___________________ ___________________ ___________________ Name of Subscriber Nationality No of Shares Amount

___________________ ___________________ ___________________ Subscribed Subscribed

_________________ __________ ____________ ____________ ELEVENTH: (Corporations which will engage in any business or activity
reserved for Filipino citizens shall provide the following):
_________________ __________ ____________ ____________
“No transfer of stock or interest which shall reduce the ownership of Filipino
_________________ __________ ____________ ____________ citizens to less than the required percentage of the capital stock as provided by
existing laws shall be allowed or permitted to be recorded in the proper books of
_________________ __________ ____________ ____________ the corporation and this restriction shall be indicated in all stock certificates issued
by the corporation.”
_________________ __________ ____________ ____________
IN WITNESS WHEREOF, we have hereunto signed these Articles of
NINTH: That the above-named subscribers have paid at least twenty-five (25%) Incorporation, this __________ day of ________________, 19 ______ in the
percent of the total subscription as follows: City/Municipality of ____________________, Province of
________________________, Republic of the Philippines.
Name of Subscriber Amount Subscribed Total Paid-In
_______________________ _______________________
_________________ ___________________ _______________
_______________________ _______________________
_________________ ___________________ _______________
________________________________
_________________ ___________________ _______________
(Names and signatures of the incorporators)
_________________ ___________________ _______________
SIGNED IN THE PRESENCE OF:
_________________ ___________________ _______________
_______________________ _______________________
(Modify Nos. 8 and 9 if shares are with no par value. In case the corporation is
non-stock, Nos. 7, 8 and 9 of the above articles may be modified accordingly, and (Notarial Acknowledgment)
it is sufficient if the articles state the amount of capital or money contributed or
donated by specified persons, stating the names, nationalities and residences of the TREASURER’S AFFIDAVIT
contributors or donors and the respective amount given by each.)
REPUBLIC OF THE PHILIPPINES)
TENTH: That _____________________ has been elected by the subscribers as
Treasurer of the Corporation to act as such until his successor is duly elected and CITY/MUNICIPALITY OF ) S.S.
qualified in accordance with the by-laws, and that as such Treasurer, he has been
authorized to receive for and in the name and for the benefit of the corporation, all PROVINCE OF )
subscription (or fees) or contributions or donations paid or given by the
subscribers or members. I, ____________________, being duly sworn, depose and say:
That I have been elected by the subscribers of the corporation as Treasurer stock, without prejudice to the appraisal right of dissenting stockholders in
thereof, to act as such until my successor has been duly elected and qualified in accordance with the provisions of this Code, or the vote or written assent of at
accordance with the by-laws of the corporation, and that as such Treasurer, I least two-thirds (2/3) of the members if it be a non-stock corporation.
hereby certify under oath that at least 25% of the authorized capital stock of the
corporation has been subscribed and at least 25% of the total subscription has The original and amended articles together shall contain all provisions required by
been paid, and received by me, in cash or property, in the amount of not less than law to be set out in the articles of incorporation. Such articles, as amended shall be
P5,000.00, in accordance with the Corporation Code. indicated by underscoring the change or changes made, and a copy thereof duly
certified under oath by the corporate secretary and a majority of the directors or
____________________ trustees stating the fact that said amendment or amendments have been duly
approved by the required vote of the stockholders or members, shall be submitted
(Signature of Treasurer) to the Securities and Exchange Commission.

SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the The amendments shall take effect upon their approval by the Securities and
City/Municipality of___________________Province of Exchange Commission or from the date of filing with the said Commission if not
_____________________, this _______ day of ___________, 19 _____; by acted upon within six (6) months from the date of filing for a cause not
__________________ with Res. Cert. No. ___________ issued at attributable to the corporation.
_______________________ on ____________, 19 ______
Section 17. Grounds when articles of incorporation or amendment may be
NOTARY PUBLIC rejected or disapproved. – The Securities and Exchange Commission may reject
the articles of incorporation or disapprove any amendment thereto if the same is
My commission expires on not in compliance with the requirements of this Code: Provided, That the
Commission shall give the incorporators a reasonable time within which to correct
_________, 19 _____ or modify the objectionable portions of the articles or amendment. The following
are grounds for such rejection or disapproval:
Doc. No. _________;
1. That the articles of incorporation or any amendment thereto is not substantially
Page No. _________; in accordance with the form prescribed herein;

Book No. ________; 2. That the purpose or purposes of the corporation are patently unconstitutional,
illegal, immoral, or contrary to government rules and regulations;
Series of 19____ (7a)
3. That the Treasurer’s Affidavit concerning the amount of capital stock
Section 16. Amendment of Articles of Incorporation. – Unless otherwise subscribed and/or paid is false;
prescribed by this Code or by special law, and for legitimate purposes, any
provision or matter stated in the articles of incorporation may be amended by a 4. That the percentage of ownership of the capital stock to be owned by citizens of
majority vote of the board of directors or trustees and the vote or written assent of the Philippines has not been complied with as required by existing laws or the
the stockholders representing at least two-thirds (2/3) of the outstanding capital Constitution.
No articles of incorporation or amendment to articles of incorporation of banks, On who assumes an obligation to an ostensible corporation as such, cannot resist
banking and quasi-banking institutions, building and loan associations, trust performance thereof on the ground that there was in fact no corporation. (n)
companies and other financial intermediaries, insurance companies, public
utilities, educational institutions, and other corporations governed by special laws Section 22. Effects on non-use of corporate charter and continuous inoperation of
shall be accepted or approved by the Commission unless accompanied by a a corporation. – If a corporation does not formally organize and commence the
favorable recommendation of the appropriate government agency to the effect that transaction of its business or the construction of its works within two (2) years
such articles or amendment is in accordance with law. (n) from the date of its incorporation, its corporate powers cease and the corporation
shall be deemed dissolved. However, if a corporation has commenced the
Section 18. Corporate name. – No corporate name may be allowed by the transaction of its business but subsequently becomes continuously inoperative for
Securities and Exchange Commission if the proposed name is identical or a period of at least five (5) years, the same shall be a ground for the suspension or
deceptively or confusingly similar to that of any existing corporation or to any revocation of its corporate franchise or certificate of incorporation. (19a)
other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. When a change in the corporate name is approved, the This provision shall not apply if the failure to organize, commence the transaction
Commission shall issue an amended certificate of incorporation under the of its businesses or the construction of its works, or to continuously operate is due
amended name. (n) to causes beyond the control of the corporation as may be determined by the
Securities and Exchange Commission.
Section 19. Commencement of corporate existence. – A private corporation
formed or organized under this Code commences to have corporate existence and TITLE III
juridical personality and is deemed incorporated from the date the Securities and
Exchange Commission issues a certificate of incorporation under its official seal; BOARD OF DIRECTORS/TRUSTEES AND OFFICERS
and thereupon the incorporators, stockholders/members and their successors shall
constitute a body politic and corporate under the name stated in the articles of Section 23. The board of directors or trustees. – Unless otherwise provided in this
incorporation for the period of time mentioned therein, unless said period is Code, the corporate powers of all corporations formed under this Code shall be
extended or the corporation is sooner dissolved in accordance with law. (n) exercised, all business conducted and all property of such corporations controlled
and held by the board of directors or trustees to be elected from among the holders
Section 20. De facto corporations. – The due incorporation of any corporation of stocks, or where there is no stock, from among the members of the corporation,
claiming in good faith to be a corporation under this Code, and its right to exercise who shall hold office for one (1) year until their successors are elected and
corporate powers, shall not be inquired into collaterally in any private suit to qualified. (28a)
which such corporation may be a party. Such inquiry may be made by the
Solicitor General in a quo warranto proceeding. (n) Every director must own at least one (1) share of the capital stock of the
corporation of which he is a director, which share shall stand in his name on the
Section 21. Corporation by estoppel. – All persons who assume to act as a books of the corporation. Any director who ceases to be the owner of at least one
corporation knowing it to be without authority to do so shall be liable as general (1) share of the capital stock of the corporation of which he is a director shall
partners for all debts, liabilities and damages incurred or arising as a result thereby cease to be a director. Trustees of non-stock corporations must be
thereof: Provided, however, That when any such ostensible corporation is sued on members thereof. A majority of the directors or trustees of all corporations
any transaction entered by it as a corporation or on any tort committed by it as organized under this Code must be residents of the Philippines.
such, it shall not be allowed to use as a defense its lack of corporate personality.
Section 24. Election of directors or trustees. – At all elections of directors or incorporation or the by-laws provide for a greater majority, a majority of the
trustees, there must be present, either in person or by representative authorized to number of directors or trustees as fixed in the articles of incorporation shall
act by written proxy, the owners of a majority of the outstanding capital stock, or constitute a quorum for the transaction of corporate business, and every decision
if there be no capital stock, a majority of the members entitled to vote. The of at least a majority of the directors or trustees present at a meeting at which there
election must be by ballot if requested by any voting stockholder or member. In is a quorum shall be valid as a corporate act, except for the election of officers
stock corporations, every stockholder entitled to vote shall have the right to vote which shall require the vote of a majority of all the members of the board.
in person or by proxy the number of shares of stock standing, at the time fixed in
the by-laws, in his own name on the stock books of the corporation, or where the Directors or trustees cannot attend or vote by proxy at board meetings. (33a)
by-laws are silent, at the time of the election; and said stockholder may vote such
number of shares for as many persons as there are directors to be elected or he Section 26. Report of election of directors, trustees and officers. – Within thirty
may cumulate said shares and give one candidate as many votes as the number of (30) days after the election of the directors, trustees and officers of the
directors to be elected multiplied by the number of his shares shall equal, or he corporation, the secretary, or any other officer of the corporation, shall submit to
may distribute them on the same principle among as many candidates as he shall the Securities and Exchange Commission, the names, nationalities and residences
see fit: Provided, That the total number of votes cast by him shall not exceed the of the directors, trustees, and officers elected. Should a director, trustee or officer
number of shares owned by him as shown in the books of the corporation die, resign or in any manner cease to hold office, his heirs in case of his death, the
multiplied by the whole number of directors to be elected: Provided, however, secretary, or any other officer of the corporation, or the director, trustee or officer
That no delinquent stock shall be voted. Unless otherwise provided in the articles himself, shall immediately report such fact to the Securities and Exchange
of incorporation or in the by-laws, members of corporations which have no capital Commission. (n)
stock may cast as many votes as there are trustees to be elected but may not cast
more than one vote for one candidate. Candidates receiving the highest number of Section 27. Disqualification of directors, trustees or officers. – No person
votes shall be declared elected. Any meeting of the stockholders or members convicted by final judgment of an offense punishable by imprisonment for a
called for an election may adjourn from day to day or from time to time but not period exceeding six (6) years, or a violation of this Code committed within five
sine die or indefinitely if, for any reason, no election is held, or if there are not (5) years prior to the date of his election or appointment, shall qualify as a
present or represented by proxy, at the meeting, the owners of a majority of the director, trustee or officer of any corporation. (n)
outstanding capital stock, or if there be no capital stock, a majority of the member
entitled to vote. (31a) Section 28. Removal of directors or trustees. – Any director or trustee of a
corporation may be removed from office by a vote of the stockholders holding or
Section 25. Corporate officers, quorum. – Immediately after their election, the representing at least two-thirds (2/3) of the outstanding capital stock, or if the
directors of a corporation must formally organize by the election of a president, corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the
who shall be a director, a treasurer who may or may not be a director, a secretary members entitled to vote: Provided, That such removal shall take place either at a
who shall be a resident and citizen of the Philippines, and such other officers as regular meeting of the corporation or at a special meeting called for the purpose,
may be provided for in the by-laws. Any two (2) or more positions may be held and in either case, after previous notice to stockholders or members of the
concurrently by the same person, except that no one shall act as president and corporation of the intention to propose such removal at the meeting. A special
secretary or as president and treasurer at the same time. meeting of the stockholders or members of a corporation for the purpose of
removal of directors or trustees, or any of them, must be called by the secretary on
The directors or trustees and officers to be elected shall perform the duties order of the president or on the written demand of the stockholders representing or
enjoined on them by law and the by-laws of the corporation. Unless the articles of holding at least a majority of the outstanding capital stock, or, if it be a non-stock
corporation, on the written demand of a majority of the members entitled to vote. corporation or who are guilty of gross negligence or bad faith in directing the
Should the secretary fail or refuse to call the special meeting upon such demand or affairs of the corporation or acquire any personal or pecuniary interest in conflict
fail or refuse to give the notice, or if there is no secretary, the call for the meeting with their duty as such directors or trustees shall be liable jointly and severally for
may be addressed directly to the stockholders or members by any stockholder or all damages resulting therefrom suffered by the corporation, its stockholders or
member of the corporation signing the demand. Notice of the time and place of members and other persons.
such meeting, as well as of the intention to propose such removal, must be given
by publication or by written notice prescribed in this Code. Removal may be with When a director, trustee or officer attempts to acquire or acquires, in violation of
or without cause: Provided, That removal without cause may not be used to his duty, any interest adverse to the corporation in respect of any matter which has
deprive minority stockholders or members of the right of representation to which been reposed in him in confidence, as to which equity imposes a disability upon
they may be entitled under Section 24 of this Code. (n) him to deal in his own behalf, he shall be liable as a trustee for the corporation and
must account for the profits which otherwise would have accrued to the
Section 29. Vacancies in the office of director or trustee. – Any vacancy corporation. (n)
occurring in the board of directors or trustees other than by removal by the
stockholders or members or by expiration of term, may be filled by the vote of at Section 32. Dealings of directors, trustees or officers with the corporation. – A
least a majority of the remaining directors or trustees, if still constituting a contract of the corporation with one or more of its directors or trustees or officers
quorum; otherwise, said vacancies must be filled by the stockholders in a regular is voidable, at the option of such corporation, unless all the following conditions
or special meeting called for that purpose. A director or trustee so elected to fill a are present:
vacancy shall be elected only or the unexpired term of his predecessor in office.
1. That the presence of such director or trustee in the board meeting in which the
Any directorship or trusteeship to be filled by reason of an increase in the number contract was approved was not necessary to constitute a quorum for such meeting;
of directors or trustees shall be filled only by an election at a regular or at a special
meeting of stockholders or members duly called for the purpose, or in the same 2. That the vote of such director or trustee was not necessary for the approval of
meeting authorizing the increase of directors or trustees if so stated in the notice of the contract;
the meeting. (n)
3. That the contract is fair and reasonable under the circumstances; and
Section 30. Compensation of directors. – In the absence of any provision in the
by-laws fixing their compensation, the directors shall not receive any 4. That in case of an officer, the contract has been previously authorized by the
compensation, as such directors, except for reasonable per diems: Provided, board of directors.
however, That any such compensation other than per diems may be granted to
directors by the vote of the stockholders representing at least a majority of the Where any of the first two conditions set forth in the preceding paragraph is
outstanding capital stock at a regular or special stockholders’ meeting. In no case absent, in the case of a contract with a director or trustee, such contract may be
shall the total yearly compensation of directors, as such directors, exceed ten ratified by the vote of the stockholders representing at least two-thirds (2/3) of the
(10%) percent of the net income before income tax of the corporation during the outstanding capital stock or of at least two-thirds (2/3) of the members in a
preceding year. (n) meeting called for the purpose: Provided, That full disclosure of the adverse
interest of the directors or trustees involved is made at such meeting: Provided,
Section 31. Liability of directors, trustees or officers.  – Directors or trustees who however, That the contract is fair and reasonable under the circumstances. (n)
wilfully and knowingly vote for or assent to patently unlawful acts of the
Section 33. Contracts between corporations with interlocking directors. – Except 1. To sue and be sued in its corporate name;
in cases of fraud, and provided the contract is fair and reasonable under the
circumstances, a contract between two or more corporations having interlocking 2. Of succession by its corporate name for the period of time stated in the articles
directors shall not be invalidated on that ground alone: Provided, That if the of incorporation and the certificate of incorporation;
interest of the interlocking director in one corporation is substantial and his
interest in the other corporation or corporations is merely nominal, he shall be 3. To adopt and use a corporate seal;
subject to the provisions of the preceding section insofar as the latter corporation
or corporations are concerned. 4. To amend its articles of incorporation in accordance with the provisions of this
Code;
Stockholdings exceeding twenty (20%) percent of the outstanding capital stock
shall be considered substantial for purposes of interlocking directors. (n) 5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or
repeal the same in accordance with this Code;
Section 34. Disloyalty of a director. – Where a director, by virtue of his office,
acquires for himself a business opportunity which should belong to the 6. In case of stock corporations, to issue or sell stocks to subscribers and to sell
corporation, thereby obtaining profits to the prejudice of such corporation, he stocks to subscribers and to sell treasury stocks in accordance with the provisions
must account to the latter for all such profits by refunding the same, unless his act of this Code; and to admit members to the corporation if it be a non-stock
has been ratified by a vote of the stockholders owning or representing at least two- corporation;
thirds (2/3) of the outstanding capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked his own funds in the venture. (n) 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage
and otherwise deal with such real and personal property, including securities and
Section 35. Executive committee. – The by-laws of a corporation may create an bonds of other corporations, as the transaction of the lawful business of the
executive committee, composed of not less than three members of the board, to be corporation may reasonably and necessarily require, subject to the limitations
appointed by the board. Said committee may act, by majority vote of all its prescribed by law and the Constitution;
members, on such specific matters within the competence of the board, as may be
delegated to it in the by-laws or on a majority vote of the board, except with 8. To enter into merger or consolidation with other corporations as provided in
respect to: (1) approval of any action for which shareholders’ approval is also this Code;
required; (2) the filing of vacancies in the board; (3) the amendment or repeal of
by-laws or the adoption of new by-laws; (4) the amendment or repeal of any 9. To make reasonable donations, including those for the public welfare or for
resolution of the board which by its express terms is not so amendable or hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That
repealable; and (5) a distribution of cash dividends to the shareholders. no corporation, domestic or foreign, shall give donations in aid of any political
party or candidate or for purposes of partisan political activity;
TITLE IV
10. To establish pension, retirement, and other plans for the benefit of its
POWERS OF CORPORATIONS directors, trustees, officers and employees; and

Section 36. Corporate powers and capacity. – Every corporation incorporated 11. To exercise such other powers as may be essential or necessary to carry out its
under this Code has the power and capacity: purpose or purposes as stated in the articles of incorporation. (13a)
Section 37. Power to extend or shorten corporate term. – A private corporation residences of the persons subscribing, the amount of capital stock or number of
may extend or shorten its term as stated in the articles of incorporation when no-par stock subscribed by each, and the amount paid by each on his subscription
approved by a majority vote of the board of directors or trustees and ratified at a in cash or property, or the amount of capital stock or number of shares of no-par
meeting by the stockholders representing at least two-thirds (2/3) of the stock allotted to each stock-holder if such increase is for the purpose of making
outstanding capital stock or by at least two-thirds (2/3) of the members in case of effective stock dividend therefor authorized;
non-stock corporations. Written notice of the proposed action and of the time and
place of the meeting shall be addressed to each stockholder or member at his place (4) Any bonded indebtedness to be incurred, created or increased;
of residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally: Provided, (5) The actual indebtedness of the corporation on the day of the meeting;
That in case of extension of corporate term, any dissenting stockholder may
exercise his appraisal right under the conditions provided in this code. (n) (6) The amount of stock represented at the meeting; and

Section 38. Power to increase or decrease capital stock; incur, create or increase (7) The vote authorizing the increase or diminution of the capital stock, or the
bonded indebtedness. – No corporation shall increase or decrease its capital stock incurring, creating or increasing of any bonded indebtedness.
or incur, create or increase any bonded indebtedness unless approved by a
majority vote of the board of directors and, at a stockholder’s meeting duly called Any increase or decrease in the capital stock or the incurring, creating or
for the purpose, two-thirds (2/3) of the outstanding capital stock shall favor the increasing of any bonded indebtedness shall require prior approval of the
increase or diminution of the capital stock, or the incurring, creating or increasing Securities and Exchange Commission.
of any bonded indebtedness. Written notice of the proposed increase or diminution
of the capital stock or of the incurring, creating, or increasing of any bonded One of the duplicate certificates shall be kept on file in the office of the
indebtedness and of the time and place of the stockholder’s meeting at which the corporation and the other shall be filed with the Securities and Exchange
proposed increase or diminution of the capital stock or the incurring or increasing Commission and attached to the original articles of incorporation. From and after
of any bonded indebtedness is to be considered, must be addressed to each approval by the Securities and Exchange Commission and the issuance by the
stockholder at his place of residence as shown on the books of the corporation and Commission of its certificate of filing, the capital stock shall stand increased or
deposited to the addressee in the post office with postage prepaid, or served decreased and the incurring, creating or increasing of any bonded indebtedness
personally. authorized, as the certificate of filing may declare: Provided, That the Securities
and Exchange Commission shall not accept for filing any certificate of increase of
A certificate in duplicate must be signed by a majority of the directors of the capital stock unless accompanied by the sworn statement of the treasurer of the
corporation and countersigned by the chairman and the secretary of the corporation lawfully holding office at the time of the filing of the certificate,
stockholders’ meeting, setting forth: showing that at least twenty-five (25%) percent of such increased capital stock has
been subscribed and that at least twenty-five (25%) percent of the amount
(1) That the requirements of this section have been complied with; subscribed has been paid either in actual cash to the corporation or that there has
been transferred to the corporation property the valuation of which is equal to
(2) The amount of the increase or diminution of the capital stock; twenty-five (25%) percent of the subscription: Provided, further, That no decrease
of the capital stock shall be approved by the Commission if its effect shall
(3) If an increase of the capital stock, the amount of capital stock or number of prejudice the rights of corporate creditors.
shares of no-par stock thereof actually subscribed, the names, nationalities and
Non-stock corporations may incur or create bonded indebtedness, or increase the A sale or other disposition shall be deemed to cover substantially all the corporate
same, with the approval by a majority vote of the board of trustees and of at least property and assets if thereby the corporation would be rendered incapable of
two-thirds (2/3) of the members in a meeting duly called for the purpose. continuing the business or accomplishing the purpose for which it was
incorporated.
Bonds issued by a corporation shall be registered with the Securities and
Exchange Commission, which shall have the authority to determine the After such authorization or approval by the stockholders or members, the board of
sufficiency of the terms thereof. (17a) directors or trustees may, nevertheless, in its discretion, abandon such sale, lease,
exchange, mortgage, pledge or other disposition of property and assets, subject to
Section 39. Power to deny pre-emptive right. – All stockholders of a stock the rights of third parties under any contract relating thereto, without further
corporation shall enjoy pre-emptive right to subscribe to all issues or disposition action or approval by the stockholders or members.
of shares of any class, in proportion to their respective shareholdings, unless such
right is denied by the articles of incorporation or an amendment thereto: Provided, Nothing in this section is intended to restrict the power of any corporation,
That such pre-emptive right shall not extend to shares to be issued in compliance without the authorization by the stockholders or members, to sell, lease, exchange,
with laws requiring stock offerings or minimum stock ownership by the public; or mortgage, pledge or otherwise dispose of any of its property and assets if the same
to shares to be issued in good faith with the approval of the stockholders is necessary in the usual and regular course of business of said corporation or if
representing two-thirds (2/3) of the outstanding capital stock, in exchange for the proceeds of the sale or other disposition of such property and assets be
property needed for corporate purposes or in payment of a previously contracted appropriated for the conduct of its remaining business.
debt.
In non-stock corporations where there are no members with voting rights, the vote
Section 40. Sale or other disposition of assets. – Subject to the provisions of of at least a majority of the trustees in office will be sufficient authorization for
existing laws on illegal combinations and monopolies, a corporation may, by a the corporation to enter into any transaction authorized by this section.
majority vote of its board of directors or trustees, sell, lease, exchange, mortgage,
pledge or otherwise dispose of all or substantially all of its property and assets, Section 41. Power to acquire own shares. – A stock corporation shall have the
including its goodwill, upon such terms and conditions and for such consideration, power to purchase or acquire its own shares for a legitimate corporate purpose or
which may be money, stocks, bonds or other instruments for the payment of purposes, including but not limited to the following cases: Provided, That the
money or other property or consideration, as its board of directors or trustees may corporation has unrestricted retained earnings in its books to cover the shares to be
deem expedient, when authorized by the vote of the stockholders representing at purchased or acquired:
least two-thirds (2/3) of the outstanding capital stock, or in case of non-stock
corporation, by the vote of at least to two-thirds (2/3) of the members, in a 1. To eliminate fractional shares arising out of stock dividends;
stockholder’s or member’s meeting duly called for the purpose. Written notice of
the proposed action and of the time and place of the meeting shall be addressed to 2. To collect or compromise an indebtedness to the corporation, arising out of
each stockholder or member at his place of residence as shown on the books of the unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold
corporation and deposited to the addressee in the post office with postage prepaid, during said sale; and
or served personally: Provided, That any dissenting stockholder may exercise his
appraisal right under the conditions provided in this Code. 3. To pay dissenting or withdrawing stockholders entitled to payment for their
shares under the provisions of this Code. (a)
Section 42. Power to invest corporate funds in another corporation or business Section 44. Power to enter into management contract. – No corporation shall
or for any other purpose. – Subject to the provisions of this Code, a private conclude a management contract with another corporation unless such contract
corporation may invest its funds in any other corporation or business or for any shall have been approved by the board of directors and by stockholders owning at
purpose other than the primary purpose for which it was organized when approved least the majority of the outstanding capital stock, or by at least a majority of the
by a majority of the board of directors or trustees and ratified by the stockholders members in the case of a non-stock corporation, of both the managing and the
representing at least two-thirds (2/3) of the outstanding capital stock, or by at least managed corporation, at a meeting duly called for the purpose: Provided, That (1)
two thirds (2/3) of the members in the case of non-stock corporations, at a where a stockholder or stockholders representing the same interest of both the
stockholder’s or member’s meeting duly called for the purpose. Written notice of managing and the managed corporations own or control more than one-third (1/3)
the proposed investment and the time and place of the meeting shall be addressed of the total outstanding capital stock entitled to vote of the managing corporation;
to each stockholder or member at his place of residence as shown on the books of or (2) where a majority of the members of the board of directors of the managing
the corporation and deposited to the addressee in the post office with postage corporation also constitute a majority of the members of the board of directors of
prepaid, or served personally: Provided, That any dissenting stockholder shall the managed corporation, then the management contract must be approved by the
have appraisal right as provided in this Code: Provided, however, That where the stockholders of the managed corporation owning at least two-thirds (2/3) of the
investment by the corporation is reasonably necessary to accomplish its primary total outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of the
purpose as stated in the articles of incorporation, the approval of the stockholders members in the case of a non-stock corporation. No management contract shall be
or members shall not be necessary. (17 1/2a) entered into for a period longer than five years for any one term.

Section 43. Power to declare dividends.  – The board of directors of a stock The provisions of the next preceding paragraph shall apply to any contract
corporation may declare dividends out of the unrestricted retained earnings which whereby a corporation undertakes to manage or operate all or substantially all of
shall be payable in cash, in property, or in stock to all stockholders on the basis of the business of another corporation, whether such contracts are called service
outstanding stock held by them: Provided, That any cash dividends due on contracts, operating agreements or otherwise: Provided, however, That such
delinquent stock shall first be applied to the unpaid balance on the subscription service contracts or operating agreements which relate to the exploration,
plus costs and expenses, while stock dividends shall be withheld from the development, exploitation or utilization of natural resources may be entered into
delinquent stockholder until his unpaid subscription is fully paid: Provided, for such periods as may be provided by the pertinent laws or regulations. (n)
further, That no stock dividend shall be issued without the approval of
stockholders representing not less than two-thirds (2/3) of the outstanding capital Section 45. Ultra vires acts of corporations. – No corporation under this Code
stock at a regular or special meeting duly called for the purpose. (16a) shall possess or exercise any corporate powers except those conferred by this
Code or by its articles of incorporation and except such as are necessary or
Stock corporations are prohibited from retaining surplus profits in excess of one incidental to the exercise of the powers so conferred. (n)
hundred (100%) percent of their paid-in capital stock, except: (1) when justified
by definite corporate expansion projects or programs approved by the board of TITLE V
directors; or (2) when the corporation is prohibited under any loan agreement with
any financial institution or creditor, whether local or foreign, from declaring BY LAWS
dividends without its/his consent, and such consent has not yet been secured; or
(3) when it can be clearly shown that such retention is necessary under special Section 46. Adoption of by-laws. – Every corporation formed under this Code
circumstances obtaining in the corporation, such as when there is need for special must, within one (1) month after receipt of official notice of the issuance of its
reserve for probable contingencies. (n) certificate of incorporation by the Securities and Exchange Commission, adopt a
code of by-laws for its government not inconsistent with this Code. For the 3. The required quorum in meetings of stockholders or members and the manner
adoption of by-laws by the corporation the affirmative vote of the stockholders of voting therein;
representing at least a majority of the outstanding capital stock, or of at least a
majority of the members in case of non-stock corporations, shall be necessary. 4. The form for proxies of stockholders and members and the manner of voting
The by-laws shall be signed by the stockholders or members voting for them and them;
shall be kept in the principal office of the corporation, subject to the inspection of
the stockholders or members during office hours. A copy thereof, duly certified to 5. The qualifications, duties and compensation of directors or trustees, officers and
by a majority of the directors or trustees countersigned by the secretary of the employees;
corporation, shall be filed with the Securities and Exchange Commission which
shall be attached to the original articles of incorporation. 6. The time for holding the annual election of directors of trustees and the mode or
manner of giving notice thereof;
Notwithstanding the provisions of the preceding paragraph, by-laws may be
adopted and filed prior to incorporation; in such case, such by-laws shall be 7. The manner of election or appointment and the term of office of all officers
approved and signed by all the incorporators and submitted to the Securities and other than directors or trustees;
Exchange Commission, together with the articles of incorporation.
8. The penalties for violation of the by-laws;
In all cases, by-laws shall be effective only upon the issuance by the Securities
and Exchange Commission of a certification that the by-laws are not inconsistent 9. In the case of stock corporations, the manner of issuing stock certificates; and
with this Code.
10. Such other matters as may be necessary for the proper or convenient
The Securities and Exchange Commission shall not accept for filing the by-laws transaction of its corporate business and affairs. (21a)
or any amendment thereto of any bank, banking institution, building and loan
association, trust company, insurance company, public utility, educational Section 48. Amendments to by-laws. – The board of directors or trustees, by a
institution or other special corporations governed by special laws, unless majority vote thereof, and the owners of at least a majority of the outstanding
accompanied by a certificate of the appropriate government agency to the effect capital stock, or at least a majority of the members of a non-stock corporation, at a
that such by-laws or amendments are in accordance with law. (20a) regular or special meeting duly called for the purpose, may amend or repeal any
by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the outstanding
Section 47. Contents of by-laws. – Subject to the provisions of the Constitution, capital stock or two-thirds (2/3) of the members in a non-stock corporation may
this Code, other special laws, and the articles of incorporation, a private delegate to the board of directors or trustees the power to amend or repeal any by-
corporation may provide in its by-laws for: laws or adopt new by-laws: Provided, That any power delegated to the board of
directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be
1. The time, place and manner of calling and conducting regular or special considered as revoked whenever stockholders owning or representing a majority
meetings of the directors or trustees; of the outstanding capital stock or a majority of the members in non-stock
corporations, shall so vote at a regular or special meeting.
2. The time and manner of calling and conducting regular or special meetings of
the stockholders or members; Whenever any amendment or new by-laws are adopted, such amendment or new
by-laws shall be attached to the original by-laws in the office of the corporation,
and a copy thereof, duly certified under oath by the corporate secretary and a stockholders or members present have chosen one of their number as presiding
majority of the directors or trustees, shall be filed with the Securities and officer. (24, 26)
Exchange Commission the same to be attached to the original articles of
incorporation and original by-laws. Section 51. Place and time of meetings of stockholders of members. –
Stockholder’s or member’s meetings, whether regular or special, shall be held in
The amended or new by-laws shall only be effective upon the issuance by the the city or municipality where the principal office of the corporation is located,
Securities and Exchange Commission of a certification that the same are not and if practicable in the principal office of the corporation: Provided, That Metro
inconsistent with this Code. (22a and 23a) Manila shall, for purposes of this section, be considered a city or municipality.

TITLE VI Notice of meetings shall be in writing, and the time and place thereof stated
therein.
MEETINGS
All proceedings had and any business transacted at any meeting of the
Section 49. Kinds of meetings. – Meetings of directors, trustees, stockholders, or stockholders or members, if within the powers or authority of the corporation,
members may be regular or special. (n) shall be valid even if the meeting be improperly held or called, provided all the
stockholders or members of the corporation are present or duly represented at the
Section 50. Regular and special meetings of stockholders or members. – Regular meeting. (24 and 25)
meetings of stockholders or members shall be held annually on a date fixed in the
by-laws, or if not so fixed, on any date in April of every year as determined by the Section 52. Quorum in meetings. – Unless otherwise provided for in this Code or
board of directors or trustees: Provided, That written notice of regular meetings in the by-laws, a quorum shall consist of the stockholders representing a majority
shall be sent to all stockholders or members of record at least two (2) weeks prior of the outstanding capital stock or a majority of the members in the case of non-
to the meeting, unless a different period is required by the by-laws. stock corporations. (n)

Special meetings of stockholders or members shall be held at any time deemed Section 53. Regular and special meetings of directors or trustees. – Regular
necessary or as provided in the by-laws: Provided, however, That at least one (1) meetings of the board of directors or trustees of every corporation shall be held
week written notice shall be sent to all stockholders or members, unless otherwise monthly, unless the by-laws provide otherwise.
provided in the by-laws.
Special meetings of the board of directors or trustees may be held at any time
Notice of any meeting may be waived, expressly or impliedly, by any stockholder upon the call of the president or as provided in the by-laws.
or member.
Meetings of directors or trustees of corporations may be held anywhere in or
Whenever, for any cause, there is no person authorized to call a meeting, the outside of the Philippines, unless the by-laws provide otherwise. Notice of regular
Securities and Exchange Commission, upon petition of a stockholder or member or special meetings stating the date, time and place of the meeting must be sent to
on a showing of good cause therefor, may issue an order to the petitioning every director or trustee at least one (1) day prior to the scheduled meeting, unless
stockholder or member directing him to call a meeting of the corporation by otherwise provided by the by-laws. A director or trustee may waive this
giving proper notice required by this Code or by the by-laws. The petitioning requirement, either expressly or impliedly. (n)
stockholder or member shall preside thereat until at least a majority of the
Section 54. Who shall preside at meetings. – The president shall preside at all exceeding five (5) years but shall automatically expire upon full payment of the
meetings of the directors or trustee as well as of the stockholders or members, loan. A voting trust agreement must be in writing and notarized, and shall specify
unless the by-laws provide otherwise. (n) the terms and conditions thereof. A certified copy of such agreement shall be filed
with the corporation and with the Securities and Exchange Commission;
Section 55. Right to vote of pledgors, mortgagors, and administrators. – In case otherwise, said agreement is ineffective and unenforceable. The certificate or
of pledged or mortgaged shares in stock corporations, the pledgor or mortgagor certificates of stock covered by the voting trust agreement shall be cancelled and
shall have the right to attend and vote at meetings of stockholders, unless the new ones shall be issued in the name of the trustee or trustees stating that they are
pledgee or mortgagee is expressly given by the pledgor or mortgagor such right in issued pursuant to said agreement. In the books of the corporation, it shall be
writing which is recorded on the appropriate corporate books. (n) noted that the transfer in the name of the trustee or trustees is made pursuant to
said voting trust agreement.
Executors, administrators, receivers, and other legal representatives duly
appointed by the court may attend and vote in behalf of the stockholders or The trustee or trustees shall execute and deliver to the transferors voting trust
members without need of any written proxy. (27a) certificates, which shall be transferable in the same manner and with the same
effect as certificates of stock.
Section 56. Voting in case of joint ownership of stock. – In case of shares of stock
owned jointly by two or more persons, in order to vote the same, the consent of all The voting trust agreement filed with the corporation shall be subject to
the co-owners shall be necessary, unless there is a written proxy, signed by all the examination by any stockholder of the corporation in the same manner as any
co-owners, authorizing one or some of them or any other person to vote such other corporate book or record: Provided, That both the transferor and the trustee
share or shares: Provided, That when the shares are owned in an “and/or” capacity or trustees may exercise the right of inspection of all corporate books and records
by the holders thereof, any one of the joint owners can vote said shares or appoint in accordance with the provisions of this Code.
a proxy therefor. (n)
Any other stockholder may transfer his shares to the same trustee or trustees upon
Section 57. Voting right for treasury shares. – Treasury shares shall have no the terms and conditions stated in the voting trust agreement, and thereupon shall
voting right as long as such shares remain in the Treasury. (n) be bound by all the provisions of said agreement.

Section 58. Proxies. – Stockholders and members may vote in person or by proxy No voting trust agreement shall be entered into for the purpose of circumventing
in all meetings of stockholders or members. Proxies shall in writing, signed by the the law against monopolies and illegal combinations in restraint of trade or used
stockholder or member and filed before the scheduled meeting with the corporate for purposes of fraud.
secretary. Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and effective for a period Unless expressly renewed, all rights granted in a voting trust agreement shall
longer than five (5) years at any one time. (n) automatically expire at the end of the agreed period, and the voting trust
certificates as well as the certificates of stock in the name of the trustee or trustees
Section 59. Voting trusts. – One or more stockholders of a stock corporation may shall thereby be deemed cancelled and new certificates of stock shall be reissued
create a voting trust for the purpose of conferring upon a trustee or trustees the in the name of the transferors.
right to vote and other rights pertaining to the shares for a period not exceeding
five (5) years at any time: Provided, That in the case of a voting trust specifically The voting trustee or trustees may vote by proxy unless the agreement provides
required as a condition in a loan agreement, said voting trust may be for a period otherwise. (36a)
 TITLE VII Where the consideration is other than actual cash, or consists of intangible
property such as patents of copyrights, the valuation thereof shall initially be
STOCKS AND STOCKHOLDERS determined by the incorporators or the board of directors, subject to approval by
the Securities and Exchange Commission.
Section 60. Subscription contract. – Any contract for the acquisition of unissued
stock in an existing corporation or a corporation still to be formed shall be deemed Shares of stock shall not be issued in exchange for promissory notes or future
a subscription within the meaning of this Title, notwithstanding the fact that the service.
parties refer to it as a purchase or some other contract. (n)
The same considerations provided for in this section, insofar as they may be
Section 61. Pre-incorporation subscription. – A subscription for shares of stock applicable, may be used for the issuance of bonds by the corporation.
of a corporation still to be formed shall be irrevocable for a period of at least six
(6) months from the date of subscription, unless all of the other subscribers The issued price of no-par value shares may be fixed in the articles of
consent to the revocation, or unless the incorporation of said corporation fails to incorporation or by the board of directors pursuant to authority conferred upon it
materialize within said period or within a longer period as may be stipulated in the by the articles of incorporation or the by-laws, or in the absence thereof, by the
contract of subscription: Provided, That no pre-incorporation subscription may be stockholders representing at least a majority of the outstanding capital stock at a
revoked after the submission of the articles of incorporation to the Securities and meeting duly called for the purpose. (5 and 16)
Exchange Commission. (n)
Section 63. Certificate of stock and transfer of shares. – The capital stock of stock
Section 62. Consideration for stocks. – Stocks shall not be issued for a corporations shall be divided into shares for which certificates signed by the
consideration less than the par or issued price thereof. Consideration for the president or vice president, countersigned by the secretary or assistant secretary,
issuance of stock may be any or a combination of any two or more of the and sealed with the seal of the corporation shall be issued in accordance with the
following: by-laws. Shares of stock so issued are personal property and may be transferred by
delivery of the certificate or certificates indorsed by the owner or his attorney-in-
1. Actual cash paid to the corporation; fact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in the
2. Property, tangible or intangible, actually received by the corporation and books of the corporation showing the names of the parties to the transaction, the
necessary or convenient for its use and lawful purposes at a fair valuation equal to date of the transfer, the number of the certificate or certificates and the number of
the par or issued value of the stock issued; shares transferred.

3. Labor performed for or services actually rendered to the corporation; No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation. (35)
4. Previously incurred indebtedness of the corporation;
Section 64. Issuance of stock certificates. – No certificate of stock shall be issued
5. Amounts transferred from unrestricted retained earnings to stated capital; and to a subscriber until the full amount of his subscription together with interest and
expenses (in case of delinquent shares), if any is due, has been paid. (37)
6. Outstanding shares exchanged for stocks in the event of reclassification or
conversion.
Section 65. Liability of directors for watered stocks. – Any director or officer of a Notice of said sale, with a copy of the resolution, shall be sent to every delinquent
corporation consenting to the issuance of stocks for a consideration less than its stockholder either personally or by registered mail. The same shall furthermore be
par or issued value or for a consideration in any form other than cash, valued in published once a week for two (2) consecutive weeks in a newspaper of general
excess of its fair value, or who, having knowledge thereof, does not forthwith circulation in the province or city where the principal office of the corporation is
express his objection in writing and file the same with the corporate secretary, located.
shall be solidarily, liable with the stockholder concerned to the corporation and its
creditors for the difference between the fair value received at the time of issuance Unless the delinquent stockholder pays to the corporation, on or before the date
of the stock and the par or issued value of the same. (n) specified for the sale of the delinquent stock, the balance due on his subscription,
plus accrued interest, costs of advertisement and expenses of sale, or unless the
Section 66. Interest on unpaid subscriptions. – Subscribers for stock shall pay to board of directors otherwise orders, said delinquent stock shall be sold at public
the corporation interest on all unpaid subscriptions from the date of subscription, auction to such bidder who shall offer to pay the full amount of the balance on the
if so required by, and at the rate of interest fixed in the by-laws. If no rate of subscription together with accrued interest, costs of advertisement and expenses of
interest is fixed in the by-laws, such rate shall be deemed to be the legal rate. (37) sale, for the smallest number of shares or fraction of a share. The stock so
purchased shall be transferred to such purchaser in the books of the corporation
Section 67. Payment of balance of subscription. – Subject to the provisions of the and a certificate for such stock shall be issued in his favor. The remaining shares,
contract of subscription, the board of directors of any stock corporation may at if any, shall be credited in favor of the delinquent stockholder who shall likewise
any time declare due and payable to the corporation unpaid subscriptions to the be entitled to the issuance of a certificate of stock covering such shares.
capital stock and may collect the same or such percentage thereof, in either case
with accrued interest, if any, as it may deem necessary. Should there be no bidder at the public auction who offers to pay the full amount
of the balance on the subscription together with accrued interest, costs of
Payment of any unpaid subscription or any percentage thereof, together with the advertisement and expenses of sale, for the smallest number of shares or fraction
interest accrued, if any, shall be made on the date specified in the contract of of a share, the corporation may, subject to the provisions of this Code, bid for the
subscription or on the date stated in the call made by the board. Failure to pay on same, and the total amount due shall be credited as paid in full in the books of the
such date shall render the entire balance due and payable and shall make the corporation. Title to all the shares of stock covered by the subscription shall be
stockholder liable for interest at the legal rate on such balance, unless a different vested in the corporation as treasury shares and may be disposed of by said
rate of interest is provided in the by-laws, computed from such date until full corporation in accordance with the provisions of this Code. (39a-46a)
payment. If within thirty (30) days from the said date no payment is made, all
stocks covered by said subscription shall thereupon become delinquent and shall Section 69. When sale may be questioned. – No action to recover delinquent stock
be subject to sale as hereinafter provided, unless the board of directors orders sold can be sustained upon the ground of irregularity or defect in the notice of
otherwise. (38) sale, or in the sale itself of the delinquent stock, unless the party seeking to
maintain such action first pays or tenders to the party holding the stock the sum
Section 68. Delinquency sale. – The board of directors may, by resolution, order for which the same was sold, with interest from the date of sale at the legal rate;
the sale of delinquent stock and shall specifically state the amount due on each and no such action shall be maintained unless it is commenced by the filing of a
subscription plus all accrued interest, and the date, time and place of the sale complaint within six (6) months from the date of sale. (47a)
which shall not be less than thirty (30) days nor more than sixty (60) days from
the date the stocks become delinquent. Section 70. Court action to recover unpaid subscription. – Nothing in this Code
shall prevent the corporation from collecting by action in a court of proper
jurisdiction the amount due on any unpaid subscription, with accrued interest, may be required, effective for a period of one (1) year, for such amount and in
costs and expenses. (49a) such form and with such sureties as may be satisfactory to the board of directors,
in which case a new certificate may be issued even before the expiration of the
Section 71. Effect of delinquency. – No delinquent stock shall be voted for or be one (1) year period provided herein: Provided, That if a contest has been presented
entitled to vote or to representation at any stockholder’s meeting, nor shall the to said corporation or if an action is pending in court regarding the ownership of
holder thereof be entitled to any of the rights of a stockholder except the right to said certificate of stock which has been lost, stolen or destroyed, the issuance of
dividends in accordance with the provisions of this Code, until and unless he pays the new certificate of stock in lieu thereof shall be suspended until the final
the amount due on his subscription with accrued interest, and the costs and decision by the court regarding the ownership of said certificate of stock which
expenses of advertisement, if any. (50a) has been lost, stolen or destroyed.

Section 72. Rights of unpaid shares. – Holders of subscribed shares not fully paid Except in case of fraud, bad faith, or negligence on the part of the corporation and
which are not delinquent shall have all the rights of a stockholder. (n) its officers, no action may be brought against any corporation which shall have
issued certificate of stock in lieu of those lost, stolen or destroyed pursuant to the
Section 73. Lost or destroyed certificates. – The following procedure shall be procedure above-described. (R.A. 201a)
followed for the issuance by a corporation of new certificates of stock in lieu of
those which have been lost, stolen or destroyed: TITLE VIII

1. The registered owner of a certificate of stock in a corporation or his legal CORPORATE BOOKS AND RECORDS
representative shall file with the corporation an affidavit in triplicate setting forth,
if possible, the circumstances as to how the certificate was lost, stolen or Section 74. Books to be kept; stock transfer agent. – Every corporation shall keep
destroyed, the number of shares represented by such certificate, the serial number and carefully preserve at its principal office a record of all business transactions
of the certificate and the name of the corporation which issued the same. He shall and minutes of all meetings of stockholders or members, or of the board of
also submit such other information and evidence which he may deem necessary; directors or trustees, in which shall be set forth in detail the time and place of
holding the meeting, how authorized, the notice given, whether the meeting was
2. After verifying the affidavit and other information and evidence with the books regular or special, if special its object, those present and absent, and every act
of the corporation, said corporation shall publish a notice in a newspaper of done or ordered done at the meeting. Upon the demand of any director, trustee,
general circulation published in the place where the corporation has its principal stockholder or member, the time when any director, trustee, stockholder or
office, once a week for three (3) consecutive weeks at the expense of the member entered or left the meeting must be noted in the minutes; and on a similar
registered owner of the certificate of stock which has been lost, stolen or demand, the yeas and nays must be taken on any motion or proposition, and a
destroyed. The notice shall state the name of said corporation, the name of the record thereof carefully made. The protest of any director, trustee, stockholder or
registered owner and the serial number of said certificate, and the number of member on any action or proposed action must be recorded in full on his demand.
shares represented by such certificate, and that after the expiration of one (1) year
from the date of the last publication, if no contest has been presented to said The records of all business transactions of the corporation and the minutes of any
corporation regarding said certificate of stock, the right to make such contest shall meetings shall be open to inspection by any director, trustee, stockholder or
be barred and said corporation shall cancel in its books the certificate of stock member of the corporation at reasonable hours on business days and he may
which has been lost, stolen or destroyed and issue in lieu thereof new certificate of demand, in writing, for a copy of excerpts from said records or minutes, at his
stock, unless the registered owner files a bond or other security in lieu thereof as expense.
Any officer or agent of the corporation who shall refuse to allow any director, end of the last taxable year and a profit or loss statement for said taxable year,
trustees, stockholder or member of the corporation to examine and copy excerpts showing in reasonable detail its assets and liabilities and the result of its
from its records or minutes, in accordance with the provisions of this Code, shall operations.
be liable to such director, trustee, stockholder or member for damages, and in
addition, shall be guilty of an offense which shall be punishable under Section 144 At the regular meeting of stockholders or members, the board of directors or
of this Code: Provided, That if such refusal is made pursuant to a resolution or trustees shall present to such stockholders or members a financial report of the
order of the board of directors or trustees, the liability under this section for such operations of the corporation for the preceding year, which shall include financial
action shall be imposed upon the directors or trustees who voted for such refusal: statements, duly signed and certified by an independent certified public
and Provided, further, That it shall be a defense to any action under this section accountant.
that the person demanding to examine and copy excerpts from the corporation’s
records and minutes has improperly used any information secured through any However, if the paid-up capital of the corporation is less than P50,000.00, the
prior examination of the records or minutes of such corporation or of any other financial statements may be certified under oath by the treasurer or any
corporation, or was not acting in good faith or for a legitimate purpose in making responsible officer of the corporation. (n)
his demand.
TITLE IX
Stock corporations must also keep a book to be known as the “stock and transfer
book”, in which must be kept a record of all stocks in the names of the MERGER AND CONSOLIDATION
stockholders alphabetically arranged; the installments paid and unpaid on all stock
for which subscription has been made, and the date of payment of any installment; Section 76. Plan or merger of consolidation. – Two or more corporations may
a statement of every alienation, sale or transfer of stock made, the date thereof, merge into a single corporation which shall be one of the constituent corporations
and by and to whom made; and such other entries as the by-laws may prescribe. or may consolidate into a new single corporation which shall be the consolidated
The stock and transfer book shall be kept in the principal office of the corporation corporation.
or in the office of its stock transfer agent and shall be open for inspection by any
director or stockholder of the corporation at reasonable hours on business days. The board of directors or trustees of each corporation, party to the merger or
consolidation, shall approve a plan of merger or consolidation setting forth the
No stock transfer agent or one engaged principally in the business of registering following:
transfers of stocks in behalf of a stock corporation shall be allowed to operate in
the Philippines unless he secures a license from the Securities and Exchange 1. The names of the corporations proposing to merge or consolidate, hereinafter
Commission and pays a fee as may be fixed by the Commission, which shall be referred to as the constituent corporations;
renewable annually: Provided, That a stock corporation is not precluded from
performing or making transfer of its own stocks, in which case all the rules and 2. The terms of the merger or consolidation and the mode of carrying the same
regulations imposed on stock transfer agents, except the payment of a license fee into effect;
herein provided, shall be applicable. (51a and 32a; P.B. No. 268.)
3. A statement of the changes, if any, in the articles of incorporation of the
Section 75. Right to financial statements. – Within ten (10) days from receipt of a surviving corporation in case of merger; and, with respect to the consolidated
written request of any stockholder or member, the corporation shall furnish to him corporation in case of consolidation, all the statements required to be set forth in
its most recent financial statement, which shall include a balance sheet as of the the articles of incorporation for corporations organized under this Code; and
4. Such other provisions with respect to the proposed merger or consolidation as 2. As to stock corporations, the number of shares outstanding, or in the case of
are deemed necessary or desirable. (n) non-stock corporations, the number of members; and

Section 77. Stockholder’s or member’s approval. – Upon approval by majority 3. As to each corporation, the number of shares or members voting for and against
vote of each of the board of directors or trustees of the constituent corporations of such plan, respectively. (n)
the plan of merger or consolidation, the same shall be submitted for approval by
the stockholders or members of each of such corporations at separate corporate Section 79. Effectivity of merger or consolidation. – The articles of merger or of
meetings duly called for the purpose. Notice of such meetings shall be given to all consolidation, signed and certified as herein above required, shall be submitted to
stockholders or members of the respective corporations, at least two (2) weeks the Securities and Exchange Commission in quadruplicate for its approval:
prior to the date of the meeting, either personally or by registered mail. Said notice Provided, That in the case of merger or consolidation of banks or banking
shall state the purpose of the meeting and shall include a copy or a summary of the institutions, building and loan associations, trust companies, insurance companies,
plan of merger or consolidation. The affirmative vote of stockholders representing public utilities, educational institutions and other special corporations governed by
at least two-thirds (2/3) of the outstanding capital stock of each corporation in the special laws, the favorable recommendation of the appropriate government agency
case of stock corporations or at least two-thirds (2/3) of the members in the case shall first be obtained. If the Commission is satisfied that the merger or
of non-stock corporations shall be necessary for the approval of such plan. Any consolidation of the corporations concerned is not inconsistent with the provisions
dissenting stockholder in stock corporations may exercise his appraisal right in of this Code and existing laws, it shall issue a certificate of merger or of
accordance with the Code: Provided, That if after the approval by the stockholders consolidation, at which time the merger or consolidation shall be effective.
of such plan, the board of directors decides to abandon the plan, the appraisal right
shall be extinguished. If, upon investigation, the Securities and Exchange Commission has reason to
believe that the proposed merger or consolidation is contrary to or inconsistent
Any amendment to the plan of merger or consolidation may be made, provided with the provisions of this Code or existing laws, it shall set a hearing to give the
such amendment is approved by majority vote of the respective boards of directors corporations concerned the opportunity to be heard. Written notice of the date,
or trustees of all the constituent corporations and ratified by the affirmative vote time and place of hearing shall be given to each constituent corporation at least
of stockholders representing at least two-thirds (2/3) of the outstanding capital two (2) weeks before said hearing. The Commission shall thereafter proceed as
stock or of two-thirds (2/3) of the members of each of the constituent provided in this Code. (n)
corporations. Such plan, together with any amendment, shall be considered as the
agreement of merger or consolidation. (n) Section 80. Effects of merger or consolidation. – The merger or consolidation
shall have the following effects:
Section 78. Articles of merger or consolidation. – After the approval by the
stockholders or members as required by the preceding section, articles of merger 1. The constituent corporations shall become a single corporation which, in case
or articles of consolidation shall be executed by each of the constituent of merger, shall be the surviving corporation designated in the plan of merger;
corporations, to be signed by the president or vice-president and certified by the and, in case of consolidation, shall be the consolidated corporation designated in
secretary or assistant secretary of each corporation setting forth: the plan of consolidation;

1. The plan of the merger or the plan of consolidation; 2. The separate existence of the constituent corporations shall cease, except that of
the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, 3. In case of merger or consolidation. (n)
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code; Section 82. How right is exercised. – The appraisal right may be exercised by any
stockholder who shall have voted against the proposed corporate action, by
4. The surviving or the consolidated corporation shall thereupon and thereafter making a written demand on the corporation within thirty (30) days after the date
possess all the rights, privileges, immunities and franchises of each of the on which the vote was taken for payment of the fair value of his shares: Provided,
constituent corporations; and all property, real or personal, and all receivables due That failure to make the demand within such period shall be deemed a waiver of
on whatever account, including subscriptions to shares and other choses in action, the appraisal right. If the proposed corporate action is implemented or affected,
and all and every other interest of, or belonging to, or due to each constituent the corporation shall pay to such stockholder, upon surrender of the certificate or
corporation, shall be deemed transferred to and vested in such surviving or certificates of stock representing his shares, the fair value thereof as of the day
consolidated corporation without further act or deed; and prior to the date on which the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
5. The surviving or consolidated corporation shall be responsible and liable for all
the liabilities and obligations of each of the constituent corporations in the same If within a period of sixty (60) days from the date the corporate action was
manner as if such surviving or consolidated corporation had itself incurred such approved by the stockholders, the withdrawing stockholder and the corporation
liabilities or obligations; and any pending claim, action or proceeding brought by cannot agree on the fair value of the shares, it shall be determined and appraised
or against any of such constituent corporations may be prosecuted by or against by three (3) disinterested persons, one of whom shall be named by the
the surviving or consolidated corporation. The rights of creditors or liens upon the stockholder, another by the corporation, and the third by the two thus chosen. The
property of any of such constituent corporations shall not be impaired by such findings of the majority of the appraisers shall be final, and their award shall be
merger or consolidation. (n) paid by the corporation within thirty (30) days after such award is made: Provided,
That no payment shall be made to any dissenting stockholder unless the
TITLE X corporation has unrestricted retained earnings in its books to cover such payment:
and Provided, further, That upon payment by the corporation of the agreed or
APPRAISAL RIGHT awarded price, the stockholder shall forthwith transfer his shares to the
corporation. (n)
Section 81. Instances of appraisal right. – Any stockholder of a corporation shall
have the right to dissent and demand payment of the fair value of his shares in the Section 83. Effect of demand and termination of right. – From the time of demand
following instances: for payment of the fair value of a stockholder’s shares until either the
abandonment of the corporate action involved or the purchase of the said shares
1. In case any amendment to the articles of incorporation has the effect of by the corporation, all rights accruing to such shares, including voting and
changing or restricting the rights of any stockholder or class of shares, or of dividend rights, shall be suspended in accordance with the provisions of this Code,
authorizing preferences in any respect superior to those of outstanding shares of except the right of such stockholder to receive payment of the fair value thereof:
any class, or of extending or shortening the term of corporate existence; Provided, That if the dissenting stockholder is not paid the value of his shares
within 30 days after the award, his voting and dividend rights shall immediately
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition be restored. (n)
of all or substantially all of the corporate property and assets as provided in the
Code; and
Section 84. When right to payment ceases. – No demand for payment under this Provided, That any profit which a non-stock corporation may obtain as an incident
Title may be withdrawn unless the corporation consents thereto. If, however, such to its operations shall, whenever necessary or proper, be used for the furtherance
demand for payment is withdrawn with the consent of the corporation, or if the of the purpose or purposes for which the corporation was organized, subject to the
proposed corporate action is abandoned or rescinded by the corporation or provisions of this Title.
disapproved by the Securities and Exchange Commission where such approval is
necessary, or if the Securities and Exchange Commission determines that such The provisions governing stock corporation, when pertinent, shall be applicable to
stockholder is not entitled to the appraisal right, then the right of said stockholder non-stock corporations, except as may be covered by specific provisions of this
to be paid the fair value of his shares shall cease, his status as a stockholder shall Title. (n)
thereupon be restored, and all dividend distributions which would have accrued on
his shares shall be paid to him. (n) Section 88. Purposes. – Non-stock corporations may be formed or organized for
charitable, religious, educational, professional, cultural, fraternal, literary,
Section 85. Who bears costs of appraisal. – The costs and expenses of appraisal scientific, social, civic service, or similar purposes, like trade, industry,
shall be borne by the corporation, unless the fair value ascertained by the agricultural and like chambers, or any combination thereof, subject to the special
appraisers is approximately the same as the price which the corporation may have provisions of this Title governing particular classes of non-stock corporations. (n)
offered to pay the stockholder, in which case they shall be borne by the latter. In
the case of an action to recover such fair value, all costs and expenses shall be CHAPTER I
assessed against the corporation, unless the refusal of the stockholder to receive MEMBERS
payment was unjustified. (n)
Section 89. Right to vote. – The right of the members of any class or classes to
Section 86. Notation on certificates; rights of transferee. – Within ten (10) days vote may be limited, broadened or denied to the extent specified in the articles of
after demanding payment for his shares, a dissenting stockholder shall submit the incorporation or the by-laws. Unless so limited, broadened or denied, each
certificates of stock representing his shares to the corporation for notation thereon member, regardless of class, shall be entitled to one vote.
that such shares are dissenting shares. His failure to do so shall, at the option of
the corporation, terminate his rights under this Title. If shares represented by the Unless otherwise provided in the articles of incorporation or the by-laws, a
certificates bearing such notation are transferred, and the certificates consequently member may vote by proxy in accordance with the provisions of this Code. (n)
cancelled, the rights of the transferor as a dissenting stockholder under this Title
shall cease and the transferee shall have all the rights of a regular stockholder; and Voting by mail or other similar means by members of non-stock corporations may
all dividend distributions which would have accrued on such shares shall be paid be authorized by the by-laws of non-stock corporations with the approval of, and
to the transferee. (n) under such conditions which may be prescribed by, the Securities and Exchange
Commission.
TITLE XI
Section 90. Non-transferability of membership. – Membership in a non-stock
NON-STOCK CORPORATIONS corporation and all rights arising therefrom are personal and non-transferable,
unless the articles of incorporation or the by-laws otherwise provide. (n)
Section 87. Definition. – For the purposes of this Code, a non-stock corporation is
one where no part of its income is distributable as dividends to its members, Section 91. Termination of membership. – Membership shall be terminated in the
trustees, or officers, subject to the provisions of this Code on dissolution: manner and for the causes provided in the articles of incorporation or the by-laws.
Termination of membership shall have the effect of extinguishing all rights of a 1. All liabilities and obligations of the corporation shall be paid, satisfied and
member in the corporation or in its property, unless otherwise provided in the discharged, or adequate provision shall be made therefore;
articles of incorporation or the by-laws. (n)
2. Assets held by the corporation upon a condition requiring return, transfer or
CHAPTER II conveyance, and which condition occurs by reason of the dissolution, shall be
TRUSTEES AND OFFICES returned, transferred or conveyed in accordance with such requirements;

Section 92. Election and term of trustees. – Unless otherwise provided in the 3. Assets received and held by the corporation subject to limitations permitting
articles of incorporation or the by-laws, the board of trustees of non-stock their use only for charitable, religious, benevolent, educational or similar
corporations, which may be more than fifteen (15) in number as may be fixed in purposes, but not held upon a condition requiring return, transfer or conveyance
their articles of incorporation or by-laws, shall, as soon as organized, so classify by reason of the dissolution, shall be transferred or conveyed to one or more
themselves that the term of office of one-third (1/3) of their number shall expire corporations, societies or organizations engaged in activities in the Philippines
every year; and subsequent elections of trustees comprising one-third (1/3) of the substantially similar to those of the dissolving corporation according to a plan of
board of trustees shall be held annually and trustees so elected shall have a term of distribution adopted pursuant to this Chapter;
three (3) years. Trustees thereafter elected to fill vacancies occurring before the
expiration of a particular term shall hold office only for the unexpired period. 4. Assets other than those mentioned in the preceding paragraphs, if any, shall be
distributed in accordance with the provisions of the articles of incorporation or the
No person shall be elected as trustee unless he is a member of the corporation. by-laws, to the extent that the articles of incorporation or the by-laws, determine
the distributive rights of members, or any class or classes of members, or provide
Unless otherwise provided in the articles of incorporation or the by-laws, officers for distribution; and
of a non-stock corporation may be directly elected by the members. (n)
5. In any other case, assets may be distributed to such persons, societies,
Section 93. Place of meetings. – The by-laws may provide that the members of a organizations or corporations, whether or not organized for profit, as may be
non-stock corporation may hold their regular or special meetings at any place even specified in a plan of distribution adopted pursuant to this Chapter. (n)
outside the place where the principal office of the corporation is located:
Provided, That proper notice is sent to all members indicating the date, time and Section 95. Plan of distribution of assets. – A plan providing for the distribution
place of the meeting: and Provided, further, That the place of meeting shall be of assets, not inconsistent with the provisions of this Title, may be adopted by a
within the Philippines. (n) non-stock corporation in the process of dissolution in the following manner:

CHAPTER III The board of trustees shall, by majority vote, adopt a resolution recommending a
DISTRIBUTION OF ASSETS IN NON-STOCK CORPORATIONS plan of distribution and directing the submission thereof to a vote at a regular or
special meeting of members having voting rights. Written notice setting forth the
Section 94. Rules of distribution. – In case dissolution of a non-stock corporation proposed plan of distribution or a summary thereof and the date, time and place of
in accordance with the provisions of this Code, its assets shall be applied and such meeting shall be given to each member entitled to vote, within the time and
distributed as follows: in the manner provided in this Code for the giving of notice of meetings to
members. Such plan of distribution shall be adopted upon approval of at least two-
thirds (2/3) of the members having voting rights present or represented by proxy 3. For a greater quorum or voting requirements in meetings of stockholders or
at such meeting. (n) directors than those provided in this Code.

TITLE XII The articles of incorporation of a close corporation may provide that the business
of the corporation shall be managed by the stockholders of the corporation rather
CLOSE CORPORATIONS than by a board of directors. So long as this provision continues in effect:

Section 96. Definition and applicability of Title. – A close corporation, within the 1. No meeting of stockholders need be called to elect directors;
meaning of this Code, is one whose articles of incorporation provide that: (1) All
the corporation’s issued stock of all classes, exclusive of treasury shares, shall be 2. Unless the context clearly requires otherwise, the stockholders of the
held of record by not more than a specified number of persons, not exceeding corporation shall be deemed to be directors for the purpose of applying the
twenty (20); (2) all the issued stock of all classes shall be subject to one or more provisions of this Code; and
specified restrictions on transfer permitted by this Title; and (3) The corporation
shall not list in any stock exchange or make any public offering of any of its stock 3. The stockholders of the corporation shall be subject to all liabilities of directors.
of any class. Notwithstanding the foregoing, a corporation shall not be deemed a
close corporation when at least two-thirds (2/3) of its voting stock or voting rights The articles of incorporation may likewise provide that all officers or employees
is owned or controlled by another corporation which is not a close corporation or that specified officers or employees shall be elected or appointed by the
within the meaning of this Code. stockholders, instead of by the board of directors.

Any corporation may be incorporated as a close corporation, except mining or oil Section 98. Validity of restrictions on transfer of shares. – Restrictions on the
companies, stock exchanges, banks, insurance companies, public utilities, right to transfer shares must appear in the articles of incorporation and in the by-
educational institutions and corporations declared to be vested with public interest laws as well as in the certificate of stock; otherwise, the same shall not be binding
in accordance with the provisions of this Code. on any purchaser thereof in good faith. Said restrictions shall not be more onerous
than granting the existing stockholders or the corporation the option to purchase
The provisions of this Title shall primarily govern close corporations: Provided, the shares of the transferring stockholder with such reasonable terms, conditions
That the provisions of other Titles of this Code shall apply suppletorily except or period stated therein. If upon the expiration of said period, the existing
insofar as this Title otherwise provides. stockholders or the corporation fails to exercise the option to purchase, the
transferring stockholder may sell his shares to any third person.
Section 97. Articles of incorporation. – The articles of incorporation of a close
corporation may provide: Section 99. Effects of issuance or transfer of stock in breach of qualifying
conditions. –
1. For a classification of shares or rights and the qualifications for owning or
holding the same and restrictions on their transfers as may be stated therein, 1. If stock of a close corporation is issued or transferred to any person who is not
subject to the provisions of the following section; entitled under any provision of the articles of incorporation to be a holder of
record of its stock, and if the certificate for such stock conspicuously shows the
2. For a classification of directors into one or more classes, each of whom may be qualifications of the persons entitled to be holders of record thereof, such person is
voted for and elected solely by a particular class of stock; and
conclusively presumed to have notice of the fact of his ineligibility to be a 1. Agreements by and among stockholders executed before the formation and
stockholder. organization of a close corporation, signed by all stockholders, shall survive the
incorporation of such corporation and shall continue to be valid and binding
2. If the articles of incorporation of a close corporation states the number of between and among such stockholders, if such be their intent, to the extent that
persons, not exceeding twenty (20), who are entitled to be holders of record of its such agreements are not inconsistent with the articles of incorporation,
stock, and if the certificate for such stock conspicuously states such number, and irrespective of where the provisions of such agreements are contained, except
if the issuance or transfer of stock to any person would cause the stock to be held those required by this Title to be embodied in said articles of incorporation.
by more than such number of persons, the person to whom such stock is issued or
transferred is conclusively presumed to have notice of this fact. 2. An agreement between two or more stockholders, if in writing and signed by
the parties thereto, may provide that in exercising any voting rights, the shares
3. If a stock certificate of any close corporation conspicuously shows a restriction held by them shall be voted as therein provided, or as they may agree, or as
on transfer of stock of the corporation, the transferee of the stock is conclusively determined in accordance with a procedure agreed upon by them.
presumed to have notice of the fact that he has acquired stock in violation of the
restriction, if such acquisition violates the restriction. 3. No provision in any written agreement signed by the stockholders, relating to
any phase of the corporate affairs, shall be invalidated as between the parties on
4. Whenever any person to whom stock of a close corporation has been issued or the ground that its effect is to make them partners among themselves.
transferred has, or is conclusively presumed under this section to have, notice
either (a) that he is a person not eligible to be a holder of stock of the corporation, 4. A written agreement among some or all of the stockholders in a close
or (b) that transfer of stock to him would cause the stock of the corporation to be corporation shall not be invalidated on the ground that it so relates to the conduct
held by more than the number of persons permitted by its articles of incorporation of the business and affairs of the corporation as to restrict or interfere with the
to hold stock of the corporation, or (c) that the transfer of stock is in violation of a discretion or powers of the board of directors: Provided, That such agreement
restriction on transfer of stock, the corporation may, at its option, refuse to register shall impose on the stockholders who are parties thereto the liabilities for
the transfer of stock in the name of the transferee. managerial acts imposed by this Code on directors.

5. The provisions of subsection (4) shall not be applicable if the transfer of stock, 5. To the extent that the stockholders are actively engaged in the management or
though contrary to subsections (1), (2) or (3), has been consented to by all the operation of the business and affairs of a close corporation, the stockholders shall
stockholders of the close corporation, or if the close corporation has amended its be held to strict fiduciary duties to each other and among themselves. Said
articles of incorporation in accordance with this Title. stockholders shall be personally liable for corporate torts unless the corporation
has obtained reasonably adequate liability insurance.
6. The term “transfer”, as used in this section, is not limited to a transfer for value.
Section 101. When board meeting is unnecessary or improperly held.  – Unless
7. The provisions of this section shall not impair any right which the transferee the by-laws provide otherwise, any action by the directors of a close corporation
may have to rescind the transfer or to recover under any applicable warranty, without a meeting shall nevertheless be deemed valid if:
express or implied.
1. Before or after such action is taken, written consent thereto is signed by all the
Section 100. Agreements by stockholders. – directors; or
2. All the stockholders have actual or implied knowledge of the action and make stockholder, shall have the power to arbitrate the dispute. In the exercise of such
no prompt objection thereto in writing; or power, the Commission shall have authority to make such order as it deems
appropriate, including an order: (1) cancelling or altering any provision contained
3. The directors are accustomed to take informal action with the express or in the articles of incorporation, by-laws, or any stockholder’s agreement; (2)
implied acquiescence of all the stockholders; or cancelling, altering or enjoining any resolution or act of the corporation or its
board of directors, stockholders, or officers; (3) directing or prohibiting any act of
4. All the directors have express or implied knowledge of the action in question the corporation or its board of directors, stockholders, officers, or other persons
and none of them makes prompt objection thereto in writing. party to the action; (4) requiring the purchase at their fair value of shares of any
stockholder, either by the corporation regardless of the availability of unrestricted
If a director’s meeting is held without proper call or notice, an action taken therein retained earnings in its books, or by the other stockholders; (5) appointing a
within the corporate powers is deemed ratified by a director who failed to attend, provisional director; (6) dissolving the corporation; or (7) granting such other
unless he promptly files his written objection with the secretary of the corporation relief as the circumstances may warrant.
after having knowledge thereof.
A provisional director shall be an impartial person who is neither a stockholder
Section 102. Pre-emptive right in close corporations. – The pre-emptive right of nor a creditor of the corporation or of any subsidiary or affiliate of the
stockholders in close corporations shall extend to all stock to be issued, including corporation, and whose further qualifications, if any, may be determined by the
reissuance of treasury shares, whether for money, property or personal services, or Commission. A provisional director is not a receiver of the corporation and does
in payment of corporate debts, unless the articles of incorporation provide not have the title and powers of a custodian or receiver. A provisional director
otherwise. shall have all the rights and powers of a duly elected director of the corporation,
including the right to notice of and to vote at meetings of directors, until such time
Section 103. Amendment of articles of incorporation. – Any amendment to the as he shall be removed by order of the Commission or by all the stockholders. His
articles of incorporation which seeks to delete or remove any provision required compensation shall be determined by agreement between him and the corporation
by this Title to be contained in the articles of incorporation or to reduce a quorum subject to approval of the Commission, which may fix his compensation in the
or voting requirement stated in said articles of incorporation shall not be valid or absence of agreement or in the event of disagreement between the provisional
effective unless approved by the affirmative vote of at least two-thirds (2/3) of the director and the corporation.
outstanding capital stock, whether with or without voting rights, or of such greater
proportion of shares as may be specifically provided in the articles of Section 105. Withdrawal of stockholder or dissolution of corporation. – In
incorporation for amending, deleting or removing any of the aforesaid provisions, addition and without prejudice to other rights and remedies available to a
at a meeting duly called for the purpose. stockholder under this Title, any stockholder of a close corporation may, for any
reason, compel the said corporation to purchase his shares at their fair value,
Section 104. Deadlocks. – Notwithstanding any contrary provision in the articles which shall not be less than their par or issued value, when the corporation has
of incorporation or by-laws or agreement of stockholders of a close corporation, if sufficient assets in its books to cover its debts and liabilities exclusive of capital
the directors or stockholders are so divided respecting the management of the stock: Provided, That any stockholder of a close corporation may, by written
corporation’s business and affairs that the votes required for any corporate action petition to the Securities and Exchange Commission, compel the dissolution of
cannot be obtained, with the consequence that the business and affairs of the such corporation whenever any of acts of the directors, officers or those in control
corporation can no longer be conducted to the advantage of the stockholders of the corporation is illegal, or fraudulent, or dishonest, or oppressive or unfairly
generally, the Securities and Exchange Commission, upon written petition by any
prejudicial to the corporation or any stockholder, or whenever corporate assets are Section 109. Classes of religious corporations. – Religious corporations may be
being misapplied or wasted. incorporated by one or more persons. Such corporations may be classified into
corporations sole and religious societies.
TITLE XIII
Religious corporations shall be governed by this Chapter and by the general
SPECIAL CORPORATIONS provisions on non-stock corporations insofar as they may be applicable. (n)
CHAPTER I – EDUCATIONAL CORPORATIONS
Section 110. Corporation sole. – For the purpose of administering and managing,
Section 106. Incorporation. – Educational corporations shall be governed by as trustee, the affairs, property and temporalities of any religious denomination,
special laws and by the general provisions of this Code. (n) sect or church, a corporation sole may be formed by the chief archbishop, bishop,
priest, minister, rabbi or other presiding elder of such religious denomination, sect
Section 107. Pre-requisites to incorporation. – Except upon favorable or church. (154a)
recommendation of the Ministry of Education and Culture, the Securities and
Exchange Commission shall not accept or approve the articles of incorporation Section 111. Articles of incorporation. – In order to become a corporation sole,
and by-laws of any educational institution. (168a) the chief archbishop, bishop, priest, minister, rabbi or presiding elder of any
religious denomination, sect or church must file with the Securities and Exchange
Section 108. Board of trustees. – Trustees of educational institutions organized as Commission articles of incorporation setting forth the following:
non-stock corporations shall not be less than five (5) nor more than fifteen (15):
Provided, however, That the number of trustees shall be in multiples of five (5). 1. That he is the chief archbishop, bishop, priest, minister, rabbi or presiding elder
of his religious denomination, sect or church and that he desires to become a
Unless otherwise provided in the articles of incorporation on the by-laws, the corporation sole;
board of trustees of incorporated schools, colleges, or other institutions of learning
shall, as soon as organized, so classify themselves that the term of office of one- 2. That the rules, regulations and discipline of his religious denomination, sect or
fifth (1/5) of their number shall expire every year. Trustees thereafter elected to church are not inconsistent with his becoming a corporation sole and do not forbid
fill vacancies, occurring before the expiration of a particular term, shall hold it;
office only for the unexpired period. Trustees elected thereafter to fill vacancies
caused by expiration of term shall hold office for five (5) years. A majority of the 3. That as such chief archbishop, bishop, priest, minister, rabbi or presiding elder,
trustees shall constitute a quorum for the transaction of business. The powers and he is charged with the administration of the temporalities and the management of
authority of trustees shall be defined in the by-laws. the affairs, estate and properties of his religious denomination, sect or church
within his territorial jurisdiction, describing such territorial jurisdiction;
For institutions organized as stock corporations, the number and term of directors
shall be governed by the provisions on stock corporations. (169a) 4. The manner in which any vacancy occurring in the office of chief archbishop,
bishop, priest, minister, rabbi of presiding elder is required to be filled, according
CHAPTER II to the rules, regulations or discipline of the religious denomination, sect or church
RELIGIOUS CORPORATIONS to which he belongs; and
5. The place where the principal office of the corporation sole is to be established corporation sole: Provided, That in cases where the rules, regulations and
and located, which place must be within the Philippines. discipline of the religious denomination, sect or church, religious society or order
concerned represented by such corporation sole regulate the method of acquiring,
The articles of incorporation may include any other provision not contrary to law holding, selling and mortgaging real estate and personal property, such rules,
for the regulation of the affairs of the corporation. (n) regulations and discipline shall control, and the intervention of the courts shall not
be necessary. (159a)
Section 112. Submission of the articles of incorporation. – The articles of
incorporation must be verified, before filing, by affidavit or affirmation of the Section 114. Filling of vacancies. – The successors in office of any chief
chief archbishop, bishop, priest, minister, rabbi or presiding elder, as the case may archbishop, bishop, priest, minister, rabbi or presiding elder in a corporation sole
be, and accompanied by a copy of the commission, certificate of election or letter shall become the corporation sole on their accession to office and shall be
of appointment of such chief archbishop, bishop, priest, minister, rabbi or permitted to transact business as such on the filing with the Securities and
presiding elder, duly certified to be correct by any notary public. Exchange Commission of a copy of their commission, certificate of election, or
letters of appointment, duly certified by any notary public.
From and after the filing with the Securities and Exchange Commission of the
said articles of incorporation, verified by affidavit or affirmation, and During any vacancy in the office of chief archbishop, bishop, priest, minister,
accompanied by the documents mentioned in the preceding paragraph, such chief rabbi or presiding elder of any religious denomination, sect or church incorporated
archbishop, bishop, priest, minister, rabbi or presiding elder shall become a as a corporation sole, the person or persons authorized and empowered by the
corporation sole and all temporalities, estate and properties of the religious rules, regulations or discipline of the religious denomination, sect or church
denomination, sect or church theretofore administered or managed by him as such represented by the corporation sole to administer the temporalities and manage the
chief archbishop, bishop, priest, minister, rabbi or presiding elder shall be held in affairs, estate and properties of the corporation sole during the vacancy shall
trust by him as a corporation sole, for the use, purpose, behalf and sole benefit of exercise all the powers and authority of the corporation sole during such vacancy.
his religious denomination, sect or church, including hospitals, schools, colleges, (158a)
orphan asylums, parsonages and cemeteries thereof. (n)
Section 115. Dissolution. – A corporation sole may be dissolved and its affairs
Section 113. Acquisition and alienation of property. – Any corporation sole may settled voluntarily by submitting to the Securities and Exchange Commission a
purchase and hold real estate and personal property for its church, charitable, verified declaration of dissolution.
benevolent or educational purposes, and may receive bequests or gifts for such
purposes. Such corporation may sell or mortgage real property held by it by The declaration of dissolution shall set forth:
obtaining an order for that purpose from the Court of First Instance of the
province where the property is situated upon proof made to the satisfaction of the 1. The name of the corporation;
court that notice of the application for leave to sell or mortgage has been given by
publication or otherwise in such manner and for such time as said court may have 2. The reason for dissolution and winding up;
directed, and that it is to the interest of the corporation that leave to sell or
mortgage should be granted. The application for leave to sell or mortgage must be 3. The authorization for the dissolution of the corporation by the particular
made by petition, duly verified, by the chief archbishop, bishop, priest, minister, religious denomination, sect or church;
rabbi or presiding elder acting as corporation sole, and may be opposed by any
member of the religious denomination, sect or church represented by the
4. The names and addresses of the persons who are to supervise the winding up of 5. The place where the principal office of the corporation is to be established and
the affairs of the corporation. located, which place must be within the Philippines; and

Upon approval of such declaration of dissolution by the Securities and Exchange 1. The names, nationalities, and residences of the trustees elected by the
Commission, the corporation shall cease to carry on its operations except for the religious society or religious order, or the diocese, synod, or district
purpose of winding up its affairs. (n) organization to serve for the first year or such other period as may be
prescribed by the laws of the religious society or religious order, or of the
Section 116. Religious societies. – Any religious society or religious order, or any diocese, synod, or district organization, the board of trustees to be not less
diocese, synod, or district organization of any religious denomination, sect or than five (5) nor more than fifteen (15). (160a)
church, unless forbidden by the constitution, rules, regulations, or discipline of the
religious denomination, sect or church of which it is a part, or by competent TITLE XIV
authority, may, upon written consent and/or by an affirmative vote at a meeting
called for the purpose of at least two-thirds (2/3) of its membership, incorporate DISSOLUTION
for the administration of its temporalities or for the management of its affairs,
properties and estate by filing with the Securities and Exchange Commission, Section 117. Methods of dissolution. – A corporation formed or organized under
articles of incorporation verified by the affidavit of the presiding elder, secretary, the provisions of this Code may be dissolved voluntarily or involuntarily. (n)
or clerk or other member of such religious society or religious order, or diocese,
synod, or district organization of the religious denomination, sect or church, Section 118. Voluntary dissolution where no creditors are affected. – If
setting forth the following: dissolution of a corporation does not prejudice the rights of any creditor having a
claim against it, the dissolution may be effected by majority vote of the board of
1. That the religious society or religious order, or diocese, synod, or district directors or trustees, and by a resolution duly adopted by the affirmative vote of
organization is a religious organization of a religious denomination, sect or the stockholders owning at least two-thirds (2/3) of the outstanding capital stock
church; or of at least two-thirds (2/3) of the members of a meeting to be held upon call of
the directors or trustees after publication of the notice of time, place and object of
2. That at least two-thirds (2/3) of its membership have given their written consent the meeting for three (3) consecutive weeks in a newspaper published in the place
or have voted to incorporate, at a duly convened meeting of the body; where the principal office of said corporation is located; and if no newspaper is
published in such place, then in a newspaper of general circulation in the
3. That the incorporation of the religious society or religious order, or diocese, Philippines, after sending such notice to each stockholder or member either by
synod, or district organization desiring to incorporate is not forbidden by registered mail or by personal delivery at least thirty (30) days prior to said
competent authority or by the constitution, rules, regulations or discipline of the meeting. A copy of the resolution authorizing the dissolution shall be certified by
religious denomination, sect, or church of which it forms a part; a majority of the board of directors or trustees and countersigned by the secretary
of the corporation. The Securities and Exchange Commission shall thereupon
4. That the religious society or religious order, or diocese, synod, or district issue the certificate of dissolution. (62a)
organization desires to incorporate for the administration of its affairs, properties
and estate; Section 119. Voluntary dissolution where creditors are affected. – Where the
dissolution of a corporation may prejudice the rights of any creditor, the petition
for dissolution shall be filed with the Securities and Exchange Commission. The
petition shall be signed by a majority of its board of directors or trustees or other Section 121. Involuntary dissolution. – A corporation may be dissolved by the
officers having the management of its affairs, verified by its president or secretary Securities and Exchange Commission upon filing of a verified complaint and after
or one of its directors or trustees, and shall set forth all claims and demands proper notice and hearing on the grounds provided by existing laws, rules and
against it, and that its dissolution was resolved upon by the affirmative vote of the regulations. (n)
stockholders representing at least two-thirds (2/3) of the outstanding capital stock
or by at least two-thirds (2/3) of the members at a meeting of its stockholders or Section 122. Corporate liquidation. – Every corporation whose charter expires by
members called for that purpose. its own limitation or is annulled by forfeiture or otherwise, or whose corporate
existence for other purposes is terminated in any other manner, shall nevertheless
If the petition is sufficient in form and substance, the Commission shall, by an be continued as a body corporate for three (3) years after the time when it would
order reciting the purpose of the petition, fix a date on or before which objections have been so dissolved, for the purpose of prosecuting and defending suits by or
thereto may be filed by any person, which date shall not be less than thirty (30) against it and enabling it to settle and close its affairs, to dispose of and convey its
days nor more than sixty (60) days after the entry of the order. Before such date, a property and to distribute its assets, but not for the purpose of continuing the
copy of the order shall be published at least once a week for three (3) consecutive business for which it was established.
weeks in a newspaper of general circulation published in the municipality or city
where the principal office of the corporation is situated, or if there be no such At any time during said three (3) years, the corporation is authorized and
newspaper, then in a newspaper of general circulation in the Philippines, and a empowered to convey all of its property to trustees for the benefit of stockholders,
similar copy shall be posted for three (3) consecutive weeks in three (3) public members, creditors, and other persons in interest. From and after any such
places in such municipality or city. conveyance by the corporation of its property in trust for the benefit of its
stockholders, members, creditors and others in interest, all interest which the
Upon five (5) day’s notice, given after the date on which the right to file corporation had in the property terminates, the legal interest vests in the trustees,
objections as fixed in the order has expired, the Commission shall proceed to hear and the beneficial interest in the stockholders, members, creditors or other persons
the petition and try any issue made by the objections filed; and if no such in interest.
objection is sufficient, and the material allegations of the petition are true, it shall
render judgment dissolving the corporation and directing such disposition of its Upon the winding up of the corporate affairs, any asset distributable to any
assets as justice requires, and may appoint a receiver to collect such assets and pay creditor or stockholder or member who is unknown or cannot be found shall be
the debts of the corporation. (Rule 104, RCa) escheated to the city or municipality where such assets are located.

Section 120. Dissolution by shortening corporate term. – A voluntary dissolution Except by decrease of capital stock and as otherwise allowed by this Code, no
may be effected by amending the articles of incorporation to shorten the corporate corporation shall distribute any of its assets or property except upon lawful
term pursuant to the provisions of this Code. A copy of the amended articles of dissolution and after payment of all its debts and liabilities. (77a, 89a, 16a)
incorporation shall be submitted to the Securities and Exchange Commission in
accordance with this Code. Upon approval of the amended articles of TITLE XV
incorporation of the expiration of the shortened term, as the case may be, the
corporation shall be deemed dissolved without any further proceedings, subject to FOREIGN CORPORATIONS
the provisions of this Code on liquidation. (n)
Section 123. Definition and rights of foreign corporations. – For the purposes of
this Code, a foreign corporation is one formed, organized or existing under any
laws other than those of the Philippines and whose laws allow Filipino citizens 7. A statement of its authorized capital stock and the aggregate number of shares
and corporations to do business in its own country or state. It shall have the right which the corporation has authority to issue, itemized by classes, par value of
to transact business in the Philippines after it shall have obtained a license to shares, shares without par value, and series, if any;
transact business in this country in accordance with this Code and a certificate of
authority from the appropriate government agency. (n) 8. A statement of its outstanding capital stock and the aggregate number of shares
which the corporation has issued, itemized by classes, par value of shares, shares
Section 124. Application to existing foreign corporations. – Every foreign without par value, and series, if any;
corporation which on the date of the effectivity of this Code is authorized to do
business in the Philippines under a license therefore issued to it, shall continue to 9. A statement of the amount actually paid in; and
have such authority under the terms and condition of its license, subject to the
provisions of this Code and other special laws. (n) 10. Such additional information as may be necessary or appropriate in order to
enable the Securities and Exchange Commission to determine whether such
Section 125. Application for a license. – A foreign corporation applying for a corporation is entitled to a license to transact business in the Philippines, and to
license to transact business in the Philippines shall submit to the Securities and determine and assess the fees payable.
Exchange Commission a copy of its articles of incorporation and by-laws,
certified in accordance with law, and their translation to an official language of the Attached to the application for license shall be a duly executed certificate under
Philippines, if necessary. The application shall be under oath and, unless already oath by the authorized official or officials of the jurisdiction of its incorporation,
stated in its articles of incorporation, shall specifically set forth the following: attesting to the fact that the laws of the country or state of the applicant allow
Filipino citizens and corporations to do business therein, and that the applicant is
1. The date and term of incorporation; an existing corporation in good standing. If such certificate is in a foreign
language, a translation thereof in English under oath of the translator shall be
2. The address, including the street number, of the principal office of the attached thereto.
corporation in the country or state of incorporation;
The application for a license to transact business in the Philippines shall likewise
3. The name and address of its resident agent authorized to accept summons and be accompanied by a statement under oath of the president or any other person
process in all legal proceedings and, pending the establishment of a local office, authorized by the corporation, showing to the satisfaction of the Securities and
all notices affecting the corporation; Exchange Commission and other governmental agency in the proper cases that the
applicant is solvent and in sound financial condition, and setting forth the assets
4. The place in the Philippines where the corporation intends to operate; and liabilities of the corporation as of the date not exceeding one (1) year
immediately prior to the filing of the application.
5. The specific purpose or purposes which the corporation intends to pursue in the
transaction of its business in the Philippines: Provided, That said purpose or Foreign banking, financial and insurance corporations shall, in addition to the
purposes are those specifically stated in the certificate of authority issued by the above requirements, comply with the provisions of existing laws applicable to
appropriate government agency; them. In the case of all other foreign corporations, no application for license to
transact business in the Philippines shall be accepted by the Securities and
6. The names and addresses of the present directors and officers of the Exchange Commission without previous authority from the appropriate
corporation; government agency, whenever required by law. (68a)
Section 126. Issuance of a license. – If the Securities and Exchange Commission deposited. In the event the licensee ceases to do business in the Philippines, the
is satisfied that the applicant has complied with all the requirements of this Code securities deposited as aforesaid shall be returned, upon the licensee’s application
and other special laws, rules and regulations, the Commission shall issue a license therefor and upon proof to the satisfaction of the Securities and Exchange
to the applicant to transact business in the Philippines for the purpose or purposes Commission that the licensee has no liability to Philippine residents, including the
specified in such license. Upon issuance of the license, such foreign corporation Government of the Republic of the Philippines. (n)
may commence to transact business in the Philippines and continue to do so for as
long as it retains its authority to act as a corporation under the laws of the country Section 127. Who may be a resident agent. – A resident agent may be either an
or state of its incorporation, unless such license is sooner surrendered, revoked, individual residing in the Philippines or a domestic corporation lawfully
suspended or annulled in accordance with this Code or other special laws. transacting business in the Philippines: Provided, That in the case of an individual,
he must be of good moral character and of sound financial standing. (n)
Within sixty (60) days after the issuance of the license to transact business in the
Philippines, the license, except foreign banking or insurance corporation, shall Section 128. Resident agent; service of process. – The Securities and Exchange
deposit with the Securities and Exchange Commission for the benefit of present Commission shall require as a condition precedent to the issuance of the license to
and future creditors of the licensee in the Philippines, securities satisfactory to the transact business in the Philippines by any foreign corporation that such
Securities and Exchange Commission, consisting of bonds or other evidence of corporation file with the Securities and Exchange Commission a written power of
indebtedness of the Government of the Philippines, its political subdivisions and attorney designating some person who must be a resident of the Philippines, on
instrumentalities, or of government-owned or controlled corporations and entities, whom any summons and other legal processes may be served in all actions or
shares of stock in “registered enterprises” as this term is defined in Republic Act other legal proceedings against such corporation, and consenting that service upon
No. 5186, shares of stock in domestic corporations registered in the stock such resident agent shall be admitted and held as valid as if served upon the duly
exchange, or shares of stock in domestic insurance companies and banks, or any authorized officers of the foreign corporation at its home office. Any such foreign
combination of these kinds of securities, with an actual market value of at least corporation shall likewise execute and file with the Securities and Exchange
one hundred thousand (P100,000.) pesos; Provided, however, That within six (6) Commission an agreement or stipulation, executed by the proper authorities of
months after each fiscal year of the licensee, the Securities and Exchange said corporation, in form and substance as follows:
Commission shall require the licensee to deposit additional securities equivalent in
actual market value to two (2%) percent of the amount by which the licensee’s “The (name of foreign corporation) does hereby stipulate and agree, in
gross income for that fiscal year exceeds five million (P5,000,000.00) pesos. The consideration of its being granted by the Securities and Exchange Commission a
Securities and Exchange Commission shall also require deposit of additional license to transact business in the Philippines, that if at any time said corporation
securities if the actual market value of the securities on deposit has decreased by shall cease to transact business in the Philippines, or shall be without any resident
at least ten (10%) percent of their actual market value at the time they were agent in the Philippines on whom any summons or other legal processes may be
deposited. The Securities and Exchange Commission may at its discretion release served, then in any action or proceeding arising out of any business or transaction
part of the additional securities deposited with it if the gross income of the which occurred in the Philippines, service of any summons or other legal process
licensee has decreased, or if the actual market value of the total securities on may be made upon the Securities and Exchange Commission and that such service
deposit has increased, by more than ten (10%) percent of the actual market value shall have the same force and effect as if made upon the duly-authorized officers
of the securities at the time they were deposited. The Securities and Exchange of the corporation at its home office.”
Commission may, from time to time, allow the licensee to substitute other
securities for those already on deposit as long as the licensee is solvent. Such Whenever such service of summons or other process shall be made upon the
licensee shall be entitled to collect the interest or dividends on the securities Securities and Exchange Commission, the Commission shall, within ten (10) days
thereafter, transmit by mail a copy of such summons or other legal process to the Section 132. Merger or consolidation involving a foreign corporation licensed in
corporation at its home or principal office. The sending of such copy by the the Philippines. – One or more foreign corporations authorized to transact
Commission shall be necessary part of and shall complete such service. All business in the Philippines may merge or consolidate with any domestic
expenses incurred by the Commission for such service shall be paid in advance by corporation or corporations if such is permitted under Philippine laws and by the
the party at whose instance the service is made. law of its incorporation: Provided, That the requirements on merger or
consolidation as provided in this Code are followed.
In case of a change of address of the resident agent, it shall be his or its duty to
immediately notify in writing the Securities and Exchange Commission of the Whenever a foreign corporation authorized to transact business in the Philippines
new address. (72a; and n) shall be a party to a merger or consolidation in its home country or state as
permitted by the law of its incorporation, such foreign corporation shall, within
Section 129. Law applicable. – Any foreign corporation lawfully doing business sixty (60) days after such merger or consolidation becomes effective, file with the
in the Philippines shall be bound by all laws, rules and regulations applicable to Securities and Exchange Commission, and in proper cases with the appropriate
domestic corporations of the same class, except such only as provide for the government agency, a copy of the articles of merger or consolidation duly
creation, formation, organization or dissolution of corporations or those which fix authenticated by the proper official or officials of the country or state under the
the relations, liabilities, responsibilities, or duties of stockholders, members, or laws of which merger or consolidation was effected: Provided, however, That if
officers of corporations to each other or to the corporation. (73a) the absorbed corporation is the foreign corporation doing business in the
Philippines, the latter shall at the same time file a petition for withdrawal of its
Section 130. Amendments to articles of incorporation or by-laws of foreign license in accordance with this Title. (n)
corporations. – Whenever the articles of incorporation or by-laws of a foreign
corporation authorized to transact business in the Philippines are amended, such Section 133. Doing business without a license. – No foreign corporation
foreign corporation shall, within sixty (60) days after the amendment becomes transacting business in the Philippines without a license, or its successors or
effective, file with the Securities and Exchange Commission, and in the proper assigns, shall be permitted to maintain or intervene in any action, suit or
cases with the appropriate government agency, a duly authenticated copy of the proceeding in any court or administrative agency of the Philippines; but such
articles of incorporation or by-laws, as amended, indicating clearly in capital corporation may be sued or proceeded against before Philippine courts or
letters or by underscoring the change or changes made, duly certified by the administrative tribunals on any valid cause of action recognized under Philippine
authorized official or officials of the country or state of incorporation. The filing laws. (69a)
thereof shall not of itself enlarge or alter the purpose or purposes for which such
corporation is authorized to transact business in the Philippines. (n) Section 134. Revocation of license. – Without prejudice to other grounds provided
by special laws, the license of a foreign corporation to transact business in the
Section 131. Amended license. – A foreign corporation authorized to transact Philippines may be revoked or suspended by the Securities and Exchange
business in the Philippines shall obtain an amended license in the event it changes Commission upon any of the following grounds:
its corporate name, or desires to pursue in the Philippines other or additional
purposes, by submitting an application therefor to the Securities and Exchange 1. Failure to file its annual report or pay any fees as required by this Code;
Commission, favorably endorsed by the appropriate government agency in the
proper cases. (n) 2. Failure to appoint and maintain a resident agent in the Philippines as required
by this Title;
3. Failure, after change of its resident agent or of his address, to submit to the withdrawal of license. No certificate of withdrawal shall be issued by the
Securities and Exchange Commission a statement of such change as required by Securities and Exchange Commission unless all the following requirements are
this Title; met;

4. Failure to submit to the Securities and Exchange Commission an authenticated 1. All claims which have accrued in the Philippines have been paid, compromised
copy of any amendment to its articles of incorporation or by-laws or of any or settled;
articles of merger or consolidation within the time prescribed by this Title;
2. All taxes, imposts, assessments, and penalties, if any, lawfully due to the
5. A misrepresentation of any material matter in any application, report, affidavit Philippine Government or any of its agencies or political subdivisions have been
or other document submitted by such corporation pursuant to this Title; paid; and

6. Failure to pay any and all taxes, imposts, assessments or penalties, if any, 3. The petition for withdrawal of license has been published once a week for three
lawfully due to the Philippine Government or any of its agencies or political (3) consecutive weeks in a newspaper of general circulation in the Philippines.
subdivisions;
TITLE XVI
7. Transacting business in the Philippines outside of the purpose or purposes for
which such corporation is authorized under its license; MISCELLANEOUS PROVISIONS

8. Transacting business in the Philippines as agent of or acting for and in behalf of Section 137. Outstanding capital stock defined. – The term “outstanding capital
any foreign corporation or entity not duly licensed to do business in the stock”, as used in this Code, means the total shares of stock issued under binding
Philippines; or subscription agreements to subscribers or stockholders, whether or not fully or
partially paid, except treasury shares. (n)
9. Any other ground as would render it unfit to transact business in the
Philippines. (n) Section 138. Designation of governing boards. – The provisions of specific
provisions of this Code to the contrary notwithstanding, non-stock or special
Section 135. Issuance of certificate of revocation. – Upon the revocation of any corporations may, through their articles of incorporation or their by-laws,
such license to transact business in the Philippines, the Securities and Exchange designate their governing boards by any name other than as board of trustees. (n)
Commission shall issue a corresponding certificate of revocation, furnishing a
copy thereof to the appropriate government agency in the proper cases. Section 139. Incorporation and other fees. – The Securities and Exchange
Commission is hereby authorized to collect and receive fees as authorized by law
The Securities and Exchange Commission shall also mail to the corporation at its or by rules and regulations promulgated by the Commission. (n)
registered office in the Philippines a notice of such revocation accompanied by a
copy of the certificate of revocation. (n) Section 140. Stock ownership in certain corporations. – Pursuant to the duties
specified by Article XIV of the Constitution, the National Economic and
Section 136. Withdrawal of foreign corporations. – Subject to existing laws and Development Authority shall, from time to time, make a determination of whether
regulations, a foreign corporation licensed to transact business in the Philippines the corporate vehicle has been used by any corporation or by business or industry
may be allowed to withdraw from the Philippines by filing a petition for to frustrate the provisions thereof or of applicable laws, and shall submit to the
Batasang Pambansa, whenever deemed necessary, a report of its findings, Section 143. Rule-making power of the Securities and Exchange Commission. –
including recommendations for their prevention or correction. The Securities and Exchange Commission shall have the power and authority to
implement the provisions of this Code, and to promulgate rules and regulations
Maximum limits may be set by the Batasang Pambansa for stockholdings in reasonably necessary to enable it to perform its duties hereunder, particularly in
corporations declared by it to be vested with a public interest pursuant to the the prevention of fraud and abuses on the part of the controlling stockholders,
provisions of this section, belonging to individuals or groups of individuals related members, directors, trustees or officers. (n)
to each other by consanguinity or affinity or by close business interests, or
whenever it is necessary to achieve national objectives, prevent illegal monopolies Section 144. Violations of the Code. – Violations of any of the provisions of this
or combinations in restraint or trade, or to implement national economic policies Code or its amendments not otherwise specifically penalized therein shall be
declared in laws, rules and regulations designed to promote the general welfare punished by a fine of not less than one thousand (P1,000.00) pesos but not more
and foster economic development. than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty
(30) days but not more than five (5) years, or both, in the discretion of the court. If
In recommending to the Batasang Pambansa corporations, businesses or industries the violation is committed by a corporation, the same may, after notice and
to be declared vested with a public interest and in formulating proposals for hearing, be dissolved in appropriate proceedings before the Securities and
limitations on stock ownership, the National Economic and Development Exchange Commission: Provided, That such dissolution shall not preclude the
Authority shall consider the type and nature of the industry, the size of the institution of appropriate action against the director, trustee or officer of the
enterprise, the economies of scale, the geographic location, the extent of Filipino corporation responsible for said violation: Provided, further, That nothing in this
ownership, the labor intensity of the activity, the export potential, as well as other section shall be construed to repeal the other causes for dissolution of a
factors which are germane to the realization and promotion of business and corporation provided in this Code. (190 1/2 a)
industry.
Section 145. Amendment or repeal. – No right or remedy in favor of or against
Section 141. Annual report or corporations. – Every corporation, domestic or any corporation, its stockholders, members, directors, trustees, or officers, nor any
foreign, lawfully doing business in the Philippines shall submit to the Securities liability incurred by any such corporation, stockholders, members, directors,
and Exchange Commission an annual report of its operations, together with a trustees, or officers, shall be removed or impaired either by the subsequent
financial statement of its assets and liabilities, certified by any independent dissolution of said corporation or by any subsequent amendment or repeal of this
certified public accountant in appropriate cases, covering the preceding fiscal year Code or of any part thereof. (n)
and such other requirements as the Securities and Exchange Commission may
require. Such report shall be submitted within such period as may be prescribed by Section 146. Repealing clause. – Except as expressly provided by this Code, all
the Securities and Exchange Commission. (n) laws or parts thereof inconsistent with any provision of this Code shall be deemed
repealed. (n)
Section 142. Confidential nature of examination results. – All interrogatories
propounded by the Securities and Exchange Commission and the answers thereto, Section 147. Separability of provisions. – Should any provision of this Code or
as well as the results of any examination made by the Commission or by any other any part thereof be declared invalid or unconstitutional, the other provisions, so
official authorized by law to make an examination of the operations, books and far as they are separable, shall remain in force. (n)
records of any corporation, shall be kept strictly confidential, except insofar as the
law may require the same to be made public or where such interrogatories, Section 148. Applicability to existing corporations. – All corporations lawfully
answers or results are necessary to be presented as evidence before any court. (n) existing and doing business in the Philippines on the date of the effectivity of this
Code and heretofore authorized, licensed or registered by the Securities and
Exchange Commission, shall be deemed to have been authorized, licensed or
registered under the provisions of this Code, subject to the terms and conditions of
its license, and shall be governed by the provisions hereof: Provided, That if any
such corporation is affected by the new requirements of this Code, said
corporation shall, unless otherwise herein provided, be given a period of not more
than two (2) years from the effectivity of this Code within which to comply with
the same. (n)

Section 149. Effectivity. – This Code shall take effect immediately upon its
approval.

Approved, May 1, 1980