TITLE II (d) The term for which the corporation is to exist, if the

INCORPORATION AND ORGANIZATION OF PRIVATE corporation has not elected perpetual existence;
CORPORATIONS
(e) The names, nationalities, and residence addresses of the
Section 10. Number and Qualifications of Incorporators. - Any incorporators;
person, partnership, association or corporation, singly or
jointly with others but not more than fifteen (15) in number, (f) The number of directors, which shall not be more than
may organize a corporation for any lawful purpose or fifteen (15) or the number of trustees which may be more
purposes: Provided, That natural persons who are licensed to than fifteen (15);
practice a profession, and partnerships or associations
organized for the purpose of practicing a profession, shall not (g) The names, nationalities, and residence addresses of
be allowed to organize as a corporation unless otherwise persons who shall act as directors or trustees until the first
provided under special laws. Incorporators who are natural regular directors or trustees are duly elected and qualified in
persons must be of legal age. accordance with this Code;

Each incorporator of a stock corporation must own or be a (h) If it be a stock corporation, the amount of its authorized
subscriber to at least one (1) share of the capital stock. capital stock, number of shares into which it is divided, the
par value of each, names, nationalities, and subscribers,
A corporation with a single stockholder is considered a One amount subscribed and paid by each on the subscription, and
Person Corporation as described in Title XIII, Chapter III of a statement that some or all of the shares are without par
this Code. value, if applicable;

Section 11. Corporate Term. - A corporation shall have (i) If it be a nonstock corporation, the amount of its capital,
perpetual existence unless its articles of incorporation the names, nationalities, and residence addresses of the
provides otherwise. contributors, and amount contributed by each; and

Corporations with certificates of incorporation issued prior to (j) Such other matters consistent with law and which the
the effectivity of this Code and which continue to exist shall incorporators may deem necessary and convenient.
have perpetual existence, unless the corporation, upon a vote
of its stockholders representing a majority of its articles of An arbitration agreement may be provided in the articles of
incorporation: Provided, That any change in the corporate incorporation pursuant to Section 181 of this Code.1âwphi1
right of dissenting stockholders in accordance with the
provisions of this Code. The Articles of incorporation and applications for amendments
thereto may be filed with the Commission in the form of an
A corporate term for a specific period may be extended or electronic document, in accordance with the Commission's
shortened by amending the articles of incorporation: rule and regulations on electronic filing.
Provided, That no extension may be made earlier than three Section 15. Amendment of Articles of Incorporation. - Unless
(3) years prior to the original or subsequent expiry date(s) otherwise prescribed by this Code or by special law, and for
unless there are justifiable reasons for an earlier extension as legitimate purposes, any provision or matter stated in the
may be determined by the Commission: Provided, further, articles of incorporation may be amended by a majority vote
That such extension of the corporate term shall take effect of the board of directors or trustees and the vote or written
only on the day following the original or subsequent expiry assent of the stockholders representing at least two-thirds
date(s). (2/3) of the outstanding capital stock, without prejudice to
the appraisal right of dissenting stockholders in accordance
A corporation whose term has expired may apply for revival with the provisions of this Code. The articles of incorporation
of its corporate existence, together with all the rights and of a nonstock corporation may be amended by the vote or
privileges under its certificate of incorporation and subject to written assent of majority of the trustees and at least two-
all of its duties, debts and liabilities existing prior to its thirds (2/3) of the members.
revival. Upon approval by the Commission, the corporation
shall be deemed revived and a certificate of revival of The original and amended articles together shall contain all
corporate existence shall be issued, giving it perpetual provisions required by law to be set out in the articles of
existence, unless its application for revival provides incorporation. Amendments to the articles shall be indicated
otherwise. by underscoring the change or changes made, and a copy
thereof duly certified under oath by the corporate secretary
No application for revival of certificate of incorporation of and a majority of the directors or trustees, with a statement
banks, banking and quasi-banking institutions, preneed, that the amendments have been duly approved by the
insurance and trust companies, non-stock savings and loan required vote of the stockholders or members, shall be
associations (NSSLAs), pawnshops, corporations engaged in submitted to the Commission.
money service business, and other financial intermediaries
shall be approved by the Commission unless accompanied by The amendments shall take effect upon their approval by the
a favorable recommendation of the appropriate government Commission or from the date of filing with the said
agency. Commission if not acted upon within six (6) months from the
date of filing for a cause not attributable to the corporation.
Section 12. Minimum Capital Stock Not Required of Stock
Corporations. - Stock corporations shall not be required to Section 16. Grounds When Articles of Incorporation or
have minimum capital stock, except as otherwise specially Amendment May be Disapproved. The Commission may
provided by special law. disapprove the articles of incorporation or any amendment
thereto if the same is not compliant with the requirements of
Section 13. Contents of the Articles of Incorporation. - All this Code: Provided, That the Commission shall give the
corporations shall file with the Commission articles of incorporators, directors, trustees, or officers as reasonable
incorporation in any of the official languages, duly signed and time from receipt of the disapproval within which to modify
acknowledged or authenticated, in such form and manner as the objectionable portions of the articles or amendment. The
may be allowed by the Commission, containing substantially following are ground for such disapproval:
the following matters, except as otherwise prescribed by this
Code or by special law: (a) The articles of incorporation or any amendment thereto is
not substantially in accordance with the form prescribed
(a) The name of corporation; herein;

(b) The specific purpose or purposes for which the corporation (b) The purpose or purposes of the corporation are patently
is being formed. Where a corporation has more than one unconstitutional, illegal, immoral or contrary to government
stated purpose, the articles of incorporation hsall indicate the rules and regulations;
primary purpose and the secondary purpose or purposes:
Provided, That a nonstock corporation may not include a (c) The certification concerning the amount of capital stock
purpose which would change or contradict its nature as such; subscribed and/or paid is false; and

(c) The place where the principal office of the corporation is to (d) The required percentage of Filipino ownership of the
be located, which must be within the Philippines; capital stock under existing laws or the Constitution has not
been complied with.
 defense. Anyone who assumes an obligation to an ostensible
No articles of incorporation or amendment to articles of corporation as such cannot resist performance thereof on the
incorporation of banks, banking and quasi-banking ground that there was in fact no corporation.
institutions, preneed, insurance and trust companies, NSSLAs,
pawnshops and other financial intermediaries shall be Section 21. Effects of Non-Use of Corporate Charter and
approved by the Commission unless accompanied by a Continous Inoperation. - If a corporation does not formally
favorable recommendation of the appropriate government organize and commence its business within five (5) year from
agency to the effect that such articles or amendment is in the date of its incorporation, its certificate of incorporation
accordance with law. shall be deemed revoked as of the day following the end of
the five (5)-year period.
Section 17. Corporation Name. - No corporate name shall be
allowed by the Commission if it is not distinguishable from However, if a corporation has commence its business but
that already reserved or registered for the use if another subsequently becomes inoperative for a period of at least five
corporation, or if such name is already protected by law, rules (5) consecutive years, the Commission may, after due notice
and regulations. and hearing, place the corporation under delinquent status.

A name is not distinguishable even if it contains one or more A delinquent corporation shall have a period of two (2) years
of the following: to resume operations and comply with all requirements that
the Commission shall prescribed. Upon the compliance by the
(a) The word "corporation", "company", incorporated", corporation, the Commission shall issue an order lifting the
"limited", "limited liability", or an abbreviation ofone if such delinquent status. Failure to comply with the requirements
words; and and resume operations within the period given by the
Commission shall cause the revocation of the corporation's
(b) Punctuations, articles, conjunctions, contractions, certificate of incorporation.
prepositions, abbreviations, different tenses, spacing, or
number of the same word or phrase. The Commission shall give reasonable notice to, and
coordinate with the appropriate regulatory agency prior to the
The Commission upon determination that the corporate name suspension or revocation of the certificate of incorporation of
is: (1) not distinguishable from a name already reserved or companies under their special regulatory jurisdiction.
registered for the use of another corporation; (2) already
protected by law; or (3) contrary to law, rules and TITLE III
regulations, may summarily order the corporation to BOARD OF DIRECTORS/TRUSTEE AND OFFICERS
immediately cease and desist from using such name and
require the corporation to register a new one. The Section 22. The Board of Directors or Trustees of a
Commission shall also cause the removal of all visible Corporation; Qualification and Term. - Unless otherwise
signages, marks, advertisements, labels prints and other provided in this Code, the board of directors or trustees shall
effects bearing such coroporate name. Upon the approval of exercise the corporate powers, condict all business, and
the new corporate name, the Commission shall issue a control all properties of the corporation.
certificate of incorporation under the amended name.
Directors shall be elected for a term of one (10 Year from
If the corporation fails to comply with the Commission's among the holders of stocks registered in the corporation's
order, the Commission may hold the corporation and its book while trustees shall be elected for a term not exceeding
responsible directors or officers in contempt and/or hold them three (3) years from among the members of the corporation.
administratively, civilly and/or criminally liable under this Each director and trustee shall hold office until the successor
Code and other applicable laws and/or revoke the registration is elected and qualified. A director who ceases to own at least
of the corporation. one (1) share of stock or a trustee who ceases to be a
member of the corporation shall cease to be such.
Section 18. Registration, Incorporation and Commencement
of Corporation Existence. - A person or group of persons The board of the following corporations vested with public
desiring to incorporate shall submit the intended corporate interest shall have independent directors constituting at least
name to the Commission for verification. If the Commission twenty percent (20%) of such board:
finds that the name is distinguishable from a name already
reserved or registered for the use of another corporation, not (a) Corporations covered by Section 17.2 of Republic Act No.
protected by law and is not contrary to law, rules and 8799, otherwise known as "The Securities Regulation Code",
regulation, the name shall be reserved in favor of the namely those whose securities are registered with the
incorporators. The incorporators shall then submit their Commission, corporations listed with an exchange or with
articles of incorporation and bylaws to the Commission. assets of at least Fifty million pesos (50,000,000.00) and
having two hundred (200) or more holders of shares, each
If the Commission finds that the submitted document s and holding at least one hundred (100) shares of a class of its
information are fully compliant with the requirements of this equity shares;
Code, other relevant laws, rules and regulations, the
Commission shall issue the certificate of incorporation. (b) Banks and quasi-banks, NSSLAs, pawnshops, corporations
engaged in money service business, preneed, trust and
A private corporation organized under this Code commences insurance companies and other financial intermediaries; and
its corporate existence and juridical personality from the date
the Commission issues the certificate of incorporation under (c) Other corporations engaged in businesses vested with
its official seal thereupon the incorporators, public interest similar to the above, as may be determined by
stockholders/members and their successors shall constitute a the Commission, after taking into account relevant factors
body corporate under the name stated in the articles of which are germane to the objective and purpose of requiring
incorporation for the period of time mentioned therein, unless the election of an independent director, such as the extent of
said period is extended or the corporation is sooner dissolved minority ownership, type of financial products or securities
in accordance with law. issued or offered to investors, public interest involved in the
nature of business operations, and other analogous factors.
Section 19. De facto Corporations. - The due incorporation of
any corporation claiming in good faith to be a corporation An independent director is a person who apart from
under this Code, and its right to exercise corporate powers, shareholdings and fees received from any business or other
shall not be required into collaterally in any private suit to relationship which could, or could reasonable be received to
which such corporation may be a party. Such inquiry may be materially interfere with the exercise of independent
made by the Solicitor General in a quo warranto proceeding. judgment in carrying out the responsibilities as a director.

Section 20. Corporation by Estoppel. - All persons who Independent directors must be elected by the shareholders
assume to act as a corporation knowing it to be without the present or entitled to vote in absentia during the election of
authority to do so shall be liable as general partners for all directors. Independent directors shall be subject to rules and
debts, liabilities and damages incurred or arising as a result regulations governing their qualifications, disqualifications,
thereof: Provided, however, That when any such ostensible voting requirements, duration of term and term limit,
corporation is sued on any transaction entered by its as a maximum number of board membership and other
corporation or on any tort committed by it as such, it shall not requirements that the Commission will prescribed to
be allowed to use on any its lack of corporate personality as a
strengthen their independence and align with international The non-holding of elections and the reasons therefor shall be
best practices. reported to the Commission within thirty (30) days from the
date of the scheduled election. The report shall specify a new
Section 23. Election of Directors or Trustees. - Except when date for the election, which shall not be later than sixty (60)
the exclusive right is reserved for holders of founders' shares days from the scheduled date.
under Section 7 of this Code, each stockholder or member
shall have the right to nominate any director or trustee If no new date has been designated, or if the rescheduled
who posseses all of the qualifications and none of the election is likewise not held, the Commission may, upon the
disqualifications and none of the disqualifications set application of a stockholder, member, director or trustee, and
forth in this Code. after verification of the unjustifiable non-holding of the
election, summarily order that an election be held.
At all elections of directors or trustees, there must be present,
either in person or through a representative authorized to act The Commission shall have the power to issue such orders as
by written proxy, the owners of majority of the may be appropriate, including other directing the issuance of
outstanding capital stock, or if there be no capital a notice stating the time and place of the election, designated
stock, a majority of the members entitled to vote. presiding officer, and the record date or dates for the
determination of stockholders or members entitled to vote.
When so authorized in the bylaws or by a majority of the
board of directors, the stockholders or members may also Notwithstanding any provision of the articles of incorporation
vote through remote communication or in absentia: Provided, or by laws to the contrary, the shares of stock or membership
That the right to vote through such modes may be exercised represented at such meeting and entitled to vote shall
in corporations vested with public interest, notwithstanding constitute a quorum for purposes of conducting an election
the absence of a provision in the bylaws of such corporations. under this section.

A stockholder or member who participates through remote Should a director, trustee or officer die, resign or in any
communication or in absentia, shall be deemed present for manner case to hold office, the secretary or the director,
purposes of quorum. trustee or officer of the corporation, shall, within seven (7)
days form knowledge thereof, report in writing such fact to
The election must be by ballot if requested by any voting the Commission.
stockholder or member.
Section 26. Disqualification of Directors, Trustees or Officers.
In stock corporations, stockholders entitled to vote shall have - A person shall be disqualified from being a director, trustee
the right to vote the number of shares of stock standing in or officer of any corporation if, within five (5) years prior to
their own names in the stock books of the corporation at the the election or appointment as such, the person was:
time fixed in the bylaws or where the bylaws are silent at the
time of the election. The said stockholder may: (a) vote such (a) Convicted by final judgment:
number of shares for as many persons as there are directors
to be elected; (b) cumulate said shares and give one (1) (1) Of an offense punishable by imprisonment for a period
candidate as many votes as the number of directors to be exceeding six (6) years;
elected multiplied by the number of shares owned; or (c)
distribute them on the same principle among as many (2) For violating this Code; and
candidates as may be seen fit: Provided, That the total
number of votes cast shall not exceed the number of shares (3) For violating Republic Act No. 8799, otherwise known as
owned by the stockholders as shown in the books of the "The Securities Regulation Code";
corporation multiplied by the whole number of directors to be
elected: Provided, however, That no delinquent stock shall (b) Found administratively liable for any offense involving
be voted. Unless otherwise provided in the articles of fraudulent acts; and
incorporation or in the bylaws, members of nonstock
corporations may cast as many votes as there are trustees to (c) By a foreign court or equivalent foreign regulatory
be elected by may not cast more than one (1) vote for one authority for acts, violations or misconduct similar to those
(1) candidate. Nominees for directors or trustees receiving enumerated in paragraphs (a) and (b) above.
the highest number of votes shall be declared elected.
The foregoing is without prejudice to qualifications or other
If no election is held, or the owners of majority of the disqualifications, which the Commission, the primary
outstanding capital stock or majority of the members entitled regulatory agency, or Philippine Competition Commission may
to vote are not present in person, by proxy, or through impose in its promotion of good corporate governance or as a
remote communication or not voting in absentia at the sanction in its administrative proceedings.
meeting, such meeting may be adjourned and the corporation
shall proceed in accordance with Section 25 of this Code. Section 27. Removal of Director or Trustees. - Any director or
trustee of a corporation may be removed fro office by vote of
The directors or trustees elected shall perform their duties as the stockholders holding or representing at least two-thirds
prescribed by law, rules of good corporate governance, and (2/3) of the outstanding capital stock, or in a nonstock
bylaws of the corporation. corporation, by a vote of at least two-thirds (2/3) of the
member entitled to vote: Provided, That such removal shall
Section 24. Corporate Officers. - Immediately after their take place either at a regular meeting of the
election, the directors of a corporation must formally organize corporation or at a special meeting called for the
an elect: (a) a president, who must be a director; (b) a purpose, and in either case, after previous notice to
treasurer, who must be a resident of the Philippines; and (d) stockholders or members of the corporation of the
such other officers as may be provided in the bylaws. If the intention to propose such removal at the meeting.
corporation is vested with public interest, the board shall also
elect compliance officer. The same person may hold two (2) A special meeting of the stockholders or members for the
or more positions concurrently, except that no one shall act purpose of removing any director or trustee must be called by
as president and secretary or as president and treasurer at the secretary on order of the president, or upon written
the same time, unless otherwise allowed in this Code. demand of stockholders representing or holding at least a
majority of the outstanding capital stock, or a majority of the
The officers shall manage the corporation and perform such members entitled to vote.
duties as may be provided in the bylaws and/or as resolved
by the board of directors. If there is no secretary, or the secretary, despite demand,
fails or refuses to call the special meeting or to give notice
Section 25. Report of Election of Directors, Trustees and thereof, the stockholder or member of the corporation signing
Officers, Non-holding of Election and Cessation from Office. - the demand may call the special meeting or to give notice
Within thirty (30) days after the election of the directors, thereof, the stockholder or member of the corporation signing
trustees and officers of the corporation, the secretary, or any the demand may call for the meeting by directly addressing
other officer of the corporation, the secretary, or any other the stockholders or members. Notice of the time and place of
officer of the corporation, shall submit to the Commission, the such meeting, as well as of the intention to propose such
names, nationalities, shareholdings, and residence addresses removal, must be given by publication or by written notice
of the directors, trustees and officers elected. prescribed in this Code.
Removal may be with or without cause: Provided, That guilty of gross negligence or bad faith in directing the affairs
removal without cause may not be used to deprive of the corporation or acquire any personal or pecuniary
minority stockholders or members of the right interest in conflict with their duty as such directors or trustees
representation to which they may be entitled under shall be liable jointly and severally for all damages resulting
Section 23 of this Code. therefrom suffered by the corporation, its stockholders or
members and other persons.
The Commission shall, motu propio or upon verified
complaint, and after due notice and hearing, order the A director, trustee or officer shall not attempt to acquire, or
removal of a director or trustee elected despite the any interest adverse to the corporation in respect of any
disqualification, or whose disqualification arose or is matter which has been reposed in them in confidence, and
discovered subsequent to an election. The removal of a upon which, equity imposes a disability upon themselves to
disqualified director shall be without prejudice to other deal in their own behalf; otherwise, the said director, trustee
sanctions that the Commission may impose on the board of or officer shall be liable as a trustee for the corporation and
directors or trustees who, with knowledge of the must account for the profits which otherwise would have
disqualification, failed to remove such director or trustee. accrued to the corporation.

Section 28. Vacancies in the Office of Director or Trustee; Section 31. Dealings of Directors, Trustees or Officers with
Emergency Board. - Any vacancy occurring in the board of the Corporation. - A contract of the corporation with one (1)
directors or trustees other that by removal or expiration of or more of its directors, trustees, officers or their spouses and
term may be filled by the vote of at least a majority of the relatives within the fourth civil degree of consanguinity or
remaining directors or trustees, if still constituting a quorum; affinity is voidable, at the option of such corporation,
otherwise, said vacancies must be filled by the stockholders unless all the following conditions are present:
or members in a regular or special meeting called for that
purpose. (a) The presence of such director or trustee in the board
meeting in which the contract was approved was not
When the vacancy is due to term expiration, the election shall necessary to constitute a quorum for such meeting;
be held no later that the day of such expiration at a meeting
called for that purpose. When the vacancy arises as a result (b) The vote of such director or trustee was not
of removal by the stockholders or members, the election may necessary for the approval of the contract;
be held on the same day of the meeting authorizing the
removal and this fact must be so stated in the agenda and (c) The contract is fair and reasonable under the
notice of said meeting. In all other cases, the election must circumstances;
be held no later than forty-five (45) days from the time the
vacancy arose. A director or trustee elected to fill vacancy (d) In case of corporations vested with public interest,
shall be referred to as replacement director or trustee elected material contracts are approved by at least a majority of the
to fill a vacancy shall be referred to as replacement director or independent directors voting to approved the material
trustee and shall serve only for the unexpired term of the contract; and
predecessor in office.
(e) In case of an officer, the contract has been previously
However, when the vacancy prevents the remaining directors authorized by the board of directors.
from consituting a quorum and emergency action is required
to prevent grave, substantial, and irreparable loss or damage Where any of the first three (3) conditions set forth in the
to the corporation, the vacancy may be temporarily filled from preceding paragraph is absent, in the case of a contract with
among the officers of the corporation by unanimous vote of a director or trustee, such contract may be ratified by the
the remaining directors or trustees. The action by the vote of the stockholders representing at least two-thirds (2/3)
designated director or trustee shall be limited to the of the outstanding capital stock or of at least two-thirds (2/3)
emergency action necessary, and the term shall cease within of the members in a meeting called for the purpose: Provided,
a reasonable time form the termination of the emergency or That full disclosure of the adverse interest of the directors or
upon election of the replacement director or trustee, trustees involved is made at such meeting and the contract is
whichever comes earlier. The corporation must notify the fair and reasonable under the circumstances.
Commission within three (3) days from the creation of the
emergency board, stating therein the reason for its creation. Section 32. Contaracts Between Corporations with
Interlocking Directors. - Except in cases of fraud, and
Any directorship or trusteeship to be filled by a reason of an provided the contract is fair and reasonable under the
increase in the number of directors or trustees shall be filled circumstances a contract between two (2) or more
only by an election at a regular or at a special meeting of corporations having interlocking directors shall not be
stockholders or members duly called for the purpose, or in invalidated on that ground alone: Provided, That if the
the same meeting authorizing the increase of directors or interest of the interlocking director in one (1) corporation is
trustees if so stated in the notice of the meeting. substantial and the interest in the other corporation or
corporations is merely nominal, the contract shall be subject
In all elections to fill vacancies under this section, the to the provisions of the preceding section insofar as the latter
procedure set forth in Section 23 and 25 of this Code shall corporation or corporations are concerned.
apply.
Stockholding exceeding twenty percent (20%) of the
Section 29. Compensation of Directors or Trustees. - In the outstanding capital stock shall be considered
absence of any provision in the bylaws fixing their substantial for purposes of interlocking directors.
compensation, the directors or trustees shall not received any
compensation in their capacity as such, except for reasonable Section 33. Disloyalty of a Director. - Where a director, by
per diems: Provided, however, That the stockholders virtue of such office, acquires a business opportunity which
representing at least a majority of the outstanding capital should belong to the corporation, thereby obtaining profits to
stock or majority of the members may grant directors or the prejudice of such corporation, the director must account
trustees with compensation and approve the amount thereof for and refund to the latter all such profits, unless the act has
at a regular or special meeting. been ratified by a vote of the stockholders owning or
representing at least two-thirds (2/3) of the outstanding
In no case shall the total yearly compensation of directors capital stock. This provision shall be applicable,
exceed ten percent (10%) of the net income before income nothwithstanding the fact that the director risked one's own
tax of the corporation during the preceding year. funds in the venture.

Directors or trustees shall not participate in the determination Section 34. Executive Management, and Other Special
of their own per diems or compensation. Committees. - If the bylaws so provide, the board may create
an executive committee composed of at least three (3)
Corporations vested with public interest shall submit to their directors. Said committee may act, by majority of vote of all
shareholders and the Commission, an annual report of the its members, on such specific matters within the competence
total compensation of each of their directors or trustees. of the board, as may be delegated to it in the bylaws or by
majority vote of the board, except with respect to the: (a)
Section 30. Liability of Directors, Trustees or Officers. - approval of any action for which shareholders' approval is also
Directors or trustees who willfully and knowingly vote for or required; (b) filing of vacancies in the board; (c) amendment
assent to patently unlawful acts of the corporation or who are or repeal of bylaws or the adoption of new bylaws; (d)
amendment or term is not amendable or repealable; and (e) and/or the Commission's rules as a valid mode for service of
distribution of cash divendends to the shareholders. notices.

The board of directors may create special committees of A certificate must be signed by a majority of the directors of
temporary or permanent nature and determine the members' the corporation and countersigned by the chairperson and
term, composition, compensation, powers, and secretary of the stockholders' meeting, setting forth:
responsibilities.
(a) That the requirements of this section have been complied
TITLE IV with;
POWERS OF THE CORPORATIONS
(b) The amount of the increase or decrease of the capital
Section 35. Corporate Powers and Capacity. - Every stock;
corporation incorporated under this Code has the power and
capacity: (c) In case of an increase of the capital stock, the amount of
capital stock or number of shares of no-par stock thereof
(a) To sue and be sued in its corporate name; actually subscribed, the names nationalities and addresses of
the persons subscribing, the amount of capital stock or
(b) To have perpetual existence unless the certificate of number of no-par stock subscribed, the names, nationalities
incorporation provides otherwise; and addresses of the persons subscribing, the amount of
capital stock or number of no-par stock subscribed by each,
(c) To adopt and use a corporate seal; and the amount paid by each on the subscription in cash or
property, or the amount of capital stock or number of shares
(d) To amend its articles of incorporation in accordance with of no-par stock allotted to each stockholder if such increase is
the provisions of this Code; for the purpose of making effective stock dividend therefor
authorized;
(e) To adopt bylaws, not contrary to law, morals or public
policy, and to amend or repeal the same in accordance with (d) Any bonded indebtedness to be incurred, created ot
this Code; increased;

(f) In case of stock corporations, to issue or sell stocks to (e) The amount of stock represented at the meeting; and
subscribers and to sell treasury stocks in accordance with the
provisions of this Code; and to admit members to the (f) The vote authorizing the increase or decrease of capital
corporation if it be a nonstock corporation; stock, or incurring, creating or increasing of bonded
indebtedness.
(g) To purchase, receive, take or grant, hold, convey, sell,
lease, pledge, mortgage, and otherwise deal with such real Any increase or decrease in the capital stock or the incurring,
and personal property, including securities and bonds of other creating or increasing of any bonded indebtedness shall
corporations, as the transaction of the lawful business of the require prior approval of the Commission and where
corporation may reasonably and necessarily require, subject appropriate, of the Philippine Competition Commission. The
to the limitations prescribed by law and the constitution; application with the Commission shall be made within six (6)
months from the date of approval of the board of directors
(h) To enter into a partnership, joint venture, merger, and stockholders, which period may be extended for
consolidation, or any other commercial agreement with justifiable reasons.
natural and juridical persons;
Copies of the certificate shall be kept on file in the office of
(i) To make reasonable donations, including those for the the corporation and filed with the Commission and attached to
public welfare or for hospital, charitable, cultural, scientific, the original articles of incorporation. After approval by the
civic, or similar purposes: Provided, That no foreign Commission and the issuance by the Commission of its
corporation shall give donations in aid of any political party or certificate of filing may declare: Provided, That the
candidate or for purpose s of partisan political activity; Commission shall not accept for filing any certificate of
increase of capital stock unless accompanied by a sworn
(j) To establish pension, retirement, and other plans for the statement of the treasurer of the corporation accompanied by
benefit of its directors, trustees, officers, and employees; and a sworn statement of the treasurer of the corporation lawfully
holding office at the time of the filing of the certificate,
(k) To exercise such other powers as may be essential or showing that at least twenty-five percent (25%) of the
necessary to carry out its purpose or purposes as stated in increase in capital stock has been subscribed and that at least
the articles of incorporation. twenty-five percent (25%) of the amount subscribed has
been paid in actual cash to the corporation or that property,
Section 36. Power to Extend or Shorten Corporate Term. - A the valuation of which is equal to twenty-five percent (25%)
private corporation may extend or shorten its term as stated of the subscription, has been transferred to the corporation:
in the articles of incorporation when approved by a majority Provided, further, That no decrease in capital stock shall be
vote of the board of directors or trustees, and ratified at a approved by the Commission if its effect shall prejudice the
meeting by the stockholders or members representing at least rights of corporate creditors.
two-thirds (2/3) of the outstanding capital stock or of its
membrs. Written notice of the proposed action and the time Nonstock corporations may incur, create or increase bonded
and place of the meeting shall be sent to the stockholders or indebtedness when approved by a majority of the board of
members at their respective place of residence as shown in trustees and of at least two-thirds (2/3) of the members in a
the books of the corporation, and must be deposited to the meeting duly called for the purpose.
addressee in the post office with postage prepaid, served
personally, or when allowed in the bylaws or done with the Bonds issued by a corporation shall be registered with the
consent of the stockholder, sent electronically in accordance Commission, which shall have the authority to determine the
with the rules and regulations of the Commission on the use sufficiency of the terms thereof.
of electronic data messages. In case of extension of corporate
term, a dissenting stockholder may exercise the right of Section 38. Power to Deny Preemptive Right. - All
appraisal under the conditions provided in this Code. stockholders of a stock corporation shall enjoy preemptive
right to subscribe to all issues or disposition of shares of any
Section 37. Power to increase or Decrease Capital Stock; class, in proportion to their respective shareholdings, unless
Incur, Create or Increase Bonded Indebtedness. - No such right is denied by the articles of incorporation or an
corporation shall increase or decrease its capital stock or amendment thereto: Provided, That such preemptive right
incur, create or increase any bonded indebtedness unless shall not extend to shares issued in compliance with laws
approved by a majority vote of the board of directors and by requiring stock offerings or minimum stock ownership by the
two-thirds (2/3) of the outstanding capital stock at a public; or to shares issued in good faith with the approval of
stockholders' meeting duly called for the purpose. Written the stockholders representing two-thirds (2/3) of the
notice of the time and place of the stockholders' meeting and outstanding capital stock in exchange for property needed for
the purpose for said meeting must be sent to the stockholders corporate purposes or in payment of previously contracted
at their places of residence as shown in the books of the debt.
corporation served on the stockholders personally, or through
electronic means recognized in the corporation's bylaws
Section 39. Sale or Other Disposition of Assets. - Subject to the members in the case of nonstock corporations at a
the provisions of Republic Act No. 10667, otherwise known as meeting duly called for the purpose. Notice of the proposed
the "Philippine Competition Act", and other related laws a investment and the time place of residence as shown in the
corporation may, by a majority vote of its board of directors books of the corporation and deposited to the addressee in
or trustees, sell, lease, exchange, mortgage, pledge, or the post office with the postage prepaid. Served personally,
otherwise dispose of its property and assets, upon such terms or sent electronically in accordance with the rules and
and conditions and for such consideration, which may be regulations of the Commission on the use of electronic data
money, stock, bonds, or other instruments for the payment of message, when allowed by the bylaws or done with the
money or other property or consideration, as its board of consent of the stockholders: Provided, That any dissenting
directors or trustees may deem expedient. stockholder shall have appraisal right as provided in this
Code: Provided, however, That where the investment by the
A sale of all or substantially all of the corporation's properties corporation is reasonably necessary to accomplish its primary
and assets, including its goodwill, must be authorized by the purpose as stated in the articles of incorporation, the approval
vote of stockholders representing at least two-thirds (2/3) of of the stockholders or members shall not be necessary.
the outstanding capital stock, or at least two-thirds (2/3) of
the members, meeting duly called for the purpose. Section 42. Power to Declare Dividends. - The board of
directors of a stock corporation may declare dividends out of
In nonstock corporations where there are no members with the unrestricted retained earnings which shall be payable in
voting rights, the vote of at least a majority of the trustees in cash, property, or in stock to all stockholders on the basis of
office will be sufficient authorization for the corporation to outstanding stock held by them: Provided, That any cash
enter into any transaction authorized by this section. dividends due on delinquent stock shall be first be applied to
the unpaid balance on th subscription plus costs and
The determination of whether or not the sale involves all or expenses, while stock holders until their unpaid subscription is
substantially all of the corporation's properties and assets fully paid: Provided, further, That no stock dividend shall be
must be computed based on its net asset value, as shown in issued without the approval of stockholders representing at
its latest financial statemments. A sale or other disposition least two-thirds (2/3)of the outstanding capital stock at a
shall be deemed to cover substantially all the corporate regular or special meeting duly called for the purpose.
property and assets if thereby the corporation would be
rendered incapable of continuing the business or Stock corporations are prohibited from restraining surplus
accomplishing the purpose of which it was profits in excess of one hundred percent (100%} of their
incorporated. paid-in capital stock, except: (a) when justified by the definite
corporate expansion projects or programs approved by the
Written notice of the proposed action and of the time and board of directors; or (b) when the corporation is prohibited
place for the meeting shall be addressed to stockholders or under any loan agreement with financial institutions or
members at their places of residence as shown in the books creditors, whether local or foreign, from declaring dividends
of the corporation and deposited to the addressee in the post without their consent, and such consent has not yet been
office with postage prepaid, served personally, or when secured; or (c) when it can be clearly shown that such
allowed by the bylaws or done with the consent of the retention is necessary under special circumstances obtaining
stockholder, sent electronically: Provided, That any dissenting in the corporation, such as when there is need for special
stockholder may exercise the right of appraisal under the reserve for probable contingencies.
conditions provided in this Code.
Section 43. Power to Enter into Management Contract. - No
After such authorization or approval by the stockholders or corporation shall conclude a management contract with
members, the board of directors or trustees may, another corporation unless such contract is approved by the
nevertheless, in its discretion, abandon such sale, lease, board of directors and by the stockholders owning at least the
exchange, mortgage, pledge, or other disposition of property majority of the outstanding capital stock, or by at least a
and assets, subject to the rights of third parties under any majority of the members in the case of a nonstock
contract relating thereto, without further action or approval corporation, or both the managing and the managed
by the stockholders or members. corporation, at a meeting duly called for the purpose:
Provided, That (a) where a stockholder or stockholders
Nothing in this section is intended to restrict the power of any representing the same interest of both the managing and the
corporation, without the authorization by the stockholders or managed corporations own or control more than one-third
members, to sell, lease, exchange, mortgage, pledge, or (1/3) of the total outstanding capital stock entitled to vote of
otherwise dispose of any of its property and assets if the the managing corporation; or (b) where a majority if the
same is necessary in the usual and regular course of business members of the board of directors of the managing
of the corporation or if the proceeds of the sale or other corporation also constitute a majority of the members of the
disposition of such property and assets shall be appropriated board of directors of the managed corporation, then the
for the conduct of its remaining business. management contract must be approved by the stockholders
of the managed corporation owning at least two-thirds (2/3)
Section 40. Power to Acquire Own Shares. - Provided, That of the total outstanding capital stock entitled to vote, or by at
the corporation has unrestricted retained earnings in its books least two-thirds (2/3) of the members in the case of a
to cover the shares to be purchased or acquired, a stock nonstock corporation.
corporation shall have the power to purchased or acquired, a
stock corporation shall have the power to purchase or acquire These shall apply to any contract whereby a corporation
its own shares for a legitimate corporate purpose or purposes, undertakes to manage or operate all or substantially all of the
including the following cases: called services contracts, operating agreements or otherwise:
Provided, however, That such service contracts or operating
(a) To eliminate fractional shares arising out of stock agreements which relate to the exploration, development
dividends; exploitation or utilization of natural resources may entered
into such periods as may be provided by the pertinent laws or
(b) To collect or compromise an indebtedness to the regulations.
corporation, arising out of unpaid subscription, in a
delinquency sale, and to purchase delinquent shares sold No management contracts shall be entered into for period
during said sale; and longer that five (5) years for any one term.

(c) To pay dissenting or withdrawing stockholders entitled to Section 44. Ultra Vires Acts of the Corporations. - No
payment for their shares under the provisions of this Code. corporation shall possess or exercise corporate powers other
than those conferred by this Code or by its articles of
Section 41. Power to Invest Corporate Funds in Another incorporation and except as necessary or incidental to the
Corporation or Business or for Any Other Purpose. - Subject exercise of the powers conferred.
to the provisions of this Code, a private corporation may
invest its funds in any other corporation, business, or for any TITLE V
purpose other than the primary purpose for which it was BYLAWS
organized, when approved by a majority of the board of
directors or trustees and ratified by the stockholders Section 45. Adoption of Bylaws. - For the adoption of bylaws
representing at least two-thirds (2/3) of the outstanding by the corporation, the affirmative vote of the stockholders
capital stock, or by at least two-thirds (2/3) of the representing at least a majority of the outstanding capital
outstanding capital stock, or by at least two-thirds (2/3) of stock, or of at least a majority of the members in case on
nonstock corporations, shall be necessary. The by-laws shall
be signed by the stockholders or members voting for them Whenever the bylaws are amended or new bylaws are
and shall be kept in the principal office of the corporation, adopted, the corporation shall file with the Commission such
subject to the inspection of the stockholders or members amended or new bylaws and, if applicable, the stockholders'
during office hours. A copy thereof, duly certified by a or members' resolution authorizing the delegation of the
majority of the directors or trustees and countersigned by the power to amend and/or adopt new bylaws, duly certified
secretary of the corporation, shall be filed with the under oath by the corporate secretary and majority of the
Commission and attached to the original articles of directors or trustees.
incorporation.
The amended or new bylaws shall only be effective upon the
Notwithstanding the provisions of the preceding paragraph, issuance by the Commission of certification that the same is
bylaws maybe adopted and filed prior to incorporation; in in accordance with this Code and other relevant laws.
such case, such bylaws shall be approved and signed by all
incorporators and submitted to the Commission, together with TITLE VI
the articles of incorporation. MEETINGS

In all cases, bylaws shall be effective only upon the issuance Section 48. Kinds of Meetings. - Meeting of the directors,
by the Commission of a certification that the bylaws are in trustees, stockholders, or members may be regular or special.
accordance with this Code.
Section 49. Regular and Special Meetings of Stockholders or
The Commission shall not accept for filing the bylaws or any Members. - Regular meetings of stockholders or members
amendment thereto of any bank, banking institution, building shall be held annually on a date fixed in the bylaws, or if not
and loan association, trust company, insurance company, so fixed in the bylaws, or if not so fixed, on any date After
public utility, educational institution, or any other corporations April 15 of every year as determined by the board of directors
governed by special laws, unless accompanied by a certificate or trustees: Provided, further, That written notice of regular
of the appropriate government agency to the effect that such meetings may be sent to all stockholders or members of
by laws or amendments are in accordance with law. record through electronic mail or such other manner as the
Commission shall allow under its guidelines.
Section 46. Contents of Bylaws. - A private corporation may
provide the following in its bylaws; At each regular meeting of stockholders or members, the
board of directors or trustees shall endeavor to present to
(a) The time, place and manner of calling and conducting stockholders or members the following:
regular or special meetings of the directors or trustees;
(a) The minutes of the most recent regular meeting which
(b) The time and manner of calling and conducting regular or shall include, among others:
special meetings and mode of notifying the stockholders or
members thereof; (1) A description of the voting and the vote tabulation
procedures used in the previous meetings;
(c) The required quorum in meetings of stockholders or
members and the manner of voting therein; (2) A description of the opportunity given to stockholders or
members to ask questions and record of the question s asked
(d) The modes by which a stockholder, member, director or and answers given;
trustees may attend meetings and cast their votes;
(3) The matters discussed and resolutions reached;
(e) The form for proxies of stockholders and members and
the manner of voting them; (4) A record of the voting results for each agenda item;

(f) The directors' or trustees' qualifications, duties and (5) A list of the director or trustees, officers and stockholders
responsibilities, the guidelines for setting the compensation of or members who attended the meeting; and
directors or trustees and officers, and the maximum number
of other board representations that an independent director (6) Such other items that the Commission may require in the
or trustee may have which shall, in no case, be more than the interest of good corporate governance and protection of
number prescribed by the Commission; minority stockholders;

(g) The time for holding the annual election of directors or (b) A members' list for nonstock corporations and, for stock
trustees and the mode or manner of giving notice thereof; corporations, material information on the current
stockholders, and their voting rights;
(h)The manner of election or appointment and the term of
officers other than directors or trustees; (c) A detailed, descriptive, balanced and comprehensible
assessment of the corporation's performance, which shall
(i) The penalties for violation of the bylaws; include information on any material change in the
corporation's business strategy, and other affairs;
(j) In the case of stock corporations, the manner of issuing
stock certificates; and (d) A financial report for the preceding year, which shall
include financial statements duly signed and certified in
(k) Such other matters as may be necessary for the proper or accordance wit this Code and the rules and the Commission
convenient transaction of its corporate affairs for the may prescribe, a statement on the adequacy of the
promotion of good governance and anti-graft and corruption corporation's internal controls or risk management systems,
measures. and a statement of all external audit and non-audit fees;

An arbitration agreement maybe provided in the bylaws (e) An explanation of the dividend policy and the fact of
pursuant to Section 181 of this Code . payment of dividends or the reasons for nonpayment thereof;

Section 47. Amendment to Bylaws. - A majority of the board (f) Director or trustee profiles which shall include, among
of directors or trustees, and the owners of at least a majority others, their qualifications and relevant experience, length of
of the outstanding capital stock, or at least a majority of the service in the corporation, trainings and continuing education
members of a nonstock corporation, at a regular or special attended, and their board representation in other
meeting duly called for the purpose, may amend or repeal the corporations;
bylaws or adopt new bylaws. The owner of two-thirds (2/3) of
the outstanding capital stock or two-third (2/3) of the (g) A director or trustee attendance report, indicating the
members in a nonstock corporation mat delegate to the board attendance of each of the meetings of the board and its
of directors or trustees the power to amend or repeal the committees and in regular or special stockholder meetings;
bylaws or adopt new bylaws: Provided, That any power
delegated to the board of directors or trustee to amend or (h) Appraisals and performance reports for the board and the
repeal the bylaws or adopt new bylaws shall be considered as criteria and procedure for assessment;
revoke whenever stockholders owning or representing a
majority of the outstanding capital stock or majority of the
members shall so vote at a regular or special meeting.
(i) A director or trustee compensation report prepared in procedures to be followed when a stockholder or member
accordance with this Code and the rules the Commission may elects either option; and
prescribe;
(d) When the meeting is for the election of directors or
(j) Director disclosures on self-dealings and related party trustees, the requirements and procedure for nomination and
transactions; and/or election.

(k) The profiles of directors nominated ir seeking election or All proceedings and any business transacted at a meeting of
reelection. the stockholders or members, if within the powers or
authority of the corporation, shall be valid even if the meeting
A director, trustee, stockholder, or member may propose any is improperly held or called: Provided, That all the
other matter for inclusion in the agenda at may regular stockholders or members of the corporation are present or
meeting of stockholders or members. duly represented at the meeting and not one of them
expressly states at the beginning of the meeting that the
Special meetings of stockholders or members shall be held at purpose of their attendance is to object to the transaction of
any time deemed necessary or as provided in the bylaws: any business because the meeting is not lawfully called or
Provided, however, That at least one (1) week written notice convened.
shall be sent to all stockholders or members, unless a
different period is provided in the bylaws, law or regulation. Section 51. Quorum in Meetings. - Unless otherwise provided
in this Code or in the bylaws, a quorum shall consist of the
A stockholder or member may propose the holding of a stockholders representing a majority of the outstanding
special meeting and items to be included in the agenda. capital stock pr a majority of the members in the case of
nonstock corporations.
Notice of any meeting may be waived, expressly or impliedly,
by any stockholder or member: Provided, That general Section 52. Regular and Special Meetings of Directors or
waivers of notice in the articles of incorporation or the bylaws Trustees; Quorum. - Unless the articles of incorporation or
shall not be allowed: Provided, further, That attendance at a the bylaws provides for a greater majority, a majority of the
meeting shall constitute a waiver of notice of such meeting, directors or trustees as stated in the articles of
except when the person attends a meeting for the express incorporation shall constitute a quorum to transact
purpose of objecting to the transaction of any business corporate business, and every decision reached by at least
because the meeting is not lawfully called or convened. a majority of the directors or trustees constituting a quorum,
except for the election of officers which shall require the vote
Whenever for any cause, there is no person authorized or the of a majority of all the members of the board, shall be valid
person authorized unjustly refuses to call a meeting, the as a corporate act.
Commission, upon petition of a stockholder or member on a
showing of good cause therefor, may issue an order, directing Regular meetings of the board of directors or trustees of
the petitioning stockholder or member to call a meeting of he every corporation shall be held monthly, unless the
corporation by giving proper notice required by this Code or bylaws provide otherwise.
the bylaws. The petitioning stockholder or member shall
preside thereat until at least a majority of the stockholders or Special meetings of the board of directors or trustees may be
members present have chosen from among themselves, a held at any time upon the call of the president or as
presiding officer. provided in the bylaws.

Unless the bylaws provide for a longer period, the stock and Meetings of directors or trustees of corporations may be held
transfer book or membership book shall be closed at least anywhere in or outside the Philippines, unless the bylaws
twenty (20) days for regular meetings and seven (7) days for provide otherwise. Notice of regular or special meetings
special meetings before the scheduled sate of the meeting. stating the date, time and place of the meeting must be sent
to every director or trustee at least two (2) days prior to the
In case of postponement of stockholders' or members' regular scheduled meeting, unless a longer time is provided in the
meetings, written notice thereof and the reason therefor shall bylaws. A director or trustee may waive this requirement,
be sent to all stockholders or members of record at least two either expressly or impliedly.
(2) weeks prior to the date of the meeting, unless a different
period is required under the bylaws, law or regulation. Directors or trustees who cannot physically attend or vote at
board meetings can participate and vote through remote
The right to vote of stockholders or members may be communication such as videoconferencing, teleconferencing,
exercised in person, through remote communication or in or other alternative modes of communication that allow them
absentia. The Commission shall issue the rules and reasonable opportunities to participate. Directors or trustees
regulations governing participation and voting through remote cannot attend or vote by proxy at board meetings.
communication or in absentia, taking into account the
company’s scale, number of stockholders or members, A director or trustee who has a potential interest in any
structure, and other factors consistent with the protection and related party transaction must recuse from voting on the
promotion of shareholders' or members' meetings. approval of the related party transaction without prejudice to
compliance with the requirments of Section 31 of this Code.
Section 50. Place and Time of Meetings of Stockholders or
Members. - Stockholders' or members' meetings, whether Section 53. Who Shall Preside at Meetings. - The
regular or special, shall be held in the principal office of the chairman or, in his absence, the president shall preside at all
corporation as set forth in the articles of incorporation, or if meetings of the directors or trustees as well as of the
not practicable, in the city or municipality where the principal stockholders or members, unless the bylaws provide
office of the corporation is located: Provided, That any city of otherwise.
municipality in Metro Manila, Metro Cebu, Metro Davao, and
other Metropolitan areas shall, for purposes of this section, be Section 54. Right to Vote of Secures Creditors and
considered a city or municipality. Administrators. - In case a stockholder grants security
interest in his or her shares in stock corporations, the
Notice of meetings shall be sent through the means of stockholder-grantor shall have the right to attend and vote at
communication provided in the bylaws, which notice shall meetings of stockholders, unless the secured creditor is
state the time, place and purpose of the meetings. expressly given by the stockholder-grantor such right in
writing which is recorded in the appropriate corporate books.
Each notice of meeting shall further be accompanied by the
following: Executors, administrators, receivers, and other legal
representatives duly appointed by the court may attend and
(a) The agenda for the meeting; vote on behalf of the stockholders or members without need
of any written proxy.
(b) A proxy which shall be submitted to the corporate
secretary within a reasonable time prior to the meeting; Section 55. Voting in Case of Joint Ownership of Stock. - The
consent of all the co-owners shall be necessary in voting
(c) When attendance, participation, and voting are allowed by shares of stock owned jointly by two (2) or more persons,
remote communication or in absentia, the requirements and unless there is a written proxy, signed by all the co-owners,
authorizing one (1) or some of them or any other person to
vote such share or shares: Provided, That when the shares The voting trustee or trustees may vote by proxy or in any
are owned in an "and/or" capacity by the holders thereof, any manner authorized under the bylaws unless the agreement
one of the joint owners can vote said shares or appoint a provides otherwise.
proxy therefor.
TITLE X
Section 56. Voting Right for Treasury Shares. - Treasury APPRAISAL RIGHT
shares shall have no voting right as long as such shares
remain in the Treasury. Section 80. When the Right of Appraisal May Be Exercised. -
Any stockholder of a corporation shall have the right to
Section 57. Manner of Voting; Proxies. - Stockholders and dissent and demand payment of the fair value of the shares in
members may vote in person or proxy in all meetings of the following instances:
stockholders or members
(a) In case an amendment to the articles of incorporation has
When so authorized in the bylaws or by a majority of the the effect of changing or restricting the rights of any
board of directors, the stockholders or members of stockholder or class of shares, or of authorizing preferences in
corporations may also vote through remote communication or any respect superior to those of outstanding shares of any
in absentia: Provided, That the votes are received before the class, or of extending or shortening the term of corporate
corporation finishes the tally of votes. existence;

A stockholder or member who participates through remote (b) In case of sale, lease, exchange, transfer, mortgage,
communication or in absentia shall be deemed present for pledge or other disposition of all or substantially all of the
purposes of quorum. corporate property and assets as provided in this Code;

The corporation shall establish the appropriate requirements (c) In case of merger or consolidation; and
and procedures for voting through remote communication and
in absentia, taking into account the company's scale, number (d) In case of investment of corporate funds for any purpose
of shareholders or members, structure and other factors other than the primary purpose of the corporation.
consistent with the basic right of corporate suffrage.
Section 81. How Right is Exercised. - The dissenting
Proxies shall be in writing, signed and filed, by the stockholder who votes against a proposed corporate action
stockholder or member, in any form authorized in the bylaws may exercise the right of appraisal by making a written
and received by the corporate secretary within a reasonable demand on the corporation for the payment of the fair value
time before the scheduled meeting. Unless otherwise provided of shares held within thirty (30) days from the date on which
in the proxy form, it shall be valid only for the meeting for the vote was taken: Provided, That failure to make the
which it is intended. No proxy shall be valid and effective for a demand within such perios shall be deemed a waiver of the
period longer than five (5) years at any one time. appraisal right. If the proposed corporate action is
implemented, the corporation shall pay the stockholder, upon
Section 58. Voting Trusts. - One or more stockholders of surrender of the certificate or certificates of stock
stock corporation may create a voting trust for the purpose of representing the stockholder's shares, the fair value thereof
conferring upon a trustee or trustees the right to vote and as of the day before the vote was taken excluding any
other rights pertaining to the shares for a period not appreciation or depreciation in anticipation of such corporate
exceeding five (5) years at any time: Provided, That in the action.
case of a voting trust specially required as a condition in a
loan agreement, said voting trust may be for a period If, within sixty (60) days form the approval of the corporate
exceeding five (5) years but shall automatically expire upon action by the stockholders, the withdrawing stockholder and
full payment of the load. A voting trust agreement must be in the corporation cannot agree on the fair value of the shares,
writing and notarized, and shall specify the terms and it shall be determined and appraised by three (3)
conditions thereof. disinterested persons, one of whom shall be named by the
stockholder, another by the corporation and the third by the
A certified copy of such agreement shall be filed with the two (2) thus chosen. The findings of the majority of the
corporation and with the Commission; otherwise, the appraisers shall be final, and their award shall be paid by the
agreement is ineffective and uneforceable. The certificate or corporation within thirty (30) days after such award is made:
certificates of stock covered by the voting trust agreement Provided, That no payment shall be made to any dissenting
shall be cancelled and new ones shall be issued pursuant to stockholder or unless the corporation has unrestricted
said agreement. The books of the corporation shall state that retained earnings in its books to cover such payment:
the transfer in the name of the trustee or trustees is made Provided, further, That upon payment by the corporation of
pursuant to the voting trust agreement. the agreed or awarded price, the stockholder shall forthwith
transfer the shares to the corporation.
The trustee or trustees shall execute and deliver to the
transferors, voting trust certificates, which shall be Section 82. Effect of Demand and Termination of Right. -
transferable in the same manner and with the same effect as From the time of demand for payment of the fair value of a
certificates of stock. stockholder's shares until either the abandonment of the
corporate action involved or the purchase of the said shares
The voting trust agreement filed with the corporation shall be by the corporation, all rights accruing to such shares,
subject to examination by any stockholder of the corporation including voting and dividend rights shall immediately be
in the same manner as any other corporate book or record: restored.
Provided, That both the trustor and the trustee or trustees
may exercise the right of inspection of all corporate books and Section 83. When Right to Payment Ceases. - No demand for
records in accordance with the provisions of this Code. payment under this Title may be withdrawn unless the
corporation consents thereto. If, however, such demand for
Any other stockholder may transfer the shares to the same payment is withdrawn with the consent of the corporation, or
trustee or trustees upon the term and conditions stated in the if the proposed corporate action is abandoned or rescinded by
voting trust agreement, and thereupon shall be bound by all the corporation or disapproved by the Commission where
the provisions of said agreement. such approval is necessary, or if the Commission where such
stockholder is not entitled to the appraisal right, then the
No voting trust agreement shall be entered into for purposes right of the stockholder to be paid the fair value of the shares
of circumventing the laws against anti-competitive shall cease, the status as the stockholder shall be restored,
agreements, abuse of dominant position, anti-competitive and all dividend distributions which would have accrued on
mergers and acquisitions, violation of nationality and capital the shares shall be paid to the stockholder.
requirements, or for the perpetuation of fraud.
Section 84. Who Bears Costs of Appraisal. - The costs and
Unless expressly renewed, all rights granted in a voting trust expenses of appraisal shall be borne by the corporation,
agreement shall automatically expire at the end of the agreed unless the fair value ascertained by appraisers is
period. The voting trust certificates as well as the certificate approximately the same as the price which the corporation
of stock in the name of the trustees shall thereby be deemed may have offered to pay the stockholder, in which the
cancelled and new certificates of stock shall be reissued in the corporation may have offered to pay the stockholder, in which
name of the trustors. 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
assessed against the corporation, unless the refusal of the Section 92. List of Members and Proxies, Place of Meetings. -
stockholder or receive payment was unjustified. The corporation shall, at all times, keep a list of its members
and their proxies of record twenty (20) days prior to any
Section 85. Notation on Certificates; Rights of Transferee. - scheduled election. The bylaws may provide that the
Within ten (10) days after demanding payment for shares members of a nonstock corporation may hold their regular or
held, a dissenting stockholder shall submit the certificates of special meetings at any place even outside the place where
stock representing the shares to the corporation for notation the principal office of the corporation is located: Provided,
that such representing the shares to the corporation for That proper notice is sent to all members indicating the date,
notation that such shares are dissenting shares. Failure to do time, and place of meeting: Provided, further, That the place
so shall, at the option of the corporation, terminate the rights of meeting shall be within the Philippine territory.
under this Title. If shares represented by the certificates
bearing such notation are transferred, and the certificates Section 173. Outstanding Capital Stock Defined. - The term
consequently cancelled, the rights of the transferor as a "outstanding capital stock", as used in this Code, shall mean
dissenting stockholder under this Title shall cease and the the total shares of stock issued under binding subscription
transferee shall have all the rights of a regular stockholder; contracts to subscribers or stockholders, whether fully or
and all dividend distributions which would have accrued on partially paid, except treasury shares.
such shares shall be paid to the transferee.

TITLE XI
NONSTOCK CORPORATION

Section 86. Definition. - For purposes of this Code and subject

to its provisions on dissolution, a nonstock corporation is one
where no part of its income is distributable as dividends to its
members, trustees, or officers: Provided, That any profit
which a nonstock corporation may obtain incidental to its
operations shall, whenever necessary or proper, be used for
the furtherance of the purpose of purposes for which the
corporation was organized, subject to the provisions of this
Title.

The provisions governing the stock corporations, when

pertinent, shall be applicable to nonstock corporations except
as may be covered by specific provisions of this Title.

Section 87. Purposes. - Nonstock corporations may be formed

or organized for charitable, religious, educational,
professional, cultural, fraternal, literary, scientific, social, civic
service, or similar purposes. like trade industry, agricultural
and like chambers, or any combination thereof, subject to the
special provisions of this Title governing particular classes of
nonstock corporations.

CHAPTER I
MEMBERS

Section 88. Right to Vote. - The right of the members of any

class or classes to vote may be limited, broadened, or denied
to the extent specified in the articles of incorporation or the
bylaws. Unless so limited, broadened, or denied, each
member, regardless of class, shall be entitled to one (1) vote.

Unless otherwise provided in the articles of incorporation or

the bylaws, a member may vote by proxy, in accordance with
the provisions of this Code. The bylaws may likewise
authorize voting through remote communication and/or in
absentia.

Section 89. Nontransferability of Membership. - Membership

in a nonstock corporation and all rights arising therefrom are
personal and nontransferable, unless the articles of
incorporation or the bylaws otherwise provide.

Section 90. Termination of Membership. - Membership shall

be terminated in the manner and for the cause provided in
the articles of incorporation or the bylaws. Termination of
membership shall extinguish all rights of a member in the
corporation or in its property, unless otherwise provided in
the articles of incorporation or the bylaws.

CHAPTER II
TRUSTEES AND OFFICERS

Section 91. Election and Term of Trustees. - The number of

trustees shall be fixed in the articles of incorporation or bylaw
which may or may not be more than fifteen (15). They shall
hold office for not more than three (3) years until their
successors are elected and qualified. Trustees elected to fill
vacancies occurring before the expiration of a particular term
shall hold office for the unexpired period.

Except with respect to independent trustees of nonstock

corporation shall be elected as trustee.

Unless otherwise provided in the articles of incorporation or

the bylaws, the members may directly elect officers of a
nonstock corporation.