Corporation Code of the Philippines Reviewer

CORPORATION CODE OF THE PHILIPPINES By Hector s De Leon Jr. ATTRIBUTES OF A CORPORATION 1. It is an artificial being 2. It is created by operation of law 3. It has the right of succession 4. It has only the powers, attributes, and properties expressly authorized by law or incident to its existence DISTINCTION BETWEEN A PARTNERSHIP AND CORPORATION 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Manner of creation Number of incorporators Commencement of juridical personality Powers Management Effect of mismanagement Right of succession Extent of liability Transferability of interest Term of existence Firm name Dissolution Laws which govern

PRIVATE CORPORATIONS ARE 1. 2.

PUBLIC CORPORATION ARE: 1. 2. 3. 4.

Provinces Cities Municipalities Barangays

CORPORATION WITH MAJORITY OWNERS MUST BE FILIPINO

COMPONENTS OF CORPORATION 1. 2. 3. 4.

Corporators Incorporators Stockholders Members

2. 3. 4. 5.

THREE OTHER COMPONENTS 1. 2. 3.

Promoters Subscribers Underwriter

CAPITAL STOCKS 1. Authorized capital stock 2. Subscribed capital stock 3. Outstanding capital stock 4. Paid-up capital stock 5. Unissued capital stock 6. Legal capital

6. 7. 8. 9.

1. 2. 3. 4. 5. 6. 7. 8. 9.

1. 2.

Par value /no par value Voting/non- voting Common/preferred # Promotion share Share in escrow Convertible stock Founder’s share Redeemable share Treasury share

3. 4. 5.

6. 7.

KINDS OF PREFERRED SHARE 1. 2.

8.

Preferred as to assets in case of liquidation Preferred as to dividends

9.

KINDS OF PREFERRED SHARE AS TO DIVIDENDS 1. 2. 3. 4. 5.

Cumulative PS Non-cumulative PS Participating PS Non-participating PS Cumulative-participating PS

Promotion Incorporation Normal organization and commencement of business operations QUALIFICATION OF INCORPORATORS

1. 2. 3. 4.

Natural person Capacity to contract Residents of the Philippines Citizens of the Philippines

Name of corporation Purpose of corporation Principal office of corporation Term of corporation Names, nationalities, residences of incorporators Number of directors Names, nationalities, residences of directors If stock corporationAmount of authorized stock if non-stock corporation-amount of capital and Names, nationalities, residences of contributor

If non-stock corporation: 1. 2.

must be a member majority of the directors must be a resident of the Philippines METHODS OF VOTING 1. 2. 3.

1. 2. 3.

governing body of the corporation binding effect of stockholders action extent of judicial review

QUALIFICATION OF DIRECTORS OR TRUSTEES If stock corporation: 1. 2. 3. 4.

must owned at least one share share must be registered in his name must continuously own at least one share during his term majority of directors must be resident of the Philippines

Straight voting Cumulative voting for one candidate Cumulative voting for distribution

CORPORATE OFFICERS 1. 2. 3. 4. 5.

President Vice-president Secretary Treasurer General manager

REQUISITES OF BOAR MEETING 1.

2. 3.

4.

Meeting of directors or trustees duly assembled as a board Presence of quorum Decision of majority of quorum or majority of entire board Meeting at the place, time, manner provided by the bylaws

QUORUM DEFINED 1. 2. 3.

Number required for presence of quorum Number required for approval of corporate acts Number provided greater than majority

DISQUALIFICATION OF DIRECTORS/TRUSTEES 1.

POWERS OF BOARD OF DIRECTORS

STEP IN THE CREATION OF CORPORATION 1. 2. 3.

Corporation for exploration, development and utilization of natural resources Public service corporation Educational corporation Banking corporation Corporation engaged in retail trade Rural banks Corporation engaged in coastwise shipping Corporation engaged in the pawnshop business Under the flag law

CONTENTS OF ARTICLES OF INCORPORATION

CLASSES OF SHARES IN GENERAL

Stock corporation Non-stock corporation

OTHER CLASSIFICATION OF CORPORATION 1. Number Of Person Who Composed -Corporation Aggregate -Corporation Sole 2.Religious or not -Ecclesiastical -Lay 3.Charitable or not -Eleemosynary -civil 4.Which Country -Domestic -foreign 5.Legal right to corporate existence -De jure -De facto 6.Open to public or not -Close -Open 7.Relation to other Corporation -Parent or Holding -Subsidiary 8.True sense or Limited sense -True -Quasi -Corporation by prescription -corporation by estoppels 9.Public or Private -Public -Private

Owner/subscriber of atleast one share

1.

CLASSIFICATION OF CORPORATIONS 1. 2.

Governmentowned/controlled corporation Quasi-public corporations

5.

2.

Not convicted by final judgment of an offense punishable by imprisonment for a period exceeding six years Do not violate corporation code for prior 5 years from election

WHO CAN FILL VACANCIES? 1. 2.

Shareholders/memb ers* Member of directors

CONTRACT OF CORPORATION WITH THE DIRECTOR OR TRUSTEES IS VALID IF: 1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for the approval of the contract; 3. That the contract is fair and reasonable under the circumstances; and 4. That in case of an officer, the contract has been previously authorized by the board of directors. CORPORATE POWERS AND CAPACITY 1. To sue and be sued in its corporate name; 2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation; 3. To adopt and use a corporate seal; 4. To amend its articles of incorporation in accordance with the provisions of this Code; 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; 6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a nonstock corporation; 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property 8. To enter into merger or consolidation with other corporations as provided in this Code; 9. To make reasonable donations, 10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and 11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation.

RELATIVE POWERS OF CORPORATION 1. 2.

Any act not prohibited Only powers those granted

CLASSIFICATION OF CORPORATE POWERS 1. Those expressly grated or authorized by law 2. Those that is necessary to the exercise of the express or incidental power 3. Those incidental to its existence IMPLIED POWERS OF CORPORATION

1. 2. 3. 4. 5.

Acts in the usual course of business Acts to protect the debts owing to a corporation Embarking in different business Acts in part or wholly to protect or aid employees Acts to increase business

WHY CORPORATION ACQUIRES ITS OWN SHARE? 1. 2. 3. 4.

Elimination of fractional share Satisfaction of indebtedness to corporation Payment of share of dissenting or withdrawing stockholders Other cases

CONDITIONS IN ACQUIRING OWN SHARES 1. 2. 3.

4.

5.

That its capital is not thereby impaired That it be for a legitimate and proper purpose That there shall be unrestricted retained earnings to purchase the same and its capital is thereby impaired That the corporation acts in good faith and without prejudice to the right of the creditor and stockholder That the condition for corporate affairs warrant it

CLASSES OF DIVIDENDS 1. 2. 3. 4. 5. 6. 7. 8.

Cash dividend Property dividend Stock dividend Optional dividend Composite dividend Scrip dividend Bond dividend Cumulative dividend 9. Liquidating dividend 10. Preferred dividend

3.

The required quorum in meetings of stockholders or members and the manner of voting therein; 4. The form for proxies of stockholders and members and the manner of voting them; 5. The qualifications, duties and compensation of directors or trustees, officers and employees; 6. The time for holding the annual election of directors of trustees and the mode or manner of giving notice thereof; 7. The manner of election or appointment and the term of office of all officers other than directors or trustees; 8. The penalties for violation of the by-laws; 9. In the case of stock corporations, the manner of issuing stock certificates; and 10. Such other matters as may be necessary for the proper or convenient transaction of its corporate business and affairs.

2. 3. 4.

5. 6.

They must not be contrary to existing law and inconsistent with the code They must not be contrary to morals and public policy They must not impair obligation of contract They must be general and uniform in their operation and not directed against particular individual They must be consistent with the articles of incorporation They must be reasonable

1. 2.

1.

2.

The time, place and manner of calling and conducting regular or special meetings of the directors or trustees; The time and manner of calling and conducting regular or special meetings of the stockholders or members;

4.

5.

6.

7.

8.

9.

10.

11.

Regular Special 12.

REQUISITES OF VALID MEETINGS 1. 2.

3. 4. 5.

It must be held at the proper place It must be held at the stated date and at the appointed time or at a reasonable time It must be called by t proper person There must be a previous notice There must be a quorum

13. 14.

15.

16.

REQUISITES OF NOTICE OF MEETINGS 1.

2. 3.

4. CONTENTS OF BY-LAWS

3.

KINDS OF MEETING

VALIDITY OF BY-LAWS 1.

2.

5.

6.

Must be issued by one who has authority to issue it Must be In writing Must state the date, time, place of the meeting Must state the business to be transacted thereat Must be sent at a certain time before the scheduled meeting Must comply with any other requirements prescribed by laws/bylaws

MATTERS AT WHICH THE LAW REQUIRES SPECIFIC NUMBER OF VOTES 1.

To amend the articles of

17.

18.

19.

20.

incorporation – B/TM & M/OCS-2/3 To elect directors or trustees-M/OCS-M To remove directors or trustees- M/OCS2/3 To call a special meeting to remove director or trusteesM/OCS-M To ratify a contract of a director or trustees with the corporation- M/OCS2/3 To extend /shorten corporate termsB/T-M & M/OCS-2/3 To increase or decrease the capital stock -B/T-M & M/OCS-2/3 To incur, create, or increase bonded indebtedness- B/T-M & M/OCS-2/3 To sell, lease, exchange, mortgage, pledge substantial assetsB/T-M & M/OCS-2/3 To invest corporate funds in other business- B/T-M & M/OCS-2/3 To issue stock dividends-Q-M & M/OCS-2/3 To enter into a management contract- Q-M & M/SH-M/2/3 To adopt by-lawsOCS-M To amend, repeal or adopt new by-lawsB/T-M & OCS-M To delegate to board of director the power to amend or repeal the bylaws-OCS-2/3 To revoke the preceding power delegated to the board of directorsOCS-M To fix the issued price of no par value share-Q-M or OCS-M To effect or amend the plan of merger or consolidationB/T-M & M/OCS-2/3 To dissolve the corporation- B/T-M & M/OCS-2/3 To adopt a plan of distribution of assets of NSC- B/TM & M-2/3

PRESIDING OFFICER AT MEETINGS 1.

President/chairman/vicechairman

2.

Stockholder or member in a temporary capacity 3. Stockholder or member chosen MANNER OF VOTING 1. 2.   

Directly Indirectly By means of proxies By a trustee under a voting trust agreement By executors, administrators, receivers, or other legal representative appointed by court

HOW PARTICIPATION IN CORPORATION ACQUIRED If stock corporation  By subscription contract with an existing corporation for the





acquisition of unissued share By purchase from the corporation of treasury share By transfer from a previous stockholder of the outstanding share or existing subscription to share

If non-stock corporation  By contract with the corporation the modes of entering into which vary according to the charter CONSIDERATION FOR STOCKS 1. 2.

Actual cash paid to the corporation; Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful

3.

4. 5.

6.

purposes at a fair valuation equal to the par or issued value of the stock issued; Labor performed for or services actually rendered to the corporation; Previously incurred indebtedness of the corporation; Amounts transferred from unrestricted retained earnings to stated capital; and Outstanding shares exchanged for stocks in the event of reclassification or conversion.

SOURCE OF CORPORATE CAPITAL 1. 2. 3.

Funds furnish by shareholder Borrowings Profits and stock dividends DIFFERENT MODE BY SHARE MAY ISSUED 1.

By subscription before and after

2.

3. 4.

incorporation, to original, unissued stock By sale of treasury stock after incorporation for money, property, or service By subscription to new stock By making a stock dividend

MODES OF STOCK TRANSFER 1.

2. 3.

Endorsement and delivery of stock certificate Transfer in a separate instrument Judicial or extrajudicial settlement of the estate