CORPORATIONS

CHARACTERISTICS

1. Artificial being
 Doctrine piercing the veil of corporate entity
- The separate personality of a corporation may be disregarded if such entity is used to
defeat public convenience of justify a wrong, protect a fraud or defend crime.
- Must have these elements: control of corporation by stockholders or parent; fraud;
harm or damage caused by the unfair act to the plaintiff
2. Created by operation of law
3. Right of succession
- Not affected by the death, insolvency or incapacity of its stockholders
4. Has the powers, attributes, and properties expressly authorized by law or incident to its existence
 Doctrine of limited capacity
- A corporation can only exercise the powers expressly given upon it by law and its
articles of incorporation

CORPORATION VS PARTNERSHIP

CORPORATION PARTNERSHIP
1. Manner of creation Operation of law Mere agreement of partners
2. Number of 5 to 15 persons 2 or more persons
organizers
3. Right of succession APPLICABLE NONE
4. Powers Exercise only powers Exercise any power authorized
expressed by law or incident by partners and not contrary
to its existence to law
5. Management Through board of directors All general partners
6. Liability of Stockholders not liable for General partners liable up to
members to debts corporation debts separate assets for
partnership debts
7. Commencement of Juridical personality on the Upon execution of partnership
exercise date of issuance of certificate contract
of incorporation
8. Transferability of Stockholder may transfer Cannot transfer interest to
interest interest to another without third persons without consent
consent of other stockholders of other partners by reason of
delectus personae
9. Term of existence Not exceeding 50 years Maybe be formed for an
indefinite period
10. Dissolution Cannot be dissolved without Maybe dissolved by partners
consent of the State
CLASSIFICATION
A. As to whether stocks are issued or not 2. Corporation sole
1. Stock corporation – has capital stock and D. As to purpose
dividends distributed 1. Public
2. Non-stock corporation – no capital stock 2. Private – GOCCs; Quasi-public corporations
and dividends distributed E. Religious or not
B. As to State under whose law it was created 1. Ecclesiastical
1. Domestic corporation – under Philippine 2. Lay
laws F. Charitable or not
2. Foreign corporation – formed outside of the 1. Eleemosynary
Philippines 2. Civil
 Incorporation test – nationality of G. As to legal right
corporation follows that of the country 1. De jure – with strict legal requirements
under whose laws it was incorporated 2. De facto – defectively formed but with
 Control test – nationality of the corporation powers of de jure corporation
follows that of the stockholders owning the H. As to relation to another corporation
controlling interest 1. Parent or holding
 Grandfather rule – method by which the 2. Subsidiary
percentage of Filipino equity in I. Shares are public or not
corporations engaged in nationalized 1. Close corporation
and/or partly nationalized areas of activities 2. Open corporation
is accurately computed J. Others
C. Number of persons composing them 1. By prescription
1. Corporation aggregate 2. By estoppel

Incorporation and Organization of Private Corporations

1. Verification with the SEC of the name to be used
2. Drafting the execution of the articles of incorporation signed by incorporators. Treasurer-in-Trust of the
proposed corporation must also execute affidavit to the effect that:
a. At least 25% of the authorized capital stock has been subscribed and that 25% of it has been
paid in money and/or property
b. Payment in money- deposited in designated bank by corporation and must obtain a
certificate of deposit from bank
3. Filing of the articles of incorporation with SEC together with other documents required by SEC
4. Payment of the filing, publication and other fees.
5. Issuance of the certificate of incorporation by the SEC – operative act that will grant juridical personality

ARTICLES OF INCORPORATION – basic governing document of the corporation.

AMENDMENT
1. Purpose must be legitimate
2. Vote required
- Majority vote of the directors
 - Vote or written assent of 2/3 of the outstanding capital stock
3. Requirements:
- Original and amended articles shall contain all provisions required by law to be set out in the
articles
- Amendment shall be indicated by underscoring the change or changes made
4. Effectivity: upon approval of SEC of from date of filing if not acted upon within 6 months with
corporation’s fault
5. GROUND FOR REJECTION:
a. No substantial compliance with form
b. Purpose is unlawful
c. Treasurer’s affidavit is false regarding amount of capital subscribed or paid
d. Required percentage of ownership by Filipinos is not complied with
e. Absence of recommendation by agencies of the government

Effect of non-use of corporate charter for 2 years – shall be deemed dissolved

Effect of continuous non-operation for 5 years – ground for revocation of its corporate franchise or certificate of
incorporation

BOARD OF DIRECTORS – governing body of the corporation

Functions:
a) Exercise corporate powers b) Conduct all corporate business c) Control and hold corporate property
Qualifications:
a) Owner of at least one share of stock
b) Majority of directors must be residents of the Philippines
c) Must at least be 5 persons but not more than 15
d) Must not be convicted by final judgment of an offense punishable by imprisonment of more than 6 years
e) Those stated in the by-laws
Term of office: hold office for one (1) year and until their successors are elected and qualified.
 Principle of Holdover – incumbent directors do not automatically cease position upon expiration of
term if no successor
Election:
1. Elected in a meeting at a purpose
2. Owners of majority of the outstanding capital stock or members must be present in person or by
representative authorized by written proxy:
3. Election must be by ballot (if requested) or other means.
4. No delinquent stock shall be voted

Methods: (Stock Corporation)

Cumulative voting – multiplying the number of shares by the number of directors to be elected
a. Straight voting – number of votes held shall be distributed equally among the candidates the
stockholder wishes to elect (ex. 4,500 votes distributed equally to 9 candidates)
b. Cumulative voting in favor of one – all votes held for one candidate (ex. 4,500 votes for one)
 c. Cumulative voting by distribution – distributing all votes held to as many candidates the
stockholder wishes to elect (ex. 1000 votes for candidate 1; 2000 votes for 2 and 1500 for 3)

(Non-stock Corporation) – a member may cast as many votes as there are trustees to be elected but may not cast
more than one vote for one candidate unless stated in the articles of incorporation that cumulative voting may
be allowed (ex. If there are 11 trustees to be elected, each member is entitled to 11 votes and may distribute one
vote for each candidate only)

Corporate officers – (may hold two or more positions at the same time except P-T and P-S)
1. President – must be director; may hold other positions simultaneously except Treasurer and Secretary
2. Treasurer – may not be a director
3. Secretary – must be a resident and citizen of the Philippines
4. Other officers provided in the by-laws

Meeting of BOD
1. Quorum – number of directors sufficient to transact business
GR: majority of the number of directors fixed in the articles of incorporation, unless a greater number is
provided in the article or by-laws.
2. Vote required to have valid corporate act – majority of those present provided there is quorum
3. Proxy not allowed at board meetings

Executive Committee – small group composed by at least 3 members of the board provided by the laws to take
immediate action on important matters without the need of a meeting
Acts not delegated to the executive committee:
1. Approval of action for which the stockholders’ approval is also required
2. Filing of vacancies in the board
3. Amendment or repeal of by-laws or the adoption of new by-laws
4. Amendment or repeal of any resolution of the board which by its express terms is not so amendable

REMOVAL OF BOD
1. Requisites
a. Must take place at a regular meeting or a special meeting called for the purpose of the corporation
b. Previous notice of the intention to propose such removal has been given to the stockholders
c. Vote – at least 2/3 of the outstanding capital stock or of members entitled to vote
2. Cause
GR: maybe it with or without just cause
Exceptions: removal without just cause may not be used to deprive minority stockholders of right of
representation in the BOD

VACANCIES IN OFFICE OF BOD

1. Cause – removal, expiration of term, increase in number of directors, resignation, death, abandonment,
disqualification
2. Filling of vacancy
a. By stockholder – if cause is removal, expiration of term, increase in number; and BOD has no quorum
 b. By BOD – other than REI; remaining BOD has quorum
3. Reporting requirements on election and vacancy
a. Election of BOD – 30 days after election to the SEC by Secretary or other
b. Death or resignation

DISQUALIFICATION as BOD – person convicted by final judgment punishable by imprisonment of more than 6
years or guilty of violating the Corporation Code; committed within 5 years prior to date of election or
appointment

COMPENSATION OF BOD
GR: not entitled to compensation
Exception: fixed by by-laws; approved by at least majority of outstanding capital stock of stockholders;
reasonable per diem
Limitation: 10% of the net income before tax of the corporation during the preceding year (in total for all BOD)

SELF-DEALING DIRECTORS
GR: VOIDABLE at the option of the corporation, except:
a. Presence of the director in the meeting in which the contract was approved was unnecessary for quorum
b. Vote of such director was not necessary for approval of contract
c. Contract is fair and reasonable
d. In case of officer, contract with such has been previously authorized by the BOD
Conditions for Ratification of contract because of absence of requisite
a. Contract is fair and reasonable
b. Full disclosure of the adverse interest of the director is made at the meeting of that purpose
c. Ratification made by the vote of stockholders at least 2/3 of the outstanding capital stock or members

INTERLOCKING DIRECTORS – one, some or all directors are directors of another corporation
Requisites:
a. No fraud
b. Contract is fair and reasonable if the interest of the interlocking director in one corporation is merely
nominal if (insofar as corporation with his nominal interest)– his presence in the meeting in which the
contract was approved was not necessary for quorum and vote not necessary for approval of contract
 20% outstanding capital stock is considered substantial

 Ex. A, B, C, D, E, F, G (BOD) Corp X A (BOD) Corp Y

Corp X Corp Y

A, B, C, D, E has quorum and A, B, C, D approved contract of X and Y VALID (A not necessary in quorum and vote)
A, B, C, D has quorum and A, B, C approved of contract VOID (A in quorum and vote for approval are necessary)

Duty of BOD
1. Duty of Obedience – restrict acts within scope of powers of corporation
2. Duty of Diligence – perform all obligations with due care
 3. Duty of Loyalty – must act in good faith and with loyalty towards corporation and stockholders

LIABILITY of BOD for damages – JOINT AND SEVERAL to the corporation, stockholders and other persons who
suffered the damages resulting from acts
Grounds:
a) Willingly and knowingly voting for or assenting to unlawful acts
b) Guilty of gross negligence or bad faith
c) Acquiring pecuniary interest in conflict with their duty as directors

POWERS OF CORPORATION
1. Express
2. Implied
3. Incidental

Power to extend or shorten corporate term

1. Requisites
a. Vote required – majority vote of the BOD; 2/3 of the outstanding capital stock or members called
for in a meeting for that purpose
2. Exercise of appraisal right – demand payment of share when he stockholder dissents from corporate acts

Power to increase or decrease capital stock

1. Requisites
a. Vote – majority vote of the BOD; 2/3 of the outstanding capital stock in a meeting
b. Increase or decrease of capital stock must be certified to in a certificate duly signed by a
majority of the directors and countersigned by the chairman and secretary of the board
c. Subscriptions and paid in capital requirements in case of increase – treasure execute sworn
statement attesting to the fact that at least 25% of the increase have been subscribed and
25% of it have been paid
d. Decrease shall not prejudice the rights of corporate creditors
e. Must be approved by SEC
2. Ways
a. Change shares, not par
b. change par, not number of shares
c. Change both

Power to incur, create or increase bonded indebtedness

1. Requisites
a. Vote – majority of vote of the BOD; 2/3 of the outstanding capital stock or members
b. Certified in a certificate duly signed by a majority of the directors and countersigned by
chairman and secretary of the board
c. Approved by SEC
d. Bonds issued must be registered by SEC which have the authority to determine sufficieny of
terms
Power to deny pre-emptive right – right to purchase or subscribe shares before offering to the public
1. When exercised:
a. Shares issued result of increase in capital stock
b. Issued out of unsubscribed portion of authorized capital stock
2. When right not available
a. Denied by the articles of incorporation
b. When shares are issued in compliance with laws requiring stock offerings or minimum stock
ownership by the public
c. When shares are to be issued in good faith with the approval of 2/3 of the outstanding
capital stock in exchange for property needed for corporate purposes, or payment of
previously contracted debt

Power to sell, lease, exchange, mortgages, pledge or otherwise dispose of all or substantially all of
corporate property including goodwill
1. Vote required – majority vote of the BOD; 2/3 of the outstanding capital stock or members
2. When vote of the BOD is sufficient
a. When the sale, lease, exchange, mortgage, pledge or other disposition of any property is
necessary in the ordinary course of business
b. When proceeds of such are to be appropriated for the conduct of the remaining business or
the corporation
3. Transfer of all or substantially all of corporate property should not prejudice creditors

Power to acquire own shares

1. Requisites: acquisition must be for legitimate purpose and must have unrestricted retained
earnings to cover purchase
 Trust fund doctrine

Power to invest corporate funds in another corporation or business for any other purpose
1. Vote – majority of the board of directors; at least 2/3 of the outstanding capital stock or
members
 Approval of stockholders need not be necessary if the investment by the corporation is
reasonably necessary to accomplish its primary purpose.
 Appraisal right may be exercised if the stockholder dissents from the act

Power to declare dividends

1. Requisites
a. Voting
1.) Stock dividends – majority of the board of directors present in a quorum; 2/3 of the
outstanding capital stock entitled to vote
2.) Cash dividends – majority of the directors present in a quorum
b. Source of dividends
1.) Surplus profits – retained earnings
2.) Paid-in surplus – only for stock dividends
 3.) Capital – only for dividends of wasting assets corporations and liquidating dividends
c. Payment when stockholder is delinquent
1.) Cash dividends – payment first applied to unpaid balance on the subscription plus
costs and expenses
2.) Stock dividends – withheld from the delinquent shareholder until his unpaid balance
has been paid

Power to enter into a management contract

1. Voting requirement – majority vote of the BOD; majority of the outstanding capital stock or
members entitled to vote (for both the managing and managed corporation)
 Vote of at least 2/3 of the outstanding capital stock or members of the managed
corporation entitled to vote is required if:
a. Stockholder representing same interest of both the managing and managed
corporation own or control more than 1/3 of the outstanding capital stock entitled
to vote of the managing corporation
b. Majority of the BOD are interlocking directors with the managing corporation
2. Duration of the management contract
GR: not exceed 5 years for any one term – unless, service contracts, operating agreements on
natural resources

Ultra-vires acts – acts or contract by which are beyond the powers of the corporation

BY-LAWS – rules of action adopted by the corporation governing its stockholders and those charged
with governance

1. Requisites:
a. Must be consistent with the charter of the corporation
b. Must be consistent with public policy
c. Must be uniform and general in application and not directed against a particular individual
d. Must be reasonable
e. Must not impair the obligations of the contracts
2. Adoption and filing
- Prior to incorporation : submitted together with the articles of incorporation
- After incorporation: submitted within one month after receipt of certificate of
incorporation and approved by the majority of the outstanding capital stock or
members
3. Effect of failure to file by laws: certificate of incorporation may be revoked or cancelled
4. Amendment or Repeal
a. Vote required – majority vote of the BOD; majority of the outstanding capital stock or
members in a meeting called for such purpose
b. Delegation of power to amend or repeal by-laws – owners of 2/e of the outstanding stock
may delegate BOD and may be amended by majority vote of those present in a quorum
 c. Revocation of power – owners of the majority of the outstanding capital stock or members
may revoke power previously delegated

MEETINGS OF BOD
REGULAR MEETINGS SPECIAL MEETINGS
Date of Meeting Monthly, unless otherwise stated in the May be held any time upon the
by-laws call of the president, or stated in
by-laws
Notice and Contents Must be sent to evert director at least 1 One day prior the scheduled
day prior; maybe waived meeting
Place of Meetings Anywhere in or outside the Philippines, unless stated in by-laws
Quorum in Meetings Majority of the number of directors; unless provided greater in by-laws or AOI
Presiding Officer President, unless stated in by-laws

Manner of Voting; During meetings, per head

presence required (NO PROXY)

MEETING OF STOCKHOLDERS
REGULAR MEETINGS SPECIAL MEETINGS
Date of Meeting Held annually on a fixed date in the by- Any time deemed necessary; unless stated
laws; if not, on a date in April every year in by-laws
Notice and Contents WRITTEN notice at least 2 weeks prior to WRITTEN notice at least 1 week prior to the
the meeting, unless stated in by-laws meeting, unless stated in by-laws
Place of Meetings Must be held in the city or municipality where the principal office is located; if practicable,
in the principal office
Quorum in Meetings Majority of the outstanding capital stock or members; unless greater number provided in
the Corporation Code or by-laws
Presiding Officer President, unless stated in by-laws

Who may call the a. Person authorized in the by-laws, BOD or any person entrusted with management
meeting b. Petitioning stockholder; or SEC
c. Secretary of the corporation in case of a special meeting to remove BOD
Requisites for a valid a. Must be held at the proper place, date and time
meeting b. Must be called by the proper person
c. Previous notice must have been given
d. There must be a quorum
Effect of improperly VALID, if transactions are within the powers of or authority of the corporation; and all
held meeting stockholders are present or duly represented at the meeting
Manner of Voting a. Stockholders may vote by shares, members per head
b. Directly or personally by a stockholder
c. Through representative voting (by means of proxy, trust agreement or through
legal representatives)
 RULES ON VOTING BY STOCKHOLDERS

VOTING SHARES OR MEMBERS

2/3 of the outstanding capital stock or members Majority of the outstanding capital stock or members
entitled to vote entitled to vote
a. Removal of Directors a. Election of directors
b. Ratification of self-dealing contracts of directors b. Granting compensation to directors
c. Ratification of the act of a director who is c. Entering into a management contract in respect
disloyal to managing and managed corporation
d. Issuance of stock dividends d. Fixing of the issued price of no-par shares
e. Entering a management contract with
interlocking directors
f. Adoption of a plan of distribution of assets of a
non-stock corporation upon dissolution

NON-VOTING SHARES OR MEMBERS

2/3 of the outstanding capital stock or members entitled to Majority of the outstanding capital stock or
vote members entitled to vote
a. Amendment of the AOI a. Adoption of by-laws
b. Extension or shortening of corporate term b. Amendment or repeal of by-laws
c. Incurring, creating or increasing bonded indebtedness c. Revocation of the authority to adopt,
d. Sales, lease, exchange, mortgage, pledge or other amend or repeal by-laws
disposition of all or substantially all of the corporate
property
e. Investment of corporate funds in another corporation
for other than primary purpose
f. Delegation to the board of directors the power to
amend, adopt or repeal by-laws
g. Ratification of merger or consolidation
h. Dissolution of the corporation

STOCKS AND STOCKHOLDERS

NON-VOTING SHARES OR MEMBERS
2/3 of the outstanding capital stock or members Majority of the outstanding capital stock or members
entitled to vote entitled to vote
i. Amendment of the AOI d. Adoption of by-laws
j. Extension or shortening of corporate term e. Amendment or repeal of by-laws
k. Incurring, creating or increasing bonded f. Revocation of the authority to adopt, amend or
indebtedness repeal by-laws
l. Sales, lease, exchange, mortgage, pledge or g.
other disposition of all or substantially all of the
corporate property
m. Investment of corporate funds in another
corporation for other than primary purpose
n. Delegation to the board of directors the power
to amend, adopt or repeal by-laws
o. Ratification of merger or consolidation
p. Dissolution of the corporation

STOCKS AND STOCKHOLDERS

1. Subscriptions
a. Pre-incorporation subscription
- subscription to unissued stock of a corporation still to be formed
- Revocability
1.) Before filing of the AOI - after 6 months from date of subscription, except if all other
subscribers consent to it or incorporation fails to materialize within 6 months from date
of subscription
2.) After filing of AOI – cannot be revoked
b. Post incorporation
- Subscription after corporation has been formed
- Revocability: may not be revoked
2. Stocks – must have all the requisites of a contract (Onerous)
a. GR: partial payment shall be applied pro-rata to all the subscribed shares. No certificate of
stocks shall be issued until fully paid.
b. Exception: BOD may apply payment to such number of shares as may be covered by the
payment and issue the corresponding certificate therefor.
c. Transfer of stocks
1.) As between parties– valid
2.) As to third persons and the corporation – not valid until recorded in the books
3.) Unpaid shares not transferable in the books
4.) Heirs no automatic right to stocks of a deceased stockholder
 d. Liability for watered stock
1.) BOD – solidarily liable to corporation and creditors for consenting to the issuance of the
watered stock; or by not expressing objections for the knowledge of the same
2.) Stockholders
a. Liability to the corporation for unpaid stock subscriptions
b. For interest on unpaid subs
c. Corporate creditors for unpaid subs
d. Corporation and its creditors for watered stocks
e. Divided unlawfully received
f. Failure to incorporate
e. Liability of subscribers for unpaid subscribers
1.) Failure to pay makes the entire balance due and demandable
2.) Stockholder shall be liable for interest at the legal rate, unless stated in by-laws
3.) If no payment made within 30 days, considered delinquent
f. Delinquency
1.) Shall not be voted
2.) Shall not be entitled to cote or represent any stockholder in a meeting
3.) Holder not entitled to any rights of a stockholder, except on dividends
4.) Remedies
a. Apply cash dividends or withhold stock dividends
b. File court action to collect amount
c. Sell at public auction with notice to delinquent stockholder

RIGHTS OF STOCKHOLDERS
1. Right to vote 4. Elect and remove BOD 7. To voting agreements

2. To dividends 5. To a stock certificate 8. Ask for dissolution

3. Inspect corporate books 6. Pre-emptive right 9. Bring derivative suit

DERIVATIVE SUITS – suit filed by stockholder in the name and in behalf of the corporation to protect
corporate rights or redress wrongs committed against the corporation.
Requisites
a. He was a stockholder at the time the transactions occurred
b. He exerted all efforts to exhaust all remedies available
c. No appraisal rights available for the acts complained of
d. Suit is not a nuisance suit

CORPORATE BOOKS AND RECORDS

MERGERS AND CONSOLIDATIONS

1. Procedure
a. BOD shall approve of a plan of merger
b. Plan of merger must be submitted for approval by the stockholders of each constituent
corporation at separate meetings duly called for
 Vote – at least 2/3 of the outstanding capital stock or members
c. Articles of merger shall be executed
d. Articles of merger submitted to SEC
e. SEC shall issue certificate of merger for effectivity
2. Effects of Merger
a. Constituent corporations shall become a single entity
b. Separate existence of each corporation shall cease
c. Surviving corporation shall possess all rights, privileges and powers; duties and
responsibilities; and liabilities of all constituent corporation

APPRAISAL RIGHT – right of a dissenting stockholder to demand payment of fair value of shares held

1. When
a. Amendment of the AOI on changing or restricting rights; authorizing preference shares;
extending or shortening or corporate term
b. Sale, lease, mortgage, transfer or pledge of all or substantially all of corporate property
c. Merger or consolidation
2. How
a. Submission of written demand within 30 days after the date on which the vote was taken
for payment of fair value
b. Within 10 days from date of demand, submission of certificate of stock. Failure may
terminate appraisal right
c. If proposed corporate action is implemented, corporation must pay stockholder within 30
days from the time fair value is determined and upon surrender of his certificate of stock
3. Amount
a. Fair value of the shares held
b. Determined by a third party if no fair value within 60 days from approval of corporate action

NON-STOCK CORPORATIONS

Members and membership

1. Right to vote – entitled to one vote except

a. When right is limited or denied in AOI
b. When right is limited or denied in AOI
c. May vote as many trustees to be elected, but for not more than one vote each candidate
d. May vote in person, by proxy or by mail
 2. Transferability of membership – personal and non-transferable
3.
4. Termination – whichever is provided in the AOI or by-laws
5. Place of meetings – in the city or municipality where the principal office is located, unless by-
laws provided otherwise (must be in the Philippines)

Trustees and officers

1. Number – not more than 15

2. Qualifications – must be members or the corporations and majority are residents of the
Philippines
3. Term of office – 3 years; 1/3 of the number shall expire every year
4. Election – may only be elected directly by the members

Distribution of assets upon dissolution

1. Liabilities and obligations

2. Assets held upon a condition requiring their return shall be returned
3. Assets held subject to limitations for some purpose are transferred to corporations of the same
purpose
4. Assets provided for distribution to members in accordance to their distributive rights
5. Assets to e distributed in accordance with the master plan adopted by majority vote of the BOT
and approved by at least 2/3 of the voting members

CLOSE CORPORATIONS
 Not a close corporation if at least 2/3 of its voting stock is owned and controlled by another
corporation which is not a close corporation
 May not be mining, oil, stock exchange, bank, insurance, public utilities, educational
institutions and corporations vested with public interest
 Agreements by stockholders are valid among parties even if not embodied in the AOI
 They shall be personally liable for corporate tors unless corporation has obtained reasonably
adequate liability insurance.
 Any action of the BOD without a meeting shall be valid, unless provided by the by-laws and
has the following requisites
a. Written consent is signed by all directors before or after the action is taken
b. All stockholders have actual or implied knowledge of the actin and make no prompt
objection in writing
c. Directors are accustomed to take informal actions with the express or implied
consent
 Amendment of the articles of incorporation must be approved by a vote of at least 2/3 of
the outstanding capital stock
DEADLOCK IN MANAGEMENT – SEC has the power to arbitrate by
a. Cancelling or altering any provision in the AOI
b. Cancelling or altering any resolution by the BOD
c. Directing or prohibiting any act of the corporation
d. Requiring the purchase at their fair value of shares of any stockholder
e. Appointing a provisional director
f. Dissolving the corporation

SPECIAL CORPORATIONS
1. Educational Corporations
- Non-stock Corp: number of BOD shall be 5 to 15 but in multiples of 5; term of office of
1/5 of their number shall expire every year
- Quorum: majority of the trustees
2. Religious Corporation
 Corporation sole – one person to administer and manage as trustee the affairs, property and
temporalities of any religious denomination
 Religious society – incorporated by at least 2/3 of the membership of a religious order,
synod, district organization of any religious denomination
DISSOLUTION
1. Voluntary Dissolution
 When creditors are not affected
a. Vote required – majority vote of the BOD and resolution of 2/3 of the outstanding
capital stock or members
b. A copy of resolution must be filed with the SEC
c. SEC shall issue certificate of dissolution
 When creditors are affected
a. Vote required - majority vote of the BOD and resolution of 2/3 of the outstanding
capital stock or members
b. Verified petition filed with the SEC
c. Hearing of petition
d. Judgment by the SEC
 By shortening corporate term – amending AOI submitted to the SEC
 Of a Corporation Sole – upon approval of a verified declaration of dissolution to the SEC
2. Involuntary Dissolution
 By expiration of term
 By non-se of corporate charter – 2 years from incorporation
 By order of SEC
 By legislative enactment

CORPORATE LIQUIDATION
 After dissolution, the corporation shall continue as a body corporate for 3 years for:
 a. Prosecute and defend suits by or against it
b. Enable to settle and close its affairs
c. Dispose of and convey property
d. Distribute assets
 Who may effect liquidation
a. Corporation itself – claims by or against it not presented within 3 years shall be
unenforceable
b. By receivership
o Corporation ceases to exist as an entity
o Receiver is substituted to its place for purpose of liquidation
o Creditors may sue the receiver for valid claims against dissolved corp.
c. By trusteeship
o All interest which the corporation had in property is terminated
o Legal interest vests in the trustees
o Beneficial interest vests in the stockholders, creditors and other third parties
o Corporation ceases to exist
o Trustee is substituted
o Creditors may sue trustee for claims against corp even after the 3 year period

FOREIGN CORPORATION
 Suits by or against the corporation
MAY BE SUED MAY SUE
Doing business in the Philippines, with YES YES
license
Doing business in the Philippines, YES NO
without license
Not doing business in the Philippines YES YES

Ground for revocation of license

1. Failure to file its annual report
2. Failure to appoint and maintain resident agent
3. Failure, after change of resident agent of his address, to submit to the SEC a statement
4. Failure to submit to the SEC an authenticated copy of any amendments to the AOI
5. Misrepresentation of any material matter
6. Failure to pay any and all taxes etc.
7. Transacting business in the Philippines outside of the purpose under its license
8. Transacting business in the Philippines as agent of or acting for and in behalf of any foreign
corporation not licensed to operate in the Philippines