Revised Corporation Code of the Philippines

Revised Corporation Code of the Philippines

• This Code shall be known as the “Revised Corporation Code of the Philippines".

Corporation Definition

• A corporation is an artificial being created by operation of law.
• Corporations have the right of succession.
• Corporations have the powers, attributes, and properties expressly authorized by law or incidental to its existence.

Classes of Corporations

• Corporations formed or organized under this Code can be stock or nonstock corporations.
• Stock corporations have capital stock divided into shares.
• Stock corporations have authorization to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held.
• Nonstock corporations are all corporations other than stock corporations.

Corporations Created by Special Laws or Charters

• Corporations created by special laws or charters are primarily governed by the provisions of the special law or charter creating them.
• The Revised Corporation Code supplements special corporation laws insofar as they apply.

Corporators and Incorporators, Stockholders and Members

• Corporators are those who compose a corporation, whether as stockholders or shareholders in a stock corporation or as members in a nonstock corporation.
• Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

Classification of Shares

• The classification of shares along with their corresponding rights, privileges, or restrictions, and their stated par value if any, must be indicated in the articles of incorporation.
• Each share is equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock.
• Shares in stock corporations are divided into classes or series of shares, or both.
• Only "preferred" or “redeemable” shares, may be deprived of the right to vote.
• There shall always be a class or series of shares with complete voting rights.
• Holders of nonvoting shares are entitled to vote on the following matters:
  • Amendment of the articles of incorporation
  • Adoption and amendment of bylaws
  • Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate property
  • Incurring, creating, or increasing bonded indebtedness
  • Increase or decrease of authorized capital stock
  • Merger or consolidation of the corporation with another corporation or other corporations
  • Investment of corporate funds in another corporation or business in accordance with this Code
  • Dissolution of the corporation
• Vote required under this Code to approve a particular corporate act shall be deemed to refer only to stocks with voting rights, except the vote as previously stated according to code.
• Shares or series of shares may or may not have a par value.
• Banks, trust, insurance, pre-need companies, public utilities, building and loan associations, and other corporations authorized to obtain or access funds from the public, whether publicly listed or not are not permitted to issue no-par value shares of stock.
• Preferred shares of stock issued by a corporation may be given preference in the distribution of dividends and in the distribution of corporate assets in case of liquidation, or such other preferences.
• Preferred shares of stock can only be issued with a stated par value.
• If authorized in the articles of incorporation, the board of directors may fix the terms and conditions of preferred shares of stock or any series thereof.
• Terms and conditions for preferred shares are effective upon filing of a certificate thereof with the Securities and Exchange Commission (the “Commission”). Shares of capital stock issued without par value are deemed fully paid and nonassessable, and the holder of shares is not liable to the corporation or its creditors in respect thereto.
• No-par value shares must be issued for a consideration of at least Five pesos (P5.00) per share.
• The entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends.
• A corporation may classify its shares further for ensuring compliance with constitutional or legal requirements.

Founders' Shares

• Founders' shares can be given certain rights and privileges not enjoyed by the owners of other stocks.
• When the exclusive right to vote and be voted for in the election of directors is granted it must be for a limited period not to exceed five (5) years from date of incorporation.
• Exclusive voting right is not allowed if its exercise will violate Commonwealth Act No. 108, otherwise known as the “Anti-Dummy Law”; Republic Act No. 7042, otherwise known as the “Foreign Investments Act of 1991"; and other pertinent laws

Redeemable Shares

• Redeemable shares may be issued by the corporation when expressly provided in the articles of incorporation.
• Redeemable shares may be purchased by the corporation from the holders of shares upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books of the corporation, and upon such other terms and conditions stated in the articles of incorporation and the certificate of stock representing the shares, subject to rules and regulations issued by the Commission.

Treasury Shares

• Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation through purchase, redemption, donation, or some other lawful means.
• Treasury shares may again be disposed of for a reasonable price fixed by the board of directors.

Number and Qualifications of Incorporators

• Any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number may organize a corporation for any lawful purpose or purposes.
• Natural persons who are licensed to practice a profession, partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless otherwise provided under special laws.
• Incorporators who are natural persons must be of legal age.
• Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock.
• A corporation with a single stockholder is considered a One Person Corporation as described in Title XIII, Chapter III of this Code.

Corporate Term

• A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
• Corporations with certificates of incorporation issued before this Code is effective, and which continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority of its outstanding capital stock, notifies the Commission that it elects to retain its specific corporate term pursuant to its articles of incorporation.
• Any change in the corporate term is without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.
• A corporate term for a specific period can be extended or shortened by amending the articles of incorporation.
• No extension may be made earlier than three (3) years before the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Commission.
• Expansion of the corporate term shall be effective only on the day following the original or subsequent expiry date(s).
• A corporation with an expired term may apply for revival of its corporate existence, with all the rights and privileges under its certificate of incorporation and duties, debts and liabilities existing prior to its revival.
• Upon approval by the Commission, the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence unless its application for revival provides otherwise.
• Application for revival of certificate of incorporation of banks, quasi-banking institutions, pre-need, insurance and trust companies, non-stock savings and loan associations (NSSLAs), pawnshops, corporations engaged in money service business, and other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency.

Minimum Capital Stock Not Required of Stock Corporations

• Stock corporations are not required to have a minimum capital stock, except as otherwise specifically provided by special law.

Contents of the Articles of Incorporation

• All corporations shall file with the Commission articles of incorporation in any of the official languages, signed and acknowledged or authenticated, in the form and manner as the Commission allows, containing the following matters, unless otherwise prescribed by this Code or by special law:
  • The name of the corporation
  • The specific purpose/s for which the corporation is being formed
  • When a corporation has more than one stated purpose, the articles of incorporation shall indicate the primary purpose and the secondary purpose or purposes.
  • A nonstock corporation cannot include a purpose which would change or contradict its nature as such.
  • The place where the principal office of the corporation is to be located, which must be within the Philippines
  • The term for which the corporation is to exist if it has not elected perpetual existence
  • The names, nationalities, and residence addresses of the incorporators
  • The number of directors, which shall not be more than fifteen (15) or the number of trustees which may be more than fifteen (15)
  • The names, nationalities, and residence addresses of persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified in accordance with this Code
  • If it is a stock corporation, the amount of its authorized capital stock, number of shares into which it is divided, the par value of each, names, nationalities, and residence addresses of the original subscribers, amount subscribed and paid by each on the subscription, and a statement that some or all of the shares are without par value, if applicable
  • If it is a nonstock corporation, the amount of its capital, the names, nationalities, and residence addresses of the contributors, and amount contributed by each
  • Other matters consistent with law that the incorporators may deem necessary and convenient
• An arbitration agreement may be provided in the articles of incorporation pursuant to Section 181 of this Code.
• The articles of incorporation and applications for amendments to them may be filed with the Commission in the form of an electronic document, in accordance with the Commission's rules and regulations on electronic filing.
• Articles of incorporation of all domestic corporations must comply substantially with the form provided in accordance with code.

Amendment of Articles of Incorporation

• Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.
• Articles of incorporation of a nonstock corporation may be amended by the vote or written assent of the majority of the trustees and at least two-thirds (2/3) of the members.
• The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation.
• Amendments to the articles shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees, with a statement that the amendments have been duly approved by the required vote of the stockholders or members shall be submitted to the Commission.
• The amendments shall take effect upon approval by the Commission or from the date of filing with the Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation.

Grounds When Articles of Incorporation or Amendment May be Disapproved

• The Commission may disapprove the articles of incorporation or any amendment to them if the same is not compliant with the requirements of this Code.
• The Commission shall give the incorporators, directors, trustees, or officers reasonable time from receipt of disapproval within which to modify the objectionable portions of the articles or amendment.
• The following are grounds for disapproval:
  • The articles of incorporation or any amendment thereto is not substantially in accordance with the form prescribed.
  • The purpose/s of the corporation are patently unconstitutional, illegal, immoral or contrary to government rules and regulations.
  • The certification concerning the amount of capital stock subscribed and/or paid is false.
  • The required percentage of Filipino ownership of the capital stock under existing laws or the Constitution has not been complied with.
• No articles of incorporation or amendment to articles of incorporation of banks, quasi-banking institutions, preneed, insurance and trust companies, NSSLAs, pawnshops, and other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law.

Corporate Name

• No corporate name shall be allowed by the Commission if it is not distinguishable from that already reserved or registered for the use of another corporation, or if such name is already protected by law, or contrary to the law, rules and regulation.
• A name is not distinguishable even if it contains one or more of the following:
  • The word “corporation”, “company”, “incorporated”, “limited”, “limited liability", or an abbreviation of one of such words; and
  • Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different tenses, spacing, or number of the same word or phrase
• The Commission, upon determination that the corporate name is: (1) not distinguishable from a name already reserved or registered for the use of another corporation; (2) already protected by law; or (3) contrary to law, rules and regulations, may summarily order the corporation to immediately cease and desist from using such name and require the corporation to register a new one.
• The Commission shall also cause the removal of all visible signages, marks, advertisements, labels, prints and other effects bearing such corporate name and upon the approval of the new corporate name, the Commission shall issue a certificate of incorporation under the amended name.
• If the corporation fails to comply with the Commission's order, the Commission may hold the corporation and its responsible directors or officers in contempt and/or hold them administratively, civilly and/or criminally liable under this Code and other applicable laws and/or revoke the registration of the corporation.

Registration, Incorporation and Commencement of Corporate Existence

• A person or group of persons desiring to incorporate shall submit the intended corporate name to the Commission for verification.
• If the Commission finds that the name is distinguishable from a name already reserved or registered for the use of another corporation, not protected by law and is not contrary to law, rules and regulations, the name shall be reserved in favor of the incorporators.
• The incorporators shall then submit their articles of incorporation and bylaws to the Commission.
• If the Commission finds that the submitted documents and information are fully compliant with the requirements of this Code, other relevant laws, rules and regulations, the Commission shall issue the certificate of incorporation.
• A private corporation organized under this Code commences its corporate existence and juridical personality from the date the Commission issues the certificate of incorporation under its official seal.
• The incorporators, stockholders/members and their successors shall constitute a body corporate under the name stated in the articles of incorporation for the period of time mentioned, unless said period is extended or the corporation is sooner dissolved in accordance with law.

De facto Corporations

• Due incorporation of any corporation claiming in good faith to be a corporation under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any private suit to which such corporation may be a party.
• Inquiry may be made by the Solicitor General in a quo warranto proceeding.

Corporation by Estoppel

• All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof.
• When any ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use its lack of corporate personality as a defense
• Anyone who assumes an obligation to an ostensible corporation as such cannot resist performance thereof on the ground that there was in fact no corporation.

Effects of Non-Use of Corporate Charter and Continuous Inoperation

• If a corporation does not formally organize and commence its business within five (5) years from the date of its incorporation, its certificate of incorporation shall be deemed revoked as of the day following the end of the five (5)-year period.
• If a corporation has commenced its business but subsequently becomes inoperative for a period of at least five (5) consecutive years, the Commission may, after due notice and hearing, place the corporation under delinquent status.
• A delinquent corporation shall have a period of two (2) years to resume operations and comply with all requirements that the Commission shall prescribe, and upon compliance by the corporation, the Commission shall issue an order lifting its delinquent status.
• Failure to comply with requirements and resume operations within the given period by will cause the revocation of the corporation's certificate of incorporation.
• The Commission shall give reasonable notice to, and coordinate with the appropriate regulatory agency prior to the suspension or revocation of the certificate of incorporation of companies under their special regulatory jurisdiction.

The Board of Directors or Trustees of a Corporation; Qualification and Term

• Unless otherwise provided in this Code, the board of directors or trustees shall exercise the corporate powers, conduct all business, and control all properties of the corporation.
• Directors shall be elected for a term of one (1) year from among the holders of stocks registered in the corporation's books
• Trustees shall be elected for a term not exceeding three (3) years from among the members of the corporation.
• Each director and trustee shall hold office until the successor is elected and qualified.
• A director who ceases to own at least one (1) share of stock or a trustee who ceases to be a member of the corporation shall cease to be such.
• The board of the following corporations vested with public interest shall have independent directors constituting at least twenty percent (20%) of the board:
  • Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as "The Securities Regulation Code”, namely those whose securities are registered with the Commission, corporations listed with an exchange or with assets of at least Fifty million pesos (P50,000,000.00) and having two hundred (200) or more holders of shares, each holding at least one hundred (100) shares of a class of its equity shares
  • Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-need, trust and insurance companies, and other financial intermediaries
  • Other corporations engaged in business vested with public interest similar to the above, as may be determined by the Commission, after taking into account relevant factors including the extent of minority ownership, type of financial products or securities issued or offered to investors, public interest involved in the nature of business operations, and other analogous factors.
• An independent director is a person who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
• Independent directors must be elected by the shareholders present or entitled to vote in absentia during the election of directors.
• Rules and regulations governing qualifications, disqualifications, rules for voting, term duration, term limit, maximum number of board memberships, and other requirements, that the Commission will prescribe to strengthen their independence and align with international best practices are applicable to independent directors.

Election of Directors or Trustees

• Except when the exclusive right is reserved for holders of founders' shares under Section 7 of this Code, each stockholder or member shall have the right to nominate any director or trustee who possesses all of the qualifications and none of the disqualifications set forth in this Code.
• At all elections of directors or trustees, there must be present, either in person or through a representative authorized to act by written proxy, the owners of the majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote.
• The stockholders or members may also vote through remote communication or in absentia: Provided, That the right to vote through such modes may be exercised in corporations vested with public interest, notwithstanding the absence of a provision in the bylaws of such corporations.
• When authorized in the bylaws or by a majority of the board of directors.
• A stockholder or member who participates through remote communication or in absentia, shall be deemed present for purposes of quorum.
• The election must be by ballot if requested by any voting stockholder or member.
• Stockholders entitled to vote shall have the right to vote the number of shares of stock standing in their own names in the stock books of the corporation as at the time fixed in the bylaws or where the bylaws are silent, at the time of the election. The said stockholder may:
  • Vote number of shares for as many persons as there are directors to be elected;
  • Cumulate said shares and give one (1) candidate as many votes as the number of directors to be elected multiplied by the number of the shares owned
  • Distribute votes on the same principle among as many candidates as appropriate
• Total number of votes cast shall not exceed the number of shares owned by the stockholders as shown in the books of the corporation multiplied by the whole number of directors to be elected.
• No delinquent stock shall be voted.
• Members of nonstock corporations may cast as many votes as trustees to be elected but may not cast more than one (1) vote for one (1) candidate, unless otherwise provided in the articles of incorporation or in the bylaws.
• Nominees for directors or trustees receiving the highest number of votes shall be declared elected.
• If no election is held, or the owners owning the majority of the outstanding capital stock or majority of the members entitled to vote are not in present in person, by proxy, or via remote communication, the meeting may be adjourned and the corporation shall proceed in accordance with Section 25 of this Code.

Corporate Officers

• Immediately after the election, the directors of a corporation must formally organize and elect:
  • A president, who must be a director
  • A treasurer, who must be a resident
  • A secretary, who must be a citizen and resident of the Philippines
  • Other officers as may be provided in the bylaws
• If the corporation is vested with public interest, the board shall elect also a compliance officer.
• One person can hold two (2) or more positions concurrently, except that no one shall act as president and secretary or as president and treasurer at the same time, unless otherwise allowed in this Code.
• The officers shall manage the corporation and perform such duties as may be provided in the bylaws and/or as resolved by the board of directors.

Report of Election of Directors, Trustees and Officers, Non-holding of Election and Cessation from Office

• Within thirty (30) days after the election of the directors, trustees and officers of the corporation, the secretary, or any other officer of the corporation, shall submit to the Commission, the names, nationalities, shareholdings, and residence addresses of the directors, trustees, and officers elected.
• Non-holding of elections and the reasons must reported to the Commission within thirty (30) days from the date of the scheduled election.
• Report shall specify a new date for the election, which shall not be later than sixty (60) days from the scheduled date.
• If no new date has been designated, or if the rescheduled election is likewise not held, the Commission may, upon the application of a stockholder, member, director or trustee, and after verification of the unjustified non-holding of the election, summarily order that an election be held.
• Shares of stock or membership represented at a meeting and entitled to vote shall constitute a quorum for purposes of conducting an election.
• The Commission shall have the power to issue orders like: directing the issuance of a notice stating the time and place of the election, designated presiding officer, and the record date or dates for the determination of stockholders or members entitled to vote.
• The secretary or the director, trustee or officer of the corporation shall report in writing such fact to the Commission, within seven (7) days of learning that a director, trustee, or officer has cease to hold office through death, resignation, or in any other manner.

Disqualification of Directors, Trustees or Officers

• A person shall be disqualified from being a director, trustee or officer of any corporation if, within five (5) years prior to the election or appointment as such, if the person was:
  • Convicted by final judgment by imprisonment exceeding 6 years
  • Convicted for violating this code
  • Convicted for violating Republic Act No. 8799, otherwise known as “The Securities Regulation Code"
  • Found administratively liable for any fraudulent act
  • By a foreign court or regulatory authority for acts, violations or misconduct similar to (a) and (b) above
• The foregoing is without prejudice to qualifications or other disqualifications, which the Commission may impose in its promotion of good corporate governance or as a sanction in administrative proceedings.

Removal of Directors or Trustees

• Vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock can remove any director or trustee of a corporation from office, or in a nonstock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote is required for removal
• Removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting.
• A special meeting of the stockholders or members for the purpose of removing any director or trustee must be called by the secretary on order of the president, or upon written demand of the stockholders owning at least a majority of the outstanding capital stock, or a majority of the members entitled to vote.
• If there is no secretary, or if the secretary, despite demand, fails or refuses to call the special meeting or to give notice thereof, the stockholder or member of the corporation signing the demand may call the meeting by directly addressing the stockholders or members
• Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be given by publication or by written notice prescribed in this Code. Removal may be with or without cause.
• Removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 23 of this Code.
• The Commission shall remove any director or trustee after discovering they are unqualified. This can occur motu proprio or upon verified complaint, and after due notice and hearing.
• Removal of a disqualified director is without prejudice to other sanctions that the Commission may impose on the board of directors or trustees who, with knowledge of the disqualification, failed to remove such director or trustee.

Vacancies in the Office of Director or Trustee; Emergency Board

• Any vacancy occurring in the board of directors or trustees other than by removal or by expiration of term may be filled by the vote of at least majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the stockholders or members in a regular or special meeting called for that purpose
• When the vacancy is due to term expiration, the election shall be held no later than the day of such expiration at a meeting called for that purpose.
• When the vacancy arises as a result of removal by the stockholders or members, the election may be held on the same day of the meeting authorizing the removal, and this fact must be so stated in the agenda and notice of said meeting.
• All other cases require, the election must be held no later than forty-five (45) days from the time the vacancy arose.
• A director or trustee elected to fill a vacancy shall be referred to as replacement director or trustee and shall serve only for the unexpired term of the predecessor in office.
• When the vacancy prevents the remaining directors from constituting a quorum and emergency action is required to prevent grave, substantial, and irreparable loss or damage to the corporation, the vacancy may be temporarily filled from among the officers of the corporation by unanimous vote of the remaining directors or trustees.
• Actions shall be limited to emergency situations and this term ends in a reasonable time after these actions are preformed,. The term shall cease within a reasonable time from the termination of the emergency or upon election of the replacement director or trustee, whichever comes earlier.
• The corporation must notify the Commission within three (3) days from the creation of the emergency board, stating therein the reason for its creation

Compensation of Directors or Trustees

• In the absence of bylaw fixing compensation, the directors or trustees shall not receive any compensation in their capacity as such, except for reasonable per diems.
• The stockholders representing at least a majority of the outstanding capital stock or majority of the members may grant per diems or any other compensation.
• In no case shall the total yearly compensation of directors exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year.
• Directors or trustees shall not participate in the determination of their own per diems or compensation.
• Corporations vested with public interest shall submit an annual report of the total compensation of each of their directors or trustees, to shareholders and the Commission.

Liability of Directors, Trustees or Officers

• Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting from this to the corporation, its stockholders or members and other persons.
• A director, trustee, or officer shall not attempt to acquire, or acquire any interest adverse to corporation in respect of any matter which has been reposed in them in confidence and upon which equity imposes a disability upon themselves to deal in their own behalf. Violation of the prior sentence liable the director, trustee, or officer as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
• A contract of the corporation with (1) one or more of its directors, trustees, officers or their spouses and relatives within the fourth civil degree of consanguinity or affinity is voidable, at the option of the corporation, unless all the following conditions are present:
  • 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
  • The vote of such director or trustee was not necessary for the approval of the contract
  • The contract is fair and reasonable under the circumstances.
  • In the case of corporations vested with public interest, material contracts are approved by at least two-thirds (2/3) of the entire membership of the board, with at least a majority of the independent directors voting to approve the material contract.
  • In case of an officer, the contract has been previously authorized by the board of directors.
• Three conditions for voidability: Where any of the first three (3) conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members at a meeting called for the purpose.
• Full disclosure of the adverse interest of the directors or trustees involved is made at such meeting and the contract is fair and reasonable under the circumstances for such ratification to be valid.
• Except in cases of fraud and provided the contract is fair and reasonable under the circumstances, a contract between two (2) or more corporations having interlocking directors shall not be invalidated on that ground alone.
• If the interest of the interlocking director in one (1) corporation is substantial and the interest in the other corporation or corporations is merely nominal, the contract shall be subject to the provisions of the preceding section insofar as the latter corporation/s are concerned.
• Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be considered substantial for purposes of interlocking directors.

Disloyalty of a Director

• Where a director, by virtue of such office, acquires a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, the director must account for and refund to the latter all such profits.
• The provision applies even if that the director risked one's own funds in the venture, unless the act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock.

Executive, Management, and Other Special Committees

• If the bylaws so provide, the board may create an executive committee composed of at least three (3) directors.
• Said committee may act, by majority vote of all its members, on specific matters within the competence of the board that may be delegated to it in the bylaws or by majority vote of the board.
• Requires all shareholder approval: approval of any action, filling of vacancies in the board, amendment or repeal of bylaws or the adoption of new bylaws, amendment or repeal of any board resolution which by its express terms is not amendable or repealable, and distribution of cash dividends to the shareholders.
• The board of directors may create special committees of temporary or permanent nature and determine the members term, composition, compensation, powers, and responsibilities.

Corporate Powers and Capacity

• Every corporation incorporated under this Code has the power and capacity to:
  • Sue and be sued in its corporate name
  • Have perpetual existence unless the certificate of incorporation provides otherwise
  • Adopt and use a corporate seal
  • Amend its articles of incorporation in accordance with the provisions of this Code
  • Adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the same in accordance with this Code
  • In case of stock corporations, to issue or 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
  • Purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution
  • Enter into a partnership, joint venture, merger, consolidation, or any other commercial agreement with natural and juridical persons
  • Make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no foreign corporation shall give donations in aid of any political party or candidate or for purposes of partisan political activity
  • Establish pension, retirement, and other plans for the benefit of its directors, trustees, officers, and employees
  • Exercise other powers as may be essential or necessary to carry out the purposes stated in the articles of incorporation

Power to Extend or Shorten Corporate Term

• A private corporation may extend or shorten its term as stated in the articles of incorporation when approved by a majority vote of the board of directors or trustees and ratified at a meeting by the stockholders or members representing at least two-thirds (2/3) of the outstanding capital stock or of its members.
• Written notice of the proposed action along with the time and place of the meeting shall be sent to stockholders or members at their respective place of residence, as shown in the books of the corporation.
• Notice must either be deposited to the addressee in the post office with postage prepaid, served personally, or sent electronically in accordance with the rules and regulations of the Commission on the use of electronic data messages, when allowed in the bylaws or is done with the consent of the stockholder
• In case of extension of corporate term, a dissenting stockholder have have the riht of appraisal under the conditions provided in this Code.

Power to Increase or Decrease Capital Stock; Incur, Create or Increase Bonded Indebtedness

• No corporation shall increase or decrease its capital stock or incur, create or increase any bonded indebtedness unless approved by a majority vote of the board of directors and by two-thirds (2/3) of the outstanding capital stock at a stockholders' meeting duly called for the purpose.
• Written notice of the time and place of the stockholders' meeting and the purpose for said meeting must be sent to the stockholders at their places of residence shown in the books of the corporation and served to the stockholders personally or through electronic means recognized in the corporation's bylaws and/or the Commission's rules as a valid mode for service of notices.
• A certificate is required setting forth the following, and must be signed by a majority of the directors of the corporation and countersigned by the chairperson and secretary of the stockholders' meeting:
  • That the requirements of this section have been complied with
  • The amount of the increase or decrease of the capital stock
  • In case of an increase of the capital stock, the amount of capital stock or number of shares of no-par stock thereof actually subscribed, the names, nationalities and addresses of the persons subscribing, the amount of capital stock or number of no-par stock subscribed by each, and the amount paid by each on the subscription in cash or property, or the amount of capital stock or number of shares of no-par stock allotted to each stockholder if such increase is the for making effective stock dividend therefor authorized
  • Any bonded indebtedness to be incurred, created or increased
  • The amount of stock represented at the meeting -The vote authorizing the increase or decrease of the capital stock, or the incurring, creating or increasing of any bonded indebtedness
• Any increase or decrease in the capital stock or incurrence, creation or increasing of any bonded indebtedness shall require prior approval of the Commission, and where appropriate, The application is to be made with the Commission with 6 months approval from board and stockholders, which may be justifiable reasons.
• Copies of certificates shall be kept in files and attached to original articles of incorporation after approval by the commission.
• The Securities and Exchange Commission shall not accept increase of capital, unless shown that 25% of the increased capital stock has been subscribed and paid: sworn statement of treasurer at the corporation lawfully holding office at the time of th filing the certificate. At least 25% of increase in capital stock has be