Philippine Corporate Books and Records PDF

TITLE VIII CORPORATE BOOKS AND RECORDS Required Books and Records (Section 73) A. Under the RCCP 1. Articles of Incorporation and By-Laws 2. Composition of the Corporation 3. Governing Board Information. 4. Record of Business Transactions 5. Records of resolution 6....

TITLE VIII CORPORATE BOOKS AND RECORDS Required Books and Records (Section 73) A. Under the RCCP 1. Articles of Incorporation and By-Laws 2. Composition of the Corporation 3. Governing Board Information. 4. Record of Business Transactions 5. Records of resolution 6. Minutes of Meetings (board, stockholders, members). 7. Reportorial Requirements 8. Stock and Transfer Book (for stock corporations) or Membership Book/List (for non-stock corporations). B. Under Special Laws Records required by laws such as: ○ Public Service Act ○ General Banking Law ○ National Internal Revenue Code (NIRC) ○ Labor Code Additional optional/subsidiary records for specific business needs. Mandatory Requirement of Keeping Books 1. Obligatory Compliance: ○ Required under Section 73; maintained primarily by the Corporate Secretary. 2. Location: ○ At the principal office or, for stock and transfer books, at the office of the stock transfer agent, if applicable. 3. Post-Dissolution: ○ Books must be preserved until the final settlement and liquidation of corporate affairs. Right to Inspect Corporate Books (Section 73) 1. Inspection Rights: ○ Granted to any director, trustee, stockholder, or member.  ○ May be done in person or through a representative at reasonable hours on business days. ○ Written demand may be made at the requestor’s expense for copies/excerpts of records. 2. Basis and Purpose: ○ Ownership of Corporate Assets: Stockholders, as beneficial owners, are entitled to know the corporation’s condition and how its resources are managed. ○ Protection Against Mismanagement and Fraud: Ensures transparency and accountability. Protects both stockholders and the public from monopolies and unlawful corporate practices. Remedies and Sanctions for Enforcement of the Right (Section 73) A. Reporting and Investigation by the SEC 1. Filing a Report: ○ If a demand for inspection/reproduction is denied or ignored, the aggrieved party may file a report with the SEC. 2. Summary Investigation: ○ Within five days, the SEC conducts an investigation and may issue an order to grant the requested inspection or reproduction. B. Liability for Damages and Penal Sanctions 1. Corporate Officers or Agents: ○ Refusal to allow inspection or copying of corporate records results in: Liability for damages. Offense punishable under Section 161 of the RCCP: Fine: ₱10,000 to ₱200,000, based on the violation's seriousness. If detrimental to the public: ₱20,000 to ₱400,000. 2. Board Resolutions: ○ If refusal stems from a board resolution, liability applies to directors or trustees who voted for such refusal. Limitations on the Right to Inspection A. Purpose of Inspection Must align with the interest of the stockholder or member and relate to legitimate corporate purposes, such as: ○ Understanding the financial condition of the corporation.  ○ Assessing the use of investments. B. Books of Foreign Corporations Right does not apply to corporations not organized under Philippine laws. Inspection rights are governed by the jurisdiction where the foreign corporation is organized. C. Confidentiality Rules Inspection is bound by prevailing confidentiality laws, including: ○ Intellectual Property Code (RA No. 8293). ○ Data Privacy Act of 2012 (RA No. 10173). ○ Securities Regulation Code (RA No. 8799). ○ Relevant Rules of Court. D. Place of Inspection Books must remain at the principal office or the office of the stock transfer agent. Stockholders are not permitted to remove books for inspection. E. Reasonable Regulations 1. Inspection rights are subject to reasonable regulations regarding: ○ Time, place, and proper purpose set by the corporation’s by-laws. 2. Conditions: ○ Regulations must not deny or unduly restrict the right of inspection. ○ Exercise only during reasonable hours on business days. Extent of the Right of Inspection A. Copies, Abstracts, and Memoranda Stockholders and members have the right to: ○ Make copies, abstracts, and memoranda of corporate records. ○ Receive the most recent financial statements under Section 74. Restriction: Corporate books cannot be removed from the office without a court order. B. Through Agents or Representatives Inspection rights may be exercised: ○ Personally by the director, trustee, stockholder, or member. ○ Through a representative or attorney-in-fact, with or without the stockholder’s presence, to ensure effectiveness. C. Pertinent Books, Papers, and Records  The right extends to: ○ All books, contracts, minutes, or other instruments necessary to protect stockholder interests. To Whom the Right is Not Available 1. Non-Stockholders or Non-Members of Record ○ Includes competitors or their representatives. 2. Individuals Using Information Improperly ○ From prior inspections. 3. Persons Acting in Bad Faith ○ Or those with illegitimate purposes for inspection requests. Liability for Abuse of Inspection Rights Penalty under Section 158 for abuse includes: ○ Fines: ₱5,000 to ₱2,000,000. ○ Additional fines: ₱1,000 per day of continuing violation, capped at ₱2,000,000. ○ Cease-and-desist orders may also be issued. Stock and Transfer Book (Section 73) Contains: ○ Stockholder records. ○ Details of installment payments. ○ Transfers or sales of stock. Location: Kept at the principal office or with a licensed stock transfer agent. Open for inspection by directors and stockholders during business hours. Stock and Transfer Agent Engaged in registering stock transfers for corporations. Requirements: ○ Must secure an SEC license and pay an annual fee. ○ A corporation may perform its stock transfers, subject to applicable rules. Financial Statements (Section 74) A. Certification and Auditing 1. Certification: ○ Signed by corporate officers and, if total assets or liabilities exceed ₱600,000, audited by an independent CPA. 2. Simplified Certification: ○ If assets or liabilities are below ₱600,000, certification under oath by the treasurer and president suffices. B. Rights of Stockholders or Members Upon a written request, the corporation must provide its most recent financial statement within 10 days. C. Duty of the Board Present the annual financial report at the regular stockholders’ meeting. ○ Includes financial statements, duly certified under RCCP and SEC rules.