OLD NEW

Batas Pambansa Bilang 68 Republic Act No. 11232 Notes

Section 1. Title of the Code. – This Code SEC. 1. Title of the Code. – This Code  The name was amended to Revised
shall be known as "The Corporation shall be known as the “Revised …
Code of the Philippines." (n) Corporation Code of the Philippines”.
 Copied word for word
Section 2. Corporation defined. – A SEC. 2. Corporation Defined. – A
corporation is an artificial being created corporation is an artificial being created by
by operation of law, having the right of operation of law, having the right of
succession and the powers, attributes succession and the powers, attributes, and
and properties expressly authorized by properties expressly authorized by law or
law or incident to its existence. (2) incidental to its existence.
 A change in phrasing where the
Section 3. Classes of corporations. – SEC. 3. Classes of Corporations. – definition now comes before the word
Corporations formed or organized under Corporations formed or organized under “stock corporations
this Code may be stock or non-stock this Code may be stock or nonstock
corporations. Corporations which have corporations. Stock corporations are
capital stock divided into shares and are those which have capital stock divided
authorized to distribute to the holders of into shares and are authorized to
such shares dividends or allotments of distribute to the holders of such shares,
the surplus profits on the basis of the dividends, or allotments of the surplus
shares held are stock corporations. All profits on the basis of the shares held.
other corporations are non-stock All other corporations are nonstock
corporations. (3a) corporations.
 Copied word for word
Section 4. Corporations created by SEC. 4. Corporations Created by Special
special laws or charters. – Corporations Laws or Charters. – Corporations created
created by special laws or charters shall by special laws or charters shall be
be governed primarily by the provisions governed primarily by the provisions of the
of the special law or charter creating special law or charter creating them or
them or applicable to them, applicable to them, supplemented by the
supplemented by the provisions of this provisions of this Code, insofar as they are
Code, insofar as they are applicable. (n) applicable.
  Explicitly states that stockholders or
Section 5. Corporators and SEC. 5. Corporators and Incorporators, shareholders are of a stock
incorporators, stockholders and Stockholders and Members. – Corporators corporation and members are of a
members. – Corporators are those who are those who compose a corporation, non-stock corporation. Hence the
compose a corporation, whether as whether as stockholders or shareholders deletion of the last paragraph
stockholders or as members. in a stock corporation or as members in
Incorporators are those stockholders or a nonstock corporation. Incorporators
members mentioned in the articles of are those stockholders or members
incorporation as originally forming and mentioned in the articles of incorporation
composing the corporation and who are as originally forming and composing the
signatories thereof. corporation and who are signatories
thereof.
Corporators in a stock corporation are
called stockholders or shareholders.
Corporators in a non-stock
corporation are called members. (4a)

Section 6. Classification of shares. – The SEC. 6. Classification of Shares. – The DIFFERENCE

shares of stock of stock corporations classification of shares, their  The classification of shares and their
may be divided into classes or series of corresponding rights, privileges, or rights, privileges or restriction
shares, or both, any of which classes or restrictions, and their stated par value, must be indicated in the AOI and
series of shares may have such rights, if any, must be indicated in the articles not as may be stated in the AOI.
privileges or restrictions as may be stated of incorporation. Each share shall be  In matters of non-voting entitled to
in the articles of incorporation: Provided, equal in all respects to every other vote for specific matters,
That no share may be deprived of voting share, except as otherwise provided in (e)specifically “authorized capital
rights except those classified and issued the articles of incorporation and in the stock “ and not “capital stock”
as "preferred" or "redeemable" shares, certificate of stock.  In addition to establishments not
unless otherwise provided in this Code: permitted to issue no-par value
Provided, further, That there shall The shares in stock corporations may shares of stock are:
always be a class or series of shares be divided into classes or series of - Pre need companies
which have complete voting rights. Any shares, or both. No share may be - other corporations authorized to
or all of the shares or series of shares deprived of voting rights except those obtain or access funds from the
may have a par value or have no par classified and issued as “preferred” or public, whether publicly listed or
value as may be provided for in the “redeemable” shares, unless otherwise not
articles of incorporation: Provided, provided in this Code: Provided, That
however, That banks, trust companies, there shall always be a class or series of SIMMILARITIES
insurance companies, public utilities, shares with complete voting rights.  Shares are STILL EQUAL with every
and building and loan associations shall other share unless stated otherwise in
not be permitted to issue no-par value Holders of nonvoting shares shall the AOI or the certificate of stock
shares of stock. nevertheless be entitled to vote on the  To approve a particular corporate act,
following matters: except as provided, shall refer only to
Preferred shares of stock issued by any stocks with voting rights
corporation may be given preference in (a)Amendment of the articles of  No share may be deprived of voting
the distribution of the assets of the incorporation; rights except those classified as
corporation in case of liquidation and in (b)Adoption and amendment of preferred or redeemable
the distribution of dividends, or such bylaws;  In matters of preference for
other preferences as may be stated in the (c) Sale, lease, exchange, mortgage, preferred shares , preference given
articles of incorporation which are not pledge, or other disposition of all or in the distribution of dividends and
violative of the provisions of this Code: substantially all of the corporate property; corporate assets, or such other
Provided, That preferred shares of stock (d) Incurring, creating, or increasing preferences in case of liquidation
may be issued only with a stated par bonded indebtedness;  Preferred shares of stock may be
value. The board of directors, where (e) Increase or decrease of authorized issued only with a stated par value
authorized in the articles of incorporation, capital stock; and the rights, privileges and
may fix the terms and conditions of (f) Merger or consolidation of the restrictions shall be fixed by the BOD
preferred shares of stock or any series corporation with another corporation or authorized by the AOI
thereof: Provided, That such terms and other corporations; 
conditions shall be effective upon the (g) Investment of corporate funds in
filing of a certificate thereof with the another corporation or business in
Securities and Exchange Commission. accordance with this Code; and
(h) Dissolution of the corporation.
Shares of capital stock issued without par
value shall be deemed fully paid and non- Except as provided in the immediately
assessable and the holder of such preceding paragraph, the vote required
shares shall not be liable to the under this Code to approve a particular
corporation or to its creditors in respect corporate act shall be deemed to refer
thereto: Provided; That shares without only to stocks with voting rights.
par value may not be issued for a
consideration less than the value of five
(P5.00) pesos per share: Provided, The shares or series of shares may or
further, That the entire consideration may not have a par value: Provided,
That banks, trust, insurance, and
received by the corporation for its no-par
value shares shall be treated as capital preneed companies, public utilities,
building and loan associations, and
and shall not be available for distribution
as dividends. other corporations authorized to obtain
or access funds from the public,
A corporation may, furthermore, classify whether publicly listed or not, shall not
its shares for the purpose of insuring be permitted to issue no- par value
compliance with constitutional or legal shares of stock.
requirements.
Preferred shares of stock issued by a
Except as otherwise provided in the corporation may be given preference in
articles of incorporation and stated in the the distribution of dividends and in the
certificate of stock, each share shall be distribution of corporate assets in case
equal in all respects to every other share. of liquidation, or such other
preferences: Provided, That preferred
Where the articles of incorporation shares of stock may be issued only with
provide for non-voting shares in the cases a stated par value. The board of
allowed by this Code, the holders of such directors, where authorized in the
shares shall nevertheless be entitled to articles of incorporation, may fix the
vote on the following matters: terms and conditions of preferred
shares of stock or any series thereof:
1. Amendment of the articles of Provided, further, That such terms and
incorporation; conditions shall be effective upon filing
2. Adoption and amendment of by-laws; of a certificate thereof with the
3. Sale, lease, exchange, mortgage, Securities and Exchange Commission,
pledge or other disposition of all or hereinafter referred to as
substantially all of the corporate property; “Commission”.
4. Incurring, creating or increasing
bonded indebtedness; Shares of capital stock issued without
5. Increase or decrease of capital stock; par value shall be deemed fully paid and
6. Merger or consolidation of the non-assessable and the holder of such
corporation with another corporation or shares shall not be liable to the
other corporations; corporation or to its creditors in respect
7. Investment of corporate funds in thereto: Provided, That no-par value
another corporation or business in shares must be issued for a
accordance with this Code; and consideration of at least Five pesos
8. Dissolution of the corporation. (P5.00) per share: Provided, further,
That the entire consideration received
Except as provided in the immediately by the corporation for its no-par value
preceding paragraph, the vote necessary shares shall be treated as capital and
to approve a particular corporate act as shall not be available for distribution as
provided in this Code shall be deemed to dividends.
refer only to stocks with voting rights. (5a)
A corporation may further classify its
shares for the purpose of ensuring
compliance with constitutional or legal
requirements.
  Founders’ shares remain to have
Section 7. Founders’ shares. – Founders’ SEC. 7. Founders’ Shares. – Founders’ privileges not enjoyed by other stock
shares classified as such in the articles shares may be given certain rights and owners.
of incorporation may be given certain privileges not enjoyed by the owners of  The reckoning point for the 5 year limit
rights and privileges not enjoyed by the other stocks. Where the exclusive right to to vote and be voted for in the election
owners of other stocks, provided that vote and be voted for in the election of is from the date of incorporation
where the exclusive right to vote and be directors is granted, it must be for a limited and not the subject to SEC approval
voted for in the election of directors is period not to exceed five (5) years from the  ADDITIONAL: That such exclusive
granted, it must be for a limited period not date of incorporation: Provided, That such right shall not be allowed if its
to exceed five (5) years subject to the exclusive right shall not be allowed if its exercise will violate Commonwealth
approval of the Securities and Exchange exercise will violate Commonwealth Act Act No. 108, otherwise known as the
Commission. The five-year period shall No. 108, otherwise known as the “Anti- “Anti-Dummy Law”; Republic Act
commence from the date of the aforesaid Dummy Law”; Republic Act No. 7042, No. 7042, otherwise known as the
approval by the Securities and Exchange otherwise known as the “Foreign “Foreign Investments Act of 1991”;
Commission. (n) Investments Act of 1991”; and other and other pertinent laws.
pertinent laws.
 Redeemable shares remain to be
Section 8. Redeemable shares. – SEC. 8. Redeemable Shares. – issued when expressly provided for
Redeemable shares may be issued by Redeemable shares may be issued by the in the AOI.
the corporation when expressly so corporation when expressly provided in the  These share are purchased (not taken
provided in the articles of incorporation. articles of incorporation. They are shares up) by the corporation from its holders
They may be purchased or taken up by which may be purchased by the  To redeem:
the corporation upon the expiration of a corporation from the holders of such shares - upon the expiration of a fixed
fixed period, regardless of the existence upon the expiration of a fixed period, period
of unrestricted retained earnings in the regardless of the existence of unrestricted - and upon such other terms and
books of the corporation, and upon such retained earnings in the books of the conditions stated in the articles of
other terms and conditions as may be corporation, and upon such other terms incorporation AND the certificate
stated in the articles of incorporation, and conditions stated in the articles of of stock representing the shares
which terms and conditions must also be incorporation and the certificate of stock - subject to rules and regulations
stated in the certificate of stock representing the shares, subject to issued by the Commission.
representing said shares. (n) rules and regulations issued by the
Commission.
Section 9. Treasury shares. – Treasury SEC. 9. Treasury shares. – Treasury
shares are shares of stock which have shares are shares of stock which have
been issued and fully paid for, but been issued and fully paid for, but
subsequently reacquired by the issuing subsequently reacquired by the issuing
corporation by purchase, redemption, corporation through purchase, redemption,
donation or through some other lawful donation, or some other lawful means.
means. Such shares may again be Such shares may again be disposed of for
disposed of for a reasonable price fixed a reasonable price fixed by the board of
by the board of directors. (n) directors.

TITLE II TITLE II  Now a corporation is organized,

INCORPORATION AND INCORPORATION AND singly or jointly, by any:
ORGANIZATION ORGANIZATION OF - Any person
OF PRIVATE CORPORATIONS PRIVATE CORPORATIONS - Partnership
- Association
Section 10. Number and qualifications of SEC. 10. Number and Qualifications of - Or corporation
incorporators. – Any number of natural Incorporators. – Any person, partnership,  Requirement of 5 incorporators is
persons not less than five (5) but not association or corporation, singly or deleted since the RCCP allows One
more than fifteen (15), all of legal age and jointly with others but not more than Person Corporation (OPC) [does this
a majority of whom are residents of the fifteen (15) in number, may organize a mean it also considers a single corp to
Philippines, may form a private corporation for any lawful purpose or create another corp since it says
corporation for any lawful purpose or purposes: Provided, That natural “singly”?]
purposes. Each of the incorporators of s persons who  The restriction for natural persons are
stock corporation must own or be a are licensed to practice a profession, provided for: who are licensed to
subscriber to at least one (1) share of the and partnerships or associations practice a profession, and
capital stock of the corporation. (6a) organized for the purpose of practicing partnerships or associations
a profession, shall not be allowed to organized for the purpose of
practicing a profession, shall not be
organize as a corporation unless
allowed to organize as a
otherwise provided under special laws.
corporation unless otherwise
Incorporators who are natural persons provided under special laws
must be of legal age.
 The RCCP now allows a One Person
Corporation [person here means
Each incorporator of a stock corporation natural, corporation, partnership,
must own or be a subscriber to at least one association?]
(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.

Section 11. Corporate term. – A SEC. 11. Corporate Term. – A corporation 

corporation shall exist for a period not shall have perpetual existence unless its
exceeding fifty (50) years from the date of articles of incorporation provides
incorporation unless sooner dissolved or otherwise.
unless said period is extended. The
corporate term as originally stated in the Corporations with certificates of
articles of incorporation may be extended incorporation issued prior to the
for periods not exceeding fifty (50) years effectivity of this Code, and which
in any single instance by an amendment continue to exist shall have perpetual
of the articles of incorporation, in existence, unless the corporation, upon
accordance with this Code; Provided, a vote of its stockholders representing a
That no extension can be made earlier majority of its outstanding capital stock,
than five notifies the Commission that it elects to
(5) years prior to the original or retain its specific corporate term
subsequent expiry date(s) unless there pursuant to its articles of incorporation:
are justifiable reasons for an earlier Provided, that any change in the
extension as may be determined by the corporate term under this section is
Securities and Exchange Commission. without prejudice to the appraisal right
(6) of dissenting stockholders in
accordance with the provisions of this
Code.
A corporate term for a specific period
may be extended or shortened by
amending the articles of incorporation:
Provided, That no extension may be
made earlier than three (3) years prior to
the original or subsequent expiry date(s)
unless there are justifiable reasons for
an earlier extension as may be
determined by the Commission:
Provided, further, That such extension
of the corporate term shall take effect
only on the day following the original or
subsequent expiry date(s).
A corporation whose term has expired
may, at any time, apply for a revival of
its corporate existence, together with all
the rights and privileges under its
certificate of incorporation and subject
to all of its duties, debts and liabilities
existing prior to 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.

No application for revival of certificate

of incorporation of banks, banking and
quasi- banking institutions, preneed,
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.
Section 13. Amount of capital stock to
be subscribed and paid for the
purposes of incorporation. – At least
twenty-five percent (25%) of the
authorized capital stock as stated in
the articles of incorporation must be
subscribed at the time of
incorporation, and at least twenty- five
(25%) per cent of the total
subscription must be paid upon
subscription, the balance to be
payable on a date or dates fixed in the
contract of subscription without need
of call, or in the absence of a fixed date
or dates, upon call for payment by the
board of directors: Provided,
however, That in no case shall the
paid-up capital be less than five
Thousand (P5,000.00) pesos. (n)

Section 14. Contents of the articles of SEC. 13. Contents of the Articles of
incorporation. – All corporations Incorporation.
organized – All corporations shall file with the
under this code shall file with the Commission articles of incorporation in any
Securities and Exchange Commission of the official languages, duly signed and
articles of incorporation in any of the acknowledged or authenticated, in such
official languages duly signed and form and manner as may be allowed by the
acknowledged by all of the incorporators, Commission, containing substantially the
containing substantially the following following matters, except as otherwise
matters, except as otherwise prescribed prescribed by this Code or by special law:
by this Code or by special law:
(a) The name of the corporation;
1. The name of the corporation;
2. The specific purpose or purposes for (b) The specific purpose or purposes for
which the corporation is being which the corporation is being formed.
incorporated. Where a corporation has Where a corporation has more than one
more than one stated purpose, the stated purpose, the articles of incorporation
articles of incorporation shall state which shall indicate the primary purpose and the
is the primary purpose and which is/are secondary purpose or purposes: Provided,
the secondary purpose or purposes: That a non-stock corporation may not
Provided, That a non-stock corporation include a purpose which would change or
may not include a purpose which would contradict its nature as such;
change or contradict its nature as such;
3. The place where the principal office of (c) The place where the principal office of
the corporation is to be located, which the corporation is to be located, which must
must be within the Philippines; be within the Philippines;
4. The term for which the corporation is
to exist; (d) The term for which the corporation is to
5. The names, nationalities and exist, if the corporation has not elected
residences of the incorporators; perpetual existence;
6. The number of directors or trustees,
which shall not be less than five (5) nor (e) The names, nationalities, and residence
more than fifteen (15); addresses of the incorporators;
7. The names, nationalities and
residences of persons who shall act as (f) The number of directors, which shall not
directors or trustees until the first regular be more than fifteen (15) or the number of
directors or trustees are duly elected and trustees which may be more than fifteen
qualified in accordance with this Code; (15);
8. If it be a stock corporation, the amount
of its authorized capital stock in lawful (g) The names, nationalities, and residence
money of the Philippines, the number of addresses of persons who shall act as
shares into which it is divided, and in directors or trustees until the first regular
case the share are par value shares, the directors or trustees are duly elected and
par value of each, the names, qualified in accordance with this Code;
nationalities and residences of the
original subscribers, and the amount (h) If it be a stock corporation, the amount
subscribed and paid by each on his of its authorized capital stock, number of
subscription, and if some or all of the shares into which it is divided, the par value
shares are without par value, such fact of each, names, nationalities, and
must be stated; residence addresses of the original
9. If it be a non-stock corporation, the subscribers, amount subscribed and paid
amount of its capital, the names, by each on the subscription, and a
nationalities and residences of the statement that some or all of the shares are
contributors and the amount contributed without par value, if applicable;
by each; and (i)If it be a nonstock corporation, the
Such other matters as are not amount of its capital, the names,
inconsistent with law and which the nationalities, and residence addresses of
incorporators may deem necessary and the contributors, and amount contributed
convenient. by each;

The Securities and Exchange (j)Such other matters consistent with law
Commission shall not accept the and which the incorporators may deem
articles of incorporation of any stock necessary and convenient.
corporation unless accompanied by a
sworn statement of the Treasurer An arbitration agreement may be
elected by the subscribers showing provided in the articles of incorporation
that at least twenty- five (25%) percent pursuant to Section 181 of this Code.
of the authorized capital stock of the
corporation has been subscribed, and
at least twenty-five (25%) of the total The articles of incorporation and
subscription has been fully paid to applications for amendments thereto
him in actual cash and/or in property may be filed with the Commission in the
the fair valuation of which is equal to form of an electronic document, in
at least twenty-five (25%) percent of accordance with the Commission’s
the said subscription, such paid-up rules and regulations on electronic
capital being not less than five filing.
thousand (P5,000.00) pesos.

Section 15. Forms of Articles SEC. 14. Form of Articles of Incorporation.

of Incorporation. – Unless – Unless otherwise prescribed by special
otherwise prescribed by special law, law, the articles of incorporation of all
articles of incorporation of all domestic corporations shall comply
domestic corporations shall substantially with the following form:
comply substantially with the
following form: ARTICLES OF Articles of
INCORPORATION Incorporation
OF of

(Name of Corporation) (Name of

KNOW ALL MEN BY THESE Corporation)
PRESENTS:
The undersigned incorporators, all of The undersigned incorporators, all of
legal age and a majority of whom are legal age, have voluntarily agreed to form a
residents of the Philippines, have this (stock) (non- stock) corporation under the
day voluntarily agreed to form a (stock) laws of the Republic of the Philippines and
(non-stock) corporation under the laws certify the following:
of the Republic of the Philippines;
AND WE HEREBY CERTIFY: First: That the name of said
FIRST: That the name of said corporation shall be “ , Inc.,
corporation shall be " , Corporation or OPC”;
INC. or CORPORATION";

SECOND: That the purpose or Second: That the purpose or purposes for
purposes for which such corporation is which such corporation is incorporated are:
incorporated are: (If there is more than (If there is more than one purpose, indicate
one purpose, indicate primary and primary and secondary purposes);
secondary purposes);

THIRD: That the principal office of the

corporation is located
in the City/Municipality of
____________, Province of
_________ , Philippines;

FOURTH: That the term for which said

corporation is to exist is ________ years
from and after the date of issuance of the
Name Nationality Residence

certificate of incorporation;

FIFTH: That the names, nationalities and

residences of the incorporators of the
corporation are as follows:
 Name Nationality Residence

SIXTH: That the number of directors or

trustees of the corporation shall be ;
and the names, nationalities and
residences of the first directors or
trustees of the corporation are as follows:

SEVENTH: That the authorized capital

stock of the corporation is
(P ) PESOS in lawful
money of the Philippines, divided into
shares with the par value of

(P ) Pesos per share.

(In case all the share are without par
value): That the capital stock of the
corporation is
shares without par
value. (In case some shares have par
value and some are without par value):
That the capital stock of said corporation
consists of
shares of which
shares are of
the par value of
(P ) PESOS each,
 and of which shares
are without par value.

EIGHTH: That at least twenty five

(25%) per cent of the authorized
capital stock above stated has been
subscribed as follows:

NINTH:That the above-named

subscribers have paid at least twenty-five

Section 16. Amendment of Articles of SEC. 15. Amendment of Articles of

Incorporation. – Unless otherwise Incorporation. – Unless otherwise
prescribed by this Code or by special law, prescribed by this Code or by special law,
and for legitimate purposes, any and for legitimate purposes, any provision
provision or matter stated in the articles or matter stated in the articles of
of incorporation may be amended by a incorporation may be amended by a
majority vote of the board of directors or majority vote of the board of directors or
trustees and the vote or written assent of trustees and the vote or written assent of
the stockholders representing at least the stockholders representing at least two-
two-thirds (2/3) of the outstanding capital thirds (2/3) of the outstanding capital stock,
stock, without prejudice to the appraisal without prejudice to the appraisal right of
right of dissenting stockholders in dissenting stockholders in accordance with
accordance with the provisions of this the provisions of this Code. The articles of
Code, or the vote or written assent of at incorporation of a nonstock corporation
least two- thirds (2/3) of the members if may be amended by the vote or written
it be a non- stock corporation. assent of majority of the trustees and at
least two-thirds (2/3) of the members.
The original and amended articles
together shall contain all provisions The original and amended articles together
required by law to be set out in the shall contain all provisions required by law
articles of incorporation. Such articles, as to be set out in the articles of incorporation.
amended shall be indicated by Amendments to the articles shall be
underscoring the change or changes indicated by underscoring the change or
made, and a copy thereof duly certified changes made, and a copy thereof duly
under oath by the corporate secretary certified under oath by the corporate
and a majority of the directors or trustees secretary and a majority of the directors or
stating the fact that said amendment or trustees, with a statement that the
amendments have been duly approved amendments have been duly approved by
by the required vote of the stockholders the required vote of the stockholders or
or members, shall be submitted to the members, shall be submitted to the
Securities and Exchange Commission. Commission.

The amendments shall take effect upon The amendments shall take effect upon
their approval by the Securities and their approval by the Commission or from
Exchange Commission or from the date the date of filing with the said Commission
of filing with the said Commission if not if not acted upon within six (6) months from
acted upon within six the date of filing for a cause not attributable
(6) months from the date of filing for a to the corporation.
cause not attributable to the corporation.

Section 17. Grounds when articles of SEC. 16. Grounds When Articles of
incorporation or amendment may be Incorporation or Amendment may be
rejected or disapproved. – The Disapproved. – The Commission may
Securities and Exchange Commission disapprove the articles of incorporation or
may reject the articles of incorporation or any amendment thereto if the same is not
disapprove any amendment thereto if the compliant with the requirements of this
same is not in compliance with the Code: Provided, That the Commission shall
requirements of this Code: Provided, give the incorporators, directors, trustees,
That the Commission shall give the or officers a reasonable time from receipt of
incorporators a reasonable time within the disapproval within which to modify the
which to correct or modify the objectionable portions of the articles or
objectionable portions of the articles or amendment. The following are grounds for
amendment. The following are grounds such disapproval:
for such rejection or disapproval:
(a) The articles of incorporation or any
1. That the articles of incorporation or amendment thereto is not substantially in
any amendment thereto is not accordance with the form prescribed
substantially in accordance with the form herein;
prescribed herein;
(b) The purpose or purposes of the
2. That the purpose or purposes of the corporation are patently unconstitutional,
corporation are patently unconstitutional, illegal, immoral or contrary to government
illegal, immoral, or contrary to rules and regulations;
government rules and regulations;
(c) The certification concerning the amount
3. That the Treasurer’s Affidavit of capital stock subscribed and/or paid is
concerning the amount of capital stock false; and
subscribed and/or paid is false;
(d) The required percentage of Filipino
4. That the percentage of ownership of ownership of the capital stock under
the capital stock to be owned by citizens existing laws or the Constitution has not
of the Philippines has not been complied been complied with.
with as required by existing laws or the
Constitution. No articles of incorporation or amendment
to articles of incorporation of banks,
No articles of incorporation or banking and quasi-banking institutions,
amendment to articles of incorporation of preneed, insurance and trust companies,
banks, banking and quasi-banking NSSLAS, pawnshops, and other
institutions, building and loan financial intermediaries shall be
associations, trust companies and other approved by the Commission unless
financial intermediaries, insurance accompanied by a favorable
companies, public utilities, educational recommendation of the appropriate
institutions, and other corporations government agency to the effect that such
governed by special laws shall be articles or amendment is in accordance
accepted or approved by the with law.
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. (n)
Section 18. Corporate name. – No SEC. 17. Corporate name. – No corporate
corporate name may be allowed by the name shall be allowed by the Commission
Securities and Exchange Commission if it is not distinguishable from that
if the proposed name is identical or already reserved or registered for the
deceptively or confusingly similar to that use of another corporation, or if such
of any existing corporation or to any other name is already protected by law, or
name already protected by law or is when its use is contrary to existing law,
patently deceptive, confusing or contrary rules and regulations.
to existing laws. When a change in the
corporate name is approved, the A name is not distinguishable even if it
Commission shall issue an amended contains one or more of the following:
certificate of incorporation under the
amended name. (n) (a) The word “corporation”,
“company”, “incorporated”, “limited”,
“limited liability”, or an abbreviation of
one of such words; and

(b) 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. 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.

Section 19. Commencement of SEC. 18. Registration, Incorporation

corporate existence. – A private and Commencement of Corporate
corporation formed or organized under Existence. – A person or group of
this Code commences to have persons desiring to incorporate shall
corporate existence and juridical submit the intended corporate name to
personality and is deemed incorporated the Commission for verification. If the
from the date the Securities and Commission finds that the name is
Exchange Commission issues a distinguishable from a name already
certificate of incorporation under its reserved or registered for the use of
official seal; and thereupon the another corporation, not protected by
incorporators, stockholders/members law and not contrary to law, rules and
and their successors shall constitute a regulations, the name shall be reserved
body politic and corporate under the in favor of the incorporators. The
name stated in the articles of incorporators shall then submit their
incorporation for the period of time articles of incorporation and bylaws to
mentioned therein, unless said period is the Commission.
extended or the corporation is sooner
dissolved in accordance with law. (n) 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 and
thereupon 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 therein, unless said
period is extended or the corporation is
sooner dissolved in accordance with
law.

Section 20. De facto corporations. – The SEC. 19. De facto Corporations. – The due
due incorporation of any corporation incorporation of any corporation claiming in
claiming in good faith to be a corporation good faith to be a corporation under this
under this Code, and its right to exercise Code, and its right to exercise corporate
corporate powers, shall not be inquired powers, shall not be inquired into
into collaterally in any private suit to collaterally in any private suit to which such
which such corporation may be a party. corporation may be a party. Such inquiry
Such inquiry may be made may be made by the Solicitor General in a
by the Solicitor General in a quo warranto quo warranto proceeding.
proceeding. (n)
Section 21. Corporation by estoppel. – All SEC. 20. Corporation by Estoppel. – All
persons who assume to act as a persons who assume to act as a
corporation knowing it to be without corporation knowing it to be without
authority to do so shall be liable as authority to do so shall be liable as general
general partners for all debts, liabilities partners for all debts, liabilities and
and damages incurred or damages incurred or arising as a result
arising as a result thereof: Provided, thereof: Provided,
however, That when any such however, That when any such ostensible
ostensible corporation is sued on any corporation is sued on any transaction
transaction entered by it as a corporation entered by it as a corporation or on any tort
or on any tort committed by it as such, it committed by it as such, it shall not be
shall not be allowed to use as a defense allowed to use its lack of corporate
its lack of corporate personality. personality as a defense. Anyone who
On who assumes an obligation to an assumes an obligation to an ostensible
ostensible corporation as such, cannot corporation as such cannot resist
resist performance thereof on the ground performance thereof on the ground that
that there was in fact no corporation. (n) there was in fact no corporation.

Section 22. Effects on non-use of SEC. 21. Effects of Non-Use of Corporate

corporate charter and continuous Charter and Continuous Inoperation. – If a
inoperation of a corporation. – If a corporation does not formally organize and
corporation does not formally organize commence its business within five (5)
and commence the transaction of its years from the date of its incorporation, its
business or the construction of its works certificate of incorporation shall be
within two (2) years from the date of its deemed revoked as of the day following
incorporation, its corporate powers the end of the five-year period.
cease and the corporation shall be
deemed dissolved. However, if a However, if a corporation has commenced
corporation has commenced the its business but subsequently becomes
transaction of its business but inoperative for a period of at least five (5)
subsequently becomes continuously consecutive years, the Commission may,
inoperative for a period of at least five (5) after due notice and hearing, place the
years, the same shall be a ground for the corporation under delinquent status.
suspension or revocation of its corporate
franchise or certificate of incorporation. A delinquent corporation shall have a
(19a) This provision shall not apply if period of two (2) years to resume
the failure to organize, commence the operations and comply with all
transaction of its businesses or the requirements that the Commission shall
construction of its works, or to prescribe. Upon compliance by the
continuously operate is due to causes corporation, the Commission shall
beyond the control of the corporation issue an order lifting the delinquent
as may be determined by the status. Failure to comply with the
Securities and Exchange requirements and resume operations
Commission. within the period given by the
Commission shall 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.
 RCCP now provides for Qualification
TITLE III TITLE III and terms but it still require that a
BOARD OF DIRECTORS/TRUSTEES BOARD OF DIRECTORS/TRUSTEES director own at least one share or in
AND OFFICERS AND OFFICERS the case of a trustee to be a member
 The board shall still exercise
Section 23. The board of directors or SEC. 22. The Board of Directors or corporate powers, conduct all
trustees. – Unless otherwise provided in Trustees of a Corporation; Qualification business, and control all properties
this Code, the corporate powers of all and Term. – Unless otherwise provided in of the corporation.
corporations formed under this Code this Code, the board of directors or WHATS GONE:
shall be exercised, all business trustees shall exercise the corporate  Majority of the directors or trustees
conducted and all property of such powers, conduct all business, and control of all corporations organized under
corporations controlled and held by the all properties of the corporation. this Code must be residents of the
board of directors or trustees to be Philippines.
elected from among the holders of stocks, Directors shall be elected for a term of one
or where there is no stock, from among (1) year from among the holders of stocks WHATS CHANGED:
the members of the corporation, who registered in the corporation’s books, while  Directors and trustee used to have a
shall hold office for one (1) year until their trustees shall be elected for a term not term for one (1) year until their
successors are elected and qualified. exceeding three (3) years from among the successors are elected and
(28a) members of the corporation. Each director qualified. NOW Directors shall be
and trustee shall hold office until the elected for a term of one (1) year
Every director must own at least one (1) successor is elected and qualified. A while trustees shall be elected for a
share of the capital stock of the director who ceases to own at least one (1) term not exceeding three (3) years.
corporation of which he is a director, share of stock or a trustee who ceases to
which share shall stand in his name on be a member of the corporation shall cease WHATS NEW:
the books of the corporation. Any director to be such.  Corporations’ vested with public
who ceases to be the owner of at least interest, whose board shall have
one (1) share of the capital stock of the The board of the following corporations 20% independent directors:
corporation of which he is a director shall vested with public interest shall have - Corporations who have at least
thereby cease to be a director. Trustees independent directors constituting at (P50,000,000.00) and having
of non-stock corporations must be least twenty percent (20%) of such (200) or more holders of shares,
members thereof. A majority of the board: with at least (100) shares of a
directors or trustees of all corporations class of its equity shares
organized under this Code must be a. Corporations covered by Section 17.2 - Banks and other financial
residents of the Philippines. of Republic Act No. 8799, otherwise intermediaries
known as “The Securities Regulation - Other corporations engaged in
Code,” namely those whose securities business vested with public
are registered with the Commission, interest
corporations listed with an exchange or  An independent director was defined
with assets of at least Fifty million is a person who, apart from
shareholdings and fees received from
pesos (P50,000,000.00) and having two
the corporation, is independent of
hundred
management and free from any
(200) or more holders of shares, with at business or other relationship which
least one hundred (100) shares of a could, or could reasonably be
class of its equity shares; perceived to materially interfere with
the exercise of independent judgment
b. Banks and quasi-banks, NSSLAs, in carrying out the responsibilities as a
pawnshops, corporations engaged in director..
money service business, pre-need, trust - He must be voted by the board.
and insurance companies, and other
financial intermediaries; and

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
which are germane to the objective and
purpose of requiring the election of an
independent director, such as 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.

c. Independent directors must be

elected by the shareholders present or
entitled to vote in absentia during the
election of directors. Independent
directors shall be subject to rules and
regulations governing their
qualifications, disqualifications, voting
requirements, duration of term and 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.
Section 24. Election of directors or SEC. 23. Election of Directors or Trustees.
trustees. – At all elections of directors or – Except when the exclusive right is
trustees, there must be present, either in reserved for holders of founders’ shares
person or by representative authorized under Section 7 of this Code, each
to act by written proxy, the owners of a stockholder or member shall have the
majority of the outstanding capital stock, right to nominate any director or trustee
or if there be no capital stock, a majority who possesses all of the qualifications
of the members entitled to vote. The and none of the disqualifications set
election must be by ballot if requested by forth in this Code.
any voting stockholder or member. In
stock corporations, every stockholder At all elections of directors or trustees,
entitled to vote shall have the right to there must be present, either in person or
vote in person or by proxy the number of through a representative authorized to act
shares of stock standing, at the time by written proxy, the owners of majority of
fixed in the by-laws, in his own name on the outstanding capital stock, or if there be
the stock books of the corporation, or no capital stock, a majority of the members
where the by- laws are silent, at the time entitled to vote. When so authorized in the
of the election; and said stockholder may bylaws or by a majority of the board of
vote such number of shares for as many directors, the stockholders or members
persons as there are directors to be may also vote through remote
elected or he may cumulate said shares communication or in absentia: Provided,
and give one candidate as many votes as That the right to vote through such modes
the number of directors to be elected may be exercised in corporations vested
multiplied by the number of his shares with public interest, notwithstanding the
shall equal, or he may distribute them on absence of a provision in the by-laws of
the same principle among as many such corporations.
candidates as he shall see fit: Provided,
That the total number of votes cast by A stockholder or member who
him shall not exceed the number of participates through remote
shares owned by him as shown in the communication or in absentia, shall be
books of the corporation multiplied by the deemed present for purposes of
whole number of directors to be elected: quorum.
Provided, however, That no delinquent
stock shall be voted. Unless otherwise The election must be by ballot if requested
provided in the articles of incorporation or by any voting stockholder or member.
in the by-laws, members of corporations
which have no capital stock may cast as In stock corporations, stockholders
many votes as there are trustees to be entitled to vote shall have the right to
elected but may not cast more than one vote the number of shares of stock
vote for one candidate. Candidates standing in their own names in the stock
receiving the highest number of votes books of the corporation at the time
shall be declared elected. Any meeting of fixed in the bylaws or where the bylaws
the stockholders or members called for are silent, at the time of the election. The
an election may adjourn from day to day said stockholder may: (a) vote such
or from time to time but not sine die or number of shares for as many persons
indefinitely if, for any reason, no election as there are directors to be elected; (b)
is held, or if there are not present or cumulate said shares and give one (1)
represented by proxy, at the meeting, the candidate as many votes as the number
owners of a majority of the outstanding of directors to be elected multiplied by
capital stock, or if there be no capital the number of the shares owned; or (c)
stock, a majority of the members entitled distribute them on the same principle
to vote. (31a) among as many candidates as may be
seen fit: Provided, That the 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:
Provided, however, That no delinquent
stock shall be voted. Unless otherwise
provided in the articles of incorporation
or in the bylaws, members of non- stock
corporations may cast as many votes as
there are trustees to be elected but may
not cast more than one (1) vote for one
(1) candidate. Nominees for directors or
trustees receiving the highest number
of votes shall be declared elected.

If no election is held, or the owners of

majority of the outstanding capital stock
or majority of the members entitled to
vote are not present in person, by proxy,
or through remote communication or
not voting in absentia at the meeting,
such meeting may be adjourned and the
corporation shall proceed in
 accordance with Section 25 of this
Code.

The directors or trustees elected shall

perform their duties as prescribed by
law, rules of good corporate
governance and by-laws of
the corporation.

Section 25. Corporate officers, quorum. – SEC. 24. Corporate Officers. – Immediately
Immediately after their election, the after their election, the directors of a
directors of a corporation must formally corporation must formally organize and
organize by the election of a president, elect: (a) a president, who must be a
who shall be a director, a treasurer who director; (b) a treasurer, who must be a
may or may not be a director, a secretary resident; (c) a secretary, who must be a
who shall be a resident and citizen of the citizen and resident of the Philippines; and
Philippines, and such other officers as (d) such other officers as may be provided
may be provided for in the by- laws. Any in the bylaws. If the corporation is vested
two (2) or more positions may be held with public interest, the board shall also
concurrently by the same person, except elect a compliance officer. The same
that no one shall act as president and person may hold two (2) or more positions
secretary or as president and treasurer at concurrently, except that no one shall act
the same time. as president and secretary or as president
The directors or trustees and officers and treasurer at the same time, unless
to be elected shall perform the duties otherwise allowed in this Code.
enjoined on them by law and the by-
laws of the corporation. Unless the The officers shall manage the corporation
articles of incorporation or the by- and perform such duties as may be
laws provide for a greater majority, a provided in the bylaws and/or as resolved
majority of the number of directors or by the board of directors.
trustees as fixed in the articles of
incorporation shall constitute a
quorum for the transaction of
corporate business, and every
decision of at least a majority of the
directors or trustees present at a
meeting at which there is a quorum
shall be valid as a corporate act,
except for the election of officers
which shall require the vote of a
majority of all the members of the
board.
Directors or trustees cannot attend or
vote by proxy at board meetings. (33a)

Section 26. Report of election of SEC. 25. Report of Election of Directors,

directors, trustees and officers. – Within Trustees and Officers, Non-holding of
thirty (30) days after the election of the Election and Cessation from Office. –
directors, trustees and officers of the Within thirty (30) days after the election of
corporation, the secretary, or any other the directors, trustees and officers of the
officer of the corporation, shall submit to corporation, the secretary, or any other
the Securities and Exchange officer of the corporation, shall submit to the
Commission, the names, nationalities Commission, the names, nationalities,
and residences of the directors, trustees, shareholdings, and residence addresses of
and officers elected. Should a director, the directors, trustees, and officers elected.
trustee or officer die, resign or in any
manner cease to hold office, his heirs in The non-holding of elections and the
case of his death, the reasons therefor shall be reported to the
secretary, or any other officer of the Commission within thirty (30) days from
corporation, or the director, trustee or the date of the scheduled election. The
officer himself, shall immediately report report shall specify a new date for the
such fact to the Securities and Exchange election, which shall not be later than
Commission. (n) 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. The Commission shall
have the power to issue such orders as
may be appropriate, including orders
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.

Notwithstanding any provision of the

articles of incorporation or bylaws to
the contrary, the shares of stock or
membership represented at such
meeting and entitled to vote shall
constitute a quorum for purposes of
conducting an election under this
section.

Should a director, trustee or officer die,

resign or in any manner cease to hold
office, the secretary, or the director,
trustee or officer of the corporation, or
in case of death, the officer’s heirs shall,
within seven (7) days from knowledge
thereof, report in writing such fact to the
Commission.
Section 27. Disqualification of directors, SEC. 26. Disqualification of Directors,
trustees or officers. – No person convicted Trustees or Officers. – A person shall be
by final judgment of an offense punishable disqualified from being a director,
by imprisonment for a period exceeding trustee, or officer of any corporation if,
six (6) years, or a violation of this Code within five (5) years prior to the election
committed within five (5) years prior to the or appointment as such, the person
date of his election or appointment, shall was:
qualify as a director, trustee or officer of
any corporation. (n) (a) Convicted by final judgment:

(1) Of an offense punishable by

imprisonment for a period exceeding
six (6) years;

For violating this Code; and

(3) For violating Republic Act No. 8799,
otherwise known as “The Securities
Regulation Code”;

(b) Found administratively liable for any

offense involving fraud acts; and

(c) By a foreign court or equivalent

foreign regulatory authority for acts,
violations or misconduct similar to
those enumerated in paragraphs (a) and
(b) above.

The foregoing is without prejudice to

qualifications or other disqualifications,
which the Commission, the primary
regulatory agency, or the Philippine
Competition Commission may impose in
its promotion of good corporate
governance or as a sanction in its
administrative proceedings.
Section 28. Removal of directors or SEC. 27. Removal of Directors or Trustees.
trustees. – Any director or trustee of a corporation
– Any director or trustee of a corporation may be removed from office by a vote of the
may be removed from office by a vote of stockholders holding or representing at
the stockholders holding or representing least two-thirds (2/3) of the outstanding
at least two-thirds (2/3) of the outstanding capital stock, or in a nonstock corporation,
capital stock, or if the corporation be a by a vote of at least two-thirds (2/3) of the
non-stock corporation, by a vote of at members entitled to vote: Provided, That
least two-thirds (2/3) of the members such removal shall take place either at a
entitled to vote: Provided, That such regular meeting of the corporation or at a
removal shall take place either at a special meeting called for the purpose, and
regular meeting of the corporation or at a in either case, after previous notice to
special meeting called for the purpose, stockholders or members of the
and in either case, after previous notice corporation of the intention to propose such
to stockholders or members of the removal at the meeting. A special meeting
corporation of the intention to propose of the stockholders or members for the
such removal at the meeting. A special purpose of removing any director or trustee
meeting of the stockholders or members must be called by the secretary on order of
of a corporation for the purpose of the president, or upon written demand of
removal of directors or trustees, or any of the stockholders representing or holding at
them, must be called by the secretary on least a majority of the outstanding capital
order of the president or on the written stock, or a majority of the members entitled
demand of the stockholders representing to vote. If there is no secretary, or if the
or holding at least a majority of the secretary, despite demand, fails or refuses
outstanding capital stock, or, if it be a to call the special meeting or to give notice
non-stock corporation, on the written thereof, the stockholder or member of the
demand of a majority of the members corporation signing the demand may call
entitled to vote. Should the secretary fail for the meeting by directly addressing the
or refuse to call the special meeting upon stockholders or members. Notice of the
such demand or fail or time and place of such meeting, as well as
refuse to give the notice, or if there is no of the intention to propose such
secretary, the call for the meeting may removal, must be given by publication or by
be addressed directly to the stockholders written notice prescribed in this Code.
or members by any stockholder or Removal may be with or without cause:
member of the corporation signing the Provided, That removal without cause may
demand. Notice of the time and place of not be used to deprive minority
such meeting, as well as of the intention stockholders or members of the right of
to propose such removal, must be given representation to which they may be
by publication or by written notice entitled under Section 23 of this Code.
prescribed in this Code. Removal may be
with or without cause: Provided, That The Commission shall, motu proprio or
removal without cause may not be used upon verified complaint, and after due
to deprive minority stockholders or notice and hearing, order the removal of
members of the right of representation to a director or trustee elected despite the
which they may be entitled under Section disqualification, or whose
24 of this Code. (n disqualification arose or is discovered
subsequent to an election. The removal
of a disqualified director shall be
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.

Section 29. Vacancies in the office of SEC. 28. Vacancies in the Office of
director or trustee. – Any vacancy Director or Trustee; Emergency Board. –
occurring in the board of directors or Any vacancy occurring in the board of
trustees other than by removal by the directors or trustees other than by removal
stockholders or members or by or by expiration of term, may be filled by the
expiration of term, may be filled by the vote of at least a majority of the remaining
vote of at least a majority of the directors or trustees, if still constituting a
remaining directors or trustees, if still quorum; otherwise, said vacancies must be
constituting a quorum; otherwise, said filled by the stockholders or members in a
vacancies must be filled by the regular or special meeting called for that
stockholders in a regular or special purpose.
meeting called for that purpose. A
director or trustee so elected to fill a When the vacancy is due to term
vacancy shall be elected only or the expiration, the election shall be held no
unexpired term of his predecessor in later than the day of such expiration at a
office. meeting called for that purpose. When
Any directorship or trusteeship to be the vacancy arises as a result of
filled by reason of an increase in the removal by the stockholders or
number of directors or trustees shall be members, the election may be held on
filled only by an election at a regular or at the same day of the meeting authorizing
a special meeting of stockholders or the removal and this fact must be so
members duly called for the purpose, or stated in the agenda and notice of said
in the same meeting authorizing the meeting. In all other cases, the election
increase of directors or trustees if so must be held no later than forty-five (45)
stated in the notice of the meeting. (n) 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.

However, 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. The action by the
designated director or trustee shall be
limited to the emergency action
necessary, and 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.

Any directorship or trusteeship to be

filled by reason of an increase in the
number of directors or trustees shall be
filled only by an election at a regular or
at a special meeting of stockholders or
members duly called for the purpose, or
in the same meeting authorizing the
increase of directors or trustees if so
 stated in the notice of the meeting.

In all elections to fill vacancies under

this section, the procedure set forth in
Sections 23 and 25 of this Code shall
apply.

Section 30. Compensation of directors. – SEC. 29. Compensation of Directors or

In the absence of any provision in the by- Trustees.
laws fixing their compensation, the – In the absence of any provision in the by-
directors shall not receive any laws fixing their compensation, the
compensation, as such directors, except directors or trustees shall not receive any
for reasonable per diems: Provided, compensation in their capacity as such,
however, That any such compensation except for reasonable per diems: Provided
other than per diems may be granted to however, That the stockholders
directors by the vote of the stockholders representing at least a majority of the
representing at least a majority of the outstanding capital stock or majority of the
outstanding capital stock at a regular or members may grant directors or trustees
special stockholders’ meeting. In no case with compensation and approve the
shall the total yearly compensation of amount thereof at a regular or special
directors, as such directors, exceed ten meeting.
(10%) percent of the net income before
income tax of the corporation during the In no case shall the total yearly
preceding year. (n) 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 to their shareholders and
the Commission, an annual report of the
total compensation of each of their
directors or trustees.

Section 31. Liability of directors, trustees SEC. 30. Liability of Directors, Trustees or
or officers. - Directors or trustees who Officers.
willfully and knowingly vote for or assent – Directors or trustees who willfully and
to patently unlawful acts of the knowingly vote for or assent to patently
corporation or who are guilty of gross unlawful acts of the corporation or who are
negligence or bad faith in directing the guilty of gross negligence or bad faith in
affairs of the corporation or acquire any directing the affairs of the corporation or
personal or pecuniary interest in conflict acquire any personal or pecuniary interest
with their duty as such directors or in conflict with their duty as such directors
trustees shall be liable jointly and or trustees shall be liable jointly and
severally for all damages resulting severally for all damages resulting
therefrom suffered by the corporation, its therefrom suffered by the corporation, its
stockholders or members and other stockholders or members and other
persons. persons.

When a director, trustee or officer

attempts to acquire or acquire, in
violation of his duty, any interest adverse A Director, Trustee, or Officer shall not
to the corporation in respect of any attempt to acquire, or acquire any interest
matter which has been reposed in him in adverse to the corporation in respect of any
confidence, as to which equity imposes a matter which has been reposed in them in
disability upon him to deal in his own confidence, and upon which, equity
behalf, he shall be liable as a trustee for imposes a disability upon themselves to
the corporation and must account for the deal in their own behalf, otherwise the said
profits which otherwise would have director, trustee, or officer shall be liable as
accrued to the corporation. (n) a trustee for the corporation and must
account for the profits which otherwise
would have accrued to the corporation.

Section 32. Dealings of directors, SEC. 31. Dealings of Directors, Trustees or

trustees or officers with the corporation. Officers with the Corporation. – A contract
– A contract of the corporation with one of the corporation with (1) one or more of its
or more of its directors or trustees or directors, trustees, officers or their spouses
officers is voidable, at the option of such and relatives within the fourth civil degree
corporation, unless all the following of consanguinity or affinity is voidable, at
conditions are present: the option of such corporation, unless all
1. That the presence of such director or the following conditions are present:
trustee in the board meeting in which the
contract was approved was not (a) (a) The presence of such director or trustee
necessary to constitute a quorum for in the board meeting in which the contract
such meeting; was approved was not necessary to
2. That the vote of such director or constitute a quorum for such meeting;
trustee was not necessary for the
approval of the contract; (b) (b) The vote of such director or trustee was
3. That the contract is fair and not necessary for the approval of the
reasonable under the circumstances; contract;
and
That in case of an officer, the contract
has been previously authorized by the (c)
board of directors. (d) (c)The contract is fair and reasonable
4. Where any of the first two conditions under the circumstances;
set forth in the preceding paragraph is
absent, in the case of a contract with (e)a (d) In case of corporations vested with
director or trustee, such contract may be public interest, material contracts are
ratified by the vote of the stockholders approved by at least two-thirds (2/3) of
representing at least two- thirds (2/3) of the entire membership of the board,
the outstanding capital stock or of at least with at least a majority of the
two-thirds (2/3) of the members in a independent directors voting to
meeting called for the purpose: Provided, approve the material contract; and
That full disclosure of the adverse
interest of the directors or trustees (f) (e) In case of an officer, the contract has
involved is made at such meeting: been previously authorized by the board of
Provided, however, That the contract is directors.
fair and reasonable under the
circumstances. (n) (g) 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 in a meeting called
for the purpose: Provided, That 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.

Section 33. Contracts between SEC. 32. Contracts between Corporations

corporations with interlocking directors. – with Interlocking Directors. – Except in
Except in cases of fraud, and provided cases of fraud, and provided the contract is
the contract is fair and reasonable under fair and reasonable under the
the circumstances, a contract between circumstances, a contract between two
two or more corporations having (2) or more corporations having
interlocking directors shall not be interlocking directors shall not be
invalidated on that ground alone: invalidated on that ground alone: Provided,
Provided, That if the interest of the That if the interest of the interlocking
interlocking director in one corporation is director in one (1) corporation is substantial
substantial and his interest in the other and the interest in the other corporation or
corporation or corporations is merely corporations is merely nominal, the contract
nominal, he shall be subject to the shall be subject to the provisions of the
provisions of the preceding section preceding section insofar as the latter
insofar as the latter corporation or corporation or corporations are concerned.
corporations are concerned.
Stockholdings exceeding twenty (20%)
Stockholdings exceeding twenty (20%) percent of the outstanding capital stock
percent of the outstanding capital stock shall be considered substantial for
shall be considered substantial for purposes of interlocking directors.
purposes of interlocking directors. (n)

Section 34. Disloyalty of a director. SEC. 33. Disloyalty of a Director. – Where

– Where a director, by virtue of his office, a director, by virtue of such office, acquires
acquires for himself a business a business opportunity which should
opportunity which should belong to the belong to the corporation, thereby
corporation, thereby obtaining profits to obtaining profits to the prejudice of such
the prejudice of such corporation, he corporation, the director must account for
must account to the latter for all such and refund to the latter all such profits,
profits by refunding the same, unless his unless the act has been ratified by a vote of
act has been ratified by a vote of the the stockholders owning or representing at
stockholders owning or representing at least two- thirds (2/3) of the outstanding
least two-thirds (2/3) of the outstanding capital stock. This provision shall be
capital stock. This provision shall be applicable, notwithstanding the fact that the
applicable, notwithstanding the fact that director risked one’s own funds in the
the director risked his own funds in the venture.
venture. (n)