S. No.

1280
H. No. 8374

Republic of the Philippines

Congress of the Philippines
Metro Manila

Seventeenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-third day of July, two thousand eighteen.

[ REPUBLIC ACT NO. 11232 ]

AN ACT PROVIDING FOR THE

REVISED CORPORATION CODE OF THE PHILIPPINES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

TITLE I
GENERAL PROVISIONS
DEFINITIONS AND CLASSIFICATIONS
SECTION 1. Title of the Code. — This Code shall be known as the “Revised
Corporation Code of the Philippines.”

SEC. 2. Corporation Defined. — A corporation is an artificial being created by

operation of law, having the right of succession and the powers, attributes, and properties
expressly authorized by law or incidental to its existence.

SEC. 3. Classes of Corporations. — Corporations formed or organized under this

this Code may be stock or nonstock corporations. Stock corporations are those which have
capital stock divided into shares and are authorized to distribute to the holders of such
shares, dividends, or allotments of the surplus profits[,] on the basis of the shares held. All
other corporations are nonstock corporations.

SEC. 4. Corporations Created by Special Laws or Charters . — Corporations created

by special laws or charters shall be governed primarily by the provisions of the special law
or charter creating them or applicable to them, supplemented by the provisions of
this Code, insofar as they are applicable.

SEC. 5. 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.

SEC. 6. Classification of Shares. — The classification of share, their corresponding

rights, privileges, or restrictions, and their stated par value, if any, must be [stated]
indicated in the articles of incorporation. Each share shall be equal in all respects to every

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other share, except as otherwise provided in the articles of incorporation and [stated] in the
certificate of stock.
The shares in stock corporations may be divided into classes or series of shares, or
both. No share may be deprived of voting rights except those classified and issued as
“preferred” or “redeemable” shares, unless otherwise provided in this Code: Provided, That
there shall always be a class or series of shares with complete voting rights.
[Where the articles of incorporation provide for non-voting shares in the cases
allowed by this Code, the] Holders of nonvoting shares shall nevertheless be entitled to
vote on the following matters:
(a) Amendment of the articles of incorporation;
(b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or
substantially all of the corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another corporation or other
corporations;
(g) Investment of corporate funds in another corporation or business in
accordance with this Code; and
(h) Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote [necessary]

required under this Code to approve a particular corporate act shall be deemed to refer only
to stocks with voting rights.
The shares or series of shares may or may not have a par value: Provided, That
banks, trust, insurance, and preneed companies, public utilities, building and loan
associations, and other corporations authorized to obtain or access funds from the
public, whether publicly listed or not, shall not be 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 [as may be stated in the articles of incorporation which are not
violative of the provisions of this Code]:  Provided, That preferred shares of stock may be
issued only with a stated par value. The board of directors, where authorized in the articles
of incorporation, may fix the terms and conditions of preferred shares of stock or any series
thereof:  Provided, further, That such terms and conditions shall be effective upon filing of a
certificate thereof with the Securities and Exchange Commission, hereinafter referred to
as the “Commission”.
Shares of capital stock issued without par value shall be deemed fully paid and
nonassessable and the holder of such shares shall not be liable to the corporation or to its
creditors in respect thereto:  Provided, That no-par value shares must be issued for a
consideration of at least Five pesos (P5.00) per share: Provided, further, That 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 further classify its shares for the purpose of ensuring compliance
with constitutional or legal requirements.

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 SEC. 7. Founders’ Shares. — Founders’ shares [classified as such in the articles of
incorporation] may be given certain rights and privileges not enjoyed by the owners of other
stocks. Where 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 the date of
incorporation [The five (5) years period shall commence from the date of the aforesaid
approval by the Securities and Exchange Commission]: Provided, That such exclusive
right shall not be 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 Investment Act of 1991”; and other pertinent laws. CAIHTE

SEC. 8. Redeemable Shares. — Redeemable shares may be issued by the

corporation when expressly provided in the articles of incorporation. They are shares
which may be purchased [or taken up] by the corporation from the holders of such
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.

SEC. 9. 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. Such shares may again be
disposed of for a reasonable price fixed by the board of directors.

TITLE II
INCORPORATION AND ORGANIZATION
OF PRIVATE CORPORATIONS

SEC. 10. Number and Qualifications of Incorporators. — Any [natural] person,

partnership, association or corporation, singly or jointly with others [,] [not less than
five (5)] but not more than fifteen (15) in number [all of legal age and a majority of whom
are residents of the Philippines], may organize a corporation for any lawful purpose or
purposes: Provided, That natural persons who are licensed to practice a profession,
and 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.

SEC. 11. Corporate Term. — A corporation shall have perpetual existence

unless [exist for a period not exceeding fifty (50) years from the date of incorporation
unless sooner dissolved or unless said period is extended] its articles of incorporation
provides otherwise.
Corporations with certificates of incorporation issued prior to the effectivity of
this Code, 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: Provided, That any change
in the corporate term under this section is without prejudice to the appraisal right of
dissenting stockholders in accordance with the provisions of this Code.

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 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) [five (5)] 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 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 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.
No application for revival of certificate of incorporation of banks, banking and
quasi-banking institutions, preneed, insurance and trust companies, nonstock
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.

SEC. 12. Minimum Capital Stock Not Required of Stock Corporations . — Stock
corporations shall not be required to have a minimum capital stock, except as otherwise
specifically provided by special law [and subject to the provisions of the following section].

[SEC. 13. Amount of capital stock to be subscribed and paid for purpose of
incorporation. – At least twenty-five (25%) percent 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%) percent of the total subscription must be paid upon subscription the
balance to be payable on a dates, fixed 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 pesos (P5,000.00).]

SEC. 13. Contents of the Articles of Incorporation . — All corporations shall file with
the Commission articles of incorporation in any of the official languages, duly signed and
acknowledged [by all of the incorporators] or authenticated, in such form and manner as
may be allowed by the Commission, containing substantially the following matters, except
as otherwise prescribed by this Code or by special law:
(a) The name of the corporation;
(b) The specific purpose or purposes for which the corporation is being formed.
Where a corporation has more than one stated purpose, the articles of incorporation shall
indicate the primary purpose and the secondary purpose or purposes: Provided, That a
nonstock corporation may not include a purpose which would change or contradict its
nature as such;
(c) The place where the principal office of the corporation is to be located, which
must be within the Philippines;
(d) The term for which the corporation is to exist, if the corporation has not
elected perpetual existence;
(e) The names, nationalities, and residence addresses of the incorporators;
(f)  The number of directors, which shall not be [less than five (5) nor] more than
fifteen (15) or the number of trustees which may be more than fifteen (15);

VGDLaw Page 4
 (g)  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;
(h)  If it be a stock corporation, the amount of its authorized capital stock [in lawful
money of the Philippines], 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;
(i)  If it be a nonstock corporation, the amount of its capital, the names,
nationalities, and residence addresses of the contributors, and amount contributed by each;
and
(j)  Such other matters consistent with law and which the incorporators may deem
necessary and convenient.
[The Securities and Exchange Commission shall not accept the articles of
incorporation of any stock corporation unless accompanied by a sworn statement of the
Treasurer elected by the subscribed, and at least twenty-five (25%) percent of the
authorized capital stock of the corporation has been subscribed, and at least twenty-five
(25%) percent of the total subscription has been fully paid to him in actual cash and/or in
property the fair valuation of which is equal to at least twenty-five (25%) percent of the said
subscription, such paid-up capital being not less than five thousand (P5,000.00) pesos.]
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 thereto may be
filed with the Commission in the form of an electronic document, in accordance with
the Commissions rules and regulations on electronic filing.

SEC. 14. Form of Articles of Incorporation. — Unless otherwise prescribed by

special law, the articles of incorporation of all domestic corporations shall comply
substantially with the following form:

Articles of Incorporation of
________________________
(Name of Corporation)
The undersigned incorporators, all of legal age, have voluntarily agreed to form a
(stock) (nonstock) corporation under the laws of the Republic of the Philippines and certify
the following:

First: That the name of said corporation shall be “__________________, Inc.,

Corporation or OPC”;

Second: That the purpose or purposes for which such corporation is incorporated

are: (If there is more than one purpose, indicate primary and secondary purposes);

Third: That the principal office of the corporation is located in the City/Municipality of

_______________, Province of ________________________, Philippines:

Fourth: That the corporation shall have perpetual existence or a term of ____ years

from the date of issuance of the certificate of incorporation;

Fifth: That the names, nationalities, and residence addresses of the incorporators
of the corporation are as follows:

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 Name
Nationality
Residence

_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________
_______________

 Sixth: That the number of directors or trustees of the corporation shall be

_____________; and the names, nationalities, and residence addresses of the first
directors or trustees of the corporation are as follows:

Name
Nationality
Residence
_______________
_______________
_______________

_______________
_______________
_______________

_______________
_______________
_______________

_______________
_______________
_______________

_______________

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 _______________
_______________

_______________
_______________
_______________

Seventh: That the authorized capital stock of the corporation is ___________

_____________________ PESOS (P________), divided into ________ shares with the
par value of __________ PESOS (P________) per share. (In case all the shares 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 have a par value of
__________________________ PESOS (P____________) each, and of which
__________________________ shares are without par value.

Eighth: That [at least twenty-five (25%) per cent of] the number of shares of the
authorized capital stock above-stated has been subscribed as follows:

Name of No. of Shares Amount Amount

Nationality
Subscriber Subscribed Subscribed Paid
         
         
         
         
         

[Ninth: That the above-named subscribers have paid at least twenty-five (25%)
percent of the total subscription as follows: x x x ]
(Modify No. 8 [and 9] if shares are with no-par value. In case the corporation is
nonstock, Nos. 7 and 8 [and 9] of the above articles may be modified accordingly, and it is
sufficient if the articles state the amount of capital or money contributed or donated by
specified persons, stating the names, nationalities, and residence addresses of the
contributors or donors and the respective amount given by each.)

Ninth: That ______________________ has been elected by the subscribers as

Treasurer of the Corporation to act as such until after the successor is duly elected and
qualified in accordance with the bylaws, that as Treasurer, authority has been given to
receive in the name and for the benefit of the corporation, all subscriptions, contributions or
donations paid or given by the subscribers or members, who certifies the information set
forth in the seventh and eighth clauses above, and that the paid-up portion of the
subscription in cash and/or property for the benefit and credit of the corporation has been
duly received.

Tenth: That the incorporators undertake to change the name of the

corporation immediately upon receipt of notice from the Commission that another
corporation, partnership or person has acquired a prior right to the use of such
name, that the name has been declared not distinguishable from a name already
registered or reserved for the use of another corporation, or that it is contrary to law,
public morals, good customs or public policy.

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 Eleventh: (Corporations which will engage in any business or activity reserved for
Filipino citizens shall provide the following):
“No transfer of stock or interest which shall reduce the ownership of
Filipino citizens to less than the required percentage of capital stock as
provided by existing laws shall be allowed or permitted to be recorded in the
proper books of the corporation, and this restriction shall be indicated in all
stock certificates issued by the corporation.”

IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation,

this ______ day of _____________, 20___ in the City/Municipality of _______________,
Province of ____________________, Republic of the Philippines.
_________________ _________________
_________________ _________________
_________________ _________________
_________________ _________________
_________________ _________________
(Names and signatures of the incorporators)

_________________________________
(Name and signature of Treasurer)

[DELETED THE FORM FOR THE TREASURER’S AFFIDAVIT]

SEC. 15. 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. The articles of
incorporation of a nonstock corporation may be amended by the vote or written 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 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 their approval by the Commission or from
the date of filing with the said Commission if not acted upon within six (6) months from the
date of filing for a cause not attributable to the corporation.

SEC. 16. Grounds When Articles of Incorporation or Amendment May Be

Disapproved. — The Commission may [reject] disapprove the articles of incorporation or
any amendment thereto if the same is not compliant with the requirements of this Code:
Provided, That the Commission shall give the incorporators, directors, trustees, or officers a
reasonable time from receipt of the disapproval within which to modify the objectionable
portions of the articles or amendment. The following are grounds for such disapproval:
(a) The articles of incorporation or any amendment thereto is not substantially in
accordance with the form prescribed herein;
(b) The purpose or purposes of the corporation are patently unconstitutional,
illegal, immoral or contrary to government rules and regulations;

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 (c)  The certification concerning the amount of capital stock subscribed and/or paid
is false; and
(d)  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,

banking and quasi-banking institutions, [building and loan associations,] preneed,
insurance and trust companies, NSSLAs, pawnshops, and other financial
intermediaries [public utilities, educational institutions, and other corporations governed by
special laws] 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.

SEC. 17. Corporate Name. — No corporate name shall be allowed by the

Commission if [the proposed name is identical or deceptively or confusingly similar to that
of any existing corporation] 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 is patently deceptive, confusing], or when its use is contrary to existing law, rules
and regulations.
A name is not distinguishable even if it contains one or more of the following:
(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.

SEC. 18. 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

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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.

SEC. 19. De Facto Corporations. — The 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. Such inquiry may be made by the Solicitor General in
a quo warranto proceeding.

SEC. 20. 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:  Provided, however,
That when any such 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.

SEC. 21. Effects of Non-Use of Corporate Charter and Continuous Inoperation . —

If a corporation does not formally organize and commence its business within five (5) [two
(2)] 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.
However, 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.
[This provision shall not apply if the failure to organize, commence the transaction of
its businesses or the construction of its works, or to continuously operate is due to causes
beyond the control of the corporation as may be determined by the Securities and
Exchange Commission]
A delinquent corporation shall have a period of two (2) years to resume
operations and comply with all requirements that the Commission shall prescribe.
Upon compliance by the corporation, the Commission shall issue an order lifting the
delinquent status. Failure to comply with the requirements and resume operations
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.

TITLE III
BOARD OF DIRECTORS/TRUSTEES AND OFFICERS

SEC. 22. 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, while trustees shall be elected for a term not
exceeding three (3) years from among the members of the corporation. Each director and

VGDLaw Page 10
trustee shall hold office until the successor is elected and qualified. [Every director must
own at least one (1) share of the capital stock of the corporation of which he is a director,
which shall stand in his name on the books of the corporation. … Trustees of non-stock
corporations must be members thereof.] 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. [A majority of the directors or trustees of all corporations organized under this Code
must be residents of the Philippines.]
The board of the following corporations vested with public interest shall have
independent directors constituting at least twenty percent (20%) of such board:
(a) 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) share of any
class of its equity shares;
(b)  Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in
money service business, preneed, trust and insurance companies, and other
financial intermediaries; and
(c)  Other corporations engaged in businesses 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.
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.

SEC. 23. 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 majority of the
outstanding capital stock, or if there be no capital stock, a majority of the members entitled
to vote. When so authorized in the bylaws or by a majority of the board of directors,
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.
A stockholder or member who participates through remote communication
or in absentia, shall be deemed present for purposes of quorum.

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 The election must be by ballot if requested by any voting stockholder or member.
In stock corporations, stockholders entitled to vote shall have the right to vote [in
person or by proxy] the number of shares of stock standing in their own names in the stock
books of the corporation at the time fixed in the bylaws or where the bylaws are silent, at
the time of the election. The said stockholder may: (a) vote such number of shares for as
many persons as there are directors to be elected; (b) 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; or (c) distribute them on the same principle 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 nonstock corporations [which have no
capital stock] 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 [, for any reason,] 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, [or
represented] by proxy, or through remote communication or not voting in absentia at
the meeting, such meeting may be adjourned [from day to day or from time to time but not
sine die or indefinitely] 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 bylaws of the corporation.

SEC. 24. Corporate Officers [,Quorum]. — Immediately after their election, the
directors of a corporation must formally organize and elect: (a) a president, who must be a
director; (b) a treasurer, who must be a resident [who may or may no be a directors]; (c) a
secretary, who must be a citizen and resident of the Philippines; and (d) such other officers
as may be provided in the bylaws. If the corporation is vested with public interest, the
board shall also elect a compliance officer. The same person may 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.

SEC. 25. 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.
The non-holding of elections and the reasons therefor shall be reported to the
Commission within thirty (30) days from the date of the scheduled election. The
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. 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

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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,
[his heirs in case of death,] the secretary, or the director, trustee or officer of the
corporation, shall [immediately report such fact] within seven (7) days from knowledge
thereof, report in writing such fact to the Commission.

SEC. 26. 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, the person was:
(a) Convicted by final judgment:
(1) Of an offense punishable by imprisonment for a period exceeding six (6) years;
(2) 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 fraudulent 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.

SEC. 27. Removal of Directors or Trustees. — Any director or trustee of a

corporation may be removed from office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the outstanding capital stock, or in a
nonstock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote:
Provided, That such 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 representing or holding 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 for 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: Provided, That 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, motu proprio or upon verified complaint, and after due
notice and hearing, order the removal of a director or trustee elected despite the
disqualification, or whose disqualification arose or is discovered subsequent to an

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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.

SEC. 28. 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 a 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. In all other cases, 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.
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.

SEC. 29. Compensation of Directors or Trustees. — In the absence of any

provision in the bylaws fixing their compensation, the directors or trustees shall not receive
any compensation in their capacity as such, except for reasonable per diems: Provided,
however, That the stockholders representing at least a majority of the outstanding capital
stock or majority of the members may grant directors or trustees with compensation and
approve the amount thereof at a regular or special meeting.
In no case shall the total yearly compensation of directors exceed ten percent (10%)
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.

SEC. 30. 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

VGDLaw Page 14
trustees shall be liable jointly and severally for all damages resulting therefrom suffered by
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 the 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; otherwise, the said director, trustee or officer shall be liable as a trustee for
the corporation and must account for the profits which otherwise would have accrued to
the corporation.

SEC. 31. Dealings of Directors, Trustees or Officers with the Corporation. — A

contract of the corporation with one (1) 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 such corporation, unless all the following conditions are present:
(a) 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;
(b) The vote of such director or trustee was not necessary for the approval of the
contract;
(c) The contract is fair and reasonable under the circumstances;
(d) In 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;
(e) In case of an officer, the contract has been previously authorized by the board
of directors.

 Where any of the first [two] 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.

SEC. 32. Contracts Between Corporations with Interlocking Directors. — 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: Provided, That 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 or corporations are concerned.
Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall
be considered substantial for purposes of interlocking directors.

SEC. 33. 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, unless act has been ratified by a vote of the stockholders owning or
representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be
applicable, notwithstanding the fact that the director risked one’s own funds in the venture.

SEC. 34. 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 such

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specific matters within the competence of the board, as may be delegated to it in the bylaws
or by majority vote of the board, except with respect to the: (a) approval of any action for
which shareholders’ approval is also required; (b) filling of vacancies in the board; (c)
amendment or repeal of bylaws or the adoption of new bylaws; (d) amendment or repeal of
any resolution of the board which by its express terms is not amendable or repealable; and
(e) 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.

TITLE IV
POWERS OF CORPORATIONS

SEC. 35. Corporate Powers and Capacity. — Every corporation incorporated under
this Code has the power and capacity:
(a)  To sue and be sued in its corporate name;
(b)  To have perpetual existence [of succession by its corporate name for the
period of time stated in the articles of incorporation and the] unless the certificate of
incorporation provides otherwise;
(c) To adopt and use a corporate seal;
(d)  To amend its articles of incorporation in accordance with the provisions of
this Code;
(e)  To adopt bylaws, not contrary to law, morals or public policy, and to amend or
repeal the same in accordance with this Code;
(f)  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;
(g)  To purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage, and otherwise deal with such 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;
(h)  To enter into a partnership, joint venture, merger, consolidation, or any
other commercial agreement with natural and juridical persons;
(i)  To make reasonable donations, including those for the public welfare or for
hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no
[domestic or] foreign corporation shall give donations in aid of any political party or
candidate or for purposes of partisan political activity;
(j)  To establish pension, retirement, and other plans for the benefit of its
directors, trustees, officers, and employees; and
(k)  To exercise such other powers as may be essential or necessary to carry out
its purpose or purposes as stated in the articles of incorporation.

SEC. 36. 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 and the time and place of

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the meeting shall be sent to stockholders or members at their respective place of residence
as shown in the books of the corporation, and must be deposited to the addressee in the
post office with postage prepaid, served personally, or when allowed in the bylaws or done
with the consent of the stockholder, sent electronically in accordance with the rules and
regulations of the Commission on the use of electronic data messages. In case of
extension of corporate term, a dissenting stockholder may exercise the right of appraisal
under the conditions provided in this Code.

SEC. 37. 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 as shown in the books of the corporation and
served on 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 must be signed by a majority of the directors of the corporation and
countersigned by the chairperson and secretary of the stockholders’ meeting, setting forth:
(a)  That the requirements of this section have been complied with;
(b)  The amount of the increase or decrease of the capital stock;
(c)  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 for the purpose of making effective stock dividend therefor
authorized;
(d)  Any bonded indebtedness to be incurred, created or increased [The actual
indebtedness of the corporation on the day of the meeting];
(e)  The amount of stock represented at the meeting; and
(f)  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 the incurring, creating or increasing
of any bonded indebtedness shall require prior approval of the Commission, and where
appropriate, of the Philippine Competition Commission. The application with the
Commission shall be made within six (6) months from the date of approval of the
board of directors and stockholders, which period may be extended for justifiable
reasons.
Copies of the certificate shall be kept on file in the office of the corporation and filed
with the Commission and attached to the original articles of incorporation. After approval by
the Commission and the issuance by the Commission of its certificate of filing, the capital
stock shall be deemed increased or decreased and the incurring, creating or increasing of
any bonded indebtedness authorized, as the certificate of filing may declare:  Provided,
That the Commission shall not accept for filing any certificate of increase of capital stock
unless accompanied by a sworn statement of the treasurer of the corporation lawfully
holding office at the time of the filing of the certificate, showing that at least twenty-five
percent (25%) of the increase in capital stock has been subscribed and that at least twenty-
five percent (25%) of the amount subscribed has been paid in actual cash to the

VGDLaw Page 17
corporation or that property, the valuation of which is equal to twenty-five percent (25%) of
the subscription, has been transferred to the corporation: Provided, further, That no
decrease in capital stock shall be approved by the Commission if its effect shall prejudice
the rights of corporate creditors.
Nonstock corporations may incur, create or increase bonded indebtedness when
approved by a majority of the board of trustees and of at least two-thirds (2/3) of the
members in a meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with the Commission, which shall
have the authority to determine the sufficiency of the terms thereof.

SEC. 38. Power to Deny Preemptive Right . — All stockholders of a stock

corporation shall enjoy preemptive right to subscribe to all issues or disposition of shares of
any class, in proportion to their respective shareholdings, unless such right is denied by the
articles of incorporation or an amendment thereto: Provided, That such preemptive right
shall not extend to shares issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public; or to shares issued in good faith with the approval
of the stockholders representing two-thirds (2/3) of the outstanding capital stock, in
exchange for property needed for corporate purposes or in payment of a previously
contracted debt.

SEC. 39. Sale or Other Disposition of Assets. — Subject to the provisions of

Republic Act No. 10667, otherwise known as the “Philippine Competition Act,” and
other related laws, a corporation may, by a majority vote of its board of directors or
trustees, sell, lease, exchange, mortgage, pledge, or otherwise dispose of its property and
assets, [including its goodwill,] upon such terms and conditions and for such consideration,
which may be money, stocks, bonds, or other instruments for the payment of money or
other property or consideration, as its board of directors or trustees may deem expedient.
A sale of all or substantially all of the corporation’s properties and assets,
including its goodwill, [when] must be authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or [in case of non-
stock corporation, by the vote of] at least two-thirds (2/3) of the members, in a stockholders’
or members’ meeting duly called for the purpose.
In nonstock corporations where there are no members with voting rights, the vote of
at least a majority of the trustees in office will be sufficient authorization for the corporation
to enter into any transaction authorized by this section.
The determination of whether or not the sale involves all or substantially all of
the corporation’s properties and assets must be computed based on its net asset
value, as shown in its latest financial statements. A sale or other disposition shall be
deemed to cover substantially all the corporate property and assets if thereby the
corporation would be rendered incapable of continuing the business or accomplishing the
purpose for which it was incorporated.
Written notice of the proposed action and of the time and place for the meeting shall
be addressed to stockholders or members at their places of residence as shown in the
books of the corporation and deposited to the addressee in the post office with postage
prepaid, served personally, or when allowed by the bylaws or done with the consent of
the stockholder, sent electronically:  Provided, That any dissenting stockholder may
exercise the right of appraisal under the conditions provided in this Code.
After such authorization or approval by the stockholders or members, the board of
directors or trustees may, nevertheless, in its discretion, abandon such sale, lease,
exchange, mortgage, pledge, or other disposition of property and assets, subject to the

VGDLaw Page 18
rights of third parties under any contract relating thereto, without further action or approval
by the stockholders or members.
Nothing in this section is intended to restrict the power of any corporation, without
the authorization by the stockholders or members, to sell, lease, exchange, mortgage,
pledge, or otherwise dispose of any of its property and assets if the same is necessary in
the usual and regular course of business of the corporation or if the proceeds of the sale or
other disposition of such property and assets shall be appropriated for the conduct of its
remaining business.

SEC. 40. Power to Acquire Own Shares. — Provided that the corporation has
unrestricted retained earnings in its books to cover the shares to be purchased or acquired,
a stock corporation shall have the power to purchase or acquire its own shares for a
legitimate corporate purpose or purposes, including [but not limited to] the following cases:
(a)  To eliminate fractional shares arising out of stock dividends;
(b)  To collect or compromise an indebtedness to the corporation, arising out of
unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold during
said sale; and
(c)  To pay dissenting or withdrawing stockholders entitled to payment for their
shares under the provisions of this Code.

SEC. 41. Power to Invest Corporate Funds in Another Corporation or Business or

for Any Other Purpose. — Subject to the provisions of this Code, a private corporation may
invest its funds in any other corporation, business, or for any purpose other than the
primary purpose for which it was organized, when approved by a majority of the board of
directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock, or by at least two-thirds (2/3) of the members in the case of
nonstock corporations, at a meeting duly called for the purpose. Notice of the proposed
investment and the time and place of the meeting shall be addressed to each stockholder
or member at the place of residence as shown in the books of the corporation and
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 message, when allowed by the bylaws or done with the consent of
the stockholders:  Provided, That any dissenting stockholder shall have appraisal right as
provided in this Code: Provided, however, That where the investment by the corporation is
reasonably necessary to accomplish its primary purpose as stated in the articles of
incorporation, the approval of the stockholders or members shall not be necessary.

SEC. 42. Power to Declare Dividends. — The board of directors of a stock

corporation may declare dividends out of the unrestricted retained earnings which shall be
payable in cash, property, or in stock to all stockholders on the basis of outstanding stock
held by them:  Provided, That any cash dividends due on delinquent stock shall first be
applied to the unpaid balance on the subscription plus costs and expenses, while stock
dividends shall be withheld from the delinquent stockholders until their unpaid subscription
is fully paid:  Provided, further, That no stock dividend shall be issued without the approval
of stockholders representing at least two-thirds (2/3) of the outstanding capital stock at a
regular or special meeting duly called for the purpose.
Stock corporations are prohibited from retaining surplus profits in excess of one
hundred percent (100%) of their paid-in capital stock, except: (a) when justified by definite
corporate expansion projects or programs approved by the board of directors; or (b) when
the corporation is prohibited under any loan agreement with financial institutions or
creditors, whether local or foreign, from declaring dividends without their consent, and such
consent has not yet been secured; or (c) when it can be clearly shown that such retention is

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necessary under special circumstances obtaining in the corporation, such as when there is
need for special reserve for probable contingencies.

SEC. 43. Power to Enter into Management Contract. — No corporation shall

conclude a management contract with another corporation unless such contract is
approved by the board of directors and by stockholders owning at least the majority of the
outstanding capital stock, or by at least a majority of the members in the case of a
nonstock corporation, of both the managing and the managed corporation, at a meeting
duly called for the purpose:  Provided, That (a) where a stockholder or stockholders
representing the same interest of both the managing and the managed corporations own or
control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the
managing corporation; or (b) where a majority of the members of the board of directors of
the managing corporation also constitute a majority of the members of the board of
directors of the managed corporation, then the management contract must be approved by
the stockholders of the managed corporation owning at least two-thirds (2/3) of the total
outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of the members in
the case of a nonstock corporation.
These shall apply to any contract whereby a corporation undertakes to manage or
operate all or substantially all of the business of another corporation, whether such
contracts are called service contracts, operating agreements or otherwise:  Provided,
however, That such service contracts or operating agreements which relate to the
exploration, development, exploitation or utilization of natural resources may be entered
into for such periods as may be provided by pertinent laws or regulations.
No management contract shall be entered into for a period longer than five (5) years
for any one (1) term.

SEC. 44. Ultra Vires Acts of Corporations. — No corporation shall possess or

exercise corporate powers other than those conferred by this Code or by its articles of
incorporation and except as necessary or incidental to the exercise of the powers
conferred.

TITLE V
BYLAWS

SEC. 45. Adoption of Bylaws. — [Every corporation formed under this Code must,
within one (1) month after receipt of official notice of the issuance of its certificate of
incorporation by the Securities and Exchange Commission.] For the adoption of bylaws by
the corporation, the affirmative vote of the stockholders representing at least a majority of
the outstanding capital stock, or of at least a majority of the members in case of nonstock
corporations, shall be necessary. The bylaws shall be signed by the stockholders or
members voting for them and shall be kept in the principal office of the corporation, subject
to the inspection of the stockholders or members during office hours. A copy thereof, duly
certified by a majority of the directors or trustees and countersigned by the secretary of
the corporation, shall be filed with the Commission and attached to the original articles of
incorporation.
Notwithstanding the provisions of the preceding paragraph, bylaws may be adopted
and filed prior to incorporation; in such case, such bylaws shall be approved and signed by
all the incorporators and submitted to the Commission, together with the articles of
incorporation.

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 In all cases, bylaws shall be effective only upon the issuance by the Commission of
a certification that the bylaws are [not inconsistent] in accordance with this Code.
The Commission shall not accept for filing the bylaws or any amendment thereto of
any bank, banking institution, building and loan association, trust company, insurance
company, public utility, educational institution, or other special corporations governed by
special laws, unless accompanied by a certificate of the appropriate government agency to
the effect that such bylaws or amendments are in accordance with law.

SEC. 46. Contents of Bylaws. — [Subject to the provisions of the Constitution, this
Code, other special laws, and the articles of incorporation] A private corporation may
provide the following in its bylaws:
(a)  The time, place and manner of calling and conducting regular or special
meetings of the directors or trustees;
(b)  The time and manner of calling and conducting regular or special meetings
and mode of notifying the stockholders or members thereof;
(c)  The required quorum in meetings of stockholders or members and the manner
of voting therein;
(d)  The modes by which a stockholder, member, director, or trustee may
attend meetings and cast their votes;
(e)  The form for proxies of stockholders and members and the manner of voting
them;
(f)  The directors’ or trustees’ [officers’ and employees’] qualifications, duties and
responsibilities, the guidelines for setting the compensation of directors or trustees and
officers [and employees], and the maximum number of other board representations
that an independent director or trustee may have which shall, in no case, be more
than the number prescribed by the Commission;
(g)  The time for holding the annual election of directors or trustees and the mode
or manner of giving notice thereof;
(h)  The manner of election or appointment and the term of office of all officers
other than directors or trustees;
(i)  The penalties for violation of the bylaws;
(j)  In the case of stock corporations, the manner of issuing stock certificates; and
(k)  Such other matters as may be necessary for the proper or convenient
transaction of its corporate [business and] affairs for the promotion of good governance
and anti-graft and corruption measures.
 An arbitration agreement may be provided in the bylaws pursuant to Section
181 of this Code.

SEC. 47. Amendment to Bylaws. — A majority of the board of directors or trustees,

and the owners of at least a majority of the outstanding capital stock, or at least a majority
of the members of a nonstock corporation, at a regular or special meeting duly called for the
purpose, may amend or repeal the bylaws or adopt new bylaws. The owners of two-thirds
(2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a
nonstock corporation may delegate to the board of directors or trustees the power to amend
or repeal the bylaws or adopt new bylaws: Provided, That any power delegated to the board
of directors or trustees to amend or repeal the bylaws or adopt new bylaws shall be
considered as revoked whenever stockholders owning or representing a majority of the
outstanding capital stock or majority of the members shall so vote at a regular or special
meeting.

VGDLaw Page 21
 Whenever the bylaws are amended or new bylaws are adopted,
the corporation shall file with the Commission such amended or new bylaws and, if
applicable, the stockholders’ or members’ resolution authorizing the delegation of the power
to amend and/or adopt new bylaws, duly certified under oath by the corporate secretary and
a majority of the directors or trustees [, shall be filed with the Securities and Exchange
Commission the same to be attached to the original articles of incorporation and original by-
laws].
The amended or new bylaws shall only be effective upon the issuance by the
Commission of a certification that the same is in accordance with this Code and other
relevant laws.

TITLE VI
MEETINGS

SEC. 48. Kinds of Meetings. — Meetings of directors, trustees, stockholders, or

members may be regular or special.

SEC. 49. Regular and Special Meetings of Stockholders or Members . — Regular

meetings of stockholders or members shall be held annually on a date fixed in the bylaws,
or if not so fixed, on any date [in] after April 15 of every year as determined by the board of
directors or trustees: Provided, That written notice of regular meetings shall be sent to all
stockholders or members of record at least [two (2) weeks] twenty-one (21) days prior to
the meeting, unless a different period is required in the bylaws, law, or
regulation: Provided, further, That written notice of regular meetings may be sent to
all stockholders or members of record through electronic mail or such other manner
as the Commission shall allow under its guidelines.
At each regular meeting of stockholders or members, the board of directors or
trustees shall endeavor to present to stockholders or members the following:
(a)  The minutes of the most recent regular meeting which shall include,
among others:
(1)  A description of the voting and vote tabulation procedures used in
the previous meeting;
(2)  A description of the opportunity given to stockholders or members
to ask questions and a record of the questions asked and answers given;
(3)  The matters discussed and resolutions reached;
(4)  A record of the voting results for each agenda item;
(5)  A list of the directors or trustees, officers and stockholders or
members who attended the meeting; and
(6)  Such other items that the Commission may require in the interest of
good corporate governance and the protection of minority stockholders;
(b)  A members’ list for nonstock corporations and, for stock corporations,
material information on the current stockholders, and their voting rights;
(c)  A detailed, descriptive, balanced and comprehensible assessment of
the corporation’s performance, which shall include information on any material
change in the corporation’s business, strategy, and other affairs;
(d)  A financial report for the preceding year, which shall include financial
statements duly signed and certified in accordance with this Code and the rules the

VGDLaw Page 22
Commission may prescribe, a statement on the adequacy of the corporation’s
internal controls or risk management systems, and a statement of all external audit
and non-audit fees;
(e)  An explanation of the dividend policy and the fact of payment of
dividends or the reasons for nonpayment thereof;
(f)  Director or trustee profiles which shall include, among others, their
qualifications and relevant experience, length of service in the corporation, trainings
and continuing education attended, and their board representations in other
corporations;
(g)  A director or trustee attendance report, indicating the attendance of each
director or trustee at each of the meetings of the board and its committees and in
regular or special stockholder meetings;
(h) Appraisals and performance reports for the board and the criteria and
procedure for assessment;
(i) A director or trustee compensation report prepared in accordance with
this Code and the rules of the commission may prescribe;
(j)  Director disclosures on self-dealings and related party transactions;
and/or
(k)  The profiles of directors nominated or seeking election or reelection.
A director, trustee, stockholder, or member may propose any other matter for
inclusion in the agenda at any regular meeting of stockholders or members.
Special meetings of stockholders or members shall be held at any time deemed
necessary or as provided in the bylaws: Provided, however, That at least one (1) week
written notice shall be sent to all stockholders or members, unless a different period is
provided in the bylaws, law or regulation.
A stockholder or member may propose the holding of a special meeting and
items to be included in the agenda.
Notice of any meeting may be waived, expressly or impliedly, by any stockholder or
member: Provided, That general waivers of notice in the articles of incorporation or
the bylaws shall not be allowed; Provided, further, That attendance at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
Whenever for any cause, there is no person authorized or the person authorized
unjustly refuses to call a meeting, the Commission, upon petition of a stockholder or
member on a showing of good cause therefor, may issue an order, directing the petitioning
stockholder or member to call a meeting of the corporation by giving proper notice required
by this Code or the bylaws. The petitioning stockholder or member shall preside thereat
until at least a majority of the stockholders or members present have chosen from among
themselves, a presiding officer.
Unless the bylaws provide for a longer period, the stock and transfer book or
membership book shall be closed at least twenty (20) days for regular meetings and
seven (7) days for special meetings before the scheduled date of the meeting.
In case of postponement of stockholders’ or members’ regular meetings,
written notice thereof and the reason therefor shall be sent to all stockholders or
members of record at least two (2) weeks prior to the date of the meeting, unless a
different period is required under the bylaws, law or regulation.

VGDLaw Page 23
 The right to vote of stockholders or members may be exercised in person,
through a proxy, or when so authorized in the bylaws, through remote
communication or in absentia. The Commission shall issue the rules and regulations
governing participation and voting through remote communication or in absentia,
taking into account the company’s scale, number of shareholders or members,
structure, and other factors consistent with the protection and promotion of
shareholders’ or members’ meetings.

SEC. 50. Place and Time of Meetings of Stockholders or Members . —

Stockholders’ or members’ meetings, whether regular or special, shall be held in the
principal office of the corporation as set forth in the articles of incorporation, or, if
not practicable, in the city or municipality where the principal office of the
corporation is located: Provided, That any city or municipality in Metro Manila, Metro
Cebu, Metro Davao, and other Metropolitan areas shall, for purposes of this section,
be considered a city or municipality.
Notice of meetings shall be [in writing] sent through the means of communication
provided in the bylaws, which notice shall state the time, place and purpose of the
meetings.
Each notice of meeting shall further be accompanied by the following:
(a)  The agenda for the meeting;
(b)  A proxy form which shall be submitted to the corporate secretary within
a reasonable time prior to the meeting;
(c)  When attendance, participation, and voting are allowed by remote
communication or in absentia, the requirements and procedures to be followed when
a stockholder or member elects either option; and
(d)  When the meeting is for the election of directors or trustees, the
requirements and procedure for nomination and election.
All proceedings and any business transacted at a meeting of the stockholders or
members, if within the powers or authority of the corporation, shall be valid even if the
meeting is improperly held or called:  Provided, That all the stockholders or members of
the corporation are present or duly represented at the meeting and not one of them
expressly states at the beginning of the meeting that the purpose of their attendance
is to object to the transaction of any business because the meeting is not lawfully
called or convened.

SEC. 51. Quorum in Meetings. — Unless otherwise provided in this Code or in the
bylaws, a quorum shall consist of the stockholders representing a majority of the
outstanding capital stock or a majority of the members in the case of nonstock corporations.

SEC. 52. Regular and Special Meetings of Directors or Trustees; Quorum. — Unless
the articles of incorporation or the bylaws provides for a greater majority, a majority of the
directors or trustees as stated in the articles of incorporation shall constitute a quorum to
transact corporate business, and every decision reached by at least a majority of the
directors or trustees constituting a quorum, except for the election of officers which shall
require the vote of a majority of all the members of the board, shall be valid as a corporate
act.
Regular meetings of the board of directors or trustees of every corporation shall be
held monthly, unless the bylaws provide otherwise.
Special meetings of the board of directors or trustees may be held at any time upon
the call of the president or as provided in the bylaws.

VGDLaw Page 24
 Meetings of directors or trustees of corporations may be held anywhere in or outside
of the Philippines, unless the bylaws provide otherwise. Notice of regular or special
meetings stating the date, time and place of the meeting must be sent to every director or
trustee at least two (2) days prior to the scheduled meeting, unless a longer time is
provided in the bylaws. A director or trustee may waive this requirement, either expressly or
impliedly.
Directors or trustees who cannot physically attend or vote at board meetings
can participate and vote through remote communication such as videoconferencing,
teleconferencing, or other alternative modes of communication that allow them
reasonable opportunities to participate. Directors or trustees cannot attend or vote
by proxy at board meetings.
A director or trustee who has a potential interest in any related party
transaction must recuse from voting on the approval of the related party transaction
without prejudice to compliance with the requirements of Section 31 of this Code.

SEC. 53. Who Shall Preside at Meetings. — The chairman or, in his absence,
the president shall preside at all meetings of the directors or trustees as well as of the
stockholders or members, unless the bylaws provide otherwise.

SEC. 54. Right to Vote of Secured Creditors and Administrators . — In case a

stockholder grants security interest in his or her shares in stock corporations, the
stockholder-grantor shall have the right to attend and vote at meetings of stockholders,
unless the secured creditor is expressly given by the stockholder-grantor such right in
writing which is recorded in the appropriate corporate books.
Executors, administrators, receivers, and other legal representatives duly appointed
by the court may attend and vote in behalf of the stockholders or members without need of
any written proxy.

SEC. 55. Voting in Case of Joint Ownership of Stock. — The consent of all the co-
owners shall be necessary in voting shares of stock owned jointly by two (2) or more
persons, unless there is a written proxy, signed by all the co-owners, authorizing one
(1) or some of them or any other person to vote such share or shares: Provided, That
when the shares are owned in an “and/or” capacity by the holders thereof, any one of the
joint owners can vote said shares or appoint a proxy therefor.

SEC 56. Voting Right for Treasury Shares. — Treasury shares shall have no
voting right as long as such shares remain in the Treasury.

SEC. 57. Manner of Voting; Proxies. — Stockholders and members may vote in
person or by proxy in all meetings of stockholders or members.
When so authorized in the bylaws or by a majority of the board of directors,
the stockholders or members of corporations may also vote through remote
communication or in absentia: Provided, That the votes are received before
the corporation finishes the tally of votes.
A stockholder or member who participates through remote communication
or in absentia shall be deemed present for purposes of quorum.
The corporation shall establish the appropriate requirements and procedures
for voting through remote communication and in absentia, taking into account the
company’s scale, number of shareholders or members, structure and other factors
consistent with the basic right of corporate suffrage.
Proxies shall be in writing, signed and filed, by the stockholder or member, in any
form authorized in the bylaws and received by the corporate secretary within a reasonable

VGDLaw Page 25
time before the scheduled meeting. Unless otherwise provided in the proxy form, it shall be
valid only for the meeting for which it is intended. No proxy shall be valid and effective for a
period longer than five (5) years at any one time.

SEC. 58. Voting Trusts. — One or more stockholders of a stock corporation may
create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote
and other rights pertaining to the shares for a period not exceeding five (5) years at any
time:  Provided, That in the case of a voting trust specifically required as a condition in a
loan agreement, said voting trust may be for a period exceeding five (5) years but shall
automatically expire upon full payment of the loan. A voting trust agreement must be in
writing and notarized, and shall specify the terms and conditions thereof.
A certified copy of such agreement shall be filed with the corporation and with the
Commission; otherwise, the agreement is ineffective and unenforceable. The certificate or
certificates of stock covered by the voting trust agreement shall be cancelled and new ones
shall be issued in the name of the trustee or trustees, stating that they are issued pursuant
to said agreement. The books of the corporation shall state that the transfer in the name of
the trustee or trustees is made pursuant to the voting trust agreement.
The trustee or trustees shall execute and deliver to the transferors, voting trust
certificates, which shall be transferable in the same manner and with the same effect as
certificates of stock.
The voting trust agreement filed with the corporation shall be subject to examination
by any stockholder of the corporation in the same manner as any other corporate book or
record: Provided, That both the trustor and the trustee or trustees may exercise the right of
inspection of all corporate books and records in accordance with the provisions of
this Code.
Any other stockholder may transfer the shares to the same trustee or trustees upon
the terms and conditions stated in the voting trust agreement, and thereupon shall be
bound by all the provisions of said agreement.
No voting trust agreement shall be entered into for purposes of circumventing the
laws against anti-competitive agreements, abuse of dominant position, anti-competitive
mergers and acquisitions, violation of nationality and capital requirements, or for the
perpetuation of fraud.
Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period. The voting trust certificates as well as
the certificates of stock in the name of the trustee or trustees shall thereby be deemed
cancelled and new certificates of stock shall be reissued in the name of the trustors.
The voting trustee or trustees may vote by proxy or in any manner authorized under
the bylaws unless the agreement provides otherwise.

TITLE VII
STOCKS AND STOCKHOLDERS

SEC. 59. Subscription Contract. — Any contract for the acquisition of unissued
stock in an existing corporation or a corporation still to be formed shall be deemed a
subscription within the meaning of this Title, notwithstanding the fact that the parties refer to
it as a purchase or some other contract.

SEC. 60. Pre-incorporation Subscription. — A subscription of shares in a

corporation still to be formed shall be irrevocable for a period of at least six (6) months from
the date of subscription, unless all of the other subscribers consent to the revocation, or

VGDLaw Page 26
the corporation fails to incorporate within the same period or within a longer period
stipulated in the contract of subscription. No pre-incorporation subscription may be revoked
after the articles of incorporation is submitted to the Commission.

SEC. 61. Consideration for Stocks. — Stocks shall not be issued for a consideration
less than the par or issued price thereof. Consideration for the issuance of stock may be:
(a)  Actual cash paid to the corporation;
(b)  Property, tangible or intangible, actually received by the corporation and
necessary or convenient for its use and lawful purposes at a fair valuation equal to the par
or issued value of the stock issued;
(c)  Labor performed for or services actually rendered to the corporation;
(d)  Previously incurred indebtedness of the corporation;
(e)  Amounts transferred from unrestricted retained earnings to stated capital;
(f)  Outstanding shares exchanged for stocks in the event of reclassification or
conversion;
(g)  Shares of stock in another corporation; and/or
(h)  Other generally accepted form of consideration.

Where the consideration is other than actual cash, or consists of intangible property
such as patents or copyrights, the valuation thereof shall initially be determined by the
stockholders or the board of directors, subject to the approval of the Commission.
Shares of stock shall not be issued in exchange for promissory notes or future
service. The same considerations provided in this section, insofar as applicable, may be
used for the issuance of bonds by the corporation.
 The issued price of no-par value shares may be fixed in the articles of incorporation
or by the board of directors pursuant to authority conferred by the articles of incorporation
or the bylaws, or if not so fixed, by the stockholders representing at least a majority of the
outstanding capital stock at a meeting duly called for the purpose.

SEC. 62. Certificate of Stock and Transfer of Shares . — The capital stock of
corporations shall be divided into shares for which certificates signed by the president or
vice president, countersigned by the secretary or assistant secretary, and sealed with the
seal of the corporation shall be issued in accordance with the bylaws. Shares of stock so
issued are personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner, his attorney-in-fact, or any other person legally
authorized to make the transfer. No transfer, however, shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation showing the names of
the parties to the transaction, the date of the transfer, the number of the certificate or
certificates, and the number of shares transferred. The Commission may require
corporations whose securities are traded in trading markets and which can
reasonably demonstrate their capability to do so to issue their securities or shares of
stocks in uncertificated or scripless form in accordance with the rules of the
Commission.
No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.

SEC. 63. Issuance of Stock Certificates. — No certificate of stock shall be issued

to a subscriber until the full amount of the subscription together with interest and expenses
(in case of delinquent shares), if any is due, has been paid.

VGDLaw Page 27
 SEC. 64. Liability of Directors for Watered Stocks . — A director or officer of
a corporation who: (a) consents to the issuance of stocks for a consideration less than its
par or issued value; (b) consents to the issuance of stocks for a consideration other than
cash, valued in excess of its fair value; or (c) [who] having knowledge of the insufficient
consideration, does not [forthwith express his objection in writing and] file a written
objection with the corporate secretary, shall be liable to the corporation or its creditors,
solidarily with the stockholder concerned for the difference between the value received at
the time of issuance of the stock and the par or issued value of the same.

SEC. 65. Interest on Unpaid Subscriptions. — Subscribers to stocks shall be liable

to the corporation for interest on all unpaid subscriptions from the date of subscription, if so
required by and at the rate of interest fixed in the subscription contract. If no rate of interest
is fixed in the subscription contract, the prevailing legal rate shall apply.

SEC. 66. Payment of Balance of Subscription. — Subject to the provisions of the

subscription contract, the board of directors may, at any time, declare due and payable to
the corporation unpaid subscriptions and may collect the same or such percentage thereof,
in either case, with accrued interest, if any, as it may deem necessary.
Payment of unpaid subscription or any percentage thereof, together with any
interest accrued, shall be made on the date specified in the subscription contract or on the
date stated in the call made by the board. Failure to pay on such date shall render the
entire balance due and payable and shall make the stockholder liable for interest at the
legal rate on such balance, unless a different interest rate is provided in the subscription
contract. The interest shall be computed from the date specified, until full payment of the
subscription. If no payment is made within thirty (30) days from the said date, all stocks
covered by the subscription shall thereupon become delinquent and shall be subject to sale
as hereinafter provided, unless the board of directors orders otherwise.

SEC. 67. Delinquency Sale. — The board of directors may, by resolution, order the
sale of delinquent stock and shall specifically state the amount due on each subscription
plus all accrued interest, and the date, time and place of the sale which shall not be less
than thirty (30) days nor more than sixty (60) days from the date the stocks become
delinquent. SDHTEC
Notice of the sale, with a copy of the resolution, shall be sent to every delinquent
stockholder either personally, by registered mail, or through other means provided in the
bylaws. The same shall be published once a week for two (2) consecutive weeks in a
newspaper of general circulation in the province or city where the principal office of
the corporation is located.
Unless the delinquent stockholder pays to the corporation, on or before the date
specified for the sale of the delinquent stock, the balance due on the former’s subscription,
plus accrued interest, costs of advertisement and expenses of sale, or unless the board of
directors otherwise orders, said delinquent stock shall be sold at a public auction to such
bidder who shall offer to pay the full amount of the balance on the subscription together with
accrued interest, costs of advertisement and expenses of sale, for the smallest number of
shares or fraction of a share. The stock so purchased shall be transferred to such
purchaser in the books of the corporation and a certificate for such stock shall be issued in
the purchaser’s favor. The remaining shares, if any, shall be credited in favor of the
delinquent stockholder who shall likewise be entitled to the issuance of a certificate of stock
covering such shares.
Should there be no bidder at the public auction who offers to pay the full amount of
the balance on the subscription together with accrued interest, costs of advertisement, and
expenses of sale, for the smallest number of shares or fraction of a share, the
corporation may, subject to the provisions of this Code, bid for the same, and the total

VGDLaw Page 28
amount due shall be credited as fully paid in the books of the corporation. Title to all the
shares of stock covered by the subscription shall be vested in the corporation as treasury
shares and may be disposed of by said corporation in accordance with the provisions of
this Code.

SEC. 68. When Sale May be Questioned. — No action to recover delinquent stock
sold can be sustained upon the ground of irregularity or defect in the notice of sale, or in the
sale itself of the delinquent stock, unless the party seeking to maintain such action first pays
or tenders to the party holding the stock the sum for which the same was sold, with interest
from the date of sale at the legal rate. No such action shall be maintained unless a
complaint is filed within six (6) months from the date of sale.

SEC. 69. Court Action to Recover Unpaid Subscription . — Nothing in this Code shall
prevent the corporation from collecting through court action, the amount due on any unpaid
subscription, with accrued interest, costs and expenses.

SEC. 70. Effect of Delinquency. — No delinquent stock shall be voted for, be entitled
to vote, or be represented at any stockholder’s meeting, nor shall the holder thereof be
entitled to any of the rights of a stockholder except the right to dividends in accordance with
the provisions of this Code, until and unless payment is made by the holder of such
delinquent stock for the amount due on the subscription with accrued interest, and the costs
and expenses of advertisement, if any.

SEC. 71. Rights of Unpaid Shares, Nondelinquent. — Holders of subscribed shares

not fully paid which are not delinquent shall have all the rights of a stockholder.

SEC. 72. Lost or Destroyed Certificates. — The following procedure shall be

followed by a corporation in issuing new certificates of stock in lieu of those which have
been lost, stolen or destroyed:
(a)  The registered owner of a certificate of stock in a corporation or such person’s
legal representative shall file with the corporation an affidavit in triplicate setting forth, if
possible, the circumstances as to how the certificate was lost, stolen or destroyed, the
number of shares represented by such certificate, the serial number of the certificate and
the name of the corporation which issued the same. The owner of such certificate of stock
shall also submit such other information and evidence as may be deemed necessary; and
(b)  After verifying the affidavit and other information and evidence with the books of
the corporation, the corporation shall publish a notice in a newspaper of general circulation
in the place where the corporation has its principal office, once a week for three (3)
consecutive weeks at the expense of the registered owner of the certificate of stock which
has been lost, stolen or destroyed. The notice shall state the name of the corporation, the
name of the registered owner, the serial number of the certificate, the number of shares
represented by such certificate, and shall state that after the expiration of one (1) year from
the date of the last publication, if no contest has been presented to the corporation
regarding the certificate of stock, the right to make such contest shall be barred and
the corporation shall cancel the lost, destroyed or stolen certificate of stock in its books. In
lieu thereof, the corporation shall issue a new certificate of stock, unless the registered
owner files a bond or other security as may be required, effective for a period of one (1)
year, for such amount and in such form and with such sureties as may be satisfactory to the
board of directors, in which case a new certificate may be issued even before the expiration
of the one (1) year period provided herein. If a contest has been presented to the
corporation or if an action is pending in court regarding the ownership of the certificate of
stock which has been lost, stolen or destroyed, the issuance of the new certificate of stock
in lieu thereof shall be suspended until the court renders a final decision regarding the
ownership of the certificate of stock which has been lost, stolen or destroyed.

VGDLaw Page 29
   Except in case of fraud, bad faith, or negligence on the part of the corporation and
its officers, no action may be brought against any corporation which shall have issued
certificate of stock in lieu of those lost, stolen or destroyed pursuant to the procedure
above-described.

TITLE VIII
CORPORATE BOOKS AND RECORDS

SEC. 73. Books to be Kept; Stock Transfer Agent. — Every corporation shall keep

and carefully preserve at its principal office all information relating to the corporation
including, but not limited to:
(a)  The articles of incorporation and bylaws of the corporation and all their
amendments;
(b)  The current ownership structure and voting rights of the corporation,
including lists of stockholders or members, group structures, intra-group relations,
ownership data, and beneficial ownership;
(c)  The names and addresses of all the members of the board of directors or
trustees and the executive officers;
(d)  A record of all business transactions;
(e)  A record of the resolutions of the board of directors or trustees and of
the stockholders or members;
(f)  Copies of the latest reportorial requirements submitted to the
Commission; and
(g)  The minutes of all meetings of stockholders or members, or of the board of
directors or trustees. Such minutes shall set forth in detail, among others; the time and
place of the meeting held, how it was authorized, the notice given, the agenda therefor,
whether the meeting was regular or special, its object if special, those present and absent,
and every act done or ordered done at the meeting. Upon the demand of a director, trustee,
stockholder or member, the time when any director, trustee, stockholder or member entered
or left the meeting must be noted in the minutes; and on a similar demand, the yeas and
nays must be taken on any motion or proposition, and a record thereof carefully made. The
protest of a director, trustee, stockholder or member on any action or proposed action must
be recorded in full upon their demand.
[The records of all business transactions of the corporation and the minutes of any
meetings] Corporate records, regardless of the form in which they are stored, shall be
open to inspection by any director, trustee, stockholder or member of the corporation in
person or by a representative at reasonable hours on business days, and [he may] a
demand in writing may be made by such director, trustee or stockholder at their
expense, for copies of such records or excerpts from said records. The inspecting or
reproducing party shall remain bound by confidentiality rules under prevailing laws,
such as the rules on trade secrets or processes under Republic Act No. 8293,
otherwise known as the “Intellectual Property Code of the Philippines,” as amended,
Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012,” Republic
Act No. 8799, otherwise known as “The Securities Regulation Code,” and the Rules of
Court.
A requesting party who is not a stockholder or member of record, or is a
competitor, director, officer, controlling stockholder or otherwise represents the
interests of a competitor shall have no right to inspect or demand reproduction of
corporate records.

VGDLaw Page 30
 Any stockholder who shall abuse the rights granted under this section shall
be penalized under Section 158 of this Code, without prejudice to the provisions
of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the
Philippines,” as amended, and Republic Act No. 10173, otherwise known as the “Data
Privacy Act of 2012”.
Any officer or agent of the corporation who shall refuse to allow [any director,
trustees, stockholder or member of the corporation to examine and copy excerpts from its
records or minutes] the inspection and/or reproduction of records in accordance with
the provisions of this Code shall be liable to such director, trustee, stockholder or member
for damages, and in addition, shall be guilty of an offense which shall be punishable under
Section 161 of this Code: Provided, That if such refusal is made pursuant to a resolution or
order of the board of directors or trustees, the liability under this section for such action
shall be imposed upon the directors or trustees who voted for such refusal: Provided,
further, That it shall be a defense to any action under this section that the person
demanding to examine and copy excerpts from the corporation’s records and minutes has
improperly used any information secured through any prior examination of the records or
minutes of such corporation or of any other corporation, or was not acting in good faith or
for a legitimate purpose in making the demand to examine or reproduce corporate
records, or is a competitor, director, officer, controlling stockholder or otherwise
represents the interests of a competitor.
If the corporation denies or does not act on a demand for inspection and/or
reproduction, the aggrieved party may report such denial or inaction to the
Commission. Within five (5) days from receipt of such report, the Commission shall
conduct a summary investigation and issue an order directing the inspection or
reproduction of the requested records.
Stock corporations must also keep a stock and transfer book, which shall contain a
record of all stocks in the names of the stockholders alphabetically arranged; the
installments paid and unpaid on all stocks for which subscription has been made, and the
date of payment of any installment; a statement of every alienation, sale or transfer of stock
made, the date thereof, by and to whom made; and such other entries as the bylaws may
prescribe. The stock and transfer book shall be kept in the principal office of
the corporation or in the office of its stock transfer agent and shall be open for inspection by
any director or stockholder of the corporation at reasonable hours on business days.
A stock transfer agent or one engaged principally in the business of registering
transfers of stocks in behalf of a stock corporation shall be allowed to operate in the
Philippines upon securing a license from the Commission and the payment of a fee to be
fixed by the Commission, which shall be renewable annually: Provided, That a
stock corporation is not precluded from performing or making transfers of its own stocks, in
which case all the rules and regulations imposed on stock transfer agents, except the
payment of a license fee herein provided, shall be applicable:  Provided, further, That the
Commission may require stock corporations which transfer and/or trade stocks in
secondary markets to have an independent transfer agent.

SEC. 74. Right to Financial Statements. — A corporation shall furnish a

stockholder or member, within ten (10) days from receipt of their written request, its most
recent financial statement, in the form and substance of the financial reporting
required by the Commission [which shall include a balance sheet as of the end of the last
taxable year and a profit or loss statement for said taxable year, showing in reasonable
details its assets and liabilities and the results of its operations].
At the regular meeting of stockholders or members, the board of directors or
trustees shall present to such stockholders or members a financial report of the operations
of the corporation for the preceding year, which shall include financial statements, duly

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signed and certified in accordance with this Code [by an independent certified public
accountant], and the rules the Commission may prescribe.
However, if the [paid capital] total assets or total liabilities of the corporation are
less than Six hundred thousand pesos (P600,000.00), or such other amount as may be
determined appropriate by the Department of Finance, the financial statements may be
certified under oath by the treasurer and the president [or any responsible officer of the
corporation].

TITLE IX
MERGER AND CONSOLIDATION

SEC. 75. Plan of Merger or Consolidation. — Two (2) or more corporations may
merge into a single corporation which shall be one of the constituent corporations or may
consolidate into a new single corporation which shall be the consolidated corporation.
The board of directors or trustees of each corporation, party to the merger or
consolidation, shall approve a plan of merger or consolidation setting forth the following:
(a)  The names of the corporations proposing to merge or consolidate, hereinafter
referred to as the constituent corporations;
(b)  The terms of the merger or consolidation and the mode of carrying the same
into effect;
(c)  A statement of the changes, if any, in the articles of incorporation of the
surviving corporation in case of merger; and, in case of consolidation, all the statements
required to be set forth in the articles of incorporation for corporations organized under
this Code; and
(d)  Such other provisions with respect to the proposed merger or consolidation as
are deemed necessary or desirable.

SEC. 76. Stockholders’ or Members’ Approval. — Upon approval by a majority vote

of each of the board of directors or trustees of the constituent corporations of the plan of
merger or consolidation, the same shall be submitted for approval by the stockholders or
members of each of such corporations at separate corporate meetings duly called for the
purpose. Notice of such meetings shall be given to all stockholders or members of the
respective corporations in the same manner as giving notice of regular or special
meetings under Section 49 of this Code. The notice shall state the purpose of the
meeting and include a copy or a summary of the plan of merger or consolidation.
The affirmative vote of stockholders representing at least two-thirds (2/3) of the
outstanding capital stock of each corporation in the case of stock corporations or at least
two-thirds (2/3) of the members in the case of nonstock corporations shall be necessary for
the approval of such plan. Any dissenting stockholder may exercise the right of appraisal in
accordance with this Code: Provided, That if after the approval by the stockholders of such
plan, the board of directors decides to abandon the plan, the right of appraisal shall be
extinguished.
Any amendment to the plan of merger or consolidation may be made: Provided,
That such amendment is approved by a majority vote of the respective boards of directors
or trustees of all the constituent corporations and ratified by the affirmative vote of
stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-
thirds (2/3) of the members of each of the constituent corporations. Such plan, together with
any amendment, shall be considered as the agreement of merger or consolidation.

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 SEC. 77. Articles of Merger or Consolidation. — After the approval by the
stockholders or members as required by the preceding section, articles of merger or articles
of consolidation shall be executed by each of the constituent corporations, to be signed by
the president or vice president and certified by the secretary or assistant secretary of
each corporation setting forth:
(a)  The plan of the merger or the plan of consolidation;
(b)  As to stock corporations, the number of shares outstanding, or in the case of
nonstock corporations, the number of members;
(c)  As to each corporation, the number of shares or members voting for or against
such plan, respectively;
(d)  The carrying amounts and fair values of the assets and liabilities of the
respective companies as of the agreed cut-off date;
(e)  The method to be used in the merger or consolidation of accounts of the
companies;
(f)  The provisional or pro forma values, as merged or consolidated, using
the accounting method; and
(g)  Such other information as may be prescribed by the Commission.

SEC. 78. Effectivity of Merger or Consolidation. — The articles of merger or of

consolidation, signed and certified as required by this Code, shall be submitted to the
Commission [in quadruplicate] for its approval: Provided, That in the case of merger or
consolidation of banks or banking institutions, loan associations, trust companies, insurance
companies, public utilities, educational institutions, and other special corporations governed
by special laws, the favorable recommendation of the appropriate government agency shall
first be obtained. If the Commission is satisfied that the merger or consolidation of the
corporations concerned is consistent with the provisions of this Code and existing laws, it
shall issue a certificate approving the articles and plan of merger or of consolidation, at
which time the merger or consolidation shall be effective.
If, upon investigation, the Commission has reason to believe that the proposed
merger or consolidation is contrary to or inconsistent with the provisions of this Code or
existing laws, it shall set a hearing to give the corporations concerned the opportunity to be
heard. Written notice of the date, time, and place of hearing shall be given to each
constituent corporation at least two (2) weeks before said hearing. The Commission shall
thereafter proceed as provided in this Code.

SEC. 79. Effects of Merger or Consolidation. — The merger or consolidation shall

have the following effects:
(a) The constituent corporations shall become a single corporation which, in case
of merger, shall be the surviving corporation designated in the plan of merger; and, in case
of consolidation, shall be the consolidated corporation designated in the plan of
consolidation;
(b) The separate existence of the constituent corporations shall cease, except that
of the surviving or the consolidated corporation;
(c) The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities, and powers and shall be subject to all the duties and liabilities of
a corporation organized under this Code;
(d) The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and franchises of each constituent corporation; and all real or
personal property, all receivables due on whatever account, including subscriptions to

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shares and other choses in action, and every other interest of, belonging to, or due to each
constituent corporation, shall be deemed transferred to and vested in such surviving or
consolidated corporation without further act or deed; and
(e) The surviving or consolidated corporation shall be responsible for all the
liabilities and obligations of each constituent corporation as though such surviving or
consolidated corporation had itself incurred such liabilities or obligations; and any pending
claim, action or proceeding brought by or against any constituent corporation may be
prosecuted by or against the surviving or consolidated corporation. The rights of creditors or
liens upon the property of such constituent corporations shall not be impaired by the merger
or consolidation.

TITLE X
APPRAISAL RIGHT

SEC. 80. When the Right of Appraisal May Be Exercised. — Any stockholder of
a corporation shall have the right to dissent and demand payment of the fair value of the
shares in the following instances:
(a)  In case an amendment to the articles of incorporation has the effect of
changing or restricting the rights of any stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence;
(b)  In case of sale, lease, exchange, transfer, mortgage, pledge or other
disposition of all or substantially all of the corporate property and assets as provided in
this Code;
(c)  In case of merger or consolidation; and
(d)  In case of investment of corporate funds for any purpose other than the
primary purpose of the corporation.

SEC. 81. How Right is Exercised. — The dissenting stockholder who votes
against a proposed corporate action may exercise the right of appraisal by making a
written demand on the corporation for the payment of the fair value of shares held
within thirty (30) days from the date on which the vote was taken:  Provided, That failure to
make the demand within such period shall be deemed a waiver of the appraisal right. If the
proposed corporate action is implemented, the corporation shall pay the stockholder, upon
surrender of the certificate or certificates of stock representing the stockholder’s shares, the
fair value thereof as of the day before the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
If, within sixty (60) days from the approval of the corporate action by the
stockholders, the withdrawing stockholder and the corporation cannot agree on the fair
value of the shares, it shall be determined and appraised by three (3) disinterested persons,
one of whom shall be named by the stockholder, another by the corporation, and the third
by the two (2) thus chosen. The findings of the majority of the appraisers shall be final, and
their award shall be paid by the corporation within thirty (30) days after such award is
made:  Provided, That no payment shall be made to any dissenting stockholder unless
the corporation has unrestricted retained earnings in its books to cover such payment: 
Provided, further, That upon payment by the corporation of the agreed or awarded price,
the stockholder shall forthwith transfer the shares to the corporation.

SEC. 82. Effect of Demand and Termination of Right . — From the time of demand
for payment of the fair value of a stockholder’s shares until either the abandonment of the
corporate action involved or the purchase of the said shares by the corporation, all rights

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accruing to such shares, including voting and dividend rights, shall be suspended in
accordance with the provisions of this Code, except the right of such stockholder to receive
payment of the fair value thereof: Provided, That if the dissenting stockholder is not paid the
value of the said shares within thirty (30) days after the award, the voting and dividend
rights shall immediately be restored.

SEC. 83. When Right to Payment Ceases. — No demand for payment under this
Title may be withdrawn unless the corporation consents thereto. If, however, such demand
for payment is withdrawn with the consent of the corporation, or if the proposed corporate
action is abandoned or rescinded by the corporation or disapproved by the Commission
where such approval is necessary, or if the Commission determines that such stockholder
is not entitled to the appraisal right, then the right of the stockholder to be paid the fair value
of the shares shall cease, the status as the stockholder shall be restored, and all dividend
distributions which would have accrued on the shares shall be paid to the stockholder.

SEC. 84. Who Bears Costs of Appraisal . — The costs and expenses of appraisal
shall be borne by the corporation, unless the fair value ascertained by the appraisers is
approximately the same as the price which the corporation may have offered to pay the
stockholder, in which case they shall be borne by the latter. In the case of an action to
recover such fair value, all cost and expenses shall be assessed against the corporation,
unless the refusal of the stockholder to receive payment was unjustified.

SEC. 85. Notation on Certificates; Rights of Transferee. — Within ten (10) days
after demanding payment for shares held, a dissenting stockholder shall submit the
certificates of stock representing the shares to the corporation for notation that such shares
are dissenting shares. Failure to do so shall, at the option of the corporation, terminate the
rights under this Title. If shares represented by the certificates bearing such notation are
transferred, and the certificates consequently cancelled, the rights of the transferor as a
dissenting stockholder under this Title shall cease and the transferee shall have all the
rights of a regular stockholder; and all dividend distributions which would have accrued on
such shares shall be paid to the transferee.

TITLE XI
NONSTOCK CORPORATIONS

SEC. 86. Definition. — For purposes of this Code and subject to its provisions on

dissolution, a nonstock corporation is one where no part of its income is distributable as
dividends to its members, trustees, or officers: Provided, That any profit which a nonstock
corporation may obtain incidental to its operations shall, whenever necessary or proper, be
used for the furtherance of the purpose or purposes for which the corporation was
organized, subject to the provisions of this Title.
The provisions governing stock corporations, when pertinent, shall be applicable to
nonstock corporations, except as may be covered by specific provisions of this Title.

SEC. 87. Purposes. — Nonstock corporations may be formed or organized for

charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social,
civic service, or similar purposes, like trade, industry, agricultural and like chambers, or any
combination thereof, subject to the special provisions of this Title governing particular
classes of nonstock corporations.

CHAPTER I
MEMBERS

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 SEC. 88. Right to Vote. — The right of the members of any class or classes to vote
may be limited, broadened, or denied to the extent specified in the articles of incorporation
or the bylaws. Unless so limited, broadened, or denied, each member, regardless of class,
shall be entitled to one (1) vote.
Unless otherwise provided in the articles of incorporation or the bylaws, a member
may vote by proxy, in accordance with the provisions of this Code. The bylaws may
likewise authorize voting through remote communication and/or in absentia.
[Voting by mail or other similar means by members of non-stock corporations may
be authorized by the by-laws of non-stock corporations with the approval of, and under
such conditions which may be prescribed by, the Securities and Exchange Commission.]

SEC. 89. Nontransferability of Membership. — Membership in a nonstock

corporation and all rights arising therefrom are personal and nontransferable, unless the
articles of incorporation or the bylaws otherwise provide.

SEC. 90. Termination of Membership. — Membership shall be terminated in the

manner and for the causes provided in the articles of incorporation or the bylaws.
Termination of membership shall extinguish all rights of a member in the corporation or in
its property, unless otherwise provided in the articles of incorporation or the bylaws.

CHAPTER II
TRUSTEES AND OFFICERS
SEC. 91. Election and Term of Trustees. — The number of trustees shall be fixed
in the articles of incorporation or bylaws which may or may not be more than fifteen (15).
[Unless otherwise provided in the articles of incorporation or the bylaws, the board of
trustees of non-stock corporation … shall, as soon as organized, so classify themselves
that the term of office of one-third (1/3) of their number shall expire every year; and the
subsequent elections of trustees comprising one-third (1/3) of the board of trustees shall be
held annually and trustees so elected shall have a term of three (3) years] They shall hold
office for not more than three (3) years until their successors are elected and
qualified. Trustees [thereafter] elected to fill vacancies occurring before the expiration of a
particular term shall hold office only for the unexpired period.
Except with respect to independent trustees of nonstock corporations vested
with public interest, only a member of the corporation shall be elected as trustee.
Unless otherwise provided in the articles of incorporation or the bylaws, the
members may directly elect officers of a nonstock corporation.

SEC. 92. List of Members and Proxies, Place of Meetings. — The corporation
shall, at all times, keep a list of its members and their proxies in the form the
Commission may require. The list shall be updated to reflect the members and
proxies of record twenty (20) days prior to any scheduled election.
The bylaws may provide that the members of a nonstock corporation may hold their
regular or special meetings at any place even outside the place where the principal office of
the corporation is located: Provided, That proper notice is sent to all members indicating the
date, time and place of the meeting:  Provided, further, That the place of meeting shall be
within Philippine territory.

CHAPTER III
DISTRIBUTION OF ASSETS IN NONSTOCK CORPORATIONS

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 SEC. 93. Rules of Distribution. — The assets of a nonstock corporation under-
going the process of dissolution for reasons other than those set forth in Section 139
of this Code, shall be applied and distributed as follows:
(a)  All liabilities and obligations of the corporation shall be paid, satisfied and
discharged, or adequate provision shall be made therefor;
(b)  Assets held by the corporation upon a condition requiring return, transfer or
conveyance, and which condition occurs by reason of the dissolution, shall be returned,
transferred or conveyed in accordance with such requirements;
(c) Assets received and held by the corporation subject to limitations permitting
their use only for charitable, religious, benevolent, educational or similar purposes, but not
held upon a condition requiring return, transfer or conveyance by reason of the dissolution,
shall be transferred or conveyed to one (1) or more corporations, societies or organizations
engaged in activities in the Philippines substantially similar to those of the
dissolving corporation according to a plan of distribution adopted pursuant to this Chapter;
(d)  Assets other than those mentioned in the preceding paragraphs, if any, shall
be distributed in accordance with the provisions of the articles of incorporation or the
bylaws, to the extent that the articles of incorporation or the bylaws determine the
distributive rights of members, or any class or classes of members, or provide for
distribution; and
(e) In any other case, assets may be distributed to such persons, societies,
organizations or corporations, whether or not organized for profit, as may be specified in a
plan of distribution adopted pursuant to this Chapter.

SEC. 94. Plan of Distribution of Assets. — A plan providing for the distribution of
assets, consistent with the provisions of this Title, may be adopted by a
nonstock corporation in the process of dissolution in the following manner:
(a)  The board of trustees shall, by majority vote, adopt a resolution recommending
a plan of distribution and directing the submission thereof to a vote at a regular or special
meeting of members having voting rights;
(b)  Each member entitled to vote shall be given a written notice setting forth the
proposed plan of distribution or a summary thereof and the date, time and place of such
meeting within the time and in the manner provided in this Code for the giving of notice of
meetings; and
(c)  Such plan of distribution shall be adopted upon approval of at least two-thirds
(2/3) of the members having voting rights present or represented by proxy at such meeting.

TITLE XII
CLOSE CORPORATIONS

SEC. 95. Definition and Applicability of Title. — A close corporation, within the

meaning of this Code, is one whose articles of incorporation provides that: (a) all
the corporation’s issued stock of all classes, exclusive of treasury shares, shall be held of
record by not more than a specified number of persons, not exceeding twenty (20); (b) all
the issued stock of all classes shall be subject to one (1) or more specified restrictions on
transfer permitted by this Title; and (c) the corporation shall not list in any stock exchange
or make any public offering of its stocks of any class. Notwithstanding the foregoing,
a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of its
voting stock or voting rights is owned or controlled by another corporation which is not a
close corporation within the meaning of this Code.

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 Any corporation may be incorporated as a close corporation, except mining or oil
companies, stock exchanges, banks, insurance companies, public utilities, educational
institutions and corporations declared to be vested with public interest in accordance with
the provisions of this Code.
The provisions of this Title shall primarily govern close corporations: Provided, That
other Titles in this Code shall apply suppletorily, except as otherwise provided under this
Title.

SEC. 96. Articles of Incorporation. — The articles of incorporation of a close

corporation may provide for:
(a)  A classification of shares or rights, the qualifications for owning or holding the
same, and restrictions on their transfers, subject to the provisions of the following section;
(b)  A classification of directors into one (1) or more classes, each of whom may
be voted for and elected solely by a particular class of stock; and
(c)  Greater quorum or voting requirements in meetings of stockholders or
directors than those provided in this Code.
The articles of incorporation of a close corporation may provide that the business of
the corporation shall be managed by the stockholders of the corporation rather than by a
board of directors. So long as this provision continues in effect, no meeting of stockholders
need be called to elect directors: Provided, That the stockholders of the corporation shall
be deemed to be directors for the purpose of applying the provisions of this Code, unless
the context clearly requires otherwise: Provided, further, That the stockholders of
the corporation shall be subject to all liabilities of directors.
The articles of incorporation may likewise provide that all officers or employees or
that specified officers or employees shall be elected or appointed by the stockholders,
instead of by the board of directors.

SEC. 97. Validity of Restrictions on Transfer of Shares. — Restrictions on the right

to transfer shares must appear in the articles of incorporation, in the bylaws, as well as in
the certificate of stock; otherwise, the same shall not be binding on any purchaser in good
faith. Said restrictions shall not be more onerous than granting the existing stockholders or
the corporation the option to purchase the shares of the transferring stockholder with such
reasonable terms, conditions or period stated. If, upon the expiration of said period, the
existing stockholders or the corporation fails to exercise the option to purchase, the
transferring stockholder may sell their shares to any third person.

SEC. 98. Effects of Issuance or Transfer of Stock in Breach of Qualifying Conditions. —

(a)  If a stock of a close corporation is issued or transferred to any person who is
not eligible to be a holder thereof under any provision of the articles of incorporation, and if
the certificate for such stock conspicuously shows the qualifications of the persons entitled
to be holders of record thereof, such person is conclusively presumed to have notice of the
fact of the ineligibility to be a stockholder.
(b)  If the articles of incorporation of a close corporation states the number of
persons, not exceeding twenty (20), who are entitled to be stockholders of record, and if the
certificate for such stock conspicuously states such number, and the issuance or transfer of
stock to any person would cause the stock to be held by more than such number of
persons, the person to whom such stock is issued or transferred is conclusively presumed
to have notice of this fact.
(c)  If a stock certificate of a close corporation conspicuously shows a restriction
on transfer of the corporation’s stock and the transferee acquires the stock in violation of

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such restriction, the transferee is conclusively presumed to have notice of the fact that the
stock was acquired in violation of the restriction.
(d)  Whenever a person to whom stock of a close corporation has been issued or
transferred has or is conclusively presumed under this section to have notice of: (1) the
person’s ineligibility to be a stockholder of the corporation; or (2) that the transfer of stock
would cause the stock of the corporation to be held by more than the number of persons
permitted under its articles of incorporation; or (3) that the transfer violates a restriction on
transfer of stock, the corporation may, at its option, refuse to register the transfer in the
name of the transferee.
(e)  The provisions of subsection (d) shall not be applicable if the transfer of stock,
though contrary to subsections (a), (b) or (c), has been consented to by all the stockholders
of the close corporation, or if the close corporation has amended its articles of incorporation
in accordance with this Title.
(f)  The term “transfer,” as used in this section, is not limited to a transfer for value.
(g)  The provisions of this section shall not impair any right which the transferee
may have to either rescind the transfer or recover the stock under any express or implied
warranty.

SEC. 99. Agreements by Stockholders. —

(a)  Agreements duly signed and executed by and among all stockholders before
the formation and organization of a close corporation shall survive the incorporation and
shall continue to be valid and binding between such stockholders, if such be their intent, to
the extent that such agreements are consistent with the articles of incorporation,
irrespective of where the provisions of such agreements are contained, except those
required by this Title to be embodied in said articles of incorporation.
(b)  A written agreement signed by two (2) or more stockholders may provide that
in exercising any voting right, the shares held by them shall be voted as provided or as
agreed, or in accordance with a procedure agreed upon by them.
(c)  No provision in a written agreement signed by the stockholders, relating to any
phase of corporate affairs, shall be invalidated between the parties on the ground that its
effect is to make them partners among themselves.
(d)  A written agreement among some or all of the stockholders in a
close corporation shall not be invalidated on the ground that it relates to the conduct of the
business and affairs of the corporation as to restrict or interfere with the discretion or
powers of the board of directors: Provided, That such agreement shall impose on the
stockholders who are parties thereto the liabilities for managerial acts imposed on directors
by this Code.
(e)  Stockholders actively engaged in the management or operation of the
business and affairs of a close corporation shall be held to strict fiduciary duties to each
other and among themselves. The stockholders shall be personally liable for corporate torts
unless the corporation has obtained reasonably adequate liability insurance.

SEC. 100. When a Board Meeting is Unnecessary or Improperly Held . — Unless the
bylaws provide otherwise, any action taken by the directors of a close corporation without a
meeting called properly and with due notice shall nevertheless be deemed valid if:
(a)  Before or after such action is taken, a written consent thereto is signed by all
the directors; or
(b)  All the stockholders have actual or implied knowledge of the action and make
no prompt objection in writing; or

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 (c)  The directors are accustomed to take informal action with the express or
implied acquiescence of all the stockholders; or
(d)  All the directors have express or implied knowledge of the action in question
and none of them makes a prompt objection in writing.
An action within the corporate powers taken at a meeting held without proper call or
notice is deemed ratified by a director who failed to attend, unless after having knowledge
thereof, the director promptly files his written objection with the secretary of the corporation.

SEC. 101. Preemptive Right in Close Corporations. — The preemptive right of stock-
holders in close corporations shall extend to all stock to be issued, including reissuance of
treasury shares, whether for money, property or personal services, or in payment of
corporate debts, unless the articles of incorporation provide otherwise.

SEC. 102. Amendment of Articles of Incorporation. — Any amendment to the articles

of incorporation which seeks to delete or remove any provision required by this Title or to
reduce a quorum or voting requirement stated in said articles of incorporation shall [not be
valid or effective unless approved by] require the affirmative vote of at least two-thirds (2/3)
of the outstanding capital stock, whether with or without voting rights, or of such greater
proportion of shares as may be specifically provided in the articles of incorporation for
amending, deleting or removing any of the aforesaid provisions, at a meeting duly called for
the purpose.

SEC. 103. Deadlocks. — Notwithstanding any contrary provision in the close

corporation’s articles of incorporation, bylaws, or stockholders’ agreement, if the directors or
stockholders are so divided on the management of the corporation’s business and affairs
that the votes required for a corporate action cannot be obtained, with the consequence
that the business and affairs of the corporation can no longer be conducted to the
advantage of the stockholders generally, the Commission, upon written petition by any
stockholder, shall have the power to arbitrate the dispute. In the exercise of such power, the
Commission shall have authority to make appropriate orders, such as: (a) cancelling or
altering any provision contained in the articles of incorporation, bylaws, or any stockholders’
agreement; (b) cancelling, altering or enjoining a resolution or act of the corporation or its
board of directors, stockholders, or officers; (c) directing or prohibiting any act of
the corporation or its board of directors, stockholders, officers, or other persons party to the
action; (d) requiring the purchase at their fair value of shares of any stockholder, either by
the corporation regardless of the availability of unrestricted retained earnings in its books,
or by the other stockholders; (e) appointing a provisional director; (f) dissolving
the corporation; or (g) granting such other relief as the circumstances may warrant.
A provisional director shall be an impartial person who is neither a stockholder nor a
creditor of the corporation or any of its subsidiaries or affiliates, and whose further
qualifications, if any, may be determined by the Commission. A provisional director is not a
receiver of the corporation and does not have the title and powers of a custodian or
receiver. A provisional director shall have all the rights and powers of a duly elected
director, including the right to be notified of and to vote at meetings of directors until
removed by order of the Commission or by all the stockholders. The compensation of the
provisional director shall be determined by agreement between such director and
the corporation, subject to approval of the Commission, which may fix the compensation
absent an agreement or in the event of disagreement between the provisional director and
the corporation.

SEC. 104. Withdrawal of Stockholder or Dissolution of Corporation. — In addition

and without prejudice to other rights and remedies available under this Title, any
stockholder of a close corporation may, for any reason, compel the corporation to purchase

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shares held at fair value, which shall not be less than the par or issued value, when
the corporation has sufficient assets in its books to cover its debts and liabilities exclusive of
capital stock: Provided, That any stockholder of a close corporation may, by written petition
to the Commission, compel the dissolution of such corporation whenever any acts of the
directors, officers, or those in control of the corporation are illegal, fraudulent, dishonest,
oppressive or unfairly prejudicial to the corporation or any stockholder, or whenever
corporate assets are being misapplied or wasted.

TITLE XIII
SPECIAL CORPORATIONS

CHAPTER I
EDUCATIONAL CORPORATIONS
SEC. 105. Incorporation. — Educational corporations shall be governed by special
laws and by the general provisions of this Code.

[SEC. 107. Pre-requisites to incorporation. — Except upon favorable recommend-

ation of the Ministry of Education and Culture, the Securities and Exchange Commission
shall not accept or approve the articles of incorporation and by-laws of any educational
institution.]

SEC. 106. Board of Trustees. — Trustees of educational institutions organized as

nonstock corporations shall not be less than five (5) nor more than fifteen (15): Provided,
That the number of trustees shall be in multiples of five (5).
Unless otherwise provided in the articles of incorporation or bylaws, the board of
trustees of incorporated schools, colleges, or other institutions of learning shall, as soon as
organized, so classify themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies, occurring before the
expiration of a particular term, shall hold office only for the unexpired period. Trustees
elected thereafter to fill vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the transaction of business.
The powers and authority of trustees shall be defined in the bylaws.
For institutions organized as stock corporations, the number and term of directors
shall be governed by the provisions on stock corporations.

CHAPTER II
RELIGIOUS CORPORATIONS
SEC. 107. Classes of Religious Corporations. — Religious corporations may be
incorporated by one (1) or more persons. Such corporations may be classified into
corporations sole and religious societies.
Religious corporations shall be governed by this Chapter and by the general
provisions on nonstock corporations insofar as applicable.
SEC. 108. Corporation Sole. — For the purpose of administering and managing, as
trustee, the affairs, property and temporalities of any religious denomination, sect or church,
a corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or
other presiding elder of such religious denomination, sect or church.

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 SEC. 109. Articles of Incorporation. — In order to become a corporation sole, the
chief archbishop, bishop, priest, minister, rabbi, or presiding elder of any religious
denomination, sect or church must file with the Commission articles of incorporation setting
forth the following:
(a)  That the applicant chief archbishop, bishop, priest, minister, rabbi, or presiding
elder represents the religious denomination, sect or church which desires to become
a corporation sole;
(b)  That the rules, regulations and discipline of the religious denomination, sect or
church are consistent with becoming a corporation sole and do not forbid it;
(c) That such chief archbishop, bishop, priest, minister, rabbi, or presiding elder is
charged with the administration of the temporalities and the management of the affairs,
estate and properties of the religious denomination, sect or church within the territorial
jurisdiction, so described succinctly in the articles of incorporation;
(d)  The manner by which any vacancy occurring in the office of chief archbishop,
bishop, priest, minister, rabbi, or presiding elder is required to be filled, according to the
rules, regulations or discipline of the religious denomination, sect or church; and
(e)  The place where the principal office of the corporation sole is to be established
and located, which place must be within the territory of the Philippines.
The articles of incorporation may include any other provision not contrary to law for
the regulation of the affairs of the corporation.

SEC. 110. Submission of the Articles of Incorporation. — The articles of incor-

poration must be verified, by affidavit or affirmation of the chief archbishop, bishop, priest,
minister, rabbi, or presiding elder, as the case may be, and accompanied by a copy of the
commission, certificate of election or letter of appointment of such chief archbishop, bishop,
priest, minister, rabbi, or presiding elder, duly certified to be correct by any notary public.
From and after filing with the Commission of the said articles of incorporation,
verified by affidavit or affirmation, and accompanied by the documents mentioned in the
preceding paragraph, such chief archbishop, bishop, priest, minister, rabbi, or presiding
elder shall become a corporation sole and all temporalities, estate and properties of the
religious denomination, sect or church theretofore administered or managed as such chief
archbishop, bishop, priest, minister, rabbi, or presiding elder shall be personally held in trust
as a corporation sole, for the use, purpose, exclusive benefit and on behalf of the religious
denomination, sect or church, including hospitals, schools, colleges, orphan asylums,
parsonages, and cemeteries thereof.

SEC. 111. Acquisition and Alienation of Property. — A corporation sole may

purchase and hold real estate and personal property for its church, charitable, benevolent,
or educational purposes, and may receive bequests or gifts for such purposes.
Such corporation may sell or mortgage real property held by it by obtaining an order for that
purpose from the Regional Trial Court of the province where the property is situated upon
proof that the notice of the application for leave to sell or mortgage has been made through
publication or as directed by the Court, and that it is in the interest of the corporation that
leave to sell or mortgage be granted. The application for leave to sell or mortgage must be
made by petition, duly verified, by the chief archbishop, bishop, priest, minister, rabbi, or
presiding elder acting as corporation sole, and may be opposed by any member of the
religious denomination, sect or church represented by the corporation sole: Provided, That
in cases where the rules, regulations, and discipline of the religious denomination, sect or
church, religious society, or order concerned represented by such corporation sole regulate
the method of acquiring, holding, selling, and mortgaging real estate and personal property,

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such rules, regulations and discipline shall govern, and the intervention of the courts shall
not be necessary.

SEC. 112. Filling of Vacancies. — The successors in office of any chief archbishop,
bishop, priest, minister, rabbi, or presiding elder in a corporation sole shall become
the corporation sole on their accession to office and shall be permitted to transact business
as such upon filing a copy of their commission, certificate of election, or letters of
appointment, duly certified by any notary public with the Commission.
During any vacancy in the office of chief archbishop, bishop, priest, minister, rabbi,
or presiding elder of any religious denomination, sect or church incorporated as
a corporation sole, the person or persons authorized by the rules, regulations or discipline
of the religious denomination, sect or church represented by the corporation sole to
administer the temporalities and manage the affairs, estate, and properties of
the corporation sole shall exercise all the powers and authority of the corporation sole
during such vacancy.

SEC. 113. Dissolution. — A corporation sole may be dissolved and its affairs settled
voluntarily by submitting to the Commission a verified declaration of dissolution, setting
forth:
(a) The name of the corporation;
(b) The reason for dissolution and winding up;
(c) The authorization for the dissolution of the corporation by the particular
religious denomination, sect or church; and
(d) The names and addresses of the persons who are to supervise the winding up
of the affairs of the corporation.
Upon approval of such declaration of dissolution by the Commission,
the corporation shall cease to carry on its operations except for the purpose of winding up
its affairs.

SEC. 114. Religious Societies. — Unless forbidden by competent authority, the

Constitution, pertinent rules, regulations, or discipline of the religious denomination, sect or
church of which it is a part, any religious society, religious order, diocese, or synod, or
district organization of any religious denomination, sect or church, may, upon written
consent and/or by an affirmative vote at a meeting called for the purpose of at least two-
thirds (2/3) of its membership, incorporate for the administration of its temporalities or for
the management of its affairs, properties, and estate by filing with the Commission, articles
of incorporation verified by the affidavit of the presiding elder, secretary, or clerk or other
member of such religious society or religious order, or diocese, synod, or district
organization of the religious denomination, sect or church, setting forth the following:
(a) That the religious society or religious order, or diocese, synod, or district
organization is a religious organization of a religious denomination, sect or church;
(b) That at least two-thirds (2/3) of its membership has given written consent or
has voted to incorporate, at a duly convened meeting of the body;
(c) That the incorporation of the religious society or religious order, or diocese,
synod, or district organization is not forbidden by competent authority or by the Constitution,
rules, regulations or discipline of the religious denomination, sect or church of which it forms
part;
(d) That the religious society or religious order, or diocese, synod, or district
organization desires to incorporate for the administration of its affairs, properties and estate;

VGDLaw Page 43
 (e) The place within the Philippines where the principal office of the corporation is
to be established and located; and
(f) The names, nationalities, and residence addresses of the trustees, not less
than five (5) nor more than fifteen (15), elected by the religious society or religious order, or
the diocese, synod, or district organization to serve for the first year or such other period as
may be prescribed by the laws of the religious society or religious order, or of the diocese,
synod, or district organization.

CHAPTER III
ONE PERSON CORPORATIONS

SEC. 115. Applicability of Provisions to One Person Corporations. — The

provisions of this Title shall primarily apply to One Person Corporations. Other
provisions of this Code apply suppletorily, except as otherwise provided in this Title.

SEC. 116. One Person Corporation. — A One Person Corporation is a

corporation with a single stockholder:  Provided, That only a natural person, trust, or
an estate may form a One Person Corporation.
Banks and quasi-banks, preneed, trust, insurance, public and publicly-listed
companies, and non-chartered government-owned-and-controlled corporations may
not incorporate as One Person Corporations: Provided, further, That a natural person
who is licensed to exercise a profession may not organize as a One
Person Corporation for the purpose of exercising such profession except as
otherwise provided under special laws.

SEC. 117. Minimum Capital Stock Not Required for One Person Corporation .
— A One Person Corporation shall not be required to have a minimum authorized
capital stock[,] except as otherwise provided by special law.

SEC. 118. Articles of Incorporation. — A One Person Corporation shall file

articles of incorporation in accordance with the requirements under Section 14 of
this Code. It shall likewise substantially contain the following:
(a) If the single stockholder is a trust or an estate, the name, nationality, and
residence of the trustee, administrator, executor, guardian, conservator, custodian,
or other person exercising fiduciary duties together with the proof of such authority
to act on behalf of the trust or estate; and
(b) Name, nationality, residence of the nominee and alternate nominee, and
the extent, coverage and limitation of the authority.

SEC. 119. Bylaws. — The One Person Corporation is not required to submit

and file corporate bylaws.

SEC. 120. Display of Corporate Name. — A One Person Corporation shall

indicate the letters “OPC” either below or at the end of its corporate name.

SEC. 121. Single Stockholder as Director, President . — The single stockholder

shall be the sole director and president of the One Person Corporation.

SEC. 122. Treasurer, Corporate Secretary, and Other Officers . — Within fifteen
(15) days from the issuance of its certificate of incorporation, the One Person
Corporation shall appoint a treasurer, corporate secretary, and other officers as it

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may deem necessary, and notify the Commission thereof within five (5) days from
appointment.
The single stockholder may not be appointed as the corporate secretary.
A single stockholder who is likewise the self-appointed treasurer of
the corporation shall give a bond to the Commission in such a sum as may be
required:  Provided, That the said stockholder/treasurer shall undertake in writing to
faithfully administer the One Person Corporation’s funds to be received as treasurer,
and to disburse and invest the same according to the articles of incorporation as
approved by the Commission. The bond shall be renewed every two (2) years or as
often as may be required.

SEC. 123. Special Functions of the Corporate Secretary. — In addition to the

functions designated by the One Person Corporation, the corporate secretary shall:
(a) Be responsible for maintaining the minutes book and/or records of
the corporation;
(b) Notify the nominee or alternate nominee of the death or incapacity of the
single stockholder, which notice shall be given no later than five (5) days from such
occurrence;
(c) Notify the Commission of the death of the single stockholder within five
(5) days from such occurrence and stating in such notice the names, residence
addresses, and contact details of all known legal heirs; and
(d) Call the nominee or alternate nominee and the known legal heirs to a
meeting and advise the legal heirs with regard to, among others, the election of a
new director, amendment of the articles of incorporation, and other ancillary and/or
consequential matters.

SEC. 124. Nominee and Alternate Nominee. — The single stockholder shall
designate a nominee and an alternate nominee who shall, in the event of the single
stockholder’s death or incapacity, take the place of the single stockholder as director
and shall manage the corporation’s affairs.
The articles of incorporation shall state the names, residence addresses and
contact details of the nominee and alternate nominee, as well as the extent and
limitations of their authority in managing the affairs of the One Person Corporation.
The written consent of the nominee and alternate nominee shall be attached to
the application for incorporation. Such consent may be withdrawn in writing any time
before the death or incapacity of the single stockholder.

SEC. 125. Term of Nominee and Alternate Nominee. — When the incapacity of
the single stockholder is temporary, the nominee shall sit as director and manage
the affairs of the One Person Corporation until the stockholder, by self
determination, regains the capacity to assume such duties.
In case of death or permanent incapacity of the single stockholder, the
nominee shall sit as director and manage the affairs of the One
Person Corporation until the legal heirs of the single stockholder have been lawfully
determined, and the heirs have designated one of them or have agreed that the
estate shall be the single stockholder of the One Person Corporation.
The alternate nominee shall sit as director and manage the One
Person Corporation in case of the nominee’s inability, incapacity, death, or refusal to
discharge the functions as director and manager of the corporation, and only for the
same term and under the same conditions applicable to the nominee.

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 SEC. 126. Change of Nominee or Alternate Nominee. — The single stockholder
may, at any time, change its (sic) nominee and alternate nominee by submitting to the
Commission the names of the new nominees and their corresponding written
consent. For this purpose, the articles of incorporation need not be amended.

SEC. 127. Minutes Book. — A One Person Corporation shall maintain a

minutes book which shall contain all actions, decisions, and resolutions taken by the
One Person Corporation.

SEC. 128. Records in Lieu of Meetings. — When action is needed on any

matter, it shall be sufficient to prepare a written resolution, signed and dated by the
single stockholder, and recorded in the minutes book of the One Person Corporation.
The date of recording in the minutes book shall be deemed to be the date of the
meeting for all purposes under this Code.

SEC. 129. Reportorial Requirements. — The One Person Corporation shall

submit the following within such period as the Commission may prescribe:
(a) Annual financial statements audited by an independent certified public
accountant: Provided, That if the total assets or total liabilities of the corporation are
less than Six hundred thousand pesos (P600,000.00), the financial statements shall
be certified under oath by the corporation’s treasurer and president;
(b) A report containing explanations or comments by the president on every
qualification, reservation, or adverse remark or disclaimer made by the auditor in the
latter’s report;
(c) A disclosure of all self-dealings and related party transactions entered
into between the One Person Corporation and the single stockholder; and
(d) Other reports as the Commission may require.

For purposes of this provision, the fiscal year of a One Person

Corporation shall be that set forth in its articles of incorporation or, in the absence
thereof, the calendar year.
The Commission may place the corporation under delinquent status should
the corporation fail to submit the reportorial requirements three (3) times,
consecutively or intermittently, within a period of five (5) years.

SEC. 130. Liability of Single Shareholder. — A sole shareholder claiming limited

liability has the burden of affirmatively showing that the corporation was adequately
financed.
Where the single stockholder cannot prove that the property of the One
Person Corporation is independent of the stockholder’s personal property, the
stockholder shall be jointly and severally liable for the debts and other liabilities of
the One Person Corporation.
The principles of piercing the corporate veil applies (sic) with equal force to
One Person Corporations as with other corporations.

SEC. 131. Conversion from an Ordinary Corporation to a One Person

Corporation. — When a single stockholder acquires all the stocks of an ordinary
stock corporation, the latter may apply for conversion into a One Person
Corporation, subject to the submission of such documents as the Commission may
require. If the application for conversion is approved, the Commission shall issue a
certificate of filing of amended articles of incorporation reflecting the conversion.
The One Person Corporation converted from an ordinary stock corporation shall

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succeed the latter and be legally responsible for all the latter’s outstanding liabilities
as of the date of conversion.

SEC. 132. Conversion from a One Person Corporation to an Ordinary Stock

Corporation. — A One Person Corporation may be converted into an ordinary stock
corporation after due notice to the Commission of such fact and of the circum-
stances leading to the conversion, and after compliance with all other requirements
for stock corporations under this Code and applicable rules. Such notice shall be
filed with the Commission within sixty (60) days from the occurrence of the circum-
stances leading to the conversion into an ordinary stock corporation. If all require-
ments have been complied with, the Commission shall issue a certificate of filing of
amended articles of incorporation reflecting the conversion.
In case of death of the single stockholder, the nominee or alternate nominee
shall transfer the shares to the duly designated legal heir or estate within seven (7)
days from receipt of either an affidavit of heirship or self-adjudication executed by a
sole heir, or any other legal document declaring the legal heirs of the single
stockholder and notify the Commission of the transfer. Within sixty (60) days from
the transfer of the shares, the legal heirs shall notify the Commission of their
decision to either wind up and dissolve the One Person Corporation or convert it into
an ordinary stock corporation.
The ordinary stock corporation converted from a One Person Corporation
shall succeed the latter and be legally responsible for all the latter’s outstanding
liabilities as of the date of conversion.

TITLE XIV
DISSOLUTION

SEC. 133. Methods of Dissolution. — A corporation formed or organized under the

provisions of this Code may be dissolved voluntarily or involuntarily.

SEC. 134. Voluntary Dissolution Where No Creditors Are Affected . — If dissolution

of a corporation does not prejudice the rights of any creditor having a claim against it, the
dissolution may be effected by majority vote of the board of directors or trustees, and by a
resolution adopted by the affirmative vote of the stockholders owning at least [two-thirds
(2/3)] majority of the outstanding capital stock or [of at least two-thirds (2/3)] majority
of the members of a meeting to be held upon the call of the directors or trustees.
At least twenty (20) [thirty (30)] days prior to the meeting, notice shall be given
to each shareholder or member of record personally, by registered mail, or by any
means authorized under its bylaws, whether or not entitled to vote at the meeting, in
the manner provided in Section 50 of this Code and shall state that the purpose of
the meeting is to vote on the dissolution of the corporation. Notice of the time, place,
and object of the meeting shall be published once [for three (3) consecutive weeks]
prior to the date of the meeting in a newspaper published in the place where the
principal office of said corporation is located, or if no newspaper is published in
such place, in a newspaper of general circulation in the Philippines.
A verified request for dissolution shall be filed with the Commission stating:
(a) the reason for the dissolution; (b) the form, manner, and time when the notices
were given; (c) names of the stockholders and directors or members and trustees
who approved the dissolution; (d) the date, place, and time of the meeting in which
the vote was made; and (e) details of publication.

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 The corporation shall submit the following to the Commission: (1) a copy of
the resolution authorizing the dissolution, certified by a majority of the board of
directors or trustees and countersigned by the secretary of the corporation; (2) proof
of publication; and (3) favorable recommendation from the appropriate regulatory
agency, when necessary.
Within fifteen (15) days from receipt of the verified request for dissolution, and
in the absence of any withdrawal within said period, the Commission shall approve
the request and issue the certificate of dissolution. The dissolution shall take effect
only upon the issuance by the Commission of a certificate of dissolution.
No application for dissolution of banks, banking and 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.

SEC. 135. Voluntary Dissolution Where Creditors Are Affected; Procedure and
Contents of Petition. — Where the dissolution of a corporation may prejudice the rights of
any creditor, a verified petition for dissolution shall be filed with the Commission. The
petition shall be signed by a majority of the corporation’s board of directors or trustees,
verified by its president or secretary or one of its directors or trustees, and shall set forth all
claims and demands against it, and that its dissolution was resolved upon by the affirmative
vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital
stock or at least two-thirds (2/3) of the members at a meeting of its stockholders or
members called for that purpose. The petition shall likewise state: (a) the reason for the
dissolution; (b) the form, manner, and time when the notices were given; and (c) the date,
place, and time of the meeting in which the vote was made. The corporation shall submit to
the Commission the following: (1) a copy of the resolution authorizing the dissolution,
certified by a majority of the board of directors or trustees and countersigned by the
secretary of the corporation; and (2) a list of all its creditors.
If the petition is sufficient in form and substance, the Commission shall, by an order
reciting the purpose of the petition, fix a deadline for filing objections to the petition which
date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of
the order. Before such date, a copy of the order shall be published at least once a week for
three (3) consecutive weeks in a newspaper of general circulation published in the
municipality or city where the principal office of the corporation is situated, or if there be no
such newspaper, then in a newspaper of general circulation in the Philippines, and a similar
copy shall be posted for three (3) consecutive weeks in three (3) public places in such
municipality or city.
Upon five (5) days’ notice, given after the date on which the right to file objections as
fixed in the order has expired, the Commission shall proceed to hear the petition and try
any issue raised in the objections filed; and if no such objection is sufficient, and the
material allegations of the petition are true, it shall render judgment dissolving
the corporation and directing such disposition of its assets as justice requires, and may
appoint a receiver to collect such assets and pay the debts of the corporation.
The dissolution shall take effect only upon the issuance by the Commission of
a certificate of dissolution.

SEC. 136. Dissolution by Shortening Corporate Term. — A voluntary dissolution

may be effected by amending the articles of incorporation to shorten the corporate term
pursuant to the provisions of this Code. A copy of the amended articles of incorporation
shall be submitted to the Commission in accordance with this Code.

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 Upon the expiration of the shortened term, as stated in the approved amended
articles of incorporation, the corporation shall be deemed dissolved without any further
proceedings, subject to the provisions of this Code on liquidation.
In the case of expiration of corporate term, dissolution shall automatically
take effect on the day following the last day of the corporate term stated in the
articles of incorporation, without the need for the issuance by the Commission of a
certificate of dissolution.

SEC. 137. Withdrawal of Request and Petition for Dissolution. — A withdrawal

of the request for dissolution shall be made in writing, duly verified by any
incorporator, director, trustee, shareholder, or member and signed by the same
number of incorporators, directors, trustees, shareholders, or members necessary to
request for dissolution as set forth in the foregoing sections. The withdrawal shall be
submitted no later than fifteen (15) days from receipt by the Commission of the
request for dissolution. Upon receipt of a withdrawal of request for dissolution, the
Commission shall withhold action on the request for dissolution and shall, after
investigation: (a) make a pronouncement that the request for dissolution is deemed
withdrawn; (b) direct a joint meeting of the board of directors or trustees and the
stockholders or members for the purpose of ascertaining whether to proceed with
dissolution; or (c) issue such other orders as it may deem appropriate.
A withdrawal of the petition for dissolution shall be in the form of a motion
and similar in substance to a withdrawal of request for dissolution but shall be
verified and filed prior to publication of the order setting the deadline for filing
objections to the petition.

SEC. 138. Involuntary Dissolution. — A corporation may be dissolved by the

Commission motu proprio or upon filing of a verified complaint by any interested party. The
following may be grounds for dissolution of the corporation:
(a) Non-use of corporate charter as provided under Section 21 of this Code;
(b) Continuous inoperation of a corporation as provided under Section 21 of
this Code;
(c) Upon receipt of a lawful court order dissolving the corporation;
(d) Upon finding by final judgment that the corporation procured its
incorporation through fraud;
(e) Upon finding by final judgment that the corporation:
(1) Was created for the purpose of committing, concealing or aiding the
commission of securities violations, smuggling, tax evasion, money laundering, or
graft and corrupt practices;
(2) Committed or aided in the commission of securities violations,
smuggling, tax evasion, money laundering, or graft and corrupt practices, and its
stockholders knew of the same; and
(3) Repeatedly and knowingly tolerated the commission of graft and
corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers,
or employees.
If the corporation is ordered dissolved by final judgment pursuant to the
grounds set forth in subparagraph (e) hereof, its assets, after payment of its
liabilities, shall, upon petition of the Commission with the appropriate court, be
forfeited in favor of the national government. Such forfeiture shall be without
prejudice to the rights of innocent stockholders and employees for services

VGDLaw Page 49
rendered, and to the application of other penalty or sanction under this Code or other
laws.
The Commission shall give reasonable notice to, and coordinate with, the
appropriate regulatory agency prior to the involuntary dissolution of companies
under their special regulatory jurisdiction.

SEC. 139. Corporate Liquidation. — Except for banks, which shall be covered by
the applicable provisions of Republic Act No. 7653, otherwise known as “The New
Central Bank Act,” as amended, and Republic Act No. 3591, otherwise known as the
“Philippine Deposit Insurance Corporation Charter”, as amended, every corporation
whose charter expires pursuant to its articles of incorporation, is annulled by forfeiture, or
whose corporate existence is terminated in any other manner, shall nevertheless remain as
a body corporate for three (3) years after the effective date of dissolution, for the purpose of
prosecuting and defending suits by or against it and enabling it to settle and close its affairs,
dispose of and convey its property, and distribute its assets, but not for the purpose of
continuing the business for which it was established.
At any time during said three (3) years, the corporation is authorized and
empowered to convey all of its property to trustees for the benefit of stockholders,
members, creditors and other persons in interest. After any such conveyance by
the corporation of its property in trust for the benefit of its stockholders, members, creditors
and others in interest, all interest which the corporation had in the property terminates, the
legal interest vests in the trustees, and the beneficial interest in the stockholders, members,
creditors or other persons-in-interest.
Except as otherwise provided for in Sections 93 and 94 of this Code, upon the
winding up of corporate affairs, any asset distributable to any creditor or stockholder or
member who is unknown or cannot be found shall be escheated in favor of the national
government.
Except by decrease of capital stock and as otherwise allowed by this Code,
no corporation shall distribute any of its assets or property except upon lawful dissolution
and after payment of all its debts and liabilities.

TITLE XV
FOREIGN CORPORATIONS

SEC. 140. Definition and Rights of Foreign Corporations. — For purposes of this
Code, a foreign corporation is one formed, organized or existing under laws other than
those of the Philippines’ and whose laws allow Filipino citizens and corporations to do
business in its own country or State. It shall have the right to transact business in the
Philippines after obtaining a license for that purpose in accordance with this Code and a
certificate of authority from the appropriate government agency.

SEC. 141. Application to Existing Foreign Corporations. — Every foreign

corporation which, on the date of the effectivity of this Code, is authorized to do business in
the Philippines under a license issued to it shall continue to have such authority under the
terms and conditions of its license, subject to the provisions of this Code and other special
laws.

SEC. 142. Application for a License. — A foreign corporation applying for a license

to transact business in the Philippines shall submit to the Commission a copy of its articles
of incorporation and bylaws, certified in accordance with law, and their translation to an

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official language of the Philippines, if necessary. The application shall be under oath and,
unless already stated in its articles of incorporation, shall specifically set forth the following:
(a)  The date and term of incorporation;
(b)  The address, including the street number, of the principal office of
the corporation in the country or State of incorporation;
(c)  The name and address of its resident agent authorized to accept summons
and process in all legal proceedings and all notices affecting the corporation, pending the
establishment of a local office;
(d)  The place in the Philippines where the corporation intends to operate;
(e)  The specific purpose or purposes which the corporation intends to pursue in
the transaction of its business in the Philippines: Provided, That said purpose or purposes
are those specifically stated in the certificate of authority issued by the appropriate
government agency;
(f)  The names and addresses of the present directors and officers of
the corporation;
(g)  A statement of its authorized capital stock and the aggregate number of
shares which the corporation has authority to issue, itemized by class, par value of shares,
shares without par value, and series, if any;
(h)  A statement of its outstanding capital stock and the aggregate number of
shares which the corporation has issued, itemized by class, par value of shares, shares
without par value, and series, if any;
(i)  A statement of the amount actually paid in; and
(j)  Such additional information as may be necessary or appropriate in order to
enable the Commission to determine whether such corporation is entitled to a license to
transact business in the Philippines, and to determine and assess the fees payable.
Attached to the application for license shall be a certificate under oath duly executed
by the authorized official or officials of the jurisdiction of its incorporation, attesting to the
fact that the laws of the country or State of the applicant allow Filipino citizens and
corporations to do business therein, and that the applicant is an existing corporation in good
standing. If the certificate is in a foreign language, a translation thereof in English under
oath of the translator shall be attached to the application.
The application for a license to transact business in the Philippines shall likewise be
accompanied by a statement under oath of the president or any other person authorized by
the corporation, showing to the satisfaction of the Commission and when appropriate, other
governmental agencies that the applicant is solvent and in sound financial condition, setting
forth the assets and liabilities of the corporation as of the date not exceeding one (1) year
immediately prior to the filing of the application.
Foreign banking, financial, and insurance corporations shall, in addition to the above
requirements, comply with the provisions of existing laws applicable to them. In the case of
all other foreign corporations, no application for license to transact business in the
Philippines shall be accepted by the Commission without previous authority from the
appropriate government agency, whenever required by law.

SEC. 143. Issuance of a License. — If the [Securities and Exchange]

Commission is satisfied that the applicant has complied with all the requirements of
this Code and other special laws, rules and regulations, the Commission shall issue a
license to transact business in the Philippines to the applicant for the purpose or purposes
specified in such license.

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 Upon issuance of the license, such foreign corporation may commence to transact
business in the Philippines and continue to do so for as long as it retains its authority to act
as a corporation under the laws of the country or State of its incorporation, unless such
license is sooner surrendered, revoked, suspended, or annulled in accordance with
this Code or other special laws.
Within sixty (60) days after the issuance of the license to transact business in the
Philippines, the licensee, except foreign banking or insurance corporations, shall deposit
with the [Securities and Exchange] Commission for the benefit of present and future
creditors of the licensee in the Philippines, securities satisfactory to the [Securities and
Exchange] Commission, consisting of bonds or other evidence of indebtedness of the
Government of the Philippines, its political subdivisions and instrumentalities, or of
government-owned or -controlled corporations and entities, shares of stock or debt
securities that are registered under Republic Act No. 8799, otherwise known as “The
Securities Regulation Code,” shares of stock in domestic corporations [listed] registered
in the stock exchange, share of stock in domestic insurance companies and banks, any
financial instrument determined suitable by the Commission, or any combination
thereof with an actual market value of at least Five hundred thousand pesos
(P500,000.00) or such other amount that may be set by the Commission: Provided,
however, That within six (6) months after each fiscal year of the licensee, the [Securities
and Exchange] Commission shall require the licensee to deposit additional securities or
financial instruments equivalent in actual market value to two percent (2%) of the amount
by which the licensee’s gross income for that fiscal year exceeds Ten million pesos
(P10,000,000.00).
The [Securities and Exchange] Commission shall also require the deposit of
additional securities or financial instruments if the actual market value of the deposited
securities or financial instruments has decreased by at least ten percent (10%) of their
actual market value at the time they were deposited. The [Securities and Exchange]
Commission may, at its discretion, release part of the additional deposit if the gross
income of the licensee has decreased, or if the actual market value of the total deposit has
increased, by more than ten percent (10%) of their actual market value at the time they
were deposited. The [Securities and Exchange] Commission may, from time to time, allow
the licensee to make substitute deposits for those already on deposit as long as the
licensee is solvent. Such licensee shall be entitled to collect the interest or dividends on
such deposits.
In the event the licensee ceases to do business in the Philippines, its deposits shall
be returned, upon the licensee’s application and upon proof to the satisfaction of the
Commission that the licensee has no liability to Philippine residents, including the
Government of the Republic of the Philippines. For purposes of computing the
securities deposit, the composition of gross income and allowable deductions
therefrom shall be in accordance with the rules of the Commission.

SEC. 144. Who May be a Resident Agent. — A resident agent may be either an
individual residing in the Philippines or a domestic corporation lawfully transacting business
in the Philippines: Provided, That an individual resident agent must be of good moral
character and of sound financial standing:  Provided, further, That in case of a
domestic corporation who will act as a resident agent, it must likewise be of sound
financial standing and must show proof that it is in good standing as certified by the
Commission.

SEC. 145. Resident Agent; Service of Process. — As a condition to the issuance

of the license for a foreign corporation to transact business in the Philippines,
such corporation shall file with the Commission a written power of attorney
designating a person who must be a resident of the Philippines, on whom summons

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and other legal processes may be served in all actions or other legal proceedings
against such corporation, and consenting that service upon such resident agent
shall be admitted and held as valid as if served upon the duly authorized officers of
the foreign corporation at its home office. Such foreign corporation shall likewise
execute and file with the Commission an agreement or stipulation, executed by the
proper authorities of said corporation, in form and substance as follows:

“The (name of foreign corporation) hereby stipulates and agrees, in

consideration of being granted a license to transact business in the
Philippines, that if the corporation shall cease to transact business in the
Philippines, or shall be without any resident agent in the Philippines on whom
any summons or other legal process may be served, then service of any
summons or other legal process may be made upon the Commission in any
action or proceeding arising out of any business or transaction which
occurred in the Philippines and such service shall have the same force and
effect as if made upon the duly authorized officers of the corporation at its
home office.”

Whenever such service of summons or other process is made upon the

Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a copy
of such summons or other legal process to the corporation at its home or principal office.
The sending of such copy by the Commission shall be a necessary part of and shall
complete such service. All expenses incurred by the Commission for such service shall be
paid in advance by the party at whose instance the service is made.
It shall be the duty of the resident agent to immediately notify the Commission in
writing of any change in the resident agent’s address.

SEC. 146. Law Applicable. — A foreign corporation lawfully doing business in the

Philippines shall be bound by all laws, rules and regulations applicable to domestic
corporations of the same class, except those which provide for the creation, formation,
organization or dissolution of corporations or those which fix the relations, liabilities,
responsibilities, or duties of stockholders, members, or officers of corporations to each
other or to the corporation.

SEC. 147. Amendments to Articles of Incorporation or Bylaws of Foreign

Corporations. — Whenever the articles of incorporation or bylaws of a foreign
corporation authorized to transact business in the Philippines are amended, such
foreign corporation shall, within sixty (60) days after the amendment becomes effective, file
with the Commission, and in proper cases, with the appropriate government agency, a duly
authenticated copy of the amended articles of incorporation or bylaws, indicating clearly in
capital letters or underscoring the change or changes made, duly certified by the authorized
official or officials of the country or State of incorporation. Such filing shall not in itself
enlarge or alter the purpose or purposes for which such corporation is authorized to
transact business in the Philippines.

SEC. 148. Amended License. — A foreign corporation authorized to transact

business in the Philippines shall obtain an amended license in the event it changes its
corporate name, or desires to pursue other or additional purposes in the Philippines, by
submitting an application with the Commission, favorably endorsed by the appropriate
government agency in the proper cases.

SEC. 149. Merger or Consolidation Involving a Foreign Corporation Licensed in the

Philippines. — One or more foreign corporations authorized to transact business in the
Philippines may merge or consolidate with any domestic corporation or corporations if

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permitted under Philippine laws and by the law of its incorporation: Provided, That the
requirements on merger or consolidation as provided in this Code are followed.
Whenever a foreign corporation authorized to transact business in the Philippines
shall be a party to a merger or consolidation in its home country or State as permitted by
the law authorizing its incorporation, such foreign corporation shall, within sixty (60) days
after the effectivity of such merger or consolidation, file with the Commission, and in proper
cases, with the appropriate government agency, a copy of the articles of merger or
consolidation duly authenticated by the proper official or officials of the country or State
under whose laws the merger or consolidation was effected: Provided, however, That if the
absorbed corporation is the foreign corporation doing business in the Philippines, the latter
shall at the same time file a petition for withdrawal of its license in accordance with this
Title.

SEC. 150. Doing Business without a License. — No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.

SEC. 151. Revocation of License. — Without prejudice to other grounds provided

under special laws, the license of a foreign corporation to transact business in the
Philippines may be revoked or suspended by the Commission upon any of the following
grounds:
(a)  Failure to file its annual report or pay any fees as required by this Code;
(b)  Failure to appoint and maintain a resident agent in the Philippines as required
by this Title;
(c)  Failure, after change of its resident agent or address, to submit to the
Commission a statement of such change as required by this Title;
(d)  Failure to submit to the Commission an authenticated copy of any amendment
to its articles of incorporation or bylaws or of any articles of merger or consolidation within
the time prescribed by this Title;
(e)  A misrepresentation of any material matter in any application, report, affidavit
or other document submitted by such corporation pursuant to this Title;
(f)  Failure to pay any and all taxes, imposts, assessments or penalties, if any,
lawfully due to the Philippine Government or any of its agencies or political subdivisions;
(g)  Transacting business in the Philippines outside of the purpose or purposes for
which such corporation is authorized under its license;
(h)  Transacting business in the Philippines as agent of or acting on behalf of any
foreign corporation or entity not duly licensed to do business in the Philippines; or
(i)  Any other ground as would render it unfit to transact business in the
Philippines.

SEC. 152. Issuance of Certificate of Revocation. — Upon the revocation of the

license to transact business in the Philippines, the Commission shall issue a corresponding
certificate of revocation, furnishing a copy thereof to the appropriate government agency in
the proper cases.
The Commission shall also mail the notice and copy of the certificate of revocation
to the corporation, at its registered office in the Philippines.

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 SEC. 153. Withdrawal of Foreign Corporations. — Subject to existing laws and
regulations, a foreign corporation licensed to transact business in the Philippines may be
allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No
certificate of withdrawal shall be issued by the Commission unless all the following
requirements are met:
(a)  All claims which have accrued in the Philippines have been paid,
compromised or settled;
(b)  All taxes, imposts, assessments, and penalties, if any, lawfully due to the
Philippine Government or any of its agencies or political subdivisions, have been paid; and
(c)  The petition for withdrawal of license has been published once a week for
three (3) consecutive weeks in a newspaper of general circulation in the Philippines.

TITLE XVI
INVESTIGATIONS, OFFENSES, AND PENALTIES

SEC. 154. Investigation and Prosecution of Offenses. — The Commission may

investigate an alleged violation of this Code, or of a rule, regulation, or order of the
Commission.
The Commission may publish its findings, orders, opinions, advisories, or
information concerning any such violation, as may be relevant to the general public
or to the parties concerned, subject to the provisions of Republic Act No. 10173,
otherwise known as the “Data Privacy Act of 2012,” and other pertinent laws.
The Commission shall give reasonable notice to and coordinate with the
appropriate regulatory agency prior to any such publication involving companies
under their regulatory jurisdiction.

SEC. 155. Administration of Oaths, Subpoena of Witnesses and Documents .

— The Commission, through its designated officer, may administer oaths and
affirmations, issue subpoena and subpoena duces tecum, take testimony in any
inquiry or investigation, and may perform other acts necessary to the proceedings or
to the investigation.

SEC. 156. Cease and Desist Orders. — Whenever the Commission has
reasonable basis to believe that a person has violated, or is about to violate
this Code, a rule, regulation, or order of the Commission, it may direct such person
to desist from committing the act constituting the violation.
The Commission may issue a cease and desist order ex parte to enjoin an act
or [a] practice which is fraudulent or can be reasonably expected to cause
significant, imminent, and irreparable danger or injury to public safety or welfare.
The ex parte order shall be valid for a maximum period of twenty (20) days, without
prejudice to the order being made permanent after due notice and hearing.
Thereafter, the Commission may proceed administratively against such
person in accordance with Section 158 of this Code, and/or transmit evidence to the
Department of Justice for preliminary investigation or criminal prosecution and/or
initiate criminal prosecution for any violation of this Code, rule, or regulation.

SEC. 157. Contempt. — Any person who, without justifiable cause, fails or
refuses to comply with any lawful order, decision, or subpoena issued by the
Commission shall, after due notice and hearing, be held in contempt and fined in an
amount not exceeding Thirty thousand pesos (P30,000.00). When the refusal

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amounts to clear and open defiance of the Commission’s order, decision,
or subpoena, the Commission may impose a daily fine of one thousand pesos
(P1,000.00) until the order, decision, or subpoena is complied with.

SEC. 158. Administrative Sanctions. — If, after due notice and hearing, the
Commission finds that any provision of this Code, rules or regulations, or any of the
Commission’s orders has been violated, the Commission may impose any or all of
the following sanctions, taking into consideration the extent of participation, nature,
effects, frequency and seriousness of the violation:
(a) Imposition of a fine ranging from Five thousand pesos (P5,000.00) to
Two million pesos (P2,000,000.00), and not more than One thousand pesos
(P1,000.00) for each day of continuing violation but in no case to exceed Two million
pesos (P2,000,000.00);
(b) Issuance of a permanent cease and desist order;
(c) Suspension or revocation of the certificate of incorporation; and
(d) Dissolution of the corporation and forfeiture of its assets under the
conditions in Title XIV of this Code.

SEC. 159. Unauthorized Use of Corporate Name; Penalties. — The

unauthorized use of a corporate name shall be punished with a fine ranging from Ten
thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00).

SEC. 160. Violation of Disqualification Provision; Penalties . — When, despite

the knowledge of the existence of a ground for disqualification as provided in
Section 26 of this Code, a director, trustee or officer willfully holds office, or willfully
conceals such disqualification, such director, trustee or officer shall be punished
with a fine ranging from Ten thousand pesos (P10,000.00) to Two hundred thousand
pesos (P200,000.00) at the discretion of the court, and shall be permanently
disqualified from being a director, trustee or officer of any corporation. When the
violation of this provision is injurious or detrimental to the public, the penalty shall
be a fine ranging from Twenty thousand pesos (P20,000.00) to Four hundred
thousand pesos (P400,000.00).

SEC. 161. Violation of Duty to Maintain Records, to Allow Their Inspection or

Reproduction; Penalties. — The unjustified failure or refusal by the corporation, or by
those responsible for keeping and maintaining corporate records, to comply with
Sections 45, 73, 92, 128, 177 and other pertinent rules and provisions of this Code on
inspection and reproduction of records shall be punished with a fine ranging from
Ten thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00), at
the discretion of the court, taking into consideration the seriousness of the violation
and its implications. When the violation of this provision is injurious or detrimental to
the public, the penalty is a fine ranging from Twenty thousand pesos (P20,000.00) to
Four hundred thousand pesos (P400,000.00).
The penalties imposed under this section shall be without prejudice to the
Commission’s exercise of its contempt powers under Section 157 hereof.

SEC. 162. Willful Certification of Incomplete, Inaccurate, False, or Misleading

Statements or Reports; Penalties. — Any person who willfully certifies a report
required under this Code, knowing that the same contains incomplete, inaccurate,
false, or misleading information or statements, shall be punished with a fine ranging
from Twenty thousand pesos (P20,000.00) to Two hundred thousand pesos
(P200,000.00). When the wrongful certification is injurious or detrimental to the
public, the auditor or the responsible person may also be punished with a fine

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ranging from Forty thousand pesos (P40,000.00) to Four hundred thousand pesos
(P400,000.00).

SEC. 163. Independent Auditor Collusion; Penalties. — An independent auditor

who, in collusion with the corporation’s directors or representatives, certifies
the corporation’s financial statements despite its incompleteness or inaccuracy, its
failure to give a fair and accurate presentation of the corporation’s condition, or
despite containing false or misleading statements, shall be punished with a fine
ranging from Eighty thousand pesos (P80,000.00) to Five hundred thousand pesos
(P500,000.00). When the statement or report certified is fraudulent, or has the effect
of causing injury to the general public, the auditor or responsible officer may be
punished with a fine ranging from One hundred thousand pesos (P100,000.00) to Six
hundred thousand pesos (P600,000.00).

SEC. 164. Obtaining Corporate Registration Through Fraud; Penalties. —

Those responsible for the formation of a corporation through fraud, or who assisted
directly or indirectly therein, shall be punished with a fine ranging from Two hundred
thousand pesos (P200,000.00) to Two million pesos (P2,000,000.00). When the
violation of this provision is injurious or detrimental to the public, the penalty is a
fine ranging from Four hundred thousand pesos (P400,000.00) to Five million pesos
(P5,000,000.00).

SEC. 165. Fraudulent Conduct of Business; Penalties. — A corporation that

conducts its business through fraud shall be punished with a fine ranging from Two
hundred thousand pesos (P200,000.00) to Two million pesos (P2,000,000.00). When
the violation of this provision is injurious or detrimental to the public, the penalty is a
fine ranging from Four hundred thousand pesos (P400,000.00) to Five million pesos
(P5,000,000.00).

SEC. 166. Acting as Intermediaries for Graft and Corrupt Practices; Penalties .
— A corporation used for fraud, or for committing or concealing graft and corrupt
practices as defined under pertinent statutes, shall be liable for a fine ranging from
One hundred thousand pesos (P100,000.00) to Five million pesos (P5,000,000.00).
When there is a finding that any of its directors, officers, employees, agents,
or representatives are engaged in graft and corrupt practices, the corporation’s
failure to install: (a) safeguards for the transparent and lawful delivery of services;
and (b) policies, code of ethics, and procedures against graft and corruption shall
be prima facie evidence of corporate liability under this section.

SEC. 167. Engaging Intermediaries for Graft and Corrupt Practices; Penalties .
— A corporation that appoints an intermediary who engages in graft and corrupt
practices for the corporation’s benefit or interest shall be punished with a fine
ranging from One hundred thousand pesos (P100,000.00) to One million pesos
(P1,000,000.00).

SEC. 168. Tolerating Graft and Corrupt Practices; Penalties . — A director,

trustee, or officer who knowingly fails to sanction, report, or file the appropriate
action with proper agencies, allows or tolerates the graft and corrupt practices or
fraudulent acts committed by a corporation’s directors, trustees, officers, or
employees shall be punished with a fine ranging from Five hundred thousand pesos
(P500,000.00) to One million pesos (P1,000,000.00).

SEC. 169. Retaliation Against Whistleblowers. — A whistleblower refers to any

person who provides truthful information relating to the commission or possible
commission of any offense or violation under this Code. Any person who, knowingly

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and with intent to retaliate, commits acts detrimental to a whistleblower such as
interfering with the lawful employment or livelihood of the whistleblower, shall, at the
discretion of the court, be punished with a fine ranging from One hundred thousand
pesos (P100,000.00) to One million pesos (P1,000,000.00).

SEC. 170. Other Violations of the Code; Separate Liability. — Violations of any

of the other provisions of this Code or its amendments not otherwise specifically
penalized therein shall be punished by a fine of not less than Ten thousand pesos
(P10,000.00) but not more than One million pesos (P1,000,000.00). If the violation is
committed by a corporation, the same may, after notice and hearing, be dissolved in
appropriate proceedings before the Commission: Provided, That such dissolution
shall not preclude the institution of appropriate action against the director, trustee,
or officer of the corporation responsible for said violation: Provided, further, That
nothing in this section shall be construed to repeal the other causes for dissolution
of a corporation provided in this Code.
Liability for any of the foregoing offenses shall be separate from any other
administrative, civil, or criminal liability under this Code and other laws.

SEC. 171. Liability of Directors, Trustees, Officers, or Other Employees . — If

the offender is a corporation, the penalty may, at the discretion of the court, be
imposed upon such corporation and/or upon its directors, trustees, stockholders,
members, officers, or employees responsible for the violation or indispensable to its
commission.

SEC. 172. Liability of Aiders and Abettors and Other Secondary Liability . —
Anyone who shall aid, abet, counsel, command, induce, or cause any violation of
this Code, or any rule, regulation, or order of the Commission shall be punished with
a fine not exceeding that imposed on the principal offenders, at the discretion of the
court, after taking into account their participation in the offense.

TITLE XVII
MISCELLANEOUS PROVISIONS

SEC. 173. Outstanding Capital Stock Defined. — The term “outstanding capital
stock,” as used in this Code, shall mean the total shares of stock issued under binding
subscription contracts to subscribers or stockholders, whether fully or partially paid, except
treasury shares.

SEC. 174. Designation of Governing Boards. — The provisions of specific

provisions of this Code to the contrary notwithstanding, nonstock or special corporations
may, through their articles of incorporation or their bylaws, designate their governing boards
by any name other than as board of trustees.

SEC. 175. Collection and Use of Registration, Incorporation and Other Fees. —
For a more effective implementation of this Code, the Commission is hereby
authorized to collect, retain, and use fees, fines, and other charges pursuant to
this Code and its rules and regulations. The amount collected shall be deposited and
maintained in a separate account which shall form a fund for its modernization and
to augment its operational expenses such as, but not limited to, capital outlay,
increase in compensation and benefits comparable with prevailing rates in the
private sector, reasonable employee allowance, employee health care services, and

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other insurance, employee career advancement and professionalization, legal
assistance, seminars, and other professional fees.

SEC. 176. Stock Ownership in Corporations. — Pursuant to the duties specified by

Article XIV of the Constitution, the National Economic and Development Authority (NEDA)
shall, from time to time, determine if the corporate vehicle has been used by
any corporation, business, or industry to frustrate the provisions of this Code or applicable
laws, and shall submit to Congress, whenever deemed necessary, a report of its findings,
including recommendations for their prevention or correction.
The Congress of the Philippines may set maximum limits for stock ownership of
individuals or groups of individuals related to each other by consanguinity, affinity, or by
close business interests, in corporations declared to be vested with public interest pursuant
to the provisions of this section, or whenever necessary to prevent anti-competitive
practices as provided in Republic Act No. 10667, otherwise known as the “Philippine
Competition Act,” or to implement national economic policies designed to promote general
welfare and economic development, as declared in laws, rules and regulations.
In recommending to the Congress which corporations, businesses and industries
will be declared as vested with public interest, and in formulating proposals for limitations
on stock ownership, the NEDA shall consider the type and nature of the industry, size of the
enterprise, economies of scale, geographic location, extent of Filipino ownership, labor
intensity of the activity, export potential, as well as other factors which are germane to the
realization and promotion of business and industry.

SEC. 177. Reportorial Requirements of Corporations. — Except as otherwise

provided in this Code or in the rules issued by the Commission, every corporation,
domestic or foreign, doing business in the Philippines [,] shall submit to the
Commission:
(a) Annual financial statements audited by an independent certified public
accountant: Provided, That if the total assets or total liabilities of the corporation are
less than Six hundred thousand pesos (P600,000.00), the financial statements shall
be certified under oath by the corporation’s treasurer or chief financial officer; and
(b) A general information sheet.

Corporations vested with public interest must also submit the following:
(1)  A director or trustee compensation report; and
(2)  A director or trustee appraisal or performance report and the standards
or criteria used to assess each director or trustee.
The reportorial requirements shall be submitted annually and within such
period as may be prescribed by the Commission.
The Commission may place the corporation under delinquent status in case of
failure to submit the reportorial requirements three (3) times, consecutively or
intermittently, within a period of five (5) years. The Commission shall give reasonable
notice to and coordinate with the appropriate regulatory agency prior to placing on
delinquent status companies under their special regulatory jurisdiction.
Any person required to file a report with the Commission may redact
confidential information from such required report: Provided, That such confidential
information shall be filed in a supplemental report prominently labelled “confidential,”
together with a request for confidential treatment of the report and the specific
grounds for the grant thereof.

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 SEC. 178. Visitorial Power and Confidential Nature of Examination Results . — The
Commission shall exercise visitorial powers over all corporations, which powers
shall include the examination and inspection of records, regulation and supervision
of activities, enforcement of compliance, and imposition of sanctions in accordance
with this Code.
Should the corporation, without justifiable cause, refuse or obstruct the
Commission’s exercise of its visitorial powers, the Commission may revoke its
certificate of incorporation, without prejudice to the imposition of other penalties and
sanctions under this Code.
All interrogatories propounded by the Commission and the answers thereto, as well
as the results of any examination made by the Commission or by any other official
authorized by law to make an examination of the operations, books, and records of
any corporation, shall be kept strictly confidential, except when the law requires the same to
be made public, when necessary for the Commission to take action to protect the public or
to issue orders in the exercise of its powers under this Code, or where such interrogatories,
answers or results are necessary to be presented as evidence before any court.

SEC. 179. Powers, Functions, and Jurisdiction of the Commission. — The

Commission shall have the power and authority to:
(a) Exercise supervision and jurisdiction over all corporations and persons
acting on their behalf, except as otherwise provided under this Code;
(b) Pursuant to Presidential Decree No. 920-A, retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution. The
Commission shall retain jurisdiction over pending suspension of payment/
rehabilitation cases filed as of 30 June 2000 until finally disposed;
(c) Impose sanctions for the violation of this Code, its implementing rules
and orders of the Commission;
(d) Promote corporate governance and the protection of minority investors,
through, among others, the issuance of rules and regulations consistent with
international best practices;
(e) Issue opinions to clarify the application of laws, rules and regulations;
(f) Issue cease and desist orders ex parte to prevent imminent fraud or
injury to the public;
(g) Hold corporations in direct and indirect contempt;
(h) Issue subpoena duces tecum and summon witnesses to appear in
proceedings before the Commission;
(i) In appropriate cases, order the examination, search and seizure of
documents, papers, files and records, and books of accounts of any entity or person
under investigation as may be necessary for the proper disposition of the cases,
subject to the provisions of existing laws;
(j) Suspend or revoke the certificate of incorporation after proper notice
and hearing;
(k) Dissolve or impose sanctions on corporations, upon final court order,
for committing, aiding in the commission of, or in any manner furthering securities
violations, smuggling, tax evasion, money laundering, graft and corrupt practices, or
other fraudulent or illegal acts;

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 (l) Issue writs of execution and attachment to enforce payment of fees,
administrative fines, and other dues collectible under this Code;
(m) Prescribe the number of independent directors and the minimum criteria
in determining the independence of a director;
(n) Impose or recommend new modes by which a stockholder, member,
director, or trustee may attend meetings or cast their votes, as technology may
allow, taking into account the company’s scale, number of shareholders or members,
structure, and other factors consistent with the basic right of corporate suffrage;
(o) Formulate and enforce standards, guidelines, policies, rules and
regulations to carry out the provisions of this Code; and
(p) Exercise such other powers provided by law or those which may be
necessary or incidental to carrying out the powers expressly granted to the
Commission.

In imposing penalties and additional monitoring and supervision

requirements, the Commission shall take into consideration the size, nature of the
business, and capacity of the corporation.
No court below the Court of Appeals shall have jurisdiction to issue a
restraining order, preliminary injunction, or preliminary mandatory injunction in any
case, dispute, or controversy that directly or indirectly interferes with the exercise of
the powers, duties and responsibilities of the Commission that falls exclusively
within its jurisdiction.

SEC. 180. Development and Implementation of Electronic Filing and

Monitoring System. — The Commission shall develop and implement an electronic
filing and monitoring system. The Commission shall promulgate rules to facilitate
and expedite, among others, corporate name reservation and registration,
incorporation, submission of reports, notices, and documents required under
this Code, and sharing of pertinent information with other government agencies.

SEC. 181. Arbitration for Corporations. — An arbitration agreement may be

provided in the articles of incorporation or bylaws of a corporation. When such an
agreement is in place, disputes between the corporation, its stockholders or
members, which arise from the implementation of the articles of incorporation or
bylaws, or from intra-corporate relations, shall be referred to arbitration. A dispute
shall be non-arbitrable when it involves criminal offenses and interests of third
parties.
The arbitration agreement shall be binding on the corporation, its directors,
trustees, officers, and executives or managers.
To be enforceable, the arbitration agreement should indicate the number of
arbitrators and the procedure for their appointment. The power to appoint the
arbitrators forming the arbitral tribunal shall be granted to a designated independent
third party. Should the third party fail to appoint the arbitrators in the manner and
within the period specified in the arbitration agreement, the parties may request the
Commission to appoint the arbitrators. In any case, arbitrators must be accredited or
must belong to organizations accredited for the purpose of arbitration.
The arbitral tribunal shall have the power to rule on its own jurisdiction and on
questions relating to the validity of the arbitration agreement. When an intra-
corporate dispute is filed with a Regional Trial Court, the court shall dismiss the case
before the termination of the pretrial conference, if it determines that an arbitration

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agreement is written in the corporation’s articles of incorporation, bylaws, or in a
separate agreement.
The arbitral tribunal shall have the power to grant interim measures necessary
to ensure enforcement of the award, prevent a miscarriage of justice, or otherwise
protect the rights of the parties.
A final arbitral award under this section shall be executory after the lapse of
fifteen (15) days from receipt thereof by the parties and shall be stayed only by the
filing of a bond or the issuance by the appellate court of an injunctive writ.
The Commission shall formulate the rules and regulations, which shall govern
arbitration under this section, subject to existing laws on arbitration.

SEC. 182. Jurisdiction Over Party-List Organizations . — The powers, author-

ities, and responsibilities of the Commission involving party-list organizations are
transferred to the Commission on Elections (COMELEC).
Within six (6) months after the effectivity of this Act, the monitoring,
supervision, and regulation of such corporations shall be deemed automatically
transferred to the COMELEC.
For this purpose, the COMELEC, in coordination with the Commission, shall
promulgate the corresponding implementing rules for the transfer of jurisdiction over
the abovementioned corporations.

SEC. 183. Applicability of the Code. — Nothing in this Act [Code] shall be

construed as amending existing provisions of special laws governing the
registration, regulation, monitoring and supervision of special corporations such as
banks, nonbank financial institutions and insurance companies.
Notwithstanding any provision to the contrary, regulators such as the Bangko
Sentral ng Pilipinas and the Insurance Commission shall exercise primary authority
over special corporations such as banks, nonbank financial institutions, and
insurance companies under their supervision and regulation.

SEC. 184. Effect of Amendment or Repeal of This Code, or the Dissolution of

a Corporation. — No right or remedy in favor of or against any corporation, its
stockholders, members, directors, trustees, or officers, nor any liability incurred by any
such corporation, stockholders, members, directors, trustees, or officers, shall be removed
or impaired either by the subsequent dissolution of said corporation or by any subsequent
amendment or repeal of this Code or of any part thereof.

SEC. 185. Applicability to Existing Corporations. — A corporation lawfully existing

and doing business in the Philippines affected by the new requirements of this Code shall
be given a period of not more than two (2) years from the effectivity of this Act within which
to comply

SEC. 186. Separability Clause. — If any provision of this Act is declared invalid or
unconstitutional, the other provisions hereof which are not affected thereby shall continue to
be in full force and effect.

SEC. 187. Repealing Clause. — Batas Pambansa Blg. 68, otherwise known as
“The Corporation Code of the Philippines,” is hereby repealed. Any law, presidential
decree or issuance, executive order, letter of instruction, administrative order, rule or
regulation contrary to or inconsistent with any provision of this Act is hereby repealed or
modified accordingly.

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 SEC. 188. Effectivity. — This Act shall take effect upon completion of its publication
in the Official Gazette or in at least two (2) newspapers of general circulation.

APPROVED,

GLORIA MACAPAGAL-ARROYO VICENTE C. SOTTO III

Speaker of the House President of the Senate
of Representatives

This Act which is a consolidation of Senate Bill No. 1280 and House Bill No. 8374 was
passed by the Senate and the House of Representatives on November 28, 2018.

DANTE ROBERTI P. MALING MYRA MARIE D. VILLARICA

Acting Secretary General Secretary of the Senate
House of Representative

APPROVED: 20 February 2019.

RODRIGO ROA DUTERTE

President of the Philippines

(Completion of Publication in The Manila Bulletin and Business Mirror on 23 February 2019)

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