LAW ON PRIVATE CORPORATIONS

BUSINESS LAW 74
ATTY. RAMON ANTONIO A. RUPERTO
BATAS PAMBANSA BLG. 68 (CORPORATION CODE OF THE PHILIPPINES)
Corpor!"o# - an artificial being created by operation of law, a!ing te rigt of
"#cce""ion and te power", attrib#te" and propertie" e$pre""ly a#tori%ed by law or
incident to it" e$i"tence. &'ec. ()
E$%&%#!' o( Corpor!"o#
*. +reated by operation of law
(. An artificial being
,. Power", attrib#te", and propertie" e$pre""ly a#tori%ed by law and to"e incidental to
it" e$i"tence
-. .a" te rigt of "#cce""ion
A corporation i" /#ridical entity "eparate and di"tinct fro0 it" director" and "toc1older".
I#'!#)%' *+%r% ,"r%)!or-o((")%r &. /% $"/$% p%r'o#$$.
*. te director2officer acted in e!ident 0alice or bad fait
2. wen te director2officer2"toc1older agreed to be "olidarily liable wit te corporation
3. wen te 3O+TRINE O4 PIER+IN5 T.E 6EI7 O4 +ORPORATE 4I+TION applie"8
*. co0plete do0inion o!er te corporation
(. "#c control 0#"t a!e been #"ed to co00it fra#d or wrong
,. te afore"aid control and breac of d#ty 0#"t pro$i0ately ca#"e te in/#ry
or lo""
D"'!"#)!"o#' /%!*%%# pr!#%r'+"p #, )orpor!"o#
Pr!#%r'+"p Corpor!"o#
MANNER O4
+REATION
Mere agree0ent by partie" 9y law
NUM9ER O4
PARTIE'
Organi%ed by at lea"t two
per"on"
Re:#ire" at lea"t fi!e
incorporator" &e$cept a
corporation "ole)
+OMMEN+EMENT
O4 ;URI3I+A7
PER'ONA7ITY
E$ec#tion of contract of
partner"ip
3ate of i""#ance of certificate of
incorporation by te 'E+ &'ec.
*<)
PO=ER'
Any power a#tori%ed by partner"
pro!ided it i" not contrary to law,
0oral", p#blic policy
Power" e$pre""ly granted by law
or i0plied fro0 to"e granted or
incidental to it" e$i"tence
MANA5EMENT
Unle"" oterwi"e agreed #pon,
e!ery partner i" an agent
6e"ted wit te 9oard of director"
or tr#"tee"
E44E+T O4
MI'MANA5EMENT
Partner" can "#e a co-partner
wo 0i"0anage"
'#it again"t a 0e0ber of te
board wo 0i"0anage" 0#"t be
in te na0e of te corporation
RI5.T O4
'U++E''ION
No rigt .a" rigt to "#cce""ion
E>TENT O4
7IA9I7ITY TO
T.IR3 PER'ON'
Partner" &e$cept li0ited partner")
are liable per"onally and
"#b"idiarily &"o0eti0e" "olidary)
for partner"ip debt" to tird
per"on"
'toc1older" are liable only to te
e$tent of teir in!e"t0ent" a"
repre"ented by te "are"
"#b"cribed by te0
TRAN'4ERA9I7ITY
O4 INTERE'T
Partner cannot tran"fer i"
intere"t in te partner"ip "o a" to
0a1e te tran"feree a partner
wito#t te con"ent of all te
oter e$i"ting partner"
'toc1older a" te rigt to
tran"fer i" "are" wito#t prior
con"ent of oter "toc1older"
TERM O4
E>I'TEN+E
Any period "tip#lated by partner" Not to e$ceed ?@ year" e$tendible
to not 0ore tan ?@ year" in
e!ery in"tance
3I''O7UTION
May be di""ol!ed at any ti0e by
ti" will of any or all partner"
+an only be di""ol!ed wit
con"ent of te 'tate
7A= 5O6ERNIN5
+i!il +ode +orporation +ode
CLASSES OF CORPORATIONS &'ec. ,)
S!o)0 Corpor!"o#' No# S!o)0 Corpor!"o#'
created and operated for te p#rpo"e of
0a1ing profit wic 0ay be di"trib#ted in
te for0 of di!idend" to "toc1older" on
te ba"i" of teir in!e"ted capital
3o not i""#e "toc1 and di"trib#te di!idend"
to teir 0e0ber" and are not #"#ally
created for profit b#t for p#blic good and
welfare
'toc1older" Me0ber"
9oard of 3irector" 9oard of Tr#"tee"
No#1Vo!"#2 S+r%'
=ere te Article" of Incorporation pro!ide for non-!oting "are", te older" of "#c
"are" "all ne!ertele"" be entitled to !ote on te following 0atter"8 &'ec. A)
*. A0end0ent of te article" of incorporationB
(. Adoption and a0end0ent of by-law"B
,. 'ale, lea"e, e$cange, 0ortgage, pledge or oter di"po"ition of
all or "#b"tantially all of te corporate propertyB
-. Inc#rring, creating or increa"ing bonded indebtedne""B
?. Increa"e or decrea"e of capital "toc1B
A. Merger or con"olidation of te corporation wit anoter
corporation or oter corporation"B
C. In!e"t0ent of corporate f#nd" in anoter corporation or
b#"ine"" in accordance wit ti" +odeB and
D. 3i""ol#tion of te corporation.
Fo3#,%r'4 '+r%' E older" 0ay be gi!en certain rigt" and pri!ilege" not en/oyed by te
owner" of oter "toc1", pro!ided tat were te e$cl#"i!e rigt to !ote and be !oted for in
te election of director" i" granted, it 0#"t be for a li0ited period not to e$ceed fi!e &?)
year" "#b/ect to te appro!al of te 'E+ &'ec. C)
Tr%'3r. S+r%' &'ec. <) R%,%%&/$% S+r%' &'ec. D)
"are" of "toc1 wic a!e been i""#ed 0ay be i""#ed by te corporation wen
LAW ON PRIVATE CORPORATIONS
Business Law 74
2
and f#lly paid for, b#t "#b"e:#ently
reac:#ired by te i""#ing corporation by
p#rca"e, rede0ption, donation or tro#g
"o0e oter lawf#l 0ean".
e$pre""ly "o pro!ided in te Article" and
0ay be p#rca"ed by te corporation #pon
te e$piration of a fi$ed period
May be depri!ed !oting rigt" ON7Y wen
it re0ain" in te trea"#ry
May be depri!ed of !oting rigt"
May be redee0ed only if tere are
retained earning"
M#"t be redee0ed e!en if tere i" no
"#rpl#" earning" e!en before di""ol#tion
C$''"(")!"o# o( Cp"!$ S!o)0'
1. AUT.ORIFE3 +APITA7 'TO+G &A+') E te a0o#nt of capital "toc1 a" "pecified in
te Article" of Incorporation
2. OUT'TAN3IN5 +APITA7 'TO+G &O+') E portion of te capital "toc1 wic i" i""#ed
and eld by per"on" oter tan te corporation it"elf
3. 'U9'+RI9E3 +APITA7 'TO+G E te a0o#nt of te capital "toc1 "#b"cribed,
weter f#lly paid or not
4. PAI3-UP +APITA7 'TO+G E tat portion of te "#b"cribed or o#t"tanding capital
"toc1 tat i" act#ally paid
A0o#nt of capital "toc1 to be "#b"cribed and paid for te p#rpo"e" of incorporation.
- At lea"t (?H of te A+' 0#"t be "#b"cribed at te ti0e of incorporation, and at
lea"t (?H of te total "#b"cription 0#"t be paid #pon "#b"cription, te balance to
be payable on a date or date" fi$ed in te contract of "#b"cription &'ec. *,)
Example: Suppose the Articles of Incorporation of X Corporation provies that the
authori!e capital stoc" of sai corporation is P#$%%%$%%%&%% ivie into #%$%%% shares of the
par value of P#%%&%% per share& At its incorporation$ onl' P2(%$%%%&%% of the authori!e
capital stoc" )as su*scri*e& At least 2(+ of the su*scription is re,uire to *e pai- thus$ onl'
P.2$(%%&%% )as pai to the treasurer of the corporation&
Therefore$ the authori!e capital stoc" of X Corporation is P#$%%%$%%%&%%$ the su*scri*e an
outstanin/ capital stoc" is P2(%$%%%&%%$ the pai0up capital stoc" is P.2$(%%&%% an the
unissue capital stoc" is P1(%$%%%&%%
Co#!%#!' o( !+% Ar!")$%' o( I#)orpor!"o# &'ec. *-)
*. Na0e of +orporation
- 0#"t not be identical or conf#"ingly "i0ilar to tat of any e$i"ting corporation or to
any oter na0e already protected by law &'ec. *D)
(. P#rpo"e&")
,. Principal Place of Office &0#"t be in te Pilippine")
-. Ter0 &'ec. **)
- not e$ceeding fifty &?@) year" fro0 te date of incorporation #nle"" "ooner
di""ol!ed or #nle"" "aid period i" e$tended.
- 0ay be e$tended for period" not e$ceeding fifty &?@) year" in any "ingle in"tance
by an a0end0ent of te Article" &No e$ten"ion can be 0ade earlier tan fi!e &?)
year" prior to te original or "#b"e:#ent e$piry date")
?. Incorporator" &na0e", nationalitie", re"idence") &'ec. *@)
- Nat#ral per"on" not le"" tan ? b#t not 0ore tan *?, all of legal age and a
0a/ority of wo0 are re"ident" of te Pilippine"
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- 0#"t own or be a "#b"criber to at lea"t one &*) "are of te capital "toc1 of te
corporation
A. N#0ber of 3irector"2Tr#"tee" &co0po"ed of ?-*?)
C. 3irector" &na0e", nationalitie" and re"idence")
8. A#tori%ed capital "toc1B par !al#e, "#b"criber", "#b"cription, a0o#nt paid (stock)
9. A0o#nt of capital (non-stock)
*@. Oter 0atter"
Gro3#, (or D"'ppro5$-R%6%)!"o# o( Ar!")$%' &'ec. *C)
*. te p#rpo"e of te corporation i" patently #ncon"tit#tional, illegal, i00oral, or contrary
to law
(. te Article" or any a0end0ent tereto i" not "#b"tantially in accordance wit te for0
pre"cribed by law
,. te trea"#rerI" affida!it concerning te a0o#nt of capital "toc1 "#b"cribed and2or paid
i" fal"e
-. te re:#ired percentage of owner"ip of te capital "toc1 to be owned by citi%en" a"
not been co0plied wit
+orporate e$i"tence co00ence" fro0 te date te 'E+ i""#e" a certificate of
incorporation &'ec. *<)
Gro3#,' o( R%5o)!"o# o( C%r!"(")!% o( I#)orpor!"o#
*. ref#"al to co0ply wit or defiance of a lawf#l order of te 'E+
(. "erio#" 0i"repre"entation a" to wat te corporation can do or i" doing to te great
pre/#dice of, or da0age to te general p#blic
,. contin#o#" inoperation for a period of at lea"t ? year"
-. fail#re to file by-law" witin te re:#ired period
?. fail#re to file re:#ired report" in appropriate for0" a" deter0ined by te co00i""ion
witin te pre"cribed period
A. fra#d in proc#ring it" certificate of incorporation
BOARD OF DIRECTORS OR TRUSTEES &'ec. (,)
- 'all e$erci"e te corporate power" of all corporation"
- control" all b#"ine"" cond#cted and all property of "#c corporation"
- to be elected fro0 a0ong te older" of &!oting) "toc1", or were tere i" no "toc1,
fro0 a0ong te 0e0ber" of te corporation
- "all old office for * year
73$"(")!"o#' o( D"r%)!or
*. e!ery director 0#"t contin#o#"ly own at lea"t * "are of "toc1
(. eac director 0#"t own one &*) "are of "toc1
,. te "are of "toc1 eld by te director 0#"t be regi"tered in i" na0e on te boo1" of
te corporation
-. 0a/ority of te director" 0#"t be a re"ident of te Pilippine"
3i":#alified8 to"e con!icted by final /#dg0ent of &'ec. (C)8
a. an offen"e p#ni"able by i0pri"on0ent for a period e$ceeding A year", or
b. a !iolation of te +orporation +ode co00itted witin fi!e &?) year" prior to te
date of i" election
LAW ON PRIVATE CORPORATIONS
Business Law 74
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M%!+o,' o( Vo!"#2
- E!ery "toc1older entitled to !ote "all a!e te rigt to !ote in per"on or by pro$y te
n#0ber" of "are" of "toc1 "tanding in i" own na0e on te "toc1 noo1" of te
corporation, in any of te following way"8
1. S!r"2+! 5o!"#2 E e!ery "toc1older J0ay !ote "#c n#0ber of
"are" for a" 0any per"on" a" tere are director"K to be electedK
Example: A o)ns #%% shares of stoc" in a corporation )ith ( irectors to *e
chosen& A is entitle to (%% votes 4#%% shares 5 ( irectors6& 7e 8a' /ive to the (
caniates of his choice #%% votes each&
2. C3&3$!"5% 5o!"#2 (or o#% )#,",!% E "toc1older allowed to
concentrate i" !ote" and Jgi!e one candidate a" 0any !ote" a" te n#0ber of
director" to be elected 0#ltiplied by te n#0ber of i" "are" "all e:#al.K
Example: A o)ns #%% shares of stoc" in a corporation )ith ( irectors to *e
chosen& A is entitle to (%% votes$ all of )hich he 8a' cast in favor of an' one
caniate&
3. C3&3$!"5% 5o!"#2 /. ,"'!r"/3!"o# E "toc1older 0ay
c#0#late i" "are" by 0#ltiplying al"o te n#0ber of i" "are" by te n#0ber
of director" to be elected and di"trib#te te "a0e a0ong a" 0any candidate" a"
e "all "ee fit.
Example: A o)ns #%% shares of stoc" in a corporation )ith ( irectors to *e
chosen& A is entitle to (%% votes 4#%% shares 5 ( irectors6& 7e 8a' istri*ute his
votes to caniates of his choice$ such as 2%% to choice # an 2%% to choice 2&
For&3$ !o ,%!%r&"#% !+% 5o!%' #%%,%, "# )3&3$!"5% 5o!"#28
D 9 :A ; B< - :C =>< = >
E 9 D ; C
=ere8 A L total n#0ber of o#t"tanding "are" entitled to !ote
9 L n#0ber of director" de"ired to be elected
+ L total n#0ber of director" to be elected
3 L n#0ber of "are" nece""ary to elect de"ired n#0ber of director"
E L n#0ber of !ote" re:#ired to elect de"ired n#0ber of director"
Example: A9 Corp& is a stoc" corporation )ith #%$%%% shares an a nine08an *oar
of irectors& :aria$ a stoc"holer o)nin/ 3$%%% shares$ see"s control of the co8pan' an
esires to elect five 4(6 irectors& 7o) 8an' votes )ill she nee to secure the election of
five irectors;
D = [A x B] / [C + 1] + 1 E = D x C
< = >#%$%%% 5 (? @ >A B #? B # E = ($%%# 5 A
= >(%$%%%? @ >#%? B # E = 3($%%A votes$ )hich 8a' *e
= ($%%% B # istri*ute to the (
= 5,001 caniates of choice
73or3& ? "#c n#0ber of te 0e0ber"ip of a collecti!e body a" i" co0petent to
tran"act it" b#"ine"" or do any oter corporate act
R%&o5$ o( D"r%)!or' (*"!+ or *"!+o3! )3'%) &'ec. (D)
LAW ON PRIVATE CORPORATIONS
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*. 6ote by te "toc1older" repre"enting (2, of te o#t"tanding capital "toc1
(. A "pecial 0eeting i" d#ly called for te p#rpo"e
3. Notice of te ti0e and place of 0eeting
-. A new director i" ten after elected in te "a0e "pecial 0eeting
M If d#e to re"ignation, abandon0ent, !acancy d#e to increa"e in n#0ber of director",
and deat, it i" filled by 0ere 0a/ority !ote of te 9oard if "till con"tit#ting a :#or#0 &'ec.
(<)
Corpor!% O((")%r' - I00ediately after teir election, te director" of a corporation 0#"t
for0ally organi%e by te election of a pre"ident, wo "all be a director, a trea"#rer wo
0ay or 0ay not be a director, a "ecretary wo "all be a re"ident and citi%en of te
Pilippine", and "#c oter officer" a" 0ay be pro!ided for in te by-law". Any two &() or
0ore po"ition" 0ay be eld conc#rrently by te "a0e per"on, e$cept tat no one "all act
a" pre"ident and "ecretary or a" pre"ident and trea"#rer at te "a0e ti0e. &'ec. (?)
LIABILIT@ OF DIRECTORS UNDER THE CORPORATION CODE
1. D"r%)!or'-O((")%r' )!"#2 *"!+ %5",%#! &$")% or /, ("!+ &'ec. ,*)
a. willf#lly and 1nowingly !ote for or a""ent to patently #nlawf#l act" of te
corporation
b. wo are g#ilty of gro"" negligence or bad fait in directing te affair" of te
corporation
c. ac:#ire" any per"onal or pec#niary intere"t in conflict wit teir d#tie"
*) in !iolation of i" d#tie"
() concerning any intere"t ad!er"e to te corporation in re"pect to any 0atter
wic a" been repo"ed in i0 in confidence
,) atte0pt" to ac:#ire or ac:#ire" it
d. con"ent" to te i""#ance of watered "toc1" or wo a!ing 1nowledge tereof, doe"
not fortwit file wit te corporate "ecretary i" written ob/ection" tereto
2. SELF1DEALING ,"r%)!or' &'ec. ,() E occ#r" wen a contract i" entered between
corporation and one or 0ore of it" director"
Effect8 +ontract i" 6oidable &at te option of +orporation) UN7E''8
a. i" pre"ence wa" not re:#ired to con"tit#te a :#or#0
b. i" !ote wa" not nece""ary to con"tit#te 0a/ority
c. te contract i" 4AIR and rea"onable
M ab"ence of &a) and &b) 0ay be ratified by (2, !ote of "toc1older" pro!ided tere
i" f#ll di"clo"#re of ad!er"e intere"t
3. INTERLOCAING ,"r%)!or' &'ec. ,,) E occ#r" wen a contract i" entered between
two or 0ore corporation" a!ing interloc1ing &"a0e) director"
Effect8 +ontract i" 6alid pro!ided tat it i" fair and rea"onable #nder te circ#0"tance"
M in ca"e te intere"t of te interloc1ing director" i" greater tan (@H in one
+orporation and le"" in te oter, te r#le on 'E74-3EA7IN5 director" applie" &te
no0inal corporation a" te option to ann#l te contract).
4. D"'$o.$!. o( ,"r%)!or' &'ec. ,-) - =ere a director ac:#ire" for i0"elf a b#"ine""
opport#nity wic "o#ld belong to te corporation, tereby obtaining profit" to te
pre/#dice of "#c corporation, e 0#"t acco#nt to te latter for all "#c profit" by
ref#nding te "a0e
LAW ON PRIVATE CORPORATIONS
Business Law 74
.
Exception: Act ratified by a !ote of te "toc1older" owning or repre"enting at lea"t
(2, of te o#t"tanding capital "toc1
EBECUTIVE COMMITTEE &'ec. ,?) - te by-law" of a corporation 0ay create an
e$ec#ti!e co00ittee, co0po"ed of not le"" tan tree 0e0ber" of te board, to be
appointed by te board.
'aid co00ittee 0ay act, by 0a/ority !ote of all it" 0e0ber", on "#c "pecific 0atter"
witin te co0petence of te board, a" 0ay be delegated to it in te by-law" or on a
0a/ority !ote of te board, e$cept8
&*) appro!al of any action for wic "areolder"I appro!al i" al"o re:#iredB
&() te filing of !acancie" in te boardB
&,) te a0end0ent or repeal of by-law" or te adoption of new by-law"B
&-) te a0end0ent or repeal of any re"ol#tion of te board wic by it" e$pre"" ter0"
i" not "o a0endable or repealableB and
&?) a di"trib#tion of ca" di!idend" to te "areolder".
POWERS OF THE CORPORATION &'ec. ,A)
*. To "#e and be "#ed tro#g it" 9oard
(. To adopt and #"e a corporate "eal
,. To enter into wit oter corporation" 0erger or con"olidation
-. To e"tabli" pen"ion, retire0ent and oter plan" for te benefit of it" director" and
tr#"tee"
?. To a0end it" Article"
A. Of "#cce""ion
C. To "ell or i""#e "toc1" to "#b"criber"
D. To p#rca"e or recei!e, real or per"onal property of oter corporation" a" te lawf#l
tran"action 0ay re:#ire
<. To adopt by-law", not contrary to law, 0oral", or p#blic policy and to a0end or repeal
te "a0e
*@. To 0a1e rea"onable donation" to carity e$cept political partie"
**. To e$erci"e power" e""ential to carry on it" p#rpo"e
Corpor!% A)!'
6ote Re:#ired
+orporate Action
9oard
'toc1older"2
Me0ber"
Non-!oting
"are" can
!oteN
Apprai"al
RigtN
&'ec. D*)
A0end Article" Ma/ority (2, Ye" Ye"
'ale, etc. of all or "#b"tantially all A""et"
&'ec. -@)
Ma/ority (2, Ye" Ye"
In!e"t0ent in oter &different) b#"ine"" &'ec.
-()
Ma/ority (2, Ye" Ye"
Increa"e2decrea"e of +apital "toc1 &'ec. ,D) Ma/ority (2, Ye"
Inc#r, increa"e 9onded indebtedne"" &'ec.
,D)
Ma/ority (2, Ye"
Adopt2A0end 9y-law" &'ec. -A2-D)
3elegate to 9oard power to a0end
Re!o1e delegated power &'ec. -D)
Ma/ority
n2a
n2a
Ma/ority
(2,
Ma/ority
Ye"
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Merger2con"olidation &'ec. CC) Ma/ority (2, Ye" Ye"
Appro!al of ca"2property di!idend" &'ec.
-,)
Ma/ority n2a
Appro!al of "toc1 di!idend" &'ec. -,) Ma/ority (2,
Enter into Manage0ent contract &'ec. --)
If 'toc1older" a!e *2, intere"t in bot
If "a0e co0po"e 0a/ority in bot
board"
Ma/ority Ma/ority
(2,
(2,
6ol#ntary 3i""ol#tion w2o creditor" &'ec.
**D)
Ma/ority (2, Ye"
6ol#ntary 3i""ol#tion w2 creditor" &'ec. **<) Ma/ority (2, Ye"
E$tend2'orten +orporate Ter0 &'ec. ,C) Ma/ority (2, Ye"
A)!"o#' *+%r% o#$. !+% '!o)0+o$,%r +' !o 5o!%
*. to elect a director
(. to re0o!e a director
,. to call a "pecial 0eeting to re0o!e a director
-. delegate to te board te power to a0end or repeal te by-law" or adopt new by-law"
?. re!o1e te power delegated to te board of director" to adopt a new by-law
V$", D%#"$ o( Pr%1%&p!"5% R"2+!
*. 3enied by te Article"
(. =it (2, !ote, in pay0ent of a pre!io#"ly contracted debt
,. 'are" to be i""#ed in co0pliance wit law"
-. =it (2, !ote, in e$cange for property needed for corporate p#rpo"e"
Po*%r !o A)C3"r% o*# '+r%' - A "toc1 corporation "all a!e te power to p#rca"e or
ac:#ire it" own "are" for a legiti0ate corporate &'ec. -*)
*. +apital i" not i0paired
(. 7egiti0ate corporate p#rpo"e"
a. To pay di""enting 2 witdrawing "toc1older"
b. To collect or co0pro0i"e indebtedne"" to corporation ari"ing fro0 #npaid
"#b"cription p#rca"ed by te corporation in a delin:#ency "ale
c. In a clo"e corporation, were tere i" a deadloc1, te di""enting "toc1older 0ay
petition to te 'E+ and e 0ay be paid te fair 0ar1et !al#e of i" "are"
d. =it re"pect to redee0able "are"
e. Eli0inate fractional "are"
f. 'are" reac:#ired to effect a decrea"e in te capital "toc1
g. In ca"e" of trea"#ry "are"
,. Te corporation a" #nre"tricted retained earning"
Tr3'! (3#, ,o)!r"#% E con"ider" te "#b"cribed capital a" tr#"t f#nd for te pay0ent of
te debt" of te corporation, to wic te creditor" loo1 for "ati"faction.
Po*%r !o ,%)$r% ,"5",%#,' - Te board of director" of a "toc1 corporation 0ay declare
di!idend" o#t of te #nre"tricted retained earning" wic "all be payable in ca", in
property, or in "toc1 to all "toc1older" on te ba"i" of o#t"tanding "toc1 eld by te0
&'ec. -,)
Re:#i"ite" for declaration of di!idend"8
LAW ON PRIVATE CORPORATIONS
Business Law 74
C
*. E$i"tence of J#nre"tricted retained earning"K
(. +orporate re"ol#tion of te board declaring te pay0ent of a
portion or all of "#c earning" to "toc1older"
Gro3#,' (or 5$", r%!%#!"o# o( '3rp$3' pro("!'
*. =en /#"tified by definite corporate e$pan"ion pro/ect"
(. =en te corporation i" proibited #nder any loan agree0ent
,. =en it can be clearly "own tat "#c retention i" nece""ary #nder "pecial
circ#0"tance" obtaining in te corporation
R%C3"'"!%' (or !+% E;%r)"'% o( Appr"'$ R"2+!'
*) Te di""enting "toc1older 0#"t a!e !oted again"t te corporate action
() M#"t be e$erci"ed on te in"tance" were apprai"al rigt" are a!ailable
,) A written de0and on te corporation for pay0ent of i" "are" 0#"t be 0ade by i0
witin ,@ day" after te date te !ote wa" ta1en
-) Te price 0#"t be ba"ed on te fair 0ar1et !al#e of te "are" a" of te day prior to
te date on wic te !ote wa" ta1en
?) 'toc1older 0#"t tran"fer i" "are" to te corporation witin *@ day"
A) Pay0ent of te "are" 0#"t be 0ade o#t of te #nre"tricted earning" of te
corporation
I#'!#)%' *+%r% Appr"'$ R"2+!' Ar% A5"$/$% (A-MISC)
*) 9y AMEN3MENT of te A2I to &a) e$tend corporate ter0, &b) cange" or re"trict" rigt"
of 'are", and &c) cange in te p#rpo"e of te corporation
() MER5ER and con"olidation
,) IN6E'T corporate f#nd" in anoter corporation or b#"ine"" or for any oter p#rpo"e"
-) 'A7E or oter di"po"ition of "#b"tantially all of te +orporate Propertie" and A""et"
?) In +7O'E corporation", for any rea"on, and only wen te corporation a" "#fficient
f#nd"
B@ LAWS
*) 0#"t be general and #nifor0 in teir operation and not directed again"t partic#lar
indi!id#al"
() 0#"t be con"i"tent wit te carter or a2i
,) 0#"t be rea"onable
-) 0#"t not i0pair obligation" of contract"
?) 0#"t not be contrary to 0oral" and p#blic policy
A) 0#"t not be contrary to e$i"ting law" or incon"i"tent wit te corporation code
E''%#!"$ R%C3"'"!%' o( 5$", '!o)0+o$,%rD' &%%!"#2
*) It 0#"t be eld at te proper place a" fi$ed in te by-law"
() Tere 0#"t be a :#or#0
,) It 0#"t be eld at te "tated date and at te appointed ti0e or at a rea"onable ti0e
tereafter wit pre!io#" notice
-) It 0#"t be called by te proper per"on
MEETINGS
S!o)0+o$,%r' D"r%)!or'
LAW ON PRIVATE CORPORATIONS
Business Law 74
A
A"#, Reg#lar or 'pecial Reg#lar or 'pecial
Fr%C3%#). At lea"t once a year &reg#lar) At lea"t once a 0ont &reg#lar)
V%#3% Principal office of te corporation Anywere in or o#t"ide of te Pilippine"
No!")% Reg#lar8 at lea"t ( wee1" prior to
te 0eetingM
'pecial8 at lea"t * wee1 prior to
0eetingM
at lea"t one &*) day prior to te
"ced#led 0eetingM
Pr%'","#2
O((")%r
Pre"ident Pre"ident
* unless a different period is required by the by-laws
Pro;. Vo!"#2 Tr3'! A2r%%&%#! (VTA)
Re:#i"ite"8
*. In writing
(. 'igned by te "toc1older
,. 4iled before te "ced#led 0eeting
wit te corporate "ecretary
Re:#i"ite"8
*. In writing
(. 6alid only for fi!e year"
,. 3#ly notari%ed
-. M#"t "pecify te ter0" and condition"
No legal title to te "are" of te
"toc1older gi!ing te agency
Ac:#ire" legal title to te "are" of te
tran"ferring "toc1older
Re!ocable at anyti0e UN7E''
co#pled wit intere"t
Irre!ocable d#ring te period
Pro$y can only act at te "pecified
"toc1older 0eeting
Tr#"tee i" not li0ited to any partic#lar
0eeting
Pro$y !ote" only in te ab"ence of te
owner of te "toc1
Tr#"tee can !ote and e$erci"e all te
rigt" of te tran"ferring "toc1older
e!en wen te latter i" pre"ent
U"#ally "ort in d#ration +annot e$ceed ? year" at any one ti0e
Need not be notari%ed nor filed wit te
'E+
M#"t be notari%ed and filed wit te
'E+ and te corporation
3oe" not a!e te rigt to in"pection .a" te rigt to in"pection
CERTIFICATE OF STOCA
Te capital "toc1 of "toc1 corporation" "all be di!ided into "are" for wic certificate"
"igned by te pre"ident or !ice pre"ident, co#nter"igned by te "ecretary or a""i"tant
"ecretary, and "ealed wit te "eal of te corporation "all be i""#ed in accordance wit
te by-law". 'are" of "toc1 "o i""#ed are per"onal property and 0ay be tran"ferred by
deli!ery of te certificate or certificate" endor"ed by te owner or i" attorney-in-fact or
oter per"on legally a#tori%ed to 0a1e te tran"fer.
No tran"fer, owe!er, "all be !alid, e$cept a" between te partie", #ntil te tran"fer i"
recorded in te boo1" of te corporation &'toc1 and Tran"fer 9oo1) "owing te na0e" of
te partie" to te tran"action, te date of te tran"fer, te n#0ber of te certificate or
certificate" and te n#0ber of "are" tran"ferred. &'ec. A,)
M No +ERTI4I+ATE O4 'TO+G "all be i""#ed to a "#b"criber #ntil te f#ll a0o#nt of i"
"#b"cription togeter wit intere"t and e$pen"e" &in ca"e of delin:#ent "are"), if any i"
d#e, a" been paid. &'ec. A-)
LAW ON PRIVATE CORPORATIONS
Business Law 74
#%
P.&%#! o( /$#)% o( '3/')r"p!"o# - Te board of director" of any "toc1 corporation
0ay at anyti0e declare d#e and payable to te corporation 3#p", '3/')r"p!"o#' to te
capital "toc1
Pay0ent of any #npaid "#b"cription, togeter wit te intere"t accr#ed, if any, "all be
0ade on te date "pecified in te contract of "#b"cription or on te date "tated in te call
0ade by te board. If witin ,@ day" fro0 te "aid date no pay0ent i" 0ade, all "toc1"
co!ered by "aid "#b"cription "all tere#pon beco0e ,%$"#C3%#! and "all be "#b/ect to
"ale, #nle"" te board of director" order" oterwi"e. &'ec. AC)
E((%)! o( ,%$"#C3%#). &'ec. C*) E +annot be !oted for be entitled to !ote or to
repre"entation at any "toc1olderI" 0eeting
D%$"#C3%#). '$% - Te "ale of delin:#ent "toc1 wic "all be 0ade not be le"" tan
tirty &,@) day" nor 0ore tan "i$ty &A@) day" fro0 te date te "toc1" beco0e delin:#ent.
Notice of "aid "ale "all be "ent to e!ery delin:#ent "toc1older and p#bli"ed once a
wee1 for two &() con"ec#ti!e wee1" in a new"paper of general circ#lation in te pro!ince
or city were te principal office of te corporation i" located.
Unle"" te delin:#ent "toc1older pay" to te corporation, on or before te date "pecified
for te "ale of te delin:#ent "toc1, te balance d#e on i" "#b"cription, pl#" accr#ed
intere"t, co"t" of ad!erti"e0ent and e$pen"e" of "ale, "aid delin:#ent "toc1 "all be "old
at p#blic a#ction to "#c bidder wo "all offer to pay te f#ll a0o#nt of te balance on te
"#b"cription togeter wit accr#ed intere"t, co"t" of ad!erti"e0ent and e$pen"e" of "ale,
for te "0alle"t n#0ber of "are" or fraction of a "are.
Te "toc1 "o p#rca"ed "all be tran"ferred to "#c p#rca"er in te boo1" of te
corporation and a certificate for "#c "toc1 "all be i""#ed in i" fa!or.
'o#ld tere be no bidder at te p#blic a#ction, te corporation 0ay bid for te "a0e, and
te total a0o#nt d#e "all be credited a" paid in f#ll in te boo1" of te corporation. Title
to all te "are" of "toc1 co!ered by te "#b"cription "all be !e"ted in te corporation a"
!r%'3r. '+r%' and 0ay be di"po"ed of by "aid corporation in accordance wit te
pro!i"ion" of ti" +ode. &'ec. AD)
CORPORATE BOOAS AND RECORDS &'ec. C-)
E!ery corporation "all 1eep and caref#lly pre"er!e at it" principal office a record of all
b#"ine"" tran"action" and 0in#te" of all 0eeting" of "toc1older" or 0e0ber", or of te
board of director" or tr#"tee"
Record" of all b#"ine"" tran"action" of te corporation and te 0in#te" of any 0eeting"
"all be open to in"pection by any "toc1older or 0e0ber of te corporation at rea"onable
o#r" on b#"ine"" day"
S!o)0 #, Tr#'(%r Boo0 - a record of all "toc1" in te na0e" of te "toc1older"
alpabetically arrangedB te in"tall0ent" paid and #npaid on all "toc1 for wic
"#b"cription a" been 0ade, and te date of pay0ent of any in"tall0entB a "tate0ent of
e!ery alienation, "ale or tran"fer of "toc1 0ade, te date tereof, and by and to wo0
0adeB and "#c oter entrie" a" te by-law" 0ay pre"cribe.
LAW ON PRIVATE CORPORATIONS
Business Law 74
##
R"2+!' o( S!o)0+o$,%r
*. rigt to IN'PE+T corporate boo1" and record"
(. rigt to 4INAN+IA7 "tate0ent"
Co&&o# (or&' o( Corpor!% Co&/"#!"o#'
1) +on"olidation E two &or 0ore) corporation" #ntie, gi!ing ri"e to a new corporate body
and di""ol!ing te con"tit#ent corporation" a" "eparate corporation"
2) Merger E two &or 0ore) corporation" #nite, one corporation wic re0ain" in being,
ab"orbing or 0erging in it"elf te oter wic di"appear" a" a "eparate corporation
3) 'ale of a""et" to anoter corporation E a corporation "elling all or "#b"tantially all of it"
a""et" to anoter corporation
4) 'ale of "toc1 E te p#rpo"e of a olding &or parent) co0pany i" to ac:#ire a "#fficient
a0o#nt of te "toc1 of anoter corporation &"#b"idiary) for te p#rpo"e of control.
5) 7ea"e of a""et" E a corporation lea"e" it" property to anoter corporation for wic te
le""or 0erely recei!e" rental paid by te le""ee
Pro)%,3r% (or %((%)!"#2 p$# o( &%r2%r or )o#'o$",!"o#
*) Appro!al of plan by te board of eac corporation
() '#b0i""ion to "toc1older" for appro!al of te plan
,) E$ec#tion of for0al contract
-) '#b0i""ion to 'E+ for appro!al
?) +ond#ct of earing by 'E+
A) I""#ance of certificate by 'E+
Appr"'$ R"2+! &'ec. D*)
- refer" to a "toc1olderO" rigt to de0and pay0ent of te fair !al#e of i" "are",
after di""enting fro0 a propo"ed corporate action, in te ca"e" pro!ided by law.
=en a!ailable8
*. a0end0ent to article" wit te effect of canging rigt" of
"toc1older" or e$tending or "ortening te ter0 of corporate e$i"tence
(. 'ale, lea"e, or oter di"po"ition of all or "#b"tantially all of
te corporate property
,. 0erger of con"olidation
-. wen corporation decide" to in!e"t it" f#nd" in anoter
b#"ine"" oter tan te pri0ary p#rpo"e of te corporation
.ow rigt i" e$erci"ed8
*. 3i""enting "toc1older "all 0a1e a written de0and &on te
corporation) for pay0ent of te fair !al#e of i" "are", witin ,@ day" after te
date on wic te !ote wa" ta1en &oterwi"e, tere i" a wai!er of i" apprai"al
rigt)
(. If te propo"ed corporate action i" effected, te corporation "all
pay to "#c "toc1older, #pon "#rrender of te corre"ponding certificate" of "toc1
a0end0ent to article" wit te effect of canging rigt" of "toc1older" or
e$tending or "ortening te ter0 of corporate e$i"tence
LAW ON PRIVATE CORPORATIONS
Business Law 74
#2
,. Upon pay0ent of te agreed price, te "toc1older "all tran"fer
te "are" to te corporation
CLOSE CORPORATIONS - one wo"e article" of incorporation pro!ide tat8
&*) All te corporationI" i""#ed "toc1 of all cla""e", e$cl#"i!e of trea"#ry
"are", "all be eld of record by not 0ore tan a "pecified n#0ber of
per"on", not e$ceeding twenty &(@)B
&() all te i""#ed "toc1 of all cla""e" "all be "#b/ect to one or 0ore "pecified
re"triction" on tran"fer per0itted by ti" TitleB and
&,) Te corporation "all not li"t in any "toc1 e$cange or 0a1e any p#blic
offering of any of it" "toc1 of any cla"".
Corpor!"o#' !+! )##o! /% "#)orpor!%, ' CLOSE Corpor!"o#
*. P#blic Utility, Oil +o0panie", Ed#cational in"tit#tion, and Mining co0panie"
(. 9an1", In"#rance +o0panie", Oter corporation" declared to be !e"ted wit p#blic
intere"t, and 'toc1 e$cange"
A)!"o#' ,o#% /. D"r%)!or "# )$o'% )orpor!"o# "' 5$", %5%# *"!+o3! &%%!"#2
*+%#
*) Tere i" a written con"ent by all director" prior to te act
2) All te "toc1older" a!e act#al or i0plied 1nowledge and 0ade no pro0pt ob/ection"
in writing
3) =en te director" are acc#"to0ed to ta1e infor0al action" wit te e$pre"" or
i0plied ac:#ie"cence of all te "toc1older"
-) =en all te director" a!e e$pre"" or i0plied 1nowledge of te action in :#e"tion and
none of te0 0a1e" pro0pt ob/ection tereto in writing
SPECIAL CORPORATIONS
E,3)!"o#$ Corpor!"o#' - Tr#"tee" of ed#cational in"tit#tion" organi%ed a" non-"toc1
corporation" "all not be le"" tan fi!e &?) nor 0ore tan fifteen &*?)8 Pro!ided, owe!er,
Tat te n#0ber of tr#"tee" "all be in 0#ltiple" of fi!e &?).
Unle"" oterwi"e pro!ided in te article" of incorporation on te by-law", te board of
tr#"tee" of incorporated "cool", college", or oter in"tit#tion" of learning "all, a" "oon
a" organi%ed, "o cla""ify te0"el!e" tat te ter0 of office of one-fift &*2?) of teir
n#0ber "all e$pire e!ery year. Tr#"tee" tereafter elected to fill !acancie", occ#rring
before te e$piration of a partic#lar ter0, "all old office only for te #ne$pired period.
Tr#"tee" elected tereafter to fill !acancie" ca#"ed by e$piration of ter0 "all old office
for fi!e &?) year". A 0a/ority of te tr#"tee" "all con"tit#te a :#or#0 for te tran"action of
b#"ine"". Te power" and a#tority of tr#"tee" "all be defined in te by-law". &'ec. *@D)
R%$"2"o3' Corpor!"o#'
LAW ON PRIVATE CORPORATIONS
Business Law 74
#2
a. Corpor!"o#' 'o$% 1 for te p#rpo"e of ad0ini"tering and 0anaging, a"
tr#"tee, te affair", property and te0poralitie" of any religio#" deno0ination,
"ect or c#rc, a corporation "ole 0ay be for0ed by te cief arcbi"op,
bi"op, prie"t, 0ini"ter, rabbi or oter pre"iding elder of "#c religio#"
deno0ination, "ect or c#rc &'ec. **@)
b. R%$"2"o3' 'o)"%!"%' 1 any religio#" "ociety or religio#" order, or any dioce"e,
"ynod, or di"trict organi%ation of any religio#" deno0ination, "ect or c#rc,
#nle"" forbidden by te con"tit#tion, r#le", reg#lation", or di"cipline of te
religio#" deno0ination, "ect or c#rc of wic it i" a part, or by co0petent
a#tority, 0ay, #pon written con"ent and2or by an affir0ati!e !ote at a 0eeting
called for te p#rpo"e of at lea"t two-tird" &(2,) of it" 0e0ber"ip, incorporate
for te ad0ini"tration of it" te0poralitie" or for te 0anage0ent of it" affair",
propertie" and e"tate &'ec. **A)
DISSOLUTION
Vo$3#!r. D"''o$3!"o#
1) by /#dg0ent of te 'E+ after earing of petition for !ol#ntary di""ol#tion were
creditor" are affected &'ec. **<)
2) by a0ending it" Article" to "orten te corporate ter0 &'ec. *(@)
3) by a !ote of te 9oard &0a/ority) and 'toc1older" &(2,) were no creditor" are
affected &'ec. **D)
I#5o$3#!r. D"''o$3!"o#
1) e$piration of te ter0 pro!ided for in te article"
() by fail#re to for0ally organi%e and co00ence te tran"action of it" b#"ine"" witin (
year" fro0 te date of incorporation
,) fail#re to operate contin#o#"ly for a period of at lea"t ? year"
-) by order of te 'E+
5ro#nd" for 3i""ol#tion8
a) !iolation of te corporation code
b) 0i"0anage0ent
c) "#"pen"ion or re!ocation of certificate of regi"tration
?) by legi"lati!e enact0ent"
G%#%r$ r%C3"'"!%' (or (or%"2# )orpor!"o#' /%(or% "! )# op%r!% "# !+% P+"$"pp"#%'
*. +orporation created by or #nder te law of anoter "tate
2. It i" licen"ed to do b#"ine"" in te Pilippine"
3. Tere i" reciprocity
C'%' *+%r% # 3#$")%#'%, (or%"2# )orpor!"o# "' $$o*%, !o '3% "# !+% P+"$"pp"#%'
*. +a"e" of i"olated tran"action"
2. +a"e" of incidental acti!itie" for wic te corporation wa" not organi%ed
3. =en te e$ception i" pro!ided by "tate" &infringe0ent, #nfair co0petition or fal"e
de"cription of trade0ar1, action to protect good na0e)
-. act" preli0inary to doing b#"ine""
?. were contract pro!ide" Pilippine co#rt" a" !en#e for contro!er"ie"
LAW ON PRIVATE CORPORATIONS
Business Law 74
#3
A. licen"e "#b"e:#ently granted enable" foreign corporation to "#e on contract" e$ec#ted
before grant of licen"e
C. Reco!ery of 0i"deli!ered property
D. were te #nlicen"ed foreign corporation a" a do0e"tic corporation for a co-plaintiff
LAW ON PRIVATE CORPORATIONS
Business Law 74
#(