TITLE II

INCORPORATION AND
ORGANIZATION OF PRIVATE
CORPORATIONS
 SECTION 10.
Number and qualifications of incorporators - any
number of natural persons not less than five(5) but
not more than fifteen(15), all of legal age and a
majority of whom are residents of the Philippines,
may form a private corporation for any lawful
purpose or purposes. Each of the incorporators of a
stock corporation must own or be subscriber to at
least one(1) share of the capital stock of the
corporation.(6a)
STEPS IN THE CREATION OF A
CORPORATION

(1) PROMOTION
(2) INCORPORATION
(3) FORMAL ORGANIZATION AND
COMMENCEMENT OF BUSINESS
OPERATIONS
 INCORPORATORS: NUMBER AND
QUALIFICATIONS

Incorporators- also called a promoter, is the

individual, corporation or association responsible
for the process; the business will not be fully
incorporated until the incorporator signs and files
the articles of incorporation. Incorporators play a
minor role in the overall business, and their
involvement typically ceases after the corporation
is established.
- are typically the actual owners of the business, but
may also be employees or members of the law
firm handling the incorporation process.
(1) NATURAL PERSONS - a human being
as distinguished from a person (as a
corporation) created by operation of law.
-these five or more persons must be natural
persons. Therefore, a corporation cannot
be an incorporator of another corporation.
EXCEPTION:
SECTION 4 of R.A. No. 7353
 (2) CAPACITY TO CONTRACT- Incorporators must
have the capacity to enter into a valid contract, the act of
forming a corporation as between the parties being
contractual.

-- a married woman may be an incorporator without the need

of the husband`s consent since under the law “ either spouse
may exercise any legitimate profession, occupation, business
or activity without the consent of the other” subject to the
right of the husband to “object only on valid, serious and
moral grounds.”

-- incorporators must be “all of legal age”.

(3) RESIDENTS OF THE PHILIPPINES- A majority of
the incorporators must be residents of the Philippines; the
rest may be persons who are neither residents nor citizens.
--the term “residents” means domiciled residents(physically
present in the Philippines with an intention to remain in the
country)
--this residence requirement is mandatory.

(4) CITIZENS OF THE PHILIPPINES- citizenship is a

necessary qualification for incorporators in a corporation in
which a certain percentage of the capital stock is required to
be owned by Filipino citizens.
--foreign shareholders are excluded from certain activities
which are exclusive for Filipino citizens.
 (5) OWNERS OF OR SUBSCRIBER TO AT LEAST
ONE(1) SHARE- Each of the incorporators of a stock
corporation must own or be a subscriber to at least one share
of the capital stock of the corporation.
--it is believed that an incorporator who has some monetary
interest will be concerned with the management of the
business.
 REQUIREMENT OF MINIMUM NUMBER OF
INCORPORATORS MANDATORY

(1) REDUCTION OF STOCKHOLDERS OR MEMBERS TO LESS THAN

MINIMUM
-- the number of stockholders or members after the corporation is
organized may become less than minimum number required for
corporation without affecting corporate existence unless valid
grounds exist for piercing or lifting the corporate veil.

(2)BENEFICIAL OWNERSHIP IN ONE (1) INDIVIDUAL

-- beneficial ownership is not necessary, a person with legal title is qualified
to be an incorporator.

(3) SUBSEQUENT ACCUMULATION OF SHARES IN ONE INDIVIDUAL

--nor the existence of the corporation originally formed by the required
number of incorporators be affected by the subsequent
accumulation of all shares in the hand of one individual, unless
circumstances exist to justify the piercing of the veil of corporate
entity.
 SECTION 11.
CORPORATE TERM. – A CORPORATION SHALL EXIST FOR A
PERIOD NOT EXCEEDING FIFTY(50) YEARS FROM THE DATE OF
INCORPORATION UNLESS SOONER DISSOLVED OR UNLESS
SAID PERIOD IS EXTENDED. THE CORPORATE TERM AS
ORIGINALLY STATED IN THE ARTICLES OF INCORPORATION
MAY BE EXTENDED FOR PERIODS NOT EXCEEDING FIFTY (50)
YEARS IN ANY SINGLE INSTANCE BY AN AMENDMENT OF THE
ARTICLES OF INCORPORATION, IN ACCORDANCE WITH THIS
CODE: PROVIDED, THAT NO EXTENTION CAN BE MADE
EARLIER THAN 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 SECURITIES AND EXCHANGE
COMMISSION.
TERM OF CORPORATE EXISTENCE
--the corporation shall exist for the term specified in the articles of
corporation not exceeding 50 years, the corporate life may be
reduced or extended by amendment of the articles of
incorporation.

EXTENSION OF CORPORATE TERM

(1)LIMITATIONS
-- the term shall not exceed 50 years in any one instance
--the amendment is effected before the expiration of the corporate
term of existence for after dissolution by expiration of the corporate
term there is no more corporate life to extend.
--the extension cannot be made earlier than five years prior to the
expiration date unless there are justifiable reasons therefore as may
be determined by the SEC.
 (2) EFFECT OF EXTENSION/ EXPIRATION OF TERM
--the mere extension of the corporate term of existence
made before the expiration of the original term constitutes
a continuation of the old, and not the creation of a new,
corporation.
--upon the expiration of the corporate term, the absence of
compliance with the legal requisites for the extension of the
period, the corporation ceases to exist and is dissolved ipso
facto.
--the expiration of the term does not produce its immediate
dissolution for all purposes.
(3) AUTOMATIC EXTENSION
--section 11 allows automatic extension of the corporate
existence by amendment of the articles of incorporation
within the 5 year period before the expiration date of the
existing term.
 SECTION 12.
MINIMUM CAPITAL STOCK REQUIRED OF
STOCK CORPORATIONS. – STOCK
CORPORATION INCORPORATED UNDER THIS
CODE SHALL NOT BE REQUIRED TO HAVE
ANY MINIMUM AUTHORIZED CAPITAL
STOCK EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED FOR BY SPECIAL
LAW, AND SUBJECT TO THE PROVISIONS OF
THE FOLLOWING SECTIONS.
 CAPITAL STOCK
REQUIREMENT
--the code does not set a minimum authorized capital stock
except as otherwise provided by special law as long as the
paid up capital, as required by Section 13, is not less than
5000 pesos.
--special laws may require higher paid-up capital, as in case
of commercial banks, insurance companies and investment
houses.

Filipino percentage ownership

requirement regarding corporate
capital
(1) Corporations for exploration, development and
utilization of natural resources.- at least 60% of the
capital of which is owned by citizens of the Philippines.
(2) Public service corporations - at least 60% of the capital
of which is owned by citizens of the Philippines.
(3) Educational Corporations – other than those established by religious
orders and mission boards, at least 60% of the capital of which is owned by
citizens of the Philippines.
(4) Banking Corporations – at least 60% of the voting stock of the
corporation shall owned or controlled by citizens of the Philippines.
(5) Corporations engaged in retail trade – enterprises with less than U.S.
2.5 million dollars paid up capital are reserved exclusively for Filipino citizens
and corporations wholly-owned by Filipino citizens.
(6) Rural Banks – before, no less than 40% of the voting stocks of which shall
be owned by Filipino citizens or corporations at least 60% of whose capital is
owned by such citizens. Foreign investors are now allowed to own acquire or
purchase up to 60% of a voting stock in a rural bank.
(7) Corporations engaged in coastwise shipping- at least 60% of the capital
stock of which or of any interest in said capital is totally owned by citizens of
the Philippines.
(8) Corporations engaged in the pawnshop business – at least 70% of the
voting capital stock shall be owned by citizens of the Philippines.
(9) Under the Flag Law – in the purchase of articles for the Government,
preference shall be given to materials and supplies produced, made or
manufactured in the Philippines and to domestic entities.