LIMITATION/REQUISITES/REQUIRMENTS
8 INSTANCES NON VOTING CAN VOTE – A2– Amendment of the article
A2S I M I D -Amendment of the bylaws
S – Sale, lease, exchange, mortgage
I – Incurring, Creating or Increasing
bonded indebtedness
M – Merger of consolidation
I – Increase or decrease of capital stock
D – Dissolution of Corporation.
Who can be an incorporator? - ANY PERSONS, Natural or Juridical Person,
Partnership, Corporation, Association (singly
or jointly).
Qualifications to be an Incorporator: - Natural Person
o Legal capacity, enter into a contract
o Must own shares
- Juridical Person
o Own shares of the corporation
-
Instances that SHAREHOLDERS will decide Voting for fixed term – MAJORITY OF THE
OCS
Voting for ratify – Ultravires act, 2/3 *BIGGER
IN VOTES
Instances that BOD will also decide Majority of BOD *BIGGER IN VOTES
o Example is BOD/MAJORITY is 15/8
o 8 BOD attended so majority is 5
Majority of Quorum of BOD
Instances that BOTH shareholders and bod Majority + 2/3
will decide Majority + Majority
Combines the vote of the BOD then ratified
by the SH
2 new voting requirements under the revised Unanimous consent of the remaining BOD in
corporation code case of emergency board
Self-dealing director
Suspension or Revocation of the Certificate of Fraud in procuring the certificate of
Incorporation under 6 instances (Pneumonic incorporation
is Fra Se Re Co Fa Fa) Serious misrepresentation as what the
corporation can do
Refusal to comply with the lawful order of
the court
Continuous in operation of a period in 5 years
Failure to file by-laws
Failure to file reports
Instances where SEC can revoke or suspend Fraud in procuring the certificate of
the COI incorporation
Serious misrepresentation as what the
corporation can do
Refusal to comply with the lawful order of
the court
Continuous in operation of a period in 5 years
Failure to file by-laws
Failure to file reports
Grounds when AOI are disapproved, Not in prescribed form
amendments (5) Illegal purpose
Certification is false
Percentage req. not complied
No favorable gov’t recommendation
Instances when Shareholders will be the Expiration of term – 1 year term for BOD
one to fill out vacancy: (5) STRICTLY for Removal of BOD
number 1, 2, 3. Increase in number of BOD
No quorum
Quorum + Delegation
When can BOD fill out vacancy? Quorum + NO delegation
o Grounds
Death, Withdrawal of BOD
Emergency Board
Period to fill out Vacancy Term expires – no later than the date of
expiration
Removal – Same day of removal
Other grounds – 45 days from the vacancy
3 Instances of Sol. Liability 30/64/150
5 Instances when ExCom cannot vote approval of any action for which
shareholders' approval is also required;
(b) filing of vacancies in the board;
(c) amendment or repeal of bylaws or the
adoption of new bylaws; (
d) amendment or term is not amendable or
reapealable
And (e) distribution of cash dividends to the
shareholders.
In these instances, its either BOD or SHs
are the ones to decide
2 Kinds of Juridical Person Private JP
o Partnership
o Corporation
Public JP
o Provinces
o Cities
o Municipalities
o Barangay
Created by OPERATION OF LAW, there Articles of Corporation filed
are 2 requirements: Certificate of Incorporation by SEC
Powers/ Attributes, and Properties expressly o Express Power
authorized by law or incidental to its o Implied Power
existence. o Incidental Power/ Inherent Power
Restrictions of No par No par – must be fully paid, non-
assessable, not liable for corporate
creditors
No par – P5.00 minimum
Entire consideration for no par shares
shall be treated as capital, and they
should not be distributable as dividends.
All preferred shares have stated par value
Qualifications of BOD Must own at least 1 share
The share must be registered under his
name
Must be continuously registered in his
name
Entities not allowed to issue par shares Banks
Trust companies
Insurance companies
Building and loan association
Pre-need companies and other
corporation authorized to obtain an
access funds from the public
Nationality of the Corporation, 4 Test Incorporation Test
o Place of Incorporation
Control Test
o Majority of citizenship of
stockholders, OWNERSHIP
Business Domicile or Center of Management
Rule
o Based on the place of operation
Grandfather Rule
o Applied by SEC because it involves
securities
o To determine nationality of the
corporation, stockholders of SH5
shall also be considered OR the
stockholders of the investee (SH5) of
the corporation.
Classes of corporation Stock – With shares and dividend
Non stock – Without shares and dividend
Private Corporations are Corporations created under BP. 68 or under
RA11232
Government Owned Control Corporation
GOCC, Majority of stock holders are
government
Quasi-Public
Requisites of De Facto Corporation: Valid law –RA11232
Attempt to incorporate/ organize – Has
attempt to file the name verification, articles.
Actual user of corporate power – Has Elected
the officers, BOD, By-laws. Operating
Issuance of COI despite of non-compliance w/
legal requirements –
Requisites for board meeting – Board of Meeting of BOD/BOT duly assembled
trustees are the ones who holds the Presence of the Quorum
meeting Decision of Majority of Quorum
Meeting at the time, place, manned
provided by the by-laws
Dealing of Directors, trustees or officers of (a) The presence of such director or
the corporation trustee in the board meeting in which the
contract was approved was not necessary
5 requisites 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 a majority of the
independent directors voting to approved
the material contract; and
(e) In case of an officer, the contract has
been previously authorized by the board of
directors.
Requisites for EXCOM (4) By-laws must provide for it.
Composed of not less than 3 members of
BOD
Must be directors from the corporation
BOD create EXCOM
Founders Shares Exclusive right - Right to vote and be voted
5 years limitation
Approval of SEC Requirement
Minimum Capital Stock requirement Ordinary or One Person Corporation, there
will be NO MINIMUM CAPITAL STOCK
REQUIRED
Contents of the Articles of Incorporation Name of the corporation - should have INC,
CORP OR OPC
Primary purpose and Secondary purposes –
Expressed power of the corporation.
Principal office is located – important
because,
o This is where meetings of
stockholders
o Where he books of corporation is
Term of Corporation – SEC 11
Stock requirements - #7 and #8 of SEC 14,
Certain requirements must be complied
o Authorized capital stock
o Number of shares divided into how
many shares
Arbitration requirement
Non-stock corporation requirement
o Arbitration agreement
o Electronic filing is allowed
Form of the articles of incorporation First provision – Name of the corporation
should contain INC. Corporation, OPC
o For the public to know
Fifth – Incorporator
o Name, nationality and residence is a
must
Sixth – Incorporating directors
Seventh – Authorized CS requirement
Eight – Number of Authorized CS
Ninth – Certificate of Treasurer
Tenth – Undertaking to change name
Arbitration defined A third person will be the one to decide for
the parties.
Normally, it is the SEC who decides. But since
there are many filed cases handled by SEC,
Third parties may now be involved.
Voting requirements STOCK HOLDERS
BOARD OF DIRECTORS
Non-amendable provisions Name of the Incorporators
Date of filing Articles of Incorporation
Original number of incorporators
Favorable Recommendation of appropriate Banks
Government Agencies (7) Banking and quasi-banking institutions
*For AMENDMENT Preneed
Insurance and trust companies
Non-stock savings and loan associations
(NSSLAs)
Pawnshops
Other financial intermediaries
Grounds when AOI or Amendment there to Not in prescribed form, did not comply with
may be disapproved by SEC SEC13 and SEC14
Illegal Purpose, SEC13
Certification is false, SEC14, 7th and 8th
provision
Percentage req. not complied, SEC12
No favorable Recommendation of
appropriate Government Agencies
Name shall not be allowed by SEC Already reserved or registered
Already protected by law
Or when it is contrary to existing laws, rules
or regulations
Effect of violation (Not distinguishable) SEC will issue summarily order
o Cease and desist order
o Removal of all visible signage’s
o If 2 orders above fails to comply –
CONTEMPT or liable to damages
amounting to 30k
o Administratively, Civilly or Criminally
liable
o And/or revoke the COI
Power to declare dividend Unrestricted retained earnings
BOD resolution
Declaration of Dividend Expansion project
Loan agreement
Special circumstances
Qualification of officers President – director, needs to attend
meeting
Secretary – resident and citizen, required to
keep corporate books and calls for meeting.
Treasurer – resident
Prohibition Pres and secretary – NO
Because in a meeting, the president is the
only one who can preside and secretary are
the one to take down the minutes of the
meeting.
Pres and treasurer – NO
Because the President authorize the
release of money while treasurer accounts
for it.
Quorum 50% + 1
To hold the meeting
Majority of Quorum Based on number of BOD/BOT present
To decide on the meeting
If within 5 years period prior to the election Convicted by FINAL judgement (3)
the candidate does the ff. F F F Offense exceeding 6 years
Violating corporation code
Violating RA6799 (Securities RC)
Found administratively liable for any
offense involving FRAUDLENT acts
Forging of corporation documents
By FOREIGN court violating foreign law in a
foreign country.
Violation of A and B
Evidence required Criminal case – Proof beyond reasonable
doubt, hardest to prove
Civil - preponderance of evidence
Administrative – substantial evidence
3 Fold duties for Bod Obedient
Loyal
Diligent
If any of the 3 is violated, the BOD will be Effects to D/T/O
LIABLE SOLIDARILY for damages Liable as trustee
Account for the profits
Grounds Power to acquire own shares To eliminate fractional shares
To collect indebtedness of the
corporation
To pay the descending SH
Requisites Power to acquire own shares Must be legitimate purpose
Presence of unrestricted retained
earnings
Requisites of Certificate of stock – Signed by the President
Counter signed by the Secretary
Sealed with the seal of the corporation
Right to vote May be limited, denied, broadened into
AOI or by laws
One vote
Termination of membership Conflict of interest
Resignation
Loss of confidence
Nonpayment of dues
Nonpayment of membership fees
Rules of distribution of Assets Creditors are paid first
Assets held with condition for return
given to the member
Assets with no conditions for return given
to similar institution
Other assets – depends in AOI/by laws
Other cases – can have a plan of
distribution of assets
Appraisal right Any reason
Sufficient assets
Validity of restrictions Must appear in AOI/By laws/Certificate of
stock
Restrictions should not be mere onerous
than those given to existing SH in terms
of purchasing the shares of transferring
SH with reasonable terms, conditions or
period stated
Effects of issuance on transfer of stock in Transferee is a third person
Breach of qualifying conditions Exceeds 20 SH
Restrictions on shares
Secretary will register the transfer if Written consent of all SH
All SH have actual knowledge and no
objection
Directors are accustomed to take
informal action with consent of all SH
All directors have express or implied
knowledge
Withdrawal of SH For any reason
Sufficient assets
Dissolution of corporation Mismanagement of the close corporation
Corporate assets are being wasted or
misapplied
BOT of non-stock Not less than 5 not more than 15
In multiples of 5
1/5 expiration
5-year term
Entities not allowed to be One-person Bank
corporation Quasi banks
Preneed
Trust
Insurance
Public listed companies
Non chartered government owned and
controlled corporations
Articles of Incorporation If a single SH is a trust or an estate the
name, the nationality, and the residence
of the trustee must be given
The name, the nationality, and the
residence of the nominee or alternate
nominee must be given.
Power of SEC regarding offenses can Conduct investigations
only Prosecute offenses
Publish F/O/A/I
Under SEC conduct of investigation Subpoena duces tecum or produce
documents as court summons
SEC can only issue Cease and Desist Person has violated the code
orders when Person is about to violate the code
corporations who failed or intentionally Fined with an amount not exceeding P
refuses to comply with the order of the 30,000
SEC.
Imposition Can be fined with minimum to maximum amount.
(P 5,000 - P 2,000,000)
Unauthorized use of corporate name Corporation can only be fined with minimum to
maximum amount.
(P 10,000 – P 200,000)
Violation of Disqualification D/T/O can only be fined with minimum to
maximum amount.
(P 10,000 – P 200,000)
Violation of duty to maintain records or Liable persons are:
allow inspection or reproduction Person/s keeping and maintaining the
records.
Willful certification of incomplete, Liable persons are:
inaccurate, false or misleading Generic, violation of ANY person.
statements of reports
Independent Auditor Collusion Liable persons are:
Pertains only to a single person (CPA)
Acting as intermediaries for Graft and Liable persons are:
Corrupt Practices Leader
D/T/O/E
Failure to install safeguards Prima facie evidence of corporate liability
Tolerating Graft and Corruption Liable persons are:
Directors
Trustees and
Officers
Retaliating against Whistleblowers Persons guilty of this act are those who retaliate
to the whistleblower of businesses who practice
graft and corruption.
Other violations Consequences:
(Other than Graft and Corruptions or Dissolution + Separate action can be filed
retaliation against whistleblowers) against other violations.
Other violations Liability shall be separate from any civil,
administrative or criminal liability.
Liability of D/T/O/E If the offender is a corporation penalty is
imposable to its D/T/O/E
Liability of Aiders, Abettors and other If the offender is assisting the main principal in
secondary liability second degree, penalty is imposed as secondary
liability
Outstanding Capital Stock Right to vote is limited only to OCS which are
stocks fully or not fully paid, while treasury
shares cannot. (only sold and reissued TS)
Collection and use of registration, Limited to SEC for their daily operational
incorporation and other fees expenses.
Reportorial Requirements Reportorial Requirements:
Audited Financial Statements audited by CPA
General Information Sheet
Corporation Vested with public interest (2)
D or T compensation report
D or T appraisal or performance report
and standards
Reportorial Requirements, Censorship Reportorial requirements are filtered and only
and Privacy limited to its non-confidential information.
Confidential information must be redacted
NEDA’s function 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
The Congress of the Philippines May set maximum limits for stock
ownership of individuals or groups of
individuals related to each other by:
o Consanguinity
o Affinity, or
o By close business interests
o or whenever necessary to prevent
anti-competitive practices
Arbitration for Corporations, Arbitrable The articles of incorporation or bylaws of a
corporation
Intra-corporate relations
Arbitration for Corporations, Non- Criminal offenses
Arbitrable Interests of third parties
Appointment of Arbitrators Independent Third person
Appointed by SEC
Applicability of Code, Not amended Banks (BSP)
institutions Non-bank, financial institution (BSP)
Insurance Company (Insurance
Commisions)