Republic Act No.

11232 - An act providing for the Doctrine of Piercing the Corporate Veil - disregards
Revised Corporation Code of the Philippines. the corporate liability
- If the corporate personality is
used for fraudulent purposes.
TITLE I - GENERAL PROVISIONS - If the corporation functions for
DEFINITIONS AND CLASSIFICATIONS the benefit of a single
individual and is used to
Section 1: Title of the Code protect the fraud.
This law is called the “Revised Corporation Code of ● C - Control - majority of the stocks in the corp
the Philippines.” is owned by the stockholders or DOSI
● C - Commit fraud or unlawful acts
Section 2: Corporation Defined ● P - Proximate Cause – The misuse of control
A corporation is a legal “artificial person” created by directly caused the harm or injury complained
law. It can continue even if its members change, and it of.
can own property, make contracts, and do other things
allowed by law. Domestic and Foreign Corporations
Domestic - corporations incorporated in the
Attributes of corp: Philippines. (Ex. JFC)
● A - Artificial being - not a real person but the Foreign - corporation incorporated sa ibang bansa. (Ex.
law will treat it as a person. (May personality Apple, Samsung)
pa rin)
● L - created by operation of law Nominee in OPC - alternative mo kapag namatay ka as
○ The general incorporation law is the you are the OPC
RCC
● S - has the right of succession - corp can exist Section 3: Classes of Corporations
perpetually There are two kinds:
● A - powers and attributes authorized by law ● Stock Corporation – has shares, and can give
(powers can be express, implied or incidental) profits (dividends) to shareholders.
○ Express powers – These are the ● Non-stock Corporation – doesn’t have shares
powers clearly written in the law or in and is usually not for profit (like associations or
the articles of incorporation. NGOs).
■ Ex. the power to sue and be - They are for public
sued, to enter into contracts, to good and welfare
issue shares. - Can make profit but
○ Implied powers – These are powers not distributed to its
not directly stated, but necessary to members
carry out the express powers. ○ Charitable (feeding programs),
■ Ex. if a corporation can enter Educational (training centers),
into contracts, it is implied it Religious, Foundations (scholarships
can hire employees or rent an or community projects)
office to make that happen. ○ Thru donations, grants, membership
○ Incidental powers – These are powers fees, fundraising events, or sponsorship
that are naturally connected or
related to the corporation’s existence One Person Corporation (OPC) - corporation with a
and operation, even if not stated. single stockholder (may be a natural person, a trust,
■ Ex. owning property, or an estate)
maintaining a bank account, or
using company funds for daily Section 4: Corporations Created by Special Laws or
business. Charters
Special Corporations - are not covered by the RCCP
Corp has the capacity: - Have constitutional
● Of succession limitation (meaning that it
● To sue shall be owned or controlled by
● To be sued the government)
● To make contracts ● Some corporations (called special corporations)
● To take, hold, and convey property, and; are created by specific laws or government
● To do other acts charters. These will follow their special law
first or their charter, then this code (if
Corporation ay iba sa: applicable).
● D - Directors
● O - Officers In simple terms:
● S - Stockholders If a corporation was created by a special law (like a
● I - Incorporators law passed by Congress), it will follow the rules in that
law first. (ex: kung ilan ang directors)
Doctrine of Corporate Entity - corporation is apart But if that special law doesn’t say anything about
and separate from its individual stockholders or certain things (like meetings, officers, etc.), then the
members. corporation will follow the Revised Corporation
Code as a backup or guide.
Principle of Limited Liability - protection from Examples:
liability of shareholders or members. ● GSIS, SSS, PNB
○ Passed by congress
 ○ National importance Note: Companies like banks and insurance firms
○ Directly supervised by the government cannot issue no-par value shares.
- basta those corporations that are authorized
Section 5: Corporators and Incorporators, to obtain or access funds from the public
Stockholders and Members
● Corporators – People involved in forming a Appraisal right - right of the stockholder to be paid by
corporation (mga taong bumubuo sa corp). the fair value of their share
○ Stockholders/shareholders for stock - iba-buy out ng corp ang shares ng
corporation - they are the owners of shareholder na nag exercise ng
shares or stocks in a stock corp (they appraisal right
may be natural or juridical persons) - Ex. kapag hindi siya payag in
○ Members for non-stock corporation amending the classification of shares
● Incorporators – The first group of people who kaso majority of vote is nanalo (kasama
start the corporation and sign its founding sa siya sa ⅓)
documents (founders).
○ Minimum of 2 and maximum of 15 Doctrine of Equality of Shares - shares are presumed
incorporators to be equal in all respects
○ But if only 1 incorporator, it is called - absent of any provision in the
One Person Corporation (OPC) articles and certificate of stock,
“All incorporators are corporators but not all dito papasok ang presumption
corporators are incorporators” that all shares are equal.

Other Classes: Classes of Shares in General:

● Promoters - persons alone or with others ● Par-value share - has specific money value
undertakes to organize a corporation. - usually fixed in the article and
(Consultant or lawyer) will also appear in the cert of
- they will procure the necessary stock
legislation. - Usually this is the minimum
- Sila maghahanap ng issued price of shares
subscriber, incorporators, ● No-par value shares (no set value per share) -
bibili ng shares (even before must be sold at ₱5 (this is called issued or stated
the corporation is established). value) or more and the entire amount goes to
- Will promote the company. capital (not for dividends).
● Subscribers - agreed to pay and take the - When this is issued,
original and unissued shares of corporation dapat ibibigay lang
- they are not stockholders. ang certificate of stock
They will become kapag FULLY PAID.
stockholders kapag ang - If not fully paid pa, do
subscription nila is accepted by not issue a certificate
the corp of stock (bawal
● Underwriter - usually an investment banker installment payment)
- They are like the middleman ● Voting shares - right to vote
- Exert their best effort to market - usually given to the common
all or part of an issue stock
- May part sa sale - Each share of stock is entitled
to vote unless otherwise
Section 6: Classification of Shares provided in AOI or declared
Corporations can have different types of shares: delinquent.
Common Shares and Preferred Shares ● Non-voting shares - without the right to vote
● Power to classify shares is granted to the - they are usually the preferred
corporation. or redeemable shares
● It is the incorporator who will determine the - Cases when non-voting
class and the number of shares which shall be shares are ALLOWED TO
issued. (This will apply sa time na kung saan VOTE (ACIDRIP)
ini-incorporate pa lang ang corp) - Basta mga big decisions na
○ They can issue one or many classes of tungkol sa corporation
shares but it is important that they issue - Amendment and
a share with complete voting rights. Adoption of AOI
● BoD and stockholders may wish to amend the - Capital Stock (if to
classification of shares by majority of votes (⅔) decrease, increase, or
● Each type can have its own rights, value, and stay the same)
voting powers, as written in the Articles of - Indebtedness
Incorporation. (issuance of bonds)
● Some shares can have no voting rights, but - Disposition of
they can vote on big decisions like: Property
○ Changing the company rules or - Corporate
structure Restructuring (like
○ Selling most company assets merging or
○ Merging with another company consolidation of corp)
○ Increasing capital - Investment
○ Dissolving the company, etc. - Dissolution
 ● Common share of stock - Holders of this are laws that protect against foreign ownership or dummy
called residual owners arrangements.
- Entitles the holder to ● Issued to the organizers (founders) and
appropriate the promoters of a corporation.
division of profits, if ● They have privilege in the distribution of
there are any. profits.
● Preferred share of stock - holder will have set
certain preferences order over the holders of Section 8: Redeemable Shares or Callable Shares
common stock These are shares the company can buy back from
- can give first priority shareholders after a certain time or under specific
in profits or during conditions.
liquidation.
- Always issued with It’s okay even if the company has no extra profits
par value (retained earnings), as long as it follows the rules in the
- Corp can issue more incorporation papers and SEC regulations.
than one class of Like kahit wala na unrestricted RE ang corp, p’wede pa
preference share rin magkaroon ng redemption UNLESS if it will cause
- BoD may fix terms insolvency to the corp. Kahit redeemable na siya kung
and conditions of magcacause ng insolvency, do not redeem it
preferred shares
- Creditors muna before ● They buy back for more control (ownership) -
preference redemption
shareholders ● Attractive to investors - sure na may babalik
● Promotion stock or promotional stock - sakanilang money
issued to promoters ● Mas bagay for investors who want short term
● Share in escrow - the person who is entitled to investment (not good for long term inv and
receive the share of stock will not receive it good for people if they do not want voting
until the condition is fulfilled. rights)
- shares of a corporation are ● Usually preferred shares
being held by a third party (like ● Issued only if expressly provided in the AOI
a bank, lawyer, or trustee) and ● May be deprived of voting rights unless the
cannot be freely used, sold, or ACIDRIP
transferred until certain
conditions are met. Unrestricted Retained Earnings - hindi nakalaan ang
- Ex. When the founder of a RE for a definite corporate purpose
company promised to stay in
the corp for 3yrs. ‘yung Section 9: Treasury Shares
100,000 shares niya ay share in These are shares that were once sold to investors but
escrow tapos kapag fulfilled later bought back by the company. The company can
niya promise, it will be resell these shares again at a fair price set by the board.
released to him. If hindi, ● Usually kapag walang bidder sa delinquent
babalik sa corp. shares, nagiging treasury shares
- Bawal galawin at ibenta ang ● Issued but not outstanding
share in escrow ● To increase the value of shares
● Convertible stock - share is changeable from ● Lower the control of other investors
one class to another class ● Can resell even at less than par value
- usually it is the ● This is unrealized income and is not considered
shareholder who will as part of RE
demand to convert ● Not distributable as cash or stock dividend but
their share can be distributed as property dividend
● Fractional share - less than one share ● Have no voting rights
● Over-issued stock - stock issued in excess of ● Redeemed shares ay nagiging treasury shares
the authorized capital stock
- this is null and void, as TITLE II - INCORPORATION AND
a general rule ORGANIZATION OF PRIVATE CORPORATIONS
- Remedy is either
refund or increase Incorporation of a private corporation is a mere
the authorized privilege.
capital stock to SEC ● Not a civil right nor a natural right, but is mere
special grant or mere special privilege (this rcc
Kapag not outstanding ang shares, it has no right to gave this privilege)
vote
Shares can also be classified to comply with legal or Steps in the creation of a corporation
constitutional rules. A. Promotion - done by promoters. All activities
done by promoters in organizing or funding the
For nonstock corp - one vote per member business is promotion
a. Promoter - general job is to float the
Section 7: Founders' Shares company
Founders can be given special rights, like exclusive - Hindi lahat ng promoter ay
power to elect directors. But this can only last for 5 incorporator, they can be a
years after the company is formed. This cannot violate lawyer or consultant
 B. Incorporation Section 11. Corporate Term
C. Formal organization and commencement of ● Corporations now have perpetual existence
business operations (ad infinitum) by default unless they choose a
specific time limit.
Incorporation - incorporators come together and ● The first day is the date of incorporation and
perform acts, conditions, deeds, writings, certifications the last day is the day before the
or records, and official acts which give the corporation corresponding number day of the same
its existence month of incorporation in the last year of its
- Articles of Incorporation (AOI) serve existence.
as the charter of the corporation ○ Ex. Aug 31, 2025 is the 1st day, then
Aug 30, 2030 is the last day
Incorporators - stockholders or members mentioned in ● Older corporations (before this law) are also
the article of incorporation as originally forming and considered to have perpetual life unless they
composing the corporation. change it. (Kahit may nakasulat sa AOI nila)
- they are the signatory in AOI ○ If they want to retain the original life or
corporate term, they must file a
Section 10. Number and Qualifications of resolution na dapat may ⅔ majority
Incorporators vote of the BoD or trustees, and
● A corporation can be formed by 2 to 15 people majority of shareholders (including
or entities - regular or private corp. nonvoting shares) or members.
● A corporation with only one person is called ○ Submit to SEC, which SEC will issue
a One Person Corporation (OPC). notice to retain corporate term to the
○ Only a one person corporation corporation
(OPC) may have a single stockholder, ○ They must submit until Feb 23, 2021.
as well as a sole director. ● Corporations can extend or shorten their
○ Only a natural person, trust, or estate lifespan by amending (change, revise, or
may form an OPC modify) their documents, if may specific term.
● For purpose of forming a domestic ● If a corporation's term expires, it can apply for
corporation, 2-15 persons may organize revival, but some types (like banks) need
themselves and form a corporation approval from the proper government
● Professionals (like lawyers or doctors) cannot agency.
form corporations for their profession unless a
special law allows it. (In partnership, General Section 12. Minimum Capital Stock Not Required of
Professional Partnership or GPP) Stock Corporations
○ Hindi magiging personally liable kapag There’s no required minimum capital to form a stock
may ginawang bad or anything kasi corporation unless a special law says so.
corporation is an artificial person, kaya ● This is determined by the incorporators
bawal talaga. ● May authorized capital stock lang ang company
○ Unless allowed by special law. if the shares that they are issuing are par value
● Each incorporator (if human) must be of legal shares. Only a capital stock for no par value
age or that they have legal capacity ● Basis of authorized capital stock is the amount
○ In stock corporations, must own or sufficient to run a business
subscribe to at least one share. ● Authorized capital = authorized shares x par
○ In nonstock corp, dapat member of the value
corporation. ● Special laws give a required minimum
● The incorporator, being an artificial person authorized capital and minimum paid-up
(like corporation), must be authorized capital
● Hindi lahat ng corporation required ng filipino ○ Ex. Mining corp minimum authorized
membership in incorporators is 100 billion and minimum paid-up
● But if a certain corporation industry requires a capital as 6,250,000
citizenship percentage, look to the foreign ● Old law before rcc:
investment negative list to find out what ○ 25% of authorized capital must be
percentage of foreign investment is allowed in subscribed
the corporation ○ 25% of subscribed authorized capital
must be paid
Steps in Incorporation ○ P5,000 is the minimum paid-up
A. Name Verification capital (mas mataas if banks or
B. Name Reservation insurance companies)
C. Drafting and execution of the AOI
D. Filing with the SEC (other documents filing for Foreign investment negative list - defines the filipino
a proper gov. agency if the corporation is vested ownership requirement regarding corporate capital
with public interest)
a. Corporations vested with public Section 13. Contents of the Articles of Incorporation
interest are banks, banking corp, quasi- Articles of Incorporation - document prepared by the
banking institutions, trust companies, persons establishing a corporation and filed with the
nonstock savings, loan associations, SEC.
pawnshops, etc. - This lists what should be
E. Payment of the filing and publication fees included in the articles of
F. Issuance by the SEC of the certificate of incorporation (like a birth
incorporation certificate of corporation):
Contents of AOI:
● Corporate Name - important for a corporation ○ Original subscribers’ information -
● Purpose/s of the corporation (with clear name, address, nationality, subscribed,
primary and secondary purposes) - this will and paid amounts
define and limit the powers of the ■ If some shares are without par
corporation value, it must be stated - name
○ Any act beyond the power of the corp tapos no. of shares subscribed
is known as ultra vires act. lang ang ilalagay
○ Purpose must be lawful, stated with ● Other legal and practical info, including
sufficient clarity optional arbitration clause
○ Specify kung ano ang primary and ○ In terms of later dispute, dapat
secondary purposes nakasulat ang mangyayari (whether
○ Ex. Global construction and arbitration or court deretso)
consultancy services inc. Construction
is the main purpose then consultancy is Necessary provisions in non-stock corp
the secondary purpose. 1. Amount of its capital money contributed or
○ No need na connected ang purposes, donated by specific persons.
mahalaga lang na lawfully combined 2. Names, nationalities, and residences of donors
with one another or contributors
● Address (must be within the Philippines) - 3. Respective amount contributed by each
principal office of the corp
○ Place where its books and records are Nationalized Corporations - provide in the AOI the
ordinarily kept. restriction against the transfer of stock or interest
○ Place where officers usually meet for which will reduce the ownership of Filipino citizens.
the purpose of managing the affairs and
transacting the business of the corp. Section 14. Form of Articles of Incorporation
○ Address must be very specific. ● Provides the standard template or format for
○ Change in address: the articles of incorporation.
■ Within the same city or ○ Intro Statement of formation
municipality - must be (stock/nonstock)
declared on the general ○ 1st Corporate name
information sheet. Not ○ 2nd Purpose(s)
required na baguhin sa AOI, ○ 3rd Principal office (Philippines)
but if they want, edi go ○ 4th Corporate term (perpetual or
■ From one city or years)
municipality to another - ○ 5th Incorporators' names,
there is a necessity to amend nationality, addresses
the AOI to indicate the new ○ 6th Number and details of
location within 15 days from directors/trustees
transfer to the said location ○ 7th Authorized capital stock / par
● Corporate Term (lifetime - perpetual or specific or no-par breakdown
years) - Section 11 ○ 8th Subscribers’ (or donors’)
● Information on incorporators and initial details and amounts
directors/trustees - names, nationalities, ○ 9th Treasurer appointment and
addresses (must be very specific) payment certification
● Number of incorporating directors or trustees ○ 10th Name change undertaking
○ Not be more than 15 directors for stock ○ 11th Foreign ownership restriction
corporation (if applicable)
■ Magulo kapag marami ang ○ Execution Section Signatures,
incorporators - maaaring mag- date, and location
agawan sa power ● Includes all the required info from Section 13.
○ Can be more than 15 trustees for non- ● Also includes the treasurer’s certification that
stock corporation the capital has been received.
■ They are nonprofit so ayos ● Includes a clause agreeing to change the name
lang na marami because of if it conflicts with an existing one. (10th clause)
more advocacy ● Filipino ownership rules must be respected and
○ Incorporating directors or trustees shall reflected in stock transfer rules if applicable.
hold office until their successors are ○ “Transfer of shares to foreigners shall
duly elected and qualified. not reduce Filipino ownership below
○ Incorporating directors or trustees are 60% as required by law.”
intended to be replaced by the
regularly elected directors or trustees. Section 15. Amendment of Articles of Incorporation
■ Hold office for 1yr for ● Amendment must not be contrary to law and
directors must be for a legitimate purpose.
■ Hold office for 3yrs for ● Articles can be amended (change, modify, or
trustees revise) with a majority vote from the board and
● Capital details (authorized capital stock, par at least 2/3 of shareholders or members.
value, how much is subscribed/paid, or ● For nonstock corporations, it's the trustees and
contributors) members who vote.
○ Amount of authorized capital stock ● Certification under oath by the corporate
○ No. of shares into which it is divided secretary shall be submitted to SEC.
○ Par value pesos
 ● The changes in AOI must be underscored or ● 5 years to begin the transaction after the
bold or highlight it. issuance of certificate of incorporation, or else
● Submit the original AOI with the amended AOI it shall be deemed dissolved.
with highlighted changes. ● After the issuance of certificate of
● The changes must be properly documented incorporation, corporation must be formally
and filed with the SEC. organized and commence the transaction of its
● Take effect only after the approval of SEC. business (basta ayusin muna nila if may need
● If the SEC doesn’t act within 6 months, the ayusin before starting)
amendment takes effect automatically (unless
delay is the corporation’s fault). Formal Organization and Commencement of
○ NOTE: This is not applied in all cases. Business Operations - process of structuring the corp
● If the corp is vested with public interest, dapat to carry out its purposes.
ang amendments ay accompanied by a A. Formal organization
favorable recommendation of the a. will bring the corporation to life.
appropriate government agency. b. Adoption of bylaws
● Names of the incorporators or trustees cannot c. Elect BoD or trustees and officers
be amended. Those are called established or d. Establish principal office
accomplished facts. e. Like preparatory steps to transact
● Foreign corporations are not required to business and accomplish their purpose
amend here in the Phil., only required to as a corp.
submit the amended copy of their AOI or B. Commencement of Business
bylaws within 60 days after it becomes a. Entering into contracts for negotiation
effective. b. Lease of properties na gagamitin sa
business
Section 16. Grounds when Articles of Incorporation c. Construction of factories
or Amendment may be Disapproved d. Constructing or ordering equipment
The SEC can reject or disapprove if:
● Form or content of AOI is incorrect or Religious Corporation - no need for the SEC to issue
incomplete certificate of incorporation
● The purpose is illegal or immoral - basta they file sa SEC ang
● Capital claims are false. (Such as the capital articles of incorporation, they
stock and subscribed or paid-up capital) will become a corporation sole
● Filipino ownership rules are violated for na.
financial institutions (if the corp involves
money or finance), the SEC needs approval Cooperatives - no need to file sa SEC
from the proper government agency first. - they need to register with the
○ Ex: BSP for banks Cooperatives Development Authority
● Fraud in procuring its certificate of to acquire a juridical personality
incorporation.
● Serious misrepresentation as to what the corp Section 19. De Facto Corporations
can do or is doing. ● Actually exists for all practical purposes as a
● Refusal to comply with or defiance of a corp
lawful order of the SEC ● Has no legal right to corporate existence as
● Continuous inoperation for 5 years. against the state.
● Failure to file: ● If a corporation acts in good faith and complies
○ Bylaws with the law, it is treated as valid even if there’s
○ Reports a technical issue.
○ They did not comply sufficiently
Section 17. Corporation Name ● Requisite:
● Names must be unique and not misleading or ○ May incorporated law (RCC)
protected by law. ○ There must be an attempt (in good
● Minor changes like adding “Inc.” or using faith) to organize as a corp under the
abbreviations don’t count as different. said law (RCC)
● If a name violates rules, the SEC can force the ○ There is actual use or exercise in good
corporation to stop using it and even remove faith of corporate powers (they act as a
signage or revoke registration if they don’t corporation)
comply. ● May certificate of incorporation sila pero may
defect sa registration
Section 18. Registration, Incorporation and ● Kapag third person (people), they are a
Commencement of Corporation Existence corporation. Pero kapag state na, sila ay seen as
● You must first reserve your corporate name de facto corp.
with the SEC. ● Status is not sufficient to be considered as a de
● Then submit your articles and bylaws. jure corp.
● Once approved, the SEC issues a Certificate of ● This can’t be questioned in private lawsuits,
Incorporation, and the corporation officially only the Solicitor General can challenge it
exists from that date. through official legal action.
○ Under this, the corp is now de jure ● The government can file a Quo Warranto
○ Corporation is now an artificial or Proceedings “by what authority are you doing
juridical person. this?” if the government wants to question the
○ Achieves legal existence corporation’s intentions or personality.
 ○ Direct proceeding to question a - bcs corp itself cannot act by on
corporate personality its own as it is just a juridical
person
Collateral Attack - a person files a case to question the - May natural person to act for
personality of the corporation (de facto corp). the corp.
- bawal ito kasi de facto corp are - Corporations can also act thru
still a corporation. Only the agents or officers if pumayag
state can question its ang BoD by the bylaws.
personality. - Courts cannot undertake to
- This is an incidental control the discretion of the
proceeding board of directors abt
administrative matters (basta
Note: De Jure is fully compliant and validly formed dapat in good faith ang BoD)
while De Facto is not fully compliant but with good
faith with just minor defects 3 Levels of Control in Corp
- The primary control in a corporation is the
De Jure Corp - its existence cannot be attacked board of directors / trustees - they exercise all
collaterally or directly by the state. corporate powers.
- 2nd in control are the officers - execute the
Section 20. Corporation by Estoppel policies done by the BoD or trustees.
● If people act like they are a corporation without - Last control are the shareholders - residual
actually being one, they are treated like power or control in the corp. Some acts cannot
partners and are personally liable. be performed without the consent of
● They can’t avoid liability by claiming the shareholders.
corporation was not properly formed.
● Likewise, anyone dealing with such a group Limitations on the power of BoD
can't refuse obligations by saying it wasn’t a 1. Limitations imposed by constitutions, statutes,
real corporation. or AOI
● There is actually no effort to comply with 2. Cannot perform acts involving fundamental
legal requirements. changes (need ng majority vote from
Note: Corporation by Estoppel has no legal shareholders)
incorporation and pretending to be corporation 3. Cannot exercise powers not possessed by the
corp. (Ultra vires kasi beyond the power ng
Section 21. Effects of Non-Use of Corporate Charter corp)
and Continuous Inoperation
● If a corporation doesn’t start its operations BoD or BoT must act together as a body, not
within 5 years, its registration is automatically individually.
revoked (cancelled). - dapat may meetings sila
○ The day after ng 5th yr - BoD as a governing body must act as a body.
● If a corporation starts but becomes inactive for - Exceptions:
5 years, the SEC, after due notice and hearing, - Directors happen to be the sole
can mark it as delinquent. stockholders
● The corporation then has 2 years to fix things. - Corporate officer ang nag enter into
If not, its registration will be revoked contract but with authorization ng BoD
(cancelled). (either expressly authorized or
○ Resume operations and comply with all impliedly)
requirements by SEC. - Kahit hindi authorized pero na-ratified
● SEC must notify and coordinate with any or nag agree naman by the next
special regulatory agency before suspending or meeting, binding ang contract entered
revoking. into.
- By-laws of corp may create an
Effectivity of Revocation - effective immediately executive committee with authority to
- corporation ay bawal na act on such specific matters.
magcontinue ng operation and - BoD of corp A tapos mayroon sila contract with
issue shares BoD ng corp B
- But they can liquidate or share - BoD ng corp B will manage the affairs
its assets ng corp A thru delegation ng corp A
- May sue for purpose of - In close corporation, any action by the
recovering its property directors without a meeting is valid. (Section
100)
Lifting of Order of Revocation - restores the
corporation into its original status. BoD or BoT can delegate its power to officers, agents
● File for petition for lifting or to an executive committee, either expressly or
● Comply with the required docs sa SEC impliedly.
● Power of BoD or BoT is an original power so
TITLE III - BOARD OF DIRECTORS/TRUSTEE p’wede ito i-delegate.
AND OFFICERS ● The delegated power cannot be delegated any
further.
Board as Governing Body - the BoD or BoT which ● Exceptions:
they exercise the corporate powers. ○ Discretionary powers of BoD or BoT
cannot be delegated such as ‘yung
 decision making and declaration of A. For Stock Corporations
dividends. a. Legal age and have legal capacity
○ They cannot delegate the entire b. Must own one share of capital stock
supervision and control of the corp to c. Share of stock must be registered in his
others. name on the books of corp
d. Must continuously own at least a share
Section 22: Board of Directors or Trustees of a of stock during their term.
Corporation; Qualifications & Term (Disqualified if binenta ang share na
● The board of directors (stock corp) or board hawak)
of trustees (non-stock corp) runs the B. For Nonstock Corporation
company. a. Legal age and have legal capacity
○ Such as conducting the business and b. Must be members in good standing
controlling all its corporation
properties Section 23: Election of Directors or Trustees
● Directors must be stockholders and are elected ● Shareholders/members have the right to
for 1-year terms. nominate and vote for directors/trustees.
● Trustees must be members and can serve up to ● Elections need majority presence (in person,
3 years. proxy, or remote).
● Hold-over Principle ○ Voting through absentia and remote
○ Each director or trustee continues in communication is p’wede basta
office until their successor is elected authorized in bylaws and authorized
and qualified din ng majority ng BoD.
○ Kumbaga, habang wala pang qualified ○ Allowed din sa corp vested with public
na papalit sa directors or trustees. interest. (Tapos no need na ng
○ Sa hold-over na ito ng director, kapag authorization ng bylaws or even ng
sumobra sa 2 months for example majority of BoD)A
before magkaroon ng new elected Normal corp = needs bylaws + BoD approval.
director, 10 months nalang for the new Public interest corp = automatic allowance, no need
director kasi nga hinold lang ang for extra approval.
position. ● Voting can be done in person, via proxy, or
● Directors = shall not be more than 15 remotely (especially in public-interest
● Trustees = may or may not be more than 15 companies).
● In a close corp, AOI may provide that the ● Election can be thru any manner pero if
business of the corp shall be managed by its requested by ballot, ayon ang gagawin
stockholders rather than BoD ● Highest number of votes are elected
○ A close corporation is a type of ○ Plurality kasi not majority
corporation that is usually owned by ● Voting methods in stock corporations:
only a small number of people (often ○ On the basis of no. of shares na hawak
family members, relatives, or close ○ Ex. Shares Owned (100) x No. of Seats
friends). (5) = 500 total
● Sole corp = no need for BoD or BoT ■ Straight Voting – 1 vote per
● Non stock Educ corp = not less than 5 nor share for each open seat. (ex.
more than 15 100 vote for each seat)
● Trustees of religious societies = not less than ● Every stockholder
5 nor more than 15 may vote such number
● A director/trustee loses the position if they no of shares for as many
longer own shares or are no longer a member. persons as there are
● Independent directors (at least 20% of the directors to be elected.
board) are required in public-interest ■ Cumulative voting for one
companies like: candidate – Putting all the
○ Companies listed or registered with votes on one candidate. (ex.
the SEC, or which have assets of ₱50 500 votes to seat 1)
million or more and at least 200 ● Available only to
shareholders, each holding 100 shares minority stockholders
or more. (a person who owns
○ Banks, insurance companies, less than half (50%) of
pawnshops, etc. (any corps that are the shares in a
receiving money from the public) corporation.)
○ Others as determined by the SEC. ● P’wede rito kapag abc
○ Also applied to nonstock corp are majority tapos def
● Independent directors must not have any are minority
relationship that affects their ability to decide shareholders, p’wede
independently. pagsamahin ng
○ Independent from the management minority ang
● The SEC (Securities and Exchange cumulative vote nila to
Commission) sets the rules about how concentrate to one
independent directors are chosen, how long candidate.
they can serve, and how many boards they can ■ Cumulative Voting by
sit on. Distribution - distribute the
votes on the same principle as
Qualifications of Directors or Trustees CV among as many candidates
 as may be seen fit. (ex. 120 to ○ Can’t be President + Secretary or
seat 1, 250 to seat 2, 130 to seat President + Treasurer (unless
3) allowed by law).
● Non-stock members: one vote per trustee to be ● Public-interest corporations must also have a
elected. (parang normal na voting lang) Compliance Officer.
● If the election fails, follow Section 25 for ○ Compliance officer ay ‘yung
procedures. nagmamake sure na sinusunod ng corp
○ Shall be reported within 30 days from ang SEC rules and regulations for those
the date of the scheduled election corp vested with public interest.
■ Report shall specify the new ● Each officer must manage the corporation
date for election and perform their roles and responsibilities.
■ It shall not be later than 60
days from the original Compensation and Term of Office of Officers
scheduled date - Compensation/salary is fixed by the BoD sa
■ Requisite notice must be given officers that they appointed. (P’wede rin
● A quorum is the minimum number of people bonuses na subject to test of reasonbleness)
(or shares, in corporations) that must be - Term of office may be fixed in the by-laws.
present in a meeting to make the decisions Otherwise, they shall be deemed elected for one
valid. year until their successors shall have been
Note: Delinquent shares (i.e., unpaid) cannot be elected.
voted. - They may be removed any time by the board.
- Directors elected thru cumulative voting - 1 yr lang ang BoD so after 1 yr term ng officers,
cannot be removed without just and unlawful need to be re-elected sila ng new set of BoD
reason.
Positions Concurrently Held by the Same Person
Section 24: Corporate Officers - Allowed except:
Kapag incorporated na ang corp, it will formally - Pres + Sec
organized kapag may directors or trustees, and officers - Pres + Treasurer
na - Allowed din if officer sa isang corp then
director sa isang corp (not prohibited)
Directors are elected by stockholders - RCCP does not prohibit a corporate officer
Trustees are elected by members from occupying the same position in another
corp organized for the same purpose.
Officers are tasked in the actual management and - However, it may be prohibited by
carrying on the details of business operations and special law (so sa mga special corps
corporate policy. maaaring bawal ito)
Actions by officers not within its powers are not
binding unless ratified or unless the corp is a Section 25: Report of Election of Directors, Trustees
corporation by estoppel. and Officers, Non-holding of Election and Cessation
● After election, directors or trustees must from Office.
appoint officers: ● Corporations must report to the SEC within 30
○ President – must be a director. days after elections, or if elections weren’t
■ Leader at tumatayong chief held.
executive ○ Report the names, nationalities,
■ Nag-iimplement ng decisions shareholdings, and residence addresses
ng board of the directors or trustees and officers
○ Vice President - back up for the elected.
president ○ Corporate secretary or any other
■ P’wede for specific area like officer ang magsusubmit
VP for finance, VP for ○ Sa annual meeting madalas ginagawa
operations ang elections
○ Treasurer – must be a resident. ● If an election wasn't held, a new election date
■ Managing the money of corp must be set within 60 days. (Reported to SEC)
○ Secretary – must be a Filipino citizen ● SEC can order an election if the company fails
and resident. to act. Like walang new election date, hindi
■ Corporate records and nakapag elect on the new election date (if
documents nagkaroon).
■ Minutes of the meeting ○ Any stockholder, director or trustee
○ General Manager - in charge sa ang magsabi sa SEC na wala pang new
operations and implementation ng election for officer.
policies of the board. ○ SEC will verify then issue a summary
○ Other Officers as may be provided in order to hold an election.
the bylaws. Meron kasi mga positions ○ SEC have powers such as:
stated in the RCC so p’wede magdadag ■ Issuance to direct issuance of
ng other officers kapag provided sa notice.
bylaws ● Time of place of
■ Mere employee if the position election
is not stated in the RCC or ● Elect presiding officer
bylaws. ● Record of date - dates
● A person can hold multiple roles except: for determination of
stockholders or
 members entitled to shareholders ang nag-upo tapos they
vote just want to cheat these minorities.
● Kahit hindi na-attain ○ Kailangan may just and lawful reason
ang quorum based ss to remove.
by-laws, kung ● The SEC can also order removal of
complete naman ang unqualified or disqualified directors.
shareholders na um- ○ Through ‘motu proprio’ - ‘on its own
attend based sa initiatives’ or;
determination of ○ Through upon a verified complaint
stockholders by the ○ Based on its own discretion
SEC, it will be valid. ○ Kahit na tapos na ang election, basta
● If a director/trustee/officer leaves (die or na-discover ng SEC na disqualified na
resign), the SEC must be notified within 7 days ang director, p’wede nila ito iutos to be
by the secretary, director/trustee, or officers. removed.
○ Secretary or any director or any officer ○ If a director, trustee, or officer knows
ang p’wede magreport to SEC they are disqualified (or others know it)
○ If the cause ay namatay, p’wede heir of but they still continue to hold office, or
the deceased director/trustee/officer they hide/conceal their
ang magreport disqualification:
■ They can be fined ₱10,000 to
Delinquent shares are unpaid shares that lose ₱200,000 (decided by the
privileges until the debt is paid. court).
■ They will be permanently
Section 26: Disqualifications of Directors, Trustees, banned from being a director,
or Officers trustee, or officer in any
A person cannot be elected as a director/trustee/officer corporation.
if in the past 5 years they were: ■ If hiding the disqualification or
1. Convicted (final judgment) of: continuing in office harms the
a. A crime or offense punishable by 6+ public, the penalty is even
years in prison. higher: ₱20,000 to ₱400,000.
b. Found guilty of violating the Revised ● Board of Director or Trustee, and even courts
Corporation Code or; cannot remove another directors or trustees.
c. Violating the Securities Regulation ● Resignation of director or trustee, effective
Code. R.A. No. 8799 immediately even if wala pa successor at any
2. Found guilty in an administrative case time.
involving fraud such as cheating and ○ P’wede magbayad ng damages if
dishonesty in business. resignation is part of fraudulent scheme
3. Found guilty by a foreign court of similar
offenses (from no. 1 and 2) Abandonment of office and failure to attend
The SEC or other regulators may impose more meetings
disqualifications for governance. (If they think need pa 1. Acceptance of incompatible office (ex. Director
ng more disqualifications to attain a good governance) ka tapos tumanggap ng another position na in
They disqualify these people because they are not conflict sa position mo as director)
worthy to those positions 2. Absence for an unreasonable length of time -
this implied resignation
Section 27: Removal of Directors/Trustees - hindi uma-attend ng meeting and hindi
● Can be removed by 2/3 vote of ginagawa ang role as a director or
stockholders/members at a regular or special trustee
meeting (with proper notice to everyone).
○ There is no specific reason in the RCC Section 28: Vacancies in the Office of Director or
in removing directors/trustees pero any Trustee; Emergency Board
reason by the shareholders is sufficient ● Vacancies (not due to removal or expired
kasi sila naman ang nag-upo ss mga terms) can be filled by the majority of
directors na ito. remaining directors/trustees (if quorum).
● In calling for a meeting: ○ Ex. 9 BoD and 1 vacant
○ Normally, it is the secretary (upon the ○ 7 (majority) in the BoD are still active
order of the president) who calls the and therefore, they can vote who will
meeting be filled to the vacant
○ However, if they refuse to do so, ○ But kahit may quorum then they want
stockholders/members can call it to refer the matter to the shareholders,
themselves. edi go
○ Written notice of time and place ● Stockholders/members must elect
○ Removal must be notified to the SEC replacements.
(through writing) by the secretary or ○ If no quorum
director/trustee within 7 days from ○ Ex. 9 BoD and 1 vacant
knowledge thereof. ○ Only 4 are active in the BoD, so the
● Removal can be with or without cause, but stockholders/members ang mag-eelect
not to cheat minority shareholders. to fill the vacant seat
○ This applies when the election is a ○ If the vacancy results from
cumulative voting wherein minority ending/expiration of the term
 ○ If the vacancy results from ending from shareholders/stockholders kung bibigyan ng
section 27 (disqualification) salary and what amount
○ Amendment from AOI, like 5 directors
ginawang 10 so the new election is by Compensation of Corporate Officers
the stockholders 1. Corporate Officers who are not directors -
● In emergencies where the board can’t form a entitled to have compensation
quorum, officers may be appointed 2. Corporate Officers who are also directors -
temporarily to prevent serious harm. entitled only have compensation as an officer
● Replacement directors serve only the and entitled to receive per diems as a director
remainder of the predecessor’s term. a. Amount of compensation may be fixed
Note: Quorum is the minimum number of people (or by mere board resolution.
shares, in corporations) that must be present in a
meeting to make the decisions valid. Section 30: Liability of Directors, Trustees or
Officers
- Pagkatapos ng term ng director/trustee, dapat Fiduciary relationship between the corp and
same day may election para sa kapalit. directors/trustees and officers - The corporation trusts
- Kung tinanggal ng stockholders ang its directors/trustees/officers to act like guardians of its
director/trustee, p’wedeng same day piliin ang money and affairs. They must always act honestly,
kapalit, basta nakalagay ito sa notice of carefully, and in the best interest of the corporation, not
meeting. for personal gain.
- For other reasons (like resignation, death, - handle the affairs of the corp with utmost good
disqualification), the election to fill the vacancy faith.
must happen within 45 days from the time the
position becomes vacant. Three-Fold Duties of Directors
1. Duty of Obedience - must follow the law and
Creation of Emergency Board the corporation’s rules (articles, bylaws).
● Directors create this 2. Duty of Diligence - must manage the company
● Vacancy is temporarily filled by the officers with care, as if it were their own business.
(by unanimous vote) 3. Duty of Loyalty - must put the corporation’s
● SEC must be notified in the creation and the interest above their own. (Do not use
reason thereof, within 3 days upon the creation. corporate’s opportunity for own gain)
● Reasons of creation:
○ Remaining directors/trustee do not They can be personally liable (jointly and severally) if
constitute a quorum they:
○ Need for emergency situation ● Approve or do illegal acts. Willfully and
○ Action is necessary to prevent knowingly to do unlawful acts.
irreparable loss or damage to the corp ● Are guilty of grossly negligent or act in bad
○ Temporary replacement must come faith in directing the affairs of the corp.
from the officers of the corp ● Have conflicts of interest and misuse their
○ Temporary replacement must be power.
elected by unanimous vote of the ● Consents the issuance of watered stocks.
remaining director or trustee. These are stocks that are issued fully paid when
in reality, it is not really not fully paid or not
Stockholder election is the long-term solution kapag paid at all.
walang quorum sa BoD. ○ Any director or officer who consents to
Emergency Board is the temporary emergency such watered stocks are liable
solution para hindi mamatay o maparalyze ang solidarily.
operations habang wala pang stockholder election. ○ Kahit hindi nagconsent pero aware sa
issuance and consent of the water
Section 29: Compensation of Directors or Trustees stocks, maaari pa rin maging liable.
● Directors/trustees don’t get a salary unless ● Contractual agreement na mismong director
allowed by the bylaws or approved by the trustee or officer ang nagsabi na they are
majority of stockholders/members. personally liable sa contract
● They can get allowance per diem (per day) like ● Liable for his corporate action by specific
kung um-attend ng meeting (like allowance) provision of law.
○ Even if wala sa by-laws, directors are They must return any gains they made at the expense
allowed to receive these allowances. of the company.
● If ever the majority of stockholders approved
on giving the directors/trustees a salary: Section 31: Dealings of Directors, Trustees, or
○ Their pay must not exceed 10% of the Officers with the Corporation
previous year’s net income (before ● Self dealing is also voidable.
taxes). ● If a director/officer has a personal interest in
○ They (directors/trustees) cannot vote a contract (such as spouse or close relative
on their own compensation. within 4th degree) with the corporation, the
● Public-interest corporations must report each contract is voidable unless:
director’s pay annually to the SEC and 1. All the conditions in the Section 31 are
shareholders. present:
● If nakalagay sa bylaws ng corp na may salary ■ Their presence wasn’t needed
(with amount) ang directors, ayon ang sundin for quorum.
● If walang nakalagay sa bylaws ng corp then it ■ Their vote didn’t affect
is up to the majority of approval.
 ■ The deal is fair and opportunity na dapat
reasonable for the sa corp.
corporation.
■ For public-interest Requisites for Application:
companies, a ⅔ of agreed 1. The opportunity presented itself to the
votes from the board and the corporation.
independent directors must 2. The corporation is actually able to avail of the
be in majority in approving it. opportunity.
■ If it involves an officer, the
board must authorize Doctrine of Corporate Opportunity is Not
beforehand. Applicable when:
2. If any of the first 3 conditions isn’t met: ● The director is engaged in a distinct
■ The board elects not to enterprise kahit same general industry, as long
question the validity of the as they act in good faith.
contract. ● The opportunity is not essential, no misuse of
■ The contract is ratified. company resources, and no direct competition.
Kumbaga:
Requisites in ratification of voidable contract ○ Not vital to the corp
1. Any of the 1st two (?) conditions set forth in ○ The director doesn’t use any
no.1 sa taas is absent. company’s resources such as time,
2. Full disclosure of the adverse interest of the funds, or property.
directors or trustees. ○ The opportunity taken won’t directly
3. Stockholders/members with 2/3 vote compete with the corp
4. The contract is fair and reasonable. ● The business opportunity ceases to be a
corporate opportunity and transforms into a
Prescriptive period is 4 years na kung saan kapag personal opportunity, maybe because of some
lumagpas dito, hindi na p’wede kwestyunin ang validity financial constraints.
of the contract.
Section 34: Executive Management and Other
Not stated in this section but was stated in another Special Committees
section (52?) that the vote of directors under these Executive Committee - body created by the by-laws.
circumstances is not valid. (Because sa conflict of - composed of not less than 3
interest niya sa contract) members of the board.
- Assure prompt and speedy
Section 32: Contracts Between Corporation with action kapag busy ang BoD
Interlocking Directors (Same Director in Multiple - Reduce the workload for BoD
Corporations) - Powerful as the board
● If the same person is a director in multiple The board may form a smaller group - Executive
corporations: Committee (at least 3 directors) to handle specific
○ Their shared position doesn’t duties (that the board allows), except:
invalidate contracts, if fair and honest. 1. Actions needing shareholder approval.
○ Valid if substantial ang interest ng 2. Filling board vacancies.
director to both corporations. 3. Amending bylaws.
○ Valid if nominal ang interest ng 4. Overturning irreversible or reversing the board
director to both corporations. decisions.
○ But if the person has a substantial 5. Declaring cash dividends.
interest (over 20%) in one company Other special committees (temporary or permanent)
and only a nominal interest (20% & can also be created with defined powers and roles.
below) in the other, extra scrutiny ● Can be created by the board itself.
(more strict in checking) applies ● Like HR, Finance, Audit - to make the work
(follow Section 31 rules). faster and efficient.
○ Voidable ang contract kapag hindi
naipasa ang mga rules.
Note: When substantial interest to one company tapos
nominal interest lang sa kabila, maaaring paboran ng
director ang company na mas malaki ang shares niya.

Section 33: Disloyalty of a Director

The director is personally benefitted at the expense of
the corporation.
If a director takes a business opportunity that should
belong to the corporation and profits from it, they must
give those profits back, unless approved by 2/3 of
stockholders.

Doctrine of Corporate Opportunity - the corporation

has the opportunity for the business venture pero the
director acquires it for themselves, for their own gain.
- like ninakaw ng
director ang