NOTES ON CORPORATION LAW

 GR: Natural Persons licensed to practice profession cannot incorporate for the
purpose of practicing a profession.

Ex: unless a special law provides otherwise.

 Removal of the requirement that 25% of the authorized capital stock be:

1. 25% requirement not applicable during incorporation or establishing a

corporation;

2. 25% still applicable in increasing the capital stocks

(Sec. 37, R.A. No. 11232)

 Corporate Term Limit

Perpetual existence, unless the AOI provides otherwise (Sec. 11, R.A 11232)

Default Rule: perpetual existence

Question: What if the corporate term has expired? – it can re-apply with SEC for
the revival of its corporate existence. Hence, once the corporate existence has
been revived, all rights, privileges and even liabilities will be revived as well.

 Use of corporate charter/consequence of non – use of charter

Extension of the allowable period for non – use of corporate charter to 5 years
from the date of incorporation.

A corporation which has commenced its business but subsequently becomes

inoperative for a period of at least 5 years may be deemed delinquent
corporation and shall have a period of 2 years to resume operations

Consequence: the delinquent status but not dissolved. Hence, it has 2 years to
resume (Sec. 21, R.A. No. 11232

 Concept of Corporation vested with Public Interest

When can you said that a corporation is vested with public interest?
1. registered in the listed in the SEC
 2. If not registered or listed with the SEC, it can still be held as corporation with
public interest if:

a. 50M assets;
b. 200 ore more holders of shares
c. each shareholder holds 100 shares of a class of its equity shares.

3. Banks, quasi – banks, non – stock, savings and loan association, pawnshop,
corporation engaged in money service business, pre – need, trust and insurance
companies and other financial intermediaries.

4. other corporation engaged in business vested with public interest similar to the
above, as may be determined by the SEC (Sec. 22, R.A No. 11232)

 One Person Corporation

What is a person corporation? – it is a corporation with only one stockholder.

Who may form? – only a natural person, trust or an estate (NET)

Note allowed to form

1. banks, quasi – banks, pre needs etc. (Sec. 116, RA 11232)

2. Natural persons who is licensed to exercise a profession may not organize as
an OPC for the purpose of exercising such profession, except when a special law
states otherwise.

Note: OPC ha no required authorized capital stock requirement, except as

provided by a special law. (Sec. 117, RA No. 11232)

AOI and By- Laws of an OPC - one person corporation is required to file and
AOI, but not required to file a corporate by – laws.

Hence, OPC is required to file AOI but not by – laws.

 OPC’s Corporate Name - OPC should indicate the letters “OPC” either below or
at the end of its corporate name, the purpose of which is for transparency to put
on notice the public that a corporation is an OPC. (Sec. 120, RA No. 11232)
 Corporate Structure and Officers of an OPC

Sec. 12, RA. No. 11232

Single stockholder is the sole director and President of the OPC.

Within 15 days from the issuance of its Certificate of Incorporation, the OPC shall
appoint a treasurer and the corporate secretary.

Single Stockholder may be appointed as treasurer, provided he shall give a

bond, but the Single Stockholder cannot be a corporate secretary.

Summary:

1. Single Stockholder, can be the director, President, and treasurer (provided that
he gives a bond if he is the treasurer as well)

2. Single Stockholder cannot be appointed as corporate secretary.

(Sec. 112 RA. 11232)

 Designation of Nominee and Alternate Nominee under OPC/ AOI NEED NOT
BE AMENDED TO CHANGE THE NOMINEE

What happens if the single stockholder is incapacitated or died? Who will

continue the business? - Designate a nominee and an alternate nominee who
shall take the place of the single stockholder (Sec. 124, RA 11232)

Note: Single Stockholder may change the nominee at any time. The AOI need
not be amended if the single stockholders need to change the nominee. (Sec.
126, RA No. 11232)

 Liability of the OPC/Single Stockholder

Principle of Piercing the Corporate veil applies to APC.

Separate personality of the Single Stockholder and the OPC.

Note: It is incumbent upon the single stockholder to prove that the property of the
OPC is independent and separate to the property of the Single Stockholder.
 Can an ordinary stock corporation (close/family corporation) be converted
into OPC?

Yes. The single stockholder must acquire all the stocks of the ordinary stock
corporation, after which, the single stockholder must apply for the conversion into
one person corporation, the sing stockholder must satisfy all the needed
documents as the SEC may deemed require. If the application is approved the
SEC shall issue a certificate of filing of amended AOI.

 Can an OPC be converted into an ordinary stock corporation?

Yes. A One Person Corporation may be converted into an ordinary stock

corporation after due notice to the Commission of such fact and of the
circumstances leading to the conversion, and after compliance with all other
requirements for stock corporations. Such notice shall be filed with the
Commission within sixty (60) days from the occurrence of the circumstances
leading to the conversion into an ordinary stock corporation. If all requirements
have been complied with, the Commission shall issue a certificate of filing of
amended articles of incorporation reflecting the conversion.

In case of death of the single stockholder, the nominee or alternate nominee

shall transfer the shares to the duly designated legal heir or estate within seven
(7) days from receipt of either an affidavit of heirship or self-adjudication
executed by a sole heir, or any other legal document declaring the legal heirs of
the single stockholder and notify the Commission of the transfer. Within sixty (60)
days from the transfer of the shares, the legal heirs shall notify the Commission
of their decision to either wind up and dissolve the One Person Corporation or
convert it into an ordinary stock corporation.

The ordinary stock corporation converted from a One Person Corporation shall
succeed the latter and be legally responsible for all the latter’s outstanding
liabilities as of the date of conversion.

 BOARD OF DIRECTORS/TRUSTEES

a. minimum number of Director to incorporate is reduced from 5 to 1

b. removal of the residency for a majority of the BOD. (hence, majority of the
BOD need not be residents of the Philippines)
c. trustee removal.
d. the term of trustees was extended, from 1 year to 3 years the reason for which
is to get a quorum. (For non-stock corporation)
e. stockholders or members when authorized by the By-laws or by a majority of
the BOD are allowed to vote through remote communication methods or in
 absentia (e.g., zoom, skype, google meet). Hence, they are considered in
determining the presence of a quorum
.
 DISQUALIFICATION OF DIRECTORS, TRUSTEES OR OFFICERS

A person shall be disqualified from being a director, trustee or officer of any

corporation if, within five (5) years prior to the election or appointment as such,
the person was:

(a) Convicted by final judgment:

(1) Of an offense punishable by imprisonment for a period exceeding six

(6) years;
(2) For violating the Revised Corporation Code (e.g., right to examine
books of account); and
(3) For violating the Securities Regulation Code
(b) Found administratively liable for any offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts, violations
or misconduct similar to those enumerated in paragraphs (a) and (b) above.
The foregoing is without prejudice to qualifications or other disqualifications,
which the Commission, the primary regulatory agency, or the Philippine
Competition Commission may impose in its promotion of good corporate
governance or as a sanction in its administrative proceedings
Note: if the offence is for violation of the Revised Corporation Code or the
Securities Regulation Code, regardless of the punishable years,
disqualified to become director or trustee already.
(d) the SEC is empowered to unilaterally or upon verified complaint, and after
due notice and hearing, order the removal of a director or trustee elected despite
the disqualification, or whose disqualification arose or is discovered subsequent
to an election
 VACANCIES IN THE OFFICE OF DIRECTOR OR TRUSTEE; EMERGENCY
BOARD POWERS

when the vacancy prevents the remaining directors from constituting a quorum
and emergency action is required to prevent grave, substantial, and irreparable
loss or damage to the corporation, the vacancy may be temporarily filled from
among the officers of the corporation by unanimous vote of the remaining
directors or trustees.
 The action by the designated director or trustee shall be limited to the emergency
action necessary, and the term shall cease within a reasonable time from the
termination of the emergency or upon election of the replacement director or
trustee, whichever comes earlier. The corporation must notify the Commission
within three (3) days from the creation of the emergency board, stating therein
the reason for its creation.

Hence, the emergency board is not a permanent board, it designed only to

address the emergency situation, and hence, there must be an election
thereafter.

 Corporate Officer

(a) a president, who must be a director;

(b) a treasurer, who must be a resident of the Philippines;
(c) a secretary, who must be a citizen and resident of the Philippines; and
(d) such other officers as may be provided in the bylaws.

If the corporation is vested with public interest, the board shall also elect a
compliance officer. The same person may hold two (2) or more positions
concurrently, except that no one shall act as president and secretary or as
president and treasurer at the same time, unless otherwise allowed in this Code.

 NON – HOLDING OF ELECTION

The non – holding of election of the directors of the corporation is required to be

reported to the SEC which is empowered under certain conditions to summarily
order that an election be held.

Other words, if no new date has been designated, or if the rescheduled election
is likewise not held, the SEC may, upon the application of a stockholder,
member, director or trustee, and after verification of the unjustified non-holding of
the election, summarily order that an election be held.

 CORPORATE POWERS

1. To enter into a partnership, joint venture, merger, consolidation, or any other

commercial agreement with natural and juridical persons

2. To make reasonable donations, including those for the public welfare or for
hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, that
no foreign corporation shall give donations in aid of any political party or
 candidate or for purposes of partisan political activity; (So pwede pa rin ang
domestic corporation mag donate sa isang political party)
 MEETINGS

GR: Regular meetings of stockholders or members shall be held annually on a

date fixed in the bylaws

XPN: If there is not fixed period stated in the by-laws, on any date after April
15 of every year as determined by the board of directors or trustees.

Note:

1. written notice of regular meetings may be sent to all stockholders or members

of record through electronic mail or such other means as provided by the SEC.

2. The right to vote of stockholders or members may be exercised in person,

through a proxy, or when so authorized in the bylaws, through remote
communication or in absentia.

3. Notice of any meeting may be waived, expressly or impliedly, by any

stockholder or member: Provided, that general waivers of notice in the articles of
incorporation or the bylaws shall not be allowed: Provided, further, that
attendance at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.

 CORPORATE BOOKS AND RECORDS

Salient provision emphasized by Dean Ceniza

1. The SEC has the power to decide if the right to inspect the corporate books
and records is within the parameters of the RCC.
2. if the paid – up capital of the corporation is less than 600K, the financial
statement may be certified under oath only by the President and Treasurer. No
need of Certification from a CPA.

 Foreign Corporation

1. Upon issuance of the license, such foreign corporation may commence to

transact business in the Philippines and continue to do so for as long as it retains
its authority to act as a corporation under the laws of the Philippines
 2. Within sixty (60) days after the issuance of the license to transact business in
the Philippines, the licensee, except foreign banking or insurance corporations,
shall deposit with the Commission for the benefit of present and future creditors
of the licensee in the Philippines, securities satisfactory to the Commission,
consisting of bonds or other evidence of indebtedness of the Government of the
Philippines, its political subdivisions and instrumentalities, or of government-
owned or -controlled corporations and entities, shares of stock or debt securities
that are registered under the SRC.

 Resident Agent of a Foreign Corporation

A resident agent may be either an individual residing in the Philippines or a

domestic corporation lawfully transacting business in the Philippines: Provided,
that an individual resident agent must be of good moral character and of sound
financial standing: Provided, further, that in case of a domestic corporation who
will act as a resident agent of a Foreign Corporation, it must likewise be of sound
financial standing and must show proof that it is in good standing as certified by
the SEC.

 VOLUNTARY DISSOLUTION OF A CORPORATION & NO CREDITORS

AFFECTED

1. If dissolution of a corporation does not prejudice the rights of any creditor

having a claim against it, the dissolution may be effected by majority vote of the
board of directors or trustees, and by a resolution adopted by the affirmative vote
of the stockholders owning at least majority of the outstanding capital stock or
majority of the members of a meeting to be held upon the call of the directors or
trustees.

 VOLUNTARY DISSOLUTION OF A CORPORATION & CREDITORS ARE

AFFECTED

1. Where the dissolution of a corporation may prejudice the rights of any creditor,
a verified petition for dissolution shall be filed with the SEC.
2. The petition shall be signed by a majority of the corporation’s board of
directors or trustees, verified by its president or secretary or one of its directors or
trustees, and shall set forth all claims and demands against it, and that its
dissolution was resolved upon by the affirmative vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or at least
two-thirds (2/3) of the members at a meeting of its stockholders or members
called for that purpose.

 DISSOLUTION BY SHORTENING THE CORPORATE TERM

 1. A voluntary dissolution may be effected by amending the articles of
incorporation to shorten the corporate term
2. Upon the expiration of the shortened term, as stated in the approved amended
articles of incorporation, the corporation shall be deemed dissolved
IMMEDIATELY without need for the issuance of a certificate of dissolution,
subject to liquidation

 WITHDRAWAL OF REQUEST AND PETITION FOR DISSOLUTION.

A withdrawal of the request for dissolution shall be made in writing, duly verified
by any incorporator, director, trustee, shareholder, or member and signed by the
same number of incorporators, directors, trustees, shareholders, or members
necessary to request for dissolution as set forth in the foregoing sections.

HENCE, IT THE REQUEST FOR WITHDRAWAL OF DISOLLUTION MUST BE

MADE IN WRITING. A withdrawal of the petition for dissolution shall be in the
form of a motion, verified and filed prior to publication of the order setting the
deadline for filing objections to the petition.

 Grounds for Involuntary Dissolution

1. Non-use of corporate charter

2. Continuous inoperation of a corporation
3. Upon receipt of a lawful court order dissolving the corporation
4. Upon finding by final judgment that the corporation procured its incorporation
through fraud
5. Upon finding by final judgment that the corporation

a. Was created for the purpose of committing, concealing or aiding the

commission of securities violations, smuggling, tax evasion, money
laundering, or graft and corrupt practices;

NOTE: but if the corporate was only used to commit crime and the
stockholders did not know it – corporation cannot be dissolved

b. Committed or aided in the commission of securities violations,

smuggling, tax evasion, money laundering, or graft and corrupt practices,
and its stockholders knew;

NOTE: but if the corporate was only used to commit crime and the
stockholders did not know it – corporation cannot be dissolved
 c. Repeatedly and knowingly tolerated the commission of graft and corrupt
practices or other fraudulent or illegal acts by its directors, trustees,
officers, or employees.

NOTE: but if the corporate was only used to commit crime and the
stockholders did not know it – corporation cannot be dissolved

 INVESTIGATION, OFFENSES AND PENALTIES

1. Unauthorized use of corporate name – Sec. 159;

2. violation of disqualification provision – Sec. 160;
3. Violation of duty to maintain records to allow inspection or reproduction – Sec.
161
4. willful certification of incomplete, inaccurate, false or misleading statements or
reports – Sec. 162
5. Independent auditor collusion – Sec. 163
6. Obtaining Corporate Registration through Fraud – Sec. 164
7. Fraudulent Conduct of Business – Sec. 165
8. Acting as Intermediaries for Graft and Corrupt Practices – Sec. 166
9. Engaging Intermediaries for Graft and Corrupt Practices - Sec. 167
10. Tolerating Graft & Corrupt Practices – Sec. 168
11. Retaliation against whistleblowers Practices - Sec. 168
12. Other violations of the Code – Sec. 170

 ADOPTION OF NEW TECHNOLOGIES

1. Recognizes stockholders or members votes cast in absentia via remote

communication method.

2. allows the AOI and applications for amendments to be filed with the SEC in the
form of Electronic Documents in accordance with the rules on electronic filing
that the SEC with promulgate (Sec. 13, RA No. 11232)

3. Implement an electronic filing and monitoring system to expediate corporate

name reservation and registration, incorporation, submission of reports, notices
and documents and sharing of information with other govt. agencies.