3.

Assets received and held by the corporation subject to

limitations permitting their use only for charitable, religious,
benevolent, educational or similar purposes, but not held upon
a condition requiring return, transfer or conveyance by reason
of the dissolution, shall be transferred or conveyed to one or
more corporations, societies or organizations engaged in
activities in the Philippines substantially similar to those of the
dissolving corporation according to a plan of distribution
adopted pursuant to this Chapter;
4. Assets other than those mentioned in the preceding
paragraphs, if any, shall be distributed in accordance with the
provisions of the articles of incorporation or the by-laws, to the
extent that the articles of incorporation or the by-laws,
determine the distributive rights of members, or any class or
classes of members, or provide for distribution; and
5. In any other case, assets may be distributed to such
persons, societies, organizations or corporations, whether or
not organized for profit, as may be specified in a plan of
distribution adopted pursuant to this Chapter. (n)
Section 95. Plan of distribution of assets. - A plan providing for the
distribution of assets, not inconsistent with the provisions of this Title, may
be adopted by a non-stock corporation in the process of dissolution in the
following manner:
The board of trustees shall, by majority vote, adopt a resolution
recommending a plan of distribution and directing the submission thereof to
a vote at a regular or special meeting of members having voting rights.
Written notice setting forth the proposed plan of distribution or a summary
thereof and the date, time and place of such meeting shall be given to each
member entitled to vote, within the time and in the manner provided in this
Code for the giving of notice of meetings to members. Such plan of
distribution shall be adopted upon approval of at least two-thirds (2/3) of the
members having voting rights present or represented by proxy at such
meeting. (n)
TITLE XII - CLOSE CORPORATIONS
Section 96. Definition and applicability of Title. - A close corporation, within
the meaning of this Code, is one whose articles of incorporation provide
that: (1) All the corporation's issued stock of all classes, exclusive of
treasury shares, shall be held of record by not more than a specified
number of persons, not exceeding twenty (20); (2) all the issued stock of all
classes shall be subject to one or more specified restrictions on transfer
permitted by this Title; and (3) The corporation shall not list in any stock
exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a close
corporation when at least two-thirds (2/3) of its voting stock or voting rights
is owned or controlled by another corporation which is not a close
corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except mining
or oil companies, stock exchanges, banks, insurance companies, public
utilities, educational institutions and corporations declared to be vested with
public interest in accordance with the provisions of this Code.
The provisions of this Title shall primarily govern close corporations:
Provided, That the provisions of other Titles of this Code shall apply
suppletorily except insofar as this Title otherwise provides.
Section 97. Articles of incorporation. - The articles of incorporation of a
close corporation may provide:
1. For a classification of shares or rights and the qualifications
for owning or holding the same and restrictions on their
transfers as may be stated therein, subject to the provisions of
the following section;
2. For a classification of directors into one or more classes,
each of whom may be voted for and elected solely by a
particular class of stock; and
3. For a greater quorum or voting requirements in meetings of
stockholders or directors than those provided in this Code.
The articles of incorporation of a close corporation may provide that the
business of the corporation shall be managed by the stockholders of the
corporation rather than by a board of directors. So long as this provision
continues in effect:
1. No meeting of stockholders need be called to elect directors;
2. Unless the context clearly requires otherwise, the
stockholders of the corporation shall be deemed to be directors
for the purpose of applying the provisions of this Code; and
3. The stockholders of the corporation shall be subject to all
liabilities of directors.
The articles of incorporation may likewise provide that all
officers or employees or that specified officers or employees
shall be elected or appointed by the stockholders, instead of by
the board of directors.
Section 98. Validity of restrictions on transfer of shares. - Restrictions on
the right to transfer shares must appear in the articles of incorporation and
in the by-laws as well as in the certificate of stock; otherwise, the same
shall not be binding on any purchaser thereof in good faith. Said restrictions
shall not be more onerous than granting the existing stockholders or the
corporation the option to purchase the shares of the transferring
stockholder with such reasonable terms, conditions or period stated
therein. If upon the expiration of said period, the existing stockholders or
the corporation fails to exercise the option to purchase, the transferring
stockholder may sell his shares to any third person.
Section 99. Effects of issuance or transfer of stock in breach of qualifying
conditions. -
 1. If stock of a close corporation is issued or transferred to any
person who is not entitled under any provision of the articles of
incorporation to be a holder of record of its stock, and if the
certificate for such stock conspicuously shows the qualifications
of the persons entitled to be holders of record thereof, such
person is conclusively presumed to have notice of the fact of
his ineligibility to be a stockholder.
2. If the articles of incorporation of a close corporation states
the number of persons, not exceeding twenty (20), who are
entitled to be holders of record of its stock, and if the certificate
for such stock conspicuously states such number, and if the
issuance or transfer of stock to any person would cause the
stock to be held by more than such number of persons, the
person to whom such stock is issued or transferred is
conclusively presumed to have notice of this fact.
3. If a stock certificate of any close corporation conspicuously
shows a restriction on transfer of stock of the corporation, the
transferee of the stock is conclusively presumed to have notice
of the fact that he has acquired stock in violation of the
restriction, if such acquisition violates the restriction.
4. Whenever any person to whom stock of a close corporation
has been issued or transferred has, or is conclusively presumed
under this section to have, notice either (a) that he is a person
not eligible to be a holder of stock of the corporation, or (b) that
transfer of stock to him would cause the stock of the
corporation to be held by more than the number of persons
permitted by its articles of incorporation to hold stock of the
corporation, or (c) that the transfer of stock is in violation of a
restriction on transfer of stock, the corporation may, at its
option, refuse to register the transfer of stock in the name of the
transferee.
5. The provisions of subsection (4) shall not be applicable if the
transfer of stock, though contrary to subsections (1), (2) or (3),
has been consented to by all the stockholders of the close
corporation, or if the close corporation has amended its articles
of incorporation in accordance with this Title.
6. The term "transfer", as used in this section, is not limited to a
transfer for value.
7. The provisions of this section shall not impair any right which
the transferee may have to rescind the transfer or to recover
under any applicable warranty, express or implied.
Section 100. Agreements by stockholders. -
1. Agreements by and among stockholders executed before the
formation and organization of a close corporation, signed by all
stockholders, shall survive the incorporation of such corporation
and shall continue to be valid and binding between and among
 such stockholders, if such be their intent, to the extent that such
agreements are not inconsistent with the articles of
incorporation, irrespective of where the provisions of such
agreements are contained, except those required by this Title to
be embodied in said articles of incorporation.
2. An agreement between two or more stockholders, if in writing
and signed by the parties thereto, may provide that in
exercising any voting rights, the shares held by them shall be
voted as therein provided, or as they may agree, or as
determined in accordance with a procedure agreed upon by
them.
3. No provision in any written agreement signed by the
stockholders, relating to any phase of the corporate affairs,
shall be invalidated as between the parties on the ground that
its effect is to make them partners among themselves.
4. A written agreement among some or all of the stockholders
in a close corporation shall not be invalidated on the ground
that it so relates to the conduct of the business and affairs of
the corporation as to restrict or interfere with the discretion or
powers of the board of directors: Provided, That such
agreement shall impose on the stockholders who are parties
thereto the liabilities for managerial acts imposed by this Code
on directors.
5. To the extent that the stockholders are actively engaged in
the management or operation of the business and affairs of a
close corporation, the stockholders shall be held to strict
fiduciary duties to each other and among themselves. Said
stockholders shall be personally liable for corporate torts unless
the corporation has obtained reasonably adequate liability
insurance.
Section 101. When board meeting is unnecessary or improperly held. -
Unless the by-laws provide otherwise, any action by the directors of a close
corporation without a meeting shall nevertheless be deemed valid if:
1. Before or after such action is taken, written consent thereto is
signed by all the directors; or
2. All the stockholders have actual or implied knowledge of the
action and make no prompt objection thereto in writing; or
3. The directors are accustomed to take informal action with the
express or implied acquiescence of all the stockholders; or
4. All the directors have express or implied knowledge of the
action in question and none of them makes prompt objection
thereto in writing.
If a director's meeting is held without proper call or notice, an action taken
therein within the corporate powers is deemed ratified by a director who
failed to attend, unless he promptly files his written objection with the
secretary of the corporation after having knowledge thereof.
Section 102. Pre-emptive right in close corporations. - The pre-emptive
right of stockholders in close corporations shall extend to all stock to be
issued, including reissuance of treasury shares, whether for money,
property or personal services, or in payment of corporate debts, unless the
articles of incorporation provide otherwise.
Section 103. Amendment of articles of incorporation. - Any amendment to
the articles of incorporation which seeks to delete or remove any provision
required by this Title to be contained in the articles of incorporation or to
reduce a quorum or voting requirement stated in said articles of
incorporation shall not be valid or effective unless approved by the
affirmative vote of at least two-thirds (2/3) of the outstanding capital stock,
whether with or without voting rights, or of such greater proportion of
shares as may be specifically provided in the articles of incorporation for
amending, deleting or removing any of the aforesaid provisions, at a
meeting duly called for the purpose.
Section 104. Deadlocks. - Notwithstanding any contrary provision in the
articles of incorporation or by-laws or agreement of stockholders of a close
corporation, if the directors or stockholders are so divided respecting the
management of the corporation's business and affairs that the votes
required for any corporate action cannot be obtained, with the
consequence that the business and affairs of the corporation can no longer
be conducted to the advantage of the stockholders generally, the Securities
and Exchange Commission, upon written petition by any stockholder, shall
have the power to arbitrate the dispute. In the exercise of such power, the
Commission shall have authority to make such order as it deems
appropriate, including an order: (1) cancelling or altering any provision
contained in the articles of incorporation, by-laws, or any stockholder's
agreement; (2) cancelling, altering or enjoining any resolution or act of the
corporation or its board of directors, stockholders, or officers; (3) directing
or prohibiting any act of the corporation or its board of directors,
stockholders, officers, or other persons party to the action; (4) requiring the
purchase at their fair value of shares of any stockholder, either by the
corporation regardless of the availability of unrestricted retained earnings in
its books, or by the other stockholders; (5) appointing a provisional director;
(6) dissolving the corporation; or (7) granting such other relief as the
circumstances may warrant.
A provisional director shall be an impartial person who is neither a
stockholder nor a creditor of the corporation or of any subsidiary or affiliate
of the corporation, and whose further qualifications, if any, may be
determined by the Commission. A provisional director is not a receiver of
the corporation and does not have the title and powers of a custodian or
receiver. A provisional director shall have all the rights and powers of a duly
elected director of the corporation, including the right to notice of and to
vote at meetings of directors, until such time as he shall be removed by
order of the Commission or by all the stockholders. His compensation shall
be determined by agreement between him and the corporation subject to
approval of the Commission, which may fix his compensation in the
absence of agreement or in the event of disagreement between the
provisional director and the corporation.
Section 105. Withdrawal of stockholder or dissolution of corporation. - In
addition and without prejudice to other rights and remedies available to a
stockholder under this Title, any stockholder of a close corporation may, for
any reason, compel the said corporation to purchase his shares at their fair
value, which shall not be less than their par or issued value, when the
corporation has sufficient assets in its books to cover its debts and liabilities
exclusive of capital stock: Provided, That any stockholder of a close
corporation may, by written petition to the Securities and Exchange
Commission, compel the dissolution of such corporation whenever any of
acts of the directors, officers or those in control of the corporation is illegal,
or fraudulent, or dishonest, or oppressive or unfairly prejudicial to the
corporation or any stockholder, or whenever corporate assets are being
misapplied or wasted.
TITLE XIII - SPECIAL CORPORATIONS CHAPTER I EDUCATIONAL
CORPORATIONS
Section 106. Incorporation. - Educational corporations shall be governed
by special laws and by the general provisions of this Code. (n)
Section 107. Pre-requisites to incorporation. - Except upon favorable
recommendation of the Ministry of Education and Culture, the Securities
and Exchange Commission shall not accept or approve the articles of
incorporation and by-laws of any educational institution. (168a)
Section 108. Board of trustees. - Trustees of educational institutions
organized as non-stock corporations shall not be less than five (5) nor more
than fifteen (15): Provided, however, That the number of trustees shall be
in multiples of five (5).
Unless otherwise provided in the articles of incorporation on the by-laws,
the board of trustees of incorporated schools, colleges, or other institutions
of learning shall, as soon as organized, so classify themselves that the
term of office of one-fifth (1/5) of their number shall expire every year.
Trustees thereafter elected to fill vacancies, occurring before the expiration
of a particular term, shall hold office only for the unexpired period. Trustees
elected thereafter to fill vacancies caused by expiration of term shall hold
office for five (5) years. A majority of the trustees shall constitute a quorum
for the transaction of business. The powers and authority of trustees shall
be defined in the by-laws.
For institutions organized as stock corporations, the number and term of
directors shall be governed by the provisions on stock corporations. (169a)
CHAPTER II RELIGIOUS CORPORATIONS
Section 109. Classes of religious corporations. - Religious corporations
may be incorporated by one or more persons. Such corporations may be
classified into corporations sole and religious societies.
Religious corporations shall be governed by this Chapter and by the
general provisions on non-stock corporations insofar as they may be
applicable. (n)
Section 110. Corporation sole. - For the purpose of administering and
managing, as trustee, the affairs, property and temporalities of any religious
denomination, sect or church, a corporation sole may be formed by the
chief archbishop, bishop, priest, minister, rabbi or other presiding elder of
such religious denomination, sect or church. (154a)
Section 111. Articles of incorporation. - In order to become a corporation
sole, the chief archbishop, bishop, priest, minister, rabbi or presiding elder
of any religious denomination, sect or church must file with the Securities
and Exchange Commission articles of incorporation setting forth the
following:
1. That he is the chief archbishop, bishop, priest, minister, rabbi
or presiding elder of his religious denomination, sect or church
and that he desires to become a corporation sole;
2. That the rules, regulations and discipline of his religious
denomination, sect or church are not inconsistent with his
becoming a corporation sole and do not forbid it;
3. That as such chief archbishop, bishop, priest, minister, rabbi
or presiding elder, he is charged with the administration of the
temporalities and the management of the affairs, estate and
properties of his religious denomination, sect or church within
his territorial jurisdiction, describing such territorial jurisdiction;
4. The manner in which any vacancy occurring in the office of
chief archbishop, bishop, priest, minister, rabbi of presiding
elder is required to be filled, according to the rules, regulations
or discipline of the religious denomination, sect or church to
which he belongs; and
5. The place where the principal office of the corporation sole is
to be established and located, which place must be within the
Philippines.
The articles of incorporation may include any other provision not contrary to
law for the regulation of the affairs of the corporation. (n)
Section 112. Submission of the articles of incorporation. - The articles of
incorporation must be verified, before filing, by affidavit or affirmation of the
chief archbishop, bishop, priest, minister, rabbi or presiding elder, as the
case may be, and accompanied by a copy of the commission, certificate of
election or letter of appointment of such chief archbishop, bishop, priest,
minister, rabbi or presiding elder, duly certified to be correct by any notary
public.
From and after the filing with the Securities and Exchange Commission of
the said articles of incorporation, verified by affidavit or affirmation, and
accompanied by the documents mentioned in the preceding paragraph,
such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall
become a corporation sole and all temporalities, estate and properties of
the religious denomination, sect or church theretofore administered or
managed by him as such chief archbishop, bishop, priest, minister, rabbi or
presiding elder shall be held in trust by him as a corporation sole, for the
use, purpose, behalf and sole benefit of his religious denomination, sect or
church, including hospitals, schools, colleges, orphan asylums, parsonages
and cemeteries thereof. (n)
Section 113. Acquisition and alienation of property. - Any corporation sole
may purchase and hold real estate and personal property for its church,
charitable, benevolent or educational purposes, and may receive bequests
or gifts for such purposes. Such corporation may sell or mortgage real
property held by it by obtaining an order for that purpose from the Court of
First Instance of the province where the property is situated upon proof
made to the satisfaction of the court that notice of the application for leave
to sell or mortgage has been given by publication or otherwise in such
manner and for such time as said court may have directed, and that it is to
the interest of the corporation that leave to sell or mortgage should be
granted. The application for leave to sell or mortgage must be made by
petition, duly verified, by the chief archbishop, bishop, priest, minister, rabbi
or presiding elder acting as corporation sole, and may be opposed by any
member of the religious denomination, sect or church represented by the
corporation sole: Provided, That in cases where the rules, regulations and
discipline of the religious denomination, sect or church, religious society or
order concerned represented by such corporation sole regulate the method
of acquiring, holding, selling and mortgaging real estate and personal
property, such rules, regulations and discipline shall control, and the
intervention of the courts shall not be necessary. (159a)
Section 114. Filling of vacancies. - The successors in office of any chief
archbishop, bishop, priest, minister, rabbi or presiding elder in a corporation
sole shall become the corporation sole on their accession to office and
shall be permitted to transact business as such on the filing with the
Securities and Exchange Commission of a copy of their commission,
certificate of election, or letters of appointment, duly certified by any notary
public.
During any vacancy in the office of chief archbishop, bishop, priest,
minister, rabbi or presiding elder of any religious denomination, sect or
church incorporated as a corporation sole, the person or persons
authorized and empowered by the rules, regulations or discipline of the
religious denomination, sect or church represented by the corporation sole
to administer the temporalities and manage the affairs, estate and
properties of the corporation sole during the vacancy shall exercise all the
powers and authority of the corporation sole during such vacancy. (158a)
Section 115. Dissolution. - A corporation sole may be dissolved and its
affairs settled voluntarily by submitting to the Securities and Exchange
Commission a verified declaration of dissolution.
The declaration of dissolution shall set forth:
1. The name of the corporation;
2. The reason for dissolution and winding up;
3. The authorization for the dissolution of the corporation by the
particular religious denomination, sect or church;
 4. The names and addresses of the persons who are to
supervise the winding up of the affairs of the corporation.
Upon approval of such declaration of dissolution by the Securities and
Exchange Commission, the corporation shall cease to carry on its
operations except for the purpose of winding up its affairs. (n)
Section 116. Religious societies. - Any religious society or religious order,
or any diocese, synod, or district organization of any religious
denomination, sect or church, unless forbidden by the constitution, rules,
regulations, or discipline of the religious denomination, sect or church of
which it is a part, or by competent authority, may, upon written consent
and/or by an affirmative vote at a meeting called for the purpose of at least
two-thirds (2/3) of its membership, incorporate for the administration of its
temporalities or for the management of its affairs, properties and estate by
filing with the Securities and Exchange Commission, articles of
incorporation verified by the affidavit of the presiding elder, secretary, or
clerk or other member of such religious society or religious order, or
diocese, synod, or district organization of the religious denomination, sect
or church, setting forth the following:
1. That the religious society or religious order, or diocese,
synod, or district organization is a religious organization of a
religious denomination, sect or church;
2. That at least two-thirds (2/3) of its membership have given
their written consent or have voted to incorporate, at a duly
convened meeting of the body;
3. That the incorporation of the religious society or religious
order, or diocese, synod, or district organization desiring to
incorporate is not forbidden by competent authority or by the
constitution, rules, regulations or discipline of the religious
denomination, sect, or church of which it forms a part;
4. That the religious society or religious order, or diocese,
synod, or district organization desires to incorporate for the
administration of its affairs, properties and estate;
5. The place where the principal office of the corporation is to
be established and located, which place must be within the
Philippines; and
1.
The names, nationalities, and residences of the trustees elected by the
religious society or religious order, or the diocese, synod, or district
organization to serve for the first year or such other period as may be
prescribed by the laws of the religious society or religious order, or of the
diocese, synod, or district organization, the board of trustees to be not less
than five (5) nor more than fifteen (15). (160a)
TITLE XIV - DISSOLUTION
Section 117. Methods of dissolution. - A corporation formed or organized
under the provisions of this Code may be dissolved voluntarily or
involuntarily. (n)
Section 118. Voluntary dissolution where no creditors are affected. - 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 duly adopted by the
affirmative vote of the stockholders owning at least two-thirds (2/3) of the
outstanding capital stock or of at least two-thirds (2/3) of the members of a
meeting to be held upon call of the directors or trustees after publication of
the notice of time, place and object of the meeting for three (3) consecutive
weeks in a newspaper published in the place where the principal office of
said corporation is located; and if no newspaper is published in such place,
then in a newspaper of general circulation in the Philippines, after sending
such notice to each stockholder or member either by registered mail or by
personal delivery at least thirty (30) days prior to said meeting. A copy of
the resolution authorizing the dissolution shall be certified by a majority of
the board of directors or trustees and countersigned by the secretary of the
corporation. The Securities and Exchange Commission shall thereupon
issue the certificate of dissolution. (62a)
Section 119. Voluntary dissolution where creditors are affected. - Where
the dissolution of a corporation may prejudice the rights of any creditor, the
petition for dissolution shall be filed with the Securities and Exchange
Commission. The petition shall be signed by a majority of its board of
directors or trustees or other officers having the management of its affairs,
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 by at least two-
thirds (2/3) of the members at a meeting of its stockholders or members
called for that purpose. If the petition is sufficient in form and substance,
the Commission shall, by an order reciting the purpose of the petition, fix a
date on or before which objections thereto may be filed by any person,
which date shall not be less than thirty (30) days nor more than sixty (60)
days after the entry of the order. Before such date, a copy of the order shall
be published at least once a week for three (3) consecutive weeks in a
newspaper of general circulation published in the municipality or city where
the principal office of the corporation is situated, or if there be no such
newspaper, then in a newspaper of general circulation in the Philippines,
and a similar copy shall be posted for three (3) consecutive weeks in three
(3) public places in such municipality or city.
Upon five (5) day's notice, given after the date on which the right to file
objections as fixed in the order has expired, the Commission shall proceed
to hear the petition and try any issue made by the objections filed; and if no
such objection is sufficient, and the material allegations of the petition are
true, it shall render judgment dissolving the corporation and directing such
disposition of its assets as justice requires, and may appoint a receiver to
collect such assets and pay the debts of the corporation. (Rule 104, RCa)
Section 120. Dissolution by shortening corporate term. - A voluntary
dissolution may be effected by amending the articles of incorporation to
shorten the corporate term pursuant to the provisions of this Code. A copy
of the amended articles of incorporation shall be submitted to the Securities
and Exchange Commission in accordance with this Code. Upon approval of
the amended articles of incorporation of the expiration of the shortened
term, as the case may be, the corporation shall be deemed dissolved
without any further proceedings, subject to the provisions of this Code on
liquidation. (n)
Section 121. Involuntary dissolution. - A corporation may be dissolved by
the Securities and Exchange Commission upon filing of a verified complaint
and after proper notice and hearing on the grounds provided by existing
laws, rules and regulations. (n)
Section 122. Corporate liquidation. - Every corporation whose charter
expires by its own limitation or is annulled by forfeiture or otherwise, or
whose corporate existence for other purposes is terminated in any other
manner, shall nevertheless be continued as a body corporate for three (3)
years after the time when it would have been so dissolved, for the purpose
of prosecuting and defending suits by or against it and enabling it to settle
and close its affairs, to dispose of and convey its property and to distribute
its assets, but not for the purpose of continuing the business for which it
was established.
At any time during said three (3) years, the corporation is authorized and
empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From and
after any such conveyance by the corporation of its property in trust for the
benefit of its stockholders, members, creditors and others in interest, all
interest which the corporation had in the property terminates, the legal
interest vests in the trustees, and the beneficial interest in the stockholders,
members, creditors or other persons in interest.
Upon the winding up of the corporate affairs, any asset distributable to any
creditor or stockholder or member who is unknown or cannot be found shall
be escheated to the city or municipality where such assets are located.
Except by decrease of capital stock and as otherwise allowed by this Code,
no corporation shall distribute any of its assets or property except upon
lawful dissolution and after payment of all its debts and liabilities. (77a, 89a,
16a)