CORPORATION RIGHTS OF SUCCESSION

RA 11232, took effect on Feb. 23, 2019 “Revised Corporation Code of
the Philippines”
• Provides for the incorporation, organization, and regulation of
private corporation, both stock and non-stock, including
educational and religious corporations;
CORPORATION CODE
• Defines their powers and provides for their dissolutions;
• Fixed the duties of directors or trustees and other officers thereof;
• Declares the rights and liabilities of stockholders or members;
• Prescribes the conditions under which corporations, including
foreign corporations, may transact business;
• Provides penalties for violation of the Code; and
• Repeals all laws and parts of laws in conflict or inconsistent with
the Code.
Corp. Code
Sec 2. – A Corporation is an artificial being created by operation of
law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence.
ATTRIBUTES OF A CORPORATION
1. It is an artificial being;
2. It is created by operation of law;
3. It has the right of succession; and
4. It has only the powers, attributes, and properties expressly
authorized by law or incidental to its existence.
CORPORATION AS AN ARTIFICIAL BEING
• May acquire and possess property
• Incur obligations
• Bring civil and criminal actions in its name
• Has the capacity of continuous existence
• Death, insanity, insolvency or withdrawal of any of the
stockholders or members does not dissolve the corporation.
POWERS, ATTRIBUTES, AND PROPERTIES OF A
CORPORATION
May exercise such powers:
• As granted by law
• Incidental or essential to its existence
ADVANTAGES OF A CORPORATION
• Has legal capacity to act as a legal unit
• Continuity of existence
• Management is centralized to Board of Directors
• Creation, management and dissolution are governed by one
general incorporation law
• Many individuals may invest their separate funds in the
corporation
• The shareholders have limited liability
• Shareholders are not agent of the corporation
• Shares of stocks can be transferred without the consent of the other
stockholders
DISADVANTAGES OF A CORPORATION
• Relatively complicated in formation and management
• Entails high cost of formation and operation
• There is lack of personal element in view of the transferability of
shares
• There is greater degree of governmental control and supervision
• Stockholders have little voice in the conduct of the business

Doctrine of piercing the veil of Corporate Entity CLASSIFICATION OF CORPORATION

The corporate judicial personality is disregarded, and the individuals 1. Stock Corporation
composing it shall be held liable if the fiction of separate entity is being - Ordinary business corporation
used as a clock or cover for fraud or illegality. - Created and operated for the purpose of making profit and to
distribute the same in the form of dividends.
• When a domestic corporation is controlled by aliens, its nationality 2. Non-stock corporation
shall be deemed to be that of the controlling stockholders during - Do not issue stock
wartime for reason of national security; - Created not for profit but for the public good and welfare
• Where the corporation is organized by an insolvent debtor to - For religious, social, civic and political organizations and
defraud his creditors and he transfers his properties to it in association
furtherance of such fraudulent purpose;
• Where a corporation is dissolved and its assets are transferred to STOCK VS. NON-STOCK CORPORATION
another corporation to avoid financial liability of the first STOCK NON-STOCK
corporation to its employees, both firms being owned and control Definition Capital stocks are No part of its
by the same person; divided into shares, income is
authorized to distributable as
Instances when the corporate fiction maybe disregarded: distribute dividends dividends to its
• Where a corporation function for the benefit of a single person or allotments of the members, trustees or
surplus profits. officers.
who has complete control over its funds and is the sole owner
Composition Stockholders Members
thereof;
Distribution of Profits is distributed Incidental profit
• Where the corporation is a mere instrumentality of the individual Profits to shareholders. made is used for
stockholders who must individually answer for corporate furtherance of its
obligations; purpose.
Right to vote Each stockholder Each member,
CORPORATION CREATED BY LAW
votes according to regardless of class, is
• Governed by RA 11232 the proportion of his entitled to one (1)
• Cannot come into existence by mere agreement of the parties shares. vote.
• Require special authority from the government.
 Voting by proxy Allowed (Sec. 57) Allowed unless the • Close corporation
agreement provides • Open corporation
otherwise (Sec. 88) • Parent or holding corporation
Voting thru May be authorized May be authorized
• Subsidiary corporation
remote by the by-laws or by the by-laws or
communication AOI. (Sec. 23) AOI. (Sec. 88) • True corporation
&/or in absentia • Quasi-corporation
Who exercises Board of Directors Board of Trustees – Corporation by prescription
Corporate Members of the – Corporation by estoppel
Powers corporation
Governing Board Board of Directors Board of Trustees, PUBLIC CORPORATION
with maximum of which may consist of 1. Provinces
15 directors. more than 15 2. Cities
trustees unless 3. Municipalities
otherwise provided 4. Barangays
by the AOI or by-
5. Autonomous regions in Muslim Mindanao and the Cordilleras
laws. (Sec. 92)
Term of Directors hold office Term of office of
directors or for 1 year and until 1/3 of the board PRIVATE CORPORATION
trustees their successors are expires every year. 1. Government Owned and Controlled Corporation (GOCC)
elected and Subsequent elections 2. Quasi-public corporation
qualified. (Sec. 23) of trustees
comprising 1/3 of COMPONENT OF A CORPORATION
the board shall be 1. Corporators 5. Promoters
held annually, and 2. Incorporators 6. Subscribers
trustees so elected 3. Stockholders 7. Underwriters
shall have a term of 4. Members
3 years. (Sec. 92)
Election of Officers are elected Officers may CAPITAL STOCK
officers by the Board of directly be elected Amount fixed in the Articles of Incorporation to be subscribed and paid
Directors (Sec. 25), by the members
by shareholders.
except in close UNLESS the AOI
corporations where or by-laws provide
the stockholders otherwise. (Sec. 92) Authorized Capital Stock
themselves may - same as capital stock if the shares of the corporation as par value
elect the officers. - if shares has no par value, the corporation has no authorized
(Sec. 97) capital stock but it has capital stock although the value Is not
Place of meetings The meetings must Any place within the specified in the AOI.
be held at the Philippines, if
principal office of provided for by the Subscribed Capital Stock
the corporation, if by-laws. (Sec. 93) - The amount of the capital stock subscribed whether fully paid or
practicable. If not, not
then anyplace in the
city or municipality Outstanding Capital Stock
where the principal
office of the - Capital stock which is issued and held by persons other than the
corporation is corporation itself.
located. (SEC 51)
Transferability Transferable. Generally non- Paid-up Capital Stock
of Interest transferrable unless - Portion of the capital stock that is paid.
the AOI or by-laws
provide otherwise. Unissued Capital Stock
- Portion of the capital stock that is not issued or subscribed.
Other Classification of Corporation
• Corporation aggregate CAPITAL VS. CAPITAL STOCK
• Corporation sole 1. Capital is the actual property or assets of a corporation while
• Ecclesiastical corporation Capital Stock is an amount.
• Lay corporation 2. Capital varies depending on the profits or losses, appreciation or
• Eleemosynary corporation depreciation of the assets. Capital Stock is an amount fixed in the
articles of incorporation and is unaffected by profits and losses.
• Civil corporation
• Domestic corporation
NATURE OF SHARES OF STOCK
• Foreign corporation 1. It is an intangible personal property
• De jure corporation 2. It merely represents an undivided share in the corporation
• De facto corporation 3. It is not part of the corporate asset
4. They do not constitute an indebtedness of the corporation to the WHEN THE CLASSIFICATION OF SHARES MAY BE MADE
shareholders 1. By the incorporators
- The classes and number of shares which a corporation shall issue
CERTIFICATE OF STOCK are first determined by the incorporators as stated in the articles of
- Is a written acknowledgement by the corporation of the interest, incorporation filed with the SEC.
right, and participation of a person in the management, profits, 2. By the Board of Directors and the Stockholders
and assets of the corporation. - After the corporations comes into existence, they may be altered
by the board of directors and the stockholders by amending the
CLASSES OF SHARES articles of incorporation pursuant to Sec. 15.
1. Par value share 7. Promotion share
2. No par value share 8. Share in escrow STEPS IN THE CREATION OF A CORPORATION
3. Voting share 9. Convertible stock 1. Promotion
4. Non-voting share 10. Founder’s share - A promoter is a person who, acting alone or with others, takes
5. Common share 11. Redeemable share initiative in founding and organizing the business or enterprise of
6. Preferred share 12. Treasury share the issuer and receives consideration therefore.
2. Incorporation
RESTRICTION ON THE ISSUANCE OF NO-PAR VALUE Steps:
SHARES a. Drafting and execution of Articles of Incorporation by the
1. Banks, trust companies, insurance companies, and loans incorporators and other documents required for registration of the
associations shall not be permitted to issue no par value shares corporation
2. Preferred shares may be issued only with a stated par value b. Filing with the SEC of the articles of incorporation
3. Shares issued without par value shall be deemed fully paid. c. Payment of filing and publication fees
4. Shares issued without par value may not be issued for less than d. Issuance by the SEC of the certificate of incorporation
P5.00
5. The entire amount paid for no par value shares shall be treated as Formal Organization and Commencement of Business
capital and shall not be available for distribution as dividends. a. Adoption of By-Laws and filing of the same with the SEC;
b. Election of board of directors/trustees, and officers;
Advantages of Par Value Shares c. Establishment of principal office;
1. Easily sold as the public is more attracted to buy this kind of shares d. Providing for subscription and payment of capital stock.
2. There is greater protection to creditors
3. There is unlikelihood of sale of subsequently issued shares at a ARTICLES OF INCORPORATION
lower price; and - Is a document prepared by the persons establishing a corporation
4. There is unlikelihood of the distribution of dividends that are only and filed with the Securities and Exchange Commission
ostensible profits containing the matter required by the Code.

Disadvantages of Par Value Shares CONTENT OF ARTICLES OF INCORPORATION

1. The subscriber liable to corporate creditors for their unpaid 1. Name of corporation
subscription; and 2. Specific purpose or purposes of corporation
2. The stated par value share is not an accurate criterion of its true 3. Place of principal business
value 4. Term of corporate life
5. Names, nationalities, and residences of the incorporators
KINDS OF PREFERRED SHARES 6. Number of directors or trustees
a. Preferred shares as to assets 7. Names, nationalities, and directors of the incorporators or trustees
- gives preference in the distribution of assets in case of liquidation 8. Authorized capital stock in pesos
b. Preferred shares as to dividends 9. Amount of capital stock subscribed, names, nationalities and
- gives preference in the distribution of dividends. residences of subscribers, and number of shares and sum
subscribed by each; if non-stock, amount of its capital, names,
Limitations on the Issuance of Preferred Shares nationalities and residences of the contributors and amount of
1. No voting rights but shall still be entitled to vote on matters contributed by each.
enumerated in Sec 6 10. Contrary treasurer elected
2. The preferences must not be violative of the provision of the Code 11. Acknowledgement
3. May be issued only with a stated par value
4. The BOD may fix the terms and conditions of PS and shall be 1. Corporate Name (Sec. 17)
effective upon filing with SEC. The corporation acquires juridical personality under the name
stated in the certificate of incorporation. It is the name of the
Kinds of Preferred Shares as to Dividends corporation which identifies and distinguishes it from other
1. Cumulative Preferred Share corporations, firms or entities.
2. Non-cumulative Preferred Share
3. Participating Preferred Share Name of Corporation
4. Non-participating Preferred Share The proposed name must not be:
5. Cumulative-participating Preferred Share a. Identical; or
 b. Deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by
law; or
c. Patently deceptive, confusing or contrary to law.
Purpose of Corporation
Limitations:
a. Purpose or purposes must be lawful;
b. Purpose or purposes must be stated with sufficient clarity;
c. If there is more than one purpose, the primary as well as the
secondary purpose must be specified; and
d. Purposes must be capable of being lawfully combined.
Principal Office of Corporation
- The articles of incorporation must state the place where the
principal office of the corporation is to be established or located,
which place must be within the Philippines.
Term of Existence
- The corporation shall have perpetual existence unless its articles of
incorporation provides otherwise.
Capitalization
Requirements:
a. The amount of its authorized capital stock in lawful money of the
Philippines;
b. The number of shares and kind of shares into which it is divided;
c. In case the shares are par value shares, the par value of each;
d. The names, nationalities and residences of the original subscribers;
e. The amount subscribed and pad by each of his subscription;
FILIPINO PERCENTAGE OWNERSHIP
No Foreign Equity
1. Mass Media except recording
2. Practice of all professions
3. Retail trade enterprises with paid-up capital of less than
US$2,500,00
4. Cooperatives
5. Private Security Agencies
6. Small-scale Mining
7. Utilization of Marine Resources in archipelagic waters, territorial
sea and exclusive economic zone as well as small-scale utilization
of natural resources in rivers, lakes, bays and lagoon.
8. Ownership, operation and management of cockpits
9. Manufacture, repair, stockpiling and/or distribution of nuclear
weapons
10. Manufacture, repair, stockpiling and/or distribution of biological,
chemical, and radiological weapon and anti-personnel mines
(Various treaties to which the Philippines is a signatory &
conventions supported by the Phils)
11. Manufacture of firecrackers and other pyrotechnic devices
Up to 20% Foreign Equity
1. Private radio communications network
Up to 25% Foreign Equity
1. Private recruitment (local or overseas employment)
2. Contracts for the construction and repair of locally-funded public
works except:
a. infrastructure/ development projects covered in RA
7718; and
b. Projects which are foreign funded or assisted and
required to undergo international competitive bidding.
3. Contracts for the construction of defense-related structures.
Up to 30% Foreign Equity
1. Advertising
Up to (40%) Foreign Equity
1. Exploration, development and utilization of natural resources
2. Ownership of private lands
3. Operation and management of public utilities
4. Ownership/ establishment and administration of educational
institutions
5. Culture, production, milling, processing, trading excepting
retailing, of rice and corn and acquiring, by barter, purchase or
otherwise, rice and corn and the by-products thereof.
6. Contracts for the supply of materials, goods and commodities to
government-owned or controlled corporation, company agency or
municipal corporation
7. Project Proponent and Facility Operator of a BOT project
requiring a public utilities franchise
8. Operation of deep sea commercial fishing vessel
9. Adjustment Companies
10. Ownership of condominium units where the common areas in the
condominium project are co-owned by the owners of the separate
units or owned by a corporation.
Up to 60% Foreign Equity
1. Financing companies regulated by the Securities and Exchange
Commission
2. Investment houses regulated by the SEC
COMMENCEMENT OF CORPORATE EXISTENCE
• A corporation commences to have juridical personality and legal
existence only from the moment the SEC issues to the
incorporators a certificate of incorporation under its official seal/
• It is the certificate of incorporation that gives juridical personality
to corporation and placed it under the jurisdiction of the
commission.
AMENDMENT OF ARTICLES OF INCORPORATION
Procedure:
1. Resolution by at least a majority of the board of directors or
trustees;
2. Vote or written assent of the stockholders representing at least 2/3
of the outstanding capital stocks or 2/3 of the members in case of
non-stock corporations.
3. Submission and filing with the SEC of:
a. The original and amended articles together containing all the
provisions required by law to be set out in the articles of
incorporation. Such articles, as amended, shall be indicated
by underscoring the change or changes made;
b. A copy thereof, duly certified under oath by the corporate
secretary and a majority of the directors or trustees stating the
fact that such amendments have been duly approved by the
required vote of the stockholders or members; and
c. A favorable recommendation pf the appropriate government
agency concerned if required by law.
Limitation in the Amendment of Articles of Incorporation
1. The amendment of any provision or matters stated in the articles
of incorporation is not allowed when it will be contrary to the
provisions or requirement prescribed by the Code or by special
law or changes any provision in the articles of incorporation stating
an accomplished fact;
2. It must be for legitimate purposes;
3. It must be approved by the required vote of the board of directors
or trustees and the stockholders or members;
4. The original articles and amended articles together must contain
all provisions required by law to se out in the articles of
incorporation;
5. Such articles, as amended, must be indicated by underscoring the
changes made, and a copy thereof duly certified under oath by the
corporate secretary and a majority of the directors or trustees
stating that the amendments have ben duly approved by the
required vote of the stockholders or members must be submitted
to the SEC;
6. The amendments shall take effect only upon their approval by the
SEC;
7. If the corporation is government by special law, the amendments
must be accompanied by a favorable recommendation of the
appropriate government agency;
8. No right or remedy in favor or against any corporation, its
stockholders, members, directors, trustees, or officers, shall be
removed or impaired either by the subsequent amendment or
repeal of this Code or of any part thereof

Facts NOT Subject to Amendment

1. Names of incorporators;
2. Names of original subscribers to the capital stock of the
corporation and their subscribed and paid up capital;
3. Treasurer elected by the original subscribers;
4. Members who contributed to the initial capital of a non-stock
corporation;
5. Date and place of execution of the articles of incorporation;
6. Witnesses to the signing and acknowledgement of the articles

Grounds for Rejection of AOI or Amendment thereto

1. That the articles of incorporation or any amendment thereto is not
substantially in accordance with the form prescribed therein;
2. That the purpose or purposes of the corporation are patently
unconstitutional, illegal, immoral or contrary to government rules
and regulations;
3. That the required percentage of ownership of the capital stock to
be owned by citizens of the Philippines has not been complied with
as required by existing laws or the constitution.

Grounds for Suspension or Revocation of Certificate of

Registration
1. Fraud in procuring its certificate of incorporation
2. Serious misrepresentation as to what the corporation can do or is
doing to the great prejudice of, or damage to, the general public
3. Refusal to comply with or defiance of a lawful order of the SEC
restraining the commission of acts which would amount to a
grave violation of its franchise
4. Continuous inoperation for a period of at least 5 years
5. Failure to file the by-laws within the required period