THE NEW CORPORATION CODE REVIEWER

SEC 6
TITLE I Classification of Shares
GENERAL PROVISIONS  Must be indicated in the AOI
DEFINITION AND CLASSIFICATIONS  Each share shall be equal in all respects to every other share except as
SEC 1: TITLE provided in AOI and Certificate of Stock
 The shares in stock corp may be divided into classes or series of shares
or both.
SEC 2:
 No share may be deprived of voting rights
CORPORATION DEFINED o Except those classified and issued as preferred or
 Artificial being redeemable shares
 Created by operation of law o Unless otheriwise provided in this code
 Having the (1) right of succession (2) the powers attributes and  Provided that there shall always be a class or series of shares with
properties complete voting rights
 Expressly authorized by law or incident to its existence  Vote required = Stock with voting rights
HOWEVER : Holders of Nonvoting shares
SEC 3  Nevertheless entitled to vote on
CLASSES OF STOCK A MID BIAS
o Amendment of AOI
STOCK NON-STOCK
o Merger and consolidation of corp with another corp/other
Have capital stock divided into shares and are All other
corps
authorized to distribute to the holder of such shares corporations
o Increase or decrease of authorized capital stock
 Dividends or allotments of the surplus profits on
o Dissolution of Corp
the basis of shares held
o Bonded indebtedness (incurring, creating or increasing)
o Investment of Corporate funds in another corp/business
SEC 4 o Adoption or amendment of bylaws
o Sale, lease, exchange, mortgage, or pledge or other
CORPORATIONS C REATED BY SPECIAL LAWS OR C HARTERS
disposition of all or substantially all of corporate property
 Governed primarily by the special law or charter creating them or
Shares or series of shares may or may not have a par value
applicable to them
 Provided that
 Supplemented b the provisions of this code insofar as they are
o Banks
applicable
o Trust
SEC 5 o Insurance and Preneed Companies
CORPORATORS AND INCORPORATORS , SH AND M EMBERS o Public Utilities
CORPORATORS INCORPORATORS o Building and Loan associations
Compose the corporation SH/Members mentioned in AOI as o And other corporaions authorized to obtain or access
 Whether as stockholders or originally forming and composing funds from public
shareholders in Stock Corp the corporation and who are  Whether publicly listed or not
signatories thereof  Shall not be permitted to issue no par value
 Or Members in non-stock corp
shares of stock

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Preferred shares of stock

 May be given preference in the distribution of dividends/corporate
SEC 9:
assets in case of liquidation
 Or such other preferences TREASURY SHARES
 Provided : issued only with stated par value  Issued and fully paid for
 BOD where authorized in AOI  may fix terms and conditions of  BUT subsequently reaquired by issuing corporation
preferred shares of stock or any series thereof  Through : purchase, redemption, donation or some other lawful
 Terms and conditions effective upon filing of certificate with SEC means
Without par value
 Deemed fully paid
 Nonassessable
 At least P5.00 /share
 Entire consideration received = treated as capital
 Not available for distribution of dividends

Corporation may further classify

 Purpose of ensuring compliance with consti or legal requirements

SEC 7
FOUNDERS S HARES
 May be given rights and privileges not enjoyed by owners of other
stocks
 Where : exclusive right to vote and be voted in election of directors is
granted  limited period NOT to exceed 5 years from date of
incorporation
 Not allowed if exercise will violate Anti-dummy law

SEC 8
REDEEMABLE S HARES
 May be issued when expressly provided by AOI
 May be purchased by corporation from holders upon expiration of
period
 Regardless of existence of unrestricted retained earning
 And upon such other terms and conditions stated in AOI

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 Upon approval = revived with perpetual existence

 Unless application provides otherwise

TITLE II SEC 12
INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS MINIMUM C APITAL S TOCK
 No minimum required
SEC 10
 Except as otherwise specifically provided by law
NUMBER AND QUALIFICATION OF INCORPORATORS
 Any: Person, Partnership, Association or Corporation
 Not more than 15 in number SEC 13:
 Each incorporator must own or subscribe to at least 1 share of capital CONTENTS OF AOI
stock  Term
 Single SH = ―One person corporation‖  Incorporator : Names, Nationalities, Residence addresses
 Place of Principal Office
SEC 11  Capital –if non-stock, names nationalities and residence of
TERM contributors and amounts contributed by each
General  Perpetual existence  Authorized Capital Stock –if stock, number into which it is divided,
Rule par value of each, names, nationalities and residence of original
Corporatio subscribers, amount subscribed, and paid by each on the
 Continue to exist = perpetual existence
n with subscription, statement that some or all are without par value if
 Unless upon vote of SH (maj) of OCS notifies
Certificate applicable
commission that it elects to retain specific corporate
of  Name of Corporation
term
Incorporat  Names, Nationalities and Residence of persons who shall act as
 Any change in term is w/o prejudice to appraisal right of
ion prior directors or trustees until 1st regular director or trustees are duly
dissenting SH
elected and qualified
Corporate  Purpose (specific)
 May be extended or shortened
term for a  Other matters as may be deemed necessary and convenient by
 By amending AOI
specific incorporators
 No extention: EARLIER than 3 years prior to original or
period Optional:
subsequent expiry dates
 Arbitration agreement (Sec 181)
 Unless Justifiable reason for an earlier extentio as may
 AOI and applications for amendment may be filed with commission in
be determined by Commission
the form of electronic document
 Extennsion shall take effect only on the day following
orginal or subsequent expiry dates SEC 14:
FORM OF AOI
Corporatio  May apply for revival of its corporate existence together GR: must comply with the form provided
n whose with all the rights and privileges under certificate of EX: Special law prescribes
term has incorporation  Signed by incorporators and treasurer
expired  Subject to all of its duties, debts, and liabilities existing *** check actual form
prior to revival

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SEC 15
AMENDMENT OF AOI SEC 17
GR: CORPORATE N AME
 Amendment by majority vote of BOD/T
PROHIBITIONS
 And vote or written assent of SH (2/3 OCS)/ (2/3 members)
 Without prejudice to appraisal right of dissenting SH - Not distinguishable
EX o From already reserved or registered for the use of another
 Prescribed by this code or matter stated in AOI corporation
o Such name already protected by law
Original and Amended Articles o Or when its use is contrary to existing law, rules and
 Shall contain all provisions required by law to be set out in AOI regulations
 Amendments : indicated by underscoring change/changes made Name is not distinguishable even if it contains one/more of the following
 Copy thereof duly certified under oath by corp secretary and majority a) Corp, Co, Inc, Ltd. Ltd liability,
of board of directors/trustees b) Punctuations, articles, conjunctions, contractions, prepositions,
 With a statement : amendment duly approved by required abbreviations, different tenses, spacing or number of the smae word
 Amendment shall take effect upon approval of the commission or from or phase
date of filing commission (x) acted upon within 6 months form date of  Commission may summarily order the corp to immediately cease and
filing for cause not attributable to corp desist from using such name and require corp to register a new one
 Commission shall cause the removal of all visible signages, marks,
advertisements, lables, prints and other effects bearing corporate
SEC 16 name
GROUNDS WHEN AOI OR AMENDMENT MAY BE DISAPPROVED  Failure to comply with order = directors/officers in
 Commission may disapprove or any amendment thereto if ::not contempt/admistratively/civilly and/or criminally liable
compliant with requirements of this code
Grounds SEC 18
a) Not substantially in accordance with form prescribed
REGISTRATION , INCORPORATION , AND C OMMENCEMENT OF C ORPORATE
b) Purpose patently unconstitutional
c) Certification concerning concerning the amount of capital stock EXISTENCE
subscribed and/or paid is false; and 1. Submit intended corporate name to the commission for
d) Required percentage of Fil ownership of CS under existing laws or verification
Consti has not complied with 2. If name is distinguishable and not contrary to law, rules and
reg : reserved in favour of incorporators
Banks, Q-bank Incst, Preneed Insurance and Trust companies, NSSLAs, 3. Submit their AOI and bylaws to the commission
pawnshop and other financial intermediaries shall be approved by the 4. Comission : finds submitted documents : fully compliant =
Commission issue certificate of incorporation
 UNLESS accompanied by favourable recommendation of the
appropriate government agency to the effect that such articles or Commences corporate existence
amendment is in accordance with law GR: date commission issues certificate under its official seal
EX: period is extended or corporation is sooner dissolved in accordance with
law

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TITLE III
BOARD OF DIRECTORS/TRUSTEES AND OFFICERS

SEC 19 SEC 20 SEC 22

De Facto Corporation Corporation by Estoppel
GR: B OARD OF DIRECTORS OR TRUSTEES SHALL
 Due incorporation  All persons who assume to act
 conduct all business and
 Claiming in good faith to be a as corporation knowing it to be
 control all properties of a corporation
corporation without authority to do so
EX: Unless otherwise provided in this code
 Exercise corporate powers shall  Liable as general partners for all
not be inquired into collaterally debts
in any private suit to which such TERM
corp may be a party DIRECTOR TRUSTEE
 Inquiry = SOLGEN in a quo From stockholders From members
warranto proceeding  cease to own at least 1 stock  cease to be a member =
= ceases to be a director cease to be a trustee
1 year- until the successor is elected 3 years
SEC 21: and qualified
EFFECTS OF N ON-USE OF C ORPORATE C HARTER AND C ONTINUOUS
INOPERATION Corporation vested with public interest
 shall have independent directors constituting 20% of such board :
a) Corporations covered under the SRC
 securities are registered with the SEC,
Does not  corp listed with an exchange or with assets of at
commence least 50 Million and having 200 or more holders
Date of Incorporation =Revoked
business within of share each having at least 100 shares of a class
5 years of its equity shares
b) Banks and quasi-banks, NSSLAs, pawnshops, corporations
engaged in money service business, preneed, trust and
insurance companies and financial intermediaries
c) Other corporations engaged in business vested with public
Period of interest
2 years  As determined by the commission
=
5 years to - Taking into account relevant factors such as extent
commence Delinquent
inoperative resume of minority ownership, type of financial products, or
Status
and securities issued or offered to investors, public
comply interest involved in nature of business operations
and other analogous factors

Independent director
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 Apart from shareholdings and fees received from corporation is STOCK CORPORATION
independent of management and free from any business or other  Entitled to vote the number of shares of stock standing IN
relationship which could or could reasonably be perceived to materially THEIR OWN NAMES in the stock book of the corporation
interfere with the exercise of independent judgment in carrying out  At time fixed by the bylaws / when bylaws are silent a: at time
responsibilities of director of election
 Must be elected by the shareholders They may:
- Present or entitled to vote in absentia during the a) Vote such number of shares for as many persons as there are
election of directors directors to be elected
 Shall be subject to rules and regulations governing disqualifications, b) Cumulate said shares and give one candidate as many votes as
voting requirements, duration of term and term limit, maximum the number of directors to be elected multiplied by number of
number of board membership and other requirements SEC may shares owned
prescribe to strengthen their independence and align with international c) Distribute them to the same principle among as many
best practices candidates as may be seen fit
SEC 23  Provided that the total number of votes cast shall not exceed the
GR: Each stockholder or member shall have the right to nominate any total number of votes cast shall not exceed the number of shares
director or trustee owned by the stockholders as shown in the books, multiplied by the
 who possess all of the qualifications and none of the whole number of directors to be elected
disqualifications set forth in this code  Provided : no delinquent stock shall be voted
EX : Exclusive right is reserved for holders of founders’ shares under Sec 7 ** for computation, check Bryan’s copy
NON-STOCK CORPORATION
Election GR:
 In person or through representative authorized to act by written proxy :  As many votes as there are trustees to be elected but may not cast
owners of majority of OCS or if there be no capital stock, majority of more than 1 vote for 1 candidate
members entitled to vote EX: Unless otherwise provided in the articles of incorporation or by laws
 When authorized in the bylaws or by majority of BOD : vote through Example: Candidates are Mais, Zeke, Vills, Gelo Troy . Topher and
remote communication or in absentia Andrea there are 4 vacant seats ; I have 4 votes
- May be exercised by corporations vested with public  1 vote for Mais, 1 Vote for Vills, 1 vote for Zeke and 1 vote for
interest –notwithstanding absence of a provision in Topher
the bylaws
- SH / Member who participates through remote If no election is held / owners of majority of OCS or majority of members are
communication or in absnetia = deemed present for not present : In person, by proxy or through remote communication or not
quorum voting in absentia at the meeting
 Meeting may be adjourned and the corporation shall proceed in
 Election must be by ballot  if requested by majority of voting accordance with Sec 25
stockholders or member

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Section 25 :
 Non-holding of elections  reported to the commission within
SEC 25:
30 days from date of scheduled electetion
 Specify a new date which shall not be later than 60 days from WITHIN 30 DAYS AFTER ELECTION OF D/T/O,
scheduled date  the secretary or any other officer shall submit to the commission the
 If no new date/ of if rescheduled election not held, the names, nationalities, shareholdings and residence addresses of the
commission may upon application of SH, Member, D/T, and D/T/O elected
after verification of the unjustified non-holding  Non-holding of elections  reported to the commission within 30 days
o Summarily order election to be held from date of scheduled electetion
o Notwithstanding any provision of the AOI or  If no new date has been designated, or if the rescheduled election is
bylaws to the contrary, the shares of stock likewise not held
membership represented at such meeting and - The commission may upon application of a SH, M,
entitled to vote shall constitute a quorum for the D/T
purpose of conducting the election - After verification of unjustified non-holding of the
election
- Summarily order that an election be held
 The commission shall have the power to issue such orders as may be
SEC 24 appropriate, including orders directing the issueance of a notice,
CORPORATE OFFICERS starting time and the place of election, disgnated presiding officer,
recording dtae or dates for the determination of stockholders
 Immediately after their election, director of a corporation must formally
 Specify a new date which shall not be later than 60 days from scheduled
organize and elect
date
Position Requirement
 If no new date/ of if rescheduled election not held, the commission may
President Director
upon application of SH, Member, D/T, and after verification of the
Treasurer Resident
unjustified non-holding
Secretary Citizen and Resident
o Summarily order election to be held
Such other officers as may be provided in the bylaws
 Notwithstanding any provision of the AOI or bylaws to the contrary, the
If corporation is vested with public interest shares of stock membership represented at such meeting and entitled to
 Compliance officer vote shall constitute a quorum for the purpose of conducting the election
 Same person may hold two or more positions concurrently  Should a D/T/O
 Except Pres (x) Treasurer (x) Secretary - Die, resign or in any manner cease to hold office
- The Secretary, or the D/T/O shall within 7 days from
knowledge thereof report in writing such fact to the
commission

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SEC 26 o Provided that if removal without cause may not be used to

deprive minority SH or members of the right of
DISQUALIFICATION OF DIRECTORS , TRUSTEES OR OFFICERS
representation to which they are entitled according to
 If within 5 years prior to election Section 23
CAF
 The commission shall motu proprio or upon verified complaint and
 Convicted by final judgment : after due notice and hearing
- Offense punishable by imprisonment for a period o order the removal of D/T elected despite the
EXCEEDING 6 years disqualification
- Violation of this code o or whose disqualification arose or is discovered
- Violation of SRC subsequent to an election
 Administratively liable for any offense involving fraudulent acts o Removal –without prejudice to other sanctions that the
 By foreign court or equivalent foreign regulatory authority, for acts Commission may impose on the board of directors or
of violations or misconduct similar to above trustees who with knowledge of such, failed to remove
 Without prejudice to qualification or other disqualification SEC, or PCC such directors or trustees
may impose

SEC 27
REMOVAL OF DIRECTORS OR TRUSTEES
 By vote of SH
 Holding or representing at least 2/3 of OCS/ members
 Regular meeting/special meeting called for that purpose
 Or in either case after previous notice to SH/members of the
intention to propose such removal at a meeting
o Meeting must be called by the secretary on the order of the
president
o Or upon written demand of SH representing/holding at
least majority of outstanding OCS/members entitled to
vote
o If there is No secretary or there is a secretary but despite
demand fails or refuses to call the special meeting or give
notice
- The SH or member signing the demand may call for
the meeting
- By directly addressing the SH/Members
 Notice of time and place of such meeting as well as of the intention
to propose such removal
o Must be given by publication or written notice prescribed
in this code
 Removal may be with or without cause

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SEC 29:
SEC 28 COMPENSATION OF DIRECTORS OR TRUSTEES
VACANCIES GR: Not receive any compensation in their capacity as such except
Other than by  May be filed by the vote of at least majority of reasonable per diems
removal or by remaining directors/trustees (IF) still constituting a EX:
expiration of quorum o Provision in bylaws fixing their compensation
remaining term  Otherwise such must be filed by SH/M in a regular or o SH representing at least majority of OCS/Members may grant
special meeting called for that purpose D/T compensation and approve the amount thereof at a regular
or special meeting
Limitations
Due to term  Election shall be held no later than the day of such
 In no case shall the total yearly compensation exceed 10% of net income
expiration expiration at a meeting called for that purpose
before income tax of corp during the preceeding year
Removal  Election may be held on the same day of the meeting
 D/T shall not participate in the determination of their own per diems or
authorizing the removal
compensation
 This fact must be so stated in the agenda and notice
 If Corp vested with public interest  shall submit to SH and the
of said meeting
Commission – annual report of total compensation of each of D/T
In all other  Election must be held no later than 45 days from the
cases time the vacancy arose
Vacancy  Vacancy may be temporarily filled from among the SEC 30:
prevents officers of the corporation LIABILITY OF D/T/O
remaining  By unanimous vote of the remaining directors or
Acts Liability
directors from trustees
 Wilfully and knowingly vote for assent to jointly and severally for
constituting a  Action by the designated director or trustee shall be
PATENTLY UNLAWFUL ACTS of the all damages resulting
quorum and limited to emergency action necessary
corporation or ; therefrom suffered by
emergency  Term shall cease within reasonable time after
 who are guilty of gross negligence or bad faith the Corporation , SH or
action is termination of emergency/election of replacement
in directing the affairs of the corporation members or other
required to (whichever is earlier)
 or acquire any personal or pecuniary interest persons
prevent grave,  Corporation must notify the commission within 3
in conflict with their duty as such directors or
substantial and days from creation of emergency board stating the
trustees
irreparable loss reason for creatin
or damage to
 D/T/O shall not attempt to acquire or acquire Otherwise, liable as
the corporation
any interest adverse to the corporation in trustee for the
Filled by reason  Filled only by an election at a regular or special
respect to any matter which has been reposed corporation and must
of increase in meeting of SH/members duly called for the purpose
in them in confidence and upon which, equity account for the profits
number of D/T  Or the same meeting authorizing the increase of
imposes a disability upon themselves to deal which otherwise would
directors or trustees if so stated in the notice of
in their own behalf have accrued to corp
meeting
 Procedure set forth in Sec 23 and 25 shall apply
 D/T elected to fill in the vacancy = ―replacement director/trustee‖
o Shall serve ONLY FOR THE UNEXPIRED TERM

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SEC 31  This is notwithstanding the fact that director risked one’s own funds in
the venture
DEALINGS OF D/T/O WITH CORPORATION
 VOIDABLE
SEC 34
 Contract of corporation with 1/more D/T/O or their spouses and EXECUTIVE MANAGEMENT AND O THER SPECIAL C OMMITTEES
relatives within the 4th civil degree of consanguinity/affinity IF BYLAWS SO PROVIDE
 At the option of such corporation  Board may create an EC
 UNLESS  Composed of at least 3 directors
a) Presence in board meeting in which it was approved was  Committee may act by majority vote of all its members on such
not necessary to constitute a quorum for such meeting specific matters within compense of the board as may be delegated
b) Vote note necessary for approval of contract to it by the bylaws or majority vote of directors
c) Contract is fair and reasonable  EXCEPT WITH RESPECT TO
d) In case corp vested with public interest –approval of at  Approval of any action for which SH approval required
least 2/3 of entire membership with at least majority of
 Filling of vacancies in board
independent directors approving the material contract
 Amendment or repeal of any resolution of the board which by
e) In case of officer, contract previously authorized by the
express terms is not amendable/repealable
board
 Amendment or repeal of by laws or adoption of new bylaws
a-c absent = may be ratified by 2/3 vote of OCS /Members
 Distribution of cash dividends to SH
 Full disclosure of adverse interest must be made
 BOD may create special committees of temporary or permanent
nature and determine the members’ term, composition , compensation,
SEC 32 powers and responsibilities
CONTRACTS BETWEEN CORPORATION WITH INTERLOCKING DIRECTORS
GR: Shall not be invalidated on that ground alone & provided that the
contract is fair and reasonable under the circumstances
EX:
 In cases of fraud
 Provided that if the interest of the interlocking directors in 1 corporation
is substantial and interest in the other corporation or corporation is
merely nominal , contract shall be subject to the provisions of the
proceeding section insofar as the latter corporations are concerned
 SH exceeding 20% of the outstanding CS = substantial for the
purpose of interlocking directors
SEC 33
DISLOYALTY OF DIRECTOR
 Director by virtue of such office
 Acquires business opportunity which belong to the corporation
 Thereby obtaining profits to the prejudice of such corporation
 Director must account for and refund all such profits
o UNLESS act is ratified by vote of SH owning or
representing at least 2/3 of OCS
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must be deposited to the addressee in the post office with postage

TITLE IV prepaid, served personally or where allowed by the bylaws or done with
POWERS OF CORPORATION consent of SH: sent electronically in accordance with rules and
SEC 35 regulations of the commission
 In case of extension: dissenting SH—may exercise right of appraisal
CORPORATE P OWERS AND CAPACITY
 Every corporation incorporated under this code has the power and
SEC 37:
capacity to
 SPA AAI/A PEMEE POWER TO INCREASE OR DECREASE C APITAL S TOCK; INCUR, C REATE OR
o Sue and be sued in Corp Name INCREASE B ONDED INDEBTEDNESS
o Perpetual Existence  Approval of majority vote of the BOD
o Adopt and Use Corporate Seal  And by 2/3 of OCS at stockholders meeting called for the purpose
o Amend AOI in accordance with the code  Written notice of the proposed action and time and place of the meeting
o Adopt bylaws shall be sent to SH/Members at their respective place of residence and
o Issue or Sell stocks to subscribes and sell treasury stocks; must be deposited to the addressee in the post office with postage
Admit members if Non-stock prepaid, served personally or where allowed by the bylaws or done with
o Purchase, receive, takeor grant, hold, convey, sell, lease, consent of SH: sent electronically in accordance with rules and
pledge, mortgage, and otherwise deal with such real and regulations of the commission
personal property---including securities and bonds of  Certificate must be signed by majority of directors and countersigned by
other corp chairperson and secretary of the SH meeting setting forth
o Enter into partnership, Joint venture, merger, o Requirements of this section have been complied with
consolidation or any other commercial agreement with o Amount of increase/decrease CS
natural and juridical persons o In case of increase: amount of CS/number of shares of no-par
o Make reasonable donations for public welfare, hospital, stock actually subscribed, name, nationalities and addresees of
charitable, cultural, scientific, civic or similar purposes person subscribing, amount of CS/number of no par stock
 No foreign corp shall give donations to aid any subscribed by each, and the amount paid by each of
political candidate or for purpose of partisan subscription in cash/property or the amount of CS/Number of
political activity shares of no par allotted to each stockholder if such increase is
o Establish pension, retirement, and other plans for the for the purpose of making effective stock dividend therefor
benefit of its directors, trustees, officers and employees authorized
and o Any bonded indebtedness incurred, created or increased
o Exercise such other powers as may be essential or o Amount of Stock represented at a meeting
necessary to carry out its purpose or purpose as stated in o Vote authorizing increase or decrease of capital stock
AOI o Incurring, creating or increasing any bonded indebtedness
SEC 36  Increase/decrease CS/incurring, creating/increasing of BI shall require
POWER TO EXTEND OR SHORTEN CORPORATE TERM prior approval of commission and where appropriate, Philippine
 Approved by a majority of vote of board of directors or trustees Competition Commission
 Ratified at a meeting by SH/Members representing 2/3 of outstanding  Application: shall be made within 6 months from date of approval of
capital stock or its members BOD and SH
 Written notice of the proposed action and time and place of the meeting o May be extended for justifiable reasons
shall be sent to SH/Members at their respective place of residence and  Copies of Certificate : kept on file in office of corp/filed with commission
and attached to original AOI
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 Commission shall not accept for filing any cert unless accompanied by  which may be money, stocks, bonds or other instruments for payment of
sworn statement by treasurer of the corporation lawfully holding office money or other property or consideration as its board of directors or
at the time of filing showing that at least 25% of increase in capital stock trustees may deem expedient
has been subscribed and 25% of the amount subscribed has been paid in Sale of all or substantially all of the corporation’s properties and
actual stock to corp/ that property, valuation of which is equal to 25% of assets, including its goodwill
subscription has been transferred to corp  must be authorized by vote of SH representing at least 2/3 of OCS /
 No decrease shall be approved by Commission if its effect  prejudice members in a meeting duly called for that purpose
rights of corporate creditors  Non-stock corp: vote of at least majority of trustees in office : sufficient
 Non-stock corp may incur, create or increase bonded indebtedness authorization
o Approved by majority of board of trustees
o And at least 2/3 of members in a meeting duly called for that Determination of whether all or substantially all
purpose  Must be computed based on its net asset value, as shown in its latest
 Bonds shall be registered with commission financial statements
 Deemed to cover substantially all the corporate property and asset if
SEC 38 thereby the corp.
 If it would render : Incapable of continuing the business or
POWER TO DENY PREEMPTIVE RIGHT
accomplishing the purpose for which it was incorporated
 All SH
 To subscribe to all issues or disposition of shares of any class  Written notice of proposed action and of time and place of meeting
 In proportion to their respective shareholdings shall be addressed to SH or M at their place of residence as shown in
 UNLESS : denied by AOI or amendment thereto books of corporation and deposited to addressee in the post office with
 Preemptive right shall not extend to postage prepaid, served personally or when allowed by bylaws or done
o shares issued in compliance with laws requiring stock offerings with the consent of stockholder sent electronically :
or - Provided any dissenting stockholder may exercise
o minimum stock ownership by the public or to shares issued in right of appraisal under the conditions provided in
GF with approval of SH representing 2/3 of OCS in exchange this code
of property needed for corporate purpose  After such authorization or approval by SH/M the BOD/BOT may
o or in payment of previously contracted debt nevertheless in its discretion , abandon such sale, lease, exchange,
SEC 39 mortgage, pledge or other disposition of property and assets
SALE OR OTHER DISPOSITION OF ASSETS o Subject to rights of 3P under any contract relating thereto
 subject to Philippine Competition Act and other related laws without further action or approval by the SH or M
 By majority vote of board of directors/trustees  Nothing in this section intended to restrict the power of any corp. ,
o Sell without the authorization by the SH/M to sell, lease, exchange,
o Lease mortgage pledge or otherwise dispose of any of its property and assets
o Exchange o if the same is necessary in the usual and regular course of
o Mortgage business of the corporation
o Pledge o or if the proceeds of the sale or other disposition of such
o Or otherwise dispose of its property and asset property and asset shall be appropriated for the conduct of the
 upon such terms and conditions and for such consideration remaining business

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 THE NEW CORPORATION CODE REVIEWER

SEC 40  Provided: any cash dividends due on delinquent stock shall first be
applied to the unpaid balance on the subscription plus costs and
POWER TO ACQUIRE OWN S HARES
expenses,
Requirement  Unrestricted Retained Earnings in its books to cover the  While Stock dividends shall be withheld from the delinquent
shares to be purchased or acquired stockholders until their unpaid subscription is fully paid
 Power to purchase or acquire its own shares for legitimate corporate  Provided : No stock dividend shall be issued
purpose or purposes including the following o Without approval of SH representing at least 2/3 of OCS
 Eliminate Fractional Shares arising from stock o At a regular or special meeting duly called for the purpose
dividends
 Collect/Compromise indebtedness to the Stock corporations are prohibited from retaining surplus profits in excess of
corporation arising out of unpaid subscription in 100% of their paid-in capital stock
a delinquency sale and to purchase delinquent  Except :
shares sold during sale a) Justified by definite corporate expansion projects or programs
 Pay dissenting/withdrawing SH entitled to approved by the board of directors; or
payment under this code b) When corporation is prohibited under any loan agreement
SEC 41 with financial institution or creditors whether local or foreign
POWER TO INVEST CORPORATE FUNDS IN ANOTHER CORPORATION OR from declaring dividends without their consent and such
consent has not yet been secured; or
BUSINESS OR FOR ANY O THER P URPOSE
c) It can be clearly shown that such retention is necessary under
 ―Any other purpose‖ = other than primary purpose for which it was
special circumstances obtaining in the corporation such as
organized
when there is a need for special reserve for probable
 Approved by majority of BOD/T
contingencies
 Ratified by 2/3 of SH (OCS) /M
 In a meeting duly called for that purpose
 Notice of the proposed investment and the time and place of the meeting
shall be addressed to each SH of Corp and deposited to addressee in the
post office with postage prepaid, served personally or sent electronically
in accordance with rules and regulations of the Commission on the use
of electronic data message (when allowed by the bylaws or done with the
consent of SH
 Dissenting SH: appraisal right
 Provided: Investment of Corp : reasonably necessary to accomplish its
primary purpose as stated in the AOI
o Apporval of SH or members shall not be necessary
SEC 42
POWER TO DECLARE DIVIDENDS
 Out of Unrestricted Retained Earnings
 Payable by Cash, property or in stock to all SH on the basis of
Outstanding stock held by them

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 THE NEW CORPORATION CODE REVIEWER

SEC 43
POWER TO ENTER INTO M ANAGEMENT C ONTRACT
TITLE V
 No corporation shall conclude a management contract with another
BYLAWS
corporation
o Unless such contract is approved by the BOD SEC 45
o And By SH owning at least the majority of outstanding capital ADOPTION OF BYLAWS
stock or by at least majority of members in case of non-stock  Affirmative vote of SH representing at least majority of OCS/M
corp necessary
o Of both the managed and managing corporation  Signed by SH/M voting for them
o in a meeting duly called for that purpose  Shall be kept in the principal office of the corporation subject to the
 provided that inspection of the SH/M during office hours
 Where the SH/SHs representing the same interest of both managing  A copy thereof duly certified by majority of D/T
and managed corp own/control more than 1/3 of the total outstanding  And countersigned by the Secretary of the corporation shall be filed with
capital stock ; or the Commission and attached to the original AOI
 Majority of members of the BOD also constitute a majority of members  Notwithsatnding the provisions of the prceding paragraph, bylaws may
of BOD of managed corporation then management contract must be be adopted and filed prior to incorporation; in such case such bylaws
approved by the SH of managed corp owing at least 2/3 of Total shall be approved and signed by all the incorporators and submitted to
Oustanding Capital Stock entitled to voth the commission together with the AOI
 Or 2/3 members  In all cases : by laws shall be effective only upon issuance by
 These shall apply to any contract whereby the corporation undertakes to Commission of a certification that the bylaws are in accordance iwth this
manage or operate all or substantially all of the business of another corp code
; whether such contracts are called service conrtacts, operating  Commission shall not accept for filing bylaws or amendments thereto of
agreements or otherwise any bank, banking institution, building and loan associations, trust
 Provided: such service conrtacts/operating agreements which relate to company, insurance company, public utility, educational institutions or
Exploartion Developnment and Exploitation of Natural resources may other special corporations governed by special laws
be entered into for such periods as may be provided by pertinent laws or o Unless: accompanied by the certificate of the appropriate
regulations government agency to the effect that such bylaws or
 No management contract shall be entered into for a period longer than 5 amendments are in accordance with law
years for any one term
SEC 44
ULTRA V IRES ACT OF C ORPORATION
 No corporation : possess or exercise corporate powers
o Other than those conferred by code or AOI
o Except : necessary or incidental to exercise of powers conferred

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 THE NEW CORPORATION CODE REVIEWER

delegate to the board of directors or trustees the power to amend or

SEC 46 repeal any by-laws or adopt new by-laws:
 Provided, That any power delegated to the board of directors or
CONTENTS OF B YLAWS—PRIVATE CORPORATION trustees to amend or repeal any by-laws or adopt new by-laws shall
be considered as revoked whenever stockholders owning or
a) The time, place and manner of calling and conducting regular or representing a majority of the outstanding capital stock or a majority
special meetings of the directors or trustees; of the members in non-stock corporations, shall so vote at a regular
b) The time and manner of calling and conducting regular or special or special meeting.
meetings and mode of notifying the SH/M  Whenever any amendment or new by-laws are adopted, such
c) The required quorum in meetings of stockholders or members and
amendment or new by-laws shall be attached to the original by-laws
the manner of voting therein;
in the office of the corporation, and a copy thereof, duly certified
d) The modes by which a SH/M/D/Trustee may attend meetings and
under oath by the corporate secretary and a majority of the directors
cast their votes
or trustees,
e) The form for proxies of stockholders and members and the manner
of voting them;  Shall be filed with the Securities and Exchange Commission the
f) The directors’ or trustees’ qualification, duties and responsibilities, same to be attached to the original articles of incorporation and
the guidelines for setting the compensation of directors or trustees original by-laws.
and officers and the maximum number of other board  The amended or new by-laws shall only be effective upon the
representations that an independent director or trustee may have issuance by the Securities and Exchange Commission of a
which shall be in no case more than a the number prescribed by the certification that the same are not inconsistent with this Code. (22a
Commission and 23a)
g) The time for holding the annual election of directors of trustees and
the mode or manner of giving notice thereof;
h) The manner of election or appointment and the term of office of all
officers other than directors or trustees;
i) The penalties for violation of the by-laws;
j) In the case of stock corporations, the manner of issuing stock
certificates; and
k) Such other matters as may be necessary for the proper or
convenient transaction of its corporate business and affairs. (21a)

SECTION 48. AMENDMENTS TO BY-LAWS. –

 A majority of BOD/T and

 The owners of at least a majority of the members of a nonstick corp at a
regular or special meeting duly called for the purpose may
amend/repeal
 any by-laws or adopt new by-laws.
 The owners of two-thirds (2/3) of the outstanding capital stock or
two-thirds (2/3) of the members in a non-stock corporation may

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 THE NEW CORPORATION CODE REVIEWER

TITLE VII 4. Previously incurred indebtedness of the corporation;

STOCKS AND STOCKHOLDERS
5. Amounts transferred from unrestricted retained earnings to
SECTION 60. S UBSCRIPTION CONTRACT. – stated capital; and

 Any contract for the acquisition of unissued stock in an existing 6. Outstanding shares exchanged for stocks in the event of
corporation or a corporation still to be formed reclassification or conversion.
 shall be deemed a subscription within the meaning of this Title,
 notwithstanding the fact that the parties refer to it as a purchase or  Where the consideration is other than actual cash, or consists of
some other contract. (n) intangible property such as patents of copyrights,
 the valuation thereof shall initially be determined by the
incorporators or the board of directors,
SECTION 61. PRE -INCORPORATION SUBSCRIPTION . –  subject to approval by the Securities and Exchange Commission.
 Shares of stock shall not be issued in exchange for promissory notes
 A subscription for shares of stock of a corporation still to be formed or future service.
 shall be irrevocable for a period of at least six (6) months from the  The same considerations provided for in this section,
date of subscription,  insofar as they may be applicable, may be used for the issuance of
 unless all of the other subscribers consent to the revocation, bonds by the corporation.
 or unless the incorporation of said corporation fails to materialize  The issued price of no-par value shares may be fixed in the articles
within said period or within a longer period as may be stipulated in of incorporation or by the board of directors pursuant to authority
the contract of subscription: conferred upon it by the articles of incorporation
 Provided, That no pre-incorporation subscription may be revoked  or the by-laws, or in the absence thereof,
after the submission of the articles of incorporation to the Securities  by the stockholders representing
and Exchange Commission. (n)  at least a majority of the outstanding capital stock at a meeting duly
called for the purpose. (5 and 16)
SECTION 62. CONSIDERATION FOR STOCKS. –

 Stocks shall not be issued for a consideration less than the par or
issued price thereof. Consideration for the issuance of stock may be
any or a combination of any two or more of the following:

1. Actual cash paid to the corporation;

2. Property, tangible or intangible, actually received by the

corporation and necessary or convenient for its use and lawful
purposes at a fair valuation equal to the par or issued value of the
stock issued;

3. Labor performed for or services actually rendered to the

corporation;
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 THE NEW CORPORATION CODE REVIEWER

NOTES
P OWER TO Approval of majority vote of the BOD
VOTING REQUIREMENTS INCREASE OR And by 2/3 of OCS at stockholders meeting called for the
D ECREASE purpose
CAPITAL STOCK ; Written notice of the proposed action and time and place of
CORPORATION Vote of Majority of OCS notifies commission that it elects to INCUR, C REATE the meeting shall be sent to SH/Members at their respective
WITH retain specific corporate term OR INCREASE
place of residence and must be deposited to the addressee in
CERTIFICATE OF Any change in term is w/o prejudice to appraisal right of BONDED
the post office with postage prepaid, served personally or
dissenting SH INDEBTENDNESS
INCORPORATION where allowed by the bylaws or done with consent of SH: sent
PRIOR T O electronically in accordance with rules and regulations of the
CONTINUE TO commission
EXIST
SALE OF ALL OR must be authorized by vote of SH representing at least 2/3 of
SUBSTANTIALLY OCS / members in a meeting duly called for that purpose
AMENDMENT OF GR:
ALL OF THE Non-stock corp: vote of at least majority of trustees in office :
AOI Amendment by majority vote of BOD/T
CORPORATION ’S sufficient authorization
And vote or written assent of SH (2/3 OCS)/ (2/3 members) PROPERTIES AND
Without prejudice to appraisal right of dissenting SH ASSETS ,
REMOVAL OF By vote of SH INCLUDING ITS
D IRECTORS OR Holding or representing at least 2/3 of OCS/ members GOODWILL
TRUSTEES Regular meeting/special meeting called for that purpose
Or in either case after previous notice to SH/members of the P OWER TO “Any other purpose” = other than primary purpose for which it
intention to propose such removal at a meeting INVEST was organized
CORPORATE Approved by majority of BOD/T
D ISLOYALTY OF Director by virtue of such office FUNDS IN Ratified by 2/3 of SH (OCS) /M
D IRECTOR Acquires business opportunity which belong to the corporation ANOTHER In a meeting duly called for that purpose
Director must account for and refund all such profits CORPORATION Notice of the proposed investment and the time and place of
OR BUSINESS OR
UNLESS act is ratified by vote of SH owning or representing at the meeting shall be addressed to each SH of Corp and
FOR ANY O THER
least 2/3 of OCS deposited to addressee in the post office with postage prepaid,
P URPOSE
This is notwithstanding the fact that director risked one’s own served personally or sent electronically in accordance with
funds in the venture rules and regulations of the Commission on the use of
electronic data message (when allowed by the bylaws or done
P OWER TO Approved by a majority of vote of board of directors or with the consent of SH
EXTEND OR trustees
SHORTEN Ratified at a meeting by SH/Members representing 2/3 of
CORPORATE outstanding capital stock or its members P OWER TO No corporation shall conclude a management contract with
TERM Written notice of the proposed action and time and place of ENTER INTO another corporation
the meeting shall be sent to SH/Members at their respective MANAGEMENT Unless such contract is approved by the BOD
place of residence and must be deposited to the addressee in CONTRACT And By SH owning at least the majority of outstanding capital
the post office with postage prepaid, served personally or stock or by at least majority of members in case of non-stock
where allowed by the bylaws or done with consent of SH: sent corp
electronically in accordance with rules and regulations of the Of both the managed and managing corporation
commission in a meeting duly called for that purpose
In case of extension: dissenting SH—may exercise right of provided that
appraisal
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 THE NEW CORPORATION CODE REVIEWER

Where the SH/SHs representing the same interest of both Provided, That any power delegated to the board of directors
managing and managed corp own/control more than 1/3 of or trustees to amend or repeal any by-laws or adopt new by-
the total outstanding capital stock ; or laws shall be considered as revoked whenever stockholders
Majority of members of the BOD also constitute a majority of owning or representing a majority of the outstanding capital
members of BOD of managed corporation then stock or a majority of the members in non-stock corporations,
management contract must be approved by the SH of shall so vote at a regular or special meeting.
managed corp owing at least 2/3 of Total Oustanding Capital
Stock entitled to vote
Or 2/3 members
ADOPTION OF Affirmative vote of SH representing at least majority of
BYLAW OCS/M necessary
Signed by SH/M voting for them
Shall be kept in the principal office of the corporation subject
to the inspection of the SH/M during office hours
A copy thereof duly certified by majority of D/T
And countersigned by the Secretary of the corporation shall be
filed with the Commission and attached to the original AOI
Notwithsatnding the provisions of the preceding paragraph,
bylaws may be adopted and filed prior to incorporation; in
such case such bylaws shall be approved and signed by all the
incorporators and submitted to the commission together with
the AOI
In all cases : by laws shall be effective only upon issuance by
Commission of a certification that the bylaws are in
accordance with this code
Commission shall not accept for filing bylaws or amendments
thereto of any bank, banking institution, building and loan
associations, trust company, insurance company, public utility,
educational institutions or other special corporations governed
by special laws
Unless: accompanied by the certificate of the appropriate
government agency to the effect that such bylaws or
amendments are in accordance with law

AMENDMENT A majority of BOD/T and

OF BYLAWS The owners of at least a majority of the members of a nonstick
corp at a regular or special meeting duly called for the purpose
may amend/repeal
any by-laws or adopt new by-laws.
The owners of two-thirds (2/3) of the outstanding capital
stock or two-thirds (2/3) of the members in a non-stock
corporation may delegate to the board of directors or
trustees the power to amend or repeal any by-laws or adopt
new by-laws:

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