First paragraph of section 6

⁃ A corporation has a power to classify shares.

⁃ All shares are presumed equals, unless otherwise stated.
2nd paragraph
⁃ corporation has the power to classify several series of shares, but the
corporation put to mind that all those shares must have equal votings rights except
when they are preferred shares or redeemable shares.
3rd paragraph
⁃ non-voting shares
⁃ but there are still matters that even non-voting shares can vote on
which is the text that on it
Par value
⁃ the specific money value fixed for a particular share
⁃ banks, insurance companies, pre-need companies, loan associations is
they cannot issue shares that do not have par value
⁃ preferred shares must have a par value
Preferred shares
⁃ are those shares that are being given a preference in the distribution
of dividends or distributions of corporate assets

⁃ a corporation can be issued no par value, no par value shares do not

have a specific money value that is fixed however it is has a minimum for no par
value, it is should not be less that 5 pesos

Section 7
Founder’s shares
⁃ shares being offered to organizers or promoters of a corporation
⁃ they have rights that are not given to other types of shares,
⁃ they have special privilege, ex: right to be voted on as a director and
executive right to vote in the election of directors
⁃ 5 years only from the date of incorporation

Section 8
Redeemable/Callable Shares
⁃ that have been already sold and held buy the corporation but have the
option to buy back such shares
⁃ terms of redemption must be stated in the articles of incorporation and
in the certificate of stock
⁃ it is only optional if may or may not be redeem those shares
⁃ the corporation can redeem even without the existence of unrestricted
retained earnings
⁃ effect of redemption is shares will be retired, the corporation can no
longer sell them again, UNLESS stated otherwise in the articles of incorporation
Unrestricted retained earnings
⁃ accumulated earnings of the corporation that has not been restricted or
degraded fo a particular reason ( e.g. earnings that have not been set aside for a
particular corporate purpose. They are FREE EARNINGS.)
General Rule
⁃ when a corporation requires shares there must be the existence of
unrestricted retained earnings ( UNDER SECTION 40 )

Section 9
Treasury Shares
⁃ which the corporation may sell again
⁃ shares that have been sold by the corporation and fully paid for, and
corporation reacquires them
⁃ there must be unrestricted retained earnings to reacquire such shares
⁃ effect of reacquisition, shares become the property of the corporation
 ⁃ the corporation can the treasury shares at a price fixed by the board
of directors

Section 10
Who can become incorporators?
⁃ Any person can become incorporators, can be a natural person or
juridical person
⁃ you can be incorporators if you are in legal age or a partnership can
be a incorporator
⁃ a corporation can also be a incorporation in another corporation
Preferred to the effectivity of the RCC
⁃ only natural person were allowed to be incorporators
But the amendment now
⁃ natural person and juridical person are allowed to be incorporators

Qualification to be an incorporators
⁃ you must be of legal age
⁃ must be a holder or subscriber of at least one share of stock
⁃ you have to sign the article of incorporation
Who are NOT ALLOWED
⁃ professional partnership cannot be form a corporation
⁃ because practicing a profession is supposedly for public service and
not for business purposes
Business partnerships
⁃ must be SEC-registered, securities and exchange commissions
⁃ all partners must execute an affidavit that they have agreement to
invest in the corporation
⁃ they must designate a partner which will sign the articles of
incorporation

Required of a corporation
⁃ SEC registered
⁃ certificate of incorporation must not have been revoked or suspended
⁃ the board of directors must be designate an authorized signatory

How many should there be?

Old RCC
⁃ there should be minimum of 5, not less that 5 but not more than 15
New RCC
⁃ no minimum, but not more than 15

Section 11
How long does a corporation exist?
⁃ perpetual existence- will live forever
⁃ exception of it if the incorporators elect a term or a particular
number of years for the corporation to exist
⁃ the corporate term chosen by the incorporators must be indicated in the
articles of incorporation
Old code
⁃ set a limit on the life of the corporation to 50 years, renewable for
another 50 years
New code
⁃ perpetual existence, unless stated otherwise

What happens to the corporate term of corporations formed prior to the effectivity
of the RCC?
⁃ the new revised corporation is what is applied but if the majority ot
them want to retain the original corporate term they should notify securities
exchange commissions
 ⁃ the only way to retain it is the vote of stockholders representing the
majority interest
⁃ the members who’s against it now given their appraisal right
Appraisal Right
⁃ dissenting stockholders can demand for the payment of the fair value of
his share/s
Can you still change corporate term?
⁃ yes they can still change it
⁃ by amending the articles by following the section 15 RCC
Can you extend the corporate term
⁃ yes, not earlier than 3 years prior to the expiration
When will it take effect?
⁃ the day after the expiration of the original term
What if the corporate term has expired and the corporation failed to renew term
prior to expiration? Can they still ask for revival?
⁃ Yes, remedy file for application of revival
⁃ they will also be subject to all duties debts and liabilities that were
existing prior to its revival
⁃ if the SEC approves it, they now have certificate of revival of
corporate existence
Types of corporations
expiration and revolt
⁃ yes, they can still file for application of perpetual existence, but
they will have to file a position to lift revoked status
Suspended by SEC
⁃ corporation has to file a petition to lift the suspended status
Name has been validly reused by another corporation, can they still file?
⁃ yes, but they must change their name within 30 days from the issuance
of the certificate of revival
EXPIRED CORPORATION WHO HAVE BEEN ( COMPLETED THE LIQUIDATION OF THEIR ASSETS,
WHOSE CERTIFICATION OF REGISTRATION HAVE BEEN REVOKED ON GROUNDS OTHER THAN NON-
FILING OF REPORTS ) CAN NO LONGER APPLY FOR REVIVAL OF CORPORATE EXISTENCE

Section 12
Capital Stock
⁃ amount indicated in the articles of incorporation and this is the
amount representing capital that may be paid for or subscribed by stockholders of
the corporation
Share of stock
⁃ units in a capital stock
Is there minimum capital stock required by law?
⁃ no, it does not afford protection to the creditors or any third persons
dealing with the corporation
⁃ commercial bank has have a higher paid up capital for the protection of
creditors because they are vested with public interest
⁃ like investment houses: insurance companies
Required filipino owner percentage, must be owned by filipino citizens
⁃ Exploration, development, utilization or natural resources, public
service corporation, educational corporation, banking corporation, coastwise
shipping is 60%
⁃ mass media, retail trade, private detective, watchman, security, 100%
⁃ advertising corporation, pawnshop business 70%
⁃ Rural banks 40%
⁃ recruitment and placement 75%

Section 13
Articles of incorporation
⁃ the document prepared by the incorporators and filed with the SEC
Contained details
⁃ name
Purpose
⁃ purpose/s, primary and secondary, will limit the powers of the
corporation
Ultra Vires
⁃ beyond the power of the corporation
⁃ the purpose of the corporation must be lawful
⁃ stated clearly
the place of the principal office
Corporate term
⁃ if perpetual term not elected you must state, if it not it is perpetual
existence
Nationalities, Residence address of incorporators
⁃ for percentages filipino owner percentage
Number of directors or trustees
⁃ for non stock corporation, they allows more than 15 of number of
trustees
INCORPORATORS - maximum of 15
BOARD OF DIRECTORS - maximum of 15
NUMBER OF TRUSTEES - more than 15

Authorized capital stock

⁃