Corpo Notes
Corpo Notes
Corpo Notes
DIRECTORS- shall be elected for a term of 1 year from among the holders of stocks registered in
the corporation’s books.
TRUSTEES- shall be elected for a term not exceeding 3 years from among the members of the
corporation.
Each director and trustee shall hold office until the successor is elected and qualified.
A director who ceases to own at least 1 share of stock or a trustee who ceases to be a member
of the corporation shall cease to be such.
The board of the following CORPORATIONS VESTED WITH PUBLIC INTEREST shall have
INDEPENDENT DIRECTORS constituting at least 20% of such board:
1.) Corporations covered by the SECURITIES REGULATION CODE – namely those whose
securities are:
a.) registered with the Commission
b.) corporations listed with an exchange or with assets of at least P50M and
having 200 or more holders of shares, each holding at least 100 shares of a class of its equity
shares
2.)
a.) banks
b.) quasi- banks
c.) NSSLA’s – non stock savings and loan association
d.) pawnshops
e.) corporations engaged in money service business
f.) pre- need
g.) trust and insurance companies
h.) other FINANCIAL INTERMEDIARIES; and
3.) Other corporations vested with public interest as may be determined by the
Commission which requires the election of an independent director SUCH AS:
a.) extent of minority ownership
b.) type of financial products
c.) securities issued or offered to investors
d.) public interest involved in the nature of business
e.) other analogous factors
INDEPENDENT DIRECTOR
apart from shareholdings and fees received from the corporation, is independent of
management
free from any business or other relationship which could or could reasonably be perceived to
materially interfere with the exercise of independent judgment in carrying out the
responsibilities as a director
Must be elected by the shareholders present or entitled to vote in absentia during the election
of directors.
GR: Each stockholder or member shall have the right to nominate any director or trustee who
possesses all of the qualifications and none of the disqualifications
XPN: When the exclusive right is reserved for holders’ or founders’ shares under Section 7
It must be for a limited period not to exceed 5 years from the date of incorporation: Provided, that such
exclusive right shall NOT be allowed if its exercise will violate the Anti- Dummy Law or the Foreign
Investments Act of 1991.
At all elections of directors or trustees there must be PRESENT the– either in person or through
a representative authorized to act by written proxy
1.) OWNERS OF MAJORITY OF THE OUTSTANDING CAPITAL STOCK
2.) MAJORITY OF THE MEMBERS ENTITLED TO VOTE
IN STOCK CORPORATIONS
-Stockholders entitled to vote shall have the right to vote the number of shares of stock
standing in their own names in the stock books of the corporation at the time fixed in the by
laws or if none- at the time of election. SAID STOCKHOLDER MAY:
1) Vote such number of shares for as many persons as there are directors to be elected
2.) Cumulate said shares and give 1 candidate as many votes as the number of directors to be
elected MULTIPLIED by the number of shares owned; or
3.) Distribute them on the same principle among as many candidates as may be seen fit:
PROVIDED;
a.) the total number of votes cast shall NOT EXCEED the number of shares owned by the
stockholders as shown in the books of the corporation multiplied by the whole number of
directors to be elected: PROVIDED that no delinquent stock shall be voted.
Nominees for directors or trustees receiving the highest number of votes shall be declared
elected.
SUCH MEETING MAY BE ADJOURNED and corporation shall proceed – Section 25 – REPORT OF
NON- HOLDING OF ELECTION
The non- holding of elections and the reasons therefor shall be reported to the Commission
within 30 days from the date of the scheduled election.
-Report shall specify a new date for the election, which shall not be later than 60 days from the
scheduled date.
2.) If the rescheduled election is likewise not held, the Commission may, upon the application of a:
a.) stockholder
b.) member
and AFTER THE VERIFICATION of the unjustified non- holding of the election, SUMMARILY order that
an election be held. The Commission shall have the power to issue appropriate orders regarding:
c.) record dates for the determination of stockholder or members entitled to vote .
Immediately after their election, the directors of a corporation must formally organize and elect:
e.) COMPLIANCE OFFICER – only if the corporation is vested with PUBLIC INTEREST.
SECTION 25 – (OTHER PARTS) – REPORT OF ELECTION OF DIRECTORS, TRUSTEEES AND OFFICERS AND
CESSATION FROM OFFICE
REPORT OF ELECTION:
Within 30 days AFTER the election of the DTO of the corporation, the SECRETARY (or other
officer) shall submit to the Commission the: NNSR
1.) names
2.) nationalities
3.) shareholding
4.) residence address of the ELECTED.
The shares of stock or membership represented at such meeting and entitled to vote shall
constitute a quorum for purposes of conducting an election.
Should a DOT die, resign, or in any manner cease to hold office, the SECRETARY or DOT of the
corporation, shall, within 7 days from knowledge thereof REPORT IN WRITING SUCH FACT TO
THE COMMISSION.
2.) Found administratively liable for any offense involving FRAUDULENT ACTS; and
3.) By a FOREIGN COURT or EQUIVALENT FOREIGN REGULATORY AUTHORITY for acts, violations or
misconduct similar to those enumerated in paragraphs A and B.
*every corporation has the right to provide for additional qualifications and disqualifications
1.) Commission
1.) STOCK - vote of the stockholders holding or representing at least 2/3 of the outstanding capital
stock
PROVIDED THAT:
1.) Such removal shall take place either at a regular meeting of the corporation OR
Must be called by the SECRETARY or ON ORDER OF THE PRESIDENT or upon WRITTEN DEMAND
of the stockholders representing or holding at least a majority of the outstanding capital stock OR a
majority of the members entitled to vote.
3.) AFTER PREVIOUS NOTICE to stockholder or members of the intention to propose such removal at the
meeting.
NOTICE of the time and place of such meeting + INTENTION to propose such removal must be
given by:
1.) publication
2.) or by written notice
Commission shall order the REMOVAL of the director or trustee elected despite the
disqualification OR whose disqualification arose or is discovered SUBSEQUENT TO THE ELECTION
1.) motu proprio OR upon verified complaint
2.) after due notice; and
3.) hearing
The removal shall be without prejudice to other sanctions that the Commission may impose on
the BOD or TRUSTEES who, with knowledge of the disqualification, failed to remove the
director or trustee.
SECTION 28 – VACCANCIES IN THE OFFICE OF DIRECTOR OR TRUSTEE; EMERGENCY BOARD
All elections under Section 28 shall observe the procedures under Section 23 and 25
Election shall be held no later than the day of such expiration at a meeting called for that
purpose.
-such fact must be stated in the agenda and notice of said meeting
WHEN VACANCY PREVENTS QUORUM AND EMERGENCY ACTION IS REQUIRED TO PREVENT GRAVE
LOSS OR DAMAGE
The vacancy may be temporarily filled from among the officers of the corporation by unanimous
vote of the remaining directors or trustees.
Emergency action shall be LIMITED to the emergency action necessary.
Corporation must NOTIFY THE COMMISSION WITHIN 3 DAYS from the creation of the
emergency board – STATING THE REASON for its creation.
1.) within a reasonable time from the termination of the emergency ;or
2.) a special meeting of stockholders or members duly called for the purpose; OR
3.) in the same meeting authorizing the increase of directors or trustees if so stated in the
notice of the meeting
In no case shall the total yearly compensation of directors exceed 10% of the net income before
income tax of the corporation during the preceding year.
Directors or trustees shall NOT participate in the determination of their own per diems or
compensation.
CORPORATIONS WITH PUBLIC INTEREST shall submit to their shareholders and the Commission,
an ANNUAL REPORT of the total compensation of each of their directors or trustees.
1.) wilfully and knowingly vote or assent to patently unlawful acts of the corporation; or
2.) who are guilty of gross negligence or bad faith in directing the affairs of the corporation
JOINTLY AND SEVERALLY for all damages resulting therefrom suffered by the corporation, its
stockholders, or members and other persons.
A DOT shall not (attempt to) acquire any interest adverse (which has been reposed in them in
CONFIDENCE) to the corporation – OTHERWSE, DOT shall be liable as a TRUSTEE for the
corporation and must account for the profits which otherwise would have accrued to the
corporation.
SECTION 31 – DEALINGS OF DOT WITH THE CORPORATION
A contract of the corporation with 1 or more of its DOT or their spouses and relatives within the
4th civil degree of consanguinity or affinity is VOIDABLE, at the option of such corporation –
UNLESS:
1.) The presence of such director or trustee in the board meeting in which the contract was approved
was not necessary to constitute a quorum for such meeting:
2.) The vote of such director or trustee was NOT necessary for the approval of the contract;
4.) CORPORATION WITH PUBLIC INTEREST- material contracts are approved by at least 2/3 of the entire
membership of the board, with at least a majority of the independent directors voting to approve the
material contract; and
5.) In case of an officer, the contract has been previously authorized by the BOD.
If any of the first 3 conditions^^ is absent, in case of a contract with a DOT, such contract may be
RATIFIED by:
1.) the vote of the stockholders representing at least 2/3 of the outstanding capital stock OR
2.) of at least 2/3 of the members in a meeting called for the purpose
PROVIDED, that full disclosure of the adverse interest of the directors or trustees
involved is made at such meeting AND the contract is fair.
GR: A contract (that is fair and reasonable) between 2 or more corporations having interlocking
directors shall NOT be invalidated on that ground alone – PROVIDED, that if the interest of the
interlocking director in 1 corporation is substantial and the interest in the other corporation or
corporations is merely nominal, the contract shall be subject to the provisions of the preceding section
insofar as the latter corporation/s are concerned.
XPN: fraud
Stockholdings exceeding 20% of the outstanding capital stock shall be considered substantial for
purposes of interlocking directors.
Director, by virtue of such office, acquires opportunity which should belong to the corporation,
thereby obtaining profits to the prejudice of such corporation,
GR: The director must ACCOUNT FOR AND REFUND to the corporation ALL SUCH PROFITS
XPN: Unless the act has been ratified by a vote of the stockholders owing or representing at
least 2/3 of the outstanding capital stock.
Section 33 is applicable notwithstanding the fact that the director risked one’s own funds in
the venture.
If bylaws provide, the board may create an executive committee composed of at least 3
directors – they may act by majority vote of all its members on specific matters as may be
delegated to it in the bylaws OR by majority vote by the board
XPN:
1.) approval of any action for which shareholders’ approval is also required
f new bylaws;
4.) amendment or repeal of any resolution of the board which by its express terms is not amenable or
repealable; and
The BOD may create special committees of temporary or permanent nature and determine the
members’ term, composition, compensation, powers, and responsibilities.
TITLE IV – POWER OF CORPORATIONS
2.) To have perpetual existence UNLESS the certificate of incorporation provides otherwise;
4.) To amend its articles of incorporation in accordance with the provisions of the Code
5.) To adopt bylaws --- not contrary to law, morals, public policy, and to amend or repeal the same
b.) to sell treasury stocks in accordance with the provisions of this Code
7.) Purchase, take, sell, lease, pledge, mortgage, deal with such real and personal property – INCLUDING
SECURITIES AND BONDS OF OTHER CORPORATIONS, as the transaction of the lawful business of the
corporation may reasonably and necessarily require
8.) To enter into a PARTNERSHIP, JOINT VENTURE, MERGER, CONSOLIDATION, or ANY OTHER
COMMERCIAL AGREEMENT with natural and juridical persons
9.) To make reasonable donations – including those for the public welfare or for hospital etc.
PROVIDED, that no foreign corporation shall give donations in aid of any political party or
candidate or for purposes of partisan political activity.
10.) To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers,
and employees; and
11.) To exercise such other powers as may be essential or necessary to carry out its purpose or purposes
as stated in the articles of incorporation
Written notice of the proposed action + TIME AND PLACE of meeting shall be sent to
stockholders or members at their respective place of residence
And must either be DEPOSITED to the addressee in the post office with postage prepaid;
Served personally;
ELECTRONICALLY
GR: No corporation shall increase or decrease its capital stock or incure, create or increase any
bonded indebtedness
XPN: UNLESS approved by a majority vote of the BOD AND by 2/3 of the outstanding capital
stock at a stockholders’ meeting duly called for the purpose.
Written notice of the TIME and PLACE of the stockholders’ meeting and the PURPOSE for said
meeting must be SENT to the stockholders at their places of residence
Sent Personally
ELECTRONIC MEANS – recognized as valid under the Commission’s rules.
A CERTIFICATE MUST:
1.) That the requirements of this section have been complied with;
a.) the amount of capital stock OR number of shares of no- par stock (no face value) thereof actually
subscribed, the names, nationalities, and addressed of the persons subscribing;
b.) the amount of capital stock or number of no- par stock subscribed by each, and the amount paid by
each on the subscription in cash or property, or
c.) the amount of capital stock or number of shares of no- par stock allotted to each stockholder if
such increase is for the purpose of making effective stock dividend therefor authorized;
6.) The vote authorizing the increase or decrease of the capital stock, or the incurring, creating,
or increasing of any bonded indebtedness.
Copies of the certificate shall be kept on file in the office of the corporation.
Filed with the Commission; and
Attached to the original articles of incorporation.
Bonds issued by a corporation shall be registered with the Commission, which shall have the
authority to determine the sufficiency of the terms thereof.
GR: All stockholders of a stock corporation shall enjoy preemptive right to subscribe to all issues or
disposition of shares of any class, in proportion to their respective shareholdings
XPN: unless such right is denied by the articles of incorporation or an amendment thereto
1.) issued in compliance with laws requiring stock offerings or minimum stock ownership by the
public;
2.) shares issued in good faith with the approval of the stockholders representing 2/3 of the
outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a
previously contracted debt.
*Aimed to maintain the existing ratio of the shareholder’s interest and voting power
ISSUES OF DISPOSITIONS
Includes issuance of the unsubscribed shares that are part of the original capital stock and he
increase of capital stock. Not available if denied in the AOI or one of the limitations
A corporation may, by a MAJORITY VOTE of its BOD or trustees, sell, lease, exchange, mortgage,
pledge, or otherwise dispose of its property and assets, UPON SUCH TERMS AND CONDITIONS
and for such consideration, which may be by:
1.) money
2.) stocks
3.) bonds
4.) other instruments for the payment of money or
5.) other property or consideration, as its board of directors or trustees may deem
expedient
A sale of ALL or SUBSTANTIALLY ALL of the corporation’s properties and assets, including its
goodwill, MUST BE AUTHORIZED by the vote of the stockholders representing at 2/3 of the
outstanding capital stock, or at least 2/3 of the members – in a meeting duly called for the
purpose.
NONSTOCK CORPORATIONS WHERE NO MEMBERS WITH VOTING RIGHTS – the vote of at least
a majority of the trustees in office will be sufficient authorization for the corporation to enter
into any transaction.
The determination of W/N the sale involves all or substantially all of the corporation’s properties
and assets must be computed based on its NET ASSET VALUE – as shown in its LATEST
FINANCIAL STATEMENTS.
A sale or other disposition shall be deemed to cover substantially all the corporate
property and assets if thereby the corporation would be rendered incapable of continuing the
business or accomplishing the purpose for which it was incorporated.
Written notice of the proposed action and of the TIME and PLACE for the meeting shall be
addressed to stockholders or members at their places of residence
1.) deposited to the addressee in the post office with postage prepaid
2.) served personally
3.) allowed by the bylaws or done with the consent of the stockholder
4.) SENT ELECTRONICALLY
PROVIDED, that any dissenting stockholder may exercise the right of appraisal under the
conditions under this Code.
Nothing in Section 39 is intended to restrict the power of any corporation without authorization
to sell etc if the same is necessary in the usual and regular business; or if the proceeds of the
sale or other disposition of such property and assets shall be appropriated for the conduct of the
remaining business.
2.) to collect or compromise an indebtedness to the corporation --- arising out of unpaid subscription, in
a delinquency sale, and to purchase delinquent shares sold during said sale; and
3.) to pay dissenting or withdrawing stockholders entitled to payment for their shares
May do so – other than the primary purpose for which it was organized—WHEN:
2.) ratified by the stockholders representing at least 2/3 of the outstanding capital stock, or
3.) by at least 2/3 of the members in the case of nonstock corporations – at a meeting duly called for
that purose.
Notice of the proposed investment + TIME and PLACE of the meeting shall be addressed to each
stockholder or member at the place of residence—
1.) deposit in the post office with postage prepaid
2.) served PERSONALLY
3.) sent ELECTRONICALLY- subject to rules of commission + electronic daa message –
when allowed by law or done with the consent of the stockholders.
PROVIDED, that any dissenting stockholder shall have appraisal right as provided in this code.
PROVIDED, HOWEVER, that where the investment by the corporation is reasonably necessary to
accomplish its primary purpose as stated in the articles of incorporation, the approval of the
stockholders or members shall NOT be necessary.
The BOD of a stock corporation may declared dividends out of the unrestricted retained earning
which shall be payable in cash, property, or in stock to all stockholders on the basis of
outstanding stock held by them: PROVIDED
1.) that any cash dividends due on delinquent stock shall first be applied to the unpaid
balance on the subscription plus costs and expenses,
2.) while stock dividends shall be withheld from the delinquent stockholders until their
unpaid subscription is fully paid:
PROVIDED FURTHER, that no stock dividend shall be issued without the approval of stockholders
representing at least 2/3 of the outstanding capital stock at a regular or special meeting duly
called for the purpose.
Stock corporations are PROHIBITED from retaining surplus profits in excess of 100% of their
paid- in capital stock, EXCEPT:
1.) when justified by definite corporate expansion projects approved by the BOD
2.) when the corporation is prohibited under any loan agreement with financial
insitutions or creditors – whether local or foreign, from declaring dividends WITHOUT THEIR
CONSENT and such consent has NOT YET BEEN SECURED;
3.) when it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation, such as when there is need for special reserve for
probable contingencies
PROVIDED, that:
1.) Where a stockholder or stockholders representing the same interest of both the managing and the
managed corporations own or control more than 1/3 of the total outstanding capital stock entitled to
vote of the managing corporation; OR
2.) Where a majority of the members of the BOD of the managing corporation also constitute a majority
of the members of the board of directors of the managed corporation, then the management contract
must be approved by the stockholders of the managed corporation owning at least 2/3 of the total
outstanding capital stock entitled to vote, or by at least 2/3 of the members in the case of a nonstock
corporation.
The shall apply to any contract whereby a corporation undertakes to manage or operate ALL OR
SUBSTANTIALLY ALL of the business of another corporation, whether such contracts are called
service contracts, operating agreements or otherwise:
PROVIDED, HOWEVER, that such service contracts or operating agreements which relate
to the exploration, development, exploitation or utilization of natural resources may be entered
into for periods as may be entered into for such periods as may be provided by the pertinent
laws or regulations.
No management contract shall be entered into for a period longer than 5 years for any 1 term.
No corporation shall possess or exercise corporate powers other than those conferred by this
Code or by its articles of incorporation and except as necessary or incidental to the exercise of the
powers conferred.
TITLE V – BYLAWS
1.) affirmative vote of the stockholders representing at least a majority of the outstanding capital stock;
OR
The bylaws shall be signed by the stockholders or members voting for them and shall be kept in
the principal office of the corporation—SUBJECT to inspection of stockholders or members
DURING OFFICE HOURS.
A certified (by majority of directors and trustees + countersigned by the secretary) copy thereof
shall be filed with the Commission and attached to the original AOI.
In all cases, bylaws shall be effective only upon the issuance by the Commission of a certification
that the bylaws are in accordance with this Code.
Unless accompanied by a certificate of the appropriate government agency to effect that such
bylaws or amendments are in accordance with law, the Commission shall NOT ACCEPT for filing
the bylaws or any amendment thereto of any
1.) bank
2.) banking institution
3.) building and loan association
4.) trust company
5.) insurance company
6.) public utility
7.) educational institution
8.) or other special corporations governed by special laws
1.) Time, place, and manner of calling and conducting regular or special meetings of the directors or
trustees;
2.) Time and manner of calling and conducting regular or special meetings and mode of notifying the
stockholders or members thereof;
-manner of voting
4.) Modes by which a stockholder, member, director, or trustee may attend meetings and cast their
votes;
5.) Form for proxies of stockholders and members and the manner of voting them;
-the guidelines for setting the compensation of directors or trustees and officers, and
-the maximum number of other board representations that an independent director or trustee
may have which shall, in no case, be more than the number prescribed by the Commission
7.) Time for holding the annual election of directors or trustees and
11.) Other matters as may be necessary for the proper or convenient transaction of its corporate affairs
for the promotion of:
At a regular or special meeting duly called for the purpose, may AMEND or REPEAL the bylaws,
or ADOPT new bylaws.
The owners of 2/3 of the outstanding capital stock or 2/3 of the members in a nonstock corporation may
delegate to the BOD or trustees the power to amend or repeal the bylaws or adopt new bylaws:
PROVIDED:
Any power delegated to the BOD or trustees to amend or repeal the bylaws or adopt new
bylaws shall be considered as REVOKED whenever stockholders owning or representing a majority of the
outstanding capital stock or majority of the members shall so vote at a regular or special meeting.
WHENEVER THE BYLAWS ARE AMENDED OR NEW BYLAWS ARE ADOPTED, Corporation shall
The amended or new bylaws shall only be effective UPON THE ISSUANCE BY THE COMMISSION OF A
CERTIFICATION that the same is in accordance with this Code and other relevant laws.
TITLE VI – MEETINGS
AT EACH REGULAR MEETING, THE BOD/T shall present to stockholders/members the following:
a.) A description of the voting and vote tabulation procedures used in the previous
meeting;
*A director, trustee, stockholder, or member may propose any other matter for inclusion in the agenda
at any regular meeting of stockholders or members.
SPECIAL MEETING
Notice of any meeting may be WAIVED- expressly or impliedly, by any stockholder or member:
PROVIDED, that general waivers of notice in the AOI or the bylaws shall NOT BE
ALLOWED
PROVIDED FURTHER, that attendance at a meeting shall constitute a waiver of notice of
such meeting, EXCEPT when the person attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or convened.
Unless the bylaws provide for a longer period, the stock and transfer book or membership book
shall be closed at least 20 days for regular meetings and 7 days for special meetings before the
scheduled date of the meeting.