QuestionsQuestions (BATAS PAMBANSA BLG. 68)
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 incident to its existence.
Stock corporations have capital stock divided into shares and may distribute dividends or allotments based on shares held; non-stock corporations are all others.
They are governed primarily by the special law/charter, supplemented by the Corporation Code insofar as provisions are applicable.
Corporators compose the corporation (as stockholders or members). Incorporators are the stockholders or members named in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.
No share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares (unless otherwise provided by the Code). There must always be at least one class/series with complete voting rights.
Even if non-voting under the articles/certificate, holders must vote on specified matters: amendment of articles, adoption/amendment of by-laws, disposition of all/substantially all assets, incurring/increasing bonded indebtedness, increase/decrease of capital stock, merger/consolidation, investment of corporate funds in another corporation/business as allowed, and dissolution.
Founders’ shares may be given certain rights/privileges, but if exclusive right to vote and be voted for directors is granted, it must be for a limited period not exceeding five (5) years, subject to SEC approval, counting from SEC approval.
At least 25% of authorized capital stock must be subscribed at incorporation, and at least 25% of total subscription must be paid on subscription; in no case shall paid-up capital be less than ₱5,000.
It commences from the date the SEC issues a certificate of incorporation under its official seal.
Not exceeding fifty (50) years from the date of incorporation, extendable for periods not exceeding fifty (50) years in any single instance by amendment, with SEC limitations on timing.
Any number of natural persons not less than 5 but not more than 15; all legal age; majority must be residents of the Philippines.
Examples: (1) corporate name, (2) purpose(s) with primary and secondary purposes, (3) principal office location within the Philippines, (4) corporate term, (5) incorporators’ names/nationalities/residences, (6) number of directors/trustees, and others required by law.
For legitimate purposes and unless otherwise prescribed: amended by majority vote of the board and vote/written assent of stockholders representing at least 2/3 of outstanding capital stock (or 2/3 of members if non-stock), without prejudice to appraisal rights of dissenting stockholders.
Examples include: not substantially in the prescribed form; purpose patently unconstitutional/illegal/immoral or contrary to government rules; false treasurer’s affidavit on subscription/payment; and failure to comply with required Filipino ownership percentage. For certain special corporations (banks, financial intermediaries, public utilities, educational institutions, etc.), SEC needs favorable recommendation from appropriate government agencies.
Election requires presence (in person or authorized representative by proxy) of owners of a majority of outstanding capital stock (or majority of members entitled to vote). Stockholders may vote in person or by proxy; they may cumulate votes (cumulate voting) for director candidates; election by ballot if requested. No delinquent stock is voted.
Directors must organize by electing: president (must be a director), treasurer (may or may not be a director), and secretary who must be a resident and citizen of the Philippines; other officers as provided by by-laws.
A director/trustee may be removed by stockholders representing at least 2/3 of outstanding capital stock (or at least 2/3 of members entitled to vote for non-stock). It must take place at a regular meeting or special meeting called for that purpose, after previous notice to stockholders/members about intent to propose removal.
Examples: increasing/decreasing capital stock and incurring/increasing bonded indebtedness require board majority and stockholders at least 2/3 vote (Section 38). Sale/other disposition of all/substantially all assets requires stockholders at least 2/3 (Section 40). These thresholds protect minority interests and ensure major structural/financial changes have strong consent.