QuestionsQuestions (Act No. 1459)
A corporation is an artificial being created by operation of law, with right of succession and powers/attributes/properties expressly authorized by law or incident to its existence.
Corporations may be public or private. Private corporations are either stock or non-stock. Stock corporations have capital stock divided into shares and may distribute dividends/allotments based on shares held; non-stock corporations are all other private corporations.
Corporators are those who compose the corporation (stockholders and/or members). Incorporators are the members/stockholders mentioned in the articles of incorporation as originally forming and composing the corporation.
Five or more persons, not exceeding fifteen; a majority must be residents of the Philippine Islands.
Name; purpose; place of principal office within the Philippines; term not exceeding 50 years (with rules as provided); names/residences of incorporators; number of directors (unless otherwise provided, not less than 5 nor more than 11) and their names/residences as directors until successors are elected/qualified; capital stock amount and number of shares (for stock corporations); amount subscribed with names/residences of subscribers, amount subscribed by each, and sums paid on subscription.
The treasurer’s sworn statement must show at least 20% of the entire capital stock is subscribed and at least 25% of the subscription has been paid.
Upon filing and issuance of the certificate by the Chief of the Division, the persons signing the articles and their associates/successors constitute a body politic and corporate under the corporate name for the specified term, subject to lawful dissolution or expiration by limitation.
A corporation cannot occupy/use private property without owners’ consent or prior condemnation and payment/tender of just compensation. For public property/lands/roads/streets etc., it must first secure a franchise from the Government.
Powers include succession; suing and being sued; transacting business within its lawful purpose; common seal; buying/holding/conveying/selling/leasing/mortgaging dealing with property reasonably necessary; appointing/dismissing subordinate officers/agents; making by-laws; admitting members/issuing/selling shares (for stock corporations); entering essential contracts. Limitation: no corporation may hold or own real estate except reasonably necessary to carry out its purposes; agricultural corporations restricted to ownership/control not to exceed 1,024 hectares.
No dividend (or any distribution) except from surplus profits arising from business; cannot distribute capital stock/property other than actual profits until payment of debts and termination of existence by limitation or lawful dissolution.
For capital increase/diminution: two-thirds of the entire subscribed capital stock favorable at a regular stockholders meeting. For bonded indebtedness: majority of subscribed capital stock favorable. Notice must be addressed to each stockholder based on residence shown by corporate books and deposited with postage prepaid; duplicates of a certificate signed by a majority of directors and counter-signed by chairman/secretary of meeting must be filed; effects occur from filing with the Chief of the Division.
Within one month after filing articles, the corporation must adopt a code of by-laws not inconsistent with law. Adoption requires affirmative vote of stockholders representing a majority of all subscribed capital stock (paid or unpaid) or majority of members if non-stock. By-laws must be signed by voting stockholders/members, kept at principal office, filed with the Chief, and attached to original articles/by-laws on file.
Election of directors uses ballot voting. A stockholder may vote shares for as many persons as directors to be elected, or cumulate shares and give one candidate as many votes as the number of directors to be elected multiplied by shares owned, or distribute votes among candidates on the same principle, subject to the cap that total votes cast cannot exceed shares owned multiplied by number of directors to be elected.