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CORP CODE OF PHILS. [BP Blg. 68] TITLE I GENERAL PROVISIONS Definitions & Classifications Section 1. Title of Code. Sec. 2. Corp defined. Artificial being Created by operation of law Having right of succession Powers, attributes & properties expressly authorized by law or incident to its existence. Sec. 3. Classes of corps. Stock - have CS divided into shares AND authorized to distribute dividends of surplus profits Nom-Stock Sec. 4. Corps created by spl laws or charters. Corps created by spl laws or charters governed primarily by spl law or charter creating them, supplemented by this Code Sec. 5. Corporators & incorporators, SH & members. Corporators - those who compose corp, whether as SH or as members. Incorporators - SH or members mentioned in AOI as originally forming & composing corp & who are signatories thereof SH or shareholders - corporators in stock corp Members - corporators in NS corp Sec. 6. Classification of shares. Shares of stock - may be divided into classes or series of shares or both Shares have rights, privileges or restrictions as may be stated in AOI GEN. RULE: no share may be deprived of voting rights EXCEPTION: those classified & issued as "preferred" or "redeemable" shares EXCEPTION TO EXCEPTION: unless otherwise provided in this Code There shall always be a class or series of shares w/c have complete voting rights Shares may have PV or have no PV as provided in AOI Provided these are always PV: banks, trust cos, insurance cos, public utilities, & bldg & loan assns PS given preference as to 1. distribution of corp assets in case of liquidation 2. distribution of dividends 3. such other preferences stated in AOI, not violative of Corp Code PS may be issued only w/ a stated PV BOD , where authorized in AOI , may fix terms & conditions of PS terms & conditions effective upon filing of a cert. w/ SEC No PV shares - deemed fully paid & non-assessable & holder of such shares not liable to corp or to its creditors No PV shares may not be issued for less than P5 per share Entire consideration for no-PV shares treated as capital & not available for distribution as dividends.

A corp may classify its shares to insure compliance w/ constitutional or legal requirements. PRESUMPTION: each share shall be equal in all respects to every other share Except as otherwise provided in AOI AND stated in cert. of stock

GEN. RULE: vote necessary to approve corp act deemed to refer only to voting shares EXCEPTION: Instances when non-voting shares are allowed to vote: 1. Amendment of AOI 2. Adoption & amendment of BL 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of corp property 4. Incurring, creating or increasing bonded indebtedness 5. Increase or decrease of CS 6. Merger or consolidation of corp w/ another corp or other corps 7. Investment of corp funds in another corp or business 8. Dissolution of corp Sec. 7. Founders' shares. classified as such in AOI given certain rights & privileges not enjoyed by owners of other stocks provided where exclusive right to vote & be voted for in election of dirs is granted must be for < 5 yrs subject to SEC approval 5-yr period commences from date of SEC approval Sec. 8. Redeemable shares. Issued by corp when expressly so provided in AOI may be purchased or taken up by corp upon expiration of fixed period regardless of existence of URE AND upon such other terms & conditions as stated in AOI & cert. of stock Sec. 9. Treasury shares. shares of stock w/c have been issued & fully paid for, but subsequently reacquired manner of reacquisition: purchase, redemption, donation or other lawful means. shares may again be disposed of for price fixed by BOD TITLE II INCORP & ORGANIZATION OF PRIVATE CORPS Sec. 10. number & qualifications of incorporators. Who may form a private corp for any lawful purpose(s)? natural persons not less than 5 but not more than 15 all of legal age Majority are residents of Phils. must own or be a subscriber to at least 1share Sec. 11. Corp term. GEN RULE: not exceeding 50 yrs from date of incorp EXCEPTION: unless sooner dissolved or unless said period is extended. corp term may be extended for periods not exceeding 50 yrs in any single instance by an amendment of AOI

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no extension earlier than 5 yrs prior to expiry date(s) unless for justifiable reasons for an earlier extension as determined by SEC .

Sec. 12. Minimum CS reqd of stock corps. specifically provided for by spl law Sec. 13. Amt of CS to be subscribed & paid for purposes of incorp . At least 25% of ACS as stated in AOI must be subscribed at time of incorp at least 25% of total subscription must be paid upon subscription balance payable on date fixed in contract of subscription w/ out need of call in absence of fixed date, upon call for payment by BOD paid-up capital should be at least P5K Sec. 14. Contents of AOI . All corps organized under Code shall file AOI w/ SEC AOI (1) in any of official languages (2) duly signed & (3) acknowledged by all of incorporators, AOI contain substantially ff. matters, except as otherwise prescribed by this Code or by spl law: 1. name of corp 2. primary purpose & secondary purpose(s) 3. place of principal office, w/c must be w/in Phils. 4. corp term 5. names, nationalities & residences of incorporators 6. number of dirs or trustees, w/c shall be 5-15 7. names, nationalities & residences of persons who shall act as dirs or trustees until first reg dirs or trustees are duly elected & qualified 8. If stock corp money amt and number of shares of ACS if PV, PV of each names, nationalities & residences of orig subscribers amt subscribed & paid by each subscriber if some or all are w/out PV, such fact must be stated 9. If a NS corp amt of its capital names, nationalities & residences of contributors amt contributed by each contributor 10. Such other matters not inconsistent w/ law & w/c incorporators deem necessary & convenient. SEC shall not accept AOI unless accompanied by a sworn statement of Treasurer showing compliance with 25/25 rule and that capital not less than P5K Sec. 15. Forms of AOI . Sec. 16. Amendment of AOI . GEN. RULE: AOI amended by a majority vote of BOD & vote or written assent of 2/3 of OCS w/ out prejudice to appraisal right of dissenting SH QUALIFICATION: Unless otherwise prescribed by this Code or by spl law, & for legitimate purposes Amendments take effect upon approval by SEC or from date of filing w/ SEC if not acted upon w/ in six (6) months from date of filing for a cause not attributable to corp

Sec. 17. Grounds when AOI or amendment may be rejected or disapproved. SEC may reject AOI or disapprove amendment if not in compliance w/ reqts of Code: SEC shall give incorporators reasonable time to correct or modify objectionable portions grounds for rejection or disapproval: 1. AOI or amendment is not substantially in accordance w/ prescribed form 2. Purpose(s) of corp are patently unconstitutional, illegal, immoral, or contrary to govt rules & regulations 3. Treasurer's Affidavit is false 4. Citizenship reqt not complied with No AOI or amendment to AOI of banks, banking & quasibanking institutions, bldg & loan associations, trust companies & other financial intermediaries, insurance companies, public utilities, educational institutions, & other corps governed by spl laws shall be accepted or approved by SEC unless accompanied by a favorable recommendation of appropriate govt agency.

Sec. 18. Corp name. Corp name not allowed if identical or deceptively or confusingly similar to existing corp if identical or deceptively or confusingly similar to any other name already protected by law if patently deceptive, confusing or contrary to existing laws When change in corp name approved, SEC shall issue amended cert. of incorp under amended name Sec. 19. Commencement of corp existence. from date SEC issues a cert. of incorp under its official seal Effects: commencement of corp existence & juridical personality Sec. 20. De facto corps. Requisites due incorp in good faith of any corp claiming to be a corp incorp under Corp Code & right to exercise corp powers cannot be inquired into collaterally; only by Solicitor General in quo warranto proceeding. Sec. 21. Corp by estoppel. All persons who assume to act as a corp knowing it to be w/out authority to do so - liable as general partners for all resulting debts, liabilities & damages when ostensible corp, acting as such, is sued for breach of contract or tort - lack of corp personality not available as defense third person who assumes an obligation to an ostensible corp as such - cannot resist performance on ground that there was in fact no corp Sec. 22. Effects on non-use of corp charter & continuous inoperation of a corp . Failure to formally organize & commence business w/ in 2 yrs from date of its incorp - corp powers cease & corp deemed dissolved

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if corp commenced transaction of business but subsequently becomes continuously inoperative for at least 5 years - ground for suspension or revocation of its corp franchise or cert. of incorp . N. A. if due to causes beyond control of corp as may be determined by SEC

TITLE III BOD /TRUSTEES/OFFICERS Sec. 23. BOD or trustees. GEN RULE: BOD exercises corp powers, conducts all business and holds all property EXCEPTION: Unless otherwise provided in Corp Code BOD elected from among SH or members Dirs hold office for 1 yr until successors are elected & qualified Every dir must own at 1 share Any dir who ceases to be owner of at least 1 share shall thereby cease to be a dir Trustees of NS corps must be members majority of dirs or trustees must be residents of Phils Sec. 24. Election of dirs or trustees. At elections, there must be present, either in person or by written proxy, majority of OCS election must be by ballot if requested by any voting SH or member every SH shall have right to vote in person or by proxy number of shares of stock at date of record, or where BL silent, at time of election How votes are distributed SH may vote such number of shares for as many persons as there are dirs to be elected or SH may cumulate said shares & give one candidate as many votes as number of dirs to be elected multiplied by number of his shares shall equal or SH may distribute them on same principle among as many candidates as he shall see fit PROVIDED total number of votes cast by him shall not exceed number of shares owned by him multiplied by whole number of dirs to be elected no delinquent stock shall be voted. GEN RULE: members of NS corps may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate EXCEPTION: Unless otherwise provided in AOI or in BL Candidates receiving highest number of votes shall be declared elected Any mtg called for an election may adjourn from day to day or from time to time but not sine die or indefinitely if, for any reason, no election is held, or if there not present or represented by proxy, at mtg, owners of a majority of OCS, or if there be no CS, majority of member entitled to vote. Sec. 25. Corp ofcrs , quorum. Immediately after election, dirs must formally organize by election of a president, treasurer, secretary, and such other ofcrs as may be provided for in BL President- must be a dir treasurer - may or may not be a dir secretary - shall be a resident & citizen of Phils. GEN RULE: Any 2 or more positions may be held concurrently by same person

EXCEPTION: no one shall act as president & secretary or as president & treasurer at same time GEN RULE: majority of number of dirs as fixed in AOI shall constitute a quorum for transaction of corp business EXCEPTION: Unless AOI or BL provide for a greater majority GEN RULE: every decision of at least majority of dirs present at mtg at w/c there is a quorum shall be valid as a corp act EXCEPTION: in election of ofcrs - majority of all BOD members reqd Dirs or trustees cannot attend or vote by proxy at board mtgs .

Sec. 26. Report of election of dirs , trustees & ofcrs . Sec. 27. Disqualification of dirs , trustees or ofcrs . Grounds: conviction by final judgment of offense punishable by more than 6 yrs imprisonment conviction by final judgement of a violation of Code offense or violation committed w/ in 5 yrs prior to date of election or appointment Sec. 28. Removal of dirs or trustees. BOD member may be removed from office by a vote of 2/3 of OCS Removal shall take place either at a reg mtg or at a spl mtg called for purpose In either case, removal done after previous notice to SH of intention to propose removal Spl mtg must be called by secretary on order of president or on written demand of majority of OCS, or, if NS, on written demand of majority of members. Should secretary fail or refuse to call spl mtg or fail or refuse to give notice, or if there is no secretary, call for mtg addressed directly to SH by any SH signing demand Notice of time & place and intention to propose removal must be given by written notice GEN RULE: Removal may be w/ or w/ out cause QUALIFICATION: removal w/ out cause may not be used to deprive minority SH of right of representation to w/c they may be entitled under S24 Sec. 29. Vacancies in office of dir or trustee. Vacancy due to removal by SH or by expiration of term - must be filled by SH in a reg or spl mtg called for that purpose Vacancy due to cause other than by removal by SH or by expiration of term - may be filled by vote of majority of remaining dirs , if still constituting a quorum Dir so elected to fill a vacancy - only for unexpired term of his predecessor Vacancy by reason of an increase in number of dirs - filled by an election at a reg or at a spl mtg or in same mtg authorizing increase of dirs if so stated in notice of mtg.

Sec. 30. Compensation of dirs . GEN RULE: dirs shall not receive any compensation, as such dirs EXCEPTIONS: (1) except for reasonable per diems (2) unless BL fixes compensation compensation other than per diems may be granted to dirs by vote of majority of OCS at a reg or spl SHs mtg.

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total yearly compensation of dirs, as such dirs, shall NOT exceed 10% of previous years earnings before taxes

Sec. 31. Liability of dirs, trustees or ofcrs . Acts proscribed (dirs/trustees only) willfully & knowingly voting for or assenting to patently unlawful corp acts guilty of gross negligence or bad faith in directing corp affairs acquire any personal or pecuniary interest in conflict w/ their duty as such dirs or trustees Nature of liability - liable solidarily for all damages resulting from proscribed acts Doctrine of Secret Profits: dir , trustee or ofcr attempts to acquire or acquires, in violation of his duty, any interest adverse to corp in respect of confidential or fiduciary matters, as to w/c equity imposes a disability upon him to deal in his own behalf - liable as a trustee for corp & must account for profits w/c otherwise would have accrued to corp Sec. 32. Dealings of dirs , trustees or ofcrs w/ corp . GEN RULE: contract of corp w/ one or more of its dirs or trustees or ofcrs voidable, at option of corp EXCEPTION: VALID when all ff. conditions are present: 1. presence of dir in board mtg in w/c contract was approved was not necessary to constitute a quorum for mtg; 2. vote of dir was not necessary for approval of contract; 3. contract is fair & reasonable under circs; & 4. in case of an ofcr, contract was previously authorized by BOD . Where any of 1st 2 conditions is absent, in case of a contract w/ a dir, contract may be ratified by vote of 2/3 of OCS in a mtg called for purpose Provided (1) full disclosure of adverse interest involved is made at such mtg and (2) contract is fair & reasonable under circs . Sec. 33. Contracts between corps w/ interlocking dirs . GEN RULE: provided it is fair & reasonable under circs, a contract between 2 or more corps having interlocking dirs is not invalidated on that ground alone EXCEPTION: in case of fraud if interest of interlocking dir in corp A is substantial & his interest in Corp B is merely nominal dir subject to Sec 32 insofar as latter corp is concerned. Stockholdings > 20% of OCS considered substantial for purposes of interlocking dirs Sec. 34. Disloyalty of a dir . ELEMENTS: 1. dir acquires for himself a business opportunity w/c should belong to corp 2. he acquires the business opportunity by virtue of his office 3. he obtains profits as a result, to the prejudice of corp LIABILITY: dir must account to corp for all profits by refunding the same EXCEPTION: no liability if his act has been ratified by a vote of 2/3 of OCS Source of funds immaterial - liability still attaches whether dir uses own funds or not

Sec. 35. Executive committee. BL may create executive committee executive committee composed of not less than 3 members of BOD, to be appointed by BOD scope of powers: specific matters delegated to it in BL or majority vote of BOD valid corp act requires approval of majority of all its members acts not delegable to executive committee: 1. where SH approval is reqd ; 2. filing of vacancies in board; 3. amendment or repeal of BL or adoption of new BL 4. amendment or repeal of any board w/c by its express terms is not so amendable or repealable 5. a distribution of cash dividends TITLE IV POWERS OF CORPS Sec. 36. Corp powers & capacity. <MEMORIZE> Every corp incorporated under this Code has power & capacity: 1. To sue & be sued in its corp name; 2. Of succession by its corp name for period of time stated in AOI & cert. of incorp ; 3. To adopt & use a corp seal; 4. To amend its AOI in accordance w/ provisions of this Code; 5. To adopt BL, not contrary to law, morals, or public policy, & to amend or repeal same in accordance w/ this Code; 6. In case of stock corps, to issue or sell stocks to subscribers & to sell stocks to subscribers & to sell treasury stocks in accordance w/ provisions of this Code; & to admit members to corp if it be a NS corp; 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage & otherwise deal w/ such real & personal property, including securities & bonds of other corps, as transaction of lawful business of corp may reasonably & necessarily require, subject to limitations prescribed by law & Constitution; 8. To enter into merger or consolidation w/ other corps as provided in this Code; 9. To make reasonable donations, including those for public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no corp , domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity; 10. To establish pension, retirement, & other plans for benefit of its dirs, trustees, ofcrs & EEs ; & 11. To exercise such other powers as may be essential or necessary to carry out its purpose(s) as stated in AOI Sec. 37. Power to extend or shorten corp term. Act: Extend or shorten corp term Reqt: approved by a majority of BOD & ratified at a mtg by 2/3 of OCS Written notice of proposed action/time/place of mtg to each SH in case of extension of corp term, any dissenting SH may exercise his appraisal right (see Sec 81.1 for appraisal right re: shortening of corp term) Sec. 38. Power to increase or decrease CS ; incur, create or increase bonded indebtedness. Acts: (1) Increase or decrease CS; and (2) incur, create, or increase bonded indebtedness

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Reqt: approval of majority vote of BOD & ratified by 2/3 of OCS at spl SHs mtg Written notice of proposed acts/time/ place of SHs mtg addressed to each SH duplicate cert signed by a majority of BOD, chairman & secretary, setting forth: 1. compliance with reqts of this section; 2. amt of increase or diminution of CS ; 3. If increase of CS, amt of CS or number of no PV shares actually subscribed, names, nationalities & residences of subscribers, amt of CS or number of no PV stock subscribed & paid by each, & amt of CS or number of shares of no-par stock allotted to each stock-holder if increase is for stock dividend 4. Any bonded indebtedness to be incurred, created or increased; 5. actual indebtedness of corp on day of mtg; 6. amt of stock represented at mtg; & 7. vote authorizing act(s). prior approval of SEC reqd One duplicate cert. kept on file in corp ofc & other filed w/ SEC & attached to original AOI SEC shall not accept for filing cert. of increase of CS unless accompanied by Treasurers affidavit re: compliance w/ 25/25 rule SEC will not approve decrease of CS if it shall prejudice rights of corp creditors NS corps may incur, create or increase bonded indebtedness, w/ approval by a majority of BOT & 2/3 of members in spl mtg Bonds issued by a corp shall be registered w/ SEC

property & assets if necessary for usual & reg course of business or if proceeds of disposition of property & assets be appropriated for conduct of its remaining business In NS corps, vote of majority of trustees will be sufficient authorization for corp to enter into any transaction authorized by this section

Sec. 41. Power to acquire own shares. power to purchase or acquire its own shares for a legitimate corp purpose(s) Essential reqt: corp has URE to cover shares to be purchased or acquired including but not limited to ff. cases 1. To eliminate fractional shares arising out of stock dividends 2. To collect or compromise an debt to corp, arising out of unpaid subscription, in a delinquency sale, & to purchase delinquent shares sold during said sale; & 3. To pay dissenting or w/drawing SH Sec. 42. Power to invest corp funds in another corp or business or for any other purpose. Act: invest funds in any other corp or business or for any purpose other than primary purpose for w/c it was organized LIMITATION: Subject to provisions of this Code REQT: approval of majority of BOD & ratified by 2/3 of OCS at spl mtg Written notice of proposed investment/time/place of mtg addressed to each SH dissenting SH shall have appraisal right where investment by corp is reasonably necessary to accomplish its primary purpose as stated in AOI , SH approval not necessary Sec. 43. Power to declare dividends. BOD may declare dividends out of URE FORMS: in cash, in property, or in stock Effect on delinquent stocks: if cash dividends - first applied to unpaid balance on subscription plus costs & expenses; if stock dividends - w/ held from delinquent SH until unpaid subscription is fully paid stock dividend needs approval of 2/3 of OCS at a reg or spl mtg GEN RULE: Stock corps prohibited from retaining surplus profits in excess of 100% of their paid-in CS EXCEPTIONS: : 1. when justified by definite corp expansion projects or programs approved by BOD 2. when corp prohibited under loan agreement from declaring dividends w/ out consent of creditor & consent not yet secured 3. when retention is necessary under spl circs obtaining in corp, e.g., need for spl reserve for probable contingencies Sec. 44. Power to enter into management contract. Act: management contract w/ another corp REQT: approval of BOD & majority of OCS of both managing & managed corp, at a spl mtg Approval 2/3 of OCS of managed corp reqd --1. where SH representing same interest of both managing & managed corps own or control more than 1/3 of OCS of managing corp; or

Sec. 39. Power to deny pre-emptive right. GEN. RULE: All SH shall enjoy pre-emptive right to subscribe to all issues or disposition of shares of any class, pro rata to interest EXCEPTIONS: unless such right is denied by AOI or an amendment thereto N.A. to shares issued in compliance w/ laws requiring stock offerings or minimum stock ownership by public N.A. to shares to be issued in good faith w/ approval of 2/3 of OCS, in exchange for property needed for corp purposes or in payment of a previously contracted debt. Sec. 40. Sale or other disposition of assets. Acts allowed: a corp may sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property & assets, including its goodwill Limitation: Subject to provisions of existing laws on illegal combinations & monopolies Reqt: majority of BOD and authority of 2/3 of OCS Consideration: money, stocks, bonds or other instruments Written notice of proposed action/time/place of mtg addressed to each SH any dissenting SH may exercise appraisal right substantially all corp property & assets - if corp would be rendered incapable of continuing business or accomplishing purpose for w/c it was incorporated After SH approval, BOD may, in its discretion, abandon such disposition, w/out further action by SH Nothing in this section is intended to restrict power of any corp , w/out SH authorization, to dispose of any of its

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where majority of BOD of managing corp also constitute a majority of BOD of managed corp 3. where corp undertakes to manage or operate all or substantially all of business of another corp (service contracts, operating agreements) MAXIMUM TERM: 5 yrs or less for any one term service contracts or operating agreements w/c relate to exploration, development, exploitation or utilization of natural resources - periods as may be provided by pertinent laws or regulations

10. Such other matters as may be necessary for proper or convenient transaction of its corp business & affairs. Sec. 48. Amendments to BL . Acts: amend or repeal any BL or adopt new BL REQT: majority vote of BOD & owners of majority of OCS at a reg or spl mtg owners of 2/3 of OCS may delegate to BOD power to amend or repeal any BL or adopt new BL any power delegated to BOD to amend or repeal any BL or adopt new BL considered as revoked whenever majority of OCS shall so vote at a reg or spl mtg Procedural Reqts: amendment or new BL attached to original BL in corp ofc & a copy duly certified under oath by corp secretary & a majority of dirs, filed w/ SEC, to be attached to original AOI & original BL Date of effectivity: upon issuance by SEC of a certification that same are not inconsistent w/ this Code TITLE VI MEETINGS Sec. 49. Kinds of mtgs . Meetings of dirs, trustees, SH, or members may be reg or spl. Sec. 50. Reg & spl mtgs of SH or members. Reg mtgs - held annually When? 1. on a date fixed in BL 2. if not fixed in BL, on any date in April of every yr as determined by BOD Provided written notice of reg mtgs shall be sent to all SH or members of record at least 2 weeks prior to mtg, unless a diff. period is reqd by BL Special mtgs - held at any time deemed necessary or as provided in BL Provided at least 1 wk written notice sent to all SH or members, unless otherwise provided in BL Notice of mtg may be waived, expressly or impliedly, by any SH or member Where there is no person authorized to call a mtg Procedure 1. petition by SH or member 2. SEC issue order to petitioning SH or member directing him to call mtg 3. petitioning SH or member gives proper notice reqd by this Code or by BL 4. petitioning SH or member presides at mtg until presiding ofcr chosen by majority Sec. 51. Place & time of mtgs of SH or members. held in city/municipality where principal office of corp is located, & if practicable in principal office of corp Metro Manila considered city or municipality. Notice of mtgs in writing, & time/place stated therein RULE: All corp acts at any SH or members mtg, if not UV, valid even if mtg improperly held or called, provided all SH or members of corp are present or duly represented at mtg Sec. 52. Quorum in mtgs . GEN RULE: quorum shall consist of majority of OCS or majority of members in case of NS corps. EXCEPTION: Unless otherwise provided for in Code or in BL Sec. 53. Reg & spl mtgs of dirs or trustees.

Sec. 45. Ultra vires acts of corps. No corp under this Code shall possess or exercise any corp powers except those (1) conferred by this Code or (2) by its AOI & except (3) such as are necessary or incidental to exercise of powers so conferred. TITLE V BY LAWS Sec. 46. Adoption of BL . Every corp must adopt a code of BL for its govt not inconsistent w/ Code. Time of adoption: w/ in one (1) month after receipt of official notice of issuance of its cert. of incorp by SEC 1. vote of majority of necessary. 2. BL signed by SH voting for them 3. BL kept in principal office of corp, subject to inspection of SH during office hours 4. Copy of BL, certified to by a majority of dirs and countersigned by corp sec - filed w/ SEC w/c shall be attached to original AOI . BL may be adopted & filed prior to incorp 1. BL shall be approved & signed by all incorporators & submitted to SEC, together w/ AOI In either case, BL EFFECTIVE only upon issuance by SEC of certification that BL not inconsistent w/ Code SEC shall not accept for filing BL or any amendment of any bank, banking institution, bldg & loan association, trust company, insurance company, public utility, educational institution or other spl corps governed by spl laws, unless accompanied by cert. of appropriate govt agency to the effect that such BL or amendments are in accordance w/ law Sec. 47. Contents of BL . Limitations: Constitution, Code, spl laws, & AOI Contents: 1. Time/place/manner of calling & conducting reg or spl mtgs of dirs or trustees; 2. Time/manner of calling & conducting reg or spl mtgs of SH or members; 3. reqd quorum in mtgs of SH or members & manner of voting therein; 4. form for proxies of SH & members & manner of voting them; 5. qualifications, duties & compensation of dirs or trustees, ofcrs & EEs ; 6. time for holding annual election of dirs of trustees & mode or manner of giving notice thereof; 7. manner of election or appointment & term of office of all ofcrs other than dirs or trustees; 8. penalties for violation of BL; 9. In case of stock corps, manner of issuing stock certs; &

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Reg mtgs - held monthly, unless BL provide otherwise Special mtgs - held at any time upon call of president or as provided in BL Meetings - held anywhere in or outside of Phils., unless BL provide otherwise. Notice of reg or spl mtgs stating date, time & place of mtg sent to every dir or trustee at least 1 day prior to scheduled mtg, unless otherwise provided by BL A dir or trustee may waive this reqt, either expressly or impliedly

Sec. 54. Who shall preside at mtgs . president - preside at all mtgs of dirs or trustee as well as of SH or members, unless BL provide otherwise Sec. 55. Right to vote of pledgors, mortgagors, & administrators. GEN RULE: pledgor or mortgagor has right to attend & vote at mtgs of SH, EXCEPTION: pledgee or mortgagee is expressly given by pledgor or mortgagor such right in writing w/c is recorded on corp books Executors, administrators, receivers, & other legal representatives duly appointed by court may attend & vote in behalf of SH or members w/ out need of any written proxy Sec. 56. Voting in case of joint ownership of stock. GEN RULE: consent of all co-owners necessary EXCEPTION: there is written proxy, signed by all co-owners, authorizing one or some of them or any other person to vote shares when shares are owned in "and/or" capacity, any one of joint owners can vote shares or appoint a proxy Sec. 57. Voting right for TS . Treasury shares shall have no voting right as long as such shares remain in Treasury Sec. 58. Proxies. Manner of voting by SH & members - in person or by proxy Proxies - in writing, signed by SH or member & filed before scheduled mtg w/ corp secretary GEN RULE: Proxy valid only for mtg for w/c it is intended EXCEPTION: Unless otherwise provided in proxy No proxy valid & effective for a period longer than 5 yrs at any one time Sec. 59. Voting trusts. SH may create VT for purpose of conferring upon a trustee right to vote & other rights pertaining to shares for a period < 5 yrs at any time if VT specifically reqd as a condition in loan agreement, VT may be for a period > 5 yrs but shall automatically expire upon full payment of loan Form: in writing & notarized, & shall specify terms & conditions certified copy of VTA filed w/ corp & w/ SEC; otherwise, VTA ineffective & unenforceable. certs of stock covered by VTA canceled & new ones issued in name of trustee stating that they are issued pursuant to VTA; In corp books, transfer pursuant to said VTA noted. Trustee obligation: trustee execute & deliver to transferors VT certs Rights under VTA:

VT certs w/c transferable in same manner & w/ same effect as certs of stock VTA subject to examination by any SH in same manner as any other corp book or record both transferor & trustee may exercise right of inspection of all corp books & records Any other SH may transfer shares to VTee upon terms & conditions stated in VTA , & shall be bound by all provisions of VTA Limitations: No VTA shall be entered into for purpose of circumventing law against monopolies & illegal combinations in restraint of trade or used for purposes of fraud Unless expressly renewed, all rights granted in VTA automatically expire at end of agreed period, & VT certs and certs of stock in name of trustee shall be deemed canceled & new certs of stock shall be reissued in name of transferors VTee may vote by proxy unless agreement provides otherwise

TITLE VII STOCKS & SH Sec. 60. Subscription contract. Any contract for acq of unissued stock in existing corp or corp still to be formed shall be deemed subscription w/ in meaning of Title notw/ standing fact that parties refer to it as a purchase or some other contract. Sec. 61. Pre-incorp subscription. GEN RULE: irrevocable for at least 6 mos from date of subscription EXCEPTIONS: all other subscribers consent to revocation incorp of said corp fails to materialize w/ in said period or w/ in a longer period stipulated in contract of subscription no pre-incorp subscription may be revoked after submission of AOI to SEC Sec. 62. Considering for stocks. Stocks shall not be issued for consideration less than par or issued price Consideration for issuance of stock: 1. Actual cash paid to corp 2. Property, tangible or intangible, actually received by corp & necessary or convenient for its use & lawful purposes at fair valuation 3. Labor performed for or services actually rendered to corp 4. Previously incurred indebtedness of corp 5. Amounts transferred from URE to stated capital 6. Outstanding shares exchanged for stocks in event of reclassification or conversion. Where consideration is other than actual cash, or consists of intangible property (patents or copyrights), valuation initially determined by incorporators or BOD, subject to SEC approval Shares of stock not issued in exchange for PNs or future service Rules applicable to issuance of bonds issued price of no-PV shares may be fixed --1. in AOI 2. by BOD pursuant to authority conferred upon it by AOI or BL 3. by majority of OCS at spl mtg Sec. 63. Stock cert & transfer of shares.

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CS divided into shares for w/c certs signed by pres/VP, countersigned by sec/asst sec, & sealed w/ seal of corp are issued in accordance w/ BL. Shares are personal property & transferable by delivery of certs endorsed by owner/his atty-in-fact/legal rep Transfer recorded in corp books with ff. details: names of parties, date of transfer, number of cert, number of shares in order to bind third parties; otherwise, binding only between the parties Shares which are not fully paid may not be recorded as transferred in the corp books

Sec. 64. Issuance of stock certs. cert. of stock issued to subscriber only upon pmt of full amt of his subscription in case of delinquent shares, pay full amt of his subscription + interest + expenses Sec. 65. Liability of dirs for watered stocks. Who liable: dir or ofcr Acts proscribed: 1. consenting to issuance of stocks for consideration less than PV or issued value which is non-cash and overvalued (e.g., land costing 1MM exchanged for 2MM worth of stocks) 2. failure to object, despite knowledge, in writing & file objection w/ corp secretary Nature of Liability: solidarily liable w/ SH concerned to corp & its creditors Amount of Liability: diff between FV received at time of issuance of stock & PV or issued value of stock Sec. 66. Interest on unpaid subscriptions. interest on all unpaid subscriptions from date of subscription, if so reqd by BL rate of interest that fixed in BL If none, legal rate Sec. 67. Payment of balance of subscription. Subject to provisions of contract of subscription, BOD may at any time declare due & payable to corp unpaid subscriptions & collect in whole or in part w/ accrued interest Payment of unpaid subscription + interest accrued made on date specified in subscription contract or on date stated in call made by BOD Effect of failure to pay on due date: renders entire balance due & payable make SH liable for interest at legal rate, unless diff. rate provided in BL, from due date until full payment If w/in 30 days from due date no payment - delinquent subject to sale, unless BOD orders otherwise Sec. 68. Delinquency sale. Power: BOD, by resolution Notice Reqt: state amt due on each subscription + accrued interest date of sale (30 to 60 days from date of delinquency) time of sale place of sale published once a wk for 2 consecutive wks in newspaper of gen circulation in place of principal ofc of corp Delinquency sale not permitted ---

when delinquent SH pays, on or before of delinquency sale, balance due + accrued interest + costs of advertisement + expenses of sale when BOD otherwise orders Delinquency Sale Proper: delinquent stock sold at public auction to bidder who shall offer to pay full amt of balance + accrued interest + costs of advertisement + expenses of sale for smallest number of shares stock purchased at delinquency sale transferred to purchaser corp books & stock cert. issued in his favor. remaining shares, if any, credited in favor of delinquent SH who is entitled to issuance of stock cert When corp can be buyer at delinquency sale: if there is no bidder at public auction who offers to pay full amt of balance on subscription + accrued interest + costs of advertisement + expenses of sale for smallest number of shares Effect: Title vested in corp as TS

Sec. 69. When sale may be questioned. Grounds: irregularity or defect in notice of sale or in sale itself of delinquent stock Reqt: 1. party must first pay or tender to purchaser the selling price, w/ legal interest from date of sale 2. commenced by filing of a complaint w/ in 6 mos from date of sale Sec. 70. Court action to recover unpaid subscription. corp may collect by court action amt due on any unpaid subscription + accrued interest + costs + expenses Sec. 71. Effect of delinquency. (1) not be voted for or (2) be entitled to vote or to representation at any SHs mtg, holder not entitled to any of rights of SH except right to dividends, until & unless full payment Sec. 72. Rights of unpaid shares. Holders of subscribed shares not fully paid w/c are not delinquent shall have all rights of a SH. Sec. 73. Lost or destroyed certs. TITLE VIII CORP BOOKS & RECORDS Sec. 74. Books to be kept; stock transfer agent. Keeping of Records: Where: at principal office What: record of all business transactions & minutes of all mtgs, "stock & transfer book" Right of inspection: What: records of all business transactions & minutes of any mtgs To whom: any dir , trustee, SH or member When: at reasonable hours on business days Liability for refusal: damages & guilty of an offense punishable under Sec 144 of this Code: Provided if refusal is made pursuant to BOD resolution, liability imposed on dirs who voted for refusal Defenses by corp for refusal: 1. improper use of info secured thru prior examination of records of such corp or of any other corp

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not in good faith not for legitimate purpose

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Sec. 75. Right to financial statements. w/ in 10 days from receipt of a written request of any SH or member at reg mtg, BOD present financial report of operations TITLE IX MERGER & CONSOLIDATION Sec. 76. Plan or merger of consolidation. Merger: A + B = A or B Consolidation: A + B = C BOD of each corp shall approve plan of merger or consolidation setting forth: 1. names of constituent corps 2. terms of merger or consolidation & mode of carrying same into effect 3. A statement of changes in AOI 4. other provisions deemed necessary or desirable Sec. 77. Stockholder's or member's approval. Reqt: approval of majority of each BOD of constituent corps + 2/3 of OCS of each corp at separate spl corp mtgs Notice to all SH of each corp, at least 2 wks prior to mtg Said notice shall state purpose of mtg & shall include a copy or a summary of plan of merger or consolidation. Any dissenting SH may exercise appraisal right if after approval, BOD decides to abandon plan, appraisal right extinguished Any amendment to plan must be approved by majority vote of each BOD of constituent corps & ratified by vote of 2/3 of OCS of each of constituent corps Sec. 78. Articles of merger or consolidation. After approval, articles of merger or articles of consolidation to be executed by each of constituent corps, signed by pres/VP & certified by sec/asst sec of each corp setting forth: 1. plan of merger or plan of consolidation 2. As to stock corps, number of shares outstanding, or in case of NS corps, number of members 3. As to each corp , number of shares or members voting for & against plan Sec. 79. Effectivity of merger or consolidation. articles of merger or of consolidation submitted to SEC for approval Provided in case of merger or consolidation of banks or banking institutions, bldg & loan associations, trust companies, insurance companies, public utilities, educational institutions & other spl corps governed by spl laws, obtain favorable recommendation of appropriate govt agency first Test: WON merger or consolidation is not inconsistent w/ Code & existing laws If YES - issue cert. of merger or of consolidation - time merger or consolidation becomes effective. If NO - give written notice of date, time & place of hearing to each constituent corp at least 2 wks before hearing; set hearing Sec. 80. Effects or merger or consolidation. 1. constituent corps become a single corp

4.

5.

separate existence of constituent corps cease, except that of surviving or consolidated corp surviving or consolidated corp possess all rights, privileges, immunities & powers & shall be subject to all duties & liabilities of a corp organized under Code surviving or consolidated corp possess all rights, privileges, immunities & franchises of each of constituent corps; & all property, real or personal, & all receivables due, & all & every other interest relating to each constituent corp, deemed transferred to & vested in surviving or consolidated corp w/ out further act or deed; & surviving or consolidated corp responsible & liable for all liabilities & obligations of each of constituent corps; & any pending claim brought by or against any of such constituent corps may be prosecuted by or against surviving or consolidated corp . rights of creditors or liens upon property of any of constituent corps not impaired by merger or consolidation

TITLE X APPRAISAL RIGHT Sec. 81. Instances of appraisal right. Any SH shall have right to dissent & demand payment of FV of shares in ff. instances: 1. where any amendment to AOI has the effect of changing or restricting rights of any SH or class of shares authorizing preferences in any respect superior to those of outstanding shares of any class extending or shortening term of corp existence 2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of corp property & assets 3. In case of merger or consolidation Sec. 82. How right is exercised. make written demand for pmt of FV of shares w/in 30d after voting date failure to make demand w/in 30d deemed a waiver of appraisal right. Upon implementation of proposed corp action and surrender of stock certs by SH, corp shall pay FV of shares (FV= price as at day before voting date, excluding any appreciation or depreciation in anticipation of corp action) If win 60d from approval of corp action, withdrawing SH & corp cannot agree on FV, it shall be determined & appraised by 3 disinterested persons, one named by SH, another by corp, & third by two thus chosen. Findings of majority of appraisers shall be final, & award will be paid by corp w/in 30d after it is made no payment made to any dissenting SH unless corp has URE to cover payment upon payment by corp of awarded price, SH transfer shares to corp Sec. 83. Effect of demand & termination of right. From time of demand for payment until either abandonment of corp action or purchase of shares by corp, GEN RULE: all rights accruing to shares, including voting & dividend rights, shall be suspended EXCEPTION: SH has right to receive payment of FV if dissenting SH not paid w/in 30d after award, voting & dividend rights immediately restored

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Sec. 84. When right to payment ceases. GEN RULE: No demand for payment may be withdrawn unless corp consents Situations: If demand for payment is withdrawn w/ consent of corp if proposed corp action is abandoned or rescinded by corp or disapproved by SEC if SEC determines that such SH is not entitled to appraisal right Effects: right of SH to be paid FV of shares ceases status as SH restored all accrued dividend distributions paid to SH Sec. 85. Who bears costs of appraisal. GEN RULE: Corp EXCEPTION: FV ascertained by appraisers approximately same as price w/c corp offered to pay SH or where refusal to receive payment is unjustified Sec. 86. Notation on certs; rights of transferee. W/in 10d after demanding payment, dissenting SH submit stock certs for notation failure shall, at option of corp , terminate his rights under this Title. If shares transferred, & certs consequently canceled, rights of transferor as dissenting SH under this Title ceases & transferee shall have all rights of reg SH; & all accrued dividend distributions shall be paid to transferee TITLE XI NON-STOCK CORPS Sec. 87. Definition. NS corp - one where no part of its income is distributable as dividends to its members, trustees, or ofcrs, subj to provisions on dissolution any profit w/c NS corp may obtain as an incident to its operations shall be used for furtherance of purpose(s) for w/c corp was organized, subj to provisions of this Title pertinent provisions governing stock corp applicable to NS corps, except when covered by specific provisions of this Title Sec. 88. Purposes. NS corps may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes Chapter I - MEMBERS Sec. 89. Right to vote. rt of members of any class or classes to vote may be (1) limited, (2) broadened or (3) denied to extent specified in AOI or BL GEN RULE: each member, regardless of class, shall be entitled to one vote EXCEPTION: when so limited, broadened or denied GEN RULE: member may vote by proxy EXCEPTION when otherwise provided in AOI or BL Voting by mail or other similar means by members may be authorized by BL w/ SEC approval Sec. 90. Non-transferability of membership. GEN RULE: Membership in NS corp & all rights arising therefrom are personal & non-transferable EXCEPTION when AOI or BL otherwise provide

Sec. 91. Termination of membership. Membership terminated in manner & for causes provided in AOI or BL Effect of termination of membership GEN RULE: extinguish all rights of member in corp or in its property EXCEPTION when otherwise provided in AOI or BL Chapter II - TRUSTEES & OFFICERS Sec. 92. Election & term of trustees. BOT of NS corps shall so classify themselves that term of ofc of 1/3 of their number expire every yr subsequent elections of trustees comprising 1/3 of BOT held annually trustees so elected shall have term of 3 yrs EXCEPTION: when otherwise provided in AOI or BL BOT may be more than 15 in number as may be fixed in AOI or BL Trustees elected to fill vacancies occurring before expiration of a particular term shall hold office only for unexpired period No person shall be elected as trustee unless he is a member of corp GEN RULE ofcrs may be directly elected by members EXCEPTION when otherwise provided in AOI or BL Sec. 93. Place of mtgs. BL may provide that members may hold reg or spl mtgs at any place even outside place where principal office of corp is located Provided proper notice sent to all members indicating date, time & place of mtg Provided further place of mtg w/in Phils Chapter III - DISTRIBUTION OF ASSETS IN NON-STOCK CORPS Sec. 94. Rules of distribution. In case dissolution of NS, its assets shall be applied & distributed as follows: 1. All liab & obligs shall be paid, satisfied & discharged, or adequate provision shall be made for it; 2. Assets held by corp upon a condition requiring return, transfer or conveyance, & w/c condition occurs by reason of dissolution, shall be returned, transferred or conveyed in acc w/ such reqts; 3. Assets received & held by corp subj to limitations permitting use only for charitable, religious, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of dissolution, shall be transferred or conveyed to other corps, societies or organizations engaged in activities in Phils. substantially similar to those of dissolving corp according to plan of distribution adopted pursuant to this Chapter; 4. Assets other than those mentioned in preceding paragraphs, if any, shall be distributed in accordance w/ provisions of AOI or BL, to extent that AOI or BL determine distributive rights of members, or any class or classes of members, or provide for distribution; & 5. In any other case, assets may be distributed to such persons, societies, organizations or corps, WON organized for profit, as may be specified in plan of distribution adopted pursuant to this Chapter. Sec. 95. Plan of distribution of assets.

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A plan providing for distribution of assets, not inconsistent w/ provisions of this Title, may be adopted by NS corp in process of dissolution in following manner: BOT shall, by majority vote, adopt resolution recommending plan of distribution & directing submission thereof to a vote at reg or spl mtg of members having voting rights. Written notice setting forth proposed plan of distribution or a summary thereof & date, time & place of such mtg shall be given to each member entitled to vote, w/ in time & in manner provided in this Code for giving of notice of mtgs to members. Such plan of distribution shall be adopted upon approval of at least 2/3 of members having voting rights present or represented by proxy at such mtg. (n) TITLE XII CLOSE CORPS Sec. 96. Definition & applicability of Title. A close corp is one whose AOI provide that: 1. All issued stock of all classes, exclusive of TS, held by not more than 20 persons 2. all issued stock of all classes subject to specified restrictions on transfer permitted by this Title 3. Corp. shall not list in any stock exchange or make any public offering of any of its stock of any class PROVISO: corp not deemed close corp when at least 2/3 of voting stock is owned/controlled by non-close corp GEN RULE: Any corp may be incorporated as a close corp EXCEPT mining or oil companies, stock exchanges, banks, insurance companies, public utilities, educational institutions & corps vested w/ public interest Governing law: provisions of this Title Suppletory: provisions of other Titles of Corp Code Sec. 97. AOI . AOI of a close corp may provide: classification of shares rights & qualifications for owning or holding shares & restrictions on transfers as may be stated in AOI, subject to provisions of 98 classification of dirs into one or more classes each of whom may be voted for & elected solely by a particular class of stock greater quorum or voting reqts in mtgs of SH or dirs than those provided in Corp Code

cert. of stock Effect of non-compliance: not binding on any purchaser in good faith. Limitation: restrictions shall not be more onerous than granting existing SH or corp the option to purchase shares of transferring SH w/ reasonable terms, conditions or period If period expires with the existing SH or corp failing to exercise option to purchase, transferring SH may sell his shares to any third person.

Sec. 99. Effects of issuance or transfer of stock in breach of qualifying conditions. 1. Conclusive presumption of notice of ineligibility to be SH on part of transferee: if stock of close corp issued/transferred to any person not entitled under any provision of AOI to be holder if cert. of stock conspicuously shows qualifications of persons entitled to be holders 2. Conclusive presumption of notice of excess in number of SH on part of transfree: If AOI of close corp states number of persons, <= 20, who are entitled to be SH if cert. of stock conspicuously states number if issuance/transfer of stock to any person would cause stock to be held by > such number of persons 3. Conclusive presumption of acquisition of stock in violation of restriction: If stock cert. of close corp conspicuously shows restriction on transfer of stock 4. corp may, at its option, refuse to register transfer of stock in name of transferee 5. provisions of subsection 4 not applicable if transfer, though contrary to subsections 1, 2 or 3 has been consented to by all SH of close corp. if close corp has amended its AOI in accordance w/ this Title. 6. transfer may be for value or gratuitous 7. this section shall not impair any right w/c transferee may have to rescind transfer or to recover under any applicable warranty, express or implied. Sec. 100. Agreements by SH. 1. Pre-incorp agreements, signed by all SH, shall survive incorp & shall continue to be valid & binding between & among such SH, if such be their intent, to the extent that such agreements are not inconsistent w/ AOI 2. Voting agreements between 2 or more SH, if in writing & signed by parties 3. No provision in written agreement signed by SH invalidated on ground that its effect is to make them partners among themselves 4. Written agreement among SH not invalidated on ground that it so relates to conduct of corp affairs as to restrict or interfere w/ BOD discretion or powers Agreement shall impose on SH liabilities for managerial acts imposed by Code on dirs 5. To extent that SH are actively engaged in management of corp affairs, SH held to strict fiduciary duties to each other & among themselves SH personally liable for corp torts unless corp has obtained reasonably adequate liability insurance. Sec. 101. When board mtg is unnecessary or improperly held.

AOI of close corp may provide that business of corp shall be managed by SH of corp rather than by a BOD. Effect: 1. No mtg of SH need be called to elect dirs 2. Unless context clearly requires otherwise, SH of corp shall be deemed to be dirs for purpose of applying provisions of this Code; & 3. SH of corp shall be subject to all liabilities of dirs. AOI may provide that all ofcrs or EEs or that specified ofcrs or EEs shall be elected or appointed by SH, instead of by BOD.

Sec. 98. Validity of restrictions on transfer of shares. Restrictions on right to transfer shares must appear in AOI BL and

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Unless BL provide otherwise, any action by dirs of close corp w/out mtg be deemed valid if: 1. Before or after such action is taken, written consent signed by all dirs; or 2. All SH have actual or implied knowledge of action & make no prompt written objection; or 3. dirs accustomed to take informal action w/ express or implied acquiescence of all SH; or 4. All dirs have express or implied knowledge of action & none of them makes prompt written objection. If dir's mtg is held w/out proper call/notice GEN RULE: action taken during that mtg w/in corp powers deemed ratified by dir. who failed to attend EXCEPTION: when absent dir. promptly files written objection w/ corp secretary

Sec. 105. Withdrawal of SH or dissolution of corp. In addition & w/out prejudice to other rights & remedies available to SH under this Title, any SH of close corp may, for any reason, compel corp to purchase his shares at FV Floor of FV: not less than par or issued value Requisite: corp must have sufficient assets to cover debts & liabilities exclusive of CS, i.e., solvent! Provided, That any SH of close corp may, by written petition to SEC, compel dissolution of corp whenever any of acts of dirs, ofcrs or those in control of corp is illegal, or fraudulent, or dishonest, or oppressive or unfairly prejudicial to corp or any stockholder, or whenever corp assets are being misapplied or wasted. TITLE XIII SPECIAL CORPS Chapter I - Educational Corps Sec. 106. Incorp . Educational corps shall be governed by spl laws & by general provisions of this Code. (n) Sec. 107. Pre-requisites to incorp . Except upon favorable recommendation of Ministry of Education & Culture, SEC shall not accept or approve AOI & BL of any educational institution. (168a) Sec. 108. BOT. Trustees of educational institutions organized as NS corps shall not be less than five (5) nor more than fifteen (15): Provided, however, That number of trustees shall be in multiples of five (5). Unless otherwise provided in AOI on BL , BOT of incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so classify themselves that term of office of one-fifth (1/5) of their number shall expire every year. Trustees thereafter elected to fill vacancies, occurring before expiration of a particular term, shall hold office only for unexpired period. Trustees elected thereafter to fill vacancies caused by expiration of term shall hold office for five (5) years. A majority of trustees shall constitute a quorum for transaction of business. powers & authority of trustees shall be defined in BL . For institutions organized as stock corps, number & term of dirs shall be governed by provisions on stock corps. (169a) Chapter II - RELIGIOUS CORPS Sec. 109. Classes of religious corps. Religious corps may be incorporated by one or more persons. Such corps may be classified into corps sole & religious societies. Religious corps shall be governed by this Chapter & by general provisions on NS corps insofar as they may be applicable. (n) Sec. 110. Corp sole. - For purpose of administering & managing, as trustee, affairs, property & temporalities of any religious denomination, sect or church, a corp sole may be formed by chief archbishop, bishop, priest, minister, rabbi or other presiding elder of such religious denomination, sect or church. (154a) Sec. 111. AOI . - In order to become a corp sole, chief archbishop, bishop, priest, minister, rabbi or presiding elder of any religious denomination, sect or church must file w/ SEC AOI setting forth following: 1. That he is chief archbishop, bishop, priest, minister, rabbi or presiding elder of his religious denomination, sect or church & that he desires to become a corp sole;

Sec. 102. Pre-emptive right in close corps. GEN RULE: Pre-emptive right shall extend to all stock to be issued, inc. reissuance of TS (whether for money/ property /personal services/in payment of corp debts) EXCEPTION: when AOI provide otherwise Sec. 103. Amendment of AOI. GEN RULE: Invalid amendment to AOI If it deletes or removes any provision reqd by this Title to be contained in AOI If it reduces quorum or voting reqt stated in AOI EXCEPTION: when approved by vote of at least 2/3 of OCS, whether w/ or w/ out voting rights, or of such greater proportion of shares specifically provided in AOI for amending, deleting or removing Sec. 104. Deadlocks. Notwithstanding any contrary provision in AOI or BL or agreement of SH of close corp, if dirs or SH are so divided respecting management of corp 's affairs that votes reqd for any corp action cannot be obtained, w/ consequence that corp affairs can no longer be conducted to advantage of SH Authority: SEC, upon written petition by any SH, shall have power to arbitrate dispute SEC power to arbitrate dispute includes power to order: 1. canceling or altering any provision contained in AOI, BL, or any SHs agreement 2. canceling, altering or enjoining any resolution or act of corp or BOD, SH, or ofcrs 3. directing or prohibiting any act of corp or BOD, SH, ofcrs, or other persons party to action 4. requiring purchase at FV of shares of any SH, either by corp regardless of availability of URE or by other SH 5. appointing provisional dir 6. dissolving corp 7. granting such other relief as circs. may warrant Provisional dir an impartial person who is not a SH and not a creditor of corp/subsidiary/affiliate not receiver of corp does not have title & powers of custodian or receiver have all rts. & powers of duly elected dir of corp, inc. rt. to notice & to vote of dirs, until his removal by SEC order or by all SH compensation determined by agreement between him & corp subject to SEC approval. SEC fixes compensation in case no agreement or disagreement

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2. That rules, regulations & discipline of his religious denomination, sect or church are not inconsistent w/ his becoming a corp sole & do not forbid it; 3. That as such chief archbishop, bishop, priest, minister, rabbi or presiding elder, he is charged w/ administration of temporalities & management of affairs, estate & properties of his religious denomination, sect or church w/ in his territorial jurisdiction, describing such territorial jurisdiction; 4. manner in w/c any vacancy occurring in office of chief archbishop, bishop, priest, minister, rabbi of presiding elder is reqd to be filled, according to rules, regulations or discipline of religious denomination, sect or church to w/c he belongs; & 5. place where principal office of corp sole is to be established & located, w/c place must be w/ in Phils. . AOI may include any other provision not contrary to law for regulation of affairs of corp . (n) Sec. 112. Submission of AOI . - AOI must be verified, before filing, by affidavit or affirmation of chief archbishop, bishop, priest, minister, rabbi or presiding elder, as case may be, & accompanied by a copy of commission, cert. of election or letter of appointment of such chief archbishop, bishop, priest, minister, rabbi or presiding elder, duly certified to be correct by any notary public. From & after filing w/ SEC of said AOI , verified by affidavit or affirmation, & accompanied by documents mentioned in preceding paragraph, such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall become a corp sole & all temporalities, estate & properties of religious denomination, sect or church theretofore administered or managed by him as such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall be held in trust by him as a corp sole, for use, purpose, behalf & sole benefit of his religious denomination, sect or church, including hospitals, schools, colleges, orphan asylums, parsonages & cemeteries thereof. (n) Sec. 113. Acquisition & alienation of property. - Any corp sole may purchase & hold real estate & personal property for its church, charitable, benevolent or educational purposes, & may receive bequests or gifts for such purposes. Such corp may sell or mortgage real property held by it by obtaining an order for that purpose from Court of First Instance of province where property is situated upon proof made to satisfaction of court that notice of application for leave to sell or mortgage has been given by publication or otherwise in such manner & for such time as said court may have directed, & that it is to interest of corp that leave to sell or mortgage should be granted. application for leave to sell or mortgage must be made by petition, duly verified, by chief archbishop, bishop, priest, minister, rabbi or presiding elder acting as corp sole, & may be opposed by any member of religious denomination, sect or church represented by corp sole: Provided, That in cases where rules, regulations & discipline of religious denomination, sect or church, religious society or order concerned represented by such corp sole regulate method of acquiring, holding, selling & mortgaging real estate & personal property, such rules, regulations & discipline shall control, & intervention of courts shall not be necessary. (159a) Sec. 114. Filling of vacancies. - successors in office of any chief archbishop, bishop, priest, minister, rabbi or presiding elder in a corp sole shall become corp sole on their accession to office & shall be permitted to transact business as such on filing w/ SEC of a copy of their commission, cert. of election, or letters of appointment, duly certified by any notary public.

During any vacancy in office of chief archbishop, bishop, priest, minister, rabbi or presiding elder of any religious denomination, sect or church incorporated as a corp sole, person or persons authorized & empowered by rules, regulations or discipline of religious denomination, sect or church represented by corp sole to administer temporalities & manage affairs, estate & properties of corp sole during vacancy shall exercise all powers & authority of corp sole during such vacancy. (158a) Sec. 115. Dissolution. - A corp sole may be dissolved & its affairs settled voluntarily by submitting to SEC a verified declaration of dissolution. declaration of dissolution shall set forth: 1. name of corp ; 2. reason for dissolution & winding up; 3. authorization for dissolution of corp by particular religious denomination, sect or church; 4. names & addresses of persons who are to supervise winding up of affairs of corp . Upon approval of such declaration of dissolution by SEC , corp shall cease to carry on its operations except for purpose of winding up its affairs. (n) Sec. 116. Religious societies. - Any religious society or religious order, or any diocese, synod, or district organization of any religious denomination, sect or church, unless forbidden by constitution, rules, regulations, or discipline of religious denomination, sect or church of w/c it is a part, or by competent authority, may, upon written consent &/or by an affirmative vote at a mtg called for purpose of at least 2/3 of its membership, incorp for administration of its temporalities or for management of its affairs, properties & estate by filing w/ SEC , AOI verified by affidavit of presiding elder, secretary, or clerk or other member of such religious society or religious order, or diocese, synod, or district organization of religious denomination, sect or church, setting forth following: 1. That religious society or religious order, or diocese, synod, or district organization is a religious organization of a religious denomination, sect or church; 2. That at least 2/3 of its membership have given their written consent or have voted to incorp , at a duly convened mtg of body; 3. That incorp of religious society or religious order, or diocese, synod, or district organization desiring to incorp is not forbidden by competent authority or by constitution, rules, regulations or discipline of religious denomination, sect, or church of w/c it forms a part; 4. That religious society or religious order, or diocese, synod, or district organization desires to incorp for administration of its affairs, properties & estate; 5. place where principal office of corp is to be established & located, w/c place must be w/ in Phils. ; & 6. names, nationalities, & residences of trustees elected by religious society or religious order, or diocese, synod, or district organization to serve for first yr or such other period as may be prescribed by laws of religious society or religious order, or of diocese, synod, or district organization, BOT to be not less than five (5) nor more than fifteen (15). (160a) TITLE XIV DISSOLUTION Sec. 117. Methods of dissolution. voluntarily involuntarily

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Sec. 118. Voluntary dissolution where no creditors are affected. Situation: No creditors are affected Reqt: majority vote of BOD + affirmative vote of 2/3 of OCS in a spl mtg publication of notice of time, place & object of mtg for 3 consecutive wks in a newspaper Right to call mtg: on BOD copy of resolution authorizing dissolution certified by majority of BOD & countersigned by corp sec SEC to issue cert. of dissolution Sec. 119. Voluntary dissolution where creditors are affected. Situation: creditors are affected Procedure: 1. petition for dissolution filed w/ SEC signed by majority of BOD or other ofcrs, verified by president or sec or one of its dirs set forth that all claims & demands against corp that dissolution was resolved upon by affirmative vote of 2/3 of OCS at spl mtg 2. If petition sufficient in form & substance - SEC shall fix period for opposition (30 to 60 days from order) 3. During period, copy of order published in a newspaper of general circulation and posted in 3 public places in municipality or city 4. After period expires, SEC shall proceed to hear petition & try issue upon 5 days prior notice 5. if no objection is sufficient & material allegations of petition are true, SEC render judgment: dissolving corp directing disposition of its assets as justice requires appoint receiver to collect assets & pay debts of corp Sec. 120. Dissolution by shortening corp term. How done: amend AOI to shorten corp term copy of amended AOI submitted to SEC Upon approval of amended AOI or expiration of shortened term - corp deemed dissolved w/out further proceedings, subject to provisions on liquidation

but not for purpose of continuing business for w/c it was established. Acts allowed during 3 yrs: to convey all property to trustees for benefit of SH/creditors/ other interested parties Effect of conveyance: all interest w/c corp had in property terminates legal interest vests in trustees & beneficial interest vests in SH/members/creditors/interested parties Upon winding up of corp affairs, any asset distributable to creditor/SH/member who is unknown or cannot be found escheated to place where assets are located TRUST FUND doctrine: GEN RULE: no corp shall distribute any of its assets or property EXCEPT: 1. upon lawful dissolution & after payment of all debts & liabilities 2. decrease of CS 3. as otherwise allowed by this Code

TITLE XV FOREIGN CORPS Sec. 123. Definition & rights of foreign corps. Defn: foreign corp one formed, organized or existing under any laws other than those of Phils. & whose laws allow Filipino citizens & corps to do business in its own country or state. Rights: right to transact business in Phils. Reqts for acquisition of right: license to transact business in Phils in accordance w/ this Code cert. of authority from appropriate govt agency Sec. 124. Application to existing foreign corps. Sec. 125. Application for a license. Reqt: submit to SEC certified copy of AOI & BL, & translated to official language of Phils. Contents of application: 1. date & term of incorp; 2. address of principal office in country of incorp; 3. name & address of resident agent; 4. place in Phils. where corp intends to operate; 5. specific purpose(s); 6. names & addresses of present dirs & ofcrs of corp; 7. statement of ACS & aggregate number of shares w/c corp has authority to issue, itemized by classes, PV of shares, shares w/ out PV, & series, if any; 8. statement of OCS & aggregate number of shares w/c corp has issued, itemized by classes, PV of shares, shares w/ out PV, & series, if any; 9. statement of amt actually paid in; & 10. necessary or appropriate info in order to enable SEC to determine whether corp is entitled to a license & to determine & assess fees payable. Attach ff. docs: 1. duly executed cert. under oath by authorized ofcls of jurisdiction of its incorp attesting to fact that laws of country of applicant allow Filipino citizens/corps to do business there that applicant is an existing corp in good standing

Sec. 121. Involuntary dissolution. filing of verified complaint proper notice & hearing on grounds provided by existing laws, rules & regulations Sec. 122. Corp liquidation. Covered corps: charter expires by its own limitation charter is annulled by forfeiture or otherwise corp existence for other purposes terminated in any other manner Effect of liquidation: continued as a body corporate for 3 yrs after dissolution Purposes: prosecute & defend suits by or against it enable it to settle & close its affairs dispose of & convey property distribute assets

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2.

3. 4.

statement under oath of president showing that applicant is solvent & in sound financial condition, & setting forth BS as of date within 1 yr prior to application Foreign banking, financial & insurance corps must comply w/ applicable laws (GBA) certain other foreign corps need previous authority from appropriate govt agency

Sec. 126. Issuance of a license. If SEC satisfied w/ compliance - issue license to applicant to transact business in Phils. for purpose(s) specified in license Upon issuance of license foreign corp may commence to transact business in Phils. continue to transact business for as long as it retains its authority to act as a corp under laws of country of its incorp , unless license is sooner surrendered, revoked, suspended or annulled W/ in sixty (60) days after issuance of license, foreign corps except foreign banking or insurance corp, shall deposit w/ SEC for benefit of present/future creditors, securities w/ actual MV of at least P100K Provided, w/ in six (6) months after each fiscal yr of licensee - SEC require deposit of addl securities eqvt to 2% of excess of gross income over P5MM. SEC require deposit of addl securities if actual MV of securities on deposit decreased by at least 10% of actual MV at time of deposit SEC has discretion to release part of addl securities deposited w/ it if gross income decreased, or if actual MV of total securities on deposit increased by > 10% of actual MV at time of deposit SEC may allow licensee to substitute other securities for those on deposit as long as licensee is solvent Such licensee entitled to collect interest or dividends on securities deposited In event licensee ceases to do business in Phils. - securities deposited shall be returned, provided licensee has no liability to Phil residents, including Govt Sec. 127. Who may be a resident agent. individual residing in Phils, provided he must be of good moral character & of sound financial standing domestic corp lawfully transacting business in Phils. Sec. 128. Resident agent; service of process. Reqt for issuance of license - file w/ SEC written POA designating a resident of Phils as resident agent Function of resident agent: person on whom summons & other legal processes may be served in all actions or other legal proceedings against corp Effect of appointment as resident agent: service upon resident agent shall be admitted & held as valid as if served upon duly authorized ofcrs of foreign corp at its home office foreign corp execute & file w/ SEC an agreement to the effect that service upon SEC shall be effective where corp shall cease to transact business in Phils. or shall be w/ out any resident agent in Phils. SEC has oblig to send mail to foreiegn corp home office within 10 days from receipt Resident agent has the duty to notify SEC in writing of any change in address

Sec. 129. Law applicable. all laws, rules & regulations applicable to domestic corps of same class EXCEPT such only as provide for creation, formation, organization or dissolution of corps or those w/c fix relations, liab, responsibilities, or duties of SH/members, or ofcrs to each other or to corp Sec. 130. Amendments to AOI or BL of foreign corps. Act: amendment of AOI or BL of a foreign corp Reqt: foreign corp shall file with SEC or appropriate govt agency a duly authenticated copy of AOI or BL , as amended w/ in 60 days after amendment becomes effective Sec. 131. Amended license. obtain an amended license in the ff. cases change in corp name new or addl purposes Sec. 132. Merger or consolidation involving a foreign corp licensed in Phils. . Act: merger or consolidation of one or more foreign corps with a domestic corp Reqt: if such is permitted under Philippine laws & by law of its incorp reqts on merger or consolidation as provided in Corp Code are followed Act: foreign corp merges or consolidates in its home country Reqt: file w/ SEC and appropriate govt agency a duly authenticated copy of articles of merger or consolidation w/in 60 days provided that if absorbed corp is foreign corp doing business in Phils, absorbed corp shall file petition for withdrawal of license Sec. 133. Doing business w/ out a license. Effects: Not permitted to maintain/intervene in any action/suit/proceeding in any court/administrative agency may be sued or proceeded against before Phil courts or administrative tribunals on any valid cause of action recognized under Phil laws. Sec. 134. Revocation of license. W/out prejudice to other grounds provided by spl laws, grounds for revocation or supension of license of foreign corp: 1. Failure to file annual report or pay any reqd fees 2. Failure to appoint & maintain a resident agent in Phils. 3. Failureto submit to SEC a statement of change of its resident agent or of his address 4. Failure to submit to SEC an authenticated copy of amendment to AOI or BL or of articles of merger or consolidation w/ in prescribed time 5. A misrepresentation of material matter in any application/report/affidavit/other document submitted by corp pursuant to this Title 6. Failure to pay taxes, etc. lawfully due to Phil Govt/agencies/political subd. 7. Transacting business in Phils. outside of authorized purpose(s)

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9.

Transacting business in Phils. as agent of or acting for & in behalf of any foreign corp/entity not duly licensed to do business in Phils. Any other ground as would render it unfit to transact business in Phils.

operations, together w/ FS of assets & liabilities, certified by independent CPA in appropriate cases, covering preceding fiscal yr & such other reqts as SEC may require. Sec. 142. Confidential nature of examination results. Sec. 143. Rule-making power of SEC

Sec. 135. Issuance of cert. of revocation. Upon revocation - SEC shall issue a cert. of revocation furnishing copy to appropriate govt agency mail to registered Phils office of foreign corp. notice of revocation + copy of cert. of revocation Sec. 136. Withdrawal of foreign corps. Subject to existing laws & regulations, withdrawal of foreign corp allowed How done: by filing petition for withdrawal of license. Requisites for issuance of withdrawal: 1. Payment, compromise or settlement of all claims w/c have accrued in Phils. 2. Payment of all taxes, etc. lawfully due to Philippine Govt/agencies/political subd 3. Publication of petition for withdrawal of license in a newspaper of gen. circulation TITLE XVI MISCELLANEOUS PROVISIONS Sec. 137. OCS defined. - OCS - total shares of stock issued under binding subscription agreements to subscribers or SH, whether or not fully or partially paid, except TS Sec. 138. Designation of governing boards. NS or spl corps may thru AOI or BL designate their governing boards by any name other than as BOT Sec. 139. Incorp & other fees. Sec. 140. Stock ownership in certain corps. - Pursuant to duties specified by Article XIV of Constitution, NEDA shall, from time to time, make a determination of whether corp vehicle has been used by any corp or by business or industry to frustrate provisions thereof or of applicable laws, & shall submit to BP, whenever deemed necessary, a report of its findings, including recommendations for their prevention or correction. Maximum limits may be set by BP for stockholdings in corps declared by it to be vested w/ a public interest pursuant to provisions of this section, belonging to individuals or groups of individuals related to each other by consanguinity or affinity or by close business interests, or whenever it is necessary to achieve national objectives, prevent illegal monopolies or combinations in restraint or trade, or to implement national economic policies declared in laws, rules & regulations designed to promote general welfare & foster economic development. In recommending to BP corps, business or industries to be declared vested w/ a public interest & in formulating proposals for limitations on stock ownership, NEDA shall consider type & nature of industry, size of enterprise, economies of scale, geographic location, extent of Filipino ownership, labor intensity of activity, export potential, as well as other factors w/c are germane to realization & promotion of business & industry. Sec. 141. Annual report or corps. Every corp, domestic or foreign, lawfully doing business in Phils. shall submit to SEC w/in prescribed period annual report of

Sec. 144. Violations of Code. - Violations of any of provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than P1,000.00 but not more than P10,000.00 or by imprisonment for not less than 30 days but not more than 5 years, or both, in discretion of court. If violation is committed by a corp , same may, after notice & hearing, be dissolved in appropriate proceedings before SEC : Provided, That such dissolution shall not preclude institution of appropriate action against dir , trustee or ofcr of corp responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal other causes for dissolution of a corp provided in this Code Sec. 145. Amendment or repeal. - No right or remedy in favor of or against any corp , its SH, members, dirs , trustees, or ofcrs , nor any liability incurred by any such corp , SH, members, dirs , trustees, or ofcrs , shall be removed or impaired either by subsequent dissolution of said corp or by any subsequent amendment or repeal of this Code or of any part thereof Sec. 146. Repealing clause. - Except as expressly provided by this Code, all laws or parts thereof inconsistent w/ any provision of this Code shall be deemed repealed. Sec. 147. Separability of provisions. Sec. 148. Applicability to existing corps. - All corps lawfully existing & doing business in Phils. on date of effectivity of this Code & heretofore authorized, licensed or registered by SEC, shall be deemed to have been authorized, licensed or registered under provisions of this Code, subject to terms & conditions of its license, & shall be governed by provisions hereof: Provided, That if any such corp is affected by new reqts of this Code, said corp shall, unless otherwise herein provided, be given a period of not more than 2 yrs from effectivity of this Code w/in w/c to comply w/ same. Sec. 149. Effectivity. - May 1, 1980