CORPORATION LAW date(s) unless there are justifiable reasons for an earlier
TITLE II, SECTIONS 10-22 extension as may be determined by the Securities and
SECTION 10. NUMBER AND QUALIFICATIONS
OF INCORPORATORS.
1) They must be natural persons
2) There must be not less than five (5) but not more
than fifteen (15)
3) They must be of legal age
4) The majority of whom are residents of the
Philippines
5) If the corporation is a stock corporation, each
incorporator must own or be a subscriber to at least one
share.
Note: They may form a private corporation for any
lawful purpose or purposes.
Discussion:
Natural persons
- Corporations and partnerships cannot be
incorporators, but may be stockholders.
- Incorporators are those stockholders or
members mentioned in the articles as originally forming
and composing the corporation and who are signatories
thereof.
- Corporators are stockholders or members who
join the corporation after its incorporation.
At least five incorporators but not more than fifteen
- They must sign the articles of incorporation.
- GENUINE INTEREST: Each incorporation
must own or subscribe to at least one share of stock of
the corporation.
Majority of the incorporators must be residents of the
Philippines.
General rule: need not be a citizen
Exceptions: public utilities (Art XII, Sec 11. Consti),
schools (Art XIV, Sec 4(2), Consti), banks (General
Banking Act), retail trade (RA 1180), savings and loan
associations (RA 3799), investment houses (Sec 5, PA
129), and other areas of investment as congress may by
law provide (Art XII, Sec.10, Consti).
Incorporators must be of legal age
SECTION 11. CORPORATE TERM.
Term Limit - Corporation shall exist for a period not
exceeding fifty (50) years from the date of incorporation.
It may be dissolved / extended.
Dissolution: by shortening the term.
Note: The moment a corporation right to exist ceases, its
corporate powers are terminated just as powers of a
natural person upon his death.
Extension: The corporate term as originally stated in
the articles of incorporation may be extended for periods
not exceeding fifty (50) years in any single instance by
an amendment of the articles of incorporation.
Condition: No extension can be made earlier than five
(5) years prior to the original or subsequent expiry
AREJOLA, MA. VERONICA, CLEMENTE, GUIA, CRUZ, GLADYS, HERNANDEZ, MARIEL, JUMAQUIO, ERIKA
LYD, LAQUINDANUM, JOSHUA, PUNONGBAYAN, PAULITO, and RIVERA, ERNESTO
Exchange Commission.
- It must be made within the time and manner
prescribed by the Corporation Code.
- Since the privilege of extension is purely
statutory, all condition precedent must be complied with
in order that extension may be effectuated.
- Otherwise, the term will expire and
corporations personality will cease to exist.
The amendment is effected before the expiration of
the corporate term of existence, for after dissolution by
expiration of the corporation term there is no more
corporate life to extend (Alhambra Cigar vs. SEC, 24
SCRA 269).
The mere extension of the corporate term of existence
made before the expiration of the original term
constitutes a continuation of the old, and not the creation
of a new corporation. (The Corporation Code of the
Philippines, Hector S. De Leon & Hector M. De Leon,
Jr., 2006 ed.)
The expiration of the term for which the corporation
was created does not, however, produce its immediate
dissolution for all purposes (Sec. 122).
DOCTRINE OF RELATION OR RELATING BACK
DOCTRINE - The filing and recording of a certificate of
extension after the term cannot relate back to the date of
the passage of the resolution of the stockholders to
extend the life of the corporation. However, the doctrine
of relations applies if the failure to file the application
for extension within the term of the corporation is due to
the neglect of the officer with whom the certificate is
required to be filed or to a wrongful refusal on his Part to
receive it (Philippine Corporate Law Compedium,
Timoteo Aquino, 2006 ed.)
SECTIONS 12. MINIMUM CAPITAL STOCK
REQUIRED OF STOCK CORPORATIONS
SECTION 13. AMOUNT OF CAPITAL STOCK TO
BE SUBSCRIBED AND PAID FOR THE
PURPOSES OF INCORPORATION
Though there is no minimum requirement for the
authorized capital stock set forth in the corporation code,
Sec.14 provides that the authorized capital stock must
not be less than P5,000.
Authorized Capital Stock is fixed in the
Articles of incorporation to be subscribed and paid by
the stockholders;
Subscribed Capital portion of ACS
subscribed by agreements whether or not paid;
Paid up Capital amount outstanding capital
stock imposed as initial capitalization requirement for a
corporation. Special Law may provide for a specific
PUC i.e insurance code for insurance companies;
Outstanding Capital Stock total shares of
stock whether or not paid. Treasury shares not included;
Capital properties or asset of a corporation
used for its operation or business.
25 25 Rule:
 25% of the authorized capital stock must be
subscribed,
25% of the amount subscribed must be paid
Note: in no case that the amount paid be less than
P5,000.
A stockholder may pay an amount less than the
corresponding 25% of the shares he subscribed, provided
that when the amount paid by all stockholders are
summed up, it will be equivalent to the 25% requirement
SECTION 14. CONTENTS OF ARTICLES OF
INCORPORATION:
AOI as Charter of the corporation and Contract
between the State and the corporation, the stockholders
and the state, and between the corporation and its
stockholders.
Treasurers Affidavit- it should relate to the
minimum subscribed capital and the minimum paid-up
capital.
All corporations shall file with SEC AOI in any
of the official languages duly signed and acknowledged
by all of the incorporators.
AOI-best proof of the purpose of a corporation.
SHALL INCLUDE:
1. Name of the Corporation
2. Specific purpose/s
Primary-must be only one
Secondary-may be several; not allied/incidental
to the primary purpose
-must not be unlawful
Purpose:
a. the person who intends to invest his money
in the business will know where and in what
kind of business/activity hismoney will be
invested in;
b. the directors and officers will be informed
regarding the scope of business they are
authorized to act; and
c. A third person will be aware if the
transaction he has with the corporation is
within the authority of the corporation.
Limitations:
a. It cannot be created or formed for a purpose
or function of which a corporate body is
incapable;
b. it cannot be created for a purpose that is
contrary to law, morals or public policy;
c. it cannot be organized for 2 or more
incompatible purposes;
d. the corporation may not be organized for a
purpose that is contrary to its nature.
3. Principal place of office
- the specifics of their principal office which
shall include, if feasible, street number,
street name, barangay, city/municipality and
the specific addresses of the incorporators,
directors/trustees.
- place of residence
4. Term
- must not exceed 50 years from and after the
date of incorporation.
5. Names, nationalities and residences of the
incorporators
- majority of incorporators must be residents
of the Philippines.
6. Number of directors/trustees
AREJOLA, MA. VERONICA, CLEMENTE, GUIA, CRUZ, GLADYS, HERNANDEZ, MARIEL, JUMAQUIO, ERIKA
LYD, LAQUINDANUM, JOSHUA, PUNONGBAYAN, PAULITO, and RIVERA, ERNESTO
- shall not be less than 5 but not more than 15
7. Names, nationalities and residences of
directors/trustees until the 1st regular
directors/trustees are duly elected and
qualified
8. Stock Corporation:
a. amount of authorized capital stock
b. no. of shares into which it is divided
c. in case of par value shares, the par value
d. names, nationalities and residences of the
original subscribers, amount subscribed
and paid by each
e. if some or all of the shares are without par
value, it must be stated in the AOI.
- without par value shares may not be issued
for a consideration less than Php5.00 per
share.
- purpose of minimum subscribed and paid-up
capitak: a. to serve as an assurance that ther
will be successful prosecution of the
business of the corporation; and b. to assure
the creditors that they have means of
obtaining satisfaction of their claims to the
extent of the subscription.
9. Non-stock Corporation:
a. amount of capital
b. names, nationalities and residences of the
contributors
c. amount contributed by each
10. Such other matters that are not inconsistent
with law and which the incorporators may
deem necessary and convenient.
SECTION 15. FORMS OF ARTICLES OF
INCORPORATION:
SUBSTANTIAL COMPLIANCE- must
comply with Sec. 14 and 15 but substantial compliance
may not affect the de jure existence of the corporation.
SECTION 16. LIMITATIONS IN THE
AMENDMENT OF AOI:
1. The amendment must be for legitimate purpose and must
not be contrary to other provisions of the Corporation
Code and Special Laws;
2. Approved by majority of the Board of Directors / Board
of Trustees;
3. Vote or written assent of stockholders representing of
the outstanding capital stock or of members;
4. The original and amended articles together shall contain
all provisions required by law to be set out in the AOI.
Such articles, as amended, shall be indicated by
underscoring the change/s made;
5. Certification under oath by corporate secretary and
majority of the BOD/BOT stating the fact that said
amendment/s have been duly approved by the required
vote of the stockholders/members, shall be submitted to
the SEC;
6. Must be approved by SEC.
7. Must be accompanied by a favorable recommendation of
the appropriate government agency in cases of:
a. Banks
b. Banking and quasi-banking institutions
c. Building and loan associations
d. Trust companies and other financial intermediaries
e. Insurance companies
f. Public utilities
g. Educational institutions
h. Other corporations governed by special laws (Section
17)
*Silence of failure to object cannot be construed as
approval by stockholders. The law requires express
approval through an affirmative vote or an assent that is
in writing.
*Amendments can be questioned only by a real party-in-
interest like a shareholder/member.
When does amendment of AOI take effect?
Upon approval by the SEC. That is upon issuance of
amended certificate of incorporation.
Is it necessary that the approval of SEC be express?
NO, implied approval is allowed. Approval of the
amendment may also take effect if the SEC did not act
within 6 months from the date of filing for a cause not
attributable to the corporation.
SECTION 17. GROUNDS FOR
REJECTION/DISAPPROVAL OF AOI OR ITS
AMENDMENT:
1. If not substantially in accordance with the form
prescribed.
2. The purpose/s of the corporation are patently
unconstitutional, illegal, immoral, or contrary to
government rules and regulations
3. The treasurers affidavit concerning the amount of
capital stock subscribed and/or paid is false
4. The required percentage of ownership of the capital
stock to be owned by Filipino citizens has not been
complied with.
*Ministerial Duty of SEC- The SEC must approve the
AOI if applicant has substantially complied with the
requirement of the Corporation Code.
SECTION 18. CORPORATE NAME. - No
corporate name may be allowed by the Securities
and Exchange Commission if the proposed name is
identical or deceptively or confusingly similar to
that of any existing corporation or to any other
name already protected by law or is patently
deceptive, confusing or contrary to existing laws.
When a change in the corporate name is approved,
the Commission shall issue an amended certificate
of incorporation under the amended name.
Basic Policy:
- A corporation cannot use a name that belongs to
another even as a trade name.
-The corporation acquires juridical personality
under the name stated in the certificate of
incorporation.
AREJOLA, MA. VERONICA, CLEMENTE, GUIA, CRUZ, GLADYS, HERNANDEZ, MARIEL, JUMAQUIO, ERIKA
LYD, LAQUINDANUM, JOSHUA, PUNONGBAYAN, PAULITO, and RIVERA, ERNESTO
-It is the name of the corporation which identifies
and distinguishes it from other corporations, firms
or entities.
-A corporations right to use its corporate and trade
name is a property right, a right in rem which it may
assert or protect against the whole world in the same
manner as it may protect its tangible property
against trespass or conversion (Philips Export B.V.
vs. CA, 206 SCRA 457).
Statutory limitation:
The proposed name must not be: a. identical;
or b. deceptively or confusingly similar to that of
any existing corporation or to any other name
already protected by law; or c. patently deceptive,
confusing or contrary to law.
Remedies of corporation whose name has been
adopted by another:
1. Injunction
2. De-registration
A corporation can change the name originally
selected by it after complying with the formalities
prescribed by law, to wit: amendment of the articles
of incorporation and filing of the amendment with
the SEC (Sec. 16). An authorized change in the
name of the corporation, whether effected by a
special act or under a general law, has no more
effect upon its identity as a corporation than a
change of name of natural person upon his identity.
It does not affect the property, rights, or liabilities of
the corporation, nor lessen or add to its obligations.
It is in no sense a new corporation, nor the
successor of the original corporation. It is the same
corporation with a different name and its character
is in no respect changed (Rep. Planters Bank vs.
CA, 216 SCRA 738).
Dominancy test
- there will be infringement if the mark contains
the dominant feature of the mark of a trademark
belonging to another; the name cannot be used if
the name indicated in the articles of
incorporation adopts the dominant feature of an
existing corporate name or even a trademark
belonging to another. The name cannot likewise
be used if it is the essential and distinguishing
feature of another corporations registered and
protected name.
Doctrine of secondary meaning-
- A word or phrase originally incapable of
exclusive appropriation [usually generic] with
reference to an article in the market, because of
geographically or otherwise descriptive, might
nevertheless have been used so long and so
exclusively by one producer with reference to
his article that, in that trade and to that branch of
the purchasing public, the word or phrase has
become to mean that the article was his product.
Requisites:
- that the complainant corporation acquired a
prior right over the use of such corporate name
- identical, deceptively or confusingly, patently
deceptive
Guidelines on corporate names:
1.) Name must contain Corp. or Inc.
2.) Name must not tend to mislead or confuse the
public and must not contain such descriptive words
as excellent fair good, etc.
3.) Name must not be similar to a name already
used by another partnership or corporation.
4.) If proposed name contains a word similar to a
word already used as a part of the firm name of a
registered corporation, proposed name must contain
two other words different from the name of the
company already registered.
5.) If name or surname used as part of corporate
name, the incorporators must have a basis for such
surname; it being one of the incorporators:
Otherwise, consent of the person whose name is
being used must be submitted.
6.) If it contains initials, it must contain an
explanation of the meaning and relevance or reason
thereof.
7.) The use of the words State Maharlika and
Baranggay are prohibited and reserved for the
government. The following words when used must
at least relate to the line of business namely:
Financing and Investment. The following words are
prohibited from being used namely: National,
Engineer, Architect.
SEC. 19 - COMMENCEMENT OF
CORPORATE EXISTENCE
A private corporation formed or organized
under this Code commences to have corporate
existence and juridical personality and is deemed
incorporated from the date the SEC issues a
certificate of incorporation under its official seal
and thereupon the incorporators,
stockholders/members and their successors shall
constitute a body politic and corporate under the
name stated in the articles of incorporation for the
period of time mentioned therein, unless said period
is extended or the corporation is sooner dissolved in
accordance with law.
Certificate of incorporation- the issuance
of the certificate of incorporation by the Security
and Exchange Commission marks the
commencement of the corporate term of
corporations incorporated under the corporation
code.
NOTE: a certificate of incorporation from
the S.E.C. is not necessary if the corporation is
created through special law.
Contract law under the corporation code-
ordinarily, a non-existent person cannot be a subject
of a contract or transaction. Thus, it is only after the
AREJOLA, MA. VERONICA, CLEMENTE, GUIA, CRUZ, GLADYS, HERNANDEZ, MARIEL, JUMAQUIO, ERIKA
LYD, LAQUINDANUM, JOSHUA, PUNONGBAYAN, PAULITO, and RIVERA, ERNESTO
issuance of the certificate of registration that a
corporation can transact business. Nevertheless, it is
a peculiarity of corporate law that certain contracts
may bind a corporation even if the same are entered
into before incorporation. It should be noted that a
subscription agreement is a contract between the
corporation and the subscriber. Hence, the law
makes the pre-incorporation subscription agreement
binding even if one of the parties the corporation-
is still legally non-existent.
Promoters - under the Securities Regulations Code,
are persons who, acting alone or with others, take
initiative in founding and organizing the business or
enterprise.
Promotional activities includes-
1. Discovery; 2. Investigation; 3. assembly
General rule- the acts of the promoter are not
binding on the corporation that will be organized.
But the acts of the promoters of a corporation may
be ratified by a corporation subsequently organized.
Underwriters- is a person who guarantees on firm
commitment and/or declared best effort basis the
distribution and sale of securities of any kind by
another company.
SECTION 20. DE FACTO CORPORATIONS
Requisites:
1. Organized under a valid law;
2. Attempt in good faith to form a corporation according to
the requirements of the law;
*Issuance of certificate of incorporation by SEC
is a minimum requirement for the formation of
the corporation in good faith
3. Use of corporate powers - The corporation must have
performed the acts which are peculiar to a corporation
like entering into a subscription agreement, adopting By-
laws and electing directors
*A de facto corporation enjoys the attributes of a
corporation until the State questions its existence.
How is the status of a de facto corporation attacked?
The existence of a de facto corporation shall not be
inquired into collaterally in any private suit to which
such corporation may be a party. Such inquiry may be
made by the Solicitor General in a quo warranto
proceedings.
SECTION 21. CORPORATION BY ESTOPPEL
What are the rules governing a corporation by
estoppel?
1. All person who assume to act as a corporation knowing
it to be without authority to do so shall be liable as
general partners for all debts, liabilities and damages
incurred or arising as a result.
2. When any such ostensible corporation is sued on any
transaction entered by it as a corporation or on any tort
 committed by it as such, it shall not be allowed to use a Substantial compliance with conditions
defense its lack of corporate personality. subsequent will suffice to perfect corporate
3. One who assume an obligation to an ostensible personality.
corporation as such, cannot resist performance thereof Organization and commencement of transaction
on the ground that there was in fact no corporation. of corporate business are conditions subsequent
and not prerequisites for acquisition of corporate
SECTION 22. EFFECTS ON NON-USE OF personality.
CORPORATE CHARTER AND CONTINUOUS
INOPERATION OF A CORPORATION. Effect of Failure to Organize
DE FACTO CORPORATION BY The corporate powers of a corporation ceases for
CORPORATION ESTOPPEL their failure to organize and commence the
transaction of its business within two (2) years
There is existence in law There is no existence in law from incorporation, and the corporation shall be
The dealings among the The dealings among the deemed dissolved.
parties on a corporate parties on a corporate basis is The dissolution of the corporation is not
basis is not required. required. automatic, the SEC opined that proper
proceedings for revocation of the Articles of
The state reserves the right Quo warranto proceeding not Incorporation must be initiated.
to question its existence applicable
through a quo warranto Effect of Non-Operation
proceeding. The failure to operate for at least five (5) years is
Stockholders are liable as Stockholders are liable as a ground to revoke or to suspend the franchise
a de jure corporation general partners for all debts, granted to the corporation.
liabilities and damages i.e: A corporation that has been operating for 10
incurred. years and ceased to operate continuously for at
least five (5) years, will have a ground for the
suspension or revocation of their corporate
Section 22 involves these two violations of the condition
franchise or certificate of incorporation.
subsequent to incorporation:
However, justification for non-operation may be
1. Failure to organize and commence business
invoked and established by the corporation.
within two (2) years from incorporation.
2. Becoming continuously inoperative for a period
Organization- is the election of officers,
of at least five (5) years.
providing for the subscription and payment of the capital
NOTE:
stock, the adoption of by-laws, and such other similar
The two-year period is counted from steps. It relates to the systematization and orderly
incorporation. arrangement of the internal and managerial affairs and
The five-year period may commence after the organs of the corporation.
incorporation.

AREJOLA, MA. VERONICA, CLEMENTE, GUIA, CRUZ, GLADYS, HERNANDEZ, MARIEL, JUMAQUIO, ERIKA
LYD, LAQUINDANUM, JOSHUA, PUNONGBAYAN, PAULITO, and RIVERA, ERNESTO