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OLD REVISED

CORPORATION CODE CORPORATION CODE REMARKS


OF THE PHILIPPINES OF THE PHILIPPINES
Section 19. Commencement of corporate SEC. 18. Registration, Incorporation and The RCCP now manifests
existence. – A private corporation formed or Commencement of Corporate Existence. – A person the substantial importance of the
organized under this Code commences to have or group of persons desiring to incorporate shall corporate name such that there is
corporate existence and juridical personality and is submit the intended corporate name to the a pre-evaluation of the name of the
deemed incorporated from the date the Securities and Commission for verification. If the Commission finds corporation to be incorporated. If
Exchange Commission issues a certificate of that the name is distinguishable from a name already such name is distinguishable and
incorporation under its official seal; and thereupon the reserved or registered for the use of another not contrary to law, rules and
incorporators, stockholders/members and their corporation, not protected by law and is not contrary regulations, the name shall be
successors shall constitute a body politic and corporate to law, rules and regulations, the name shall be reserved in favor of the
under the name stated in the articles of incorporation reserved in favor of the incorporators. The incorporators, and subsequently
for the period of time mentioned therein, unless said incorporators shall then submit their articles of the commission shall issue the
period is extended or the corporation is sooner incorporation and bylaws to the Commission. certificate of incorporation.
dissolved in accordance with law. (n)
If the Commission finds that the submitted All other matters in this
documents and information are fully compliant with provision remains the same.
the requirements of this Code, other relevant laws,
rules and regulations, the Commission shall issue the
certificate of incorporation.

A private corporation organized under this


Code commences its corporate existence and juridical
personality from the date the Commission issues the
certificate of incorporation under its official seal and
thereupon the incorporators, stockholders/members
and their successors shall constitute a body 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.
Section 20. De facto corporations. – The due SEC. 19. De facto Corporations. – The due This provision of the law is
incorporation of any corporation claiming in good faith incorporation of any corporation claiming in good faith the same.
to be a corporation under this Code, and its right to to be a corporation under this Code, and its right to
exercise corporate powers, shall not be inquired into exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such collaterally in any private suit to which such
corporation may be a party. Such inquiry may be made corporation may be a party. Such inquiry may be made
by the Solicitor General in a quo warranto proceeding. by the Solicitor General in a quo warranto proceeding.
(n)
Section 21. Corporation by estoppel. – All SEC. 20. Corporation by Estoppel. – All This provision of the law is
persons who assume to act as a corporation knowing persons who assume to act as a corporation knowing the same.
it to be without authority to do so shall be liable as it to be without authority to do so shall be liable as
general partners for all debts, liabilities and damages general partners for all debts, liabilities and damages
incurred or arising as a result thereof: Provided, incurred or arising as a result thereof: Provided,
however, That when any such ostensible corporation however, That when any such ostensible corporation
is sued on any transaction entered by it as a is sued on any transaction entered by it as a
corporation or on any tort committed by it as such, it corporation or on any tort committed by it as such, it
shall not be allowed to use as a defense its lack of shall not be allowed to use its lack of corporate
corporate personality. personality as a defense. Anyone who assumes an
obligation to an ostensible corporation as such cannot
One who assumes an obligation to an resist performance thereof on the ground that there
ostensible corporation as such, cannot resist was in fact no corporation.
performance thereof on the ground that there was in
fact no corporation. (n)
Section 22. Effects on non-use of SEC. 21. Effects of Non-Use of Corporate In the OCCP, the period for
corporate charter and continuous inoperation of a Charter and Continuous Inoperation. – If a the non-use of the corporate
corporation. – If a corporation does not formally corporation does not formally organize and charter subject to the revocation of
organize and commence the transaction of its business commence its business within five (5) years from the the certificate of incorporation
or the construction of its works within two (2) years date of its incorporation, its certificate of incorporation increased from two (2) years to
from the date of its incorporation, its corporate powers shall be deemed revoked as of the day following the five (5) years.
cease and the corporation shall be deemed dissolved. end of the five (5)- year period.
However, if a corporation has commenced the The period for the
transaction of its business but subsequently becomes However, if a corporation has commenced its continuous inoperation before
continuously inoperative for a period of at least five (5) business but subsequently becomes inoperative for a revocation or suspension of the
years, the same shall be a ground for the suspension or period of at least five (5) consecutive years, the certificate of incorporation
revocation of its corporate franchise or certificate of Commission may, after due notice and hearing, place remains to be the same. However,
incorporation. (19a) the corporation under delinquent status. the RCCP now includes an express
provision that the corporation
before declaring the corporation to
This provision shall not apply if the failure to A delinquent corporation shall have a period have a delinquent status must be
organize, commence the transaction of its businesses of two (2) years to resume operations and comply with afforded with due notice and
or the construction of its works, or to continuously all requirements that the Commission shall prescribe. hearing.
operate is due to causes beyond the control of the Upon compliance by the corporation, the Commission
corporation as may be determined by the Securities shall issue an order lifting the delinquent status. Failure The RCCP defines a
and Exchange Commission. to comply with the requirements and resume delinquent corporation, and
operations within the period given by the Commission provides a period of 2 years to
shall cause the revocation of the corporation’s comply with the requirements set
certificate of incorporation. forth under the law, in order to lift
its delinquent status. Otherwise, it
The Commission shall give reasonable notice shall cause the revocation of its
to, and coordinate with the appropriate regulatory certificate of incorporation.
agency prior to the suspension or revocation of the
certificate of incorporation of companies under their The RCCP also expressly
special regulatory jurisdiction. provides for the coordination of
the Commission and the
appropriate regulatory agency
with respect to the suspension or
revocation of the certificate of
incorporation of the companies.
TITLE III TITLE III
BOARD OF BOARD OF
DIRECTORS/TRUSTEES AND DIRECTORS/TRUSTEES AND
OFFICERS OFFICERS
Section 23. The board of directors or SEC. 22. The Board of Directors or Trustees The RCCP provides for an
trustees. – Unless otherwise provided in this Code, the of a Corporation; Qualification and Term. – Unless express provision with respect to
corporate powers of all corporations formed under otherwise provided in this Code, the board of directors the term of a Trustee which shall
this Code shall be exercised, all business conducted or trustees shall exercise the corporate powers, not exceed three (3) years.
and all property of such corporations controlled and conduct all business, and control all properties of the
held by the board of directors or trustees to be elected corporation. The most distinguishable
from among the holders of stocks, or where there is no part of Section 22 of the RCCP is
stock, from among the members of the corporation, Directors shall be elected for a term of one (1) the inclusion of an Independent
who shall hold office for one (1) year until their year from among the holders of stocks registered in the Director. The RCCP provides for
successors are elected and qualified. (28a) corporation’s books, while trustees shall be elected for the qualifications of such director
a term not exceeding three (3) years from among the
Every director must own at least one (1) share members of the corporation. Each director and trustee and when such director is required
of the capital stock of the corporation of which he is a shall hold office until the successor is elected and in a corporation.
director, which share shall stand in his name on the qualified. A director who ceases to own at least one (1)
books of the corporation. Any director who ceases to share of stock or a trustee who ceases to be a member
be the owner of at least one (1) share of the capital of the corporation shall cease to be such.
stock of the corporation of which he is a director shall
thereby cease to be a director. Trustees of non-stock The board of the following corporations
corporations must be members thereof. A majority of vested with public interest shall have independent
the directors or trustees of all corporations organize directors constituting at least twenty percent (20%) of
such board:
a) Corporations covered by Section 17.2 of
Republic Act No. 8799, otherwise known as
“The Securities Regulation Code”, namely
those whose securities are registered with the
Commission, corporations listed with an
exchange or with assets of at least Fifty million
pesos (P50,000,000.00) and having
twohundred (200) or more holders of shares,
each holding at least one hundred (100) shares
of a class of its equity shares;
b) Banks and quasi-banks, nonstock savings and
loan associations, pawnshops, corporations
engaged in money service business, preneed,
trust and insurance companies, and other
financial intermediaries; and
c) Other corporations engaged in businesses
vested with public interest similar to the
above, as may be determined by the
Commission, after taking into account relevant
factors which are germane to the objective and
purpose of requiring the election of an
independent director, such as the extent of
minority ownership, type of financial products
or securities issued or offered to investors,
public interest involved in the nature of
business operations, and other analogous
factors.

An independent director is a person who, apart


from shareholdings and fees received from the
corporation, is independent of management and free
from any business or other relationship which could,
or could reasonably be perceived to materially
interfere with the exercise of independent judgment in
carrying out the responsibilities as a director.

Independent directors must be elected by the


shareholders present or entitled to vote in absentia
during the election of directors. Independent directors
shall be subject to rules and regulations governing
their qualifications, disqualifications, voting
requirements, duration of term and term limit,
maximum number of board memberships and other
requirements that the Commission will prescribe to
strengthen their independence and align with
international best practices.
Section 24. Election of directors or SEC. 23. Election of Directors or Trustees. – For purposes of election,
trustees. – At all elections of directors or trustees, Except when the exclusive right is reserved for holders the Board of Directors or Trustees,
there must be present, either in person or by of founders’ shares under Section 7 of this Code, each Stockholders and Members can
representative authorized to act by written proxy, the stockholder or member shall have the right to now vote through remote
owners of a majority of the outstanding capital stock or nominate any director or trustee who possesses all of communication or in absentia.
if there be no capital stock, a majority of the members the qualifications and none of the disqualifications set Such manner of voting will still
entitled to vote. forth in this Code. constitute a quorum for purposes
of the election.
The election must be by ballot if requested by At all elections of directors or trustees, there
any voting stockholder or member. must be present, either in person or through a
representative authorized to act by written proxy, the
In stock corporations, every stockholder owners of majority of the outstanding capital stock, or
entitled to vote shall have the right to vote in person or if there be no capital stock, a majority of the members
by proxy the number of shares of stock standing, at the entitled to vote. When so authorized in the bylaws or
time fixed in the by-laws, in his own name on the stock by a majority of the board of directors, the
books of the corporation, or where the by-laws are stockholders or members may also vote through
silent, at the time of the election; and said stockholder remote communication or in absentia: Provided,
may vote such number of shares for as many persons That the right to vote through such modes may be
as there are directors to be elected or he may cumulate exercised in corporations vested with public interest,
said shares and give one candidate as many votes as notwithstanding the absence of a provision in the
the number of directors to be elected multiplied by the bylaws of such corporations.
number of his shares shall equal, or he may distribute
them on the same principle among as many candidates A stockholder or member who participates
as he shall see fit: through remote communication or in absentia, shall be
deemed present for purposes of quorum.
Provided, That the total number of votes cast
by him shall not exceed the number of shares owned The election must be by ballot if requested by
by him as shown in the books of the corporation any voting stockholder or member.
multiplied by the whole number of directors to be
elected: In stock corporations, stockholders entitled to
vote shall have the right to vote the number of shares
Provided, however, That no delinquent stock of stock standing in their own names in the stock books
shall be voted. of the corporation at the time fixed in the bylaws or
where the bylaws are silent, at the time of the election.
Unless otherwise provided in the articles of
incorporation or in the by-laws, members of The said stockholder may: (a) vote such
corporations which have no capital stock may cast as number of shares for as many persons as there are
many votes as there are trustees to be elected but may directors to be elected; (b) cumulate said shares and
not cast more than one vote for one candidate. give one (1) candidate as many votes as the number of
directors to be elected multiplied by the number of the
Candidates receiving the highest number of shares owned; or (c) distribute them on the same
votes shall be declared elected. Any meeting of the principle among as many candidates as may be seen fit:
stockholders or members called for an election may Provided, That the total number of votes cast shall not
adjourn from day to day or from time to time but not exceed the number of shares owned by the
sine die or indefinitely if, for any reason, no election is stockholders as shown in the books of the corporation
held, or if there are not present or represented by multiplied by the whole number of directors to be
proxy, at the meeting, the owners of a majority of the elected: Provided, however, That no delinquent stock
outstanding capital stock, or if there be no capital stock, shall be voted. Unless otherwise provided in the
a majority of the members entitled to vote. (31a) articles of incorporation or in the bylaws, members of
nonstock corporations may cast as many votes as there
are trustees to be elected but may not cast more than
one (1) vote for one (1) candidate. Nominees for
directors or trustees receiving the highest number of
votes shall be declared elected.

If no election is held, or the owners of majority


of the outstanding capital stock or majority of the
members entitled to vote are not present in person, by
proxy, or through remote communication or not
voting in absentia at the meeting, such meeting may be
adjourned and the corporation shall proceed in
accordance with Section 25 of this Code.

The directors or trustees elected shall perform


their duties as prescribed by law, rules of good
corporate governance, and bylaws of the corporation.
Section 25. Corporate officers, quorum. – SEC. 24. Corporate Officers. – Immediately Section 24 of the RCCP
Immediately after their election, the directors of a after their election, the directors of a corporation must now provides for an additional
corporation must formally organize by the election of formally organize and elect: (a) a president, who must requisite for the corporate
a president, who shall be a director, a treasurer who be a director; (b) a treasurer, who must be a resident; treasure i.e. he must be a resident.
may or may not be a director, a secretary who shall be (c) a secretary, who must be a citizen and resident of
a resident and citizen of the Philippines, and such other the Philippines; and (d) such other officers as may be Moreover, the RCCP also
officers as may be provided for in the by-laws. Any two provided in the bylaws. If the corporation is vested mandates the corporation to elect
(2) or more positions may be held concurrently by the with public interest, the board shall also elect a a compliance officer if the
same person, except that no one shall act as president compliance officer. The same person may hold two (2) corporation is vested with public
and secretary or as president and treasurer at the or more positions concurrently, except that no one interest.
same time. shall act as president and secretary or as president and
treasurer at the same time, unless otherwise allowed Further, the provision
The directors or trustees and officers to be in this Code. with respect to the constitution
elected shall perform the duties enjoined on them by and explanation of a quorum was
law and the by-laws of the corporation. Unless the The officers shall manage the corporation and removed.
articles of incorporation or the bylaws provide for a perform such duties as may be provided in the bylaws
greater majority, a majority of the number of directors and/or as resolved by the board of directors.
or trustees as fixed in the articles of incorporation shall
constitute a quorum for the transaction of corporate
business, and every decision of at least a majority of the
directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act,
except for the election of officers which shall require
the vote of a majority of all the members of the board.

Directors or trustees cannot attend or vote by


proxy at board meetings. (33a)
Section 26. Report of election of directors, SEC. 25. Report of Election of Directors, The first paragraph under
trustees and officers. – Within thirty (30) days after Trustees and Officers, Non-holding of Election and Section 25 of the RCCP, provides
the election of the directors, trustees and officers of the Cessation from Office. – Within thirty (30) days after an additional requirement in the
corporation, the secretary, or any other officer of the the election of the directors, trustees and officers of the report of the election of the
corporation, shall submit to the Securities and corporation, the secretary, or any other officer of the directors, trustees and officers of
Exchange Commission, the names, nationalities and corporation, shall submit to the Commission, the the corporation i.e. shareholdings.
residences of the directors, trustees, and officers names, nationalities, shareholdings, and residence
elected. Should a director, trustee or officer die, resign addresses of the directors, trustees and officers The RCCP provides for an
or in any manner cease to hold office, his heirs in case elected. express provision in case there is
of his death, the secretary, or any other officer of the non-holding or failure to hold an
corporation, or the director, trustee or officer himself, The non-holding of elections and the reasons election. Such that, failure or non-
shall immediately report such fact to the Securities and therefor shall be reported to the Commission within holding thereof shall be reported
Exchange Commission. (n) thirty (30) days from the date of the scheduled to the SEC and a new date for the
election. The report shall specify a new date for the election must be held within 60
election, which shall not be later than sixty (60) days days from submission of the
from the scheduled date. report. Otherwise, the SEC may
issue an order to direct the holding
If no new date has been designated, or if the of the election, upon the
rescheduled election is likewise not held, the application of the corporation’s
Commission may, upon the application of a member, director or trustee.
stockholder, member, director or trustee, and after
verification of the unjustified non-holding of the The RCCP now provides a
election, summarily order that an election be held. The period in which to file a report in
Commission shall have the power to issue such orders case of death, resignation or any
as may be appropriate, including orders directing the manner which caused the
issuance of a notice stating the time and place of the cessation to hold office i.e. within 7
election, designated presiding officer, and the record days from the knowledge thereof,
date or dates for the determination of stockholders or which changed the OCCP’s
members entitled to vote. indefinite requirement of an
‘immediate’ report which was
Notwithstanding any provision of the articles subject to different
of incorporation or bylaws to the contrary, the shares interpretations.
of stock or membership represented at such meeting
and entitled to vote shall constitute a quorum for
purposes of conducting an election under this section.

Should a director, trustee or officer die, resign


or in any manner cease to hold office, the secretary, or
the director, trustee or officer of the corporation, shall,
within seven (7) days from knowledge thereof, report
in writing such fact to the Commission.
Section 27. Disqualification of directors, SEC. 26. Disqualification of Directors, The RCCP provides for
trustees or officers. – No person convicted by final Trustees or Officers. – A person shall be disqualified
additional disqualifications of
judgment of an offense punishable by imprisonment from being a director, trustee or officer of any directors, trustees and officers,
for a period exceeding six (6) years, or a violation of corporation if, within five (5) years prior to the election
such as a violation of the Securities
this Code committed within five (5) years prior to the or appointment as such, the person was: Regulation Code, fraudulent acts
date of his election or appointment, shall qualify as a which resulted to administrative
director, trustee or officer of any corporation. (n) (a) Convicted by final judgment: liability, and a judgment by a
1) Of an offense punishable by foreign court or equivalent foreign
imprisonment for a period exceeding regulatory authority for similar
six (6) years; violations and misconduct.
2) For violating this Code; and
3) For violating Republic Act No. 8799, Moreover, there is also the
otherwise known as “The Securities incorporation of the Fit and Proper
Regulation Code”; rule i.e. that the primary regulatory
(b) Found administratively liable for any agency or the PCC may impose
offense involving fraudulent acts; and additional qualifications or other
(c) By a foreign court or equivalent foreign disqualifications of Directors,
regulatory authority for acts, violations or Trustees or Officers.
misconduct similar to those enumerated in
paragraphs (a) and (b) above.

The foregoing is without prejudice to


qualifications or other disqualifications, which the
Commission, the primary regulatory agency, or the
Philippine Competition Commission may impose in its
promotion of good corporate governance or as a
sanction in its administrative proceedings.
Section 28. Removal of directors or SEC. 27. Removal of Directors or Trustees. The RCCP provides the
trustees. – Any director or trustee of a corporation – Any director or trustee of a corporation may be SEC the power to motu proprio or
may be removed from office by a vote of the removed from office by a vote of the stockholders upon verified complaint, and after
stockholders holding or representing at least two- holding or representing at least two-thirds (2/3) of the due notice and hearing, order the
thirds (2/3) of the outstanding capital stock, or if the outstanding capital stock, or in a nonstock corporation, removal of a director or trustee
corporation be a non-stock corporation, by a vote of at by a vote of at least two-thirds (2/3) of the members elected.
least two-thirds (2/3) of the members entitled to vote: entitled to vote: Provided, That such removal shall take
Provided, That such removal shall take place either at a place either at a regular meeting of the corporation or Moreover the SEC also has
regular meeting of the corporation or at a special at a special meeting called for the purpose, and in the power to impose sanctions
meeting called for the purpose, and in either case, after either case, after previous notice to stockholders or against the board of directors or
previous notice to stockholders or members of the members of the corporation of the intention to trustees who, with knowledge of
corporation of the intention to propose such removal propose such removal at the meeting. A special the disqualification, failed to
at the meeting. A special meeting of the stockholders or meeting of the stockholders or members for the remove such director or trustee.
members of a corporation for the purpose of removal purpose of removing any director or trustee must be
of directors or trustees, or any of them, must be called called by the secretary on order of the president, or
by the secretary on order of the president or on the upon written demand of the stockholders
written demand of the stockholders representing or representing or holding at least a majority of the
holding at least a majority of the outstanding capital outstanding capital stock, or a majority of the members
stock, or, if it be a non-stock corporation, on the written entitled to vote.
demand of a majority of the members entitled to vote.
If there is no secretary, or if the secretary,
Should the secretary fail or refuse to call the despite demand, fails or refuses to call the special
special meeting upon such demand or fail or refuse to meeting or to give notice thereof, the stockholder or
give the notice, or if there is no secretary, the call for the member of the corporation signing the demand may
meeting may be addressed directly to the stockholders call for the meeting by directly addressing the
or members by any stockholder or member of the stockholders or members. Notice of the time and place
corporation signing the demand. Notice of the time and of such meeting, as well as of the intention to propose
place of such meeting, as well as of the intention to such removal, must be given by publication or by
propose such removal, must be given by publication or written notice prescribed in this Code. Removal may
by written notice prescribed in this Code. Removal be with or without cause: Provided, That removal
may be with or without cause: Provided, That removal without cause may not be used to deprive minority
without cause may not be used to deprive minority stockholders or members of the right of
stockholders or members of the right of representation to which they may be entitled under
Section 23 of this Code.
representation to which they may be entitled under
Section 24 of this Code. (n) The Commission shall, motu proprio or upon
verified complaint, and after due notice and hearing,
order the removal of a director or trustee elected
despite the disqualification, or whose disqualification
arose or is discovered subsequent to an election. The
removal of a disqualified director shall be without
prejudice to other sanctions that the Commission may
impose on the board of directors or trustees who, with
knowledge of the disqualification, failed to remove
such director or trustee.
Section 29. Vacancies in the office of SEC. 28. Vacancies in the Office of Director First, the RCCP has
director or trustee. – Any vacancy occurring in the or Trustee; Emergency Board. – Any vacancy express terms and procedures in
board of directors or trustees other than by removal by occurring in the board of directors or trustees other filling up such vacancy, when the
the stockholders or members or by expiration of term, than by removal or by expiration of term may be filled vacancy is due to (1) expiration of
may be filled by the vote of at least a majority of the by the vote of at least a majority of the remaining term and (2) removal by the
remaining directors or trustees, if still constituting a directors or trustees, if still constituting a quorum; stockholders and members.
quorum; otherwise, said vacancies must be filled by otherwise, said vacancies must be filled by the
the stockholders in a regular or special meeting called stockholders or members in a regular or special The RCCP also provides
for that purpose. A director or trustee so elected to fill meeting called for that purpose. for an express procedure in all
a vacancy shall be elected only or the unexpired term other cases i.e. that the election to
of his predecessor in office. When the vacancy is due to term expiration, fill up such vacancy shall not be
the election shall be held no later than the day of such later than 45 days from the time
Any directorship or trusteeship to be filled by expiration at a meeting called for that purpose. When the vacancy arose.
reason of an increase in the number of directors or the vacancy arises as a result of removal by the
trustees shall be filled only by an election at a regular stockholders or members, the election may be held on Second, there is an added
or at a special meeting of stockholders or members the same day of the meeting authorizing the removal provision which states that when a
duly called for the purpose, or in the same meeting and this fact must be so stated in the agenda and notice vacancy arose and such vacancy
authorizing the increase of directors or trustees if so of said meeting. In all other cases, the election must be prevents the Board from having a
stated in the notice of the meeting. (n) held no later than forty-five (45) days from the time the quorum, the vacancy may be
vacancy arose. A director or trustee elected to fill a temporarily filled up by the
vacancy shall be referred to as replacement director or unanimous vote of the remaining
trustee and shall serve only for the unexpired term of members of the Board.
the predecessor in office.
However, the action of
such designated director is limited
However, when the vacancy prevents the only to emergency situations. In
remaining directors from constituting a quorum and such case, the corporation must
emergency action is required to prevent grave, notify the SEC within 3 days from
substantial, and irreparable loss or damage to the such creation of the emergency
corporation, the vacancy may be temporarily filled Board, and the reason for its
from among the officers of the corporation by creation.
unanimous vote of the remaining directors or trustees.
The action by the designated director or trustee shall
be limited to the emergency action necessary, and the
term shall cease within a reasonable time from the
termination of the emergency or upon election of the
replacement director or trustee, whichever comes
earlier. The corporation must notify the Commission
within three (3) days from the creation of the
emergency board, stating therein the reason for its
creation.

Any directorship or trusteeship to be filled by


reason of an increase in the number of directors or
trustees shall be filled only by an election at a regular
or at a special meeting of stockholders or members
duly called for the purpose, or in the same meeting
authorizing the increase of directors or trustees if so
stated in the notice of the meeting.

In all elections to fill vacancies under this


section, the procedure set forth in Sections 23 and 25
of this Code shall apply.
Section 30. Compensation of directors. – In SEC. 29. Compensation of Directors or With respect to
the absence of any provision in the by-laws fixing their Trustees. – In the absence of any provision in the compensation received by the
compensation, the directors shall not receive any bylaws fixing their compensation, the directors or Directors or Trustees, the same
compensation, as such directors, except for reasonable trustees shall not receive any compensation in their rules under the OCCP remains the
per diems: Provided, however, That any such capacity as such, except for reasonable per diems: same.
compensation other than per diems may be granted to Provided, however, That the stockholders representing
directors by the vote of the stockholders representing at least a majority of the outstanding capital stock or However, the RCCP
at least a majority of the outstanding capital stock at a majority of the members may grant directors or provides for an additional rule that
regular or special stockholders’ meeting. In no case trustees with compensation and approve the amount the Directors and Trustees
shall the total yearly compensation of directors, as thereof at a regular or special meeting. themselves cannot participate in
such directors, exceed ten (10%) percent of the net the determination of their own per
income before income tax of the corporation during In no case shall the total yearly compensation diems or compensation.
the preceding year. (n) of directors exceed ten percent (10%) of the net
income before income tax of the corporation during Moreover, in the last
the preceding year. paragraph of Section 29 of the
RCCP, it mandates the
Directors or trustees shall not participate in corporations vested with public
the determination of their own per diems or interest to submit an annual report
compensation. of the total compensation of each
of their directors and trustees.
Corporations vested with public interest shall
submit to their shareholders and the Commission, an
annual report of the total compensation of each of their
directors or trustees
Section 31. Liability of directors, trustees SEC. 30. Liability of Directors, Trustees or This provision of the law
or officers. - Directors or trustees who willfully and Officers. – Directors or trustees who willfully and remains the same.
knowingly vote for or assent to patently unlawful acts knowingly vote for or assent to patently unlawful acts
of the corporation or who are guilty of gross negligence of the corporation or who are guilty of gross negligence
or bad faith in directing the affairs of the corporation or or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be with their duty as such directors or trustees shall be
liable jointly and severally for all damages resulting liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its therefrom suffered by the corporation, its stockholders
stockholders or members and other persons. or members and other persons.

When a director, trustee or officer attempts to A Director, Trustee or Officer shall not attempt
acquire or acquire, in violation of his duty, any interest to acquire, or acquire any interest adverse to the
adverse to the corporation in respect of any matter corporation in respect of any matter which has been
which has been reposed in him in confidence, as to reposed in them in confidence, and upon which, equity
which equity imposes a disability upon him to deal in imposes a disability upon themselves to deal in their
his own behalf, he shall be liable as a trustee for the own behalf; otherwise, the said director, trustee or
corporation and must account for the profits which officer shall be liable as a trustee for the corporation
otherwise would have accrued to the corporation. (n) and must account for the profits which otherwise
would have accrued to the corporation.
Section 32. Dealings of directors, trustees SEC. 31. Dealings of Directors, Trustees or First, the general rule with
or officers with the corporation. – A contract of the Officers with the Corporation. – A contract of the respect to the voidable
corporation with one or more of its directors or corporation with one (1) or more of its directors, transactions made by a Self-
trustees or officers is voidable, at the option of such trustees, officers or their spouses and relatives within Dealing Director now extends to
corporation, unless all the following conditions are the fourth civil degree of consanguinity or affinity is spouse and relatives of such
present: voidable, at the option of such corporation, unless all director, trustee, or officer within
1. That the presence of such director or trustee in the following conditions are present: his 4th civil degree of consanguinity
the board meeting in which the contract was (a) The presence of such director or trustee in the or affinity.
approved was not necessary to constitute a board meeting in which the contract was
quorum for such meeting; approved was not necessary to constitute a Second, there is an
2. That the vote of such director or trustee was quorum for such meeting; inclusion in the provided list of
not necessary for the approval of the contract; (b) The vote of such director or trustee was not exceptions that, in case of
3. That the contract is fair and reasonable under necessary for the approval of the contract; corporations vested with public
the circumstances; and (c) The contract is fair and reasonable under the interest, material contracts are
4. That in case of an officer, the contract has been circumstances; approved by at least 2/3 of the
previously authorized by the board of (d) In case of corporations vested with public entire membership of the board,
directors. interest, material contracts are approved by at with at least a majority of the
least two-thirds (2/3) of the entire independent directors voting to
Where any of the first two conditions set forth membership of the board, with at least a approve the material contract.
in the preceding paragraph is absent, in the case of a majority of the independent directors voting to
contract with a director or trustee, such contract may approve the material contract; and However, the Code did not
be ratified by the vote of the stockholders representing (e) In case of an officer, the contract has been provide as to the standard or
at least two-thirds (2/3) of the outstanding capital previously authorized by the board of explanation of what a ‘material
stock or of at least two-thirds (2/3) of the members in directors. contract’ is.
a meeting called for the purpose: Provided, That full
disclosure of the adverse interest of the directors or Where any of the first three (3) conditions set Lastly, there was a change
trustees involved is made at such meeting: Provided, forth in the preceding paragraph is absent, in the case in the last paragraph of the
however, That the contract is fair and reasonable of a contract with a director or trustee, such contract provision. Such that it now
under the circumstances. (n) may be ratified by the vote of the stockholders includes the third condition set
representing at least two-thirds (2/3) of the forth by the Code i.e. that the
outstanding capital stock or of at least two-thirds (2/3) contract is fair and reasonable
of the members in a meeting called for the purpose: under the circumstances.
Provided, That full disclosure of the adverse interest of
the directors or trustees involved is made at such
meeting and the contract is fair and reasonable under
the circumstances
Section 33. Contracts between SEC. 32. Contracts Between Corporations This provision of the law
corporations with interlocking directors. – Except with Interlocking Directors. – Except in cases of remains the same.
in cases of fraud, and provided the contract is fair and fraud, and provided the contract is fair and reasonable
reasonable under the circumstances, a contract under the circumstances, a contract between two (2)
between two or more corporations having or more corporations having interlocking directors
interlocking directors shall not be invalidated on that shall not be invalidated on that ground alone: Provided,
ground alone: Provided, That if the interest of the That if the interest of the interlocking director in one
interlocking director in one corporation is substantial (1) corporation is substantial and the interest in the
and his interest in the other corporation or other corporation or corporations is merely nominal,
corporations is merely nominal, he shall be subject to the contract shall be subject to the provisions of the
the provisions of the preceding section insofar as the preceding section insofar as the latter corporation or
latter corporation or corporations are concerned. corporations are concerned.

Stockholdings exceeding twenty (20%) Stockholdings exceeding twenty percent


percent of the outstanding capital stock shall be (20%) of the outstanding capital stock shall be
considered substantial for purposes of interlocking considered substantial for purposes of interlocking
directors. (n) directors.
Section 34. Disloyalty of a director. – Where SEC. 33. Disloyalty of a Director. – Where a This provision of the law
a director, by virtue of his office, acquires for himself a director, by virtue of such office, acquires a business remains the same.
business opportunity which should belong to the opportunity which should belong to the corporation,
corporation, thereby obtaining profits to the prejudice thereby obtaining profits to the prejudice of such
of such corporation, he must account to the latter for all corporation, the director must account for and refund
such profits by refunding the same, unless his act has to the latter all such profits, unless the act has been
been ratified by a vote of the stockholders owning or ratified by a vote of the stockholders owning or
representing at least two-thirds (2/3) of the representing at least two-thirds (2/3) of the
outstanding capital stock. This provision shall be outstanding capital stock. This provision shall be
applicable, notwithstanding the fact that the director applicable, notwithstanding the fact that the director
risked his own funds in the venture. (n) risked one’s own funds in the venture.
Section 35. Executive committee. – The by- SEC. 34. Executive, Management, and Other The RCCP provides the
laws of a corporation may create an executive Special Committees. – If the by-laws so provide, the
board the power to create special
committee, composed of not less than three members board may create an executive committee composed
committees of temporary or
of the board, to be appointed by the board. of at least three (3) directors. permanent nature and determine
the members’ term, composition,
Said committee may act, by majority vote of all Said committee may act, by majority vote of all compensation, powers, and
its members, on such specific matters within the its members, on such specific matters within the responsibilities.
competence of the board, as may be delegated to it in competence of the board, as may be delegated to it in
the by-laws or on a majority vote of the board, except the bylaws or by majority vote of the board, except
with respect to: (1) approval of any action for which with respect to the: (a) approval of any action for
shareholders’ approval is also required; (2) the filing of which shareholders’ approval is also required; (b)
vacancies in the board; (3) the amendment or repeal of filling of vacancies in the board; (c) amendment or
by-laws or the adoption of new by-laws; (4) the repeal of bylaws or the adoption of new bylaws; (d)
amendment or repeal of any resolution of the board amendment or repeal of any resolution of the board
which by its express terms is not so amendable or which by its express terms is not amendable or
repealable; and (5) a distribution of cash dividends to repealable; and (e) distribution of cash dividends to
the shareholders. the shareholders.

The board of directors may create special


committees of temporary or permanent nature and
determine the members’ term, composition,
compensation, powers, and responsibilities.
TITLE IV TITLE IV
POWERS OF CORPORATIONS POWERS OF CORPORATIONS
Section 36. Corporate powers and capacity. SEC. 35. Corporate Powers and Capacity. – First, Section 35 merely
– Every corporation incorporated under this Code has Every corporation incorporated under this Code has adopts to the provision of the RCCP
the power and capacity: the power and capacity: with respect to the perpetual
1. To sue and be sued in its corporate name; (a) To sue and be sued in its corporate name; existence of a corporation.
2. Of succession by its corporate name for the (b) To have perpetual existence unless the
period of time stated in the articles of certificate of incorporation provides Second, corporations now
incorporation and the certificate of otherwise; have the power to create
incorporation; (c) To adopt and use a corporate seal; partnerships and joint ventures
3. To adopt and use a corporate seal; (d) To amend its articles of incorporation in with either natural or juridical
4. To amend its articles of incorporation in accordance with the provisions of this Code; persons.
accordance with the provisions of this Code; (e) To adopt bylaws, not contrary to law, morals or
5. To adopt by-laws, not contrary to law, morals, public policy, and to amend or repeal the same Lastly, the provision with
or public policy, and to amend or repeal the in accordance with this Code; respect to the lifting of prohibition
same in accordance with this Code; (f) In case of stock corporations, to issue or sell on political contributions is subject
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury to different interpretation. It can
stocks to subscribers and to sell stocks to stocks in accordance with the provisions of this be gleaned that such ban has now
subscribers and to sell treasury stocks in Code; and to admit members to the been lifted pursuant to the
accordance with the provisions of this Code; corporation if it be a nonstock corporation; doctrine of lex posterior derogat
priori. It can also be interpreted as
and to admit members to the corporation if it (g) To purchase, receive, take or grant, hold, the ban is not yet lifted by reason of
be a non-stock corporation; convey, sell, lease, pledge, mortgage, and the provisions under the Omnibus
7. To purchase, receive, take or grant, hold, otherwise deal with such real and personal Election Code, pursuant to the
convey, sell, lease, pledge, mortgage and property, including securities and bonds of harmonization of laws.
otherwise deal with such real and personal other corporations, as the transaction of the
property, including securities and bonds of lawful business of the corporation may
other corporations, as the transaction of the reasonably and necessarily require, subject to
lawful business of the corporation may the limitations prescribed by law and the
reasonably and necessarily require, subject to Constitution;
the limitations prescribed by law and the (h) To enter into a partnership, joint venture,
Constitution; merger, consolidation, or any other
8. To enter into merger or consolidation with commercial agreement with natural and
other corporations as provided in this Code; juridical persons;
9. To make reasonable donations, including (i) To make reasonable donations, including
those for the public welfare or for hospital, those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or similar charitable, cultural, scientific, civic, or similar
purposes: Provided, That no corporation, purposes: Provided, That no foreign
domestic or foreign, shall give donations in aid corporation shall give donations in aid of any
of any political party or candidate or for political party or candidate or for purposes of
purposes of partisan political activity; partisan political activity;
10. To establish pension, retirement, and other (j) To establish pension, retirement, and other
plans for the benefit of its directors, trustees, plans for the benefit of its directors, trustees,
officers and employees; and officers, and employees; and
11. To exercise such other powers as may be (k) To exercise such other powers as may be
essential or necessary to carry out its purpose essential or necessary to carry out its purpose
or purposes as stated in the articles of or purposes as stated in the articles of
incorporation. (13a) incorporation.
Section 37. Power to extend or shorten SEC. 36. Power to Extend or Shorten Written notices can now
corporate term. – A private corporation may extend Corporate Term. – A private corporation may extend be sent electronically to the
or shorten its term as stated in the articles of or shorten its term as stated in the articles of stockholders or members of the
incorporation when approved by a majority vote of the incorporation when approved by a majority vote of the corporation, when allowed in the
board of directors or trustees and ratified at a meeting board of directors or trustees, and ratified at a meeting bylaws or done with the consent of
by the stockholders representing at least two-thirds by the stockholders or members representing at least the stockholder or member
(2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the outstanding capital stock or of concerned, in accordance with the
two-thirds (2/3) of the members in case of non-stock its members. Written notice of the proposed action and rules and regulations of the
corporations. Written notice of the proposed action the time and place of the meeting shall be sent to
and of the time and place of the meeting shall be stockholders or members at their respective place of Commission on the use of
addressed to each stockholder or member at his place residence as shown in the books of the corporation, electronic data messages.
of residence as shown on the books of the corporation and must be deposited to the addressee in the post
and deposited to the addressee in the post office with office with postage prepaid, served personally, or
postage prepaid, or served personally: Provided, That when allowed in the bylaws or done with the consent
in case of extension of corporate term, any dissenting of the stockholder, sent electronically in accordance
stockholder may exercise his appraisal right under the with the rules and regulations of the Commission on
conditions provided in this code. (n) the use of electronic data messages. In case of
extension of corporate term, a dissenting stockholder
may exercise the right of appraisal under the
conditions provided in this Code.
Section 38. Power to increase or decrease SEC. 37. Power to Increase or Decrease First, sending of written
capital stock; incur, create or increase bonded Capital Stock; Incur, Create or Increase Bonded notices through electronic means
indebtedness. – No corporation shall increase or Indebtedness. – No corporation shall increase or is now recognized as a valid
decrease its capital stock or incur, create or increase decrease its capital stock or incur, create or increase service of notice. Provided, that
any bonded indebtedness unless approved by a any bonded indebtedness unless approved by a such means is recognized by the
majority vote of the board of directors and, at a majority vote of the board of directors and by two- SEC and/or by the by-laws of the
stockholder’s meeting duly called for the purpose, two- thirds (2/3) of the outstanding capital stock at a Corporation.
thirds (2/3) of the outstanding capital stock shall favor stockholders’ meeting duly called for the purpose.
the increase or diminution of the capital stock, or the Written notice of the time and place of the Second, the list of
incurring, creating or increasing of any bonded stockholders’ meeting and the purpose for said inclusions in the certificate in the
indebtedness. Written notice of the proposed increase meeting must be sent to the stockholders at their increase or decrease of capital
or diminution of the capital stock or of the incurring or places of residence as shown in the books of the stock has changed. There is a
increasing of any bonded indebtedness is to be corporation and served on the stockholders removal from the list manifesting
considered, must be addressed to each stockholder at personally, or through electronic means recognized in ‘the actual indebtedness of the
his place of residence as shown on the books of the the corporation’s bylaws and/or the Commission’s corporation on the day of the
corporation and deposited to the addressee in the post rules as a valid mode for service of notices meeting’ and a change in the list
office with postage prepaid, or served personally. with respect to the amount paid
and shares of stocks subscribed by
A certificate in duplicate must be signed by a A certificate must be signed by a majority of the stockholders of the company
majority of the directors of the corporation and the directors of the corporation and countersigned by for purposes of dividend shares.
countersigned by the chairman and the secretary of the chairperson and secretary of the stockholders’
the stockholders’ meeting, setting forth: meeting, setting forth:
(1) That the requirements of this section have (a) That the requirements of this section have
been complied with; been complied with;
(2) The amount of the increase or diminution of (b) The amount of the increase or decrease of the
the capital stock; capital stock;
(3) If an increase of the capital stock, the amount (c) and the amount paid by each on the
of capital stock or number of shares of no-par subscription in cash or property, or the
stock thereof actually subscribed, the names, amount of capital stock or number of shares of
nationalities and residences of the persons no-par stock allotted to each stockholder if
subscribing, the amount of capital stock or such increase is for the purpose of making
number of no-par stock subscribed by each, effective stock dividend therefor authorized;
and the amount paid by each on his (d) Any bonded indebtedness to be incurred,
subscription in cash or property, or the created or increased;
amount of capital stock or number of shares of (e) The amount of stock represented at the
no-par stock allotted to each stockholder if meeting; and
such increase is for the purpose of making (f) The vote authorizing the increase or decrease
effective stock dividend therefor authorized; of the capital stock, or the incurring, creating or
(4) Any bonded indebtedness to be incurred, increasing of any bonded indebtedness.
created or increased;
(5) The actual indebtedness of the corporation on Any increase or decrease in the capital stock or
the day of the meeting; the incurring, creating or increasing of any bonded
(6) The amount of stock represented at the indebtedness shall require prior approval of the
meeting; Commission, and where appropriate, of the Philippine
(7) The vote authorizing the increase or Competition Commission. The application with the
diminution of the capital stock, or the Commission shall be made within six (6) months from
incurring, creating or increasing of any bonded the date of approval of the board of directors and
indebtedness. stockholders, which period may be extended for
justifiable reasons.
Any increase or decrease in the capital stock or
the incurring, creating or increasing of any bonded Copies of the certificate shall be kept on file in
indebtedness shall require prior approval of the the office of the corporation and filed with the
Securities and Exchange Commission. Commission and attached to the original articles of
incorporation. After approval by the Commission and
One of the duplicate certificates shall be kept the issuance by the Commission of its certificate of
on file in the office of the corporation and the other filing, the capital stock shall be deemed increased or
shall be filed with the Securities and Exchange decreased and the incurring, creating or increasing of
Commission and attached to the original articles of any bonded indebtedness authorized, as the certificate
incorporation. From and after approval by the of filing may declare: Provided, That the Commission
Securities and Exchange Commission and the issuance shall not accept for filing any certificate of increase of
by the Commission of its certificate of filing, the capital capital stock unless accompanied by a sworn
stock shall stand increased or decreased and the statement of the treasurer of the corporation lawfully
incurring, creating or increasing of any bonded holding office at the time of the filing of the certificate,
indebtedness authorized, as the certificate of filing may showing that at least twenty-five percent (25%) of the
declare: Provided, That the Securities and Exchange increase in capital stock has been subscribed and that
Commission shall not accept for filing any certificate of at least twenty-five percent (25%) of the amount
increase of capital stock unless accompanied by the subscribed has been paid in actual cash to the
sworn statement of the treasurer of the corporation corporation or that property, the valuation of which is
lawfully holding office at the time of the filing of the equal to twenty-five percent (25%) of the subscription,
certificate, showing that at least twenty-five (25%) has been transferred to the corporation: Provided,
percent of such increased capital stock has been further, That no decrease in capital stock shall be
subscribed and that at least twenty-five (25%) percent approved by the Commission if its effect shall prejudice
of the amount subscribed has been paid either in actual the rights of corporate creditors.
cash to the corporation or that there has been
transferred to the corporation property the valuation Nonstock corporations may incur, create or
of which is equal to twenty-five (25%) percent of the increase bonded indebtedness when approved by a
subscription: Provided, further, That no decrease of the majority of the board of trustees and of at least two-
capital stock shall be approved by the Commission if its thirds (2/3) of the members in a meeting duly called
effect shall prejudice the rights of corporate creditors. for the purpose.

Non-stock corporations may incur or create Bonds issued by a corporation shall be


bonded indebtedness, or increase the same, with the registered with the Commission, which shall have the
approval by a majority vote of the board of trustees authority to determine the sufficiency of the terms
and of at least two-thirds (2/3) of the members in a thereof.
meeting duly called for the purpose.

Bonds issued by a corporation shall be


registered with the Securities and Exchange
Commission, which shall have the authority to
determine the sufficiency of the terms thereof. (17a)