SPECIFIC POWERS OF CORPORATIONS

EXTEND OR General rule: A corporation have perpetual existence.

SHORTEN Exception: Unless articles of incorporation provides otherwise.
CORPORATE Corporate term for a Specific Period:
TERM  May be extended/shortened by amending the Articles of incorporation.
CORPORATE  No extension can be made earlier than 3 years prior to the original/subsequent expiry
TERM (SEC 11 date. Unless for justifiable reasons.
AND 36)  Extension of corporate term shall take effect only on the day following the
original/subsequent expiry date.
Corporation filing for revival:
 Commission shall approve the application for revival.
 Commission shall issue a certificate of revival giving it perpetual existence unless the
application for revival provides otherwise.
Recommendation of Appropriate Government Agency is required for application of revival of the
following aside from the approval of the Commission:
 Banks, banking and quasi-banking institutions, preneed, insurance and trust companies,
nonstock savings and loan associations, pawnshops, corporations engaged in money
service business, and other financial intermediaries.

Section 36 power of Corporations to Extend and Shorten Corporate Term

 Majority vote BOD;
 Ratification at the meeting by stockholders/members – 2/3 of outstanding capital stock
or members;
 Written notice requirement sent to stockholders/members. Where?
o Residence indicates in books of corporation deposited to the address in the
post office with postage prepaid.
o Personally served
o If bylaws allow/stockholder consented- sent electronically
 In case of extension of corporate term- dissenting stockholder may exercise the right of
appraisal under the conditions provided in this Code.

TO AMEND THE  Amendment of AOI:

ARTICLES OF o Majority vote of BOD/trustees;
INCORPORATION o 2/3 vote or written assent of stockholders
(SEC. 15)  Without prejudice to the appraisal right of dissenting stockholders.
 For non-stock corporations 2/3 vote of members

TO INCREASE OR  GR: Corp can’t increase/decrease capital stock or incur, create, or increase bonded
DECREASE indebtedness without the ff:
CAPITAL STOCK o Majority vote of BOD
(SEC. 37) o 2/3 of outstanding capital stock of stockholders
o In a meeting called for that purpose
o Notice requirement
 Stockholder’s residence and served personally
 Electronic means if allowed by bylaws
 Certificate signed by majority of directors + countersigned by chairperson and secretary
of the stockholder’s meeting.

TO DENY PRE-  All stockholders have preemptive right to subscribe to all issues or dispositions of shares
EMPTIVE RIGHT of any class
(SEC. 38) o In proportion of shareholdings.
 Exception: Unless denied by AOI or amendment thereto
 Preemptive right shall not extend to shares issued for the ff:
o In compliance with laws requiring stock offerings or minimum stock ownership
 by the public;
o To shares issued in good faith with the approval of the stockholders representing
twothirds (2/3) of the outstanding capital stock, in exchange for property needed
for corporate purposes or in payment of a previously contracted debt.

TO SELL OR 1. Corporation can sell, lease, exchange, mortgage, pledge, or otherwise dispose of its property
DISPOSE ALL OR and assets.
SUBSTANTIALLY  For consideration: money, stocks, bonds, or other instruments for the payment of
ALL OF THE money or other property or consideration
ASSETS OF THE  VOTE requirement: Majority vote by BOD or trustees.
COROPORATION  Take note this involves transactions that does not cover all/substantially all of the
(SEC. 39) assets of the corporation.
2. In cases of sale of all/substantially all of the properties and assets and goodwill:
 2/3 vote requirement stockholders (representing outstanding capital stock)
/members
 Meeting duly called for that purpose
3. For non-stock corporation:
 vote of at least a majority of trustees in office sufficient authorization for any
transaction authorized under Sec 39.
4. To determine whether or not sale involves all/substantially all of Corp’s properties and assets:
 Compute based on net asset value from latest financial statements
 Also considered if the transaction renders the corporation incapable to continue the
business or purpose for which it is incorporated.
5. Written notice requirement served to stockholder/members (1) personally; (2) electronically-
if bylaws allows or stockholder consented.
6. BOD/trustees can at their discretion abandon the transaction even if it was authorized by
stockholders/members.
 Subject to the rights of 3rd parties;
 No further approval from stockholders/members.

TO ACQUIRE ITS  Corporation must have unrestricted retained earnings for shares purchased/acquired.
OWN SHARES  The power must be for a legitimate corporate purpose.
(SEC. 40) This includes:
(1) eliminate fractional shares arising out of stock dividends;
(2) collect/compromise an indebtedness to the corporation from unpaid subscription (from
delinquency sale) and to purchase delinquent shares sold;
(3) pay dissenting/withdrawing stockholders

TO INVEST 1. Private Corporation can invest funds in other corporation, business or for any other purpose
CORPORATE other than the primary purpose of the corp.
FUNDS IN  Approved by majority of BOD/trustees
ANOTHER  Ratified by stockholders 2/3 OCT or members
CORPORATION,  In a meeting for that purpose.
BUSINESS OR  Notice of proposed investment sent to stockholder/member (1) personally; (2)
FOR ANY OTHER electronically, if bylaws allow or with their consent.
PUSPOSE (SEC. 2. Dissenting stockholder have appraisal right
3. If the investment is reasonably necessary to accomplish primary purpose in AOI  no approval
41)
needed from stockholders/members.

TO DECLARE 1. BOD may declare dividends from unrestricted retained earnings of the corporation.
DIVIDENDS (SEC.  Payable in cash, property, or stock to all stock holders
42)  On the basis of outstanding capital stock
 cash dividends due on delinquent stocks- applied first to unpaid subscription + cost +
expenses.
 Stock dividends withheld from delinquent stockholders until their unpaid subscription is
paid.
2. Issuance of stock dividends requires stockholders approval 2/3 of outstanding capital stock in
regular/special meeting
3. Prohibition of stock corporation from retaining surplus profits in excess of 100% of their paid-
 in capital stock.
 EXCEPT:
o Corporate expansion projects programs with BOD approval;
o Corporation is prohibited by financial institutions/creditors (local/foreign)
from declaring dividends without their consent;
o Clearly shown retention is necessary such as need for special reserve for
probable contingencies.

TO ENTER INTO 1. Contract must be approved by BOTH BOD and stockholders of managing and managed
A corporation:
MANAGEMENT  Vote requirement at least majority of outstanding capital stocks/ majority of
CONTRACT (SEC members;
43)  Remember both managing corporation and managed corporation;
 At meeting duly called for the purpose
2. There’s a higher approval requirement for stockholders/members on the part of the
MANAGED corporation if both corporations have interlocking ownership and management.
 Stockholder/member have interest in BOTH managed and managing corps or They
control more than 1/3 of the total outstanding capital stock entitled to vote of the
managing corporation.
 Majority of the members of the board of directors of the managing corporation also
constitute a majority of the members of the board of directors of the managed
corporation
o MANAGEMENT CONTRACT APPROVED BY stockholders of managed
corporation that owns 2/3 of total outstanding capital stock/ members
3. This apply to any contract whereby a corporation undertakes to manage or operate all or
substantially all of the business of another corporation, whether such contracts are called
service contracts, operating agreements or otherwise.
 Exploration, development, exploitation, utilization of natural resources may be
entered for periods provided by laws/regulations
4. Management contract period- not exceeding 5 years for 1 term.