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19 _____
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No. _________;
Page No. _________;
Book No. ________;
Series of 19____ (7a)
SECTION
16. Amendment of Articles of Incorporation. — Unless otherwise
prescribed by this Code or by special law, and for legitimate purposes,
any provision or matter stated in the articles of incorporation
may be amended by a majority vote of the board of directors or trustees
and the vote or written assent of the stockholders representing
at least two-thirds (2/3) of the outstanding capital stock, without
prejudice to the appraisal right of dissenting stockholders in accordance
with the provisions of this Code, or the vote or written assent
of at least two-thirds (2/3) of the members if it be a non-stock
corporation.
The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation.
Such articles, as amended shall be indicated by underscoring the
change or changes made, and a copy thereof duly certified under
oath by the corporate secretary and a majority of the directors
or trustees stating the fact that said amendment or amendments have
been duly approved by the required vote of the stockholders or members,
shall be submitted to the Securities and Exchange Commission.
The
amendments shall take effect upon their approval by the Securities
and Exchange Commission or from the date of filing with the said
Commission if not acted upon within six (6) months from the date
of filing for a cause not attributable to the corporation.
SECTION
17. Grounds when articles of incorporation or amendment may be rejected
or disapproved. — The Securities and Exchange Commission may
reject the articles of incorporation or disapprove any amendment
thereto if the same is not in compliance with the requirements of
this Code: Provided, That the Commission shall give the incorporators
a reasonable time within which to correct or modify the objectionable
portions of the articles or amendment. The following are grounds
for such rejection or disapproval:
1. That the articles of incorporation or any amendment thereto is
not substantially in accordance with the form prescribed herein;
2.
That the purpose or purposes of the corporation are patently unconstitutional,
illegal, immoral, or contrary to government rules and regulations;
3.
That the Treasurer's Affidavit concerning the amount of capital
stock subscribed and/or paid is false;
4.
That the percentage of ownership of the capital stock to be owned
by citizens of the Philippines has not been complied with as required
by existing laws or the Constitution.
No
articles of incorporation or amendment to articles of incorporation
of banks, banking and quasi-banking institutions, building and loan
associations, trust companies and other financial intermediaries,
insurance companies, public utilities, educational institutions,
and other corporations governed by special laws shall be accepted
or approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the effect
that such articles or amendment is in accordance with law. (n)
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. (n)
SECTION
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 Securities and Exchange Commission 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. (n)
SECTION
20. De facto corporations. — The due incorporation of any
corporation claiming in good faith to be a corporation under this
Code, and its right to exercise corporate powers, 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 proceeding. (n)
SECTION
21. Corporation by estoppel. — All persons 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 thereof: Provided, however, That
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 as a defense its lack of corporate
personality.
On
who assumes an obligation to an ostensible corporation as such,
cannot resist performance thereof on the ground that there was in
fact no corporation. (n)
SECTION
22. Effects on non-use of corporate charter and continuous inoperation
of a corporation. — If a corporation does not formally organize
and commence the transaction of its business or the construction
of its works within two (2) years from the date of its incorporation,
its corporate powers cease and the corporation shall be deemed dissolved.
However, if a corporation has commenced the transaction of its business
but subsequently becomes continuously inoperative for a period of
at least five (5) years, the same shall be a ground for the suspension
or revocation of its corporate franchise or certificate of incorporation.
(19a)
This
provision shall not apply if the failure to organize, commence the
transaction of its businesses or the construction of its works,
or to continuously operate is due to causes beyond the control of
the corporation as may be determined by the Securities and Exchange
Commission.
TITLE
III — BOARD OF DIRECTORS/TRUSTEES AND OFFICERS
SECTION
23. The board of directors or trustees. — Unless otherwise
provided in this Code, the corporate powers of all corporations
formed under this Code shall be exercised, all business conducted
and all property of such corporations controlled and held by the
board of directors or trustees to be elected from among the holders
of stocks, or where there is no stock, from among the members of
the corporation, who shall hold office for one (1) year until their
successors are elected and qualified. (28a)
Every
director must own at least one (1) share of the capital stock of
the corporation of which he is a director, which share shall stand
in his name on the books of the corporation. Any director who ceases
to be the owner of at least one (1) share of the capital stock of
the corporation of which he is a director shall thereby cease to
be a director. Trustees of non-stock corporations must be members
thereof. A majority of the directors or trustees of all corporations
organized under this Code must be residents of the Philippines.
SECTION
24. Election of directors or trustees. — At all elections
of directors or trustees, there must be present, either in person
or by representative authorized to act by written proxy, the owners
of a majority of the outstanding capital stock, or if there be no
capital stock, a majority of the members entitled to vote. The election
must be by ballot if requested by any voting stockholder or member.
In stock corporations, every stockholder entitled to vote shall
have the right to vote in person or by proxy the number of shares
of stock standing, at the time fixed in the by-laws, in his own
name on the stock books of the corporation, or where the by-laws
are silent, at the time of the election; and said stockholder may
vote such number of shares for as many persons as there are directors
to be elected or he may cumulate said shares and give one candidate
as many votes as the number of directors to be elected multiplied
by the number of his shares shall equal, or he may distribute them
on the same principle among as many candidates as he shall see fit:
Provided, That the total number of votes cast by him shall not exceed
the number of shares owned by him as shown in the books of the corporation
multiplied by the whole number of directors to be elected: Provided,
however, That no delinquent stock shall be voted. Unless otherwise
provided in the articles of incorporation or in the by-laws, members
of corporations which have no capital stock may cast as many votes
as there are trustees to be elected but may not cast more than one
vote for one candidate. Candidates receiving the highest number
of votes shall be declared elected. Any meeting of the stockholders
or members 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 are not present or represented
by proxy, at the meeting, the owners of a majority of the outstanding
capital stock, or if there be no capital stock, a majority of the
member entitled to vote. (31a)
SECTION
25. Corporate officers, quorum. — Immediately after their
election, the directors of a corporation must formally organize
by the election of a president, who shall be a director, a treasurer
who may or may not be a director, a secretary who shall be a resident
and citizen of the Philippines, and such other officers as may be
provided for in the by-laws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act
as president and secretary or as president and treasurer at the
same time.
The
directors or trustees and officers to be elected shall perform the
duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for
a greater majority, a majority of the number 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, trustees and officers. —
Within thirty (30) days after the election of the directors, trustees
and officers of the corporation, the secretary, or any other officer
of the corporation, shall submit to the Securities and Exchange
Commission, the names, nationalities and residences of the directors,
trustees, and officers elected. Should a director, trustee or officer
die, resign or in any manner cease to hold office, his heirs in
case of his death, the secretary, or any other officer of the corporation,
or the director, trustee or officer himself, shall immediately report
such fact to the Securities and Exchange Commission. (n)
SECTION
27. Disqualification of directors, trustees or officers. —
No person convicted by final judgment of an offense punishable by
imprisonment for a period exceeding six (6) years, or a violation
of this Code committed within five (5) years prior to the date of
his election or appointment, shall qualify as a director, trustee
or officer of any corporation. (n)
SECTION
28. Removal of directors or trustees. — Any director or trustee
of a corporation may be removed from office by a vote of the stockholders
holding or representing at least two-thirds (2/3) of the outstanding
capital stock, or if the corporation be a non-stock corporation,
by a vote of at least two-thirds (2/3) of the members entitled to
vote: Provided, That such removal shall take place either at a regular
meeting of the corporation or at a special meeting called for the
purpose, and in either case, after previous notice to stockholders
or members of the corporation of the intention to propose such removal
at the meeting. A special meeting of the stockholders or members
of a corporation for the purpose of removal of directors or trustees,
or any of them, must be called by the secretary on order of the
president or on the written demand of the stockholders representing
or holding at least a majority of the outstanding capital stock,
or, if it be a non-stock corporation, on the written demand of a
majority of the members entitled to vote. Should the secretary fail
or refuse to call the special meeting upon such demand or fail or
refuse to give the notice, or if there is no secretary, the call
for the meeting may be addressed directly to the stockholders or
members by any stockholder or member of the corporation signing
the demand. Notice of the time and place of such meeting, as well
as of the intention to propose such removal, must be given by publication
or by written notice prescribed in this Code. Removal may be with
or without cause: Provided, That removal without cause may not be
used to deprive minority stockholders or members of the right of
representation to which they may be entitled under Section 24 of
this Code. (n)
SECTION
29. Vacancies in the office of director or trustee. — Any
vacancy occurring in the board of directors or trustees other than
by removal by the stockholders or members or by expiration of term,
may be filled by the vote of at least a majority of the remaining
directors or trustees, if still constituting a quorum; otherwise,
said vacancies must be filled by the stockholders in a regular or
special meeting called for that purpose. A director or trustee so
elected to fill a vacancy shall be elected only or the unexpired
term of his predecessor in office.
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. (n)
SECTION
30. Compensation of directors. — In the absence of any provision
in the by-laws fixing their compensation, the directors shall not
receive any compensation, as such directors, except for reasonable
per diems: Provided, however, That any such compensation other than
per diems may be granted to directors by the vote of the stockholders
representing at least a majority of the outstanding capital stock
at a regular or special stockholders' meeting. In no case shall
the total yearly compensation of directors, as such directors, exceed
ten (10%) percent of the net income before income tax of the corporation
during the preceding year. (n)
SECTION
31. Liability of directors, trustees or officers. — Directors
or trustees who willfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence
or bad faith in directing the affairs of the corporation or acquire
any personal or pecuniary interest in conflict with their duty as
such directors or trustees shall be liable jointly and severally
for all damages resulting therefrom suffered by the corporation,
its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquires,
in violation of his duty, any interest adverse to the corporation
in respect of any matter which has been reposed in him in confidence,
as to which equity imposes a disability upon him to deal in his
own behalf, he shall be liable as a trustee for the corporation
and must account for the profits which otherwise would have accrued
to the corporation. (n)
SECTION
32. Dealings of directors, trustees or officers with the corporation.
— A contract of the corporation with one or more of its directors
or trustees or officers is voidable, at the option of such corporation,
unless all the following conditions are present:
1.
That the presence of such director or trustee in the board meeting
in which the contract was approved was not necessary to constitute
a quorum for such meeting;
2.
That the vote of such director or trustee was not necessary for
the approval of the contract;
3.
That the contract is fair and reasonable under the circumstances;
and
4.
That in case of an officer, the contract has been previously authorized
by the board of directors.
Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or
trustee, such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital
stock or of at least two-thirds (2/3) of the members in a meeting
called for the purpose: Provided, That full disclosure of the adverse
interest of the directors or trustees involved is made at such meeting:
Provided, however, That the contract is fair and reasonable under
the circumstances. (n)
SECTION
33. Contracts between corporations with interlocking directors.
— Except in cases of fraud, and provided the contract is fair
and reasonable under the circumstances, a contract between two or
more corporations having interlocking directors shall not be invalidated
on that ground alone: Provided, That if the interest of the interlocking
director in one corporation is substantial and his interest in the
other corporation or corporations is merely nominal, he shall be
subject to the provisions of the preceding section insofar as the
latter corporation or corporations are concerned.
Stockholdings
exceeding twenty (20%) percent of the outstanding capital stock
shall be considered substantial for purposes of interlocking directors.
(n)
SECTION
34. Disloyalty of a director. — Where a director, by virtue
of his office, acquires for himself a business opportunity which
should belong to the corporation, thereby obtaining profits to the
prejudice of such corporation, he must account to the latter for
all such profits by refunding the same, unless his act has been
ratified by a vote of the stockholders owning or representing at
least two-thirds (2/3) of the outstanding capital stock. This provision
shall be applicable, notwithstanding the fact that the director
risked his own funds in the venture. (n)
SECTION
35. Executive committee. — The by-laws of a corporation may
create an executive committee, composed of not less than three members
of the board, to be appointed by the board. Said committee may act,
by majority vote of all its members, on such specific matters within
the competence of the board, as may be delegated to it in the by-laws
or on a majority vote of the board, except with respect to: (1)
approval of any action for which shareholders' approval is also
required; (2) the filing of vacancies in the board; (3) the amendment
or repeal of by-laws or the adoption of new by-laws; (4) the amendment
or repeal of any resolution of the board which by its express terms
is not so amendable or repealable; and (5) a distribution of cash
dividends to the shareholders.
TITLE
IV — POWERS OF CORPORATIONS
SECTION
36. Corporate powers and capacity. — Every corporation incorporated
under this Code has the power and capacity:
1.
To sue and be sued in its corporate name;
2.
Of succession by its corporate name for the period of time stated
in the articles of incorporation and the certificate of incorporation;
3.
To adopt and use a corporate seal;
4.
To amend its articles of incorporation in accordance with the provisions
of this Code;
5.
To adopt by-laws, not contrary to law, morals, or public policy,
and to amend or repeal the same in accordance with this Code;
6.
In case of stock corporations, to issue or sell stocks to subscribers
and to sell stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this Code; and to admit members
to the corporation if it be a non-stock corporation;
7.
To purchase, receive, take or grant, hold, convey, sell, lease,
pledge, mortgage and otherwise deal with such real and personal
property, including securities and bonds of other corporations,
as the transaction of the lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed
by law and the Constitution;
8.
To enter into merger or consolidation with other corporations as
provided in this Code;
9.
To make reasonable donations, including those for the public welfare
or for hospital, charitable, cultural, scientific, civic, or similar
purposes: Provided, That no corporation, 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, and other plans for the benefit
of its directors, trustees, officers and employees; and
11.
To exercise such other powers as may be essential or necessary to
carry out its purpose or purposes as stated in the articles of incorporation.
(13a)
SECTION
37. Power to extend or shorten corporate term. — A private
corporation may extend or shorten its term as stated in the articles
of incorporation when approved by a majority vote of the board of
directors or trustees and ratified at a meeting by the stockholders
representing at least two-thirds (2/3) of the outstanding capital
stock or by at least two-thirds (2/3) of the members in case of
non-stock corporations. Written notice of the proposed action and
of the time and place of the meeting shall be addressed to each
stockholder or member at his place of residence as shown on the
books of the corporation and deposited to the addressee in the post
office with postage prepaid, or served personally: Provided, That
in case of extension of corporate term, any dissenting stockholder
may exercise his appraisal right under the conditions provided in
this code. (n)
SECTION
38. Power to increase or decrease capital stock; incur, create or
increase bonded indebtedness. — No corporation shall increase
or decrease its capital stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of the board of
directors and, at a stockholder's meeting duly called for the purpose,
two-thirds (2/3) of the outstanding capital stock shall favor the
increase or diminution of the capital stock, or the incurring, creating
or increasing of any bonded indebtedness. Written notice of the
proposed increase or diminution of the capital stock or of the incurring,
creating, or increasing of any bonded indebtedness and of the time
and place of the stockholder's meeting at which the proposed increase
or diminution of the capital stock or the incurring or increasing
of any bonded indebtedness is to be considered, must be addressed
to each stockholder at his place of residence as shown on the books
of the corporation and deposited to the addressee in the post office
with postage prepaid, or served personally.
A certificate
in duplicate must be signed by a majority of the directors of the
corporation and countersigned by the chairman and the secretary
of the stockholders' meeting, setting forth:
(1)
That the requirements of this section have been complied with;
(2)
The amount of the increase or diminution of the capital stock;
(3)
If an increase of the capital stock, the amount of capital stock
or number of shares of no-par stock thereof actually subscribed,
the names, nationalities and residences of the persons subscribing,
the amount of capital stock or number of no-par stock subscribed
by each, and the amount paid by each on his subscription in cash
or property, or the amount of capital stock or number of shares
of no-par stock allotted to each stock-holder if such increase is
for the purpose of making effective stock dividend therefor authorized;
(4)
Any bonded indebtedness to be incurred, created or increased;
(5)
The actual indebtedness of the corporation on the day of the meeting;
(6)
The amount of stock represented at the meeting; and
(7)
The vote authorizing the increase or diminution of the capital stock,
or the incurring, creating or increasing of any bonded indebtedness.
Any
increase or decrease in the capital stock or the incurring, creating
or increasing of any bonded indebtedness shall require prior approval
of the Securities and Exchange Commission.
One of the duplicate certificates shall be kept on file in the office
of the corporation and the other shall be filed with the Securities
and Exchange Commission and attached to the original articles of
incorporation. From and after approval by the Securities and Exchange
Commission and the issuance by the Commission of its certificate
of filing, the capital stock shall stand increased or decreased
and the incurring, creating or increasing of any bonded indebtedness
authorized, as the certificate of filing may declare: Provided,
That the Securities and Exchange Commission shall not accept for
filing any certificate of increase of capital stock unless accompanied
by the sworn statement of the treasurer of the corporation lawfully
holding office at the time of the filing of the certificate, showing
that at least twenty-five (25%) percent of such increased capital
stock has been subscribed and that at least twenty-five (25%) percent
of the amount subscribed has been paid either in actual cash to
the corporation or that there has been transferred to the corporation
property the valuation of which is equal to twenty-five (25%) percent
of the subscription: Provided, further, That no decrease of the
capital stock shall be approved by the Commission if its effect
shall prejudice the rights of corporate creditors.
Non-stock corporations may incur or create bonded indebtedness,
or increase the same, with the approval by a majority vote of the
board of trustees and of at least two-thirds (2/3) of the members
in a 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)
SECTION
39. Power to deny pre-emptive right. — All stockholders of
a stock corporation shall enjoy pre-emptive right to subscribe to
all issues or disposition of shares of any class, in proportion
to their respective shareholdings, unless such right is denied by
the articles of incorporation or an amendment thereto: Provided,
That such pre-emptive right shall not extend to shares to be issued
in compliance with laws requiring stock offerings or minimum stock
ownership by the public; or to shares to be issued in good faith
with the approval of the stockholders representing two-thirds (2/3)
of the outstanding capital stock, in exchange for property needed
for corporate purposes or in payment of a previously contracted
debt.
SECTION
40. Sale or other disposition of assets. — Subject to the
provisions of existing laws on illegal combinations and monopolies,
a corporation may, by a majority vote of its board of directors
or trustees, sell, lease, exchange, mortgage, pledge or otherwise
dispose of all or substantially all of its property and assets,
including its goodwill, upon such terms and conditions and for such
consideration, which may be money, stocks, bonds or other instruments
for the payment of money or other property or consideration, as
its board of directors or trustees may deem expedient, when authorized
by the vote of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, or in case of non-stock
corporation, by the vote of at least to two-thirds (2/3) of the
members, in a stockholder's or member's meeting duly called for
the purpose. Written notice of the proposed action and of the time
and place of the meeting shall be addressed to each stockholder
or member at his place of residence as shown on the books of the
corporation and deposited to the addressee in the post office with
postage prepaid, or served personally: Provided, That any dissenting
stockholder may exercise his appraisal right under the conditions
provided in this Code.
A sale or other disposition shall be deemed to cover substantially
all the corporate property and assets if thereby the corporation
would be rendered incapable of continuing the business or accomplishing
the purpose for which it was incorporated.
After
such authorization or approval by the stockholders or members, the
board of directors or trustees may, nevertheless, in its discretion,
abandon such sale, lease, exchange, mortgage, pledge or other disposition
of property and assets, subject to the rights of third parties under
any contract relating thereto, without further action or approval
by the stockholders or members.
Nothing
in this section is intended to restrict the power of any corporation,
without the authorization by the stockholders or members, to sell,
lease, exchange, mortgage, pledge or otherwise dispose of any of
its property and assets if the same is necessary in the usual and
regular course of business of said corporation or if the proceeds
of the sale or other disposition of such property and assets be
appropriated for the conduct of its remaining business.
In
non-stock corporations where there are no members with voting rights,
the vote of at least a majority of the trustees in office will be
sufficient authorization for the corporation to enter into any transaction
authorized by this section.
SECTION
41. Power to acquire own shares. — A stock corporation shall
have the power to purchase or acquire its own shares for a legitimate
corporate purpose or purposes, including but not limited to the
following cases: Provided, That the corporation has unrestricted
retained earnings in its books to cover the shares to be purchased
or acquired:
1.
To eliminate fractional shares arising out of stock dividends;
2.
To collect or compromise an indebtedness to the corporation, arising
out of unpaid subscription, in a delinquency sale, and to purchase
delinquent shares sold during said sale; and
3.
To pay dissenting or withdrawing stockholders entitled to payment
for their shares under the provisions of this Code. (a)
SECTION
42. Power to invest corporate funds in another corporation or business
or for any other purpose. — Subject to the provisions of this
Code, a private corporation may invest its funds in any other corporation
or business or for any purpose other than the primary purpose for
which it was organized when approved by a majority of the board
of directors or trustees and ratified by the stockholders representing
at least two-thirds (2/3) of the outstanding capital stock, or by
at least two thirds (2/3) of the members in the case of non-stock
corporations, at a stockholder's or member's meeting duly called
for the purpose. Written notice of the proposed investment and the
time and place of the meeting shall be addressed to each stockholder
or member at his place of residence as shown on the books of the
corporation and deposited to the addressee in the post office with
postage prepaid, or served personally: Provided, That any dissenting
stockholder shall have appraisal right as provided in this Code:
Provided, however, That where the investment by the corporation
is reasonably necessary to accomplish its primary purpose as stated
in the articles of incorporation, the approval of the stockholders
or members shall not be necessary. (17 1/2a)
SECTION
43. Power to declare dividends. — The board of directors of
a stock corporation may declare dividends out of the unrestricted
retained earnings which shall be payable in cash, in property, or
in stock to all stockholders on the basis of outstanding stock held
by them: Provided, That any cash dividends due on delinquent stock
shall first be applied to the unpaid balance on the subscription
plus costs and expenses, while stock dividends shall be withheld
from the delinquent stockholder until his unpaid subscription is
fully paid: Provided, further, That no stock dividend shall be issued
without the approval of stockholders representing not less than
two-thirds (2/3) of the outstanding capital stock at a regular or
special meeting duly called for the purpose. (16a)
Stock
corporations are prohibited from retaining surplus profits in excess
of one hundred (100%) percent of their paid-in capital stock, except:
(1) when justified by definite corporate expansion projects or programs
approved by the board of directors; or (2) when the corporation
is prohibited under any loan agreement with any financial institution
or creditor, whether local or foreign, from declaring dividends
without its/his consent, and such consent has not yet been secured;
or (3) when it can be clearly shown that such retention is necessary
under special circumstances obtaining in the corporation, such as
when there is need for special reserve for probable contingencies.
(n)
SECTION
44. Power to enter into management contract. — No corporation
shall conclude a management contract with another corporation unless
such contract shall have been approved by the board of directors
and by stockholders owning at least the majority of the outstanding
capital stock, or by at least a majority of the members in the case
of a non-stock corporation, of both the managing and the managed
corporation, at a meeting duly called for the purpose: Provided,
That (1) where a stockholder or stockholders representing the same
interest of both the managing and the managed corporations own or
control more than one-third (1/3) of the total outstanding capital
stock entitled to vote of the managing corporation; or (2) where
a 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, then the management contract
must be approved by the stockholders of the managed corporation
owning at least two-thirds (2/3) of the total outstanding capital
stock entitled to vote, or by at least two-thirds (2/3) of the members
in the case of a non-stock corporation. No management contract shall
be entered into for a period longer than five years for any one
term.
The
provisions of the next preceding paragraph shall 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:
Provided, however, That such service contracts or operating agreements
which relate to the exploration, development, exploitation or utilization
of natural resources may be entered into for such periods as may
be provided by the pertinent laws or regulations. (n)
SECTION
45. Ultra vires acts of corporations. — No corporation under
this Code shall possess or exercise any corporate powers except
those conferred by this Code or by its articles of incorporation
and except such as are necessary or incidental to the exercise of
the powers so conferred. (n)
TITLE
V — BY LAWS
SECTION
46. Adoption of by-laws. — Every corporation formed under
this Code must, within one (1) month after receipt of official notice
of the issuance of its certificate of incorporation by the Securities
and Exchange Commission, adopt a code of by-laws for its government
not inconsistent with this Code. For the adoption of by-laws by
the corporation the affirmative vote of the stockholders representing
at least a majority of the outstanding capital stock, or of at least
a majority of the members in case of non-stock corporations, shall
be necessary. The by-laws shall be signed by the stockholders or
members voting for them and shall be kept in the principal office
of the corporation, subject to the inspection of the stockholders
or members during office hours. A copy thereof, duly certified to
by a majority of the directors or trustees countersigned by the
secretary of the corporation, shall be filed with the Securities
and Exchange Commission which shall be attached to the original
articles of incorporation.
Notwithstanding
the provisions of the preceding paragraph, by-laws may be adopted
and filed prior to incorporation; in such case, such by-laws shall
be approved and signed by all the incorporators and submitted to
the Securities and Exchange Commission, together with the articles
of incorporation.
In
all cases, by-laws shall be effective only upon the issuance by
the Securities and Exchange Commission of a certification that the
by-laws are not inconsistent with this Code.
The
Securities and Exchange Commission shall not accept for filing the
by-laws or any amendment thereto of any bank, banking institution,
building and loan association, trust company, insurance company,
public utility, educational institution or other special corporations
governed by special laws, unless accompanied by a certificate of
the appropriate government agency to the effect that such by-laws
or amendments are in accordance with law. (20a)
SECTION
47. Contents of by-laws. — Subject to the provisions of the
Constitution, this Code, other special laws, and the articles of
incorporation, a private corporation may provide in its by-laws
for:
1.
The time, place and manner of calling and conducting regular or
special meetings of the directors or trustees;
2.
The time and manner of calling and conducting regular or special
meetings of the stockholders or members;
3.
The required quorum in meetings of stockholders or members and the
manner of voting therein;
4.
The form for proxies of stockholders and members and the manner
of voting them;
5.
The qualifications, duties and compensation of directors or trustees,
officers and employees;
6.
The time for holding the annual election of directors of trustees
and the mode or manner of giving notice thereof;
7.
The manner of election or appointment and the term of office of
all officers other than directors or trustees;
8.
The penalties for violation of the by-laws;
9.
In the case of stock corporations, the manner of issuing stock certificates;
and
10.
Such other matters as may be necessary for the proper or convenient
transaction of its corporate business and affairs. (21a)
SECTION
48. Amendments to by-laws. — The board of directors or trustees,
by a majority vote thereof, and the owners of at least a majority
of the outstanding capital stock, or at least a majority of the
members of a non-stock corporation, at a regular or special meeting
duly called for the purpose, may amend or repeal any by-laws or
adopt new by-laws. The owners of two-thirds (2/3) of the outstanding
capital stock or two-thirds (2/3) of the members in a non-stock
corporation may delegate to the board of directors or trustees the
power to amend or repeal any by-laws or adopt new by-laws: Provided,
That any power delegated to the board of directors or trustees to
amend or repeal any by-laws or adopt new by-laws shall be considered
as revoked whenever stockholders owning or representing a majority
of the outstanding capital stock or a majority of the members in
non-stock corporations, shall so vote at a regular or special meeting.
Whenever
any amendment or new by-laws are adopted, such amendment or new
by-laws shall be attached to the original by-laws in the office
of the corporation, and a copy thereof, duly certified under oath
by the corporate secretary and a majority of the directors or trustees,
shall be filed with the Securities and Exchange Commission the same
to be attached to the original articles of incorporation and original
by-laws.
The
amended or new by-laws shall only be effective upon the issuance
by the Securities and Exchange Commission of a certification that
the same are not inconsistent with this Code. (22a and 23a)
TITLE
VI — MEETINGS
SECTION
49. Kinds of meetings. — Meetings of directors, trustees,
stockholders, or members may be regular or special. (n)
SECTION
50. Regular and special meetings of stockholders or members. —
Regular meetings of stockholders or members shall be held annually
on a date fixed in the by-laws, or if not so fixed, on any date
in April of every year as determined by the board of directors or
trustees: Provided, That written notice of regular meetings shall
be sent to all stockholders or members of record at least two (2)
weeks prior to the meeting, unless a different period is required
by the by-laws.
Special
meetings of stockholders or members shall be held at any time deemed
necessary or as provided in the by-laws: Provided, however, That
at least one (1) week written notice shall be sent to all stockholders
or members, unless otherwise provided in the by-laws.
Notice
of any meeting may be waived, expressly or impliedly, by any stockholder
or member.
Whenever,
for any cause, there is no person authorized to call a meeting,
the Securities and Exchange Commission, upon petition of a stockholder
or member on a showing of good cause therefor, may issue an order
to the petitioning stockholder or member directing him to call a
meeting of the corporation by giving proper notice required by this
Code or by the by-laws. The petitioning stockholder or member shall
preside thereat until at least a majority of the stockholders or
members present have chosen one of their number as presiding officer.
(24, 26)
SECTION
51. Place and time of meetings of stockholders of members. —
Stockholder's or member's meetings, whether regular or special,
shall be held in the city or municipality where the principal office
of the corporation is located, and if practicable in the principal
office of the corporation: Provided, That Metro Manila shall, for
purposes of this section, be considered a city or municipality.
Notice
of meetings shall be in writing, and the time and place thereof
stated therein.
All
proceedings had and any business transacted at any meeting of the
stockholders or members, if within the powers or authority of the
corporation, shall be valid even if the meeting be improperly held
or called, provided all the stockholders or members of the corporation
are present or duly represented at the meeting. (24 and 25)
SECTION
52. Quorum in meetings. — Unless otherwise provided for in
this Code or in the by-laws, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock or a majority
of the members in the case of non-stock corporations. (n)
SECTION
53. Regular and special meetings of directors or trustees. —
Regular meetings of the board of directors or trustees of every
corporation shall be held monthly, unless the by-laws provide otherwise.
Special meetings of the board of directors or trustees may be held
at any time upon the call of the president or as provided in the
by-laws.
Meetings
of directors or trustees of corporations may be held anywhere in
or outside of the Philippines, unless the by-laws provide otherwise.
Notice of regular or special meetings stating the date, time and
place of the meeting must be sent to every director or trustee at
least one (1) day prior to the scheduled meeting, unless otherwise
provided by the by-laws. A director or trustee may waive this requirement,
either expressly or impliedly. (n)
SECTION
54. Who shall preside at meetings. — The president shall preside
at all meetings of the directors or trustee as well as of the stockholders
or members, unless the by-laws provide otherwise. (n)
SECTION 55. Right to vote of pledgors, mortgagors, and administrators.
— In case of pledged or mortgaged shares in stock corporations,
the pledgor or mortgagor shall have the right to attend and vote
at meetings of stockholders, unless the pledgee or mortgagee is
expressly given by the pledgor or mortgagor such right in writing
which is recorded on the appropriate corporate books. (n)
Executors,
administrators, receivers, and other legal representatives duly
appointed by the court may attend and vote in behalf of the stockholders
or members without need of any written proxy. (27a)
SECTION
56. Voting in case of joint ownership of stock. — In case
of shares of stock owned jointly by two or more persons, in order
to vote the same, the consent of all the co-owners shall be necessary,
unless there is a written proxy, signed by all the co-owners, authorizing
one or some of them or any other person to vote such share or shares:
Provided, That when the shares are owned in an "and/or"
capacity by the holders thereof, any one of the joint owners can
vote said shares or appoint a proxy therefor. (n)
SECTION
57. Voting right for treasury shares. — Treasury shares shall
have no voting right as long as such shares remain in the Treasury.
(n)
SECTION
58. Proxies. — Stockholders and members may vote in person
or by proxy in all meetings of stockholders or members. Proxies
shall in writing, signed by the stockholder or member and filed
before the scheduled meeting with the corporate secretary. Unless
otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and effective
for a period longer than five (5) years at any one time. (n)
SECTION
59. Voting trusts. — One or more stockholders of a stock corporation
may create a voting trust for the purpose of conferring upon a trustee
or trustees the right to vote and other rights pertaining to the
shares for a period not exceeding five (5) years at any time: Provided,
That in the case of a voting trust specifically required as a condition
in a loan agreement, said voting trust may be for a period exceeding
five (5) years but shall automatically expire upon full payment
of the loan. A voting trust agreement must be in writing and notarized,
and shall specify the terms and conditions thereof. A certified
copy of such agreement shall be filed with the corporation and with
the Securities and Exchange Commission; otherwise, said agreement
is ineffective and unenforceable. The certificate or certificates
of stock covered by the voting trust agreement shall be cancelled
and new ones shall be issued in the name of the trustee or trustees
stating that they are issued pursuant to said agreement. In the
books of the corporation, it shall be noted that the transfer in
the name of the trustee or trustees is made pursuant to said voting
trust agreement.
The
trustee or trustees shall execute and deliver to the transferors
voting trust certificates, which shall be transferable in the same
manner and with the same effect as certificates of stock.
The
voting trust agreement filed with the corporation shall be subject
to examination by any stockholder of the corporation in the same
manner as any other corporate book or record: Provided, That both
the transferor and the trustee or trustees may exercise the right
of inspection of all corporate books and records in accordance with
the provisions of this Code.
Any
other stockholder may transfer his shares to the same trustee or
trustees upon the terms and conditions stated in the voting trust
agreement, and thereupon shall be bound by all the provisions of
said agreement.
No
voting trust agreement shall be entered into for the purpose of
circumventing the law against monopolies and illegal combinations
in restraint of trade or used for purposes of fraud.
Unless
expressly renewed, all rights granted in a voting trust agreement
shall automatically expire at the end of the agreed period, and
the voting trust certificates as well as the certificates of stock
in the name of the trustee or trustees shall thereby be deemed cancelled
and new certificates of stock shall be reissued in the name of the
transferors.
The
voting trustee or trustees may vote by proxy unless the agreement
provides otherwise. (36a)
TITLE
VII — STOCKS AND STOCKHOLDERS
SECTION
60. Subscription contract. — Any contract for the acquisition
of unissued stock in an existing corporation or a corporation still
to be formed shall be deemed a subscription within the meaning of
this Title, notwithstanding the fact that the parties refer to it
as a purchase or some other contract. (n)
SECTION
61. Pre-incorporation subscription. — A subscription for shares
of stock of a corporation still to be formed shall be irrevocable
for a period of at least six (6) months from the date of subscription,
unless all of the other subscribers consent to the revocation, or
unless the incorporation of said corporation fails to materialize
within said period or within a longer period as may be stipulated
in the contract of subscription: Provided, That no pre-incorporation
subscription may be revoked after the submission of the articles
of incorporation to the Securities and Exchange Commission. (n)
SECTION
62. Consideration for stocks. — Stocks shall not be issued
for a consideration less than the par or issued price thereof. Consideration
for the issuance of stock may be any or a combination of any two
or more of the following:
1.
Actual cash paid to the corporation;
2.
Property, tangible or intangible, actually received by the corporation
and necessary or convenient for its use and lawful purposes at a
fair valuation equal to the par or issued value of the stock issued;
3.
Labor performed for or services actually rendered to the corporation;
4.
Previously incurred indebtedness of the corporation;
5.
Amounts transferred from unrestricted retained earnings to stated
capital; and
6.
Outstanding shares exchanged for stocks in the event of reclassification
or conversion.
Where
the consideration is other than actual cash, or consists of intangible
property such as patents of copyrights, the valuation thereof shall
initially be determined by the incorporators or the board of directors,
subject to approval by the Securities and Exchange Commission.
Shares
of stock shall not be issued in exchange for promissory notes or
future service.
The
same considerations provided for in this section, insofar as they
may be applicable, may be used for the issuance of bonds by the
corporation.
The
issued price of no-par value shares may be fixed in the articles
of incorporation or by the board of directors pursuant to authority
conferred upon it by the articles of incorporation or the by-laws,
or in the absence thereof, by the stockholders representing at least
a majority of the outstanding capital stock at a meeting duly called
for the purpose. (5 and 16)
SECTION
63. Certificate of stock and transfer of shares. — The capital
stock of stock corporations shall be divided into shares for which
certificates signed by the president or vice president, countersigned
by the secretary or assistant secretary, and sealed with the seal
of the corporation shall be issued in accordance with the by-laws.
Shares of stock so issued are personal property and may be transferred
by delivery of the certificate or certificates indorsed by the owner
or his attorney-in-fact or other person legally authorized to make
the transfer. No transfer, however, shall be valid, except as between
the parties, until the transfer is recorded in the books of the
corporation showing the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates
and the number of shares transferred.
No
shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation. (35)
SECTION
64. Issuance of stock certificates. — No certificate of stock
shall be issued to a subscriber until the full amount of his subscription
together with interest and expenses (in case of delinquent shares),
if any is due, has been paid. (37)
SECTION
65. Liability of directors for watered stocks. — Any director
or officer of a corporation consenting to the issuance of stocks
for a consideration less than its par or issued value or for a consideration
in any form other than cash, valued in excess of its fair value,
or who, having knowledge thereof, does not forthwith express his
objection in writing and file the same with the corporate secretary,
shall be solidarily, liable with the stockholder concerned to the
corporation and its creditors for the difference between the fair
value received at the time of issuance of the stock and the par
or issued value of the same. (n)
SECTION
66. Interest on unpaid subscriptions. — Subscribers for stock
shall pay to the corporation interest on all unpaid subscriptions
from the date of subscription, if so required by, and at the rate
of interest fixed in the by-laws. If no rate of interest is fixed
in the by-laws, such rate shall be deemed to be the legal rate.
(37)
SECTION
67. Payment of balance of subscription. — Subject to the provisions
of the contract of subscription, the board of directors of any stock
corporation may at any time declare due and payable to the corporation
unpaid subscriptions to the capital stock and may collect the same
or such percentage thereof, in either case with accrued interest,
if any, as it may deem necessary.
Payment
of any unpaid subscription or any percentage thereof, together with
the interest accrued, if any, shall be made on the date specified
in the contract of subscription or on the date stated in the call
made by the board. Failure to pay on such date shall render the
entire balance due and payable and shall make the stockholder liable
for interest at the legal rate on such balance, unless a different
rate of interest is provided in the by-laws, computed from such
date until full payment. If within thirty (30) days from the said
date no payment is made, all stocks covered by said subscription
shall thereupon become delinquent and shall be subject to sale as
hereinafter provided, unless the board of directors orders otherwise.
(38)
SECTION 68. Delinquency sale. — The board of directors may,
by resolution, order the sale of delinquent stock and shall specifically
state the amount due on each subscription plus all accrued interest,
and the date, time and place of the sale which shall not be less
than thirty (30) days nor more than sixty (60) days from the date
the stocks become delinquent.
Notice
of said sale, with a copy of the resolution, shall be sent to every
delinquent stockholder either personally or by registered mail.
The same shall furthermore be published once a week for two (2)
consecutive weeks in a newspaper of general circulation in the province
or city where the principal office of the corporation is located.
Unless
the delinquent stockholder pays to the corporation, on or before
the date specified for the sale of the delinquent stock, the balance
due on his subscription, plus accrued interest, costs of advertisement
and expenses of sale, or unless the board of directors otherwise
orders, said delinquent stock shall be sold at public auction to
such bidder who shall offer to pay the full amount of the balance
on the subscription together with accrued interest, costs of advertisement
and expenses of sale, for the smallest number of shares or fraction
of a share. The stock so purchased shall be transferred to such
purchaser in the books of the corporation and a certificate for
such stock shall be issued in his favor. The remaining shares, if
any, shall be credited in favor of the delinquent stockholder who
shall likewise be entitled to the issuance of a certificate of stock
covering such shares.
Should
there be no bidder at the public auction who offers to pay the full
amount of the balance on the subscription together with accrued
interest, costs of advertisement and expenses of sale, for the smallest
number of shares or fraction of a share, the corporation may, subject
to the provisions of this Code, bid for the same, and the total
amount due shall be credited as paid in full in the books of the
corporation. Title to all the shares of stock covered by the subscription
shall be vested in the corporation as treasury shares and may be
disposed of by said corporation in accordance with the provisions
of this Code. (39a-46a)
SECTION
69. When sale may be questioned. — No action to recover delinquent
stock sold can be sustained upon the ground of irregularity or defect
in the notice of sale, or in the sale itself of the delinquent stock,
unless the party seeking to maintain such action first pays or tenders
to the party holding the stock the sum for which the same was sold,
with interest from the date of sale at the legal rate; and no such
action shall be maintained unless it is commenced by the filing
of a complaint within six (6) months from the date of sale. (47a)
SECTION
70. Court action to recover unpaid subscription. — Nothing
in this Code shall prevent the corporation from collecting by action
in a court of proper jurisdiction the amount due on any unpaid subscription,
with accrued interest, costs and expenses. (49a)
SECTION
71. Effect of delinquency. — No delinquent stock shall be
voted for or be entitled to vote or to representation at any stockholder's
meeting, nor shall the holder thereof be entitled to any of the
rights of a stockholder except the right to dividends in accordance
with the provisions of this Code, until and unless he pays the amount
due on his subscription with accrued interest, and the costs and
expenses of advertisement, if any. (50a)
SECTION
72. Rights of unpaid shares. — Holders of subscribed shares
not fully paid which are not delinquent shall have all the rights
of a stockholder. (n)
SECTION
73. Lost or destroyed certificates. — The following procedure
shall be followed for the issuance by a corporation of new certificates
of stock in lieu of those which have been lost, stolen or destroyed:
1.
The registered owner of a certificate of stock in a corporation
or his legal representative shall file with the corporation an affidavit
in triplicate setting forth, if possible, the circumstances as to
how the certificate was lost, stolen or destroyed, the number of
shares represented by such certificate, the serial number of the
certificate and the name of the corporation which issued the same.
He shall also submit such other information and evidence which he
may deem necessary;
2.
After verifying the affidavit and other information and evidence
with the books of the corporation, said corporation shall publish
a notice in a newspaper of general circulation published in the
place where the corporation has its principal office, once a week
for three (3) consecutive weeks at the expense of the registered
owner of the certificate of stock which has been lost, stolen or
destroyed. The notice shall state the name of said corporation,
the name of the registered owner and the serial number of said certificate,
and the number of shares represented by such certificate, and that
after the expiration of one (1) year from the date of the last publication,
if no contest has been presented to said corporation regarding said
certificate of stock, the right to make such contest shall be barred
and said corporation shall cancel in its books the certificate of
stock which has been lost, stolen or destroyed and issue in lieu
thereof new certificate of stock, unless the registered owner files
a bond or other security in lieu thereof as may be required, effective
for a period of one (1) year, for such amount and in such form and
with such sureties as may be satisfactory to the board of directors,
in which case a new certificate may be issued even before the expiration
of the one (1) year period provided herein: Provided, That if a
contest has been presented to said corporation or if an action is
pending in court regarding the ownership of said certificate of
stock which has been lost, stolen or destroyed, the issuance of
the new certificate of stock in lieu thereof shall be suspended
until the final decision by the court regarding the ownership of
said certificate of stock which has been lost, stolen or destroyed.
Except
in case of fraud, bad faith, or negligence on the part of the corporation
and its officers, no action may be brought against any corporation
which shall have issued certificate of stock in lieu of those lost,
stolen or destroyed pursuant to the procedure above-described. (R.A.
201a)
TITLE
VIII — CORPORATE BOOKS AND RECORDS
SECTION
74. Books to be kept; stock transfer agent. — Every corporation
shall keep and carefully preserve at its principal office a record
of all business transactions and minutes of all meetings of stockholders
or members, or of the board of directors or trustees, in which shall
be set forth in detail the time and place of holding the meeting,
how authorized, the notice given, whether the meeting was regular
or special, if special its object, those present and absent, and
every act done or ordered done at the meeting. Upon the demand of
any director, trustee, stockholder or member, the time when any
director, trustee, stockholder or member entered or left the meeting
must be noted in the minutes; and on a similar demand, the yeas
and nays must be taken on any motion or proposition, and a record
thereof carefully made. The protest of any director, trustee, stockholder
or member on any action or proposed action must be recorded in full
on his demand.
The
records of all business transactions of the corporation and the
minutes of any meetings shall be open to inspection by any director,
trustee, stockholder or member of the corporation at reasonable
hours on business days and he may demand, in writing, for a copy
of excerpts from said records or minutes, at his expense.
Any
officer or agent of the corporation who shall refuse to allow any
director, trustees, stockholder or member of the corporation to
examine and copy excerpts from its records or minutes, in accordance
with the provisions of this Code, shall be liable to such director,
trustee, stockholder or member for damages, and in addition, shall
be guilty of an offense which shall be punishable under Section
144 of this Code: Provided, That if such refusal is made pursuant
to a resolution or order of the board of directors or trustees,
the liability under this section for such action shall be imposed
upon the directors or trustees who voted for such refusal: and Provided,
further, That it shall be a defense to any action under this section
that the person demanding to examine and copy excerpts from the
corporation's records and minutes has improperly used any information
secured through any prior examination of the records or minutes
of such corporation or of any other corporation, or was not acting
in good faith or for a legitimate purpose in making his demand.
Stock
corporations must also keep a book to be known as the "stock
and transfer book", in which must be kept a record of all stocks
in the names of the stockholders alphabetically arranged; the installments
paid and unpaid on all stock for which subscription has been made,
and the date of payment of any installment; a statement of every
alienation, sale or transfer of stock made, the date thereof, and
by and to whom made; and such other entries as the by-laws may prescribe.
The stock and transfer book shall be kept in the principal office
of the corporation or in the office of its stock transfer agent
and shall be open for inspection by any director or stockholder
of the corporation at reasonable hours on business days.
No
stock transfer agent or one engaged principally in the business
of registering transfers of stocks in behalf of a stock corporation
shall be allowed to operate in the Philippines unless he secures
a license from the Securities and Exchange Commission and pays a
fee as may be fixed by the Commission, which shall be renewable
annually: Provided, That a stock corporation is not precluded from
performing or making transfer of its own stocks, in which case all
the rules and regulations imposed on stock transfer agents, except
the payment of a license fee herein provided, shall be applicable.
(51a and 32a; P.B. No. 268.)
SECTION
75. Right to financial statements. — Within ten (10) days
from receipt of a written request of any stockholder or member,
the corporation shall furnish to him its most recent financial statement,
which shall include a balance sheet as of the end of the last taxable
year and a profit or loss statement for said taxable year, showing
in reasonable detail its assets and liabilities and the result of
its operations.
At the regular meeting of stockholders or members, the board of
directors or trustees shall present to such stockholders or members
a financial report of the operations of the corporation for the
preceding year, which shall include financial statements, duly signed
and certified by an independent certified public accountant.
However,
if the paid-up capital of the corporation is less than P50,000.00,
the financial statements may be certified under oath by the treasurer
or any responsible officer of the corporation. (n)
TITLE
IX — MERGER AND CONSOLIDATION
SECTION
76. Plan or merger of consolidation. — Two or more corporations
may merge into a single corporation which shall be one of the constituent
corporations or may consolidate into a new single corporation which
shall be the consolidated corporation.
The
board of directors or trustees of each corporation, party to the
merger or consolidation, shall approve a plan of merger or consolidation
setting forth the following:
1.
The names of the corporations proposing to merge or consolidate,
hereinafter referred to as the constituent corporations;
2.
The terms of the merger or consolidation and the mode of carrying
the same into effect;
3.
A statement of the changes, if any, in the articles of incorporation
of the surviving corporation in case of merger; and, with respect
to the consolidated corporation in case of consolidation, all the
statements required to be set forth in the articles of incorporation
for corporations organized under this Code; and
4.
Such other provisions with respect to the proposed merger or consolidation
as are deemed necessary or desirable. (n)
SECTION
77. Stockholder's or member's approval. — Upon approval by
majority vote of each of the board of directors or trustees of the
constituent corporations of the plan of merger or consolidation,
the same shall be submitted for approval by the stockholders or
members of each of such corporations at separate corporate meetings
duly called for the purpose. Notice of such meetings shall be given
to all stockholders or members of the respective corporations, at
least two (2) weeks prior to the date of the meeting, either personally
or by registered mail. Said notice shall state the purpose of the
meeting and shall include a copy or a summary of the plan of merger
or consolidation. The affirmative vote of stockholders representing
at least two-thirds (2/3) of the outstanding capital stock of each
corporation in the case of stock corporations or at least two-thirds
(2/3) of the members in the case of non-stock corporations shall
be necessary for the approval of such plan. Any dissenting stockholder
in stock corporations may exercise his appraisal right in accordance
with the Code: Provided, That if after the approval by the stockholders
of such plan, the board of directors decides to abandon the plan,
the appraisal right shall be extinguished.
Any
amendment to the plan of merger or consolidation may be made, provided
such amendment is approved by majority vote of the respective boards
of directors or trustees of all the constituent corporations and
ratified by the affirmative vote of stockholders representing at
least two-thirds (2/3) of the outstanding capital stock or of two-thirds
(2/3) of the members of each of the constituent corporations. Such
plan, together with any amendment, shall be considered as the agreement
of merger or consolidation. (n)
SECTION
78. Articles of merger or consolidation. — After the approval
by the stockholders or members as required by the preceding section,
articles of merger or articles of consolidation shall be executed
by each of the constituent corporations, to be signed by the president
or vice-president and certified by the secretary or assistant secretary
of each corporation setting forth:
1.
The plan of the merger or the plan of consolidation;
2.
As to stock corporations, the number of shares outstanding, or in
the case of non-stock corporations, the number of members; and
3.
As to each corporation, the number of shares or members voting for
and against such plan, respectively. (n)
SECTION
79. Effectivity of merger or consolidation. — The articles
of merger or of consolidation, signed and certified as herein above
required, shall be submitted to the Securities and Exchange Commission
in quadruplicate for its approval: Provided, That in the case of
merger or consolidation of banks or banking institutions, building
and loan associations, trust companies, insurance companies, public
utilities, educational institutions and other special corporations
governed by special laws, the favorable recommendation of the appropriate
government agency shall first be obtained. If the Commission is
satisfied that the merger or consolidation of the corporations concerned
is not inconsistent with the provisions of this Code and existing
laws, it shall issue a certificate of merger or of consolidation,
at which time the merger or consolidation shall be effective.
If,
upon investigation, the Securities and Exchange Commission has reason
to believe that the proposed merger or consolidation is contrary
to or inconsistent with the provisions of this Code or existing
laws, it shall set a hearing to give the corporations concerned
the opportunity to be heard. Written notice of the date, time and
place of hearing shall be given to each constituent corporation
at least two (2) weeks before said hearing. The Commission shall
thereafter proceed as provided in this Code. (n)
SECTION 80. Effects of merger or consolidation. — The merger
or consolidation shall have the following effects:
1.
The constituent corporations shall become a single corporation which,
in case of merger, shall be the surviving corporation designated
in the plan of merger; and, in case of consolidation, shall be the
consolidated corporation designated in the plan of consolidation;
2.
The separate existence of the constituent corporations shall cease,
except that of the surviving or the consolidated corporation;
3.
The surviving or the consolidated corporation shall possess all
the rights, privileges, immunities and powers and shall be subject
to all the duties and liabilities of a corporation organized under
this Code;
4.
The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises
of each of the constituent corporations; and all property, real
or personal, and all receivables due on whatever account, including
subscriptions to shares and other choses in action, and all and
every other interest of, or belonging to, or due to each constituent
corporation, shall be deemed transferred to and vested in such surviving
or consolidated corporation without further act or deed; and
5.
The surviving or consolidated corporation shall be responsible and
liable for all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations;
and any pending claim, action or proceeding brought by or against
any of such constituent corporations may be prosecuted by or against
the surviving or consolidated corporation. The rights of creditors
or liens upon the property of any of such constituent corporations
shall not be impaired by such merger or consolidation. (n)
TITLE
X — APPRAISAL RIGHT
SECTION 81. Instances of appraisal right. — Any stockholder
of a corporation shall have the right to dissent and demand payment
of the fair value of his shares in the following instances:
1.
In case any amendment to the articles of incorporation has the effect
of changing or restricting the rights of any stockholder or class
of shares, or of authorizing preferences in any respect superior
to those of outstanding shares of any class, or of extending or
shortening the term of corporate existence;
2.
In case of sale, lease, exchange, transfer, mortgage, pledge or
other disposition of all or substantially all of the corporate property
and assets as provided in the Code; and
3.
In case of merger or consolidation. (n)
SECTION
82. How right is exercised. — The appraisal right may be exercised
by any stockholder who shall have voted against the proposed corporate
action, by making a written demand on the corporation within thirty
(30) days after the date on which the vote was taken for payment
of the fair value of his shares: Provided, That failure to make
the demand within such period shall be deemed a waiver of the appraisal
right. If the proposed corporate action is implemented or affected,
the corporation shall pay to such stockholder, upon surrender of
the certificate or certificates of stock representing his shares,
the fair value thereof as of the day prior to the date on which
the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action.
If within a period of sixty (60) days from the date the corporate
action was approved by the stockholders, the withdrawing stockholder
and the corporation cannot agree on the fair value of the shares,
it shall be determined and appraised by three (3) disinterested
persons, one of whom shall be named by the stockholder, another
by the corporation, and the third by the two thus chosen. The findings
of the majority of the appraisers shall be final, and their award
shall be paid by the corporation within thirty (30) days after such
award is made: Provided, That no payment shall be made to any dissenting
stockholder unless the corporation has unrestricted retained earnings
in its books to cover such payment: and Provided, further, That
upon payment by the corporation of the agreed or awarded price,
the stockholder shall forthwith transfer his shares to the corporation.
(n)
SECTION
83. Effect of demand and termination of right. — From the
time of demand for payment of the fair value of a stockholder's
shares until either the abandonment of the corporate action involved
or the purchase of the said shares by the corporation, all rights
accruing to such shares, including voting and dividend rights, shall
be suspended in accordance with the provisions of this Code, except
the right of such stockholder to receive payment of the fair value
thereof: Provided, That if the dissenting stockholder is not paid
the value of his shares within 30 days after the award, his voting
and dividend rights shall immediately be restored. (n)
SECTION
84. When right to payment ceases. — No demand for payment
under this Title may be withdrawn unless the corporation consents
thereto. If, however, such demand for payment is withdrawn with
the consent of the corporation, or if the proposed corporate action
is abandoned or rescinded by the corporation or disapproved by the
Securities and Exchange Commission where such approval is necessary,
or if the Securities and Exchange Commission determines that such
stockholder is not entitled to the appraisal right, then the right
of said stockholder to be paid the fair value of his shares shall
cease, his status as a stockholder shall thereupon be restored,
and all dividend distributions which would have accrued on his shares
shall be paid to him. (n)
SECTION
85. Who bears costs of appraisal. — The costs and expenses
of appraisal shall be borne by the corporation, unless the fair
value ascertained by the appraisers is approximately the same as
the price which the corporation may have offered to pay the stockholder,
in which case they shall be borne by the latter. In the case of
an action to recover such fair value, all costs and expenses shall
be assessed against the corporation, unless the refusal of the stockholder
to receive payment was unjustified. (n)
SECTION
86. Notation on certificates; rights of transferee. — Within
ten (10) days after demanding payment for his shares, a dissenting
stockholder shall submit the certificates of stock representing
his shares to the corporation for notation thereon that such shares
are dissenting shares. His failure to do so shall, at the option
of the corporation, terminate his rights under this Title. If shares
represented by the certificates bearing such notation are transferred,
and the certificates consequently cancelled, the rights of the transferor
as a dissenting stockholder under this Title shall cease and the
transferee shall have all the rights of a regular stockholder; and
all dividend distributions which would have accrued on such shares
shall be paid to the transferee. (n)
TITLE
XI — NON-STOCK CORPORATIONS
SECTION
87. Definition. — For the purposes of this Code, a non-stock
corporation is one where no part of its income is distributable
as dividends to its members, trustees, or officers, subject to the
provisions of this Code on dissolution: Provided, That any profit
which a non-stock corporation may obtain as an incident to its operations
shall, whenever necessary or proper, be used for the furtherance
of the purpose or purposes for which the corporation was organized,
subject to the provisions of this Title.
The
provisions governing stock corporation, when pertinent, shall be
applicable to non-stock corporations, except as may be covered by
specific provisions of this Title. (n)
SECTION
88. Purposes. — Non-stock corporations may be formed or organized
for charitable, religious, educational, professional, cultural,
fraternal, literary, scientific, social, civic service, or similar
purposes, like trade, industry, agricultural and like chambers,
or any combination thereof, subject to the special provisions of
this Title governing particular classes of non-stock corporations.
(n)
CHAPTER
I — Members
SECTION
89. Right to vote. — The right of the members of any class
or classes to vote may be limited, broadened or denied to the extent
specified in the articles of incorporation or the by-laws. Unless
so limited, broadened or denied, each member, regardless of class,
shall be entitled to one vote.
Unless
otherwise provided in the articles of incorporation or the by-laws,
a member may vote by proxy in accordance with the provisions of
this Code. (n)
Voting
by mail or other similar means by members of non-stock corporations
may be authorized by the by-laws of non-stock corporations with
the approval of, and under such conditions which may be prescribed
by, the Securities and Exchange Commission.
SECTION
90. Non-transferability of membership. — Membership in a non-stock
corporation and all rights arising therefrom are personal and non-transferable,
unless the articles of incorporation or the by-laws otherwise provide.
(n)
SECTION
91. Termination of membership. — Membership shall be terminated
in the manner and for the causes provided in the articles of incorporation
or the by-laws. Termination of membership shall have the effect
of extinguishing all rights of a member in the corporation or in
its property, unless otherwise provided in the articles of incorporation
or the by-laws. (n)
CHAPTER
II — Trustees and Offices
SECTION
92. Election and term of trustees. — Unless otherwise provided
in the articles of incorporation or the by-laws, the board of trustees
of non-stock corporations, which may be more than fifteen (15) in
number as may be fixed in their articles of incorporation or by-laws,
shall, as soon as organized, so classify themselves that the term
of office of one-third (1/3) of their number shall expire every
year; and subsequent elections of trustees comprising one-third
(1/3) of the board of trustees shall be held annually and trustees
so elected shall have a term of three (3) years. Trustees thereafter
elected to fill vacancies occurring before the expiration of a particular
term shall hold office only for the unexpired period.
No
person shall be elected as trustee unless he is a member of the
corporation.
Unless
otherwise provided in the articles of incorporation or the by-laws,
officers of a non-stock corporation may be directly elected by the
members. (n)
SECTION
93. Place of meetings. — The by-laws may provide that the
members of a non-stock corporation may hold their regular or special
meetings at any place even outside the place where the principal
office of the corporation is located: Provided, That proper notice
is sent to all members indicating the date, time and place of the
meeting: and Provided, further, That the place of meeting shall
be within the Philippines. (n)
CHAPTER
III — Distribution of Assets in Non-Stock Corporations
SECTION
94. Rules of distribution. — In case dissolution of a non-stock
corporation in accordance with the provisions of this Code, its
assets shall be applied and distributed as follows:
1.
All liabilities and obligations of the corporation shall be paid,
satisfied and discharged, or adequate provision shall be made therefore;
2.
Assets held by the corporation upon a condition requiring return,
transfer or conveyance, and which condition occurs by reason of
the dissolution, shall be returned, transferred or conveyed in accordance
with such requirements;
3.
Assets received and held by the corporation subject to limitations
permitting their use only for charitable, religious, benevolent,
educational or similar purposes, but not held upon a condition requiring
return, transfer or conveyance by reason of the dissolution, shall
be transferred or conveyed to one or more corporations, societies
or organizations engaged in activities in the Philippines substantially
similar to those of the dissolving corporation according to a plan
of distribution adopted pursuant to this Chapter;
4.
Assets other than those mentioned in the preceding paragraphs, if
any, shall be distributed in accordance with the provisions of the
articles of incorporation or the by-laws, to the extent that the
articles of incorporation or the by-laws, determine the distributive
rights of members, or any class or classes of members, or provide
for distribution; and
5.
In any other case, assets may be distributed to such persons, societies,
organizations or corporations, whether or not organized for profit,
as may be specified in a plan of distribution adopted pursuant to
this Chapter. (n)
SECTION
95. Plan of distribution of assets. — A plan providing for
the distribution of assets, not inconsistent with the provisions
of this Title, may be adopted by a non-stock corporation in the
process of dissolution in the following manner:
The
board of trustees shall, by majority vote, adopt a resolution recommending
a plan of distribution and directing the submission thereof to a
vote at a regular or special meeting of members having voting rights.
Written notice setting forth the proposed plan of distribution or
a summary thereof and the date, time and place of such meeting shall
be given to each member entitled to vote, within the time and in
the manner provided in this Code for the giving of notice of meetings
to members. Such plan of distribution shall be adopted upon approval
of at least two-thirds (2/3) of the members having voting rights
present or represented by proxy at such meeting. (n)
TITLE
XII — CLOSE CORPORATIONS
SECTION
96. Definition and applicability of Title. — A close corporation,
within the meaning of this Code, is one whose articles of incorporation
provide that: (1) All the corporation's issued stock of all classes,
exclusive of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding twenty (20); (2)
all the issued stock of all classes shall be subject to one or more
specified restrictions on transfer permitted by this Title; and
(3) The corporation shall not list in any stock exchange or make
any public offering of any of its stock of any class. Notwithstanding
the foregoing, a corporation shall not be deemed a close corporation
when at least two-thirds (2/3) of its voting stock or voting rights
is owned or controlled by another corporation which is not a close
corporation within the meaning of this Code.
Any
corporation may be incorporated as a close corporation, except mining
or oil companies, stock exchanges, banks, insurance companies, public
utilities, educational institutions and corporations declared to
be vested with public interest in accordance with the provisions
of this Code.
The
provisions of this Title shall primarily govern close corporations:
Provided, That the provisions of other Titles of this Code shall
apply suppletorily except insofar as this Title otherwise provides.
SECTION
97. Articles of incorporation. — The articles of incorporation
of a close corporation may provide:
1.
For a classification of shares or rights and the qualifications
for owning or holding the same and restrictions on their transfers
as may be stated therein, subject to the provisions of the following
section;
2. For a classification of directors into one or more classes, each
of whom may be voted for and elected solely by a particular class
of stock; and
3. For a greater quorum or voting requirements in meetings of stockholders
or directors than those provided in this Code.
The
articles of incorporation of a close corporation may provide that
the business of the corporation shall be managed by the stockholders
of the corporation rather than by a board of directors. So long
as this provision continues in effect:
1.
No meeting of stockholders need be called to elect directors;
2.
Unless the context clearly requires otherwise, the stockholders
of the corporation shall be deemed to be directors for the purpose
of applying the provisions of this Code; and
3.
The stockholders of the corporation shall be subject to all liabilities
of directors.
The
articles of incorporation may likewise provide that all officers
or employees or that specified officers or employees shall be elected
or appointed by the stockholders, instead of by the board of directors.
SECTION
98. Validity of restrictions on transfer of shares. — Restrictions
on the right to transfer shares must appear in the articles of incorporation
and in the by-laws as well as in the certificate of stock; otherwise,
the same shall not be binding on any purchaser thereof in good faith.
Said restrictions shall not be more onerous than granting the existing
stockholders or the corporation the option to purchase the shares
of the transferring stockholder with such reasonable terms, conditions
or period stated therein. If upon the expiration of said period,
the existing stockholders or the corporation fails to exercise the
option to purchase, the transferring stockholder may sell his shares
to any third person.
SECTION
99. Effects of issuance or transfer of stock in breach of qualifying
conditions. —
1.
If stock of a close corporation is issued or transferred to any
person who is not entitled under any provision of the articles of
incorporation to be a holder of record of its stock, and if the
certificate for such stock conspicuously shows the qualifications
of the persons entitled to be holders of record thereof, such person
is conclusively presumed to have notice of the fact of his ineligibility
to be a stockholder.
2.
If the articles of incorporation of a close corporation states the
number of persons, not exceeding twenty (20), who are entitled to
be holders of record of its stock, and if the certificate for such
stock conspicuously states such number, and if the issuance or transfer
of stock to any person would cause the stock to be held by more
than such number of persons, the person to whom such stock is issued
or transferred is conclusively presumed to have notice of this fact.
3.
If a stock certificate of any close corporation conspicuously shows
a restriction on transfer of stock of the corporation, the transferee
of the stock is conclusively presumed to have notice of the fact
that he has acquired stock in violation of the restriction, if such
acquisition violates the restriction.
4.
Whenever any person to whom stock of a close corporation has been
issued or transferred has, or is conclusively presumed under this
section to have, notice either (a) that he is a person not eligible
to be a holder of stock of the corporation, or (b) that transfer
of stock to him would cause the stock of the corporation to be held
by more than the number of persons permitted by its articles of
incorporation to hold stock of the corporation, or (c) that the
transfer of stock is in violation of a restriction on transfer of
stock, the corporation may, at its option, refuse to register the
transfer of stock in the name of the transferee.
5.
The provisions of subsection (4) shall not be applicable if the
transfer of stock, though contrary to subsections (1), (2) or (3),
has been consented to by all the stockholders of the close corporation,
or if the close corporation has amended its articles of incorporation
in accordance with this Title.
6.
The term "transfer", as used in this section, is not limited
to a transfer for value.
7.
The provisions of this section shall not impair any right which
the transferee may have to rescind the transfer or to recover under
any applicable warranty, express or implied.
SECTION
100. Agreements by stockholders. —
1.
Agreements by and among stockholders executed before the formation
and organization of a close corporation, signed by all stockholders,
shall survive the incorporation of such corporation and shall continue
to be valid and binding between and among such stockholders, if
such be their intent, to the extent that such agreements are not
inconsistent with the articles of incorporation, irrespective of
where the provisions of such agreements are contained, except those
required by this Title to be embodied in said articles of incorporation.
2.
An agreement between two or more stockholders, if in writing and
signed by the parties thereto, may provide that in exercising any
voting rights, the shares held by them shall be voted as therein
provided, or as they may agree, or as determined in accordance with
a procedure agreed upon by them.
3.
No provision in any written agreement signed by the stockholders,
relating to any phase of the corporate affairs, shall be invalidated
as between the parties on the ground that its effect is to make
them partners among themselves.
4.
A written agreement among some or all of the stockholders in a close
corporation shall not be invalidated on the ground that it so relates
to the conduct of the business and affairs of the corporation as
to restrict or interfere with the discretion or powers of the board
of directors: Provided, That such agreement shall impose on the
stockholders who are parties thereto the liabilities for managerial
acts imposed by this Code on directors.
5.
To the extent that the stockholders are actively engaged in the
management or operation of the business and affairs of a close corporation,
the stockholders shall be held to strict fiduciary duties to each
other and among themselves. Said stockholders shall be personally
liable for corporate torts unless the corporation has obtained reasonably
adequate liability insurance.
SECTION
101. When board meeting is unnecessary or improperly held. —
Unless the by-laws provide otherwise, any action by the directors
of a close corporation without a meeting shall nevertheless be deemed
valid if:
1.
Before or after such action is taken, written consent thereto is
signed by all the directors; or
2.
All the stockholders have actual or implied knowledge of the action
and make no prompt objection thereto in writing; or
3.
The directors are accustomed to take informal action with the express
or implied acquiescence of all the stockholders; or
4.
All the directors have express or implied knowledge of the action
in question and none of them makes prompt objection thereto in writing.
If
a director's meeting is held without proper call or notice, an action
taken therein within the corporate powers is deemed ratified by
a director who failed to attend, unless he promptly files his written
objection with the secretary of the corporation after having knowledge
thereof.
SECTION
102. Pre-emptive right in close corporations. — The pre-emptive
right of stockholders in close corporations shall extend to all
stock to be issued, including reissuance of treasury shares, whether
for money, property or personal services, or in payment of corporate
debts, unless the articles of incorporation provide otherwise.
SECTION
103. Amendment of articles of incorporation. — Any amendment
to the articles of incorporation which seeks to delete or remove
any provision required by this Title to be contained in the articles
of incorporation or to reduce a quorum or voting requirement stated
in said articles of incorporation shall not be valid or effective
unless approved by the affirmative vote of at least two-thirds (2/3)
of the outstanding capital stock, whether with or without voting
rights, or of such greater proportion of shares as may be specifically
provided in the articles of incorporation for amending, deleting
or removing any of the aforesaid provisions, at a meeting duly called
for the purpose.
SECTION
104. Deadlocks. — Notwithstanding any contrary provision in
the articles of incorporation or by-laws or agreement of stockholders
of a close corporation, if the directors or stockholders are so
divided respecting the management of the corporation's business
and affairs that the votes required for any corporate action cannot
be obtained, with the consequence that the business and affairs
of the corporation can no longer be conducted to the advantage of
the stockholders generally, the Securities and Exchange Commission,
upon written petition by any stockholder, shall have the power to
arbitrate the dispute. In the exercise of such power, the Commission
shall have authority to make such order as it deems appropriate,
including an order: (1) cancelling or altering any provision contained
in the articles of incorporation, by-laws, or any stockholder's
agreement; (2) cancelling, altering or enjoining any resolution
or act of the corporation or its board of directors, stockholders,
or officers; (3) directing or prohibiting any act of the corporation
or its board of directors, stockholders, officers, or other persons
party to the action; (4) requiring the purchase at their fair value
of shares of any stockholder, either by the corporation regardless
of the availability of unrestricted retained earnings in its books,
or by the other stockholders; (5) appointing a provisional director;
(6) dissolving the corporation; or (7) granting such other relief
as the circumstances may warrant.
A provisional
director shall be an impartial person who is neither a stockholder
nor a creditor of the corporation or of any subsidiary or affiliate
of the corporation, and whose further qualifications, if any, may
be determined by the Commission. A provisional director is not a
receiver of the corporation and does not have the title and powers
of a custodian or receiver. A provisional director shall have all
the rights and powers of a duly elected director of the corporation,
including the right to notice of and to vote at meetings of directors,
until such time as he shall be removed by order of the Commission
or by all the stockholders. His compensation shall be determined
by agreement between him and the corporation subject to approval
of the Commission, which may fix his compensation in the absence
of agreement or in the event of disagreement between the provisional
director and the corporation.
SECTION
105. Withdrawal of stockholder or dissolution of corporation. —
In addition and without prejudice to other rights and remedies available
to a stockholder under this Title, any stockholder of a close corporation
may, for any reason, compel the said corporation to purchase his
shares at their fair value, which shall not be less than their par
or issued value, when the corporation has sufficient assets in its
books to cover its debts and liabilities exclusive of capital stock:
Provided, That any stockholder of a close corporation may, by written
petition to the Securities and Exchange Commission, compel the dissolution
of such corporation whenever any of acts of the directors, officers
or those in control of the corporation is illegal, or fraudulent,
or dishonest, or oppressive or unfairly prejudicial to the corporation
or any stockholder, or whenever corporate assets are being misapplied
or wasted.
TITLE
XIII — SPECIAL CORPORATIONS
CHAPTER I — Educational Corporations
SECTION
106. Incorporation. — Educational corporations shall be governed
by special laws and by the general provisions of this Code. (n)
SECTION
107. Pre-requisites to incorporation. — Except upon favorable
recommendation of the Ministry of Education and Culture, the Securities
and Exchange Commission shall not accept or approve the articles
of incorporation and by-laws of any educational institution. (168a)
SECTION
108. Board of trustees. — Trustees of educational institutions
organized as non-stock corporations shall not be less than five
(5) nor more than fifteen (15): Provided, however, That the number
of trustees shall be in multiples of five (5).
Unless
otherwise provided in the articles of incorporation on the by-laws,
the board of trustees of incorporated schools, colleges, or other
institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold
office only for the unexpired period. Trustees elected thereafter
to fill vacancies caused by expiration of term shall hold office
for five (5) years. A majority of the trustees shall constitute
a quorum for the transaction of business. The powers and authority
of trustees shall be defined in the by-laws.
For
institutions organized as stock corporations, the number and term
of directors shall be governed by the provisions on stock corporations.
(169a)
CHAPTER
II — Religious Corporations
SECTION
109. Classes of religious corporations. — Religious corporations
may be incorporated by one or more persons. Such corporations may
be classified into corporations sole and religious societies.
Religious
corporations shall be governed by this Chapter and by the general
provisions on non-stock corporations insofar as they may be applicable.
(n)
SECTION
110. Corporation sole. — For the purpose of administering
and managing, as trustee, the affairs, property and temporalities
of any religious denomination, sect or church, a corporation sole
may be formed by the chief archbishop, bishop, priest, minister,
rabbi or other presiding elder of such religious denomination, sect
or church. (154a)
SECTION
111. Articles of incorporation. — In order to become a corporation
sole, the chief archbishop, bishop, priest, minister, rabbi or presiding
elder of any religious denomination, sect or church must file with
the Securities and Exchange Commission articles of incorporation
setting forth the following:
1.
That he is the chief archbishop, bishop, priest, minister, rabbi
or presiding elder of his religious denomination, sect or church
and that he desires to become a corporation sole;
2.
That the rules, regulations and discipline of his religious denomination,
sect or church are not inconsistent with his becoming a corporation
sole and do not forbid it;
3.
That as such chief archbishop, bishop, priest, minister, rabbi or
presiding elder, he is charged with the administration of the temporalities
and the management of the affairs, estate and properties of his
religious denomination, sect or church within his territorial jurisdiction,
describing such territorial jurisdiction;
4.
The manner in which any vacancy occurring in the office of chief
archbishop, bishop, priest, minister, rabbi of presiding elder is
required to be filled, according to the rules, regulations or discipline
of the religious denomination, sect or church to which he belongs;
and
5.
The place where the principal office of the corporation sole is
to be established and located, which place must be within the Philippines.
The
articles of incorporation may include any other provision not contrary
to law for the regulation of the affairs of the corporation. (n)
SECTION
112. Submission of the articles of incorporation. — The articles
of incorporation must be verified, before filing, by affidavit or
affirmation of the chief archbishop, bishop, priest, minister, rabbi
or presiding elder, as the case may be, and accompanied by a copy
of the commission, certificate 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
and after the filing with the Securities and Exchange Commission
of the said articles of incorporation, verified by affidavit or
affirmation, and accompanied by the documents mentioned in the preceding
paragraph, such chief archbishop, bishop, priest, minister, rabbi
or presiding elder shall become a corporation sole and all temporalities,
estate and properties of the 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 corporation sole, for the use, purpose, behalf
and sole benefit of his religious denomination, sect or church,
including hospitals, schools, colleges, orphan asylums, parsonages
and cemeteries thereof. (n)
SECTION
113. Acquisition and alienation of property. — Any corporation
sole may purchase and hold real estate and personal property for
its church, charitable, benevolent or educational purposes, and
may receive bequests or gifts for such purposes. Such corporation
may sell or mortgage real property held by it by obtaining an order
for that purpose from the Court of First Instance of the province
where the property is situated upon proof made to the satisfaction
of the court that notice of the application for leave to sell or
mortgage has been given by publication or otherwise in such manner
and for such time as said court may have directed, and that it is
to the interest of the corporation that leave to sell or mortgage
should be granted. The application for leave to sell or mortgage
must be made by petition, duly verified, by the chief archbishop,
bishop, priest, minister, rabbi or presiding elder acting as corporation
sole, and may be opposed by any member of the religious denomination,
sect or church represented by the corporation sole: Provided, That
in cases where the rules, regulations and discipline of the religious
denomination, sect or church, religious society or order concerned
represented by such corporation sole regulate the method of acquiring,
holding, selling and mortgaging real estate and personal property,
such rules, regulations and discipline shall control, and the intervention
of the courts shall not be necessary. (159a)
SECTION
114. Filling of vacancies. — The successors in office of any
chief archbishop, bishop, priest, minister, rabbi or presiding elder
in a corporation sole shall become the corporation sole on their
accession to office and shall be permitted to transact business
as such on the filing with the Securities and Exchange Commission
of a copy of their commission, certificate of election, or letters
of appointment, duly certified by any notary public.
During
any vacancy in the office of chief archbishop, bishop, priest, minister,
rabbi or presiding elder of any religious denomination, sect or
church incorporated as a corporation sole, the person or persons
authorized and empowered by the rules, regulations or discipline
of the religious denomination, sect or church represented by the
corporation sole to administer the temporalities and manage the
affairs, estate and properties of the corporation sole during the
vacancy shall exercise all the powers and authority of the corporation
sole during such vacancy. (158a)
SECTION
115. Dissolution. — A corporation sole may be dissolved and
its affairs settled voluntarily by submitting to the Securities
and Exchange Commission a verified declaration of dissolution.
The
declaration of dissolution shall set forth:
1.
The name of the corporation;
2.
The reason for dissolution and winding up;
3.
The authorization for the dissolution of the corporation by the
particular religious denomination, sect or church;
4.
The names and addresses of the persons who are to supervise the
winding up of the affairs of the corporation.
Upon
approval of such declaration of dissolution by the Securities and
Exchange Commission, the corporation shall cease to carry on its
operations except for the purpose of winding up its affairs. (n)
SECTION
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 the constitution,
rules, regulations, or discipline of the religious denomination,
sect or church of which it is a part, or by competent authority,
may, upon written consent and/or by an affirmative vote at a meeting
called for the purpose of at least two-thirds (2/3) of its membership,
incorporate for the administration of its temporalities or for the
management of its affairs, properties and estate by filing with
the Securities and Exchange Commission, articles of incorporation
verified by the affidavit of the presiding elder, secretary, or
clerk or other member of such religious society or religious order,
or diocese, synod, or district organization of the religious denomination,
sect or church, setting forth the following:
1.
That the 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 two-thirds (2/3) of its membership have given their
written consent or have voted to incorporate, at a duly convened
meeting of the body;
3.
That the incorporation of the religious society or religious order,
or diocese, synod, or district organization desiring to incorporate
is not forbidden by competent authority or by the constitution,
rules, regulations or discipline of the religious denomination,
sect, or church of which it forms a part;
4.
That the religious society or religious order, or diocese, synod,
or district organization desires to incorporate for the administration
of its affairs, properties and estate;
5.
The place where the principal office of the corporation is to be
established and located, which place must be within the Philippines;
and
6.
The names, nationalities, and residences of the trustees elected
by the religious society or religious order, or the diocese, synod,
or district organization to serve for the first year or such other
period as may be prescribed by the laws of the religious society
or religious order, or of the diocese, synod, or district organization,
the board of trustees to be not less than five (5) nor more than
fifteen (15). (160a)
TITLE
XIV — DISSOLUTION
SECTION
117. Methods of dissolution. — A corporation formed or organized
under the provisions of this Code may be dissolved voluntarily or
involuntarily. (n)
SECTION
118. Voluntary dissolution where no creditors are affected. —
If dissolution of a corporation does not prejudice the rights of
any creditor having a claim against it, the dissolution may be effected
by majority vote of the board of directors or trustees, and by a
resolution duly adopted by the affirmative vote of the stockholders
owning at least two-thirds (2/3) of the outstanding capital stock
or of at least two-thirds (2/3) of the members of a meeting to be
held upon call of the directors or trustees after publication of
the notice of time, place and object of the meeting for three (3)
consecutive weeks in a newspaper published in the place where the
principal office of said corporation is located; and if no newspaper
is published in such place, then in a newspaper of general circulation
in the Philippines, after sending such notice to each stockholder
or member either by registered mail or by personal delivery at least
thirty (30) days prior to said meeting. A copy of the resolution
authorizing the dissolution shall be certified by a majority of
the board of directors or trustees and countersigned by the secretary
of the corporation. The Securities and Exchange Commission shall
thereupon issue the certificate of dissolution. (62a)
SECTION
119. Voluntary dissolution where creditors are affected. —
Where the dissolution of a corporation may prejudice the rights
of any creditor, the petition for dissolution shall be filed with
the Securities and Exchange Commission. The petition shall be signed
by a majority of its board of directors or trustees or other officers
having the management of its affairs, verified by its president
or secretary or one of its directors or trustees, and shall set
forth all claims and demands against it, and that its dissolution
was resolved upon by the affirmative vote of the stockholders representing
at least two-thirds (2/3) of the outstanding capital stock or by
at least two-thirds (2/3) of the members at a meeting of its stockholders
or members called for that purpose.
If
the petition is sufficient in form and substance, the Commission
shall, by an order reciting the purpose of the petition, fix a date
on or before which objections thereto may be filed by any person,
which date shall not be less than thirty (30) days nor more than
sixty (60) days after the entry of the order. Before such date,
a copy of the order shall be published at least once a week for
three (3) consecutive weeks in a newspaper of general circulation
published in the municipality or city where the principal office
of the corporation is situated, or if there be no such newspaper,
then in a newspaper of general circulation in the Philippines, and
a similar copy shall be posted for three (3) consecutive weeks in
three (3) public places in such municipality or city.
Upon
five (5) day's notice, given after the date on which the right to
file objections as fixed in the order has expired, the Commission
shall proceed to hear the petition and try any issue made by the
objections filed; and if no such objection is sufficient, and the
material allegations of the petition are true, it shall render judgment
dissolving the corporation and directing such disposition of its
assets as justice requires, and may appoint a receiver to collect
such assets and pay the debts of the corporation. (Rule 104, RCa)
SECTION 120. Dissolution by shortening corporate term. — A
voluntary dissolution may be effected by amending the articles of
incorporation to shorten the corporate term pursuant to the provisions
of this Code. A copy of the amended articles of incorporation shall
be submitted to the Securities and Exchange Commission in accordance
with this Code. Upon approval of the amended articles of incorporation
of the expiration of the shortened term, as the case may be, the
corporation shall be deemed dissolved without any further proceedings,
subject to the provisions of this Code on liquidation. (n)
SECTION
121. Involuntary dissolution. — A corporation may be dissolved
by the Securities and Exchange Commission upon filing of a verified
complaint and after proper notice and hearing on the grounds provided
by existing laws, rules and regulations. (n)
SECTION
122. Corporate liquidation. — Every corporation whose charter
expires by its own limitation or is annulled by forfeiture or otherwise,
or whose corporate existence for other purposes is terminated in
any other manner, shall nevertheless be continued as a body corporate
for three (3) years after the time when it would have been so dissolved,
for the purpose of prosecuting and defending suits by or against
it and enabling it to settle and close its affairs, to dispose of
and convey its property and to distribute its assets, but not for
the purpose of continuing the business for which it was established.
At
any time during said three (3) years, the corporation is authorized
and empowered to convey all of its property to trustees for the
benefit of stockholders, members, creditors, and other persons in
interest. From and after any such conveyance by the corporation
of its property in trust for the benefit of its stockholders, members,
creditors and others in interest, all interest which the corporation
had in the property terminates, the legal interest vests in the
trustees, and the beneficial interest in the stockholders, members,
creditors or other persons in interest.
Upon
the winding up of the corporate affairs, any asset distributable
to any creditor or stockholder or member who is unknown or cannot
be found shall be escheated to the city or municipality where such
assets are located.
Except
by decrease of capital stock and as otherwise allowed by this Code,
no corporation shall distribute any of its assets or property except
upon lawful dissolution and after payment of all its debts and liabilities.
(77a, 89a, 16a)
TITLE
XV — FOREIGN CORPORATIONS
SECTION
123. Definition and rights of foreign corporations. — For
the purposes of this Code, a foreign corporation is one formed,
organized or existing under any laws other than those of the Philippines
and whose laws allow Filipino citizens and corporations to do business
in its own country or state. It shall have the right to transact
business in the Philippines after it shall have obtained a license
to transact business in this country in accordance with this Code
and a certificate of authority from the appropriate government agency.
(n)
SECTION
124. Application to existing foreign corporations. — Every
foreign corporation which on the date of the effectivity of this
Code is authorized to do business in the Philippines under a license
therefore issued to it, shall continue to have such authority under
the terms and condition of its license, subject to the provisions
of this Code and other special laws. (n)
SECTION
125. Application for a license. — A foreign corporation applying
for a license to transact business in the Philippines shall submit
to the Securities and Exchange Commission a copy of its articles
of incorporation and by-laws, certified in accordance with law,
and their translation to an official language of the Philippines,
if necessary. The application shall be under oath and, unless already
stated in its articles of incorporation, shall specifically set
forth the following:
1.
The date and term of incorporation;
2.
The address, including the street number, of the principal office
of the corporation in the country or state of incorporation;
3.
The name and address of its resident agent authorized to accept
summons and process in all legal proceedings and, pending the establishment
of a local office, all notices affecting the corporation;
4. The place in the Philippines where the corporation intends to
operate;
5.
The specific purpose or purposes which the corporation intends to
pursue in the transaction of its business in the Philippines: Provided,
That said purpose or purposes are those specifically stated in the
certificate of authority issued by the appropriate government agency;
6.
The names and addresses of the present directors and officers of
the corporation;
7.
A statement of its authorized capital stock and the aggregate number
of shares which the corporation has authority to issue, itemized
by classes, par value of shares, shares without par value, and series,
if any;
8.
A statement of its outstanding capital stock and the aggregate number
of shares which the corporation has issued, itemized by classes,
par value of shares, shares without par value, and series, if any;
9.
A statement of the amount actually paid in; and
10.
Such additional information as may be necessary or appropriate in
order to enable the Securities and Exchange Commission to determine
whether such corporation is entitled to a license to transact business
in the Philippines, and to determine and assess the fees payable.
Attached
to the application for license shall be a duly executed certificate
under oath by the authorized official or officials of the jurisdiction
of its incorporation, attesting to the fact that the laws of the
country or state of the applicant allow Filipino citizens and corporations
to do business therein, and that the applicant is an existing corporation
in good standing. If such certificate is in a foreign language,
a translation thereof in English under oath of the translator shall
be attached thereto.
The
application for a license to transact business in the Philippines
shall likewise be accompanied by a statement under oath of the president
or any other person authorized by the corporation, showing to the
satisfaction of the Securities and Exchange Commission and other
governmental agency in the proper cases that the applicant is solvent
and in sound financial condition, and setting forth the assets and
liabilities of the corporation as of the date not exceeding one
(1) year immediately prior to the filing of the application.
Foreign
banking, financial and insurance corporations shall, in addition
to the above requirements, comply with the provisions of existing
laws applicable to them. In the case of all other foreign corporations,
no application for license to transact business in the Philippines
shall be accepted by the Securities and Exchange Commission without
previous authority from the appropriate government agency, whenever
required by law. (68a)
SECTION
126. Issuance of a license. — If the Securities and Exchange
Commission is satisfied that the applicant has complied with all
the requirements of this Code and other special laws, rules and
regulations, the Commission shall issue a license to the applicant
to transact business in the Philippines for the purpose or purposes
specified in such license. Upon issuance of the license, such foreign
corporation may commence to transact business in the Philippines
and continue to do so for as long as it retains its authority to
act as a corporation under the laws of the country or state of its
incorporation, unless such license is sooner surrendered, revoked,
suspended or annulled in accordance with this Code or other special
laws.
Within
sixty (60) days after the issuance of the license to transact business
in the Philippines, the license, except foreign banking or insurance
corporation, shall deposit with the Securities and Exchange Commission
for the benefit of present and future creditors of the licensee
in the Philippines, securities satisfactory to the Securities and
Exchange Commission, consisting of bonds or other evidence of indebtedness
of the Government of the Philippines, its political subdivisions
and instrumentalities, or of government-owned or controlled corporations
and entities, shares of stock in "registered enterprises"
as this term is defined in Republic Act No. 5186, shares of stock
in domestic corporations registered in the stock exchange, or shares
of stock in domestic insurance companies and banks, or any combination
of these kinds of securities, with an actual market value of at
least one hundred thousand (P100,000.) pesos; Provided, however,
That within six (6) months after each fiscal year of the licensee,
the Securities and Exchange Commission shall require the licensee
to deposit additional securities equivalent in actual market value
to two (2%) percent of the amount by which the licensee's gross
income for that fiscal year exceeds five million (P5,000,000.00)
pesos. The Securities and Exchange Commission shall also require
deposit of additional securities if the actual market value of the
securities on deposit has decreased by at least ten (10%) percent
of their actual market value at the time they were deposited. The
Securities and Exchange Commission may at its discretion release
part of the additional securities deposited with it if the gross
income of the licensee has decreased, or if the actual market value
of the total securities on deposit has increased, by more than ten
(10%) percent of the actual market value of the securities at the
time they were deposited. The Securities and Exchange Commission
may, from time to time, allow the licensee to substitute other securities
for those already on deposit as long as the licensee is solvent.
Such licensee shall be entitled to collect the interest or dividends
on the securities deposited. In the event the licensee ceases to
do business in the Philippines, the securities deposited as aforesaid
shall be returned, upon the licensee's application therefor and
upon proof to the satisfaction of the Securities and Exchange Commission
that the licensee has no liability to Philippine residents, including
the Government of the Republic of the Philippines. (n)
SECTION
127. Who may be a resident agent. — A resident agent may be
either an individual residing in the Philippines or a domestic corporation
lawfully transacting business in the Philippines: Provided, That
in the case of an individual, he must be of good moral character
and of sound financial standing. (n)
SECTION 128. Resident agent; service of process. — The Securities
and Exchange Commission shall require as a condition precedent to
the issuance of the license to transact business in the Philippines
by any foreign corporation that such corporation file with the Securities
and Exchange Commission a written power of attorney designating
some person who must be a resident of the Philippines, on whom any
summons and other legal processes may be served in all actions or
other legal proceedings against such corporation, and consenting
that service upon such resident agent shall be admitted and held
as valid as if served upon the duly authorized officers of the foreign
corporation at its home office. Any such foreign corporation shall
likewise execute and file with the Securities and Exchange Commission
an agreement or stipulation, executed by the proper authorities
of said corporation, in form and substance as follows:
"The
(name of foreign corporation) does hereby stipulate and agree, in
consideration of its being granted by the Securities and Exchange
Commission a license to transact business in the Philippines, that
if at any time said corporation shall cease to transact business
in the Philippines, or shall be without any resident agent in the
Philippines on whom any summons or other legal processes may be
served, then in any action or proceeding arising out of any business
or transaction which occurred in the Philippines, service of any
summons or other legal process may be made upon the Securities and
Exchange Commission and that such service shall have the same force
and effect as if made upon the duly-authorized officers of the corporation
at its home office."
Whenever
such service of summons or other process shall be made upon the
Securities and Exchange Commission, the Commission shall, within
ten (10) days thereafter, transmit by mail a copy of such summons
or other legal process to the corporation at its home or principal
office. The sending of such copy by the Commission shall be necessary
part of and shall complete such service. All expenses incurred by
the Commission for such service shall be paid in advance by the
party at whose instance the service is made.
In
case of a change of address of the resident agent, it shall be his
or its duty to immediately notify in writing the Securities and
Exchange Commission of the new address. (72a; and n)
SECTION
129. Law applicable. — Any foreign corporation lawfully doing
business in the Philippines shall be bound by all laws, rules and
regulations applicable to domestic corporations of the same class,
except such only as provide for the creation, formation, organization
or dissolution of corporations or those which fix the relations,
liabilities, responsibilities, or duties of stockholders, members,
or officers of corporations to each other or to the corporation.
(73a)
SECTION
130. Amendments to articles of incorporation or by-laws of foreign
corporations. — Whenever the articles of incorporation or
by-laws of a foreign corporation authorized to transact business
in the Philippines are amended, such foreign corporation shall,
within sixty (60) days after the amendment becomes effective, file
with the Securities and Exchange Commission, and in the proper cases
with the appropriate government agency, a duly authenticated copy
of the articles of incorporation or by-laws, as amended, indicating
clearly in capital letters or by underscoring the change or changes
made, duly certified by the authorized official or officials of
the country or state of incorporation. The filing thereof shall
not of itself enlarge or alter the purpose or purposes for which
such corporation is authorized to transact business in the Philippines.
(n)
SECTION
131. Amended license. — A foreign corporation authorized to
transact business in the Philippines shall obtain an amended license
in the event it changes its corporate name, or desires to pursue
in the Philippines other or additional purposes, by submitting an
application therefor to the Securities and Exchange Commission,
favorably endorsed by the appropriate government agency in the proper
cases. (n)
SECTION
132. Merger or consolidation involving a foreign corporation licensed
in the Philippines. — One or more foreign corporations authorized
to transact business in the Philippines may merge or consolidate
with any domestic corporation or corporations if such is permitted
under Philippine laws and by the law of its incorporation: Provided,
That the requirements on merger or consolidation as provided in
this Code are followed.
Whenever
a foreign corporation authorized to transact business in the Philippines
shall be a party to a merger or consolidation in its home country
or state as permitted by the law of its incorporation, such foreign
corporation shall, within sixty (60) days after such merger or consolidation
becomes effective, file with the Securities and Exchange Commission,
and in proper cases with the appropriate government agency, a copy
of the articles of merger or consolidation duly authenticated by
the proper official or officials of the country or state under the
laws of which merger or consolidation was effected: Provided, however,
That if the absorbed corporation is the foreign corporation doing
business in the Philippines, the latter shall at the same time file
a petition for withdrawal of its license in accordance with this
Title. (n)
SECTION 133. Doing business without a license. — No foreign
corporation transacting business in the Philippines without a license,
or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws. (69a)
SECTION
134. Revocation of license. — Without prejudice to other grounds
provided by special laws, the license of a foreign corporation to
transact business in the Philippines may be revoked or suspended
by the Securities and Exchange Commission upon any of the following
grounds:
1.
Failure to file its annual report or pay any fees as required by
this Code;
2.
Failure to appoint and maintain a resident agent in the Philippines
as required by this Title;
3.
Failure, after change of its resident agent or of his address, to
submit to the Securities and Exchange Commission a statement of
such change as required by this Title;
4.
Failure to submit to the Securities and Exchange Commission an authenticated
copy of any amendment to its articles of incorporation or by-laws
or of any articles of merger or consolidation within the time prescribed
by this Title;
5.
A misrepresentation of any material matter in any application, report,
affidavit or other document submitted by such corporation pursuant
to this Title;
6.
Failure to pay any and all taxes, imposts, assessments or penalties,
if any, lawfully due to the Philippine Government or any of its
agencies or political subdivisions;
7.
Transacting business in the Philippines outside of the purpose or
purposes for which such corporation is authorized under its license;
8. Transacting business in the Philippines as agent of or acting
for and in behalf of any foreign corporation or entity not duly
licensed to do business in the Philippines; or
9.
Any other ground as would render it unfit to transact business in
the Philippines. (n)
SECTION
135. Issuance of certificate of revocation. — Upon the revocation
of any such license to transact business in the Philippines, the
Securities and Exchange Commission shall issue a corresponding certificate
of revocation, furnishing a copy thereof to the appropriate government
agency in the proper cases.
The
Securities and Exchange Commission shall also mail to the corporation
at its registered office in the Philippines a notice of such revocation
accompanied by a copy of the certificate of revocation. (n)
SECTION
136. Withdrawal of foreign corporations. — Subject to existing
laws and regulations, a foreign corporation licensed to transact
business in the Philippines may be allowed to withdraw from the
Philippines by filing a petition for withdrawal of license. No certificate
of withdrawal shall be issued by the Securities and Exchange Commission
unless all the following requirements are met;
1.
All claims which have accrued in the Philippines have been paid,
compromised or settled;
2.
All taxes, imposts, assessments, and penalties, if any, lawfully
due to the Philippine Government or any of its agencies or political
subdivisions have been paid; and
3.
The petition for withdrawal of license has been published once a
week for three (3) consecutive weeks in a newspaper of general circulation
in the Philippines.
TITLE
XVI — MISCELLANEOUS PROVISIONS
SECTION
137. Outstanding capital stock defined. — The term "outstanding
capital stock", as used in this Code, means the total shares
of stock issued under binding subscription agreements to subscribers
or stockholders, whether or not fully or partially paid, except
treasury shares. (n)
SECTION
138. Designation of governing boards. — The provisions of
specific provisions of this Code to the contrary notwithstanding,
non-stock or special corporations may, through their articles of
incorporation or their by-laws, designate their governing boards
by any name other than as board of trustees. (n)
SECTION
139. Incorporation and other fees. — The Securities and Exchange
Commission is hereby authorized to collect and receive fees as authorized
by law or by rules and regulations promulgated by the Commission.
(n)
SECTION
140. Stock ownership in certain corporations. — Pursuant to
the duties specified by Article XIV of the Constitution, the National
Economic and Development Authority shall, from time to time, make
a determination of whether the corporate vehicle has been used by
any corporation or by business or industry to frustrate the provisions
thereof or of applicable laws, and shall submit to the Batasang
Pambansa, whenever deemed necessary, a report of its findings, including
recommendations for their prevention or correction.
Maximum
limits may be set by the Batasang Pambansa for stockholdings in
corporations declared by it to be vested with a public interest
pursuant to the 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 and regulations designed to promote the
general welfare and foster economic development.
In
recommending to the Batasang Pambansa corporations, businesses or
industries to be declared vested with a public interest and in formulating
proposals for limitations on stock ownership, the National Economic
and Development Authority shall consider the type and nature of
the industry, the size of the enterprise, the economies of scale,
the geographic location, the extent of Filipino ownership, the labor
intensity of the activity, the export potential, as well as other
factors which are germane to the realization and promotion of business
and industry.
SECTION
141. Annual report or corporations. — Every corporation, domestic
or foreign, lawfully doing business in the Philippines shall submit
to the Securities and Exchange Commission an annual report of its
operations, together with a financial statement of its assets and
liabilities, certified by any independent certified public accountant
in appropriate cases, covering the preceding fiscal year and such
other requirements as the Securities and Exchange Commission may
require. Such report shall be submitted within such period as may
be prescribed by the Securities and Exchange Commission. (n)
SECTION
142. Confidential nature of examination results. — All interrogatories
propounded by the Securities and Exchange Commission and the answers
thereto, as well as the results of any examination made by the Commission
or by any other official authorized by law to make an examination
of the operations, books and records of any corporation, shall be
kept strictly confidential, except insofar as the law may require
the same to be made public or where such interrogatories, answers
or results are necessary to be presented as evidence before any
court. (n)
SECTION
143. Rule-making power of the Securities and Exchange Commission.
— The Securities and Exchange Commission shall have the power
and authority to implement the provisions of this Code, and to promulgate
rules and regulations reasonably necessary to enable it to perform
its duties hereunder, particularly in the prevention of fraud and
abuses on the part of the controlling stockholders, members, directors,
trustees or officers. (n)
SECTION
144. Violations of the Code. — Violations of any of the provisions
of this Code or its amendments not otherwise specifically penalized
therein shall be punished by a fine of not less than one thousand
(P1,000.00) pesos but not more than ten thousand (P10,000.00) pesos
or by imprisonment for not less than thirty (30) days but not more
than five (5) years, or both, in the discretion of the court. If
the violation is committed by a corporation, the same may, after
notice and hearing, be dissolved in appropriate proceedings before
the Securities and Exchange Commission: Provided, That such dissolution
shall not preclude the institution of appropriate action against
the director, trustee or officer of the corporation responsible
for said violation: Provided, further, That nothing in this section
shall be construed to repeal the other causes for dissolution of
a corporation provided in this Code. (190 1/2 a)
SECTION
145. Amendment or repeal. — No right or remedy in favor of
or against any corporation, its stockholders, members, directors,
trustees, or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be
removed or impaired either by the subsequent dissolution of said
corporation or by any subsequent amendment or repeal of this Code
or of any part thereof. (n)
SECTION
146. Repealing clause. — Except as expressly provided by this
Code, all laws or parts thereof inconsistent with any provision
of this Code shall be deemed repealed. (n)
SECTION
147. Separability of provisions. — Should any provision of
this Code or any part thereof be declared invalid or unconstitutional,
the other provisions, so far as they are separable, shall remain
in force. (n)
SECTION
148. Applicability to existing corporations. — All corporations
lawfully existing and doing business in the Philippines on the date
of the effectivity of this Code and heretofore authorized, licensed
or registered by the Securities and Exchange Commission, shall be
deemed to have been authorized, licensed or registered under the
provisions of this Code, subject to the terms and conditions of
its license, and shall be governed by the provisions hereof: Provided,
That if any such corporation is affected by the new requirements
of this Code, said corporation shall, unless otherwise herein provided,
be given a period of not more than two (2) years from the effectivity
of this Code within which to comply with the same. (n)
SECTION
149. Effectivity. — This Code shall take effect immediately
upon its approval.
Approved, May 1, 1980
