EXCEL PROFESSIONAL SERVICES, INC.

PARTNERSHIP 1772, first paragraph (1768). However, Associations

and societies, whose articles are kept secret among the
PARTNERSHIP members, and wherein any one of the members may
 By the contract of partnership two or more persons contract in his own name with third persons, shall have
bind themselves to contribute money, property, or no juridical personality. (1775)
industry to a common fund, with the intention of A partnership begins from the moment of the execution
dividing the profits among themselves. Two or more of the contract, unless it is otherwise stipulated. (1784)
persons may also form a partnership for the exercise of 2. Lawful object or purpose (1770). Any event which
a profession. (1767). makes it unlawful for the business of the partnership to
be carried on or for the members to carry it on in
Note: Since a partnership is a contract, all agreement partnership caused for automatic dissolution of the
between the parties has the force of law between the partnership. (1830)
contracting parties (1159) provided it is not contrary to
law, moral, good custom, public order and public policy. EFFECTS OF UNLAWFUL PARTNERSHIP
(1306) 1. The contract is void ab initio and the partnership
never existed in the eyes of the law
Distinction between partnership and Co- ownership 2. The profits shall be confiscated in favor of the
1. Creation government
2. Juridical personality 3. The instruments or tools and proceeds of the crime
3. Purpose shall also be forfeited in favor of the government
4. Duration 4. The contributions of the partners shall not be
5. Disposal of interest confiscated unless they fall under no. 3
6. Power to act with third person
7. Effect of death 3. Contribution of money, property or industry to a
common fund.
Distinction between Partnership and conjugal partnership of
gain Obligations with respect to contribution to
1. Parties partnership capital
2. Laws which govern
3. Juridical personality 1. Partners must contribute equal shares to the capital
4. Commencement of the partnership unless there is stipulation to
5. Purpose contrary. (Art 1790).
6. Distribution of profits 2. Partners (capitalist) must contribute additional
7. Management capital In case of imminent loss to the business of
8. Disposition of shares the partnership and there is no stipulation
otherwise; refusal to do so shall create an
Distinction between partnership and voluntary association obligation on his part to sell his interest to the
1. Juridical personality other partners. (Art. 1791)
2. Purpose Requisites:
3. Contribution of members a. There is an imminent loss of the business of the
4. Liability of members partnership
b. The majority of the capitalist partners are of the
Characteristics opinion that an additional contribution to the
1. Consensual common fund would save the business
2. Nominate c. The capitalist partner refuses deliberately to
3. Bilateral contribute (not due to financial inability)
4. Onerous d. There is no agreement to the contrary
5. Commutative RISK OF LOSS OF THINGS CONTRIBUTED
6. Principal Contributed property Loss to be borne by
7. Preparatory Partnership Partner
Specific and determinate √
 A partnership may be constituted in any form, except
things which are not fungible
where immovable property or real rights are
where only the use is
contributed thereto, in which case a public
contributed
instrument shall be necessary. (1771)
Specific and determinate √
 A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said things the ownership of which
property is not made, signed by the parties, and is transferred to the
attached to the public instrument. (1773) partnership
 Every contract of partnership having a capital of three
thousand pesos or more, in money or property, shall Fungible things (consumable) √
appear in a public instrument, which must be recorded Cannot be kept without √
in the Office of the Securities and Exchange deteriorating
Commission. Things contributed to be sold √
 Failure to comply with the requirements of the Things brought and appraised √
preceding paragraph shall not affect the liability of the in the inventory (limited to
partnership and the members thereof to third persons. value appraised)
(1772)  If one of the Partners refused to give contribution,
the other partner may compel him to deliver
Requisites (Specific performance) what he has promised.
1. Valid Contract  The partnership is dissolved when a specific thing
The partnership has a judicial personality separate and which a partner had promised to contribute to the
distinct from that of each of the partners, even in case partnership, perishes before the delivery. (1830,4)
of failure to comply with the requirements of article

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4. Intent to divide the profit among the partners. are distributed in accordance with capital contribution.
(1767).
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES Test to determine whether partnership exists:
DISTRIBUTION OF DISTRIBUTION OF 1. Persons who are not partners as to each other are not
partners as to third persons; except estoppels (1825).
PROFITS LOSSES
2. Co-ownership or co-possession does not of itself
With According to According to establish a partnership, whether such-co-owners or co-
possessors do or do not share any profits made by the
agreement agreement
use of the property;
3. The sharing of gross returns does not of itself establish
Without 1. Share of 1. If sharing of profits
a partnership, whether or not the persons sharing them
agreemen capitalist partner is stipulated -
have a joint or common right or interest in any
t is in proportion apply to sharing of
property from which the returns are derived;
to his capital losses
4. The receipt by a person of a share of the profits of a
contribution 2. If no profit sharing
business is prima facie evidence that he is a partner in
2. Share of stipulated - losses
the business, but no such inference shall be drawn if
industrial partner shall be borne
such profits were received in payment: (DRAWInG)
is not fixed - as according to
a. Debt by installments or otherwise;
may be just and capital contribution
b. As Rent to a landlord or
equitable under 3. Purely industrial
c. As an Annuity to a widow or representative of a
the partner not liable
deceased partner;
circumstances for losses
d. Wages of an employee
e. As Interest on a loan, though the amount of
Distribution of profit and losses: (1797)
payment vary with the profits of the business;
a. Profit or losses shall be distributed in
f. As the consideration for the sale of a Goodwill of a
conformity with the agreement;
business or other property by installments or
b. If only the share of each partner in the profits
otherwise.
has been agreed upon, the share of each in the
losses shall be in the same proportion.
Reason: It s not merely the sharing of profits, but rather
c. In the absence of stipulation, the share of each
the sharing of them as a co-owner of the business that
partner in the profits and losses shall be in
makes one a partner. Hence, the test is “Does the recipient
proportion to what he may have contributed,
of profit received it as co-owner/proprietor of the
but the industrial partner shall not be liable for
business”, if the answer is in affirmative a partnership
the losses.
exists.
d. As for the profits, the industrial partner shall
receive such share as may be just and
Classifications of Partnership
equitable under the circumstances. If besides
As to liability of partners
his services he has contributed capital, he shall
1. General partnership - consists of general partners who
also receive a share in the profits in proportion
are liable pro rata and subsidiarily and sometimes
to his capital.
solidarily with their separate property for partnership
debts
Designation of profit and losses
2. Limited partnership - one formed by 2 or more persons
1. The designation of losses and profits cannot be
having as members one or more general partners and
entrusted to one of the partners.
one or more limited partners, the latter not being
2. If the partners have agreed to entrust to a third person
personally liable for the obligations of the partnership
the designation of the share of each one in the profits
As to duration
and losses, such designation may be impugned only
1. Partnership at will - one in which no time is specified
when it is manifestly inequitable. In no case may a
and is not formed for a particular undertaking or
partner who has begun to execute the decision of the
venture which may be terminated anytime by mutual
third person, or who has not impugned the same within
agreement
a period of three months from the time he had
2. Partnership with a fixed term or particular undertaking
knowledge thereof, complain of such decision. (1798)
- the term for which the partnership is to exist is fixed
or agreed upon or one formed for a particular
undertaking
Nota Bene:
As to extent of its subject matter
All partners, including industrial ones, shall be liable pro
1. Universal partnership is either
rata with all their property and after all the
a. Universal partnership of all present property - the
partnership assets have been exhausted, for the
property which belongs to each of the partners at
contracts which may be entered into in the name and for
the time of the constitution of the partnership,
the account of the partnership, under its signature and by a
becomes the common property of all the partners,
person authorized to act for the partnership. However, any
as well as all the profits which they may acquire
partner may enter into a separate obligation to perform a
therewith.(1779) A stipulation for the common
partnership contract. (1816) Any stipulation exempting any
enjoyment of any other profits may also be made
partner against the liability shall be void as far as 3 rd
(There must be a stipulation. e.g. salary that may
person is concerned. But the stipulation is valid among the
be earn by the partner); but the property which the
partners. (1817)
partners may acquire subsequently by inheritance,
legacy, or donation cannot be included in such
5. Established for the common benefit or interest of the
stipulation, except the fruits thereof. Articles of
partners. (1770) Hence, A stipulation which excludes
universal partnership, entered into without
one or more partners from any share in the profits or
specification of its nature, only constitute a
losses is void. (1799).
universal partnership of profits. (1781)
Note: Only the agreement as to profit and loss is void
b. Universal partnership of all profits - all that the
not the partnership itself. In such case, as if there is no
partners may acquire by their industry or work
agreement as to profit and loss and the profit and loss
during the existence of the partnership. Movable or
EXCEL PROFESSIONAL SERVICES, INC.
immovable property which each of the partners
may possess at the time of the celebration of the
contract shall continue to pertain exclusively to
each, only the usufruct passing to the partnership.
(1780)
Note: Persons who are prohibited from giving each
other any donation or advantage cannot enter into
universal partnership
The following cannot enter in a universal partnership:
a. Between those who were guilty of adultery or
concubinage;
b. Between those persons found guilty of the same
criminal offense (adultery or concubinage), in
consideration thereof;
c. Between a person and Public officer or his wife,
descedants and ascendants, by reason of his office.
(739)
2. Particular partnership – object determinate things, their
use or fruits, or specific undertaking, or the exercise of
a profession or vocation (1783)
As to representation to others
1. Ordinary or real partnership - one which actually exists
among the partners and also as to 3rd persons
2. Ostensible or partnership by estoppel - one which in
reality is not a partnership but is considered a
partnership only in relation to those who, by their
conduct or omission, are precluded to deny or disprove
its existence
As to legality of existence
1. De jure partnership – comply all requirement of the law
2. De facto partnership – do not comply all requirement of
the law
As to publicity
1. Secret partnership - one wherein the existence of
certain persons as partners is not avowed or made
known to the public by any of the partners
2. Open or notorious partnership - one whose existence is
avowed or made known to the public by the members
of the firm
As to purpose
1. Commercial or trading partnership - one formed for the
transaction of business
2. Professional or non trading partnership - one formed
for the exercise of a profession
Kinds of partners
1. Capitalist partner – One who contribute money or
property
2. Industrial partner – One contribute industry. He is not
liable for loss as between the partners but liable pro
rata as to 3rd person.
3. Capitalist-industrial partner – One who contribute
money, property or industry.
4. General partner – liable to the extent of his separate
property
5. Limited partner – liable only to the extent of his capital
contribution. Not allowed to contribute industry.
6. Silent partner – do not participate in the management.
7. Continuing Partner - one who continues the business of
a partnership after it has been dissolved by reason of
the admission of a new partner, retirement, death or
expulsion of one of the partners
8. Surviving Partner - one who remains after a
partnership has been dissolved by death of any partner
9. Subpartner - one who is not a member of the
partnership who contracts with a partner with reference
to the latter's share in the partnership
10. Secret partner – not known by third person
11. Dormant partner – silent and secret
12. Ostensible partner – participate in the management
and known by third person
13. Partners by estoppels or nominal partner – not really
partners but only as a result of misrepresentation to 3 rd
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person
14. Managing partner – one manage the partnership
15. Liquidating partner – one who wind-up the affair of the
partnership
16. Retiring partner – one who retire in the partnership
17. Incoming partner – One who is admitted to the
partnership
RELATIONS CREATED BY A CONTRACT OF
PARTNERSHIP
1. Relations among the partners themselves
2. Relations of the partners with the partnership
3. Relations of the partnership with 3 rd persons with whom
it contracts
4. Relations of the partners with such 3rd persons
OBLIGATIONS OF PARTNERS
 A partnership begins from the moment of the execution
of the contract, unless it is otherwise stipulated. (1784)
 When a partnership for a fixed term or particular
undertaking is continued after the termination of such
term or particular undertaking without any express
agreement, the rights and duties of the partners
remain the same as they were at such termination, so
far as is consistent with a partnership at will.
A continuation of the business by the partners or such
of them as habitually acted therein during the term,
without any settlement or liquidation of the partnership
affairs, is prima facie evidence of a continuation of the
partnership. (1785)
Obligations with respect to contribution of
property:
1. To contribute at the beginning of the partnership or
at the stipulated time the money, property or
industry which he may have promised to contribute
2. To answer for eviction in case the partnership is
deprived of the determinate property contributed
3. To answer to the partnership for the fruits of the
property the contribution of which he delayed, from
the date they should have been contributed up to
the time of actual delivery
4. To preserve said property with the diligence of a
good father of a family pending delivery to
partnership
5. To indemnify partnership for any damage caused to
it by the retention of the same or by the delay in its
contribution
 Every partner is a debtor of the partnership for
whatever he may have promised to contribute thereto.
He shall also be bound for warranty in case of eviction
with regard to specific and determinate things which he
may have contributed to the partnership, in the same
cases and in the same manner as the vendor is bound
with respect to the vendee. He shall also be liable for
the fruits thereof from the time they should have been
delivered, without the need of any demand. (1786)
Effect of Failure to contribute property promised:
1. Partners becomes ipso jure a debtor of the
partnership even in the absence of any demand
2. Remedy of the other partner is not rescission but
specific performance with damages from defaulting
partner
Obligations with respect to contribution of money
and money converted to personal use
1. To contribute on the date fixed the amount he has
undertaken to contribute to the partnership
2. To reimburse any amount he may have taken from
the partnership coffers and converted to his own
use
3. To pay for the agreed or legal interest, if he fails to
pay his contribution on time or in case he takes any
BL.2102
 amount from the common fund and converts it to responsibility if through the partner's extraordinary
his own use efforts in other activities of the partnership, unusual
4. To indemnify the partnership for the damages profits have been realized. (1794)
caused to it by delay in the contribution or  The risk of specific and determinate things, which are
conversion of any sum for his personal benefits not fungible, contributed to the partnership so that only
their use and fruits may be for the common benefit,
 A partner who has undertaken to contribute a sum of shall be borne by the partner who owns them.
money and fails to do so becomes a debtor for the If the things contribute are fungible, or cannot be kept
interest and damages from the time he should have without deteriorating, or if they were contributed to be
complied with his obligation. (1788) sold, the risk shall be borne by the partnership. In the
The same rule applies to any amount he may have absence of stipulation, the risk of the things brought
taken from the partnership coffers, and his liability and appraised in the inventory, shall also be borne by
shall begin from the time he converted the amount to the partnership, and in such case the claim shall be
his own use. limited to the value at which they were appraised.
 Unless there is a stipulation to the contrary, the (1795)
partners shall contribute equal shares to the capital of  The partnership shall be responsible to every partner
the partnership. (1790) for the amounts he may have disbursed on behalf of
 Art. 1791 - If there is no agreement to the contrary, in the partnership and for the corresponding interest,
case of an imminent loss of the business of the from the time the expense are made; it shall also
partnership, any partner who refuses to contribute an answer to each partner for the obligations he may have
additional share to the capital, except an industrial contracted in good faith in the interest of the
partner, to save the venture, shall he obliged to sell partnership business, and for risks in consequence of
his interest to the other partners. its Management. (1796)
 Art. 1792 - If a partner authorized to manage collects a  Every partner may associate another person with him
demandable sum which was owed to him in his own in his share, but the associate shall not be admitted
name, from a person who owed the partnership into the partnership without the consent of all the other
another sum also demandable, the sum thus collected partners, even if the partner having an associate
shall be applied to the two credits in proportion to their should be a manager. (1804)
amounts, even though he may have given a receipt for  The partnership books shall be kept, subject to any
his own credit only; but should he have given it for the agreement between the partners, at the principal place
account of the partnership credit, the amount shall be of business of the partnership, and every partner shall
fully applied to the latter. at any reasonable hour have access to and may inspect
The provisions of this article are understood to be and copy any of them. (1805)
without prejudice to the right granted to the other  Partners shall render on demand true and full
debtor by article 1252 (Application for payment), but information of all things affecting the partnership to
only if the personal credit of the partner should be any partner or the legal representative of any deceased
more onerous to him. partner or of any partner under legal disability. (1806)
 Every partner must account to the partnership for any
Obligation of managing partners who collects benefit, and hold as trustee for it any profits derived by
debt from person who also owed the partnership him without the consent of the other partners from any
1. Apply sum collected to 2 credits in proportion to transaction connected with the formation, conduct, or
their amounts liquidation of the partnership or from any use by him of
2. If he received it for the account of partnership, the its property. (1807)
whole sum shall be applied to partnership credit  Any partner shall have the right to a formal account as
Requisites: to partnership affairs: (1809)
1. The partner who collects is authorized to manage a. If he is wrongfully excluded from the partnership
and actually manages the partnership business or possession of its property by his co-
2. The person owed him and the partnership partners;
3. The partner issues a receipt in his own name only. b. If the right exists under the terms of any
4. The claim of the partnership and the partner are agreement;
both due and demandable. c. When any partner must account to the partnership
fro profit derived by him without the consent of
 Art. 1793 - A partner who has received, in whole or in other partners (1807);
part, his share of a partnership credit, when the other d. Whenever other circumstances render it just and
partners have not collected theirs, shall be obliged, if reasonable.
the debtor should thereafter become insolvent, to bring
to the partnership capital what he received even MANAGEMENT OF THE PARTNERSHIP
though he may have given receipt for his share only. RIGHTS AND OBLIGATIONS WITH RESPECT TO
Obligation of partner who receives share of
partnership credit
MANAGEMENT
1. Obliged to bring to the partnership capital what he
has received even though he may have given Partner is Power of managing Vote of partners
receipt for his share only appointed partner is representing
Requisites: manager in the irrevocable without controlling
a. A partner has received in whole or in part, his articles of just/lawful cause; interest
share of the partnership credit partnership Revocable only necessary to
b. The other partners have not collected their shares
when in bad faith revoke power
c. The partnership debtor has become insolvent
Partner is Power is revocable
 Every partner is responsible to the partnership for
damages suffered by it through his fault, and he cannot appointed any time for any
compensate them with the profits and benefits which manager after cause
he may have earned for the partnership by his constitution of
industry. However, the courts may equitably lessen this
EXCEL PROFESSIONAL SERVICES, INC.

partnership immovable property of the partnership, even if it

may be useful to the partnership. But if the refusal
2 or more Each may execute In case of of consent by the other partners is manifestly
persons all acts of opposition, prejudicial to the interest of the partnership, the
entrusted with administration decision of court's intervention may be sought.
management of majority shall
General Rule:
partnership prevail; In case When the manner of management has not been agreed
without of tie, decision upon, all the partners shall be considered agents and
specification of of partners whatever any one of them may do alone shall bind the
duties/stipulation owning partnership, without prejudice to the provisions of article
that each shall controlling 1801. However, none of the partners may, without the
not act w/o the interest shall consent of the others, make any important alteration in the
immovable property of the partnership, even if it may be
other's consent prevail
useful to the partnership. But if the refusal of consent by
the other partners is manifestly prejudicial to the interest
Stipulated that Concurrence of all Absence or
of the partnership, the court's intervention may be sought.
none of the necessary for the disability of any
(1803)
managing validity of acts one cannot be An act of a partner which is not apparently for the carrying
partners shall act alleged unless on of business of the partnership in the usual way does not
w/o the consent there is bind the partnership unless authorized by the other
of others imminent partners.
danger of grave Except when authorized by the other partners or unless
they have abandoned the business, one or more but less
or irreparable
than all the partners have no authority to (GARCI CA)
injury to 1. Assign the partnership property in trust for
partnership creditors or on the assignee's promise to pay the
debts of the partnership;
Manner of 1. All partners are If refusal of 2. Dispose of the goodwill of the business;
management not agents of the partner is 3. Do any other act which would make it impossible
agreed upon partnership manifestly to carry on the ordinary business of a partnership;
2. Unanimous 4. Confess a judgment;
prejudicial to
consent 5. Enter into a compromise concerning a partnership
interest of
required for claim or liability;
alteration of partnership,
6. Submit a partnership claim or liability to arbitration;
immovable court's
7. Renounce a claim of the partnership.
property intervention No act of a partner in contravention of a restriction on
may be sought authority shall bind the partnership to persons having
knowledge of the restriction. (1818)

 The partner who has been appointed manager in the Appointment of managing partner
articles of partnership may execute all acts of 1. Appointment in the article of incorporation (1800)
administration despite the opposition of his partners, a. Execute all act of administration despite opposition
unless he should act in bad faith; and his power is
of his partners except he acted in bad faith.
irrevocable without just or lawful cause. The vote of the
partners representing the controlling interest shall be b. His power is irrevocable without just or lawful
necessary for such revocation of power. cause.
A power granted after the partnership has been c. Partners representing controlling interest shall be
constituted may be revoked at any time. (1800) necessary for revocation of power.
 If two or more partners have been intrusted with the
management of the partnership without specification of 2. Other appointment
their respective duties, or without a stipulation that one
a. Revocable at any time, with or without just or
of them shall not act without the consent of all the
others, each one may separately execute all acts of lawful cause.
administration, but if any of them should oppose the
acts of the others, the decision of the majority shall Two or more partners have been intrusted with the
prevail. In case of a tie, the matter shall be decided by management
the partners owning the controlling interest. (1801) Art. 1801 Article 1802
Without specification of their
 In case it should have been stipulated that none of the respective duties
managing partners shall act without the consent of the Without a stipulation that one There is stipulated that
others, the concurrence of all shall be necessary for the of them shall not act without none of the managing
validity of the acts, and the absence or disability of any the consent of all the others partners shall act without
one of them cannot be alleged, unless there is the consent of the others
imminent danger of grave or irreparable injury to the Rule: Rule:
partnership. (1802) a. Each one may separately a. The concurrence of all
 When the manner of management has not been agreed execute all acts of shall be necessary for
upon, the following rules shall be observed: (1803) administration. the validity of the
a. All the partners shall be considered agents and b. But if any of them should acts.
whatever any one of them may do alone shall bind oppose the acts of the b. The absence or
the partnership, without prejudice to the provisions others, the decision of the disability of any one of
of article 1801. majority shall prevail. them cannot be
b. None of the partners may, without the consent of c. In case of a tie, the alleged, unless there
the others, make any important alteration in the matter shall be decided is imminent danger

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 by the partners owning of grave or judgment creditor of a partner, the court may charge the
the controlling interest. irreparable injury to interest of the debtor partner with payment of the
the partnership. unsatisfied amount of such judgment debt with interest
thereon; and may then or later appoint a receiver of his
Prohibition against engaging in business share of the profits, and of any other money due or to fall
due to him in respect of the partnership, and make all
Capitalist partner (1808) Industrial partner other orders, directions, accounts and inquiries which the
(1789) debtor partner might have made, or which the
Cannot engage in same kind Industrial partner cannot circumstances of the case may require.
of business in which the engage in business for The interest charged may be redeemed at any time before
partnership is engaged himself (any business) foreclosure, or in case of a sale being directed by the court,
except if there is stipulation except if there is stipulation may be purchased without thereby causing a dissolution:
1. With separate property, by any one or more of the
Reason: To avoid conflict of Reason: Industrial partners
partners; or
interest must devote his entire
2. With partnership property, by any one or more of
industry to the partnership
the partners with the consent of all the partners
Violation Violation:
whose interests are not so charged or sold.
1. Bring to the common 1. Exclude him from the
funds any profits firm
Rule on conveyance of real property (by any partner
accruing to him from his 2. Avail themselves of the
or all partners)
transactions benefits which he may
Conveye Title of Exec Passing of title/Right
2. Shall personally bear all have obtained
d by real uted of the partnership
the losses 3. Damages, in either
propert in the
case.
y name
of
Property Rights of a Partner (1810)
Any Partners Partne Title passes to the buyer
The property rights of a partner are:
partner hip rship but the Partnership may
1. His rights in specific partnership property
recover
A partner is co-owner with his partners of specific
Exception:
partnership property. (1811)
1. Conveyance was in
 Equal right with his partners to possess specific
the usual way of
partnership property for partnership purposes but
business, except
not for any other purpose without the consent of
when the buyer has
his partners.
knowledge of the
 Not assignable except in connection with the
partner lack of
assignment of rights of all the partners in the same
authority.
property
 Not subject to attachment or execution, except on 2. Real property was
a claim against the partnership. But partnership transferred to 3rd
property can be attached for partnership debt. person in good faith.
 Not subject to legal support Any Partners Partne Passes the equitable
2. His interest in the partnership - A partner's interest in partner hip r interest of the
the partnership is his share of the profits and surplus. partnership provided the
(1812) conveyance was in the
 A conveyance by a partner of his whole interest in usual way of business.
the partnership does not of itself dissolve the By One or One Title passes to the buyer
partnership, or, as against the other partners in the partners more but or but the Partnership may
absence of agreement. whose not all more recover
name partner but Exception:
Right of the assignee: Entitles the assignee to title (no right not all 1. Conveyance was in
receive in accordance with his contract the profits to stands of partne the usual way of
which the assigning partner would otherwise be partners rs business, except
entitled. hip when the buyer has
disclose) knowledge of the
partner lack of
Assignee has no right: authority.
a. To interfere in the management or administration 2. Real property was
of the partnership business or affairs; transferred to 3rd
b. To require any information or account of person in good faith
partnership transactions, Partner One or Partne Passes the equitable
c. To inspect the partnership books; more or rship/ interest of the
 In case of fraud in the management of the all the partne partnership, provided
partnership, the assignee may avail himself of the partners, r own the act is one within the
usual remedies. or in a name authority of the partner.
 In case of a dissolution of the partnership, the third (usual way of business)
assignee is entitled to receive his assignor's person in
interest and may require an account from the date trust for
only of the last account agreed to by all the the
partners. (1813) partners
3. His right to participate in the management (n) hip
All All All Passes all their rights in
Right of partner’s creditor (1814) partner partner partne such property
Without prejudice to the preferred rights of partnership rs
creditors, on due application to a competent court by any
EXCEL PROFESSIONAL SERVICES, INC.

Obligation of the partners with regards to third partnership arising before his admission as though
person he had been a partner when such obligations were
 An admission or representation made by any partner incurred, except that this liability shall be satisfied
concerning partnership affairs within the scope of his only out of partnership property, unless there is a
authority is evidence against the partnership. (1820) stipulation to the contrary. (1826)
 Notice to any partner of any matter relating to  The creditors of the partnership shall be preferred
partnership affairs, and the knowledge of the partner to those of each partner as regards the partnership
acting in the particular matter, acquired while a partner property. Without prejudice to this right, the private
or then present to his mind, and the knowledge of any creditors of each partner may ask the attachment and
other partner who reasonably could and should have public sale of the share of the latter in the partnership
communicated it to the acting partner, operate as assets. (1827)
notice to or knowledge of the partnership. (1821)
Exception: In case of fraud on the partnership, DISSSOLUTION
committed by or with the consent of that partner. Dissolution is change in the relation of the partners
 All partners and the partnership are solidary liability caused by any partner ceasing to be associated in the
for everything chargeable to the partnership. (1824) carrying on as distinguished from the winding up of the
a. Any wrongful act or omission of any partner acting business. (1828) On dissolution the partnership is not
in the ordinary course of the business of the terminated, but continues until the winding up of
partnership or with the authority of co- partnership affairs is completed. (1829)
partners, loss or injury is caused to any person,
not being a partner in the partnership, or any Automatic dissolution Judicial dissolution
penalty is incurred, the partnership is liable (1830) (1831)
therefor to the same extent as the partner so 1. Without violation of the 1. A partner has been
acting or omitting to act. (1822) agreement between the declared insane in
b. Where one partner acting within the scope of his partners: any judicial
apparent authority receives money or property of a a. By the termination of proceeding or is
third person and misapplies it; (1823, 1) the definite term or shown to be of
c. Where the partnership in the course of its business particular undertaking unsound mind;
receives money or property of a third person and specified in the 2. A partner becomes
the money or property so received is misapplied by agreement; incapable of
any partner while it is in the custody of the b. By the express will of performing his part
partnership. (1823,2) any partner, who must of the partnership
 Partnership by estoppels act in good faith, when contract;
When a person represents himself or consent to no definite term or 3. A partner has been
another to another representing him to anyone particular is specified; guilty of such
(he is an agent of the persons consenting to such c. By the express will of conduct as tends to
representation) as a partner in an existing partnership, all the partners who affect prejudicially
he is liable to have not assigned the carrying on of
a. Any such persons to whom such representation has their interests or the business;
been made. suffered them to be 4. A partner willfully or
b. The representation was made in a public manner, charged for their persistently
he is liable to such person, whether the separate debts, either commits a breach of
representation has or has not been made or before or after the the partnership
communicated to such person. termination of any agreement, or
Partnership liability result specified term or otherwise so
1. When all the members of the existing particular undertaking; conducts himself in
partnership consent to the representation. d. By the expulsion of matters relating to
2. Liable as though he were an actual member of the any partner from the the partnership
partnership business bona fide in business that it is
No partnership liability result accordance with such a not reasonably
1. He is liable pro rata with the other persons, if power conferred by the practicable to carry
any, so consenting to the contract or agreement between on the business in
representation as to incur liability, otherwise the partners partnership with
separately. 2. In contravention of the him;
agreement between the 5. The business of the
partners, where the partnership can only
Liabilities in estoppel circumstances do not be carried on at a
permit a dissolution under loss;
All partners consented to Partnership is liable
any other provision of this 6. Other circumstances
representation
article, by the express will render a dissolution
No existing partnership & all Person who represented of any partner at any time; equitable.
those represented consented; himself & all those who 3. Any event which makes it On the application of
Not all partners of existing made representation unlawful for the business the purchaser of a
partnership consents to liable pro-rata/jointly of the partnership to be partner's interest under
representation carried on or for the article 1813 or 1814:
members to carry it on in 1. After the
No existing partnership & not all Person who represented partnership termination of the
represented consented; himself liable & those 4. When a specific thing specified term or
None of partners in existing who made/consented to which a partner had particular
partnership consented representation promised to contribute to undertaking;
separately liable the partnership, perishes 2. At any time if the
before the delivery; in any partnership was a
 A person admitted as a partner into an existing case by the loss of the partnership at will
partnership is liable for all the obligations of the thing, when the partner when the interest

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 who contributed it having was assigned or 1. Had extended credit to the partnership prior to
reserved the ownership when the charging dissolution and had no knowledge or notice of
thereof, has only order was issued. his want of authority; or
transferred to the 2. Had not extended credit to the partnership
partnership the use or prior to dissolution, and, having no knowledge
enjoyment of the same; or notice of his want of authority, the fact of his
but the partnership shall want of authority has not been advertised in
not be dissolved by the the manner provided for advertising the fact of
loss of the thing when it dissolution.
occurs after the
partnership has acquired  The dissolution of the partnership does not of itself
the ownership thereof; discharge the existing liability of any partner (1835)
5. Death of any partner; Exception:
6. Insolvency of any partner A partner is discharged from any existing liability upon
or of the partnership; dissolution of the partnership by an agreement to that
7. Civil interdiction of any effect between himself, the partnership creditor and the
partner; person or partnership continuing the business; and
such agreement may be inferred from the course of
Effect of dissolution dealing between the creditor having knowledge of the
General Rule: Dissolution terminates all authority of any dissolution and the person or partnership continuing
partner to act for the partnership: (1832) the business.
Exception:  The individual property of a deceased partner shall be
1. By any act appropriate for winding up partnership liable for all obligations of the partnership incurred
affairs or completing transactions unfinished at while he was a partner, but subject to the prior
dissolution; payment of his separate debts. (Ibid)
2. By any transaction which would bind the partnership if  Where a partnership contract is rescinded on the
dissolution had not taken place, provided the other ground of the fraud or misrepresentation of one of the
party to the transaction: parties thereto, the party entitled to rescind is, without
a. Had extended credit to the partnership prior to prejudice to any other right, entitled: (1838)
dissolution and had no knowledge or notice of the 1. To a lien on, or right of retention of, the surplus of
dissolution; or the partnership property after satisfying the
b. Though he had not so extended credit, had partnership liabilities to third persons for any sum
nevertheless known of the partnership prior to of money paid by him for the purchase of an
dissolution, and, having no knowledge or notice of interest in the partnership and for any capital or
dissolution, the fact of dissolution had not been advances contributed by him;
advertised in a newspaper of general circulation in 2. To stand, after all liabilities to third persons have
the place (or in each place if more than one) at been satisfied, in the place of the creditors of the
which the partnership business was regularly partnership for any payments made by him in
carried on. respect of the partnership liabilities; and
Liability of a partner shall be satisfied out of 3. To be indemnified by the person guilty of the fraud
partnership assets alone when such partner had been or making the representation against all debts and
prior to dissolution liabilities of the partnership.
1. Unknown as a partner to the person with whom the
contract is made; and LIMITED PARTNERSHIP
2. So far unknown and inactive in partnership affairs Members one or more general partners and one or more
that the business reputation of the partnership limited partners.
could not be said to have been in any degree due
to his connection with it. General Limited
Partner/partnership partner/partnership
1. With respect to the partners, 1. General partner is 1. Limited partner’s
a. When the dissolution is not by the act, insolvency personally liable for the liability extend only to
or death of a partner; or partnership obligation his capita contribution
b. When the dissolution is by such act, insolvency or 2. When management has 2. Limited partner has
death of a partner, each partner is liable to his co- not been agreed upon, no share in the
partners for his share of any liability created by any all general partner have management of a
partner acting for the partnership as if the equal right in the limited partnership
partnership had not been dissolved unless: (1833) management of the
1. The dissolution being by act of any partner, the partnership.
partner acting for the partnership had 3. General partner may 3. Limited partner must
knowledge of the dissolution; or contribute money, contribute money or
2. The dissolution being by the death or property or industry property but not
insolvency of a partner, the partner acting for industry
the partnership had knowledge or notice of the 4. General partner is a 4. Limited partner is not
death or insolvency. proper party to a proper party to
2. With respect to persons not partners, the partnership is proceeding by or against proceedings by or
in no case bound by any act of a partner after a partnership against a partnership.
dissolution: 5. General partner may 5. Limited partner name
a. Where the partnership is dissolved because it is appear in the firm name must not appear in
unlawful to carry on the business, unless the act is the firm name
appropriate for winding up partnership affairs; or 6. General partner cannot 6. No prohibition in case
b. Where the partner has become insolvent; or engage in a business of Limited partner
c. Where the partner has no authority to wind up which is of the kind of
partnership affairs; except by a transaction with business in which the
one who - partnership is engage.
EXCEL PROFESSIONAL SERVICES, INC.

7. Retirement, death, 7. Do not the same 3. Any partner shall have the it just and
insanity or insolvency of effect, executor or right to a formal account as reasonable; and
general partner dissolves administrator shall to partnership affairs: (3) Have
the partnership have all the rights of a. If he is wrongfully dissolution and
a limited partner for excluded from the winding up by decree
the purpose of setting partnership business or of court.
his estate. possession of its A limited partner shall
8. Can be constituted in 8. Must follow all the property by his co- have the right to
whatever form requirement of the partners; receive a share of the
law for limited b. If the right exists under profits or other
partnership the terms of any compensation by way
9. Composed of all general 9. Composed of at least agreement; of income, and to the
partner one general partner c. As provided by article return of his
and at least one 1807; contribution, (1851)
limited partner d. Whenever other provided that after
10. No need to include in the 10. Must include in the circumstances render it such payment is
partnership name the partnership name the just and reasonable. made, whether from
word “LTD” word “LIMITED” or A general partner shall have all property of the
“LTD” the rights and powers and be partnership or that of
subject to all the restrictions a general partner, the
11. When the interest of one 11. When the interest of
and liabilities of a partner in a partnership assets are
of the general partner is the limited partner is
partnership without limited in excess of all
charged, his interest charged, the interest
partners. However, without the liabilities of the
may be redeemed with may be redeemed
written consent or ratification of partnership except
separate property of one with the separate
the specific act by all the liabilities to limited
or more partners or; property of any
limited partners, a general partners on account
partnership property general partner, but
partner or all of the general of their contributions
with the consent of all may not be redeemed
partners have no authority to: and to general
partners whose interest with partnership
(1) Do any act in partners (1856).
is not so charged or property. (1862)
sold. (1814) contravention of the
certificate;
General Rule: (2) Do any act which would
The limited partners as such shall not be bound by the make it impossible to
obligations of the partnership.(1843) carry on the ordinary
business of the
Exception: partnership;
 The name of the partnership failed to add the word (3) Confess a judgment
”Limited” or “Ltd”. against the partnership;
 Failure to file the article of co-partnership to the SEC. (4) Possess partnership
 The contributions of a limited partner may be cash or property, or assign their
property, but not services. (1845) rights in specific
 The surname of a limited partner appear in the partnership property,
partnership name unless: for other than a
(1) It is also the surname of a general partner, or partnership purpose;
(2) Prior to the time when the limited partner became (5) Admit a person as a
such, the business has been carried on under a name general partner;
in which his surname appeared. (1846) (6) Admit a person as a
 A limited partner takes part in the control of the limited partner, unless
the right so to do is
business. (1848) given in the certificate;
(7) Continue the business
Right of General partner Right of limited with partnership
partner (Art. 1851) property on the death,
1. The partnership books shall A limited partner shall retirement, insanity,
be kept, subject to any have the same rights civil interdiction or
agreement between the as a general partner insolvency of a general
partners, at the principal to: partner, unless the right
place of business of the (1) Have the so to do is given in the
partnership, and every partnership books certificate. (1850)
partner shall at any kept at the principal
reasonable hour have place of business of  A person may be a general partner and a limited
access to and may inspect the partnership, and partner in the same partnership at the same time,
and copy any of them. at a reasonable hour provided that this fact shall be stated in the certificate.
(1805) to inspect and copy  A person who is a general, and also at the same time a
2. Partners shall render on any of them; limited partner, shall have all the rights and powers
(2) Have on and be subject to all the restrictions of a general
demand true and full
demand true and full partner; except that, in respect to his contribution, he
information of all things
information of all shall have the rights against the other members which
affecting the partnership to
things affecting the he would have had if he were not also a general
any partner or the legal
partnership, and a partner. (1853)
representative of any
formal account of  Allowable transaction of limited partner (not also
deceased partner or of any
partnership affairs general partner)
partner under legal
whenever a. Loan money to the partnership
disability. (1806)
circumstances render b. Transact other business with the partnership,

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 c. Received a pro rata share of the assets with the or amendment of the certificate, to enforce
general creditors (if he is not also a general such liabilities.
partner)  A limited partner's interest is assignable. (1859)
 Prohibited transactions  An assignee, who does not become a substituted
a. Receive or hold as collateral security and limited partner, has no right to require any information
partnership property, or or account of the partnership transactions or to inspect
b. Receive from a general partner or the partnership the partnership books; he is only entitled to receive the
any payment, conveyance, or release from liability share of the profits or other compensation by way of
if at the time the assets of the partnership are not income, or the return of his contribution, to which his
sufficient to discharge partnership liabilities to assignor would otherwise be entitled. (Right are similar
persons not claiming as general or limited partners to those of a person to whom a partner conveyed his
The receiving of collateral security, or payment, whole interest in the partnership)
conveyance, or release in violation of the foregoing
prohibition is a fraud on the creditors of the A substituted limited partner - is a person admitted to
partnership. (Reason 3rd persons enjoy preferential all the rights of a limited partner who has died or has
rights insofar as a partnership assets are concerned) assigned his interest in a partnership
(1854) Requisites when assignee become substituted limited
 A limited partner may receive from the partnership the partner
share of the profits or the compensation by way of a. All the members consent thereto or if the assignor,
income stipulated for in the certificate. (provided that being thereunto empowered by the certificate,
Partnership assets > All outside liabilities) (1856) gives the assignee that right.
 Where there are several limited partners the members b. An assignee becomes a substituted limited partner
may agree that one or more of the limited partners when the certificate is appropriately amended in
shall have a priority over other limited partners as to accordance with article 1865.
the return of their contributions, as to their c. The certificate as amended must be registered in
compensation by way of income, or as to any other the SEC.
matter. If such an agreement is made it shall be stated
in the certificate, and in the absence of such a  The retirement, death, insolvency, insanity or civil
statement all the limited partners shall stand upon interdiction of a general partner dissolves the
equal footing. (1855) partnership, unless the business is continued by the
 Requisites for return of contribution of limited partner. remaining general partners:
(1857) (1) Under a right so to do stated in the certificate, or
a. All liabilities of the partnership, except liabilities to (2) With the consent of all members. (1860)
general partners and to limited partners on account  On the death of a limited partner his executor or
of their contributions, have been paid or there administrator shall have all the rights of a limited
remains property of the partnership sufficient to partner for the purpose of setting his estate, and such
pay them; power as the deceased had to constitute his assignee a
b. The consent of all members is had, unless the substituted limited partner.
return of the contribution may be rightfully  The estate of a deceased limited partner shall be liable
demanded under the provisions of the second for all his liabilities as a limited partner. (1861)
paragraph; and
c. The certificate is cancelled or so amended as to set Liabilities of the partnership shall rank in order of
forth the withdrawal or reduction. payment
 Return of contribution of limited partner as a General partnership Limited partnership
matter of right - Limited partner may rightfully (1839) (1863)
demand the return of his contribution: (1857) a. Those owing to creditors a. Those to creditors, in the
a. On the dissolution of a partnership; or other than partners; order of priority as
b. Arrival of the date specified in the certificate for its b. Those owing to partners provided by law, except
return; other than for capital those to limited partners
c. After he has six months' notice in writing to all and profits; on account of their
other members, if no time is specified in the c. Those owing to partners contributions, and to
certificate, either for the return of the contribution in respect of capital; general partners;
or for the dissolution of the partnership. d. Those owing to partners b. Those to limited partners
 Liability of limited partner to the partnership (1858) in respect of profits. in respect to their share
a. For the difference between his contribution as of the profits and other
actually made and that stated in the certificate as compensation by way of
having been made, and income on their
b. For any unpaid contribution which he agreed in the contributions;
certificate to make in the future at the time and on c. Those to limited partners
the conditions stated in the certificate in respect to the capital
Liability limited partner as trustee – A limited partner is of their contributions;
considered as trustee for the partnership. d. Those to general
a. Specific property stated in the certificate as partners other than for
contributed by him, but which was not capital and profits;
contributed or which has been wrongfully e. Those to general
returned, and partners in respect to
b. Money or other property wrongfully paid or profits;
conveyed to him on account of his f. Those to general
contribution. partners in respect to
Requisites for waiver or compromise capital.
a. Consent of all members;
b. It does not affect the right of a creditor of a
partnership who extended credit or whose claim Note: In general partnership, the payment of capital is
arose after the filing and before a cancellation preferred than with respect to profits. In limited
EXCEL PROFESSIONAL SERVICES, INC.

partnership, the payment of profit has preference over
capital.
CORPORATION
Element of Corporation
1. It is an artificial being
2. Created by operation of law
3. Having the right of succession
4. The powers, attributes and properties expressly
authorized by law or incident to its existence.
Doctrine of separate juridical personality
Corporation has juridical personality separate and distinct
from the stockholders composing the corporation.
Piercing the veil of corporate entity
When the veil of corporate fiction is used as a shield to
perpetuate fraud, to defeat public convenience, justify
wrong or defend crime, this fiction shall be disregarded and
the individuals composing it will be treated identically.
Doctrine of limited capacity
Corporation may exercise only powers expressly authorized
by law or incident to its existence.
Theory of Corporation
1. Theory of concession – Exist by grant of the state
(Philippine Setting)
2. Gennosenshaft theory – It exist because the parties
want it to exist
Private Corporation can only be created by
corporation code (B.P. 68)
Under Art. XII, Sec 16 of the 1987 Constitution which
provides as follows:
“The Congress shall not, except by general law, provide for
the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations
may be created or established by special charters in the
interest of the common good and subject to the test of
economic viability.”
Special law can create only
1. Public corporation
2. Government owned or controlled corporations
provided:
a. In the interest of common goods
b. Subject to test of economic viability.
Corporation not entitled to moral damages
A corporation, being an artificial person and having
existence only in legal contemplation, has no feeling, no
emotions, no senses; therefore, it cannot experience
physical suffering, mental anguish, fright, serious anxiety,
wounded feelings, etc.
Distinction between partnership And Corporation
1. Manner of creation
2. Number of incorporators
3. Commencement of juridical personality
4. Powers
5. Management
6. Effect of mismanagement
7. Right of succession
8. Transferability of interest
9. Term of existence
10. Firm name
11. Dissolution
12. Laws which govern
Classification of corporation
1. Stock corporation - Corporations which have capital
stock divided into shares and are authorized to
distribute to the holders of such shares dividends or
allotments of the surplus profits on the basis of the
shares held. (Sec 4, BP 68)
2. Non-stock corporation – All other corporations are non-
stock corporations.
Other classification of Corporations
1. Number of persons
a. Corporation aggregate – more than one member
b. Corporation sole – one member or corporator
2. Religious purpose or not
a. Ecclesiastical corporation - Religious
b. Lay corporation – other than religious purpose.
(Either eleemosynary or civil)
3. Charitable or not
a. Eleemosynary corporation - Charitable
b. Civil corporation – Business of profit
4. Country of creation
a. Domestic corporation – incorporated under
Philippine law
b. Foreign corporation – Incorporated under foreign
law
5. Legal right to corporate existence
a. De jure corporation – exist in fact and in law
b. De facto corporation – exist in fact but not in law
6. Public or not
a. Close corporation – limited to selected persons
b. Open corporation – open to any person
7. Relation to other corporation
a. Parent corporation – Owner of more than 50% of
another corporation
b. Subsidiary corporation – acquire of parent company
8. True or limited sense
a. True corporation
b. Quasi corporation
1. Corporation by prescription – exercise power
for indefinite period without interference from
sovereign power. (Roman Catholic Church)
2. Corporation by estoppels
9. Public or private purpose
a. Public corporation
b. Private corporation
10. Going public or not
a. Going public – Decide to list its share in the stock
exchange
b. Going private – Restrict the share to certain group
Classes of shares
1. Par value share
2. No par value share
Limitation:
a. Cannot be issued by the following corporation:
(BPI-TB)
1. Bank
2. Public utilities
3. Insurance company
4. Trust company
5. Building and loan association
b. Preferred shares not allowed
c. Cannot be issued for a consideration less than five
peso (P5)
d. Deemed fully paid and non assessable
e. Entire consideration received shall be treated as
capital and not available for dividend distribution.
3. Voting share
 That there shall always be a class or series of
shares which have complete voting rights.
 That no share may be deprived of voting rights
except those classified and issued as "preferred" or
"redeemable" shares.
4. Non voting share- shares without right to vote
Non voting shares classified as such may still vote
under the following circumstances:

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 a. Amendment of the articles of incorporation;
b. Adoption and amendment of by-laws;
c. Sale, lease, exchange, mortgage, pledge or other
disposition of all or substantially all of the corporate
property;
d. Incurring, creating or increasing bonded
indebtedness;
e. Increase or decrease of capital stock;
f. Merger or consolidation
g. Investment of corporate funds in another
corporation or business except where the
investment by the corporation is reasonably
necessary to accomplish its primary purpose as
stated in the articles of incorporation
h. Dissolution of the corporation.
5. Common stock – equal right. Except as otherwise
provided in the articles of incorporation and stated in
the certificate of stock, each share shall be equal in all
respects to every other share. (6)
6. Preferred stock – Preferred shares of stock issued by
any corporation may be given preference in the
distribution of the assets of the corporation in case of
liquidation and in the distribution of dividends, or such
other preferences as may be stated in the articles of
incorporation.
7. Promotion stock – issued to promoter
8. Share in escrow – Subject to agreement where the
stock is deposited to third and kept by the depositary
until the condition contained in agreement happened.
9. Convertible stock – Convertible to other shares
10. Founder share – issued to founder or organizer having
a right granted . (Sec 7)
11. Redeemable share (Sec 8)
a. Must be expressly so provided in the articles of
incorporation
b. Purchased or taken up by the corporation upon the
expiration of a fixed period, regardless of the
existence of unrestricted retained earnings.
c. Terms and conditions must be stated in the articles
of incorporation and certificate of stock
12. Treasury stock – shares of stock which have been
issued and fully paid but subsequently reacquired by
the issuing corporation by purchase, redemption,
donation or other lawful means. (Sec 9)
Corporate term – 50 years may be extended for periods
not exceeding fifty (50) years in any single instance by an
amendment of the articles of incorporation. No extension
can be made earlier than five (5) years prior to the original
or subsequent expiry date(s) unless there are justifiable
reasons for an earlier extension. (Sec 11)
Contents of the articles of Incorporation (Sec 14)
All corporations organized under this code shall file with the
Securities and Exchange Commission articles of
incorporation in any of the official languages duly signed
and acknowledged by all of the incorporators, containing
substantially the following matters, except as otherwise
prescribed by this Code or by special law:
1. The name of the corporation;
2. The specific purpose or purposes for which the
corporation is being incorporated. Where a corporation
has more than one stated purpose, the articles of
incorporation shall state which is the primary purpose
and which is/are he secondary purpose or purposes:
Provided, That a non-stock corporation may not include
a purpose which would change or contradict its nature
as such;
3. The place where the principal office of the corporation
is to be located, which must be within the Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the
incorporators;
6. The number of directors or trustees, which shall not be
less than five (5) nor more than fifteen (15);
7. The names, nationalities and residences of persons who
shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified in
accordance with this Code;
8. If it be a stock corporation, the amount of its
authorized capital stock in lawful money of the
Philippines, the number of shares into which it is
divided, and in case the share are par value shares, the
par value of each, the names, nationalities and
residences of the original subscribers, and the amount
subscribed and paid by each on his subscription, and if
some or all of the shares are without par value, such
fact must be stated;
9. If it be a non-stock corporation, the amount of its
capital, the names, nationalities and residences of the
contributors and the amount contributed by each; and
10. Such other matters as are not inconsistent with law and
which the incorporators may deem necessary and
convenient.
Minimum Capital requirement
General Rule: No minimum authorized capital stock (Sec
12)
Exception:
1. Sec 13
 25% of the authorized capital stock must be
subscribed.
 25% of the total subscription be paid.
 In no case the paid up capital be less than P5,000
2. Special Law
Percentage of Filipino ownership (Nationalize Corporation)
1. 100% Filipino
a. Mass media except recording
b. Retail trade corporation
c. Private security agencies
d. Small scale mining
e. Utilization of natural resources
f. Cockpits
g. Manufacture, repair, stockpiling and/or distribution
of nuclear weapon
2. 80% Filipino
a. Private radio communications network
3. 75%
a. Private recruitment, whether for local or overseas
employment
b. Construction and repair of locally funded works
c. Construction of defense related structures
d. Under the flag law
4. 70%
a. Pawnshop business
5. 60%
a. Corporation for exploration, development and
utilization of natural resources – 60%
b. Realty companies and other corporations that own
public lands
c. Public utilities corporations
d. Educational Institution
e. Banking corporation
f. Rural bank
g. Culture, production milling, processing, trading
except retail of rice and corn and by products.
h. Coastwise shipping
i. Sauna and steam bath bathhouse, massage clinics
and similar activities
j. Adjustment companies
6. 40%
a. Financing companies
b. Investment house
Corporate Name not allowed (Sec 18)
1. Identical
EXCEL PROFESSIONAL SERVICES, INC.
2. Deceptive
3. Confusingly similar to that existing corporation
4. Any name already protected by law
5. Patently deceptive, confusing or contrary to existing
laws.
Note: When approved – Commission issue amended
certificate of incorporation under amended name.
Commencement of corporate existence – Issuance of
certificate of incorporation. (Sec 19)
DeFacto corporation(Sec 20)
1.Valid law
2.Bonafide intent to incorporate under such valid law
3.Actual exercise in good faith of such corporate power.
 i.e. Majority of incorporators are not resident of the
Philippines; defect in form; acknowledged before a
person without authority.
 Only direct proceeding of quo warranto is allowed.
Collateral attack not allowed.
 Instituted by solicitor general
Corporation by estoppels (Sec 21)
 liable as general partner for all debts, liabilities and
damages.
Effects on non-use of corporate charter and continuous
inoperation of a corporation (Sec. 22)
Distinction between corporators and incorporators
Corporators (Sec 5) Incorporators (Sec 10)
Limited depending on the Limit only to not less than
available authorized capital five but not more than 15.
stock.
Not signatories in the Originally formed and
article of incorporation. signatories of the article of
incorporation
They cease to be Remain as incorporators
corporators when they are even no longer a holder of
no longer a holder of shares of stock
shares of stock.
Corporator
a. Stockholder or shareholder – Stock corporation
b. Member – non stock corporation
Number and Qualifications of Incorporators
1. Not less than 5 but not more than 15
2. Must be a natural person
3. All must be of legal age
4. Majority must be resident of the Philippines
Page 13 of 24
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5. Must be an owner or subscriber of at least one (1)
share of capital stock
Number and Qualifications of Director (Sec 23)
1. Not less than five but not more than 15 (Sec 14)
2. Owner of at least one share
3. The ownership (Legal not beneficial ownership, e.g.
pledgor, mortgagor) must be stand in the name of the
director in the book of the corporation.
4. Majority must be residence of the Philippines
5. Not convicted by final judgment for an offense
punishable by imprisonment of more than 6 years
6. Do not commit a violation of the corporation code
within 5 years prior to the date of his election or
appointment.
Qualification of Corporate officer (Sec 25)
1. President – Must be director
2. Secretary – Resident and citizen of the Philippines
3. *Treasurer – May or may not be a director
Apply to all:
a. Not convicted by final judgment for an offense
punishable by imprisonment of more than 6 years
b. Do not commit a violation of the corporation code
within 5 years prior to the date of his election or
appointment. (Sec 27)
*Corporate treasurer must be a resident of the Philippines.
(Policy of the SEC)
Concurrent position of corporate officer (Sec 25)
1. President + secretary – Not allowed
2. President + treasurer – Not allowed
3. Secretary + treasure – Allowed
*Chairman and Vice chairman not allowed (SEC Opinion)
By Laws
 May provide for the qualification of the director
a. At least 25 years of age
b. Have some experience in business, finance or law
c. Disqualify anyone who is competing with the
corporation
As long as the qualification imposed are reasonable and
not meant to unjustly or unfairly deprive the minority
of their rightful representation in the Board of
Directors, it is valid.
Report of election
Submit to the SEC within 30 days by the secretary or any
other officer of the corporation the result of the election
containing the following:
1. Names
2. Nationalities
3. Residence of the director, trustee or officer elected.
In case of:
a. Death – heir, secretary, or any officer, or director
or trustee himself
b. Resign – secretary, or any officer, or director or
trustee himself
c. Any manner cease to hold office - secretary, or any
officer, or director or trustee himself report such
fact to the SEC
Removal of directors or trustees (Sec. 28)
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. 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.
BL.2102
Vacancies in the office of director (Sec 29)
1. Other than removal by the stockholders or members or
expiration of term – Majority of the remaining directors
or trustees if still constituting quorum.
2. Removal by stockholder or members or expiration of
term or increase in the number of director or other
than (Removal, expiration or increase) but was referred
by the BOD to the stockholders – Stockholder in a
regular or special meeting called for that purpose. (Sec
29)
Director or trustee elected - served only the
unexpired term of his predecessor in office.

Compensation of director (Sec 30)

General rule: No compensation except for reasonable per
diems
Exception: Provided for in by laws
1. Vote of the stockholders representing at least a
majority of the outstanding capital stock at regular
or special meeting
2. Total yearly compensation shall not exceed 10% of
the net income before income tax of the preceding
year.

Liability of Corporate officers (Sec 31)

Liability: Jointly and severally for all damages suffered by
the corporation, stockholders or members and other person
when such director or trustee:
1. Knowingly vote for or assent to patently unlawful acts
of the corporation;
2. Guilty of gross negligence or bad faith in directing the
affairs of the corporation;
3. Acquire any personal or pecuniary interest in conflict
with their duty as director or trustee
Disloyalty of a director (Sec 34)
Liable as trustee for the corporation + account for the
Where a director, by virtue of his office, acquires for
profit (otherwise accrued to the corporation) when the
himself a business opportunity which should belong to the
director, trustee or officer attempts to acquire/acquires in
corporation, thereby obtaining profits to the prejudice of
violation of his duty:
such corporation, he must account to the latter for all
1. Any interest adverse to the corporation which has
such profits by refunding the same, unless his act has
reposed to him in confidence
been ratified by a vote of the stockholders owning or
2. Where equity imposes a disability upon him to deal in
representing at least two-thirds (2/3) of the outstanding
his own behalf
capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked his own
Self dealing director (Sec 32)
funds in the venture.
Rule: A contract of the corporation with one or more of its
directors or trustees or officers is voidable, at the option of
Executive committee (Sec 35)
such corporation
1. The by-laws of a corporation may create an executive
committee, composed of not less than three members
Exception: Valid when all the requisites are present
of the board, to be appointed by the board.
1. That the presence of such director or trustee in the
2. Said committee may act, by majority vote of all its
board meeting in which the contract was approved was
members, on such specific matters within the
not necessary to constitute a quorum for such meeting;
competence of the board, as may be delegated to it in
2. That the vote of such director or trustee was nor
the by-laws or on a majority vote of the board.
necessary for the approval of the contract;
Executive committees have no power to:
3. That the contract is fair and reasonable under the
a. Approval of any action for which shareholders' approval
circumstances;
is also required;
4. That in case of an officer, the contract has been
b. The filing of vacancies in the board;
previously authorized by the board of directors.
c. The amendment or repeal of by-laws or the adoption of
5. Full disclosure of the adverse interest of the directors
new by-laws;
or trustees involved is made at such meeting.
d. The amendment or repeal of any resolution of the
Absence of requisites 1 or 2 – Can be ratified by 2/3 of the
board which by its express terms is not so amendable
outstanding capital stock or 2/3 of the members.
or repealable;
Absence of requisite 3 – Cannot be ratified
e. Distribution of cash dividends to the shareholders.
Interlocking director (Sec 33)
Corporate powers and capacity (Sec 36)
Rule: Except in cases of fraud, and provided the contract is
Every corporation incorporated under this Code
fair and reasonable under the circumstances, a contract
between two or more corporations having interlocking has the power and capacity:
directors shall not be invalidated on that ground alone. Express Power Stockhold
ers vote

1. To sue and be sued in its corporate name; No

EXCEL PROFESSIONAL SERVICES, INC.
2. Of succession by its corporate name for
the period of time stated in the articles of
incorporation and the certificate of
incorporation; No
3. To adopt and use a corporate seal; No
4. To amend its articles of incorporation in
accordance with the provisions of this Yes
Code;
5. To adopt by-laws, not contrary to law,
morals, or public policy, and to amend or Yes
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 No
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 Yes
reasonably and necessarily require, subject
to the limitations prescribed by law and Yes
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 No
similar purposes: Provided, That no
corporation, domestic or foreign, shall give
donations in aid of any political party or No
candidate or for purposes of partisan
political activity;
10. To establish pension, retirement, and other
plans for the benefit of its directors, No
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. (Implied power)
Express power – (Par 1 -10)
Implied power – Reasonably necessary to exercise the
express power to accomplish or carry out the purpose for
which the corporation was formed.
Incidental power – Indispensably necessary to carry out
the purpose
Note: Cororation can exercise only power conferred by
corporation code or by its article of incorporation except
such as are necessary or incidental to the exercise of the
powers so conferred (Intra vires act). Otherwise the act of
the corporation is ultravires act (Sec 45)
Power to extend or shorten corporate term (Sec 37)
1. Majority vote of the BOD + 2/3 of the outstanding
capital stock or 2/3 of the embers.
2. 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.
3. Extension of corporate term (sec 37) or shortening the
term of corporate existence (Sec 81), any dissenting
stockholder may exercise his appraisal right.
Power to increase/decrease capital stock; Increase bond
indebtedness (Sec 38)
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1. Written notice of the proposed Increase/decrease
of stock or increase in bonded indebtedness
2. State the time and place of the stockholders
meeting
3. Addressed to each stockholder at his place of
residence as shown in the books of the corporation
4. Deposit in the post office or served personally
5. Approval of the SEC
6. Certificate in Duplicate signed by majority of the
directors and countersigned by the chairman and
secretary stating the following:
a. Compliance with the requirement
b. Amount of increase/decrease capital stock
c. Names/nationalities/residence of the persons
subscribing, the amount of capital stock
subscribe or # of no par shares subscribed. If
stock dividend - allotted to each stockholder.
d. Bond incurred, created or increased
e. Actual indebtedness on the day of the meeting
f. Amount of stock represented at the meeting
g. Vote authorizing the increase/decrease of stock
or increase in bond indebtedness.
7. Duplicate certificate – one kept in the office of the
corporation and one filed with the SEC
8. For increase in stock – sworn statement of the
treasure (lawfully at the time of filing) of the
corporation showing 25% of such increased capital
stock has been subscribed and 25% of amount
subscribed has been paid.
9. Decrease in stock – Not approved if it effect
prejudice the right of corporate creditor (Trust fund
doctrine)
10. Bond – Registered with the SEC
11. Non stock corporation – Majority of the board of
trustee + 2/3 of the member
Types of Bond
1. Mortgage bonds – Bonds secured by mortgage on real
properties.
2. Collateral trust bonds – Bonds secured by stocks and
bonds of other corporation.
3. Debenture bonds – Bonds without collateral security.
4. Registered bonds – Requires the registration of the
name of the bondholders on the books of the
corporation.
5. Coupon or bearer bonds – are unregistered bonds in
the sense that the name of the bondholder is not
recorded on the company books.
6. Convertible bonds – are those which give the holders
thereof the right to convert their bondholdings into
share capital or other securities of the issuing company
within a specified period of time.
7. Callable bonds – are bonds issued whereby another
party promises to make payment if the borrowing
company fails to do so.
8. Junk bonds – are high risk, high yield bonds issued by
enterprises that are heavily indebted or otherwise in
weak financial condition.
9. Treasury bonds – are company’s own bonds originally
issued and reacquired but not cancelled.
10. Term bonds – are bonds with a single date of maturity.
11. Serial bonds – are those with a series of maturity
dates.
Power to deny pre-emptive right (Sec 39)
Rule: 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.
Exception:
1. Denied in the articles of incorporation or an
amendment thereto
BL.2102
2. Shares to be issued in compliance with laws requiring Rule: BOD can declare only dividend out of the
stock offerings or minimum stock ownership by the unrestricted retained earnings
public; Cash/property Stock dividend
3. Shares to be issued in good faith with the approval of dividend
the stockholders representing two-thirds (2/3) of the Delinquent 1st applied to Withheld until his
outstanding capital stock, in exchange for property unpaid balance on unpaid
needed for corporate purposes or in payment of a the subscription subscription is
previously contracted debt. plus cost and fully paid
expense
Sale or disposition of assets (Sec 40) Approval of Without approval 2/3 of the
Sale of all or substantially all including goodwill - if thereby the of stockholders. outstanding
the corporation would be rendered incapable of continuing stockholder capital stock
the business or accomplishing the purpose for which it was (Regular/special
incorporated meeting)
1. Subject to existing laws on illegal combinations and
monopolies
Rule: Corporation prohibited to retain surplus profit
2. Majority of the BOD or trustees + 2/3 of outstanding
(unappropriated retained earnings) in excess of 100% of
capital stock (2/3 of the members)
their paid in capital
3. Written notice of the proposed action and of the time
Exception:
and place of the meeting shall be addressed to each
1. Definite corporate expansion projects or programs
stockholder or member at his place of residence as
(appropriation for expansion project)
shown on the books of the corporation and deposited to
2. Prohibition under any loan agreement with any financial
the addressee in the post office with postage prepaid,
institution or creditor without its/his consent, and such
or served personally.
consent has not yet been secured; or (Appropriation for
4. Exercise of appraisal right
bond redemption)
5. After approval of the stockholder – BOD may abandon
3. Retention is necessary under special circumstances
such sale subject to the right of 3 rd person without
obtaining in the corporation, such as when there is
further approval by the stockholder or member.
need for special reserve for probable contingencies.
(Appropriation for contingency)
Note:
4. Addition: provided by law. (appropriation for treasury
No vote of stockholders is required
stock)
1. Sale of assets which is necessary in the usual and
regular course of business, or
Power to enter into management contract (Sec. 44)
2. If the proceeds of the sale or other disposition of such
No corporation shall conclude a management contract with
property and assets be appropriated for the conduct of
another corporation (also apply to any contract whereby a
its remaining business.
corporation undertakes to manage or operate all or
substantially all of the business of another corporation,
Power to acquire own shares (Sec 41)
whether such contracts are called service contracts,
1. Legitimate corporate purpose or purposes, including
operating agreements or otherwise) unless such contract
but not limited to the following cases:
shall have been approved by the board of directors and
a. To eliminate fractional shares arising out of stock
by stockholders owning at least the majority of the
dividends
outstanding capital stock, or by at least a majority of
b. To collect or compromise an indebtedness to the
the members in the case of a non-stock corporation, of
corporation, arising out of unpaid subscription, in a
both the managing and the managed corporation, at a
delinquency sale, and to purchase delinquent
meeting duly called for the purpose:
shares sold during said sale; and
Exception: Then the management contract must be
c. To pay dissenting or withdrawing stockholders
approved by the stockholders of the managed corporation
entitled to payment for their shares under the
owning at least two-thirds (2/3) of the total outstanding
provisions of this Code.
capital stock entitled to vote, or by at least two-thirds (2/3)
2. Corporation has unrestricted retained earnings in its
of the members in the case of a non-stock corporation
books to cover the shares to be purchased or acquired.
under the following:
(1) Where a stockholder or stockholders representing the
Investment of Fund in another corporation (Sec 42)
same interest of both the managing and the managed
Other than primary purpose
corporations own or control more than one-third (1/3)
1. Majority of the board of directors or trustees and
of the total outstanding capital stock entitled to vote of
ratified by the stockholders representing at least two-
the managing corporation; or
thirds (2/3) of the outstanding capital stock or
(2) Where a majority of the members of the board of
members stockholder's or member's meeting duly
directors of the managing corporation also constitute a
called for the purpose.
majority of the members of the board of directors of
2. Written notice of the proposed investment and the time
the managed corporation
and place of the meeting shall be addressed to each
stockholder or member at his place of residence as
General Rule: No management contract shall be entered
shown on the books of the corporation and deposited to
into for a period longer than five years for any one term.
the addressee in the post office with postage prepaid,
Exception: That such service contracts or operating
or served personally.
agreements which relate to the exploration,
development, exploitation or utilization of natural
Investment of fund which is reasonably necessary to
resources may be entered into for such periods as may be
accomplishment its primary purpose as stated in the article
provided by the pertinent laws or regulations.
of incorporation.
1. Approval of the stockholders or members shall not be
Ultra vires acts of corporations.
necessary
No corporation under this Code shall possess or exercise
any corporate powers except those conferred by this Code
Power to declare dividend (Sec 43)
or by its articles of incorporation and except such as are
EXCEL PROFESSIONAL SERVICES, INC.

necessary or incidental to the exercise of the powers so amend the by-laws (Sec
conferred. (Sec. 45) 48)
Fixing the issuance price of √
Summary of vote Major Major Outstand no par value share by the
required for corporate ity of ity of ing BOD when authorized by
act BOD the capital the Article of Incorporation
Quor Stock (Sec 62)
um of Maj 2/ Fixing the issuance price of √
the orit 3 no par value share in the
BOD y absence of price fixed in the
Amendment of Article of √ *√ articles of incorporation or
Incorporation (Sec 16) authority given to the BOD
Election of Directors or √
to fixed the issuance price
trustees (Sec 24 & 29)
(Sec 62)
Removal of Director or √
Merger or consolidation √ √
trustees (Sec 28)
(Sec 77)
Calling for special meeting √
Adopt a plan of √ √
for removal of director or
distribution of assets of
trustee (Sec 28)
a non stock corporation
Filing of vacancy other than ^√
Corporate dissolution √ √
removal or expiration of
(Sec 118)
term provided the Adoption of by-laws prior to Approved and signed by all
remaining director incorporation (Sec 46) the incorporators
constitute quorum (Sec 29)
Compensation of directors √ *√ - Stockholder meeting not required except those
(Sec 30) amendment of articles of incorporation wherein the
Self dealing director (Sec √ corporation code require a regular or special stockholders
32) meeting.
Interlocking director (Sec √ ^√ - Remaining director provided they constitute quorum
33) 1√ - Ratified
Disloyalty of a director (Sec √ 2√ - Approved
3√ - Authorized
34)
Delegation of power to √
Nota Bene: Letter in bold letter are required to be
executive committee (Sec approved by both the BOD and stockholders or
35) members.
Extension or shortening √ 1√ * However, in case (1) where a stockholder or stockholders
of corporate term (Sec representing the same interest of both the managing and
37) the managed corporations own or control more than one-
Increase or decrease √ 2√ third (1/3) of the total outstanding capital stock entitled to
capital stock (Sec 38) vote of the managing corporation; or (2) where a majority
of the members of the board of directors of the managing
Incur, create or increase √ 2√
corporation also constitute a majority of the members of
bond indebtedness (Sec the board of directors of the managed corporation then the
38) management contract must be approved by the
Denial of pre emptive √ 2√ stockholders of the managed corporation owning at least
right (Sec 39) two-thirds (2/3) of the total outstanding capital stock
Sale or disposition of all √ 3√ entitled to vote, or by at least two-thirds (2/3) of the
or substantially all of members in the case of a non-stock corporation. (Sec 44)
corporate property (Sec
40)
Investment of corporate √ 1√
Director meeting Stockholder
fund in another
meeting
corporation other than  Proxy  Proxy vote not  Proxy vote
for primary purpose (Sec allowed (Sec 25) allowed
42)  Date of  Regular meeting  Regular
Declaration of stock √ 2√ meetin – monthly unless meeting –
dividend (Sec 43) g the By law annually as
Management contract √ 2√ provide fixed by the by
(Sec 44)* otherwise. (Sec law if not (any
Adoption of by-laws after √ 53) date in April)
 Special meeting – + written
incorporation (Sec 46)
At anytime upon notice 2 weeks
Amendment of by-laws √ √
call of the prior to
(Sec 48) president or meeting.
Delegation of power to the √ provided in the  Special
Board to amend the by-laws by laws. (Sec 53) meeting – at
(Sec 48)  Regular and any time
To revoke the delegated √ special meeting deemed
power given to the Board to required a notice necessary +

Page 17 of 24
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 of at least 1 day written notice 1. Pledgor/mortgagor – Right to vote is expressly given by
prior to scheduled 1 week prior to the pledgor or mortgagor such right in writing which is
meeting unless meeting or recorded on the appropriate corporate books. (Sec 55)
the by law stated in by 2. Executor/administrator/receiver and other legal
provide. law. representative appointed by the court without any
 Notice can be written proxy. (Sec 56)
waived express of 3. Treasury shares no right to vote as long as remain in
implied. treasury. (Sec 57)
 Place of  Anywhere in or  City or 4. Proxies (Sec 58)
meetin out side of the municipality a. In writing
g Philippines where the b. Signed by stockholder or member
unless the by law principal office c. Filed before the scheduled meeting with the
provide of the corporate secretary
otherwise. (Sec corporation is d. Valid only for the meeting which it is intended
53) located e. If provided a period, it has a limit for a period of 5
(preferred at years.
the principal 5. Voting trusts
office of the a. Must be in writing and notarized
corporation). b. Specify the term and condition
 Improperly c. Filed with the corporation and the SEC
held or called d. Period of agreement not to exceed 5 years except
– valid if within voting trust specifically required as a condition in a
the power or loan agreement (automatically expire upon
authority of payment of the loan)
the corporation e. Certificate of stock covered by voting trust
and provided agreement shall be cancelled and a new one shall
all be issued in the name of the trustee.
stockholders or f. The book of corporation shall noted the transfer
members are g. Not valid if the purpose is circumventing the law
present or duly against monopolies and illegal combinations in
represented. restraint of trade or used for purposes of fraud.
 Quorum  Majority of the  Majority of the h. Automatically expire at the end of the agreed
BOD/trustee as outstanding period unless renewed.
fixed in the article capital stock or May be voted by proxy unless the agreement prohibit it.
of incorporation majority of the
unless the article members. (Sec Adoption of by-laws (Sec. 46)
or by law 52) Every corporation formed must, within one (1) month after
provides a receipt of official notice of the issuance of its certificate of
greater majority. incorporation by the Securities and Exchange Commission,
(Sec 25) adopt a code of by-laws for its government not inconsistent
 Preside  President shall preside unless the by with the corporation Code.
the law provide otherwise The Securities and Exchange Commission shall not accept
meetin for filing the by-laws or any amendment thereto of any
g bank, banking institution, building and loan association,
trust company, insurance company, public utility,
Proper person to call meeting educational institution or other special corporations
1. Person designated in the by laws have authority to call governed by special laws, unless accompanied by a
stockholder’s or members meetings. certificate of the appropriate government agency to the
2. In the absence of such provision in the by laws, the effect that such by-laws or amendments are in accordance
meeting may be called by a director or trustee or by with law.
officer entrusted with the management of the
corporation. Amendments to by-laws (Sec. 48)
3. When there is no person authorized to call a meeting, Whenever any amendment or new by-laws are adopted,
the Secretaries and Exchange Commission, upon such amendment or new by-laws shall be attached to the
petition of a stockholder or member on a showing of original by-laws in the office of the corporation, and a copy
good cause therefor, may issue an order to the thereof, duly certified under oath by the corporate
petitioning stockholder or member directing him to call secretary and a majority of the directors or trustees, shall
a meeting of the corporation by giving proper notice be filed with the Securities and Exchange Commission the
required by this Code or by the by-laws. (Sec 50) same to be attached to the original articles of incorporation
4. A special meeting of the stockholders or members of a and original by-laws.
corporation for the purpose of removal of directors or The amended or new by-laws shall only be effective upon
trustees, or any of them, must be called by the the issuance by the Securities and Exchange Commission of
secretary on order of the president or on the written a certification that the same are not inconsistent with this
demand of the stockholders representing or holding at Code.
least a majority of the outstanding capital stock, or, if it Contents of by-laws (Sec 47)
be a non-stock corporation, on the written demand of a Subject to the provisions of the Constitution, this Code,
majority of the members entitled to vote. (Sec 28) other special laws, and the articles of incorporation, a
5. Special meetings of the board of directors or trustees private corporation may provide in its by-laws for:
may be held at any time upon the call of the president 1. The time, place and manner of calling and conducting
or as provided in the by-laws. (Sec 53) regular or special meetings of the directors or trustees;
2. The time and manner of calling and conducting regular
Voting power or special meetings of the stockholders or members;
3. The required quorum in meetings of stockholders or
members and the manner of voting therein;
EXCEL PROFESSIONAL SERVICES, INC.

4. The form for proxies of stockholders and members and (Regular office of the (Sec 93)
the manner of voting them; and corporation is
5. The qualifications, duties and compensation of special) located, and if
directors or trustees, officers and employees; practicable in
6. The time for holding the annual election of directors of the principal
trustees and the mode or manner of giving notice place of the
thereof; corporation.
7. The manner of election or appointment and the term of (Sec 51)
office of all officers other than directors or trustees; Metro manila
8. The penalties for violation of the by-laws; is considered
9. In the case of stock corporations, the manner of city or
issuing stock certificates; and municipality.
10. Such other matters as may be necessary for the proper
or convenient transaction of its corporate business and STOCK AND STOCKHOLDERS
affairs.  Any contract for the acquisition of unissued stock in an
existing corporation or a corporation still to be formed
Stock Non stock corporation shall be deemed a subscription notwithstanding the fact
corporation that the parties refer to it as a purchase or some other
Number of Not less May be more than fifteen contract. (Sec 60) Holders of subscribed shares not
director than 5 but (15) in number as may be fully paid which are not delinquent shall have all the
not more fixed in their articles of rights of a stockholder. (Sec. 72)
than 15 incorporation or by-laws  A subscription for shares of stock of a corporation still
Term of One (1) year Term of office of one-third to be formed (Sec 61)
office of until their (1/3) of their number shall BEFORE submission of articles of incorporation to the
the successors expire every year; and SEC
director/ are elected subsequent elections of a. Irrevocable for a period of at least six (6) months
trustees and qualified. trustees comprising one- from the date of subscription
(Sec 23) third (1/3) of the board of Exception:
trustees shall be held 1. All of the other subscribers consent to the
annually and trustees so revocation,
elected shall have a term of 2. The incorporation of said corporation fails to
three (3) years. (Sec 92) materialize within said period or within a longer
Purpose For profit. Organized for charitable, period as may be stipulated in the contract of
religious, educational, subscription:
professional, cultural, AFTER submission of articles of incorporation to the
fraternal, literary, scientific, SEC
social, civic service, or No pre-incorporation subscription may be revoked
similar purposes, like trade,  Consideration for stocks - Stocks shall not be issued for
industry, agricultural and a consideration less than the par or issued price thereof
like chambers, or any otherwise it is watered stock. (Sec 62)
combination thereof. (Sec 1. Actual cash paid to the corporation;
88) 2. Property, tangible or intangible, actually received
Voting Cumulative Non cumulative (entitled to by the corporation and necessary or convenient for
1 vote) unless authorized its use and lawful purposes at a fair valuation equal
under the article of to the par or issued value of the stock issued;
incorporation or by laws. 3. Labor performed for or services actually rendered
(Sec 89) to the corporation;
Manner of Voting either Voting by mail or other 4. Previously incurred indebtedness of the
voting in person or similar means by members corporation;
by of non-stock corporations 5. Amounts transferred from unrestricted retained
representative may be authorized by the earnings to stated capital; and
authorized to by-laws of non-stock 6. Outstanding shares exchanged for stocks in the
act by written corporations. (Sec 89) event of reclassification or conversion.
proxy (Sec a. When consideration is other than actual cash, or
24) consists of intangible property such as patents
Distributio Authorized to Not authorized to distribute of copyrights, the valuation thereof shall initially be
n of distribute dividends to its members, determined by the incorporators or the board of
dividend dividends to trustees or officers. (Sec directors, subject to approval by the Securities and
stockholders 87) Exchange Commission.
Transferab Transferrable Membership in a non-stock b. Shares of stock shall not be issued in exchange for
ility of corporation and all rights promissory notes or future service.
interest arising therefrom are
personal and non- No par value share
transferable, unless the 1. Fixed in the article of incorporation
articles of incorporation or 2. Board of directors pursuant to authority conferred
the by-laws otherwise upon it by the articles of incorporation or the by-
provide. (Sec 90) laws
Ownership At least owner Member of the corporation. 3. Stockholders representing at least a majority of the
of director of one share (Sec 92) outstanding capital stock at a meeting duly called
of stock for the purpose.
Stockholde City or Any place in the Philippines
r/member municipality even outside the place  Shares of stock so issued are personal property and
Place of where the where the principal office of may be transferred by delivery of the certificate or
meeting principal place the corporation is located. certificates indorsed by the owner or his attorney-in-

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 fact or other person legally authorized to make the
transfer. (Sec 63)
 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. (Ibid)
 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. (Sec 64)
 Liability of directors for watered stocks (Sec 65)
Any director or officer of a corporation 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.
a. 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,
b. Having knowledge thereof, does not forthwith
express his objection in writing and file the same
with the corporate secretary.
 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. (Sec 66)
 Right of stockholders to bring suits
1. Derivative suit – One brought by one or more
stockholders or members in the name and on
behalf of the corporation to redress wrongs
committed against it or to protect or vindicate
corporate rights, whenever the officials of the
corporation refuse to sue, or are the ones to be
sued or hold control of the corporation.
2. Individual suit – Action brought by a stockholder
against the corporation for direct violation of his
contractual rights as such individual stockholders.
Any recovery by the stockholder belongs to him.
3. Representative suit – When a wrong is committed
against a group of stockholders, a stockholder may
bring suit in behalf of himself and all other
stockholders who are similarly situated.
 Remedies for payment of stock subscription
a. Extra judicial sale at public auction (Sec 67-69)
1. 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.
2. 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.
3. 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,
unless the board of directors orders otherwise.
4. Board resolution ordering 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.
5. Copy of the resolution, shall be sent to every
delinquent stockholder either personally or by
registered mail
6. 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.
7. 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.
8. Stock 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.
9. Should there be no bidder at the public auction
the corporation may bid for the same, and the
total amount due shall be credited as paid in
full in the books of the corporation. The shares
acquired by the corporation shall be held as
treasury shares.
b. Judicial Action - collecting by action in a court of
proper jurisdiction the amount due on any unpaid
subscription, with accrued interest, costs and
expenses. (Sec 70)
c. Collection from cash dividends and withholding of
stock dividends - 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 (Sec 43)
d. To deny delinquent shares the right to vote -No
delinquent stock shall be voted for 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. (Sec 71)
 No delinquent stock shall be voted for 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. (Sec 71)
CORPORATE BOOKS AND RECORDS
 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 (Sec
74) including stock and transfer book (Ibid)
 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, writing, for a copy
of excerpts from said records or minutes, at his
expense. (Ibid)
 Liability of the officer or agent of the corporation for
refusing any director, trustees, stockholder or member
of the corporation to examine and copy excerpts from
its records or minutes
a. 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:
b. 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
EXCEL PROFESSIONAL SERVICES, INC.
action shall be imposed upon the directors or
trustees who voted for such refusal:
Defenses under the code in refusing the person
demanding to examine and copy excerpts from the
corporation's records and minutes:
a. Improperly used any information secured through
any prior examination of the records or minutes of
such corporation or of any other corporation,
b. Was not acting in good faith or
c. Not for a legitimate purpose in making his demand.
 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.
Right to Financial Statement
1. 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.
2. 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.
3. 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.
MERGER AND 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.
(Sec 76)
 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
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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. (Sec 80)
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: (Sec 81)
1. In case any amendment to the articles of incorporation
has the effect of
a. Changing or restricting the rights of any
stockholder or class of shares;
b. Authorizing preferences in any respect superior to
those of outstanding shares of any class;
c. Extending or shortening the term of corporate
existence;
2. Sale, lease, exchange, transfer, mortgage, pledge or
other disposition of all or substantially all of the
corporate property and assets.
3. Merger or consolidation.
4. Investment of corporate funds in another corporation
or business or for any other purpose. (Sec 42)
 Exercise of appraisal right (Sec 82)
a. Any stockholder who shall have voted against
the proposed corporate action
b. 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, failure to make the demand within such
period shall be deemed a waiver of the
appraisal right.
c. Surrender of the certificate or certificates of
stock representing his shares.
d. If within 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,
the Fair value of the shares 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 and the same
shall be paid within 30 days after such awards.
e. The corporation has unrestricted retained
earnings in its books to cover such payment.
f. Upon payment by the corporation of the agreed
or awarded price, the stockholder shall
forthwith transfer his shares to the corporation.
 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, 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. (Sec
83)
 No demand for payment 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
BL.2102
 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. (Sec 84)
 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. (Sec 85)
NON-STOCK CORPORATIONS
Is one where no part of its income is distributable as
dividends to its members, trustees, or officers. 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. (Sec 87)
It may be formed or organized for:
1. Charitable
2. Religious
3. Educational
4. Professional
5. Cultural
6. Fraternal
7. Literary
8. Scientific
9. Social
10. Civic service
11. Similar purposes like trade, industry, agricultural and
like chambers, or any combination thereof.
 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. (Sec
89)
 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. (Sec 90)
 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. (Sec 92)
 No person shall be elected as trustee unless he is a
member of the corporation. (Ibid)
 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.
(Ibid)
 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. (Sec 93)
CLOSE CORPORATION
 All corporation’s issued shares are not owned by not
more than twenty (20) person
 Issued stock are subject to specified restriction on
transfer
 Cannot be listed in any stock exchange or make any
public offering of any of its stock of any class.
 A corporation is not 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.
 Cannot incorporate
a. Mining or oil companies
b. Stock exchanges
c. Banks
d. Insurance companies
e. Public utilities
f. Educational institutions
g. Corporation vested with public interest
 The articles of incorporation 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.
SPECIAL CORPORATIONS
EDUCATIONAL CORPORATIONS
 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) (Sec
108)
 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
RELIGIOUS CORPORATIONS
 Religious corporations may be incorporated by one or
more persons. Such corporations may be classified
into: (Sec 109)
a. Corporations sole - 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,
EXCEL PROFESSIONAL SERVICES, INC.
rabbi or other presiding elder of such religious
denomination, sect or church. (Sec 110)
1. From and after the filing with the
Securities and Exchange Commission of
the said articles of incorporation, such chief
archbishop, bishop, priest, minister, rabbi or
presiding elder shall become a corporation
sole.
2. 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. (Sec 113)
b. 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. (Sec 116)
DISSOLUTION
 Methods of dissolution (Sec 117)
a. Voluntary dissolution where no creditors are
affected (Sec 118)
1. Majority vote of the board of directors or
trustees,
2. Affirmative vote of the stockholders owning at
least two-thirds (2/3) of the outstanding capital
stock or members
3. 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.
4. 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.
5. The Securities and Exchange Commission shall
thereupon issue the certificate of dissolution.
b. Voluntary dissolution where creditors are affected
(Sec 119)
1. Petition signed by a majority of its board of
directors or trustees or other officers having
the management of its affairs for dissolution
shall be filed with the SEC
2. Affirmative vote of the stockholders
representing at least two-thirds (2/3) of the
outstanding capital stock or members.
3. SEC shall issue 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.
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4. 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 no such
newspaper, posted for three (3) consecutive
weeks in three (3) public places in such
municipality or city.
5. 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.
c. Dissolution by shortening corporate term (Sec 120)
1. Amendment of articles of incorporation to
shorten the corporate term
2. Submission to the SEC
3. Approval by the SEC
d. Involuntarily (Sec 121)
1. Verified complaint
2. After proper notice and hearing on the grounds
provided by existing laws, rules and regulations
Foreign Corporation
 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 and a certificate of
authority from the appropriate government agency.
(Sec 123)
 A resident agent may be either an individual (must be
of good moral character and of sound financial standing
) residing in the Philippines or a domestic corporation
lawfully transacting business in the Philippines. (Sec
127)
 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. (Sec 129)
 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.
(Sec 133)
 Grounds for the revocation of license
1. Failure to file its annual report or pay any fees as
required;
2. Failure to appoint and maintain a resident agent in
the Philippines
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.
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
BL.2102
5. A misrepresentation of any material matter in any
application, report, affidavit or other document
submitted by such corporation
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.