Sec 10: Number and Qualifications of incorporators Section 11: Corporate Term

 Not less than 5 but not more than 15  Exist for a period not exceeding 50 years from the date of
 All of legal age incorporation UNLESS SOONER DISSOLVED OR UNLESS SAID
 Majority of whom are residents of the Philippines PERIOD IS EXTENDED.
 Must own or be a subscriber to at least 1 share of the capital stock  PROVIDED no extension can be made earlier than 5 years prior to
the original or subsequent expiry dates
Steps in creation of a corporation:
 UNLESS there are justifiable reasons for an earlier extension as
1. Promotion may be determined by the SEC.
2. Incorporation
Extension of Corporate Term
3. Formal organization and commencement of business operations
1. Limitations
Steps in Incorporation

1. Drafting and execution of the article of incorporation by the

incorporators.
2. Filling with SEC of the articles of Incorporation together with the
following requirements
3. Payment of the filing and publication fees
4. Issuance by the SEC of the certificate of incorporation if all the
papers filed after verification and examination are found in order.

Incorporators: Number and Qualifications

1. Natural Persons
2. Capacity to Contract
3. Residents of the Philippines
4. Citizens of the Philippines
5. Owners of or Subscribers to at least 1 share

Requirement of minimum number of incorporators is mandatory

 Reduction of stockholders or members to less than minimum.
 Beneficial ownership in 1 individual.
 Subsequent accumulation of shares in 1 individual.
Section 12: Minimum capital stock required of stock corporations
 Stock corporations incorporated under this Code shall NOT be
required to have any minimum authorized capital stock
 EXCEPT: otherwise specifically provided for by special law and
subject to the provision of the following section.
Filipino percentage ownership requirement regarding corporate capital
1. Corporations for exploration,
development and utilization
of natural resources
2. Public Service Corporations
3. Educational Corporations
4. Banking Corporations
5. Corporations engaged in
retail trade
6. Rural Banks
7. Corporations engaged in
coastwise shipping
8. Corporations engaged in the
pawnshop business
9. Under the Flag Law
At least 60% of capital owned by the
citizens of the Philippines
At least 60% of voting stock owned or
controlled by the citizens of the
Philippines
Enterprises with Less than US 2.5 million
paid up capital are reserved exclusively
for Filipino Citizens
 No less than 40% of voting stocks
owned by Filipino citizens and at
least 60% of capital owned by such
citizens
 Foreign investors can own, acquire
or purchase up to 60% of voting
stock in a rural bank.
At least 60% of the capital stock or of any
interest is totally owned by citizens of
the Philippines
At least 70% of voting capital stock
owned by the citizens of the Philippines
Domestic entities may have at least 75%
of capital owned by citizens of the
Philippines.
SECTION 13: Amount of Capital Stock to be subscribed and paid for
purposes of incorporation
 At least 25% of authorized capital stock as stated in AOI must be
subscribed at the time of incorporation
 At least 25% of the total subscription must be paid upon
subscription
 Provided that in no case shall the paid up capital be less than
5,000.
*Note: This requirements are mandatory
Post Incorporation
- 25% subscription and 25% paid up capital is required not only during
the incorporation period but also in case of increase of the
authorized capital stock.
Computations of the 25% subscription requirement
1. Where the capital stock consists only of par value shares
o Based on the amount of the authorized capital stock
irrespective of the class, number and par value of the
shares.
2. Where the capital stock consists only of no par value shares
o Computed on the basis of the entire number of authorized
shares.
3. Where the capital stocks is divided into par value shares and
no par value shares
o Based on the number of said no par value shares
SECTION 14: Contents of Articles of Incorporation
1. The name of the corporation
2. The specific purpose or purposes for which the corporation is being
incorporated.
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 5
nor more than 15.
7. The names, nationalities and residences of the 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 shares 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
10. Such other matters as are not inconsistent with law and which the
incorporators may deem necessary and convenient.
SECTION 15: Forms of Articles of Incorporation
Purpose or purposes of the Corporation
1. Must be lawful
2. Must be stated with sufficient clarity
3. Primary purpose must be stated
4. Must be capable of being lawfully combined.
Reasons for statement of purpose or purposes
1. A person who intends to invest his money in the business
corporation will know where and in what kind of business or activity
his money will be invested.
2. The directors and the officers of the corporation will know within
what scope of business they are authorized to act; and lastly.
3. A third person who has dealings with the corporation may know by
perusal of the articles whether the transaction or dealing he has
with the corporation is within the authority of the corporation or
not.
MAIN PURPOSE: To determine whether the acts performed by the
corporation are authorized or beyond its power
Capital Stock/ capital and subscribers/ contributors
1. Stock Corporation
a. Amount of its authorized capital stock in pesos
b. Number of shares into which it is divided
c. Par value in pesos of each shares
d. Names, nationalities and residences of the original subscribers
e. Amount of capital stock subscribed and paid by each on his
subscription
f. If some or all of the shares are without par value, such fact
2. Non-Stock Corporation
a. Amount of its capital or money contributed or donated by
specified persons
b. Names, nationalities and residences of the donors or
contributors
c. Respective amount contributed by each
SECTION 16: Amendment of Articles of Incorporation
 Any provision or matter stated in the AOI may be amended by a:
 majority vote of the board of directors or trustees
 and the votes or written assent of the stockholders representing at
least 2/3 of the outstanding capital stock,
 without prejudice to the appraisal right of dissenting stockholders in
accordance with the provisions of this Code
 or the vote or written assent of 2/3 of the members if it be non-
stock corporation.
*Unless otherwise prescribed by this Code or by special law
 The original and amended articles together shall contain all
provisions required by law to be set out in the AOI.
 Such articles, as amended, shall be indicated by underscoring the
changes or changes made and a copy thereof duly certified under
oath by the corporate secretary and a majority of the directors or
trustees stating the fact that said amendment or amendments
have been duly approved by the required vote of the stockholders
or members, shall be submitted to SEC.
 Amendments shall take effect upon their approval by the SEC or
from the date of filing with the said Commission if not acted upon
within 6 months from the date of filing for a cause not attributable
to the corporation.
SECTION 17: Grounds when AOI or amendment may be rejected or
disapproved.
1. That the AOI or any amendments thereto is not substantially in
accordance with the form prescribed herein.
2. That the purpose or purposes of the corporation are patently
unconstitutional, illegal, immoral, contrary to government rules and
regulations
3. That the Treasurer’s Affidavit concerning the amount of capital
stock subscribed and/or paid is false.
4. That the percentage of ownership of the capital stock to be owned
by citizens of the Philippines has not been complied with as
required by existing laws or the Constitution.
No AOI or amendment to AOI of the following shall be accepted or
approved by the Commission UNLESS accompanied by a favourable
recommendation of the appropriate government agency to the effect
that such articles or amendment is in accordance with law.
- Banks
- Banking and quasi banking institutions
- Building and loan associations
- Trust companies and other financial intermediaries
- Insurance companies
- Public utilities
- Educational institutions
- Other corporations governed by special laws
Suspension or revocation of the certificate of registration of corporations
1. Fraud in procuring its certificate of incorporation
2. Serious misrepresentation as to what the corporation can do or is
doing to the great prejudice of or damage to, the general public.
3. Refusal to comply with or defiance of lawful order of the
Commission restraining the commission of acts which would
amount to a grave violation of its franchise
4. Continuous inoperation for a period of at least 5 years
5. Failure to file by laws within the required period
6. Failure to file required reports in appropriate forms as determined
by the Commission within the prescribed period.
SECTION 18: Corporate Name
No corporate name may be allowed by the SEC if the proposed name is
identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws.
When a change in the corporate name is approved, the Commission shall
issue and amended certificate of incorporation under the amended name.
SECTION 19: Commencement of Corporate Existence
A private corporation formed or organized under this Code commences to
have corporate existence and juridical personality and is deemed
incorporated from the date the SEC issues a certificate of incorporation
under its official seal; and thereupon the incorporators,
stockholders/members and their successors shall constitute a body politic
and corporate under the name stated in the AOI for the period of time
mentioned therein, unless said period is extended or the corporation is
sooner dissolved in accordance with law.
SECTION 20: De Facto Corporations
The due incorporation of any corporation claiming in good faith to be a
corporation under this Code, and its right to exercise corporate powers,
shall not be inquired into collaterally in any private suit to which such
corporation may be a party.
Such inquiry may be made by the Solicitor General in a quo warranto
proceeding.
Requisites of a de facto corporation
SECTION 21: Corporation by Estoppel
All persons who assume to act as a corporation knowing it to be without
authority to do so shall be liable as general partners for all debts, liabilities
and damages incurred or arising as a result thereof:
PROVIDED: that any such ostensible corporation is sued on any transaction
entered by it as a corporation or on any tort community by it as such, it
shall not be allowed to use as a defense its lack of corporate personality.
One who assumes an obligation to an ostensible corporation as such,
cannot resist performance thereof on the grounf that there was in fact no
corporation.
SECTION 22: Effects Of Non-Use Of Corporate Charter and Continuous
Inoperation of a Corporation

1. Valid law under which a corporation with powers assumed might be

incorporated.
2. A bona fide attempt to organize a corporation under such law
3. Actual user or exercise in good faith of corporate powers conferred
upon it by law.

Creation of corporation precluded

a. Absence of AOI
b. Failure to file AOI with the SEC
c. Lack of certificate of incorporation from the SEC

Creation of de facto corporation results

a. Name of the corporation closely resembles that of a pre-existing

corporation that it will tend to deceive the public
b. Incorporators or a certain number of them are not residents of the
Philippines.
c. Acknowledgement of the AOI or certificate of incorporation is
insufficient or defective in form or it was acknowledge before a
person without authority.