Powers of Corporation.

Section 35. Corporate Powers and Capacity. – Every corporation

incorporated under this Code has the power and capacity: (a) To sue and be
sued in its corporate name; (b) To have perpetual existence unless the
certificate of incorporation provides otherwise; (c) To adopt and use a
corporate seal; (d) To amend its articles of incorporation in accordance with
the provisions of this Code; (e) To adopt bylaws, not contrary to law, morals
or public policy, and to amend or repeal the same in accordance with this
Code; (f) In case of stock corporations, to issue or sell stocks to subscribers
and to sell treasury stocks in accordance with the provisions of this Code;
and to admit members to the corporation if it be a nonstock corporation; (g)
To purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage, and otherwise deal with such real and personal property,
including securities and bonds of other corporations, as the transaction of the
lawful business of the corporation may reasonably and necessarily require,
subject to the limitations prescribed by law and the Constitution; (h) To
enter into a partnership, joint venture, merger, consolidation, or any other
commercial agreement with natural and juridical persons; (i) To make
reasonable donations, including those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or similar purposes: Provided, That no
foreign corporation shall give donations in aid of any political party or
candidate or for purposes of partisan political activity; (j) To establish
pension, retirement, and other plans for the benefit of its directors, trustees,
officers, and employees; and (k) 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.
Section 36. Power to Extend or Shorten Corporate Term. – A private
corporation may extend or shorten its term as stated in the articles of
incorporation when approved by a majority vote of the board of directors or
trustees, and ratified at a meeting by the stockholders or members
representing at least two-thirds of the outstanding capital stock or of its
members. Written notice of the proposed action and the time and place of
the meeting shall be sent to stockholders or members at their respective
place of residence as shown in the books of the corporation, and must either
be deposited to the addressee in the post office with postage prepaid, served
personally, or when allowed in the bylaws or done with the consent of the
stockholder, sent electronically in accordance with the rules and regulations
of the Commission on the use of electronic data messages. In case of
extension of corporate term, a dissenting stockholder may exercise the right
of appraisal under the conditions provided in this Code.
Section 37. Power to Increase or Decrease Capital Stock; Incur, Create or
Increase Bonded Indebtedness. – No corporation shall increase or decrease
its capital stock or incur, create or increase any bonded indebtedness unless
approved by a majority vote of the board of directors and by two-thirds of
the outstanding capital stock at a stockholders’ meeting duly called for the
purpose. Written notice of the time and place of the stockholders’ meeting
and the purpose for said meeting must be sent to the stockholders at their
places of residence as shown in the books of the corporation and served on
the stockholders personally, or through electronic means recognized in the
corporation’s bylaws and/or the Commission’s rules as a valid mode for
service of notices. A certificate must be signed by a majority of the directors
of the corporation and countersigned by the chairperson and secretary of the
stockholders’ meeting, setting forth: (a) That the requirements of this section
have been complied with; (b) The amount of the increase or decrease of the
capital stock; (c) In case of an increase of the capital stock, the amount of
capital stock or number of shares of no-par stock thereof actually subscribed,
the names, nationalities and addresses of the persons subscribing, the
amount of capital stock or number of no-par stock subscribed by each, and
the amount paid by each on the subscription in cash or property, or the
amount of capital stock or number of shares of no-par stock allotted to each
stockholder if such increase is for the purpose of making effective stock
dividend therefor authorized; (d) Any bonded indebtedness to be incurred,
created or increased; (e) The amount of stock represented at the meeting;
and (f) The vote authorizing the increase or decrease of the capital stock, or
the incurring, creating or increasing of any bonded indebtedness. Any
increase or decrease in the capital stock or the incurring, creating or
increasing of any bonded indebtedness shall require prior approval of the
Commission, and where appropriate, of the Philippine Competition
Commission. The application with the Commission shall be made within six
months from the date of approval of the board of directors and stockholders,
which period may be extended for justifiable reasons. Copies of the
certificate shall be kept on file in the office of the corporation and filed with
the Commission and attached to the original articles of incorporation. After
approval by the Commission and the issuance by the Commission of its
certificate of filing, the capital stock shall be deemed increased or decreased
and the incurring, creating or increasing of any bonded indebtedness
authorized, as the certificate of filing may declare: Provided, That the
Commission shall not accept for filing any certificate of increase of capital
stock unless accompanied by a sworn statement of the treasurer of the
corporation lawfully holding office at the time of the filing of the certificate,
showing that at least twenty-five percent of the increase in capital stock has
been subscribed and that at least twenty-five percent of the amount
subscribed has been paid in actual cash to the corporation or that property,
the valuation of which is equal to twenty-five percent of the subscription,
has been transferred to the corporation: Provided, further, That no decrease
in capital stock shall be approved by the Commission if its effect shall
prejudice the rights of corporate creditors. Nonstock corporations may incur,
create or increase bonded indebtedness when approved by a majority of the
board of trustees and of at least two-thirds of the members in a meeting duly
called for the purpose. Bonds issued by a corporation shall be registered with
the Commission, which shall have the authority to determine the sufficiency
of the terms thereof.
Section 38. Power to Deny Preemptive Right. – All stockholders of a stock
corporation shall enjoy preemptive right to subscribe to all issues or
disposition of shares of any class, in proportion to their respective
shareholdings, unless such right is denied by the articles of incorporation or
an amendment thereto: Provided, That such preemptive right shall not
extend to shares issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public; or to shares issued in good faith
with the approval of the stockholders representing two-thirds of the
outstanding capital stock, in exchange for property needed for corporate
purposes or in payment of a previously contracted debt.
Section 39. Sale or Other Disposition of Assets. – Subject to the provisions
of Republic Act 10 6 6 7, otherwise known as “Philippine Competition Act”,
and other related laws, a corporation may, by a majority vote of its board of
directors or trustees, sell, lease, exchange, mortgage, pledge, or otherwise
dispose of its property and assets, upon such terms and conditions and for
such consideration, which may be money, stocks, bonds, or other
instruments for the payment of money or other property or consideration, as
its board of directors or trustees may deem expedient. A sale of all or
substantially all of the corporation’s properties and assets, including its
goodwill, must be authorized by the vote of the stockholders representing at
least two-thirds of the outstanding capital stock, or at least two-thirds of the
members, in a stockholders’ or members’ meeting duly called for the
purpose. In nonstock corporations where there are no members with voting
rights, the vote of at least a majority of the trustees in office will be
sufficient authorization for the corporation to enter into any transaction
authorized by this section. The determination of whether or not the sale
involves all or substantially all of the corporation’s properties and assets
must be computed based on its net asset value, as shown in its latest
financial statements. A sale or other disposition shall be deemed to cover
substantially all the corporate property and assets if thereby the corporation
would be rendered incapable of continuing the business or accomplishing
the purpose for which it was incorporated. Written notice of the proposed
action and of the time and place for the meeting shall be addressed to
stockholders or members at their places of residence as shown in the books
of the corporation and deposited to the addressee in the post office with
postage prepaid, served personally, or when allowed by the bylaws or done
with the consent of the stockholder, sent electronically: Provided, That any
dissenting stockholder may exercise the right of appraisal under the
conditions provided in this Code. After such authorization or approval by the
stockholders or members, the board of directors or trustees may,
nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage,
pledge, or other disposition of property and assets, subject to the rights of
third parties under any contract relating thereto, without further action or
approval by the stockholders or members. Nothing in this section is intended
to restrict the power of any corporation, without the authorization by the
stockholders or members, to sell, lease, exchange, mortgage, pledge, or
otherwise dispose of any of its property and assets if the same is necessary in
the usual and regular course of business of the corporation or if the proceeds
of the sale or other disposition of such property and assets shall be
appropriated for the conduct of its remaining business.
Section 40. Power to Acquire Own Shares. – Provided that the corporation
has unrestricted retained earnings in its books to cover the shares to be
purchased or acquired, a stock corporation shall have the power to purchase
or acquire its own shares for a legitimate corporate purpose or purposes,
including the following cases: (a) To eliminate fractional shares arising out
of stock dividends; (b) To collect or compromise an indebtedness to the
corporation, arising out of unpaid subscription, in a delinquency sale, and to
purchase delinquent shares sold during said sale; and (c) To pay dissenting
or withdrawing stockholders entitled to payment for their shares under the
provisions of this Code.
Section 41. Power to Invest Corporate Funds in Another Corporation or
Business or for Any Other Purpose. – Subject to the provisions of this Code,
a private corporation may invest its funds in any other corporation, business,
or for any purpose other than the primary purpose for which it was
organized, when approved by a majority of the board of directors or trustees
and ratified by the stockholders representing at least two-thirds of the
outstanding capital stock, or by at least two thirds of the members in the case
of nonstock corporations, at a meeting duly called for the purpose. Notice of
the proposed investment and the time and place of the meeting shall be
addressed to each stockholder or member at the place of residence as shown
in the books of the corporation and deposited to the addressee in the post
office with postage prepaid, served personally, or sent electronically in
accordance with the rules and regulations of the Commission on the use of
electronic data message, when allowed by the bylaws or done with the
consent of the stockholders: Provided, That any dissenting stockholder shall
have appraisal right as provided in this Code: Provided, however, That
where the investment by the corporation is reasonably necessary to
accomplish its primary purpose as stated in the articles of incorporation, the
approval of the stockholders or members shall not be necessary.
Section 42. Power to Declare Dividends. – The board of directors of a stock
corporation may declare dividends out of the unrestricted retained earnings
which shall be payable in cash, property, or in stock to all stockholders on
the basis of outstanding stock held by them: Provided, That any cash
dividends due on delinquent stock shall first be applied to the unpaid balance
on the subscription plus costs and expenses, while stock dividends shall be
withheld from the delinquent stockholders until their unpaid subscription is
fully paid: Provided, further, That no stock dividend shall be issued without
the approval of stockholders representing at least two-thirds of the
outstanding capital stock at a regular or special meeting duly called for the
purpose. Stock corporations are prohibited from retaining surplus profits in
excess of one hundred percent of their paid-in capital stock, except: (a) when
justified by definite corporate expansion projects or programs approved by
the board of directors; or (b) when the corporation is prohibited under any
loan agreement with financial institutions or creditors, whether local or
foreign, from declaring dividends without their consent, and such consent
has not yet been secured; or (c) when it can be clearly shown that such
retention is necessary under special circumstances obtaining in the
corporation, such as when there is need for special reserve for probable
contingencies.
Section 43. Power to Enter into Management Contract. – No corporation
shall conclude a management contract with another corporation unless such
contract is approved by the board of directors and by stockholders owning at
least the majority of the outstanding capital stock, or by at least a majority of
the members in the case of a nonstock corporation, of both the managing and
the managed corporation, at a meeting duly called for the purpose: Provided,
That (a) where a stockholder or stockholders representing the same interest
of both the managing and the managed corporations own or control more
than one-third of the total outstanding capital stock entitled to vote of the
managing corporation; or (b) where a majority of the members of the board
of directors of the managing corporation also constitute a majority of the
members of the board of directors of the managed corporation, then the
management contract must be approved by the stockholders of the managed
corporation owning at least two-thirds of the total outstanding capital stock
entitled to vote, or by at least two-thirds of the members in the case of a
nonstock corporation. These shall apply to any contract whereby a
corporation undertakes to manage or operate all or substantially all of the
business of another corporation, whether such contracts are called service
contracts, operating agreements or otherwise: Provided, however, That such
service contracts or operating agreements which relate to the exploration,
development, exploitation or utilization of natural resources may be entered
into for such periods as may be provided by the pertinent laws or
regulations. No management contract shall be entered into for a period
longer than five years for any one term.
Section 44. Ultra Vires Acts of Corporations. – No corporation shall possess
or exercise corporate powers other than those conferred by this Code or by
its articles of incorporation and except as necessary or incidental to the
exercise of the powers conferred.