Republic of the Philippines

SOUTHERN LUZON STATE UNIVERSITY

JGE Tagkawayan Campus
Tagkawayan, Quezon

Student: PREVALDO, RIZALYN M.

RAMIREZ, MARC JOSHUA A.
RAMOS, REA R.
RODRIGORA, KIA O.
SILVA, SARAH JANE B.
SOLBITA, REMIA DONA L.
TULOP, HONEYLETH V.
VILLANUEVA, EUNICE F.
ZATE, JULIE ANN A.
Course: Bachelor of Science in Business Administration Major in Financial
Management Subject: BAC02 Business Law
Professor: GERALD D. PURIGAY, MPA

CORPORATIONS

General Provisions

Topics:
⮚ Doctrine of piercing viel of corporate entity.
⮚ Corporation is created by operation of law.
⮚ Similarities and distinction between Partnership and Corporation.
⮚ Classes of corporation.
⮚ Capital stock and other term, concept
⮚ Power of a corporation to classify it's own shares.
⮚ Incorporation and organization of private corporation.
⮚ Kinds of franchise.
⮚ Qualifications of incorporation.
⮚ Corporate term.
⮚ Paid in capital stock.
⮚ Articles of incorporations.
⮚ Amendment of the articles of incorporation.
⮚ Corporate name.
⮚ Registration in corporation and commencement of corporate existence.
⮚ Corporation by estoppel.

Law on corporations
The law governing private corporations in the Philippines is the Revised Corporation Code of the
Philippines (Republic Act No. 11232) which took effect on February 23, 2019. It repealed the
Corporation Code of the Philippines (Batas Pambansa Blg. 68) which was in effect from May 1, 1980
until the new law came into effect.

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Corporation; statutory definition and attributes
A corporation is an artificial being created by operation of law, having the right of succession and
the powers, attributes and properties expressly authorized by law or incidental to its existence. [Sec. 2,
Revised Corporation Code (RCC)] (Note: Unless otherwise stated, all sections of law pertain to
provisions of the Revised Corporation Code of the Philippines.)

The foregoing definition provides for the attributes of a corporation, namely:

1. It is an artificial being.
2. It is created by operation of law.
3. It has the right of succession,
4. It has only the powers, attributes and properties expressly authorized by law or incidental to its
existence.

Corporation as an artificial being or person

There are two kinds of persons under the law: natural persons or human beings, and artificial persons. A
corporation falls under the second kind. A corporation' is a juridical entity with a legal personality separate and
distinct from the people comprising it (Situs Development Corporation vs. Asiatrust, Bank, G.R. No. 180036, July
25, 2012), whether stockholders (or members, in the case of nonstock corporations) and which juridical personality
commences upon the issuance of the certificate of incorporation by the Securities and Exchange Commission
(SEC).

As a juridical entity, a corporation is separated by law by a dividing line from its stockholders (or
members, in case of nonstock corporations). Prof. Ballantine has these to say as the consequences of such separate
juridical personality:

1. The debts of the corporation are not the debts of its stockholders, nor are the debts of the stockholders the
debts of the corporation.
2. The stockholders are not the owners of the assets of the corporation but have only an indirect interest
therein.
3. In connection with corporate property or affairs, stockholders cannot maintain actions in their own name
and they have no right to recover possession of property belonging to the corporation or to recover
damages for injury thereto.
4. In taxation, the income of the corporation is not the income of the stockholders who may still be required to
pay taxes on the dividends they may derive from such income.

Doctrine of piercing the veil of corporate entity

1. Doctrine concept
This is the doctrine to the effect that the separate personality of a corporation will be disregarded if
such entity is used to:
a. defeat public convenience, justify a wrong, protect fraud or defend crime (Koppel vs. Yatco, 77 Phil
496); or
b. where a corporation serves as a mere alter ego or conduit of a person or an instrumentality, agency
or adjunct of another corporation (San Juan Structural and Steel Fabricators, Inc. vs. CA, 296
SCRA 631); or
c. where the corporate fiction is used to evade contracts and obligations, (Reynoso vs. CA, 345 SCRA
335); or
d. confuse legitimate legal or judicial issues. (R. F. Sugay & Co. vs. Reyės, 120 Phil 1497).
2. Application of the doctrine
The doctrine may apply to corporations as well as natural persons involved with the corporation.
(I/AME vs. Litton and Company, G.R. No. 191525, December 13, 2017)
3. Primary consequence of piercing the veil
The primary consequence of piercing the veil is to hold-the stockholders directly liable for corporate
acts or obligations.-Where the separate personality of the corporation is disregarded, the corporation will be
treated merely as an association of persons and the stockholders or members will be considered as the
corporation, i.e., liability will attach personally or directly to the officers and stockholders. (Yao, Sr. vs.
People, G.R. No. 168306, June 19, 2007)
4. Summary of application of the doctrine
a. Defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of
existing obligation;
b. Fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime;
and
c. Alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit
of a person, or where the corporation is so organized and controlled and its affairs are so conducted

COMPILATION OF TOPICS IN BUSINESS LAW

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 as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. (Sarona
vs. National Labor Relations Commission, G.R. No. 185280, January 18, 2012),

Piercing the corporate veil based on the alter ego theory requires the concurrence of three
elements:
1) Control of the corporation by the stockholder or parent corporation;
2) Fraud or fundamental unfairness imposed on the plaintiff; and
3) 3) Harm or damage caused to the plaintiff by the fraudulent or unfair act of the
corporation. (Philippine National Bank vs. Hydro Resources Contractors Corp., G.R. No.
167530, March 13, 2013; See also WPM International Trading, Inc., et al. vs. Fe Corazon
Labayen, G.R. No. 182270, September 17, 2014)

Corporation is created by operation of law

Unlike partnerships, corporations do not come into existence by the mere agreement of the parties. They
require special authority from the sovereign power. Such authority may be granted either through a general law
providing the guidelines for the incorporation of private corporations, which under our jurisdiction is the Revised
Corporation Code of the Philippines, or by a special law which by itself confers juridical status upon the
corporation, whether public (such as in the case of local governments) or private (such as in the case of
government-owned or controlled corporations, like the Philippine Postal Corporation).

Corporation has the right of succession

A corporation continues to exist perpetually or for the period for which was formed regardless of the
changes in the ownership of its shares of stock or in its membership. Its existence is not affected by the death,
insolvency, or incapacity of the individual stock stockholders or members. This means the existence of a
corporation is independent from the existence of the stockholders or members.

Corporation has the powers, attributes and properties expressly authorized by law or incidental to its
existence.
A corporation, being a mere creation of the law, operates under the doctrine of limited capacity. Hence, it
can only perform acts within the powers expressly granted to it by its charter, those implied from such powers
expressly conferred, and those that are incidental to its existence. Any act performed beyond the range of such
powers is considered ultra vires. (See Sec. 44, RCC)

Similarities and distinctions between partnership and corporation

1. Similarities
a. Both have a separate juridical personality.
b. Both are artificial persons, i.e., they have no bodily existence, and can only act through agents.
c. Both are composed of a group of persons with the exception of a corporation sole and One Person
Corporation (OPC).
d. A partnership, with the exception of a general professional partnership, is taxed as a corporation.
2. Distinctions
a. Manner of creation
A corporation is created by operation of law, while a partnership is created by the mere
agreement of the partners. (Sec. 18, Art. 1767)
b. Number of organizers
A corporation may be formed singly or jointly with others, but the number should not
exceed 15. A partnership may be formed by two or more persons. (Sec. 10; Art. 1767)
c. Right of succession
A corporation has the right of succession, while a partnership has no such right. (Sec. 2,
Art. 1828)
d. Powers
A corporation can exercise only the powers expressly authorized by law, those implied
from the exercise. of such express powers, and those incidental to its existence. A partnership may
exercise any power provided it is authorized by the partners and it is not contrary to law, morals
good customs, public order or public policy. (Sec. 2, Art. 1306)
e. Management
A corporation acts through its board of directors, while a partnership acts through all the
general partners, each one of whom is considered an agent of the partnership, unless otherwise
agreed. (Sec. 23, Art. 1803)
f. Liability of members for debts
The stockholders or members are not liable for the obligations of the corporation, while the
general partners of a partnership are liable with their separate property for partnership debts. (Sec.
2, Art. 1816)
g. Commencement of existence
A corporation commences to have juridical personality on the date of the issuance of its
certificate of incorporation. A partnership, on the other hand, commences to have juridical

COMPILATION OF TOPICS IN BUSINESS LAW

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references
 personality upon the execution of the. partnership contract unless a different date is set by the
partners. (Sec. 18, Art. 1784)
h. Transferability of interest
In a corporation, a stockholder can transfer his shares to another person without the
consent of the other stockholders. (Sec. 62) In a partnership, a partner cannot transfer his interest to
a third person for the purpose of making the latter a partner without the consent of the other
partners (Art. 1813), by reason of the element of delectus personae which is inherent in a
partnership contract.
i. Dissolution
A corporation cannot be dissolved without the consent of the State, while a partnership
may be dissolved by the partners. '(Sec. 117-122, Art. 1830)

(Note: Sections and articles pertain to provisions of the Revised Corporation Code of the
Philippines and the Civil Code of the Philippines, respectively.)

Classes of corporations
1. In general
a. Stock corporation - One that has capital stock divided into shares and is authorized to distribute
dividends or allotments of surplus profits on the basis of the shares held. (Sec. 3, RCC)
b. b. Nonstock corporation - One no part of the income of which is distributable as dividends to its
members, trustees or officers. (Sec. 87, Ibid.)
2. As to the state or country under whose laws it was created
a. Domestic corporation One incorporated under Philippine laws (or one operating within the country
under whose laws it was incorporated).
b. Foreign corporation One formed, organized and 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. (Sec. 140, Ibid.)

Tests to determine nationality of a corporation:

1) Incorporation test The nationality of a corporation follows that of the country under whose
laws it was incorporated.. This is the test applied in our jurisdiction as can be determined
from the definition of a foreign corporation under Sec. 140. Thus, a corporation formed
under the laws of Japan is a Japanese corporation or a corporation formed under the laws
of the Philippines is a Philippine corporation.
2) Control test - The nationality of a corporation follows that of the stockholders owning the
controlling interest. This is applied during wartime for the purpose of the security of the
State. Thus, although a corporation has been formed under Philippine laws but the
controlling shares are owned by the citizens of X country with which the Philippines is at
war, its nationality is that of the citizens of X country. Consequently, the corporation is
considered an enemy corporation and its assets may be confiscated to prevent its being
used against our country. (See Filipinas Compania de Seguros vs. Christern, Huenefeld &
Co., Inc., 89 Phil 54.)
3) Business domiciliary test The nationality of a corporation is that of the country where its
principal business is conducted. Thus, under this test, a corporation organized under the
laws of the United States of America shall be considered a Philippine corporation if its
principal business is conducted in the Philippines.
(Note: As previously stated, the Philippines applies the incorporation test, but, the control
test may be applied in times of war.)
3. As to number of persons composing them
a. Corporation aggregate - One that is composed of more than one corporator.
b. Corporation sole - One composed of only one person, like a bishop or a rabbi, or a "One Person
Corporation".
4. As to whether its purpose is public or private
a. Public corporation One that is organized for the government of a portion of the State, like provinces,
cities, municipalities and barangays.
"The true criterion to determine whether a corporation is public or private is found in the
totality of the relation of the corporation to the State. If the corporation is created by the
State as the latter's own agency or instrumentality to help it in carrying out its
governmental functions, then that corporation is considered public; otherwise, it is private.
Applying the above test, provinces, chartered cities, and barangays can best exemplify
public corporations. They are created by the State as its own device and agency for the
accomplishment of parts of its own public works." (Philippine Society for the Prevention
of Cruelty to Animals vs. Commission on. Audit, G.R. No. 169752, September 25, 2007)
b. Private corporation One that is formed for a private purpose or end, like San Miguel Corporation.
Private corporations include the following:
1) Government-owned or controlled corporations These refer to corporations created

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 by special law (Sec. 4, RCC) other than those for the government of a portion of
the State, such as the Land Bank, Government Service Insurance System,
Philippine Postal Corporation, etc., and those formed under the Revised
Corporation Code, where the government owns at least a majority of its
outstanding voting capital stock. They may be performing governmental or
proprietary function.
2) Quasi-public corporations Those organized for profit which are granted a franchise
by the State to perform public service, such as Meralco.
"The fact that a certain juridical entity is impressed with public interest does
not, by that circumstance alone, make the entity a public corporation, inasmuch as
a corporation may be private although its charter contains provisions of a public
character, incorporated solely for the public good. This class of corporations may
be considered quasi-public corporations, which are corporations that render public
service, supply public wants, or pursue eleemosynary objectives. While purposely
organized for the gain or benefit of its members, they are required by law to
discharge functions for the public benefit. Examples of these corporations are
utility, railroad, warehouse, telephone, telegraph, water supply corporations and
transportation companies. A quasi-public corporation is a species of private
corporations, but the qualifying factor is the type of service that the former renders
to the public: if it performs a public service, then it becomes a quasi-public
corporation" (Emphasis supplied.)
Philippine Society for the Prevention of Cruelty to Animals vs.
Commission on Audit, supra)

5. As to whether its purpose is religious or not

a. a. Ecclesiastical or religious corporation - One formed for a religious purpose.
b. Lay corporation - One formed for a purpose other than ecclesiastical or religious.
6. As to whether its purpose is charitable or not
a. Eleemosynary corporation charity - One organized for public
b. Civil corporation - One organized for business or profit.
7. As to their legal right to corporate existence
a. De jure corporation One that has been created in strict compliance with all the legal requirements
and whose.right to exist as a corporation cannot be successfully attacked in a direct proceeding for
that purpose by the State.
b. De facto corporation One that is defectively created but there is an actual exercise of corporate rights
and franchise resulting from an attempt in good faith to incorporate on the part of the members. It
has all the powers of a de jure corporation but its due existence can be attacked directly in a quo
warranto proceeding.
8. As to their relation to another corporation or other corporations
a. Parent or holding corporation - One which owns the shares of another corporation and having the
power, directly or indirectly, over the latter including the election of the directors thereof.
b. Subsidiary corporation One whose shares of stock are owned by another corporation, called the
parent corporation, which has the power to elect its directors
9. As to whether its shares may be held by the public or not
a. Close corporation One whose articles of incorporation provide that its shares are limited to a few,
restricted as to their transfer, and not listed in any stock exchange. (See Sec. 95, RCC.)
b. Open corporation One whose shares are open to the public, such as those whose shares are listed in
the stock exchanges.
10. Other classifications
a. Corporation by prescription One which has exercised corporate powers for such a length of time
without interference from the State and which, by fiction of law, is given the status of a
corporation, such as the Roman Catholic Church.
b. Corporation by estoppel One which is not in reality a corporation but is considered as one with
respect to those who are precluded by their admission or conduct from denying its existence. (See
Sec. 20, RCC.)

Components of a corporation

1. Corporators Those who compose a corporation, whether as stockholders or members.

2. Stockholders - Corporators of a stock corporation.
3. Members - Corporators of a non-stock corporation.
4. Incorporators - Those stockholders or members mentioned in the articles of incorporation as originally
forming and composing the corporation and are signatories of such document.

One's name may be mentioned in the articles of incorporation, but if he is not identified as an incorporator
and is not a signatory thereto, he is mere subscriber or member. Or an individual may be a signatory to the articles

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of incorporation but is not an incorporator if he is merely signing the articles to represent an incorporator which is
not a natural person.

Promoter
1. Concept
A promoter is a person, natural or juridical, who usually discovers a prospective business and brings
persons interested to invest in it through the formation of a corporation. Although the law does not require
the services of a promoter as a precondition to incorporation; a promoter facilitates the creation of the
corporation by negotiating contracts for its initial operations including subscriptions to its capital stock,
incorporating the business, and helping management start operations.
2. Promoter's liability on contract
A promoter is personally liable for contracts made for the benefit of the proposed corporation. If the
incorporation of the corporation does not materialize, the promoter remains personally liable. If the
corporation is formed, he remains liable until the corporation ratifies or adopts such contracts, or releases
him from liability. The third person must also agree to absolve him from liability.
3. Corporation's liability on contracts entered into by a promoter
A newly-formed corporation is not automatically liable for pre-incorporation contracts entered into
by a promoter on its behalf. It will become liable only by its adoption, ratification of novation of such
contracts. The adoption or ratification of the contract is similar to the agency concept of ratification.

Capital stock and other terms, concept

1. Capital stock The amount specified in the articles of incorporation paid in, or procured to be paid in for the
carrying on of the business of the corporation.
a. Authorized capital stock The total amount of shares which a corporation is allowed to issue if the
shares have par value. If the shares do not have par value, the corporation does not have an
authorized capital stock which is an amount. What it has is the authorized number of no-par shares
that it may issue. Once issued, the corporation shall have a capital stock with the corresponding
amount, but not an authorized capital stock.
b. Subscribed capital stock This is the part of the capital stock which is subscribed, whether paid or
unpaid.
For legal purposes, all shares subscribed whether or not fully or partially paid are already
considered issued. This is evident from the definition of outstanding capital stock in Sec. 173.
c. Outstanding, capital stock - This refers to the total shares of stock issued to subscribers or
stockholders, whether fully or partially paid (as long as there is a binding subscription contract),
except treasury shares. (Sec: 173, RCC)
d. Paid-up capital stock The part of the subscribed capital stock paid to the corporation.
e. Unissued capital stock-That part of the capital stock which is not issued or subscribed.
2. Legal capital - Refers to the total par value of all issued par value shares, or the total cash or consideration
received for all issued no-par value shares.
3. Stated capital The capital with which the corporation issuing shares without par value begins business,
increased by any additions thereto, or diminished by any deductions therefrom.
4. Capital - Refers to the actual property of the corporation in money and other property.

Share of stock
1. Concept
A share of stock is one of the units into which the capital stock is divided. It represents the intangible
interest or right which an owner has in the management, profits, and assets of the corporation. It is property
subject to conversion. (Shurdut Investment Corp. vs. Bataan Pulp, 44752-R, March 13, 1975)
2. Distinguished from stock certificate
a. Share of stock represents the rights and interest of a stockholder in a corporation. Stock certificate is
the written evidence of such rights and interest.
b. Share of stock is intangible personal property, while stock certificate is tangible personal property.
c. Share of stock may be issued even if not fully paid, except shares without par value which are
deemed fully paid and non-assessable upon issuance. Stock certificate is issued only if the
subscription is fully paid.

Classes of stock
1. Common stock The ordinary stock of a corporation that entitles the holder to a pro rata division of the
dividends, without any preference or advantage over other stockholders.
2. Preferred stock - One that entitles the holder to certain preferences over other stockholders. Such
preferences may be as follows:
a. Preferred stock as to asset One that entitles the holder to preference in the distribution of assets over
common stock upon liquidation of the corporation.
b. Preferred stock as to dividends - One that entitles the holder to preference in the distribution of
dividends over common stock. The following are the kinds of preferred stock as to dividends:
1) Cumulative preferred stock - Those which entitle the holder to payment not only of current

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 dividends but also those in arrears, when dividends are declared, to the extent stipulated,
before holders of common shares are paid.
2) Non-cumulative preferred stock - Those that entitle the holder to payment of current
dividends but not those in arrears, before holders of common shares are paid.
3) Participating preferred stock - Those that entitle the holder to participate with the holders
of common shares in the surplus profits after the amount stipulated has been paid to the
holders of preferred shares.
4) Non-participating preferred stock - Those that entitle the holders only to the stipulated
preferred dividend.
3. Par value stock - One the nominal value of which appears on the stock certificate.
4. No-par value stock One without any nominal or par value appearing on the stock certificate.
5. Redeemable shares - Those that grant the issuing corporation the power to redeem or purchase them after a
certain period.
The following are the characteristics of redeemable shares:
a. They may be issued by the corporation only when expressly provided in the artioles of
incorporation. (Sec. 8, RCC)
b. They may be deprived of the voting right. (Sec. 6, Ibid.)
c. They may be purchased by the corporation upon the expiration of a fixed period, regardless of the
existence of unrestricted retained earrings in the books of the corporation. (Sec. 8, Ibid.)
Thus, the requirement that the corporation must have unrestricted retained earnings when it
acquires its own shares under Sec. 41 is not applicable to redeemable shares. Nonetheless, the
SEC's Rules Governing Redeemable and Treasury Shares provide that where the purchase of the
redeemable shares is optional, the, corporation, after such redemption, must have sufficient assets
in its books to cover the debts and liabilities inclusive of capital stock.
d. The terms and conditions for their purchase must be stated in the articles of incorporation and in the
stock certificate representing the said shares. (Sec. 8, Ibid.)
e. They shall be considered as treasury shares unless retired or again disposed of by the corporation.
(See Sec. 9, Ibid.)
6. Founders' shares Founders' shares are shares issued by a corporation, classified as such in the articles of
incorporation and which grant the holders thereof certain rights and privileges not enjoyed by other shares
such as the exclusive right to vote and be voted for in the election of directors or preference in the
distribution of dividends. (Sec. 7, RCC) They are issued to those who established the corporation.
The following are the limitations on the issuance of founders' shares.
a. They must be classified as such in the articles of incorporation.
b. If the exclusive right to vote and be voted for in the election of directors is granted, it must be for a
'limited period not to exceed (5) years from the date of incorporation. However, such exclusive
right shall not be allowed if its exercise will violate the "Anti-Dummy Law", the "Foreign
Investments Act of 1991", and other pertinent laws.
c. The grant of such exclusive right to vote and be voted for in the election of directors to the holders
of founders' shares will thus deprive the other shares the right to vote in the election of directors
during the term provided for its exercise, although such other shares may not be classified as
"preferred" or "redeemable" (See Sec. 6.)
7. Treasury shares - Those that have been issued and fully paid for, but subsequently reacquired by the issuing
corporation by purchase, redemption, donation or through some other lawful means. (Sec. 9)
Treasury shares have the following characteristics:
a. They shall have no voting rights as long as they remain in the treasury. (Sec. 56, Ibid.)
b. Although they are part of the subscribed capital stock, they are not considered as outstanding shares.
(Sec. 173, Ibid.)
c. Since they are not outstanding for being owned by the corporation, they are not entitled to dividends.
(Sec. 42, Ibid)
d. They may again be disposed of for a reasonable price fixed by the board of directors. (Sec. 9, Ibid.)
The price may be less than the par value or the issued price in case of no-par shares provided
it is reasonable. By reason of this provision, the shares are not considered as watered stock.
8. Watered stock - Those issued without consideration or for an inadequate consideration.
9. Voting stock - Those entitled to vote in meetings of the corporation.
10. Nonvoting stock - Those without voting rights, except in certain cases.

Power of a corporation to classify its own shares

1. A corporation may divide its shares into classes or series of shares, or both. Such classification may include
the following:
a. Voting and nonvoting shares.
b. Common and preferred shares.
c. Par value and no-par value shares.
d. Classification to insure compliance with constitutional or legal requirements.
Thus, a corporation may classify its shares into Series "A", which can be subscribed only by
Filipinos, and Series "B", which can be subscribed by both Filipinos and foreigners. This

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 classification may be resorted to in order that foreign stock ownership would not exceed the
maximum, say 40%, as provided by law, for certain corporations.
2. The classification of shares, their corresponding rights, privileges,. or restriction, and their stated par value,
if any, must be included in the articles of incorporation.
3. Except as otherwise provided in the articles of incorporation and stated in the stock certificate, each share
shall be equal in all respects to every other share. (This is referred to as the "doctrine of equality of
shares".)
4. Limitations on the issuance of non voting shares
a. Only those classified as "preferred" or "redeemable" shares may be deprived of the voting right,
unless otherwise provided in the Revised Corporation Code.
An instance when shares may be deprived of the voting right although they are not classified
as "preferred or "redeemable" is when founders' shares are issued where the holders thereof are
given the exclusive right to vote and be voted for in the election of directors for a period of five (5)
years.
b. There shall always be a series or class of shares that have complete voting rights.
In other words, not all the shares may be deprived of the voting right.
c. Nonvoting shares may nevertheless vote in the following cases:
1) Amendment of the articles of incorporation.
2) Adoption and amendment of bylaws.
3) Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporate property.
4) Incurring, creating indebtedness. or increasing bonded.
5) Increase or decrease of authorized capital stock.
6) Merger or consolidation of the corporation with another corporation or other corporations.
7) Investment of corporate funds in another corporation or business.
8) Dissolution of the corporation. (Sec. 6, Ibid.)
5. Limitations on the issuance of no-par shares
a. Subscriptions to no-par shares shall be deemed fully paid and non-assessable and the holder of such
shares shall not be liable to the corporation or to its creditors in respect thereto.
Thus, there should be no "subscription receivable" in the corporate books for no-par shares
subscribed.
b. Shares without par value must be issued for a consideration of at least P5.00 per share.
For par value shares, they may be issued for a consideration lower than P5.00 per share, as in
the case of some mining shares which have a par value of as low as one centavo (P0.01) per share.
c. The entire consideration received for no-par shares shall be treated as capital and shall not be
available for distribution as dividends.
Thus, when no-par shares are subscribed at a price above the "issued price" (the minimum
price at which no-par shares may be issued as provided in Sec. 61 of the RCC), the amount in
excess thereof shall likewise be treated as capital. It is different in the case of par value shares
because any consideration received in excess of the par value may be distributed as stock
dividends. (SEC Opinion)
d. Banks, trust, insurance, and pre need companies, public utilities, building and loan associations, and
other corporations authorized to obtain or access funds from the public, whether publicly listed or
not, shall not be permitted to issue no-par value shares of stock.
6. Limitations on the issuance of preferred shares
a. Preferences in the distribution of dividends and in the distribution of corporate assets in case of
liquidation, or such other preferences must be indicated in the articles of incorporation.
b. Preferred shares may be issued only with a stated par value
Thus, there can be no no-par preferred stock.
c. The board of directors, where authorized in the articles of incorporation, may fix the terms and
conditions of preferred shares or any series thereof.
d. Such terms and conditions shall be effective upon the filing of a certificate thereof with the SEC.

Incorporation and Organization of Private Corporations

Steps in incorporation
1. Verification with the SEC of the name to be used. This may be done online or with the SEC Name
Verification Unit.
This is to ensure that the name adopted by a corporation is distinguishable from that already reserved or
registered for the use of another corporatión, or is not one already protected by law or which is contrary to
existing law, rules and régulations. (See Sec. 17, RCC.)
2. Drafting and execution of the articles of incorporation signed by the incorporators. The articles of
incorporation must comply with the requirements provided for in Sections 13 and 14.
3. Filing of the articles of incorporation with the SEC, together with the following documents:

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 a. Verification Slip/Certificate authorizing the use of the corporate name obtained in No. 1 above.
b. Treasurer's Affidavit to the effect that the paid-up portion of the subscription in cash and/or property
for the benefit and credit of the corporation has been duly received.
c. Joint Affidavit of two incorporators to change corporate name unless the undertaking to change the
corporate name is already stated in the articles of incorporation.
d. Endorsement/clearance from a department of the SEC or other government agencies, if applicable.
e. Payment of the filing, legal research and other fees.
f. Issuance of the certificate of incorporation by the SEC.
This is the operative act that will confer juridical personality on the corporation. A
corporation commences its existence and juridical personality from the date stated in the
certificate, which is actually the date of issue. (See Sec. 18, RCC.)

(Note: Under Section 13 of the Revised Corporation Code, the articles of incorporation and applications for
amendments thereto may be filed with the SEC in the form of an electronic document, in accordance with
the SEC's rules and regulations on electronic filing.)

Kinds of franchise
1. Primary franchise
It is also known as a corporate franchise. It refers to the right and privilege granted by the State to exist
as a corporation and to do such things as are authorized by the charter of the corporation. The primary
franchise of a corporation is vested in the individuals who compose the corporation and not in the
corporation itself. (JRS Business Corporation vs. Imperial Assurance, G.R. No. L-19891, July 31, 1964) It
is conferred through the issuance of the certificate of incorporation.
2. Secondary franchise
This refers to different rights, privileges and powers which are obtained by the corporation, which are
not a prerequisite to corporate existence such as the right to occupy and use public places for the operation
of a system of water, gas works, electricity lighting plants, railroad, etc., (Words and Phrases, 570) or to
operate a messenger and express delivery service. (JRS Business Corporation vs. Imperial Assurance, Inc.,
supra).

Who may be incorporators

a. Natural person.
b. Partnership.
c. Association.
d. Corporation.

Number of incorporators
1. For an ordinary corporation, two (2) or more persons, but not more than fifteen (15), may organize
themselves and form a corporation.
2. For a One Person Corporation (OPC), only one incorporator is required who is also the single stockholder
and sole director. (See Sec. 1, SEC Memorandum Circular No. 16. Series of 2019.)

Qualifications of incorporators
1. For a stock corporation, each incorporator must own, or be a subscriber to at least one (1) share of capital
stock. For a nonstock corporation, each incorporator must be a member of the corporation.
2. The incorporators may be composed of any combination of natural person/s, SEC-registered partnership/s,
SEC-registered domestic corporation/s or association/s, as well as foreign corporation/s.
3. Incorporators who are natural persons must be of legal age, and must sign the articles of
incorporation/bylaws. (Sec. 3, Ibid.)

Partnerships as incorporators
If an SEC-recorded partnership is made an. incorporator, the application for registration must be
accompanied by a Partners' Affidavit, duly executed by all the partners, to the effect that they have authorized the
partnership to invest in the corporation about to be formed and that they have designated one of the partners to
become a signatory to the incorporation documents.

Partnerships under "dissolved" or "expired" status with the SEC shall not be authorized to become an
incorporator. (Sec. 4, Ibid.)

Domestic corporations or associations as incorporators

If an SEC-registered domestic corporation is made an incorporator, its investment in the new corporation
must be approved by a majority of the board of directors or trustees and ratified by the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock, or by at least two-thirds (2/3) of the members in the case of
nonstock corporations, at a meeting duly called for the purpose.
A Directors'/Trustees Certificate or a Secretary's Certificate, indicating the necessary approvals, as
well as the authorized signatory to the incorporation documents, shall be executed under oath and submitted by the

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applicant.
Domestic corporations under "delinquent", "suspended", "revoked", or "expired", status with the SEC shall not
be authorized to become an incorporator. (Sec. 5, Ibid.)

Foreign corporations as incorporators

If a foreign corporation is made an incorporator, the application for registration must be accompanied
by a copy of the document (i.e., Board Resolution, Directors' Certificate, Secretary's Certificate, or its equivalent),
duly authenticated by a Philippine Consulate or which an apostille is affixed thereto, authorizing the foreign
corporation to invest in the corporation being formed and specifically naming the designated signatory on behalf of
the foreign corporation. (Sec. 6, Ibid.) Note: An Apostille is a certificate that authenticates the origin of a public
document. It is issued by a country that is party to the Apostille Convention to be used in another country which is
also a party to the Convention. (Per Department of Foreign Affairs, Office of Consular Affairs Website.)]

Signatories of the articles of incorporation

Each individual signing the articles of incorporation/bylaws must indicate the capacity which he/she is
affixing his/her signature thereto, (i.e., Incorporator or Representative of XYZ Corp.)
An individual designated to sign the articles of incorporation/bylaws on behalf of an incorporator,
which is not a natural person, must also indicate the corporate or partnership name of the entity being represented
and for whom he/she is executing the articles of incorporation/bylaws. (Sec. 7, Ibid.)

Designation of incorporators as directors

An individual who signs the articles of incorporation on behalf of an incorporator, which is not a natural
person, may not be named as a director or trustee in the same articles of incorporation, unless the said individual is
also the owner of at least one (1) share of stock, or is also a member, of the corporation being formed. (Sec. 8,
Ibid.)

Foreign nationals in the articles of incorporation

The inclusion of foreign nationals in the articles of incorporation shall be subject to the applicable
constitutional, statutory and regulatory restrictions, as well as conditions, with respect to foreign participation in
certain investment areas or activities. (Sec. 9, Ibid.)

Additional requirements for certain corporations

No articles of incorporation of banks, banking and quasi-banking institutions, preneed, insurance and trust
companies, non stock savings and loan associations (NSSLAs), pawnshops, and other financial intermediaries shall
be approved unless accompanied by a favorable recommendation of the appropriate government agency to the
effect that the articles of incorporation are in accordance with law. (Sec. 10, Ibid.)

Corporate term
1. Perpetual existence as the default in corporate term
A corporation shall have perpetual existence unless its articles of incorporation provide for a specific
corporate term.
2. Corporate terms of corporations with certificates of incorporation issued prior to the effectivity of the
Revised Corporation Code
a. The corporate term of corporations with certificates of incorporation issued prior to the effectivity of
the Code, i.e., February 23, 2019, and which continue to exist, shall be deemed perpetual effective
such date, without any further action on the part of the corporation. The corporation, subject to the
payment of filing fees, may amend Article Four to reflect is perpetual corporate term in its articles
of incorporation, by a vote of majority of its Board of Directors or Trustees, and by a vote of its
stockholders representing a majority of its outstanding capital stock including the nonvoting
shares, or a majority of its members, in case of a nonstock corporation. However, all other
provisions to be amended in one and the same amended articles of incorporation, shall require the
vote of a majority of the Board of Directors or Trustees and the vote of the stockholders
representing two-thirds (2/3) of its outstanding capital stock, or two-thirds (2/3) of the members, in
case of a nonstock corporation. [Sec. 2, par. (a) SEC Memorandum Circular No. 22, Series of
2020]
b. If any of such corporations elects to continue with its present corporate term pursuant to the articles
of incorporation, it shall notify the SEC by filing a Notice with attached Directors' Certificate,
certifying that the decision to retain the specific corporate term as specified in the articles of
incorporation was approved in a meeting duly held for the purpose by a majority vote of the Board
of Directors or Trustees and by the vote of the stockholders representing a majority of the
outstanding capital stock, including the nonvoting shares, or a majority of the members, in case of
a nonstock corporation. [Sec. 2, par. (b), Ibid.]

The Notice to be submitted to the SEC must be signed by at least a majority of the members
of the Board of Directors or Trustees, and attested by the Corporate Secretary. [Sec. 2, par. (c),
Ibid.] The Notice must be submitted to the SEC within a period of two (2) years from February 23,

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 2019, or until February 23, 2021, pursuant to Sec. 185 of the Revised Corporation Code. A
Certificate of Filing of Notice to Retain Specific Corporate Term shall be issued to the corporation.
[Sec. 2, par. (d), Ibid.] The corporate term shall be deemed perpetual if the corporation fails to
comply with required notification after the lapse of the two-year period. [Sec. 2, par. (e) Ibid.)
3. Amendment to extend or shorten corporate term
a. Corporations incorporated under the Revised Corporation Code and existing corporations
incorporated before the effectivity of the Code that opted to retain their specific corporate term,
may file an amendment of the articles of incorporation to extend or shorten the specific corporate
term pursuant to Section 11, par. 3, of the Code. The amendment must be approved by the vote or
written assent of majority of the Board of Directors or Trustees and the vote or written assent of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the
corporation. [Sec. 3, par. (a), Ibid.] (Note: The author respectfully submits that in case of nonstock
corporations, the amendment must be voted upon or assented to in writing by at least two-thirds
(2/3) of the members, although this is not mentioned in the Memorandum Circular.)
b. In no case shall the extension be made earlier than three (3) years prior to the original or subsequent
expiration date of the corporate term, unless there are justifiable reasons for extension as may be
determined by the SEC. [Sec. 3, par. (b), Ibid.]
c. Extension of the corporate term shall take effect only on the day following the original or subsequent
expiry date(s). [Sec. 3, par. (c), Ibid.]
4. Amendment to change specific corporate term to perpetual corporate term
Corporations incorporated under the Revised Corporation Code whose articles of incorporation
provide for a specific term of existence and existing corporations incorporated before the effectivity of the
Code that notified the SEC of the decision to retain the specific corporate term, may subsequently amend
its specific corporate term to perpetual term of existence. The amendment must be approved by vote or
written assent of majority of the Board of Directors or Trustees and vote or written assent of the
stockholders representing at least two thirds (2/3) of the outstanding capital stock of the corporation, (Sec.
4, Ibid.) (Note: The author respectfully submits that in case of nonstock corporations, the amendment must
be voted upon or assented to in writing by at least two-thirds (2/3) of the members although this is not
mentioned in the Memorandum Circular.)
5. Amendment to change perpetual corporate term to specific corporate term
Corporations incorporated under the Revised Corporation Code whose articles of incorporation
provide for perpetual term of existence, corporations incorporated before and existing at the time of the
effectivity of the Code whose corporate terms were treated perpetual for failure to comply with the
notification under Section 2 of the Memorandum Circular, as well as corporations that amended their
articles of incorporation to reflect their perpetual term of existence, may subsequently amend their
perpetual term of existence to specific corporate term.
The amendment must be approved by the vote or written assent of majority of the Board of Directors
or Trustees and vote or written assent of the stockholders representing at least two thirds (2/3) of the
outstanding capital stock of the corporation. (Sec. 5, Ibid.) (Note: The author respectfully submits that in
case of nonstock corporations, the amendment must be voted upon or assented to in writing by at least two-
thirds (2/3) of the members although this is not mentioned the Memorandum Circular.)
6. Appraisal right of dissenting stockholders
Any change in the corporate term pursuant to Section 11 of the Code shall be without prejudice to the
appraisal right of dissenting stockholders in accordance with the provisions of the Code. (Sec. 6, Ibid.)
(Note: Appraisal right is the right of dissenting stockholders to demand payment of the fair value of their
shares in case they dissent from specific corporate acts under Sec. 80 of the Code.)
7. Revival of corporate existence when corporate term has expired
a. Corporations that may apply for revival
The following corporations may file a Petition for Revival of Corporate Existence:
1) Generally, a corporation whose term has expired;
2) An Expired Corporation whose Certificate of Registration has been revoked for non-filing
of reports (e.g., General Information Sheet, and Audited Financial Statements), provided
that it shall file the proper Petition to Lift its Revoked Status, which may be incorporated
in its Petition to Revive, and must settle the corresponding penalties thereof,
3) An Expired Corporation whose Certificate of Registration has been suspended, provided
that it shall file the proper Petition to Lift its Suspended Status, which may be incorporated
in its Petition to Revive, and must settle the corresponding penalties thereof; or
4) An Expired Corporation whose corporate name has already been validly re-used; and is
currently being used, by another existing corporation duly registered with the SEC,
provided that the former shall change its corporate name within thirty (30) days from the
issuance of its Certificate of Revival of Corporate Existence. (Sec. 2, SEC Memorandum
Circular No. 23, Series of 2019)

b. Who may not apply for revival The following are not allowed to file a Petition for Revival of
Corporate Existence:
1) An Expired Corporation which has completed the liquidation of its assets;

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 2) A corporation whose Certificate of Registration has been revoked for reasons other than
non-filing of reports (e.g., General Information Sheet, and Audited Financial Statements);
3) A corporation dissolved by virtue of Sections 6(c) and 6(d) of Presidential Decree No.
902-A, as amended by Presidential Decree No. 1799; or
4) An Expired Corporation which had already availed itself of re-registration, in accordance
with Memorandum Circular No. 13, Series of 2019 (Amended Guidelines and Procedure
on the Use of Corporate and Partnership Names), or other memorandum circulars issued
by the SEC pertaining to re-registration, except when:
a) The re-registered corporation has given its consent to the Petitioner to use its corporate
name, and has undertaken to undergo voluntary dissolution immediately after the issuance
of the Petitioner's Certificate of Revival; or
b) The re-registered corporation has given its consent to the Petitioner to use its corporate
name, and has undertaken to change its corporate name immediately after the issuance of
the Petitioner's Certificate of Revival. (Sec. 2, Ibid.)

c. When corporation deemed revived

If the SEC finds that the Petition is meritorious, it shall grant the Petition and issue a
Certificate of Revival of Corporate Existence, which shall be evidence of Petitioner's revival,
together with all the rights and privileges under its Certificate of Incorporation and subject to all
duties, debts and liabilities existing prior to the revival of its corporate term. [Sec. 6, par. (i), Ibid.]
d. Favorable recommendation for revival by appropriate government agency required on certain
corporations
No application for revival of certificate of incorporation shall be approved by the SEC
unless it is accompanied by a favorable recommendation of the appropriate government agency
with respect to the following corporations:
1) Banks.
2) Banking and quasi-banking institutions.
3) Preneed, insurance and trust companies.
4) Non Stock savings and loan associations (NSSLAs).
5) Pawnshops.
6) Corporations engaged in the money service business.
7) Other financial intermediaries. (Sec. 8, Ibid.)
e. Exercise of appraisal right
Any change in the corporate term shall be without prejudice to the exercise by dissenting
stockholders of their appraisal right.

Paid-in capital stock

1. Minimum capital stock not required
Stock corporations shall not be required to have a minimum capital stock, except as otherwise provided by law

2. Minimum paid-up capital as regards certain corporations (Per SEC Website) (Legend: P - Philippine Peso,
US $ - US Dollar)
a. Based on Industry

Break Bulk Agent P 250,000.00

Cargo Consolidator P 400,000.00

Financing Company - Main

First class cities P 10,000,000.00

Other cities P 5,000,000.00

Municipalities P 2,500,000,00

Financing Company - Branch

First class cities P 1,000,000.00

Other cities P 500,000.00

Municipalities P 250,000.00

Freight Forwarders

Domestic P 250,000.00

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 International P 2,000,000.00

Health Maintenance Organization P 10,000,000.00

Insurance

Insurance Broker P 20,000,000.00

Reinsurance Broker P 20,000,000.00

Insurance Broker and

Reinsurance Broker P 50,000,000.00

Life Insurance Company P 1,000,000,000.00

Non-Life Insurance Company P 1,000,000,000.00

Reinsurance Company P 2,000,000,000.00

Investment Adviser/Manager P 10,000,000.00

Investment Company P 50,000,000.00

Investment House P 300,000,000.00

Lending Company - Main P 1,000,000.00

Lending Company - Branch

First class cities P 300,000.00

Other cities P 150,000.00

Municipalities P 750,000.00

Mining

Authorized Capital Stock P 100,000,000.00

Paid-up Capital, Stock P 6,250,000.00

Carrier Non-Vessel Operating Common

Carrier P 4,000,000.00

Pawnshop P 100,000.00

Pre-Need Plan Issuer P 100,000,000.00

Pre-Need Plan Agent P 5,000,000.00

Recruitment for Local

Employment

Corporation P 500,000.00

Partnership P 200,000.00

Recruitment for Overseas

Employment P 5,000,000.00

Retail Trade with Foreign Equity US$ 2,500,000.00

School (for stock corporations)

Elementary Education P 1,000,000.00

Elementary and Secondary

Education P 2,500,000.00

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 Elementary, Secondary and
Tertiary Education P 5,000,000.00

Security Agency P 500,000.00

Securities Broker/Dealer (New/SRO-Member) P 100,000,000.00

Securities Bróker/Dealer
(Existing/ SRO-Member) P 10,000,000.00

Securities Broker/Dealer in Proprietary Shares

(Non-SRO-Member) P 5,000,000.00

Special Purpose Vehicle P 31,250,000.00

Special Purpose Corporation P 5,000,000.00

Transfer Agent P 1,000,000.00

b. Based on Equity

Domestic Corporation with more than 40% foreign equity

-Domestic Market Enterprise US$ 200,000.00

-Export Market Enterprise P 5,000.00

Foreign Branch Office

-Domestic Market Enterprise US$ 200,000.00

-Export Market Enterprise P 5,000.00

Partnership with foreign partner

-Domestic Market Enterprise US$ 200,000.00

-Export Market Enterprise P 3,000.00

Foreign Representative Office US$ 30,000.00

Regional Area Headquarters

(RHQ) US$ 50,000.00

Regional Operating Headquarters

(ROHQ) US$ 200,000.00

Articles of incorporation
1. Concept
The basic governing document of a private corporation is the articles of incorporation. The articles
are, in effect, the application of the incorporators with the government through the SEC to give them the
privilege to exist as a corporation. They must contain substantially the matters enumerated under Section
14. As part of the charter of a corporation, they partake of the nature of a contract among the
stockholders/members themselves, between the corporation and the stockholders/members, between the
corporation and the State, and between the stockholders/members and the State.
2. Contents of the articles of incorporation
a. The name of the corporation
b. The purpose or purposes of the corporation
1) The purpose or purposes of a corporation must comply with the following requisites:
2) The purpose or purposes must be lawful
3) The purpose or purposes must be definitely stated.
4) If the corporation has more than one purpose, the primary purpose should be stated
separately from the secondary purpose or purposes.
5) The purposes, if there are several, must be capable of being lawfully combined.

c. The place of principal office which must be in the Philippines.

d. The term of existence of the corporation.
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 e. Names, nationalities and residence addresses of the incorporators.
f. Number, names, nationalities and residences of directors or trustees.
g. The amount of authorized capital stock, the number of shares into which it is divided and the par
value of each share.
h. The names of the subscribers, nationalities, number of shares subscribed, amount subscribed, and
amount paid-in.
i. Other matters not inconsistent with law and which the incorporators may deem necessary or
convenient.
j. The name of the temporary treasurer elected (treasurer-in-trust).

Amendment of the articles of incorporation

1. Requirements for amendment of articles of incorporation
a. The amendment must be for a legitimate purpose or purposes.
b. The following vote must be obtained:
1) Majority vote of the board of directors or trustees, and
2) The vote or written assent of two-thirds (2/3) of the outstanding capital stock in the case of
a stock corporation, or two-thirds (2/3) of the members in the case of a nonstock
corporation.
c. The original and the amended articles shall contain all provisions required by law to be set out in the
articles of incorporation.
d. The amendment shall be indicated by underscoring the change or changes made, and a copy thereof
duly certified under oath by the corporate secretary and majority of the directors or trustees, with a
statement that the amendments have been duly approved by the required vote of the stockholders
or members, shall be submitted to the SEC.
2. Effectivity of amendments
a. Upon approval by the SEC, or
b. From the date of filing with the SEC if not acted upon within six (6) months from the date of filing
for a cause not attributable to the corporation.
3. Grounds for rejection or disapproval of the articles of incorporation or any amendment thereto
a. No substantial compliance with the required form.
b. Purpose or purposes are patently unconstitutional, illegal, immoral, or contrary to government rules
and regulations.
c. Falsity in the certification concerning the amount of capital stock subscribed and/or paid.
d. Non-compliance with the required percentage of ownership of the capital stock by Filipinos under
existing laws or the Constitution.
a. Absence of favorable recommendation from the appropriate government agency to the effect that
such articles or amendment is in accordance with law in the case of the following corporations:
1) Banks,
2) Banking and quasi-banking institutions,
3) Preneed, insurance and trust companies,
4) NSSLAS,
5) Pawnshops, and
6) Other financial intermediaries,
4. Correction or modification of objectionable portions
The SEC shall give the incorporators or the corporation a reasonable time within which to correct
or modify objectionable portions of the articles or amendment. (Sec. 16, RCC)
5. Non-amendable provisions in the articles of incorporation
Except to correct errors, the following matters which refer to accomplished facts, may not be amended:
a. The names of the incorporators.
b. The names of the original subscribers to the capital stock and their subscribed and paid-up capital.
c. The names of the original directors,
d. The treasurer elected by the original subscribers.
e. The witnesses to the execution of the articles of incorporation and the acknowledgment made by the
incorporators on the due execution of the articles.
f. The members who contributed to the initial capital of the nonstock corporation.

Corporate name
1. What corporate name may be used
a. The name should be distinguishable from that already reserved or registered for the use of another
corporation. A name is not distinguishable even if it contains one or more of the following:
1) The word "corporation" "company", "incorporated", "limited liability", or an abbreviation
of one of such words; and
2) Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different
tenses, spacing, or number of the same word or phrase.
b. The name should not be one that is already protected by law.

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 c. The use of the name should not be contrary to existing law, rules and regulations. (Sec. 17, RCC)
2. Consequence on the use of corporate name that is not allowed
The SEC, upon determination that the corporate name is not distinguishable from that already reserved or
registered for the use of another corporation, already protected by law, or contrary to law, rules and
regulations:
a. May summarily order the corporation to immediately cease and desist from using such name and
require the corporate name to register a new one.
b. If the corporation fails to comply with the order of the. SEC, the latter may hold the corporation and
its responsible directors of officers in contempt and/or hold them administratively, civilly and/or
criminally liable under the Code and other applicable laws and/or revoke the registration of the
corporation.
c. Shall cause the removal of all visible signages, marks, advertisements, labels, prints, and other
effects bearing such corporate name. (Ibid.)
3. How new name is changed
A corporation may change its name, either on its own, or in compliance with the order of the SEC
to register a new one, by amending the articles of incorporation. Upon approval of the new corporate name,
the SEC shall issue a certificate of incorporation under the amended name.
4. Guidelines and Procedures on the Use of Corporate and Partnership Names
Per SEC Memorandum Circular No. 13, Series of 2019, the following are the guidelines and
procedures in the registration of corporate and partnership names:
a.
1) The corporate name shall contain the word "Corporation" or "Incorporated," or the
abbreviations "Corp." or "Inc.", respectively;
2) In the case of a One Person Corporation, the corporate name shall contain the word "OPC"
either below or at the end of the corporate name;
3) The partnership name shall bear the word "Company" or "Co." and if it is a limited
partnership, the word "Limited" or "Ltd." A professional partnership name may bear the
word "Company," "Associates," or "Partners," or other similar descriptions;
4) The corporate name of a foundation shall use the word "Foundation.”
5) The corporate name of all non-stock, non-profit corporations, including non-governmental
organizations and foundations, engaging in microfinance activities shall use the word
"Microfinance" or "Microfinancing"; provided that said corporations shall state in the
purpose clause of their articles of incorporation that they shall conduct microfinance
operations pursuant to Republic Act No 8425 or the Social Reform and Poverty
Alleviation Act.
b. A term that describes the business of a corporation in its name should refer to its primary purpose. If
there are two such terms, the first should refer to the primary purpose and the second to the
secondary purpose.
c.
1) The name shall be distinguishable from other corporate or partnership name registered
with the Commission, or with the Department of Trade and Industry, in the case of sole
proprietorships;
2) If the name applied for is similar to that of a registered corporation or partnership, the
applicant shall add one or more distinctive words to the proposed name to remove the
similarity or differentiate it from the registered name; However, the addition of one or
more distinctive words shall not be allowed if the registered name is coined or unique
unless the board of directors or majority of the partners of the subject corporation or
partnership gives its consent to the applied name.
3) Punctuation marks, spaces, signs, symbols, and other similar characters, regardless of their
form or arrangement, shall not be acceptable as distinguishing words for purposes of
differentiating a proposed name from a registered name.
4) A name that consists solely of special symbols, punctuation marks or specially designed
characters shall not be registered.
d. Business or trade name which is different from the corporate or partnership name shall be indicated
in the articles of incorporation or partnership. A company may have more than one business or
trade name.
e. A trade name or trademark registered with the Intellectual Property Office may be used as part of the
corporate or partnership name or a party other than its owner if the latter gives its consent to such
use.
f.
1) The full name or surname of a person may be used in a corporate or partnership name if he
or she is a stockholder, member or partner of the said entity and has consented to such use;
if the person is already deceased, the consent shall be given by his or her estate;
2) A single stockholder of a One Person Corporation (OPC) may use his/her name; provided,
that said name shall be accompanied with descriptive words aside from the suffix OPC.
The single stockholder may also use the name of another person provided that consent was

COMPILATION OF TOPICS IN BUSINESS LAW

FROM: NOTES IN BUSINESS LAW AND OBLIGATION AND CONTRACT BY: ATTY. FIDELITO R. SORIANO, CPA
This compilation is exclusively for SLSU JGE students and does not claim credit for any content from the main
references
 given by the said person or if deceased, his estate. Provided that the name shall be
accompanied by the descriptive words other than the suffix OPC.
3) The Commission may require a registrant to explain to its satisfaction the reason for the
use of a person's name.
4) The meaning of initials used in a name shall be stated by the registrant in the Articles of
Incorporation, Articles of Partnership or in a separate document signed by an incorporator,
director or partner, as the case may be.
g. The name of an internationally known foreign corporation, or something similar to it, cannot be used
by a domestic corporation unless it is a subsidiary and the parent corporation has consented to such
use.
However, a name written in a foreign language, even if registered in another country, shall not be
registered if the name violates good morals, public order or public policy, or has an offensive or
indecorous meaning in any of the country's official languages or major dialects.
h. The name of a local geographical únit, site, or location cannot be used as a corporate or partnership
name unless it is accompanied by a descriptive word or phrase,, e.g., Pasay Food Store, Inc.
i. Pursuant to existing laws, the following words and phrases can be used as corporate or partnership
name only in the manner provided:
1) “Finance Company," "Financing Company," "Finance and Leasing Company,"
"Investment Company," and "Investment House" by entities engaged in the financing or
investment house business (R.A. 8556 and P.D. 129)
2) "Lending Company" and "Lending Investor" by lending companies (R.A. 9474); or
"Pawnshop" by entities authorized to operate pawnshops (P.D. 114)
3) "Bank," "Banking," "Banker," "Savings and Loan Association," (R.A. 8367); "Trust
Corporation," "Trust Company," or words of similar meaning by entities engaged in the
banking or trust business (R.A. 8791)
4) "United Nations," "UN," in full or abbreviated form 10 exclusively by the United Nations
and its attached agencies (R.A. 226)
5) "Bonded" (R.A. 247) by entities with licensed warehouses
6) "SPV-AMC" by corporations authorized to act as special purpose vehicle (R.A. 9182).
7) The name of an international government organization, such as "International Criminal
Police Organization" (INTERPOL), "International Monetary Fund" (IMF), and
"International Labour Organization" (ILO) may not be used as part of a corporate or
partnership name unless duly authorized or allowed by the Commission; and
8) ASEAN (protected under Article 6 of the Paris Convention for the Protection of Industrial
Property, adopted in 1883 and revised in Stockholm in 1967)
j. The practice of a profession regulated by a special law which, among other things, provides for the
permissible use of the profession's name in a firm, partnership or association, shall govern the use
of the name, e.g., "Engineer" or "Engineering" (R.A. 1582), "Architect" (R.A. No. 9266), or
"Geodetic Engineer" (R.A. 8560)
Notwithstanding the limitations mentioned above, any association registered by entities engaged in
the listed activities may use the profession's name, ę.g., Association of Engineers of the
Philippines, Inc.”
k. Unless otherwise authorized by the Commission, the words and phrases enumerated below can be
used only by the entities mentioned:
1) "Investment(s)" or "Capital" by entities organized as investment house or investment
company;
2) "Capital" by entities organized as investment house, investment company or holding
company;
3) "Asset/ Investment/ Fund/Financial Management," or "Asset/Investment/Fund/Financial
Adviser," or any similar words or phrases by entities organized as investment company
adviser or holders of investment management activities (IMA) license from the Bangko
Sentral ng Pilipinas;
4) "National," "Bureau," "Commission," "State," and other words, acronyms, abbreviations
that have gained wide acceptance in the Philippines by entities that perform governmental
functions.
5) "Association" and "Organization" or similar words which pertain to nonstock corporations
by entities primarily engaged in nonprofit activities.
6) "Stock Exchange/Futures Exchange/Derivatives Exchange," "Stock Broker/ Securities
Broker/Derivatives Broker," "Commodity/Financial Futures Merchant/Broker," "Securities
Clearing Agency/Stock Clearing Agency," "Plans," or any similar words or phrases by
entities organized as an exchange, broker dealer, commodity futures broker, clearing
agency, or pre need company under the Securities Regulation Code. (R.A. 8799)
l. Pursuant to Republic Act 10530, or the "The Act Defining The Use and Protection of The Red
Cross, Red Crescent and Red Crystal Emblems", the use of the words "red cross", "red crescent",
or "red crystal" or their translation in any official language and dialect cannot be used or registered
as part of a corporate or partnership name, unless with the consent of the Philippine Red Cross.

COMPILATION OF TOPICS IN BUSINESS LAW

FROM: NOTES IN BUSINESS LAW AND OBLIGATION AND CONTRACT BY: ATTY. FIDELITO R. SORIANO, CPA
This compilation is exclusively for SLSU JGE students and does not claim credit for any content from the main
references
 m. The name of a corporation or partnership that has been dissolved or whose registration has been
revoked shall not be used by another corporation or partnership within five (5) years from the
approval of dissolution or for five (5) years from the date of revocation, unless its use has been
allowed at the time of dissolution or revocation by the stockholders, members or partners who
represent a majority of the outstanding capital stock or membership of the dissolved corporation or
partnership, as the case may be.
n. A corporate or partnership name, which was previously used but became the subject of amendment,
shall not be re-registered or used by another corporation or partnership for a period of three (3)
years from the date of the approval of the adoption of the new corporate or partnership name.
o. Names of absorbed/constituent corporation may not be used unless it is the surviving corporation
intending to use the. said absorbed/constituent corporate name: Provided, however, that another
corporation may use the names or absorbed/constituent corporation if consent of the surviving
corporation is obtained.

Registration, incorporation and commencement of corporate existence

1. Application for use of corporate name
A person or group of persons desiring to incorporate shall submit the intended corporate name to
the SEC for verification. If the SEC finds that the name is distinguishable from a name already reserved or
registered for the use of another corporation, not protected by law and is not contrary to law, rules and
regulations, the name shall be reserved in favor of the incorporators. (Sec. 18, RCC)
2. Submission of the articles of incorporation
Upon approval of the corporate name to be used, the incorporators shall then submit their articles of
incorporation and bylaws to the SEC reflecting such approved corporate name. (Ibid.)
3. Issuance of certificate of incorporation
If the SEC finds that the submitted documents and information are fully compliant with the
requirements of the Code, other relevant laws, rules and regulations, it shall then issue the certificate of
incorporation. (Ibid.)
The certificate of incorporation is the document issued by the SEC under its official seal giving the
incorporators, stockholders/members and their successors the authority to constitute themselves as a body
politic and corporate under the name stated in the articles of incorporation for the period specified therein.
4. Effect of issuance of certificate of incorporation
The issuance of the certificate of incorporation by the SEC is the operative act that will confer
corporate existence and juridical personality upon the corporation commencing on the date stated in the
certificate.
The existence of the following corporations is, however, recognized although there is no certificate of
incorporation issued by the SEC:
a. In the case of a corporation sole under Sec. 110, par. 2 of the Code which provides that "(F)rom and
after the filing with the Commission of the said articles of incorporation, verified by affidavit or
affirmation, and accompanied by documents mentioned in the preceding paragraph, such chief
archbishop, bishop, priest, minister, rabbi or presiding elder, as the case, may be, shall become a
corporation sole .." (Emphasis supplied.)
b. In the case of a corporation by prescription, which is given, the status of a corporation by fiction of
law by reason of its exercise of corporate powers for such a length of time without interference by
the State, and whose existence may even precede that of the State.

Corporation by estoppel
1. Concept
A corporation by estoppel is one which is not in reality a corporation but is considered as one with
respect to those who are precluded by their admission or conduct from denying its existence. This
holds true with respect to both the persons holding themselves as representing a corporation or
believing themselves to be dealing with a corporation.
2. Liability of persons who assume to act as a corporation All persons who hold themselves as representing 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. (Sec. 20, RCC)
3. Lack of corporate personality of ostensible corporation not a defense in suit

COMPILATION OF TOPICS IN BUSINESS LAW

FROM: NOTES IN BUSINESS LAW AND OBLIGATION AND CONTRACT BY: ATTY. FIDELITO R. SORIANO, CPA
This compilation is exclusively for SLSU JGE students and does not claim credit for any content from the main
references