R. A. No. 11232 The Revised Corporation Code of the Philippines 5


SEC. 45. Adoption of Bylaws. – For the adoption of bylaws by the corporation, the affirmative vote of the stockholders representing at least a majority of the outstanding capital stock, or of at least a majority of the members in case of nonstock corporations, shall be necessary. The bylaws shall be signed by the stockholders or members voting for them and shall be kept in the principal office of the corporation, subject to the inspection of the stockholders or members during office hours. A copy thereof, duly certified by a majority of the directors or trustees and countersigned by the secretary of the corporation, shall be filed with the Commission and attached to the original articles of incorporation.

Notwithstanding the provisions of the preceding paragraph, bylaws may be adopted and filed prior to incorporation; in such case, such bylaws shall be approved and signed by all the incorporators and submitted to the Commission, together with the articles of incorporation.

In all cases, bylaws shall be effective only upon the issuance by the Commission of a certification that the bylaws are in accordance with this Code.

The Commission shall not accept for filing the bylaws or any amendment thereto of any bank, banking institution, building and loan association, trust company, insurance company, public utility, educational institution, or other special corporations governed by special laws, unless accompanied by a certificate of the appropriate government agency to the effect that such bylaws or amendments are in accordance with law.

SEC. 46. Contents of Bylaws. – A private corporation may provide the following in its bylaws:

(a) The time, place and manner of calling and conducting regular or special meetings of the directors or trustees;

(b) The time and manner of calling and conducting regular or special meetings and mode of notifying the stockholders or members thereof;

(c) The required quorum in meetings of stockholders or members and the manner of voting therein;

(d) The modes by which a stockholder, member, director, or trustee may attend meetings and cast their votes;

(e) The form for proxies of stockholders and members and the manner of voting them;

(f) The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for setting the compensation of directors or trustees and officers, and the maximum number of other board representations that an independent director or trustee may have which shall, in no case, be more than the number prescribed by the Commission;

(g) The time for holding the annual election of directors or trustees and the mode or manner of giving notice thereof;

(h) The manner of election or appointment and the term of office of all officers other than directors or trustees;

(i) The penalties for violation of the bylaws;

(j) In the case of stock corporations, the manner of issuing stock certificates; and

(k) Such other matters as may be necessary for the proper or convenient transaction of its corporate affairs for the promotion of good governance and anti-graft and corruption measures.

An arbitration agreement may be provided in the bylaws pursuant to Section 181 of this Code.

SEC. 47. Amendment to Bylaws. – A majority of the board of directors or trustees, and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a nonstock corporation, at a regular or special meeting duly called for the purpose, may amend or repeal the bylaws or adopt new bylaws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a nonstock corporation may delegate to the board of directors or trustees the power to amend or repeal the bylaws or adopt new bylaws: Provided, That any power delegated to the board of directors or trustees to amend or repeal the bylaws or adopt new bylaws shall be considered as revoked whenever stockholders owning or representing a majority of the outstanding capital stock or majority of the members shall so vote at a regular or special meeting.

Whenever the bylaws are amended or new bylaws are adopted, the corporation shall file with the Commission such amended or new bylaws and, if applicable, the stockholders’ or members’ resolution authorizing the delegation of the power to amend and/or adopt new bylaws, duly certified under oath by the corporate secretary and a majority of the directors or trustees.

The amended or new bylaws shall only be effective upon the issuance by the Commission of a certification that the same is in accordance with this Code and other relevant laws.

The Corporation Code of the Philippines
TITLE I – General Provisions
TITLE II – Incorporation and Organization of Private Corporation
TITLE III – Board of Directors/Trustees and Officers
TITLE IV – Powers of Corporations
TITLE V – By Laws
TITLE VI – Meetings
TITLE VII – Stocks and Stockholders
TITLE VIII – Corporate Books and Records
TITLE IX – Merger and Consolidation
TITLE X – Appraisal Right
TITLE XI – Non-Stock Corporations
TITLE XII – Close Corporations
TITLE XIII – Special Corporations
TITLE XIV – Dissolution
TITLE XV – Foreign Corporations
TITLE XVI – Investigations, Offenses and Penalties
TITLE XVII – Miscellaneous Provisions

Philippines Startup Scene

Philippines Business Registration
Philippines Business Registration

The startup scene in the Philippines is thriving with events every week, ranging from hackathons, open coffees, gamification, conferences and meetups on just about every programming language, apis to social innovation. These events are not only being held in Metro Manila but also in Baguio, Cebu and Davao.

The Philippines’ startups are in education, tech, social innovation, agriculture, e-commerce and payment gateways. Outside of the tech world very few people are aware of the evolution of the Philippines as a hotbed for startups.

The corporation code of the Philippines, Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) regulations are not small entrepreneur friendly. Monthly and annual filings of reports to government agencies cost startups time and money, making it extremely difficult for startups that are bootstrapping. Secondary licenses may be required of them depending on the nature of their business. Legal restrictions on foreign ownership (foreign investment negative list) may hamper some startups’ efforts to find investors overseas. Another issue is the limitation on more than 19 investors/shareholders per year for a close corporation without having to fulfill the securities registration requirements with the SEC.

Part of the amazing growth of new startups has been the opening of new angel investors groups, venture capitalists, startup accelerators and incubators; notably Kickstart Ventures (part of the Globe Telecom Group), Pollenizer (Australian, Kickstart joint venture partner) and Ideaspace Foundation (funded by a  consortium of companies belonging to the same group as Smart Communications), Launch Garage, LaunchPad, PhilDev and more.

Unfortunately there is little information available to founders and co-founders of Philippines startups on how to properly setup a corporation. What should be included in the Articles of Incorporation and By-laws and how various clauses, such as tag-along rights, drag-along rights, right of first refusal should be used as well the classes of shares and their par values.

Startups with correctly prepared Articles of Incorporation (AOI) and By-laws will avoid having to waste time and money in making amendments to their AOI when their first investors are willing to buy shares or agree to purchase a convertible note.