corporation code of the philippines

US Companies Expanding to the Philippines: Why BIR and SEC Compliance Should Be Your First Priority

Expanding internationally is a strategic milestone for any organization. For many U.S. companies, the Philippines has become one of the most attractive destinations for growth in Southeast Asia.

With its highly skilled English-speaking workforce, competitive labor costs, and strong service sector, the Philippines offers a compelling environment for outsourcing, shared services, tech operations, and regional headquarters.

However, while market entry may look straightforward on paper, regulatory compliance in the Philippines — particularly with the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) — is where many foreign companies face unexpected complexity.

Before hiring employees or generating revenue, your financial and regulatory foundation must be properly structured.

Why US Companies Are Expanding to the Philippines

Several factors continue to drive U.S. expansion into the Philippine market:

  • Access to a skilled and cost-efficient workforce
  • Strong BPO and IT infrastructure
  • Favorable time zone overlap with the United States
  • Growing domestic consumer market
  • Strategic ASEAN positioning

But expansion success depends not only on operational setup — it depends on regulatory compliance.

Understanding the Role of the Philippine SEC for Foreign Companies

The Philippine Securities and Exchange Commission (SEC) regulates corporate registration and business entities in the Philippines.

For U.S. companies expanding to the Philippines, registration with the SEC is mandatory when establishing:

  • A Domestic Corporation (subsidiary)
  • A Branch Office
  • A Representative Office
  • A Regional Headquarters

The SEC is responsible for:

  • Approving your Articles of Incorporation
  • Issuing your Certificate of Registration
  • Regulating corporate governance compliance
  • Monitoring reportorial requirements

Failure to comply with SEC reportorial requirements can result in penalties, suspension, or revocation of registration.

For foreign companies, structuring the correct entity type at the beginning is critical — as it directly affects taxation, liability, and operational flexibility.

The Bureau of Internal Revenue (BIR): Tax Compliance Starts Immediately

Once SEC registration is completed, registration with the Bureau of Internal Revenue (BIR) follows.

The BIR oversees:

  • Taxpayer registration
  • Issuance of Authority to Print official receipts
  • Books of accounts registration
  • Tax identification numbers (TIN)
  • Monthly, quarterly, and annual tax filings

This is where many U.S. companies underestimate the administrative requirements.

Even newly registered entities — including those not yet profitable — may have ongoing filing obligations.

Common BIR Compliance Requirements Include:

  • Registration of manual or computerized books of accounts
  • Monthly VAT or percentage tax filings
  • Withholding tax reporting
  • Annual income tax returns
  • Financial statement submission

Non-compliance may lead to:

  • Financial penalties
  • Accrued interest charges
  • Audit exposure
  • Business permit renewal issues

For U.S. companies unfamiliar with Philippine tax procedures, professional bookkeeping support becomes essential.

Why Outsourced Bookkeeping Is Critical for US Companies Expanding to the Philippines

When entering a new regulatory environment, financial clarity is not optional — it is infrastructure.

Outsourcing bookkeeping in the Philippines provides several strategic advantages:

1. Immediate Local Compliance Expertise

Philippine tax and accounting processes differ significantly from U.S. GAAP reporting systems.

A local outsourced bookkeeping team ensures:

  • Proper transaction recording aligned with BIR standards
  • Accurate tax calculations
  • Timely filing of statutory reports
  • Maintenance of compliant books of accounts

This prevents costly corrections later.

2. Cost-Efficient Market Entry

Hiring in-house finance staff during early expansion increases fixed overhead.

Outsourcing eliminates:

  • Full-time salary commitments
  • Employment benefits and statutory contributions
  • Recruitment and onboarding costs
  • Infrastructure setup

This allows U.S. companies to allocate capital toward revenue-generating activities instead of administrative overhead.

3. Alignment Between US Headquarters and Philippine Operations

One of the biggest challenges for multinational companies is reconciling local statutory reporting with consolidated global reporting.

Professional outsourced bookkeeping ensures:

  • Clean financial records
  • Organized documentation
  • Reporting that can be easily integrated into parent company financial statements

This supports transparency for leadership, investors, and auditors.

4. Reduced Regulatory Risk

BIR audits and SEC compliance checks are part of operating in the Philippines.

Proper bookkeeping ensures:

  • Financial records are audit-ready
  • Required reports are submitted on time
  • Tax computations are properly documented

Risk mitigation begins with accurate records.

Structuring Your Philippine Expansion Correctly from Day One

For US companies expanding to the Philippines, the correct sequence typically includes:

  1. SEC registration of the chosen entity type
  2. BIR registration and tax mapping
  3. Books of accounts registration
  4. Setup of accounting systems
  5. Ongoing bookkeeping and compliance monitoring

Skipping steps or delaying compliance can create operational bottlenecks that slow growth.

Why Dayanan Business Solutions Supports International Companies

At Dayanan Business Solutions, we assist U.S. and international companies entering the Philippine market by providing:

  • SEC registration support
  • BIR registration guidance
  • Outsourced bookkeeping services
  • Ongoing tax and financial compliance management

We understand that foreign-owned entities require:

  • Regulatory clarity
  • Accurate financial reporting
  • Cost-efficient operational support
  • Confidence in local compliance

Our goal is to ensure your Philippine operations are compliant, structured, and financially organized from the beginning.

Frequently Asked Questions (FAQs)

1. What are the first steps for US companies expanding to the Philippines?

The first step for US companies expanding to the Philippines is choosing the appropriate legal structure (subsidiary, branch office, representative office, or regional headquarters). After selecting the entity type, registration must be completed with the Philippine Securities and Exchange Commission (SEC), followed by registration with the Bureau of Internal Revenue (BIR) for tax compliance. Proper bookkeeping systems should also be established immediately to ensure regulatory compliance from day one.

2. Do US companies need to register with both the SEC and BIR?

Yes. Foreign companies must register with the SEC to legally establish their entity in the Philippines. After SEC registration, the company must register with the BIR to obtain a Tax Identification Number (TIN), register books of accounts, and comply with tax filing requirements. Both registrations are mandatory for legal operations.

3. What is the difference between a Philippine subsidiary and a branch office?

A subsidiary is a separate domestic corporation incorporated under Philippine law, even if fully foreign-owned. A branch office, on the other hand, is an extension of the foreign parent company and is not considered a separate legal entity. The choice between the two affects taxation, liability, and capital requirements, making professional guidance essential.

4. What taxes must foreign companies file in the Philippines?

Depending on the structure and business activity, foreign companies may be required to file:

  • Corporate income tax
  • Value-added tax (VAT) or percentage tax
  • Withholding taxes
  • Annual financial statements

Filing obligations often apply even if the company has not yet generated revenue.

5. Is bookkeeping required even if the Philippine entity is not yet profitable?

Yes. Even newly registered companies without active revenue may have ongoing filing and reporting obligations with the BIR and SEC. Proper bookkeeping ensures that all transactions are recorded accurately and that compliance deadlines are met, preventing penalties.

6. Why should US companies outsource bookkeeping when expanding to the Philippines?

Outsourcing bookkeeping provides immediate access to local compliance expertise without the cost of hiring a full-time finance team. It ensures accurate financial records, timely tax filings, reduced risk of penalties, and better alignment between Philippine operations and US headquarters reporting systems.

7. How long does it take to register a foreign-owned company in the Philippines?

The timeline varies depending on the entity type and document readiness, but SEC registration typically takes several weeks. BIR registration follows thereafter. Delays can occur if documentation is incomplete or compliance requirements are misunderstood, which is why professional assistance can streamline the process.

8. Can US companies own 100% of a business in the Philippines?

In many industries, 100% foreign ownership is allowed. However, certain sectors remain restricted under Philippine foreign investment regulations. It is important to verify whether the intended business activity falls under any ownership limitations before registration.



Final Thoughts: Expansion Is Strategic. Compliance Is Foundational.

The Philippines presents tremendous opportunities for U.S. companies seeking operational efficiency and regional growth.

But expansion success depends on more than talent and market strategy.

It depends on:

  • Proper SEC registration
  • Full BIR compliance
  • Accurate bookkeeping systems
  • Ongoing regulatory alignment

If your company is planning to expand to the Philippines, ensure that your financial and regulatory foundation is established correctly from day one.

Because in international expansion, compliance is not an afterthought — it is a competitive advantage.

Dayanan Business Solutions is here to help you navigate through the Philippines Corporate Compliance landscape. Contact us.

Doing Business in the Philippines: Foreign Ownership, Capital Requirements, and Legal Framework

Philippines Foreign Investment Law

A Practical Guide for Foreign Investors

(RA 7042, as amended by RA 8179 and RA 11647)

Introduction

The Philippines continues to pursue a more liberal and competitive foreign investment regime, aligned with regional ASEAN standards. Legislative reforms over the past decades have reduced entry barriers, clarified ownership rules, and strengthened investor protection while maintaining constitutional safeguards.

The legal framework governing foreign investment is primarily anchored on the Foreign Investments Act of 1991 (Republic Act No. 7042), as amended by Republic Act No. 8179 and Republic Act No. 11647. These amendments significantly modernized the law, particularly with respect to capital requirements, market access, and ease of doing business.

Legal Framework: The Foreign Investments Act (RA 7042)

RA 7042 establishes the State policy to attract, promote, and welcome productive foreign investments that contribute to employment generation, technology transfer, and national economic development.

Key Legislative Amendments

🔹 Republic Act No. 8179 (1996)

RA 8179 introduced early liberalization measures, including:

  • Removal of technology-transfer and Filipino employment requirements as conditions for market entry
  • Greater flexibility for foreign-owned enterprises serving the domestic market
  • Simplification of registration and ownership rules

🔹 Republic Act No. 11647 (2022)

RA 11647 represents a major pro-investment reform. Key changes include:

  • Lower minimum paid-up capital requirements for foreign-owned domestic enterprises
  • Expanded powers of Investment Promotion Agencies (IPAs)
  • Enhanced ease-of-doing-business mechanisms to attract SMEs and professional firms

Foreign Ownership Rules and the Negative List

Foreign ownership is governed by the Foreign Investment Negative List (FINL), which identifies sectors subject to restrictions.

List A – Constitutionally or Statutorily Restricted Activities

Foreign equity limitations apply to sectors such as:

  • Mass media
  • Land ownership
  • Exploitation of natural resources
  • Certain public utilities and professions

Foreign ownership is typically capped at 40%, unless otherwise provided by law.

List B – National Interest and SME Protection

These activities are restricted for reasons of national security, public health, or protection of small and medium enterprises.

All sectors not included in the FINL are generally open to up to 100% foreign ownership.

Minimum Paid-Up Capital Requirements (Updated)

One of the most significant changes introduced by RA 11647 is the substantial reduction in minimum paid-up capital thresholds for foreign-owned domestic market enterprises.

Domestic Market Enterprises

A domestic market enterprise is one that sells goods or services primarily within the Philippines.

Minimum Paid-Up Capital:

Ownership StructureMinimum Paid-Up Capital
50-100% Foreign-Owned (Generally)USD 200,000
With advanced technology or endorsed as startupUSD 100,000
Employing at least 15 Filipino employeesUSD 100,000
Businesses engaged in RetailPHP 25,000,000 (and 10,000,000 per store)

Export Enterprises

An export enterprise is defined as one that exports at least 60% of its output.

Minimum Paid-Up Capital:

  • No minimum paid-up capital requirement* but suggested to have a sufficient paid-up capital that is to be used for pre-operating costs, corporate bank accounts, office equipment and etc.
  • May be 100% foreign-owned, subject to sectoral restrictions

This structure is particularly attractive for BPOs, manufacturing exporters, and offshore service providers.

Enterprises Engaged in FINL-Listed Activities

Enterprises operating in restricted or regulated sectors must comply with:

  • Applicable foreign equity caps
  • Industry-specific capital and licensing requirements
  • Constitutional and special law limitations

Capital requirements vary depending on the sector and regulatory agency involved.

Investment Incentives and Registration

Foreign investors may register with:

  • Board of Investments (BOI)
  • Philippine Economic Zone Authority (PEZA)
  • Other Investment Promotion Agencies (IPAs)

Incentives May Include:

  • Income Tax Holidays (ITH)
  • Special Corporate Income Tax (SCIT)
  • Duty-free importation of capital equipment
  • Full repatriation of profits and capital

RA 11647 strengthened coordination among IPAs to improve investor assistance and processing efficiency.

Registration and Compliance Process

Foreign-owned entities are generally required to:

  1. Determine FINL applicability
  2. Confirm ownership and capital eligibility
  3. Register with the Securities and Exchange Commission (SEC)
  4. Secure secondary licenses and local permits
  5. Comply with ongoing reporting and regulatory requirements

Professional advisory support is recommended to ensure proper structuring and regulatory compliance.

Practical Advisory Notes

  • Early structuring is critical — capital and ownership decisions affect future scalability
  • Overlapping laws apply, including the Public Service Act and Retail Trade Liberalization Act
  • Periodic FINL updates may affect long-term business plans
  • Restructuring post-registration can be costly and time-consuming

Frequently Asked Questions

Can foreign investors own land?
No. Land ownership remains constitutionally restricted. Long-term leases are permitted under applicable laws.

Is 100% foreign ownership now easier?
Yes. RA 11647 significantly lowered capital requirements for domestic enterprises not covered by the FINL.

Does RA 11647 override constitutional limits?
No. Constitutional restrictions remain in force.

Is BOI or PEZA registration mandatory?
Registration is optional but required to avail of incentives.

Where can I see the Foreign Investment Negative List?
https://www.dayananconsulting.com/12th-regular-foreign-investment-negative-list-a-b/

Conclusion

The Foreign Investments Act (RA 7042), as amended by RA 8179 and RA 11647, reflects the Philippines’ continued commitment to liberalizing foreign investment while protecting national interests. With reduced capital barriers, clearer ownership rules, and strengthened institutional support, the Philippines presents compelling opportunities for foreign investors — provided that businesses are properly structured and compliant from the outset.

Foreign investment in the Philippines offers significant opportunities—but proper structuring and compliance are critical from the outset. Ownership limitations, capital requirements, and regulatory approvals can materially affect your investment outcomes if not addressed early.

Dayanan Business Solutions assists foreign investors with:

  • Investment structuring and ownership analysis
  • Capital requirement assessment under RA 7042, as amended
  • SEC registration and regulatory compliance
  • BOI and PEZA registration for incentives
  • Ongoing corporate and compliance advisory

If you are considering establishing or expanding a business in the Philippines, speak with our consultants to evaluate your options and ensure full regulatory compliance.

Contact Dayanan Business Solutions today Contact Us to schedule an initial consultation.

The Corporation Code of the Philippines 16

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE XVI

MISCELLANEOUS PROVISIONS

Section 137. Outstanding capital stock defined. – The term “outstanding capital stock”, as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares. (n)

Section 138. Designation of governing boards. – The provisions of specific provisions of this Code to the contrary notwithstanding, non-stock or special corporations may, through their articles of incorporation or their by-laws, designate their governing boards by any name other than as board of trustees. (n)

Section 139. Incorporation and other fees. – The Securities and Exchange Commission is hereby authorized to collect and receive fees as authorized by law or by rules and regulations promulgated by the Commission. (n)

Section 140. Stock ownership in certain corporations. – Pursuant to the duties specified by Article XIV of the Constitution, the National Economic and Development Authority shall, from time to time, make a determination of whether the corporate vehicle has been used by any corporation or by business or industry to frustrate the provisions thereof or of applicable laws, and shall submit to the Batasang Pambansa, whenever deemed necessary, a report of its findings, including recommendations for their prevention or correction.

Maximum limits may be set by the Batasang Pambansa for stockholdings in corporations declared by it to be vested with a public interest pursuant to the provisions of this section, belonging to individuals or groups of individuals related to each other by consanguinity or affinity or by close business interests, or whenever it is necessary to achieve national objectives, prevent illegal monopolies or combinations in restraint or trade, or to implement national economic policies declared in laws, rules and regulations designed to promote the general welfare and foster economic development.

In recommending to the Batasang Pambansa corporations, business or industries to be declared vested with a public interest and in formulating proposals for limitations on stock ownership, the National Economic and Development Authority shall consider the type and nature of the industry, the size of the enterprise, the economies of scale, the geographic location, the extent of Filipino ownership, the labor intensity of the activity, the export potential, as well as other factors which are germane to the realization and promotion of business and industry.

Section 141. Annual report or corporations. – Every corporation, domestic or foreign, lawfully doing business in the Philippines shall submit to the Securities and Exchange Commission an annual report of its operations, together with a financial statement of its assets and liabilities, certified by any independent certified public accountant in appropriate cases, covering the preceding fiscal year and such other requirements as the Securities and Exchange Commission may require. Such report shall be submitted within such period as may be prescribed by the Securities and Exchange Commission. (n)

Section 142. Confidential nature of examination results. – All interrogatories propounded by the Securities and Exchange Commission and the answers thereto, as well as the results of any examination made by the Commission or by any other official authorized by law to make an examination of the operations, books and records of any corporation, shall be kept strictly confidential, except insofar as the law may require the same to be made public or where such interrogatories, answers or results are necessary to be presented as evidence before any court. (n)

Section 143. Rule-making power of the Securities and Exchange Commission. – The Securities and Exchange Commission shall have the power and authority to implement the provisions of this Code, and to promulgate rules and regulations reasonably necessary to enable it to perform its duties hereunder, particularly in the prevention of fraud and abuses on the part of the controlling stockholders, members, directors, trustees or officers. (n)

Section 144. Violations of the Code. – Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more than five (5) years, or both, in the discretion of the court. If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in appropriate proceedings before the Securities and Exchange Commission: Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee or officer of the corporation responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal the other causes for dissolution of a corporation provided in this Code. (190 1/2 a)

Section 145. Amendment or repeal. – No right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or of any part thereof. (n)

Section 146. Repealing clause. – Except as expressly provided by this Code, all laws or parts thereof inconsistent with any provision of this Code shall be deemed repealed. (n)

Section 147. Separability of provisions. – Should any provision of this Code or any part thereof be declared invalid or unconstitutional, the other provisions, so far as they are separable, shall remain in force. (n)

Section 148. Applicability to existing corporations. – All corporations lawfully existing and doing business in the Philippines on the date of the effectivity of this Code and heretofore authorized, licensed or registered by the Securities and Exchange Commission, shall be deemed to have been authorized, licensed or registered under the provisions of this Code, subject to the terms and conditions of its license, and shall be governed by the provisions hereof: Provided, That if any such corporation is affected by the new requirements of this Code, said corporation shall, unless otherwise herein provided, be given a period of not more than two (2) years from the effectivity of this Code within which to comply with the same. (n)

Section 149. Effectivity. – This Code shall take effect immediately upon its approval.

Approved: May 1, 1980

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 15

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE XV

FOREIGN CORPORATIONS

Section 123. Definition and rights of foreign corporations. – For the purposes of this Code, a foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state. It shall have the right to transact business in the Philippines after it shall have obtained a license to transact business in this country in accordance with this Code and a certificate of authority from the appropriate government agency. (n)

Section 124. Application to existing foreign corporations. – Every foreign corporation which on the date of the effectivity of this Code is authorized to do business in the Philippines under a license therefore issued to it, shall continue to have such authority under the terms and condition of its license, subject to the provisions of this Code and other special laws. (n)

Section 125. Application for a license. – A foreign corporation applying for a license to transact business in the Philippines shall submit to the Securities and Exchange Commission a copy of its articles of incorporation and by-laws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:

1. The date and term of incorporation;

2. The address, including the street number, of the principal office of the corporation in the country or state of incorporation;

3. The name and address of its resident agent authorized to accept summons and process in all legal proceedings and, pending the establishment of a local office, all notices affecting the corporation;

4. The place in the Philippines where the corporation intends to operate;

5. The specific purpose or purposes which the corporation intends to pursue in the transaction of its business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the certificate of authority issued by the appropriate government agency;

6. The names and addresses of the present directors and officers of the corporation;

7. A statement of its authorized capital stock and the aggregate number of shares which the corporation has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if any;

8. A statement of its outstanding capital stock and the aggregate number of shares which the corporation has issued, itemized by classes, par value of shares, shares without par value, and series, if any;

9. A statement of the amount actually paid in; and

10. Such additional information as may be necessary or appropriate in order to enable the Securities and Exchange Commission to determine whether such corporation is entitled to a license to transact business in the Philippines, and to determine and assess the fees payable.

Attached to the application for license shall be a duly executed certificate under oath by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or state of the applicant allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. If such certificate is in a foreign language, a translation thereof in English under oath of the translator shall be attached thereto.

The application for a license to transact business in the Philippines shall likewise be accompanied by a statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Securities and Exchange Commission and other governmental agency in the proper cases that the applicant is solvent and in sound financial condition, and setting forth the assets and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.

Foreign banking, financial and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them. In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Securities and Exchange Commission without previous authority from the appropriate government agency, whenever required by law. (68a)

Section 126. Issuance of a license. – If the Securities and Exchange Commission is satisfied that the applicant has complied with all the requirements of this Code and other special laws, rules and regulations, the Commission shall issue a license to the applicant to transact business in the Philippines for the purpose or purposes specified in such license. Upon issuance of the license, such foreign corporation may commence to transact business in the Philippines and continue to do so for as long as it retains its authority to act as a corporation under the laws of the country or state of its incorporation, unless such license is sooner surrendered, revoked, suspended or annulled in accordance with this Code or other special laws.

Within sixty (60) days after the issuance of the license to transact business in the Philippines, the license, except foreign banking or insurance corporation, shall deposit with the Securities and Exchange Commission for the benefit of present and future creditors of the licensee in the Philippines, securities satisfactory to the Securities and Exchange Commission, consisting of bonds or other evidence of indebtedness of the Government of the Philippines, its political subdivisions and instrumentalities, or of government-owned or controlled corporations and entities, shares of stock in “registered enterprises” as this term is defined in Republic Act No. 5186, shares of stock in domestic corporations registered in the stock exchange, or shares of stock in domestic insurance companies and banks, or any combination of these kinds of securities, with an actual market value of at least one hundred thousand (P100,000.) pesos; Provided, however, That within six (6) months after each fiscal year of the licensee, the Securities and Exchange Commission shall require the licensee to deposit additional securities equivalent in actual market value to two (2%) percent of the amount by which the licensee’s gross income for that fiscal year exceeds five million (P5,000,000.00) pesos. The Securities and Exchange Commission shall also require deposit of additional securities if the actual market value of the securities on deposit has decreased by at least ten (10%) percent of their actual market value at the time they were deposited. The Securities and Exchange Commission may at its discretion release part of the additional securities deposited with it if the gross income of the licensee has decreased, or if the actual market value of the total securities on deposit has increased, by more than ten (10%) percent of the actual market value of the securities at the time they were deposited. The Securities and Exchange Commission may, from time to time, allow the licensee to substitute other securities for those already on deposit as long as the licensee is solvent. Such licensee shall be entitled to collect the interest or dividends on the securities deposited. In the event the licensee ceases to do business in the Philippines, the securities deposited as aforesaid shall be returned, upon the licensee’s application therefor and upon proof to the satisfaction of the Securities and Exchange Commission that the licensee has no liability to Philippine residents, including the Government of the Republic of the Philippines. (n)

Section 127. Who may be a resident agent. – A resident agent may be either an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided, That in the case of an individual, he must be of good moral character and of sound financial standing. (n)

Section 128. Resident agent; service of process. – The Securities and Exchange Commission shall require as a condition precedent to the issuance of the license to transact business in the Philippines by any foreign corporation that such corporation file with the Securities and Exchange Commission a written power of attorney designating some person who must be a resident of the Philippines, on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office. Any such foreign corporation shall likewise execute and file with the Securities and Exchange Commission an agreement or stipulation, executed by the proper authorities of said corporation, in form and substance as follows:

“The (name of foreign corporation) does hereby stipulate and agree, in consideration of its being granted by the Securities and Exchange Commission a license to transact business in the Philippines, that if at any time said corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes may be served, then in any action or proceeding arising out of any business or transaction which occurred in the Philippines, service of any summons or other legal process may be made upon the Securities and Exchange Commission and that such service shall have the same force and effect as if made upon the duly-authorized officers of the corporation at its home office.”

Whenever such service of summons or other process shall be made upon the Securities and Exchange Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a copy of such summons or other legal process to the corporation at its home or principal office. The sending of such copy by the Commission shall be necessary part of and shall complete such service. All expenses incurred by the Commission for such service shall be paid in advance by the party at whose instance the service is made.

In case of a change of address of the resident agent, it shall be his or its duty to immediately notify in writing the Securities and Exchange Commission of the new address. (72a; and n)

Section 129. Law applicable. – Any foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except such only as provide for the creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation. (73a)

Section 130. Amendments to articles of incorporation or by-laws of foreign corporations. – Whenever the articles of incorporation or by-laws of a foreign corporation authorized to transact business in the Philippines are amended, such foreign corporation shall, within sixty (60) days after the amendment becomes effective, file with the Securities and Exchange Commission, and in the proper cases with the appropriate government agency, a duly authenticated copy of the articles of incorporation or by-laws, as amended, indicating clearly in capital letters or by underscoring the change or changes made, duly certified by the authorized official or officials of the country or state of incorporation. The filing thereof shall not of itself enlarge or alter the purpose or purposes for which such corporation is authorized to transact business in the Philippines. (n)

Section 131. Amended license. – A foreign corporation authorized to transact business in the Philippines shall obtain an amended license in the event it changes its corporate name, or desires to pursue in the Philippines other or additional purposes, by submitting an application therefor to the Securities and Exchange Commission, favorably endorsed by the appropriate government agency in the proper cases. (n)

Section 132. Merger or consolidation involving a foreign corporation licensed in the Philippines. – One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporation or corporations if such is permitted under Philippine laws and by the law of its incorporation: Provided, That the requirements on merger or consolidation as provided in this Code are followed.

Whenever a foreign corporation authorized to transact business in the Philippines shall be a party to a merger or consolidation in its home country or state as permitted by the law of its incorporation, such foreign corporation shall, within sixty (60) days after such merger or consolidation becomes effective, file with the Securities and Exchange Commission, and in proper cases with the appropriate government agency, a copy of the articles of merger or consolidation duly authenticated by the proper official or officials of the country or state under the laws of which merger or consolidation was effected: Provided, however, That if the absorbed corporation is the foreign corporation doing business in the Philippines, the latter shall at the same time file a petition for withdrawal of it license in accordance with this Title. (n)

Section 133. Doing business without a license. – No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. (69a)

Section 134. Revocation of license. – Without prejudice to other grounds provided by special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Securities and Exchange Commission upon any of the following grounds:

1. Failure to file its annual report or pay any fees as required by this Code;

2. Failure to appoint and maintain a resident agent in the Philippines as required by this Title;

3. Failure, after change of its resident agent or of his address, to submit to the Securities and Exchange Commission a statement of such change as required by this Title;

4. Failure to submit to the Securities and Exchange Commission an authenticated copy of any amendment to its articles of incorporation or by-laws or of any articles of merger or consolidation within the time prescribed by this Title;

5. A misrepresentation of any material matter in any application, report, affidavit or other document submitted by such corporation pursuant to this Title;

6. Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions;

7. Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized under its license;

8. Transacting business in the Philippines as agent of or acting for and in behalf of any foreign corporation or entity not duly licensed to do business in the Philippines; or

9. Any other ground as would render it unfit to transact business in the Philippines. (n)

Section 135. Issuance of certificate of revocation. – Upon the revocation of any such license to transact business in the Philippines, the Securities and Exchange Commission shall issue a corresponding certificate of revocation, furnishing a copy thereof to the appropriate government agency in the proper cases.

The Securities and Exchange Commission shall also mail to the corporation at its registered office in the Philippines a notice of such revocation accompanied by a copy of the certificate of revocation. (n)

Section 136. Withdrawal of foreign corporations. – Subject to existing laws and regulations, a foreign corporation licensed to transact business in the Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by the Securities and Exchange Commission unless all the following requirements are met;

1. All claims which have accrued in the Philippines have been paid, compromised or settled;

2. All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions have been paid; and

3. The petition for withdrawal of license has been published once a week for three (3) consecutive weeks in a newspaper of general circulation in the Philippines.

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 13

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE XIII

SPECIAL CORPORATIONS

Chapter I – Educational Corporations

Section 106. Incorporation. – Educational corporations shall be governed by special laws and by the general provisions of this Code. (n)

Section 107. Pre-requisites to incorporation. – Except upon favorable recommendation of the Ministry of Education and Culture, the Securities and Exchange Commission shall not accept or approve the articles of incorporation and by-laws of any educational institution. (168a)

Section 108. Board of trustees. – Trustees of educational institutions organized as non-stock corporations shall not be less than five (5) nor more than fifteen (15): Provided, however, That the number of trustees shall be in multiples of five (5).

Unless otherwise provided in the articles of incorporation on the by-laws, the board of trustees of incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so classify themselves that the term of office of one-fifth (1/5) of their number shall expire every year. Trustees thereafter elected to fill vacancies, occurring before the expiration of a particular term, shall hold office only for the unexpired period. Trustees elected thereafter to fill vacancies caused by expiration of term shall hold office for five (5) years. A majority of the trustees shall constitute a quorum for the transaction of business. The powers and authority of trustees shall be defined in the by-laws.

For institutions organized as stock corporations, the number and term of directors shall be governed by the provisions on stock corporations. (169a)

Chapter II – RELIGIOUS CORPORATIONS

Section 109. Classes of religious corporations. – Religious corporations may be incorporated by one or more persons. Such corporations may be classified into corporations sole and religious societies.

Religious corporations shall be governed by this Chapter and by the general provisions on non-stock corporations insofar as they may be applicable. (n)

Sec. 110. Corporation sole. – For the purpose of administering and managing, as trustee, the affairs, property and temporalities of any religious denomination, sect or church, a corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi or other presiding elder of such religious denomination, sect or church. (154a)

Section 111. Articles of incorporation. – In order to become a corporation sole, the chief archbishop, bishop, priest, minister, rabbi or presiding elder of any religious denomination, sect or church must file with the Securities and Exchange Commission articles of incorporation setting forth the following:

1. That he is the chief archbishop, bishop, priest, minister, rabbi or presiding elder of his religious denomination, sect or church and that he desires to become a corporation sole;

2. That the rules, regulations and discipline of his religious denomination, sect or church are not inconsistent with his becoming a corporation sole and do not forbid it;

3. That as such chief archbishop, bishop, priest, minister, rabbi or presiding elder, he is charged with the administration of the temporalities and the management of the affairs, estate and properties of his religious denomination, sect or church within his territorial jurisdiction, describing such territorial jurisdiction;

4. The manner in which any vacancy occurring in the office of chief archbishop, bishop, priest, minister, rabbi of presiding elder is required to be filled, according to the rules, regulations or discipline of the religious denomination, sect or church to which he belongs; and

5. The place where the principal office of the corporation sole is to be established and located, which place must be within the Philippines.

The articles of incorporation may include any other provision not contrary to law for the regulation of the affairs of the corporation. (n)

Section 112. Submission of the articles of incorporation. – The articles of incorporation must be verified, before filing, by affidavit or affirmation of the chief archbishop, bishop, priest, minister, rabbi or presiding elder, as the case may be, and accompanied by a copy of the commission, certificate of election or letter of appointment of such chief archbishop, bishop, priest, minister, rabbi or presiding elder, duly certified to be correct by any notary public.

From and after the filing with the Securities and Exchange Commission of the said articles of incorporation, verified by affidavit or affirmation, and accompanied by the documents mentioned in the preceding paragraph, such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall become a corporation sole and all temporalities, estate and properties of the religious denomination, sect or church theretofore administered or managed by him as such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall be held in trust by him as a corporation sole, for the use, purpose, behalf and sole benefit of his religious denomination, sect or church, including hospitals, schools, colleges, orphan asylums, parsonages and cemeteries thereof. (n)

Section 113. Acquisition and alienation of property. – Any corporation sole may purchase and hold real estate and personal property for its church, charitable, benevolent or educational purposes, and may receive bequests or gifts for such purposes. Such corporation may sell or mortgage real property held by it by obtaining an order for that purpose from the Court of First Instance of the province where the property is situated upon proof made to the satisfaction of the court that notice of the application for leave to sell or mortgage has been given by publication or otherwise in such manner and for such time as said court may have directed, and that it is to the interest of the corporation that leave to sell or mortgage should be granted. The application for leave to sell or mortgage must be made by petition, duly verified, by the chief archbishop, bishop, priest, minister, rabbi or presiding elder acting as corporation sole, and may be opposed by any member of the religious denomination, sect or church represented by the corporation sole: Provided, That in cases where the rules, regulations and discipline of the religious denomination, sect or church, religious society or order concerned represented by such corporation sole regulate the method of acquiring, holding, selling and mortgaging real estate and personal property, such rules, regulations and discipline shall control, and the intervention of the courts shall not be necessary. (159a)

Section 114. Filling of vacancies. – The successors in office of any chief archbishop, bishop, priest, minister, rabbi or presiding elder in a corporation sole shall become the corporation sole on their accession to office and shall be permitted to transact business as such on the filing with the Securities and Exchange Commission of a copy of their commission, certificate of election, or letters of appointment, duly certified by any notary public.

During any vacancy in the office of chief archbishop, bishop, priest, minister, rabbi or presiding elder of any religious denomination, sect or church incorporated as a corporation sole, the person or persons authorized and empowered by the rules, regulations or discipline of the religious denomination, sect or church represented by the corporation sole to administer the temporalities and manage the affairs, estate and properties of the corporation sole during the vacancy shall exercise all the powers and authority of the corporation sole during such vacancy. (158a)

Section 115. Dissolution. – A corporation sole may be dissolved and its affairs settled voluntarily by submitting to the Securities and Exchange Commission a verified declaration of dissolution.

The declaration of dissolution shall set forth:

1. The name of the corporation;

2. The reason for dissolution and winding up;

3. The authorization for the dissolution of the corporation by the particular religious denomination, sect or church;

4. The names and addresses of the persons who are to supervise the winding up of the affairs of the corporation. Upon approval of such declaration of dissolution by the Securities and Exchange Commission, the corporation shall cease to carry on its operations except for the purpose of winding up its affairs. (n)

Section 116. Religious societies. – Any religious society or religious order, or any diocese, synod, or district organization of any religious denomination, sect or church, unless forbidden by the constitution, rules, regulations, or discipline of the religious denomination, sect or church of which it is a part, or by competent authority, may, upon written consent and/or by an affirmative vote at a meeting called for the purpose of at least two-thirds (2/3) of its membership, incorporate for the administration of its temporalities or for the management of its affairs, properties and estate by filing with the Securities and Exchange Commission, articles of incorporation verified by the affidavit of the presiding elder, secretary, or clerk or other member of such religious society or religious order, or diocese, synod, or district organization of the religious denomination, sect or church, setting forth the following:

1. That the religious society or religious order, or diocese, synod, or district organization is a religious organization of a religious denomination, sect or church;

2. That at least two-thirds (2/3) of its membership have given their written consent or have voted to incorporate, at a duly convened meeting of the body;

3. That the incorporation of the religious society or religious order, or diocese, synod, or district organization desiring to incorporate is not forbidden by competent authority or by the constitution, rules, regulations or discipline of the religious denomination, sect, or church of which it forms a part;

4. That the religious society or religious order, or diocese, synod, or district organization desires to incorporate for the administration of its affairs, properties and estate;

5. The place where the principal office of the corporation is to be established and located, which place must be within the Philippines; and

6. The names, nationalities, and residences of the trustees elected by the religious society or religious order, or the diocese, synod, or district organization to serve for the first year or such other period as may be prescribed by the laws of the religious society or religious order, or of the diocese, synod, or district organization, the board of trustees to be not less than five (5) nor more than fifteen (15). (160a)

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 12

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE XII

CLOSE CORPORATIONS

Section 96. Definition and applicability of Title. – A close corporation, within the meaning of this Code, is one whose articles of incorporation provide that: (1) All the corporation’s issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) all the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the meaning of this Code.

Any corporation may be incorporated as a close corporation, except mining or oil companies, stock exchanges, banks, insurance companies, public utilities, educational institutions and corporations declared to be vested with public interest in accordance with the provisions of this Code.

The provisions of this Title shall primarily govern close corporations: Provided, That the provisions of other Titles of this Code shall apply suppletorily except insofar as this Title otherwise provides.

Section 97. Articles of incorporation. – The articles of incorporation of a close corporation may provide:

1. For a classification of shares or rights and the qualifications for owning or holding the same and restrictions on their transfers as may be stated therein, subject to the provisions of the following section;

2. For a classification of directors into one or more classes, each of whom may be voted for and elected solely by a particular class of stock; and

3. For a greater quorum or voting requirements in meetings of stockholders or directors than those provided in this Code.

The articles of incorporation of a close corporation may provide that the business of the corporation shall be managed by the stockholders of the corporation rather than by a board of directors. So long as this provision continues in effect:

1. No meeting of stockholders need be called to elect directors;

2. Unless the context clearly requires otherwise, the stockholders of the corporation shall be deemed to be directors for the purpose of applying the provisions of this Code; and

3. The stockholders of the corporation shall be subject to all liabilities of directors.

The articles of incorporation may likewise provide that all officers or employees or that specified officers or employees shall be elected or appointed by the stockholders, instead of by the board of directors.

Section 98. Validity of restrictions on transfer of shares. – Restrictions on the right to transfer shares must appear in the articles of incorporation and in the by-laws as well as in the certificate of stock; otherwise, the same shall not be binding on any purchaser thereof in good faith. Said restrictions shall not be more onerous than granting the existing stockholders or the corporation the option to purchase the shares of the transferring stockholder with such reasonable terms, conditions or period stated therein. If upon the expiration of said period, the existing stockholders or the corporation fails to exercise the option to purchase, the transferring stockholder may sell his shares to any third person.

Section 99. Effects of issuance or transfer of stock in breach of qualifying conditions. –

1. If stock of a close corporation is issued or transferred to any person who is not entitled under any provision of the articles of incorporation to be a holder of record of its stock, and if the certificate for such stock conspicuously shows the qualifications of the persons entitled to be holders of record thereof, such person is conclusively presumed to have notice of the fact of his ineligibility to be a stockholder.

2. If the articles of incorporation of a close corporation states the number of persons, not exceeding twenty (20), who are entitled to be holders of record of its stock, and if the certificate for such stock conspicuously states such number, and if the issuance or transfer of stock to any person would cause the stock to be held by more than such number of persons, the person to whom such stock is issued or transferred is conclusively presumed to have notice of this fact.

3. If a stock certificate of any close corporation conspicuously shows a restriction on transfer of stock of the corporation, the transferee of the stock is conclusively presumed to have notice of the fact that he has acquired stock in violation of the restriction, if such acquisition violates the restriction.

4. Whenever any person to whom stock of a close corporation has been issued or transferred has, or is conclusively presumed under this section to have, notice either (a) that he is a person not eligible to be a holder of stock of the corporation, or (b) that transfer of stock to him would cause the stock of the corporation to be held by more than the number of persons permitted by its articles of incorporation to hold stock of the corporation, or (c) that the transfer of stock is in violation of a restriction on transfer of stock, the corporation may, at its option, refuse to register the transfer of stock in the name of the transferee.

5. The provisions of subsection (4) shall not applicable if the transfer of stock, though contrary to subsections (1), (2) of (3), has been consented to by all the stockholders of the close corporation, or if the close corporation has amended its articles of incorporation in accordance with this Title.

6. The term “transfer”, as used in this section, is not limited to a transfer for value.

7. The provisions of this section shall not impair any right which the transferee may have to rescind the transfer or to recover under any applicable warranty, express or implied.

Section 100. Agreements by stockholders. –

1. Agreements by and among stockholders executed before the formation and organization of a close corporation, signed by all stockholders, shall survive the incorporation of such corporation and shall continue to be valid and binding between and among such stockholders, if such be their intent, to the extent that such agreements are not inconsistent with the articles of incorporation, irrespective of where the provisions of such agreements are contained, except those required by this Title to be embodied in said articles of incorporation.

2. An agreement between two or more stockholders, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the shares held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them.

3. No provision in any written agreement signed by the stockholders, relating to any phase of the corporate affairs, shall be invalidated as between the parties on the ground that its effect is to make them partners among themselves.

4. A written agreement among some or all of the stockholders in a close corporation shall not be invalidated on the ground that it so relates to the conduct of the business and affairs of the corporation as to restrict or interfere with the discretion or powers of the board of directors: Provided, That such agreement shall impose on the stockholders who are parties thereto the liabilities for managerial acts imposed by this Code on directors.

5. To the extent that the stockholders are actively engaged in the management or operation of the business and affairs of a close corporation, the stockholders shall be held to strict fiduciary duties to each other and among themselves. Said stockholders shall be personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance.

Section 101. When board meeting is unnecessary or improperly held. – Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if:

1. Before or after such action is taken, written consent thereto is signed by all the directors; or

2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or

3. The directors are accustomed to take informal action with the express or implied acquiescence of all the stockholders; or

4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing.

If a director’s meeting is held without proper call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof.

Section 102. Pre-emptive right in close corporations. – The pre-emptive right of stockholders in close corporations shall extend to all stock to be issued, including reissuance of treasury shares, whether for money, property or personal services, or in payment of corporate debts, unless the articles of incorporation provide otherwise.

Section 103. Amendment of articles of incorporation. – Any amendment to the articles of incorporation which seeks to delete or remove any provision required by this Title to be contained in the articles of incorporation or to reduce a quorum or voting requirement stated in said articles of incorporation shall not be valid or effective unless approved by the affirmative vote of at least two-thirds (2/3) of the outstanding capital stock, whether with or without voting rights, or of such greater proportion of shares as may be specifically provided in the articles of incorporation for amending, deleting or removing any of the aforesaid provisions, at a meeting duly called for the purpose.

Section 104. Deadlocks. – Notwithstanding any contrary provision in the articles of incorporation or by-laws or agreement of stockholders of a close corporation, if the directors or stockholders are so divided respecting the management of the corporation’s business and affairs that the votes required for any corporate action cannot be obtained, with the consequence that the business and affairs of the corporation can no longer be conducted to the advantage of the stockholders generally, the Securities and Exchange Commission, upon written petition by any stockholder, shall have the power to arbitrate the dispute. In the exercise of such power, the Commission shall have authority to make such order as it deems appropriate, including an order:

(1) canceling or altering any provision contained in the articles of incorporation, by-laws, or any stockholder’s agreement;
(2) canceling, altering or enjoining any resolution or act of the corporation or its board of directors, stockholders, or officers;
(3) directing or prohibiting any act of the corporation or its board of directors, stockholders, officers, or other persons party to the action;
(4) requiring the purchase at their fair value of shares of any stockholder, either by the corporation regardless of the availability of unrestricted retained earnings in its books, or by the other stockholders;
(5) appointing a provisional director;
(6) dissolving the corporation; or
(7) granting such other relief as the circumstances may warrant.

A provisional director shall be an impartial person who is neither a stockholder nor a creditor of the corporation or of any subsidiary or affiliate of the corporation, and whose further qualifications, if any, may be determined by the Commission. A provisional director is not a receiver of the corporation and does not have the title and powers of a custodian or receiver. A provisional director shall have all the rights and powers of a duly elected director of the corporation, including the right to notice of and to vote at meetings of directors, until such time as he shall be removed by order of the Commission or by all the stockholders. His compensation shall be determined by agreement between him and the corporation subject to approval of the Commission, which may fix his compensation in the absence of agreement or in the event of disagreement between the provisional director and the corporation.

Section 105. Withdrawal of stockholder or dissolution of corporation. – In addition and without prejudice to other rights and remedies available to a stockholder under this Title, any stockholder of a close corporation may, for any reason, compel the said corporation to purchase his shares at their fair value, which shall not be less than their par or issued value, when the corporation has sufficient assets in its books to cover its debts and liabilities exclusive of capital stock: Provided, That any stockholder of a close corporation may, by written petition to the Securities and Exchange Commission, compel the dissolution of such corporation whenever any of acts of the directors, officers or those in control of the corporation is illegal, or fraudulent, or dishonest, or oppressive or unfairly prejudicial to the corporation or any stockholder, or whenever corporate assets are being misapplied or wasted.

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 11

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE XI

NON-STOCK CORPORATIONS

Section 87. Definition. – For the purposes of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution: Provided, That any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this Title.

The provisions governing stock corporation, when pertinent, shall be applicable to non-stock corporations, except as may be covered by specific provisions of this Title. (n)

Section 88. Purposes. – Non-stock corporations may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural and like chambers, or any combination thereof, subject to the special provisions of this Title governing particular classes of non-stock corporations. (n)

Chapter I – MEMBERS

Section 89. Right to vote. – The right of the members of any class or classes to vote may be limited, broadened or denied to the extent specified in the articles of incorporation or the by-laws. Unless so limited, broadened or denied, each member, regardless of class, shall be entitled to one vote.

Unless otherwise provided in the articles of incorporation or the by-laws, a member may vote by proxy in accordance with the provisions of this Code. (n)

Voting by mail or other similar means by members of non-stock corporations may be authorized by the by-laws of non-stock corporations with the approval of, and under such conditions which may be prescribed by, the Securities and Exchange Commission.

Section 90. Non-transferability of membership. – Membership in a non-stock corporation and all rights arising therefrom are personal and non-transferable, unless the articles of incorporation or the by-laws otherwise provide. (n)

Section 91. Termination of membership. – Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the by-laws. Termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its property, unless otherwise provided in the articles of incorporation or the by-laws. (n)

Chapter II – TRUSTEES AND OFFICERS

Section 92. Election and term of trustees. – Unless otherwise provided in the articles of incorporation or the by-laws, the board of trustees of non-stock corporations, which may be more than fifteen (15) in number as may be fixed in their articles of incorporation or by-laws, shall, as soon as organized, so classify themselves that the term of office of one-third (1/3) of their number shall expire every year; and subsequent elections of trustees comprising one-third (1/3) of the board of trustees shall be held annually and trustees so elected shall have a term of three (3) years. Trustees thereafter elected to fill vacancies occurring before the expiration of a particular term shall hold office only for the unexpired period.

No person shall be elected as trustee unless he is a member of the corporation.

Unless otherwise provided in the articles of incorporation or the by-laws, officers of a non-stock corporation may be directly elected by the members. (n)

Section 93. Place of meetings. – The by-laws may provide that the members of a non-stock corporation may hold their regular or special meetings at any place even outside the place where the principal office of the corporation is located: Provided, That proper notice is sent to all members indicating the date, time and place of the meeting: and Provided, further, That the place of meeting shall be within the Philippines. (n)

Chapter III – DISTRIBUTION OF ASSETS IN NON-STOCK CORPORATIONS

Section 94. Rules of distribution. – In case dissolution of a non-stock corporation in accordance with the provisions of this Code, its assets shall be applied and distributed as follows:

1. All liabilities and obligations of the corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefore;

2. Assets held by the corporation upon a condition requiring return, transfer or conveyance, and which condition occurs by reason of the dissolution, shall be returned, transferred or conveyed in accordance with such requirements;

3. Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution, shall be transferred or conveyed to one or more corporations, societies or organizations engaged in activities in the Philippines substantially similar to those of the dissolving corporation according to a plan of distribution adopted pursuant to this Chapter;

4. Assets other than those mentioned in the preceding paragraphs, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the by-laws, to the extent that the articles of incorporation or the by-laws, determine the distributive rights of members, or any class or classes of members, or provide for distribution; and

5. In any other case, assets may be distributed to such persons, societies, organizations or corporations, whether or not organized for profit, as may be specified in a plan of distribution adopted pursuant to this Chapter. (n)

Section 95. Plan of distribution of assets. – A plan providing for the distribution of assets, not inconsistent with the provisions of this Title, may be adopted by a non-stock corporation in the process of dissolution in the following manner:

The board of trustees shall, by majority vote, adopt a resolution recommending a plan of distribution and directing the submission thereof to a vote at a regular or special meeting of members having voting rights. Written notice setting forth the proposed plan of distribution or a summary thereof and the date, time and place of such meeting shall be given to each member entitled to vote, within the time and in the manner provided in this Code for the giving of notice of meetings to members. Such plan of distribution shall be adopted upon approval of at least two-thirds (2/3) of the members having voting rights present or represented by proxy at such meeting. (n)

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 10

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE X

APPRAISAL RIGHT

Section 81. Instances of appraisal right. – Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances:

1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Code; and

3. In case of merger or consolidation. (n)

Section 82. How right is exercised. – The appraisal right may be exercised by any stockholder who shall have voted against the proposed corporate action, by making a written demand on the corporation within thirty (30) days after the date on which the vote was taken for payment of the fair value of his shares: Provided, That failure to make the demand within such period shall be deemed a waiver of the appraisal right. If the proposed corporate action is implemented or affected, the corporation shall pay to such stockholder, upon surrender of the certificate or certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action.

If within a period of sixty (60) days from the date the corporate action was approved by the stockholders, the withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be determined and appraised by three (3) disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two thus chosen. The findings of the majority of the appraisers shall be final, and their award shall be paid by the corporation within thirty (30) days after such award is made: Provided, That no payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its books to cover such payment: and Provided, further, That upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith transfer his shares to the corporation. (n)

Section 83. Effect of demand and termination of right. – From the time of demand for payment of the fair value of a stockholder’s shares until either the abandonment of the corporate action involved or the purchase of the said shares by the corporation, all rights accruing to such shares, including voting and dividend rights, shall be suspended in accordance with the provisions of this Code, except the right of such stockholder to receive payment of the fair value thereof: Provided, That if the dissenting stockholder is not paid the value of his shares within 30 days after the award, his voting and dividend rights shall immediately be restored. (n)

Section 84. When right to payment ceases. – No demand for payment under this Title may be withdrawn unless the corporation consents thereto. If, however, such demand for payment is withdrawn with the consent of the corporation, or if the proposed corporate action is abandoned or rescinded by the corporation or disapproved by the Securities and Exchange Commission where such approval is necessary, or if the Securities and Exchange Commission determines that such stockholder is not entitled to the appraisal right, then the right of said stockholder to be paid the fair value of his shares shall cease, his status as a stockholder shall thereupon be restored, and all dividend distributions which would have accrued on his shares shall be paid to him. (n)

Section 85. Who bears costs of appraisal. – The costs and expenses of appraisal shall be borne by the corporation, unless the fair value ascertained by the appraisers is approximately the same as the price which the corporation may have offered to pay the stockholder, in which case they shall be borne by the latter. In the case of an action to recover such fair value, all costs and expenses shall be assessed against the corporation, unless the refusal of the stockholder to receive payment was unjustified. (n)

Section 86. Notation on certificates; rights of transferee. – Within ten (10) days after demanding payment for his shares, a dissenting stockholder shall submit the certificates of stock representing his shares to the corporation for notation thereon that such shares are dissenting shares. His failure to do so shall, at the option of the corporation, terminate his rights under this Title. If shares represented by the certificates bearing such notation are transferred, and the certificates consequently canceled, the rights of the transferor as a dissenting stockholder under this Title shall cease and the transferee shall have all the rights of a regular stockholder; and all dividend distributions which would have accrued on such shares shall be paid to the transferee. (n)

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 9

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE IX

MERGER AND CONSOLIDATION

Section 76. Plan or merger of consolidation. – Two or more corporations may merge into a single corporation which shall be one of the constituent corporations or may consolidate into a new single corporation which shall be the consolidated corporation.

The board of directors or trustees of each corporation, party to the merger or consolidation, shall approve a plan of merger or consolidation setting forth the following:

1. The names of the corporations proposing to merge or consolidate, hereinafter referred to as the constituent corporations;

2. The terms of the merger or consolidation and the mode of carrying the same into effect;

3. A statement of the changes, if any, in the articles of incorporation of the surviving corporation in case of merger; and, with respect to the consolidated corporation in case of consolidation, all the statements required to be set forth in the articles of incorporation for corporations organized under this Code; and

4. Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable. (n)

Section 77. Stockholder’s or member’s approval. – Upon approval by majority vote of each of the board of directors or trustees of the constituent corporations of the plan of merger or consolidation, the same shall be submitted for approval by the stockholders or members of each of such corporations at separate corporate meetings duly called for the purpose. Notice of such meetings shall be given to all stockholders or members of the respective corporations, at least two (2) weeks prior to the date of the meeting, either personally or by registered mail. Said notice shall state the purpose of the meeting and shall include a copy or a summary of the plan of merger or consolidation. The affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of each corporation in the case of stock corporations or at least two-thirds (2/3) of the members in the case of non-stock corporations shall be necessary for the approval of such plan. Any dissenting stockholder in stock corporations may exercise his appraisal right in accordance with the Code: Provided, That if after the approval by the stockholders of such plan, the board of directors decides to abandon the plan, the appraisal right shall be extinguished.

Any amendment to the plan of merger or consolidation may be made, provided such amendment is approved by majority vote of the respective boards of directors or trustees of all the constituent corporations and ratified by the affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members of each of the constituent corporations. Such plan, together with any amendment, shall be considered as the agreement of merger or consolidation. (n)

Section 78. Articles of merger or consolidation. – After the approval by the stockholders or members as required by the preceding section, articles of merger or articles of consolidation shall be executed by each of the constituent corporations, to be signed by the president or vice-president and certified by the secretary or assistant secretary of each corporation setting forth:

1. The plan of the merger or the plan of consolidation;

2. As to stock corporations, the number of shares outstanding, or in the case of non-stock corporations, the number of members; and

3. As to each corporation, the number of shares or members voting for and against such plan, respectively. (n)

Section 79. Effectivity of merger or consolidation. – The articles of merger or of consolidation, signed and certified as herein above required, shall be submitted to the Securities and Exchange Commission in quadruplicate for its approval: Provided, That in the case of merger or consolidation of banks or banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions and other special corporations governed by special laws, the favorable recommendation of the appropriate government agency shall first be obtained. If the Commission is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of this Code and existing laws, it shall issue a certificate of merger or of consolidation, at which time the merger or consolidation shall be effective.

If, upon investigation, the Securities and Exchange Commission has reason to believe that the proposed merger or consolidation is contrary to or inconsistent with the provisions of this Code or existing laws, it shall set a hearing to give the corporations concerned the opportunity to be heard. Written notice of the date, time and place of hearing shall be given to each constituent corporation at least two (2) weeks before said hearing. The Commission shall thereafter proceed as provided in this Code. (n)

Section 80. Effects or merger or consolidation. – The merger or consolidation shall have the following effects:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation;

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed; and

5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any of such constituent corporations may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall not be impaired by such merger or consolidation. (n)

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions

The Corporation Code of the Philippines 8

THE CORPORATION CODE OF THE PHILIPPINES
[Batas Pambansa Blg. 68]

TITLE VIII

CORPORATE BOOKS AND RECORDS

Section 74. Books to be kept; stock transfer agent. – Every corporation shall keep and carefully preserve at its principal office a record of all business transactions and minutes of all meetings of stockholders or members, or of the board of directors or trustees, in which shall be set forth in detail the time and place of holding the meeting, how authorized, the notice given, whether the meeting was regular or special, if special its object, those present and absent, and every act done or ordered done at the meeting. Upon the demand of any director, trustee, stockholder or member, the time when any director, trustee, stockholder or member entered or left the meeting must be noted in the minutes; and on a similar demand, the yeas and nays must be taken on any motion or proposition, and a record thereof carefully made. The protest of any director, trustee, stockholder or member on any action or proposed action must be recorded in full on his demand.

The records of all business transactions of the corporation and the minutes of any meetings shall be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, writing, for a copy of excerpts from said records or minutes, at his expense.

Any officer or agent of the corporation who shall refuse to allow any director, trustees, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal: and Provided, further, That it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation’s records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand.

Stock corporations must also keep a book to be known as the “stock and transfer book”, in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days.

No stock transfer agent or one engaged principally in the business of registering transfers of stocks in behalf of a stock corporation shall be allowed to operate in the Philippines unless he secures a license from the Securities and Exchange Commission and pays a fee as may be fixed by the Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from performing or making transfer of its own stocks, in which case all the rules and regulations imposed on stock transfer agents, except the payment of a license fee herein provided, shall be applicable. (51a and 32a; B. P. No. 268.)

Section 75. Right to financial statements. – Within ten (10) days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement, which shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in reasonable detail its assets and liabilities and the result of its operations.

At the regular meeting of stockholders or members, the board of directors or trustees shall present to such stockholders or members a financial report of the operations of the corporation for the preceding year, which shall include financial statements, duly signed and certified by an independent certified public accountant.

However, if the paid-up capital of the corporation is less than P50,000.00, the financial statements may be certified under oath by the treasurer or any responsible officer of the corporation. (n)

The Corporation Code of the Philippines
TITLE I General Provisions
TITLE II Incorporation and Organization of Private Corporations
TITLE III Board of Directors Trustees 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 Miscellaneous Provisions