Corporation

• ACT No. 1459 - AN ACT PROVIDING FOR THE FORMATION AND ORGANIZATION OF CORPORATIONS, DEFINING THEIR POWERS, FIXING THE DUTIES OF DIRECTORS AND OTHER OFFICERS THEREOF, DECLARING THE RIGHTS AND LIABILITIES OF SHAREHOLDERS AND MEMBERS, PRESCRIBING THE CONDITIONS UNDER WHICH SUCH CORPORATIONS MAY TRANSACT BUSINESS, AND REPEALING CERTAIN ARTICLES OF THE CODE OF COMMERCE AND ALL LAWS OR PARTS OF LAWS IN CONFLICT OR INCONSISTENT WITH THIS ACT
• Corporation


  An artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence
• Types of corporations


  • Public corporations
  • Private corporations (stock corporations, nonstock corporations)
• Corporators


  Those who compose the corporation, whether stockholders or members or both
• Incorporators


  Members or stockholders or both mentioned in the articles of incorporation as originally forming and composing the corporation
• Stockholders/Shareholders


  Owners of shares in a corporation which has capital stock
• Members


  Corporators of a corporation which has no capital stock and corporators of a corporation who do not own capital stock
• Forming a private corporation


  5 or more persons, not exceeding 15, a majority of whom are residents of the Philippine Islands, file articles of incorporation with the Division of Archives, Patents, Copyrights, and Trade-Marks of the Executive Bureau
• Information required in articles of incorporation


  • Name of corporation
  • Purpose
  • Principal office location
  • Term of existence
  • Names and residences of incorporators
  • Number of directors
  • If stock corporation: amount of capital stock, number of shares, amount subscribed, names/residences of subscribers, amount paid by each
• Additional information required for articles of incorporation of railroad, tramway, wagon road, and telegraph and telephone companies
• Chief of the Division of Archives, Patents, Copyrights, and Trade-Marks collects a fee of 25 pesos for filing articles of incorporation
• Chief of the Division of Archives, Patents, Copyrights, and Trade-Marks shall not file articles of incorporation of any stock corporation unless accompanied by a sworn statement showing at least 20% of capital stock has been subscribed and 25% of subscription has been paid
• Certified copy of articles of incorporation is prima facie evidence of the facts stated
• Chief of the Division of Archives, Patents, Copyrights, and Trade-Marks issues a certificate to the incorporators upon filing of articles of incorporation
• Corporation is a body politic and corporate upon issuance of certificate by Chief of the Division of Archives, Patents, Copyrights, and Trade-Marks
• Powers of every corporation


  • Succession by corporate name
  • Sue and be sued
  • Transact business and exercise powers to accomplish purpose
  • Make and use a common seal
  • Purchase, hold, convey, sell, lease, mortgage real and personal property
• Corporations cannot conduct business of buying and selling real estate or be a private agricultural land holding company
• Light corporations for the purpose of doing business in the city of Manila, and railroad corporations for the purpose of doing business in the Philippine Islands, may form and organize as corporations under this Act
• General powers of corporations


  • (1) Succession by its corporate name
  • (2) To sue and be sued
  • (3) To transact business and exercise necessary powers
  • (4) To make and use a common seal
  • (5) To deal with real and personal property
  • (6) To appoint and dismiss subordinate officers or agents
  • (7) To make by-laws
  • (8) To admit members and issue/sell stock
  • (9) To enter into obligations or contracts
• No corporation shall possess or exercise any corporate powers except those conferred by this Act and necessary to exercise those powers
• No corporation doing business in the Philippine Islands or receiving any grant, franchise, or concession from the Government of the Philippine Islands shall use, employ or contract for the labor of persons claimed or alleged to be held in involuntarily servitude
• No corporation organized under this Act shall create or issue bills, notes, or other evidence of debt for circulation as money
• No corporation shall issue stock or bonds except in exchange for actual cash paid to the corporation or for property actually received by it at a fair valuation equal to the par value of the stock or bonds so issued
• No corporation shall make or declare any stock or bond dividend or any dividend whatever except from the surplus profits arising from its business, or divide or distribute its capital stock or property than actual profits among its members or stockholders until after the payment of its debts and the termination of its existence by limitation or lawful dissolution
• Increasing or diminishing capital stock or incurring, creating, or increasing bonded indebtedness


  1. 2/3 of entire corporate capital stock subscribed must favor increase/diminution

  2. Majority of subscribed capital stock must favor incurring/creating/increasing bonded indebtedness

  3. Written/printed notice to each stockholder

  4. Certificate signed by majority of directors and countersigned by chairman and secretary of stockholders' meeting

  5. Certificate filed with Chief of Division of Archives, Patents, Copyrights, and Trade-Marks
• Amending articles of incorporation


  1. Majority vote of board of directors/trustees

  2. Vote/written assent of 2/3 of members (if nonstock) or 2/3 of subscribed capital stock (if stock)

  3. Copy of amended articles filed with Chief of Division of Archives, Patents, Copyrights, and Trade-Marks
• If a corporation does not formally organize and commence the transaction of its business or the construction of its works within two years from date of its incorporation, its corporate powers cease
• Adopting by-laws


  1. Within 1 month of filing articles of incorporation

  2. Affirmative vote of stockholders representing majority of subscribed capital stock or majority of members (if no capital stock)

  3. By-laws signed by voting stockholders/members and filed with Chief of Division of Archives, Patents, Copyrights, and Trade-Marks
• Amending or repealing by-laws


  1. Owners of majority of subscribed capital stock or majority of members (if no capital stock) may amend/repeal at regular/special meeting

  2. Owners of 2/3 of subscribed capital stock or 2/3 of members (if no capital stock) may delegate power to board of directors
• Meetings of members/stockholders shall be held at the principal office of the corporation
• Proceedings at any meeting of stockholders/members within the powers of the corporation are valid even if the meeting is improperly held or called
• Calling a meeting when no one is authorized


  Any judge of a Court of First Instance may issue an order to a stockholder/member to call a meeting
• Executors, administrators, guardians, or other persons in a position of trust and legally authorized may vote as stockholders upon stock held in their representative capacity
• Powers and duties of directors


  • Exercise corporate powers
  • Conduct business
  • Control and hold corporate property
• Electing directors


  1. Elected annually by stockholders (if stock corporation) or members (if nonstock corporation)

  2. 2 weeks' notice of election by publication and written notice to stockholders/members

  3. Majority of subscribed capital stock or members entitled to vote must be present

  4. Election by ballot, stockholders can vote shares or cumulate votes
• Director qualifications


  • Must own at least 1 share of capital stock (if stock corporation)
  • Must be members (if other corporations)
  • At least 2 directors must be residents of the Philippine Islands
• All corporations organized under this Act must have at least two of the directors as residents of the Philippine Islands
• Elections of directors


  1. Majority of subscribed capital or members entitled to vote must be present

  2. Elections must be by ballot

  3. Stockholders can vote shares in person or by proxy

  4. Stockholders can cumulate votes

  5. Directors receiving highest votes are elected

  6. Meeting can adjourn if no election is held
• Organizing after election


  1. Directors elect a president, secretary/clerk, and other officers

  2. Majority of directors constitute a quorum

  3. Decisions of majority of quorum are valid
• Removal of directors


  1. 2/3 vote of members or stockholders holding 2/3 of subscribed capital

  2. Notice of intention to propose removal must be given

  3. Special meeting can be called by secretary/clerk or members/stockholders

  4. Vacancy created can be filled at the same meeting