53 FREQUENTLY ASKED IN CORPO CODE 

53 FREQUENTLY ASKED PROVISIONS OF THE

CORPORATION CODE

Section 2. Corporation defined. – A corporation is an artificial being

created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or
incident to its existence.

Section 43. Power to declare dividends. – The board of directors of a

stock corporation may declare dividends out of the unrestricted retained
earnings which shall be payable in cash, in property, or in stock to all
stockholders on the basis of outstanding stock held by them: Provided,
That any cash dividends due on delinquent stock shall first be applied to
the unpaid balance on the subscription plus costs and expenses, while
stock dividends shall be withheld from the delinquent stockholder until
his unpaid subscription is fully paid: Provided, further, That no stock
dividend shall be issued without the approval of stockholders
representing not less than two-thirds (2/3) of the outstanding capital stock
at a regular or special meeting duly called for the purpose. (16a)

Stock corporations are prohibited from retaining surplus profits in excess

of one hundred (100%) percent of their paid-in capital stock, except: (1)
when justified by definite corporate expansion projects or programs
approved by the board of directors; or (2) when the corporation is
prohibited under any loan agreement with any financial institution or
creditor, whether local or foreign, from declaring dividends without
its/his consent, and such consent has not yet been secured; or (3) when it
can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation, such as when there is need for
special reserve for probable contingencies.

Section 122. Corporate liquidation. – Every corporation whose charter

expires by its own limitation or is annulled by forfeiture or otherwise, or
whose corporate existence for other purposes is terminated in any other
manner, shall nevertheless be continued as a body corporate for three (3)
years after the time when it would have been so dissolved, for the purpose
of prosecuting and defending suits by or against it and enabling it to settle
and close its affairs, to dispose of and convey its property and to
distribute its assets, but not for the purpose of continuing the business for
which it was established.

At any time during said three (3) years, the corporation is authorized and
empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From and
after any such conveyance by the corporation of its property in trust for
the benefit of its stockholders, members, creditors and others in interest,
all interest which the corporation had in the property terminates, the legal
interest vests in the trustees, and the beneficial interest in the
stockholders, members, creditors or other persons in interest.

Upon the winding up of the corporate affairs, any asset distributable to

any creditor or stockholder or member who is unknown or cannot be
found shall be escheated to the city or municipality where such assets are
located.

Except by decrease of capital stock and as otherwise allowed by this

Code, no corporation shall distribute any of its assets or property except
upon lawful dissolution and after payment of all its debts and liabilities.

Section 39. Power to deny pre-emptive right. – All stockholders of a

stock corporation shall enjoy pre-emptive right to subscribe to all issues
or disposition of shares of any class, in proportion to their respective
shareholdings, unless such right is denied by the articles of incorporation
or an amendment thereto: Provided, That such pre-emptive right shall not
extend to shares to be issued in compliance with laws requiring stock
offerings or minimum stock ownership by the public; or to shares to be
issued in good faith with the approval of the stockholders representing
two-thirds (2/3) of the outstanding capital stock, in exchange for property
needed for corporate purposes or in payment of a previously contracted
debt.

Section 41. Power to acquire own shares. – A stock corporation shall

have the power to purchase or acquire its own shares for a legitimate
corporate purpose or purposes, including but not limited to the following
cases: Provided, That the corporation has unrestricted retained earnings in
its books to cover the shares to be purchased or acquired:

1. To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation,
arising out of unpaid subscription, in a delinquency sale, and to
purchase delinquent shares sold during said sale; and
 3. To pay dissenting or withdrawing stockholders entitled to payment
for their shares under the provisions of this Code.

Section 42. Power to invest corporate funds in another corporation or

business or for any other purpose. – Subject to the provisions of this
Code, a private corporation may invest its funds in any other corporation
or business or for any purpose other than the primary purpose for which it
was organized when approved by a majority of the board of directors or
trustees and ratified by the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, or by at least two thirds (2/3) of the
members in the case of non-stock corporations, at a stockholder’s or
member’s meeting duly called for the purpose. Written notice of the
proposed investment and the time and place of the meeting shall be
addressed to each stockholder or member at his place of residence as
shown on the books of the corporation and deposited to the addressee in
the post office with postage prepaid, or served personally: Provided, That
any dissenting stockholder shall have appraisal right as provided in this
Code: Provided, however, That where the investment by the corporation
is reasonably necessary to accomplish its primary purpose as stated in the
articles of incorporation, the approval of the stockholders or members
shall not be necessary.

Section 63. Certificate of stock and transfer of shares. – The capital stock

of stock corporations shall be divided into shares for which certificates
signed by the president or vice president, countersigned by the secretary
or assistant secretary, and sealed with the seal of the corporation shall be
issued in accordance with the by-laws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation.

Section 64. Issuance of stock certificates. – No certificate of stock shall

be issued to a subscriber until the full amount of his subscription together
with interest and expenses (in case of delinquent shares), if any is due,
has been paid.
Section 3. Classes of corporations. – Corporations formed or organized
under this Code may be stock or non-stock corporations. Corporations
which have capital stock divided into shares and are authorized to
distribute to the holders of such shares dividends or allotments of the
surplus profits on the basis of the shares held are stock corporations. All
other corporations are non-stock corporations.

Section 14. Contents of the articles of incorporation. – All corporations

organized under this code shall file with the Securities and Exchange
Commission articles of incorporation in any of the official languages duly
signed and acknowledged by all of the incorporators, containing
substantially the following matters, except as otherwise prescribed by this
Code or by special law:

1. The name of the corporation;

2. The specific purpose or purposes for which the corporation is being
incorporated. Where a corporation has more than one stated purpose,
the articles of incorporation shall state which is the primary purpose
and which is/are the secondary purpose or purposes: Provided, That a
non-stock corporation may not include a purpose which would
change or contradict its nature as such;
3. The place where the principal office of the corporation is to be
located, which must be within the Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the incorporators;
6. The number of directors or trustees, which shall not be less than
five (5) nor more than fifteen (15);
7. The names, nationalities and residences of persons who shall act as
directors or trustees until the first regular directors or trustees are
duly elected and qualified in accordance with this Code;
8. If it be a stock corporation, the amount of its authorized capital
stock in lawful money of the Philippines, the number of shares into
which it is divided, and in case the share are par value shares, the par
value of each, the names, nationalities and residences of the original
subscribers, and the amount subscribed and paid by each on his
subscription, and if some or all of the shares are without par value,
such fact must be stated;
9. If it be a non-stock corporation, the amount of its capital, the
names, nationalities and residences of the contributors and the
amount contributed by each; and
10. Such other matters as are not inconsistent with law and which the
incorporators may deem necessary and convenient.
The Securities and Exchange Commission shall not accept the articles of
incorporation of any stock corporation unless accompanied by a sworn
statement of the Treasurer elected by the subscribers showing that at least
twenty-five (25%) percent of the authorized capital stock of the
corporation has been subscribed, and at least twenty-five (25%) of the
total subscription has been fully paid to him in actual cash and/or in
property the fair valuation of which is equal to at least twenty-five (25%)
percent of the said subscription, such paid-up capital being not less than
five thousand (P5,000.00) pesos.

Section 38. Power to increase or decrease capital stock; incur, create or

increase bonded indebtedness. – No corporation shall increase or
decrease its capital stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of the board of directors
and, at a stockholder’s meeting duly called for the purpose, two-thirds
(2/3) of the outstanding capital stock shall favor the increase or
diminution of the capital stock, or the incurring, creating or increasing of
any bonded indebtedness. Written notice of the proposed increase or
diminution of the capital stock or of the incurring, creating, or increasing
of any bonded indebtedness and of the time and place of the stockholder’s
meeting at which the proposed increase or diminution of the capital stock
or the incurring or increasing of any bonded indebtedness is to be
considered, must be addressed to each stockholder at his place of
residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally.

A certificate in duplicate must be signed by a majority of the directors of

the corporation and countersigned by the chairman and the secretary of
the stockholders’ meeting, setting forth:

(1) That the requirements of this section have been complied with;

(2) The amount of the increase or diminution of the capital stock;

(3) If an increase of the capital stock, the amount of capital stock or

number of shares of no-par stock thereof actually subscribed, the names,
nationalities and residences of the persons subscribing, the amount of
capital stock or number of no-par stock subscribed by each, and the
amount paid by each on his subscription in cash or property, or the
amount of capital stock or number of shares of no-par stock allotted to
each stock-holder if such increase is for the purpose of making effective
stock dividend therefor authorized;
(4) Any bonded indebtedness to be incurred, created or increased;

(5) The actual indebtedness of the corporation on the day of the meeting;

(6) The amount of stock represented at the meeting; and

(7) The vote authorizing the increase or diminution of the capital stock, or
the incurring, creating or increasing of any bonded indebtedness.

Any increase or decrease in the capital stock or the incurring, creating or

increasing of any bonded indebtedness shall require prior approval of the
Securities and Exchange Commission.

One of the duplicate certificates shall be kept on file in the office of the
corporation and the other shall be filed with the Securities and Exchange
Commission and attached to the original articles of incorporation. From
and after approval by the Securities and Exchange Commission and the
issuance by the Commission of its certificate of filing, the capital stock
shall stand increased or decreased and the incurring, creating or
increasing of any bonded indebtedness authorized, as the certificate of
filing may declare: Provided, That the Securities and Exchange
Commission shall not accept for filing any certificate of increase of
capital stock unless accompanied by the sworn statement of the treasurer
of the corporation lawfully holding office at the time of the filing of the
certificate, showing that at least twenty-five (25%) percent of such
increased capital stock has been subscribed and that at least twenty-five
(25%) percent of the amount subscribed has been paid either in actual
cash to the corporation or that there has been transferred to the
corporation property the valuation of which is equal to twenty-five (25%)
percent of the subscription: Provided, further, That no decrease of the
capital stock shall be approved by the Commission if its effect shall
prejudice the rights of corporate creditors.

Non-stock corporations may incur or create bonded indebtedness, or

increase the same, with the approval by a majority vote of the board of
trustees and of at least two-thirds (2/3) of the members in a meeting duly
called for the purpose.

Bonds issued by a corporation shall be registered with the Securities and

Exchange Commission, which shall have the authority to determine the
sufficiency of the terms thereof.
Section 32. Dealings of directors, trustees or officers with the
corporation. – A contract of the corporation with one or more of its
directors or trustees or officers is voidable, at the option of such
corporation, unless all the following conditions are present:

1. That the presence of such director or trustee in the board meeting

in which the contract was approved was not necessary to constitute a
quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the
approval of the contract;
3. That the contract is fair and reasonable under the circumstances;
and
4. That in case of an officer, the contract has been previously
authorized by the board of directors.

Where any of the first two conditions set forth in the preceding paragraph
is absent, in the case of a contract with a director or trustee, such contract
may be ratified by the vote of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3)
of the members in a meeting called for the purpose: Provided, That full
disclosure of the adverse interest of the directors or trustees involved is
made at such meeting: Provided, however, That the contract is fair and
reasonable under the circumstances.

Section 34. Disloyalty of a director. – Where a director, by virtue of his

office, acquires for himself a business opportunity which should belong
to the corporation, thereby obtaining profits to the prejudice of such
corporation, he must account to the latter for all such profits by refunding
the same, unless his act has been ratified by a vote of the stockholders
owning or representing at least two-thirds (2/3) of the outstanding capital
stock. This provision shall be applicable, notwithstanding the fact that the
director risked his own funds in the venture.

Section 36. Corporate powers and capacity. – Every corporation

incorporated under this Code has the power and capacity:

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of time stated in
the articles of incorporation and the certificate of incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the
provisions of this Code;
 5. To adopt by-laws, not contrary to law, morals, or public policy, and
to amend or repeal the same in accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers
and to sell stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this Code; and to admit members
to the corporation if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease,
pledge, mortgage and otherwise deal with such real and personal
property, including securities and bonds of other corporations, as the
transaction of the lawful business of the corporation may reasonably
and necessarily require, subject to the limitations prescribed by law
and the Constitution;
8. To enter into merger or consolidation with other corporations as
provided in this Code;
9. To make reasonable donations, including those for the public
welfare or for hospital, charitable, cultural, scientific, civic, or
similar purposes: Provided, That no corporation, domestic or foreign,
shall give donations in aid of any political party or candidate or for
purposes of partisan political activity;
10. To establish pension, retirement, and other plans for the benefit of
its directors, trustees, officers and employees; and
11. To exercise such other powers as may be essential or necessary to
carry out its purpose or purposes as stated in the articles of
incorporation.

Section 15. Forms of Articles of Incorporation. – Unless otherwise

prescribed by special law, articles of incorporation of all domestic
corporations shall comply substantially with the following form:

ARTICLES OF INCORPORATION OF

__________________________

(Name of Corporation)

KNOW ALL MEN BY THESE PRESENTS:

The undersigned incorporators, all of legal age and a majority of whom

are residents of the Philippines, have this day voluntarily agreed to form a
(stock) (non-stock) corporation under the laws of the Republic of the
Philippines;

AND WE HEREBY CERTIFY:

FIRST: That the name of said corporation shall be
“_____________________, INC. or CORPORATION”;

SECOND: That the purpose or purposes for which such corporation is

incorporated are: (If there is more than one purpose, indicate primary and
secondary purposes);

THIRD: That the principal office of the corporation is located in the

City/Municipality of ________________________, Province of
_______________________, Philippines;

FOURTH: That the term for which said corporation is to exist is

_____________ years from and after the date of issuance of the
certificate of incorporation;

FIFTH: That the names, nationalities and residences of the incorporators

of the corporation are as follows:

NAME NATIONALITY RESIDENCE

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

SIXTH: That the number of directors or trustees of the corporation shall

be _______; and the names, nationalities and residences of the first
directors or trustees of the corporation are as follows:

NAME NATIONALITY RESIDENCE

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

SEVENTH: That the authorized capital stock of the corporation is

______________________ (P___________) PESOS in lawful money of
the Philippines, divided into __________ shares with the par value of
____________________ (P_____________) Pesos per share.

(In case all the share are without par value):

That the capital stock of the corporation is ______________ shares

without par value. (In case some shares have par value and some are
without par value): That the capital stock of said corporation consists of
_____________ shares of which ______________ shares are of the par
value of _________________ (P____________) PESOS each, and of
which _________________ shares are without par value.

EIGHTH: That at least twenty five (25%) per cent of the authorized
capital stock above stated has been subscribed as follows:

Name of Subscriber Nationality No of Shares Amount

Subscribed Subscribed

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

NINTH: That the above-named subscribers have paid at least twenty-five

(25%) percent of the total subscription as follows:

Name of Subscriber Amount Subscribed Total Paid-In

_________________ ___________________ _______________

_________________ ___________________ _______________

_________________ ___________________ _______________

_________________ ___________________ _______________

_________________ ___________________ _______________

(Modify Nos. 8 and 9 if shares are with no par value. In case the
corporation is non-stock, Nos. 7, 8 and 9 of the above articles may be
modified accordingly, and it is sufficient if the articles state the amount of
capital or money contributed or donated by specified persons, stating the
names, nationalities and residences of the contributors or donors and the
respective amount given by each.)

TENTH: That _____________________ has been elected by the

subscribers as Treasurer of the Corporation to act as such until his
successor is duly elected and qualified in accordance with the by-laws,
and that as such Treasurer, he has been authorized to receive for and in
the name and for the benefit of the corporation, all subscription (or fees)
or contributions or donations paid or given by the subscribers or
members.

ELEVENTH: (Corporations which will engage in any business or activity

reserved for Filipino citizens shall provide the following):

“No transfer of stock or interest which shall reduce the ownership of

Filipino citizens to less than the required percentage of the capital stock
as provided by existing laws shall be allowed or permitted to be recorded
in the proper books of the corporation and this restriction shall be
indicated in all stock certificates issued by the corporation.”

IN WITNESS WHEREOF, we have hereunto signed these Articles of

Incorporation, this __________ day of ________________, 19 ______ in
the City/Municipality of ____________________, Province of
________________________, Republic of the Philippines.

_______________________ _______________________

_______________________ _______________________

________________________________
(Names and signatures of the incorporators)

SIGNED IN THE PRESENCE OF:

_______________________ _______________________

(Notarial Acknowledgment)

TREASURER’S AFFIDAVIT

REPUBLIC OF THE PHILIPPINES )

CITY/MUNICIPALITY OF ) S.S.

PROVINCE OF )

I, ____________________, being duly sworn, depose and say:

That I have been elected by the subscribers of the corporation as

Treasurer thereof, to act as such until my successor has been duly elected
and qualified in accordance with the by-laws of the corporation, and that
as such Treasurer, I hereby certify under oath that at least 25% of the
authorized capital stock of the corporation has been subscribed and at
least 25% of the total subscription has been paid, and received by me, in
cash or property, in the amount of not less than P5,000.00, in accordance
with the Corporation Code.

____________________

(Signature of Treasurer)

SUBSCRIBED AND SWORN to before me, a Notary Public, for and in

the City/Municipality of ___________________ Province of
_____________________, this _______ day of ___________, 19 _____;
by __________________ with Res. Cert. No. ___________ issued at
_______________________ on ____________, 19 ______

NOTARY PUBLIC

My commission expires on

_________, 19 _____
Doc. No. _________;

Page No. _________;

Book No. ________;

Series of 19____ (7a)

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.

Section 20. De facto corporations. – The due incorporation of any

corporation claiming in good faith to be a corporation under this Code,
and its right to exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such corporation may be a party.
Such inquiry may be made by the Solicitor General in a quo warranto
proceeding.

Section 23. The board of directors or trustees. – Unless otherwise

provided in this Code, the corporate powers of all corporations formed
under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of
directors or trustees to be elected from among the holders of stocks, or
where there is no stock, from among the members of the corporation, who
shall hold office for one (1) year until their successors are elected and
qualified. (28a)

Every director must own at least one (1) share of the capital stock of the
corporation of which he is a director, which share shall stand in his name
on the books of the corporation. Any director who ceases to be the owner
of at least one (1) share of the capital stock of the corporation of which he
is a director shall thereby cease to be a director. Trustees of non-stock
corporations must be members thereof. A majority of the directors or
trustees of all corporations organized under this Code must be residents
of the Philippines.

Section 28. Removal of directors or trustees. – Any director or trustee of

a corporation may be removed from office by a vote of the stockholders
holding or representing at least two-thirds (2/3) of the outstanding capital
stock, or if the corporation be a non-stock corporation, by a vote of at
least two-thirds (2/3) of the members entitled to vote: Provided, That such
removal shall take place either at a regular meeting of the corporation or
at a special meeting called for the purpose, and in either case, after
previous notice to stockholders or members of the corporation of the
intention to propose such removal at the meeting. A special meeting of
the stockholders or members of a corporation for the purpose of removal
of directors or trustees, or any of them, must be called by the secretary on
order of the president or on the written demand of the stockholders
representing or holding at least a majority of the outstanding capital
stock, or, if it be a non-stock corporation, on the written demand of a
majority of the members entitled to vote. Should the secretary fail or
refuse to call the special meeting upon such demand or fail or refuse to
give the notice, or if there is no secretary, the call for the meeting may be
addressed directly to the stockholders or members by any stockholder or
member of the corporation signing the demand. Notice of the time and
place of such meeting, as well as of the intention to propose such
removal, must be given by publication or by written notice prescribed in
this Code. Removal may be with or without cause: Provided, That
removal without cause may not be used to deprive minority stockholders
or members of the right of representation to which they may be entitled
under Section 24 of this Code.

Section 24. Election of directors or trustees. – At all elections of

directors or trustees, there must be present, either in person or by
representative authorized to act by written proxy, the owners of a
majority of the outstanding capital stock, or if there be no capital stock, a
majority of the members entitled to vote. The election must be by ballot if
requested by any voting stockholder or member. In stock corporations,
every stockholder entitled to vote shall have the right to vote in person or
by proxy the number of shares of stock standing, at the time fixed in the
by-laws, in his own name on the stock books of the corporation, or where
the by-laws are silent, at the time of the election; and said stockholder
may vote such number of shares for as many persons as there are
directors to be elected or he may cumulate said shares and give one
candidate as many votes as the number of directors to be elected
multiplied by the number of his shares shall equal, or he may distribute
them on the same principle among as many candidates as he shall see fit:
Provided, That the total number of votes cast by him shall not exceed the
number of shares owned by him as shown in the books of the corporation
multiplied by the whole number of directors to be elected: Provided,
however, That no delinquent stock shall be voted. Unless otherwise
provided in the articles of incorporation or in the by-laws, members of
corporations which have no capital stock may cast as many votes as there
are trustees to be elected but may not cast more than one vote for one
candidate. Candidates receiving the highest number of votes shall be
declared elected. Any meeting of the stockholders or members called for
an election may adjourn from day to day or from time to time but not sine
die or indefinitely if, for any reason, no election is held, or if there are not
present or represented by proxy, at the meeting, the owners of a majority
of the outstanding capital stock, or if there be no capital stock, a majority
of the member entitled to vote.

Section 31. Liability of directors, trustees or officers. – Directors or

trustees who wilfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or acquire any personal
or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and
other persons.

When a director, trustee or officer attempts to acquire or acquires, in

violation of his duty, any interest adverse to the corporation in respect of
any matter which has been reposed in him in confidence, as to which
equity imposes a disability upon him to deal in his own behalf, he shall be
liable as a trustee for the corporation and must account for the profits
which otherwise would have accrued to the corporation.

Section 40. Sale or other disposition of assets. – Subject to the provisions

of existing laws on illegal combinations and monopolies, a corporation
may, by a majority vote of its board of directors or trustees, sell, lease,
exchange, mortgage, pledge or otherwise dispose of all or substantially all
of its property and assets, including its goodwill, upon such terms and
conditions and for such consideration, which may be money, stocks,
bonds or other instruments for the payment of money or other property or
consideration, as its board of directors or trustees may deem expedient,
when authorized by the vote of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock, or in case of non-stock
corporation, by the vote of at least to two-thirds (2/3) of the members, in
a stockholder’s or member’s meeting duly called for the purpose. Written
notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of
residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally:
Provided, That any dissenting stockholder may exercise his appraisal
right under the conditions provided in this Code.

A sale or other disposition shall be deemed to cover substantially all the

corporate property and assets if thereby the corporation would be
rendered incapable of continuing the business or accomplishing the
purpose for which it was incorporated.

After such authorization or approval by the stockholders or members, the

board of directors or trustees may, nevertheless, in its discretion, abandon
such sale, lease, exchange, mortgage, pledge or other disposition of
property and assets, subject to the rights of third parties under any
contract relating thereto, without further action or approval by the
stockholders or members.

Nothing in this section is intended to restrict the power of any

corporation, without the authorization by the stockholders or members, to
sell, lease, exchange, mortgage, pledge or otherwise dispose of any of its
property and assets if the same is necessary in the usual and regular
course of business of said corporation or if the proceeds of the sale or
other disposition of such property and assets be appropriated for the
conduct of its remaining business.

In non-stock corporations where there are no members with voting rights,

the vote of at least a majority of the trustees in office will be sufficient
authorization for the corporation to enter into any transaction authorized
by this section.

Section 45. Ultra vires acts of corporations. – No corporation under this

Code shall possess or exercise any corporate powers except those
conferred by this Code or by its articles of incorporation and except such
as are necessary or incidental to the exercise of the powers so conferred.

Section 46. Adoption of by-laws. – Every corporation formed under this

Code must, within one (1) month after receipt of official notice of the
issuance of its certificate of incorporation by the Securities and Exchange
Commission, adopt a code of by-laws for its government not inconsistent
with this Code. For the adoption of by-laws by the corporation the
affirmative vote of the stockholders representing at least a majority of the
outstanding capital stock, or of at least a majority of the members in case
of non-stock corporations, shall be necessary. The by-laws shall be signed
by the stockholders or members voting for them and shall be kept in the
principal office of the corporation, subject to the inspection of the
stockholders or members during office hours. A copy thereof, duly
certified to by a majority of the directors or trustees countersigned by the
secretary of the corporation, shall be filed with the Securities and
Exchange Commission which shall be attached to the original articles of
incorporation.

Notwithstanding the provisions of the preceding paragraph, by-laws may

be adopted and filed prior to incorporation; in such case, such by-laws
shall be approved and signed by all the incorporators and submitted to the
Securities and Exchange Commission, together with the articles of
incorporation.

In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws
are not inconsistent with this Code.

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

Section 62. Consideration for stocks. – Stocks shall not be issued for a

consideration less than the par or issued price thereof. Consideration for
the issuance of stock may be any or a combination of any two or more of
the following:

1. Actual cash paid to the corporation;

2. Property, tangible or intangible, actually received by the
corporation and necessary or convenient for its use and lawful
purposes at a fair valuation equal to the par or issued value of the
stock issued;
3. Labor performed for or services actually rendered to the
corporation;
4. Previously incurred indebtedness of the corporation;
5. Amounts transferred from unrestricted retained earnings to stated
capital; and
6. Outstanding shares exchanged for stocks in the event of
reclassification or conversion.
Where the consideration is other than actual cash, or consists of
intangible property such as patents of copyrights, the valuation thereof
shall initially be determined by the incorporators or the board of directors,
subject to approval by the Securities and Exchange Commission.

Shares of stock shall not be issued in exchange for promissory notes or

future service.

The same considerations provided for in this section, insofar as they may
be applicable, may be used for the issuance of bonds by the corporation.

The issued price of no-par value shares may be fixed in the articles of
incorporation or by the board of directors pursuant to authority conferred
upon it by the articles of incorporation or the by-laws, or in the absence
thereof, by the stockholders representing at least a majority of the
outstanding capital stock at a meeting duly called for the purpose.

Section 67. Payment of balance of subscription. – Subject to the

provisions of the contract of subscription, the board of directors of any
stock corporation may at any time declare due and payable to the
corporation unpaid subscriptions to the capital stock and may collect the
same or such percentage thereof, in either case with accrued interest, if
any, as it may deem necessary.

Payment of any unpaid subscription or any percentage thereof, together

with the interest accrued, if any, shall be made on the date specified in the
contract of subscription or on the date stated in the call made by the
board. Failure to pay on such date shall render the entire balance due and
payable and shall make the stockholder liable for interest at the legal rate
on such balance, unless a different rate of interest is provided in the by-
laws, computed from such date until full payment. If within thirty (30)
days from the said date no payment is made, all stocks covered by said
subscription shall thereupon become delinquent and shall be subject to
sale as hereinafter provided, unless the board of directors orders
otherwise.

Section 71. Effect of delinquency. – No delinquent stock shall be voted

for or be entitled to vote or to representation at any stockholder’s
meeting, nor shall the holder thereof be entitled to any of the rights of a
stockholder except the right to dividends in accordance with the
provisions of this Code, until and unless he pays the amount due on his
subscription with accrued interest, and the costs and expenses of
advertisement, if any
Section 80. Effects of 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.

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.

Section 118. Voluntary dissolution where no creditors are affected. – If

dissolution of a corporation does not prejudice the rights of any creditor
having a claim against it, the dissolution may be effected by majority vote
of the board of directors or trustees, and by a resolution duly adopted by
the affirmative vote of the stockholders owning at least two-thirds (2/3)
of the outstanding capital stock or of at least two-thirds (2/3) of the
members of a meeting to be held upon call of the directors or trustees
after publication of the notice of time, place and object of the meeting for
three (3) consecutive weeks in a newspaper published in the place where
the principal office of said corporation is located; and if no newspaper is
published in such place, then in a newspaper of general circulation in the
Philippines, after sending such notice to each stockholder or member
either by registered mail or by personal delivery at least thirty (30) days
prior to said meeting. A copy of the resolution authorizing the dissolution
shall be certified by a majority of the board of directors or trustees and
countersigned by the secretary of the corporation. The Securities and
Exchange Commission shall thereupon issue the certificate of dissolution.
(62a)

Section 119. Voluntary dissolution where creditors are affected. – Where

the dissolution of a corporation may prejudice the rights of any creditor,
the petition for dissolution shall be filed with the Securities and Exchange
Commission. The petition shall be signed by a majority of its board of
directors or trustees or other officers having the management of its
affairs, verified by its president or secretary or one of its directors or
trustees, and shall set forth all claims and demands against it, and that its
dissolution was resolved upon by the affirmative vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or by
at least two-thirds (2/3) of the members at a meeting of its stockholders or
members called for that purpose.

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.
Section 120. Dissolution by shortening corporate term. – A voluntary
dissolution may be effected by amending the articles of incorporation to
shorten the corporate term pursuant to the provisions of this Code. A
copy of the amended articles of incorporation shall be submitted to the
Securities and Exchange Commission in accordance with this Code.
Upon approval of the amended articles of incorporation of the expiration
of the shortened term, as the case may be, the corporation shall be
deemed dissolved without any further proceedings, subject to the
provisions of this Code on liquidation.

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.

Section 6. Classification of shares. – The shares of stock of stock

corporations may be divided into classes or series of shares, or both, any
of which classes or series of shares may have such rights, privileges or
restrictions as may be stated in the articles of incorporation: Provided,
That no share may be deprived of voting rights except those classified
and issued as “preferred” or “redeemable” shares, unless otherwise
provided in this Code: Provided, further, That there shall always be a
class or series of shares which have complete voting rights. Any or all of
the shares or series of shares may have a par value or have no par value as
may be provided for in the articles of incorporation: Provided, however,
That banks, trust companies, insurance companies, public utilities, and
building and loan associations shall not be permitted to issue no-par value
shares of stock.

Preferred shares of stock issued by any corporation may be given

preference in the distribution of the assets of the corporation in case of
liquidation and in the distribution of dividends, or such other preferences
as may be stated in the articles of incorporation which are not violative of
the provisions of this Code: Provided, That preferred shares of stock may
be issued only with a stated par value. The board of directors, where
authorized in the articles of incorporation, may fix the terms and
conditions of preferred shares of stock or any series thereof: Provided,
That such terms and conditions shall be effective upon the filing of a
certificate thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully
paid and non-assessable and the holder of such shares shall not be liable
to the corporation or to its creditors in respect thereto: Provided; That
shares without par value may not be issued for a consideration less than
the value of five (P5.00) pesos per share: Provided, further, That the
entire consideration received by the corporation for its no-par value
shares shall be treated as capital and shall not be available for distribution
as dividends.

A corporation may, furthermore, classify its shares for the purpose of

insuring compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in

the certificate of stock, each share shall be equal in all respects to every
other share.

Where the articles of incorporation provide for non-voting shares in the

cases allowed by this Code, the holders of such shares shall nevertheless
be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all
or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another
corporation or other corporations;
7. Investment of corporate funds in another corporation or business in
accordance with this Code; and
8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote

necessary to approve a particular corporate act as provided in this Code
shall be deemed to refer only to stocks with voting rights.
Section 10. Number and qualifications of incorporators. – Any number
of natural persons not less than five (5) but not more than fifteen (15), all
of legal age and a majority of whom are residents of the Philippines, may
form a private corporation for any lawful purpose or purposes. Each of
the incorporators of s stock corporation must own or be a subscriber to at
least one (1) share of the capital stock of the corporation.

Section 30. Compensation of directors. – In the absence of any provision

in the by-laws fixing their compensation, the directors shall not receive
any compensation, as such directors, except for reasonable per diems:
Provided, however, That any such compensation other than per diems
may be granted to directors by the vote of the stockholders representing at
least a majority of the outstanding capital stock at a regular or special
stockholders’ meeting. In no case shall the total yearly compensation of
directors, as such directors, exceed ten (10%) percent of the net income
before income tax of the corporation during the preceding year.

Section 33. Contracts between corporations with interlocking

directors. – Except in cases of fraud, and provided the contract is fair and
reasonable under the circumstances, a contract between two or more
corporations having interlocking directors shall not be invalidated on that
ground alone: Provided, That if the interest of the interlocking director in
one corporation is substantial and his interest in the other corporation or
corporations is merely nominal, he shall be subject to the provisions of
the preceding section insofar as the latter corporation or corporations are
concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding capital

stock shall be considered substantial for purposes of interlocking
directors.

Section 51. Place and time of meetings of stockholders of members. –

Stockholder’s or member’s meetings, whether regular or special, shall be
held in the city or municipality where the principal office of the
corporation is located, and if practicable in the principal office of the
corporation: Provided, That Metro Manila shall, for purposes of this
section, be considered a city or municipality.

Notice of meetings shall be in writing, and the time and place thereof
stated therein.

All proceedings had and any business transacted at any meeting of the
stockholders or members, if within the powers or authority of the
corporation, shall be valid even if the meeting be improperly held or
called, provided all the stockholders or members of the corporation are
present or duly represented at the meeting.

Section 54. Who shall preside at meetings. – The president shall preside

at all meetings of the directors or trustee as well as of the stockholders or
members, unless the by-laws provide otherwise.

Section 65. Liability of directors for watered stocks. – Any director or

officer of a corporation consenting to the issuance of stocks for a
consideration less than its par or issued value or for a consideration in any
form other than cash, valued in excess of its fair value, or who, having
knowledge thereof, does not forthwith express his objection in writing
and file the same with the corporate secretary, shall be solidarily, liable
with the stockholder concerned to the corporation and its creditors for the
difference between the fair value received at the time of issuance of the
stock and the par or issued value of the same.

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. 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 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) cancelling or altering any
provision contained in the articles of incorporation, by-laws, or any
stockholder’s agreement; (2) cancelling, 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 16. Amendment of Articles of Incorporation. – Unless otherwise

prescribed by this Code or by special law, and for legitimate purposes,
any provision or matter stated in the articles of incorporation may be
amended by a majority vote of the board of directors or trustees and the
vote or written assent of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, without prejudice to the appraisal
right of dissenting stockholders in accordance with the provisions of this
Code, or the vote or written assent of at least two-thirds (2/3) of the
members if it be a non-stock corporation.

The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Such articles,
as amended shall be indicated by underscoring the change or changes
made, and a copy thereof duly certified under oath by the corporate
secretary and a majority of the directors or trustees stating the fact that
said amendment or amendments have been duly approved by the required
vote of the stockholders or members, shall be submitted to the Securities
and Exchange Commission.

The amendments shall take effect upon their approval by the Securities
and Exchange Commission or from the date of filing with the said
Commission if not acted upon within six (6) months from the date of
filing for a cause not attributable to the corporation.

Section 21. Corporation by estoppel. – All persons who assume to act as

a corporation knowing it to be without authority to do so shall be liable as
general partners for all debts, liabilities and damages incurred or arising
as a result thereof: Provided, however, That when any such ostensible
corporation is sued on any transaction entered by it as a corporation or on
any tort committed by it as such, it shall not be allowed to use as a
defense its lack of corporate personality.
On who assumes an obligation to an ostensible corporation as such,
cannot resist performance thereof on the ground that there was in fact no
corporation.

Section 25. Corporate officers, quorum. – Immediately after their

election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of
the Philippines, and such other officers as may be provided for in the by-
laws. Any two (2) or more positions may be held concurrently by the
same person, except that no one shall act as president and secretary or as
president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the

duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a greater
majority, a majority of the number of directors or trustees as fixed in the
articles of incorporation shall constitute a quorum for the transaction of
corporate business, and every decision of at least a majority of the
directors or trustees present at a meeting at which there is a quorum shall
be valid as a corporate act, except for the election of officers which shall
require the vote of a majority of all the members of the board.

Directors or trustees cannot attend or vote by proxy at board meetings.

Section 29. Vacancies in the office of director or trustee. – Any vacancy

occurring in the board of directors or trustees other than by removal by
the stockholders or members or by expiration of term, may be filled by
the vote of at least a majority of the remaining directors or trustees, if still
constituting a quorum; otherwise, said vacancies must be filled by the
stockholders in a regular or special meeting called for that purpose. A
director or trustee so elected to fill a vacancy shall be elected only or the
unexpired term of his predecessor in office.

Any directorship or trusteeship to be filled by reason of an increase in the

number of directors or trustees shall be filled only by an election at a
regular or at a special meeting of stockholders or members duly called for
the purpose, or in the same meeting authorizing the increase of directors
or trustees if so stated in the notice of the meeting.

Section 50. Regular and special meetings of stockholders or members. –

Regular meetings of stockholders or members shall be held annually on a
date fixed in the by-laws, or if not so fixed, on any date in April of every
year as determined by the board of directors or trustees: Provided, That
written notice of regular meetings shall be sent to all stockholders or
members of record at least two (2) weeks prior to the meeting, unless a
different period is required by the by-laws.

Special meetings of stockholders or members shall be held at any time

deemed necessary or as provided in the by-laws: Provided, however, That
at least one (1) week written notice shall be sent to all stockholders or
members, unless otherwise provided in the by-laws.

Notice of any meeting may be waived, expressly or impliedly, by any

stockholder or member.

Whenever, for any cause, there is no person authorized to call a meeting,

the Securities and Exchange Commission, upon petition of a stockholder
or member on a showing of good cause therefor, may issue an order to
the petitioning stockholder or member directing him to call a meeting of
the corporation by giving proper notice required by this Code or by the
by-laws. The petitioning stockholder or member shall preside thereat until
at least a majority of the stockholders or members present have chosen
one of their number as presiding officer.

Section 53. Regular and special meetings of directors or trustees. –

Regular meetings of the board of directors or trustees of every
corporation shall be held monthly, unless the by-laws provide otherwise.

Special meetings of the board of directors or trustees may be held at any

time upon the call of the president or as provided in the by-laws.

Meetings of directors or trustees of corporations may be held anywhere in

or outside of the Philippines, unless the by-laws provide otherwise.
Notice of regular or special meetings stating the date, time and place of
the meeting must be sent to every director or trustee at least one (1) day
prior to the scheduled meeting, unless otherwise provided by the by-laws.
A director or trustee may waive this requirement, either expressly or
impliedly.

Section 59. Voting trusts. – One or more stockholders of a stock

corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote and other rights pertaining to the
shares for a period not exceeding five (5) years at any time: Provided,
That in the case of a voting trust specifically required as a condition in a
loan agreement, said voting trust may be for a period exceeding five (5)
years but shall automatically expire upon full payment of the loan. A
voting trust agreement must be in writing and notarized, and shall specify
the terms and conditions thereof. A certified copy of such agreement shall
be filed with the corporation and with the Securities and Exchange
Commission; otherwise, said agreement is ineffective and unenforceable.
The certificate or certificates of stock covered by the voting trust
agreement shall be cancelled and new ones shall be issued in the name of
the trustee or trustees stating that they are issued pursuant to said
agreement. In the books of the corporation, it shall be noted that the
transfer in the name of the trustee or trustees is made pursuant to said
voting trust agreement.

The trustee or trustees shall execute and deliver to the transferors voting
trust certificates, which shall be transferable in the same manner and with
the same effect as certificates of stock.

The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner as
any other corporate book or record: Provided, That both the transferor
and the trustee or trustees may exercise the right of inspection of all
corporate books and records in accordance with the provisions of this
Code.

Any other stockholder may transfer his shares to the same trustee or
trustees upon the terms and conditions stated in the voting trust
agreement, and thereupon shall be bound by all the provisions of said
agreement.

No voting trust agreement shall be entered into for the purpose of

circumventing the law against monopolies and illegal combinations in
restraint of trade or used for purposes of fraud.

Unless expressly renewed, all rights granted in a voting trust agreement

shall automatically expire at the end of the agreed period, and the voting
trust certificates as well as the certificates of stock in the name of the
trustee or trustees shall thereby be deemed cancelled and new certificates
of stock shall be reissued in the name of the transferors.

The voting trustee or trustees may vote by proxy unless the agreement
provides otherwise.
Section 72. Rights of unpaid shares. – Holders of subscribed shares not
fully paid which are not delinquent shall have all the rights of a
stockholder.

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 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.