-

TITLE 11 INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

TITLE 11 controlled corporations may not incorporate as One Person
INCORPORATION AND ORGANIZATION OF Corporations: Provided, further, That a natural person who is licensed
to exercise a
PRIVATE CORPORATIONS
profession may not organize as a One Person Corporation for
SEC. 10. Number and Qualifications of Incorporators. - Any person, the purpose of exercising such profession except as otherwise provided
partnership, association or corporation, singly or jointly with others under special laws. 1
but not more than fifteen (15) In number, may organize a
Sec.116. Revised Corporaäon Code ofthe Philippines (RCCP)
corporation for any lawful purpose or purposes: Provided, That
natural persons who are licensed to practice a profession, and 222
partnerships or associations organized for the purpose of practicing a .
profession, shall not be allowed to organize as a corporation unless
otherwise provided under special laws. Incorporators who are natural
persons must be of legal age. Steps in the creation of a corporation
1. Promotion
Each incorporator of a stock corporation must own or be a This includes activities done by promoter for the founding
subscriber to at least one (1) share of the capital stock. and organizing of the business or enterprise of the issuer.
2. Incorporation
A cörporation with a single stockholder is considered a One Steps of incorporation
Person Corporation as described in Title XII!, Chapter Ill of this Code. a. Execution of the articles of incorporation by the incorporators
and other documents required for registration of the
ONE PERSON CORPORA TION corporation.
A One Person Corporation is a corporation with a single stockholder. b. Filing of the articles of incorporation with the SEC together
Only a natural person, trust, or an estate may form a One Person Corporation. with the treasurers affidavit In case the corporation is governed
by special law (e.g. educational institution), a favorable
Banks and quasi-banks, preneed, mast, insurance, public and recommendation of the appropriate government agency (e.g.
publicly-listed companies, and non-chartered government-owned and CHED or DepEd) that such articles of incorporation and by-
laws is in accordance with law.
3. Formal organization and commencement of business
transactions

Examples of formal organization:

a. Adoption of by-laws and filing the same with the SEC
b. Election of board of directors or board of trustees and
oncers
c. Payment of shares

Note:
Any person, partnership, association or corporation, singly
or jointly with others but not more than fifteen (15) in number,
may organize a corporation for any lawful purpose or purposes.

Note:
 INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE CORPORATIONS
Natural persons who are licensed to practice a profession, and corporation must be approved by a majority of the board of directors or
partnerships or associations organized for the purpose of practicing a trustees and ratified by the stockholders representing at least two-thirds
profession, shalt not be allowed to organize as a corporation unless (2/3) pf the outstanding capital stock or by at least two-thirds (2/3) of
the members in the case of corporations at a meeting duly called for the
otherwise provided under special laws.
purpose.
A Directors'/Trustees' Certificate or a Secretary's Certificate,
Number of Incorporators indicating the necessary approvals, as well as the authorized signatory of the
For the purpose of forming a new domestic corporation under the incorporation documents shall be executed under oath and submitted by the
Revised Corporation Code, two (2) or more persons, but not more than fifteen applicant.
(IS), may organize themselves and form a corporation. Domestic corporations under ('delinquent", "suspended",
Only a One Person Corporation (OPC) may have a single stockholder, as "revoked", or "expired" status with the SEC shall not be authorized to become
well as a sole director. Accordingly, its registration must comply with the an incorporator.
corresponding separate guidelines on the establishment of an OPC.
Foreign Corporations as Incorporators

223 In the event that a foreign corporation is made an incorporator,

the application for registration must be accompanied by a copy of a document
(i.e. Board Resolution, Directors' Certificate, Secretary's Certificate, or its
--Each incorporator of a nonstock corporation must be a equivalent), duly authenticated by a Philippine Consulate or with an apostille
member of the corporation. affixed thereto, authorizing the foreign corporation to invest in the corporation
Qualification of incorporators- each incorporator of a stock being formed and specifically naming the designated signatory on behalf of
corporation must own or be a subscriber to at least one share of the the foreign corporation.
capital stock. Each incorporator of a nonstock corporation must be a
member of the corporation.
The incorporators may be composed of any combination of
natural person/s. SEC registered partnership/s, SEC registered 224
domestic corporation/s or association/s. as well as fpreign
corporation/s.

Signatories of the Articles of Incorporation

Each individual signing the Articles of Incorporation/Bylaws must
indicate the capacity upon which he/she is affixing his/her signature thereto. (i.e.
Incorporators who are natural persons must be of legal Incorporator or Representative of
age, and must sign the Articles of Incorporation/Bylaws.
XYZ Corp.)
Partnerships as Incorporators An individual designated to sign the Articles of Incorporation/Bylaws on
In the event that a SEC-recorded partnership is made an behalf of an incorporator, which is not a natural person, must also indicate the
incorporator, the application for registration must be accompanied by a corporate or partnership name of the entity being represented and for whom he/she
Partner's Affidavit, duly executed by all the partners, to the is executing the Articles of Incorporation/Bylaws.
effect that they have authorized the partnership to invest in the The Taxpayer Identification Number (TIN) of the principal, as well as the
corporation about to be formed and that they have designated one of the designated signatory, should both be indicated in the Articles of Incorporation.
partners to become signatorv to the incorporation documents. No application for incorporation shall be accepted unless the registration
Partnerships under "dissolved" or "expired" status with the SEC documents reflect the TIN or passport number of all its foreign investors other
shall not be authorized to become an incorporator. than foreign corporations which have not yet been issued a Taxpayer
Identification Number.
Domestic Corporations or Associations as Incorporators After incorporation, -all the foreign investors, natural or juridical, shall
In the event that a SEC-registered domestic corporation or secure a Taxpayer Identification Number. All documents to be filed with the SEC
association is made an incorporator, its investment in the new after incorporation (e.g. General Information Sheets) shall not be accepted unless
 INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE CORPORATIONS
the TIN of all its foreign investors, natural or juridical, resident or non-resident, extension may be made earlier than three (3) years prior to the
are indicated therein. original or subsequent expiry date(s) unless there are
justifiable reasons for an earlier extension as may be
Designation of Incorporators as Directors or Trustees determined by the Commission: Provided, further, That such
An individual who signs the Articles of Incorporation on behalf of an extension of the corporate term shall take effect only on the
incorporator, which is not a natural person, may not be named as a director or day following the original or subsequent expiry date(s).
trustee in the same Articles of Incorporation, unless when the said individual is
also the owner of at least one (1) share of stock, or is also a A corporation whose term has expired may apply for a
member, of the corporation being formed.
revival of its corporate existence, together with all the rights
and privileges under its certificate of incorporation and subject
Foreign Nationals in the Articles of Incorporation to all of its duties, debts and liabilities existing prior to its
The inclusion of foreign nationals in the Articles of Incorporation shall be revival. Upon approval by the Commission, the corporation
subject to the applicable constitutional, statutory, and regulatory restrictions, as shall be deemed revived and a certificate of revival of
well as conditions, with respect to foreign participation in certain investrnent areas corporate existence shall be issued, giving it perpetual
or activities. existence, unless its application for revival provides otherwise.

Additional Requirements for Certain Corporations No application for revival of certificate of incorporation
No Articles of Incorporation of banks, banking and quasi-banking of banks, banking and quasi-banking institutions, preneed,
institutions, preneed insurance and trust companies, nonstock savings and loan insurance and Oust companies, nonstock savings and loan
associations (NSSLAS), pawnshops, and other financial intermediaries shall be associations, pawnshops, corporations engaged in money
approved unless accompanied by a favorable recommendation of the appropriate service business, and other financial intermediaries shall be
government agency to the effect that the Articles of Incorporation are in approved by the Commission unless accompanied by a
accordance with law.2 favorable recommendation of the appropriate government
agency.
SEC MC No. 16, series of2019.
General rule:
225 A corporation shall have perpetual existence.
TITLE 11 -
CORPORATIONS Exception:
If the articles of incorporation provides
SEC. 11. Corporate Term. - A corporation shall have perpetual Note: otherwise or if it provides for a specific period.
existence unless Its articles of Incorporation provides otherwise.
Corporations with certificates of incorporation issued prior to the 226
effectivity of this Code, and which continue to exist, shall have Note: A corporate term for a specific period may be extended or shortened
by amending the
perpetual existence, unless the corporation, upon a vote of its
stockholders representing a majority of its' outstanding capital stock,
notifies the Commission that it elects to retain its specific corporate articles ofincorporation.
term pursuant to its articles of incorporation: Provided, that any change
in the corporate term under this section is without prejudice to the
A corporate term for a specific period may be extended or shortened
appraisal right of dissenting stockholders in accordance with the by amending the articles o incorporation
provisions of this Code.

A corporate term for a specific period may be extended or A corporation for a specific period ceases to exist and is
shortened by amending the articles of incorporation: Provided, That no dissolved ipso facto upon the expiration of the period fixed in
 Excepdon:
and
INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE CORPORATIONS
Note:
the original articles of incorporation, in the absence of compliance with the legal requisites corporation duly registeréd with the SEC, provided that the former
of extension of period. change its corporate name within thirty (30) days from the of its
Certificate of Revival of Corporate Existence.
REVIVAL OF CORPORATE EXISTENCE
A corporation whose term has expired may apply for a revival of its Apply for Revival?
corporate existence. The following are not allowed to file a Petition for Revival of
Existence:
General Rule: Expired Corporation which has completed the liquidation of its
Upon approval by the SEC, the corporation shall be deemed
corporation whose Certificate of Registration has been revoked for
revived and a certificate of revival of corporate existence shall be reasons other than non-filing of reports (e.g. General Information Sheet
issued, giving it perpetual existence. Audited Financial Statements);
A corporation dissolved by virtue of Sections 6(c) and 6(d) of
Presidential Decree No. 902-A, as amended by Presidential Decree
If its application for revival provides otherwise or provides for a specific
or
period. d. An Expired Corporation which already availed of re-registration, in
accordance with Memorandum Circular No. 13, series of 2019
(Amended Guidelines and Procedures on the Use of Corporate and
The following corporations require the favorable Partnership Names), or other memorandum circulars issued by the SEC
recommendation of the appropriate government agency before the pertaining to re-registration, except when:
SEC will approve the application for revival of certificate of
i. The re-registered corporation has given its consent to the Petitioner to
incorporation:
use its corporate name, and has undertaken to undergo voluntary
1. Banks; dissolution immediately after the issuance of the Petitioner's Certificate
2. Banking and quasi-banking institutions; of Revival; or ii. The re-registered corporation has given its consent to
3. Preneed; the Petitioner to use its corporate name, and has undertaken to change
4. Insurance and trust companies; its corporate name immediately after the issuance of the Petitioner's
5. Nonstock savings and loan associations; Certificate of Revival.
6. Pawnshops;
Revival number of votes for the Revival of an
7. Corporations engaged in money service business; and Expired Stock of the nard of directors, and the vote of the
8. Other financial intermediaries. Initiate
outstanding capital stock. For nonstock
required a majority vote Qf the board of trustees, and the vote of
Who May Apply for Revival? least a majority
members.
The following corporations may file a Petition for Revival of Corporate mainritv
Existence: least
a. Generally, a corporation whose term has expired; the
b. An Expired Corporation whose Certificate of Registration has been
revoked for non-filing of reports (e.g. General Information Sheet and its
Audited Financial Statements), provided that it shall file the proper 228
Petition to Lift its Revoked Status, which may be incorporated in its Appraisal Right
Petition to Revive, and must settle the corresponding penalties thereof; Right of Appraisal ---The revival of the corporate existence is
227 without prejudice to the appraisal right of dissenting stockholders in
Expired Corporation whose Certificate of Registration has been accordance with the provisions of the Revised Corporation Code.3
provided that it shall file the proper Petition to Lift its suspended
Status, which may be incorporated in its Petition to must settle the SEC. 12. Minimum Capital Stock Not Required of Stock
corresponding penalties thereof; or Corporations. Stock corporations shall not be required to have a
Expired Corporation whose corporate name has already been minimum capital stock, except as otherwise specifically provided
'Validly re-used, and is currently being used, by another existing _- by special law.
 INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE CORPORATIONS
General rule: (i) If it be a nonstock corporation, the amount of its capital, the
There is no minimum authorized capital stock. names, nationalities, and residence addresses of the
Exception: contributors, and amount contributed by each; and
If provided by special law. (j) Such ether matters consistent with law and which the
incorporators may deem necessary and convenient
SEC. 13. Contents of the Articles of Incorporation. - All
corporations shall file with the Commission-articles of An arbitration agreement may be provided in the articles of
incorporation in any of the official languages, duly signed and incorporation pursuant to Section 181 of this Code.
acknowledged or authenticated, in such form and manner as may
be allowed by the Commission, containing substantially the The articles of incorporation and applications for amendments
following matters, except as otherwise prescribed by this Code or thereto may be filed with the Commission in the form of an electronic
by special law: document, in accordance with the Commission's rules and regulations
(a) The name of the corporation; on electronic filing.
(b) The specific purpose or purposes for which the corporation is
SEC. 14. Form of Articles of Incorporation. - Unless otherwise
being formed. Where a corporation has more than one stated
prescribed by special law, the articles of incorporation of all domestic
purpose, the articles of incorporation shall indicate the primary
corporations shall comply substantially with the following form:
purpose and the secondary purpose or purposes: Provided, That
a nonstock corporation may not include a purpose which would Articles of Incorporation
change or contradict its nature as such; of
(c) The place where the principal office of the corporation is to be
located, which must be within the Philippines;
(d) The term for which the corporation is to exist, if the corporation (Name of Corporation)
has not elected perpetual existence; The undersigned incorporators, all of legal age, have
(e) The names, nationalities, and residence addresses of the voluntarily agreed to form a (stock) (nonstock) corporation
incorporators; under the laws of the Republic of the Philippines and certify
(f) The number of directors, which shall not be more than fifteen the following:
(15) or the number of trustees which may be more than fifteen
First: That the name of said corporation shall be "
(g) The names, nationalities, and residence addresses of persons who Inc., Corporation or OPC";
shall act as directors or trustees until the first regular directors or
& trustees are duly elected and qualified in accordance with this Second: That the purpose or purposes for which such
Code; corporation is incorporated are: (If there is more than one
(h) If it be a stock corporation, the amount of its authorized capital purpose, indicate primary and secondary purposes);
stock, number of shares into which it is divided, the par value of
Third: That the principal office of the corporation is located in
3 SEC MC No. 23, series of2019. the City/Municipality of Province of
229 Philippines;
TITLE 11 -
CORPORATIONS Fourth: That .the corporation shall have perpetual
existence or a term of years from the date of
each, names, nationalities, and residence addresses of the issuance of the certificate of incorporation;
original subscribers, amount subscribed and paid by each on 230
the subscription, and a statement that some or all of the shares Fifth: That the names, nationalities, and residence addresses of
are without par value, if applicable; the incorporators of the corporation are as follows:
 INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE CORPORATIONS
Name Nationality Residence

Sixth: That the number of directors or trustees of the

corporation shall be and the names, nationalities, and residence
addresses 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

PESOS (P ), divided into shares with the par value of PESOS (P )
per share.

(In _case all the shares 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 have a par value of PESOS each, and of
which shares are without par -value.

Eighth: That the number of shares of the authorized capital stock

above-stated has been subscribed as follows:

Name of No. of Shares Amount Amount

Subscriber Nationality Subscribed Subscribed Paid

231
 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 -
INCORPORATION AND ORGANKZATION OF
PRIVATE CORPORATIONS
E 11 existing laws shall be allowed or permitted to be recorded in the
ORATIONS proper books of the corporation, and this restriction shall be
indicated in all stock certificates issued by the corporation."
(Modifr No. 8 if shares are with no-par value. In case
the corporation is nonstock, Nos. 7 and 8 ofthe above IN WITNESS WHEREOF, we have hereunto signed these
articles may be modified accordingly, and it is Articles of Incorporation, this day of
sufficient if the aracles state the amount of capital or
20 in the City/Municipality of Province of Republic of the
money con&ibuted or donated by specified persons,
Phikippines.
stating the names, nationalities, and residence
addresses of the conä•ibutors or donors and the 232
respective amount given by each.)

Ninth: That has been elected by the

subscribers as Treasurer of the
Corporation to act as such until after the (Names and signatures of the
successor is duly elected and qualified in accordance incorporators) (Name and
with the bylaws, that as Treasurer, authority has been
given to receive in the name and for the benefit of the signature of Treasurer)
corporation, all subscriptions, contributions or
Subscription
donations paid or given by the subscribers or A written- contract to purchase newly issued shares of stock or
members, who certifies t.11C information set forth in bonds. Also termed stock subscription. 4
the seventh and eighth clauses above, and that
the paid-up portion of the What is paid-up capital?
subscription in cash and/or property for the Paid-up capital is that portion of the
benefit and credit of the corporation has been duly authorized capital stock which has been both
received. subscribed and paid. To reiterate, such must form
part of the authorized capital stock of the
Tenth: That the incorporators undertake to change the corporation, subscribed and then actually paid
name of the corporation immediately up.
upon receipt of notice from the
Commission that another corporation, partnership or ARTICLES OF INCORPORATION
person has acquired a prior right to The articles of incorporation has been described as one that defines the
charter of the corporation and the contractual relationships between the State and
the use of such name, that the name has the corporation, the stockholders and the State, and between the corporation and
been declared not distinguishable from a name already its stockholders.s
registered or reserved for the use of another There is no gainsaying that the contents of the articles of incorporation are
corporation, or that it is contrary to law, public binding, not only on the corporation, but also on its shareholders.6
morals, good customs or public policy.
Three-fold nature of the articles of incorporation
Eleventh: (Corporations which will engage in any 1. A contract between the State and the corporation;
business or activity reserved for Filipino citizens shall 2. A contract between the corporation and its stockholders; and
provide the following): 3. A contract between the stockholders inter se.
"No transfer of stock or interest which shall reduce THE NAME OF THE CORPORATION
the ownership of Filipino citizens to less than the A name is peculiarly important as necessary to the very existence of a
required percentage of capital stock as provided by corporation. Its name is one of its attributes, an element of its existence, and
 11 - INCORPORATION AND ORGANIZATION OF PRWATE
- INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS
essential to its identity. The general rule as to corporations is that each stockholders representing at least two-thirds (2/3) of the
corporation must have a name by which it is to sue and be sued and do outstanding capital stock, or by at least two-thirds (2/3) of the
all legal acts. The name of a corporation in this respect designates the members in the case of nonstock corporations, at a meeting
corporation in the same manner as the name of an individual designates
duly called for the purpose. ,ux.
the person; and the right to use its corporate name is as much a part of
the corporate franchise as any other privilege granted.7
PRINCIPAL OFFICE OF THE CORPORATION
Purposes:
1. To fix the residence of the corporation in a definite place;
4 see p. 1655, Blacks Law Dlcdonary, Tenth Ediäon s
Jesus V. Lanuza, etal. vs. CA. etaL, C.R. No. 131394,
2. To determine the venue of court cases involving the corporation;
March 28, nos. V. Lanuza. et.al. vs. CA. etal., C.R. No. 3. For purposes of stockholders or members meeting; and
131394, March 28, 2005.
NM Roålschlld & Sons (Ausralla) Limited vs. Lepanto Consolidated Mining Company, G.R. No. 4. To determine the place where the books and records of the
175799. November 28. 2011. corporation are ordinarily kept.
233
Limitations on the use of corporate name Problem:
The name must not be identical, deceptively or confusingly Y Corp. is a domestic corporation with address at
similar to that of any existing corporation or to any other name Makati CiV. On the other hand, X Corp. is a domestic
already protected by law, or patently deceptive, confusing or contrary corporation similarly engaged in the business of selling,
to law. installing, and maintaining/servicing elevators, escalators and
It must contain the word "Inc., Corporation, or OPC." parking equipment, with address at Makati, as stated in its
Articles of Incorporation.
Change of corporate name X Corp. filed a Complaint for unfair trade practices
A corporation can change its name by amending its articles of against Z Corp., alleging among others, that: it was appointed
by Z Corp. as the exclusive distributor of Z elevators and
incorporation.
escalators in the Philippines
PURPOSE CLAUSE 234
This will confer, as well as limits, the powers which a under a Distributorship Agreement; x:xx Z Corp. terminated the
corporation may exercise. Any act beyond its powers is known as ultra Exclusive Distributorship Agreement; x:xx.
vires acts.
Where a corporation has more than one stated purpose, the
X Corp. filed a motion to amend the Complaint,
alleging that subsequent to the filing of the complaint, it learned
articles of incorporation shan state which is the primary purpose and that Z Corp. transferred all its organization, assets and goodwill,
which is/are the secondary purpose or purposes to determine which as a consequence of a joint venture agreement with Y Corp.
investment of corporate funds require the authority of both the Board Consequently, in order to afford complete relief, Y Corp. was to
and Stockholders. be additionally impleaded as a party. defendant Hence, in the
Amended Complaint, X Corp. impleaded y Corp. as a party-
defendant
Note:
Section 41 of this Code provides:
Y Corp. filed a Motion to Dismiss the Amended
Complaint, raising as ground that the venue was improperly laid,
Subject to the provisions of this Code, a private as neither X Corp. nor Y Corp. reside in Mandaluyong City,
corporation may invest its funds in any other corporation, where the original case was filed. What is the meaning of
business, or for any purpose other than the primary purpose residence as regards corporations? Answer:
for which it was organized, when approved by a majority of Since both parties to this case are corporations, there is a
the board of directors or trustees and ratified by the need to clarify the meaning of residence. The law recognizes
TITLE 11 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE CORPORATIONS
CORPORATIONS
two types of persons: (1) natural and (2) juridical.
Corporations come under the latter.
Residence is the permanent home — the place to SEC. 15. Amendment of Articles of Incorporation. - Unless otherwise
which, whenever absent for business or pleasure, one intends prescribed by this Code or by special law, and for legitimate
to return. Residence is vital when dealing with venue. A purposes, any provision or matter stated in the articles of
corporation, however, has no residence in the same sense in incorporation may be amended by a majority vote of the board of
which this term is applied to a natural person. This is directors or trustees and the _ vote or written assent of the
precisely the reason why the Court in Young Auto Supply stockholders representing at least two thirds (2/3) of the outstanding
Company v. Court of Appeals ruled that for practical capital stock, without prejudice to the appraisal right of dissenting
purposes, q corporation is in a metqphy sicql sense q stockholders in accordance with the provisions of this Code. The
resident Qf the place where its principql office is locate or as articles of incorporation of a nonstock corporation may be amended
stated in the articles of incorporation. Even before this ruling by the vote or written assent of majority of the trustees and at least two-
it has already been established that the residence Qf a
thirds (2/3) of the members.
corporation is the plqce where its principql office is
established. The original and amended articles together shall contain all
The place where the principal office of the
corporation is to be located is one of the required contents of provisions required by law to be set out in the articles of incorporation.
the articles of incorporation which shall be filed with the Amendments to the articles shall be indicated by underscoring the change or
Securities and Exchange Commission (SEC).8 changes made, and a copy thereof duly certified under oath by the corporate
secretary and a majority of the director's or bustees, with a statement that
TERM OF EXISTENCE the amendments have been duly approved by the required vote of the
A corporation shall have perpetual existence unless its articles stockholders or members, shall be submitted to the Commission.
of incorporation provides otherwise.
The amendments shall take effect upon their approval by the
NUMBER OF BOARD OF DIRECTORS OR TRUSTEES Commission or from the date of filing with the said Commission if not
The number of directors shall not be more than fifteen (15). acted upon within six (6) months from the date of filing for a cause not
The number of trustees may be more than fifteen (15). attributable to the corporation.

AUTHORIZED CAPITAL STOCK Limitations in the Amendment of the Articles of Incorporation

This is the maximum amount fixed in the articles of 1. The amendment must be for legitimate purposes and must not be
incorporation that may be subscribed and paid by the stockholders of contrary to the Corporation Code and special laws;
the corporation. 2. The amendment must be approved by a majority of the board of directors
or board of trustees;
3. The amendment requires the vote or written assent of stockholders'
see Hyatt Elevators and Escalators Corporation vs. Goldstar Elevators, Phlls„ Inc., GR No.
representing 2/3 of the outstanding capital stock or 2/3 members if it be a
161026, October 24, 2005.
non-stock corporation;
235 4. The original and amended articles together shall contain all provisions
:ORPORATIONS required by law to be set out in the articles of incorporation. Such
articles, as amended, shall be indicated by underscoring the changes
The articles of incorporåtion of a stock corporation should made;
contain amount of its authorized capital stock in lawful money of the 236
Philippines, number of shares into which it is divided, and in case
the shares are par shares, the par value of each, the names, •rrrLE
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 : fåct must be
stated.
 11 - INCORPORATION AND ORGANIZATION OF PRWATE
- INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS
5. Certification under oath by the corporate secretary and a nonstock savings and loan associations (NSSLAs), pawnshops, and other
majority of the board of directors or board of trustees stating financial intermediaries shall be approved by the Commission unless
the fact that said amendments have been duly approved by the accompanied by a favorable recommendation. of the appropriate
required vote of the stockholders or members, shall be government agency to the effect that such articles or amendment is in
submitted to the SEC; accordance with law.
6. The amendment must be approved by the SEC;
7. The amendment must be accompanied by favorable
recommendation of the appropriate government agency in
237
cases of:
a. Banks;
b. Banking and quasi-banking institutions;
c. Preneed;
d. Insurance and bust companies;
e. Nonstock savings and loan associations (NSSLAs);
f. Pawnshops; and
g. Other financial intermediaries.

SEC. 16. Grounds When Articles of Incorporation or

Amendment may be Disapproved. - The Commission may
disapprove the articles of incorporation or any amendment
thereto if the same is not compliant with the requirements
of this Code: Provided, That the Commission shall give
the incorporators, directors, trustees, or officers a
reasonable time from receipt of the disapproval within
which to modify the objectionable portions of the articles
or amendment The following are grounds for such
disapproval:

(a) The articles of incorporation or any amendment

thereto is not substantially in accordance with the
form prescribed herein;
(b) The purpose or purposes of the corporation are
patently unconstitutional, illegal, immoral or contrary
to government rules and regulations;
(c) The certification concerning the amount of capital
stock subscribed and/or paid is false; and
(d) The required percentage of Filipino ownership of the
capital Stock under existing laws or the Constitution
has not been complied with.

No articles of incorporation or amendment to articles

of incorporation of banks, banking and quasi-banking
intitutions, preneed, insurance and trust companies,
TITLE 11 - INCORPORATION AND ORGANIZATION OF PRIVATETITLE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS

Note: corporation sole to a corporation aggregate required, not just an

Before disapproving the articles of incorporation or its amendments, amendment of X church's articles of incorporaäon, but a complete
the SEC should give the incorporators, directors, trustees, or oncers, Q dissolution of the existing corvoration sole followed by a re-
reasonable time within Which to correct or modify the objectionable portions incorporation.
Of the articles or amendment Can a corporation sole be converted into a corporation aggregate
by mere amendment of its articles of incorporation?
Problem: Answer:
In 1909, Bishop Z established the X church as a corporation sole True, the (Old) Corporation Code provides no specific
with Bishop Z acting as its "General Superintendent" Thirty-nine years mechanism for amending the articles of incorporation of a corporation
later in 1948, X chu'rch enacted and registered its by-laws that sole. But, as the RTC correctly held, Section 109 of the (Old) Corporation
established a Supreme Elders, made up of church ministers, who were to Code allows the application to religious corporations of the general
serve for four years. The by-laws empowered the Supreme Elders to elect provisions governing non-stock corporations.
a General Superintendent, a General Secretary, a General Evangelist, and There is np point t.p dissolving the corppratipn sole of one
a Treasurer General who would manage the affairs of the organization. member tp enable the corporation aggregate emerge from it. Whether
For all intents and purposes, the Supreme E\ders served as X church's it is a non-stock corporation or a corporation sole, the corporate being
board of directors. remains distinct from its members, whatever be their number. The
Apparently, although X church remained a corporation sole on increase in the number of its corporate membership does not change the
paper (with all corporate powers theoretically lodged in the hands of one complexion of its corporate responsibility to third parties. The one
member, the General! Superintendent), it had always acted like a member, with the concurrence of two-thirds of the membership of the
corporation aggregate. The Supreme Elders exercised X church's organizaäon for whom he acts as trustee, can self-will the arnendment
decision-making powers without ever being challenged. Subsequently, He can, with membership concurrence, increase the technical number of
during its 1973 General Conference, the general membership voted to put the members of the corporation from "sole" or one to the greater number
things right by changing X church's organizational structure from a authorized by its amended ar•äcles.
corporation sole- to corporation aggregate. On May 7, 1973 the The amendment of the articles of incorporation, requires merely
Securities and Exchange Commission (SEC) approved the vote. For some that: a) the amendment is not conüary to any provision or requirement
reasons, however, the corporate papers of the X church remained under the Corporation Code, and that b) it is for a legitimate purpose.
unaltered as a corporation sole. Section 17 of the Corporation Code (now Section 16, Revised Corporation
Only in 2001, about 28 years later, did the issue reemerge. In answer Code) provides that amendment shall be disapproved if, among others,
to a query from X church, the SEC replied on April 3, 2001 that,
although the SEC Commissioner did not, in 1948, object to the conversion not observed. or (f the purpose or purposes of the corporation are patently
of X church into a corporation aggregate, that conversion was not unconstitväonql. illeqqi. immoral. or contrqrv to government rules qnd
properly carried out ahd documented. The SEC said that X church needed reqvlqtions or if the required percentqqe Qf ownership is not complied
to amend its articles of incorporation for that purpose. with. These impediments do not appear in the case of X church. 9 a
Acting on this advice, the Supreme elders resolved to convert X
church to a corporatiqn aggregate. Bishop L, its General Superintendent, SEC. 17. Corporate Name. - No corporate name shall be allowed by the
instructed all their congregations to take up the matter with their Commission if it is not distinguishable from that already reserved or c
respective members. for resolution. Subsequently, the general registered for the use of another corporation, or if such name is already
membership approvéd the conversion, prompting X church to file protected by law, Or when its use is contrary to existing law, rules and c
amended articles of incorporation with the SEC. Bishop L filed regulations. .
an in support of the conversion.
X church's Reverend P, et al., which belonged to a faction that did A name is not distinguishable even if it contains one or more of the
not support the conversion, filed a civil case for "Declaration of following:1. The word corporation, company, incorporated, limited, limited liability
Nullity of Amended Articles of Incorporation from Corporation Sole or an abbreviation of such words 2. Punctuations, articles of conjuctions,
to Corporation Aggregate" in X church's name against members of its contractions, preposition, abbreviations, different tenses, spacing or mnumber of the
 - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS
Supreme same word or phrase
elders. They claim that a complete shift from X church's status as a 9 see Igles[a Evangel[a Metod'sä En Las (slas Filipinas (iEMELIF) (Corporadon sole). Inc., et-at. vs.
Bishop Nathanael Lazaro, etaL, GR No. 184088, July 6. 2010.
238 239
TITLE 11

Amended Guidelines and Procedures on the Use of Corporate and

Partnership Names
To keep abreast with developments in business and information
technolcv in the country, the SEC is adopting the following guidelines and
procedures in the registration of corporate, one person corporate and
partnership names:

1. a) The corporate name shall contain the word "Corporation" or

"Incorporated," or the abbreviations "Corp." or "Inc." Respectively.

b) in case of a One Person Corporation, the corporate name shall contain

the word "OPC'.' either below or at the end of its corporate name.

c) The partnership name shall bear the word "Company" or "Co." and if
it is a limited partnership, the word "Limited" or "Ltd". A
professional partnership name may bear the word "Company,"
"Associates," or "Partners," or other similar descriptions.

d) The corporate name of a foundation shall use the word "Foundation".

 11 - INCORPORATION AND ORGANIZATION OF PRIVATE
TITLE 11 - INCORPORATION AND ORGANIZATION OF PRIVATETITLE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS

CORPORATIONS(a) The word "corporation", "company "incorporated", CORPORATIONS

e) The corporate name of all non-stock, non-profit corporations,
including•non-governmental organizations and foundations, engaging
in microfinance activities shall use the word "Microfinance" or
"Microfinancing"; provided that said corporations shall state in the
"limited", "limited liability or an abbreviation of one of purpose clause of their Articles of Incorporation that they shall
such words; and conduct microfinance operations pursuant to Republic Act No. 8425
(b) Punctuations, articles, conjunctions, contractions, or the Social Reform and Poverty Alleviation Act
prepositions, abbreviations, different tenses, spacing,
or number of the same word or phrase. 2. A term that describes the business of a corporation in its name should
refer to its primary purpose. If there are two such terms, the first should
The Commission, upon determination that the refer to the primary purpose and the second to the secondary purpose.
corporate name is: (1) not distinguishable from a name already
reserved or registered for the use of another corporation; (2) 3. a) The name shall be distinguishable from other corporate or partnership
already protected by law; or (3) contrary to law, rules and name registered with the SEC, or with the Department of Trade and
regulations, may summarily order the corporation to industry, in the case of sole proprietorship.
immediately cease and desist from using such name and require
the corporation to register a new one. The Commission shall b) If the name applied for is similar to that of a registered corporation or
also cause the removal of all visible signages, marks, partnership, the applicant shall add one or more distinctive words to
the proposed name to remove the similarity or differentiate it from the
advertisements, labels, prints and other effects bearing such
registered name.
corporate name. Upon the approval of the new corporate name,
the Commission shall issue a certificate of incorporation under
However, the addition of one or more distinctive words shall
the amended name. not be allowed if the registered name is coined or unique unless the
board of
If the corporation fails to comply with the Commission's
order, the Commission may hold the corporation and its
241
responsible directors or officers in contempt and/or hold them
administratively, civilly and/or criminally liable under this directors or majority of ks or specially designated
Code and other applicable laws and/or revoke the registration the partners of the characters shall not be
subject corporation or registered.
of the corporation.
partnership gives its
Note: consent to the applied 4. Business or trade name which is
name. different from the corporate or
No corporate name shall be allowed by the Commission if
it is not distinguishable from that already reserved or registered partnership name shall be
for the use of another corporation, or if such name is already c) Punctuation marks, indicated in the articles of
protected by law, or when its use is contrary to existing law, rules spaces, signs, incorporation or partnership. A
and regulations. symbols, and other company may have more than
similar characters, one business or trade name.
regardless of their
A name is peculiarly important as necessary to the very form or arrangement,
existence of a corporation. Its name is one of its attributes, an element 5. A trade name or trademark
shall not be
of its existence, and essential to its identity. The general rule as to acceptable as
registered with the
corporations is that. each corporation must have a name by which it is distinguishing words Intellectual Property Office
to sue and be sued and do all for purposes of may be used as part of the
legal acts. The name of a corporation in this respect designates the differentiating a corporate or partnership
corporation in the same manner as the name of an individual proposed name from name of a party other than its
a registered name. owner if the latter gives its
designates the person; and the right to use its corporate name is as
consent to such use.
much a part of the corporate franchise as any other privilege granted. d) A name that consist
10
solely of special
 - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS
6. a) The full name or incorporator, director, or
surname of a person partner, as the case may be.
may be used in a
corporate or partnership 7. The name of an internationally
name if he or she is a known foreign corporation, or
stockholder, member or something similar to it, cannot
partner of the said entity be used by a domestic
and has consented to corporation unless it is its
such use; if the person is subsidiary and the parent
already deceased, the corporation has consented to
consent shall be given such use.
by his or her estate; 242
b) A single stockholder 8.
of a One Person
Corporation (OPC)
may use his/her
name; provided, that 9.
said name shall be However, a
accompanied with name written in a
descriptive words foreign language,
aside from the suffix even registered in
OPC. another country,
shall not be
The single registered if the
stockholder may also name viola good
use the name of another morals, public order
person provided consent or public policy, or
was given by the said has an offensive
person or if deceased, indecorous meaning
his estate. Provided that in any of the
the name shall be countrys official
accompanied by the languages or major
descriptive words other dialects.
than the suffix OPC.
The name of a local
c) The SEC may geographical unit,
require a registrant site or location
to explain to its cannot be used as:.
satisfaction the corporate or
partnership name
reason for the use unless it is
of a person's name. accompanied by a
descriptive word or
d) The meaning of
phrase, e.g. Pasay
initials used in a
Food Store, Inc.
name shall be stated
by the registrant in
the Articles of Pursuant to existing laws, the
Incorporation, following words and phrases can be
Articles of used - 11. in the corporate or
TITLE 11 - INCORPORATION AND ORGANIZATION OF PRIVATETITLE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
partnership name in the
manner enumerated below:

a) "Finance e)
Company," f)
"Financing
Company,"
"Finance and
Leasing
Company,"
and "Leasing
Company,"
h)
"investrnent
Company,"
"Investment
House" by
entities
engaged in
financing or
investment
house business
(RA. 8556 and
Pres. Decree
129).

b) "Lending
Company' and
"Lending
Investor" by
lending
companies
(RA 9474), or
"Pawnshop"
by entities
authorized to
operate
pawnshops
(P.D 114).

c) "Bank,"
"Banking,"
"Banker,"
"Savings and
Loan
Association"
(RA 8367),
"Trust
Corporation,"
"Trust
Company" or
 - INCORPORATION AND ORGANIZATION
OF PRIVATE
LE
Il
t

I
o
u
-
T
N

a) "
b) "
c) "
d) "
e) "
f) 'T
C
a the applicant for re-regisb•ation is a new corporation
) intending to use the name of the expired corporation
13. T (specially identifying the corporate name and registration
14. T number);
N
b the re-registration is approved by the maiority vote of the
) directors pr trustees and the vote of the stockholders
representing the majority of the outstanding capita! svock or
membership•
c
they shall include a statement in the articles of incorporaäon
)
of the new corporaäon that the same is using the name of the
expired corporation; and
d
if applicable, they will no longer file a petition to set aside the
)
order of revocation.

ii. Latest General Information Sheet of the expired corporation,

12. Pursuant to Republic Act 10530, or 'TheAct Defining The Use and Protection
of The Red Cross, Red Crescent and Red Crystal Emblems", the use of the stamped "received" by the SEC; and
words "red cross", "red crescent", or "red crystal" or their translation in any
official language and dialect cannot be used or registered as part of a iii Affidavit, executed under oath by the hold-over corporate
.
secretary, attesting that:
244
 TIT
LE
TITLE - INCORPORATION AND ORGANIZATION OF PRIVATE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
245
11
a) corpora
te
liquidat
ion
process;

b) there is
no
pending
intra-
corpora
te
dispute
or claim
involvi
ng the
expired
corpora
tion;
and

c) that the
expired
corpora
tion has
no
derogat
ory
informa
tion
with the
SEC at
the time
of its
applicat
ion for
re-
registrat
ion.

U
pon
approva
 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE tORPORATIONS CORPORATIONS
l of the allowed
re- for the
registrat registrat
ion, the ion or
certifica use of
te of the
registrat former
ion to corporat
be e or
issued partners
to the hip
new name
corpora provide
tion d that
shall •the
indicate corporat
its new ion or
SEC partners
registrat hip,
ion which
number previou
and pre- sly
generat owned
ed Tax the used
Identifi corporat
cation e or
Number partners
(TIN) hip
as name,
confirm gives its
ation consent.
that the The
same is require
a ment to
separate wit, as:
and
distinct For
entity
Corporations:
from
the
a)
expired Direct9E51.
corpora .Tr.ustees
tion. approving
the use of
the former
15. A
name by
another
n earlier corporation
period or
may be
 TIT
LE
TITLE - INCORPORATION AND ORGANIZATION OF PRIVATE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
ck
partnership;
and ho
lde
b) S r
For or,
in
Partnerships:
ca
ses
of
nership's inc
Resolutionap
approved aci
by
the ty
Of the
or
Partners de
approvingath
the use , of
the formerhis
name by
/he
another r
corporation
de
or sig
nat
partnership.
ed
no
24
mi
6 ne
e.
For gi
One ve
Perso n
in
n a
Corpo no
ration tar
ize
s: d
ins
tru
he me
co nt
ns an
ent d
of co
the un
sol ter
e sig
sto ne
 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE tORPORATIONS CORPORATIONS
d 248
by
the R
1. T
Co
2. A
rp
or 3. A
ate
Se N
T
cre h
tar c
y'. T
T
c
1o
a) D 2.
b) S .
17. a G
S
c) A D
T
18. A h
.1TLE 11S
eS
e
249
undertaking
11 is
already
included as one
of said the
provisions
counteof
the Articles
rpart, of
Incorporations
must
or Partnership
be
of the
unequi
registrant.ll
vocal
and
e intenti
E onal
l for,
1 when
L misapp
lied, it
h
can
easily
SEC MC No. becom
13,
series of2019.e a
most
 TIT
LE
TITLE - INCORPORATION AND ORGANIZATION OF PRIVATE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
conven tion
ient that
and can be
effectiv invoke
e d only
means in
of highly'
injustic excepti
e. onal
Estopp and
el is justi
not
unders fiable
tood to cases.
15
be a
principl
e that, Proble
as a m:
rule, X
should filed a
prevale case for
ntly damage
apply s
but, against
Y. X
such as alleged
it that he
conced was the
edly is, preside
as a nt of the
mere K
excepti Jeepney
Drivers'
on Associa
from tion,
the Inc. (K,
standar Inc)
d legal while Y
norms was the
preside
of
nt of the
general S
applica Jeepney
 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE tORPORATIONS CORPORATIONS
Operato collect
rs' and the
Drivers' daily
Associa dues
tion, from
Inc. (S, the
Inc.); member
Upon s of the
the consoli
request dated
of the associat
Sanggu ion;
niang election
Bayan, s were
X and held
Y and
agreed both X
to and Y
consoli ran for
date preside
their nt; X
respecti won; Y
ve proteste
associat d and,
ions and alleging
form fraud,
the refused
Unified to
Jeepney recogni
Operato ze the
rs' and results
Drivers' of the
Associa election
tion, ; Y aiso
Inc. (U, refused
Inc.); X to abide
and Y by their
also agreem
agreed ent and
to elect continu
one set ed
of collecti
officers ng the
who dues
shall be from
given the
the sole member
authorit s of his
y to associat
 TIT
LE
TITLE - INCORPORATION AND ORGANIZATION OF PRIVATE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
ion arose
despite out of
several their
demand plan to
s to consolid
desist X ate their
was respecti
thus ve
constrai jeepney
ned to drivers'
file the and
complai operator
nt to s'
resb•ain associati
Y from ons into
collecti a single
ng the common
dues. associati
on. This
the unified
doctrine associati
of on was,
corporat however
ion by , säll a
estoppel proposal
applicab .
le in the Consoli
present dation
case? becomes
Answer: effective
not upon
here is mere
no agreeme
intracor nt of the
porate member
nor s but
partners only
hip upon
relation issuance
between of the
X and certifica
Y. The te of
controve consolid
rsy ation by
between the
them SEC.
 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE tORPORATIONS CORPORATIONS
assumin
orporati g the
on by form of
estoppel a
is corporati
founded on, who
on therefore
principle kmow
s of that it
equity has not
and is been
designed registere
to d, there
prevent is no
injustice corporati
and on by
unfairne estoppel.
ss. It 16
applies T
when he
persons doctrine
assume of
to form corporati
a on by
corporati estoppel
on and may
exercise apply to
corporat the
e alleged
function corporati
s and on and
enter to a third
into party. In
business the first
relations instance,
with an
third unincorp
persons. orated
Where associati
there is on,
no third which
person represent
involved ed itself
and the to be a
conflict corporati
arises on,
only
among
those
 TIT
LE
TITLE - INCORPORATION AND ORGANIZATION OF PRIVATE - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
1
val ns
Drug
Corpor
cA
ation
vs. CA
and
Wilson
C Yao. SEC MC No. 13.
C.R. series of2019.
No.
103200 248
. R
August
31,
1. T
1993. 2. A
see 3. A
Reynal
do M. N
T
Lozano
vs.
Hon.El T
T
lezer
De Los
1.T
Santos h
2.T
and h
Antonl G
o
Anda.
C.R. c
No.
125221 D
T
, June h
19, S
1997. eS
250 e
249
W
O
n
S
H
A
T
1T
h
2
u
nI
e
a
d
 - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF
PRIVATE tORPORATIONS CORPORATIONS
said counterpart, must be unequivocal and intentional for, when will be estopped from denying its corporate capacity in a
misapplied, it can easily become a most convenient and effective means suit against it; by a third person who relied in good faith on
ofinjusäce. Estoppel is not understood to be a principle that, as a rule, such representation. It ? cannot allege lack of personality to
be sued to evade its responsibility for a contract it entered
should prevalently apply but, such as it concededly is, as a mere
into and by virtue of which it received advantages and
exception from the standard legal norms of general application that can benefits.
be invoked only in highly exceptional andjustifiable cases. 15 On the other hand, a third party who, knowing an
association to be unincorporated, nonetheless treated it as a
Problem: corporation and received benefits from it, may be barred from
denying its corporate existence in a suit brought against the
X filed a case for damages against Y. X alleged that he was the
alleged corporation. In such case, all those who benefited
president of the K Jeepney Drivers' Association, Inc. (K, Inc.) while Y was
from the .transaction made by the ostensible corporation, contracts
the president of the S Jeepney Operators' and Drivers' Association, Inc. (S,
despite knowledge of its legal defects, may be held liable for
Inc); Upon the request of the Sangguniang Bayan, X and Y agreed to
they impliedly assented to or took advantage of.17
consolidate their respective associations and form the Unified Jeepney
Operators' and Drivers' Association, Inc. (U, Inc.); X and Y also agreed to
elect one set ofofficers who shall be given the sole authority to collect the SEC. 21. Effects of Non-Use of Corporate Charter and
daily dues from the members of the consolidated association; elections were Continuous Inoperation. - If a corporation does not
held and both X and-Y ran for president; X won; Y protested and, alleging formally organize commence its business within five (5) revoked
fraud, refused to . recognize the results of the election; Y also refused to years from the date of its its certificate of incorporation
abide by their agreement and continued collecting the dues from the shall be deemed as of the day following the end of the five
members of his association despite several demands to desist X was thus (5)-year period.
constrained to file the complaint to restrain Y from collecting the dues.
Is the doctrine of corporation by estoppel applicable in the present
case? However, if a corporation has commenced its
Answer: business subsequently becomes inoperative for a period of
There is no intracorporate nor partnership relation beBueen X and
at least five consecutive years, the Commission may, after
Y. The controversy between them arose out of their plan to consolidate their due notice and hearing, place the corporation under
respective jeepney drivers' and operators' associations into a single common delinquent status.
association. This unified association was, however, still a proposal.
Consolidation becomes effective not upon mere agreement of the members A delinquent corporation shall have a period of two
but only upon issuance of the certificate of consolidaäon by the SEC. (2) years resume operations and comply with all
Corporation by estoppel is founded on principles of equity and is requirements that the Commission shall prescribe. Upon
designed to prevent injustice and unfairness. It applies when persons assume compliance by the corporation, the Commission shall issue
to form a corporation and exercise corporate functions and enter into
business relations with third persons. Where there is no third person an order lifting the delinquent status. Failure to comply
involved and the conflict arises only among those assuming the form of a with the requirements and resume operations within the
corporation, who therefore know that it has not been registered, there is no period given by the Commission shall cause the
cprporatipn hy estqppel.16 revocation of the corporation's certificate of incorporation.
The doca•ine of corporaäon by estoppel may apply to the alleged
corporation and to a third party. In the first instance, an unincorporated The Commission shall give reasonable notice to, and
association, which represented itselfto be a corporation,
coordinate with the appropriate regulatory agency prior
to the suspension or revocation of the certificate of
Naval Drug Corporaäon vs. CA and C Yao. C.R. No. 103200, August 31. 1993.
incorporation of companies under special regulatory
see Reynaldo M. Lozano vs. Hon.Ellezer R. De ins Santos and Antonio Anda. GR. No. 125221, June 19, 1997.
250 jurisdiction.
TITLE - INCORPORATION AND ORGANIZATION OF PRIVATE TITLE 11 - INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS CORPORATIONS
1. FAILURE TO FORMALLY ORGANIZE AND COMMENCE 252
ITS BUSINESS WITHIN 5 YEARS FROM THE DATE OF ITS 253
INCORPORATION
The certificate of incorporation shall be deemed revoked as of the day
following the end of the five (5) year period.

Lim Tong Llm vs. Phillpplne Fishing Gear IndusMes, Inc., GR No. 136448. November 3, 1999.
251
11

Examples of acts constituting formal organization

1. Adoption of by-laws and filing of the same with the SEC.
2. Election of Board of Directors or Board of Trustees as well as the
officers like the President, Secretary, Treasurer, and other officers as stated in its by-
laws.
3. Establishment of the principal once.
4. providing for the subscription and payment of its shares stock.
5. Other necessary to enable the corporation to transact business or accomplish
the purpose for which it was created.

Examples of acts constituting commencement of business

1, Entering into contracts or negotiation for lease or sale of properties to be
used as business or factory site,
2. Making plans for and the construction of the factory.
3. Taking steps to expedite the construction of the corporation's working
equipment

Il, CONTINUOUS INOPERATION FORAT LEAST 5

CONSECUTIVE YEARS
The SEC may, after due notice and hearing, place the
corporation under delinquent status.

Note:
A delinquent corporation shall have a period of two (2) years to resume
operations and comply with all requirements that the Commission shall
prescribe. Upon compliance by the corporation, the Commission shall issue an
order lifting the delinquent status. Failure to comply with the requirements and
resume operations within the period given by the Commission Shall cause the
revocation of the corporation's certificate of incorporation.