SECTION 17

No corporate name shall be allowed by the Commission if it is not distinguishable from that
already reserved or registered for the use of another corporation, or if such name is already
protected by law, or when its use is contrary to existing law, rules and regulations.
A name is not distinguishable even if it contains one or more of the following:
(a) The word “corporation”, “company”, “incorporated”, “limited”, “limited liability”, or an
abbreviation of one of such words; and
(b) Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different
tenses, spacing, or number of the same word or phrase.
The Commission, upon determination that the corporate name is:
(1) not distinguishable from a name already reserved or registered for the use of another
corporation;
(2) already protected by law; or
(3) contrary to law, rules and regulations, may summarily order the corporation to immediately
cease from using such name and require the corporation to register a new one.
 SECTION 17
The Commission shall also cause the removal of all visible signages,
marks, advertisements, labels, prints and other effects bearing such
corporate name. Upon the approval of the new corporate name, the
Commission shall issue a certificate of incorporation under the
amended name.
If the corporation fails to comply with the Commission’s order, the
Commission may hold the corporation and its responsible directors or
officers in contempt and/or hold them administratively, civilly and/or
criminally liable under this Code and other applicable laws and/or
revoke the registration of the corporation.
 SECTION 17

Change of corporate name

1.Requirements
2.Effect

Limitation upon use of corporate name

 SECTION 18
SEC. 18. Registration, Incorporation and Commencement of Corporate Existence. – A person or
group of persons desiring to incorporate shall submit the intended corporate name to the
Commission for verification. If the Commission finds that the name is distinguishable from a name
already reserved or registered for the use of another corporation, not protected by law and is not
contrary to law, rules and regulations, the name shall be reserved in favor of the incorporators.
The incorporators shall then submit their articles of incorporation and bylaws to the Commission.
If the Commission finds that the submitted documents and information are fully compliant with
the requirements of this Code, other relevant laws, rules and regulations, the Commission shall
issue the certificate of incorporation.
A private corporation organized under this Code commences its corporate existence and juridical
personality from the date the Commission issues the certificate of incorporation under its official
seal and thereupon the incorporators, stockholders/members and their successors shall
constitute a body corporate under the name stated in the articles of incorporation for the period
of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in
accordance with law.
 SECTION 18

Issuance of juridical personality

1.Issuance of certificate of incorporation

2.Filing of articles of incorporation
3.Registration of cooperative
 SECTION 19

SEC. 19. 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 19
De Jure Corporation defined
It is one created in strict or substantial conformity with the
mandatory statutory requirements for incorporation and whose right to
exist as a corporation cannot be successfully questioned by any party
even in a direct proceeding for that purpose by the State.

De Facto Corporation defined

It is one which actually exists for all practical purposes as a
corporation but which has no legal right to corporate existence as
against the State. It is a corporation from the fact of its acting as such,
though not in law or of right a corporation.
 SECTION 19

Requisites of a de facto corporation

Existence of law

Bona fide attempt to incorporate

1.Creation of corporation precluded
2.Creation of de facto corporation results
 SECTION 19
User or exercise of corporate powers in good faith
1.User contemplated
2.Duty to correct defect of discovered

Questioning validity of corporate existence

Direct attack of corporate existence

Collateral attack of corporate existence

Reason for the rule against collateral attack

 SECTION 20

SEC. 20. 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 its lack
of corporate personality as a defense. Anyone 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 20

Estoppel to deny corporate existence

Corporation by estoppel without de facto existence

 SECTION 21

SEC. 21. Effects of Non-Use of Corporate Charter and Continuous

Inoperation. – If a corporation does not formally organize and
commence its business within five (5) years from the date of its
incorporation, its certificate of incorporation shall be deemed revoked
as of the day following the end of the five (5)-year period.
However, if a corporation has commenced its business but
subsequently becomes inoperative for a period of at least five (5)
consecutive years, the Commission may, after due notice and hearing,
place the corporation under delinquent status. Page 11 of 73
 SECTION 21
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.
The Commission shall give reasonable notice to, and coordinate with
the appropriate regulatory agency prior to the suspension or revocation
of the certificate of incorporation of companies under their special
regulatory jurisdiction.
 SECTION 21
Statutory requirements before and after corporation

Mandatory provisions- prescribe formalities for

incorporation which are designed to protect the public.

Directory provisions- regarded as relatively

inconsequential so that failure to comply with a directory
provision will not be fatal to valid corporation.
 SECTION 21
Conditions precedent explained

Conditions subsequent explained

Formal organization and commencement of business

1.Acts constituting formal organizationn
2.Substantial compliance effect
3.Acts constituting commencement of business
4.Effect of subsequent continuous inoperation
 PART II

B O A R D
TITLE III
O F D I R E C T O R S / T R U S T E E S / O F F I C E R S
S E C 2 2 - 3 4
 SECTION 22
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term. – Unless otherwise provided in this Code, the
board of directors or trustees shall exercise the corporate powers,
conduct all business, and control all properties of the corporation.
Directors shall be elected for a term of one (1) year from among the
holders of stocks registered in the corporation’s books, while trustees
shall be elected for a term not exceeding three (3) years from among
the members of the corporation. Each director and trustee shall hold
office until the successor is elected and qualified. A director who
ceases to own at least one (1) share of stock or a trustee who ceases to
be a member of the corporation shall cease to be such.
 SECTION 22
The board of the following corporations vested with public interest shall have independent
directors constituting at least twenty percent (20%) of such board:
a) Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as “The
Securities Regulation Code”, namely those whose securities are registered with the
Commission, corporations listed with an exchange or with assets of at least Fifty million pesos
(P50,000,000.00) and having two hundred (200) or more holders of shares, each holding at
least one hundred (100) shares of a class of its equity shares;
b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service
business, pre-need, trust and insurance companies, and other financial intermediaries; and
c) Other corporations engaged in business vested with public interest similar to the above, as
may be determined by the Commission, after taking into account relevant factors which are
germane to the objective and purpose of requiring the election of an independent director,
such as the extent of minority ownership, type of financial products or securities issued or
offered to investors, public interest involved in the nature of business operations, and other
analogous factors.
 SECTION 22
An independent director is a person who, apart from shareholdings and fees
received from the corporation, is independent of management and free from any
business or other relationship Page 12 of 73 which could, or could reasonably be
perceived to materially interfere with the exercise of independent judgment in
carrying out the responsibilities as a director. Independent directors must be
elected by the shareholders present or entitled to vote in absentia during the
election of directors.
Independent directors shall be subject to rules and regulations governing their
qualifications, disqualifications, voting requirements, duration of term and term
limit, maximum number of board memberships and other requirements that the
Commission will prescribe to strengthen their independence and align with
international best practices.
 SECTION 22
Corporate powers exercised by board of directors or
trustees
1.Governing body of the corporation
2.Binding effect of stockholders’ action
3.Extent of judicial review

Reason for the Rule

 SECTION 22
Limitation on powers of board of directors and trustees

Powers exercised by board of directors or trustees as a

board

Reasons for the rule

Exceptions to the rule

 SECTION 22

Delegation of power of directors or trustees

1.General rule
2.Exceptions
 SECTION 22
Number of directors or trustees

1.Stock corporations
2.Ordinary non-stock corporations
3.Close corporation
4.Corporation sole
5.Religious societies
 SECTION 22
Qualifications of directors or trustees
Reason for the requirement

Natural persons contemplated by law

Stock ownership requirement

Additional qualifications by law

Effect of lack of qualification