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LTS Program
Objectives

After finishing this module, you will be able to

a. Explain what Lesson Plan is.

b. Discuss the things to be considered in lesson planning.
c. Write your own lesson plan.
d. Appreciate the importance of proper lesson planning in the learning process.

Just like the blueprint of the architect, or the script of a play, teachers also need a plan for their daily
activities. This is commonly called a Lesson Plan.

Lesson Proper

A Lesson Proper serves as blueprint for a teacher. It provides the general framework for the work of the
day or term that would be carried out. According to Bossing (1952), a lesson plan is “a statement of
achievements to be realized and the specific means by which these are to be attained as a result of the
activities engaged in day by day under the guidance of the teacher.”

The sole purpose of lesson planning is the improvement of teaching by the teachers and of the learning by
the learners. A well- made lesson plan will give the teacher a feeling of confidence and security in the
classroom. He/She will have a definite and appropriate experience ready to develop with the students.

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Example,

If you are teaching Mathematics to a grade one pupil and the topic is counting number, you can use
colorful Popsicle sticks for you to get his/her attention. The give a number and ask him/her to count using
the Popsicle sticks.

Evaluating the effectiveness of the procedure

Intelligent teaching requires evaluation. Evaluation must be focused on the teaching and learning of the
pupils, the ability of an effective teacher to evaluate the growth of each pupil will be a factor to determine
whether the teacher succeeded in teaching the subject matter or not. This includes recitation, quizzes and
reviews.

Revisions

The plan must be flexible to make any necessary changes possible.

Giving the assignment

An assignment is another important phase of teaching. The fundamental aim of the assignment is to give
pupils definite work to do and to guide and to stimulate them for the performance of such work, which
will result in an educative experience. It must bring out the interest of the student to the past or new
lesson.

After knowing the back steps of making your own lesson plan, let us new put into application those
things. First, I will give you the types of lesson plans that you can use.

Types of Lesson Plans

A. Detailed Lesson Plan – this is the type of lesson plan used by first time teachers. Just like a
script of a play, you write down all the questions and the expected answers of your students.

Example

Title: Lesson Plan in Math 1

Objectives

After the 30 minute lesson the students should be able to:

1. Define counting numbers.

2. Recite the counting numbers from 1 – 10.
3. Write the counting numbers from 1 – 10 in a piece of paper.

Subject Matter / Topic : Counting numbers

Materials : Popsicle sticks, pen, paper, glue

Procedure :

Teacher’s Activity Student’

Good morning class! Good morning Ma’am!
Today we will discuss counting numbers. Ma’am, counting numbers are numbers that does
Can anyone give me the definition of counting not include zero, fraction and negative numbers.
numbers?

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(In detailed lesson plan you need to write down all the questions that you will ask during the discussion
and the expected answers from your students)

Evaluation

Write the counting numbers from 1 – 10 in a ½ sheet of paper.(10 points)

Semi-Detailed Lesson Plan – It simply contains the lesson procedures and guide questions for students.

Example

Title: Lesson Plan in Math 1

Objectives

After 30 – minute lesson the students should be able to:

1. Define counting numbers.

2. Recite the counting number from 1- 10.
3. Write the counting numbers from 1 – 10 in a piece of paper.

Subject Matter / Topic: Counting numbers

Procedure

1. What is a counting number?

2. What are the characteristics of a counting number? (Just give the essential/guide questions that
will be used in the discussion.)

Evaluation

Write the counting numbers from 1 – 10 in a ½ sheet of paper. (10 points)

Brief Lesson Plan – It contains a very short description of the activity and is usually guided by a course
outline.

Example

Title : Lesson Plan in Math 1

Objective

After the 30 – minute lesson the students should be able to:

1. Define counting numbers.

2. Recite the counting numbers from 1 – 10.
3. Write the counting numbers from 1 – 10 in a piece of paper.

Subject Matter / Topic: Counting numbers

Materials: Popsicle sticks, pen, paper, glue

Procedure / Activity: Pre test and Post test

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Basic parts of a Lesson Plan

1. Title – this usually includes the type of lesson plan that you will use, the name of the teacher and
the date of teaching
2. Objectives – here you will place your aims or objectives for your lesson plan. It must be clear and
measurable. This is stated by the phrase “At the end of the lesson the students are expected to…”.
3. Subject Matter – this provides the main facts and concept of the lesson.
4. Materials – these include the instructional materials you will use. These may be a blackboard,
visual aids and/or projector.
5. Procedure – this includes the lesson proper, specifically the teacher and student activities. It is in
a two column form, one side for the teacher’s activity and another for the student activity.
 Motivation – in a detailed lesson plan, it is where we write the opening prayer, the
greetings and the motivation that we will use { such as a quotation, a game or an
anecdote}.
 Discussion – here you place the main content of your subject matter. This also includes
the guide questions and expected answers of the student.
 Summary/Closing Activity – it is where we write here the closing remarks, summary and
generalization of the lesson.
 Evaluation or Assignment – this serves to measure the learner or student’s
comprehension or their preparation for the next lesson.

At the most, teachers teach only one subject at a time, but there is a day when they are assigned to teach
all the subjects. Time may be devoted for the preparation of the materials and other teaching aids. So to
make it easier for you, you may use the lesson plans shown above as guide.

Objectives

If a teacher wants to teach her lesson very well he/she must have a blueprint that will serve as a guide
throughout the session. Just like an architect who wants to build a house or a building he / she must first
have the idea on how he/ she wants it to look like and then draw it afterwards. The very first step in
making a lesson plan is formulating the objectives; these are the things that the teacher wants to attain at
the end of every lesson.

One of the most popular proponents of education, Benjamin Bloom conceptualized the so called Bloom’s
Taxonomy (figure 1.1).

Move your mouse on the box for a closer view of each objectives. You don’t have to click on it.

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 Bloom’s Taxonomy Objectives

Leaning
Knowledge Comprehension Application Analysis Synthesis Evaluation
Domain
Draw Explain Apply Analyze Combine Solve
Identify Relate Modify Sort Design Critique
Label Describe Build Categorize Invert Criticize
Select Paraphrase Construct Investigate Originate Upgrade
Appropriate Outline Confirm Solve Compare Compose Appraise
Verbs used Write Convert Report Debate Generate Assess
to start The List Match Sketch Differentiate Plan Conclude
Objectives Recite Infer Procedure Examine Formulate Justify
State Discuss Device Judge
Name Estimate Revise
Record Predict Hypothesize
Repeat

Learning Knowledg Comprehensio Applicatio

Analysis Synthesis Evaluation
Domain e n n
People Speech Diagram Survey Poem Editorial
Events Story Sculpture Syllogism Play Conclusion
Recording Photograph Photograph Model Invention Valuing
s Diagram Forecast Conclusion Game Self-Evaluation
Dictionary Analogy Illustration Graph Article Group
Student
Television Collage List Argument Cartoon Discussion
Output/Product
Shows Graph Project Questionnair Story Recommendatio
s
Definition Exams Puzzle e Book n
Text Drama Cartoon Report Experimen Court Trial
Reading Poster Filmstrips t Survey
Magazine Summary Report
Articles Outline Song

Bloom’s Taxonomy Objectives

There are three domains of educational activities according to Benjamin Bloom. First is the cognitive
domain which focuses mainly on mental skills (Knowledge). Second is the affective domain that
concentrates on the growth in feelings or emotional areas of a child (Attitude). And lastly the
psychomotor domain includes physical movement, coordination and use of motor skills.

The diagram gives emphasis on the five levels of cognitive domain (Purple) namely Knowledge,
Comprehension, Application, Synthesis and Evaluation

As for you who are still new in the field of teaching Bloom’s Taxonomy will help you in formulating
your objectives because it already provides the right words/verbs to be used (Orange) and suitable
activities for you to be able to meet objectives that you want your students to learn (Green).

There are so many activities that you can give to your students. In fact you can create your own if you
want to. For example, if you want your students to understand a particular text. You should select the
right verb under comprehension to be able to formulate a right objective and choose from the activities
that falls under it. Remember to take into consideration the capability of your learner before choosing the

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activities. Ask yourself “will he/she be able to do or answer that?” , “Is the activity suitable for his/her age
and capabilities?”

Take note of the following examples:

1. Topic: Rational numbers

Objective: “To solve an equation involving rational numbers.”

Exercise: 2 ½ + 2 1/2 = ___

2. Topic: “Events in World History”

Objective: “ Outline the important events in world history”

“Activity : Make the student fill a blank time line”

These are just some of the sample objectives and activities for a certain topic/s. always remember to
make your objectives very specific so you would know if you were able to meet them and make the
activities suitable for your learner.

Evaluating a Lesson Plan

Evaluating the Lesson Plan measures how much the student learned from the lesson that was
previously taught. This also shows the impact of the lesson to the learner after teaching the lesson.
Evaluating will also reveal the effectiveness and efficiency of the Lesson Plan in the teaching process.

Lesson Plan Evaluation Tool

The following chart provides a scoring guide and a selection of descriptive terms to use in the evaluation
of your Lesson Plan. When giving feedbacks, provide a number in the “rating” column. Use N/A if the
statement is not applicable to this observation. Comment sections can be added under each statement or,
as provided, under each broad section.

The chart on the next page is the list of rating used to evaluate the Lesson Plan.

5 4 3 2 1

Outstanding Above Average Satisfactory Below Average Unsatisfactory

Rating

1. Effectiveness
 Did you fully achieve the objectives in the 
implementation of the lesson plan?
 Did these factors in lesson planning facilitate the 
achievement of you objectives?
1. Mastery of the subject matter 2.
3. Learning environment 4.

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 5. Others: (please specify) ________________ 6.
2. Efficiency
 Were the resources utilized well in the 
implementation of the project?
1. Materials 2.
3. Books 4.
5. Others: (please specify) _____________ 6.
 Was the time spent for the lesson enough? Was it 
utilized wisely?
3. Appropriateness 4.
 Was the lesson appropriate to the age of the 
learner?
 Was it suitable to the needs of the learning? 

TOTAL 

BUSINESS ORGANIZATION
PARTNERSHIP
Partnership, nature:
Within the context of Philippine law, a "partnership" is treated as an artificial being created by operation
of law with a legal personality separate and distinct from the partners thereof.  It proceeds from the
concept that persons may be allowed to pool their resources and funds to engage in the pursuit of a
common business objective without necessarily organizing themselves into a corporation, upon which the
law imposes a much higher form of regulation, limitation and standards. Philippine partnerships operate
under the concept of unlimited liability and unless otherwise agreed upon by the partners, each one of
them acts as manager and agent of the partnership and consequently, their acts bind the partnership.cralaw

Partnership, governing law:

Unlike corporations whose governing law is a special law - the Corporation Code of the Philippines,
partnerships in the Philippines are governed by and covered under Articles 1767 to 1867 of the Civil
Code of the Philippines [circa 1950].  These are the provisions of law which govern all aspects of
partnerships - from their creation, formation, existence, operation and management to their dissolution
and liquidation, including the obligations of the partners to one another, to the public or third persons and
to the government.

Partnership, how formed; registration requirement:

Partnerships are required to be registered with the Securities and Exchange Commission [SEC]. 
Registration is done by filing the Articles of Partnership with the SEC.  The Articles of Partnership set
forth all the terms and conditions mutually agreed by the partners thereto.
More specifically, the documents required are as follows:
[1]  Proposed Articles of Partnership;
[2]  Name Verification Slip;
[3]  Bank Certificate of Deposit;
[4]  Alien Certificate of Registration, Special Investors Resident Visa or proof of other types of visa [in
case of foreigner];
[5]  Proof of Inward Remittance [in case of non-resident aliens].
It bears noting that corporations are not allowed by law to become partners in a partnership.

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Partners, liability:
As a general rule, the liability of partners in a partnership organization is unlimited in the sense that the
partnership creditors may run after them for any and all of their assets and property in payment of the
partnership debts. Should one of the partners defray all liabilities of the partnership, he is entitled to be
reimbursed by the other partners for their respective shares therein.
In the case, however, of limited partnerships, the law allows the limitation of the liability of certain
partners to the extent of the amount contributed to the partnership.

Partnership, dissolution:
Philippine law allows the dissolution of partnership for any reason, provided such dissolution does not
amount to a breach of contract or is prejudicial to third parties.  The death of a partner or the unauthorized
transfer of ownership of his share in the partnership [in case there is a limitation to this effect] results in
the dissolution thereof.  In other words, any change in the composition of the partnership, unless so
allowed, will result in the dissolution thereof.  Consequently, the remaining partners may form a new
partnership with less or more partners.

Business or professional ethics are standards or codes of conduct set by people in a specific profession.
A code of ethics is a part of the expectations of those involved in many different types of professions.
People in a profession don't want to condone bad, dishonest or irresponsible behavior if it does occur by
someone in their field. By setting out expected behaviors in the form of professional ethics, professionals
work together to try to uphold a good reputation. Professional ethics are commonly known as ethical
business practices.

Respect and honesty are the two main components of professional ethics. All employees are expected to
represent a business ethically as they are a part of it. This is why businesspeople traditionally speak of
"we" or "us" rather than the more personal "I" for the most part. For instance, if an employee must
mention company policy to a customer, he or she may say "I'm sorry, but this is our company policy in
these situations." Policies are another type of preferred standards in how business is done, and everyone
in a company is expected to represent them.

It should be noted that people within each profession are expected to be respectful and honest in their
personal dealings as well. For instance, it would be unethical for law enforcement professionals to also be
criminals in their time off the job. Professionals are also expected to uphold professional ethics by not
getting involved in any type of conflict of interest. A conflict of interest situation may occur when an
individual tries to accomplish personal goals as a result of being in a certain profession. For example, a
politician who uses government resources to get work done on his personal home could be seen as being
involved in a conflict of interest.

Professional ethics training is often included in career education programs. For instance, medical
assistants are trained on the many ethics issues regarding patient confidentiality. It is both unethical and
unlawful to discuss a patient's health records with others who are not involved in the medical care of the
individual.

Engineering, journalism, religious organizations and many other professions have professional ethics.
These ethical codes or rules must never go against laws, but rather often coordinate with them as in the
case of medical record confidentiality. In general, professional ethics always include upholding honesty
and respect in the profession over personal needs, conflicts or biases. A bias is a personal belief such as
prejudice toward a certain group of people.

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 THE CORPORATION CODE OF THE PHILIPPINES

TITLE I : GENERAL PROVISIONS

Definitions and Classifications

Section 1. Title of the Code. – This Code shall be known as “The Corporation Code of the Philippines”.

Sec. 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.

Sec. 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.

Sec. 4. Corporations created by special laws or charters. – Corporations created by special laws or
charters shall be governed primarily by the provisions of the special law or charter creating them or
applicable to them, supplemented by the provisions of this Code, insofar as they are applicable.

Sec. 5. Corporators and incorporators, stockholders and members. – Corporators are those who compose a
corporation, whether as stockholders or as members. Incorporators are those stockholders or members
mentioned in the articles of incorporation as originally forming and composing the corporation and who
are signatories thereof.

Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-stock

corporation are called members.

Sec. 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.

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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.

Sec. 7. Founders’ shares. – Founders’ shares classified as such in the articles of incorporation may be
given certain rights and privileges not enjoyed by the owners of other stocks, provided that where the
exclusive right to vote and be voted for in the election of directors is granted, it must be for a limited
period not to exceed five (5) years subject to the approval of the Securities and Exchange Commission.
The five-year period shall commence from the date of the aforesaid approval by the Securities and
Exchange Commission.

Sec. 8. Redeemable shares. – Redeemable shares may be issued by the corporation when expressly so
provided in the articles of incorporation. They may be purchased or taken up by the corporation upon the
expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books of
the corporation, and upon such other terms and conditions as may be stated in the articles of
incorporation, which terms and conditions must also be stated in the certificate of stock representing said
shares.

Sec. 9. Treasury shares. – Treasury shares are shares of stock which have been issued and fully paid for,
but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through
some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board
of directors.

TITLE II : INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

Sec. 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.

Sec. 11. Corporate term. – A corporation shall exist for a period not exceeding fifty (50) years from the
date of incorporation unless sooner dissolved or unless said period is extended. The corporate term as

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originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50)
years in any single instance by an amendment of the articles of incorporation, in accordance with this
Code; Provided, That no extension can be made earlier than five (5) years prior to the original or
subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be
determined by the Securities and Exchange Commission.

Sec. 12. Minimum capital stock required of stock corporations. – Stock corporations incorporated under
this Code shall not be required to have any minimum authorized capital stock except as otherwise
specifically provided for by special law, and subject to the provisions of the following section.

Sec. 13. Amount of capital stock to be subscribed and paid for the purposes of incorporation. – At least
twenty-five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be
subscribed at the time of incorporation, and at least twenty-five (25%) per cent of the total subscription
must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of
subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the
board of directors: Provided, however, That in no case shall the paid-up capital be less than five Thousand
(P5,000.00) pesos.

Sec. 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 he 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

19
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.

Sec. 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

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………………………………. ………………………………. ……………………………….

………………………………. ………………………………. ……………………………….

………………………………. ………………………………. ……………………………….

………………………………. ………………………………. ……………………………….

………………………………. ………………………………. ……………………………….

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

…………………………….. ……………………………….. ………………………….

…………………………….. ……………………………….. ………………………….

…………………………….. ……………………………….. ………………………….

…………………………….. ……………………………….. ………………………….

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…………………………….. ……………………………….. ………………………….

(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
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

22
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)

Sec. 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.

Sec. 17. Grounds when articles of incorporation or amendment may be rejected or disapproved. – The
Securities and Exchange Commission may reject the articles of incorporation or disapprove any
amendment thereto if the same is not in compliance with the requirements of this Code: Provided, That
the Commission shall give the incorporators a reasonable time within which to correct or modify the
objectionable portions of the articles or amendment. The following are grounds for such rejection or
disapproval:

1. That the articles of incorporation or any amendment thereto is not substantially in

accordance with the form prescribed herein;

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 2. That the purpose or purposes of the corporation are patently unconstitutional, illegal,
immoral, or contrary to government rules and regulations;
3. That the Treasurer’s Affidavit concerning the amount of capital stock subscribed and/or
paid if false;
4. That the percentage of ownership of the capital stock to be owned by citizens of the
Philippines has not been complied with as required by existing laws or the Constitution.

No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-

banking institutions, building and loan associations, trust companies and other financial intermediaries,
insurance companies, public utilities, educational institutions, and other corporations governed by special
laws shall be accepted or approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the effect that such articles or amendment is in
accordance with law.

Sec. 18. Corporate name. – No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently deceptive, confusing or contrary
to existing laws. When a change in the corporate name is approved, the Commission shall issue an
amended certificate of incorporation under the amended name.

Sec. 19. Commencement of corporate existence. – A private corporation formed or organized under this
Code commences to have corporate existence and juridical personality and is deemed incorporated from
the date the Securities and Exchange Commission issues a certificate of incorporation under its official
seal; and thereupon the incorporators, stockholders/members and their successors shall constitute a body
politic and 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.

Sec. 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.

Sec. 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.

Sec. 22. Effects on non-use of corporate charter and continuous inoperation of a corporation. – If a
corporation does not formally organize and commence the transaction of its business or the construction
of its works within two (2) years from the date of its incorporation, its corporate powers cease and the
corporation shall be deemed dissolved. However, if a corporation has commenced the transaction of its
business but subsequently becomes continuously inoperative for a period of at least five (5) years, the
same shall be a ground for the suspension or revocation of its corporate franchise or certificate of
incorporation.

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This provision shall not apply if the failure to organize, commence the transaction of its businesses or the
construction of its works, or to continuously operate is due to causes beyond the control of the
corporation as may be determined by the Securities and Exchange Commission.

TITLE III : BOARD OF DIRECTORS/TRUSTEES/OFFICERS

Sec. 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.

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.

Sec. 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 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.

Sec. 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,

25
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.

Sec. 26. Report of election of directors, trustees and officers. – Within thirty (30) days after the election
of the directors, trustees and officers of the corporation, the secretary, or any other officer of the
corporation, shall submit to the Securities and Exchange Commission, the names, nationalities and
residences of the directors, trustees, and officers elected. Should a director, trustee or officer die, resign or
in any manner cease to hold office, his heirs in case of his death, the secretary, or any other officer of the
corporation, or the director, trustee or officer himself, shall immediately report such fact to the Securities
and Exchange Commission.

Sec. 27. Disqualification of directors, trustees or officers. – No person convicted by final judgment of an
offense punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code
committed within five (5) years prior to the date of his election or appointment, shall qualify as a director,
trustee or officer of any corporation.

Sec. 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.

Sec. 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.

A 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.

Sec. 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
pre 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

26
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.

Sec. 31. Liability of directors, trustees or officers. – Directors or trustees who willfully 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.

Sec. 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 nor 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.

Sec. 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.

Sec. 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.

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Sec. 35. Executive committee. – The by-laws of a corporation may create an executive committee,
composed of not less than three members of the board, to be appointed by the board. Said committee may
act, by majority vote of all its members, on such specific matters within the competence of the board, as
may be delegated to it in the by-laws or on a majority vote of the board, except with respect to: (1)
approval of any action for which shareholders’ approval is also required; (2) the filing of vacancies in the
board; (3) the amendment or repeal of by-laws or the adoption of new by-laws; (4) the amendment or
repeal of any resolution of the board which by its express terms is not so amendable or repealable; and (5)
a distribution of cash dividends to the shareholders.

TITLE IV : POWERS OF CORPORATIONS

Sec. 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.

Sec. 37. Power to extend or shorten corporate term. – A private corporation may extend or shorten its
term as stated in the articles of incorporation when approved by a majority vote of the board of directors
or trustees and ratified at a meeting 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 case of non-stock corporations.
Written notice of the proposed action and of the time and place of the meeting shall be addressed to each

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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 in case of
extension of corporate term, any dissenting stockholder may exercise his appraisal right under the
conditions provided in this code. (n)

Sec. 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

29
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. (17a)

Sec. 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.

Sec. 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.

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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. (28 1/2a)

Sec. 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. (n)

Sec. 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. (17
1/2a)

Sec. 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. (n)

Sec. 44. Power to enter into management contract. – No corporation shall conclude a management
contract with another corporation unless such contract shall have been approved by the board of directors
and by stockholders owning at least the majority of the outstanding capital stock, or by at least a majority
of the members in the case of a non-stock corporation, of both the managing and the managed

31
corporation, at a meeting duly called for the purpose: Provided, That (1) where a stockholder or
stockholders representing the same interest of both the managing and the managed corporations own or
control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the managing
corporation; or (2) where a majority of the members of the board of directors of the managing corporation
also constitute a majority of the members of the board of directors of the managed corporation, then the
management contract must be approved by the stockholders of the managed corporation owning at least
two-thirds (2/3) of the total outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of the
members in the case of a non-stock corporation. No management contract shall be entered into for a
period longer than five years for any one term.

The provisions of the next preceding paragraph shall apply to any contract whereby a corporation
undertakes to manage or operate all or substantially all of the business of another corporation, whether
such contracts are called service contracts, operating agreements or otherwise: Provided, however, That
such service contracts or operating agreements which relate to the exploration, development, exploitation
or utilization of natural resources may be entered into for such periods as may be provided by the
pertinent laws or regulations. (n)

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