Law on Corporation Title 2 (Part 1)

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.
 
Qualifications of incorporators
1. Must be a natural person.

2. Must be of legal age.

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 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 purpose 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 percent (25%)
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 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 (P5,0000) pesos.
 
Amount to be subscribed and paid
Illustration:
 

If X, Inc. has authorized capital stock of P100, 000 divided into 1,000 shares with par value of
P100.00 per share, it must be shown that at least P25, 000 or 250 shares of the authorized capital
stock must be subscribed. Of the total subscription of P25, 000, at least P6, 250.00 or 25% of total
subscription must be paid. It is not necessary that each subscriber pay Twenty-five percent (25%) on
his subscription. On the other hand, where the authorized capital stock is stated at 2,000 no par
value shares , it must be shown that at least 500- no par value share have been subscribed. The
basis of computation is on the number of shares.

Securities and Exchange Commission (SEC) may conduct compliance with paid-up capital
requirements because it has come to the knowledge of the Commission that some corporation have
been organized merely as fronts for some hidden objectives with no real intention of carrying out the
purported purposes in their articles of incorporation. If a bigger capital stock is required, the abuse of
the privileges of a corporation would be minimized.

 
Capital stock requirements under the special laws
 

1. In case of mining and agricultural incorporation, or corporation organized for the purpose of the
disposition , exploitation, development or utilization of natural resources of the Philippines, as well as
corporation organized for the operations of public utilities, the Constitution provides that at least 60
% of the capital stock of such corporation must be owned by citizens of the Philippines.

2. The Insurance Code provide that “no domestic insurance company shall, if a stock corporation,
engage in business in the Philippines unless posses of a paid up capital stock equal to at least two
million pesos”. Where the insurance company is to engage in insurance business it must have a
“paid-up capital stock of at least five million pesos” to be invested in securities specified by law,
which securities are to be deposited with the Insurance Commissioner.

3. The Financing Company Act requires that “at least sixty per centum of the capital of financing
companies must be owned by citizens of the Philippines and shall have a paid-up capital of not less
than five hundred thousand pesos”.
 

4. Commercial banks are required to have a paid-up capital of 100 million pesos. When a
commercial bank having licence to operate an expanded foreign currency deposit system it must
have a paid-up capital of at least 150 million pesos and when a commercial bank is authorized to
engage in universal banking it must have a paid up capital of at least 500 million pesos.

5. The New Constitution provides that: “The ownership and management of mass media shall be
limited to citizens of the Philippines or to corporations or association wholly-owned and manage by
such citizen”.

6. Under the Retail Trade Nationalization law “no person who is not a citizen of

the Philippines, and no association, partnership, or corporation the capital of which is not wholly
owned by citizens of the Philippines, shall engage directly or indirectly in the retail trade business.

7. Only vessels of domestic ownership are authorized to engage in coastwise shipping in the
Philippines. Vessels are considered of domestic ownership when such ownership is vested in some
one or more of the following: (1) Citizens of the Philippines; (2) any corporation or any company
composed wholly of the citizens of the Philippines; (3) any corporation or company created under the
laws of the Philippines, provided at least 75% of the capital stock thereof or of any interested in said
capital is wholly owned by the citizens of the Philippines.

Sec.14. Contents of articles of the incorporations. – All corporation 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 laws:
 

1. The name of the corporation.

2. The specific purpose or purposes for which the corporation is being incorporated. Where the
corporation have more than one stated purpose, the article of incorporation shall state which the
primary is and which is/are the secondary purpose or purposes: Provided, That a non-stock
corporation may not include a purpose which would change or contradict its nature as such.
 

3. The place where the principal office of the corporation is to be located, which must be within the
Philippines.

4. The term for which the corporation is to exist.

5. The names, nationalities and residences of the incorporators.

6. The number of directors or trustees which shall not be less than five (5) nor more than fifteen (15).

7. The names, nationalities and residences of the person who shall act as directors or trustees until
the first regular directors or trustees are duly elected and qualified 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 which it is divided, and in case the shares are par value shares,
the par value of each, the names, nationalities and residences of the original subscriber, 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.

10. Such other matters 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 subscriber
showing that at least 25% of the authorized capital stock of the corporation has been subscribed,
and at least 25% of the total subscription has been fully paid to him in actual cash and/or in property
the fair valuation of which are equal to at least 25% of the said subscription , such paid up capital
being not less than five-thousand pesos (P5,000).

 
Sec.15. Forms of Articles of Incorporation. – Unless otherwise prescribed by special law, articles
of incorporation of all domestic corporations shall supply substantially the following requirements in
the form as provided for by the SEC:
 

1. The name of the corporation.

Incorporators may choose any name they see fit , however strange, uneuphonious, or unrhetorical it
may be , provided it is one not identical with or prejudicially similar to a name which has previously
been adopted by and is being use by another corporation as its corporate name

 
Change of Corporate name
The change of the corporate name doesn’t mean a new corporation, nor the successor of the
original corporation. It is the same corporation with a different name having its character with no
respect change. The corporation continues, as before, responsible in its new name for all debts or
other liabilities it had previously contracted or incurred.

2. Specific purpose or purposes.

The statement of the purpose has its principal function the affirmative authorization of the
management to enter into those contracts and business transactions which may be considered as
incidental to its attainment of the purposes. It also imposes implied limitations of their authority by
the exclusion of lines of activity which are not covered.

3. Principal office of the Corporation.

4. Terms of Existence of the Corporation.

The 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.

5. Names, Nationalities and residences of incorporators.

The names, nationalities and residences of the incorporators must be stated in the articles of the
corporation for the purpose of complying with legal requirement that majority of the incorporators
must be residents of the Philippines and complying with the statutory requirement on share
ownership and in other instances where Filipino Citizens are required.

6. Number of directors and trustees.

The number of the director and trustees must not be less than five (5) nor more than fifteen (15).

7. Names, nationalities and residences of directors.

A majority of the directors or trustees of all corporation organized under this Code must be a
residents citizens of the Philippines.

8. Amount of authorized capital stock.

A stock corporation must state 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 shares 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 the shares are
without par value, such fact must be stated”.

9. Non-stock Corporation.

The Corporation Code requires the articles of the non-stock corporation to states: the amount of its
capital, the names, nationalities and residences of its contributors and the amount contributed by
each. A non-stock corporation may have capital but it has no authorized capital stock.

10. Inclusion of other matters.

The articles of incorporation “may include other matters that is not inconsistent with law and which
the incorporators may deem necessary and convenient”.