Revised Corporation Code R.A. No. 11232 – Title I – General Provisions

TITLE I – GENERAL PROVISIONS

DEFINITIONS AND CLASSIFICATIONS

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

Section 2. Corporation Defined. – A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incidental to its existence.

Section 3. Classes of Corporations. – Corporations formed or organized under this Code may be stock or nonstock corporations. Stock corporations are those which have for 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 shares held. All other corporations are nonstock corporations.

Section 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.

Section 5. Corporators and Incorporators, Stockholders and Members. – Corporators are those who compose a corporation, whether as stockholders or shareholders in a stock corporation or as members in a nonstock corporation. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

Section 6. Classification of shares. – The classification of shares, their corresponding rights, privileges, or restrictions, and their stated par value, if any, must be indicated in the articles of incorporation. Each share shall be equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock.

The shares in stock corporations may be divided into classes or series of shares, or both. 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, That there shall always be a class or series of shares with complete voting rights.

Holders of non-voting shares shall nevertheless be entitled to vote on the following matters:

• (a) Amendment of the articles of incorporation;
• (b) Adoption and amendment of bylaws;
• (c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate property;
• (d) Incurring, creating, or increasing bonded indebtedness;
• (e) Increase or decrease of authorized capital stock;
• (f) Merger or consolidation of the corporation with another corporation or other corporations;
• (g) Investment of corporate funds in another corporation or in business in accordance with this Code; and,
• (h) Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote required under this Code to approve a particular corporate act shall be deemed to refer only to stocks with voting rights.

The shares or series of shares may or may not have a par value: Provided, That banks, trust, insurance, and preneed companies, public utilities, building and loan associations, and other corporations authorized to obtain or access funds from the public, whether publicly listed or not, shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by a corporation may be given preference in the distribution of dividends a d in the distribution of corporate assets in case of liquidation, or such other preferences: Provided, That preferred shares 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, further, That such terms and conditions shall be effective upon filing of a certificate thereof with the Securities and Exchange Commission, hereinafter referred to as “Commission”.

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

A corporation may further classify its shares for the purpose of ensuring compliance with constitutional or legal requirements.

Section 7. Founder’s Shares. – Founder’s shares may be given certain rights and privileges not enjoyed by the owners of other stocks. 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 from the date of incorporation: Provided, That such exclusive right shall not be allowed if its exercise will violate Commonwealth Act No. 108, otherwise known as the “Anti-Dummy Law”; Republic Act No. 7042, otherwise known as the “Foreign Investments Act of 1991”, and other pertinent laws.

Section 8. Redeemable Shares. – Redeemable shares may be issued by the corporation when expressly provided in the articles of incorporation. They are shares which may be purchased by the corporation from the holders of such shares 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 stated representing the shares, subject to rules and regulations issued by the Commission.

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

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