To maintain an organized and orderly filing of Annual Financial Statements (AFS) and General Information Sheet (GIS), and to comply with the zero-contact policy and automation of business-related transactions mandated by Republic Act No. 11032, otherwise known as the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, the Securities and Exchange Commission (SEC), pursuant to its authority under Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines, and Republic Act No. 8799, otherwise known as the Securities Regulation Code, hereby adopts the following measures in the filing of annual reports with the Commission:
All corporations under the jurisdiction of the SEC Extension Offices shall be governed by the same schedule in 2025.
This Memorandum Circular shall be published in two newspapers of general circulation.
Non-stock corporations or foundations in the Philippines may be formed for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, such as trade, industry, agricultural, and like chambers, or any combination thereof.
Certain accredited non-stock, non-profit corporations in the Philippines are exempt from income tax on donations, grants, and gifts provided they are:
To set up a non-stock non-profit corporation in the Philippines, you must first be registered with different government agencies. This article might be a help to your generous and big heart, having in mind the welfare of the less fortunate, or just want to start a non-stock non-profit corporation.
Incorporators
Incorporators shall be not less than five (5) in number but not more than fifteen (15) and the majority of whom are residents of the Philippines. Resident or non-resident aliens (foreigners) can be incorporators of a non-stock corporation, provided that the majority of the incorporators are residents of the Philippines.
Basic requirements for registration with the Securities and Exchange Commission (SEC)
The documentary requirements of the Securities and Exchange Commission (SEC) in the Philippines are as follows:
There is no fixed amount of contribution required but only such reasonable amount as the incorporators and trustees may deem sufficient to enable the corporation to start operation, except in the case of foundations which must have a minimum contribution of at least One Million Pesos (P1,000,000.00).
Additional requirements:
Once an application was submitted, the SEC evaluator will review the initial drafts for seven (7) working days and will email that the application is preapproved. After signing and uploading the generated forms, SEC will send another email if the application was approved and qualified for payment and you will receive a payment assessment form that should be paid within 45 days. Once paid, the digital COI will be received, and the original documents together with proof of payment will be submitted to the SEC office within 60 days from the date of incorporation in order to claim the original Certificate of Incorporation.
Registration with the BIR
The non-stock non-profit corporation must be registered with the BIR within 30 days from the date of Incorporation and obtain a Tax Identification Number (TIN), registration of book of accounts, and official receipts or invoices. Certain registration fees and taxes will be paid.
If you wish to be tax-exempt, non-stock non-profit corporations in the Philippines are required to secure a BIR Tax Exemption Ruling.
Business Permits and Licenses
Non-stock non-profit corporations must also be registered in the Local Government unit (LGU) where the principal office address of the company is located and secure the business permit, barangay clearance, sanitary permit, fire safety inspection certificate, and other clearances in order to go operational. Certain registration fees will be paid.
Employer Registration
Employers for non-stock non-profits are required to be registered with Social Security System, Philippine Health Insurance Corporation, and Home Development Mutual Fund for the benefit of their employees.
A Corporation is a legal entity that is separate and distinct from its owner or incorporators. It has legal rights and obligations similar to an individual. It can enter into contracts, loans, hire employees, pay taxes, etc. The ownership of a corporation is divided into shares of stock.
A Corporation issues the stock to individuals or other businesses, who then become owners or stockholders, of the corporation.
Advantages of a Corporation
Disadvantages of a Corporation
Where to Register a Corporation?
Here are the government agencies where the corporation are required to register in the Philippines:
Who may form a Corporation?
Any person, partnership, association, or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. Provided, that natural persons who are licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless otherwise provided under special laws. Incorporators who are natural persons must be of legal age.
Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock.
How much is the Capitalization?
Stock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law. However, some highly regulated companies or corporations are required to have a minimum capitalization based on the industry or equity of that certain entity.
Some domestic corporations with more than 40% foreign equity are required to have at least U$200,000.00 minimum paid-up capital if the registering corporation intends to operate as a Domestic Market Enterprise
Basic Documentary Requirements
Additional Requirements
References:Republic Act 11232 or Act of Providing for the Revised Corporation CodeRepublic Act No. 7042, as amended, also known as the Foreign Investment Act of 1991 (FIA)
One indicator that a business is in good financial standing is it has excessive retained earnings or accumulated profits. With this, users of the financial statements, for example, investors can decide whether to put up additional funds to expand business operations or banks may approve loan applications. The question is, when do you consider retained earnings excessive and what is the regulatory compliance associated with it?
Retained Earnings; definition and classification
Retained earnings in simplest words, is the excess profit accumulated and generated from business operations net of dividend payment to shareholders. It represents a portion of your business equity that may be used for investment in Research and Development, equipment, or business expansion for example. Retained Earnings may be classified further into two: Unrestricted and Restricted. Restricted retained earnings are those that a business may not distribute as dividends such as appropriation of retained earnings for a loan (as required by loan covenant) while unrestricted retained earnings are those that are available for dividend distribution.
When Retained Earnings Is Excessive and Its Exemption?
Retained Earnings are considered excessive if unrestricted retained earnings are more than the 100% paid-up capital of your company.
If your Philippine Company has excess retained earnings, the financial statements must include the following information in accordance with Section 42 of the Revised Corporation Code (RA 11232):
“Stock corporations are prohibited from retaining surplus profits in excess of one hundred (100%) percent of their paid-in capital stock, except:
(a) when justified by definite corporate expansion projects or programs approved by the Board of Directors; or
(b) when the corporation is prohibited under any loan agreement with financial institutions or creditors, whether local or foreign, from declaring dividends without their consent, and such consent has not yet been secured; or
(c) when it can be clearly shown that such retention is necessary under special circumstances obtained in the corporation, such as when there is a need for special reserve for probable contingencies.”
Regulatory Compliance Requirement So, unless covered by the limitations listed above, the Securities and Exchange Commission (SEC) in the Philippines requires that the Audited Financial Statements include a Statement of Reconciliation of Retained Earnings Available for Dividend Declaration. The template for such a statement provided by SEC MC No.11-2008 is attached to this article for reference.
It is a key takeaway that the amount of retained earnings of the Company for the reconciliation statement should be based on Retained Earnings of “stand-alone” or Separate Financial Statements. So, if your Company is a Philippines Subsidiary of a Parent Corporation, the amount of retained earnings for such reconciliation is of the PH Subsidiary Company. This is because retained earnings based on consolidated financial statements include a surplus of subsidiaries, which are not yet actual earnings of the parent unless distributed in the form of dividends by the subsidiaries. However, in accordance with Revised SRC Rule 68, the Parent company’s retained earnings reconciliation must be submitted along with the consolidated financial statements.
In reference with PAS 1, the notes to financial statements of Corporations shall disclose information that is relevant to an understanding of the financial statements which includes any provisions indicating retention for expansion projects must be definite and approved by the Board of Directors. The following disclosures are relevant pursuant to PAS 1 to provide an understanding on the impact of the retention of earnings on the financial statements:
(i) Details of the expansion (e.g., description of the project, timeline) to render the project definite;
(ii) The date of the approval of the project by the Board of Directors
Noncompliance of such regulatory requirements will be subjected to appropriate sanction of the SEC upon review of the audited financial statements as per SEC MC 6-2005: “Failure to Comply with any of the requirements of SRC Rule 68 or Incomplete Disclosures in the Financial Statements”
Tax Implications Prior to CREATE LAW, improper accumulated earnings tax (IAET) is at 10%. IAET was imposed on the excessive accumulated taxable income of a corporation founded for the intention of avoiding income tax on its shareholders by allowing the corporation’s revenues and profits to accrue rather than distributing them to the shareholders as dividends. Its implementation was intended to discourage or penalize firms for improperly accumulated earnings in order to avoid paying dividend taxes that would have been required had the earnings been distributed as dividends to shareholders.
The 10% IAET has been REPEALED with the implementation of CREATE LAW, and there is no retroactivity clause for 10% IAET. According to RR No. 5-2021, the repeal of IAET applies to the entire tax year for all fiscal years/taxable years ending after the effective date of CREATE LAW. Because CREATE LAW went into effect on April 11, 2021, your financial statements of prior to 2021 that contain improperly accumulated earnings over the “reasonable needs” of the business may still be subject to IAET evaluation during tax audit.
At the end of the day, knowing that your firm is in conformity with local regulations in the Philippines can help you save money on penalties and avoid having to deal with future tax or regulatory evaluations. So, if you’re an accountant, you should check your retained earnings before year-end reporting to see if there’s any reporting or disclosure required.
By: Garry S. Pagaspas, CPA
1. Natural person only incorporators, majority Ph residents
Under the old rules (Batas Pambansa Blg. 68 or BP 68), incorporators must be natural persons only and majority of such incorporators must be residents of the Philippines. This has been changed under the Revised Corporation Code or Republic Act No. 11232 (RA No. 11232) as incorporators of local corporation could now be natural personals and/or juridical persons – local or foreign. Philippine residency requirement is no longer required. This however, is subject to foreign investment rules for foreign ownership. Please refer to SEC MC No. 19 series of 2019 for incorporator guidelines.
2. At least five (5) natural person incorporators
It takes at least five (5) to fifteen (15) natural person incorporators, majority of which are Philippine residents, to register a local domestic corporation in the past. Under the Revised Corporation Code, at least two (2) to fifteen (15) incorporators could register and majority residence requirements is no longer required. While this works to the advantage of foreign investors in registering their business entity in the Philippines, the rules on extent of foreign ownership under foreign investment rules still applies. Notably, under the Revised Corporation Code Philippines as implemented by SEC MC No. 7 series of 2019, a single natural person can register a One Person Corporation (OPC) that could engage in any lawful business in the Philippines other than practice of profession.
3. 25%-25% Pre-incorporation subscription
To register a local domestic corporation, you are required to have an authorized capital stock of certain amount that once approved, such amount of capitalization represents the maximum that the corporation may raise through issuance of such shares. Previously, it is required that at least 25% of such authorized capitalization in Philippines shall be subscribed and of which, 25% must be paid-up, cumulatively, otherwise, the application for registration of domestic corporation will not be approved. This requirement has been changed and you can now register a local domestic corporation without regard to the 25%-25% pre-incorporation subscription.
4. Minimum paid-up capitalization of P5K, in general
Registering a corporation is not really cash heavy because the old rules only require at least PhP5,000.00 minimum paid-up capitalization for stock corporations following the application of the 25%-25% pre-incorporation subscription, unless a specific amount of paid-up capitalization is required by special law, rules and regulations (e.g. lending investor requiring PhP1M minimum paid-up capitalization). This requirement has also been changed and the new rules no longer require any minimum paid-up capitalization, unless a specific amount of paid-up capitalization is required by special law, rules and regulations. For practical considerations however, a reasonable amount of capitalization is highly recommended.
5. 5-15 natural person member of the Board, majority Ph residents
The Board of Directors is the governing body of the corporation through which corporate powers are exercised. As a rule, five (5) to fifteen (15) qualified members of the board of directors are required and majority of the members must be residents. Under the Revised Corporation Code in Philippines, at least two (2) to fifteen (15) qualified members of the Board of Directors could be opted and majority of such members does not necessarily be required to be residents of the Philippines.
6. Disallowed Teleconference/ Videoconference on stockholders meeting
The Old Corporation Code was enacted in the past where technology is not much a factor but later, SEC passed a circular allowing teleconference and/or videoconferencing for the conduct of meeting of the board of directors, instead of the traditional face to face. However, such rules were not made applicable to stockholders meeting, in turn, requiring a face-to-face attendance, unless a proxy is allowed by the bylaws. Now, under the Revised Corporation Code, remote communication, teleconference/ videoconference or in absentia is allowed for stockholder’s meeting, completely embracing the modern technological means of business gatherings. Please refer to SEC MC No. 6 series 2020 for related guidelines.
7. 50-year corporate term
Previously, corporate term or corporate life shall not exceed 50 years and subject to extension of not more than 50 years, in any one instance. Under the Revised Corporation Code Philippines, corporate term is perpetual and unlimited, unless a shorter term is opted. On transition, existing domestic corporations upon effectivity of Revised Corporation Code are automatically converted to perpetual existence unless it prefers a shorter term. At any rate, a fixed corporate term is still allowed either upon registration or as an amendment.
8. 3-year inoperation revocation, now 5 years
Once registered, the local domestic corporation in Philippines is expected to operate based on the purpose or purposes it was registered. If for a reason or another, the corporation stopped operation and failed to resume within a period of three (3) years, then, the old rules provide that the certificate of incorporation is automatically cancelled. Under the Revised Corporation Code Philippines, the three – year period now became five (5) years to give the corporation ample time to get back on its feet.
Summary
The above enumeration of basic corporate rules no longer applicable under the Revised Corporation Code or Republic Act No. 11232 in Philippines is not all inclusive and there could be more rules that has been replaced with new ones or changed by the Revised Corporation Code. Further reading of the Revised Corporation Code in Philippines and related literatures is highly recommended to develop a better understanding of new corporate rules. Alternatively, let us know how we can further assist for the purpose.
About the author:
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for two (2) decades helping further taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has likewise been helping out local and foreign investors/clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.
Disclaimer: This is for purposes of academic discussions only as personally summarized by the author, not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.
Revised Corporation Code (RCC) or Republic Act No. 11232 in the Philippines signed into law last February 20, 2019 has introduced major changes in the Corporation Code under Batas Pambansa Bilang 68 in the Philippines and among those are related to personalities and officers. Below is a summary of those in the sequence they appeared in the RCC that you could use as easy reference for dealings with your respective corproations, Securities and Exchange Corporation (SEC), and other related discussions.
1. Incorporators
Incorporators in Philippines are the ones who originally form a corporation. Under the Old Corporation Code (OCC) or Batas Pambansa Bilang 68, an incorporator must be natural persons numbering at least 5 but not more than 15, must own at least one (1) share, and majority of which must be residents. This was changed under the Revised Corporation Code (RCC) or Republic Act No. 11232 as it expanded the 5-15 to not only natural persons but also to juridical persons – i.e., SEC-registered partnerships, SEC-registered association or corporation, and foreign corporations. Natural person incorporator must own at least one (1) share while a juridical-entity incorporation must authorize a representative who would sign on the SEC registration papers through a formal document like a partnership or board resolution. The requirement on majority must be residents of the Philippines was also deleted in the RCC. Finally, an incorporator in a One Person Corporation (a new type of corporation under RCC not found in OCC) must be a natural person only.
2. Board of Directors / Trustees
Board of Directors for stock corporation in the Philippines or Board of Trustees for non-stock, non-profit corporations in Philippines represents the governing body of the corporation through which the corporate powers are exercised directly or through the officers duly authorized by the Board. Revised Corporation Code of the Philippines deleted the requirement that majority of the members must be residents of the Philippines, extended trustees term to three (3) years from one (1) year, allowed stockholders voting through remote communication or in absentia for election of the Board. Board meetings shall now be presided by the Chairman of the Board, or the President in its absence, participated by Members though remote communication (e.g. videoconferencing, teleconferencing, or other alternative modes but cannot attend by proxy.
3. Independent director
Independent directors in Philippine for corporations vested with public interest (e.g. listed companies, banks and quasi-banks, pre-need companies, trust and insurance companies, etc.) is likewise a new inclusion in Revised Corporation Code not found in Old Corporation Code or BP 68, although, this has been existing prior to RCC by virtue of Securities Regulation Code. As defined in the Revised Corporation Code of the Philippines, an independent director in the Philippines 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 which could, or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
4. Corporate Compliance Officer
If the corporation is vested with vested with public interest, Revised Corporation Code of the Philippines requires the Board of Directors to elect a compliance officer. Again, while this is new in the corporation code, this is not totally new under the Securities Regulation Code and provided for under the Code of Corporate Governance.
5. Corporate President
The corporate president of the corporation in the Philippine is required to be a member of the Board of Director who runs the day-to-day operations of the corporation and perform such acts based on the authority given by the Board of Directors. Under the Revised Corporation Code of the Philippines, the President could preside over board or stockholder’s meeting in the absence of the Chairman of the Board.
6. Corporate Treasurer
Corporate Treasurer is required to be a resident of the Philippines under the Revised Corporation Code of the Philippines but could not be held by the same person acting as President. This would mean that the corporate Treasurer in the Philippines does not need to be a Filipino citizen for as long as it could show proof of residency and to the extent allowed by investment rules. In compliance with corporations filing of annual income tax return in Philippines and annual audited financial statements, a treasurer is required to be a signatory on the statement of management responsibility (SMR).
7. Corporate Secretary
A Corporate Secretary under the Revised Corporation Code of the Philippines is required to be a Filipino Citizen and a resident of the Philippines but could not be held by the same person acting as President. A corporate Treasurer in Philippines could at the same time hold such function as Corporate Secretary. As a corporate officer, functions of Corporate Secretary relates to board and stockholder’s meeting – notices, minutes and certification of such resolutions, among others; stockholdings, related stock certificates and maintenance of stock and transfer book in Philippines; and other administrative functions.
8. Corporation Sole
Under the Revised Corporation Code in Philippines, a corporation sole may be established for religious purposes relative to the administration and management of the affairs, properties and temporalities of the religious institution. It is the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder of such religious institution who could register a corporation sole.
9. Single Stockholder of One Person Corporation
A single corporation is a new type of corporate entity under the Revised Corporation Code in Philippines where a single stockholder could register a corporation, singly but clothed with limited liability in such manner as a regular corporation and not merely as a sole proprietor whose legal entity is attached to the legal personality of the owner. Single stockholder of One Person Corporation in Philippines acts as Sole Director and President at the same time and could even act further as a Treasurer, but subject to a surety bond requirement of SEC. To anticipate worst case scenario on the personality of single stockholder – e.g. death or incapacity, the Revised Corporation Code in Philippines requires designation of the nominee director and alternate nominee director in Philippines who would take place the single stockholder as director and manage the corporation’s affair. Corporate Secretary of One Person Corporation in Philippines and such other officers could likewise be appointed.
10. Resident Agent in Philippines of Foreign Corporation
Resident agent requirement applies for foreign corporations who intend to do business in the Philippines securing with the Securities and Exchange Commission (SEC) a License to do Business in the Philippines and would act as a repository of such summons and other legal processes involving the foreign corporation with respect to its Philippine operations. Resident agent in the Philippines could either be a natural person residing in Philippines of good moral character and sound financial standing or a registered domestic corporation lawfully transacting business in the Philippines and of sound financial standing. Appointment of resident agent could be made through a board resolution of the foreign corporation’s board of director’s while change of Resident Agent would require a process of securing SEC approval on such new appointment.
The above enumeration of corporate personalities and officers in Philippines along with the changes in the rules under the Revised Corporation Code could serve as a guide in familiarizing the nature of their functions and in compliance with the necessary requirements of the SEC, if any. They are not all-inclusive and was simply hand-picked by the author for the purpose of this article.
TITLE XVII – MISCELLANEOUS PROVISIONS
Section 173. Outstanding Capital Stock Defined. – The term “outstanding capital stock”, as used in this Code, shall mean the total shares of stock issued under binding subscription contracts to subscribers or stockholder, whether fully or partially paid, except as treasury shares.
Section 174. Designation of Governing Boards. – The provisions of specific provisions of this Code to the contrary notwithstanding, nonstock or special corporation may, through their articles of incorporation or their bylaws, designate their governing boards by any name other than as board of directors.
Section 175. Collection and Use of Registration, Incorporation and other Fees. – For a more effective implementation of this Code, the Commission is hereby authorized to collect, retain, and use fees, fines, and other charges pursuant to this Code, and its rules and regulations. The amount collected shall be deposited and maintained in a separate account which shall form a fund for its modernization and to augment its operational expenses such as, but not limited to, capital outlay, increase in compensation and benefits comparable with prevailing rates in the private sector, reasonable employee allowance, employee health care services, and other insurance, employee career advancement and professionalization, legal assistance, seminars, and other professional fees.
Section 176. Stock Ownership in Corporations. – Pursuant to the duties specified by Article XIV of the Constitution, the National Economic and Development Authority (NEDA) shall, from time to time, determine if the corporate vehicle has been used, by any corporation, business, or industry to frustrate the provisions of this Code or applicable laws, and shall submit to Congress, whenever deemed necessary, a report of its findings, including recommendations for the prevention and correction.
The Congress of the Philippines may set maximum limits for stock ownership of individuals or groups of individuals related to each other by consanguinity, affinity, or by close business interests, in corporations declared to be vested with public interest pursuant to the provisions of this section, or whenever necessary to prevent anti-competitive practices as provided in Republic Act No. 10667, otherwise known as the “Philippine Competition Act”, or to implement national economic policies designed to promote general welfare and economic development, as declared in laws, rules and regulations.
In recommending to the Congress which corporations, businesses and industries will be declared as vested with public interest, and in formulating proposals for limitations on stock ownership, the NEDA shall consider the type and nature of the industry, size of the enterprise, economies of scale, geographic location, extent of Filipino ownership, labor intensity of the activity, export potential, as well as other factors which are germane to the realization and promotion of business and industry.
Section 177. Reportorial Requirements of Corporations. – Except as otherwise provided in this Code or in the rules issued by the Commission, every corporation, domestic or foreign, doing business in the Philippines shall submit to the Commission:
Corporations vested with public interest must also submit the following:
The reportorial requirements shall be submitted annually and within such period as may be prescribed by the Commission.
The Commission may place the corporation under delinquent status in case of failure to submit reportorial requirements three 93) times, consecutively or intermittently, with a period of five (5) years. The Commission shall five responsible notice to and coordinate with appropriate regulatory agency prior to placing on delinquent status companies under their special regulatory jurisdiction.
Any person required to file a report with the Commission may redact confidential information from such required report: Provided, That such confidential information shall be filed in a supplemental report prominently labelled as “confidential”, together with a request for confidential treatment of the report and the specific grounds for the grant thereof.
Section 178. Visitorial Power and Confidential Nature of Examination Results. – The Commission shall exercise visitorial powers over all corporations, which powers shall include the examination and inspection of records, regulation and supervision of activities, enforcement of compliance, and imposition of sanctions in accordance with this Code.
Should the corporation, without justifiable cause, refuse or obstruct the Commission’s’ exercise of its visitorial powers, the Commission may revoke its certificate of incorporation, without prejudice to the imposition of penalties and other sanctions under this Code.
All interrogatories propounded by the Commission and the answers thereto, as well as the results of any examination made by the Commission or by any other official authorized to make an examination of the operations, books, an records of any corporation, shall be kept strictly confidential, except when the law requires the same to be made public, when necessary for the Commission to take action to protect the public or to issue orders in the exercise of its powers under this Code, or where such interrogatories, answers or results are necessary to be presented as evidence before any court.
Section 179. Powers, Functions, and Jurisdiction of the Commission. – The Commission shall have the power and authority to:
In imposing penalties and additional monitoring and supervision requirements, the Commission shall take into consideration the size, nature of the business, and capacity of the corporation.
No court below the Court of Appeals shall have jurisdiction to issue a restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy that directly or indirectly interferes with the exercise of the powers, duties and responsibilities of the Commission that falls exclusively within its jurisdiction.
Section 180. Development and Implementation of Electronic Filing and Monitoring System. – The Commission shall develop and implement and electronic filing and monitoring system. The Commission shall promulgate rules to facilitate and expedite, among others, corporate name reservation and registration, incorporation, submission of reports, notices, and documents required under this Code, and sharing of pertinent information with other government agencies.
Section 181. Arbitration for Corporations. – An arbitration agreement may be provided in the articles of incorporation or bylaws of a corporation. When such an agreement is in place, disputes between the corporation, its stockholders or members, which arise from the implementation of the articles of incorporation or bylaws, or from intra-corporate relations, shall be referred to arbitration. A dispute shall be nonarbitrable when it involves criminal offenses and interests of third parties.
The arbitration agreement shall be binding on the corporation, its directors, trustees, officers, and executives or managers.
To be enforceable, the arbitration agreement should indicate the number of arbitrators and the procedure for their appointment. The power to appoint the arbitrators forming the arbitral tribunal shall be granted to a designated independent third party. Should the third party fail to appoint the arbitrators in the manner and within the period specified in the arbitration agreement, the parties may request the Commission to appoint the arbitrators. In any case, arbitrators must be accredited or must belong to organizations accredited for the purpose of arbitration.
The arbitral tribunal shall have the power to rule on its own jurisdiction and on questions relating to the validity of the arbitration agreement. When an intra-corporate dispute is filed with a Regional Trial Court, the court shall dismiss the case before the termination of the pretrial conference, if it determines that an arbitration agreement is written in the corporation’s articles of incorporation, bylaws, or a separate agreement.
The arbitral tribunal shall have the power to grant interim measures necessary to ensure enforcement of the award, prevent a miscarriage of justice, or otherwise protect the rights of the parties.
A final arbitral award under this section shall be executory after the lapse of fifteen (15) days from receipt thereof by the parties and shall be stayed only for the filing of a bond or the issuance by the appellate court of an injunctive writ.
The Commission shall formulate the rules and regulations, which shall govern arbitration under this section, subject to existing laws on arbitration.
Section 182. Jurisdiction Over Party-List Organization. – The powers, authorities, and responsibilities of the Commission involving party-list organizations are transferred to the Commission on Elections (COMELEC).
Within six (6) months after the effectivity of this Act, the monitoring, supervision, and regulation of such corporations shall be deemed automatically transferred to the COMELEC.
For this purpose, the COMELEC, in coordination with the Commission, shall promulgate the corresponding implementing rules for the transfer of jurisdiction over the abovementioned corporations.
Section 183. Applicability of the Code. – Nothing in this Act shall be construes as emending existing provisions of special laws governing registration, regulation, monitoring and supervision of special corporation such as banks, nonbank financial institutions and insurance companies.
Notwithstanding any provision to the contrary, regulators such as the Bangko Sentral ng Pilipinas and Insurance Commission shall exercise primary authority over special corporation such as banks, nonbank financial institutions, and insurance companies under their supervision and regulation.
Section 184. Effect of Amendment or Repeal of This Code, or the Dissolution of Corporation. – No right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees or officers shall be removed or impaired either by the subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or any part thereof.
Section 185. Applicability to Existing Corporations. – A corporation lawfully existing and doing business in the Philippines affected by the new requirements of this Code shall be given a period of not more than two (2) years from the effectivity of this Act within which to comply.
Section 186. Separability Clause. – If any provision of this Act is declared invalid or unconstitutional, the other provisions hereof which are not affected thereby shall continue to be in full force and effect.
Section 187. Repealing Clause. – Batas Pambansa Blg. 68, otherwise known as “The Corporation Code of the Philippines”, is hereby repealed. Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent with any provision of this Act is hereby repealed or modified accordingly.
Section 188. Effectivity. – This Act shall take effect upon completion of its publication in the Official Gazette or in at least two (2) newspapers of general circulation.
Approved,
GLORIA MACAPAGAL-ARROYO VICENTE C. SOTTO III
Speaker,House of Representatives President of the Senate
← Previous End
See our quality seminars, workshops, and trainings…
See how we can help you with our other professional services : company registrations; Ph Working Visa; and HR Services
Get to know more about us…
Read More Articles…
TITLE XVI – INVESTIGATIONS, OFFENSES, AND PENALTIES
Section 154. Investigation and Prosecution of Offenses. – The Commission may investigate an alleged violation of this Code, or of a rule, regulation, or order of the Commission.
The Commission may publish its findings, orders, opinion, advisories, or information concerning any such violation, as may be relevant to the general public or to the parties concerned, subject to the provisions of Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”, and other pertinent laws.
The Commission shall give reasonable notice to and coordinate with the appropriate regulatory agency prior to any such publication involving companies under their regulatory jurisdiction.
Section 155. Administering Oaths, Subpoena of Witnesses and Documents. – The Commission, through its designated officer, may administer oaths and affirmations, issue subpoena and sub poena duces tecum, take testimony in any inquiry or investigation, and may perform other act as necessary to the proceedings or to the investigation.
Section 156. Cease and Desist Order. – Whenever the Commission has reasonable basis to believe that a person has violated, or is about to violate this Code, a rule, regulation, or order of the Commission, it may direct such person to desist from committing the act constitution the violation.
The Commission may issue a cease and desist order ex parte to enjoin an act or practice which is fraudulent or can be reasonably expected to cause significant, imminent, and irreparable danger or injury to public safety or welfare. The ex parte order shall be valid for a maximum period of twenty (20) days, without prejudice to the order being made permanent after due notice and hearing.
Thereafter, the Commission may proceed administratively against such person in accordance with Section 158 of this Code, and/ or transmit evidence to the Department of Justice for preliminary investigation or criminal prosecution and/ or initiate criminal prosecution for any violation of this Code, rule, or regulation.
Section 157. Contempt. – A person who, without justifiable cause, fails or refuses to comply with any lawful order, decision, or subpoena issued by the Commission shall, after due notice and hearinig, be held in contempt and fined in an amount not exceeding Thirty thousand pesos (P30,000.00). When the refusal amounts to clear and open defiance of the Commission’s order, decision, or subpoena, the Commission may impose a daily fine of One thousand pesos (P1,000.00) until the order, decision, or subpoena is complied with.
Section 158. Administrative sanctions. – If, after due notice and hearing, the Commission finds that any provision of this Code, rules or regulations, or any of the Commission’s orders has been violated, the Commission may impose any or all of the following sanctions, taking into consideration the extent of participation, nature, effects, frequency and seriousness of the violation:
Section 159. Unauthorized Use of Corporate Name; Penalties. – The unauthorized use of a corporate name shall be punished with a fine ranging from Ten thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00).
Section 160. Violation of Disqualification Provision; Penalties. – When, despite the knowledge of the existence of ground for disqualification as provided in Section 26 of this Code, a director, trustee or officer willfully holds office, or willfully conceals such disqualification, such director, trustee or officer shall be punished with a find ranging from Ten thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00) at the discretion of the Court, and shall be permanently disqualified from being a director, trustee or officer of any corporation. When the violation of this provision is injurious or detrimental to the public, the penalty shall be fine ranging from Twenty thousand pesos (P20,000.00) to Four hundred thousand pesos (P400,00.00).
Section 161. Violation of Duty to Maintain Records, Allow their Inspection or Reproduction; Penalties. – The unjustified failure or refusal by the corporation, or by those responsible for keeping and maintaining corporate records, to comply with Sections 45, 73, 92, 128, 177 and other pertinent rules and provisions of this Code on inspection and reproduction of records shall be punished with a fine ranging from Ten thousand pesos (P10,000.00) to Two hundred thousand pesos (P200,000.00), at the discretion of the court, taking into consideration the seriousness of the violation and its implications. When the violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from Twenty thousand pesos (P20,000.00) to Four hundred thousand pesos (P400,000.00).
The penalties imposed under this section shall be without prejudice to the Commission’s exercise of its contempt powers under Section 157 hereof.
Section 162. Willful Certification of Incomplete, Inaccurate, False, or Misleading Statements or Reports; Penalties. – Any person who willfully certifies a report required under this Code, knowing that the same contains incomplete, inaccurate, false, or misleading information or statements, shall be punished with a fine ranging from Twenty thousand pesos (P20,000.00) to Two hundred thousand pesos (P200,000.00). When the wrongful certification is injurious or detrimental to the public, the auditor or responsible person may also be punished with a fine ranging from Forty thousand pesos (P40,000.00) to Four hundred thousand pesos (P400,00.00).
Section 163. Independent Auditor Collusion; Penalties. – An independent auditor, who in collusion with the corporation’s directors or representatives, certifies the corporations financial statement despite its incompleteness or inaccuracy, its failure to give a fair and accurate presentation of the corporation’s condition, or despite containing false or misleading statements shall be punished with a fine ranging from Eighty thousand pesos (P80,000.00) to Five hundred thousand pesos (P500,000.00). When the statement or report certified is fraudulent, or has the effect of causing injury to the general public, the auditor or responsible officer may be punished with a fine ranging from One hundred thousand pesos (P100,000.00) to Six hundred thousand pesos (P600,000.00).
Section 164. Obtaining Corporate Registration Through Fraud; Penalties. – Those responsible for the formation of a corporation through fraud, or who assisted directly or indirectly therein, shall be punished with a fine ranging from Two hundred thousand pesos (P200,000.00) to Two million pesos (P2,000,000.00). When the violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from Four hundred thousand pesos (P400,000.00) to Five million pesos (P5,000,000.00).
Section 165. Fraudulent Conduct of Business; Penalties. – A corporation that conducts its business through fraud shall be punished with a fine ranging from Two hundred thousand pesos (P200,000.00) to Two million pesos (P2,000,000.00). When the violation of this provision is injurious or detrimental to the public, the penalty is a fine ranging from Four hundred thousand pesos (P400,000.00) to Five million pesos (P5,000,000.00).
Section 166. Acting as Intermediaries for Graft and Corrupt Practices; Penalties. – A corporation used for fraud, or for committing or concealing graft and corrupt practices as defined under pertinent statutes, shall be liable for a fine ranging from One hundred thousand pesos (P100,000.00) to Five million pesos (P5,000,000.00).
When there is a finding that any of its directors, officers, employees, agents, or representatives are engaged in graft and corrupt practices, the corporation’s failure to install: (a) safeguards for the transparent and lawful delivery of services; and (b) policies, code of ethics, and procedures against graft and corruption shall be prima facie evidence of corporate liability under this section.
Section 167. Engaging Intermediaries for Graft and Corrupt Practices; Penalties. – A corporation that appoints an intermediary who engages in graft and corrupt practices for the corporation’s benefit or interest shall be punished with a fine ranging from One hundred thousand to One million pesos (P1,000,000.00).
Section 168. Tolerating Graft and Corrupt Practices; Penalties. – A director, trustee, or officer who knowingly fails to sanction, report, or file the appropriate action with proper agencies, allows or tolerates the graft and corrupt practices or fraudulent acts committed by a corporation’s directors, trustees, officers, or employees shall be punished with a fine ranging from Five hundred thousand pesos (P500,00.00) to One million pesos (P1,000,000.00).
Section 169. Retaliation Against Whistleblowers. – A whistleblower refers to any person who provides truthful information relating to the commission or possible commission of any offense or violation under this Code. Any person who, knowingly and with intent to retaliate, commits acts detrimental to a whistleblower such as interfering with the lawful employment or livelihood of the whistleblower, shall, at the discretion of the court, be punished with a fine ranging from One hundred thousand pesos (P100,000.00) to One million pesos (P1,000,000.00).
Section 170. Other Violations of the Code; Separate Liability. – Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than Ten thousand pesos (P10,000.00) but not more than One million pesos (P1,000,000.00). If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in appropriate proceedings before the Commission: Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee, or officer of the corporation responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal other causes for dissolution of a corporation provided in this Code.
Section 171. Liability of Directors, Trustees, Officers, or Other Employees. – If the offender is a corporation, the penalty may, at the discretion of the court, be imposed upon such corporation and/ or upon its directors, trustees, stockholders, members, officers, or employees responsible for the violation or indispensable to its commission.
Section 172. Liability of Aiders and Abettors or Other Secondary Liability. – Anyone who shall aid, abet, counsel, command, induce, or cause any violation of this Code, or any rule, regulation, or order of the Commission shall be punished with a fine not exceeding that imposed on the principal offenders, at the discretion of the court, after taking into account their participation in the offense.
← Previous Next →
TITLE XV – FOREIGN CORPORATIONS
Section 140. Definition and Rights of Foreign Corporations. – For purposes of this Code, a foreign corporation is one formed, organized or existing under laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or State. It shall have the right to transact business in the Philippines after obtaining a license for that purpose in accordance with this Code and a certificate of authority from the appropriate government agency.
Section 141. Application to Existing Foreign Corporations. – Every foreign corporation which, on the date of the effectivity of this Code, is authorized to do business in the Philippines under a license issued to it shall continue to have such authority under the terms and conditions of its license, subject to the provisions of this Code and other special laws.
Section 142. Application for a License. – A foreign corporation applying for a license to transact business in the Philippines shall submit to the Commission a copy of its articles of incorporation and bylaws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:
Attached to the application for license shall be in a certificate under oath duly executed by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or State of the applicant allow Filipino citizens and corporations to do business therein and that the applicant is an existing corporation in good standing. If the certificate is in foreign language, a translation thereof in English under oath of the translator shall be attached to the application.
The application for a license to transact business in the Philippines shall likewise be accompanied by a statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Commission and when appropriate, other government agencies that the applicant is solvent and in sound financial condition, setting forth the assets liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.
Foreign banking, financial, and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them. In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Commission without previous authority from the appropriate government agency, whenever required by law.
Section 143. Issuance of License. – If the Commission is satisfied that the applicant has complied with all the requirements of this Code and other special laws, rules and regulations, the Commission shall issue a license to transact business in the Philippines to the applicant for the purpose or purposes specified in such license. Upon issuance of such license, such foreign corporation may commence to transact business in the Philippines and continue to do so for as long as it retains its authority to act as a corporation under the laws of the country or State of its incorporation, unless such license is sooner surrendered, revoked, suspended, or annulled in accordance with this Code or other special laws. Within sixty (60) days after the issuance of the license to transact business in the Philippines, the license, except foreign banking or insurance corporations, shall deposit with the Commission for the benefit of the present and future creditors of the license in the Philippines, securities satisfactory to the Commission, consisting of Bonds or other evidence of indebtedness of the Government of the Philippines, its political subdivisions and instrumentalities, or of government-owned-or-controlled corporations and entities, shares of stock or debt securities that are registered under Republic Act No. 8799, otherwise known as “The Securities Regulation Code”, shares of stock in domestic corporations listed in stock exchange, shares of stock in domestic insurance companies and banks, any financial instrument determined suitable by the Commission, or any combination thereof with an actual market value of at least Five hundred thousand pesos (P500,000.00) or such other amount that may be set by the Commission; Provided, however, That within six (6) months after each fiscal year of the license, the Commission shall require the licensee to deposit additional securities or financial instruments equivalent in actual market value to two percent (2%) of the amount by which the licensee’s gross income for that fiscal year exceeds Ten million pesos (P10,000,000.00). The Commission shall also require the deposit of additional securities or financial instruments if the actual market value of the deposited securities of financial instruments has decreased by at least ten percent (10%) of their actual market value at the time they were deposited. The Commission may, at its discretion, release part of the additional deposit if the gross income of the licensee has decreased, or if the actual market value of the total deposit has increased, by more than ten percent (10%) of their actual market value at the time they were deposited. The Commission may, from time to time, allow the licensee to make substitute deposit for those already on deposit as long as the licensee is solvent. Such licensee shall be entitled to collect the interest or dividends on such deposits. In the event the licensee ceases to do business in the Philippines, its deposits shall be returned, upon the licensee’s application and upon proof to the satisfaction of the Commission that the licensee has no liability to Philippine residents, including the Government of the Republic of the Philippines. For the purpose of computing the securities deposit, the composition of gross income and allowable deductions therefrom shall be in accordance with the rules of the Commission.
Section 144. Who May be a Resident Agent. – A resident agent may either be an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided, That an individual resident agent must be of good moral character and of sound financial standing; Provided, further, That in case of a domestic corporation who will act as resident agent, it must likewise be of sound financial standing and mush show proof that it is in good standing as certified by the Commission.
Section 145. Resident Agent; Service of Process. – As a condition to the issuance of the license for a foreign corporation to transact business in the Philippines, such corporation shall file with the Commission a written power of attorney designating a person who must be a resident of the Philippines, on whom summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office. Such foreign corporation shall likewise execute and file with the Commission an agreement or stipulation executed by the proper authorities of said corporation, in form and substance as follows:
“The (name of foreign corporation) hereby stipulates and agrees, in consideration of being granted a license to transact business in the Philippines, that if the corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes may be served, then service of any summons or other legal processes may be made upon the Commission in any action or proceedings arising out of any business or transaction which occurred in the Philippines and such service shall have the same force and effect as if made upon the duly authorized officers of the corporation at its home office.”
Whenever such service of summons or other process is made upon the Commission, the Commission shall within ten (10) days thereafter, transmit by mail a copy of such summons or other legal processes to the corporation at its home office or principal office. The sending of such copy by the Commission shall be necessary part of and shall complete such service. All expenses incurred by the Commission for such service shall be paid in advance by the party at whose instance the service is made.
It shall be the duty of the resident agent to immediately notify the Commission in writing of any change in the resident agent’s address.
Section 146. Law Applicable. – A foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except those which provide for the creation, formation, organization or dissolution of corporations or those which fix relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation.
Section 147. Amendments to Articles of Incorporation or Bylaws of Foreign Corporations. – Whenever the articles of incorporation or bylaws of a foreign corporation authorized to transact business in the Philippines are amended, such foreign corporation shall, within sixty (60) days after the amendment becomes effective, file with the Commission, and in proper cases, with the appropriate government agency, a duly authenticated copy of the amended articles of incorporation or bylaws, indicating clearly in capital letters or underscoring the changes made, duly certified by the authorized official or officials of the country or State of incorporation. Such filing shall not in itself enlarge or alter the purpose or purposes for which such corporation is authorized to transact business in the Philippines.
Section 148. Amended License. – A foreign corporation authorized to transact business in the Philippines shall obtain an amended license in the event it changes its corporation name, or desire to pursue other or additional purposes in the Philippines, by submitting an application with the Commission, favorably endorsed by the appropriate government agency in the proper cases.
Section 149. Merger or Consolidation Involving a Foreign Corporation Licensed in the Philippines. – One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporations if permitted under the Philippine laws and by the law of its incorporation: Provided, That the requirements on merger or consolidation as provided in this Code are followed.
Whenever a foreign corporation authorized to transact business in the Philippines in the Philippines shall be a party to a merger or consolidation in its home country or State as permitted by the law authorizing its incorporation, such foreign corporation shall, within sixty (60) days after the effectivity of such merger or consolidation, file with the Commission, and in proper cases, with the appropriate government agency, a copy of the articles of merger or consolidation duly authenticated by the proper official or officials of the country or State under whose laws the merger or consolidation was affected: Provided, however, That if the absorbed corporation is the foreign corporation doing business in the Philippines, the latter shall at the same time file a petition for withdrawal of its license in accordance with this Title.
Section 150. Doing Business Without a License. –No foreign transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause or action recognized under Philippine laws.
Section 151. Revocation of License. – Without prejudice to other grounds provided under special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Commission upon any of the following grounds:
Section 152. Issuance of Certificate of Revocation. – Upon the revocation of the license to transact business in the Philippines, the Commission shall issue a corresponding certificate of revocation, furnishing a copy thereof to the appropriate government agency in the proper case.
The Commission shall also mail the notice and copy of the certificate of revocation to the corporation, at its registered office in the Philippines.
Section 153. Withdrawal of Foreign Corporations. – Subject to existing laws and regulations, a foreign corporation licensed to transact business in the Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by the Commission unless all the following requirements are met:
TITLE XIV – DISSOLUTION
Section 133. Methods of Dissolution. – A corporation formed or organized under the provisions of this Code may be dissolved voluntarily or involuntarily.
Section 134. Voluntary Dissolution Where No Creditors are Affected. – If dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution may be affected by majority vote of the board of directors or trustees, and by a resolution adopted by the affirmative vote of the stockholders owning at least majority of the outstanding capital stock or majority of the members of a meeting to be held upon the call of the directors or trustees.
At least twenty (20) days prior to the meeting, notice shall be given to each shareholder or member of record personally, by registered mail, or by any means authorized under its bylaws, whether or not entitled to vote at the meeting, in the manner provided in Section 50 of this Code and shall state that the purpose of the meeting is to vote on the dissolution of the corporation. Notice of the time, place and object of the meeting shall be published once prior to the date of the meeting in a newspaper published in the place where the principal office of said corporation is located, or if no newspaper is published in such place, in a newspaper of general circulation in the Philippines.
A verified request for dissolution shall be filed with the Commission stating: (a) the reason for the dissolution; (b) form, manner, and time when the notices were given; (c) names of the stockholders and directors or members and time of the meeting in which the vote was made, and (e) details of publication.
The corporation shall submit to the Commission: (1) a copy of the resolution authorizing the dissolution, certified by a majority of the board of directors or trustees and countersigned by the secretary of the corporation; (2) proof of publication; (3) favorable recommendation from the appropriate regulatory agency, when necessary.
Within fifteen (15) days from receipt of the verified request for dissolution, and in the absence of any withdrawal within said period, the Commission shall approve the request and issue the certificate of dissolution. The dissolution shall take effect only upon the issuance by the Commission of a certificate of dissolution.
No application for dissolution of banks, banking and quasi-banking institutions, preneed, insurance and trust companies, NSSLAs, pawnshops, and other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency.
Section 135. Voluntary Dissolution Where Creditors are Affected; Procedure and Contents of Petition. – Where the dissolution of a corporation may prejudice the rights of any creditor, a verified petition for dissolution shall be filed with the Commission. The petition shall be signed by a majority of the corporation’s board of directors or trustees, verified by its president or secretary or one of its directors or trustees and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or at least two-thirds (2/3) of the members at a meeting of its stockholders or members called for that purpose. The petition shall likewise state: (a) the reason for the dissolution; (b) the form, manner, and time when the notices were given; and (c) the date, place and time of the meeting in which the vote was made. The corporation shall submit to the Commission the following: (1) copy of the resolution authorizing the dissolution, certified by a majority of board of directors or trustees and countersigned by the secretary of the corporation; and (2) a list of all its creditors.
If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a deadline for filing objections to the petition which date shall not be less than thirty (30) days or more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of general circulation published in a municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then, in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) public places in such municipality or city.
Upon five (5) days’ notice, given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue raised in the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it shall render judgment dissolving the corporation and directing disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation.
The dissolution shall take effect only upon the issuance by the Commission of a certificate of dissolution.
Section 136. Dissolution by Shortening Corporate Term. – A voluntary dissolution may be effected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of this Code. A copy of the amended articles of incorporation shall be submitted to the Commission in accordance with this Code.
Upon the expiration of the shortened term, as stated in the approved amended articles of incorporation, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation.
In the case of expiration of corporate term, dissolution shall automatically take effect on the day following the last day of the corporate term stated in the articles of incorporation, without the need for issuance by the Commission of a certificate of dissolution.
Section 137. Withdrawal of Request and Petition for Dissolution. – A withdrawal of the request for dissolution shall be made in writing, duly verified by any incorporator, director, trustee, shareholder, or member and signed by the same number of incorporators, directors, trustees, shareholders, or members necessary to request for dissolution as set forth in the foregoing sections. The withdrawal shall be submitted no later than fifteen (15) days from receipt by the Commission of the request for dissolution. Upon the request of a withdrawal of request for dissolution, the Commission shall withhold action on the request for dissolution and shall, after investigation: (a) make a pronouncement that the request for dissolution is deemed withdrawn; (b) direct a joint meeting of the board of directors or trustees and the stockholders or members for the purpose of ascertaining whether to proceed with dissolution; or (c) issue such other orders as it may deem appropriate.
A withdrawal of the petition for dissolution shall be in the form of a motion and similar substance to a withdrawal of request for dissolution but shall be verified and filed prior to publication of the order setting the deadline for filing objections to the petition.
Section 138. Involuntary Dissolution. – A corporation may be dissolved by the Commission motu proprio or upon filing of a verified complaint by any interested party. The following may be grounds for dissolution of the corporation:
If the corporation is ordered dissolved by final judgment pursuant to the grounds set forth in subparagraph € hereof, its assets, after payment of its liabilities, shall upon petition of the Commission with the appropriate court, be forfeited in favor of the national government. Such forfeiture shall be without prejudice to the rights of innocent stockholders and employees for services rendered, and to the application or other penalty or sanction under this Code or other laws.
The Commission shall give reasonable notice to, and coordinate with, the appropriate regulatory agency prior to the involuntary dissolution of companies under their special regulatory jurisdiction.
Section 139. Corporate Liquidation. – Except for banks, which shall be covered by the applicable provisions of Republic Act No. 7653, otherwise known as “The New Central Bank Act”, as amended, and Republic Act No. 3591, otherwise known as the Philippine Deposit Insurance Corporation Charter, as amended, every corporation whose charter expires pursuant to its articles of incorporation, is annulled by forfeiture, or whose corporate existence is terminated in any other manner, shall nevertheless remain as a body corporate for three (3) years after the effective date of dissolution, for the purpose of prosecuting and defending suits by or against it enabling it to settle and close its affairs, dispose of and convey its property, and distribute its assets, but not for the purpose of continuing the business for which it was established.
At any time during said three (3) years, the corporation is authorized and empowered to convey all of its property to trustee for the benefit of stockholders, members, creditors and other persons in interest. After any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustee, and the beneficial interest in the stockholders, members, creditors or other persons-in-interest.
Except as otherwise provided in Section 93 and 94 of this Code, upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated in favor of the national government. Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.
Live Webinar 1 & 2: BIR Tax Compliance for VAT Entity
Live Webinar: Value Added Tax: In and Out
Live Webinar: Returns and Reports Preparation under eBIR Forms and Online Submissions
Onsite Training: PEZA Registered Entities: Taxation and Basic Reports
Live Webinar on Ph Payroll Computations and Taxation
Live Webinar: Withholding Taxes, Subjects & Applications
Onsite Training: Basic Bookkeeping for Non-Accountants
Onsite Seminar: BIR Examination: Their Procedures and Our Defenses
Live Webinar: Winning BIR Tax Assessments Series: Process, Remedies & Writing Effective Protest
Onsite Training: Basic Business Accounting & BIR Compliance VAT Entity
Revenue Memorandum Circular No. 34-2025
Revenue Memorandum Circular No. 32-2025
Republic Act No. 12079
2025 Filing of Annual Financial Statements and General Information Sheet
Revenue Regulations No. 012-2025
Δ
Phone : (02) 5310-2239
Mobile : Smart: 0939-916-2952 Globe: 0967-497-4989
Email : info(@)taxacctgcenter.ph
© Tax and Accounting Center 2025. All Rights Reserved