LAW ON PARTNERSHIP

Title IX, Civil Code of the Philippines

CHAPTER 1 – GENERAL PROVISIONS (ART. 1767- 1783)

OVERVIEW
Law on Partnership - Title IX, Civil Code of the Philippines (Arts.1767-1867)

Chapter 1 - General Provisions (Arts. 1767-1783)

Chapter 2- Obligations of the Partners (Arts. 1784-1827)

Section 1- Obligations of the Partners among Themselves (1784-1809)

Section 2 - Property Rights of a Partner (1810-1814)

Section 3 - Obligations of a Partner with Regard to Third Persons (1815-1827)

Chapter 3 - Dissolution and Winding Up (Arts. 1828-1842)

Chapter 4 - Limited Partnership (Arts. 1843-1867)

DEFINITION
PARTNERSHIP (Art. 1767) - By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the profits
among themselves.

Two or more persons may also form a partnership for the exercise of a profession.

NOTE:
A profession has been defined as "a group of men pursuing a learned art as a common calling in the
spirit of public service - no less a public service because it may incidentally be a means of livelihood". A
professional partnership is a particular partnership [Article 1783].

ESSENTIAL FEATURES
1. There must be a valid contract;
2. The parties must have legal capacity;
3. There must be a mutual contribution of money, property, or industry to a common fund;
4. The object or purpose must be lawful [Article 1770];
5. The primary purpose must be to obtain profits and to divide the same among the parties;
6. The partnership has a juridical personality separate from individual partners [Article 1768].

JURIDICAL PERSONALITY
The partnership has a juridical personality separate and distinct from that of each of the partners.

-fiction by law.
Illustration:

Mr. A, Mr. B and Mr. C, decided to form the ABC Partnership.

 Natural persons - Mr. A, B and C

 Juridical person - ABC partnership- a person who had a right

RIGHTS OF A JURIDICAL PERSON

1. Right to acquire property;
2. Right to incur obligations;
3. Right to sue and be sued.

FORM
General rule: The contract may be constituted in any form [Article 1771].

Exceptions:

1. Where immovable property or real rights are contributed:

a) The contract must appear in a public instrument; and
b) Attached to such instrument must be an inventory, signed by the parties, of the
property contributed [Articles 1771 and 1773];
2. Where the capital is at least P3,000, in money or property:
(a) The contract must appear in a public instrument; and
(b) It must be recorded in the Office of the Securities and Exchange Commission (SEC).

KINDS OF PARTNERSHIP
1. AS TO THE LEGALITY OF ITS EXISTENCE:
(1) Partnership de jure is one which has complied with all the requisites for its lawful
establishment;
(2) Partnership de facto is one which failed to so comply.
2. AS TO ITS OBJECT:
(1) Universal partnership:
(a) of all present property;
(b) (b) of profits;
(2) Particular partnership. – Hindi mo ibibigay lahat.

3. AS TO ITS DURATION:
(1) For a fixed term or particular undertaking;
(2) At will. – walang pinag-usapan kung kalian mag-eend. Anytime pwedeng mag-sara

4. AS TO THE LIABILITY OF THE PARTNERS:

(1) General partnership, consisting of general partners only, who are liable pro rata for
partnership obligations with all their property after exhaustion of partnership assets;
- Pwedeng habulin hanggang personal assets.
(2) Limited partnership includes, aside from general partner/s, limited partners, who are
not personally liable for partnership obligations.

LAW ON PARTNERSHIP

Title IX, Civil Code of the Philippines

CHAPTER 2 – OBLIGATIONS OF THE PARTNERS (ARTS. 1784- 1827)

PART 1

LEGAL RELATIONS
CREATED BY A CONTRACT OF PARTNERSHIP

1. Relations between partners;

2. Relations between the partners on one hand and he partners on the other hand;
3. Relations between the partners on one hand and the third person on the other hand; and
4. Relations between the partnership and the third persons.

*nagkakaroon ng relationship or relation sa isa’t- isa because basically they deal with one another
* significance why we need to mention this legal relationship - the significance is because of this
relationship certain obligations arises. In other words, kapag may relasyon, may obligasyon.

COVERAGE

Section 1- Obligations of the Partners among themselves (1784- 1809)

Section 2- Property rights of a partner (1810-1814)

Section 3- Obligations of the partners with regard to third persons (1815-1827)

SECTION 1- OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES

1. OBLIGATION TO CONTRIBUTE WHAT HAD BEEN PROMISED (1786):

A. Obligation to deliver the fruits/interest;
B. Warranty against eviction.
-If may property na sangla , obligation ng partner na palitan yung contribution niya or else
maaalis na siya.
2. PROHIBITION AGAINST ENGAGING IN BUSINESS:
A. INDUSTRIAL PARTNER- cannot engage in business for himself unless the partnership
expressly permits him to do so. (1789)
- Pag nagengage ka sa other business pwedeng kunin ng partnership yung kinita mo doon
plus damages or pwede kang paalisin.
B. CAPITALIST PARTNER- cannot engage for their own account in any operation which is of the
kind of business in which the partnership is engaged, unless there is a stipulation to the
contrary. (1808)
-bawal yung parehas na business.
-penalty- ibigay mo yung kinita mo sa partnership

3. OBLIGATION TO CONTRIBUTE ADDITIONAL CAPITAL (1791);

- Imminent loss- magkakaroon ng malakig pagkalugi, kaya kailangan ng additional capital,
it only applies to capitalist partners.
- If ayaw mo, You will be force to sell your interest/share to the other partners.
4. OBLIGATION OF A MANAGING PARTNER TO APPLY PAYMENT RECEIVED TO PARTNERSHIP
CREDIT (1792);

Example:
A and B formed AB partnership. They agreed that partner A will be the managing partner.
Subsequently, in a contract, partner A had a receivable against X in the amount of P100,000 due
on August 1, 2021. In another transaction, AB partnership had a receivable against X in the
amount of P300,000 due also in August 1, 2021. On September 1, 2021 X paid A the amount of
P80,000. Should A collect the entire amount?

A. If A issued a receipt for his own credit, then the P80,000 should be applied to his own credit
and the balance of P60,000 (300,000/400,000 x P80,000) will be applied to the credit of the
partnership.
B. If A issued a receipt for the credit of the partnership, then the entire P80,000 will be applied
to the credit of the partnership.

5. OBLIGATION TO RETURN CREDIT RECEIVED (1793);

Example:

A and B entered into a contract of partnership. Subsequently, X owned the partnership the
amount of P500,000. Thereafter, partner A collected P200,000 from X. Later, X turned insolvent
so that B could not collect from X.

In this case, the law provides that partner A should give the share of B in the amount of
P100,000.

6. OBLIGATION TO INDEMNIFY FOR DAMAGES (1794);

- If you cause damage to the partnership, bayaran mo talaga siya bawal yung ibabawas sa
compensation.
7. THE RISK OF LOSS (1795);
- Yung owner yung responsible. may re
8. RIGHT TO REFUND FOR AMOUNTS DISBURSED ON BEHALF OF THE PARTNERSHIP (1796);
9. RIGHT TO ASSOCIATE ANOTHER IN SHARE (1804);
-pwede mo i-share yung share mo sa iba,pero hindi pa rin siya partner kailangan lahat mag-
agree para mag partner ka.

10. RIGHT TO INSPECT PARTNERSHIP BOOKS (1805);

- Books that affects the partnerships (BOA), it should be inspected in the reasonable hour
in the day.
11. OBLIGATION TO RENDER ON DEMAND TRUE AND FULL INFORMATION OF ALL THINGS
AFFECTING THE PARTNERSHIP (1806); hindi pwedeng may tinatago sa ibang partners.

12. RIGHT TO A FORMAL ACCOUNT (1809);

1. If he is wrongfully excluded from the partnership business or possession of its property by
his co-partners;
2. If the right exists under the terms of any agreement;
3. As provided by article 1807;
4. Whenever other circumstances render it just and reasonable. (n)

13. OBLIGATION TO SHARE IN THE PROFITS AD LOSSESS (1797);

Rules for distribution of profits and losses of a partnership

1. Distribution of profits
A. According to agreement
B. If there is no agreement
I. Capitalist partner- in proportion to what he may have contributed to the common
fund.
II. Industrial partner- that which is just and equitable under the circumstances.
2. Distribution of losses
A. According to agreement
I. Loss agreement
II. Profit agreement
B. If there is no agreement:
I. Capitalist partner- in proportion to what they may have contributed to the common
fund;
II. Industrial partners- not liable for losses.
14. RIGHT TO PARTICIPATE IN MANAGEMENT (1803).

Management of the partnership is primarily governed by the agreement of the partners in the
articles of partnership. It may be stipulated that the partnership will be managed by:

1. All the partners (Mutual Agency); or any of the partner may represent the partnership or lahat
sila manager. (majority, controlling interest , let the court decide)
2. A number of partners appointed as managers, which may be appointed:
a. In the articles of partnership; or ( pwede lang siyang tanggalin with just cause by the vote of
partners with having controlling interest.)
b. After constitution of the partnership ( pwedeng tanggalin anytime/ revocable anytime)

MANAGEMENT BY TWO OR MORE PARTNERS (1801)

When there are two or more managing partners appointed, without specification of their duties or
without a stipulation on how each one will act:

1. Each one may separately execute all acts of administration.

2. If any of them opposes the acts of the others, the decision of the majority prevails.
3. In case of a tie, the partners owning the controlling interest will decide [Article 1801].

Requisites:

1. Two or more partners have been appointed as managers;

2. There is no specification of their respective duties; and
3. There is no stipulation that one of them shall not act without the consent of all the others.

SECTION 2- PROPERTY RIGHTS OF A PARTNER

ARTICLE 1810. The property rights of a partner are:

1. His rights in specific partnership property;

 Note: This right is not assignable, not subject to attachment or execution, and not subject to
legal support. (1811)
2. His interest in partnership; and
 Note: Refers to his share of the profits and surplus. (1812)
3. His rights to participate in the management. (n)

SECTION 3- OBLIGATIONS OF THE PARTNERS WITH REGARD TO THIRD PERSONS

1. OBLIGATIONS TO OPERATE UNDER A FIRM NAME (1815);

-if nilagay mo pangalan mo sa partnership kasama ka na sa mga liable.
2. NATURE OF INDIVIDUAL LIABILITY FOR PARTNESHIP’S CONTRACTUAL OBLIGATIONS;
A. All partners, including industrial ones, shall be liable pro rata with all their property and after
all the partnership assets have been exhausted, for the contracts which may be entered into
in the name and for the account of the partnership, under its signature and by a person
authorized to acts for the partnership. (1816) pro rata= equally

B. Any stipulation against the liability laid down in the preceding article shall be void, except as
among the partners. (1817)
C. An industrial partner, who is not liable for losses, is not exempt from his liability. However, he
can recover the amount he has paid from the capitalist partners, unless there is a stipulation
to the contrary [Via. Maritima v. Munoz (1907)].
3. LIABILITY OF PARTNERS FOR PARTNERSHIP CONTRACTS

A. ACTS APPARENTLY FOR THE CARRYING ON OF USUAL BUSINESS

General rule: Any act of a partner which is apparently for the carrying on of the usual business
of the partnership binds the latter, including the executions of any instrument in the partnership
name.

Exception: The partnership is not bound when the following concur:

1. The partner has in fact no authority to act; and

2. The person with whom he deals has knowledge of such facts [Article 1818 (1)].

B. ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL BUSINESS

General rule: Acts of a partner which is not apparently for carrying on of the visual business
does not bind the partnership.

Exception: The partnership is bound if the other partners authorized him to do the act [Article
1818, 2nd par.].

C. ACTS OF STRICT DOMINION

General rule: One or some of the partners have no authority to do the following acts of strict
dominion: (owner), acts of administration (manager)

1. Assign the partnership property in trust for creditors or on the assignee’s promise to pay
the debts of the partnership;
2. Dispose of the goodwill of the business;
3. Do any other act which makes it impossible to carry on the ordinary business of the
partnership;
4. Confess a judgment;
5. Enter into a compromise concerning a partnership claim or liability;
6. Submit a partnership claim or liability to arbitration;
7. Renounce a claim of the partnership.

Exceptions: They may do so if:

1. Authorized by all the partners; or

2. The other partners have abandoned the business [Article 1818, 3 rd par.].
4. CONVEYANCE OF PARTNERSHIP REAL PROPERTY (SELLING, DONATING, ASSIGNING)
A. TITLE IN PARTNERSHIP NAME

Any partner may convey the real property in the name of the partnership.

The partnership can recover it, except when:

1. The act of the partner binds the partnership, when he has authority to carry out the usual
business of the partnership, under Article 1818, 1 st par.; or
2. If not so authorized, the property has been conveyed by the grantee, or a person claiming under
him, to a holder for value and without knowledge that the partner exceeded his authority
[Article 1819, 1st par.].
B. TITLE IN THE NAME OF OTHER PERSONS

Where the title is in the name of one or more but not all the partners and the record does not
disclose the right of the partnership:

1. The partners having title may convey title.

2. The partnership may recover it when the partners conveying title have no authority to carry
on the usual business of the partnership, unless the purchaser or his assignee is:
a. A holder for value; and
b. Without knowledge that the act exceeded authority [Article 1819, 3 rd par.].
5. LIABILITY OF THE PARTNERSHIP FOR ADMISSION BY A PARTNER

An admission or representation by any partner may be used as evidence against the partnership
when:
1. It concerns partnership affairs;
2. Such affairs within the scope of his authority [Article 1820].
6. LIABILITY OF THE PARTNERSHIP FOR WRONGFUL ACTS OF PARTNER

The partnership is solidarily liable with the partner who causes loss or injury to any person not a
partner, or incurs any penalty through any wrongful act or omission:
solidary =treated a if you are a one person.
1. In the ordinary course of the business of the partnership; or
2. Not in such ordinary course of business, but with the authority of his co-partners [Article
1822].
7. LIABILITY OF THE PARTHNERSHIP FOR MISAPPLICATION OF MONEY OR PROPERTY

The partnership is liable for losses suffered by a third person whose money or property was:

1. Received by a partner:
a. Acting within the scope of his apparent authority; and
b. Misapplied it;
2. Received by the partnership:
a. In the course of its business; and
b. Misapplied by any partner while it is the custody of the partnership [Article 1823].

NOTE: ARTICLE 1824. All partners are liable solidarily with the partnership for everything chargeable to
the partnership under Articles 1822 and 1823.

PARTNERSHIP BY ESTOPPEL

A partner by estoppel is a person who, by words spoken or written or by conduct [1] represents himself
as a partner or [2] consents to another representing him to anyone as a partner:

1. In an existing partnership; or
2. With one or more persons not actual partners [Article 1825, 1 st par.].

NATURE OF LIABILITY

A partner by estoppel is liable in the following manner: (1825)

1. He is liable as though he were a partner when:

a. There is an existing partnership;
b. All the partners consented to the representation; and
c. A partnership liability results.
2. He is liable jointly and pro rata (as though he were a partner in fact) with those who consented
to the representation when:
a. There is an existing partnership but not all the partners consented; or
b. There is no existing partnership and all those represented as partners consented to the
representation.
3. He is liable separately when:
a. There is an existing partnership but none of the partners consented; or
b. There is no existing partnership and all of those represented as partners consented to the
representation.

LIABILITY OF AN INCOMING PARTNER

A person admitted as a partner is liable:

1. For obligations incurred subsequently to his admission as the other partners are liable;
2. For obligations incurred before his admission, but will be satisfied only out of the
partnership property, unless otherwise stipulated that he fully assumes such obligations.
(1826)

Ratio:

1. The new partner partakes of the benefits of the partnership property and an already established
business.
2. He has every means of obtaining full knowledge of the debts of the partnership and remedies
that amply protect his interest [De Leon (2010)].

Chapter 3- dissolution and winding up (arts.1828-1842)

THREE FINAL STAGES OF A PARTNERSHIP

1. DISSOLUTION-the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business. It is different from the winding-up of the business
(Article 1828). It does not terminate the partnership, which continues until the winding up of
partnership affairs is completed [Article 1829]
- If may partner na ABC pag umalis si C may dissolution na agad.
- ‘PAG MAY DUMAGDAG WALANG DISSOLUTION

2. WINDING UP- the actual process of settling the partnership business or affairs after dissolution.
It involves collection and distribution of partnership assets, payment of debts, and
determination of the value of the interest of the partners in the partnership
- Know kung ilan ang assets and liabilities
- Tignan mo kung ilan ung natira

3. TERMINATION- the point in time when all partnership affairs are completely wound up and
finally settled. It signifies the end of the partnership life De Leon (2010).

KINDS OF DISSOLUTION
1. EXTRAJUDICIAL DISSOLUTION- these are nos. 1 to 7 of Art.1830
- Walang kinalaman yung korte, or walang intervention yung law/operation of law pagdating
sa dissolution ng partnerships.

2. JUDICIAL DISSOLUTION- These refer to no.8 of Art.1830 in relation to Art.1831

- May intervention ng court
- Commonly ordered by judgement of the court.
EXTRAJUDICIAL DISSOLUTION:

ARTICLE 1830. Dissolution is caused:

(1) Without violation of the agreement between the partners:

(a) By the termination of the definite term or particular undertaking specified in the
agreement:

(b) By the express will of any partner, who must act in good faith, when no definite
term or particular undertaking is specified;
(c) By the express will of all the partners who have not assigned their interests or suffered
them to be charged for their separate debts, either before or after the termination of any
specified term or particular undertaking

(d) By the expulsion of any partner from the business bona fide in accordance with such a
power conferred by the agreement between the partners;

(2) in contravention of the agreement between the partners, where the circumstances do
not permit a dissolution under any other provision of this article, by the express will of
any partner at any time; (pag umalis siya at walang pipigil, kailangan pa rin niyang harapin
yung mga consequences)

(3) By any event which makes it unlawful for the business of the partnership to be carried on
or for the members to carry it on in partnership.

(4) When a specific thing, which a partner had promised to contribute to the partnership,
perishes before the delivery, any case by the loss of the thing, when the partner who
contributed it having reserved the ownership thereof, has only transferred to the
partnership the use or enjoyment of the same; but the partnership shall not be dissolved by
the loss of the thing when it occurs after the partnership has acquired the ownership
thereof;

(5) By the death of any partner,

(6) By the insolvency of any partner or of the partnership, ( no longer wise, malulugi na
talaga )

(7) By the civil interdiction of any partner ( accessory penalty, penalty of 12 years and 1 day-
20 years) pinagbabawalan ka na magmanage ng property.)

JUDICIAL DISSOLUTION:

ARTICLE 1831. On application by or for a partner the court shall decree a dissolution
whenever:

(1) A partner has been declared insane in any judicial proceeding or is shown to be of
unsound mind; may problema sap ag-iisip

(2) A partner becomes in any other way incapable of performing his part of the partnership
contract;

(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on
of the business;
(4) A partner wilfully or persistently commits a breach of the partnership agreement, or
otherwise so conducts himself in matters relating to the partnership business that it is not
reasonably practicable to carry on the business in partnership with him;

(5) The business of the partnership can only be carried on at a loss;

(6) Other circumstances render a dissolution equitable. Kapag may rason na sapat naman
para sa court para msy dissolution ung partnership.

EFFECTS OF DISSOLUTION

1. ON AUTHORITY OF THE PARTNERS

in general, upon dissolution, the authority of the partners to represent the partnership is confined only
to acts necessary to

(1) Wind up partnership affairs or

(2) Complete transactions begun but not then finished Article 1832. 1st. par

2. ON LIABILITY FOR TRANSACTIONS AFTER DISSOLUTION

The liability of a partner, in general, is the same as in ordinary contracts (pro rata and subsidiary).

In the following cases, however, the liability shall be satisfied out of the partnership assets alone (ie,
there is no subsidiary liability)

1. When the partner had been, prior to the dissolution, unknown as a partner to the person with whom
the contract is made

2. When the partner had been prior to the dissolution, so far unknown or inactive in partnership affairs
that the business reputation of the partnership could not be said to have been in any degree due to his
connection with it Article 1834)

3. ON LIABILITY FOR CONTRACTS AFTER DISSOLUTION BY SPECIFIC CAUSES

General rule: A contract entered into by a partner acting for the partnership after dissolution by act,
death or insolvency of a partner binds the other partners.

Exceptions:

(1) The dissolution being by act of any partner, the partner acting for the partnership had knowledge of
the dissolution, or
(2) The dissolution being by death or insolvency of a partner, the partner acting for the partnership had
knowledge or notice of the death or insolvency [Article 1833).

4. ON EXISTING LIABILITY OF PARTNERS

General rule: Dissolution does not of itself discharge the existing liability of any partner.

Exception: A partner may be relieved when there is an agreement to that effect between

[1] Himself

(2) The partnership creditor, and

(3) The person or partnership continuing the business.

A. Such agreement may be inferred from the course of dealing between the creditor having knowledge
of the dissolution and the person or partnership continuing the business

B. In case of dissolution by death, the individual property of a deceased partner is liable for obligations
of the partnership incurred while he was partner, after payment of his separate debts [Article 1835).

WINDING UP
1. WHO MAY WIND UP

The following partners have the right to wind up the partnership affairs:

(1) Those designated in an agreement (Liquidating partner):

(2) Those who have not wrongfully dissolved the partnership; or

(3) The legal representative of the last surviving partner, who was not insolvent. Any partner or his legal
representative or assignee may obtain winding up by the court, upon cause shown [Article 1836]

2. MANNER OF WINDING UP

1. Extrajudicial, by the partners themselves; or

2. Judicial, under the control and direction of the proper court.

SETTLING OF ACCOUNTS BETWEEN PARTNERS

1. COMPOSITION OF PARTNERSHIP ASSETS

(1) The partnership property; and

(2) The contributions of the partners necessary for the payment of all the liabilities (Article 1839(1)).

2.ORDER OF APPLICATION OF ASSETS

The partnership liabilities shall rank, in order of payment, as follows:

(1) Those owing to creditors other than partners;

(2) Those owing to partners other than for capital and profits;

(3) Those owing to partners in respect of capital;

(4) Those owing to partners in respect of profits (Article 1839(2)

LAW ON PARTNERSHIP
Title IX, Civil Code of the Philippines
CHAPTER 4 – LIMITED PARTNERSHIP (ARTS. 1843- 1867)

CREATION

LIMITED

Created by the partners after compliance with the requirements of law.

Essential requisites in formation of limited partnership: (Art. 1844)

1. Certificate of limited partnership (14 items);

2. The Certificate of Limited Partnership must be filed in the Office of the Securities and Exchange
Commission (SEC).

GENERAL

As a rule, it may be constituted in any form (Art. 1771).

Exceptions:

(1) Where immovable property or real rights are contributed:

(a) The contract must appear in a public instrument; and

(b) Attached to such instrument must be an inventory, signed by the parties, of the
property contributed [Articles 1771 and 1773];

(2) Where the capital is at least P3, 000, in money or property:

(a) The contract must appear in a public instrument; and

(b) It must be recorded in the Office of the Securities and Exchange Commission (SEC).

CONTRIBUTION

LIMITED

The Limited partners contribute cash or property or both. They cannot contribute industry or service.
(Art. 1845)

GENERAL
The general partners contribute money, property or industry.

MEMBERSHIP

LIMITED

At least 1 general partner and 1 limited partner. (Art. 1843)

GENERAL

All are general partners.

EXTENT OF LIABILITY

LIMITED

The limited partners are liable only to the extent of their capital contribution.

GENERAL

The partners are personally liable for partnership obligations.

MANAGEMENT RIGHT

LIMITED

Limited partner has no participation in the management. (Art. 1848)

GENERAL

All are managers unless there is a stipulation to the contrary.

PROHIBITION TO ENGAGE IN OTHER BUSINESS

LIMITED

No prohibition against engaging in business.

GENERAL

A) INDUSTRIAL PARTNER - cannot engage in business for himself unless the partnership expressly
permits him to do so. (1789)
B) CAPITALIST PARTNER- cannot engage for their own account in any operation which is of the kind of
business in which the partnership is engaged, unless there is a stipulation to the contrary. (1808)

FIRM NAME

LIMITED

The firm name must be followed by the word "Limited". The surname of a limited partner shall not
appear in the partnership name.

GENERAL
It may or may not include the name of one or more of the partners.

SUMMARY

1. A Limited partnership is formed by compliance in good faith with the statutory requirements;

2. The Limited partners contribute cash or property or both. They cannot contribute industry or service.
(Art. 1845);

3. At least 1 general partner and 1 limited partner;

4. The limited partners are not personally liable for partnership obligations beyond their capital
contributions;

5. Limited partner has no participation in the management. (Art. 1848);

6. No prohibition against engaging in business;

7. The firm name must be followed by the word "Limited". The surname of a limited partner shall not
appear in the partnership name.

REVISED CORPORATION CODE OF THE PHILIPPINES (R.A. NO. 11232)

Title 1 GENERAL PROVISIONS (section 1-9)

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. (SEC. 2)

Characteristics of a corporation

1. It is an artificial being;
 Corporation has juridical personality. Has rights to acquire property, incur in
obligations, has right to be sue and be sued.
 kailangan sundan ang requirements ng law.
2. Created by operation of law;
 created by corpo of law, it is not created by contract it is created by following the
requirements of law, created by operations of law.
3. It has the right of succession;
 pwede ipasa sa iba without consent of the other stockholders.
 Pwede manahin ng mga tagapagmana niya kahit without the need of approval of
the stockholders.
4. It has the powers, attributes, and properties expressly authorized by law or incidental to its
existence.
 the powers of corporation is defined by law.
 The power is not subject to stipulation it is defined by the law itself.

CLASSES OF CORPORATION

Corporations formed or organized under this Code may be stock or nonstock corporations.

 Stock corporations are those which have capital stock divided into shares and are authorized to
distribute to the holders of such shares, dividends, or allotments of the surplus profits on the
basis of the shares held. Kailangan mo lang bumili ng stocks.

All other corporations are nonstock corporations. (SEC. 3)

– refers to family-owned corporation or non- profit corporations. Limited lang ang partners.

OTHER CLASSES OF CORPORATION

1. QUASI-CORPORATION- Some entities are not absolutely corporations but are considered as if
they were.
2. QUASI-PUBLIC CORPORATIONS - is one engaged in rendering basic services of such public
importance as to entitle them certain privileges like eminent domain or use of public property.
3. GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS are those organized by the
government or corporations which the government is a majority stockholder
4. DOMESTIC AND FOREIGN CORPORATIONS- Domestic corporation is one incorporated under
Philippine laws Foreign corporation is one formed, organized, or existing under any laws other
than those of the Philippines.
5. CORPORATION AGGREGATE AND CORPORATION SOLE Corporation aggregate is one composed
of more than one member or corporator. Corporation sole consists of one member or
corporator and his successors.
6. RELIGIOUS CORPORATIONS, SOLE OR AGGREGATE-religious corporations are organized either
as a corporation aggregate.
7. ECCLESIASTICAL AND LAY CORPORATIONS Ecclesiastical corporation is one organized for
religious purposes. Lay corporation is one organized for a purpose other than religious.
8. BELEEMOSYNARY AND CIVIL CORPORATIONS Eleemosynary corporation is one organized for
charitable purposes. Civil corporations are those than ecclesiastical and eleemosynary, whether
public or private.
9. CLOSE AND OPEN CORPORATIONS Close corporation is one wherein all the outstanding stock is
owned by the persons who are active in management and conduct on the business. Open
corporation is one in which all the members or corporations have a vote in the election of the
directors and other officers
10. MULTI-NATIONAL CORPORATION - is one having been created or organized in one state
conduct its business or activities across national boundaries and but subject to the legal
sanctions of the countries in which they operate.
11. NON-PROFIT CORPORATIONS-are those organized without contemplation of gains, profits, or
dividends to their members on invested capital
12. DE JURE CORPORATION-is often created in strict or substantial conformity with the statutory
requirements for incorporation.

CORPORATORS AND INCORPORATORS, STOCKHOLDERS AND MEMBERS

 CORPORATORS are those who compose a corporation, whether as stockholders or
shareholders in a stock corporation or as a member in a nonstock corporation.
- Basta part ka of the corporation you are consider a corporator.

 STOCKHOLDERS are the owners of shares of stock in a stock corporation.

 MEMBER are the corporators of a non-stock 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. (SEC. 5) naunang member/ founders

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. (SEC. 6)

Holders of nonvoting shares shall nevertheless be entitled to vote on the following matters:

a) Amendment of the articles of incorporations;

b) Adoption and amendment of bylaws;
c) Sale, lease, exchange, mortgage, pledge, or other disposition of all 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;
g) Investment of corporate funds in another corporation or business in accordance with
this code; and
h) Dissolution of the corporation.
Except as provided in the immediately precedingly paragraph, the vote required under this code to
approve a particular corporate act shall be deemed to refer only to stocks with voting rights.

- Pag hindi ito yung subject ng voting then non-voting share cannot vote.

Classes or series of shares

1. Voting and non- voting shares

2. Par value and no-par value
 PAR VALUE= FIXED VALUE OR MINIMUM AMOUNT NA PWEDE MONG BILIHIN.
 NO-PAR VALUE= NO FIXED AMOUNT, STATED VALUE AND PAR VALUE CANNOT BE
ISSUED LESS THAT 5 PESOS.
3. Common and preferred shares.
 COMMON- HAS COMPLETE VOTING RIGHTS,
 PREFERRED- YOU DO NOT HAVE COMPLETE VOTING RIGHTS.
3.1 preferred as to asset – Mauuna ka
3.2 preferred as dividends; - mauuna ka
4. Shares Escrow;
 kapag magmemerge yung dalawang company.
5. Founder’s shares
 may special privileges
6. Redeemable “callable” shares;
 pwede siyang bilhin ulit within a certain period or rate
7. Treasury shares;
 pwede bilhin walang stipulation.
8. Other shares classified to comply with constitutional or legal requirements.

TITLE II INCORPORATION AND ORGANIZATION OF PRIVATE CORPPORATIONS (SECTIONS 10-21)

STEPS IN THE CREATION OF A CORPORATION
1. PROMOTION – this includes activities done by promoter for the founding and organizing of the
business or enterprise of the issuer. Nangangalap ng possible subscribers.
2. INCORPORATION –
a. Execution of the articles of incorporation by the incorporators and other documents
required for registrations and corporation.
b. Filing of the articles of incorporations with the SEC together with the treasurer’s affidavit.
3. FORMAL ORGANIZATION AND COMMENCEMENT OF BUSINESS TRANSACTIONS.

NUMBER AND QUALIFICATIONS OF INCORPORATORS

 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.
 A corporation with a single stockholder is considered a One Person Corporation as described in
Title XIII, Chapter III of this Code. (SEC.10)

CORPORATE TERM

A corporation shall have perpetual existence unless its articles of incorporation provides
otherwise. (walang limit, unless maglagay ka)

A corporate term for a specific period may be extended or shortened by amending the articles
of incorporation: Provided, That no extension may be made earlier than three (3) 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 Commission (SEC.11)

CONTENTS OF THE ARTICLES OF INCORPORATION

(a) The name of corporation;

(b) The specific purpose or purposes for which the corporation is being formed. Where a
corporation has more than one stated purpose, the articles of incorporation shall indicate the
primary purpose and the secondary purpose or purposes: Provided, that a nonstock corporation
may not include a purpose which would change or contradict its nature as such;

(c)The place where the principal office of the corporation is to be located, which must be within
the Philippines;

(d) The term for which the corporation is to exist, if the corporation has not elected perpetual
existence;
(e) The names, nationalities, and residence addresses of the incorporators.
(f) The number of directors, which shall not be more than fifteen (15) or the number of trustees
which may be me than fifteen (15);
(g)The names, nationalities, and residence addresses of persons who shall act as directors or
trustees until the first regular directors or trustees are duly elected and qualified in accordance
with this Code;
(h) If it be a stock corporation, the amount of its authorized capital stock, number of shares into
which it is divided, the par value of each, names, nationalities, and subscribers, amount
subscribe and paid by each on the subscription, and a statement that some or all of the shares
are without par value, if applicable
(i) If it be a nonstock corporation, the amount of its capital, the names, nationalities, and
residence addresses of the contributions, and amount contributed by each and
(j) Such other matters consistent with law and which the incorporators may deem necessary and
convenient.

An arbitration agreement may be provided in the articles of incorporation pursuant to Section

181 of this Code.
The Articles of incorporation and applications for amendments there may be filed with the
Commission in the form of an electronic document, in accordance with the Commission's rule
and regulations on electronic filing (SEC.11)

GROUNDS WHEN ARTICLES OF INCORPORATION OR AMENDMENT MAY BE

DISAPPROVED

(a) The articles of incorporation or any amendment thereto is not substantially in accordance
with the form prescribed herein; (sec. 14 follow)

(b) The purpose or purposes of the corporation are patently unconstitutional, illegal, immoral or
contrary to government rules and regulations; (bawal smuggler )

(c) The certification concerning the amount of capital stock subscribed and/or paid is false; and
(fake)
(d) The required percentage of Filipino ownership of the capital stock under existing laws or the
Constitution has not been complied with. (100% owned by filipino citizens

COMMENCEMENT OF CORPORATION EXISTENCE

A private corporation organized under this Code commences its corporate existence and
juridical personality from the date the Commission issues the CERTIFICATE OF INCORPORATION
under its official seal thereupon the incorporators, stockholders/members and their successors
shall constitute a body corporate under the name stated in the articles of incorporation for the
period of time mentioned therein, unless said period is extended or the corporation is sooner
dissolved in accordance with law. (SEC.18)
Article finafile sa SEC
Certifiate na naapprove na yung corporation

EFFECTS OF NON-USE OF CORPORATE CHARTER AND CONTINOUS

INOPERATION

If a corporation does not formally organize and commence its business within five (5) year from
the date of its incorporation, its certificate of incorporation shall be deemed revoked as of the
day following the end of the five (5) year period. (pag hindi nag-operate aalisin na yun)

However, if a corporation has commence its business but subsequently becomes inoperative for
a period of at least five (5) consecutive years, the Commission may, after due notice and
hearing, place the corporation under delinquent status. (nag-stop ka ng five years under
delinquent status, bibigyan ka naman ng chance within 2 years to resume operation, but if you
failed the commission will revoked the corporation certificate.)

A delinquent corporation shall have a period of two (2) years to resume operations and comply
with all requirements that the Commission shall prescribed. Upon the compliance by the
corporation, the Commission shall issue an order lifting the delinquent status. Failure to comply
with the requirements and resume operations within the period given by the Commission shall
cause the revocation of the corporation's certificate of incorporation.

The Commission shall give reasonable notice to, and coordinate with the appropriate
regulatory agency prior to the suspension or revocation of the certificate of incorporation of
companies under their special regulatory jurisdiction.

REVISED CORPORATION CODE OF THE PHILIPPINES (R.A. NO. 11232)

TITLE III AND IV (SECTIONS 22-44)

TITLE III BOARD OF DIRECTORS/TRUSTEE AND OFFICERS (sections 22-34)

BOARD OF DIRECTORS
Election

The Board of Directors is the governing body of the corporation. (Sila lang ang pwedeng mag
manage. without them the corporation cannot operate kaya need mag elect agad.)

A corporation's board of directors is understood to be that body which

1. Exercises all powers provided for under the Corporation Code:

2. Conducts all business of the corporation; and

3. Controls and holds all property of the corporation. (Sec. 22)

QUALIFICATIONS OF A BOARD OF DIRECTOR/TRUSTEE

1. For a stock corporation, ownership of at least 1 share of the capital stock of the corporation in
his own name, for a non-stock corporation, only members of the corporation can be elected:

2. Must be capacitated;

3. Must be of legal age;

4. Other qualifications as may be prescribed in the bylaw of the corporation. (Rules and regulations
adapted by the corporation)

INDEPENDENT DIRECTOR

An independent director is a person who apart from shareholdings and fees received from any
business or other relationship which could, or could reasonable be received to materially
interfere with the exercise of independent judgment in carrying out the responsibilities as a
director.
The board of the following corporations vested with public interest shall have independent
directors constituting at least twenty percent (20%) of such board

(a) Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as "The
Securities Regulation Code, namely those whose securities are registered with the Commission,
corporations listed with an exchange or with assets of at least Fifty million pesos (50,000,000.00)
and having two hundred (200) or more holders of shares, each holding at least one hundred
(100) shares of a class of its equity shares

(b) Banks and quasi-banks, SSLA, pawnshops, corporations engaged in money service business,
preneed, trust and insurance companies and other financial intermediaries; and

(c) Other corporations engaged in businesses vested with public interest similar to the above,
as may be determined by the Commission, after taking into account relevant factors which are
germane to the objective and purpose of requiring the election of an independent director, such
as the extent of minority ownership, Type of financial products or securities issued or offered to
investors, public interest invested in the nature of business operations, and other analogous
factors. (to safeguard the public interest, baka kasi magkaroon ng sabwatan).

ELECTION OF DIRECTORS/TRUSTEES
1. The owners of majority of the outstanding capital stock or if there be no capital stock, a
majority of the members entitled to vote, of the corporation must be present, either in person
or through a representative authorized to act by written proxy:

3. When so authorized in the bylaws or by a majority of the board of directors, the

stockholders or members may also vote through remote communication or in absentia;
(There is no need for you to vote.)

3. The election must be by ballot, if requested by any voting stockholder or member:

4. In stock corporations, the total number of voted cast shall not exceed the number of shares
owned by the stockholder as shown in the books of the corporation multiplied by the whole
number of directors to be elected. Provided, that no delinquent stock shall be voted. (bawal
kang bumoto ng sobra)

5. In nonstock corporations, the members of nonstock corporations may cast as many votes as
there are trustees to be elected but may not cast more than one vote for one candidate;
(majority win) duh

CORPORATE OFFICERS
OFFICERS Need not be a Filipino
REQUIREMENT Need not be a resident of the Philippines
1. Must be a director 2. Must be a
Citizen Must be a resident of the Philippines
stockholder of record of at least 1 share
Must be a Filipino Citizen Must be resident of the Philippines
May or may not be a
Need not be a Filipino Citizen President
director
If the corporation is vested with public Secretary
May or may not be a
interest. Qualifications may be provided for in the bylaws. Treasurer
director
OFFICER Compliance officer
CITIZENSHIP
RESIDENCE Other officers
Note: Any 2 or more positions may be held concurrently by the same person, except, that no
one shall act as president and secretary or as president and treasurer at the same time.

DISQUALIFICATION OF DIRECTORS, TRUSTEES OR OFFICERS.

A person shall be disqualified from being a director, trustee or officer of any corporation if,
within five (5) years prior to the election or appointment as such, the person was:

(a) Convicted by final judgment:

(1) of an offense punishable by imprisonment for a period exceeding six (6) years;
(2) For violating this Code; and
(3) For violating Republic Act No. 8799, otherwise known as "The Securities Regulation Code":

(b) Found administratively liable for any offense involving fraudulent acts, and

(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and (b) above.

The foregoing is without prejudice to qualifications or other disqualifications, which the

Commission, the primary regulatory agency, or Philippine Competition Commission may impose
in its promotion of good corporate governance or as a sanction in its administrative
proceedings. (Sec. 26)

REMOVAL OF DIRECTOR OR TRUSTEES

 Any director or trustee of a corporation may be removed from office by a vote of the
stockholders holding or representing at least two-thirds (2/3) of the outstanding capital
stock, or in a nonstock corporation, by a vote of at least two-thirds (2/3) of the member
entitled to vote.

 The Commission shall, motu propio or upon verified complaint, and after due notice and
hearing, order the removal of a director or trustee elected despite the disqualification,
or whose disqualification arose or is discovered subsequent to an election. The removal
of a disqualified director shall be without prejudice to other sanctions that the
Commission may impose on the board of directors or trustees who, with knowledge of
the disqualification, failed to remove such director or trustee. (Sec. 27)

DEALINGS OF DIRECTORS, TRUSTEES OR OFFICERS WITH THE CORPORATION

- Pwede naman na ang director ay makipagdeal sa sariling company

A contract of the corporation with one (1) or more of its directors, trustees, officers or their spouses and
relatives within the fourth civil degree of consanguinity or affinity is voidable, at the option of such
corporation, unless all the following conditions are present:

(a) The presence of such director or trustee in the board meeting in which the contract was approved
was not necessary to constitute a quorum for such meeting: (quorum general rule majority of BOD is
present, 50% +1 )

(b) The vote of such director or trustee was not necessary for the approval of the contract:

(c) The contract is fair and reasonable under the circumstances;

(d) In case of corporations vested with public interest, material contracts are approved by at least a
majority of the independent directors voting to approved the material contract; and

(e) in case of an officer, the contract has been previously authorized by the board of directors.

Where any of the first three (3) conditions set forth in the preceding paragraph is absent, in the case of a
contract with a director or trustee, such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of
the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest
of the directors or trustees involved is made at such meeting and the contract is fair and reasonable
under the circumstances.

TITLE IV POWERS OF THE CROPORATIONS (SECTON 35-44)

CORPORATE POWERS AND CAPACITY

Every corporation incorporated under this Code has the power and capacity: (Sec. 35)

(a) To sue and be sued in its corporate name;

(b) To have perpetual existence unless the certificate of incorporation provides otherwise,
(c) To adopt and use a corporate seal;

(d) To amend its articles of incorporation in accordance with the provisions of this Code;

(e) To adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the
same in accordance with this Code:

(f) in case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks
in accordance with the provisions of this Code; and to admit members to the corporation if it be
a nonstock corporation;

(g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and
otherwise deal with such real and personal property, including securities and bonds of other
corporations, as the transaction of the lawful business of the corporation may reasonably and
necessarily require, subject to the limitations prescribed by law and the constitution;

(h) To enter into a partnership, joint venture, merger, consolidation, or any other commercial
agreement with natural and juridical persons;

(i) To make reasonable donations, including those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or similar purposes: Provided, That no foreign corporation
shall give donations in aid of any political party or candidate or for purposes of partisan political
activity:

(j) To establish pension, retirement, and other plans for the benefit of its directors, trustees,
officers, and employees; and
(k) To exercise such other powers as may be essential or necessary to carry out its purpose or
purposes as stated in the articles of incorporation.

OTHER POWERS AND CAPACITY

1. POWER TO EXTEND OR SHORTEN CORPORATE TERM (SEC. 36) A private corporation may
extend or shorten its term as stated in the articles of incorporation when approved by a
majority vote of the board of directors or trustees, and ratified at a meeting by the
stockholders or members representing at least two-thirds (2/3) of the outstanding capital stock
or of its members.

2. POWER TO INCREASE OR DECREASE CAPITAL STOCK; INCUR, CREATE OR INCREASE BONDED

INDEBTEDNESS. (SEC. 37) No corporation shall increase or decrease its capital stock or incur,
create or increase any bonded indebtedness unless approved by a majority vote of the board
of directors and by two thirds (2/3) of the outstanding capital stock at a stockholders' meeting
duly called for the purpose.
3.POWER TO DENY PREEMPTIVE RIGHT (SEC. 38) All stockholders of a stock corporation shall
enjoy preemptive right to subscribe to all issues or disposition of shares of any class, in
proportion to their respective shareholdings, unless such right is denied by the articles of
incorporation or an amendment thereto: Provided, That such preemptive right shall not extend
to shares issued in compliance with laws requiring stock offerings or minimum stock ownership
by the public; or to shares issued in good faith with the approval of the stockholders
representing two-thirds (2/3) of the outstanding capital stock in exchange for property needed
for corporate purposes or in payment of previously contracted debt. (Issue it first to existing
stock holders.)

4. SALE OR OTHER DISPOSITION OF ASSETS (SEC.39)- A sale of all or substantially all of the
corporation's properties and assets, including its goodwill, must be authorized by the vote of
stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or at least
two-thirds (2/3) of the members, meeting duly called for the purpose. BOD lamang

5. POWER TO ACQUIRE OWN SHARES (SEC. 40) - Provided, That the corporation has
unrestricted retained earnings in its books to cover the shares to be purchased or acquired, a
stock corporation shall have the power to purchased or acquired, a stock corporation shall have
the power to purchase or acquire its own shares for a legitimate corporate purpose or
purposes, including the following cases:
(a) To eliminate fractional shares arising out of stock dividends;

(b) To collect or compromise an indebtedness to the corporation, arising out of unpaid

subscription, in a delinquency sale,

and to purchase delinquent shares sold during said sale; and

(c) To pay dissenting or withdrawing stockholders entitled to payment for their shares under
the provisions of this Code.

6. POWER TO INVEST CORPORATE FUNDS IN ANOTHER CORPORATION OR BUSINESS OR FOR

ANY OTHER PURPOSE. (SEC. 41) Subject to the provisions of this Code, a private corporation
may invest its funds in any other corporation, business, or for any purpose other than the
primary purpose for which it was organized, when approved by a majority of the board of
directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock, or by at least two thirds (2/3) of the outstanding capital stock, or
by at least two-thirds (2/3) of the members in the case of nonstock corporations at a meeting
duly called for the purpose.

7. POWER TO DECLARE DIVIDENDS (SEC. 42) The board of directors of a stock corporation may
declare dividends out of the unrestricted retained earnings which shall be payable in cash,
property, or in stock to all stockholders on the basis of outstanding stock held by them:
Provided, That any cash dividends due on delinquent stock shall be first be applied to the
unpaid balance on the subscription plus costs and expenses, while stock holders until their
unpaid subscription is fully paid: Provided, further, That no stock dividend shall be issued
without the approval of stockholders representing at least two-thirds (2/3)of the outstanding
capital stock at a regular or special meeting duly called for the purpose.
Cash and property dividend okay lang na approved by the boaed of directors lang, pero pag
magiissue na ng stocks dividend kailangan may approval yan ng 2/3.

8. POWER TO ENTER INTO MANAGEMENT CONTRACT (SEC. 43)

No corporation shall conclude a management contract with another corporation unless such
contract is approved by the board of directors and by the stockholders owning at least the
majority of the outstanding capital stock, or by at least a majority of the members in the case
of a nonstock corporation, or both the managing and the managed corporation, at a meeting
duly called for the purpose.
No management contracts shall be entered into for period longer that five (5) years for any one
term.

ULTRA VIRES ACTS OF THE CORPORATION

No corporation shall possess or exercise corporate powers other than those conferred by this
Code or by its articles of incorporation and except as necessary or incidental to the exercise of
the powers conferred. (Sec. 44) (exceeded your power, you perform acts not within your
corporate power to do.)

- pag without the approval, it is not within the powerof the BOD to declare
such stock dividend, pwedeng kasuhan yung BOD by means of derivative suit.

INTRA VERES
Performs act within the corporate power.

REVISED CORPORATION CODE OF THE PHILIPPINES (R.A. NO. 11232)

TITLE V-VII (SECTIONS 45-72)

Title V- BYLAWS (SECTIONS 45-47)

BYLAWS DEFINED

By-laws signifies the rules and regulations or private laws enacted by the corporation to
regulate, govern and control its own actions, affairs and concerns and its stockholders or
members and directors and officers with relation thereto and among themselves in their
relation to it.

ADOPTION OF BYLAWS
For the adoption of bylaws AFTER by the corporation, the affirmative vote of the stockholders
representing at least a majority of the outstanding capital stock, or of at least a majority of the
members in case on nonstock corporations, shall be necessary. The bylaws shall be signed by
the stockholders or members voting for them and shall be kept in the principal office of the
corporation, subject to the inspection of the stockholders or members during office hours. A
copy thereof, duly certified by a majority of the directors or trustees and countersigned by the
secretary of the corporation, shall be filed with the Commission and attached to the original
articles of incorporation. (POST-INCORPORATION)

Notwithstanding the provisions of the preceding paragraph, bylaws maybe adopted and filed
prior to incorporation; in such case, such bylaws shall be approved and signed by all
incorporators and submitted to the Commission, together with the articles of incorporation.
(PRE-INCORPORATION)

CONTENTS OF BYLAWS

A private corporation may provide the following in its bylaws;

(a) The time, place and manner of calling and conducting regular or special meetings of the
directors or trustees;

(b) The time and manner of calling and conducting regular or special meetings and mode of
notifying the stockholders or members thereof;

(c) The required quorum in meetings of stockholders or members and the manner of voting
therein;

(d) The modes by which a stockholder, member, director or trustees may attend meetings and
cast their votes;

(e) The form for proxies of stockholders and members and the manner of voting them;

(1) The directors' or trustees' qualifications, duties and responsibilities, the guidelines for
setting the compensation of directors or trustees and officers, and the maximum number of
other board representations that an independent director or trustee may have which shall, In
no case, be more than the number prescribed by the Commission;

(g) The time for holding the annual election of directors or trustees and the mode or manner of
giving notice thereof;

(h)The manner of election or appointment and the term of officers other than directors or
trustees;

(i) The penalties for violation of the bylaws;

(j) In the case of stock corporations, the manner of issuing stock certificates; and

(k) Such other matters as may be necessary for the proper or convenient transaction of its
corporate affairs for the promotion of good governance and anti-graft and corruption
measures.

AMENDMENT TO BYLAWS

 A majority of the board of directors or trustees, and the owners of at least a majority of
the outstanding capital stock, or at least a majority of the members of a nonstock
corporation, at a regular or special meeting duly called for the purpose, may amend or
repeal the bylaws or adopt new bylaws.

 The owner of two-thirds (2/3) of the outstanding capital stock or two-third (2/3) of the
members in a nonstock corporation mat delegate to the board of directors or trustees
the power to amend or repeal the bylaws or adopt new bylaws: Provided, That any
power delegated to the board of directors or trustee to amend or repeal the bylaws or
adopt new bylaws shall be considered as revoke whenever stockholders owning or
representing a majority of the outstanding capital stock or majority of the members
shall so vote at a regular or special meeting.

TITLE VI
MEETINGS
(SECTIONS 48-58)
Kinds of meetings
1. Meetings of director/trustees
a. regular
b. special
2. Meetings of Stockholders/members
a. regular
b. special

MEETINGS OF STOCKHOLDERS/MEMBERS

1. REGULAR MEETINGS
Schedule:

Regular meetings of stockholders or members shall be held annually on a date fixed in the
bylaws, or if not so fixed in the bylaws, or if not so fixed, on any date After April 15 of every
year as determined by the board of directors or trustees. (Sec. 49)

2. SPECIAL MEETINGS: (emergency meeting)

Schedule:

Special meetings of stockholders or members shall be held at any time deemed necessary or as
provided in the bylaws

Place and Time:

Stockholders or members' meetings, whether regular or special, shall be held in the principal
office of the corporation as set forth in the articles of incorporation, or if not practicable, in the
city or municipality where the principal office of the corporation is located: Provided, That any
city of municipality in Metro Manila, Metro Cebu, Metro Davao, and other Metropolitan areas
shall, for purposes of this section, be considered a city or municipality, (Sec. 50)

MANNER OF VOTING

 Stockholders and members may vote in person or proxy in all meetings of stockholders
or members

 When so authorized in the bylaws or by a majority of the board of directors, the

stockholders or members of corporations may also vote through remote
communication or in absentia: Provided, That the votes are received before the
corporation finishes the tally of votes.

 A stockholder or member who participates through remote communication or in

absentia shall be deemed present for purposes of quorum.

 Proxies shall be in writing, signed and filed, by the stockholder or member, in any form
authorized in the bylaws and received by the corporate secretary within a reasonable
time before the scheduled meeting. Unless otherwise provided in the proxy form, it
shall be valid only for the meeting for which it is intended. No proxy shall be valid and
effective for a period longer than five (5) years at any one time.

MEETINGS OF DIRECTOR/TRUSTEES

1. REGULAR MEETINGS
Schedule:

Regular meetings of the board of directors or trustees of every corporation shall be held
monthly, unless the bylaws provide otherwise.

2. SPECIAL MEETINGS:

Schedule:

Special meetings of the board of directors or trustees may be held at any time upon the
call of the president or as provided in the bylaws.

Place and time: Meetings of directors or trustees of corporations may be held

anywhere in or outside the Philippines, unless the bylaws provide otherwise. Notice of
regular or special meetings stating the date, time and place of the meeting must be sent
to every director or trustee at least two (2) days prior to the scheduled meeting, unless
a longer time is provided in the bylaws. A director or trustee may waive this
requirement, either expressly or impliedly.

Note: Directors or trustees who cannot physically attend or vote at board meetings can
participate and vote through remote communication such as videoconferencing,
teleconferencing, or other alternative modes of communication that allow them
reasonable opportunities to participate. Directors or trustees cannot attend or vote by
proxy at board meetings.

VOTING TRUSTS

One or more stockholders of stock corporation may create a voting trust for the purpose
of conferring upon a trustee or trustees the right to vote and other rights pertaining to
the shares for a period not exceeding five (5) years at any time: Provided, That in the
case of a voting trust specially required as a condition in a loan agreement, said voting
trust may be for a period exceeding five (5) years but shall automatically expire upon full
payment of the load. A voting trust agreement must be in writing and notarized, and
shall specify the terms and conditions thereof. (parang binigay mo yung vote mo or
sangla)

TITLE VII
STOCKS AND STOCKHOLDERS
(SECTIONS 59-72)
SHARES OF STOCK VS. CERTIFICATE OF STOCK

SHARES OF STOCK

 Unit of interest in a corporation

 Intangible personal property
 May be issued by the corporation even if the subscription is not fully paid.

CERTIFICATE OF STOCK

 Evidence of the holder's ownership of the stock and of his right as a shareholder
 Tangible personal property
 May be issued only if the subscription is fully paid

CONSIDERATION FOR STOCKS

Stocks shall not be issued for a consideration less than the par or issued price thereat.
Consideration for the issuance of stuck may be;

(a) Actual cash paid to the corporation;

(b) Property, tangible or intangible, actually received by the corporation and necessary
or convenient for its use and lawful purposes at a fair valuation equal to the par or
issued value of the stock issued;
(c) Labor performed for or services actually rendered to the corporation;
(d) Previously incurred indebtedness of the corporation;
(e) Amounts transferred from unrestricted retained earnings to stated capital:
(f) Outstanding shares exchanged for stocks in the event of reclassification or
conversion;

(g) Shares of stock in another corporation, and/or

(h) Other generally accepted form of consideration.

Where the consideration is other than actual cash, or consists of intangible property
such as patents or copyrights, the valuation thereof shall initially be determined by the
stockholders or the board of directors, subject to the approval of the Commission,

Shares of stock shall not be issued in exchange for promissory notes or future service.
The same considerations provided in this section, insofar as applicable, may be used for
the issuance or bonds by the corporation.

LIABILITY OF DIRECTORS FOR WATERED STOCKS

- Watered stocks- stocks issued less than its stated or PAR value)

A director or officer of a corporation who:

(a) consents to the issuance of stocks for a consideration less than its par or issued
value:
(b) consents to the issuance of stocks for the consideration other than cash, valued in
excess of its fair value; or
(c) having knowledge of the insufficient consideration, does not file written objection
with the corporate secretary, shall be liable to the corporation or its creditors, solidarily
with the stockholder concerned for the difference between the value receive at the time
of issuance of the stock and the par or issued value of the same.

DELINQUENCY SALE – (unpaid subscription)

- Ibenta na lang sa iba.
The board of directors may, by resolution, order the sale of delinquent stock and shall
specifically state the amount due on each subscription plus all accrued interest, and the
date, time and place of the sale which shall not be less than thirty (30) days nor more
than sixty (60) days from the date the stock become delinquent.

Should there be no bidder at the public auction who offers to pay the full amount of the
balance on the subscription together with accrued interest, costs of advertisement, and
expenses of sale, for the smallest number of shares or fraction of a share, the
corporation may, subject to the provisions of this Code, bid for the same, and the total
amount due shall be credited as fully paid in the books of the corporation. Title to all the
shares of stock covered by the subscription shall be vested in the corporation as
treasury shares and may be disposed of by said corporation in accordance with the
provisions of this Code.
-kapag walang bumili pwedeng bilin ng corporation, ang tawag na dun is treasury
shares.

EFFECT OF DELINQUENCY

No delinquent stock shall be voted for, be entitled to vote, or be represented at any

stockholder's meeting, nor shall the holder thereof be entitled to any of the rights of a
stockholder except the right to dividends in accordance with the provisions of this
Code, until and unless payment is made by the holder of such delinquent stock for the
amount due on the distribution with accrued interest, and the costs and expenses of
advertisement, if any.
REVISED CORPORATION CODE OF THE PHILIPPINES (R.A. NO. 11232)
Title VIII
CORPORATE BOOKS AND RECORDS (SEC. 73-74)

BOOKS TO BE KEPT

Every corporation shall keep and carefully preserve at its principal office all information
relating to the corporation including, but not limited to:

(a) The articles of incorporation and bylaws of the corporation and all their amendments

(b) The current ownership structure and voting rights of the corporation, including lists
of stockholders or members group structures, intra group relations, ownership data, and
beneficial ownership.

(c) The names and addresses of all the members of the board of directors or trustees
and the executive officers

(d) A record of all business transactions;

(e) A record of the resolutions of the board of directors or trustees and of the
stockholders or members;

(f) Copies of the latest reportorial requirements submitted to the Commission, and

(g) The minutes of all meetings of stockholders or members, or of the board of directors
or trustees. (Sec. 73)

STOCK TRANSFER BOOK AND AGENT

- Stock corporations must also keep a STOCK AND TRANSFER BOOK, which
shall contain a record of all stocks in the names of the stockholders
alphabetically arranged; the instalments paid and unpaid on all stocks for
which subscription has been made, and the date of payment of any
instalment; a statement of every alienation, sale or transfer of stock made,
the date thereof, by and to whom made; and such other entries as the
bylaws may prescribed.

- The stock and transfer book shall be kept in the principal office of the
corporation or in the office of its stock transfer agent and shall be open or
inspection by any director or stockholder of the corporation at reasonable
hours on business days.

- A STOCK TRANSFER AGENT or one engaged principally in the business of

registering transfers of stocks in behalf of a stock corporation shall be
allowed to operate in the Philippines upon securing a license from the
Commission and the payment of a fee to be fixed by the Commission, which
shall be renewable annually.

RIGHT TO FINANCIAL STATEMENTS

 A corporation shall furnish a stockholder or member, within ten (10) days from
receipt of their written request, its most recent financial statement, in the form
and substance of the financial reporting required by the Commission.

 At the regular meeting of stockholders or members, the board of directors or

trustees shall present to such stockholders or members a financial report of the
operations of the corporation for the preceding year, which shall include
financial statements, duly signed and certified in accordance with this Code, and
the rules the Commission may prescribe.

 However, if the total assets or total liabilities of the corporation are less than Six
hundred thousand pesos (P600,000.00), or such other amount as may be
determined appropriate by the Department of Finance, the financial statements
may be certified under oath by the treasurer and the president.

TITLE IX
MERGER AND CONSOLIDATION
(SEC. 75- 79)

MERGER AND CONSOLIDATION DEFINED

1. MERGER - is a union whereby one or more existing corporations are absorbed

by another corporation that survives and continues the combined business.
-YUNG ISA WILL SURVIVE ABSORBING THE OTHER.

Ex. A corp. + B. corp. = A/B

2. CONSOLIDATION - is the union of two or more existing entities to form a new

entity called the consolidated corporation.

Ex. A. corp. + B. corp. = New corp.

STOCKHOLDERS' OR MEMBERS' APPROVAL

 Upon approval by a MAJORITY VOTE OF EACH OF THE BOARD OF DIRECTORS

OR TRUSTEES of the constituent corporations of the plan of merger or
consolidation, the same shall be submitted for approval by the stockholders or
members of each of such corporations at separate corporate meetings duly
called for the purpose.

 The affirmative vote of stockholders representing at LEAST TWO-THIRDS (2/3)

OF THE OUTSTANDING CAPITAL STOCK OF EACH CORPORATION in the case of
stock corporations or at least two-thirds (2/3) of the members in the case of
nonstock corporations shall be necessary for the approval of such plan.

ARTICLES OF MERGER OR CONSOLIDATION

After the approval by the stockholders or members as required by the preceding

section, articles of merger or articles of consolidation shall be executed by each
of the constituent corporations, to be signed by the president or vice president
and certified by the secretary or assistant secretary of each corporation setting
forth

(a) The plan of the merger or the plan of consolidation

(b) As to stock corporations, the number of shares outstanding, or in the case of

nonstock corporations, the number of members;

(c) As to each corporation, the number of shares or members voting for or

against such plan, respectively,

(d) The carrying amounts and fair values of the assets and liabilities of the
respective companies as of the agreed cut-off date

(e) The method to be used in the merger or consolidation of accounts of the

companies;

(f) The provisional or pro forma values, as merged or consolidated, using the
accounting method, and

(g) Such other information as may be prescribed by the Commission. (Sec. 77)
EFFECTIVITY OF MERGER OR CONSOLIDATION

 The articles of merger or of consolidation, signed and certified as required by this

Code, shall be submitted to the Commission for its approval.

 If the Commission is satisfied that the merger or consolidation of the

corporations concerned is consistent with the provisions of this Code and
existing laws, it shall issue a certificate approving the articles and plan or merger
or of consolidation, at which time the merger or consolidation shall be effective.

 If upon investigation, the Commission has reason to believe that the proposed
merger or consolidation is contrary to or inconsistent with the provisions of this
Code or existing laws, it shall set a hearing to give the corporations concerned
the opportunity to be heard. Written notice of the date, time, and place of
hearing shall be given to each constituent corporation at least two (2) weeks
before said hearing. The Commission shall thereafter proceed as provided in this
Code.

TITLE X
APPRAISAL RIGHT
(SEC. 80-85)

APPRAISAL RIGHT DEFINED

APPRAISAL RIGHT-it is a right of a dissenting stockholder to get out of the

corporation by demanding payment of the fair market value of his shares. (TALO)

WHEN THE RIGHT OF APPRAISAL MAY BE EXERCISED

Any stockholder of a corporation shall have the right to dissent and demand
payment of the fair value of the shares in the following instances:

(a) In case an amendment to the articles of incorporation has the effect of

changing or restricting the rights of any stockholder or class of shares, or of
authorizing preferences in any respect superior to those of outstanding shares of
any class, or of extending or shortening the term of corporate existence;

(b) In case of sale, lease, exchange, transfer, mortgage, pledge or other

disposition of all or substantially all of the corporate property and assets as
provided in this Code:

(c) In case of merger or consolidation; and

(d) In case of investment of corporate funds for any purpose other than the
primary purpose of the corporation.

HOW RIGHT IS EXERCISED

The dissenting stockholder who votes against a proposed corporate action may
exercise the right of appraisal by making a written demand on the corporation
for the payment of the fair value of shares held within thirty (30) days from the
date on which the vote was taken: Provided, That failure to make the demand
within such period shall be deemed a waiver of the appraisal right. If the
proposed corporate action is implemented, the corporation shall pay the
stockholder, upon surrender of the certificate or certificates of stock
representing the stockholder's shares, the fair value thereof as of the day before
the vote was taken excluding any appreciation or depreciation in anticipation of
such corporate action. (Sec. 81)

NOTATION ON CERTIFICATES; RIGHTS OF TRANSFEREE

Within ten (10) days after demanding payment for shares held, a dissenting
stockholder shall submit the certificates of stock representing the shares to the
corporation for notation that such shares are dissenting shares. Failure to do so
shall, at the option of the corporation, terminate the rights under this Title. If
shares represented by the certificates bearing such notation are transferred, and
the certificates consequently cancelled, the rights of the transferor as a
dissenting stockholder under this Title shall cease and the transferee shall have
all the rights of a regular stockholder; and all dividend distributions which would
have accrued on such shares shall be paid to the transferee.

TITLE XIV
DISSOLUTION
(SEC. 133-139)

MODES OF DISSOLUTION- closing down

1. VOLUNTARY DISSOLUTION
- nagkasundo silang isara na

2. INVOLUNTARY DISSOLUTION
- gusto man nilang ituloy wala na silang magagawa.

VOLUNTARY DISSOLUTION
1. By the vote of the board of directors or trustees and the resolution adopted by
the stockholders or members where no creditors are affected; (Sec.134)
(majority)

2. By the judgement of the SEC after hearing of petition for voluntary dissolution
where creditors are affected; (Sec. 135)
- gustong magsara pero may utang sa mga creditors)
- majority of the board pero kailangan ng 2/3 votes.

3. By amending the articles of incorporation to shorten the corporate term; (Sec.

136)

4. In case of a corporation sole, by submitting to the SEC a verified declaration of

the dissolution for approval; and

5. In case of merger or consolidation (Title IX).

INVOLUNTARY DISSOLUTION

1. By expiration of corporate term provided for in the articles of incorporation:

2. By legislative enactment;
-naging illegal yung business

3. Upon receipt of a lawful court order dissolving the corporation;

-pinapasara na ng law/court.

4. By failure to formally organize and commence its business within 5 years from
the date of incorporation:

5. If a corporation has commenced its business but subsequently becomes

inoperative for a period of at least five (5) consecutive years, the SEC may, after
due notice and hearing, place the corporation under delinquent status. A
delinquent corporation shall have a period of two (2) years to resume operations
and comply with all requirements that the SEC shall prescribe. Failure to comply
with the requirements and resume operations within the period given by the SEC
shall cause the revocation of the corporation's certificate of incorporation: and

6. By order of the SEC on grounds under existing laws.

CORPORATE LIQUIDATION

Every corporation whose charter expires pursuant to its article 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 and 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.