REVISED CORPORATION CODE - RA 11232 Control test
A corporation is an artificial being created by operation of law, having the
right of succession and the powers, attributes and properties expressly
authorized by law or incident to its existence. (Sec. 2, R.A. 11232)
Attributes of a corporation:
 It is an artificial being with separate and distinct personality;
 It is created by operation of law;
 It has the right of succession; and
 It has powers, attributes and properties expressly authorized by law
or incidental to its existence.
Consequence of Separate Liability
Property – entitled to own properties in its own name and its properties are
not the properties of its stockholders, directors and officers
Obligations – can incur obligations and its obligations of its stockholders,
directors and officers
Rights – Rights belonging to corporation cannot be invoked by stockholders
Limited Liability Rule
A stockholder is personally liable for the financial obligations of the
corporation to the extent of his unpaid subscription. While stockholders are
generally not liable, the stockholders may be liable if they have not or have
not fully paid the subscription price if the corporation is insolvent or it cannot
comply with its obligations. (Domina C. Halley vs. Printwell, Inc., G.R. No.
157549 [2011] [Bar 1997 and 2013])
Place of incorporation test
“Sec. 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.” (RCCP)
War-time control test
In times of war, the nationality of a corporation is determined by the
nationality of the controlling stockholders.
Sec. 3(a) of R.A. 7402, as amended, defines “Philippine National” as:
1. a corporation organized under Philippine laws of which 60% of
the capital stock outstanding and entitled to vote is owned and
held by Filipino citizens; or
2. a corporation organized abroad and registered as doing business
in the Philippines under the general law on corporations of which
100% of the capital stocks entitled to vote belong to
Filipinos.
Take note: Where a corporation and its non-Filipino stockholders own stocks
in a SEC-registered enterprise, at least 60% of the capital stock outstanding
and entitled to vote of each of both corporations must be owned and held by
citizens of the Philippines and at least 60% of the members of the Board of
Directors of each of both corporations must be citizens of the Philippines, in
order that the corporation shall be considered a Philippine National.
Grandfather rule
It is the method of attributing the shareholdings of a given corporate
shareholder to the second or even the subsequent tier of ownership to
determine the ultimate ownership in a corporation. To do this, simply
multiply the percentage of shares held by the second corporation in the first
corporation with its Filipino equity, and the product of these percentages is
determined to be the ultimate Filipino ownership of the subsidiary
corporation.
Landmark case: Narra vs. Redmont G.R. No. 195580, January 28
[2015]
When applied
 If the Filipino equity is less than 60% of the outstanding capital of
a corporation that owns shares in a partly nationalized enterprise –
at least 60% must be owned by Philippine nationals; or
 There is an attempt to circumvent the nationalization requirement
or when there is doubt as to the real owners, as in the case where
there is layering.
“Doubt" refers to various indicia that the "beneficial ownership" and
"control" of the corporation do not in fact reside in Filipino shareholders
but in foreign stakeholders. Some of these are:
a. foreign investors provide practically all the funds;
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 b. foreign investors undertake to provide practically all the
technological support;
c. foreign investors, while being minority stockholders, manage the
company and prepare all economic viability studies.
A corporation sole has no nationality. (Roman Catholic Apostolic
Administration of Davao, Inc. vs. LRC, G.R. No. L-8451, December 20, 1957)
According to the SEC, the requirement of 60% Filipino ownership must be
applied to BOTH:
a. Total number of outstanding shares of stock entitled to vote in the
election of directors; AND
b. The total number of outstanding shares of stock, whether or not
entitled to vote in the election of directors.
Doctrine of piercing the veil of corporate entity
Three areas where the doctrine may be applied:
a. defeat of public convenience, such as evasion of an obligation;
b. fraud cases, or when used to justify a wrong, protect fraud or defend a
crime;
c. alter ego cases, where a corporation is merely an alter ego, business
conduit or instrumentality of another entity
Three-Pronged Control Test (for alter-ego cases)
a. Control, not only of finances, but of policy and business practice in respect
to the transaction attacked such that the corporation at that time had no
mind, will or existence of its own;
b. Such control was used to commit a fraud, wrong, dishonesty or an unjust
act which violates a legal right;
c. Such control coupled with the breach must be the proximate cause of the
injury or unjust loss complained of (Concept Builders, Inc. vs. NLRC, G.R.
No. 108734)
Kinds:
a. traditional – the court disregards the existence of the corporate entity so
a claimant can reach the assets of a corporate insider;
b. reverse – the plaintiff seeks to reach corporate assets to satisfy claims
against a corporate insider (International Academy vs. Litton and Company,
G.R. No. 191525 [2017])
The corporate fiction was disregarded in these cases where it was
used:
a. to shield a violation of the prohibition against forum shopping (First Phil.
Bank vs. CA [1996]);
b. to avoid a judgment credit (Sibagat Timber Corp. vs. Garcia [1992]);
c. to avoid the payment of higher taxes (Koppel Phils., Inc. vs. Yatco
[1946]);
d. to avoid inclusion of corporate assets as part of the estate of a decedent
(Cease vs. CA [1979]);
e. to promote unfair objectives (Villanueva vs. Adre [1989]);
f. to violate a provision under the Labor Code (Reahs vs. NLRC [1997]);
g. to confuse legitimate issues (Jacinto vs. CA [1991]); and
h. to avoid a judgment in favor of an employee where the employer
corporation is no longer existing and is unable to satisfy judgment, the
employee’s recourse being against the officers of the corporation who
were, in effect, acting in behalf of the corporation. (Restaurante Las
Conchas vs. Llego [1999])
Created by operation of law
 Concession Theory
 Theory of Corporate Enterprise (PSE vs. CA[1997])
 Primary franchise
 Secondary franchise
 General law
 Special law
Right of succession
Capacity to have continuity of existence despite the changes on the persons
who compose.
Theory of Special Capacities/Limited Capacity Doctrine
No corporation, under the Code, shall possess or exercise any corporate
powers, except those conferred by law, its Articles of Incorporation, those
implied from express powers and those as are necessary or incidental to the
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exercise of the powers so conferred. The corporation’s capacity is limited to Even two persons may form a Any person, partnership,
such express, implied and incidental powers and any act beyond any of these partnership association or corporation, singly or
is ultra vires. jointly with others but not more
than fifteen (15) in number, may
Classifications and distinctions organize a corporation. (Sec. 10)
AS TO POWERS
1. As to organizers/functions/governing law
Subject only to what may be More restricted in its power
Public – by the State only, governed by special laws and the LGC; agreed upon by the partners because of its limited personality
AUTHORITY OF THOSE WHO COMPOSE
Private – by private persons alone or with the State, usually for profit- Mutual agency and each general Stockholders are not agents of the
making and governed by the RCCP. partner can present and bind the corporation in the absence of
partnership express authority
As to legal status

De jure – organized in strict compliance with the requirements of the

law; TRANSFER OF INTEREST
Cannot be transferred without the Freely transferable without the
De Facto – a defect exists in its incorporation, and the elements are: consent from others consent of other stockholders
unless there is stipulation
 There must be a valid law as basis for incorporation; SUCCESSION
 Bona fide attempt to incorporate; and no right of succession Right to succession
 Use of corporate powers. AS TO CAPACITY OF STOCKHOLDER
A partnership can be a stockholder Corporation can also now be a
2. Corporation by estoppel or incorporator (Sec 10, RA 11232) partner in a partnership and a Joint
Venture (Sec 35[h])
3. Corporation by prescription

4. As to existence of stocks
 Stock corporation; and Advantages of a corporation
 Non-stock corporation
 The capacity to act as a legal unit;
5. As to laws of incorporation  Limitations of, or exemption from, individual liability of
 Domestic corporation; and shareholders;
 Foreign corporation  Continuity of existence;
 Transferability of shares;
6. As to number of components  Centralized management; and
 Corporation Aggregate  Standardized method of organization, and finance.
 Corporation Sole
 One Person Corporation Disadvantages of a corporation

Corporation vs Partnership  More complicated in formation and management;

 Higher cost of formation and operation;
PARTNERSHIP CORPORATION  Lack of personal element;
AS TO MANNER OF CREATION  Greater governmental control and regulation;
Created by mere agreement From issuance of Certificate of  Management and control are separate from ownership; and
Corporation by the SEC or in  Stockholders have little voice in the conduct of business.
passage of a special law
AS TO THE NUMBER OF ORGANIZERS

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Components of a Corporation
Incorporators - Those mentioned in the Articles of Incorporation as originally
forming and composing the corporation and who are signatories thereof.
Corporators - Those who compose a corporation, whether as stockholders or
members.
Directors and trustees - The Board of Directors is the governing body in a
stock corporation while the Board of Trustees is the governing body in a non-
stock corporation.
Corporate Officers - Officers who are identified as such in the Corporation
Code, the Articles of Incorporation, or the By-laws of the corporation.
Promoter – A person who, acting alone or with others, takes initiative in
founding and organizing the business or enterprise of the issuer and receives
consideration therefor.
Subscribers - Persons who have agreed to take and pay for original, unissued
shares of a corporation formed or to be formed.
Number and Qualifications of Incorporators:
 Any person, partnership, association or corporation, singly or jointly
with others but not more than 15 in number may organize a
corporation.
 Incorporators who are natural persons must be of legal age.
 Each incorporator must own at least one share of the capital stock.
 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 provided under special laws. (Sec. 10, RA 11232)
Formation of a Corporation
Incorporation- It is the performance of conditions, acts, deeds, and
writings by incorporators, and the official acts, certification or records, which
give the corporation its existence.
Incorporation and Commencement of Corporate Existence
 Submission of the intended corporate name to the commission for
verification.
 Submission of Articles of Incorporation and the By-laws.
 Issuance of the certificate of incorporation. (Sec. 18, RA 11232)
Limitation on the use of Corporate Names
 If it is not distinguishable from that already reserved or registered
for the use of another corporation.
 If such name is already protected by law.
 When its use is contrary to existing law, rules and regulations. (Sec.
17, RA 11232)
Examples:
1. The corporate name shall contain the word “Corporation” or its
abbreviation “Corp.” or Incorporated”, or “Inc.”.“The corporate
name of a foundation shall use the word “Foundation”. This is to
distinguish the corporation from a partnership and other business
organizations (SEC Memo. Circ. No. 5, Series of 2008).
2. The name of a dissolved firm shall not be allowed to be used by
other firms within 3 years after the approval of the dissolution of
the corporation by SEC, unless allowed by the last stockholders
representing at least majority of the outstanding capital stock of the
dissolved firm (SEC Memo. Circ. 14, Series of 2000).
3. For as long as a corporation is existing regardless of whether or not
it is in operation, its corporate name cannot be used by any other
group or corporation (SEC Opinion, Sept. 2, 1993).
4. The practice of a profession regulated by special law which among
others provides for the permissible use of the profession’s name in
a firm, partnership or association shall govern the use of the name
e.g. “Engineer” or “Engineering”. (RA 1582)
5. Unless otherwise authorized by the Commision, the following words
and phrases can only be used by the entities mentioned:
a. “Investment or Capital” – investment houses, investment or
holding company
b. “Asset/Fund/Financial/Financial Management or Adviser” –
licensed by BSP to hold investment management activities
c. “National, Bureau, Commision, State and other words acronyms
that have gained wide acceptance in the Philippines” – by entities
performing governmental functions.
Note: These names are already preserved for governmental use.
d. Association, Organization – non stock corporations.
e. “Stock/Futures/Derivatives Exchange or Broker, Plans, Securities/Stock
Clearing Agency or any similar words or phrases – by entities organized as
an exchange, broker dealer, commodity futures broker, clearing agency, or
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pre-need company under RA 8799 or Securities and Regulation Code. (SEC
Memo Circ. No. 21, Dec. 4, 2013)
6. A person’s full name or surname may be used in a corporate name:
a. If he is a stockholder of the corporation and has consented to such use;
b. If the person is already deceased, the consent shall be given by his estate;
c. The Commission may require a registrant to explain to its satisfaction the
reason for the use of a person’s name;
d. The meaning of initials used in a name shall be stated by the registration
the articles of incorporation in a separate document signed by an
incorporator or director (SEC Memo. Circ. No. 5, Series of 2008).
The Doctrine of Secondary Meaning
The doctrine of secondary meaning requires that the word or phrase used in
the corporate name has been for such length of time with such exclusivity
as to have associated or identified the corporation in the mind of the general
public (or at least that portion of the general public to do with the
corporation’s market) (Lyceum of the Philippines v. CA, G.R. No. 101897,
March 5, 1993)
(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 more 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 residence addresses of the

original subscribers, amount subscribed and paid by each on the

A corporation that changes its corporate name is not considered as a subscription, and a statement that some or all of the shares are without par
new corporation. It is the same corporation with a different name, and its value, if applicable;
character is in no respect changed (Republic Planters Bank v. CA, G.R. No.
(i) If it be a nonstock corporation, the amount of its capital, the names,
93073, December 21, 1992).
nationalities, and
Articles of Incorporation
residence addresses of the contributors, and amount contributed by each;
The Articles of Incorporation (AOI) is one that defines the charter of the and
corporation and the contractual relationships between the State and the
(j)Such other matters consistent with law and which the incorporators may
corporation, the stockholders and the State, and between the corporation
deem necessary and convenient.
and its stockholders.
An arbitration agreement may be provided in the articles of incorporation
Contents of the Articles of Incorporation
pursuant to Section 181 of this Code.
All corporations shall file with the Commission articles of incorporation in any
The articles of incorporation and applications for amendments thereto may
of the official languages, duly signed and acknowledged or authenticated, in
be filed with the Commission in the form of an electronic document, in
such form and manner as may be allowed by the Commission, containing
accordance with the Commission’s rules and regulations on electronic filing.
substantially the following matters, except as otherwise prescribed by this
(Sec 13, RA 11232)
Code or by special law:

(a) The name of the corporation;

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Amendments of Articles of Incorporation
By majority vote of the Board of Directors and the vote or written assent of
the stockholders representing at least 2/3 of the outstanding capital stock.
In case of non-stock; by vote or written assent of majority of the trustees
and at least 2/3 of the members.
A copy duly certified under oath by the corporate secretary and a majority
of the directors or trustees, with a statement that the amendments have
been duly approved by the required vote of the stockholders or members,
filed with the SEC. (Sec. 15, RA 11232)
When does the amendment take effect?
The amendment of the AOI takes effect either:
1. Upon approval by the SEC or;
2. From the date of filing with the SEC:
a. If not acted upon within 6 months from the date of filing; and
b. For a cause not attributable to the corporation.
Grounds for disapproval of amendments:
 If such is not substantially in accordance with the form prescribed
by the CC.
 The purpose/s of the corporation is/are patently unconstitutional,
illegal, immoral, or contrary to government rules and regulations.
 The treasurer’s affidavit concerning the amount of capital stock
subscribed and/or paid is false.
 The required percentage of ownership of the capital stock to be
owned by Filipino citizens has not been complied with.
 In cases of banking, quasi-banking, insurance and trust companies,
pawnshops and other financial intermediaries, no AOI or
amendments thereto shall be approved unless accompanied by a
favorable recommendation of appropriate government agencies.
(Sec. 16, RA 11233)
What if the amendment was disapproved?
No automatic rejection of the AOI or any amendment thereto. The SEC shall
give the incorporators a reasonable time within which to correct or modify
the objectionable portions of the AOI or amendment.
Issuance of Certificate of Incorporation
Ministerial function of the Commission
Exception: However, SEC has authority to pass upon the lawfulness of the
object or purpose of the corporation as expressed in the AOI.
What are By-laws?
By-laws are rules and regulations or private laws enacted by the corporation
to regulate, govern and control its own actions, affairs and concerns and of
its stockholders or members and directors and officers in relation thereto
and among themselves in their relation to it.
Nature and Functions of By-laws:
 The corporate power to adopt by-laws is inherent in every
corporation.
 The by-laws supplement the Articles of Incorporation.
Requisites of a valid By-laws
 Must be consistent with the Revised Corporation Code, other
pertinent laws and regulations;
 Must not be contrary to morals and public policy;
 Must not impair obligations and contracts or property rights of
stockholders;
 Must be reasonable;
 Must be consistent with the charter or Articles of Incorporation; and
 Must be of general application and not directed against a particular
individual.
Procedure in adopting By-laws
Pre - incorporation – It shall be approved and signed by all the incorporators
and submitted to the Commission, together with Articles of Incorporation.
Post - incorporation –
 Vote of the majority of the stockholders representing the
outstanding capital stock or members in case of non-stock;
 By-laws shall be signed by the stockholders or members voting for
them;
 It shall be kept in the principal office of the corporation and subject
to the inspection of the stockholders or members during office
hours;
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  Copy thereof, duly certified by the board of directors or board of
trustees countersigned by the secretary of the corporation, shall be
filed with the Commission and shall be attached with the original
Articles of Incorporation. (Sec. 45, RA 11232)
In all cases, by-laws shall be effective only upon the issuance by the
Commission of a certification that the by-laws are in accordance with the
Revised Corporation Code.
Amendments, repeals, or adoptions of new By-laws:
 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 non-stock, at a regular or special
meeting called for such purpose.
 By the board only after due delegation by the stockholders owning
2/3 of the outstanding capital stock or 2/3 of the members in a non-
stock corporation of the power to amend, repeal, or adopt new by-
laws.
 Whenever the by-laws are amended or a new set of by-laws are
adopted, the corporation shall file with the Commission such
amended or new set of by-laws.
 In cases of amendments or adoption through delegation, the
stockholders’ or members’ resolution authorizing the
delegation of the power to amend or adopt a new set of by-laws,
duly certified under oath by the corporate secretary and majority of
the directors or trustees shall likewise be filed. (Sec. 47, RA 11232)
Binding effect of By-laws
As to members/ stockholders, officers, trustees/ directors and corporation –
They are bound by and must comply with it. They are presumed to know the
provisions of the by-laws.
As to third persons
General Rule: They are not bound.
Exception: They have knowledge or notice of the by-laws at the time a
contract was executed.
Non-use of Corporate Charter
Continuous inoperation within 5 years from the date of its incorporation.
Effect: It’s certificate of incorporation shall be deemed revoked. (Sec 21, RA
11232)
 If a corporation has commenced business but subsequently
became inoperative for a period of 5 years, the same may be placed
under delinquent status after due notice and hearing.
 A delinquent corporation shall have a period of 2 years to resume
operation and comply with all the requirements of the Commission.
Kinds of Corporate Powers
Express powers – granted by law, the Revised Corporation Code, and its
Articles of Incorporation or Charter, and administrative regulations;
Inherent/incidental powers – not expressly stated but are deemed to be
within the capacity of corporate entities;
Implied/necessary powers – exists as a necessary consequence of the
exercise of the express powers of the corporation or the pursuit of its
purposes as provided for in the Charter
Express powers under the Revised Corporation Code
General Powers enumerated under Section 35 of the Revised Corporation
Code.
Specific Powers expressly provided under Sections 36 to 43 and Section 15.
Corporate Powers and Capacity
(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;
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(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.
Important points on the power to sue and be sued
 Commences upon the issuance of the certificate of incorporation.
 Exercised by the board of directors.
 Physical acts of signing documents can be done by an officer of the
corporation so long as has been duly authorized by a resolution of
its board of directors.
Exception
The following officers may sign even in the absence of a board resolution:
a. Chairperson of the Board of Directors;
b. President;
c. General Manager;
d. Personnel Officer; or
e. Employment Specialist in labor case.
Ultra Vires Acts
An ultra vires act refers to an act outside or beyond express, implied and
incidental corporate powers.
It is one committed outside the object for which a corporation is created as
defined by the law of its organization and therefore beyond the power
conferred upon it by law. (Sec. 44, RA 11232)
Ultra Vires Acts VS. Illegal Acts
 Ultra vires acts are not necessarily unlawful while illegal acts are.
 Ultra vires acts are merely voidable and may be enforced by
performance, ratification or estoppel while illegal acts cannot be
validated.
 Ultra vires acts may bind parties whereas illegal acts don’t.
Ultra Vires acts VS Unauthorized Acts
 Ultra Vires acts are those acts of the Corporation while unauthorized
acts are those of an officer.
 In cases of unauthorized acts, the law on agency will apply.
Doctrine of Apparent Authority
If a corporation knowingly permits one of its officers, or any other agent, to
act within the scope of an apparent authority, it holds him out to the public
possessing the power to do those acts; and thus, the corporation will, as
against anyone who has in good faith dealt with it through such agent, be
estopped from denying the agent’s authority.
Who exercises corporate powers?
 The Revised Corporation Code vests in the board of directors the
exercise of the corporate powers of a stock corporation, save in
those instances where the Code requires stockholders’ approval for
certain specific acts.
 The Revised Corporation Code vests in the Board of Trustees the
exercise of the corporate powers of a non-stock corporation. (Sec
22, RA 11232)
Instances when Powers are not exercised by the board
 If there is a management contract
 The powers of the board was delegated to an executive committee.
Management Contract
 Requires the approval of the board of directors and by stockholders
owning at least a majority of the outstanding capital stocks, or
members in case of non-stock, of both the managing and the
managed corporation.
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  Management Contracts can only be entered into for a period no Board of Directors – cash, property dividends.
longer than 5 years for any 1 term. (Sec. 43, RA 11232)
Board of Directors with the approval of stockholders representing not less
Cases of Interlocking stockholders or interlocking directors than 2/3 of outstanding capital – stock dividends. (Sec. 42, RA 11232)

Contract must be approved by the stockholders of the managed May the Board be compelled to declare dividends?
corporation owning at least 2/3 of the outstanding capital stock
entitled to vote or 2/3 of the members (Sec 32, RA 11232) No, declaration of dividends are discretionary upon the board.

Executive Committee Exception:

Composed of 3 directors Stock corporations are prohibited from retaining surplus profits in excess of
100% of their paid-in capital.
Limitations:
Exception to the exception:
 Actions for which approval of shareholders are required.
 Filing of vacancies in the board Definite corporate expansion projects or programs approved by the board.
 Adoption, amendment or repeal of by-laws.
Prohibited from declaring dividends due to loan agreements requiring the
 Amendment or repeal of board resolutions.
consent of such creditor or financial institution.
 Distribution of cash dividends. (Sec. 34, RA 11232)
If it can be shown the such retention is necessary under special
circumstances obtaining in the corporation.
Corporate powers which are exercised by the BOD and
stockholders jointly (ASIA-FuSE)
Other rules regarding dividends:
1. Amendments to by-laws
 Stockholders are entitled to dividends pro rata based on the total
2. Extending or Shortening the corporate term
number of shares and not on the amount paid for the shares.
3. Increase or decrease of capital stock  Stockholders are entitled to dividends at the time of declaration.
 Stocks dividends can be declared at a premium (at value higher
4. The sale or other disposition of All or substantially all of the than par
corporate assets

5. Investment of corporate funds in another corporation

or business or for any other purpose;

6. Issuance of stock dividends

When may a Corporation Acquire its own shares?

There must be unrestricted retained earnings to cover the shares to be

purchased or acquired.

For a legitimate corporate purpose or purposes. (Sec. 40, RA 11232)

Who may declare dividends?