Atty.ThelmaR.

VictorAlcoriza CompanyRegistrationandMonitoringDepartment SecuritiesandExchangeCommission

Section106,CorporationCode Educationalcorporationsshallbe governedby 1.speciallaws;and 2.thegeneralprovisionsofthe CorporationCodeofthe Philippines.

2

SpecialLaw BP232(EducationActof1982),as amendedbyRANo.7798(1994)

Section 25 mandates the incorporation of schools either as stock or nonstock educational corporations under the provisions of the Corporation Code.
3

CorporationCode
SpecialProvisions TitleXIII,SpecialCorporations; ChapterI,EducationalCorporations S106:Incorporation S107:requiresfavorableDepEd recommendation asaprerequisitetoSECregistration S108:Boardoftrustees GeneralProvisions (e.g.onmeetings,voting,bylaws,officers, etc.)
4

SEC Registration Primary Franchise Legal Personality General Supervision

DepEd Registration Secondary Franchise License or Authorityto Operate Direct Supervision

(RegulationofOperations
5

Whatisacorporation?(S22)
artificialbeing createdbyoperationoflaw hastherightofsuccession hasthepowers,attributesand propertiesexpresslyauthorizedby law(Section36)orincidenttoits existence
6

AdvantagesOverUnregisteredAssociations
(XIIISECQuarterlyBulletin,Opinion,26June1989)

enjoysperpetualsuccession hasthecapacitytoenterintocontracts (e.g.,takeandgrantproperty) cansue(andbesued) hasthecapacitytoreceiveandenjoy commongrantsandprivilegesand immunities itsstockholders/membershavegenerallyno personalliabilitybeyondthevalueoftheir shares/contribution
7

ImportantDoctrines
DoctrineofCorporateFiction Thecorporationhasalegalpersonalityseparateand distinctfromthosecomposingit. DoctrineofPiercingtheVeilofCorporateEntity (DisregardingtheFictionofCorporateEntity): Theseparatepersonalityofacorporationmaybe disregardedifsuchentityisavailedoftodefeatpublic convenience,justifyawrong,protectfraudordefendcrime. Estoppel Doctrine Anadmissionorrepresentationisrenderedconclusiveas againstthepersonrelyingthereon.
8

ClassesofEducationalCorporations
Stock NonStock

withcapitalstockdividedinto shares

nocapitalstock;fundscomefrom donationsandcontributions

authorizedtodistributedividends

nodistributionofdividends; income,ifany,shallnotinuretothe benefitofanymember,trusteeor officer

atleast60%ofthecapitalmustbe ownedbycitizensofthe Philippines

(par.1,Section4(2),ArticleXIV,PhilippineConstitution)

atleast60%ofthetotal membershipmustbecitizensofthe Philippines

(par.1,Section4(2),ArticleXIV,PhilippineConstitution)

CorporateTerm(S11)
50yearsfromthedateofincorporation unless:

soonerdissolved, registrationrevokedonlawfulgrounds, orperiodextended

unlimitednumberoftimes butnotmorethan50yearsineachinstance byamendmentoftheAI(S16) priortoexpirydate butnotearlierthan5yearspriortoexpiration, exceptforjustifiablereasonsasmaybe determinedbySEC
10

PrincipalOffice
wherethecorporatebooksandrecordsarekept; notnecessarilytheplacewherethebusinessistransacted mustbelocatedwithinthePhilippines(Section14[3]) ratio:acorporationmaylegallyexistonlywithinthe boundariesofthecountryunderthelawof whichitwasorganized determinestheresidenceofthecorporation (fixesthejurisdictionofthecourtsorvenueofactionsbyor againstthecorporation;facilitatesserviceofprocess; determinesthetaxsitus;determinestheprovincewherea chattelmortgageofsharesshouldberegistered;fixesthe placeofmeetingsofstockholders/members)
11

PersonsInvolved 1. Incorporators 2. Stockholders/Members 3. BoardofDirectors/Trustees 4. Officers

12

Incorporators(S5&S10)
personsmentionedintheAIasoriginally formingandcomposingthecorporationand whoaresignatoriesthereof number:atleast5butnotmorethan15 naturalperson oflegalage majorityareresidentsofthePhilippines instock:mustownsatleast1shareofstock; innonstock:mustbeamember
13

Stockholders/Members
Stock:Stockholders becomesuchbypurchasingstocks directlyfromthecorporationorfrom individualowners maybenaturalorjuridicalpersons atleast60%ofthecapitalmustbe ownedbycitizensofthePhilippines
(par.1,Section4(2),ArticleXIV,PhilippineConstitution)

Nonstock:Members becomesuchbyvirtueofadmissionto thecorporation same atleast60%ofthetotalmembership mustbecitizensofthePhilippines

(par.1,Section4(2),ArticleXIV,PhilippineConstitution)

shares ofstocktransferable mustberecordedintheStockand TransferBook

membershipnottransferable, unless theAIorBLprovidesotherwise mustberecordedintheMembership Book

14

BoardofDirectors/Trustees
exercisesthecorporatepowers conductsallbusiness controlsallproperties actsasabody *AmajorityofthenumberasfixedintheAIshall constituteaquorum.Everydecisionofatleast majorityofthedirectors/trusteespresentatmeetings atwhichthereisaquorumshallbevalidasacorporate act,exceptintheelectionofofficerswhichrequires thevoteofmajorityofallthemembersoftheboard.
(S25)

15

BoardofDirectors/Trustees
Stock:BoardofDirectors Nonstock:BoardofTrustees

atleast5butnotmorethan15 atleast5butnotmorethan (S14) 15andinmultiplesof5(S108) majorityareresidentsofthe same Philippines(S23) allarenaturalpersons allareoflegalage eachisaholderofatleast1 share(S23) same same eachisamember(S92)
16

BoardofDirectors/Trustees
Stock:BoardofDirectors Nonstock:BoardofTrustees

allarecitizensofthe Philippines(par.2,Section4(2),ArticleXIV,
PhilippineConstitution)

same

term ofoffice:1year,and untiltheirsuccessorsare electedandqualified (holdover)(S23)

1to5yearsasfixedintheAI orBL;but iftheAIorBLis silent,assoonasorganized, classify,staggeredbasis:1/5 shallexpireeveryyear; thereafter,termshallbe5 years(S108)

17

BoardofDirectors/Trustees:Election(S24)
quorum:majorityoftheOCS/members,entitledtovotemustbe presenteitherinpersonorbyproxy entitledtovote: instock:notdeniedvotingrightsunderBL;notdelinquent;those formingpartoftheOCS,perSTB,asofcutoffdatefixedin theBL;ifBLissilent,asofthedayofelection innonstock:membersrecordedintheMBasofcutoffdatefixedin theBL;ifBLissilent,asofthedayofelection manner:vivavoce;raisingofhands;byballot,ifrequested byanyvotingstockholder/member

18

BoardofDirectors/Trustees:Election (S24)
Stock:CumulativeVotingallowed 1. astockholdermayvotesuchnumberofsharesforasmany personsastherearedirectorstobeelected,or 2. hemaycumulatesaidsharesandgive1candidateasmany votesasthenumberofdirectorstobeelectedmultipliedby thenumberofsharesshallequal,or 3. hemaydistributethemonthesameprincipleamongasmany candidatesasheshallseefit Provided:thetotalnumberofvotescastbyhimshallnotexceed thenumberofsharesownedbyhimasshownintheSTB multipliedbythenumberofdirectorstobeelected NonStock:unlesstheAIorBLsoprovide,amembermaycast onlyasmanyvotesastherearetrusteestobeelectedbuthe maynotcastmorethan1votefor1candidate
19

BoardofDirectors/Trustees: Vacancies(S29)

GeneralRule:Vacanciesmaybefilledbythe remainingmembersoftheboard(ifstill constitutingaquorum). Exceptions:mustbefilledbythestockholders/ membersinaregular/specialmeetingcalledfor thatpurpose removal&expirationofterm(serveonlyforthe unexpiredterm) increaseinthenumberofdirectors/trustees(or inthesamemeetingauthorizingtheincreaseif sostatedinthenotice
20

Meetings(S49S59)
Stockholders/Members BoardofDirectors/Trustees WhenHeld: Regular: Regular: annually ondatefixedintheBL;if monthly,unlesstheBLprovide fixedintheBL,onanydateinApril Otherwise ofeveryyearasdeterminedbythe board Special: heldatanytimedeemednecessary orasprovidedintheBL Special:atanytimeuponthecallof thepresidentorasprovidedin theBL

Quorum: majorityoftheoutstandingcapital stock/members

majorityofthenumberasfixedin theAI

21

Meetings(S49S59)
Stockholders/Members NoticeRequirement: Regular: writtennotice(specifyingdate, timeandplace)requiredatleast2 weeksprior,unlessBLrequiresa differentperiod;maybewaived expresslyorimpliedly Special: same,butatleast1week prior PresidingOfficer: President,unlessBLprovide otherwise same BoardofDirectors/Trustees same,butatleast1dayprior

22

Meetings(S49S59)
Stockholders/Members
VotingRight: Stock:1share:1vote; GR:sharesmaybeclassifiedinAI Limitations: nosharemaybedeprivedofvoting rights,exceptpreferredandredeemable shares(exceptincasesunderS6last par.) wheretherearenonvotingshares, theremustbeaclasswithcomplete votingrights Nonstock: 1member:1vote, unlesslimitedbroadenedordeniedin theAIorBL
23

BoardofDirectors/Trustees
per head

Meetings(S49S59)
Stockholders/Members Boardof Directors/Trustees

mayvoteinperson0rby cannotvotebyproxy proxy(S58);butinnon stock:AIorBLmay provideotherwise(S89) tele/videoconferencing Nonstock: (SEC MC15S2001) votingbymailorother similar meansallowed, butmustbeprovidedfor intheBL
24

Meetings(S49S59)
Stockholders/Members BoardofDirectors/Trustees PlaceofMeetings: inthecityormunicipality where anywhereinoroutsideofthe Philippines,unlesstheBLprovide theprincipalofficeislocated otherwise ifnonstock:BLmayprovide otherwise;conditions:with propernoticeandmustbe withinthePhilippines(S93) ifpracticable,intheprincipal office MMconsideredascity/ municipalityforpurposesof meetings

25

Officers(S25)
naturalpersons citizensofthePhilippines(AntiDummyLaw;(par.2,Section4(2),
ArticleXIV,PhilippineConstitution)

doesnotactasabody;eachhasadesignatedfunction President alwaysadirector otherofficersneednotbedirectors Secretary alsoresidentofthePhilippines compatiblepositionsmaybeheldbythesameperson ifstock:electedbymajorityvoteofallthemembersofthe boardofdirectors ifnonstock:maybeelectedbythemembers,unless otherwiseprovidedforintheAIorBL
26

ReportorialRequirements(S141): GeneralInformationSheet
filingperiod:within30calendardaysfromthedateof theactualannualstockholders/membersmeeting ifunabletoholdmeeting:notlaterthanJanuary30of thenextcalendaryear 5copies intheformprescribedbytheCommission certifiedandsworntobytheCorporateSecretary submitalsoinelectronicformatifwithannualgross revenueofatleastPhP5M changesbetweenannualmeetingsmustbereflected inanamendedGISlabeledassuchwithchanges clearlyhighlighted submitwithin30calendardays aftertheoccurrenceoreffectivity ofsuchchange
27

ReportorialRequirements(S141): FinancialStatements
filingperiod:within120calendardaysaftertheendofthe fiscalyearasspecifiedintheBL for2009&2010:numbercoding(lastnumericaldigit) mustbeauditedbyanindependentCPAaccreditedwith theBOAif: stockwithpaidupcapitalofPhP50,000ormore nonstock withannualgrossreceiptsofPhP100,000or more,ortotalassetsofPhP500,000ormore otherwise:mayattheminimumbecertified,underoath, bytheTreasurerofthecorporation

28

ReportorialRequirements: Penalties(S144)
1.

Fine ScaleofFines basedonretainedearnings/fund balance notexceedPhP10,000peryear 2.Suspension 3.RevocationoftheCertificateof Incorporation

29

Dissolution:Methods
1. Voluntary

wherenocreditorsareaffected(S118) wherecreditorsareaffected(S119) shorteningofcorporateterm(S120) 2. Involuntary(S121) uponfilingofaverifiedcomplaint afterpropernoticeandhearing ongroundsprovidedbyexistinglaws,rules &regulations

30

Liquidation
Definition: thewindingupoftheaffairsofthecorporationbyreducing itsassetsinmoney,settlingwithcreditorsanddebtors,and apportioningtheamountofprofitandloss Methods: Liquidationbythecorporationitselforitsboard (S122,par.1) Liquidationbytrusteestowhomtheboardhad conveyedthecorporateassets(S122,par.2) Liquidationbyadulyappointedreceiver(S119,lastpar)

31

Liquidation: DistributionofAssetsinGeneral
Thecorporationspropertyconstitutesatrustfundfor thepaymentofdistributionofdebtsanddistribution tostockholders. Thetrustfunddoctrineepitomizestheideaofequal protectiontocreditorsandproratadistributionincase ofinadequacyofcorporateassetstopayalldebts. Thestockholdersareentitledtoparticipate,prorata,in theassets,afterpaymentofthecreditors,unless regulatedbytheAI.
32

Liquidation:DistributionofAssets inNonstockCorporations
Rulesfordistribution(S94): 1. Paymentofallliabilitiesandobligationsoradequateprovisiontherefor shall bemade. 2. Returnofallassetshelduponaconditionrequiringreturn,transferor conveyancethereofandwhichconditionoccursbyreasonofdissolution. 3. Assetsheldsubjecttolimitationspermittingtheiruseonlyforeducational purposesshallbetransferredto1ormoresimilareducationalcorporations. 4. Assetsotherthantheaboveshallbedistributedinaccordancewiththe provisionsoftheAIorBL. 5. Inanyothercase,assetsmaybedistributedtosuchpersons,societies, organizationsorcorporationsasmaybespecifiedintheplanofdistribution (adoptedbytheBOTthruaresolution;writtennoticeofthemeetingonthe proposedplangiventomembers;approvalbyatleast2/3ofthemembers required)(S95)

33

Cases:Jurisdiction
SEC PetitionforthecallingofannualmeetingunderS51 PetitionforchangeofnameforviolationofS18 Petitionforrevocationoflicenseforgroundsstatedunder PD902A,S6(l): fraudinprocuringcertificateofregistration seriousmisrepresentationonwhatthecorporationcandooris doingtothegreatprejudiceordamagetothegeneralpublic refusaltoobeylawfulorderoftheSEC continuousinoperation foraperiodofatleast5years failuretofileBLwithintherequiredperiod failuretofiletherequiredreportsinthefrompresrcibed bySEC withintheappropriateperiod
34

Cases:Jurisdiction
RegularCourts(SRC,S5.2&PD902A,S5) Casesinvolving: devices/schemesemployedbytheboard/officers amountingtofraudandmisrepresentationwhichmay bedetrimentaltopublicinterestorto stockholders/membersofSECregisteredcorporations intracorporatecontroversies electioncontroversies Petitionforsuspensionofpayments
35

Maraming Salamat !
tva.052010.bohol

36