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The Articles of Incorporation is a necessary document to form a corporation in the Philippines. A corporation is an artificial person created by law and should be registered with the Securities and Exchange Commission ("SEC"). The existence of a corporation begins after it has submitted the Articles of Incorporation to the SEC and the SEC issues a Certificate of Incorporation.
A corporation can only exist for a maximum period of fifty (50) years but the period may be extended for periods not exceeding fifty (50) years through the amendment of the Articles of Incorporation.
This document is specifically designed for non-stock corporations.
Types of Corporation
A corporation can be a stock corporation or a non-stock corporation.
A stock corporation has a capital stock that is divided into shares that may or may not have a par value. Par values are the minimum subscription or issue price of the shares of the corporation. Stock corporations are authorized to engage in income generating activities and to distribute dividends to its shareholders. Stock corporations are generally not required to have a minimum authorized capital stock. Stocks cannot be issued below the par value or issue price.
A non-stock corporation does not have stocks and no part of its income can be distributed to its members, trustees, or officers as dividends. Any profit generated by the non-stock corporation as an incident to its operation can, whenever necessary or proper, only be used for the furtherance of the purpose or purposes for which the non-stock corporation was organized. A non-stock corporation is formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural, and like chambers, or any combinations thereof. A non-stock corporation may not include a purpose which would change or contradict its nature as a non-stock corporation.
Incorporators are the members mentioned in the Articles of Incorporation as originally forming or composing the corporation. They are the signatories of the Articles of Incorporation. There must be a minimum of five (5) and a maximum of fifteen (15) incorporators to form a corporation. Incorporators must all be natural persons (another corporation cannot be an incorporator) of legal age and a majority of the incorporators must be residents of the Philippines. Incorporators of a non-stock corporation must be a member of the non-stock corporation.
Foreigners are generally allowed to be incorporators provided that the requirements of the incorporators are complied with and the business activity of the corporation is not fully reserved for Filipino ownership. Examples of business activities that are fully reserved to Filipino ownership are mass media (except recording), retail trade with paid up capital of less than US$2,500,000.00, cooperatives, and private securities agencies.
Trustees exercise all the corporate powers and conduct the business of a non-stock corporation. They also hold and control all the properties of the corporation. They are elected from among the members of the corporation.
A non-stock corporation must have at least five (5) and may have more than fifteen (15) trustees. However, for educational institutions, the number of trustees must be at least (5) but not more than fifteen (15) and the number of trustees must be in multiples of five (5). For religious societies, the number of trustees must be at least (5) but not more than fifteen (15). For a corporation sole, the trustee is only one (1).
Generally, as soon as the trustees are organized, the first trustees elected and named in the Articles of Incorporation shall classify themselves so that the term of office of one-third (1/3) of the total number of trustees shall expire every year. This would mean that one-third (1/3) of the total number of trustees shall be elected every year. All subsequent trustees who are elected into office shall have a term of three (3) years.
Trustees must be natural persons (another corporation cannot be a trustee) of legal age and must be members of the corporation. Majority of the trustees must be residents of the Philippines.
A person is disqualified from being a trustee if they have been convicted by final judgment of (a) an offense punishable by imprisonment for a period exceeding six years or (b) a violation of the Corporation Code committed within five (5) years prior to the date of his election or appointment.
Like incorporators, foreigners may also generally be trustees of a corporation except for business activities that are fully reserved for Filipinos. Provided however, that if the business activities of the corporation is partially nationalized, such as ownership of private land (60% Filipino ownership), and educational institutions other than those established by religious groups and mission boards (60% Filipino ownership), among others, the number of seats for foreigners in the board of directors should be in proportion to the allowed foreign equity.
Membership in a non-stock corporation and all rights arising from said membership is purely personal and cannot be transferred. Membership may only be terminated in the manner and for causes provided in the Articles of Incorporation and the By-laws. Unless otherwise provided in the Articles of Incorporation, termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its property.
Juridical entities, such as corporations, may be members of a non-stock corporation provided that there are duly-designated or authorized representatives of the juridical entity.
Contributed capital is the amount contributed to non-stock corporations. There is no minimum contributed capital however, in the case of foundations, the minimum contributed capital is one million (P1,000,000.00) pesos. In the case of foundations, the amount should be deposited in the bank in the name of the treasurer-in-trust and a bank certificate of deposit is required for registration.
How to use this document
This document can be used by incorporators when forming a non-stock corporation. This document compiles the information required by the Corporation Code of the Philippines in forming a corporation in the Philippines. Take note that the Securities and Exchange Commission requires additional requirements for the primary registration of non-stock corporations such as a cover sheet, name verification slip, by laws, treasurer's certificate, and, if necessary, registration to, endorsement or clearances from other government agencies. It is important to check the requirements before filling up and filing this document.
In this document, the user will be asked for information on the corporation such as the name, principal address, and purpose or purposes of the corporation. The user must also indicate whether the non-stock corporation will be a foundation, due to different requirements for contributed capital, or if it will be an educational institution, due to the requirements of the number of trustees. The user will also be asked to provide details such as the name, nationality, residential address and tax identification number (TIN) of the incorporators and the name, nationality, and residential address of the trustees. The user may also choose to provide either the total amount of contribution or to enumerate the names of the contributors with their respective contributions. Finally, the user must also identify the treasurer, who must also be a trustee of the corporation. Once the document is completed, the incorporators must sign at least three (3) original copies of the document together with two (2) witnesses.
Finally, this document includes an acknowledgment that may be filled up if the information is available. The acknowledgment will ask for information such as the province and city or municipality where the document will be notarized. The incorporators must personally appear before the notary public and present proof of their identification to acknowledge their signatures on the document as their free and voluntary act and deed. The notary public will usually keep one (1) original copy of the document.
Once the document is notarized, the user may submit the document to the Securities and Exchange Commission, together with the other requirements, to register the corporation.
Articles of Incorporation are governed by the Corporation Code of the Philippines. However, other laws, their rules and regulations, and SEC rules may affect the conduct and transactions of the Corporation such as but not limited to the 1987 Constitution of the Republic of the Philippines, the Foreign Investments Act, specifically the Foreign Investment Negative List, and the Anti-Dummy Law may affect the ownership and board membership requirements of a corporation, depending on the business of the corporation.
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