Articles of Incorporation for Stock Corporations

What are the Articles of Incorporation?

The Articles of Incorporation is the document that lays down the foundational information concerning a corporation and this document is needed to form a corporation. 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.

What are the different types of Articles of Incorporation?

• Articles of Incorporation for Stock Corporations. This is a document that is needed to form a stock corporation. A stock corporation is a type of business organization where ownership is represented by stocks or shares of the company's capital stock.
• Articles of Incorporation for Non-Stock Corporations. This is a document that is a necessary document to form a non-stock corporation. A non-stock corporation is a type of business organization that does not issue stocks or shares of ownership.
• Articles of Incorporation (Non-Stock Educational Corporation). This is needed to form a corporation in the Philippines. This document is specifically designed for non-stock educational corporations.
• Articles of Incorporation (One Person Corporation). This is used to form a stock corporation where there is a single stockholder. The single stockholder can be a natural person, a trust, or an estate.
• Articles of Partnership (General Partnership). This is a document wherein the persons enter into an agreement or contract of partnership. In a general partnership, all partners have unlimited liability for the debts and obligations of the partnership. This means that each partner is personally responsible for the partnership's financial obligations and can be held liable for any losses or damages incurred by the business.
• Articles of Partnership (Limited Partnership). This is a document wherein the persons enter into an agreement or contract of limited partnership. Limited partners have limited liability and are only liable for the amount of their investment in the partnership. Limited partners typically do not participate in the management of the business and are only passive investors.

Is it mandatory to have Articles of Incorporation?

To form a stock corporation, the Articles of Incorporation for Stock Corporations should be prepared and submitted to the Securities and Exchange Commission. Absent this document, the stock corporation will not have corporate existence or existence under the law.

What must the Articles of Incorporation contain?

The Articles of Incorporation must contain the following information:

• The name of the corporation,
• The duration of the corporation,
• The place where the corporation will operate (principal office),
• The details of the incorporators,
• The capital of the corporation called the authorized capital stock,
• The number of shares subscribed (or those which are promised to be purchased by investors), and
• The treasurer appointed.

What are the prerequisites of the Articles of Incorporation?

There is no minimum capitalization for a corporation. However, if the corporation has minimum capitalization, meaning the incorporators invested money in the corporation in exchange for stocks or shares, a certain percentage of the corporation's capital should be owned by Filipino citizens depending on the specific industry with which the corporation is engaged in, to be legal and valid.

For example, if a corporation is an advertising company, 70% of the capital thereof must be owned by Filipino Citizens and the remainder of 30% may be owned by foreign citizens. If the corporation is a private recruitment agency, engaged in defense related structure construction, 60% of the capital thereof must be owned by Filipino Citizens, and 40% may be owned by foreign citizens. The Foreign Investment Negative List may be inspected to determine the Filipino ownership requirement for corporations in a specific industry. If requirement under the list mentioned is not complied with, any violating corporation may be meted with a fine or suspension, or its officers may be punished with imprisonment.

Who is involved in the Articles of Incorporation?

The following are the parties in the Articles of Incorporation

• Incorporators. These are the stockholders mentioned in the Articles of Incorporation as originally forming or composing the corporation. They are the signatories of the Articles of Incorporation. There cannot be more than fifteen incorporators. Incorporators may be a natural person, a partnership, an association or corporation. Incorporators of a stock corporation must own or be a subscriber to at least one share of the capital stock of the corporation. Note that Incorporators may also be directors of the corporation who will conduct the business of the corporation.
• Directors. The number of directors of a corporation cannot be more than fifteen directors. Directors exercise the corporate powers of the corporation, conduct all business, and control and hold all properties of the corporation. They are elected from the stockholders of the corporation and hold office for one year until their successors are elected and qualified. Directors must be natural persons (another corporation can't be a director) of legal age. They must own at least one share of the capital stock of the corporation of which he is a director and said share should be recorded in his name in the books of the corporation.
• Treasurer. The treasurer is in charge of the general oversight of the finances of the corporation, and is elected as such by the stockholders. The treasurer also must affix his signature in the Articles of Incorporation.

Who cannot enter into the Articles of Incorporation?

Foreigners are not allowed to be incorporators and directors if the business activity of the corporation is fully reserved for Filipino ownership.

Examples of business activities that are fully reserved for 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.

Note that an incorporator and a director must own or be a subscriber to at least one share of the corporation at the time the Articles of Incorporation is submitted to the Securities and Exchange Commission. Further, a person is disqualified from being a director of any corporation if, within 5 years before the election or appointment, the person was:

• Convicted by final judgment of (a) an offense punishable by imprisonment for a period exceeding six years, or (b) a violation of the Revised Corporation Code or (c) a violation of the Securities Regulation Code.
• Found administratively liable for any offense involving acts of fraud.
• Found liable by a foreign court or equivalent foreign regulatory authority for acts, violations, or misconduct similar to those in the abovementioned points.

What can be the duration of the Articles of Incorporation?

The Articles of Incorporation subsist so long as the corporation exists. A corporation can have a perpetual existence, meaning, it can exist indefinitely. Further, the incorporators may choose as to how long the life of a corporation will be.

What has to be done once the Articles of Incorporation is ready?

Once the document is completed, the incorporators and the treasurer must sign at least three original copies of the document.

The document also includes an Acknowledgment portion. Notarization of the document converts the document from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity. To notarize the document, the parties must go to a notary public to acknowledge that they have signed the Distribution Agreement freely and voluntarily. They should also present a valid I.D. issued by an official agency bearing their photograph and signature such as a driver's license or a passport, among others.

Once the document is notarized, one original copy will be kept by the corporation, one original copy will be kept by the notary public and the last original copy of Articles of Incorporation may be submitted to the Securities and Exchange Commission, together with the other requirements (e.g. cover sheet, name verification slip, by-laws, and, if necessary, registration to, endorsement or clearances from other government agencies), to register the corporation.

Is it necessary to notarize the Articles of Incorporation for it to be valid?

Yes. The Articles of Incorporation is a document that should be submitted to the Securities and Exchange Commission for purposes of forming the corporation, the Securities and Exchange Commission requires the same to be notarized before it is registered.

Further, notarization of the Articles of Incorporation converts the same from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity, meaning, the document will be presumed to be validly written and signed once it is shown to court in case a dispute is brought before it.

Is it necessary to register the Articles of Incorporation?

Yes. After notarization, the Articles of Incorporation must be registered before the Securities and Exchange Commission. Other requirements such as a cover sheet, name verification slip, by-laws, and, if necessary, registration to, endorsement, or clearances from other government agencies should also be submitted. For a more complete list of requirements, the website of the Securities and Exchange Commission should be checked.

Once the requirements are complete, the Securities and Exchange Commission will issue a Certificate of Registration of the corporation signifying that the corporation is valid and exists under the law.

What are the costs involved in the finalization of Articles of Incorporation?

Some notaries public may charge based on the percentage of the amount of capital involved, which is usually ay 1%. Further, registration fees may also be paid for the registration to be made before the Securities and Exchange Commission.

Which laws are applicable to Articles of Incorporation?

Articles of Corporation are governed by the Revised 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 Philippines, the Securities Regulation Code, the Foreign Investment Act, the Republic Act 8179, specifically the Foreign Investment Negative List, the Anti-Money Laundering Act, and the Anti-Dummy Law may affect the ownership and board membership requirements of a corporation, depending on the business of the corporation. The paid-up capital may also have a minimum amount depending on the industry.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.