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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 drafted for 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.
Incorporators 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 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 stock corporation must own or be a subscriber to at least one (1) share of the capital stock of the 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.
A stock corporation must have a minimum of five (5) and a maximum of fifteen (15) 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 (1) year until their successors are elected and qualified.
Directors must be natural persons (another corporation can't be a director) of legal age and a majority of the directors must be residents of the Philippines. They must own at least one (1) 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. A person is disqualified from being a director of any corporation if he has 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 before the date of his election or appointment.
Foreigners may generally be directors of a corporation except for business activities that are fully reserved for Filipinos such as mass media (except recording), retail trade with paid up capital of less than US$2,500,000.00, cooperatives, and private securities agencies among others. If the business activities of the corporation is partially nationalized, such as private recruitment (75% Filipino ownership), advertising (70% Filipino ownership), operation of public utilities (60% Filipino ownership), and ownership of private land (60% Filipino ownership), among others, the number of seats for foreigners in the board of directors is in proportion of their present foreign equity to the number of directors.
Subscription is the mutual agreement between a corporation and a person, known as a subscriber, to take and pay for the shares of a corporation.
If the corporation has stocks with par values, at least twenty-five (25%) percent of the total authorized capital stock must be subscribed at the time of incorporation and at least twenty-five (25%) percent of the total subscription must be paid upon subscription.
If the corporation has stocks without par values, at least twenty-five (25%) percent of the total shares must be subscribed and fully paid for. The issue price of stocks without par values may be fixed in the Articles of Incorporation or by the board of directors, if authorized by the articles of incorporation or the by-laws, or in the absence of such authority, by the stockholders representing at least majority of the outstanding capital stock at a meeting called for the purpose of fixing said issue price. Stocks without par values cannot be issued at less than five (P5.00) pesos per share.
Finally, the total paid-up capital cannot be less than five thousand (P5,000.00) pesos.
How to use this document
This document can be used by incorporators when forming a 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 stock corporations such as a cover sheet, name verification slip, by-laws, 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 will be asked for the number of shares that the corporation will issue and, if said shares will have a par value, the par value of each share. The user will also be asked to provide details such as the name, citizenship, residential address and tax identification number (TIN) of the incorporators and the name, citizenship, and residential address of the directors. The names, citizenship, number of shares subscribed, and the amount paid by the subscribers to the shares of the corporation will also be asked in completing this document. Finally, the user must also identify the treasurer, who must also be a director 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 Corporation 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 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.
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