Corporation Law: The Revised Corporation Code of the Philippines - Sec 5 (September 11, 2023)

THE REVISED CORPORATION CODE  OF THE PHILIPPINES  

Republic Act No. 11232 

TITLE I - GENERAL PROVISIONS 

Definitions and Classifications 

SEC 5. Corporators and Incorporators, Stockholders and Members. – Corporators are those who compose a corporation, whether as stockholders or shareholders in a stock corporation or as members in a nonstock corporation. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

1. Components. 

  • The components of the corporation include:

  1. shareholders or members,
  2. directors or trustees, and
  3. officers. 
  • Stockholders or members are referred to in Section 5 of as the Corporators. 
    • Corporators in a stock corporation 
      • called stockholders or shareholders
    • Corporators in a non-stock corporation
      • called members.
2. lncorporators. 
  • Stockholders or members mentioned in the Articles of Incorporation as originally forming and composing the corporation and who are signatories thereof. 
  • There is only one set of incorporators. 
  • The incorporators appearing as such in the Articles of Incorporation will remain to be incorporators up to the termination of the life of the corporation. 
  • The Articles of Incorporation cannot be amended to change the names of the incorporators because the fact that the persons named therein are incorporators is an accomplished fact or deed that can no longer be undone. 

3. Shareholders. 
  • Holders of shares in a corporation with interest over the:
    • management (control)
    • income (dividends) and 
    • assets (share upon liquidation) of the corporation.
  • They participate in controlling the affairs of the corporation by exercising their right to vote by electing members of the board of directors. 
  • The right to participate in the control and management is exercised through the election of members of the board of directors because "it is the board of directors that controls or manages the corporation."
  • Two-Thirds Requirement.
    • Shareholders vote on or approve fundamental structural changes in the corporation.
    • Concurrence of the stockholders representing 2/3 of the outstanding capital (or 2/3 of the members whenever applicable) is necessary in the exercise of the following powers:
      • To extend or shorten corporate term 
      • To increase/decrease capital stock 
      • To incur, create or increase bonded indebtedness 
      • To deny pre-emptive right after incorporation γƒΌ since the denial is required to be in the Articles of Incorporation or any amendment thereto, and approval of amendments to the Articles of Incorporation requires the vote or written assent of stockholders representing 2/3 of the outstanding capital stock or 2/3 of the members 
      • To sell, lease, exchange, mortgage, pledge, or otherwise dispose of all or substantially all of corporate assets 
      • To invest in another corporation, business, or for any purpose other than the primary purpose for which it was organized, like the secondary purpose 
      • To declare stock dividends (
      • To enter into management contract
      • To amend the Articles of Incorporation
      • To merge or consolidate with another corporation or other corporations
      • To voluntarily dissolve the corporation where creditors are affected
  • Majority
    • Approval at a meeting duly called for the purpose by the stockholders representing majority of the outstanding capital, or majority of the members, is necessary, together with Board approval, in the exercise of the following powers:
      • To enter into a management contract under circumstances not covered by either of the two instances stated above
      • To adopt, amend or repeal the By-laws
      • Voluntary dissolution where no creditor is affected
  • Without Prior Board Approval
    • Without Board resolution, the stockholders/members may by the vote of:
      • 2/3 of the outstanding capital stock or of the members 
        • Delegate to the Board the power to amend the By-laws
        • Remove any director or trustee subject to the requirements under Section 27 of the RCCP. 
      • Majority of outstanding capital stock or of the members
        • Grant directors or trustees with compensation and approve the amount thereof at a regular or special meeting.
        • Revoke the power of the Board to amend the By-Laws, which was previously delegated
  • Others
    •  Provisions of the RCCP on the vote required for specific matters requiring stockholder action are as follows:
      • 2/3 of outstanding capital stock or of the members
        • Ratification of contracts entered into by directors/trustees (involving self-dealing/disloyalty) under Sections 31 and 33 of the RCCP
      • Majority of outstanding capital stock
        • Fixing the issued price of no-par value shares if not so fixed in the Articles of Incorporation or by the Board pursuant to the authority under the Articles

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