Corporation Law: The Revised Corporation Code of the Philippines - Sec 36

 THE REVISED CORPORATION CODE  OF THE PHILIPPINES

Republic Act No. 11232 

TITLE IV -  POWERS OF CORPORATIONS

Section 36. Power to Extend or Shorten Corporate Term.

A private corporation may extend or shorten its term as stated in the articles of incorporation when approved by a majority vote of the board of directors or trustees, and ratified at a meeting by the stockholders or members representing at least two-thirds (2/3) of the outstanding capital stock or of its members. Written notice of the proposed action and the time and place of the meeting shall be sent to the stockholders or members at their respective place of residence as shown in the books of the corporation, and must be deposited to the addressee in the post office with postage prepaid, served personally, or when allowed in the bylaws or done with the consent of the stockholder, sent electronically in accordance with the rules and regulations of the Commission on the use of electronic data messages. In case of extension of corporate term, a dissenting stockholder may exercise the right of appraisal under the conditions provided in this Code.

1. Perpetual Term. 
  • A corporation shall have perpetual existence unless its Articles of Incorporation provides otherwise. 
    • Corporations with certificates of incorporation issued prior to the effectivity of the RCCP, and which continue to exist, shall have perpetual existence. 
    • If existing corporations opt to have a fixed term, stockholders representing a majority of its outstanding capital stock must vote to retain its specific term and must notify the SEC that it elects to retain its specific corporate term pursuant to its Articles of Incorporation.
  • New corporations may opt to have a fixed term by indicating such term in their Articles of Incorporation

2. Not Inherent Right.
  • When a new corporation indicates a fixed corporate term in its Articles of Incorporation, or when an existing corporation opts to retain its existing fixed term with notice to the SEC, the specific period may still be extended or shortened by amending the Articles of Incorporation. 
  • It should be noted however that since the life of the corporation is a concession of the State, the power to extend the corporate term is not an inherent right. 
  • In fact, the perpetual term of corporations is also just a concession of the State
  • Corporations can shorten their corporate terms under Section 36. 
  • However, shortening of corporate term can also be done at the discretion of the corporation through any of the modes of dissolution under Sections 133 to 139 of the RCCP. 

3. Requirements. 
  • Extension and shortening of the term of the corporation are subject to the following requirements under Section 36 of the RCCP:
  1. The action must be approved by a majority vote of the board of directors or trustees. 
  2. The action must be ratified at a meeting by the stockholders representing at least 2/3 of the outstanding capital stock or by at least 2/3 of the members in case of non-stock corporations.
  3. For purposes of such stockholders'/members' meeting, written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his/her/its place of residence as shown in the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally, or sent electronically. 
  4. A copy of the amended Articles of Incorporation shall be submitted to the SEC for its approval. 

4. Appraisal Right. 
  • Section 36 of the RCCP provides that in case of extension of corporate term, any dissenting stockholder may exercise the appraisal right under the conditions provided in the Code. 
  • However, Section 80 provides that the appraisal right is available even in the shortening of corporate term. 

5. Dissolution. 
  • The shortening of the corporate term may be designed to have the effect of dissolving the corporation under Section 136 of the RCCP. 
    • The dissolution takes effect on the date of approval of the Amended Articles of Incorporation by the SEC. 
    • The three-year liquidation period shall likewise be reckoned from the date of the SEC approval of the Amended Articles of Incorporation.
  • Upon the expiration of the shortened term, as stated in the approved Amended Articles of Incorporation, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of the RCCP on liquidation.
  • In the case of expiration of corporate term, dissolution shall automatically take effect on the day following the last day of the corporate term stated in the Articles of Incorporation, without the need for the issuance by the SEC of a certificate of dissolution. 

PROBLEM: 
A, a corporation, was organized for a term of 50 years, expiring in December 2020. Outline the steps to be taken in order that A may extend its corporate life. 
Section 36 of the Revised Corporation Code provides that the corporate term of a private corporation may be extended by an amendment of the Articles of Incorporation approved by the majority vote of the Board of Directors or Trustees and ratified at a meeting by the stockholders representing at least 2/3 of the outstanding capital stock or by at least 2/3 of the members, in case of a non-stock corporation. 
The amendment of the Articles of Incorporation shall then be submitted to the Securities and Exchange Commission for approval. The amendment shall take effect upon SEC approval, or from the date of filing with the SEC in case of the latter's inaction within six months from said date of filing for a cause not attributable to the corporat10n (Section 15, RCCP). (1968 Bar)

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