Frequently Asked Questions (FAQs) About Corporate Governance

Who can incorporate?

Any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. Natural persons who are licensed to practice a profession may organize a professional corporation. Note that since a juridical person may be an incorporator, a partnership or corporation may be an incorporator of another corporation.

Are there any restrictions on its composition?

Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock. Also, a corporator must be of legal age. An incorporator need not be a Philippine Citizen or a Philippine Resident.

What is the minimum capital needed?

In general, there is no minimum capital stock. The law has done away with the minimum requirement that at least 25% of the authorized capital stock is subscribed at the time of incorporation and that at least 25% of the total subscription be paid upon incorporation.

What is a Board of Directors?

A Board of Directors (BOD) exercises the corporate powers and conducts all of the business and controls all of the properties of the corporation. The Board of Directors collectively makes the biggest decisions in a corporation.

How many Directors are required?

The BOD of a stock corporation should have at least 5 directors but shall not exceed 15. However, a corporation with a paid-up capital stock of less than PHP 625,000 may only have up to three directors.

What qualifications are required?

Every director must own at least one (1) share of stock of the corporation. A majority of the directors must be residents of the Philippines. All directors must be of legal age. A corporation vested with public interest should have at least two (2) independent directors.

What are the corporate acts that need BOD approval?

Requires Majority vote (50% + 1):

• To extend or shorten corporate term (Sec 37)
• To increase or decrease capital stock; incur, create or increase bonded indebtedness (Sec 38)
• Sell, lease, exchange, mortgage, pledge, or otherwise dispose of all or substantially all of its property and assets (Sec 40)
• To invest corporate funds in another corporation or business (Sec 42)
• To enter into management contract (Sec 44)
• Amend by-laws (Sec 48)
• Voluntary dissolution if no creditors are affected (Sec 118)
• Amendment to the plan of merger or consolidation (Sec 77)

What are the corporate acts that need stockholder approval?

Requires 2/3 Vote:

• Shares to be issued in good faith in exchange for property needed for corporate purposes (Sec 39)
• Shares to be issued in good faith in payment of previously contracted debt
• Sell, lease, exchange, mortgage, pledge, or otherwise dispose of all or substantially all of its property and assets (Sec 40)
• To invest corporate funds in another corporation or business (Sec 42)
• To issue stock dividends (Sec 43)
• Plan of merger and consolidation (Sec 76, 77)
• Voluntary dissolution if no creditors are affected (Sec 118)

Requires Majority Vote:

• To enter into management contract (Sec 44)
• To amend, repeal any by-laws or adopt new by-laws (Sec 48)
• Amendment of Articles of Incorporation (Sec 103)

What are the requirements for calling and holding a BOD Meeting?

Regular meetings of the board of directors of every corporation shall be held monthly, unless the by-laws provide otherwise. Special meetings can also be held at any time upon the call of the president or as provided by the by-laws. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director at least 1 day prior to the scheduled meeting, unless otherwise provided by the by-laws.

What are the requirements for calling and holding a Stockholder Meeting?

Regular meetings of stockholders are held annually on a date fixed by the by-laws, or if so not fixed on any date in April of every year as determined by the BOD. Written notice for regular meetings must be sent to stockholders at least 2 weeks before the meeting and at least 1 week for special meetings, unless a different period is required by the by-laws.