The Revised Corporation Code of the Philippines (Republic Act 11232) establishes the legal framework for corporate entities in the country. A corporation is defined as an artificial person created by law, possessing a legal personality separate from its owners, which allows it to own property, incur obligations, and participate in legal proceedings in its own name.
Classification and Structure
- Types of Corporations: Entities are primarily classified as stock corporations, which distribute profits as dividends to shareholders, or non-stock corporations, which operate for charitable, educational, or religious purposes.
- Incorporators and Founders: Corporations are established by two to fifteen incorporators, who can be individuals, partnerships, or other corporations. An exception is the One Person Corporation (OPC), which is owned by a single stockholder.
- Stockholders and Members: In stock corporations, owners are called stockholders; in non-stock entities, they are known as members. Collectively, all individuals composing the entity are referred to as corporators.
- Share Classifications: Shares can be classified as common (offering full voting rights but non-guaranteed dividends) or preferred (providing limited voting rights but fixed dividend rates). Other types include redeemable and treasury shares.
Governance and Regulatory Requirements
- Foundational Documents: Corporate existence is established through Articles of Incorporation—detailing the name, purpose, and capital structure—and By-laws, which provide internal rules for governance.
- Management: A Board of Directors oversees strategic direction and high-level decision-making. Key officers, such as the President, Corporate Secretary, and Treasurer, manage daily operations and compliance.
- Powers and Limitations: While corporations have broad powers to enter contracts and acquire assets, actions taken beyond their legal authority are termed "ultra vires" and may be deemed void.
- Compliance: All corporations must file annual general information sheets and financial statements with the Securities and Exchange Commission (SEC). Under recent updates, micro-entities with total assets or liabilities of 3 million pesos or less are exempt from submitting audited financial statements, requiring only a sworn statement of management responsibility instead.