corporate term image article Nicolas & de Vega Law Offices

Pursuant to the Revised Corporation Code, a corporation shall have a perpetual existence, unless its Articles of Incorporation provides otherwise.

Corporations shall have perpetual existence.

Prior to amendment by the law, corporations used to have a corporate term of fifty years. However, Republic Act No. 11232, otherwise known as “The Revised Corporation Code” changed that.  Now, under Section 11 of the Revised Corporation Code, a corporation shall have perpetual existence unless its articles of incorporation provides otherwise.  So yes, there is a forever, but only in corporations and still subject to certain conditions.

 

Corporations registered prior to the Revised Corporation Code shall likewise have perpetual existence unless they submit to the SEC a Notice to Retain Specific Corporate Term.

So, what will happen to the corporations that existed prior to the Revised Corporation Code? Section 11 of the same law enunciates that such corporations will benefit from the amendment of the law and will also have perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority of its articles of incorporation: Provided, That any change in the corporate right of dissenting stockholders in accordance with the provisions of the said law.

What about those who do not want to have perpetual existence? Well, the law will not force their hands.  The Securities & Exchange Commission (“SEC”) issued a Notice dated 13 January 2021 stating that corporations registered prior to the Revised Corporation Code and wish to retain their corporate term should file electronically their Notice to Retain Specific Corporate Term, with the attached Director’s Certificate on or before 23 February 2021. Hard copies should also be formally filed with the SEC, for the issuance of a Certificate of Filing Notice to Retain Specific Corporate Term.  The SEC added that corporations who fail to submit the said Notice by 23 February 2021 shall be deemed to have selected a perpetual term.

A corporation may shorten its corporate term.

Although the Revised Corporation Code gives perpetual existence to a corporation, the term may always be shortened by amending the articles of incorporation. Section 36 of the Revised Corporation Code mandates that the corporate term may be shortened when approved by a majority vote of the board of directors AND and ratified at a meeting by the stockholders or members representing at least two-thirds (2/3) of the outstanding capital stock. 

A corporation may be voluntarily dissolved.

A corporation may also be dissolved voluntarily. For voluntary dissolution of the corporation where no creditors are affected, Section 134 of the Revised Corporation Code requires a majority vote of the board of directors and a resolution adopted by the affirmative vote of the stockholders owning at least majority of the outstanding capital stock in a meeting to held upon the call of the directors. However, when the voluntary dissolution affects creditors, aside from the majority vote of the directors, the law requires the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock.

A corporation may be dissolved by the SEC.

Care must be taken to retain the corporate’s perpetual existence since the SEC has the power to dissolve corporations. Art. 138 of the Revised Corporation Code grants the SEC the power to motu proprio or upon the filing of a verified complaint on interested party, dissolve a corporation on the following grounds:

a. None-use of corporate charter as provided under Section 21 of this Code;

b. Continuous in operation of a corporation as provided under Section 21 of this Code;

c. Upon receipt of a lawful court order dissolving the corporation;

d. Upon finding by the final judgment that the corporation procured its incorporation through fraud;

e. Upon finding by final judgment that the corporation:

    1. Was created for the purpose of committing, concealing, or aiding the commission of securities violation, smuggling, tax evasion, money laundering, or graft and corrupt practices;

      2. Committed or aided in the commission of securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices, and its stockholders knew of the same; and

     3.  Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers, or employees.

In a nutshell, if a corporation does not commit acts which will enable SEC to have the same dissolved, it can actually live forever. So yes, there is a forever in corporations.

 

About Nicolas and De Vega Law Offices

If you need assistance in registration of corporations with the Securities and Exchange Commission, or have issues in corporate law, commercial law, corporate or commercial litigation, or civil or other criminal law-related issues,  we can help you. Nicolas and de Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.

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Excerpt:

This article talks about the term of existence of a corporation. Pursuant to the Revised Corporation Code, a corporation shall have a perpetual existence, unless its Articles of Incorporation provides otherwise. The existence of a corporation may be affected by shortening the corporate term, voluntary and involuntary dissolution.

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