I. Introduction

In the Philippines, corporations acquire juridical personality only upon the issuance of a Certificate of Incorporation by the Securities and Exchange Commission. The principal documents required for incorporation are the Articles of Incorporation and, where applicable, the By-Laws. These documents form the constitutional framework of a corporation: the Articles of Incorporation establish the corporation’s existence, powers, structure, capital, and identity, while the By-Laws regulate its internal governance, meetings, officers, voting, and administrative procedures.

The governing law is primarily the Revised Corporation Code of the Philippines, Republic Act No. 11232, which modernized Philippine corporate law by allowing, among others, one-person corporations, perpetual corporate terms, electronic filing, remote participation in meetings, and greater flexibility in corporate structuring.

This article discusses the legal nature, required contents, execution, filing, amendment, and practical significance of Articles of Incorporation and By-Laws in the Philippine corporate setting.

II. Nature and Function of the Articles of Incorporation

The Articles of Incorporation are the basic charter of a corporation. They are filed with the Securities and Exchange Commission and, once approved, give birth to the corporation as a separate juridical person.

The Articles perform several core functions:

First, they identify the corporation’s legal name, purpose, principal office, term, incorporators, directors or trustees, capital structure, and other essential details.

Second, they define the corporation’s primary and secondary purposes. These purposes determine the scope of corporate powers and activities. A corporation generally cannot validly engage in business outside its stated purposes unless such activities are incidental or reasonably necessary to accomplish its corporate objectives.

Third, they serve as public notice to shareholders, creditors, regulators, and third parties dealing with the corporation.

Fourth, they establish the corporation’s capital structure, including authorized capital stock, shares, par value or no-par value shares, subscriptions, and paid-in capital, if the corporation is a stock corporation.

The Articles are therefore not merely administrative forms. They are legal instruments with binding consequences on the corporation, its shareholders or members, directors or trustees, and third parties.

III. Who May Form a Corporation

Under Philippine law, a corporation may be formed by:

Any person, partnership, association, or corporation, singly or jointly with others, subject to nationality restrictions and special laws; or
A single stockholder, in the case of a One Person Corporation.

The Revised Corporation Code removed the old requirement of at least five incorporators for ordinary corporations. A corporation may now be organized by one or more persons, but not more than fifteen incorporators, except in special cases provided by law.

Incorporators must have legal capacity. Natural-person incorporators must generally be of legal age. Juridical entities may also act as incorporators, subject to applicable laws, their own governing documents, and any regulatory restrictions.

IV. Required Contents of the Articles of Incorporation

The Revised Corporation Code requires that the Articles of Incorporation substantially state the following matters.

1. Corporate Name

The Articles must state the name of the corporation.

A corporate name must be distinguishable from names already reserved or registered with the Securities and Exchange Commission. It must not be misleading, deceptive, contrary to law, or offensive to public policy. Certain words, such as “bank,” “insurance,” “trust,” “investment,” “finance,” “university,” or similar regulated terms, may require prior clearance from the appropriate government agency.

The corporate name is important because it is the legal identity under which the corporation sues, is sued, contracts, owns property, pays taxes, and transacts business.

If the proposed name is confusingly similar to an existing corporation, partnership, or registered name, the SEC may reject it or require modification.

2. Specific Purpose or Purposes

The Articles must state the corporation’s purpose or purposes.

If there is more than one purpose, the Articles must indicate the primary purpose and may state one or more secondary purposes. The primary purpose identifies the main business or activity of the corporation. Secondary purposes allow the corporation to undertake additional activities, provided they are lawful and not inconsistent with the primary purpose.

The purpose clause must be lawful. A corporation cannot be formed for illegal, immoral, fraudulent, or unconstitutional objectives.

For corporations engaged in regulated industries, the purpose clause must usually conform to special laws and may require endorsements from relevant agencies. Examples include banking, lending, financing, insurance, education, recruitment, securities, public utilities, mining, telecommunications, and health-related services.

3. Principal Office

The Articles must state the corporation’s principal office, which must be located in the Philippines.

Under current practice, the principal office is commonly stated with sufficient specificity, usually including the city or municipality and province, and often the complete address. The principal office determines the corporation’s official address for notices, venue for certain proceedings, and jurisdictional or regulatory matters.

Changes in principal office may require amendment of the Articles if the address stated therein changes in a way that affects the registered information.

4. Corporate Term

The Articles must state the term for which the corporation is to exist.

Under the Revised Corporation Code, corporations generally have perpetual existence unless their Articles provide otherwise. Corporations existing before the Revised Corporation Code are generally deemed to have perpetual existence unless they elect to retain their original corporate term.

A corporation may still choose a fixed corporate term if desired. If a fixed term is chosen, it may be extended by amendment of the Articles, subject to statutory requirements.

5. Names, Nationalities, and Residences of Incorporators

The Articles must state the names, nationalities, and residences of the incorporators.

This requirement allows the SEC and the public to identify the persons or entities responsible for forming the corporation. Nationality information is especially important where the corporation will engage in activities subject to foreign ownership limits.

For juridical incorporators, the Articles or accompanying documents may need to show authority to invest, subscribe, or participate in the incorporation.

6. Number of Directors or Trustees

The Articles must state the number of directors or trustees.

For a stock corporation, the governing board is the Board of Directors. For a non-stock corporation, it is the Board of Trustees.

Generally, the number of directors or trustees must not exceed fifteen, except as otherwise provided by law. Special corporations and certain regulated entities may be subject to different board composition requirements.

For One Person Corporations, the single stockholder acts as the sole director and president, subject to special provisions.

7. Names, Nationalities, and Residences of Initial Directors or Trustees

The Articles must state the names, nationalities, and residences of the persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified.

This ensures that the corporation has an initial governing body upon incorporation.

Directors must generally own at least one share of stock recorded in their name on the books of the corporation. Trustees of non-stock corporations must generally be members of the corporation unless otherwise allowed by law.

8. Authorized Capital Stock

For stock corporations, the Articles must state the amount of authorized capital stock in lawful money of the Philippines, the number of shares into which it is divided, and the par value of each share, if any.

The authorized capital stock represents the maximum amount of capital that the corporation is authorized to issue, unless later increased through amendment of the Articles.

Shares may be par value or no-par value shares, subject to legal limitations. Certain corporations, such as banks, trust companies, insurance companies, public utilities, building and loan associations, and other entities where special laws require par value shares, may be restricted in their ability to issue no-par value shares.

9. Subscription and Paid-In Capital

The Articles must state the amount of capital stock subscribed, the names of subscribers, the amount subscribed by each, and the amount paid by each on the subscription.

Under the Revised Corporation Code, the old general rule requiring at least 25% of authorized capital stock to be subscribed and at least 25% of subscribed capital to be paid at incorporation has been removed as a universal requirement. However, special laws, industry regulations, and SEC rules may still impose minimum capitalization, subscription, or paid-in capital requirements for particular types of corporations.

Thus, although ordinary domestic corporations may enjoy greater flexibility, corporations engaged in regulated businesses must still comply with applicable minimum capital requirements.

10. Other Matters Not Inconsistent with Law

The Articles may contain other provisions not inconsistent with law, including provisions on:

Classes of shares;
Preferred shares;
Redeemable shares;
Founders’ shares;
Voting or non-voting shares, subject to statutory limits;
Restrictions on transfer of shares;
Pre-emptive rights;
Denial or limitation of pre-emptive rights;
Arbitration agreements for intra-corporate disputes;
Corporate governance provisions;
Supermajority voting requirements;
Qualifications of directors, trustees, officers, shareholders, or members;
Special rights of shareholders or members; and
Other lawful arrangements.

However, provisions contrary to the Revised Corporation Code, the Constitution, special laws, public policy, or SEC regulations may be rejected or deemed invalid.

V. Additional Requirements for Non-Stock Corporations

A non-stock corporation is one where no part of its income is distributable as dividends to members, trustees, or officers, subject to lawful compensation and legitimate expenses.

The Articles of a non-stock corporation must state its purposes, membership structure, trustees, and other details required by law. Non-stock corporations are commonly used for foundations, associations, clubs, religious organizations, civic groups, professional associations, educational institutions, and charitable entities.

The Articles should clearly provide that no part of the corporation’s income shall inure to the benefit of any private individual, except as reasonable compensation for services rendered or as otherwise legally permitted.

Upon dissolution, assets of a non-stock corporation are generally distributed according to law, the Articles, the By-Laws, and the corporation’s stated purposes, subject to restrictions applicable to charitable, religious, educational, or similar organizations.

VI. One Person Corporations

The Revised Corporation Code introduced the One Person Corporation, or OPC.

An OPC is a corporation with a single stockholder. Only a natural person, trust, or estate may form an OPC, except as otherwise restricted by law. Banks, quasi-banks, pre-need, trust, insurance, public and publicly listed companies, and non-chartered government-owned and controlled corporations generally cannot incorporate as OPCs. Professionals may also be restricted from using OPCs for the practice of their profession unless allowed by special law.

The Articles of an OPC must state that it is a One Person Corporation. The corporate name must include “OPC” either below or at the end of its corporate name.

An OPC is not required to submit corporate By-Laws. Instead, it is governed by the special provisions of the Revised Corporation Code, its Articles of Incorporation, and applicable SEC rules.

The single stockholder acts as sole director and president. The OPC must also appoint a treasurer, corporate secretary, and nominee and alternate nominee, subject to the limitations provided by law.

VII. Execution and Signing of the Articles

The Articles of Incorporation must be signed by the incorporators or their duly authorized representatives.

The Articles are generally acknowledged or authenticated in accordance with SEC requirements. Where documents are executed outside the Philippines, consularization or apostille may be required, depending on the country of execution and applicable rules.

If a juridical entity acts as incorporator, supporting documents may be required to show authority, such as a board resolution or equivalent authorization.

The Articles must be truthful, complete, and consistent with law. False statements may result in rejection, revocation, administrative sanctions, civil liability, or criminal liability, depending on the circumstances.

VIII. Filing with the Securities and Exchange Commission

The Articles of Incorporation are filed with the SEC, together with required forms and supporting documents.

The typical incorporation process includes:

Verification and reservation of the corporate name;
Preparation of Articles of Incorporation;
Preparation of By-Laws, if required or submitted with the Articles;
Preparation of Treasurer’s Affidavit or equivalent financial certifications, where required;
Submission of proof of authority for juridical incorporators, if applicable;
Submission of endorsements or clearances for regulated activities, if required;
Payment of filing and registration fees;
SEC review;
Issuance of Certificate of Incorporation.

Upon issuance of the Certificate of Incorporation, the corporation acquires juridical personality and may begin to exercise corporate powers, subject to post-registration requirements such as tax registration, local government permits, registration of books of accounts, employer registrations, and industry-specific licenses.

IX. Grounds for Rejection or Disapproval of Articles

The SEC may reject or disapprove Articles of Incorporation for various reasons, including:

The Articles do not substantially comply with legal requirements;
The corporate purpose is illegal, unconstitutional, immoral, or contrary to government rules;
The corporate name is not distinguishable or is misleading;
Required endorsements or clearances are missing;
Capitalization requirements are not met;
The incorporators or directors are disqualified;
The nationality structure violates foreign ownership restrictions;
The Articles contain provisions contrary to law or public policy;
The documents contain false, inconsistent, or incomplete statements.

In practice, many SEC comments involve corporate name issues, insufficient purpose clauses, missing regulatory endorsements, errors in capital structure, incorrect incorporator information, incomplete addresses, or non-compliance with nationality restrictions.

X. Amendment of Articles of Incorporation

The Articles of Incorporation may be amended after incorporation.

Generally, amendment requires:

Approval by a majority vote of the board of directors or trustees; and
Approval by the vote or written assent of stockholders representing at least two-thirds of the outstanding capital stock, or at least two-thirds of the members in the case of non-stock corporations.

The amendment must be submitted to the SEC and takes effect upon SEC approval, or from the date of filing if not acted upon within the period provided by law, subject to statutory rules and exceptions.

Common amendments include:

Change of corporate name;
Change of principal office;
Change of primary or secondary purpose;
Increase or decrease of authorized capital stock;
Reclassification of shares;
Extension or shortening of corporate term;
Change in number of directors or trustees;
Addition or deletion of provisions on pre-emptive rights;
Conversion of corporate structure, where allowed;
Compliance with regulatory requirements.

Some amendments require additional approvals from government agencies. For example, changes involving banks, insurance companies, educational institutions, public utilities, financing companies, lending companies, or other regulated entities may require prior endorsement or clearance.

XI. Nature and Function of By-Laws

The By-Laws are the internal rules adopted by the corporation for its governance and administration.

While the Articles create and define the corporation, the By-Laws regulate how the corporation operates internally. They function as a binding agreement among the corporation, its directors or trustees, officers, shareholders or members, subject to the Articles, the Revised Corporation Code, and applicable laws.

By-Laws typically cover:

Meetings of stockholders, members, directors, or trustees;
Notices and quorum requirements;
Voting procedures;
Election, qualifications, powers, and duties of directors, trustees, and officers;
Terms of office;
Creation of committees;
Share certificates and stock transfer procedures;
Corporate seal;
Fiscal year;
Dividends;
Conflict-of-interest rules;
Internal dispute procedures;
Corporate records;
Other governance matters.

By-Laws must not be inconsistent with the Articles of Incorporation. If there is a conflict, the Articles generally prevail because they are the corporation’s charter filed with the SEC.

XII. When By-Laws Must Be Filed

Under the Revised Corporation Code, corporations are generally required to adopt By-Laws. The By-Laws may be filed together with the Articles of Incorporation or within the period allowed by law after incorporation.

The Revised Corporation Code allows the By-Laws to be filed prior to incorporation together with the Articles. If not filed with the Articles, the corporation must adopt and file its By-Laws within the statutory period.

A One Person Corporation is not required to submit By-Laws.

Failure to adopt or file By-Laws may expose the corporation to regulatory consequences, including possible suspension or revocation proceedings, depending on the circumstances and applicable SEC rules.

XIII. Required Contents of By-Laws

The Revised Corporation Code provides that the By-Laws may contain provisions for the corporation’s internal governance. The following are the usual and legally significant contents.

1. Time, Place, and Manner of Meetings

The By-Laws should state the time, place, and manner of calling and conducting regular and special meetings of stockholders or members.

For stockholders’ or members’ meetings, the By-Laws commonly provide:

Annual meeting date;
Special meeting procedures;
Who may call meetings;
Notice periods;
Place of meetings;
Remote communication rules;
Proxy rules;
Quorum requirements;
Voting procedures.

The Revised Corporation Code recognizes participation and voting through remote communication or in absentia, subject to legal and regulatory requirements.

2. Quorum Requirements

The By-Laws commonly specify quorum requirements for meetings.

For stockholders’ meetings, quorum is generally based on outstanding capital stock. For non-stock corporations, quorum is generally based on membership. For board meetings, quorum is generally a majority of the number of directors or trustees as fixed in the Articles, unless law or the Articles provide otherwise.

The By-Laws may impose stricter requirements if not inconsistent with law.

3. Voting Rights and Procedures

The By-Laws should set out how voting is conducted.

For stock corporations, voting is generally based on shares. Stockholders may vote in person, by proxy, through remote communication, or in absentia, subject to the Revised Corporation Code, SEC rules, Articles, and By-Laws.

For non-stock corporations, voting is generally based on membership rights, subject to the Articles and By-Laws.

The By-Laws may include procedures for:

Election of directors or trustees;
Cumulative voting, where applicable;
Voting by ballot;
Voting by proxy;
Electronic voting;
Tabulation and validation of votes;
Record date determination;
Election inspectors or committees.

4. Directors, Trustees, and Officers

The By-Laws should provide for the qualifications, duties, powers, terms, election, and removal of directors, trustees, and officers.

Corporate officers usually include:

President;
Treasurer;
Corporate Secretary;
Other officers provided in the By-Laws.

The President must be a director. The Treasurer may or may not be a director, depending on the corporation’s structure, but must comply with legal qualifications. The Corporate Secretary must be a resident and citizen of the Philippines.

The same person may hold multiple offices, except where prohibited by law. However, the President cannot concurrently serve as Corporate Secretary or Treasurer.

5. Board Meetings

The By-Laws should regulate regular and special meetings of the board of directors or trustees.

They usually provide:

Frequency of regular board meetings;
Who may call special board meetings;
Notice requirements;
Place or mode of meetings;
Remote participation;
Quorum;
Voting;
Minutes;
Written consents, if allowed;
Committee procedures.

Board action is usually taken at a duly called meeting with quorum, unless the law permits a different method.

6. Stock Certificates and Transfer of Shares

For stock corporations, the By-Laws commonly include provisions on:

Issuance of stock certificates;
Form and signing of certificates;
Lost or destroyed certificates;
Transfer procedures;
Stock and transfer book;
Restrictions on transfer;
Unpaid subscriptions;
Delinquent shares;
Record date;
Rights of transferees.

A transfer of shares is generally valid between the parties upon execution, but it is not binding on the corporation or third parties until recorded in the corporation’s stock and transfer book.

Restrictions on share transfers must be lawful and should be clearly stated in the Articles, By-Laws, stock certificates, or shareholders’ agreements, as applicable.

7. Fiscal Year

The By-Laws may state the corporation’s fiscal year. If no special fiscal year is adopted, the calendar year is commonly used.

The fiscal year is important for accounting, taxation, financial reporting, annual meetings, dividend declarations, and regulatory filings.

8. Dividends and Corporate Funds

For stock corporations, the By-Laws may include rules on the declaration and payment of dividends, subject to the Revised Corporation Code.

Dividends may generally be declared out of unrestricted retained earnings and may be in the form of cash, property, or stock dividends, subject to legal requirements.

Stock dividends require stockholder approval, while cash and property dividends generally require board approval, subject to applicable law.

9. Corporate Seal

The By-Laws may provide for a corporate seal. Although modern practice has reduced the formal importance of seals, many corporations still maintain one for official documents.

10. Amendments to By-Laws

The By-Laws should provide procedures for amendment, repeal, or adoption of new By-Laws.

Generally, amendment requires approval by the stockholders representing at least a majority of the outstanding capital stock or a majority of the members. The power to amend may also be delegated to the board by a two-thirds vote of stockholders or members, subject to the right of stockholders or members to revoke such delegation.

Amended By-Laws must be filed with the SEC.

XIV. By-Laws Must Conform to Law and Articles

By-Laws are subordinate to:

The Constitution;
The Revised Corporation Code;
Special laws and regulations;
The Articles of Incorporation;
Public policy.

A By-Law provision is invalid if it is contrary to law, unreasonable, oppressive, discriminatory, or inconsistent with the Articles.

Examples of problematic By-Law provisions include:

Provisions denying statutory voting rights;
Provisions allowing directors to be removed without required stockholder or member action;
Provisions eliminating legally required notice;
Provisions permitting corporate purposes beyond those in the Articles;
Provisions violating foreign ownership restrictions;
Provisions creating unreasonable restraints on share transfer;
Provisions allowing officers to act without board authority where board approval is required;
Provisions inconsistent with mandatory governance rules.

XV. Articles of Incorporation vs. By-Laws

Although closely related, the Articles and By-Laws serve different legal purposes.

The Articles of Incorporation are external and foundational. They create the corporation and define its identity, purposes, capital, term, incorporators, and board structure. They are filed with and approved by the SEC as a condition for corporate existence.

The By-Laws are internal and operational. They regulate meetings, officers, elections, notices, voting, records, and governance procedures.

The Articles are generally superior to the By-Laws. If a By-Law provision conflicts with the Articles, the Articles prevail. If either conflicts with law, the law prevails.

In practice, the Articles answer the question: What is the corporation? The By-Laws answer the question: How is the corporation governed?

XVI. Mandatory Corporate Records Related to Articles and By-Laws

Corporations must keep and preserve corporate records, including:

Articles of Incorporation and amendments;
By-Laws and amendments;
Minutes of stockholders’ or members’ meetings;
Minutes of board meetings;
Stock and transfer book, for stock corporations;
Membership book, for non-stock corporations;
Financial statements;
Records of resolutions;
Other records required by law.

Stockholders and members have inspection rights subject to legal limitations. Corporate records are essential in proving valid corporate action, ownership, elections, authority of officers, and compliance with law.

XVII. Importance of the Purpose Clause

The purpose clause is among the most important parts of the Articles.

A well-drafted purpose clause should be:

Specific enough to satisfy SEC requirements;
Broad enough to permit reasonable business expansion;
Consistent with foreign ownership rules;
Compatible with tax and licensing requirements;
Appropriate for the intended industry;
Not misleading or overbroad;
Not mixed with regulated activities unless proper clearances are obtained.

A corporation that intends to operate a technology business, for example, should consider whether it will engage in software development, IT consulting, platform operation, e-commerce, data processing, business process outsourcing, digital marketing, or other related activities. Each may require different wording and may implicate different regulatory issues.

A poorly drafted purpose clause may later require amendment, delay licensing, limit business activity, or create regulatory complications.

XVIII. Nationality and Foreign Ownership Considerations

The Articles of Incorporation must be consistent with Philippine nationality laws.

Certain industries are fully or partially reserved to Filipino citizens or Philippine nationals. Foreign ownership restrictions may arise under the Constitution, statutes, the Foreign Investments Act, the Public Service Act, land laws, mass media rules, educational laws, retail trade rules, advertising rules, financing and lending rules, and other special laws.

Because the Articles state incorporators, subscribers, directors, capital structure, and purposes, the SEC may examine whether the proposed corporation complies with applicable nationality requirements.

For partly nationalized industries, the corporation may need to ensure that both voting control and beneficial ownership satisfy Philippine nationality requirements. It may also need to observe rules on board composition, share classification, transfer restrictions, and reportorial compliance.

XIX. Capitalization Requirements

The Revised Corporation Code removed the general minimum subscribed and paid-in capital requirement for ordinary corporations, unless a special law provides otherwise.

However, minimum capitalization may still apply to corporations engaged in regulated activities, such as:

Lending;
Financing;
Insurance;
Banking;
Securities;
Investment houses;
Pre-need;
Recruitment;
Retail trade involving foreign investors;
Public utilities or public services;
Educational institutions;
Mining;
Real estate investment structures;
Other regulated industries.

For this reason, incorporators should not assume that no minimum capital is required simply because the general corporation law is flexible. The intended activity must always be checked against special laws and agency regulations.

XX. Common Classes of Shares in Articles of Incorporation

A stock corporation may classify shares in its Articles, subject to law.

Common classes include:

1. Common Shares

Common shares usually carry ordinary voting rights and economic rights. They are the default equity interest in a corporation.

2. Preferred Shares

Preferred shares enjoy preferences or privileges over common shares, usually as to dividends, assets upon liquidation, or redemption. The preferences must be stated in the Articles.

Preferred shares may be voting or non-voting, subject to the limitations of the Revised Corporation Code.

3. Redeemable Shares

Redeemable shares may be purchased or taken up by the corporation upon the expiration of a fixed period or upon the occurrence of a specified event, regardless of the existence of unrestricted retained earnings, if properly provided in the Articles and subject to SEC rules and creditor protection principles.

4. Founders’ Shares

Founders’ shares may be given certain rights and privileges, including exclusive voting rights for a limited period, subject to statutory limitations.

5. Non-Voting Shares

The Articles may provide for non-voting shares. However, holders of non-voting shares are still entitled to vote on certain fundamental corporate matters, such as amendment of Articles, adoption and amendment of By-Laws, sale or disposition of substantially all corporate assets, merger or consolidation, increase or decrease of capital stock, dissolution, and other matters specified by law.

XXI. Pre-Emptive Rights

Pre-emptive rights allow existing stockholders to subscribe to new issuances of shares in proportion to their existing holdings, so they can maintain their percentage ownership.

Under Philippine law, stockholders generally have pre-emptive rights to all issues or dispositions of shares of any class, unless denied by the Articles of Incorporation or subject to statutory exceptions.

If incorporators intend to deny or limit pre-emptive rights, the Articles should expressly say so. Otherwise, stockholders may assert such rights when new shares are issued.

Pre-emptive rights are especially important in corporations with multiple founders, investors, family shareholders, or foreign ownership limitations.

XXII. Restrictions on Transfer of Shares

Share transfer restrictions may be included in the Articles, By-Laws, shareholders’ agreements, or stock certificates, provided they are lawful and reasonable.

Common restrictions include:

Right of first refusal;
Right of first offer;
Consent requirement;
Lock-up period;
Restrictions to preserve nationality compliance;
Family corporation restrictions;
Buy-sell arrangements;
Tag-along and drag-along provisions;
Restrictions on transfers to competitors.

Restrictions should not amount to an absolute prohibition against transfer. They must be carefully drafted and clearly reflected in corporate records and certificates to be enforceable against affected parties.

XXIII. Arbitration Agreements in Articles or By-Laws

The Revised Corporation Code allows arbitration agreements in the Articles of Incorporation or By-Laws for intra-corporate disputes.

Such arbitration provisions may cover disputes between the corporation, stockholders or members, directors, trustees, or officers arising from the implementation of the Articles or By-Laws or from intra-corporate relations.

However, arbitration provisions do not generally bind third parties unless they consent. They also cannot cover criminal offenses or matters that cannot legally be compromised.

An arbitration clause may help reduce litigation, preserve confidentiality, and provide a specialized mechanism for resolving corporate disputes.

XXIV. Electronic Filing, Remote Meetings, and Modern Governance

Philippine corporate law increasingly recognizes electronic and remote processes.

The Revised Corporation Code allows remote communication and in absentia participation in stockholders’, members’, directors’, and trustees’ meetings, subject to legal requirements, SEC rules, and the corporation’s internal procedures.

By-Laws should be updated to address:

Electronic notices;
Remote meeting platforms;
Verification of identity;
Electronic voting;
Digital signatures;
Recording and minutes;
Cybersecurity;
Data privacy;
Electronic records;
Hybrid meetings;
In absentia voting.

Modern By-Laws should not be limited to traditional physical meetings, especially for corporations with geographically dispersed shareholders, directors, or members.

XXV. Legal Consequences of Defective Articles or By-Laws

Defects in Articles or By-Laws may have serious consequences.

Possible consequences include:

Delay in SEC registration;
Rejection of incorporation application;
Invalidity of certain provisions;
Corporate governance disputes;
Challenge to board or stockholder actions;
Difficulty opening bank accounts;
Tax registration issues;
Licensing delays;
Problems with investors or lenders;
SEC administrative penalties;
Suspension or revocation of certificate of incorporation;
Personal liability in cases of fraud, bad faith, or misuse of corporate form.

In some cases, even if the corporation exists, defective governance documents can create uncertainty over who has authority to act, whether meetings were valid, whether directors were properly elected, or whether share issuances were valid.

XXVI. Post-Incorporation Requirements Related to Governance Documents

After incorporation, a Philippine corporation generally must attend to several post-registration matters, including:

Obtaining the Certificate of Incorporation;
Filing or confirming By-Laws, if not filed with the Articles;
Holding organizational meetings;
Electing regular directors or trustees, if applicable;
Appointing officers;
Issuing shares and stock certificates, where applicable;
Maintaining stock and transfer books;
Registering with the Bureau of Internal Revenue;
Securing local business permits;
Registering with SSS, PhilHealth, and Pag-IBIG if it will have employees;
Obtaining industry-specific licenses;
Filing annual reportorial requirements with the SEC;
Keeping minutes and corporate records.

The Articles and By-Laws are therefore only the beginning. Corporate compliance is continuing.

XXVII. Reportorial and Compliance Considerations

Corporations registered in the Philippines must comply with continuing reportorial requirements. These generally include annual submission of financial statements, general information sheets, and other reports required by the SEC and other agencies.

The information in the Articles and By-Laws must remain consistent with official records. If the corporation changes its name, office, capital structure, purposes, board composition, or other key matters, appropriate filings must be made.

Failure to comply with reportorial requirements may result in fines, penalties, delinquent status, suspension, or revocation of registration.

XXVIII. Common Drafting Mistakes

Common mistakes in Articles of Incorporation include:

Choosing a corporate name that is too similar to an existing name;
Using an overbroad or vague purpose clause;
Including regulated activities without required clearance;
Failing to consider foreign ownership restrictions;
Setting an impractical capital structure;
Omitting share preferences or rights;
Failing to deny or preserve pre-emptive rights clearly;
Inconsistent incorporator, subscriber, or director information;
Using an incomplete principal office address;
Copying templates without adapting them to the business.

Common mistakes in By-Laws include:

Inconsistent quorum rules;
Unclear meeting notice requirements;
Failure to allow remote meetings or electronic voting;
Vague officer powers;
No procedure for lost stock certificates;
No clear rules on stock transfers;
Provisions inconsistent with the Articles;
Outdated rules based on the old Corporation Code;
No conflict-of-interest provisions;
No practical procedure for amendments.

Well-drafted documents reduce disputes and make compliance easier.

XXIX. Practical Drafting Considerations

When preparing Articles and By-Laws, incorporators should consider the corporation’s intended operations, ownership structure, investment plans, regulatory classification, tax position, and long-term governance needs.

Important practical questions include:

What business will the corporation actually conduct?
Will it need licenses from agencies other than the SEC?
Are there foreign shareholders?
Are nationality restrictions relevant?
Will investors enter later?
Should shares have different classes or preferences?
Should pre-emptive rights be preserved or denied?
Should transfers be restricted?
How will deadlocks be resolved?
Who will control the board?
What quorum and voting thresholds are appropriate?
Will meetings be held remotely?
Who may sign contracts and checks?
What internal approvals are needed for major transactions?
Should disputes be arbitrated?
How will founders exit?

The best Articles and By-Laws are not merely compliant. They are designed for the corporation’s actual needs.

XXX. Special Corporations and Regulated Entities

Certain corporations require special treatment.

1. Educational Corporations

Educational corporations may be subject to special rules under education laws and regulations, including ownership, board composition, permits, and supervision by education authorities.

2. Religious Corporations

Religious corporations may be organized as corporation sole or religious societies, subject to special provisions.

3. Close Corporations

A close corporation may include special provisions in its Articles, such as restrictions on share transfers, limits on number of shareholders, and management arrangements. Close corporations are useful for family businesses and small enterprises but require careful drafting.

4. Publicly Listed and Public Companies

Public and publicly listed companies are subject to stricter corporate governance, disclosure, and securities regulations. Their Articles and By-Laws must align with securities laws, exchange rules, and SEC governance codes.

5. Corporations with Secondary Licenses

Corporations engaged in lending, financing, securities, investment, insurance, banking, recruitment, and similar activities require secondary licenses or special approvals. Their Articles and By-Laws must be compatible with the requirements of the relevant regulator.

XXXI. Relationship with Shareholders’ Agreements

Articles and By-Laws are public or corporate governance documents. Shareholders’ agreements are private contracts among shareholders.

A shareholders’ agreement may address matters such as:

Voting arrangements;
Board nomination rights;
Reserved matters;
Transfer restrictions;
Exit rights;
Valuation mechanisms;
Deadlock resolution;
Non-compete or confidentiality obligations;
Funding obligations;
Tag-along and drag-along rights.

However, shareholders’ agreements should not contradict the Articles, By-Laws, or mandatory law. To improve enforceability, key provisions affecting the corporation or third parties may need to be reflected in the Articles, By-Laws, stock certificates, or corporate records.

XXXII. Corporate Authority and Officer Powers

By-Laws commonly define officer powers, but corporate authority often requires board approval.

The board of directors or trustees exercises corporate powers, conducts business, and controls corporate property. Officers act as agents of the corporation within the authority granted by law, the Articles, the By-Laws, board resolutions, or established practice.

A common mistake is assuming that the President or General Manager can bind the corporation in all matters. In many cases, board approval is necessary, especially for significant transactions such as borrowing, sale of major assets, issuance of shares, real estate transactions, guarantees, or appointment of key officers.

Clear By-Laws and board resolutions help avoid disputes over authority.

XXXIII. Effect of Articles and By-Laws on Third Parties

The Articles of Incorporation are filed with the SEC and are accessible as corporate records. Third parties may rely on them to determine corporate existence, purposes, capital structure, and authorized representatives.

By-Laws are also part of corporate records and may affect third parties who have notice of them, particularly in matters involving officer authority, share transfers, and internal approvals.

However, internal restrictions may not always defeat the rights of innocent third parties who relied in good faith on apparent authority. For this reason, corporations should align their public documents, board resolutions, secretary’s certificates, and actual practices.

XXXIV. Piercing the Corporate Veil and Governance Documents

A corporation has a personality separate and distinct from its shareholders, directors, and officers. However, courts may disregard the corporate fiction when the corporation is used to defeat public convenience, justify wrong, protect fraud, or defend crime.

Defective or sham Articles and By-Laws may be relevant in veil-piercing cases, especially where the corporation is undercapitalized, used as a mere alter ego, commingles funds, has no real governance, or exists only to evade obligations.

Maintaining proper Articles, By-Laws, minutes, records, capital accounts, and separate corporate operations helps preserve limited liability.

XXXV. Remedies for Violations of Articles or By-Laws

Violations of Articles or By-Laws may give rise to intra-corporate remedies, including:

Injunction;
Declaratory relief;
Nullification of corporate acts;
Election contests;
Derivative suits;
Inspection of corporate records;
Damages;
SEC administrative remedies;
Arbitration, if validly provided;
Other remedies under law.

Intra-corporate disputes may fall within the jurisdiction of designated commercial courts, subject to procedural rules and the nature of the controversy.

XXXVI. Best Practices

For Articles of Incorporation:

Choose a legally available and commercially appropriate name;
Draft a precise but flexible purpose clause;
Consider future business expansion;
Address foreign ownership restrictions early;
Use an appropriate capital structure;
Clearly state share classes and rights;
Decide whether to preserve or deny pre-emptive rights;
Include lawful transfer restrictions if needed;
Ensure all incorporator and subscriber details are accurate;
Secure required endorsements before filing.

For By-Laws:

Align them with the Articles;
Use clear meeting and notice rules;
Provide remote meeting and electronic voting mechanisms;
Define officer authority carefully;
Include practical stock transfer rules;
Provide procedures for vacancies and removals;
Address conflicts of interest;
Include fiscal year and recordkeeping provisions;
Provide amendment procedures;
Avoid copying outdated templates.

XXXVII. Conclusion

Articles of Incorporation and By-Laws are the foundation of Philippine corporate existence and governance. The Articles create the corporation, define its legal identity, state its purposes, establish its capital and board structure, and inform the public of its essential attributes. The By-Laws regulate the corporation’s internal affairs, meetings, elections, officers, voting, records, and operating procedures.

In the Philippine context, these documents must be drafted with close attention to the Revised Corporation Code, SEC rules, foreign ownership restrictions, industry-specific regulations, tax and licensing requirements, and the practical needs of the business or organization.

A corporation with carefully prepared Articles and By-Laws begins with a stronger legal foundation. It is better positioned to obtain approvals, attract investors, avoid governance disputes, maintain compliance, and operate with clarity. Conversely, poorly drafted or outdated documents can create legal uncertainty, regulatory delays, shareholder conflict, and avoidable liability.

For incorporators, directors, trustees, shareholders, members, and advisers, understanding these requirements is essential. Articles and By-Laws are not mere formalities. They are the legal architecture of the corporation.