Corporate Powers and Representation Under Sections 36–48 of the Revised Corporation Code of the Philippines

I. Introduction

Sections 36–48 of the Revised Corporation Code of the Philippines (RCC; Republic Act No. 11232) gather the heart of how a corporation acts: what powers a corporation has and who can validly wield them. In Philippine practice, these provisions operate together with the corporation’s articles, bylaws, board and stockholder approvals, and long-standing doctrines on authority, ultra vires, and estoppel. This article offers a practitioner-focused map of those provisions—what they authorize, what they require, and how they’re tested in real transactions and disputes.

Big picture: The RCC confers a broad set of general powers on corporations, layers in specific powers that usually require enhanced approvals or filings, and defines who may represent the corporation so that third parties can rely on corporate acts with confidence.

II. General Corporate Powers

1) Juridical personality and capacity

A corporation has a separate juridical personality: it can own property, incur obligations, sue and be sued, and perform acts necessary or incidental to its business. This separation shields shareholders (limited liability), while leaving corporate property answerable for corporate debts.

2) Express, implied, and incidental powers

Express powers are specifically granted by the RCC and the articles of incorporation (e.g., to issue shares within the authorized capital, declare dividends subject to law).
Implied powers are those reasonably necessary to carry out express powers (e.g., hiring officers, entering commercial contracts).
Incidental powers arise from the corporation’s nature and usual business (e.g., opening bank accounts, acquiring office equipment).

3) Limits: ultra vires and illegality

An ultra vires act is outside the corporation’s powers (by statute or its primary/secondary purposes) or accomplished without requisite approvals. It is generally not void per se as between the parties; it may be voidable or unenforceable unless ratified, or if it implicates public policy, then void.
Illegal acts (contrary to law/morals/public policy) are void and cannot be ratified.

III. Corporate Representation: Who Binds the Corporation?

1) Board of directors/trustees

Corporate powers are exercised by the board (or the body of trustees for nonstock corporations). The board acts collectively at a board meeting with quorum and requisite vote, or by written action if allowed. Individual directors have no inherent authority to bind the corporation.

2) Corporate officers

The president (or CEO) typically has actual or implied authority to enter ordinary, day-to-day contracts within the business. The scope is set by bylaws, board resolutions, or established practice.
The corporate secretary does not bind the corporation by contracting, but certifies board actions and attests to authority (the “secretary’s certificate”), a key reliance document for counterparties and registrars.
The treasurer/CFO manages finance-related acts, often including bank mandates, but still within board-granted authority.

3) Apparent authority and estoppel

Even without actual authority, the corporation may be bound by an officer’s act under apparent (ostensible) authority where:

the corporation’s representations or conduct reasonably led a third party to believe the officer was authorized; and
the third party acted in good faith and exercised ordinary diligence. A corporation that knowingly allows its officers to act in a certain manner may be estopped from denying their authority.

4) Ratification

The board (and when required, the stockholders) may ratify an unauthorized act, curing defects in authority so long as the act was not illegal or void for public policy reasons. Ratification can be express (resolution) or implied (accepting benefits).

IV. Specific Powers and Transactions Typically Addressed in Sections 36–48

The RCC clusters several higher-impact corporate powers that usually demand board action plus heightened stockholder approval, sometimes with regulatory filings. While language and numbering vary by edition, the substance that practitioners look for in “Sections 36–48” generally covers the following:

1) Amendment of articles and corporate term

Amendments to the articles (e.g., change of corporate name, principal office, purposes, increase/decrease of capital stock, reclassification of shares) require board approval and a supermajority stockholder vote, followed by filing with the SEC.
The RCC recognizes perpetual term by default for corporations unless a specific term is chosen. Extension or shortening of term is an amendment requiring the same approvals and SEC filing.

2) Increase or decrease of capital; creation of new classes; bond issuance

Increase of authorized capital stock: board approval + two-thirds (2/3) stockholder vote; observance of pre-emptive rights (unless validly denied), proof of subscription and payment, and SEC approval.
Decrease of capital: designed to match capital to actual needs, protect creditors (notice and creditor protection mechanisms), and requires board + 2/3 stockholder approval and SEC sign-off.
Reclassification/Denomination of shares or creation of preferred/redeemable classes: similar approvals; ensure no impairment of vested rights.
Issuance of bonds or indebtedness (e.g., corporate notes, debentures) commonly needs board approval; public offerings invoke securities regulation.

3) Sale, lease, exchange, mortgage, pledge, or disposition of (all or substantially all) assets

Disposition of all or substantially all corporate assets outside the ordinary course requires board approval and 2/3 stockholder vote. “Substantially all” refers to acts that render the corporation incapable of continuing its business or substantially impair it.
Ordinary-course asset sales require only appropriate officer authority under the board.

4) Investment of corporate funds in another business or for a purpose other than the primary purpose

Requires board approval and 2/3 stockholder vote unless the investment is reasonably necessary to accomplish the primary purpose(s) and within ordinary authority.

5) Pre-emptive rights

Pre-emptive rights allow existing stockholders to subscribe to new issuances in proportion to holdings so they’re not diluted—unless denied or limited in the articles.
Exceptions often include: shares issued to fulfill options granted to officers/employees as part of compensation plans duly approved; shares issued in mergers/conversions; or treasury shares sold under certain conditions, subject to the articles and RCC constraints.

6) Acquisition of own shares (treasury shares); limitations

A corporation may purchase its own shares and hold them as treasury shares if it has unrestricted retained earnings (URE) available for the purchase, and the acquisition does not prejudice creditors. Treasury shares have no voting or dividend rights while in the treasury.
Financial assistance rules (no unlawful assistance for acquisition of its own shares except under allowable employee benefit or redemption structures) must be observed.

7) Dividends and retained earnings

Dividends may be declared only out of unrestricted retained earnings:
- Cash or property dividends: by the board, subject to preferential rights of any preferred class.
- Stock dividends: board approval plus 2/3 stockholder assent because they alter outstanding capital structure.
Retained earnings tests: The RCC discourages unreasonable retention by imposing limits if retained earnings exceed paid-in capital subject to legitimate expansion, debt covenants, or reserve requirements.

8) Management contracts and interlocking arrangements

A management contract (delegating management to another corporation) generally requires board approval of both corporations and 2/3 stockholder vote of the managing and managed corporations, particularly where interlocking directorates/stockholdings exist.
Additional safeguards apply where the managing and managed corporations are interlocking (e.g., majority ownership or common directors), to mitigate conflicts of interest.

9) Appraisal rights

Stockholders who dissent from certain fundamental changes (e.g., sale of substantially all assets, investments in another business not reasonably necessary to the primary purpose, merger or consolidation, etc.) may demand the fair value of their shares—triggering appraisal rights procedures.

10) Corporate records and inspection; reliance by third parties

The RCC bolsters inspection rights of stockholders and regulators, and empowers third parties to rely in good faith on board minutes, secretary’s certificates, and public filings (e.g., General Information Sheet, amended articles). Good documentation is essential to show authority.

V. Approvals, Votes, and Filings: A Quick Matrix

Corporate Act	Board Vote	Stockholder Vote	Filings/Notes
Ordinary-course contracts	Majority (quorum present)	—	Officer authority; secretary’s certificate for counterparties
Amend articles (name, term, purposes, etc.)	Majority of board	2/3 of outstanding capital stock (OCS)	SEC filing and approval; publish/notify as required
Increase authorized capital; reclassify shares	Majority of board	2/3 OCS	Pre-emptive rights analysis; subscription/paid-in proof; SEC approval
Decrease capital	Majority of board	2/3 OCS	Creditor protection; SEC approval
Sale/lease of all or substantially all assets (outside ordinary course)	Majority of board	2/3 OCS	Appraisal rights may attach
Investment in another business not reasonably necessary to primary purpose	Majority of board	2/3 OCS	Appraisal rights may attach
Stock dividends	Majority of board	2/3 OCS	Update capital structure; SEC filings as needed
Cash/property dividends	Majority of board	—	Must be out of URE; respect preferences
Buy-back/treasury share acquisition	Majority of board	—	Must be out of URE; protect creditors
Management contract (with interlocks or special cases)	Majority of each board	2/3 of each affected corp	Related-party/conflict safeguards; disclose in GIS/SEC filings

Notes: “Majority of board” assumes a quorum. “2/3 OCS” refers to two-thirds of outstanding capital stock entitled to vote, unless the RCC or the articles require a higher threshold. For nonstock corporations, translate votes into members rather than shares.

VI. Authority in Documents: What Counterparties Look For

Secretary’s certificate (notarized):
- Confirms date of meeting, quorum, resolution text, officer authorized, and that the resolution remains in force.
- Often paired with a specimen signature and incumbency certificate.
Board resolution:
- Specifies transaction scope, price ranges/limits, signatories, authority to negotiate, and documents to be executed.
Stockholder approval evidence (if required):
- Certified minutes or written consent, vote counts, and attendance/quorum details.
SEC filings/approvals:
- Amended articles, capital changes, or management contracts; proof of SEC acceptance is frequently a closing condition.
Due diligence bundle:
- Articles, bylaws, latest GIS and AFS, list of directors/officers, evidence of URE for buybacks/dividends.

VII. Common Risk Areas and How to Manage Them

Act outside corporate purposes: Update purposes (primary/secondary) to match actual business; rely on the RCC’s broader powers but avoid clear mismatches that create ultra vires risk.
Missing supermajority: Track whether the act is a board-only or board + 2/3 matter; calendar approvals early.
Pre-emptive rights: Check articles; document waivers or exclusions; keep a cap table and pre-emptive offer mechanics.
URE tests (dividends, buybacks): Maintain accurate retained earnings; avoid thin capitalization that harms creditor interests.
Substantially all assets standard**:** Analyze both quantitative (percentage of assets/revenues) and qualitative (ability to continue the business) factors.
Apparent authority reliance: Third parties should seek a secretary’s certificate and, for large deals, board and stockholder documentation.
Related-party and interlocks: Disclose, abstain where appropriate, and record the fairness process; consider independent directors/committees.
Record-keeping: Keep minutes detailed; align authorizations with executed documents.

VIII. Practical Templates (Short-Form)

A. Board Resolution (excerpt)

RESOLVED, that the Corporation approve the [transaction], under terms substantially similar to those presented, and authorize the President, or in his absence the [Officer], to negotiate, sign, and deliver the [Agreement], including ancillary documents, with such changes not materially inconsistent with this authority. RESOLVED FURTHER, that the Corporate Secretary is directed to issue certifications as may be required.

B. Secretary’s Certificate (core clauses)

I, [Name], Corporate Secretary of [Corporation], certify that at a meeting of the Board of Directors held on [Date], at which a quorum was present, the foregoing resolutions were duly adopted and remain in full force and effect as of this date. IN WITNESS WHEREOF, I have hereunto set my hand this [Date] at [City]. (Notarial acknowledgment)

IX. Litigation and Enforcement Touchpoints

Challenging authority: Third parties may face a defense that a signatory lacked authority. Courts examine board minutes, course of dealing, and apparent authority indicators.
Ultra vires defenses: Available but not to defeat equitable claims where benefits were accepted in good faith; ratification often cures.
Appraisal proceedings: Dissenters must follow strict timelines and deposit requirements; the corporation must pay fair value as determined per RCC mechanisms.
Creditor remedies: Where dividends/buybacks impair capital or violate URE rules, creditors may invoke unlawful distribution theories and target directors who willfully or negligently assented.

X. Compliance Checklist for Counsel and Corporate Secretaries

Map the act: ordinary course vs. fundamental change.
Confirm decision-maker: board only, or board + stockholders.
Quorum/vote math: directors present; 2/3 OCS when needed.
Conflict review: interlocks, related-party transactions, abstentions.
Pre-emptive rights: offer/waiver mechanics or carve-outs.
URE / solvency: dividends and buybacks only out of URE; creditor impact.
Documentation: precise resolutions; secretary’s certificate; specimen signatures.
Regulatory: SEC filings/clearances where applicable; GIS updates.
Closing conditions: incumbency, approvals, certificates, legal opinions (if required).
Post-closing: record updates, share issuances/transfers, book entries.

XI. Conclusion

Sections 36–48 of the RCC function as the operating system for corporate action in the Philippines. They frame the breadth of powers a corporation may exercise, identify the gates (board, stockholders, and regulators) that control high-impact moves, and establish the representational pathways by which officers and agents validly bind the company. Day-to-day compliance—clear approvals, disciplined record-keeping, respect for pre-emptive and appraisal rights, and careful attention to capital and creditor protections—translates these statutory rules into reliable, enforceable corporate acts.

Takeaway for practitioners: When in doubt, (1) align the transaction with corporate purposes; (2) confirm the right approvals at the right thresholds; (3) paper the authority trail (resolutions + secretary’s certificate); and (4) test distributions and buybacks against URE and creditor safeguards. These habits are the surest way to keep corporate power both effective and defensible under the RCC.