Corporate Term Expiring After 50 Years: Do You Need to Amend the Articles Under the Revised Corporation Code?

In the landscape of Philippine corporate law, one of the most significant reforms introduced by the Revised Corporation Code (Republic Act No. 11232, or RCC), which took effect on February 23, 2019, is the shift toward perpetual corporate existence. Prior to this, corporations were shackled by a rigid 50-year term limit, necessitating formal amendments and regulatory approvals for extensions. For corporations incorporated under the old regime—Batas Pambansa Blg. 68 (the Old Corporation Code)—whose 50-year terms are now expiring in the post-RCC era, a critical question arises: Must the articles of incorporation (AOI) still be amended to avoid dissolution, and if so, how? This article explores the topic exhaustively, delving into the legal framework, procedural requirements, implications, and practical guidance within the Philippine context.

The Old Rule: The 50-Year Limit Under the Old Corporation Code

Under the Old Corporation Code (B.P. Blg. 68, effective May 1, 1980), Section 11 explicitly limited a corporation's existence to a maximum of 50 years from the date of incorporation, unless the AOI provided for a shorter period. This term was non-negotiable; corporations could not be formed with perpetual existence. As the term approached expiration, the corporation faced the prospect of dissolution unless it sought an extension.

To extend the corporate term, the following steps were mandatory:

Board Resolution: The board of directors (BOD) had to adopt a resolution recommending the amendment of the AOI to extend the term.
Stockholders' Approval: At a regular or special stockholders' meeting, at least two-thirds (2/3) of the outstanding capital stock had to approve the amendment. Dissenting stockholders were entitled to appraisal rights under Sections 81 to 89 of the Old Code, allowing them to demand payment for their shares at fair value.
Amendment of AOI: The AOI had to be formally amended to reflect the new term, which could be another 50 years or less, but not perpetual (as perpetual existence was not permitted).
SEC Approval and Filing: The proposed amendment, along with supporting documents (e.g., board resolution, minutes of the stockholders' meeting, treasurer's affidavit on paid-up capital), had to be filed with the Securities and Exchange Commission (SEC). SEC approval was required for the amendment to take effect, and the approved AOI had to be published or annotated accordingly.

Failure to comply resulted in automatic dissolution upon term expiration, with the SEC potentially issuing a certificate of dissolution. Assets would then be liquidated, debts settled, and any remainder distributed to stockholders. This process was cumbersome, often leading to delays, costs, and uncertainties, especially for closely held or family corporations.

Extensions were common; many corporations incorporated in the 1980s or earlier routinely amended their AOI every 50 years to continue operations. However, the rigidity stifled long-term planning and deterred foreign investment, as perpetual existence is a standard feature in many jurisdictions.

The New Rule: Perpetual Existence Under the Revised Corporation Code

The RCC fundamentally overhauled this framework to align Philippine corporate law with global standards, promoting ease of doing business. Section 11 of the RCC now provides:

"Corporate Term. — Unless otherwise provided in this Code, the corporate term as fixed in the articles of incorporation shall be perpetual. In case of a term of existence limited by the articles of incorporation, the corporation shall be dissolved on the day following the expiration of the term unless the existence is maintained by affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock, in a stockholders’ meeting duly called for the purpose. The vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock shall amend the articles of incorporation to extend the term of corporate existence, without need of further approval or filing with the Commission. If the corporation fails to amend its articles of incorporation to extend the term of corporate existence, the Commission, upon receipt of a verified request of a stockholder, partner, director, or officer, shall order the dissolution of the corporation."

Key innovations include:

Default Perpetual Term: For corporations incorporated on or after the RCC's effectivity (February 23, 2019), the AOI need not specify a term; perpetual existence is automatic unless the AOI explicitly limits it (e.g., for specific projects like infrastructure with finite durations). Even if limited, the term can now exceed 50 years, including perpetuity, as the old cap is removed.
No 50-Year Cap: Unlike the Old Code, there is no upper limit on the term. Corporations can now incorporate with indefinite existence from inception, subject only to dissolution triggers like insolvency, merger, or voluntary liquidation.
Simplified Extension for Limited-Term Corporations: For any corporation (new or old) with a limited term in its AOI, extension upon expiration is streamlined. The 2/3 stockholder vote not only maintains existence but automatically amends the AOI—no SEC filing or approval is required. This vote can extend the term to perpetuity or any duration.

This reform eliminates bureaucratic hurdles, reducing costs and timelines. It applies universally, but its impact is most felt by legacy corporations approaching their 50-year mark post-2019.

Application to Existing Corporations with Terms Expiring After 50 Years

Corporations incorporated before February 23, 2019, under the Old Code typically have AOI stating a 50-year term (or implying it if silent, as courts interpreted silence as 50 years). The RCC does not retroactively rewrite these AOI; the specified (or implied) term governs until expiration. Thus, for such corporations, the 50-year clock continues ticking from their incorporation date.

If the term expires after the RCC's effectivity (e.g., a corporation incorporated in 1985, with term expiring in 2035), the RCC's Section 11 squarely applies. The corporation does not automatically gain perpetual existence upon the RCC's effectivity; it remains bound by its limited term until action is taken. However, the extension mechanism is now governed by the RCC, not the Old Code.

Important nuances:

Pre-Expiration Planning: Corporations can proactively amend their AOI before expiration to adopt perpetual existence, even under the Old Code's procedures if done pre-RCC, but post-RCC, they can use the simplified vote. However, for terms expiring post-RCC, the urgency arises closer to the expiration date.
No Automatic Perpetuity for Legacy Corporations: Unlike some misconceptions, the RCC does not deem all pre-existing corporations perpetual by default if their AOI specifies a limit. The limited term persists, but the extension process is modernized.
Special Cases: Non-stock corporations (e.g., foundations, cooperatives) follow similar rules under Sections 86-88 of the RCC, with perpetual terms unless limited. Close corporations or one-person corporations (new under RCC Sections 115-128) also default to perpetual existence.

If a corporation's term expired before the RCC's effectivity, it would have needed Old Code extension procedures. Post-expiration revivals are rare and require SEC discretion, often treated as new incorporations.

Procedure for Extension Under the RCC

Yes, amendment of the AOI is still required to extend beyond the original term, but the process is vastly simplified—no SEC involvement. Here's the step-by-step procedure for a corporation facing 50-year expiration:

Board Recommendation: The BOD adopts a resolution recommending the extension (to perpetual or a new limited term) and calling a special stockholders' meeting. This should be done well in advance (e.g., 6-12 months before expiration) to allow for notices and voting.
Notice of Meeting: Issue written notices to all stockholders at least two weeks (or as per bylaws) before the meeting, stating the purpose (extension of corporate term). Notices must include agenda details and be sent via registered mail, email, or other modes in the bylaws. For listed corporations, additional disclosure rules under the Securities Regulation Code apply.
Stockholders' Meeting: Hold the meeting with quorum (majority of outstanding capital stock unless bylaws specify otherwise). Voting is per share; proxies are allowed under Section 47.
Affirmative Vote: Secure at least 2/3 of the outstanding capital stock (not just present shares). Preferred shares with voting rights count fully. The vote explicitly maintains existence and amends the AOI to reflect the new term (e.g., "perpetual").
Automatic Amendment: Upon the vote, the AOI is deemed amended effective immediately. No further formalities are needed—the corporation continues seamlessly.
Record-Keeping: Minutes of the meeting must be recorded in the stock and transfer book. While not required, notifying the SEC via a cover letter or updated general information sheet (GIS) is advisable for records and to avoid disputes.
Post-Vote Actions: Update internal documents (e.g., bylaws if needed), inform creditors/banks, and handle any tax implications (e.g., no immediate tax on extension itself).

For non-stock corporations, the vote is by 2/3 of members entitled to vote.

Consequences of Non-Extension

If the 2/3 vote is not obtained or the meeting is not held:

Dissolution Trigger: The corporation dissolves the day after term expiration. However, dissolution is not automatic; it requires a verified request from any stockholder, director, officer, or (implicitly) creditor to the SEC.
SEC Order: Upon request, the SEC issues an order of dissolution. The corporation enters liquidation under Sections 118-122 of the RCC: BOD acts as trustees, pays debts, distributes assets, and files a final GIS marked "DISSOLVED."
Practical Risks: Even without a request, the expired term could invalidate contracts, expose directors to liability for ultra vires acts, and complicate litigation (e.g., courts may question the corporation's capacity to sue/be sued). Banks may freeze accounts, and tax authorities could demand settlements.
Irreversibility: Post-dissolution revival is difficult; it requires court petition under Section 134 (rarely granted) or re-incorporation as a new entity, losing continuity, tax IDs, and goodwill.

Proactive extension is thus essential to preserve the corporate entity.

Appraisal Rights for Dissenting Stockholders

The RCC preserves robust protections for minorities. Under Sections 80-86, any stockholder who voted against the extension (or abstained, if specified) and continuously holds shares for at least six months prior can exercise appraisal rights:

Demand Payment: Within 30 days post-vote, submit a written demand for fair value payment.
Valuation: If no agreement, the SEC appoints appraisers; value is book value plus/minus adjustments, or market value for listed shares.
Payment and Termination: Corporation pays within 30 days of determination; non-payment allows sale of shares to the corporation or withdrawal of demand.

This ensures dissenters are not forced into an unwanted perpetual entity, balancing majority rule with fairness.

Practical Considerations and Best Practices

Timing: Monitor incorporation date; set calendar reminders 18 months pre-expiration. Delays risk rushed votes or challenges.
Stockholder Dynamics: In family or closely held firms, align interests early to secure 2/3 vote. For public companies, comply with PSE disclosure rules.
Costs: Minimal compared to Old Code—no filing fees, legal costs mainly for notices/meetings. Budget for potential appraisals (rare).
Tax and Regulatory Impacts: Extension does not trigger income tax, but update BIR registrations. For foreign-owned firms, check FDI rules (no change).
Common Pitfalls: Insufficient notice invalidates the vote; treasury shares don't vote; ensure quorum.
SEC Guidance: While the RCC is self-executory, consult SEC opinions or legal counsel for edge cases (e.g., suspended corporations).
Strategic Advice: Opt for perpetual existence to future-proof; limited terms suit temporary ventures (e.g., SPVs).

Conclusion

Under the Revised Corporation Code, a corporate term expiring after 50 years does necessitate an amendment to the articles of incorporation to avoid dissolution—but the process is democratized and efficient. A simple 2/3 stockholder vote at a duly called meeting automatically extends the term (ideally to perpetuity) without SEC hurdles, marking a welcome departure from the Old Code's bureaucracy. This reform empowers corporations to focus on growth rather than administrative survival. For legacy entities nearing their half-century mark, immediate action is prudent: convene the board, rally stockholders, and secure continuity. Failure to do so invites dissolution risks that could unravel decades of enterprise. In the Philippine corporate ecosystem, perpetual existence is now the norm—embrace it to thrive indefinitely.

For tailored advice, consult a corporate lawyer, as specifics vary by AOI and circumstances.