In the Philippine legal landscape, corporations are generally classified into two categories: stock and non-stock. While stock corporations are driven by profit-sharing and equity, non-stock corporations (NSCs) are defined by their service-oriented nature and the absence of capital stock. Governed primarily by the Revised Corporation Code of the Philippines (RCC), specifically Sections 86 to 94, NSCs play a vital role in the country’s social, civic, and religious sectors.

I. Definition and Nature of Non-Stock Corporations

Under Section 86 of the RCC, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers. Any profit generated by the corporation as an incident to its operations must be used for the furtherance of the purpose or purposes for which the corporation was organized.

Key Characteristics:

No Capital Stock: The corporation does not issue shares of stock.
Membership-Based: Ownership is not through equity but through membership.
Non-Profit Distribution: Unlike stock corporations, which exist to provide returns to shareholders, NSCs are prohibited from distributing "dividends" or profits to their members.
Incidental Income: An NSC can engage in activities that generate profit (e.g., a school charging tuition or a hospital charging fees), but that profit must be reinvested into the organization.

II. Purposes of Non-Stock Corporations

According to Section 87 of the RCC, non-stock corporations may be formed for any of the following purposes:

Charitable (e.g., orphanages, foundations for the poor)
Religious (e.g., churches, missions)
Educational (e.g., private non-profit universities)
Professional (e.g., Integrated Bar of the Philippines)
Cultural (e.g., arts foundations)
Fraternal/Social (e.g., country clubs, alumni associations)
Literary/Scientific (e.g., research institutes)
Civic Service (e.g., Rotary clubs)
Similar Purposes like trade, industry, agricultural, or chambers.

III. Governance and Management

The governance structure of an NSC differs significantly from that of a stock corporation:

1. Board of Trustees

Instead of a Board of Directors, an NSC is governed by a Board of Trustees.

Composition: Trustees must be members of the corporation.
Term Limits: Unless otherwise provided in the Articles of Incorporation or Bylaws, the term of office for trustees is usually staggered, with one-third of the board elected annually.
Independent Trustees: For corporations "vested with public interest" (like non-stock schools or foundations), the SEC requires a certain number of independent trustees.

2. Membership and Voting Rights

Right to Vote: Each member is entitled to one vote regardless of the amount of "contribution," unless the Articles of Incorporation provide otherwise (Section 88).
Non-Transferability: Membership is personal and non-transferable unless the Bylaws state otherwise.
Termination: Membership can be terminated in the manner provided in the Articles or Bylaws.

IV. SEC Regulations and Compliance

The Securities and Exchange Commission (SEC) exercises strict oversight over NSCs to prevent the "disguising" of profit-oriented businesses as non-stock entities for tax purposes.

1. Registration Requirements

To incorporate, an NSC must file:

Articles of Incorporation: Detailing the specific non-stock purpose.
Bylaws: Outlining membership rules and meeting procedures.
List of Members: Certified by the Corporate Secretary.
Undertaking to Change Name: If the name is already in use.

2. Annual Reporting (The "Life Blood" of Compliance)

All NSCs must submit the following annually:

General Information Sheet (GIS): Filed within 30 days of the annual meeting.
Audited Financial Statements (AFS): If gross annual receipts are above a certain threshold (currently PHP 600,000), otherwise, a Sworn Statement by the Treasurer is sufficient.

3. Special Rules for Foundations

Foundations (a subset of NSCs) are subject to SEC Memorandum Circular No. 8, Series of 2006:

They must include the word "Foundation" in their corporate name.
They must file a Sworn Statement of Sources and Uses of Funds (SSSUF).
They are subject to stricter audits to ensure funds are used for the declared charitable purposes.

4. Mandatory Disclosure Form (MDF)

To combat money laundering and terrorist financing, the SEC requires NSCs to file an MDF. This allows the SEC to identify the "beneficial owners" or those with significant control over the entity.

V. Dissolution and Distribution of Assets

The distribution of assets upon dissolution of an NSC is strictly regulated by Section 93 of the RCC:

Payment of Liabilities: All debts must be settled first.
Return of Assets: Assets held upon condition requiring return must be returned to the donor.
Transfer to Similar Entities: Assets received for charitable or religious purposes, without a return condition, must be transferred to another corporation engaged in substantially similar activities (the Cy Pres doctrine).
Distribution to Members: Only assets not subject to the above conditions may be distributed to members if the Articles or Bylaws explicitly allow it.

VI. Common Examples in the Philippines

Category	Examples
Foundations	ABS-CBN Foundation, GMA Kapuso Foundation, Ayala Foundation
Educational	Ateneo de Manila University, De La Salle University (Non-stock variants)
Professional/Civic	Integrated Bar of the Philippines (IBP), Philippine Institute of Certified Public Accountants (PICPA)
Homeowners	Homeowners’ Associations (HOAs) - though regulated also by DHSUD, they often start as SEC non-stock corps.
Social Clubs	Manila Polo Club, Baguio Country Club

VII. Conversion Issues

Stock to Non-Stock: A stock corporation may convert to non-stock through an amendment of its Articles of Incorporation.
Non-Stock to Stock: This is not allowed by simple amendment. Because an NSC’s assets are "dedicated" to its purpose, converting it to a profit-sharing entity is seen as a violation of the trust of the donors/members. To achieve this, the NSC must be dissolved, and a new stock corporation must be formed.