Published — February 9, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
More on corporations, aside from knowing corporate term: CAN A CORPORATION ACQUIRE ITS OWN SHARES?
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A corporate may now exist perpetually
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Corporations with certificate of incorporation prior to the effectivity of the Revised Corporation Code may also exist perpetually
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Any change in the corporate term is without prejudice to the appraisal right of dissenting stockholders
Maturity is achieved when a person postpones immediate pleasures for long-term values. – Joshua L. Liebman
The term of a corporation was previously limited only up to fifty (50) years of existence which may be extended for another period not exceeding fifty (50) years. However, with the effectivity of the Revised Corporation Code (RCC) on February 23, 2019, a corporation may now exist perpetually.
What is now the corporate term of a corporation whose certificate of incorporation was issued prior to the effectivity of the RCC?
The law says:
Corporations with certificates of incorporation issued prior to the effectivity of the RCC and which continue to exist shall have perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority, amends its articles of incorporation.
Also, under Memorandum Circular No. 22, Series of 2020 (MC No. 22 s. 2020) which was issued by the Securities and Exchange Commission (SEC), the corporate term of a corporation with certificate of incorporation issued prior to the effectivity of the RCC and which continue to exist, shall be deemed perpetual upon the effectivity of the RCC, without any action on the part of the corporation. The corporation, subject to the payment of filing fees, may amend Article Four (corporate term) to reflect its corporate term in its Articles of Incorporation, by a majority vote of its Board of Directors or Trustees and by a vote of its stockholders representing a majority of its outstanding capital stock, or a majority of members, in case of a non-stock corporation.
How about if the corporation with certificate of incorporation issued prior to the effectivity of the RCC and continues to exist, elects to continue with their present corporate term?
MC No.22 s. 2020 says:
Such corporation shall notify the SEC by filing a Notice with attached Director’s Certificate, certifying that the decision to retain the specific corporate term as specified in the Articles of Incorporation was approved in a meeting duly held for the purpose by the required number of votes.
The Notice to be submitted to the SEC must be signed by at least a majority of the members of the Board of Directors or Trustees, and attested by the Corporate Secretary. Said Notice must be submitted within a period of two years from February 23, 2019 or until February 23, 2021. After which, a Certificate of Filing of Notice to Retain Specific Corporate Term shall be issued to the corporation.
If the corporation fails to comply with the required notification, the term of the corporation shall be deemed perpetual.
What if the corporations incorporated prior or under the RCC opted to extend or shorten its corporate term?
MC No.22 s. 2020 says:
Such corporations may file an amendment of articles of incorporation to extend or shorten the specific corporate term. The amendment must be approved by vote or written assent of majority of the Board of Directors or Trustees and vote or written assent of stockholders representing at least two-thirds (2/3) of the outstanding capital stock or members.
In no case shall any extension of the said corporations be made earlier than the three (3) years prior to the original or subsequent expiration date of the corporate term, unless there are justifiable reasons for the extension as may be determined by the SEC. For extensions of the corporate term, it shall take effect only on the day following the original or subsequent expiry date.
What if the corporations incorporated under the RCC elect to change specific corporate term to perpetual corporate term?
MC No. 22 s. 2020 says:
Such corporations may subsequently amend its specific corporate term to perpetual term of existence. The amendment must be approved by vote or written assent of majority of the Board of Directors or Trustees and vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the corporation.
What if same corporations elect to change perpetual corporate term to specific corporate term?
MC No. 22 s. 2020 says:
Such corporations may subsequently amend its perpetual term of existence to specific corporate term. The amendment must be approved by vote or written assent of majority of the Board of Directors or Trustees and vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the corporation.
In all of the instances mentioned above or any change in the corporate term, take note that the appraisal right of the dissenting stockholders is not affected.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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