WHEN DOES STOCK CORPORATION BECOME NON-STOCK?

After learning about stock and non-stock corporation you may also read: How foreign corporation can do business in the Philippines

In answering the query, we must first know what is meant by a Corporation. Under Batas Pambansa Blg. 68 or otherwise known as the Corporation Code of the Philippines (Code henceforth), a corporation is defined as an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.

There are two classes of corporation which may be formed or organized under the Code. They are the following:

1. Stock Corporations –corporations which have capital stock divided into shares and are authorized to distribute to the holders of such to distribute to the holders of such shares and dividends or allotments of the surplus profits on the basis of the shares held.
2. Non- stock corporations – corporations with no authorized capital stock. It is organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social civil service, or similar purposes, like trade, industry, agricultural and like chambers, or any combinations thereof.

In line with this, corporations may be dissolved either voluntarily or involuntarily in accordance with the Corporation Code of the Philippines. The question now is, “Is it possible for stock corporations to become non-stock corporations? The answer yes. The Securities and Exchange Commission mandates that the following basic documents must be submitted:

1. Name Verification Slip
2. Articles of Incorporation (AI) and By-laws (BL)
3. Joint affidavit of two incorporators to change corporate name (not required if already stated in AI)
4. List of members certified by the corporate secretary, unless already stated in the AI; and
5. List of the names of contributors or donors and the amounts contributed or donated certified by the treasurer. There is no fixed amount of contribution required but only such reasonable amount as the incorporators and trustees may deem sufficient to enable the corporation to start operation, except in the case of foundations which must have a minimum contribution of at least One Million Pesos (P1,000,000.00).

It must be noted that once a stock corporation became a non-stock, it no longer has authorized capital stocks and no part of its income can be distributed to its members, trustees, or officers as dividends. Any profit generated by the non-stock corporation as an incident to its operation can, whenever necessary or proper, only be used for the furtherance of the purpose or purposes for which the non-stock corporation was organized.

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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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