Article 31p. 31

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

expiration of a particular term shall hold office only for

the unexpired period.

No person shall be elected as trustee unless he is a

member of the corporation.

Unless

otherwise

provided

for

in the articles of

incorporation

or

the

bylaws, officers of a non-stock

corporation may be directly elected by the members. (n)

SECTION 93. Place of Meetings . — The bylaws may

provide that the members of a non-stock corporation

may hold their regular or special meetings at any place

even outside the place where the principal office of the

corporation is located: Provided , That proper notice is sent

to all members indicating the date, time and place of the

meeting: and Provided , further , That the place of meeting

shall be within the Philippines. (n)

CHAPTER III Distribution of Assets in Non-Stock

Corporations

SECTION 94. Rules of Distribution . — In case of

dissolution of a non-stock corporation in accordance with

the provisions of this Code, its assets shall be applied and

distributed as follows:

1. All liabilities and obligations of the corporation shall

be paid, satisfied and discharged, or adequate provision

shall be made therefor;

2. Assets held by the corporation upon a condition

requiring

return,

transfer

or

conveyance, and which

condition occurs by reason of the dissolution, shall be

returned, transferred or conveyed in accordance with

such requirements;

3. Assets received and held by the corporation subject

to limitations permitting their use only for charitable,

religious, benevolent, educational or similar purposes, but

not held upon a condition requiring return, transfer or

conveyance

by

reason

of

the

dissolution,

shall

be

transferred or conveyed to one or more corporations,

societies or organizations engaged in activities in the

Philippines substantially similar to those of the dissolving

corporation pursuant to a plan of distribution adopted as

provided in this Chapter;

4.

Assets

other

than

those

mentioned

in

the

preceding paragraphs, if any, shall be distributed in

accordance

with

the

provisions

of

the

articles

of

incorporation or the bylaws, to the extent that the articles

of incorporation or the bylaws, determine the distributive

rights of members, or any class or classes of members, or

provide for distribution; and

5. In any other case, assets may be distributed to such

persons, societies, organizations or corporations, whether

or not organized for profit, as may be specified in a plan

of distribution as provided in this Chapter. (n)

SECTION 95. Plan of Distribution of Assets . — A plan

providing for the distribution of assets, not inconsistent

with the provisions of this Title, may be adopted by a

non-stock corporation in the process of dissolution in the

following manner:

The board of trustees shall, by majority vote, adopt a

resolution recommending a plan of distribution and

directing the submission thereof to a vote at a regular or

special

meeting

of

members

having

voting

rights.

Written

notice

setting

forth

the

proposed

plan

of

distribution or a summary thereof; and the date, time and

place of such meeting shall be given to each member

entitled to vote, within the time and in the manner

provided in this Code for the giving of notice of meetings

to members. Such plan of distribution shall be adopted

upon approval of at least two-thirds (2/3) of the members

having voting rights present or represented by proxy at

such meeting. (n)

TITLE XII Close Corporations

SECTION 96. Definition and Applicability of Title . —

A close corporation, within the meaning of this Code, is

one whose articles of incorporation provide that: (1) All of

the corporation's issued stock of all classes, exclusive of

treasury shares, shall be held of record by not more than a

specified number of persons, not exceeding twenty (20);

(2) All of the issued stock of all classes shall be subject to

one or more specified restrictions on transfer permitted

by this Title; and (3) The corporation shall not list in any

stock exchange or make any public offering of any of its

stock of any class. Notwithstanding the foregoing, a

corporation shall be deemed not a close corporation

when at least two-thirds (2/3) of its voting stock or voting

rights is owned or controlled by another corporation

which is not a close corporation within the meaning of

this Code.

Any corporation may be incorporated as a close

corporation,

except

mining

or

oil

companies,

stock

exchanges, banks, insurance companies, public utilities,

educational institutions and corporations declared to be

vested

with

public

interest

in

accordance

with the

provisions of this Code.

The provisions of this Title shall primarily govern close

corporations: Provided , That the provisions of other Titles

of this Code shall apply suppletorily except insofar as this

Title otherwise provides.

SECTION 97. Articles of Incorporation . — The articles

of incorporation of a close corporation may provide:

1. For a classification of shares or rights and the

qualifications

for

owning

or

holding

the same and

restrictions on their transfers as may be stated therein,

subject to the provisions of the following section;

2. For a classification of directors into one or more

classes, each of which may be voted for and elected solely

by a particular class of stock; and

3. For a greater quorum or voting requirements in

meetings

of

stockholders

or

directors

than

those

provided in this Code.

The articles of incorporation of a close corporation

may provide that the business of the corporation shall be

managed by the stockholders of the corporation rather

than by a board of directors. So long as this provision

continues in effect:

1. No meeting of stockholders need be called to elect

directors;

2. Unless the context clearly requires otherwise, the

stockholders of the corporation shall be deemed to be

directors for purposes of applying provisions of this Code;

and

3. The stockholders of the corporation shall be subject

to all liabilities of directors.

The articles of incorporation may likewise provide

that all officers or employees or that specified officers or

employees

shall

be

elected

or

appointed

by

the

stockholders, instead of by the board of directors.

SECTION 98. Validity of Restrictions on Transfer of

Shares . — Restrictions on the right to transfer shares

must appear in the articles of incorporation and in the

bylaws as well as in the certificate of stock; otherwise, the

same shall not be binding on any purchaser thereof in

good faith. Said restrictions shall not be more onerous

than

granting

the

existing

stockholders

or

the

corporation the option to purchase the shares of the

transferring

stockholder with such reasonable terms,

conditions or period stated therein. If upon the expiration

of

said

period,

the

existing

stockholders

or

the

corporation fails to exercise the option to purchase, the

transferring stockholder may sell his shares to any third

person.

SECTION 99. Issuance or Transfer of Stock of a Close

Corporation in Breach of Qualifying Conditions . —

1. If stock of a close corporation is issued or transferred

to any person who is not entitled under any provision of

the articles of incorporation to be a holder of record of

stock, and if the certificate for such stock conspicuously

shows the qualifications of the persons entitled to be

© Compiled by RGL

31 of 211