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RFBT 2 – BSA Second Year

NON-STOCK CORPORATIONS & DISSOLUTION
by Atty. Erickson A. Sandel

NON-STOCK CORPORATIONS
• No part of its income is distributable as dividends
• Profit shall be used for the furtherance of its purpose/s which may be any of
the following.
o Professional purposes o Trade chambers
o Artistic & Cultural o Industry chambers
purposes o Agricultural chambers
o Scientific purposes o combo of any of the given
o Social – charitable /
fraternal / civic service
o Educational purposes
o Religious purposes

COMPARISON BETWEEN STOCK AND NON-STOCK CORPORATIONS

Non-Stock Corporation Stock Corporation

Limits on operation
DISTRIBUTION OF prohibited allowed
INCOME AS DIVIDENDS

PROFIT-MAKING prohibited allowed

ACTIVITY

Right of corporators
TRANSFERABILITY OF personal & transferable
CORPORATE nontransferable
MEMBERSHIP

PROXY allowed allowed

EXTENT OF VOTING “one member, one vote” “one share, one vote”

REMOTE possible when the bylaws possible when the bylaws

COMMUNICATION OR IN permits or majority of the Board
ABSENTIA VOTING permits

Board & Officers

COMPOSITION OF BOARD trustees directors

MAXIMUM NUMBER OF none not more than 15

BOARD MEMBERS

TERM OF OFFICE 3 years 1 year

CORPORATE OFFICERS may be elected directly elected by the Board only

by the members
Meetings
PLACE OF MEETINGS may be outside the within the location of the
location of the principal principal office
office but within the
Philippines

*In corporations vested with public interest, voting through remote communication
or in absentia is allowed even without any provision in the bylaws (paragraph 2, Sec.
23)
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RFBT 2 – BSA Second Year
NON-STOCK CORPORATIONS & DISSOLUTION
by Atty. Erickson A. Sandel

In other matters not provided for, like the place of trustee’s meetings, compensation
& liabilities of trustees, inspection rights of members, etc., follow the analogous
provisions governing stock corporations (last paragraph, Sec. 86)

CORPORATE DISSOLUTION
METHODS OF CORPORATE DISSOLUTION
VOLUNTARY INVOLUNTARY
Request for Petition for Shortening Order of the SEC:
Dissolution Dissolution Corporate Term (1) motu propio (on
(when no creditors (when any (by amending the its own); or
are prejudiced) creditors are articles of (2) upon complaint
prejudiced) incorporation) of any interest
party

PROCEDURE FOR VOLUNTARY DISSOLUTION

SHORTENING
REQUEST FOR PETITION FOR
CORPORATE
DISSOLUTION DISSOLUTION
TERM
MEETING
Board approval majority vote majority vote majority vote
SH / M approval majority vote 2/3 vote 2/3 vote

DOCUMENTARY (1) Resolution authorizing the dissolution (1) Amended

REQUIREMENTS Articles
(2) newspaper (2) list of creditors
publication of
the notice of
meeting
(3) recommendation
of the proper
agency, if
necessary

SEC FILING file the Request file the Petition submit the
+ the docs + the docs Amended Articles

SEC HEARING not required required for not required

entertaining
objections to the
dissolution

in the absence of in the absence of

any written any sufficient
withdrawal of the objection… SEC will
Request…. SEC will then issue a:
then issue a:
automatic upon
EFFECTIVITY OF expiration of the
Certificate of Dissolution
DISSOLUTION shortened corporate
term

the corporation* remains in existence for 3 YEARS only for

LIQUIDATION winding up its affairs (bring/defend suits, pays its debts and
distribute assets)
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RFBT 2 – BSA Second Year
NON-STOCK CORPORATIONS & DISSOLUTION
by Atty. Erickson A. Sandel

*except banking corporations which are governed by special laws (particularly the
New Central Bank Act & Philippine Deposit Insurance Corporation Law)

At any time within the 3 year-period, the corporation can convey its properties to a
trustee.

GROUNDS FOR INVOLUNTARY DISSOLUTION

(1) NON-USE OF CORPORATE CHARTER OR CONTINUOUS

INOPERATION UNDER SECTION 21

Dissolution takes effect upon revocation of its certificate of

incorporation

a. NON-USE: Failure to organize within 5 years from date of

incorporation
b. CONTINUOUS NONOPERATION:
o Inoperative for a period of at least 5 years (delinquency status)
o Given 2 years to resume operations
o Expiry of the 2-year period without any resumption made

(2) COURT ORDER FOR DISSOLUTION

(3) FRAUDULENT INCORPORATION
(4) PARTICIPATION IN SECURITIES VIOLATION, SMUGGLING, TAX
EVASION, MONEY LAUNDERING, OR GRAFT & CORRUPTION*
(5) TOLERATION OF ILLEGAL ACTS OF ITS D/T/O/E.*

*Grounds 4 and 5 may result in FORFEITURE of its assets upon petition of

the SEC in court