Guetze and his wife have three (3) children: Neymar, 25, who is now based in Rio de Janeiro, Brazil; Muelter, 23, who has migrated to Munich, Germany; and James, 21, who resides in Bogota, Colombia. Neymar and Muelter have since renounced their Philippine citizenship in favor of their country of residence. Nearing 70 years old, Guetze decided to incorporate his business in Binondo, Manila. He asked his wife and three (3) children to act as incorporators with one (1) share of stock each, while he owned 999,996 shares of the 1,000,000 shares of the capital stock. (6%)
(A) Assuming all other requirements are met, should the Securities and Exchange Commission (SEC) accept or reject the Articles of Incorporation? Why?
(B) Being the control freak and micro-manager that he is, Guetze asked you – his astute legal adviser – if he can serve as Chairman of the Board of Directors, as President, and as General Manager of the corporation, all at the same time. Please advise Guetze.
(C) Assuming the corporation has beenproperly registered, may the Articles of Incorporation now beamended to reduce the number of directors to two (2) – Guetze and his wife– to reflect the real owners of the shares of stock?
Suggested answer only. Not an official answer and not legal advice.
(A) The SEC should reject the Articles; (B) Guetze may serve as Chairman, President, and General Manager concurrently; and (C) the Articles cannot be amended to reduce directors to two. Under the Corporation Code, a majority of incorporators must
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Quick check
Under the former Corporation Code (BP 68), what residency requirement applied to incorporators of a domestic corporation?
BP 68 required a majority of incorporators to be Philippine residents.
Which combination of corporate positions is explicitly prohibited from being held concurrently by a single person under RA 11232?
Section 24 explicitly prohibits the President from serving concurrently as Treasurer or Secretary.
What is the general statutory minimum number of directors required for a standard stock corporation under RA 11232?
Standard stock corporations must have at least five directors under Section 13.
Can a stock corporation amend its articles of incorporation to reduce its board of directors to two members?
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Which primary statute governs corporate formation, board composition, and officer qualifications in the Philippines?
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Learn more about these topics
1. Incorporator Residency Rule
Under the Corporation Code of the Philippines (Batas Pambansa Blg. 68), a majority of the incorporators of a domestic corporation were required to be residents of the Philippines. Although the Revised Corporation Code (Republic Act Number 11232) has since removed the residency requirement for incorporators, under the former law, an application for incorporation filed by five incorporators, only two of whom resided in the Philippines, failed to satisfy the statutory residency requirement. Consequently, the Securities and Exchange Commission was duty-bound to reject the articles of incorporation.
2. Concurrent Corporate Offices
Under Section 24 of the Revised Corporation Code of the Philippines (Republic Act Number 11232), corporate officers are appointed by the board of directors. A single individual may validly hold two or more corporate positions concurrently, provided the offices are not legally incompatible. The statute explicitly prohibits only specific dual roles, such as serving simultaneously as President and Secretary, or as President and Treasurer. Therefore, an individual may lawfully serve as Chairman of the Board of Directors, President, and General Manager at the same time.
3. Minimum Board Seats
Under Section 13 of the Revised Corporation Code of the Philippines (Republic Act Number 11232), the number of directors in a stock corporation must not be less than five nor more than fifteen, except in special corporate entities like one person corporations. Even if a majority of corporate shares are beneficially owned by only two individuals, the articles of incorporation cannot be amended to reduce the total number of board directors below the statutory minimum of five directors.