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This article was originally published on February 9, 2021 and has been updated to reflect recent legal developments.
This article is provided for general informational purposes only and does not create, nor shall it be construed as creating, a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. For advice on specific legal concerns, you are encouraged to engage the services of a qualified lawyer. You may also directly consult Alburo Alburo and Associates Law Offices for proper guidance tailored to your situation.
The views and information presented herein are based on the laws, rules, and jurisprudence prevailing at the time of writing. They do not take into account subsequent legal developments and should not be relied upon as a substitute for professional legal advice.
AT A GLANCE:
Section 11 of Republic Act No. 11232, otherwise known as the Revised Corporation Code, states that Corporations created under Republic Act No. 11232 shall have perpetual existence unless its articles of incorporation. On the other hand, in cases of corporations with certificates of incorporation issued prior to the effectivity of the Revised Corporation Code and which continue to exist shall likewise have perpetual existence, unless the corporation elects to retain its specific corporate term.
“Maturity is achieved when a person postpones immediate pleasures for long-term values.” – Joshua L. Liebman
Before the enactment of the Republic Act No. 11232, otherwise known as the “Revised Corporation Code,” the term of a corporation was generally limited to fifty (50) years, subject to extension for another period not exceeding fifty (50) years.
However, with the effectivity of the Revised Corporation Code on February 23, 2019, the rule on corporate term was substantially changed.
Section 11 of Republic Act No. 11232 now provides that a corporation shall have perpetual existence unless its Articles of Incorporation provide otherwise, to wit:
“SEC. 11. Corporate Term. – A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
xxx.”
Corporate Term of Existing Corporations Prior to the RCC
Section 11 of Republic Act No. 11232 provides that corporations with certificates of incorporation issued prior to the effectivity of the RCC and which continue to exist shall likewise have perpetual existence, unless the corporation elects to retain its specific corporate term.
“xxx.
Corporations with certificates of incorporation issued prior to the effectivity of this Code, and which continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority of its outstanding capital stock, notifies the Commission that it elects to retain its specific corporate term pursuant to its articles of incorporation: Provided, That any change in the corporate term under this section is without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.
xxx.”
This rule was further implemented by the Securities and Exchange Commission through SEC Memorandum Circular No. 22, Series of 2020.
Section 2 of the Memorandum Circular states that 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.
Amendment of Corporate Term
A corporation may subsequently amend its corporate term in accordance with the provisions of the law and applicable SEC regulations.
In cases of corporation created under Republic Act No. 11232, Section 11 provides:
“A corporate term for a specific period may be extended or shortened by amending the articles of incorporation: Provided, That no extension may be made earlier than three (3) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Commission: Provided, further, That such extension of the corporate term shall take effect only on the day following the original or subsequent expiry date(s).”
In the case of corporations existing prior to the effectivity of the RCC, Article Four of the corporation’s Articles of Incorporation may likewise be amended to expressly reflect its perpetual corporate term.
Section 2 of SEC Memorandum Circular No. 22, Series of 2020 provides:
“xxx.
The corporation, subject to payment of filing fees, may amend Article Four to reflect its perpetual corporate term in its Articles of Incorporation, by a vote of majority of its Board of Directors or Trustees and by a vote of its stockholders representing a majority of its outstanding capital stock including the non-voting shares, or a majority of the members, in case of a non-stock corporation.
Provided that, for all other provisions to be amended in one same amended articles of incorporation, the required vote should be vote of majority of its Board of Directors or Trustees and vote of its stockholders representing a two-thirds (2/3) of its outstanding capital stock or members, in case of a non-stock corporation.”
Appraisal Right
Take note that any change in the corporate term remains subject to the appraisal right of dissenting stockholders pursuant to the provisions of the Republic Act No. 11232.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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