Dear PAO,
I have a question regarding AAA Corp., where my mother works. They are concerned about the corporation’s term because the Securities and Exchange Commission (SEC) issued a certificate of incorporation on Nov. 1, 1974. Its Articles of Incorporation (AOI) provide that it shall have a term of 50 years, unless extended for a period not exceeding another 50 years. Will AAA Corp.’s existence end upon the lapse of its original term as specified in the AOI, or will the new provision of the Revised Corporation Code providing for the perpetual existence of a corporation apply? Can you enlighten me on this matter?
Dante

Dear Dante,
The Philippines is one of the few countries that sets a limit to the term of a corporation before the enactment of the Republic Act (RA) 11232, or known as the Revised Corporation Code of the Philippines (RCCP). This law took effect on Feb. 23, 2019.

Section 2 of the RCCP defines a corporation 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 incidental to its existence.”
Section 11 of the RCCP explains the term of a corporation. It provides that:

“Section 11. Corporate Term. – A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
“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 right of dissenting stockholders in accordance with the provisions of this Code.

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).
“A corporation whose term has expired may apply for revival of its corporate existence, together with all the rights and privileges under its certificate of incorporation and subject to all of its duties, debts and liabilities existing prior to its revival. Upon approval by the Commission, the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence, unless its application for revival provides otherwise.

“No application for revival of certificate of incorporation of banks, banking and quasi-banking institutions, preneed, insurance and trust companies, non-stock savings and loan associations (NSSLAs), pawnshops, corporations engaged in money service business, and other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency.”

Before the enactment of the RCCP, corporations in our country had a limited term, which led to the loss of income and livelihood for families, as well as the loss of legacy and aspirations for entrepreneurs and employees. The perpetual corporate term, as the default option under RCCP, seeks to address this problem. It also allows corporations to develop long-term plans and to look into more sustainable and far-reaching strategies for economic growth.

However, corporations may opt to specify a term limit in their Articles of Incorporation (AOI) to give their stockholders an opportunity to assess the future of the corporation and determine, at that point, whether to wind up the affairs of the corporation or to extend the life of the corporation.
In the situation you mentioned, the existence of the corporation where your mother works does not end with the lapse of its original term as specified in the AOI. Existing corporations need not do anything if they want to have a perpetual term because they will automatically be considered to have a perpetual term by virtue of the express wordings of Section 11 of the RCCP. As an exception, a corporation may opt to have a limited corporate term upon a vote of its stockholders representing a majority of its outstanding capital stock.

We hope that we are able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Thank you for your continued trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]