Corporation Code of the Philippines: Stocks and Stockholders

Corporation Code of the Philippines: Stocks and Stockholders

The Corporation Code of the Philippines, also known as Batas Pambansa Bilang 68, was enacted on May 1, 1980. It governs rules and regulations concerning the establishment and operation of both stock and non-stock corporations in the country. It is made up of 149 sections grouped into 16 titles.


In 2018, the Senate amended the Corporation Code, with Senate Bill No. 1280 introducing the concept of a one-person corporation in response to problems individuals commonly face in meeting the minimum requirement of five stockholders for a corporation. It also allows corporations to use the perpetual term as a default option.


Some definitions


The Code provides a legal definition of a corporation, which is “an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.”


These entities can be classified as stock or non-stock corporations. Corporations with capital stock that has been divided into shares, and with the authority to distribute dividends or allotments of surplus profits (based on shares held) to various holders, are called stock corporations.

Other corporations fall under the non-stock category.


Corporate stocks, also called capital stocks, refer to shares of ownership within a stock corporation or a publicly listed company. Owning stocks makes you a stockholder or shareholder of that particular company.


You become a part-owner based on the number of the shares you own in the corporation and until you decide to sell and/or transfer your shares to another individual. As an owner, you can participate in the company’s growth and profitability. Likewise, you can face losses if the company underperforms.


A stock certificate represents ownership of stocks.


The Philippine Stock Exchange (PSE) is the venue where local companies with publicly listed stocks are made available to potential investors for trading.


Kinds of stocks


There are different kinds of stocks depending on the rights and privileges they afford a stockholder.


  • Common stocks –The majority of shares issued by corporations are common shares. Common shares give individuals ownership interest in the company, entitling them to a portion of the profits. Votes can be used to elect board members, as well as influence the company’s decisions.


Common stocks are usually classified into Class A and B shares.

The distinction between these lies in the extent of voting rights: those buying into A shares (often from company management and other specific employees with company perks) have more voting rights than B shareholders.


Holders of A shares usually get 10 voting rights per stock; B shareholders only get one. The voting rights accorded per shareholder stems from the belief that those accorded the higher voting rights would know better how to manage company operations and contribute to a better return on investment for everyone concerned.


Preferred stock – Those with preferred stocks are prioritized to receive a fixed minimum amount of dividends, in either pesos or a percentage of the stock par value as declared by the company’s board, before dividends are paid to common stockholders. This is only possible if there are enough retained earnings.


  • Cumulative preferred stock – Owners of cumulative preferred stocks have rights to past dividends omitted from the current preferred stock and its corresponding dividends. These omitted cumulative preferred dividends should be given before common stock dividends can be paid.


  • Convertible preferred stock – These are preferred stocks that can be exchanged into common stocks at the holder’s option, subject to specified terms and conditions.


The Code also discusses the basic powers of corporations, including the capacity to either extend or shorten a corporate term, increase or decrease capital stock, and declare dividends, among other powers given by the Code.


Other areas discussed by the Code include regulations on the adoption of by-laws, as well as the contents and amendment thereof. The Code also covers rules on special or regular meetings among stockholders, directors, trustees, and members, as well as rules on quorum and voting.