Businesses grow or change, depending on factors ranging from a simple transfer to a new office to the incorporation of major revisions to the company mission and vision. Circumstances like these merit amendments to the Articles of Incorporation and By-laws.
Amending Articles of Incorporation
When amending the Articles of Incorporation (AI), a business is allowed to change only the following:
• Corporate name
• Extension of the term of the corporation
• Classes or series of shares
• Rights, privileges, or restriction in share ownership
• The number of directors
• The purpose or purposes of the business
• The names of the officers and directors
• The legal address of the company
Details in the AI that cannot be amended are:
• The first set of directors and subscribers
• The initial treasurer (if the treasurer has changed, you have to indicate it
in the General Information Sheet)
• The original subscription, place, and date of execution of the first AI
According to Section 16 of the Corporation Code of the Philippines, a majority vote of the board of directors or trustees, as well as the vote or written assent of two-thirds of the corporation’s stockholders, is needed to confirm the proposed amendments. This should be done without prejudice to the appraisal rights of stockholders who state their dissent over said amendments.
For non-stock corporations, a two-thirds vote or written assent of its members is
required for confirmation.
Required documents to formally amend the AI
The Securities and Exchange Commission (SEC) is the agency tasked to approve amendments made to a company’s AI. Thus, the following documents should be prepared for submission:
• Amended AI
• Directors’ or trustees’ certificate notarized and signed by majority of the
directors or trustees and the corporate secretary indicating the following:
o The amendment of the AI and indicate the amended provisions
o The vote of the directors or trustees and stockholders or members
o The date and place of the stockholders’ or members’ meeting
o The tax identification of the signatories (to be placed below their
names)
• Notarized secretary’s certificate indicating no pending cases of intracorporate
dispute
• Compliance Monitoring Division (CMD) clearance and/or clearances from
a similar department of the Commission
There are other additional requirements you might need to submit like endorsement or clearance from other government agencies.
For a change of corporate name, the business entity must submit to the SEC a name verification slip and the affidavit of a director, trustee or officer agreeing to said change. The affidavit is not required if it has previously been stated in the AI. The SEC, in turn, will issue an amended certificate of incorporation using the new name upon approval, as stated in Section 18 of the Corporation Code of the Philippines.
For changes in the amount of authorized capital stock or alteration to the classification and conversion of shares, the SEC also requires special documents
Moreover, the SEC has the right to reject or disapprove any changes to the AI if it does not comply with the Corporation Code, existing laws or the Constitution.
Factors affecting SEC rejection of proposed amendments to a company’s AI
The following are the grounds that the SEC can use to reject amendments done to the AI:
• The AI or any amendment did not conform with the prescribed form
• The purpose/s of the corporation are unconstitutional, illegal, immoral or
contrary to government rules and regulations
• The Treasurer’s Affidavit stating the amount of capital stock subscribed
and/or paid is false
• The percentage of ownership of the capital stock to be owned by
Philippine citizens was not complied with, as required by existing laws or
the Constitution
The SEC will give incorporators time to correct or modify the objectionable portions of their amended AI.
Amending by-laws
As for amending or repealing a corporation’s by-laws, a majority vote among the
following parties is required for its passing:
• Board of directors
• Owners of outstanding stock (for stock corporations)
• Members (for non-stock corporations)
In addition, owners of two-thirds of the outstanding capital stock or two-thirds of the members may opt to delegate their voting powers to the board of directors or trustees. Said powers can be revoked when the stockholder or member takes back their place and votes at a regular or special meeting.
When adopting an amendment to the by-laws or creating new by-laws, the new version should be attached to the original in the office of the corporation.
A copy of the new by-laws must also be filed with the SEC, attached to the original AI and original by-laws. The copy to be submitted to the SEC must be certified by the corporate secretary and majority of the directors and trustees.
The amended by-laws or new by-laws will come into effect when the SEC issues a certificate proving that the amended provisions are consistent with the Code.
It’s important to take note that the basic requirements to submit to the SEC in order to officially amend by-laws are similar to the ones for amending the AI.
If you want to know more about amending Articles of Incorporation and By-laws in the Philippines, give FilePino a call today at +1.806.553.6552 (USA) or +63.917.892.2337 (Philippines). You can also browse the website for more helpful articles.
