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Automatic Extension of Corporate Term

Posted by Jack Advincula | Sep 23, 2019 | 0 Comments

In its SEC-OGC Opinion No. 19-28, the Securities and Exchange Commission clarified the import of Section 11 of the Revised Corporation Code concerning the extension of corporate term to perpetual existence, which provides, to wit:

“SEC. 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 term under this section is without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.

x x x”

In said Opinion, the SEC confirmed that the corporate term of a corporation existing before, and which continues to exist upon the effectivity of the RCC shall be automatically deemed perpetual without any further action on the part of the corporation. This means that the corporation is no longer required to amend its Articles of Incorporation to indicate perpetual existence as its corporate term.

The SEC further opine that since the automatic conversion of the corporate term to perpetual existence does not require an amendment of the AOI, the 2/3 affirmative vote of the outstanding shares to amend the AOI is likewise not required.

Disclaimer: This article is for general information only and is not intended nor it be construed as a substitute for legal advice on any specific matter. A professional legal advice is still necessary to an actual or particular issue.

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Jack Advincula

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