Registration, Incorporation, and Commencement of Corporate Existence

State Grant of Corporate Personality

A corporation is not created by private agreement alone; it exists as a juridical person only because the State, through the Securities and Exchange Commission, recognizes its incorporation under the Revised Corporation Code.

Incorporation is the legal process by which the incorporators submit the required organizational documents, the SEC determines compliance with law, and a certificate of incorporation is issued under the corporate name. Registration is therefore constitutive, not merely evidentiary, because the certificate marks the beginning of corporate existence.

Before incorporation, the proposed corporation has no separate personality, no board capable of binding it, no capacity to sue or be sued in its corporate name, and no estate distinct from the persons who intend to form it. Acts done in anticipation of incorporation are generally acts of the promoters, incorporators, subscribers, or contracting parties who made them, subject to later adoption or assumption by the corporation after it comes into existence.

The RCC liberalized incorporation by allowing one or more persons, but not more than fifteen, to organize a stock corporation, subject to the special rules on one person corporations and to restrictions imposed by the Constitution, special laws, and regulatory statutes. Natural-person incorporators must have capacity to contract, and juridical persons may act as incorporators when not disqualified by law.

Pre-Registration Requirements

Corporate Name

The process begins with submission of the intended corporate name to the SEC for verification. The name must be distinguishable from names already reserved or registered and must not be contrary to law, misleading, deceptive, or reserved for entities authorized to engage in a regulated business.

A corporate name is not a mere label. It is the legal name under which the corporation acquires rights, incurs obligations, sues, is sued, opens records, receives notices, and holds itself out to the public. Because the name is part of the articles and certificate, the corporation must use its registered name, and any later change requires amendment and SEC approval.

Reservation or approval of a proposed name does not itself create a corporation. It only allows the incorporators to proceed with the filing of the articles and related documents, and it may still be affected by later objections, prior rights, or the SEC's power to order a change of name when the registered name violates statutory standards.

Articles of Incorporation

The articles of incorporation are the corporation's basic charter. They identify the corporate name, purposes, principal office, term if not perpetual, incorporators, first directors or trustees, capital structure for stock corporations, contributions for nonstock corporations, and other lawful matters that define the corporation's authority and organization.

The stated corporate purpose is especially important because it tells the State and the public the business or undertaking for which corporate personality is granted. A purpose that is illegal, unconstitutional, contrary to special law, or beyond the applicant's permitted nationality or license status is a ground to deny registration.

For a stock corporation, the articles must state the authorized capital stock, the number and class of shares, par value when applicable, and subscription and payment information required by law or SEC rules. The RCC removed the general minimum capital stock requirement, but special laws may still impose minimum capitalization, paid-up capital, net worth, or equity requirements for particular industries.

For a nonstock corporation, the articles must state the amount of capital or contributions, when applicable, and the persons contributing to the corporation's initial fund. Its assets are devoted to the stated nonstock purposes, and no part of its income is distributable as dividends to members.

Bylaws and Ancillary Requirements

Bylaws contain the internal rules for corporate governance, including meetings, notices, quorum, voting, officers, committees, share transfers when applicable, and other rules consistent with law and the articles. They may be filed with the articles or adopted after incorporation, but they become effective only upon SEC certification that they are not inconsistent with law.

The absence of operative bylaws does not prevent the issuance of the certificate when the RCC and SEC rules allow later filing, but the corporation still needs governance rules to function regularly. The articles create the corporation; the bylaws regulate the manner by which the corporation exercises its powers after creation.

Certain corporations cannot be registered on the articles alone because their purposes are subject to prior clearance, endorsement, or supervision by another government agency. Banks, insurance companies, lending and financing entities, educational institutions, public utilities, and other regulated enterprises may require favorable recommendation or licensing before or after SEC registration, depending on the governing special law.

SEC Review and Grounds for Refusal

The SEC examines whether the submitted documents substantially comply with the RCC, whether the corporate name is allowable, whether the stated purposes are lawful, whether required nationality or ownership limits are observed, and whether required endorsements or regulatory approvals have been obtained.

The SEC may refuse registration when the articles or supporting documents do not substantially comply with law, the purpose is illegal or unconstitutional, required ownership percentages are not met, a required recommendation from a proper government agency is absent, or the documents contain materially false statements.

SEC review at the incorporation stage is preventive. It protects the public from entities claiming corporate status despite unlawful purposes, misleading names, defective capital representations, prohibited ownership structures, or lack of authority to engage in a regulated line of business.

Certificate of Incorporation

When the SEC finds the documents compliant, it issues the certificate of incorporation under its official seal. That certificate is the operative act that converts the association of incorporators into a corporation with juridical personality separate and distinct from its stockholders, members, directors, trustees, officers, and incorporators.

The certificate is conclusive evidence of incorporation against ordinary collateral attack, subject to the State's authority to question, suspend, revoke, or dissolve the corporation in a proper proceeding when the law so allows. Private parties who dealt with the entity as a corporation generally cannot ignore the certificate merely to escape obligations arising from their dealings.

The certificate does not validate an illegal purpose, excuse continuing violations, supply a license required by special law, or authorize activities beyond the corporation's charter. Incorporation grants juridical capacity; it does not automatically grant every operational permit, franchise, accreditation, or secondary license needed to conduct a particular business.

Commencement of Corporate Existence

A private corporation organized under the RCC commences its corporate existence and juridical personality from the date the SEC issues the certificate of incorporation. The date of signing the articles, payment of filing fees, reservation of the name, subscription to shares, or holding of preliminary meetings does not by itself create the corporation.

From the date of incorporation, the incorporators, stockholders or members, and their successors constitute a body corporate under the registered name. The corporation may then exercise the powers granted by law, its articles, and its bylaws, subject to the limitations imposed by the RCC and special laws.

Juridical personality has several immediate consequences. The corporation may acquire and hold property in its own name, incur obligations, enter contracts, sue and be sued, adopt and use a corporate seal, issue shares when authorized, admit members when applicable, and perform acts necessary or incidental to its purposes.

Separate personality also means that corporate property belongs to the corporation, not to the stockholders or members individually. Corporate obligations are obligations of the corporation, and stockholders generally risk only their investment, subject to unpaid subscriptions, express guarantees, statutory liabilities, tort liability, fraud, bad faith, or circumstances justifying disregard of the corporate fiction.

Corporate powers are exercised by the board of directors or trustees, unless the RCC, the articles, the bylaws, or a valid delegation provides otherwise. Incorporators do not continue to control the corporation merely because they signed the articles; after incorporation, authority flows through the corporate organs recognized by law.

Initial Organization After Incorporation

Incorporation and organization are related but distinct. Incorporation creates the juridical person; organization equips that person to act through officers, records, governance rules, share or membership structures, and business arrangements.

The first directors or trustees named in the articles serve until their successors are elected and qualified. Their initial role is to enable the new corporation to begin regular corporate action, including the adoption or implementation of bylaws, appointment of officers, opening of corporate books, issuance of subscribed shares, collection of unpaid subscriptions, admission of members, and authorization of initial transactions.

The election of directors or trustees is part of corporate organization because the corporation can act only through its governing body and authorized officers. Detailed voting rules, qualifications, term, quorum, cumulative voting, and election disputes belong to the specific topic on election, but the organizational point is that a corporation must have a lawful governing body before it can act regularly.

Formal organization normally includes acts showing that the corporation has moved beyond paper existence: holding organizational meetings, establishing governance arrangements, electing or appointing officers, keeping required records, and taking steps to pursue the stated corporate purpose. Commencement of business means actual pursuit of the corporate purpose through transactions or operations, not mere intention to operate in the future.

If a corporation does not formally organize and commence its business within five years from incorporation, its certificate of incorporation is deemed revoked as of the day following the end of that period. If a corporation has commenced business but later becomes continuously inoperative for at least five years, it may be placed under delinquent status and ultimately face revocation if it fails to resume operations or justify its inactivity within the period allowed by law.

Registration, Licensing, and Business Commencement

SEC incorporation is primary registration. It gives the entity corporate existence and capacity under the RCC, but it does not replace business permits, tax registration, local permits, professional licenses, franchises, or secondary licenses required for regulated activities.

A corporation may be duly incorporated yet unable to lawfully operate a particular business until it obtains the required authority from the appropriate agency. A lending company, financing company, insurance company, bank, school, public utility, or entity engaged in an activity reserved by nationality rules may need additional approvals before it may legally transact with the public.

The distinction matters because lack of incorporation affects juridical personality, while lack of a business permit or secondary license affects authority to operate. The first concerns existence; the second concerns regulatory compliance, and violations may result in fines, suspension, cease-and-desist orders, revocation, or personal liability depending on the governing law.

Pre-Incorporation Acts and Contracts

A proposed corporation cannot appoint an agent, ratify a contract, or be bound as principal before it exists. Persons who contract for a corporation still to be formed may be personally liable when the other party relied on their undertaking or when the contract shows that liability was assumed pending incorporation.

After incorporation, the corporation may adopt or assume a pre-incorporation contract if the contract is within its corporate powers and the other contracting party accepts the corporation as obligor. Adoption does not automatically release the promoter or pre-incorporation contracting party unless novation, stipulation, or the circumstances clearly show that the other party agreed to substitute the corporation as debtor.

Subscription agreements made before incorporation are treated as continuing commitments to the corporation once formed, unless law or the subscription terms provide otherwise. Upon incorporation, the corporation may enforce valid subscriptions and collect unpaid amounts according to the RCC, the articles, the bylaws, and the terms of subscription.

Effect of Defects in Incorporation

Defects before issuance of the certificate usually prevent de jure corporate existence because the State has not yet granted corporate personality. Persons who nevertheless transact as a corporation may incur personal liability, and the supposed entity may lack capacity to enforce rights as a corporation.

After issuance of the certificate, defects in formation generally do not allow every private litigant to deny corporate existence in an incidental dispute. The proper remedy for serious defects in incorporation is normally a direct proceeding by or in the name of the State, or an SEC proceeding authorized by law, especially when the certificate has already clothed the entity with apparent corporate status.

The doctrines on de facto corporations and corporation by estoppel operate only at the margins of defective incorporation. They do not replace statutory registration and do not make careful compliance with the RCC unnecessary.

Legal Incidents of Commencement

Once corporate existence begins, the corporation becomes a distinct taxpayer, employer, contracting party, litigant, property holder, and regulated entity. Its rights and obligations are accounted for separately from those of its stockholders, members, directors, trustees, and officers.

The corporation's powers are limited by law, its articles, and its nature as a juridical entity. Acts outside its purposes may be ultra vires, unauthorized, or subject to ratification or challenge depending on the nature of the act, the participation of the board or stockholders, the rights of third persons, and the governing statutory rule.

The articles and certificate also fix the corporation's principal office, corporate term, classification, and first governance structure. These matters affect venue for certain proceedings, receipt of notices, regulatory supervision, corporate records, and the determination of the corporation's authorized activities.

Corporate existence is continuous during the term stated in the articles or, if no term is stated, perpetually under the RCC, unless the corporation is dissolved, its certificate is revoked, its term expires under a valid charter limitation, or the law provides another mode of termination.

Dissolution or revocation is different from non-incorporation. A dissolved or revoked corporation once existed and may retain limited capacity for winding up as provided by law; a never-incorporated association never acquired corporate personality in the first place, although estoppel or personal liability may affect the parties who used the corporate form without authority.