Section 21: EFFECTS OF NON-USE OF CORPORATE CHARTER AND CONTINUOUS INOPERATION Flashcards
What is the Effects of Non-Use of Corporate Charter and Continuous lnoperation?
If a corporation does not formally organize and commence its business within five (5) years from the date of its incorporation, its certificate of incorporation shall be DEEMED REVOKED as of the day following the end of the five (5)-year period.
*THEY WILL LOSE THEIR CORPORATE EXISTENCE
What does it mean to formally organize or commence a business?
TO ORGANIZE
(1) adoption, filing by the corporation and approval by the SEC of the corporate By-laws after incorporation;
(2) election of Directors or Trustees and of officers;
(3) establishment of the principal office; and
(4) providing for the subscription and payment of the capital stock;
(5) taking such steps as are necessary to endow the legal entity with capacity to transact the legitimate business for which it was created.303
TO COMMENCE
(1) entering into contracts or negotiation for lease or purchase of properties to be used as business or factory site;
(2) making plans for and the construction of the factory;
(3) taking steps to expedite the construction of the company’s working equipment.
What does it mean when certificate of incorportion is revoked?
the state is stripping the corporation from the personality and the powers given to it
What happens when the corporation was able to formally organIze but became inoperative for five consecutive years following the formal organization?
However, if a corporation has commenced its business but SUBSEQUENTLY becomes inoperative for a period of at least five (5) consecutive years, the Commission may, after DUE NOTICE and hearing, place the corporation under DELINQUENT status
What can delinquent corporation do?
A delinquent corporation shall have a period of two (2) years to resume operations and comply with all requirements that the Commission shall prescribe.
FAILURE to comply with the requirements will cause REVOCATION
*The Commission shall give reasonable notice to, and coordinate with the appropriate regulatory agency prior to the suspension or revocation of the certificate of incorporation of companies under their special regulatory jurisdiction.
Failure to Submit Reports. A corporation may also be placed under delinquent status if it fails to comply with the reportorial requirements three (3) times, consecutively or intermittently within a period of five (5) years.
