Section 95: Close Corporation

Question 1

Close Corporation REQUISITES (must be written in the articles of incorporation)

Answer 1

(1) All of the corporation’s issued stock of all classes, exclusive of treasury shares; shall be held of record by not more than a specified number of persons, not exceeding 20;

(2) All the issued stock of all classes shall be subject
to one or more specified restrictions on transfer permitted by Title XII of the RCCP, particularly, a preemption of shares is restricted in favor of any stockholder or of the corporation; and

(3) The listing of the corporate stocks in any stock
exchange or making a public offering of those stocks is
prohibited.

Question 2

A close corporation CAN be a “family corporation.” However,
a family corporation is NOT NECESSARILY a close corporation and it may also be organized as an ordinary corporation.

Answer 2

T

Question 3

Close Corporation OR Ordinary Corporation

There is a limitation in the number of stockholders to a maximum of 20.

Answer 3

Close

In Ordinary Corporation, there is no limit as to number of stockholders.

Question 4

Close Corporation OR Ordinary Corporation

There must be a restriction on the transfer of shares.

Answer 4

Close

In Ordinary Corporation, restriction in the transfer of shares need not be provided for.

Question 5

Close Corporation OR Ordinary Corporation

Qualifications of stockholders are not normally prescribed.

Answer 5

Ordinary

In Close Corporation, specific qualifications to be eligible as stockholder are usually provided for.

Question 6

Close Corporation OR Ordinary Corporation

Public offering of shares is prohibited

Answer 6

Close

In Ordinary Corporation, it is NOT PROHIBITED

Question 7

Close Corporation OR Ordinary Corporation

As provided by the articles of incorporation, managed by STOCKHOLDERS

Answer 7

Close

In Ordinary Corporation, it is managed by BOARD OF DIRECTORS

Question 8

Close Corporation OR Ordinary Corporation

There are rules in deadlock

Answer 8

Close

In Ordinary Corporation, there are no rules in deadlock

Question 9

Close Corporation OR Ordinary Corporation

A shareholder may withdraw and may ask the corporation to purchase his
share/s

Answer 9

Close

In Ordinary Corporation, Generally, a shareholder cannot withdraw and compel the corporation to purchase his shares; the exceptions are pro-
vided for under Section 40 of
the RCCP.

Question 10

What Cannot be a Close Corporation?

Answer 10

(a) A corporation wherein at least 2/3 of its voting stock
or voting rights is owned by another corporation that is not a
close corporation;

(b) Mining or oil companies;

(c) Stock exchanges;

(d) Banks;

(e) Insurance companies;

(f) Public utilities;

(g) Educational institutions; and

(h) Corporations declared to be vested with public
interest.