h. Effects of Nonuse of Corporate Charter

Non-use of corporate charter (Sec. 21)

If a corporation does not formally organize and commence its business within 5 years

• Effect: certificate of incorporation shall be deemed revoked following the end of the 5-year period

Continuous Inoperation (Sec. 21)

If a corporation has commenced its business but subsequently becomes inoperative for a period of at least 5 consecutive years

• Effect: after due notice and hearing, the corporation will be put on delinquent status
• Remedy: it shall have a period of 2 years to resume operations. Otherwise, certificate of incorporation will likewise be revoked.

“Organization” under SEC Rules

• Adoption of the by-laws and the filing and approval of the same with and by the SEC if the same were not adopted and filed simultaneously with the articles of incorporation;
• Election of the Board of Directors or Trustees and of the officers;
• Establishment of the principal office; and
• Providing for the subscription and payment of the capital stock and the taking of such steps as are necessary to endow the legal entity with capacity to transact the legitimate business for which it was created

“Commenced Business” under SEC Rules

When the corporation has performed preparatory acts geared towards the fulfillment of the purposes for which it was established such as but not limited to the following:

• Entering into contracts or negotiations for lease or sale of properties to be used as business or factory site;
• Making plans for and the construction of the factory; and
• Taking steps to expedite the construction of the company’s working equipment

In the event of failure to file for an extension if a corporation’s term has expired, it may apply for a revival of its corporate existence, together with all the rights and privileges under its certificate of incorporation and subject to all of its duties, debts and liabilities existing prior to its revival. Upon approval by the SEC, the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence, unless its application for revival provides otherwise.

Effects of Delinquency Status:

A delinquent corporation shall have a period of two (2) years to resume operations and comply with all requirements that the SEC shall prescribe.

• Upon compliance by the corporation, the SEC shall issue an order lifting the delinquent status.
• Failure to comply with the requirements and resume operations within the period given by the SEC shall cause the revocation of the corporation’s certificate of incorporation.

Corporations under special regulatory jurisdiction

The SEC 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.

Certificate of Stock — R.A. No. 11232, Sections 62¹ and 63