ACCRA Law Offices

February 16, 1987 ACCRA Law Offices 5th Floor, ACCRA Bldg. 122 Gamboa St.,Legaspi Village Makati, Metro Manila Attention : Atty . Violeta Calvo-Drilon Madam: This has reference to your letter dated December 23, 1986 relative to the amended articles of incorporation of the South Seas Trading Corporation extending its corporate life. It appears from the facts on record that the above corporation was registered with the Department of Commerce and Industry on January 10, 1936. By its corporate articles, it was to exist for fifty (50) years from incorporation. Its term of existence expired on January 10, 1986. On December 31, 1985, Article IV of its amended articles of incorporation was amended extending for another fifty (50) years from and after January 10, 1986. Said amended articles was filed with this Commission on April 8, 1986. Counsel for the corporation maintains that the late filing of the amended articles of incorporation was in view of the delay in finalization of the documents which had to be sent to and cleared with the non resident foreign stockholder in New York. The issue to be resolved here is whether or not the corporation can file its amended articles of incorporation extending the term of existence beyond the expiry date of the original term. The Supreme Court, in a similar case, ruled that: "If the amendment is to extend the corporate terms, it should be approved and filed prior to the expiration of the original term since the corporation is ipso facto dissolved as soon as such term expires". (Alhambra Cigar & Cigarette Manufacturing Company vs. SEC, No. L-23606 July 29, 1968, cited in Campos, The Corporation Code Comments, Notes and Selected Cases, p. 885, Emphasis supplied). "Under some statutes there must first be a vote of a specified majority of the stockholders in favor of the extension at a meeting called for that purpose in the manner prescribed. Then provision is made for the preparation and execution of a certificate showing the proceeding had, and this certificate is required to be filed or recorded .(Campbell v. Watson, 62 N.J. Eg. 396, 421, 50 atl. 120 cited in Vol. 8, Fletchers' Cyclopedia Corporation, p. 559). "Since the privilege of extension is purely statutory, all of the statutory conditions precedent must be complied with in order that the extension may be effectuated. And, generally these conditions must be complied with, and the steps necessary to effect the extension must be taken, during the life of the corporation, and before the expiration of the term of existence as originally fixed by its charter or the general law, since, as a rule, the corporation is ipso facto dissolved as soon as that time expires. So where the extension is by amendment of the articles of incorporation, the amendment must be adopted before that time. And similarly, the filing and recording of a certificate of extension after that time cannot relate back to the date of the passage of a resolution by the stockholders in favor of the extension so as to save the life of the corporation "....(Emphasis supplied).Supra, p. 559) From the above, there is no doubt that the amended articles of incorporation extending the original term should be filed before the expiry date of the original term. In this instance, the amended articles of incorporation should have been filed before January 10, 1986. Considering that the same has been filed on April 8, 1986, almost three months after the original term has expired, the same, therefore, cannot be admitted. The fact that the meeting of the Board of Directors and the stockholders representing two-thirds of the outstanding capital stock was held before the expiration of the original term is of no moment in view of the above ruling. In the case of RAMCAR, INCORPORATED, this Commission approved the extension of the company's original term. The expiry date of its original term was on May 17, 1979. However prior to the expiry date, its corporate existence was extended for another fifty years from and after May 17, 1979. The corresponding amended articles of incorporation and other pertinent documents were filed with this Commission only after the said expiry date. This precedent, however, cannot be applied to the instant case inasmuch as the ruling was made prior to the effectivity of the Corporation Code. Relative to this, Sec. 16 of the Corporation Code provides, and we quote: "SECTION 16. Amendment of Articles of Incorporation . Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the Board of Directors . . . and the vote or written assent of the stockholders representing at least two thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code . . . . The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Such articles, as amended, shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors ...stating the fact that said amendment or amendments have been approved by the required vote of the stockholders ...shall be submitted to the Securities and Exchange Commission. The amendments shall take effect upon its approval by the Securities and Exchange Commission ...." Applying the foregoing provision to the instant case, it is therefore necessary that the amendment extending the term of existence of the subject corporation be approved by this Commission before the same can take effect. Considering the foregoing reason, your amended articles of incorporation is hereby disapproved. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman