All ▸ Bar 2024 ▸ COMMERCIAL AND TAXATION LAWS ▸ I. CORPORATION LAW (R.A. No. 11232, Revised Corporation Code) ▸ C. Incorporation and Organization ▸ 3. Capitalization - Section 12

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Question:

Anthony, Beverly, and Celeste are planning to incorporate their business in the Philippines. They are aware of the importance of proper capitalization in their newly formed corporation. In line with this, they need to comply with Section 12 of the Corporation Code of the Philippines. Section 12 states that:

"No corporation shall commence business or exercise any of its corporate powers unless and until the paid-up capital stock is not less than Five Thousand Pesos (Php 5,000.00) for a stock corporation."

Assuming that Anthony, Beverly, and Celeste have decided to incorporate their business as a stock corporation, answer the following:

What is the significance of complying with the capitalization requirement under Section 12 of the Corporation Code?
What are the consequences if the corporation fails to comply with the capitalization requirement stated in Section 12?
Discuss any exceptions or exemptions to the capitalization requirement under the Corporation Code.

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