Effect of Non-Use of Corporate Charter (Section 21, Revised Corporation Code)
Summary
TLDRAttorney Marie Chris Bataan's video script explores the consequences for corporations that fail to formally organize or commence business within five years of receiving their certificate of incorporation. As per Section 21 of the Revised Corporation Code, such corporations risk having their certificate revoked, losing their corporate status and powers. The script also discusses the implications for corporations that become inactive for five consecutive years, facing potential delinquent status and a two-year window to resume operations and comply with SEC requirements to avoid revocation.
Takeaways
- 📜 The video discusses the consequences for corporations that fail to formally organize after obtaining a certificate of incorporation.
- 🕒 According to Section 21 of the revised corporation code, a corporation has five years to formally organize and commence business from the date of incorporation.
- 📝 If a corporation does not start its business within the five-year period, its certificate of incorporation is considered revoked the day after the period ends.
- 🏢 Formal organization involves filing bylaws, electing a board of directors, establishing a principal office, and other activities to transact legitimate business.
- ❌ A revoked certificate of incorporation means the state withdraws the corporation's legal personality and powers granted at the time of incorporation.
- 📅 The five-year period starts from the date the certificate of incorporation was issued, and non-compliance results in automatic revocation.
- 🔄 However, if a corporation has commenced business but then becomes inactive for five consecutive years, it may be placed under delinquent status by the commission.
- 🚫 Delinquent corporations are given a two-year period to resume operations and comply with the commission's requirements to avoid revocation.
- 📋 Compliance includes meeting all prescribed requirements set by the Securities and Exchange Commission to maintain the corporation's status.
- 🛑 Failure to comply within the two-year period results in the revocation of the corporation's certificate of incorporation.
- 🏛 Creating a corporation is a privilege, and maintaining its status requires substantial compliance with the state's and the commission's regulations.
Q & A
What is the main focus of Attorney Marie Chris Bataan's YouTube channel?
-The main focus of Attorney Marie Chris Bataan's YouTube channel is to simplify the law by discussing concepts and principles of law in under 10 minutes.
What happens to a corporation that fails to formally organize after receiving a certificate of incorporation?
-If a corporation fails to formally organize and commence its business within five years from the date of incorporation, its certificate of incorporation is deemed revoked as of the day following the end of the five-year period.
What are some activities that constitute the formal organization or commencement of a corporation's business?
-Formal organization or commencement of a corporation's business includes filing the bylaws with the Securities and Exchange Commission, electing their board of directors, establishing a principal office or principal place of business, and any other activity that enables the corporation to transact legitimate business or accomplish its purpose.
What does it mean when a corporation's certificate of incorporation is revoked?
-When a corporation's certificate of incorporation is revoked, it means that the state is stripping the corporation of its legal personality and the powers it was granted when the certificate was issued.
Can a corporation become a de facto corporation if its certificate of incorporation is revoked?
-No, a corporation cannot become a de facto corporation if its certificate of incorporation is revoked because a de facto corporation requires a valid certificate of incorporation.
What is the consequence for a corporation that has commenced its business but becomes inoperative for at least five consecutive years?
-If a corporation has commenced its business but becomes inoperative for at least five consecutive years, the Securities and Exchange Commission may place the corporation under delinquent status after due notice and hearing.
What is the status of a corporation that has been placed under delinquent status by the Securities and Exchange Commission?
-A corporation that has been placed under delinquent status is referred to as a delinquent corporation and must comply with the requirements prescribed by the Securities and Exchange Commission to continue its operations.
How long does a delinquent corporation have to resume operations and comply with the requirements set by the Securities and Exchange Commission?
-A delinquent corporation has a period of two years to resume operations and comply with all requirements prescribed by the Securities and Exchange Commission.
What happens if a delinquent corporation fails to comply with the requirements and resume operations within the two-year period?
-If a delinquent corporation fails to comply with the requirements and resume operations within the two-year period, its certificate of incorporation will be revoked.
What is the significance of the five-year period mentioned in the script for a corporation's operations?
-The five-year period is significant because it is the time frame within which a corporation must formally organize and commence its business after receiving its certificate of incorporation. Failure to do so results in the revocation of the certificate.
Why is it important for a corporation to comply with the requirements set by the Securities and Exchange Commission?
-It is important for a corporation to comply with the requirements set by the Securities and Exchange Commission to maintain its corporate status and privileges granted by the state, as failure to comply can lead to the revocation of the corporation's certificate of incorporation.
Outlines
📜 Certificate Revocation for Non-Organized Corporations
Attorney Marie Chris Bataan introduces the topic of corporations that have been legally created but fail to formally organize within five years of receiving their certificate of incorporation. According to Section 21 of the Revised Corporation Code, such corporations will have their certificate revoked, effectively losing their corporate status. The video explains the necessity for corporations to file bylaws, elect a board of directors, and establish a principal office to be considered formally organized. The consequences of non-compliance are highlighted, including the loss of corporate powers and the revocation of the certificate on the day following the five-year period from the date of incorporation.
🕒 Impact of Inactivity on Corporate Status
This paragraph delves into the scenario where a corporation has commenced its business but then becomes inactive for at least five consecutive years. The Securities and Exchange Commission (SEC) has the authority to place such corporations under delinquent status after due notice and hearing. The video clarifies that a delinquent corporation has a two-year period to resume operations and meet the requirements set by the SEC. Failure to do so within the given timeframe results in the revocation of the corporation's certificate of incorporation. The importance of maintaining corporate activity and compliance with SEC regulations is emphasized to retain the privilege of corporate status.
⏳ Timeframe for Delinquent Corporations to Resume Operations
The final paragraph of the script addresses the fate of delinquent corporations, which are given a two-year window to resume operations and fulfill the necessary requirements as dictated by the SEC. If a corporation fails to comply within this period, its certificate of incorporation will be revoked. The video underscores the responsibility of corporations to adhere to the state-granted privilege of their corporate status by ensuring substantial compliance with SEC regulations. A reminder is given to viewers to engage with the content by liking, subscribing, and activating notifications for future uploads, concluding the educational segment on corporate compliance and legal consequences.
Mindmap
Keywords
💡Virtual Classroom
💡Certificate of Incorporation
💡Formal Organization
💡Commencement of Business
💡Revocation
💡Delinquent Status
💡Securities and Exchange Commission
💡Bylaws
💡Board of Directors
💡Principal Office
💡Corporation by Estoppel
Highlights
Introduction to the YouTube channel by Attorney Marie Chris Bataan, focusing on simplifying the law.
Discussion on the creation of corporations and the issuance of a certificate of incorporation by the Securities and Exchange Commission.
Exploration of the consequences for corporations that fail to formally organize after receiving their certificate of incorporation.
Section 21 of the Revised Corporation Code's explanation of what happens to corporations that do not use their corporate charter.
Clarification that a corporation's certificate of incorporation is revoked if it does not commence business within five years of incorporation.
Definition of formally organizing and commencing business, including filing bylaws and electing a board of directors.
Explanation of the revocation of the certificate of incorporation as the state stripping the corporation of its legal personality.
Illustration of the five-year period's calculation from the date of issuance of the certificate of incorporation.
Differentiation between a revoked certificate of incorporation and the concept of a de facto corporation.
Introduction of the term 'corporation by estoppel' for the protection of third persons.
Discussion of the second scenario where a corporation becomes non-operative for five consecutive years and the implications.
Mention of the Securities and Exchange Commission's power to place a corporation under delinquent status after due notice and hearing.
Description of the two-year period given to a delinquent corporation to resume operations and comply with requirements.
Consequence of a corporation's failure to comply within the two-year period, leading to the revocation of its certificate of incorporation.
Emphasis on the importance of complying with the state's requirements to maintain corporate status.
Closing remarks encouraging viewers to like, subscribe, and turn on notifications for new video uploads.
Transcripts
foreign
[Music]
hi i am attorney marie chris bataan
this is my virtual classroom welcome to
my youtube channel
in this channel i shall aim to simplify
the law i will discuss concepts and
principles of law in under 10 minutes
hi again everyone welcome back to our
virtual classroom so what shall we talk
about in this video so in my other
videos if you have watched them we have
been talking about the creation of the
corporation how we create them how they
come into being now for this video i
want to talk about corporations that
were actually created they have been
issued a certificate of incorporation by
your securities and exchange commission
however
they were unable to formally organize
after getting or securing the
certificate of incorporation in other
words they failed to use their corporate
charter so what would happen to them now
this is what we are going to talk about
in this video
section 21 of the revised corporation
code actually tells you what happens to
corporations
who failed to use their corporate
chapter
let's read the first paragraph of
section 21
it states
if a corporation does not formally
organize and commence its business
within five 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-year period so what does that tell
you
it tells you that if a corporation
after having been given a personality by
the state through the securities and
exchange commission through the issuance
of the certificate of incorporation
fails to formally organize and commence
its business
then they will lose their right to them
being a corporation because under the
first paragraph it tells you that the
certificate of incorporation is revoked
now let's break this first part
paragraph into two parts
first let's discuss what does it mean to
formally organize or commence the
business
and second what does it mean when the
certificate of incorporation is your
vote
so let's discuss first the first part of
the first paragraph and that is the
formal organization and commencement so
what does that mean when the corporation
has to formally organize or commence its
business
this would mean that the corporation has
started doing something to get ready for
transacting into business or transacting
business itself so how does the
corporation do that
the corporation must file the bylaws
with the securities and exchange
commission they must have already
elected their board of directors
they must have already established a
principal office or principal place of
business and any other activity that
would enable the corporation to transact
legitimate business or accomplish the
purpose for which it was created so if
the corporation have not done any of
these activities or things
that would amount to formally organizing
or commencing the business
then
paragraph one of section 21 will tell
you
that the certificate of incorporation is
deemed revoked
what does that mean
when the certificate of incorporation
gets revoked it means now that the state
is tripping the corporation from its
personality it is stripping the
corporation from the powers that it was
given when the certificate of
incorporation was issued
so when is it considered revoked it is
considered revoked the day following the
expiration of the five year period
five year period counting from when from
the time that the certificate of
incorporation was issued so let's say
abc corporation was issued a certificate
of incorporation
on january 15
2020.
now they were issued a certificate of
incorporation but they failed to do any
activity that would formally organize or
commence the business of the corporation
they did not elect their board of
directors they did nothing after the
certificate of incorporation was issued
and they did so for five years so in our
example
if your
abc corporation's certificate of
incorporation was issued and dated on
january 15 2020
the five-year period will end on january
14
2025
and if from that period
they did not do any activity they did
not enter into any transaction or did
not do anything to formally organize
their business or commence their
business
then
your first paragraph of section 21 will
tell you that their certificate of
incorporation is now revoked the day
following the expiration of that five
year period
as i've mentioned they are now being
stripped from the personality that was
granted to them by the state through
your securities and exchange commission
do they now become a de facto
corporation no they're not even a de
facto corporation because then there is
already no certificate of incorporation
if you have watched my other video on de
facto corporations i will put the link
down below
you would have learned
that for a de facto corporation to
become one you must have a certificate
of incorporation
so
if you fail to use your charter your
charter rather because you failed to
formally organize or commence the
business five years from the time
the certificate of incorporation was
issued then by law
your certificate of incorporation is
revoked
as i've said you are stripped of the
personality of a corporation
you lose your corporate powers
however
the corporation may still be a
corporation by estopel
for the protection of third persons
what is a corporation by estopal i have
also discussed that in another video and
i will put the link down below or the
link up there
now how about
if
the corporation was issued a certificate
of incorporation they were able to
formally organize after that
but they became an operative for five
consecutive years
will their certificate of incorporation
also be revoked just like the earlier
scenario
the answer to that question is under the
second paragraph of section
21. let's read the second paragraph
it states
however if a corporation has commenced
its business but subsequently becomes an
operative for a period of at least five
consecutive years the commission may
after do notice and hearing place the
corporation under delinquent status so
unlike the first scenario where the
corporation failed to formally organize
right after securing a certificate of
incorporation they the their certificate
of incorporation is deemed revoked a day
following
the
expiration of the five year period in
the second scenario the corporation was
able to organize only that they became
an operative for at least five years so
what happens to them
your revised corporation code says
that your securities and exchange
commission will put them on delinquent
status after do notice and hearing
now once they're on delinquent status of
course they will now be called a
delinquent corporation if they want to
continue with the operation of their
business then they have to comply with
the requirements prescribed by the
commission and that is the third
paragraph of section 21
it says
a delinquent corporation shall have a
period of two years to resume operations
and comply with all requirements that
the commission shall prescribe upon
compliance by the corporation the
commission shall issue an order lifting
the delinquent status failure to comply
with the requirements and resume
operations within the period given by
the commission shall cause the
revocation of the corporation so your
revised corporation code
gives the delinquent corporation or a
corporation in a delinquent status
two years within which to resume
operations and to comply with all the
requirements that the securities and
exchange commission
will require of them
if they fail to comply within the
two-year period
then their certificate of incorporation
will also be
revolt
you have to remember
that creating a corporation is a
privilege granted to you by the state
and therefore you must ensure that you
have substantially complied with all the
requirements
that are put forth by your securities
and exchange commission so that your
corporate status will continue because
if not then your securities and exchange
commission is granted the power by the
state to revoke your certificate of
incorporation just like in the scenarios
we have discussed in this video
that is it for this video i hope again
you have learned from this video and i
will see you in the next
so if you find this video helpful please
click like subscribe and that
notification bell so that you will be
notified of new video uploads
thank you for watching see you next time
in mbl classroom
[Music]
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