Outline - RCC - Part 1

CORPORATION LAW
Course Outline
A. GENERAL PRINCIPLES
a-1. Definition – artificial being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence [Section 2]
a-2. Kinds of Businesses
1. As to Organization
1-a. Sole Proprietorship [Bar, 1949]
1-b. Partnership [Article 1767, New Civil Code]
1-c. Corporation
1-d. Joint Venture – categorized as a form of limited partnership since its period [Kohler,
Dictionary for Accountants, 1975, p. 243; see J.M. Tuason & Co. vs. Bolanos, L-4935, 28
May 1954; Bar, 1987; B
ar 1995]
2. As to Activity
2-a. Merchandising
2-b. Manufacturing
2-c. Service-concerned
a-3. Attributes of a Corporation
1. Artificial Being
1-a. Separate entity concept [Bar, 1996]
1. Liability for Torts [PNB vs. Court of Appeals, 83 SCRA 237]
2. Liability for Damages [Bar, 1955]
3. Liability for Crimes [Sia vs. People, 121 scra 655; People vs. Conception, 44 Phil.
126; Section 144]
4. Constitutional rights -
a. Due process [Albert vs. University Publication Co., 13 SCRA 84]
b. Equal protection [Smith Bell & Co., vs. Natividad, 40 Phil. 136]
c. Unreasonable search and seizures [Stonehill vs. Diokno, 20 SCRA 383]
5. Theory of Concession [Tayag vs. Benguet Consolidated, Inc., 26 SCRA 242]
1-b. Piercing the Veil of Corporate Entity
1. Definition – corporate fiction disregarded where the entity is formed or used for
non-legitimate purposes [Bar, 1978; Bar 1985; Bar 1991]
2. Reasons: When corporation is used to
a. Defeat public convenience

b. Justify wrong
c. Protect fraud
d. Defend crime
e. As mere alter ego [Umali vs. Court of Appeals, 189 SCRA 529]
3. Cases
a. Claparols vs. CIR [65 SCRA 613]

b. Cruz vs. Dalisay [152 SCRA 482]
c. Tan Boon Bee and Co. vs. Jarencio [163 SCRA 205]
d. CIR vs. Norton & Harrison Company [11 SCRA 714]
c. Philippine Veterans Investment Development Corporation vs. Court of Appeals [181
SCRA 669]
d. Telephone Engineering and Service Co., Inc. vs. Workmen’s Compensation

Commission [104 SCRA 354]
4. Theory of Corporate Enterprise [Rationale: there can be no association without associates,

Villanueva, p. 266]
2. Created by Operation of Law
3-a. Creation under the Corporation Code
3-b. Creation under a Special Law
1. Governed primarily by Charter creating it

2. Corporation Code applies only on a suppletory manner [Section 4]
ar, 1989]
3-c. De Facto Corporation [Section 20; B
1. Definition – a corporation that actually exists as a corporate body, but which, because of
failure to comply with some provisions of the law, has no legal right to corporate existence as
against the state. Certificate of incorporation must be issued. This is distinguished with
Corporation de Jure.
2. Only the state can question the personality of the corporation. Right usurped is that of the
sovereign, then it is the sovereign alone can question it through a Quo Warranto proceedings
represented by the Solicitor General
3. Requisites –
a. Law authorizing incorporation

b. Bona fide attempt to organize
c. Assumption of corporate powers
3-d. Corporation by Estoppel [Section 21]
1. Defined – applies to persons assuming to act as a corporation without authority to do so with

respect to third persons who were prejudiced on the basis of their misrepresentations
2. How Action Commenced – Sued under the name by which they are generally or commonly
known [Section 15, Rule 3, Revised Rules of Court]
3. Liability – liable as general partners
3. Coverage
a. Debts
b. Liabilities
c. Damages
3. Perpetual Succession
3-a. Concept – not immortality, but continuity of corporate life
3-b. Corporate Term [Section 11]
1. Duration – not exceeding 50 years
2. Renewable for another 50 years within 5 years prior to expiration [Alhambra Cigar vs.
Securities and Exchange Com-mission, 24 SCRA 269]
3-c. Extension or Shortening of Term [Section 37; Bar, 1988]
3-d. Doctrine of Relation – Delay in the approval of the application for extension of corporate term
attributable to circumstances beyond the control of corporation would make the new charter related back
to the day the corporation is entitled to have the charter issued [Vitug, p. 379]
4. Powers, Attributes and Property Rights

4-a. Express Powers –
1. Section 36 of the Corporation Code and
2. Purpose of corporation as stated in the Charter
4-b. Implied Powers – which are necessary in order to attain or execute the express powers
4-c. Incidental Powers – which can be exercised by the mere fact of its being a corporation
a-4. Classes of Corporations [Bar, 1954]
1. Statutory
1-a. Stock Corporation [Sections 3 and 63] – one where the ownership of the interest or equity
is represented in the form of shares of stock
1-b. Non-Stock Corporation [Sections 87-95] – one where the interest or equity is in the form of
membership
1-c. Close Corporation [Sections 76-105]
1-d. Foreign Corporation [Sections 123-136]
1-e. Educational Corporation [Sections 106-107]
1-f. Religious Corporation [Sections 109, 116]

2. As to Number
2-a. Corporation Sole [Sections 110-115; Bar, 1954]
2-b. Corporation Aggregate
3. As to Purpose
3-a. Ecclesiastical
3-b. Eleemosynary [Bar, 1967]
3-c. Lay
3-d. Public –
1. Defined – one formed or organized for the government of a portion of a State for
the purpose of promoting the general good and welfare [Section 3, Act. No. 1456]
2. Constitutional Prohibition - The Congress shall not, except by general law, provide
for the formation, organization or regulation of private corporations. Government
owned or controlled corporations may be created or established by special charters in
the interest of the common good and subject to the test of economic viability [Section
16, Article XII, 1987 Constitution]
3. Corporation Code applies on a suppletory manner [Section 4]
4. Quasi-Public corporation – refers to a private corporation that is franchised or

licensed by the government to render services involving performance of public utilities
5. Public-Quasi corporation – refers to a public corporation engaged in the

performance of public or governmental function but not being the State or its political
corporation
4. As to Nationality
4-a. Tests of Nationality [Bar, 1957]
1. Incorporation Test
2. Control Test [see Filipinas de Seguros vs. Christern, Huenefeld & Co., Inc. G.R.
L-2294, 25 May 1951]
3. Residence Test
a. Generally fixed by law creating them

b. Place where legal representation is established or where principal
functions are exercised
4-b. Classes
1. Domestic Corporation – those organized in accordance with B.P. 68
2. Foreign Corporation – those organized under a foreign law that allows Filipino
citizens and corporations to do business in their state or country [Section 123]
4-c. Grandfather Rule [ SEC Opinion, 4 May 1987]
5. As to Existence
5-a. De Jure
ar, 1955; Bar, 1959]

5-b. De Facto [Section 20; B
5-c. Corporation by Estoppel [Section 21; Bar, 1955; Bar, 1973]
6. As to Membership
6-a. Open Corporation
6-b. Close Corporation – one whose Charter provides
1. All corporate stocks issued must be held of record by not more than 20 persons
2. All corporate stocks issued are subject to certain restrictions on transfer
3. Stocks are not listed in any stock exchange [Section 96]
7. As to Relation with Other Corporations

7-a. Parent
7-b. Subsidiary
a-5. Four Basic Advantages of a Corporation [Bar, 1953]
1. Separate juridical personality
2. Limited liability of investors
3. Free transferability of units of ownership

4. Centralized management
a-6. Components of a Corporation
1. Incorporators [Bar, 1952]

1-a. Definition – those stockholders or members mentioned in the Articles of
Incorporation as originally forming the corporation [Section 5]
1-b. Qualifications [Section 10]
1. Majority are Philippine residents
2. Natural persons
3. Of legal ages
4. Not less than 5 not more than 15
5. Owner or subscriber of at least 1 share of stock
2. Corporators
2-a. Definition – those composing the corporation, whether stock or non-stock [Section 126;
Bar, 1952]
2-b. Kinds –
1. Stockholders – corporators of stock corpo-rations
2. Members – corporators of non-stock corpo-rations
a-7. Capital Structure
1. Terminologies
1-a. Capital Stock – amount subscribed and paid in by the stockholders or secured to be paid in
upon which the corporation is to conduct its operations [Bar, 1957; Bar, 1964]
1.b. Authorized Capital Stock – total amount of the capital stock which it can raise [Bar, 1964]
1-c. Subscribed Capital Stock – amount of authorized capital which has already been
subscribed [Bar, 1964]
1-d. Stated Capital
1-e. Legal Capital – refers to the amount of funds received by the corporation in payment of the
shares of stocks. This shall be held in trust for the creditors of the corporation under the Trust
Fund Doctrine.
1-f. Paid-up Capital – amount of subscription that has already been paid [Bar, 1964]
2. Legal Requirement
2-a. Pre-Incorporation [Sections 12-13]
1. 25% of authorized capital stock subscribed

2. 25% of subscribed capital stock paid
3. In no case less than P5,000 [Section 13]
2-b. Post-Incorporation [Section 38]
1. Applies to increases in capitalization
2. 25% of increase capital stock subscribed
4. Treasurer’s Affidavit
3. Classifications of Shares [Section 6]

3-a. Preferred shares – those which entitles the owner certain preferences [Bar, 1949]
1. As to Dividends
2. As to Liquidation
3-b. Common shares – those ordinary stocks of a corporation which entitles the owner to pro
rata dividend without any priority or preference over any other stockholders [Bar, 1949]
3-c. Par Value shares – those whose value is fixed in the Articles of Incorporation [Bar, 1950]
3-d. No-Par Value shares [Bar, 1958; 1970; B

ar, 1984]
1. Types
a. With stated value
b. Without stated value
2. Valuation of Shares of Stocks [Section 62]

a. Articles of Incorporation
b. Board of directors pursuant to an authority conferred by the Charter or by

the By-Laws
c. Majority vote of the stockholders

3. Corporations Prohibited to Issue No-Par Value Shares [Bar, 1958,Bar,
1959]
a. Banks
b. Insurance companies
c. Trust companies
d. Building & trust associations

e. Public utilities
3-e. Voting shares [Bar, 1984]
3-f. Non-Voting shares
1. Treasury shares [Section 9]

2. Preferred shares [Section 6]
3. Redeemable shares [Ibid]
3-g. Redeemable shares – refer to shares that may be purchased or taken up by the
corporation upon the expiration of a fixed period regardless of the existence of unrestricted
retained earnings [Section 8]
3-h. Convertible shares – those which give the holder the option to convert the same into
another class of shares
3-i. Shares in escrow – shares deposited with a third person to be delivered to the stockholder
upon compliance with certain conditions
3-j. Treasury shares [Bar, 1992]
1. Definition – shares issued and fully paid but subsequently reacquired by the issuing
corporation [Sections 9]
2. When Necessary [Bar, 1949]
a. Elimination of fractional shares
b. Collection or compromise of unpaid subscriptions
c. Payment to dissenting/withdrawing stockholders [Section 41]
3-k. Delinquent shares – those which were declared as such
3-l. Founders’ shares [Section 7]
1. Definition - shares of stocks classified as such in the Articles of Incorporation given

to the founding stockholders
2. They enjoy certain rights and privileges not available to other classes of stocks
3. If privilege consists of the exclusive right to vote and be voted upon as Director, it
must be for a period not exceeding five (5) years
3-m. Outstanding shares – shares fully paid and already in the hands of the stockholders
3-n. Issued shares [Section 137]
3-o. Watered shares – shares issued for no or less than their par or stated value [Bar, 1993]
4. Issuance of Stock Certificates [Section 64]

4-a. Ways of issuance
1. Subscription – refers to any contract for the acquisition of unissued stock in an

existing corporation or corporation still to be formed [Section 60]
a. Pre-Incorporation – subscription of stocks in a corporation still to be

formed irrevocable for a period of 6 months from date of subscription
[Section 61; Bar, 1979]
b. Post-Incorporation – subscription of stocks in a corporation after its

formation
2. Exchange or other onerous transfers
3. No promissory notes, no future services
4. ar, 1975; B
Issued only upon full payment [Bar, 1976; B ar 1979;B
ar, 1988]
5. Cannot be set-off against unpaid salary [Apodaco vs. NLRC, 172 SCRA
442; Article 102, Labor Code of the Philippines; Bar, 1988]
4-b. Consideration for Issuance [Section 62]
1. Cash
2. Property, whether tangible or intangible
3. Labor performed or services actually rendered [Bar, 1952]
6. Previously incurred indebtedness

7. Amounts transferred from unrestricted retained earnings to stated capital
8. Reclassification or conversion
4-c. Collecting Subscriptions
1. Determination of Due Date [Section 67]
a. Subscription contract
b. In the absence, at any time from the date specified in the “call” by the
Board of Directors
2. Effect of Non-Payment on Due Date
a. Entire balance becomes due and payable
b. After the lapse of 30 days from due date, stocks become delinquent. As
such, holder lose all rights due as a stockholder except the right to dividends
[Section 71]
3. Modes of Collection [Bar, 1988]
a. Judicial remedy – ordinary suit for collection of sum of money [Section

70]
b. Extrajudicial remedy - Delinquency sale [Section 68; Bar, 1969; Bar,

1997]
1. Resolution
2. Notice of Delinquency Sale
3. Publication
4. Public Auction
5. Sale to highest bidder or treasury shares
c. Minimum Amount Due
1. Balance on subscription
2. Accrued interest, if any
3. Advertisement costs
4. Expenses of sale
d. Application of Dividends [Section 71]
4. Interests on Unpaid Subscriptions [Section 66]

a. General Rule: No interest payable
b. Exception
6. By-Laws provision
7. At the rate prescribed in the By-Laws
8. In the absence of the rate prescribed therein, legal rate
4-d. Right of Pre-Emption [Bar, 1982; Bar, 1983; B

ar 1984]
1. Definition – right of the stockholder to subscribe additional shares of stocks before

the same can be offered to the public in proportion to their respective shareholdings
2. When Right Deniable [Section 39]
a. Denial by the Charter
b. Shares issued to comply with legal Filipino ownership requirements
c. Shares issued in exchange for property needed or in payment of

previously contracted indebtedness in accordance with the approval of 2/3
of stockholders or members
3. Coverage
a. Only shares originally offered for sale to the public
b. Does not include
1. Shares previously offered but not sold
2. Treasury shares
4-e. Issuance of New Certificates [Section 73]
1. Coverage
a. Lost
b. Destroyed
c. Stolen
2. Procedures [Bar, 1969]
a. Affidavit of loss of stockholder
b. Verification by the corporation
c. Publication of Notice of Loss
1. If no bond filed by stockholder, wait until lapse of one year from

last publication
2. If bond is filed by stockholder, new certificates may be issued

even prior to the one year period
d. If Contested –
1. Case is filed without, wait for final decision
2. If no case filed, file an action for Interpleader
5. Transfer of Shares of Stocks [Bar, 1981; Bar, 1994; Bar, 1995]
5-a. Synopsis
1. Open corporation
2. Close corporation
5-b. Manner of Transfer
5-c. Assignment
5-d. Pledge
1. Pledgor entitled to the rights

2. If registered in corporate books without any reservation in writing, pledgee
entitled to the rights [Section 55]
5-e. Mortgage
1. Mortgagor entitled to the rights

2. If registered in corporate books without any reservation in writing, mortgagor
entitled to the rights [Ibid]
B. INCORPORATION AND ORGANIZATION
b-1. Definition
1. Incorporation – covers all steps and processes from the time of the application for incorporation until the issuance of the
Certificate of Incorporation
2. Organization
2-a. Definition – refers to the acts of starting the operations of the corporation as a going concern and the establishment of
machineries to run its operations
2-b. Steps
1. Adoption of By-Laws
a. Pre-incorporation
b. Post-incorporation – one month from issuance of Certificate [Section 46]
2. Election of corporate Directors
3. Election of corporate Officers
b-2. Terminologies
1. Promotion – the initial and pre-incorporation steps until the actual formation of the corporation [Bar, 1949]
2. Primary franchise
2-a. Definition - refers to the right to exist as a corporation
2-b. Characteristics
1. Vested in the individuals who compose the corporation and not in the corporation itself
2. Incapable of being transferred
3. Secondary franchise
3-a. Definition - refers to the right to conduct the business of the corporation
1. Vested in the corporation itself
2. Capable of being transferred
4. Concession theory – Registration and issuance of the Certificate of Incorporation signals the birth of the
corporation’s personality [Vitug, p. 391]
5. Articles of Incorporation – basic document for the registration of a corporation
6. Corporation By-Laws – set of rules or guidelines for the internal operation of the corporation
7. Certificate of Incorporation
b-3. Steps in Incorporation
1. Promotion –
1-a. Definition - the conduct of a project or feasibility study that interests prospective investors to set-up a corporation
business.
1-b. Who Undertakes - This is undertaken by a person called the promoter for a fee or consideration
1-c. Effect – binding only between the promoter and the parties and prospective investors who signed and executed the
promotion contract. This is binding only upon the corporation if, after its creation, the promotion contract was adopted by the
corporation by virtue of a Board Resolution
2. Drafting and Execution in compliance with the compliance with the requirements [Sections 13, 14, 15, 61, 139-141]
3. Issuance of Certificate of Incorporation [Section 19]
b-4. Articles of Incorporation [Bar, 1990]
1. Definition – charter of the corporation
2. Contents [Sections 14, 15]

2-a. Name of corporation [Section 18; Republic Planters Bank vs. Court of Appeals, 216 SCRA 738; Bar, 1976]
2-b. Purpose/purposes [Bar, 1976; Bar, 1977]
2-c. Principal place of business
2-d. Term of existence [Section 11]
2-e. Incorporators [Section 10]
2-f. Number of Directors/Trustees
2-g. Acting or Temporary Directors/Trustees
2-h. Stock Corporation data [Bar, 1984]
2-i. Non-stock corporation data
2-j. Other matters
3. Attachments
3-a. Treasurer’s Affidavit
3-b. Favorable recommendation of appropriate government agency
3-c. Amendments of Articles [Section 16]
1. By vote
2. By written assent
4. Purpose of Charter
4-a. Contract between State and the corporation
4-b. Contract between the corporation and corporators
4-c. Contract between State and the corporators [Government of the Philippine Islands vs. Manila Railroad Co., 52 Phil.
699]
5. Other Documents
5-a. Verification slip – contains the corporate name duly verified and certified to by the records section of the Securities and
Exchange Commission
5-b. Letter-Undertaking –contains the undertaking of the corporate secretary or treasurer of the corporation to change the
corporate name in the event that the same has already been used or appropriated by another corporation, person or firm
5-c. Bank Certificate – shows the amount of the paid-up capital in the name of the Treasurer in trust for the corporation
which is in the process of incorporation
5-d. Letter-Authority – contains the express authority given by the treasurer of the corporation in favor of the Central Bank
and/or Securities and Exchange Commission to examine the account involving the paid-up capital
5-e. Treasurer’s Affidavit –
5-f. Statement of Assets – showing the assets of the corporation in the form of the amount of subscription, the paid-up
capital and the balance on account of the subscription
5-g. Registration Sheet – contains details concerning the names of incorporators, the kind and nature of corporation, names
and addresses of directors and officers, as well as data of stock capitalization
6. Grounds for Disapproval
5-a. Non-conformity with the prescribed form
5-b. Patently illegal or immoral purpose
5-c. False Treasurer’s Affidavit
5-d. Non-compliance with required Filipino ownership
5-e. Non-submission of required favorable recommendation of appropriate government agency
b-5. Corporate By-Laws
1. Definition – set of rules or guidelines for the internal operation of the corporation
2. Adoption of By-Laws [Section 46]
2-a. When adopted
1. Pre-incorporation
2. Post incorporation – within 1 month from issuance of Certificate of Incorporation
2-b. How adopted – affirmative vote of majority of the corporators
3. Purposes – defines the

3-a. Relation between the stockholders and the corporation
3-b. Relation between the stockholders interse
3-c. Relation between the Board of Directors/Trustees and Officers and the corporation
3-d. Relation between the Board of Directors/Trustees and Officers and the stockholders
3-e. Particulars for stockholders’ and Board of Directors/Trustees’ meetings
3-f. Other internal operations of the corporation
4. Elements of Valid By-Laws
4-a. Consistent with general laws
4-b. Consistent with public policy and public welfare

4-c. Reasonable
4-d. Consonance with the Charter and the nature, purposes and objects of the corporation
5. Contents [Section 47]
5-a. Time, place and manner of calling and conducting regular or special meetings of directors and trustees
5-b. Time and manner of calling and conducting regular or special meetings of stockholders or members
5-c. Required quorum in meetings of stockholders or members and the manner of voting therein
5-d. Form for proxies of stockholders and members and the manner of voting them
5-e. Qualifications, duties and compensation of directors or trustees, officers and employees;
5-f. Time for holding annual election of directors or trustees and the mode or manner of giving notice thereof
5-g. Manner of election or appointment and the term of office of all officers other than directors or trustees
5-h. Penalties for violation of by-laws
5-i. Manner of issuing stock certificates
5-j. Other matters necessary for the proper or convenient transaction of corporate business and affairs
6. Amendments [Section 48]
6-a. Who can exercise
1. Majority of the board of directors or trustees and majority of the corporators
2. May be delegated to the board of directors or trustees by 2/3 votes of the corporators. Power delegated may be revoked
by majority votes of the corporators
6-b. Procedures
1. Attach amended By-Laws to original and Articles of Incorporation
2. Copy of amended By-Laws certified under oath by corporate secretary and majority of board of directors or trustees filed
with the Securities and Exchange Commission
b-6. Effects of –
1. Non-Organization [Section 22]

1-a. Coverage – failure to organize within two (2) years counted from the issuance of the Certificate of Incorporation for
causes within its control
1-b. Effect – corporate powers ipso facto cease to exist [Bar, 1979]
2. Continuous Inoperation [Section 22]

2-a. Coverage – continuous inoperation for five (5) years for causes within its control
2-b. Effect – ground for the suspension or revocation of its corporate franchise
C. CORPORATE MANAGEMENT
c-1. Levels of Control in Corporate Heirarchy [Citibank NA vs. Chua, G.R. No. 102300, 17 March 1993]–
1. Board of Directors/Trustees
2. Corporate Officers
3. Stockholders
c-2. Board of Directors/Trustees [Section 23; Bar, 1975]
1. Definition – repository of corporate powers [Ramirez vs. Orientalist Company, 38 Phil. 634; Bar, 1975]
2. Number [Section 14]
3. Qualifications [Section 23; Bar, 1946; Bar, 1965]
3-a. Natural persons
3-b. Legal age
3-c. Not disqualified by law
3-d. Owner of at least one share of stock [Bar, 1984; Bar, 1987]
3-e. Majority are residents
4. Disqualifications [Section 27]

4-a. Convicted by final judgment of an offense punishable by an imprisonment for a period exceeding six (6) years
4-b. Convicted by final judgment of an offense for violation of the Corporation Code committed within five (5) years prior to
his election or appointment
5. Elections [Section 24]

5-a. Manner
1. Viva voce
2. By ballot when requested by any voting shareholder
3. In person or by proxy
5-b. Requirements
1. Proper notice
2. Attended by majority of stockholders
5-c. Voting
1. Cumulative [Bar, 1951]
a. Purpose – to secure representation of minority stockholders in the Board of Directors/Trustees

b. How Made – Number of votes is to be determined by multiplying the number of directors to be voted upon and the
number of shares
2. Individual
6. Removal [Section 28]

6-a. Instances
1. For cause
2. Without cause
6-b. Requirements
1. Vote of stockholders representing 2/3 of the outstanding capital stock or 2/3 votes of the members entitled to vote
2. Removal without cause should not deprive minority stockholders or members of the right of representation [Bar, 1983;
Bar, 1991]
7. Vacancies
7-a. Causes
2. Expiration of term
3. Increase in number
4. Other causes such as death, resignation, retirement
7-b. How Filled Up [Section 29]
1. By Board if still constituting quorum in vacancies resulting from causes other than removal, expiration of term or increase
in number
2. By stockholders in an election called for such purpose if vacancy is due to:
a. Removal
b. Expiration of term
c. Increase in number
c. Remaining members of the Board no longer constitute quorum

8. Meetings
8-a. Requisites of Valid Board Meetings
1. Proper Notice [Bar, 1990]
2. Meeting of Board duly assembled
3. Existence of a quorum
4. Decision of the majority of the quorum
8-b. Quorum [Bar, 1970]
1. By Laws provision
2. Majority of the number of directors or trustees as fixed by the Articles of Incorporation
8-c. Particulars [Section 53]
1. General Rules – By-Laws provision
2. Regular Meetings
a. Frequency – monthly
b. Place – in or outside the Philippines [Bar, 1987]
c. Notice at least one day prior to the schedule
3. Special Meetings
a. Frequency – as the need arises
b. Place – in or outside the Philippines

8-d. Cases
1. Calica vs. Labatique, 55 OG 647

2. Ingersoll vs. Malabon Sugar Company, 53 Phil. 745
9. Compensation [Section 30; Bar, 1987]
9-a. General Rule : Only reasonable per diems
9-b. Exception
1. By-Laws
2. Vote of stockholders representing at least a majority of the outstanding capital stock or a majority of the members
9-c. Limitation – not to exceed ten percent (10%) of the net income before income tax of the corporation during the
preceding year [Bar, 1991]
c-3. Corporate Officers [Bar, 1995]
1. Types
1-a. Statutory
1. President [Bar, 1948; Bar, 1950; Bar, 1960; Bar, 1971; Bar, 1993]
a. Must be a director
b. Not a secretary nor treasurer at the same time
2. Secretary
a. Must be a citizen
b. Must be a resident of the Philippines
3. Treasurer
1-b. Non-Statutory
1. Rule – other officers may be provided in the By-Laws
2. Cases
a. General Manager – function is only to supervise and conduct the ordinary business of the corporation [see Liboro vs.
Rogers, L-11046, 30 October 1959]
b. Board of Liquidators vs. Kalaw, 20 SCRA 989]
2. How Elected – majority of all the members of the Board of Directors or Trustees
3. Compensation
3-a. Directors [Section 30]
3-b. Officer-Director
c-4. Executive Committee [Section 35]
1. Creation – by virtue of By-Laws provision
2. Composition – not less than 3 members of the Board of Directors/Trustees

3. Delegable Acts – all acts or matters within the competence of the Board of Directors/Trustees except when explicitly
prohibited by the Corporation Code or the By-Laws
4. Non-delegable Acts
4-a. Approval of any action requiring stockholders’ approval
4-b. Filling-up of vacancies in the Board of Directors or Trustees
4-c. Amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable
4-c. Distribution of cash dividends to stockholders
c-5. Management Contracts [Section 44]
1. Creation
1-a. Resolution signed by majority of the Board
1-b. Majority vote of stockholders or members
2. Requirements
2-a. Votes representing 2/3 of the outstanding capital stock or 2/3 of the members
2-b. In case of
1. Interlocking stockholders – owns 1/3 interest of the managing corporation
2. Interlocking directors -
3. Limitations
c-6. Ultra Vires Corporate Acts [Section 45]
1. Definition
2. Kinds of Ultra Vires Acts
3. Effects
c-7. Corporate Reports
D. CORPORATE POWERS
d-1. Classification
1. Express -
2. Implied
3. Incidental
d-2. Voting Requirements
1. 2/3 of Stockholders and Majority of Board of Directors

1-a. Extension or shortening of corporate term [Section 37; Bar, 1953]
1-b. Increase or decrease of capital stock [Section 38; Bar, 1947; Bar, 1982; Bar, 1987]
1-c. Increase, incur or create bonded indebtedness [Section 38; Bar, 1956]
1-d. Sale, barter, exchange or other disposition of all or substantially all corporate assets [Section 40]
1-e. Investment of corporate funds to another corporation [Section 42;Bar, 1947]
1-f. Investment of corporate funds to other ventures [Section 42; Bar, 1982; Bar, 1996]
1-g. Declaration of stock dividends [Section 43; Bar, 1982; Bar, 1990]
1-h. Enter into management contracts [Section 44; Bar, 1974]
1-i. Ratification of contracts with self-dealing directors [Section 32]
1-j. Ratification of contracts with inter-locking directors [Section 33]
1-k. Merger or consolidation [Section 77]
1-l. Voluntary dissolution of corporations [Section 118]
2. Majority of the Stockholders

2-a. Fixing value of no-par shares [Section 62]
2-b. Adoption, amendment and repeal of by-laws [Section 46]
2-c. Fixing compensation of the board of directors [Section 30; Bar, 1987; Bar, 1991]
d-3. Instances where Non-Voting Shares can Vote
1. Amendment of Articles [Section 16]

2. Adoption and amendment of By-Laws [Bar, 1981]
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all corporate assets [Section
40; Bar, 1980; Bar, 1988]
4. Incurring, creating or increasing bonded indebtedness [Section 38]
5. Increase or decrease of capital stock [Section 38]
6. Merger or consolidation [Sections 76-80]
7. Investment of corporate funds [Section 42]
d-4. Appraisal Right
1. Definition
2. When Exercisable
3. Manner of Exercise
E. CORPORATE LIABILITY
e-1. Kinds of Liability
1. Corporate liability
2. Officers’ liability [Bar, 1989; Bar, 1995]
3. Directors’ liability
e-2. Corporate Liability
1. Usual and normal transactions

2. Torts
3. Crimes
e-3. Liability of Director/Trustee
1. Personal Liability [Section 21; Bar, 1996]

1-a. Business opportunity theory [Section 34; B ar, 1985; Bar, 1991]
1. When Applicable – a director or trustee acquires for himself a business opportunity belonging to the corporation whereby
he obtained profits to the prejudice of the corporation
2. Effects
a. Account for the profits to the corporation
b. Personally bear the losses

3. Exception: Act is ratified by 2/3 of the stockholders or members
1-b. Inter-locking Directors [Section 33]
1. Where applicable – contracts entered into between two corporations having the same director/s or trustee/s
2.
1-c. Self-Dealing Director [Section 32; Bar, 1995]
1. Coverage
2. When Contract is Valid
a. Presence of director or trustee not necessary to constitute quorum
b. Vote of the director or trustee not necessary to approve the contract
c. Contract is fair and reasonable
d. If he is an officer at the same time, the contract has been previously authorized by the Board of Directors or Trustees
3. Effects on Contracts
a. As a rule, voidable at the option of the corporation
b. If presence of director or trustee helped in constituting quorum or his vote helped in the approval of the contract, the same
is voidable subject to ratification by 2/3 of stockholders or members
2. Solidary Liability
2-a. Coverage [Section 31]
1. Patently unlawful acts of the corporation
2. Gross negligence or bad faith in directing affairs of the corporation [Bar, 1968]
3. Acquisition of personal or pecuniary interest in conflict with duty as director
4. Watered stocks [Section 65]
2-b. To Whom Liable
1. Corporation
2. Stockholders or members
3. Other persons
2-c. Persons Liable – Directors/Trustees
1. Who willfully and knowingly voted or assented
2. Who committed gross negligence
3. Who were guilty of bad faith
3. Inter-locking Directors [Section 33; Bar, 1950]

3-a. Definition – directors of one corporation who are at the same time directors of another corporation
3-b. Coverage
3-c. Effect on Contracts

3-d. When Contract Valid [Bar, 1995]
1. Corporation where Inter-locking Director has Substantial Interest
a. No fraud involved
b. Fair and reasonable
c. Quorum and required votes; otherwise there is a need for ratification
2. Corporation where Inter-locking Director has Nominal Interest
a. Presence in BOD meeting is not necessary to constitute quorum
b. Vote unnecessary for approval of the corporate act
c. Fair and reasonable
4. Doctrines
4-a. Doctrine of Limited Liability – shields the corporators from corporate liability beyond their agreed contribution to the
capital or shareholding
4-b. Doctrine of Immunity – protects a person acting for and in behalf of the corporation from being personally liable for his
authorized acts [Bar, 1988], This is otherwise known as the “business judgment” rule [Bar, 1986].
F. RIGHTS OF STOCKHOLDERS
f-1. Classification of Rights [Bar, 1995]
1. Managerial rights
2. Proprietary rights
3. Remedial rights
4. Appraisal rights
f-2. Managerial Rights
1. Definition
2. Stockholders’ Meeting [Section 50]
2-a. Kinds of Meeting [Section 49]
2-b. Time of Meeting [Section 51]
2-c. Place of Meeting [Sections 51, 93]
2-d. Notice of Meeting
2-e. Quorum [Sections 25, 52]
3. Kinds of Voting
2-a. Personal
2-b. Representative or Proxy Voting [Section 58]
1. Definition – voting through an agent
2. Revocable at will of the grantor [see Alejandrino vs. De Leon, L-49043, 29 December 1943]
2-c. Special Rules
1. Voting Trust Agreement [Section 59; Bar, 1976; B

ar, 1985; Bar, 1992]
a. Definition – an arrangement whereby the stockholders transfer their shares to a trustee who acquires the right to vote said
shares
b. Limitations
1. Not exceeding 5 years
2. If created by virtue of a loan agreement, not exceeding 5 years but ipso facto terminated upon full payment of the loan
3. Must be in writing, notarized and filed with the SEC
2. Joint Ownership [Section 56]
a. Co-ownership
b. Consent of all co-owners or joint owners are necessary
3. Pledgors, Mortgagors [Section 55]
4. Executors, Administrators, Receivers and other Legal Representations [Section 55]
a. If appointed by the court, they can vote the shares
b. Without need of any written proxy
f-3. Proprietary Rights
1. Definition – right as owner of the corporation [Bar, 1995]

2. Coverage
2-a. Right to dividend
2-b. Right to liquidation
2-c. Right of pre-emption [Section 39]
1. Definition – preferential right to subscribe additional shares of stocks proportionate to stockholding
2. When Denied
d. To comply with Filipino ownership requirements

e. To acquire property needed for corporate purposes
f. To pay previously contracted debt
3. Dividends [Section 43; Bar, 1987]
3-a. Definition – distribution of the earnings of the corporation to the stockholders
3-b. Kinds
1. Cash [Bar, 1987; Bar, 1989]
2. Property
3. Scrip
4. Stock [Bar, 1991]
5. Liquidating
3-c. Retention of Surplus Profits

3-d. Entitlement to Dividends
1. Unpaid subscriptions [Sections 43, 72]
2. Delinquent shares [Section 71]
3. Treasury shares
3-e. Determination of Dividends
1. Cumulative
2. Participating
3. Cumulative and participating
4. Liquidation
5-a. Steps
1. Dissolution
2. Winding-up
3. Termination
5-b. Liquidating dividends
5-c. Preferences of Preferred Stockholders
f-4. Remedial Rights [Bar, 1993]
1. Individual Suit – suit instituted by a stockholder for his own benefit against the corporation
2. Representative Suit – suit filed by a stockholder in his behalf and in behalf of other stockholders similarly situated
with a common cause of action against the corporation
3. Derivative Suit – suit filed in behalf of the corporation by its stockholders upon a cause of action belonging to the
corporation [Bar, 1960; Bar, 1975]
4. Right to Inspection [Sections 74-75; Bar, 1976; Bar, 1988]
1. Records of business transactions
2. Minutes of Meetings
3. Stock and Transfer book
4-b. Requisites
1. Exercised during reasonable hours on business day
2. Person demanding right has not improperly used any information obtained through any previous examination of the books
and records
3. Demand is made in good faith or for a legitimate purpose [Africa vs. PCGG, 205 SCRA 39]
5. Appraisal Right [Bar, 1976; Bar, 1983; Bar, 1987]

5-a. Definition
5-b. Instances
1. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all the corporate property [Section 40]
4. Merger or consolidation
5. Investment of corporate funds in another corporation [Section 42]
6. Extension or shortening of corporate term [Section 37]
5-c. Procedures [Sections 82]
1. Written demand within 30 days after dissenting vote, otherwise waived
2. If price is agreed upon
a. Corporation shall pay the value of the interest after corporate action is implemented or effected
b. Stockholder surrenders the shares
3. If price cannot be agreed upon
a. Within 60 days from approval of corporate action, appraisal follows
b. 3 Members of appraisal team whose findings/award are final
c. Within 30 days after award, payment shall be made by the corporation
4. Payment shall be made only from the unrestricted retained earnings
5-d. When Ineffective [Section 84]
1. Withdrawal of demand
2. Abandonment or rescission by the corporation of the proposed corporate action
3. Disapproval by SEC of proposed corporate action
4. Resolution by SEC on the non-entitlement of appraisal right
G. DISSOLUTION AND WINDING-UP

g-1. Terminologies
1. Dissolution [Bar, 1981]
2. Winding up or Liquidation [Section 122]
3. Termination
g-2. Causes of Corporate Dissolution [Section 117]
1. Voluntary [Sections 118-120; Bar, 1963; B

ar, 1968]
1-a. Vote and resolution of majority of Board of Directors/Trustees and 2/3 of stockholders or members when no prejudice to
creditors [Section 118]
1-b. Judgment by the SEC after hearing on the Petition for Voluntary Dissolution where creditors are affected [Section 119]
1-c. Amendment of Articles of Incorporation shortening corporate term [Section 120]

2. Involuntary [Section 121]
2-a. Expiration of corporate term [Section 11]
2-b. Legislative enactment [Section 145]
2-c. Failure to organize and commence business operations within 2 years from incorporation [Section 22]
2-d. Judicial decree of Forfeiture [Sections 20, 134; Rule 66, Revised Rules of Court]
2-e. Order of SEC [Section 121]
H. FOREIGN CORPORATION
h-1. Definitions –
1. Foreign corporation – organized in a foreign country, provided that said foreign country allows Filipinos and domestic
corporations to do business therein [Section 123]
2. Doing business covers:
2-a. Soliciting orders
2-b. Service contracts
2-c. Opening offices, whether called liaison offices or branches
2-d. Appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for
a period totaling 180 days or more
2-e. Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the
Philippines
2-f. Any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent
performance normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the
business organization [Section 3(d), R.A. 7042, Foreign Investment Act of 1991], PROVIDED, that the following shall not be
deemed doing business:
1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business and/or the
exercise of rights as such investor;
2. Having a nominee director or officer to represent its interest in such corporation;
3. Appointing a representative or distributor domiciled in the Philippines which transact business in its own name and for its
own account
h-2. Suability of Foreign Corporations
1. Doing Business in the Philippines
1-a. With license – may sue and be sued in the Philippines
1-b. Without license – cannot sue but may be sued in the Philippines [Section 133]
2. Not Doing Business in the Philippines only on isolated transactions
2-a. May sue
2-b. May be sued [Facilities vs. de la Osa, 89SCRA 131]

h-3. License
1. Requirements
1-a. Appointment of Resident Agent, either a Filipino or domestic corporation; and power of attorney to SEC to receive
processes
1-b. Must prove that the foreign corporation’s country grants reciprocal rights to Filipinos and Philippine corporation;
1-c. Establish an office in the Philippines;
1-d. Bring in its assets;
2. In the event of insolvency, an undertaking the Filipino creditors will be preferred;
3. Notice of six months should it desire to terminate operations;

4. Franchise and patents must remain in the Philippines if possible;
5. Must file a bond of P100,000.00, that within 6 months after each fiscal year, the SEC shall require the deposit of
additional securities equivalent to 2% of the amount in excess of P5million of the gross income
h-4. Grounds for Revocation of License
1. Failure to file annual reports required by the Code

2. Failure to appoint or maintain a resident agent
3. Failure to inform SEC of change of resident agent or the latter’s change of address
4. Failure to submit copy of amended articles or by-laws or articles of merger or consolidation
5. Failure to pay taxes, impost or assessments
6. Engaged in business not authorized by SEC
7. Acting as dummy of a foreign corporation not licensed to do business in the Philippines
I. NON-STOCK CORPORATION
i-1. Definition – one where no part of its income is distributable as dividends to its members, trustees or officers, subject to
the provisions of the Corporation Code on dissolution.
i-2. Particulars
a. Purposes –
a-1. Charitable
a-2. Educational
a-3. Religious
a-4. Professional
a-5. Cultural
a-6. Recreational
a-7. Fraternal
a-8. Literary
a-9. Scientific
a-10. Social
a-11. Civic service

b. Right to Vote
b-1. Right may be limited, broadened or denied to the extent specified in the Articles of Incorporation or by the By-Laws
b-2. Unless otherwise specified, each member regardless of class shall be entitled to one vote
b-3. Voting by mail or other similar means by members of non-stock corporations may be authorized by its By-Laws
i-3. Non-Transferability of Membership
a. Membership and all rights arising therefrom are personal and non-transferable
b. Except when authorized by the Articles of Incorporation or by the By-Laws
i-4. Election and Term of Trustees
a. May be more than 15 in number

b. Classified in such manner that the term of office of 1/3 of their number shall expire every year
c. Subsequent elections of trustees shall be held annually and trustees so elected shall have a term of 3 years
i-5. Place of Meetings
a. May be held in a place outside the place where the principal place of the corporation is located
b. Must be within the Philippines [Section 93]
J. CLOSE CORPORATIONS
j-1. Definition -
j-2. Particulars
a. Requirements –
a-1. Number of stockholders not to exceed 20
a-2. Restriction: pre-emption in favor of the stockholders or corporation
a-3. Stocks cannot be listed in the stock exchange or be publicly offered
b. Prohibitions –
b-1. Mining companies
b-2. Oil companies
b-3. Stock exchanges
b-4. Banks
b-5. Insurance companies
b-6. Public utility
b-7. Educational institution
b-8. Other corporations declared to be vested with public interest
j-3. Restrictions on Transfer
a. Must appear
a-1. In the Articles of Incorporation
a-2. In the By-Laws
a-3. On the Stock Certificate
b. Pre-emptive right extends not only to unissued shares but also to treasury stocks [Section 102]
PREPARED BY:
ATTY. HENRY C. FILOTEO, CPA

Professor
CORPORATION LAW
Course Outline
A. GENERAL PRINCIPLES
a-1. Definition – artificial being created by operation of law, having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence [Section 2]
a-2. Kinds of Businesses
1. As to Organization
1-a. Sole Proprietorship [Bar, 1949]
1-b. Partnership [Article 1767, New Civil Code]
1-c. Corporation
1-d. Joint Venture – categorized as a form of limited partnership since its period [Kohler, Dictionary for Accountants, 1975,
p. 243; see J.M. Tuason & Co. vs. Bolanos, L-4935, 28 May 1954; Bar, 1987; Bar 1995]
2. As to Activity
2-a. Merchandising
2-b. Manufacturing
2-c. Service-concerned
a-3. Attributes of a Corporation
1. Artificial Being
1-a. Separate entity concept [Bar, 1996]
1. Liability for Torts [PNB vs. Court of Appeals, 83 SCRA 237]
2. Liability for Damages [Bar, 1955]
3. Liability for Crimes [Sia vs. People, 121 scra 655; People vs. Conception, 44 Phil. 126; Section 144]
4. Constitutional rights -
a. Due process [Albert vs. University Publication Co., 13 SCRA 84]
b. Equal protection [Smith Bell & Co., vs. Natividad, 40 Phil. 136]
c. Unreasonable search and seizures [Stonehill vs. Diokno, 20 SCRA 383]

5. Theory of Concession [Tayag vs. Benguet Consolidated, Inc., 26 SCRA 242]
1-b. Piercing the Veil of Corporate Entity
1. Definition – corporate fiction disregarded where the entity is formed or used for non-legitimate purposes [Bar, 1978; Bar
1985; Bar 1991]
2. Reasons: When corporation is used to
a. Defeat public convenience

b. Justify wrong
c. Protect fraud
d. Defend crime
e. As mere alter ego [Umali vs. Court of Appeals, 189 SCRA 529]
3. Cases
a. Claparols vs. CIR [65 SCRA 613]

b. Cruz vs. Dalisay [152 SCRA 482]
c. Tan Boon Bee and Co. vs. Jarencio [163 SCRA 205]
d. CIR vs. Norton & Harrison Company [11 SCRA 714]
c. Philippine Veterans Investment Development Corporation vs. Court of Appeals [181 SCRA 669]
d. Telephone Engineering and Service Co., Inc. vs. Workmen’s Compensation Commission [104 SCRA 354]
4. Theory of Corporate Enterprise [Rationale: there can be no association without associates, Villanueva, p. 266]
2. Created by Operation of Law

3-a. Creation under the Corporation Code
3-b. Creation under a Special Law
1. Governed primarily by Charter creating it

2. Corporation Code applies only on a suppletory manner [Section 4]
ar, 1989]
3-c. De Facto Corporation [Section 20; B
1. Definition – a corporation that actually exists as a corporate body, but which, because of failure to comply with some
provisions of the law, has no legal right to corporate existence as against the state. Certificate of incorporation must be
issued. This is distinguished with Corporation de Jure.
2. Only the state can question the personality of the corporation. Right usurped is that of the sovereign, then it is the
sovereign alone can question it through a Quo Warranto proceedings represented by the Solicitor General
3. Requisites –
a. Law authorizing incorporation

b. Bona fide attempt to organize
c. Assumption of corporate powers
3-d. Corporation by Estoppel [Section 21]
1. Defined – applies to persons assuming to act as a corporation without authority to do so with respect to third persons who
were prejudiced on the basis of their misrepresentations
2. How Action Commenced – Sued under the name by which they are generally or commonly known [Section 15, Rule 3,
Revised Rules of Court]
3. Liability – liable as general partners
3. Coverage
a. Debts
b. Liabilities
c. Damages
3. Perpetual Succession
3-a. Concept – not immortality, but continuity of corporate life
3-b. Corporate Term [Section 11]
1. Duration – not exceeding 50 years
2. Renewable for another 50 years within 5 years prior to expiration [Alhambra Cigar vs. Securities and Exchange
Com-mission, 24 SCRA 269]
3-c. Extension or Shortening of Term [Section 37; Bar, 1988]
3-d. Doctrine of Relation – Delay in the approval of the application for extension of corporate term attributable to
circumstances beyond the control of corporation would make the new charter related back to the day the corporation is
entitled to have the charter issued [Vitug, p. 379]
4. Powers, Attributes and Property Rights

4-a. Express Powers –
1. Section 36 of the Corporation Code and
2. Purpose of corporation as stated in the Charter
4-b. Implied Powers – which are necessary in order to attain or execute the express powers
4-c. Incidental Powers – which can be exercised by the mere fact of its being a corporation
a-4. Classes of Corporations [Bar, 1954]
1. Statutory
1-a. Stock Corporation [Sections 3 and 63] – one where the ownership of the interest or equity is represented in the form of
shares of stock
1-b. Non-Stock Corporation [Sections 87-95] – one where the interest or equity is in the form of membership
1-c. Close Corporation [Sections 76-105]
1-d. Foreign Corporation [Sections 123-136]
1-e. Educational Corporation [Sections 106-107]
1-f. Religious Corporation [Sections 109, 116]
2. As to Number
2-a. Corporation Sole [Sections 110-115; Bar, 1954]
2-b. Corporation Aggregate
3. As to Purpose
3-a. Ecclesiastical
3-b. Eleemosynary [Bar, 1967]
3-c. Lay
3-d. Public –
1. Defined – one formed or organized for the government of a portion of a State for the purpose of promoting the general
good and welfare [Section 3, Act. No. 1456]
2. Constitutional Prohibition - The Congress shall not, except by general law, provide for the formation, organization or
regulation of private corporations. Government owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of economic viability [Section 16, Article XII, 1987
Constitution]
3. Corporation Code applies on a suppletory manner [Section 4]
4. Quasi-Public corporation – refers to a private corporation that is franchised or licensed by the government to render
services involving performance of public utilities
5. Public-Quasi corporation – refers to a public corporation engaged in the performance of public or governmental function
but not being the State or its political corporation
4. As to Nationality
4-a. Tests of Nationality [Bar, 1957]
1. Incorporation Test
2. Control Test [see Filipinas de Seguros vs. Christern, Huenefeld & Co., Inc. G.R. L-2294, 25 May 1951]
3. Residence Test
a. Generally fixed by law creating them

b. Place where legal representation is established or where principal functions are exercised
4-b. Classes
1. Domestic Corporation – those organized in accordance with B.P. 68
2. Foreign Corporation – those organized under a foreign law that allows Filipino citizens and corporations to do business in
their state or country [Section 123]
4-c. Grandfather Rule [SEC Opinion, 4 May 1987]
5. As to Existence
5-a. De Jure
5-b. De Facto [Section 20; Bar, 1955; Bar, 1959]
5-c. Corporation by Estoppel [Section 21; Bar, 1955; Bar, 1973]
6. As to Membership
6-a. Open Corporation
6-b. Close Corporation – one whose Charter provides
1. All corporate stocks issued must be held of record by not more than 20 persons
2. All corporate stocks issued are subject to certain restrictions on transfer
3. Stocks are not listed in any stock exchange [Section 96]
7. As to Relation with Other Corporations

7-a. Parent
7-b. Subsidiary
a-5. Four Basic Advantages of a Corporation [Bar, 1953]
1. Separate juridical personality
2. Limited liability of investors
3. Free transferability of units of ownership

4. Centralized management
a-6. Components of a Corporation
1. Incorporators [Bar, 1952]

1-a. Definition – those stockholders or members mentioned in the Articles of Incorporation as originally forming the
corporation [Section 5]
1-b. Qualifications [Section 10]
1. Majority are Philippine residents
2. Natural persons
3. Of legal ages
4. Not less than 5 not more than 15
5. Owner or subscriber of at least 1 share of stock
2. Corporators
2-a. Definition – those composing the corporation, whether stock or non-stock [Section 126; Bar, 1952]
2-b. Kinds –
1. Stockholders – corporators of stock corpo-rations
2. Members – corporators of non-stock corpo-rations
a-7. Capital Structure
1. Terminologies
1-a. Capital Stock – amount subscribed and paid in by the stockholders or secured to be paid in upon which the corporation
is to conduct its operations [Bar, 1957; Bar, 1964]
1.b. Authorized Capital Stock – total amount of the capital stock which it can raise [Bar, 1964]
1-c. Subscribed Capital Stock – amount of authorized capital which has already been subscribed [Bar, 1964]
1-d. Stated Capital
1-e. Legal Capital – refers to the amount of funds received by the corporation in payment of the shares of stocks. This shall
be held in trust for the creditors of the corporation under the Trust Fund Doctrine.
1-f. Paid-up Capital – amount of subscription that has already been paid [Bar, 1964]
2. Legal Requirement
2-a. Pre-Incorporation [Sections 12-13]
1. 25% of authorized capital stock subscribed

3. In no case less than P5,000 [Section 13]
2-b. Post-Incorporation [Section 38]
1. Applies to increases in capitalization
2. 25% of increase capital stock subscribed
4. Treasurer’s Affidavit
3. Classifications of Shares [Section 6]

3-a. Preferred shares – those which entitles the owner certain preferences [Bar, 1949]
1. As to Dividends
2. As to Liquidation
3-b. Common shares – those ordinary stocks of a corporation which entitles the owner to pro rata dividend without any
priority or preference over any other stockholders [Bar, 1949]
3-c. Par Value shares – those whose value is fixed in the Articles of Incorporation [Bar, 1950]
3-d. No-Par Value shares [Bar, 1958; 1970; B

ar, 1984]
1. Types
a. With stated value
b. Without stated value
2. Valuation of Shares of Stocks [Section 62]

a. Articles of Incorporation
b. Board of directors pursuant to an authority conferred by the Charter or by the By-Laws
c. Majority vote of the stockholders

3. Corporations Prohibited to Issue No-Par Value Shares [Bar, 1958,Bar, 1959]
a. Banks
b. Insurance companies
c. Trust companies
d. Building & trust associations

e. Public utilities
3-e. Voting shares [Bar, 1984]
3-f. Non-Voting shares
1. Treasury shares [Section 9]

2. Preferred shares [Section 6]
3. Redeemable shares [Ibid]
3-g. Redeemable shares – refer to shares that may be purchased or taken up by the corporation upon the expiration of a
fixed period regardless of the existence of unrestricted retained earnings [Section 8]
3-h. Convertible shares – those which give the holder the option to convert the same into another class of shares
3-i. Shares in escrow – shares deposited with a third person to be delivered to the stockholder upon compliance with certain
conditions
3-j. Treasury shares [Bar, 1992]

1. Definition – shares issued and fully paid but subsequently reacquired by the issuing corporation [Sections 9]
2. When Necessary [Bar, 1949]
a. Elimination of fractional shares
b. Collection or compromise of unpaid subscriptions
c. Payment to dissenting/withdrawing stockholders [Section 41]
3-k. Delinquent shares – those which were declared as such
3-l. Founders’ shares [Section 7]
1. Definition - shares of stocks classified as such in the Articles of Incorporation given to the founding stockholders
2. They enjoy certain rights and privileges not available to other classes of stocks
3. If privilege consists of the exclusive right to vote and be voted upon as Director, it must be for a period not exceeding five
(5) years
3-m. Outstanding shares – shares fully paid and already in the hands of the stockholders
3-n. Issued shares [Section 137]
3-o. Watered shares – shares issued for no or less than their par or stated value [Bar, 1993]
4. Issuance of Stock Certificates [Section 64]
4-a. Ways of issuance
1. Subscription – refers to any contract for the acquisition of unissued stock in an existing corporation or corporation still to
be formed [Section 60]
a. Pre-Incorporation – subscription of stocks in a corporation still to be formed irrevocable for a period of 6 months from date
of subscription [Section 61; Bar, 1979]
b. Post-Incorporation – subscription of stocks in a corporation after its formation
2. Exchange or other onerous transfers
3. No promissory notes, no future services
4. ar, 1975; Bar 1979;Bar, 1988]

Issued only upon full payment [Bar, 1976; B
5. Cannot be set-off against unpaid salary [Apodaco vs. NLRC, 172 SCRA 442; Article 102, Labor Code of the
Philippines; Bar, 1988]
4-b. Consideration for Issuance [Section 62]
1. Cash
2. Property, whether tangible or intangible
3. Labor performed or services actually rendered [Bar, 1952]
6. Previously incurred indebtedness

7. Amounts transferred from unrestricted retained earnings to stated capital
8. Reclassification or conversion
4-c. Collecting Subscriptions
1. Determination of Due Date [Section 67]
a. Subscription contract
b. In the absence, at any time from the date specified in the “call” by the Board of Directors
2. Effect of Non-Payment on Due Date
a. Entire balance becomes due and payable
b. After the lapse of 30 days from due date, stocks become delinquent. As such, holder lose all rights due as a stockholder
except the right to dividends [Section 71]
3. Modes of Collection [Bar, 1988]
a. Judicial remedy – ordinary suit for collection of sum of money [Section 70]
b. Extrajudicial remedy - Delinquency sale [Section 68; Bar, 1969; Bar, 1997]
1. Resolution
2. Notice of Delinquency Sale
3. Publication
4. Public Auction
5. Sale to highest bidder or treasury shares
c. Minimum Amount Due
1. Balance on subscription
2. Accrued interest, if any
3. Advertisement costs
4. Expenses of sale
d. Application of Dividends [Section 71]
4. Interests on Unpaid Subscriptions [Section 66]

a. General Rule: No interest payable
b. Exception
6. By-Laws provision
7. At the rate prescribed in the By-Laws
8. In the absence of the rate prescribed therein, legal rate
4-d. Right of Pre-Emption [Bar, 1982; Bar, 1983; B
ar 1984]
1. Definition – right of the stockholder to subscribe additional shares of stocks before the same can be offered to the public
in proportion to their respective shareholdings
2. When Right Deniable [Section 39]
a. Denial by the Charter
b. Shares issued to comply with legal Filipino ownership requirements
c. Shares issued in exchange for property needed or in payment of previously contracted indebtedness in accordance with
the approval of 2/3 of stockholders or members
3. Coverage
a. Only shares originally offered for sale to the public

b. Does not include
1. Shares previously offered but not sold
2. Treasury shares
4-e. Issuance of New Certificates [Section 73]
1. Coverage
a. Lost
b. Destroyed
c. Stolen
2. Procedures [Bar, 1969]

a. Affidavit of loss of stockholder
b. Verification by the corporation
c. Publication of Notice of Loss
1. If no bond filed by stockholder, wait until lapse of one year from last publication
2. If bond is filed by stockholder, new certificates may be issued even prior to the one year period
d. If Contested –
1. Case is filed without, wait for final decision
2. If no case filed, file an action for Interpleader
5. Transfer of Shares of Stocks [Bar, 1981; Bar, 1994; Bar, 1995]
5-a. Synopsis
1. Open corporation
2. Close corporation
5-b. Manner of Transfer
5-c. Assignment
5-d. Pledge
1. Pledgor entitled to the rights

2. If registered in corporate books without any reservation in writing, pledgee entitled to the rights [Section 55]
5-e. Mortgage
1. Mortgagor entitled to the rights

2. If registered in corporate books without any reservation in writing, mortgagor entitled to the rights [Ibid]
B. INCORPORATION AND ORGANIZATION
b-1. Definition
1. Incorporation – covers all steps and processes from the time of the application for incorporation until the issuance of the
Certificate of Incorporation
2. Organization
2-a. Definition – refers to the acts of starting the operations of the corporation as a going concern and the establishment of
machineries to run its operations
2-b. Steps
1. Adoption of By-Laws
a. Pre-incorporation
b. Post-incorporation – one month from issuance of Certificate [Section 46]
2. Election of corporate Directors
3. Election of corporate Officers
b-2. Terminologies
1. Promotion – the initial and pre-incorporation steps until the actual formation of the corporation [Bar, 1949]
2. Primary franchise
2-a. Definition - refers to the right to exist as a corporation
1. Vested in the individuals who compose the corporation and not in the corporation itself
2. Incapable of being transferred
3. Secondary franchise
3-a. Definition - refers to the right to conduct the business of the corporation
1. Vested in the corporation itself
2. Capable of being transferred
4. Concession theory – Registration and issuance of the Certificate of Incorporation signals the birth of the
corporation’s personality [Vitug, p. 391]
5. Articles of Incorporation – basic document for the registration of a corporation
6. Corporation By-Laws – set of rules or guidelines for the internal operation of the corporation
7. Certificate of Incorporation
b-3. Steps in Incorporation
1. Promotion –
1-a. Definition - the conduct of a project or feasibility study that interests prospective investors to set-up a corporation
business.
1-b. Who Undertakes - This is undertaken by a person called the promoter for a fee or consideration
1-c. Effect – binding only between the promoter and the parties and prospective investors who signed and executed the
promotion contract. This is binding only upon the corporation if, after its creation, the promotion contract was adopted by the
corporation by virtue of a Board Resolution
2. Drafting and Execution in compliance with the compliance with the requirements [Sections 13, 14, 15, 61, 139-141]
3. Issuance of Certificate of Incorporation [Section 19]
b-4. Articles of Incorporation [Bar, 1990]
1. Definition – charter of the corporation
2. Contents [Sections 14, 15]

2-a. Name of corporation [Section 18; Republic Planters Bank vs. Court of Appeals, 216 SCRA 738; Bar, 1976]
2-b. Purpose/purposes [Bar, 1976; Bar, 1977]

2-c. Principal place of business
2-d. Term of existence [Section 11]
2-e. Incorporators [Section 10]
2-f. Number of Directors/Trustees
2-g. Acting or Temporary Directors/Trustees
2-h. Stock Corporation data [Bar, 1984]
2-i. Non-stock corporation data
2-j. Other matters
3. Attachments
3-a. Treasurer’s Affidavit
3-b. Favorable recommendation of appropriate government agency
3-c. Amendments of Articles [Section 16]
1. By vote
2. By written assent
4. Purpose of Charter
4-a. Contract between State and the corporation
4-b. Contract between the corporation and corporators
4-c. Contract between State and the corporators [Government of the Philippine Islands vs. Manila Railroad Co., 52 Phil.
699]
5. Other Documents
5-a. Verification slip – contains the corporate name duly verified and certified to by the records section of the Securities and
Exchange Commission
5-b. Letter-Undertaking –contains the undertaking of the corporate secretary or treasurer of the corporation to change the
corporate name in the event that the same has already been used or appropriated by another corporation, person or firm
5-c. Bank Certificate – shows the amount of the paid-up capital in the name of the Treasurer in trust for the corporation
which is in the process of incorporation
5-d. Letter-Authority – contains the express authority given by the treasurer of the corporation in favor of the Central Bank
and/or Securities and Exchange Commission to examine the account involving the paid-up capital
5-e. Treasurer’s Affidavit –
5-f. Statement of Assets – showing the assets of the corporation in the form of the amount of subscription, the paid-up
capital and the balance on account of the subscription
5-g. Registration Sheet – contains details concerning the names of incorporators, the kind and nature of corporation, names
and addresses of directors and officers, as well as data of stock capitalization
6. Grounds for Disapproval
5-a. Non-conformity with the prescribed form
5-b. Patently illegal or immoral purpose
5-c. False Treasurer’s Affidavit
5-d. Non-compliance with required Filipino ownership
5-e. Non-submission of required favorable recommendation of appropriate government agency
b-5. Corporate By-Laws
1. Definition – set of rules or guidelines for the internal operation of the corporation
2. Adoption of By-Laws [Section 46]
2-a. When adopted
1. Pre-incorporation
2. Post incorporation – within 1 month from issuance of Certificate of Incorporation
2-b. How adopted – affirmative vote of majority of the corporators
3. Purposes – defines the

3-a. Relation between the stockholders and the corporation
3-b. Relation between the stockholders interse
3-c. Relation between the Board of Directors/Trustees and Officers and the corporation
3-d. Relation between the Board of Directors/Trustees and Officers and the stockholders
3-e. Particulars for stockholders’ and Board of Directors/Trustees’ meetings
3-f. Other internal operations of the corporation
4. Elements of Valid By-Laws
4-a. Consistent with general laws
4-b. Consistent with public policy and public welfare
4-c. Reasonable
4-d. Consonance with the Charter and the nature, purposes and objects of the corporation
5. Contents [Section 47]
5-a. Time, place and manner of calling and conducting regular or special meetings of directors and trustees
5-b. Time and manner of calling and conducting regular or special meetings of stockholders or members
5-c. Required quorum in meetings of stockholders or members and the manner of voting therein
5-d. Form for proxies of stockholders and members and the manner of voting them
5-e. Qualifications, duties and compensation of directors or trustees, officers and employees;
5-f. Time for holding annual election of directors or trustees and the mode or manner of giving notice thereof
5-g. Manner of election or appointment and the term of office of all officers other than directors or trustees
5-h. Penalties for violation of by-laws
5-i. Manner of issuing stock certificates
5-j. Other matters necessary for the proper or convenient transaction of corporate business and affairs
6. Amendments [Section 48]
6-a. Who can exercise
1. Majority of the board of directors or trustees and majority of the corporators
2. May be delegated to the board of directors or trustees by 2/3 votes of the corporators. Power delegated may be revoked
by majority votes of the corporators
6-b. Procedures
1. Attach amended By-Laws to original and Articles of Incorporation
2. Copy of amended By-Laws certified under oath by corporate secretary and majority of board of directors or trustees filed
with the Securities and Exchange Commission
b-6. Effects of –
1. Non-Organization [Section 22]

1-a. Coverage – failure to organize within two (2) years counted from the issuance of the Certificate of Incorporation for
causes within its control
1-b. Effect – corporate powers ipso facto cease to exist [Bar, 1979]
2. Continuous Inoperation [Section 22]

2-a. Coverage – continuous inoperation for five (5) years for causes within its control
2-b. Effect – ground for the suspension or revocation of its corporate franchise
C. CORPORATE MANAGEMENT
c-1. Levels of Control in Corporate Heirarchy [Citibank NA vs. Chua, G.R. No. 102300, 17 March 1993]–
1. Board of Directors/Trustees
2. Corporate Officers
3. Stockholders
c-2. Board of Directors/Trustees [Section 23; Bar, 1975]
1. Definition – repository of corporate powers [Ramirez vs. Orientalist Company, 38 Phil. 634; Bar, 1975]
2. Number [Section 14]
3. Qualifications [Section 23; Bar, 1946; Bar, 1965]
3-a. Natural persons
3-b. Legal age
3-c. Not disqualified by law
3-d. Owner of at least one share of stock [Bar, 1984; Bar, 1987]
3-e. Majority are residents
4. Disqualifications [Section 27]

4-a. Convicted by final judgment of an offense punishable by an imprisonment for a period exceeding six (6) years
4-b. Convicted by final judgment of an offense for violation of the Corporation Code committed within five (5) years prior to
his election or appointment
5. Elections [Section 24]

5-a. Manner
1. Viva voce
2. By ballot when requested by any voting shareholder
3. In person or by proxy
5-b. Requirements
1. Proper notice
2. Attended by majority of stockholders
5-c. Voting
1. Cumulative [Bar, 1951]
a. Purpose – to secure representation of minority stockholders in the Board of Directors/Trustees

b. How Made – Number of votes is to be determined by multiplying the number of directors to be voted upon and the
number of shares
2. Individual

6-a. Instances
1. For cause
2. Without cause
6-b. Requirements
1. Vote of stockholders representing 2/3 of the outstanding capital stock or 2/3 votes of the members entitled to vote
2. Removal without cause should not deprive minority stockholders or members of the right of representation [Bar, 1983;
Bar, 1991]
7. Vacancies
7-a. Causes
2. Expiration of term
3. Increase in number
4. Other causes such as death, resignation, retirement
7-b. How Filled Up [Section 29]
1. By Board if still constituting quorum in vacancies resulting from causes other than removal, expiration of term or increase
in number
2. By stockholders in an election called for such purpose if vacancy is due to:
a. Removal
b. Expiration of term
c. Increase in number
c. Remaining members of the Board no longer constitute quorum

8. Meetings
8-a. Requisites of Valid Board Meetings
1. Proper Notice [Bar, 1990]
2. Meeting of Board duly assembled
3. Existence of a quorum
4. Decision of the majority of the quorum
8-b. Quorum [Bar, 1970]
1. By Laws provision
2. Majority of the number of directors or trustees as fixed by the Articles of Incorporation
8-c. Particulars [Section 53]
1. General Rules – By-Laws provision
2. Regular Meetings
a. Frequency – monthly
b. Place – in or outside the Philippines [Bar, 1987]
3. Special Meetings
a. Frequency – as the need arises
b. Place – in or outside the Philippines
8-d. Cases
1. Calica vs. Labatique, 55 OG 647

2. Ingersoll vs. Malabon Sugar Company, 53 Phil. 745
9. Compensation [Section 30; Bar, 1987]
9-a. General Rule : Only reasonable per diems
9-b. Exception
1. By-Laws
2. Vote of stockholders representing at least a majority of the outstanding capital stock or a majority of the members
9-c. Limitation – not to exceed ten percent (10%) of the net income before income tax of the corporation during the
preceding year [Bar, 1991]
c-3. Corporate Officers [Bar, 1995]
1. Types
1-a. Statutory
1. President [Bar, 1948; Bar, 1950; Bar, 1960; Bar, 1971; Bar, 1993]
a. Must be a director
b. Not a secretary nor treasurer at the same time
2. Secretary
a. Must be a citizen
b. Must be a resident of the Philippines
3. Treasurer
1-b. Non-Statutory
1. Rule – other officers may be provided in the By-Laws
2. Cases
a. General Manager – function is only to supervise and conduct the ordinary business of the corporation [see Liboro vs.
Rogers, L-11046, 30 October 1959]
b. Board of Liquidators vs. Kalaw, 20 SCRA 989]
2. How Elected – majority of all the members of the Board of Directors or Trustees
3. Compensation
3-a. Directors [Section 30]
3-b. Officer-Director
c-4. Executive Committee [Section 35]
1. Creation – by virtue of By-Laws provision
2. Composition – not less than 3 members of the Board of Directors/Trustees
3. Delegable Acts – all acts or matters within the competence of the Board of Directors/Trustees except when explicitly
prohibited by the Corporation Code or the By-Laws
4. Non-delegable Acts
4-a. Approval of any action requiring stockholders’ approval
4-b. Filling-up of vacancies in the Board of Directors or Trustees
4-c. Amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable
4-c. Distribution of cash dividends to stockholders
c-5. Management Contracts [Section 44]
1. Creation
1-a. Resolution signed by majority of the Board
1-b. Majority vote of stockholders or members
2. Requirements
2-a. Votes representing 2/3 of the outstanding capital stock or 2/3 of the members
2-b. In case of
1. Interlocking stockholders – owns 1/3 interest of the managing corporation
2. Interlocking directors -
3. Limitations
c-6. Ultra Vires Corporate Acts [Section 45]
1. Definition
2. Kinds of Ultra Vires Acts
3. Effects
c-7. Corporate Reports
D. CORPORATE POWERS
d-1. Classification
1. Express -
2. Implied
3. Incidental
d-2. Voting Requirements
1. 2/3 of Stockholders and Majority of Board of Directors

1-a. Extension or shortening of corporate term [Section 37; Bar, 1953]
1-b. Increase or decrease of capital stock [Section 38; Bar, 1947; Bar, 1982; Bar, 1987]
1-c. Increase, incur or create bonded indebtedness [Section 38; Bar, 1956]
1-d. Sale, barter, exchange or other disposition of all or substantially all corporate assets [Section 40]
1-e. Investment of corporate funds to another corporation [Section 42;Bar, 1947]
1-f. Investment of corporate funds to other ventures [Section 42; Bar, 1982; Bar, 1996]
1-g. Declaration of stock dividends [Section 43; Bar, 1982; Bar, 1990]
1-h. Enter into management contracts [Section 44; Bar, 1974]
1-i. Ratification of contracts with self-dealing directors [Section 32]
1-j. Ratification of contracts with inter-locking directors [Section 33]
1-k. Merger or consolidation [Section 77]
1-l. Voluntary dissolution of corporations [Section 118]
2. Majority of the Stockholders

2-a. Fixing value of no-par shares [Section 62]
2-b. Adoption, amendment and repeal of by-laws [Section 46]

2-c. Fixing compensation of the board of directors [Section 30; Bar, 1987; Bar, 1991]
d-3. Instances where Non-Voting Shares can Vote
1. Amendment of Articles [Section 16]

2. Adoption and amendment of By-Laws [Bar, 1981]
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all corporate assets [Section
40; Bar, 1980; Bar, 1988]
6. Merger or consolidation [Sections 76-80]
7. Investment of corporate funds [Section 42]
d-4. Appraisal Right
1. Definition
2. When Exercisable
3. Manner of Exercise
E. CORPORATE LIABILITY
e-1. Kinds of Liability
1. Corporate liability
2. Officers’ liability [Bar, 1989; Bar, 1995]
3. Directors’ liability
e-2. Corporate Liability
1. Usual and normal transactions

2. Torts
3. Crimes
e-3. Liability of Director/Trustee
1. Personal Liability [Section 21; Bar, 1996]

1-a. Business opportunity theory [Section 34; B ar, 1985; Bar, 1991]
1. When Applicable – a director or trustee acquires for himself a business opportunity belonging to the corporation whereby
he obtained profits to the prejudice of the corporation
2. Effects
a. Account for the profits to the corporation
b. Personally bear the losses
3. Exception: Act is ratified by 2/3 of the stockholders or members
1-b. Inter-locking Directors [Section 33]
1. Where applicable – contracts entered into between two corporations having the same director/s or trustee/s
2.
1-c. Self-Dealing Director [Section 32; Bar, 1995]
1. Coverage
2. When Contract is Valid
a. Presence of director or trustee not necessary to constitute quorum

b. Vote of the director or trustee not necessary to approve the contract
c. Contract is fair and reasonable
d. If he is an officer at the same time, the contract has been previously authorized by the Board of Directors or Trustees
3. Effects on Contracts
a. As a rule, voidable at the option of the corporation
b. If presence of director or trustee helped in constituting quorum or his vote helped in the approval of the contract, the same
is voidable subject to ratification by 2/3 of stockholders or members
2. Solidary Liability
1. Patently unlawful acts of the corporation
2. Gross negligence or bad faith in directing affairs of the corporation [Bar, 1968]
3. Acquisition of personal or pecuniary interest in conflict with duty as director
4. Watered stocks [Section 65]
2-b. To Whom Liable
1. Corporation
2. Stockholders or members
3. Other persons
2-c. Persons Liable – Directors/Trustees
1. Who willfully and knowingly voted or assented
2. Who committed gross negligence
3. Who were guilty of bad faith
3. Inter-locking Directors [Section 33; Bar, 1950]

3-a. Definition – directors of one corporation who are at the same time directors of another corporation
3-b. Coverage
3-c. Effect on Contracts
3-d. When Contract Valid [Bar, 1995]
1. Corporation where Inter-locking Director has Substantial Interest
a. No fraud involved
b. Fair and reasonable
c. Quorum and required votes; otherwise there is a need for ratification
2. Corporation where Inter-locking Director has Nominal Interest
a. Presence in BOD meeting is not necessary to constitute quorum
b. Vote unnecessary for approval of the corporate act

c. Fair and reasonable
4. Doctrines
4-a. Doctrine of Limited Liability – shields the corporators from corporate liability beyond their agreed contribution to the
capital or shareholding
4-b. Doctrine of Immunity – protects a person acting for and in behalf of the corporation from being personally liable for his
authorized acts [Bar, 1988], This is otherwise known as the “business judgment” rule [Bar, 1986].
F. RIGHTS OF STOCKHOLDERS
f-1. Classification of Rights [Bar, 1995]
1. Managerial rights
2. Proprietary rights
3. Remedial rights
4. Appraisal rights
f-2. Managerial Rights
1. Definition
2. Stockholders’ Meeting [Section 50]
2-a. Kinds of Meeting [Section 49]
2-b. Time of Meeting [Section 51]
2-c. Place of Meeting [Sections 51, 93]
2-d. Notice of Meeting
2-e. Quorum [Sections 25, 52]
3. Kinds of Voting
2-a. Personal
2-b. Representative or Proxy Voting [Section 58]
1. Definition – voting through an agent
2. Revocable at will of the grantor [see Alejandrino vs. De Leon, L-49043, 29 December 1943]
2-c. Special Rules
1. Voting Trust Agreement [Section 59; Bar, 1976; B

ar, 1985; Bar, 1992]
a. Definition – an arrangement whereby the stockholders transfer their shares to a trustee who acquires the right to vote said
shares
b. Limitations
1. Not exceeding 5 years
2. If created by virtue of a loan agreement, not exceeding 5 years but ipso facto terminated upon full payment of the loan
3. Must be in writing, notarized and filed with the SEC
2. Joint Ownership [Section 56]
a. Co-ownership
b. Consent of all co-owners or joint owners are necessary
3. Pledgors, Mortgagors [Section 55]
4. Executors, Administrators, Receivers and other Legal Representations [Section 55]
a. If appointed by the court, they can vote the shares
b. Without need of any written proxy
f-3. Proprietary Rights
1. Definition – right as owner of the corporation [Bar, 1995]

2. Coverage
2-a. Right to dividend
2-b. Right to liquidation
2-c. Right of pre-emption [Section 39]
1. Definition – preferential right to subscribe additional shares of stocks proportionate to stockholding
2. When Denied
d. To comply with Filipino ownership requirements

e. To acquire property needed for corporate purposes
f. To pay previously contracted debt
3. Dividends [Section 43; Bar, 1987]
3-a. Definition – distribution of the earnings of the corporation to the stockholders
3-b. Kinds
1. Cash [Bar, 1987; Bar, 1989]
2. Property
3. Scrip
4. Stock [Bar, 1991]
5. Liquidating
3-c. Retention of Surplus Profits
3-d. Entitlement to Dividends
1. Unpaid subscriptions [Sections 43, 72]
2. Delinquent shares [Section 71]
3. Treasury shares
3-e. Determination of Dividends
1. Cumulative
2. Participating
3. Cumulative and participating

4. Liquidation
5-a. Steps
1. Dissolution
2. Winding-up
3. Termination
5-b. Liquidating dividends
5-c. Preferences of Preferred Stockholders
f-4. Remedial Rights [Bar, 1993]
1. Individual Suit – suit instituted by a stockholder for his own benefit against the corporation
2. Representative Suit – suit filed by a stockholder in his behalf and in behalf of other stockholders similarly situated
with a common cause of action against the corporation
3. Derivative Suit – suit filed in behalf of the corporation by its stockholders upon a cause of action belonging to the
corporation [Bar, 1960; Bar, 1975]
4. Right to Inspection [Sections 74-75; Bar, 1976; Bar, 1988]
1. Records of business transactions
2. Minutes of Meetings
3. Stock and Transfer book
4-b. Requisites
1. Exercised during reasonable hours on business day
2. Person demanding right has not improperly used any information obtained through any previous examination of the books
and records
3. Demand is made in good faith or for a legitimate purpose [Africa vs. PCGG, 205 SCRA 39]
5. Appraisal Right [Bar, 1976; Bar, 1983; Bar, 1987]

5-a. Definition
5-b. Instances
1. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all the corporate property [Section 40]
4. Merger or consolidation
5. Investment of corporate funds in another corporation [Section 42]
6. Extension or shortening of corporate term [Section 37]
5-c. Procedures [Sections 82]
1. Written demand within 30 days after dissenting vote, otherwise waived

2. If price is agreed upon
a. Corporation shall pay the value of the interest after corporate action is implemented or effected
b. Stockholder surrenders the shares
3. If price cannot be agreed upon
a. Within 60 days from approval of corporate action, appraisal follows
b. 3 Members of appraisal team whose findings/award are final
c. Within 30 days after award, payment shall be made by the corporation
4. Payment shall be made only from the unrestricted retained earnings
5-d. When Ineffective [Section 84]
1. Withdrawal of demand
2. Abandonment or rescission by the corporation of the proposed corporate action
3. Disapproval by SEC of proposed corporate action
4. Resolution by SEC on the non-entitlement of appraisal right
G. DISSOLUTION AND WINDING-UP

g-1. Terminologies
1. Dissolution [Bar, 1981]
2. Winding up or Liquidation [Section 122]
3. Termination
g-2. Causes of Corporate Dissolution [Section 117]
1. Voluntary [Sections 118-120; Bar, 1963; B

ar, 1968]
1-a. Vote and resolution of majority of Board of Directors/Trustees and 2/3 of stockholders or members when no prejudice to
creditors [Section 118]
1-b. Judgment by the SEC after hearing on the Petition for Voluntary Dissolution where creditors are affected [Section 119]
1-c. Amendment of Articles of Incorporation shortening corporate term [Section 120]
2. Involuntary [Section 121]

2-a. Expiration of corporate term [Section 11]
2-b. Legislative enactment [Section 145]
2-c. Failure to organize and commence business operations within 2 years from incorporation [Section 22]
2-d. Judicial decree of Forfeiture [Sections 20, 134; Rule 66, Revised Rules of Court]
2-e. Order of SEC [Section 121]
H. FOREIGN CORPORATION
h-1. Definitions –
1. Foreign corporation – organized in a foreign country, provided that said foreign country allows Filipinos and domestic
corporations to do business therein [Section 123]
2. Doing business covers:
2-a. Soliciting orders
2-b. Service contracts
2-c. Opening offices, whether called liaison offices or branches
2-d. Appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for
a period totaling 180 days or more
2-e. Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the
Philippines
2-f. Any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent
performance normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the
business organization [Section 3(d), R.A. 7042, Foreign Investment Act of 1991], PROVIDED, that the following shall not be
deemed doing business:
1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business and/or the
exercise of rights as such investor;
2. Having a nominee director or officer to represent its interest in such corporation;
3. Appointing a representative or distributor domiciled in the Philippines which transact business in its own name and for its
own account
h-2. Suability of Foreign Corporations
1. Doing Business in the Philippines
1-a. With license – may sue and be sued in the Philippines
1-b. Without license – cannot sue but may be sued in the Philippines [Section 133]
2. Not Doing Business in the Philippines only on isolated transactions
2-a. May sue
2-b. May be sued [Facilities vs. de la Osa, 89SCRA 131]
h-3. License
1. Requirements
1-a. Appointment of Resident Agent, either a Filipino or domestic corporation; and power of attorney to SEC to receive
processes
1-b. Must prove that the foreign corporation’s country grants reciprocal rights to Filipinos and Philippine corporation;
1-c. Establish an office in the Philippines;
1-d. Bring in its assets;
2. In the event of insolvency, an undertaking the Filipino creditors will be preferred;
3. Notice of six months should it desire to terminate operations;

4. Franchise and patents must remain in the Philippines if possible;
5. Must file a bond of P100,000.00, that within 6 months after each fiscal year, the SEC shall require the deposit of
additional securities equivalent to 2% of the amount in excess of P5million of the gross income
h-4. Grounds for Revocation of License
1. Failure to file annual reports required by the Code

2. Failure to appoint or maintain a resident agent
3. Failure to inform SEC of change of resident agent or the latter’s change of address
4. Failure to submit copy of amended articles or by-laws or articles of merger or consolidation
5. Failure to pay taxes, impost or assessments
6. Engaged in business not authorized by SEC
7. Acting as dummy of a foreign corporation not licensed to do business in the Philippines
I. NON-STOCK CORPORATION
i-1. Definition – one where no part of its income is distributable as dividends to its members, trustees or officers, subject to
the provisions of the Corporation Code on dissolution.
i-2. Particulars
a. Purposes –
a-1. Charitable
a-2. Educational
a-3. Religious
a-4. Professional
a-5. Cultural
a-6. Recreational
a-7. Fraternal
a-8. Literary
a-9. Scientific
a-10. Social
a-11. Civic service
b. Right to Vote
b-1. Right may be limited, broadened or denied to the extent specified in the Articles of Incorporation or by the By-Laws
b-2. Unless otherwise specified, each member regardless of class shall be entitled to one vote
b-3. Voting by mail or other similar means by members of non-stock corporations may be authorized by its By-Laws
i-3. Non-Transferability of Membership
a. Membership and all rights arising therefrom are personal and non-transferable
b. Except when authorized by the Articles of Incorporation or by the By-Laws
i-4. Election and Term of Trustees

a. May be more than 15 in number
b. Classified in such manner that the term of office of 1/3 of their number shall expire every year
c. Subsequent elections of trustees shall be held annually and trustees so elected shall have a term of 3 years
i-5. Place of Meetings
a. May be held in a place outside the place where the principal place of the corporation is located
b. Must be within the Philippines [Section 93]
J. CLOSE CORPORATIONS
j-1. Definition -
j-2. Particulars
a. Requirements –
a-1. Number of stockholders not to exceed 20
a-2. Restriction: pre-emption in favor of the stockholders or corporation
a-3. Stocks cannot be listed in the stock exchange or be publicly offered
b. Prohibitions –
b-1. Mining companies
b-2. Oil companies
b-3. Stock exchanges
b-4. Banks
b-5. Insurance companies
b-6. Public utility
b-7. Educational institution
b-8. Other corporations declared to be vested with public interest
j-3. Restrictions on Transfer
a. Must appear
a-1. In the Articles of Incorporation
a-2. In the By-Laws
a-3. On the Stock Certificate
b. Pre-emptive right extends not only to unissued shares but also to treasury stocks [Section 102]
PREPARED BY:
ATTY. HENRY C. FILOTEO, CPA

Professor
Corporation Law Course Syllabus (Complete)
Part I – General Provisions
A. Corporation, defined (Sec. 2)
Case:
a. Tayag v. Benguet Consolidated, 26 SCRA 242
b. Torres v. Court of Appeals, 278 SCRA 793
c. Philippine Stock Exchange, Inc. v. Court of Appeals, 281 SCRA 232
1. Art. XII Section 16, 1987 Philippine Constitution
Case:
a. Feliciano v. COA, GR No. 147402, January 14, 2004
2. Attributes of a Corporation
3. Similarities and Distinctions between Contract of Partnership and Corporations
4. Corporations Created by Special Laws or Charter
Cases:
a. National Coal Co. v. Collector of Internal Revenue, 46 Phil. 583
b. Marilao Water Consumers Association, Inc. v. IAC, 201 SCRA 437
B. Classification of corporations
1. Under the Corporation Code (Sec. 3)
2. Sole and Aggregate
3. Ecclesiastic and Lay
4. Eleemosynary and Civil
5. Domestic and Foreign
6. De jure and de facto corporations
6.1 Requisite of De Facto Corporation

6.2 Quo Warranto
Cases:
a. Sawadjaan v. Court of Appeals, G.R. No. 141735, June 8, 2005
7. Close and Open Corporation

8. Parent, Subsidiary, and Affiliated
9. Private and Public
10. Corporation by Prescription and Corporation by Estoppel
C. Nationality of corporations
1. Control test
2. Grandfather rule
Case:
a. Wilson Gamboa v. Sec. Margarito Teves, GR NO. 176579, June 28, 2011
D. Corporations created by special laws (Sec. 4)
E. Corporators and incorporators, stockholders and members (Sec. 5)
F. Corporate juridical personality
1. Doctrine of separate juridical personality (or Doctrine of Corporate Entity
Case:
a. Cease v. CA, GR NO. 33172, October 18, 1979
2. Doctrine of piercing the corporate veil

a) Grounds for application of doctrine
b) Test in determining applicability
Cases:
a. CIR v. Norton and Harrison Company, G.R. No. 17618, August 31, 1964
b. McLeod v. NLRC, GR No. 146667, January 23, 2007
c. De Asis and Co. v. Court of Appeals, GR No. L-61549, May 27, 1985
d. Martinez v. Court of Appeals, GR NO. 131673, September 10, 2004
e. Solidbank Corporation v. Mindanao Ferroalloy Corporation,, GR No. 153535, July 28, 2005
f. Yamamoto v. Nishino Leather Industries, Inc., GR No. 150283, April 16, 2008
g. ASJ Corporation v. Sps. Evangelista, GR NO. 158086, February 14, 2008
3. Entitlement to constitutional rights
a) Due process
Case:
a. Albert v. University Publishing, Inc. G.R. No. 10118, June 16, 1965)
b) Equal protection of the law
c) Protection against unreasonable searches and seizure
4. Entitlement to Moral Damages
Case:
a. ABS-CBN v. Court of Appeals, GR NO. 128690, January 21, 1999

b. Coastal Pacific Trading, Inc. v. Sothern Rolling Mills, Co., Inc., July 28, 2006
5. Libel
Case:
a. Filipinas Broadcasting v. Ago Medical Center, GR No. 141994, January 17, 2005
6. Liability for torts
Cases:
a. PNB v. CA, GR NO. 27155, May 18, 1978
7. Doctrine of Corporate Negligence

Case:
a. Professional Services Inc., v. Court of Appeals, G.R. No. 126297, Feb. 2, 2010
8. Liability for crime
G. Classification of Shares (Sec. 6)
1. Par value or no par value

2. Voting or non-voting
3. Common or preferred
4. Promotion share
5. Share in escrow
6. Convertible stock
7. Founder’s share (Sec. 7)
8. Redeemable share (Sec. 8)
9. Treasury share (Sec. 9)
Part II – Incorporation and Organization of Private Corporations
A. Number and qualifications of incorporators (Sec. 10)
1. Capital stock (distinguish from capital)

2. Authorized capital stock
3. Subscribed capital stock
4. Outstanding capital stock
5. Paid-up capital stock
6. Unissued capital stock
7. Legal capital (distinguish from capital stock)
8. Par value
9. Certificate of stock
Case:
a. Kukan International Corp. v. Reyes, G.R No. 182729, Sept. 29, 2010
B. Theory on Multiple Corporate Personalities
C. Minimum capital stock and subscription requirements
1. Incorporation and organization

a. Promoter
a.1) Liability of promoter
a.2b) Liability of corporation for promoter’s contracts
2. Subscription contract
Case:
a. Jaka Investments Corp. v. CIR, GR No. 147629, July 28, 2010
b. Ong Yong v. Tiu, GR No. 144476, April 8, 2003
3. Pre-incorporation subscription agreements

4. Consideration for stocks
5. Filipino ownership requirement based on specific constitutional and legal grounds
D. Corporate term (Sec. 11)
1. Doctrine of Relation (Relating Back Doctrine)
Case:
a. Alhambra Cigar & Cigarette Manufacturing Company, Inc. v. SEC, GR No. L-23606, July 29,
1968
b. PNB v. CA, GR No. 63201, May 27, 1992
E. Articles of incorporation (Sec. 14)

1. Contents
2. Non-amendable items
3. Doctrine of substantial compliance
F. Ground for rejection (Sec. 17)
G. Corporate name (Sec. 18)
H. Commencement of corporate existence (Sec. 19)
1. Genossenschaft Theory
2. Theory on concession
3. Theory of Corporate Enterprise or Economic Unit
I. De facto corporation (Sec. 20)
1. Differences between de jure, de facto and corporation by estoppels
Case:
a. Seventh Day Adventist Conference Church of Southern Philippines, Inc. v. Northeastern
Mindanao Mission of Seventh Day Adventist, Inc. GR No. 150416, July 21, 2006
J. Corporation by estoppel (Sec. 21)
K. Non-use of corporate charter (Sec. 22)
Part III – Board of Directors/Trustees/Officers
A. The Board of Directors of Trustees (Sec. 23)

1. Fiduciary duties
B. Election of directors or trustees (Sec. 24)

1. Methods of voting
a. Straight voting
b. Cumulative voting
2. In a non-stock corporation
C. Corporate officers, quorum (Sec. 25)
Case:
a. Matling Industrial and Commercial Coorp. V. Coros, G.R. No. 157802, October 13, 2010
D. Report of election (Sec. 26)
E. Disqualification of directors, trustees or officers (Sec. 27)
F. Removal of directors or trustees (Sec. 28)
G. Vacancies in the office of director or trustee (Sec. 29)
Case:
a. Valle Verde Country Club, Inc. v. Africa, G.R. No. 151969, September 4, 2009
b. Tan v. Sycip, G.R. No. 153468, August 17, 2006
H. Compensation of directors (Sec. 30)
I. Liability of directors, trustees or officers (Sec. 31)

1. Corporate opportunity doctrine
J. Dealings of directors, trustees or officers with the corporation (Sec. 32)

K. Contracts between corporations with interlocking directors (Sec. 33)
L. Disloyalty of a director (Sec. 34)
M. Executive committee (Sec. 35)
O. Business Judgment Rule
Case:
Saber v. Court of Appeals, G.R. No. 132981, August 31, 2004
Part IV – Powers of Corporations
A. Classification of powers
1. Express powers
2. Implied powers
3. Incidental or inherent powers
Case:
a. Cebu Bionic Builders Supply, Inc. v. DBP, GR No. 154366, November 17, 2010
b. Shipside Incorporated v. CA, GR No. 143377, February 20, 2001
B. Corporate powers and capacity (Sec. 36)

1. General powers, theory of general capacity
2. Specific powers, theory of specific capacity
a) Power to extend or shorten corporate term (Sec. 37)
a.1) Appraisal right of dissenting stockholders
b) Power to increase or decrease capital stock or incur, create, increase bonded indebtedness
(Sec. 38)
b.1) Limitation
b.2) Necessity
c) Power to deny pre-emptive rights (Sec. 39)
c.1) As to treasury shares
d) Power to sell or dispose of corporate assets (Sec. 40)
d.1) Appraisal right of dissenting stockholder
e) Power to acquire own shares (Sec. 41)
e.1) Conditions for the exercise of the power
e.2) Trust fund doctrine
f) Power to invest corporate funds in another corporation or business (Sec. 42)
g) Power to declare dividends (Sec. 43)
g.1) Concept of dividends (distinguished from profits)
g.2) Classes of dividends
g.3) Unrestricted retained earnings
h) Power to enter into management contract (Sec. 44)
i) Ultra vires acts (Sec. 45)
(i) Applicability of ultra vires doctrine
(ii) Consequences of ultra vires acts
Case:
a. Zomer Development Company, Inc. v. International Exchange Bank, GR No. 150694, March
13, 2009
b. Republic v. Acoje Mining, Inc. GR No. L-18062, February 28, 1963
(iii) Ratification
j) Doctrine of apparent authority
Case:
a. Westmont Bank v. Inland Construction and Development Corp., GR No. 123650, March 23,
2009
b. BPI Family Savings Bank v. First Metro Investment Corp, GR No. 132390, May 21, 2004
k) Doctrine of individuality of subscription

l) Doctrine of equality of shares
m) Trust fund doctrine
Part V – By Laws
A. Adoption of by-laws (Sec. 46)

a) Requisites of valid by-laws
b) Binding effects
c) Contents (Sec. 47)
d) Amendments (Sec. 48)
Case:
a. PMI Colleges v. NLRC, GR NO. 121466, August 15, 1997
Part VI – Meetings
A. Kinds (Sec. 49-51)

1. Necessity of meetings
B. Place and time of meeting of stockholders or members (Sec. 51)
Case:
a. Expertravel & Tours, Inc. v. Court of Appeals, G.R. No. 152392, May 26, 2005
C. Quorum (Sec. 52)

1. Requisites for a valid meeting of stockholders
2. Specific number of votes required by law
D. Regular and special meetings of directors or trustees (Sec. 53)
1. Business judgment rule

2. Solidary liabilities for damages
E. Who shall preside (Sec. 54)
F. Pledgors, mortgagors and administrators (Sec. 55)
G. Voting in case of joint ownership (Sec. 56)
H. Voting right for treasury shares (Sec. 57)
I. Proxies (Sec. 58)
K. Voting trust (Sec. 59)
Case:
a. Lee vs. Court of Appeals, G.R. No. 14441, Dec. 17, 1996
Title VII – Stocks and Stockholders
A. Rights of stockholders in general
B. Derivative suit
C. Liabilities of stockholders
D. Subscription contract (Sec. 60)

E. Pre-incorporation subscription (Sec. 61)
F. Certificate of stock
1. Nature of the certificate
2. Uncertificated shares
3. Negotiability
4. Requirements for valid transfer of stocks
5. Issuance
6. Full payment
7. Payment pro-rata
8. Stock and transfer book
9. Lost or destroyed certificates
10. Situs of the shares of stock
G. Consideration for stocks (Sec. 62)
H. Certificate of stock and transfer of shares (Sec. 63)
I. Issuance of stock certificate (Sec. 64)
J. Liability of directors for watered stocks (Sec. 65)
K. Interest on unpaid subscription (Sec. 66)
L. Payment of balance (Sec. 67)
M. Delinquency sale (Sec. 68)
N. When sale may be questioned (Sec. 69)
O. Court action to recover unpaid subscription (Sec. 70)
P. Effect of delinquency (Sec. 71)
Q. Rights of unpaid shares (Sec. 72)
R. Lost or destroyed certificates (Sec. 72)
Part VIII – Corporate Books and Records (Sec. 74-74)
A. Contents
B Who may make valid entries
Part IX – Merger and Consolidation
A. Merger and consolidation (Sec. 76)
B. Approval required (Sec. 77)
C. Articles of merger or consolidation (Sec. 78)
D. Effectivity (Sec. 79)
E. Effects (Sec. 80)
Part X – Appraisal Right
A. Instances of appraisal right (Sec. 81)
B. How right is exercised (Sec. 82)
C. Effect of demand and termination of right (Sec. 83)
D. When right to payment ceases (Sec. 84)
E. Who bears costs of appraisal (Sec. 85)
F. Notation on certificates; rights of transferee (Sec. 86)
Part XI – Non-Stock Corporations
A. Definition (Sec. 87)
B. Purposes (Sec. 88)
C. Members right to vote (Sec. 89)
D. Non-transferability of membership (Sec. 90)

E. Termination of membership (Sec. 91)
F. Election and term of trustees (Sec. 92)
G. Place of meetings (Sec. 93)
Part XII – Distribution of Assets in Non-Stock Corporations
A. Rules of distribution (Sec. 94)
B. Plan of distribution of assets (Sec. 95)
Part XIII – Close Corporations
A. Definition and applicability of Title (Sec. 96)
B. Articles of incorporation (Sec. 97)
C. Validity of restrictions on transfer of shares (Sec. 98)
D. Effects of issuance or transfer of stock in breach of qualifying conditions (Sec. 99)
E. Agreements by stockholders (Sec. 100)
F. When board meeting is unnecessary or improperly held (Sec. 101)
G. Pre-emptive right in close corporations (Sec. 102)
H. Amendment of articles of incorporation (Sec. 103)
I. Deadlocks (Sec. 104)
J. Withdrawal of stockholder or dissolution of corporation (Sec. 105)
Part XIV – Special Corporations

A. Educational Corporations
1. Incorporation (Sec. 106)
2. Pre-requisites to incorporation (Sec. 107)
3. Board of trustees (Sec. 108)
B. RELIGIOUS CORPORATIONS
1. Classes of religious corporations (Sec. 109)
2. Corporation sole (Sec. 110)
3. Articles of incorporation (Sec. 111)
4. Submission of the articles of incorporation (Sec. 112)

5. Acquisition and alienation of property (Sec. 113)
6. Filling of vacancies (Sec. 114)
7. Dissolution (Sec. 115)
8. Religious societies (Sec. 116)
Part XV – Dissolution
A. Methods of dissolution (Sec. 117)
B. Voluntary dissolution where no creditors are affected (Sec. 118)
C. Voluntary dissolution where creditors are affected (Sec. 119)
D. Dissolution by shortening corporate term (Sec. 120)
E. Involuntary dissolution (Sec. 121)
F. Corporate liquidation (Sec. 122)
Part XVI – Foreign Corporations

A. Definition and rights of foreign corporations (Sec. 123)
B. Application to existing foreign corporations (Sec. 124)
C. Application for a license (Sec. 125)
D. Issuance of a license (Sec. 126)
E. Who may be a resident agent (Sec. 127)
F. Resident agent; service of process (Sec. 128)
G. Law applicable (Sec. 129)
H. Amended license (Sec. 131)
I. Merger or consolidation involving a foreign corporation licensed in the

Philippines (Sec. 132)
J. Doing business without a license (Sec. 133)
K. Revocation of license (Sec. 134)
L. Issuance of certificate of revocation (Sec. 135)
M. Withdrawal of foreign corporations (Sec. 136)

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CORPORATION LAW

a-2. Kinds of Businesses

1-b. Partnership [​Article 1767, New Civil Code​]

a-3. Attributes of a Corporation

1. Liability for Torts [​PNB vs. Court of Appeals​, 83 SCRA 237]

2. Liability for Damages [​Bar, 1955​]

a. Due process [​Albert vs. University Publication Co.​, 13 SCRA 84]

c. Unreasonable search and seizures [​Stonehill vs. Diokno​, 20 SCRA 383]

5. Theory of Concession [​Tayag vs. Benguet Consolidated, Inc.​, 26 SCRA 242]

1-b. Piercing the Veil of Corporate Entity

a. Defeat public convenience

a. Claparols vs. CIR​ [65 SCRA 613]

d. ​Telephone Engineering and Service Co., Inc. vs. Workmen’s Compensation

4. Theory of Corporate Enterprise [Rationale: there can be no association without associates,

2. Created by Operation of Law

3-a. Creation under the Corporation Code

3-b. Creation under a Special Law

1. Governed primarily by Charter creating it

a. Law authorizing incorporation

1. Defined – applies to persons assuming to act as a corporation without authority to do so with

3. Liability – liable as general partners

3-b. Corporate Term [​Section 11​]

1. Duration – not exceeding 50 years

3-c. Extension or Shortening of Term [​Section 37; ​Bar, 1988​]

4. Powers, Attributes and Property Rights

1. Section 36 of the Corporation Code and

2. Purpose of corporation as stated in the Charter

a-4. Classes of Corporations [​Bar, 1954​]

1-c. Close Corporation [​Sections 76-105​]

1-d. Foreign Corporation [​Sections 123-136​]

1-e. Educational Corporation [​Sections 106-107​]

1-f. Religious Corporation [​Sections 109, 116​]

2-b. Corporation Aggregate

3-b. Eleemosynary [​Bar, 1967​]

3. Corporation Code applies on a suppletory manner [​Section 4​]

4. Quasi-Public corporation – refers to a private corporation that is franchised or

5. Public-Quasi corporation – refers to a public corporation engaged in the

a. Generally fixed by law creating them

1. Domestic Corporation – those organized in accordance with B.P. 68

4-c. ​Grandfather Rule [​ SEC Opinion, 4 May 1987]

​ ar, 1955​; ​Bar, 1959​]

6-b. Close Corporation – one whose Charter provides

2. All corporate stocks issued are subject to certain restrictions on transfer

3. Stocks are not listed in any stock exchange [​Section 96​]

7. As to Relation with Other Corporations

a-5. Four Basic Advantages of a Corporation [​Bar, 1953​]

1. Separate juridical personality

2. Limited liability of investors

3. Free transferability of units of ownership

1. Incorporators [​Bar, 1952​]

1-b. Qualifications [​Section 10​]

1. Majority are Philippine residents

4. Not less than 5 not more than 15

5. Owner or subscriber of at least 1 share of stock

1. Stockholders – corporators of stock corpo-rations

2. Members – corporators of non-stock corpo-rations

a-7. Capital Structure

1-d. Stated Capital

1-b. Partnership [Article 1767, New Civil Code]

1. Liability for Torts [PNB vs. Court of Appeals, 83 SCRA 237]

2. Liability for Damages [Bar, 1955]

a. Due process [Albert vs. University Publication Co., 13 SCRA 84]

c. Unreasonable search and seizures [Stonehill vs. Diokno, 20 SCRA 383]

5. Theory of Concession [Tayag vs. Benguet Consolidated, Inc., 26 SCRA 242]

a. Claparols vs. CIR [65 SCRA 613]

d. Telephone Engineering and Service Co., Inc. vs. Workmen’s Compensation

3-b. Corporate Term [Section 11]

3-c. Extension or Shortening of Term [Section 37; Bar, 1988]

a-4. Classes of Corporations [Bar, 1954]

1-c. Close Corporation [Sections 76-105]

1-d. Foreign Corporation [Sections 123-136]

1-e. Educational Corporation [Sections 106-107]

1-f. Religious Corporation [Sections 109, 116]

3-b. Eleemosynary [Bar, 1967]

3. Corporation Code applies on a suppletory manner [Section 4]

4-c. Grandfather Rule [ SEC Opinion, 4 May 1987]

ar, 1955; Bar, 1959]

3. Stocks are not listed in any stock exchange [Section 96]

a-5. Four Basic Advantages of a Corporation [Bar, 1953]

1. Incorporators [Bar, 1952]

1-b. Qualifications [Section 10]

2-a. Pre-Incorporation [Sections 12-13]

3. Classifications of Shares [Section 6]

3-d. No-Par Value shares [Bar, 1958; 1970; B

2. Valuation of Shares of Stocks [Section 62]

1. Treasury shares [Section 9]

3-j. Treasury shares [Bar, 1992]

2. When Necessary [Bar, 1949]

c. Payment to dissenting/withdrawing stockholders [Section 41]

3-l. Founders’ shares [Section 7]

3-n. Issued shares [Section 137]

4. Issuance of Stock Certificates [Section 64]

3. Labor performed or services actually rendered [Bar, 1952]

1. Determination of Due Date [Section 67]

3. Modes of Collection [Bar, 1988]

a. Judicial remedy – ordinary suit for collection of sum of money [Section

b. Extrajudicial remedy - Delinquency sale [Section 68; Bar, 1969; Bar,

4. Interests on Unpaid Subscriptions [Section 66]

4-d. Right of Pre-Emption [Bar, 1982; Bar, 1983; B

2. When Right Deniable [Section 39]

4-e. Issuance of New Certificates [Section 73]

3. Issuance of Certificate of Incorporation [Section 19]

b-4. Articles of Incorporation [Bar, 1990]

2. Contents [Sections 14, 15]

2-b. Purpose/purposes [Bar, 1976; Bar, 1977]

2-d. Term of existence [Section 11]

2-e. Incorporators [Section 10]