CORPORATION DEFINED

CORPORATION AND INCORPORATORS

Sec 2. – an artificial being created by

operation of law, having the rights of
INCORPORATORS succession, and the powers, attributes and
properties expressly authorized by law or
-Persons who organized the corporation incidental to its existence.
-They are those who incorporate and who
actually signed the Articles of Incorporation. ELEMENTS:
1. An artificial being;
TN: The law requires that there must at least 2. Created by operation of law;
be 5 incorporators. 3. Has right of succession;
4. Has the powers, attributes and properties
Florinda B. Urbi expressly authorized by law or incidental to
FEU- INSTITUTE OF LAW
CORPO LAW REVIEWER its existence
CORPORATION V. PARTNERSHIP

CORPORATION PARTNERSHIP

Must not be less than At least 2 partners

5 and not more than would be enough
15 incorporators

PARTIES

1. INCORPORATORS - persons who start the

corporation. They do not execute
immediately the articles of incorporation.
First, they hire the promoters.

2. PROMOTERS – those would simply solicit

investment from other people. They explain
the idea and promote the business. Once the
promoters are able to convice, then there
will be stockholders or investors.

3. INVESTORS- not all investors are

incorporators but all incorporators are
investors because they will have to
subscribe.

Florinda B. Urbi
FEU- INSTITUTE OF LAW
CORPORATION IS AN ARTIFICIAL BEING
CORPO LAW REVIEWER

Under the law, it is granted a separate and

distinct personality from that of its owners or
 Under the law, it is granted a separate and
distinctConstitutional
personality from that
rights ofof its owners orthat a
a corporation
stockholders.
natural persons also enjoy

TN: An1.artificial
right tobeing is created
sue and be suedby law, while
natural2.being
right is
tocreated by God.
due process of law and equal
protection of rights
Q: What happens
3. right when
against a juridical person
unreasonable searches is and
created?
seizure
4. right against non-impairment of contracts
A: that5.juridical
right toperson
own and acquires
acquirethe rights,
property
properties andtoattributes
6. right enter intoascontracts
expressly
authorized by law or incident to its existence.
A corporation enjoys the right to due
Important: An artificial person has a separate
process.
set of rights from that of natural persons.
Artificial persons
Reason: enjoys certain
A corporation rights thatof
is composed
naturalnatural
persons also enjoy,
persons. but not
The mere all.that they are
fact
natural persons, they should not be deprived
Q: Why ofare corporations
their granted rights
basic constitutional some
constitutional rights of natural persons?

A: Because behindRIGHT the corporate veil are

OF SUCCESSION
natural persons. The creation of corporation
SUCCESSION
is merely a legal fiction. When a juridical
- If a stockholder
person is created or member
by law, it covers dies,
the natural
persons by thewithdraws, is insolvent
veil of corporate or suffers
fiction.
incapacity, the corporation will still
Corporations continue
should enjoy and nottheseberights
dissolved.
“as
far as practicable”
Important: The heirs will succeed. Death of a
“as farstockholder
as practicable”doesmeans
not dissolve
there arethesome
corporation.
rights that cannot be Even so, in an
exercised byextreme
an
possibility that
artificial person, such as: all of the stockholders will
dies, still, there is a right of succession. The
heirsrights
1. Political of all the
(e.g.stockholders,
right to vote,become
right to the
stockholders.
run for public office) And they will now assume the
2. Rightright of the stockholders.
to liberty
3. Right to life
Succession takes effect at the moment of
death. Stockholdings are transferable. If you
own a share, you can transfer or assign it.

Florinda B. Urbi
FEU- INSTITUTE OF LAW
CORPO LAW REVIEWER
 POWERS OF A CORPORATION
Florinda B. Urbi CLASSES OF CORPORATIONS
FEU- INSTITUTE OF LAW
CORPO LAW REVIEWER
“The powers, attributes and properties Sec 3.
expressly authorized by law or incident to its
 It is instituted to
ULTRA VIRES ACT UNAUTHORIZED ACT govern a portion of
the state.
Acts of the Acts of officers done
corporation which beyond the powers
are beyond the granted to them Public corporations
powers of the Those formed or organized to
corporation govern a [portion of the State and for the
general good and welfare.
Example of Unauthorized Act:
The board of directors decided to borrow Private corporations
money from a bank to finance a particular Those formed or some private
project. If expressly authorized or if within purpose, benefit or end. Private
the by-laws, then the act of the board is corporations may either be:
valid. However, if it was a discovered that
the resolution is only signed by the A. Quasi-public corporations
president and not by the board, then it can Private corporations which perform
be considered an unauthorized act public service

B. GOCC- created or organized by the gov’t

Holding or Patent Subsidiary or of which the gov’t is the majority
A corporation which A corporation which stockholder.
holds ownership of is owned and
various corporations, controlled by Holding or patent and Subsidiary
thereby having another corporation Corporation
control over such
corporations. STOCK or NON-STOCK CORPORATIONS

STOCK NON-STOCK

Has capital stocks All other corporation

divided into shares which do not fall
and are authorized to under stock
PUBLIC v PRIVATE CORPORATION distribute dividends to corporation
the holders of such
shares
PUBLIC PRIVATE
CORPORATION CORPORATION
Formed by the Organized for private
In stock corporations, Its members are not
government for the purpose, benefit or
the stockholders entitled for profits.
common good and profit.
expect a return There is no
public welfare.
through dividends distribution of
profits. The profits
are used to improve
Florinda B. Urbi
FEU- INSTITUTE OF LAW its facilities, service
CORPO LAW REVIEWER or hire more people.
Q: What is the purpose of dividing capital A: Through the right of first refusal. Once
into shares of stocks? shares are issued, they cannot be sold
directly to the public. The corporation must
A: The purpose is to measure dividends first offer it to the current stockholders and
must state it in the Articles.
Example: If a stockholder owns 25% shares
of stocks, upon distribution of dividends, he Important: The right of first refusal does not
will be entitled to 25% of the total limit one’s right of ownership because it is
dividends. not absolute prohibition, but only qualified.
Here, the prohibition only applies to first
Important: Dividends are relevant only in offer. After that, you may sell it to other
stock corporations. This is because there is interested party.
no distributions of profits in non-stock
corporations. However, it is not accurate to
say that non-stock corporations do not earn
profit. In fact, they do, only that they are
not distributed as dividend but rather
plowed back to the company to improve its
facilities, service, etc.

SPECIAL CORPORATIONS CORPORATORS, INCORPORATORS , ETC

CLOSE OPEN SEC 5

Limited to selected Open to any person
persons or members who may wish to Corporators are those who compose a
of the family become a shareholder corporation, whether as stockholders or as
Q: How do we keep corporation close? members.

Incorporators are those stockholders or

SEC 4. CORPORATIONS CREATED BY SPECIAL
members mentioned in the articles of
LAWS OR CHARTERS
incorporation as originally forming and
-shall be governed primarily by the
composing the corporation and whi are
provisions of the special law or charter
signatories thereof.
creating them or applicable to them,
supplemented by the provisions of this code,
Corporators in a stock corporation are called
insofar as they are applicable.
stockholders.
Important: The corporation code covers only
Corporators in a non-stock corporation are
those corporations formalized under the
called members
code. For special corporations, they shall be Incorporators
governed by laws creating them. The
corporation code applies only suppletorily
.

Florinda B. Urbi
FEU- INSTITUTE OF LAW
CORPO LAW REVIEWER
TN: they must be natural persons because
they have to sign the Articles. Also, they
must be at least 5, but not more than 15.

Corporators

A. Stockholders- in a stock corporation

B. Mmebers – in a non stock corporation

Important: Only incorporators are required

to be natural persons. Thus, artificial
persons can be stockholders.

Florinda B. Urbi
FEU- INSTITUTE OF LAW
CORPO LAW REVIEWER