Business Law and Regulation (Corporation Law Midterm Exam)

• Corporation


  Artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence
• Corporation


  • Exercises its powers through its board of directors and/or its duly authorized officers and agents
  • Doctrine of piercing the corporate veil should be done with caution
• Domestic corporation


  Corporation incorporated under the laws of the Philippines
• Revised Corporation Code


  Republic Act No. 11232, which was enacted to update and modernize the country's laws governing corporations
• Revised Corporation Code


  • Provides the legal framework for the formation, organization, operation, and regulation of corporations in the Philippines
• Stock corporations


  Corporations that have capital stock divided into shares and are authorized to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held
• Corporations created by special laws or charters

  Governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of the Revised Corporation Code, insofar as they are applicable
• Juridical person


  A corporation is an example of a juridical person
• Perpetual existence


  A corporation shall have perpetual existence unless its articles of incorporation provides otherwise
• Concession theory


  A corporation is considered an artificial entity that lacks existence until it obtains approval from the state, typically through the Securities and Exchange Commission (SEC), under the law
• The life of the corporation does not start from the filing of the Articles of Incorporation with the SEC
• Merely agreeing to form a corporation is insufficient; the state's consent, either through specific legislation or general laws, is necessary
• Ultra vires


  If a corporation engages in activities unrelated to its business purpose, such actions are considered ultra vires but can be validated through ratification
• De facto corporation


  For a de facto corporation to exist, it is crucial to file Articles of Incorporation and obtain the Certificate of Incorporation
• Officers and directors of a de facto corporation

  • Bear the same liabilities and penalties as those duly elected by a corporation de jure, including criminal liability
  • Their actions are binding in situations where they would be within the authority of officers of a corporation de jure
• Someone who transacts with such a corporation is prevented from denying its legal existence in any action arising from or related to such contract or transaction
• An unincorporated association, presenting itself as a corporation, will be legally prevented from denying its corporate status in a lawsuit brought against it by a third party who relied in good faith on that representation
• Piercing the corporate veil

  • To ignore the distinct legal identity of a corporation, the wrongdoing must be clearly and convincingly proven; it cannot be assumed
  • Piercing the veil cannot be invoked by someone who is not a victim of fraud or wrongdoing
• Powers of a corporation

  A corporation has no power except those expressly conferred on it by the Revised Corporation Code and its charter, and those that are implied or incidental to its existence
• Voting rights


  • Stockholders and members have the option to vote either in person or by proxy in all stockholder or member meetings
  • Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member
  • Unless the exclusive privilege is reserved for holders of founders' shares, every stockholder or member retains the right to nominate any director or trustee who meets all qualifications and none of the disqualifications specified in the Code
• Watered stocks


  Pertain solely to the initial issuance of stocks and not to any subsequent transfer of these stocks by the corporation, as it would then be considered a sale rather than an issuance
• Doctrine of Limited Capacity


  A corporation possesses only the powers expressly granted to it by law and its articles of incorporation. This includes powers incidental to the granted ones, those essential to achieve its purpose, and those necessary for its existence
• Hold-over period


  The duration between the end of one year from a member's election to the Board and the election and qualification of their successor
• Certificate of stock


  A document that serves as evidence of ownership of shares and facilitates the transfer of title, providing a convenient means of transferring ownership
• A contract between two or more corporations with directors serving on both boards (interlocking directors) will not be invalidated solely on that basis
• Independent director


  An individual who, beyond shareholdings and fees received from the corporation, maintains independence from management and is devoid of any business or other association that could or could reasonably be seen to significantly impede the exercise of impartial judgment while fulfilling duties as a director
• Right of appraisal


  Allows a shareholder who dissents from specific corporate actions to request payment for the fair value of their shares
• Corporate Entity Theory


  A corporation gains legal existence upon receiving the Certificate of Incorporation. At this point, it obtains the capacity to sue and be sued, engage in contracts, hold, or transfer property, and perform legal actions in its name. As a distinct legal entity, it possesses a separate personality from its stockholders or members. The assets it owns are exclusively under its ownership as a separate legal entity. Furthermore, the corporation is not personally liable for the debts, obligations, or liabilities of its shareholders
• Affiliated corporations


  Under the common control of the parent holding company and function as integral parts of a unified system
• If a foreign corporation acts as an incorporator, the application for registration must include a copy of a document. This document should be authenticated by a Philippine Consulate or bear an apostille. It must authorize the foreign corporation to invest in the corporation being established and explicitly mention the designated signatory on its behalf
• Stock and transfer book

  The Corporate Secretary and the Stocks and Transfer Agent have the authority to make legitimate entries
• There shall always be a class or series of shares which have complete voting rights
• The right to vote is inherent in and incidental to the ownership of corporate stocks
• Board of Directors


  The governing body in a stock corporation
• Grandfather Rule


  A method used to attribute the shareholdings of a corporate shareholder to subsequent tiers of ownership, especially when there is uncertainty. This approach helps identify the ultimate ownership structure within a corporation
• Corporation by estoppel


  Arises when a group of individuals knowingly presents themselves as a corporation, despite lacking the authority to do so, and engages in a transaction with a third party based on this representation
• Piercing the corporate veil


  Serves as an exception to the general rule that a corporation maintains a separate legal identity from its shareholders and members
• Reverse Piercing of the Corporate Veil

  A legal principle that holds the corporation accountable for the debts or obligations of its shareholders. This concept reverses the usual separation between the corporation and its owners, attributing the liabilities of individual shareholders to the corporation itself. It is invoked when it is considered fair or required to hold the corporation responsible for the actions or debts of its shareholders
• The reinstatement of corporate existence does not affect the appraisal rights of dissenting stockholders as outlined in the Revised Corporation Code
• Stock corporation


  A company that has its capital divided into shares and is empowered to distribute dividends to shareholders based on the number of shares they own