[Corporation] Intro

• DEFINITION

  1. Artificial being created by operation of law
  2. Has rights of succession and power, attributes and properties authorized by law
• Piercing the Veil of the Corporate Entity

  Corp is confined to legitimate transactions.

  Used to contradict the separate entity concept

  Applied in the following scenarios:

  Defeat public convenience

  Justify wrong

  Defend crime

  Protect fraud

  Corporation is alter-ego or dummy entity
• Piercing the Veil Test

  There is control

  Control is used to commit fraud and tolerance

  Proximate cause of injury
• Operation of Law

  Corporation existence upon issuance of Certificate of Incorporation or Registration

  Exception:

  Estoppel

  Created by Special Law

  Corporation Sole (One Person Corporation)
• Right of Succession

  Death, Incapacity, or Civil Interdiction of one stockholder does not result to dissolution.

  "Strong" judicial personality
• Powers of a Corporation

  Express: Corporation code, other laws, Articles of Incorporation

  Implied: inferred from or necessary for express

  Incidental: to teh existence of the corporation
• Powers of Corporation

  EXPRESS POWERS:

  • To sue and be sued in its corporation name
  • Of succession by its corporation name
  • Adopt and use corporation seal
  • Amend its AOI
  • Adopt by-laws not contrary to LAMOCPOPS
  • For stock corporation, right to sell shares
  • For non-stock, to admit members
  • Acquire properties
  • Enter into merger and consolidation
  • To form a partnership and Joint Venture
  • To make reasonable donations (+ Domestic Corporations political aid*)
  • Establish pension, retirement and other plans
• Ultra Vires Act

  • Cannot be executed or performed
  • Not within express, inherent or implied powers
  • Not all are illegal, but all illegal are ultra vires
• Classes of Corporation

  • Stock
  • Non-stock
• Stock

  • Capital stock divided into shares
  • Authority to distribute dividends
• Non-stock


  Not authorized to distribute surplus profits
• Under what law

  • Domestic
  • Foreign
• Whether public can own shares

  • Close
  • Open
• Close

  • Shares of stocks are limited in number
  • No public investors
• Open

  • Accept outsiders as stockholders or investors
  • Called "Publicly Listed Corporations"
• As to purpose

  • Private
  • Public
• Private

  • May be considered as privileges conferred by State
  • Formed for the government
  • For general good and welfare
• Public

  • Formed for the government
  • For general good and welfare
• As to religious purpose

  • Ecclesiastical
  • Lay
• Ecclesiastical


  • Exclusively for spiritual purposes
  • To secure public worship or perpetuate right
• Lay

  • Eleemosynary: for benevolent purposes
  • Civil: for benefit, pecuniary of its members
• As to number of persons

  • Aggregate
  • Sole
• As to validity of incorporation

  • De Jure
  • De Facto
• De Jure


  • Full compliance
  • Separate distinct personality
• De Facto

  • In good faith (colorable compliance)
  • Use of corporate powers
  • Separate and distinct personality - maybe directly attacked thru quo warranto
• Promotional Stage

  Bring together persons interested in the business venture

  Promoter held personally liable on contracts made by him
• Process of Incorporation

  1. Drafting of AOI
  2. Preparation and submission of additional and supporting documents
  3. Filing with the SEC
  4. Subsequent issuance of Certificate of Incorporation
• Name of the Corporation

  Not (confusingly) similar to other names alr registered
• ARTICLES OF INCORPORATION

  Specific purpose

  • If more than one, state the "primary purpose"
  • Non-stock must not have purpose contrary to nature

  Reason for requiring statement of purpose:

  • To inform SH w/n what lines of bus his money is put
  • So BOD within what lines they're authorized to act
  • Anyone may ascertain if contract is within general authority

  General limitations:

  • Must be lawful
  • Must be specific or stated concisely
  • Specify primary and secondary purpose
  • Purposes are capable of being lawfully combined
• PRINCIPAL OFFICE

  
  

  Must be within the Philippines

  Includes Province, City, or Municipality

  
  

  Important in:

  Venue of actions

  Registration of chattel mortgage of shares

  Validity of meetings of stockholders
• TERM OF CORPORATION

  General assumption is of perpetual existence

  Term, if specified, must be in the AOI

  Equally applies to already existing corporations (xpn: majority of SH votes to retain)

  Definite term may be extended 5 years prior to expiry date

  After expiration, corporation may file for revival to the SEC
• NAMES, NATIONALITIES, AND RESIDENCES OF THE INCORPORATORS

  Corporators

  • Need not be among those executed in the AOI

  Incorporators

  • Those mentioned in the AOI
  • Must not be more than 15

  Qualities of incorporators

  • Natural person (+ partnership, association, or corporation*)
  • Of legal age
  • Must own or subscribe to at least 1 share
  • Majority are PH residents (Removed)
• Director


  Governing board in stock corporation
• Number of directors

  • Should not exceed 15
• Trustees


  For non-stock corporation
• Number of trustees

  • May exceed 15 (exception: educational non-stock; 5, 10, 15)
• Independent directors

  • Constituting at least 20% of the board
  • Independent of management
• Corporations required to have independent directors

  • Corporations covered by the SRC (>50M, 200 shareholders each holding at least 100 shares)
  • Banks, quasi-banks, NSSLAs, pawnshops
  • Corporations engaged in money service, pre-need trust
  • Insurance companies, and other financial intermediaries
  • Other corporations vested with public interest similar to above
• ACTING DIRECTORS

  Names, nationalities, and residences

  Until the first regular directors or trustees are elected
• BOARD OF DIRECTORS (OR TRUSTEES)

  • Supreme authority in matter of management of regular and ordinary business affairs
  • Authority does not extend or changes in the corporation charter (belongs wholly to Shareholders).