CORPORATION

• Corporation


  An artificial being created by operation of law, with the right of succession and only the powers, attributes and properties expressly authorized by law or incidental to its existence
• Attributes of a corporation

  • Separate Personality/Corporate Entity Theory
  • Limited Liability Doctrine
• Separate Personality/Corporate Entity Theory

  • The corporation has a juridical personality separate and distinct from the stockholders or members
• Limited Liability Doctrine


  • The liabilities of the corporations are generally its own and cannot extend to the stockholders in their personal capacities
• The State can disregard the notion that a corporation has a personality separate and distinct from the persons composing it for certain justifiable reasons
• Reasons for piercing the corporate veil

  • Equity Cases - When the corporation is used to defeat public convenience
  • Control Test - When the corporate entity is used to justify wrong, protect fraud, or defend a crime
  • Alter ego Cases - If a certain corporation is only an adjunct or an extension of the personality of the corporation. When a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation and its affairs are so conducted as to make it merely an instrumentality, agency or conduit of another corporation
  • Objective Test - When the end result of piercing the veil is to make the stockholders liable for debts and obligations of the corporation
• Concession or Fiat Theory

  Corporation owes its existence to the law and the State and the extent of its existence, powers, and liberties is fixed by its charter
• Public Corporations or Private Corporations owned and controlled by the government can only be created by special law (Charters)
• Commencement of Corporate Existence

  At the time of the issuance of the Certificate of Incorporation or Registration, except for corporation by estoppel, corporation by prescription, those created by special law, and sole corporation
• Powers, Attributes and Properties of a Corporation

  • To sue and be sued in its corporate name
  • To have perpetual existence unless the certificate of incorporation provides otherwise
  • To adopt and use a corporate seal
  • To amend its articles of incorporation
  • To adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the same
  • To issue or sell stocks to subscribers and to sell treasury stocks
  • To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with real and personal property
  • To enter into a partnership, joint venture, merger, consolidation, or any other commercial agreement
  • To make reasonable donations
  • To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers, and employees
  • To exercise such other powers as may be essential or necessary to carry out its purpose or purposes
• Express Powers


  Powers expressly conferred by law or the articles of incorporation
• Implied Powers


  Powers inferred from or reasonably necessary for the exercise of provided powers of the Corporation
• Incidental or Inherent Powers


  Powers that attached to a corporation at the moment of its creation without regard to its expressed powers or particular primary purposes
• No corporation shall possess or exercise corporate powers other than those conferred by this Code or by its articles of incorporation and except as necessary or incidental to the exercise of the powers conferred
• Effects of Ultra Vires Acts


  • Executed Contract - Voidable
  • Executory contracts - Unenforceable
  • Partly executed and partly executory - principle of unjust enrichment at the expense of another shall apply
  • Ultra vires acts which are illegal per se - null and void
  • Ultra vires for being outside the primary and secondary purpose - voidable on the part of the other party
  • Corporate officer exceeded authority or unauthorized - unenforceable
• Doctrine of Apparent Authority

  If a corporation knowingly permits its officer, or any other agent to perform acts within the scope of an apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against any person who has dealt in good faith with the corporation through such an agent, be estopped from denying such authority
• Tests to Determine Nationality of Corporation

  • Incorporation Test - the nationality of a corporation follows that of the country under whose laws it was incorporated
  • Business Domiciliary Test - the country where it is principal business is conducted
  • Control Test - nationality of the corporation follows that of the stockholder owning the controlling interest
  • Grandfather Rule - a method by which the percentage of Filipino equity in corporations engaged in nationalized and/or partly nationalized areas of activities, provided for under the Philippine Constitution and other nationalization laws, is accurately computed and the diminution of such equity is prevented
• Classes of Corporations


  • Stock Corporation - one that has capital stock divided into shares and are authorized to distribute to holders such shares dividend or allotments of the surplus profits on the basis of the shares held
  • Non-stock Corporation - one no part of the income which is distributable as dividends to its members, trustees or officers
  • Domestic Corporation - incorporated under Philippine laws
  • Foreign Corporation - formed, organized and existing under any laws other those of the Philippines and whose laws allows Filipino citizens and corporations to do business in its own country or State
  • Corporation Aggregate - composed of more than one corporator
  • Corporation Sole - composed of only one person
  • Public Corporation - organized for the government of a portion of the State
  • Private Corporation - formed for a private purpose or end
  • Quasi-public Corporation - organized for profits which are granted a franchise by the State to perform public service
  • Ecclesiastical Corporation - formed for a religious purpose
  • Lay Corporation - formed for a purpose other than ecclesiastical or religious
  • Eleemosynary Corporation - organized for public charity
  • Civil Corporation - organized for business or profit
  • Parent or Holding Corporation - one which owns the share of another corporation having the power, directly or indirectly, over the latter including the election of the directors thereof
  • Subsidiary Corporation - one whose shares of stock are owned by another corporation, called the parent corporation
  • Affiliate - corporation which is a member of a group of companies
  • Close Corporation - one which is limited to selected persons or members of the family
  • Open Corporation - one which is open to any person who may wish to become a stockholder or member thereto
  • Corporation by Prescription - one which has exercised corporate powers for such a length of time without interference from the State and which, by fiction of law, is given the status of a corporation
  • Corporation by Estoppel - one which is not in reality a corporation but is considered as one with respect to those who are precluded by their admission or conduct from denying its existence
  • De jure Corporation - one that has been created in strict compliance with all the legal requirements and whose right to exist as a corporation cannot be successfully attacked in a direct proceeding for that purpose by the State
  • De facto Corporation - one that is defectively created but there is is an actual exercise of corporate rights and franchise resulting from an attempt in good faith to incorporate on the part of the members
• Requisites of De facto Corporation

  • Organized under a valid law
  • Attempt in good faith to form a corporation according to the requirements of the law (colorable compliance)
  • Use of corporate powers
• Who may be incorporators

  • Natural Person
  • Partnership
  • Association
  • Corporation
• Number of Incorporators


  • Ordinary Corporation - two (2) or more persons, but not more than fifteen (15)
  • One Person Corporation - only one incorporator is required who is also the single stockholder and sole director
• Qualifications of Incorporators


  • Stock Corporation - each incorporator must own, or be a subscriber to at least one (1) share of capital stock
  • Non-stock Corporation - each incorporator must be a member of the corporation
  • Incorporators who are natural persons must be of legal age and must sign the articles of incorporation
• Incorporation may be a combination of the incorporators under the RCC, as well as foreign corporation/s
• Corporate Term


  A corporation shall have perpetual existence unless its articles of incorporation provide for a specific corporate term. Corporations with certificates of incorporation issued prior to the effectivity of this Code (February 23, 2019), and which continue to exist, shall have perpetual existence, without further action. If a corporation continues to elect its corporate term, it shall notify the Commission after it is approved by a vote of its stockholders representing a majority of its outstanding capital stock. Any change in the corporate term is without prejudice to the appraisal right of dissenting stockholders
• Stock corporation


  Incorporators must each own, or be a subscriber to at least one (1) share of capital stock
• Non-stock corporation


  Each incorporator must be a member of the corporation
• Incorporators who are natural persons

  • Must be of legal age and must sign the articles of incorporation
• Incorporation


  May be a combination of the incorporators under the RCC, as well as foreign corporation/s
• A corporation shall have perpetual existence unless its articles of incorporation provide for a specific corporate term
• Corporations with certificates of incorporation issued prior to the effectivity of this Code (February 23, 2019), and which continue to exist – shall have perpetual existence, without further action
• If a corporation continues to elect its corporate term

  Shall notify the Commission after it is approved by a vote of its stockholders representing a majority of its outstanding capital stock
• Any change in the corporate term is without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code
• Extending or shortening corporate term

  By amending the articles of incorporation which is approved by a vote or written assent of majority of Board of Directors of Trustee and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the corporation or of its members
• No extension may be made earlier than three (3) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the SEC
• Such extension of the corporate term shall take effect only on the day following the original or subsequent expiry date(s)
• Revival of corporate existence when corporate term has expired

  A corporation whose term has expired may apply for a revival of its corporate existence, together with all the rights and privileges under its certificate of incorporation and subject to all of its duties, debts and liabilities existing prior to its revival
• Upon approval by the Commission, the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence, unless its application for revival provides otherwise
• No application for revival of certificate of incorporation of (1) banks, (2) banking and (3) quasi-banking institutions, (4) preneed, (5) insurance and trust companies, (6) non-stock savings and loan associations (NSSLAs), (7) pawnshops, (8) corporations engaged in money service business, and (9) other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency
• Common Stock


  Ordinary stock of a corporation that entitles the holder to a pro rata division of the dividends, without preference or advantage over other stockholders
• Preferred Stock


  One that entitles the holder to certain preferences over other stockholders