Corporation

• Sole


  No artificial/juridical personality
• Partnership


  Artificial juridical personality
• Corporation


  Artificial/juridical personality
• Equation


  • Sole: A = L + OE
  • Partnership: A = L + Partners Equity
  • Corporation: A = L + Shareholder's Equity
• Doctrine of Separate Entity

  • Sole: No distinction between personality of each partner
  • Partnership: Distinction between personality of each partner
  • Corporation: Separation between the business and the owners
• Succession of business


  • Sole: If one partner dies, contract terminated, new contract needed to continue
  • Partnership: Can be inherited or open for succession
  • Corporation: Can be inherited or open for succession
• Doctrine of Separate Entity

  • In partnership, distinction between personality of each partner
  • In corporation, separation between the business and the owners
  • There are 2 types of persons: Natural (rational beings) and Artificial (juridical or legal persons, given personality based on the fiction of law)
• Advantage of Artificial Person

  • Business (partnership or corporation) can buy property registered in its own name
  • Can file a case or be sued through the corporation or partnership itself
• Corporation Law (Act 1459)


  1906
• BP 68 - Corporation Code of the Philippines


  May 1, 1980
• RA 11232 - Revised Corporation Code of the Philippines


  February 23, 2019
• Corporation Code


  • General law on Private Corporation regarding its creation, formation, and powers
  • For Government Owned and Controlled Corporations (GOCCs), they have their own rules and regulations
• RA 11232 Section 2


  A corporation is an 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
• Attributes of Corporation


  • It's an artificial being
  • It is created by operation of law
  • It has the right of succession
  • It has only the properties expressly authorized by law or incidental to its existence
• Artificial being


  • Personality given from fiction of law
  • Capable of having rights and obligations separate and distinct from its members or stockholders
  • Doctrine of Limited Liability (advantage for corporation/investors but disadvantage for creditors)
• Created by operation of law


  Need to comply with the process to obtain the certificate of registration from SEC to function as corporation, which marks the birthday of corporation
• Right of succession


  Continuous existence in term of articles in incorporation
• Properties expressly authorized by law or incidental to its existence

  Express power (granted by state and Article of Corporation), Implied power (not stated in AOI but still have the rights and power to do it), Incidental power (allowed to do in virtue of being a corporation)
• Articles of Corporation (AOI)


  • Primary Purpose (only one purpose)
  • Secondary Purposes (branching out to other business)
• Lack of filing for secondary purpose is called Ultra vieress (outside powers)
• Advantages of Corporation


  • Perpetual/continuous existence
  • Transferability of shares
  • Attracts more investors
  • Continuous Existence
  • Easy ownership transfer
  • Easy to raise capital
  • Limited liability
• Disadvantages of Corporation


  • Costly to form
  • Highly regulated by the SEC and other government agencies
  • Limited liability may discourage creditors
  • Double Taxation (corporate income tax and dividend tax)
• Doctrine of Corporate Entity/Doctrine of Separate Personality


  Corporation is a juridical personality separate from its stockholders and any other legal entities (parent-subsidiary relationships)
• Similarities between Partnership and Corporation

  • Both have juridical personality
  • Can only act through agents
  • Composed of an aggregate of individuals
  • Can only be organized when there is law authorizing their organization
  • Taxable entities
• Classification of Corporation under the Code

  • Stock corporation (capital stock divided into shares, authorized to distribute dividends)
  • Nonstock corporation (all other corporations)
• Classification of Private Corporations

  • As to existence of Stocks (stock, nonstock)
  • As to the number of persons who compose them (aggregate, sole, one-person)
  • As to whether they are for religious purpose or not (ecclesiastical, lay)
  • As to whether they are for charitable purpose or not (eleemosynary, civil)
  • As to state or country under or by whose laws they have been created (domestic, foreign)
  • As to their legal right to corporate existence (de jure, de facto)
  • As to whether they are open to the public or not (close, open)
  • As to their relation to another corporation (parent/holding, subsidiary)
  • As to whether they are corporations in a true sense or only in a limited sense (true, quasi)
  • As to whether they are for public (government) or private purposes (public, private)
  • Going public or not (going public, going private)
• Components of a Corporation

  • Corporators (compose the corporation)
  • Incorporators (originally forming and composing the corporation, signatories)
  • Stockholders
  • Members
• Minimum capital stock not required for stock corporations, except as otherwise specifically provided by special law
• Powers of the Board

  • Control over the properties and assets of the corporation
  • Conduct of business
  • All corporate powers
• Number and Qualifications of Directors

  • Not more than 15 directors/trustees
  • Owns at least one share
  • Ownership must stand in the name of the director in the books of the corporation
  • Possess all the qualifications and none of the disqualifications
• Board of Directors/Trustees/Officers


  • Shall exercise corporate powers, conduct all business, control all properties
  • Directors shall be elected for a term of one year, trustees for a term not exceeding three years
  • Corporation vested with public interest shall have Independent Directors constituting at least 20% of the board
• Independent Director


  A person who is independent of management and free from any business or other relationships, perceived to materially interfere with the exercise of independent judgement
• Repository of Corporate Powers

  The Board of Directors or the Board of Trustees shall exercise corporate powers
• Corporate Officers


  • President (must be a director at the time of assuming office)
  • Treasurer (may or may not be director, must be a resident)
  • Secretary (need not be a director, must be resident and citizen of the Philippines)
  • Compliance Officer (if corporation is vested with public interest)
• Basic Rights of Stockholders

  • Direct or indirect participation in management
  • Inspection of corporate books and records
  • Pre-emptive right to subscribe to all issues or disposition of shares of the corporation
  • Right to vote on matters provided for by law
  • Right to receive dividends
  • Appraisal right
  • Right to bring derivative suit
• Director


  Must be elected by the shareholders present or entitled to vote in absentia during the election of directors
• Board of Directors or Board of Trustees


  Shall exercise corporate powers
• Corporate Officers


  • President
  • Treasurer
  • Secretary
• President


  Must be a director at the time the assumes office, not at the time of appointment
• Treasurer


  May or may not be director; as a matter of sound corporate practice, must be a resident