Professional Documents
Culture Documents
CORPORATION
242)
DOCTRINE OF SEPARATE
PERSONALITY
corporation
has
juridical
ATTRIBUTES OF A CORPORATION
1. It is an artificial being.
Consequences/significance:
incurred
by
CORPORATION:
SCRA 483)
the
acting
Code)
imprimatur
of
the
state
26 SCRA 242)
in
law
the
property
of
the
manager,
83 SCRA 237)
corporate
secretary,
Court).
5. Changes
in
individual
remains
identity
its
(The
the
membership
by
individual
changes
in
membership.
Corporation
Code
6. Entitlement
to
of
constitutional
guaranties:
a. Due
process
University
(Albert
vs.
Publishing,
13
SCRA 84)
CORPORATE ENTITY
Bell
&
Co.
vs.
Protection
ordinarily
against
would
subject
or
from
distinguishes
seizures.
vs.
corporation
to,
be
self-incrimination.
(Bataan
4.
corporation
is
perpetuating
fraud
or
therefor
by
management.
piercing the
others
cannot
also
be
c.
ed.)
3.
do wrong.
Rules:
a. There must have been
ALTER
EGO
RULE
and
of
by
piercing.
the
corporation
pecuniary
pertaining
claims
to
corporation
corporate
the
against
officers
or
stockholders.
Ego
2. Alter
INSTRUMENTALITY
Cases
controlled
and
its
affairs
are
or
complete
stock
when
the
Rules:
not
every partner is an
agent
is vested in the
duty); and
agreed
upon,
of
the
partnership
or trustees
6. Effect of mismanagement
A partner as such can
member
mismanages
board of directors
Corporation
or
by
agreement
mere
of
the
of
trustees
the
who
mismanages must
1. Creation
Created
and
board of directors
business
Created by law or
be in the name of
by operation of law
the corporation
parties
7. Right of succession
2. Number of incorporators
May be organized by
Requires at least
Partnership has no
Corporation
five
right of succession
right of succession
incorporators
(except
corporation sole)
Partners
juridical
Acquires
juridical
are
liable
personally
and
moment of execution
date of issuance of
of
the
to third persons
partnership
certificate
of
9. Transferability of interest
incorporation by the
Securities
and
(sometimes solidarily)
of
are
contract
Stockholders
subsidiarily
has
Partner
cannot
Stockholder
has
Exchange
Commission
the partnership so as
to
to
4. Powers
make
the
transfer
transferee a partner
consent
without
other stockholders
power authorized by
powers
unanimous consent of
because
granted by law or
all
corporation is not
it is not contrary to
based
law,
granted or incident
partnership is based
principle
to its existence
on the principle of
Partnership
may
Corporation
exercise
morals,
any
good
can
expressly
the
the
existing
delectus personarum
public policy)
5. Management
When management is
The power to do
of
his
on
the
this
partnership may be
corporation
period
time
term in excess of
contract as a distinct
management
the
50 years extendible
2.
2.
existence
instance
3.
of
stipulated
by
partners
may
1.
has
continuity
of
1.
of
complica-
high
cost
formation
and
operations
its
credit
is
3.
by
its
weakened
strengthened
may
legal
its credit is
continuity of existence
limited
4.
feature
by
the
liability
Limited partnership is
corporation
required by law to
adopt
provided it is not
management
To its name
the
board of directors.
personal element.
any
5.
5.
firm
management,
any
name
same
similar
as
to
registered
or
name
12. Dissolution
its
in
the
creation,
4.
lack
degree
and
governmental
dissolution
are
supervision
are
ment
consent
one
only
of
be
the
State
governed
by
the
Code
Corporation Code
of
organization
6.
can
of
greater
standardized as they
may be dissolved at
of the partners
centralized
governed
under
general
manageand
control
incorporation law.
ownership.
6.
limited liability
7.
7.
shareholders
Stockhol-
business.
8.
transferability
of
shares
FRANCHISES OF CORPORATION
1. Primary or corporate franchise/General
Franchise
The right or privilege granted by the
ADVANTAGES
VIS--VIS
DISADVANTAGES OF
BUSINESS
DISADVANTAGE
S
for
Example,
use
which
of
it
the
was
created.
streets
of
delivery service.
franchise of being or
of
20)
existing
right
PRIMARY
Refers
to
as
the
a
corporation
Vested
rights.
Example:
of
eminent
domain
in
individuals
compose
the
Vested
in
the
who
the
corporation
compose
the
Requisites:
1. The existence of a valid law
under
which
may
be
incorporated;
2. A bona fide attempt in good
faith to incorporate under
such law;
corporation.
be
sold
or
Cannot be sold or
May
transferred because
transferred; subject to
good
it is inseparable from
sale
powers; and
subject to levy.
on
it
execution,
faith
of
corporate
4. Issuance of a certificate of
incorporation by the SEC as
CLASSES OF CORPORATION
a minimum requirement of
1. AS TO ORGANIZERS
The
only
between
difference
de
facto
2. AS TO FUNCTIONS
3. AS TO GOVERNING LAW
a. public Special Laws; and
b. private
Law
on
Private
Corporations
4. AS TO LEGAL STATUS
a. De jure corporation organized in
to
existence;
challenge
a
de
its
facto
of law.
(The
Corporation
the
Philippines
corporation.
Code
de facto.
ed.)
d. Corporation by prescription
c.
of
exercised
one
which
has
5. AS TO EXISTENCE OF SHARES OF
STOCK
company
its
authorized
to
of
or
stockholders
to
shareholders
distribute
dividends
its
subsidiary.
of
The
the
parent
(Sec. 3)
subsidiary.
stocks
nor
7. AS
6. AS
TO
TO
PLACE
a. Domestic
RELATIONSHIP
OF
INCORPORATION
distribute
corporation-
OF
determines
b. Foreign
corporation
as a
(Sec. 123)
which controls
another
corporation
wherein
all
or
or
requirements
indirectly
by
such
other
of
corporation
(e.g.
number
of
of
stockholders
corporation
corporate entity.
directors
incorporators,
composed
of
board
and
its
non-Filipino
OF CORPORATIONS
regardless
1.
INCORPORATION
TEST
of the nationality
of
the
stockholders.
2.
shares
entitled
to
vote
and
the
COMPONENTS OF A CORPORATION
members
b.
TEST.
Incorporators
They
are
those
statute.
Qualifications:
1. natural person;
15;
3. of legal age;
citizens;
Philippines; and
can be incorporators.
behalf
where
are
impliedly,
Directors/Trustees.
d.
incorporated
Members
cooperatives
corporators
of
of
proposed
by
its
corporation
Board
of
c.
Underwriter
person
who
INCORPORATORS
CORPORATORS
signatory
the
stockholder
(stock
of
corporation)
or
Articles
to
Incorporation
member (non-stock
corporation)
fait
accompli;
be
if
they
Articles
subsequently
lose
Incorporation
of
cannot
such
their qualifications
CLASSIFICATION OF SHARES
1. COMMON SHARES
The basic class of stock ordinarily and
be amended to replace
them)
number is limited to 5-
no restriction as to
15
number
may be such
capacity
through a guardian
management
of
its
affairs
without
2. PREFERRED SHARES
therefor.
Limitations:
4. TREASURY SHARES
in Section 6 paragraph 6.
Code.
value.
stockholders
investment
3. REDEEMABLE SHARES
of
in
the
the
value
company
of
their
and
of the capital.
own shares.
Limitations:
shares;
c.
Redeemable
shares
may
be
issuance of shares.
of
incorporation,
unless
otherwise
Redeemable
shares
be
(uncalled
and
subject
to
reissue).
be effectively lost.
itself.
bonded indebtedness;
5. FOUNDERS' SHARE
of
corporation
stock
in
f.
merger
or
consolidation
of
capital stock
property.
in
dividend
payments.
But
if
another
corporation
or
h. corporate dissolution
an
8. ESCROW STOCK
6. VOTING SHARES
9. OVER-ISSUED STOCK
7. NON-VOTING SHARES
as
voting rights.
vote
on
the
following
fundamental
issued
spurious
in
stock.
excess
Its
of
issuance
the
is
Articles
of
Incorporation
b. adoption and amendment of
c.
Stock
watered stocks.
It includes stocks:
a. Issued without consideration.
by-laws;
b.
property;
Issued
as
fully
paid
when
the
justify it.
full share.
incorporation.
12. NO PAR VALUE SHARES
articles of incorporation.
Limitations:
liabilities. (Sec. 6)
DEFINITION OF TERMS:
dividends;
c.
They
cannot
be
issued
as
preferred stocks;
companies,
insurance
at
the
organization
of
the
said shares;
f.
6)
of incorporation
c.
COMMENCEMENT
TRANSACTION OF BUSINESS
total
amount
of
the
capital
stock
FORMAL
ORGANIZATION
OF
AND
THE
Formal organization:
and officers;
II.
INCORPORATION
AND
TERM OF CORPORATE EXISTENCE
ORGANIZATION
Limitations:
STEPS
IN
THE
CREATION
OF
CORPORATION
extend.
b. INCORPORATION
Steps:
incorporation
Except:
Domestic
Corporations
e) Criminology
Insurance
P500T
capital
f)
Chemistry
g) Customs Brokerage
h) Environmental Planning
i)
Forestry
j)
Geology
k) Interior Design
l)
m) Law
Landscape Architecture
n) Librarianship
o) Marine Deck Officers
at least P500T
4. Savings and Loan Corporation
q) Master Plumbing
r)
s) Social Work
5. Financing Companies
Paid up: - P2M for Metro Manila
t)
Teaching
u) Agriculture
v) Fisheries
Sugar Technology
capital
stock
has
been
of
less
than
US$2,500,000(Sec. 5 of RA 8762)
4. Cooperatives (Ch. III, Art. 26 of RA
6938)
FILIPINO PERCENTAGE
OWNERSHIP REQUIREMENT
NO FOREIGN EQUITY
May 1994)
Engineering
operation
and
c) Accountancy
d) Architecture
PD 449)
9. Manufacture,
and/or
repair,
distribution
of
stockpiling
nuclear
CA 541)
Constitution)
10. Manufacture,
and/or
repair,
distribution
stockpiling
of
biological,
(Various
16.
by the Philippines)
17. Exploration,
development
and
7183)
Equity
radio
communications
administration
of
and
educational
Equity
Constitution)
21. Culture,
production,
processing,
trading
of
rice
and
milling,
excepting
retailing,
corn
and
PD 442)
194;Sec. 15 of RA 8762
22. Contracts for the supply of materials,
a) infrastructure/development
projects covered in RA 7718; and
b) projects which are foreign funded
or
assisted
and
required
to
goods
and
government-owned
corporation,
commodities
or
company,
to
controlled
agency
or
5183)
23. Project
Proponent
and
Facility
de facto one.
of
condominium
units
4. term of existence;
5. names,
residences of incorporators;
4726)
citizenship
nationalities,
and
and
qualified;
amended by RA 8556)
by RA 8366)
each share;
9. names, residences, number of
10. if
Significance:
The
document
prepared
by
non-stock,
the
amount
of
total subscription;
11. name of treasurer elected by
subscribers; and
ownership
accompanied
of
Filipinos
to
by
favorable
of
the
appropriate
recommendation
minimum.
government agency.
AMENDMENT
OF
ARTICLES
OF
NON-AMENDABLE
FACTS
IN
THE
INCORPORATION
ARTICLES OF INCORPORATION
Limitations:
matters
such as:
stated
in
the
articles
of
1. Names of incorporators;
be
contrary
to
the
provisions
or
the
accomplished fact
capital
of
the
subscribers;
initial
corporation;
stock
together
must
contain
all
capital
of
non-stock
GROUNDS
ARTICLES OF INCORPORATION OR
AMENDMENT THERETO
prescribed
stockholders
or
members
must
be
FOR
REJECTION
OF
regulations
corporation,
Board of Trustees.
beneficial
with
2.
only
members
ownership
of
of
the
the
stocks
FOR
SUSPENSION
OR
(Sec. 23)
REVOCATION OF CERTIFICATE OF
A)
incorporation
directors/trustees.
general public
stockholders/members of record.
at least 5 years
5.
prescribed
required period
the
by-laws
of
the
corporation.
CORPORATE OFFICERS
Qualifications:
and
of incorporation so provide.
4. Such
other
officers
as
may
be
CORPORATE
OFFICER
EMPLOYEE
the
managing officer of
Code
the corporation
will
in
in
Position is provided
Employed
action
case
of
labor
dispute
by
of
case
of
OF
powers
of
RULE:
CORPORATE
the
The
corporate
corporation shall be
of
an
Executive
may
be
an
individual,
EXCEPTIONS:
1. In
may
POWERS
GENERAL
transaction.
DIRECTORS/TRUSTEES
AS REPOSITORY OF
the
labor
disputes
BOARD
finalize
manage
the
Limitations
Constitution,
imposed
statutes,
by
articles
the
of
incorporation or by-laws.
2. Cannot perform constituent or those
involving fundamental changes in the
corporation requiring the approval of
stockholders or members.
3. Cannot exercise powers not possessed
by the corporation. (The Corporation
Code
of
the
Philippines
Annotated,
(The
(Philippine
trustees
1. Duty of Obedience
are
ORIGINAL
and
Corporate
Law,
Cesar
2. Duty of Diligence
to
resulting
(Philippine
3. Duty of Loyalty
Corporate
Law,
Cesar
patently
unlawful
therefrom
acts
suffered
of
by
the
the
any
pecuniary
or
personal
Consequences:
When
to
director
acquire
or
or
trustee
stockholders.
attempts
acquires
in
ed.)
profits
which
otherwise
would
have
elected.
par.)
corporation,
thereby
obtaining
profits
ELECTION OF DIRECTORS/TRUSTEES
Limitations:
members
called
for
the election of
LIMITATIONS
present
either
in
person
or
by
ON
THE
provides
stockholder.
voted.
directors.
number
of votes
shall
elected.
be declared
classification
of
shares
METHODS OF VOTING
for
REMOVAL OF DIRECTORS/TRUSTEES
Limitations:
the
Callejo, J.)
agents
authority.
(LapuLapu
OF CORPORATE OFFICERS
his office;
(Sec. 31)
to
the
issuance
of
estopped to deny.
hold
and
corporation; or
unauthorized,
may
himself
liable
with
the
become
DOCTRINE OF
DOCTRINE OF
LIMITED LIABILITY
IMMUNITY
Shields
the
corporators
from
corporate
beyond
their
contribution
Protects
The
rule
shall
be
applied
liability
agreed
corporation
the
acting
for
to
person
being
from
himself
capital or shareholding
in the corporation.
his
authorized
actions
34)
2. Contracts of self-dealing directors
Contracts which are entered into by
the corporation with one or more of its
REMEDIES IN CASE OF
MISMANAGEMENT
32)
1. Receivership;
done;
3. Dissolution if the abuse amounts to a
ground for quo warranto but the
contract
was
not
necessary
to
SEC.
RULES
ENTERED
ON
CONTRACTS
INTO
DIRECTORS/TRUSTEES
BY
OR
OFFICERS:
1. Doctrine of Corporate Opportunity
profits
he
realizes
on
business
opportunity which:
undertake;
2. From its nature, is in line with
corporations
business
and
is
of
between
capital stock).
2002 ed.)
Contracts
entered
into
board.
May act by a majority vote of all of its
corporation
or
corporations
members.
is
Limitations
1. Matters
on
the
Powers
needing
of
the
stockholder
approval;
2. Filling up of board vacancies;
3. Amendment, repeal or adoption of by-
COMPENSATION OF DIRECTORS OR
TRUSTEES
laws;
4. Amendment
or
repeal
of
any
Except:
repealable; and
by-laws
b. when granted by
the vote of
Incorporation or Charter
2. Inherent/Incidental
corporation
Powers
not
activity.
10. To establish pension, retirement, and
Classification:
1. Acts in the usual course of business
directors,
corporation
employees.
trustees,
officers
and
out of profits
SPECIAL/SPECIFIC POWERS
Acts
to
increase
business
(The
(Secs.
37-44)
1. Power to extend or shorten corporate
term;
2. Increase or decrease corporate stock;
indebtedness;
(Sec. 36)
2. Of succession;
amend
its
Articles
of
provided:
a. there is an unrestricted retained
Incorporation;
5. To adopt its by-laws;
earnings, and
admit members;
property,
securities
and
bonds
or
powers)
partnership-within
general
whereby
one
BONDED
DEBENTURE
INDEBTEDNESS
term
Secured by a
Serial obligations
mortgage on
or notes issued on
dissolve a corporation
corporate property. .
the
(Philippine Corporate
Law, Cesar
corporation.
WAYS
INCREASING/DECREASING
THE
CAPITAL STOCK
a. By increasing/decreasing the number
of shares and retaining the par value;
b. By increasing/decreasing the par value
of
existing
shares
increasing/decreasing
the
without
number
of
shares;
c. By increasing/decreasing the number
of shares and increasing/decreasing the
par value.
AVAILABLE
TOOLS
STOCKHOLDERS
TO
TO
THE
REPLENISH
CAPITAL
a. Additional subscription to shares of
stock of the corporation by stockholders
or by investors;
b. Advances by the stockholders to the
corporation;
c. Payment of unpaid subscription by the
stockholders; and
create
indebtedness
or
increase
of
bonded
the
Hence,
indebtedness
To
collect
or
compromise
an
of
unpaid
delinquency
sale
subscription,
and
to
in
purchase
basis
business
stock
Except:
expansion projects
board of directors
must
further
comply
with
the
approved by the
financial
declaring
been secured
circumstances
corporate purpose
for
DIVIDENDS
contingencies.
Sources of dividends:
fixed time.
Forms:
SPECIAL RULES:
While
or
dividends
special
creditor
without
obtaining
reserve
from
its/his
in
for
the
probable
a. Cash
institution
b. Property
c.
cash
Stock
dividends
due
on
therefrom
may
be
availed
of
for
dividend distribution.
(i)
Has
sufficient
income
from
patents
and
leaseholds,
without
previously
charged
to
regarded
as
contractions
and
payment
dividends
because
(paid-in surplus)
when:
of
of the corporation.
h. Corporate earnings which have not yet
capital.
Note that unlike par value shares,
CASH DIVIDENDS
premium,
the
entire
DIVIDENDS
1.
Involves
disbursement
stockholders
declared as dividends.
accumulated earnings
dividends.
applicable.
e. No dividends can be declared out of
to
STOCK
the
of
2. Since it is still
paid
part
becomes
absolute
the
property
stockholder
the
of
and
cannot be reached by
of
corporate
property, may be
reached
by
corporate creditors
creditors
corporation
absence of fraud
corporation.
3. Declared by the
board
discretion
concurrence of the
of
in
the
the
with
stockholders
the
at
the
outstanding capital
representing
least
2/3
of
stock
at
regular/special
meeting
4. Does not increase
4. Corporate capital
is increased
5.
5.
Its
declaration
No
and assets.
1. Redemption of redeemable shares
(Sec. 8)
debt
is
by
its
created
corporation to each of
declaration
its stockholders
contract
EXECUTIVE
MANAGEMENT
COMMITTEE
CONTRACT
The
1. Express power of
stockholders
be provided for in
a corporation
satisfy
their
corporation
not
creditors
may
sue
directly
for
the
dissipate.
the
latters
unpaid
subscription.
Application of the TFD:
1. Where the corporation has distributed
its capital among the stockholders
without providing for the payment of
creditors;
the
2. A governing body
2.
which functions as
company
the
itself.
always be subject to
Corporation
(The
Code
board
of
the
Philippines
the by-laws
capital
stock
from
their
subscriptions;
3. Where it has transferred the corporate
property in fraud of its creditors; and
4. Where the corporation is insolvent.
Coverage of the TFD:
1. If the corporation is solvent, the TFD
extends to the capital stock represented
by the corporations legal capital.
Annotated,
Management
must
Hector
directions
recall
the
delegation
of
managerial
(The
Code
power.
Corporation
of
the
Philippines
Annotated, Hector de
Leon, 2002 ed.)
and
SCRAS 361)
ACTS
only
Types:
an
act
outside
or
beyond
to
corporation as provided
ULTRA VIRES
of
corporation
by
ACTS
Not necessarily
Unlawful;
policy,
corporation
order
Can be ratified
Cannot be ratified
Cannot
wholly or partly
parties
bind
public
the
executed
contracts
and
Executory
against
b.
ILLEGAL ACTS
no
ends,
and
reasonably
36)
ACTS
1. State
public policy;
certificate of registration
2. Stockholders
contracts;
a. Injunction; or
b. Derivative suit
3. Creditors
creditors
oppressive.
Binding effect:
a. As to members and corporation
V. BY-LAWS
Rules
of
action
adopted
by
b. As to third persons
They are not bound to know the by-
Functions:
a.
Supplement
articles
of
incorporation
incorporation
the
corporation
and
the
individuals
composing it
d. Define the rights and duties of
corporate officers and directors/trustees
CONTENTS OF BY-LAWS
between
directors or trustees
corporation
the
internal
stockholders/
the
force
of
and
State;
between
the
of voting therein
stockholders
and
members;
Executed
them
incorporation
e.
The
qualification,
duties
before May
be
after
executed
incorporation.
and
simultaneously
the
Articles
with
of
Incorporation
Amended by a majority
May be amended by
of
a majority vote of
trustees
stockholders
majority
directors or trustees
outstanding
outstanding
capital
stock or a majority
of the member in
members in case of
non-stock
non-stock corporations
corporation
Power
Power to amend or
Such
other
matters
as
may
be
the
directors/
and
to
amend/repeal
articles
the
repeal
BOD
and
vote
of
capital
by-laws
or
cannot be delegated
affairs
by
stockholders/
may be delegated
of directors/ trustees
outstanding
ARTICLES OF
BY-LAWS
the
INCORPORATION
members
acquisition
corporate existence;
capital
of subsequent;
absence
in
the
case of non-stock
its
corporation
merely
furnishes a ground
for the revocation of
VI. MEETINGS
the franchise
STOCKHOLDERS/MEMBERS MEETING
WHEN:
of the former.
b.
date in April;and
in the by-laws.
WHERE:
exercised
instances:
of
the
following
any
trustees;
in
agreement;
4. Pledge or mortgage of shares;
5. As provided for in its by-laws.
WHEN:
directors
cannot
do
so.
(Sec.
and
(Sec. 25).
EXTENT OF AUTHORITY
WHERE:
the Philippines.
b.
LIMITED
PROXY
restrict
the
Limitations:
VOTING TRUST
shares
transferring
stockholder
like
stock
certificates,
Limitations:
of
the
the principal
be notarized
notarized
The
agreement
is
irrevocable
Revocable
except
anytime
one
with
interest
to
particular meeting
act
at
any
against
monopolies
and
illegal
combinations
b. The agreement must not be used for
purposes of fraud
c. It must be in writing and notarized and
specify the terms and conditions thereof
d. A certified copy of the agreement must
specified
stockholders meeting
rights
of
stockholder
when
the
the
even
latter
is
present
An agreement must
A proxy is usually of
shorter
SEC
58 it cannot exceed 5
made a condition of a
loan.
corporation
divorced
inherent
in
the
agreement
shall
from
ownership of stocks
proxy
votes as agent
PROXY
The
or
stock
agreed period
in
right to ownership of
VOTING TRUSTS
the
duration
holder
mere agent
The trust may vote in
person or by proxy
in person
SUBSCRIPTION
CONTRACT
any
provides otherwise
Trustee
legal
title
acquires
to
the
sold.
Underwriters are
There is no
given commission.
commission.
He becomes a
refuse to become a
stockholder of the
stockholder/ member
of the company.
liability
that
is
legally
enforceable.
STOCK OPTION
corporation
who
had
the
legal
third
and
conditions
of
the
grant
UNDERWRITING AGREEMENT
and
person,
termed
the
by
Warrant
Certificate,
UNDERWRITING
STOCK
AGREEMENT
SUBSCRIPTION
AGREEMENT
themselves to take
signer to the
purchasers and to
which cannot be
of
the
other
subscribers
incorporation
of
said
4. Previously
no
pre-incorporation
corporate
indebtedness;
5. Amounts
transferred
unrestricted
stated capital,
incurred
retained
from
earning
to
61)
future services.
b. By
sale
of treasury
stock
after
notes
in
service
consideration.
payment
of
the
cash
SHARES OF STOCK
VALID CONSIDERATIONS IN
of its debt.
2. Property,
tangible
or
intangible,
CERTIFICATE OF STOCK
purposes;
Requisites;
document
evidencing
the
a. Necessary or proper in
business
b. Ascertainable
pecuniary
value
c.
The
Capable
of
being
shareholder
ultra vires.
2. If there is no overissue, but no
payment has been made to cover the
par or stated value of the excess
shares, the latter would constitute
watered stocks.
3. If there is no overissue and
Incorporeal
or
Concrete
and
intangible property
tangible
corporation even if
if the subscription is
the
fully paid.
subscription
is
STOCK
essential
CAPITAL STOCK
SHARES OF
STOCK
Amount paid in or
secured to be paid
in
the
in the management of
upon
by
stockholders
which
the
corporation
is
its
surplus
profits,
and
its
dissolution, in all of
indorsed
operation. It is the
property
after
of
corporation
the
itself
to
conduct
upon
the corporation
payment
of
corporate debts.
certificate
to
the
corporate
(monetary value).
SHARES OF
CERTIFICATE OF
STOCK
STOCK
Unit of interest in a
Evidence
corporation
holders
of
the
ownership
right
as
the
creditor/pledgee.
The
agreement
a. Extra-judicial
i. Delinquency sale
(Chemphil
b. Judicial action
Note: The prescriptive period in case of
EFFECTS
OF
UNREGISTERED
TRANSFER OF SHARES
purposes of registration
c. It is invalid as against corporate
DELINQUENCY
the corporation
balance
unpaid,
due
the
and
payable
shares
with
become
OF
CERTIFICATE
OF
STOCK
balance
due
and
payable
with
OF
UNPAID
unpaid,
the
shares
become
SUBSCRIPTION
1. Voluntary payment
subscription contract
b. Upon call by the Board of Directors
2. Involuntary payment
Effect:
PROCEDURE
OF
SALE
THE
any
FOR
inheres
to
stockholders
by
the
corporate
43)
specified
in
the
contract
of
shares
be subject to sale.
subscribers
not disqualified.
the
elected
board.
as
director
may
not
be
province
either
or
personally
the
city
or
where
auction.
SALE
71)
a.
The
person
participating
in
the
of stock.
necessary
highest bidder.
period.
mislaid
corporation.
Such
shares
shall
be
to
the
board,
the
new
which
thereby
obligates
the
(Sec. 73)
1. MANAGERIAL RIGHTS
certificate
was
lost,
stolen
or
2. PROPRIETARY RIGHTS
a. Right to dividends;
b. Right
to
c.
stock
liquidation;
of
assets
in
of
issuance
corporate books;
e. Right to recover stocks unlawfully
subscription
f.
Preemptive right
PREEMPTIVE
STOCKHOLDERS
RIGHT
OF
the
representing
surplus.
approval
of
2/3
the
of
stockholders
the
outstanding
OF
stockholder
are
not
subscribed
or
FIRST
(Philippine
REFUSAL
ed.)
PRE-EMPTIVE
RIGHT OF FIRST
RIGHT
REFUSAL
May be exercised
of
no
stipulations
authorized shares:
provision of law
GENERAL
RULE:
There
is
express
the
Pertains
to
unsubscribed
portion
of
the
authorized to issue.
may
against
of
corporation
capital
stock
for
portion
thus
offered
for
subscription.
When pre-emptive right not available:
a.
When
denied
incorporation
by
the
article
of
provisions
on
be
Exercisable
against
another stockholder
authorized
authorized
is
Close Corporation
its
but
no
contractual
capital
of the corporation of
his shares of stock
claimed
the
3. REMEDIAL RIGHTS
a. Individual suit a suit instituted
by a shareholder for his own
behalf against the corporation;
b. Representative suit a suit filed
by a shareholder in his behalf
and in behalf likewise of other
stockholders
and
with
similarly
a
situated
common
cause
LIABILITIES OF STOCKHOLDERS
shareholders
subscription
whose
(not
remedies
subsidiary
creditors
are
merely
as
accion
on unpaid subscription
accion
such
subrogatoria
and
any
person
or
directors,
against
officers
the
and/or
VIII.
CORPORATE
corporation.
RECORDS
Requisites:
INSPECTION RIGHTS
Limitations:
BOOKS
AND
during
reasonable
business days;
hours
on
would be futile
(iii)
previous
The
stockholder/member
examination
books
corporation; and
unless
the
transactions
are
c.
and
records
of
the
of
the
continuously injurious
(Sec. 74)
corporation.
corporation:
1. Book of Minutes
a. minutes
of
stockholder
or
hearing
EFFECTS
OF
MERGER
OR
1. Books of Account;
2.
and
corporation
3. Financial Records.
and,
in
the
case
of
2.
The
separate
existence
CONSOLIDATION
constituent
A union whereby
or
3.
corporations
corporations to form a
corporation
absorbed by another
new
corporation
called
are
which
existing
corporation
the
survives
and
consolidated
continues
the
corporation.
combined business.
The
surviving
shall
shall
the
MERGER
more
corporation
of
or
possess
cease,
consolidated
all
rights,
The
surviving
or
consolidated
PROCEDURE:
corporations;
merger or consolidation
surviving
purpose
6.
shall be executed by
each of the
constituent corporations
d. Submission to the SEC for approval
The
or
consolidated
surviving
or
constituent corporations;
corporation
consolidated
7.
pending
by
or
constituent
against
any
corporations
of
shares
of
stock
of
the
acquiring
the
be
may
(Philippine
Corporate
Law,
Cesar
MERGER and
CONSOLIDATION
merger or consolidation.
1. Sale of assets is
1.merger/consolidatio
always involved
RULE:
GENERAL
When
SALE OF ASSETS
2. There is automatic
2.
assumption
corporation
of
liabilities
the
AS
TO
liable
debts
There
continuance
is
of
the
3.
for
and
The
selling
corporation ordinarily
ASSUMPTION OF LIABILITIES:
contemplates
stockholders
liquidation
a
of
the
enterprise
liabilities;
2. If there is a consolidation or merger;
3. If the purchase was in fraud of
creditors; and
4. If
not
corporation
3.
NON-
is
EXCEPTIONS
always
Purchasing
generally
not
involved
one
is
the
purchaser
is
merely
4. Transfer of title is
are
by virtue of contract
transferred
by
operation of law
5.
The
constituent
corporations
are
5.
The
corporation
selling
is
not
automatically
dissolved
transfer
DE FACTO MERGER
of
all
its
property
shares
ed.)
of
stock
of
the
acquiring
a. ASSETS-ONLY LEVEL
would
end-up
enterprise
of
with
the
the
selling
business
corporation
raw
assets
and
properties
of
the
outstanding
existence;
2. Sale,
shares,
or
encumbrance
b)
or
other
b. BUSINESS-ENTERPRISE LEVEL
another
corporation
or
in
venture
c. EQUITY LEVEL
purpose
6. In
close
corporation,
stockholder
compel
business.
the
for
any
reason
corporation
to
liabilities
exclusive
of
capital
stock
APPRAISAL RIGHTS
The right to withdraw from the
PROCEDURE
fundamental
changes
in
corporate
appraisal right
restricting
of
shareholders or of authorizing
preferences
the
over
rights
those
of
RULE:
GENERAL
Except when:
1. The
corporation
consents
to
the
corporation
or
rescinded
by
the
dissenting
withdrawal
approval is necessary
4. The Commission determines that such
right.
taken.
corporation
organized
for
an
trustees, or
shall be suspended
religious,
by them.
educational,
professional,
3. To
(Sec. 88)
transfer
membership
if
for
stock
4. To be elected as trustee
corporations,
STOCK
Has
NON-STOCK
capital
stock
Opinion)
distribute dividends to
members
RULES
ON
CONVERSION
(SEC
of
the
articles
of
incorporation.
its stockholders
Stockholders may
Members
transfer
The
dissolved;
corporation
mere
must
amendment
their
membership
cannot
allowed
first
be
of
the
unless
by
the
articles or by-laws
Cumulative voting is
available
available
election of directors
in
the
unless
otherwise provided in
the articles or by-laws
Directors cannot
exceed 15 in number
15 in number
is 1 year
elected annually
Stockholders
vote by proxy
may
Members may be
deprived of the right
to vote by proxy in
now
become
stockholders
of
the
corporation.
Officers may be
by
the
Board
of
Directors
RIGHTS OF MEMBERS
members unless
otherwise provided in
vote
by
proxy
unless
and
Members
may
be
meeting,
except
or
or by-laws
assent is sufficient or
means
other
similar
formal
meeting
unnecessary
RULES
FOR
DISTRIBUTION
OF
(SEC. 94)
made therefor
by
be
preemption
corporation
and
reason
of
dissolution,
subject
to
shall
limitations
in
favor
of
the
religious,
or
offered; AND
benevolent,
educational
more
owned
corporations,
societies
or
or
controlled
by
another
Other
distributed
assets,
in
Characteristics:
1. Stockholders may act as directors
if
any,
accordance
shall
be
with
the
or the by-laws
the
management
of
the
CORPORATION
Its
incorporation
only
5. Corporate actuations
may
be
articles
of
need
contain
contain
must
the
special
matters prescribed by
matters
enumerated in Sec.
14 of the Code.
general
so precludes a de jure
close
corporation
status.
Its
status
as
ordinary
corporation
affected
ownership
articles
the
incorporated
Its
(The
an
stock
is
by
of
not
not
be
the
controlled by another
its
corporation which is
not
rights.
corporation.
Its
articles
cannot
Its
a
articles
Business
of
the
corporation
is
board of directors.
by
the
managed
the
by
stockholders
the
if
so
the
provide,
directors.
The
d. banks;
of
corporation may be
articles
c. stock exchanges;
may
Business
b. oil companies;
close
managed
a. mining companies;
or
corporation:
owned
corporate
Its
articles
may
officers
and
employees
are
of
the
corporate
elected by a majority
officers or employees
vote
of
all
the
may be elected or
e. insurance companies;
members
of
the
appointed
f. public utilities;
board of directors.
stockholders.
is
is
by
the
g. education institutions;
h. other corporations declared to be
vested with public interest. (Sec.
96)
ORDINARY
CLOSE
STOCK
CORPORATION
subject
to
the
subject
to
no
exceptions found in
exceptions
unless
Sec. 39.
be
be
exercised
by
exercised
and
corporation
stockholder
by
for
any
of
an
reason.
Except
as
regards
In
redeemable
shares,
arbitration of an intra-
corporate deadlock by
the
corporation may be
1. EDUCATIONAL CORPORATION
made
the
ordered to purchase
unrestricted retained
earnings.
the
from
case
SEC,
the
stockholders
regardless
of
the
availability
unrestricted
of
retained
earnings.
or instruction.
A favorable recommendation of the
DECS is essential for the approval of its
articles and by-laws.
Arbitration of intra-
Arbitration
intra-
corporate
corporate deadlock by
the
Code.
available remedy in
directors
or
NON-STOCK
EDUCATIONAL
stockholders are so
stockholders are so
divided
respecting
EDUCATIONAL
CORPORATION
the management of
management of the
the corporation.
corporation.
deadlock
of
SEC
is
an
IN
non-stock
corporation
CORPORATION
CLOSE
A special corporation
which may a stock or
non-stock
Governed by the
Governed by special
provisions on non-
CORPORATIONS
stock corporations
general provisions of
and suppletorily by
the provisions on
stock corporations
of the corporation
3. Direct or prohibit any act of the
corporation
of trustees may be
board of trustees
more than 15
than 15.
corporation
shall be 3 years
shall be 5 years
regardless
of
the
2. RELIGIOUS CORPORATION
for
or
of
incorporation
Kinds:
the
administration
of
church
issuance
of
the
(Note:
certificate
of
However, the
a) CORPORATION SOLE
- A special form of corporation,
notwithstanding
status
c) Legislative dissolution;
advantages; and
b) RELIGIOUS SOCIETIES
-
non-stock
It
is
corporation
incorporated
the
non-operational
SEC
orders
its
corporation;
until
its
by
e)
Minority
stockholders
suit
for
an
grounds:
i. The corporation was illegally
organized;
ii.
Continuous
inactivity
(subsequent to incorporation,
DISSOLUTION
organization
commencement of business)
corporate existence.
and
Modes:
1. Voluntary
a) Application for dissolution with the
SEC
iv.
Commission
the
by
EFFECTS OF DISSOLUTION
3. By a management committee or
SEC.
co-owners thereof
personality
d.
Reincorporation
of
the
dissolved
145).
winding up
LIQUIDATION
REHABILITATION
Connotes a winding
Connotes a
up or settling with
reopening or
reorganization
Winding up process
Contemplates a
continuance of
distributed to those
LIQUIDATION
The process by which all the assets of
the corporation are converted into liquid
assets (cash) in order to facilitate the
entitled
distributed
to
the
stockholders
or
members.
Methods:
1. By the corporation itself through its
board of directors/trustees;
2. By a trustee to whom the corporate
assets have been conveyed; and
to restore the
The
definition
espouses
the
7.
RESIDENT AGENT
is entitled to license
LICENSE
by the Code;
resident agent;
3. Failure to inform
agent;
127-128)
consolidation;
CONTENTS FOR APPLICATION OF
5. A
LICENSE
matters in reports;
assessments;
misrepresentation
in
material
agent
8. Acting
corporation; and
intends to operate
as
dummy
of
foreign
corporation
the
branches;
phrase
doing
or
transacting
business.
b) Appointing
or
(Philippine
distributors
domiciled
in
the
Philippines
or
in
any
ed.)
A.
Jurisprudential Tests
representatives
or
the
organized
for
or
which
whether
in
the
business
continuing
who
it
was
it
has
and
commercial
or
dealings
and
arrangements,
and
progressive
prosecution
of,
the
commercial
(Continuity Test).
purpose
2. Contract Test
gain
of
or
the
of
the
business
organization.
a) Mere
investment
in
as
shareholder
domestic
B. Statutory Tests
b) Appointing a representative or
distributor
domiciled
No. 7042)
Philippines
which
a) Soliciting
contracts,
orders,
service
opening
offices,
in
the
transacts
c) Publication
of
general
or broadcast media;
3. Estoppel Rule
Philippines;
e) Consignment
f)
5455
by
the
foreign
with
Collecting
information
in
the
such
foreign
corporations
and
Philippines; and
g) Performing services auxiliary to
A. On suits
sale
which
are
not
on
continuing basis.
the Philippines:
a) may not sue or intervene in any
C. Jurisprudential Rules
action
administrative
Philippines; but
ones,
can
sue
or
be
sued
on
in
any
court
agency
of
or
the
action
recognized
in
the
quasi-estoppel by acceptance of
in the Philippines:
petitioner
incidental thereto.
agreements
entered
despite
into
the
the
said
prohibition
B. On contracts
ORIGINAL
AND
EXCLUSIVE
2. Intra-corporate disputes;
such;
4. Controversies
in
election,
WHEN
FOREIGN
WHETHER
TO
DO
OR
NOT
BUSINESS
THEREAT
or
management
committee
(provisional remedies).
business transaction;
2. To protect its corporate reputation,
corporate
business
transaction,
e.g.
tort
that
controversy.
offices
are
However,
whose
created
by
the
the
INTRA-CORPORATE DISPUTE
Elements:
among
corporators,
between
compensation
from
the
corporation
partnerships
and
in
the
1.
Filing
verified
petition
with
the
corporations,
complaint
determines jurisdiction.
GROUNDS
FOR
SUSPENSION
OR
CANCELLATION OF CERTIFICATE OF
petition:
misrepresentation
to
objectives of corporation;
e. rehabilitation plan;
f. schedule
of
disposition
of
payments
assets
and
effected
of
general
financial
condition;
j. at
CORPORATE REHABILITATION
least
nominations
for
rehabilitation receiver;
approved/
adversarial
to
all
Applicability:
petitions
consented
for
filed
by
dissipation,
if
it
were
left
in
the
He
does
not
take
over
the
pendency
of
the
(Bar
proceedings.
bar
them
from
any
POWERS
AND
MANAGEMENT
FUNCTIONS
OF
COMMITTEE
OR
P.D. 902-A)
5. Referral
of rehabilitation
plan to
rehabilitation receiver;
Discussions on the
rehabilitation plan;
other associations;
and
protect
the
interest
of
the
9.
Approval
or
disapproval
of
the
REHABILITATION RECEIVER
of directors
management,
of the entity
notwithstanding
under
any
provision
of
incorporation
law,
or
articles
by-laws
to
of
the
contrary.
preclude
the
simultaneous
and
ground
to
of
2002.)
Mere
disagreement
for
the
appointment
stockholders,
of
management
Automatic Stay
receiver
functions
the
management
appointment
committee
of
becomes
Effect
corporation
of
appointment
shall
be
of
suspended
accordingly.
Colayco
vs.
First
Womens
Credit
management
28, 2003)
rehabilitation
committee
receiver
to
or
the
effectively
PD
902-A,
jurisdiction
over
intra-
or
schemes,
which
the
SEC
shall
v. CA)
(SRC)
26 and 27);
6. Regulations
PURPOSES:
Securities
Market
of
encourage
participation
the
of
widest
ownership
in
enterprises
on
about securities
trading
and
or
and
related
organizations
10. Registration
of
clearing
other
manipulative
practices
which
amount
of
credit
that
12. Civil
liabilities
arising
market. (Sec. 2)
in
the
liabilities
arising
statements
prospectus,
of
pre-need
plans.
(Section 16);
4. Protection of shareholder interests
(Section 19);
be
or
from
false
registration
from
omissions
false
in
communications
the
and
of
may
and
agencies
2. Rejection
of
(Section 42);
associations
(Section 29);
insider
of
5. To protect investors
over-the-counter
devices
prices,
manipulative
and
contracts
(Section
60),
of
trust
funds
investors
to
for
fraud
or
mismanagement
of
the
(Section 36.5[a]).
SEC
1.
Supervision
over
corporations,
SECURITIES
franchise;
2.
Approve,
reject
registration
statements/licensing applications;
3.
Regulate/supervise
activities
(Sec. 3)
Kinds:
5.
notes,
SROs;
asset-backed securities;
6.
Recommend
propose
policies,
legislation
to
advise,
Congress
evidence
of
indebtedness,
on
securities market;
sharing
7.
any
and
all
certificates
of
deputize
agreement,
enforcement
association
or
person
in
the
6.
membership
for
contempt
Proprietary
or
non-proprietary
certificates
in
corporations;
of
the
Commission;
Classes:
corporation
1.
or
association
to
call
Exempt
securities
and
securities
sale
shall
of
which
is
not
an
exempt
transaction.
be
made
available
to
each
EXCEPTIONS:
DERIVATIVE
financial
options
and
instrument,
warrants,
including
whose
2. Exempt transactions.
value
Kinds:
said Government.
which
agency
reciprocity.
the
Philippines
thereof
on
the
maintains
basis
of
Rule 3.1-1)
REGISTRATION OF SECURITIES
GENERAL
RULE:
registration
Revenue.
5. Any security issued by a bank except
its own shares of stock.
6. Any securities added by the SEC by
rule or regulation after public hearing.
1. Judicial
sale
administrator,
by
executor,
guardian/receiver
in
isolated
of a public company.
It is mandatory to make a tender offer
insolvency or bankruptcy.
3. Sale
transactions
by
owner.
paid.
or
security
from
same
issuer
8. Brokers transactions
9. Pre-incorporation
subscription
and
2. By
furnishing the
issuer
or
the
house,
insurance
periods; and
3. By
publishing
all
requests
or
TENDER OFFER
PUBLIC COMPANY
DEFINITION OF TERMS:
securities.
be made.
2. STOP-LOSS ORDER The direction
UNLAWFUL ACTS
available price.
(Sec. 23.3)
3. Employment
of
manipulative
or
put is purchased.
performance
call,
(Sec. 25)
reverse of put.
of
any
put,
an
insider
to
shares of stock.
unlawful unless:
or
reverse
wherein
of
MATCHED
there
is
ORDERS
change
in
the
months.
27.1)
INSIDER
following:
1. The issuer;
11. OVER
THE
COUNTER
TRANSACTION
INSIDER TRADING
MATERIAL
NON-PUBLIC
Significance)
may
stock.
be
exposed
by
subsequent
Margin Call
or