Professional Documents
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CORPORATION LAW
INTRODUCTION
1) Sociedades Anonimas
2) Cuentas en Participacion
3) The Corporation Law (1906)
4) The Corporation Code (1980)
CORPORATION, DEFINED
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 incident to its existence.
1) THEORIES ON THE
CORPORATION
FORMATION
OF
Theory of Concession
Tayag vs. Benguet Consolidated, Inc.
Torres vs. CA
CLASSIFICATIONS OF CORPORATION
1.Under the Corporation Code (Sec. 3)
2. Sole and Aggregate
3. Ecclesiastic and Lay
4. Eleemosynary
5. Domestic and Foreign
6. De jure and de facto corporations
6.1 Requisite of De Facto Corporation
6.2 Quo Warranto
Cases:
a. Sawadjaan v. Court of Appeals, G.R. No.
141735, June 8, 2005
ATTRIBUTES OF A CORPORATION
1) Artificial Being
2) Creature of the Law
3) Right of Succession
4) Creature of Enumerated Powers,
Attributes and Properties
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in one or
NATIONALITY OF CORPORATIONS
Nationality serves as the legal basis for subjecting the
enterprise or its activities to the laws, the economic and
fiscal powers, and the various social and financial
policies of the state to which it is supposed to belong
TEST OF NATIONALITY
1) PLACE OF INCORPORATION TEST
2) CONTROL TEST
3) GRANDFATHER RULE
Gamboa vs. Teves
G.R. No. 176579, June 28, 2011
works
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5)
GRANDFATHER RULE THREE LEVEL
RELATIONSHIP TEST
TARGET COMPANY- grandson
HOLDING COMPANY father
PERSON OR ENTITY HOLDING SHARES IN THE
HOLDING COMPANY - grandfather
CORPORATORS, INCORPORATORS,
STOCKHOLDERS AND MEMBERS
FRAUD CASES
ALTER EGO CASES
DEFEAT PUBLIC CONVENIENCE CASES
EQUITY CASES
1)
2)
3)
4)
Due Process
Equal Protection of the Law
Against Unreasonable Searches and Seizures
Against Self-Incrimination
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SHARE IN ESCROW
CLASSIFICATION OF SHARES
REDEEMABLE SHARE
PAR VALUE AND NO PAR VALUE
TREASURY SHARE
-
ULTRA VIRES
1) Outside of the express, implied or incidental
powers of the corporation;
2) Which have been executed on behalf of the
corporation without proper authorization from the
BOD;
3) Which are per se contrary to law, morals or
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public policy.
POWER TO EXTEND OR SHORTEN CORPORATE
TERM
- majority of BOD
- 2/3 of outstanding capital stock
- Appraisal right available in extension; not
available in shortening
EXPRESS POWERS
1) Power to sue and be sued;
2) Power to sell, lease, dispose or encumber
assets
3) Power to borrow
INCIDENTAL POWERS
- majority of BOD
- 2/3 of outstanding capital stock
25% requirement on subscribed capital stock;
25% requirement on paid-up capital
No appraisal right
INCREASE
OR
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redeemable share
Treasury share
Unrestricted retained earnings
When Exercised:
1) maximize profit
2) enhance the value of the corporation
Majority of BOD
2/3 of the outstanding capital stock
Applicability: stock dividend (paid
stockholders)
POWER
TO
CONTRACTS
-
CORPORATE GOVERNANCE
ENTER
INTO
only
to
MANAGEMENT
Majority of BOD
Majority of the outstanding capital stock
Exception:
organized
primarily
as
management company
DELEGATED POWER
- delegated by the stockholders
- can be overridden by the stockholders
Majority of BOD
* Corporate Social Responsibility
Majority of BOD
EXECUTIVE COMMITTEE
SECTION 23, CORPORATION CODE
- all corporate powers shall be exercised by, and
all corporate business shall be conducted through the
BOD of the corporation
- other powers: need the ratification of the
stockholders
CENTRALIZED MANAGEMENT
- human intervention is required in order to allow
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DUTIES
AND
LIABILITIES
TRUSTEES OR OFFICERS
DIRECTORS,
1) LOYALTY
2) OBEDIENCE
3) DILIGENCE
OF
INTERLOCKING DIRECTORS
- shareholdings exceeding 20% of the
outstanding capital stock shall be considered substantial
for purpose of interlocking directors
MEETINGS
REPORT ON ELECTION
- 30 days after the election
- the Secretary shall submit the report to SEC
KINDS OF MEETINGS
TERM OF OFFICE
- ONE year and until their successors are
elected and qualified
- hold over principle
- non-permanency of Board Seat
--
PLACE
AND
TIME
OF
STOCKHOLDERS/MEMBERS
1) Stockholders or Members
2) Directors/Trustees
1) Regular
annual
stockholders/members
2) Special
KINDS OF MEETINGS
- regular or special
- no proxy
- minutes
- resolutions versus minutes
CORPORATE OFFICERS
- President must be a director
- Secretary must be a resident of the
Philippines
- Treasurer
meeting
for
MEETING
OF
NOTICE OF MEETING
Regular Meeting: At least two (2) weeks before
the meeting
Special Meeting: At least one (1) week before
the meeting
exception: provided by the By-Laws
Notice of any meeting may be waived, expressly
or impliedly, by any stockholder or member.
Whenever, for any cause, there is no person
authorized to call a meeting, the Secretaries and
Exchange Commission, upon petition of a stockholder or
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REGULAR
AND
SPECIAL
DIRECTORS/TRUSTEES
MEETINGS
BAR QUESTION:
The proposed Amended By-Laws of CXT, Inc., a
corporation listed in the Makati Stock Exchange, contain
a provision that the meetings of the Board of Directors
need not be held in the principal office, and may be held
outside the country.
As Corporate Secretary of CXT, you are asked
to comment on the validity of the above proposed
amendment.
MORTGAGORS
AND
OF
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VOTING TRUSTS
Section 59, Corporation Code
Lee vs. Court of Appeals, G.R. No. 14441, Dec. 17,
1996
STOCKHOLDERS
CASH DIVIDEND VERSUS STOCK DIVIDEND
RIGHTS OF STOCKHOLDERS
1) Right to vote, including the right to appoint a
proxy;
2) Right to a share in the profits of the corporation,
including the right to declare stock dividends;
3) Right to a proportionate share of the assets of
the corporation upon liquidation
4) Right of appraisal;
5) Pre-emptive right;
6) Right to inspect corporate books and records;
7) Right to elect directors;
8) Such other rights as may contractually be
granted to the stockholders by the corporation or
by special law.
VOTING RIGHTS
Sales versus SEC 169 SCRA
A court will not deprive a stockholder of this right to vote
except upon a clear showing of its denial under the
Articles of Incorporation and By-Laws as it is an inherent
right in stock ownership.
Proxy
Voting trust agreement
Legal
Personal
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PRE-EMPTIVE RIGHT
Section 39 of the Corporation Code:
- All stockholders of a stock corporation shall enjoy
pre-emptive rights to subscribe to all issues or
disposition of shares of any class, in proportion to
their respective shareholdings.
Right of first refusal - contractual
RIGHT TO INSPECT
1)
2)
3)
4)
5)
6)
Financial statements;
Annual Report;
Minutes of Meetings;
Books that record all business transactions;
Stock and transfer book;
Report of election.
Basis:
ownership of assets/corporate properties
Access to information on corporate affairs (how
can the stockholder vote well)
DERIVATIVE SUIT
A suit brought by a stockholder, for and in behalf of
a corporation and against any person be he also a
stockholder, director, officer or third person
Jurisdiction: RTC
REQUISITES:
1) Cause of action in favor of the corporation;
2) Refusal of the corporation to sue;
3) Party filing the suit is a stockholder;
4) Plaintiff has exhausted all administrative
remedies;
5) Filed in good faith.
LIABILITIES OF A STOCKHOLDER
1) Unpaid subscription plus interest;
2) Watered stock
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