You are on page 1of 14

CORPORATION CODE SYLLABUS (FINALS)

POWERS OF CORPORATION
Section 36-45 (Section 45) (Section 39)

1. To sue and be sued

Shipside Inc. vs. CA

A corporation, such as petitioner, has no power except those expressly conferred on it by the Corporation Code and those that
are implied or incidental to its existence.In turn, a corporation exercises said powers through its board of directors and / or its duly
authorized officers and agents. Thus, it has been observed that the power of a corporation to sue and be sued in any court is lodged
with the board of directors that exercises its corporate powers (Premium Marble Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn,
physical acts of the corporation, like the signing of documents, can be performed only by natural persons duly authorized for the
purpose by corporate by-laws or by a specific act of the board of directors.

Yu vs Yukayguan

The Court has recognized that a stockholders right to institute a derivative suit is not based on any express provision of the
Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when the said laws make corporate directors or
officers liable for damages suffered by the corporation and its stockholders for violation of their fiduciary duties. Hence, a stockholder
may sue for mismanagement, waste or dissipation of corporate assets because of a special injury to him for which he is otherwise
without redress. In effect, the suit is an action for specific performance of an obligation owed by the corporation to the stockholders to
assist its rights of action when the corporation has been put in default by the wrongful refusal of the directors or management to make
suitable measures for its protection. The basis of a stockholders suit is always one in equity. However, it cannot prosper without first
complying with the legal requisites for its institution.

BPI Leasing Corp vs. CA

In BA Savings Bank v. Sia,[12] it was held that the certificate of non-forum shopping may be signed, for and on behalf of a
corporation, by a specifically authorized lawyer who has personal knowledge of the facts required to be disclosed in such
document. This ruling, however, does not mean that any lawyer, acting on behalf of the corporation he is representing, may routinely
sign a certification of non-forum shopping. The Court emphasizes that the lawyer must be specifically authorized in order validly to
sign the certification.
Corporations have no powers except those expressly conferred upon them by the Corporation Code and those that are implied
by or are incidental to its existence. These powers are exercised through their board of directors and/or duly authorized officers and
agents. Hence, physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose
by corporate bylaws or by specific act of the board of directors.[13]
The records are bereft of the authority of BLCs counsel to institute the present petition and to sign the certification of non-
forum shopping. While said counsel may be the counsel of record for BLC, the representation does not vest upon him the authority to
execute the certification on behalf of his client.There must be a resolution issued by the board of directors that specifically authorizes
him to institute the petition and execute the certification, for it is only then that his actions can be legally binding upon BLC.

2. Power to sell and dispose assets

Spouses Firme vs Bukal Enterprises

There was no consent on the part of the Spouses Firme. Consent is an essential element for the existence of a contract, and
where it is wanting, the contract is non-existent. The essence of consent is the conformity of the parties on the terms of the contract,
the acceptance by one of the offer made by the other.
There is no Board Resolution authorizing Aviles to negotiate and purchase the Property on behalf of Bukal Enterprises. It is
the board of directors or trustees which exercises almost all the corporate powers in a corporation. Under Sections 23 and 36 of the
Corporation Code, the power to purchase real property is vested in the board of directors or trustees. While a corporation may appoint
agents to negotiate for the purchase of real property needed by the corporation, the final say will have to be with the board, whose
approval will finalize the transaction. A corporation can only exercise its powers and transact its business through its board of directors
and through its officers and agents when authorized by a board resolution or its by-laws.

AF Realty Devt vs Dieselman Freight Services

No. There was no valid agency created. The Board of Directors of DFS never authorized Cruz, Jr. to sell the land. Hence, the
agreement between Cruz, Jr. and Polintan, as well as the subsequent agreement between Polintan and Noble, never bound the
corporation. Therefore the sale transacted by Noble purportedly on behalf of Polintan and ultimately purportedly on behalf of DFS is
void.
Yasuma vs Heirs of De Villa

The corporation can also act through its corporate officers who may be authorized either expressly by the by-laws or board
resolutions or impliedly such as by general practice or policy or as are implied from express powers. [10] The general principles
of agency govern the relation between the corporation and its officers or agents. [11] When authorized, their acts can bind the
corporation. Conversely, when unauthorized, their acts cannot bind it.
However, the corporation may ratify the unauthorized act of its corporate officer. [12] Ratification means that the principal
voluntarily adopts, confirms and gives sanction to some unauthorized act of its agent on its behalf. It is this voluntary choice,
knowingly made, which amounts to a ratification of what was theretofore unauthorized and becomes the authorized act of the
party so making the ratification.[13] The substance of the doctrine is confirmation after conduct, amounting to a substitute for a
prior authority.[14] Ratification can be made either expressly or impliedly. Implied ratification may take various forms like
silence or acquiescence, acts showing approval or adoption of the act, or acceptance and retention of benefits
flowing therefrom.[15]
The power to borrow money is one of those cases where corporate officers as agents of the corporation need a special power
of attorney.[16]In the case at bar, no special power of attorney conferring authority on de Villa was ever presented. The
promissory notes evidencing the loans were signed by de Villa (who was the president of respondent corporation) as borrower
without indicating in what capacity he was signing them. In fact, there was no mention at all of respondent corporation. On
their face, they appeared to be personal loans of de Villa.

3. Extending Corporate Term

Alhambra Cigar vs SEC

Alhambra cannot avail of the new law because it has already expired at the time of its passage. When a corporation is
liquidating pursuant to the statutory period of three years to liquidate, it is only allowed to continue for the purpose of final
closure of its business and no other purposes. In fact, within that period, the corporation is enjoined from continuing the
business for which it was established. Hence, Alhambras board cannot validly amend its articles of incorporation to extend its
lifespan.

4. Power to Decrease Capital Stock

Philtust vs Rivera

It is established doctrine that subscription to the capital of a corporation constitute a find to which creditors have a right to
look for satisfaction of their claims and that the assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts. (Velasco vs. Poizat, 37 Phil., 802.) A corporation has no
power to release an original subscriber to its capital stock from the obligation of paying for his shares, without a valuable
consideration for such release; and as against creditors a reduction of the capital stock can take place only in the manner an
under the conditions prescribed by the statute or the charter or the articles of incorporation. Moreover, strict compliance with
the statutory regulations is necessary

5. Power to Invest Corporate Funds

De La Rama vs Ma-Ao Sugar Central

It is prohibited to the Corporation to invest in shares of another corporation unless such an investment is authorized by two-
thirds of the voting power of the stockholders, if the purpose of the corporation in which investment is made is foreign to the
purpose of the investing corporation because surely there is more logic in the stand that if the investment is made in a
corporation whose business is important to the investing corporation and would aid it in its purpose, to require authority of the
stockholders would be to unduly curtail the Power of the Board of Directors; the only trouble here is that the investment was
made without any previous authority of the Board of Directors but was only ratified afterwards; this of course would have the
effect of legalizing the unauthorized act but it is an indication of the manner in which corporate business is transacted by the
Ma-ao Sugar administration
6. Sale of Substantially All Assets

Pena vs CA

The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the corporation.

They are in effect, written, into the charter. In this sense they become part of the fundamental law of the corporation with
which the corporation and its directors and officers must comply.

Apparently, only three (3) out of five (5) members of the board of directors of respondent PAMBUSCO convened by virtue
of a prior notice of a special meeting. There was no quorum to validly transact business since it is required under its by-laws
that at least four (4) members must be present to constitute a quorum in a special meeting of the board of directors.

Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation or by-laws of the corporation may
fix a greater number than the majority of the number of board members to constitute the quorum necessary for the valid
transaction of business. Any number less than the number provided in the articles or by-laws therein cannot constitute a
quorum and any act therein would not bind the corporation; all that the attending directors could do is to adjourn.

Islamic Directorate of the Philippines vs CA

Since the SEC has declared the Carpizo group as a void Board of Trustees, the sale it entered into with INC is likewise void.
Without a valid consent of a contracting party, there can be no valid contract.

In this case, the IDP, never gave its consent, through a legitimate Board of Trustees, to the disputed Deed of Absolute Sale
executed in favor of INC. Therefore, this is a case not only of vitiated consent, but one where consent on the part of one of the
supposed contracting parties is totally wanting. Ineluctably, the subject sale is void and produces no effect whatsoever.

Further, the Carpizo group failed to comply with Section 40 of the Corporation Code, which provides that: " ... a corporation
may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all
or substantially all of its property and assets... when authorized by the vote of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock; or in case of non-stock corporation, by the vote of at least two-thirds (2/3) of the
members, in a stockholders' or members' meeting duly called for the purpose...."

The subject lot constitutes the only property of IDP. Hence, its sale to a third-party is a sale or disposition of all the corporate
property and assets of IDP. For the sale to be valid, the majority vote of the legitimate Board of Trustees, concurred in by the
vote of at least 2/3 of the bona fide members of the corporation should have been obtained. These twin requirements were not
met in the case at bar.

7. Dividends

Nielson & Co., vs Lepanto Consolidated

The contract thus entered into pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed operating
contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto considered Nielson as its agent and
that Lepanto terminated the management contract because it had lost its trust and confidence in Nielson

8. Ultra Vires Acts


Section 45
Montelibano vs Bacolod Murcia Milling

There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended
Milling Contract for the purpose of making its terms more acceptable to the other contracting parties. As the resolution in
question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or
decrease the profits of the central, the court has no authority to review them. Whether the business of a corporation should be
operated at a loss during depression, or close down at a smaller loss, is a purely business and economic problem to be
determined by the directors of the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under
the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-appellants herein.

Republic vs. Acoje Mining


The claim that the resolution adopted by the board of directors of appellant company is an ultra vires act cannot also be
entertained it appearing that the same covers a subject which concerns the benefit, convenience and welfare of its employees
and their families. While as a rule an ultra vires act is one committed outside the object for which a corporation is created as
defined by the law of its organization and therefore beyond the powers conferred upon it by law (19 C.J.S., Section 965, p.
419), there are however certain corporate acts that may be performed outside of the scope of the powers expressly conferred if
they are necessary to promote the interest or welfare of the corporation.
Thus, it has been held that "although not expressly authorized to do so a corporation may become a surety where the
particular transaction is reasonably necessary or proper to the conduct of its business," 1 and here it is undisputed that the
establishment of the local post office is a reasonable and proper adjunct to the conduct of the business of appellant company.
Indeed, such post office is a vital improvement in the living condition of its employees and laborers who came to settle in its
mining camp which is far removed from the postal facilities or means of communication accorded to people living in a city or
municipality..
Even assuming arguendo that the resolution in question constitutes an ultra vires act, the same however is not void for it was
approved not in contravention of law, customs, public order or public policy. The term ultra viresshould be distinguished from
an illegal act for the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter
is void and cannot be validated.2 It being merely voidable, an ultra vires act can be enforced or validated if there are equitable
grounds for taking such action. Here it is fair that the resolution be upheld at least on the ground of estoppel.

Coleman vs Hotel de France

It is not seemly for a corporation, any more than for an individual, to make a contract and then break it; to abide by it so long
as it is advantageous, and repudiate it when it becomes onerous. The courts may well say to such corporation: "As you have
called it a contract, we will do the same. As you have enjoyed the benefits when it was beneficial, you must bear the burden
when it becomes onerous, unless it clearly appears that that which you have assumed to do is beyond your powers." In Railway
Co. vs. McCarthy (96 U. S., 267), the Supreme Court said:
"When a contract is not on its face necessarily beyond the scope of the power of the corporation by which it was made, it
will, in the absence of proof to the contrary, be presumed to be valid. Corporations are presumed to contract within their
powers. The doctrine of ultra vires, when invoked for or against a corporation, should not be allowed to previal where it would
defeat the ends of justice or work a legal wrong."

Crisologo Jose vs CA

Accommodation party liable on the instrument to a holder for value, although such holder at the time of taking the instrument
knew him to be only an accommodation party, does not include nor apply to corporations which are accommodation parties.
This is because the issue or indorsement of negotiable paper by a corporation without consideration and for the accommodation
of another is ultra vires. Hence, one who has taken the instrument with knowledge of the accommodation nature thereof cannot
recover against a corporation where it is only an accommodation party.

Atrium Management vs CA

The act is not ultra vires but De Leon is still personally liable. The act is not ultra vires because the act of issuing the checks
was well within the ambit of a valid corporate act. De Leon as treasurer is authorized to sign checks. When the checks were
issued, Hi-Cement has sufficient funds to cover the P2 million.
As a rule, there are four instances that will make a corporate director, trustee or officer along (although not necessarily) with the
corporation personally liable to certain obligations. They are:
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing its affairs, or
(c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;
2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action.

Lopez Realty vs Fontecha

In the case at bench, it was established that petitioner corporation did not issue any resolution revoking nor nullifying the board
resolutions granting gratuity pay to private respondents. Instead, they paid the gratuity pay, particularly, the first two (2)
installments thereof, of private respondents Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and Perfecto Bautista.
Despite the alleged lack of notice to petitioner Asuncion Lopez Gonzales at that time the assailed resolutions were passed, we
can glean from the records that she was aware of the corporation's obligation under the said resolutions. More importantly, she
acquiesced thereto. As pointed out by private respondents, petitioner Asuncion Lopez Gonzales affixed her signature on Cash
Voucher Nos. 81-10-510 and 81-10-506, both dated October 15, 1981, evidencing the 2nd installment of the gratuity pay of
private respondents Mila Refuerzo and Florentina Fontecha. 18
We hold, therefore, that the conduct of petitioners after the passage of resolutions dated August, 17, 1951 and September 1,
1981, had estopped them from assailing the validity of said board resolutions

Sections 23-30,31 & 34 (Special Mention) and 35 of the Corporation Code


Section 32 and 33

9. Centralized Management/Apparent Authority

Philippine Airlines vs FASAP

In the absence of one element, the retrenchment scheme becomes an irregular exercise of management prerogative. The
employers obligation to exhaust all other means to avoid further losses without retrenching its employees is a component of the
first element as enumerated above. To impart operational meaning to the constitutional policy of providing full protection to
labor, the employers prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last
resort, after less drastic means have been tried and found wanting. [31]

In the instant case, PAL admitted that since the pilots strike allegedly created a situation of extreme urgency, it no longer
implemented cost-cutting measures and proceeded directly to retrench. This being so, it clearly did not abide by all the
requirements under Article 283 of the Labor Code. At the time it was implemented, the retrenchment scheme under scrutiny
was not triggered directly by any financial difficulty PAL was experiencing at the time, nor borne of an actual implementation
of its proposed downsizing of aircraft. It was brought about by and resorted to as an immediate reaction to a pilots strike which,
in strict point of law and as herein earlier discussed, may not be considered as a valid reason to retrench, nor may it be used to
excuse PAL for its non-observance of the requirements of the law on retrenchment under the Labor Code.

Peoples Air Cargo vs. CA

In the absence of one element, the retrenchment scheme becomes an irregular exercise of management prerogative. The
employers obligation to exhaust all other means to avoid further losses without retrenching its employees is a component of the
first element as enumerated above. To impart operational meaning to the constitutional policy of providing full protection to
labor, the employers prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last
resort, after less drastic means have been tried and found wanting. [31]

In the instant case, PAL admitted that since the pilots strike allegedly created a situation of extreme urgency, it no longer
implemented cost-cutting measures and proceeded directly to retrench. This being so, it clearly did not abide by all the
requirements under Article 283 of the Labor Code. At the time it was implemented, the retrenchment scheme under scrutiny
was not triggered directly by any financial difficulty PAL was experiencing at the time, nor borne of an actual implementation
of its proposed downsizing of aircraft. It was brought about by and resorted to as an immediate reaction to a pilots strike which,
in strict point of law and as herein earlier discussed, may not be considered as a valid reason to retrench, nor may it be used to
excuse PAL for its non-observance of the requirements of the law on retrenchment under the Labor Code.

San Juan Structural vs CA

GR: acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers
exceed their authority, their actions "cannot bind the corporation, unless it has ratified such acts or is estopped from
disclaiming them.

statutorily granted privilege of a corporate veil may be used only for legitimate purposes

utilized as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse legitimate issues; or
serve as a mere alter ego or business conduit of a person or an instrumentality, agency or adjunct of another
corporation - none here

Sec. 96. Definition and Applicability of Title. A close corporation, within the meaning of this Code, is one whose articles of
incorporation provide that: (1) All of the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of
record by not more than a specified number of persons, not exceeding twenty (20); (2) All of the issued stock of all classes shall
be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The corporation shall not list in any
stock exchange or make any public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall
be deemed not a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by
another corporation which is not a close corporation within the meaning of this Code. . . . .
Woodchild Holdings vs Roxas Electric

Woodchild Holdings, Inc. v. Roxas Electric and Construction Company, Inc. the Court stated that persons dealing with an
assumed agency, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. In other words, when the petitioner relied only on the words of
respondent Alejandro without securing a copy of the SPA in favor of the latter, the petitioner is bound by the risk accompanying
such trust on the mere assurance of Alejandro.

Yao Ka Sin Trading vs CA

The Board may enter into contracts through the president. The president may only enter into contracts upon authority of the
Board. Hence, any agreement signed by the president is subject to approval by the Board. Unlike a general manager (like the
case of Francisco vs GSIS), the president has no apparent authority to enter into binding contracts with third persons. Further, if
indeed the by-laws of Prime White did provide Maglana with apparent authority, this was not proven by Yao Ka Sin.
As a rule, apparent authority may result from (1) the general manner, by which the corporation holds out an officer or agent as
having power to act or, in other words, the apparent authority with which it clothes him to act in general or (2) acquiescence in
his acts of a particular nature, with actual or constructive knowledge thereof, whether within or without the scope of his
ordinary powers. These are not present in this case.
Also, the subsequent letter by Prime White to Yao Ka Sin is binding because Yao Ka Sins failure to respond constitutes an
acceptance, per stated in the letter itself which was not contested by Henry Yao during trial.

10. Business Judegment/ Directors and officers liability

Montelibano vs Bacolod-Murcia

There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended
Milling Contract for the purpose of making its terms more acceptable to the other contracting parties. As the resolution in
question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or
decrease the profits of the central, the court has no authority to review them. Whether the business of a corporation should be
operated at a loss during depression, or close down at a smaller loss, is a purely business and economic problem to be
determined by the directors of the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under
the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-appellants herein.

Tramat vs CA

It was, nevertheless, an error to hold David Ong jointly and severally liable with TRAMAT to de la Cuesta under the questioned
transaction. Ong had there so acted, not in his personal capacity, but as an officer of a corporation, TRAMAT, with a distinct
and separate personality. As such, it should only be the corporation, not the person acting for and on its behalf, that properly
could be made liable thereon. 3
Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly
attach, as a rule, only when
1. He assents (a) to a patently unlawful act of the corporation, or
(b) for bad faith, or gross negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons; 4
2. He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with the corporate
secretary his written objection thereto; 5
3. He agrees to hold himself personally and solidarily liable with the corporation; 6 or
4. He is made, by a specific provision of law, to personally answer for his corporate action. 7
In the case at bench, there is no indication that petitioner David Ong could be held personally accountable under any of the
abovementioned cases.

Sanchez vs Republic

Section 31 lays down the "doctrine of corporate opportunity" and holds personally liable corporate directors found guilty of
gross negligence or bad faith in directing the affairs of the corporation, which results in damage or injury to the corporation, its
stockholders or members, and other persons. The ejectment suit that held only ULFI liable to the DECS for unpaid rents does
not constitute res judicata to the issue of personal liabilities of Kahn and petitioner Sanchez under the circumstances to pay
such obligations, given that the unaccounted funds would have settled the same.
Premium Marble vs CA

Sec. 26 of the Corporation Code provides, thus:


Sec. 26. Report of election of directors, trustees and officers. Within thirty (30) days after the election of the directors, trustees
and officers of the corporation, the secretary, or any other officer of the corporation, shall submit to the Securities
and Exchange Commission, the names, nationalities and residences of the directors, trustees andofficers elected. xxx
Evidently, the objective sought to be achieved by Section 26 is to give the public information, under sanction of oath of
responsible officers, of the nature of business, financial condition and operational status of the company together with
information on its key officers or managers so that those dealing with it and those who intend to do business with it may know
or have the means of knowing facts concerning the corporations financial resources and business responsibility.[10]
The claim, therefore, of petitioners as represented by Atty. Dumadag, that Zaballa, et al., are the incumbent officers of Premium
has not been fully substantiated. In the absence of an authority from the board of directors, no person, not even the officers of
the corporation, can validly bind the corporation.[11]

Prime White Cement vs IAC

Te is what can be called as a self-dealing director he deals business with the same corporation in which he is a director. There
is nothing wrong per se with that. However, Sec. 32 provides that:
SEC. 32. Dealings of directors, trustees or officers with the corporation. - A contract of the corporation with one or more of
its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to
constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in the case of an officer, the contract with the officer has been previously authorized by the Board of Directors.
In this particular case, the Supreme Court focused on the fact that the contract between PWCC and Te through Falcon and Trazo
was not reasonable. Hence, PWCC has all the rights to void the contract and look for someone else, which it did. The contract is
unreasonable because of the very low selling price.

11. Rights of Stockholders and Members

Section 6, 7, 8, 50, 52, 55, 56, 58, 59, 64, 71, 74, 75, 81-86

Mobilia Products vs Umezawa

Lee vs CA

voting trust - created by an agreement between a group of the stockholders of a corporation and the trustee or by a group of
identical agreements between individual stockholders and a common trustee, whereby it is provided that for a term of years,
or for a period contingent upon a certain event, or until the agreement is terminated, control over the stock owned by such
stockholders, either for certain purposes or for all purposes, is to be lodged in the trustee, either with or without a reservation
to the owners, or persons designated by them, of the power to direct how such control shall be used (Ballentine's Law
Dictionary)

Sec. 59. Voting Trusts One or more stockholders of a stock corporation may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote and other rights pertaining to the share for a period rights pertaining to
the shares for a period not exceeding 5 years at any one time: Provided, that in the case of a voting trust specifically required
as a condition in a loan agreement, said voting trust may be for a period exceeding 5 years but shall automatically expire
upon full payment of the loan. A voting trust agreement must be in writing and notarized, and shall specify the terms and
conditions thereof. A certified copy of such agreement shall be filed with the corporation and with the Securities and
Exchange Commission; otherwise, said agreement is ineffective and unenforceable. The certificate or certificates of stock
covered by the voting trust agreement shall be cancelled and new ones shall be issued in the name of the trustee or trustees
stating that they are issued pursuant to said agreement. In the books of the corporation, it shall be noted that the transfer in the
name of the trustee or trustees is made pursuant to said voting trust agreement.

Ponce vs Encarnacion

The only question to determine in this case is whether under and pursuant to section 26 of Act No. 1459, known as the
Corporation law, the respondent court may issue the order complained of. Said section provides:
Whenever, from any cause, there is no person authorized to call a meeting, or when the officer authorized to do so refuses, fails
or neglects to call a meeting, any judge of a Court of First Instance on the showing of good cause therefor, may issue an order
to any stockholder or member of a corporation, directing him to call a meeting of the corporation by giving the proper notice
required by this Act or by-laws; and if there be no person legally authorized to preside at such meeting, the judge of the Court
of First Instance may direct the person calling the meeting to preside at the same until a majority of the members or
stockholders representing a majority of the stock members or stockholders presenting a majority of the stock present and
permitted by law to be voted have chosen one of their number to act as presiding officer for the purposes of the meeting.

On the showing of good cause therefor, the court may authorize a stockholder to call a meeting and to preside threat until the
majority stockholders representing a majority strockholders representing a majority of the stock present and permitted to be
voted shall have chosen one among them to preside it. And this showing of good cause therefor exists when the court is
apprised of the fact that the by-laws of the corporation require the calling of a general meeting of the stockholders to elect the
board of directors but call for such meeting has not been done.
Article 9 of the by-laws of the Daguhoy Enterprises, Inc., provides:
The Board of Directors shall compose of five (5) members who shall be elected by the stockholders in a general meeting called
for that purpose which shall be held every even year during the month of January.
Article 20 of the by-laws in part provides:
. . . Regular general meetings are those which shall be called for every even year,

Lanuza vs CA

Articles of Incorporation
- Defines the charter of the corporation and the contractual relationships between the State and the corporation, the
stockholders and the State, and between the corporation and its stockholders.
- Contents are binding, not only on the corporation, but also on its shareholders.
Stock and transfer book
- Book which records the names and addresses of all stockholders arranged alphabetically, the installments paid and unpaid
on all stock for which subscription has been made, and the date of payment thereof; a statement of every alienation, sale or
transfer of stock made, the date thereof and by and to whom made; and such other entries as may be prescribed by law
- necessary as a measure of precaution, expediency and convenience since it provides the only certain and accurate method
of establishing the various corporate acts and transactions and of showing the ownership of stock and like matters
- Not public record, and thus is not exclusive evidence of the matters and things which ordinarily are or should be written
therein
In this case, the articles of incorporation indicate that at the time of incorporation, the incorporators
were bona fide stockholders of 700 founders shares and 76 common shares. Hence, at that time, the corporation had 776 issued
and outstanding shares.
According to Sec. 52 of the Corp Code, a quorum shall consist of the stockholders representing a majority of the
outstanding capital stock. As such, quorum is based on the totality of the shares which have been subscribed and issued,
whether it be founders shares or common shares
To base the computation of quorum solely on the obviously deficient, if not inaccurate stock and transfer book, and
completely disregarding the issued and outstanding shares as indicated in the articles of incorporation would work injustice to
the owners and/or successors in interest of the said shares.
The stock and transfer book of PMMSI cannot be used as the sole basis for determining the quorum as it does not reflect
the totality of shares which have been subscribed, more so when the articles of incorporation show a significantly larger amount
of shares issued and outstanding as compared to that listed in the stock and transfer book.
One who is actually a stockholder cannot be denied his right to vote by the corporation merely because the corporate
officers failed to keep its records accurately. A corporations records are not the only evidence of the ownership of stock in a
corporation.
It is no less than the articles of incorporation that declare the incorporators to have in their name the founders and several
common shares. Thus, to disregard the contents of the articles of incorporation would be to pretend that the basic document
which legally triggered the creation of the corporation does not exist and accordingly to allow great injustice to be caused to the
incorporators and their heirs

Section 74

Pardo v Hercules Lumber

We are entirely unable to concur in this contention. The general right given by the statute may not be lawfully abridged to the
extent attempted in this resolution. It may be admitted that the officials in charge of a corporation may deny inspection when
sought at unusual hours or under other improper conditions; but neither the executive officers nor the board of directors have
the power to deprive a stockholder of the right altogether. A by-law unduly restricting the right of inspection is undoubtedly
invalid. Authorities to this effect are too numerous and direct to require extended comment. (14 C.J., 859; 7 R.C.L., 325; 4
Thompson on Corporations, 2nd ed., sec. 4517; Harkness vs. Guthrie, 27 Utah, 248; 107 Am., St. Rep., 664. 681.) Under a
statute similar to our own it has been held that the statutory right of inspection is not affected by the adoption by the board of
directors of a resolution providing for the closing of transfer books thirty days before an election. (State vs. St. Louis Railroad
Co., 29 Mo., Ap., 301.)
It will be noted that our statute declares that the right of inspection can be exercised "at reasonable hours." This means at
reasonable hours on business days throughout the year, and not merely during some arbitrary period of a few days chosen by
the directors.

WG Philpotts v Phil Manufacturing Co.

The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459, which reads as follows: "The
record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any
director, member or stockholder of the corporation at reasonable hours."
This provision is to be read of course in connecting with the related provisions of sections 51 and 52, defining the duty of the
corporation in respect to the keeping of its records.
Now it is our opinion, and we accordingly hold, that the right of inspection given to a stockholder in the provision above quoted
can be exercised either by himself or by any proper representative or attorney in fact, and either with or without the attendance
of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another;
and we find nothing in the statute that would justify us in qualifying the right in the manner suggested by the respondents.

Ang-Abaya v Ang

In order therefore for the penal provision under Section 144 of the Corporation Code to apply in a case of violation of a
stockholder or members right to inspect the corporate books/records as provided for under Section 74 of the Corporation Code,
the following elements must be present:
First. A director, trustee, stockholder or member has made a prior demand in writing for a copy of excerpts from the
corporations records or minutes;
Second. Any officer or agent of the concerned corporation shall refuse to allow the said director, trustee, stockholder or member
of the corporation to examine and copy said excerpts;
Third. If such refusal is made pursuant to a resolution or order of the board of directors or trustees, the liability under this
section for such action shall be imposed upon the directors or trustees who voted for such refusal; and,
Fourth. Where the officer or agent of the corporation sets up the defense that the person demanding to examine and copy
excerpts from the corporations records and minutes has improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a
legitimate purpose in making his demand, the contrary must be shown or proved.
Thus, in a criminal complaint for violation of Section 74 of the Corporation Code, the defense of improper use or motive is in
the nature of a justifying circumstance that would exonerate those who raise and are able to prove the same. Accordingly, where
the corporation denies inspection on the ground of improper motive or purpose, the burden of proof is taken from the
shareholder and placed on the corporation.33 This being the case, it would be improper for the prosecutor, during preliminary
investigation, to refuse or fail to address the defense of improper use or motive, given its express statutory recognition. In the
past we have declared that if justifying circumstances are claimed as a defense, they should have at least been raised during
preliminary investigation;34 which settles the view that the consideration and determination of justifying circumstances as a
defense is a relevant subject of preliminary investigation

12. Appraisal Rights


Section 81

Turner v Lorenzo Shipping

A stockholder who dissents from certain corporate actions has the right to demand payment of the fair value of his or her shares.
This right, known as the right of appraisal, is expressly recognized in Section 81 of the Corporation Code, to wit:

Section 81. Instances of appraisal right. - Any stockholder of a corporation shall have the right to dissent and demand payment
of the fair value of his shares in the following instances:

1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder
or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate
property and assets as provided in the Code; and

3. In case of merger or consolidation. (n)


Clearly, the right of appraisal may be exercised when there is a fundamental change in the charter or articles of incorporation
substantially prejudicing the rights of the stockholders. It does not vest unless objectionable corporate action is taken. [13] It
serves the purpose of enabling the dissenting stockholder to have his interests purchased and to retire from the corporation. [14]

Under the common law, there were originally conflicting views on whether a corporation had the power to acquire or purchase
its own stocks. InEngland, it was held invalid for a corporation to purchase its issued stocks because such purchase was an
indirect method of reducing capital (which was statutorily restricted), aside from being inconsistent with the privilege of limited
liability to creditors.[15] Only a few American jurisdictions adopted by decision or statute the strict English rule forbidding a
corporation from purchasing its own shares. In some American states where the English rule used to be adopted, statutes
granting authority to purchase out of surplus funds were enacted, while in others, shares might be purchased even out of capital
provided the rights of creditors were not prejudiced.[16] The reason underlying the limitation of share purchases sprang from the
necessity of imposing safeguards against the depletion by a corporation of its assets and against the impairment of its capital
needed for the protection of creditors.[17]

Now, however, a corporation can purchase its own shares, provided payment is made out of surplus profits and the acquisition
is for a legitimate corporate purpose.[18] In the Philippines, this new rule is embodied in Section 41 of the Corporation Code, to
wit:

Section 41. Power to acquire own shares. - A stock corporation shall have the power to purchase or acquire its own shares for a
legitimate corporate purpose or purposes, including but not limited to the following cases: Provided, That the corporation has
unrestricted retained earnings in its books to cover the shares to be purchased or acquired:

1. To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in a delinquency sale, and to
purchase delinquent shares sold during said sale; and

3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the provisions of this Code. (n)

The Corporation Code defines how the right of appraisal is exercised, as well as the implications of the right of appraisal, as
follows:

1. The appraisal right is exercised by any stockholder who has voted against the proposed corporate action by making a
written demand on the corporation within 30 days after the date on which the vote was taken for the payment of the fair value
of his shares. The failure to make the demand within the period is deemed a waiver of the appraisal right. [19]

2. If the withdrawing stockholder and the corporation cannot agree on the fair value of the shares within a period of 60 days
from the date the stockholders approved the corporate action, the fair value shall be determined and appraised by three
disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two thus
chosen. The findings and award of the majority of the appraisers shall be final, and the corporation shall pay their award within
30 days after the award is made. Upon payment by the corporation of the agreed or awarded price, the stockholder shall
forthwith transfer his or her shares to the corporation.[20]

3. All rights accruing to the withdrawing stockholders shares, including voting and dividend rights, shall be suspended from
the time of demand for the payment of the fair value of the shares until either the abandonment of the corporate action involved
or the purchase of the shares by the corporation, except the right of such stockholder to receive payment of the fair value of the
shares.[21]

4. Within 10 days after demanding payment for his or her shares, a dissenting stockholder shall submit to the corporation the
certificates of stock representing his shares for notation thereon that such shares are dissenting shares. A failure to do so shall, at
the option of the corporation, terminate his rights under this Title X of the Corporation Code. If shares represented by the
certificates bearing such notation are transferred, and the certificates are consequently canceled, the rights of the transferor as a
dissenting stockholder under this Title shall cease and the transferee shall have all the rights of a regular stockholder; and all
dividend distributions that would have accrued on such shares shall be paid to the transferee. [22]

5. If the proposed corporate action is implemented or effected, the corporation shall pay to such stockholder, upon the
surrender of the certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which the
vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action. [23]
Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless the corporation has unrestricted
retained earnings in its books to cover the payment. In case the corporation has no available unrestricted retained earnings in its
books, Section 83 of theCorporation Code provides that if the dissenting stockholder is not paid the value of his shares within
30 days after the award, his voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the payment of the shares of stocks
of the withdrawing stockholders. Under the doctrine, the capital stock, property, and other assets of a corporation are regarded
as equity in trust for the payment of corporate creditors, who are preferred in the distribution of corporate assets. [24] The
creditors of a corporation have the right to assume that the board of directors will not use the assets of the corporation to
purchase its own stock for as long as the corporation has outstanding debts and liabilities.[25] There can be no distribution of
assets among the stockholders without first paying corporate debts. Thus, any disposition of corporate funds and assets to the
prejudice of creditors is null and void

Quiz Questions:
1. Under Section 32 of the Corporation Code, what are the conditions that need to be present in order that contracts entered into
by a corporation with its directors or officers, will not be voidable?
2. What is the liability of a self-dealing director or officer?
3. Enumerate the basic rights of stockholders. (Refer to Syllabus)
4. Differentiate Proxies from Voting Trusts.

Define a Foreign Corporation


When is a foreign Corporation Deemed Doing Business in the Philippines
Differentiate Dissolution of Corporations from Liquidation

Non-Stock Corporations Sections 87-95

Lions Club International vs Amores

It is of judicial notice that a Lions club is a voluntary association of civic-minded men whose general purpose and aim is to
serve the people and the community. It appears from the records that duly organized and chartered Lions clubs all over the
world are under the supervision of the mother club known as The International Association of Lions Clubs for Lions Clubs
International) which holds international offices in Illinois, U.S.A., and is governed by its constitution and by-laws
It is clear that under the Constitution of Lions International, Art. IV, Section, 8, the District Governor serves without
compensation. Lionism prides itself in that its motto is: "We serve", and "Liberty, Intelligence, Our Nation's Safety" its slogan
or credo. (Secs. 2 and 3, Art. 1, Constitution). There is, therefore, no proprietary or pecuniary interest involved in the
membership of the Lions and in the offices they seek and hold in the club and district levels. Being merely a member or officer
of the Lions Clubs or District is only a privilege and an opportunity for service to the community that is not enforceable at law.
And since the disputed election to the position of District Governor is within the peculiar province and function of Lions
International through its established tribunal to decide and determine in accordance with its governing laws, its resolution may
not be questioned elsewhere, much less in the courts.

Compare Codal Provisions Stock/Non-Stock/Close Corporations as to:


Definition
Purpose
Voting Rights/Manner of Voting
Election of Officers
Venue and Procedure in Meetings
Transfer of Shares
Pre-Emptive Right
Amendment of Articles and By-Laws
Distribution of Assets(for Non-Stock Corporations)

13. Close Coporations (96-105)

Dulay Enterprises vs CA

Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the
directors of a close corporation without a meeting shall nevertheless be deemed valid if:
1. Before or after such action is taken, written consent thereto is signed by all the directors, or
2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or
3. The directors are accustomed to take informal action with the express or implied acquiese of all the stockholders, or
4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection
thereto in writing.
If a directors' meeting is held without call or notice, an action taken therein within the corporate powers is deemed ratified by a
director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having
knowledge thereof.
Dulay Inc. is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage isnot
necessary to bind the corporation for the action of its president. #fluffypeaches At any rate, corporate actiontaken at a board
meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter
promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in
his case, Virgilio Dulay failed to do.

Although a corporation is an entity which has a personality distinct and separate from its individual stockholders or
members, the veil of corporate fiction may be pierced when it is used to defeat public convenience justify wrong, protect
fraud or defend crime.

Naguiat vs NLRC

1. Liability of NE, CFTI and officers


2. NE not liable
A. LA found that respondents were employees of CFTI as they received salary from said office, etc. (upheld by SC)
B. S. Naguiat was presumed to be managing and controlling taxi business on behalf of NE; S. Naguiat, in supervising
taxi drivers, was carrying out his responsibilities as CFTI
C. NE is a separate corporation completely (trading business); it is neither respondents indirect employer nor labor-
only contractor
D. Constitution of CFTI-AAFES TDA provided that members are CFTI employees and that for collective bargaining
purposes, the definite employer is CFTI
3. CFTI president solidarily liable [S. Naguiat]
A. A.C. Ransom Labor Union-CCLU v. NLRC family-owned corporation filed application for clearance to cease
operations. Backwages were computed; however, none of the motions for execution could be implemented for
failure to find leviable assets. LA granted unions prayer that officers and agents be personally held liable for
payment of backwages. NLRC however said that officers of a corporation are not personally liable for official acts
unless they exceeded scope of authority. SC however reversed NLRC and upheld LA, saying that if the policy of the
law were otherwise, the employer can have ways for evading payment of backwages.
B. Employer any person acting in the interest of an employer, directly or indirectly (LC 212c)
C. Applying the ruling on A.C. Ransom, S. Naguiat falls within the meaning of employer who may be held jointly
and severally liable for the obligations of the corporation to the dismissed employees
D. Both CFTI and NE were close family corporations (Corp. Code Sec. 100, par. 5) [To the extent that the stockholders
are actively engaged in the management or operation of the business [] Said stockholders shall be personally
liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance]
E. cf. MAM Realty Development v. NLRC: director / officer may still be held solidarily liable with a corporation by a
specific provision of law
i. WON there was corporate tort. YES
ii. TORT violation of a right given or the omission of a duty imposed by law; breach of legal duty
F. S. Naguiat is solidarily liable for corporate tort because he actively engaged in CFTIs management or operation

14. Foreign Corporations (123-136)

Communication Materials and Design vs CA

We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations Implementing the Omnibus
Investments Code of 1987, the following:
(1) A foreign firm is deemed not engaged in business in the Philippines if it transacts business through middlemen, acting in
their own names, such as indebtors, commercial bookers or commercial merchants.
(2) A foreign corporation is deemed not doing business if its representative domiciled in the Philippines has an independent
status in that it transacts business in its name and for its account. [20]
Generally, a foreign corporation has no legal existence within the state in which it is foreign. This proceeds from the principle
that juridical existence of a corporation is confined within the territory of the state under whose laws it was incorporated and
organized, and it has no legal status beyond such territory.Such foreign corporation may be excluded by any other state from doing
business within its limits, or conditions may be imposed on the exercise of such privileges. [25] Before a foreign corporation can transact
business in this country, it must first obtain a license to transact business in the Philippines, and a certificate from the appropriate
government agency. If it transacts business in the Philippines without such a license, it shall not be permitted to maintain or intervene
in any action, suit, or proceeding in any court or administrative agency of the Philippines, but it may be sued on any valid cause of
action recognized under Philippine laws.[26]
In a long line of decisions, this Court has not altogether prohibited a foreign corporation not licensed to do business in the
Philippines from suing or maintaining an action in Philippine Courts. What it seeks to prevent is a foreign corporation doing business
in the Philippines without a license from gaining access to Philippine Courts.[27]
Generally, a foreign corporation has no legal existence within the state in which it is foreign. This proceeds from the principle
that juridical existence of a corporation is confined within the territory of the state under whose laws it was incorporated and
organized, and it has no legal status beyond such territory.Such foreign corporation may be excluded by any other state from doing
business within its limits, or conditions may be imposed on the exercise of such privileges. [25] Before a foreign corporation can transact
business in this country, it must first obtain a license to transact business in the Philippines, and a certificate from the appropriate
government agency. If it transacts business in the Philippines without such a license, it shall not be permitted to maintain or intervene
in any action, suit, or proceeding in any court or administrative agency of the Philippines, but it may be sued on any valid cause of
action recognized under Philippine laws.[26]
In a long line of decisions, this Court has not altogether prohibited a foreign corporation not licensed to do business in the
Philippines from suing or maintaining an action in Philippine Courts. What it seeks to prevent is a foreign corporation doing business
in the Philippines without a license from gaining access to Philippine Courts.[27]

Columbia Pictures Inc. vs CA

In 1986, obviously the 1988 case of 20thCentury Fox was not yet promulgated. The lower court could not possibly have
expected more evidence from the VRB and Columbia Pictures in their application for a search warrant other than what the law and
jurisprudence, then existing and judicially accepted, required with respect to the finding of probable cause.
The Supreme Court also revisited and clarified the ruling in the 20 th Century Fox Case. It is evidently incorrect to suggest, as
the ruling in 20th Century Fox may appear to do, that in copyright infringement cases, the presentation of master tapes of the
copyright films is always necessary to meet the requirement of probable cause for the issuance of a search warrant. It is true that such
master tapes are object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact is made
through demonstration involving the direct use of the senses of the presiding magistrate. Such auxiliary procedure, however, does not
rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence tending to prove
the factum probandum, especially where the production in court of object evidence would result in delay, inconvenience or expenses
out of proportion to is evidentiary value.
In fine, the supposed pronouncement in said case regarding the necessity for the presentation of the master tapes of the copy-
righted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the
existence of probable cause in copy-right infringement cases where there is doubt as to the true nexus between the master tape and the
pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive
was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases.

15. Mergers and Consolidations (76-80)

16. Dissolution (117-121, 22)

17. Liquidiation (122)

Gelano vs CA

conjugal property is liable time during which the corporation, through its own officers, may conduct the liquidation of its assets
and sue and be sued as a corporation is limited to 3 years from the time the period of dissolution commences; but that there is
no time limited within which the trustees must complete a liquidation placed in their hands

only the conveyance to the trustees must be made within the 3-year period

effect of the conveyance is to make the trustees the legal owners of the property conveyed, subject to the beneficial
interest therein of creditors and stockholders

trustee may commence a suit which can proceed to final judgment even beyond the 3-year period

"trustee" = general concept - include the counsel to whom was entrusted in the instant case

The purpose in the transfer of the assets of the corporation to a trustee upon its dissolution is more for the protection of its
creditor and stockholders

Debtors may not take advantage of the failure of the corporation to transfer its assets to a trustee
Section 77 of the Corporation Law, when the corporate existence is terminated in any legal manner, the corporation shall
nevertheless continue as a body corporate for 3 years after the time when it would have been dissolved, for the purpose of
prosecuting and defending suits by or against it

Clemente vs CA

If, indeed, the sociedad has long become defunct, it should behoove petitioners, or anyone else who may have any interest in
the corporation, to take appropriate measures before a proper forum for a peremptory settlement of its affairs. We might invite
attention to the various modes provided by the Corporation Code (see Sees. 117-122) for dissolving, liquidating or winding up,
and terminating the life of the corporation. Among the causes for such dissolution are when the corporate term has expired or
when, upon a verified complaint and after notice and hearing, the Securities and Exchange Commission orders the dissolution
of a corporation for its continuous inactivity for at least five (5) years. The corporation continues to be a body corporate for
three (3) years after its dissolution for purposes of prosecuting and defending suits by and against it and for enabling it to settle
and close its affairs, culminating in the disposition and distribution of its remaining assets. It may, during the three-year term,
appoint a trustee or a receiver who may act beyond that period. The termination of the life of a juridical entity does not by itself
cause the extinction or diminution of the rights and liabilities of such entity (see Gonzales vs. Sugar Regulatory Administration,
174 SCRA 377) nor those of its owners and creditors. If the three-year extended life has expired without a trustee or receiver.
having been expressly designated by the corporation within that period, the board of directors (or trustees) itself, following the
rationale of the Supreme Court's decision in Gelano vs. Court of Appeals (103 SCRA 90) may be permitted to so continue as
"trustees" by legal implication to complete the corporate liquidation. Still in the absence of a board of directors or trustees,
those having any pecuniary interest in the assets, including not only the shareholders but likewise the creditors of the
corporation, acting for and in its behalf, might make proper representations with the Securities and Exchange commission,
which has primary and sufficiently broad jurisdiction in matters of this nature, for working out a final settlement of the
corporate concerns.