University of Eastern Philippines BS Accountancy Batch 2019

THE LIFE OF A PRIVATE CORPORATION,

a study/review guide on Philippine Corporate Law
Part I INTRODUCTION
1. Definition in Sec.2,
2. Four attributes of a corporation,
3. advantages /disadvantages,
4. compare with partnership,
5. kinds or classifications (with great emphasis on corporations vested with public interest under the new
law) see sec. 22 of the new law.

Part II BIRTH (FORMATION AND ORGANIZATION)

1. Who may form
2. How (Steps in Incorporation)
 Parts of Articles of Incorporation (AOI)
 Capitalization ( Know the capital structure or the Shareholders Equity, its composition, may refer
to your financial accounting for better understanding)
3. Issue Certificate of Incorporation
 De jure, De facto, and Estoppel principles
4. Organization
 By laws
5. A new person created (juridical)
 Doctrine of separate juridical personality (creation of a corporate veil)
 Piercing the corporate veil
 Nationality (tests to determine nationality) at this point, you may browse and lunderstand a
little about foreign corporations.

Part III LIFE (OPERATION, EXERCIZE OF CORPORATE POWERS)

1. Sources of Powers
 General (Sec.36); Special; Implied or Incidental powers(AOI purpose clause)
2. Ultra Vires Acts
3. Control and Management
 3 levels of control and management/ corporate hierarchy
Ist level – BOD/BOT
2nd level – Officers
3rd level – SHs/members in case non-stock
 THE BOARD OF DIRECTORS OR TRUSTEES (the policy setting function, the one who
exercises the corpo powers as a collegial body)
o Functions (Business judgment rule in Sec 22 of the new law)
o Number of members/directors
o Term of office
o Qualifications and Disqualifications
o How elected
o How removed
o Compensation
o Duties and Liabilities (self-dealing, interlocking directors, disloyalty) Secs. 30 to 33 of
the new law.
o Quorum requirement
o The Executive committee and other committees that may be formed.

 OFFICERS (the one who execute policies set by the Board)

o Minimum set of officers
o Qualifications and Disqualifications
 SHAREHOLDERS / MEMBERS (ones who exercise residual powers or ones who decide on
fundamental and major changes in the corporation)
o Voting ( required number of votes, proxy, VTA, and most esp. the new provision on
absentee voting)
o Corporate acts requiring approval of SHs (including non-voting shares) AASIIMID sec.
6 of the new law.

4. Financing and the Capital Structure

 3 Main sources of Financing
 Contribution by SHs (EQUITY)
 Loans and Advances from Creditors (BORROWING)
 Profits from operation
University of Eastern Philippines BS Accountancy Batch 2019

 Classification of SHARES (common, preferred, redeemable, founders’ shares, etc.)

 Subscription (read with the pre-emptive right of a sh)
 Consideration for the shares of stocks (with premium, or discount, a.k.a. watered stock)
 Issuance (issued shares vs. outstanding shares)
 Transfer of shares
 Treasury Shares
5. Dividends
 Forms (Cash, stock, property are the basic forms under the law, refer to your financial
accounting as to other types of dividends)
 Sources of dividends
 How given (consider also the dates of declaration, record, and payment)
 When may be given or declared?

Part IV DEATH (DISSOLUTION)

1. Causes of Dissolution
 Expiration of corporate term, if they refuse to live in perpetuity. (subject to renewal) note:
corporations vested with public interest don’t have any choice but to exist in perpetuity under
the new law.
 Voluntary
 Involuntary
 Failure to organize or commence business
 Cessation of business
2. Corporate Combinations
 Merger and Consolidations, the process, voting requirements, and effects.
 Sale of ALL or substantially all assets of the corporation.

Good Luck!!!

AAEstigoy
Professor