NATURE OF CORPORATION,

CORPORATE POWERS,
LIABILITY FOR TORTS AND
CRIMINAL ACTS

4LM1
Tejada, Aisha Jenica
Pasion, Mary Anne
Torio, Alyanna Jasmine
NATURE OF CORPORATION
 NATURE OF THE CORPORATION

Sec. 2. 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.

o Theory of Concession: looks at corporation as a creature of State

and of limited powers and capabilities, completely within the control of
the State.
o Theory of Enterprise Entity: there can be no corporate existence
without persons to compose it; there can be no association without
associates.
 NATURE OF THE CORPORATION

Four Corporate Attributes:

a) Artificial Being
b) Created by operation of law
c) Right of Succession
d) Creature of Limited Powers

Corporation as a Creature of the Law

 The power to create a corporation is legislative in
character.
 NATURE OF THE CORPORATION

o The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common
good and subject to the test of economic viability. (Sec. 16, Art.
XII, 1987 Constitution)

o Corporations, partnerships and associations for private interest

or purpose to which the law grants a juridical personality,
separate and distinct from that of each shareholder, partner or
member. (Art 44(3), NCC)
 NATURE OF THE CORPORATION
o Private corporations are regulated by laws of general application
on the subject. (Art 45, NCC)

 Corporation Code: general law referred to in the said

constitutional provision

Corporation as a Person:
a) Entitled to due process and equal protection
b) Unreasonable searches and seizure
c) Not entitled to privilege against self-incrimination
d) Not entitled to Moral damages
CORPORATE POWERS
 CORPORATE POWERS
 Refers to the right or capacity of a corporation to
perform all acts or things, except only those
forbidden by law and its articles of incorporation
in furtherance of its purpose/s
 CORPORATE POWERS
 A corporation has no power except those
expressly conferred on the Corporation Code and
its charter, and those implied or incidental to its
existence.

 A corporation exercises its powers through the

Board of Directors and/or its duly authorized
officers and agents
 CORPORATE POWERS
Kinds:

1. Express – authorized by corporation code, AOI or charter and

other laws. (Sec 36 of BP 68)
 To sue and be sued in its corporate name
 Of succession by its corporate name for the period of time stated
in the articles of incorporation and the certificate of incorporation
 To adopt and use a corporate seal;
 To amend its articles of incorporation in accordance with the
provisions of this Code;
 To adopt by-laws, not contrary to law, morals, or public policy,
and to amend or repeal the same in accordance with this Code;
 In case of stock corporations, to issue or sell stocks to subscribers
and to sell stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this Code; and to admit
members to the corporation if it be a non-stock corporation;
 CORPORATE POWERS
 To purchase, receive, take or grant, hold, convey, sell, lease,
pledge, mortgage and otherwise deal with such real and
personal property, including securities and bonds of other
corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to
the limitations prescribed by law and the Constitution;

 To enter into merger or consolidation with other corporations

as provided in this Code;
 To make reasonable donations, including those for the public
welfare or for hospital, charitable, cultural, scientific, civic, or
similar purposes: Provided, That no corporation, domestic or
foreign, shall give donations in aid of any political party or
candidate or for purposes of partisan political activity;
 To establish pension, retirement, and other plans for the
benefit of its directors, trustees, officers and employees; and
 To exercise such other powers as may be essential or necessary
to carry out its purpose or purposes as stated in the articles of
incorporation.
 CORPORATE POWERS
2. Incidental or Inherent

 Right to succession
 Right to have a corporate name
 Right to make by-laws
 Right to sue and be sued
 Right to acquire and hold properties for the
purposes authorized by the charter
 Right to adopt and use a corporate seal
 Right to contract
 CORPORATE POWERS
3. Implied – inferred from or necessary for the
exercise of express powers

 Acts in the usual course of business

 Acts to protect debts owing to a corporation
 Embarking in different business
 Acts in part or wholly to protect or aid employess
 Acts to increase business
 CORPORATE POWERS
 Ultra Vires
 Acts or contracts of a corporation outside the scope if
its express, implied, and incidental powers.
Types of Ultra Vires:

 Acts done beyond the powers of the corporation as

provided in the law or AOI
 Acts or contracts entered into in behalf of a
corporation by persons who have no corporate
authority
 Acts or contracts which are illegal as being contrary
to law
 CORPORATE POWERS
 An ultra vires act may be that of:
 The corporation
 The BoD
 The corporate officers
LIABILITY OF CORPORATIONS
FOR TORTS
 LIABILITY OF A CORPORATION

 A corporation must be held liable:

1. For all the contracts and default that arise

from those who entered into by its agent
through its Board of Directors

2. The acting officer is solidarily liable with the

corporation for the damages resulting from his
negligence
PHILIPPINE NATIONAL BANK V. COURT OF
APPEALS

 A corporation is liable, therefore whenever a

tortous act is committed by and officer or agent
under express direction or authority from the
stockholders of members acting as a body, or,
generally, from the directors as a governing body.
PHILIPPINE NATIONAL BANK V. COURT OF
APPEALS

 Article 19 of the Civil Code: every person must in

the exercise of his rights and in the performance
of his duties act with justice, give everyone his
due, and observe honesty and good faith.
PHILIPPINE NATIONAL BANK V. COURT OF
APPEALS

Corporation is liable when:

1. Tortuous act arises from an express direction or

pursuant to the exercise of powers given by the
Board of Directors

2. One that arises as a necessary incident of the

business of the corporation, would the damages
resulting therefrom be ascribable to the
corporation
 SERGIO F. NAGUIAT V. NLRC

 When the tort act arises from or is connected

with a business of the corporation, it would be
safe to assume that the corporate principal would
also be liable.
CRIMINAL LIABILITY IN
THE CORPORATE SETTING
 POLICY CONSIDERATIONS

People v. Tan Boon Kong

 Veil of corporate fiction- shielding individual

actors in the criminal act, even of they do the act
for or in behalf of the corporation they represent
 POLICY CONSIDERATIONS

People v. Tan Boon Kong

- A corporation can act only through its officers and

agents, and where the business itself involves a
violation of law, the correct rule is that all who
participate in it are liable.
SIA V. PEOPLE

• The act alleged to be a crime was not in the

performance of an act directly ordained by law to
be performed by the corporation but it was based
on the intent and agreement of the parties
SIA V. PEOPLE

• P.D. 115 had not been enacted making it

expressly a case of estafa for violating the terms
of trust receipts and imposing expressly the
criminal liability upon the responsible officers,
directors, and employees of the corporation
SIA V. PEOPLE

• Officers can be held criminally liable when the

corporation was directly required by law to do an
act in a given manner, and the same law makes
the person who fails to perform the act in the
prescribed manner expressly liable criminally.
CORPORATE CRIMINAL RECOGNIZED IN THE
ANTI-MONEY LAUNDERING LAW OF 2001

• Offender

1. Any person who commits a money laundering

offense

2. Defines a person as any natural or juridical person

3. Person who undertakes the acts defined being

criminal acts

4. Subject to criminal prosecution and punishment

CORPORATE CRIMINAL RECOGNIZED IN THE
ANTI-MONEY LAUNDERING LAW OF 2001

• Offender

1. Corporation, Association, Partnership or any Juridical

Person – penalty shall be imposed upon responsible
officers

2. Juridical Person – suspension and revocation of license

3. Alien- deportation

4. Public official or employee- perpetual or temporary

absolute disqualification from office
 ENTITLEMENT TO MORAL DAMAGES

• Corporation cannot be entitled to moral damages

but if a corporation may have a good reputation
which, if besmirched, may also be a ground for
the award of moral damages.

• Asset Privatization Trust v. CA

THANK YOU!