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1. What is a corporation?

Sec. 2, BP 68 to wit: "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."
2. What are the attributes of a corporation? Briefly explain each.
The attributes are:
1. It is an artificial being.
2. It is created by operation of law.
3. It has the right of succession.
4. It has only the powers, attributes and properties expressly authorized by
law or incident to its existence.
3. What is meant by the "doctrine of legal entity"? (p. 15, de leon)
The company and its members are two separate/distinct entities. Doctrinally, a
corporation is a legal or juridical person with a personality separate and apart
from its individual stockholders or members and from any legal entity to which it
may be connected or related. The stockholders or members who, as natural
persons, are merged in the corporate body, compose the corporation but they
are not the corporation."
4. Explain: "piercing the veil of corporate entity." (p 26, de leon)
The doctrine that a corporation is a legal entity or a person in law, distinct from
the persons composing it or any other corporation to which it may be related, is
merely a legal fiction for purposes of convenience and to subserve the ends of
justice. This fiction, therefore, cannot be extended to a point beyond its reason
and policy. Peculiar situations or valid grounds may exist to warrant the disregard
of its independent being and the piercing of the corporate veil.
The above doctrine is applied only in three basic areas:
1. defeat of public convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation;
2. fraud cases or when the corporate entity is used to justify a wrong,
protect fraud, or defend a crime;
3. alter ego cases, where a corporation is merely a farce since it is a mere
alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation.

5. Distinguish between corporation and partnership?

1. manner of creation
2. number of incorporators
3. commencement of juridical
4. powers

5. management
6. effect of mismanagement

7. right of succession
8. extent of liability to third

9. transferability of interest

10. terms of existencce

Created by mere agreement of
the parties (Art. 1787)
May be organized by only two
persons (Art. 1767)
From moment of execution of
contract of partnership (Art.
Exercise any power
authorized by the partners
provided it is not contrary to
law, morals, good customs,
public order or public policy
(Art. 1306)
When not agreed, every
partner is an agent of the
partnership (Art. 1803).
A partner can sue a co-partner
who mismanages (Art. 1794,
1806, 1809).
A partner has no right of
succession (Arts. 1828-1831,
Partners (except limited
partners) are liable personally
and subsidiarily (sometimes
solidarily) for partnership
debts to third persons (Art.
1816, 1822-1824).
Partner cannot transfer his
interest in partnership so as to
make the transferee a partner
without the consent of all
existing partners (Art. 1767,
Any period stipulated by
partners (Art. 1767, 1785)

11. firm name

Ltd partnership must append

"Ltd." to its name (Art. 1844)

12. dissolution

Any time by will of any or all

partners (Art. 1830: 1-2)
Civil code

13. governing law

Created by law or by operation
of law (Sec. 2, BP 68)
Requires at least five persons
(except sole proprietorship)
(Sec. 10, BP 68)
From date of issuance of
certificate of incorporation by
the SEC (Sec. 19, BP 68)
Exercise powers only
expressly granted by law or
implied from those granted or
incident to its existence (Sec.
2, 36, BP 68)
Vested in board of directors or
trustees (Sec. 23, BP 68).
A suit a against a member of
the BOD or BOT who
mismanages must be in the
name of the corporation (Sec.
23, BP 68)
Has right of succession (Sec.
2, BP 68)
Stockholders are liable only to
the extent of the shares
subscribed by them (Sec. 64,
37, BP 68)
Stockholders have a general
right to transfer shares without
the prior consent of the other
stockholders because a corp.
is not based on this
principle(Sec.63 , BP 68)
Not exceeding 50 yrs.
extendible to not more than 50
years in any one instance
(Sec. 11, BP 68)
Any name as long as not
similar or same to any
registered firm name (Sec. 18,
BP 68)
Consent of the state needed
(Sec. 117-122, BP 68)
Corporation code


Sec. 3, BP 68 (p. 55, de leon)
"Corporations formed or organized under this
Code may be stock or non-stock corporations.
Corporations which have capital stock divided
into shares and are authorized to distribute to the
holders of such shares dividends or allotments of
the surplus profits on the basis of the shares held
are stock corporations. All other corporations are
non-stock corporations."

1. Stock corporation - is the ordinary business corporation created and operated

for the purpose of making a profit which may be distributed in the form of
dividends to stockholders on the basis of their invested capital.
2. Non-stock corporation - do not issue stocks and distribute dividends to their
members; they are created not for profit but for the public good and welfare.
(a) Corporation aggregate or a corporation consisting of more than one
member or corporator; or
(b) Corporation sole or a special form of corporation usually associated
with the clergy (Sec. 110).
(2) as to whether they are for RELIGIOUS PURPOSES OR NOT:
(a) Ecclesiastical corporation or one organized for religious purposes.
Under the Code, religious corporations are classified into corporations sole and
religious societies (Sec. 109, par. 2) or
(b) Lay corporation or one organized for a purpose other than for religion.
Lay corporations, in turn, may be either eleemosynary or civil.
(3) as to whether they are for CHARITABLE PURPOSES OR NOT:
(a) Eleemosynary corporation or one established for, or devoted to,
charitable purposes or those supported by charity; or
(b) Civil corporation or one established for business or profit, i.e., with a
view toward realizing gains to be distributed among its members.
(a) Domestic corporation or one incorporated under the laws of the
Philippines; or
(b) Foreign corporation or one formed, organized, or existing under any
laws other than those of the PHL. It includes multinational corporations created
under the laws of another State (see Sec. 123). For tax purposes, a foreign
corporation is further classified into resident or non-resident.
(a) De jure corporation or a corporation existing in fact and in law; or
(b) De facto corporation or a corporation existing in fact but not in law
(Sec. 21).
(6) as to whether they are OPEN TO THE PUBLIC OR NOT:
(a) Close corporation or one which is limited to selected persons or
members of a family (Secs. 96-105); or
(b) Open corporation or one which is open to any person who may wish to
become a stockholder or member thereto.


(a) Parent or holding corporation or one which is so related to another
corporation that it has the power, either directly or indirectly, through one or more
intermediaries, to control or to elect the majority of the directors of such other
(b) Subsidiary corporation or one which is so related to another
corporation that the majority of its directors can be elected, either directly or
indirectly, by such other corporation which thereby become its parent corporation.
It is one in which another corporation owns at least a majority (i.e., more than
50%) of the shares and thus has control over its financial and/or operating
policies; or
(c) Affiliated corporation or one related to another by owning or being
owned by common management or by a long-term lease of its properties or other
control device. An affiliation exists between a holding or parent company and its
subsidiary, or between two corporations owned or controlled by a third.
(8) as to whether they are for PUBLIC (GOVERNMENT) OR PRIVATE
(a) Public corporations or those formed or organized for the government of
a portion of the State for the general good and welfare; or
(b) Private corporations or those formed for some private purpose, benefit,
or end; it may either be a stock or non-stock corporation, government-owned or
controlled corporation or quasi-public corporation.
The Code eliminated the classification of corporations into public or private
obviously for the reason that it applies only to private corporations.
(a) Government-owned or controlled corporations or those created or
organized by the government or of which the government is the majority
(b) Quasi-public corporations or private corporations which have accepted
from the State the grant of franchise or contract involving the performance of
public duties but which are organized for profit. They have been defined also as
corporations private in ownership but having an appropriate franchise from the
State to provide for a necessity or convenience of the general public, incapable
of being furnished through the ordinary channels of private competitive business
and dependent for its exercise upon eminent domain or some agency of the
government. They are private corporations that perform public service.
(9) as to whether they are CORPORATIONS IN A TRUE SENSE OR ONLY IN A
(a) True corporation or one which exists by statutory authority; or
(b) Quasi-corporation or one which exists without formal legislative grant.
It is an exception to the general rule that a corporation can exist only by authority
of law. It may be:
(b1) Corporation by prescription or one which has exercised
corporate power for an indefinite period without interference on the part of the

sovereign power and which by fiction of law is given the status of a corporation
(b2) Corporation by estoppel or one which in reality is not a
corporation, either de jure or de facto, because it I so defectively formed, but is
considered a corporation in relation to those only who, by reason of their acts or
admissions, are precluded from asserting that it is not a corporation. This legal
assumption is not good, however, as against the State but may arise only for
purposes of private litigation