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BUSINESS ORGANIZATION II

Atty. Hilario N. Magsino, Jr.


CORPORATION CODE
(Batas Pambansa Blng. 68)
I.

NATURE AND FORMATION


1.
Definition of a corporation Section 2 of the Corporation Code
2.
Tri-Level Existence in the Corporate Setting
A.

NATURE OF CORPORATIONS
1.
a.

Corporate Attributes
Theories in the formation of a corporation
Tayag vs. Benguet Consolidated, 26 SCRA 242 (1968)
Ang Pue & Co. vs. Secretary, 5 SCRA 645 (1962)
1. Theory of Concession
2. Theory of Enterprise Entity

b.

Creature of the Law


1. Constitution Section 16, Article XII of the Constitution
NDC vs. Phil. Veterans Bank, 192 SCRA 257 (1990)
2. Civil Code - Articles 44 and 45 of the Civil Code
3. Franchise
JRS vs. Imperial Insurance, 11 SCRA 634 (1964)

c.

Four attributes of a corporation

d.

Advantages and Disadvantages of the Corporate Form

e.

The Corporate entity compared with other business endeavors


1. Sole Proprietorship
2. Partnership (Article 1768, 1772 and 1775 of the Civil Code)
J. M. Tuazon vs. Bolaos, 95 PHIL 106 [28 May 1954]
3. Joint Venture
Aurbach vs. Sanitary Wares, 180 SCRA 130 (1989)
4. Business Trusts (Article 1441 of the Civil Code)

f.

The Corporation and the Bill of Rights


1. Equal Protection
Smith Bell vs. Natividad, 40 PHIL 136 (1919)
2. Unreasonable search and seizure
Stonehill vs. Diokno, 20 SCRA 283 (1967)
Bache & Co. vs. Ruiz, 37 SCRA 823 (1971)
3. Self-incrimination
Bataan Shipyard vs. PCGG, 150 SCRA 181 (1987)

2.

Classification Of Corporations

a.

In relation to the State


- Public
- Private
National Coal Co. vs. CIR, 46 PHIL 583 (1924)
Philippine Society vs. COA, GR No. 169752 (2007)
- Quasi-Public
Davao Water District vs. CSC, 201 SCRA 593 (1991)

b.

As to place of incorporation
- Domestic
- Foreign (Section 123 of the Corporation Code)

c.

As to nationality (Section 140 of the Corporation Code)


Tests - Place of Incorporation Control
- Principal Place of Business
- Investment Test
1.
Exploitation of Natural Resources
Register of Deeds vs. Ung Sui Si Temple, 97 PHIL 58 (1955)
2.
Public Utilities - Section 11, Art. XII of the Constitution
People vs. Quasha, 93 PHIL 333 (1953)
3.
Mass Media - Section 11 (1), Art. XVI of the Constitution
4.
Advertising Industry
- Section 11 (2), Art. XVI of the Constitution
5.
War-Time test
Filipinas Comania vs. Christern, 89 PHIL 744 (1952)
6.
Grandfather Rule

d.

As to purpose of incorporation
- Municipal
- Religious (Sections 109 and 116 of the Corporation Code)
- Educational (Sections 106 to 108 of the Corporation Code)
(Section 25, BP 232)
- Charitable, Scientific or Vocational
- Business Corporation

e.

f.

g.

As to number of members
- Aggregate Corporation
- Corporation Sole (Sec. 110 to 115 of the Corporation Code)
Roman Catholic Administrator vs. LRC, 102 PHIL 597 (1957)
Republic vs. Villanueva, 114 SCRA 875 (1982)
As to existence of shares (Secs. 3 and 5 of the Corporation Code)
- Stock
- Non-Stock (Sections 87 and 88 of the Corporation Code)
CIR vs. Club Filipino, 5 SCRA 321 (1962)
As to relationship of management and control
2

- Holding company
- Affiliate company
- Parent and subsidiary company
h.

B.

Close Corporations
- Definition (Section 96 of the Corporation Code)
- Articles of Incorporation Requirements
(Section 97 of the Corporation Code)
- Pre-emptive Rights (Section 102 of the Corporation Code)
- Amendment (Section 103 of the Corporation Code)
- Restriction on Transfer of Shares
(Sections 98 and 99 of the Corporation Code)
- Agreements by Stockholder
(Section 100 of the Corporation Code)
- No Necessity of Board (Section 101 of the Corporation Code)
Dulay Enterprises, Inc. vs. CA (G.R. No. 91889 [1993])
- Deadlocks (Section 104 of the Corporation Code)
- Withdrawal and Dissolution (Section 105 of the Corporation Code)
Financing Corp vs. Teodoro, 93 PHIL 678

FORMATION OF CORPORATIONS
1.

Organizing the Corporation

a.

Promoters

(Section 2 [r] of the Revised Securities Act [BP 178])


(Sections 60 and 61 of the Corporation Code)
Cagayan Fishing Development vs. Sandiko (65 PHIL 223 [1937])
Rizal Light & Ice Co. vs. Municipality, 25 SCRA 285 (1968)
Caram, Jr. vs. CA, 151 SCRA 372 (1987)

b.

Subscription Contracts
(Sections 60 and 72 of the Corporation Code)
Trillana vs. Quezon College, 93 PHIL 383
1.
2.

3.

2.
a.
b.

Purchase Agreement
Bayla vs. Silang Traffic, Co., 73 PHIL 557 (1942)
Pre-Incorporation Subscription
(Sec. 61 of the Corporation Code)
- Offer Theory
- Contract Theory
Release from subscription obligation
Velasco vs. Poizat, 37 PHIL 802
PNB vs. Bitulok Sawmill, Inc., 23 SCRA 1366

Formalities in Organizing
Generally
Government of the PI vs. Manila Railroad, 103 PHIL 757 (1929)
Rural Bank of Salinas vs. CA, 210 SCRA 510 (1992)
Articles of Incorporation
3

c.

1. Procedure and Documentary Requirements


- As to contents and form (Section 14 and 15)
- As to corporate name (Section 18)
Red Line Transit vs. Rural Transit, 60 PHIL 549 (1934)
Philippine Insurance vs. Hartigan, 34 SCRA 252 (1970)
Universal Mills vs. Universal Textile, 78 SCRA 62 (1977)
2. As to purpose (Section 14 [2])
Uy Siuliong vs. Director, 40 PHIL 514 (1919)
3. As to principal office (Section 14 [3])
Clavecilla vs. Antillon, 19 SCRA 379 (1967)
4. As to Corporate Term (Section 11)
Alhambra Cigar & Cigarette vs. SEC, 25 SCRA 269 (1968)
Benguet Consolidated vs. Pineda, 98 PHIL 711 (1956)
5. As to number and residency of Incorporators (Section 10)
6. As to minimum capitalization (Section 12)
7. As to subscription and paid-up requirements (Section 13)
8. Grounds for Disapproval (Section 17)
Asuncion vs. De Yriate, 28 PHIL 67 (1914)
9. Commencement of Corporate Existence (Section 19)
By-Laws
Loyola Grand Villas vs. CA, GR No. 117188 [07 August 1997]
PMI Colleges vs. NLRC, GR No. 121466 [15 August 1997]
Pena vs. CA, 193 SCRA 7117 (1991)
a.
b.
c.

C.

Adoption Procedure (Section 46)


Contents (Section 47)
Amendments (Section 48)

RECOGNITION AND DISREGARD OF CORPORATENESS


1.

Separate Juridical Personality


Santos vs. NLRC, GR No. 101699 [13 March 1996]
Stockholders of F. Guanzon vs. Register, 6 SCRA 373 (1962)
Manila Gas vs. CIR, 62 PHIL 895 (1936)
Magsaysay-Labrador vs. CA, 180 SCRA 266 (1989)
Good Earth vs. CA, 194 SCRA 544 (1991)

2.

Defective Incorporation
1. De jure
2. De facto (Section 20 of the Corporation Code)
i. Rationale for the doctrine
Tayko vs. Capistrano, 53 PHIL 866 (1928)
ii. Requisites
Fernandez vs. Cuerva, 21 SCRA 1095 (1967)
Hall vs. Piccio, 86 PHIL 603 (1950)
Benguet Consolidated vs. Pineda, 98 PHIL 711 (1956)
3. Corporation by estoppel (Sec 21 of the Corporation Code)
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i. Rationale for the doctrine


Asia Banking vs. Standard Products, 46 PHIL 144 (1924)
Vda. De Salvatierra vs. Garlitos, 103 PHIL 757 (1958)
Albert vs. University Publishing, 13 SCRA 84 (1965)
Lim vs. Philippine Fishing Gear (G.R. No. 136448 [1999])
3.

Piercing the veil of corporate fiction


Umali vs. CA, 189 SCRA 529 (1990)
Koppel (Phil) vs. Yatco, 77 PHIL 496 (1946)
Tantongco vs. Kaisahan, 106 PHIL 199 (1959)
Robledo vs. NLRC, 238 SCRA 52 [1994]
a. Fraud cases
Gregorio Araneta, Inc. vs. Tuazon, 91 PHIL 786 (1952)
Palacio vs. Fely Transportation Co., 5 SCRA 1011 (1962)
Palay, Inc. vs. Clave, 124 SCRA 636 (1983)
Pabalan vs. NLRC, 184 SCRA 495 (1990)
Del Rosario vs. NLRC, 187 SCRA 777 (1990)
Villia Rey Transit vs. Ferrer, 25 SCRA 845 (1968)
b. Alter ego cases
Arnold vs. Willets and Paterson, Ltd., 44 PHIL 634 (1923)
La Campana Coffee vs. Kaisahan, 93 PHIL 160 (1953)
Yutivo Sons Hardware vs. CTA, 1 SCRA 160 (1961)
Liddell & Co. vs. Collector, 2 SCRA 632 (1961)
Ramirez Telephone vs. Bank of America, 29 SCRA 191
Guatson International vs. NLRC (GR No. 100322 [1994])
Concept Builders, Inc. vs. NLRC (GR No. 108734 [1996])
c. Equity cases
TESCO vs. WCC, 104 SCRA 354 (1981)
AD Santos vs. Vasquez, 22 SCRA 1158 (1968)

D.

4.

Due Process
McConnel vs. CA, 1 SCRA 723 91961)
Emilio Cano Enterprises vs. CIR, 13 SCRA 291 (1965)
NAMARCO vs. Associated Finance Co. Inc., 19 SCRA 962
Jacinto vs. CA, 198 SCRA 211 (1992)
Arcilla vs. CA, 215 SCRA 120 (1986)
AC Ransom Labor Union vs. NLRC, 142 SCRA 269
Lim vs. NLRC, 171 SCRA 328 (1989)
De Guzman vs. NLRC, 211 SCRA 723 (1992)

5.

Anti-Trust Issues
Garcia vs. Executive Secretary (G.R. No. 132451 [1999])
Standard Oil Co. vs. US, 221 U.S. 1 (1910)

CORPORATE POWERS
5

1.
a.

b.

Sources of Corporate Powers


Corporate Powers and Capacity (Article 42 of the Civil Code)
1. Express Powers (Section 36 of the Corporation Code)
2. Implied Powers (Section 36 [11] of the Corporation Code)
3. Incidental Powers (Section 2 of the Corporation Code)
Specified Powers
1.

Power to sue and be sued


- Section 36 [1] of the Corporation Code
BS Savings Bank vs. Sia (GR No. 131214 [2000])

2.

Power to extend or shorten corporate term


- Section 37 and 81(1) of the Corporation Code

3.

Power to increase or decrease capital stock


- Section 38 and 16 of the Corporation Code
Madrigal & Co. vs. Zamora, 151 SCRA 355 (1987)

4.

Power to sell, dispose, lease or encumber assets


- Section 40 of the Corporation Code
Pena vs. CA, 193 SCRA 717 (1991)
Islamic Directorate vs. CA, GR No. 117897 [14 May 1997]
Power to deny pre-emptive rights
- Section 39 of the Corporation Code
Datu vs. SEC, 123 SCRA 722 (1907)
Power to purchase own shares
- Section 41 of the Corporation Code
Phil Trust vs. Rivera, 44 PHIL 469 (1923)
Boman Environmental vs. CA, 167 SCRA 540 (1988)
Power to invest corporate funds in another corporation
or business or for any other purpose
- Section 42 of the Corporation Code
Dela Rama vs. Ma-ao Sugar Central, 7 SCRA 247 (1969)
Power to enter into a management contract
- Section 44 of the Corporation Code
Power to make donations
- Section 36(9) of the Corporation Code

5.
6.

7.

8.
9.

2.

10.

Power to provide gratuities to employees


- Section 36(10) of the Corporation Code
Lopez Realty vs. Fontecha (GR No. 76801 [11 August 1995])

11.

Power to enter into a joint venture


- Section 44 of the Corporation Code
Tuazon & Co. vs. Bolanos, 95 Phil 906

Ultra Vires Acts (Section 45 of the Corporation Code)


a.
Types of Ultra Vires Acts
b.
Test to Determine Ultra Vires
Montelibano vs. Bacolod-Murcia, 5 SCRA 36 (1962)
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3.

c.

Cases
Pirovano vs. De la Rama Streamship, 96 PHIL 335 (1954)
Luneta Motors vs. AD Santos, 5 SCRA 809 (1962)
Republic vs. Acoje Mining, 3 SCRA 361 (1963)
Crisologo-Jose vs. CA, 177 SCRA 594 (1989)
Harden vs. Benguet Consolidated, 58 PHIL 1140 (1948)

d.

Ratification of Ultra Vires Acts


Carlos vs. Mindoro Sugar, 57 PHIL 343 (1932)

Liability for Torts or Crimes


a.
b.
c.

For Torts
PNB vs. CA, 83 SCRA 237 (1978)
Criminal Liability
People vs. Tan Boon Kong, 54 PHIL 607 (1930)
Sia vs. People, 121 SCRA 655 (1983)
Moral Damages
ABS-CBN vs. CA (G.R. No. 128690 [January 1999])
Filipinas Broadcasting vs. AMEC-BCCM (GR No. 141994 [2005])

II.

FINANCIAL STRUCTURE

A.

DEBT SECURITIES
Generally - Lirag Textile Mills, Inc., vs. SSS (GR No. L-33205 [1987])

B.

1.

Authority to Issue Debt Securities


- Power to incur, create or increase bonded indebtedness
(Section 38 of the Corporation Code)

2.

Types of Debt Securities


- Unsecured Bonds
- Secured Bonds
- Income Bonds
- Convertible Bonds
- Callable Bonds

EQUITY SECURITIES
Generally - Garcia vs. Lim Chu Sing, 59 PHIL 562
1.
Issuance of Shares
a.
Certificate of Stock (Section 63 of the Corporation Code)
b.
Pre-Emptive Rights (Section 39 of the Corporation Code)
c.
Consideration (Section 62 of the Corporation Code)
National Exchange vs. Dexter, 51 PHIL 601
1. Par Value
2. No Par Value
d.
Payment of the Balance of the Subscription
(Sections 66 and 67 of the Corporation Code)
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e.
f.

g.
2.

C.

D.

Lingayen Gulf vs. Baltazar, 93 PHIL 404


Liability for Unpaid Subscriptions
Keller vs. COB Group, 141 SCRA 86
Delinquency Subscription
(Sections 68 to 71 of the Corporation Code)
Phil Trust vs. Rivera, 44 PHIL 496
Miranda vs. Tarlac Rice Mill, 57 SCRA 619
De Silva vs. Aboitiz, 44 PHIL 755
Trust Fund Doctrine (Sections 43 and 122 of the Corporation Code)
Classes of Shares

a. Classification of Shares (Section 6 of the Corporation Code)


1. Preferred Shares
- Participating and Non-Participating
- Cumulative and non-Cumulative
2. Founders Shares (Section 7 of the Corporation Code)
3. Redeemable Shares (Section 8 of the Corporation Code)
Republic Planters Bank vs. Hon. Agana (GR No. 51765 [1997])
4. Treasury Shares (Section 9 of the Corporation Code)
Commissioner vs. Manning, 66 SCRA 14
b. Watered Stocks (Section 65 of the Corporation Code)
c. Quasi-Reorganization (Section 38 of the Corporation Code)
Reduction of Capital Stock
Stock Splits
DIVIDENDS AND OTHER DISTRIBUTIONS
Right to Dividends (Section 43 of the Corporation Code)
1.

Types of Dividends and Other Distributions


Nielsen & Co. vs. Lepanto Consolidated, 26 SCRA 540 (1968)

2.

Legal Restrictions on Dividends and Other Distributions

3.

Declaration and Payment of Dividends


CIR vs. Court of Appeals , GR No. 108576 (20 January 1999)

4.

Liability for Improper Dividends and Distributions


Steinberg vs. Velasco, 52 PHIL 953 (1929)

TRANSFER OF INVESTMENT SECURITIES


1.

Ownership of Securities

a. Right to Issuance (Section 64 of the Corporation Code)


Baltazar vs. Lingayen Gulf, 14 SCRA 522
b. Joint Ownership (Section 56 of the Corporation Code)
c. Pledgor, Mortgagor and Administrators
(Section 55 of the Corporation Code)
d. Pooling Agreements
- Control and Board Discretion

(Section 100 of the Corporation Code)


e. Stock and Transfer Book (Section 74 of the Corporation Code)
Chua Guan vs. Samahang Magsasaka, 62 PHIL 472
Monserat vs. Ceran, 58 PHIL 469
Fua Cun vs. Summers, 44 PHIL 705
Nava vs. Peers Marketing, 74 SCRA 65
f. Lost or Destroyed Certificates (Sec. 73 of the Corporation Code)
2.

Transfer of Securities

a. Transfer of Shareholding (Section 63 of the Corporation Code)


Uson vs. Diosomito, 61 PHIL 535
Escano vs. Filipinas Mining, 74 PHIL 711
Ponce vs. Alsons Cement (GR No. 139802 [2002])
Tan vs. SEC (GR No. 95696 [1992])
b. Remedy if Transfer is Refused
Hager vs. Bryan, 19 PHIL 138
Batong Buhay vs. CA, 147 SCRA 4
Won vs. Wack Wack Golf Club, 104 PHIL 466
d. Validity of Restrictions
Lambert vs. Fox, 26 PHIL 588
Fleishcher vs. Botica Nolasco, 47 PHIL 583
Padgett vs. Babcock and Templeton, 59 PHIL 232
e.
Forged Transfers
Sta. Maria vs. Hongkong and Shanghai, 89 PHIL 780
De Los Santos vs. Republic, 96 PHIL 577
f.
Non-transferability of Membership in a Non-Stock Corporation
(Section 90 of the Corporation Code)
III.

MANAGEMENT STRUCTURE

A.

CORPORATE GOVERNANCE
1.
Powers of the Board or Trustees
(Section 23 of the Corporation Code)
Gamboa vs. Victoriano, 90 SCRA 40 (1979)
Gokongwei vs. SEC, 89 SCRA 336, (1979)
a.
Must act as a body
(Section 25 of the Corporation Code)
Islamic Directorate vs. CA, GR No. 117897 [14 May 1997]
Ramirez vs. Orientalist, 38 PHIL 634 (1918)
Board of liquidators vs. Kalaw, 20 SCRA 987 (1967)
Acuna vs. Batac Producers, 20 SCRA 562 (1967)
Harden vs. Benguet Consolidated, 58 PHIL 1140 (1948)
b.
Executive Committee
(Section 35 of the Corporation Code)

B.

ROLE OF SHAREHOLDERS
Right to Vote and Attend Meetings (Section 89 of the Corporation Code)
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Price vs. Martin, 58 PHIL 707


a. Instances:
- Election of Directors and Trustees
(Section 24 of the Corporation Code)
- Amendment of Articles of Incorporation
(Section 16 of the Corporation Code)
- Investment in another Business
(Section 42 of the Corporation Code)
Dela Rama vs. Ma-ao Sugar, 27 SCRA 247
Gokongwei vs. SEC, 89 SCRA 336, (1979)
- Merger and Consolidation
(Section 77 of the Corporation Code)
- Increase and Decrease of Capital Stock
(Section 38 of the Corporation Code)
- Adoption, Amendment, and Repeal of By-Laws
(Section 48 of the Corporation Code)
- Declaration of Stock Dividends
(Section 43 of the Corporation Code)
- Management Contracts
(Section 44 of the Corporation Code)
- Fixing of Consideration for Par Value Shares
(Section 62 of the Corporation Code)
b. Treasury Shares (Section 57 of the Corporation Code)
c. Conduct of Stockholders or Members Meetings
- Kinds and Requirements of Meetings
(Sections 49 and 50 of the Corporation Code)
- Place and Time of Meeting
(Section 51 and 93 of the Corporation Code)
- Quorum (Section 52 of the Corporation Code)
Lanuza vs. Court of Appeals (GR No. 131394 [2005])
d. Contracts and Agreements Affecting Stockholders
a. Proxy (Section 58 of the Corporation Code)
b. VTA (Section 59 of the Corporation Code)
Lee vs. Court of Appeals, 205 SCRA 752 [1992]
NIDC vs. Aquino, 163 SCRA 153
c. Pooling agreements (Section 100 of the Corporation Code)
C.

ENFORCEMENT OF RIGHTS OF SHAREHOLDERS


a. Right to Inspect
1. Specified Records (Sections 74 and 75 of the Corporation Code)
2. Remedies
Philpots vs. Phil Manufacturing, 40 PHIL 471
Pardo vs. Hercules, 46 PHIL 964
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D.

Veraguth vs. Isabela Sugar, 57 SCRA 266


Gonzales vs. PNB, 122 SCRA 489
3. Confidential Nature of SEC Examinations
(Section 142 of the Corporation Code)
b.
Appraisal Right (Sections 81 to 86 of the Corporation Code)
c.
Derivative Suits
Richardson vs. Arizona Fuels Corp., 614 P.2d 636
Bitong vs. CA (GR No. 123553 [1998])
SMC vs. Khan, 176 SCRA 447
Pascual vs. Orosco, 19 PHIL 83
Evangelista vs. Santos, 86 PHIL 387
Republic Bank vs. Cuadero, 19 SCRA 671
Reyes vs. Tan, 3 SCRA 198
ROLE OF DIRECTORS AND OFFICERS
1.
Function of the Board of Directors
a.
Role of directors, officers and trustees
Generally:
Rural Bank Of Milaor vs. Ocfemia (GR No. 137686 [2000])
2.
Election and Tenure of Directors/Trustees
a. Qualifications of directors and trustees
(Section 44 of the Corporation Code)
Lee vs. Court of Appeals, 205 SCRA 752 [1992]
Gokongwei vs. SEC, 89 SCRA 336, (1979)
Detective & Protective Bureau vs. Cloribel, 26 SCRA 255 (1968)
Directors (Sections 24 and 26 of the Corporation Code)
Grace Christian HS vs. CA, GR No. 108905, [23 October 1997]
Trustees (Section 92 and 138 of the Corporation Code)
a. Cumulative Voting (Villianueva, Philippine Corporate Law)
1. Cole Formula
2. Glassner Formula
3. DHondt Remainders Table
b. Vacancy in the board
(Section 29 of the Corporation Code)
c. Term of office; Hold-Over Principle
(Section 23 of the Corporation Code)
Ponce vs. Encarnacion, 94 PHIL 81 (1953)
d.
Removal of directors or trustees
- Section 28 of the Corporation Code
Roxas vs. Dela Rosa, 49 PHIL 609 (1926)
4.
Exercise of Directors Functions
a.
Meetings of directors or trustees
(Section 49 and 53 of the Corporation Code)
Expertravel & Tours, Inc. vs. CA (GR No. 152392 [2005])
b.
Compensation for directors or trustees
(Section 30 of the Corporation Code)
Western Institute of Technology vs. Salas (GR No. 113032 [1997])
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5.

6.

Officers
(Section 25 of the Corporation Code)
Ongkingco vs. NLRC, 270 SCRA 613 [1997]
Tabang vs. NLRC, 266 SCRA 462 [1997]
Gurrea vs. Lezama, 103 PHIL 553 (1958)
PSBA vs. Leano, 127 SCRA 778 (1984)
Pearson & George vs. NLRC, 67 SCAD 698, 30 Jan 1996 (113928)
Reahs Corporation vs. NLRC, GR No. 117473 [14 April 1997]
Duties of Directors and Officers
a. Duty of Obedience
b. Duty of Diligence; Business Judgement Rule
(Section 31 of the Corporation Code)
Smith vs. Van Gorkom, 488 A.2nd 858 (1985)
Montelibano vs. Bacold-Murica, 5 SCRA 36 (1962)
Board of Liquidators vs. Kalaw, 20 SCRA 987 (1967)
c. Duty of Loyalty; Doctrine of Corporate Opportunity
(Section 31 and 34 of the Corporation Code)
d. Corporate Dealings
(Section 32 of the Corporation Code)
Mead vs. McCullough, 21 PHIL 95 (1911)
Prime White Cement vs. IAC, 220 SCRA 103 (1993)
e. Contracts between corporations with interlocking directors
(Section 33 of the Corporation Code)

IV.

FUNDAMENTAL CHANGES

A.

CHARTER AMENDMENTS
a. Articles of Incorporation (Section 16 of the Corporation Code)
b. By Laws (Section 48 of the Corporation Code)

B.

COMBINATIONS
a.Concept of Merger and Consolidation
PNB vs. Andrada Electric (GR No. 142936 [2002])
b. Procedure
- Plan of Merger or Consolidation
(Section 76 of the Corporation Code)
- Stockholders or Members Approval
(Section 77 of the Corporation Code)
- Articles of Merger or Consolidation
(Section 78 of the Corporation Code)
- Approval by the SEC
(Section 79 of the Corporation Code)
c. Effects of Merger or Consolidation
(Section 80 of the Corporation Code)
Associated Bank vs. CA (GR No. 123793 [1998])

12

Filipinas Port Services, Inc. vs. NLRC (GR No. 97237 [1991])
C.

REHABILITATION
PVB Employees Union-N.U.B.E. vs. Vega (G.R. No. 105364 [2001])
PAL vs. Spouses Sadic (GR No. 146698 [2002])
RCBC vs. IAC (GR No. 74851 [1999])

D.

DISSOLUTION
a. Dissolution (Section 177 of the Corporation Code)
1. Voluntary
- No creditors are affected
(Section 188 of the Corporation Code)
- Creditors are affected
(Section 119 of the Corporation Code)
2. Involuntary Dissolution
(Section 121 of the Corporation Code, Section 6)
(Section 2 of Rule 66 of the Rules of Court)
Quo-Warranto
Republic vs. Bisaya Land Transportation, 81 SCRA 9
Government vs. Philippine Sugar Estate, 38 PHIL 15
Republic vs. Security Credit, 19 SCRA 58
3. Expiration of Term (Section 122 of the Corporation Code)
4. Shortening of Corporate Term
(Sec. 120 of the Corporation Code)
5. Non-Use of Corporate Charter and Continuous Inoperation
(Section 22 of the Corporation Code)
b. Liquidation of Corporate Assets
(Section 122 of the Corporation Code)
Buenaflor vs. Camarines Sur Industry, 108 SCRA 472
National Abaca vs. Pore, 2 SCRA 989
Tan Tiong Bio vs. CIR, 100 PHIL 86
Gelano vs CA, 103 SCRA 90
c. Methods of Liquidation
Board of Liquidators vs. Kalaw, 20 SCRA 987
China Banking vs. Michelin, 58 PHIL 261
Republic vs. Marsman, 44 SCRA 418
Alhambra Sugar vs. SEC, 24 SCRA 269
d.

V.

Rules for Non-Stock Corporations


Rules on Foundations
(Sections 94 and 95 of the Corporation Code)

e.
Right to Proportionate Share of Remaining Assets upon Dissolution
Foreign Corporation
a. Definition (Section 123 of the Corporation Code)
Avon Insurance PLC vs. CA (GR No. 97642 [1997])
13

b. Concept of Doing Business


(Article 44 of the Omnibus Investments Code)
(Section 1 (f) of the Implementing Rules of the Omnibus Investments Code)
- Application for License
(Section 124 and 125 of the Corporation Code)
(Article 48 of the Omnibus Investments Code)
- Issuance of a License (Section 126 of the Corporation Code)
(Article 49 of the Omnibus Investments Code)
- Amendment of License (Section 131 of the Corporation Code)
Columbia Pictures, Inc. vs. CA (GR No. 110318 [1996])
Granger Associates vs. Microwave Systems, 189 SCRA 631
Marubeni vs. Tensuan, 190 SCRA 105
Facilities Management vs. Dela Osa, 89 SCRA 131
Top-Weld vs. ECER, 138 SCRA 118 (GR 44944 (1985)]
Schmid vs. Oberly, 116 SCRA 186
Mentholatum vs. Mangaliman, 72 PHIL 525
Aetna Casualty vs. Pacific Star Line, 80 SCRA 635
Agilent Technologies Singapore (PTE) LTD. vs.
Integrated Silicon Technology Philippines Corporation
(GR No. 154618 [2004])
- Effects of Failure to Obtain License
(Sec. 133 of the Corporation Code)

Commissioner vs. KMK Gani, 182 SCRA 591


Marshal Wells vs. Elser, 46 PHIL 71
Western Equipment vs. Reyes, 51 PHIL 115
c. Applications and Effect of Local Laws on the Right of a foreign
Corporation to Sue (SCRA Annotation 114 SCRA 429)
d. Resident Agent (Sections 127 and 128 of the Corporation Code)
e. Applicable Laws to Foreign Corporations
(Section129 of the Corporation Code)
- Grey vs. Insular Life, 67 PHIL 139
f.

Amendment of Articles of Incorporation


(Section 130 of the Corporation Code)

g. Merger and Consolidation (Section 132 of the Corporation Code)


h. Revocation of License (Section 134 and 135 of the Corporation Code)
i. Withdrawal of Foreign Corporation
(Section 136 of the Corporation Code)

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