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o Express power
o Implied power
o Incidental power
Take note: If a corporation exercise power beyond express, implied
and incidental power it commits an ultra vires act which is a ground for
dissolution of the erring corporation but if a corporation act within an
express, implied and incidental power that is an intra vires act.
3 Doctrines in the Corporation Code
1. Doctrine of separate juridical entity
A corporation is a legal or juridical person with a personality
separate and apart from its individual stockholders or members and
from any other legal entity to which it may be connected.
Consequences:
o Liability for acts or contracts
The general rule is that obligations incurred by a
corporation, acting through its authorized agents are its
sole liabilities. Similarly, a corporation may not generally,
be made to answer for acts or liabilities of its stockholders
or members or those of the legal entities to which it may
be connected and vice versa (Creese vs. CA, 93 SCRA 483).
o Right to bring actions
It may bring civil and criminal actions in its own name in
the same manner as natural persons (Art. 46, NCC).
o Right to acquire and possess property
Property conveyed to or acquired by the corporation is in
law the property of the corporation itself as a distinct legal
entity and not that of the stockholders or members (Art.
44(3), NCC).
o Acquisition of court of jurisdiction
Service of summons may be made on the president,
general manager, corporate secretary, treasurer or inhouse counsel (Sec. 11, Rule 14, Rules of Court).
o Changes in individual membership
Corporation remains unchanged and unaffected in its
identity by changes in its individual membership (The
Corporation Code of the Philippines Annotated, Hector de
Leon, 2002 ed.).
o Entitlement to constitutional guaranties
Advantages of a corporation
1. Capacity to act as a legal entity
2. Continuity of life
3. The liability of the stockholders for the debts of the corporation is
limited to their fully paid investment in the corporation
4. There is better management as the best service may be extracted from
the bigger membership of a corporation
5. There is a greater source of capital
Similarities between Partnership and Corporation
1. Both are composed of group of person with exception to corporation
sole
2. Both are artificial person
3. Both are devoid of physical bodily existence and as such can only act
through their respective agent
4. Both have juridical personalities separate and distinct from the
member or stockholder
Distinction between Partnership and Corporation
1. Matter of creation
A partnership is created by mere agreement
A corporation is created by operation of law
2. Number of incorporators
A partnership can be formed by 2 or more person (No limit
regarding number of partner)
A corporation req. at least 5 but not more than 15 incorporator or
BOD (except corporation sole)
Note: After it is duly organized the corporation can add stockholders
or corporator depending on the number of authorized capital stock
3. Power
A partnership may by agreement do any lawful act. Meaning it can
exercise ANY power authorized by the partner provided it is not
contrary to law, morals, good customs, public order or public policy.
A corporation may only exercise power within express, implied and
incidental power.
4. Extent of Liability as to 3rd person
In partnership all general partners (except limited partners) are
liable to the extent of their separate property for partnerships
debts.
In corporation a member/ stockholder is liable only to the extent of
their shareholding except when the doctrine of piercing the veil of
corporate entity applied.
5. Dissolution
A partnership may be dissolve at any time (Delectus Personae)
A corporation cannot be dissolve without the consent and authority
of state.
A partnership has so many grounds for dissolution like automatic
and judicial dissolution while a corporation has few grounds
because remember that a corporation is created by consent of state
and therefore it must have a consent coming from state to dissolve
6. Term of existence
A partnership may exist indefinitely.
A corporation shall exist for a period not exceeding 50 years but
subject to renewal. I a-amend lang yung articles of incorporation
for the proposed extension of corporate term
7. Transferability of interest
A partner cannot transfer his interest without the consent of the
other
1. Stock corporation
A corporation which has capital stock divided into shares and is
authorized to distribute to holders of such shares, dividends or
allotments of the surplus profits on the basis of the shares held
Requisites to be classified as a stock corporation:
o That they have a capital stock divided into shares; and
o That they are authorized to distribute dividends or allotments as
surplus profits to its stockholders on the basis of the shares held
by them
Take Note: If one of the requisite is absent then it is a non-stock
corporation
2. Non-stock
All other corporations are non-stock corporations.
A corporation which does not issue stocks nor distribute dividends
to their members (Sec. 87).
Other classes of corporations:
3. Aggregate and Sole(As to number of persons who compose
them)
Aggregate corporations those composed of a 2 or more
corporator
Corporation sole those that consist of one member or 1
corporator; a special form of corporation usually associated with the
clergy.
o Example: Roman Catholic Church
4. Ecclesiastical and Lay (As to whether they are for religious
purposes or not)
Ecclesiastical or religious corporations those composed
exclusively of ecclesiastics organized for spiritual purposes or for
administering properties held for religious ones. They are further
classified as religious societies or corporation sole.
Lay corporations those established for the purposes other than
religion. They are further classified as eleemosynary or civil
(Whether charitable or not)
o Eleemosynary corporations are created for charitable and
benevolent purposes.
o Civil corporations are organized not for the purpose of public
charity but for the benefit, pecuniary or otherwise, of its
members in short for profit.
5. De jure corporations and De facto corporations (As to legal
right)
o Requirement of De Facto
There is a valid law
There is an attempt with good faith
Actual exercise of corporate power
6. Close and Open (As to whether they are open to public or not)
Close corporations those whose shares of stock are held by
limited number of persons or members of family. Limited to 20
persons.
Open corporations those formed to openly accept outsiders as
stockholders or investors. Open to anyone.
Concept of going public or private
A corporation is deemed to be going public when it decides to list
its shares in the stock exchange. These include corporations that
will make initial public offering of its shares. A corporation is said to
be going private when it would restrict the shareholders to a
certain group. In a sense, these also include closed and closely held
corporation.
7. Parent or Holding Companies and Subsidiaries and Affiliates
(Relation to another corporation)
So incorporators are the one who originally form the corporation and
are mention in the AOI who are signatories. Limited to not less than
but not more than 15
TAKE NOTE: requisites to being an incorporator that he be a signatory
of AOI because if he is not a signatory of the articles then he is not n
incorporator though he is mention in the AOI. Once a corporation is
duly organize even though he sells his share of stock he ceased to be a
corporator but not an incorporator why because it is recorded in the
SEC
Qualifications:
Natural person;
Not less than 5 but not more than 15;
Of legal age;
Majority must be residents of the Philippines; and
Each must own or subscribe to at least one share (Sec. 10).
Par Value
-It is always with Par Value
No-Par Value
-Preferred share cannot be issue with no par value
Par Value
-Can be issue at any amount
No-Par Value
-The minimum stated value is not less than 5 pesos because if it is issue at
less than 5 edi watered stock yan
Par Value
-Are NOT deemed fully paid and therefore assessable meaning pwedeng
habulin ng corporate creditor yung stockholder ng par value share kasi hindi
naman siya deemed fully paid at assessable siya
No-Par Value
-Once issued it is DEEMED fully paid and therefore non-assessable kaya ang
lumalabas ang corporate creditor hindi na pwedeng habulin ang mga
stockholder ng no-par value share kasi deemed fully paid na and nonassessable siya
Par Value
-Part of legal capital is only to the extent of par value the share premium is
not part of legal capital
No-Par Value
-Entire consideration receive is becomes part of legal capital and therefore
not available for dividend distribution
2. Voting stock and Non-voting Stock
Voting Stock- Shares with a right to vote. Under the code,
whenever a vote is necessary to approve a particular corporate act,
such vote refers only to stocks with voting rights except in certain
cases when even non-voting shares may also vote (Sec. 6, par. 6
and last par.) A class of stock which entitles the holder to vote in
the meeting of the corporation
Non-Voting Stock- Shares without right to vote. The law only
authorizes the denial of voting rights in the case of redeemable
shares and preferred shares, provided that there shall always be a
class or series of shares which have complete voting rights. These
redeemable and preferred shares, when such voting rights are
denied, shall nevertheless be entitled to vote on the following
fundamental matters: A class of stock which the holder cannot vote
in the meeting of the corporation.
Take Note: ONLY those classified as PREFERRED OR REDEEMABLE share may
be deny of voting power in the AOI BUT EVEN THOUGH Preferred and
Redeemable share as classified as NON-VOTING STOCK they can still vote
under 8 instances and that is FUNDAMENTAL CHANGES OF THE
CORPORATION.
Key: (A2 SI2 MID)The vote is necessary to approve a particular corporate
act shall be deemed to refer only to voting share. However, non-voting share
are not absolutely disqualified from voting. The holders of non-voting shares
shall nevertheless be entitled to vote on the following matters:
Number 1 and 3 to 8 parehas lang yan ng voting requirements and that is
majority of BOD plus 2/3 of outstanding capital stock with regular or special
meeting
1. Amendments of the AOI
Voting requirement- Majority of BOD +2/3 of Outstanding Capital
Stock
TAKE NOTE: (SEC 19) Majority of BOD + assent of at least 2/3 of
Outstanding Capital Stock meaning meeting is not required.
EXCEPT: when there is specific provision in corporation code
requiring regular or special meeting.
Example: Amendment of AOI for the propose extension or
shortening corporate term the voting req. should be majority of BOD
+2/3 of Outstanding capital stock WITH regular or special meeting.
Question: The number of BOD that is stated in AOI are 7 and you
want to make it 9, kaialngan pa ban g regular or special meeting
called for that purpose or pwede na ang written vote or assent ng
2/3 of OCS?
Answer: Written vote or assent will suffice because that is the
general rule
Limitations:
If deprived of voting rights, it shall still be entitled to vote on
matters enumerated in Section 6, par. 6.
May be issued only with a stated par value.
The board of directors may fix the terms and conditions only when
so authorized by the articles of incorporation and such terms and
conditions shall be effective upon filing a certificate thereof with the
SEC.
4. Promotion Stock- Share of stock that are issued to the promoters
Limitations:
Limited to 5 years. Maximum period of founders share for exclusive
right to vote and be voted is 5 years and are subject to approval by
SEC and the 5 years shall commence upon approval by the SEC
Take note that if it is other right then it has no limit of period the
only limit stated here is for the right to vote and be voted
Sec. 8. Redeemable shares. - Redeemable shares may be issued by the
corporation when expressly so provided in the articles of incorporation. They
may be purchased or taken up by the corporation upon the expiration of a
fixed period, regardless of the existence of unrestricted retained earnings in
the books of the corporation, and upon such other terms and conditions as
may be stated in the articles of incorporation, which terms and conditions
must also be stated in the certificate of stock representing said shares.
Limitations:
Redeemable shares may be issued only when expressly provided for
in the articles of incorporation;
The terms and conditions affecting said shares must be stated both
in the articles of incorporation and in the certificates of stock
representing such shares;
Redeemable shares may be deprived of voting rights in the articles
of incorporation, unless otherwise provided in the Code.
Redeemable shares may be redeemed, regardless of the existence
of unrestricted retained earnings (Sec. 8), provided that the
corporation has, after such redemption, sufficient assets in its books
to cover debts and liabilities inclusive of capital stock. Redemption
may not be made where the corporation is insolvent or if such