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THE CORPORATION CODE OF THE

PHILIPPINES (BP Blg. 68)
Sec. 1 This Code shall be known as the
Corporation Code of the Philippines
Notes.
Took effect: May 1, 1980
The CCP applies to all corporations
already in existence at the time the
CCP took effect.
The CCP is consistent with the
mandate under Sec 16 Art XII of the
1987 Constitution for Congress to
prescribe all the criteria for the
formation, organization or regulation
of private corporations in a general law
applicable to all without discrimination
Sec. 148 CCP says that all
corporations lawfully existing and
doing business in the Philippines on

the date of the effectivity if the CCP

and thereafter authorized, licensed or
registered by the Securities and
Exchage Commission shall be deemed
to have been authorized, licensed or
registered under the provisions of the
Code, subject to the terms and
conditions of its license and shall be
governed by the provisions thereof.
Ex. the rule giving all shareholders the
right to vote was applied to a corp that
was in existence at the time of the
effectivity if the CCP despite a
contrary provision in the Articles of
Incorporation. The provision in the
Articles was valid under Act 1459 but
was late considered invalid under the
CCP
Sec. 148 granted corporations already
in existence at the time the CCP took
effect a period of not more than 2

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years from the effectivity of the Code

within which to comply with the new
requirements of the Code.
PURPOSE of Corporate Law:
defining the area within which the
parties are free to allocate risk,
control and profit as they wich
and
prescribing the allocation of these
elements in the absence of express
agreement
The CCP and the general law that it
repealed provide for the formation and
organization of corporations, define
their powers, fix the duties of directors
and other officers thereof, declare the
rights and liabilities of shareholders
and members and prescribe the
conditions under which corporations
may transact business
Main group of persons affected by

corporate law:
stockholders
directors and officers
creditors
Corporate Law seeks to regulate both
the relations between the groups and
within the groupd
It regulates the mechanisms by which
people join, or leave, one of these
groups as well as their rights and
duties once they have joined a group
Since a separate juridical entity is
present, corporate law may not
necessarily establish direct legal
realtions between the groups but may
instead mediate these relationships
through the other juridical entity, the
corporation
Congress: The CCP is to lay down
rules and regulations of the

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organization of corporations with a

view to the protection of public
interest, but at the same time, promote
the economic and social development
of
the
country
through
the
development of the corporate vehicle
as a means of doing business in the
Philippines.
The general rule is that the CCP is the
primary law that should be applied in
the regulation of corporations
But there are exceptional cases when
the CCP is NOT the primary law that
governs specific corporations
Banks and other financial
institutions. General Banking Law
and the New Central Bank Act.
CCP only applie suppletorily. As
between a general and special law,
the latter shall prevail.
Insurance Code of the Ph applies

to insurance corporations as a
primary statute and the CCP
applies suppletorily. Sec. 185 says
that the provisions of the CCP
shall apply to all insurance
corporations engaged in the
business in the Ph insofar as they
do not confilct with the provisions
of the ICP
Insurance corps and banks are still
under the regulatory powers of the
SEC as corporate entitites. But
insurance corps are subject to the
regulatory
powers
of
the
Insurance Commission in the
pursuit of insurance business
while the Bangko Sentral ng
Pilipinas (BSP) regulates banks as
such. Hence, the minimum paid
up capital may be imposed by the
Insurance
Commision
on

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insurance corporations and by the

the SEC en banc can issue
BSP on banks
opinions that have the force and
effect of regulations. But they are
The Pre-Need Code RA 9829 is
considered
as
persuasive
the primary law on pre need
authorities that may be resorted to
companies
in the absence of Consitutional
Other laws applicable to corporations
and statutory provisions
Securities Regulation Code RA
8799
Sec. 2. Corporation defined. A corporation
PD 902-A; RA 7045 The Foreign is an artificial being created by operation of
Investment Act of 1997
law, having the right of succession and the
New Civil Code also applies powers, attributes and properties expressly
suppletorily; agency rules applies authourized by law or incident to its
to certain acts of directors, existence.
officers, or stockholders in the
absence of any applicable Notes.
provision in the Corporation Code Attributes of a Corporation as derived
from the definition:
Opinions of SEC Legal officers do
It is an artifical being
not ave the force and effect of
It is created by operation of law
SEC Rules and Regulations
because as a collegial body, only
it has the right of succession

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it has the powers, attributes

expressly authorized by law or
incident to its existence.
Concession Theory. Sec. 1 provides
that basic postulate in corporation law
that a corporation is an artificial being
created by operation of law. It owes its
life to the State and its birth is purely
dependent on the State's will. It is a an
artificial being invisible, intangible,
and existing only in contemplation of
law. Also, Fiat Theory; Government
Paternity Theory or the Franchise
Theory
A corporation is not in fact and in
reality a person, but the law treats it
as though it were a person by
process of fiction or by regarding it
as an artificial person distinct and
separate
from
its
individual
stockholders. It owes its existence to

law. It is an artificial person created

by law for certain specific purposes,
the extent of whose existence,
powers and liberties is fixed by its
charter.
It is a creature without any legal
existence until it haw received the
imprimatur of the State acting
according to law
it is logically inconceivable therefore
that it will have rights and privileges
of higher priority than that of its
creator.
It cannot legitimately refuse to yield
obedience to acts if its State organs not
excluding the judiciary, whenever
called upon to do so
Rejection of:
Genossenchaft Theory: reality of
the group as a social and legal
entity, independent of a state

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recognition and concession

Symbol theory- a corporation is a
Realist or inherence theory- views
symbol for the aggregate of the
corporations
as
the
legal
associates
in
their
group
recognition of group interests that
personalities. A corporation is
already exists, as a practical
regarded as the symbol for the
matter; it views the corporation as
aggregate of group jural relations
a group whose group activities are
of the persons composing the
such as to require separate legal
enterprise
recognition, with many of the
attributes of a natural person, and FRANCHISES. A corporation is granted by
by its focus on the voluntary the State the right to exist by virtue of a
associational
activities
of primary franchise.
individuals provides a basis for franchise- a special privilege conferred
invoking the usual constitutional
by governmental authority and which
and other legal protection for
does not belong to citizens of the
individuals
country generally as a matter of
Enterprise theory- this stresses on
common right. Its meaning depends
the
underlying
commercial
more or less upon the connection in
enterprise without emphasis on
which the word is employed and the
entity-aggregate distinctions of the
property and corporation to which it is
components
applied.

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Divisions:
The right to be and to act as a
corporation is not a natural or civil
Corporate or general - to exist as a
right of any person; such right as well
corporation
as the right to enjoy the immunities
Special or secondary - certain rights
and
privileges
resulting
from
and privileges conferred upon
incorporation constitute a franchise
existing corporations, such as the
and a corporation therefore cannot be
right to use the streets of a
created except by or under a special
municipality to lay pipes of tracks,
authority from the State
erect poles or sting wires
The primary franchise, the right to A corporation is thus created by
operation of law when it is granted a
exist as a corporation is vested in the
franchise either through a special law
individuals
who
compose
the
or it is organized under a general law
corporation and not in the corporation
itself. It cannot be conveyed in the The general law under which a
corporation can be organized in the Ph
absence of legislative authority to do
is the CCP
so
The special franchise are vested in the Examples of the secondary franchises
are those issued by the SEC to
corporation and may ordinarily be
companies that issue securities
conveyed or mortgaged under a
general power granted to a corporation
Creation by Special Law.
to dispose of its property.

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The Constitution provides that only

not exist automatically upon the
government
owned
and
controlled
passage of PD 198. They are created
corporation may be created by special law.
pursuant to PD 198 that constitutes
their special charter
Special laws may also recognize that
certain entitites may acquire juridical
Contract Theory. Under this theory,
personality
withtout
directly
incorporation is deemed to involve
conferring
corporate
status
contracts among the members, between the
automatically by the mere passage of
members and the corporation, and between
law
the members or the corporation and the
For instance, in once case, the special
State.
law, without directly creating national
sports associations, recognized the Thus, because of the contract between
existence of the said national sports
the State and the corporation, the
associations and provided the manner
corporation is entitled to the right
by which these entities may acquire
against impairment of contracts
juridical personality
The State cannot take the life of the
Another example are Local Water
corporation without due process
Districts that are considered GOCCs Incorporation is a contract between
with special charters since they are
those who compose the corporation
created pursuant to PD 198 not under
and their contract is governed and
the Corporation Code. But LWDs do

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evidenced by the Articles of

Incorporation.
There is also a contract between the
corporation and its stockholders or
members. Thus, stockholders and
members cannot disregard the
provisions of the Articles and By-laws
of the corporation. The corporation in
turn, cannot disregard the rights of the
shareholders or members provided for
in the Articles and By Laws
RIGHT OF SUCCESSION.
CJ Marshall said that a corporation, being a
creature of law, possesses only those
properties which the charter of its creation
confers upon it, either expressly or as
incidental to its very existence.
Among the most important are
immortality and if the expression may
be allowed, individuality

properties by which a perpetual

succession of personas are considered
the same and may act as a single
individual
they enable a corporation to manage its
own affairs and to hold property
without the perplexing intricacies, the
hazardous and endless necessity of
perpertual conveyances for the purpose
of transmitting it from hand to hand
Perpetual succession - that continuous
existence which enable a corporation
to manage its affairs and hold proerty
without the necessity of perpetual
conveyances,
for
purposes
of
transmitting it. By reason of this
qualoty, this ideal and artifical person
remains in it legal entity and
personality, the same though frequent
changes may be made of its members.
All individual members that have

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existed from the foundation to the

corporate immortality but rather a
present time or that shall ever hereafter
continuity of existence irrespective of
exist are but one person in law, a
its components.
person that never dies; in like manner The term of a corporation is 50 years,
as te River Thames is still the same
subject to further extension of its terms
river though parts which compose it
under Sec. 11 of the Corporation Code.
are changing every instant
A corporation continues to exist even Doctrine of Separate Personality
if there is a change in those who A corporation has a personality separate
compose it. Death of a shareholder or and distinct from its members.
transfer of his shares will not affect the it has a personality separate and
distinct from the persons composing it
continued existence of the corporation
as well as from that of any other entity
A shift in the composition of the
to which it may be related
shareholders of a corporation would
NOT affect its existence and Art. 44 of NCC specifies corporations
as among those considered as juridical
continuity. The juridical entity remain
persons with juridical personality,
and the corporation continues to be the
separate and distinct from that of each
employer of its people and continues
shareholder or member.
to be liable for the payment of their
NCC provides that the personality of
just claims.
juridical entities begins as soon as they
Perpetual succession does NOT imply

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have been constituted according to law

Art. 45 NCC says that private
corporations are regulated by laws of
general application on the subject
Art. 46 NCC provides that juridical
persons may acquire and possess
property of all kinds as well as incur
obligations and bring civil or criminal
actions in conformity with the laws
and regulations of their organization.
Because of the seperate personality of
the corporation, the properties of the
corporation are not the properties of its
shareholders, members or officers
Properties registered in the name of the
corporation are owned by it as an
entity separate and distinct from those
who compose it.
A stockholder cannot sell, transfer,
mortgage or encumber the properties
of the corporation without proper

authority
Physical acts like the offereing of the
property of the corporation for sale or
the acceptance of a counter offer of a
prospective buyer of the property of
the corporation can be performed by
the corporation only through officers
or agents duly authorized for the
purpose by corporate by laws or by
specific acts of the board of directors.
A stockholder cannot use at such
property to pay for his personal debts
Properties of the shareholders,
members or officers of the corporation
are not the properties of the
corporation
A shareholder has no right to file in his
own name an action involving the
properties of the corporation because
of the separate nature of the
personality of the stockholder and the

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corporation
Properties of the stockholders are not
An action filed by a corporation to
part of the properties of a judicially
recover the properties of its
declared insolvent corporation. Thus,
shareholders or members should be
the prohibition against an insolvent
dismissed for failure to state a cause of
corporation to transfer properties does
action because the corporation is not
not apply to the corporation's
the real party in interest
stockholder who wishes to transfer his
own personal property
properties of the corporation cannot be
included in the inventory of the properties belonging to a corporation
properties of the estate of a deceased
cannot be attached to satisfy the debt
shareholder of the corporation
of a stockholder. The stockholder only
has an indirect interest in the assets
real properties should be excluded
and business of the former.
from the inventory of the estate of the
deceased shareholder if they are in the
Nature of the Stockholders' Interest in
possession of and registered in the
Corporate Properties
name of the corporation in the absence
of any cogency to shred the veil of The interest of the shareholder in the
properties of the corporation is
corporate fiction. The presumption of
indirect, contingent and inchoate
conclusiveness of the titles in favor of
the
corporation
should
stand the interest of the shareholder on a
particular property becomes actual,
undisturbed.

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direct and existing only upon

liquidation of the assets of the
corporation and the same property is
assigned to the shareholder concerned
There is a clear distinction between the
title of a property of the corporation
and the interest of its members and
stockholders in the property of the
corporation
The ownership of corporate properties
is in the corporation itself and not in
the holders of its share of stock
The interest of each stockholder
consists in the right to a proportionate
part of the profits whenever dividends
are declared by the corporation, during
its existence, under its charter, and to a
like proportion of the property
remaining, unde the termination of
dissolution of the corporation, after
payment of its debts

Properties registered in the name of the

corporation are owned by it as an
entity separate and distinct from its
members.
Share of stock constitute personal
property; they do not represent
property of the corporation
A share of stock only typifies an
aliquot part of the corporation's
property or the right to share in its
proceeds to that extent when
distributed according to law and equity
but its holder is not the owner of any
part of the capital of the corporation
the holder is not entitled to the
possession of any definite portion of
its property or assets
he is not a co owner or tenant in
common of the corporate property
stockholders of a corporation are NOT

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co-owners of the corporation's assets

the liquidiation of its debts and
liabilities
they do not own pro indiviso shares in
the assets and therefore they cannot Separate Obligations.
mortagage or convey the same except The obligations of the corporation are NOT
in their capacity as directors, the obligations of the its shareholders and
collectively with the other directors, or members and officers and vice versa.
as duly authorized officers of the The president of the corporation may
corporation
not be held liable for the obligation
arising from the tort committed by the
the stockholders are not themselves the
employee of the corporation
real parties in interest to claim and
recover compensation for the damages General rule: directors and officers are
arising from the wrongful attachment
not personally liable for the
of the corporation's assets. Only the
obligations of the corporation
corporation is the real party in interest the obligations incurred by the
for that purpose.
corporate officers or other persons
If the shareholders will be allowed to
acting as corporate agents are the
recover the damages belonging to the
direct
accountabilities
of
the
corporation, the stockholders would be
corporation they represent and not
unduly appropriating and distributing
theirs
part of the corporation's assets prior to they may however be liable in the
the dissolution of the corporation and
instances mentioned in Sec 31 of the

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CCP
Neither are stockholders or officers
liable for the contractual obligations of
the corporation
even majority shareholders are not
liable for corporate obligations
But there are instances when the
officers or stockholders voluntarily
make themselves personally liable
like when they act as a surety or
make themselves solidarily liable by
signing the appropriate surety
agreement or affixing their joint and
solidarily signature
The corporation cannot likewise be
made to answer for the personal
obligations of the stockholders,
members of a non-stock corporation
cannot be enforced against the
corporation itself and v.v.

a stockholder cannot condone an

obligation of a third person to the
corporation. this right belongs to the
corporation alone
Bautistat v Auto Plus Traders Inc G.R.
166405 Aug 6, 2008 a corporate
officer was prosecuted for violation of
BP 22 for issuing 2 bounced checks for
and in behald of the corporation. The
officer was subsequently acquitted
because the SC said the officer cannot
be helf liable for the value of the
checks bec they were issued for the
obligations of the corporation. the
corporation remains liable bec there
was no evidence that the debts covered
by the checks have been paid. And
even if the corporate officer was not
acquitted, the corporation can still be
made liable for the value of the checks
if they were issued for corporate debts.

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A separate action can be maintained

against the corporation
Limited Liability Rule.
Under this rule, a stockholder is personally
liable fro the financial obligations of the
corporation to the extent of his unpaid
subscription. While stockholders are
generally not liable, the stockholders may
be hald liable if they have not or have not
fully paid the subscription price.
Rationale: for small and/or closely helf
companies, limited liability may be the
principal reason for the investor to use
the corporation as a vehicle in
pursuing business
it also has advantages even if the
ownership of share in a corporation is
diffused and spread among numerous
stockholders
or
even
if
the
management is largely separated from

ownership of the corporation.

1. investment in share is encouraged
because the task of evaluating equity
investment is greatly simplified
considering that the low probability
even of insolvency and the financial
condition of other investors can
already be ignored
2. Investment in risky ventures if
encouraged
3. Banks and other financial
intermediaries who are considered
experts are encouraged to closely
monitor corporate debtors more
closely
When there is separation of investment
(stockholders)
and
management
(directors and officers), the Limited
Liability Rule is said to be one of the
devices that is beneficial to investors.
Judge F. Easterbrook and Prof. D.

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Fischel: the costs generated by agency

undertaken without thinking of
relations are outweighed by the gains
financial risk
from separation and specialization of REMEDY. The stockholder who are
function. LLR reduced the costs of this
sought to be made liable for their
separation and specialization. The cost
unpaid
subscription
should
be
of monitoring managers and other
impleaded. If the stockholders are not
shareholders is thus reduced.
impleaded as defendants, a separate
Shares also become fungible because
acton should be filed against them to
the value of shares is determined by
enforce any judgment obligation.
the present value of the income stream
generated by the corporation's assets; Separate Acts.
the identity and walth of the other The acts of the stockholders do not bind the
corporation unless they are properly
shareholders are irrelevant
authorized.
investors would not be required to
spend more to analyze the market The acts of officers and directors in
their personal capacity cannot be
prices of the shares because the share
imputed to the corporation.
may
already
be
considered
Their powers and duties pertain to
homogenous commodities.
them respectively and not to each other
Further, diversification if encouraged
and
risky
ventures
such
as if the stockholders, officers, and
directors are disqualified from
development of new products can be

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performing
certain
acts,
the
necessarily mean that the corporation
corporation
is
not
necessarily
was the authority to represent its
disqualified and v.v.
members in legal proceedings,
including an arbitration proceeding
an individual cannot enter into a
contract with himself but a corporation A stockholder is not an agent of the
has the same freedom of contracting
corporation and he becomes an agent
with its stockholders that it has of
only if he was duly appointed as such
contracting with any other person
a stockholder may even be an
the corporation is not the agent of the
employee of the corporation
stockholders and does not act of hold the corporation may even sue the
property as agent for them
stockholders and the latter may sue the
a non-stock corporation may file an
corporation
action in the name of its members only even if the corporation and the
if it can prove that the members indeed
stockholders are co-defendants in an
authorized the corporation to institute
action, summons served on the
the action for and in behalf of such
corporation does not bind the
members
stockholders who must personally be
the mere fact that the non-stock
served
corporation was organized for the
purpse of advancing the interests and Doctrine of Piercing the Veil of
welfare of its member does not Corporate Fiction

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It is a basic principle in corporate law that a

person or where the corporation is so
corporation has a separate personality
organized and controlled and its affairs
distinct from its stockholders and from
are so conducted as to make it merely
other corporations to which it may be
an instrumentality, agency, conduti or
connected. this is a fiction created by law
adjunct of another corporation, then its
with the intent that it should be treated as
distinct personalitiey may be ignored.
true. However, under the doctrine of the The courts will treat the corporation as
piercing the veil of corporate entity, the
a mere aggrupation of persons and the
corporation's separate juridical personality
liability will directly attach to them.
may be disregarded when there is an abuse When not pierced
of the corporate form.
Mere ownership
by a single
Corporate
personality
may
be
stockholder or by another corporation
disregarded when the corporate
of all or nearly all of the capital stock
identity is used to:
of a corporation is not in itself
sufficient ground fro disregarding the
defeat public convenience
separate corporate personality
justify wrong
The similarity of business of two
protect fraud
corporations does not warrant the
defend crime
disregard of the corporate veil absent
Also, where the corporation is a mere
sufficient showing that the corporate
alter ego or business conduit of a
entity was purposely used as a shield

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to defraud creditors and third persons

of their rights
even the overlapping of incorporators
ans stockholdrers of two or more
corporations will not necessarily
justify the piercing of the veil

company, the various sectors being

separately incorporated, either because they
were once independent and have been
acquired or because the central concern,
entering new fields, created new
corporations to develop them or for tax
reasons.
Theory of Enterprise Entity
That the entity commonly known as a
- An alternative account of the Doctrine of
corporate entity takes its being from
Piercing the Veil of Corporate Fiction
the realoity of the underlying
- offered as a unifying dominant principle
enterprise, formed or in formation
to systematize the doctrines and rules
that the state's approval of the
pertaining to corporations including
corporate form sets up a prima facie
doctrine of piercing, rules on defective
case that assets, liabilities and
incorporation and as an alternative
operations of the corporation are those
justification for corporate liability for pre
of the enterprise
incorporation promoter's contracts
but where the corporate entity is
- More often than not, a single large scale
defective, or otherwise challenged, its
business is conducted not by a single
existence, extent and consequences
corporation but by a constellation of
may be determined by the actual
corporations controlled by a central holding
existence and extent operations of the

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underlying enterprise, which by these Other names:

very qualities acquires an entity if its 1. identity doctrine - if the plaintiff can
own, recognized by law.
show that there was such a unity interest
and ownership that the independence if the
3 basic areas wherein the doctrine of corporations and in effect ceased or had
piercing the veild may be applied:
never begun and adherence to the fiction of
1. Cases where public convenience may separate identity would serve only to defeat
be defeated as when the corporate justice and equity by permitting the
fiction is used as a vehicle for the economic entity to escape liability arising
evasion of an existing obligations
out of an operation of one corporation for
2. fraud cases or when the corporate the benefit of the whole enterprise
entity is used ti justify a wrong, protect
fraud, or defend a crim
2. Instrumentality Rule
3. alter ego cases where a corporation is
merely a farce since it is a mere alter
ego or business conduit of 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
adjucnt of another corporation