NOTES FROM TODAYS INTEGRATION:

Agency in-charge of corporations in general SEC SRC Section 5 has been taken over by special
commercial courts
SEC has administrative powers.

Basics of incorporation
- Incorporators
o Number
o Term
- Directors
o Disqualifications
o Nationality requirement or lack thereof
o Residency requirement
o Can be voluntarily or involuntarily removed
With or without cause is valid provided it is not used to diminish
representativeness
Seats can remain vacant or can be filled up by shareholders or by the board for
the unexpired term
- Domestic v foreign corporation
- Shareholders
o No number required but note the required number of incorporators
- Quorum of BOD
o Always based on the Board, not on the number of directors there
- Powers of a corporation (Section 36)
o Section 2
o Section 43
o Power to guarantee cannot be implied, cannot be incidental, must be expressly stated in
the AOI either in the primary purpose or secondary purpose according to the SEC
o Usually carried out by the Board
If 2/3 approval of the shareholders is needed, the number required for the Board
is MAJORITY OF THE BOARD as stated in the AOI (Sections 37 to 43)
If only majority of the shareholders approval is needed, the number required is
MAJORITY OF THE QUORUM
- Remember the birth certificate or marriage contract as to contents
o Term walang forever

Limited Liability Doctrine

- If you bought 1000 pesos worth of shares and paid only 250, you are liable for as much as you
have not paid for: 750.
- If you have fully paid for it, you are no longer liable.

Piercing the corporate veil

- Can be used as a defense or a basis of liability
- Must implead party against whom you are making a claim
- Cannot be pierced using a writ of execution sheriffs cannot do it

AOI
- Contents
 o Which are amendable and which are not?
- Everything can be changed except as to the four sets of names
- Everything that can be amended requires 2/3 shareholders approval
o Through actual meeting
o By written assent EXCEPT those in Sections 37 to 43
- Can provide for a higher vote but can never provide for a lower vote

By-laws
- Everything can be changed
- Can provide for a higher vote but can never provide for a lower vote

Shareholders meeting
- Unless specified in the Corpo Code, everything is majority of the quorum
- See Section 6 for instances when even those with non-voting shares can vote
o Usually these require 2/3 shareholders vote
- 1 vote per share regardless of the par value

Cumulative voting
- 1 share has an exponential number of votes equivalent to the number of Board seats

Capital stock
- There has to be at least one class of voting shares
- Preferred shares Preferred as to common shares
o Distinguish equity (shares, always last in terms of preference) from liability (creditors get
paid ahead)

Stock Dividends
- Required 2/3 shareholders approval
o Forcing shareholders to reinvest the money in the company

Corporate officers
- Determines where the case is filed
- Somebody who is specifically identified as a corporate officer in the AOI
- Term: 1 year

Nationality
- Grandfather Rule
- Control Test applies when the Filipino ownership required is 60% or less

Its only stock dividend if you receive stock of your own company.

Shareholders have several rights.

Not all amendments will give rise to appraisal right only those that will prejudice the rights of a
stockholder.

Right to inspect
- Assumed that the one asking is in good faith

Dissolution
Close corporation
- Requirements

Foreign corporation
- Estoppel

Securities Code
- The rule is full disclosure!
- Public is 19 or more
- Exempt transactions and issuances

Table 1
Checklist Incorporator Director Stockholder/subscriber O
Natural or Artificial N N A/N
Stockholders too Need no
EXCEPT
Yes Yes Yes
because
must b
Residences Majority Majority None
Citizenship No No No Corpor
Number 5 to 15 (stock); 5 to
Only
more than 15 (non-
position
5 to 15 stock); multiples of 5 No limit
treasur
but not more than 15
se
(educational)
Term 1 year (stock); 3 years
(non-stock, divisible
None (forever) by 3); 5 years None
(educational, divisible
by 5)
Proxy Not allowed in any of them

Table 2

CATEGORY BOARD OFFICERS STOCKHOLDERS

Minimum of 5 (because
3 President,
all directors have to be
Number Secretary, Treasurer
stockholders) can be
(all natural persons)
A/N persons
Term All 1 year Forever
See table above
Proxy No all Allowed
Secretary has to be a None according to the
Citizenship
citizen Corpo Code
Secretary has to be a
Residency None
citizen
Whichever venue they Whichever venue they
Venue Principal place of office
choose choose.
 Majority
Two types: (according to
Section 6)
(1) Majority voting
- Election of
Directors
- Revocation of
delegation
- Compensation of
Directors
- Issuance of no-par
shares
(2) Majority non-
voting
- By-laws (Sec 6
(2))
Majority of number - Management
Quorum/Voting 0 (3) 2/3 voting
fixed in the articles
- Section 28
- Section 32
- Section 33
- Stock dividends
(4) 2/3 voting and
non-voting
- Section 6 (1), (3),
(4), (5), (6), (7),
(8)
- Amendment of
by-laws IF
delegated
- Bonded
indebtedness
(Section 38)
- Section 42
- Section 45