CORPORATIONS

Obtain juridical personality upon registration, primary franchise

Secondary franchise – special franchise, for public utilities

<INCORPORATOR IS NATURAL PERSON ONLY>

-maximum life is 50 years, can be extended.
-Authorized stock must be 25% subscribed and subscription must be 25% paid

<SUBSCRIBED STOCK WILL FORM PART OF OUTSTANDING STOCK WHETHER FULLY PAID OR
NOT>

Charter – contract bet. Govt and the Corp; it can be amended by the govt and stockholders with
majority vote. ****; charter can be ratified by stockholders with 2/3 votes or by the majority of
the board ****

Expulsion of member of the board

-members cannot be expelled by the board
- member can only be expelled by the stockholdersin a meeting with 2/3 votes.

 After incorporation the corporation must organize in 2 YEARS

<QUESTIONS>

 CAN REGISTRATION BE CANCEL IN A BASIS THAT THE COMPANY IS NOT OPERATING FOR
5 YEARS? ----YES
 CAN REGISTRATION BE CANCEL IN A BASIS OF APPARENT LOSSES? ---- NO

De facto corporation – do not comply with requirements but operating

 CAN PRIVATE INDIVIDUALS QUESTION LEGALITY OF THE EXISTENCE OF THE

CORPORATION? ---- NO. Only the state/govt can question.
Board of directors – for management; must be ODD number.

Closed Corporation
-The stockholders are also the BOD the directly manage the corporation; requires
provision in the by laws
- Quorum is the minimum of member present (1/2 + 1)
- NOT MORE THAN 20 MEMBERS
- PWEDE BANG 5 LANG STOCKHOLDERS AND WALA NG DIRECTORS? BASTA STATED SA
BY LAWS PWEDE YON =)

 CAN THE BOARD DELEGATE ITS JOB? ---- NO

EXCEPT : EXECUTIVE COMMITTEE / MGMT COMMITTEE - composed of 3 member of
the board and its purpose is to expediate or taking action in between meeting
<EXECUTIVE COM / MGMT COM CANNOT DECLARE DIVIDENDS>

Non-stock corporation
-Members
- BOD = BOARD OF TRUSTEE
- atleast 2 members must be resident

 IS CITEZENSHIP REQUIRED? ---- NO, EXCEPT IN BUSINESS THAT ARE RESERVED ONLY TO
FILIPINOS, MUST BE 60% OWNED BY PH CITIZENS
 HOW DO YOU ELECT MEMBER OF THE BOARD?
- STOCKHOLDERS ELECT IN A MEETING
- 1 SHARE / 1 MEMBERSHIP CERT. = AS MANY VOTE AS MANY POSITION TO BE
FILLED
EXAMPLE : 15 positions need to be filled, so you have 15 votes, you can give it 1 per
member or give all 15 votes to one member. Concentrating all your votes to 1 candidate is
called CUMULATIVE VOTING <THIS IS ALLOWED>

 CAN EX-CONVICT BE A DIRECTOR?

>If the reason is because he violates corporation code, THEN DISQUALIFIED
 >Other reason (such as murder, estafa, etc) will render him disqualified ONLY IF
ATLEAST 6 YEARS IMPRISONMENT WAS THE PUNISHMENT

<ONE CANNOT BE A MEMBER OF THE BOARD IF THERE IS A CONFLICT OF INTEREST>

DIRECTOR – has no compensation; per diem only/ allowance

 CAN A DIRECTOR ENTER IN A CONTRACT WITH THE COMPANY WHERE HE IS A DIRECTOR

FOR HIS OWN INTEREST ---- IT DEPENDS. If fair and reasonable and approved by the
board of directors.

Articles of Incorporation – states primary and secondary purpose of the corporation, it is to

limit the power of the corporation. Power may be express or implied.
ULTRA VIRES – beyond the power of the corpo; VOIDABLE; can be question.
<CORPORATION IS SUBJECT TO LIMITATIONS THAT ITS POWERS AND ATTRIBUTES ARE
DEFINED BY LAW>

Pre emption – right of first refusal; to preserve control

 CAN YOU DENY PRE EMPTION TO STOCKHOLDERS? ---- IF PROVIDED IN THE ARTICLES,
THEN YES.

Treasury Shares – converted into asset; can be reissued or retired; only upon SEC’s approval

MINORITY, if outvoted, has this remedy:

- EXERCISE APPRAISAL RIGHT, IT IS WITHDRAWING FROM THE COMPANY AND THE
COMPANY WILL PAY HIS SHARES. ***
<DIVIDENDS CAN ONLY BE DECLARED OUT OF PROFIT, UNRESTRICTED RE>

 CAN THE STOCKHOLDERS COMPEL THE BOARD TP DECLARE DIVIDENDS? ---- NO

<CASH DIVIDENDS DECLARED CANNOT BE WITHDRAWN. CONTRACT NA YON BETWEEN THE
CORP AND STOCKHOLDERS>
<STOCK DIV. DECLARED CAN BE WITHDRAWN>
  CAN CORPORATION ENTER INTO A MGMT CONTRACT WITH ANOTHER COMPANY? ---
YES. Must be approved by the board and stockholders, WITH A LIMITED TIME OF 5
YEARS

<DIRECTORS CANNOT REPRESENTENTED BY PROXIES>

<THE SUBSCRIPTION MUST BE FULLY PAID FIRST BEFORE ISSUANCE OF STOCK CERTIFICATES>
<WATERED STOCKS – ISSUANCE OF STOCK BELOW PAR; ILLEGAL>

Call – board is issuing a resolution to request all unpaid stockholders to pay.

<MERGERS –ONLY ONE WILL SURVIVE> A + B = A/B

<CONSOLIDATION – DISSOLVES 2 CORPORATIONS TO GIVE WAY TO EMERGENCE OR
CREATION OF NEW COMPANY> A+B = C

<DISSOLUTION – through expiration of the term; can be voted by stockholders as long as no

creditors are affected; have to set provision to creditors; involuntary if ordered by SEC because
of failure to organize for 2 years or inoperation for 5 years.>
<Effects of dissolution – the corporation will still continue to have a corporate body for 3 YEARS
to wind up its affairs and liquidation>

 How to determine if a corporation is foreign or domestic? ---- PLACE OF CORPORATION

OR INCORPORATION; if subsidiary of foreign corporation, it must be incorporate by 5
natural persons.
<CONGLOMERATE – not a corporation or a corporate entity; companies that have common
owners of officers; GROUP OF COMPANIES>
COOPERATIVES

 Can you incorporate with a minimum of 5 members if you are cooperative? –NO. IT
MUST BE 15
 Register in Cooperative Devt Authority
 BOD – 5 to 15; Majority should be citizen of PH; no nationality required unless you go
with PH line of business
 Reason to form cooperatives? Not for profit
Kinds of coop
1. Electric coop
2. Agrarian reform coop
3. Transport coop
4. Cooperative bank
5. Consumer – grocery
6. Multi-purpose
7. Credit coop
8. Marketing
9. Service - can be in many form
10. Producers coop- joint production of agri products
11. Water service
12. Fishermen
13. Other

 Activities are undertaken for the benefits of the members

 Term = maximum of 50 years
 Instead of stockholders, members
 Instead of stock certificate, certificate of membership
 Articles of cooperation
<Is it allowed for members to own many units of membership? NO. you cannot own beyond
10%.>

 Authorized Share Capital

25% subscribed, 25% paid
 Pag coop SHARE CAPITAL, cannot be less than 15K
 Merger and consolidation, ¾ approval of the members

<CAN WE CREATE COOPERATIVE FOR ELECTION? NO!!! POLITICAL PARTY YON NOT COOP>
<Can there be coop made up of minors? YES!!!, Called laboratory coop; legal age members
are not required>

<can employees of the CDA be members of coop? general rule: no, but can they form coop
inside CDA>

<can a member withdraw from coop? Discouraged. It cannot be made if there are liabilities to
be covered by capital contributions and the withdrawal will diminish the asset>

<liability of the member is limited only up to the contribution; like limited partner and
stockholders; NO PERSONAL LIABILITY>

 Coop are exempted in full in VAT an all other taxes

 Coop can receive donations and gifts too.
<can coop borrows form bank? YES>
<can you transfer membership? YES. As long naka 1 year term ka na>

THE SECURITIES REGULATION CODE

Securities- instrument that evidences once participation of interest (e.g, share of stocks,
promissory notes, bonds, stock dividends)
-covered only corporations
-administered and enforced by SEC
-to protect investors, the sec requires registration and monitoring of every security issued.
What securities are exempted?
1. Bonds issued by govt (treasury bonds)
2. Certificates issued by a receiver during a bankruptcy proceedings (IOUs). (Approved by
court)
3. Securities issued by bank belonging to other companies. (Subj. to registration
requirements)
Exempted transactions
 1. Isolated transaction (SOS issued thru process of incorporation)
2. Offer of subscription before incorporation <EXEMPT!!!!!!>

COMMODITIES FUTURES CONTRACT

-buy in fixed price with the expectation that the prices will go up.
-if marketed, IT REQUIRES REGISTRATION WITH SEC.

Tender offer – blind invitation to all stockholders to sell their shares or offer to buy; if you’re
going to buy at least 15% of a class of shares of a corp listed or corp of at least 200
stockholders or asset of more than 20M PHP, YOU HAVE TO REGISTER SA SEC.

<can investor borrow money and invest it in stock exchange? BSP limits borrowing for that
purpose>

<Coop by business venture. –TRUE, basta true agad>

<Min members of Corporation. -5; Partnership. -2. Cooperative. -15>
<Employees of CDA are not eligible to be a member of coop. within CDA office lang pwede. ---
-SUBJECT TO EXCEPTIONS>
<COOP… REGULAR MEMBER – full pledged; ASSOCIATE MEMBER- still has to tested for
loyalty and dedication, should patronize the coop for at least 2 years to become a regular
member… ANSWER TRUE…>
<COOP… the death or insanity of a member will not dissolve the cooperative>
<COOP… quorum of at least 25% of all the members who are entitled to vote>
<COOP… director cannot be directly involved in the operations and management of the coop;
cannot be attend through proxies>
<COOP… you must be a member for at least 1 year to transfer membership>
<COOP CANNOT BE CALLED INCORPORATED>
<Stock dividends is subject to REGISTRATION; required to go to SEC to apply for exemption>
<who managed ???Premeet logs??? (example burial, memorial) – SEC in collaboration with
other agencies>
<closed corp doesn’t have listed shares>
<company borrowed money, in exchange, the bank wants to have 1 seat in the board of
directors to be reserved for the bank --- THIS CAN BE DONE ONLY AFTER AMENDING THE BY
LAWS>
<Why banks and publicly traded companies are required to hire 2 independent directors? ---
the objectives are to raise quality and professionalism of the decisions of the board, and
there will be more effective enforcement of the rules>
<independent directors are chosen because of expertise & experience>
<BORROWING IN BANK TO BUY STOCKS ARE NOT ALLOWED BY THE MONETARY BOARD. T OR
F? ----ANSWER. ONLY IF IT IS EXCESSIVE>

<PARTNERSHIP>
T OR F
-If the partners want to give to the charity the profits of partnership, would you advice them
to form coop instead? ---- NOT NECESSARILY

<can sole proprietorship buy property under sole proprietorship name? ----NO. KASE WALA
SYANG JURIDICAL PERSONALITY, so under lang sa name nung tao>

<QUESTION>
SIBLINGS INHERITED APARTMENT, INSTEAD OF CO OWN LANG NAG FORM SILANG
PARTNERSHIP, USAPAN KUKUNIN LANG YUNG RENTALS. IS THAT LEGAL? ---- IT DEPENDS!!!! IF
ONLY IT IS USED FOR TAX EVASION THEN IT BECOME ILLEGAL.
<PARTNERSHIP REGISTRATION TO SEC IS OPTIONAL, UPTO CAPITAL OF 3K>

<QUESTION>
<You are a lot owner and a company approached you to build building sa lot. You agreed.
Does this create a particular form of partnership? ---- IT DEPENDS... >
< Partnership borrowed money from bank then it cannot pay na. Are partners liable? ---- YES!
JOINTLY!! Kase arises from contract >
< Liability arises from quasi-delict of a partner doing business purpose – personal obligation
yon ng guilty partner, if he cannot pay then it will become liability of partners SOLIDARILY!!!>
< A partner do illegal act in the name of the partnership, the victims are running after the
remaining partners. Are the other partners liable? --- IT DEPENDS. if they have the knowledge
of the illegal act >

<SECRET PARTNERSHIP (def.) – partners doesn’t know each other and the objectives are
secret>
<IF YOU ARE A UNIVERSAL PARTNER CAN YOU CONTRIBUTE YOUR FUTURE PROPERTY? ----
YES. But not future inheritance or donated property>
<IS IT REQUIRED THAT THE PARTNERS ARE ODD NUMBER? ----- NO. >
<IF YOU’RE A CAPITALIST PARTNER CAN YOU APPOINT SUBSTITUTE PARTNER? ----- IT
DEPENDS. Whether other agreed>
<IS IT TRUE THAT THE INDUSTRIAL PARNERS’ SHARE IN PROFITS MUST BE FIRST SATISFIED
BEFORE CAPITALIST PARTNERS? ---- YES>
<IF THE INDUSTRIAL PARTNER TAKES CONTRACT TO HIMSELF INSTEAD OF GIVING IT TO THE
PARTNERSHIP AND HIS DEFENSE IS THAT HE IS ALLOWED TO ENGAGE IN BUSINESS AFTER THE
PARTNERSHIP. IS IT RIGHT? – YES. Only if no damaged is done to the partnership.>
<if you’re newly admitted partner you are liable to the preexisting debt of the partnership
but there can be stipulation to the contrary>
<if your name does not appear on the partnership name does it mean that you’re not a
partner? ----IT DOES NOT FOLLOW>
<if the partnership is dissolved can the remaining partner continue the partnership? ----YES>
<LIMITED PARTNER CANNOT CONTRIBUTE SERVICES.>

< 90 % OF CAPITAL STOCK OF A CORPORATION IS OWNED BY ONE PERSON AND HE IS

RUNNING THE CORP AS IF A SOLE PROPRIETOR. DOES THAT MEAN THAT YOU HAVE YOU
HAVE TO PIERCE THE VEIL OF CORPORATE ENTITY? ------ NOT NECESSARILY. Only if used for
fraud. >

< Can a corporation be a limited partner? ------ YES >

< a partnership can be a partner in another partnership --- TRUE>
<PLDT, SSS, PUP. WHICH IS PUBLICLY HELD PRIVATE CORPORATION ------ PLDT>
<Incorporation can be a stockholders but cannot be an incorporators ----- TRUE >
< can you be a president and secretary?- NO>
< chief accountant and auditor? --- NO >
< treasurer and secretary? ---- YES >
< Is a company can change its business if it’s bankrupt/nalulugi? ---- IT DEPENDS >
< can a company buy outstanding shares to reduce authorized shares? --- YES>
< is unpaid subscriber consider as stockholders? ------- YES>