VII. ARTICLES OF INCORPORATION
Bacolod-Murcia
1. Nature of the Charter - Government of P.I. v. Manila
Railroad Co., 52 Phil. 699 (1929).
2. Procedure and Documentary Requirements (Sec. 13
and 14)
(a) As to Number and Residency of Incorporators
(Sec. 10);
(b) Corporate Name (Secs. 17, 13(1))
(c) Purpose Clause (Secs. 13(2) and 41)
(d) Corporate Term (Sec. 11).
(e) Principal Place of Business (Sec. 13(c))
(f) Minimum Capitalization (Sec. 12)
(g) Subscription (Sec. 13).
(h) Steps and Documents Required in SEC (Sec. 18)
3. Grounds for Disapproval (Sec. 16)
4. Amendments to the Articles of Incorporation (Sec.
15).
5. Commencement of Corporate Existence (Sec. 18).
VIII. BY-LAWS
1. Nature and Functions (Gokongwei v. SEC, 89 SCRA 337
[1979]; Peña v. CA, 193 SCRA 717 [1991])
(a) Common Law Limitations on By-Laws
(i) By-Laws Cannot Be Contrary to Law and
Articles of Incorporation
(ii) By-Law provisions cannot be unreasonable
or be contrary to the nature of by-laws.
(iii) By-Law provisions cannot discriminate.
(b) Binding Effects on By-laws (China Banking Corp.
v. Court of Appeals, 270 SCRA 503 [1997], PMI
Colleges v. NLRC, 277 SCRA 462 [1997])
2. Adoption Procedure (Sec. 45)
3. Contents (Sec. 46)
4. Amendments (Sec. 47)
IX. CORPORATE POWERS, AUTHORITY AND ACTIVITIES
1. Corporate Power and Capacity (Art. 46, Civil Code; Secs.
35 and 44)
(a) Classification of Corporate Powers: Express;
Implied; and Incidental
(b) Where Corporate Power is Lodged
2. Ultra Vires Acts
(a) Concept and Types (Sec. 44)
(b) Ratification of Ultra Vires Acts: (Pirovano v. De la
Rama Steamship Co., Inc., 96 Phil. 335 [1954],
Harden v. Benguet Consolidated Mining Co., 58
Phil. 140 [1933])
(i) Theory of Estoppel or Ratification
(ii) Theory of Apparent Authority (Prime White
Cement Corp. v. Intermediate Appellate Court,
220 SCRA 103, 113-114 [1993]; Francisco v.
GSIS, 7 SCRA 577 [1963], Yao Ka Sin
Trading v. CA, 209 SCRA 763 [1992])
3. Specific (Express) Powers
(a) Enumerated Powers (Sec. 35)
(b) Power to Extend or Shorten Corporate Term
(Secs. 36 and 80 [1]).
(c) Power to Increase or Decrease Capital Stock (Sec.
37)
(d) To Incur, Create or Increase Bonded
Indebtedness (Sec. 37).
(e) Sell or Dispose of Assets (Sec. 39).
(f) To Invest Corporate Funds in Another
Corporation or Business or For Any Other
Purpose (Sec. 41; De la Rama v. Ma-ao Sugar
Central Co., 27 SCRA 247 [1969]).
(g) To Declare Dividends (Sec. 42; Nielson & Co. v.
Lepanto Consolidated Mining Co., 26 SCRA 540
[1968]).
(i) To Enter into Management Contracts (Sec. 43)
(j) Other Powers
X. DIRECTORS, TRUSTEES AND OFFICERS
1. Powers of the Board of Directors or Trustees (Sec. 22;
Gamboa v. Victoriano, 90 SCRA 40 [1979]).
(a) Two Theories on the Source of Power of the
Board of Directors
(b) Board Must Act As a Body (Sec. 24; The Board of
Liquidators v. Heirs of Maximo M. Kalaw, 20 SCRA
987 [1967])
(c) Effects of a “Bogus” Board
(d) Executive Committee (Sec. 34)
2. BUSINESS JUDGMENT RULE (Montelibano v.
Miling Co., Inc., 5 SCRA 36 [1962]; Philippine Stock
Exchange, Inc. v. Court of Appeals, 281 SCRA 232
[1997])
3. Qualifications of Directors and Trustees (Secs. 22 and
27; Gokongwei, Jr. v. SEC, 89 SCRA 336 [1979], Lee v.
CA, 205 SCRA 752 [1992]).
4. Election of Directors and Trustees
(a) Directors (Secs. 23 and 25; Premium Marble
Resources v. Court of Appeals, 264 SCRA 11
[1996]).
(b) Trustee (Secs. 91 and 174)
(c) Cumulative Voting (Sec. 23; Cumulative Voting in
Corporate Elections: Introducing Strategy in the
Equation, 35 SOUTH CAROLINA L. REV. 295)
5. Vacancy in the Board (Sec. 28)
6. Term of Office, Hold-over Principle
7. Removal of Directors or Trustees (Sec. 27; Roxas v. De
la Rosa, 49 Phil. 609 [1926]).
8. Directors' or Trustees' Meetings (Secs. 48, 52, 53)
9. Compensation of Directors (Sec. 29; Western Institute of
Technology, Inc. v. Salas, 278 SCRA 216, 223 [1997])
10. Role of Directors
(a) Directors as Fiduciaries.
- Pre-Corporation Code. Palting v. San Jose
Petroleum, Inc., 18 SCRA 924 (1966).
- Nature of Duties of Directors and Officers. Prime
White Cement Corp. v. IAC, 220 SCRA 103
(1993).
(b) Duty of Obedience
(c) Duty of Diligence (Sec. 30; Steinberg v. Velasco,
52 Phil. 953 [1929]; Bates v. Dresser, 251 U.S. 524,
64 L. Ed. 388, 40 S. Ct. 247 [1919]; Smith v. Van
Gorkam, 488 A.2d 858, Supreme Court of
Delaware, 1985)..
(d) Duty of Loyalty (Secs. 30 to 33)
- Doctrine of Corporate Opportunity (Gokongwei
v. SEC, 89 SCRA 336 [1979])
- Self-dealings (Secs. 31 and 32)
(e) Duty to Creditors and Outsiders
(f) Corporate Dealings with Directors and Officers
(Sec. 31)
(g) Contracts Between Corporations with
Interlocking Directors (Sec. 32)
11. Who Is an "Officer" of the Corporation (Sec. 24; Gurrea
v. Lezama, 103 Phil. 553 [1958, Dy v. NLRC, 145 SCRA
211 [1986], De Rossi v. NLRC, 314 SCRA 245 [1999])
12. Powers of Corporate Officers:
(a) The Rule on Corporate Officer’s Power to Bind the
Corporation
(b) When Corporation Bound by the Act of Its
President. People’s Aircargo v. Court of Appeals,
297 SCRA 170 (1998)
(c) The Corporate Secretary
(d) Corporate Treasurer
(e) Coverage of Corporate “Agents”
13. Liabilities of Corporate Officers: (Sec. 30; Vazquez v.
Borja, 74 Phil. 560 (1944); Palay, Inc. v. Clave, 124
SCRA 638 [1093]; Tramat Mercantile, Inc. v. CA, 238
SCRA 14 [1994])
Jurisprudential Enumeration of Officer
Liabilities - MAM Realty v. NLRC, 244 SCRA 797,
(1995)
(a) Special Provisions in Labor Laws.- A.C.
Ransom Labor Union-CCLU v. NLRC, 142 SCRA
269 (1986), Del Rosario v. NLRC, 187 SCRA 777
(1990), Maglutac v. NLRC,189 SCRA 767 (1990)