TITLE II : Incorporation & Organization of Private Corporations

1. How many incorporators should there be in a private 5. STEPS IN THE CREATION OF CORPORATION
corporation?
Sec.10: 1st: Promotion – activities done by promoter for the
Any person, partnership, association or corporation, founding and organizing the business or enterprise.
singly or jointly with others but not more than 15 in
number, may organize a corporation for any lawful 2nd : Incorporation –
purposes.
i. Execution of Articles of Inc by
Provided: incorporators and other documents
 natural persons who are licensed to practice a required for registration.
profession ii. Filling of Articles of Inc with the SEC
 Partnership or association organized for the together with TREASURER’S
purpose of practicing a profession AFFIDAVIT.
SHALL NOT BE ALLOWED TO ORGANIZE AS A (if governed by special law-
CORPORATION UNLESS OTHERWISE PROVIDED Recommendation of government
UNDER SPECIAL LAWS. agency is needed)

3rd : Formal organization and commencement of

2. Qualification of incorporators?
business corporation.
Each incorporator of a stock corporation must own or
 Adoption of by-laws and filling the
be a subscriber to at least 1 share of capital stock.
same with SEC
 Election of Bod/bot and officers
A corporation with a single stockholder- ONE PERSON
 Payment of shares
CORPORATION

6. Corporate term of Corporation

3. What is One-Person Corporation?
Sec. 11:
Have perpetual existence unless provided otherwise
 Corporation with single stockholder
in the Articles of Incorporation.
 Only a NATURAL PERSON, TRUST, or an ESTATE
can form it.
 Corporation whose article is issued prior to the
The ff. cannot form OPC: effectivity and which continue to exist shall HAVE
 Banks & Quasi-banks PERPETUAL EXISTENCE unless upon a vote of the
 Pre-need majority stockholders which elects to retain its
 Trust corporate term.
 Insurance  Provided, that in any change in the corporate
 Public & publicly-listed companies term is without prejudice to the appraisal right of
 Non-chartered GOCC dissenting stockholders.
 Those licensed person organized to exercise  Corporate term may be extended or shortened
a profession except permitted otherwise. by amending the articles:
o Extension- earlier than 3 years prior to
4. INCORPORATOR vs CORPORATOR expiry date unless there is justifiable
reason for early extension. Provided,
INCORPORATOR CORPORATOR such extension shall take effect on the
following the original or subsequent
Those stockholders or Who composed a corporation expiry date.
members mentioned in the whether as stock or
Articles of Incorporation as: members.
7. Can an expired corporation be revived?
ORIGINALLY FORMING
& COMPOSING the corporation
and SIGNATORIES thereof.  Expired corporation may apply for revival of its
corporate existence together with all the rights
Signatory of AoI. May or may not be a and privileges under its certificate of
signatories. incorporation and subject to all of its duties,
Does not cease to be an Ceases to be a corporator debts, liabilities existing prior to its revival.
incorporator upon sale of (stock corp)  Upon approval by commission-
shares. o Shall be deemed revived
Ceases to be a member o Certificate of Revival Corporate
(nonstock) Existence is issued

Not more than 15 persons No restriction as to number

except for a close
corporation.
 TITLE II : Incorporation & Organization of Private Corporations

 No application for revival of CE: 9. Define Subscription & Paid-up Capital

 Banks and quasi-banks, Pre-need
 Insurance and trust companies  Subscription- a written contract to purchase
 Non-stock savings newly issued shares of stock or bonds. “Stock
 Loan associations & pawnshops Subscription”
UNLESS ACCOMPANIED BY A FAVORABLE
RECOMMENDATION OF THE APPROPRIATE  Paid-up Capital- portion of the authorized capital
GOVERNMENT AGENCY. stock which has been both subscribed and paid

8. Is there a minimum capital stock required of stock

corporation?
10. Articles of Incorporation
Sec.12:

Definition:
NO MINIMUM AUTHORIZED CAPITAL STOCK unless
Defines the charter of the corporation and the
provided by special law.
contractual relationships between:
 the state and the corporation
Additional Notes
 stockholders and the State
Sec 13:
 Corporation and stockholders
There is no gain saying that the contents of it are
 All corporations shall file with the
binding, not only on the corporation, but on the
commission articles of incorporation in any
shareholders.
official languages, duly signed and
acknowledged in such form and manner
A. 3-fold Nature
allowed by commission containing
 state and the corporation
substantially the following matters except as
 stockholders inter se.
otherwise prescribed by this code or special
 Corporation and stockholders
law.
 CONTENTS OF AoI:
B. Name of the Corporation
o Name of corporation
 One of its attributes, an element of
o Purpose of formation (If more than
the corporation existence.
one purpose: INDICATE THE
 General rule: each corporation
PRIMARY AND SECONDARY…)
must have a name by which it is TO
o Principal Office must be within PH
SUE AND BE SUED and DO ALL
o Term of existence
LEGAL ACTS.
o Name, nationalities, and residences
 The name of corporation
o Number of directors:
designates the corporation in the
 Not more than 15 (stockc)
same manner as the name of an
 Can be more than 15
individual designates the person
(nonstockcorp)
 Right to use the corporate name is
o (Stock corp)
as much a part of the corporate
o Authorized amount of
franchise as any other privilege
stock
granted.
o Number of shares divided
 Limitations:
o Par value
i. Must not be identical,
o Names, nationalities,
deceptively or confusingly
residence of subscriber
similar to any existing
o (non-stock corp)
corporation or already
o Name, nationalities,
protected by law.
residences of contributors
ii. Must contain the word
o amount of contributions
INC, CORPORATION, OR
o such other matters consistent with
OPC.
law.
 Change of Name- by amending the
o Arbitration Agreement may be
articles.
provided pursuant to section 181.
o ARTICLES OF INCORPORATION
C. Purpose Clause
AND APPLICATIONS FOR
o This will confer, as well as limits, the
AMENDMENT may be filed with the
powers which a corporation may
commission in the form of
exercise.
ELECTRONIC DOCUMENT, in
o ULTRA VIRES ACTS- Any act beyond
accordance with the commission’s
powers.
rules and regulation on electronic
o If more than one purpose- state the
filing.
primary and secondary purposes or
purposes to determine which
 TITLE II : Incorporation & Organization of Private Corporations
investment of corporate funds require
the authority of both Board and
Stockholders.
D. Principal Office of the Corporation
PURPOSE:
 Fix the residence in a definite
place
 Determine the venue of court
cases involving corporation
 Purposes of stockholders or
members meeting
 Determine the place where the
books and records ordinarily
kept.
E. Term of Existence
 Perpetual life unless stated
otherwise.
F. Number of BOD/BOT
 BOD <15
 BOT > 15
G. Authorized Capital Stock
-maximum amount fixed in the articles that
may be subscribed and paid by stockholders
11. May the Articles of Incorporation Amended? And
Limitations.
 (Stock corp) May be amended by a majority vote
of the board of directors or trustees and the vote
or written assent of stockholders representing at
least 2/3 of outstanding capital stock.
 Non-stock Corporation’s articles may be
amended by a vote or written assent of majority
of trustees at least 2/3 of the members.
 Unless otherwise stated prescribed by general
law or by special law and for legitimate purposes.
 Shall take effect upon their approval by the
commission or from the date of filling if not acted
upon within 6 months from the date of filling for
a cause not attributable to the corporation.
LIMITATIONS:
1. Amendment must be for legitimate purpose
and not be contrary to corporation code and
special laws
2. Must be approved by a majority of bod/bot.
3. Requires the vote or written assent
representing 2/3 of outstanding shares or
2/3 members.
4. Original and amendment articles together
shall contain all provisions.Indicate the
changes made
5. Certification under oath by the corporate
secretary and a majority of the BOD or BOT
stating the fact that said amendments have
been duly approved by the required vote
and shall be submitted to Sec.
6. Must be approved by Sec.
7. Must be accompanied by a favorable
recommendation of the appropriate
government agency.
12. Grounds which SEC may reject or disapprove any
amendmends?
 The articles of incorporation or any
amendment there to is not substantially in
accordance with the form prescribed.
 Purpose or purposes of the corporation are
patently UNCONSTITUTIONAL, ILLEGAL,
IMMORAL OR CONTRARY to government
rules and regulations.
 Certification concerning the amount of
capital stock subscribed or paid is false.
 Required percentage of filipino ownership of
the capital stock under existing laws or the
constitution has not been complied with.
NOTE!
Before disapproving the, the SEC should give the
incorporators, directors, trustees, or officers a
reasonable time within which to correct or modify the
objectionable portions of the articles or amendment
13. When does a corporation commence to have
existence and obtain juridical personality?.
 If the name is distinguishable, it will be
reserved for the incorporators. Then the
articles of incorporation and by-laws shall be
submitted to commission.
 And if the submitted documents are fully
compliant- certificate of incorporation is
issued.
CERTIFICATE OF INCORPORATION – Gives juridical
personality and places the corporation under the
jurisdiction of SEC.
FROM THE DATE SEC ISSUES THE CERTIFICATE OF
INCORPORATION – a corporation commences its
corporate existence and juridical personality is
incorporated.
14. De Facto Corporation
Requirements to be qualified:
 Existence of valid law under which it
may be incorporated
 Attempt in good faith to incorporate
 Assumption of corporate powers
 TITLE II : Incorporation & Organization of Private Corporations

The due incorporation of any corporation claiming in
good faith, and its right to exercise corporate , shall
not be inquired into collaterally in any private suit to
which such corporation may be a party. Such inquiry
may be made by the solicitor general in a quo
warranting proceeding.
NOTE:
The filling and issuance of certificate are
essential for the existence of a de facto corporation.
15. Effect of non-use of Corporate Charter and
continuous in-operation
 If a corporation does not formally organize
and commence its business within 5 years
from the date of its incorporation,
CERTIFICATE OF INCORPORATION shall be
deemed REVOKED as of the day following
the end of 5 year period.

The supreme court held that an organization
not registered with SEC cannot be considered a
corporation in any concept.
TWO CONFLICTING PUBLIC INTEREST UNDER DE
FACTO DOCTRINE:
1. One supposed to an unauthorized
assumption of corporate privileges.
2. The other in favor of doing justice to the
parties and establishing a general assurance
of security in business dealing with
corporations.
Generally, de facto doctrine exists to PROTECT THE
PUBLIC DEALING WITH SUPPOSED CORPORATE
ENTITIES, NOT TO FAVOR THE DEFECTIVE OR NON-
EXISTENT CORPORATION.
Sec. 20: Corporation by Estoppel
 All persons who assume to act as corporation
knowing it to be without authority to do so shall
be LIABLE AS GENERAL PARTNERS FOR ALL
DEBTS, LIABILITIES AND DAMAGES incurred.
 Provided, however, that when any such
OSTENSIBLE CORPORATION is sued in any
transaction entered by it as a corporation it on
any tort committed by it as such, SHALL NOT BE
ALLOWED TO USE ITS LACK OF CORPORATE
RESPONSIBILITY AS A DEFENSE.
 Anyone who assumes an obligation to an
ostensible corporation as such cannot resist
performance thereof on the ground that there
was in fact no corporation.
16. Effect of corporation has been organized but
subsequently becomes inactive
 If becomes inoperative for a period at least 5
consecutive years, the commission may,
after due notice and hearing, place the
corporation under DELINQUENT STATUS
 .DELINQUENT CORPORATION shall have a
period of 2 years to resume operations and
comply with all requirements.
 Failure to comply with the requirements and
resume operations within 2 years, the
certificate of incorporation shall be revoked.
EXAMPLE OF ACTS CONSTITUTING FORMAL ORGANIZATION
1. Adoption of by-laws and filing the same with sec
2. Election
3. Establishment of principal office
4. Subscription and payment of shares
5. Others acts necessary to transact business.
EXAMPLE OF ACTS CONSTITUTING COMMENCEMENT OF
BUSINESS
1. Entering into contracts or negotiation for lease or sale
of properties
2. Making plans
3. Taking steps to expedite the construction of working
equipment.

Doctrine of Estoppel
Predicated on, and has it origin in, equity which
broadly defined, is justice according to natural law and right.

Its principle intended to avoid a clear case of injustice.

Estoppel is not understood to be a principle that, as a

rule, should prevalently apply but, such as it concededly is, as
a mere exception from the standard legal norms of general
application that can be invoked only in highly exceptional and
justifiable cases.