Philippine Corporation Law – Key Vocabulary

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Flashcards cover fundamental vocabulary in Philippine Corporation Law, including corporate personality, powers, classes, governance, director duties, shareholder rights, share classifications, and dissolution procedures.

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75 Terms

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Artificial Being

A juridical person created by law, separate and distinct from its shareholders or members.

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Corporate Entity Theory

Doctrine recognizing a corporation’s separate legal personality from the individuals composing it.

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Doctrine of Separate Personality

Principle that a corporation’s rights and liabilities are its own, not those of its shareholders.

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Piercing the Veil of Corporate Entity

Judicial act of disregarding separate personality when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime.

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Concession Theory

View that a corporation exists only by grant of the State; its powers are fixed by its charter.

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Certificate of Incorporation (COI)

Document issued by the SEC signifying the corporation’s legal existence.

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Commencement of Corporate Existence

The date the SEC issues the Certificate of Incorporation, unless created by special law.

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Ultra Vires Act

Act beyond a corporation’s express, implied, or incidental powers; may be void, voidable, or ratifiable.

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Limited Liability Doctrine

Rule that shareholders are liable only to the extent of their subscribed capital.

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Right of Succession

Capacity of a corporation to continue its existence despite changes in ownership.

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Express Powers

Powers explicitly granted to a corporation by the Corporation Code, special law, or its charter.

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Implied Powers

Powers reasonably necessary to carry out a corporation’s express powers or purposes.

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Incidental Powers

Powers that naturally attach to corporate existence, such as the right to sue and be sued.

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Stock Corporation

Corporation with capital stock divided into shares and the right to distribute profits to shareholders.

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Non-Stock Corporation

Corporation organized primarily for purposes other than profit and without capital stock.

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Domestic Corporation

Corporation formed and organized under Philippine laws.

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Foreign Corporation

Corporation formed under laws other than those of the Philippines.

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Close Corporation

Corporation whose shares are held by not more than 20 persons and restricts share transfer.

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Open Corporation

Corporation with freely transferable shares and often publicly traded.

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Private Corporation

Corporation organized for private benefit, interest, or purpose.

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Public Corporation

Government-owned or ‑controlled corporation created for public or governmental purpose.

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Corporation Sole

Religious corporation consisting of a single person holding property in trust for a religious group.

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Ecclesiastical Corporation

Religious corporation composed of a group or congregation (e.g., Religious societies).

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Lay Corporation

Non-religious corporation, which may be eleemosynary (charitable) or civil (secular).

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De Jure Corporation

Corporation with full and lawful compliance with incorporation requirements.

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De Facto Corporation

Entity acting as a corporation under colorable compliance but with a defect in formation.

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Corporation by Estoppel

Entity treated as a corporation with respect to parties who dealt with it believing it was validly incorporated.

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Promoter

Person who undertakes to form a corporation and may be personally liable on pre-incorporation contracts.

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Board of Directors (BOD)

Governing body that directs corporate affairs; generally 5–15 members owning at least one share each.

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Independent Director

Member of the BOD with no material relationship with the corporation; required in public-interest corporations.

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Quorum (Directors)

Majority of the entire membership of the board, unless bylaws provide otherwise.

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Straight Voting

Shareholder casts one vote per share for each director position.

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Cumulative Voting

Total votes equal shares owned × number of directors; may concentrate votes to elect minority representation.

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Emergency Board

Temporary directors elected from officers when remaining directors cannot form a quorum and urgent action is needed; SEC to be notified within 3 days.

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Corporate Opportunity Doctrine

Prohibits directors/officers from exploiting for themselves business opportunities that belong to the corporation.

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Self-Dealing Director

Director who contracts with his own corporation; contract is voidable unless fairness, full disclosure, and proper ratification are shown.

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Interlocking Director

Same individual sits on boards of two corporations; contracts valid unless fraudulent or one interest exceeds 20% ownership and is unfair.

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Duty of Loyalty

Obligation of directors/officers to prioritize the corporation’s interest over personal interest.

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Duty of Obedience

Obligation to act within the law, articles, bylaws, and board/stockholder resolutions.

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Duty of Diligence

Obligation to exercise the care of a prudent person in like circumstances.

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Derivative Suit

Action brought by a shareholder on behalf of the corporation to redress wrongs against it.

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Executive Committee

Board-created body (≥3 directors) that may act on corporate matters except those requiring shareholder approval.

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Audit Committee

Board committee overseeing financial reporting and internal controls; includes at least one independent director.

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Nomination Committee

Board committee that screens and nominates candidates for directors; includes at least one independent director.

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Compensation Committee

Board committee that reviews remuneration; includes at least one independent director.

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Corporate Officers

President, Treasurer, Secretary, and other officers elected by the board; compliance officer required for public-interest corporations.

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Treasury Shares

Previously issued, fully paid shares reacquired by the corporation; non-voting and non-dividend earning while in treasury.

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Escrow Shares

Shares held in trust until fulfillment of a condition, e.g., completion of a transaction.

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Common Shares

Ordinary voting shares with residual claim on assets and earnings.

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Preferred Shares

Shares with preferential rights (e.g., dividends) but usually non-voting except on fundamental changes (III-AM-SAD matters).

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Redeemable Shares

Shares that may be repurchased by the corporation at a fixed time/price, not more than five years from issuance.

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Founders’ Shares

Shares given to incorporators/grantors of special rights, usually limited in time or percentage.

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No-Par Shares

Shares without par value; deemed fully paid when issued at stated value, not less than ₱5.

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Subscription Contract

Agreement to purchase unissued shares; generally irrevocable for six months unless consented otherwise.

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Delinquent Shares

Shares on which the subscriber defaulted in payment; lose voting and dividend rights until settled.

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Pre-emptive Right

Shareholder’s right to subscribe pro rata to new issuances to maintain percentage ownership, subject to exceptions.

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Appraisal Right

Right of a dissenting shareholder to demand payment of fair value of shares in certain extraordinary transactions (AIM-CSC).

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Voting Trust Agreement

Written agreement transferring voting rights of shares to a trustee for a period, filed with the SEC.

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Proxy

Authority given by a shareholder to another person to vote in his stead; generally valid for five years unless limited.

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By-laws

Internal rules governing a corporation’s management; effective upon SEC approval.

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One Person Corporation (OPC)

Corporation with a single stockholder who may be a natural person, estate, or trust.

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SLEMPO

Sale, Lease, Exchange, Mortgage, Pledge, or other disposition of all or substantially all corporate assets; needs 2⁄3 stockholder approval.

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Voluntary Dissolution (No Creditors Affected)

Termination by majority board vote and majority stockholders after proper notice and publication; SEC approval required.

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Involuntary Dissolution

Revocation of corporate franchise by the State for grounds like fraud, continuous inoperation, or failure to file reports.

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Liquidation

Process of winding up corporate affairs: collecting assets, paying creditors, and distributing remaining assets to shareholders.

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De Facto Delinquent Status

Status of a corporation that has been non-operational for five continuous years; must resume within two more years or COI is revoked.

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Express Power to Sue and Be Sued

Statutory right of a corporation to initiate or defend legal actions in its corporate name.

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Management Contract

Agreement where one corporation manages another; requires stockholder approval and additional votes if interlocking ownership exists.

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Independent Director Ownership Limit

An independent director’s shareholdings must not exceed 2% of the corporation’s subscribed capital stock.

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Watered Stock

Shares issued for insufficient consideration; directors consenting to issuance are personally liable.

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Emergency Board Notice

SEC must be notified within three days of creation of an emergency board.

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Quasi-Public Corporation

Private corporation imbued with public interest, subject to greater regulation (e.g., banks, insurance companies).

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Treasurer’s Affidavit

Sworn statement of the treasurer-in-trust attesting to full subscription and minimum paid-in capital.

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Securities Regulation Code (SRC) Violation

Ground for permanent disqualification of a director if convicted by final judgment.

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Hold-Over Doctrine

Directors/officers continue to serve until their successors are elected and qualified when no election is held at the proper time.