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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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Artificial Being
A juridical person created by law, separate and distinct from its shareholders or members.
Corporate Entity Theory
Doctrine recognizing a corporation’s separate legal personality from the individuals composing it.
Doctrine of Separate Personality
Principle that a corporation’s rights and liabilities are its own, not those of its shareholders.
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.
Concession Theory
View that a corporation exists only by grant of the State; its powers are fixed by its charter.
Certificate of Incorporation (COI)
Document issued by the SEC signifying the corporation’s legal existence.
Commencement of Corporate Existence
The date the SEC issues the Certificate of Incorporation, unless created by special law.
Ultra Vires Act
Act beyond a corporation’s express, implied, or incidental powers; may be void, voidable, or ratifiable.
Limited Liability Doctrine
Rule that shareholders are liable only to the extent of their subscribed capital.
Right of Succession
Capacity of a corporation to continue its existence despite changes in ownership.
Express Powers
Powers explicitly granted to a corporation by the Corporation Code, special law, or its charter.
Implied Powers
Powers reasonably necessary to carry out a corporation’s express powers or purposes.
Incidental Powers
Powers that naturally attach to corporate existence, such as the right to sue and be sued.
Stock Corporation
Corporation with capital stock divided into shares and the right to distribute profits to shareholders.
Non-Stock Corporation
Corporation organized primarily for purposes other than profit and without capital stock.
Domestic Corporation
Corporation formed and organized under Philippine laws.
Foreign Corporation
Corporation formed under laws other than those of the Philippines.
Close Corporation
Corporation whose shares are held by not more than 20 persons and restricts share transfer.
Open Corporation
Corporation with freely transferable shares and often publicly traded.
Private Corporation
Corporation organized for private benefit, interest, or purpose.
Public Corporation
Government-owned or ‑controlled corporation created for public or governmental purpose.
Corporation Sole
Religious corporation consisting of a single person holding property in trust for a religious group.
Ecclesiastical Corporation
Religious corporation composed of a group or congregation (e.g., Religious societies).
Lay Corporation
Non-religious corporation, which may be eleemosynary (charitable) or civil (secular).
De Jure Corporation
Corporation with full and lawful compliance with incorporation requirements.
De Facto Corporation
Entity acting as a corporation under colorable compliance but with a defect in formation.
Corporation by Estoppel
Entity treated as a corporation with respect to parties who dealt with it believing it was validly incorporated.
Promoter
Person who undertakes to form a corporation and may be personally liable on pre-incorporation contracts.
Board of Directors (BOD)
Governing body that directs corporate affairs; generally 5–15 members owning at least one share each.
Independent Director
Member of the BOD with no material relationship with the corporation; required in public-interest corporations.
Quorum (Directors)
Majority of the entire membership of the board, unless bylaws provide otherwise.
Straight Voting
Shareholder casts one vote per share for each director position.
Cumulative Voting
Total votes equal shares owned × number of directors; may concentrate votes to elect minority representation.
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.
Corporate Opportunity Doctrine
Prohibits directors/officers from exploiting for themselves business opportunities that belong to the corporation.
Self-Dealing Director
Director who contracts with his own corporation; contract is voidable unless fairness, full disclosure, and proper ratification are shown.
Interlocking Director
Same individual sits on boards of two corporations; contracts valid unless fraudulent or one interest exceeds 20% ownership and is unfair.
Duty of Loyalty
Obligation of directors/officers to prioritize the corporation’s interest over personal interest.
Duty of Obedience
Obligation to act within the law, articles, bylaws, and board/stockholder resolutions.
Duty of Diligence
Obligation to exercise the care of a prudent person in like circumstances.
Derivative Suit
Action brought by a shareholder on behalf of the corporation to redress wrongs against it.
Executive Committee
Board-created body (≥3 directors) that may act on corporate matters except those requiring shareholder approval.
Audit Committee
Board committee overseeing financial reporting and internal controls; includes at least one independent director.
Nomination Committee
Board committee that screens and nominates candidates for directors; includes at least one independent director.
Compensation Committee
Board committee that reviews remuneration; includes at least one independent director.
Corporate Officers
President, Treasurer, Secretary, and other officers elected by the board; compliance officer required for public-interest corporations.
Treasury Shares
Previously issued, fully paid shares reacquired by the corporation; non-voting and non-dividend earning while in treasury.
Escrow Shares
Shares held in trust until fulfillment of a condition, e.g., completion of a transaction.
Common Shares
Ordinary voting shares with residual claim on assets and earnings.
Preferred Shares
Shares with preferential rights (e.g., dividends) but usually non-voting except on fundamental changes (III-AM-SAD matters).
Redeemable Shares
Shares that may be repurchased by the corporation at a fixed time/price, not more than five years from issuance.
Founders’ Shares
Shares given to incorporators/grantors of special rights, usually limited in time or percentage.
No-Par Shares
Shares without par value; deemed fully paid when issued at stated value, not less than ₱5.
Subscription Contract
Agreement to purchase unissued shares; generally irrevocable for six months unless consented otherwise.
Delinquent Shares
Shares on which the subscriber defaulted in payment; lose voting and dividend rights until settled.
Pre-emptive Right
Shareholder’s right to subscribe pro rata to new issuances to maintain percentage ownership, subject to exceptions.
Appraisal Right
Right of a dissenting shareholder to demand payment of fair value of shares in certain extraordinary transactions (AIM-CSC).
Voting Trust Agreement
Written agreement transferring voting rights of shares to a trustee for a period, filed with the SEC.
Proxy
Authority given by a shareholder to another person to vote in his stead; generally valid for five years unless limited.
By-laws
Internal rules governing a corporation’s management; effective upon SEC approval.
One Person Corporation (OPC)
Corporation with a single stockholder who may be a natural person, estate, or trust.
SLEMPO
Sale, Lease, Exchange, Mortgage, Pledge, or other disposition of all or substantially all corporate assets; needs 2⁄3 stockholder approval.
Voluntary Dissolution (No Creditors Affected)
Termination by majority board vote and majority stockholders after proper notice and publication; SEC approval required.
Involuntary Dissolution
Revocation of corporate franchise by the State for grounds like fraud, continuous inoperation, or failure to file reports.
Liquidation
Process of winding up corporate affairs: collecting assets, paying creditors, and distributing remaining assets to shareholders.
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.
Express Power to Sue and Be Sued
Statutory right of a corporation to initiate or defend legal actions in its corporate name.
Management Contract
Agreement where one corporation manages another; requires stockholder approval and additional votes if interlocking ownership exists.
Independent Director Ownership Limit
An independent director’s shareholdings must not exceed 2% of the corporation’s subscribed capital stock.
Watered Stock
Shares issued for insufficient consideration; directors consenting to issuance are personally liable.
Emergency Board Notice
SEC must be notified within three days of creation of an emergency board.
Quasi-Public Corporation
Private corporation imbued with public interest, subject to greater regulation (e.g., banks, insurance companies).
Treasurer’s Affidavit
Sworn statement of the treasurer-in-trust attesting to full subscription and minimum paid-in capital.
Securities Regulation Code (SRC) Violation
Ground for permanent disqualification of a director if convicted by final judgment.
Hold-Over Doctrine
Directors/officers continue to serve until their successors are elected and qualified when no election is held at the proper time.