REVISED CORPORATION CODE

Corporation

Is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence.

Issuance of certificate of incorporation

WHEN DOES CORP EXISTENCE TOOK PLACE?

Government-owned and Controlled Corp.

Stock (non) corp., vested with functions relating to public needs (governmental or proprietary in nature

at least majority (51%) of its outstanding capital stock

number of shares owned by Gov't in a GOCC

Quasi-Public Corporation

- Created by operation of RCC but performs governmental functions
- Engaged in private business involving public interest.

De Facto Corporation

Exist for all practical purposes as a corp. but w/c has NO LEGAL RIGHT to corporate existence as against the State.
Due to defect in some of the Articles of Incorporation

CORPORATION BY ESTOPPEL

a corp. with No real existence by law
· A mere fiction existing for a particular case, and vanishing after element of estoppel ceases.

Corporation by PRESCRIPTION

- Existed longer than the memory of a man can remembers and is presumed to have acquired its juridical personality from the long time ago. They are not required to file AOI.

Place of Incorporation Test

- Nationality of a corp. is based on whose laws it was incorporated.
- Used if NOT engaged in nationalized or partly nationalized activities

Control Test

· Usually applied in times of war
· Based on the controlling stockholders.
· Used in Foreign Investment Act

60%

required number of share on Voting Rights and Full Beneficial ownership under control test

mass media

100% Filipino-owned

private recruitment

at most 25% Foreign equity

private lands

40% foreign equity

Advertising

70% foreign equity

Public utilities
Exploitation and development of natural resources

60% foreign equity

GRANDFATHER RULE (Strict Rule)

- Used when a corp is owned by another corporation (entity)
- Applied when the 60:40 rule is in doubt.

yes under RCC

Can a corp. be a partnership?

Yes, whenever a torturous act is committed by an officer or agent with authority acting as a body of a corp. they are liable solidarily.

Can a Corporation have Liability for torts?

No, since it's a mere legal fiction, does not have the elements of malice. The responsible officers would the only one be criminally liable.

Can a Corporation have Liability for crimes?

Generally Yes, except: Moral damages

can a corp recover damages?

under Art. 2219 in cases of
1. Libel
2. Slander
3. Any defamation
Or the reputation is debased resulting to humiliation in the business realm.

A corp can recover moral damages if:

1. ALTER EGO of another entity (conduit cases)
2. Justification of wrong
3. Protection of fraud
4. Perpetration of deception
5. Defeat public convenience
6. Achieve equity

DOCTRINE OF PEIRCING THE VEIL OF CORPORATION FICTION cases when the state disregards the separate judicial personality

TRUE

No extension may be made earlier than 3 years prior to the original or subsequent expiry dates

favorable recommendation from an appropriate govt agency

for revival of banks, quasi banks, insurance co, pawnshops other similar kinds has an addt'l requirement of?

1. Amendment of AOI
2. Adoption and amendment of bylaws.
3. Sales, lease, exchange, mortgage, pledge, or disposition of all or substantially all of the corp. property. (SLEMPD)
4. Incurring, creating or increasing bonded indebtedness
5. Increase or decrease of authorized capital stock.
6. Merger and consolidation
7. Investment of funds
8. Dissolution

Matters where non-voting shares can vote:

FOUNDER'S SHARES

· Exclusive right to vote and be voted for election of directors.

PROMOTER

- Help to organized and formed the corporation.
- "Agents of incorporators"

TRUE

· Stocks shall not be issued less that par or issued priced

TRUE

shares of stocks shall not be issued in exchange for PROMISSORY NOTES or FUTURE SERVICES.

1. name of incorporators
2. first set of directors and subscribers
3. initial treasurers (treasurer-in-trust)
4. original subscription and its subscriber(s)
5. members who contributed to the initial capital of NSC
6. witnesses and acknowledgement
7. place and date of execution of 1st AOI

what are non-amendable items in AOI?

TRUE

Bylaw are not required at the time of incorporation

Upon issuance of Commission of a CERTIFICATION that the bylaws are in ACCORDANCE WITH THE CODE.

When does by-laws took effect?

Governance and management specifically:
1. Exercise corporate powers
2. Conduct all business
3. Control all properties

Functions of BOD

15

required number of directors

1 year

term of a director

at least 20%

required number of independent directors in a corp vested with public interest

Independent Directors

members of the board of directors who are not employees of the company, independent of management and free from any business/ relationship

9 years

cumulative term of independent director

1. Obedience
2. Loyalty
3. Diligence "diligence of a good father of a family" (business judgement rule)

Fiduciary (three-fold) duties of Directors:

TRUE

A contract of the corporation with 1 or more of its directors, trustees, officers, or their spouses and relatives within the 4th civil degree of consanguinity or affinity is voidable, at the option of such corporation.

executive committee

composed of at least 3 directors. They may act on specific matters within the competence of board as may be delegated in bylaws or majority of votes

YES. Opposing SH(s) may choose to get out of the Corp by demanding the FV of his shares.

Is appraisal rights available to dissenting (opposing) SH in case of extension?

Pre-emptive Right

" right to subscribe to all issues or disposition of shs, in proportion to their respective shareholdings"

TRUE

Transfer of all assets of corp. shall not render the transferer liable on liabilities of transferor.

dividends

Portion of the enterprise sets apart for ratable division among SH

profit

Results of operations of the corp.

certificate of stock

· Written instrument acknowledging that the person named in the document is the owner of the stocks.
· Prima facie evidence

dissolution

Termination of existence

TRUE

· For winding up activities, corp. existence shall continue for 3 years from such dissolution.

a. Non-use of corporate charter
b. Continuous inoperation
c. Upon receipt of lawful court order
d. Final judgement:
FRAUDULENT, Other crimes, Repeatedly or tolerated by BOD/BOT or others.

GROUNDS FOR DISSOLUTION

liquidation

· Settling the affairs of corporation.

· May investigate alleged violation of RCC, rule and regulation or order of SEC.
· May publish such findings relevant to the general findings subject to Data Privacy Act of 2012.
· Give reasonable notice and coordinate w/ appropriate agency prior to any publication.
· May administer oaths and affirmation.
· Issue subpoena (compel to appear before them) and subpoena decus tecum (compel to bring necessary documents).
· take testimony in any inquiry or investigation.
Issue cease and desist orders.

Authority of SEC

merger

Union whereby one corporation absorbs one or more existing corporation, and the absorbing corp. survives and continues the combined business.

Consolidation

Union of two or more corporation to form NEW corporation called CONSOLIDATION CORP.

constituent corporation

Parties to merger or consolidation

Close Corporation

Is one whose AOI provides that:
1. All issued stock of all classes shall be held of record by not more than 20 stockholder.
2. All issued stock of all classes shall be subject to 1 or more specified restriction on transfer permitted by this Title.
3. The corp. shall not list any stock exchange or make any public offerings of its stock of any class.

· Mining and oil
· Stock exchanges
· Banks
· Insurance companies
· Public utilities
· Educ institutions
· Corp vested with public interest

MAY NOT BE INCORPORATED AS CLOSE CORPORATION

Corporation Sole

· administering and managing, as trustees, the affairs, property, and temporalities of religious denomination.
· He is not the "owner" only the trustees.

1. Single stockholder
2. Natural person, trust or estate may form an OPC
3. Existence: perpetual
Except: Trust or estate
4. No requirement on Min. authorized capital stock.
5. Not required to submit and file corporate bylaws.
6. Required to indicate "OPC" in the name of corp.
7. Single SH shall be the director & president of OPC.
8. Required to designate a nominee and an alternate nominee who shall, in event of death or incapacity, take place temporarily.

ONE PERSON CORPORATION CHARACTERISTICS

· Banks and quasi-banks
· Pre-need
· Trust
· Insurance
· Public and publicly-listed co.
· Non-chartered GOCCs
· Natural person for the purpose of exercising a profession,
Except if otherwise provided by special laws.

NOT ALLOWED TO INCORPORATE AS OPC

TRUE

· Single SH cannot be a Corporate Secretary.

TRUE

· Single SH appointed as Treasurer shall give a "Coupon" Bond to SEC to be renewed every 2 year.

FOREIGN CORPORATION

· Shall have the right to transact business in PH after obtaining a license for that purpose.

Rights to dividends
Appraisal rights
Preemptive rights
To inspect books and records
Right to be refurnished the most recent FS.

Proprietary rights

1,000 daily

HOW MUCH IS THE FINED IN CASES OF FAILURE TO ATTEND SUBPOENA?

10,000-200,000

fines for prohibited acts

20,000-400,000

Fines for Violation that is injurious or detrimental to PUBLIC

80,000-500,000

fine for Independent auditor collusion

100,000-600,000

fine for Independent auditor collusion if injurious or detrimental to PUBLIC

200,000-2Million

fines for Obtaining Fraudulent corp. registration or Fraudulent conduct of business

400,000-5Million

fines for Obtaining Fraudulent corp. registration or Fraudulent conduct of business if injurious or detrimental to public

charter

A government corporation is normally created by:

not exceeding 5 years from date of incorporation

The exclusive right to vote and be voted for in the
election of directors, if granted, it must be for a
limited period which is:

watered stock

It refers to stocks which contemplates an original
issuance of shares.

any official language

Which language shall corporations use in filing
articles of incorporation with the Commission?

form

The articles of incorporation of all domestic
corporation shall comply substantially with what?

D. EXTRAJUDICIAL COURT AGREEMENT

It is not a requirement before one can qualify as a
de facto corporation.
A. THE EXISTENCE OF A VALID LAW UNDER WHICH IT
MAY BE INCORPORATED.
B. AN ATTEMPT IN GOOD FAITH TO INCORPORATE
C. ASSUMPTION OF CORPORATE POWERS
D. EXTRAJUDICIAL COURT AGREEMENT

doctrine of estoppel

It refers to an equivocal and intentional for, when
misapplied, it can easily become a most convenient
and effective means of injustice

board of directors

It refers to the governing body of a corporation

corporation code

It mandates that all corporations duly organized
pursuant thereto are required to submit to the SEC
the names, nationalities, shareholdings, and
residences of the directors, trustees and officers
elected.

A. CONVICTED BY PRELIMINARY JUDGMENT

Disqualifications of a director, trustee or
officers includes the following, except:
A. CONVICTED BY PRELIMINARY JUDGMENT
B. CONVICTED BY FINAL JUDGMENT
C. FOUND ADMINISTRATIVELY LIABLE FOR ANY OFFENSE
INVOLVING FRAUDULENT ACTS
D. BY A FOREIGN COURT OF EQUIVALENT FOREIGN
REGULATORY AUTHORITY FOR ACTS, VIOLATIONS OR
MISCONDUCT

A. NO LATER THAN THE DAY OF SUCH EXPIRATION

It is when an election be held if the vacancy is
due to term expiration.
A. NO LATER THAN THE DAY OF SUCH EXPIRATION
B. AFTER THE DAY OF EXPIRATION
C. AFTER THE ANNULMENT OF DEEDS
D. ON THE DAY OF CELEBRATION

B. CORPORATE OFFICERS WHO ARE NOT DIRECTORS
C. CORPORATE DIRECTORS

They are not involve in the provision on
compensation of directors
A. CORPORATE OFFICERS WHO ARE ALSO DIRECTORS
B. CORPORATE OFFICERS WHO ARE NOT DIRECTORS
C. CORPORATE DIRECTORS
D. ANY CORPORATE OFFICER

A. BAD FAITH

It implies the breach of faith and willful failure
to respond to plan.
A. BAD FAITH
B. BREACH OF CONTRACT
C. GOOD FAITH
D. BREACH ON MORAL DILEMMA

INTERLOCKING DIRECTORS

These pertains to members of the board of directors
in a certain corporation who are also directors in
another corporation.

A. DIRECTOR

His act violating the doctrine of corporate
opportunity can be ratified.
A. DIRECTOR
B. STOCKHOLDER
C. SHAREHOLDER
D. MANAGER

derivative suit

It pertains to an action brought by a stockholder
on behalf of the corporation to enforce corporate
rights against the corporation's directors,
officers or other insiders.

appraisal right

It means that a stockholder who dissented and voted
against the proposed corporate action, may choose
to get out of the corporation.

Bonded Indebtedness

It is a long-term indebtedness secured usually by
real property.

pre-emptive right

Its purpose is to enable the shareholder to retain
his proportionate control in the corporation

fractional shares

These refer to shares which are less than one
share.

funds

It includes any corporate property to be used in
furtherance of business.

INTERLOCKING STOCKHOLDERS

This pertains to a person which represents the same
interest of both the managing and the managed
corporations.

Ultravires Act

An act outside or beyond corporate powers.

D. THE PROVISION DEMANDING EXECUTORY INVESTMENTS AND SHARES

A private corporation may provide the following in
its bylaws, except:
A. THE PENALTIES FOR VIOLATION OF THE BYLAWS
B. THE TIME, PLACE AND MANNER OF CALLING AND
CONDUCTING REGULAR OR SPECIAL MEETINGS
C. THE REQUIRED QUORUM IN MEETINGS OF
STOCKHOLDERS OR MEMBERS
D. THE PROVISION DEMANDING EXECUTORY INVESTMENTS AND SHARES

special meeting

This is a kind of meeting wherein at least one week
written notice shall be sent to all stockholders or
members.

outstanding capital stock

It is counted as the basis of the presence of a
quorum in meetings.

regular meeting

It is conducted monthly anywhere in or outside of
the Philippines.

chairman

A person that shall preside at meetings