CPALE Corporate Law (Revised Corporation Code - RA 11232) Review Flashcards

Vocabulary practice flashcards generated from the CPALE Corporate Law review notes on the Revised Corporation Code of the Philippines (R.A. No. 11232).

Corporation

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

Stock Corporation

A corporation that has capital stock divided into shares AND is authorized to distribute dividends or profits to shareholders on the basis of shares held.

Nonstock Corporation

A corporation where no part of its income is distributable as dividends to its members, trustees, or officers, and is organized for authorized non-profit purposes.

Incorporators

Stockholders or members mentioned in the Articles of Incorporation as original founders and signatories, comprising 1 to 15 natural or juridical persons.

No-Par Value Shares

Shares issued without a stated par value, subject to a minimum issue price of ₱5.00 per share, where 100% of the consideration is treated as Legal Capital.

Founders' Shares

Special shares granted to corporate founders carrying an exclusive right to vote and be voted for as directors, limited to a maximum period of 5 years from incorporation.

Redeemable Shares

Shares reacquired by the corporation upon the expiration of a fixed period as expressly stated in the Articles of Incorporation, regardless of the existence of unrestricted retained earnings.

Treasury Shares

Issued and fully paid shares reacquired by the corporation via purchase, redemption, donation, or other lawful means, possessing no voting rights, dividend rights, or quorum counts.

De Facto Corporation

An organization formed with colorable compliance with law in good faith exercising corporate powers, whose due incorporation can only be questioned by the State via a Quo Warranto proceeding.

Corporation by Estoppel

A group of persons acting as a corporation knowing it lacks legal authority, who are liable as general partners for corporate debts and barred from denying corporate existence against third parties.

Non-use of Charter

The failure of a corporation to formally organize and commence business within 5 years from incorporation, resulting in automatic revocation of its Certificate of Incorporation.

Continuous Inoperation

The state where a corporation has commenced business but becomes inoperative for 5 consecutive years, leading to placement under Delinquent Status with 2 years to resume operations.

Independent Director

A director independent of management and free from relationships that materially interfere with independent judgment, required to constitute at least 20% of the board in corporations vested with public interest.

Cumulative Voting

A statutory voting method in stock corporations where total votes equal shares owned multiplied by directors to be elected, allowing a stockholder to concentrate or distribute votes.

Executive Committee

A committee provided in the bylaws, composed of at least 3 directors, authorized to act on board matters by majority vote, excluding non-delegable powers like declaring cash dividends or filling board vacancies.

Preemptive Right

The statutory right of existing shareholders to subscribe to all new share issuances or dispositions to maintain their proportional ownership interest, unless denied in the Articles of Incorporation.

Substantially All Assets Test

A evaluation determining if a sale renders the corporation incapable of continuing business or accomplishing its corporate purpose based on the net asset value from latest financial statements.

Watered Stock

Shares issued for consideration less than their par or issued value, or for non-cash property valued above fair value, rendering consenting or non-objecting directors solidarily liable with the subscriber.

Highest Bidder in Delinquency Sale

The bidder in a delinquency auction who offers to pay the full unpaid subscription balance plus interest and expenses for the smallest number or fraction of shares.

Voting Trust Agreement

An agreement transferring legal title and voting rights of stock to a trustee for a maximum period of 5 years (unless tied to a loan agreement), requiring notarization and filing with the corporation and SEC.

Merger

A corporate combination where two or more constituent corporations combine into a single entity, which shall be one of the constituent corporations (Surviving Corporation).

Consolidation

A corporate combination where two or more constituent corporations combine to create an entirely new single entity (Consolidated Corporation).

Appraisal Right

The statutory right of a dissenting stockholder who voted against major structural corporate changes to demand payment of the fair value of their shares, strictly subject to Unrestricted Retained Earnings.

Close Corporation

A corporation whose Articles of Incorporation cap stockholders at 20, subject all issued stock to transfer restrictions, and prohibit stock exchange listing or public offerings.

One Person Corporation (OPC)

A corporation with a single stockholder who must be a natural person, trust, or estate, where the sole stockholder serves as sole director and president.

Corporation Sole

A special religious corporation formed by a single presiding head (archbishop, bishop, minister, rabbi, or elder) to administer temporalities and property held in trust for the religious denomination.

Foreign Corporation

A corporation formed, organized, or existing under laws other than those of the Philippines, whose home country laws grant reciprocal rights to Filipino citizens and corporations.

Outstanding Capital Stock

The total shares of stock issued under binding subscription contracts, whether fully or partially paid, strictly excluding treasury shares.