Accounting Corporations

Corporations

Artificial being/entity created by law

Corporations

Existence is separate from the owners

Corporations

Cannot be created by mere agreement of the owners Like in partnership

Corporations

Has rights of succession and privelages

Limited

Corporations have _____ Liability

RA11232 - The Revised Corporation Code of the Philippines

The law governing the corporations in the Philippines

Securities and Exchange Commission

The government agency regulating the corporation and other associations in the Philippines.

Securities and Exchange Commission

Government agency with the right to remove from office any director or trustee, provided the removal takes place during a meeting.

Securities and Exchange Commission

Have the right to revoke the license of a business if it operates illegally

Stock Corporation

• Capital Stock divided into shares

• Gives shareholders dividends or allotments of the surplus profits.

• For Income

Owners of a Stock company

Stockholders and shareholders

Managers of a stock company

Board of Directors

Non Stock Corporation

• Profit is used for the purpose or purposes of the Corporation

• For Member’s Interest

Owners of Non Stock Corporation

Members

Managers of Non Stock Corporation

Board of Trustees

Maximum Number of BOD

15 Persons

Quasi-Public Corporation

• Provides a given service

• Supported by the government through a public mandate

• Private Sector

Government-owned Corporation

Organized by the government of which the government is the majority stockholder

Public Corporation

Created for political or public purpose & connected with the administration of government.

Private Corporation

Ownend by individuals or other corporations for private purpose and benefit.

Open Corporation

Shares of stocks are available to the public

Closed Corporation

Shares of stocks are held by few individuals and ownership is not available to the public

One Person Corporation

Corporation characteristic: An Individual owns the Corporation

Publicly Listed Corporation

Corporation characteristic: Tradeable on Philippine Stock Exchange

Non-Listed Corporation

Corporation characteristic: Not Tradeable on Philippine Stock Exchange

Corporations with Perpetual term

Perpetuity in existence until dissolved and liquidated, Its life can be shortened by amendment of the articles of corporation.

Corporation with specific term

Exists until expiration of its term. Can be shortened or extended.

Promotion → Incorporation → Formal Organization → Commencement

4 Steps in creation of a Corporation

Promotion

Conceptualizing the business idea, assembling promoters, securing initial funding.

Promotion

Bringing together all interested persons, solicit enough subscriptions and capital to form a corporations.

Underwriters

Investment banking or stockbrokers often facilitate the promotion and subsequent sale of shares to prospective investors.

Incorporation

Registering the corporation, filiing legal documents, obtaining a certificate of incorporation

Incorporation

1. Corporation name that is distinguishable, not used, lawful

2. Drafting and execution of articles of incorporation

3. Filing to the SEC.

4. Payment of filing and publication fees

5. Issuance by the SEC of the certificate of incorporation

25% Subscribed Shares and 25% of those Subscribed shares are paid Rule of the SEC

Is no longer required under the new corporation code.

Formal Organization

Adopting by-laws, electing direcors and officers, issuing shares, setting up internal structures.

Formally Organize and Commence

Corporations should ______ by 5 years from the date of Corporation.

Commencement

Securing permits, raising funds, launching operations and promoting the business

• Name

• Purpose

• Place of Principal Office

• Terms of existence (IF the Corp has a specific term)

• Name, residences, and addresses of the incorporators

• The amount of share capital, Par value and the No. of shares into which it is divided.

6 Contents of Articles of Incorporation

By-Laws

Rules of action adopted by the corporation for its internal goverment and for the government of its officers, shareholders or members

By-Laws

1. Conduct of meeting of shareholders and directors

   1. Rules for directorship (ie. owner of at least 1 share and majority are residents of the Phil.)

   2. Rules of Officership

   3. Rules for issuing shares

   4. Method of amending by laws

   5. Others

By-Laws

Determine whether or not Remote Participation is Allowed

Organization Costs

Preliminary expenses incurred upon forming a corporation including legal fees, incorporation fees and share issuance costs. Treated as a Direct Cost

Share Issuance cost

Shall be debited to either Retained earnings OR share premium depending if there is sufficient share premium

Corporators

Composes the corporation, whether as stockholder or as members

Incorporators

Stockholders/Members mentioned in the articles of incorporation as orginally forming and composinng the corporation and who are signatories thereto.

Minimum and Maximum number of Incorporators

1-15

(15) Number and Qualifications of Incorporators.

Any person, partnership, association or corporation, singly or jointly with others but not more than ____ in number

Incorporators

Should be of legal age, own or be a subscriber of one share

Subscribers

Persons who have agreed to take and pay for original, unissued shares of a corporation formed or to be formed.

Directors

Must own at least 1 share of voting stock

Minutes book

Contains the minutes of the meeting of the directors and stockholders.

Stock and Transfer Book

A record of names of shareholders, installlments paid and unpaid by shareholders and dates of payment, transfers of shares and dates thereof.

Shareholder’s ledger

Subsidiary record of share capital issued indicating the number of shares issued to each shareholder.

Subscriber’s ledger

Subsidiary record of subscriptions made indicating the individual subscriptions of the subscribers

5 Rights of Stockholders

1. Vote

2. Selling Stock

3. Purchase additional shares of stock

4. Receive dividends

5. Share in any assets after liquidation and debt payment

Share of stock

Each unit of ownership is called a

Stock certificate

Servers as proof that a stockholder has purchased shares.

Par Value Shares

Share of stock that is given a fixed or definite value in the articles of incorporation

No Par Value Shares

Share of stock that has no fixed value is called

1. Bank

2. Public Utilities

3. Insurance Companies

4. Trust Companies

5. Building and Loan Associations

6. Pre-need Companies

6 Types of Corporations that arent allowed to have a no par valu e stock

Minimum no Par Value cost

5php and when issued it is deemed fully paid

Voting Shares

In Absence of a contrary provision in the articles of incorporation all shares shall be considered

Members and Shareholders

Has the right to be present and vote at all corporate meeting unless stipulated otherwise.

Ordinary Shares/Common Stock

Entitles the holder to an equal pro-rata of profits without any preference.

Preference share/Preferred stock

Entitle the holder to certain advantages or benefits over the holders of ordinary shares.

Treasury Shares

Share that has been issues by the Corporation as fully paid and later reacquired but not retired.

Par Value

Arbitrary amount assigned to each share of stock when it is authorized.

Market price

is the amount that each share of stock will sell for in the market

Paid-in Capital

Cash and other assets received in exchange for stock

Retained Earnings

Cumulative net income (loss) not distributed as dividends

Corporations’ equity

Consists of Paid-in Capital and Retained Earnings

Shareholders Equity

The residual interest of owners in the net assets of a corporation. It is also known as OE or Net Assets

Delinquent Organization

Failure to Fomally organize and commence business within 5 years

2 years

Deliquent Corporations have a period of ____ to resume operation and comply with SEC requirements

Remote Participation

Allows Corporate meeting and deicision-making to be conducted via electronic means. Ensuring accessibility and participation without Physical Presence.

Lifting Ban on Corporate Donations for Political Parties or Candidates

Allows certain corporate donations to political campaigns provided compliance with election laws.

Corporations

Cannot be a general partner

Corporations

Can be an incorporator, corporator so can a partnership

Trust Fund Doctrine

Mandates that the corporation must maintain its legal capital for the protection of its creditor

Directors

Must own at least one (1) share of voting stock

Directors

Only one in an One Person Corporation

Board of Directors/Trustees

1-15 members

Incorporators

Natural persons must be of legal age, and own or subscribed to at least one share of voting stock.

Minimum of Stated Value

5php

The following are prohibited/not permitted to issue no-par value shares:

● Banks ● Public Utilities ● Insurance Companies ● Trust Companies ● Building and Loan Associations ● Pre-Need Companies