Regulatory Framework for Business Transactions: Corporation and Partnership Law

Flashcards covering key corporate law doctrines, officer requirements, shareholder rights, and partnership principles derived from the practice test transcript.

Mandated Corporate Officers

Under the Revised Corporation Code, these specifically include the President, Secretary, Treasurer, and for certain corporations, the Compliance Officer.

Appraisal Right

The right of any stockholder of a corporation to dissent and demand payment of the fair value of his or her shares in the corporation.

Board Vacancy - Removal

A vacancy in the board of directors that can only be filled by the vote of the stockholders or members, rather than the remaining directors.

Independent Director

A director required in corporations vested with public interest, such as publicly listed companies like The Swift Corporation.

Removal of Corporate Officers

The act of replacing an officer which requires a vote of a majority of the Board of Directors.

Officer Qualifications

Rules stating the President must be a director, the Treasurer must be a resident of the Philippines, and the Secretary must be a citizen and resident of the Philippines.

Amendment of Articles of Incorporation

The process of changing corporate documents which requires the approval of a majority of the Board and a two-thirds ($2/3$) vote of the outstanding capital stock.

Distributable Retained Earnings

The portion of retained earnings that can be declared as dividends, calculated as total Retained Earnings minus Appropriated Retained Earnings.

Grounds for Removal of a Director

Factual bases for ousting a director including conviction by final judgment for an offense punishable by more than $6$ years, or breaches of the duties of Loyalty, Obedience, and Diligence.

Ratification of Director Removal

The process requiring approval of the shareholders representing two-thirds ($2/3$) of the outstanding capital stock to finalize the ousting of a board member.

Doctrine of Separate Juridical Personality

A legal doctrine stating a corporation has its own rights, obligations, and liabilities independent of the personal affairs of its shareholders, directors, and officers.

Trust Fund Doctrine

The principle that a corporation's capital stock, property, and assets are held in trust for the benefit of its creditors and cannot be distributed to prejudice them.

Business Judgment Rule

A doctrine protecting directors from personal liability for business decisions made in good faith, with due care, and in the best interest of the corporation.

Doctrine of Individuality of Subscription

The principle that a stock subscription is a single and indivisible contract requiring full payment before any share certificate can be issued or transferred.

Doctrine of Corporate Opportunity

A rule prohibiting directors and officers from taking business opportunities for themselves that rightfully belong to the corporation.

Pre-Emptive Right

The right of existing shareholders to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings.

Piercing the Veil of Corporate Fiction

A legal remedy used when the separate personality of a corporation is disregarded because it is used to defeat public convenience, justify wrong, or protect fraud.

Ultra Vires Act

An act committed by a corporation that is outside the scope of its expressed or implied powers as stated in its Articles of Incorporation or by law.

Hold-Over Capacity

The status where existing board members continue to serve as directors after their term has expired because no new election was called.

Insider Trading

The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential or non-public information.

No Par Value Shares Restriction

A rule stating that certain entities, specifically Banks, Insurance companies, and Trust companies, are not allowed to issue shares without a stated value.

Partnership

A contract where two or more persons bind themselves to contribute money, property, or industry to a common fund with the intention of dividing the profits.

General Professional Partnership

A partnership formed specifically for the purpose of exercising a profession.

Pro-rata Liability

The liability of partners, including industrial partners, for partnership contracts after all partnership assets have been exhausted.