Comprehensive Guide to the Revised Corporation Code and Business Organizations in the Philippines

What is the title of the Revised Corporation Code of the Philippines?

The Revised Corporation Code of the Philippines.

When was the Revised Corporation Code signed into law?

20 February 2019.

When did the Revised Corporation Code become effective?

23 February 2019.

What did the Revised Corporation Code repeal?

The 1980 Corporation Code.

How many sections does the Revised Corporation Code contain?

188 sections.

What significant new concept was introduced in the Revised Corporation Code?

The one-person corporation (OPC).

What is the purpose of the Revised Corporation Code?

It serves as a combination of substantive and procedural law.

What is the significance of the grounds for disapproval of Articles of Incorporation?

They outline the reasons a corporation's articles may be rejected.

What are the qualifications of the Board of Directors/Trustees?

They are specified in Section 22 of the Revised Corporation Code.

What is the effect of non-use of corporate charter and continuous inoperation?

It is addressed in Section 21 of the Revised Corporation Code.

What section discusses the compensation of directors or trustees?

Section 29.

What does Section 30 of the Revised Corporation Code address?

The liability of directors, trustees, or officers.

What is the focus of Section 31?

Dealings of directors, trustees, or officers.

What does Section 32 cover?

Interlocking directors.

What is the topic of Section 33?

Disloyalty of a director.

What is the role of the executive committee as per Section 34?

It outlines the functions and powers of the executive committee.

What powers are granted to corporations in Section 35?

Corporate powers and capacity.

What does Section 36 allow corporations to do?

Extend or shorten the corporate term.

What does Section 37 address regarding capital stock?

The power to increase or decrease capital stock.

What is the focus of Section 38?

The power to deny pre-emptive rights.

What does Section 39 discuss?

Sale or other disposition of assets.

What does Section 40 allow corporations to do?

Acquire their own shares.

What is outlined in Section 42?

The power to declare dividends.

What does Section 44 cover?

Ultra vires acts.

What is the purpose of bylaws as per Section 45?

To govern the internal management of the corporation.

What is discussed in Section 48?

Kinds of meetings.

What does Section 51 specify about meetings?

Quorum in meetings.

What is the new requirement for incorporators to form a corporation under the new law?

Only one incorporator is required to form a corporation, as opposed to the previous requirement of at least five.

What is a One Person Corporation (OPC)?

An OPC is a corporation that can be formed by a single individual, allowing for limited liability and the benefits of corporate structure.

What is the veil of corporate fiction?

The veil of corporate fiction is a legal distinction that protects shareholders from personal liability for corporate debts.

What is the primary distinction between a corporation and a sole proprietorship?

A corporation has a veil of corporate fiction and limited liability, while a sole proprietorship does not, exposing the owner to unlimited liability.

What are the advantages of forming a corporation?

Advantages include limited liability, right of succession, transferability of interest, centralized management, and more capitalization.

What are the disadvantages of a corporation?

Disadvantages include higher income tax liability, less participation in management, lack of delectus personae, dissolution requirements, and greater government control.

What is the definition of a corporation?

A corporation is an artificial being created by operation of law, having the right of succession and powers authorized by law.

What is the difference between private and public corporations?

Private corporations are formed for private purposes, while public corporations are created by the state for public administration and welfare.

What is the role of the Board of Directors in a corporation?

The Board of Directors manages the corporation and makes decisions on behalf of the shareholders.

What is required for a One Person Corporation to limit liability?

The owner must declare a capital amount that is separate from personal funds to limit liability.

What is the significance of the SEC in the context of corporations?

The SEC regulates corporations and ensures compliance with laws, including the formation and operation of corporations.

What happens to a corporation upon the death of a stockholder?

The right of succession allows the heir to become the new stockholder, ensuring business continuity.

What is the process for dissolving a corporation?

Dissolution requires consent from the state, as corporations are imbued with public interest.

What is the liability of shareholders in a corporation?

Shareholders are liable only to the extent of their investments as represented by their shares.

What is a partnership?

A partnership is a contract between two or more persons to contribute to a common fund with the intention of dividing profits.

What is a sole proprietorship?

A sole proprietorship is a business owned and operated by a single individual, who has unlimited liability.

What does 'delectus personae' refer to in partnerships?

Delectus personae refers to the personal nature of partnerships, where partners must agree to work together.

What is the significance of financial statements for corporations?

Corporations have the right to financial statements, which provide transparency and accountability to shareholders.

What is the implication of 'watered stocks' in corporate liability?

Directors may be held liable for issuing watered stocks, which are shares sold for more than their actual value.

What is the concept of 'transferability of interest' in corporations?

Transferability of interest allows shareholders to sell or transfer their shares without needing consent from other shareholders.

What is the difference in management between a corporation and a sole proprietorship?

In a corporation, management is centralized in the Board of Directors, while a sole proprietorship is managed directly by the owner.

What are unpaid subscriptions in the context of corporations?

Unpaid subscriptions refer to shares that have been subscribed for but not yet paid for by the shareholders.

What is the impact of higher income tax liability on corporations?

Corporations may face double taxation, first on corporate income and again on dividends distributed to shareholders.

What is the role of the stock transfer agent?

The stock transfer agent manages the transfer of shares and maintains records of stock ownership.

What is the significance of lost or destroyed certificates in corporations?

Lost or destroyed certificates can complicate ownership claims and require legal processes to resolve.

What are publicly-listed corporations?

Private corporations whose stocks are listed in the Philippine Stock Exchange (PSE), such as San Miguel Corporation and Philippine Long Distance Telephone Company.

Define quasi-public corporations.

Private corporations performing public functions, for example, VECO.

What are Government-Owned and Controlled Corporations (GOCC)?

Private corporations created by Congress through a special charter, with majority shareholdings owned by the government, such as the Development Bank of the Philippines.

What distinguishes a GOCC from a private corporation?

A GOCC is created by its own charter for the exercise of a public function, while a private corporation is incorporated under general corporation law.

Is the Department of Education a public corporation?

No, it is an instrumentality of the government under the Executive Branch.

What is a government instrumentality?

An entity that is not a private or public corporation but performs functions of a particular branch of the government.

Where do employees of a GOCC go if illegally dismissed?

It depends on their special charter; they are not covered under the Revised Corporation Code or Labor Code.

What defines private corporations?

Corporations established for a private purpose or benefit.

What is PAGCOR?

An artificial being that operates as a private corporation.

What are the consequences of a corporation being an artificial being?

It has a separate personality from its members, incurs separate liability, and enjoys rights distinct from stockholders.

What rights does a corporation have?

Rights include the ability to sue or be sued, own and dispose of properties, enter into contracts, and enjoy constitutional and civil rights.

What rights can a corporation not exercise?

Political rights, the right to life, and the right to liberty.

What is the principle of liberality of contracts?

Anyone can stipulate any provision in a contract as long as it is not contrary to law, morals, public policy, and public order.

Can a corporation be held criminally liable?

Generally, no, because it cannot possess intent, which is necessary for criminal liability under the Revised Penal Code.

What is the liability of stockholders in a corporation?

Stockholders are not personally liable for corporate debts; their liability is limited to their investments.

What happens if a corporation violates the Anti-Money Laundering Act (AMLA)?

Penalties may include suspension, revocation of license, or fines.

What are the constitutional rights of a corporation?

Rights include due process, equal protection of the law, and non-impairment of contracts.

What is the role of the Articles of Incorporation in a corporation?

They define the powers and limitations of the corporation, binding it to operate within those parameters.

What is the significance of the Revised Corporation Code?

It provides the legal framework within which corporations must operate, including their formation and governance.

What is the distinction between a corporation and a partnership regarding liability?

In a corporation, stockholders have limited liability, while partners in a partnership can be held personally liable for debts.

What is the importance of proving asset ownership in corporate liability cases?

To establish that assets were transferred to defraud creditors, which can affect liability and recovery.

What must be proven for creditors to proceed against Corporation B's assets?

That the assets were actually owned by Corporation A and that the stockholders of both corporations are the same.

Under what circumstance can the corporate veil be lifted?

When the assets were transferred to defraud creditors.

What is the general rule regarding creditors demanding payment from stockholders when a corporation incurs debts?

Generally, creditors cannot demand payment from stockholders if the corporation's assets are insufficient.

What is the purpose of rehabilitation in corporate law?

To gather the corporation's assets and determine how creditors will be paid.

What role does a receiver play in corporate rehabilitation?

The receiver manages the corporation's business to generate income, which is then distributed to creditors.

What document manages the relationship between a corporation and its shareholders?

The Articles of Incorporation.

What is the relationship among shareholders regulated by?

The articles of incorporation and the law.

What is the relationship between a corporation and the state?

A corporation is created by the state, which grants privileges that can be revoked for non-compliance with the law.

What does the veil of corporate fiction protect?

It protects stockholders from personal liability for the corporation's debts.

Can a partnership enjoy the veil of corporate fiction?

No, the veil of corporate fiction only applies to corporations.

What are the four conditions under which the veil of corporate fiction can be pierced?

1. Defeats public convenience; 2. Used to perpetuate fraud; 3. Used to defend a crime; 4. Used to justify a wrong.

What is the primary purpose of forming a corporation?

To gather funds or investments for business operations.

What distinguishes an investor from a lender?

An investor takes on risk without guaranteed returns, while a lender expects repayment with interest.

What is the minimum number of incorporators required to create a corporation?

At least two persons.

When does a corporation acquire juridical personality?

From the date of issuance of the Certificate of Incorporation by the SEC.

How is management structured in a corporation?

Power is vested in the Board of Directors or Board of Trustees.

What happens in the event of mismanagement in a corporation?

Suits must be filed in the name of the corporation against the Board of Directors or Trustees.

What must happen if a corporation wants to change its primary business focus?

The Articles of Incorporation must be amended and ratified by the stockholders.

What must stockholders do if the Board of Directors wants to pursue a new business?

Stockholders must ratify an amendment to the Articles of Incorporation.

What is the relationship between the Articles of Incorporation and the stockholders?

Amending the Articles of Incorporation is essentially amending the contract between shareholders and the corporation.

What is the extent of liability for stockholders in a corporation?

Stockholders are liable only to the extent of their investments as represented by the shares they have subscribed.

What is required for the transferability of interest in a corporation?

Transferability of interest requires the consent of all partners based on delectus personarum.

What is the term of existence for a corporation?

A corporation can have a perpetual term of existence.

What are some contents of the By-Laws of a Corporation?

By-Laws may include the number of boards and officers elected, their term of office, functions and powers, and meeting schedules.

What is the significance of cash dividends for shareholders?

Cash dividends are considered taxable income for shareholders.

How does management participation differ between shareholders and partnerships?

Shareholders have indirect participation in management, primarily through electing the Board of Directors.

What is the difference in dissolution between a corporation and a partnership?

A corporation requires state consent for dissolution, while a partnership can be dissolved at any time by any or all partners.