FinAcc - Chapter 14 ( Corporations: Basic Consideration )

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 incident to its existence.

What is the meaning of corporation?

Attributes of a Corporation - Artificial Being

a corporation have a personality separate and apart from its individual shareholders or members.

Attributes of a Corporation - Created by operation of law

corporation cannot come into existence by mere agreement of the parties as in the case of business partnership. Corporation requires special authority or grant from the state.

Attributes of a Corporation - Right of Succession

a corporation has the capacity of continued existence subject to the period stated in the Articles of Incorporation.

Attributes of a Corporation - Right of Succession

The death, withdrawal, incapacity or insolvency of the individual shareholders or members will not dissolve the corporation.

Advantages of a Corporation

Corporation had the legal capacity to act as a legal entity.

Advantages of a Corporation

shareholders have limited liability

Advantages of a Corporation

it has continuity of existence

Advantages of a Corporation

shares of stocks can be transferred without the consent of the other shareholders.

Advantages of a Corporation

its management is centralized in the board of directors

Advantages of a Corporation

shareholders are not general agents of the business.

Advantages of a Corporation

greater ability to acquire funds.

disadvantages of a Corporation

a corporation is relatively complicated in formation and management

disadvantages of a Corporation

there is a greater degree of government control and supervision

disadvantages of a Corporation

it requires a relatively high cost of formation and operation

disadvantages of a Corporation

it is subject to heavier taxation than other forms of business organization

disadvantages of a Corporation

minority shareholders are subservient to the wishes of majority.

disadvantages of a Corporation

in large corporations, management and control have been separated from ownership. (BOD -> President -> Vice President)

disadvantages of a Corporation

transferability of shares permits the uniting of incompatible and conflicting elements in one venture.

Stock and non-stock corporation

private corporations are either ____ or ____. these are the 2 classes of corporations.

stock corporation

these are corporations which have share capital divided into shares and are authorized to distribute to the holders of such shares dividends or allotments of the surplus profit on the basis of the shares held.

non-stock corporation

this is one where no part of its income is distributable as dividends to its members, trustees or officers.

Classifications of Corporation: Number of Persons

Corporation Aggregates. A corporation consisting of more than 1 corporator.

Classifications of Corporation: Number of Persons - Corporation Sole

a special form of corporation usually associated with the clergy. it is a corporation which consists of only 1 member or corporator and his successors such as bishop.

Classifications of Corporation: Nationality - Domestic Corporation

A corporation organized under the Philippine laws.

Classifications of Corporation: Nationality - Foreign Corporation

A corporation organized under foreign laws.

Classifications of Corporation: Public corporation

a corporation formed or organized for the government of a portion of the state.

Classifications of Corporation: Private corporation

a corporation created for private aim, benefit or purpose.

Classifications of Corporation: Charitable purpose or not: Ecclesiastical Corporation

those organized corporation for religious purposes

Classifications of Corporation: Charitable purpose or not: Eleemosynary Corporation

those corporations that are established for public charity.

Classifications of Corporation: Charitable purpose or not: Civil Corporation

those corporation established for business or profit.

Classifications of Corporation: Legal right to corporate existence - De Jure corporation

a corporation existing in fact and in law. it is organized in strict conformity with the law.

Classifications of Corporation: Legal right to corporate existence - De facto corporation

a corporation existing in fact but not in law.

Classifications of Corporation: degree of public participation with regard to share ownership - Close Corporation

a corporation whose share ownership is limited to selected persons or members of a family not exceeding 20 persons.

Classifications of Corporation: degree of public participation with regard to share ownership - Open Corporation

a corporation where the share is available for subscription or purchase by any person.

Classifications of Corporation: degree of public participation with regard to share ownership - Publicly-held Corporation

a corporation with a class of equity securities listed on an exchange or with assets in excess of P50,000,000 and having 200 or more holders at least 200 of which are holding at least 100 shares of a class of its equity securities.

Classifications of Corporation: Relation to another corporation - Parent or holding corporation

corporation that is related to another corporation that it has the power to either directly or indirectly elect the majority of the directors of a subsidiary corporation

Classifications of Corporation: Relation to another corporation - Subsidiary Corporation

a corporation controlled by another corporation known as a parent corporation

1. Promotion

2. Incorporation

3. Formal organization & Commencement

3 steps in the creation of an organization:

Promotion

it is the process of bringing together that incoporators or the persons interested in the business, of procuring subscriptions or capital for the corporation and of setting in motion the machinery that leads to the incorporation of the corporation itself.

Corporation or Incorporated

Corp. or Inc.

the corporate name shall contain the word ____ or ____ or the abbreviations "Corp." or "Inc."

articles of incorporation

drafting and execution of the this by the incorporators are very important.

certificate of deposit

when the treasurer deposits the cash paid, the bank is required to issue a?

treasurer's affidavit, statement of financial position, certificate of bank deposit and certificate as to the name of the corporation

in filing the articles of the incorporation with the SEC together with these are important.

within 2 years

if a corporation does not formally organize and commence the transaction of its business within _____ from the date of its incorporation, its corporate powers shall cease and the corporation shall be dissolved,

at least 5 years

if a corporation has commenced business but subsequently becomes continuously inoperative for a period of _____, the same shall be ground for the suspension or revocation of its certificate of incorporation.

By-laws

these are the rules of action adopted by the corporation for its internal government and for the government of its officers, shareholders and members.

1 month

the by-laws should be adopted for ___ from the issuance of the certificate of incorporation by the SEC.

Corporators

those who compose a corporation whether as shareholders or members at any time.

incorporator

shareholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and are signatories to said articles of incorporation.

true

true or false? an incorporator will always retain his status as such though no longer having an interest in the corporation.

true

All incorporators are corporators but not all corporators and incorporators. true or false?

shareholders or stockholders

corporators in a stock corporation.

true

true or false? shareholders may be natural or juridical persons.

members

they are corporators of a non stock corporation

subscribers

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

true

true or false? all incorporators are subscribers but a subscriber need not to be an incorporator.

promoters

persons who bring about or cause to bring about the formation and organization of a corporation.

underwriters

they are usually investment bankers

independent director

person who apart from his fees and shareholdings is independent of management and free from any business or other relationship which could, or could reasonably be perceived to