Law-on-Corporation

Corporation Law Overview

Definition of a Corporation

  • Artificial Being: Created by law, possesses rights of succession.

  • Juridical Personality: Strong legal personality.

  • Limited Powers: Authority defined by law.

Classes of Corporations

I. By Organization

  1. Private Corporations

  2. Public Corporations

    • Chartered GOCCs

    • Non-Chartered GOCCsII. By Legal Status

  3. De Jure Corporation

  4. De Facto Corporation

  5. Corporation by EstoppelIII. By Existence of Stocks

  6. Stock Corporations

  7. Non-Stock CorporationsIV. By Law of Incorporation

  8. Domestic Corporation

  9. Foreign Corporation

Nationality of Corporations

Control Test: Evaluates nationality based on controlling stockholder.

  • 60% Filipino ownership = Philippine nationality.

  • Less than 60% requires further examination to determine nationality.

Grandfather Rule: Used to ascertain Filipino ownership in second-tier ownership structures.

  • Should not be standalone for determining ownership; needs to be combined with Control Test.

Corporate Powers and Structure

  • Ultra Vires Acts: Actions outside the powers prescribed by law or articles of incorporation.

  • Amends corporate purposes through Articles of Incorporation (AOI).

Board of Directors and Governance

  • Centralized Management: Powers lie with the board of directors.

  • Duties: They have fiduciary duties, including duty of care and loyalty.

  • Elections: Governed by voting procedures; majority must be present.

Stockholders' Rights

  • Rights include dividends, voting, inspection of records, and appraisal rights.

  • Derivative Suit: Stockholders can sue on behalf of the corporation if the board refuses to act.

Incorporation and Registration

  • AOI must detail corporation's name, purpose, office location, and stock structure.

  • Must adhere to SEC regulations for issuance of corporate name and registration.

Corporate Dissolution

  • Voluntary Dissolution: Requires majority stockholder approval; SEC must be notified.

  • Involuntary Dissolution: May occur due to inactivity or failure to comply with the law.

Special Types of Corporations

  • Non-Stock Corporations: Do not distribute profits as dividends.

  • Foreign Corporations: Must obtain license for business operations in the Philippines.