Documente Academic
Documente Profesional
Documente Cultură
Course Outline
A. GENERAL PRINCIPLES
a-1. Definition 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. [Section 2]
a-2. Kinds of Businesses
1. As to Organization
1-a. Sole Proprietorship [Bar, 1949; Anita Mangila v. CA, G.R. No. 125027, August 12, 2002]
1-b. Partnership [Article 1767, New Civil Code]
1-c. Joint Account or Cuentas en Participation
1-d. Business Trust
1-e. Joint Venture categorized as a form of limited partnership since its period [Kohler, Dictionary
for Accountants, 1975, p. 243; see J.M. Tuason & Co. vs. Bolanos, L-4935,
28 May 1954; Bar, 1987; Bar 1995]
1-f. Cooperative
1-g. Corporation
2. As to Activity
2-a. Merchandising
2-b. Manufacturing
2-c. Service-concerned
a-3. Attributes of a Corporation
1. Artificial Being
1-a. Separate entity concept [Bar, 1996]
1. Liability for Torts [PNB vs. Court of Appeals, 83 SCRA 237]
2. Liability for Damages [Bar, 1955]
3. Liability for Crimes [Sia vs. People, 121 scra 655; People vs. Conception, 44 Phil.
126; Section 144]
4. Constitutional rights a. Due process [Albert vs. University Publication Co., 13 SCRA 84]
b. Equal protection [Smith Bell & Co., vs. Natividad, 40 Phil. 136]
c. Unreasonable search and seizures [Stonehill vs. Diokno, 20 SCRA 383]
5. Theory of Concession [Tayag vs. Benguet Consolidated, Inc., 26 SCRA 242]
1-b. Piercing the Veil of Corporate Entity
1. Definition corporate fiction disregarded where the entity is formed or used for nonlegitimate purposes [Bar, 1978; Bar 1985; Bar 1991]
2. Reasons: When corporation is used to
a. Defeat public convenience
b. Justify wrong
c. Protect fraud
d. Defend crime
e. As mere alter ego [Umali vs. Court of Appeals, 189 SCRA 529]
3. Cases
a. Claparols vs. CIR [65 SCRA 613]
b. Cruz vs. Dalisay [152 SCRA 482]
c. Tan Boon Bee and Co. vs. Jarencio [163 SCRA 205]
d. CIR vs. Norton & Harrison Company [11 SCRA 714]
e. Philippine Veterans Investment Development Corporation vs. Court of
Appeals [181 SCRA 669]
f. Telephone Engineering and Service Co., Inc. vs. Workmens Compensation
Commission [104 SCRA 354]
4. Theory of Corporate Enterprise [Rationale: there can be no association without
associates, Villanueva, p. 266]
As to Purpose
3-a. Ecclesiastical
3-b. Eleemosynary [Bar, 1967]
3-c. Lay
3-d. Public
1. Defined one formed or organized for the government of a portion of a State for the
purpose of promoting the general good and welfare [Section 3, Act. No. 1456]
2. Constitutional Prohibition - The Congress shall not, except by general law, provide for the
formation, organization or regulation of private corporations. Government owned or
controlled corporations may be created or established by special charters in the interest of
the common good and subject to the test of economic viability [Section 16, Article XII,
1987 Constitution]
3. Corporation Code applies on a suppletory manner [Section 4]
4. Quasi-Public corporation refers to a private corporation that is franchised or licensed by
the government to render services involving performance of public utilities
5. Public-Quasi corporation refers to a public corporation engaged in the performance of
public or governmental function but not being the State or its political corporation
4. As to Nationality
4-a. Tests of Nationality [Bar, 1957]
1. Incorporation Test
2. Control Test [see Filipinas de Seguros vs. Christern, Huenefeld & Co., Inc. G.R. L2294, 25 May 1951]
3. Residence Test
a. Generally fixed by law creating them
b. Place where legal representation is established or where principal functions are
exercised
4-b. Classes
1. Domestic Corporation those organized in accordance with B.P. 68
2. Foreign Corporation those organized under a foreign law that allows Filipino citizens and
corporations to do business in their state or country [Section 123]
4-c. Grandfather Rule [SEC Opinion, 4 May 1987]
5. As to Existence
5-a. De Jure
5-b. De Facto [Section 20; Bar, 1955; Bar, 1959]
5-c. Corporation by Estoppel [Section 21; Bar, 1955; Bar, 1973]
6. As to Membership
6-a. Open Corporation
6-b. Close Corporation one whose Charter provides
1. All corporate stocks issued must be held of record by not more than 20 persons
2. All corporate stocks issued are subject to certain restrictions on transfer
3. Stocks are not listed in any stock exchange [Section 96]
7. As to Relation with Other Corporations
7-a. Parent
7-b. Subsidiary
a-5. Four Basic Advantages of a Corporation [Bar, 1953]
1. Separate juridical personality
2. Limited liability of investors
3. Free transferability of units of ownership
4. Centralized management
a-6. Components of a Corporation
1. Incorporators [Bar, 1952]
1-a. Definition those stockholders or members mentioned in the Articles of Incorporation as
originally forming the corporation [Section 5]
1-b. Qualifications [Section 10]
1. Majority are Philippine residents
2. Natural persons
3. Of legal ages
D. CORPORATE POWERS
d-1. Classification
1. Express 2. Implied
3. Incidental
d-2. Voting Requirements
1. 2/3 of Stockholders and Majority of Board of Directors
1-a. Extension or shortening of corporate term [Section 37; Bar, 1953]
1-b. Increase or decrease of capital stock [Section 38; Bar, 1947; Bar, 1982; Bar, 1987]
1-c. Increase, incur or create bonded indebtedness [Section 38; Bar, 1956]
1-d. Sale, barter, exchange or other disposition of all or substantially all corporate assets
[Section 40]
1-e. Investment of corporate funds to another corporation [Section 42;Bar, 1947]
1-f. Investment of corporate funds to other ventures [Section 42; Bar, 1982; Bar, 1996]
1-g. Declaration of stock dividends [Section 43; Bar, 1982; Bar, 1990]
1-h. Enter into management contracts [Section 44; Bar, 1974]
1-i. Ratification of contracts with self-dealing directors [Section 32]
1-j. Ratification of contracts with inter-locking directors [Section 33]
1-k. Merger or consolidation [Section 77]
1-l. Voluntary dissolution of corporations [Section 118]
2. Majority of the Stockholders
2-a. Fixing value of no-par shares [Section 62]
2-b. Adoption, amendment and repeal of by-laws [Section 46]
2-c. Fixing compensation of the board of directors [Section 30; Bar, 1987; Bar, 1991]
d-3. Instances where Non-Voting Shares can Vote
1. Amendment of Articles [Section 16]
2. Adoption and amendment of By-Laws [Bar, 1981]
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all corporate
assets [Section 40; Bar, 1980; Bar, 1988]
4. Incurring, creating or increasing bonded indebtedness [Section 38]
5. Increase or decrease of capital stock [Section 38]
6. Merger or consolidation [Sections 76-80]
7. Investment of corporate funds [Section 42]
d-4. Appraisal Right
1. Definition
2. When Exercisable
3. Manner of Exercise
E. CORPORATE LIABILITY
e-1. Kinds of Liability
1. Corporate liability
2. Officers liability [Bar, 1989; Bar, 1995]
3. Directors liability
e-2. Corporate Liability
1. Usual and normal transactions
2. Torts
3. Crimes
e-3. Liability of Director/Trustee
1. Personal Liability [Section 21; Bar, 1996]
1-a. Business opportunity theory [Section 34; Bar, 1985; Bar, 1991]
1. When Applicable a director or trustee acquires for himself a business opportunity
belonging to the corporation whereby he obtained profits to the prejudice of the
corporation
2. Effects
F. RIGHTS OF STOCKHOLDERS
f-1. Classification of Rights [Bar, 1995]
I. NON-STOCK CORPORATION
i-1. Definition one where no part of its income is distributable as dividends to its members, trustees or
officers, subject to the provisions of the Corporation Code on dissolution.
i-2. Particulars
a. Purposes
a-1. Charitable
a-2. Educational
a-3. Religious
a-4. Professional
a-5. Cultural
a-6. Recreational
a-7. Fraternal
a-8. Literary
a-9. Scientific
a-10. Social
a-11. Civic service
b. Right to Vote
b-1. Right may be limited, broadened or denied to the extent specified in the Articles of
Incorporation or by the By-Laws
b-2. Unless otherwise specified, each member regardless of class shall be entitled to one vote
b-3. Voting by mail or other similar means by members of non-stock corporations may be
authorized by its By-Laws
i-3. Non-Transferability of Membership
a. Membership and all rights arising therefrom are personal and non-transferable
b. Except when authorized by the Articles of Incorporation or by the By-Laws
i-4. Election and Term of Trustees
a. May be more than 15 in number
b. Classified in such manner that the term of office of 1/3 of their number shall expire every year
c. Subsequent elections of trustees shall be held annually and trustees so elected shall have a term
of 3 years
i-5. Place of Meetings
a. May be held in a place outside the place where the principal place of the corporation is located
b. Must be within the Philippines [Section 93]
J. CLOSE CORPORATIONS
j-1. Definition j-2. Particulars
a. Requirements
a-1. Number of stockholders not to exceed 20
a-2. Restriction: pre-emption in favor of the stockholders or corporation
a-3. Stocks cannot be listed in the stock exchange or be publicly offered
b. Prohibitions
b-1. Mining companies
b-2. Oil companies
b-3. Stock exchanges
b-4. Banks
b-5. Insurance companies
b-6. Public utility
b-7. Educational institution
b-8. Other corporations declared to be vested with public interest
j-3. Restrictions on Transfer
a. Must appear
a-1. In the Articles of Incorporation
a-2. In the By-Laws
a-3. On the Stock Certificate
b. Pre-emptive right extends not only to unissued shares but also to treasury stocks [Section 102]