CHAPTER 1

INTRODUCTION
Use of the Term "Corporate Law"
Proper Treatment of the Corporation Code

USE OF TERM "CORPORATE LAW"

The reference to the whole body of laws, principles and doctrines
covering private corporations in the Philippines is referred to in this book
as "Corporate Law" in order not to confuse the use of such term with the
official name of the old Corporation Law, or Act No. 1459.1

PROPER TREATMENT OF THE CORPORATION CODE2

Philippine Corporate Law comes from the common law system of
the United States. Although we have a Corporation Code that provides for
statutory principles, Philippine Corporate Law is essentially, and continues
to be, the product of commercial developments. Necessarily, the statutory
corporate provisions and principles are essentially representations of a
time when such principles were governing, or at best, the general
controlling influence, but by no means can be taken to indicate future
developments. Much of the development in Corporate Law can be
expected to happen in jurisprudential rules that apply and adopt corporate
principles into the changing concepts and mechanism of the commercial
world.
The Corporation Code should therefore be seen as suggesting
dated principles and practices in Corporate Law, but the real toss and
tussle, and the boiling pot for current and future Corporate Law
developments necessarily would be in commercial practices, which would
be reflected in issues and controversies put forth before the judicial
system, and some of which would be synthesized into jurisprudential law.
Once in a while of course, Congress comes up with pieces of legislation
meant to supplement or amend existing Corporate Law doctrines or rules;
1

Enacted on 1 March 1906 by the Philippine Commission, and took effect on 1 April
1906. Section 1 of Act No. 1459 specifically provides that The short title of this Act shall
be The Corporation Law.
2
A more detailed discussion of this approach is found in Chapter 20 on Legal
Theory of Philippine Corporate Law.

but often such legislative enactments are meant to officially incorporate

already existing commercial practices into statutory language.
The study of Philippine Corporate Law, and the interpretation and
application of the various provisions of the Corporation Code and other
suppletory statutory provisions in Philippine jurisdiction, should therefore
take their approach on what the Philippine Supreme Court held in a
leading case:3 that "Corporation Law must be given a reasonable not an
unduly harsh, interpretation which does not hamper the development of
trade relations and which fosters more friendly commercial intercourse
among countries. The objectives . . . are even more relevant today when
we view commercial relations in terms of a world economy, when the
tendency is to re-examine the political boundaries separating one nation
from another insofar as they define business requirements or restrict
marketing conditions."4
oOo
CORP. MANUSCRIPT\01-INTRODUCTION\11-22-2002

3
4

Home Insurance Co. v. Eastern Shippine Lines, 123 SCRA 434 (1983).
Ibid, at p. 435.