1.

Theory of Concession

It is a principle in the creation of corporations, under which a corporation is an artificial

creature without any existence until it has received the imprimatur of the State acting
according to law, through SEC. The life of the Corporation is a concession made by the State.

2. Theory of Corporate Personality

The legal use of the word person' has attracted an assortment of theories which is probably
second to none in volume. Person' in law, is both the recognition of an entity as well as the
acknowledgement of such an entity's rights and interests. Granting of personhood' states
then enables an entity to undertake acts and relations that are recognized in the law. In the
realm of law, the term person' is nothing more than an abstraction - a representation
through the form of an entity either real or artificial, of certain attributes. These attributes
come to form what is known as personality' in the law.

The effort in this paper has been to provide a description of this conception of corporate
personality. In doing so, at first the researcher has attempted to introduce the subject by
speaking of personality in the widest possible terms and locating its existence even outside
the boundaries of law. The researcher has then outlined the concept of legal personality, its
nature, types and implications and while doing so, summarily dealt with the notion of the
corporation sole and the corporation aggregate. Next, the researcher has dealt with part of
the subject-matter itself by elaborating on the meaning and theoretical underpinnings of the
concept of dual personality and the attributes of corporate personality along with a
jurisprudential understanding of the same.

3. Doctrine of Piercing the Veil of Corporate Fiction

Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the
rights or duties of a corporation as the rights or liabilities of its shareholders. Usually a
corporation is treated as a separate legal person, which is solely responsible for the debts it
incurs and the sole beneficiary of the credit it is owed. Common law countries usually uphold
this principle of separate personhood, but in exceptional situations may "pierce" or "lift" the
corporate veil.

4. Pre-Incorporation Theory

A pre-incorporation agreement is entered into by the corporate promotes whom form the
company by filing its Articles of Incorporation. Since the corporation is not formed or if fails
to adopt the agreement, the promoters can be held liable for an breach of agreement.

5. Theory of Continuing Offers

6. Theory of Incorporation
7. Domiciliary Test.
8. Control Test in determining the nationality of a corporation

1. Incorporation test Determined by the state of incorporation, regardless of the

nationality of the stockholders.

2. Domiciliary test Determined by the principal place of business of the corporation.

3. Control test Determined by the nationality of the controlling stockholders or

members. This test is applied in times of war.

4. Grandfather rule Nationality is attributed to the percentage of equity in the

corporation used in nationalized or partly nationalized area.

The Constitution and various laws reserve certain areas of activities to Philippine citizens or
to corporations that have a minimum percentage of Filipino ownership. For example, with
respect to corporations, ownership of land is limited to corporations at least sixty per
centum of whose capital is owned by Philippine citizens. If 60% of the capital of a
Philippine corporation is owned by individuals who are Philippine citizens, then there would
be no issue on whether the Philippine corporation is a Philippine national qualified to own
land. On the other hand, an issue would arise if 60% of the capital of the Philippine
corporation is owned, in turn, by another Philippine corporation that has foreign
stockholders.

If a Philippine corporation has corporate stockholders, how does one determine whether
such Philippine corporation is a Philippine national? Two tests have been employed in the
Philippines: (a) the grandfather rule; and (b) the control test.

To illustrate how these tests are applied, lets take a Philippine corporation (called
Corporation X) with the following ownership structure:

(a) non-Philippine citizens own 40% of the capital stock outstanding and entitled to vote of
Corporation X;

(b) another Philippine corporation (called Corporation Y) owns 60% of the capital stock
outstanding and entitled to vote of Corporation X.

On other hand, Corporation Y has the following ownership structure:

(a) non-Philippine citizens own 40% of the capital stock outstanding and entitled to vote of
Corporation Y;

(b) Philippine citizens own 60% of the capital stock outstanding and entitled to vote of
Corporation Y.

Lets also assume that Philippine citizens constitute at least 60% of the members of the
board of directors of each of Corporation X and Corporation Y.

If the grandfather rule is applied, Corporation X will not be deemed a Philippine national
because the grandfather rule takes into account the direct and indirect foreign equity of
foreigners in Corporation X (see SEC Opinion re: Silahis International Hotel, May 4, 1987).
Applying the grandfather rule, the direct and indirect foreign equity in Corporation X would
be 64%, calculated at follows:

Direct foreign-owned equity in Corporation X 40%

Indirect foreign owned equity in Corporation X 24%

Under the above scenario, the foreigners are deemed to have a 24% indirect foreign equity
in Corporation X because foreigners own 40% of Corporation Y, which in turn owns 60% of
Corporation X (i.e., 40% multiplied by 60% equals 24%). Thus, under the grandfather rule,
Corporation X is not qualified to own land.

On the other hand, if the control test is applied, Corporation X is deemed to be a Philippine
national qualified to own land. Under the control test, Corporation X is considered a
Philippine national since at least 60% of its capital stock outstanding and entitled to vote is
held by Corporation Y, which is also considered a Philippine national since at least 60% of its
capital stock outstanding and entitled to vote is held by Philippine citizens.

9. The Grandfather Rule

The grandfather rule, on the other hand, provides that the nationality of the stockholders
is material or critical in determining the nationality of a corporation or its compliance with
our laws on permissible foreign investments.

10. Doctrine of Substantial compliance

A doctrine in equity that if a good faith attempt was made to perform the requirements of a
contract, but failed to exactly meet the specifics, and if the essential aim of the contract has
been met, the agreement will still be considered as having been completed. Minimal
damages for the impreciseness may be permitted by the court.
Compliance (to meet conditions) must be distinguished from performance (to accomplish
actions). See, Phoenix Mutual Life
Insurance Company v. Adams, 30 F.3d 554, 565 (4th Cir.1994), (It is perhaps most accurate
to describe the doctrine of substantial compliance as an equitable principle often applied in
the contract context and referred to interchangeably as substantial performance in that
context. The term substantial performance is often used in the context of construction
contract cases, while the term substantial compliance is often used in the context of tax law,
the law of wills, and corporate law.) Typically, questions will include aspects of compliance
and performance which may require determination of their relative importance as to the
essence of the question. Compliance is a matter of diligence, with negligible material
investment. Where terms are certain and met specifically by diligent effort, equity may be
invoked to excuse a failure of form. In contrast, performance involves a material
investment, which will be recognized in equity to prevent unjust enrichment. As an equitable
doctrine, substantial compliance may also be invoked by language of a contract that admits
interpretation, creating conditions that are implied or constructive. In addition, there is the
federal common law doctrine of substantial compliance which applies a two prong test: 1)
Intent, 2) Positive action, which is for all practical purposes similar to that required. That test
suggests a viable analog applicable to questions of substantiality. The requisite
substantiality derives from the essence and gravamen of the item at issue and must be
determined from context; i.e., generally, a statute is construed more strictly than a contract.
In any case, express conditions must be administered literally because there is no predicate
for interpretation.

11. Doctrine of Secondary Meaning

This doctrine is to the effect that a word or phrase originally incapable of exclusive
appropriation with reference to an article on the market, because it is geographical or
otherwise descriptive, may nevertheless be used exclusively by one producer with
reference to his article so long as in that trade and to that branch of the purchasing
public, the word or phrase has come to mean that the article was his product.

12.

13. Doctrine of Apparent Authority

a, apparent authority (also called "ostensible authority") relates to the doctrines of

the law of agency. It is relevant particularly in corporate law and constitutional law.
Apparent authority refers to a situation where a reasonable third party would understand
that an agent had authority to act. This means a principal is bound by the agent's
actions, even if the agent had no actual authority, whether express or implied. It raises
an estoppel because the third party is given an assurance, which he relies on and would
be inequitable for the principal to deny the authority given. Apparent authority can
legally be found, even if actual authority has not been given. [1]

There must be some act or some knowing omission on the part of the principal - if the
agent alone acts to give the third party this false impression, then the principal is not
bound.[2] However, the principal will be bound if the agent so acts in the presence of the
principal, and the principal stands silently and says nothing to dissuade the third party
from believing that the agent has the authority to bind the principal. Apparent authority
can also occur where a principal terminates the authority of an agent, but does not
inform third parties of this termination. This is called lingering apparent authority.
Business owners can avoid being liable by giving public notice of the termination of
authority, and by contacting any individual third parties who would have had reason to
know of such authority.

In relation to companies, the apparent authority of directors, officers and agents of the
company is normally referred to as "ostensible authority." Apparent authority issues also
arise in the Fourth Amendment context, concerning who has authority to consent to a
search.

14.Doctrine of Ultra vires act

Ultra vires is a Latin phrase meaning "beyond the powers". If an act requires legal
authority and it is done with such authority, it is characterised in law as intra
vires ("within the powers"). If it is done without such authority, it is ultra vires. Acts that
are intra vires may equivalently be termed "valid" and those that are ultra vires "invalid".

In corporate law, ultra vires describes acts attempted by a corporation that are beyond the
scope of powers granted by the corporation's objects clause, articles of incorporation or in a
clause in its Bylaws, in the laws authorizing a corporation's formation, or similar founding
documents. Acts attempted by a corporation that are beyond the scope of its charter
are void or voidable.

1. An ultra vires transaction cannot be ratified by shareholders, even if they wish it to

be ratified.

2. The doctrine of estoppel usually precluded reliance on the defense of ultra

vires where the transaction was fully performed by one party.

3. A fortiori, a transaction which was fully performed by both parties could not be
attacked.

4. If the contract was fully executory, the defense of ultra vires might be raised by
either party.

5. If the contract was partially performed, and the performance was held to be
insufficient to bring the doctrine of estoppel into play, a suit for quasi contract for
recovery of benefits conferred was available.

6. If an agent of the corporation committed a tort within the scope of his or her
employment, the corporation could not defend on the ground the act was ultra vires.
Several modern developments relating to corporate formation have limited the probability
that ultra vires acts will occur. Except in the case of non-profit
corporations (including municipal corporations), this legal doctrine is obsolescent; within
recent years, almost all business corporations are chartered to allow them to transact any
lawful business. The Model Business Corporation Act of the United States states that: "The
validity of corporate action may not be challenged on the ground that the corporation lacks
or lacked power to act." The doctrine still has some life among non-profit corporations or
state-created corporate bodies established for a specific public purpose, such as universities
or charities.
According to American laws, the concept of ultra vires can still arise in the following kinds of
activities in some states:

1. Charitable or political contributions

2. Guaranty of indebtedness of another

3. Loans to officers or directors

4. Pensions, bonuses, stock option plans, job severance payments, and other fringe
benefits

5. The power to acquire shares of other corporations

6. The power to enter into a partnership

15. Principle of Preemptive Right

A preemptive right is a privilege that may be extended to certain shareholders of a

corporation that grants them the right to purchase additional shares in the company prior to
shares being made available for purchase by the general public in the event of a seasoned
offering, which is a secondary issuing of stock shares. A preemptive right, also referred to as
preemption rights, anti-dilution provisions or subscription rights, is written into the contract
between the stock purchaser and the company, although a few states grant preemptive
rights as a matter of law unless specifically negated in a company's articles of incorporation.
A preemptive right does not function like a put option that gives a shareholder the right to
sell stock at a specified price.

BREAKING DOWN 'Preemptive Right'

When a majority shareholder of a company, or a shareholder committing large amounts of
capital to a startup company, purchases stock shares, he often wants to ensure his
ownership interest or voting power as a shareholder cannot be diminished by a secondary
stock offering in which the company issues a substantial amount of additional shares. By
securing preemptive rights at the time of his initial stock purchase, the shareholder can
make sure he is able to prevent any seasoned offering from diluting his ownership
percentage.
The preemptive right grants the shareholder an opportunity, but does not confer an
obligation, to buy an amount of shares prior to a seasoned offering that is proportionate to
his existing equity ownership percentage. As a simple example, assume a company's initial
stock offering consists of 100 shares, and an individual purchases 10 of the shares, giving
him a 10% equity interest in the company. At a later point in time, the company makes a
seasoned offering of 500 additional shares. If the original shareholder holds a preemptive
right, he must be granted the opportunity to purchase up to 50 shares of the new offering,
which maintains his 10% equity interest in the company.

Types of Preemptive Rights

Preemptive rights may also be granted to purchasers of convertible preferred shares of a

company's stock, since a seasoned offering of common stock diminishes the value of the
preferred shares they hold in the event they elect to exercise their option to convert their
preferred shares to common stock shares.

Preemptive rights may be granted to a shareholder with either a ratchet-based provision or

weighted-average provision that is applicable if a seasoned stock offering is issued at a
lower price than the price of the shareholder's original shares. Under a ratchet provision, the
shareholder is granted the right to buy additional shares at the lower price of the seasoned
offering. A weighted-average provision grants a shareholder the right to buy additional
shares at a price that accounts for the discrepancy in price between the original and the
seasoned offering share prices.