REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

RFBT2-Partnership and Corporation

LECTURE NOTES

PARTNERSHIP The partnership has a judicial personality separate and

PARTNERSHIP
 By the contract of partnership two or more persons
bind themselves to contribute money, property, or
industry to a common fund, with the intention of
dividing the profits among themselves. Two or more
persons may also form a partnership for the exercise of
a profession. (1767).
Note: Since a partnership is a contract, all agreement
between the parties has the force of law between the
contracting parties (1159) provided it is not contrary to
law, moral, good custom, public order and public policy.
(1306)
distinct from that of each of the partners, even in case
of failure to comply with the requirements of article
1772, first paragraph (1768). However, Associations
and societies, whose articles are kept secret among the
members, and wherein any one of the members may
contract in his own name with third persons, shall have
no juridical personality. (1775)
A partnership begins from the moment of the execution
of the contract, unless it is otherwise stipulated. (1784)
2. Lawful object or purpose (1770). Any event which
makes it unlawful for the business of the partnership to
be carried on or for the members to carry it on in
partnership caused for automatic dissolution of the
partnership. (1830)

Distinction between partnership and Co- ownership EFFECTS OF UNLAWFUL PARTNERSHIP

1. Creation 1. The contract is void ab initio and the partnership
2. Juridical personality never existed in the eyes of the law
3. Purpose 2. The profits shall be confiscated in favor of the
4. Duration government
5. Disposal of interest 3. The instruments or tools and proceeds of the crime
6. Power to act with third person shall also be forfeited in favor of the government
7. Effect of death 4. The contributions of the partners shall not be
confiscated unless they fall under no. 3
Distinction between Partnership and conjugal partnership of
gain 3. Contribution of money, property or industry to a
1. Parties common fund.
2. Laws which govern
3. Juridical personality Obligations with respect to contribution to
4. Commencement partnership capital
5. Purpose
6. Distribution of profits 1. Partners must contribute equal shares to the capital
7. Management of the partnership unless there is stipulation to
8. Disposition of shares contrary. (Art 1790).
2. Partners (capitalist) must contribute additional
Distinction between partnership and voluntary association capital In case of imminent loss to the business of
1. Juridical personality the partnership and there is no stipulation
2. Purpose otherwise; refusal to do so shall create an
3. Contribution of members obligation on his part to sell his interest to the
4. Liability of members other partners. (Art. 1791)
Requisites:
Characteristics a. There is an imminent loss of the business of the
1. Consensual partnership
2. Nominate b. The majority of the capitalist partners are of the
3. Bilateral opinion that an additional contribution to the
4. Onerous common fund would save the business
5. Commutative c. The capitalist partner refuses deliberately to
6. Principal contribute (not due to financial inability)
7. Preparatory d. There is no agreement to the contrary
RISK OF LOSS OF THINGS CONTRIBUTED
 A partnership may be constituted in any form, except Contributed property Loss to be borne by
where immovable property or real rights are Partnership Partner
contributed thereto, in which case a public Specific and determinate √
instrument shall be necessary. (1771) things which are not fungible
 A contract of partnership is void, whenever immovable where only the use is
property is contributed thereto, if an inventory of said contributed
property is not made, signed by the parties, and Specific and determinate √
attached to the public instrument. (1773) things the ownership of
 Every contract of partnership having a capital of three which is transferred to the
thousand pesos or more, in money or property, shall partnership
appear in a public instrument, which must be recorded
in the Office of the Securities and Exchange Fungible things (consumable) √
Commission. Cannot be kept without √
 Failure to comply with the requirements of the deteriorating
preceding paragraph shall not affect the liability of the
Things contributed to be sold √
partnership and the members thereof to third persons.
Things brought and appraised √
(1772)
in the inventory (limited to
value appraised)
Requisites
 If one of the Partners refused to give contribution,
1. Valid Contract

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the other partner may compel him to
deliver (Specific performance) what he has
Designation of profit and losses
promised. 1. The designation of losses and profits cannot be
 The partnership is dissolved when a specific
intrusted to one of the partners.
thing which a partner had promised to2. If the partners have agreed to intrust to a third
contribute to the partnership, perishes person the designation of the share of each one
before the delivery. (1830,4) in the profits and losses, such designation may
be impugned only when it is manifestly
4. Intent to divide the profit among the inequitable. In no case may a partner who has
partners. (1767). begun to execute the decision of the third
RULES FOR DISTRIBUTION OF PROFITS person, or who has not impugned the same
AND LOSSES within a period of three months from the time
DISTRIBUTION OF DISTRIBUTION OF he had knowledge thereof, complain of such
PROFITS LOSSES decision. (1798)

With According to According Nota Bene:

to
agreement agreement agreement All partners, including industrial ones, shall be
liable pro rata with all their property and after
Without 1. Share of 1. If sharing all
of the partnership assets have been
capitalist partner profits exhausted,
is for the contracts which may be entered
agreement
is in proportion stipulated into
- in the name and for the account of the
to his capital apply to sharingpartnership, under its signature and by a person
contribution of losses authorized to act for the partnership. However, any
2. Share of 2. If no partner may enter into a separate obligation to
profit
industrial partner sharing perform a partnership contract. (1816) Any
is not fixed - as stipulated stipulation
- exempting any partner against the
may be just and losses shall be liability shall be void as far as 3 rd person is
equitable under borne according concerned. But the stipulation is valid among the
the to partners. (1817)
capital
circumstances contribution
3. 5.
Purely industrial Established for the common benefit or interest
partner not liable of the partners. (1770) Hence, A stipulation
for losses which excludes one or more partners from any
share in the profits or losses is void. (1799).
Distribution of profit and losses: (1797) Note: Only the agreement as to profit and loss
a. Profit or losses shall be distributed in is void not the partnership itself. In such case,
conformity with the agreement; as if there is no agreement as to profit and loss
b. If only the share of each partner in the and the profit and loss are distributed in
profits has been agreed upon, the share of accordance with capital contribution.
each in the losses shall be in the same
proportion. Note that industrial partner is Test to determine whether partnership exists:
not liable for the loss unless there is 1. Persons who are not partners as to each other
express stipulation to the contrary. are not partners as to third persons; except
c. In the absence of stipulation, the share of estoppels (1825).
each partner in the profits and losses shall 2. Co-ownership or co-possession does not of itself
be in proportion to what he may have establish a partnership, whether such-co-
contributed, but the industrial partner shall owners or co-possessors do or do not share any
not be liable for the losses. profits made by the use of the property;
d. As for the profits, the industrial partner 3. The sharing of gross returns does not of itself
shall receive such share as may be just and establish a partnership, whether or not the
equitable under the circumstances. If persons sharing them have a joint or common
besides his services he has contributed right or interest in any property from which the
capital, he shall also receive a share in the returns are derived;
profits in proportion to his capital. 4. The receipt by a person of a share of the profits
of a business is prima facie evidence that he is
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a partner in the business, but no such inference
shall be drawn if such profits were received in
payment: (DRAWInG)
a. Debt by installments or otherwise;
b. As Rent to a landlord or
c. As an Annuity to a widow or representative
of a deceased partner;
d. Wages of an employee
e. As Interest on a loan, though the amount of
payment vary with the profits of the
business;
f. As the consideration for the sale of a
Goodwill of a business or other property by
installments or otherwise.
Reason: It s not merely the sharing of profits, but
rather the sharing of them as a co-owner of the
business that makes one a partner. Hence, the
test is “Does the recipient of profit received it as co-
owner/proprietor of the business”, if the answer is
in affirmative a partnership exists.
Classifications of Partnership
As to liability of partners
1. General partnership - consists of general
partners who are liable pro rata and subsidiarily
and sometimes solidarily with their separate
property for partnership debts
2. Limited partnership - one formed by 2 or more
persons having as members one or more
general partners and one or more limited
partners, the latter not being personally liable
for the obligations of the partnership
As to duration
1. Partnership at will - one in which no time is
specified and is not formed for a particular
undertaking or venture which may be
terminated anytime by mutual agreement
2. Partnership with a fixed term or particular
undertaking - the term for which the
partnership is to exist is fixed or agreed upon or
one formed for a particular undertaking
As to extent of its subject matter
1. Universal partnership is either
a. Universal partnership of all present property
- the property which belongs to each of the
partners at the time of the constitution of
the partnership, becomes the common
property of all the partners, as well as all
the profits which they may acquire
therewith.(1779) A stipulation for the
common enjoyment of any other profits
may also be made (There must be a
stipulation. e.g. salary that may be earn by
the partner); but the property which the
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partners may acquire subsequently by
inheritance, legacy, or donation cannot be
included in such stipulation, except the
fruits thereof. Articles of universal
partnership, entered into without
specification of its nature, only constitute a
universal partnership of profits. (1781)
b. Universal partnership of all profits - all that
the partners may acquire by their industry
or work during the existence of the
partnership. Movable or immovable
property which each of the partners may
possess at the time of the celebration of the
contract shall continue to pertain
exclusively to each, only the usufruct
passing to the partnership. (1780)
Note: Persons who are prohibited from giving
each other any donation or advantage cannot
enter into universal partnership
The following cannot enter in a universal
partnership:
a. Between those who were guilty of adultery
or concubinage;
b. Between those persons found guilty of the
same criminal offense (adultery or
concubinage), in consideration thereof;
c. Between a person and Public officer or his
wife, descedants and ascendants, by reason
of his office. (739)
2. Particular partnership – object determinate
things, their use or fruits, or specific
undertaking, or the exercise of a profession or
vocation (1783)
As to representation to others
1. Ordinary or real partnership - one which
actually exists among the partners and also as
to 3rd persons
2. Ostensible or partnership by estoppel - one
which in reality is not a partnership but is
considered a partnership only in relation to
those who, by their conduct or omission, are
precluded to deny or disprove its existence
As to legality of existence
1. De jure partnership – comply all requirement of
the law
2. De facto partnership – do not comply all
requirement of the law
As to publicity
1. Secret partnership - one wherein the existence
of certain persons as partners is not avowed or
made known to the public by any of the
partners
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2. Open or notorious partnership - one whose
existence is avowed or made known to the
public by the members of the firm
As to purpose
1. Commercial or trading partnership - one formed
for the transaction of business
2. Professional or non trading partnership - one
formed for the exercise of a profession
Kinds of partners
1. Capitalist partner – One who contribute money
or property
2. Industrial partner – One contribute industry. He
is not liable for loss as between the partners but
liable pro rata as to 3rd person.
3. Capitalist-industrial partner – One who
contribute money, property or industry.
4. General partner – liable to the extent of his
separate property
5. Limited partner – liable only to the extent of his
capital contribution. Not allowed to contribute
industry.
6. Silent partner – do not participate in the
management.
7. Continuing Partner - one who continues the
business of a partnership after it has been
dissolved by reason of the admission of a new
partner, retirement, death or expulsion of one
of the partners
8. Surviving Partner - one who remains after a
partnership has been dissolved by death of any
partner
9. Subpartner - one who is not a member of the
partnership who contracts with a partner with
reference to the latter's share in the partnership
10. Secret partner – not known by third person
11. Dormant partner – silent and secret
12. Ostensible partner – participate in the
management and known by third person
13. Partners by estoppels or nominal partner – not
really partners but only as a result of
misrepresentation to 3rd person
14. Managing partner – one manage the
partnership
15. Liquidating partner – one who wind-up the
affair of the partnership
16. Retiring partner – one who retire in the
partnership
17. Incoming partner – One who is admitted to the
partnership
RELATIONS CREATED BY A CONTRACT OF
PARTNERSHIP
1. Relations among the partners themselves
2. Relations of the partners with the partnership
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3. Relations of the partnership with 3rd persons
with whom it contracts
4. Relations of the partners with such 3rd persons
OBLIGATIONS OF PARTNERS
 A partnership begins from the moment of the
execution of the contract, unless it is otherwise
stipulated. (1784)
 When a partnership for a fixed term or
particular undertaking is continued after the
termination of such term or particular
undertaking without any express agreement,
the rights and duties of the partners remain the
same as they were at such termination, so far
as is consistent with a partnership at will.
A continuation of the business by the partners
or such of them as habitually acted therein
during the term, without any settlement or
liquidation of the partnership affairs, is prima
facie evidence of a continuation of the
partnership. (1785)
Obligations with respect to contribution of
property:
1. To contribute at the beginning of the
partnership or at the stipulated time the
money, property or industry which he may
have promised to contribute
2. To answer for eviction in case the
partnership is deprived of the determinate
property contributed
3. To answer to the partnership for the fruits
of the property the contribution of which he
delayed, from the date they should have
been contributed up to the time of actual
delivery
4. To preserve said property with the diligence
of a good father of a family pending delivery
to partnership
5. To indemnify partnership for any damage
caused to it by the retention of the same or
by the delay in its contribution
 Every partner is a debtor of the partnership for
whatever he may have promised to contribute
thereto.
He shall also be bound for warranty in case of
eviction with regard to specific and determinate
things which he may have contributed to the
partnership, in the same cases and in the same
manner as the vendor is bound with respect to
the vendee. He shall also be liable for the fruits
thereof from the time they should have been
delivered, without the need of any demand.
(1786)
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Effect of Failure to contribute property
promised:
1. Partners becomes ipso jure a debtor of the
partnership even in the absence of any
demand
2. Remedy of the other partner is not
rescission but specific performance with
damages from defaulting partner
Obligations with respect to contribution of
money and money converted to personal
use
1. To contribute on the date fixed the amount
he has undertaken to contribute to the
partnership
2. To reimburse any amount he may have
taken from the partnership coffers and
converted to his own use
3. To pay for the agreed or legal interest, if he
fails to pay his contribution on time or in
case he takes any amount from the
common fund and converts it to his own use
4. To indemnify the partnership for the
damages caused to it by delay in the
contribution or conversion of any sum for
his personal benefits
 A partner who has undertaken to contribute a
sum of money and fails to do so becomes a
debtor for the interest and damages from the
time he should have complied with his
obligation. (1788)
The same rule applies to any amount he may
have taken from the partnership coffers, and
his liability shall begin from the time he
converted the amount to his own use.
 Unless there is a stipulation to the contrary, the
partners shall contribute equal shares to the
capital of the partnership. (1790)
 Art. 1791 - If there is no agreement to the
contrary, in case of an imminent loss of the
business of the partnership, any partner who
refuses to contribute an additional share to the
capital, except an industrial partner, to save
the venture, shall he obliged to sell his interest
to the other partners.
 Art. 1792 - If a partner authorized to manage
collects a demandable sum which was owed to
him in his own name, from a person who owed
the partnership another sum also demandable,
the sum thus collected shall be applied to the
two credits in proportion to their amounts, even
though he may have given a receipt for his own
credit only; but should he have given it for the
account of the partnership credit, the amount
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shall be fully applied to the latter.
The provisions of this article are understood to
be without prejudice to the right granted to the
other debtor by article 1252 (Application for
payment), but only if the personal credit of the
partner should be more onerous to him.
Obligation of managing partners who
collects debt from person who also owed
the partnership
1. Apply sum collected to 2 credits in
proportion to their amounts
2. If he received it for the account of
partnership, the whole sum shall be applied
to partnership credit
Requisites:
1. The partner who collects is authorized to
manage and actually manages the
partnership
2. The person owed him and the partnership
3. The partner issues a receipt in his own
name only.
4. The claim of the partnership and the
partner are both due and demandable.
 Art. 1793 - A partner who has received, in
whole or in part, his share of a partnership
credit, when the other partners have not
collected theirs, shall be obliged, if the debtor
should thereafter become insolvent, to bring to
the partnership capital what he received even
though he may have given receipt for his share
only.
Obligation of partner who receives share
of partnership credit
1. Obliged to bring to the partnership capital
what he has received even though he may
have given receipt for his share only
Requisites:
a. A partner has received in whole or in part,
his share of the partnership credit
b. The other partners have not collected their
shares
c. The partnership debtor has become
insolvent
 Every partner is responsible to the partnership
for damages suffered by it through his fault,
and he cannot compensate them with the
profits and benefits which he may have earned
for the partnership by his industry. However,
the courts may equitably lessen this
responsibility if through the partner's
extraordinary efforts in other activities of the
partnership, unusual profits have been realized.
(1794)
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 The risk of specific and determinate things, partnership fro profit derived by him
which are not fungible, contributed to the without the consent of other partners
partnership so that only their use and fruits (1807);
may be for the common benefit, shall be borne d. Whenever other circumstances render it
by the partner who owns them. just and reasonable.
If the things contribute are fungible, or cannot
be kept without deteriorating, or if they were MANAGEMENT OF THE PARTNERSHIP
contributed to be sold, the risk shall be borne RIGHTS AND OBLIGATIONS WITH RESPECT TO
by the partnership. In the absence of MANAGEMENT
stipulation, the risk of the things brought and
appraised in the inventory, shall also be borne Partner is Power of managing Vote of partners
by the partnership, and in such case the claim appointed partner is representing
shall be limited to the value at which they were
manager in the irrevocable without controlling
appraised. (1795)
 The partnership shall be responsible to every articles of just/lawful cause; interest
partner for the amounts he may have disbursed partnership Revocable only necessary to
on behalf of the partnership and for the when in bad faith revoke power
corresponding interest, from the time the
expense are made; it shall also answer to each Partner is Power is revocable
partner for the obligations he may have appointed any time for any
contracted in good faith in the interest of the manager after cause
partnership business, and for risks in constitution of
consequence of its Management. (1796)
partnership
 Every partner may associate another person
with him in his share, but the associate shall
2 or more Each may execute In case of
not be admitted into the partnership without the
consent of all the other partners, even if the persons all acts of opposition,
partner having an associate should be a entrusted with administration decision of
manager. (1804) management of majority shall
 The partnership books shall be kept, subject to partnership prevail; In case
any agreement between the partners, at the without of tie, decision
principal place of business of the partnership, specification of of partners
and every partner shall at any reasonable hour
duties/stipulation owning
have access to and may inspect and copy any of
them. (1805) that each shall controlling
 Partners shall render on demand true and full not act w/o the interest shall
information of all things affecting the other's consent prevail
partnership to any partner or the legal
representative of any deceased partner or of Stipulated that Concurrence of all Absence or
any partner under legal disability. (1806) none of the necessary for the disability of any
 Every partner must account to the partnership managing validity of acts one cannot be
for any benefit, and hold as trustee for it any partners shall act alleged unless
profits derived by him without the consent of
w/o the consent there is
the other partners from any transaction
connected with the formation, conduct, or of others imminent
liquidation of the partnership or from any use danger of grave
by him of its property. (1807) or irreparable
 Any partner shall have the right to a formal injury to
account as to partnership affairs: (1809) partnership
a. If he is wrongfully excluded from the
partnership business or possession of its Manner of 1. All partners If refusal of
property by his co-partners; management not are agents of partner is
b. If the right exists under the terms of any the partnership
agreed upon manifestly
agreement; 2. Unanimous
c. When any partner must account to the prejudicial to
consent
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required for interest
alteration of partnership, considered agents and whatever any one of them
immovable court's
property
intervention
may be sought consent of the others, make any important
 The partner who has been appointed manager
in the articles of partnership may execute all
acts of administration despite the opposition of
his partners, unless he should act in bad faith;
and his power is irrevocable without just or
lawful cause. The vote of the partners
representing the controlling interest shall be
necessary for such revocation of power.
A power granted after the partnership has been
constituted may be revoked at any time. (1800)
 If two or more partners have been intrusted
with the management of the partnership
without specification of their respective duties,
or without a stipulation that one of them shall
not act without the consent of all the others,
each one may separately execute all acts of
administration, but if any of them should
oppose the acts of the others, the decision of
the majority shall prevail. In case of a tie, the
matter shall be decided by the partners owning
the controlling interest. (1801)
 In case it should have been stipulated that none
of the managing partners shall act without the
consent of the others, the concurrence of all
shall be necessary for the validity of the acts,
and the absence or disability of any one of them
cannot be alleged, unless there is imminent
danger of grave or irreparable injury to the
partnership. (1802)
 When the manner of management has not been
agreed upon, the following rules shall be
observed: (1803)
a. All the partners shall be considered agents
and whatever any one of them may do
alone shall bind the partnership, without
prejudice to the provisions of article 1801.
b. None of the partners may, without the
consent of the others, make any important
alteration in the immovable property of the
partnership, even if it may be useful to the
partnership. But if the refusal of consent by
the other partners is manifestly prejudicial
to the interest of the partnership, the
court's intervention may be sought.
General Rule:
When the manner of management has not been
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ofagreed upon, all the partners shall be
may do alone shall bind the partnership, without
prejudice to the provisions of article 1801.
However, none of the partners may, without the
alteration in the immovable property of the
partnership, even if it may be useful to the
partnership. But if the refusal of consent by the
other partners is manifestly prejudicial to the
interest of the partnership, the court's intervention
may be sought. (1803)
An act of a partner which is not apparently for the
carrying on of business of the partnership in the
usual way does not bind the partnership unless
authorized by the other partners.
Except when authorized by the other partners or
unless they have abandoned the business, one or
more but less than all the partners have no
authority to (GARCI CA)
1. Assign the partnership property in trust for
creditors or on the assignee's promise to pay
the debts of the partnership;
2. Dispose of the goodwill of the business;
3. Do any other act which would make it
impossible to carry on the ordinary
business of a partnership;
4. Confess a judgment;
5. Enter into a compromise concerning a
partnership claim or liability;
6. Submit a partnership claim or liability to
arbitration;
7. Renounce a claim of the partnership.
No act of a partner in contravention of a restriction
on authority shall bind the partnership to persons
having knowledge of the restriction. (1818)
Appointment of managing partner
1. Appointment in the article of incorporation
(1800)
a. Execute all act of administration despite
opposition of his partners except he acted in
bad faith.
b. His power is irrevocable without just or
lawful cause.
c. Partners representing controlling interest
shall be necessary for revocation of power.
2. Other appointment
a. Revocable at any time, with or without just
or lawful cause.
Two or more partners have been intrusted
with the management
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Art. 1801 Article 1802
Without specification of their
respective duties
Without a stipulation that one There is stipulated that
of them shall not act without none of the managing
the consent of all the others partners shall act without
the consent of the others
Rule: Rule:
a. Each one may separately a. The concurrence of all
execute all acts of shall be necessary for
administration. the validity of the
b. But if any of them should acts. 2.
oppose the acts of the b. The absence or
others, the decision of the disability of any one
majority shall prevail. of them cannot be
c. In case of a tie, the alleged, unless there
matter shall be decided is imminent danger
by the partners owning of grave or
the controlling interest. irreparable injury
the partnership.
Prohibition against engaging in business
specific partnership property for partnership
purposes but not for any other purpose
without the consent of his partners.
 Not assignable except in connection with
the assignment of rights of all the partners
in the same property
 Not subject to attachment or execution,
except on a claim against the partnership.
But partnership property can be attached
for partnership debt.
 Not subject to legal support
His interest in the partnership - A partner's
interest in the partnership is his share of the
profits and surplus. (1812)
 A conveyance by a partner of his whole
interest in the partnership does not of itself
dissolve the partnership, or, as against the
other partners in the absence of agreement.
Right of the assignee: Entitles the assignee to
receive in accordance with his contract the
profits to which the assigning partner would
otherwise be entitled.

Assignee has no right:

Capitalist partner (1808) Industrial partner
a. To interfere in the management or
(1789)
administration of the partnership business
Cannot engage in same kind Industrial partner cannot
or affairs;
of business in which the engage in business for
b. To require any information or account of
partnership is engaged himself (any business)
partnership transactions,
except if there is stipulation except if there is stipulation
c. To inspect the partnership books;
Reason: To avoid conflict of Reason: Industrial partners
 In case of fraud in the management of the
interest must devote his entire
partnership, the assignee may avail himself
industry to the partnership
of the usual remedies.
Violation Violation:
 In case of a dissolution of the partnership,
1. Bring to the common 1. Exclude him from the
the assignee is entitled to receive his
funds any profits firm
assignor's interest and may require an
accruing to him from his 2. Avail themselves of the
account from the date only of the last
transactions benefits which he may
account agreed to by all the partners.
2. Shall personally bear all have obtained
(1813)
the losses 3. Damages, in either
3. His right to participate in the management (n)
case.
Right of partner’s creditor (1814)
Note: It is believed that
Without prejudice to the preferred rights of
industrial partners are
partnership creditors, on due application to a
also entitled to the
competent court by any judgment creditor of a
remedy granted since
partner, the court may charge the interest of the
they are equally
debtor partner with payment of the unsatisfied
prejudiced
amount of such judgment debt with interest
thereon; and may then or later appoint a receiver of
Property Rights of a Partner (1810) his share of the profits, and of any other money due
The property rights of a partner are: or to fall due to him in respect of the partnership,
1. His rights in specific partnership property and make all other orders, directions, accounts and
A partner is co-owner with his partners of inquiries which the debtor partner might have
specific partnership property. (1811) made, or which the circumstances of the case may
 Equal right with his partners to possess require.
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The interest charged may be redeemed at any time partners, r own the act is one within the
before foreclosure, or in case of a sale being or in a name authority of the partner.
directed by the court, may be purchased without third (usual way of business)
thereby causing a dissolution: person in
1. With separate property, by any one or more trust for
of the partners; or the
2. With partnership property, by any one or partners
more of the partners with the consent of all hip
the partners whose interests are not so All All All Passes all their rights in
charged or sold. partner partner partne such property
rs
Rule on conveyance of real property (by any
partner or all partners) Obligation of the partners with regards to
Conveye Title of Exec Passing of title/Rightthird person
d by real uted of the partnership  An admission or representation made by any
propert in the partner concerning partnership affairs within
y name the scope of his authority is evidence against
of the partnership. (1820)
Any Partners Partne Title passes to the buyer Notice to any partner of any matter relating to
partner hip rship but the Partnership may partnership affairs, and the knowledge of the
recover partner acting in the particular matter, acquired
Exception: while a partner or then present to his mind, and
1. Conveyance was in the knowledge of any other partner who
the usual way of reasonably could and should have
business, except communicated it to the acting partner, operate
when the buyer has as notice to or knowledge of the partnership.
knowledge of the (1821)
partner lack of Exception: In case of fraud on the partnership,
authority. committed by or with the consent of that
2. Real property was partner.
transferred to 3  All partners and the partnership are solidary
person in good faith. liability for everything chargeable to the
Any Partners Partne Passes the equitable partnership. (1824)
partner hip r interest of the a. Any wrongful act or omission of any partner
partnership provided the acting in the ordinary course of the business
conveyance was in the of the partnership or with the authority of
usual way of business. co-partners, loss or injury is caused to any
By One or One Title passes to the buyer person, not being a partner in the
partners more but or but the Partnership may partnership, or any penalty is incurred,
whose not all more recover the partnership is liable therefor to the
name partner but Exception: same extent as the partner so acting or
title (no right not all 1. Conveyance was in omitting to act. (1822)
stands of partne the usual way of b. Where one partner acting within the scope
partners rs business, except of his apparent authority receives money or
hip when the buyer has property of a third person and misapplies it;
disclose) knowledge of the (1823, 1)
partner lack of c. Where the partnership in the course of its
authority. business receives money or property of a
2. Real property was third person and the money or property so
transferred to 3 received is misapplied by any partner while
person in good faith it is in the custody of the partnership.
Partner One or Partne Passes the equitable (1823,2)
more or rship/ interest of the Partnership by estoppels
all the partne partnership, provided When a person represents himself or
consent to another to another representing
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him to anyone (he is an agent of the persons
consenting to such representation) as a partner DISSSOLUTION
in an existing partnership, he is liable to Dissolution is change in the relation of the
a. Any such persons to whom such partners caused by any partner ceasing to be
representation has been made. associated in the carrying on as distinguished from
b. The representation was made in a public the winding up of the business. (1828) On
manner, he is liable to such person, dissolution the partnership is not terminated, but
whether the representation has or has not continues until the winding up of partnership affairs
been made or communicated to such is completed. (1829)
person.
Partnership liability result Automatic dissolution Judicial dissolution
1. When all the members of the existing (1830) (1831)
partnership consent to the 1. Without violation of the 1. A partner has been
representation. agreement between the declared insane in
2. Liable as though he were an actual member partners: any judicial
of the partnership a. By the termination of proceeding or is
the definite term or shown to be of
particular undertaking unsound mind;
No partnership liability result specified in the 2. A partner becomes
1. He is liable pro rata with the other agreement; incapable of
persons, if any, so consenting to the b. By the express will of performing his part
contract or representation as to incur any partner, who must of the partnership
liability, otherwise separately. act in good faith, when contract;
no definite term or 3. A partner has been
Liabilities in estoppel particular is specified; guilty of such
c. By the express will of conduct as tends to
All partners consented to Partnership is liable
all the partners who affect prejudicially
representation
have not assigned the carrying on of
No existing partnership & all Person who represented their interests or the business;
those represented consented; himself & all those who suffered them to be 4. A partner willfully or
Not all partners of existing made representation charged for their persistently
partnership consents to liable pro-rata/jointly separate debts, either commits a breach
representation before or after the of the partnership
termination of any agreement, or
No existing partnership & not Person who represented specified term or otherwise so
all represented consented; himself liable & those particular undertaking; conducts himself in
None of partners in existing who made/consented to d. By the expulsion of matters relating to
partnership consented representation any partner from the the partnership
separately liable business bona fide in business that it is
accordance with such a not reasonably
 A person admitted as a partner into an existing power conferred by the practicable to carry
partnership is liable for all the obligations of agreement between on the business in
the partnership arising before his admission the partners partnership with
as though he had been a partner when such 2. In contravention of the him;
obligations were incurred, except that this agreement between the 5. The business of the
liability shall be satisfied only out of partners, where the partnership can
partnership property, unless there is a circumstances do not only be carried on
stipulation to the contrary. (1826) permit a dissolution under at a loss;
 The creditors of the partnership shall be any other provision of this 6. Other
preferred to those of each partner as regards article, by the express will circumstances
the partnership property. Without prejudice of any partner at any time; render a dissolution
to this right, the private creditors of each 3. Any event which makes it equitable.
partner may ask the attachment and public sale unlawful for the business On the application of
of the share of the latter in the partnership of the partnership to be the purchaser of a
assets. (1827) carried on or for the partner's interest under
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members to carry it on in article 1813 or 1814: affairs that the business reputation of the
partnership 1. After the partnership could not be said to have been
4. When a specific thing termination of the in any degree due to his connection with it.
which a partner had specified term or
promised to contribute to particular
the partnership, perishes undertaking; 1. With respect to the partners,
before the delivery; in any 2. At any time if the a. When the dissolution is not by the act,
case by the loss of the partnership was a insolvency or death of a partner; or
thing, when the partner partnership at will b. When the dissolution is by such act,
who contributed it having when the interest insolvency or death of a partner, each
reserved the ownership was assigned or partner is liable to his co-partners for his
thereof, has only when the charging share of any liability created by any partner
transferred to the order was issued. acting for the partnership as if the
partnership the use or partnership had not been dissolved unless:
enjoyment of the same; (1833)
but the partnership shall 1. The dissolution being by act of any
not be dissolved by the partner, the partner acting for the
loss of the thing when it partnership had knowledge of the
occurs after the dissolution; or
partnership has acquired 2. The dissolution being by the death or
the ownership thereof; insolvency of a partner, the partner
5. Death of any partner; acting for the partnership had
6. Insolvency of any partner knowledge or notice of the death or
or of the partnership; insolvency.
7. Civil interdiction of any 2. With respect to persons not partners, the
partner; partnership is in no case bound by any act of a
partner after dissolution:
Effect of dissolution a. Where the partnership is dissolved because
General Rule: Dissolution terminates all authority of it is unlawful to carry on the business,
any partner to act for the partnership: (1832) unless the act is appropriate for winding up
Exception: partnership affairs; or
1. By any act appropriate for winding up b. Where the partner has become insolvent; or
partnership affairs or completing transactions c. Where the partner has no authority to wind
unfinished at dissolution; up partnership affairs; except by a
2. By any transaction which would bind the transaction with one who -
partnership if dissolution had not taken place, 1. Had extended credit to the partnership
provided the other party to the transaction: prior to dissolution and had no
a. Had extended credit to the partnership prior knowledge or notice of his want of
to dissolution and had no knowledge or authority; or
notice of the dissolution; or 2. Had not extended credit to the
b. Though he had not so extended credit, had partnership prior to dissolution, and,
nevertheless known of the partnership prior having no knowledge or notice of his
to dissolution, and, having no knowledge or want of authority, the fact of his want of
notice of dissolution, the fact of dissolution authority has not been advertised in the
had not been advertised in a newspaper of manner provided for advertising the fact
general circulation in the place (or in each of dissolution.
place if more than one) at which the
partnership business was regularly carried  The dissolution of the partnership does not of
on. itself discharge the existing liability of any
Liability of a partner shall be satisfied out of partner (1835)
partnership assets alone when such partner had Exception:
been prior to dissolution A partner is discharged from any existing
1. Unknown as a partner to the person with liability upon dissolution of the partnership by
whom the contract is made; and an agreement to that effect between himself,
2. So far unknown and inactive in partnership the partnership creditor and the person or
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partnership continuing the business; and such contribute money, contribute money or
agreement may be inferred from the course of property or industry property but not
dealing between the creditor having knowledge industry
of the dissolution and the person or partnership 4. General partner is a 4. Limited partner is not
continuing the business. proper party to a proper party to
 The individual property of a deceased partner proceeding by or against proceedings by or
shall be liable for all obligations of the a partnership against a partnership.
partnership incurred while he was a partner, but 5. General partner may 5. Limited partner name
subject to the prior payment of his separate appear in the firm name must not appear in
debts. (Ibid) the firm name
 Where a partnership contract is rescinded on 6. General partner cannot 6. No prohibition in case
the ground of the fraud or misrepresentation of engage in a business of Limited partner
one of the parties thereto, the party entitled to which is of the kind of
rescind is, without prejudice to any other right, business in which the
entitled: (1838) partnership is engage.
1. To a lien on, or right of retention of, the 7. Retirement, death, 7. Do not the same
surplus of the partnership property after insanity or insolvency of effect, executor or
satisfying the partnership liabilities to third general partner administrator shall
persons for any sum of money paid by him dissolves the partnership have all the rights of
for the purchase of an interest in the a limited partner for
partnership and for any capital or advances the purpose of setting
contributed by him; his estate.
2. To stand, after all liabilities to third persons 8. Can be constituted in 8. Must follow all the
have been satisfied, in the place of the whatever form requirement of the
creditors of the partnership for any law for limited
payments made by him in respect of the partnership
partnership liabilities; and 9. Composed of all general 9. Composed of at least
3. To be indemnified by the person guilty of partner one general partner
the fraud or making the representation and at least one
against all debts and liabilities of the limited partner
partnership. 10. No need to include in the 10. Must include in the
partnership name the partnership name the
word “LTD” word “LIMITED” or
“LTD”
11. When the interest of one 11. When the interest of
of the general partner is the limited partner is
charged, his interest charged, the interest
may be redeemed with may be redeemed
LIMITED PARTNERSHIP separate property of one with the separate
Members one or more general partners and one or or more partners or; property of any
more limited partners. partnership property general partner, but
with the consent of all may not be redeemed
General Limited partners whose interest with partnership
Partner/partnership partner/partnership is not so charged or property. (1862)
1. General partner is 1. Limited partner’s sold. (1814)
personally liable for the liability extend only to
partnership obligation his capita contributionGeneral Rule:
2. When management has 2. Limited partner has The limited partners as such shall not be bound by
not been agreed upon, no share in the
the obligations of the partnership.(1843)
all general partner have management of a
equal right in the limited partnership Exception:
management of the  The name of the partnership failed to add the
partnership. word ”Limited” or “Ltd”.
3. General partner may 3. Limited partner must

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 Failure to file the article of co-partnership to the A general partner shall have all made, whether from
SEC. the rights and powers and be property of the
 The contributions of a limited partner may be subject to all the restrictions partnership or that of
cash or property, but not services. (1845) and liabilities of a partner in a a general partner, the
 The surname of a limited partner appear in the partnership without limited partnership assets are
partnership name unless: partners. However, without the in excess of all
(1) It is also the surname of a general partner, written consent or ratification of liabilities of the
or the specific act by all the partnership except
(2) Prior to the time when the limited partner limited partners, a general liabilities to limited
became such, the business has been carried on partner or all of the general partners on account
under a name in which his surname appeared. partners have no authority to: of their contributions
(1846) (1) Do any act in and to general
 A limited partner takes part in the control of the contravention of the partners (1856).
business. (1848) certificate;
(2) Do any act which would
Right of General partner Right of limited make it impossible to
partner (Art. 1851) carry on the ordinary
1. The partnership books shall A limited partner shall business of the
be kept, subject to any have the same rights partnership;
agreement between the as a general partner (3) Confess a judgment
partners, at the principal to: against the partnership;
place of business of the (1) Have the (4) Possess partnership
partnership, and every partnership books property, or assign their
partner shall at any kept at the principal rights in specific
reasonable hour have place of business of partnership property,
access to and may inspect the partnership, and for other than a
and copy any of them. at a reasonable hour partnership purpose;
(1805) to inspect and copy (5) Admit a person as a
2. Partners shall render on any of them; general partner;
demand true and full (2) Have on (6) Admit a person as a
information of all things demand true and full limited partner, unless
affecting the partnership to information of all the right so to do is
any partner or the legal things affecting the given in the certificate;
representative of any partnership, and a (7) Continue the business
deceased partner or of any formal account of with partnership
partner under legal partnership affairs property on the death,
disability. (1806) whenever retirement, insanity,
3. Any partner shall have the circumstances render civil interdiction or
right to a formal account as it just and insolvency of a general
to partnership affairs: reasonable; and partner, unless the
a. If he is wrongfully (3) Have right so to do is given in
excluded from the dissolution and the certificate. (1850)
partnership business or winding up by decree
possession of its of court.  A person may be a general partner and a
property by his co- A limited partner shall limited partner in the same partnership at the
partners; have the right to same time, provided that this fact shall be
b. If the right exists under receive a share of the stated in the certificate.
the terms of any profits or other A person who is a general, and also at the same
agreement; compensation by way time a limited partner, shall have all the rights
c. As provided by article of income, and to the and powers and be subject to all the restrictions
1807; return of his of a general partner; except that, in respect to
d. Whenever other contribution, (1851) his contribution, he shall have the rights against
circumstances render it provided that after the other members which he would have had if
just and reasonable. such payment is he were not also a general partner. (1853)

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 Allowable transaction of limited partner (not
also general partner)
a. Loan money to the partnership
b. Transact other business with the
partnership,
c. Received a pro rata share of the assets with
the general creditors (if he is not also a
general partner)
 Prohibited transactions
a. Receive or hold as collateral security and
partnership property, or
b. Receive from a general partner or the
partnership any payment, conveyance, or
release from liability if at the time the
assets of the partnership are not sufficient
to discharge partnership liabilities to
persons not claiming as general or limited
partners
The receiving of collateral security, or payment,
conveyance, or release in violation of the
foregoing prohibition is a fraud on the creditors
of the partnership. (Reason 3rd persons enjoy
preferential rights insofar as a partnership
assets are concerned) (1854)
 A limited partner may receive from the
partnership the share of the profits or the
compensation by way of income stipulated for
in the certificate. (provided that Partnership
assets > All outside liabilities) (1856)
 Where there are several limited partners the
members may agree that one or more of the
limited partners shall have a priority over other
limited partners as to the return of their
contributions, as to their compensation by way
of income, or as to any other matter. If such an
agreement is made it shall be stated in the
certificate, and in the absence of such a
statement all the limited partners shall stand
upon equal footing. (1855)
 Requisites for return of contribution of limited
partner. (1857)
a. All liabilities of the partnership, except
liabilities to general partners and to limited
partners on account of their contributions,
have been paid or there remains property of
the partnership sufficient to pay them;
b. The consent of all members is had, unless
the return of the contribution may be
rightfully demanded under the provisions of
the second paragraph; and
c. The certificate is cancelled or so amended
as to set forth the withdrawal or reduction.
 Return of contribution of limited partner as
a matter of right - Limited partner may
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rightfully demand the return of his contribution:
(1857)
a. On the dissolution of a partnership; or
b. Arrival of the date specified in the certificate
for its return;
c. After he has six months' notice in writing to
all other members, if no time is specified in
the certificate, either for the return of the
contribution or for the dissolution of the
partnership.
 Liability of limited partner to the partnership
(1858)
a. For the difference between his contribution
as actually made and that stated in the
certificate as having been made, and
b. For any unpaid contribution which he
agreed in the certificate to make in the
future at the time and on the conditions
stated in the certificate
Liability limited partner as trustee – A limited
partner is considered as trustee for the
partnership.
a. Specific property stated in the certificate as
contributed by him, but which was not
contributed or which has been wrongfully
returned, and
b. Money or other property wrongfully paid
or conveyed to him on account of his
contribution.
Requisites for waiver or compromise
a. Consent of all members;
b. It does not affect the right of a creditor of a
partnership who extended credit or whose
claim arose after the filing and before a
cancellation or amendment of the
certificate, to enforce such liabilities.
 A limited partner's interest is assignable. (1859)
 An assignee, who does not become a
substituted limited partner, has no right to
require any information or account of the
partnership transactions or to inspect the
partnership books; he is only entitled to receive
the share of the profits or other compensation
by way of income, or the return of his
contribution, to which his assignor would
otherwise be entitled. (Right are similar to
those of a person to whom a partner conveyed
his whole interest in the partnership)
A substituted limited partner - is a person
admitted to all the rights of a limited partner
who has died or has assigned his interest in a
partnership
Requisites when assignee become substituted
limited partner
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a. All the members consent thereto or if the profits;
assignor, being thereunto empowered by f. Those to general
the certificate, gives the assignee that right. partners in respect to
b. An assignee becomes a substituted limited capital.
partner when the certificate is appropriately
amended in accordance with article 1865.
c. The certificate as amended must be Note: In general partnership, the payment of
registered in the SEC. capital is preferred than with respect to profits. In
limited partnership, the payment of profit has
 The retirement, death, insolvency, insanity or preference over capital.
civil interdiction of a general partner dissolves
the partnership, unless the business is CORPORATION
continued by the remaining general partners:
(1) Under a right so to do stated in the Element of Corporation
certificate, or 1. It is an artificial being
(2) With the consent of all members. (1860) 2. Created by operation of law
3. Having the right of succession
 On the death of a limited partner his executor 4. The powers, attributes and properties expressly
or administrator shall have all the rights of a authorized by law or incident to its existence.
limited partner for the purpose of setting his
estate, and such power as the deceased had to Doctrine of separate juridical personality
constitute his assignee a substituted limited Corporation has juridical personality separate and
partner. distinct from the stockholders composing the
 The estate of a deceased limited partner shall corporation.
be liable for all his liabilities as a limited
partner. (1861) Piercing the veil of corporate entity
When the veil of corporate fiction is used as a shield
to perpetuate fraud, to defeat public convenience,
Liabilities of the partnership shall rank in justify wrong or defend crime, this fiction shall be
order of payment disregarded and the individuals composing it will be
General partnership Limited partnership treated identically.
(1839) (1863)
a. Those owing to a. Those to creditors, Doctrine
in of limited capacity
creditors other than the order of priority Corporation
as may exercise only powers expressly
partners; provided by law, except authorized by law or incident to its existence.
b. Those owing to partners those to limited partners
other than for capital on account of their Theory of Corporation
and profits; contributions, and 1. to Theory of concession – Exist by grant of the
c. Those owing to partners general partners; state (Philippine Setting)
in respect of capital; b. Those to limited
2. Gennosenshaft theory – It exist because the
d. Those owing to partners partners in respect to parties want it to exist
in respect of profits. their share of the profits
and other compensation Private Corporation can only be created by
by way of income corporation
on code (B.P. 68)
their contributions;
Under Art. XII, Sec 16 of the 1987 Constitution
c. Those to limited
partners in respect which to provides as follows:
the capital of their “The Congress shall not, except by general law,
contributions; provide for the formation, organization, or
d. Those to general
regulation of private corporations. Government-
partners other than for owned or controlled corporations may be created or
capital and profits; established by special charters in the interest of the
e. Those to general
common good and subject to the test of economic
partners in respect to
viability.”
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Special law can create only a. Domestic corporation – incorporated under
1. Public corporation Philippine law
2. Government owned or controlled corporations b. Foreign corporation – Incorporated under
provided: foreign law
a. In the interest of common goods 5. Legal right to corporate existence
b. Subject to test of economic viability. a. De jure corporation – exist in fact and in
law
Corporation not entitled to moral damages b. De facto corporation – exist in fact but not
A corporation, being an artificial person and having in law
existence only in legal contemplation, has no 6. Public or not
feeling, no emotions, no senses; therefore, it a. Close corporation – limited to selected
cannot experience physical suffering, mental persons
anguish, fright, serious anxiety, wounded feelings, b. Open corporation – open to any person
etc. 7. Relation to other corporation
a. Parent corporation – Owner of more than
Distinction between partnership And 50% of another corporation
Corporation b. Subsidiary corporation – acquire of parent
1. Manner of creation company
2. Number of incorporators 8. True or limited sense
3. Commencement of juridical personality a. True corporation
4. Powers b. Quasi corporation
5. Management 1. Corporation by prescription – exercise
6. Effect of mismanagement power for indefinite period without
7. Right of succession interference from sovereign power.
8. Transferability of interest (Roman Catholic Church)
9. Term of existence 2. Corporation by estoppels
10. Firm name
11. Dissolution 9. Public or private purpose
12. Laws which govern a. Public corporation
b. Private corporation
Classification of corporation 10. Going public or not
1. Stock corporation - Corporations which have a. Going public – Decide to list its share in the
capital stock divided into shares and are stock exchange
authorized to distribute to the holders of such b. Going private – Restrict the share to certain
shares dividends or allotments of the surplus group
profits on the basis of the shares held. (Sec 4, Classes of shares
BP 68) 1. Par value share
2. Non-stock corporation – All other corporations 2. No par value share
are non-stock corporations. Limitation:
a. Cannot be issued by the following
Other classification of Corporations corporation: (BPI-TB)
1. Number of persons 1. Bank
a. Corporation aggregate – more than one 2. Public utilities
member 3. Insurance company
b. Corporation sole – one member or 4. Trust company
corporator 5. Building and loan association
2. Religious purpose or not b. Preferred shares not allowed
a. Ecclesiastical corporation - Religious c. Cannot be issued for a consideration less
b. Lay corporation – other than religious than five peso (P5)
purpose. (Either eleemosynary or civil) d. Deemed fully paid and non assessable
3. Charitable or not e. Entire consideration received shall be
a. Eleemosynary corporation - Charitable treated as capital and not available for
b. Civil corporation – Business of profit dividend distribution.
4. Country of creation 3. Voting share

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 That there shall always be a class or series
of shares which have complete voting
rights.
 That no share may be deprived of voting
rights except those classified and issued as
"preferred" or "redeemable" shares.
4. Non voting share- shares without right to vote
Non voting shares classified as such may still
vote under the following circumstances:
a. Amendment of the articles of incorporation;
b. Adoption and amendment of by-laws;
c. Sale, lease, exchange, mortgage, pledge or
other disposition of all or substantially all of
the corporate property;
d. Incurring, creating or increasing bonded
indebtedness;
e. Increase or decrease of capital stock;
f. Merger or consolidation
g. Investment of corporate funds in another
corporation or business except where the
investment by the corporation is reasonably
necessary to accomplish its primary purpose
as stated in the articles of incorporation
h. Dissolution of the corporation.
5. Common stock – equal right. Except as
otherwise provided in the articles of
incorporation and stated in the certificate of
stock, each share shall be equal in all respects
to every other share. (6)
6. Preferred stock – Preferred shares of stock
issued by any corporation may be given
preference in the distribution of the assets of
the corporation in case of liquidation and in the
distribution of dividends, or such other
preferences as may be stated in the articles of
incorporation.
7. Promotion stock – issued to promoter
8. Share in escrow – Subject to agreement where
the stock is deposited to third and kept by the
depositary until the condition contained in
agreement happened.
9. Convertible stock – Convertible to other shares
10. Founder share – issued to founder or organizer
having a right granted . (Sec 7)
11. Redeemable share (Sec 8)
a. Must be expressly so provided in the articles
of incorporation
b. Purchased or taken up by the corporation
upon the expiration of a fixed period,
regardless of the existence of unrestricted
retained earnings.
c. Terms and conditions must be stated in the
articles of incorporation and certificate of
stock
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12. Treasury stock – shares of stock which have
been issued and fully paid but subsequently
reacquired by the issuing corporation by
purchase, redemption, donation or other lawful
means. (Sec 9)
Corporate term – 50 years may be extended for
periods not exceeding fifty (50) years in any single
instance by an amendment of the articles of
incorporation. No extension can be made earlier
than five (5) years prior to the original or
subsequent expiry date(s) unless there are
justifiable reasons for an earlier extension. (Sec 11)
Contents of the articles of Incorporation (Sec
14)
All corporations organized under this code shall file
with the Securities and Exchange Commission
articles of incorporation in any of the official
languages duly signed and acknowledged by all of
the incorporators, containing substantially the
following matters, except as otherwise prescribed
by this Code or by special law:
1. The name of the corporation;
2. The specific purpose or purposes for which the
corporation is being incorporated. Where a
corporation has more than one stated purpose,
the articles of incorporation shall state which is
the primary purpose and which is/are he
secondary purpose or purposes: Provided, That
a non-stock corporation may not include a
purpose which would change or contradict its
nature as such;
3. The place where the principal office of the
corporation is to be located, which must be
within the Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the
incorporators;
6. The number of directors or trustees, which shall
not be less than five (5) nor more than fifteen
(15);
7. The names, nationalities and residences of
persons who shall act as directors or trustees
until the first regular directors or trustees are
duly elected and qualified in accordance with
this Code;
8. If it be a stock corporation, the amount of its
authorized capital stock in lawful money of the
Philippines, the number of shares into which it
is divided, and in case the share are par value
shares, the par value of each, the names,
nationalities and residences of the original
subscribers, and the amount subscribed and
paid by each on his subscription, and if some or
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
RFBT2-Partnership and Corporation
all of the shares are without par value, such
fact must be stated;
9. If it be a non-stock corporation, the amount of
its capital, the names, nationalities and
residences of the contributors and the amount
contributed by each; and
10. Such other matters as are not inconsistent with
law and which the incorporators may deem
necessary and convenient.
Minimum Capital requirement
General Rule: No minimum authorized capital stock
(Sec 12)
Exception:
1. Sec 13
 25% of the authorized capital stock must be
subscribed.
 25% of the total subscription be paid.
 In no case the paid up capital be less than
P5,000
2. Special Law
Percentage of Filipino ownership (Nationalize
Corporation)
1. 100% Filipino
a. Mass media except recording
b. Retail trade corporation
c. Private security agencies
d. Small scale mining
e. Utilization of natural resources
f. Cockpits
g. Manufacture, repair, stockpiling and/or
distribution of nuclear weapon
2. 80% Filipino
a. Private radio communications network
3. 75%
a. Private recruitment, whether for local or
overseas employment
b. Construction and repair of locally funded
works
c. Construction of defense related structures
d. Under the flag law
4. 70%
a. Pawnshop business
5. 60%
a. Corporation for exploration, development
and utilization of natural resources – 60%
b. Realty companies and other corporations
that own public lands
c. Public utilities corporations
d. Educational Institution
e. Banking corporation
f. Rural bank
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g. Culture, production milling, processing,
trading except retail of rice and corn and by
products.
h. Coastwise shipping
i. Sauna and steam bath bathhouse, massage
clinics and similar activities
j. Adjustment companies
6. 40%
a. Financing companies
b. Investment house
Corporate Name not allowed (Sec 18)
1. Identical
2. Deceptive
3. Confusingly similar to that existing corporation
4. Any name already protected by law
5. Patently deceptive, confusing or contrary to
existing laws.
Note: When approved – Commission issue amended
certificate of incorporation under amended name.
Commencement of corporate existence – Issuance
of certificate of incorporation. (Sec 19)
De Facto corporation(Sec 20)
1. Valid law
2. Bonafide intent to incorporate under such valid
law
3. Actual exercise in good faith of such corporate
power.
 i.e. Majority of incorporators are not resident of
the Philippines; defect in form; acknowledged
before a person without authority.
 Only direct proceeding of quo warranto is
allowed. Collateral attack not allowed.
 Instituted by solicitor general
Corporation by estoppels (Sec 21)
 liable as general partner for all debts, liabilities
and damages.
Effects on non-use of corporate charter and
continuous inoperation of a corporation (Sec. 22)
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3. The ownership (Legal not beneficial ownership,
Not applicable if due to causes beyond e.g. pledgor, mortgagor) must be stand in the
the control of the corporation as name of the director in the book of the
determined by SEC corporation.
4. Majority must be residence of the Philippines
5. Not convicted by final judgment for an offense
Ground for suspension punishable
or by imprisonment of more than 6
Deemed dissolve revocation of corporate
years
6. Do not commit a violation of the corporation
franchise or certificate of
code within 5 years prior to the date of his
incorporation election or appointment.
Date of Not formally
organize, andContinuously inoperative
Incorporation Qualification of Corporate officer (Sec 25)
1. President – Must be director
Commence 2. Secretary – Resident and citizen of the
transaction Philippines

2of years
its 3. Treasurer – May or may not be a director
Apply to all:
business 5 years a. Not convicted by final judgment for an
offense punishable by imprisonment of
more than 6 years
Distinction between corporators and b. Do not commit a violation of the corporation
code within 5 years prior to the date of his
incorporators
election or appointment. (Sec 27)
Corporators (Sec 5) Incorporators (Sec 10)
Limited depending on the Limit only to not less thanConcurrent position of corporate officer (Sec 25)
available authorized capital five but not more than 15. 1. President + secretary – Not allowed
stock. 2. President + treasurer – Not allowed
Not signatories in the Originally formed 3. Secretary + treasure – Allowed
and
article of incorporation. signatories of the article of
incorporation By Laws
 May provide for the qualification of the director
They cease to be Remain as incorporators
a. At least 25 years of age
corporators when they are even no longer a holder of
b. Have some experience in business, finance
no longer a holder of shares of stock or law
shares of stock. c. Disqualify anyone who is competing with
the corporation
Corporator As long as the qualification imposed are
a. Stockholder or shareholder – Stock corporation reasonable and not meant to unjustly or
b. Member – non stock corporation unfairly deprive the minority of their rightful
representation in the Board of Directors, it is
valid.
Number and Qualifications of Incorporators
1. Not less than 5 but not more than 15 Report of election
2. Must be a natural person Submit to the SEC within 30 days by the secretary
3. All must be of legal age or any other officer of the corporation the result of
4. Majority must be resident of the Philippines the election containing the following:
5. Must be an owner or subscriber of at least one 1. Names
(1) share of capital stock 2. Nationalities
3. Residence of the director, trustee or officer
Number and Qualifications of Director (Sec 23) elected.
1. Not less than five but not more than 15 (Sec In case of:
14) a. Death – heir, secretary, or any officer, or
2. Owner of at least one share director or trustee himself

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RFBT2-Partnership and Corporation
b. Resign – secretary, or any officer, or
director or trustee himself
c. Any manner cease to hold office - secretary,
or any officer, or director or trustee himself
report such fact to the SEC
Removal of directors or trustees (Sec. 28)
Any director or trustee of a corporation may be
removed from office by a vote of the stockholders
holding or representing at least two-thirds (2/3) of
the outstanding capital stock, or if the corporation
be a non-stock corporation, by a vote of at least
two-thirds (2/3) of the members entitled to vote.
That such removal shall take place either at a
regular meeting of the corporation or at a special
meeting called for the purpose, and in either case,
after previous notice to stockholders or members of
the corporation of the intention to propose such
removal at the meeting.
Vacancies in the office of director (Sec 29)
1. Other than removal by the stockholders or
members or expiration of term – Majority of the
remaining directors or trustees if still
constituting quorum.
2. Removal by stockholder or members or
expiration of term or increase in the number of
director or other than (Removal, expiration or
increase) but was referred by the BOD to the
stockholders – Stockholder in a regular or
special meeting called for that purpose. (Sec
29)
Director or trustee elected - served only the
unexpired term of his predecessor in office.
Compensation of director (Sec 30)
General rule: No compensation except for
reasonable per diems
Exception: Provided for in by laws
1. Vote of the stockholders representing at
least a majority of the outstanding capital
stock at regular or special meeting
2. Total yearly compensation shall not exceed
10% of the net income before income tax of
the preceding year.
Liability of Corporate officers (Sec 31)
Liability: Jointly and severally for all damages
suffered by the corporation, stockholders or
members and other person when such director or
trustee:
1. Knowingly vote for or assent to patently
unlawful acts of the corporation;
2. Guilty of gross negligence or bad faith in
directing the affairs of the corporation;
Page 20 of 34
RFBT2
3. Acquire any personal or pecuniary interest in
conflict with their duty as director or trustee
Liable as trustee for the corporation + account for
the profit (otherwise accrued to the corporation)
when the director, trustee or officer attempts to
acquire/acquires in violation of his duty:
1. Any interest adverse to the corporation which
has reposed to him in confidence
2. Where equity imposes a disability upon him to
deal in his own behalf
Self dealing director (Sec 32)
Rule: A contract of the corporation with one or
more of its directors or trustees or officers is
voidable, at the option of such corporation
Exception: Valid when all the requisites are present
1. That the presence of such director or trustee in
the board meeting in which the contract was
approved was not necessary to constitute a
quorum for such meeting;
2. That the vote of such director or trustee was
nor necessary for the approval of the contract;
3. That the contract is fair and reasonable under
the circumstances;
4. That in case of an officer, the contract has been
previously authorized by the board of directors.
5. Full disclosure of the adverse interest of the
directors or trustees involved is made at such
meeting.
Absence of requisites 1 or 2 – Can be ratified by 2/3
of the outstanding capital stock or 2/3 of the
members.
Absence of requisite 3 – Cannot be ratified
Interlocking director (Sec 33)
Rule: Except in cases of fraud, and provided the
contract is fair and reasonable under the
circumstances, a contract between two or more
corporations having interlocking directors shall not
be invalidated on that ground alone.
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the stockholders owning or representing at least
Director two-thirds (2/3) of the outstanding capital stock.
This provision shall be applicable, notwithstanding
the fact that the director risked his own funds in the
venture.

Executive committee (Sec 35)

1. The by-laws of a corporation may create an
executive committee, composed of not less than
three members of the board, to be appointed by
the board.
2. Said committee may act, by majority vote of all
its members, on such specific matters within
the competence of the board, as may be
delegated to it in the by-laws or on a majority
Substantial Interest
Nominal Interest vote of the board.
Executive committees have no power to:
a. Approval of any action for which shareholders'

Corporation 1 Corporation 2
approval is also required;
b. The filing of vacancies in the board;
c. The amendment or repeal of by-laws or the
adoption of new by-laws;
d. The amendment or repeal of any resolution of
the board which by its express terms is not so
Presence of such amendable or repealable;
director or trustee
e. not
Distribution of cash dividends to the
necessary to shareholders.
constitute a quorum
Corporate powers and capacity (Sec 36)
for such meeting;Every corporation incorporated under this Code has
the power and capacity:
Vote of such director
Express Power Stockhold
or trustee was nor ers vote
necessary for the
approval of the 1. To sue and be sued in its corporate name; No
2. Of succession by its corporate name for
contract; the period of time stated in the articles of
Contract is fair and incorporation and the certificate of
reasonable under theincorporation; No
3. To adopt and use a corporate seal; No
circumstances; 4. To amend its articles of incorporation in
Full disclosure of the accordance with the provisions of this Yes
adverse interest of theCode;
5. To adopt by-laws, not contrary to law,
directors or trustees morals, or public policy, and to amend or Yes
involved is made at repeal the same in accordance with this
such meeting. Code;
6. In case of stock corporations, to issue or
Disloyalty of a director (Sec 34) sell stocks to subscribers and to sell stocks
Where a director, by virtue of his office, acquires for to subscribers and to sell treasury stocks
himself a business opportunity which should belong in accordance with the provisions of this No
to the corporation, thereby obtaining profits to the Code; and to admit members to the
prejudice of such corporation, he must account to corporation if it be a non-stock
the latter for all such profits by refunding the corporation;
same, unless his act has been ratified by a vote of 7. To purchase, receive, take or grant, hold,
Page 21 of 34
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RFBT2-Partnership and Corporation
convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal
property, including securities and bonds of
other corporations, as the transaction of
the lawful business of the corporation may Yes
reasonably and necessarily require, subject
to the limitations prescribed by law and Yes
the Constitution;
8. To enter into merger or consolidation with
other corporations as provided in this
Code;
9. To make reasonable donations, including
those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or No
similar purposes: Provided, That no
corporation, domestic or foreign, shall give
donations in aid of any political party or No
candidate or for purposes of partisan
political activity;
10. To establish pension, retirement, and other
plans for the benefit of its directors, No
trustees, officers and employees; and
11. To exercise such other powers as may be
essential or necessary to carry out its
purpose or purposes as stated in the
articles of incorporation. (Implied power)
Express power – (Par 1 -10)
Implied power – Reasonably necessary to exercise
the express power to accomplish or carry out the
purpose for which the corporation was formed.
Incidental power – Indispensably necessary to carry
out the purpose
Note: Cororation can exercise only power conferred
by corporation code or by its article of incorporation
except such as are necessary or incidental to the
exercise of the powers so conferred (Intra vires
act). Otherwise the act of the corporation is
ultravires act (Sec 45)
Power to extend or shorten corporate term
(Sec 37)
1. Majority vote of the BOD + 2/3 of the
outstanding capital stock or 2/3 of the embers.
2. Written notice of the proposed action and of the
time and place of the meeting shall be
addressed to each stockholder or member at his
place of residence as shown on the books of the
corporation and deposited to the addressee in
the post office with postage prepaid, or served
personally.
3. Extension of corporate term (sec 37) or
shortening the term of corporate existence (Sec
81), any dissenting stockholder may exercise
his appraisal right.
Page 22 of 34
RFBT2
Power to increase/decrease capital stock; Increase
bond indebtedness (Sec 38)
1. Written notice of the proposed
Increase/decrease of stock or increase in
bonded indebtedness
2. State the time and place of the stockholders
meeting
3. Addressed to each stockholder at his place
of residence as shown in the books of the
corporation
4. Deposit in the post office or served
personally
5. Approval of the SEC
6. Certificate in Duplicate signed by majority
of the directors and countersigned by the
chairman and secretary stating the
following:
a. Compliance with the requirement
b. Amount of increase/decrease capital
stock
c. Names/nationalities/residence of the
persons subscribing, the amount of
capital stock subscribe or # of no par
shares subscribed. If stock dividend -
allotted to each stockholder.
d. Bond incurred, created or increased
e. Actual indebtedness on the day of the
meeting
f. Amount of stock represented at the
meeting
g. Vote authorizing the increase/decrease
of stock or increase in bond
indebtedness.
7. Duplicate certificate – one kept in the office
of the corporation and one filed with the
SEC
8. For increase in stock – sworn statement of
the treasure (lawfully at the time of filing)
of the corporation showing 25% of such
increased capital stock has been subscribed
and 25% of amount subscribed has been
paid.
9. Decrease in stock – Not approved if it effect
prejudice the right of corporate creditor
(Trust fund doctrine)
10. Bond – Registered with the SEC
11. Non stock corporation – Majority of the
board of trustee + 2/3 of the member
Types of Bond
1. Mortgage bonds – Bonds secured by mortgage
on real properties.
2. Collateral trust bonds – Bonds secured by
stocks and bonds of other corporation.
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
RFBT2-Partnership and Corporation
3. Debenture bonds – Bonds without collateral
security.
4. Registered bonds – Requires the registration of
the name of the bondholders on the books of
the corporation.
5. Coupon or bearer bonds – are unregistered
bonds in the sense that the name of the
bondholder is not recorded on the company
books.
6. Convertible bonds – are those which give the
holders thereof the right to convert their
bondholdings into share capital or other
securities of the issuing company within a
specified period of time.
7. Callable bonds – are bonds issued whereby
another party promises to make payment if the
borrowing company fails to do so.
8. Junk bonds – are high risk, high yield bonds
issued by enterprises that are heavily indebted
or otherwise in weak financial condition.
9. Treasury bonds – are company’s own bonds
originally issued and reacquired but not
cancelled.
10. Term bonds – are bonds with a single date of
maturity.
11. Serial bonds – are those with a series of
maturity dates.
Power to deny pre-emptive right (Sec 39)
Rule: All stockholders of a stock corporation shall
enjoy pre-emptive right to subscribe to all issues or
disposition of shares of any class, in proportion to
their respective shareholdings.
Exception:
1. Denied in the articles of incorporation or an
amendment thereto
2. Shares to be issued in compliance with laws
requiring stock offerings or minimum stock
ownership by the public;
3. Shares to be issued in good faith with the
approval of the stockholders representing two-
thirds (2/3) of the outstanding capital stock, in
exchange for property needed for corporate
purposes or in payment of a previously
contracted debt.
Sale or disposition of assets (Sec 40)
Sale of all or substantially all including goodwill - if
thereby the corporation would be rendered
incapable of continuing the business or
accomplishing the purpose for which it was
incorporated
1. Subject to existing laws on illegal combinations
and monopolies
Page 23 of 34
RFBT2
2. Majority of the BOD or trustees + 2/3 of
outstanding capital stock (2/3 of the members)
3. Written notice of the proposed action and of the
time and place of the meeting shall be
addressed to each stockholder or member at his
place of residence as shown on the books of the
corporation and deposited to the addressee in
the post office with postage prepaid, or served
personally.
4. Exercise of appraisal right
5. After approval of the stockholder – BOD may
abandon such sale subject to the right of 3 rd
person without further approval by the
stockholder or member.
Note:
No vote of stockholders is required
1. Sale of assets which is necessary in the usual
and regular course of business, or
2. If the proceeds of the sale or other disposition
of such property and assets be appropriated for
the conduct of its remaining business.
Power to acquire own shares (Sec 41)
1. Legitimate corporate purpose or purposes,
including but not limited to the following cases:
a. To eliminate fractional shares arising out of
stock dividends
b. To collect or compromise an indebtedness
to the corporation, arising out of unpaid
subscription, in a delinquency sale, and to
purchase delinquent shares sold during said
sale; and
c. To pay dissenting or withdrawing
stockholders entitled to payment for their
shares under the provisions of this Code.
2. Corporation has unrestricted retained earnings
in its books to cover the shares to be purchased
or acquired.
Investment of Fund in another corporation
(Sec 42)
Other than primary purpose
1. Majority of the board of directors or trustees
and ratified by the stockholders representing at
least two-thirds (2/3) of the outstanding capital
stock or members stockholder's or member's
meeting duly called for the purpose.
2. Written notice of the proposed investment and
the time and place of the meeting shall be
addressed to each stockholder or member at his
place of residence as shown on the books of the
corporation and deposited to the addressee in
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RFBT2-Partnership and Corporation

the post office with postage prepaid, or served of the outstanding capital stock, or by at least a
personally. majority of the members in the case of a non-stock
corporation, of both the managing and the
Investment of fund which is reasonably necessary managed corporation, at a meeting duly called for
to accomplishment its primary purpose as stated in the purpose:
the article of incorporation. Exception: Then the management contract must be
1. Approval of the stockholders or members shall approved by the stockholders of the managed
not be necessary corporation owning at least two-thirds (2/3) of the
total outstanding capital stock entitled to vote, or
Power to declare dividend (Sec 43) by at least two-thirds (2/3) of the members in the
Rule: BOD can declare only dividend out of the case of a non-stock corporation under the following:
unrestricted retained earnings (1) Where a stockholder or stockholders
Cash/property Stock dividend representing the same interest of both the
dividend managing and the managed corporations own
Delinquent 1st applied to Withheld until his or control more than one-third (1/3) of the
unpaid balance on unpaid total outstanding capital stock entitled to vote
the subscription subscription is of the managing corporation; or
plus cost and fully paid (2) Where a majority of the members of the board
expense of directors of the managing corporation also
Approval of Without approval 2/3 of the constitute a majority of the members of the
the of stockholders. outstanding board of directors of the managed corporation
stockholder capital stock
(Regular/special General Rule: No management contract shall be
meeting) entered into for a period longer than five years for
any one term.
Rule: Corporation prohibited to retain surplus profit Exception: That such service contracts or operating
(unappropriated retained earnings) in excess of agreements which relate to the exploration,
100% of their paid in capital development, exploitation or utilization of
Exception: natural resources may be entered into for such
1. Definite corporate expansion projects or periods as may be provided by the pertinent laws or
programs (appropriation for expansion project) regulations.
2. Prohibition under any loan agreement with any
financial institution or creditor without its/his Ultra vires acts of corporations.
consent, and such consent has not yet been No corporation under this Code shall possess or
secured; or (Appropriation for bond exercise any corporate powers except those
redemption) conferred by this Code or by its articles of
3. Retention is necessary under special incorporation and except such as are necessary or
circumstances obtaining in the corporation, incidental to the exercise of the powers so
such as when there is need for special reserve conferred. (Sec. 45)
for probable contingencies. (Appropriation for
contingency) Summary of vote Major Major Stockhol
4. Addition: provided by law. (appropriation for required for corporate ity of ity of der
treasury stock) act BOD the Maj 2/
Quor orit 3
Power to enter into management contract y
um of
(Sec. 44)
No corporation shall conclude a management the
contract with another corporation (also apply to any BOD
contract whereby a corporation undertakes to Amendment of Article of √ √
manage or operate all or substantially all of the Incorporation (Sec 16)
business of another corporation, whether such Election of Directors or √
contracts are called service contracts, operating trustees (Sec 24 & 29)
agreements or otherwise) unless such contract shall Removal of Director or √
have been approved by the board of directors and trustees (Sec 28)
by stockholders owning at least the majority
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Calling for special meeting √ amend the by-laws (Sec
for removal of director or 48)
trustee (Sec 28) Fixing the issuance price of √
Filing of vacancy other than √ no par value share by the
removal or expiration of BOD when authorized by
term (Sec 29) the Article of Incorporation
Compensation of directors √ (Sec 62)
(Sec 30) Fixing the issuance price of √
Self dealing director (Sec no par value share in the
32) absence of price fixed in the
Interlocking director (Sec articles of incorporation or
33) authority given to the BOD
Disloyalty of a director (Sec to fixed the issuance price
34) (Sec 62)
Delegation of power to √ Merger or consolidation √ √
executive committee (Sec (Sec 77)
35) Adopt a plan of √ √
Extension or shortening √ distribution of assets of
of corporate term (Sec a non stock corporation
37) Corporate dissolution √ √
Increase or decrease √ (Sec 118)
capital stock (Sec 38) Adoption of by-laws prior to Approved and signed by all
Incur, create or increase √ incorporation (Sec 46) the incorporators
bond indebtedness (Sec Nota Bene: Letter in bold letter are required to
38) be approved by both the BOD and
Denial of pre emptive √ stockholders or members.
right (Sec 39) * However, in case (1) where a stockholder or
Sale or disposition of all √ stockholders representing the same interest of both
or substantially all of the managing and the managed corporations own
or control more than one-third (1/3) of the total
corporate property (Sec
outstanding capital stock entitled to vote of the
40) managing corporation; or (2) where a majority of
Investment of corporate √ the members of the board of directors of the
fund in another managing corporation also constitute a majority of
corporation other than the members of the board of directors of the
for primary purpose (Sec managed corporation then the management
42) contract must be approved by the stockholders of
Declaration of stock √ the managed corporation owning at least two-thirds
(2/3) of the total outstanding capital stock entitled
dividend (Sec 43)
to vote, or by at least two-thirds (2/3) of the
Management contract √ √
members in the case of a non-stock corporation.
(Sec 44)* (Sec 44)
Adoption of by-laws after √
incorporation (Sec 46) Director meeting Stockholder
Amendment of by-laws √ √ meeting
(Sec 48)  Proxy  Proxy vote not  Proxy vote
Delegation of power to the allowed (Sec 25) allowed
Board to amend the by-  Date of  Regular meeting  Regular
laws (Sec 48) meetin – monthly unless meeting –
To revoke the delegated √ g the By law annually as
provide fixed by the by
power given to the Board to
otherwise. (Sec law if not (any

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53) date in April) meetin
 Special meeting – + written g
At anytime upon notice 2 weeks
call of the prior to
president or meeting. Proper person to call meeting
provided in the  Special 1. Person designated in the by laws have authority
by laws. (Sec 53) meeting – at to call stockholder’s or members meetings.
 Regular and any time2. In the absence of such provision in the by laws,
special meeting deemed the meeting may be called by a director or
required a notice necessary + trustee or by officer entrusted with the
of at least 1 day written notice management of the corporation.
prior to scheduled 1 week prior 3. When there is no person authorized to call a
meeting unless to meeting or meeting, the Secretaries and Exchange
the by law stated in by Commission, upon petition of a stockholder or
provide. law. member on a showing of good cause therefor,
 Notice can be may issue an order to the petitioning
waived express of stockholder or member directing him to call a
implied. meeting of the corporation by giving proper
 Place of  Anywhere in or  City or notice required by this Code or by the by-laws.
meetin out side of the municipality (Sec 50)
g Philippines where the
4. A special meeting of the stockholders or
unless the by law principal office members of a corporation for the purpose of
provide of the removal of directors or trustees, or any of
otherwise. (Sec corporation is them, must be called by the secretary on order
53) located of the president or on the written demand of
(preferred at the stockholders representing or holding at
the principal least a majority of the outstanding capital
office of the stock, or, if it be a non-stock corporation, on
corporation). the written demand of a majority of the
 Improperly members entitled to vote. (Sec 28)
held or called 5. Special meetings of the board of directors or
– valid if trustees may be held at any time upon the call
within the of the president or as provided in the by-laws.
power or (Sec 53)
authority of
the Voting power
corporation 1. Pledgor/mortgagor – Right to vote is expressly
and provided given by the pledgor or mortgagor such right in
all writing which is recorded on the appropriate
stockholders corporate books. (Sec 55)
or members 2. Executor/administrator/receiver and other legal
are present or representative appointed by the court without
duly any written proxy. (Sec 56)
represented. 3. Treasury shares no right to vote as long as
 Quoru  Majority of the  Majority of the remain in treasury. (Sec 57)
m BOD/trustee as outstanding 4. Proxies (Sec 58)
fixed in the article capital stock a. In writing
of incorporation or majority of b. Signed by stockholder or member
unless the article the members. c. Filed before the scheduled meeting with the
or by law (Sec 52) corporate secretary
provides a d. Valid only for the meeting which it is
greater majority. intended
(Sec 25) e. If provided a period, it has a limit for a
 Preside  President shall preside unless the by period of 5 years.
the law provide otherwise 5. Voting trusts
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a. Must be in writing and notarized Subject to the provisions of the Constitution, this
b. Specify the term and condition Code, other special laws, and the articles of
c. Filed with the corporation and the SEC incorporation, a private corporation may provide in
d. Period of agreement not to exceed 5 years its by-laws for:
except voting trust specifically required as a 1. The time, place and manner of calling and
condition in a loan agreement conducting regular or special meetings of the
(automatically expire upon payment of the directors or trustees;
loan) 2. The time and manner of calling and conducting
e. Certificate of stock covered by voting trust regular or special meetings of the stockholders
agreement shall be cancelled and a new one or members;
shall be issued in the name of the trustee. 3. The required quorum in meetings of
f. The book of corporation shall noted the stockholders or members and the manner of
transfer voting therein;
g. Not valid if the purpose is circumventing the 4. The form for proxies of stockholders and
law against monopolies and illegal members and the manner of voting them;
combinations in restraint of trade or used 5. The qualifications, duties and compensation of
for purposes of fraud. directors or trustees, officers and employees;
h. Automatically expire at the end of the 6. The time for holding the annual election of
agreed period unless renewed. directors of trustees and the mode or manner
May be voted by proxy unless the agreement of giving notice thereof;
prohibit it. 7. The manner of election or appointment and the
term of office of all officers other than directors
Adoption of by-laws (Sec. 46) or trustees;
Every corporation formed must, within one (1) 8. The penalties for violation of the by-laws;
month after receipt of official notice of the issuance 9. In the case of stock corporations, the manner
of its certificate of incorporation by the Securities of issuing stock certificates; and
and Exchange Commission, adopt a code of by-laws 10. Such other matters as may be necessary for
for its government not inconsistent with the the proper or convenient transaction of its
corporation Code. corporate business and affairs.
The Securities and Exchange Commission shall not
accept for filing the by-laws or any amendment Stock Non stock corporation
thereto of any bank, banking institution, building corporation
and loan association, trust company, insurance Number of Not less May be more than fifteen
company, public utility, educational institution or director than 5 but (15) in number as may be
other special corporations governed by special laws, not more fixed in their articles of
unless accompanied by a certificate of the than 15 incorporation or by-laws
appropriate government agency to the effect that Term of One (1) year Term of office of one-third
such by-laws or amendments are in accordance office of until their (1/3) of their number shall
with law. the successors expire every year; and
director/ are elected subsequent elections of
Amendments to by-laws (Sec. 48) trustees and qualified. trustees comprising one-
Whenever any amendment or new by-laws are (Sec 23) third (1/3) of the board of
adopted, such amendment or new by-laws shall be trustees shall be held
attached to the original by-laws in the office of the annually and trustees so
corporation, and a copy thereof, duly certified under elected shall have a term of
oath by the corporate secretary and a majority of three (3) years. (Sec 92)
the directors or trustees, shall be filed with the Purpose For profit. Organized for charitable,
Securities and Exchange Commission the same to religious, educational,
be attached to the original articles of incorporation professional, cultural,
and original by-laws. fraternal, literary, scientific,
The amended or new by-laws shall only be effective social, civic service, or
upon the issuance by the Securities and Exchange similar purposes, like trade,
Commission of a certification that the same are not industry, agricultural and
inconsistent with this Code. like chambers, or any
Contents of by-laws (Sec 47) combination thereof. (Sec
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88) not fully paid which are not delinquent shall
Voting Cumulative Non cumulative (entitled to have all the rights of a stockholder. (Sec. 72)
1 vote) unless authorized A subscription for shares of stock of a
under the article of corporation still to be formed (Sec 61)
incorporation or by laws. BEFORE submission of articles of incorporation
(Sec 89) to the SEC
Manner of Voting either Voting by mail or other a. Irrevocable for a period of at least six (6)
voting in person or similar means by members months from the date of subscription
by of non-stock corporations Exception:
representative may be authorized by the 1. All of the other subscribers consent to
authorized to by-laws of non-stock the revocation,
act by written corporations. (Sec 89) 2. The incorporation of said corporation
proxy (Sec fails to materialize within said period or
24) within a longer period as may be
Distributio Authorized to Not authorized to distribute stipulated in the contract of
n of distribute dividends to its members, subscription:
dividend dividends to trustees or officers. (Sec AFTER submission of articles of incorporation to
stockholders 87) the SEC
Transferab Transferrable Membership in a non-stock No pre-incorporation subscription may be
ility of corporation and all rights revoked
interest arising therefrom 
are Consideration for stocks - Stocks shall not be
personal and issued for a consideration less than the par or
transferable, unless the issued price thereof otherwise it is watered
articles of incorporation or stock. (Sec 62)
the by-laws otherwise 1. Actual cash paid to the corporation;
provide. (Sec 90) 2. Property, tangible or intangible, actually
Ownership At least owner Member of the corporation. received by the corporation and necessary
of director of one share (Sec 92) or convenient for its use and lawful
of stock purposes at a fair valuation equal to the par
Stockholde City or Any place in the Philippines or issued value of the stock issued;
r/member municipality even outside the place 3. Labor performed for or services actually
Place of where the where the principal office of rendered to the corporation;
meeting principal place the corporation is located. 4. Previously incurred indebtedness of the
(Regular office of the (Sec 93) corporation;
and corporation is 5. Amounts transferred from unrestricted
special) located, and if retained earnings to stated capital; and
practicable in 6. Outstanding shares exchanged for stocks in
the principal the event of reclassification or conversion.
place of the a. When consideration is other than actual
corporation. cash, or consists of intangible property
(Sec 51) such as patents of copyrights, the valuation
Metro manila thereof shall initially be determined by the
is considered incorporators or the board of directors,
city or subject to approval by the Securities and
municipality. Exchange Commission.
b. Shares of stock shall not be issued in
STOCK AND STOCKHOLDERS exchange for promissory notes or future
 Any contract for the acquisition of unissued service.
stock in an existing corporation or a corporation
still to be formed shall be deemed a No par value share
subscription notwithstanding the fact that the 1. Fixed in the article of incorporation
parties refer to it as a purchase or some other 2. Board of directors pursuant to authority
contract. (Sec 60) Holders of subscribed shares conferred upon it by the articles of
incorporation or the by-laws

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3. Stockholders representing at least a
majority of the outstanding capital stock at
a meeting duly called for the purpose.
 Shares of stock so issued are personal property
and may be transferred by delivery of the
certificate or certificates indorsed by the owner
or his attorney-in-fact or other person legally
authorized to make the transfer. (Sec 63)
 No transfer, however, shall be valid, except as
between the parties, until the transfer is
recorded in the books of the corporation
showing the names of the parties to the
transaction, the date of the transfer, the
number of the certificate or certificates and the
number of shares transferred. (Ibid)
 No certificate of stock shall be issued to a
subscriber until the full amount of his
subscription together with interest and
expenses (in case of delinquent shares), if any
is due, has been paid. (Sec 64)
 Liability of directors for watered stocks (Sec 65)
Any director or officer of a corporation shall be
solidarily, liable with the stockholder concerned
to the corporation and its creditors for the
difference between the fair value received at
the time of issuance of the stock and the par or
issued value of the same.
a. Consenting to the issuance of stocks for a
consideration less than its par or issued
value or for a consideration in any form
other than cash, valued in excess of its fair
value,
b. Having knowledge thereof, does not
forthwith express his objection in writing
and file the same with the corporate
secretary.
 Subscribers for stock shall pay to the
corporation interest on all unpaid subscriptions
from the date of subscription, if so required by,
and at the rate of interest fixed in the by-laws.
If no rate of interest is fixed in the by-laws,
such rate shall be deemed to be the legal rate.
(Sec 66)
 Right of stockholders to bring suits
1. Derivative suit – One brought by one or
more stockholders or members in the name
and on behalf of the corporation to redress
wrongs committed against it or to protect or
vindicate corporate rights, whenever the
officials of the corporation refuse to sue, or
are the ones to be sued or hold control of
the corporation.
2. Individual suit – Action brought by a
stockholder against the corporation for
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direct violation of his contractual rights as
such individual stockholders. Any recovery
by the stockholder belongs to him.
3. Representative suit – When a wrong is
committed against a group of stockholders,
a stockholder may bring suit in behalf of
himself and all other stockholders who are
similarly situated.
 Remedies for payment of stock subscription
a. Extra judicial sale at public auction (Sec 67-
69)
1. Payment of any unpaid subscription or
any percentage thereof, together with
the interest accrued, if any, shall be
made on the date specified in the
contract of subscription or on the date
stated in the call made by the board.
2. Failure to pay on such date shall render
the entire balance due and payable and
shall make the stockholder liable for
interest at the legal rate on such
balance, unless a different rate of
interest is provided in the by-laws,
computed from such date until full
payment.
3. If within thirty (30) days from the said
date no payment is made, all stocks
covered by said subscription shall
thereupon become delinquent and
shall be subject to sale as, unless the
board of directors orders otherwise.
4. Board resolution ordering the sale of
delinquent stock and shall specifically
state the amount due on each
subscription plus all accrued interest,
and the date, time and place of the sale
which shall not be less than thirty (30)
days nor more than sixty (60) days
from the date the stocks become
delinquent.
5. Copy of the resolution, shall be sent to
every delinquent stockholder either
personally or by registered mail
6. Published once a week for two (2)
consecutive weeks in a newspaper of
general circulation in the province or
city where the principal office of the
corporation is located.
7. Delinquent stock shall be sold at public
auction to such bidder who shall offer
to pay the full amount of the balance on
the subscription together with accrued
interest, costs of advertisement and
expenses of sale, for the smallest
number of shares or fraction of a share.
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8. Stock purchased shall be transferred to
such purchaser in the books of the
corporation and a certificate for such
stock shall be issued in his favor.
9. Should there be no bidder at the public
auction the corporation may bid for the
same, and the total amount due shall
be credited as paid in full in the books
of the corporation. The shares acquired
by the corporation shall be held as
treasury shares.
b. Judicial Action - collecting by action in a
court of proper jurisdiction the amount due
on any unpaid subscription, with accrued
interest, costs and expenses. (Sec 70)
c. Collection from cash dividends and
withholding of stock dividends - Any cash
dividends due on delinquent stock shall first
be applied to the unpaid balance on the
subscription plus costs and expenses, while
stock dividends shall be withheld from the
delinquent stockholder until his unpaid
subscription is fully paid (Sec 43)
d. To deny delinquent shares the right to vote
-No delinquent stock shall be voted for be
entitled to vote or to representation at any
stockholder's meeting, nor shall the holder
thereof be entitled to any of the rights of a
stockholder. (Sec 71)
 No delinquent stock shall be voted for be
entitled to vote or to representation at any
stockholder's meeting, nor shall the holder
thereof be entitled to any of the rights of a
stockholder except the right to dividends in
accordance with the provisions of this Code,
until and unless he pays the amount due on his
subscription with accrued interest, and the costs
and expenses of advertisement, if any. (Sec 71)
CORPORATE BOOKS AND RECORDS
 Every corporation shall keep and carefully
preserve at its principal office a record of all
business transactions and minutes of all
meetings of stockholders or members, or of the
board of directors or trustees (Sec 74) including
stock and transfer book (Ibid)
 The records of all business transactions of the
corporation and the minutes of any meetings
shall be open to inspection by any director,
trustee, stockholder or member of the
corporation at reasonable hours on business
days and he may demand, writing, for a copy of
excerpts from said records or minutes, at his
expense. (Ibid)
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 Liability of the officer or agent of the
corporation for refusing any director, trustees,
stockholder or member of the corporation to
examine and copy excerpts from its records or
minutes
a. Shall be liable to such director, trustee,
stockholder or member for damages, and in
addition, shall be guilty of an offense which
shall be punishable under Section 144 of
this Code:
b. That if such refusal is made pursuant to a
resolution or order of the board of directors
or trustees, the liability under this section
for such action shall be imposed upon the
directors or trustees who voted for such
refusal:
Defenses under the code in refusing the person
demanding to examine and copy excerpts from
the corporation's records and minutes:
a. Improperly used any information secured
through any prior examination of the
records or minutes of such corporation or of
any other corporation,
b. Was not acting in good faith or
c. Not for a legitimate purpose in making his
demand.
 Stock and transfer book- in which must be kept
a record of all stocks in the names of the
stockholders alphabetically arranged; the
installments paid and unpaid on all stock for
which subscription has been made, and the date
of payment of any installment; a statement of
every alienation, sale or transfer of stock made,
the date thereof, and by and to whom made;
and such other entries as the by-laws may
prescribe.
Right to Financial Statement
1. Within ten (10) days from receipt of a written
request of any stockholder or member, the
corporation shall furnish to him its most recent
financial statement, which shall include a
balance sheet as of the end of the last taxable
year and a profit or loss statement for said
taxable year, showing in reasonable detail its
assets and liabilities and the result of its
operations.
2. At the regular meeting of stockholders or
members, the board of directors or trustees
shall present to such stockholders or members
a financial report of the operations of the
corporation for the preceding year, which shall
include financial statements, duly signed and
certified by an independent certified public
accountant.
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3. However, if the paid-up capital of the
corporation is less than P50,000.00, the
financial statements may be certified under
oath by the treasurer or any responsible officer
of the corporation.
MERGER AND CONSOLIDATION
 Two or more corporations may merge into a
single corporation which shall be one of the
constituent corporations or may consolidate into
a new single corporation which shall be the
consolidated corporation. (Sec 76)
 The merger or consolidation shall have the
following effects:
1. The constituent corporations shall become a
single corporation which, in case of merger,
shall be the surviving corporation
designated in the plan of merger; and, in
case of consolidation, shall be the
consolidated corporation designated in the
plan of consolidation;
2. The separate existence of the constituent
corporations shall cease, except that of the
surviving or the consolidated corporation;
3. The surviving or the consolidated
corporation shall possess all the rights,
privileges, immunities and powers and shall
be subject to all the duties and liabilities of
a corporation organized under this Code;
4. The surviving or the consolidated
corporation shall thereupon and thereafter
possess all the rights, privileges, immunities
and franchises of each of the constituent
corporations; and all property, real or
personal, and all receivables due on
whatever account, including subscriptions to
shares and other choses in action, and all
and every other interest of, or belonging to,
or due to each constituent corporation, shall
be deemed transferred to and vested in
such surviving or consolidated corporation
without further act or deed; and
5. The surviving or consolidated corporation
shall be responsible and liable for all the
liabilities and obligations of each of the
constituent corporations in the same
manner as if such surviving or consolidated
corporation had itself incurred such
liabilities or obligations; and any pending
claim, action or proceeding brought by or
against any of such constituent corporations
may be prosecuted by or against the
surviving or consolidated corporation. The
rights of creditors or liens upon the property
of any of such constituent corporations shall
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not be impaired by such merger or
consolidation. (Sec 80)
Appraisal Right
Any stockholder of a corporation shall have the
right to dissent and demand payment of the fair
value of his shares in the following instances: (Sec
81)
1. In case any amendment to the articles of
incorporation has the effect of
a. Changing or restricting the rights of any
stockholder or class of shares;
b. Authorizing preferences in any respect
superior to those of outstanding shares of
any class;
c. Extending or shortening the term of
corporate existence;
2. Sale, lease, exchange, transfer, mortgage,
pledge or other disposition of all or substantially
all of the corporate property and assets.
3. Merger or consolidation.
4. Investment of corporate funds in another
corporation or business or for any other
purpose. (Sec 42)
 Exercise of appraisal right (Sec 82)
a. Any stockholder who shall have voted
against the proposed corporate action
b. Written demand on the corporation
within thirty (30) days after the date on
which the vote was taken for payment
of the fair value of his shares, failure to
make the demand within such period
shall be deemed a waiver of the
appraisal right.
c. Surrender of the certificate or
certificates of stock representing his
shares.
d. If within 60 days from the date the
corporate action was approved by the
stockholders, the withdrawing
stockholder and the corporation cannot
agree on the fair value of the shares,
the Fair value of the shares shall be
determined and appraised by three (3)
disinterested persons, one of whom
shall be named by the stockholder,
another by the corporation, and the third by
the two thus chosen and the same shall be
paid within 30 days after such awards.
e. The corporation has unrestricted retained
earnings in its books to cover such payment.
f. Upon payment by the corporation of the
agreed or awarded price, the stockholder
shall forthwith transfer his shares to the
corporation.
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 From the time of demand for payment of the fair
value of a stockholder's shares until either the
abandonment of the corporate action involved or the
purchase of the said shares by the corporation, all
rights accruing to such shares, including voting and
dividend rights, shall be suspended, except the right
of such stockholder to receive payment of the fair
value thereof: Provided, That if the dissenting
stockholder is not paid the value of his shares within
30 days after the award, his voting and dividend
rights shall immediately be restored. (Sec 83)
 No demand for payment may be withdrawn unless the
corporation consents thereto. If, however, such
demand for payment is withdrawn with the consent of
the corporation, or if the proposed corporate action is
abandoned or rescinded by the corporation or
disapproved by the Securities and Exchange
Commission where such approval is necessary, or if
the Securities and Exchange Commission determines
that such stockholder is not entitled to the appraisal
right, then the right of said stockholder to be paid the
fair value of his shares shall cease, his status as a
stockholder shall thereupon be restored, and all
dividend distributions which would have accrued on
his shares shall be paid to him. (Sec 84)
 The costs and expenses of appraisal shall be borne by
the corporation, unless the fair value ascertained by
the appraisers is approximately the same as the price
which the corporation may have offered to pay the
stockholder, in which case they shall be borne by the
latter. (Sec 85)
NON-STOCK CORPORATIONS
Is one where no part of its income is distributable as
dividends to its members, trustees, or officers. Provided
that any profit which a non-stock corporation may obtain
as an incident to its operations shall, whenever necessary
or proper, be used for the furtherance of the purpose or
purposes for which the corporation was organized. (Sec
87) It may be formed or organized for:
1. Charitable
2. Religious
3. Educational
4. Professional
5. Cultural
6. Fraternal
7. Literary
8. Scientific
9. Social
10. Civic service
11. Similar purposes like trade, industry, agricultural and
like chambers, or any combination thereof.
 The right of the members of any class or classes to
vote may be limited, broadened or denied to the
extent specified in the articles of incorporation or the
by-laws. Unless so limited, broadened or denied, each
member, regardless of class, shall be entitled to one
vote. (Sec 89)
 Membership in a non-stock corporation and all rights
arising therefrom are personal and non-transferable,
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unless the articles of incorporation or the by-laws
otherwise provide. (Sec 90)
 Unless otherwise provided in the articles of
incorporation or the by-laws, the board of trustees of
non-stock corporations, which may be more than
fifteen (15) in number as may be fixed in their articles
of incorporation or by-laws, shall, as soon as
organized, so classify themselves that the term of
office of one-third (1/3) of their number shall expire
every year; and subsequent elections of trustees
comprising one-third (1/3) of the board of trustees
shall be held annually and trustees so elected shall
have a term of three (3) years. Trustees thereafter
elected to fill vacancies occurring before the
expiration of a particular term shall hold office only
for the unexpired period. (Sec 92)
 No person shall be elected as trustee unless he is a
member of the corporation. (Ibid)
 Unless otherwise provided in the articles of
incorporation or the by-laws, officers of a non-stock
corporation may be directly elected by the members.
(Ibid)
 The by-laws may provide that the members of a non-
stock corporation may hold their regular or special
meetings at any place even outside the place where
the principal office of the corporation is located:
Provided, That proper notice is sent to all members
indicating the date, time and place of the meeting:
and Provided, further, That the place of meeting shall
be within the Philippines. (Sec 93)
CLOSE CORPORATION
 All corporation’s issued shares are not owned by not
more than twenty (20) person
 Issued stock are subject to specified restriction on
transfer
 Cannot be listed in any stock exchange or make any
public offering of any of its stock of any class.
 A corporation is not a close corporation when at least
two-thirds (2/3) of its voting stock or voting rights is
owned or controlled by another corporation which is
not a close corporation.
 Cannot incorporate
a. Mining or oil companies
b. Stock exchanges
c. Banks
d. Insurance companies
e. Public utilities
f. Educational institutions
g. Corporation vested with public interest
 The articles of incorporation may provide that the
business of the corporation shall be managed by the
stockholders of the corporation rather than by a board
of directors. So long as this provision continues in
effect:
1. No meeting of stockholders need be called to
elect directors;
2. Unless the context clearly requires otherwise, the
stockholders of the corporation shall be deemed
to be directors for the purpose of applying the
provisions of this Code; and
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3. The stockholders of the corporation shall be
subject to all liabilities of directors
 The articles of incorporation may likewise provide that
all officers or employees or that specified officers or
employees shall be elected or appointed by the
stockholders, instead of by the board of directors.
SPECIAL CORPORATIONS
EDUCATIONAL CORPORATIONS
 Trustees of educational institutions organized as non-
stock corporations shall not be less than five (5) nor
more than fifteen (15): Provided, however, That the
number of trustees shall be in multiples of five (5)
(Sec 108)
 Unless otherwise provided in the articles of
incorporation on the by-laws, the board of trustees of
incorporated schools, colleges, or other institutions of
learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of
their number shall expire every year. Trustees
thereafter elected to fill vacancies, occurring before
the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected
thereafter to fill vacancies caused by expiration of
term shall hold office for five (5) years. A majority of
the trustees shall constitute a quorum for the
transaction of business. The powers and authority of
trustees shall be defined in the by-laws.
 For institutions organized as stock corporations, the
number and term of directors shall be governed by
the provisions on stock corporations
RELIGIOUS CORPORATIONS
 Religious corporations may be incorporated by one or
more persons. Such corporations may be classified
into: (Sec 109)
a. Corporations sole - as trustee, the affairs,
property and temporalities of any religious
denomination, sect or church, a corporation sole
may be formed by the chief archbishop, bishop,
priest, minister, rabbi or other presiding elder of
such religious denomination, sect or church. (Sec
110)
1. From and after the filing with the
Securities and Exchange Commission of
the said articles of incorporation, such
chief archbishop, bishop, priest, minister,
rabbi or presiding elder shall become a
corporation sole.
2. Any corporation sole may purchase and hold
real estate and personal property for its
church, charitable, benevolent or educational
purposes, and may receive bequests or gifts
for such purposes. (Sec 113)
b. Religious societies. - Any religious society or
religious order, or any diocese, synod, or district
organization of any religious denomination, sect
or church, unless forbidden by the constitution,
rules, regulations, or discipline of the religious
denomination, sect or church of which it is a part,
or by competent authority, may, upon written
consent and/or by an affirmative vote at a
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meeting called for the purpose of at least two-
thirds (2/3) of its membership, incorporate for
the administration of its temporalities or for the
management of its affairs, properties and estate
by filing with the Securities and Exchange
Commission, articles of incorporation verified by
the affidavit of the presiding elder, secretary, or
clerk or other member of such religious society or
religious order, or diocese, synod, or district
organization of the religious denomination, sect
or church. (Sec 116)
DISSOLUTION
 Methods of dissolution (Sec 117)
a. Voluntary dissolution where no creditors are
affected (Sec 118)
1. Majority vote of the board of directors or
trustees,
2. Affirmative vote of the stockholders owning
at least two-thirds (2/3) of the outstanding
capital stock or members
3. Publication of the notice of time, place and
object of the meeting for three (3)
consecutive weeks in a newspaper published
in the place where the principal office of said
corporation is located; and if no newspaper
is published in such place, then in a
newspaper of general circulation in the
Philippines, after sending such notice to each
stockholder or member either by registered
mail or by personal delivery at least thirty
(30) days prior to said meeting.
4. A copy of the resolution authorizing the
dissolution shall be certified by a majority of
the board of directors or trustees and
countersigned by the secretary of the
corporation.
5. The Securities and Exchange Commission
shall thereupon issue the certificate of
dissolution.
b. Voluntary dissolution where creditors are affected
(Sec 119)
1. Petition signed by a majority of its board of
directors or trustees or other officers having
the management of its affairs for dissolution
shall be filed with the SEC
2. Affirmative vote of the stockholders
representing at least two-thirds (2/3) of the
outstanding capital stock or members.
3. SEC shall issue an order reciting the purpose
of the petition, fix a date on or before which
objections thereto may be filed by any
person, which date shall not be less than
thirty (30) days nor more than sixty (60)
days after the entry of the order.
4. Copy of the order shall be published at least
once a week for three (3) consecutive weeks
in a newspaper of general circulation
published in the municipality or city where
the principal office of the corporation is
situated or if no such newspaper, posted for
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
RFBT2-Partnership and Corporation
three (3) consecutive weeks in three (3)
public places in such municipality or city.
5. Upon five (5) day's notice, given after the
date on which the right to file objections as
fixed in the order has expired, the
Commission shall proceed to hear the
petition and try any issue made by the
objections filed; and if no such objection is
sufficient, and the material allegations of the
petition are true, it shall render judgment
dissolving the corporation.
c. Dissolution by shortening corporate term (Sec
120)
1. Amendment of articles of incorporation to
shorten the corporate term
2. Submission to the SEC
3. Approval by the SEC
d. Involuntarily (Sec 121)
1. Verified complaint
2. After proper notice and hearing on the
grounds provided by existing laws, rules and
regulations
Foreign Corporation
 One formed, organized or existing under any laws
other than those of the Philippines and whose laws
allow Filipino citizens and corporations to do business
in its own country or state. It shall have the right to
transact business in the Philippines after it shall have
obtained a license to transact business and a
certificate of authority from the appropriate
government agency. (Sec 123)
 A resident agent may be either an individual (must be
of good moral character and of sound financial
standing ) residing in the Philippines or a domestic
corporation lawfully transacting business in the
Philippines. (Sec 127)
 Any foreign corporation lawfully doing business in the
Philippines shall be bound by all laws, rules and
regulations applicable to domestic corporations of the
same class, except such only as provide for the
creation, formation, organization or dissolution of
corporations or those which fix the relations,
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RFBT2
liabilities, responsibilities, or duties of stockholders,
members, or officers of corporations to each other or
to the corporation. (Sec 129)
 No foreign corporation transacting business in the
Philippines without a license, or its successors or
assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or
administrative agency of the Philippines; but such
corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws.
(Sec 133)
 Grounds for the revocation of license
1. Failure to file its annual report or pay any fees as
required;
2. Failure to appoint and maintain a resident agent
in the Philippines
3. Failure, after change of its resident agent or of
his address, to submit to the Securities and
Exchange Commission a statement of such
change.
4. Failure to submit to the Securities and Exchange
Commission an authenticated copy of any
amendment to its articles of incorporation or by-
laws or of any articles of merger or consolidation
within the time prescribed
5. A misrepresentation of any material matter in
any application, report, affidavit or other
document submitted by such corporation
6. Failure to pay any and all taxes, imposts,
assessments or penalties, if any, lawfully due to
the Philippine Government or any of its agencies
or political subdivisions;
7. Transacting business in the Philippines outside of
the purpose or purposes for which such
corporation is authorized under its license;
8. Transacting business in the Philippines as agent
of or acting for and in behalf of any foreign
corporation or entity not duly licensed to do
business in the Philippines; or
9. Any other ground as would render it unfit to
transact business in the Philippines.