MIDTERMS COVERAGE: VOLUNTARY MODES OF DISSOLVING

1. Shortening of corporate term (with or without creditors)

 Attributes of corporation 2. Failure to organize or commence business
 Theories and creation of corporation *Impairment of private contracts- no adoption of by-laws, etc.
 Classification of corporations (a) the cessation of corporate powers
 Stock shares -suability of a corporation may be sued (de jure corp) along with stockholders
 Stockholders -all corporate powers mawawala except power to be sued
 Nationality of a corporation *earnest money
 Modes of determining the nationality of a corporation (b) dissolution of the corporation- considered dissolved only if there's an issuance of
 General rule and exception of “doctrine of separate juridical entity” certificate of dissolution by SEC
 When to pierce the corporate veil? -deemed dissolved on the second year without purchase, sales etc.
3. Cessation of business within 5 years
 Creation of corporation
-1 month before 2nd yr, on the 5th yr the corporation will be ground to
 Minimum corporate requirements
termination and suspension if it didn’t commence
 Contents of articles of incorporation and by-laws
-Petition of issuance to dissolve (BIR); needed
 Stocks corporation only
 Apply of dissolution- continue
 Election of officers or trustees  Issuance
 Difference between AOI and by-laws -suspension or revocation of certificate
 Procedure of adopting by-laws
-the primary purpose is the basis for commencement of business
 Corporate powers (3) TRANSACTING BUSINESS. carrying out of purpose vs.
 Inherent powers FORMALLY ORGANIZING BUSINESS. exercise of corporate powers and the creation of that body to create powers (BOD)
 Express powers -corporate sole (i.e. catholic church)
 Implied powers VERIFIED DECLARATION OF DISSOLUTION VS. DECLARATION OF DISSOLUTION
 Fundamental right of stockholders Verified declaration of dissolution-needed (includes separate paper)
 Management -know what content -has capacity -no other petition (certificate of non-forum shopping), declaration

 Propriety -that is signed by lawyer

 Remedial Declaration of dissolution
 Voting requirements of stockholders and BOD  Involuntary- merger and consolidation
 Obligations of stockholders and BOD and their qualifications
 Methods of voting for board of directors INVOLUNTARY MODES OF DISSOLVING
1. Failure to renew from what was the original term
 Cumulative voting
Grounds for revocation
 Dividends
a. Fraud in procuring its certificate of registration
 The treatment or rem of dividends
b. Serious misrepresentations as to what the corp can do or is doing to the great
 Dissolution
prejudice of, or damage to, the general public
c. Refusal to comply with or defiance of any lawful order of the SEC restraining
commission of acts which would amount to grave violation of its franchise
d. Continuous inoperation for a period of at least 5 years
e. Failure to file by-laws within the required period
In reality, f. failure to file required reports in appropriate forms as determined by the SEC
within the prescribe period is NOT a ground for dissolution
see (PNB vs. CA)
SEC gives notice if there is failure to file required reports . . . -go back to refusal

Other grounds:
Sec. 144. Violations of the provisions of the Corporation Code not specifically penalized therein
Sec. 104. In case of deadlock in the mgt of the affairs and business of a close corp, the
SEC, upon written petition by any stockholder, shall have the power to make such order
as it deems appropriate, including an order dissolving the corporation
Quo warranto proceedings- when it has offended
- the non-use of franchise

LIQUIDATION 3 YEARS WINDING UP TERMINATION

ABC CORP. CONTRACT OF LEASE XYZ CORP. 50 TH

YEAR

4 years extended to 20 YEARS

16th 20th
 On the 16th yr, if XYZ CORP. hadn’t extend it corporate term or renew then AUTOMATIC DISSOLUTION
 Ipso facto- upon the expiration of original term

GR: After term, all terminated

Ex: For the purpose of liquidation or winding up

MODES OF LIQUIDATION
1 By the corporation itself
PS. If both (1) and (2) are
2 By trusteeship not applicable use 3 
3 Receivership

METHODS OF LIQUIDATION
1. Physically divided or partitioned
2. Property will undergo sale to a third person and the proceeds of that sale would be
distributed to the stockholders
3. Assessment of the property (assigned and transferred to 1 stockholder or 1 member
that stockholder have the obligation to pay the remaining members)
PS. All 1,2,3 must be in proportion to their shares
RIGHTS OF STOCKHOLDERS
1. Management- operation/ administer
2. Propriety
a. Right to dividend
b. Right of first refusal
c. Appraisal right
d. Right to inspect
e. Pre-emptive right
f. Right to vote
3. Remedial
a. Derivative suit- corporation vs. officers; corporation vs. sh A, sh B, & sh C
- stockholders can sue under its corporate name against officer
b. Individual suit- brought about by stockholders against corporation
- stockholder X, stockholder Y & stockholder Z vs. Corporation
c. Representative suit- representative of stockholders vs. representative of
corporation