1.

Nature and Classes of Corporations

Definition:

A Corporation is an artificial being, being created by operation of law, having the right of
succession and the powers, attributes, and properties expressly authorized by law or incidental to its
existence.

Characteristics of a corporation:

1. It is an artificial being

2. Created by Operation of Law

3. It has the right of succession

4. It has powers, attributes, and properties expressly authorized by law or incidental to its
existence.

A. Corporation as an artificial being

-It has a juridical personality separate and distinct from its members.

-The corporation can enter into obligations in its own name.

- corporate property is not the property of the individual members.

- GR: Corporation cannot be liable for the separate obligation or liabilities of its members

XPN: Piercing the veil of Corporate fiction.

- The protection granted by the separate juridical personality of the corporation may
be disregarded if it is being used to protect a crime or perpetrate fraud. If not, then the vale
of corporate fiction should not be fixed. It must be done with caution.

2 ways to pierce the veil of corporate fictions

A. Disregard the corporate entity and make individual members liable

B. Consider 2 corporations as being controlled by 1.

Elements of peircing the veil

1. Control - Total control by the other corporation

2. Use of corporate fiction to commit a wrong or fraud

3. The damage is caused by the use of the corporate fiction.

 B. Created by Operation of law

- What law? Corporation Code

- Follow the requirements then it can be created.

C. It has the Right of Succession (continuation of its life)

- The corporation continues despite the change of members, directors, stock holders, etc.

D. It has powers, attributes, and properties expressly authorized by law or incidental to its
existence.

-Powers are either Express and Implied. It is written in the corporation code.

Classes of Corporations

As to Existence of Stocks

1. Stock Corporations - Corporations that have a capital stock divided into shares and are
authorized to distribute profits in the form of dividends to its stock holders/ shareholders. The
persons composing it are called stockholders

2. Non - Stock Corporations - Corporations that doesnt distribute dividends to its members. The
persons composing it are called members.

Ex. St. Lukes Medical Center.

As to Purpose

A. Public Corporation - Corporation organized for public purposes

B. Private Corporations - Corporations organized for private purposes / profit

As to Legality of Existence

A. De Jure Corporation - Organized in accordance with the requirements of the law.

B. De Facto Corporations - A corporation where there is a flaw in its incorporation.

C. Corporation by Estoppel - A group of persons who assume to act as a corporation

knowing it to be without authority to do so.

D. Corporation by Prescription - A corporation that has not been formally organized but
has been duly recognized because of immemorial usage as a corporation, with rights and
duties under the law.

Eg. Roman Catholic Church

As to laws of Incorporation

A. Domestic Corporation - Incorporated under Philippine laws

B. Foreign Corporation - Formed, organized under law other than Philippine laws

As to relationship of Management and Control

A. Parent Corporation - A corporation controlling the financial interest in one or more

corporation.

B. Subsidiary Corporation - the corporation controlled by a parent corporation. It is so

related to another corporation that the majority of its directors can be elected either
directly or indirectly by the other corporation.

As to whether it is for Religious Purpose or Not

A. Lay Corporation - A corporation organized for a purpose other than religion.

B. Ecclesiastical Corporation - A corporation organized for religious purposes.

As to whether they are open to the Public or Not

A. Open Corporations - Corporations which is open to any person who wishes to become a
stockholder or a member.

B. Closed Corporations - Corporations not open to the public and shall not list its stocks
publicly.

Other Kinds of Corporations

A. Eleemosynary Corporation - one established for charitable Purposes

B. Corporation Sole - A corporation incorporated consisting of only one member for the
purpose of managing the affairs and property of a religious sect or church.
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