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CORPORATION LAW COMMERCIAL LAW
THE CORPORATION CODE OF THEPHILIPPINES(BATAS PAMBANSA BLG. 68)
Chapter IINTRODUCTION1. The Corporation as a LegalConcept
1.1 Corporation Defined
A Corporation is an artificial being created byoperation of law, having the right of succession andthe powers, attributes, and properties expresslyauthorized by law or incident to its existence. (§2)
A corporation is a creature of:
A general enabling statute (requirements of the law must be complied with); and
The agreement of individuals who seek toincorporate (internal contractualarrangements: articles of incorporation andby-laws).
1.2 Four attributes of a corporation
An artificial being:1.
a juridical person capable of having rightsand obligations, w/ a personality separateand distinct from its members orstockholders2.
hence, stockholders are not personallyliable for corp. obligations and cannot beheld liable to third persons who have claimsagainst the corp. beyond their agreedcontribution to the corporate capital
(paid-up capital and unpaid subscriptions)
This isknown as the doctrine of limited liability.Created by operation of law:1.
mere consent of the parties to form a corp.is not sufficient: the State must give itsconsent either through a special law (in thecase of a gov’t corp.) or a general law (fora private corp.)2.
the general law under w/c a private corp.may be formed or organized is theCorporation CodeHas the right of succession:1.
its continued existence during the termstated in its articles of incorp. cannot beaffected by any change in the members orstockholders2.
nor is it affected by the transfer of sharesby a stockholder to a 3
personHas the powers, attributes and properties expresslyauthorized by law or incident to its existence: as itis a mere creature of the law, it can exercise onlysuch powers as the law may choose to grant it,either expressly or impliedly
1.3..Advantages of the CorporateOrganizations
Separate juridical personality – personalityseparate and distinct from individualstockholders and members2)
Limited liability to investors – stockholders areliable only to the extent of their contribution
General rule: Where a corporation buys allthe shares of another corporation, this willnot operate to dissolve the othercorporation and as the two corporationsstill maintain their separate corporateentities, one will not answer for the debtsof the other. [Nell v Pacific Farms (15 SCRA415), Nov. 23, 1965]
If there is an express assumption of liabilities;o
There is a consolidation or merger;o
If the purchase was in fraud of creditors;o
If the purchaser becomes acontinuation of the seller;o
If there are unpaid subscriptions(stockholder is liable for the unpaidbalance).3)
Free transferability of units of ownership –stockholders hold their shares as personalproperty with rights to dispose, assign orencumber them as they may desire
Centralized Management – all corporate powersare exercised by the board of directors
1.4 Partnership vs. Corporation
Extent of Liability—partners are personallyliable for the debts of the partnership;stockholders cannot be made to personallyanswer to corporate creditors
Creation—mere agreement of the parties,w/c can be composed of just 2 persons,gives rise to the juridical personality of thepartnership, whether or not registered w/the SEC (Art. 1768, NCC); a corp., w/ aminimum of 5 incorporators, derives its juridical personality from the certificateissued by the SEC
Management—In most cases, all theowners in a partnership actively participatein management, w/ capacity to bind it byany usual contract (Art. 1818, NCC); in acorp., management is centralized in theboard of directors w/c has exclusive powerto bind the corp.
Nature of Relationship—partnership isbased on mutual trust and confidence(delectus personae) so that its existence isprecarious because of the facility w/ whichit can be dissolved (i.e. through the deathor unilateral act of a partner); a corp. hasmore stability as it enjoys the right of succession and is not affected by the deathor insolvency of a stockholder; also,dissolution before a corp.’s term requires a
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