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I. HISTORICAL BACKGROUND1. The Philippine Corporate Law
 When the Philippines came under American sovereignty, attention was drawn to the fact thatthere was no entity in Spanish law exactly corresponding to the notion ³corporation´ in Englishand American law; the Philippine Commission enacted the Corporation Law (Act No. 1459), tointroduce the American corporation into the Philippines as the standard commercial entity and tohasten the day when the
 sociedad anónima
of the Spanish law would be obsolete. The statute is asort of codification of American Corporate Law.
 Harden v. Benguet Consolidated Mining Co.
, 58 Phil. 141 (1933).
2
. The Corporation Law
 The first corporate statute, the Corporation Law, or Act No. 1459, became effective on 1 April1906. It had various piece-meal amendments during its 74 year history. It rapidly becameantiquated and not adapted to the changing times.
3. The Corporation Code
 The present Corporation Code, or 
 Batas Pambansa Blg 
. 68, became effective on 1 May 1980. Itadopted various corporate doctrines enunciated by the Supreme Court under the old CorporationLaw. It clarified the obligations of corporate directors and officers, expressed in statutorylanguage established principles and doctrines, and provided for a chapter on close corporations.
4
. Proper Treatment of Philippine Corporate Law
 Philippine Corporate Law comes from the common law system of the United States. Therefore,although we have a Corporation Code that provides for statutory principles, Corporate Law isessentially, and continues to be, the product of commercial developments. Much of thisdevelopment can be expected to happen in the world of commerce, and some expressed jurisprudential rules that try to apply and adopt corporate principles into the changing conceptsand mechanism of the commercial world.
II. CONCEPTS
 
S 
ee opening paragraphs of 
V
illanueva,
Corporate Contract Law,
38 Ateneo L.J. 1 (No. 2, June1994).
1. Definition: Corporation
is an artificial being created by operation of law, having the rightof succession and the powers, attributes and properties expressly authorized by law or incident toits existence. [Sec. 2. BP 68] ( See also Section 2; Articles 44(3), 45, 46, and 1775, Civil Code. )
2
. Tri-Level Existence of Corporation
 
 
(a) Aggregation of Assets and Resources(b) Business Enterprise or Economic Unit(c) Juridical Entity
3. Relationships Involved in Corporate Setting
 
(a) Juridical Entity Level
, which views the State-corporations relationship
(b) Contractual Relationship Level
, which considers that the corporate setting is at once acontractual relationship on four (4) levels:- Between the corporation and its agents or representatives to act in the real world, such as itsdirectors and its officers, which is governed also by the Law on Agency;- Between the corporation and its shareholders or members;- Between and among the shareholders in a common venture; and- Between the corporation and third-parties or ³outsiders´, which is essentially governed byContract Law.
4
. Theories on Formation of Corporation:
 
(a)
 
Theory of Concession
(
T 
ayag v. Benguet Consolidated Inc.
, 26 SCRA 242 [1968])To organize a corporation that could claim a juridical personality of its own and transact businessas such, is not a matter of absolute right but a privilege which may be enjoyed only under suchterms as the State may deem necessary to impose (x-
cf.
 
 Ang Pue & Co. v.
S 
ec. of Commerce and  Industry
, 5 SCRA 645 [1962]).Before a corporation may acquire juridical personality, the State must give its consent either inthe form of a special law or a general enabling act, and the procedure and conditions providedunder the law for the acquisition of such juridical personality must be complied with. The failureto comply with the statutory procedure and conditions does not warrant a finding that suchassociation achieved the acquisition of a separate juridical personality, even when it adopts setsof constitution and by-laws. x
 International Express
T 
ravel &
T 
our 
S 
ervices, Inc. v. Court of  Appeals,
343 SCRA 674 (2000).Since all corporations, big or small, must abide by the provisions of the Corporation Code, theneven a simple family corporation cannot claim an exemption nor can it have rules and practicesother than those established by law. x
T 
orres v. Court of Appeals
, 278 SCRA 793 (1997).
(b)
 
Theory of Enterprise Entity
(Berle,
T 
heory of Enterprise Entity
, 47 Col. L. Rev. 343[1947])
 
Corporations are composed of natural persons and the legal fiction of a separate corporate personality is not a shield for the commission of injustice and inequity, such as the use of separate personality to avoid the execution of the property of a sister company.x
T 
an Boon Bee& Co., Inc. v. Jarencio
, 163 SCRA 205 (1988). A corporation is but an association of individuals, allowed to transact under an assumedcorporate name, and with a distinct legal personality. In organizing itself as a collective body, itwaives no constitutional immunities and perquisites appropriate to such a body.x
 Philippine
S 
tock Exchange, Inc. v. Court of Appeals,
281 SCRA 232 (1997). 
5
. Four Attributes of Corporation from Statutory Definition:
 (a) A corporation is an artificial being(b) Created by operation of law(c) With right of succession(d) Only has powers, attributes and properties expressly authorized by law or incident to itsexistence
6. Advantages and Disadvantages of Corporate Form:
 
(a) Four Basic Advantageous Characteristics of Corporate Organization:
 (i) Strong Legal Personality- Entity attributable powers- Continuity of existence- PurposeThe corporation was evolved to make possible the aggregation and assembling of huge amountsof capital upon which big business depends; and has the advantage of non-dependence on thelives of those who compose it even as it enjoys certain rights and conducts activities of natural persons.
 Reynoso, IV v. Court of Appeals,
G.R. No. 116124-25, 22 November 2000.(ii) Centralized Management.(iii) Limited Liability to InvestorsOne advantage of a corporate business organization is the limitation of an investor¶s liability tothe amount of the investment, which flows from the legal theory that a corporate entity isseparate and distinct from its stockholders. x
S 
an Juan
S 
tructural and 
S 
teel Fabricators, Inc. v.Court of Appeals
, 296 SCRA 631, 645 (1998).
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