Notes (Bus. Org. II, 17 Nov.

2010 Lecture Transcript and Notes)

Classification of Corporations 1. As to stocks a. Stock corporation- is the ordinary business corporation created and operated for the purpose of making a profit which may be distributed in the form of dividends to stockholders on the basis of their invested capital. b. Non-stock corporation- do not issue stock and distribute dividends to their members and is created not for profit but for public good and welfare. 2. As to number of persons who compose them a. Corporation Aggregate- or a corporation consisting of more than one member or corporation. b. Corporation sole- a special form of corporation usually associated with the clergy. 3. As to whether they are for religious purpose or not a. Ecclesiastical corporation- one organized for religious purposes. b. Lay corporation- one organized for a purpose other than for religion. 4. As to whether they are for charitable purpose or not a. Eleemosynary corporation- one established for or devoted to charitable purposes. b. Civil corporation- one established for business or profit. 5. As to the State or by whose laws they have been created a. Domestic corporation- one incorporated under the laws of the Philippines b. Foreign corporation- one formed, organized or existing under any laws other than those of the Philippines. 6. As to their legal right to corporate existence a. De jure corporation- a corporation existing in fact and in law. b. De facto corporation- a corporation existing in fact but not in law. 7. As to whether they are open to the public or not a. Close corporation- one which is limited to selected persons or members of a family. b. Open corporation- one which is open to any person who may wish to become a stockholder or member thereto. 8. As to their relation to another corporation a. Parent holding corporation- one which is so related to another corporation that it has power, either directly or indirectly, to elect the majority of the directors of such other corporation. b. Subsidiary corporation- one which is so related to another corporation that the majority of its directors can be elected either directly or indirectly by such other corporation. c. Affiliated corporation- one so related to another by owning or being owned by common management or a long term lease of its properties or other device. 9. As to whether they are for public or private purpose a. Public corporations- those formed or organized for the government of a portion of the state for the general good and welfare. b. Private corporation- those formed for some private purpose, benefit or end. i. Government-owned and controlled corporation- created or organized by the government or of which the government is a majority stockholder. ii. Quasi public corporation- private corporations which have accepted from the State the grant of franchise or contract involving the performance of public duties but which are organized for profit.

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Notes (Bus. Org. II, 17 Nov. 2010 Lecture Transcript and Notes)
10. As to whether they are corporations in a true sense or only in a limited sense a. True corporation- one which exists by statutory authority b. Quasi-corporation- one which exists without formal legislative grant. i. Corporation by prescription- one which has exercised corporate powers for an indefinite period without interference on the part of the sovereign power and which by fiction of law is given the status of a corporation. ii. Corporation by estoppel- one which in reality is not a corporation, either de jure or de facto, because it is so defectively formed, but is considered a corporation in relation to those only who, by reason of their acts or admissions, are precluded from asserting that it is not a corporation. STOCK CORPORATION vs. NON-STOCK CORPORATION Stock Corporation- corporation which have capital stock divided into shares and are authorized to distribute to the holders of shares dividends or allotments of the surplus profits on the basis of the shares. Non-stock corporation- does not have stocks because they are created not for profits or business but for charitable purposes, etc. CAPITALIZATION (STOCK CORPORATION) ACS 10 M Shares 10,000,00 0 2,500,000 A- 500K B- 500K C- 500K D- 500K E- 500K SCS 2.5M If there are 5 incorporators: A- 500K B- 500K C- 500K D- 500K E- 500K PCS Par Value Profits 1peso/share 1M 1peso/share (625K) A- 125K B- 125K C- 125K D- 125K E- 125K A-200K B-200K C-200K D-200K E-200K Losses Dividends

AUTHORIZED CAPITAL STOCK --you should indicate in the AOI the maximum amount of the capital that the corporation intends to put up during its entire life. --although, as we said later that it may increase or decrease --so that if you have an ACS of 10M, thats the most that you can invest --so that if you need capital from the public, and you want the public to invest, you can only invite investors only up to 10M.

Authorized Capital Stock (ACS)- the maximum amount of capital that the corporation intends to put up. It is the amount as specified in the AOI. Subscribed Capital Stock (SCS)- amount that the SH committed to acquire. Paid up capital stock (PCS)- portion of the subscribed or outstanding capital stock that is actually paid. Par value- fixed value of the share stated in the AOI and indicated int the cert. of stock

--the moment your capitalization exceeds 10M, you do not have enough shares anymore so you cannot accept the investment if more than your ACS. SHARES --so if we divide the 10M into shares at 1peso, then there will be 10M shares at 1 peso per share. --this is what the law means when it said that in a stock corporation, its capital is divided it into shares

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Notes (Bus. Org. II, 17 Nov. 2010 Lecture Transcript and Notes)
--and to be able to divide it into shares, we must assign a par value for each share. It is up to the incorporators how much par value they will assign to each share. --RATIONALE for dividing the capital into shares: for purposes of measuring your shares in terms of profits or liabilities (measure your rights in the voting, shares in the profits or liability). SUBSCRIBED CAPITAL STOCKS --after determining the ACS and dividing it into shares, determine the SCS --this is the amount in peso which a SH committed to acquire or subscribe. --the law requires that only 25% of the 10M should be subscribed. --so that if there are 5 incorporators who agreed to subscribe equally, each will subscribe 500 K shares each. PAID UP CAPITAL STOCK --25% of the SCS should be actually paid, that is 625K or 125K for each. --since it will determine rights and liabilities, if there is a 1M peso profit, it will be distributed equally, so 200K for each or it could be that the profits will be distributed not as cash but as shares --sometimes, there will be losses, --and while we said that the liability of the SH is limited into to their stock holdings, they have not yet paid their entire stock holdings --they still owe the corp. From their commitment to pay 500K (500 shares), they only paid 125K, so they still have an obligation to the corp to the extent of 375K. --you should pay the balance, you cannot run away from that obligation, the corp cannot even say that you will not be made to pay the balance anymore. You cannot agree to forget about the balance. --RATIONALE: the SH holds the funds of corporation in trust for the public dealing with it [TRUST FUND DOCTRINE]. It is a commitment not among themselves but to the public; that these are the money that the corporation has. The money does not belong to the SH but for the corporation. The corporation on the other hand, cannot just give it or throw it away but holds its assets and capital in trust for the public who will deal with it. --so here, it is therefore possible that the corp. will suffer losses, who will bear the losse? --the SH because they still have a balance, an obligation to pay to the corp. on their share holdings --this is the PURPOSE of dividing the capital into shares. It is intended to measure ones share on the profits or losses or rights. NON-STOCK CORPORATION --on the other hand, if its is a non-stock corp. --there is no need to measure anything because it is not intended for profit. It is intended for another thing. --perhaps, charitable, religious, educational purposes --so although there is no need to measure, a corp. cannot exist without funds --here what the law requires, even if it is not for profit, there will be CONTRIBUTIONS --and for measuring contributions, the amount should not be less than P5 (minimum), --the contributions are not intended for measuring rights or liabilities but for the purpose of establishing your membership. --it is NON-ASSESSABLE, meaning, you pay it at one time. If you dont pay it at one time you are not yet a member. --since you pay it at one time, you do not talk of the TRUST FUND. --insofar as the SHs are concerned, they have already paid. ILLUSTRATION: In an exclusive clubs or country clubs, the coffee or other facilities are very expensive. From these products sold, they realize profits, but the profits earned do not go or are not distributed to the SH. The profits earned will be used to improve existing facilities or for expansions. In case of losses, the corp. do not ask the SH to contribute.

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