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Reviewer, Corporation Code

Reviewer, Corporation Code

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Published by lonitsuaf

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Published by: lonitsuaf on Jun 19, 2012
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 A. Corporation An artificial being, created by operationof law, having the capacity of succession and thepowers, attributes and properties expressly authorized by law or incident to its existence (Sec.2, CC).B. Attributes of Corporation1.
 Artificial being It has a juridical personality existsindependently from stockholders,members or its officersa.
Doctrine of Corporate Entity 
Acorporation comes into existenceupon the issuance of the certificate of incorporation (Sec 19, CC). Then andonly then will it acquire a juridicalpersonality to sue and be sued, enterinto contracts, hold or convey property or perform any legal act, inits own name.i)
Residence and nationality 
 the Code does not providefor any citizenshiprequirement but only residency requirement for thequalification of incorporatorsii)
Constitutional rights
(a)Due process (Albert v.University Publishing, Inc.(13 SCRA 84 [1965]); (b)Equal protection of law (Smith Bell and Co. v.Natividad, 40 Phil. 136[1919]); (c) Protection againstunreasonable search andseizure (Stonehill v. Diokno,20 SCRA 383 [1967].iii)
Criminal liability 
Since acorporation is a mere legalfiction, it cannot be heldliable for a crime committedby its officers. It does nothave the essential element of malice.iv)
Right to recover moraldamages. A corporation isnot entitled to moraldamages because it has nofeeling, no emotions, nosenses (ABS
CBN v. CA,GR No. 128690, Jan 21,1999).However a corporationis entitled for moral damagesin cases of libel, slander, orany form of defamation. Art.2219(7) of the Civil Codedoes qualify whether theplaintiff is a natural orjuridical person (FilipinasBroadcasting Network. v. Ago Medical andEducational Center-Bicol, et.al, GR No. 141954, Jan. 17,2005)b.
Doctrine of piercing the veil of corporate entity 
the doctrine that acorporation is distinct from theperson composing it is a theory introduced for purposes of convenience and to serve the ends of justice. But when the veil of corporate fiction is used as a shield todefeat public convenience, justify  wrong, protect fraud or defend acrime, this fictin shall be disregardedand the individuals composing it willbe treated identically (Cruz v. Dalisay,152 SCRA 487 [1987]).It means that while thecorporation cannot be generally heldliable for act or liabilities of itsstockholders or members, and vice versa because a corporation has apersonality separate and distinct fromits members or stockholders,however the corporate existence isdisregarded under this doctrine whenthe corporation is formed or used forillegitimate purposes, particularly, as ashield to perpetuate fraud, defeatpublic convenience, justify wrong,evade a just and valid obligation ordefend a crime. The doctrine requires the courtto see through the protective shroud which exempts its stockholders fromliabilities that they are ordinarily  would be subject to, or distinguishesa corporation from a seemingly separate one, were it not for the
existing corporate fiction (Lim v. CA323 SCRA 102). The doctrine aims to protect theinterest of innocent third persondealing with the corporation.i)
 Alter ego principle orinstrumentality rule
Whenone corporation is soorganized and controlled andits affairs are conducted sothat it is in fact a mereinstrumentality or adjunct of the other, the fiction of thecorporate entity to theinstrumentality may bedisregarded (ConceptBuilders, Inc. v. NLRC, 257SCRA 149 [1996]. TEST: (1) Control, notmere majority or completestock control, but completedominion, not only of finances but of policy andbusiness in respect to thetransaction attacked so thatthe corporate entity as to thistransaction had at the timeno separate mind, will orexistence of its own; (2) Suchconcept must have been usedby the defendant to commitfraud or wrong in
contravention of plaintiff’s
legal right; and (3) theaforesaid control and breachof duty must proximately cause the injury or unjustloss complained of (ConceptBuilders, Inc. v. NLRC, 257SCRA 149 [1996].ii)
Probative factors of identity:(1) Stock ownership by oneor common ownership of both corporations; (2)Identity of directors andofficers; (3) The manner of keeping corporate books andrecords; and (4) Methods of conducting the business(Concept Builders, Inc. v.NLRC, 257 SCRA 149[1996].2.
Creature of law Corporation cannot come intoexistence by mere agreement of theparties as in the case of businesspartnership. It requires special grant fromState exercised by the legislature eitherthrough special incorporation law orcharter or general corporation law.i)
Constitutional limitations.Congress shall not, except by general law, provide for theformation, organization, orregulation of privatecorporations. Government-owned or controlled corporationmay be created or established by special charters in the interest of the common good and subject tothe test of economic viability (Art. 12, Sec. 16, 1987Constitution)3.
Right of successionIt is the capacity to havecontinuity of existence despite thechanges of the persons who compose it. Thus, the personality continues despitethe changes of stockholders, members,board members or officers.Unlike in partnership, the death,incapacity or civil interdiction of one ormore of its stockholders does not resultin its dissolution. It persists to existindependently of the individuals orpersons composing it.Continuity of existence: Therights and obligations of the a corporationare not affected by the death, incapacity or replacement of the individualmembers, but the corporate businesscontinues uninterrupted and unaffected aslong as the corporate entity continues.4.
Creature of enumerated powers, attributesand properties As it is a mere creature of thelaw, it can exercise only such powers asthe law may choose to grant it, eitherexpressly or impliedly 

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