THE CORPORATION CODE OF THE PHILIPPINES (BATAS PAMBANSA BLG.

68)
A. Definition and Attributes of a Corporation
Corporation
A corporation is an artificial being created by operation of law, having the right
of succession and the powers, attributes and properties expressly authorized
by law or incident to its existence.
Attributes of a corporation
1. It is an artificial being
2. It is created by operation of law
3. It has the right of succession
4. It has the powers, attributes and properties expressly authorized by law
or incident to its existence.
Corporation as an artificial being
A corporation is a juridical entity with a personality separate and distinct from
its members or stockholders. It is not a person but the law treats it as though it
is a person. The stockholders or members compose the corporation but they
are not the corporation.
Doctrine of Piercing the Veil of Corporate Entity
Being a mere creature of law, a corporation may be allowed to exist solely for
lawful purposes. But where the fiction of corporate entity is being used as a
cloak or cover for fraud or illegality, this fiction will be disregarded and the
individuals composing it will be treated as identical.
Corporation as a creation of law or by operation of law
General Rule:
A corporation cannot come into existence by mere agreement of the parties as
in the case of business partnership. They require special authority or grant
from the State. This power is exercised by the State through the legislative
department either by a special incorporation law which directly creates the
corporation (Examples: GSIS, SSS, Pag-Ibig, etc.) or by means of a general

incorporation law (BP Blg. 68) under which, by operation of said law, persons
desiring to be and act as a corporation may incorporate.
Exception:
Corporations by prescription (Example: Roman Catholic Church) need not
obtain legislative grant or authority to exist.
Right of Succession
A corporation has the capacity of continuous existence regardless of the death,
withdrawal, insolvency or incapacity of the individual members of the
stockholders and regardless of the transfer of their interest or shares. However,
this does not mean that a corporation is immortal.
Under the Corporation Code, a corporation has a life expectancy of fifty (50)
years from the date of its incorporation (Secs. 14 and 15) unless sooner
dissolved or unless said period is extended (Sec. 11)
Powers, attributes and properties of the corporation
A corporation, being a mere creation of law, may exercise only such powers as
are granted by law of its creation. An express grant, however, is not necessary.
All powers which may be implied from those expressly provided by law and
those which are incidental or essential to the corporations existence may also
be exercised.
PARTNERSHIP
CORPORATION
How Created
Mere agreement.
By operation of law.
Number of Incorporators
At least 2 parties
At least 5 (except corporation sole).
Commencement of Juridical Personality
Upon execution of contract of
Upon issuance of certificate of
partnership.
incorporation (except corporation
sole).
Powers

As long as the parties have agreed

to it, the partnership can perform
any act as long as it does not
violate any law or right of others.

Has only such powers as are

expressly granted to it and such as
are necessary to the exercise of the
powers granted or for the
accomplishment of its purpose
(Sec. 2, 36(11) and 45)
Who May Exercise Management Powers
If no agreement, all partners will
Board of Directors / Trustees.
manage the partnership.
Nature of relationship
Based on mutual trust and
Has more stability as it enjoys the
right of succession and is not
confidence (Delectus personae) so
affected by the death or insolvency
that its existence is precarious
of a stockholder; also, dissolution
because the facility with which it
before a corporations term requires
can be dissolved. (i.e. through the
death or unilateral act of a partner) a 2/3 vote of the stock (Sec. 118
and 119, Corp. Code), always
subject to SEC intervention.
Right of Succession
No right of succession.
Right of succession is present.
rd
Extent of Liability to 3 Persons
Separate property is liable.
Limited to stockholdings or
subscription.
Term of Existence
Any period stipulated.
Limited to 50 years (extendible).
Transferability of Interest
Cannot transfer interest without
Can transfer shareholdings without
consent.
others consent (Delectus
personarum)
Governing Law
Civil Code
Corporation Code
Dissolution
Dissolved at anytime by the will of
Can only be dissolved with the
any or all of the partners.
consent of the State.
Advantages and disadvantages of the corporate form of business
Advantages:

1.
2.
3.
4.
5.

6.
7.

1
2

3
4

5
6

7
8

Capacity to act as a single unit

Limited Shareholders liability stockholders are liable only to the extent
of their contribution
Continuity of existence
Feasibility of greater undertaking
Transferability of shares stockholders hold their shares as personal
property with rights to dispose, assign or encumber them as they may
desire
Centralized Management all corporate powers are exercised by the
board of directors
Standardized Method of organization, management and finance

Disadvantages:
To have a valid and binding corporate act, formal proceedings, such as board
meetings are required;
The business transactions of a corporation is limited to the State of its
incorporation and may not act as such corporation in other jurisdiction unless
it has obtained a license or authority from the foreign state;
The shareholders limited liability tends to limit the credit available to the
corporation as a separate legal entity;
By the very nature of shares of stock which are personal properties,
transferable at will by the owners thereof, transfer of shares may result to
uniting incompatible and conflicting interests;
The minority shareholders have practically no say in the corporate affairs;
In large scale enterprises, stockholders voting rights may become merely
fictitious and theoretical because of disinterest in management, wide-scale
ownership and inaccessible place of meeting;
Double taxation may be imposed on corporate income;
Corporations are subject to governmental regulations supervision and control
including submission of reportorial requirements not otherwise imposed in
other business form.
Government powers in relation to corporations
B. Classification of Corporations
1. Stock and non-stock corporations
2. Corporations created by special law
3. Public and private corporations
4. Ecclesiastical and lay corporations
5. Aggregate and sole corporations

6. Close and open corporations

7. Domestic and foreign corporations
8. Parent/holding, subsidiaries and affiliates
9. Public and private corporations
10.
Quasi-public corporations
11.
De jure and de facto corporations
12.
Corporation by estoppel
C. Formation and Organization of Corporations
1. Process of incorporation
2. Contents of the Articles of Incorporation
a. Prefatory paragraph
b. Contents of the Articles of Incorporation
1) Prefatory paragraph
2) Corporate name
3) Purpose clause
4) Principal office
5) Term of existence
6) Incorporators
7) Directors/Trustees
8) Capitalization
a) Shares of stock and classification
b) Purpose of classification
i.
Common stocks
ii.
Preferred stocks
iii.
Par and no-par shares
iv.
Voting and non-voting shares
v.
Founders shares
vi.
Redeemable shares
vii.
Treasury shares
c) Capital requirements
9) Restrictions and preferences
10)
No-transfer clause
11)
Treasurer
12)
Acknowledgement
13)
Treasurers affidavit
14)
Grounds for disapproval
c. Commencement of corporate existence
d. Defectively formed corporations
1) De facto corporations

2) Corporation by estoppel
e. Organization and commencement of business
1) Corporate organization
2) Commencement of business transaction