CORPORATION LAW Chapter I.

INTRODUCTION
(1) Definition and attributes of a corporation (2) Kinds of business organizations and their differences (3) Jurisdiction of the SEC

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Union Glass v. SEC Abejo v. De la Cruz SEC v. CA Magalad v. Premiere Financing

Chapter II. CLASSIFICATION OF PRIVATE CORPORATIONS
(1) Stock v. Non-Stock Corporations

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CIR v. Club Filipino

(2) Other Matters

NDC v. Phil. Veterans Bank Pioneer Insurance v. CA

Chapter III. FORMATION AND ORGANIZATION OF CORPORATION
(1) Requirements in the formation of a corporation (2) Steps in the formation of a corporation (a) promotion (b) drafting of articles of incorporation (i) Corporate Name

 Lyceum of the Phils. V. CA (ii) Purpose Clause (iii) Principal Office (iv) Term of Existence (v) Incorporators and directors; numbers and qualifications (vi) Capital stock; subscription; payment (c) filing of articles; payment of fees (d) examination of articles; approval or rejection by SEC (e) issuance of certificate of incorporation
(3) De Facto Corporations: Requisites (a) User of Corporate Powers (b) Formation under apparently valid statute

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Municipality of Malabang v. Benito Bergeron v. Hobbs Harril v. Davis Hall v. Piccio

(c) Colorable compliance with the legal requirements in good faith

(4) Corporation by Estoppel

Empire Mfg. V. Stuart Page 1 of 16

(5) Internal Organization: By-Laws Fleischer v. Standard Oil  Laguna Trans. Ferrer (e) Close Corporations Cease v. Standard Products Cranson v. CA Delpher Trades v. El Hogar Chapter IV. Calica NAFLU v. IBM Salvatierra v.. Jarencio Namarco v. CIR Indophil Textile Mills v. GR Woods Asia Banking Corp. v. evasion of liability to government  State v. Guanzon v. Labrador (2) Disregarding Corporate Entity (a) Contrary to law / public policy. Clave Magsaysay v. CTA Page 2 of 16 . v. CIR Yutivo v. David (b) Evasion of liability to creditors          Tan Boon Bee v. Associated Financing Jacinto v. Southern Railway Koppel (Phils.) v. Yatco Liddell v. CA (c) Evasion of liability / obligation to employees Claparols v. CA (3) Parent-Subsidiary Relationship     Garrett v. v. Garlitos Albert v. Botica Nolasco Gov’t of the Phils. SSS  Marvel Bldg. CA Palay v.       Lowell-Woodward v. Inc. V. Ople (d) Evasion of liability on contract Villa-Rey Transit v. Register of Deeds Caram v. THE CORPORATE ENTITY (1) The Theory of Corporate Entity     Stockholders of T. University Publishing Co. Corp.

Times Printing Co. V. Govt. Tomb Cagayan Fishing Co. v. Fay & Egan Pioneer Insurance v. Kaisahan Chapter V. Michigan Southern Pirovano v. Dunn Rizal Light & Ice Co. CA How & Associates. CA La Campana Coffee Factory v. Boss Quaker Hill v. CONTROL AND MANAGEMENT OF CORPORATION (1) Allocation of Power and Control Page 3 of 16 . v. v. Parr (4) Compensation of Promoters (5) Fiduciary relationship between corporation and promoter  Old Dominion v. PROMOTER’S CONTRACTS PRIOR TO INCORPORATION (1) Liability of Corporation for Promoter’s Contracts     McArthur v. Acoje Mining Co. De la Rama Steamship Harden v. Carlos v. PSC and Morong Electric (3) Personal Liability of Promoter on Pre-Incorporation Contracts     Wells v. Mindoro Sugar Co. Benguet Consolidated Mining Chapter VII. v. of the Phils.  Philvidec v. El Hogar Bissel v. Inc. CORPORATE POWERS (1) (2) (3) (4) General Powers of Corporation Specific Powers of Corporation Implied Powers The Ultra Vires Doctrine       Republic of the Phils. CA) (2) Corporate Rights under Promoter’s Contracts   Builders’ Duntile v. Clifton v. Sandiko (Also see Caram v. Bigelow Chapter VI.

(c) Board Committees  Hayes v. Canada. Everett Trust v. Orientalist Co. Loew’s Inc. Ltd. Citibank NA v. Loew’s Inc.S. SEC Roxas v. Atlantic & Plant S. Johnston Ponce v. Acuna v.. Chua (2) Who Exercises Corporate Powers (a) Board of directors or trustees     Ramirez v. Comm. Ericta Zachary v. and Fernandez Lopez v. Pacific Waxed Paper Alejandrino v. Tan Johnston v. Encarnacion Detective & Protective Bureau v. Bachrach Motor Co. De Leon Duffy v. Dela Rama v. Fairchild Engine . Cloribel Gokongwei v. SEC (3) Devices Affecting Control (a) Proxy Device     In Re Giant Portland Cement Co. Batac Producers Cooperative Marketing Assoc. Co. Milin PNB v. (d) Stockholders or members           BOD and Elec. Kong Li Po The Board of Liquidators v. dela Rosa Angeles v. of SMB v. Ma-ao Sugar Central Gokongwei v. Loft (i) Who pays?   (b) Voting Trust Page 4 of 16 Campbell v. Santos Campbell v. CA (b) Corporate officers and agents     Yu Chuck v. Rosenfeld v. Heirs of Maximo Kalaw Zamboanga Transportation v. State ex rel.

Andrews Pool v. DUTIES OF DIRECTORS AND CONTROLLING STOCKHOLDERS (1) Duty of Diligence: Business Judgment Rule           Otis & Co. Pennsylvania Railroad Montelibano v. Indiana Mutual Casualty (i) Unusual voting and quorum requirements  Benintendi v. Ringling Bros. NIDC v. Kenton Hotel Chapter VIII. Man Steinberg v. Nicollet Hotel. Davies Everett v. Gokongwei v. Bowen Lowell Hoit & Co. Detig Bates v. Allen Walker v. Asia Banking Mackin v. Avalon Realty (f) Restriction on transfer of shares (g) Prescribing qualifications for directors. Buck Retail Store v. Dodge (d) Cumulative Voting (e) Classification of Shares  Gottschalk v. Dresser (a) The self-dealing director Page 5 of 16 . Inc. founder’s shares cf.    Abercrombie v. Harkert McQuade v. V. Inc. Aquino (c) Pooling and voting agreements     Ringling v. Stoneham Clark v. Bacolod-Murcia Milling Litwin v. SEC (h) Management contracts  Sherman & Ellis. Pool Foster v. V. V. Velasco Barnes v.

Allen (e) Interlocking directors Globe Woolen Co. V. Mead v. Northern Fiscal Corporation (4) Duty to Creditors Chapter IX. Hercules Lumber Gonzales v. V. La Previsora Central Coop Exchange v. Repide Taylor v. Deutsch Litwin v. Carlisle Irving Trust v. SEC (d) Seizing corporate opportunity    Singer v. American Woolen Co. El Hogar Barreto v. Tibe Fogelson v. v. Sperry Corporation (b) Fixing compensation of directors and officers      Govt. Inc. McCullough Piccard v. THE RIGHT OF INSPECTION (1) Basis of Right (2) What Records Covered (3) Extent of and Limitations on Right (4) Who may exercise Right (5) Remedies available if Inspection Refused   Pardo v. California Eastern Airways (c) Using inside information    Strong v. Wright Gokongwei v. PNB Page 6 of 16 . Kerbs v. Utica Gas & Electric (2) Close Corporation (3) Duty of Controlling Interest Insuranshares Corp. San Jose Petroleum.   Palting v.

Isabela Sugar Co. V. Wolf’s Head Oil Refining (iii) Preference upon liquidation  Hay v. DERIVATIVE SUITS (1) Nature and Basis of derivative suit: distinguished from individual and representative suit (2) Requirements relating to derivative suits     Evangelista v. FINANCING THE CORPORATION (1) Sources of Financing (2) Capital Structure (3) Capital and Capital Stock Distinguished (4) Shares of Stock: Kinds (a) Common stocks (b) Preferred stocks (i) Preference as to dividends      Participating v. Roxas Chapter X. Santos Republic Bank v.   Veraguth v. Augusta Hallowell (c) Par or no par shares Page 7 of 16 . Non-participating Cumulative v. Tan SMC v. Kahn Chapter XI. Cuaderno Reyes v. SEC Cojuangco v. Hay (iv) Preference stockholder is not a creditor  Augusta Trust Co. Gokongwei v. Non-Cumulative Discretionary Dividend Type Mandatory Dividend Type Earned cumulative or dividend credit type (ii) As to voting right  Ellingwood v.

Lim Chu Sing (a) Pre-incorporation subscription   Utah Hotel Co. v. Crothers (7) Debt Securities (a) Form of borrowings (b) Bonds and Debentures (c) Convertible Securities. (b) Post-incorporation subscription  Bayla v. Continental Turst Co. New York Trust Co. v. V. Eclipse Pocahontas Coal Co. CIR Page 8 of 16 . Madsen Wallace v. stock options  Meritt-Chapman & Scott Corp. Fuller v. Thom v. Garage & Repair Ross Transport Inc. (d) Hybrid Securities  John Kelley Co. Avenue M. (6) The Pre-Emptive Right to Shares (a) Basis of Right (b) Extent and limitations under Code (c) In close corporations (d) Waiver of pre-emptive right (e) When issue is in breach of trust (f) Remedies when denied      Stokes v.(d) Treasury Shares (e) Redeemable Shares (f) Founder’s Shares (5) Nature of Subscription Contract  Garcia v. Krogh Dunslay v. v. Silang Traffic Co. Baltimore Trust Co.

Inc. Poizat Lingayen Gulf Electric v. V. Da Silva v. Lepanto Consolidated Mining Co. Allen (e) The Trust Indenture  Aladdin Hotel Co. Aboitiz National Exchange v. Dexter Lumanlan v. CONSIDERATION FOR ISSUANCE OF SHARES (1) Form of Consideration (2) Liability on Watered Stocks     Triplex Shoe Co. McCarty v. Bing Crosby Minute Maid Corp. v. v. Eaton (3) How Payment of Shares Enforced (a) Delinquency sale. Crammer Page 9 of 16 . Baltazar Miranda v. Jordan Co. v. DIVIDENDS AND PURCHASE BY CORPORATION OF ITS OWN SHARES (1) Form of Dividends  Nielson & Co. Summers Baltazar v. v. Tarlac Rice Mill Co. Rice & Hutchins. V. (2) Source of Dividends  Berks Broadcasting Co. requisites (b) Court Action       Velasco v. Lingayen Gulf Electric Power Nava v. Cura (4) Effect of Delinquency (5) Rights and Obligations of Holders of Unpaid but Non-delinquent Stock    Fua Cun v. Langdeau Rhode v. Peers Marketing (6) Issuance of Certificate (7) Lost or Destroyed Certificate Chapter XIII. Dock-hop Co. Bloom Chapter XII.

(4) Preference as to Dividends *2 *3 Wabash Railway Co. Ford Motor Co. Barclay Burk v. V. St. (5) When Right to Dividends Vests. United States Rubber (3) Dividend Declaration discretionary with Board *0 *1 Keough v. TRANSFER OF SHARES (1) Manner and Effectivity of Transfer (a) Indorsement of stock certificate. Rights of Transferee *4 McClaran v. RH Macy (d) Effectivity of amendment (e) Special amendments (1) Increase of capital stock (2) Decrease of capital stock *6 Philippine Trust Co. Ottawa Gas & Electric Co. Lich v. Crescent Planning Mill (6) Liability for Illegal Dividends (7) Purchase by Corporation of its own shares Chapter XIV. registration in corporate books Page 10 of 16 . Dodge v. Rivera (3) Change in corporate term (f) Amendments in close corporations Chapter XV. V. AMENDMENTS OF CHARTER (1) Amendment by Legislature (2) Amendment by Stockholders (a) Limitations on power (b) Grounds for rejection of amendment (c) Amendment changing stockholder’s rights *5 Marcus v. Paul Milk Co.

General (4) Collateral Transfers  Chua Guan v. McGrath. Hongkong & Shanghai Banking De los Santos v. DISSOLUTION (1) Cause of Dissolution (a) Expiration of original. Atty. when quasi-negotiable (b) Forged transfers   Santamaria v.(b) Effect of lack of registration  Uson v. Diosomito (c) No registration of transfer of unpaid shares (d) Remedy if registration refused  Rivera v. Close Corporations (a) General rule: free transferability of shares (b) Exceptions: in close corporations (c) Intrinsic validity of various kinds of restrictions (1) Consent restriction (2) Option restriction (3) Prescribing qualifications of stockholders (4) Redeemable common stock (d) Formal validity of restrictions (3) Unauthorized Transfers (a) Certificate indorsed in blank. Florendo (2) Restrictions on Transfer. extended or shortened term (b) Voluntary dissolution when no creditors affected Page 11 of 16 . Samahang Magsasaka (5) Non-transferability and termination of membership in non-stock corporations Chapter XVI.

CIR (3) Distribution of Assets of Non-stock corporations Chapter XVII. appraisal right (3) Sale of substantially all assets (a) Legal requirements Page 12 of 16 . Co. Winding up and liquidation (a) Loss of juridical personality *7 National Abaca Corp. cessation of business for 5 years (f) Involuntary dissolution (1) Revocation of certificate of registration by SEC (2) Quo Warranto proceedings  Republic v. Marsman Development Tan Chiong Bio v. Pore (b) Executory contracts (c) Methods of liquidation (d) Distribution of assets after payment of debts    China Banking Corp. Bisaya Land Trans. Michelin & Co. Teodoro (e) Failure to organize and commence business.(c) Voluntary dissolution when creditors affected (d) Dissolution by minority in close corporations  Financing Corporation v. v. v. Methods (2) Merger and Consolidation (a) Nature and distinction (b) Only de facto merger under Corporation Law (c) Express authority to merge granted by code. Republic v. CORPORATE COMBINATIONS (1) Purposes of Combinations. (2) Effects of Dissolution. requirements (d) Remedies of creditors and dissenting stockholders.

Fernandez Home Insurance v. Director of Patents Le Chemise Lacoste v. Mangaliman Facilities Management Corp. Elser Atlantic Mutual v. incentives for investment therein (c) Non-preferred areas of investment (4) Legal Requirements Prior to Transaction of Business (a) BOI certificate (b) SEC license to do business (c) Certificate from appropriate government agency (5) Effects of Failure to Secure SEC license      Marshall Wells v. v. Blouse Edward J. FOREIGN CORPORATIONS (1) Definition. ECED Antam Consolidated v. v. Cebu Stevedoring General Garments Corp. de la Osa Merryl Lynch Futures v. Nell Co. Pacific Farms Chapter XVIII.(b) No assumption of liabilities. CA (7) How Courts Acquire Jurisdiction over Foreign Corporations Page 13 of 16 . Eastern Shipping (6) What Constitutes Transacting Business        Mentholatum v. appraisal right (d) Compared with merger and consolidation   Reyes v. Status (2) Methods of Entry of Investment (3) Permitted Areas of Investment (a) Partially nationalized areas (b) Preferred areas. Pacific Star Line Topweld Manuel v. v. exceptions (c) Remedies of dissenting stockholders. CA Pacific Vegetable Oil v. Singson Aetna Casualty & Surety Co. v.

of the Phils. SPECIAL AND MISCELLANEOUS PROVISIONS (1) Educational corporations (a) Stock or non-stock (b) Temporary permit (c) Government recognition (d) Special requirement to be University (e) Incorporation under the Code (f) Educational foundations (2) Religious corporations (a) Corporation sole (b) Religious societies (3) Close Corporations (4) Miscellaneous Provisions Page 14 of 16 . General Corp. v. Union Insurance (8) Laws Governing Licensed Foreign Corporations (9) Merger of Licensed Foreign Corporation (10) Withdrawal of Foreign Corporation (11) Revocation and Suspension of License (12) Existing Licensed Foreign Corporations Chapter XIX.

Piccio) (5) What corporate officers are required by law? (6) When does a corporation’s corporate powers cease? Chapter IV. by-laws. (4) Can a corporation transact business as a de facto corporation while the application is still pending at the SEC? (cf. (2) What advantages does a corporation have over other kinds of business organizations? What are the disadvantages of a corporation? Chapter II. INTRODUCTION (1) What are the kinds of corporations? Differentiate them from each other. CORPORATE POWERS (1) (2) (3) (4) (5) What are the corporate powers conferred by law? What are the implied powers? What is the ultra vires doctrine? What are the legal consequences of ultra vires acts? What is the quorum requirement for: (a) Board meetings Page 15 of 16 . CORPORATE ENTITY (1) (2) (3) (4) (5) What is the theory of corporate entity? When can the veil of corporate entity be pierced? What are the effects of piercing the veil of corporate fiction? What is a parent-subsidiary relationship? When may it be disregarded by the courts? What are the criteria by which a subsidiary can be considered a mere instrumentality of the parent company? (cf. quorum.Make a table.. Garrett v. PROMOTER’S CONTRACTS PRIOR TO INCORPORATION (1) Under what circumstances can a promoter be held liable? When is he exempt from liability? (2) When can a corporation assume the obligations and liabilities of a promoter? Chapter VI.) Chapter III. Southern Railway) Chapter V. CLASSIFICATION OF PRIVATE CORPORATIONS (1) Differentiate stock and non-stock corporations.GUIDE QUESTIONS: Chapter I. FORMATION / ORGANIZATION --. (2) What is the restrictions of the different provisions of the Corporation Code with respect to these 2 corporations? (e. (1) What are the statutory requirements in the formation of a corporation? (2) What are the steps in the formation of a corporation? (a) What are the required contents in the articles of incorporation (AOI)? (3) What is a de facto corporation? Distinguish this from a corporation by estoppel. etc.g. Hall v.

Chapter VII. What are their advantages / disadvantages? Page 16 of 16 .(b) Stockholders’ meetings (6) What is the numerical requirement for: (a) Election of directors (b) Removal of directors (c) Merger and consolidation (d) Amendment of by-laws (7) What are the devices affecting control of the corporation? Distinguish them from each other. CONTROL AND MANAGEMENT OF CORPORATION (1) (2) (3) (4) (5) What are the 3 “levels” of corporate control / power? What are the powers of the BOD? What are the powers of the corporate officers? What are the powers of the stockholders? What are the various devices used to wrest/preserve control? Differentiate them from each other.

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