IV.

SEPARATE JURIDICAL PERSONALITY AND DOCTRINE OF PIERCING VEIL OF CORPORATE FICTION

A. Main Doctrine: A Corporation Has A Personality Separate and Distinct from its Stockholders or Members. Rudimentary is the rule that a corporation is invested by law with a personality distinct and separate from its stockholders or membersby legal fiction and convenience it is shielded by a protective mantel and imbued by law with a character alien to the persons comprising it. xLim v. Court of Appeals, 323 SCRA 102 (2000). 1. Sources: Sec. 2; Article 44, Civil Code 2. Importance of Protecting Main Doctrine: The separate juridical personality includes: right of succession; limited liability; centralized management; and generally free transferability of shares of stock. Therefore, an undermining of the separate juridical personality of the corporation, such as the application of the piercing doctrine, necessarily dilutes any or all of those attributes. One of the advantages of a corporate form of business organization is the limitation of an investors liability to the amount of the investment. This feature flows from the legal theory that a corporate entity is separate and distinct from its stockholders. However, the statutorily granted privilege of a corporate veil may be used only for legitimate purposes. On equitable considerations, the veil can be disregarded when it is utilized as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse legitimate issues; or serve as a mere alter ego or business conduit of a person or an instrumentality, agency or adjunct of another corporation. xSan Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 296 SCRA 631, 645 (1998). 3. Applications: (a) Majority Ownership of or Dealings in Shareholdings: Ownership of a majority of capital stock and the fact that majority of directors of a corporation are the directors of another corporation creates no employer-employee relationship with the latters employees. DBP v. NLRC, 186 SCRA 841 (1990); Francisco, et al. v. Mejia, G. R. No. 141617, 14 August 2001. The mere fact that a stockholder sells his shares of stock in the corporation during the pendency of a collection case against the corporation, does not make such stockholder personally liable for the corporate debt, since the disposing stockholder has no personal obligation to the creditor, and it is the inherent right of the stockholder to dispose of his shares of stock anytime he so desires. xRemo, Jr. v. Intermediate Appellate Court, 172 SCRA 405, 413-414 (1989). Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality. xSunio v. NLRC , 127 SCRA 390 (1984); xAsionics Philippines, Inc. v. National Labor Relations Commission, 290 SCRA 164 (1998); xLim v. Court of Appeals, 323 SCRA 102 (2000); xManila Hotel Corp. v. NLRC, 343 SCRA 1 (2000); xFrancisco v. Mejia, G. R. No. 141617, 14 August 2001. Mere substantial identity of the incorporators of the two corporations does not necessarily imply fraud, nor warrant the piercing of the veil of corporate fiction. In the absence of clear and convincing evidence to show that the corporate personalities were used to perpetuate fraud, or circumvent the law, the corporations are to be rightly treated as distinct and separate from each other. xLaguio v. NLRC, 262 SCRA 715 (1996). (b) Dealings Between the Corporation and Stockholders: The transfer of the corporate assets to the stockholder is not in the nature of a partition but is a conveyance from one party to another. Stockholders of F. Guanzon and Sons, Inc. v. Register of Deeds of Manila, 6 SCRA 373 (1962). As a general rule, a corporation may not be made to answer for acts or liabilities of its stockholders or those of the legal entities which it may be connected and vice-versa.xARB Constructions Co., Inc. v. Court of Appeals, 332 SCRA 427 (200) (c) On Issues of Privileges Enjoyed: The tax privileges enjoyed by a corporation do not extend to its stockholders. A corporation has a personality distinct from that of its stockholders, enabling the taxing power to reach the latter when they receive dividends from the corporation. It must be considered as settled in this jurisdiction that dividends of a domestic corporation which are paid and delivered in cash to foreign corporations as stockholders are subject to the payment of the income tax, the exemption clause to the charter [of the domestic corporation] notwithstanding.xManila Gas Corp. v. Collector of Internal Revenue, 62 Phil. 895, 898 (1936).

(d) Being a Corporate Officer: Being an officer or stockholder of a corporation does not by itself make ones property also of the corporation, and vice-versa, for they are separate entities, and that shareholders are in no legal sense the owners of corporate property which is owned by the corporation as a distinct legal person. Good Earth Emporium, Inc. v. CA, 194 SCRA 544 (1991) The mere fact that one is president of the corporation does not render the property he owns or possesses the property of the corporation, since that president, as an individual, and the corporation are separate entities. xCruz v. Dalisay, 152 SCRA 487 (1987). (e) Properites, Obligations and Debts: Likewise, a corporation has no legal standing to file a suit for recovery of certain parcels of land owned by its members in their individual capacity, even when the corporation is organized for the benefit of the members. Sulo ng Bayan v. Araneta, Inc., 72 SCRA 347 [1976]). The corporate debt or credit is not the debt or credit of the stockholder nor is the stockholders debt or credit that of the corporation. xTraders Royal Bank v. CA, 177 SCRA 789 (1989). Stockholders have no personality to intervene in a collection case covering the loans of the corporation on the ground that the interest of shareholders in corporate property is purely inchoate. xSaw v. CA, 195 SCRA 740 [1991]) The interests of payees in promissory notes cannot be off-set against the obligations between the corporations to which they are stockholders absent any allegation, much less, even a scintilla of substantiation, that the parties interest in the corporation are so considerable as to merit a declaration of unity of their civil personalities. xIndustrial and Development Corp. v. Court of Appeals, 272 SCRA 333 (1997). It is a basic postulate that a corporation has a personality separate and distinct from its stockholders. Therefore, even when the foreclosure on the assets of the corporation was wrongful and done in bad faith, the stockholders of the corporation have no standing to recover for themselves moral damages. Otherwise, it would amount to the appropriation by, and the distribution to, such stockholders of part of the corporat ions assets before the dissolution of the corporation and the liquidation of its debts and liabilities. xAsset Privatization Trust v. Court of Appeals, 300 SCRA 579, 617 (1998). Where real properties included in the inventory of the estate of a decedent are in the possession of and are registered in the name of the corporations, in the absence of any cogency to shred the veil of corporate fiction, the presumption of conclusiveness of said titles in favor of said corporations should stand undisturbed. xLim v. Court of Appeals, 323 SCRA 102 (2000). (f) Third-Parties: The fact that respondents are not stockholders of the disputed corporations does not make them non-parties to the case, since the jurisdiction of a court or tribunal over the subject matter is determined by the allegations in the Complaint. In this case, it is alleged that the aforementioned corporations are mere alter egos of the directors-petitioners, and that the former acquired the properties sought to be reconveyed to FGSRC in violation of directors-petitioners fiduciary duty to FGSRC. The notion of corporate entity will be pierced or disregarded and the individuals composing it will be treated as identical if, as alleged in the present case, the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; or as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. Gochan v. Young, G.R. No. 131889, 21 March 2001. B. Piercing the Veil of Corporate Fiction: 1. Source of Incantation: xUnited States v. Milwaukee Refrigerator Transit Co., 142 Fed. 247 [1905]). xSee also Francisco v. Mejia, G. R. No. 141617, 14 August 2001. 2. Nature of the Piercing Doctrine (Traders Royal Bank v. Court of Appeals, 269 SCRA 15 [1997]) Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from liabilities that ordinarily, they could be subject to, or distinguishes one corporation from a seemingly separate one, were it not for the existing corporate fiction. xLim v. Court of Appeals, 323 SCRA 102 (2000). This Court has pierced the veil of corporate fiction in numerous cases where it was used, among others, to avoid a judgment credit, to avoid inclusion of corporate assets as part of the estate of a decedent, to avoid liability arising from debt; when made use of as a shield to perpetrate fraud and/or confuse legitimate issues, or to promote unfair objectives or otherwise to shield them. xReynoso, IV v. Court of Appeals, G.R. No. 116124-25, 22 November 2000; also xRamoso v. Court of Appeals, G.R. No. 117416, 8 December 2000. 3. When Piercing Doctrine Not Applicable: (a) Piercing the veil of corporate fiction is remedy of last resort and is not available when other remedies are still available. Umali v. CA, 189 SCRA 529 (1990).

(b) Piercing is not allowed unless the remedy sought is to make the officer or another corporation pecuniarily liable for corporate debts. Umali v. CA, 189 SCRA 529 (1990);Indophil Textile Mill Workers Union-PTGWO v. Calica, 205 SCRA 697 (1992). (c) Piercing is not available when the personal obligations of an individual are sought to be enforced against the corporation. xRobledo v. NLRC, 238 SCRA 52 (1994) The rationale behind piercing a corporations identity in a given case is to remove the barrier between the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a shield for undertaking certain proscribed activities. However, in the case at bar, instead of holding certain individuals or person responsible for an alleged corporate act, the situation has been reversed. It is the petitioner as a corporation which is being ordered to answer for the personal liability of certain individual directors, officers and incorporators concerned. Hence, it appears to us that the doctrine has been turned upside down because of its erroneous invocation. Francisco Motors Corp. v Court of Appeals, 309 SCRA 72, 83 (1999). (d) To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established. It cannot be presumed. This is elementary. The organization of the corporation at the time when the relationship between the landowner and the developer were still cordial cannot be used as a basis to hold the corporation liable later on for the obligations of the landowner to the developer under the mere allegation that the corporation is being used to evade the performance of obligation by one of its major stockholders. xLuxuria Homes, Inc. v. Court of Appeals,302 SCRA 315 (1999); xDevelopment Bank of the Philippines vs. Court of Appeals,G.R. No. 126200, 16 August 2001. (e) Not Applicable to Theorizing: Piercing of the veil of corporate fiction is not allowed when it is resorted to justify under a theory of co-ownership the continued use and possession by stockholders of corporate properties. BoyerRoxas v. Court of Appeals, 211 SCRA 470 [1992]). The piercing doctrine cannot be availed of in order to dislodge from the jurisdiction of the SEC a the petition for suspension of payments filed under Section 5(e) of Pres. Decree No. 902-A, on the ground that the petitioning individuals should be treated as the real petitioners to the exclusion of the petitioning corporate debtor. The doctrine of piercing the veil of corporate fiction heavily relied upon by the petitioner is entirely misplaced, as said doctrine only applies when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime. xUnion Bank of the Philippines v. Court of Appeals, 290 SCRA 198 (1998). Changing of the petitionerss subsidiary liabilities by converting them to guarantors of bad debts cannot be done by piercing the veil of corporate identity. xRamoso v. Court of Appeals, G.R. No. 117416, 8 December 2000. (f) Piercing doctrine is meant to prevent fraud, and cannot be employed to perpetrate fraud or a wrong. Gregorio Araneta, Inc. v. Tuason de Paterno and Vidal, 91 Phil. 786 (1952). The theory of corporate entity was not meant to promote unfair objectives or otherwise, nor to shield them. xVillanueva v. Adre, 172 SCRA 876 (1989). (g) Piercing is a power belonging to the court and cannot be assumed improvidently by a sheriff. Cruz v. Dalisay, 152 SCRA 482 (1987). 3. Consequences and Types of Piercing Cases: Umali v. CA, 189 SCRA 529 [1990]) (a) The application of the doctrine to a particular case does not deny the corporation of legal personality for any and all purposes, but only for the particular transaction or instance for which the doctrine was applied. Koppel (Phil.) Inc. v. Yatco, 77 Phil. 496 (1946); xTantoco v. Kaisahan ng Mga Manggagawa sa La Campana, 106 Phil. 198 (1959). (b) Classification of the Piercing Cases:

(i) When the corporate entity is used to commit fraud or to do a wrong (fraud cases); (ii) When the corporate entity is merely a farce since the corporation is merely the alter ego, business conduit or instrumentality of a person or another entity (alter ego cases); and (iii) When the piercing the corporate fiction is necessary to achieve justice or equity (equity cases). The three cases may appear together in one application. R.F. Sugay & Co., v. Reyes, 12 SCRA 700 (1964). 4. Fraud Cases: (a) Acts by the Controlling Shareholder: Where a stockholder, who has absolute control over the business and affairs of the corporation, entered into a contract with another corporation through fraud and false representations, such stockholder shall be liable jointly and severally with his co-defendant corporation even when the contract sued upon was entered into on behalf of the corporation. Namarco v. Associated Finance Co., 19 SCRA 962 (1967). The tests in determining whether the corporate veil may be pierced are: (1) the defendant must have control or complete domination of the other corporations finances, policy and business practices with regard to the transaction attached; (2) control must be used by the defendant to commit fraud or wrong; and (3) the aforesaid control or breach of duty must be the proximate cause of the injury or loss complained of. Manila Hotel Corporation v. NLRC, 343 SCRA 1 (2000); xAlsoLim v. Court of Appeals, 323 SCRA 102 (2000). (b) One cannot evade civil liability by incorporating properties or the business. Palacio v. Fely Transportation Co., 5 SCRA 1011 (1962). (c) The veil of corporation fiction may be pierced when used to avoid a contractual commitment against noncompetition. Villa Rey Transit, Inc. v. Ferrer, 25 SCRA 845 (1968). (d) The Supreme Court found the following facts to be legal basis to pierce: One company was merely an adjunct of the other, by virtue of a contract for security services, the former provided with security guards to safeguard the latters premises; both companies have the same owners and business address; the purported sale of the shares of the former stockholders to a new set of stockholders who changed the name of the corporation appears to be part of a scheme to terminate the services of the security guards, and bust their newly-organized union which was then beginning to become active in demanding the companys compliance with Labor Standards laws. De Leon v. NLRC, G.R. No. 112661, 30 May 2001. (e) Parent-Subsidiary Relations; Affiliates (Reynoso, IV v. Court of Appeals,G.R. No. 116124-25, 22 November 2000; Commissioner of Internal Revenue v. Norton and Harrison, 11 SCRA 704, [1954]; Tomas Lao Construction v. NLRC, 278 SCRA 716 [1997]). - Why is there inordinate showing of alter-ego elements? Guiding Principles in Fraud Cases: (i) There must have been fraud or an evil motive in the affected transaction, and the mere proof of control of the corporation by itself would not authorize piercing; and (ii) The main action should seek for the enforcement of pecuniary claims pertaining to the corporation against corporate officers or stockholders. 5. Alter-Ego Cases: (a) Where the stock of a corporation is owned by one person whereby the corporation functions only for the benefit of such individual owner, the corporation and the individual should be deemed the same. Arnold v. Willets and Patterson, Ltd., 44 Phil. 634 (1923).

(b) When the corporation is merely an adjunct, business conduit or alter ego of another corporation, the fiction of separate and distinct corporation entities should be disregarded. xTan Boon Bee & Co. v. Jarencio, 163 SCRA 205 (1988). The corporation veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. xFirst Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996). (c) Employment of same workers; single place of business, etc. La Campana Coffee Factory v. Kaisahan ng Manggagawa, 93 Phil. 160 (1953). The doctrine that a corporation is a legal entity or a person in law distinct from the persons composing it is merely a legal fiction for purposes of convenience and to subserve the ends of justice. This fiction cannot be extended to a point beyond its reason and policy. Where, as in this case, the corporation fiction was used as a means to perpetrate a social injustice or as a vehicle to evade obligations or confuse the legitimate issues, it would be discarded and the two (2) corporations would be merged as one, the first being merely considered as the instrumentality, agency conduit or adjunct of the other. In this case, because of the actions of management of the two corporations, there was much confusion as to the proper employment of the claimant. xAzcor Manufacturing, Inc. v. NLRC, 303 SCRA 26 (1999). (d) Use of nominees. xMarvel Building v. David, 9 Phil. 376 (1951). (e) Avoidance of tax. Yutivo Sons Hardware v. Court of Tax Appeals 1 SCRA 160 (1961); xLiddell & Co. v. Collector of Internal Revenue, 2 SCRA 632 (1961). (f) Mixing of bank deposit accounts. xRamirez Telephone Corp. v. Bank of America, 29 SCRA 191 (1969). (g) Where it appears that two business enterprises are owned, conducted, and controlled by the same parties, both law and equity will, when necessary to protect the rights of third persons, disregard the legal fiction that two corporations are distinct entities and treat them as identical. xSibagat Timber Corp. v. Garcia, 216 SCRA 70 (1992). (h) Thinly-capitalized corporations. McConnel v. Court of Appeals, 1 SCRA 722 (1961). (i) Parent-subsidiary relationship. Koppel (Phil.), Inc. v. Yatco, 77 Phil. 97 (1946);xPhilippine Veterans Investment Development Corporation v. CA, 181 SCRA 669 (1990). (j) Affiliated companies. xGuatson International Travel and Tours, Inc. v. NLRC,230 SCRA 815 (1990). (k) Summary of Probative Factors: Philippine National Bank vs. Ritratto Group, Inc., et al., G.R. No. 142616, 31 July 2001; xConcept Builders, Inc. v. NLRC, 257 SCRA 149 (1996). Whether the existence of the corporation should be pierced depends on questions of facts, appropriately pleaded. Mere allegation that a corporation is the alter ego of the individual stockholders is insufficient. The presumption is that the stockholders or officers and the corporation are distinct entities. The burden of proving otherwise is on the party seeking to have the court pierce the veil of corporate entity. xRamoso v. Court of Appeals, G.R. No. 117416, 8 December 2000. (l) Guiding Principles in Alter-Ego Cases: (i) The doctrine applies in this case even in the absence of evil intent; it applies because of the direct violation of a central corporate law principle of separating ownership from management. (ii) The doctrine in such cased is based on estoppel: if stockholders do not respect the separate entity, others cannot also be expected to be bound by the separate juridical entity.

(iii) Piercing in alter ego cases may prevail even when no monetary claims are sought to be enforced against the stockholders or officers of the corporation. 6. Equity Cases: (a) When used to confuse legitimate issues. Telephone Engineering and Service Co., Inc. V. WCC, 104 SCRA 354 (1981). (b) When used to raise technicalities. xEmilio Cano Ent. v. CIR, 13 SCRA 291 (1965). 7. Piercing Doctrine and Due Process Clause (a) The need to bring a new case against the officer. McConnel v. Court of Appeals, 1 SCRA 723 (1961). (b) When corporate officers are sued in their official capacity when the corporation was not made a party, the corporation is not denied due process. Emilio Cano Enterprises v. Court of Industrial Relations, 13 SCRA 291 (1965). (c) Provided that evidential basis has been adduced during trial to apply the piercing doctrine. Jacinto v. Court of Appeals, 198 SCRA 211 (1991); xArcilla v. Court of Appeals, 215 SCRA 120 (1992).

Corporation by Estoppel Doctrine (Sec. 21; Salvatierra v. Garlitos, 103 Phil. 757 [1958];Albert v.
University Publishing Co., 13 SCRA 84 [1965]; International Express Travel & Tour Services, Inc. v. Court of Appeals, 343 SCRA 674 (2000); xAsia Banking Corporation v. Standard Products, 46 Phil. 145 [1924]; xMadrigal Shipping Co., Inc. v. Ogilvie, Supreme Court Advanced Decision, 55 O.G. No. 35, p. 7331). An individual should be held personally liable for the unpaid obligations of the unincorporated association in whose behalf he entered into such transactions, under the principle that any person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. International Express Travel & Tour Services, Inc. v. Court of Appeals, 343 SCRA 674 (2000). (a) Nature of Doctrine Corporation by estoppel doctrine is founded on principles of equity and is designed to prevent injustice and unfairness. It applies when persons assume to form a corporation and exercise corporate functions and enter into business relations with third persons. Where there is no third person involved and the conflict arises only among those assuming the form of a corporation, who therefore know that it has not been registered, there is no corporation by estoppel. Lozano v. De Los Santos, 274 SCRA 452 (1997) A party cannot challenge the personality of the plaintiff as a duly organized corporation after having acknowledged same when entering into the contract with the plaintiff as such corporation for the transportation of its merchandise. (Ohta Dev. Co. v. Steamship Pompey, 49 Phil. 117 [1926]); the same principle applied in Compania Agricole de Ultramar v. Reyes, 4 Phil. 1 [1911] but that case pertained to a commercial partnership which required registration in the registry under the terms of the Code of Commerce. (b) Two Levels: (i) With fraud and (ii) Without fraud

When incorporating individuals represent themselves to be officers of the corporation never duly registered with SEC, and engages in the name of purported corporation in illegal recruitment, they are estopped from claiming that they are not liable as corporate officers, since Section 25 of Corporation Code provides that all persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all the debts, liabilities and damages incurred or arising as a result thereof. People v. Garcia, 271 SCRA 621 (1997). An individual cannot avoid his liabilities to the public as an incorporator of a corporation whose incorporation was not consummated, when he held himself out as officer of the corporation and received money from applicants who availed of their services. Such individual is estopped from claiming that they are not liable as corporate officers for illegal

recruitment under the corporation by estoppel doctrine under Sec. 25 of the Corporation Code which provides that all persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all the debts, liabilities and damages incurred or arising as a result thereof. People v. Pineda, G.R. No. 117010, 18 April 1997.

Doctrine of Apparent Authority (Prime White Cement Corp. v. Intermediate Appellate Court, 220 SCRA
103, 113-114 [1993]; Francisco v. GSIS, 7 SCRA 577 [1963]) A contract signed by the President/Chairman without authority from the Board of Directors is void. Although the bylaws grant authority to the President to execute and sign for and in behalf of the corporation all contracts and agreements which the corporation may enter into, the same presupposes a prior act of the corporation exercised through its Board of Directors. Yao Ka Sin Trading v. CA, 209 SCRA 763 (1992). Although an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time. Yao Ka Sin Trading v. CA, 209 SCRA 763 (1992). Persons who deal with corporate agents within circumstances showing that the agents are acting in excess of corporate authority, may not hold the corporation liable.Traders Royal Bank v. Court of Appeals, 269 SCRA 601 (1997); also Art. 1883, Civil Code. The authority of a corporate officer in dealing with third persons may be actual or apparent. . . the principal is liable for the obligations contracted by the agent. The agents apparent representation yields to the principals true representation and the contract is considered as entered into between the principal and the third person. First Philipine International Bank v. Court of Appeals, 252 SCRA 259 (1996). If a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agents authority. Soler v. Court of Appeals, G.R. No. 123892, 21 May 2001. Under Article 1898 of the Civil Code, the acts of an agent beyond the scope of his authority do no bind the principal unless the latter ratifies the same expressly or implied. It also bears emphasizing that when the third person knows that the agent was acting beyond his power or authority, the principal can not be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principals ratification. In the case of the corporation as the principal, there was no such ratification. Therefore, when the officer entered into the speculative contracts without securing the Boards approval, nor did he submit the contracts to the Board after their consummation nor were they recorded in the books of the corporation, there was, in fact, no occasion at all for ratification. Safic Alcan & Cie. V. Imperial Vegetable Co., G.R. No. 126751, 28 March 2001.

What is the doctrine of apparent authority? The doctrine of apparent authority provides that a corporation will be liable to innocent third persons for the acts of its agent where the representation was made by the agent in the course of business and acting within his/her general scope of authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his/her principal or some other person for his/her own ultimate benefit.

Doctrine of Corporate Opportunity (Gokongwei v. SEC, 89 SCRA 336 [1979]; SeeAnnotations:

Doctrine of Corporate Opportunity, 89 SCRA 412). - Self-dealings (Secs. 32 and 33) - Using Inside Information (Gokongwei v. SEC, 89 SCRA 336 [1979]).

When a director, who also owns of the equity of the corporation, who has also been designated as the administrator of corporate affairs, and who was directly negotiating the sale of the corporations large landholdings to the Government at great prices, purchases the shares of stock of a shareholder without informing the latter of the ongoing negotiations, such director is deemed to have fraudulently acquired the shareholdings by way of deceit practiced by means of concealing his knowledge of the state of the negotiations and their probable successful result. xStrong v. Repide, 41 Phil. 947 [1909]; - Applies to confidential employees (cf. xSing Juco v. Llorente, 43 Phil. 589 [1922])

Ultra Vires Acts

(a) Concept and Types (Sec. 45) An ultra vires act is one committed outside the object for which a corporation is created as define by the law of its organization and therefore beyond the power conferred upon it by law. The term ultra vire is distinguished from an illegal act from the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be validated. Atrium Management Corporation vs. Court of Appeals, G.R. No. 109491, 28 February 2001. (b) Ratification of Ultra Vires Acts: (Pirovano v. De la Rama Steamship Co., Inc., 96 Phil. 335 [1954]; Carlos v. Mindoro Sugar Co., 57 Phil. 343 [1932];Republic v. Acoje Mining Co., 3 SCRA 361 [1963]; Crisologo Jose v. CA, 177 SCRA 594 [1989]; BASIS OF ULTRA VIRES DOCTRINE (Two Corporate Principles)1. A corporation is a creature of the law and has only such powers and privileges as aregranted by the State the ultra vires doctrine is a product of the theory of concession asprovided in Sec. 2.2. The doctrine upholds the fiduciary duty of directors and officers to the stockholders ormembers such duty dictates that the corporation engage only in transactions to which thestockholders and members bind themselves by way of the provisions of the purposes clause. This is also necessarily include an obligation not to enter into transactions which violate thelaw. TEST TO DETERMINE ULTRA VIRES Whether the act in question is in direct and immediatefurtherance of the corporations business, fairly incident to the express powers andreasonably necessary to their exercise. The strict terms direct and immediate refers to thebusiness of the corporation while the liberal terms fairly incident and reasonablynecessary with reference to the powers of the corporation. With regard to the business of thecorporation as the reference point, much latitude is given to the corporation to enter intovarious contracts as long as they have logical relation to the pursuit of such business. On theother hand, when the purpose clause used limiting words that Court will hold such corporationto such limited business. POLICIES SUPERVENING IN ULTRA VIRES ISSUES Acts not per se illegal, liberal interpretation.1.) PUBLIC CONVENIENCE if corporation contracts are strictly construed, the public would beinconvenienced by having to verify and enter into contractual safeguards when entering intocontracts with corporations. As such liberal construction is afforded to such corporatecontracts.2.) CONTRAVENTIONOF CONTRACTUAL EXPECTATIONS setting aside the corporate contracton the ground of ultra vires would contravene the expectations of both parties who enteredinto the contract expecting to be bound.3.) PRINCIPLE OF BUSINESS JUDGMENT the court will not sit in judgment to substitute theirbusiness judgment for that of the directors; and that as much as possible, directors in theexercise of their business judgment, should be given leeway to adopt corporate policies andto engage in transactions as they deem best for the corporation.4.) NATURE OF BUSINESS OF OPERATIONS it is impossible to anticipate all possiblecontingencies at the time the Articles are drawn thus there would be a need to amend orrevise the Articles to keep abreast with the various aspects of the business. ULTRA VIRES ACTS DISTINGUISHED FROM ACTS WHICH ARE ILLEGAL PER SE

Illegal acts of a corporation are those acts which are contrary to law, morals, or publicorder or contravenes some rule of public policy or public duty are void. Such acts orcontracts cannot be the basis of any court action nor acquire validity by performance,ratification or estoppel. Ultra vires acts are those which are not illegal and void ab initio but are within thescope of the articles of incorporation are merely voidable and may become bindingand enforceable when ratified by stockholders. Said ratification cures the infirmity of the corporate act and makes it valid and enforceable.

Theory of Concession (Tayag v. Benguet Consolidated Inc., 26 SCRA 242 [1968])

To organize a corporation that could claim a juridical personality of its own and transact business as such, is not a matter of absolute right but a privilege which may be enjoyed only under such terms as the State may deem necessary to impose (x-cf.Ang Pue & Co. v. Sec. of Commerce and Industry, 5 SCRA 645 [1962]). Before a corporation may acquire juridical personality, the State must give its consent either in the form of a special law or a general enabling act, and the procedure and conditions provided under the law for the acquisition of such juridical personality must be complied with. The failure to comply with the statutory procedure and conditions does not warrant a finding that such association achieved the acquisition of a separate juridical personality, even when it adopts sets of constitution and by-laws. xInternational Express Travel & Tour Services, Inc. v. Court of Appeals, 343 SCRA 674 (2000). Since all corporations, big or small, must abide by the provisions of the Corporation Code, then even a simple family corporation cannot claim an exemption nor can it have rules and practices other than those established by law. xTorres v. Court of Appeals, 278 SCRA 793 (1997).

The Grandfather Rule (Opinion of DOJ No. 18, s. 1989, dated 19 January 1989; SEC Opinion, dated 6
November 1989, XXIV SEC Quarterly Bulletin (No. 1- March 1990); SEC Opinion, dated 14 December 1989, XXIV SEC Quarterly Bulletin (No. 2 -June 1990) Up to what level do you apply the grandfather rule? ( Palting v. San Jose Petroleum Inc., 18 SCRA 924 [1966]).

THE DOCTRINE OF CORPORATE PERSONALITY

Corporate personality Corporate personality refers to the fact that as far as the law is concerned a company personality really exists apart and different from its owners. As a result of this, a company can sue and be sued in its own name, hold its own property and crucially be liable for its own debts. It is this concept that enables limited liability for shareholders to occur as the debts belong to the legal entity of the company and not to the shareholders in that company. The history of corporate personality Corporate legal personality arose from the activities of organisations such as religious orders and local authorities which were granted rights by the government to hold property and sue and be sued in their own right and not to have to rely on the rights of the members behind the organisation. Over time the concept began to be applied to commercial ventures with a public interest element such as rail building ventures and colonial trading businesses. However, modern company law only began in the midnineteenth century when a series of Companies Acts were passed which allowed ordinary individuals to form registered companies with limited liability. The way in which corporate

personality and limited liability link together is best expressed by examining the key cases.

The doctrine on apparent authority provide that if a private corporation intentionally or negligentlyclothes its officers or agents with apparent power to perform acts for it, the corporation will beestopped to deny that such apparent authority is real, as to innocent 3rdpersons dealing in good faithwith such officers or agents. This apparent authority may result from: (1) the general manager bywhich the corporation holds out an officer or agents as having power to act (2) the acquiescence inhis acts of a particular nature, with actual or constructive knowledge thereof, whether with or withoutthe scope of power. NOTE: Under the doctrine of apparent authority and under the sub-classification of apparentauthority by circumstance, the first contract is unenforceable because PWCC effectively provedthrough clear and convincing evidence that their President cannot bind the corporation withoutauthorization from the Board of Directors, so not the burden shifted upon YKS for him to provide forsuch circumstances which have led him to believe that the President has such apparent authority tobind the corporation; however such was not effectively discharged by YKS, that is why the firstcontract is unenforceable. Also, it is most important to note, that the contract for 10,000 bags of cement is enforceable because such is a contract of sale entered into by the President in the regularcourse of business of the corporation. However, the 45,000 bags contract is unenforceable because itis a contract of dealership which is in the extraordinary course of the business of the corporation.,hence, not within the purview of the apparent authority of the President.

If a corporation knowingly permits one of its officers to act within the scope of anapparent authority, it holds him out to the public as possessing the power to do thoseacts, the corporation will, as against anyone who has in good faith dealt with it throughsuch agent, be estopped from denying the agents authority. Soler v. Court of Appeals,358 SCRA 57 (2001). The authority of a corporate officer dealing with third persons may be actual orapparent . . . the principal is liable for the obligations contracted by the agent. The agent apparent representation yields to the principal's true representation and thecontract is considered as entered into between the principal and the third person. First Philipine International Bank v. Court of Appeals, 252 SCRA 259 (1996). Persons who deal with corporate agents within circumstances showing that theagents are acting in excess of corporate authority, may not hold the corporation liable. Traders Royal Bank v. Court of Appeals, 269 SCRA 601 (1997). Apparent authority may be ascertained through (1) the general manner in which thecorporation holds out an officer or agent as having the power to act, or, in other wordsthe apparent authority to act in general with which is clothes them; or (2) theacquiescence in his acts of a particular nature, with actual or constructive knowledgethereof, within or beyond the scope of his ordinary powers. Inter-Asia Investment Industries v. Court of Appeals,403 SCRA 452 (2003).

Tests in determining the nationality of corporations

1. Incorporation test Determined by the state of incorporation, regardless of the nationality of the stockholders. 2. Domiciliary test Determined by the principal place of business of the corporation. 10

3. Control test Determined by the nationality of the controlling stockholders or members. This test is applied in times of war. 4. Grandfather rule Nationality is attributed to the percentage of equity in the corporation used in nationalized or partly nationalized area.

How to determine the nationality of a corporation

Posted on August 25, 2010 by Hector M. de Leon Jr Posted in Commercial Law, Constitutional Law Tagged corporation

The control test as the primary test As a rule, the control test applies. The primacy of the control test over the grandfather rule can be traced to DOJ Opinion No. 19, s. 1989 (the 1989 DOJ Ruling), which states: . . . the Grandfather Rule, which was evolved and applied by the SEC in several cases, will not apply in cases where the 60-40 Filipino-alien equity ownership in a particular natural resource corporation is not in doubt. (underscoring supplied) In other words, according to the Department of Justice, the control test generally applies, with the grandfather rule applicable only when the 60-40 Filipino-alien equity ownership is in doubt. On the basis of the 1989 DOJ Ruling, the SEC issued several opinions doing away with the grandfather rule. For example, in a May 30, 1990 opinion, the SEC stated: . . . the Commission En Banc, on the basis of the Opinion of the Department of Justice No. 18., S. 1989 dated January 19, 9189 voted and decided to do away with the strict application/computation of the so called grandfather rule. . . and instead applied the so-called control test method for determining corporate nationality. (underscoring supplied)(see also SEC Opinion dated August 6, 1991; SEC Opinion dated October 14, 1991) Around two years after the issuance of the 1989 DOJ Ruling, Congress enacted the Foreign Investments Act of 1991 (FIA), which expressly embodied the control test. Section 3(a) of the FIA (as amended by Republic Act No. 8179) provides: . . . the term Philippine national shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors, in order that the corporation shall be considered a Philippine national. (underscoring supplied) Similarly, Section 1(a) of the rules and regulations implementing the FIA expressly provides for the application of the control test: Philippine national shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty
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percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefits of the Philippine nationals; Provided, that where a corporation and its non-Filipino stockholders own stocks in Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose. (underscoring supplied) While the control test was enshrined in the FIA and its implementing rules, the SEC continues to apply the grandfather rule when the Filipino equity ownership is in doubt (as provided in the 1989 DOJ Ruling). For example, in SEC-OGC Opinion No. 22-07 dated December 7, 2007, the SEC stated: . . . when there is doubt as to the actual extent of Filipino equity in the investee corporation, the Commission is not precluded from using the Grandfather Rule. My former professor at the UP College of Law, Prof. Raul Palabrica, makes a great summary of the SEC position in his Philippine Daily Inquirer column: . . . this should not be taken to mean that the grandfather rule is already history. In an inverse way, the SEC pointed out that the grandfather rule will not apply in cases where the 60 -40 Filipino equity ownership is not in doubt. The rule therefore is: While the control test shall be used as standard to determine the nationality of corporations, the grandfather rule will be applied if there are questions about compliance with Filipino ownership requirements. (see Raul Palabrica, Nationality Ownership Rule, Philippine Daily Inquirer, October 19, 2007) Based on the FIA and its implementing rules and regulations (which embody the control test), my personal view is that the control test should be the test used in determining the nationality of a corporation. While the 1989 DOJ opinion made reference to the application of the grandfather rule when the 60-40 equity ownership interest is in doubt, the 1989 DOJ opinion was issued prior to the enactment of the FIA. Also, I believe that if there is doubt as to the 60-40 Filipino-alien equity ownership interest in the investing corporation that has a 60% equity in a corporation engaged in a partly nationalized activity, what should be applied is the Anti-Dummy Law (in conjunction with the control test), not the grandfather rule. Thus, if 60% of the shares of the investing corporation is held by Filipinos as dummies for foreigners, that 60% equity in the investing corporation will not be deemed held by Philippine nationals. Applying the control test, the investee corporation will not also be a Philippine national.

substantial performance (compliance) legal definition

noun A doctrine in equity that if a good faith attempt was made to perform the requirements of a contract, but failed to exactly meet the specifics, and if the essential aim of the contract has been met, the agreement will still be considered as having been completed. Minimal damages for the impreciseness may be permitted by the court.

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Substantial performance is a term used in contract law that means the contract has been completed or performed to an extent that performance should be considered adequate. It arose from common law contract concepts, which were put into place to ensure that if a contract had been almost completely performed, the absence of the completion of small or insignificant details would not give one party license to breach a contract. In other words, if a person completes most or all of his responsibilities under a contract, he is entitled to payment or whatever else he was promised under the terms of the contract. Contracts are legally enforceable promises. Contracts may contain numerous terms or conditions that the parties to the contract must meet. Completing some of the provisions of a contract may be time consuming and may take years. Under the doctrine of substantial performance, when one party completes the contract in such a manner that performance is substantially the same as complete performance, the other party is bound to pay. In other words, if, for example, a contractor is bound to complete a contract using one type of wood but the wood is unavailable so he uses a wood that is equivalent, substantial performance will protect that contractor. It permits the contractor to enforce the contract and demand payment, although he did not perform the duties listed under the contract to the exact specifications listed in the contract. In order for a contract to be enforced when there is substantial performance but not a complete fulfillment of all contract duties, the party requesting the substantial performance must have been unable to perform the exact duties in the contract through no fault of his own. This means a party can't simply decide to perform differently and expect substantial performance. Something beyond his control must have necessitated that he make an alteration. Substantial performance is the opposite doctrine to the doctrine of perfect tender. In contracts that require perfect tender, the contract duties must be completed exactly as specified. Even if the result of one party's performance is substantially the same, in a perfect tender contract, that party will be considered in breach and not entitled to payment. When one party wants to enforce a contract under the doctrine of substantial performance, he has the burden of proof. If he can demonstrate that his method of completing the contract duties was so similar as to be almost equivalent to the original duties, he is entitled to collect full payment of the contract. The other party can then try to prove he suffered damages as a result of the change and the amount of payment this party must make is reduced by any damages he proves.

What is the doctrine of secondary meaning?

This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because it is geographical or otherwise descriptive, may nevertheless be used exclusively by one producer with reference to his article so long as in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. and C. Merriam Co. v. Saalfield, 198 F. 369, 373, cited in Ang v. Teodoro, G.R. No. L-48226, Dec. 14, 1942) Doctrine of secondary meaning can be extended to corporation name but must comply with the requirement that it has been used so long and so exclusively by one and that the said name has come to mean that it is referred to as that corporation. 13

preemptive right
The right of current shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of any future issue of common stock. Most states consider preemptive rights valid only if made explicit in a corporation's charter. Read more: http://www.investorwords.com/3773/preemptive_right.html#ixzz2NgLR8iSj
WHAT IS THE PRE-EMPTIVE RIGHT? It is the option privilege of an existing stockholder to subscribe to a proportionate part of shares subsequently issued by the corporation, before the same can be disposed of in favor others. WHY A PRE-EMPTIVE RIGHT? To protect existing stockholder equity. If the right is not recognized, the SHs interest in the corporation will be diluted by the subsequent issuance of shares.

Basis of Right; Common Law Rule

Under the prevailing view in common law, the preemptive right is limited to shares issued in pursuance of an increase in the authorized capital stock and does not apply to additional issues of originally authorized shares which form part of the existing capital stock. This common law principle which was generally understood to be applicable in this jurisdiction has now to give way to the express provisions of the Corporation Code on the matter.

Extent and Limitations of Preemptive Right under the Code

WHAT IS THE EXTENT OF THE PRE-EMPTIVE RIGHT? All stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues or dispositions of shares of any class, in proportion to their respective shareholdings. Exception: When such right is denied by the AOI or an amendment thereto.

Appraisal Right
Statutory remedy available in many states to minority stockholders who object to an extraordinary action taken by the corporation (such as a merger). This remedy requires the corporation to repurchase the stock of dissenting stockholders at a price equivalent to its value immediately before the extraordinary corporate action. Read more: http://www.answers.com/topic/appraisal-right#ixzz2NgMhdT8c

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Derivative suits. The general rule is that where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. Nonetheless, an individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stocks in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. A derivative action is a suit by a shareholder to enforce a corporate cause of action. The corporation is a necessary party to the suit. And the relief which is granted is a judgment against a third person in favor of the corporation. Similarly, if a corporation has a defense to an action against it and is not asserting it, a stockholder may intervene and defend on behalf of the corporation. By virtue of Republic Act No. 8799, otherwise known as the Securities Regulation Code, jurisdiction over intra-corporate disputes, including derivative suits, is now vested in the Regional Trial Courts designated by the Supreme Court pursuant to A.M. No. 00-11-03-SC promulgated on 21 November 2000.
Derivative Suit - brought by a stockholder for and in behalf of the corporation to protect/vindicate corporate rights after he has exhausted intra-corporate remedies Requisites: a. cause of action in favor of the corporation b. refusal of corporation to sue c. injury to the corporation Although corporations dissolved have 3 years to wind up, they can convey their properties to a trustee who can continue the suit beyond the 3 year period. The lawyer who handled the case in the trial court may be considered as trustee for the dissolved corporation with respect to the matter in litigation only even if no appointment was extended to him. (Selano vs. CA)

Nature and Basis of derivative suit

Suits of stockholders/ members based on wrongful or fraudulent acts of directors or other persons: a. Individual suits - wrong done to stockholder personally and not to other stockholders (ex. When right of inspection is denied to a stockholder) Class suit - wrong done to a group of stockholders (ex. Preferred stockholders' rights are violated) Derivative suit - wrong done to the corporation itself Cause of action belongs to the corp. and not the stockholder But since the directors who are charged with mismanagement are also the ones who will decide WON the corp. will sue, the corp. may be left without redress; thus, the stockholder is given the right to sue on behalf of the corporation. An effective remedy of the minority against the abuses of management An individual stockholder is permitted to bring a derivative suit to protect or vindicate corporate rights, whenever the officials of the corp. refuse to sue or are the ones to be sued or hold the control of the corp. Suing stockholder is merely the nominal party and the corp. is actually the party in interest.

b.

c.

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A SH can only bring suit for an act that took place when he was a stockholder; not before. (Bitong v. CA, 292 SCRA 503)

Representative Suit
Representative Suit - brought by the stockholder in his own behalf and in behalf of other stockholders similarly situated, having common cause against the corporation

In limited instances, a representative of such person may bring the suit, in which case it is called a representative suit. Examples of the latter are suits by trustees, executors, administrators and guardians,[3] derivative suits,[4] and suits by legitimate labor organizations on behalf of their members.[5]

Intra-corporate controversy; fraud. It is essential for the complaint to show on its face what are claimed to be the fraudulent corporate acts if the complainant wishes to invoke the courts special commercial jurisdiction. This is because fraud in intra-corporate controversies must be based on devises and schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association, as stated under Rule 1, Section 1 (a)(1) of the Interim Rules. The act of fraud or misrepresentation complained of becomes a criterion in determining whether the complaint on its face has merits, or within the jurisdiction of special commercial court, or merely a nuisance suit. Simny G. Guy, Geraldine G. Guy, Gladys G. Yao and the Heirs of the late Grace G. Cheu vs. Gilbert Guy/Simny G. Guy, Geraldine G. Guy, Gladys G. Yao and the heirs of the late Grace G. Cheu vs. The Hon. Ofelia C. Calo, in her capacity as Presiding Judge of the RTC-Mandaluyong City-Branch 211 and Gilbert Guy G.R. No. 189486/G.R. No. 189699. September 5, 2012
The doctrine asserts that a corporation or oter business entity may be found vicariously liable for the wholly internal agreements of its agents. Although courts have almost uniformly rejected civil intracorporate conspiracy allegations, the judiciary has overwhelmingly approved the use of the intracorporate conspiracy doctrine in federal criminal prosecutions.

CORPORATE POWERS

General Powers of Corporation (Sec. 36)

To sue and be sued in its corporate name; Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation; To adopt and use a corporate seal; To amend its articles of incorporation in accordance with the provisions of this Code; To adopt by-laws not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code;

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In case of stock corporations, to issue of sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a nonstock corporation; To purchase, receive, take, grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution; (NOTE: There are two (2) general restrictions on the power of the corp. to acquire and hold properties:

(1) that the property must be reasonable and necessarily

required by the transaction of its lawful business, and

(2) that the power shall be subject to the limitations prescribed

by other special laws and the Constitution.) To adopt any plan of merger or consolidation as provided in this Code; To make reasonable donations, including those for the public welfare of for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided that: no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity;

To establish pension, retirement and other plans for the benefit of its directors, trustees, officers and employees; and To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its articles of incorporation.

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