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COURSE OUTLINE FOR BUSINESS ORGANIZATION II

A. CORPORATION LAW
I. Introduction
1.1 What are the different forms of business organizations?
-

Sole proprietorships
Partnerships
Business trust
Joint stock company
Cooperatives
Other business forms such as a joint venture

1.2 Review provisions on Partnership (Review Articles 1767-1867)


A.
B.
C.

Definition (Art. 1767)


Essential requistes of a Partnership CCPP
Kinds of Partnership
c.1 Accdg to object
a) universal partnership of all present property/profit
b) particular partnership
c.2 Accdg to liability of partners general or limited

D. Kinds of Partners - as to liability, contribution, mgmt& as to third persons


E. Distribution of profits and losses
F. Principle of delectus personae
G. Dissolution, winding up and termination of partnership
2. Corporation Law
2.1 Historical Background of Corporate Law
- Evolution of Private Corporation in 3 waves
- Scope of the Code
- Art. XII, Section VI of the Constitution
SEC. 16. The Congress, shall not, except by general law, provide for the formation, organization,
or regulation of private corporations. Government-owned or controlled corporations may be created
or established by special charters in the interest of the common good and subject to the test of
economic viability
Cases : 1) Bourns vs. Carman, 7 Phils. 117 (1906)
2) Harden v. Benguet Consolidated Mining Co., 58 Phils.
141 (1933)
3) Benguet Consolidated Mining Co. Vs. Mariano Pineda 098 Phil
711 G.R. No. L-7231 | 1956-03-28
4) Dante V. Liban, et al vs. Richard J. Gordon,GRN, 175352 ,
July 15, 2009
En Banc Resolution of the Court in in the same case of
Liban, issued on January 18, 2011
1.2

Definition of a Corporation, its nature and attributes (Sec 2)


-

What is the theory of Concession? Distinguish it from the Genossenchaft Theory.


Theory of Corporate Business Enterprise or Economic Unit
Four Attributes of a Corporation
Main Doctrine of Separate Juridical Personality

Cases : 5) Tayag v. Benguet Consolidated, 26 SCRa 242 (1968)


6) Arnold v. Willits & Patterson Limited, 44 Phils. 634 (1923)
7) Pantranco Employees Asso., et al. Vs. NLRC, et al.,G.R.
No. 170689 | 2009-03-17
8) Ruperto Suldao Vs. Cimech System Construction, Inc.,
G.R. No. 171392 | 2006-10-30
1.3 Advantages/Disadvantages of a Corporation
- Corporation as a person
- Entitlement to damages
- Liability for torts
- Liability for crimes
Cases : 9) Mambulao Lumber Co. v. PNB. 22 SCRA 359 (1969)

10) ABS-CBN v. Court of Appeals, 310 SCRA 572 (1999)


11) National Power Corp. vs. Philipp Brothers Oceanic, Inc.,
G.R. No. 126204 | 2001-11-20
12) Meralco v. T.E.A.M Electronics Corporation 540 SCRA
62 (2007)
13) Ching vs. Sec. of Justice, 481 SCRA 602 (2006)
1.4 Citizenship/Nationality of a Corporation see Sec. 123 and Sec. 149
- What are the tests to determine nationality of a corporation?
- Understanding the control test
- What is the grandfather rule?
14) J.G. Summit Holdings, Inc. vs CA, et al, G.R.No.124293 |
2005-01-31

1.5 Doctrine of Piercing the Veil of Corporate Entity/Fiction

Grounds for application of doctrine fraud, alter ego and equity cases

Proof Required to disregard corporate fiction

Tests in Determining applicability

Illustrations when corporate fiction is established

Sunio Doctrine
15) General Credit Corp. Vs. Alsons Devt., G.R. No.
154975 | 2007-01-29
16) Mel Velarde vs Lopez Inc, G.R. No. 153886 | 2004-01-14
17) Heirs of Ramon Durano, Sr vs. Uy G.R. No.
136456 | 2000-10-24 (2000)
18) Philippine National Bank v. Ritratto Group, Inc.
G.R. No. 142616 | 2001-07-31
19) Sunio vs.NLRC,127 SCRA 390
1.6.) Classes of Corporations (Secs. 3 and 4)
1.6.1 Stock and Non stock Corporation
Cases : 20) Collector of Internal revenue v. Club Filipino, Inc. de Cebu,
5 SCRA 321 (1962)
1.6.2 Other Classes of a corporation
21) Shipside Inc vs. Court of Appeals, G.R. No. 1433 | 2001-0220
22) Roman Catholic Apostolic vs. Register of Deeds of Davao
City, 102 Phils. 596 (1957)
1.6.3 Composition/Components of a Corporation (Sec. 5)
- Three other classes of persons who play an important role in the
incorporation of persons
- What is a promoter?
- Liability of a promoter
- Liability of a corporation for promoters contracts
- Theory of Continuing Offer

1.6.4 Capital Stock of a Corporation (2 Components)


1.6.5 Three (3) basic policies on share classification
1.6.6 Classification of Shares ( Section 6)
General Rule and Exceptions (1st paragraph )

Classification of shares common, preferred, par value, no par value shares, redeemable
shares, founders shares; treasury shares (Secs. 7-9)

Instances when even non voting shares can vote : AASI IMID
Cases : 23 ) PLDT vs. NTC, 539 SCRA 365 (2007)
24) Gamboa vs Teves, G.R. No. 176579 | 2011-06-28 (read
also the dissenting opinion of Justice Velasco)
25) Republic Planters Bank v. Agana, 269 SCRA 1 (1997)
26) Commissioner of Internal Revenue v. CA 301 SCRA
152 (1999)
II. INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS
2.1 Number and qualifications of incorporators
2.2 Steps in organizing a corporation
2.3 Corporate term
2.4 Minimum Capital Stock and Subscription Required of Stock Corporations
Sec. 13

Trust Fund Doctrine

Three (3) instances when where the Trust Fund doctrine allows the distribution of corporate
capital assets

Case : 27) Ong Yiung vs. Tiu 401 SCRA 1 (2003)


2.5 Articles of Incorporation

Form and contents

Procedure for Amendment of Articles of Incorporation

Non- amendable items of the Articles of Incorporation

Grounds for Rejection or Disapproval of the Articles of Incorporation


Case : 28) Lanuza vs. Court of Appeals, 454 SCRA 54 (2005)
29) Kaanib sa Iglesia ng Dios Kay Kristo Hesus, HSK sa
Bansang Pilipinas, Inc. vs. Iglesia ng Dios Kay Cristo
Hesus, Haligi at Suhay ng Katotohanan or AK(IDKJHSK)BP vs. IDCJ-HSK, G.R.N 137592, December 12,
2001
30) Hyatt Elevators vs. Goldstar Elevators, Phils., 473 SCRA
705 (2005)
2.6 Corporate Name (compare with Trade name and Business Name)
- Limitations on use of corporate name
31) Philips Export B. V vs. Court of Appeals 206 SCRA 457
32) Industrial Refractories Corp. vs. Court of Appeals, 390 SCRA
252 (2002)
2.7 Commencement of Corporate Existence
2.8 Non user 2 yrs vs. Non User 5 years (Sec. 22)
2.9 De facto corporation vs.Corporation by Estoppel
2.10 Effect of Non Use of Corporate Charter
Cases :
33) Sawadjaan vs. Court of Appeals 459 SCRA 516 (2005)
34) Pioneer Insurance and Surety Corporation vs. CA 175 SCRA 668
(1989)
35) Merill Lynch Futures v. Court of Appeas, 211 SCRA 824 (1992)
36) Intl Express Travel v. Court of Appeals 343 SCRA 674 (2000)
37) Lozano vs. Delos Santos, 272 SCRA 452 (1997)
38) Seventh Day Adventist Conference Church vs. Northeastern
Mindanao Mission of 7th Day Adv, Inc, GRN. 150416,21Jul 2006
III. BOARD OF DIRECTORS/TRUSTEES/OFFICERS
3.1 Centralized Management Doctrine The Board is the seat/repository of
corporate powers
39) Filipinas Port Services vs. Go 518 SCR 453 (2007)
40) San Juan Structural vs. Court of Appeals, 296 SCRA 632 (1998)
Doctrine of apparent authority?-not applicable
Doctrine of piercing not applicable but rather doctrine of corporate personality
3.2 Business Judgment Rule and its exceptions
41) Montelibano v. Bacolod Murcia Milling 5 SCRA 36 (1962)
42) Phil. Stock Exchange, Inc., v. CA, 282 SCRA 232 (1997)
3.3 Qualifications and Disqualifications of the Board of Directors,
3.4 Compensation of Directors
Case : 43) Western Institute of Technology Inc. vs. Salas 278
SCRA 216 (1997)
3.5 Three fold duties of directors, trustees and corporate officers (Sec 31 vs. Sec. 34)
Cases : 44) Board of Liquidators vs. Kalaw, 20SCRA 987(1967)
45) Benguet Electric Cooperative vs. NLRC209 SCRA 55
(1992)
46) People's Aircargo and Warehousing Co. Inc.v. CA, 297
SCRA 170-1998
47) Easycall Communications Phils., Inc. vs. Edward King,
Gr No. 145901, Dec. 15, 2005 (Who are corporate Officers?)
48) Premium Marble Resources vs. CA 353 SCRA 23 (2001)
3.6. Doctrine of Corporate Opportunity
3.7 Requisites of Board Meetings; Quorum of the Board
3.8 Election of Directors or Trustees cumulative voting
Cases : 49)Gokongwei vs. SEC 89SCRA 336 (1979)
50) Aurbach v. Sanitary Wares Manufacturing Corp. 189
SCRA
130 (1989)
51) Expertravel & Tours v. Court of Appeals, 459 SCRA 147
(2005)
3.9 Removal and Vacancy of Directors
Case : 52) Tan vs. Sycip, 499 SCRA 216 (2006)
3.10 Derivative Suits

Cases : 53) Bitong vs. CA -292 SCRA 503 (1998)


54) Republic Bank vs. Cuaderno 19 SCRA 671
3.11 Interlocking Directors
3. 12 Dealings of Directors, Trustees, Officers
3.13. Executive Committee
IV. POWERS OF A CORPORATION
4.1 Corporate Powers and Capacity Very impt (Sec. 36)

Express

Incidental

Implied
Cases : 55) Reynoso IV vs. Court of Appeals, 345 SCRA 335 (2000)
56) Nestle Phils. Inc., vs. CA 203 SCRA 504 (1991)
57) Atrium Management Corp vs. CA G.R. No. 109491 Feb 28,
2001
4.2 Extending or Shortening Corporate term
4.3 Increasing or decreasing capital stock
4.4 Pre-emptive rights and the power to deny pre-emptive rights

What is pre-emptive right?

Purpose of pre-emptive right

Issue vs disposition under Section 39


Case :58) Dee vs. SEC, 199 SCRA 238 (1991)
5. Sale or disposition of Assets

Bulk Sales Law


6. Acquiring own shares
7. Investing Corporate funds in another corporation or business
8. Declaring dividends

Cash dividends

Stock dividends
Case : 59) Nielson and Co. v Lepanto Consolidated Mining Co.,Inc. 26
SCRA 540 (1968)
60) Wise and Co. v. Meer 78 Phil. 655 (1947)
9. Ultra Vires Acts of a Corporation
Case : 61) Woodchild Holdings vs. Roxas Electric 436 SCRA 235
(2004)
62) Pirovano v. Dela Rama Steamship Co., 96 Phil. 355 (1954)
10. Doctrine of Ratification
63) Yasuma vs. Heirs of Cecillio S. de Villa, 499 SCR 466 (2006)
V. BY LAWS
1. Nature of by- laws
2. Contents of by- laws
3. Amendments or repeals
4. Effectivity of by laws
Cases : 64) Loyola Grand Villas Homeowners (South) Association Inc. v.
CA. 276 SCRA 681 (1997)
65) San Miguel Corp. v. Mandaue Packing Product Plants UnionFFW, 467 SCRA 107 (2005)
69) China Banking Corporation v. CA 270 SCRA 503 (1997)
70) PMI Colleges v. NLRC 277 SCRA 462 (1997)
VI. MEETINGS
1.
2.
3.
4.

Kinds of meetings of the Stockholders and Board of Directors


Meetings of Stockholders
Meetings of Directors/Trustees
Right to vote in Special cases

Right to vote of pledgors, mortgagors and administrators of shares of stocks


Right to vote of joiint membership stock
Voting of treasury stocks
Proxy
Voting trust

Cases : 72) Cojuangco vs. Roxas `95 SCRA 797 (1991)


Read again Tan vs. Sycip and Lanuza cases

73) Lee v. CA, 205 SCRA 752


VII. STOCKS AND STOCKHOLDERS
1. Subscription contract
2. Pre-incorporation subscription
3. Consideration for stocks
4. Certificate of stock and transfer of shares
5. Issuance of Stock Certificate
6. Watered stocks
7. Payment of Balance of Subscription
8. Delinquency Sale
Cases : 74) Nautica Canning Corp vs. Yumul, GR No. 1644588, Oct. 19,
2005 (stockholder)
75) Republic of the Philippines vs. Estate of Hans Menzi, et. Al
G.R. No. 152578, November 23, 2005
76) Rural Bank of LIpa City vs. CA , GR No. 124535, 28 Sept.
2001

VIII CORPORATE BOOKS AND RECORDS.


1. Corporate Books required to be kept
Case :77) Provident International Resources Corp. vs Venus, 554
SCRA 540 (2008)
78) NATU v. Secretary of Labor, 109 SCRA 139 (1981)
79) Torres, Jr. v. CA, 278 SCRA 793 (1997)
2.

Right to financial statement


Cases :80) W.G. Philpotts v. Phil Manufacturing Co. 40 Phil 471
(1919)
81) Gonzales vs. PNB (122SCRA 489) 1983)

IX- MERGER AND CONSOLIDATION


1. Difference between merger from consolidation
2. Stockholders or members approval
3. Articles of merger or consolidation
4. Effects of merger or consolidation
Cases : 82) Polland Industrial Ltd. VS. NDC 467 SCRA 500 (2005)
83) Babst vs. CA, 350 SCRA 341 (2001)
X APPRAISAL RIGHT
1. Instances of appraisal right
2. How right is exercised
3. Effect of demand and Termination of Right
XI - NON STOCK CORPORATIONS
XII - CLOSE CORPORATIONS
XIII - SPECIAL CORPORATIONS
G.R. No. 184088
July 6, 2010
IGLESIA EVANGELICA METODISTA EN LAS ISLAS FILIPINAS (IEMELIF) (Corporation Sole), INC., et
al vs. BISHOP NATHANAEL LAZARO, et al acting individually and as members of the Supreme
Consistory of Elders and those claiming under the Corporation Aggregate, Respondents.

XIV - DISSOLUTION
XV - FOREIGN CORPORATION
Cases : 84) The Mentholatum Co., Inc c. Mangaliman, et alG.R. No. L47701 June 27, 1941
85) Top-Weld Manufacturing ,Inc. v. ECED SA 138 SCRA
118(1985)
86) Avon Insurance PLCv. CA, 278 SCRA 312
XVI - MISCELLANEOUS PROVISIONS
Part II Important Provisions of the Securities Regulation Code
Part III- Interim Rules of Procedure on Corporate Rehabiltation
Part IV - Rules on Intracorporate Controversies
Cases : 87) IBC v, Jalandoon G.R. No. 148152, Nov. 18, 2005