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Course Outline Atty. Joanne L.

Ranada
Business Organization II Academic Year 2017-2018

PART 1
CORPORATION LAW OF THE PHILIPPINES

I. INTRODUCTION

1. General

2. Kinds of Business Organization

 Sole Proprietorship
 Partnership
 Joint Venture
 Corporation

3. Historical Background

II. DEFINITION & ATTRIBUTES

LBC Express vs. CA (236 SCRA 602)


Filipinas Broadcasting vs. Ago Medical Center (GR No. 141954, January 17, 2005)

1. Advantages/disadvantages of the corporate form of business

2. Distinctions between a corporation and partnership

3. Government powers

III. CLASSIFICATION OF CORPORATIONS

1. Stock vs. Non-Stock

Collector vs. Club Filipino de Cebu (5 SCRA 312)

2. Created by special law

PNOC-EDC vs. NLRC (201 SCRA 487)

3. Public vs. Private

National Coal Corp. vs. CIR (146 SCRA 583)

4. Ecclesiastical & Lay

5. Aggregate & Sole

6. Close & Open

7. Domestic & Foreign

8. Parent/Holding, Subsidiaries & Affiliates

9. Public & Private

10. Quasi-Public
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

11. De jure vs. De facto

12. Corporations by Estoppel

IV. FORMATION & ORGANIZATION

1. Process of Incorporation

2. Contents of the Articles of Incorporation

a. Prefatory Paragraph

b. Corporate Name

Red Line Transport vs. Rural Transit (60 Phil 549)


Universal Mills vs. Universal Textile Mills (78 SCRA 62)
Lyceum of the Philippines vs. CA (219 SCRA 610)
Philipps Export B.V. vs. CA (206 SCRA 457)

SEC Memorandum Circular No. 21, Series of 2013


Omnibus Guidelines and Procedures on the Use of Corporate and
Partnership Names

SEC Memorandum Circular No. 8, Series of 2013


Amendment on the Guidelines and Procedures on the Use of Corporate and
Partnership Names

c. Purpose Clause

e. Principal Office Address

Clavecilla Radio Systems vs. Antillon (19 SCRA 379)

SEC Memorandum Circular No. 6, Series of 2016


Omnibus Guidelines on Principal Office Address; Address of each
Incorporator, Director, Trustee or Partner

f. Term of Existence

SEC Memorandum Circular No. 21, Series of 2014


Guidelines Governing the Computation of Corporate Term

g. Incorporators

h. Directors/Trustees

i. Capitalization

i. Shares of stock and classification

ii. Purpose of the classification

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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

 Common vs. Preferred Shares

 Par vs. No-par Shares

 Voting vs. Non-voting Shares

 Founders' Shares

 Redeemable Shares

 Treasury Shares

Commissioner vs. Manning (66 SCRA 14)

iii. Capital requirements

Heirs of Gamboa vs. Teves (GR No. 176579, October 9, 2012)

iv. Restrictions and Preferences

Executive Order No. 184


Tenth Foreign Investment Negative List

j. No-transfer Clause

k. Treasurer

l. Undertaking to Change Name

SEC Memorandum Circular No. 8, Series of 2012

m. Acknowledgment

n. Treasurer's Affidavit

3. Grounds for Disapproval

4. Commencement of Corporate Existence

Cagayan Fishing vs. Sandiko (65 Phil 233)

5. Defectively-formed corporations

a. De facto corporations

Municipality of Malabang vs. Benito (27 SCRA 452)


Hall vs. Piccio (86 Phil 603)

b. Corporation by Estoppel

Lozano vs. Delos Santos (274 SCRA 452)


Albert vs. University Publishing (13 SCRA 84)
Salvattierra vs. Garlitos (103 Phil 757)
Chiang Kai Shiek vs. CA (172 SCRA 389)
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

Asia Banking Corp. vs. Standard Products (46 Phil 144)


International Express Travel vs. CA (343 SCRA 674)
Greorg Grotjahn vs. Isnani (235 SCRA 216)

6. Organization and Commencement of Business

a. Corporate organization

b. Commencement of Business Transaction

V. CORPORATE CHARTER AND ITS AMENDMENTS

1. The Corporate Charter

a. Corporate Entity Theory

Sulo ng Bayan vs. Araneta (72 SCRA 347)


Caram vs. CA (151 SCRA 372)
Rustan Pulp and Paper Mills vs. CA (214 SCRA 665)
Cruz vs. Dalisay (152 SCRA 482)
Palay Inc. vs. Clave (124 SCRA 638)
Soriano vs. CA (174 SCRA 195)

2. Piercing the Veil of Corporate Fiction

a. General Concept

Palacio vs. Fely Transportation Co. (5 SCRA 1011)


Marvel Bldg. vs. David (94 SCRA 376)
Yutivo and Sons vs. CTA (1 SCRA 160)
Commissioner vs. Norton & Harrison (11 SCRA 714)
La Campana Coffee vs. Kaisahan ng Manggagawa (93 Phil 160)
Emilio Cano vs. CIR (13 SCRA 290)
Telephone Engineering vs. WCC (104 SCRA 354)
Claparols vs. CIR (65 SCRA 613)
Nat'l Federation vs. Ople (143 SCRA 124)
A.C. Ransom vs. CA (150 SCRA 498)
Concept Builders vs. NLRC (257 SCRA 149)
Mc Connel vs. CA (1 SCRA 722)
Tan Boon Bee vs. Jarencio (163 SCRA 205)
Cease vs. CA (93 SCRA 483)
Wensha Spa Center, Inc. vs. Yung. (GR No. 185122, August 10, 2010)
General Credit Corp. vs. Alsons Development, et. al. (GR 154975, January
29, 2007)

b. When not justified

Remo, Jr. vs. IAC (172 SCRA 405)


Del Rosario vs. NLRC (187 SCRA 777)
Indophil Textile Mills vs. Galica (205 SCRA 697)
PNB vs. Ritratto Group (362 SCRA 216)
Pacific Rehaus Corp. vs. CA (719 SCRA 665)
Yu vs. NLRC (245 SCRA 134)
Francisco Motors Corporation vs. Court of Appeals (GR. No. 100812, June
25, 1999)
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

3. Amendment of Corporate Charter

4. Special Amendments

5. Provisions subject to amendments

a. Change in Corporate Name

Phil. First Insurance vs. Hartigan (74 SCRA 2520)

Relevant SEC Memorandum Circulars

b. Corporate Term

Alhambra Cigar vs. SEC (24 SCRA 269)

VI. BOARD OF DIRECTORS / TRUSTEES

1. Powers of the Board

a. Classification of Powers

Ramirez vs. Orientalist (38 Phil 634)


Barreto vs. La Previsora (57 Phil 649)

b. Qualifications and Disqualifications

Lee vs. CA (205 SCRA 572)


Detective and Protective Bureau vs. Cloribel (26 SCRA 256)

2. Election and Voting

3. Validity and Binding Effects of Actions of Corporate Officers

Yao Ka Sin Trading vs CA (209 SCRA 763)


Lopez Realty vs. Fontecha (247 SCRA 183)
Pua Casim vs. Neumark (46 Phil 242)
Yu Chuck vs. Kong Li Po (46 Phil 208)
Francisco vs. GSIS (7 SCRA 557)
Board of Liquidators vs. Kalaw (20 SCRA 987)
Buenaseda vs. Bowen & Co. (110 Phil 464)

4. Removal and Filling up of vacancies

Valle Verde Country Club vs. Africa (598 SCRA 201, September 2009)

5. Compensation of Directors

Central Cooperative Exchange vs. Tibe (33 SCRA 593)


Western Inst. of Tech. vs. Salas (278 SCRA 216)
Gov't vs. El Hogar Filipino (50 Phil 399)
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

6. Liability Corporate Officers

Tramat Mercantile vs. CA (238 SCRA 214)


Llamado vs. CA (270 SCRA 423)
Uichico vs. NLRC (273 SCRA 35)

7. Three-fold Duty of Directors

Montelibano vs. Bacolod Murcia Milling (5 SCRA 36)


Strong vs. Repide (41 Phil 947)

8. Self-Dealing Directors

Prime White Cement vs. IAC (220 SCRA 1030)


Mead vs. Mc Cullough (21 Phil 95)

9. Interlocking Directors

10. Derivative Suit

Pascual vs. Orozco (19 Phil 83)


Everette vs. Asia Banking (49 Phil 512)
Republic Bank vs. Cuaderno (19 SCRA 671)
Western Institute of Tech. vs. Salas (supra)
San Miguel Corp. vs. Khan (176 SCRA 447)
Chase vs. Buencamino (136 SCRA 365)
Reyes vs. Tan (3 SCRA 198)
Gamboa vs. Victorino (90 SCRA 40)
Evangelista vs. Santos (86 Phil 387)

11. Executive Committee

VII. CORPORATE POWERS AND AUTHORITY

1. Classifications of Corporate Power

a. Power to sue and be sued

Delta Motors vs. Mangosing (70 SCRA 77)


E.B. Villarosa & Partner Co. vs. Benito (GR 14926, August 6, 1999)

b. Power of Succession

c. Power to Adopt and Use a Common Seal

d. Power to Amend the Articles of Incorporation

e. Power to Adopt By-Laws

f. Power to Sell / Issue Stocks or Admit Members

g. Power to Acquire / Alienate Property

Luneta Motors Co. vs. A.D. Santos Inc. (5 SCRA 809)


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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

Gov't. vs. El Hogar Filipino (supra)


Director of Lands vs. CA (158 SCRA 568)

h. Power to Adopt Plans of Merger / Consolidation

i. Power to make Donations

j. Power to establish Pension, Retirement and other Plans

Republic vs. Acoje Mining Co. (7 SCRA 361)

k. Implied Powers

Teresa Electric vs. PSC (21 SCRA 199)


National Power Corporation vs. Vera (170 SCRA 721)
Powers vs. Marshall (161 SCRA 176)

l. Power to Extend / Shorten Corporate Term

m. Power to Increase / Decrease the Authorized Capital Stock; Incur / Create Bonded
Indebtedness

Philtrust vs. Rivera (44 Phil 469)


Madrigal & Co. vs. Zamora (151 SCRA 3550)

n. Power to Deny Pre-emptive Rights

Benito vs. SEC (123 SCRA 722)

o. Power to Sell / Dispose of Assets

Islamic Directorate of the Phils. vs. CA (272 SCRA 454)


Edward Nell & Co. vs. Pacific Farms (15 SCRA 415)

p. Power to Acquire Own Shares

Steinberg vs. Velasco

q. Power to Invest Funds

De la Rama vs. Ma-ao Sugar Central (7 SCRA 247)


John Gokongwei vs. SEC (89 SCRA 336)

r. Power to Declare Dividends

i. Types

ii. When and to whom it is vested

Nielson & Co. vs. Lepanto Consolidated Mining (26 SCRA 540)

s. Power to Enter into Management Contracts

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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

2. Ultra Vires Acts

a. Consequences: on the Corporation, on the immediate parties, on the stockholders

Privano vs. Dela Rama Steamship Co. (96 Phil 335)


Carlos vs. Mindoro Sugar Co. (57 Phil 343)
Japanese Warnotes Claimants Assn. vs. SEC (110 Phil 540)
Crisologo - Jose vs. CA (117 SCRA 594)

VIII. BY- LAWS

Loyola Grand Villas Assn. vs. CA (276 SCRA 681)


Govt vs. El Hogar Filipino (supra)
Gokongwei vs. SEC (89 SCRA 336)

IX. MEETINGS

1. Stockholders' / Members' Meeting

Board of Directors vs. Tan (105 Phil 426)


Ponce vs. Encarnacion (91 Phil 81)

2. Directors' / Trustees' Meeting

SEC Memorandum Circular No. 15, Series of 2001


Board Meeting Through Teleconferencing or Videoconferencing ("Tele/Video
Conferencing")

3. Right to Vote and Manner of Voting

a. Proxy and other representative voting

NIDC vs. Aquino (160 SCRA 153)

SEC Memorandum Circular No. 4, Series of 2004


Voting by Mail and One Share-One Vote Policy

IX. STOCK and STOCKHOLDERS

1. Subscription Contract

Trillana vs Quezon College (93 Phil 383)

SEC Memorandum Circular No. 11, Series of 2016


Subscription Contracts

2. Pre-incorporation Subscription

National Exchange vs. Dexter (51 Phil 601)

3. Certificates of Stock and their Transfer

Monserrat vs. Ceron (58 Phil 472)


Chua Guan vs. Samahang Magsasaka (62 Phil 472)
Padgett vs. Babcock & Templeton (59 Phil 232)
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

Lambert vs. Fox (26 Phil 588)


Embassy Farms vs. CA (188 SCRA 492)
Razon vs IAC (207 SCRA 510)
Rural Bank of Salinas vs. CA (210 SCRA 510)
Tay vs. CA (GR No. 126891, August 5, 1998)
Rural Bank of Lipa vs. CA (366 SCRA 740)
Tan vs. SEC (206 SCRA 740)
Nava vs. PEERS Marketing (74 SCRA 65)
Won vs. Wack Wack Golf (104 Phil 466)
De los Santos vs. Mc Grath (95 Phil 577)

4. Forged and Unauthorized Transfers

5. Issuance of Stock Certificates

Fua Cun vs. Summers

6. Watered Stocks

7. Enforcement and Payment of Unpaid Subscriptions

Velasco vs. Poizat (37 Phil 802)


De Silva vs. Aboitiz & Co. (44 Phil 755)
Lingayen Gulf vs. Baltazar (93 Phil 746)
Apocada vs. NLRC (175 SCRA 442)
Lumanlan vs. Cura (59 Phil 746)
PNB vs. Bitulok Sawmill (33 SCRA 136)
Edward Keller vs. COB Group (141 SCRA 86)
Garcia vs. Suarez (67 Phil 441)

8. Effects of Delinquency

9. Rights of Unpaid Shares

10. Lost or Destroyed Certificates

11. Rights and Liabilities of Stockholders

XI. CORPORATE BOOKS AND RECORDS

1. Books and Records to be Kept

2. Right of Inspection

W.G. Philpotts vs. Phil. Mfg. Corp. (49 Phil 471)


Vegaruth vs. Isabela Sugar (57 Phil 266)
Gokongwei vs. SEC (supra)
Gonzales vs. PNB (122 Phil 489)

XII. MERGER AND CONSOLIDATION

1. Requirements and Procedure

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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

2. Effects

Associated Bank vs. CA (GR 123793, June 29, 1998)


BPI vs. BPI Employees Union (658 SCRA 569)

XIII. APPRAISAL RIGHT

1. Definition; when exercised

2. Requirements and Procedure

3. Effect

4. When Right ceases

5. Cost of appraisal

XIV. NON-STOCK CORPORATIONS

1. Definition; Purpose

2. Membership and Voting Rights

Chinese YMCA vs. Ching (71 SCRA 463)


Cebu Country Club vs. Elizagaque (542 SCRA 65)

3. Trustees and Officers

Lions Club Int'l vs. CA (121 SCRA 621)

4. Other references:

SEC Memorandum Circular No. 8, Series of 2006


Revised Guidelines on Foundations

SEC Memorandum Circular No. 4, Series of 2013


Amendment of Part I (4) (A) & (B) of SRC Rule 68, as amended

SEC Memorandum Circular No. 10, Series of 2016


Guidelines on the Issuance of Certificate on the Nationality of Non-Stock Corporations

XV. CLOSE CORPORATIONS

1. Definition; Permissive Provisions

2. Effects of Breach of Qualifying Provisions

3. Stockholders' Agreement

4. When Board Meeting Not Necessary

5. Pre-Emptive Right

6. Deadlocks
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

7. Withdrawal of Stockholders / Dissolution

Dulay Enterprises vs. CA (225 SCRA 678)


Naguiat Enterprises vs. NLRC (268 SCRA 546)

XVI. SPECIAL CORPORATIONS

1. Educational Corporations

2. Religious Corporations

a. Corporation Sole

Roman Catholic Apostolic Church vs. LRC (102 Phil 596)


Director vs. CA (158 SCRA 568)
Republic vs. IAC (168 SCRA 165)

i. Filling up of Vacancies

ii. Dissolution

3. Religious Societies

XVII. DISSOLUTION AND WINDING UP

1. Methods of Dissolution

a. Expiration of Corporate Term

PNB vs. CFI (209 SCRA 294)

b. Voluntary Dissolution

i. Where no creditors are affected

ii. Where creditors are affected

c. Shortening of Corporate Term

d. Involuntary Dissolution

Gov't vs. Phil. Sugar Estate (39 Phil 15)


Gov't vs. El Hogar Filipino (supra)
Republic vs. Security Credit (19 SCRA 59)
Republic vs. Visaya Land (81 SCRA 9)
Financing Corporation vs. Teodoro (94 Phil 687)

2. Effects of Dissolution

Buenaflor vs. Camarines Sur Industry (108 Phil 427)


Cebu Port Labor Union vs. State Marine (101 Phil 468)
Gonzales vs. Sugar Regulatory Administration (174 SCRA 377)
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

3. Liquidation and Winding Up

National Abaca vs. Pore (2 SCRA 989)


Sumera vs. Valencia (67 Phil 721)
Board of Liquidators vs. Kalaw (20 SCRA 987)
Gelano vs. CA (103 SCRA 90)
Republic vs. Marsman (44 SCRA 481)
Chung Ka Bio vs IAC (163 SCRA 534)
Clemente vs. CA (242 SCRA 717)

XVIII. FOREIGN CORPORATIONS

1. Definition

2. Modes of Entry

3. Application of License

Subsidiary (FIA Form F-100)


Branch Office (FIA Form F-103)
Representative Office (FIA Form F104)
Regional Operating Area Headquarters
Regional Area Headquarters

4. Resident Agent

5. Effect of Doing Business Without a License

Mentholatun vs. Mangaliman (72 Phil 524)


Marshall-Wells vs. Elser (46 Phil 70)
Bulakhids vs. Navarro (142 SCRA 1)
Swedish East Asia vs. Manila Port Services (25 SCRA 632)
Antam Consolidated vs. CA (143 SCRA 288)
Facilities Management vs. Dels Osa (89 SCRA 131)
Far East International vs. Nankai Kogyo (6 SCRA 725)
Communication Materials and Design vs. CA (260 SCRA 673)
Western Equipment vs. Reyes (51 Phil 115)
General Garments vs. Director (41 SCRA 50)
Puma Sportshufabriken vs. IAC (158 SCRA 233)
Le Chemise Lacoste vs. Fernandez (120 SCRA 377)

6. Capacity to Sue

Atlantic Mutual Insurance vs. Cebu Stevedoring (17 SCRA 1037)


Olympia Business Machines vs. E. Razon Inc. (155 SCRA 208)
Time vs. Reyes (39 SCRA 303)

7. Laws Governing Foreign Corporations

M.E. Gray vs. Insular Lumber (67 Phil 139)

8. Amendment of the License

9. Merger / Consolidation
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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

10. Revocation of License

11. Withdrawal of License

XIV. MISCELLANEOUS PROVISIONS

PART 2
PRESIDENTIAL DECREE 902-A

I. Devices or Schemes Amounting to Fraud

II. Intra-Corporate Controversies

III. Controversies in the Election, Appointment or Removal of Directors / Officers

IV. Appointment of Management Committee, Board or Body

R.J. Jacinto vs. FWCC (410 SCRA 140)


Sy Chim vs. Sy Siy Ho & Sons (480 SCRA 206)

PART 3
SECURITIES REGULATION CODE
2015 IMPLEMENTING RULES AND REGULATIONS

I. Rule 3: Definition of Terms

II. Rule 5: Powers and Functions of the Commission

SEC Memorandum Circular No. 11, Series of 2003


Supervision Over Registered Corporations

III. Title III: Registration of Securities

Rule 8.1 Registration Statement

Rule 9.1 Exempt Securities

Rule 9.2 Other Exempt Transactions

Rule 10.1 Exempt Transactions

Rule 10.1.7 Isolated Transactions

Rule 10.1.11 Qualified Buyers

Rule 10.2 Limited Public Offerings and other Exempt Transactions

Rule 10.3 Application for Confirmation of Exemption

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Course Outline Atty. Joanne L. Ranada
Business Organization II Academic Year 2017-2018

Rule 13 Suspension or Revocation of Registration of Securities

Rule 14 Amendments to the Registration Statement and Prospectus

Rule 15 Reportorial Requirements

Rule 19 Tender Offer; Mandatory Tender Offer and Exemptions

Justee Terms Enterprise vs. SEC (CA GR. SP. No. 48013, July 30, 1999)
China Banking vs. CA (270 SCRA 503)
People vs. Petralba (439 SCRA 158)

Rule 23 Reports to be Filed by Directors, Officers and Principal Stockholders

IV. Title VII: Prohibitions on Fraud, Manipulation and Insider Trading

Rule 24.1 Manipulative Practices

Rule 24.2 Short Sales

Rule 25 Option Trading

Rule 26 Fraudulent Transactions

Rule 27 Insider Trading

V. Title VIII: Registration of Securities Market Professionals

Rule 28.1.1 Broker Dealer

Rule 28.1.2 Registration Requirements

Rule 28.1.5 Registration of Salesmen and Associated Persons of Broker Dealers

Rule 28.1.5.4 Registration Requirements

VI. Title IX: Exchanges and other Securities Trading Markets

Rule 38 Requirements on Nomination and Election of Independent Directors

SEC Memorandum Circular No. 9, Series of 2011


Term Limits for Independent Directors

SEC Advisory dated 20 July 2015


Clarification on the Term Limits of Independent Directors

SEC Advisory dated 31 March 2016


Term Limits for Independent Directors

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