COMPONENTS OF A CORPORATION

1. CORPORATORS – those who compose a corporation, whether as a stockholder or as

members
2. INCORPORATORS – the stockholders or members mentioned in the AOI as originally
forming and composing the corporation and who are signatories thereof
3. STOCKHOLDERS/SHAREHOLDERS – owners of shares of stock in stock corporation
4. MEMBERS – corporators of a non-stock corporation
5. BOARD OF DIRECTORS / BOARD OF TRUSTEES – BOD is the governing body in a
stock corporation. BOT is the governing body in a non-stock corporation.
6. CORPORATE OFFICERS – president (who shall be the director), treasurer, secretary,
and/or compliance officer.
7. SUBSCRIBER – persons who have agreed to take and pay for original, unissued shares of a
corporation formed or to be formed
8. UNDERWRITER – a person who guarantees on firm commitment and/or declared best effort
basis the distribution and sale of securities of any kind by another company (Ex: investment
banker)
9. PROMOTER – a person who brings about or cause to bring about the formation and
organization of a corporation (Ex: founder or organizer)

SHARES
(vo)1. VOTING SHARES – shares with a right to vote
(Pa)2. PAR VALUE SHARES – shares with a value fixed in the AOI and the certificate of stock
(no)3. NO PAR VALUE SHARES – shares with no par value
(pro)4.PROMOTION/AL SHARE – a share issued to promoters or those in some way
interested in the company for incorporating the company, or for services rendered in launching or
promoting the welfare of the company
(Escrow)5. SHARE IN ESCROW – a share subject to an agreement by virtue of which the
share is deposited by the grantor or his agent with a third person to be kept by the depositary until
the performance of certain condition or the happening of a certain event contained in the
agreement
(frac)6. FRACTIONAL SHARE – a share that is less than one full share
(over)7. OVER-ISSUED SHARE – a stock or share issued in excess of the authorized capital
stock (NOTE: such issuance is void0
(Con)8. CONVERTIBALE SHARE – a share that is convertible by the stockholder from one
class to another class at a certain price and within a certain period
(found)9. FOUNDERS’ SHARE – shares classified as such in the AOI which may be given
certain rights and privileges not enjoyed by the owners of other stocks
(Re)10. REDEEMABLE SHARES – are shares usually preferred, which by their terms are
redeemable at a fixed date, or at the option of either issuing corporation, or the stockholder, or
both at a certain redemption price. (IN A SENSE, a repurchase for cancellation) (So, once
redeemed are retired, unless otherwise provided by the AOI)
(tre)11. TREASURY SHARES – are shares of stock which have been issued and fully paid for,
but subsequently reacquired by the issuing corporation by purchase, redemption, donation or
through some other lawful means.
 ULTRA VIRES ACT
an act outside or beyond corporate powers, including those that may ostensibly be within such
powers but are, by general or special laws, prohibited or declared illegal.
Act as one outside the powers conferred by the Code or by the AOI, or beyond what is necessary
or incidental to the exercise of the powers so conferred.

BUSINESS JUDGMENT RULE

contracts intra vires entered into by the BOD are binding upon the corporation. The court will not
interfere unless such contracts are so unconscionable (unreasonable) and oppressive.

DOCTRINE OF CORPORATE OPPORTUNITY (Section 31)

holds personally liable corporate directors found guilty of gross negligence or bad faith in
directing the affairs of the corporation, which results in damage or injury to the corporation, its
stockholder or members, and other persons.

ERROR IN BUSINESS JUDGMENT

if the cause of the losses is merely error in business judgment, not amounting to bad faith or
negligence, directors and/or officers are not liable. (mismanagement and resulting losses are not
enough)
SELF-DEALING DIRECTORS/TRUSTEES OR OFFICERS
contract of the corporation with one or more of its directors or trustees or their spouses and
relatives within the 4th civil degree of consanguinity or affinity.
As a rule, it is voidable.
Exceptions: if the presence shall not constitute a quorum; vote is not necessary for the approval of
the contract; contract is fair and reasonable.
In case of corporations vested with public interest, material contract are approved by at elast 2/3 of
the entire membership of the board, with at least a majority of the independent directors voting to
approve the material contract.
In case of an officer, the contract has been previously authorized by the BOD
REMEDY: ratification (formal approval)
By a vote of the stockholders representing at least 2/3 of the OCS or at least 2/3 of the members in
a meeting called for the purpose.
INTERLOCKING DIRECTORS
these are members of the BOD in a certain corporation who are also directors in another
corporation
NOTE: If the interest of the interlocking directors in one corporation is substantial and his interest
in the other corporation/s is merely nominal, he shall be subject to the provisions of Section 31
insofar as the latter corporation/s are concerned.
DOCTRINE OF CORPORATE OPPORTUNITY
a director, by virtue of his officer, acquires for himself a business opportunity which should
belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must
account to the latter for all such profits by refunding the same.
REMEDY: ratification (formal approval). By a vote of the stockholders representing at least 2/3 of
the OCS
ONE PERSON CORPORATION
A corporation with a single stockholder who must be a natural person
NOT ALLOWED AS OPC: banks and quasi-banks; preneed; trust; insurance; public and publicly-
listed companies; and non-chartered GOCC
Need not submit by-laws. Only AOI
The single stockholder shall be the sole director and president
The single stockholder may not be appointed as the corporate secretary but may assume the role of
a treasurer
The single stockholder who assumes the position of a treasurer shall post a surety bond
NOMINEE and ALTERNATE NOMINEE – who shall take the place of the single stockholder in
the event of death or incapacity, in managing the corporate affairs. Their written consent must be
submitted to SEC.
MINUTES BOOK – contains all actions, decisions, and resolutions taken by the OPC for purposes
of record keeping
Annual financial statements audited by independent CPA
FS shall be certified by the treasurer and president of the total assets/liabilities are less than
PhP600,000.00
OPC may be converted into an ordinary stock corporation

3 FOLD DOCTRINES
1. Estate and Corporation
2. Stockholders and the Estate
3. Between Corpo and its Stockholders

*TABLES
*TRUST FUND DOCTRINE