F. CORPORATE POWERS
Submission and filing of the amendments with
1. Special (limited) capacities
2. Kinds of Powers
2.1 Express
Those expressly granted by law inclusive of the
corporate charter or AOI
2.2 Implied
A corporation is given such powers as are
essential or necessary to carry out its purpose or
purposes as stated in the articles of incorporation.
This phrase gives rise to such a wide range of
implied powers, that it would not be at all difficult
to defend a corporate act versus an allegation that
it is ultra vires.
A corporation is presumed to act within its powers
and when a contract is not its face necessarily
beyond its authority; it will, in the absence of proof
to the contrary, be presumed valid.
2.1 Incidental
Those incidental to its existence.
3. Statutory powers
3.1 Extend or shorten corporate term (Section 11
and 37)
From the above-provision and jurisprudence, the
requirements and procedure for extending or shortening
the corporate term are as follows:
1. Approval by the majority vote of the BOD/T;
2. Ratification by the stockholders representing at least
2/3 of the outstanding capital stock (including non-voting
shares) or 2/3 of the members in case of non-stock
corporations;
3. The ratification must be made at a meeting duly called
for that purpose;
4. Prior written notice of the proposal to extend or
shorten the corporate term must be made stating the
time and place of meeting addressed to each stockholder
or member at his place of residence, either by mail or
personal service;
5. In case of extension, the same cannot be made earlier
than 5 years prior to the original or subsequent expiry
date unless there are justifiable reasons for an earlier
extension;
6. In case of extension, the same must be made during
the lifetime of the corporation;
7. Any dissenting stockholder may exercise his appraisal
right;
8. Submission of the amended articles with the SEC; and
9. Approval thereof by the SEC (as required under Sec.
37 for extension, and Sec. 120 for shortening the term
with the effect of dissolution)
3.2 Amendment of articles of incorporation
(Section 16)
The steps to be followed for an effective
amendment of the articles of incorporation would
thus be:
1. Resolution by at least a majority of the board
of directors or trustees;
2. Vote OR WRITTEN ASSENT of the
stockholders representing at least 2/3 of the
outstanding capital stocks or members in case of
a non-stock corporation. (Note: non-voting shares
are considered in determining the voting and
quorum requirement in case of amendments of the
articles of incorporation as provided in Sec. 6);
3.
the SEC as follows:
a. The original and amended articles together shall
contain all the provision required by law to be set
out in the articles of incorporation. Such articles,
as amended, shall be indicated by underscoring
the change or changes made;
b. A copy thereof, duly certified under oath by the
corporate secretary and a majority of the directors
or trustees stating the fact that such amendments
have been approved by the required vote of the
stockholders or members;
c. Favorable recommendation of the appropriate
government agency concerned in the case where
the corporation is under its supervision such as
banking and insurance companies, etc.
When to take effect?
(1) Upon approval by the SEC; or
(2) From the date of filing if not acted upon within
6 months for a cause not attributed to the
corporation (does not apply to increasing or
decreasing the capital stock or shortening the
corporate term, which shall require the approval of
the SEC [Sec. 38 and 120])
3.3 Increase/decrease capital stock; incur; create
or increase bonded indebtedness (Section 38)
The following requirements or procedure should
be complied with:
1. Approval by the majority vote of the BOD/T;
2. Ratification by the stockholders representing at
least 2/3 of the outstanding capital stock (including
non-voting shares) or 2/3 of the members in case
of non-stock corporations at a meeting duly called
for that purpose;
3. Prior written notice of the proposal to extend or
shorten the corporate term must be made stating
the time and place of meeting addressed to each
stockholder or member at his place of residence,
either by mail or personal service;
4. A certificate in duplicate must be signed by a
majority of the directors of the corporation,
countersigned by the chairman and the secretary
of the stockholders meeting, setting forth the
matters contained in subsection 1 to 7 of Sec. 38;
5. In case of increase in capital stock, 25% of such
increased capital must be subscribed and that at
least 25% of the amount subscribed must be paid
either in cash or property;
6. In case of decrease of capital stock, the same
must not prejudice the right of the creditors;
7. Filing of the certificate of increase and amended
AOI with the SEC; and
8. Approval thereof by the SEC.
METHODS OF INCREASING CAPITAL STOCK:
1. Increase the par value of the existing number of
shares without increasing the number of shares;
2. Increase the number of existing shares without
increasing the par value thereof;
3. Increasing the number of shares and at the
same time increasing the par value of the shares
REASONS/PURPOSE FOR THE INCREASE:
 1. Expansion;
2. Payment of Debt Obligations;
3. To acquire additional assets such as providing
cars to employees to distribute the goods;
*Nothing in law prohibits increase of capital stock
REASONS FOR DECREASE:
1. To reduce or wipe out existing deficit where no
creditors would thereby by affected;
2. When the capital is more than what is necessary
to procreate the business or reduction of capital
surplus;
3. To write down the value of its fixed assets to
reflect their present actual value in case where
there is a decline in the value of the fixed assets of
the corporation.
TRUST FUND DOCTRINE: The subscriptions to
capital stock of the corporation constitute a fund
which the creditors have a right to look up for the
satisfaction of their claims. Accordingly, if the
decrease would affect the rights of creditors, the
same would not be approved by the SEC.
3.4 Deny pre-emptive right (Section 39)
PRE-EMPTIVE RIGHT is a right granted by law to
all existing stockholders of a stock corporation to
subscribe to all issues or disposition of shares of
any class, in proportion to their respective
holdings, subject only to the limitation imposed
under Sec. 39, which provides:
BASIS OF RIGHT: The grant of this right is for the
preservation, unimpaired and undiluted, of the old
stockholders’ relative and proportionate voting
strength and control, that is, the existing ratio of
their property interest and voting power in the
corporation.
EXCEPTIONS (Under Sec. 39):
1. When shares to be issued is in compliance with
laws requiring stock offerings or minimum stock
ownership by the public; or
2. Shares to be issued in good faith with the
approval of the stockholders representing 2/3 of
the outstanding capital stock either:
a. In exchange for property needed for
corporate purpose; or
b. In payment of a previously contracted debt.
The exceptions will not apply to stockholders of
close corporation whose pre-emptive right, is
broader if not absolute. See Sec. 102.
The right may likewise be lost by waiver, express
or implied or inability or failure to exercise it having
been notified of the proposed disposition of
shares.
3.5 Sell or dispose asset (Section40)
The conditions for the valid exercise of this power
are thus as follows:
1. Resolution by a majority of the BOD/T;
2. Authorization from the stockholders
representing at least 2/3 of the outstanding capital
stock or 2/3 of the members;
3. The ratification of the stockholders or member
must be made at a meeting duly called for that
purpose;
4. Prior written notice of the proposed action and
of the time and place of meeting must be made
addressed to all stockholders of record, either by
mail or personal service;
5. The sale of the assets shall be subject to the
provisions of existing laws on illegal combinations
and monopolies; and
6. Any dissenting stockholder shall have the option
to exercise his appraisal right.
The above requirements will not apply:
1. In case the sale is NOT covering all or
substantially all of the assets of a corporation as
to render it incapable of continuing the
business or accomplishing the purpose for
which it was incorporated; or if the proceeds are
to be used to continue the conduct of the
remaining business of the company;
2. If the sale is in the usual and regular course of
business of the company.
ISLAMIC DIRECTORATE OF THE PHILIPPINES vs CA
FACTS: The Islamic Directorate of the Philippines received
two parcels of land from the Libyan government for the
purpose of putting up a Mosque, Madrasah (arabic school)
and other religious infrastructures. In 1972, Martial Law was
declared, most of the members of the Board of Trustees,
together with petitioner Sen. Mamintal Tamano, fled to the
middle- east to escape political prosecution.
Thereafter, two Muslim groups sprung claiming to be the
legitimate IDP. One headed by Engr. Farouk Caprizo, not
having been properly elected as new members of the Board of
Trustees caused to be sold, through a resolution of IDP, the
two lots to respondent Iglesia Ni Cristo.
The 1971 Board of Trustees now filed a petition to declare the
sale null and void.
ISSUE: is the sale is valid?
RULING:
No. The Caprizo Group is a fake board of trustees. IDP never
gave its consent through a legitimate Board of Trustees.
Therefore, this is not a case of vitiated consent, but one where
consent on the part of one of the contracting parties is totally
wanting. Ineluctably, the subject sale is void and produces no
effect whatsoever.
The Caprizo group-INC sale is further deemed null and void
ab initio because of the Caprizo Group’s failure to comply with
Sec. 40 of the Corporation Code pertaining to the disposition
of all or substantially all assets of the corporation.
The Tandang Sora property, it appears from the records,
constitutes the only property of the IDP. Hence, its sale to a
third-party is a sale or disposition of all the corporate property
and assets of IDP falling squarely within the contemplation of
Sec. 40. For the sale to be valid, the majority vote of the
legitimate Board of Trustees, concurred in by vote of at least
2/3 of the bona fide members of the corporation should have
been obtained. These twin requirements were not met as the
Caprizo Groups which voted to sell the property was a fake
Board and those whose names and signatures were affixed by
the Caprizo Group together with the sham Board Resolution
authorizing negotiation for the sale were, from all indications,
not bona fide members of the IDP as they were made to
appear to be.
A juridical person can not be considered essentially a formal
party to a case where it was not duly represented by its
legitimate governing board.
In this connection, although it is true that Civil Case No. Q-90-
6937, which gave rise to G.R. No. 107751, was entitled,
“Iglesia Ni Kristo, Plaintiff v. Islamic Directorate of the
Philippines, Defendant,” the IDP can not be considered
essentially a formal party thereto for the simple reason that it
was not duly represented by a legitimate Board of Trustees in
that case. As a necessary consequence, Civil Case No. Q-90-
6937, a case for Specific Performance with Damages, a mere
action in personam , did not become final and executory
insofar as the true IDP is concerned since petitioner
corporation, for want of legitimate representation, was
effectively deprived of its day in court in said case. Res inter
alios judicatae nullum aliis praejudicium faciunt. Matters
adjudged in a cause do not prejudice those who were not
parties to it. Elsewise put, no person (natural or juridical) shall
be affected by a proceeding to which he is a stranger.
SME BANK, INC vs DE GUZMAN
FACTS:
RULING: There are two types of corporate acquisitions: asset
sales and stock sales. In asset sales, the corporate entity sells
all or substantially all of its assets to another entity. In stock
sales, the individual or corporate shareholders sell a
controlling block of stock to new or existing shareholders. In
asset sales, the rule is that the seller in good faith is authorized
to dismiss the affected employees, but is liable for the payment
of separation pay under the law. The buyer in good faith, on
the other hand, is not obliged to absorb the employees
affected by the sale, nor is it liable for the payment of their
claims. The most that it may do, for reasons of public policy
and social justice, is to give preference to the qualified
separated personnel of the selling firm.
In contrast with asset sales, in which the assets of the selling
corporation are transferred to another entity, the transaction in
stock sales takes place at the shareholder level. Because the
corporation possesses a personality separate and distinct
from that of its shareholders, a shift in the composition of its
shareholders will not affect its existence and continuity. Thus,
notwithstanding the stock sale, the corporation continues to be
the employer of its people and continues to be liable for the
payment of their just claims. Furthermore, the corporation or
its new majority shareholders are not entitled to lawfully
dismiss corporate employees absent a just or authorized
cause.
JIAO vs NLRC
FACTS:
RULING: As a rule, a corporation that purchases the assets of
another will not be liable for the debts of the selling
corporation, provided the former acted in good faith and paid
adequate consideration for such assets, except when any of
the following circumstances is present: (1) where the
purchaser expressly or impliedly agrees to assume the debts;
(2) where the transaction amounts to a consolidation or
merger of the corporations; (3) where the purchasing
corporation is merely a continuation of the selling corporation;
and (4) where the selling corporation fraudulently enters into
the transaction to escape liability for those debts.
BANK OF COMMERCE vs RADIO PHILIPPINES
NETWORK, INC
FACTS:
RULING: Merger is a reorganization of two or more
corporations that results in their consolidating into a single
corporation, which is one of the constituent corporations, one
disappearing or dissolving and the other surviving. To put it
another way, merger is the absorption of one or more
corporations by another existing corporation, which retains its
identity and takes over the rights, privileges, franchises,
properties, claims, liabilities and obligations of the absorbed
corporation(s). The absorbing corporation continues its
existence while the life or lives of the other corporation(s) is or
are terminated.
Indubitably, it is clear that no merger took place between
Bancommerce and TRB as the requirements and procedures
for a merger were absent. A merger does not become effective
upon the mere agreement of the constituent corporations. All
the requirements specified in the law must be complied with in
order for merger to take effect. Section 79 of the Corporation
Code further provides that the merger shall be effective only
upon the issuance by the Securities and Exchange
Commission (SEC) of a certificate of merger.
The idea of a de facto merger came about because, prior to
the present Corporation Code, no law authorized the merger
or consolidation of Philippine Corporations, except insurance
companies, railway corporations, and public utilities. And,
except in the case of insurance corporations, no procedure
existed for bringing about a merger. Still, the Supreme Court
held in Reyes v. Blouse, 91 Phil. 305 (1952), that authority to
merge or consolidate can be derived from Section 281⁄2 (now
Section 40) of the former Corporation Law which provides,
among others, that a corporation may
‘sell, exchange, lease or otherwise dispose of all or
substantially all of its property and assets” if the board of
directors is so authorized by the affirmative vote of the
stockholders holding at least two-thirds of the voting power.
The words “or otherwise dispose of,” according to the
Supreme Court, is very broad and in a sense, covers a merger
or consolidation.
“a de facto merger can be pursued by one corporation
acquiring all or substantially all of the properties of another
corporation in exchange of shares of stock of the acquiring
corporation. The acquiring corporation would end up with the
business enterprise of the target corporation; whereas, the
target corporation would end up with basically its only
remaining assets being the shares of stock of the acquiring
corporation.” No de facto merger took place in the present
case simply because the TRB owners did not get in exchange
for the bank’s assets and liabilities an equivalent value in
Bancommerce shares of stock. Bancommerce and TRB
agreed with BSP approval to exclude from the sale the TRB’s
contingent judicial liabilities, including those owing to RPN, et
al.
3.6 Acquire own shares (Section 41)
The limitation that the corporation must at all times
have ―unrestricted retained earningsǁ is a
condition for the exercise of this power,
EXCEPT:
1. Redemption of redeemable shares under Sec.
8;
2. Exercise of stockholders right to compel a close
corporation to purchase his shares for any reason
under Sec. 105 when the corporation has sufficient
assets in its book to cover its debts and liabilities
exclusive of capital stock;
3. In case of deadlocks under Sec. 104.
Once purchased, the shares are considered as
treasury shares and while they remain so, they
have no voting rights and dividend rights. The
corporation may (1) re-issue them even below par;
(2) issue them as stock dividends; (3) retire or
cancel them and thereby remove from issue
effectively reducing the number of shares issued
stated in the AOI.
3.7 Invest corporate funds (Section 42)
―MAY INVEST FUNDSǁ has been held by the
SEC to mean an investment in the form of money,
stock, bonds and other liquid assets and does not
include real properties or other fixed assets,
 otherwise the law would have phrased Sec. 42 to
include ―assetsǁ rather than ―to invest fundsǁ.
SECONDARY PURPOSE: the law uses the
phrase ―for any purpose other than the primary
purposeǁ signifying that even if the business or
undertaking is allowed or authorized in the
secondary purpose or purposes of the corporation,
the provision of Sec. 42 would apply.
REQUIREMENTS FOR A VALID INVESTMENT
OF CORPORATE FUNDS:
1. Resolution by a majority of the BOD/T;
2. Ratification by the stockholders representing 2/3
of the outstanding capital stock (or 2/3 of
members);
3. The ratification must be made at a meeting duly
called for that purpose;
4. Prior written notice of the proposed investment
and the time and place of the meeting shall be
made, addressed to each stockholder or member
by mail or by personal service; and
5. Any dissenting stockholder shall have the option
to exercise his appraisal right.
RATIFICATION: as a requirement, applies only to
investments that are beyond the corporation’s
primary purpose, or outside the express or implied
powers of the investing corporation. Thus, if the
investment is reasonably necessary to accomplish
its primary purpose, the approval of the
stockholders or members is not required.
3.8 Declare dividends (Section 43)
DIVIDENDS are corporate profits set aside,
declared and ordered by the BOD to be paid to the
stockholders. It is a fruit of investment, the
recurrent return, analogous to interest and rent
upon other forms of invested capital.
UNRESTRICTED RETAINED EARNINGS: the
undistributed earnings of the corporation which
have not been allocated for any managerial,
contractual or legal purposes and which are free
for distribution to the stockholders as dividends.
TYPES OF DIVIDENDS:
1. Cash dividends – payable in lawful money or
currency;
2. Property dividends - those paid in the form
property (e.g., bonds, notes, shares in another
corporation);
3. Stock dividends – corporation’s own shares of
stock out of the remaining unissued shares which
would require the approval of the stockholders
representing 2/3 of the outstanding capital stock at
a regular or special meeting duly called for that
purpose. This is to be valued at par value or issue
price.
Cash and property dividends have the effect of
reducing corporate assets to the extent of the
dividends declared. In stock dividends, it would
generally not increase the proportionate interest of
the stockholders of the corporation although it will
have the effect of increasing the subscribed and
paid-up capital (exception is when the stock
dividend declaration would result in fractional
shares like when 1 share is declared as dividend
for every 9 shares held)
OVERISSUANCE OF SHARES: happens when a
corporation issues shares beyond its authorized
capital stock, even in the form of stock dividends.
DELINQUENCY: is a requirement for the
application of the second part of the first paragraph
of Sec. 43. Such that, cash dividends declared are
first applied on the unpaid balance on the
subscription plus costs and expenses and stock
dividends are withheld until the subscription is fully
paid.
WHO CAN DECLARE DIVIDENDS? The BOD.
They cannot be compelled to declare dividends,
except:
(1) When the unrestricted retained earnings is in
excess of 100% of the paid-up capital; and
(2) In the case of Mandatory If Earned Preference
Shares.
The judgment of the BOD is conclusive,
EXCEPT:
(1) when they act in bad faith;
(2) for a dishonest purpose;
(3) they act fraudulently, oppressively,
unreasonably or unjustly; or
(4) abuse of discretion can be shown as to impair
the rights of the complaining shareholders. The
TEST of bad faith is to determine if the policy of
the directors is dictated by their personal interest
rather than the corporate welfare.
WHEN DIVIDENDS RIGHTS VEST: It has been
succinctly said that the right of the stockholders to
be paid dividends vest as soon as they have been
lawfully and finally declared by the BOD. It is not
revocable unless:
(1) it has not been officially communicated to the
stockholders; or
(2) it is in the form of stock dividends which is
revocable any time prior to distribution because
this does not result in the distribution of assets but
merely the division of existing shares of a
stockholder into smaller units or integers.
TRANSFER OF SHARES: The dividends already
declared belong to the owner at the time of
declaration. Usually, however, the dividends are
payable
REPUBLIC PLANTERS BANK vs HON. ENRIQUE A.
AGANA, SR
FACTS:
RULING: A preferred share of stock, on one hand, is one
which entitles the holder thereof to certain preferences over
the holders of common stock. The preferences are designed
to induce persons to subscribe for shares of a corporation.
Preferred shares take a multiplicity of forms. The most
common forms may be classified into two: (1) preferred shares
as to assets; and (2) preferred shares as to dividends. The
former is a share which gives the holder thereof preference in
the distribution of the assets of the corporation in case of
liquidation; the latter is a share the holder of which is entitled
to receive dividends on said share to the extent agreed upon
before any dividends at all are paid to the holders of common
stock. There is no guaranty, however, that the share will
receive any dividends.
Thus, the declaration of dividends is dependent upon the
availability of surplus profit or unrestricted retained earnings,
as the case may be. Preferences granted to preferred
stockholders, moreover, do not give them a lien upon the
property of the corporation nor make them creditors of the
corporation, the right of the former being always subordinate
to the latter. Dividends are thus payable only when there are
profits earned by the corporation and as a general rule, even
if there are existing profits, the board of directors has the
discretion to determine whether or not dividends are to be
declared. Shareholders, both common and preferred, are
considered risk takers who invest capital in the business and
who can look only to what is left after corporate debts and
liabilities are fully paid.
Redeemable shares, on the other hand, 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. A
redemption by the corporation of its stock is, in a sense, a
repurchase of it for cancellation. The present Code allows
redemption of shares even if there are no unrestricted retained
earnings on the books of the corporation. This is a new
provision which in effect qualifies the general rule that the
corporation cannot purchase its own shares except out of
current retained earnings. However, while redeemable shares
may be redeemed regardless of the existence of unrestricted
retained earnings, this is subject to the condition that the
corporation has, after such redemption, assets in its books to
cover debts and liabilities inclusive of capital stock.
Redemption, therefore, may not be made where the
corporation is insolvent or if such redemption will cause
insolvency or inability of the corporation to meet its debts as
they mature.
3.9 Enter into management contract (Section 44)
This provision was inserted to assure not only
technical competence but continuity in
management policy in running corporate affairs
which can be achieved through a management
contract.
REQUIREMENTS OF A VALID MANAGEMENT
CONTRACT:
1. Resolution of the BOD;
2. Approval by the stockholders representing a
majority of the outstanding capital stock or majority
of the members of both the managing and the
managed corporation;
3. The approval of the stockholders or members
must be made at the meeting called for that
purpose; and
4. The contract shall not be for a period longer than
5 years for any one term, except those which
relate to exploration, development or utilization of
natural resources which may be entered into for
such periods as may be provided by pertinent laws
and regulations;
5. 2/3 of the stockholders or members would be
required, where:
a. The stockholders representing the same
interest of both the managing and the
managed corporation own or control more
than 1/3 of the total outstanding capital stock
of the managing corporation;
b. A majority f the members of the BOD of the
managing corporation also constitute a
majority of the directors of the managed
corporation;
c. The contract would constitute the
management or operation of all or
substantially all of the business of another
corporation, whether such contracts are
called service contracts. If it will not constitute
the management of all or substantially all of
the business of another corporation, the first
paragraph of Sec. 44 will apply and not that
of the second, that is, only the vote of the
majority is required.
3.10 Other powers [enter into partnership/joint
venture, borrow funds, mortgage, act as
surety/guarantor, practice profession(Sec 37,
RA9266)]
4. Ultra vires acts
ULTRA VIRES ACTS are those which cannot be executed
or performed by a corporation because they are not within
its express, inherent, or implied powers as defined by its
charter or AOI. Accordingly, it may be subject to a
collateral attack questioning the authority of the
corporation to engage in such particular endeavor.
CONSEQUENCES:
1. On the Corporation itself: The proper forum may
suspend or revoke, after proper notice and hearing, the
franchise or certificate of registration of the corporation for
serious misrepresentation as to what the corporation can
do or is doing to the great damage or prejudice of the
general public.
2. On the rights of the Stockholders: A stockholder may
bring either an individual or derivative suit to enjoin a
threatened ultra-vires act or contract. If already performed,
a derivative suit against the directors may be filed, but their
liability will depend on whether they acted in good faith and
with reasonable diligence in entering into the contract.
3. On the immediate parties:
a. If the contract is fully executed in both sides, the contract
is effective and the courts will not interfere to deprive either
party of what has been acquired under it;
b. If the contract is executory on both sides,, as a rule,
neither party can maintain an action for its non-
performance; and
c. Where the contract is executory on one side only, and
has been fully performed on the other, the courts differ as
to whether an action will lie on the contract against the
party who has received benefits of performance under it.
Majority of the courts, however, hold that the party who has
received benefits from the performance is ―estopped to
set up that the contract is ultra vires to defeat an action on
the contract.
RURAL BANK OF MILAOR vs FRANCISCA OCFEMIA
FACTS:
RULING: Tena had previously transacted business on behalf
of the bank, and the latter had acknowledged her authority. A
bank is liable to innocent third persons where representation
is made in the course of its normal business by an agent like
Manager Tena, even though such agent is abusing her
 authority. Clearly, persons dealing with her could not be
blamed for believing that she was authorized to transact
business for and on behalf of the bank.
The bank is estopped from questioning the authority of the
bank manager to enter into the contract of sale. If a
corporation knowingly permits one of its officers or any other
agent to act within the scope of an apparent authority, it holds
the agent out to the public as possessing the power to do
those acts; thus, the corporation will, as against anyone who
has in good faith dealt with it through such agent, be estopped
from denying the agent’s authority.
G. BY-LAWS
1. Concept of By-laws
BY-LAWS are rules and ordinances made by a
corporation for its own government; to regulate the
conduct and define the duties of the stockholders or
members towards the corporation and among
themselves. They are the rules and regulations or
private laws enacted by the corporation to regulate,
govern and control its own actions, affairs and
concerns and tis stockholder or members and
directors and officers with relation thereto and among
themselves in their relation to it.
LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH)
ASSOCIATION, INC VS HON. COURT OF APPEALS
FACTS: Petitioner Association was organized on Feb. 8,
1983, but for some reason failed to file its corporate by-laws.
Victorio Soliven, himslef the owner and developer of the
subdivision was the first president of the Association. Later
on, asking on the status of petitioner, Soliven discovered that
the said association was already dissolved (according to the
head of the legal department of HIGC), and accordingly
caused the registration of HIGC as the association covering
Phases West I, East I and East II of the subdivision.
ISSUE: Can the Association can be considered dissolved for
non-adoption of by-laws?
RULING: This exchange of views demonstrates clearly that
automatic corporate dissolution for failure to file the by-laws
on time was never the intention of the legislature. Moreover,
even without resorting to the records of deliberations of the
Batasang Pambansa, the law itself provides the answer to the
issue propounded by petitioner.
Taken as a whole and under the principle that the best
interpreter of a statute is the statute itself (optima statuti
interpretatix est ipsum statutum), Section 46 aforequoted
reveals the legislative intent to attach a directory, and not
mandatory, meaning for the word “must” in the first sentence
thereof. Note should be taken of the second paragraph of the
law which allows the filing of the by-laws even prior to
incorporation. This provision in the same section of the Code
rules out mandatory compliance with the requirement of filing
the by-laws “within one (1) month after receipt of official notice
of the issuance of its certificate of incorporation by the
Securities and Exchange Commission.” It necessarily follows
that failure to file the by-laws within that period does not imply
the “demise” of the corporation.
By-laws may be necessary for the
‘government” of the corporation but these are subordinate to
the articles of incorporation as well as to the Corporation Code
and related statutes. There are in fact cases where by-laws
are unnecessary to corporate existence or to the valid
exercise of corporate powers, thus: “In the absence of charter
or statutory provisions to the contrary, by-laws are not
necessary either to the existence of a corporation or to the
valid exercise of the powers conferred upon it, certainly in all
cases where the charter sufficiently provides for the
government of the body; and even where the governing
statute in express terms confers upon the corporation the
power to adopt by- laws, the failure to exercise the power will
be ascribed to mere nonaction which will not render void any
acts of the corporation which would otherwise be valid.”
CHINA BANKING CORPORATION vs COURT OF
APPEALS
FACTS:
RULING: As to the first query, there is no question that the
purchase of the subject share or membership certificate at
public auction by petitioner (and the issuance to it of the
corresponding Certificate of Sale) transferred ownership of
the same to the latter and thus entitled petitioner to have the
said share registered in its name as a member of VGCCI. It is
readily observed that VGCCI did not assail the transfer
directly and has in fact, in its letter of 27 September 1974,
expressly recognized the pledge agreement executed by the
original owner, Calapatia, in favor of petitioner and has even
noted said agreement in its corporate books. In addition,
Calapatia, the original owner of the subject share, has not
contested the said transfer. By virtue of the afore-mentioned
sale, petitioner became a bona fide stockholder of VGCCI
and, therefore, the conflict that arose between petitioner and
VGCCI aptly exemplifies an intra-corporate controversy
between a corporation and its stockholder under Sec. 5(b) of
P.D. 902-A.
An important consideration, moreover, is the nature of the
controversy between petitioner and private respondent
corporation. VGCCI claims a prior right over the subject share
anchored mainly on Sec. 3, Art. VIII of its by-laws which
provides that “after a member shall have been posted as
delinquent, the Board may order his/her/its share sold to
satisfy the claims of the Club ...” It is pursuant to this provision
that VGCCI also sold the subject share at public auction, of
which it was the highest bidder. VGCCI caps its argument by
asserting that its corporate by-laws should prevail. The bone
of contention, thus, is the proper interpretation and application
of VGCCIÊs aforequoted bylaws, a subject which irrefutably
calls for the special competence of the SEC.
JOHN GOKONGWEI, JR VS SEC
FACTS: As additional causes of action, it was alleged that
corporations have no inherent power to disqualify a
stockholder from being elected as a director and, therefore,
the questioned act is ultra vires and void; that Andres M.
Soriano, Jr. and/or Jose M. Soriano, while representing other
corporations, entered into contracts (specifically a
management contract) with respondent corporation, which
was allowed because the questioned amendment gave the
Board itself the prerogative of determining whether they or
other persons are engaged in competitive or antagonistic
business; that the portion of the amended bylaws which states
that in determining whether or not a person is engaged in
competitive business, the Board may consider such factors as
business and family relationship, is unreasonable and
oppressive and, therefore, void; and that the portion of the
amended by-laws which requires that "all nominations for
election of directors ... shall be submitted in writing to the
Board of Directors at least five (5) working days before the
date of the Annual Meeting" is likewise unreasonable and
oppressive.
ISSUE: Is the amended by-laws of SMC disqualifying a
competitor from nomination or election to the BOD are valid
and reasonable?
RULING: Yes. The validity or reasonableness of a by-law of
a corporation in purely a question of law. Whether the by-law
is in conflict with the law of the land, or with the charter of the
corporation, or is in a legal sense unreasonable and therefore
unlawful is a question of law. This rule is subject, however, to
the limitation that where the reasonableness of a by-law is a
mere matter of judgment, and one upon which reasonable
minds must necessarily differ, a court would not be warranted
in substituting its judgment instead of the judgment of those
who are authorized to make by-laws and who have exercised
their authority.
It is a settled state law in the United States, according to
Fletcher, that corporations have the power to make by-laws
declaring a person employed in the service of a rival company
to be ineligible for the corporation's Board of Directors. ... (A)n
amendment which renders ineligible, or if elected, subjects to
removal, a director if he be also a director in a corporation
whose business is in competition with or is antagonistic to the
other corporation is valid." This is based upon the principle
that where the director is so employed in the service of a
rival company, he cannot serve both, but must betray one
or the other. Such an amendment "advances the benefit
of the corporation and is good." An exception exists in New
Jersey, where the Supreme Court held that the Corporation
Law in New Jersey prescribed the only qualification, and
therefore the corporation was not empowered to add
additional qualifications. This is the exact opposite of the
situation in the Philippines because as stated heretofore,
section 21 of the Corporation Law expressly provides that a
corporation may make by-laws for the qualifications of
directors. Thus, it has been held that an officer of a
corporation cannot engage in a business in direct competition
with that of the corporation where he is a director by utilizing
information he has received as such officer, under "the
established law that a director or officer of a corporation may
not enter into a competing enterprise which cripples or injures
the business of the corporation of which he is an officer or
director.
It is also well established that corporate officers "are not
permitted to use their position of trust and confidence to
further their private interests." In a case where directors of a
corporation cancelled a contract of the corporation for
exclusive sale of a foreign firm's products, and after
establishing a rival business, the directors entered into a new
contract themselves with the foreign firm for exclusive sale of
its products, the court held that equity would regard the new
contract as an offshoot of the old contract and, therefore, for
the benefit of the corporation, as a "faultless fiduciary may not
reap the fruits of his misconduct to the exclusion of his
principal.
The doctrine of "corporate opportunity" is precisely a
recognition by the courts that the fiduciary standards could not
be upheld where the fiduciary was acting for two entities with
competing interests. This doctrine rests fundamentally on the
unfairness, in particular circumstances, of an officer or
director taking advantage of an opportunity for his own
personal profit when the interest of the corporation justly calls
for protection.
It is not denied that a member of the Board of Directors of the
San Miguel Corporation has access to sensitive and highly
confidential information, such as: (a) marketing strategies and
pricing structure; (b) budget for expansion and diversification;
(c) research and development; and (d) sources of funding,
availability of personnel, proposals of mergers or tie-ups with
other firms.
It is obviously to prevent the creation of an opportunity for an
officer or director of San Miguel Corporation, who is also the
officer or owner of a competing corporation, from taking
advantage of the information which he acquires as director to
promote his individual or corporate interests to the prejudice
of San Miguel Corporation and its stockholders, that the
questioned amendment of the by-laws was made. Certainly,
where two corporations are competitive in a substantial
sense, it would seem improbable, if not impossible, for the
director, if he were to discharge effectively his duty, to satisfy
his loyalty to both corporations and place the performance of
his corporation duties above his personal concerns.
Sound principles of corporate management counsel against
sharing sensitive information with a director whose fiduciary
duty of loyalty may well require that he disclose this
information to a competitive arrival. These dangers are
enhanced considerably where the common director such as
the petitioner is a controlling stockholder of two of the
competing corporations. It would seem manifest that in such
situations, the director has an economic incentive to
appropriate for the benefit of his own corporation the
corporate plans and policies of the corporation where he sits
as director.
Indeed, access by a competitor to confidential information
regarding marketing strategies and pricing policies of San
Miguel Corporation would subject the latter to a competitive
disadvantage and unjustly enrich the competitor, for advance
knowledge by the competitor of the strategies for the
development of existing or new markets of existing or new
products could enable said competitor to utilize such
knowledge to his advantage.
Neither are We persuaded by the claim that the by-law was
Intended to prevent the candidacy of petitioner for election to
the Board. If the by-law were to be applied in the case of one
stockholder but waived in the case of another, then it could be
reasonably claimed that the by-law was being applied in a
discriminatory manner. However, the by law, by its terms,
applies to all stockholders. The equal protection clause of the
Constitution requires only that the by-law operate equally
upon all persons of a class. Besides, before petitioner can be
declared ineligible to run for director, there must be hearing
and evidence must be submitted to bring his case within the
ambit of the disqualification. Sound principles of public policy
and management, therefore, support the view that a by-law
which disqualifies a competition from election to the Board of
Directors of another corporation is valid and reasonable.
ISSUE2: Does the Corporation have the power to prescribe
qualifications?
HELD2: Yes. Private respondents contend that the disputed
amended by laws were adopted by the Board of Directors of
San Miguel Corporation a-, a measure of self-defense to
protect the corporation from the clear and present danger that
the election of a business competitor to the Board may cause
upon the corporation and the other stockholders inseparable
prejudice. Submitted for resolution, therefore, is the issue —
whether or not respondent San Miguel Corporation could, as
a measure of self- protection, disqualify a competitor from
nomination and election to its Board of Directors.
It is recognized by an authorities that 'every corporation has
the inherent power to adopt by-laws 'for its internal
government, and to regulate the conduct and prescribe the
rights and duties of its members towards itself and among
themselves in reference to the management of its affairs. At
common law, the rule was "that the power to make and adopt
by-laws was inherent in every corporation as one of its
necessary and inseparable legal incidents. And it is settled
throughout the United States that in the absence of positive
legislative provisions limiting it, every private corporation has
this inherent power as one of its necessary and inseparable
legal incidents, independent of any specific enabling provision
in its charter or in general law, such power of self-government
being essential to enable the corporation to accomplish the
purposes of its creation.
In this jurisdiction, under section 21 of the Corporation Law, a
corporation may prescribe in its by-laws "the qualifications,
duties and compensation of directors, officers and employees
... " This must necessarily refer to a qualification in addition to
that specified by section 30 of the Corporation Law, which
provides that "every director must own in his right at least one
share of the capital stock of the stock corporation of which he
is a director ... " In Government v. El Hogar, the Court
sustained the validity of a provision in the corporate by-law
requiring that persons elected to the Board of Directors must
be holders of shares of the paid up value of P5,000.00, which
shall be held as security for their action, on the ground that
section 21 of the Corporation Law expressly gives the power
to the corporation to provide in its by-laws for the qualifications
of directors and is "highly prudent and in conformity with good
practice
ISSUE3: Does the stockholders have the vested right to be
elected a director?
HELD: No. Any person "who buys stock in a corporation does
so with the knowledge that its affairs are dominated by a
majority of the stockholders and that he impliedly contracts
that the will of the majority shall govern in all matters within
the limits of the act of incorporation and lawfully enacted by-
laws and not forbidden by law." To this extent, therefore, the
stockholder
may be considered to have "parted with his personal right or
privilege to regulate the disposition of his property which he
has invested in the capital stock of the corporation, and
surrendered it to the will of the majority of his fellow
incorporators. ... It cannot therefore be justly said that the
contract, express or implied, between the corporation and the
stockholders is infringed ... by any act of the former which is
authorized by a majority ... ."
Under section 22 of the same law, the owners of the majority
of the subscribed capital stock may amend or repeal any by-
law or adopt new by- laws. It cannot be said, therefore, that
petitioner has a vested right to be elected director, in the face
of the fact that the law at the time such right as stockholder
was acquired contained the prescription that the corporate
charter and the by-law shall be subject to amendment,
alteration and modification.
It being settled that the corporation has the power to provide
for the qualifications of its directors, it has also been settled
that the disqualification of a competitor from being elected to
the Board of Directors is a reasonable exercise of corporate
authority.
In the case at bar, there are facts which cannot be denied,
viz.: that the amended by-laws were adopted by the Board of
Directors of the San Miguel Corporation in the exercise of the
power delegated by the stockholders ostensibly pursuant to
section 22 of the Corporation Law; that in a special meeting
on February 10, 1977 held specially for that purpose, the
amended by-laws were ratified by more than 80% of the
stockholders of record; that the foreign investment in the
Hongkong Brewery and Distillery, a beer manufacturing
company in Hongkong, was made by the San Miguel
Corporation in 1948; and that in the stockholders’ annual
meeting held in 1972 and 1977, all foreign investments and
operations of San Miguel Corporation were ratified by the
stockholders.
The validity or reasonableness of a by-law of a corporation is
purely a question of law. Whether the by-law is in conflict with
the law of the land, or with the charter of the corporation, or is
in a legal sense unreasonable and therefore unlawful is a
question of law. This rule is subject, however, to the limitation
that where the reasonableness of a by-law is a mere matter
of judgment, and one upon which reasonable minds must
necessarily differ, a court would not be warranted in
substituting its judgment instead of the judgment of those who
are authorized to make by-laws and who have exercised their
authority.
In this jurisdiction, under Section 21 of the Corporation Law,
a corporation may prescribed in its by-laws “the qualifications,
duties and compensation of directors, officers and employees
***.” This must necessarily refer to a qualification in addition
to that specified by section 30 of the Corporation Law, which
provides that “every director must own in his right at least one
share of the capital stock of the stock corporation of which he
is a director * * *.”
Any person “who buys stock in a corporation does so with the
knowledge that its affairs are dominated by a majority of the
stockholders and that he implied contracts that the will of the
majority shall govern in all matters within the limits of the act
of incorporation and lawfully enacted by-laws and not
forbidden by law.” To this extent, therefore, the stockholder
may be considered to have “parted with his personal right or
privilege to regulate the disposition of his property which he
has invested in the capital stock of the corporation and
surrendered it to the will of the majority or his fellow
incorporators. **** It can not therefore be justly said that the
contract, express or implied, between the corporation and the
stockholders is infringed *** by any act of the former which is
authorized by a majority, ***.”
It is obviously to prevent the creation of an opportunity for an
officer or director of San Miguel Corporation, who is also the
officer or owner of competing corporation, from taking
advantage of the information which he acquires as director to
promote his individual or corporate interests to the prejudice
of San Miguel Corporation and its stockholders, that the
questioned amendment of the by-laws was made. Certainly,
where two corporations are competitive in a substantial
sense, it would seem improbable, if not impossible, for the
director, if he were to discharge effectively his duty, to satisfy
his loyalty to both corporations and place the performance of
his corporate duties above his personal concerns.
Sound principles of corporate management counsel against
sharing sensitive information with a director whose fiduciary
duty to loyalty may well require that he disclose this
information to a competitive rival. These dangers are
enhanced considerably where the common director such as
the petitioner is a controlling stockholder of two of the
competing corporations. It would seem manifest that in such
situations, the director has an economic incentive to
appropriate for the benefit of his own corporation the
corporate plans and policies of the corporation where he sits
as director.
There is another important consideration in determining
whether or not the amended by-laws are reasonable. The
Constitution and the law prohibit combinations in restraint of
trade or unfair competition. Thus, Section 2 of Article XIV of
the Constitution provides: “That State shall regulate or prohibit
private monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall
be allowed.”
However, the by- law, by its terms, applies to all stockholders.
The equal protection clause of the Constitution requires only
that the by-laws operate equally upon all persons of a class.
Besides, before petitioner can be declared ineligible to run for
director, there must be hearing and evidence must be
submitted to bring his case within the ambit of the
disqualification. Sound principles of public policy and
management, therefore, support the view that a by-law which
disqualifies a competitor from election to the Board of
Directors of another corporation is valid and reasonable.
2. Adoption of by-laws; procedure; requisites of
valid by-laws (Section 46)
EFFECTIVITY: After approval of the SEC.
BY-LAWS PRIOR TO INCORPORATION: it must be
signed by all the incorporators without the need of the
affirmative vote of the majority of the outstanding
capital stock or the members provided it is submitted
together with the AOI.
AFTER INCPORPORATION: Must be submitted one
month after the issuance of the certificate of
incorporation and must be approved by a majority of
the outstanding capital stock or members and signed
by such stockholders or members voting for them.
Failure to file within 1 month may result to suspension
or revocation of corporate franchise.
THIRD PERSONS: are generally not bound, affected
or prejudiced the by- laws, it being merely internal
rules of the corporation, EXCEPT: if they have
knowledge of its existence and contents.
GRACE CHRISTIAN HIGH SCHOOL vs THE COURT OF
APPEALS
FACTS:
RULING: These provisions of the former and present
corporation law leave no room for doubt as to their meaning:
 the board of directors of corporations must be elected from
among the stockholders or members. There may be
corporations in which there are unelected members in the
board but it is clear that in the examples cited by petitioner the
unelected members sit as ex officio members, i.e., by virtue
of and for as long as they hold a particular office. But in the
case of petitioner, there is no reason at all for its
representative to be given a seat in the board. Nor does
petitioner claim a right to such seat by virtue of an office held.
In fact it was not given such seat in the beginning. It was only
in 1975 that a proposed amendment to the by-laws sought to
give it one.
Since the provision in question is contrary to law, the fact that
for fifteen years it has not been questioned or challenged but,
on the contrary, appears to have been implemented by the
members of the association cannot forestall a later challenge
to its validity. Neither can it attain validity through
acquiescence because, if it is contrary to law, it is beyond the
power of the members of the association to waive its invalidity.
For that matter the members of the association may have
formally adopted the provision in question, but their action
would be of no avail because no provision of the by-laws can
be adopted if it is contrary to law.
It is probable that, in allowing petitioner’s representative to sit
on the board, the members of the association were not aware
that this was contrary to law. It should be noted that they did
not actually implement the provision in question except
perhaps insofar as it increased the number of directors from
11 to 15, but certainly not the allowance of petitioner’s
representative as an unelected member of the board of
directors. It is more accurate to say that the members merely
tolerated petitioner’s representative and tolerance cannot be
considered ratification.
Nor can petitioner claim a vested right to sit in the board on
the basis of “practice.” Practice, no matter how long
continued, cannot give rise to any vested right if it is contrary
to law. Even less tenable is petitioner’s claim that its right is
“coterminus with the existence of the association.”
PMI COLLEGES vs NLRC
FACTS:
RULING: Neither can we concede that such contract would
be invalid just because the signatory thereon was not the
Chairman of the Board which allegedly violated petitioner’s
bylaws. Since by-laws operate merely as internal rules among
the stockholders, they cannot affect or prejudice third persons
who deal with the corporation, unless they have knowledge of
the same. No proof appears on record that private respondent
ever knew anything about the provisions of said by-laws. In
fact, petitioner itself merely asserts the same without even
bothering to attach a copy or excerpt thereof to show that
there is such a provision. How can it now expect the Labor
Arbiter and the NLRC to believe it? That this allegation has
never been denied by private respondent does not
necessarily signify admission of its existence because
technicalities of law and procedure and the rules obtaining in
the courts of law do not strictly apply to proceedings of this
nature.
4.
ENRIQUE SALAFRANCA vs PHILAMLIFE
FACTS:
RULING: Admittedly, the right to amend the by-laws lies
solely in the discretion of the employer, this being in the
exercise of management prerogative or business judgment.
However this right, extensive as it may be, cannot impair the
obligation of existing contracts or rights.
3. Contents of by-laws (Section 47)
Subject to the provisions of the Constitution, this
Code, other special laws, and the articles of H. MEETINGS
incorporation, a private corporation may provide in its 1. Kinds of Meetings (Section 49)
by-laws for:
1. The time, place and manner of calling and
conducting regular or special meetings of the
directors or trustees;
2. The time and manner of calling and conducting
regular or special meetings of the stockholders or
members;
3. The required quorum in meetings of stockholders
or members and the manner of voting therein;
4. The form for proxies of stockholders and members
and the manner of voting them;
5. The qualifications, duties and compensation of
directors or trustees, officers and employees;
6. The time for holding the annual election of
directors of trustees and the mode or manner of giving
notice thereof;
7. The manner of election or appointment and the
term of office of all officers other than directors or
trustees;
8. The penalties for violation of the by-laws;
9. In the case of stock corporations, the manner of
issuing stock certificates; and
10. Such other matters as may be necessary for the
proper or convenient transaction of its corporate
business and affairs.
MA. MERCEDES L. BARBA vs LICEO DE
CAGAYAN UNIVERSITY
FACTS:
RULING: Corporate officers are elected or appointed by the
directors or stockholders, and are those who are given that
character either by the Corporation Code or by the
corporation’s by-laws. Section 25 of the Corporation Code
enumerates corporate officers as the president, the secretary,
the treasurer and such other officers as may be provided for
in the by-laws. In Matling Industrial and Commercial
Corporation v. Coros, 633 SCRA 12 (2010), the phrase “such
other officers as may be provided for in the by-laws” has been
clarified, thus: Conformably with Section 25, a position must
be expressly mentioned in the By-Laws in order to be
considered as a corporate office. Thus, the creation of an
office pursuant to or under a By-Law enabling provision is not
enough to make a position a corporate office. Guerrea v.
Lezama, the first ruling on the matter, held that the only
officers of a corporation were those given that character either
by the Corporation Code or by the By-Laws; the rest of the
corporate officers could be considered only as employees of
subordinate officials. Thus, it was held in Easycall
Communications Phils., Inc. v. King: An “office” is created by
the charter of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an employee
occupies no office and generally is employed not by the action
of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be
paid to such employee.
Amendment to by-laws (Section 48)
TWO MODES OF AMENDMENT:
1. By a majority vote of the directors or trustees and the
majority vote of the outstanding capital stock or members,
at a regular or special meeting called for that purpose; or
2. By the board of directors alone when delegated by
stockholders owning 2/3 of the outstanding capital stock or
2/3 of the members. This power, however, is considered
revoked, when so voted by a majority of the outstanding
capital stock or members in a regular or special meeting.
 1.1 Regular / special meetings of stockholders /
members (Section 50)
1.2 Regular / special meetings of directors / trustees
(Section 53)
3. Right to financial statements (Section 75)
K. MERGER AND CONSOLIDATION
1. Concept of merger and consolidation
2. Procedure and requisites (Sections 76, 77, and 78)

2. Place and time of meetings (Section 51)

3. Quorum (Section 52)
4. Voting rights of stockholders
4.1 Pledgors, mortgagors, administrators shares
(Section 55)
4.2 Escrow shares
4.3 Jointly-owned shares (Section 56)
4.4 Treasury shares (Section 57) 3. Effects of merger and consolidation (Section 80)
4.5 Delinquent shares (Section 71)
4.6 Unpaid shares; derivative suits (Section 72) L. APPRAISAL RIGHT
1. Instances of appraisal right (Section 81)

2. Requisites if the exercise of appraisal (Section 82)

4.7 Sequestered shares

3. Effect of demand and termination of right of appraisal

(Section 83)
4. Cessation of right to payment (Section 84)
5. Proxies; voting trust (Section 58 and 59) 5. Responsibility for costs of appraisal (Section 85)
I. STOCK SUBSCRIPTION 6. Notation on certificates (Section 86)
1. Subscription contract; Trust fund doctrine (Section 60)
M. NON-STOCK CORPORATION
1. Definition and purpose (Section 87 and 88)

2. Pre-incorporation subscription (Section 61) 2. Member’s right to vote (Section 89 and 93)
3. Consideration for stocks (Section 62)
4. Certificate of stock; issuance (Section 63 and 64)

3. Membership non-transferable; exception (Section 90)

5. Watered stock (Section 65) 4. Membership termination (Section 91)
6. Unpaid subscriptions; interest (Section 66 and 67)
7. Sale of delinquent stock; requisites (Section 68 and
69)
8. Judicial recovery of unpaid subscription (Section 70)
9. Replacement of lost or destroyed certificates (Section
73) 5. Election of Trustees (Section 92)
6. Distribution of Assets; rules and plan of distribution
J. CORPORATE BOOKS AND RECORDS (Sections 94 and 95)
1. Books to keep (Section 74)
1.1 Record of all business transactions N. CLOSE CORPORATIONS
1.2 Minutes of the meeting (stockholders and board 1. Requisites (Section 96)
meetings)
1.3 Stock and transfer books
2. Right to examine / inspect corporate books

2. Contents of articles of incorporations (Section 97)

3. Restriction on transfer of shares (Sections 98 and 99)
 4. Stockholders agreement; directors’ actions; pre-
emptive rights (Sections 100, 101, and 102)
5. Amendment of articles of incorporation; deadlocks;
withdrawal of stockholder or dissolution (Sections
103, 104, and 105)

O. SPECIAL CORPORATIONS
1. Educational Corporation (Sections 106, 107, 1nd 108)
2. Religious Corporations; corporation sole; religious 4. Doing business without license (Section 133)
societies (Sections 109, 110, 116)

P. CORPORATE DISSOLUTION 5. Revocation and withdrawal of license (Sections 134,

1. Modes of Dissolution (Section 117) 135, and 136)
1.1 Voluntary (Sections 118, 119, and 120)
1.2 Involuntary (Section 121)
1.2.1 Filing of verified complaint
1.2.2 Revocation of articles of incorporation
1.2.3 Quo warranto proceedings

2. Rehabilitation (Financial Rehabilitation and

Insolvency Act of 2010 R.A. No. 10142)
2.1 Voluntary
2.2 Involuntary

3. Liquidation Section 122)

Q. FOREIGN CORPORATIONS
1. Definition (Section 123)
2. License application and issuance; requisites (Sections
125, 126, 127, and 128)

3. Meaning of “doing business in the Philippines” (Sec.

3(d) R.A. No. 7042)