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NOTES ON CORPORATION LAW
Q: How are corporations classified? A:
Private corporations are classified into
stock or non-stock corporations. According to status:
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NOTES ON CORPORATION LAW
A: The ostensible corporation; there is no the Securities and Exchange Commission
corporation to talk about. articles of incorporation in any of the
official languages duly signed and
Q: A, B, and C were sued by Mr. Mamba. acknowledged by all of the incorporators,
A, B, and C claimed that there is no containing substantially the following
corporation, therefore, no corporate matters, except as otherwise prescribed
liability. This being the reality, can A, B, by this Code or by special law:
and C use the defense.
1. The name of the corporation;
A: They cannot. Corporation by estoppel.
2. The specific purpose or purposes for
Q: Are they liable as general partners? which the corporation is being
incorporated. Where a corporation
A: Yes. Sec. 21 expressly provides that has more than one stated purpose,
gen. partners are liable up to the extent of the articles of incorporation shall
their property. Sec. 21 requires active state which is the primary purpose
representation. and which is/are he secondary
purpose or purposes: Provided, That
CASE: Lim Tong Lim v. CA
a nonstock corporation may not
include a purpose which would
Facts: Lim Tong Lim, Chua and Yao were
change or contradict its nature as
into commercial fishing. They have been
such;
doing business under the name Ocean
Quest. They entered into a contract with
3. The place where the principal office of
the Philippine Fishing Gear, both by Chua
the corporation is to be located,
and Yao. Ocean Quest breached the
which must be within the Philippines;
obligation. Philippine Fishing Gear filed a
case against Lim, Yao and Chua, since
4. The term for which the corporation
there was no corporation existing. Trial
court ruled in favor of PFGI. Lim appealed is to exist;
to the CA, stating that he was not part of
the deal. 5. The names, nationalities and
residences of the incorporators;
Issue: Whether or not Lim is liable
6. The number of directors or trustees,
Held: Yes which shall not be less than five (5)
nor more than fifteen (15);
Rationale: He benefited by the use of the
fishnets. Lim Tong Lim was one of those 7. The names, nationalities and
who strongly opposed against the writ of residences of persons who shall act
attachment. It showed that he benefited. as directors or trustees until the first
He is likewise liable due to corporation by regular directors or trustees are duly
estoppel. elected and qualified in accordance
with this Code;
As to their relation to another corporation:
8. If it be a stock corporation, the
Q: Give us the concept of holding or amount of its authorized capital stock
parent corporation and subsidiary: A: in lawful money of the Philippines,
Holding – has management over the the number of shares into which it is
subsidiary. Subsidiary – controlled by the divided, and in case the share are par
parent corporation. value shares, the par value of each,
the names, nationalities and
As to whether they are open to the public residences of the original subscribers,
or not: and the amount subscribed and paid
by each on his subscription, and if
Q: What about open and close? some or all of the shares are without
A: Open – those formed to openly accept par value, such fact must be stated;
outsiders or stockholders or investors.
Close – those whose shares of stock are
9. If it be a non-stock corporation, the
held by limited number of persons like the
amount of its capital, the names,
family or other closely-knit group.
nationalities and residences of the
contributors and the amount
basic requirement is to submit with the
contributed by each; and
SEC the Article of Incorporation (AI)
10. Such other matters as are not
inconsistent with law and which the
Sec. 14. Contents of the articles of
incorporators may deem necessary
incorporation. - All corporations
and convenient.
organized under this code shall file with
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NOTES ON CORPORATION LAW
has been using the name, 17 years before
Lyceum of the Philippines was registered.
Q: What do you mean by deceptively and Q: What is the importance of the purpose
confusingly similar? of the corporation?
A: The name is closely similar that creates A: It states the objective of the
confusion or deception with the public. corporation, and for the stockholder, it
tells him of the risk of his investment. For
CASE: Ang Mga Kaanib sa Iglesio ng Dios the board, to know their authority to act.
Kay Kristo Hesus, Haligi at Saligan ng And for other people, to know the general
Katotohanan sa Bansang Pilipinas (IDKJ- authority of the management.
HSK) v. Iglesia ng Dios kay Cristo Jesus,
Haligi at Sungay ng Katotohanan (IDCJ- Q: How many purposes do we have?
HSK)
A: Two. Primary and secondary.
Facts: IDCJ-HSK is a non stock corporation
Q: What is the limitation of the secondary
registered in 1936. Sometime in 1976, Eli
purpose?
Soriano disassociated, together with
A: it must not be contrary to law and must
others, from the corporation. He started a
not deviate from the primary purpose. It
new corporation called IDKJ-HSK. IDCJ
must be in line with the primary purpose.
filed a complaint with the SEC, to compel
IDKJ to change its name. During the
Q: How long may a corporation exist?
pendency of the case, Soriano filed a
petition to change its name to Ang mga
A: 50 years.
Kaanib sa Iglesia ng Dios kay Kristo
Hesus, Haligi at Saligan ng Katotohanan. Q: May they extend?
IDCJ filed another complaint with the SEC,
because the name is confusingly similar to A: Yes but not for more than 50 years at
theirs. Soriano filed a motion to dismiss any single instance.
which was denied. SEC ruled in favor of
IDCJ. note of the time when to file for extension.
It is within 5 years of the expiration of the
Issue: 1. Whether or not the name is term. You cannot file before or after that
confusingly similar. period.
Issue: Whether or not the action may Q: Who are corporators? A: all persons
prosper. who who compose the corporation at any
given time.
Held: No
Q: Who are incorporators?
Rationale: The SC ruled that it did not A: It is applied only to those mentioned in
achieve exclusive use. Lyceum of Baguio the articles of incorporation as originally
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NOTES ON CORPORATION LAW
forming the corporation and signatories of and loan associations shall not be
the AI. permitted to issue no-par value shares of
stock.