APRIL 3, 2022 (Sunday)
corporation, either by special incorporation or charter or by means of
1. WHAT IS A CORPORATION?
SEC. 2. Corporation Defined. – A corporation is an artificial being created by
operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence.
2. ATTRIBUTES OF A CORPORATION
(ALS-PAPI)
1) It is an Artificial being
2) It is created by operation of Law
3) It enjoys the right of Succession
4) It has the Powers, Attributes and Properties expressly authorized by
law or Incident to its existence.
1)Artificial Personality
A corporation is a legal or juridical person with a personality separate and
distinct from its individual stockholders or members and from any other
legal entity into which it may be connected or related.
2) Corporation as a Creation of Law or by Operation of Law
No corporation can exist without the consent or grant of the sovereign,
and that the power to create corporations is one of the attributes of
sovereignty. Corporations cannot come into existence by mere agreement
of the parties.
GR: A legislative grant or authority is required for the creation of a
general corporation law.
EXP: For corporations by prescription, such authority is not necessary.
The creation of a corporation is by operation of law
The Philippine jurisprudence adopted the Concession or Fiat Theory
which states that a corporation is conceived as an artificial person owing
existence through creation by a foreign power. Further, a corporation is
without any existence until it has received the imprimatur of the State
acting according to law, through the SEC. (Tayag vs Benguet
Consolidated Inc., GR No. L- 23145, Nov. 29, 1968)
3) Right to Succession
A corporation has a capacity of continuous existence irrespective of the
death, withdrawal, insolvency, or incapacity of the individual stockholders
or members and regardless of the transfer of their interest or shares of
stock.
4) Powers, Attributes and Properties of a corporation
The powers that a corporation can exercise are only those which are
granted by the law of its creation. All powers which may be implied from
those expressly provided by law and those which are incidental or
essential to the corporation’s existence may also be exercised. (Sec.35,
RCC)
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 Test: Whether the act of the corporation is in direct and immediate
furtherance of its business, fairly incidental to the express powers and
reasonably necessary to their existence.
3. TWO CLASSES OF CORPORATION.
SEC. 3. Classes of Corporations. – Corporations formed or organized
under this Code may be stock or nonstock corporations. Stock corporations
are those which have capital stock divided into shares and are authorized to
distribute to the holders of such shares, dividends, or allotments of the
surplus profits on the basis of the shares held. All other corporations are
nonstock corporations.
For a stock corporation to exist, 2 requisites must be complied with:
1. A capital stock divided into shares;
2. An authority to distribute to the holders of such shares, dividends or
allotments of surplus profits on the basis of the shares held.
Note: if only one requisite is present, it cannot be classified as stock
corporation.
4. ELEEMOSYNARY AND CIVIL CORPORATION
(1) Eleemosynary or Charitable Corporation – a corporation created not
for private gain or profit but for charitable purposes for the administration
of charitable trusts. This corporation is not an ecclesiastical corporation
but a lay corporation.
(2) Civil Corporation - a corporation not for the purpose of charity but for the
benefit, pecuniary or otherwise, of its members.
5. DOMESTIC AND FOREIGN CORPORATION
(1) Domestic – incorporated and organized under the laws of the Philippines
(2) Foreign – formed, organized or existing under any laws other than those
of the Phillippines and whose laws allow Filipino Citizens and
corporations to do business in its own country or state. (Sec. 140, RCC)
6. TESTS IN DETERMINING THE NATIONALITY OF CORPORATIONS
1) Place of Incorporation test – in using the Place of Incorporation test,
the nationality of a corporation is determined by the state of
incorporation, regardless of the nationality of the stockholders.
2) Control Test – in determining the nationality of a corporation, the
control test uses the nationality of the stockholders.
3) Grandfather Rule - Nationality is attributed to the percentage of
equity in the corporation used in nationalized or partly nationalized
area. This test is an exception to the control test and was applied by
the SEC in several cases.
4) Domiciliary Test – Determined by the principal place of business of
the corporation.
7. CAN A CORPORATION RECOVER DAMAGES?
Yes. Moral damages? Yes, in case of Libel.
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8. CAN A CORPORATION BE HELD CRIMINALLY LIABLE? No. in the
absence of MALICE
Section. 17 last paragraphs. Cannot be held criminally liable under RPC or
felony because intent is required in felonies. Can be held criminally liable
under a Special Law with express provision of the law.
9. IS CORPORATION LIABLE BY THE ACTS OF AGENTS OR OFFICERS?
SEC. 30. Liability of Directors, Trustees or Officers. – Directors or
trustees who willfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary
interest in conflict with their duty as such directors or trustees shall be liable
jointly and Page 16 of 73 severally for all damages resulting therefrom
suffered by the corporation, its stockholders or members and other persons.
A director, trustee, or officer shall not attempt to acquire, or acquire
any interest adverse to the corporation in respect of any matter which has
been reposed in them in confidence, and upon which, equity imposes a
disability upon themselves to deal in their own behalf; otherwise, the said
director, trustee, or officer shall be liable as a trustee for the corporation and
must account for the profits which otherwise would have accrued to the
corporation.
10. LIMITED LIABILITY RULE
Under this rule, "a stockholder is personally liable for the financial
obligations of the corporation to the extent of his unpaid subscription." While
stockholders are generally not liable, the stockholders may be liable if they
have not or have not fully paid the subscription price.
The limited liability rule applies even if the corporation is the result of a
joint venture agreement. "By choosing to adopt a corporate entity as the
medium to pursue the joint venture enterprise, the parties (stockholders) to
the joint venture are bound by corporate.
law principles under which the entity must operate. Among these
principles is the limited liability doctrine. The use of a joint venture corporation
allows the co-venturers to take full advantage of the limited liability feature of
the corporate vehicle which is not present in a formal partnership
arrangement."
Reason for the Limited Liability Rule. For small and/or closely held
companies, limited liability may be the principal reason for the investor to use
the corporation as a vehicle in pursuing business. However, limited liability
has advantages even if the ownership of shares in a corporation is diffused
and spread among numerous stockholders or even if the management
(directors) is largely separated from ownership of the corporation.
Some legal writers propose that the reasons for the Limited
Liability Rule include:
(1) investment in shares is encouraged because the task of evaluating
equity investment is greatly simplified considering that the low-probability
even of insolvency and the financial condition of other investors can already
be ignored;
(2) investment in risky ventures is encouraged;
(3) banks and other financial intermediaries who are considered
experts are encouraged to closely monitor corporate debtors more closely
11. DE FACTO AND DE JURE CORPORATION
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(1) De jure corporation - a corporation organized in accordance with
requirements of law.
(2) De facto corporation - a corporation that is formed where there exists a
flaw in its incorporation but there is colorable compliance with the
requirements of law.
What are the elements of a de facto corporation?
The requisites of a de facto corporation are as follows:
a. Existence of a valid law under which it may be
incorporated;
b. Attempt in good faith to incorporate; and
c. Actual use or exercise in good faith of corporate powers.
DE FACTO DE JURE
One which actually exists for all One created in strict or substantial
practical purposes as a corporation conformity with the mandatory
but which has no legal right to statutory requirements
corporate existence as against the incorporation.
state.
There is a colorable compliance with There is substantial compliance with
the requirements of the law creating the requirements of the law creating
the corporation. the corporation.
Can be attacked directly but not Its right to exist as a corporation
collaterally. cannot be successfully attacked or
questioned by any party even in
direct proceeding for that purpose
by the State.
Stockholders enjoy exemption from personal liability for corporate
obligations
12. CORPORATE NAME. ITS IMPORTANCE (SEC.17, RCC)
Just like the names of natural persons, the name of the corporation is
necessary for identification and not need an indication of its purpose. The
Supreme court explained that the very law of their creation and continued
existence requires each to adopt and certify a distinctive name. A corporation
has the power of succession under its corporate name. The name of the
corporation is therefore essential to its existence.
Jurisprudence provides that a name is peculiarly important as
necessary to the very existence of a corporation. Its. Name is one of its
attributes, an element of its existence, and essential to its identity. The
general rule as to corporations is that each corporation must have a name by
which it is to sue and be sued and do all legal acts.
for
13. LIMITATION IN THE USE OF CORPORATE NAME
1. SEC. 17. Corporate Name. – No corporate name shall be allowed
by the Commission if it is not distinguishable from that already
reserved or registered for the use of another corporation, or if such
name is already protected by law, or when its use is contrary to
existing law, rules and regulations.
A name is not distinguishable even if it contains one or more of the
following:
(a) The word “corporation”, “company”, “incorporated”,
“limited”, “limited liability”, or an abbreviation of one of such words;
and
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 (b) Punctuations, articles, conjunctions, contractions,
prepositions, abbreviations, different tenses, spacing, or number of
the same word or phrase.
2. Under Section 17 of the RCC, any corporate name is allowed,
provided that none of the following disqualifications are present, to wit;
a. Not distinguishable from that already reserved or registered for the use of
another corporation.
b. Name is already protected by law.
c. Use is contrary to existing law, rules, and regulations.
Further, appending the following words to the corporate name, does
not mean that it is already distinguishable, to wit:
a. The word corporation, company, incorporated, limited, limited liability,
or an abbreviation of one of such words.
b. Punctuations, articles, conjunctions, contractions, prepositions,
abbreviations, different tenses, spacing, or number of the same word
or phrase.
14. OUTSTANDING CAPITAL STOCK
Outstanding Capital Stock refers to the total shares of stock issued
to subscribers or stockholders, whether or not fully or partially paid except
treasury shares so long as there is a binding subscription agreement.
15. DOCTRINE OF SEPARATE JURIDICAL PERSONALITY
The Doctrine of corporate juridical personality states that a
corporation is a juridical entity with legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people
comprising it.
A corporation has a personality separate and distinct from its
members. It has a personality separate and distinct from the persons
composing it as we l as from that of any other entity to which it may he
related. This separate juridical personality is recognized under the New Civil
Code because its article 44 specifies corporations as among those
considered as Juridical persons with juridical personality, separate, and
distinct from that of each shareholder or member. Hence, corporations have
separate properties, rights and obligations. For instance, rights can be
enforced for and against the corporation and the filing g of a complaint
against the stockholder is not ipso facto a complaint against the corporation.
16. DOCTRINE OF PIERCING THE CORPORATE VEIL (P. 177 GN)
The doctrine of piercing the corporate veil is the doctrine that allows
the State to disregard, for certain justifiable reasons, the notion that a
corporation has a personality separate and distinct from the persons
composing it.
Basic in corporate law is the principle that a corporation has a
separate personality distinct from its stockholders and from other
corporations to which it may be connected. It is a fiction created by law with
the intent that it should be treated as true. However, under the doctrine of
piercing the veil of corporate entity, the corporation's separate juridical
personality may be disregarded when there is an abuse of the corporate
form. Whenever the doctrine applies, the principal and the conduit will be
treated as one; the controlled corporation will be deemed to have, "so to
speak, no separate mind, will or existence of its own, and is but a conduit for
its principal. If applicable, "the corporation is merely an aggregation of
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 persons whose liabilities must be treated as one with the corporation. The
conduit corporation will then be solidarily liable with the principal.
Where it appears that business enterprises are owned, conducted and
controlled by the same parties, law and equity will disregard the legal fiction
that these corporations are distinct entities and shall treat them as one. This
is in order to protect the rights a of third persons. (Vicmar vs. Elarcos)
In order to justify the piercing of the corporate veil, allegation or proof
of fraud or other public policy considerations is needed (Hacienda Luisita vs
Presidential Agrarian Reform, 2011)
Note: This is an exception to the Doctrine of Separate Corporate
Entity.
Effect of piercing the corporate veil
1. The corporation will be treated merely as an association of
persons undertaking a business and the liability will attach
directly to the officers and stockholders.
2. Where there are two (2) corporations, they will be merged into
one, the one being merely regarded as the instrumentality,
agency, conduit or adjunct of the other.
Note: Notwithstanding that the corporate veil has been pierced,
the corporation continues for other legitimate objectives, the
corporate character is not necessarily abrogated. (Reynoso vs
CA)
17. CORPORATE TERM NCC VS RCC
18. TREASURER’S AFFIDAVIT (Ginhali or wara, why?)
The term of existence of a corporation is now perpetual under the
RCCP. However, it may also choose to have a fixed term.
What are the revisions under the RCC on corporate term?
a. A corporation shall have perpetual existence unless its articles
of incorporation provide otherwise.
b. Corporations with certificates of incorporation issued prior to
the effectivity of the RCC, and which continue to exist, shall
have perpetual existence, unless the corporation, upon a vote
of its stockholders representing a majority of its outstanding
capital stock, notifies the SEC that it elects to retain its specific
corporate term pursuant to its articles of incorporation:
Provided, That any change in the corporate term under this
section is without prejudice to the appraisal right of dissenting
stockholders.
c. The period to extend the corporate term has been reduced
from five (5) to three (3) years prior to the original or
subsequent expiry date(s).
d. Extension of the corporate term shall take effect only on the
day following the original or subsequent expiry date(s).
e. A corporation whose term has expired is not ipso facto
dissolved but may apply for a revival of its corporate existence.
Upon approval by the SEC, the corporation shall be deemed
revived and a certificate of revival of corporate existence shall
be issued, giving it perpetual existence, unless its application
for revival provides otherwise.
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 A separate treasurer's affidavit is no longer required but the certification of the
treasurer is now incorporated in the Ninth clause of the Articles of
Incorporation.
19. PUBLIC AND PRIVATE CORPORATION
As to functions:
(1) Public Corporation - a corporation organized for the government of a
portion of a State (like cities and municipalities) for the purpose of serving
general good and welfare.
(2) Private Corporation - a corporation formed for some private purpose,
benefit, aim or end. They may be stock or non-stock corporations.
20. DIFFERENT METHODS IN ORDER THAT A CORPORATION BE IDENTIFY
21. REQUIRED MINIMUM AUTHORIZED CAPITAL STOCKS
SEC. 12. Minimum Capital Stock Not Required of Stock Corporations. –
Stock corporations shall not be required to have a minimum capital stock,
except as otherwise specifically provided by special law.
22. ALTER EGO DOCTRINE
Case law lays down a three-pronged test to determine the application of the
alter ego theory, which is also known as the instrumentality theory, namely:
a. Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own;
b. Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention of plaintiff’s legal right;
and
c. The aforesaid control and breach of duty must have proximately caused
the injury or unjust loss complained of.
23. NUMBER OF QUALIFICATIONS OF INCORPORATORS???
24. ARTICLES OF INCORPORATION
Articles of Incorporation (AOI) is one that defines the charter of the
corporation and the contractual relationships between the State and the
corporation, the stockholders and the State, and between the corporation and
its stockholders (Jurisprudence)
Three-fold nature of AOI:
An AOI, which stands as the corporate charter, is a contract of the
three-fold nature because it is a contract between:
1. The State and the Corporation
2. The Corporation and the stockholders; and
3. The stockholders inter se.
25. TORT LIABILITY.
The corporation is liable for every tort which it expressly directs or
authorizes.
A corporation is civilly liable in the same manner as a natural person
for torts, because generally speaking, the rules governing the liability of a
principal or master for a tort committed by an agent or servant are the same
whether the principal or master be a natural person or a corporation, and
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 whether the servant or agent be a natural or artificial person. All of the has the power of succession under its corporate name. The name of the
authorities agree that a principal or master is liable for every tort that he/she/it corporation is therefore essential to its existence.
expressly directs or authorizes, and this is just as true of a corporation as of a Jurisprudence provides that a name is peculiarly important as
natural person. A corporation is liable, therefore, whenever a tortious act is necessary to the very existence of a corporation. Its. Name is one of its
committed by an officer or agent under express direction or authority from the attributes, an element of its existence, and essential to its identity. The
stockholders or members acting as a body, or generally, from the directors as general rule as to corporations is that each corporation must have a name by
the governing body. which it is to sue and be sued and do all legal acts.
5. LIMITATION IN THE USE OF CORPORATE NAME
26. FRANCHISES. 2. SEC. 17. Corporate Name. – No corporate name shall be allowed
A corporation is granted by the State the right to exist by virtue of a by the Commission if it is not distinguishable from that already
primary franchise. A franchise is a special privilege conferred by reserved or registered for the use of another corporation, or if such
governmental authority, and which does not belong to citizens of the country name is already protected by law, or when its use is contrary to
generally as a matter of common existing law, rules and regulations.
A name is not distinguishable even if it contains one or more of the
following:
(a) The word “corporation”, “company”, “incorporated”,
“limited”, “limited liability”, or an abbreviation of one of such words;
APRIL 6, 2022 (Wednesday)
and
1. OTHER TYPES OF CORPORATION (PAGE 136, GN) (b) Punctuations, articles, conjunctions, contractions,
2. WHAT IS ARTICLES OF INCORPORATION (AOI) prepositions, abbreviations, different tenses, spacing, or number of
3. CONTENTS OF ARTICLES OF INCORPORATION (AOI) (SEC. 13) the same word or phrase.
4. CORPORATE NAME. ITS IMPORTANCE (SEC.17, RCC)
2. Under Section 17 of the RCC, any corporate name is allowed,
Just like the names of natural persons, the name of the corporation is
provided that none of the following disqualifications are present, to wit;
necessary for identification and not need an indication of its purpose. The
Supreme court explained that the very law of their creation and continued d. Not distinguishable from that already reserved or registered for the use of
existence requires each to adopt and certify a distinctive name. A corporation another corporation.
e. Name is already protected by law.

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f. Use is contrary to existing law, rules, and regulations.
Further, appending the following words to the corporate name, does
not mean that it is already distinguishable, to wit:
c. The word corporation, company, incorporated, limited, limited liability,
or an abbreviation of one of such words.
Punctuations, articles, conjunctions, contractions, prepositions, abbreviations,
different tenses, spacing, or number of the same word or phrase.
6. KINDS OF CORPORATION NA KINAHANGLAN MAY RECOMMENDATION
7. HOW TO AMEND ARTICLES OF INCORPORATION (SEC.15)
8. WHAT IS THE NATURE OF AOI
9. IS THE CORPORATE NAME ONLY ARE THE ONE THAT CAN BE
AMENDED?
10. WHAT IS BY-LAWS (P174, GN)
By-laws are rules and regulations or private laws enacted by the corporation
to regulate, govern and control its own actions, affairs and concerns and its
stockholders or members and directors and officers in relation thereto and
among themselves in their relation to it.
11. WHAT ARE BINDING EFFECTS OF A CORPORATION BY LAWS (P175,
GN)
a) As to members/stockholders, officers, trustees/directors
corporation
They are bound by and must comply with it. They are presumed to know the
provisions of the by-laws
b) As to third persons
GR: They are not bound
XPN: They have knowledge or notice of the by-laws at the time the contract
was executed.
12. DIFFERENT CORPORATE POWERS (P177)
1) Express Powers – granted by law, the Corporation Code, and its
Articles of Incorporation or Charter, and administrative regulations;
2) Inherent/incidental powers – not expressly stated but are deemed to
be within the capacity of corporate entities;
3) Implied/necessary powers – exists as a necessary consequence of
the exercise of the express powers of the corporation or the pursuit of
its purposes as provided for in the Charter.
Exercise of Corporate Powers
a) Stock – power to exercise corporate powers vests in the Board of
Directors
(Great Asian Sales vs CA)
b) Non – Stock - power to exercise corporate powers vests in the Board of
Trustees
13. ATLEAST 5 DIFFERENCE BETWEEN RCC AND NEW CORPORATE LAW
and
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