Andrea Jane S.

Alegre

BSBA – Major in HRM – Blk 1 A

Chapter 7 – REVIEW QUESTIONS

1. An artificial being created by law that has the right of succession as well as the powers, attributes,
and properties expressly authorized by law or incident to its existence.
2.

Artificial Being

A corporation is not a real or legal entity. A corporation is not a natural person, but the law treats it as
such, allowing it to perform virtually all business functions that a natural person can. As a result, a
corporation can enter into contracts, own and dispose of property, and sue and be sued in its own name.
It has a separate and distinct personality from its shareholders, authorized officers, and employees
because it is an artificial being. As a result, the corporate shareholders' personal liabilities are not the
corporation's obligation.

Created by Operation of Law

This means that, unlike business partnerships, corporations cannot be formed simply by the agreement
of the parties; instead, they must be granted special authority by the state through the legislative
department or through a special incorporation law. As a more recent creation of law, a corporation can
only exist for lawful purposes; thus, its existence cannot be extended to any unlawful activities.

POWER OF SUCCESSION

The Corporate Rights of Succession determine who takes over the company if the current CEO leaves or
dies.

POWER, ATTRIBUTES AND PROPERTIES

A corporation, as a legal entity, can only exercise powers that are expressly granted to it by the
Corporation Code, it’s Articles, By-Laws, and other special laws. A corporation can exercise incidental
power as long as it is inherently necessary for its existence and the achievement of its goals.

OWNERSHIP INTEREST

A corporation's ownership interest is represented by share capital, which is divided into several shares of
stock. Anyone who purchases a share capital becomes a shareholder or stockholder of the corporation. A
shareholder is not legally responsible for the corporation's unpaid debts. They are only liable up to the
amount of their subscription.

MANAGED BY BOARD OF DIRECTION (BOD)

A corporation is managed by a group of shareholders known as the "board of directors," which is made
up of at least five natural persons but no more than fifteen, according to the Corporation Code.A
shareholder cannot enter into contracts on behalf of the corporation. Contracts can only be entered into
by the board of directors and other authorized officers.

3.

Advantages of Corporation:

- Limited Liability of Shareholders

- Transferability of Shares
- Continued Life Existence
- Greater Source of Funds

Disadvantages of Corporation:

- Greater degree of government control and supervision

- Centralized Management
- Having Income Tax
4. Stock corporation, these corporations issue shares of stock to shareholders, who are entitled to
dividends based on the corporation's earnings. These corporations must pay income and business
taxes. While nonstock corporation are formed for civic, charitable, or religious purposes, these
corporations do not issue stock. They are made up of members rather than shareholders. These
corporations are generally exempt from paying taxes.

5.
A. Nationality
- A resident foreign corporation, like a domestic corporation, establishes a branch in the
Philippines. A nonresident foreign corporation does not open a branch in the Philippines, but it
does earn money there in the form of rent, interest, and dividends. Foreign corporations' income
is only taxable in the Philippines if it is earned there.
B. Purpose
- Corporations owned and controlled by the government. These corporations are primarily for
profit, but they are owned or controlled by the government.
C. Legal right

- De Jure Corporation. A corporation that has been duly registered as having met all of the legal
requirements for its legal existence.
- De Facto Corporation. A corporation that fails to completely comply with the requirements of
law.

D. Number of persons

- Sole corporation. A corporation owned and registered by a single corporator or member and his
successors who are religious denomination members. Aggregate Corporation that has more than
one corporator or member.
E. Extent of membership

- Open Corporation, this corporation's stock is available for public subscription. In general,
stockholders are unrelated to one another. Close Corporation, this is owned and managed by a
family or close relatives of no more than 20 people. This corporation's stock is not available for
public subscription.
F. Relation to other corporation
- Power or Holding Corporation. A corporation that acquires significant influence over another
corporation and has the power to elect directly or indirectly the majority directors of a subsidiary
corporation. Subsidiary Corporation. This corporation is controlled by the parent or holding
corporation.
6. The following are the distinctions between members and shareholders: A member is someone
who has subscribed to the company's memorandum. A shareholder is someone who owns the
company's stock.
7. Promotion Change. A "promoter" manages a company's promotional efforts. As one of the
preliminary steps in organizing. A promoter's job entails the distribution of prospectus, obtaining
subscriptions from prospective customers, inventors, as well as obtaining a charter for the
proposed corporation formed by the firm's shareholders.

Incorporation Stage.
The following procedures are involved in incorporation:
1. SEC registration of corporate name. The title, the name of the corporation should not be the
same as or similar to the name of an already registered corporation.

2. Articles of Incorporation Drafting and Execution. The incorporators must draft this corporate
fundamental instrument, which must be signed and acknowledged by a notary public.

3. Sworn affidavits and bank deposit certificates must be signed. The Articles of Incorporation
should be filed with the SEC, along with a corporate temporary treasurer's sworn statements
about the capital subscribed and paid-up, as well as statements about the corporation's assets
and liabilities.
 4. Payment of the and publication fees.”
5Issuance of Certificate of Incorporation. The SEC issue certificate of incorporation to evidence
approval of incorporation.

Formal organization and commencement of business operation. The adoption of by-laws for the
board of directors (or trustees) and the officers by the board is required for formal organization.
It also includes taking other steps that are required for the corporation to conduct legitimate
business or achieve the purpose for which it was formed.

8. Stockholders

Board of Director (BOD)

President

Vice President Corporate Corporate

Secretary treasurer

9. If a corporation does not formally organize and begin conducting business or constructing works
within two (2) years after its incorporation, its corporate powers expire and it is deemed dissolved.
10. Sec 14 of the Corporate Code of the Philippines
11. The contents of Articles of incorporation are provided in Sec 14 of the Corporate Code of the
Philippines, which states; “All corporation organized under this Code shall file with the securities
and exchange commission articles of incorporation in any of the official languages, duly signed
and acknowledge by all the incorporators, containing substantially the following matters, except
as otherwise prescribed by this code or by special law.
1. The name of the corporation;
2. The specific purpose or purpose for which the corporation is being incorporated;
3. The place where the principal office of the corporation to be located, which must be within the
Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the incorporators;
6. The number of directors or trustees which shall not be less than five (5) or more than fifteen
(15)
7. The names, nationalities and residences of the persons who small act as directors or trustees
until the first regular directors or trustees are duly elected and qualified in accordance with this
Code;
8. If it is as stock corporation, the amount of its authorized capital stock in a lawful money of the
Philippines; the number of shares into which it is divided and, in case the shares are par value
shares, the par value of each; the names, nationalities and residences of the original subscribers,
and the amount subscribed and paid by each on this subscription; and if some or all the shares
are without par value, such fact must be stated;
9. If it is a non-stock corporation, the amount of its capital, the names, nationalities and residences
of the contributors and the amount contributed by each; and
10. Such other matters as are not inconsistent with law and which the incorporators may deem
necessary and convenient.”

12. Containing the most basic information about the company and outlining what it is about, the
Articles of Incorporation are drafted and then filed with the state agency that is in charge of
business registration. The bylaws, on the other hand, need not be filed with the state agency.
 13. Organizational costs are expenses related to forming a corporation, partnership, or limited liability
company (not a sole proprietorship). These may include legal, management, consulting,
accounting and filing fees.

14. Organization expenses incurred in connection with the formation of the corporation prior to the
commencement of business are treated as expenses. Direct costs related to share capital issuance
(cost of printing, stock books, corporate seal and other legal or accounting fees in relation to stock
issuance) shall be charged against the related share premium or additional paid-in capital (APIC)
arising from such capital stock issuance. The excess of direct stock issuance cost over the related
APIC shall be changed current expense. If the cost recurring of indirect in nature, it is charged
against corporate income, Example of these costs are maintaining capital stock records,
administrative salaries for share capital issuance and agent fees.

15. SEC. 61 Pre-incorporation subscription is mandatory (Sec. 13 & 14) at least 25% of the authorized
capital stock has been subscribed and at least 25% of the total subscription has been fully paid.

16. Stock corporations must also keep a stock and transfer book, which shall contain a record of all
stocks in the name of stockholders alphabetically arranged; the installments paid and unpaid on
all stocks for which subscription has been made, and the date of payment of any installment; a
statement of every alienation.

TRUE OR FALSE:

1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. FALSE
6. FALSE
7. FALSE
8. TRUE
9. FALSE
10. TRUE
11. TRUE
12. TRUE

PROBLEM 7-6