E.
Power to Acquire Own Shares
• Provided that the corporation has URE, a
stock corporation shall have the power to
purchase or acquire its own shares for a
legitimate corporate purpose, including the
following:
a. To eliminate fractional shares arising
out of stock dividends;
b. To collect or compromise an
indebtedness to the corporation,
arising out of unpaid subscription, in a
delinquency sale, and to purchase
delinquent shares sold during said
sale; and
c. To pay dissenting or withdrawing
stockholders entitled to payment for
their shares
• Why the requirement of URE?
• Trust Fund Doctrine = the capital stock,
property, and other assets of a corporation are
regarded as equity in trust for the payment of
corporate creditors, who are preferred in the
distribution of corporate assets. The creditors
have the right to assume that the BOD will not
use the assets of the corporation to purchase
its own stock for as long as the corporation has
outstanding debts and liabilities. There can be
no distribution of assets among the
stockholders without first paying corporate
debts.
F. Power to Invest Corporate Funds in
Another Corporation/Business or for Any
Other Purpose
• Voting requirement: If primary purpose, only
majority of the board approval.
• If for any purpose other than the primary
purpose = majority of the BOD/BOT and 2/3 of
SH
• Appraisal right: Present
• Notification requirement: Written notice sent
to stockholders/members either by mail,
served personally, or when allowed in the
bylaws or done with the consent of the
stockholder, sent electronically. (NEW)
G. Power to Declare Dividends
• Whether or not there should be dividends
and its form = business judgment
• BOD may declare dividends out of the URE
which shall be payable in cash, property, or in
stock to all stockholders on the basis of
outstanding stock held by them. Cash
dividends due on delinquent stock shall first be
applied to the unpaid balance on the
subscription plus costs and expenses, while
stock dividends shall be withheld from the
delinquent stockholders until their unpaid
subscription is fully paid. Thus, absent the
availability of URE, the BOD had no power to
issue dividends. CIR vs. Goodyear Philippines,
Inc., G.R. No. 216130, August 3, 2016.
• Voting Requirement: Cash dividend –
majority vote of the BOD
• Stock dividend - majority vote of the board
plus 2/3 stockholders
• Stock corporations are prohibited from
retaining surplus profits in excess of 100% of
their PIC stock, except:
a. when justified by definite corporate
expansion projects approved by the
BOD; or
b. when the corporation is prohibited
under any loan agreement with
financial institutions or creditors,
whether local or foreign, from declaring
dividends without their consent, and
such consent has not yet been
secured; or
c. when it can be clearly shown that
such retention is necessary under
special circumstances, such as when
there is need for special reserve for
probable contingencies.
• Dividends vs profits:
• Profits are a result of operations of the
corporation. Hence, it belongs to the
corporation. There can be no dividends unless
there are profits, as it is the source of
dividends. Dividends belong to the
stockholders.
• It is possible that there are profits but no
dividends but there can never be dividends
unless there are profits.
• A stock dividend is a distribution to the
stockholders of the company’s own stocks. The
corporate profits are transferred to capital
stock and shares of stock representing the
increase in capitalization are distributed to the
stockholders. Unless there are available
unissued shares of the corporation, stock
dividends cannot be declared without first
increasing the capital stock. Although the
number of their shares increased, the
stockholders’ investment and proportionate
interest remain the same. They have received
nothing out of the company’s assets; unless
they sell the stock dividends, they receive no
income. This is the rationale why stockholder
action is required for stock dividends.
• RE include earnings from sale of goods or
services of a corporation in the ordinary course
of business as well as earnings from sale of
corporate property other than the stock in
trade, at a price higher than its cost.
• They do not include premium on par stock,
i.e., the difference between the par value and
the higher price for which the stock is sold by
the corporation, since this is regarded as PIC.
• Nevertheless, SEC has allowed the
declaration of stock dividends out of such
premium, as stock dividend does not involve
distribution of corporate assets to the
stockholders but merely gives tangible
evidence of the increase in their equity.
• Illustrations:
• Land book value 1990 = P10,000 now
market value P1M
• Common stock P1 per share sold at P10
H. Power to Enter into Management
Contracts
• Voting Requirement: majority of the BOD and
majority stockholders
• Special ratification rule of 2/3 of SH if:
a. SH representing the same interest of
both the managing and the managed
corporations own/control more than
1/3 of the total OCS entitled to vote of
the managing corporation; or
b. majority of the members of the BOD
of the managing corporation also
constitute a majority of the members
of the BOD of the managed corporation
• Contract duration: no longer than 5 years for
any 1 term
Ultra vires act
• A corporation shall possess or exercise only
those corporate powers conferred by this Code
or by its AOI and those necessary or incidental
to the exercise of the powers conferred;
otherwise, ultra vires.
• Corporate contracts which are illegal vs ultra
vires: former contemplates the doing of an act
which are contrary to law, morals or public
policy or public duty are void. They cannot
serve as basis of a court action nor acquire
validity by performance, ratification or
estoppel. Mere ultra vires acts, on the other
hand, or those which are not illegal or void ab
initio, but are not merely within the scope of
the AOI are merely voidable and maybe
subject to ratification.
• Montelibano, et al. vs. Bacolod-Murcia Milling
Co., Inc. 115 Phil. 18 - The test to determine if
a corporate act is in accordance with its
purposes: If that act is one which is lawful in
itself, and not otherwise prohibited, is done for
the purpose of serving corporate ends, and is
reasonably tributary to the promotion of those
ends, in a substantial, and not in a remote and
fanciful, sense, it may fairly be considered
within charter powers.
RIGHTS OF STOCKHOLDERS
1. Right to vote
2. Appraisal right
3. Right to inspect records
4. Right to institute derivative suit
Manner of voting for stockholders and
members
• The right to vote of stockholders or members
may be exercised:
1. In person
2. Through a proxy
3. When so authorized in the bylaws,
through remote communication or in
absentia, provided, that the votes are
received before the corporation finishes
the tally of votes.
• Proxy - a form of agency created in instances
when a person is unable to personally cast his
or her vote; hence, the act of voting is
delegated to another person. It shall be in
writing, signed and filed, by the SH/member,
and received by the corporate secretary within
a reasonable time before the scheduled
meeting. Unless otherwise provided in the
proxy form, it shall be valid only for the
meeting for which it is intended. No proxy shall
be valid and effective for a period longer than
5 years at any one time.
Place of meetings
1. For SH/members, whether regular
or special - in the principal office of the
corporation as set forth in the AOI, or,
if not practicable, in the city or
municipality where the principal office
of the corporation is located: Provided,
That any city or municipality in Metro
Manila, Metro Cebu, Metro Davao, and
other Metropolitan areas shall, for
purposes of this section, be considered
a city or municipality. (NEW)
2. For DT - anywhere in or outside of
the Philippines, unless the bylaws
provide otherwise.
Election of BOD/BOT
• Under Section 23, SH/member shall have the
right to nominate any DT who possesses all of
the qualifications and none of the
disqualifications, except when the exclusive
right is reserved for holders of founders’
shares.
• In stock corporations, SH entitled to vote
shall have the right to vote the number of
shares of stock standing in their own names in
the stock books of the corporation at the time
fixed in the bylaws or where the bylaws are
silent, at the time of the election.
Cumulative voting
• A viva voce or hand raising vote would be
sufficient unless a vote by ballot is requested.
• Stock corporations = cumulative voting is
mandatory. SH would have such number of
votes equal to the number of shares owned by
the SH as shown in the books of the
corporation multiplied by the whole number of
directors to be elected.
• No. of votes = No. of shares x vacancy
• SH may: (a) vote such number of shares for
as many persons as there are directors to be
elected; (b) cumulate said shares and give 1
candidate as many votes as the number of
directors to be elected multiplied by the
number of the shares owned; or (c) distribute
them on the same principle among as many
candidates as may be seen fit. No delinquent
stock shall be voted.
• Non-stock corporations = unless otherwise
provided in the AoI or bylaws, members may
cast as many votes as there are trustees to be
elected but may not cast more than 1 vote for
1 candidate. Nominees for directors or trustees
receiving the highest number of votes shall be
declared elected.
• No. of votes = No. of vacancy but can give
only 1 vote to 1 candidate Cumulative voting
• You have 1 common share. There are 3
vacant seats in the board. There are 5
candidates (Bulma, Piccolo, Vegeta, Trunks,
Chi-chi). How many votes can you cast and to
whom will you give it?
• If no election is held, or the owners of
majority of the OCS/members entitled to vote
are not present in person, by proxy, or through
remote communication or not voting in
absentia at the meeting, such meeting may be
adjourned and the corporation shall proceed in
accordance with Section 25.
• The non-holding of elections and the reasons
therefor shall be reported to the SEC; report
shall specify a new date for the election, which
shall not be later than 60 days from the
scheduled date.
• If no new date has been designated, or if the
rescheduled election is likewise not held, the
SEC may, upon the application of an SH,
member, DT, and after verification of the
unjustified non-holding of the election,
summarily order that an election be held.
Appraisal right
• Appraisal right - SH who dissented and voted
against the proposed corporate action, may
choose to get out of the corporation by
demanding payment of the fair market value of
his shares.
• SH given the right to get out of the
corporation even before its dissolution because
there has been a major change in his contract
of investment with which he does not agree
and which the law presumes he did not foresee
when he bought his shares.
When right can be exercised (ATSIM)
a. In case an amendment to the AOI
has the effect of changing or restricting
the rights of any stockholder or class of
shares, or of authorizing preferences in
any respect superior to those of
outstanding shares of any class, or of
 extending or shortening the term of
corporate existence;
b. In case of sale, lease, exchange,
transfer, mortgage, pledge (SLEMP) or
other disposition of all or substantially
all of the corporate property and
assets;
c. In case of merger or consolidation;
and
d. In case of investment of corporate
funds for any purpose other than the
primary purpose of the corporation.
How right is exercised and implications
1. The dissenting stockholder makes
written demand on the corporation for
the payment of the fair value of shares
within 30 days from the date on which
the vote was taken. Failure to make
the demand within such period =
waiver of the appraisal right.
2. If the withdrawing stockholder and
the corporation cannot agree on the
fair value of the shares = determined
and appraised by 3 disinterested
persons. No payment unless the
corporation has URE. Upon payment by
the corporation of the price, SH shall
transfer the shares to the corporation.
3. Rights accruing to the withdrawing
SH's shares, including voting and
dividend rights, shall be suspended
from the time of demand for the
payment of the fair value of the shares
until either the abandonment of the
corporate action involved or the
purchase of the shares by the
corporation, except the right of such
stockholder to receive payment of the
fair value of the shares. How right is
exercised and implications
4. Within 10 days after demanding
payment for shares held, dissenting SH
shall submit the stock certificates.
Failure to do so shall, at the option of
the corporation, terminate the rights. If
shares represented by the certificates
bearing such notation are transferred,
and the certificates consequently
cancelled, the rights of the transferor
as a dissenting SH shall cease and the
transferee shall have all the rights of a
regular SH; and all dividend
distributions which would have accrued
on such shares shall be paid to the
transferee.
5. If the proposed corporate action is
implemented, the corporation shall pay
the SH, upon surrender of the
certificate, the fair value thereof as of
the day before the vote was taken.
6. If the dissenting SH is not paid the
value of the said shares within 30 days
after the award, the voting and
dividend rights shall be restored.
• Requirement of URE = Trust Fund Doctrine.
When right to payment ceases
• No demand for payment may be withdrawn
unless the corporation consents thereto. If,
however, such demand for payment is:
a. withdrawn with the consent of the
corporation, or
b. if the proposed corporate action is
abandoned or rescinded by the
corporation or disapproved by the SEC
where such approval is necessary, or
c. if the SEC determines that such SH
is not entitled to the appraisal right
• then the right of the SH to be paid the fair
value of the shares shall cease, the status as
the SH shall be restored, and all dividend
distributions which would have accrued on the
shares shall be paid to the SH.
Who bears cost of appraisal
• It shall be borne by the corporation
• Unless the fair value ascertained by the
appraisers is approximately the same as the
price which the corporation may have offered
to pay the SH, in which case they shall be
borne by the latter. In the case of an action to
recover such fair value, all costs and expenses
shall be assessed against the corporation,
unless the refusal of the SH to receive
payment was unjustified.
Right to inspection
• Corporate records shall be open to inspection
by any DT, SH/member in person or by a
representative at reasonable hours on business
days, and a demand in writing may be made
by such DT or SH at their expense, for copies
of such records. The inspecting or reproducing
party shall remain bound by confidentiality
rules, such as the rules on trade secrets or
processes under RA 8293, RA 10173 (Data
Privacy), RA 8799 (SRC), and the Rules of
Court. (NEW)
• A requesting party who is not a SH or
member of record, or is a competitor, director,
officer, controlling SH or otherwise represents
the interests of a competitor shall have no
right to inspect or demand reproduction of
corporate records. (NEW)
• An action for injunction / writ of preliminary
injunction filed by a corporation is unavailable
to prevent SH from exercising their right to
inspection. Philippine Associated Smelting and
Refining Corporation (PASAR) vs. Lim, G.R. No.
172948, October 5, 2016.
• An heir of the deceased SH has no right to
inspect the books. Upon the death of a SH, the
heirs do not automatically become SH of the
corporation and acquire the rights and
privileges of the deceased as SH of the
corporation. The stocks must be distributed
first to the heirs in estate proceedings, and the
transfer of the stocks must be recorded in the
books of the corporation. It is the
administrator or executor who is entitled to
exercise the rights of the deceased as SH.
Puno vs. Puno Enterprises, 599 SCRA 585.
Refusal on the part of the corporation on
the request for inspection
• Any officer or agent of the corporation who
shall refuse to allow the inspection and/or
reproduction of records shall be liable to such
DT, SH or member for damages, and in
addition, shall be guilty of an offense which
shall be punishable under Section 161 of this
Code.
• If such refusal is made pursuant to a
resolution or order of the BOD/BOT, the
liability under this section for such action shall
be imposed upon the DT who voted for such
refusal.
• It shall be a defense to any action under this
section that the person demanding to examine
and copy excerpts from the corporation’s
records and minutes:
a. has improperly used any information
secured through any prior examination
of the records or minutes of such
corporation or of any other
corporation, or
b. was not acting in GF or for a
legitimate purpose in making the
demand to examine or reproduce
corporate records, or
c. is a competitor, director, officer,
controlling SH or otherwise represents
the interest of a competitor.
• If the corporation denies or does not act on
demand for inspection/ reproduction,
aggrieved party may report such to the SEC.
Within 5 days from receipt of such report, the
SEC shall conduct a summary investigation and
issue an order directing the
inspection/reproduction of the requested
records.
• In Terelay Investment and Development
Corp. vs. Yulo, 765 SCRA 1, Cecilia Yulo, owner
of 5 shares of stock or .001% in Terelay,
sought for the examination of the books but
was denied as she has insignificant holding in
the corporation, prompting her to file for
mandamus.
• Corporation Code has granted to ALL
stockholders the right to inspect the corporate
books and records, and in so doing has not
required any specific amount of interest for the
exercise of the right to inspect.
• Neither could the corporation deny the right
to inspect the corporate books and records on
the basis that her inspection would be used for
a doubtful or dubious reason.
• The only time when the demand to examine
and copy the corporation's records and
minutes could be refused is when the
corporation puts up as a defense to any action
that "the person demanding" had "improperly
used any information secured through any
prior examination of the records or minutes of
such corporation or of any other corporation,
or was not acting in GF or for a legitimate
purpose in making his demand."
• The right of the SH to inspect the books and
records should not be made subject to the
condition of a showing of any particular dispute
or of proving any mismanagement, but if the
right is to be denied, the burden of proof is
upon the corporation to show that the purpose
of the shareholder is improper, by way of
defense.
• Purposes to justify a demand for inspection:
 1. To ascertain the financial condition
of the company or the propriety of
dividends;
2. the value of the shares of stock for
sale or investment;
3. whether there has been
mismanagement;
4. in anticipation of SH meetings to
obtain a mailing list of SH to solicit
proxies or influence voting;
5. to obtain information in aid of
litigation with the corporation or its
officers as to corporate transactions.
• Improper purposes which may justify denial
of the right of inspection:
1. Obtaining of information as to
business secrets or to aid a competitor;
2. to secure business "prospects" or
investment or advertising lists;
3. to find technical defects in corporate
transactions in order to bring "strike
suits" for purposes of blackmail or
extortion.
Derivative Suit
• An SH suing on account of wrongful or
fraudulent corporate actions may sue in any of
three (3) capacities: as an individual; as part
of a group or specific class of SH; or as a
representative of the corporation.
• Individual suits are filed when the cause of
action belongs to the individual SH personally,
and not to the SH as a group or to the
corporation, e.g., denial of right to inspection
and denial of dividends to a SH.
• If the cause of action belongs to a group of
SH, such as when the rights violated belong to
preferred SH, a class or representative suit
may be filed to protect the SH in the group.
• A derivative suit is an action filed by SH to
enforce a corporate action. It is an exception to
the general rule that the corporation's power to
sue is exercised only by the BOD/BOT.
Basis
• Not based on any express provision of the
Corporation Code, but is impliedly recognized
when the law makes corporate
directors/officers liable for damages suffered
by the corporation and its SH for violation of
their fiduciary duties e.g., mismanagement,
waste or dissipation of corporate assets
• In derivative suits, the real party in interest
is the corporation, and the suing SH is a mere
nominal party.
Requisites for filing
• Rule 8, Section 1 of the Interim Rules of
Procedure for Intra-Corporate Controversies
(Interim Rules):
1. He was an SH or member at the
time the acts or transactions subject of
the action occurred and at the time the
action was filed;
2. He exerted all reasonable efforts,
and alleges the same with particularity
in the complaint, to exhaust all
remedies available under the AoI, by-
laws, laws or rules governing the
corporation or partnership to obtain the
relief he desires;
3. No appraisal rights are available for
the act or acts complained of; and
4. The suit is not a nuisance or
harassment suit. In case of nuisance or
harassment suit, the court shall
forthwith dismiss the case.
• The fifth requisite is implied in the
first paragraph of Rule 8, Section 1 of
the Interim Rules: The action brought
by the SH or member must be "in the
name of the corporation or
association."
• A demand made on the BOD for the
appropriate relief is considered compliance with
the requirement of exhaustion of corporate
remedies. Lopez Realty vs. Spouses
Tanjangco, G.R. No. 154291, 12 November
2014.
• Western Institute of Technology, Inc., et al.
vs. Salas, et al., 278 SCRA 216 - Minority SH
who is suing for and on behalf of the
corporation must allege in his complaint before
the proper forum that he is suing on a
derivative cause of action on behalf of the
corporation and all other SH similarly situated
who wish to join him. Moreover, it is important
that the corporation be made a party to the
case.
• Asset Privatization Trust vs. Court of
Appeals, 300 SCRA 579 - It is a condition sine
qua non that the corporation be impleaded as
party in derivative suits. Not only is the
corporation an indispensable party, but it is
also the present rule that it must be served
with process. The reason given is that the
judgment must be made binding upon the
corporation in order that the corporation may
get the benefit of the suit and may not bring a
subsequent suit against the same defendants
for the same cause of action. In other words,
the corporation must be joined as party
because it is its cause of action that is being
litigated and because judgment must be a res
judicata against it.
• Reasons for disallowing a direct individual
suit:
1. The universally recognized doctrine
that an SH in a corporation has no
legal or equitable title to corporate
property; to allow SH to sue separately
would conflict with the separate
corporate entity principle;
2. The prior rights of the creditors may
be prejudiced. The SH may not directly
claim damages for themselves for that
would result in the distribution of part
of the corporate assets before the
dissolution of the corporation and the
liquidation of its debts and liabilities;
3. The filing of such suits would conflict
with the duty of the management to
sue for the protection of all concerned;
4. It would produce wasteful
multiplicity of suits; and
5. It would involve confusion in
ascertaining the effect of partial
recovery by an individual on the
damages recoverable by the
corporation for the same act.
• The derivative suit did not prosper in the
following cases:
1. Suit for the personal loan taken by
the President and Corporate Secretary
of the corporation, when the
corporation was never made a party to
the agreement; Ang vs. Spouses Ang,
G.R. No. 201675, June 19, 2013.
2. The SH’s allegation that he tried for
a number of times to talk to the
corporate director to settle their
differences, but the latter would not
listen and that taking further remedies
within the corporation would have been
idle ceremony, considering that it was
a family corporation and it was
impossible to expect the directors to
take action against themselves who
were the ones accused of wrongdoing.
Yu vs. Yukayguan, 589 SCRA 588.
3. Although the Complaint alleged that
demand letters were sent to the BOD
and that these were unheeded, these
allegations will not suffice. Forest Hills
Golf and Country Club, Inc. vs. Fil-
Estate Properties, Inc., G.R. No.
206649, July 20, 2016.
4. The person instituting the suit is
only an employee of JAKA and not a
bona fide SH of Mr. & Ms. Publishing
Co., Inc. at the time of the transaction
complained of. Bitong vs. Court of
Appeals, 292 SCRA 503.
5. The suit clearly is not for the benefit
of the corporation for a judgment in
favor of the complainant would mean
recovery of his personal property.
There is no actual or threatened injury
alleged to have been done to the
corporation due to the foreclosure of
the properties belonging to third-party
mortgagors. BSP vs. Campa, Jr., G.R.
No. 185979, March 16, 2016.
6. The complaint for nullification of the
election is a direct action by
petitioners, who were the members of
the BOD of the corporation before the
election, against respondents, who are
the newly elected BOD. Petitioners are
the injured party, whose rights to vote
and to be voted upon were directly
affected by the election of the new set
of BODs. Legaspi Towers 300, Inc., vs.
Muer, G.R. No. 170783, June 18, 2012.
7. The allegation of SH Balmores that
the acts of Pasig Printing Corporation's
(PPC) directors, specifically the waiver
of rights in favor of Villamor's law firm
and their failure to take back the MC
Home Depot checks from Villamor,
were detrimental to his individual
interest as a SH. In filing an action,
therefore, his intention was to
vindicate his individual interest and not
PPC's or a group of SH. Villamor, Jr.
vs. Umale, 736 SCRA 325.
• Can the majority board institute a derivative
suit?
• NO. Due to their control over the BOD, the
majority should not ordinarily be allowed to
resort to derivative suits. Where a corporation
under the effective control of the majority is
wronged, board-sanctioned litigation should
take precedence over derivative actions. After
all, the law expressly vests the power to sue in
the BOD, and a remedy based on equity, such
as the derivative suit, can prevail only in the
absence of one provided by statute. Ago Realty
& Development Corporation vs. Ago, G.R. No.
210906 & 211203, October 16, 2019.
ARTICLES OF INCORPORATION AND BY-
LAWS
Corporate term
• Under Section 11, a corporation shall have
perpetual existence unless its AoI provide
otherwise. (NEW)
• Corporations with certificates of incorporation
issued prior to the effectivity of this Code, and
which continue to exist, shall have perpetual
existence, unless the corporation, upon a vote
of its majority of the SH, notifies the SEC that
it elects to retain its specific corporation term
pursuant to its AoI. However, dissenting
stockholders can exercise their appraisal right.
• A corporate term for a specific period may be
extended or shortened by amending the AoI
but no extension may be made earlier than 3
years prior to the original or subsequent expiry
dates unless there are justifiable reasons for
an earlier extension.
• A corporation whose term has expired may
apply for a revival of its corporate existence,
together with all the rights and privileges
under its certificate of incorporation and
subject to all of its duties, debts and liabilities
existing prior to its revival. Upon approval of
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.
• No application for revival of certificate of
incorporation of banks, banking and quasi-
banking institutions, preneed, insurance and
trust companies, non-stock savings and loan
associations, pawnshops, corporations engage
in money service business, and other financial
intermediaries shall be approved unless
accompanied by a favorable recommendation
of the appropriate government agency.
• SEC Memorandum Circular No. 23 s.2019 or
the Guidelines on Revival of Expired
Corporations however provides that (a) an
expired corporation which has completed the
liquidation of its assets; (b) a corporation
whose certificate of registration has been
revoked for reasons other than non-filing of
reports; (c) a corporation dissolved by virtue of
Sections 6(c)(d) of PD No. 902-A; or (d) an
expired corporation which already availed of
re-registration per circular, could no longer file
a Petition for Revival of Corporate Existence.
• Voting requirement for revival = majority
vote of the BoD + majority of the OCS in stock
corporations or majority of the members in
nonstock corporation.
Minimum Capital Stock of Stock
Corporations
• Stock corporations shall NOT be required to
have a minimum capital stock, except as
otherwise specifically provided by special law.
(NEW)
Amendment of Articles of Incorporation
• The voting requirement is majority vote of
the BoD or BoT + 2/3 of the SH
• Dissenting SH can exercise their appraisal
right.
• The amendments shall take effect upon their
approval by the SEC or from the date of filing
with the SEC if not acted upon within 6 months
from the date of filing for a cause not
attributable to the corporation.
Grounds when AoI or amendments may
be disapproved
• The following are ground for such
disapproval:
• The AoI is not substantially in accordance
with the prescribed form;
• The purpose/s of the corporation are patently
unconstitutional, illegal, immoral, or contrary
to government rules and regulations;
• The certification concerning the amount of
capital stock subscribed and/or paid is false;
and
• The required percentage of Filipino ownership
of the capital stock under existing laws or the
Constitution has not been complied with.
• Banks, banking and quasi-banking
institutions, preneed, insurance and trust
companies, non-stock savings and loan
associations (NSSLAs), pawnshops, and other
financial intermediaries, their AoI shall be
accompanied by a favorable recommendation
of the appropriate government agency to the
effect that such AoI is in accordance with law.
Corporate name
• Under Section 17, no corporate name shall
be allowed 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 (NEW):
a. The word “corporation,” “company,”
“incorporated,” “limited,” “limited
liability,” or an abbreviation of such
words; and
b. Punctuations, articles, conjunctions
contraction prepositions, abbreviations,
different tenses, spacing, or number of
the same word or phrase.
• The SEC, upon determination that the
corporate name is:
a. not distinguishable from a name
already reserved, or registered for the
use of another corporation;
b. already protected by law; or
c. contrary to law, rules and
regulations may summarily order the
corporation to immediately cease and
desist from using such name and
require the corporation to register a
new one. It shall also cause the
removal of all visible signages, marks,
advertisements, labels, prints and
other effects bearing such corporate
name.
• If the corporation fails to comply with the
SEC’s order, the SEC may hold the corporation
and its responsible directors or officers in
contempt and/or hold them administratively,
civilly and/or criminally liable and/or revoke
the registration of the corporation.
• Why is name so important?
• Philips Export B.V. vs. Court of Appeals, 206
SCRA 457 held that a name is 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. Each
corporation must have a name by which it is to
sue and be sued and do all legal acts.
• The SC disallowed the use of the following
corporate names, as the name chosen is either
not distinguishable from a name registered in
favour of another corporation or is already
protected by law (trademark):
1. Paperone Inc., as Asia Pacific has
trademark over “Paper One” Asia
Pacific Resources International
Holdings, Ltd. vs.Paperone, Inc., G.R.
No. 213365-66, December 10, 2018.
2. De La Salle Montessori International
Malolos, Inc., was required to change
its name due to the complaint from De
La Salle Brothers, Inc., De La Salle
University, Inc., La Salle Academy,
Inc., De La Salle-Santiago Zobel
School, Inc. and De La Salle
Canlubang, Inc.; De La Salle
Montessori International Malolos, Inc.,
vs. De La Salle Brothers, Inc., G.R. No.
205548, February 7, 2018.
3. "Indian Chamber of Commerce
Phils., Inc.", when FilipinoIndian
Chamber of Commerce of the
Philippines, Inc. has right of priority;
Indian Chamber of Commerce Phils.,
Inc. vs. Filipino-Indian Chamber of
Commerce of the Philippines, Inc., G.R.
No. 184008, August 3, 2016.
4. The use of “Family Bank” by GSIS
Family Bank upon complaint of BPI
Family Bank; GSIS Family Bank-Thrift
Bank [formerly Comsavings Bank, Inc.]
vs. BPI Family Bank, 771 SCRA 284.
Corporate name
5. Eli Soriano’s “Ang Mga Kaanib sa
Iglesia ng Dios Kay KristoHesus, H.S.K,
sa Bansang Pilipinas”, with the
acronym "H.S.K." for Haligi at Saligan
ng Katotohanan vs. Iglesia ni Cristo’s
“Iglesia ng Dios Kay Cristo Jesus, Haligi
at Suhay ng Katotohanan” Ang mga
Kaanib sa Iglesia ng Dios Kay Kristo
Hesus, H.S.K. sa Bansang Pilipinas,
Inc. vs. Iglesia ng Dios Kay Cristo
Jesus, Haligi at Suhay ng Katotohanan,
372 SCRA 171.
• Articles of incorporation of Zeta was
amended to change the corporate name to
Zuellig Freight and Cargo Systems, Inc. Was
Zeta dissolved?
• What is the effect of a change in corporate
name?
• NONE. A change in the corporate name does
not make a new corporation. It has no effect
on the identity of the corporation, or on its
property, rights, or liabilities. The corporation,
upon the change in its name, is not a new
corporation. It is the same corporation with a
different name, and its character is in no
respect changed. Zuellig Freight and Cargo
Systems vs. NLRC, 701 SCRA 561
Registration, incorporation and
commencement of corporate existence
• The first step to be performed is submission
of the intended corporate name to the SEC for
verification. If the name is distinguishable from
a name already reserved or registered for the
use of another corporation, not protected by
law and is not contrary to law, rules and
regulations, the name shall be reserved in
favor of incorporators. The incorporators shall
then submit their AoI and bylaws to the SEC.
• It is only when the submitted documents and
information are fully compliant with the
requirements would the SEC issue a certificate
of incorporation.
• A private corporation commences its
corporate existence and juridical personality
from the date the SEC issues the certificate of
incorporation.
Effect of non-use of corporate charter and
continuous inoperation
• If a corporation does not formally organize
and commence its business within 5 years from
the date of its incorporation, its certificate of
incorporation shall be deemed revoked as of
the day following the end of the 5-year period.
• However, if a corporation has commenced its
business but subsequently becomes
inoperative for a period of at least 5
consecutive years, the SEC may, after due
notice and hearing, place the corporation under
delinquent status. (NEW)
• A delinquent corporation shall have 2 years
to resume operations and comply with all
requirements that the SEC shall prescribe.
Upon compliance by the corporation, the SEC
shall issue an order lifting the delinquent
status. Failure to comply with the requirements
and resume operations within the period shall
cause the revocation of the corporation’s
certificate of incorporation.
Adoption of bylaws
• By-laws - regulations, ordinances, rules or
laws adopted by a corporation for its internal
governance.
• By-laws may be necessary for the
government of the corporation but these are
subordinate to the AOI.
• 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 its
powers, certainly in all cases where the charter
sufficiently provides for the government of the
body.
• By-laws operate merely as internal rules
among the SH; they cannot affect or prejudice
third persons who deal with the corporation,
unless they have knowledge of the same.
• Voting Requirement: vote of majority SH
• Effectivity: upon the issuance by the SEC of a
certification that the bylaws are in accordance
with this Code
• Bylaws may be adopted and filed prior to
incorporation; in such case, such bylaws shall
be approved and signed by all the
incorporators and submitted to the SEC,
together with the AOI.
Amendment of bylaws
• Voting Requirement: majority of the
BOD/BOT + majority SH/members OR majority
of the BOD/BOT pursuant to a delegation by
owners of 2/3 of the SH/members, but power
to delegate shall be considered as revoked
whenever SH/members shall so vote at the
meeting
• Effectivity: Upon the issuance by the SEC of
a certification that the same is in accordance
with this Code and other relevant laws
By laws vs. articles
• Considering that bylaws are subordinate only
to the AOI, the following bylaws provisions are
invalid:
1. Automatic inclusion of Grace
Christian High School as a permanent
member of the BOD of the Association
 without the benefit of election; Grace
Christian High School vs. Court of
Appeals, 281 SCRA 133
2. Authorized the giving of continuous
compensation to particular directors
after their employment has terminated
for past services rendered gratuitously
by them to the corporation; Vda. De
Barretto vs. La Previsora Filipina, 59
Phil 212
3. Provision restricting the transfer of
ownership where the owner of a share
of stock could not sell it to another
person except to the defendant
corporation, when the same does not
even appear in the AOI. Fleischer vs.
Botica Nolasco Co., Inc., 47 Phil. 583.
Securities Regulation Code
• Intra-corporate dispute (concept)
• Why is it important to know whether intra-
corporate or not?
• Jurisdiction!
Jurisdiction now lodged with the RTC
(2015, 2014, 2009, 2006, 1997, 1996,
1991, 1987, 1985, 1981 Bar)
• Intra-corporate controversies Disputes that
involve any of the following relationships:
a. between the corporation,
partnership or association and the
public;
b. between the corporation,
partnership or association and the
state in so far as its franchise, permit
or license to operate is concerned;
c. between the corporation, partnership
or association and its stockholders,
partners, members or officers; and
d. among the stockholders, partners or
associates, themselves. Cosare vs.
Broadcom Asia, Inc., February 5, 2014
Tests of determining intra-corporate
controversy:
Status or relationship of the parties and the
nature of the question that is the subject of the
controversy.
The controversy must not only be rooted in the
existence of an intra-corporate relationship,
but must as well pertain to the enforcement of
the parties' correlative rights and obligations
under the Corporation Code and the internal
and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents
are merely incidental to the controversy or if
there will still be conflict even if the
relationship does not exist, then no intra-
corporate controversy exists. Aguirre v.
FQB+7, INC, 688 SCRA 242, January 9, 2013
• What is the effect of dissolution of a
corporation on pending intracorporate
disputes?
None. The dissolution of the
corporation simply prohibits it from
continuing its business. However,
despite such dissolution, the parties
involved in the litigation are still
corporate actors. The dissolution does
not automatically convert the parties
into total strangers or change their
intra-corporate relationships. Neither
does it change or terminate existing
causes of action, which arose because
of the corporate ties between the
parties. Aguirre v. FQB+7, INC, 688
SCRA 242, January 9, 2013
INTELLECTUAL PROPERTY
• Copyright, including fair use and moral rights
• Extent of copyright protection
Baker vs. Selden, 101 US 102 –
copyright does not cover process
Protected from the moment of creation
Merger doctrine - when there is only 1
way, or a very few ways, to express an
idea, the expression is said to merge
with its idea and is not protected by a
copyright
Doctrine of fixation – bare ideas are
not protected unless it is fixed in some
material form
Idea-expression dichotomy – copyright
extends only to the fixed expression of
an idea, and not to the idea itself
What can be copyrighted?
A. Original Works
1. Books, pamphlets, articles and other
writings
2. Periodicals and newspapers;
3. Lectures, sermons, addresses,
dissertations prepared for oral delivery,
whether or not reduced in writing or
other material form;
4. Letters;
5. Dramatic or dramatico-musical
compositions; choreographic works or
entertainment in dumb shows;
6. Musical compositions, with or
without words;
7. Works of drawing, painting,
architecture, sculpture, engraving,
lithography or other works of art;
models or designs for works of art;
8. Original ornamental designs or
models for articles of manufacture,
whether or not registrable as an
industrial design, and other works of
applied art;
A work of applied art is an artistic
creation with utilitarian functions or
incorporated in a useful article.
• Ching vs. Salinas, Sr. 462
SCRA 241, June 29, 2005
(spring and bearing for cars are
not works of applied art);
• Olano vs. Lim Eng Co, G.R.
No. 195835, March 14, 2016
(Hatch door is a useful article)
• Denicola test - if design
elements of an article reflect
merger of aesthetic and
functional considerations, the
artistic aspects of the work
cannot be conceptually
separable from the utilitarian
aspects, the article cannot be
copyrighted
9. Illustrations, maps, plans, sketches,
charts and three-dimensional works
relative to geography, topography,
architecture or science;
10. Drawings or plastic works of a
scientific or technical character;
11. Photographic works including works
produced by a process analogous to
photography; lantern slides;
12. Audiovisual works and
cinematographic works and works
produced by a process analogous to
cinematography or any process for
making audio-visual recordings;
13. Pictorial illustrations and
advertisements;
14. Computer programs;
15. Other literary, scholarly, scientific
and artistic works
B. Derivative Works
1. Dramatizations, translations,
adaptations, abridgments,
arrangements, and other alterations of
literary or artistic works
2. Collections of literary, scholarly or
artistic works, and compilations of data
and other materials which are original
by reason of the selection or
coordination or arrangement of their
contents (Doctrine of Compilations)
Unprotected Works:
1. Any idea, procedure, system,
method or operation, concept,
principle, discovery or mere data as
such, even if they are expressed,
explained, illustrated or embodied in a
work; Joaquin vs. Drilon, 302 SCRA
225, January 28, 1999 What can be
copyrighted?
2. News of the day and other
miscellaneous facts having the
character of mere items of press
information; ABS-CBN Corporation vs.
Gozon, 753 SCRA 1, March 11, 2015,
J. Leonen
3. Any official text of a legislative,
administrative or legal nature, as well
as any official translation thereof
4. Any work of the Government of the
Phils; however, prior approval of the
government agency or office wherein
the work is created shall be necessary
for exploitation of such work for profit
5. Those which copyright had already
lapsed
Copyright or Economic Rights:
 1. Reproduction of the work or
substantial portion of the work;
Habana vs. Robles, 310 SCRA 511
2. Dramatization, translation,
adaptation, abridgment, arrangement
or other transformation of the work
Copyright
3. The first public distribution of the
original and each copy of the work by
sale or other forms of transfer of
ownership;
First sale doctrine – distribution right
exhausted by the first authorized sale
of the work
Kirtsaeng vs. John Wiley & Sons, Inc.,
568 U.S. 519, 133 S. Ct. 1351 (2013)
where the Court ruled that physical
books produced and purchased abroad
could be imported into the United
States for resale without violating the
copyright owner's distribution rights
under copyright law
4. Rental of the original or a copy of an
audiovisual or cinematographic work, a
work embodied in a sound recording, a
computer program, a compilation of
data and other materials or a musical
work in graphic form, irrespective of
the ownership of the original or the
copy which is the subject of the rental;
5. Public display of the original or a
copy of the work;
6. Public performance of the work; and
7. Other communication to the public
of the work
Rules on Copyright Ownership:
1. Original literary and artistic works =
author of the work;
2. Joint authorship, the co-authors
shall be the original owners of the
copyright and in the absence of
agreement, their rights shall be
governed by the rules on co-
ownership. If, however, a work of joint
authorship consists of parts that can be
used separately and the author of each
part can be identified, the author of
each part shall be the original owner of
the copyright in the part that he has
created;
3. In the case of work created by an
author during and in the course of his
employment, the copyright shall belong
to:
(a) The employee = if the
creation of the object of
copyright is not a part of his
regular duties even if the
employee uses the time,
facilities and materials of the
employer.
(b) The employer = if the work
is the result of the performance
of his regularly-assigned
duties, unless there is an
agreement, express or implied,
to the contrary.
4. Work commissioned by a person
other than an employer of the author
and who pays for it and the work is
made in pursuance of the commission,
the person who so commissioned the
work shall have ownership of the work,
but the copyright thereto shall remain
with the creator, unless there is a
written stipulation to the contrary;
But submission of a literary,
photographic or artistic work to a
newspaper, magazine or periodical for
publication shall constitute only a
license to make a single publication
unless a greater right is expressly
granted.
5. Audiovisual work = producer, the
author of the scenario, the composer of
the music, the film director, and the
author of the work so adapted.
6. Letters = writer subject to the
provisions of Article 723 of the Civil
Code Anonymous and Pseudonymous
Works — publishers shall be deemed to
represent the authors of articles
published without the names of the
authors or under pseudonyms, unless
the contrary appears, or the
pseudonyms leaves no doubt as to the
author's identity, or if the author of the
anonymous works discloses his identity
• Doctrine of Divisibility of Copyright =
copyright may be assigned or licensed in whole
or in part.
Limitations on Copyright:
(a) The recitation or performance of a
work, once it has been lawfully made
accessible to the public, if done
privately and free of charge or if made
strictly for a charitable or religious
institution or society; Filipino Society
of Composers vs. Tan, 148 SCRA 461,
March 16, 1987
(b) The making of quotations from a
published work if they are compatible
with fair use and only to the extent
justified for the purpose, including
quotations from newspaper articles and
periodicals in the form of press
summaries: Provided, That the source
and the name of the author, if
appearing on the work, are mentioned;
(c) The reproduction or communication
to the public by mass media of articles
on current political, social, economic,
scientific or religious topic, lectures,
addresses and other works of the same
nature, which are delivered in public if
such use is for information purposes
and has not been expressly reserved:
Provided, That the source is clearly
indicated;
(d) The reproduction and
communication to the public of literary,
scientific or artistic works as part of
reports of current events by means of
photography, cinematography or
broadcasting to the extent necessary
for the purpose;
(e) The inclusion of a work in a
publication, broadcast, or other
communication to the public, sound
recording or film, if such inclusion is
made by way of illustration for
teaching purposes and is compatible
with fair use: Provided, That the source
and the name of the author, if
appearing in the work, are mentioned;
(f) The recording made in schools,
universities, or educational institutions
of a work included in a broadcast for
the use of such schools, universities or
educational institutions:
Fair Use of a Copyrighted Work:
Provided, That such recording must be
deleted within a reasonable period
after they were first broadcast:
Provided, further, That such recording
may not be made from audiovisual
works which are part of the general
cinema repertoire of feature films
except for brief excerpts of the work;
(g) The making of ephemeral
recordings by a broadcasting
organization by means of its own
facilities and for use in its own
broadcast;
(h) The use made of a work by or
under the direction or control of the
Government, by the National Library or
by educational, scientific or
professional institutions where such
use is in the public interest and is
compatible with fair use;
(i) The public performance or the
communication to the public of a work,
in a place where no admission fee is
charged in respect of such public
performance or communication, by a
club or institution for charitable or
educational purpose only, whose aim is
not profit making
(j) Public display of the original or a
copy of the work not made by means
of a film, slide, television image or
otherwise on screen or by means of
any other device or process: Provided,
That either the work has been
published, or, that the original or the
copy displayed has been sold, given
away or otherwise transferred to
another person by the author or his
successor in title; and
(k) Any use made of a work for the
purpose of any judicial proceedings or
for the giving of professional advice by
a legal practitioner
(l) The reproduction or distribution of
published articles or materials in a
specialized format exclusively for the
use of the blind, visually- and reading-
impaired persons: Provided, That such
copies and distribution shall be made
on a nonprofit basis and shall indicate
the copyright owner and the date of
the original publication. (NEW)
Fair use is the privilege to use the
copyrighted material in a reasonable
manner without the consent of the
copyright owner or as copying the
theme or ideas rather than their
expression.
 Fair use of a copyrighted work for
criticism, comment, news reporting,
teaching including limited number of
copies for classroom use, scholarship,
research, and similar purposes is not
an infringement of copyright.
Decompilation, which is the
reproduction of the code and
translation of the forms of a computer
program to achieve the interoperability
of an independently created computer
program with other programs may also
constitute fair use as decompilation is
done for the purpose of obtaining the
information necessary to achieve
interoperability.
Jailbreaking for IOS and rooting for
android
Four-factor Test:
(a) The purpose and character of the
use, including whether such use is of a
commercial nature or is for non-profit
educational purposes;
The "transformative test" is generally
used in reviewing the purpose and
character of the usage of the
copyrighted work. The court must look
into whether the copy of the work adds
new expression, meaning or message
to transform it into something else.
(b) The nature of the copyrighted
work;
(c) The amount and substantiality of
the portion used in relation to the
copyrighted work as a whole;
(d) The effect of the use upon the
potential market for or value of the
copyrighted work (Probable effects
test) ABS-CBN vs. Gozon, March 11,
2015, J.Leonen
Reproduction of published work allowed if:
1. Single copy
2. Made by natural person
3. Exclusively for research and private
study
But excludes:
(a) A work of architecture in the form
of building or other construction;
(b) An entire book, or a substantial
part thereof, or of a musical work in
graphic form by reprographic means;
(c) A compilation of data and other
materials;
(d) A computer program except as
back-up copy/archival purpose; and
(e) Any work where reproduction would
unreasonably conflict with a normal
exploitation of the work or would
prejudice the legitimate interests of the
author.
Reproduction by libraries in limited copies
allowed if:
1. Fragile character or rarity cannot be
lent
2. Isolated articles, instead of lending
the entire volume
3. Preserve or replace a copy not
available with the publisher; not
permissible to produce missing pages
unless out of stock Copyright
No more ban on importation for
personal purposes (correlate Kirtsaeng
case)
Deposit and notice
Moral right:
1. The right of attribution or paternity
or authorship – in perpetuity after
death
2. Right to alteration and integrity of
ownership – GR 50 years after death
Waiver of moral right
• Valid if in writing
• Void if it is:
• To use the name of the author, or the
title of his work, or otherwise to make
use of his reputation with respect to
any version or adaptation of his work
which, because of alterations therein,
would substantially tend to injure the
literary or artistic reputation of another
author; or
• To use the name of the author with
respect to a work he did not create.
• Section 195.
Exceptions to moral rights
1. When an author contributes to a
collective work, his right to have his
contribution attributed to him is
deemed waived unless he expressly
reserves it.
2. In the absence of a contrary
stipulation at the time an author
licenses or permits another to use his
work, the necessary editing, arranging
or adaptation of such work, for
publication, broadcast, use in a motion
picture, dramatization, or mechanical
or electrical reproduction in accordance
with the reasonable and customary
standards or requirements of the
medium in which the work is to be
used, shall not be deemed to
contravene the author’s rights. Nor
shall complete destruction of a work
unconditionally transferred by the
author be deemed to violate such
rights.
• Sections 196 and 197.
• Resale right - right to participate in the
gross proceeds of the sale or lease to the
extent of 5%. This right shall exist during the
lifetime of the author and for 50 years after his
death.
This however shall not apply to prints,
etchings, engravings, works of applied art, or
works of similar kind wherein the author
primarily derives gain from the proceeds of
reproductions Section 200.
Term of Protection
1. Original works and derivative works
- during the life of the author and for
50 years after his death; also applies
to posthumous works.
2. Works of joint authorship - during
the life of the last surviving author and
for 50 years after his death.
3. Anonymous or pseudonymous works
- 50 years from the date on which the
work was first lawfully published:
Provided, That where, before the
expiration of the said period, the
author's identity is revealed or is no
longer in doubt, apply #1 or #2 as
previously mentioned; provided,
further, That such works if not
published before shall be protected for
50 years counted from the making of
the work.
4. Works of applied art - 25 years from
the date of making.
5. Photographic works - 50 years from
publication of the work and, if
unpublished, 50 years from the
making.
6. Audio-visual works including those
produced by process analogous to
photography or any process for making
audio-visual recordings - 50 years from
date of publication and, if unpublished,
from the date of making.
7. Performances not incorporated in
recordings - 50 years from the end of
the year in which the performance took
place;
8. Sound or image and sound
recordings and for performances
incorporated therein - 50 years from
the end of the year in which the
recording took place
9. Broadcasts - 20 years from the date
the broadcast took place.
Copyright Infringement (NEW) — A person
infringes a right when one:
(a) Directly commits an infringement;
(b) Benefits from the infringing activity
of another person who commits an
infringement if the person benefiting
has been given notice of the infringing
activity and has the right and ability to
control the activities of the other
person;
(c) With knowledge of infringing
activity, induces, causes or materially
contributes to the infringing conduct of
another.
• Can mall owners whose tenants are selling
pirated materials be liable?
• Mall owners are not automatically
penalized for the infringing acts of their
tenants. One must have both proven
knowledge of the infringement, and the
ability to control the activities of the
infringing person to be held liable. The
mall owner must have also benefited
from the infringement.
 • GF not a defense.
Remedies for infringement:
(a) Injunction restraining such
infringement
(b) Pay the copyright proprietor actual
damages as he may have incurred due
to the infringement as well as the
profits the infringer may have made
due to such infringement
In proving profits, the plaintiff shall be
required to prove sales only and the
defendant shall be required to prove
every element of cost which he claims,
or, in lieu of actual damages and
profits, such damages which to the
court shall appear to be just and shall
not be regarded as penalty.
Damages to be awarded shall be doubled
against any person who: (NEW)
(i) Circumvents effective technological
measures; or
Technological protection measures
(TPM) = those used by the author to
restricts acts which are unauthorized.
It is any technology (software or
hardware) which restricts access to a
copyrighted material without the
consent of the copyright holder. E.g.,
software requiring a password to gain
access to a website.
(ii) Having reasonable grounds to know that it
will induce, enable, facilitate or conceal the
infringement, remove or alter any e-RMI from
a copy of a work, sound recording, or fixation
of a performance, or distribute, import for
distribution, broadcast, or communicate to the
public works without authority, knowing that e-
RMI has been removed or altered without
authority.
Rights management information (RMI)
= information which identifies the
work, the author of the work, or
information about the terms and
conditions of use of the work
The copyright owner may elect, at any time
before final judgment is rendered, to recover
instead of actual damages and profits,
statutory damages equivalent to the filing fee
but not less than P50K. In awarding statutory
damages, the court may consider the
following:
(1) The nature and purpose of the
infringing act;
(2) The flagrancy of the infringement;
(3) Whether the defendant acted in
bad faith;
(4) The need for deterrence;
(5) Any loss that the plaintiff has
suffered/likely to suffer by reason of
the infringement; and
(6) Any benefit shown to have accrued
to the defendant by reason of the
infringement.
In case the infringer was not aware and had no
reason to believe that his acts constitute an
infringement of copyright, the court in its
discretion may reduce the award of statutory
damages to not more than P10K: Provided,
That the amount of damages to be awarded
shall be doubled against any person who:
(i) Circumvents effective technological
measures;
(ii) Having reasonable grounds to know
that it will induce, enable, facilitate or
conceal the infringement, remove or
alter any e-RMI from a copy of a work,
sound recording, or fixation of a
performance, or distribute, import for
distribution, broadcast, or
communicate to the public works
without authority, knowing that e-RMI
has been removed or altered without
authority. Copyright
Remedies for infringement:
(c) Deliver under oath, for impounding
during the pendency of the action,
sales invoices and other documents
evidencing sales, all articles and their
packaging alleged to infringe a
copyright and its implements
(d) Deliver under oath for destruction
without any compensation all infringing
copies or devices, as well as all plates,
molds, or other means for making such
infringing copies
(e) Payment of moral and exemplary
damages and destruction of infringing
copies of the work even in the event of
acquittal in a criminal case.
 INSURANCE
• What can be insured
• Claims for life insurance
What May be Insured
• One can an insure a contingent or unknown
event, past or future, which may damnify a
person OR create a liability against him
(Section 3).
• In short, you can insure anything or
something which you have insurable interest
on. What May be Insured
• Q: Can a past event be insured?
• A: Yes, provided the past event is
unknown to the parties AND they must
expressly stipulate that a prior loss is
insured by the policy. (44 CJS 991)
• Q: Can you insure the probability of winning
the lottery?
• A: NO. A gaming or wagering policy
is void. (Sections 4 and 25
• Q: Driver sideswiped a pedestrian. The
pedestrian then sued the driver as well as the
third-party liability insurer for damages but the
insurance company moved to dismiss on the
ground that the liability of the driver has not
yet been determined with finality. Is this
correct?
• A: NO. Where the insurance policy
insures directly against liability, the
insurer’s liability accrues immediately
upon occurrence of the injury or event
upon which liability depends. (1996
Bar)
• Q: Wife takes an insurance on her life and/or
of her children’s life. Is the consent of the
husband required?
• A: No more. Marital consent is not
necessary (Section 3).
• Q: Husband took an insurance on the life of
his wife and designated himself as beneficiary.
The husband however died. Who can get the
proceeds?
• A: The wife. In case of predecease of
the owner of the policy on an insurance
taken on the life of the insured, the
interest shall vest in the insured,
unless otherwise provided for in the
policy. (Section 3)
• Q: What is insurable interest?
• A: Insurable interest is that interest
which a person is deemed to have in
the subject matter insured, where he
has a relation or connection with or
concern in it, such that the person will
derive pecuniary benefit or advantage
from the preservation of the subject
matter insured and will suffer
pecuniary loss or damage from its
destruction, termination, or injury by
the happening of the event insured
against.
• The existence of an insurable interest gives a
person the legal right to insure the subject
matter of the policy of insurance. Lalican vs.
Insular Life Assurance Co. Ltd., 597 SCRA 159
Insurable Insurance in Life and Property
1. Amount to be insured
L - Unlimited, except one taken by
creditor on life of debtor
P - Limited to actual value of interest in
the property
2. When it must exist
L - Must exist at the time insurance
takes effect but not when the loss
occurs
P - Must exist both at the time
insurance takes effect and at the time
of loss, but need not exist in the
meantime
3. As to beneficiary
L - Beneficiary need not possess
insurable interest on the life of the
insured
P - Beneficiary must possess insurable
interest on the property
• Q: Can you take an insurance over your own
life?
• A: Yes, as you have insurable interest
over your own life (Section 10). What
May be Insured
• Q: Can you take an insurance over your own
life AND designate anyone as beneficiary?
• A: Yes, as designation is based on
liberality. However, the beneficiary
designated must not be disqualified
 under Article 739 of the Civil Code.
These are:
• Those made between persons
who are guilty of adultery or
concubinage at the time of
donation;
• those made between persons
found guilty of the same
criminal offense, in
consideration thereof;
• those made to a public officer
or his wife, descendants and
ascendants, by reason of his
office.
• Q: Husband took an insurance on his life and
designated his concubine and illegitimate
children as beneficiaries. Is this valid?
• A: The designation as to the
concubine is void. However, there is no
legal proscription in naming as
illegitimate children as beneficiaries. It
is only in cases where the insured has
not designated any beneficiary, or
when the designated beneficiary is
disqualified by law to receive the
proceeds, that the insurance policy
proceeds shall redound to the benefit
of the estate of the insured. Heirs of
Loreto C. Maramag vs. Maramag, 588
SCRA 774.
• Q: Can a husband take an insurance on the
life of the wife and vice versa and designate
himself/herself as beneficiary?
• A: Yes, under Section 10
(legitimate).
• Q: Can the father/mother take an insurance
on the life of their children and designate
himself/herself as beneficiary?
• A: Yes, under Section 10 (no
distinction between legitimate or
illegitimate
• Q: Can grandparents take an insurance on
the life of their grandchildren and vice-versa
and designate himself/herself as beneficiary?
• A: Yes, provided relationship is
legitimate (Article 992 Civil Code on
iron-curtain rule).
• Q: Can siblings insure one another?
• A: Yes, even if the relationship is
illegitimate (Article 196 Family Code)
• Q: Can a corporation take an insurance on
the life of its official, designating itself as
beneficiary?
• A: Yes, provided the death of the
employee would result to material
injury for the corporation. El Oriente
Fabrica de Tobacos vs. Posadas, 56
Phil 147
• Q: Can you insure the life of your
househelp/driver?
• A: No, absence of material injury.
(2011 Bar)
• Q: Can you insure the life of your co-partner
in a partnership?
• A: Yes. (2011 Bar)
• Q: Can you insure the life of your fellow
stockholder?
• A: No.
• Q: A loan was taken by the debtor from the
creditor. Can a creditor insure the life of the
debtor?
• A: Yes, but it is limited only to the
amount of the indebtedness.
• Q: Can a debtor insure his life and designate
the creditor as beneficiary?
• A: Yes. In taking out a policy on his
own life and paying its premium, the
debtor intended to use it as a collateral
for his debt at least to the amount of
the policy's face value. Dela Fuente vs.
Fortune Life Insurance Co., Inc., G.R.
No. 224863, December 2, 2020
• Q: What is the difference between an
insurance taken by the debtor on his own life
payable to the creditor and one taken by the
creditor on the life of the debtor?
• A: Where a debtor in good faith
insures his life for the benefit of his
creditor, full payment of the debt does
not invalidate the policy; in such case,
the proceeds should go to the estate of
the debtor.
• Where an insurance is taken by a
creditor on the life of his debtor, the
insuring creditor could only recover
such amount as remains unpaid at the
 time of the death of the debtor, — such
that, if the whole debt has already
been paid, then recovery on the policy
is no longer permissible. Dela Fuente
vs. Fortune Life Insurance Co., Inc.,
G.R. No. 224863, December 2, 2020.
• Q: Sailormoon allows Tuxedo Mask to occupy
her house as long as she is alive. Can a
usufructuary (Tuxedo Mask) insure the life of
the naked owner (Sailormoon)?
• A: Yes, as one can insure any person
upon whose life any estate or interest
vested in him depends. (Section 10)
• Q: Can an unpaid seller insure the items sold
to the buyer?
• A: Yes. A vendor or seller retains an
insurable interest in the property sold
so long as he has any interest therein,
as where he has a vendor’s lien. The
vendor has an insurable interest until
full payment of the value of the
delivered goods. Gaisano Cagayan vs.
Insurance Company of Northern
America, 490 SCRA 286.
• Q: Can an owner of a house insure the
same?
• A: Yes, he has insurable interest over
it.
• Q: Can an owner of a house insure the same
AND designate a third person as beneficiary?
• A: NO, the beneficiary must have
insurable interest over it. (Section 18 –
principle of strict indemnity)
• Q: Can a mere lessee insure the property
subject of the lease?
• A: Yes, as the lessee will suffer with
the loss of the property. Ong Lim Sing
vs. Feb Leasing, 524 SCRA 333, June
8, 2007
• Q: Asgard and Milestone are partners in a
contract where Milestone will create boxes
using Asgard’s equipment, with some parts
thereof modified by Milestone by attaching its
own parts. Does Milestone possess insurable
interest over the equipment?
• A: Yes. Insurable interest in property
is not limited to property ownership in
the subject matter of the insurance.
Where the interest of the insured in the
property is such that he will be
benefitted by its continued existence,
or will suffer a direct pecuniary loss by
its destruction, his contract of
insurance will be upheld, although he
has no legal or equitable title.
• When Milestone removed its parts
and machines, Milestone still had an
actual and real interest in the
preservation of the machines while the
contract is not yet terminated and non-
preservation will render Milestone liable
for breach of contract as no boxes
would be manufactured under the
contract. UCPB General Insurance Co.,
Inc. vs. Asgard Corrugated Box
Manufacturing Corp., G.R. No. 244407,
January 26, 2021.
• Q: Can a mortgagee insure the property
subject of the mortgage?
• A: Yes, but it is limited only to the
amount of the loan or credit. (Section
8). Upon payment of the insurance
proceeds, the insurer is subrogated to
the rights of the mortgagee.
• Q: Can a mortgagor insure the property
subject of the mortgage and designate the
mortgagee as beneficiary?
• A: Yes, pursuant to a “Loss Payable
Clause”. However, the mortgagee can
recover only up to the extent of the
loan, and the remainder accrues to the
mortgagor. Upon payment of the
proceeds, the debt is extinguished.
• Q: A debtor borrowed from a creditor. Since
the loan was a clean one, can a general
creditor insure the property of the debtor?
• A: NO, he has no interest over it.
2014, 1965 Bar
• Q: Can a judgment creditor insure his levied
property? How about the highest bidder in the
auction sale?
• A: Yes, they have an interest over it
within the redemption period. 1977 Bar
• Q: Can a buyer of an item in transit take an
insurance over it?
• A: Yes, he already has equitable title
to it. 2015, 1991 Bar • Filipino
Merchants Insurance vs. CA, 179 SCRA
698
• Q: Can a child take an insurance over the race
property of his parents?
ethnic origin
• A: No, he has no insurable interest
yet, the interest being merely marital status
contingent. 1987, 1960 Bar
age
• Q: Can you take an insurance on your
color
growing crops / young of animals?
religious, philosophical or
• A: Yes, as this in an expectancy,
political affiliations;
coupled with an existing interest in that
out of which the expectancy arises health
(Section 14)
education
Claims Settlement
genetic or sexual life of a
• Q: When are proceeds of a life insurance person
policy payable?
or to any proceeding for any
• A: It shall be paid immediately upon offense committed or alleged
maturity of the policy, unless such to have been committed by
proceeds are made payable in such person, the disposal of
installments or as an annuity, in which such proceedings, or the
case the installments, or annuities shall sentence of any court in such
be paid as they become due. proceedings;
• In the case of a policy maturing by b. Issued by government agencies
the death of the insured, the proceeds peculiar to an individual which
thereof shall be paid within 60 days includes, but not limited to:
after presentation of the claim and
filing of the proof of death of the social security numbers
insured.
previous or current health
• Refusal/failure to pay within the records
timeframe entitles the party to
interests, unless reason for licenses or its denials
refusal/failure to pay is due to suspension or revocation
fraudulent claim (Section 248)
tax returns

c. Specifically established by an
DATA PRIVACY ACT executive order or an act of Congress
Q: What is Personal Information (PI)? to be kept classified.

A: It is any information whether Q: The processing of PI is being done remotely

recorded in a material form or not,
from which the identity of an individual
is apparent or can be reasonably and
directly ascertained by the entity
holding the information, or when put
together with other information would
directly and certainly identify an
individual. (Section 3)
Q: What is Sensitive Personal Information
(SPI)?
A: It refers to personal information:
a. About an individual’s –
abroad. Can the Data Privacy Act be applied
then?
A: Yes, it is possible. It applies to the
processing of all types of PI and to any
natural and juridical person involved in
PI processing including those PI
controllers and processors who,
although not found or established in
the Philippines, use equipment that are
located in the Philippines, or those who
maintain an office, branch or agency in
the Philippines (Section 4) Data Privacy
Act
Q: What kind of information is excluded under f. Information necessary for banks and
the law? other financial institutions under the
jurisdiction of the BSP to comply with
a. Information about any individual AMLA; and g. PI originally collected
who is or was an officer/employee of a from residents of foreign jurisdictions
government institution that relates to in accordance with the laws of those
the position or functions of the foreign jurisdictions, including any
individual, including: applicable data privacy laws, which is
being processed in the Philippines.
1. The fact that the he is or
was an officer/employee of the Q: In entering the mall, you are required to fill-
government institution; up the Health Declaration Form where the
following details were being asked from you:
2. The title, business address
Your name, address, e-mail and phone
and office telephone number of
number. The information given is then
the individual;
processed on-line thru the app.
3. The classification, salary
Is the information you gave personal
range and responsibilities of
information (PI) or sensitive personal
the position held by him;
information (SPI)?
4. The name of the individual
A: Personal Information (PI) only.
on a document prepared him in
the course of employment with Q: You applied for a credit card at one of the
the government. booths of Citibank at the mall. The form
contained your personal details (birth
b. Information about an individual who
date/place, spouse), including education,
is or was performing service under
workplace and income (SSS/TIN #). The
contract for a government institution
information is then processed by Citibank
that relates to the services performed,
personnel.
including the terms of the contract, and
the name of the individual given in the Is the information you gave personal
course of the performance of those information (PI) or sensitive personal
services; information (SPI)?
c. Information relating to any A: Sensitive Personal Information
discretionary benefit of a financial (SPI).
nature such as the granting of a license
or permit given by the government to Distinguish the criteria for processing of
an individual, including the name of the personal information vs. sensitive
individual and the exact nature of the personal information and privileged
benefit; information.

d. PI processed for journalistic, artistic, Personal Information

literary or research purposes;
The processing of PI shall be permitted only if
e. Information necessary in order to not otherwise prohibited by law, and when at
carry out the functions of public least one of the following conditions exists:
authority which includes the processing
of personal data for the performance a. The data subject has given his or
by the independent central monetary her consent;
authority and law enforcement and
b. The processing of PI is necessary
regulatory agencies of their
and is related to the fulfillment of a
constitutionally and statutorily
contract with the data subject or in
mandated functions. Nothing in this Act
order to take steps at the request of
shall be construed as to have amended
the data subject prior to entering into a
or repealed RA 1405 (Secrecy of Bank
contract;
Deposits Act); RA 6426 (Foreign
Currency Deposit Act); and RA 9510 c. The processing is necessary:
(Credit Information System Act);
 c1. for compliance with a legal
obligation to which the
personal information controller
is subject;
c2. to protect vitally important
interests of the data subject,
including life and health;
c3. to respond to national
emergency,
c4. to comply with the
requirements of public order
and safety, or
c5. to fulfill functions of public
authority which necessarily
includes the processing of
personal data for the fulfillment
of its mandate;
c6. for the purposes of the
legitimate interests pursued by
the personal information
controller or by a third party to
whom the data is disclosed,
except where such interests
are overridden by fundamental
rights and freedoms of the data
subject which require
protection under the Philippine
Constitution.
Sensitive Personal Information and
Privileged Information
The processing of SPIPI shall be prohibited,
except in the following cases:
a. The data subject has given his or
her consent, specific to the purpose
prior to the processing, or in the case
of privileged information, all parties to
the exchange have given their consent
prior to processing;
b. The processing is provided for by
existing laws and regulations:
Provided:
b1. such regulatory enactments
guarantee the protection of the
SPIPI
b2. the consent of the data
subjects are not required by
law or regulation permitting the
processing of the SPIPI;
c. Necessary to protect the life and
health of the data subject or another
person, and the data subject is not
legally or physically able to express his
or her consent prior to the processing;
d. Necessary to achieve the lawful and
noncommercial objectives of public
organizations and their associations,
Provided:
d1. processing is only confined
and related to the bona fide
members of these
organizations or their
associations
d2. SPI are not transferred to
third parties
d3. consent of the data subject
was obtained prior to
processing;
e. necessary for purposes of medical
treatment, is carried out by a medical
practitioner or a medical treatment
institution, and an adequate level of
protection of personal information is
ensured;
f. the processing concerns such PI as is
necessary for the protection of lawful
rights and interests of natural or legal
persons in court proceedings, or the
establishment, exercise or defense of
legal claims, or when provided to
government or public authority
Protection Afforded to Journalists and
Their Sources (Section 5)
Nothing in this Act shall be construed as to
have amended or repealed the provisions of
Republic Act No. 53, which affords the
publishers, editors or duly accredited reporters
of any newspaper, magazine or periodical of
general circulation protection from being
compelled to reveal the source of any news
report or information appearing in said
publication which was related in any confidence
to such publisher, editor, or reporter.
Requirements in processing of personal
information (Section 11)
The processing of PI is done by the PI
controller.
Processing shall be allowed, subject to
compliance with the requirements of this Act
and other laws allowing disclosure of
information to the public and adherence to the
principles of transparency, legitimate
purpose and proportionality.
Personal information must be:
a. Collected for specified and legitimate
purposes determined and declared
before, or as soon as reasonably
practicable after collection, and later
processed in a way compatible with
such declared, specified and legitimate
purposes only;
b. Processed fairly and lawfully;
c. Accurate, relevant and, where
necessary for purposes for which it is
to be used the processing of PI, kept
up to date; inaccurate or incomplete
data must be rectified, supplemented,
destroyed or their further processing
restricted;
d. Adequate and not excessive in
relation to the purposes for which they
are collected and processed;
e. Retained only for as long as
necessary for the fulfillment of the
purposes for which the data was
obtained or for the establishment,
exercise or defense of legal claims, or
for legitimate business purposes, or as
provided by law; and
f. Kept in a form which permits
identification of data subjects for no
longer than is necessary for the
purposes for which the data were
collected and processed. PI collected
may be processed for historical,
statistical or scientific purposes and
may be stored for longer periods, but
adequate safeguards must be present.
Subcontract of Personal Information
(Section 14)
Q: Can processing of PI be subcontracted?
A: Yes, provided the PI controller shall
be responsible for ensuring that proper
safeguards are in place to ensure the
confidentiality of the PI processed,
prevent its use for unauthorized
purposes, and generally, comply with
the requirements of this Act and other
laws for processing of PI.
Extension of Privileged Communication
(Section 15)
Q: The Comelec had been capturing the data of
all voters who applied for registration. A
collection agency would like to know the
whereabouts of a debtor who had been hiding.
Can it get such information from the Comelec
database?
A: No. A PI controller cannot be
compelled to divulge information it was
able to gather. PI controllers may
invoke the principle of privileged
communication over privileged
information that they lawfully control
or process. Any evidence gathered on
privileged information is inadmissible.
What are the rights of the data subject?
(Section 16) - (2019 Bar)
a. The right to be informed
b. The right to access
c. The right to object
d. The right to erasure or blocking
e. The right to damages
f. The right to file a complaint
g. The right to rectify
h. The right to data portability
THE RIGHT TO BE INFORMED: - whether PI
pertaining to him is/was processed; - be
furnished with the relevant information before
the entry of his PI into the processing system
of the PI controller, or at the next practical
opportunity - Includes the right to be notified
in case of data breach E.g., Conversation in
credit card hotline recorded
THE RIGHT TO OBJECT:
- To processing of data (e.g., profiling,
marketing, automated processing)
- Exceptions:
processing is pursuant to a subpoena
or
when the collection and processing are
for obvious purposes, including:
when it is necessary for the
performance of or in relation to a
contract or service or
when necessary in the context of an
employer-employee relationship,
 between the collector and the data
subject, or
when the information is being collected
and processed as a result of legal
obligation
THE RIGHT TO ACCESS:
- To find out whether an organization holds any
personal data and be given reasonable access
to it
- E.g., Cctv footage to establish identity
RIGHT TO RECTIFY:
- The right to dispute the inaccuracy or error
and have the PI controller correct it
immediately unless the request is vexatious or
unreasonable
- If the information had been corrected, the PI
controller shall ensure the accessibility of both
the new and the retracted information and the
simultaneous receipt of the new and the
retracted information by recipients thereof.
- E.g., Wrong birth date submitted to GSIS
THE RIGHT TO ERASURE OR BLOCKING
(The right to be forgotten)
- To suspend, withdraw or order the blocking,
removal or destruction of his PI from the PI
controller's filing system upon discovery and
substantial proof that the PI are: incomplete,
outdated, false, unlawfully obtained, used for
unauthorized purposes or are no longer
necessary for the purposes for which they were
collected.
- E.g., Sidis case
- Removal of digital records from search
engines
THE RIGHT TO DAMAGES:
- The right to claim compensation for any
damages sustained due to such inaccurate,
incomplete, outdated, false, unlawfully
obtained or unauthorized use of PI.
ASSIGNABILITY OF RIGHTS
- The lawful heirs and assigns of the data
subject may invoke the rights of the data
subject at any time after the death of the data
subject or when the data subject is
incapacitated or incapable of exercising the
rights.
RIGHT TO DATA PORTABILITY
- The right, where PI is processed by electronic
means and in a structured and commonly used
format, to obtain from the PI controller a copy
of data undergoing processing in an electronic
format and allow further use by the data
subject.
- E.g., Back-up Facebook data
Limitation on the Rights of the Data
Subject (Section 19)
If the processed PI are used only for:
1. the needs of scientific and statistical
research and no activities are carried out and
no decisions are taken regarding the data
subject, provided, That the PI shall be held
under strict confidentiality and shall be used
only for the declared purpose.
2. purpose of investigations in relation to any
criminal, administrative or tax liabilities of a
data subject
Duties and responsibilities of personal
information controller (Section 20)
The PI controller must implement reasonable
and appropriate measures:
for the protection of PI against any
accidental or unlawful destruction,
alteration and disclosure, as well as
unlawful processing.
to protect PI against natural dangers
such as accidental loss or destruction,
and human dangers such as unlawful
access, fraudulent misuse, unlawful
destruction, alteration and
contamination.
Determination of the appropriate level of
security taking into account the nature of the
PI to be protected, the risks represented by the
processing, the size of the organization and
complexity of operations, current data privacy
best practices and cost of security
implementation. Measures implemented must
include:
1. Safeguards to protect its computer
network against accidental, unlawful or
unauthorized usage or interference
with or hindering of their functioning or
availability;
2. A security policy with respect to the
processing of PI;
3. A process for identifying and Illustration
accessing foreseeable vulnerabilities in
its computer networks, and for taking - Customer care professional changing
preventive, corrective and mitigating enrolling an account for express cash and
action against security incidents that issuing a temporary PIN for withdrawal
can lead to a security breach; and
-Hack of customer data in a fast-food chain’s
4. Regular monitoring for security on-line delivery service or credit card company
breaches and a process for taking client profile
preventive, corrective and mitigating
action against security incidents that
can lead to a security breach.

5. The PI controller must further

ensure that PI processor shall
implement the security measures
required.

6. The employees, agents or

representatives of a PI controller who
are involved in the processing of PI
shall operate and hold PI under strict
confidentiality if the PI are not
intended for public disclosure. This
obligation continues even after leaving
the public service, transfer to another
position or upon termination of
employment or contractual relations.

7. The PI controller shall promptly

notify the NPC and affected data
subjects of data breach.

Notification may be delayed only to the

extent necessary to determine the
scope of the breach, to prevent further
disclosures, or to restore reasonable
integrity to the information and
communications system.

1. In evaluating if notification is
unwarranted, the NPC may
take into account compliance
by the PI controller with this
section and existence of good
faith in the acquisition of PI.

2. The NPC may exempt a PI

controller from notification
where such notification would
not be in the public interest or
in the interests of the affected
data subjects.

3. The NPC may authorize

postponement of notification
where it may hinder the
progress of a criminal
investigation related to a
serious breach.