Separate Juridical Section.

2 RCCP A corporation is a being with a juridical

Personality personality separate and distinct from its
stockholders, members, directors, trustees
and officers.

Application to One Person Section 130, -such is true even for One Person
Corporations RCCP corporations
Limited Liability Rule (LLR) Donnina C. A stockholder is personally liable for the
Halley v. financial obligations of the corporation to
Printwell Inc. GR the extent of his unpaid subscription.
No. 157549, May While Stockholders are generally not
30, 2011 liable, the stockholders may be liable if
they have not paid or have not fully paid
the Subscription price and the corporation
is insolvent or it cannot comply with its
obligations. The unpaid subscriptions are
assets of the corporation in the form of
receivables that can be made to answer
for corporate obligations.
LLR for One Person Sec. 130 RCCP It applies, however the sole shareholder
Corporations has the burden of proving that the
corporation was adequately financed,
otherwise the sole stockholder shall be
jointly and severally liable for the debts
and liabilities of the One person
corporation.
Nationality of Corporations The control test is the primary test, but the
grandfather rule applies if: 1. Less than
60% of the equity is owned by Fil in a
nationalized enterprise where 60% of the
outstanding capital must be owned by PH
nationals; OR
2. there is an attempt to circumvent
nationalization requirement or when there
is doubt as to the real owners, as in the case
of when there is layering
Place of Incorporation Test Sec. 140 RCCP The Corporation is considered a national of
the country where it was incorporated
Control Test RA 7042-The A corporation is PH Corp, if:
Foreign It is organized in PH and 60% of the
Investment Act of outstanding capital voting stock is owned
1991 by Fil;
Organized abroad and 100% of voting
stock is owned by Fil;
If a corp owns stocks in another corp, FIL
if:
The Corporation who owns shares in an
SEC registered enterprise, at least 60%
 of the capital stock entitled to vote in
each and both corp is owned and held by
FIL, and 60% of the BOD in each and
both of the Corps are citizens of the PH;
Grandfather Rule Narra Nickel It is a method of determining the
Mining and nationality of a corporation that owns
Development shares in another corporation by breaking
Corp. V Redmont down the equity structure of the
Consolidated shareholders of a corporation. This is used
Mines Corp. GR to determine the ultimate ownership in a
no. 195580, corporation.
January 28, 2015
SEC Test- Both the Voting Sec. 2 SEC-MC According to the SEC the requirement of
Control test and the no. 8, Roy III v. 60% Filipino ownership must be applied to
Beneficial Ownership test Herbosa, GR No. Both,
applied 207246, (a) total no. of outstanding shares of stock
November 22, entitled to vote in the election of
2016 directors; and
(b) the total no. of outstanding shares of
stock whether or not entitled to vote in
the election of directors;
Piercing the Veil of Cruz v. Dalisay The veil of corporate fiction which
Corporate Fiction A.M No. R-181-P, separated the juridical personality of the
July 31, 1987 Corporation and the persons composing it
shall be disregarded, and the individual
shall be treated identically, when the veil is
used as a shield to perpetuate fraud, to
defeat public convenience, justify wrong or
defend crime.
This is a judicial Function.
Elements which must be Concept Builders, 1. Control, not a mere stock control but
established to justify the Inc. v NLRC GR complete domination, such that the
Piercing of the Veil of No. 108734, May Corporation had at the time no separate
Corporate Fiction 29, 1996 mind, will or existence of its own;
2. Use of Control to commit a fraud or
wrong to perpetuate the violation of a
statutory or other positive legal breach
of duty, or a dishonest and unjust act;
and
3. Proximate Causation exist between the
control and breach of duty, and the
injury or unjust loss complained of;
Concession Theory Tayag vs. Benguet A corporation is an artificial creature
Consolidated, without any existence until it has received
Inc., G.R. No. L- the imprimatur of the state acting according
23145 to law, through the SEC.
November 29,
1968
Limited Capacity Doctrine SEC. 44 RCCP No corporation under the code shall
possess or exercise any corporate powers,
 except those express, implied and
incidental powers under the law and its
AOI.
Otherwise such acts are Ultra Vires
Accomplished Fact Rule (Sundiang & There are entries in the Articles of
Aquino, 2019) Incorporation that cannot be amended
because they are Accomplished facts. Ex.
Names of Incorporators
Business Judgement Rule (Philippine Stock Under the business judgment rule,
Exchange Inc. vs. questions of policy and management are
Court of Appeals, left to the judgment of the officers and
G.R. 125469, Oct. directors of a corporation, and the courts
27, 1997). have no authority to substitute the board’s
judgment with theirs. Moreover, the board
is considered the business manager of the
corporation and its orders cannot be
reviewed by the courts as long as it acts in
good faith

Derivative Suit Ching and A shareholder’s derivative suit seeks to

Wellington, recover for the benefit of the corporation
vs. and its whole body of shareholders when
Subic Bay Golf injury is caused to the corporation that may
and Country Club, not otherwise be redressed because of
Inc. failure of the corporation to act.
G.R. No. 174353
September 10,
2014-citing
AMJUR
Requisites of a Derivative Sec. 1, Rule 8 of (1) He was a stockholder or member at the
Suit the Interim Rules time the acts or transactions subject of the
of Procedure action occurred and at the time the action
Governing was filed;
IntraCorporate
Controversies (2) He exerted all reasonable efforts, and
alleges the same with particularity in the
complaint, to exhaust all remedies available
under the articles of incorporation, 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.
Trust Fund Doctrine PLDT v. NTC, The assets of a corporation are held in trust
G.R. No. 152685 as security for satisfaction to creditors in
December 4, 2007 case of corporate liquidation.
(Philip Turner v. the capital stock, property and other assets
 Lorenzo Shipping of a corporation are regarded as equity in
Corporation, G.R. trust for the payment of corporate creditors.
157479, 2010). The Supreme Court has established that
corporate creditors are preferred over
stockholders in the distribution of
corporate assets
(Boman It also provides that subscriptions to the
Environmental capital stock of a corporation constitute a
Development fund to which creditors have a right to look
Corporation v. for the satisfaction of their claims
Court of Appeals,
G.R. 77860,
1988).
Nell Doctrine Nell v. Pacific The buyer of substantially all of the assets
farms, 1965 of the corporation will not be liable for the
debts of the transferor.
Doctrine of Corporate Sec, 30 and 33 of When a director takes business opportunity
Opportunity the RCCP that belongs to the corporation, the self
interest of the director is in conflict with
the interest of the corporation. Hence, the
law will generally not permit him to seize
the opportunity even if he will use his own
funds. He must account and refund all
profits.
Exception Sec. 33 RCCP The contract was ratified by vote of
stockholders owning 2/3 of the outstanding
capital stock
Interlocking Directorship Sec. 32 RCCP When some directors in one corporation are
directors in another
Pre-emptive Right Sec. 38 RCCP The share holder’s right to subscribe to all
issues or disposition of shares of any class
in proportion to their stockholdings.
Appraisal Right Sec. 80 RCCP Right of the Dissenting stockholder to
withdraw from the corporation and demand
payment of the fair value of his or her
shares. This right is exercised after
dissenting from or voting against proposed
corporate acts involving fundamental
changes in the corporate structure
Intra-Corporate Roberto San Jose An intra-corporate controversy is one
Controversy and Delfin which arises between a stockholder and the
Angcao vs. Jose corporation or among the stockholders
Ma. Ozamiz, G.R. involving internal affairs of the
No. 190590, 12 corporation.
July 2017
The Relationship Test ibid Under the relationship test, there is an
intra-corporate controversy when the
conflict is:

(1) between the corporation, partnership, or


The Nature of Controversy ibid
Test
association and the public;
(2) between the corporation, partnership, or
association and the State insofar as its
franchise, permit, or license to operate is
concerned;
(3) between the corporation, partnership, or
association and its stockholders, partners,
members, or officers; and (4) among the
stockholders, partners, or associates
themselves.
an intra-corporate controversy arises when
the dispute is not only rooted in the
existence of an intra-corporate relationship,
but also in the enforcement of the parties’
correlative rights and obligations under the
corporation code and the internal and intra-
corporate regulatory rules of the
corporation.