BUSINESS ORGANIZATION I
COURSE OUTLINE
INTRODUCTION
General
Kinds of Business Organization
Sole Proprietorship
Partnership,
Joint Venture
Corporation
Historical Background
DEFINITION AND ATTRIBUTES
Case: Filipinas Broadcasting vs. Ago Medical Center (GR No, 141954, Jan . 17, 2005)
‘Advantages of the corporate form of business
Disadvantages
Distinctions between a corporation and partnership
Government power in relation to corporations
CLASSIFICATION OF CORPORATIONS
Stock and non-stock
Case: Collector vs. Club Filipino de Cebu (5SCRA312)
Corporations Created by Special Law
Case: PNOC-EDC vs. NLRC (201SCRAA87)
Public and Private
Case: National Coal Corporation vs. C.1.R. (146Phil.583)
Ecclesiastical and Lay
One Person Corporation
Close and Open
Parent/holding, Subsidiaries and Affiliates
Public and Private
Quasi-public
De jure corporation
De facto corporation
Corporation by estoppel
FORMATION AND ORGANIZATION
Process of Incorporation
Contents of the Articles of Incorporation
Prefatory Paragraph
Corporate Name
Cases: Red Line Transport vs. Rural Transit (60Phil.549)
Universal Mills vs. Universal Textile Mills (78SCRA62)
Lyceum of the Philippines vs. CA. (219SCRA610)Purpose Clause
Principal Offices
Case: Clavecilla Radio Systems vs. Antillon (19SCRA379)
Term of existence
Incorporators
Qualifications and disqualifications
Directors and Trustees
Qualifications and disqualifications
Capitalization
Shares of stock and classification
Purpose of classification
Common shares
Preferred shares
Par and no-par value shares
Voting and non-voting shares
Founders’ shares
Redeemable shares
Treasury shares
Case: Commissioner vs. Manning (66SCRA14)
Other Matters consistent with law
Restrictions and Preferences
Arbitration Agreement
No-transfer Clause
Treasurer elect
Undertaking to Change Name
Execution Clause
Acknowledgment
Grounds for disapproval
Commencement of Corporate Existence
Case: Cagayan Fishing vs. Sandiko (65Phil.233)
Defectively formed corporations
De facto corporations
Case: Municipality of Malabang vs. Benito (27SCRAS33)
Hall vs. Piccio (B6Phil.757)
Lozano vs Delos Santos(24SCRA4S2)
Albert vs University Publishing (13SCRA84)
Chiang Kai Shiek vs. C.A. (172SCRA389)
Asia Banking Corp. vs. Standard products (A6Phil.144)
Salvatierra vs. Garlitos (103PhiI757)
International Express Travel and Tours vs. C.A. (343SCRA674)
Georg Grotjahn Vs. Isnani (235SCRA216
Organization and Commencement of Business
Corporate Organization
Commencement of Business TransactionCORPORATE CHARTER AND ITS AMENDMENTS
The Corporate Charter
‘The Corporate Entity Theory
Cases: Sulo ng Bayan vs. Araneta (72SCRA347)
Caram vs. C.A. (151SCRA372)
Rustan Pulp and Paper Mills vs. C.A. (214SCRA665)
Cruz vs. Dalisay (152SCRA482)
Palay Inc. vs Clave (124SCR638)
Soriano vs. C.A. (174SCRA195)
Piercing the Veil of Corporate Fiction
Cases: International Academy of Management and Economics (I/AME) vs.
Litton and Co., Inc. (848SCRA437) *not in the book
Palacio vs. Fely Transportation Co. SSCRA1011)
Marvel Bldg. vs. David 94Phil376)
Yutivo & Sons vs. C.T.A. (1SCRA160)
Commissioner vs. Norton & Harrison (11SCRA7140,
La Campana Coffee vs. Kaisahan ng mga Manggagawa (93Phil160)
Emilio Cano vs. C.1.R. 13SCRA290)
Telephone Engineering vs. WCC (104SCRA354)
Claparols vs C.1.R. (65SCRA613)
NAFLU vs. Ople (143SCRA124)
AC Ransom vs. NLRC (1S0SCRA498)
Concept Builders vs. N.LR.C. (257SCRA149)
McConnel vs. C.A. (1SCRA722)
Tan Boon Bee vs Jarencio (163SCRA205)
Cease vs. C.A. 93SCRA483)
When not Justified
Cases: Remo Jr. vs. 1.A.C. (172SCRA405)
Del Rosario vs. NLRC (187SCRA777)
Indophil Textile Mills vs. Galica (205SCRA697)
PNB vs. Ritratto Group (362SCRA216)
Pacfic Rehaus Corp. vs C.A. (719SCRA66S)
Yu vs NLRC (245SCRA134)
Amendment of the Corporate Charter
Special Amendments
Provisions Subject to Amendments
Change in Corporate Name
Case: Philippine First Insurance vs. Hartigan (74SCRA252)
Amendment of Corporate Term
Case: Alhambra Cigar vs SEC (24SCRA134)
Board of Directurs/TrusteesPowers of the Board
Classification of Powers
Cases: Ramirez vs. Orientalist (38Phil634)
Barreto vs. La Previsora ((57Phil649)
Qualifications and Disqualifications
Cases: Lee vs C.A. ( 205SCRAS72)
Detective and Protective Bureau vs Cloribel (26SCRA256)
Election and Voting
Other Corporate Officers
Validity and Binding Effects of Actions of Corporate Officers
Cases: Yao Ka Sin Trading vs. C.A. (209SCRA763)
Lopez Realty vs Fontecha (247SCRA763)
Pua Casim vs. Neumark ((46PhiI242)
Yu Chuck vs. Kong Li Po (46Phil608)
Francisco vs. GSIS (7SCRAS77)
Board of Liquidators vs. Kalaw (20SCRA987}
Buenaseda vs. Bowen & Co. (110PhiI464)
Removal and Filling Up of Vacancies
Case: Valle Verde Country Club vs. Africa (598SCRA202)
‘Compensation of Directors/Officers
Cases: Central Cooperative Exchange vs. Tibe (33SCRA593)
Western Institute of Technology vs. Salas (278SCRA216)
Gov't vs. El Hogar Filipino (50Phil399)
Liability of Corporate Directors/Officers
Cases: Zaragoza vs. Tan (847 SCRA437) *not in the book
Tramat Mercantile vs C.A. (238SCRA214)
Lamado vs C.A. (270SCRA423)
Uichico vs NLRC (273SCRA35)
Three-fold Duty of Directors
Cases: Montelibano vs. Bacolod Murcia Milling (SSCRA36)
Strong vs. Repide (41Phi!95)
Self-Dealing Directors
Cases: Prime White Cement vs. I.A.C. (220SCRA103)
Mead vs. McCullough (21Phi!95)
Interlocking Directors
Derivative Suit
Cases: Pascual vs. Orozco (19Phil83)
Everette vs. Asia Banking (49Phil512)
Republic Bank vs. Cuaderno (19SCRA671)
Western Institute of Tech vs. Salas (278SRA216)
San Miguel Corp. vs. Khan (176SCRA365)
Chase vs. Buencamino (136SCRA365)
Reyes vs. Tan (35CRA198)
Gamboa vs. Victorino (90SCRA40)Evangelista vs. Santos (86Phil387)
Executive, Management and other Committees
CORPORATE POWERS AND AUTHORITY
Classification of Corporate Powers
Power to sue or be sued
Cases: Delta Motors vs. Mangosing{70SCRA77)
E.B. Villarosa & Partners Co. vs. Benito (GR14926, Aug. 6, 1999)
Power to have Perpetual Existence unless the Al provides otherwise
Power to Adopt and use a Common Seal
Power to Amend the Articles of Incorporation
Power to adopt By-laws
Power to Sell/Issue Stocks or Admit Members
Power to Acquire/Allienate Property
Cases: _Luneta Motors vs. A.D. Santos Inc. (SSCRABO9)
Director of Lands vs. C.A. (158SCRAS568)
Power to enter into partnership, joint venture, merger, consolidation or other
Commercial agreement
Power to make donations
Power to establish Pension, Retirement and other Plans
Case: _Republiv vs. Acoje Mining Co. (7SCRA361)
Implied Powers
Classification
Cases: Teresa Electric vs. PSC (21SCRA199)
National Power Corp. vs. Vera (170SCRA721)
Power to Extend/Shorten Corporate Term
Power to Increase/Decrease Capital Stock; incur, Create Bonded Inbedtedness
Cases: Philtrust vs. Rivera (44Phil469)
Madrigal & Co. vs. Zamora (151SCRA355)
Power to Deny Pre-emptive Rights
Case: Benito vs. SEC (123SCRA722)
Power to Sell/Dispose of all or Substantially All of Corporate Assets/Properties
Cases: Islamic Directorate of the Phil. vs. C.A. (272SCRA454)
Edward Nell & Co. vs. Pacific Farms ((15SCRA415)
(now known as NELL Doctrine as held in Y1 Leisure vs. C.A.)
Power to Acquire Own Shares
Case: Steinberg vs. Velasco (52Phil953)
Power to Invest Funds
Requirements and Procedure
Cases: De la Rama vs. Ma-ao Sugar Central (7SCRA247)
John Gokongwei vs. SEC (89SCRA336)
Power to Declare Dividends
To whom lodgedType of dividends
‘When right to dividends vest
Case: _Nellson & Co. vs. Lepanto Consolidated Mining (26SCRAS40)
Power to Enter into Management Contract
Requirements and Procedure
Ultra-vires Acts
Consequences
On the corporation itself
On the immediate parties
On the stockholders
Cases: Privano vs. Dela Rama Steamship Co. (96Phil336)
Carlos vs. Mindoro Sugar Co. (57Phil343)
Japanese Warnotes Claimants Assn. Vs. SEC (110Phil540)
Crisologo-Jose vs. C.A. (117SCRAS94)
BY-LAWS
Adoption and modes
Cases: Fleisher vs. Botica Nolasco (47Phil583)
Gov't vs. El Hogar Filipino (supra)
Go Kongwei vs. SEC (89SCRA336)
MEETINGS
Stockholders’/Members’ Meeting
Requirements for Valid Meeting
Cases: Board of Directors vs. Tan (105Phil426)
Directors’ /Trustees’ Meeting
Stockholders’ Right to Vote and Manner of Voting
Proxy and other Representative Voting
Case: NIDC vs. Aquino (160SCRA153)
‘STOCKS AND STOCKHOLDERS
Subscription Contract
Case: __Trillana vs. Quezon College (93Phil383)
Pre-incorporation Subscription
Case: National Exchange vs. Dexter {S1Phil601)
Certificates of Stock And their Transfer
Cases: Monserrat vs. Ceron (S8PhiI469)
Chua Guan vs. Samahang Magsasaka (62Phil472)
Uson vs. Diosomito (51Phil535)
Padgett vs. Babcock & Templeton (S9Phil232)
Lambert vs. Fox (26Phil588)
Embassy Farms vs. C.A. (188SCRA492)
Razon vs. !.A.C. (207SCRA234)
Rural Bank of Salinas vs. C.A. (210SCRA510)Tay vs. C.A. (GR No. 126891, Aug. 5, 1998)
Rural Bank of Lipa vs. C.A. (366SCRA188)
Tan vs. SEC (206SCRA740)
Won vs. Wack Wack Golf (104Phil466)
De los Santos vs. McGrath (95PhiI577)
Forged and unauthorized Transfers
Issuance of Stock Certificate
Watered Stocks
Enforcement and Payment of Unpaid Subscriptions
Case: Velasco vs. Poizat (37Phil802)
De Silva vs. Aboitiz & Co. (44PhiI755)
‘Apocada vs. NLRC (175SCRA442)
Lumanian vs Cura (SSPhil746)
PNB vs. Bitulok Sawmill (33SCRA136)
Edward Keller vs. COB Group (141SCRA86)
Garcia vs. Suarez (67Phil441)
Effects of Delinquency
Rights of Unpaid Shares
Lost or Destroyed Certificates
Rights and Liabilities of Stockholders
(CORPORATE BOOKS AND RECORDS:
Books and Records to be Kept
Right of inspection
Cases: W.G. Philpotts vs. Phil Mfg Corp. (49Phil471)
Pardo vs. Hercules Lumber (47Phil964)
Vegaruth vs. Isabela Sugar (57PhiI266)
Gokongwel vs. SEC (supra)
Gonzales vs. PNB (122Phil4890
MERGER AND CONSOLIDATION
Requirements and Procedure
Effects of Merger/Consolidation
Cases: Associated Bank vs. C.A. (GR 123793, June 29,1980)
‘Ong vs BPI Family Savings Bank (852SCRA 614) *not in ‘the book
Bank of P.I. vs. BPI Employees Union (Oct. 11, 2011)
{on the issue as to whether or not the employees of the dissolved/absorbed
Corporation is automatically absorbed by the surviving corporation)
APPRAISAL RIGHT
Definition
When Exercised
Requirements and Procedure
Effects of Exercise of RightWhen Right to Payment Ceases
Cost of Appraisal
NON-STOCK CORPORATIONS
Definition
Purpose
Membership and Voting Rights
Cases: Chinese YMCA vs. Ching (71SCRA463)
Cebu Country Club vs. Elizagaque (S42SCRA65)
Trustees and Officers
CLOSE CORPORATION
Definition
Permissive Provisions
Effects of Breach of Qualifyi
Stockholders’ Agreement
When Board Meeting Not Necessary
Pre-emptive Right
Deadlocks
Withdrawal of Stockhoiders/Dissolution
Cases: _Dulay Enterprises vs. C.A. (225SCRA678)
Naguiat Enterprises vs. NLRC (268SCRA546)
Conditions
SPECIAL CORPORATIONS
Educational Corporations
Religious Corporations
Corporation Sole
Case: Roman Catholic Apostolic Church vs. LRC (102PhiI596)
Director vs. C.A. (158SCRAS68)
Republic vs. IAC (168SCRA16)
Filling up of Vacancies
Dissolution
Religious Societies
One Person Corporation
DISSOLUTION AND WINDING UP
Methods of Dissolution
Expiration of Corporate Term
Case: PNB vs. CFi (209SCRA294)
Voluntary Dissolution where no Creditors are Affected
Voluntary Dissolution where Creditors are Affected
Shortening of Corporate Term
Involuntary DissolutionCases:
Gov't. vs. Phil Sugar Estate (39Phil59)
Gov't. vs. Ei Hogar Filipino (supra)
Republic vs. Security Credit (19SCRAS9)
Republic vs. Bisaya Land Transportation (81SCRA9)
Financing Corporation vs. Teodoro (94Phil687)
Effects of Dissolution
Cases: Buenaflor vs. Camarines Sur Industry (108Phil427)
Cebu Port Labor Union vs. State Marine (101PhiI468)
‘Sumera vs. Valencia (67Phil721)
National Abaca vs. Pore (2SCRA989)
Board of Liquidators vs. Kalaw (20SCRA987)
Gelano vs. C.A. (103SCRA90)
Chung Ka Bio vs. IAC (163SCRAS34)
Clemente vs. C.A. (242SCRA717)
FOREIGN CORPORATIOS
Definition
Application for License
Modes of Entry
Resident Agent
Control Test vis Grandfather Rule
Case: Narra Nickel Mining vs. Redmont Mines (722SCRA, April 21, 2014
Doing Business
Cases:
Capacity to Sue
Cases:
MR. Jan., 28, 2015 (majority decision only) * not in the book
Without a License and its Effects
Mentholatum vs. Mangaliman (72Phil524)
Marshall-Wells vs. Elser (46Phil70)
Bulakhidas vs. Navarro (14SCRA1)
‘Swedish East Asia vs. Manila Port Services (25SCRA632)
Far East Int'l. vs. Nankai Kogyo (6SCRA725)
Facilities Management vs. Dela Osa (89SCRA131)
Communication Materials and Design vs. C.A. (260SCRA673)
Western Equipment vs. Reyes ((51Phil115)
General Garments vs. Director (41SCRASO)
Puma Sportshufabriken vs. IAC 158SCRA233)
Le Chemise Lacoste vs. Fernandez (129SCRA377)
Atlantic Mutual Insurance vs. Cebu Stevedoring (17SCRA1037)
Olympia Business Machines vs. E. Razon (15SSCRA208)
Time vs. Reyes (39SCRA303)
Laws Governing Foreign Corporations
Case:
M.E. Grey vs. Insular Lumber (67Phil139)
Amendment of the Articles of Incorporation
Merger/ConsolidationRevocation of License
Withdrawal of License
Investigations, Offenses and Penalties
MISCELLANEOUS PROVISIONS
Abitration for Corporation
PART I!
PRESIDENTIAL DECREE 902-A, as amended
Devises or Schemes Amounting to Fraud
Intra-corporate Controversies
Controversies in the Election, Appointment or Removal of Directors/Officers
Appointment of Management Committee, Board or Body
Cases: RJ. Jacinto vs. FWCC (410SCRA140)
Sy Chim vs. Sy Suy Ho & Sons (480SCRA206)
‘SECURITIES REGULATION CODE (RA8799)
Securities Defined/Enumerated
Registration of Securities
Regulation of Brokers, Dealers and Saiemen
Cases: _Justee Terms Enterprises vs. SEC (CA GR SP No. 48013, July 30, 1999)
China Banking vs. CA (270SCRASO3)
SEC vs. Santos (719SCRA514)*not in the book
Tender Offer Rule
The Independent Director Rule
Other Forms of Fraudulent Transactions and Market Manipulations
Wash Sale
Matched Order
Painting the Tape
‘Marking the Close
Hype and Dump
Making False or Misleading Statements
Short Sale
Insider Trading.
Civil and Administrative Sanctions
Penal Sanctions
Settlement Offer
Limitation of Actions
Amount of Damages
10