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Week 3 Complete Reviewer
Week 3 Complete Reviewer
Under Article 44 of the Civil Code, a corporation is a juridical person. It has an identity granted to it by
law.
a) Public Corporations are classified as Public Juridical Persons. It is formed and organized for the Government of
a portion of the State. Its purpose is the general good and welfare.
b) Private Corporations are classified as Private Juridical Persons. Such are formed for some private purpose,
benefit, aim, or end.
A corporation is an entity separate and distinct from its stockholder. While not in fact and in reality, a
person, the law treats the corporation as though it were a person by process of fiction or by regarding it as an
artificial person distinct and separate from its individual stockholders.
(Remo, Jr. v. IAC, G.R. No. L-67626, April 18, 1989)
The Corporation has a strong legal personality separate and distinct from the shareholders or members
composing it. (Art. 44 (3), Civil Code) The death, incapacity, withdrawal, or insolvency of any of its
shareholders or members does not affect its juridical personality. This attribute guarantees business continuity
and certainty of long-term contractual dealings.
Having a separate legal personality, a corporation may: (1) contract and transact in its
own name; (2) acquire and possess property of all kinds; (3) incur obligations; and (4) bring
civil or criminal actions, in conformity with the laws and regulations of their organizations.
(Art. 46, NCC)
Like solemn/formal contracts, certain formalities of the law must be complied with
before the creation of a corporation. Unlike in partnership which can be constituted in any
form, a Corporation begins to exist as a juridical person from the moment a certificate of
incorporation is granted to it by the Securities and Exchange Commission (SEC); and
thereupon the incorporators, stockholders, members and their successors shall constitute a
body corporate under the name stated in the articles of incorporation for the period of time
mentioned therein, unless said period is extended or the corporation is sooner dissolved in
accordance with the law. (Sec 18, Revised Corporation Code)
To organize a corporation that could claim a juridical personality of its own and
transact business as such is NOT a matter of absolute right but a PRIVILEGE which may be
enjoyed only under such terms as the state may deem necessary to impose. (Ang Pue and Co.
v. Secretary of
Commerce and Industry, G.R. No. L-17295, July 30, 1962)
Art. 1775. Associations and societies, whose articles are kept secret among the
members, and wherein any one of the members may contract in his own name with third
persons, shall have no juridical personality, and shall be governed by the provisions relating
to co-ownership.
It is essential that the partners are fully informed not only of the agreement but of all
matters affecting the corporation. It is necessary that the articles be given publicity for the
protection not only of the members themselves but also third persons from fraud and deceit.
Jose Remo Jr. v. Intermediate Appellate Court and EB Marcha Transport Company Inc. G.R.
No. 67626. April 18, 1989
RULING:
NO. A corporation is an entity separate and distinct from its stockholder. While not in
fact and in reality, a person, the law treats the corporation as though it were a person through
fiction by the law or by regarding it as an artificial person distinct and separate from its
individual stockholders. However, the corporate fiction may be disregarded when it "is used to
defeat public convenience, justify wrong, protect fraud, or defend crime". There are many
occasions when the Supreme Court pierced the corporate veil because of its use to protect
fraud and to justify wrong. In the instant case, there is no strong basis to pierce the corporate
veil of Akron and hold Remo personally liable for its obligation to private respondents.
Even if petitioner Remo was still a member of the board of directors, then, and he
participated in authorizing the purchase of Akron to be paid out of a loan to be secured from a
lending institution, it does not appear that it was intended to defraud anyone and EB
Transport.
The sale through pacto de retro of the two units to a third person by the corporation
does not constitute fraud because the 13 units were sold through a deed of absolute sale hence
Akron is free to dispose of the same.
. Centralized Management
In line with this, it is worth noting that these stockholders are not agents of the
corporation, nor can they bind the corporations, unlike in a partnership setting, where each
partner may bind the partnership, even without the knowledge of other partners.
YES. The Corporation Code of the Philippines vests in the board of directors the
exercise of the corporate powers of the corporation, save in those instances where the Code
requires stockholders’ approval for certain specific acts. Section 23 of the Code provides:
"SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations controlled and
held by the board of directors or trustees x x x."
The two board resolutions clearly show that Great Asian authorized Arsenio to secure a
loan or discounting line from Bancasia. It also categorized Arsenio as the authorized signatory
to sign and deliver all the implementing documents, including checks, for Great Asian. The
second board resolution even gave Arsenio full authority to agree with Bancasia on the terms
and conditions of the discounting line.
The only issue to determine is whether the Deeds of Assignment are indeed the
transactions the board of directors of Great Asian authorized Arsenio to sign under the two
board resolutions.
In the financing industry, the term "discounting line" means a credit facility with a
financing company or bank, which allows a business entity to sell, on a continuing basis, its
accounts receivable at a discount. The term "discount" means the sale of a receivable at less
than its face value. The purpose of a discounting line is to enable a business entity to generate
instant cash out of its receivables which are still to mature at future dates.
Through the Deeds of Assignment, the Great Asian generated instant cash from its
fifteen checks, which were still not due and demandable then. In short, instead of waiting for
the maturity dates of the fifteen postdated checks, Great Asian sold the checks to Bancasia at
less than the total face value of the checks. In exchange for receiving an amount less than the
face value of the checks, Great Asian obtained immediately much needed cash.
The foregoing facts show that the discounting arrangements entered into by Arsenio
under the Deeds of Assignment were the very transactions envisioned in the two board
resolutions of Great Asian to raise funds for its business. Arsenio did exactly what the board of
directors of Great Asian directed and authorized him to do. He acted completely within the
limits of his authority under the two board resolutions. Therefore, he had all the proper and
necessary authority from the board of directors of Great Asian to sign the Deed of
Assignment.
Generally, a corporate officer is not held personally liable, as long as his or her actions
fall within the scope of their position and the parameters of the law. An officer of a
corporation may serve on the board of directors or fulfill a managerial role.
However, the privilege of being considered as a separate and distinct entity is confined
to limited uses. Should this be exercised for fraudulent, unfair or illegal purposes (eg, to evade
taxes, escape liabilities to third parties, confuse legitimate issues of employer-employee
relationship, protect fraud), the veil of corporate entity may be pierced, and the stockholder
may then be held personally liable.
By virtue of the separate juridical personality of a corporation, the corporate debt or credit is
not the debt or credit of the stockholder. This protection from liability for shareholders is the
principle of limited liability. PNB v. Hydro Resources Contractors Corporation, 693
SCRA 631 (1998)
It is hornbook law that corporate personality is a shield against personal liability of its
officers — a corporate officer and his spouse cannot be made personally liable under a trust
receipt where he entered into and signed the contract clearly in his official capacity.
Consolidated Bank and Trust Corporation v, CA, 356 SCRA 761 (2001)
A corporation and its shareholders may choose whether or not to concede the
advantage of limited liability; while in a partnership, there is already an implied contract that if
the partnership’s assets are insufficient, the partners’ separate properties would be liable.
Villanueva, C.L & Villanueva-Tiansay, T.S. (2021). Philippine Corporate Law.
NON-LIABILITY OF OFFICERS
RULING:
No. Such a contract cannot bind Motorich, because it never authorized or ratified such sale.
In the case at bar, Respondent Motorich categorically denies that it ever authorized
Nenita Gruenberg, its treasurer, to sell the subject parcel of land. Consequently, San Juan
Structural had the burden of proving that Nenita Gruenberg was in fact authorized to represent
and bind Motorich in the transaction. Petitioner failed to discharge this burden. Its offer of
evidence before the trial court contained no proof of such authority.
A corporate officer or agent may represent and bind the corporation in transactions with
third persons to the extent that the authority to do so has been conferred upon him, and this
includes powers which have been intentionally conferred, and also such powers as, in the usual
course of the particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining to the
particular officer or agent, and such apparent powers as the corporation has caused person
dealing with the officer or agent to believe that it has conferred.
As a general rule, the acts of corporate officers within the scope of their authority are
binding on the corporation. But when these officers exceed their authority, their actions,
cannot bind the corporation, unless it has ratified such acts as is estopped from disclaiming
them.
Clearly then, Nenita Gruenberg did not testify that Motorich had authorized her to sell its
property. On the other hand, her testimony demonstrates that the president of Petitioner
Corporation, in his great desire to buy the property, threw caution to the wind by offering and
paying the earnest money without first verifying Gruenberg’s authority to sell the lot.
One of the advantages of a corporation is the limitation of an investor’s liability to the
amount of investment. This feature flows from the legal theory that a corporate entity is
separate and distinct from its stockholders.
B.P. 68, Sec. 31 & RA 11232, Section 30. Liability of directors, trustees or officers. –
Directors or trustees who wilfully and knowingly vote for or assent to patently unlawful acts
of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of
the corporation or acquire any personal or pecuniary interest in conflict with their duty as such
directors or trustees shall be liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or members and other persons.
Solidary liability will then attach to the directors, officers or employees of the
corporation in certain circumstances, such as (Heirs of Fe Tan Uy v. International Exchange
Bank Bank, L-166282, February 13, 2013) :
1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote
for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross
negligence in directing the corporate affairs; and (c) are guilty of conflict of interest to the
prejudice of the corporation, its stockholders or members, and other persons;
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto;
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the corporation; or
4. When a director, trustee or officer is made, by specific provision of law, personally liable
for his corporate action.
5. To the extent that the stockholders are actively engaged in the business and affairs of a
close corporation, the stockholders shall be held to strict fiduciary duties to each other
and among themselves. Said stockholders shall be personally liable for corporate torts
unless the corporation has obtained reasonably adequate liability insurance
Stockholders who are actively engaged in the management or operation of the business
and affairs of a close corporation shall be personally liable for corporate torts unless the
corporation has obtained reasonable adequate liability insurance. Naguiat vs. NLRC, 269
SCRA 564 (1996)
4. Free-Transferability of Units of Ownership (Shares) for Investors
Certificate of Stock and Transfer of Shares. – The capital stock of corporations shall be
divided into shares for which certificates signed by the president or vice president,
countersigned by the secretary or assistant secretary, and sealed with the seal of the
corporation shall be issued in accordance with the bylaws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or certificates indorsed
by the owner, his attorney in-fact, or any other person legally authorized to make the transfer.
No transfer, however, shall be valid, except as between the parties, until the transfer is
recorded in the books of the corporation showing the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates, and the number of shares
transferred. The Commission may require corporations whose securities are traded in trading
markets and which can reasonably demonstrate their capability to do so to issue their securities
or shares of stocks in uncertificated or scripless form in accordance with the rules of the
Commission.
No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.
General Rule: The shares of stocks can be transferred without the consent of the other
stockholders. Transfer of shares is a matter of right if the stockholder. (inherent right)
Rationale: It places more liquidity in the corporate setting and encourages investors to
channel their investments through corporate vehicles. (refers to legal persons and legal
arrangements)
● It is the inherent right of the stockholder to dispose of his shares of stock which he
owns as any other property of his shares of stock (which he owns as any other property
of his) anytime he so desires. (PNB vs Ritratto Group, G.R. No. 142616, July 31,
2001)
● “Until registration is accomplished, the transfer, though valid between the parties,
cannot be effective as against the corporation.” Thus, the unrecorded transfer cannot
enjoy the status of a stockholder; he cannot vote nor be voted for, and he will not be
entitled to dividends. The corporation will be protected when it pays dividend to the
registered owner despite a previous transfer of which it had no knowledge. The
purpose of registration therefore is twofold: to enable the transferee to exercise all the
rights of a stockholder and to inform the corporation of any change in shares
ownership so that it can ascertain the persons entitled to the rights and subject to the
liabilities of a stockholder.
Authority to Transfer Stock Does Not Empower The Corporation to Restrict
● Authority granted to regulate the transfer of a shareholder’s stock does not empower the
corporation to restrict the right of a stockholder to transfer his shares, but merely
authorizes the adoption of regulations as to formalities and procedure to be followed in
effecting transfer. (Thomson vs Court of Appeals, G.R. No. 116631, October 28,
1998)
● If the transfer would cause violations of the law (ex. Ratio requirement for local-foreign
holdings), then the corporation may restrict the right transfer of the holder’s shares.
Well-Developed Market
● The system of free transferability of the units of investments in the corporate setting
presumes a well-developed market for shares of stock.
● By provision of law, while it is true that in so far as the buyer and seller is concerned,
the sale (transfer of shares/certificate) is made by meeting of minds. However, there is
a provision in the law that before such sale is binding to 3 rd persons, it must be
recorded in the Books of the Corporation - showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or certificates, and the
number of shares transferred.
● In order to be valid among 3rd persons, transfer must be registered in the books, if not,
it will only be binding among the parties.
3
Sec. 33 of the Revised Corporation Code
4
Espiritu v. Petron Corp., G.R. No. 170891
5
Bustos vs. Register of Deeds Marikina City, G.R. No. 185024
3. When he acquires personal or pecuniary interest which conflicts with his duty as such
officer.6
a) Formation of Corporation
“Establishing a corporation in the Philippines can approximately take 29 days for a
total cost of PHP 7,630.00. Compared to sole proprietorship or unregistered entities
corporations entails a more significant amount.”7
The SEC filing fees for the incorporation of a domestic corporation are as follows:
1. Basic Filing Fee for the Articles of Incorporation - ⅕ of 1% of the authorized capital
stock or the subscription price of the subscribed capital stock, but not less than P2,000.00.
2. Legal Research - 1% of the filing fee.
3. Examining and Filing Fee for the By-Laws - P1,010.00.
4. Cost and registration of the Stock & Transfer Book - P470.00
More than P500M to less than P750M: P500,000.00 plus 0.075% of the excess over
P500M +LRF (1% of Filing Fee)
More than P750M to not more than P1B: P687,500.00 + 0.05% of the excess over
P750M + LRF (1% of Filing Fee)
6
Sec. 30 of the Revised Corporation Code
7
Shield GEO (Global Employment Organization)
More than P1B: P812,500.00 plus 0.025% of the excess over P1 Billion + LRF (1% of
Filing Fee)
Memorandum Circular No. 3, s. 2017 of the Securities and Exchange Commission (Credit
Rating Agencies has an Annual Monitoring Fee of PHP 15,000.00 paid yearly at least 45 days prior to
the anniversary date of its accreditation.) 9
The profits of the corporation which are already subjected to corporate income tax when
declared and distributed as dividends to the stockholders are again subjected to the further income tax.
a) Section 24 (B)(2) of the National Internal Revenue Code (1997) states that:
(B) Rate of Tax on Certain Passive Income
(2) Cash and/or Property Dividends - A final tax at the following rates shall be
imposed upon the cash and/or property dividends actually or constructively received
by an individual from a domestic corporation or from a joint stock company, insurance
or mutual fund companies and regional operating headquarters of multinational
companies, or on the share of an individual in the distributable net income after tax of a
partnership (except a general professional partnership) of which he is a partner, or on
the share of an individual in the net income after tax of an association, a joint account,
or a joint venture or consortium taxable as a corporation of which he is a member or co-
venturer:
xxx
Ten percent (10%) beginning January 1, 2000.
xxx
8
Republic Act No. 10365
9
Memorandum Circular No. 3, s. 2017 of the Securities and Exchange Commission
b) According to Section 27 (D)(4), 1997 National Internal Revenue Code:
(D) Rates of Tax on Certain Passive Incomes. -
(4) Intercorporate Dividends. - Dividends received by a domestic corporation
from another domestic corporation shall not be subject to tax.
c) Section 29 of the National Internal Revenue Code (NIRC) of 1997, as amended, imposes
Improperly Accumulated Earnings Tax (IAET) on corporations for each taxable year on the
improperly accumulated taxable income of such corporations. It is a form of penalty tax which is
equal to 10 percent of the improperly accumulated taxable income. The dividends must be
declared and paid or issued not later than one year following the close of the taxable year,
otherwise, the IAET, if any, should be paid within 15 days thereafter.10
10
Section 6 of Revenue Regulations (RR) 2-2001
11
Cyanamid Philippines, Inc. v. CTA, GR No. - 108067. January 20, 2000
Revenue (BIR) considered the accumulation of earnings up to 100% of the paid-up
capital of a corporation as falling within the “reasonable needs of the business.”
Moreover, earnings that are reserved for a justified purpose (e.g., definite corporate
expansion, compliance with any loan covenants, earnings reserve subject to the
legal prohibition against its distribution) were also considered within the purview of
“reasonable needs of the business.”
ii) The Tax Code also exempted from the imposition of the 10% IAET, certain companies,
including publicly-held corporations. Publicly-held companies refer to those, where the
top 20 ultimate individual shareholders hold less than 50% of the value of the outstanding
capital stock or the voting power of the corporation pursuant to Revenue Regulations
(RR) No. 2-2001. The IAET does not also apply to banks and other nonbank financial
intermediaries, and to insurance companies. RR 2-2001 likewise included taxable
partnerships, general professional partnerships, nontaxable joint ventures and
enterprises duly registered under special economic zones as exempt from the coverage
of IAET.
iii) Tax rate is 10% based on improperly accumulated earnings.
As a mechanism to recover lost revenue, the tax rate is patterned after the rate
that the government should have earned. Since tax on dividends to resident individuals
is 10%, then, the tax rate imposed is the same. Thus, Section 29 of the National Internal
Revenue Code of the Philippines imposes a 10% improperly accumulated earnings tax.
iv) Imposition is not outright upon the mere improper accumulation.
The mere fact that the retained earnings exceed 100% of the paid up
capitalization at the end of a taxable year does not mean an outright tax liability for
IAET. What is being taxed is the improper accumulation and not the mere accumulation.
As a rule, the corporate taxpayer has within one (1) year or twelve months from the end
of the taxable year within which to dispose of or remedy the excess retained earnings. Under the
rules of the Securities and Exchange Commission (SEC), such corporate taxpayer must come up
with a concrete plan as to the disposition of such excess. It is the failure to dispose of such
excess upon the lapse of one (1) year that is being penalized and subjected to improperly
accumulated earnings tax in the Philippines.
HELD
1. No.
For a dismissal to be valid, the rule is that the employer must comply with both substantive and
procedural due process requirements. Substantive due process requires that the dismissal must be
pursuant to either a just or an authorized cause under the provisions of Labor Code. Procedural due
process, on the other hand, mandates that the employer must observe the twin requirements of notice
and hearing before a dismissal can be affected.
On the issue of procedural due process, both parties are in agreement that Rodriguez was not
given a written notice specifying the grounds for his termination and giving him a reasonable
opportunity to explain his side; a hearing which would have given him the opportunity to respond to
the charge and present evidence in his favor; and a written notice of termination indicating that after
considering all the circumstances, management has concluded that his dismissal is warranted.
2. Yes.
Since ALPS Transportation is a sole proprietorship owned by Alfredo Perez, it is he who must
be held liable for the payment of backwages to Rodriguez. A sole proprietorship does not possess a
juridical personality separate and distinct from that of the owner of the enterprise. Thus, the owner has
unlimited personal liability for all the debts and obligations of the business, and it is against him that a
decision for illegal dismissal is to be enforced.
I. Definition
CORPORATION PARTNERSHIP
1. Creation
2. Number of Incorporators
3. Powers
5. Management
6. Right of Succession
8. Transferability of Interest
11. Dissolution
Under Art. 1775, Associations and societies, whose articles are kept secret among the
members, and wherein any one of the members may contract in his own name with third persons, shall
have no juridical personality, and shall be governed by the provisions relating to co-ownership. An
example of an association that fails to comply with the statutory requirement in partnerships under Art.
1775 are co-ownerships.
IV. Comparison Between a Corporation and Other Associations Under Art. 1775
Corporations have a strong juridical personality, which means that it has a right of succession,
as opposed to other associations under Article 1775 which states that, associations whose articles or
agreements are kept secret among the members (i.e., known to some members only but withheld from
the rest) and wherein anyone of them may contract in his own name with third persons are, by this
article, deprived of juridical personality for evidently such.
Does a defective corporation can at least result in a partnership? The answer depends on
whether or not there is a clear intent to participate in the management of the business affairs on the
part of the investor. Parties who intend to participate or have actually participated in the business
affairs of the proposed corporation would be considered as partners under a de facto partnership. On
the other hand, parties who took no part notwithstanding their subscriptions do not become partners
with other subscribers. (Pioneer Insurance v. CA, G.R. No. 84197, July 28, 1989)
B. Joint Ventures:
I. Definition
A. As to the formation
Under the Philippine setting, a corporation is formed by operations of the law. While joint
ventures may be formed through any of the following schemes, among others: a) incorporation of a
new company; b) entering into a contractual joint ventures; or c) acquiring shares in an existing joint
ventures entity.
B. Laws/codes regulating it
A joint venture is regulated by the Joint Venture Guidelines (JV Guidelines) published by
Philippine Competition Commission (PCC). However, before the said guidelines, joint ventures were
regulated by general contract laws and partnership laws to determine the rights and liabilities of the
parties. (Aurbach v Sanitary Wares Manufacturing Corporation, GR No. 75875, 15 December 1989)
Held:
Yes.
A careful analysis of the provisions of the contracts of the PCSO and PGMC disclose that the
contract is not in reality a contract of lease under which the PGMC is merely an independent
contractor for a piece of work, but one where the statutorily proscribed collaboration or association, in
the least, or joint venture, at the most, exists between the contracting parties.
Collaboration is defined as the acts of working together in a joint project. Association means
the act of a number of persons in uniting together for some special purpose or business.
The only thing PCSO has is its franchise or authority to operate the on-line lottery system; with
the rest, including the risks of the business, being borne by PGMC. Undoubtedly, then, the Berjaya
Group Berhad knew all along that in connection with an on-line lottery system, the PCSO had nothing
but its franchise. However, from the very inception, the PCSO and the PGMC mutually understood
that any arrangement between them would necessarily leave to the PGMC the technical,
operations, and management aspects of the on-line lottery system while the PCSO would,
primarily, provide the franchise.
The Contract of Lease is not what it purports to be. Its denomination as such is a crafty device,
carefully conceived, to provide a built-in defense in the event that the agreement is questioned as
violative of the exception in Section 1 (B) of the PCSO’s charter. The acuity or skill of its draftsmen to
accomplish that purpose easily manifests itself in the Contract of Lease. Yet, woven therein are
provisions which negate its title and betray the true intention of the parties to be in or to have a joint
venture for a period of eight years in the operation and maintenance of the on-line lottery system.
So in Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, is indisputably clear with
respect to its franchise or privilege "to hold and conduct charity sweepstakes races, lotteries and other
similar activities." Meaning, the PCSO cannot exercise it "in collaboration, association or joint
venture" with any other party. Thus, the challenged Contract of Lease violates the exception provided
for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid
for being contrary to law.
C. Cooperatives
A cooperative is a duly registered association of persons, with a common bond of interest, who
have voluntarily joined together to achieve a lawful common social or economic end, making equitable
contributions to the capital required and accepting a fair share of the risks and benefits of the
undertaking in accordance with universally accepted cooperative principles.12
12
Article 3 of R.A. 6938 as amended by R.A. 9520, Philippine Cooperative Code
II. Juridical Personality and Limited Liability Feature
A cooperative, like an ordinary corporation, has a juridical personality separate and distinct from
its members, and has limited liability features.13
Unlike an ordinary sock corporation which is organized for profit, and a nonstock corporation
which can be organized for any eleemosynary purpose and no part of the net income is to be distributed
to the officers and members thereof, the primary objective of every cooperative is self-help: “The
primary objective of every cooperative is to help improve the quality of life of its members. Towards
this end, the cooperative shall aim to provide goods and services to its members and thus enable them to
attain increased income and savings, investments, productivity, and purchasing power and promote
among them equitable distribution of net surplus through maximum utilization of economies of scale,
cost-sharing and risk-sharing; provide optimum social and economic benefits to its member; teach them
efficient ways of doing things in a cooperative manner.”16
COOPERATIVE CORPORATION
D. Business Trusts
- An unincorporated business organization created by a legal document, a declaration of trust, and used in
place of a corporation or partnership for transaction of various kinds of business with limited liability.
(Legal Dictionary).
- When certain persons entrust their property or money to others who will manage the same for the
former, a business trust is created. The investors are called cestui que trust; the managers are the
trustees.
- In a true business trust, the cestui que trust (beneficiaries) does not at all participate in the
management; hence, they are exempted from personal liability, in that they can be bound only to
the extent of their contribution.
As to creation
- While a business trust is simply a deed of trust which is easier and less expensive to constitute
for it is not bound by any legal requirements. A business trust is mainly governed by contractual
doctrines and common law principles on trust.
As to Juridical Personality
- Based on RA 11232, one of the four attributes of a corporation is it has a strong juridical
personality. A corporation has the right of succession. A corporation has a separate and distinct
personality from its members. A business trust on the other hand does not have a separate
juridical personality.
- While a Corporation under the New Civil Code, Art 45, Juridical persons mentioned in Nos. 1
and 2 of the preceding articles are governed by the laws creating or recognizing them. (Those
governed are other corporations, institutions and entities for public interest or purpose, created
by law, their personality begins as soon as they have been constituted according to law. Private
corporations are regulated by laws of general application on the subject.