NAVARRO, EILEEN, A

2-BSA-1

1. What is the nationality of a corporation organized and incorporated under the laws of a foreign country but owned 100% by
Filipinos? 
The nationality of this corporation is Filipino because even if it is organized and incorporated under the laws of a foreign country it is
owned 100% by Filipinos. The corporation will adopt the nationality of the dominant members or stockholders when there are reasons to
pierce the corporate veil, disregarding the fiction, as the corporation will then be seen as being the same.

Under the Foreign Investments Act of 1991, a corporation is a “Philippine National” if it is organized under the laws of the Philippines and
at least 60 percent of its capital stock outstanding and entitled to vote are owned and held by Filipino citizens.

2. After many difficult years, which called for sacrifices on the part of the company's directors, Annie Manufacturing Inc. was finally
earning substantial profits. Thus, the President proposed to the BOD that the directors be paid a bonus equivalent to 15% of the
company's net income before tax during the preceding year. The President's proposal was unanimously approved by the BOD. A
stockholder of Annie Manufacturing Inc. questioned the bonus. Does he have grounds to object?

Yes, the stockholder has a valid and legal basis to object to the payment of a bonus to the directors equal to 15% of the company's net
income. According to SEC. 29 of the Corporation Code. Compensation of Directors or Trustees, In no case, shall the total yearly
compensation of directors cannot exceed ten (10%) percent of the net income before income tax of the corporation during the preceding
year.

Also according to section 30 of the Corporation Code, A director, trustee, or officer A director, trustee, or officer shall not attempt to
acquire or acquire any interest adverse to the corporation in respect of any matter which has been reposed in them in confidence, and upon
which, equity imposes a disability upon themselves to deal in their behalf; otherwise the said director, trustee, or officer shall be liable as a
trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.

3. Yella Inc. is engaged in raising and selling hogs in the local market. Mr. Cyann, one of its directors while traveling abroad, met a
leather goods manufacturer who was interested in buying pig skins from the Philippines. Mr. Cyann set up a separate company
and started exporting pig skins to his foreign contact but the pig skins exported were not sourced from Yella Inc. His fellow
directors in Yella Inc, complained that he should have given this business to Yella Inc. How would you decide on this matter? Is
there a conflict of interest?

According to section 33 of the Corporation Code Where a director, by such office, acquires a business opportunity that should belong to the
corporation, thereby obtaining profits to the prejudice of such corporation, the director must account for and refund to the latter all such
profits, unless the act has been ratified by a vote of the stockholders owning or representing at least 2/3 of the outstanding capital stock.
This provision shall be applicable, even though the director risked one’s funds in the venture.

But in this case, this article is not applicable and I would side with Mr. Cyann because in this case there is no conflict of interest between
the corporation and Mr. Cyann. Yella Inc. is a company that raises and sells hogs in the local market. Mr. Cyann's firm intended to be
involved in the export of pig skins.

4. As a result of the merger, the absorbed corporation is automatically dissolved and its assets and liabilities are acquired and
assumed by the surviving corporation. Pending approval of the merger by the SEC, may the surviving corporation already
institute suits to collect all receivables due to the absorbed corporation from its customers? Explain your answer.

No, the merger is not effective until and unless it is approved by the SEC. After all, the merger does not become effective upon the mere
agreement of the constituent corporation, because the merger involves fundamental changes in the corporation, as well as stockholder and
creditor rights, and there must be an express provision of law authorizing them. The surviving corporation has no legal identity concerning
receivables owing to the absorbed firm until the merger is approved by the SEC.

5. Distinction: De facto Corporation vs. Corporation by Estoppel. Is there a difference between a de facto corporation and a
corporation by estoppel? Explain briefly.

A De Facto company is one that, although having no legal right to corporate existence against the state, really exists for all intents and
purposes as a corporation. The establishment of a de facto corporation requires that there be a valid law under which a corporation might be
incorporated, a bona fide attempt to organize as a corporation under such law, and the actual use or exercise in good faith of corporate
powers conferred upon it by law.

A company by Estoppel occurs when individuals take the role of a corporation even though they lack the legal power to do so. In this
instance, such individuals will be held personally accountable as general partners for any debts, obligations, and losses incurred or accrued
as a result of their acts.