RFBT 06 Corporations PDF

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 44  October 2022 CPA Licensure Examination

RFBT-06
REGULATORY FRAMEWORK for BUSINESS TRANSACTIONS J. DOMINGO  N. SORIANO
LAW ON CORPORATIONS (WITH SRC)

Definition and Attributes of a Corporation
• A Corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes
and properties expressly authorized by law or incident to its existence. (B.P. Blg. 68 or the Corporation Code of the
Philippines)
• Artificial being with separate personality – properties, rights and obligations of the corporations are not the properties,
rights and obligations of the stockholders, officers or Board of directors.
o It exists by fiction of law; hence it is subject to limitations that are inherent because of its nature.
o In the creation of corporations, under which a corporation is an artificial creature without any existence until it has
received the imprimatur of the State acting according to law, through the SEC; the life of a corporation is a concession
made by the State.
• Right of succession – capacity to have continuity of existence despite the changes on the person who compose it. Thus,
the personality continues despite the change of stockholders, members, board of directors or officers.
• Powers, attributes and properties – No corporation under the Code, shall possess or exercise any corporate powers,
except those conferred by law, its Articles of Incorporation, those implied from express powers and those necessary or
incidental to the exercise of the powers so conferred. The corporation’s capacity is limited to such express, implied and
incidental powers.
Express Powers – those expressly authorized by the Corporation Code and other laws, and its Articles of Incorporation.
AMENDMENTS: Section 35 (formerly Section 36) which enumerates the corporate powers and capacity was amended as
follows:
1. par. (h) now expressly authorizes a corporation to enter into a partnership and joint venture.
A domestic corporation can now give donations in aid of any political party or candidate or for purposes of partisan political
activity under par. (i).
Implied Powers – Those that can be inferred from or necessary for the exercise of EXPRESS powers;
Incidental Powers – those that are incidental to the existence of the corporation.
Ultra-vires act – beyond the powers conferred upon it by law; It is merely voidable, may be ratified by the BOD.
Illegal act – void in itself.
Classification:
A. As to existence of stocks
a. Stock
b. Non-stock
B. As to laws of incorporation
a. Domestic
b. Foreign
C. Close Corporations – not more than 20 stockholders with certain restrictions with regard to the transfer of issued stocks
and cannot be listed in the stock exchange nor the shares be publicly offered.
D. Corporation by estoppel - group of persons which holds itself out as a corporation and enters into a contract with third
persons on the strength of such appearance cannot be permitted to deny its existence in an action under the said contract.
E. As to legal status
a. De jure corporation – a corporation organized in accordance with the requirements of law;
b. De Facto corporation - a corporation where there exists a flaw in its incorporation. The requisites:
i. There exists a valid law under which it may be incorporated;
ii. An attempt in good faith to incorporate;
iii. Use of corporate powers
F. As to the law creating them

a. General law – under the provisions of the Corporation Code;
b. Special law – public corporations
• Can a private corporation be created through a Special law? NO because of a Constitutional prohibition in Section 16, Article
XII with the exception of GOCCs
Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of
the common good and subject to the test of economic viability.
The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or established by special charters in the interest of the common
good and subject to the test of economic viability.
Advantages and Disadvantages
Page 1 of 19 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
LAW ON CORPORATIONS (with SRC) RFBT-06
A. Advantages
a. The capacity to act as a legal unit;
b. Continuity of existence
c. Transferability of shares
d. Centralized management through the Board of Directors;
e. Standardized method of organizations and finance;
f. Limited liability of the stockholders
B. Disadvantages
a. More complicated in formation and management;
b. Higher cost of formation and operation;
c. Lack of personal element;
d. Greater governmental control and regulation;
e. Management and control are separate;
f. Stockholders have little voice in the conduct of business.
Components of a Corporation
A. Incorporators – those mentioned in the articles of incorporation as originally forming and composing the corporation,
having signed the articles and acknowledged the same before a notary public.
• Requirement for Incorporators in an AOI:

o Natural Persons;
o At least five but not more than fifteen;
o Must be of legal age;
o Majority must be RESIDENTS of the Philippines;
o Each must own or subscribe to at least one share.
AMENDMENT: The following are the changes on the rules concerning incorporators of a corporation:
1. A partnership, association or corporation are now included in the enumeration of who may be incorporators, which used to
have “natural persons” only.
2. The minimum of 5 incorporators has been removed, which now paves way to the creation of a One Person Corporation.
3. Inclusion of restriction for the following to organize a corporation:
a. Natural persons who are licensed to practice a profession and
b. Partnerships or associations organized to practice a profession
Unless otherwise provided under special laws.
B. Corporators – all the stockholders and members of a corporation including the incorporators who are still stockholders;
ALL incorporators are corporators but NOT ALL corporators are incorporators.
• They own at least one share in a stock corporation while members are those who compose the non-stock corporation.
C. Directors and Trustees – The Board of Directors/Trustees is the governing body of a stock/non-stock corporation; they
exercise the powers of a corporation.
AMENDMENTS:
1. Section 22 of the RCC, the following corporations vested with public interest are shall have independent directors
constituting at least 20% of such board:
a. Corporations covered by the Securities Regulations Code;
b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-need, trust and
insurance companies, and other financial intermediaries; and
c. Other corporations engaged in business vested with public interest similar to the above, as may be determined by the
SEC.
An independent director is a person who, apart from shareholdings and fees received from the corporation, is
independent of management and free from any business or other relationship which could, or could reasonably be
perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
2. Election of Directors and Trustees – the following changes were introduced:

a. Manner of voting: In the stockholders’ meeting for the election of directors/trustees, Section 23 of the RCC now
specifically allows the stockholders or members to vote through remote communication or in absentia, in case the
by-laws or majority of the BOD authorizes the same, or even without such authorization in case of corporations vested
with public interest.
A stockholder or member who participates through remote communication or in absentia, shall be deemed present for
purposes of quorum.
b. Manner of voting in non-stock corporations (not new): Unless otherwise provided in the articles of incorporation or in
the bylaws, members of nonstock corporations may cast as many votes as there are trustees to be elected but may not
cast more than one (1) vote for one (1) candidate. Nominees for directors or trustees receiving the highest number of
votes shall be declared elected.
c. No election: If no election is held, or the owners of majority of the outstanding capital stock or majority of the 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.
3. Report on Election - Section 25 of the RCC requires a report within 30 days to be submitted to the SEC in case of non-
holding of elections, which shall include 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 a stockholder, member, director or trustee, summarily order that an election be held.
Should a director, trustee or officer die, resign or in any manner cease to hold office, the secretary, or the director, trustee
or officer of the corporation, or in case of death, the officer’s heirs shall, within seven (7) days from knowledge thereof,
report in writing such fact to the SEC
4. Disqualification of Directors, Trustees or Officers - The list of disqualification of directors now includes:
a. Conviction by final judgment for violation of the Securities Regulations Code;
b. Found administratively liable for any offense involving fraud acts; and
c. By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to the
disqualifications under the Code.
Also, the SEC and the Philippine Competition Commission may provide for qualifications or additional disqualifications.
5. Removal of Directors or Trustees - The SEC is now empowered to motu proprio, or upon verified complaint, and after
due notice and hearing, order the removal of a director or trustee elected despite the disqualification, or whose
disqualification arose or is discovered subsequent to an election.
6. Vacancies in the Office of Director or Trustee: Section 28 of the RCC now provides when the election of the replacement
member of the Board will be held, as follows:
CAUSE OF VACANCY WHEN ELECTION WILL BE HELD

Removal Same day of the meeting authorizing the removal
Expiration of the term No later than the day of such expiration at a meeting called for
that purpose
Other causes (death, resignation, abandonment) No later than 45 days from the time the vacancy arose
Emergency Board: When the vacancy prevents the remaining directors from constituting a quorum and emergency action
is required to prevent grave, substantial, and irreparable loss or damage to the corporation, the vacancy may be
temporarily filled from among the officers of the corporation by unanimous vote of the remaining directors or
trustees.
The action by the designated director or trustee shall be limited to the emergency action necessary, and the term shall
cease within a reasonable time from the termination of the emergency or upon election of the replacement director or
trustee, whichever comes earlier. The corporation must notify the Commission within 3 days from the creation of the
emergency board, stating therein the reason for its creation
Increase in the number of Directors: Any directorship or trusteeship to be filled by reason of an increase in the number of
directors or trustees shall be filled only by an election at a regular or at a special meeting of stockholders or
members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated
in the notice of the meeting.
7. Compensation of Directors or Trustees: Section 29 of the RCC now specifically prohibits the Director/Trustee from
participating in the fixing of their own per diems or compensation.
Likewise, the same section requires corporations vested with public interest to submit to their shareholders and the
Commission, an annual report of the total compensation of each of their directors or trustees.
8. Self-Dealing Directors: An additional requisite is provided for transactions of self-dealing directors of corporations vested
with public interest: Approval of:
a. At least two-thirds (2/3) of the entire membership of the board, with
b. At least a majority of the independent directors.
9. Committees: Section 34 (formerly Section 35) which used to cover only Executive Committees, now likewise covers
management and other committees.
The same section now specifically provides for the authority of the Board of Directors to create special committees of
temporary or permanent nature and to determine the members’ term, composition, compensation, powers, and
responsibilities.
10. Directors’ Meetings: the following changes were introduced by Section 52 (amending Section 53):
a. The notice requirement for Directors’ Meeting is now 2 days from 1 day prior to the date of the meeting.
b. Directors/trustees are now allowed to attend the meeting through remote communication such as videoconferencing,
teleconferencing, or other alternative modes of communication that allow them reasonable opportunities to participate.
Directors or trustees cannot attend or vote by proxy at board meetings.
c. A director or trustee who has a potential interest in any related party transaction must recuse from voting on the
approval of the related party transaction without prejudice to compliance with the requirements for Self-Dealing
Directors.
11. Term of Trustees: The term for Trustees remain to be 3 years, but Section 91 removed the requirement that the term of
office of 1/3 of the number of trustees shall expire every year.
Moreover, the same Section authorizes the election of a non-member trustee if he is an independent trustee of a non-
stock corporation vested with public interest.
D. Corporate Officers – They are the officers who are identified as such in the Corporation Code, The Articles of Incorporation
or the By-laws of the Corporation.

AMENDMENTS:
1. Section 24 of the RCC removed the requirement of majority of all members of the board in the election of the officers.
Also, the same section now requires that the Treasurer of the Corporation be a resident.
Articles of Incorporation (AOI), By laws and Capital Stock
What is the AOI? Is the fundamental document on which the existence of the corporation is based. It is the basic charter of
the corporation.
Contents of the AOI?

a. Name
The requirement with regards the registration of corporate name has specifically included now those which are “already
reserved for the use of another corporation”, and indicated that a corporate name is NOT DISTINGUISHABLE EVEN IF it contains
one or more of the following:
1. The word “corporation”, “company”, “incorporated”, “limited”, “limited liability”, or an abbreviation of one of such words;
and
2. Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different tenses, spacing, or number of the
same word or phrase.
The same Section likewise granted the following powers to the SEC:
1. Authority to summarily order the corporation to immediately cease and desist from using such name and require the
corporation to register a new one whenever its 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.
2. Cause the removal of all visible signages, marks, advertisements, labels, prints and other effects bearing such corporate
name; and
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 if the corporation fails to comply with the Commission’s
order.
b. Purpose
c. Place of principal office
d. Term: not to exceed 50 years, subject to renewal not earlier than 5 years prior to expiration.
AMENDMENTS:
1. Perpetual Existence: The RCC removed the limitation of 50 years for corporate existence, since under the revised Sec. 11,
“[a] corporation shall have perpetual existence unless its articles of incorporation provides otherwise.”
As to corporations already existing prior to the effectivity of the Code, and which continue to exist, they shall have
perpetual existence. Except if by majority vote of its stockholders, it notifies the SEC to retain its specific corporate term.
The same section provides that dissenting stockholders can exercise their appraisal right.
2. Extension: The same section also changed the period of extension of corporate term from 5 years to 3 years prior to
expiration and that such extension takes effect on the day following the original or subsequent expiry dates.
Also under Sec. 11, after the expiration of the corporate term, a corporation may file for revival of its corporate
existence. Upon approval by the Commission, 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.
The notice to the stockholders for extending (or shortening) of corporate term may now be sent electronically in accordance
with the rules and regulations of the SEC on the use of electronic data message.
e. Name, Citizenship and residence of the Incorporators

f. Name, citizenship and residences of directors,
g. Par Value of shares, no. of authorized shares
i. Authorized Capital Stock – the amount fixed in the articles of incorporation;
ii. Subscribed Capital – the portion of the authorized capital stock that is covered by subscription agreements whether
fully paid or not;
iii. Paid up Capital – the portion of the authorized capital stock which has been subscribed and fully paid;
iv. Outstanding capital stock – total shares of stock issued whether or not fully paid except treasury shares; WHAT are
Treasury Shares?
h. 25%/25% rule
AMENDMENT:
The requirement under the old Section 13 requiring that at least 25% of the Authorized Capital Stock be subscribed and that at
least 25% of the subscribed capital must be paid-up, has been removed.
Likewise, the provision in the AOI disclosing the 25%/25% subscribed/paid-up capital requirement has been removed.
(but this requirement still applies in case of increase of authorized capital stock under Section 37)
i. Name of the treasurer elected
AMENDMENTS:
1. The Articles of Incorporation (AOI) may now include an arbitration agreement pursuant to Section 181 of the RCC.
2. The RCC now authorizes the filing of the AOI and applications for amendments thereto in the form of electronic document.
3. Requirement of Favorable Recommendation:

a. The following were specifically included as those who would be needing a favorable recommendation from the
concerned government agency:
i. Non-Stock Savings and Loans Associations; and
ii. Pawnshops.
b. On the other hand, the following were removed from the enumeration of entities requiring favorable
recommendations:
i. Educational Institutions; and Other corporations governed by special laws.
What is a Treasurer’s Affidavit? – A statement under oath by the corporation’s temporary treasurer attesting that at least
25% of the authorized capital stock has been subscribed and at least 25 thereof has been paid.
By-laws – relatively permanent and continuing rules of action adopted by the corporation for its own government and that of
the individuals composing it. The By-laws must be consistent with the AOI, corporation code and other pertinent laws and
regulations.
AMENDMENTS:
1. Adoption of By-Laws: Section 45 (amending Section 46) of the RCC removed the one-month (from receipt of the notice
of issuance of the certificate of incorporation) requirement to submit the by-laws.
2. Contents of the By-Laws: Section 46(d) of the RCC now includes “The modes by which a stockholder, member, director,
or trustee may attend meetings and cast their vote.” It likewise includes that an arbitration agreement may be provided in
the bylaws.
Amendment to the By-Laws - The submission of the amended by-laws no longer requires that it be filed with the SEC
attached to the original articles of incorporation and original bylaws
What is a stock and transfer book? – a record maintained by the Corporate Secretary to monitor the issuance, exchange,
transfer and retirement of the corporation’s shares.
Doctrine of Piercing the Veil of Corporate Fiction and the Grandfather Rule
A. What is the Doctrine of piercing the veil of corporate fiction?
• When the veil of corporate fiction is used as a shield to perpetuate fraud, to defeat public convenience, justify a wrong
or defend the crime, the fiction shall be disregarded and the individuals composing it will be treated identically.
• Who determines if the corporate veil should be pierced? The Courts.
B. Grandfather rule
• Know the terms:

o Nationalized Activity – certain activities engaged by corporations that require whole or partial Filipino ownership;
o A corporation regarded as a Filipino National – at least 60% of the authorized capital stock is owned by Filipinos;
• What is the grandfather rule? It is a method of determining the nationality of a corporation which in turn is owned by
another corporation by breaking down the entity structure of the shareholders of the corporation.
• Applies to nationalized activities.

o Exploration and development of natural resources
o Realty companies;
o Operation and management of public utilities
Stockholders and Shares of Stock

A. How does one become a shareholder in a corporation?
• A person becomes a shareholder the moment he: 1) Enters into a subscription contract with an existing corporation 2)
Acquires shares from existing shareholders by sale or any other contract or 3) Succession
B. Shares can either be Voting or Non-Voting. What kind of Voting power is being referred to describe the shares?
• Section 6 of the Corporation Code. Even holders of non-voting shares can vote on the following matters:
i. Amendment of the AOI
ii. Adoption and amendment of By-laws;
iii. Increase or decrease of capital stock;
iv. Merger or consolidation;
v. Corporate dissolution, etc.
• What are common shares? –the ordinary stock of a corporation entitles the holder to a pro rata division of the
dividends without any preference or advantage over any stockholders.
• Preferred shares? – One which entitles the holder to certain preferences over other shareholders. Such preferences
may be preferred as to asset, preferred as to dividends or both. Preferred shares can also be cumulative or non-
cumulative or participating or non-participating
• What are Founders’ Shares? Those shares issued to the founders of the corporation which are granted certain rights
and privileges such as the exclusive right to vote and be voted for in the election of directors, for a period not to exceed
5 years, subject to the approval of the SEC.
AMENDMENT:
The amended Section removed the requirement of “approval of the SEC,” from where the start of the five-year period shall
commence.
On the other hand, a limitation was added “That such exclusive right shall not be allowed if its exercise will violate
Commonwealth Act No. 108, otherwise known as the “Anti-Dummy Law”; Republic Act No. 7042, otherwise known as the
“Foreign Investments Act of 1991”; and other pertinent laws.”

C. Par value and no-Par value
• Limitations of no-par value shares
o Not less than P5.00;
o Cannot be issued as Preferred Shares;
o Cannot be issued by banks, trust companies, insurance companies, public utilities and building and loans
association;
o The AOI must state that the shares are no par value shares;
D. What is a certificate of Stock? Evidence of the holder’s ownership of the stock and his right as a shareholder and up to
the extent specified therein; It is concrete and tangible; may be issued only if the subscription is FULLY paid.
• I subscribed to 1,000 shares of stock at P5 each. I made a partial payment of P2,500. Can I demand the Certificate of
Stock for the 500 shares?
• What is the Doctrine of Individuality or Indivisibility of Subscription?

o A subscription is one, entire and indivisible contract even if two or more shares are covered. The subscriber is not
entitled to the certificate for part or all of the certificates covered until full payment of the subscription price.
E. Redeemable shares
• What are Redeemable Shares – shares which the issuing corporation is permitted to redeem or purchase its own shares
• Requisites:
o Only when expressly allowed in the AOI;
o The terms must be embodied both in the AOI and the Cert of Stock;
o The corporation is required to maintain a sinking fund to answer for the redemption price if the corporation is
required to redeem.
• The redeemable shares are deemed RETIRED upon redemption unless otherwise provided in the AOI.
• Unrestricted RE is not necessary before shares can be redeemed.
F. Treasury Shares
• Shares which have been earlier issued and fully paid and thereafter acquired by the corporation through purchase,
donation, redemption or through some other lawful means.
• Basic requirements for a corporation to acquire its own shares:

o The corporation has unrestricted retained earnings in its books to cover the shares to be purchased/acquired
o For a legitimate business purpose, under the following circumstances:
▪ To eliminate fractional shares arising out of stock dividends;
▪ 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 the sale;
▪ To pay dissenting or withdrawing stockholders entitled to payment of their shares.
G. Watered Stocks
• What are watered stocks? Stocks issued not in exchange for its equivalent either in cash, property or services; thus,
the issuance of such stocks are prohibited.
• Other instances that results to the issuance of watered stocks:

o W/o consideration;
o The fair value of the property received is less than the par value of the issued shares;
o Issued as stock dividends when there are no sufficient RE or surplus to justify it.
• What are the consequences on the part of the Corporate Officers or BOD if they consented to the issuance of Watered
Stocks?
o The Directors or Officers who consented shall be solidarily liable to the corporation for the difference in value.
Dividends
• What are dividends? The amount of cash, property or the corporation’s own shares given to outstanding shareholders in
proportion to their percentage share in the ownership participation in the corporation.
• Represents the distribution of earnings to the stockholders;
• Is Dividend synonymous to profit?
• Who has the power to declare dividends? IT DEPENDS. If Cash or Property dividend – BOD; if Stock Dividends BOD +
Approval of the SHs owning not less than 2/3 of the Outstanding Capital Stock.
• Can the BOD be compelled to declare dividends every year? Why or Why not? Is there an exception?
o Stock Corporations are prohibited from retaining surplus profits in excess of 100% of the paid in capital.
• The BOD may still REFUSE; Exceptions to the exception:
o Justified by a definite corporate expansion/projects/programs approved by the Board;
o The corporation is prohibited under a loan agreement to declare dividends without the creditor’s consent and such
consent has not yet been secured;
o It can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation.
• Can dividends be sourced from the Corporations Outstanding Capital? Or from Paid in Capital? NO. The Trust fund doctrine
will be violated if dividends are declared out of capital except only in two instances:
o Liquidating Dividends and;
o Dividends from investments in wasting assets corporations such as mines, oil, well, etc.
• Dividends are sourced from unrestricted retained earnings
• What is the Trust Fund Doctrine? The Capital Stock, property and other assets of the corporation are regarded as equity
in trust for the payment of the corporate creditors;
• Who are entitled to Dividends? Stockholders of record at the time of the declaration of the Dividends by the BOD. The
stockholders’ right to the dividends accrue as soon as the declaration is made by the BOD and the stockholders can demand
payment thereof;
• Are unpaid subscribers entitled to dividends? YES.

Directors and Officers of the Corporation
A. What are the Qualifications of Directors?

a. Stock corporation – must own at least one share of stock of the corporation, must be a stockholder in his own right,
must own the LEGAL TITLE and not merely beneficial title; Non-stock corporation, must be a member.
b. Majority of the Directors/Trustees must be residents of the Philippines. – Why do you think there is such requirement?
c. He must not have been convicted by final judgment of an offense punishable by imprisonment for a period exceeding
six (6) years or a violation of the Corporation Code within 5 years before the date of his election;
d. He must be of legal age;
e. He must possess other qualifications as may be prescribed in the by-laws of the corporation.
B. What is the Business Judgment Rule? -- Questions of policy or management are left solely to the honest decision of
officers and directors of a corporation and the courts are without authority to substitute their judgment for the judgment
of the BOD; the BOD is the business manager of the corporation and so long as it acts in good faith, its orders are not
reviewable by the court or the SEC
C. Election of Directors
• What are the different methods of voting for members of the BOD?
o Straight Voting – every stockholder may vote such number of shares for as many persons as there are directors
to be elected;
o Cumulative Voting for one candidate – a stockholder is allowed to concentrate his votes and give one candidate
as many votes as the number of directors to be elected multiplied by the number of shares shall equal;
o Cumulative voting by distribution – a stockholder may cumulate his shares by multiplying also the number of
his shares by the number of directors to be elected and distribute the same among as many candidates as he shall
see fit.
• Election of directors in a stock corporation should be by the stockholders constituting a quorum; all shareholders
holding voting shares have the right to vote.
Rights and Obligations of Stockholders
A. Voting Rights
• A Stockholder is given the right to vote in a stockholders’ meeting, to vote not only in the election of directors but in
all matters affecting the affairs of the corporation.
• Stockholders Meeting
o Regular – fixed date stated in the bylaws or if there is none, any date in April as determined by the Board of
Directors
o The Corporate Secretary will give notice to all stockholders within a period specified in the Bylaws or in the absence
thereof, two weeks.
o Special – any time deemed necessary
o The corporate secretary shall give notice w/in the period specified in the by-laws, if there is none, one week.
o Quorum for the Meeting – stockholders representing majority of the outstanding capital stock excluding delinquent
shares and non-voting shares or majority of the members if non-stock.
▪ Case of Tan vs. Sycip
o Place of meeting – City or municipality of the principal office and if practicable, the principal place of business.
o Proxy – stockholders or members may vote in person or by proxy in all meetings of stockholders or members.
▪ Proxy form – in writing, signed by the stockholders or members and filed before the scheduled meeting with
the corporate secretary
▪ Period of validity – it should only be valid for the meeting for which it is intended unless otherwise stated. No
proxy shall be valid for a period longer than 5 years at any one time.
AMENDMENTS:
1. If there is no date fixed in the by-laws for the stockholders’ annual meeting, it shall now be held AFTER APRIL 15, which
before only indicated ANY DATE IN APRIL.
2. From the required two-week notice, it is now required that notice to stockholders be given 21 days prior to the regular
meeting.
3. The notice may now be sent through electronic means.
4. Unless the bylaws provide for a longer period, the stock and transfer book or membership book shall be closed at
least 20 days for regular meetings and 7 days for special meetings before the scheduled date of the meeting.
5. Postponement can be validly made if there is a notice of at least 2 weeks prior to the meeting.
6. The revised provision likewise authorizes the voting in absentia or through remote communication.
7. Agenda of the Meeting: A director, trustee, stockholder, or member may propose any other matter for inclusion in the
agenda at any regular or special meeting.
8. Waiver of Notice: Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member.
However, under the revised Section 49 of the RCC, general waivers of notice in the articles of incorporation or the bylaws
shall not be allowed.
The attendance at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or
convened.

9. Place of Meeting The revised Section 50 (formerly Section 51) introduced the following changes:
a. The place shall be the principal office of the corporation, if it is not practicable, in the city or municipality where the
principal office is located.
b. Metro Cebu and Metro Davao, as well as other Metropolitan Areas are now considered a city or municipality (formerly
Metro Manila only. Notice of meetings can now be sent through electronic means.
• Voting Trust
o One or more stockholder of a corporation of a stock corporation may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not
exceeding five years at any one time. The trustees can also be voted as a director.
• Limitations on the right to vote
o Where the AOI provide for classification of shares pursuant to Section 6, non-voting shares are not entitled to vote
except as provided in the last paragraph of Section 6;
o Preferred and redeemable shares may be deprived of the right to vote unless otherwise provided in the corporation
code;
o Fractional shares cannot be voted unless they constitute at least one full share;
o Treasury shares have no voting rights as long as they remain in the treasury;
o Holders of stock declared delinquent by the BOD for unpaid subscription are NOT entitled to vote or a
representation at any stockholders’ meeting;
o A transferee of stock cannot vote if his transfer is NOT registered in the stock and transfer book of the corporation;
o A stockholder is still entitled to vote even if the shares are mortgaged or pledged unless he authorizes the creditor
in writing to vote.
B. Right to Dividends – already discussed

C. Appraisal Right
D. Right to issuance of stock certificate for fully paid shares
E. Proportionate participation in the distribution of assets in liquidation
F. Right to transfer of stocks in corporate books
G. Pre-emptive right
• A pre-emptive right is the shareholder’s right to subscribe to all issues or disposition of shares of any class in proportion
to his present holdings, the purpose being to enable the shareholder to retain his proportionate control in the
corporation and to retain his equity in the surplus.
• Pre-emptive right is NOT available in the following:
o Shares to be issued to comply with the laws requiring stock offering or minimum stock ownership by the public;
o Shares issued in good faith in exchange for property needed for corporate purposes;
o Shares issued in payment for previously contracted debt;
o In case the right is denied in the Articles of Incorporation;
o If one shareholder does not want to exercise his pre-emptive right, the other shareholders are not entitled to
purchase the corresponding shares of the shareholder who declined. But if nobody purchased the same and later
on the board re-issued the shares, the pre-emptive right applies.
Right to inspect books and records and to be furnished with the most recent financial reports
H. Right to file individual, representative and derivative suits

a. Individual actions – those brought by the shareholder in his own name against the corporation when a wrong is
directly inflicted against him;
b. Representative action – those brought by the stockholder in behalf of himself and all other stockholders similarly
situated when a wrong is committed against a group of stockholders.
c. Derivative Suit – those brought by one or more stockholders/members in the name and on behalf of the corporation
to redress wrongs committed against it or protect/vindicate corporate rights whenever the officials of the corporation
refuse to sue or the ones to be sued or has control of the corporation.
Requisites of Derivative Action:

1. He was a stockholder or member at the time of 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;
3. No appraisal rights are available for the act or acts complained of; and
4. The suit is not a nuisance or harassment suit.
I. What are the obligations of a stockholder?

a. Liability for any unpaid subscription;
b. Liability to the corporation for interest on unpaid subscription if so required by the by-laws;
c. Liability to the creditors of the corporation for unpaid subscription;
d. Liability for watered stock;
e. Liability for dividends unlawfully paid
f. Liability for failure to create a corporation.
I. Merger or Consolidation
• Merger – is one where a corporation absorbs another corporation and remains in existence while the other is dissolved.
• Consolidation – is one where a new corporation is created, and consolidating corporations are extinguished.

• Effects of Merger or Consolidation
o Constituent corporations shall become a single corporation;
o The separate existence of the constituent corporations shall cease to exist except that of the surviving corporation
(merger) or the consolidated corporation (consolidation);
o The surviving corporation or the consolidated corporation shall possess all the rights, privileges and immunities
and powers as well as the liabilities of the constituent corporations;
o Employees – are not deemed absorbed although it may be provided in a Merger Plan.
• Procedure:
o BOD of each corporation shall draft a plan of merger or consolidation:
▪ Names of the corporations involved;
▪ Terms and mode of carrying it;
▪ Statement of changes in the present articles of the constituent corporations
o Plan of merger shall be approved by a majority vote of each BOD at separate meetings and approved by
stockholders owning 2/3 of the OCS or members;
o The Articles of Merger or Articles of Consolidation shall be executed by each of the constituent corporations
o Filed in the SEC
Corporate Dissolution
A. Dissolution – extinguishment of the franchise of a corporation and the termination of its corporate existence.
B. Modes of dissolution:
• Voluntary Dissolution, no creditors are affected– Board resolution approved by majority of the members of the BOD
and stockholders owning 2/3 of the OCS, filed in the SEC;
AMENDMENTS: Section 134 of the RCC introduced the following amendments:
1. Required vote of the stockholders for voluntary dissolution is now majority, no longer 2/3.
2. Notice requirement is reduced to 20 days before the meeting from 30 days, and must provide that the purpose of the
meeting is to vote on the dissolution of the corporation.
3. Publication requirement is now once prior to the date of the meeting, from three consecutive weeks.
4. A verified request for dissolution shall be filed with the SEC stating: (a) the reason for the dissolution; (b) the form,
manner, and time when the notices were given; (c) names of the stockholders and directors or members and trustees, who
approved the dissolution; (d) the date, place, and time of the meeting in which the vote was made; and (e) details of
publication
5. The corporation shall submit the following to the SEC: (1) a copy of the resolution authorizing the dissolution, certified
by a majority of the board of directors or trustees and countersigned by the secretary of the corporation; (2) proof of
publication; and (3) favorable recommendation from the appropriate regulatory agency, when necessary
6. Within 15 days from receipt of the verified request for dissolution, and in the absence of any withdrawal within said period
the SEC shall approve the request and issue the certificate of dissolution. The dissolution shall take effect only upon the
issuance by the Commission of a certificate of dissolution.No application for dissolution of banks, banking and quasi-banking
institutions, preneed, insurance and trust companies, nonstock savings and loan associations, pawnshops, and other
financial intermediaries shall be approved by the SEC unless accompanied by a favorable recommendation of the appropriate
government agency.
• Voluntary Dissolution, creditors are affected – Resolution approved by the BOD and stockholders owning 2/3 of
the OCS; Filing of a petition in the SEC – Why is a petition necessary to be filed in the SEC? why not just file the
resolution directly? – there will be a hearing;
AMENDMENTS: Section 135 introduced the following changes:
1. Contents of the petition to be filed with the SEC will include: (a) the reason for the dissolution; (b) the form, manner, and
time when the notices were given; and (c) the date, place, and time of the meeting in which the vote was made.
2. The corporation shall submit to the SEC the following: (1) a copy of the resolution authorizing the dissolution, certified by
a majority of the board of directors or trustees and countersigned by the secretary of the corporation; and (2) a list of all
its creditors
Specified the effectivity date of the dissolution which is upon the issuance by the SEC of a certificate of dissolution.
• Involuntary Dissolution – Filing a verified complaint in the SEC under the following grounds:
AMENDMENT: The SEC can now dissolve a corporation motu proprio.
• Failure to organize or commence business within two years from incorporation;
The period for the automatic revocation of the corporate charter has been increased to 5 years in case of failure to organize.
• Continuously inoperative for 5 years;
In case of continuous non-operation for 5 years, it is no longer considered a ground for revocation, at least not immediately.
In such case, the SEC may, after due hearing and notice, place the corporation under delinquent status and allow the
corporation to resume operations within 2 years upon compliance with the requirements of the SEC; where upon compliance,
the SEC shall issue an order lifting the delinquent status.
In case of non-compliance, with the requirements and to resume operations, only then will the SEC cause the revocation of the
corporation’s certificate of incorporation.
Notably, Section 21 no longer includes the exception that the provision on failure to commence and continuous non-operation
shall not apply if the failure to organize, commence the transaction of its businesses or the construction of its works, or to
continuously operate is due to causes beyond the control of the corporation as may be determined by the SEC.

i. Failure to file by-laws within 30 days from the issuance of the certificate of incorporation;
ii. Continuance of business is not feasible as declared by the Management Committee or Rehabilitation receiver;
iii. Fraud in procuring the Certificate of Incorporation;
iv. Serious misrepresentation;
v. Failure to file the required reports.
AMENDMENTS: Additional grounds to dissolve a corporation:

1. Upon receipt of a lawful court order dissolving the corporation
2. Upon finding by final judgment that the corporation procured its incorporation through fraud
3. Upon finding by final judgment that the corporation:
a. Was created for the purpose of committing, concealing or aiding the commission of securities violations, smuggling,
tax evasion, money laundering, or graft and corrupt practices;
b. Committed or aided in the commission of securities violations, smuggling, tax evasion, money laundering, or graft
and corrupt practices, and its stockholders knew; and
Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its
directors, trustees, officers, or employees.
a. Shortening of Term – amending the AOI particularly the term of corporate existence. How?
b. Expiration of Term
C. Effects of Dissolution
a. Transfer of Legal title of corporate property – transfer of ownership from corporation to the stockholders;
b. The corporation ceases as a body corporate to continue business for which it was established;
c. Continues to exist but only for purposes of liquidation for 3 years;
d. After the expiration of the 3-year period, the corporation ceases to exist for all purposes.
e. Shareholders can Reincorporate by filing new AOI and by-laws
D. Liquidation – what is the process of liquidation?

• Modes of liquidation:
o By the Board of Directors;
o Through a trustee;
o By management committee or rehabilitation receiver
AMENDMENT: Upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or member who
is unknown or cannot be found shall now be escheated in favor of the national government, which used to be the city or
municipality where the property is located under the old Section 122.
Foreign Corporations
• A corporation formed, organized and existing under any law other than those of the Philippines and whose laws allow
Filipino Citizens and corporations to do business in its own country or state – what do you call this principle?
• What constitutes “doing business in the Philippines?”

o Continuity test – doing business implies a continuity of commercial dealings and arrangements and contemplates to
some extent the performance of acts or works or the exercise of some functions normally incident to and in progressive
prosecution of the purpose and object of its organization;
o Substance test – a foreign corporation is doing business in the country if it is continuing the body or substance of the
enterprise of business for which it was organized
o Contract test – actual performance of specific commercial acts within the territory of the Philippines
▪ Commercial act must be performed within Philippine territory;
▪ Must earn profits
▪ Established operations here in the Philippines and is not a mere importer or has appointed a distributor of goods
to the Philippines. Except:
• The distributor is under full control of the foreign corporation; and
• Distributes only the product of the foreign corporation, then it is doing business in the Philippines.
• Doing Business under the Foreign Investment Act of 1991:

o Soliciting orders, service contracts, opening offices;
o Appointing representatives, distributors domiciled in the Philippines;
o Participating in the management, supervision or control of any domestic business firm, entity or corporation in the
Philippines;
o Any act or acts that imply a continuity of commercial dealings;
• Not doing business:
o Mere investment as a shareholder and exercising the rights of an investor;
o Having a nominee director or officer to represent its interest in the corporation and
o Appointing a representative or distributor which transact business in its own name and for its own account.
ONE PERSON CORPORATION
A whole Chapter (Chapter III of the RCC) is dedicated to a One Person Corporation (OPC), a corporation with a single
stockholder.
1. The provision of the said Chapter apply to an OPC and other provisions apply suppletorily (Section 115);
2. Section 116, aside from providing the definition for an OPC, provides that only a natural person, trust or an estate may
form an OPC;

3. Banks, quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-chartered GOCCs and natural
persons who are licensed to practice a profession for the purpose of exercising their profession may not incorporate as an
OPC;
4. An OPC shall not be required to have a minimum authorized capital stock except as otherwise provided by special law
(Section 117);
5. The Articles of Incorporation shall be the same as that of a multi-person corporation and the following additional provisions:
a. If the single stockholder is a trust or an estate, the name, nationality, and residence of the trustee, administrator,
executor, guardian, conservator, custodian, or other person exercising fiduciary duties together with the proof of such
authority to act on behalf of the trust or estate; and
b. Name, nationality, residence of the nominee and alternate nominee, and the extent, coverage and limitation of the
authority.
6. The OPC is not required to submit and file corporate by-laws (Section 119);
7. The corporate name shall indicate the letters “OPC” either below or at the end (Section 120);
8. The single stockholder shall be the sole director and president (Section 121);
9. Within 15 days from the issuance of its certificate of incorporation, the OPC shall appoint a treasurer, corporate secretary,
and other officers as it may deem necessary, and notify the SEC thereof within 5 days from appointment.
10. The single stockholder may not be appointed as the corporate secretary.
11. A single stockholder who is likewise the self-appointed treasurer of the corporation, shall give a bond to the SEC in such a
sum as may be required. The said stockholder/treasurer shall undertake in writing to faithfully administer the OPC’s funds
to be received as treasurer, and to disburse and invest the same according to the Articles as approved by the SEC. The
bond shall be renewed every 2 years or as often as may be required. (Section 122)
12. Nominee and Alternate Nominee: The single stockholder shall designate a nominee and an alternate nominee who shall, in
the event of the single stockholder’s death or incapacity, take the place of the single stockholder as director and shall
manage the corporation’s affairs.
The articles of incorporation shall state the names, residence addresses and contact details of the nominee and alternate
nominee, as well as the extent and limitations of their authority in managing the affairs of the OPC.
The written consent of the nominee and alternate nominee shall be attached to the application for incorporation. Such
consent may be withdrawn in writing any time before the death or incapacity of the single stockholder
Term of the Nominee: When the incapacity of the single stockholder is temporary, the nominee shall sit as director and
manage the affairs of the OPC until the stockholder, by self-determination, regains the capacity to assume such duties.
In case of death or permanent incapacity of the single stockholder, the nominee shall sit as director and manage the
affairs of the OPC until the legal heirs of the single stockholder have been lawfully determined, and the heirs have
designated one of them or have agreed that the estate shall be the single stockholder of the OPC.
The alternate nominee shall sit as director and manage the OPC in case of the nominee’s inability, incapacity, death, or
refusal to discharge the functions as director and manager of the corporation, and only for the same term and under the
same conditions applicable to the nominee.
Change of Nominee: The single stockholder may, at any time, change its nominee and alternate nominee by submitting to
the SEC the names of the new nominees and their corresponding written consent. For this purpose, the articles of
incorporation need not be amended.
13. Corporate Secretary: In addition to the functions designated by the OPC, the corporate secretary shall:
a. Be responsible for maintaining the minutes book and/or records of the corporation;
b. Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which notice shall be
given no later than 5 days from such occurrence;
c. Notify the SEC of the death of the single stockholder within 5 days from such occurrence and stating in such notice the
names, residence addresses, and contact details of all known legal heirs; and
d. Call the nominee or alternate nominee and the known legal heirs to a meeting and advise the legal heirs with regard
to, among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or
consequential matters.
14. Minutes Book: An OPC is required to maintain minutes book which shall contain all actions, decisions, and resolutions taken
by it. (Section 127)
15. Records in lieu of Meetings: When action is needed on any matter, it shall be sufficient to prepare a written resolution,
signed and dated by the single stockholder, and recorded in the minutes book of the OPC. The date of recording in the
minutes book shall be deemed to be the date of the meeting for all purposes under the RCC.
16. Reportorial Requirements:

a. Annual Financial Statements audited by an independent CPA. But if the total assets or total liabilities of the corporation
are less than P600,000 the financial statements shall be certified under oath by the corporation’s treasurer and
president.
b. A report containing explanations or comments by the president on every qualification, reservation, or adverse remark
or disclaimer made by the auditor in the latter’s report;
c. A disclosure of all self-dealings and related party transactions entered into between the OPC and the single stockholder;
and
d. Other reports as the SEC may require.

The SEC may place the corporation under delinquent status should the corporation fail to submit the reportorial requirements
3 times, consecutively or intermittently, within a period of 5 years.
17. Liability of Single Stockholder: A sole shareholder claiming limited liability has the burden of affirmatively showing that the
corporation was adequately financed.
Where the single stockholder cannot prove that the property of the OPC is independent of the stockholder’s personal
property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the OPC.
The principles of piercing the corporate veil applies with equal force to OPC as with other corporations.
18. Conversion from Ordinary Corporation to OPC: When a single stockholder acquires all the stocks of an ordinary stock
corporation, the latter may apply for conversion into n OPC, subject to the submission of such documents as the SEC may
require.
If the application for conversion is approved, the Commission shall issue certificate of filing of amended articles of
incorporation reflecting the conversion. The OPC converted from an ordinary stock corporation shall succeed the latter and
be legally responsible for all the latter’s outstanding liabilities as of the date of conversion.
19. Conversion from OPC to Ordinary Corporation: An OPC may be converted into an ordinary stock corporation after due notice
to the SEC (within 60 days from occurrence) of such fact and of the circumstances leading to the conversion, and after
compliance with all other requirements for stock corporations under the RCC. If all requirements have been complied with,
the Commission shall issue an amended certificate of incorporation reflecting the conversion.
In case of death of the single stockholder, the nominee or alternate nominee shall transfer the shares to the duly designated
legal heir or estate within 7 days from receipt of either an affidavit of heirship or self-adjudication executed by a sole heir,
or any other legal document declaring the legal heirs of the single stockholder and notify the SEC of the transfer. Within
60 days from the transfer of the shares, the legal heirs shall notify the SEC of their decision to either wind up and dissolve
the OPC or convert it into an ordinary stock corporation.
The ordinary stock corporation converted from an OPC shall succeed the latter and be legally responsible for all the latter’s
outstanding liabilities as of the date of conversion.
SECURITIES REGULATION CODE (SRC)
• The SRC is also termed as a “Blue Sky Law”, enacted to protect the public from unscrupulous promoters, who stake
business or venture claims which have no real basis, and sell shares or interests therein to investors, who are then left
holding certificates representing nothing more than a claim to a square of the blue sky.
• State Policy: The State shall establish socially conscious, free market that regulates itself, encourage the widest
participation of ownership in enterprises, enhance the democratization of wealth, promote the development of the capital
market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading
and other fraudulent or manipulative devices and practices which create distortions in the free market.
• Powers and functions of the SEC:

1. Have jurisdiction and supervision over all corporations, partnerships or associations who are grantees of primary
franchises and/or a license or a permit issued by the Government
2. Formulate policies and recommendations on issues concerning the securities market, advise Congress and other
government agencies on all aspects of the securities market and propose legislation and amendment thereto
3. Approve, reject, suspend, revoke or require amendments to registration statements and registration and licensing
applications
4. Regulate, investigate or supervise the activities of persons to ensure compliance
5. Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs
6. Impose sanctions for the violation of laws and rules, regulations and orders and issued pursuant thereto
7. Prepare, approve, amend or repeal rules, regulations and orders and issue opinions and provide guidance on and
supervise compliance with such rules, regulations and orders
8. Enlist the aid and support of and/or deputize any and all enforcement agencies of the Government, civil or military as
well as any private institution, corporation, firm, association or person in the implementation of its powers and functions
under the SRC
9. Issue cease and desist orders to prevent fraud or injury to the investing public
10. Punish for the contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of
and penalties prescribed by the Rules of Court
11. Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof
under its supervision
12. Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in
appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns
and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of
the cases before it, subject to the provisions of existing laws
13. Suspend or revoke after proper notice and hearing the franchise of certificate of registration of corporations,
partnerships or associations, upon any of the grounds provided by law
14. Exercise such other powers as may be provided by law as well as those which may be implied from, or which are
necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives
and purposes of these laws
• Securities: shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and
evidenced by a certificate, contract, instrument, whether written or electronic in character
• Exempt securities:
1. Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency
thereof, or by any person controlled and supervised by, and acting as an instrumentality of said Government

2. Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic
relations, or by any state, province or political subdivision thereof on the basis of reciprocity, provided, that the
commission may require compliance with the form and content of disclosures the commission may prescribe
3. Certificate issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body
4. Any security or its derivatives the sale or transfer of which, by law, is under the supervision and regulation of the Office
of the Insurance Commission, HLURB or BIR
5. Any security issued by a bank except its own shares of stock
• Exempt transactions:
1. At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy
2. By or for the account of a pledge holder, or mortgagee or any other similar lien holder selling or offering for sale or
delivery in the ordinary course of business and not for the purpose of avoiding provisions of the SRC to liquidate a
bona fide debt, a security pledged in good faith as security for such debt
3. An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner thereof, or
by his representative for the owner’s account, such sale or offer for sale, subscription or delivery not being made in
the course of repeated and successive transactions of a like character by such owner, or on his account by such
representative not being the underwriter of such security
4. The distribution by a corporation, actively engaged in the business authorized by its articles of incorporation, of
securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus
5. The sale of capital stock of a corporation to its own stockholders exclusively where no commission or other
remuneration is paid or given directly or indirectly in connection with the sale of such capital stock
6. The issuance of bonds or notes secured by mortgage upon real estate or tangible personal property, where the entire
mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale
7. The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of
conversion entitling the holder of the security surrendered in exchange to make such conversion
8. Broker’s transactions, executed upon customer’s orders, on any registered exchanges or other trading market
9. Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof or in pursuance of an
increase in its authorized capital stock under the Corporation Code, when no expense is incurred, or no commission,
compensation or remuneration is paid or given in connection with the sale or disposition of such securities, and only
when the purpose for soliciting, giving or taking of such subscriptions is to comply with the requirements of such law
as to the percentage of the capital stock of a corporation which should be subscribed before it can be registered and
duly incorporated, or its authorized capital increased
10. The exchange of securities by the issuer with its existing security holders exclusively, where no commission or other
remuneration is paid or given directly or indirectly for soliciting such exchange
11. The sale of securities by an issuer to fewer than 20 persons in the Philippines during any 12-month period
12. The sale of securities to any number of the following qualified buyers:
a. Bank
b. Registered investment house
c. Insurance company
d. Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision
thereof or managed by a bank or other persons authorized by the BSP to engage in trust functions
e. Investment company
f. Such other person as the Commission may by rule determine as qualified buyers
• Procedure for registration of securities:

1. Issuer shall file in the main office of the SEC a sworn registration statement as prescribed.
2. Upon filing of the registration statement, the issuer shall pay to the SEC a fee of not more than 1/10 of 1% of the
maximum aggregate price at which such securities are proposed to be offered.
3. Notice of the filing shall be immediately published by the issuer, at its own expense, in 2 newspapers of general
circulation in the Philippines, once a week for 2 consecutive weeks.
4. Within 45 days after the date of filing, the SEC shall declare the registration statement effective or rejected, unless the
applicant is allowed to amend the registration statement.
5. Upon effectivity of the registration statement, the issuer shall state under oath in every prospectus that all registration
requirements have been met and that all information are true and correct as represented by the issuer or the one
making the statement.
• Manipulation of security prices:

1. To create a false or misleading appearance of active trading in any listed security traded in an exchange or any other
trading market:
a. Wash sale: by effecting any transaction in such security which involves no change in the beneficial ownership
thereof
b. Matched orders: by entering an order or orders for the purchase or sale of such security with the knowledge
that a simultaneous order or orders of substantially the same size, time and price, for the sale or purchase of
any such security, has or will be entered by or for the same or different (but colluding) parties
c. Market rigging or jiggling: by performing similar act where there is no change in beneficial ownership
2. To effect, alone or with others, a series of transactions in securities that:
a. Raises their price to induce the purchase of a security, whether of the same or a different class of the same
issuer or of a controlling, controlled or commonly controlled company by others
b. Depresses their price to induce the sale of a security, whether of the same or a different class, of the same
issuer or of a controlling, controlled or commonly controlled company by others
c. Creates active trading to induce such a purchase or sale through manipulative devices such as:
i. Marking the close: placing of purchase or sale order, at or near the close of the trading period
ii. Painting the tape: akin to marking the close but the activity us made during the normal trading hours
iii. Squeezing the float: the part or portion of the issue/security which is outstanding but intentionally
held by dealers or other persons with a view of reselling them later for profit
iv. Hype and dump: act employed by a person or group of persons of purchasing the outstanding capital
stock of a dormant public shell company for a nominal amount and merge it with their privately held
company

v. Boiler room operations: involves an intensive selling campaign through numerous salesmen by
telephone or through direct mail offerings for securities of either a certain type or from a specific
issuer
vi. Improper matched orders: engaging in transactions where both the buy and sell orders are entered
at the same time with the same price and quantity by different but colluding parties
vii. Scalping: where a person purchases securities for his own account before recommending that
security, and then sells the share at a profit upon the rise in the market price following the
recommendation
viii. Daisy chain: a pattern of fictitious trading activity by a group of persons who lures innocent people
into the scheme
ix. Flipping: operated where one office buys a particular stock for customers, while another office
simultaneously recommends that its customers sell the stock, with the stock being shifted from one
office to another, and the firm makes a profit, and the broker earn their commissions
x. And such other similar devices
3. To circulate or disseminate information that the price of any security listed in an exchange will or is likely to rise or fall
because of manipulative market operations of any one or more persons conducted for the purpose of raising or
depressing the price of the security for the purpose of inducing the purchase or sale of such security
4. To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to
believe was so false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in
an exchange
5. To effect, either alone or others, any series of transactions for the purchase and/or sale of any security traded in an
exchange for the purpose of pegging, fixing or stabilizing the price of such security unless otherwise allowed by the
SRC or by the rules of the Commission
6. No person shall use or employ, in connection with the purchase or sale of any security any manipulative or deceptive
device or contrivance
• Fraudulent transactions: it shall be unlawful for any person, directly or indirectly, in connection with the purchase or
sale of any securities to:
1. Employ any device, scheme or artifice to defraud
2. Obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact
necessary in order to make the statements made, in the light of the circumstances under which they were made, not
misleading
3. Engage in any act, transaction, practice or course of business which operated or would operate as a fraud or deceit
upon any person
• Short Sale: selling of security which the vendor does not own; illegal except when in accordance with the rules
• Option Trading: endorsing or guaranteeing the performance of any put, call, straddle, option, or privilege, in relation to
any security registered on an exchange; unlawful
• Insider Trading: It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material
information with respect to the issuer or the security that is not generally available to the public unless:
1. The insider proves that the information was not gained from such relationship
2. If the other party selling to or buying from the insider (or his agent) is identified, the insider proves:
a. That he disclosed the information to the other party
b. That he had reason to believe that the other party is otherwise is also in possession of the information
• “Insider” shall include:

1. The issuer;
2. A director or officer of, or a person controlling, controlled by, or under common control with the issuer;
3. A person whose relationship or former relationship to the issuer gives or gave him access to a fact of special significance
about the issuer or the security that is not generally available;
4. A government employee, or directors, or officer of an exchange, clearing agency and/or self-regulatory organization
(SRO) who has access to material information about an issuer or a security that is not generally available to the public;
or
5. A person who learns such a fact from any of the foregoing insiders with knowledge that the person from whom he
learns the fact is an insider.
• “Material Non-Public”: has not been generally disclosed to the public and would likely affect the market price of the
security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information
• “Fact of Special Significance”:

1. A material fact which would be likely, on being made generally available to affect the market price of a security to a
significant extent, or
2. One which a reasonable person would consider especially important in determining his course of action with regard to
the shares of stock
• “Material Fact”: if it induces or tends to induce or otherwise affect the sale or purchase of its securities
• Tender Offer: publicly announced intention to acquire securities of a public company; to protect minority shareholders
against any scheme that dilutes the share value of their investments
When mandatory:
1. When any person or group of persons acting in concert, who intends to acquire 35% or more of equity shares in a
public company (any corporation with a class of equity securities listed on an exchange or with assets in excess of P50
million and having 200 or more holders, at least 200 of which are holding at least 100 shares of a class of its equity
securities)
2. Any person or group of persons acting in concert, who intends to acquire 35% or more equity shares in a public
company in one or more transactions within a period of 12 months, shall be required to make a tender offer to all
holder of such class for the number of shares so acquired within the said period

3. If any acquisition of even less than 35% would result in ownership of over 51% of the total outstanding equity securities
of a public company, the acquirer shall be required to make a tender offer for all the outstanding equity securities to
all remaining stockholders of the said company at a price supported by a fairness opinion provided by an independent
financial advisor or equivalent 3rd party
Exempted:
1. Any purchase of shares from the unissued capital stock provided that the acquisition will not result to a 50% or more
ownership of shares by the purchaser
2. Any purchase of shares from an increase in authorized capital stock
3. Purchase in connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where
the acquisition is made by the debtor or creditor
4. Purchases in connection with privatization undertaken by the government of the Philippines
5. Purchases in connection with corporate rehabilitation under court supervision
6. Purchases through an open market at the prevailing market price
7. Merger or consolidation
• Rules on proxy solicitation:

1. Proxies must be issued and proxy solicitation must be made in accordance with rules and regulations issued by the
SEC.
2. Proxies must be in writing, signed by the stockholder or his duly authorized representative and file before the scheduled
meeting with the corporate secretary.
3. Unless otherwise provided in the proxy, 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.
4. No broker or dealer shall give any proxy, consent or any authorization, in respect of any security carried for the account
of the customer, to a person other than the customer, without the express written authorization of such customer.
5. A broker or dealer who holds or acquires the proxy for at least 10% or such percentage as the SEC may prescribe of
the outstanding share of such issuer, shall submit a report identifying the beneficial owner within 10 days after such
acquisition, for its own account or customer, to the issuer of security, to the exchange where the security is traded
and to the SEC.
• Disclosure Rule: requires that material information should be disclosed to the Exchange within the prescribed period from
receipt of such information to protect investors’ interests
Civil liabilities: brought before RTC (exclusive); damages not exceeding triple the amount of the transaction plus actual and
exemplary damages (if necessary) and attorney’s fees not exceeding 30% of the award
1. On account of false registration statement
2. Arising in connection with prospectus, communications and reports
3. For fraud in connection with securities transactions
4. For manipulation of security prices
5. With respect to commodity futures contracts and pre-need plans
6. On account of insider trading
No action shall be maintained unless brought within 2 years after discovery and within 5 years after such cause of action
accrued.
Corporate Governance: the system of stewardship and control to guide organizations in fulfilling their long-term economic,
moral, legal, and social obligations towards their stakeholders; a system of direction, feedback, and control using regulations,
performance standards and ethical guidelines to hold the board and senior management accountable for ensuring ethical
behavior—reconciling long-term customer satisfaction with shareholder value—to the benefit of all stakeholders and society; to
maximize the organization’s long-term success, creating sustainable value for its shareholders, stakeholders, and the nation
• Filing of General Information Sheet (GIS): All corporations shall file their GIS within 30 calendar days from:
1. Stock corporations: date of actual annual stockholders’ meeting
2. Non-stock corporations: date of actual annual members’ meeting
3. Foreign corporations: anniversary date of the issuance of the SEC License
• Filing of Annual Audited Financial Statements:

1. All corporations, including branch offices, representative offices, regional headquarters, and regional operating
headquarters of foreign corporations whose fiscal year ends on December 31: depending on the last numerical digit of
their SEC registration or license number in accordance with the schedule set by the SEC (Note: All corporations may
file their AFS regardless of the last numerical digit or license number on or before the first day stated in the coding
schedule.)
2. Those whose fiscal year ends on a date other than December 31: within 120 calendar days from end of their fiscal year
3. Broker dealer whose fiscal year ends on December 31: depending on the last numerical digit of their SEC registration
or license number in accordance with the schedule set by the SEC
4. Broker dealer whose fiscal year ends on date other than December 31: within 110 calendar days after the close of such
fiscal year
5. Those whose securities are listed on the Philippine Stock Exchange (PSE) and those whose securities but not listed in
PSE and Public Companies covered under SRC: within 105 calendar days after the end of the fiscal year
6. Those whose AFS are being audited by the COA provided that the following documents are attached to their AFS:
a. An affidavit signed by the President and Treasurer (or CFO) attesting to the fact that the company timely
provided COA with the financial statements and supporting documents and that the audit of COA has just
been concluded; and
b. A letter from COA confirming the above information.
7. Late filings or filing after respective due dates shall be accepted but subject to the prescribed penalties which shall
computed from the date of the last day of filing schedule.
8. The AFS, other than the consolidated financial statements, shall have the stamped “received by the Bureau of Internal
Revenue (BIR) or its authorized banks”, unless the BIR allows an alternative proof of submission for its authorized
banks.

1. An ultra vires act is an act or a transaction of a corporation which:
A. Is considered illegal
B. Is contrary to morals, public policy, good customs
C. Not within the express, implied or incidental powers of the corporation
D. All of the above
2. Under the Revised Corporation Code, a foreign corporation has power and capacity to do all of the following, except:
A. Form joint ventures
B. Adopt and use a corporate seal
C. Give aid for political partisan activities
D. Acquire properties in its own name
3. Under the Revised Corporation Code, a foreign corporation has power and capacity to do all of the following, except:
A. Form joint ventures
B. Adopt and use a corporate seal
C. Give aid for political partisan activities
D. Acquire properties in its own name
4. Mr. X was invited by his friends to invest in XYZ Corp., a newly organized firm where he was appointed president. He
entered into a contract of sale with ABC Corp. to purchase equipment, in accordance with the primary purpose of the
corporation. Later on, however, it was discovered that the Articles of Incorporation had not been filed by his friends. He
hurriedly attended to the matter and when the SEC issued the Certificate of Registration, the corporation became bankrupt
and Mr. X is now being sued by ABC Corp. in his personal capacity. In this case,
A. Mr. X cannot be made liable since XYZ Corp. is considered a de facto corporation which has a separate personality.
B. Mr. X cannot be made liable since the de facto status of the corporation has not been attacked by the State.
C. Mr. X can be made liable upto his personal assets since he is the president of XYZ Corporation which is a corporation
by estoppel.
D. Mr. X can be made liable only upto his investment since he had no knowledge that the corporation was not validly
incorporated.
5. Mr. X invested his property in exchange for shares in ABC Corporation. Later on, the same property mortgaged as security
for the loan of ABC Corporation from M Bank. For failure to pay, the mortgage was foreclosed and proceeds were less than
the amount of the outstanding balance of the loan which M Bank sought from Mr. X contending that the property was
invested by him. Mr. X cannot be made liable under which principle:
A. Corporate Entity Theory
B. Piercing the Veil of Corporate Entity
C. Limited Liability Principle
D. All of the above
6. Under the Revised Corporation Code, a corporation has:

A. A maximum of 50 years of existence
B. A maximum of 50 years of existence but renewable not earlier than 5 years prior to expiration of the term
C. A maximum of 50 years of existence but renewable not earlier than 3 years prior to expiration of the term
D. Perpetual existence
7. Which of the following is still a requirement that applies to incorporators under the Revised Corporation Code:
A. Majority must be residents of the Philippines
B. Must be natural persons
C. Natural persons must be of legal age
D. None of the choices
8. A, B, C, D and E is organizing a corporation whose Authorized Capital Stock is P64,000. How much is the minimum paid-
up capital requirement under the Revised Corporation Code for the corporation to incorporate?
A. P0
B. P4,000
C. P5,000
D. P16,000
9. A restriction as to transfer of shares in an ordinary stock corporation must be indicated in:

I. Articles of Incorporation
II. By-Laws
III. Certificate of Stock
A. I, II and III C. I and III

B. I and II D. II and III
10. The existence of a corporation sole begins from:

A. The time the parties came to an agreement to form a corporation and contribute money or property.
B. Filing of the verified articles of incorporation.
C. Issuance of a certificate of registration.
D. First day of the year following the filing of the Articles of Incorporation
11. The following are qualifications of a director, except:

A. They must own at least 1% share.
B. They meet all the qualifications under the by-laws
C. They do not possess any of the disqualifications under the Corporation Code.
D. None of the choices is an exception

12. A, is a stockholder of Silvestre Corporation, who holds 10,000 shares thereof. A stockholders meeting was called to elect
members of a 5-man Board. How many votes can A cast in favor of B if they employ cumulative voting?
A. 10,000 votes C. 50,000 votes
B. 25,000 votes D. 100,000 votes
13. A, B, C, D and E are members of the Board of Directors. A retired and D died. In this case, who shall fill-up the vacancy?
A. Stockholders in a meeting called for the purpose, regardless if the directors still have a quorum
B. A, B and C, since they still constitute a quorum
C. A, B and C, regardless if they still constitute a quorum
D. Stockholders in a meeting called for the purpose since the directors no longer have a quorum
14. A, B, C, D, E, F, G, H, I are members of the Board of Directors. In the meeting to appoint corporate officers, only A, B, C,
D and E are present. How many votes are required to elect corporate offices?
A. 2 C. 4
B. 3 D. 5
15. A, B, C, D and E are directors of REALTY CORP., Z wanted to sell his property with a fair market value of P100M for P90M.
Z offered the property first to A, who acquired it for P90M and eventually sold the same for P100M. In this case,
A. A can keep the profits provided the sale is ratified by the stockholders.
B. A can keep the profits because it was offered to him and not to REALTY CORP.
C. The sale is not subject to ratification and A may be required to remit the profits to REALTY CORP
D. None of the above
16. Mr. X is a Director of both XYZ Corporation and ABC Corporation. XYZ and ABC entered into a contract of sale, the contract
between XYZ and ABC, is considered valid absent fraud and provided it is reasonable under the circumstances. But it is
considered voidable if the shareholdings of Mr. X in the two corporations are:
ABC XYZ
A. 25% 25%
B. 5% 5%
C. 25% 5%
D. 3% 20%
17. Which of the following corporate officer position may be held by the same person?
A. President and Secretary
B. Treasurer and Secretary
C. President and Treasurer
D. None of the above
18. Mr. X, as the president of ABC Corporation, signed the check in his official capacity. Later on, the check bounced due to
insufficiency of funds and he is now being sued for violation of BP Blg. 22. Can Mr. X be made personally liable?
A. Yes, because he acted in bad faith in allowing the issuance of a worthless check
B. No, because he merely signed in his official capacity
C. Yes, because he is made personally liable by law
D. No, because of the corporate entity theory
19. Which of the following is false with regards preferred shares?

A. Preferred share is a stock that gives the holder preference over the holder of common stocks with respect to the
payment of dividends and/or with respect to distribution of capital upon liquidation.
B. A preferred share can be issued without a par value provided it is not issued for less than P5.
C. The preference must be stated in the Articles of Incorporation and the Certificate of Stock.
D. None of the above.
20. As a general rule, preferred shares do not give the holder the right to vote. However, they shall have the right to vote on
the following, except:
A. Amendment of the Articles of Incorporation
B. Adoption and amendment of the by-laws
C. Sale of all or substantially all of the inventories
D. Increase or decrease of capital stock
21. X Co. has P10M Authorized Capital Stock divided into: (1) 5M shares at P1.00 par value; and (2) 1M no par value shares
with issued value at P5.00. If A acquired 100,000 no par value shares at P4.00 and the same were issued. In this case,
A. There is no issuance of watered stocks
B. A and the directors of X Co. are solidarily liable for the P1.00 per share difference.
C. Only A is liable for the P1.00 per share difference.
D. Only the directors of X Co. is liable for the P1.00 per share difference
22. Mr. A subscribed to 10,000 shares of P1 par value for P10 per share. He was able to pay 50% of the subscription price. In
this case, which of the following is not a right granted to Mr. A?
A. He can receive dividends attributable to the whole 10,000 shares
B. He has the right to vote equivalent to the 10,000 shares
C. He can demand the issuance of certificate of stock for the 5,000 shares already paid
D. None of the choices.
23. Which of the following grounds to deny pre-emptive right requires the approval of 2/3 of the outstanding capital stock?
A. Shares to be issued in order to comply with the laws requiring stock offering or minimum stock ownership by the public
B. Shares issued in good faith in exchange for property needed for corporate purposes
C. In case the right is denied in the By-Laws
D. None of the choice

24. The appraisal right of a stockholder may be exercised in the following actions of the corporation, except:
A. In case of merger or consolidation.
B. Sale of all or substantially all the assets of the corporation.
C. Investment of funds in another corporation or business or for any other purpose other than the primary purpose.
D. Amendments to the Articles of Incorporation to change the name of the corporation
25. Under the revised corporation code, which of the following is a valid requirement for the validity of the annual stockholders’
meeting?
A. If there is no date fixed in the by-laws, it can be held on any date in April
B. There must be notice 2 weeks prior to the meeting
C. It must be held in the city where the principal office is located
D. It must be called by the proper party
26. The delegation of the power to amend the by-laws would require __ vote of the stockholders, while its revocation would
require __ vote.
A. Majority; Majority
B. Majority; 2/3
C. 2/3; 2/3
D. 2/3; Majority
27. A Corp. and B Corp. agreed to a business combination. In the agreement, A. Corp. will absorb all the assets and liabilities
of B Corp. and the latter will cease to exist. The business combination entered into is a:
A. Merger C. Reorganization
B. ConsolidationD. Quasi-reorganization
28. The merger or consolidation is deemed effective starting:

A. On the date the parties agreed to a consolidation or merger
B. On the date the stockholders ratified the Board resolution for consolidation or merger
C. Upon submission of the articles of merger or consolidation to the SEC
D. Upon issuance of the certificate of merger or consolidation
29. As a general rule, ____ of the outstanding capital stock is required to constitute a quorum; and majority of _____________
is the voting requirement.
A. Majority; outstanding capital stock
B. Majority; those present
C. 2/3; outstanding capital stock
D. 2/3; those present
30. The regular meetings of _____ are to be held monthly:

A. Stockholders
B. Members
C. Board of Directors
D. All of the choices
31. The following does not apply to an OPC, except:

A. Articles of Incorporation
B. By-Laws
C. Authorized Capital Stock
D. Minutes of the Meetings of BOD
32. What will be the term of the nominee in case of temporary incapacity of the sole stockholder?
A. Until declaration of the court of the sole stockholder’s capacity to take over
B. Upon self-determination of the sole stockholder that he regained capacity
C. Until the legal heirs of the stockholder have been determined
D. Once the heirs have designated one of them to take over management
33. The place of meetings of members in a non-stock corporation:

A. Anywhere
B. Anywhere in the Philippines
C. The principal office
D. The city or municipality where the principal office is located
34. In order to be considered as a close corporation, the following are required to appear in the Articles of Incorporation,
except:
A. All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than
a specified number of persons, not exceeding twenty.
B. All the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this
Title.
C. The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class.
D. None of the choices is an exception.
35. Which of the following business is allowed to incorporate as a close corporation?

A. Banks and insurance companies
B. Mining companies
C. Educational institutions
D. Hospitals

36. To qualify as a foreign corporation, the consideration is
A. Ownership of the shares of stock
B. Appointment of a resident agent
C. Agreement of the parties
D. Under what country’s law it was incorporated
37. The following are effects of dissolution, except:

A. The corporate entity ceases to exist except for liquidation purposes.
B. It can no longer enter into contracts for furthering its purpose
C. It can no longer apply for a secondary franchise
D. Existing contracts are deemed terminated
38. In case the corporation has been continuously inoperative for a period of 5 years, under the Revised Corporation Code,
it:
A. Is automatically dissolved
B. Provides for a ground to dissolve the corporation
C. Will be placed under delinquent status by the SEC
D. Shall no longer be allowed to operate
39. Under the Revised Corporation Code, any asset distributable to any creditor or stockholders or members who is unknown
or cannot be found shall be escheated in favor of:
A. The national government
B. The city or municipality where the asset is located
C. A charitable institution designated by the corporation
D. The other stockholders
40. A corporation doing business in the Philippines without the requisite license:
A. Can sue and be sued in Philippine courts
B. Can sue but cannot be sued in Philippine courts
C. Can be sued but cannot sue in Philippine courts
D. Cannot sue and be sued in Philippine courts
1. C 11. A 21. D 31. A

2. C 12. C 22. C 32. B
3. C 13. B 23. B 33. B
4. D 14. D 24. D 34. D
5. A 15. A 25. D 35. D
6. D 16. C 26. D 36. D
7. C 17. B 27. A 37. D
8 A 18. C 28. D 38. C
9. C 19. B 29. B 39. A
10. B 20. C 30. C 40. C

RFBT 06 Corporations PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

RFBT 06 Corporations PDF

Uploaded by

Copyright:

Available Formats

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 44  October 2022 CPA Licensure Examination

LAW ON CORPORATIONS (WITH SRC)

Illegal act – void in itself.

F. As to the law creating them

Advantages and Disadvantages

Page 1 of 19 0915-2303213  www.resacpareview.com

• Requirement for Incorporators in an AOI:

Unless otherwise provided under special laws.

2. Election of Directors and Trustees – the following changes were introduced:

Page 2 of 19 0915-2303213  www.resacpareview.com

CAUSE OF VACANCY WHEN ELECTION WILL BE HELD

Page 3 of 19 0915-2303213  www.resacpareview.com

Articles of Incorporation (AOI), By laws and Capital Stock

Contents of the AOI?

e. Name, Citizenship and residence of the Incorporators

i. Name of the treasurer elected

Page 4 of 19 0915-2303213  www.resacpareview.com

A. What is the Doctrine of piercing the veil of corporate fiction?

• Know the terms:

• Applies to nationalized activities.

Stockholders and Shares of Stock

Page 5 of 19 0915-2303213  www.resacpareview.com

• What is the Doctrine of Individuality or Indivisibility of Subscription?

• Basic requirements for a corporation to acquire its own shares:

• Other instances that results to the issuance of watered stocks:

• Are unpaid subscribers entitled to dividends? YES.

Page 6 of 19 0915-2303213  www.resacpareview.com

A. What are the Qualifications of Directors?

d. He must be of legal age;

Rights and Obligations of Stockholders

Page 7 of 19 0915-2303213  www.resacpareview.com

• Limitations on the right to vote

B. Right to Dividends – already discussed

H. Right to file individual, representative and derivative suits

Requisites of Derivative Action:

I. What are the obligations of a stockholder?

Page 8 of 19 0915-2303213  www.resacpareview.com

AMENDMENTS: Section 134 of the RCC introduced the following amendments:

AMENDMENTS: Section 135 introduced the following changes:

AMENDMENT: The SEC can now dissolve a corporation motu proprio.

• Failure to organize or commence business within two years from incorporation;

Page 9 of 19 0915-2303213  www.resacpareview.com

AMENDMENTS: Additional grounds to dissolve a corporation:

D. Liquidation – what is the process of liquidation?

• What constitutes “doing business in the Philippines?”

• Doing Business under the Foreign Investment Act of 1991:

ONE PERSON CORPORATION

Page 10 of 19 0915-2303213  www.resacpareview.com

16. Reportorial Requirements:

Page 11 of 19 0915-2303213  www.resacpareview.com

SECURITIES REGULATION CODE (SRC)

• Powers and functions of the SEC:

Page 12 of 19 0915-2303213  www.resacpareview.com

• Procedure for registration of securities:

• Manipulation of security prices:

Page 13 of 19 0915-2303213  www.resacpareview.com

• “Insider” shall include:

• “Fact of Special Significance”:

Page 14 of 19 0915-2303213  www.resacpareview.com

• Rules on proxy solicitation:

• Filing of Annual Audited Financial Statements:

Page 15 of 19 0915-2303213  www.resacpareview.com