An intra-corporate controversy is one which arises between a stockholder and the

corporation or among the stockholders involving internal affairs of the corporation.

In the case of Roberto San Jose and Delfin Angcao vs. Jose Ma. Ozamiz, G.R. No.
190590, 12 July 2017, the Supreme Court discussed the two tests in determining
whether or not a case involves an intra-corporate dispute. The two tests are the
relationship test and the nature of the controversy test.

The Relationship Test

Under the relationship test, there is an intra-corporate controversy when the conflict is:

(1) between the corporation, partnership, or association and the public;

(2) between the corporation, partnership, or association and the State insofar as its
franchise, permit, or license to operate is concerned;

(3) between the corporation, partnership, or association and its stockholders, partners,
members, or officers; and (4) among the stockholders, partners, or associates
themselves.

The Nature of Controversy Test

On the other hand, in accordance with the nature of controversy test, an intra-corporate
controversy arises when the dispute is not only rooted in the existence of an intra-
corporate relationship, but also in the enforcement of the parties’ correlative rights and
obligations under the corporation code and the internal and intra-corporate regulatory
rules of the corporation.

Who has jurisdiction over intra-corporate disputes?

The Securities and Exchange Commission is given original and exclusive jurisdiction to
hear and decide cases involving intra-corporate controversies, as provided under
Section 5 of Presidential Decree No. 902-A.

Republic Act No. 8799, or otherwise known as the Securities Regulation Code, which
took effect on 08 August 2000, transferred jurisdiction to decide intra-corporate disputes
to courts of general jurisdiction or regional trial courts. (designated as Special
Commercial Court by the Supreme Court, but this designation was merely intended as a
procedural tool to expedite the resolution of commercial cases in line with the court’s
exercise of jurisdiction)

The Interim Rules of Procedure for Intra-Corporate Controversies provide, to wit:

“Section 1. (a) Cases covered. – These Rules shall govern the procedure to be

observed in civil cases involving the following:

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(2) Controversies arising out of intra-corporate, partnership, or association relations,
between and among stockholders, members, or associates; and between, any or all of
them and the corporation, partnership, or association of which they are stockholders,
members, or associates, respectively;

(3) Controversies in the election or appointment of directors, trustees, officers, or

managers of corporations, partnerships, or associations;

(4) Derivative suits; and

(5) Inspection of corporate books.

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Under the foregoing Rules, all of the actions covered by these Rules shall be
commenced and tried in the Regional Trial Court which has jurisdiction over the
principal office of the corporation, partnership, or association concerned. Where the
principal office of the corporation, partnership or association is registered in the
Securities and Exchange Commission as Metro Manila, the action must be filed in the
city or municipality where the head office is located.

Recent Development: Now Arbitration is Required

Section 181 of Republic Act No. 11232, otherwise known as the Revised corporation
code, which took effect on 23 February 2019, requires that intra-corporate disputes be
referred to arbitration, to wit:

“SEC. 181. Arbitration for Corporations. – An arbitration agreement may be provided in

the articles of incorporation or bylaws of an unlisted corporation. When such an
agreement is in place, disputes between the corporation, its stockholders or members,
which arise from the implementation of the articles of incorporation or bylaws, or from
intra-corporate relations, shall be referred to arbitration. A dispute shall be nonarbitrable
when it involves criminal offenses and interests of third parties.”

Apparently, the new law requires that intra-corporate disputes or disputes between the
corporation, its stockholders or members, which arise from the implementation of the
articles of incorporation or bylaws, or from intra-corporate relations, be settled through
an arbitration. However, this requirement takes place only when the corporation
provided an arbitration agreement in its articles of incorporation or bylaws, or in a
separate agreement.

Furthermore, if the controversy already involves criminal offenses and interest of third
parties, it shall be nonarbitrable, and thus dispensing with the requirement of arbitration.
On the other hand, the law also provides that when an intra-corporate dispute is filed
with a Regional Trial Court, the court shall dismiss the case before the termination of
the pretrial conference, if it determines that an arbitration agreement is written in the
corporation’s articles of incorporation, bylaws, or in a separate agreement.

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Force and Effect of the Arbitration Agreement
Accordingly, the arbitration agreement shall be binding on the corporation, its directors,
trustees, officers, and executives or managers.

To be enforceable, the arbitration agreement should indicate the number of arbitrators

and the procedure for their appointment. The power to appoint the arbitrators forming
the arbitral tribunal shall be granted to a designated independent third party. Should the
third party fail to appoint the arbitrators in the manner and within the period specified in
the arbitration agreement, the parties may request the SEC to appoint the arbitrators. In
any case, arbitrators must be accredited or must belong to organizations accredited for
the purpose of arbitration.

The arbitral tribunal shall have the power to rule on its own jurisdiction and on questions
relating to the validity of the arbitration agreement.

Additionally, the arbitral tribunal shall have the power to grant interim measures
necessary to ensure enforcement of the award, prevent a miscarriage of justice, or
otherwise protect the rights of the parties. A final arbitral award shall be executory after
the lapse of fifteen (15) days from receipt thereof by the parties and shall be stayed only
by the filing of a bond or the issuance by the appellate court of an injunctive writ.