The Revised

Corporation Code
of the Philippines
(RA 11232)
The Revised Corporation Code of the
Philippines, Act No. 11232 (the
“Revised Corp. Code” or the “Law”) took
effect on February 23, 2019.
⚫ Corporation, defined. – 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. (Sec. 2)
 CHARACTERISTICS OF A CORPORATION

⚫ 1. It is an artificial being.
⚫ 2. It is created by operation of law.
⚫ 3. It enjoys the right of succession.
⚫ 4. It has the powers, attributes and properties
expressly authorized by law or incident to its
existence.
⚫ “Piercing the veil of corporate fiction” or
“Instrumentality” or “Alter Ego” Doctrine
enumerated the possible probative factors
Concept Builders, Inc. v. NLRC of identity which could justify the
application of the doctrine

1. Stock ownership by one or common ownership of both

corporations;
2. Identity of directors and officers;
3. The manner of keeping corporate books and records; and
4. Methods of conducting the business.
 DOCTRINE OF PIERCING THE VEIL OF
CORPORATE ENTITY

⚫ Requisites:
⚫ 1. There must be control, not mere majority or complete
stock control, but complete domination, not only of finances,
but of policy, and business practice in respect to the
transaction attacked so that the corporate entity as to this
transaction had, at that time, no separate mind, will or
existence of its own (control);
⚫ 2. Such control must have been used by the defendant to
commit fraud or wrong, to perpetrate the violation of a
statutory or other positive duty, or dishonest and unjust act in
contravention of plaintiff’s legal rights (breach of duty); and
⚫ 3. Such control and breach of duty must proximately cause
the injury to the plaintiff. (Concept Builders, Inc. vs. NLRC,
257 SCRA, 149)
CONCEPT BUILDERS v. NLRC, and Norberto Marabe; Rodolfo Raquel, Cristobal Riego, Manuel
Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia,
Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve,
Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe
Basilan, and Ruben Robalos, respondents.

⚫ Petitioner Concept Builders, Inc., a domestic corporation engaged in the

construction business. Private respondents were employed by said
company as laborers, carpenters and riggers. However, they were
illegally dismissed.

⚫ Aggrieved, private respondents filed a complaint for illegal dismissal.

The Labor Arbiter rendered judgment ordering petitioner to reinstate
private respondents and to pay them back wages. It became final and
executory.

⚫ The alias Writ of Execution cannot be enforced by the sheriff because all
the employees inside petitioner’s premises at 355 Maysan Road,
Valenzuela, Metro Manila, claimed that they were employees of Hydro
Pipes Philippines, Inc. (HPPI) and not by petitioner. Thus, NLRC issued a
break-open order against Concept Builders and HPPI.

⚫ Issue: Whether the piercing the veil of corporate entity is proper.

 CONCEPT BUILDERS v. NLRC
Held: Yes.

It is a fundamental principle of corporation law that a corporation is an entity separate and distinct
from its stockholders and from other corporations to which it may be connected. But, this separate
and distinct personality of a corporation is merely a fiction created by law for convenience and to
promote justice. So, when the notion of separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor
laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an
alter ego of another corporation.

The conditions under which the juridical entity may be disregarded vary according to the peculiar
facts and circumstances of each case. No hard and fast rule can be accurately laid down, but
certainly, there are some probative factors of identity that will justify the application of the doctrine
of piercing the corporate veil, to wit:

a. Stock ownership by one or common ownership of both corporations.

b. Identity of directors and officers.
c. The manner of keeping corporate books and records.

The SEC en banc explained the “instrumentality rule” which the courts have applied in
disregarding the separate juridical personality of corporations as follows:
 CONCEPT BUILDERS v. NLRC
Where one corporation is so organized and controlled and its affairs are conducted so
that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the
corporate entity of the “instrumentality” may be disregarded. The control necessary to
invoke the rule is not majority or even complete stock control but such domination of
instances, policies and practices that the controlled corporation has, so to speak, no
separate mind, will or existence of its own, and is but a conduit for its principal. It must
be kept in mind that the control must be shown to have been exercised at the time the
acts complained of took place. Moreover, the control and breach of duty must
proximately cause the injury or unjust loss for which the complaint is made.

The absence of any one of these elements prevents “piercing the corporate veil.” In
applying the “instrumentality” or “alter ego” doctrine, the courts are concerned with
reality and not form, with how the corporation operated and the individual defendant’s
relationship to that operation.

Clearly, petitioner ceased its business operations in order to evade the payment to private
respondents of back wages and to bar their reinstatement to their former positions. HPPI
is obviously a business conduit of petitioner corporation and its emergence was skillfully
orchestrated to avoid the financial liability that already attached to petitioner
corporation.
 SEC. 3. Classes of Corporations

⚫ Corporations formed or organized under this Code

may be stock or non stock corporations. Stock
corporations are those which have capital stock
divided into shares and are authorized to distribute
to the holders of such shares, dividends, or
allotments of the surplus profits on the basis of the
shares held. All other corporations are non stock
corporations.
⚫ Ex. Of Stock Corporations –San Miguel Corp.,
⚫ Non-stock – St. Luke’s Medical Center
Top Stock Corporations in the Phils.
Ex. Of Stock Corporations
Aboitiz Equity Ventures, Inc. – sector: Holding Firms
Aboitiz Power Corp. – sector: Energy & Utilities
Alliance Global Group, Inc. – sector: Holding Firms
Ayala Corporation – sector: Holding Firms
Ayala Land, Inc. – sector: Real Estate
Bank of The Philippine Islands – sector:
Finance
BDO Unibank, Inc. – sector: Finance
DMCI Holdings, Inc. – sector: Holding Firms
First Gen Corporation – sector: Energy & Utilities
Globe Telecom, Inc. – sector:
Telecommunications GT Capital Holdings, Inc. –
sector: Holding Firms G Summit Holdings, Inc. –
sector: Holding Firms
Jollibee Foods Corporation – sector: Food &
Beverages LT Group, Inc. – sector: Holding Firms
Manila Electric Company – sector: Energy & Utilities
Megaworld Corporation – sector: Real Estate
Metro Pacific Investments Corporation – sector: Holding Firms
Metropolitan Bank & Trust Company – sector: Finance
Petron Corporation – sector: Energy & Utilities
Philippine Long Distance Telephone Company – sector:
Telecommunications Puregold Price Club, Inc. – sector: Commerce
Robinsons Land Corporation – sector: Real Estate
Robinsons Retail Holdings, Inc. – sector: Commerce
San Miguel Corporation – sector: Food & Beverages
Security Bank Corporation – sector: Finance
SM Investments Corporation – sector: Holding Firms
SM Prime Holdings, Inc. – sector: Real Estate
Semirara Mining And Power Corporation – sector: Mining / Energy & Utilities
Universal Robina Corporation – sector: Food & Beverages
 OTHER CLASSES OF CORPORATION:
AS TO PURPOSE
⚫ Public Corporation
A corporation organized for the
government or a portion of the
State for the general good and
welfare
Government Owned or
controlled Corporation
A corporation owned by the
government directly or through
its instrumentalities either
wholly, or, where applicable as
in the case of stock corporations,
to the extent of at least 51% of its
capital stock
⚫ Private Corporation
A corporation formed for some
private purpose benefit or end.
Quasi-public Corporation
A private corporation which has
accepted from the State the grant
of franchise or contract involving
the performance of public duties
but which is organized for profit
(ex. Electric, water and transport
companies)
 AS TO LEGAL RIGHT TO CORPORATE EXISTENCE

⚫ De Jure Corporation ⚫ De facto Corporation

a corporation organized in A corporation organized with a
accordance with the colorable compliance with the
requirements of law. requirements of a valid law. Its
existence cannot be inquired
collaterally. Such inquiry may be
made by the Solicitor General in
a quo warranto proceeding.
Corporation by Estoppel
Corporation by prescription
– group of persons that assumes to act as a
corporation knowing it to be without one which has exercised
authority to do so, and enters into a corporate powers for an
transaction with a third person on the
strength of such appearance. It cannot be indefinite period without
permitted to deny its existence in an action interference on the part of the
under said transaction. (Sec. 21) It is neither
de jure nor de facto.
sovereign power, e.g. Roman
Catholic Church.
 AS TO LAWS OF INCORPORATION

Domestic corporation Foreign corporation

a corporation formed, a corporation formed,
organized, or existing organized, or existing
under Philippine laws. under any laws other
than those of the
Philippines.
 AS TO WHETHER THEY ARE OPEN TO THE PUBLIC OR NOT
⚫ Open Corporation
A corporation which is open to
any person who may wish to
become a stockholder or
member thereto.
⚫ Close Corporation
⚫ Is one whose articles or
incorporation provide that: [1] 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 20;
⚫ [2] All the issued stock of all classes
shall be subject to one or more
specified restrictions on transfer;
⚫ [3] The corporation shall not list in
any stock exchange or make any
public offering of any of its stock of
any class.
 AS TO RELATIONSHIP OF MANAGEMENT AND CONTROL

Parent or Holding Subsidiary Corporation

Corporation
A corporation that hold A corporation more than
stock in another 50% of the voting stock of
corporation for purposes of which is controlled directly
control. or indirectly by another
corporation, which thereby
becomes its parent
corporation.
 AS TO THE NUMBER OF PERSONS WHO COMPOSE THEM

⚫ Corporation Aggregate ⚫ Corporation Sole

A corporation consisting A corporation consisting
of more than one member. of only one member for the
purpose of administering
and managing, as trustee,
the affairs, property and
temporalities of any
religious denomination,
sect or church.
 AS TO WHETHER THEY ARE FOR RELIGIOUS PURPOSES OR NOT

Ecclesiastical Corporation Lay Corporation

A corporation organized A corporation organized

for religious purposes. for a purpose other than
religion.
AS TO WHETHER THEY ARE FOR CHARITABLE PURPOSES OR NOT

Eleemosynary Corporation Civil Corporation

A corporation organized A corporation organized
for charitable purposes. for business or profit.
⚫ SEC. 4. Corporations Created by Special Laws or
Charters. – Corporations created by special laws or
charters shall be governed primarily by the provisions of
the special law or charter creating them or applicable to
them, supplemented by the provisions of this Code,
insofar as they are applicable.

⚫ Private Corporations – are governed by the General

law or the Corporation Code
⚫ Public Corporations – are governed by the Special law
or the charter creating them.
⚫ SEC.5. Corporators and Incorporators, Stockholders
and Members. – Corporators are those who
compose a corporation, whether as stockholders or
shareholders in a stock corporation or as members
in a nonstock corporation. Incorporators are
those stockholders or members mentioned in the
articles of incorporation as originally forming and
composing the corporation and who are signatories
thereof.
 COMPONENTS OF A CORPORATION

1. Corporators – those who compose a corporation, whether as

stockholders or members
2. Incorporators - They are 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. They have no powers beyond
those vested in them by the statute.
3. Stockholders (shareholders) – The owners of shares of stock in
a stock corporation.
4. Members – The corporators of a non-stock corporation
5. Board of Directors or Board of Trustees- The Board of
Directors is the governing body in a stock corporation whereas
the Board of Trustees is the governing body in a non-stock
corporation.
 COMPONENTS OF A CORPORATION

6. Corporate Officers –
President - who shall be a
director; Treasurer- may not be a
director;
Secretary – who shall be resident and citizen of the Phils; and
such other officers as may be provided in the by laws. If the
corporation is vested with public interest, the board shall also
elect a compliance officer.
7. Subscribers – persons who have agreed to take and pay for
original, unissued shares of a corporation formed or to be
formed.
8. Underwriter- A person who guarantees on a firm
commitment and/or declared best effort basis the distribution
and sale of securities of any kind by another company.
 COMPONENTS OF A CORPORATION

The Underwriter is also a person or entity, especially an

investment banker, who guarantees the sale of newly issued
securities by purchasing all or part of shares for resale to the
public.
9. Promoter – is a person who brings about or cause to bring about
the formation and organization of a corporation by:
a. Bringing together the incorporators or persons interested
in the enterprise;
b. Procuring subscription or capital for the corporation; and
c. Setting in motion the machinery which leads to
the incorporation of the corporation itself.
He is a founder or organizer of a corporation or business venture;
one who takes the enterpreneurial initiative in funding or
organizing a business enterprise.
 Who may classify shares?

1. Incorporators
It is to be determined by the incorporators by stating it in their
articles of incorporation which will be filed with the SEC,

2. Board of Directors and stockholders

The original classification of shares made by the incorporators which
was stated in the A/I can be amended by a majority vote of the BOD and the
vote or written assent of the stockholders representing at least 2/3 of the
outstanding capital stock.
Voting Shares – shares with a right to vote. There shall always be a class or
series of shares which have complete voting rights.
• Only stock actually issued and outstanding may be voted in STOCK CORP.
* Only those who are actual members with voting rights should be counted
in a NON STOCK CORP.
Matters that can be voted upon by a non voting share

1. Amendment of the Articles of Incorporation;

2. Adoption and amendment of by laws;
3. Sale, lease, exchange, mortgage, pledge or other dispositions of all or
substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of authorized capital stock;
6. Merger or consolidation of the corporation with another corporation
or other corporations;
7. Investment of corporate funds in another corporation or business in
accordance with this Code; and
8. Dissolution of the corporation.
 CLASSIFICATION OF SHARES

⚫ 1. COMMON SHARES
⚫ The basic class of stock ordinarily and usually
issued without extraordinary rights and privileges,
and the owners thereof are entitled to a pro rata
share in the profits of the corporation and in its
assets upon dissolution and, likewise, in the
management of its affairs without preference or
advantage whatsoever.
2. PREFERRED SHARES
Those issued with par value, and preferences either with respect to (a)
assets after dissolution, (b) distribution of dividends, or both, and other
preferences.
Limitations:
a. If deprived of voting rights, it shall still be entitled to vote on matters
enumerated in Section 6 paragraph 6.
b. Preference must not be violative of the Code.
c. May be issued only with a stated par value.
d. The board of directors may fix the terms and conditions only when so
authorized by the articles of incorporation and such terms and conditions
shall be effective upon filing a certificate thereof with the SEC
3. REDEEMABLE SHARES
Those which permit the issuing corporation to redeem or purchase its
own shares.
Limitations:
a. Redeemable shares may be issued only when expressly provided for
in the articles of incorporation;
b. The terms and conditions affecting said shares must be stated both
in the articles of incorporation and in the certificates of stock
representing such shares;
c. Redeemable shares may be deprived of voting rights in the articles of
incorporation, unless otherwise provided in the Code.
Redeemable shares may be redeemed, regardless of the existence of
unrestricted retained earnings (Sec. 8), provided that the corporation
has, after such redemption, sufficient assets in its books to cover debts
and liabilities inclusive of capital stock
4. TREASURY SHARES
Shares that have been earlier issued as fully paid and have thereafter been acquired by
the corporation by purchase, donation, and redemption or through some lawful means.
(Sec. 9)
If purchased from stockholders:
The transaction in effect is a return to the stockholders of the value of their investment
in the company and a reversion of the shares to the corporation. The corporation must
have surplus profits with which to buy the shares so that the transaction will not cause
an impairment of the capital.
If acquired by donation from the stockholders:
The act would amount to a surrender of their stock without getting back their
investments that are instead, voluntarily given to the corporation.
Treasury shares need not be sold at par or issued value but may be sold at the best price
obtainable, provided it is reasonable. When treasury shares are sold below its par or
issued value, there can be no watering of stock because such watering contemplates an
original issuance of shares.
Treasury shares have no voting rights as long as they remain in treasury (uncalled and
subject to reissue).
Reason: A corporation cannot in any proper sense be a stockholder in itself and equal
distribution of voting rights will be effectively lost. Neither are treasury shares entitled
to dividends or assets because dividends cannot be declared by a corporation to itself.
5. FOUNDERS' SHARES
Shares issued to organizers and promoters of a corporation in
consideration of some supposed right or property.
Shares classified as such in the articles of incorporation which may be
given special preference in voting rights and dividend payments. But if an
exclusive right to vote and be voted for as director is granted, this
privilege is subject to approval by the SEC, and cannot exceed 5 years
from the date of approval.
6. VOTING SHARES - Shares with a right to vote.

7. NON-VOTING SHARES - Shares without right to vote. The law only

authorizes the denial of voting rights in the case of redeemable shares and
preferred shares, provided that there shall always be a class or series of
shares which have complete voting rights.
These redeemable and preferred shares, when such voting rights are denied,
shall nevertheless be entitled to vote on matters stated under Sec. 6.
8. ESCROW STOCK
Deposited with a third person to be delivered to a stockholder or his
assign after complying with certain conditions, usually payment of full
subscription price.
9. OVER-ISSUED STOCK
Stock issued in excess of the authorized capital stock. It is also known as
spurious stock. Its issuance is considered null and void.
10. WATERED STOCK
A stock issued not in exchange for its equivalent either in cash, property,
share, stock dividends, or services.
“Water” in the stock represents the difference between the fair market
value at the time of the issuance of the stock and the par or issued value
of said stock. Both par and no par stocks can thus be watered stocks.
It includes stocks:
a. Issued without consideration.
b. Issued as fully paid when the corporation has received a lesser sum of
money than its par or issued value.
c. Issued for a consideration other than actual cash, the fair valuation
of which is less than its par or issued value.
d. Issued as stock dividend when there are no sufficient retained
earnings to justify it.
11. PAR VALUE SHARES
Shares with a value fixed in the certificates of stock and the articles of
incorporation.
12. NO PAR VALUE SHARES
Shares having no par value but have issued value stated in the certificate or
articles of incorporation.
Limitations:
a. No par value shares cannot have an issued price of less than P5.00;
b. The entire consideration for its issuance constitutes capital so that no
part of it should be distributed as dividends;
c. They cannot be issued as preferred stocks;
d. They cannot be issued by banks, trust companies, insurance companies,
public utilities and building and loan association;
e. The articles of incorporation must state the fact that it issued no par
value shares as well as the number of said shares;
f. Once issued, they are deemed fully paid and non-assessable. (Sec. 6)
13. STREET CERTIFICATE
A stock certificate endorsed by the registered holder in blank and
transferee can command its transfer to his name from the issuing
corporation.

14. CONVERTIBLE SHARE A share that is changeable by the stockholder

from one class to another at a certain price and within a certain period.

15. FRACTIONAL SHARE A share with a value of less than one full share.
DOCTRINE OF EQUALITY OF SHARES
Where the articles of incorporation do not provide for any
distinction of the shares of stock, all shares issued by the
corporation are presumed to be equal and enjoy the same
rights and privileges and are also subject to the same
liabilities. (Sec. 6)
FACTS:
Nike manufactures footwear and apparel in factories in foreign
countries. In the 1990s, numerous critics accused Nike of unfair
labor practices and unsafe working conditions. Nike responded to
these allegations with a public relations and advertising
campaign. In 1998 Marc Kasky, an activist lawyer, invoked
California’s False Advertising Law and Unfair Competition Law
for the purpose of suing Nike for publishing false and misleading
statements in this campaign. Nike claimed that the statements
were noncommercial speech on matters of public concern and
thus were constitutionally protected. Nike prevailed in trial court
and in the California Court of Appeals.
ISSUE: May a corporation be subjected to liability for factual
inaccuracies on the theory that its statements are commercial
speech because they might affect consumers' opinions about the
business as a good corporate citizen and thereby affect their
purchasing decisions?
⚫ The Supreme Court reversed the judgment of the Court of Appeal
and remanded to that court for further proceedings. The Court held
that the statements alleged, which were accepted as true on
demurrer, constituted commercial speech and that the action was
thus not barred under the federal and state Constitutions. The Court
held that false and misleading speech has no constitutional value in
itself and was protected only in circumstances and to the extent
necessary to give breathing room for the free debate of public issues.
Commercial speech, because it was both more readily verifiable by
its speaker and more hardy than noncommercial speech, can be
effectively regulated to suppress false and actually or inherently
misleading messages without undue risk of chilling public debate.
Under these basic principles, when a corporation, to maintain and
increase its sales and profits, makes public statements defending
labor practices and working conditions at factories where its
products were made, those public statements were commercial
speech that may be regulated to prevent consumer deception.
⚫ DOCTRINE OF SEPARATE PERSONALITY A
corporation has a juridical personality separate and
distinct from that of its stockholders or members. Used
for purposes of convenience and to subserve the ends
of justice. Consequences/significance:
⚫ 1. Liability for acts or contracts – obligations incurred by
a corporation, acting through its authorized agents are its
sole liabilities. (Creese vs. CA, 93 SCRA 483)
⚫ 2. Right to bring actions – may bring civil and
criminal actions in its own name in the same manner
as natural persons. (Art. 46, Civil Code
⚫ 3. Right to acquire and possess property – property
conveyed to or acquired by the corporation is in law the
property of the corporation itself as a distinct legal entity
and not that of the stockholders or members. (Art.
44(3), Civil Code)
⚫ 4. Acquisition of court of jurisdiction – service of
summons may be made on the president, general
manager, corporate secretary, treasurer or in-house
counsel. (Sec. 11, Rule 14, Rules of Court).
⚫ 5. Changes in individual membership – remains
unchanged and unaffected in its identity by changes in
its individual membership. (The Corporation Code of the
Philippines Annotated, Hector de Leon, 2002 ed.)
⚫ 6. Entitlement to constitutional guaranties: a. Due
process (Albert vs. University Publishing, 13 SCRA
84) b. Equal protection of the law (Smith, Bell &
Co. vs. Natividad, 40 Phil. 136) c. Protection against
unreasonable searches and seizures. (Stonehill vs.
Diokno, 20 SCRA 383) A corporation is not entitled
to invoke the right against self-incrimination.
(Bataan Shipyard vs. PCGG)
⚫ 7.Liability for torts – a corporation is liable
whenever a tortuous act is committed by an officer
or agent under the express
⚫ direction or authority of the stockholders or members
acting as a body, or, generally, from the directors as
the governing body. (PNB vs. CA, 83 SCRA 237)
⚫ 8. A corporation is not entitled to moral damages
because it has no feelings, no emotions, no senses.
(ABS- CBN vs. Court of Appeals)
⚫ 9. Liability for Crimes – since a corporation is a mere
legal fiction, it cannot be held liable for a crime
committed by its officers, since it does not have the
essential element of malice; in such case the
responsible officers would be criminally liable. (People
vs. Tan Boon Kong, 54 Phil.607)
 ABS-CBN BROADCASTING CORP. v
CA, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS, INC.,and VICENTE DEL ROSARIO
(301 SCRA 589)Date: January 21, 1999

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby

VIVA gave ABS-CBN an exclusive right to exhibit some VIVA films. According
to the agreement, ABS-CBN shall have the right of first refusal to the next
24VIVA films for TV telecast under such terms as may be agreed upon by the
parties, however, such right shall be exercised by ABS-CBN from the actual
offer in writing.
Sometime in December 1991, VIVA, through Vicente Del Rosario (Executive
Producer), offered ABS-CBN through VP Charo Santos-Concio, a list of 3 film
packages from which ABS-CBN may exercise its right of first refusal.ABS-
CBN, however through Mrs. Concio, tick off only 10 titles they can purchase
among which is the film “Maging SinoKa Man” which is one of the subjects of
the present case, therefore, it did not accept the said list as per the rejection
letter authored by Mrs. Concio sent to Del Rosario. Subsequently, Del Rosario
approached Mrs. Concio with another list consisting of 52 original movie titles
and 104 re-runs, proposing to sell to ABS-CBN airing rights for P60M (P30M
in cash and P30M worth of television spots). Del Rosario and ABS-CBN’s
General Manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in
QC to discuss the package proposal but to no avail
Four days later, Del Rosario and Mr. Graciano Gozon, Senior VP of Finance of Republic
Broadcasting Corporation (RBS/Channel 7) discussed the terms and conditions of
VIVA’s offer. A day after that, Mrs. Concio sent the draft of the contract between ABS-
CBN and VIVA which contained a counter-proposal covering 53 films for P35M. VIVA’s
Board of Directors rejected the counter-proposal as it would not sell anything less than
the package of 104 films for P60M.After said rejection, ABS-CBN closed a deal with
RBS including the 14 films previously ticked off by ABS-CBN.
Consequently, ABS-CBN filed a complaint for specific performance with prayer for a
writ of preliminary injunction and/or TRO against RBS, VIVA and Del Rosario. RTC
then enjoined the latter from airing the subject films. RBS posted aP30M counterbond
to dissolve the injunction. Later on, the trial court as well as the CA dismissed the
complaint holding that there was no meeting of minds between ABS-CBN and VIVA,
hence, there was no basis for ABS-CBN’s demand, furthermore, the right of first refusal
had previously been exercised.
Hence, the present petition, ABS-CBN argued that an agreement was made during the
meeting of Mr. Lopez and Del Rosario jotted down on a “napkin” (this was never
produced in court). Moreover, it had yet to fully exercise its right of
first refusal since only 10 titles were chosen from the first list. As to actual, moral and
exemplary damages, there was no clear basis in awarding the same.
Issue:
WON a contract was perfected between ABS-CBN and VIVA and WON
moral damages may be awarded to a corporation
RULING:
Both NO.
Contracts that are consensual in nature are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and
the acceptance upon the subject matter, consideration, and terms of
payment a contract is produced. The offer must be certain. To convert
the offer into a contract, the acceptance must be absolute and must
not qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A
qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer. Consequently,
when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to generate consent because
any modification or variation from the terms of the offer annuls the
offer
After Mr. Del Rosario of Viva met Mr. Lopez of ABS-
CBN to discuss the package of films, ABS-CBN, sent
through Ms. Concio, counter-proposal in the form a
draft contract. This counter-proposal could be nothing
less than the counter-offer of Mr. Lopez during his
conference with Del Rosario.
Clearly, there was no acceptance of VIVA’s offer, for
it was met by a counter-offer which substantially
varied the terms of the offer.
 G.R. No. L-19550 June 19, 1967HARRY S. STONEHILL, ROBERT P. BROOKS, JOHN J.
BROOKS andKARL BECK, petitioners,vs.
HON. JOSE W. DIOKNO, in his capacity as SECRETARY OF JUSTICE;

⚫ Petitioners, who have prior deportation cases pending, and the corporation they
form were alleged to committed "violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and the Revised Penal Code,” to which they were
served 4 search warrants, directing any peace officer to search petitioners’ persons
and/or premises of their offices, warehouses and/or residences for: “books of
accounts, financial records, vouchers, correspondence, receipts, ledgers, journals,
portfolios, credit journals, typewriters, and other documents and/or papers showing
all business transactions including disbursements receipts, balance sheets and profit
and loss statements and Bobbins (cigarette wrappers).”
⚫ The items allegedly illegally obtained can be classified into two groups: (1)those
found and seized in the offices of aforementioned corporations, and(2) those found
in petitioners’ residences Petitioners aver that the warrant is illegal for, inter alia:
(1) they do not describe with particularity the documents, books and things to be
seized; (2)cash money, not mentioned in the warrants, were actually seized; (3) the
warrants were issued to fish evidence against the aforementioned petitioners in
deportation cases filed against them; (4) the searches and seizures were made in an
illegal manner; and (5) the documents, papers and cash money seized were not
delivered to the courts that issued the warrants, to be disposed of in accordance with
law x x x
Respondent-prosecutors invoke the Moncado vs People’s Court ruling: even if
the searches and seizures under consideration were unconstitutional, the
documents, papers and things thus seized are admissible in evidence against
petitioners herein.
Issue: WON the search warrants issued are valid.
Held:
The constitution protects the people’s right against unreasonable search
and seizure. It provides; (1) that no warrant shall issue but upon probable
cause, to be determined by the judge in the manner set forth in said
provision; and
(2) that the warrant shall particularly describe the things to be seized. In the
case at bar, none of these are met.

The warrant was issued from mere allegation that petitioners committed a
“violation of Central Bank Laws, Tariff and Customs Laws, Internal Revenue
(Code) and Revised Penal Code.” In other words, no specific offense had been
alleged in said applications. The averments thereof with respect to the offense
committed were abstract.
However, SC emphasized that petitioners cannot assail the
validity of the search warrant issued against their corporation
because petitioners are not the proper party.

The petitioners have no cause of action to assail the legality of

the contested warrants and of the seizures made in pursuance
thereof, for the simple reason that said corporations have their
respective personalities, separate and distinct from the
personality of herein petitioners, regardless of the amount of
shares of stock or of the interest of each of them in said
corporations, and whatever the offices they hold therein may
be.8 Indeed, it is well settled that the legality of a seizure can be
contested only by the party whose rights have been impaired
thereby and that the objection to an unlawful search and seizure
is purely personal and cannot be availed of by third parties.
 Mariano Albert v. University Publishing Co.

⚫ The University Publishing Co. Inc. through its President Jose

Aruego entered into a contract with Mariano Albert whereby
the corporation agreed to pay a certain sum in installments
for the exclusive right to publish his revised commentaries in the RPC
and for his share in the previous sale of the book’s first edit edition.
The corporation failed to pay the second installment thereby making
the whole amount due and demandable (i.e. there was an acceleration
clause). Albert then sued the corporation. The lower court rendered
judgment in favor of Albert and a writ of execution was issued against
the corporation. Albert however, petitioned for a writ of execution
against Aruego, as the real defendant, stating that there is no such
entity as University Publishing Co. Inc. Albert annexed to his
petition a certification from the SEC saying that their records contain
no such registered corporation.
⚫ The corporation countered by saying that Aruego is not a party to
this case and that, therefore, Albert’s petition should be denied. The
corporation countered by saying that Aruego is not a party to this
case, and that therefore, Albert’s petition should be denied.
The corporation, actually did not want Aruego to be declared a
party to the present case is because there would be no need to
institute a separate action against Aruego to be declared a party to
the present case is because there would then be a need to institute a
separate action against Aruego; and if this is done, Aruego can set up
the defense of prescription under the Statute of Limitations.
⚫ Issue:
⚫ Whether the judgment may be executed against Jose M. Aruego,
supposed President of University Publishing Co., Inc., as the real
defendant.
1. The corporation cannot invoke the doctrine of estoppel. The fact of non-
registration of the corporation has not been disputed because the corporation
only raised the point that it and not Aruego is the party defendant
thereby assuming that the corporation is an existing corporation with an
independent juridical personality. HOWEVER, precisely on account of non-
registration, it cannot be considered a corporation not even a corporation de
facto. It has therefore no personality separate from Aruego; it cannot be sued
independently. The estoppel doctrine has not been invoked and even if it had
been, it is not applicable to the case at bar: (a)Aruego had represented a non-
existing entity and induced not only Albert but also the court to believe in
such representation (b) He signed the contract as president of the
corporation stating that this was a corporation duly organized and existing
under the laws of the Philippines. One who induced another to act upon his
willful misrepresentation that a corporation was duly organized and existing
under the law, cannot thereafter set up againsthis victim the principle of
corporation by estoppel.
2. Aruego is the real defendant as he had control over the
proceedings. Had Aruego beennamed as party defendant
instead of or together with the corporation, there would be
noroom for debate as to his personal liability. Since he was not so
named, matters of due processhave arisen. Parties to a suit are
persons who have a right to control the proceedings, tomake
defense, to adduce and crossexamine witnesses and to appeal
from a decision. In the caseat bar, Aruego, was and in reality, the
one who answered and litigated through his own firm
ascounsel. He was in fact, if not on name, the defendant. Clearly
then Aruego had his day incourt as the real defendant and due
process of law has been substantially observed.
3.) Aruego is the real party in interest because he reaped the
benefits from the contract.
⚫ Trust fund doctrine is a principle of judicial
intervention which says that corporate assets are held as
a trust fund for the benefit of shareholders and
creditors and that the corporate officers have a fiduciary
duty to deal with them properly.
⚫ INCORPORATOR
⚫ signatory to the Articles
of Incorporation
⚫ Must own or at least a
subscriber to at least one (1)
share of the capital stock.
⚫ fait accompli; accomplished fact
(the Articles of Incorporation
cannot be amended to replace
them)
⚫ number is limited to 15
⚫ must have contractual capacity
CORPORATOR
⚫ stockholder (stock
corporation) or member (non-
stock corporation)
⚫ May or may not be a signatory to
the Articles of Incorporation
⚫ Ceases to be a corporator by sale
of his shares in case of a stock
corporation. In case of a non-
stock corporation, when the
corporator ceases to be a
member
⚫ no restriction as to number
except for a close
corporation
⚫ may be such through a guardian
 ONE PERSON CORPORATION

⚫ A One Person Corporation is a corporation with a

single stockholder . Only a natural person, trust,
or an estate may form an OPC.
 II. INCORPORATION AND ORGANIZATION
⚫ STEPS IN THE CREATION OF A CORPORATION
⚫ a. PROMOTION – a number of business operations
peculiar to the commercial world by which a company
is generally brought into existence.
(18 Am. Jur. 2d 647, cited in de Leon p. 116)
⚫ b. INCORPORATION
⚫ Steps: 1. Drafting and execution of Articles of
Incorporation by the incorporators and other
documents required for registration of the corporation
⚫ 2. Filing with the SEC of the articles of incorporation
3. Payment of filing and publication fees
⚫ 4. Issuance by the SEC of the certificate of
incorporation
⚫ c. FORMAL ORGANIZATION AND
COMMENCEMENT OF THE TRANSACTION OF
BUSINESS
⚫ These are conditions subsequent, which may be
satisfied by substantial compliance in order that a
corporation may legally continue as such. Formal
organization:
⚫ 1. Adoption of By-Laws and filing of the same with
the SEC;
⚫ 2. Election of board of directors/trustees, and officers;
⚫ 3. Establishment of principal office;
⚫ 4. Providing for subscription and payment of
capital stock
QUALIFICATIONS OF INCORPORATORS
⚫ Stock corporation
⚫ -must own, or be a subscriber of at least one (1) share
of the capital stock
⚫ Non Stock corporation
⚫ - must be a member of the corporation
The incorporation must be composed of
any combination of natural person/s, SEC-
registered partnership/s, SEC-registered
domestic corporation or association as well as
foreign corporations.
1ncorporators who are natural persons
must be of legal age and must sign the Articles
of Incorporation / By Laws.
 Partnership as Incorporators
⚫ In the event that a SEC-recorded partnership
is made as incorporator, the application for
registration must be accompanied by a
Partner’s Affidavit duly executed by the
partners, to the effect that they have duly
authorized the partnership to invest in the
corporation about to be formed and that they
have designated one of the partners to
become signatory to the incorporation
documents.
⚫ Partnership under “dissolved” or “expired”
status with the SEC cannot be authorized to
become an incorporator.
 DOMESTIC CORPORATIONS OR ASSOCIATIONS AS
INCORPORATORS

⚫ Stock corporation
-Must be approved by the
majority of the BOD or
trustees as ratified by the
stockholders representing at
least 2/3 of the outstanding
capital stock
⚫ A Director/Secretary’s
Certificate with the
necessary approvals, as
well as the signatory to the
incorporation documents
shall be executed under
oath and submitted by the
applicant.
⚫ Non Stock Corporation
⚫ Approved by at least 2/3 of
the members at a meeting
duly called for the purpose.
⚫ A Trustee’s/Secretary’s
Certificate with the
necessary approvals, as
well as the signatory to the
incorporation documents
shall be executed under
oath and submitted by the
applicant.
 FOREIGN CORPORATION AS INCORPORATORS

⚫ -application for registration must be accompanied

by the documents (same as domestic corporation)
duly authenticated by the Philippine consulate or
with an apostilled affixed thereto.
 CORPORATE TERM
⚫ General Rule:
⚫ A corporation shall have perpetual existence
⚫ ETR: If the AI provides otherwise or if it
provides for a specific period. (A corporate
term for a specific period may be extended or
shortened by amending the AI. However, a
corporation for a specific period ceases to
exist and is dissolved ipso facto upon the
expiration of the period fixed in the original
AI in the absence of compliance with the legal
requisites of extension of period.
 REVIVAL OF CORPORATE EXISTENCE

⚫ A corporation whose term has expired may apply for

a revival of its corporate existence, together with all the
rights and privileges under its certificate
of incorporation and subject to all of its duties, debts
and liabilities existing prior to its revival.
⚫ . A corporation shall have perpetual existence
unless its articles of incorporation provides otherwise.
This is one of the major changes made under the
Revised Corporation Code (Republic Act No. 11232).
Under the old Corporation Code, the maximum
corporate term is only fifty (50) years, subject to
extensions. The limit on corporate term has been
removed.
 REQUIRED VOTE TO INITIATE REVIVAL

⚫ STOCK ⚫ NON STOCK

⚫ at least a majority vote
of the BOD and the vote
of at least majority of the
outstanding capital
stock.
⚫ at least a majority vote
of the BOT and the vote
of at least majority of the
members.
 APPRAISAL RIGHT

⚫ The revival of the corporate existence is without

prejudice to the appraisal right of dissenting
stockholders in accordance with the provisions of the
Revised Corporation Code.
⚫ Sec. 12. Minimum Capital Stock not required of
stock corporation - Stock corporation shall not be
required to have a minimum capital stock, except as
otherwise specifically provided by special law.
 ARTICLES OF INCORPORATION (AI)

⚫ The document prepared by the persons

establishing a corporation and filed with the SEC
containing the matters required by the Code.
⚫ Significance:
⚫ 1. The issuance of a certificate of
incorporation signals the birth of the
corporation’s juridical personality;
⚫ 2. It is an essential requirement for the existence of
a corporation, even a de facto one.
 Contents of AI: (Sec. 14)
⚫ 1. name of corporation;
⚫ 2. purpose/s, indicating the primary and secondary purposes;
⚫ 3. place of principal office;
⚫ 4. term of existence;
⚫ 5. names, citizenship and residences of incorporators;
⚫ 6. number, names, citizenship and residences of directors or trustees;
⚫ 7. names, nationalities, and residences of the persons who shall act as
directors or trustees until the first regular ones are elected and qualified;
⚫ 8. if a stock corporation, the amount of its authorized capital stock,
number of shares and in case the shares are par value shares, the par
value of each share;
⚫ 9. names, residences, number of shares, and the amounts subscribed and
paid by each of the original subscribers which shall not be less than 25%
of authorized capital stock;
⚫ 10. if non-stock, the amount of capital, the names, residences, and
amount paid by each contributor, which shall not be less than 25% of
total subscription; 11. name of treasurer elected by subscribers; and 12. if
the corporation engages in a nationalized industry, a statement that no
transfer of stock will be allowed if it will reduce the stock ownership of
Filipinos to a percentage below the required legal minimum.
AMENDMENT OF ARTICLES OF INCORPORATION
Limitations:
1. The amendment of any provision or matters stated in the articles of
incorporation is not allowed when it will be contrary to the provisions or
requirement prescribed by the Code or by special law or changes any
provision in the articles of incorporation stating an accomplished fact
2. It must be for legitimate purposes
3. It must be approved by the required vote of the board of directors or
trustees and the stockholders or members
4. The original articles and amended articles together must contain all
provisions required by law to be set out in the articles of incorporation
5. Such articles, as amended, must be indicated by underscoring the
changes made, and a copy thereof duly certified under oath by the
corporate secretary and a majority of the directors or trustees stating that
the amendments have been duly approved by the required vote of the
stockholders or members must be submitted to the SEC
6. The amendments shall take effect only upon their approval by the SEC
7. If the corporation is governed by special law, the amendments must be
accompanied by a favorable recommendation of the appropriate
government agency.
 NON-AMENDABLE FACTS IN THE ARTICLES OF
INCORPORATION

⚫ Those matters referring to facts existing as of

the date of the incorporation such as:
⚫ 1. Names of incorporators;
⚫ 2. Names of original subscribers to the capital
stock of the corporation and their subscribed
and paid up capital;
⚫ 3. Treasurer elected by the original subscribers;
⚫ 4. Members who contributed to the initial
capital of a non-stock corporation;
⚫ 5. Date and place of execution of the articles
of incorporation;
⚫ 6. Witnesses to the signing and
acknowledgment of the articles.
GROUNDS FOR REJECTION OF ARTICLES OF INCORPORATION OR
AMENDMENT THERETO

⚫ 1. The articles or its amendment is not

substantially in accordance with the form
prescribed
⚫ 2. The purposes of the corporation are
patently unconstitutional, illegal, immoral,
or contrary to government rules and
regulations
⚫ 3. The Treasurer’s Affidavit concerning
the amount of capital stock subscribed
and/or paid is false
⚫ 4. The required percentage of ownership
of the capital stock to be owned by Filipino
citizens has not been complied with.
 GROUNDS FOR SUSPENSION OR REVOCATION OF
CERTIFICATE OF REGISTRATION (Pres. Decree No. 902-A)

1. Fraud in procuring its certificate of incorporation

2. Serious misrepresentation as to what the corporation
can do or is doing to the great prejudice of, or damage
to, the general public
3. Refusal to comply with or defiance of a lawful order
of the SEC restraining the commission of acts which
would amount to a grave violation of its franchise
4. Continuous inoperation for a period of at least 5 years
5. Failure to file the by-laws within the required period
6. Failure to file required report