TOPICS: LAW ON PARTNERSHIP (ART.

1767 – 1867)

DEFINITION:

 Art. 1767. By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund with the intention of dividing the profits among
themselves.

ELEMENTS

 Agreement to contribute money, property or industry to a common fund

 Intent to divide profits among themselves
 community of interests

ORGANIZATIONS DEEMED PARTNERSHIPS OR GOVERNED BY THE LAW ON

PARTNERSHIP

Professional partnerships

 Partnerships formed by persons for the sole purpose of exercising their common profession, no
part of the income of which is derived from engaging in any trade or business.

Joint ventures

 A joint venture is likened to a particular partnership or one which "has for its object determinate
things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.
However, both are different in the sense that a joint venture is limited to a single transaction,
while a partnership generally relates to a continuing business of varionts Transactions of a
certain kind. Now Howwer hat pina veidare is not a legal entity.

CHARACTERISTICS OF A PARTNERSHIP

Consensual - perfected by mere consent. Bilateral - formed by two or more persons creating reciprocal
rights and obligations.

Preparatory - entered into as a means to an end. Nominate - has a special name or designation.

Onerous - contributions in the form of either money, property and/or industry must be made.

 Commutative the undertaking of each partner is considered as the equivalent of that of the
others.

Principal - its existence or validity does not depend on some other contract.

PRINCIPLES APPLICABLE

Affectio Societatis - the desire to formulate an ACTIVE union with people among whom there exist mutual
confidence and trust (delectus personarum).

Principle of Delectus Personae (choice of persons) - a person has the right to select persons with whom he
wants to be associated with in partnership.

PURPOSE

✓ For the an intention of dividing the profit among the partners, or

✓ in order to exercise a profession.

 The object must be a lawful one.

RULES IN DETERMINING EXISTENCE OF A PARTNERSHIP

(a) there was an intention to create a partnership

(b) there was a common fund obtained from contributions
(c) there was a joint interest in the profits.

PARTNERSHIP, A JURIDICAL PERSON

 As an independent juridical person, a partnership may enter into contracts, acquire and possess
property of all kinds in its name, as well as incur obligations and bring civil or criminal actions.
 As a juridical person, the personality of the partnership is separate and distinct from that of each
of the partners

EFFECT OF FAILURE TO COMPLY WITH STATUTORY REQUIREMENTS

Under Art 1772

 Partnership still acquires personality despite failure to comply with the requirements of
execution of public instrument and registration of name in SEC.

Under Arts 1773 and 1775

 Partnership with immovable property contributed, if without requisite inventory, signed and
attached to public instrument, shall not acquire any juridical personality because the contract
itself is void. This is also true for secret associations or societies.

WHO CAN FORM PARTNERSHIPS?

Persons with legal capacity to enter into contracts

 Natural persons should be at least 18 years old, not suffering from any legal impediment such as
insanity or civil interdiction Juridical persons de jure
 Husband and wife can enter into particular partnerships but not universal partnerships. Reason:
Husband and wife cannot sell and donate to one another
 Under the Revised Corporation Code, corporations can now join partnerships.

TESTS AND RULES TO DETERMINE EXISTENCE OF A PARTNERSHIP

 By estoppel, if the persons treat each other as partners (Art. 1825, CC); Co-ownership or co-
possession does not of itself establish a partnership, whether such co-owners or co-possessors do
or do not share any profits made by the use of the property (Art. 1769 [2], CC);
 The sharing of gross returns does not of itself establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in any property from which the returns are
derived (Art. 1769 [3], CC);
 The receipt by a person of a share of the profits of a business is prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if such profits were received in
payment:
o As a debt by installments or otherwise; As wages of an employee or rent to a
landlord;
 o As an annuity to a widow or representative of a deceased partner; As interest on a
loan, though the amount of payment vary with the profits of the business;
o As the consideration for the sale of a goodwill of a business or other property by
installments or otherwise. (Art. 1769 [4], CC)

DISTINCTION BETWEEN A CO-OWNERSHIP AND A PARTNERSHIP

o There is a co-ownership when an undivided thing or right belongs to different persons (Art. 484,
CC). It is a partnership when two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among
themselves (Art. 1767, CC).
o Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners
or co-possessors do or do not share any profits made by the use of the property (Art. 1769 [2],
CC)
o The sharing of returns does not in itself establish a partnership whether or not the persons
sharing therein have a joint or common right or interest in the property. There must be a clear
intent to form a partnership, the existence of a juridical personality different from the individual
partners, and the freedom of each party to transfer or assign the whole property.

FORM OF THE PARTNERSHIP CONTRACT

General rule: Contracts shall be obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present (Art. 1356, CC).

In the following instances, the partnership contract should be in writing:

 When, by its terms, it is not to be performed within a year from the making thereof. (Art.
1403[2][a], CC)
 Where immovable property or real rights are contributed thereto. (Art. 1771, CC)
 Aside from being in writing, it should also be in a public instrument.
 An inventory of the contributed property duly signed by the parties should also be attached to the
public instrument. (This is indispensable to the validity of the partnership.)
 Where the capital is P3,000.00 or more, in money or property. (Art. 1772, CC)
o Aside from being in writing, it should also be in a public instrument.
o It must be filed with or recorded in the SEC.

EFFECTS OF A PARTNERSHIP CREATED FOR UNLAWFUL PURPOSES

A partnership must have a lawful object or purpose and must be established for the common benefit or
interest of the partners (Art. 1770, CC)

Effects of an unlawful partnership:

 The contract is void ab initio and the partnership never existed in the eyes of the law (Art.
1409[1]);
 The partnership will be dissolved and the profits confiscated in favor of the government (Art.
1770, CC);
 The instruments or tools and proceeds of the crime shall also be forfeited in favor of the
government, but the contributions of the innocent partners shall not be confiscated. (Art. 1411–
1412, CC)

CLASSIFICATIONS OF PARTNERSHIP

1) As to the extent of its subject matter, a partnership may be:

  Universal partnership or one which refers to all the present property or to all profits.
o Universal Partnership of all Present Property
The partners contribute all the property which actually belongs to them to a common fund,
with the intention of dividing the same among themselves, as well as all the profits which
they may acquire therewith (Art. 1778, CC)
o Universal Partnership of Profits

It comprises all that the partners may acquire by their industry or work during the existence
of the partnership (Art. 1780, CC)

o Particular partnership or one

which has for its object determinate things, their use of fruits, or a specific undertaking, or
the exercise of a profession or vocation (Art. 1783).

2) As to liability of the partners, a partnership may be:

 General partnership or one consisting of general partners who are liable pro rata and
subsidiary (Art.1816) and sometimes solidarily (Arts. 1822-1824) with their separate
property for partnership debts;
 Limited partnership or one formed by two or more persons having as members one or
more general partners and one or more limited partners, the latter not being liable for the
obligations of the partnership.

3) As to its duration, a partnership is either:

 Partnership at will or one in which no time is specified and is not formed for a particular
undertaking or venture and which may be terminate anytime by mutual agreement of the
partners, or by the will of any one partner alone; or one for a fixed term or particular undertaking
which is continued by the partners after the termination of such term or particular undertaking
without express agreement (Art. 1785);
 Partnership with a fixed term or one which the term for which the partnership is to exist is
fixed or agreed upon or one formed for a particular undertaking, and upon the expiration of the
term or completion of the particular enterprise, the partnership is dissolved, unless continued by
the partners.

4) As to the legality of its existence, a partnership may be:

 De jure partnership or one which has complied with all the legal requirements for its
establishment;
 De facto partnership or one which has failed to comply with all the legal requirements forsus
establishment.

5) As to representation to others, a partnership may be:

 Ordinary or real partnership or one which actually exists among the partners and also as to
third persons;
 Ostensible partnership or partnership by estoppel or one which in reality is not a partnership,
but is considered a partnership only in relation to those who, by their conduct or admission, are
precluded to deny or disprove their existence

6) As to publicity, a partnership may be:

  Secret partnership or one wherein the existence of certain persons as partners is not avowed or
made known to the public by any of the partners;
 Open or notorious partnership or one whose existence is avowed or made known to the public
by the members of the firm.

7) As to purpose, a partnership may be:

 Commercial or trading partnership or one formed for the transaction of business;

 Professional or non-trading partnership or one formed for the exercise of a profession.

KINDS OF PARTNERS

1. Capitalist partner or one who contributes money or property to the common fund.
2. Industrial partner or one who contributes only his industry or personal service.
3. General partner or one whose liability to third persons extends to his separate property; he may
be either a capitalist or industrial partner. He is also known as real partner.
4. Limited partner or one whose liability to third persons is limited to his capital contribution. He
is also known as special partner.
5. Managing partner or one who manages the affairs or business of the partnership; he may be
appointed either in the articles of partnership or af the constitution of the partnership.
6. Liquidating partner or one who takes charge of the winding up of partnership affairs upon
dissolution.

COMMENCEMENT OF PARTNERSHIP AND OBLIGATION TO CONTRIBUTE

 A partnership begins from the moment of the execution of the contract, unless it is otherwise
stipulated. (Art. 1784, CC)
o Registration with the Securities and Exchange Commission is not essential to give the
partnership juridical personality.
 Every partner is a debtor of the partnership for whatever he may have promised to contribute
thereto. (Art. 1786, CC)
 A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor
for the interest and damages from the time he should have complied with his obligation (Art.
1788, CC)
 A partner who contributes property is bound to warrant the thing against eviction (Art. 1786,
CC)

RULES ON CONTRIBUTION AND SHARES

Capital:

 That stated in the agreement shall prevail;

 In the absence thereof, the share shall be equal;
 In case of imminent loss of the business, additional share as may be determined by the majority.

Profits:

 The partners share the profits according to their agreement subject to Art. 1799.
 If there is no such agreement:
o The share of each capitalist partner shall be in proportion to his capital contribution.
o The industrial partner shall receive such share, which must be satisfied first before the
capitalist partners shall divide the profits, as may be just and equitable under the
circumstances. The share of an industrial partner in the profits is not fixed as in the
 case of the capitalist partners as it is very difficult to ascertain the value of the
services of a person.

Losses:

 The losses shall be distribused according to their agreement subject to Article 1799.
 If there is no such agreement, but the contract provides for the share of the partners in the profits,
the share of each in the losses shall be in accordance with the profit sharing ratio, but the
industrial partner shall not be liable for losses. The profits or losses of the partnership cannot be
determined by taking into account the result of one particular transaction but of all the
transactions had.
 If there is also no profit-sharing stipulated in the contract, then losses shall be borne by the
partners in proportion to their capital contributions, but the purely industrial partner shall not be
liable for the losses.

OBLIGATIONS AND RIGHTS OF THE PARTNERS

OBLIGATIONS OF PARTNERS AMONG THEMSELVES

1. Contribution of property; (Art. 1786, NCC)

2. Contribution of money and money converted to personal use; (Art. 1788, NCC)
3. Prohibition in engaging in business for himself; (Art. 1789, NCC)
4. Contribute additional capital; (Art. 1791, NCC)
5. Managing partner who collects debt; (Art. 1792, NCC)
6. Partner who receives share of partnership credit; (Art. 1793, NCC)
7. Damages to partnership; (Art. 1794, NCC)
8. Keep the partnership books; (Art. 1805, NCC)
9. Render information; (Art. 1806, NCG) and
10. Accountable as fiduciary. (Art. 1807, NCC)

RULES REGARDING CONTRIBUTION OF MONEY TO THE PARTNERSHIP

1. To contribute on the date fixed the amount the partner has undertaken to contribute to the
partnership;
2. To reimburse any amount the partner may have taken from the partnership coffers and converted
to his own use;
3. To indemnify the partnership for the damages caused to it by delay in the contribution or
conversion of any sum for the partner's personal benefit;
4. To pay the agreed or legal interest, if the partner fails to pay his contribution on time or in case
he takes any amount from the common fund and converts it to his own use.

Rule regarding obligation to contribute to partnership capital:

 Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the
capital of the partnership. (Art. 1790, NCC). It is not applicable to an industrial partner unless,
besides his services, he has contributed capital pursuant to an agreement.

OBLIGATIONS OF MANAGING PARTNERS WHO COLLECT HIS PERSONAL RECEIVABLE

FROM A PERSON WHO ALSO OWES THE PARTNERSHIP

1. Apply sum collected to 2 credits in proportion to their amounts

2. If he received it for the account of partnership, the whole sum shall be applied to
partnership credit (Art. 1792, NCC)
OBLIGATION OF A PARTNER WHO RECEIVES SHARE OF PARTNERSHIP CREDIT

 To bring to the partnership capital what he has received even though he may have given receipt
for his share only. (Art. 1793, NCC)

Requisites:

1. A partner has received in whole or in part, his share of the partnership credit;
2. Other partners have not collected their shares; and
3. Partnership debtor has become insolvent. (Art. 1793, NCC)

RIGHTS OF PARTNERS

1. Right to reimbursement for amounts advanced to the partnership and to indemnification for risks
in consequence of management; (Art. 1796, NCC)
2. Right on the distribution of profits and losses; (Art. 1797, NCC)
3. Right to associate another person with him in his share without the consent of the other partners;
(Art. 1804, NCC)

NOTE: Such partnership formed between a member of a partnership and a third person for a division of
the profits coming to him from the partnership enterprise is termed sub-partnership.

4. Right to free access and to inspect and copy at any reasonable hour the partnership books; (Art.
1805, NCC)

OBLIGATIONS OF THE PARTNERSHIP/PARTNERS TO THIRD PERSONS

3. Partner as an agent of the partnership. (Art. 1818, NCC)

 Acts for apparently carrying on the usual way the business of the partnership (Art. 1818)
 Acts of strict dominion or ownership when authorized (Art. 1819)
 Acts in contravention of the authority granted but the third person has actual or presumptive
knowledge of the restrictions (Art. 1818)

4. Conveyance of real property belonging to the partnership. (Art.1819, NCC)

5. Admission or representation made by any partner concerning partnership affairs within the scope
of his authority is evidence against the partnership. (Art. 1820, NCC)

6. Notice to partner of any matter relating to partnership affairs operates as notice to partnership
except in case of fraud:

(a) Knowledge of partner acting in the particular matter acquired while a partner
(b) Knowledge of the partner acting in the particular matter then present to his mind c.
Knowledge of any other partner who reasonably could and should have communicated it to
the acting partner. (Art. 1821, NCC)

7. Partners and the partnership are solidarily liable to third persons for the partner's tort or breach
of trust. (NCC, Art. 1822-24)

8. Liability of incoming partner is limited to:

(a) His share in the partnership property for existing obligations

(b) Extends to his separate property for subsequent obligations. (NCC, Art. 1826)
9. Creditors of partnership are preferred in partnership property. Private creditors of each partner may
attach the partner's share in partnership assets. (NCC, Art. 1827)

RULES REGARDING DISTRIBUTION OF PROFITS AND LOSSES

a. Distribution of Profits

 The partners share in the profits according to their agreement.

 In the absence of such:

a. Capitalist partner - in proportion to his contribution;

b. Industrial partner - what is just and equitable under the circumstances. (Arts. 1797, NCC)

b. Distribution of Losses

 The partners share in the losses according to their agreement.

 In the absence of such, according to their agreement as to profits.
 In the absence of profit agreement, in proportion to his capital contribution. (Art. 1797, NCC)

FINAL STAGES OF PARTNERSHIP

1. Dissolution - A change in the relation of the partners caused by any partner ceasing to be associated in
carrying on the business. (Art. 1828, NCC) Partners cease to carry on the business together. It represents the
demise of a partnership. Thus, any time a partner leaves the business, the partnership is dissolved.

2. Winding up - Actual process of liquidating and settling the partnership business or affairs after
dissolution. It is the final step after dissolution in the termination of the partnership.

3. Termination - Point in time when all partnership affairs are completely wind-up and finally settled;
signifies the end of the partnership life. It takes place after both dissolution and winding up have occurred.

CAUSES OF DISSOLUTION

1. Without violating the agreement between the partners:

a) Termination of the definite term or specific undertaking

b) Express will of any partner in good faith, when there is no definite term or particular undertaking
specified
c) Express will of all partners who have not assigned their interested or suffered them to be charged
for their separate debts, either before or after the termination of any specified term or particular
undertaking
d) Expulsion in good faith of any partner

2. Violating the agreement;

3. Business becomes unlawful;

EFFECTS OF DISSOLUTION

1. Partnership is not terminated;

2. Partnership continues for a limited purpose;
3. Transaction of new business is prohibited.
4. Existence of partnership terminated

Effect of dissolution on the authority of a partner

GR: The partnership ceases to be a going concern.

XPN: The partner's power of representation is confined only to acts incident to winding up or completing
transactions begun but not then finished. (Art. 1832, NCC)

WINDING UP OF THE PARTNERSHIP

 Order of Preference of Liabilities of the Partnership:

 Those owing to creditors other than partners
 Those owing to partners other than for capital and profits
 Those owing to partners in respect of capital o Those owing to partners in respect of profits

After the exhaustion of the partnership property, the partners shall contribute pro rata with their own
property.

TOPICS: REVISED CORPORATION CODE (RA NO. 11232)

DEFINITION

 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, RCC)

Attributes of the Corporation

1. It is an artificial being;
2. It is created by operation of law;
3. It has the right of succession; and
4. It has only the powers, attributes and properties expressly authorized by law or incident to its
existence. (Sec. 2, RRC)

CLASSES OF CORPORATION

1. As to whether shares of stocks are issued or not

Stock corporation - share capital are divided into shares and are authorized to distribute to shareholders
dividends on the basis of shares held

Non-stock corporation – no part of its income is distributable as dividends

2. As to nationality

a) domestic corporation
b) foreign corporation
c) multinational corporation

3. As to number of persons composing them

a) sole corporation
b) aggregate corporation

4. As to purpose

a) government corporation (public, GOCC)

b) privately owned corporation (civil, eleemosynary, ecclesiastical, lay)
c) quasi-public corporation (for profit but perform public service)
5. As to legal right to corporate existence

a) de jure corporation
b) de facto corporation

6. As to extent of membership

a) open corporation
b) close corporation

7. As to relations to other corporations

a) parent or holding corporation

b) subsidiary corporation
c) c. affiliated corporation

8. Other classifications

a) Corporation by prescription
b) Corporation by estoppel

9. One Person Corporation - a corporation with a single stockholder, who may be a natural person, a trust,
or an estate.

NATIONALITY OF CORPORATIONS

Test in determining the nationality of a corporation:

1. Control test: Nationality is determined by the nationality of the controlling stockholders or

members. In times of war, this test shall apply.
2. Grandfather rule: In case of doubt, it is the method of attributing the shareholdings of a given
corporate shareholder to the second or even the subsequent tier of ownership to determine the
ultimate ownership in a corporation.

The Grandfather Rule Applies if:

1. The Filipino equity is less than 60% of the outstanding capital of a corporation that owns shares
in a partly 'nationalized enterprise; or
2. There is attempt to circumvent the nationalization requirement or when there is doubt as to the
real owners, as in the case where there is layering.

CORPORATE JURIDICAL PERSONALITY

Doctrine of Separate Juridical Personality (Doctrine of Corporat Entity)

 A corporation has a personality separate and distinct from its members. It has a personality
separate and distinct from the persons composing it as well as from of any other entity to which
it may be related.

DOCTRINE OF PIERCING THE CORPORATE VEIL

 Under the doctrine of piercing the corporate veil, the corporate existence is disregarded when the
corporation is formed or used for illegitimate purposes, particularly, as a shield to perpetuate
 fraud, defeat public convenience, justify wrong, evade a just and valid obligation or defend a
crime.
 The corporate mask may be removed or the corporate veil pierced when the corporation is just an
alter ego of a person or of another corporation. For reasons of public policy and in the interest of
justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud,
illegality or inequity committed against third persons.

CAPITAL STRUCTURE

Required Number of Incorporators:

 Any person, partnership, association, or corporation, singly or jointly with others but not more
than fifteen (15) in number, may organize a corporation for lawful purpose or purposes. (Sec. 10,
RCC)
 For the purpose of forming a new domestic corporation under the RCC, two or more persons, but
not more than 15. may organize themselves and form a corporation.
 Only a One Person Corporation (OPC) may have a single stockholder, as well as a sole director.
Accordingly, its registration must comply with the corresponding separate guidelines on the
establishment of an OPC. (Sec. 1. SEC MC No. 16-2019)

Qualifications of Incorporators

1. Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of
stock. (Sec. 10, RCC)
2. Incorporators who are natural persons must be of legal age: and
3. Incorporators must sign the Articles of Incorporation/Bylaws. (Sec. 3. SEC MC No. 16-2019)

Note: Natural persons who are licensed to practice a profession, and partnerships or associations
organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation
unless otherwise provided under special laws. (Sec. 10, RCC)

SUBSCRIPTION REQUIREMENTS

 Since stock corporations are not required to have a minimum capital stock, there is no
requirement for minimum subscribed and paid up capital. (Sec. 12, RCC)

CORPORATE TERM

 A corporation shall have perpetual existence unless its articles of incorporation provides
otherwise. (Sec. 11, RCC)

CLASSIFICATION OF SHARES OF STOCKS

1. Common stock - represents the residual ownership interest in the corporation. It is a basic class of stock
ordinarily and usually issued without extraordinary rights or privileges and entitles the shareholder to a pro
rata division of profits. It usually carries with it the right to vote, and frequently, the exclusive the right to
do so.

2. Preferred stocks are those which entitle the shareholder to some priority on dividends and asset
distribution and other preferences as may be stated in the Articles of Incorporation which are not violative
of the provision of the Code.

a. Whether the preferred shareholders have the right to receive additional dividend:
 a) Participating - the holder is still given a right to participate with the common stocks holder
dividends beyond the stated preference.
b) Non-participating - where there is no such participation. b. Whether preferred shareholders
have the right of to receive dividend in

arrears:

a) Cumulative - those that entitle the owner to the payment of not only current dividend but also
back dividends not previously paid whether or not during the past years, dividends were declared
or paid.
b) Non-cumulative - those which entitle the holder of such share only to the payment of current
dividends when dividends are paid, to the extent agreed upon before any other stockholders are
paid the same.

OTHER CLASSIFICATION OF SHARES OF STOCKS

 Ordinary or preference shares can be classified according to the purpose for which they are
issued or acquired:
1. Founders' Share
2. Bonus Share
3. Treasury Share
4. Promotion Share
5. Donated Share
6. Watered Share

STAGES IN ORGANIZING CORPORATION

1. Promotion
 Issuing of prospectus
 Procuring subscriptions from prospective investors
 Securing a corporate charter
2. Incorporation
3. Formal organization and commencement of business

ARTICLES OF INCORPORATION

Nature and Function of Articles of Incorporation:

 It is one that defines the charter of the corporation and the contractual relationships between the
State and the corporat the stockholders and the State, and between the corporation its
stockholders.

Contents of Articles of Incorporation:

1. Name of corporation:
2. Purpose/s, indicating the primary and secondary purposes:
3. Place of principal office (must be within the Philippines):
4. Term for which the corporation is to exist (if it did not elect perpetual existence):
5. Names, nationalities and residences of incorporators:
6. Number of directors (shall not be more than 15 but number of trustees may be more than 15):
7. Names, nationalities, and residences of the persons who shall act as directors of trustees until the
first regular ones are duly elected and qualified:
8. If it be a stock corporation, amount of authorized capital stock, number of shares and in case of
par value stock corporations, the par value of each shares, names, nationalities, residences, and
 the amount subscribed and paid by each on his subscription, and if some or all of the shares are
without par value, such fact must be stated:
9. If it be a non-stock corporation, the amount of its capital, the names, nationalities and residences
of the contributors and the amount contributed by each.
10. Such other matters consistent with law and which the incorporators may deem necessary and
convenient.
11. An arbitration agreement may be provided in the articles of incorporation pursuant to Section
181 of the Code. (Sec. 13, RCC)

REGISTRATION, INCORPORATION AND COMMENCEMENT OF CORPORATE EXISTENCE

 A private corporation formed or organized under the Code commences to have corporate
existence and juridical personality and is deemed incorporated from the date the SEC issues a
certificate of incorporation under its official seal; and thereupon the incorporators,
stockholders/members and their successors shall constitute a body corporate under the name
stated in the articles of incorporation for the period of time mentioned therein, unless said period
is extended or the corporation is sooner dissolved in accordance with law. (Sec. 18, RCC)

CORPORATE BY-LAWS

Nature and function of by-laws

 By-laws signifies the rules and regulation or private laws enacted by the corporation to regulate,
govern and control its own actions, affairs and concerns and its stockholders or members and
directors and officers with relation thereto and among themselves in their relation to it.
Requisites of valid by-laws:
1. It must be general and uniform in its effect or applicable to all alike or those similarly situated:
2. It must be reasonable, not arbitrary.
3. It must be consistent with the Articles of Incorporation.
4. It must not be contrary to law. public policy or morals:
5. It must not impair obligations and contracts and vested rights.

Contents of By-laws

1. Time, place and manner of calling and conducting meetings of directors or trustees:
2. Time and manner of calling and conducting of stockholders' or members' meetings and mode of
notifying them:
3. The required quorum and the manner of voting:
4. The modes by which a stockholder, member, director or trustee may attend meetings and cast
their votes:
5. The form for proxies of stockholders or members and the manner voting them:
6. The directors or trustees qualifications, duties and responsibilities. guidelines for setting the
compensation of directors or trustees and officers. and the maximum number of other board
representations that an director or trustee may have:
7. The time for holding the annual election of directors or trustees and the mode or manner of
giving notice thereof;
8. The manner of election or appointment of officers other than director trustees:
9. The penalties for violation of bylaws;
10. In case of stock corporations, the manner of issuing stock certificates: 11. Such other matters
necessary for the proper and convenient transaction of its corporate affairs.
11. An arbitration agreement may be provided in the by-laws pursuant to Section 181 of the RCC.
(Sec. 46, RCC)

CORPORATE POWERS
  A corporation has no power except those expressly conferred on it by the Corporation Code and
its charter, and those that are implied or incidental to its existence.

Kinds of corporate powers:

1. Express powers - powers expressly provided by the Corporation Code, applicable special laws,
administrative regulations, and the Articles of Incorporation of the corporation.
2. Inherent/Incidental powers- not expressly stated but are deemed to be within the capacity of
corporate entities: powers that are deemed conferred on the corporation because they are
incidental to the existence of the corporation. (Sec. 2. RCC)
3. Implied/Necessary powers - exist as a necessary consequence of the exercise of the express
powers of the corporation or the pursuit of its purposes.