Is it operate my business under my name or other
person’s name?
 refereeing to sole proprietorship
 If the business is not a small enterprise
avoid sole proprietor risk – there is a risk
under his name. can he operate another
entity’s name?
How would you say that a corporation is a different
personality?
Corporation has separate and distinct personality
from its shareholders -- if it incurred tax liability,
the defense cannot run after its shareholders.
 ang puweding habuling ay un investment ng
stockholders.
 this is the doctrine of limited Liability
How can you be the owner of the corporation?
 share holder (don’t call yourself an owner)
 payment for shares of stocks - the contribution
of the shareholders
Under the revised corporation the incorporators
the incorporators can be below 5 in fact it can only
be one.
Paid up capital – un capital na need para maka upsi
ng business un ngayon na ngayon na to start the
business
2M – un na produce na una.
5M – authorized capital stocks (unbibilin ng mga
ibangwant pa mga own ng corp)
If corpo then un anak mag bebenta siya ng portion
niya puwede ba niya ibenta ng walang consent un
ibang stock holders?
 Yes. doctrine free transferability of units of
investment.
Declaration of dividends – which is declared by the
corporation. (Dividend income)
Gain from trading – bili ng stock then if tumaas un
value ng shares sell the share.
 if hawak mo lang un shares mo di mo binbenta –
you will earn divided income  if binenta mo than
you will earn from gain from trading.
CORPORATION AND ITS ATTRIBUTES
Section 2 -- CORPORATION – is an artificial being
created by operation of law, having the right of
succession and powers, attributed and properties
expressly authorized by law or incidental to its
existence.
ATTRIBUTES OF A CORPORATION
1. Artificial being
2. Created by operation of law
3. It has the right of succession
4. It has powers, attributes and properties’
expressly authorized by law or incidental to
its existence
ARTIFICAIL BEING
- It treated by law as a separate person,
distinct form the investors, or incorporators,
or stockholders  Doctrine of Corporate
entity
- It can be liable for the acts and obligations
signed in its name
- It can sue and be sued separate from the
stockholders.
- Can buy and sell properties.
- Stockholders – are entitle to a
proportionate share in the corporation but
that amount to being a co-owner of a
specific property under the name of the
corporation
- Can buy and convey the corporation
RIGHT TO SUCCESSION
- Corporation will continue to exist even with
the change in the membership or
composition of stockholders.
- In partnership – change in the membership
it dissolves the partnership, if another is
admitter or one dies then it is dissolved it
will cease to exist.
- In corp – even if there is an additional
investor or one withdraws – dose not
dissolve the corporation
 POWERS, ATTRIBUTES AND PROPERTIES
EXPRESSLY
- authorize by law or incident to its existence
- Because a corp is created by law, corp
should act in accordance with law (RCC)
Q: Is there a need for express grant do as to what
powers they may exercise?
A: no. Because the RCC, provides for the general
powers a corp can exercise
Q: if the president enters into a contract on behalf
of the corporation as authorized by the governing
body BoC can the president be made liable for the
contract that he signed in behalf of the corp?
A: NO. because he entered into the contract on
behalf of the corporation. Apply doctrine of
corporate entity
HC: a person cannot sue the corporation for the
debt of its members, even if the member is the
president or director.
APT v CA
Was it proper to award the damages in favor of
Held: the corporation is not entitled to any award
of damage because it should be included in the
suit.
An individual stock holder is permitted to institute a
derivative suit (legal action filed by the shareholder of a
company to address any harms or wrongs done to the
company. A derivative lawsuit is generally filed on behalf
of the company against executives or board members)
On behalf of the corporation wherein he holds
stock in order to protect or vindicate the corporate
rights, whenever the officials of the corporation
refuse to sue, or are the ones to be sued or hold
the control of the corporation. In such actions, the
suing stock holder is regarded as the nominal party
and with the corporation as the real party interest.
HC: sabi ni DPB teka may intrestako sa MIIC, so
dapat okay lang na awardan ang MIIC since party
naman ako; HELD: equity did not give it not
ownership the right of the DPBP over the corporate
property is merely INCHOATE.
 Why inchoate? – because if the corporation
did not dissolve yet, THE property of the
corporation is the property of the
corporation. Ang pag aari lang niya ar un
shares – not the property.
When can a stockholder institute a derivative suit?
A: Requisites:
1. to protect or vindicate the corporate rights
2. the officials of the corporation refuse to
sue, or are the ones to be sued or hold the
control of the corporation
3. OR it is also possible it is the stockholder
who is sued.
Q: If the stock holder who filed a suit pertaining to
the interest and properties of the corporation is it
proper?
A: No. in this case the MICC corporation was no
impleaded in the case, it is not a party interest in
the case. The controversy in this case revolves
around the properties of the stockholders.
Q: can the corporation represent its stockholders?
A: No.
Can corporation be awarded moral damages?
--- it depends – no definite pronouncement---
HC: pag ang ang pinupuntirya sa question ay
besmirched reputation use pp. v manero “corps.
Are entitled to moral damages due to besmirched
reputation”
Mambulao v PNB – if the issue does not include
besmirched reputation
Since the corporation is an artificial being it cannot
suffer sleepless nights. Hence they are not entitled
to moral damages
BAC & co. v RUIZ (rights against unreasonable
search)
The corporation is protect by the constitutional
guarantee, but the officers of the corporation have
no personality to assail the legality of seizures.
HC: dapat un corporation ang mag quequestion ng
legality ng SW not its stockholders
Q: does the corporation have the right against-self
incorporation?
A: No. this right is persona and it will only apply to
natural individuals. Also a corporation is vested
with special privilege and franchise by the state,
thus it may be compelled to submit to the visitorial
powers of the State.
Q: would it mean that a corporation is not
protected by the Data privacy Act?
A: NO. data privacy act is another matter. Hence,
corporation under the data privacy act.
Can a corporation be criminally liable?
a corporation always acts thru the BoD and officers
and its agents.
HC: it can be charged criminally and civilly. If the
penalty is a fine then it can be subject to the
penalty of paying a fine.
The SC held if a crime is committed by the
corporation, then the corporation is not the one
liable criminally, because it cannot be imprisoned.
Hence, the liability will not fall upon the
corporation. PUWEDE maka commit ng crime, thru
its officer and BoD but it cannot be imprisoned;
BUT if the penalty is only a FINE the corporation
will be labile.
 Can it commit a crime?
 yes. thru its BoD
 Can it be panlized?
 it depends. If imprisonment No. if FINE
yes.
RIGHT TO REPRESENT
Sulo ng Bayan
What was the problem that need to be addressed?
 WON the corporation a non-stock may institute
an action in behalf of it members over a land
property owned by its members?
Who are the aggrieved parties?
 members of the Sulo ng Bayan
Who filed the case?
 Sulo ng Bayan co.
Does it have the personality to file the case?
No. It does not legal interest and the members did
not transfer legal interest to the corporation; it
does not have any legal interest in the case. it
cannot file a case behalf of its stockholders because
it has a distinct and separate entity. it is not affect
by the individual rights and transactions of it
stockholders. It does not talk about the properties
of the stockholders but not the property of the
corporation.
It cannot be awarded damages, because it is not a
party of the case. (not in answering the question if
a corporation has the legal interest in the case 
before inserting that it is a diff. personality to the
corp. – it is not a party to the case)
DOCTRINE OF PIERCING THE VEIL OF CORPORATE
ENTITY
Disregarding the doctrine of corporate entity
- Creditors duing the corp. has the burden
proof of proving that the corp. was used to
perpetrate fraud for the courts to pierce the
veil of corporate entity
Q: When do you need to disregard the doctrine of
entity and consider the directors and officers as
one?
A: it is when the corporation is used for fraud, used
as a vehicle to perpetuate a illegal activity  here
the court can disregard the doctrine of corporate
entity so that the directors can be made liable to
civil or criminally.
EX: ABC co. borrowed money from X. If X wants to
sue an action for the recovery or damages. He will
go after the properties of the corporation. X cannot
go after the incorporators or stock holders. The
directors is not obligated to get monwy fr: their
p[pckets to collect money form X.
Q: what if the BoD of ABC decided to not pay X they
have, sufficient assets but they don’t want to pay X.
Hence, they dissolved the corporation and crated
another corporation so X cannot go after them due
to doctrine of corporate entity. They transferred all
assets to another corp still owned by them
A: The reason for dissolving the coprporation, was
to defraud X, and transferred all assets. ABC corp.
cannot be considered as a separate entitiy now.
Because the doctrine of doctrine of corporate entity
was used as a vehicle to perpetrate fraud against X. and welfare purposes, benefit /
So X can ask the court to perice the veil, meaning X gain
now can go after the BoD of ABC, who are guilty in Personality begins upon When SEC issues a cert. of
passage of the law incorporation
the perpetration of Fraud. Not Subject to COA Not subject to COA. Cannot
audit to book of accounts of
GR: Doctrine of Corporate Entity the corpo
EXP: Piercing the veil of corporate entity
o It does not necessarily mena that when a
Q: A has multiple creditors, and he does not want corporation is owned by the state or its
to pay the creditors, so he created a corporation instrumentality is automatically a public
and put all his assets under the name of the corp. corporation
so the the creditors cannot attach, properties of A. o GOCC are said top be govt corporations but
Can the creditors go after the corporation for the do not fall w/in the classification of a public
debts of A? corporation.
A: Yes. Because he can apply the Doctrine of o Many private corps are granted special
Piercing the veil of corporate entity. charter by the legislature , because they
constitute gocc or controlled corps but STILL
TYPES OF CORPORATION cannot be considered as a public
SECTION 3 RCC corporation
Stock Corporation Non-Stock Corporation o EXAMPLE. Nat. Coal co: the govt is the
one which have capital stock is one which do not issue
divided into shares and are shares and are created not for
majority stock holder, it has a charter.
authorized to distribute to profit but for public good and HOWEVER, the law creating its charter was
the holders of such shares welfare and where no part of expressly made the company subject to the
dividends or allotments or its income is distributable as
the surplus profits on the dividends to its members,
RCC. – then it is a private corporation – even
basis of the shares held. trustees, or officers. if the majority of the stockholder are owned
by the govt, and the charter was a direct
created for making a profit. Created for public welfare grant – asid from the fact that it has been
made subject to the provision of RCC I was
Profit is distributed to the Does not capital stock
stockholders in the form of distribute to the members NOT INCORPORATED FOR PUBLIC WELFARE..
dividends. -- Private corporation
o EXAMPLE: NAFCO created under the
Has Capital Stock Religious, charitable, scientific, common wealth act, controlling shares
literary or civic organizations. owned by govt .. – but the it was made
subject to the provisions of RCC = PRIVATE
Issues stocks / shares Does not issue stock/ share.
(Stockholders) (members) o EXAMPLE: a corporation has its own charter
but it is not subject to the control or
Note: there are business that can only be created in supervision of any of the agency of the state
the form of stock corporation – banks or financial and employees are covered by the SSS =
institutions private.
Acc. To Purpose o It is not public purpose alone that
determines if a co. is private or public or the
Public Corporations Private Corporation ownership of its capital, or the fact that it
Created by special law Created by General has its own charter.
Law – corporation code 3 types of private corporation:
Has own charter No own charter, 1. Organized under the Corporation for
franchise is granted by PRIVATE ENDS
SEC 2. Organized under the Corp. Code as GOCCs
Purpose: general good Purpose: private to achieve certain purposes for the Govt
 3. GOCCs organized with own charters. participation of the government in the
selection of members of the national
NOTE: it is possible for a GOCC to have private executive board of the BSP
holdings and private corp. to have govt’ holdings.
GOCC is organizes as – EITHER stock or non stock
Quasi-Public GOCC  The moment the corporation is organized to
Corporation be NEITHER a stock or non-stock it ceases to
Private corporations Agency organized as a be a GOCC (it should either be a stock or
supported by the stock or non-stock nonstock)
government in the corporation vested w/
performance of public functions relating Why did the SC as an instrumentality as well?
duties. (electric, H2O, public needs whether  Because there is a provision on the charter
trnaspo.) governmental or of BSP which states that it will be
propriety in nature, considered as an attached agency of DECS
and owned by the
govt’ directly through HC: bakit di siya puweding maging instrumentality
its instrumentalities lang? kasi instrumentality is NEITHER a stock or a
either wholly or where non-stock which is the basic characteristic of an
applicable in the case instrumentality. It was both, kasi nga attached
of stock corporations, agency siya ng DeCS so nag peperform ng
the extent of at least governmental functions which is basic
majority of its characteristic of a government instuentality. PERO,
outstanding capital NGA CREATED SIYA AS a non-stock. Pero di din siya
stock puwede GOCC lang kasi nga it was not designed to
A stock or a non-stock earn revenue.

MIAA v CA
Public and Private – this classification talk about
purpose.
Instrumentality – neither a non-stock or a stock
BSP Case
Both a public and government instrumentality
 Because BSP has both characteristics of a
GOCC and an instrumentality
Why was it considered as as gocc?
 Because it is created as a non-stock co.
 The 2nd aspect is that is exercises corporate
powers however, there is a substantial
 MIAA is an instrumentality because it is
neither a stock NOR a non-stock
corporation
 In order for a corporation to be considered
as a GOCC it is a must that it be organized
either as a non-stock or a stock corporation
 It is not a stock corporation because even if
it has a capital the stock is not divided into
shares
Why is it not considered as a non-stock?
 20% of its annual gross operating income
will be distributed to the national treasury,
hence it will not be considered as a non-
stock corporation (kasi dapat pag nonstock
di dapat ididistribute un income niya to its
members kaya di siya non stock)
 MIAA is not organized for charitable,
religious, educational, professional, cultural,
recreational fraternal, literary, scientific,
social, civil service, or similar purposes like
trade, industry, agriculture.
  It operates a public utility for international
and domestic air transport
HC: compared sa BSP. Instrumentality lang siya kasi
performing governmental function kasi siya nag
mamanage ng airport. Di siya GOCC because it is
not a stock and it is also a non-stock. If na create
siya as a non-stock similar na siya sa BSP it will be
regarded as both gocc and instrumentality.
 is there a prohibition that a government
instrumentality should neither be a stock or a non-
stock? WALA (the law does not say that an
instrumentality of the govt must either be a stock
or non-stock – pang GOCC un)
The difference between an instrumentality and a
GOCC is that a GOCC is either a stock or non-stock.
An instrumentality is NEITHER a stock or a non-
stock.
HC: hindi puwedng maging gooc if its not created as
a stock or non-stock
REQUISITES FOR STOCK CORPORATION
1. There must be a capital
2. It must be divided into shares
REUQISITES OF A NON-STOCK
1. None of its income will be distributed to its
officers
2. It should be organized as a charitable,
religious, educational, professional, cultural,
recreational fraternal, literary, scientific,
social, civil service, or similar purposes like
trade, industry, agriculture.
GOCC Gov’t instrumentality
EITHER stock or non- NEITHER a stock or
stock (pag di siya non-stock
stock or nonstock
matic di siya gocc)
Exercises corporate Exercises corporate
powers powers
No they are Perform
designed to earn governmental
revenue functions
LIBAN v GORDON
PNRC
 SUI GENERIS
 the constitution on the prohibition on the
creation of private corporation by virtue of a
special law was not applied in this case.
 PNRC is a national society enjoying the
status as an auxiliary of the state.
 Not a private corporation because it was
created by virtue of the Geneva convention.
 It enjoys a special status under international
humanitarian law and as auxiliary of the
state to comply with Geneva convention
 NOT an instrumentality and not a private
corporation – it is rather considered as a
national society
HC: the constitution proscribes the creation of a
private corporation by a special charter because a
private corporation must only be created by virtue
of a general law. – it should not be created by a
special law! – because if that is the case it will be
considered as a public corporation
NOTE: under the constitution the congress cannot
create a corporation by virtue of a charter. The
government can only do so in the creation of a
GOCC because it is owned by the government.
VFP v REYES
REQUISITES OF A PUBLIC CORPORATION
1. Created by a special law
2. Must be created for public interest
VFP – public corporation, is subject to supervision
of the national defense.
NOTE: public corporation subject to the supervision
of the government and COA.
FUNA v MECO
 Created to perform consular function
 MECO is a non-stock
 BUT it is not owned by the government
 It Is not a GOCC, although it is for public
purpose and a non-stock
 It is also not a government instrumentality
(kasi nga non stock siya)
 MECO is SUI GENERIS
 Since MECO handles of government funds,
and collects it on behalf of the DOLE since it
collects government funds it is subject to
COA audit notwithstanding the fact that it is
a sui generis entity
REQUISITES TO BE A GOCC
1. Non-stock or non-stock
2. Public character of its function; it has be
vested with public interest
3. Government ownership
NOTE: if 1 & 2 is present but the govt dosent own it
then it cannot be considered as a gocc
SUMMARY
It is important to know WON a corporation is a
public corporation or private corporation because
any question with tax exemption, supervision of the
govt and coa audit will determined if the
corporation is private or public.
2 determining factor to treat a corp. as a PUBLIC
co.
1. Manner of creation
2. Purpose of which it has been established
(public functions)
Once you determine if it is a public or private co.
determine if it is a government instrumentality or
GOCC
 Because of tax exemption
 GOCC – considered as taxable entities
 Instrumentalities – exempt from taxes
NOTE: to be considered owned by the govt there is
no specific amount of ownership required kahit
konti lang un ownership ng govt can be considered
as government owned
Stock v Non-stock
Non-profit – hindi ibig sabihin non ay hindi
kumikita; the meaning is the profit is not
distributed to the members.
 The moment it distributes its profits to its
members it ceases to be a nonprofit
organization it becomes a profit
organization
Authorized capital stock – plano nilang total share
na gusto nilang ibenta
EX: J,H,A co. needs a capital of 10m. 2M-J 1M H & A
= 4M un nabili naming tatlo sa 10 ang tawa sa 4m
ay subscribed capital
What if sabi ni H, puwede bang 500k muna pero
bibilin ko yang 1M. – yes an tawag sa bayad na ay
PAID UP CAPITAL, -- un hinid pa bayad SUBSCRIBED
CAPITAL
Issuance of shares – if ang corporation ang nag
bebenata ng shares
Distribution of dividends – based on percentage og
share.

Q: is there a possibility that there will be more than
20 shareholders, but the shares will not be listed in
the stock exchange?
A: Yes. get secondary franchise if lalampas ng 20 it
is required
NOTE: it is not the nationality of the shareholders
but rather it is the manner of creation of the
corporation. specifically under what laws the
corporation is incorporated. For example if a
corporation is incorporated under the laws of the
Philippines then it is a domestic corporation.
Articles of corporation is submitted in Ph
if a corporation it's formed by Filipino citizens
however it was incorporated in South Korea and
under South Korean laws. Articles incorporation
submitted in Korea.
Foreign investment act
Retail company must be 100% Filipino owned
- Grocery, bakery
NOTE: although 100% domestic corporation so long
as the articles of incorporation is submitted under
the laws of the PH.
Special Charter corporations
 SEC has no jurisdiction over a corporation
operating under a special law or charter
 This corporation need not register with SEC
 GOCC – being a public corporation SEC has
no jurisdiction over them
EDUCATIONAL INSTITUTIONS
 Can be a stock or non-stock
 If it will be created as Non stock then the
BoT must be NOT LESS THAN 5, NOT more
than 15 and it must be in the multiples of 5
 If STOCK – governed by their own articles
(kahit ano)
RELIGIOUS SOLE & RELIGIOUS SOCIETIES
Religious sole – ONE PERSON
Religious society – multiple persons
FORMATION OF A CORPORATION
what brings a corporation into existence?
 issuance of the certificate of incorporation by
the SEC.
Incorporators – original formers of the
incorporation
Can a corporation become an incorporator?
A: YES, corporations, partnerships. SEC 10.
Note the EXP: partnerships created for a practice of
a profession can’t form corporation.
 Law firms cannot create corporation a
general partnership (wha the can establish
is a general professional partnership)
To be an incorporator – must own at least one
share; of the company.
One person corporation Is now allowed,
The law does not provide for a minimum number
Maximum – 15 (not more than 15)
GR: no corporate existence unless there is a
certificate of incorporation
EXP: Doctrine of Ratification
EXP to EXP: Doctrine of Ratification, will not be
applied if it will cause injustice.
Who can become incorporators?
Anu person, partnership, corporation, association
EXP:
1. Partnerships created for a practice of
profession (cuz practicing a profession is
supposed to be for public service)
Q: Peason has a lawfirm, she proposed to harvey
and ross that they should form a corporation to
manage the law firm (parang un co. un magiging
holding company) hence magiging incorporator
tong law firm dun sa gagawing company. Is that
allowed?
A: NO. profession can only establish is a general
partnership
Q: what if a special law allows the creation of a
corporation for a practice of profession ex:
dentists? Sabi JK ui suga join ka naman sa
icrecreate kong corporation, suga said ay puwede
bang di nalang ako un corporation ko nalng?
A: No. because if a special law allows the creation
of corporation for the practice of profession the
the incorporators must be a natural persons. Hindi
puwedeng juridical. In this case a corporation
cannot be an incorporator becase the corporation
is being to be established for the purpose practicing
a proffesio. TAKE NOTE that is IF there will be a
special law that allows the creation of such corp. so
if may special law then G basta natural persons
How to be an incorporator?
- Must own at least one share
- An incorporator cannot be an incorporate
alone he must be a subscriber
Qualification to become incorporator?
Natural Person
1. Legal age
2. Holder of 1 share of stock/subscriber of
stock
3. Sign articles of corporation
Partnership
1. Partnership is SEC registered
2. All partners must execute an affidavit that
they will invest in a corp.
3. Designate a partner to sign the articles of
incorporation
Corporation
1. SEC registered
2. Approval of BoD / BoT and ratified by the
stockholders representing atleast 2/3 of the
outstanding capital stock. For non-stock
2/3rds of the members
3. Submission of director’s / trustee’s
secretaries cert. of their decision to invest
4. BoD / BoT must designate an authorized
signatory
PROMOTER
 Brings to gether interested in a business
 Set in motion that leads to the creation of
corporation
 Pre-incorpoopration
 Ano gusto Negosyo, purpose papano itatayo
un business
STEPS IN FORMING A CORPORATION:
1. Promotion
o incorporators can do away with it.
o meet people who could be invested
in founding a corporation
2. Drafting of articles of incorporation
3. Filing of the articles of incorporation and
other required documents w/ SEC and
Payment of required fees
4. Examination of articles by the SEC (approval
or rejection)
SEC 19 - a corporation will not commence its
juridical personality unless the SEC upon the
issuance of certificate of incorporation.
 a corporation will commence its juridical
existence from the date the SEC issues a cert. of
incorporation.
Marc II Marketing
 Takeaway: management contract was executed prior to
incorporation and after the incorporation the
management never adopted the contract.
GR: No contract entered into, before the
incorporation can bind the corporation.
EXP: Doctrine of ratification
EXP to EXP: doctrine of ratification will not apply if there
will be injustice.
HC: Before it can be binding the corporation must first
have a corporate existence, if not then there is no
corporation to speak of. Exp. If the corporation ratifies
the act after its incorporation – however if such
ratification will cause injustice, doctrine of ratification will
not apply.
When was the incorporation of the entity? August
15, 1994, petitioner corporation was officially
incorporated and registered with the SEC.  
What act of the corporation was being questioned?
Execution of a Management Contract (January 16
1994)
Was the act done before incorporation or after
incorporation?  Thus, the franchise will take effect when the
 Before the incorporation
Was the act ratified? No. Because the corporation
never ratified the said management contract when it was
finally incorporated.  considered as void act unless
There was no evidence presented to prove that the
corporation adopted, ratified or confirmed the
Management Contract.
CAGAYAN Fishing v Sandiko
NON APPLICABILITY OF THE DOCTRINE OF
INCORPORATION
Tabora may utang sa PNB, collateral nya un lupa. Nun di na
makabayad binenta niya un properties sa Co. na ginawa niya
na sila din naman un may ari. Ngayon cayan sold the
properties to sandiko. So pano hahabulin ng PNB un
properties? Eh nalipat na sa co. and kay sandiko so wawa
naman un PNB; here the sale was ratified. Will the ratification
apply?
- NO it will create an injustice on the part of
PNB
Q: is it possible that the act of promoters will be
ratified after the incorporation
A: yes. – pag rinatify un act ni promoter – it will be
considered as legally binding upon the corporation
Caram v Ca
Q: dapat bang ang stock holder ay ang mag
babayad ng fees ng promoter? Eh investor lang
naman
A: serveries prior to incorporation or pre
organizational services should be paid by the
corporation not the stockholders the services
benefited the corporation.
Rizal light v municipality of morong
At the time the franchise has been granted Morang
has no legal personality because wala pa siyang
certificate of incorporation. At the time morang has
municipal franchise morong has no corporate
existence tyet
Q: is the franchise void? Because at the time the
franchise was grated Morong was technically non-
existent
With respect to franchise it is not void; but
it is valid – it will just take effect until the
organized
 Diba sa oblicon – parang voidable – it is
valid but not effective – it will take effect
upon the organization of the corporation.
corporation is organized
GR: any act done prior to incorporation it will be
1. Act has been ratified
2. Unless it’s a pre-organizational service
3. If the issue is the effectivity of a franchise
THEORIES IN THE FORMATION OF CORPORATION
Theory of concession – the grant of juridical
personality is only by virtue of a primary franchise
(theory adopted under SEC 19)
Theory of enterprise entity – there can be no
corporate existence without persons to compose it
(theory adopted in defacto corporation)
Drafting of the articles of incorporation
a. Contents (see sec 13)
b. Form (see sec.14) – di na daw kailangin
aralin
 SC: that the articles of incorporation should prevail
because the aoi is actually the charter of the
corporation and it defines the contractual
relationship between the state and the corporation
so any data indicated in the aoi will prevail.
Sec 13 the reason why the SC ruled that the contents of
the articles of incorporation shall be binding is
because it appears that the entries in the stock and
transfer book is not completed.
stock & transfer book - basically a book that
records the names and actions of the stockholders
- It is just a measure of precaution meaning
it's necessary for precaution expediency and
convenience in order to establish the
ownerships over the shares of stocks
- if there is a discrepancy between a stock
and transferable and um AIO, AOI prevail
- articles of incorporation is considered public
record
- stock in transfer book is not considered a
public record
ang naka lagay nalng sa AOI – is un binili na share
nun time na crincreate
 what if there are additional shares?

What will happen if there is a disparity bet. The aoi

and the s&t book? And there were shares acquired
after the incorporation of the co? meaning you can
Drafting the articles of incorporation
not rely on the aoi beucase un andong lang un
Article of incorporation
unang na purchase ano ng titignan mong record?
- Charter of the corporation for the
 relly on the GENERAL INFORMATION SHEET – a
corporation to have a primary franchise
document (public) submitted to the SEC, which
- Primary franchise – certificate of
indicates the names and address, shares
incorporation issued by the SEC
purchased, tax identification no. of the stockholders
In drafting take note of 2 things Form and Contents
CORPORATE NAME
CONTENTS – SEC 13 of RRC

Laluza v CA
What would be the basis of the quorum is it the
outstanding capital stock in the AOI or is it the
outstanding capital stock in the company stock and
transfer book?  a corporation has the right to use its name
There was a difference between the aoi and like a property right
company stock transfer book  it a right in rem – can be protected against
But walang bumili ng additional share mula nun na the hold world (parang intellectual
incorporate un co. walang nag benta ng share property)

PRIORITY OF ADOPTION RULE REQUISITES
1. co. should have aquired a right to use the
corporate name
HC: pano magkakaroon ng karapant doon ? when it
registered.
2. There is another entity who would use the
proposed name but the proposed name is
either:
o Identical
o Deceptively/confusingly similar to
any of the existing corporation or
any name already protected by law
o Patently deceptive, confusing or
contrary to existing law
- Dibs parang ganon
Dos and don’ts in comping up with a corporate
name
1. Make the proposed name distinguishes
from that already reserved/registered for
the use of another corporation
- The SEC will not allow the name if it is not
distinguishable
- Even if the name contains, company,
incorporated, limited and etc it will not
make the name distinguishable
- Same with the insertion of punctuations,
conjunctions will not make the name
distinguishable
HC: di mo puweding I argue na ay may and naman
un akin, may comma. Un mga simpleng ganon will
not make the name of the company distinguishable
not even numbers.
If the commission finds out that the co. name is not
distinguishable and already protected by law the
SEC can immediately deny the application.
 There are also instances where it will be
granted
Q: what happens the co. still uses the name di nag
comply sa SEC?
A: the corporation can be held administratively and
civilly liable and criminally liable
How can you appeal when stil, gusto mo kasi un
pangalan?
 If business are not the same (purpose) kahit
sabihinmo pa na may 1 letter lang nap ag
kakaiba
 Argue in the line of purpose therefore it will
not mislead the public
PURPOSE – important in the determination if the
name is confusing.
2. Put either the word “incorporated” / “inc”
or “corporation,” or “corp.” after the name
of your company
3. If you are 1 person corporation, have the
word “OPC” below or at the end of the
corporate name (RCC sec 120)
4. If you are a foundation, the word
foundation must appear in the corporate
name
5. If the co is a non-stock, non-profit co.
engaged in microfincane activities, include
the word “microfinance” / “microfinancing”
 It will not apply if the co is a stock
co. applicable only to non-stock non
profit
6. If the name you have applied for is similar to
that of a registered co. or partnership, add
one or more distinctive words to your
proposed corporate name
  Challenging if the corporation has
the same business purpose
 Assuming the co. has a similar name
to another that is already registered,
and that co. wants to use that name
it is necessary that the co. should get
the consent of the majority if the
Bod of the earlier registered co.
7. Do not put punctuation marks, spaces signs
symbols and other similar characters
8. Word education should only be used if the
corporation is engaged in educational
services
What is the ground to pray for the change of the
name?
 Acc. To brothers the name de la salle is
misleading and confusingly similar
 And it had already acquired the right to use
the name because it already has registered
such name
Is the term “de la salle” misleading
- Because there was an argument that “de la
salle” is a generic term and being a generic
term, anybody could use it
SC: it was the brothers who first registered. Not
Montessori.
Purpose for which both companies has been
established is engaged in educational service
because they are both private educational
institutions. Thus, since the purpose which they
were created are the same then there is a need to
check whether the similarity will confuse / defraud
the public.
BUT there is no need to show an actual confusion
before there can be compulsion to change the
name – it will suffice that confusion is PROBABLE.
Compared to the case of lyceum (word lyceum is
genric word)
De la salle s not generic – why? Because the word
de la salle is not descriptive of the institution
- The usage of the same is not widespread
Compare it LYCEUM
Is lyceum descriptive of the business?
- Yes. as it refers to an educational institution
Is it widespread?
- Yes. thus it is generic
GISIS FAMILY BANK v BPI FAMILY BANK
BPI praying that the GSIS change the name
SC: PRIORITY of adoption rule. The 1 st one to
register is the family bank – hen bpi has the prior
right
- Is it confusingly similar? Kasi may dinagdag
naman na GSIS and “thrift” which would
differentiate it from BPI?
SC: the inclusion of the 2 distinctive words will not
be considered as a ground, to separate GSIS from
BPI – because both of them are engaged in the
same banking business hence the inclusion of gsis /
trift which lead to the conclusion that there will be
NO PROBABILITY of confusion because there
because there is still a probability of confusion by
linking gsis fam bank to gsis fam bank just by
thinking about the possibility of a merger (kasi
result ng merger itong si BPI fam bank) which can
result to a confusion of the public
Employer is hanjin
Issue: WON the removal of the name hanjin will be
considered as an infringement to the right of the
union to self-organization because acc. To them for
them to be linked to the corporation it is necessary
that the name of the employer will be indicated in
the name of the union
Hanjin – don’t want to include his name in the
union
But not all members of the union are not employer
of hanjin
SC: the BLR’s order to remove name hanjin is
proper and it will not be considered as an
infringement to self-organization
Industrial Refractories v CA
- The moment it as registered with the SEC
that already protects the name even
assuming that there is no registration of
business name before the DTI does not
matter
1979 industrial refractories has been incorporated
but under the name of Sinclair it was only in 1985
that it amended its name in order to rename the
corporation from Sinclair to industrial factories
corporation
 In this case the second thing that the court
considered is the BUSINESS STRUCTURE –
what is business of the co.
 Both corporation in the steel industry .
PURPOSE – would lead to the conclusion that
probably there might be a conclusion considering
that the names are similar and they are also engage
in the same business activity
Other than the purpose take note – WON it
includes distinguishing words
- Ang dinagdag kasi nun 2nd na co. is
“industrial”
- Nyaon and tanong – will that word be
enough to identify and descried the type of
business of the co?
SC: that word alone will not set is aside from
refractories co.
Ano titiganan mo if confronted ka ng co. wth 2
names: look at the:
1. Purpose
2. Distinguishing words
3. WON the similar word is a generic term
 If it’s a generic term it can be used
by the public
4. Is the use of the generic term WIDESPREAD.
 If it is not widespread it cannot be
considered within the meaning of
generic for the purposes of
registration of the name
 “Refractories” is it a genetric term? – yes, it
is a generic term – HOWEVER the use of it is
not widespread
Use of Generic name EXP
Kahit generic some1 can appropriate a generic
term for it slef (puwede mong solohin un generic
term) WHEN?
1. If the doctrine of secondary meaning
applies
It will apply when the generic name has already
been used for a long time by a corporation and the
usage of the same is exclusively made for that
corporation. (ginamit ng matagal & siya lang
gumamit)
EX: lyceum – a generic term. Widely use – yes. in
the lyceum case – it was not able to establish that
the word lyceum was used by lyceum alone to the
exclusion of the others – hence the doctrine of
2ndary meaning will not apply
What if there ius a generic term that nobody used
it and it is not widespread; co. used it for a long itm
to the exclusion of the others, will that generic
term be considered as a property of the co?
- YES.
DOCTRINE OF SECONDARY MEANING
A generic term where it can be appropriate by a
corporation
LYCEUM CASE
the supreme court held that it was actually no
evidence presented by the lyceum in order to
establish that the word lyceum has acquired
secondary meaning because they were not able to
prove that it was lyceum alone that used that word
to the exclusion of the other. While it is true that
lyceum has used the term for long time it will not
be enough – it is necessary for lyceum to prove that
the usage of the word lyceum has been used to the
exclusion of the others.
HC: Bale lonf time + to the exclusion of the others -
for a name to acquire a secondary meaning – coz if
my 2nd dary meaning it can acquire a right over the
generic term
Summary
1. Apply the priority adoption rule
o Check who registered first
2. T determine won the names won the names
are confusing and identical
o Check if engaged on the same
business
o If the names contains distinguishing
words that would set them apart
o Determine if the word is generic
o If the words are not generic check if
the word already acquired
secondary meaning
o Secondary meaning – name used for
a long time and usage must the
exclusion of the others
3. Names can be questioned before SEC or
may be collaterally attacked in another
proceeding.
Corporate name can Collaterally attack – di
kailangan directly filing in SEC meaning you can
question thru a case filed in court not necessarily
the sec. un NLRC siya un nag direct to remove the
name of hanjin for ex sa case ni hanjin
Purpose of a corporation
Doctrines of Limited Capacity – a corporation can
only exercise powers that are express, implied or
incidental to its existence
- Expressed – can be seen in the AoI under
the purpose clause, which defines what the
corporation actually do and not do
- Incidental –
Effect when a co. performs an act not indicated in
its purpose clause.
 That act will be considered ulatra vires act –
ana act that go beyond the its powers of the
corporation.
 o Ultra vires act – not a void act unless
illegal
o Transaction entered by the co. is
VOIDABLE - binding until annulled,
needs ratification by the BoD. By
amending the Aoi
o Magiging void lang if illegal
 SEC can impose fines.
Q: is it possible that a corporation well have more
than one purposes/
A: yes. but it must be specified which is primary &
secondary
GR
Q: can a non-stock co. include a purpose
contradictory to its nature like non-stock non profit
hospital, can it include a purpose it will engaged in
retailing?
A: NO
If the purpose clause of the AoI – is
unconstitutional, illegal, immoral contrary to
government rules and regulations -- SCE can
immediately reject the application
If the purpose is lawful – SEC is not authorize to
inquire WON a corporation has hidden motives
 mandamus will lie to compel it to issue the
cert.
Will the act be considered an ultra vires if the
company is a repair shop and nagbebenta siya ng
spare parts?
 NO. it is incidental to the purpose indicated
in the AoI
Q: may store siya, nag pandemic, so nag online
selling siya will that be allowed ?
A: yes. because online selling is impliedly included
in the business of selling, the definition of sale can
be stretched, to sell in different platforms.
Q: Korean school un co. purpose is educational
services. It is not a uni. Nag offer sila ng dormitory?
Is it implied purpose?
A: No. it is not incidental tp the purpose
amendment of the AoI. It is not a university so No
Co. is engaged in financing services – if may bibili
sa Toyota and walang pambayad uutang – pupunta
siya sa Toyota financial serviceing – business is
financing.
 Toyota also offered services that sila narin
bahala sa registration ng vehicle? It it
impliedly included in the purpose of the
company w/c is only financing – coz
financing lang un nakalagay sa articles ?
A: YES.
Mandatory Inclusion
If the co. would register as sec they are mandated
to include phrase above.
- Because of the investment scam
If a co. has a primary license and it will offer shares
to more than 20 it is required to get a secondary
license
Purpose of a Corporation
Can one impugn the legality of the purpose of a
corporation by filing a case court? (court not sec)
A: NO. the legality of the purpose cannot be
collaterally attack. The best proof of the purpose is
AoI. So as long as the AoI shows a legal purpose
then that is allowed the sec cannot inquire if the
co. has hidden motive.
SEC has no authority to inquire if the co. has other
purposes, other than those indicated in its aoi
The best proof of the purpose of a corporation it's
the article of incorporation and by-laws. the
articles of incorporation must state the primary and
secondary purpose of the corporation while the
bylaws - outline the administrative organization of
the corporation which in turn is supposed to ensure
or facilitate the accomplishment of the said
purpose.
Note that if a corporation's big boss as stated in the
AOI it's lawful then the SEC has no authority to
inquire whether the corporation has purposes
other than those stated and mandamus will lie to
compel to issue the certificate of incorporation.
PRINCIPAL OFFICE
Principal office must be w/in Ph
- Domestic co – because if the aio is
submitted in ph it principal office must be
located in ph
Principal office – in the aoi is the place of residence
of the co.
Resident foreign corporation – not required to
principal office in ph – only need LICENSE TO DO
BUSINESS from SEC
- It is not registered in ph
- Incorporated under the law of other state
Ex: LV, its aoi is summitted in Italy. – if want nila
mag do business here – license to do business in the
sec
Q: why call it “Resident” foreign corporation
A: because it is engaged in doing business in ph,
the moment it set ups a branch in office ph it is a
resident foreign co. the moment that it has a
general sales agen in ph it is considered as RFC
Is the LV branch in Ph, still LV?
- Yes. the act of the branch in ph. is the act of
the co. in Italy. Iisa lang it is a mere
extension of the main co. in Italy
Nonresident foreign co.
EX: procter & gamble Ph and proctor and gamble
Us. P&G ph submitted its aoi in SEC PH, it received
it primary franchise in Ph – how do you call p&G
ph ?
 DOMESTIC CO. note that 100% of the shares are
owned by P&G US.
Q: is P&G US different from P&G ph?
A: yes p & g us is registered un us and p&g ph is
registered in ph. since p&g ph is 100% owned by
p&g us – it is a subsidiary p&g US which is the
parent branch. P&g Ph is NOT an extension of the
P&G US, they are completely different personalites
Q: can you say the p&g us is engaged business in
ph? A: NO. it is not p&g us that is engaged in
business in the Ph it is P&g Ph that is engaged in
business in pH.
And the only thing done by p&g us is to buy the
share of p&g ph.
Why is place of residence important?
1. Determines the venue in an action by or
against the corporation
o Principal office address of the co.
2. determines the province where a chattel
mortgage of share should be registered
Clavecillia radio system v antillon
AoI states that the principal office is located in mnl.
But the case was filed in cdobecuase they have a
branch office in cdo was it proper?
SC: since the principal office in manila the case
should be filed in manila. The mere fact that it
maintains a branch office in some parts of the
country does not mean that it can be sue in any
places.
Sy v Tyson enterprises
Case was filed against Tyson (co.) and Sy (pres of
co). it was filed in Rizal because the pres of the co.
is residing in Rizal.
Can a case be field in the place where the president
of the co is residing?
A: No. the pres. and the co. are different entities.
The co. has a separate and distinct personality of it
stockholders. It must be in manila because it is the
residence of the co. and sy is a resident of Bacolod
and one of the parties to the case it can be in
Bacolod. But NOT in Rizal
Young auto Supply v CA
AoI – principal residence of YASCO. is in cebu.
Yasco filed a case against Roxas.
There was a DOAS that indicates the co. now
located in pasay. All receipts and invoices indicate
that the office is in Pasay. Thus, it mislead Roxas.
SC: since the principal office is in cebu case should
have been filed in cebu (so tamas a yasco). Because
if it is field in pasay and yasco questioned the venue
on the ground that its principal place of business
was in cebu roxas can argue that yasco was in
estoppel because it mislead roxas to believe that
pasay was its principal place of business. But hind
inga it un ngyare
Pilipinas sell v royal
Principal office address indicate in the articles, but
it has been changed (naglipat sila ng office), co.
forgot to amend the articles.
SC: based on the principle of the insolvency law the
actual place where they are conducting business.
So since the moved, to a place where they are
conducting business. Then that will be considered
as their place of residence
NOTE: this is applicable case applies to insolvency
law
SUMMARY
GR: case should be filed in the place of residences
as indicated in the aoi
EXP:
1. if special law dictates another place of
residence (insolvency law)
2. when estoppel lies against the co. (they
misrepresented themselves thru documents,
that the place of residence is on another
place YASCO case)
TERMS of EXISTENCE
Term for which the co. is to exits if the co. has not
elected perpetual existence
 prior to the RCC term of existence is up to a
max of 50 (old)
 Perpetual na ngayon
 But if the co. opt to die, the could still set a
fixed term. If they don’t then perpetual
Q; what about co., that existed before the RCC? If
50 un pinili nila?
A: the companies before the effectivity of the rcc,
shall automatically have perpetual existence (wala
na silang need gawin)
Q: can they opt not to be perpetual? When they
want to retain the specific term of existence?
A: notify the sec that they want to retain the
specific term of exiastence
Q: There was an act done after the corporate term?
Would that act be considered valid?
A: NO. technically the co. its already dead any act
done will not binding and valid. (still valid principle
of the RCC)

Sec 136 – if the term has been shortened and upon
the expiration of such term, the co. is deemed of
dissolved even without any further act on the part
of the state or the co.
 There is no need for the state to issue a
cert. of dissolution before it can be
considered as dissolved.
 Upon expiration of the term it is
automatically dissolved after the corporate
term
A corporation can shorten and extend its corporate
term.
BUT there conditons in extending corporate term
Conditions of EXTENSION of corporate term
(applicable to extension only not shortening)
1. No extension may be made earlier then 3
yrs prior to the original or subsequent
expiry date
EXP: justifiable reasons for an earlier
extension as may be determined by the
commission
HC: before 3yrs ng expiration dapat mag apply na
for extension. Ex: April 27, 2023 and expiration so
dapat before April 27, 2020. Apply ka na for
extension.
2. Such extension of the corporate term shall
take effect only on the day following the
original or subsequent expiry date.
HC: it should take effect a day after, so if the expiry
date is December 31, 2020, then it will take effect
January 1, 2021.
SEC 36 – the shortening and extending there is a
need for the BoD / BoT to vote upon the shortening
and extending the corporate term
VOTING REQUIREMENT: (shortening & extnesion)
1. MAJORITY VOTE of BoT / BoD
2. And ratified by atleast 2/3rd of the
stockholders of OUTSTANDING CAPITAL
STOCK / members.
HC: so majority of Bot and Bod. Then need pa
iratify ng stockholders ATLEST 2/3rds of the
stockholers of the outstanding capital stock. If non
stock ang co 2/3rds of its members
Is there a NOTICE requirement? – YES
SEC. 36 – there has to be a written notice, about
the meeting to ratify the extension or shortening of
term. This has to bee sent as shown in the books of
corporation AND
- It has must either be deposited to the
addressee in the post office with postage
prepaid, served personally, or when
allowed by the by laws or done with the
consent of the stockholder, sent
electronically.
HC: electronic sending of notice is only allowed
when the bylaw states that it is allowed if the by-
laws indicates otherwise, then it is not allowed.
If there is a dissenting stock holder – he can
exercise his/her right of appraisal
RIGHT OF APPRAISAL SEC 80 and 81 RCC
Means that the stockholder (natural/juridical) will
demand the fair value of the shares
HC: sasabihin iyalang ibalik niyo na sakin un pera
ko
SEC 136: Dissolution by shortening the Corporate
term
 All the co. has to do is amend the aoi to
indicate the shortened term and upon the
expiration of that Corporate term, the co.
shall be deemed dissolved w/o any
proceeding conducted by the SEC
 Cert. of dissolution is not required to
consider a co. dissolved. Kasi matic upon
expiration of the shortened term on the aoi
co. is dissolved
Q: is there appraisal right on the part of the
stockholder?
A: yes. anything about extension ot shortened
corporate term, a dissenting SH may exercise his or
her or its right to appraisal.
Q: what if the period of existence has already
expired and the corporation would still want to
continue its business
A: proper remedy is application for REVIVAL OF
EXISTENCE. Accompanied by a favorable
recommendation of appropriate govt agency.
NOTE: for banks, banking and quasi-banking
institutions, preneed, insurance and trust
companies, non-stock savings andloand
asssociations, pawnshop, corporation engaged in
money service business and other financial
intermediaries REQUIRE a favorable reco. From
any govt agency.
HC: Favorable is necessary when co. is engaged inb
business mentioned above
 Upon the approval of SEC, co. is deemed
revived
Alhambra Cigar & cigarette Mfg. v SEC
The co. extended it life by amending its aoi the
extension was made after the expiration of its
corporate existence.
May a corporation extend its life by amendment of
its aoi effected during the 3yr statutory period for
liquidation when its original term of existence had
already expired?
SC: not allowed at the time of the filing of the
application extension the corporation is already a
defunct co. thus it has no legal faculties any action
not be considered as binding. Application for
extension will not be considered as valid
INCORPORATORS
How many incorporators are required?
Stock co.
Domestic – 2 – 15
OPC – 1
Qualification of an incorporator
1. Subscriber to 1 share
2. Natural, Sec registered partnership, sec
registered co., sec registered association,
foreign co.
3. If natural – must be of legal age
Partnership as an incorporator (requirements)
1. Sec registered
2. Partners’ affidavit executed by all partners
3. Expired or dissolved status – not allowed
o If the partnership is dissolved it
cannot be an incorporator
Corpo. as an incorporator domestic
(requirements)
1. Sec registered
2. approval of the MAJORITY of the BOD and
ratified by 2/3rds of the OCS or members
3. Director’s certificate
o It would indicate that majority of the
BoD approved & ratified by 2/3rd of
OCS
4. Delinquent, suspended, expired or dissolved
status – not allowed
Foreign co. incorporator
1. Director’s certificate duly authenticated by
Ph consulate or with an apostille authorizing
investment
2. Designation of the signatory
HC: if the co. is not a natural person, there must be
a representative of the corporation but in the AoI, It
must NOT be the name of the representative
indicated in the article, dapat un pangalan padin
ng Co.
STOCKS
Capital Stock - the amount fixed in the AOI to be
subscribed and paid in or secured to be paid in by
shareholders of a corporation either in money or
property labor or services at the organization of the
corporation or afterwards upon which is to conduct
its operation
Authorized Capital Stock – shares of the
corporation that has par value
 If the shares has no par value then the co.
has no authorized capital stock
 If the shares has no par value don’t call it
authorized capital stock jus Capital stock
 There is no minimum for authorized capital
stock
Note: in the RCC there is no minimum amount for
subscribed and paid up stock
Requirement on authorized capital stock
1. AoI must mention the money equivalent of
the authorized capital stock, par value,
number of shares
 Par value – value of each share
Ex: 10M par value is 1 Peso so ilan ang share 10M.
Bibilaka ng stock sa Big Hit Authorized capital stock
1M and par value is 10 ilang shares meron ka ?
100k
GR: NO MINIMUM for both OPC and Domestic co.
EXP: Minimum 100M – if mining co.
Subscribed Capital Stock
Stock that has already been subscribed regales if
fully paid or not.
 There is no minimum amount
Q: puwede bang bumili ng stock kahit di pa
nagagawa un co?
A: Yes, it will be covered by pre incorporation
agreement because in this pre incorporation
subscription agreement the parties agree to
contribute to a proposed corporation
Subscription agreement – if na create na un
corporation.
Subscription – mutual agreement of the
subscribers to take and pay for the stock of a
corporation
Paid Up capital – portion of the authorized capital
stock which was been paid
 It has to be paid
 No minimum paid up capital
Note: there is instances where the law dictate that
a certain minimum paid up capital, will be required
of a corporation if a corporation has more than 40%
foreign equity
GR: stock corporations shall not be required to
have a minimum capital stock except if specifically
provided by special law
Min. paid up cap.
Note: if co is engaged on an activity reserved only
for Filipinos. There has to be an indication of this
statement: sec 14 rcc
 an undertaking that they will not transfer the
shares to a foreign individual which would diminish
the required percentage of Filipino ownership over
that co.
MISCI-NACUSIO local charter v NWPC
Here they included the loans as part of the capital
SC: loans are not part the capital; they are liabilities
they are not considered as investments in the
corporation the value of the loans cannot be added
up to the value of the capital to arrive at the total
amount of capital of the co. Unless there is a death
equity swap.
Death equity swap – happens when the loan will
be converted into shares. Q: shares which may be purchased by the
corporation from the holders of such shares upon
Ex: may utang ang co. sakin ang 10M, puwede the expiration of a fixed.
kaming mag agree na wag mo ng bayaran un A: Redeemable shares
utang mo na 10M I convert mo nalang sa share--
so in exchange mag issue ng lang ng share of Q: shares of stock which have been issued the fully
stocks. paid for but subsequently reacquired by the issuing
corporation
SEC 170 Outstanding capital stock A: Treasury shares
Total of shares of stock issued under binding subs
prions contracts to subscribers whether fully or Q: value of a single common share asset by the
partially paid, Except treasury shares. corporation's charter
A: Par value
What’s the difference of outstanding capital stock
and subscribed capital stock? Q: when par value shares are issued above bar the
premium or excess is not to be considered as part
Difference of paid up capital and outstanding of the legal capital
capital stock? A: True

Can a corporation legally sell a share above the par Q: no par value shares: the entire consideration is
value (since the par value of the share must be part of legal capital and shall not be available for
indicated in the AoI), nakasulat sa AOI 10p per dividend distribution
share pero binenta ng 15p per share A: true
 Yes, the capital will be the 10P the 5P excess is
called a premium on the shares. Q: what is true about non-voting shares?
Can the corporation sell below the par value? A. Holders can vote in cases of amendments of
 ___, but that type of share sold below the par the AOI
value is called watered stocks/shares. B. Holders cannot vote
C. Holders can vote in case of declaration of
Legal Capital dividend
Amount of shares issued based on the par value. D. holders can vote
- It is the amount equal to the aggregate par
value and or issued value of the outstanding
capital stock.

Q: is it legally boss able for an entity to have no

voting shares
A: yes provided that there are shares with complete
voting rights

Q: Which company is permitted to issue no par

value share? Loan associations, callcenter, pre-need
companies, banks
A: call center

Q: true or false no par value shares must be issued

for consideration of at least 5 pesos per share
A: true