Partnership
Contract of co-ownership- no intention of using
NOTES
1. Characteristics of a partnership:
a. Consensual
b. Onerous—contribution of money,
property, or industry into a common fund
c. Nominate—Designated Name
d. Preparatory—Its organization is followed
by other contracts to carry out its
purpose
e. Principal—It can stand alone
f. Bilateral or multilateral—2 or more
persons
g. Agency—each partner is an agent to
partnership and to each other
2. Professional partnership has no legal
personality. Legal personality means that a
partnership can sue and be sued, enter into
contracts, acquire property in its own name, can
incur obligations.
3. A partnership can be a partner in another
partnership or a stockholder in a corporation
because it has a juridical personality to enter
into contracts
4. Even if a partner transfers all interests to
another, the transferee does not become a
partner unless all other partners consent. This is
based on the principle of delectus personarum
(principle of mutual trust and confidence).
5. Limited partner would be liable as a general
partner if he include his surname in the
partnership name and takes part in the control of
business
6. General-limited—liable up to personal assets but
subject to reimbursement
7. In a general partnership, insanity of a general
partner does not result in the automatic
dissolution of the partnership but only serves as
a ground for the application for judicial
dissolution
8. Death, retirement, insanity or civil interdiction
(DRICI) of a general partner in a limited
partnership, automatically dissolves the
partnership. But civil interdiction of a limited
partner does not so.
9. Acts of a partner who is insolvent, does not have
a right to wind up the affairs of the partnership
and the business is unlawful doesn’t bound the
partnership.
10. If the partner who acts after dissolution and at
fault, he alone ultimately liable to the creditors.
The partners can seek reimbursement from the
partner who is guilty.
11. New creditor is deemed to have knowledge of
the dissolution. He is not therefore, protected by
law. Partnership is not bound
12. A partnership begins from the moment of
execution of the contract but there can be
stipulation otherwise.
13.
the asset for business purposes
14. A partnership cannot be formed for a charitable
purpose
15. Corporation's legal personality commences from
the time it is issued a certificate of incorporation
by the SEC
16. Corporation's nationality is determined by the
nation's whole laws for which it was created.
17. Death of the president or chairman does not
dissolve the firm
18. Partnership is governed by the Civil Code of the
Philippines while corporation is under
corporation code of the Philippines
19. Corporation can only be dissolved by the
consent of the state
20. A contract of partnership may be made in any
form or manner except if a specific form is
required by law for its validity or enforceability
21. It may be made orally or in private instrument if
the total contribution of money or other personal
property is less than 3,000. If it is more than
3,000 or more, it shall be recorded in the SEC.
Noncompliance of which does not make the
contract void. However, if immovable property or
real rights are contributed, it must be made in
public instrument.
22. A limited partnership must be registered with the
SEC, otherwise, it is deemed to be a general
partnership
23. Universal partnership of all profits—any property
belonging to them at the time of the execution of
the contract belongs to them but the usufruct(
use and enjoyment) of such property belongs to
the partnership. Only the fruits of the property as
well as whatever property acquired by the
partners through industry during the existence of
the contract, are contributed to the common
fund.
24. Partnership de facto- a partnership in fact but
not in law. It is still valid partnership although it
lacks certain requirements for its legality
25. A husband and wife cannot enter into a contract
of universal partnership because this has the
effect of donation and there are prohibited from
giving donation to each other. They can enter
into a particular partnership but not to govern
thair property relations.
26. The liability of an industrial partner is always that
of a general partner
27. A person may be a general partner and a limited
partner in the same partnership at the same
time, provided this fact is stated in the certificate
of a limited partnership
28. A limited partner cannot contribute services
hence it is always a capitalist and a silent
partner
29. A capitalist partner will be obliged to sell his
interest to the other partners when in case of
imminent loss of the business of the partnership
he refuses to give additional contribution
30. capitalist partner cannot engage in the same or
similar business of the firm unless permitted by
all others
31. Cannot engage in any kind of business unless
permitted to do so. All his industry is supposed
to be contributed to the firm
32. Industrial partner is exempted as to losses
between partners but is liable to strangers but
with right to be reimbursed from the capitalists
33. An agreement that even the industrial partner
shall be liable for losses is permissible
34. If a partner gives a receipt for the firm, it is the
firm's credit that has been collected. If it his own
receipt, payment of the debtor will be pro-rated
between the firm and the partner receiving the
payment
35. A partner has the right to be reimbursed by the
partnership for the amount disbursed on behalf
of the partnership and the right to ask for
dissolution of the firm at the proper time
36. A partner has the right in a specified partnership
property to use it for business purposes only
37. The right to inspect and copy books is not
available to the partnership pending dissolution
nor in one already dissolved
38. As a rule, no formal account is demandable until
after dissolution. This is because partners have
access to the books. But if a partner is
wrongfully excluded from the business, he can
demand it at any reasonable time
39. Joint management arises when two or more
partners are appointed managers with an
agreement that one cannot act without the
consent of the others. The approval of all the
managers is necessary for the validity of one's
act.
40. Solidary management takes place when 2 or
more appointed managers may separately
execute all acts of administration. But if one of
them should oppose the acts of the others, the
decision of the majority shall prevail. In case of a
tie, the matter shall be decided by the controlling
partners.
41. Participation in the selection of the managing
partner is held by law as taking part in the
control of the business
42. General or limited partner partners may exercise
some rights not available in the general
partnership, if the same are given and indicated
in the certificate such as the remaining general
partners may continue the business even upon
death, retirement, civil interdiction of a general
partner or the limited partner to demand and
receive property other than cash in return for his
contribution
43. If the firm upon dissolution is not solvent, a
limited partner does not enjoy the same
preference as an outside creditor.
44. A limited partner who is held liable as a general
partner does not however get the rights of the
latter
45. Insanity, incapability, prejudicial conduct of a
partner, unfair competition, the business can
only be carried at a loss are only grounds for the
petition of a partner in the court to dissolve the
firm
46. Civil Interdiction is an accessory penalty
imposed on a convict when the crime committed
is punishable from 12 years and 1 day to 30
years that deprives the convict of his rights of
parental authority, guardianship, marital
authority, the right to manage his property and of
the right to dispose of his property.
Corporation
1. A copy of the articles filed which is returned with
the certificate of incorporation issued by the
commission under its official seal becomes its
corporate charter.
2. A corporation created by special law has no
articles of incorporation
3. A corporation has the power of succession by its
corporate name. Character of a corporation is
not necessarily determined by its name.
4. The purposes should be stated definitely. The
main purpose and secondary purposes shall be
distinguished from each other. Main purpose
must be specified.
5. A nonstock corporation may not include a
purpose which would change or contradict its
nature
6. The purposes, where there are more than one,
must be capable of being lawfully combined.
Thus, banks which are governed by the general
banking law of 2000 are prohibited from directly
engaging in non-banking activities such as
insurance. Similarly, Insurance companies are
not allowed to engage in banking operations.
7. The main reason for stating the purpose of the
corporation is to determine whether the acts
performed by the corporation are authorized or
beyond its powers. In the latter case, they will be
known as ultra vires acts.
8. The principal place must be within the
Philippines (city or town).
9. The place of principal office does not necessarily
mean the place where the business of the
corporation is transacted but the place where its
books and records are ordinarily kept and its
officers usually meet for the purpose of
managing the affairs and transacting the
business of the corporation.
10. If the new address is located within the same
city or municipality, no corporate document is
required to be filed with the SEC except a notice
regarding the change of address.
11. The incorporating directors or trustees shall hold
office until their successors are duly elected and
qualified. They are intended to hold office for
one year when the corporation is organized
12. Every director must have at least one share of
capital stock of the corporation of which he is
director.
13. If some or all of the shares are without par
value, such fact shall be stated in the articles
14. If the shares have par value, the amount of the
authorized capital stock in pesos is specified in
the articles, but if they have no par value, no
amount of capital stock is specified in the
articles which need only state the number of
shares into which said capital stock is divided.
The reason is that the price of no-par value
shares may vary from to time and therefore the
total amount of the capital stock cannot be
known until all the shares are issued.
15. Corporations which will engage in any business
or activity reserved for Filipino citizens shall
provide in their articles of incorporation the
restriction against the transfer of stock or
interest which will reduce the ownership of
Filipino citizens to less than the required
percentage of the capital stock as provided by
existing laws.
16. The general amendment may also be effected
by the “written assent” of the stockholders
representing 2/3 of the outstanding capital stock
or 2/3 of its members, meaning that such action
need not be taken at a meeting and upon a vote.
17. If the amendment consists in extending or
shortening the corporate term, a meeting of the
stockholders or members is necessary.
18. The amendments shall take effect only upon
their approval of the SEC
19. In banking institutions covered by special law,
the amendments must be accompanied by a
favorable recommendation of the appropriate
government agency with respect to it that it is in
accordance with law.
20. Corporations must formally organize their affairs
within 2 years, otherwise, deemed dissolved. If
becomes continuously inoperative for 5 years
after its organization, temporarily suspended or
revoked.
21. When a change of name is approved, it is
required that the commission must issue an
amended certificate of incorporation under the
amended name.
22. In the case of religious corporations, the code
does not require the SEC to issue a certificate of
incorporation. From and after the filing of
articles, the chief archbishop shall become a
corporation sole.
23. De facto is the one that has not complied with all
the requirements necessary to be a de jure
corporation but has complied sufficiently to be
accorded corporate status as against third
parties although not against the state
24. A corporation by estoppel has no real existence
in law. It is neither de jure nor a de facto
corporation, but does a mere fiction exist for the
particular case. It exists only between the
persons who misrepresented their status and
the parties who relied on the misrepresentation.
25. Mandatory provisions prescribe formalities for
incorporation which are designed to protect the
public.
26. Stockholders have indirect control of the
corporation through their votes.
27. Acts of stockholders are not binding on the
corporation. A corporation can act only through
the BOD.
28. BOD cannot perform constituent acts involving
fundamental or major changes in the corporation
such as amendment of the articles of
incorporation
29. BOD hold a fiduciary relation (trust and
confidence) to the corporation and the
stockholders or members they represent. They
are required to discharge their duties in good
faith and with diligence, care and skill. They are
liable if they breach their fiduciary duty.
30. For BOD to exercise their powers, they must
meet as directors or trustees and act at a
meeting at which there is a quorum
31. Directors are not agents of the corporation and
thus have no power acting individually to bind
the corporation
32. In a close corporation, any action by the
directors without a meeting or at a meeting
improperly held is deemed valid or ratified.
33. A corporation is expressly allowed to enter into a
management contract under which it delegates
the management of its affairs to another
corporation for a certain period of time. BOD can
also delegate its power, impliedly or expressly to
other officers and agents
34. One disadvantage of corporation is that
stockholders have little voice in the conduct of
the business.
35. Under the doctrine of piercing the veil of
corporate entity, the corporation and the persons
composing it will be treated as one and identical
person (instances such as fraud, tax evasion,
and avoiding obligation).
36. In nonstock corporation, minimum members are
5 and may be more than 15. Number of
members must be multiple of 5. No part of
income shall be distributed as dividends to
members.
37. Civil Corporation is one organized for profit.
Eleemosynary is for charitable
38. In close corporation, stockholders shall not
exceed 20persons.
39. A partnership can be a corporator in a
corporation but a corporation cannot be a
partner in a partnership
40. A corporation can subscribe after another
corporation’s incorporation but not if made
before.
41. A corporation can be a corporator but never
an incorporator in another corporation
except in rural bank law
42. A married woman can be an incorporator with
the consent of the husband if it involves conjugal
or absolute community property. If it involves her
exclusive property, consent is not required
43. Majority must be residents of the Philippines to
form a private corporation.
44. By-laws need not be notarized but required to be
signed by the incorporators and stockholders
and filed with SEC. It is mandatory. It shall be
effective upon issuance of the SEC of certificate
certifying that the by-laws are not inconsistent
with the code.
45. Articles of Incorporation are adopted by the
incorporators as CHARTER of the corporation
while by-laws are for their internal government
46. Regular meetings- it shall be held annually on a
date fixed in the by-laws or if not so fixed, on
any date in April of every year
47. Special meetings shall be held at any time
necessary or as provided in the by-laws,
provided however that at least one week written
notice shall be sent to all stockholders
48. Place of meetings must be held in the principal
place of the corporation. Any provision changing
such place is illegal
49. The quorum of board meetings shall be majority
of all members of the BOD or board of trustee.
50. Every corporation must have at least a BOD,
President, Treasurer, Secretary
51. A president must be a director
52. A secretary must be a resident and a citizen of
the Philippines
53. Any 2 or more positions may be held
concurrently by the same person except a
president and secretary or treasurer at the same
time
54. Straight voting—a stockholder may vote his
number of shares for as many persons as there
are directors to be elected.
55. Cumulative voting for one candidate—a
stockholder cumulates/concentrates all his
shares and gives one candidate as many votes
as the number of directors to be elected
multiplied by the number of his shares
56. Cumulative voting by distribution—distributes
shares among as many candidates he sees fit.
57. One stock is equal to 1 vote
58. Only the stockholders can remove a director. 2/3
of the outstanding capital stock or members is
required
59. Vacancy in the BOD is filled up by the remaining
directors constituting a quorum (majority shall
remain) if the cause of vacancy is other than
removal, expiration of term or increase in the
number of directors or trustees. If not, such
vacancy will be filled up by the stockholders.
60. Regular meetings of the board shall be held
monthly
61. Special meetings may be held at any time upon
the call of the president
62. Place of meetings may be anywhere
63. Directors or trustees are not allowed to vote or
attend by proxy and they do not receive
compensation in the absence of any provision in
the by-laws fixing their salary
64. Should the stockholders representing the
majority grant them compensation; such total
yearly compensation shall not exceed ten
percent of income before tax of the corporation
during the preceding year.
65. You cannot be a director in 2 or more
corporations. One cannot serve 2 masters at the
same time
66. 3 corporate powers: (1)express (2)implied (3)
incidental
67. Most of the decision by majority of the directors
require approval or ratification by at least 2/3
outstanding capital stock. This is true in case of
any amendment to articles of incorporation
68. A corporation engaged in transportation cannot
engage in any other business alien to
transportation
69. Corporations engaged in agriculture are
prohibited from having any other interest in any
other corporation engaging in agriculture
70. Private corporations engaged in retail trade and
rural banking must be 100 percent Filipino-
owned. For Public Utility development and
exploitation of natural resource must be atleast
60%filipino owned. For pawnshop, at least 70%
71. Ultra vires act may be ratified by approval. If fully
or partially executed can bind the parties. An
illegal act can never be binding to the
corporation.
72. Stated value of no-par value shares shall not be
less than 5
73. At least 25 percent of the authorized must be
subscribed. Paid-up capital upon incorporation
shall not be less than 25 percent of the
subscribed capital.25-25 rule
74. Founder’s share—right to vote and be voted in
the election of directors must be for a limited
period not to exceed 5 years.
75. Non-voting shares: (1) preferred (2) redeemable
(3) treasury. They nevertheless have two rights:
Amendment of articles of incorporation and
adoption and amendment of by-laws.
76. Preferred share is always a par-value share
77. Shares of stock are deemed issued from the
moment subscription is accepted whether fully
paid or not(incorporation)
78. Subscribers become stockholders upon
subscription whether fully paid or not
(incorporation).
79. Certificate of Stock is a personal property and
may be mortgaged or pledged or transferred
80. A subscriber is entitled to all the rights of a fully
paid stockholder for as long as he has not been
declared delinquent
81. Transferror has the right to vote
82. After incorporation, full payment is required for
purchasers to become stockholders.
83. Persons convicted by final judgment of an
offense punishable by imprisonment for a period
exceeding six years and guilty of violation the
Code within 5 years prior to the date of election
or appointment shall be disqualified to be a
director, trustee or officer
84. Removal of directors or trustees may be with or
without cause. Removal without cause may not
be used to deprive minority stockholders of the
right of representation in the board of directors.
Otherwise, the basic purpose of cumulative
voting which is to allow minority stockholders to
unite and elect their representative in the board
will be rendered useless.
85. A director elected to fill a vacancy shall serve
only for the unexpired portion of the term of his
predecessor in office
86. It is on the presumption that directors and
trustees render service gratuitously and that the
return upon their shares adequately furnishes
the motives for service, without compensation.
87. They are entitled only to compensation if it is
fixed in the by-laws or when the giving of
compensation is approved by the stockholders
representing at least a majority of the
outstanding capital stock. Board approval is
sufficient
88. Directors are liable to the corporation,
stockholder or members or other persons who
suffer damages. Nature of liability is solidary.
89. A special meeting of the stockholders for the
purpose of removal of directors or trustees must
be called by the secretary on order of the
president or on the written demand of the
stockholders (only the majority is required). In
removal of directors, 2/3 is required.
90. Stockholders or members who have removed a
director or trustee are also given the power to
choose his replacement at the same meeting.
91. A director can quit any time but by reason of
fiduciary nature of the position they occupy, he
cannot resign as part of a fraudulent scheme to
prejudice the corporation. He should repair and
make good such loss in case of loss of profits.
92. Where a director accepts a position in which his
duties are incompatible with those as such
director, it is presumed that he has abandoned
his office as director
93. Stockholders may be filled by stockholders if the
cause is removal, increase in the number of
directors or the expiration of term. Also if other
than removal or expiration if the remaining
directors do not constitute a quorum
94. Only the majority is required to authorize
compensation of directors.
95. A director is entitled to be reimbursed for
legitimate expenses incurred in behalf of the
corporation.
96. A private corporation is authorized to provide in
its by-laws for the compensation of directors or
trustees.
97. The per diems granted to the directors should
not be included in their total yearly
compensation for purposes of the 10 percent
limitation
98. The agents of the corporation are the directors.
99. A contract of the corporation with one or more of
its directors/trustees or officers is voidable at the
option of such corporation unless all the
condition enumerated in sec 32 are all present.
In the case of a contract with a director or
trustee, only that the contract is fair and
reasonable, if the contract is ratified the 2/3
100. It is a valid contract between 2 or more
corporation which have interlocking directors as long
as there is no fraud and the contract is fair and
reasonable under circumstances.
101. The guilty director will only be exempted from
liability to the corporation if his disloyal act is ratified
by 2/3
102. The executive committee must be provided for
in the by-laws and composed of not less than 3
members of the board. The committee may act on
specific matters within the competence of the board,
as may be delegated to it by the board or in the by-
laws except those to which only the board duly
called and assembled as such can act upon.
103. The restrictions on the power of the executive
committee may be enlarged by the board to cover
other matters. The executive committee may amend
or repeal any resolution of the board.
104. Committee cannot delegate its authority even
to one of its members since it can only bind the
corporation through majority of votes
105. All members of an executive committee must
be directors of the corporation. However if all acts of
the committee will be merely recommendatory in
nature and shall not be carried out without the formal
of the BOD, some members may not be directors.
106. Doctrine of limited capacity—only those that
are express, implied or incidental
107. Intra vires—acted within the powers
108. A corporation may not engage in a business
different from that for which it was created as a
regular and a permanent part of its business. This is
especially true in banking and insurance companies
organized under special laws.
109. The use of corporate seal in certificates of
stock must be deemed directory rather than
mandatory. A corporation may exist even without a
seal. Any seal adopted and used by the corporation
may be altered by it at its pleasure.
110. Power to acquire and convey property has
always been regarded as an incident to every
corporation
111. A stockholder has absolute right to use, enjoy and
dispose of his properties, to perform all acts and to make
all contracts without any restriction except when they are
prohibited by law.
112. A corporation cannot do acts not expressly or
impliedly given by law
113. Implied powers are those powers which are
reasonably necessary to exercise the express powers
and to accomplish or carry out the purposes for which
the corporation was formed.
114.A corporation which has been dissolved after the
expiration of the 3-year winding up period ceases to be
de jure de facto and therefore it cannot sue or be sued
115. A corporation must be first duly registered in
accordance with law to have the power to sue
116. A seal is a device used to identify or replace the
signature of an individual or organization and to
authenticate written matter
117. Purchasing or holding real and personal property,
to adopt and use a corporate seal , to contract and make
by-laws are incidental powers
118. A corporation may not hold alienable lands of a
public domain except by lease for a period not
exceeding 25 years, renewable for not more than 25
years and not to exceed 1,000 hectares in area.
119. Natural resources belong to the state and cannot
be alienated to corporations. Their exploration and
development and utilization shall be under the full control
and supervision of the State
120. If a corporation acquires shares or securities of
other corporation and it is done in pursuance of its
purpose for which it was created, the approval of the
stockholders is not needed unless it is done solely for
investment.
121. Appraisal right applies only to a stockholder of a
stock corporation
122. Excess stock issued is void even in the hands of a
bonafide purchaser for value
123. Any incurring, creating, or increasing by the
corporation of any bonded indebtednessis subject to
prior approval of the Securities and Exchange
Commission. The bonds issued by the corporation have
to be registered with the corporation
124. Preemptive right is not absolute
125. Shareholders cannot be compelled to subscribe to
a class different. A stockholder whose pre-emptive right
is violated may maintain an action to compel the
corporation to give him that right. If the denial is by an
amendment to the articles of incorporation, he may
exercise his appraisal right
126. The vote of the majority of the trustees in office will
be sufficient authorization for the corporation to enter
into any transaction because there are no members with
voting rights.
127. Any disposition which does not involve all or
substantially all of the corporate assets made in the
ordinary course of business does not require the
approval of the stockholders and would not entitle any
dissenting stockholders to exercise his appraisal right. It
can only exercise the same if it is on the sale of all or
substantially all of the corporate assets as such which
would render the corporation incapable of continuing the
business or accomplishing the purpose for which it was
incorporated.
128. The acquisition of shares shall be for legitimate
purposes, its capital is not impaired, in good faith without
prejudice to the rights of the stockholders and creditors
and that there is an unrestricted retained earnings to
cover the shares acquired.
129. Section 41 does not authorize a corporation to
arbitrarily purchase the shares it issued to any of its
stockholders indebted to it for the purpose of applying
the proceeds for the satisfaction of its claim against
them.
130. Redeemable shares may be purchased by the
corporation regardless of the existence of the
unrestricted retained earnings in the books of the
corporation
131. In view of trust fund doctrine, buyback of shares or
distribution of assets among stockholders is a fraud
against creditors and therefore void.
132. A corporation may invest its funds in another
business which is incident or auxiliary to its primary
purpose as stated in the articles of incorporation without
the approval of the stockholders. In such case,
dissenting stockholders shall have no appraisal right.
133. Stock dividend shall not be issued without the
approval of 2/3. The board may declare dividends other
than stock without need of stockholder’s approval.
134. A corporation cannot make a valid contract to pay
dividends other than from retained earnings or profits
and an agreement to pay such dividends out of capital is
unlawful and void.
135. Stockholders should only receive dividends from
their investment and not from their investment itself.
136. As a rule, dividends cannot be declared out of
borrowed money for borrowed money is not profits; but
money may be borrowed temporarily for the purpose of
paying dividends if the corporation has used its surplus
assets to make improvements for which it might have
borrowed money.
137. Dividends may not be declared so long as deficit
exists
138. The directors are the judges on how and when to
spend corporate funds.
139. The corporation may be compelled by the SEC to
declare dividends to its stockholders if it retains surplus
profits in excess of 100percent of their paid-in capital
stock
140. Payment of subscription from dividends (stock,
cash, “to be declared”) is illegal for it obligates the
subscriber to pay nothing for the shares except as
dividends may accrue upon the stock.
141. The stockholder is still entitled to receive cash
dividends due on delinquent stock but the dividends
shall first be applied to the unpaid balance on the
subscription plus costs and expenses while stock
dividends shall be withheld from the delinquent
stockholder until his unpaid subscription is fully
paid.
142. Some courts take the view that unlawful dividends
received in good faith by the stockholders may not be
recovered if the corporation is solvent.
143. In the absence of a record date, the dividend
belongs to the person who is the owner of the shares of
stock at the time of declaration.
144. Declaration of stock dividends may be rescinded at
any time before the actual issuance.
145. The participation of each stockholder in the
earnings of the corporation is based on his total
subscription. The reason is that “stockholder’s” entire
subscription represents his holdings in the company for
which he pays interest on any unpaid portion.
146. Only in cases where a stockholder is delinquent in
the payment of his unpaid subscription that he loses his
privilege in a corporation where he has holdings, except
his right to receive cash dividends, which however shall
first be applied to his unpaid balance on the subscription
plus cost and expenses.
147. The contract must be approved by a majority of the
quorum of BOD and prescribed vote of the stockholders
of both the managing and the managed corporation. The
period of the contract must not be longer than 5 years for
any one term.
148. Upon the issuance of the certificate of
incorporation, the corporation comes into existence but
not yet organized.
149. By-laws shall be adopted within one month after
receipt of official notice of the issuance of its certificate
of incorporation by the SEC. Nevertheless, by-laws may
be adopted and filed prior to incorporation with the
articles of incorporation. Failure to file a code of by-laws
within one month from the date of incorporation with the
SEC shall render the corporation liable to the revocation
of its registration
150. By-laws must be general and uniform in their
operation and not directed against particular individuals,
and must not be discriminatory.
151. By-laws are not binding to a party who doesn’t have
knowledge of its provision.
152. At least 2 directors must be residents of the
Philippines.
153. Corporation cannot provide in the by-laws for the
manner of election and the term of office of directors or
trustees which are already regulated by law.
154. The power to make and repeal by-laws can only be
exercised at a regular or special meeting duly called for
the purpose. It can be delegated (2/3) to directors. But
the power to amend the articles of incorporation lies with
the stockholders members and cannot be delegated to
directors.
155. To revoke the delegated power, the law merely
requires the vote of majority of the outstanding capital
stock.
156. Revocation is valid notwithstanding that no previous
notice was given to stockholders or members of the
intention to propose such revocation.
157. Articles of incorporation constitutes the charter or
fundamental law of the corporation. The filing of articles
of incorporation is a condition precedent to corporate
existence, while the filing of by-laws is a condition
subsequent.
158. The president shall preside at all meetings of
directors or trustees and of the stockholders or
members, even where the chairman of the board is
present, unless otherwise provided in the by-laws.
159. The directors or trustees are not a corporate body;
they are, when acting as a board, agents of the
corporation.
160. In the absence of provision in the by-laws, the
meeting may be called by a director or trustee or by an
officer entrusted with the management of the
corporation.
170. A stockholder may make the call on order of the
SEC whenever for any cause, there is no person
authorized to call a meeting.
171. The special meeting for the removal of directors
may be called by the secretary of the corporation or by a
stockholder.
172. Whether regular or special, notice must be given
when required by the law or by the by-laws of the
corporation.
173. Written notice of even regular meetings must be
sent to stockholders or members at least 2 weeks before
the meeting pr at least 1 week for special meetings.
However, notice of any meetings may be waived
expressly or impliedly, by a stockholder or member. In
meetings ordered by the SEC, It is evident that notice is
necessary.
174. Any business transacted at any meeting of
stockholders shall be valid even if the meeting be
improperly held or called provided that acts are not ultra
vires and that all the stockholders are present or
represented at the meeting
175. Unless otherwise provided in the by-laws or in the
code, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock
or a majority of the members in the case of nonstock
corporation. A majority vote, in the absence of express
provision in the by-laws and unless the vote of a greater
number is required by law, is sufficient to decide any
question properly presented.
176. To amend the articles—majority vote of BOD and
vote or written assent of 2/3
177. To elect directors—majority
178. To remove directors—2/3 of the outstanding stock
or of members entitled to vote
179. To ratify a contract of director or officer—2/3
180. To extend or shorten corporate term—majority of
BOD and 2/3
181. To increase or decrease the capital stock—majority
of BOD and 2/3
182. To incur, create, or increase bonded
indebtedness—a majority of BOD and 2/3
183. To sell, lease, exchange, mortgage or otherwise
dispose all or substantially all of the corporate assets—
majority of BOD and 2/3
184. To invest corporate funds in another corporation or
business or for any purpose other than the primary
purpose—majority vote of BOD and 2/3
185. To issue stock dividends—majority of the quorum of
BOD and 2/3. The approval of stockholders is not
required with respect to other dividends such as cash
and bond dividends.
186. To enter into management contract—majority of the
quorum of BOD and a majority of the outstanding capital
stock of both managing and managed corporations and
in some cases, 2/3 of the total outstanding capital stock
entitled to vote or of the members, with respect to the
managed corporation.
187. To adopt by-laws—a majority of the outstanding
capital stock or of the members.
188. To fix the issued price of no par value shares—a
majority of the quorum of BOD if authorized by the
articles of incorporation or in the absence of such
authority, by a majority of the outstanding capital stock.
189. To effect or amend a plan of merger or
consolidation—a majority of vote of BOD and 2/3 of the
outstanding capital stock or of the members of the
constituent corporation
190. To dissolve the corporation—a majority vote of
BOD and 2/3 of the outstanding capital stock or of the
members
191. To adopt a plan of distribution of assets of a
nonstock corporation—a majority vote of trustees and
2/3 of the members having voting rights.
192. A corporation may prescribe a greater voting
requirement for the approval of any of the above
corporate acts in its articles of incorporation and/or by-
laws in order to protect the rights of minority
stockholders
193. Notice of a regular meeting need not be given if the
articles of incorporation or by-laws specify the time of the
meeting (except when it is to be held at another place).
A director trustee may waive the requirement of notice of
any meeting, expressly or impliedly
194. If the presiding officer is not present at the time for
a meeting to convene, a stockholder who takes the floor
may temporarily preside at the meeting of stockholders
pending the selection of the presiding officer. Unless the
contrary is provided by the by-laws, the presiding officer
may be selected by the vote of the stockholders present.
195. One cannot vote if he does not appear to be a
stockholder in the books of the corporation
196. Each member, regardless of class, shall be entitled
to one vote
197. Pledgees or mortgagees of shares in stock
corporation have the right to attend and vote at meetings
of stockholders only when expressly given such right in
writing by the pledgor or the mortgagor as the latter
remains the owner of the stock pledged or mortgaged.
The authorization is required by the code to be recorded
on the appropriate corporate books by such pledgor or
mortgagor.
198. A proxy may refer to a person or a formal written
authority
199. The right to vote by proxy is a special form of
agency. No proxy shall be valid and effective for a period
longer than 5 years.
200. Directors cannot attend or vote by proxy at board
meetings
201. Proxies are irrevocable at any time unless made
irrevocable by the giver. It becomes irrevocable when
the holder of proxy has given or promised a stockholder
a consideration or interest (loan of money in return for
irrevocable proxy.
202. In voting trust agreement(must be in writing,
notarized and filed with SEC), a stockholder of a
corporation parts with the voting power only but retains
the beneficial ownership of stock. A voting trustee is only
a share owner vested with legal title for the sole purpose
of voting upon stock that he does not own. New
certificate is issued to the trustee.
203. Trustee is the legal title holder or owner of the
shares so transferred under the agreement. Hence, he is
qualified to be a director.
204. The ultimate control of the corporation depends
upon the votes of the stockholders
205. Voting trust agreement, if validly executed is
irrevocable while a proxy must be coupled with interest
before it becomes irrevocable.
206*. The stockholders have the power to fill vacancy in
the BOD if the cause is any of the ff: (1) removal (2)
Expiration of term (3) Increase in the number of directors
207*. BOD can fill the vacancy if the cause of vacancy is
other than removal, expiration of term or increase in the
number of director and the remaining directors still
constitute a quorum
208*. Directors are entitled to compensation if the giving
of compensation is fixed in the by-laws, approved by the
stockholders representing at least a majority of the
outstanding capital stock or when the compensation
refers to reasonable per diem
209. A contract of the corporation with one or more its
directors or trustees is voidable unless all the ff
conditions are present: (1) that the presence of such
director is not necessary to constitute a quorum (2) that
the vote of such director was not necessary for the
approval of the contract (3) that the contract is fair and
reasonable under the circumstances.. When any of the
first two conditions is absent, such contract may be
ratified by the vote of 2/3. Full disclosure of the adverse
interest of the director involved must be made at such
meeting.
210. There is interlocking directorate when a director
holds seats in the board of directors of 2 or more
corporations. There is no prohibition in the corporation
code regarding this. However, law provides for requisites
when 2 corporations with interlocking directors contract
with each other. The requisites are (if the interest of the
director is substantial, 20percent and nominal in the
other): (1) there is no fraud (2) the contract is fair and
reasonable (3) the presence is not required for a quorum
and approval, vote. If the interest is both nominal or
substantial, requirement (3) is no longer required.
211. The doctrine of corporate opportunity prohibits
directors from acquiring business opportunities for his
personal gain at the expense of the corporation
(breaches his fiduciary duty). He must first disclose to
the corporation the opportunity and if the latter refuses to
take it, he can take it. If breached, he must account to
the corporation the profits by refunding the same.
212. Executive committee is composed of not less than
3 directors and whose creation is provided in the by-
laws. It acts on routine matters or on those which do not
require board meeting because it is difficult to convene
due to quorum requirement. Thus small number is
appointed among them. It cannot repeal or adopt by-
laws and cannot fill vacancies in the board.
213. A donation must be for a public welfare and not for
political purpose
214. Specific express powers are to shorten or extend
corporate life, increase or decrease capital stock, power
to incur create or increase bonded indebtedness and
power to deny preemptive right.
215. All stockholders must give their consent for the
ratification of an ultra vires act.
216. A corporator in a stock corporation must be a
stockholder. Honorary membership in a business
corporation is not allowed by law
217. Private corporation may be organized by private or
by the state or both for private ends, aims, benefits or
purpose
218. In political law, public corporations are commonly
referred as to municipal corporation
219. Government created private corporation to augment
its income. The corporation is then subject to the rules of
the law governing private corporation. Examples are:
GSIS, PNR, LRT, PNB, NAWASA, NAPOCOR
220. Quasi-public corporation—are in reality organized
as private corporation but performs public functions.
Examples: PLDT, MERALCO, PAL, WG and A
221. Pre-incorporation subscription shall be irrevocable
within 6 months from subscription

AMENDMENTS IN THE REVISED CORPORATION

CODE
1. INCORPORATORS: Removal of the minimum
number of incorporators.
2. CORPORATE TERM: Removal of the 50-year
corporate term. This means that unless there is
a provision in the Articles of Incorporation with
regard to the term of corporate existence, the
corporation will exist perpetually unless sooner
dissolved.
3. ONE PERSON CORPORATION: Allowance for
a single person - whether natural or juridical - to
organize and put up a corporation. However, this
is subject to the requirement of a minimum
capital stock of Php 1,000,000.00 to be paid up
in a lump sum at the time of incorporation.
4. CORPORATE OFFICERS: Chief Executive
Officer is made the alternative title to President
and Chief Financial Officer is made the
alternative title to Treasurer. Also, the inclusion
of Compliance Officer as a mandatory corporate
officer on top of the president/CEO,
treasurer/CFO, and corporate secretary.
5. BOARD MEETINGS: Allowance of remote
communication methods in attending board
meetings subject to provisions of the corporate
by-laws.
6. NATIONALITY OF A CORPORATION:
Formalization of the test in determining the
nationality of a corporation, i.e. the control test.
7. REMOVAL OF A MEMBER OF THE BOARD
OF DIRECTORS OR TRUSTEES: Empowering
the SEC to remove disqualified members of the
Board of Directors or Trustees

Source: -jkyap, De Leon and Judge Betonio