doctrine of equality of shares- share
shall be equal in all respects to every
other share;
redeemable shares-permit the issuing
corporation to redeem or repurchase
said shares; may be issued by the
corporation when expressly provided in
the articles of incorporation
treasury shares- s shares of stock that
have been issued and fully paid for, but
subsequently reacquired by the issuing
corporation
Other Kinds of Stocks/Shares
Escrow stocks are deposited with a third
person to be delivered to a stockholder
or his assign after complying with
certain conditions
Over-issued stocks or spurious stocks
are those issued in excess of the
authorized capital stock
Watered stocks are those issued not in
exchange for their equivalent either in
cash, property, share, stock dividends,
or services
Street certificates those endorsed by the
registered holder in blank
Convertible shares those shares that
grant the stockholder the right to convert
said shares from one class to another at
a certain price
Fractional shares are those that have a
value of less than one full share
instrumentality or control test requires
that the subsidiary be completely under
the control and domination of the parent
fraud test which requires that the parent
corporation's conduct in using the
subsidiary corporation be unjust,
fraudulent or wrongful;
harm test which requires a causal
connection between the fraudulent
conduct committed through the
instrumentality of the subsidiary
Capital stock or stated capital is the
amount fixed in the articles of
incorporation to be subscribed and paid
in cash
Capital is the value of the actual
property of the corporation
Authorized capital stock is the capital
stock divided Info shares with par values
Subscribed capital stock is the total
amount of the capital stock subscribed
whether fully paid or not.
Outstanding capital stock is the portion
of the capital stock issued to
subscribers minus the treasury stocks.
Stated capital is the capital stock divided
into no-par value shares.
Paid-up capital is the amount paid by
the stockholders on subscriptions from
unissued shares of the corporation.
3 steps in the creation of a corporation
- Promotion
- Incorporation
- Formal organization and
commencement of the
transaction of business
stock corporations shall not have a
required minimum capital stock
De jure corporation- organized in
accordance with the requirements of law
De facto corporation - organized with
colorable compliance
Corporation by estoppel - a group of
persons that assumes to act as a
corporation knowing it to be without
authority to do so
Corporation by prescription- one that
lias exercised corporate powers for an
indefinite period without interference on
the part of the sovereign power
directors are elected for a term of one
year
trustees are elected for a term not
exceeding three years
The number of directors in a stock
corporation cannot exceed 15 with a
term of one year each while the number
of trustees in a nonstock corporation
can exceed 15, and with a term of three
years each—-one-third of the board
are elected annually.
independent director is a person who
must not have a relation with the
corporation
straight voting where every stockholder
may vote such number of shares for as
many persons as there are directors to
be elected;
cumulative voting for one candidate
where a stockholder is allowed to
concentrate his votes and give one
candidate
cumulative voting by distribution where
a stockholder may cumulate his shares
by multiplying the number of his shares
by the number of directors to be elected
30 days after the election submit their
names, nationalities, and etc.
director, trustee or officer dies, resigns,
secretary or the director, trustee or
officer of the corporation, shall report the
same in writing to the SEC within seven
days
directors/trustees may be removed by a
vote of the stockholders representing at
least two-thirds of the outstanding
capital stock
election must be held within 45 days
from the time the vacancy arose
Executive Committee is a body created
by the bylaws and composed of not less
than three members of the board of
directors
Ultra vires acts are not necessarily
unlawful, but they are outside the
powers of the corporation.
ultra vires act as an act that is beyond
the conferred powers of a corporation or
the purposes or objects for which it is
created as defined by the law of its
organization.
A corporation has express, inherent,
and implied powers.
Contracts that are entered into by the
corporation with one or more of its own
directors/trustees, or officers are
voidable, unless certain conditions are
met
bylaws of a corporation are the
governing rules by which the corporation
operates.
right of first refusal" or preemptive right
For the bylaws to be valid, it must: •
. not be contrary to law nor with the
Revised Corporation Code;
• not be contrary to morals and public
policy; • not impair obligations and
contracts
* be general and uniform;
* be consistent with the charter or
articles of incorporation, and
* be reasonable, not arbitrary or
oppressive
Regular meetings of
stockholders/members be held on the
date fixed in the bylaws and if no date is
fixed, on any date after April 15 of every
year as determined by the board of
directors or trustees.
Written notice of regular meetings shall
be sent to all stockholders or members
or record at least 21 days prior to the
meeting
The use of remote communication such
as videoconferencing and
teleconferencing during stockholder
meetings is allowed.
Regular meetings of the board of
directors/trustees are held monthly
unless otherwise provided in the bylaws.
special meetings may be held at any
time upon the call of the president or as
provided in the bylaws.
No proxy shall be valid and effective for
a period longer than five years at any
one time
A general proxy confers a general
discretionary power to attend and vote
at the annual meetings while a limited
proxy restricts the authority to vote to
specified matters only and may direct
the manner
Stockholders or members may attend
and vote in their meetings by proxy;
directors cannot do so as they must
always act in person.
subscription contract is a contract for the
acquisition of unissued stock in an
existing corporation or a corporation still
to be formed.
subscription contract is a consensual
contract that is perfected upon the
meeting of the minds
underwriting agreement is an
agreement between a corporation and a
third person
subscription of shares in a corporation
still to be formed shall be irrevocable for
at least six months from the date of
subscription,
no certificate of stock shall be issued to
a subscriber until the full amount of
subscription together with interest and
expenses (in case of delinquent shares),
if any is due, has been paid.
"Water" in the stock represents the
difference between the fair market value
at the time of the issuance of the stock
and the par value of the said stock
Unpaid subscription may be collected
through:voluntary payment, involuntary
payment: extra-judicial delinquency sale
and application, judicial action.
The name of the subscriber is recorded
in the stock and transfer book, and from
that time, such subscriber becomes a
stockholder o f record entitled to all the
rights of a stockholder.
Managerial rights are the voting rights
and the right to remove directors.
merger is a union of two or more
existing corporations whereby one or
more of these corporations are
absorbed by another corporation.
Consolidation is a union of two or more
existing corporations to form a new
corporation called the consolidated
corporation.
proprietary rights right to dividends, right
to issuance of the stock certificate for
fully paid
general rule, when one corporation buys
all the shares of another corporation,
this will not operate to dissolve the other
corporation and as the two corporations
are still maintaining their separate
corporate entities, one will not answer
for the debts of the other. The exception
as to non-assumption of liabilities are:
(1) if there is an express assumption of
liabilities; (2) if there is a consolidation
or merger; (3) if the purchase was in
fraud of creditors; and (4) if the
purchaser is a continuation of the seller.
This rule is also known as the Nell
Doctrine
Appraisal right is the stockholder's right
to withdraw from the corporation and
demand payment of the fair value of his
shares
Merger and consolidation are corporate
strategies to combine with another
corporate entity and later operate as a
single legal entity
A partnership arises from a contract
entered into by people wno trust one
another and are willing to contribute
their money, property, and service to a
common fund that will be used to
generate profit.
very foundation and essence of a
partnership is the mutual desire and
consent
A partnership duly formed under the law
is a juridical person that has a
personality separate and distinct from
the partners
there must be: fl) -t valid Contract; (2)
legal capacity of the persons forming the
partnership; (3) mutual contribution of
money, property, or industry to a
common business; (4) a lawful
business; and (5) primary purpose
which is to obtain profits and to divide
the same among the parties
Consensual - it is perfected by mere
consent
Bilateral - it is entered between two or
more persons With reciprocal rights and
obligations
Principal - jt does not depend for its
validity or existence
Commutative - the undertaking of one
partner is regarded as the equivalent of
that of the other partners.
Preparatory - it is entered into so that
such persons may lawfully engage in
business to realize profits
Onerous - where partners contribute
something so that they may share in the
profits of the business.
Nominate - it has a special name or
designation under the law.
universal partnership which refers to all
the present property or to all profits or a
particular partnership which has for its
object determinate things
universal partnership of profits
comprises all that the partners may
acquire by their industry or work during
the existence of the partnership.
delectus personae defined as the right
of a person to choose whom he wants
to associate with
As to duration a partnership may either
be for a fixed term or a particular
undertaking,or at will,
partnership de jure that has complied
with all the requisites for its lawful
establishment, or a partnership de facto
that failed to so comply.
general partnership consisting of
general partners who are liable pro rata
and subsidiarily or at times solidarily
with their separate property for
partnership obligations
a limited partnership which is formed by
two or more persons having as
members one or more general partners
and one or more limited partners who
are not personally liable for the
partnership obligations
secret partnership—one where the
existence of certain persons as partners
is not made known
notorious partnership whose existence
is made known
a commercial or trading partnership that
exists for the transaction of business or
a professional
non trading partnership that exists for
the exercise of a profession
capitalist partner who contributes money
or property
industrial partner who contributes only
his industry, skills, or services
general partner whose liability to third
persons extends to his separate
property;
limited partner whose liability to third
persons is limited to his capital
contribution
managing partner who is designated to
manage
liquidating partner who takes charge of
winding up
partner by estoppel who is not really a
partner but , is liable as such for the
protection of innocent third persons;
continuing partner who continues the
business after the dissolution
surviving partner who remains a partner
after dissolution
sub-partner who is not a member of the
partnership he only contracts with a
partner concerning the share of the
latter in the partnership
ostensible partner who takes an active
part in the business of the partnership
and is known by the public;
silent partner who does not take an
active part in the business, but maybe
known to be a partner by third persons
dormant partner who doesn't take an
active part in the business and is not
known or held out as a partner
original partner who has been a partner
since the constitution of the partnership;
incoming partner who is about to join
retiring partner who is withdrawing from
the partnership.
A contract of partnership creates four
kinds of relationships: (1) among the
partners; (2) between the partners and
the partnership; (3) between the
partnership and third persons; and (4)
between the partners and third persons.
specific and determinate things which
are not fungible and where only the use
is contributed by the partner, the risk of
loss is borne by the partner
specific and determinate things the
ownership of which is transferred to the
partnership, the risk of loss is for the
account of the partnership
fungible or consumable things, the risk
of loss is borne by the partnership
things contributed in order that the
partnership may sell the same, the
partnership bears the risk of loss.
things brought and appraised in the
inventory, the partnership bears the risk
of loss
loss is due to the fault of any of the
partners, the partner at fault shall be
liable for damages
Property Rights of Partners: his rights in
specific partnership property, his interest
in the partnership, and his right to
participate in the management.
partner's right in such property is not
assignable, except when all the partners
assign their rights in the same property
When there is no agreement as. to the
manner of management, all the partners
are considered agents. This is referred
to as mutual agency; whatever any one
does alone binds the partnership
dissolution as the change in the relation
of the partners caused by any partner
ceasing to be associated in the carrying
on of the business
Winding up is the actual process of
settling the partnership business or
affairs after dissolution
Termination is the point when all
partnership affairs are completely
wound up and finally settled; it signifies
the end of the life of the partnership.
A partnership may be dissolved without
violation of the agreement, in
contravention of the agreement, by
operation of law, by decree of a court,
and upon application by a person who
acquires the interest of a partner.
Any partner may cause the dissolution
of the partnership at any time without
the consent of his co-partners at
his pleasure or for any reason which he
deems sufficient by expressly
withdrawing therefrom even though the
partnership was entered into for a
definite term. A partner has a power,
although not necessarily the right, to
dissolve a partnership, even though his
co-partners wish to continue the
business. The withdrawing partner is
liable for damages for unjustified
dissolution but he can’t be compelled to
stay in the partnership.
C. Unlawfulness of the Business
• Lawful from the start, but the business
became unlawful because of a
supervening event and this is a ground
for
Dissolution.
/ Dissolution may be caused
involuntarily when a supervening event
makes the business itself of the
partnership unlawful, a law makes the
continuance of the business illegal.
D. Loss (When a Specific thing which a
partner had promised to contribute to
the partnership, perishes before the
delivery)
• Loss of a specific thing before it is
contributed before the delivery to the
partnership is a ground for dissolution
because it is as if the partner did not
contribute anything. If the object is lost
after the delivery to the
partnership, when the thing is already in
the possession of the partnership, the
partnership will not be dissolved
but rather it will bear the risk of loss.
Loss where only use or enjoyment
contributed - If only the use or
enjoyment of the thing is contributed,
the
partner having reserved the ownership
thereof, the loss of the same before or
after delivery dissolves the
partnership.
E. Death of any partner
• Death of any partner causes a
decrease in the numbers of the partners
which means automatic dissolution. This
is because the increase or decrease in
the membership will dissolve the
partnership.
The surviving partners have no authority
to continue the business except so far
as is necessary to wind up.
F. Insolvency of a partner or of the
partnership
• It is a ground for dissolution because it
can no longer satisfy its obligations and
probably it cannot also conduct
its business. An insolvent partner has no
authority to act for the partnership
because how can he perform his
obligations when he doesn’t have any
assets left.
G. Civil Interdiction of any partner
• The only resort of a partner suffering
from civil interdiction is to dispose his
property mortis causa or via last will
and testament. This is because he will
be prohibited to manage his property or
enter to any kind of business
because as stipulated in the law, a
person suffering from civil interdiction
cannot give a valid consent.
Judicial Dissolution – any partner or
even an assignee can go to court and
ask the court to issue an order to
dissolve the partnership.
Causes of Judicial Dissolution
A. Dissolution by Judicial Decree on
Application by a partner (Article 1831)
On Application by or for a partner, the
court shall decree a dissolution
whenever there is an:
1. Insanity –
2. Incapacity
3. Misconduct and persistent breach of
the partnership agreement.
4. Business of the partnership can only
be carried on at loss –
5. A partner has been guilty of such
conduct as it tends to prejudicially affect
the carrying on of the business.
6. Other circumstances

B. Dissolution by Judicial Decree on

Application by a Purchaser of a
Partner’s Interest
1. When the specified term or particular
undertaking has been terminated.
2. In case of a partnership at will, at any
time when the interest was assigned or
when the charging order was issued.

WINDING UP (Article 1836)

A. Extrajudicial Winding Up
1. The partners designated in the
agreement.
2. By the partners who have not
wrongfully dissolved the partnership.
3. By the legal representative of the last
surviving partner (when all the partners
are already dead), provided the last
survivor was not insolvent.

B. Judicial Winding Up
• Under the control and direction of the
court, upon proper cause that is shown
to the court.