Reg 2

*Kapag ang directors ay natanggal dahil sa IRES (Increase or Decrease ng number of directors, Valid
Removal, Expiration of term) na nasa quorum pa – kailangan pumalit ay Stockholder

*Kapag namatay or other reasons aside from IRES – remaining directors

*Appointment of treasurer – majority of all

*The approval of the contract for the purchase of cement worth 500,000 from x constructions supplies –
majority of present na nagcoconstitute ng quorom

To adopt by laws

- Majority of the outstanding capital stock or of the members

In no case shall the total yearly compensation of directors, as directors exceed

- 10% of the net income before income tax during the preceding year

Title 1 General Provisions

Corporation

- Is an artificial being – personality separate and distinct from owners

- created by operation of law – only the State through the SEC can grant a business license to
operate as a corporation
- Right of succession – namamana – perpetual life continuously exist
- Powers, attributes and properties, expressly authorized by law or incidental (express, implied/
necessary and incidental/inherent – right to sued and be sued)

Corporation vs. Partnership

- Main difference operation by law.

- Contract partnership

AKAWNTING YT

A corporation has limited capacity – can exercise only the powers expressly conferred upon it by law and
its articles of incorporation those implied from such powers expressly granted and those are inherent to
its existence.

Major Classes in General

1. Stock Corporation - shareholders/directors

2. Non-Stock Corporation – trustees/members
According to Purpose

1. Public Corporation – general good or welfare

2. Private Corporation –
3. Quasi-Public Corporation – supported by the government eg. public utilities, electric, water
& transportation
4. GOCC – owned by Gov. of the Republic of the Philippines at least a majority of its
outstanding capital stock

According to Control

1. Parent – have the power

2. Subsidiary – owned by another corporation

According to Legal Status

1. De Jure – by law
2. De Facto – by fact – has all the powers of a de jure corpo. but its existence can be attacked
directly in a quo warranto proceeding

According to Laws in Incorporation

1. Domestic – incorporated in Philippine laws (operating within the country)

2. Foreign – other than those of the Philippines and whose laws allow Filipino citizens and
corporation to do business in its own country or State

According to Number of Persons

1. Aggregate – more than one corporation

2. Sole – only one person, lie a bishop or Rabbi One Person Corporation

Public or Not

1. Open – listed in stock exchange

2. Close – not listed in any stock exchange

Charitable or Not

1. Eleemosynary – one organized for Public charity

2. Civil – one organized for business or profit

Religious or Not

1. Ecclesiastes – for religious purpose

2. Lay – other than ecclesiastical or purposes
Corporation by Prescription

- has existed longer than the memory of man can remember and is presumed to have acquired its
juridical personality from the long time ago. Roman Catholic

Corporation by Estoppel

- one which not in reality a corporation but is considered as one with respect to those who are
precluded by their admission or conduct from denying its existence

Incorporation Test – primary test under ph,

Control Test – Liberal Rule – if the corporation is at least 60% Filipino owned – considered as 100%
domestic corp

Wholly/Partly Nationalized Industries

No foreign equity – mass media by mandate of the 1987 Corp

Up to 25% foreign Equity – private recruitment, whether for local or overseas employment by mandate
of PD No. 442

Up to 40% foreign equity – ownership of private lands

Grandfather Rule (Strict Rule) – is less than 60% Filipino-owned, then the corresponding percentage
belonging to Filipino shall be the only shares to be recorded as Filipino Share

In doubt 60-40 Filipino foreign ownership

Doctrine of Piercing the Corporate Viel

- Fraud test
- Alter ego or instrumentality test (or Conduit cases)
- Public convenience or objective test
- Equity cases/test

Title 2 – Incorporation and Organization of Private Corporation

Capital Structure

Different Qualification of Incorporators (sec. 10)

- Natural or Artificial Person

- Not more than 15
 - Cannot organize corporation for practice of profession
- Legal Age (if natural person)
- Holder or subscriber of at least 1 stock
 Stock corporation shall not be required to have minimum capital stock, except as otherwise
specially provided by special law. (sec. 12)

Corporate Term – perpetual existence (Sec. 11)

- No extension maybe earlier than 3 years prior to the original or subsequent expiry date
- May apply revival of its corporate existence

By favorable recommendation of the appropriate government agency

- Banks - Pawnshops
- Banking and Quasi Banking - Corporation engaged in money service business
- Preneed - Other financial intermediaries
- Insurance and Trust Companies
- Non-stock Savings and Loan Associations (NSSLAs)

Classification of Shares

- Common
- Preferred – issued only with par value, My be deprived by voting rights
- Voting
- Non-Voting
- Par Value
- No Par Value
- Founder’s Shares
- Redeemable Shares
- Treasury Shares – have been issued and fully paid for, but reacquired
 No share may be deprived

Holders of Non-voting shares

- Amendment of the AOI

- Adoption and amendment by laws
- Sales, Lease, exchange, mortgage, pledge
- Incurring, creating or increasing bonded indebtedness
- Increase or decrease of authorized capital
- Merger or Consolidation
- Investment of corporate funds in another corp
- Dissolution ‘
Different Components of a Corporation

Corporator – who compose a corporation, whether stockholders or members

Incorporator – mentioned in AOI a originally forming and composing the corporation and who are
signatories thereof

Directors – BOD is governing body in a stock corporation

Trustees- BOD is a governing body of a non-stock corporation

Promoter – help to organized and incorporate what we want in a corporation

- have joint personal liability for a corporation that was never formed
- not agent of corporation before it come into existence, then they become agents ratifying the
contracts by BOD

Subscription Contract
- Contract for the acquisition of unissued stock, shall be irrevocable at least 6 months from the date of
subscription

Articles of Incorporation

- Name of corporation
- Purposes
- Place of principal office
- Corporate Term
- Names, nationalities and residence addresses of the incorporators
- Number of directors ( not be more than 15 (stock) may be more than 15 (nonstock)

Non Amendable in AOI

- Names of incorporators
- First set of directors and Subscribers
- Initial Treasurer
- Original Subscription
- The place and date of execution of the first AOI

To vote or election

- In person
- Representative
- Remote Communication (in absentia)
Formula of how many shares needed to be elected (OS x n/N+1) + 1

Adoption of Bylaws – majority of the outstanding capital stocks

Title 3 Board of Directors/Trustees and Officers

BOD
- exercise the corporate powers
- conduct all business
- control all properties of the corporation

Governing Body of Corp

- Not more than 15 (sec. 13)

- Owner of at least 1 share
- 1 year term (director); 3 yrs term (trustees)
- Not convicted by final judgment in certain cases within 5 years prior to election
- Other qualification provided in the bylaws

Stockholders elect directors

Directors elect officers