ag : BUSINESS LAWS AND REGULATIONS Rosalie dela Cruz-CadaPREFACE ded primarily for accountancy students, business students and Covafiod Public Accountant Licensure Examination candidates. This work Le ico serve as a simplified material for use of law students. Business owners and a guide in their business operations. This book is intet managers can use this as of each law were explained in the simplest way possible with guage, examples, and exercises taken from bar examination sided by the Supreme Court which were also incorporated to them to do an extra reading as the titles and citations of ded, Legal terms were defined for easy comprehension. y is provided at the end of each topic and exercises in the form of Fig and cases as well as True or False questions were provided ipter to test the knowledge acquired from the lesson. 6 laws in one book and I hope that the effort I put through .f the students—to learn the laws they will need The provisions the use of layman's lan; questions and cases dec assist the reader and inspire the cases were likewise inclu Lesson summatr} hypothetical questio at the end of each chaj It is hard to put 5 to will serve the purpose o} in writing it oose. to excel in the career they ch my heartfelt gratitude to my loving husband, Dr. Leo Cada ighters Shirley Marie, Dr. Joanne Irish, Elizabeth Grace, and ons-in-law, and granddaughters for all their support while I cecial thanks to Mr. Eugene Villaceran who encouraged me want to express Jr, and my lovely dau Dr. Claudine Rose, my s was writing the book. Sp to write this book. gs God may be glorified! ‘That in all thin; Rosalie J. Dela Cruz-CadaPtgcinecopyiht 2001 by Rex 800k Store, ne Rosalie Dela CrusCada Stuns Ls and Replat 2m eason nos ihrer otest3 on Textbook 0+ 5.00534) hated sn . nd "ees tiose eran cipro 8S aches: reer Pet Book Store, inc (RES) wth main office at 856 Nicanor Reyes St, sempaloc, Manta us fmerInracton Center Tel. Nos: 8857-777, 6857-7742-4, 8857-7796 (0 97 / Ema + ona: non 1551 sa, ecto A cubs0, 14033 tle, os 608, erenes «nero: 26-65 nem sé $2840: Ut 10 UGE Gt Canaan Bi. Gen soto ve, Aan CO i tag MEME: Ut ats 9. 10Soho Gana rene, andluone iy / el No 77802 SHE Ge etn cy rs ROH ho on sages Casatvane Fortlr a, 1273 ae 7 etic a / ashen as Se este 8 thou 2 22993744 Rocawes 1095) 22-152 + MAKAT: Unit UG2, sar centrum Bl, Sen. cl Puyat Ave. Makati CYC I Mento Pelesonal choo Rockvel Caney Bei taka Cy / Te No 09564202705 my tui Cy / Tel No. (674) 422-0578 « TUGUEGARAO: 10 Arellano Ext. 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(083) 204-8512, (083) 554-7102 Wr rexcom.ph ~ Daisnas Heights, Genera book nay : na "= 2d of eproducedin veograpieg Thal be 3 Tt a ek athe, outines or notes—whether printed, mimeoss => incomplance win ton o2l without the writen permasion ofthe Publisher ang Auto" me MOSS ort ademark patent ond ater pertinent WS Bk Se, s TS. ay ay re sno es Internet Link Ds a een ito ON te ene ek OE ont ks TSE Tesi ert Orton Emo content ofthe external sites and for hat of subzeauet IA "ASV werk tne eNNAl ur aoe then Bois ony Although verified atthe date of publica he ou or does it er "have control ovr the availabilty of inked pages. oreo EsB00 oe Ses crin ate Rasy as 2! Warn sts ents pont Ma a ge eM rake Ile them aval are re of vues or oher Natl yeast tet docca Fhe crectans mettre repardng the use o the ests of the we TE Reamer inde renee nee sith eo th on pe cle Aca, pg) on Development escin fhe PIE i itera rot POTTS Associaton of the Pillppines(SEAP), Academic Booksele’s ASSO Mt Nc ya” ot Pion eel te Ponies (BEAR Academic Book, ; Aeon Memb, ne (CLAP) Asan Publishers Resour von wr NHS Phone oot reenable Asocation (PA; Asia Pace Publishers AO opine Bock Puig ine Development Federation (Philbook) ener reno sa ling company nt. xD “SONS Quezon chy / Te. No. 8657-7778 PREFACE . UNITI THE LAW ON PARTNERSHIP ———— eee. CHAPTER 1: GENERAL PROVISIONS Essential Features. Parties, Object and Form. Duration of Partnership vem: Rules to Determine Existence ..... Kinds of Partnership..... Kinds of Partners eYNaagane CHAPTER 2: RIGHTS AND OBLIGATIONS LESSON 1: RIGHTS AND OBLIGATIONS OF THE PARTNERSHIP Right to Contribution. 15 Right to‘Additional Contribution... a 17 Right to Apply Payment Received to Partnership Credit 18 Right to Return of Credit Received...... 19 Right to Indemnity for Damages... 19 Suit for Damages Responsibility to Partners 20 20, LESSON 2: RIGHTS AND OBLIGATIONS OF PARTNERS INTER SE Right to Associate Another in Share... Right to Inspect Partnership Books..... Right to Formal Account Property Rights of Partners Ownership of Certain Properties.. Rights in a Specific Property ...LESSON 3: OBLIGATIONS 0} Interest in Partnership Right to Participate in Management Right to Profits and Obligation for Losses 2, Eaclusion of Partner from Share e Obligation to Render Informatior a Obligation to Account and Act as Trustes e F THE PART! THIRD PERSONS oe Obligation to Operate und i ea ler a Firm N: Liability of Partnership sig Liability of Partners for Partnership Contracts Conveyance of Part nersh Libya par eth Real Property. UNIT II REVISED CORPORATION CODE CHAPTER 1: ORGANIZATION, INCORPORATION, AND FUNCTIONS OF DIRECTORS/OFFICERS LESSON 1: _ Lesson 1.1: GENERAL PROVISIONS Classes of Corporations 7 Corporators, Incorporators, Stockholders, and Members Classification of Shares... Doctrine of Equality of Shares. Other Kinds of Stocks/Shares.... Doctrine of Piercing the Veil of Corporate Entit , Lesson 1.2: INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS (eit ofan Incoming Partner lotice to or Knowledge of the Partnership a Number and Qualifications of Incorporators. CHAPTER Cases otDisslution DISSOLUTION AND WINDING UP 3 Terms of Corporate Existence .. Cts of Dissolution 3 Capital Stock Requirements ning Up Partners 40 Contents of the Articles of Incorporation.. ights of Partners i 4a Amendment of Articles of Incorporation Grounds When Articles of Incorporation or Amendment May Be Disapproved.. Corporate Name .. Registration, Incorporation, and Commencement of Corporate Existence 2 Effects of Non-use of Corporate Charter and Continuous Inoperation .... LESSON 2: Lesson 2.1: BOARD OF DIRECTORS/TRUSTEES AND OFFICERS The Board of Directors or Trustees of a Corporation, Its Qualifications and Terms Disqualification of Directors, Trustees, or Officers Election of Directors or Trustees Corporate Officers Report of Election of Directors, Trustees, and Officers; Non-holding of Election and Cessation from Office Removal of Directors or Trustees ...‘Vacancies in the Office of Director or Trustee; Emergency Board........ 88 Compensation of Directors or Trustees. Liabilities of Directors, Trustees, or Officer: os Dealings of Directors, Trustees, or Officers with the Corporation. Contracts Between Corporations with Interlocking Directors. Disloyalty of a Director... Executive Management and-Other Special Committees. Lesson 2.2: POWERS OF CORPORATIONS Corporate Powers and Capaci is Power fo Extend or Shorten Corporate Term, pee to Increase or Decrease Capital Stock; Incur, or Increase Bonded Indebtedness, Power to Acquire Own Share Create, Pow oe Invest Corporate Funds in Another Corporation or peste or for Any Other Purpose. aa paws to Declare Dividend: a Sy : ee Enter into Management Contract. a "es Acts of the Corporations... a LESSON 3, Lesson 3:1: BYLAWS Adoption of Bylaws. Lesson 3.2; MEETINGS Regular a ind Speci i ice ae Meetings of Stockholders or Member: at Meetings of Directors or Trustees; Quorum a of Presiding the Meetings : and Vote i i a ‘© in Meeting: CHap TER 2; RIGHTS OF stog ‘KHOLDER, MER L a GER, AND APPRAISA! ay aL RIGHT "son Lag “STOCKS AND g Subscrip TOCKHOLDER: Cone eon Contract, . i OMsider, 1 Liability of Directors for Watered Stocks... Delinquency Sale Effects of Delinquency Lost or Destroyed Certificates Lesson 1.2: CORPORATE BOOKS AND RECORDS Books to Be Kept; Stock Transfer Agent.. Right to Financial Statements ...... LESSON 2: Lesson 2.1: MERGER AND CONSOLIDATION Plan of Merger or Consolidation Stockholders’ or Members’ Approval. Articles of Merger or Consolidation Effectivity of Merger or Consolidation Effects of Merger or Consolidation .. Lesson 2.2: APPRAISAL RIGHT When to Exercise Appraisal Right CHAPTER 3: OTHER CLASSES OF CORPORATIONS, DISSOLUTION, AND POWERS OF SEC LESSON 1: NONSTOCK CORPORATION. Purposes . Right to Vote..... Election and Term of Trustees Rules of Distribution of Assets i Conversion from a Stock Corporation to a Nonstock Corporation... LESSON 2: Lesson 2.1: CLOSE CORPORATIONS 1 Articles of Incorporation... Effects of Issuance or Transfer of Stocks in Breach of Qualifying Conditions... Agreements by Stockholders. When a Board Meeting is Unnecessary or Improperly Held Amendment of Articles of Incorporation... Deadlocks... Withdrawal of Stockholder or Dissolution of CorporatioyLESSON 2.2: SPECIAL CORPORATIONS LESSON 2.2.1: EDUCATIONAL CORPORATIONS Board of Trustees....... LESSON 2.2.2: RELIGIOUS CORPORATIONS Corporation Sole... Articles of Incorporation. Submission of the Articles of Incorporation Acquisition and Alienation Filling of Vacancies. Dissolution... Religious Societio of Property .. LE ‘SSON 2.2.3: ONE-PERSON: CORPORATION Minimum Cay ital i oben Pi Stock Not Required for Corporation. Articles of Incorporation Bylaws... Display of Co ¢ rporate N; Single Stockhol ar Nominee and Treasures, C 2 ” Corporate S| Minute Boose Secretar Ider as Director and Py Alternate Nominee er 'y, and Other Officers mae ords, and Reportorial Requirements Conversion fro, oP Ca ty Corpération to OPC ™ OPC to an Ordinary Stock Corporation... Voluntary Dissok Voluntary pi to? Where Ni x aa io Cred one, 'ssolution Where ie itors Are Affected Of Petition. editors Are Affected; Py 'Ssolution, Withdrawa rocedure and Resident Agent; Service of Process Applicable Laws Amendments to Articles of Incorporation or Bylaws of Foreign Corporations... a Merger or Consolidation Involving a Foreign Corporation Licensed in the Philippines... Doing Business Without a License Revocation of a License. Withdrawal of Foreign Corporations Foreign Investments Act of 1991. LESSON 5: Lesson 5.1: INVESTIGATIONS, OFFENSES, AND PENALTIES. Investigation and Prosecution of Offenses Administrative Sanctions..... Lesson 5.2: MISCELLANEOUS PROVISIONS Reportorial Requirements of Corporation : Visitorial Power and Confidential Nature of Examination Results. Powers, Functions, and Jurisdictions of the SEC Development and Implementation of Electronic Filing and Monitoring System .. Arbitration for Corporations. UNIT III COOPERATIVES ESSE CHAPTER 1: PHILIPPINE COOPERATIVE CODE OF 2008 (REPUBLIC ACT NO. 9520) Membership in a Cooperative General Assembly Board of Directors. Committees of the Cooperative.. Liability for Damages and Secret ProfitsCompensation... Self-dealing Directors, Offi Disloyalty of a Director . Illegal Use of Confident: lential Ir Removal of Officers, ae Tax Treatment of Cooperatives Insolvency ‘ Dissolution... Liguidation of a Cooperative Source of Capital .. t Investment of Capital. soe 223) ers or Committee Member: CHAPTER 2: COOPERA’ TIVE DEV} Tit ELOP] oe . TER OF 2019 (REPUBLIC aan ind > Functions, and Res i “a tk 65 Pre neers Sie of the Cooperative and Funeti 0a e cae Functions of the Board of Direc eect Administrator ce ration for i hibition eX Exempt Settlement of Disputes Talning Standards. wPetatives in Different e LESSON 2: FORM AND INTERPRETATION Requisites of Negotiability .. Must Be in Writing, Signed by the Maker or Drawer : Must Contain an Unconditional Promise or Order to Pay a Sum Certain in Money peal H Must be Payable on Demand or at a Fixed or Determinable Future Time....247 ‘Must be Payable to Order or to Bearer..... Concept of a Fictitious Person. Identification of the Drawee. Completion and Delivery of Instruments Incomplete but Delivered Instruments Incomplete Instrument Not Delivered Complete but Undelivered Instruments. Rules to Be Followed in Interpreting Negotiable Instruments .. Liability on the Instrument. ina Forgery ve Cut-off Rule .. Material Alteration Consideration . CHAPTER 2: NEGOTIATION AND HOLDERS. LESSON 1: NEGOTIATION Modes of Transfe Concept of Negotiation. Ways of Negotiation. Indorsement ... Negotiation by a Prior Party ... LESSON 2: HOLDERS General Concept of a Holder... Holder in Due Course . Rights of Holder in Due Course Shelter Rule.....ABOUT THE BOOK This textbook, Business Laws and Regulations, presents a comprehensive understanding of the laws, rules, and regulations governing the different business organizations such as partnerships, corporations, and cooperatives. It discusses the vital concepts and principles regarding partnerships, corporations, and cooperatives, including the rights, obligations, and liabilities of persons comprising such business organizations. A simplified approach is used in explaining the law on partnership (Articles 1767 to 1867 of Book IV of the Civil Code of the Philippines), the law on private corporations (Republic Act No. 11232), the law on cooperatives (Republic Act No.11364), the Negotiable Instruments Law, the Bouncing Checks Law (Batas Pambansa Blg. 22), and Article 315 of the Revised Penal Code on Swindling (Estafa). This textbook also describes the ethical behavior to be observed in compliance with the specific laws governing business organizations and identifies the legal issues associated with the rights and obligations pertinent to specific business organization. ABOUT THE AUTHOR Rosalie dela Cruz-Cada is an active litigation lawyer and a certified public accountant. She holds a Master of Laws which she oblained from the San Beda & College-Graduate School of Law in 2013. She also obtained a Master of Public Administration degree from the University of the Philippines-Diliman in 1995 and a Post-graduate diploma in International Humanitarian Law, from the NALSAR University in Hyderabad, India in 2012. She is currently taking up her Doctor of Philosophy in Psychology major in Clinical Psychology at the Far Easter University-Manila. She is & former bank examiner at the Central Bank of the Philippines and thereafter headed the legal department of four commercial banks before she joined the academe. She was an independent director of a rural bank based in Laguna, Oucomes-Based Edvcaton (OBE) has become a powerul and engaging way of reforming te O QUEGOMES- Prion eacatona! sysom The hghigh a OBE tthe produ! 1 develo the ea rads The Rex Esato’ teary textbooks are designed in compliance wth the Commssen on Highs Education's (CHED) requirements for OBE learning materials. The content, learning activities, and {xeries aim to guide stuf to loan important Krawiedgo and ‘acquis to meet the CHED' Brescrbed competences in pectic program. vw ‘ EN wT r - , aaa acme od alrooztolass: fost 1A a olaaeo 10h ea