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CORPORATION LAW

Chapter I. INTRODUCTION

(1) Definition and attributes of a corporation
(2) Kinds of business organizations and their differences
(3) Jurisdiction of the SEC
• Union Glass v. SEC
• Abejo v. De la Cruz
• SEC v. CA
• Magalad v. Premiere Financing

Chapter II. CLASSIFICATION OF PRIVATE CORPORATIONS

(1) Stock v. Non-Stock Corporations
• CIR v. Club Filipino

(2) Other Matters
• NDC v. Phil. Veterans Bank
• Pioneer Insurance v. CA

Chapter III. FORMATION AND ORGANIZATION OF CORPORATION

(1) Requirements in the formation of a corporation

(2) Steps in the formation of a corporation
(a) promotion
(b) drafting of articles of incorporation
(i) Corporate Name
• Lyceum of the Phils. V. CA
(ii) Purpose Clause
(iii)Principal Office
(iv) Term of Existence
(v) Incorporators and directors; numbers and qualifications
(vi) Capital stock; subscription; payment
(c) filing of articles; payment of fees
(d) examination of articles; approval or rejection by SEC
(e) issuance of certificate of incorporation

(3) De Facto Corporations: Requisites
(a) User of Corporate Powers
(b) Formation under apparently valid statute
• Municipality of Malabang v. Benito
(c) Colorable compliance with the legal requirements in good faith
• Bergeron v. Hobbs
• Harril v. Davis
• Hall v. Piccio

(4) Corporation by Estoppel
• Empire Mfg. V. Stuart

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Yatco • Liddell v. v. Ople (d) Evasion of liability on contract • Villa-Rey Transit v. Southern Railway • Koppel (Phils. University Publishing Co. El Hogar Chapter IV. V. v. Ferrer (e) Close Corporations • Cease v. Associated Financing • Jacinto v. CTA Page 2 of 16 . Standard Oil • Laguna Trans.. Calica • NAFLU v. CA (c) Evasion of liability / obligation to employees • Claparols v.) v. CIR • Yutivo v. Botica Nolasco • Gov’t of the Phils. Guanzon v. David (b) Evasion of liability to creditors • Tan Boon Bee v. Jarencio • Namarco v. IBM • Salvatierra v. GR Woods • Asia Banking Corp. v. CIR • Indophil Textile Mills v. SSS • Marvel Bldg. CA • Delpher Trades v. Labrador (2) Disregarding Corporate Entity (a) Contrary to law / public policy. evasion of liability to government • State v. Corp. Garlitos • Albert v. Clave • Magsaysay v. THE CORPORATE ENTITY (1) The Theory of Corporate Entity • Stockholders of T. Inc. Standard Products • Cranson v. • Lowell-Woodward v. CA • Palay v. Register of Deeds • Caram v. CA (3) Parent-Subsidiary Relationship • Garrett v. (5) Internal Organization: By-Laws • Fleischer v.

El Hogar • Bissel v. Dunn • Rizal Light & Ice Co. V. Benguet Consolidated Mining Chapter VII. CA) (2) Corporate Rights under Promoter’s Contracts • Builders’ Duntile v. PROMOTER’S CONTRACTS PRIOR TO INCORPORATION (1) Liability of Corporation for Promoter’s Contracts • McArthur v. v. Times Printing Co. Boss • Quaker Hill v. Fay & Egan • Pioneer Insurance v. Bigelow Chapter VI. CONTROL AND MANAGEMENT OF CORPORATION (1) Allocation of Power and Control Page 3 of 16 . CA • How & Associates. v. Tomb • Cagayan Fishing Co. v. CA • La Campana Coffee Factory v. Mindoro Sugar Co. Inc. • Carlos v. Parr (4) Compensation of Promoters (5) Fiduciary relationship between corporation and promoter • Old Dominion v. Acoje Mining Co. Kaisahan Chapter V. Michigan Southern • Pirovano v. De la Rama Steamship • Harden v. • Clifton v. of the Phils. Sandiko • (Also see Caram v. CORPORATE POWERS (1) General Powers of Corporation (2) Specific Powers of Corporation (3) Implied Powers (4) The Ultra Vires Doctrine • Republic of the Phils. PSC and Morong Electric (3) Personal Liability of Promoter on Pre-Incorporation Contracts • Wells v. • Philvidec v. v. • Govt.

Atlantic & Plant S.. Comm. • Dela Rama v. Canada. Cloribel • Gokongwei v. (d) Stockholders or members • BOD and Elec. Encarnacion • Detective & Protective Bureau v. and Fernandez • Lopez v. Tan • Johnston v. Ltd. SEC (3) Devices Affecting Control (a) Proxy Device • In Re Giant Portland Cement Co. CA (b) Corporate officers and agents • Yu Chuck v. Ericta • Zachary v. SEC • Roxas v. Heirs of Maximo Kalaw • Zamboanga Transportation v. Loft (i) Who pays? • Campbell v. Batac Producers Cooperative Marketing Assoc. Santos • Campbell v. De Leon • Duffy v. of SMB v. Loew’s Inc. Fairchild Engine (b) Voting Trust Page 4 of 16 .S. • Rosenfeld v. Johnston • Ponce v. Chua (2) Who Exercises Corporate Powers (a) Board of directors or trustees • Ramirez v. (c) Board Committees • Hayes v. • Citibank NA v. Bachrach Motor Co. Everett Trust v. Co. Ma-ao Sugar Central • Gokongwei v. • Acuna v. dela Rosa • Angeles v. Kong Li Po • The Board of Liquidators v. Loew’s Inc. Pacific Waxed Paper • Alejandrino v. Orientalist Co. • State ex rel. Milin • PNB v.

Aquino (c) Pooling and voting agreements • Ringling v. Harkert • McQuade v. Dresser (a) The self-dealing director Page 5 of 16 . V. • NIDC v. SEC (h) Management contracts • Sherman & Ellis. Ringling Bros. Asia Banking • Mackin v. V. Indiana Mutual Casualty (i) Unusual voting and quorum requirements • Benintendi v. Andrews • Pool v. founder’s shares cf. DUTIES OF DIRECTORS AND CONTROLLING STOCKHOLDERS (1) Duty of Diligence: Business Judgment Rule • Otis & Co. Velasco • Barnes v. Inc. • Abercrombie v. Dodge (d) Cumulative Voting (e) Classification of Shares • Gottschalk v. Kenton Hotel Chapter VIII. V. Davies • Everett v. Stoneham • Clark v. Allen • Walker v. Pool • Foster v. Inc. Detig • Bates v. Nicollet Hotel. Avalon Realty (f) Restriction on transfer of shares (g) Prescribing qualifications for directors. Gokongwei v. Bacolod-Murcia Milling • Litwin v. Man • Steinberg v. Pennsylvania Railroad • Montelibano v. Bowen • Lowell Hoit & Co. • Buck Retail Store v.

Utica Gas & Electric (2) Close Corporation (3) Duty of Controlling Interest Insuranshares Corp. Hercules Lumber • Gonzales v. v. Repide • Taylor v. V. Carlisle • Irving Trust v. El Hogar • Barreto v. • Palting v. California Eastern Airways (c) Using inside information • Strong v. THE RIGHT OF INSPECTION (1) Basis of Right (2) What Records Covered (3) Extent of and Limitations on Right (4) Who may exercise Right (5) Remedies available if Inspection Refused • Pardo v. V. PNB Page 6 of 16 . McCullough • Piccard v. Allen (e) Interlocking directors Globe Woolen Co. La Previsora • Central Coop Exchange v. Northern Fiscal Corporation (4) Duty to Creditors Chapter IX. • Mead v. Inc. American Woolen Co. • Kerbs v. SEC (d) Seizing corporate opportunity • Singer v. Deutsch • Litwin v. Wright • Gokongwei v. Sperry Corporation (b) Fixing compensation of directors and officers • Govt. Tibe • Fogelson v. San Jose Petroleum.

DERIVATIVE SUITS (1) Nature and Basis of derivative suit: distinguished from individual and representative suit (2) Requirements relating to derivative suits • Evangelista v. Hay (iv) Preference stockholder is not a creditor • Augusta Trust Co. Isabela Sugar Co. SEC • Cojuangco v. Santos • Republic Bank v. Kahn Chapter XI. Tan • SMC v. Non-participating • Cumulative v. • Gokongwei v. FINANCING THE CORPORATION (1) Sources of Financing (2) Capital Structure (3) Capital and Capital Stock Distinguished (4) Shares of Stock: Kinds (a) Common stocks (b) Preferred stocks (i) Preference as to dividends • Participating v. Non-Cumulative • Discretionary Dividend Type • Mandatory Dividend Type • Earned cumulative or dividend credit type (ii) As to voting right • Ellingwood v. V. Wolf’s Head Oil Refining (iii) Preference upon liquidation • Hay v. Augusta Hallowell (c) Par or no par shares Page 7 of 16 . Roxas Chapter X. • Veraguth v. Cuaderno • Reyes v.

v. Lim Chu Sing (a) Pre-incorporation subscription • Utah Hotel Co. Garage & Repair • Ross Transport Inc. • Fuller v. Silang Traffic Co. CIR Page 8 of 16 . • Thom v. New York Trust Co. Continental Turst Co. Avenue M. Eclipse Pocahontas Coal Co. (b) Post-incorporation subscription • Bayla v. stock options • Meritt-Chapman & Scott Corp. Krogh • Dunslay v. Madsen • Wallace v. V. v. Baltimore Trust Co. (6) The Pre-Emptive Right to Shares (a) Basis of Right (b) Extent and limitations under Code (c) In close corporations (d) Waiver of pre-emptive right (e) When issue is in breach of trust (f) Remedies when denied • Stokes v. (d) Hybrid Securities • John Kelley Co. v. (d) Treasury Shares (e) Redeemable Shares (f) Founder’s Shares (5) Nature of Subscription Contract • Garcia v. Crothers (7) Debt Securities (a) Form of borrowings (b) Bonds and Debentures (c) Convertible Securities.

Dexter • Lumanlan v. Baltazar • Miranda v. CONSIDERATION FOR ISSUANCE OF SHARES (1) Form of Consideration (2) Liability on Watered Stocks • Triplex Shoe Co. • Jordan Co. V. • Bing Crosby Minute Maid Corp. Summers • Baltazar v. v. Crammer Page 9 of 16 . DIVIDENDS AND PURCHASE BY CORPORATION OF ITS OWN SHARES (1) Form of Dividends • Nielson & Co. Allen (e) The Trust Indenture • Aladdin Hotel Co. Peers Marketing (6) Issuance of Certificate (7) Lost or Destroyed Certificate Chapter XIII. requisites (b) Court Action • Velasco v. v. Dock-hop Co. Tarlac Rice Mill Co. Inc. • McCarty v. Cura (4) Effect of Delinquency (5) Rights and Obligations of Holders of Unpaid but Non-delinquent Stock • Fua Cun v. Poizat • Lingayen Gulf Electric v. • Da Silva v. v. V. Lingayen Gulf Electric Power • Nava v. Langdeau • Rhode v. Rice & Hutchins. Aboitiz • National Exchange v. Lepanto Consolidated Mining Co. v. (2) Source of Dividends • Berks Broadcasting Co. Bloom Chapter XII. Eaton (3) How Payment of Shares Enforced (a) Delinquency sale.

Crescent Planning Mill (6) Liability for Illegal Dividends (7) Purchase by Corporation of its own shares Chapter XIV. registration in corporate books Page 10 of 16 . TRANSFER OF SHARES (1) Manner and Effectivity of Transfer (a) Indorsement of stock certificate. Rights of Transferee *4 McClaran v. V. Barclay *3 Burk v. AMENDMENTS OF CHARTER (1) Amendment by Legislature (2) Amendment by Stockholders (a) Limitations on power (b) Grounds for rejection of amendment (c) Amendment changing stockholder’s rights *5 Marcus v. Paul Milk Co. Ottawa Gas & Electric Co. • Lich v. (5) When Right to Dividends Vests. Ford Motor Co. United States Rubber (3) Dividend Declaration discretionary with Board *0 Keough v. RH Macy (d) Effectivity of amendment (e) Special amendments (1) Increase of capital stock (2) Decrease of capital stock *6 Philippine Trust Co. V. Rivera (3) Change in corporate term (f) Amendments in close corporations Chapter XV. (4) Preference as to Dividends *2 Wabash Railway Co. St. *1 Dodge v.

Diosomito (c) No registration of transfer of unpaid shares (d) Remedy if registration refused • Rivera v. Atty. Samahang Magsasaka (5) Non-transferability and termination of membership in non-stock corporations Chapter XVI. Close Corporations (a) General rule: free transferability of shares (b) Exceptions: in close corporations (c) Intrinsic validity of various kinds of restrictions (1) Consent restriction (2) Option restriction (3) Prescribing qualifications of stockholders (4) Redeemable common stock (d) Formal validity of restrictions (3) Unauthorized Transfers (a) Certificate indorsed in blank. extended or shortened term (b) Voluntary dissolution when no creditors affected Page 11 of 16 . (b) Effect of lack of registration • Uson v. DISSOLUTION (1) Cause of Dissolution (a) Expiration of original. Hongkong & Shanghai Banking • De los Santos v. Florendo (2) Restrictions on Transfer. when quasi-negotiable (b) Forged transfers • Santamaria v. General (4) Collateral Transfers • Chua Guan v. McGrath.

Winding up and liquidation (a) Loss of juridical personality *7 National Abaca Corp. Marsman Development • Tan Chiong Bio v. Methods (2) Merger and Consolidation (a) Nature and distinction (b) Only de facto merger under Corporation Law (c) Express authority to merge granted by code. Teodoro (e) Failure to organize and commence business. (c) Voluntary dissolution when creditors affected (d) Dissolution by minority in close corporations • Financing Corporation v. (2) Effects of Dissolution. appraisal right (3) Sale of substantially all assets (a) Legal requirements Page 12 of 16 . Bisaya Land Trans. Pore (b) Executory contracts (c) Methods of liquidation (d) Distribution of assets after payment of debts • China Banking Corp. • Republic v. CORPORATE COMBINATIONS (1) Purposes of Combinations. requirements (d) Remedies of creditors and dissenting stockholders. Co. cessation of business for 5 years (f) Involuntary dissolution (1) Revocation of certificate of registration by SEC (2) Quo Warranto proceedings • Republic v. CIR (3) Distribution of Assets of Non-stock corporations Chapter XVII. Michelin & Co. v. v.

Mangaliman • Facilities Management Corp. v. Nell Co. FOREIGN CORPORATIONS (1) Definition. incentives for investment therein (c) Non-preferred areas of investment (4) Legal Requirements Prior to Transaction of Business (a) BOI certificate (b) SEC license to do business (c) Certificate from appropriate government agency (5) Effects of Failure to Secure SEC license • Marshall Wells v. Blouse • Edward J. Elser • Atlantic Mutual v. (b) No assumption of liabilities. appraisal right (d) Compared with merger and consolidation • Reyes v. Status (2) Methods of Entry of Investment (3) Permitted Areas of Investment (a) Partially nationalized areas (b) Preferred areas. Director of Patents • Le Chemise Lacoste v. Pacific Star Line • Topweld Manuel v. ECED • Antam Consolidated v. Cebu Stevedoring • General Garments Corp. Singson • Aetna Casualty & Surety Co. Fernandez • Home Insurance v. CA • Pacific Vegetable Oil v. Pacific Farms Chapter XVIII. Eastern Shipping (6) What Constitutes Transacting Business • Mentholatum v. v. exceptions (c) Remedies of dissenting stockholders. v. de la Osa • Merryl Lynch Futures v. CA (7) How Courts Acquire Jurisdiction over Foreign Corporations Page 13 of 16 . v.

SPECIAL AND MISCELLANEOUS PROVISIONS (1) Educational corporations (a) Stock or non-stock (b) Temporary permit (c) Government recognition (d) Special requirement to be University (e) Incorporation under the Code (f) Educational foundations (2) Religious corporations (a) Corporation sole (b) Religious societies (3) Close Corporations (4) Miscellaneous Provisions Page 14 of 16 . • General Corp. of the Phils. v. Union Insurance (8) Laws Governing Licensed Foreign Corporations (9) Merger of Licensed Foreign Corporation (10) Withdrawal of Foreign Corporation (11) Revocation and Suspension of License (12) Existing Licensed Foreign Corporations Chapter XIX.

CORPORATE POWERS (1) What are the corporate powers conferred by law? (2) What are the implied powers? (3) What is the ultra vires doctrine? (4) What are the legal consequences of ultra vires acts? (5) What is the quorum requirement for: (a) Board meetings Page 15 of 16 . PROMOTER’S CONTRACTS PRIOR TO INCORPORATION (1) Under what circumstances can a promoter be held liable? When is he exempt from liability? (2) When can a corporation assume the obligations and liabilities of a promoter? Chapter VI. Southern Railway) Chapter V.) --. quorum. Hall v.GUIDE QUESTIONS: Chapter I.g. Chapter III.. INTRODUCTION (1) What are the kinds of corporations? Differentiate them from each other. (4) Can a corporation transact business as a de facto corporation while the application is still pending at the SEC? (cf. Piccio) (5) What corporate officers are required by law? (6) When does a corporation’s corporate powers cease? Chapter IV. CLASSIFICATION OF PRIVATE CORPORATIONS (1) Differentiate stock and non-stock corporations. (2) What advantages does a corporation have over other kinds of business organizations? What are the disadvantages of a corporation? Chapter II. Garrett v. by-laws.Make a table. CORPORATE ENTITY (1) What is the theory of corporate entity? (2) When can the veil of corporate entity be pierced? (3) What are the effects of piercing the veil of corporate fiction? (4) What is a parent-subsidiary relationship? When may it be disregarded by the courts? (5) What are the criteria by which a subsidiary can be considered a mere instrumentality of the parent company? (cf. (2) What is the restrictions of the different provisions of the Corporation Code with respect to these 2 corporations? (e. FORMATION / ORGANIZATION (1) What are the statutory requirements in the formation of a corporation? (2) What are the steps in the formation of a corporation? (a) What are the required contents in the articles of incorporation (AOI)? (3) What is a de facto corporation? Distinguish this from a corporation by estoppel. etc.

(b) Stockholders’ meetings (6) What is the numerical requirement for: (a) Election of directors (b) Removal of directors (c) Merger and consolidation (d) Amendment of by-laws (7) What are the devices affecting control of the corporation? Distinguish them from each other. Chapter VII. What are their advantages / disadvantages? Page 16 of 16 . CONTROL AND MANAGEMENT OF CORPORATION (1) What are the 3 “levels” of corporate control / power? (2) What are the powers of the BOD? (3) What are the powers of the corporate officers? (4) What are the powers of the stockholders? (5) What are the various devices used to wrest/preserve control? Differentiate them from each other.