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1.

Who is the official head of the government


when the code was passed?
Ferdinand Marcos
Batas Pambansa not RA
Philippines was not a
Republic but a Parliament
Section 1. Title of the Code- This code shall be known as
The Corporation Code of the Philippines.
The law that governs private corporations in the
Philippines.
Took effect on May 1, 1980
Replaced the Corporation Law which was enacted on
March 1, 1906 during the American Regime through the
Philippine Commission.
Aims corporations to become effective partners of the
national government

2. Is SGV & Co. a form of Corporation?
SyCip Gorres Velayo & Co (SGV & Co.)
is currently the Philippines' largest
multidisciplinary professional services
firm with eight offices across the
country.
No. It is a form of Limited Partnership.
Section 2. Corporation defined. A Corporation is an
artificial being created by operation of law, having the
right of succession and the powers, attributes, and
properties expressly authorized by law or incident to its
existence.
I. ATTRIBUTES OF A CORPORATION
1. It is an artificial being with separate and distinct personality.
(Doctrine of Separate Personality)
2. It is created by operation of law.
3. It enjoys the right of succession.
4. It has the powers, attributes and properties expressly
authorized by law or incident to its existence.
Advantages of the Corporate Organizations
1. Separate juridical personality
Advantages of the Corporate Organizations
2. Limited liability to investors

General rule: Where a corporation buys all the shares of another
corporation, this will not operate to dissolve the other corporation
and as the two corporations still maintain their separate corporate
entities, one will not answer for the debts of the other. [Nell v
Pacific Farms (15 SCRA 415), Nov. 23, 1965]
Advantages of the Corporate Organizations

Exceptions:
o If there is an express assumption of liabilities;
o There is a consolidation or merger;
o If the purchase was in fraud of creditors;
o If the purchaser becomes a continuation of the seller;
o If there are unpaid subscriptions (stockholder is liable for
the unpaid balance).

Advantages of the Corporate Organizations
3. Free transferability of units of ownership
4. Centralized Management
Partnership vs. Corporation
Both have a separate juridical personality.
Both are artificial persons ie. They have no bodily
existence, and can only act through agents
Both are composed of a group of persons with the
exception of a corporate sole.
A partnership, with the exception of a general professional
partnership, is taxed as a corporation.

Partnership vs. Corporation
Partnership Corporation
Extent of Liability partners are personally liable for the
debts of the partnership
Stockholders cannot be made
to personally answer to
corporate creditors
Creation Mere agreement of the partners Created by the operation of
law
Number of
Organizer
mere agreement of the parties, w/c
can be composed of just 2 persons,
Formed by 5 or more persons
but not exceeding 15
Management In most cases, all the
owners actively participate in
management, w/ capacity to bind it by
any usual contract
management is centralized in
the board of directors w/c
has exclusive power to bind
the corp
Right of
Succession
No right Has right
Partnership vs. Corporation
Partnership Corporation
Nature of
Relationship
based on mutual trust and confidence
(delectus personae) so that its
existence is precarious because of the
facility w/ which it can be dissolved
(i.e. through the death or unilateral act
of a partner);
Has more stability as it enjoys
the right of succession and is
not affected by the death
or insolvency of a
stockholder; also,
dissolution before a corp.s
term requires a2/3rds vote of
the stock
Powers May exercise any power provided it is
authorized by partners and is not
contrary to law, morals, good customs,
public order or public policy.
Can exercise only the powers
expressly authorized by law
or incident to its existence
Commencement
of existence
upon the execution of the partnership
contract unless a different date is set
by the partners.
On the date of the issuance
of its certificate of
incorporation
Partnership vs. Corporation
Partnership Corporation
Transferability of
interest
A partner cannot transfer his shares to
another person without partners
consent

Can transfer his shares to
another person without the
consent of other stockholders
Term of existence May be formed for an indefinite
period
May exist for a period not
exceeding 50 years
Dissolution May be dissolved by a partner Cannot be dissolved without
the consent of the state
Sec. 3. Classes of corporations. -
Corporations formed or organized under this Code may be
stock or non-stock corporations.
Corporations which have capital stock divided into shares and are
authorized to distribute to the holders of such shares dividends or
allotments of the surplus profits on the basis of the shares held are
stock corporations.
All other corporations are non-stock corporations.
Stock corporation
One which has a capital stock divided into shares and is
authorized to distribute to the holders of such shares
dividends or allotments of the surplus profits (i.e.,
retained earnings on the basis of the shares
held It is organized for profit.
The governing body of a stock corporation is usually the
Board of Directors (Except in certain instances for close
corporations)
Non-stock corporation
All other corporations are non-stock corporations
One where no part of the income is distributable as
dividends to its members, trustees, or officers, subject
to the provisions of the Code on dissolution.
Not organized for profit.
Its governing body is usually the Board of Trustees.
1. Public corporation - One formed or organized for the government or
a particular state. Its purpose is for the general good and welfare.
2. Private corporation - One formed for some private purpose, benefit,
aim or end
Other kinds of corporations
The true test is the purpose of corporation.

If corporation is created for political or public purpose connected with
the administration of government, then it is a public corporation.

If not, it is a private corporations although the whole or substantially the
whole interest in the corporation belongs to the state.
Other kinds of corporations
In the Philippines, public corporations are the Provinces, cities,
municipalities, and barangays. They are also called Municipal
corporations or local government.

The code eliminated the classification of corporations into public or
private obviously for the reason that it applies only to private
corporations.
Other kinds of corporations
Other kinds of corporations
Private corporations include:

a. Government- owned or controlled corporations (GOCC) or those
directly created by Special law (Sec 4) or if organized under the
general corporation law (B.P. Blg. 68)
These corporations are private not public corporations
because they are not established for the government of a
portion of the state.
Private corporations include:

b. Quasi- public corporations or those which have accepted from the state
the grant of a franchise or contract involving the rendition or
performance of some public duties or service but which are organized for
profit.
Other kinds of corporations
(1) As to number of persons who compose them:
a. Corporation Aggregate- corporation consisting of more than one
member or corporator
b. Corporation sole or religious corporation- consists of one member
or corporator only and his successors, such as bishop
Other kinds of corporations
4. Educational corporation (106) Those corporations which are organized for
educational purposes. This type of corporation is governed by Section 106 of
the Corporation Code.
Other kinds of corporations
Sec. 4. Corporations created by special laws or charters. -
Corporations created by special laws or charters shall be
governed primarily by the provisions of the special law or
charter creating them or applicable to them, supplemented by
the provisions of this Code, insofar as they are applicable.
Corporations created by special laws shall be owned or
controlled by the government. All because:

1. To give everyone equal opportunity to access the special
privilege granted.
2. To prevent bribery and corruption of the legislature.
Sec. 5. Corporators and incorporators, stockholders and
members.
Corporators- those who compose a corporation, whether as
stockholders or as members.
Incorporators- those stockholders or members mentioned in the
articles of incorporation as originally forming and composing the
corporation and who are signatories of such document.
Note: Ones name may be mentioned in the articles of incorporation
as a subscriber or a member, but if he is not a signatory thereto, he is
a mere stockholder or a member, not incorporator.
Sec. 5. Corporators and incorporators, stockholders and
members.
Stockholders- the corporators of a stock corporation.
Members- the corporators of a non- stock corporation.
Other Classes
Promoters- persons who bring about or cause to bring about the
formation and organization of a corporation by bringing together the
incorporators or the persons interested in the enterprise .
They lay the groundwork for corporate existence.
Subscribers- persons who have agreed to take and pay for original,
unissued shares of a corporation formed or to be formed.
What do you call this thing???
Sec. 6. Classification of shares. - The shares of stock of stock
corporations may be divided into classes or series of shares, or both,
any of which classes or series of shares may have such rights,
privileges or restrictions as may be stated in the articles of
incorporation:
Provided, That no share may be deprived of voting rights except those
classified and issued as "preferred" or "redeemable" shares, unless
otherwise provided in this Code: Provided, further, That there shall
always be a class or series of shares which have complete voting
rights. Any or all of the shares or series of shares may have a par
value or have no par value as may be provided for in the articles of
incorporation:
Provided, however, That banks, trust companies, insurance
companies, public utilities, and building and loan associations shall
not be permitted to issue no-par value shares of stock.
Sec. 6. Classification of shares. (continued)
Preferred shares of stock issued by any corporation may be given
preference in the distribution of the assets of the corporation in case
of liquidation and in the distribution of dividends, or such other
preferences as may be stated in the articles of incorporation which
are not violative of the provisions of this Code:
Provided, That preferred shares of stock may be issued only with a
stated par value. The board of directors, where authorized in the
articles of incorporation, may fix the terms and conditions of
preferred shares of stock or any series thereof: Provided, That such
terms and conditions shall be effective upon the filing of a certificate
thereof with the Securities and Exchange Commission.
Shares of capital stock issued without par value shall be deemed fully
paid and non assessable and the holder of such shares shall not be
liable to the corporation or to its creditors in respect thereto:
Sec. 6. Classification of shares. (continued)
Provided; That shares without par value may not be issued for a
consideration less than the value of five (P5.00) pesos per share:
Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall betreated as capital and
shall not be available for distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of
insuring compliance with constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and
stated in the certificate of stock, each share shall be equal in all
respects to every other share.
Sec. 6. Classification of shares. (continued)
Where the articles of incorporation provide for non-voting shares in
the cases allowed by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all
or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
Except as otherwise provided in the articles of incorporation and
stated in the certificate of stock, each share shall be equal in all
respects to every other share.
Sec. 6. Classification of shares. (continued)
Where the articles of incorporation provide for non-voting shares in
the cases allowed by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all
or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
Sec. 6. Classification of shares. (continued)
6. Merger or consolidation of the corporation with another
corporation with or other corporation.
7. Investment of corporate funds in another corporation or business.
8. Dissolution of the corporation
Except as provided in the immediately preceding paragraph, the vote
necessary to approve a particular corporate act as provided in this
Code shall be deemed to refer only to stocks with voting rights.
Sec. 6. Classification of shares. (continued)
Sec. 6. Classification of shares.
Share of Stock
A share of Stock is one of units in
which the capital stock of the
corporation is divided.
stock certificate- the written
acknowledgement by the
corporation of the stockholders
interest in the corporation and its
property.

- Formal written evidence of
ownership
Share of Stock
- tangible
- Written evidence of that
right
- may not be issued unless
subscription is fully paid
- Not essential to ownership

- Incorporeal or intangible property
- Represents the right or interest of
a person in a corporation
- May be issued even if the
subscription is not fully paid
except in no par shares
vs
Sec. 6. Classification of shares.
- The ordinary stock of a
corporation entitles the holder to a
pro rata division of the dividends
1. Common Stock
Sec. 6. Classification of shares.
- Entitles the holder to certain
preferences over the shareholders.
2. Preferred Stock
a. Preferred stock as to asset-
entitles the holder to preference in
the distribution of assets over over
common stock upon the liquidation
of the corporation
a. Preferred as to dividends-
entitles the holder to preference in
the distribution of dividends over
common stock
Sec. 6. Classification of shares.
- The nominal value that appears on
the stock certificate
- Capital stock that has been
assigned a value per share in the
corporate charter.
- Its primary purpose is to fix the
minimum issue price of the
shares
3. Par Value Stock
Sec. 6. Classification of shares.
- One without nominal value that appears on the stock certificate
- Capital stock that has not been assigned a value in the corporate
charter
- Always has issued value
- A corporation may issue no par value shares only or with par
value
- Does not represent any proportionate interest in the capital stock
3. No- Par Value Stock
Power of a corporation to classify its own shares &
Limitations thereto
a. Voting and non voting shares
b. Common and preferred shares
c. Par Value and no par value shares
d. Classification to insure compliance with constitutional or legal
requirements
1. classification of corporation may include the following:
Power of a corporation to classify its own shares &
Limitations thereto
3. each share shall be equal in all respects to every other share.
2. Any of which classes or series of shares may have such rights,
privileges or restrictions as may be stated in the articles of
incorporation.
4. Limitations when shares are deprived of the voting right:
a. Only those classified as redeemable or preferred, otherwise
provided by this code
b. There shall always be a series of or class of shares that have
complete voting rights

Power of a corporation to classify its own shares &
Limitations thereto
4. Limitations when shares are deprived of the voting right
(continued):

c. Non- voting shares may nevertheless vote on the following
matters previously mentioned from this section.

5. Limitations when no- par shares are issued.
a. Subscribers to no- par
b. Preferred shares may be issued only with a stated par value


Poer of a corporation to classify its own shares & Limitations
thereto
4. Limitations when shares are deprived of the voting right
(continued):
c. Non- voting shares may nevertheless vote on the following
matters previously mentioned from this section.
Sec. 7. Founders' shares. - Founders' shares classified as such
in the articles of incorporation may be given certain rights and
privileges not enjoyed by the owners of other stocks,
provided that where the exclusive right to vote and be voted for in
the election of directors is granted, it must be for a limited period not
to exceed five (5) years subject to the approval of the Securities and
Exchange Commission.
The five-year period shall commence from the date of the aforesaid
approval by the Securities and Exchange
Commission.
Sec. 7. Founders' shares. -
Those that grant to the founders certain rights and privileges not
enjoyed by others shares.
Rules on Founders shares
a. Must be classified as such in the articles of corporation
b. Certain rights and privileges subject to the ff. limitations:
- if the exclusive right to vote and be voted for the election of
director is granted, it must be for a limited period not exceeding 5 years
subject to approval of SEC
- the five- year period begins at the said approval
Sec. 8. Redeemable shares. - Redeemable shares may be
issued by the corporation when expressly so provided in the
articles of incorporation.
They may be purchased or taken up by the corporation upon
the expiration of a fixed period, regardless of the existence of
unrestricted retained earnings in the books of the corporation,
and upon such other terms and conditions as may be stated in
the articles of incorporation, which terms and conditions must
also be stated in the certificate of stock representing said
shares.
Sec. 8. Redeemable shares. -
Those which grant the issuing corporation the power to redeem or
purchase them after a certain period.
Rules on Redeemable shares
a. They may be issued by the corporation only if expressly provided in the
articles of incorporation
b. They may be deprived of their voting rights
c. They may be purchased or taken up by the corporation upon the
expiration of a fixed period, regardless of the existence of unrestricted
retained earnings in the books of corporation/
d. The terms and conditions for their redemption must be stated in the
articles of incorporation and the stock certificate representing the said
shares.
Sec. 9. Treasury shares. - Treasury shares are shares of stock
which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation by purchase,
redemption, donation or through some other lawful means.
Such shares may again be disposed of for a reasonable price
fixed by the board of directors.
Sec. 9. Treasury shares. -
is a corporations own stock that it has issued and subsequently
reacquired from shareholder (Principles of Accounting, Kieso). A corporation
may acquire treasury stock for various reasons:
1. To reissue the shares to officers and employees under bonus and stock
compensation plans.
2. To signal to the stock market that management believes the stock is under
priced, in the hope of enhancing its market value.
3. To have additional shares available for use in the acquisition of other
companies.
4. To reduce the number of shares outstanding and thereby increase earnings
per share.

Another infrequent reason for purchasing shares is that management may want
to eliminate hostile shareholders by buying them out.
Sec. 9. Treasury shares. -
Rules on Treasury Shares:
a. They shall have no voting rights (Sec. 57)
b. Although they are part of the subscribed stock, they are not
considered outstanding shares. (Sec 137)
c. Being owned by the corporation, they are not entitled to
dividends
d. They may be again disposed for a reasonable price fixed by the
board of directors