Corporation

Code
 1.
Definition
 Sec. 02 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
incidental to its existence.

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 Articles of Incorporation
> These are a set of formal documents to
legally document the creation of a
corporation.

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 2.
Contents
 Sec. 13 Contents of the Articles of
Incorporation
All corporations shall file with the
Commission articles of incorporation in any of
the official languages, duly signed and
acknowledged or authenticated, in such form
and manner as may be allowed by the
Commission, containing substantially the
following matters, except as otherwise
prescribed by this Code or by special law:

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 Sec. 13 Contents of the Articles of
Incorporation
> The name of the corporation;
> The specific purpose or purposes for which
the corporation is being formed. Where a
corporation has more than one stated
purpose, the articles of incorporation shall
indicate the primary purpose and the
secondary purposes: Provided that a non-
stock corporation may not include a purpose
which would change or contradict its nature
as such;
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 Sec. 13 Contents of the Articles of
Incorporation
> The place where the principal office of the
corporation is to be located, which must be
within the Philippines;
> The term for which the corporation is to
exist, if the corporation has not elected
perpetual existence;
> The names, nationalities, and residence
addresses of the incorporators;
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 Sec. 13 Contents of the Articles of
Incorporation
> The number of directors, which shall not be
more than fifteen (15) or the number of
trustees which may be more than fifteen
(15);
> The names, nationalities, and residence
addresses of persons who shall act as
directors or trustees until the first regular
directors or trustees are duly elected and
qualified in accordance with this Code;
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 Sec. 13 Contents of the Articles of
Incorporation
> If it be a stock corporation, the amount of
its authorized capital stock, number of
shares into which it is divided, the par value
of each, names, nationalities, and residence
addresses of the original subscribers;
amount subscribed and paid by each on the
subscription, and a statement that some or
all of the shares are without par value, if
applicable;
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 Sec. 13 Contents of the Articles of
Incorporation
> If it be a non-stock corporation, the amount
of its capital, the names, nationalities and
residence addresses of the contributors, and
amount contributed by each;
> Such other matters consistent with law and
which the incorporators may deem
necessary and convenient.

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Based on The
Revised
Corporation Code

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Based on The
Revised
Corporation Code

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Note:
Modify No. 8 if
shares are with no
par value

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 (In case the corporation is
nonstock, Nos. 7 and 8 of the
above articles may be
modified accordingly, and it is
sufficient if the articles state
the amount of capital or
money contributed or
donated by specified persons,
stating the names,
nationalities, and residence
addresses of the contributors
or donors and the respective
amount given by each.)

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Ninth: That ____________________
has been elected by the subscribers as
Treasurer of the Corporation to act as
such until after the successor is duly
elected and qualified in accordance
with the bylaws, that as Treasurer,
authority has been given to receive in
the name and for the benefit of the
corporation, all subscriptions,
contributions or donations paid or
given by the subscribers or members,
who certifies the information set forth
in the seventh and eighth clauses
above, and that the paid-up portion of
the subscription in cash and/or property
for the benefit and credit of the
corporation has been duly received.

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Based on The
Revised
Corporation Code

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Based on The
Revised
Corporation Code

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 3.
Grounds For
Rejection
 SEC. 16. Grounds When Articles of
Incorporation or Amendment may be
Disapproved.
The following are the grounds for such
disapproval:
> The articles of incorporation or any
amendment thereto is not substantially in
accordance with the form prescribed therein;
> The purpose/ purposes of the corp are
patently unconstitutional, illegal, immoral, or
contray to government rules and regulations.
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 SEC. 16. Grounds When Articles of
Incorporation or Amendment may be
Disapproved.
> The certification concerning the amount of
capital stock subscribed and/or paid is false;
and
> The required percentage of Filipino
ownership of the capital stock under existing
laws or the Constitution has not been complied
with.

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 SEC. 16. Grounds When Articles of
Incorporation or Amendment may be
Disapproved.
No articles of incorporation or amendment
to articles of incorporation of banks, banking
and quasi-banking institutions, preneed,
insurance and trust companies, NSSLAS,
pawnshops, and other financial
intermediaries shall be approved by the
Commission unless accompanied by a
favorable recommendation of the appropriate
government agency to the effect that such
articles or amendment is22 in accordance with
 4.
Case
Zambrano et. al. v. Phil Carpet
Manufacturing, et. al, June 21,
2017
 Facts
> Petitioners were employees of PhilCarpet.
> They were notified of the termination of
their employment due to serious business
losses.
> However, they aver that the closure of Phil
Carpet was a mere pretense to transfer its
operations to its wholly owned and
controlled corporation, Pacific Carpet
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 Facts
> Phil Carpet countered that it permanently
closed and totally ceased its operations
> Phil Carpet likewise faithfully complied
with the requisites for closure or cessation
of business under the Labor Code
> Petitioners were also paid their separation
pay and they voluntarily executed their
respective Release and Quitclaim
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 LA Ruling
> The termination of the petitioners'
employment was due to total cessation of
manufacturing operations of Phil Carpet
because it suffered continuous serious
business losses.
> Petitioners voluntarily accepted their
separation pay and other benefits and
eventually executed their individual release
and quitclaim in favor of the company
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 NLRC Ruling
> NLRC affirmed the findings of the LA.

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 CA Ruling
> CA ruled that the total cessation of Phil
Carpet's manufacturing operations was not
made in bad faith because the same was
clearly due to economic necessity.
> Mere ownership by a single stockholder or
by another corporation of all or nearly all of
the capital stock of a corporation is not of
itself sufficient ground for disregarding the
separate corporate personality
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 Issue
> WHETHER OR NOT PACIFIC
CARPET MAY BE HELD LIABLE FOR
PHIL CARPET'S OBLIGATIONS .

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 Ruling: NO
> Pacific Carpet has a personality separate
and distinct from Phil Carpet.
> The corporate mask may be removed or the
corporate veil pierced when the corporation
is just an alter ego of a person or of another
corporation

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 Ruling: NO
> A corporation is an artificial being created
by operation of law. It possesses the right of
succession and such powers, attributes, and
properties expressly authorized by law or
incident to its existence. It has a personality
separate and distinct from the persons
composing it, as well as from any other
legal entity to which it may be related.

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 Ruling: NO
> Doctrine of piercing the corporate veil
applies only in three (3) basic areas:
- defeat of public convenience
- fraud cases
- alter ego cases

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 Ruling: NO
> Piercing the corporate veil based on the
alter ego theory requires the concurrence of
three elements :
- control of the corporation by the
stockholder or parent corporation
- fraud or fundamental unfairness
imposed on the plaintiff,
- harm or damage caused to the plaintiff
by the fraudulent or unfair act of the
corporation.
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 Ruling: NO
> Petitioners failed to present substantial
evidence to prove their allegation that
Pacific Carpet is a mere alter ego of Phil
Carpet.

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 5.
Case
I/AME v. Litton and Company,
Inc., Dec. 13, 2017
 Facts
> Santos was a lessee of Litton, and he owed
the latter rental arrears
> Litton filed a complaint for unlawful
detainer against Santos
> MeTC ruled in Litton's favor however the
judgment was not executed.

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 Facts
> Litton subsequently filed an action for
revival of judgment, which was granted.
> Santos then appealed the RTC decision to
the CA, which nevertheless affirmed the
RTC decision.
> MeTC levied on a piece of real property
registered in the name of (I/AME), in order
to execute the judgment against Santos.
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 Facts
> I/AME claimed that it has a separate and
distinct personality from Santos; hence, its
properties should not be made to answer for
the latter's liabilities
> MeTC reversed its earlier ruling
> Litton then elevated the case to the RTC,
which in turn reversed the Order

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 CA Ruling
> CA upheld the Judgment and Order of the
RTC

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 Issue
> Whether or not it was proper to pierce the
corporate veil of I/AME and make its
property answer for the liability of Santos

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 Ruling: YES
> I/AME argues that the doctrine of piercing
the corporate veil applies only to stock
corporations
> However, since the law does not make a
distinction between a stock and non-stock
corporation, neither should there be a
distinction in case the doctrine of piercing
the veil of corporate fiction has to be
applied.
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 Ruling: YES
> The mere fact that the corporation involved
is a nonprofit corporation does not by itself
preclude a court from applying the equitable
remedy of piercing the corporate veil.
> Santos was adjudged liable to pay on a
judgment
> He became President of a corporation
> He formed a corporation to conceal assets
which were supposed to pay for the
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judgment
 Ruling: YES
> The corporation which has Santos as its
President, is being asked by the court to pay
on the judgment
> Piercing the Corporate Veil may Apply to
Natural Persons via Reverse Piercing of
the Corporate Veil.

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 Ruling: YES
> In a traditional veil-piercing action, a court
disregards the existence of the corporate
entity so a claimant can reach the assets of a
corporate insider.
> In a reverse piercing action, however, the
plaintiff seeks to reach the assets of a
corporation to satisfy claims against a
corporate insider."

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 Ruling: YES
> The Court has pierced the corporate veil in
a reverse manner in the instances when the
scheme was to avoid corporate assets to be
included in the estate of a decedent as in the
Cease case and when the corporation was
used to escape a judgment to pay a debt.

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Thank You!
Prepared by:
Helen Carla L. Tabernero

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