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Lorjun Suson

on 4 March 2014

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Corporation Code aims to

seeks to establish new concept of business corporations;
not only to private gain but also to the National Government in spreading profits & benefits for the social and economic development
Coming of Americans
Philippine Bill of July 1, 1902

Corporation Law
Piece of Legislation was embodied in Act. No. 1459
April 1, 1906
74 years

Corporation Code
Batas Pambansa Bilang 68
May 1, 1980
Brief History of Corporation Code
Corporation as Artificial being
Legal person
takes and hold property
and conveys the same;
1. It contracts obligations
2. Is sued and be sued in its corporate name
3. Same manner as natural person
They compose the corporation, but
they are not the corporation
Other attributes of corporations
1. It has attributes that is created by operation of law
2. Right to succession and has the powers
3. Attributes and properties authorized by law or incident by its existence
Powers of Corporation-
can do only what is
allowed by law
or charters
Powers of natural person-
can do anything not forbidden by law

1. Definition of Corporation

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.
1. Definition of 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.
Corporation as Artificial being
. A corporation is given by law with rights, powers and liabilities usually
accorded to a natural person
as an
artificial person
, it can act only through directors who are chosen by stockholders, directors then elect their officers , select employees, agents and make company policies .
Corporate Nationality

- natively born in the RP e.g pure Filipino
– An inhabitant of a particular town or city; One who is domiciled in a country, and who is a citizen, though neither native nor naturalized; half breed Filipino.
- inhabitant in the RP over a long period of time e.g a foreigner married to a Filipina for a long time

Control Test
- used by the Supreme Court to recognized the citizenship or nationality of a corporation’s stockholders
Identical features of Partnership and Corporations

1. Both are organizations composed of an aggregate (kasunduan) of individuals.

2. Have juridical personality distinct from their respective component members;
3. Can act only through their respective agents.
e.g may tauhan po

Distinctions between Partnership & Corporation
1. Limited liability of stockholder serves to limit the credit available to the corporation (plenty process to follow before granted)
2. Transferability of shares permits the uniting of incompatible and conflicting interest in one enterprise
3. Minority stockholder are usually subservient to the wishes of the majority
4. In big corporations,the stockholders voting rights have become largely theoretical because of widespread ownership , disinterest in the mgt. , inertia and inaccessible meeting places;
5. Large corporations are subject to governmental restrictions, controls, reports requirements not imposed on other forms of business organizations
6. In large corporations, mgt, and control has been separated from ownership
7. Corporate sphere of activity is limited in transaction of its business to the state of organization;
8. Corporate forms involves “double taxation” on corporate income;
Disadvantages of corporate form of business
Advantages of corporations businesses
1. Capacity to hold property; To contract; To sue be sued as a legal unit or distinct entity (has a legal and separately identifiable existence)
2. Exemptions of shareholder from individual liability
3. Continuity of existence
4. Transferability of shares
5. Centralized management under a board of directors
6. Standardized methods of organization, mgt., finance for the protection of shareholders and creditors

1. Created by agreement among partners
2. Organized by two person or not greater than four
3. Partner is considered an agent of partnership
4. General partners are liable to 3rd person even with their separate properties
5. Does not have power of successions
6. Interest cannot be transferred w/o the consent of other partners, due to its
delectus personae
7. May be formed in indefinite period of time.
8. Govern by
Civil Code


1. Cannot be created without the consent of the state (corp.law)
2. Requires at least five incorporators
3, The power to bind the corporation , unless delegated, rests in the board of directors .
4. Shareholders are liable only to the extent of the shares subscribed by them;
5. Death ,insolvency, incapacity of partners does not affect existence of corporations;
6. Stockholder may transfer shares even w/o the consent of other stockholder, because
delectus personae is foreign in corporation
7. Limited by law to 50 years , extendible not to more than 50 yrs. For each extension;
8. Govern by
Corporation Code

In Relation to the State
Public corporations
Private Corporation

- are those who compose a corporation, whether as stockholders
or as members.
- are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof and is filed with SEC..
Corporators and incorporators, stockholders and members
Disqualification of directors, trustees or officers
No person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code committed within five (5) years prior to the date of his election or appointment, shall qualify as a director, trustee or officer of any corporation.
Disadvantages of corporate form of business
Incorporator and corporator distinguished
Incorporator –natural persons whose names appear in the articles of incorporations as originally forming a corporation.
Corporator- all persons who compose the corporations at any given time and need not be a signatories in the articles of incorporations. But, on the other hand incorporators may be considered a corporators as long as he/she continues to be a stockholder, although not all corporators are incorporators.

Components of Corporations
Components of Corporations
As to Place of Incorporation
Domestic Corporation
Foreign Corporation
As to Purpose of Incorporation
Municipal or Public corporation
Religious corporation
Educational corporations
Charitable, Scientific or Vocational corporations
Business corporation
As to openess
close corporations - family corporations
open corporations
As to Legal Status
De Jure Corporation
De Facto Corporation
Corporation by Estoppel
As to Existence of Shares
Stock Corporation
Non-Stock Corporation
- they are the owners of the stock and are called capital stock. Corporators in a stock corporations are called stockholders/shareholders.
- these are the individuals who are contributors to the corporation.
board of directors
- are individuals who are corporators in a non-stock corporations.
Capacity of incorporators
Incorporators must have valid capacity to enter into a valid and enforceable contract.
Minors cannot be incorporators yet
Married women may however, be incorporators;
Civil Code provides that women age 21+ is qualified for all acts of civil life.
Married women
*Article 117 of civil code provides that,”a wife may exercise any profession or occupation or engage in business”

Election of directors or trustees
At all elections of directors or trustees, there must be present, either in person or by representative authorized to act by written proxy, the owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote.
The election must be by ballot if requested by any voting stockholder or member.
The board of directors or trustees

Every director must
own at least one (1) share of the capital stock
of the corporation of which he is a director, which share shall stand in his name on the books of the corporation.
Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director.
Trustees of non-stock corporations must be members thereof. a majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines.
Removal of directors or trustees
Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing at least
two-thirds (2/3) of the outstanding capital stock
, or if the corporation be a non-stock corporation, by a vote of at
least two-thirds (2/3) of the members entitled to vote
: Provided, That such removal shall take place either at a
regular meeting
of the corporation or at a
special meeting called for the purpose
, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting.
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