Course Outline in Bus. Org.

II
2nd Semester 2015-2016
USLS College of Law
A. Pre-lim
Title I General Provisions
Sec. 1. Title of the Code
Brief history of the Code
Significant changes in the Code
Sec. 2. Corporation defined
Attributes of a corporation:
1. Corporation as an artificial being
1.1 Doctrine of legal entity
1.2 Doctrine of piercing the corporate veil
2. Corporation as a creation of law
3. Corporation has right of succession
4. Corporation has powers, attributes and properties expressly granted by law
Advantages of the corporate form
Sec. 3. Classes of corporation
Classification of corporations under the Code
Stock corporations
Non-stock corporations
SEC policy on conversion of stock corporations to non-stock and vice versa
Other classes of corporation
Sec. 4. Corporations covered by special laws or charters
Governing law
Sec. 5. Corporators and incorporators, stockholders and members
Sec. 6. Classification of shares
Power to classify shares
Authority to classify shares
Voting rights
Equality of shares; Doctrine of equality of shares
Preferred shares
Authority of board to fix terms and conditions of preferred stocks
Consideration of no par value shares
Shares of banks cannot be issued without par value
Shares without par value deemed fully paid
Capital; definition
Classes of shares
Distinction between share of stock and certificate of stock
Sec. 7. Founders share
Nature of founders share
Statutory limitation on founders share
Restrictions on transfer of founders share
Sec. 8. Redeemable shares
Nature of redemption of shares

Classes of redeemable shares

Restriction on redemption of shares
Effect of redemption of shares
Sec. 9. Treasury shares
Nature of treasury shares
Treasury shares not entitled to dividends
Status of treasury shares
Treasury shares not distributable as cash or stock dividend
Treasury shares not entitled to voting rights
Resale of treasury shares
Title II
Sec. 10. Number and qualification of incorporators
Process by which a corporation comes into being
1. Creation
2. Incorporation
3. Organization
a. Promoters
b. Underwriters
c. Incorporators
Sec. 11. Corporate term
Limitations and rationale
Sec. 12. Minimum capital stock required
Sec. 13. Amount of capital stock to be subscribed and paid for
Minimum subscription and date of payment
Treasurers affidavit
Sec. 14. Contents of articles of incorporation
Sec. 15. Form of articles of incorporation
Sec. 16. Amendment of the articles of incorporation
Nature of corporate charter
Modes of amending corporate charter
Power to amend
What can and cannot be amended
Necessity of Stockholders meeting for amendment
Limitations on the power of corporations to amend AoI
Sec. 17. Grounds when AoI or amendment may be rejected or disapproved
Non-compliance with form
Purpose unconstitutional, immoral, illegal
False treasurers affidavit
Non-compliance with required percentage of ownership
Grandfather rule
Control test
Sec. 18. Corporate name
Limitations on use of corporate name
Restrictions under special laws

Sec. 19. Commencement of corporate existence

Effects of SEC registration

Sec. 20. De Facto corporation

Nature and status of de facto corporations
Requisites for existence of a de facto corporation
Collateral attack
Powers, rights and liabilities of de facto corporation
Sec. 21. Corporation by estoppel
Sec. 22. Effects of non-use of corporate charter
Formal organization and transaction of business
Rule on suspension/revocation of certificate of registration
Continuous inoperation; its effects
Title III
Sec. 23. Board of Directors or Trustees
Corporate body acts only through agents
Business Judgment Rule
Corporate Heirarchy
Board as a Body
Qualifications of directors/trustees
Election of directors/trustees
Term of office
Sec. 24. Election of Directors or Trustees
Who may vote
Time of election
Quorum for election
Manner and method of voting
Sec. 25. Corporate Officers, Quorum
Who are corporate officers
Incompatible positions
Meeting; Quorum
Sec. 26. Report of election of directors, trustees and officers
Annual reports
Effects of failure to file report
Sec. 27. Disqualification of directors, trustees or officers
Sec. 28. Removal of directors or trustees
Power of stockholder to remove
Requisites for removal
Sec. 29. Vacancies in the office of director or trustee
Manner of filling of vacancies in the board
1. by the stockholders
2. by the board of directors/trustees

Sec. 30. Compensation of directors

Compensation distinguished from per diem
SEC rulings on compensation of corporate officers
Sec. 31. Liability of directors, trustees or officers
Breach of trust; obligation
Sec. 32. Dealings of directors, trustees or officers
Requirements for validity of contracts of self-dealing directors
Sec. 33. Contracts between corporations with interlocking directors
Requirements for validity of contracts of interlocking directors
Contracts of self-dealing vs. interlocking director
Sec. 34. Disloyalty of a director
Doctrine of corporate opportunity
Sec. 35. Executive committee
Rationale and requirements
B. Mid-Terms
Sec. 36. Corporate powers and capacity
Powers of corporation; definition: general and specific powers
Classification of powers
Sec. 37. Power to extend or shorten corporate term
Extending/Shortening corporate terms
Sec. 38. Power to increase or decrease capital stock; incur, create or increase bonded
indebtedness
Increase/Decrease of capital stock; its effects; when effective
Meaning of bond
Distinction between bonds and stocks
Meaning of bonded indebtedness
Sec. 39. Power to deny pre-emptive right
What is pre-emptive right; waiver
Effects to reissuance of shares
Where no pre-emptive right exists
Sec. 40. Sale or other disposition of assets
Authority of the board
Effect of sale or disposition
Appraisal right of dissenting stockholder
Sec. 41. Power to acquire own shares
Effect of acquisition
Trust Fund doctrine
Sec. 42. Power to invest corporate funds in another corporation or business
Distinguish from Sec. 36
Sec. 43. Power to declare dividends
Dividends defined
Classes of dividends
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Power to declare dividend; when to declare

Who are entitled
Sec. 44. Power to enter into management contract
Limitations on the power
Sec. 45. Ultra vires acts of corporations
Concept
Ultra vires vs. illegal acts
Ratification of ultra vires acts
Legal consequences of ultra vires acts
Title V
Sec. 46. Adoption of by-laws
Definition and nature of by-laws
Power to adopt by-laws
Elements of valid by-laws
Effect of failure to adopt by-laws
Sec. 47. Contents of by-laws
Sec. 48. Amendments to by-laws
Procedure and effectivity of amendments
Title VI
Sec. 49. Kinds of meetings
Sec. 50. Regular and Special meetings of stockholders or members
Necessity
Requisites for a valid meeting
Sec. 51. Place and time of meeting
Sec. 52. Quorum in meetings
Quorum required
Instances when the law requires a specific number of votes
Sec. 53. Regular and special meeting of directors/trustees
Sec. 54. Who shall preside at meetings
Presiding officer
Sec. 55. Right to vote of pledgors, mortgagors and administrators
Sec. 56. Voting in case of joint ownership of stock
Sec. 57. Voting right for treasury share
Sec. 58. Proxies
Meaning of proxy
Who may give a proxy
Duration and revocation of proxy
Sec. 59. Voting trusts
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Nature and definition of voting trusts

Purpose of Voting trust agreement
Extent of authority and duration of voting trust
Title VII
Sec. 60. Subscription contract
Definition
Kinds of subscription
1. Pre-incorporation
2. Post-incorporation
3. Illegal subscription
Sec. 61. Pre-incorporation subscription
Irrevocability of PISA
Sec. 62. Consideration for stocks
Power to issue stock; sources of corporate funding
Consideration for stock
Watered stock
Sec. 63. Certificate of stock and transfer of shares
Manner of issuance of certificates of stock
Nature
Modes of transfer
1. By endorsement
2. By assignment
Restriction on transfer of shares
Remedy of stockholder where corporation refuses to register transfer of stock
Sec. 64. Issuance of stock certificates
Doctrine of indivisibility of subscription contract
Transfer of subscription
Cancellation of stock certificates
Sec. 65. Liability of directors for watered stock
Nature of watered stock
Basis of liability
Effect of issuance and liability
Sec. 66. Interest on unpaid subscriptions
Liability of stockholder for interest on unpaid subscription
Sec. 67. Payment of balance of subscription
When payable
Power of the board of directors to make a call
Call; defined
When stock becomes delinquent
Requisites of a valid call
Doctrine of indivisibility of stock
Sec. 68. Delinquency sale
Highest bidder defined
Procedure for sale

Sec. 69. When sale may be questioned

Recovery of stock unlawfully sold
Sec. 70. Court action of recover unpaid subscription
Remedies to enforce payment of unpaid subscription
1. Ordinary court action
2. Extrajudicial sale at public auction
3. Collection from cash dividends
Remedy by judicial action
Sec. 71. Effect of delinquency
Sec. 72. Rights of unpaid shares
Rights regarding control and management of the corporation
Derivative suit: its concept and nature
1. Individual suit
2. Class or representative suit
3. Derivative action
4. Requisites of a derivative suit
Sec. 73. Lost or destroyed certificates
Title VIII
Sec. 74. Books to be kept; stock transfer agent
Sec. 75. Right to financial statements
Title IX
Sec. 76. Plan of merger or consolidation
Sec. 77. Stockholders or members approval
Sec. 78. Articles of merger or consolidation
Sec. 79. Effectivity of merger or consolidation
Sec. 80. Effects of merger or consolidation
Title X
Sec. 81. Instances of appraisal right
Sec. 82. How right is exercised
When appraisers may be appointed; determination of fair value
Sec. 83. Effect of demand and termination of right
Sec. 84. When right to payment ceases
Sec. 85. Who bears cost of appraisal
Sec. 86. Notation on certificates
Transfer of dissenting shares
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C. Finals
Title XI NON-STOCK CORP
Sec. 87. Definition
Sec. 88. Purposes
Definition of non-stock
Concept of non-stock
Purposes of non-stock corporation
Sec. 89. Right to vote
Sec. 90. Non-transferability of membership
Sec. 91. Termination of membership
Sec. 92. Election and terms of trustees
Sec. 93. Place of meetings
Sec. 94. Rules for distribution
Sec. 95. Plan for distribution of assets
Title XII CLOSE CORP.
Sec. 96. Definition and applicability
Sec. 97. Articles of Incorporation
Sec. 98. Validity of restrictions on transfer of shares
Sec. 99. Effects of issuance of transfer of stock in breach of qualifying conditions
Sec. 100. Agreements by stockholders
Sec. 101. When board meeting is unnecessary and improperly held
Sec. 102. Pre-emptive right in close corporations
Sec. 103. Amendment of articles of incorporation
Sec. 104. Deadlocks
Sec. 105. Withdrawal of stockholder or dissolution of corporation
Title XIII
Sec. 106. Incorporation
Sec. 107. Pre-requisites to incorporation

Sec. 108. Board of trustees

Sec. 109. Classes of religious corporations
Sec. 110. Corporation sole
Sec. 111. Articles of Incorporation
Sec. 112. Submission of articles of incorporation
Sec. 113. Acquisition and alienation of property
Sec. 114. Filling of vacancies
Sec. 115. Dissolution
Sec. 116. Religious societies
Title XIV
Sec. 117. Methods of Dissolution
Sec. 118. Voluntary dissolution where no creditors are affected
Requirements/conditions
Sec. 119. Voluntary dissolution where creditors are affected
Sec. 120. Dissolution by shortening corporate term
Sec. 121. Involuntary dissolution
Sec. 122. Corporate liquidation
Methods of liquidation
Distribution of assets
Title XV
Sec. 123. Definition and rights of foreign corporation
Nature and status of foreign corporations
Modes of entry of foreign corporations
Sec. 124. Application to existing foreign corporations
Application of Code to existing foreign corporation
Sec. 125. Application for a license
Application for license with the SEC
Sec. 126. Issuance of a license
Meaning of transacting/doing business in the Philippines
What are isolated transactions
Sec. 127. Who may be a resident agent
Resident agent
Sec. 128. Resident agent; service of process
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Appointment of resident agent

Sec. 130. Amendments to articles of incorporation or by-laws of foreign corporations
Sec. 131. Amended license
Sec. 132. Merger or consolidation involving a foreign corporation license in the
Philippines
Sec. 133. Doing business without a license
Doing business without a license
Sec. 134. Revocation of license
Revocation of license
Grounds for Revocation
Sec. 135. Issuance of certificate of revocation
Issuance of certificate of revocation
Effect of revocation of license

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