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I. Attributes of Corporation
a. It is an artificial being.
i. Doctrine of separate personality
ii. Piercing the veil of corporate fiction as an exception to doctrine of separate personality
1. Fraud cases
2. Alter ego cases
3. Defeat public convenience cases
4. Equity cases
iii. Limited liability rule
iv. Implications for being artificial being
1. Constitutional Rights
2. Right to Moral Damages
b. It is created: (1) by operation of law in case of private corporation or (2) by enactment of special law in case of
public corporation.
i. Concession theory
c. It enjoys the right of succession.
i. Maximum term of private corporation
ii. Period for renewal of term of private corporation
iii. Effect of failure to renew the term within the deadline for renewal
d. It has the powers, attributes, properties expressly authorized by law or incident to its existence.
i. Types of powers of corporation
1. Express powers
2. Implied or necessary powers
3. Incidental or inherent powers
ii. Status of ultra vires acts or contracts of corporation
1. Ultra vires acts which are illegal per se
2. Ultra vires for failure to comply with voting formality required by law
3. Ultra vires for being outside the primary and secondary purposes of the corporation
iii. Status of ultra vites acts or contracts of corporation
e. Advantages of forming a corporation
i. Continuity of existence
ii. Limited liability on the part of investors
iii. Strong juridical personality
iv. Legal capacity to act as a distinct unit
v. Centralized management
vi. Ease in transferability of shares
vii. Ease in raising funds
f. Disadvantages of forming a corporation
i. High cost of formation
ii. Little voice of stockholders in management
iii. Weakened credit rating because of limited liability feature
iv. Greater degree of governmental regulation
v. More taxes
e. As to control or ownership
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i. Holding or parent corporation
ii. Subsidiary corporation
iii. Affiliates
iv. Associates
f. As to presence of stocks and distribution of dividends
i. Stock corporation
ii. Nonstock corporation
e. Certificate of stock
i. Nature of the certificate of stock as instrument
ii. Requirements for issuance of certificate of stock
iii. Remedies of subscriber for unjustified refusal of issuance of certificate of stock
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iv. Requirements for valid transfer of shares of stocks
1. Under Civil Code
2. Under Corporation Code
v. Stock and transfer books
X. Nonstock corporation
a. Characteristics of nonstock corporation
b. Transferability of membership in a nonstock corporation
c. Revocation of membership in a nonstock corporation
d. Conversion of nonstock corporation to stock corporation
e. Converstion of stock corporation to nonstock corporation
CORPORATE ACTS WHICH REQUIRE AT LEAST MAJORITY VOTE OF THE BOD AND VOTE OF THE
STOCKHOLDERS REPRESENTING AT LEAST MAJORITY OF THE OCS (FAM)
Corporate Act Salient Points
Fixing the issued Price of No-
Majority of quorum of BOD, if Majority of OCS, if BOD is not
par value shares (Sec. 62, last
authorized by AOI or by-laws authorized by the AOI
par., CC)
Amendment may be made by
Amendment or repeal of By- the Board only after due
laws or Adoption of new By- Majority vote Majority of OCS delegation by the
laws (Sec. 48, CC) stockholders.
Non-voting shares can vote
Majority of OCS/members of
Majority vote of BOD of both
Management Contract (Sec. both managing and managed
managing and managed
44, CC) corporation and in some
corporation
cases 2/3 of OCS/members
CORPORATE ACTS WHICH REQUIRE VOTE OF THE STOCKHOLDERS REPRESENTING AT LEAST MAJORITY OF THE OCS
ALONE (FFAD)
Corporate Act Salient Points
Reasonable per diems may be given
Fixing of compensation of By-laws may provide for compensation
Majority of OCS
directors (Sec. 30, CC) Limit: not more than 10% of the net income before income
tax
Adoption of By-laws
Majority of OCS/members Non-voting shares can vote
(Sec. 46, CC)
Candidates with the highest number of votes get elected
Election of Directors/trustees Cumulative voting: No. shares x No. of directors to be
Majority of OCS/members
(Sec. 24, CC) elected
Non-voting shares cannot vote
Fixing the issued Price of No- Stockholders/Members shall vote if the BOD/BOT are not
Par value shares Majority of OCS authorized by the Articles of Incorporation and the by-laws
(Sec. 62, last par., CC) to fix the price
CORPORATE ACTS WHICH REQUIRE VOTE OF THE STOCKHOLDERS REPRESENTING AT LEAST 2/3
OF THE OCS ALONE
(PARDS)
Corporate Act Salient Points
Only if the AOI or amendment thereto denies pre-
emptive right
Denial of pre-emptive right (Sec. 39, CC) 2/3 of OCS Denial extends to shares issued in good faith in
exchange for property needed for corporate purposes
or in payment of previously contracted debts
Delegation of the power to Amend,
Delegation can be revoked by majority OCS
Repeal or Adopt New By-laws to BOD 2/3 of OCS
Non-voting shares cannot vote
(Sec. 48, CC)
Notice and statement of purpose are necessary
Must be made in a meeting called by the secretary on
President’s order or on written demand of majority of
Removal of Directors/Trustees
2/3 of OCS/members OCS
(Sec. 28, CC)
Non-voting shares cannot vote
Removal without cause cannot be used to deprive
minority stockholders of their right of representation
Ratification of act of disloyal director
2/3 of OCS
(Sec. 34, CC)
The contract must be fair and reasonable under the
circumstances
Full disclosure of adverse interest of directors/trustees
Ratification of a contract of self-dealing
2/3 of OCS/members involved is necessary
directors (Sec. 32, CC)
Presence of director/trustee must be necessary to
constitute quorum OR the vote of director/trustee must
be necessary for the approval of the contract
CORPORATE ACTS WHICH REQUIRE AT LEAST MAJORITY VOTE OF THE BOD AND VOTE OF
STOCKHOLDERS REPRESENTING AT LEAST 2/3 OF THE OCS (ADAM-LI³ES)
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Effective upon approval by
SEC, or date of filing if not
acted upon within six months
Must be for a legitimate
purpose
Dissolution of Corporation See sections 117-112
Majority vote 2/3 of OCS/members
(Secs. 118 and 119, CC) Non-voting shares can vote
Adoption of plan of distribution
2/3 of members having voting
of assets of non-stock Majority vote of trustees
rights
corporation (Sec. 95 [2], CC)
Non-voting shares can vote
Appraisal right is available,
except when the plan is
abandoned
Merger or Consolidation Majority of BOD of constituent 2/3 of OCS/members of
(Sec. 77, CC) corporations constituent corporations Any amendment to the plan
may be made provided it is
approved by majority vote of
the board and 2/3 of
OCS/members
Majority of the board is
sufficient if the transaction
does not cover all or
substantially all of the assets
Sale, Lease, Exchange, of the corporation
Mortgage, Pledge, Dispose of
Non-voting shares can vote
all or substantially all of Majority vote 2/3 of OCS/members
Appraisal right is available
corporate assets
(Sec. 40, CC) Notice is required
If sale is abandoned,
director’s action is sufficient,
no need for ratification by
stockholders
Meeting is required
Non-voting shares can vote
No appraisal right
Notice requirement
SEC prior approval Prior
approval of the SEC is
necessary for it is only from
Increase or decrease of and after the approval by the
Majority vote 2/3 of OCS/members SEC and the issuance by the
capital stock (Sec. 38, CC)
SEC of a certificate of filing
that the capital stock shall
stand increased or decreased
Treasurer’s sworn statement
is necessary
No decrease of capital stock
if it will prejudice right of
creditors
Meeting is required
Non-voting shares can vote
Incur, Create, Increase
No appraisal right
Bonded Indebtedness Majority vote 2/3 of OCS/members
(Sec. 38, CC) Notice is required
Registration of bonds with
the SEC is necessary
Non-voting shares can vote
Appraisal right available
Investment of Corporate Notice is required
Funds in another Corporation Investment in the secondary
or Business or for any other Majority vote 2/3 of OCS/members purpose is covered
purpose other than primary Stockholder’s ratification is
purpose (Sec. 42, CC) not necessary if the
investment is incidental to
primary purpose
Non-voting shares can vote
Appraisal right is available
Extension or shortening of
Majority vote 2/3 of OCS/members Notice requirement
corporate term (Sec. 37, CC)
Effected through an
amendment of the AOI
Issuance of Stock Dividends There must be unrestricted
Majority of the quorum 2/3 of OCS/members
(Sec. 43, CC) retained earnings
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1. Time, place and manger of 1. Designation of time when 1. Providing for cumulative 1. Classification of shares of
calling and conducting regular and voting rights may be exercised voting in nonstock stock and preferences granted
special meetings of directors, by stockholders of record. (24) corporations. (24) to preferred shares. (6)
trustees, places for meetings of
directors or trustees may be
outside the Philippines if it so
provided in the by-laws.
2. Time and manner of calling and 2. Providing for additional 2. Providing for higher quorum 2. Provisions on founder’s
conducting regular and special officers for the corporation. requirement for a valid board shares. (7)
meetings of the stockholders or (25) meeting. (25)
members.
3. Required quorum in meetings of 3. Provisions for the 3. Limiting, broadening or 3. Providing for redeemable
stockholders and the manner of compensation of directors. denial of the right to vote, shares. (8)
voting. (30) including voting by proxy for
members in nonstock
corporations. (29)
4. Form for proxies of stockholders 4. Creation of an executive 4. Transferability of 4. Provisions on the purposes
and members and manner of committee. (35) membership in a nonstock of the corporation. (14, 15,
voting. corporation. (90) 36(11) and 45)
5. Qualifications, duties and 5. Date of the annual meeting 5. Termination of membership 5. Providing for the corporate
compensation of directors, or provisions of special in nonstock corporations. (91) term of existence. (13 and 14)
trustees, officers and employees. meetings of the stockholders
or members. (50 and 53)
6. Time for holding annual election 6. Quorum on meeting of 6. Manner of election and 6. Capitalization of stock
of directors or trustees, mode and stockholders or members. term of office of trustees and corporations. (14 and 18)
manner of giving notice thereto. (52) officers in nonstock
corporation. (92)
7. Manner of election or 7. Providing for the presiding 7, Manner of distribution of 7. Corporate name (39)
appointment and the term of office officer at meetings of the assets in nonstock
of all officers except directors and directors or trustees as well as corporations upon dissolution.
trustee. of stockholders or members. (94)
(54)
8. Penalties for violation of by-laws. 8. Procedure for issuance of 8. Providing for staggered 8. Denial of pre-emptive rights
certificate of shares of stock. board in educational (48)
(63) institutions. (108)
9. Manner of issuing stock 9. Providing for interest on
certificates. unpaid subscriptions. (66)
10. Such other matters necessary 10. Entries to be made in the
for the proper means of corporate stock and transfer book. (74)
business and affairs.
11. Providing for meetings of
the members in a nonstock
corporation outside of the
principal office of the
corporation. (93)
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