CASES SUMMARY (PART 1)

I. GENERAL

Campos, Volume 1, Chapter I, pages 1-212

A. Definition and attributes of a corporation – Sec. 2, Corporation Code

B. Corporation differentiated from other types of business organizations

C. Advantages and disadvantages of the corporate entity

D. History

E. Regulation of corporations

1) Corporation Code, Batas Pambansa Blg. 68

2) R.A. 8799, Securities Regulation Code

Sec. 5 – SEC powers and functions

see also PD 902-A

3) Rules and regulations issued by the SEC pursuant to statutory grant of power to supervise
and regulate corporations

F. Interests within the corporation; the corporate hierarchy

G. Nationality

1) Nationalized and partly nationalized activities – 1987 Constitution, Articles XII, XIV and XVI

2) Control test; Grandfather rule

Narra Nickel Mining v. Redmont Consolidated, GR 195580, 21 April 2014

the Grandfather Rule or the second part of the SEC Rule applies only when the 60-40 Filipino-
foreign equity ownership is in doubt (i.e., in cases where the joint venture corporation with
Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests in
other joint venture corporation which is either 60-40% Filipino-alien or the 59% less Filipino).

Gamboa v Teves et al, G.R. No. 176579, 28 June 2011; see also SC Resolution on Motions
for Reconsideration, 9 October 2013

How is the term “capital” defined?

“The term capital in Section 11, Article XII of the 1987 Constitution refers only to shares of
stock entitled to vote in the election of directors, and thus in the present case only to common
shares, and not to the total outstanding capital stock (common and non-voting preferred
shares).

II. Classes of corporations

Campos, Vol. 1, Chapter II, pages 43-49

A. Private corporations

1) Stock corporations - Sec. 3, Code

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2) Non-stock corporations - Sec. 3, 87, 88, Code

Collector v Club Filipino de Cebu, GR L-12719, 31 May 1962 – No authority for dividend
distribution

The bar and restaurant are necessary adjuncts of the Club to foster its purposes and the
profits derived therefrom are necessarily incidental to the primary object of developing and
cultivating sports. That a Club makes some profit, does not make it a profit making club.

Moreover, for a stock corporation to exist, two requisites must be complied with, to wit: (1) a
capital stock divided into shares and (2) an authority to distribute to the holders of such
shares, dividends or allotments of the surplus profits. In the case at bar, while the respondent
Club's capital stock is divided into shares, nowhere in its articles of incorporation or by-laws
could be found an authority for the distribution of its dividends or surplus profits.

"A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-
profit, non-stock organizations, unless the intent to the contrary is manifest and patent."

3) Close corporations - Sec. 96, Code

4) Public corporations under SRC - Sec. 17.2(c), SRC; SRC Rule 3.1[L];[O]

5) Educational – Sec. 106; 107, Code; see also R.A. 7798

6) Religious; corporation sole – Sec. 109;110, Code

7) Parent and subsidiary corporations; holding companies; affiliate companies

B. Corporations created by special law or charter

1) Sec. 4, Code

2) Article XII, Sec. 16, 1987 Constitution

National Coal v Collector of Internal Revenue, GR L-22619, 2 Dec 1924

The Court held that NCC is a private corporation. The mere fact that Government happens to
the majority stockholder does not make it a public corporation.

As a private corporation (governed by general law), it has no greater rights, powers or

privileges than any other corporation which might be organized for the same purpose under the
Corporation Law.

PNOC EDC v NLRC, GR 79182, 11 September 1991

Test in determining whether a GOCC is subject to the Civil Service Law is the manner of its
creation, such that those created by special charter are subject to its provisions while those
incorporated under the general Corporation Law are not within its coverage. PNOC-EDC being
incorporated under the general Corporation Law is a GOCC whose employees are subject to the
Labor Code.

C. Domestic corporations v foreign corporations

Campos, Volume I, pages 239-240

Sec. 123, Code

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