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CORPORATION
1. Definition
Section 2 of the Corporation Code defined corporation as 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.
According to Chief Justice Marshall, a corporation is “an artificial
being, invisible, intangible, and existing only in contemplation of
law.”
2. Attributes of a Corporation
It is an artificial being;
It is created by operation of law;
It has the right of succession; and
It has the powers, attributes and properties expressly authorized by
law or incident to its existence.
B. CLASSES OF CORPORATIONS
Under Section 3, corporations formed or organized under the
Corporation Code may be stock or non-stock corporations.
Corporations may also be created by special laws or charters.
In other statutes and jurisprudence, corporations are further
classified as to: (1) number of components; (2) functions; (3)
manner of creation; (4) legal status; (5) existence of stocks; (6) laws
of incorporation; and (7) relationship.
C. NATIONALITY OF CORPORATIONS
2. Control Test
It requires looking into the nationality, domicile, or residence of
the individuals who control the corporation.
It is applied if the Filipino ownership of a corporation’s capital
is at least 60% and where the 60-40 Filipino alien shareholding
is not in doubt.
3. Grandfather Rule
It is resorted to if doubt exists as to the locus of the beneficial
ownership and control of a corporation.
It is a method of determining the nationality of a corporation which
in turn is owned by another corporation by breaking down the equity
structure of the shareholders.
3. Corporate Term
A corporation may exist perpetually unless otherwise stated in its
Articles of Incorporation.
5. Articles of Incorporation
a. Nature and Function of Articles
It is the charter or constitution of the corporation.
Defines the contractual relationships between the State and the
Corporation, the Stockholders and the State and between the
Corporation and Stockholders
b. Contents
Section 14 enumerates the contents of the articles of
incorporation.
They are: (1) corporate name; (2) purpose or purposes of the
corporation; (3) principal office; (4) corporate term; (5) names,
nationalities, and residences of the incorporators; (6) the number
of directors or trustees; (7) the names, nationalities and
residences of directors or trustees; (8) amount of authorized
capital stock; and (9) such other matters the incorporators may
deem necessary and convenient.
c. Amendment
It pertains to amendments in general.
The law requires the express approval of the stockholders
through an affirmative vote or an assent that is in writing.
Only a real party-in-interest can question an amendment.
d. Non-amendable Items
The names of the incorporators cannot be changed and their
number cannot be increased because such information are
considered accomplished facts.
7. Adoption of By-Laws
a. Nature and Functions of By-Laws
They are the rules and regulations or private laws adopted for its
internal government and to regulate the conduct and prescribe the
rights and duties of tis members towards itself and among
themselves in reference to the management of its affairs.
c. Binding Effect
The by-laws binds the corporation, stockholders, members
It also binds those having directions, management and control of
its affairs
d. Amendment or Revision
Amendment can be made by the stockholders together with the
board, or the Board after due delegation by the stockholders.
F. CORPORATE POWERS
3. How Exercised
a. By the Shareholders
Assent of shareholders representing 2/3 of the outstanding
capital stock is necessary in the sale or disposition of all or
substantially all of the corporation’s assets under Sec. 40.
Ratification by the shareholders of the approval of the board to
pursue secondary purpose is necessary under Sec. 42.
c. By the Officers
Corporate powers are exercised by officers through delegation
by the board.
4. Elections
a. Cumulative Voting/ Straight Voting
Cumulative voting is defined as a method of concentrating votes
devised to give sufficient opportunity to minority shareholders to
secure representation in the board.
Straight voting is a method of voting wherein every shareholder
may vote such number of shares for as many persons as there are
directors to be elected.
b. Quorum
A quorum is the minimum number of members of a group or
committee required to be in attendance in order for that group to
be able to take official action.
5. Removal
The requisites for a valid removal are: (1) it must take place either
at a regular meeting of the stockholders called for the purpose; (2)
the call for a special meeting shall be made by the secretary on order
of the president or on the written demand of stockholders
representing at least a majority of the outstanding capital stock; (3)
there must be previous notice to the stockholders or members of the
intention to remove a director; (4) the removal must be by a vote of
the stockholders representing 2/3 of the outstanding capital stock or
2/3 of members; (5) a director who was elected by the minority must
be removed only for cause.
6. Filing of Vacancies
Vacancies may be filled either by the stockholders or by the
remaining directors constituting a quorum depending on the reason
for the vacancy.
7. Compensation
In the absence of any provision in the by-laws, the directors shall
not receive any compensation, as such directors, except for
reasonable per diems.
11.Contracts
a. By Self-Dealing Directors with the Corporation
It is discouraged as there can be no real bargaining because the
director is acting on both sides of the trade.
13. Meetings
a. Regular or Special
i. When and Where
Regular meetings shall be held annually on a date fixed in the
by-laws or if not, on any date after April 15 of every year
Special Meetings shall be held at any time deemed necessary
by the by-laws
Shall be held in the principal office or if not in the
municipality or city where such office is located
ii. Notice
Written notice of regular meetings shall be sent to
stockholders/members at least 21 days prior to the meeting
Written notice of special meetings shall be sent to
stockholders/members at least 1 week unless a different
period is provided in the by-laws
b. Who Presides
The chairman or, in his absence, the president shall preside at
all meetings unless the by-laws provide otherwise
c. Quorum
Consist of stockholders representing a majority of the
outstanding capital stock or majority of members
d. Rule on Abstention
The general rule is that the abstention is counted in favor of
the issue that won the majority vote unless there is clear
evidence to contrary