By the contract of partnership two or more persons bind Article 1767 GENERAL PROVISION

themselves to contribute money, property, or industry to a

common fund, with the intention of dividing the profits
Characteristics
among themselves.
1. Consensual – require mere
Two or more person may also form a partnership for the consent of
exercise of a profession. conducting parties
2. Bilateral – requires two or more
Persons
Persons The following cannot bind 3. Preparatory – entered as a
 Natural into a contract means to an end
 Juridical 4. Nominate – name given to
A corporation may NOT  Minors agreement to the
be a partner but it may  With civil interdiction partnership
engage in Joint  Insane Person 5. Onerous – contributions of either
ventures  Deaf, Mute or Bind money, property or
If the person is only a industry must be made.
6. Commutative – gives and receives
Delectus Personae SUSPECT, he may still
bind himself into a contract an equivalent
You can’t join a
since there is no Final 7. Principal – one entered by
partnership without the
Verdict yet. both parties, on their
consent of all partners
own accounts
The partnership has a juridical personality separate and
distinct from that of each of the partners, even in case of
Article 1768
GENERAL PROVISION

failure to comply with the requirements of article 1772, first

paragraph.

Consequences of being a Juridical Person

 Can sue and be sued
 Acquire any kind of property
 Insolvency of a partnership does not mean that the
partners themselves are insolvent
In determining whether a partnership exists, these rules shall
Article 1769 GENERAL PROVISION

apply:
(1) Except as provided by article 1825, persons who are not To determine whether a
partners as to each other are not partners as to third persons person is a partner:
(2) Co-ownership or co-possession odes not of itself co-
possessors do or do not share any profits made by the use of 1. Required Contribution
the property 2. Say in Management
(3) The sharing of gross returns does not of itself establish a 3. Share in Losses
partnership, whether or not the persons sharing them have a
joint or common right or interest in any property from which
the returns are derived PARTNERSHIP BY
(4) The receipt by a person of a share in the profits of a business ESTOPPEL
is prima facie evidence that he is part in the business, but no
such inference shall be drawn if such profits were received in A person who is not technically
payment: a partner can be held liable as
(a) As a debt by installments or otherwise a general partner would be for
(b) As wages of an employee or rent to a landlord any debts and damages owed
to a third party.
(c) As an annulty to a widow or representative of a decreased
Someone who is not a
partner
partner of a firm, but allows
(d) As interest on a loan, though the amounts of payment vary
others to think that he is a
with the profits of the business
partner, through his
(e) As consideration for the sale of goodwill of a business or
behavior or conduct.
other property by installments or otherwise
 Existence of
Fiduciary Relationship

Partners have a well-defined

fiduciary relationship between them.
Co-owners do not. Should there be
dispute; the remedy of partners is an
action for dissolution, termination
and accounting. For co-owners it
would be one, for instance, for non-
performance of contract. People can
become co-owners without a
contract but they cannot become
partners without one.

Fiduciary Relationship
A relationship in which one
party places special trust, confidence,
and reliance in and is influenced by
another who has a fiduciary duty to act
for the benefit of the party
Example for (1)
If A & B say PUBLICLY that they are
not partners, then according to
A1825, If they told C that they are
and C enters into a contract of
partnership with them, then A and B
are in a PARTNERSHIP BY
ESTOPPEL
Example for (2)
If A & B inherited land from their
parents and subsequently leased
the land out for P50,000/month,
then it can be said that they share
profits, but are they in a
partnership?
No, they are merely co-owners,
the P50,000 profit is merely
incidental and besides, it was not
derived from BUSINESS
OPERATIONS.
Example for (3)
If they bought the land If a person owns a big tract of land for
for P1,000,000 each to planting rice and entered into an
build a house but agreement with a farmer that they will
instead opted to sell it divide the harvest, is the farmer
for P2,500,000 then partners with the owner of the land?
they have a profit of No, because of the following
P500,000 but are they (1) The farmer had no contribution
partners? (2) The farmer has no say in
No, because even if management
there was a profit of (3) The farmer has no say in
P500,000, this is management
merely incidental to the (4) In case of loss, the owner shall
sale and not from carry the entire burden and the
business operations of farmer not pay anything
A&B Example for (4)
A partnership borrowed P50,000 and
If the land was instead instead of giving the creditor a specific
used to build an amount to be repaid, they agreed that
apartment that is rented the creditor will receive 1% of the
out? partnership’s annual gross profit. Is
Yes, because A & B the creditor a partner?
share profits from No, because the receipt of share in
RENTING, this can be net income happens to be because of
considered as ordinary an existing debt.
business operations.
A partnership must have a lawful object or purpose, and must be
established for the common benefit or interest of the partners. Article 1770 GENERAL PROVISION
When an unlawful partnership is dissolved by a juridical decree,
the profits shall be confiscated in favor of the State, without
prejudice to the provisions of the Penal Code governing the Effects of an unlawful partnership
confiscation of the instruments and effects of a crime. (1664a)
1. The contract is void and
the partnership never
 The partnership must have a lawful object or purpose existed in the eyes of the
 Lawful object refers to CAPITAL law
 Lawful purpose refers to the BUSINESS itself 2. The profit shall be
 There must be common interest and benefit confiscated in favor of the
 Unlawfulness of the partnership will cause it to be dissolved government
and profits shall be confiscated 3. The instruments or tools
and proceeds of the crime
shall also be forfeited in
Example of unlawful purpose: favor of the government
- GAMBLING 4. The contributions of the
A & B are partners where A contributed P100,000 in cash and B partners shall not be
contributes gambling paraphernalia. They were raided and the gambling confiscated unless they
paraphernalia was confiscated. Can the P100,000 also be confiscated? fall under #3.

No, because the P100,000 was not the reason for the crime in anyway.
The state is therefore required to return this amount to A
A partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto,
in which case, a public instrument shall be necessary
Article 1771 GENERAL PROVISION

(1667a) Can a partnership be created orally?

Yes, A partnership may be constituted in

 Partnerships are not covered by the Statute of Fraud any form ( as stated in Article 1771)
since these are not necessarily required to be in
writing (contract of partnership can be in any form)
 If immovable property and/or real rights are
contributed to the partnership, then the contract must
be in a public instrument (notarized documents)
 In order to bind 3rd persons, the transfer of ownership
of immovable property MUST BE REGISTERED with
the REGISTRY OF PROPERTY in the province of
city
 The article shows that partnerships can be perfected
by MERE CONSENT
Every contract of partnership
having a capital of P3,000.00
or more, in money or property,
shall appear in a public
instrument, which must be
recorded in the office of the
Securities and Exchange
Commission.
Failure to comply with the
requirements of the preceding
paragraph shall not affect the
liability of the partnership and
the members thereof to third
persons.
If the partnership’s capital is
P3,000.00 or more (in any
form), it must be in a public
instrument, recorded with the
SEC and note that property
referred to here is MOVABLE
since immovable property is
covered by Article 1771.
Failure to comply with the
Article 1772 GENERAL PROVISION
requirements of Article 1772 will
not affect the liability of the Purpose of Registration:
(1) rdCondition for obtaining a license to engage in business
partnership to 3 persons.
and in trade
(2) 3rd persons want proof that the partnership is existent,
 Isn’t this inconsistent with
who the partners are and what the capitalization is before
Article !358?
they enter into contracts/engage in business.
No, remember that in Article
(3) The government requires this so that tax liabilities may
1358, if the contract terms
not be avoided (BIR)
exceed P500.00 then the
contract must be in writing. This
is merely for purposes of
convenience and not validity or
enforceability of the law
 How do we reconcile this with
Article 1358 and 1357?
Article 1358 is for purpose of
convenience and not for
validity or enforceability of the
law.
Article 1357 states that
contracting parties have the
right to compel each other to
place the contract into writing.
 Failure to comply with the
Article’s requirement will not
prevent the formation of the
partnership
 The Statute of Fraud will only
apply if there was an agreement
made by the contracting parties
Example:
A and B promise to contribute to
their partnership money worth
P10,000.00 each within one year
from their agreement. A contributes
early but when the time comes for B
to contribute his share, he refuses to
do so. Can A compel B to give his
contribution?
No, A cannot compel B to pay his
contribution to the partnership
Why?
Because the contract/agreement
between the two parties was purely
ORAL and never really written, and it
has already been one year since
they agreed to their contract items.
A contract of partnership is void, Actual case in applying
Article 1773 GENERAL PROVISION

whenever immovable property is article 1773: Suppose a partnership contributes

contributed thereto, if an inventory A and B agree to form a immovable property but does not
of said property is not made, partnership engaging in a conduct an inventory and enters
signed by the parties and fish pond business where into a contract with A. The
attached to the public both partners will partnership does not fulfill its
instruments. (1668a) obligation to A and A sues the
contribute cash; the cash is
partnership. Was A right in suing
later used to buy land that the partnership?
Refers specifically where one or is converted into a fish No, since the partnership was void
both of the parties contribute pond. C comes along and from the beginning. A should
0immovable property. The points out that the instead file against the “partnership”
requirements are: partnership is void themselves. They will be sued
(1) The contract must be in because no inventory of under the legal basis of them being
partners by estoppels, as stated in
a public instrument the land was made. Is the Article 1825
(2) An inventory of the partnership really void? If A wishes to be in a partnership
immovable property No, the partnership is not with B and promises to contribute
must be made, signed VOID because according land but subsequently sells the
by BOTH parties and to the Supreme Court, same plot to C, who immediately
attached to the public Article 1773 need not apply registers the transfer, who owns the
land?
instrument, otherwise since the land was
C owns the land because A never
the partnership is BOUGHT from CASH registered the transfer
VOIDED. CONTRIBUTION. Estafa: when the owner of a
property sells the same to two or
more different persons.
Any immovable property or an
interest therein may be acquired
in the partnership name. Title so
acquired can be conveyed only
in the partnership name.
 Being a juridical entity, a
partnership can acquire
property and subsequently
become its owner
Associations and societies
whose articles are kept secret
among members, and wherein
anyone of the members may
contract in his own name with
third persons, shall have no
juridical personality and shall be
governed by the provisions
relating to co-ownership. (1669)
 There is no juridical entity
since the members can
contract with 3rd persons in
their own name without
binding others.
 In a partnership:
1. The partners are merely
agents who cannot act alone
2. Article of partnership are
known to ALL partners And
to the GENERAL PUBLIC
As to its object, a partnership is either universal or particular. Article 1776 GENERAL PROVISION
As regards to the liability of the partners, a partnership may be
general or limited
4. As to Legality of Existence
a. De Jure – complied with ALL
requirements
Classifications of Partnerships b. De Facto – failed to comply
1. As to the Object with all requirements
a. Universal Partnership of All present Property 5. As to Representation to Other
Universal Partnership of All Profits a. Ordinary/Real – actually exists
b. Particular Partnerships b. Ostensible/ by Estoppel – exists
2. As to the Liability only to partners
a. General – are liable PRO-RATA and subsidiarity, 6. As to Publicity
sometimes solitarily, with their own a. Secret – some partners are not
property/ assets if the partnership is known to the public
insolvent. (may include industrial b. Open/ Notorious – all partners
partners) are known to the public
b. Limited – are liable only up to the extent of their 7. As to Purpose
contribution a. Commercial / Trading– business
3. As to Duration transaction
a. At will – no particular undertaking, can be b. professional / Non- Trading –
dissolved at any time exercise of professions
b. With a Fixed Term – may only be dissolved upon
the end of its term unless continued by the
partners
Kinds of Partners
1. Under the Civil Code:
(a) Capitalist – contribute money/ property
(b) Industrial – contribute industry
(c) General – Liability extends to personal assets
(d) Limited – liability up to contribution only
(e) Managing – manages the partnership
(f) Liquidating – Responsible during dissolution
(g) By Estoppel – not really a partners
(h) Continuing – continues business after dissolution
(i) Surviving – remains after partner’s death
(j) Sub-partner – contracts with partners, Art. 1804

2. Other Classification
(a) Ostensible – Active, known to the public
(b) Secret – Active, unknown to the public
(c) Silent – Inactive, Known to the public
(d) Dormant – Inactive, unknown to the public
(e) Original – members at time of organization
(f) Incoming – about to become a member
(g) Retiring – about to withdraw
Article 1777GENERAL PROVISIONS
A universal partnership may
refer to all the present
property or to all the profits.
(1672)
Article 1778GENERAL PROVISIONS
A partnership of all
present property is that
which the partners
contribute all the property
which actually belongs to
them to a common fund,
with the intention of
dividing the same among
themselves, as well as the
profit which they may
acquire therewith. (1673)
Article 1779 GENERAL PROVISIONS
In a universal partnership of all
present property the property
which belongs to each of the
partners at the time of the
constitution of the partnership
becomes the common property
of all the partners, as well as all
the profits which they acquire
therewith.
A stipulation for the common
enjoyment of any other profits
may also be made; but the
property which the partners
may acquire subsequently by
inheritance, legacy or donation
cannot be included in such
stipulation, except the fruits
thereof. (1674a)
Article 1779 GENERAL
PROVISIONS
In a universal partnership of
all present property the
property which belongs to
each of the partners at the
time of the constitution of the
partnership becomes the
common property of all the
partners, as well as all the
profits which they acquire
therewith.
A stipulation for the common
enjoyment of any other profits
may also be made; but the
property which the partners
may acquire subsequently by
inheritance, legacy or
donation cannot be included
in such stipulation, except the
fruits thereof. (1674a)

SEC. 1. TITLE OF THE CODE.
This Code shall be known as “The
Corporation Coder of the
Philippines”
SEC. 2. CORPORATION
DEFINED
A 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.
General Provisions Definitions
And
Classifications
SIMILARITIES BETWEEN A PARTNERSHIP
AND A CORPORATION
1. Juridical personality separate and distinct from the
individuals composing it.
2. Act only through its agents.
3. Composed of an aggregate of individuals.
4. Distribute profits to those who contribute to capital.
5. May be organized only when there is a law
authorizing it.
6. Subject to income tax.
 Distinctions Between A
POINT OF
PARTNERSHIP CORPORATION
Partnership And A Corporation COMPARISON
May exercise powers Can exercise only the
POINT OF authorized by partners powers expressly
PARTNERSHIP CORPORATION
COMPARISON provided the same are granted by law or
By mere By law or Powers not contrary to law, incident to its
Manner of morals, good customs, existence.
agreement of the operation of law
Creation parties public policy or public
Number of minimum of (2) At least (5) five
Parties two persons incorporators When it is not agreed It is vested in the
Generally, from From the date of upon, each partner is an board of directors or
Management agent of the trustees
the moment of the issuance of
Commencement execution of the the certificate of partnership.
of Juridical contract incorporation of
Right of No right of succession Possesses right of
Personality the Securities and
Exchange Succession succession
Commission (SEC) Partners (except limited stockholders are
A partner cannot A stockholder has partners) are liable liable only to the
Extent of personally and extent of their
transfer interest the right to
so as to make a transfer his shares Liability To subsidiarity for investments as
Transferability Third partnership debts to third represented by the
partner without without the prior
of Interest the consent of all consent of the Persons persons. shares subscribed by
other existing other them.
partners. stockholders.
 POINT OF
PARTNERSHIP CORPORATION
COMPARISON Advantages of a Corporation form of
May be May not be Business Organization
established for formed for a term
Term of any period of in excess of 50 1. The capacity to hold property, to contract,
Existence time stipulated years extendible
by the partners to not more than to sue and be sued as a legal unit or distinct
50 years. entity.
A limited A corporation may
2. Exemption of shareholders from individual
partnership is adopt a firm name
required to add provided it is not liability
the word ‘Ltd.’ to identical or 3. Continuity of existence in spite of death or
Firm Name its name deceptively similar
changes of members.
to any registered
firm name or 4. Transferability of shares.
contrary to 5. Centralized management under a board of
existing laws
directors.
May be dissolved May only be
at any time by dissolved with 6. Standardized methods of organization,
Dissolution the will of any or the consent of management and finance for the protection
all partners the state. of shareholders and creditors under
Civil Code Corporation Code
Governing statutory regulations
Laws
Disadvantages of a Corporation form of Business Organization

1. The limited liability of the stockholders serves to limit the credit available to the corporation.
2. The transferability of shares permits the uniting of incompatible and conflicting interests in
one enterprise.
3. The minority stockholders 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, Luke warmness and disinterest in management, inertia, and inaccessible
meeting places.
5. In large corporations, management and control has been separated from ownership.
6. By and large corporations are subject to governmental restrictions, controls, and report
requirements not imposed on other forms of business organizations.
7. Corporate sphere of activity is limited in the transaction of its business to the state of the
organization.
8. The corporate form involves “double taxation” on corporation income.
SEC. 3. CLASSES OF CORPORATIONS
Corporations formed or organized under
this Code may be stock or non-stock
corporations. Corporations which have
capital stock divided into shares and are
authorized to distribute to the holders of
such share’s dividends or allotments of
the surplus profits on the basis of shares
held are stock corporations. All other
corporations are non-stock corporations.
OTHER KINDS OF CORPORATIONS
1. Quasi-corporations – from the word
“quasi”, meaning “as if”, are entities that
are not absolutely corporations but are
considered as if they were. Eg. Public
boards created by law
2. Quasi-public – are entities engaged in
rendering basic services of such public
importance as to entitle them to certain
privileges like eminent domain or use of public
property. E.g. Electric, gas, water and
telephone companies.
3. Government-owned or controlled – are
entities organized by the government or
corporations of which the government is a
majority stockholder. E.g. Philippine Air Lines
4. Domestic – one incorporated under Philippine
laws.
5. Foreign – one formed, organized, or existing
under any laws other than those of the
Philippines.
6. Corporation aggregate – one composed of
more than one member or corporator.
7. Corporation sole – consists of one
member or corporator and his successors.
8. Religious corporations, sole or aggregate
– organized, either as sole or aggregate, to
administer properties of the church.
9. Ecclesiastical – organized for religious
purposes.
10. Lay – organized for a purpose other than
religious
11. Eleemosynary – organized for charitable
purposes.
12. Civil – are those than ecclesiastical and
eleemosynary, whether public or private.
13. Close – one wherein all the outstanding
stock is owned by the persons who are
active in management and conduct of the
business
14. Open – one in which all the members or
corporations have a vote in the election of
the directors and other officers.
15. Multi-national – one having been created
or organized in one state conducts business
or activities across national boundaries and
but subject to the legal sanctions of the
countries in which they operate.
16. Non-profit – organized without
contemplation of gains, profits or dividends
to their members on invested capital.
17. De Jure – one created in strict or
substantial conformity with the statutory
requirements for incorporation and whose
right to exist as a corporation cannot be
successfully attacked even in a direct
proceeding for that purpose by the State
SEC. 4. CORPORATIONS CREATED BY
SPECIAL LAWS OR CHARACTERS
Corporations created by special laws or
charters shall be governed primarily by
the provisions of the special law or
charter creating them or applicable to
them, supplemented by the provisions of
this Code, insofar as they are applicable.
SEC. 5. CORPORATORS AND
INCORPORATORS, STOCKHOLDERS,
AND MEMBERS.
Corporators are those who compose a
corporation, whether as stockholders or
members. Incorporators are those
stockholders or members mentioned in
the articles of incorporation as originally
forming and composing the corporation
and who are signatories thereof.
Corporators in a stock corporation are
called stock-holders or shareholders.
Corporators in a non-stock corporation
are called members.
COMPONENTS OF A CORPORATION
1. CORPORATORS – those who compose a corporation, whether as stockholders or members
2. INCORPORATORS - those mentioned in the Articles of Incorporation as originally forming and
composing the corporation, having signed the Articles and acknowledged the same before a notary public.
They have no powers beyond those vested in them by the statute.
 There is only one set of incorporators, hence, they will remain to be such incorporators up to the
termination of the life of the corporation.
QUALIFICATIONS:
a. natural person;
b. not less than 5 but not more than 15;
c. of legal age;
d. majority must be residents of the Philippines; and
e. each must own or subscribe to at least one share (Sec. 10).
GENERAL RULE: Only natural persons can be incorporators.
EXCEPTION: When otherwise allowed by law, e.g., Rural Banks Act of 1992, where incorporated
cooperatives can be incorporators of rural banks.
Note: However, it is undeniable that corporations can be corporators.
3. STOCKHOLDERS – owners of shares of stock in a stock corporation
4. MEMBERS – corporators of a corporation which has no capital stock
 INCORPORATORS CORPORATORS

OTHER COMPONENTS OF A CORPORATION Signatory to the Stockholder

Articles of (stock
1. PROMOTER - A person who, acting alone or with others, takes Incorporation corporation) or
initiative in founding and organizing the business or enterprise of member
the issuer and receives consideration therefor (Sec. 3, R.A. 8799). (non-stock
 He is an agent of the incorporators but not of the corporation. corporation)
Fiat accompli; They may cease
 Contracts by the promoter for and in behalf of a proposed
accomplished fact to be such if
corporation generally bind only him, subject to and to the extent (the articles of they
of his representations, and not the corporation, unless and until incorporation subsequently
after these contracts are ratified, expressly or impliedly, by its cannot be lose their
amended to shareholdings
Board of Directors/Trustees (Cagayan Fishing Development Co.,
replace them)
Inc. v. Sandiko, 65 Phil. 223). Number is limited No restriction
2. SUBSCRIBER – A person who has agreed to take and pay for to 5-15 as to members
original and unissued shares of a corporation formed or to be Must have May be such
formed. contractual through a
capacity guardian
3. UNDERWRITER – A person who guarantees on a firm commitment
and/ or declared best effort basis the distribution and sale of
securities of any kind by another company (Sec. 3, R.A. 8799). A person may perform two
position in the incorporation as
long as it is not against the law
and it is not a conflict of
interest
CLASSIFICATION OF A CORPORATION
2. As to organizers
a. Public – by state only
b. Private – by private person alone or with the
State
3. As to functions
a. Public – government of a portion of the
State
b. Private – usually for profit-making functions
4. As to governing law
a. Public – special laws or local government code
b. Private – Law on Private Corporations.
5. As to legal status
a. De jure corporation - corporation created in
strict or substantial conformity with the
mandatory statutory requirements for
incorporation and the right of which to exist as
a corporation cannot be successfully attacked
or questioned by any party even in a direct
proceeding for that purpose by the state
a. De facto corporation - organized with a
colorable compliance with the requirements
of a valid law and its existence cannot be
inquired collaterally but such inquiry may be
made by the Solicitor General in a quo
warranto proceeding (Sec. 20).  The only
difference between a de facto corporation
and a de jure corporation is that a de jure
corporation can successfully resist a suit
brought by the State challenging its
existence; a de facto corporation cannot
sustain its right to exist as against the
State.
b. Corporation by estoppel group of persons
that assumes to act as a corporation knowing it to
be without authority to do so and enters into a
transaction with a third person on the strength of
such appearance. It cannot be permitted to deny
its existence in an action under said transaction
(Sec. 21). It is neither de jure nor de facto.
b. Corporation by prescription - one which has
exercised corporate powers for an
indefinite period without interference on
the part of the sovereign power, e.g. Roman
Catholic Church.
6. As to existence of stocks
a. Stock Corporation– a corporation which has
capital stock divided into shares and is
authorized to distribute to holders of such
shares, dividends or allotments of the
surplus profits on the basis of the shares
held (Sec. 3); or
 For a stock corporation to exist, the above
requisites must be complied with for even
if there is a statement of capital stock,
the corporation is still not a stock
corporation if dividends are not supposed
to be declared, i.e. there is no distribution
of retained earning (CIR vs. Club Filipino,
Inc. de Cebu, 5 SCRA 321).
b. Non-Stock Corporation–a corporation which
does not issue stocks nor distribute
dividends to their members (Sec. 87).
6. As to existence of stocks
a. Domestic Corporation – corporation formed,
organized or existing under Philippine laws
b. Foreign Corporation – a corporation formed,
organized or existing under any laws other
than those of the Philippines and whose laws
allow Filipino citizens and corporation to do
business in its own country or state.
7. As to whether they are open to the public
a. Open - one which is open to any person who
may wish to become a stockholder or member
thereto
b. Close - those whose shares of stock are held
by limited number of persons like the family or
other closely-knit group
11. As to relationship of management and 8. As to number of persons who compose
control them:
a. Holding Corporation- it is one which controls a. Aggregate Corporation– a corporation
another as a subsidiary by the power to elect consisting of more than one person or
management. It is one that holds stocks in other member
companies for purposes of control rather than for b. Corporation Sole– a corporation consisting of
mere investment.
only one person or member; a special form of
b. Subsidiary Corporation – one which is so corporation usually associated with the clergy
related to another corporation that the majority of
9. As to whether they are religious purpose or
its directors can be elected either directly or
a. Ecclesiastical Corporation - one organized for
indirectly by such other corporation. It is always
religious purposes
controlled
b. Lay Corporation – one organized for a purpose
c. Affiliate – one related to another by owning or
other than for religion.
being owned by common management or by a
10. As to whether they are for charitable purpose
long-term lease of its properties or other control
a. Eleemosynary Corporation – one established for
device. It may be the controlled or controlling
or devoted to charitable purposes or those
corporation, or under common control
supported by charity
d. Parent and subsidiary corporation– When a
b. Civil Corporation – one established for business
corporation has a controlling financial interest in
or profit
one or more corporations , the one having control
is the parent corporation, and the others are the
subsidiary corporations
BASIC REQUIREMENTS VICE-PRESIDENT - in the absence of the
president, or if the office of the
 Articles of Incorporation
president becomes vacant,
 By-Laws
- As a rule, the vice president
 Treasurer’s Affidavit
elected and appointed by the
shareholders or directors has
authority to act in his stead,
PRESIDENT – The powers are vested in and to perform the duties of
him by law or the by-laws the office
- He must be a director of
the corporation
- He may be given actual
TREASURER - May or may not be a director
authority to make
- It is the important position during
contracts, or to execute
the formation of the corporation
conveyances, borrow
- Receive and keep the money of the
money, execute
corporation and to disburse them as
mortgages, and do other
he may be authorized.
acts, by the charter, the
- He is the proper officer and the only
by-laws, resolutions of
proper officer in the absence of
directors or their
express provision to the contrary
informal acquiescence.
Corporate Secretary - must be a resident citizen Board of Directors - unless provided in
of the Philippines. this Code, the
- Its duty is to make and corporate powers
keep corporate records of all corporation
- To make proper entries formed under
of the voters, resolution this
and proceedings of the Code shall be
shareholders and exercised.
directors in the - Must own at least
management of the one of the capital
corporation stocks of the
corporation
Executive Committee - small board - A majority of the
- Composed of not less than directors or
three members of the trustees of all
board corporations
- To be appointed by the organized under
board this Code must
- May act, by majority vote be residents of
of all within the competence the Philippines
of such board
 SEC. 36. CORPORATE POWERS AND CAPACITY
- Every corporation incorporated under the Code has the power and capacity:
1. To sue and be sued in its corporation name
2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of
incorporation
3. To adopt and use a corporate seal.
4. To amend its articles of incorporation in accordance with the provisions of this code.
5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this
Code
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the
provisions of this code; and to admit members to the corporation id it be a
Non-stock corporation
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and
personal property, including securities and bonds of other corporations as the transaction of the lawful business of the
corporation may be reasonably and necessarily require subject to the limitations prescribed by law and the constitution.
8. To enter into with other corporations merger or consolidation as provided in this code.
9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civil or
similar purpose; Provided, that no corporation, domestic or foreign, shall give donations in aid of any political party or
candidate or for purpose of partisan political activity
10. To establish pension, remittance and other plans for the benefit of its directors, trustee, officers and employees
11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its
articles of incorporation
POWERS OF A CORPORATION
A corporation has such powers, and such
powers only, as are conferred upon it by law
or by its agreement. Powers may be
conferred upon a corporation:
1. Expressly
2. Impliedly because they are
incidental to corporate existence.
3. Impliedly, because they are
necessary or proper in order to
exercise the powers expressly
conferred.
General Express Powers
Sec. 36 of the Corporation Code enumerates
the general and express powers of
corporations.
OTHER CORPORATE POWERS
1. Power to extend or shorten corporate term Sec. 37
2. Power to increase or decrease capital stock; incur,
create or increase bonded indebtedness (Sec. 38)
3. Power to deny pre-emptive right (Sec. 39)
4. Power to sell or dispose assets (Sec. 40)
5. Power to acquire own shares (Sec. 41)
6. Power to invest corporate funds in another
corporation or business or for any other purpose
(Sec. 42)
7. Power to declare dividends (Sec. 43)
8. Power to enter into management contract (Sec. 44)
Sec. 37. Power to Extend or Shorten Corporate Term
A private corporation may extend or shorten its
terms as stated in the articles of incorporation
when improved by a majority vote of the board of
directors or trustees and ratified at a meeting by
the stockholders representing at least two thirds
(2/3) of the outstanding capital stock or by at
least two-thirds (2/3) of the members in case of
non-stock corporations. Written notice of
proposed action and of the time and place of the
meeting shall be addressed to each stockholder or
member at his place of residence as shown on the
books of the corporation and deposited to the
addressee in the post office with postage prepaid,
or served personally: Provided, That in case of
extension of corporate term, any dissenting
stockholder may exercise his appraisal right under
the conditions provided in this Code.
Extension of corporate term limited to 50
years
The corporate term may be extended for
periods not exceeding 50 years in any single
instance as provided by section 11 of the
Corporation Code. No extension can be made
earlier than 5 years prior to the original or
subsequent expiry date(s) unless there are
justifiable reasons for an earlier extension as
determined by the SEC
Corporation cannot extend expired term.
A corporation cannot extend its life by
amendment of its articles of incorporation
effected during the three-year statutory period
for liquidation when its original term of existence
had already expired.
Sec. 38. Power to increase or decrease capital stock; incur, create or increase
bonded indebtedness
No corporation shall increase or decrease its capital
stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of
the board of directors and, at a stockholders’ meeting
duly called for the purpose, two-thirds (2/3) of the
outstanding capital stock shall favor the increase or
diminution of the capital stock, or the incurring,
creating or increasing of and bonded indebtedness.
Written notice of the proposed increase or diminution
of the capital stock or of the incurring, creating, or
increasing of any bonded indebtedness and of the
time and place of the stockholders’ meeting at which
the proposed increase or diminution of the capital
stock or the incurring or increasing of any bonded
indebtedness is to be considered, must be addressed
to each stockholder at his place of residence as
shown on the books of the corporation and deposited
to the addressee in the post office with postage
prepaid, or served personally.
No corporation shall increase or decrease its capital
stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of
the board of directors and, at a stockholders’
meeting duly called for the purpose, two-thirds (2/3)
of the outstanding capital stock shall favor the
increase or diminution of the capital stock, or the
incurring, creating or increasing of and bonded
indebtedness. Written notice of the proposed
increase or diminution of the capital stock or of the
incurring, creating, or increasing of any bonded
indebtedness and of the time and place of the
stockholders’ meeting at which the proposed increase
or diminution of the capital stock or the incurring or
increasing of any bonded indebtedness is to be
considered, must be addressed to each stockholder
at his place of residence as shown on the books of the
corporation and deposited to the addressee in the
post office with postage prepaid, or served
personally.
Sec. 23. The board of directors or trustees
Unless otherwise provided in this Code, the corporate Qualifications Of Directors
powers of all corporation formed under this Code shall
be exercised , all business conducted and all property of 1. He must own at least one (1) share of the capital
such corporations controlled and held by the board of stock of the corporation in his name.
directors or trustees to be elected from among the
2. Majority of the directors must be a resident
holders of stock, or where there is no stock, from
citizen of the Philippines.
among the members of the corporation, who shall hold
office for one (1) year and until their successors are 3. A director must not have been convicted by final
elected and qualified. judgement of an offense punishable by
imprisonment exceeding six (6) years or a violation
Every director must own at least one (1) share of the of the provisions of the Corporation Code
capital stock of the corporation of which he is a committed within five (5) years prior to the date of
director, which share shall stand in his name on the election or appointment.
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 the director
shall thereby cease to be a director. Trustees of non-
stock corporations must be members thereof. Most of
the directors or trustees of all corporations organized
under this Code must be residents of the Philippines.
Special Corporation not organized with the
Corporation Code where directors are required
to be citizens of the Philippines.

1. Bank and banking institution, at least 2/3 of the members

of the board of directors shall be citizen of the Philippines.

2. Rural banks, every member of the board of directors

shall be citizens of the Philippines.

3. Domestic air carrier, the directing head or 2/3 of the

board of directors and other managing officers shall be
citizens of the Philippines.

4. Registered investments companies, the directors

thereof must be Filipino citizen.

5. Private development banks, all the members of the

board of directors shall be citizen of the Philippines.

6. In case of financing corporation, at least 2/3 of all

members of the board of directors shall be citizen of the
Philippines
Sec. 24. 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 the 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 nu
any voting stockholder or member.
 In stock corporations, every stockholder entitled
to vote shall have the right to vote in person or
by proxy the number of shares of stock
standing, at the time fixed in the by-laws, in his
own name of the stock books of the corporation
