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Corporation
Enabling Law – BP 68 as Amended by RA No. 11232 - c. Limited Liability Rule
Revised Corporation Code of the Philippines (RCC) Limited liability is achieved by creating a corporation to protect
the shareholders. The corporation separates the owners as a
A. Definition of Corporation – Sec. 2, RCC different legal entity and makes the corporation responsible for all
SEC. 2. Corporation Defined. – A corporation is an artificial being debts and obligations. By using this corporate structure, the
created by operation of law, having the right of succession and the shareholders are protected under what is referred to as the
powers, attributes, and properties expressly authorized by law or "corporate veil." However, it is possible to remove the corporate
incidental to its existence. veil or pierce it when it is shown that the corporation has been
improperly run. This principle can also be applied to other
Attributes business entities, including limited liability companies and limited
1. lt is an artificial being – a corporation has a juridical personality. partnerships.
(Exception: Doctrine of Piercing the Veil of Corporate Fiction)
Piercing the veil of corporate entity – the applicability of the C. Formation
corporate entity theory is confined to legitimate transactions a. Components
and is subject to equitable limitations to prevent its being  two (2) or more persons, but not more than fifteen (15), may
used as a cloak or cover for fraud or illegality, or to work organize themselves and form a corporation.
injustice.  Only a One Person Corporation (OPC) may have a single
2. Created by operation of law (state’s consent; compliance with stockholder, as well as a sole director. Accordingly, its
the requirements imposed by law) registration must comply with the corresponding separate
3. Has the right of succession (it continues to exist regardless of the guidelines on the establishment of an OPC.
changes in the ownership)  Each incorporator of a stock corporation must own, or be a
4. Has power, attributes, properties granted by law (Doctrine of subscriber to, at least one (1) share of the capital stock. Each
Limited Capacity, whereby a corporation can exercise only the incorporator of a nonstock corporation must be a member of
powers expressly conferred upon it by law and its articles of the corporation.
incorporation, those implied from such powers expressly granted,  The incorporators may be composed of any combination of
and those that are inherent to its existence. natural persons/s, SEC-registered partnership/s SEC-
registered domestic corporation/s or association/s as well as
B. Nature of Corporation foreign corporation/s,
a. Composition  lncorporators who are natural persons must be of legal age,
SEC. 5. Corporators and lncorporators, Stockholders and and must sign the Articles of lncorporation/Bylaws.
Members. – Corporators are those who compose a corporation,  Each jndividual signing the Articles of lncorporation/Bylaws
whether as stockholders or shareholders in a stock corporation or must indicate the capacity upon which he/she is affixing
as members in a nonstock corporation. lncorporators are those his/her signature thereto. (i.e. lncorporator or Representative
stockholders or members mentioned in the articles of of XYZ Corp.)
incorporation as originally forming and composing the corporation  An individual designated to sign the Articles of
and who are signatories thereof. lncorporation/Bylaws on behalf of an jncorporator, which is
not a natural person, must also indicate the corporate or
Corporators – are those who compose a corporation partnership name of the entity being represented and for
Stockholders – corporators in a stock corporation whom he/she is executing the Articles of
Members – corporators in a nonstock corporation lncorporation/Bylaws.+
Incorporators – are those stockholders or members mentioned
in the articles of incorporation as originally forming and Components of a corporation
composing the corporation and who are signatories thereof. 1. Corporators - those who compose a corporation
(stockholders or members)
b. Juridical Personality 2. lncorporators - are those stockholders or members
A private corporation organized under this Code commences its mentioned in the articles of incorporation as originally
corporate existence and juridical personality from the date the forming and composing the corporation and who are
Commission issues the certificate of incorporation under its signatories thereof.
official seal and thereupon the incorporators, 3. Stockholders – owners of shares of stock in a stock
stockholders/members and their successors shall constitute a body corporation.
corporate under the name stated in the articles of incorporation for 4. Members – corporators in a nonstock corporation
the period of time mentioned therein, unless said period is 5. Board of Directors – is the governing body in a stock
extended or the corporation is sooner dissolved in accordance with corporation
law. (RCC Sec. 18, Paragraph 3) Board of Trustees – is the governing body in a non- stock
corporation.
6. Corporate Officers – the president, who shall be a director, a
[A corporation obtains its juridical personality from the date of the treasurer who may or may not be a director, a secretary who
issuance of the certificate of incorporation of the Securities and shall be a resident and citizen of the Philippines, and such
Exchange Commission (SEC)] other officers as may be provided for in the by-laws. lf the
corporation is vested with public interest, the board shall
Juridical persons such as partnerships, associations, and also elect a compliance officer.
corporation may now incorporate a corporation. There is no more 7. Subscribers – persons who have agreed to take and pay for
minimum number of incorporators, but the maximum number original, unissued shares of a corporation formed or to be
remains at 15. (Section 10; Section 10) formed.
8. Underwriter – a person who guarantees on a firm
commitment and/or declared best effort basis the

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 distribution and sale of securities of any kind by another form of an electronic document, in accordance with the
company. A person or entity, especially an investment Commission’s rules and regulations on electronic filing.
banker, who guarantees the sale of newly issued securities
by purchasing all or part of the shares for resale to the Bylaws – are the rules a corporation sets. They are established by
public. the board of directors during the time the corporation is being
9. Promoter – founder or organizer of a corporation or business formed. This process is called incorporation, and one of the first
venture; one who takes the entrepreneurial initiative in tasks of this new corporation will be to form corporate bylaws.
funding or organizing a business enterprise. Written bylaws tell organizations how to handle any new issues or
(a) Brings together the incorporators or the persons situations that might arise. Having bylaws in place will save time
interested in the enterprise; that would've been spent on trying to work out complications
(b) Procures subscriptions or capital for the within the company. lt will also help keep things running smoothly
corporation; and and define goals or missions.
(c) Sets in motion the machinery which leads to the
incorporation of the corporation itself.
d. Capital Requirement
b. Certificate of Incorporation SEC. 12. Minimum Capital Stock Not Required of Stock
lf the Commission finds that the submitted documents and Corporations. – Stock corporations shall not be required to have a
information are fully compliant with the requirements of this minimum capital stock, except as otherwise specifically provided
Code, other relevant laws, rules and regulations, the Commission by special law.
shall issue the certificate of incorporation. (RCC Sec. 18,
Paragraph 2) D. Classes of Corporation
a. Stock v Non-Stock (Sec. 3, RCC)
SEC. 3. Classes of Corporations. – Corporations formed or
c. Articles of Incorporation
organized under this Code may be stock or nonstock corporations.
SEC. 13. Contents of the Articles of lncorporation. – All
Stock corporations are those which have capital stock divided
corporations shall file with the Commission articles of
into shares and are authorized to distribute to the holders of such
incorporation in any of the official languages, duly signed and
shares, dividends, or allotments of the surplus profits on the basis
acknowledged or authenticated, in such form and manner as may
of the shares held. All other corporations are nonstock
be allowed by the Commission, containing substantially the
corporations.
following matters, except as otherwise prescribed by this Code or
by special law:
SEC. 86. Definition. – For purposes of this Code and subject
(a) The name of the corporation;
to its provisions on dissolution, a nonstock corporation is one
(b) The specific purpose or purposes for which the corporation is
where no part of its income is distributable as dividends to its
being formed. Where a corporation has more than one stated
members, trustees, or officers: Provided, That any profit which a
purpose, the articles of incorporation shall indicate the
nonstock corporation may obtain incidental to its operations shall,
primary purpose and the secondary purpose or purposes:
whenever necessary or proper, be used for the furtherance of the
Provided, That a nonstock corporation may not include a
purpose or purposes for which the corporation was organized,
purpose which would change or contradict its nature as such;
subject to the provisions of this Title.
(c) The place where the principal office of the corporation is to
be located, which must be within the Philippines;
(d) The term for which the corporation is to exist, if the b. Created under RCC v. Special Charter (Sec. 4, RCC)
corporation has not elected perpetual existence; Corporations created under RCC – the provisions under
(e) The names, nationalities, and residence addresses of the RCC will be followed.
incorporators; Corporations created by special laws or charters - shall
(f) The number of directors, which shall not be more than fifteen be governed primarily by the provisions of the special law or
(15) or the number of trustees which may be more than charter creating them or applicable to them, supplemented by the
fifteen (15); provisions of this Code, insofar as they are applicable. (RCC, Sec.
(g) The names, nationalities, and residence addresses of persons 4)
who shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified in c. Public v. Private
accordance with this Code; Public Corporations – Those formed or organized for the
(h) lf it be a stock corporation, the amount of its authorized government of a portion of the state which have for their purpose
capital stock, number of shares into which it is divided, the the general good and welfare. (Republic Act No. 1459 also known
par value of each, names, nationalities, and residence as The Corporation Law, Sec. 3)
addresses of the original subscribers, amount subscribed and Private Corporations – Those formed for some private
paid by each on the subscription, and a statement that some purpose, benefit, aim or end. (The corporation Law, Sec. 3)
or all of the shares are without par value, if applicable;
(i) lf it be a nonstock corporation, the amount of its capital, the
names, nationalities, and residence addresses of the d. De Jure v. De Facto
contributors, and amount contributed by each; and De facto Corporation – exits but not in law; substantially
(j) Such other matters consistent with law and which the complied with the requirements of RCC.
incorporators may deem necessary and convenient. An De Jure Corporation – one created in strict conformity with the
arbitration agreement may be provided in the articles of statutory requirements for incorporation.
incorporation pursuant to Section 181 of this Code.
e. Corporation by Estoppel
The articles of incorporation and applications for SEC. 20. Corporation by Estoppel. – All persons who assume
amendments thereto may be filed with the Commission in the to act as a corporation knowing it to be without authority to do so
shall be liable as general partners for all

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 debts, liabilities and damages incurred or arising as a result i. Educational Corporation
thereof: Provided, however, That when any such ostensible SEC. 105. lncorporation. – Educational corporations shall be
corporation is sued on any transaction entered by it as a governed by special laws and by the general provisions of this
corporation or on any tort committed by it as such, it shall not be Code.
allowed to use its lack of corporate personality as a defense.
Anyone who assumes an obligation to an ostensible corporation as SEC. 106. Board of Trustees. –Trustees of educational
such cannot resist performance thereof on the ground that there institutions organized as nonstock corporations shall not be less
was in fact no corporation. than five (5) nor more than fifteen (15): Provided, That the
number of trustees shall be in multiples of five (5).
f. Domestic v. Foreign Unless otherwise provided in the articles of incorporation or
Domestic corporation – one incorporated under Philippine bylaws, the board of trustees of incorporated schools, colleges, or
laws. other institutions of learning shall, as soon as organized, so
Foreign corporation – one formed, organized or existing under classify themselves that the term of office of one-fifth (1/5) of
laws other than those of the Philippines’ and whose laws allow their number shall expire every year. Trustees thereafter elected to
Filipino citizens and corporations to do business in its own fill vacancies, occurring before the expiration of a particular term,
country or State. lt shall have the right to transact business in the shall hold office only for the unexpired period. Trustees elected
Philippines after obtaining a license for that purpose in accordance thereafter to fill vacancies caused by expiration of term shall hold
with this Code and a certificate of authority from the appropriate office for five (5) years. A majority of the trustees shall constitute
government agency. (RCC Sec. 140) a quorum for the transaction of business. The powers and authority
of trustees shall be defined in the bylaws.
g. Aggregate v. Sole v. One Person Corporation For institutions organized as stock corporations, the number
Corporation aggregate – one composed of more than one and term of directors shall be governed by the provisions on stock
member or corporator. corporations.
Corporation sole – consists of one member or corporator and
his successors. j. Religious Corporation
One Person Corporation – is a corporation with a single SEC. 107. Classes of Religious Corporations. – Religious
stockholder, who can only be a natural person, trust or estate. corporations may be incorporated by one (1) or more persons.
Alternate nominee, a person must be nominated before the OPC Such corporations may be classified into corporations sole and
take effect. The nominee will administer first and then assign religious societies.
heirs. The heirs will continue the business. Religious corporations shall be governed by this Chapter and
by the general provisions on nonstock corporations insofar as
h. Close Corporation applicable.
Close corporation – one wherein all the outstanding stock is
owned (exclusive) by the persons who are active in management
and conduct of the business (family or other closely-knit group)

E. Corporation as Distinguished from a Contract of Partnership:

Point of Comparison Partnership Corporation

Manner of Creation By mere agreement of the parties CANNOT be created without the consent of the
state
Number of Parties By a minimum of two (2) persons Not more than fifteen (15) in number
Commencement of Juridical Generally from the moment of execution of the From the date of the issuance of the certificate of
Personality contract incorporation of the SEC
Powers May exercise powers authorized by partners Can exercise only the powers expressly granted
provided the same are not contrary to law, morals, by law or incident to its existence.
good customs, public policy or public order.

Management ln absence of stipulation, partner is considered an lt is vested in the board of directors or trustees.
agent of the partnership
Right of Succession No right of succession Possesses right of succession
Extent of Liability to Third Persons Partners (except limited partners) are liable Stockholders are liable only to the extent of
personally and subsidiarily for partnership debts their investments as represented by the shares
to third persons. subscribed by them.
Transferability of interest A partner cannot transfer interest so as to A stockholder has the right to transfer his
make a partner without the consent of all other shares without the prior consent of the other
existing partners. stockholders.
Term of existence May be established for any period of time stipulated May not be formed for a term in excess of 50 years
by the partners. extendible to not more than 50 years.
Firm name A limited partnership is required to add the A corporation may adopt a firm name provided it
word ‘Ltd.’ to its name. is not identical or deceptively similar to any
registered firm name or contrary
to existing laws.
Dissolution May be dissolved at any time by the will of any May only be dissolved with the consent of the state.
or all partners.
Governing Laws Civil Code Revised Corporation Code

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F. Nationality of Corporations (People v. Tan Boon Kong, G.R. No. L35262, Mar. 15,
a. Control Test 1930)
Control test (general rule) – Test used to determine the eligibility of Exception: lf the penalty of the crime is only fine or
a corporation, which has foreign equity participation in its forfeiture of license or franchise. (Ching v. Secretary of
ownership structure, to engage in nationalized or partly Justice, G.R. No 164317, Feb. 6, 2006)
nationalized activities. (SEC-OGC Opinion No. 12-02) lf a
corporation is at least 60% Filipino- owned, the all shares (100%)
are recorded as Filipino shares. There is no need to further trace the 3. Recovery for Damages
ownership of the 60% (or more) Filipino stockholdings since a a. Read: Filipinas Broadcasting Network v. Ago Medical
corporation which is at least 60% Filipino-owned is considered as and Educational Center, G.R. 141994,
Filipino. JanuException:ary 17, 2005

i. Gamboa v. Teves, G.R. No 176579, June 28, 2011 Can a corporation recover damages? YES
ii. Roy lll v. Herbosa, G.R. No. 207246, November 22 2016 Exception: Moral damages
iii. Section 2, SEC- Memorandum Circular No. 8 Is a corporation entitled to moral damages?
Exception: The corporation may recover moral
damages under item 7 of article 2219 of the New Civil Code
b. Grandfather Rule
because said provision expressly authorizes the recovery of
Grandfather rule (strict rule) – lf a corporation is less than 60%
moral damages in cases of libel, slander, or any other form of
Filipino-owned, then the corresponding percentage belonging to
defamation. Article 2219 does not qualify whether the
Filipino shall be the only shares to be recorded as Filipino shares.
injured party is a natural or juridical person. Therefore, a
Grandfather rule is applied to corporations where 60- 40 Filipino-
corporation, as a juridical person, can validly complain for
foreign ownership is in doubt. Under this rule, the combined totals
libel or any other form of defamation and claim for moral
of the foreign and filipino-owned corp. must be traced (i.e.,
damages.
“grandfathered”) to determine the total percentage of Filipino
ownership.
ii. Doctrine of Piercing the Corporate Veil
Disregards the separate personality of a corporation if this
i. Read: Narra Nickel Mining and Dev. Corp. vs. Redmont
separate personality is used as an alter ego of another entity and
Consolidated Mines, G.R. No. 195580, Apr. 21, 2014
was used to justify wrong, protect fraud, perpetrate deception, or
defeat public convenience. This doctrine may also be used to
c. Corporate Juridical Personality:
achieve equity.
Can a corporation become a partner in a partnership?
General rule: NO
Exceptions: The authority to enter into a partnership relation is The three-pronged test to determine the application of the alter ego
expressly conferred by the charter of (or) the articles of theory, which is also known as the instrumentality theory, namely:
incorporation of the corporation and the nature to be undertaken by (1) Control, not mere majority or complete stock control, but
the partnership is in line with business of the corporation. complete domination, not only of finances but of policy and
lf it is a foreign corporation, must obtain license to transact business practice in respect to the transaction attacked so
business in the Philippines. that the corporate entity as to this transaction had at the time
no separate mind, will or existence of its own;
i. Doctrine of Separate Personality [It is the “instrumentality” or “control” test. This test
As a general rule, a corporation has a separate and distinct requires that the subsidiary be completely under the control
personality from those who represent it. lts officers are solidarily and domination of the parent. lt examines the parent
liable only when exceptional circumstances exist, such as cases corporation’s relationship with the subsidiary. It inquires
enumerated in Sec. 31 of the corporation code. (Pioneer whether a subsidiary corporation is so organized and
lnsurance Surety Corp. vs. Morning Star Travel & Tours, lnc., et. controlled and its affairs are so conducted as to make it a
al., G.R. No. 198436, July 08, 2015) mere instrumentality or agent of the parent corporation such
that its separate existence as a distinct corporate entity will
be ignored. lt seeks to establish whether the subsidiary
1. Read: Shrimp Specialists, lnc., vs. Fuji-Triumph Agri-
corporation has no autonomy and the parent corporation,
Ind’l Corp., G.R. No. 168756, Dec. 7, 2009
though acting through the subsidiary in form and
appearance, “is operating the business directly for itself.”]
2. Limited Liability for Torts and Crimes
Is a corporation liable for torts?
YES, whenever a tortuous act is committed by an officer or (2) Such control must have been used by the defendant to
agent under the express direction or authority of the commit fraud or wrong, to perpetuate the violation of a
stockholders or members acting as a body, or, generally, statutory or other positive legal duty, or dishonest and
from the directors as the governing body. (PNB v. CA, G.R. unjust act in contravention of plaintiff’s legal right; and [It
No. L-27155, May 18, 1978) is the “fraud” test. This test requires that the parent
corporation’s conduct in using the subsidiary
Is a corporation liable for crimes? corporation be unjust, fraudulent or wrongful. lt
NO, since a corporation is a mere legal fiction, it cannot be examines the relationship of the plaintiff to the
held liable for a crime committed by its officers, since it does corporation. lt recognizes that piercing is appropriate
not have the essential element of malice; in such case the
responsible officers would be criminally liable.

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 only if the parent corporation uses the subsidiary in a way
 Holder or subscriber of at least 1 stock (required only
that harms the plaintiff creditor. As such, it requires a
during the incorporation)
showing of “an element of injustice or fundamental
unfairness.”]
ii. Subscription Requirements – (Sec. 10, RCC but see
also the old requirements provided under BP 68 for
(3) The aforesaid control and breach of duty must have
better appreciation)
proximately caused the injury or unjust loss complained of.
 lnitial subscription requirements were removed in the
[It is the “harm” test. This test requires the plaintiff to show
revised corporation code
that the defendant’s control, exerted in a fraudulent, illegal
or otherwise unfair manner toward it, caused the harm  Stock corporations shall not be required to have minimum
suffered. A causal connection between the fraudulent capital stock, except as otherwise specifically provided by
conduct committed through the instrumentality of the special law. (ex. Pawnshop – P100,000, elementary school
subsidiary and the injury suffered or the damage incurred by for stock corporations – 1,000,000, security agency –
the plaintiff should be established. The plaintiff must prove 500,000) (RCC Sec. 12)
that, unless the corporate veil is pierced, it will have been  2015PR_MinimumPaidUpCapital.pdf (sec.gov.ph)
treated unjustly by the defendant’s exercise of control and
improper use of the corporate form and, thereby, suffer iii. Corporate Term – (Sec. 11, RCC)
damages.] SEC. 11. Corporate Term. – A corporation shall have
perpetual existence unless its articles of incorporation provides
To summarize, piercing the corporate veil based on the alter ego otherwise.
theory requires the concurrence of three elements: (1) control of Corporations with certificates of incorporation issued prior
the corporation by the stockholder or parent corporation, (2) to the effectivity of this Code, and which continue to exist, shall
fraud or fundamental unfairness imposed on the plaintiff, and (3) have perpetual existence, unless the corporation, upon a vote of
harm or damage caused to the plaintiff by the fraudulent or its stockholders representing a majority of its outstanding capital
unfair act of the corporation. The absence of any of these stock, notifies the Commission that it elects to retain its specific
elements prevents piercing the corporate veil. corporate term pursuant to its articles of incorporation: Provided,
That any change in the corporate term under this section is
Elements of Piercing the Veil of Corporate Fiction without prejudice to the appraisal right of dissenting stockholders
1. Control - not mere stock control, but complete domination - in accordance with the provisions of this Code.
not only of finances, but of policy and business practice in A corporate term for a specific period may be extended or
respect to the transaction attacked, must have been such that shortened by amending the articles of incorporation: Provided,
the corporate entity as to this transaction had at the time no That no extension may be made earlier than three
separate mind, will or existence of its own; (3) years prior to the original or subsequent expiry date(s) unless
2. Such control must have been used by the defendant to there are justifiable reasons for an earlier extension as may be
commit a fraud or a wrong to perpetuate the violation of determined by the Commission: Provided, further, That such
a statutory or other positive legal duty, or a dishonest and an extension of the corporate term shall take effect only on the day
unjust act in contravention of plaintiff's legal right; and following the original or subsequent expiry date(s).
3. The said control and breach of duty must have proximately A corporation whose term has expired may apply for a
caused the injury or unjust loss complained of. revival of its corporate existence, together with all the rights and
privileges under its certificate of incorporation and subject to all
of its duties, debts and liabilities existing prior to its revival.
1. Grounds Upon approval by the Commission, the corporation shall be
2. Test in Determining its Applicability deemed revived and a certificate of revival of corporate existence
 Fraud test shall be issued, giving it perpetual existence, unless its
 Alter-ego or instrumentality test (or conduit cases) application for revival provides otherwise.
 Public convenience or objective test No application for revival of certificate of incorporation of
 Equity cases/test banks, banking and quasibanking institutions, preneed, insurance
a. READ: Zambrano v. Philippine Carpet and trust companies, non-stock savings and loan associations
Manufacturing Corp., G.R. No. 224099, June 21, (NSSLAs), pawnshops, corporations engaged in money service
2017 business, and other financial intermediaries shall be approved by
the Commission unless accompanied by a favorable
d. Capital Structure recommendation of the appropriate government agency.
i. Number and Qualifications of incorporators – (Sec. 5,
10, RCC) iv. Classification of Shares – (Sec. 6, RCC)
RCC Sec. 10 SEC. 6. Classification of Shares. – The classification of
 Natural or artificial person shares, their corresponding rights, privileges, or restrictions, and
 Not more than 15 (5-15 before) their stated par value, if any, must be indicated in the articles of
 Natural persons, partnerships or associations cannot incorporation. Each share shall be equal in all respects to
organize corporations for practice of profession (not every other share, except as otherwise provided in the articles of
allowed to organize as a corporation unless otherwise incorporation and in the certificate of stock. The shares in stock
provided under special laws) corporations may be divided into classes or series of shares,
 Legal age (if natural person) or both. No share may be deprived of voting rights except
those classified and issued as “preferred” or “redeemable”
shares, unless otherwise

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 provided in this Code: Provided, That there shall always be a Common shares – a class of stock entitling the holder to
class or series of shares with complete voting rights. vote on corporate matters, to receive dividend after other
Holders of nonvoting shares shall nevertheless be entitled to claims and dividends have been paid (especially to preferred
vote on the following matters: shareholders), and to share in assets upon liquidation. Also
(b) Amendment of the articles of incorporation; called as ordinary shares and capital stock (if it is the
(c) Adoption and amendment of bylaws; corporation’s only class of stock outstanding).
(d) Sale, lease, exchange, mortgage, pledge, or other
disposition of all or substantially all of the corporate
* lt has no preference and entitles the shareholder to a pro
property;
rata division of the profits, if any. The common stock
(e) lncurring, creating, or increasing bonded indebtedness;
shareholders have complete voting rights.
(f) lncrease or decrease of authorized capital stock;
(g) Merger or consolidation of the corporation with
another corporation or other corporations; 2. Scope of voting rights subject to classification (Sec. 6,
(h) lnvestment of corporate funds in another corporation or RCC)
business in accordance with this Code; and The Right to Vote in STOCK Corporations
(i) Dissolution of the corporation. The right to vote is inherent in and incidental to the
Except as provided in the immediately preceding paragraph, ownership of corporate stocks. lt is settled that unissued
the vote required under this Code to approve a particular stocks may not be voted or considered in determining
corporate act shall be deemed to refer only to stocks with voting whether a quorum is present in a stockholders’ meeting, or
rights. whether a requisite proportion of the stock of the
The shares or series of shares may or may not have a par corporation is voted to adopt a certain measure or act. Qnly
value: Provided, That banks, trust, insurance, and preneed actually stock issued and outstanding may be voted. Under
companies, public utilities, building and loan associations, Section 6 of the Corporation Code (Also, Section 6, Revised
and other corporations authorized to obtain or access funds from Corporation Code), each share of stock is entitled to vote,
the public, whether publicly listed or not, shall not be permitted unless otherwise provided in the articles of incorporation or
to issue no-par value shares of stock. declared delinquent under Section 67 of the Code (Now
Preferred shares of stock issued by a corporation may be Section 66, Revised Corporation Code).
given preference in the distribution of dividends and in the
distribution of corporate assets in case of liquidation, or such The Right to Vote in NON-STOCK Corporations
other preferences: Provided, That preferred shares of stock may ln non-stock corporations, the voting rights attach,
be issued only with a stated par value. The board of directors, membership. Members vote as persons, in accordance with
where authorized in the articles of incorporation, may fix the the law and the by-laws of the corporation. Each member
terms and conditions of preferred shares of stock or any series shall be entitled to one vote unless so limited, broadened, or
thereof: Provided, further, That such terms and conditions shall denied in the articles of incorporation or bylaws. We hold
be effective upon filing of a certificate thereof with the Securities that when the principle for determining the quorum for
and Exchange Commission, hereinafter referred to as the stock corporations is applied by analogy to nonstock
“Commission”. corporations, only those who are actual members with
Shares of capital stock issued without par value shall be voting rights should be counted.
deemed fully paid and nonassessable and the holder of such
shares shall not be liable to the corporation or to its creditors in
respect thereto: Provided, That no-par value shares must be 3. Founder’s Share (Sec. 7, RCC)
issued for a consideration of at l east Five pesos (P5.00) per SEC. 7. Founders’ Shares. – Founders’ shares may be
share: Provided, further, That the entire consideration received given certain rights and privileges not enjoyed by the
by the corporation for its no-par value shares shall be treated as owners of other stocks. Where the exclusive right to vote
capital and shall not be available for distribution as dividends. and be voted for in the election of directors is granted, it
A corporation may further classify its shares for the purpose must be for a limited period not to exceed five (5) years
of ensuring compliance with constitutional or legal requirements. from the date of incorporation: Provided, That such
exclusive right shall not be allowed if its exercise will
violate Commonwealth Act No. 108, otherwise known as
v. Classification of Shares the “Anti-Dummy Law”; Republic Act No. 7042, otherwise
1. Preferred v. Common Shares (Sec. 6, RCC) Preferred known as the “Foreign lnvestments Act of 1991”; and other
shares – may be deprived of voting rights. However, pertinent laws.
corporations usually give holders of preferred shares certain
benefits or preference not enjoyed by common
shareholders. The preferences are designed to induce 4. Redeemable Shares (Sec. 8, RCC)
persons to subscribe for shares of a corporation. Most SEC. 8. Redeemable Shares. – Redeemable shares may
common forms: be issued by the corporation when expressly provided in the
(a) Preferred shares as to assets – gives the holder articles of incorporation. They are shares which may be
preference in the distribution of the assets of the purchased by the corporation from the holders of such
corporation in case of liquidation. shares upon the expiration of a fixed period, regardless of
(b) Preferred shares as to dividends – a share the holder the existence of unrestricted retained earnings in the books
of which is entitled to receive dividends on said share of the corporation, and upon such other terms and
to the extent agreed upon before any dividends at all conditions stated in the articles of incorporation and the
are paid to the holders of common stock. There is no certificate of stock representing the shares, subject to rules
guaranty, however, that the share will receive any and regulations issued by the Commission.
dividends.

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  Liability of a corporation(hindi nilalagay sa equity 2. No pre-incorporation subscription may be revoked after
portion) dahil mandatory ang redemption. the submission of the articles of incorporation to the SEC.

5. Treasury Shares (Sec. 9, RCC) iv. Consideration for stocks

SEC. 9. Treasury Shares. – Treasury shares are shares SEC. 61. Consideration for Stocks. – Stocks shall not be
of stock which have been issued and fully paid for, but issued for a consideration less than the par or issued price
subsequently reacquired by the issuing corporation through thereof. Consideration for the issuance of stock may be:
purchase, redemption, donation, or some other lawful (a) Actual cash paid to the corporation;
means. Such shares may again be disposed of for a (b) Property, tangible or intangible, actually received by the
reasonable price fixed by the board of directors. corporation and necessary or convenient for its use and
 The existence of unrestricted retained earnings is lawful purposes at a fair valuation equal to the par or
important. issued value of the stock issued;
(c) Labor performed for or services actually rendered to the
e. Incorporation and organization corporation;
i. Promoter (d) Previously incurred indebtedness of the corporation;
Promoter – founder or organizer of a corporation or business (e) Amounts transferred from unrestricted retained
venture; one who takes the entrepreneurial initiative in funding earnings to stated capital;
or organizing a business enterprise. (f) Outstanding shares exchanged for stocks in the
(a) Brings together the incorporators or the persons event of reclassification or conversion;
interested in the enterprise; (g) Shares of stock in another corporation; and/or
(b) Procures subscriptions or capital for the corporation; and (h) Other generally accepted form of consideration Where the
(c) Sets in motion the machinery which leads to the consideration is other than actual cash, or
incorporation of the corporation itself. consists of intangible property such as patents or copyrights, the
valuation thereof shall initially be determined by the
stockholders or the board of directors, subject to the approval of
ii. Subscription contract
the Commission.
SEC. 59. Subscription Contract. – Any contract for the
Shares of stock shall not be issued in exchange for
acquisition of unissued stock in an existing corporation or a
promissory notes or future service. The same considerations
corporation still to be formed shall be deemed a subscription
provided in this section, insofar as applicable, may be used for
within the meaning of this Title, notwithstanding the fact that the
the issuance of bonds by the corporation.
parties refer to it as a purchase or some other contract.
The issued price of no-par value shares may be fixed in the
* involves the corporation as one of the contracting parties since
articles of incorporation or by the board of directors pursuant to
the subject matter of the transaction is property owned by the
authority conferred by the articles of incorporation or the
corporation ~ its shares of stock.
bylaws, or if not so fixed, by the stockholders representing at
least a majority of the outstanding capital stock at a meeting
iii. Pre-incorporation for subscription agreements – (Sec. duly called for the purpose.
60, RCC) Requisites:
Pre-incorporation subscription – a subscription for shares of stock (a) lt must be subject to a fair valuation equal to the par or
of a corporation still to be formed. issued value of the stock issued;
Rules: (b) The property is actually received by the corporation; and
1. A pre-incorporation subscription is irrevocable for a (c) lf it consists of intangible property, the valuation thereof
period of at least 6 months from the date of subscription. shall initially be determined by the incorporators or the
Exceptions: board of directors subject to the approval by the SEC.
a. All of the other subscribers consent to the
revocation.
b. The corporation fails to incorporate within the same
period or within a longer period stipulated in the
contract of subscription.

Corporation

Enabling Law – BP 68 as Amended by RA No. 11232 - Revised

Corporation Code of the Philippines (RCC)
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corporation code had several amendments and in it actually introduced who guarantees the sale of newly issued
several amendments and deleted also some provisions this revised securities by purchasing all or part of the
corporation code became shares for resale to the public. 22
effective February 23 2019. 9. Promoter Is a person who brings about or
cause to bring about the formation and
organization of a corporation by:
A. Definition of Corporation – Sec. 2, RCC
1. Bringing together the incorporators or the
Section 2. A corporation is an artificial being created by operation of law, persons interested in the enterprise;
having the right of succession and the powers, attributes, and properties
expressly authorized by law or incident to its existence.
2. Procuring subscriptions or capital for the
corporation; and
Artificial Being- (“Capacity to Contract and Transact Business”)

Treated by Law as a separate person a separate person that is distinct from 3. Setting in motion the machinery which
the investors or the incorporators that are making up the Corporation and leads to the incorporation of the corporation
this is what we call the doctrine of corporate entity because of such itself. A founder or organizer of a
doctrine the corporation then can be liable for acts or contracts that are corporation or business venture; one who
entered into in the name of the corporation. takes the entrepreneurial initiative in
funding or organizing a business
enter into contracts in its own name it can sue and it can also be sued again enterprise.23
separately and distinctly
from the stockholders or the members composing the corporation b. Juridical Personality=It is one that is created by law, it is
not really a person but by operation of law it is treated
Created by Operation of Law (“Creature of the Law ”) as such as if it is a person. Hence, it can act only
Mere consent of the parties is not sufficient. The State must give its through its directors, officers, and employees.
consent either through a special law (in case of government corporations) c. Limited Liability Rule
or a general law (i.e., Corporation Code in case of private corporations). C. Formation
a. Components
Has the Right of Succession (“Strong Juridical Personality ”) b. Certificate of Incorporation
A corporation has the capacity for continuous existence despite changes in
c. Articles of Incorporation
stockholders/members or by any transfer of shares by a stockholder to a
d. Capital Requirement
3rd person.
D. Classes of Corporation
Has the Powers, Attributes, and Properties Expressly Authorized by a. Stock v Non-Stock (Sec. 3, RCC)
Law or Incident to Its Existence (“A Creature of Limited Powers”) b. Created under RCC v. Special Charter (Sec. 4, RCC)
As a mere creature of law, it can exercise only such powers as the law c. Public v. Private
may choose to grant it, either expressly or impliedly. d. De Jure v. De Facto
e. Corporation by Estoppel
B. Nature of Corporation f. Domestic v. Foreign
g. Aggregate v. Sole v. One Person Corporation (there is
a. Composition
1. Corporators- those who compose corp. only one incorporator-sole stockholder)
whether as stockholders or as members h. Close Corporation
2. Incorporators- mentioned in the articles of i. Educational Corporation
incorporation and signatories thereof. j. Religious Corporation
3. Stockholders (shareholders) - The owners of E. Corporation as Distinguished from a Contract of Partnership:
shares of stock in a stock corporation. F. Nationality of Corporations https://youtu.be/e-c-UYB91J0?
4. Members- The corporators of a non-stock si=54rmV7pJj20DIYCo
corporation. a. Control Test
5. Board of Directors or Board of Trustees The i. Gamboa v. Teves, G.R. No 176579, June 28,
board of directors is the governing body in a
2011
stock. corporation, while the Board of
ii. Roy III v. Herbosa, G.R. No. 207246,
Trustees is the governing body in a non-
stock corporation. November 22 2016
6. Corporate Officers The president, who shall iii. Section 2, SEC- Memorandum Circular No.
be a director, a treasurer who may or may 8
not be a director, a secretary who shall be a b. Grandfather Rule
resident and citizen of the Philippines, and i. Read: Narra Nickel Mining and Dev. Corp.
such other officers as may be provided for in vs. Redmont Consolidated Mines, G.R. No.
the by-laws. If the corporation is vested with 195580, Apr. 21, 2014
public interest, the board shall also elect a c. Corporate Juridical Personality: https://youtu.be/e-c-
compliance officer. UYB91J0?si=54rmV7pJj20DIYCo
7. Subscribers Persons who have agreed to i. Doctrine of Separate Personality
take and pay for original, unissued shares of 1. Read: Shrimp Specialists, Inc., vs. Fuji-Triumph Agri-Ind’l Corp.,
a corporation formed or to be formed. G.R. No. 168756, Dec. 7, 2009
8. Underwriter A person who guarantees on a 2. Limited Liability for Torts and Crimes
firm commitment and/or declared best effort 3. Recovery for Damages
basis the distribution and sale of securities
a. Read: Filipinas
of any kind by another company. A person
Broadcasting Network
or entity, especially an investment banker,
vs. Ago Medical and
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 Educational Center, G.R. the SEC that the majority interest in the corporation has voted upon
141994, January 17, retaining the original corporate term
2005
ii. Doctrine of Piercing the Corporate Veil now remember that what is only required to retain the original corporate
1. Grounds term is the vote of the stakeholders representing the majority interest and
2. Test in Determining its Applicability that such decision to retain as voted upon by the stockholders
a. READ: Zambrano v. representing the majority interest Classification of Shares – (Sec. 6, RCC)
Philippine Carpet
Manufacturing Corp., For extension- amendment, not earlier than 3 years from the time that
G.R. No. 224099, June the renewed term will expire
21, 2017
d. Capital Structure
Effectivity- the day after the expiration of the original term
i. Number and Qualifications of incorporators
– (Sec. 5, 10, RCC)
If not extended-they can still continue by applying for revival of
corporate existence-the same rights and obligations.
No minimum but not more than 15

iv. Classification of Shares

Can be a natural person -be of legal age, holder of at least 1 share of stock
1. Preferred v. Common Shares (Sec. 6, RCC)
or at least subscribed to a share of stock, sign the articles of incorporation
2. Scope of voting rights subject to classification (Sec. 6, RCC)
3. Founder’s Share (Sec. 7, RCC)
Can be a juridical person- 4. Redeemable Shares (Sec. 8, RCC)
5. Treasure Shares (Sec. 9, RCC)
Partnership- sec registered, partners must execute an affidavit stating e. Incorporation and organization
that they have agreed that the partnership will invest in the corporation i. Promoter
and they will also have to designate a partner who will sign the articles of ii. Subscription contract
incorporation in behalf of the partnership iii. Pre-incorporation for subscription
agreements – (Sec. 12, RCC)
Exception: Partnerships which are created for the practice of profession iv. Consideration for stocks
cannot form a corporation because practicing a profession is supposedly v. Articles of Incorporation
for public service and not for business purposes. 1. Contents – Sec.13
2. Non-Amendable Items –
Corporation: SEC registered, their certificate of incorporation rather must vi. Corporate Name; Limitations – (Sec. 17,
not have been revoked or suspended to become an incorporator of RCC)
another corporation, it is required that the decision to invest in another vii. Registration, incorporation and
corporation as of course you invest when you become an incorporator, commencement of corporate existence –
such decision must be approved by majority of the board of directors or (Sec. 18, RCC)
trustees and ratified by stockholders representing at least two-thirds of viii. Election of Directors or Trustees (Sec. 23,
the outstanding capital stock if it's a stock corporation or two-thirds of RCC)
the members if it be non-stock corporation And of course there must be ix. Adoption of By-Laws – (Sec. 45, RCC)
the submission of the directors or trustees certificate or secretary 1. Contents – (Sec. 46, RCC)
certificate to show this decision to invest that there was already such an 2. Binding Effects – (Sec. 45, RCC)
approval by the board of directors or trust trustees and ratification by the 3. Amendments – (Sec. 47, RCC)
stockholders representing at least two-thirds of the outstanding capital x. Effect of Non-Use of Corporate Charter –
stock or two-thirds of the members (Sec. 21, RCC)

The board of directors must designate an authorized signatory because of

course an incorporator must sign the articles of incorporation the
corporation of course is not a real it's not a natural person
f. Corporate Powers
rather so it cannot sign and so there must be a designated person who
i. Kinds -
will sign in behalf of the corporation
ii. General Powers; theory of general capacity
- (Sec. 35, RCC)
ii. Subscription Requirements – (Sec. 10, RCC iii. Specific Powers; theory of specific capacity
but see also the old requirements provided -
under BP 68 for better appreciation) 1. Power to Extend or Shorten Corporate Term - (Sec. 36, RCC)
iii. Corporate Term – (Sec. 11, RCC) 2. Power to increase or decrease capital stock or incur, create,
increase bonded indebtedness - (Sec. 37, RCC)
Perpetual Existence- It will live forever (General Rule) 3. Power to deny pre-emptive rights - (Sec. 38, RCC)
4. Power to sell or dispose corporate assets - (Sec. 39, RCC)
Exception: if the incorporators have actually decided to put a particular 5. Power to acquire own shares - (Sec. 40, RCC)
term or a particular number of years for the corporation to exist and such is 6. Power to invest corporate funds in another corporation or
indicated or stated in the articles of incorporation business or for any other purpose - (Sec. 41, RCC)
7. Power to declare dividends - (Sec. 42, RCC)
Corporations existing prior to revision- Perpetual Existence however if the 8. Power to enter into management contracts - (Sec. 43, RCC)
stockholders would want to retain the original term they need to notify 9. Ultra Vires Acts - (Sec. 44, RCC)

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 - University of LIM AND
Mindanao v ALL
Bangko PERSONS
Sentral ng CLAIMIN
Pilipinas, G UNDER
GR. No. HER,
194964-65, RESPOND
ENT, GR
July 11,
212034,
2016.
July 02,
10. Doctrine of individuality of subscription (Sec. 62-63, RCC) 2018
11. Doctrine of equality of shares – 2. Tenure, qualifications and disqualifications of directors (Sec. 22,
- Commission RCC)
er of 3. Corporations vested with public interest (Sec. 22, RCC)
Intemal 4. Independent directors (Sec. 22, RCC)
Revenue vs. 5. Election (Sec. 23, RCC)
CA, et aI., 6. Removal (Sec. 27, RCC)
G.R. No. 7. Filing of vacancies (Sec. 28, RCC)
108576, 8. Compensation of directors (Sec. 29, RCC)
January 20, 9. Disloyalty
1999. a. Business Judgment
12. Trust fund doctrine Rule
- Philip b. Solidary Liability for
Turner v. Damages (Sec. 30,
Lorenzo RCC)
Shipping 10. Personal liabilities (Sec. 30, RCC)
Corporation 11. Responsibility for Crimes
, G.R. 12. Special fact doctrine
157479, 13. Inside information
2010. 14. Contracts (Sec. 31, RC sC)
g. Stockholders and members 15. Between corporations with interlocking directors (Sec.32, RCC)
i. Fundamental rights of stockholders 16. Executive and other special committees (Sec. 34, RCC)
ii. Participation in management 17. Meetings
1. Proxy – (Sec. 57, RCC) a. Regular and Special
2. Voting Trust Agreement – (Sec. 58, RCC) Meetings (Sec. 52,
3. Cases when stockholder’s action is required RCC)
4. Manner of voting - (Sec. 54-68, RCC) b. Who presides (Sec. 53,
iii. Proprietary rights RCC)
1. Appraisal right- (Sec. 80-85, RCC) c. Quorum (Sec. 52,
2. Right to inspect – (Sec. 73, RCC) RCC)
3. Preemptive right – (Sec. 38, RCC) d. Remote communication
4. Right to dividends – (Sec. 42, 70, 82-83, RCC) (Sec. 52, RCC)
iv. Remedial rights e. Rule on abstention Sec.
1. Individual suit 52, RCC)
a. Florente v Florente, GR viii. Capital Affairs
No. 174909, January 20, 1. Certificate of stocks (Sec. 62, RCC)
2016 2. Watered stocks (Sec. 61, 64, RCC)
2. Representative suit 3. Payment of balance of subscription (Sec. 66, RCC)
a. Florente v Florente, GR 4. Sale of delinquent shares (Sec. 67, RCC)
No. 174909, January 20, 5. Alienation of shares (Secs. 68-71, RCC)
2016 6. Corporate books and records
3. Derivative suit a. Records to be kept at
a. Florente v Florente, GR principal office (Sec.
No. 174909, January 20, 73, RCC)
2016 b. Right to inspect
v. Obligation of stockholders corporate books (Sec.
vi. Meetings 73, RCC)
1. Regular or special (Secs. 48-49, RCC) c. Effect of refusal to
2. Notice (Sec. 49, RCC) inspect corporate books
3. Place and Time of Meetings (Sec. 50, RCC) (Sec. 73, RCC)
4. Minutes and Agenda of Meetings (Sec. 49, RCC) 7. Dissolution and liquidation
5. Remote communication (Sec. 49, RCC) a. Modes of dissolution
vii. Board of Directors and Trustees (Sec. 133-138, RCC)
1. Repository of Corporate Powers (Sec. 23, RCC) b. Methods of liquidation
- COLEGIO (Sec. 139, RCC)
MEDICO- ix. Other Corporation
FARMACE 1. Non-stock corporation (Sec. 86-94, RCC)
UTICO DE 2. Educational corporation (Sec. 105-105, RCC)
FILIPINAS, 3. One person corporation
INC., a. Excepted corporation
PETITIONE (Sec. 116, RCC)
R, V. LILY
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 b. Capital stock
requirement (Sec. 117,
RCC)
c. Articles of incorporation
and by-laws (Sec. 118-
119, RCC)
d. Corporate Name (Sec.
120, RCC)
e. Corporate structure and
officers (Sec. 121-122,
RCC)
f. Nominee (Sec. 124, 125,
RCC)
g. Liability (Sec. 130,
RCC)
h. Conversion (Secs. 131-
132, RCC)
4. Foreign Corporation
a. Bases of authority over
foreign corporation
b. Necessity of a license to
do business (Secs. 141-
143, RCC)
c. Personality to sue (Sec.
145, RCC)
d. Suability of foreign
corporations
e. Instances when foreign
corporations without
license may be allowed
to sue (Sec. 150, RCC)
x. Merger and Consolidation
1. Definition and concept
2. Distinguish: constituent and consolidated corporation
3. Plan of merger or consolidation (Sec. 75, RCC)
4. Articles of merger or consolidation (Sec. 77, RCC)
5. Procedure, effectivity, limitations, and effect (Secs. 76, 78, 79,
RCC)

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