BLR 3.

Stockholders have no right to recover

possession of the properties of corporation or
Corporation to recover damages
4. In taxation, the income of the corporation
Definition of corporation is not the income of the stockholder
(depends on the percentage)
 Under the Revised Corporation Code of
the Philippines (Republic Act 112232), a Doctrine of piercing of corporate
corporation is an artificial being created veil/Doctrine of piercing the veil of
by operation of law, having the rights of corporate fiction
succession and the powers, attributes  A.k.a Fraud Principle
and properties incidental to its existence  GR: Separate and distinct personality

Corporation as an artificial being or person Concept:

A. Natural person- flesh 1. Corporate fiction cannot be used to
B. Juridical person- artificial existence perpetuate fraud as a vehicle for the evasion
of existing obligation
Corporation is created by operation of law 2. When the corporation is used as a mere
-it requires special authority from the alter ego or an instrumentality
sovereign power through general law (private 3. Confuse legitimate legal or judicial issues
corporations) or by special law (local 4. Properties cannot transfer to third persons
government)
Grounds for application of doctrine
Corporation has the right of succession  Can apply to natural and juridical
persons
 A corporation has the capacity of  To hold stockholders directly liable
continued existence regardless of the (When the veil is pierced, the ones who
death, withdrawal, insolvency or are originally considered as separate and
incapacity of its directors or distinct will now be directly liable as
stockholders. consequences)

Corporation has the powers, attributes and Classes of corporation

properties
Stock Corporation- has capital stock
Doctrine of Limited Capacity divided into shares and is authorized to
-can exercise only the powers expressly distribute dividends created for the
authorized by law, those implied from the purpose of making profit
exercise of such powers, and those incidental
to its existence. Non-Stock Corporation- doesn’t have
capital stock and not authorized to
Corporate juridical personality distribute dividends and relies on
contributions and donations
Under the Doctrine of Separate Corporate
Entity/Personality Nationality of corporations

 A corporation is a juridical entity with a Domestic corporation- incorporated

legal personality separate and distinct under Philippine laws
from stockholders, officers and
members, upon the issuance of the Foreign corporation- one formed,
certificate of incorporation by SEC organized, and existing under any laws
(Securities and Exchange Commission). other than of the Philippine laws

General Rules: Control Test

1. The debts incurred by the corporation is Incorporation Test- The nationality of the
different from the person who incurred the corporation follows that of the country under
debt (vice-versa) whose laws it was incorporated
2. Stockholders are not the owners of the
corporation
 Control test- The nationality of a  “Doctrine of equality of shares”
corporation follows that of the stockholder - When no distinction involved, the legal
owning the controlling interest (may be presumption will be each share in a company
applied in times of war) has the same right, privileges, and liabilities
 May be deprived the right to vote
Grandfather rule
Numbers and qualifications of incorporators
 To determine the nationality of a
corporation for purposes of registration  Old code: Only natural person
 Determines the Filipino ownership (60%) Revised code: Natural or artificial
and Foreign ownership (40%) with not  Old code: 5 minimum, 15 maximum
less than sixty percent for Filipinos Revised code: Two minimum, but not
more than 15 may organize and form a
Used for: corporation
1. Said rule is applied specifically in cases For One Person Corporation (OPC)-
where the corporation has corporate only one incorporator is required
stockholders with alien stockholdings,  Cannot organize corporation for the
otherwise, if the rule is not applied, the practice of profession
presence of such corporate stockholders  Legal age (natural person)
could  For stock corporation, must own one (1)
2. diminish the effective control of Filipinos. share of capital stock
 For non-stock, must be a member of
When should the grandfather rule is incorporation
applied?
Subscription requirement
 the corporation’s Filipino equity falls  There is no minimum subscription
below the constitutional threshold of 60 requirement under the Revised
percent or; Corporation Code of the Philippines
 there exists a “doubt” as to the Filipino except otherwise provided by special
to Foreign equity. law.

Liability for torts and crimes Corporate term

 A corporation is civilly liable in the same Old rule: Corporation can only go for 50 years
manner as natural persons for torts, New Code: Can continue to exist perpetually
because “generally speaking, the rules unless its articles of incorporation provide a
governing the liability of a principal or specific corporate term
master for a tort committed by an agent
or servant are the same whether the Articles of Incorporation
principal or master be a natural person
or a corporation, and whether the  Basic governing document of a private
servant or agent be a natural or artificial corporation
person.
 If terminated without prior notice, the Contents:
corporation is held liable A. The name of the corporation
B. The purpose
Classification of shares/stock C. Place of the principal office must be in the
Philippines
1. Common shares D. Term of existence
 ordinary stock of a corporation that E. Names, nationalities and residence address
entitles the holder to a pro rata of incorporators
(proportional) division of dividends, F. Number, names, nationalities and
without any preference or advantage residences of directors and trustees
over other stockholders G. Amount of authorized capital stock,
number of shares divided and par value
2. Preferred shares H. Names of subscribers, nationalities,
 entitles the holder to certain preferences number of shares subscribe, amount
over other stockholders subscribed, and amount paid in
I. Other matters not inconsistent with law II. Acts to protect debts due to the
J. The name of temporary treasurer corporation
III. Different line of business
Corporate name IV. Acts designed to protect and aid
employees
 Under the Revised Code, no corporate V. Increase the business of the corporation
names shall be allowed by the C. Incidental powers
commission if it is not distinguishable I. Power of succession
from that already reserved or registered II. Have a corporate name
for the use of another corporation, or if III. Adopt a corporate seal
such name is already protected by law, IV. Power to acquire, hold or dispose or
rules and regulations. convey property as its reasonably require
 Specific names can be sued, but not V. Adopt and amend its by laws
general names
 The Commission shall also cause the Power to extend or shorten corporate term
removal of all visible signages, marks,
advertisements, labels prints and other  A private corporation may extend or
effects bearing such corporate name. shorten its term as stated in the articles
Upon the approval of the new corporate of incorporation when approved by a
name, the Commission shall issue a majority vote of the board of directors or
certificate of incorporation under the trustees, and ratified at a meeting by the
amended name stockholders or members representing
at least two-thirds (2/3) of the
Registration, incorporation, and outstanding capital stock or of its
commencement of corporate name members.

1. Application for use of corporate name Power to declare dividends

 Shall submit the intended corporate
name to the SEC  The board of directors has the power
2. Submission of the articles of incorporation and discretion to declare dividends and
3. Issuance of certificate of incorporation they cannot be compelled by the
 Issuing of official seal to the stockholder to make such declaration
incorporators the authority to constitute unless the board’s refusal is unjustified
themselves as a body politic or except in cases when the law makes
4. Effect of issuance of certificate of such declaration compulsory.
incorporation  When declared, are payable only to
 Will confer corporate existence stockholders of record as of certain date

Corporate powers Ultra Vires Act

 Corporation has right, power, and  “beyond the power”

attributes expressly granted by law and  An act performed outside the express,
incidental to its existence implied, and incidental powers of the
corporation
A. Express powers  No corporation shall possess or exercise
I. To sue and be sued corporate powers other than those
II. Have perpetual existence conferred by this code
III. To adopt and use a corporate seal
IV. Amend its articles of incorporation in Coverage:
accordance to the provisions A. Acts beyond the power but which are not
V. To adopt bylaws, not contrary to law, illegal or unlawful
morals, or public policy B. Acts or contracts entered into in behalf of
VI. To issue or sell stocks to subscribers (stock the corporation by persons who have no
corporations) corporate entity
VII. To purchase, receive, take or grant, hold,
convey, sell, lease, pledge, mortgage…
B. Implied powers
I. Acts in the usual course of business