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
corporation follows that of the stockholder 2. Preferred shares
owning the controlling interest (may be  entitles the holder to certain preferences
applied in times of war) over other stockholders
 “Doctrine of equality of shares”
Grandfather rule - When no distinction involved, the legal
presumption will be each share in a company
 To determine the nationality of a has the same right, privileges, and liabilities
corporation for purposes of registration  May be deprived the right to vote
 Determines the Filipino ownership (60%)
and Foreign ownership (40%) with not Numbers and qualifications of incorporators
less than sixty percent for Filipinos
 Old code: Only natural person
Used for: Revised code: Natural or artificial
1. Said rule is applied specifically in cases  Old code: 5 minimum, 15 maximum
where the corporation has corporate Revised code: Two minimum, but not
stockholders with alien stockholdings, more than 15 may organize and form a
otherwise, if the rule is not applied, the corporation
presence of such corporate stockholders For One Person Corporation (OPC)-
could only one incorporator is required
2. diminish the effective control of Filipinos.  Cannot organize corporation for the
practice of profession
When should the grandfather rule is  Legal age (natural person)
applied?  For stock corporation, must own one (1)
share of capital stock
 the corporation’s Filipino equity falls  For non-stock, must be a member of
below the constitutional threshold of 60 incorporation
percent or;
 there exists a “doubt” as to the Filipino Subscription requirement
to Foreign equity.  There is no minimum subscription
requirement under the Revised
Liability for torts and crimes Corporation Code of the Philippines
except otherwise provided by special
 A corporation is civilly liable in the same law.
manner as natural persons for torts,
because “generally speaking, the rules Corporate term
governing the liability of a principal or
master for a tort committed by an agent Old rule: Corporation can only go for 50 years
or servant are the same whether the New Code: Can continue to exist perpetually
principal or master be a natural person unless its articles of incorporation provide a
or a corporation, and whether the specific corporate term
servant or agent be a natural or artificial
person. Articles of Incorporation
 If terminated without prior notice, the
corporation is held liable  Basic governing document of a private
 ***The right to inspect is allowed only corporation
during office hours. If one demands
inspection, he shall shoulder the Contents:
expenses involve. 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, VI. To issue or sell stocks to subscribers (stock
number of shares divided and par value corporations)
H. Names of subscribers, nationalities, VII. To purchase, receive, take or grant, hold,
number of shares subscribe, amount convey, sell, lease, pledge, mortgage…
subscribed, and amount paid in B. Implied powers
I. Other matters not inconsistent with law I. Acts in the usual course of business
J. The name of temporary treasurer II. Acts to protect debts due to the
corporation
Corporate name III. Different line of business
IV. Acts designed to protect and aid
 Under the Revised Code, no corporate employees
names shall be allowed by the V. Increase the business of the corporation
commission if it is not distinguishable C. Incidental powers
from that already reserved or registered I. Power of succession
for the use of another corporation, or if II. Have a corporate name
such name is already protected by law, III. Adopt a corporate seal
rules and regulations. IV. Power to acquire, hold or dispose or
 Specific names can be sued, but not convey property as its reasonably require
general names V. Adopt and amend its by laws
 The Commission shall also cause the
removal of all visible signages, marks, Power to extend or shorten corporate term
advertisements, labels prints and other
effects bearing such corporate name.  A private corporation may extend or
Upon the approval of the new corporate shorten its term as stated in the articles
name, the Commission shall issue a of incorporation when approved by a
certificate of incorporation under the majority vote of the board of directors or
amended name trustees, and ratified at a meeting by the
stockholders or members representing
Registration, incorporation, and at least two-thirds (2/3) of the
commencement of corporate name outstanding capital stock or of its
members.
1. Application for use of corporate name
 Shall submit the intended corporate Power to declare dividends
name to the SEC
2. Submission of the articles of incorporation  The board of directors has the power
3. Issuance of certificate of incorporation and discretion to declare dividends and
 Issuing of official seal to the they cannot be compelled by the
incorporators the authority to constitute stockholder to make such declaration
themselves as a body politic unless the board’s refusal is unjustified
4. Effect of issuance of certificate of or except in cases when the law makes
incorporation such declaration compulsory.
 Will confer corporate existence  When declared, are payable only to
stockholders of record as of certain date
Corporate powers
Ultra Vires Act
 Corporation has right, power, and
attributes expressly granted by law and  “beyond the power”
incidental to its existence  An act performed outside the express,
implied, and incidental powers of the
A. Express powers corporation
I. To sue and be sued  No corporation shall possess or exercise
II. Have perpetual existence corporate powers other than those
III. To adopt and use a corporate seal conferred by this code
IV. Amend its articles of incorporation in
accordance to the provisions Coverage:
V. To adopt bylaws, not contrary to law, A. Acts beyond the power but which are not
morals, or public policy illegal or unlawful
B. Acts or contracts entered into in behalf of
the corporation by persons who have no
corporate entity

Foreign Corporation

 Foreign corporations intending to

operate in the Philippines through
the modes allowed by law, should
register with the Philippine Securities
and Exchange Commission [SEC].
 If a foreign corporation does business
in the Philippines with the required
license, it can sue before Philippine
courts on any transaction.
 A foreign corporation cannot operate
without a license or its successors or
assigns, shall be permitted to
maintain or intervene in any action,
suit or proceeding in any court or
administrative agency of the
Philippines; but such corporation may
be sued or proceeded against before.
 Regardless of percentage of foreign
ownership or participation, are
forbidden to make any kind of
donation for partisan political
activity.