CORPORATION Corporations have certain 4. Can attract more investor** 2.

According to shares authorized

➢ an artificial being (juridical person) CHARACTERISTICS UNIQUE TO 5. Centralized management to issue
➢ created by the operation of law THIS FORM OF ORGANIZATION: A. STOCK CORPORATION –
➢ with rights of succession **BLUE CHIP-shares of corporation who share capital are divided into
➢ has powers, attributes and ▪ CAPITAL ACQUISITION - easier has a national reputation to operate shares and shareholders are
properties expressly authorized by to acquire debt and equity (not profitably in good and bad times entitled to dividends
law or incident to its existence. constrained by the financial B. NON-STOCK
resources of a few owners) DISADVANTAGES CORPORATION-no stocks are
Corporate Powers: ▪ LIMITED LIABILITY – liability to 1. Incorporation and operation is issued and non-profit in nature
➢ those expressly granted by law corporate creditors are not costly and owners are called members
or EXPRESS POWERS (as transferrable to shareholders ( 2. Highly regulated
granted within the statute of Art. extent is only up to the amount of 3. Heavier taxation 3. According to whether for
Of Inc.) Ex. To sue and be sued, his subscription) 4. Complicated formation and charitable or not
to purchase properties, to buy or ▪ LIFE SPAN – it enjoys a stable management A. ECCLESIASTICAL
sell) life, theoretically, it can operate 5. Minority shareholders are CORPORATION-for religious
➢ power inherent to corporate forever, sometimes outlasting its subservient to the wishes of purposes
existence or INCIDENTAL owners unless otherwise majority. B. ELEEMOSYNARY
POWERS are powers existing as dissolved for some reasons. CORPORATION-created not for
a consequence of the fact that it is ▪ PROFESSIONAL TYPICAL CORPORATE private gain or profit but devoted
a juridical person (Ex: right of MANAGEMENT – professional ORGANIZATIONAL STRUCTURE for charity
succession, right to corp, name, managers are hired by the The basic type consists of the following: C. CIVIL CORPORATION-
right to make bylaws, etc.) owners/investors to handle the 1. Shareholders – owners of shares established for business
➢ IMPLIED POWERS -powers oversight of the business on their in a corporation
beyond those explicitly behalf. 2. Board of Directors – headed by 4. According to legal right to
established (Ex. To operate a ▪ OWNERSHIP INTEREST Chairman of the Board corporate existence
bookstore) ➢ it is based on the numbers of 3. Officers of the corporation A. DE JURE
shares owned . headed by the President or CEO CORPORATION-exists in
RELATED TERMS: ➢ Buying or selling of shares who must be a director fact and in law
➢ ULTRA VIRES ACT– is an act or shifts the ownership to a 4. Employees – carry out the tasks B. DE FACTO
contract of a corporation entered different investor. from the top management CORPORATION-exists in
beyond the powers expressly or ▪ SEPARATE ENTITY associated to the company’s fact, not in law
impliedly inferred upon the ➢ as a legal entity, it operates mission.
corporation. separately and distinct from 5. According to degree of public
➢ INTRA VIRES ACT – an act its owners . KINDS OF CORPORATION participation as to share
within the legitimate powers of a ➢ transactions of the business ownership
corporation. are different from that of the 1. According to purpose of creation A. CLOSE
➢ ILLEGAL ACTS – acts that are shareholders A. PUBLIC CORPORATION – CORPORATION-limited
contrary to law, morals, good organized for the government to selected family
customs, public order or public ADVANTAGES B. PRIVATE CORPORATION – B. OPEN
policy 1. Limited liability created for private aim /profit CORPORATION-shares
2. Can exist with continuity are available to public
3. Shares of ownership are
transferable
 C. PUBLICLY-HELD STEPS ON HOW TO ORGANIZE amount of capitalization with no. free from any business
CORPORATION-shares A CORPORATION of shares and par value if it is a relationship to be able to exercise
are listed stock corporation, if non-stock the honest judgement.
1. Promotion – the process of amount of capital must be stated.
6. According to relation to bringing together the incorporators RIGHTS OF A SHAREHOLDER
another corporation or persons interested in the BY- LAWS
A. PARENT OR business. ➢ Rules of action adopted by the 1. Right to be issued certificate of
HOLDING 2. Incorporation – a legal process corporation for the internal stock or other evidences of share
CORPORATION-has used to form a corporate entity or government of its officers , ownership and to transfer such.
significant influence company thus declaring the firm’s shareholders or members . It is to 2. Right to attend and vote in person
over another corporation assets and income separate from be adopted within one (1) month or by proxy at shareholder’s
or subsidiary. its owners. after issuance of Certificate of meeting.
B. SUBSIDIARY 3. Formal organization and Incorporation by SEC. 3. Right to elect and remove
CORPORATION- commencement of business directors.
controlled by another operations - according to COMPONENTS OF A CORPORATION 4. Right to adopt, amend or repeal
such as a parent or Corporation Code of the Phils, a 1. Corporators-those who compose by-laws.
holding company. corporation must formally the corporation whether as 5. Right to receive dividends when
organize and commence shareholders or members. declared.
7. Other kinds of corporation transaction of its business within 2. Incorporators-shareholders or 6. Right to inspect corporate books
A. QUASI-PUBLIC - a five (5) years from the date of members originally forming and and records and receive financial
private corporation that incorporation. It is not allowed for composing the corporation and reports about corporation’s
has accepted from the a corporation to be continuously signatories thereof to the Articles operations.
state the grant of a inoperative for a period of at least of Incorporation. 7. The right to participate in the
franchise or contract five (5) years, even if it has 3. Shareholders or stockholders- distribution of corporate assets
involving performance of already commenced business. they are corporators in a stock upon dissolution.
public duties e.g. corporation which can be a natural 8. The right to exercise pre-emptive
Meralco, PLDT, LRT, REGISTRATION or juridical persons. right.
MRT 4. Members-are corporators of a
B. QUASI SECURITIES AND EXCHANGE non-stock corporation. PRE-EMPTIVE RIGHT- the right
CORPORATION – assoc. COMMISSION 5. Subscribers-those who have granted to shareholders to have the
of government or political ➢ The agency of the government agreed to take the original first option to subscribe to any future
institution , not a where corporate businesses are unissued shares under issuance or disposition of shares
corporation in full sense registered is the subscription agreement . before it will be offered to new
but was invested by law 6. Promoters-persons who bring investors so that the shareholder may
with some attributes and FOR DOCUMENTATION AND FILING about the formation and maintain his/her proportional
rights of a corporation for PURPOSES: organization of a corporation. ownership in the company thus
its existence unaffected 7. Underwriters-investment bankers preventing stock dilution.
by death or disability of ARTICLES OF INCORPORATION who agreed to use his best efforts ➢ This right is not absolute (not
members e.g. Board of ➢ Business name and address , to market all or part of an issue of dependent on something else)
Accountancy , Board of incorporators name with securities. ➢ It is also called subscription right
Nursing nationalities and addresses, 8. Independent director-elected by or subscription privilege
nature of business, directors and the shareholders, a person who is
trustees, term of existence, independent of management and
CLASSES OF SHARES OF STOCK PREFERENCE SHARES CORPORATE BOOKS & RECORDS Corporation vs. Other forms of
1. Ordinary Shares (Common) – a ▪ Often has no voting power business organization
share which entitles the holder to ▪ Cumulative preference holder These books are kept in the principal
an equal pro-rata division of have the right to receive dividend office of the company such as • Partnership and sole
profits without any preference. in arrears ** 1. MINUTES BOOK-contains proprietorship has the same
2. Preference shares – a share ▪ Less risky due to fixed rate of minutes of the meetings of the Asset and Liability elements with
which entitles the holder to a fixed return directors and shareholders Corporation
dividend, whose payment takes ▪ Can be redeemed 2. STOCK &TRANSFER BOOK-a • The only difference is in the
priority over that of the holder of ▪ Priority over company assets in record of the names of Equity Section of the Balance
ordinary shares . Preference case of bankruptcy shareholders alphabetically Sheet.
shares are issued with PAR ▪ Convertible to ordinary shares arranged, installment paid and
VALUE . unpaid by shareholders on all ❖ if Capital Account is maintained in
3. Treasury Shares-are fully paid ** dividend of prior years stock for which subscription has Sole Proprietorship &
shares bought back by the issuing been made and dates of Partnership, Contributed Capital
company thus reducing the RELATED TERMS installment payment. Any transfer (also known as Paid-in Capital)
number of shares outstanding in • PAR VALUE SHARE –share with of stock and dates thereof are and Stocks or Shares
the open market. minimum issue price per share as also recorded. component are for the
4. Convertible shares-a share per Articles of Incorporation. 3. STOCK CERTIFICATE BOOK- corporation.
which is convertible or changeable ➢ PAR VALUE- per share contains the list of every share in
from one class to another class value indicated in the a company , numbered in order, ❖ Owner’s equity is for the
e.g. preference share to ordinary stock certificate with the name of the current partnership and sole
share. • NO PAR VALUE SHARE- one owner of every single share. It is proprietorship while
5. Callable stock-shares at stake by without any value appearing on commonly called Shareholder’s
Shareholder’s equity is for the
investor which the issuing the face of stock certificate. Register.
corporation.
company can buy back. (both • STATED VALUE SHARE- a no 4. BOOKS OF ACCOUNTS – record
classes of shares - ordinary and par value share to which the of all business transactions of the The accounting equation for a corporation
preference) directors assigned value per company which include the will be
share. General Journal and General
Understanding ordinary shares & • PROMOTION SHARES-those Ledger. ASSETS = LIABILITIES +
preference shares issued to promoters as 5. SUBSCRIPTION BOOK- a book SHAREHOLDERS’ EQUITY
compensation. of printed blank subscription
ORDINARY SHARES • STOCK CERTIFICATE-a legal
▪ Have voting power document in a physical piece of 6. SHAREHOLDER’S LEDGER-a
Amendment to Corporation Code of the
▪ No right to dividend in arrears paper certifying ownership of ledger which details the number of
Philippines
▪ Faces more risks because specific number of shares of stock shares issued to each
dividend varies according to profit. in a Corporation. shareholder THE REVISED CORP. CODE OF THE
▪ Cannot be redeemed PHILS.
7. SUBSCRIBER’S LEDGER-It is a
▪ If company collapses, no priority subsidiary ledger for the
in capital repayment. subscription receivable account. It
▪ Non convertible to other type of reports the individual subscription
stocks of the subscriber.
WHAT THE REGULATION SAYS? A corporate term may be extended or from the public , publicly listed or not, shall
❑ Republic Act 11232 known as shortened by amending the Articles of E. NON-USE OF CORPORATE not be permitted to issue no par value
the Revised Corporation Code Incorporation provided that no extension CHARTER AND CONTINUOUS H. FOUNDERS’ SHARE- may be given
of the Phils which expressly may be made earlier than three (3) years INOPERATION-if a corporation does not certain rights and privileges not enjoyed
repeals Batas Pambansa Blg. 68 prior to the original expiry date unless formally organize and commence by the owners of other stocks. Exclusive
or CCP, aims to improve the ease there is justifiable reasons for an earlier operation of its business, within five (5) right to vote and be voted for in the
of doing business in the country. extension. years from the date of incorporation, the election of directors is granted for a limited
This was signed by Pres. Duterte ➢ A corporation who intend certificate of incorporation shall be period not to exceed five (5) years from
and took effect on February 23, to be bound by specific deemed revoked as of the day following the date of incorporation provided that the
2019. term must notify the the end of the five (5)-year period. exclusive right shall not be allowed if its
❑ It simplifies the requirements to commission. However, if it has already commenced its exercise will violate Commonwealth Act
set-up and register a corporation ➢ For a corporation whose business but subsequently becomes No. 108 known as “Anti-Dummy Law” and
with SEC and provides for the term has already expired, inoperative for a period of at least five (5) RA No. 7042 known as “Foreign
recognition of technology and its it may submit an consecutive years , then after due notice Investment Act of 1991” and other
use to facilitate government and application to SEC for and hearing , the commission may place pertinent laws.
internal corporate processes. revival of its corporate the corporation under delinquent status.
existence subject to NOTE: I. INCORPORATION & ORGANIZATION
A. MINIMUM NO. OF SHAREHOLDERS, certain requirements. Under DELINQUENT STATUS, a OF PRIVATE CORP.- any person,
DIRECTORS & TRUSTEES ➢ No application for revival corporation shall have two (2) years to partnership, association or corporation,
➢ Removal of minimum of certificate of resume operations and comply with the singly or jointly with others but not more
number of shareholders, incorporation of banks SEC requirements and upon compliance, than fifteen (15) in number may organize a
directors, trustees and and quasi-banking , the commission will issue order lifting the corporation for any lawful purpose/s.
minimum capitalization preneed, insurance and delinquent status. Failure to comply with Natural persons licensed to practice a
requirements. trust companies, non- the req and resume operation within the profession and partnership or association
➢ It has removed “subject to stock savings and loan given period shall cause revocation of its organized for the purpose of practicing a
compliance with special associations, pawnshops , certificate of incorporation upon profession shall not be allowed to
laws” , the minimum corporations engage in reasonable notice is given. organize a corporation unless otherwise
subscribed and paid-up money services business provided under special laws.
capital requirement for a and financial F. CLASSIFICATION OF SHARES –
stock corporation. No intermediaries unless shares in stock corporation may be J. CAPITALIZATION-a stock corporation
minimum required accompanied by a divided into classes or series of shares or shall not be required to have a minimum
subscription and payment. favorable both. No share may be deprived of voting capital stock except as otherwise
recommendation of the rights except for those classified and specifically provided by special laws.
B. ONE PERSON CORPORATION- the appropriate government issued as “preferred” or “redeemable stock. Preference shares may be issued
new law permits natural person, trusts or agency. shares”. only with a stated par value.
estates to form one person corporation, ❑ No par value share issued shall
single shareholder. D. ELECTRONIC FILING & G. PAR VALUE OF A SHARE – Shares be deemed fully paid and non-
MONITORING SYSTEM –mandates SEC may or may not have a par value , assessable and the holder of
C. CORPORATE TERM-as revised, a to develop and implement a system to Provided insurance and preneed such shall not be liable to the
corporation shall have perpetual existence enable electronic submission of companies, banks, trusts, public utilities , corporation and its creditors
unless its Articles of Incorporation application , reports and other documents building and loan associations and other provided that no par value shares
provided otherwise. as well as sharing information with other corporations authorized to obtain funds must be issued unless for a
government bodies. consideration of at least P5 per
 share. Provided further, that the
entire consideration received shall
be treated as Capital and shall not
be available for distribution as
dividends.
K. BOARD OF
DIRECTORS/TRUSTEES AND
OFFICERS-they shall exercise
corporate powers , conduct all
business and control of all properties
of corporation.
➢ The BOD shall be elected for a
term of one (1) year from among
the holders of stocks registered in
the corporation’s books while
trustees shall be elected for a
term not exceeding three (3) years
from among the members of a
corporation.
➢ A director who ceases to own at
least one share of a stock or a
trustee who ceases to be a
member of a corporation shall
cease to be such.
➢ Immediately after election of BOD,
an election must be formally
organized to elect the corporate
officers composed of
a) President, must be a director
himself
b) Treasurer – must be a resident
c) Secretary-must be resident and
citizen of the Phils.
d) other officers as maybe provided in
the bylaws.