Professional Documents
Culture Documents
Corporation
Corporation
I.
Corporation; Definition
- A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence.
(sec. 2, BP 68)
Note:
1. All corporations, big or small, must abide by the provisions of the
Corporation Code. Being a simple family corporation is not an
exemption. Such corporations cannot have rules and practices other
than those established by law. (Manuel Torres, Jr. v. CA)
2. A corporation is an artificial being created by operation of law. It
owes its life to the State, its birth being purely dependent on its
will. (Tayag v. Benguet)
3. A corporation is subject to SECs jurisdiction, regulation and
control. The SEC has the authority to look into the rulings issued by
the corporation. The SEC is the entity with the primary say as to
whether or not securities, including shares of stock of a corporation,
may be traded or not in the stock exchange. (PSE v. CA)\
A. Art. XII Section 16, 1987 Philippine Constitution
- Section 16. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may
be created or established by special charters in the interest of the
common good and subject to the test of economic viability.
Note:
1. The Constitution recognizes two classes of corporations. The first
refers to private corporations created under a general law. The
second refers to GOCCs created by special charters. Under existing
laws, that general law is the Corporation Code.
B. Attributes of a Corporation
1. It is an artificial being with separate and distinct personality.
- It is entitled to own properties in its own name and its properties
are not the properties of its stockholders, directors and officers
(Wise v. Man Sung Lung)
- The interest of the stockholders over the properties of the
corporation is merely inchoate (Saw v. CA)
- It can incur obligations and its obligations are not the obligations
of its stockholders, directors and officers (Vasquez v. De Borja)
- Rights belonging to the corporation cannot be invoked by the
stockholders even if the latter owns substantial majority of the
shares in that corporation and rights of the stockholders, directors
and officers cannot be invoked by the corporation (Stonehill v.
Diokno)
- Tax exemptions in favor of the corporation cannot be invoked by its
stockholders. (Manila Gas Corp v. Collector of Internal Revenue)
* Artificial Being
- It exists by fiction/operation of law only, hence, it is subject to
limitations that are inherent because of its nature.
- It can act only through its directors, officers and employees.
- Corporations are incapable of intent, hence, they cannot commit
felonies that are punishable under the RPC and SPL because
crimes are personal in nature.
- A corporation may, however, be dissolved for violation of one
Corporation Code (sec. 144)
- Moral damages cannot be awarded in favor of corporations
because they do not have feelings and mental state.
- However, a corporation can recover moral damages under Art.
2219(7) of NCC if it was the victim of defamation (Filipinas
Broadcasting Network Inc v. Ago Medical and Educational Center)
- If the veil of corporate entity or fiction is used as a shield to
perpetuate fraud, to defeat public convenience, justify wrong or
defend crime, this fiction shall be disregarded and the individuals
composing it will be treated identically. (Doctrine of Piercing the
Veil of Corporate Fiction)
- The Doctrine, however, cannot be used to make the corporation
liable for the personal obligations of directors, officers or
shareholders.
- The separate personality may be disregarded if such personality is:
i.
Used to evade obligations to employees or used as a pretext
to dismiss employees;
ii.
Used to evade lawful obligations or a money judgment;
iii.
Dominated by officers or stockholders or other person or
entity to the extent that the corporation is a mere alter ego,
adjunct or business conduit;
iv.
Used to defeat public convenience;
v.
Used to justify wrong;
vi.
vii.
viii.
ix.
-