*** Lecture Notes ***

> Art 12, sec 16; Par 3. Sec 1;

*not allowed to create private corps- unconstitutional should be created under gen. law, hence, it must
me under the corporation code.

ATTRIBUTEs OF CORPORATION
1) artificial being (juridical personality)
a) x physical capability
b) nature of relationship of corporation and its officers and agents
*corporate of agents> BOD, Members
c) who wields the corporate power (sec 23)
d) effects of act of corporate agents w/out authority from the board
*ultra vires act of the agent, possible personal liability
e) legal personality of corporation
* separate personality of the corpo with that of the agents
f) piercing the veil of corporate fiction
xpn to the GR; members of the board can be held liable separate of that the corporation
g) Constitutional Rights of a Corporation
-not all (rights) of a natural person is accorded to artificial persons
*personal right- self-incrimination
*if applicable to corporations

2) CREATION BY OPERATION OF LAW

a) Concession Theory- cannot be higher than the law that the created it > state
b) Nationality of Corporation
*corporate citizenship/nationality
*Incorporate Law
*Grandfather Rule
*Control
c) Residence of Corporation
* (hyatt elevators)
* will determine where the venue of the case is determined
d) law sets the term, condition, requirements
e) period for corporate existence
f) rights of a corporation

(Abs CBN v. CA)

Award of moral damages > not capable of encountering physical suffering. It may not experience
sleepless nights.
**other view:
Filipinas Broadcasting Corp v. Ago Medical
Allowed of moral damages to private corporation > no flip flopping> besmirched reputation> abuse of
right on the part of fbc, when the former lambasted the latter. (the reputation has been compromised)

3RD ATTRIBUTE: RIGHTS OF SUCCESSION

*even the demise of incorporators, the corpo is still there> corporate existence remains
*mergers> 2 corpos are joined together> joined assets including liability of properties
*consolidation> no longer exist> new entity is brought into life.

4th attribute: PAP

*source of corporate powers
*powers of a corporation
*limitation on corporate powers
*ultra vires acts (when the corpo performs an act outside of its activity)> can still be ratified through
stockholders v. illegal act of corpo
*effects of act of corpo without authority> services of security agency

BAsIC CONCEPTs AND DOCTRINEs:

1) DOCTRINE OF Separate personality

2) Xpn: piercing the veil
3) Doctrine of Apparent Authority
4) Doctrine of Equality of shares
5) Doctrine of Limited Liability
6) Doctrine of Corporate Opportunity
7) Trust Fund Doctrine
8) Business judgment Rule
9) Ultra Vires Doctrine

***Doctrine of separate personality***

-mere creation of law and only have a limited liability
-it does not really exist at all
-must be represented by coporate agents
>>it dictates that a corpo is invested by law with personality distinct and separate from a natural person
(?)
>>GR

Sec 31 is the exception to the GR that Corporate Directors are liable

*Pantranco Case*
Act of corporate agent, if liability impose therefromm, they will not be liable
XPN: Doctrine of Piercing the Veil of Coporate Fiction- not the GR.

Factors to consider in applying the doctrine:

1) The first copo was dissolved;
2) The assets of the first corpo were treansferred to the 2 nd corpo to avoid the liability of
the first corpo
3) Both corpo are owned and controlled by the same person > 2 nd corpo as a continuation
and successor of the first corpo

Factors/Identity in the Application of Docrtine (some probative factors that will justify the docrine)
1) Stock ownership by one or common ownership of both corporations
2) ..
3) The manner of keeping the corporate books and records; and
4) Methods of conducting business (same business with same officers)

ALTER EGO DOCTRINE

- Two corpo apparently acting as one.

*Three-pronged test to determine ^:

1. Control (complete domination)
2. such control is used to commit a fraud/unjust act in contravention of the plaintiff’s legal right
3. ^must have proximately caused the injury or unjust loss complained of.

>merely an exception
>wrong doing must be convincingly and clearly established. It cannot be presumed!
>If the court has no jurisdiction over the corpo, it follows that the court has no business in
piercing the veil of corporate fiction …

WHO CAN PIERCE THE CORPORATE FICTION

>purely a judicial prerogative. The sheriff, executing the judgment of the court, has no power to
pierce the veil…

DOCTRINE OF APPARENT AUTHORITY

- Corporate agents must always bear in mind tha the actions they performed is connected
bestowed by the corporation.
- Act beyond the scope of authority: personally liable
- Xpn: this doctrine
- The third party is not required to run to the personal liability of the officer but of the
corporation
- Concept: corpo is estopped from denying the agent’s authority if it knowingly permits one of the
officers to act within the scope of an apparent authority.
 - Application: usual course of business > agent is allowed and permitted to manage its business
- No application: if the principal did not commit any act/conduct that the third party knew and
relied upon.
- *act of principal and not the act of the agent
- allowed by the principal
- volunti non fit injuria- to the willing, no injury done

DOCTRINE OF LIMITED LIABILITY

- LIABLE ONLY TO THE EXTENT OF UNPAID OBLIGATION
- The corporation’s obligation is separate from that of the stockholder

DOCTRINE OF CORPORATE OPPORTUNITY

- Sec 31. Whatever opportunity that runs conflict with the corpo that he acquire by virtue of
confidence> in favor of corporation
- Relevant: corporate director acting in a manner that I vioaltive of his code as director. (ie. own
business conflict with the corpo’s business)
- Can the corpo hold him liable? Yes. The doctrine applies.

TRUsT FUND DOCTRINE

- It is the rule that the property of a corpo is a trust fund for the payment of creditors. (Halley v.
Printwell
- (ie. investor putting his money in the corpo> wishes to retrieve his money back> it cannot
because it will violate the trust fund doctrine> will be allowed to retrieve hi investment if there
is unreserved retained earning.
- Not authorized to withdraw unless there is unrestricted return earnings.
- Scope: not limited to reaching the stockholders unpaid subscription. Suppose the sh paid the
subscription and in the process he was able to get their shares from the capital of corporation >
will prejudice the claim of creditors.
- Violation: distribution of properties to the stockholders made by stockholders

BUsINEss JUDGMENT RULE

- The BOD or trustees have the sole authority to determine policies, enter into contracts,a nd
conduct the ordinary business of the corporation within the scope of its charter.

ULTRA VIREs DOCTRINE

- One that is committed outside the object for which a corporation is created as defined by law or
its organization and thereof
- Doctrine of estoppel cannot operate to give effect to an act which is otherwise null and void or
ultra vires.
- When an act is illegal> void ab initio
- corporation cannot raise the issue of estoppels to escape from liability
INCORPORATION AND ORGANIZATION OF PRIVATE CORPO

CORPO NATIONALITY
Incorporation Rule
Control Rule- determine whether foreign or local. (if at war w/ foreign corpo)
- ownership: majority stockholders> if majority is foreigner = foreign corporation
- 60/40

Grandfather Rule
- determination of the citizenship of corporation by looking at the owners of corpo> apply the
control rule but beyond> when ownership is subject/ in the name of other corpo, Hence,
multilayered corpo., owned by other corpos. Ownership other than this corporation.
- Looking at the owners of the corporation (one who controls)
- Is stricter than Control Rule
- (Narra Nickel Mining) determination if foreign or domestic
- Applied if foreign corporation or not (if the 60/40 was violated)
- Usually applicable in cases of war

CITIZENsHIP OF CORPORATION

REsIDENCE OF CORPORATION
- Principal office as stated in the Articles of Incorporation
- Purposes of bringing an action^^ this theory will follow

PERIOD OF CORPORATE EXIsTENCE

- Old: 50 years -new: perpetual

*NO MORE CAPITAL REUIREMENT

- authorized capital (no more 25% subscription)
- Residency not citizenship
- binding contribution to corporation: money subscribed to the corporation
- the moment the stockholder subscribe to the initial Cs,

BYLAWs
-non submission of bylaws in the beginning will not be fatal to the application of the corporation for
organization purposes.
-non filing will not result in automatic dissolution
- reuirement of notice of hearing before corpo is revoked for the failure of filing the by law on time

DE FACTO CORPORATION
1. Valid law
2. Bonafide attempt to organize
 3. Actual exercise of corpo power
4. Issuance of CoC

*Ostensible Corporation- cannot raise the defense of lack of corporate personality

February 2018 (Corporate Name and the Use of it

 Must not be confusingly similar