REVISED CORPORATION

CODE
ATTY. CHRISTIAN GEORGE LLANES MELITANTE, BSBA, JD, MBA, REALTOR
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ONE PERSON CORPORATION

How do you distinguish a one person corp from a sole prop?

1. An OPC has a separate juridical personality from the sole SH

composing it.
2. The assets of the OPC are not the assets of the SH.
3. The liability of the OPC does not extend to the sole SH.
4. OPC is registered with the SEC, whereas sole prop is with the DTI.
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Who can organize as OPC?

1. Natural persons
2. Trust
3. Estate

What is the exception to natural persons?

• If the natural persons organize for the purpose of exercising a
profession.

What do you mean by trust? Is this a trust entity?

• No. The trust referred to here is the trust fund managed by
another. A trust entity cannot put up an OPC.

Can a corp put up an OPC?

• No. Not one of those allowed.
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Who can be president of the OPC?

• Only the sole SH.

Can the president be the secretary?

• No. It is not clear under the RCC, but the IRR says it is not
allowed

Can the president be the treasurer too?

• Yes, but he needs to put up a bond, in scheduled
amounts, which must be renewed every 2 years
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Is the OPC required to submit bylaws?

• No. He alone can dictate the rules of the corp.

What if the sole SH dies?

• His nominee shall take over until his heirs are identified
and sorted out what to do with the corp. This also
applies in case of insanity, incapacity, or withdrawal of
the SH.
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How can the OPC maintain its separate legal personality?

1. It must be adequately financed

2. The properties of the OPC must be separate and not
commingled with the properties of the sole SH
3. The notion of separate personality must not be misused or
abused
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Can a foreigner be the sole SH of the OPC?

• Yes, subject to laws regarding nationalized activities
such as public utilities, or mass media.

Can a person organize more than one OPC?

• Under the RCC, there is no prohibition. It is not
answered by the SEC yet, but it appears the trend is
to allow it.
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FOREIGN CORPORATIONS
What is a foreign corp?
• A corp that is formed, organized, and existing under the laws of a
foreign country, subject to the principle of reciprocity.
• This is the most important among all the other classes of corps in the
law.

What are the elements of an FC?

1. Place of incorporation
2. Principle of reciprocity

What if the country of the FC does not permit Filipinos to do business in

their country, does that mean the corp is no longer an FC?
• No. It is still an FC in the eyes of our laws so long as it is organized and
existing under the foreign law. The effect is it will never be allowed to
do business here in the PH.
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What is the most important consideration in FCs?

• It is whether the FC can sue or be sued here in the PH. All bar qs
revolve around this issue.

What is the rule on ability to sue?

• If the FC has license to do business, it can sue and be sued. If the
FC has no license, it cannot sue but can be sued, subject to
certain exceptions. An FC suing on an isolated or casual
transaction, even without license is allowed to sue.

Is an FC required to obtain license?

No. it is merely required if the FC will engage in doing business as
contemplated by law.

What must be alleged by the suing FC in the complaint?

• That is an FC suing with license, or that it is suing on an isolated
transaction.
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What do you mean by doing business?

• The law does not define doing business, but the FRIA does
provide a list of activities deemed to be doing business.
• This is important because if the FC is not doing business,
then it does not need license.

Under FRIA:
1. Soliciting orders and service contracts
2. Opening offices
3. Appointing distributors
4. Management in a corp
5. Any act or acts that implies continued dealings to attain
the purpose of the corp
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In BMW vs Kahn, BMW did not have a showroom here.

But it has an office which collects orders, then it will fax
the orders to Germany, cause the shipment of the
vehicle. BMW did not obtain license to do business.

Can BMW sue here in the PH?

• No. Because it has no license while engaged in doing
business. Soliciting orders amounts to doing business.

What if you only have service centers? You don’t have a

showroom, you don’t solicit orders, but you provide post
sale services.
• That is considered as doing business under the first
enumeration.
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What are the offices that can be put up?

1. Subsidiary
2. Branch
3. Operating headquarters
4. Regional headquarters
5. Regional operating headquarters
Note that whatever office an FC may put up to establish
presence here in the PH amounts to doing business.

If you are dealing with an FC, are you better off dealing with
a subsidiary or with a branch?
• You are better off with a branch. A branch has no
separate personality from the FC, whereas a subsidiary is
separate and distinct from the FC itself.
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When does appointing distributors amount to doing business?

1. If the distributor is exclusive to the FC, without independent
operations
2. Domiciled for 180 days or more in the PH

In Steelcase vs Design International, ABC corp, an FC without license,

engaged XYZ as distributor. The distributor sells the products of ABC,
as well as the products of other corps. Thereafter, there was dispute
on the terms of distributorship. ABC sued XYZ. XYZ filed a motion to
dismiss on the ground that ABC has no license to do business in the
PH and therefore cannot sue.

Will the motion be granted?

• No. First, the appointment of the distributor here is not doing
business because it is not exclusive to the foreign corp, considering
the distributor sells products of other corps as well.
• Second, the distributor is estopped because it contracted with an
FC, knowing it has no license to do business.
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• In Columbia Pictures vs CA, Columba Pictures enters into a

distributorship contract with local distributors for the showing
of foreign films. The contracts were all done abroad but
Columbia appointed an attorney in fact here in the PH to
enforce its IP rights.
Is Columbia doing business?
No. Because when the contract is executed abroad, without
any further activity in the PH on the part of the FC, it is deemed
isolated transaction.

Does the appointment of attorney in fact amount to doing

business?
• No, so long as the appointment is limited to the enforcement
of IP rights.
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If an FC will invest in the equity of a domestic corp, does it need

license?
• No. Mere passive investment in equity does not amount to
doing business.

What if the rights of the FC as SH were violated, is the FC allowed

to sue to enforce its rights, despite lack of license?
• Yes. Any enforcement of cause of action as a result of that
passive investment does not require license to do business.

May an FC vote its shares to elect directors of the corp?

• Yes. This is right resulting from passive investment in equity
which is enforceable without need of license.

When is the FC as SH needed to obtain license?

• If the FC will actively participate in the management of the
corp.
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What is usually the issue when it comes to FCs investing in equity?

• It is not the license to do business, but the ownership limit allowed to
foreign FCs. There are activities reserved in whole or in part for Filipinos.

Can lending companies be wholly owned by FCs?

• Yes. Recent amendment to the negative investment list now allows
lending corps including online lending apps to be wholly owned by FCs.

Suppose the lending corp was engaged in online shaming to harass its
borrowers who failed to pay.

What would be the cause of action of borrowers?

Their cause of action is violation of the Data Privacy Act. The lending
company is precluded from divulging the identity of the borrower without
the express consent of the latter. The identity of the borrower is a personal
info that cannot be processed by the lender without the consent of the
data subject.
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What is the key principle of data privacy?
• You cannot process any personal info and personal sensitive info
without the consent of the data subject except in cases allowed by
law.

What do you mean by processing?

• It is so broad to include collection, authorization, retrieval, storage,
use, updating, erasure, destruction.

Can wellness center be wholly owned by FCs?

• Yes. Now, they can be owned by FCs.

When can you say that an act, or acts, amounts to doing business?
• You apply the characterization test.

What is the characterization test?

• Whether the act or acts will evince the intention of the corp to attain
its corporate purpose. If this is the case, then the FC is deemed
engaged in doing business.
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In Hutchison, vs SBMA, Hutchison is a port operator all over Asia. It

participated in the bidding to operate the Subic Bay Port. The project
was awarded originally to Hutchison but was revoked by SBMA Board
and awarded to Razon. The Office of the President affirmed the
SBMA Board. Hutchison filed an injunction with the RTC. SBMA filed a
motion to dismiss on the ground that Hutchison cannot sue since it
has no license to do business. Hutchison argued that mere bidding is
not doing business. It has not won the project yet. Once it has won,
then it will obtain license.
Does Hutchison need license considering that it merely participated
in the bidding?
• Yes. Being a FC engaged in operating ports, its act of participating
in bidding shows its intention to attain the purpose of the corp, and
hence considered doing business. Without license, it cannot sue.

In Litton Mill vs CA, the FC is organized for the purpose of buying and
selling sports wears. It sold on a one-time transaction, 3000 jerseys.
Can Litton sue in the PH?
• No. Despite only being an isolated transaction, but because it is an
act that shows intention to attain the purpose of the FC, it is
deemed doing business, and therefore lack of license bars it from
suing in the PH.
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Does it have to be several acts to show continued business

operations?
• Generally, yes if it is to show continued business operations.
A single act cannot prove continued business operations.
But even if it is just one act but shows the intention to attain
the purpose of the FC, then it is enough.

When can an FC use even without license?

1. Casual or isolated transaction
2. Action to enforce IP rights
3. Exclusive venue stipulation
4. FC is a co-plaintiff
5. Obtaining license subsequent to the transaction
6. Estoppel
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When an FC exports goods to the PH, without any activity

done in the PH, is that doing business?
• No. Mere exportation is an isolated transaction.
• An FC Insurance company paid its insured and was
subrogated into the rights of the insured. It sued the
wrong doer here in the PH.

Is it allowed to sue despite lack of license to do business?

Yes. Enforcement of subrogatory rights is an isolated
transaction.

Goods meant to be delivered to an FC were misdelivered

to a local company. Can the FC sue to recover the goods?
• Yes. Recovery of misdelivered goods is an isolated
transaction.
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In Antam Consolidated vs CA, the FC contracted with DC for the purchase of copra
products. The DC did not deliver the FC, so the FC incurred losses. A second contract was
executed, but this time the losses of the FC was reflected in the reductions to the
consideration. The second contract was again not fulfilled. A third contract was
executed, same story. Thereafter, the FC had enough and sued. The DC moved to dismiss
on account of no license to do business.
Can the FC sue?
• Yes. There may be 3 contracts, but they arose from one isolated transaction. No license
is needed to sue.

Why is enforcement of IP rights allowed to FCs without license?

• Because it is a treaty obligation under the Paris convention, now embodied in the IP
code.

What is this obligation under the Paris Convention?

• PH has the obligation to recognize and protect the IP rights of citizens, nationals, or
countries signatories thereto.

If a person in the US has an establishment and uses a trademark, that mark, even though
not well known, enjoys protection here in the PH despite not being registered here.
Is the protection limited to well-known marks?
• No. This applies to trademarks in general.
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In Ecole De Cuisine vs Contreau, Ecole was able to register the

trademark “Cordon Bleu”, but years prior Contreau has already
registered “Cordon Bleu” in France, which is a signatory to the Paris
convention. When Contreau tried to register the trademark here in
the PH, it was opposed by Ecole because the latter has already
registered it here in the PH. it turns out that the directress of Ecole is an
alumna of Contreau.
Who owns the trademark?
• It is Contreau. Despite not being registered here, it is protected
because it has a establishment in France, which is a signatory to the
Paris Convention.
• In IP, it is not registration that confers ownership of the trademark. It
is the other way around. It is ownership that confers the right to
register.

What is the so called first to file rule?

• The first to file for registration is prima facie the owner of the mark.
However, this is merely presumptive and not conclusive. It can be
overcome by evidence.
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In Birkenstock vs Phil Shoe Expo, Birkenstock is a well-known
mark as early as 1800s in Germany. And then a corp based
in Marikina was able to register the name Birkenstock in the
PH. When Birkenstock applied for registration in PH, Phil Shoe
Expo opposed on the ground that it owned the trademark.
Who is the owner?
• It is Birkenstock. It is not registration that confers ownership
but ownership that confers right to register. Phil Shoe’s
registration is invalid for appropriating a mark already
belonging to another who enjoys IP protection under Paris
Convention.

How do you prove ownership?

• Just show the attributes of ownership such as being the
first one to use the mark commercially.
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In Fredco Manufacturing vs Harvard, Fredco was able to register the trademark

“Harvard Jeans” despite “Harvard” being a well-known mark. When Harvard
applied for registration of the mark for its merchandise such as bags, it was
opposed by Fredco.

Who is the owner of the mark?

Obviously, it is Harvard. It was a mistake to have granted registration to Fredco
because it suggests a false connection to Harvard.

In Phillip Morris vs CA, Phillip Morris owns among others the trademark “MARK”.
Fortune Tobacco registered the trademark “MARK 7”, which is confusingly similar
with that of Phillip Morris. Phillip filed a trademark infringement suit against
Fortune. The defense of Fortune is Phillip is an FC without license to do business in
the PH therefore cannot sue. Second, there is no showing that Phillip used the
trademark in the PH.

Are the contentions valid?

• On the first, no. a FC may sue to enforce IP rights despite lack of license.
• On the second, Fortune is right. Lack of use of the mark here in the PH is fatal.
• However, this has already been abandoned by the cases of Ecole de Cuisine,
Bikenstock, and Fredco Manufacturing. Despite not being used here in the PH,
if used in a country signatory to the Paris convention, it enjoys IP protections.
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If the FC is party to an agreement that stipulated that Phil

courts will be the venue of the suit, can the FC file the suit
without license?
• It depends. As you know, there are 2 kinds of venue
stipulations: permissive and exclusive. The FC has no choice,
and therefore must file the case in the PH despite without
license, only if the venue stipulation is exclusive.

ABC entered into a loan agreement with a syndicate of

lenders, a consortium of banks. If the FC is part of the
consortium and the consortium will file an action to enforce
the payment, can the FC join the suit?
• Yes. Because the FC is a co-plaintiff. The cause of action
cannot be split so as to exclude the FC in the action.
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without license?
• It is not void but merely voidable, because it can be cured by the
act of obtaining the requisite license. The license obtained
subsequent to the transaction cures the defect and retroacts to
the date of the transaction. (Home Insurance vs Eastern Shipping)

What will now stop the FCs from doing business without license if they
can after all obtain the license subsequent to the transaction?
• While the transaction is cured, this is without prejudice to criminal
liability imposed by RCC for doing business without license.

Will all violations of the RCC give rise to criminal liability?

No, because the RCC is not a penal code. There are only two
violations that are criminal:
1. Violation of the right of inspection
2. Doing business without license.
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• What do you mean by estoppel here?

• It means the DC dealt with the FC despite knowledge that the latter has no license
to do business and reaped the benefits therefrom. The DC is deemed precluded to
question the lack of capacity to sue of the FC.
• What are the requirements for issuance of the license of the FC?
• 1. Proof of bona fide incorporation
• 2. Security deposit
• 3. Resident agent

• What are the proofs of bona fide incorporation?

• AOI or bylaws. This is the only time the FC is required to submit bylaws. Just to show
proof that it is a bona fide corp.
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What is the function of the resident agent?

One with authority to receive summons and other court processes in behalf of the
corp.

Can the resident agent be a corp?

• Yes. The law does not require the agent to be a natural person. So, it can be
either natural or juridical.

Can the resident agent sign certification for non-forum shopping or sign the
complaint?
• No. The resident agent only has the authority to receive summons and other
court processes unless separately authorized by the board of the FC (Expert
Travels vs Korean Airlines)

What happens if the FC violates the rules of the SEC or the terms of its license?
• This will result in the revocation of its license.

What happens if the resident agent resigns, dies, or incapacitated?

• This will not immediately result to revocation of the license. The FC must be
given reasonable time to appoint a new one.
THANK YOU