 Affords greater protection to minority stockholders

REVISED CORPORATION CODE OF THE PHILIPPINES - It expanded the list of books and records required to be kept by the corporation
(Republic Act No. 11232) available for examination and expanded the remedies available in case of
violation of stockholders’ right of inspection

Title I: GENERAL PRINCIPLES  Codifies internationally- accepted practices and norms on conducting business.
- Allowing the right to vote through electronic communication and sending notices
of meeting electronically
A. GENERAL PRINCIPLES - Provisions for arbitration mechanism to resolve disputes within the corporation

 Strengthens the powers of the Securities and Exchange Commission (hereafter “SEC”)
1. THE CORPORATION CODE OF THE PHILIPPINES (Sec.1) to be able to fully exercise its regulatory authority over corporations
- Enumerates enforcement provisions and authorized the SEC to administer,
Section 1. Section 1. Title of the Code. - This Code shall be known as the "Revised Corporation investigate and prosecute violation of the RCC provisions.
Code of the Philipines".

a. History 2. PRIVATE CORPORATIONS, defined (Sec.2)

- Act. No. 1459, Corporation Law (enacted on March 1, 1906, took effect on April 1, Section 2. Corporation defined. – A corporation is an artificial being created by operation of law,
1906) having the right of succession and the powers, attributes and properties expressly authorized by
law or incident to its existence.
- Batas Pambansa Blg. 68 (Corporation Code of the Philippines) – May 1, 1980

- Republic Act No. 11232, otherwise known as the Revised Corporation Code (hereafter
referred to as “RCC”)
 repealed the 38-year-old Batas Pambansa 68
 approved by Congress on February 20, 2019
 signed into law by President Rodrigo R.Duterte on February 21, 2019
 took effect on February 23, 2019, upon completion of its publication in Manila
Bulletin and Business Mirror,
 effective upon its publication on February 21, 2019
 otherwise known as the Corporation
b. Salient points of the RCC
 Promotes ease of doing business, hence, the provisions, among others, on one-person
corporation, the option of the corporation to have perpetual existence and the
elimination of the minimum subscription requirement upon incorporation.
 Adopts best practices on good corporate governance.
- For instance, the RCC requires certain items to be contained in the bylaws,
minutes and agenda of regular stockholders’ meetings all aimed at fostering
transparency.
3. ATTRIBUTES OF A CORPORATION
a. Created by operation of law
 A.XII, Sec.16, Phil. Constitution
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.
 GR: Created by operation of law
Mere consent of the parties is not sufficient. The State must give its consent either
through a special law (in case of government corporations) or a general law (i.e.,
Corporation Code in case of private corporations).
 EXC: Sec. 4
Section 4. Corporations created by special laws or charters. – Corporations created by
special laws or charters shall be governed primarily by the provisions of the special law
or charter creating them or applicable to them, supplemented by the provisions of this
Code, insofar as they are applicable. (n)
2-fold test: Common good & economic viability (A.XII, Sec.16, Phil. Constitution)

Atty. Maan Grace B. Elago BLR 221 Page 1 of 5

b. Artificial being
 GR: Doctrine of Corporate Entity (Sec.18)
Section 18. Registration, Incorporation and Commencement of Corporation Existence. -
xxx
A private corporation organized under this Code commences its corporate existence
and juridical personality from the date the Commission issues the certificate of
incorporation under its official seal thereupon the incorporators,
stockholders/members and their successors shall constitute a body corporate under
the name stated in the articles of incorporation for the period of time mentioned
therein, unless said period is extended or the corporation is sooner dissolved in
accordance with law.
 Definition
A corporation has a juridical personality separate and distinct from that of its
stockholders or members.
Used for purposes of convenience and to subserve the ends of justice
 Consequences:
- Ownership of property, capacity to sue and be sued in its own right (Art. 46,
NCC);
- Entitlement to constitutional rights; eg. Due process, equal protection;
(Cannot always claim equal rights with natural persons; i.e. entitlement to
moral damages.
- Liability for crimes or torts;
- Not liable for the debts of its stockholders and vice versa
- Remains unchanged and unaffected in its identity by changes in its individual
membership
 EXC: Doctrine of Piercing the Veil of Corporate Fiction/Doctrine of Corporate Alter Ego
 Definition
Piercing the veil of corporate entity requires the court to see through the
protective shroud which exempts its stockholders from liabilities that ordinarily
they could be subject to, or distinguishes one corporation from a seemingly
separate one, were it not for the existing corporate fiction.
This doctrine allows the State to disregard the fiction of juridical personality of the
corporation where the entity is formed or used for non-legitimate purposes
 Elements: Control, breach of duty, injury
 Grounds
- Where corporate fiction is used to defeat public convenience
Atty. Maan Grace B. Elago
Corporate Fiction: a personality separate from the stockholders/members.
Public Convenience: Instead of dealing with all the individual stockholders, it
is for public convenience to deal with the corporation alone.
- Where corporate fiction is used to justify a wrong, to protect fraud, or to
defend a crime
 Instances of piercing the veil of corporate fiction
- Where a corporation functions for the benefit of a single person (mere alter
ego/business conduit of the owner)
- Corporation is a mere instrumentality of the individual stockholders
- Subsidiary company is created merely as an agency of a parent corp
 Alter ego/Instrumentality doctrine
There must be control, not merely majority or complete stock control,
but complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind,
will or existence of its own
- Domestic corporation is controlled by aliens
 Dummy doctrine
Where the corporation is controlled by aliens, in violation of the law as
where it was organized under Philippine laws
- Organized by an insolvent debtor to defraud his creditors
 Effect
In piercing the veil, the stockholders become liable instead of the corporation.
c. With powers, attributes and properties expressly authorized by law or incident to its
existence (Title IV)
As a mere creature of law, it can exercise only such powers as the law may choose to grant
it, either expressly or impliedly.
d. With right to Succession
 Succession (artificial succession), defined – continuation of a corporation’s legal status
despite changes in ownership/management
 Right of succession
A corporation has the capacity for continuous existence despite changes in
rd
stockholders/members or by any transfer of shares by a stockholder to a 3 person.
BLR 221 Page 2 of 5
4. ADVANTAGES AND DISADVANTAGES OF A CORPORATION Effect of mismanagement Partner vs. partner Corp vs. Board
Right of succession None Yes
ADVANTAGES DISADVANTAGES Only up to extent of
Extent of liability Liable to 3rd persons
Complicated in formation and investment
Legal capacity to act as a legal unit
management Transferability of interest No Yes
Relatively high cost of formation & Dissolution Any time With consent of the state
Continuity of existence
operation Governing law New Civil Code RA 11232
Credit strengthened by continuity of Credit weakened by limited liability of
existence SHs
Centralized management Lack of personal element B. COMPONENTS OF A CORPORATION (Subjective components)
Standardized creation, organization, Greater degree of governmental
management, dissolution control 1. Promoter
Makes feasible gigantic financial enterprises SHs voting rights theoretical in large A person who, acting alone or with others, takes initiative in founding and organizing the
Limited liability of SHs corps where proxies are used business or enterprise of the issuer and receives consideration therefor
SHs have little voice in conduct of
SHs are not considered general agents
business 2. Incorporators (Sec. 5,10)
Separation of control/mgmt &
Transferrability of interests Section 5. Corporators and Incorporators, Stockholders and Members. – xxx
ownership
Incorporators are those stockholders or members mentioned in the articles of incorporation as
originally forming and composing the corporation and who are signatories thereof.
5. CORPORATION VS. PARTNERSHIP
Section 10. Number and Qualifications of Incorporators. - Any person, partnership, association or
 Similarities corporation, singly or jointly with others but not more than fifteen (15) in number, may organize
a corporation for any lawful purpose or purposes: Provided, That natural persons who are
 Juridical personality licensed to practice a profession, and partnerships or associations organized for the purpose of
 Can only act through its agents practicing a profession, shall not be allowed to organize as a corporation unless otherwise
 Aggregate of individuals provided under special laws. Incorporators who are natural persons must be of legal age.
 Distribution of profits to those who contribute capital Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of
 Organized only if the law allows it the capital stock.
 Taxable A corporation with a single stockholder is considered a One Person Corporation as described in
 “Perpetual” existence Title XIII, Chapter III of this Code.

 Differences 3. Corporators (Sec. 5)

Section 5. Corporators and Incorporators, Stockholders and Members. - Corporators are those
PARTNERSHIP CORPORATION who compose a corporation, whether as stockholders or shareholders in a stock corporation or
Manner of creation Mere agreement of parties Operation of Law/ Law as a members in a nonstock corporations. xxx
Number of incorporators At least 2 Even 1 a. Stockholders; subscribers
b. Members
Commencement of juridical Issuance of Certificate of
Execution of contract
personality Incorporation
4. Governing Body (Title III)
Expressly granted by law
a. Board of Directors
Powers As authorized by partners or incident to its
b. Board of Trustees
existence
Management GR: all partners Board

Atty. Maan Grace B. Elago BLR 221 Page 3 of 5

5. Managing and Administrative Body dividends to its members, trustees, or officers: Provided, That any profit which a nonstock
a. Executive committee corporation may obtain incidental to its operations shall, whenever necessary or proper, be
b. Contracted Managers used for the furtherance of the purpose of purposes for which the corporation was
organized, subject to the provisions of this Title.
6. Corporate Officers (Sec. 24) The provisions governing the stock corporations, when pertinent, shall be applicable to
Section 24. Corporate Officers. - Immediately after their election, the directors of a corporation nonstock corporations except as may be covered by specific provisions of this Title.
must formally organize an elect: (a) a president, who must be a director; (b) a treasurer, who
must be a resident of the Philippines; and (d) such other officers as may be provided in the 2. As to number of persons composing the corporation
bylaws. If the corporation is vested with public interest, the board shall also elect compliance
officer. The same person may hold two (2) or more positions concurrently, except that no one a. Corporation Aggregate : a corporation consisting of more than one member or corporator
shall act as president and secretary or as president and treasurer at the same time, unless
otherwise allowed in this Code. b. Corporation Sole : a religious corporation which consists of one member or corporator only
The officers shall manage the corporation and perform such duties as may be provided in the and his successors, such as a bishop. (Sec. 108)
bylaws and/or as resolved by the board of directors.
c. One Person Corporation : one with a single stockholder (Sec. 116)
7. Underwriter
A person, usually an investment banker, who: Section 116. One Person Corporation. - A One Person Corporation is a corporation with a
(1) Has agreed, alone or with others, to buy at stated terms an entire issue of securities or a single stockholder: Provided, That only a natural person, trust, or an estate may form a One
substantial part thereof; or Person Corporation.
(2) Has guaranteed the sale of an issue by agreement to buy from the issuing party any unsold Banks and quasi-banks, preneed, trust, insurance, public and publicly-listed companies, and
portion at a stated price; or non-chartered government-owned and -controlled corporations may not incorporate as
(3) Has agreed to use his “best efforts” to market all or part of an issue; or ONe Person Corporations: Provided, further, That a natural person who is licensed to
(4) Has offered for sale stock he has purchased from a controlling stockholder exercise a profession may not organize as a One Person Corporation for the purpose of
exercising such profession except as otherwise provided under special laws.

3. As to legal status

C. CLASSIFICATION OF CORPORATIONS a. De Jure Corporation

Organized in accordance with the requirements of law; existing both in fact and in law
1. As to existence of shares of stock
b. De Facto Corporation (Sec.19)
a. Stock Corporation (Sec.3) Organized with a colorable compliance with the requirements of a valid law; existing in fact
but not in law
Section 3. Classes of Corporations. - Corporations formed or organized under this Code may
be stock or nonstock corporations. Stock corporations are those which have capital stock Section 19. De facto Corporations. - The due incorporation of any corporation claiming in
divided into shares and are authorized to distribute to the holders of such shares, dividends, good faith to be a corporation under this Code, and its right to exercise corporate powers,
or allotments of the surplus profits on the basis of the shares held. All other corporations shall not be required into collaterally in any private suit to which such corporation may be a
are nonstock corporations. party. Such inquiry may be made by the Solicitor General in a quo warranto proceeding.

b. Non-Stock Corporation (Sec.3 & 86) c. Corporation by Estoppel (Sec.20)

A group of persons that assumes to act as a corporation knowing it to be without authority
Section 86. Definition. - For purposes of this Code and subject to its provisions on to do so, and enters into a transaction with a third person on the strength of such
dissolution, a nonstock corporation is one where no part of its income is distributable as appearance. It is precluded to deny its existence in an action under said transaction. It is
neither a de jure nor de facto corporation

Atty. Maan Grace B. Elago BLR 221 Page 4 of 5


Section 20. Corporation by Estoppel. - All persons who assume to act as a corporation
knowing it to be without the authority to do so shall be liable as general partners for all
debts, liabilities and damages incurred or arising as a result thereof: Provided, however,
That when any such ostensible corporation is sued on any transaction entered by its as a
corporation or on any tort committed by it as such, it shall not be allowed to use on any its
lack of corporate personality as a defense. Anyone who assumes an obligation to an
ostensible corporation as such cannot resist performance thereof on the ground that there
was in fact no corporation.
d. Corporation by Prescription
One which has exercised corporate powers for an indefinite period without interference on
the part of the sovereign power and which by fiction of law is given the status of a
corporation, e.g. Roman Catholic Church
1) Government –owned or controlled corporation (GOCC)
 One created or organized by the government or of which the government is
the majority stockholder; it is not for the government of a portion of the
State
 e.g. GSIS, SSS, PNRC,
 May be organized as stock (ex. Land Bank of the Phil., Dev’t. Bank of the Phil.)
or non-stock
2) Quasi-Public Corporation (a.k.a. “public utility” or “public service corporation”)
 A.k.a. “public utility” or “public service corporation”; a private corporation
which have accepted from the State the grant of franchise or contract
involving the performance of public duties but which are organized for profit.
 e.g. electric, water, telephone and transportation companies
6. As to publicity

4. As to relationship of management and control a. Open corporation

Open to any person who may wish to become a stockholder/member thereto
a. Parent/Holding Corporation
One which controls another as a subsidiary by the power, either directly or indirectly, to b. Close corporation (Title XII)
elect management. It is one that holds stocks in other companies for purposes of control Limited to selected prsons or members of a family
rather than for mere investment.
7. Special corporations
b. Subsidiary Corporation
i. Majority-owned Subsidiary a. Educational corporations (Sec. 105-106)
Its capital stock (51% to 94%) is owned by another corporation
ii. Wholly-Owned Subsidiary b. Religious corporations (Sec. 107-114)
Its capital stock (95% to 100%) is owned by another corporation  Lay corporation – organized for a purpose other than for religion; may be:
 Eleemosynary (for charitable purposes), or
c. Affiliates  Civil (for business/profit)
Companies subject to the common control of the Holding Corporation
8. As to place of incorporation
d. Parent and Subsidiary Corporation
Separate entities with power to contract with each other a. Domestic Corporation
Formed, organized, or existing under Philippine laws
5. As to Functions
b. Foreign Corporation
a. Public Corporation Formed, organized or existing under any laws other than those of the Philippines. (Sec. 123)
One formed or organized for the government of a portion of the State for the general good
and welfare

b. Private Corporation
Those formed for private purpose, usually for profit-making
- includes:

Atty. Maan Grace B. Elago BLR 221 Page 5 of 5