C.

THE LAW PERTAINING TO PRIVATE PERSONAL AND COMMERCIAL RELATIONS

b. Commercial Law - 6 questions (10%)

1. Corporations

TERMS DEFINITION
Corporation 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 incidental to its existence. (Sec. 2, RCCP)

Attributes of a Corporation:

a) It is an artificial being with separate and distinct personality;

b) It is created by operation of law;

c) It has the right of succession; and

d) It has powers, attributes and properties expressly authorized by law or incident to its existence
Doctrine of Corporations are juridical persons to which the law grants a juridical personality, separate and distinct from
Corporate Entity/ that of each shareholder. (Art. 44, NCC)
Doctrine of
Separate The separateness of its personality is present even if a corporation is a One Person Corporation (Sec. 116,
Personality RCCP)
Limited Liability While stockholders are generally not personally liable for the financial obligations of the corporation, the
Rule stockholders may be liable if they have not paid or have not fully paid the subscription price and the
corporation is insolvent or it cannot comply with its obligations. (Donnina Halley v. Printwell Inc, 2011)

Note: A sole shareholder (OPC) claiming limited liability has the burden of affirmatively showing that the
corporation was adequately financed
Artificial being A corporation exists by fiction of law only; hence, it is subject to the limitations that are inherent because of
its nature.

Actions: It can act only through its directors, officers, and employees

Criminal Liability: Generally, corporations cannot be criminally liable because there is no law making them
criminally liable

If the crime is committed by a corporation or other juridical entity, the directors, officers, employees or other
officers thereof responsible for the offense shall be charged and penalized for the crime, precisely because
of the nature of the crime and the penalty therefor.

However, a law may be passed to specifically provide that a corporation is criminally liable. The RCCP
provides that if the offender is a corporation, the penalty may at the discretion of the court be imposed upon
such corporation responsible for the violation of the provisions of the RCCP or indispensable to its
commission. The penalty of payment of fine can be imposed on the corporation itself.
Doctrine of A corporation is a legal entity distinct from the persons composing it. This theory was adopted for the
Piercing the veil of purpose of convenience and to serve the ends of justice. But when the veil of corporate fiction is used as a
corporate entity 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
Three-Pronged Control – not mere stock control, but complete domination – not only of the finances, but of policy and
Control Test business practice in respect to the transaction attacked and must have been such that the corporate entity
as to this transaction had at the time no separate mind, will or existence of its own.
Such control must have been used by the defendant to commit a fraud or wrong to perpetuate the violation
of a statutory or other positive legal breach of duty, or a dishonest and an unjust act in contravention of the
plaintiff’s legal right; and
The said control and breach of duty must have proximately caused the injury or unjust loss complained of
Concession It is a principle in the creation of corporations under which a corporation is an artificial creature without any
Theory existence until it has received the imprimatur of the State acting according to law through the SEC.
Right of Capacity to have continuity of existence despite the changes on the persons who compose it.
Succession
Theory of Special No corporation, under the code, shall possess or exercise any corporate powers EXCEPT:
Capacities/
Limited Capacity a) Those conferred by law,
Doctrine b) Its Articles of Incorporation,
c) Those implied from express powers; and
d) Those as are necessary or incidental to the exercise of the powers so conferred
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a. Kinds of Corporations

As to
Existence of 1. Stock Those which have capital stock divided into shares and are authorized to
Stocks distribute to the holders of such shares, dividends, or allotments of the surplus
profits on the basis of the shares held. (Sec. 3, RCCP)
2. Non-Stock One where no part of its income is distributable as dividends to its members,
trustees, or officers: Provided, That any profit which a nonstock corporation may
obtain incidental to its operations shall, whenever necessary or proper, be used
for the furtherance of the purpose or purposes for which the corporation was
organized, subject to the provisions of this Title. (Sec. 86, RCCP)
Organizers Public State only
Private Private persons alone or with the State
Functions Public Government of a portion of the State
Private Usually for profit-making functions
Governing law Public Special Laws and Local Government Code
Private Law on Private Corporations
Legal Status De jure Corporation organized in accordance with requirements
De facto A corporation where there exists a flaw in its incorporation

Requisites:
1. The existence of a valid law under which it may be incorporated
2. An attempt in good faith to incorporate
3. Use of corporate powers (Aquino)
Corporation by Estoppel Groups of persons which holds itself out as a corporation and enters into a
contract with a third person on the strength of such appearance cannot be
permitted to deny its existence in an action under said contract
Corporation by prescription A corporation that was not formally organized as such, but has been duly
recognized by immemorial usage as a corporation, with rights and duties
maintainable at law (e.g. Roman Catholic Church)
Laws of Domestic Corporation formed, organized or existing under Philippine laws
incorporation Foreign A corporation formed, organized or existing under any laws other than those of
the Philippines and whose laws allow Filipino citizens and corporations to do
business in its own country or state (Sec. 123, RCCP)
Number of Corporation Aggregate A corporation that is formed by and is composed of two or more stockholders or
Components members
Corporation Sole A corporation that is organized and formed by one person (who may be the chief
archbishop, bishop, priest, minister, rabbi, or other presiding elder of a religious
denomination, sect or church). This applies to religious corporations where a
corporation sole is allowed for purposes of administering and managing as
trustee, the affairs, property and temporalities of any religious denomination, sect
or church.(Sec. 107 and Sec. 108, RCCP). These stock corporations suppletorily
apply to a corporation sole.
One Person Corporation A corporation with a single stockholder, who may be a natural person, a trust, or
an estate (Sec. 116, RCCP). No other person / entity, outside those mentioned
in Section 116 of the RCCP, may form an OPC. An OPC is a stock corporation.
Submission of By-Laws is not required for an OPC (Sec. 119, RCCP)
Other Close One whose articles of incorporation provides that:
Corporations (a) all the corporation’s issued stock of all classes, exclusive of treasury shares,
shall be held of record by not more than a specified number of persons, not
exceeding twenty (20);
(b) all the issued stock of all classes shall be subject to one or more specified
restrictions on transfer permitted by this Title; and
(c) the corporation shall not list in any stock exchange or make any public offering
of its stocks of any class. Notwithstanding the foregoing, a corporation shall not
be deemed a close corporation when at least two-thirds (2/3) of its voting stock
or voting rights is owned or controlled by another corporation which is not a close
corporation within the meaning of this Code.
Special Corporations
Educational
Religious
Corporation For the purpose of administering and managing, as trustee, the affairs, property
Sole and temporalities of any religious denomination, sect or church, a corporation
sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or
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 other presiding elder of such religious denomination, sect, or church. (Sec. 108,
RCCP).
Religious A religious organization of a religious denomination, sect or church that is
Society incorporated for the administration of its temporalities or for the management of
its affairs, properties and estates (Sec. 114, RCCP)
Corporations Going Public When it decides to list its shares in the stock exchange. This includes
going public corporations that will make initial public offering of its shares
vs going
private
Going Private When it would restrict the shareholders to a certain group. In a sense, this also
includes close or closely-held corporations
Real Estate Investment A stock corporation established in accordance with the Corporation Code of the
Trust Philippines and the rules and regulations promulgated by the SEC principally for
the purpose of owning income generating real estate assets (Sec. 3(cc), RA No.
9856)

b. Composition of/Membership in Board of Directors

Qualifications of For stock corporation – must own at least 1 share of the capital stock of the corporation in his own name;
Directors For non-stock corporation – he must be a member. He must be a stockholder in his own right. It must be a
legal title not beneficial title.
He must not be disqualified under Section 26 of the RCCP, and other laws and regulations.

1) Convicted by final judgment:

a) of an offense punishable by imprisonment for a period exceeding 6 years

b) for violating RCCP; and
c) for violating RA 8799 (SRC)

2) Found administratively liable for any offense involving fraudulent acts; and

3) By a foreign court or equivalent foreign regulatory authority for acts, convicted of violations or misconduct
similar to those enumerated in paragraphs (a) (1) to (3) of Section 26.
Must be of legal Age
He must possess other qualifications as may be prescribed by law and in the by-laws of the corporation (eg
percentage of equity participation of foreigners with respect to nationalized activities must be complied with
and by-laws may provided for qualifications/disqualifications)
Independent A person who, apart from shareholdings and fees received from the corporation, is independent of
Director management and free from any business or other relationship which could, or could reasonably be
perceived to materially interfere with the exercise of independent judgment in carrying out the
responsibilities as a director. (Sec. 22, RCCP)

Independent directors must be elected by the shareholders present or entitled to vote in absentia during
the election of directors. Independent directors shall be subject to rules and regulations governing their
qualifications, disqualifications, voting requirements, duration of term and term limit, maximum number of
board memberships and other requirements prescribed by the SEC.
Who must have The board of the following corporations vested with public interest shall have independent directors
independent constituting at least twenty percent (20%) of such board:
directors
a) Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as “The Securities
Regulation Code”, namely those whose securities are registered with the Commission, corporations listed
with an exchange or with assets of at least Fifty million pesos (P50,000,000.00) and having two hundred
(200) or more holders of shares, each holding at least one hundred (100) shares of a class of its equity
shares;

b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-
need, trust and insurance companies, and other financial intermediaries; and

c) Other corporations engaged in business vested with public interest similar to the above, as may be
determined by the Commission, after taking into account relevant factors which are germane to the objective
and purpose of requiring the election of an independent director, such as the extent of minority ownership,
type of financial products or securities issued or offered to investors, public interest involved in the nature
of business operations, and other analogous factors.
How many SEC. 13. Contents of the Articles of Incorporation. –
directors or
trustees? xxx

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 (f) The number of directors, which shall not be more than fifteen (15) or the number of trustees which may
be more than fifteen (15);
What constitutes Stock Corporations – Majority of the OCS
quorum in election Non-stock Corporations – Majority of the members entitled to vote
of directors or
trustees?
How may directors Straight Voting Vote such number of shares for as many persons as there are directors to be elected
be voted for in Cumulative Cumulate his shares and give one candidate as many vote as the number of directors to
Stock Voting for 1 be elected multiplied by the number of his shares
Corporations? candidate
Cumulative Distribute his shares among as many candidates as he shall see fit (Sec. 23, RCCP)
Voting by
distribution
How may trustees Members may cast as many votes as there are trustees to be elected but may not acst more than one vote
be voted for in for one candidate.
non-stock
corporations?
Procedure for a) There must be a regular meeting or a special meeting called for the purpose
removal of
directors or b) A special meeting of the stockholders or members must be called by the secretary on order of the
trustees president, or upon written demand of stockholders representing or holding at leat a majority of the OCS, or
a majority of the members entitled to vote

c) Prior notice to stockholders or members of the corporation of the intention to propose removal at the
meeting

d) A vote of 2/3 of the OCS or members entitled to vote (Sec. 27, RCCP)

Note: Removal may be with or without cause, provided that removal without cause may not be used to
deprive minority stockholders or members of the right of representation to which they may be entitled
How vacancies are Removal Filled by the stockholders or members in a regular or special meeting called for that
filled purpose (Sec. 28, RCCP)
Expiration of term

Other than by May be filled by the vote of at least a majority of the remaining directors or trustees if
removal or still constituting a quorum (Sec. 28, RCCP)
expiration of term

c. Powers

Kinds
Express General Powers Sue and be sued in its corporate name
(Sec. 35, RCCP) Right of succession
Adopt and use a corporate seal
Amend Articles of Incorporation
Adopt, amend or repeal By-laws
For stock corporations – issue and sell stocks to subscribers and to sell treasury
stocks; for non-stock corporations – admit members
Purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with real and personal property – including bonds and securities of
other corporations – as the transaction of its lawful business may reasonably and
necessarily require
Enter into partnership, joint venture, merger, consolidation, or any commercial
agreement with natural or juridical persons
Make reasonable donations for public welfare, or for hospital, charitable, cultural,
scientific, civic, or similar purposes

Prohibition: foreign corporations shall not give donations in aid of any political party
or candidate or for purposes of partisan political activity
Establish pension, retirement and other plans for the benefit of directors, trustees,
officers and employees
Exercise other powers essential or necessary to carry out its purpose/s
Specific Powers Extend or Shorten Corporate Term (Sec. 36, RCCP)
Increase or Decrease Capital Stock (Sec. 37, RCCP)
Incur, Create or Increase Bonded Indebtedness (Sec. 37, RCCP)
Deny Pre-Emptive Right (Sec. 38, RCCP)
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 Sell, Dispose, Lease, Encumber Property and Assets (including all or substantially all
of corporate assets) (Sec. 39, RCCP)
Purchase or Acquire Own Shares (Sec. 40, RCCP)
Invest in Another Corporation, Business or for Any Other Purpose (Sec. 41, RCCP)
Declare Dividends (Sec. 42, RCCP)
Enter into Management Contract (even if it is called service contract, operating
agreement or otherwise) – the manager undertakes to manage or operate all or
substantially all of the business of the corporation (Sec. 43, RCCP)
Implied Those that can be inferred from or necessary for the exercise of the express powers

Test: Whether the act in question is in direct and immediate furtherance of the
corporation’s business, fairly incident to the express powers and reasonably
necessary to their exercise
Incidental Those that are incidental to the existence of the corporation

d. Duties and Prerogatives of Board of Directors and Stockholders

Duties Term Definition

Directors Duty of The directors or trustees and officers to be elected shall perform the duties enjoined on them
Obedience by law, the AOI and the by-laws
Duty of Loyalty The director or officer owes loyalty and allegiance to the corporation – a loyalty that is
undivided and an allegiance that is influenced by no consideration other than the welfare of
the corporation
Duty of Directors or trustees shall not willfully and knowingly vote for or assent to patently unlawful
Diligence acts of the corporation or act in bad faith or with gross negligence in directing the affairs of
the corporation.
The duty of diligence makes an officer liable for damages which, through his non-
performance, the principal may have suffered (Art. 1884, NCC)
Fill vacancy of directors in case of vacancy other than by removal or expiration of term (Sec.
28, RCCP)
Stockholders Liability to the corporation for unpaid subscription (Secs. 66 to 69, RCCP)
Liability to the corporation for interest on unpaid subscription if so required by the By-Laws
(Secs. 65, and 66)
Liability to the creditors of the corporation for unpaid subscription subject to the Limited
Liability Rule
Liability for watered stock (Sec. 64, RCCP)
Liability for dividends unlawfully paid (Sec. 42, RCCP)
Administrative, civil and criminal liability of a stockholder responsible for violation of the
RCCP or for acts indispensable to the violation of the RCCP (Sec. 171, RCCP)

Rights and Obligations of Directors Rights and Obligations of Stockholders

Exercise Corporate Powers (Sec. 22, RCCP)
Conduct all business (Sec. 22, RCCP)
Control all properties of the corporation (Sec. 22, RCCP)
Immediately after their election, the directors of a
corporation must formally organize and elect:
(a) a president, who must be a director;
(b) a treasurer, who must be a resident;
(c) a secretary, who must be a citizen and resident of the
Philippines; and
(d) such other officers as may be provided in the bylaws.
Right to compensation, provided:
a) Compensation is fixed in the bylaws; OR
Direct or indirect participation in management
Voting rights (Sec. 6 and Sec. 57, RCCP)
Right to remove directors (Sec. 27, RCCP)
Proprietary Rights:
a) Right to dividends
b) Appraisal right (Sec. 80, RCCP)
c) Right to issuance of stock certificate for fully paid shares (Sec. 63,
RCCP)
d) Proportionate participation in the distribution of assets in liquidation
(Sec. 139, RCCP)
e) Right to transfer of stocks in corporate books (Sec. 62, RCCP)
f) Pre-emptive right (Sec. 38, RCCP)
Right to inspect books and records (Sec. 73, RCCP)

b) Granted by the vote of the stockholders representing

at least a majority of the OCS at a regular or special
stockholders’ meeting (Sec. 29, RCCP)

Note: In no case shall the total yearly compensation

exceed 10% of the net income tax of the corporation
during the preceding year and directors shall not

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 participate in the determination of their own per diems or
compensation
Right to be furnished with the most recent financial statement/financial
report (sec. 74, RCCP)
Right to recover stocks unlawfully sold for delinquent payment of
subscription
Right to the issuance of new certificates in lieu of lost, stolen or
destroyed certificates (Sec. 71, RCCP)
Right to file individual suit, representative suit, and derivative suits

e. Articles of Incorporation and By-laws

Provision related to Articles of Incorporation Notes

SEC. 13. Contents of the Articles of Incorporation. – All corporations
shall file with the Commission articles of incorporation in any of the official
languages, duly signed and acknowledged or authenticated, in such form
and manner as may be allowed by the Commission, containing
substantially the following matters, except as otherwise prescribed by this
Code or by special law:
(a) The name of the corporation;
(b) The specific purpose or purposes for which the corporation is being
formed. Where a corporation has more than one stated purpose, the
articles of incorporation shall indicate the primary purpose and the
secondary purpose or purposes: Provided, That a nonstock corporation
may not include a purpose which would change or contradict its nature as
such;
(c) The place where the principal office of the corporation is to be located,
which must be within the Philippines;
(d) The term for which the corporation is to exist, if the corporation has not
elected perpetual existence;
In addition to those enumerated in the provisions:
a) Name of treasurer elected by subscribers and the
certification of the treasurer that the information set
forth in the seventh (on the authorized capital stock
and number of shares into which the ACS is dived)
and eighth (number of shares subscribed and details
of subscriptions) clauses of the Articles and that the
paid-up portion of the subscription in cash and/or
property for the benefit and credit of the corporation
has been duly received. (Note: there is no more
Treasurer’s Affidavit and the certification of the
treasurer is incorporated in the Articles but the
Treasurer must sign the Articles of Incorporation).
b) If the corporation engages in a nationalized
industry, a statement that no transfer of stock will be
allowed and recorded in the corporate books if it will
reduce the stock ownership of Filipinos below the
required legal minimum (Sec. 14, RCCP)

(e) The names, nationalities, and residence addresses of the incorporators;

(f) The number of directors, which shall not be more than fifteen (15) or the
number of trustees which may be more than fifteen (15);

(g) The names, nationalities, and residence addresses of persons who

shall act as directors or trustees until the first regular directors or trustees
are duly elected and qualified in accordance with this Code;

(h) If it be a stock corporation, the amount of its authorized capital stock,

number of shares into which it is divided, the par value of each, names,
nationalities, and residence addresses of the original subscribers, amount
subscribed and paid by each on the subscription, and a statement that
some or all of the shares are without par value, if applicable;
(i) If it be a nonstock corporation, the amount of its capital, the names,
nationalities, and residence addresses of the contributors, and amount
contributed by each; and

(j)Such other matters consistent with law and which the incorporators may
deem necessary and convenient.

An arbitration agreement may be provided in the articles of incorporation

pursuant to Section 181 of this Code.

The articles of incorporation and applications for amendments thereto may

be filed with the Commission in the form of an electronic document, in
accordance with the Commission’s rules and regulations on electronic
filing.
SEC. 15. Amendment of Articles of Incorporation. – Unless otherwise Procedure. Amendment requires the majority vote of
prescribed by this Code or by special law, and for legitimate purposes, any directors or trustees, and the vote or written assent
provision or matter stated in the articles of incorporation may be amended of the stockholders representing at least 2/3 of the
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 by a majority vote of the board of directors or trustees and the vote or
written assent of the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock, without prejudice to the appraisal right of
dissenting stockholders in accordance with the provisions of this Code. The
articles of incorporation of a nonstock corporation may be amended by the
vote or written assent of majority of the trustees and at least two-thirds (2/3)
of the members.
The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Amendments
to the articles shall be indicated by underscoring the change or changes
made, and a copy thereof duly certified under oath by the corporate
secretary and a majority of the directors or trustees, with a statement that
the amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the Commission.
The amendments shall take effect upon their approval by the Commission
or from the date of filing with the said Commission if not acted upon within
six (6) months from the date of filing for a cause not attributable to the
corporation.
SEC. 16. Grounds When Articles of Incorporation or Amendment May
be Disapproved. – The Commission may disapprove the articles of
incorporation or any amendment thereto if the same is not compliant with
the requirements of this Code: Provided, That the Commission shall give
the incorporators, directors, trustees, or officers a reasonable time from
receipt of the disapproval within which to modify the objectionable portions
of the articles or amendment. The following are grounds for such
disapproval:
outstanding capital stock of a stock corporation or 2/3
of the members of a non-stock corporations. This
includes extension and shortening of corporate term.
When Effective. Upon approval by the SEC, or from
date of filing with the SEC if the amendments are
impliedly approved by the SEC – that is, if not acted
upon by the SEC within 6 months from date of filing,
provided that the cause of delay cannot be attributed
to the corporation
Congress. The passage of statutes amending or
repealing the RCCP or special laws may result in the
amendment of the Articles of Incorporation or even
the dissolution of the corporation, provided that no
vested right or remedy or liability is removed or
impaired (Sec. 184, RCCP)
Any decision of the Commission rejecting the AOI or
disapproving any amendment thereto is appealable
by Petition for Review to the CA in accordance with
the pertinent provisions of the Rules of Court (PD No.
902-A, Sec. 6).

(a) The articles of incorporation or any amendment thereto is not

substantially in accordance with the form prescribed herein;

(b) The purpose or purposes of the corporation are patently

unconstitutional, illegal, immoral or contrary to government rules and
regulations;

(c) The certification concerning the amount of capital stock subscribed

and/or paid is false; and

(d) The required percentage of Filipino ownership of the capital stock under
existing laws or the Constitution has not been complied with.

No articles of incorporation or amendment to articles of incorporation of

banks, banking and quasi-banking institutions, preneed, insurance and
trust companies, NSSLAS, pawnshops, and other financial intermediaries
shall be approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the effect that
such articles or amendment is in accordance with law.

Term Definition/Elements/Requisites
Accomplished Fact There are provisions in the Articles of Incorporation that cannot be amended because they are
Rule accomplished facts:

a) Names of Incorporators

b) Names of persons who shall act as directors or trustees until the first regular directors or trustees are
duly elected

c) names of original subscribers and the amount subscribed and paid by each on the subscription, or
the names of the members who contributed to and the amount contributed by each to the capital

d) Name of the Treasurer elected by the original subscribers

e) Names of witnesses (Sec. 14, RCCP)

Limitations on use of It is not distinguishable from that already reserved or registered for the use of another corporation; or
corporate name If such name is already protected by law; or
When its use is contrary to existing law, rules and regulations (Sec. 17, RCCP)
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 By-laws Relatively permanent and continuing rules of action adopted by the corporation for its own government
and that of the individuals composing it and those having the direction, management and control of its
affairs, in whole or in part, in the management and control of its affairs and activities (China Banking
Corporation v. CA, 1997)
Requisites of By-laws It must be consistent with the RCCP, other pertinent laws and regulations
It must be consistent with AOI. In case of conflict, AOI prevails
It must be reasonable and not arbitrary or oppressive
It must not disturb vested rights, impair contract or property rights of stockholders or members to create
obligations unknown to the law.
In case of any bank, banking institution, building and loan association, trust company, insurance
company, public utility, educational institution or other special corporations governed by special laws,
the by-laws or any amendment thereto shall not be accepted by the SEC unless accompanied by a
certificate or the appropriate government agency to the effect that such by-laws or amendments are in
accordance with law (Sec. 45, RCCP)
Adoption of Original Pre- It may accompany the Articles of Incorporation and SEC will approve it together with
By-laws Incorporation the Articles. In this case, the by-laws must be approved and signed by all incorporators.
(Sec. 45, RCCP)
Post- For the adoption of by-laws after incorporation, the by-laws must be:
Incorporation
a) approved by stockholders constituting at least a majority of outstanding capital or of
at least a majority of the members in case of nonstock corporations and
b) A copy (signed by the approving stockholders or members, certified by majority of
directors or trustees, and countersigned by the corporate secretary) must be filed with
and approved by the SEC and attached to the original AOI. (Sec. 45, RCCP)
Amendment Stockholders/ Majority of the board plus majority of the OCS or members may amend or repeal the
members by-laws or adopt new by-laws
together with
board
By the Board As delegated by 2/3 of the OCS or 2/3 of members. Note that the delegated authority
only can be revoked by a majority of the OCS or majority of the members

2. Intra-corporate Dispute

a. Concept

Term Definition/Elements/Requisites
Intra-Corporate The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as
Controversies well pertain to the enforcement of the parties’ correlative rights and obligations under the Corporation
Code and the internal and intra-corporate regulatory rules of the corporation, If the relationship and its
incidents are merely incidental to the controversy or if there will still be conflict even if the relationship
does not exist, then no intra-corporate controversy exists (Aguirre II v. FQB+7 Inc)
Cases Covered Devices or schemes employed by, or any act of, the board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners or members of any corporation, partnership or association
Controversies arising out of intra-corporate partnership or association relations, between and among
stockholders, members or associates; and between, any or all of them and the corporation, partnership,
or association of which they are stockholders, members or associates, respectively;
Controversies in the Election or appointment of directors, trustees, officers or managers of corporations,
partnerships or associations
Derivative suits; and
Inspection of corporate books (Rule 1, Sec. 1(a), AM No. 01-2-04-SC)
Two-Pronged Test A dispute is intra-corporate if it passes both Relationship Test and Nature of the controversy Test
Relationship Test An intra-corporate controversy is one which pertains to any of the following relationships:
Between the corporation, partnership or association and the public
Between the corporation, partnership or association and the state in so far as its franchise, permit
or license to operate is concerned
Between the corporation, partnership or association and its stockholders, partners, members or
officers; and
Among the stockholders, partners or associates themselves
Nature of the There must be an intrinsic connection with the regulation of the internal affairs of the corporation
Controversy Test
Conditions for The right must be exercised at reasonable hours on business days
exercise of right to The director, trustee, stockholder, or member has not improperly used any information he secured
inspect corporate through any previous examination
books Demand is made in good faith or for a legitimate purpose

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Who are not entitled
to right of inspection?
Derivative Suit
When stockholders/
members may file
derivative suit
Requisites of
Derivative Suit
Inspecting or reproducing party must respect and is bound by confidentiality rules under prevailing laws
(Sec. 73, RCCP)
A requesting party who is not a stockholder or member of record
Is a competitor, director, officer, controlling stockholder or otherwise represents the interest of a
competitor
An action filed by stockholders to enforce a corporate action. It is an exception to the general rule that
the corporation’s power to sue is exercised only by the board of directors or trustees (Villamor, Jr v.
Umale, 2014)
Whenever the directors or officers of the corporation refuse to sue to vindicate the rights of the
corporation; or
Are the ones to be sued and are in control of the corporation;
When directors or officers are guilty of breach of trust, and not of mere error or judgment (Villamor Jr.
v. Umale, 2014)
He was a stockholder or member at the time the acts or transactions subject of the action occurred and
at the time the action was filed
He exerted all Reasonable efforts, and alleges the same with particularity in the complaint, to exhaust
all remedies available under the articles of incorporation, bylaws, laws or rules governing the corporation
or partnership to obtain the relief he desires
No appraisal rights are available
Suit is not a nuisance or harassment suit (Rule 8, Sec. 1., AM No. 01-2-04-SC)

INTELLECTUAL PROPERTY LAW

COPYRIGHT

COPYRIGHT

The scope of copyright is confined to literary and artistic
works which are original intellectual creations in the literary
and artistic domain protected from the moment of their
creation (Kho v. Court of Appeals, G.R. No. 115757, March
19, 2002).
There must be “fixation”. To be fixed, a work must be embodied in
a medium sufficiently permanent and stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of
more than transitory duration. Strictly speaking, there is no work for
copyright purpose, unless there is something tangible. It is “fixation”
that defines the time from when copyright subsists (Booklet No. 1,
p. 14, Managing Intellectual Property in the Book Publishing
Industry, WIPO).

Protection is given only to the expression of the idea – not the idea
itself (Olaño v. Lim Eng Co, G.R. No. 195835, March 14, 2016)

Copyright infringement
A person infringes a right protected when one:
1. Directly commits an infringement;
2. Benefits from infringing activity of another person
who commits an infringement if the person
benefiting has been given notice of the infringing
activity and has the right and ability to control the
activities of the other person; or
3. With knowledge of infringing activity, induces,
causes or materially contributes to the infringing
conduct of another. (IPC, Sec. 216)
To constitute a substantial reproduction, it is not necessary that the
entire copyrighted work, or even a large portion of it, be copied, if
so much is taken that the value of the original is substantially
diminished, or if the labors of the original author are substantially,
and to an injurious extent, appropriated (Habana v. Robles, G.R.
No. 131522, July 19, 1999).
Good faith, lack of knowledge of the copyright, or lack of intent to
infringe is not a defense against copyright infringement (Columbia
Pictures v. CA, G.R. No. 110318, August 28, 1996).

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 Authorship To Whom it Belongs

Sole authorship Copyright shall belong to the author of the work, his heirs, or assigns (IPC, Sec. 178.1)

Joint authorship In the absence of agreement, the rights of the co-authors shall be governed by the rules on co-
ownership.

If work consists of parts that can be used separately and the author of each can be identified, the
author of each part shall be the original owner of the copyright in the part that he has created (IPC,
Sec. 178.2)

Collective works Copyright belongs to the person under whose name it is disclosed (IPC, Sec. 171.2).

Contributor is deemed to have waived his right, unless he expressly reserves it (IPC, Sec. 196)

Work created by the The copyright shall belong to:

author during and in the
course of his 1. The employee if the creation of the object of copyright is not a part of his regular duties
employment even if the employee uses the time, facilities and materials of the employer;
2. The employer if the work is the result of the performance of his regularly-assigned duties,
unless there is an agreement, express or implied, to the contrary (IPC, Sec. 178.3).

Commissioned work Ownership of the work itself: The person, other than the employer of the author, who commissioned
such work (IPC, Sec. 178.4).

Ownership of the copyright: The creator of the commissioned work, unless there is a written
stipulation to the contrary (IPC, Sec. Sec. 178.4)

Audiovisual work The copyright shall belong to the:

1. Producer,
2. Author of the scenario,
3. Composer of the music,
4. Film director,
5. Author of the work so adapted.

The producer shall exercise the copyright to an extent required for the exhibition of the work in any
manner, except for the right to collect performing license fees for the performance of musical
compositions which are incorporated ito the work (IPC, Sec. 178.5).

Letters The copyright shall belong to the writer subject to the provisions of Article 723 of the Civil Code (IPC,,
Sec. 178.6)

Anonymous and Publishers are deemed representatives of the author, unless:

Pseudonymous works
1. The contrary appears; or
2. Pseudonyms or adopted name leaves no doubt as to the author’s identity; or
3. Author discloses identity.

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Fair Use Principle

FAIR USE PRINCIPLE

The fair use of a copyrighted work for criticism, comment,
news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes
is not an infringement of copyright. Decompilation, which is
understood here to be the reproduction of the code and
translation of the forms of the computer program to achieve
the inter-operability of an independently created computer
program with other programs may also constitute fair use. In
determining whether the use made of a work in any
particular case is fair use, the factors to be considered shall
include:
a. The purpose and character of the use,
including whether such use is of a commercial
nature or is for non-profit educational
purposes;
Fair use is a privilege to use the copyrighted material in a
reasonable manner without the consent of the copyright owner or
as copying the theme or ideas rather than their expression. Fair
use is an exception to the copyright owner’s monopoly of the use
of the work to avoid stifling the very creativity which that law is
designed to foster. (ABS-CBN Corporation v. Gozon, G.R. No.
195956, March 11, 2015).
News as expressed in a video footage is entitled to copyright
protection. Broadcasting organizations have not only copyright on
but also neighboring rights over their broadcasts. Copyrightability
of a work is different from fair use of a work for purposes of news
reporting (ABS-CBN Co. v. Gozon, supra).

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion

used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market

for or value of the copyrighted work (Sec. 185,
IPC).

The fact that a work is unpublished shall not by itself bar a

finding of fair use if such finding is made upon consideration
of all the above factors (Sec. 185.2, IPC).

Moral Rights

MORAL RIGHTS

The following are the moral rights of a copyright owner: Moral rights shall not be assignable or subject to license (Sec.
198.1, IPC).
1. To require that the authorship of the works be
attributed to him, in particular, the right that his
name, as far as practicable, be indicated in a
prominent way on the copies, and in
connection with the public use of his work
(Sec. 193.1, IPC);

2. To make any alterations of his work prior to, or

to withhold it from publication (Sec. 193.2,
IPC);

3. To object to any distortion, mutilation or other

modification of, or other derogatory action in
relation to, his work which would be prejudicial
to his honor or reputation (Sec. 193.3, IPC);
and

4. To restrain the use of his name with respect to

any work not of his own creation or in a
distorted version of his work (Sec. 193.4, IPC).

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 The rights of an author under Section 193.1 (Attribution
Right) shall last during the lifetime of the author and in
perpetuity after his death while the rights under Sections
193.2, 193.3, and 193.4 shall be coterminous with the
economic rights (Sec. 198.1, IPC).
INSURANCE
INSURANCE
A contract of insurance is an agreement whereby one
undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or
contingent event (Sec. 2, IC).
a. What can be Insured
WHAT CAN BE INSURED
Any contingent or unknown event, whether past or future,
which may damnify a person having an insurable interest, or
create a liability against him, may be insured against subject
to the provisions of this chapter (Sec. 3, IC).
The preceding section does not authorize an insurance for
or against the drawing of any lottery, or for or against any
chance or ticket in a lottery drawing a prize (Sec. 4, IC).
Basis of insurable interest in life and health insurance
Every person has an insurable interest in the life and health.
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The term of protection subsequent to the death of the author
provided in the preceding Section shall run from the date of his
death or of publication, but such terms shall always be deemed to
begin on the first day of January of the year following the event
which gave rise to them Insurance (Sec. 214, IPC).
Elements of a contract of insurance:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the
happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of the general
scheme to distribute actual losses among a large
group of persons bearing a similar risk
5. In consideration of the insurer’s promise, the insured
pays a premium (Philippine Health Care Providers,
Inc. v. CIR, G.R. No. 167330, September 18, 2009).
Thus, insurance may be taken upon any property, life, health or
one’s liability in which the insured has insurance interest
(VILLANUEVA-CASTRO, Commercial Law Recap Book One
(2020), p. 88).
A person is deemed to have insurable interest in the subject
matter of insurance where he has a relation or connection with or
concern in it that he will derive pecuniary benefit or advantage
from its preservation and will suffer pecuniary loss or damage from
its destruction, termination, or injury by the happening of the event
insured against (44 C.J.S. 870).
(See table below)
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 1. Of himself;

2. Of any person on whom he depends wholly or

in part for education or support;

3. Of any person under a legal obligation to him

for the payment of money, or respecting
property or services, of which death or illness
might delay or prevent the performance; and

4. Of any person upon whose life any estate or

interest vested in him depends (Sec. 11, IC).

Basis of Insurable Interest in Property Insurance

As to a mortgaged property, the mortgagor and the mortgagee
have each an independent insurable interest therein and both
An insurable interest in property may consist in: interests may be covered by one policy, or each may take out a
separate policy covering his interest, either at the same or at
1. An existing interest; separate times.

2. An inchoate interest founded on an existing ● Mortgagor’s insurable interest: covers the full value of the
interest; or mortgaged property.
● Mortgagee’s insurable interest: to the extent of the debt
3. An expectancy, coupled with an existing
(Geagonia v. CA, G.R. No. 114427, February 6, 1995).
interest in that out of which the expectancy
arises (Sec. 13, IC).
(See table below)

Distinctions between insurable interest in life and in property

Insurable Interest in Property Insurable Interest in Life

As to measure The measure of an insurable
interest in property is the extent to
which the insured might be
damnified by loss or injury thereof
(Sec. 17, IC).
General Rule: Insurable interest in life is beyond
pecuniary estimation.
Exception: A life insurance obtained by a creditor
on the life of the debtor, as the measure here is the
amount of debt owed to the creditor.

As to time when insurable The insurable interest must exists General Rule: It is enough that the insurable
interest must exist when the insurance takes effect and interest exists at the time the policy takes effect and
when the loss occurs but it need not need not exist at the time of the loss.
exist in the meantime.

Exception: Creditor taking insurance on the life of

debtor, as the former must have insurable interest
at the time the policy took effect and at the time of
loss.

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 As to beneficiary The beneficiary must also have If the subject matter of insurance is the life of the
insurable interest in the property insured, he can designate anyone as beneficiary
insured when the insurance takes though the latter has no insurable interest in his
effect and when the loss occurs. (insured) life.

However, one cannot lawfully procure insurance for

his own benefit on the life of another in whose life
he has no insurable interest.

(VILLANUEVA-CASTRO, Commercial Law Recap Book One (2020), pp. 92-94)

b. Claims for Life Insurance

Liability of Insurer if Insured Commits Suicide

The insurer in a life insurance contract shall be liable in case

of suicide only when it is committed after the policy has been
in force for a period of two years from the date of its issue or
of its last reinstatement, unless the policy provides a shorter
period: Provided, however, That suicide committed in the
state of insanity shall be compensable regardless of the date
of commission (Sec. 183, IC).

Forfeiture of Beneficiary’s Interest

The share forfeited shall pass on to:
The interest of a beneficiary in a life insurance policy shall 1. The other beneficiaries, unless otherwise disqualified;
be forfeited when the beneficiary is the principal, 2. In the absence of other beneficiaries, the proceeds shall
accomplice, or accessory in willfully bringing about the death be paid in accordance with the policy contract; and
of the insured (Sec. 12, IC). 3. If the policy contract is silent, the proceeds shall be paid
to the estate of the insured (Sec. 12, IC).

Incontestability Clause
The incontestability clause provides that after a policy of life
insurance made payable on the death of the insured shall
have insured for a period of two (2) years from the date of
its issue or of its last reinstatement, the insurer cannot prove
that the policy is void ab initio or is rescindable by reason of
the fraudulent concealment or misrepresentation of the
insured or his agent (Sec. 48, IC).
First view: The incontestability clause applies if the following
requisites are present: (1) The policy must be a Life Insurance
policy; (2) The policy is in force for 2 years from issue or last
reinstatement (Manila Bankers Life Insurance Corp. v. Aban, July
29, 2013).
Second view: The death of the insured within the two-year period
will render the right of the insurer to rescind nugatory (Sun Life v.
Sibya, June 8, 2016).

Assignment of Life Insurance Policy

A policy of life insurance upon life or health may pass by
transfer, will or succession to any person, whether he has an
insurable interest or not, and such person may recover upon
it whatever the insured might have recovered (Sec. 184, IC).
Notice to an insurer of a transfer or bequest thereof is not
necessary to preserve the validity of a policy of insurance upon
life or health, unless thereby expressly required (Sec. 185, IC).

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 5. Republic Act No. 10173 (Data Privacy Act of 2012)
(note: organization of topics is based on the old syllabus)

Definitions

Personal information, therefore, refers to any information than can

Personal information refers to any information whether identify an individual
recorded in a material form or not, from which the identity of
an individual is apparent or can be reasonably and directly
ascertained by the entity holding the information, or when
put together with other information would directly and
certainly identify an individual (R.A. No. 10173, Sec. 3(g)).

Sensitive personal information refers to personal

information:

1. About an individual’s race, ethnic origin,

marital status, age, color, and religious,
philosophical or political affiliations;

2. About an individual’s health, education,

genetic or sexual life of a person, or to any
proceeding for any offense committed or
alleged to have been committed by such
person, the disposal of such proceedings, or
the sentence of any court in such
proceedings;

3. Issued by government agencies peculiar to an

individual which includes, but not limited to,
social security numbers, previous or current
health records, licenses or its denials,
suspension or revocation, and tax returns;
and

4. Specifically established by an executive order

or an act of Congress to be kept classified.
(DPA, Sec. 3(l)).

Personal Information Controller refers to a person or

organization who controls the collection, holding, processing
or use of personal information, including a person or
organization who instructs another person or organization to
collect, hold, process, use, transfer or disclose personal
information on his or her behalf (DPA, Sec. 3(h)).

The term excludes:

1. A person or organization who performs such

functions as instructed by another person or
organization; and

2. An individual who collects, holds, processes or

uses personal information in connection with
the individual’s personal, family or household
affairs. (DPA, Sec. 3(h)).

Personal Information Processor refers to any natural or

juridical person qualified to act as such under the Act to
whom a PIC may outsource the processing of personal data
pertaining to a data subject (DPA, Sec. 3(i)).
Example: if Company A outsources the processing of service
applications of customers to a call center agency, Company A
would be the PIC while the call center agency is the PIP
(VILLANUEVA-CASTRO, Commercial Law Recap Book One
(2020), p. 313)..

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Scope

This Act applies to the processing of all types of personal
information and to any natural and juridical person involved
in personal information processing including those personal
information controllers and processors who, although not
found or established in the Philippines, use equipment that
are located in the Philippines, or those who maintain an
office, branch or agency in the Philippines. (DPA, Sec. 4).
The DPA seeks to protect “individual personal information”
which refers to personal data of a natural person. This means that
information about corporations or juridical persons are beyond the
scope of the Act. Information not deemed “personal data” are
likewise excluded from the application of the law (VILLANUEVA-
CASTRO, Commercial Law Recap Book One (2020), p. 315).

Sensitive personal information refers to personal

information:

1. About an individual’s race, ethnic origin,

marital status, age, color, and religious,
philosophical or political affiliations;

2. About an individual’s health, education,

genetic or sexual life of a person, or to any
proceeding for any offense committed or
alleged to have been committed by such
person, the disposal of such proceedings, or
the sentence of any court in such
proceedings;

3. Issued by government agencies peculiar to an

individual which includes, but not limited to,
social security numbers, previous or current
health records, licenses or its denials,
suspension or revocation, and tax returns;
and

4. Specifically established by an executive order

or an act of Congress to be kept classified.
(DPA, Sec. 3(l)).

Extraterritorial Application

This Act applies to an act done or practice engaged in and

outside of the Philippines by an entity if:

1. The act, practice or processing relates to

personal information about a Philippine citizen
or a resident;

2. The entity has a link with the Philippines, and

the entity is processing personal information in
the Philippines or even if the processing is
outside the Philippines as long as it is about
Philippine citizens or residents such as, but not
limited to, the following:

a. A contract is entered in the Philippines;

b. A juridical entity unincorporated in

the Philippines but has central
management and control in the
country; and

c. An entity that has a branch, agency,

office or subsidiary in the Philippines
and the parent or affiliate of the
Philippine entity has access to
personal information; and

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 3. The entity has other links in the Philippines
such as, but not limited to:

a. The entity carries on business in the

Philippines; and

b. The personal information was

collected or held by an entity in the
Philippines. (DPA, Sec. 6).

The Act does not apply to the following:

1. GOVERNMENT EMPLOYEE: Information about any
individual who is or was an officer or employee of
government that relates to his or her position or functions,
including:
a. The fact that the individual is or was an
officer or employee of the government;
b. The title, office address, and office
telephone number of the individual;
c. The classification, salary range, and
responsibilities of the position held by the
individual; and
We wish to emphasize that the DPA should not be an obstacle to
the collection and processing of personal data by the various
government agencies as long as the same is necessary for the
fulfillment of their respective mandates (NPC Advisory Opinion
No. 2019-0401, October 17, 2019).
As to whether the University may issue public reports that provide
statistical information in relation to specific offenses, the
University may do so considering that purely statistical data falls
outside the ambit of the DPA as the same does not identify a
person (NPC Advisory Opinion No. 2020-013, February 21,
2020).

d. The name of the individual on a document

he or she prepared in the course of his or
her employment with the government;

2. CONTRACT FOR GOVERNMENT INSTITUTION:

Information about an individual who is or was performing a
service under contract for a government institution, but only
in so far as it relates to such service, including the name of
the individual and the terms of his or her contract;

3. BENEFIT OF A FINANCIAL NATURE: Information

relating to any discretionary benefit of a financial nature
conferred on an individual upon the discretion of the
government, such as the granting of a license or permit,
including the name of the individual and the exact nature of
the benefit: Provided, that they do not include benefits given
in the course of an ordinary transaction or as a matter of
right;

4. JOURNALISTIC, ARTISTIC, LITERARY OR RESEARCH

PURPOSES: Personal information processed for
journalistic, artistic, literary or research purposes, in order to
uphold freedom of speech, of expression, or of the press,
subject to requirements of other applicable law or
regulations;

5. FUNCTIONS OF PUBLIC AUTHORITY: Information

necessary in order to carry out the functions of public
authority, in accordance with a constitutionally or statutorily
mandated function pertaining to law enforcement or
regulatory function, including the performance of the

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 functions of the independent, central monetary authority,
subject to restrictions provided by law.

Nothing in this Act shall be construed as having amended or

repealed Republic Act No. 1405, otherwise known as the
Secrecy of Bank Deposits Act; Republic Act No. 6426,
otherwise known as the Foreign Currency Deposit Act; and
Republic Act No. 9510, otherwise known as the Credit
Information System Act (CISA);

6. BANKS: Information necessary for banks, other financial

institutions under the jurisdiction of the independent, central
monetary authority or Bangko Sentral ng Pilipinas, and other
bodies authorized by law, to the extent necessary to comply
with Republic Act No. 9510 (CISA), Republic Act No. 9160,
as amended, otherwise known as the Anti-Money
Laundering Act, and other applicable laws;

7. FOREIGN RESIDENTS: Personal information originally

collected from residents of foreign jurisdictions in
accordance with the laws of those foreign jurisdictions,
including any applicable data privacy laws, which is being
processed in the Philippines. The burden of proving the law
of the foreign jurisdiction falls on the person or body seeking
exemption. In the absence of proof, the applicable law shall
be presumed to be the Act and these Rules (DPA, Sec. 4).

Processing of Personal Information

The processing of personal data shall be allowed subject to Transparency. The data subject must be aware of the nature,
adherence to the general principles of: purpose, and extent of the processing of his or her personal data,
including the risks and safeguards involved, the identity of
1. Transparency; personal information controller, his or her rights as a data subject,
and how these can be exercised. Any information and
2. Legitimate purpose; and
communication relating to the processing of personal data should
3. Proportionality (DPA, Sec. 11). be easy to access and understand, using clear and plain
language.

Legitimate purpose. The processing of information shall be

compatible with a declared and specified purpose which must not
be contrary to law, morals, or public policy.

Proportionality. The processing of information shall be

adequate, relevant, suitable, necessary, and not excessive in
relation to a declared and specified purpose. Personal data shall
be processed only if the purpose of the processing could not
reasonably be fulfilled by other means (IRR of R.A. 10173, Rule
4, Sec. 18).

Posting of name and photo relating to suspects of a crime in

public places

● Public disclosure of personal data, in particular the

alleged suspect’s photo, whether derived from the

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 establishment’s surveillance footages or acquired
elsewhere, may constitute a violation of the DPA.
● By publicly posting the information of a possible suspect,
the purpose becomes an intentional association of the
person to the crime for the public’s scrutiny, instead of
leaving the matter to the police.
● Furthermore, said posting violates the principle of
proportionality for being unnecessary and excessive
processing of personal data (NPC.

Regardless of the format of the consent given by the data subject,

The processing of sensitive personal information and it must be freely given, specific, and informed. Implied, implicit
privileged information shall be prohibited, except in the or negative consent is not recognized under the law (DPA, Sec.
following cases: 3(b); NPC Advisory Opinion No 2017-007, January 9, 2017).
1. The data subject has given his or her consent,
specific to the purpose prior to the processing,
or in the case of privileged information, all
parties to the exchange have given their
consent prior to processing;

2. The processing of the same is provided for by

existing laws and regulations: Provided, That
such regulatory enactments guarantee the
protection of the sensitive personal
information and the privileged information:
Provided, further, That the consent of the data
subjects are not required by law or regulation
permitting the processing of the sensitive
personal information or the privileged
information;

3. The processing is necessary to protect the life

and health of the data subject or another
person, and the data subject is not legally or
physically able to express his or her consent
prior to the processing;

4. The processing is necessary to achieve the

lawful and noncommercial objectives of public
organizations and their associations:
Provided, That such processing is only
confined and related to the bona fide members
of these organizations or their associations:
Provided, further, That the sensitive personal
information are not transferred to third parties:
Provided, finally, That consent of the data
subject was obtained prior to processing;

5. The processing is necessary for purposes of

medical treatment, is carried out by a medical
practitioner or a medical treatment institution,
and an adequate level of protection of
personal information is ensured; or

6. The processing concerns such personal

information as is necessary for the protection
of lawful rights and interests of natural or legal
persons in court proceedings, or the
establishment, exercise or defense of legal
claims, or when provided to government or
public authority (DPA, Sec. 13).

Rule on Subcontracting

A personal information controller may subcontract the

processing of personal information: Provided, That the
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 personal information controller shall be responsible for
ensuring that proper safeguards are in place to ensure the
confidentiality of the personal information processed,
prevent its use for unauthorized purposes, and generally,
comply with the requirements of this Act and other laws for
processing of personal information. The personal
information processor shall comply with all the requirements
of this Act and other applicable laws (DPA, Sec. 14).

Rights of a Data Subject

Under Chapter IV of the Data Privacy Act, there are eight (8)
rights that belong to data subjects, namely:

1. Right to be informed;

2. Right to access;

3. Rght to object;

4. Right to erasure and blocking;

5. Right to rectify;

6. Right to file a complaint;

7. Right to damages;

8. Right to data portability.

Exceptions / non-applicability

The rights of a data subject are not applicable if the

processed personal information are used only for the needs
of scientific and statistical research and, on the basis of
such, no activities are carried out and no decisions are taken
regarding the data subject: Provided, That the personal
information shall be held under strict confidentiality and shall
be used only for the declared purpose. Likewise, the
immediately preceding sections are not applicable to
processing of personal information gathered for the purpose
of investigations in relation to any criminal, administrative or
tax liabilities of a data subject (DPA, Sec. 19).

Right to be informed

The data subject is entitled to:

1. Be informed whether personal information pertaining to him or her shall be, are being or have been processed;

2. Be furnished the information indicated hereunder before the entry of his or her personal information into the
processing system of the personal information controller, or at the next practical opportunity:

a. Description of the personal information to be entered into the system;

b. Purposes for which they are being or are to be processed;

c. Scope and method of the personal information processing;

d. The recipients or classes of recipients to whom they are or may be disclosed;

e. Methods utilized for automated access, if the same is allowed by the data subject, and the extent to which
such access is authorized;

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 f. The identity and contact details of the personal information controller or its representative;

g. The period for which the information will be stored; and

h. The existence of their rights, i.e., to access, correction, as well as the right to lodge a complaint before the
Commission (DPA, Sec. 16(b)).

Right to access

The data subject has the right to reasonable access to, upon demand, the following:

1. Contents of his or her personal data that were processed;

2. Sources from which personal data were obtained;

3. Names and addresses of recipients of the personal data;

4. Manner by which such data were processed;

5. Reasons for the disclosure of the personal data to recipients, if any;

6. Information on automated processes where the data will, or is likely to, be made as the sole basis for any decision
that significantly affects or will affect the data subject;

7. Date when his or her personal data concerning the data subject were last accessed and modified; and

8. The designation, name or identity, and address of the personal information controller (DPA, Sec. 16(c)).

Right to object

The data subject shall have the right to object to the processing of his or her personal data, including processing for direct
marketing, automated processing or profiling. The data subject shall also be notified and given an opportunity to withhold consent
to the processing in case of changes or any amendment to the information supplied or declared to the data subject (IRR of R.A.
10173, Rule VIII, Sec. 34(b)).

Right to rectification

The data subject has the right to dispute the inaccuracy or error in the personal data and have the personal information controller
correct it immediately and accordingly, unless the request is vexatious or otherwise unreasonable. If the personal data has been
corrected, the personal information controller shall ensure the accessibility of both the new and the retracted information and the
simultaneous receipt of the new and the retracted information by the intended recipients thereof: Provided, That recipients or
third parties who have previously received such processed personal data shall be informed of its inaccuracy and its rectification,
upon reasonable request of the data subject (DPA, Sec. 14(d)).

Right to erasure or blocking

The data subject shall have the right to suspend, withdraw or order the blocking, removal or destruction of his or her personal
information from the personal information controller’s filing system upon discovery and substantial proof that the personal
information are incomplete, outdated, false, unlawfully obtained, used for unauthorized purposes or are no longer necessary for
the purposes for which they were collected (R.A. 10173, Sec. 14(e)).

Right to data portability

The data subject shall have the right, where personal information is processed by electronic means and in a structured and
commonly used format, to obtain from the personal information controller a copy of data undergoing processing in an electronic
or structured format, which is commonly used and allows for further use by the data subject (DPA, Sec. 18).

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Duties and responsibilities of personal information controllers

The personal information controller:

1. Must implement reasonable and appropriate organizational, physical and technical measures intended
for the protection of personal information against any accidental or unlawful destruction, alteration and
disclosure, as well as against any other unlawful processing.

2. Shall implement reasonable and appropriate measures to protect personal information against natural
dangers such as accidental loss or destruction, and human dangers such as unlawful access, fraudulent
misuse, unlawful destruction, alteration and contamination.

3. The determination of the appropriate level of security under this section must take into account the nature
of the personal information to be protected, the risks represented by the processing, the size of the
organization and complexity of its operations, current data privacy best practices and the cost of security
implementation. Subject to guidelines as the Commission may issue from time to time, the measures
implemented must include:

4. The employees, agents or representatives of a personal information controller who are involved in the
processing of personal information shall operate and hold personal information under strict confidentiality
if the personal information are not intended for public disclosure. This obligation shall continue even after
leaving the public service, transfer to another position or upon termination of employment or contractual
relations.

5. The personal information controller shall promptly notify the Commission and affected data subjects when
sensitive personal information or other information that may, under the circumstances, be used to enable
identity fraud are reasonably believed to have been acquired by an unauthorized person, and the personal
information controller or the Commission believes (bat such unauthorized acquisition is likely to give rise to
a real risk of serious harm to any affected data subject. The notification shall at least describe the nature of
the breach, the sensitive personal information possibly involved, and the measures taken by the entity to
address the breach. Notification may be delayed only to the extent necessary to determine the scope of the
breach, to prevent further disclosures, or to restore reasonable integrity to the information and
communications system (R.A. 10173, Sec. 18).

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