A corporation is a person.

As such, "the law vests in corporation rights, powers and attributes as

if they are natural persons with physical existence and capabilities to act on their own."
However, it is also a "fundamental principle that a corporation is a juridical entity created by law
and, therefore, possesses no power or authority other than what is vested by law. The natural
person can do anything and everything except that which the law prohibits. But a corporation can
only do that which the law authorizes it to perform. As a creature of law, the power and attributes
of a corporation are those set out, expressly or impliedly, in the law.

A corporation is granted sufficient powers to pursue its purposes. Title IV treats general and
special powers of the corporation. In addition, the law vests it with "such other powers as may be
essential or necessary to carry out its purpose or purposes as stated in the articles of
incorporation. (Sec. 35(k)).

The approval by the Commission of any of the corporation's purpose or purposes carries with it
the grant by the State of essential or necessary powers, although not specifically mentioned in the
law.

Kinds of Powers

A corporation may exercise (1) express powers, (2) implied powers, and (2) incidental powers.

Express Powers

Express Powers are the powers expressly provided in the RCCP, applicable special laws,
administrative regulations, and the Articles of Incorporation of the corporation.

The express powers under the RCCP include (1) the general powers under Section 35, and (2)
specific powers under Sections 9, 15, and 36 to 43 of the RCCP.

The powers expressly provided for in the RCP are deemed part of the Articles of Incorporation
even if such powers are not enumerated therein.

Implied Powers

The existence of implied power is recognized under paragraph (k) of Section 35 of the RCCP.
Under said section, a corporation is empowered to exercise such other powers as may be
essential or necessary to carry out its purpose or purposes as stated in the Articles of
Incorporation.

Implied powers include all powers that are reasonably necessary or proper for the execution of
the powers expressly granted and are not expressly or impliedly excluded.

The term "implied powers" has also been defined as one which the law will regard as existing by
implication; such power must be one in a sense necessary, i.e., needful, suitable and proper to
accomplish the object of the grant - one that is directly and immediately appropriate for the
execution of specific powers; and not one that has slight, indirect or remote relation to the
specific purposes.

Incidental Powers

Incidental powers are powers that are deemed conferred on the corporation because they are
incidental to the existence of the corporation. Corporations have incidental powers as a
consequence of the fact that they exist as juridical persons.

Incidental powers include: 1) right to succession, 2) right to have a corporate name, 3) right to
make by-laws for its government, 4) right to sue and be sued, and 5) right to acquire and hold
properties for the purpose authorized by the charter.

Test to Determine if Power is Implied

The corporation has the powers expressly granted in its charter or in the statutes under which it is
created or such powers as are necessary for the purpose of carrying out its express powers. Only
such powers as are reasonably necessary to enable corporations to carry out the express powers
granted and the purposes of the creation are implied.

Powers merely convenient or useful are not implies if they are not essential, having in view the
nature and object of the corporation.

The test to be applied is: "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. If so, the corporation has the power to do it; otherwise, not."

Stretching the Purpose Clause

The SEC adopted the "Stretching of Purpose Clauses Rule" under which it is legal to stretch the
meaning of the purpose clause to cover new and unexpected situations. Situations and
circumstances may arise which could not have been foreseen at the time of incorporation that can
be accommodated by the "stretched" interpretation of the purpose clause. There is no more need
to amend the Articles of Incorporation to accommodate the new situations.

Specific Powers

Under the Theory of Specific Capacity, a corporation cannot exercise powers except those
expressly or impliedly given to it.

The specific powers of a corporation can be found in Sections 36 to 43 of the RCC.

The specific powers of the corporations are provided for in the RCP, including the specific
requirements and/or procedure for their exercise.

General Powers
Under the theory of general capacity, a corporation holds such powers which are not prohibited
or withheld from it by general laws.

The general powers of a corporation are enumerated under Section 35 of the RCC.

As a rule, the Board exercises the general powers of the corporation. Generally, approval of a
resolution by the Board is enough for the exercise of such powers. (Sec. 52)

Unless otherwise provided in the Code, the board exercises these corporate powers. (Sec. 22)

The exercise of special powers affects fundamental corporate relations. These refer to those
which require explicit board action under the law, charter or bylaws. The law generally requires
consent or approval of shareholders or members, and in proper cases the Commission. In
extreme cases, dissenting shareholders may exercise their appraisal right by surrendering and
demanding for payment the fair value of their shares.

The board has the sole authority to initiate the exercise of these special powers, subject to the
shareholders' or members' approval. Despite such approval, the board has the option to abandon
the exercise of such powers.

Other powers expressly granted by law are the following:

1. Power to extend or shorten corporate term (Sec. 36);

2. Power to increase or decrease capital stock (Sec. 37);
3. Power to incur, create or increase bonded indebtedness;
4. Power to deny pre-emptive rights (Sec. 38);
5. Power to sell or dispose corporate assets (Sec. 39);
6. Power to acquire own shares (Sec. 40).
7. Power to invest corporate funds in another corporation or business or for any other
purpose (Sec. 41);
8. Power to declare dividends (Sec. 42);
9. Power to enter into management contract (Sec. 43).

Changes introduced by the Code

The Code recognized the Commission's policy of permitting corporations to "enter into a
partnership, joint venture xxx or any other commercial agreement with natural and juridical
persons." (Sec. 35 (h)).

It also lifted the prohibition against domestic corporations from making campaign or political
contributions. (Sec. 35(i); Omnibus Election Code, Sec. 95; RA No. 7166, Sec. 13)

As a person with separate juridical personality and the capacity to enter into a contract, a
corporation may sue and be sued in its corporate name, adopt and use a corporate seal. It may
deal with real and personal properties, whether tangible or intangible. It may enter into any
commercial agreement with natural and juridical persons. It may make reasonable donations,
including campaign or political contributions. It may provide pension, retirement, health, and
other plans for the benefit of its directors, trustees, officers, and employees.

Sec 35. Corporate Powers and Capacity. – Every corporation incorporated under this Code has
the power and capacity:

1. To sue and be sued in its corporate name;

2. To have perpetual existence unless the certificate of incorporation provides otherwise;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal
the same in accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks and
to sell treasury stocks in accordance with the provisions of this Code; and to admit
members to the corporation if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property, including securities and bonds of
other corporations, as the transaction of the lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by law and the
Constitution;
8. To enter into a partnership, joint venture, merger or consolidation or any other
commercial agreement with natural or juridical persons;
9. To make reasonable donations, including those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or similar purposes: Provided, That no foreign
corporation shall give donations in aid of any political party or candidate or for purposes
of partisan political activity;
10. To establish pension, retirement, and other plans for the benefit of its directors, trustees,
officers and employees; and
11. To exercise such other powers as may be essential or necessary to carry out its purpose
or purposes as stated in the articles of incorporation.

To sue and be sued in its corporate name

One of the incidental powers of a corporation. The power is granted to a fully organized
corporation, unless specifically revoked by another law. The power to sue is exercised by the
corporation through the Board and/or its duly authorized officers and agents.

A case instituted by a corporation without authority from its board of directors is subject to
dismissal on the ground of failure to state a cause of action.

Thus, in the absence of proof that he was authorized by the board, a minority stockholder and
member of the board had no authority to sue (for violation of B.P. Big. 22) on behalf of the
corporation unless he is suing on a derivative cause of action.
The only instance that board resolution is not necessary in filing legal action on behalf of the
corporation is through a derivative suit. A derivative suit is an action filed by a minority
stockholder in the name and on behalf of the corporation to enforce a corporate right or cause of
action against the directors and officers who committed a wrongful act against the corporation.
Obviously, the directors who committed the wrongful act, being in control of the corporation, are
not expected to adopt a resolution to authorize the filing of legal action to nullify their very own
acts.

The rule on real party-in-interest ensures, therefore, that the party with the legal right to sue
brings the action, and this interest ends when a judgment involving the nominal plaintiff will
protect the defendant from a subsequent identical action.

A corporation, being a juridical entity, separate and distinct from the persons comprising it, has
the express power to sue and be sued in its corporate name, just like any natural person may have
the right and privilege, for acts done for or against it.

Physical acts of the corporation, like the signing of documents, can be performed only by natural
persons duly authorized for the purpose by the corporate by-laws or by a specific act of the board
of directors. An individual corporate officer cannot solely exercise any corporate power
pertaining to the corporation without authority from the board of directors. (Secs. 23 and 25)

Generally, corporations are required to attach a copy of the Board Resolution authorizing the
filing of the complaint or petition. The Rules require parties themselves to sign and submit a
certificate on non-forum shopping. Such requirement cannot be imposed directly on artificial
persons, like corporations, for the simple reason that they cannot personally do the task
themselves. Corporations act only through their officers and duly authorized agents. Only
specifically authorized individuals may perform physical actions in behalf of the corporate
entity. The rules do not require corporate officers to sign the certificate. There is no prohibition
against authorizing agents to do so. What is important is that there is a Board resolution giving
such authority.

If no power of attorney, secretary's certificate or Board resolution is attached to the petition or

complaint, the pleading is not properly verified and should be treated as an unsigned pleading. A
person, including the counsel of the corporation, who alleges that he is duly authorized to file an
action must present a resolution issued by the Board that specifically authorized him to institute
the action and execute the certification against forum shopping. Only then would his actions be
binding on the corporation.

In exceptional cases, certain officers have implied authority to sign the certification on non-
forum shopping. The following officials or employees of the company can sign the verification
and certification without the need of a board resolution: (1) the Chairperson of the Board of
Directors, (2) the President of a corporation, (3) the General Manager or Acting General
Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case. These officers
are in a position to verify the truthfulness and correctness of the allegations in the petition.
Generally, in any legal action, the rules governing jurisdiction and venue of actions filed by or
against an individual likewise apply to suits filed for or against a corporation. As to venue of
actions filed against it, the well-settled rule is that the same must be instituted at the place of the
principal office of the corporation. It has thus been held that the residence of the corporation is
the place of its principal office as may be indicated in its articles of incorporation and may
therefore, be sued only at that place.

As to service of summons, Section 12, Rule 14 of the Revised Rules of Civil Procedure, which
took effect on May 1, 2020 states that:

Section 12. Service upon domestic private juridical entity. — When the defendant is a
corporation, partnership or association organized under the laws of the Philippines
with a juridical personality, service may be made on the president, managing partner, general
manager, corporate secretary, treasurer, or in-house counsel of the corporation wherever
they may be found, or in their absence or unavailability, on their secretaries.

If such service cannot be made upon any of the foregoing persons, it shall be made upon
the person who customarily receives the correspondence for the defendant at its principal
office.

In case the domestic juridical entity is under receivership or liquidation, service of

summons shall be made on the receiver or liquidator, as the case may be.

Should there be a refusal on the part of the persons above-mentioned to receive summons
despite at least three (3) attempts on two (2) separate dates, service may be made
electronically, if allowed by the court, as provided under Section 6 of this rule. 

For the purpose of receiving service of summons and being bound by it, a corporation is
identified with its agent or officer who under the rule is designated to accept service of process.
The corporate power to receive and act on such service, so far as to make it known to the
corporation, is thus vested in such officer or agent.

A strict compliance with the mode of service is necessary to confer jurisdiction of the court over
a corporation. The officer upon whom service is made must be the one who is named in the
statute; otherwise the service is insufficient.

The purpose is to render it reasonably certain that the corporation will receive prompt and proper
notice in an action against it or to insure that the summons be served on a representative so
integrated with the corporation that such person will know what to do with the legal papers
served on him. In other words, "to bring home to the corporation notice of the filing of the
action."

Where there is no service of summons or a voluntary general appearance by the defendant, the
court acquires no jurisdiction to pronounce a judgment in the cause.
The designation of persons or officers who are authorized to accept summons for a domestic
corporation or partnership is now limited and more clearly specified in Section 11, Rule 14 of the
1997 Rules of Civil Procedure. The rule now states "general manager" instead of only
"manager"; "corporate secretary" instead of "secretary"; and "treasurer" instead of "cashier." The
phrase "agent, or any of its directors" is conspicuously deleted in the new rule.

Note, however, that this rule will hold true if the corporation is sued by a third party. It will not
hold true and is not applicable in intra-corporate controversies under Section 5, Rule 2 thereof
which provides that "if the defendant is a domestic corporation service shall be deemed adequate
if made upon any of the statutory or corporate officers as fixed in the by-laws or their respective
secretaries.

To have perpetual existence unless the certificate of incorporation provides otherwise

Power of Succession

A corporation has the power and capacity to have perpetual existence unless the certificate of
incorporation provides otherwise. Thus, if there is no fixed term, the right of the corporation to
exist continue until it is dissolved.

Under the Code, a corporation has perpetual existence. This rule applies to an existing
corporation, whose articles of incorporation shall be deemed amended to reflect its perpetual,
unless the corporation (by majority vote of shareholders or members) elects to retain its limited
term.

With regard to a corporation with limited term, such term may be extended or shortened through
an amendment of its articles of incorporation. Generally, an extension may be made no earlier
than three years prior to the end of its term. The Commission may grant an earlier extension for
justifiable reasons. (Sec. 11)

A dissenting shareholder may exercise his appraisal right in accordance with law. Such right
applies not only to the extension but also to the shortening of corporate term. (Sec. 80)

However, in case of trust or estate, its term of existence shall be co-terminous with the existence
of the trust or estate.

To adopt and use a corporate seal

This can be traced in ancient common law where all actions of the corporation were required to
be under seal.

The right of a corporation to have a common seal has been recognized and spoken of from the
earliest times as one of its inherent or incidental privilege (Sec. 11). Under Philippine
jurisprudence, this power or authority is expressly granted by law.
A corporation may, however, exist without a seal. A seal is not indispensable for the transactions
or contracts of the corporation. It is not mandatory but merely permissive. This is because
corporate seal performs no further or greater function than to impart prima facie evidence of the
due execution buy the corporation of a written document or obligation. Corporations can thus
enter into contract without the use of its corporate seal and the due execution of the instrument
may be proved by other evidence. A document may be considered valid and binding even in the
absence of a seal.

However, one instance when a seal is necessary is with respect to the certificate of stock as
provided for under Section 62 of the RCCP.

The affixing of the corporate seal is prima facie proof that the document or instrument on which
it is sealed was duly issued by the corporation.

To amend its articles of incorporation in accordance with the provisions of this Code

Amendment of the articles of incorporation is a matter of right granted to corporations created

under the general provisions of the Corporation Code by merely following the procedure laid
down in Section 15 thereof. If the amendment, however, consist of extending or shortening the
corporate term, or by increasing or decreasing the authorized capital stock, the requirements
imposed under Sections 36 and 37, respectively, must be complied with.

As far as corporations created by special law are concerned, amendment may not be considered a
matter of right. Corporations created by the special touch of the legislature are primarily
governed by the law of their creation. The law creating it may or may not authorize or empower
the corporation to make any changes in its articles of incorporation or charter. However, whether
empowered or not, Congress may amend or repeal a corporate charter by virtue of its inherent
authority to amend or repeal laws under the Constitution.

To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the
same in accordance with this Code

The Revised Corporation Code not only authorizes or empowers a corporation to adopt its
corporate by-laws but in fact requires a corporation formed or organized under it to so adopt its
by-laws, not contrary to law, morals or public policy.

By-Laws are meant to regulate the manner of conducting the internal affairs of the corporation.

It is implicit from Section 45 of the RCCP that a corporation's life may start even without the
By-Laws.

The by-laws may be adopted and filed prior to incorporation. In such case, such by-laws shall be
approved and signed by all incorporators and submitted to the Commission, together with the
articles of incorporation (Sec. 45).
The By-Laws may be filed after incorporation. The existence of the power of the corporation to
adopt By-Laws does not, ordinarily and of necessity, make the exercise of such power essential
to its corporate life or to the validity of its acts.

While the Old Code required corporations that do not file their by-laws simultaneous with the
articles of incorporation to adopt its by-laws within one (1) month from receipt of the official
notice of the issuance of certificate of incorporation or registration, the New Code does not
explicitly provide for a deadline if the by-laws are to be filed subsequently.

Formal organization of a corporation includes the adoption and filing of its by-laws. And under
Section 21, if a corporation does not formally organize and commence its business within five
(5) years from the date of its incorporation, its certificate of incorporation shall be deemed
revoked as of the day following the end of the five (5) years.

Amendment or repeal of the by-laws is specially allowed subject to the procedure and
requirement provided for in Section 47 of the Code.

In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks and to
sell treasury stocks in accordance with the provisions of this Code; and to admit members
to the corporation if it be a non-stock corporation

The subscribers, and not the stock corporation, are the owners of the shares therein. However,
the corporation has certain powers relating to shares, including:

1. the power to issue previously unsubscribed shares;

2. the power to sell treasury stocks;
3. the power to sell delinquent shares;
4. the power to acquire its own shares in proper cases;
5. the power to redeem redeemable shares;
6. the power to increase or decrease the par value of shares; and
7. the power to resort to stock split.

The power of a corporation to issue or sell its stocks is an inherent right of any stock corporation
created pursuant to the Code except only as it may be regulated by law or by the articles of
incorporation. This right, however, does not apply where it sells or issues stocks of other
corporations in which case the provision of the Securities Regulation Code and the rules and
regulations issued by the SEC relative to the sale of securities may be made to apply.

The manner, requirements and procedure for the issuance and sale of a corporation's own stocks
are covered by the provisions of Title VII of the Corporation Code.

Admission, as well as termination of members is a prerogative granted by law to non-stock

corporations and the manner, requirements or procedures, including qualifications and grounds
for their disqualification, for such admission or termination may be contained in its articles of
incorporation or by-laws or by the rules of the corporation.
The power of the corporation to issue stocks includes the authority to set the terms and
conditions of the issuance. These may include terms and dates of payment. Ordinarily, the 25%
payment requirement for subscription only applies in case of an increase of capital stock. The
corporation, however, by stipulation, may require that 25% of the subscription be likewise paid
upon issuance of the shares and the balance on a specified date.

To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property, including securities and bonds of
other corporations, as the transaction of the lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by law and the
Constitution

The power to sell, acquire, lease or otherwise convey real or personal property is vested in the
Board of Directors. While a corporation may appoint agents to negotiate for the purchase of real
property needed by the corporation, the final say will have to be with the Board, whose approval
will finalize the transaction. If the power to sell land is conferred to an agent, there must be a
written contract of agency for such purpose and the special power of attorney, including the
Board resolution, must expressly confer such specific power to sell the specified parcel of land.
If the power is not expressly conferred, the sale is not yet binding on the corporation even if the
buyer already made a deposit.

The Board can exercise this power under Section 35(g) without concurrence of the stockholders.
Stockholders' approval is necessary only in cases covered by Section 39 (sale of all or
substantially all of the assets) and Section 41 of the RCCP.

In the absence of an express restriction in the Articles of Incorporation and By-laws, a

corporation may, through a board resolution, validly lease or acquire real property from another
person if it does so in good faith and in the legitimate furtherance of its corporate purposes to
further the interest of the corporation without securing the consent of the stockholders. The
corporation may also sell its properties in the ordinary course of its business without prior
approval of stockholders.

Even in the cases that are not covered by Sections 39 and 41, the By-laws of the corporation may
expressly require the approval of the stockholders for the sale of the corporate property. In the
absence of any provision in the By-laws as to the number of votes required, the vote of
stockholders representing the majority of the outstanding capital stock is sufficient to approve
the sale.

While a corporation is expressly empowered by law to acquire or alienate real and/or personal
properties, a limitation is imposed by Section 35 to the effect that it must be so acquired, held, or
conveyed "as the transaction of the lawful business of the corporation may reasonably and
necessarily require." Likewise, the Code further provides that it shall be "subject to the
limitations imposed by law and the Constitution."

Thus, Section 3 of Article XII of the 1987 Constitution provides that private corporations may
not hold alienable lands of the public domain (except agricultural lands) but only by lease for a
period not exceeding twenty-five (25) years renewable for not more than twenty-five (25) years,
and not to exceed 1,000 hectares.

Jurisprudence provides, however, that a corporation may register alienable public lands if it has
been held by it, personally or through his predecessor-in-interest, openly, continuously and
publicly within the prescribed statutory period of thirty (30) years under the Public Land Law, as
amended, since it is converted into private property by mere lapse of completion of said period.

The phrase "as the transaction of the lawful business of the corporation may reasonably require"
practically sets the limit of the corporate authority to acquire, own, hold or alienate property. The
purpose clause in the articles of incorporation grants as well as limits the powers which a
corporation may exercise. Whether or not the acquisition of such property is within the corporate
powers or authority may reasonably be determined from the purpose or purposes indicated in the
articles of incorporation.

Temporary lease of corporate property is allowed even if a corporation is not engaged in the
business of leasing properties. The SEC imposed the following requirements for temporary lease:

(i) the property is not presently used by the corporation and leasing of the property is not
made on a regular basis;
(ii) leasing the property will make it productive instead of allowing them to remain idle;
(iii) there is no express restrictions in the Articles of Incorporation and By-laws; and
(iv) leasing the property is not used as a scheme to prejudice corporate creditors or result
in the infringement of the trust fund doctrine.

A corporation can acquire usufruct over an immovable property. However, Article 605 of the
New Civil Code provides that usufruct cannot be constituted in favor of a corporation for more
than 50 years. A usufruct is meant only as a lifetime grant.

To enter into a partnership, joint venture, merger or consolidation or any other

commercial agreement with natural or juridical persons

Section 35(h) of the Code grants corporations the express power to enter into a partnership, joint
venture, merger, consolidation, or any other commercial agreement with natural and juridical
persons.

Merger occurs when one corporation absorbs another constituent corporations. There is
consolidation when two or more corporations form a new single corporation. The rules on
merger and consolidation are provided for in Sections 75 to 79.

The power into to enter into partnership is a new power.

Power to enter into a partnership (read Aquino p.440)

The general rule is that a corporation cannot enter into a partnership with natural persons or other
corporations. In contrast, it is generally accepted that a corporation may enter into a joint venture
with another, where the venture is in accordance with its corporate purpose or purposes. This
rule is based on the notion that in a partnership, the corporation would be bound by acts of
persons other than its own directors, trustees or officers. However, this view became less
popular. Even the Commission opined that such view no longer reflects the current practice in
corporation law.

In a SEC opinion, the Commission provided the condition to be satisfied in order that a
corporation may enter into a partnership:

a. The authority to enter into a partnership relations is expressly provided for in the
articles of incorporation;
b. The business of the partnership is in line with the purpose or purposes in the articles of
incorporation;
c. The articles of partnership provide that all the partners manage the partnership and
stipulate that all of them are jointly and severally liable for the obligations of the
partnership; and
d. If it is a foreign corporation, it must obtain a license to do business in the Philippines.

The Commission later opined that a corporation could be a limited partner, instead of a general
partner. This means that it would be bound only to the extent of its investment for the acts of the
other partners, unless the latter are its own authorized agents and officers. The justification is in
the Code itself allowing a corporation to invest its funds in another corporation. Such allowance
does not require that the invertor-corporation be involved in the management of the investee
corporation.

Power to enter into a joint venture

A corporation may enter into a joint venture with another corporation, provided (a) it is
sanctioned by its charter, and (b) the venture is consistent with its purpose or purposes. A foreign
corporation, which is a party to the joint venture, must secure the prescribed license to do
business in the Philippines.

Joint venture has been generally understood to mean an organization formed for some temporary
purpose. The partnership contemplates a general business with some degree of continuity, while
the joint venture is formed for the execution of a single transaction, and is thus temporary in
nature.

To make reasonable donations, including those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or similar purposes: Provided, That no foreign
corporation shall give donations in aid of any political party or candidate or for purposes
of partisan political activity

Ordinarily, a pure gift of funds or property by a corporation not created for charitable purposes is
not authorized and would constitute a violation of the rights of its stockholders unless it is
empowered by statute.
A business corporation is regarded as being carried primarily for the profit of its stockholders. It
is not for the corporation to be generous with other people's money.

There are circumstances, however, under which a donation by a corporation may be to its benefit
as a means of increasing its business or promoting patronage.

The following must be complied with:

(1) the donation must be reasonable; and

(2) the donation must be for valid purposes including public welfare or for hospital,
charitable, cultural, scientific, civic, or similar purposes; and
(3) if the corporation is a foreign corporation, the donation must not be in aid of any
political party or candidate or for purposes of partisan political activity.

The SEC observed that the donation must bear a reasonable relation to the corporation's interest
and not be so remote and fanciful.

A corporation is likewise empowered to accept donations when it is necessary to carry out its
express powers. The SEC noted however that there must be compliance with Act No. 4075, as
amended by PD No. 1546 and the rules issued by DSWD.

As for political contributions, it is premised on the recognition of corporations as persons under

the Constitution and the recognition that protection to free speech extends to corporations.

Under the old Code, corporations (whether domestic or foreign) were prohibited from making
campaign or political contributions. The Code lifted the prohibition directed to domestic
corporations, save those mentioned in the Omnibus Election Code (OEC, Sec. 95) on account of
their benefits and privileges derived from the government.

Sec. 95. Prohibited contributions. - No contribution for purposes of partisan political

activity shall be made directly or indirectly by any of the following:

(1) Public or private financial institutions: Provided, however, That nothing herein shall
prevent the making of any loan to a candidate or political party by any such public or
private financial institutions legally in the business of lending money, and that the loan is
made in accordance with laws and regulations and in the ordinary course of business;

(2) Natural and juridical persons operating a public utility or in possession of or

exploiting any natural resources of the nation;

(3) Natural and juridical persons who hold contracts or sub-contracts to supply the
government or any of its divisions, subdivisions or instrumentalities, with goods or
services or to perform construction or other works;

(4) Natural and juridical persons who have been granted franchises, incentives,
exemptions, allocations or similar privileges or concessions by the government or any of
 its divisions, subdivisions or instrumentalities, including government-owned or controlled
corporations;

(5) Natural and juridical persons who, within one year prior to the date of the election,
have been granted loans or other accommodations in excess of P100,000 by the government or
any of its divisions, subdivisions or instrumentalities including government-owned or
controlled corporations;

(6) Educational institutions which have received grants of public funds amounting to no
less than P100,000.00;

(7) Officials or employees in the Civil Service, or members of the Armed Forces of the
Philippines; and

(8) Foreigners and foreign corporations.

It shall be unlawful for any person to solicit or receive any contribution from any of the
persons or entities enumerated herein.

Political contributions are not subject to donor's tax, provided they are duly reported to the
COMELEC. (RA No. 7166, Sec. 13)

Any provision of law to the contrary notwithstanding any contribution in cash or in kind
to any candidate or political party or coalition of parties for campaign purposes, duly
reported to the Commission shall not be subject to the payment of any gift tax.

Foreign corporations remain forbidden from making political contributions, directly or indirectly.
Such prohibition is consistent with the State policy against foreign interference in the country's
domestic affairs.

To establish pension, retirement, and other plans for the benefit of its directors, trustees,
officers and employees

The power to establish pension, retirement and other plans for its directors, trustees, officers and
employees is a power expressly granted by law to all corporations registered under the general
provisions of the Corporation Code. The power of the corporation to grant gratuity pay to
employees is covered by such provision. Stockholders' approval is not necessary.

A gratuity is a bounty or gift given in return for a favor or services. It may be in the form of a
remunerative donation.

The traditional concept is that this power should extend only to employees and should not cover
other officers of the corporation. Through the years, however, it has become established that a
corporation may furnish medical care and other aid to its officials and employees as is necessary
to enable the corporation to fittingly carry out its purposes and business.
The directors, officials, and employees are the very persons responsible for the success of any
business undertaking and granting them certain benefits and privileges would necessarily be to
the advantage of the corporation.

The power may include any act to promote the convenience, welfare and benefit of the
employees or officers.

The retirement fund established by the corporation may gain tax exempt status under the NIRC.

To exercise such other powers as may be essential or necessary to carry out its purpose or
purposes as stated in the articles of incorporation.

Paragraph k of Section 35 taken along with the provision of Section 44 which authorizes the
juridical entity to exercise "necessary or incidental" powers, practically gives the corporation a
wide range of implied powers.

Powers "incident" are those that attach to the corporation from the date of its incorporation which
may likewise be said to be "inherent" to corporate existence. These powers, which are thus
impliedly conferred, are (1) the privilege of having the right of succession; (2) the capacity to sue
and be sued; (3) the capacity to purchase, hold, convey real and personal property in its corporate
name; (4) the authority to adopt a corporate seal; and (5) the authority to adopt and amend by-
laws. These incidental or inherent powers are likewise powers expressly granted by the
Corporation Code.

As to powers "essential or necessary" to carry out the corporate purpose or purposes, no uniform
rule has been or can be laid down as to what would constitute "reasonably necessary" to the
exercise of the corporation's express powers. Each case must depend upon its particular facts and
circumstances and upon the nature of the power granted. Whether an act comes within the
implied powers of a corporation is a mixed question of law and fact, to be determined in each
case from all its facts and circumstances.

A corporation has authority to do what will legitimately tend to effectuate the express purposes
and objective; that it may ordinarily do all things that are convenient, suitable or necessary to
enable it to fully perform the undertaking designated charter, and for which it is organized.

The following classification is presented as embracing most of the implied powers which a
corporation may exercise:

1. Acts in the usual course of business;

2. Acts to protect debts owing to the corporation;
3. Embarking in a different business (it must be part of its regular business);
4. Acts in part or wholly to protect or aid its employees; and
5. Acts to increase business.

A corporation has "other powers as may be essential or necessary to carry out its purpose or
purposes as stated in the articles of incorporation." According to the Supreme Court, the extent
of these powers is the "logical relation of the act to the corporate purpose expressed in the
charter. If that act is one which is lawful in itself, and not otherwise prohibited, is done for the
purpose of serving corporate ends, and is reasonably tributary to the promotion of those ends, in
a substantial, and not in a remote and fanciful, sense, it may fairly be considered within charter
powers. The test to be applied is 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. If so, the corporation has the power to do it, otherwise, not."

Power to guaranty or secure obligation of another entity*

The law does not expressly confer on a corporation the power to guaranty or secure the
obligation of another entity. The Commission acknowledges a corporation may validly provide
for the same in its articles of incorporation, and in furtherance of its business purpose. This
complements its power and capacity "to...pledge, mortgage and otherwise deal with such real and
personal property... as the transaction of the lawful business of the corporation may reasonably
and necessarily require."

The grant of a security interest that is in furtherance of a corporation's business is embraced

within the scope of a corporation's implied powers. The guarantee or mortgage should be entered
into to obtain some benefit for the corporation.

A mortgage of corporate assets to secure the obligations of another corporation is allowed: (a)
when the mortgage is in furtherance of the interests of the corporation and done in the usual and
regular course of its business; or (b) when it is made to secure the debt of a subsidiary.

Acting as guarantor or surety furthers the interests of the corporation if the corporation obtains
some benefit under the contract of guaranty or suretyship. Hence for its validity, the following
should be considered:

1. There is no express restriction in the articles of incorporation or by-laws;

2. The purpose of the guaranty is legal;
3. The consent of all corporate creditors and shareholders must be secured;
4. The transaction is not used as a scheme to defraud or prejudice corporate creditors, or
result in infringement of the trust fund doctrine;
5. The guaranty will not hamper the continuous business operation of the corporation;
6. The parent company is financially solvent and capable of paying the creditor.

If the power to enter into suretyship agreements and to issue corporate guarantees must be
provided in the articles of incorporation. Otherwise, the same may be considered ultra vires, and
make the concerned members of the board personally liable to the corporation’s stakeholders.

Further, the board must secure shareholders' or members' approval if the grant of guaranty or
surety amounts to an indirect sale or disposal of all or substantially all properties of the
corporation. (Sec. 39)

(see Aquino p. 443)

Sec 36. Power to Extend or Shorten Corporate Term. – A private corporation may extend or
shorten its term as stated in the articles of incorporation when approved by a majority vote of the
board of directors or trustees and ratified at a meeting by the stockholders representing at least
two-thirds (2/3) of the outstanding capital stock or of its members. Written notice of the
proposed action and the time and place of the meeting shall be sent to stockholders or members
at their respective place of residence as shown on the books of the corporation, and must be
deposited to the addressee in the post office with postage prepaid, served personally, or when
allowed in the bylaws or done with the consent of the stockholder, sent electronically in
accordance with the rules and regulations of the Commission on the use of electronic data
messages. In case of extension of corporate term, a dissenting stockholder may exercise the right
of appraisal under the conditions provided in this code.

Sec. 80. Instances of appraisal right. - Any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of his shares in the following instances:
 
1. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in any
respect superior to those of outstanding shares of any class, or of extending or shortening the
term of corporate existence;
 
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code; and
 
3. In case of merger or consolidation. (n)

This power to extend the corporate term may be exercised in case the corporation has opted to
have a fixed term, as specified in its articles of incorporation, in lieu of perpetual existence, and
under the conditions specified by the RCC.

On the other hand, the corporate term may be shortened for corporations with a specified term in
the articles of incorporation or even those with perpetual existence.

Under the Code, a corporation has perpetual existence. This rule applies to an existing
corporation, whose articles of incorporation shall be deemed amended to reflect its perpetual,
unless the corporation (by majority vote of shareholders or members) elects to retain its limited
term.

With regard to a corporation with limited term, such term may be extended or shortened through
an amendment of its articles of incorporation. Generally, an extension may be made no earlier
than three years prior to the end of its term. The Commission may grant an earlier extension for
justifiable reasons. (Sec. 11)

Extending or shortening the corporate term involves an act of amending the articles of
incorporation but it is considered as a special amendment in that the special provision of Section
36 and not Section 15 of the Code governs. The latter still applies in so far as submission of the
amendments and approval thereof by the SEC is concerned.

A dissenting shareholder may exercise his appraisal right in accordance with law. Such right
applies not only to the extension but also to the shortening of corporate term. (Sec. 80)

The stockholder not in favor of extension of the corporate term may exercise his appraisal right,
that is, he may get out of the corporation and demand for the payment of the fair value of his
shares subject to the conditions specified in Section 80 of the RCC.

From the above-provision and jurisprudence, the requirements and procedure for extending or
shortening the corporate term are as follows:

1. Approval by the majority vote of the board of directors or trustees;

2. Ratification by the stockholders representing at least 2/3 of the outstanding capital
stock (including non-voting shares) or 2/3 of the members in case of non-stock corporations;
3. The ratification must be made at a meeting duly called for that purpose;
4. Prior written notice of the proposal to extend or shorten the corporate term must be
made stating the time and place of meeting addressed to each stockholder or member at his
place of residence, either by mail or personal service, or when allowed in the by-laws or done
with the consent of the stockholder, sent electronically;
5. In case of extension, the same cannot be made earlier than three (3) years prior to the
original or subsequent expiry date unless there are justifiable reasons for an earlier
extension;
6. In case of extension, the same must be made during the lifetime of the corporation;
7. Any dissenting stockholder may exercise his appraisal right;
8. Submission of the amended articles with the SEC; and
9. Approval thereof by the SEC (as required under Sec. 37 for extension, and Sec. 120 for
shortening the term with the effect of dissolution).