SCRIPT FOR LAWS

Good morning, everyone I am Harlene Cambel and I am the reporter of group 4. So today, I will discuss to you the
Sections 1 and 2 of the Corporation Code of the Philippines. Basically, this is the code that supervises or regulates the
corporations in the Philippines. So for the past weeks, Judge Espinosa and the other groups, or all of us we’re
discussing partnership. Even last year, may discussions na rin ng Partnership and Corporations Accounting, so as an
ice breaker, my question is, may natatandaan ba kayong distinct difference/s ng Corporation from a Partnership? Kasi
‘di ba ang similarities lang naman nila ay instead of an individual, they are both regulated by more than one person, or
group of people. So, focus tayo sa differences.

Alright, thank you sa lahat ng sumagot. All of them are correct, ‘no. Sa Corporation Limited ‘yung liability, sa
Partnership ay hindi, UNLESS you are a limited partner, hindi hahabulin ang mga ari-arian mo. And also, kung sa
partnership, once may deceased na partner, dissolution na ‘yung kasunod, while in a Corporation, merong right of
succession, so naipapasa. Later in the discussion, mapag-uusapan din naman natin ‘yan so let’s move on to our topic.

Section 1: DISCUSS

KEYWORDS
1. mapa stock or non-stock man ‘yan
2. defines their powers, meaning anong mga pwede nilang gawin
3. their duties, under din ng code na ito, paano sila magbabayad ng taxes, ganiyan, and also their liabilities to their
creditors
4. rights and liabilities din nila, itong code na ‘to ang nag-r-regulate
5. kung makikipag transact man ang foreign corporations, itong code na ito ang mag-p-prescribe, or mag-s-serve as
their guideline
6. ang kanilang penalties kung sakaling malabag ang code, dini-discuss din dito
7. itong code lang na ito ang mag-p-prevail, kahit may iba pang batas that will try to contradict what it says

May questions ba so far?

Section 2: DISCUSS

So punta naman tayo sa Section 2, which is called Corporation Defined kung saan dine-define na natin what a
Corporation is. So sabi… BASA DEFINITION. Dagdag ko lang na that definition only refers to the private
corporations o sa mga corporations na inorganize under the corporation law. Okay, so a corporation has four attributes
that I’d like to discuss and those are: BASA ATTRIBUTES. So mapapansin natin na itong mga attributes na ibinigay
ay connected sa kung paano siya idine-define sa Section 2 of the Revised Corporation Code. So iisa-isahin natin sila.
NEXT SLIDE, PLEASE. THANK YOU. BASAHIN. It is the Doctrine of Corporate personality which pertains to the
separation of the corporation to its members. So separate, nakahiwalay ang members or stockholders nito sa kaniya
dahil nga may artificial personality siya. We can say na the law gave birth to the existence of the artificial personality,
that is, a corporation. So as a consequence ng legal concept na ito, Number 1…

KEYWORDS
1. The general rule is that obligations incurred by a corporation, acting through its authorized agents, are its sole
liabilities. Ibig sabihin, sa corporation lang ang liabilities na ‘yon, hindi sa stockholders or members kasi nga separate
and personalities nila. AND VICE VERSA, meaning ang liabilities also ng stockholders or members, sa kaniya lang,
sole responsibility niya ‘yon. The corporation is not liabile to the stockholders’ liabilities, as much as the stockholders
are not liable to the corporation’s liabilities. Walang damayan, so ‘yun ang general rule.

2. It may acquire and possess property of all kinds. Parang sa partnership, pwedeng bumili ng machinery, equipments
and etc., immovable man or otherwise. Property conveyed to or acquired by the corporation is in law the property of
the corporation itself as a distinct legal entity and not that of the stockholders or members as such and vice versa. Just
like in liabilities, kung ano man ang inacquire ng corporation, it does not belong sa mga stockholders, kundi sa
juridical personality ng corporation. So although may claims and ownership pa rin ang stockholders to the said
properties na inacquire ng corporation, residual interest na lang ‘yon, dahil similar sa partnership: Kailangan munang
ma-satisfy ang outside liabilities BEFORE ma-satisfy ang claims ng stockholders or members.

3. Property conveyed to or acquired by the corporation is in law that the property of the corporation itself as a distinct
legal entity and not that of the stockholders or members.
4. Sinasabi na a corporation is not held liable for personal indebtedness of the stockholders even if he should be its
president, kahit sino ka pa. Kahit ikaw pa ang pinaka mataas sa corporation, under the Corporation Code, as a
stockholder or member, hindi mo pwedeng idamay ang corporation sa sole liabilities mo. Kahit isa man sa members
ng corporation ‘yung gumawa ng contract ng corporation to another party, si Corporation pa rin ng held liable doon at
hindi sinuman sa members o stockholders.

5. Ang sabi, hindi exempted ang dividends of the stockholders sa taxes, tina-ax din ‘yan dahil income ‘yan eh. Also,
kung si Corporation ay may biabayaran na tax, hindi ‘yon pwedeng isama s binayarang taxes ng stockholders o
members niya, and as always, it is vice versa.

6. A corporation has no personality to bring an action for or in behalf of its stockholders if the purpose is trying to
recover a property na pagmamay-ari ni said stockholder or member. Kasi again, paulit ulit, separate po ang
personalities nila.

7. Likewise, as an entity na distinct from its members or stockholders, a corporation will remain unchanged by
changes in its individual membership. May maalis man, may pumalit or matanggal na members, si Corporation, tuloy
lang. Nag-e-exist pa rin siya, tuloy ang operations. Kung sa partnership, kapag may umalis sa partners, ma-d-dissolve,
sa Corporation hindi, unaffected ang corporation sa ganon.

So, ito na ang exemptions sa general rule, itong Doctrine of piercing the veil of corporate entity BASAHIN
meaning, for our convenience kaya lang may legal fiction. Okay, ano ba ‘yung legal fiction, kung may fanfiction, may
legal fiction which pertains to the corporation as an artificial being, fictional being. So ginawa lang itong fiction na ‘to
para mapadali ang process, pero it cannot be extended to a point beyond its reason and policy. So kailan ba
dinidisregard ang legal fiction na ito? Eto BASAHIN Napakahaba ‘no, ang meaning lang naman ay kapag ginamit mo
ang corporation para sa illegal activities mo, you, or rather, the stockholders or members and the corporation will be
treated as one. Iisa na lang kayo, kasi paano, sinong ikukulong eh ang corporation ay artificial being? So as long as
legal ang activities mo using the corporation, you are separate to it as much as it is separate to you. Pero kung illegal
na mga ginagawa mo using the corporation dahil nga aware ka na separate ang personality mo sa kaniya and you took
that for granted, the law will not see you and the corporation separately anymore, iisa na ang tingin sa inyo ng batas.
Liable ka na, being the one that operates the corporation. So kaya nandito ang Doctrine na ito, is to prevent those
wrongdoings, para hindi magamit ang pagiging legal fiction ng corporation sa illegal na bagay as a scapegoat of those
stockholders or members na gustong gumawa ng illegal, so napakahalaga niya. NEXT SLIDE PO. PLEASE. THANK
YOU.

So, ang unang attribute ng corporation is it is an artificial being, next naman is Corporation as a creation of law or
operation of law. Kung babalikan natin ang definition ng corporation under this code, ‘di ba ‘yon pa nga mismong title
nitong Section 2 na nagsasabing ang Corporation ay isang artificial being na ginawa under the law, under ng batas. So
ito:

KEYWORDS
1. This power is exercised by the State through the legislature (congress natin ‘yan, the lower house and the senate),
either by a special incorporation law or charter which directly creates the corporation or by means of a general
corporation law under which individuals desiring to be and act as a corporation may incorporate. Generally kasi, you
can create a corporation by two ways, either ayan, created by law or operated by law. Created by law MEANING
meron talagang batas na nagsasabi na itong corporation na ito ay dapat mag-operate, example daw nito ay GOCCs or
Government Owned and Controlled Corporations, may specific law na nag-create sa kanila. Examples are: GSIS,
PAGCOR, Landbank, ‘yan may mga specific laws na nilegislate or in-enact for their specific corporation. Ito namang
operated by law, ibig sabihin may isang general law lang that will act as a guidance or as a regulator on how
individuals will operate or create a corporation, how it will be regulated, or how it will be dissolved. Pero itong
guidelines na ito mandatory ha, concept lang ‘yung pagiging guidelines niya. Again, kapag created by law, may
specific na law for that corporation, kapag by operation of law, may batas na nag-s-serve as mandatory guidelines para
sa mga individuals or group of people na gustong bumuo ng corporation. That’s the general rule, so of course, there’s
an exception. And what is that exception? BASAHIN basically, ang sinasabi ditong prescription is the passage of
time, through the passage of time, you will gain rights or ownership. Sinasabi na kahit walang legislative or authority
na nag-authorize sa creation ng isang corporation, through passage of time, maituturing na rin siyang isang
corporation. An example is a Catholic Church, the organization ha, not the religion. Na sa tinagal tagal na nandito ang
Catholic Church, by the passage of time, treated na siya as a corporation by the law.

So dalawa nang attributes ng corporation ang na-d-discuss natin, ano nga ‘yon? Anyone? PLEASE SANA MAY
SUMAGOT. Nice, that’s correct, thank you.
Ang pangatlong attribute naman ay Right o succession of a corporation BASAHIN so basically, may perpetual
existencenga ang corporation pero hindi siya immortal. Ayan, self explanatory naman ‘yung right of succession. Ahit
‘yung owner pa ng corporation ‘yan, mamatay man siya, pwede niyang ipasa ang ownership na ‘yon. Kahit may ma-
withdraw sa stockholders or members, kahit may maging insolvent, incapacitated na, or may mg-transfer ng interest, it
will not dissolve the corpoatin, unlike sa partnership na once may mag-withdraw, dissolution na agad ang kasunod.
Kaya advantage din ‘yan ng corporation, may perpetual existence siya. Now under the revised Corporation Code
BASAHIN So dati kasi, sa Old Corporation Code, sinasabi na 50 years lang ang buhay ng corporation pero you can
renew naman. Ngayon, dito sa revised corporation code, tinanggal na ‘yung 50 years lang ang buhay, binigyan na ng
perptual existence UNLESS sinabi or provided na mismo sa articles of incorporation na halimbawa, for 30 years lang,
edi for 30 years lang pero kung hindi provided, automatically, it has a perpetual existence. Number 2 BASAHIN gaya
ng example kanina, ‘yung GSIS, Landbank and etcetera, they have the right of succession for the term na sinabi sa
laws that creates them

So let’s move on to the last attribute which is the Corporation having the Powers, attributes, and properties of a
corporation. BASAHIN FIRST PARAGRAPH. Dahil nga ang corporation ay purely created by the law, pwede lang
sila ma-exercise ng power na granted to them by the law of their creation, kung ano lang ang sinasabi ng batas na
power and attributes na pwede nilang ma-exercise as a corporation, hanggag doon lang sila. So ang sinasabi dito na
express grant ay kung ano ‘yung naklagay o nakalista sa articles of incorporation niya, expressed eh, stated. Ito
namang incidental, ito ‘yung mga implied, mga unstated sa articles of incorporation or even doon sa charter, ‘di sila
stated pero they are essential para sa existence or operations ng corporation. Example sa express: This corporation was
incorporated for doing construction, ‘yun ang expressed power niya. Mag-construct ng buildings, roads, basta mga
ginagawa as a construction business. So kung itong example natin may express grant na si Construction business ay
mag-c-construct ng mga buildings, pwede ba siyang bumili ng materials para sa construction? May right ba silang
bumili ng land o property para doon mag-operate? Doon ngayon papasok itong si implied or incidental power. Na
kahit hindi stated sa articles of incorporation, may power siya so acquire those properties para mag-operate ang
corporation, para ma-exercise niya kung ano man ang expressed powers na stated sa articles of incorporation niya.
BASAHIN NEXT PARAGRAPH. Ayon, ang tanong lang ay kung direct ba ‘yung connection, or fairly incidental ba
to the express power and necessary ba siya to exercisethe express powers, kasi kung hindi, it shouldn’t be done. Sa
book ni Hector de Leon, may ilang given instances don, you can read that.

So isa-isahin natin ang four attributes of a Corporation under this Code, ano nga ulit ‘yon? First, Corporation as an
artificial being. Second, It is created by operation of law. Third, it has the right of succession; and Lastly it has only
the powers, attributes, and properties expressly authorized by law or incident to its existence.