***COMMERCIAL LAW***

PRIVATE CORPORATIONS

Concession theory
- It holds that corporate existence is granted by the state where the corporation
is incorporated.
- State that creates a corporation as a legal status

60-40 RULE
- 60% Filipino
- 40% Foreign

Not compliant
- All covered corporation shall at all times observe the constitutional or
statutory ownership requirement. For purposes of determining compliance
therewith the required percentage of Filipino ownership shall be applied

SHARES
- Insurance corporations are not allowed to have no-par value shares.
- Only par value in insurance corporation

LIMITED CAPACITY Sec 44 RCC

- No corporation shall possess or exercise any corporate powers other than
those conferred by this code or by its articles of incorporation and except
such as are necessary or incidental
STOCK vs NON-STOCK
- A stock corporation is a corporation which has a capital stock dived int
shares and is authorize to distribute to holders of such shares, dividends or
allotment of the surplus profits on the basis of the shares held

- Nonstock corporation is one where no part of its income is distributed as

dividends to its members

MANNER OF CREATION
- General law: A corporation created under the RCC of the Philippines
- Special law: A corporation directly created by Congress through a special
law.

DE JURE CORPORATION
- Created in strict or substantial compliance with the mandatory requirements
for incorporation and the right for which to exist as a corporation cannot be
successfully attacked or questioned by any party
-
- Voidable contract valid until nullify by the state

DE FACTO CORPORATION
- The filing of articles of incorp and the issuance of the certificate of
incorporation are essential for the existence of a de facto corporation
An organization not registered with the SEC cannot be considered a corporation in
any concept not even as a corporation de facto
- It is the act of registration with SEC through the issuance of a certificate of
incorporation that marks the beginning of an entity corporate existence
CORPORATION SOLE
- One consists only of one-member, religious denomination

ONE PERSON CORPORATION

- One person corporation a single stockholder

PARENT OR HOLDING CO.

- Which owns or is organized to own a substantial portion of another’s
company voting shares of stock
- Organized and is basically

SUBSIDIARY
-corporation more than 50% of the voting stock of which is owned or controlled
directly or indirectly through one or more intermediaries by another corporation
which thereby becomes its parent corporation

AFFILIATE
- Corp that directly thor

CLOSE CORP
*Articles of corporation is one whose article of incorp provide that:
- not exceeding 20 stockholders
- restricted share transfer
- Not allowed to list in the stock exchange
-Notwithstanding the foregoing, a corporation shall not be deemed a close corp
when at least 2/4 of its voting stock

ELEEMOSYNARY CORPORATION
- Created for private gain or profit but for charitable purposes

REMOVAL OF SIGNAGES
- SEC can order to immediately cease using the name even if it is approved by
the registration of the corporate name

NAME OF DISSOLVED CORPORATION

- The corporate name cannot be used by another company for 5years from
dissolution unless permitted by the stockholders representing majority of the
capital stock

CORPORATE TERM
- Provides that corporations with certificates of incorporation issued prior to
the effectivity thereof and which continue to exist shall enjoin perpetual
existence RCC took effect on Feb 23 2019

- To continue existence – provides that a corp may apply for a revival of tis
corporate existence
SUBSCRIPTION CONTRACT
- A contract for the acquisition of Unissued stock in an existing corporation or
a corporation still to be formed shall be deemed a subscription

INDIVISIBILITY OF SUBSCRIPTION CONTRACT

- No certificate of stock shall be issued until the full amount of the
subscription together with the interest and expenses has been pain
- Serves to secure payment of subscription

INTEREST ON SUBSCRIPTION
- No interest

ISSUANCE OF SHARES
- The power to issue stocks is lodged with the BOD and no meeting is
required and what is only requires is the BOD resolution approving the
additional issuance of shares. Also file the necessary application with SEC

DOCTRINE OF EQUALITY OF SHARES

- Except provided in the AOI and stated in the certificate of stock, each share
be equal in all respect to every other share

NON-VOTING SHARES
- No, corporation must always have a class or series of share with complete
voting rights.

FOUNDER’s SHARES vote of BOD

- No, the exclusive right to vote is only for 5years
- No, the 6-year count is from incorporation
SEPARATE PERSONALITY RULE
- Properties belong to the corporation and do not belong to the stockholder

CENTRALIZED MANAGEMENT RULE

-exercise of corporate powers, conduct of business and control of assets and
properties- entrusted to a body

BUSINESS JUDGMENT RULE

- Question of policy are left solely to the honest decision of officers and
directors of a corporation and the COURTS ARE WITHOUT AUTHORITY
to substitute their judgment for the judgment of the BOD

STRAIGHT VOTING
- Every stockholder may vote such number of shares for as many persons as
there are directors to be elected.
-
CUMULATIVE VOTING (for stock corporations it is a matter of legal rights)
For non-stock corp it cannot use of cumulative voting
- A stockholder allowed to concentrate his votes and give one candidate as
many votes as the number of directors to be elected multiplied by the
number of his shares shall equals

ELECTRONIC VOTING
- As a rule, no, but if the corp is vested with public interest it may

BALLOTING
- Election should be by ballot if requested by a voting stockholder or member
TERM OF OFFICE

STOCK CORP – 1year

NON-STOCK – not exceeding 3years

BOD QUALIFICATION
- The previous requirement that a majority of the BOD must be resident was
already removed

ANTI-DUMMY LAW
- Foreigner are allowed to become BOD in proportion to their allowable
participation or share in the capital of such entities

DIRECTORS ELECTED FROM STOCKHOLDERS

- Must be elected from among the stockholders or member

INDEPENDENT DIRECTORS
- BOD have independent directors (20% of the BOD)
Public companies
- Securities listed with an exchange
- 50M assets and with 200 or more shareholders, each holding at least
100sahres

- Independent Director is independent of management and free from any

business or other relationship
VIOLATION OF SECURITIES LAW

If within 5yrs prior to the election or appointment was:

- Convicted by final judgment for an offense punishable by imprisonment for
a period exceeding 6yrs

NOTE THAT THE BOARD DISQUALIFICATIONS APPLY ALSO TO

OFFICERS

BOARD REMOVAL is for stockholders only

- Removal and replacement of director are prerogatives of the stockholder
- 2/3 of the outstanding capital stock should vote in favor of the director

REMOVAL BY THE SEC

- SEC can motu propio remove a director or trustee elected

BOARD VACANCY
- Remaining BOD provided there is still a quorum

EMERGENCY BOARD
- Unanimous vote is needed

PER DIEM
- Directors or trustees shall not participate in their determination of their
compensation or PER DIEM
SPECIAL COMMITTEE

Notice of the BOD

-Regular/Special meeting
-Remote communication – that allow them reasonable opportunities to participate

The chairman or in his absence the president shall preside at all meetings of the
BOD

QUORUM-BOD MEETING
- Consist of 10 members
- 6 BOD – the basis is the majority vote of the 10 members

DIRECTORS PROXY ATTENDANCE

- No, Directors and Trustees cannot attend via proxy
It is expressly prohibited by law by proxy

PLACE OF BOD
- Anywhere

BOARD ACTION; VOTE NEEDED

- Majority vote needed
EXECUTIVE COMMITTEE
- Should be in the by laws
- At least 3 members should come from the BOD
- Decisions are final and does not require board confirmation

CANNOT BE DELEGATED TO THE EXECOM

Approval of stock dividend declaration

Amendment of the company bylaws

- act which requires stockholders’ approval

- Board vacancies
- Amendment/repeal of bylaws
- Cash dividends
- Amendment of resolutions

OFFICERS
- Election of officers is entrusted to the BOARD
- But for non-stock/closed corporation can elect their officers but for stock is a
matter by the BOARD

ACTS OF MANAGEMENT/OFFICER
- To be binding upon the corporation, officers must:
- Have authority from the BOARD
COMPROMISE AGREEMENT SIGNED BY PRESIDENT

PRESIDENT OBTAINING THE LOAN

SELF-DEALING (spouse and relatives up to 4th degree of consanguinity)

- Only the corporation has the authority to cure the contract
Generally voidable
- To be valid it must:
Presence of director is not necessary for quorum
Vote of the director is not necessary for approval
Contract is fair/reasonable

INTERLOCKING
- Its valid as long as the contract terms are fair

CORPORATAE OPPORTUNITY
- Corporation is prohibited from competing with the business in which h his
corporation is engaged in as otherwise he would be guilty of disloyalty
where profits that he may realize will have to go to the corporate funds
except if the disloyal act is ratified
INSTANCES OF LIABILITY
- Patently unlawful act
- Gross negligence or bad faith
- Conflict of interest
- Watered stocks
- Stipulations
- Law

PATENTLY UNLAWFUL ACT

CREDIT LINE
- Bad faith; gross negligence in directing its affairs

LIABILITY UNDER BP22

WARRANTY BREACH
-

VOTE OF SHAREHOLDERS (if non stock 2/3 of the outstanding members)

- Amendment of AOI – 2/3 of the outstanding shares

- Sale/lease/exchange/mortgage/pledge- 2/3

- Amendment of Bylaw – Majority of the outstanding shares/ majority of the

members

- Investment – 2/3
 - Compensation to BOD – majority of the outstanding shares

- Delegation of the power to amend bylaws- 2/3

- Removal – 2/3 of the outstanding shares

- Merger/Consolidation- 2/3

- Capital Increase/decrease – 2/3

NON-VOTING SHARES
Can vote on:
Amendment of AOI
Adoption and amendment of Bylaws
SLEMP
Bonded indebtedness
Increase or decrease of Capital stock
Merger or consolidation
Investment
Dissolution

CHANGE OF CORPORATE NAME

- The mere change in the corporate name is not considered under the law as
the creation of a new corporation; hence the renamed corporation remains
liable for the illegal dismissal of its employee separated under
NELL DOCTRINE
-Where one corporation sells or otherwise transfers all of its assets to another
corporation, the latter is not liable for the debts and liabilities of the transferor
except:
- purchaser expressly or impliedly agrees to assume such debts
- consolidation or merger of the corporations
- purchasing corporation is merely a continuation of the selling corporation
- fraudulent sale

BUSINESS ENTERPRISE TRANSFER

- Transferee corporation interest goes beyond the assets of the transferor’s
assets and its desire to acquire the latter’s business enterprises, including its
goodwill.

- Here, the transferee purchases not only the assets of the transferor, but also
its

ABONDONMENT OF SALE
- Without further action or approval by the stockholders or members

STOCK DIVIDENDS
MERGER
- Rights of creditors or liens upon the property of r

LEGAL CONSEQUENCES
-Single corporation
Separate existence cease
Rights of the surviving entity
Rights, privileges, immunities and franchises, properties

RIGHT TO TERMINATE NOT IMPAIRED

- It must have a lawful and authorized cause or the rtight of such an employee
to resign, the merger

MERGER vs SALE OF ASSETS