BMMZ Corporation Law Notes Midterms Finals

1
CO RPO RAT IO N L AW
Recitation Questions - Compilation
PART I CORPORATIONS AND TITLE I ON GENERAL PROVISIONS
1. What are the types of business organizations in Philippines?

i) Sole proprietorship,
ii) Partnership,
iii) Joint Account or Cuentas en Participation;
iv) Business Trusts;
v) Joint Venture;
vi) cooperative;
vii) syndicate,
and viii) corporations
2. Origin/history of a corporation? p. 30
Recits: Roman times- cīvis rōmānus sum (I am a Roman citizen) more advance time.
The so called Roman colegia composed of priest
Romans invaded most of Europe- then when British colonized some of country they
form company- went to Canada- America a colony of England adopted the latter-
America form corp also- America went to Philippines- most of our commercial laws are
patterned after American law- Civil Law is adopted from Spanish law
Book: Corporations have their origin in Roman Law.

In Roman Times.- The corporations, like most other forms of business organization, take their
rise in Roman times. Probably the earliest form is that of the Collegium or college of priests. This
body had many of the rights and privileges which the law gives to the modern corporation. The
Collegium could hold property; it could sue and be sued; the rights of the corporate bony were
separate from those of individual members; it existed in perpetuity, and it was autonomous.
Besides the Collegium, other Roman organizations such as municipalities, official societies
engaged in state administration, military groups, and trade and societies took on corporate form
In The Philippines. - During the Spanish Regime, prior to the enactment of the former
Corporation Law (Act No. 1459.), there existed in the Philippines several forms of commercial
companies, associations, and partnerships.
• The concept of a corporation not having been introduced yet, these named associations
and partnerships were the most common entities by which business was generally
conducted during that time. Among these were the sociedad en comandita (limited
partnership) and the sociedad regular colectiva (general partnership), which were
governed by Articles 116 to 150 and
Consolidated notes of Bajao, Matanog, Migullas, and Zayas

2
3. Corporation laws in the Phil?

- Old corporation law
- New corporation law
- RCCP
4. What is the purpose of rccp/revision of corporation law/ why revise corporation code?
- Enhancing the ease of doing business
i. Because there are complaints that there are many stages before you can put
up a business
ii. Provide easy access to business for small, mini, medium enterprises- they are
the ones gives employment
iii. Giving minority stockholders a stronger hold of the corporation
- Prioritizing corporate and stockholder protection
- Instilling corporate and civic responsibility
- Strengthening the policy and regulatory corporate framework
5. What is a 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
6. What are the attributes of a 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
9. Partnership v. Corporation

3
7. What is an artificial being?

It is a juridical person that has separate personality which can be pierced in certain instances
8. What is the right of a corporation as a being?

- Can own/hold properties
- Has certain rights under Bill of right
- Can sue (not moral damages because no feelings, with expn)
9. Can a corporation be criminally prosecuted?

- Yes, provided that penalty is fine, forfeiture, revocation of franchise, not imprisonment
- Element of crime is intent: corporation has no intent/no mind of its own
iv. So it will be the people who will commit the crime, corp will suffer not of
imprisonment.
v. People will suffer penalties, imprisonment, disqualification
10. Stonehill v Diokno (might happen again in the Philippines)
11. What do you mean by created by operation of law?

- General law - RCCP
- Special law – by a franchise (creation of the State)
vi. Primary franchise- granted to individual to create a corporation
vii. Secondary franchise- granted to corporations, i.e., utility company etc.
1. Note: we have now revised definition of public services and public utility
a. Constitution: foreigners cannot engage in certain business in Phil,
issue in Globe (control not by Ayala-they only run it, Singapore-

4
Japan partnership 50-50-violation of Constitution), Smart-Meralco-

PLDT owned by Indonesian.
b. What is a utility from a public service corp or public utility corp, they
classify telecommunication and retailing as public services (not
anymore a utility, we are now open to foreign investment-moot and
academic the case of Globe and Smart)
12. What is right of succession? what are the options?

- Corporation may opt to continue through the succession of the members of the
corporation
- Options of term of existence: Perpetual (default term) or limited existence
13. It has the power attributes, and properties expressly authorized by law or incident to its
existence, explain.
- Sec. 44
- Expressio unius est exclusio alterius. That which is expressed is included and that
which is not is excluded; a rule of statutory interpretation that says that if something is
mentioned as being included, then anything that is not mentioned is by implication
meant not to be included.
- What it can do is what is conferred by law, what it cannot do is that which is not
conferred by law. If not expressly authorized, at least incidental. (Express, implied,
incidental powers)
14. Distinctions between partnership and corporation?

- creation:
- organizers:
- powers:
- authority of those who compose it:
- transfer of interest:
- liability of those who compose it:
- right of succession:
- capacity to be partner/stockholder:
15. What is doctrine of limited liability?

The liability of stockholders in Philippine corporations is limited only to the extent of their
capital contribution thereto. Other properties, holdings or assets of stockholders are not within
the reach of corporate creditors. To discourage abuse of this privilege, the Securities and
Exchange Commission [SEC] imposes certain reportorial requirements which should be
complied with on a regular basis.in short, Under this rule, a stockholder is personally liable for
the financial obligations of the corporation to the extent of his unpaid subscription.
Applies even if the corp is the result of a joint venture agreement
Applies to a one person corporation
16. Doctrine of separate juridical personality?

Corporation has distinct personality from its members. Can be disregarded if there is an abuse
of right. Etc.

5
In short, The acts of the stockholders do not bind the corporation unless they are properly
authorized. Similarly, the acts of officers and directors in their personal capacity cannot be
imputed to the corporation. Their powers and duties pertain to them respectively and not to each
other.
17. Doctrine of piercing the veil of corporate fiction?
18. Recent news: https://www.forbes.com/sites/jonathanburgos/2022/01/26/philippines-

richest-man-manuel-villar-takes-over-abs-cbns-tv-channel-
frequencies/?sh=339515bf73bd

6
19. Is it sufficient enough to disregard the doctrine of separate juridical entity if 99.9% is
owned by one person?
- No. A corporation always has separate legal entity.
- Doctrine of piercing the veil of corporation applies only when:
Memory Aid: PADFJ
1. Alter ego test
a. PC owner all or most of CS
b. Control
c. Both have common officers
d. PC finances SC
e. PC subscribes to all
2. Defeats public convenience;
3. Is used to perpetuate fraud;
4. Is used to defend a crime;
5. Is used to justify a wrong.
20. What areas of doctrine of piercing the veil apply?
21. What are the types of corporation as to legal status

- De jure corporation
- De facto corporation
viii. Cannot be inquired collaterally-inquiry should be a direct attack by the solgen
through quo warranto
1. Quo warranto is a special civil action
2. state interested with de facto corporations because there is a contract
between the corporation and the State. It is the state that gives
authority/grant franchise, it did not follow the correct procedure of
incorporation, so the corporation is not properly incorporated. It can
question why it is operating when it is not incorporated or not given
authority by the State.
- Corporation by estoppel
ix. They are natural persons
x. What is applied is the law on partnership
xi. They are liable up to the personal asset, similar to partnership
- Corporation by prescription
xii. Roman catholic church- hold in trust
22. Classes/Kinds of corporation: page 135

- One person corporation
- holding corporation: Holds other companies for purpose of control and not for
investment
xiii. example: Ayala realty holding
- Subsidiary corporation:
- Etc.
23. How to determine the nationality of the corporation?

- General rule: Place of incorporation test
- Expn: Control test (used when there is doubt of ownership/control of Filipino ownership)

7
xiv. Basis of doubt: in nationalized industry – like exploitation of natural resources,

utility, advertising companies, mining (60/40 ownership)
xv. You determines nationality of the corporation by looking at who controls it
despite it being incorporated in the Philippines
NOTE:
1. GR: foreigners can own a corporation
2. EXPN: but not in nationalized industry
a. Latest law on nationalized industry: Llido’s report
- Grandfather rule- a form of a control test- extension of control test-another layer of
control test
xvi. Main requisite to use it to determine control: when there is doubt, when the
foreign equity is also owned by another corporation. Meaning it is not owned by
individuals. You check the ownership of the investor corporation(father, then gf
is the stockholders of the that investor corporation) in the investee corporation
24. who is a promoter?

- The promoters promote the corporation itself. They convince the people to invest. They
tell the people that they are organizing such corporation. However, they are not
committed to buy the shares, and are purely salesmen.
25. who are corporators? p149

- Corporators are those who compose a corporation, whether as stockholders or
shareholders in a stock corporation or as members in a nonstock corporation.
Incorporators are those stockholders or members mentioned in the articles of
incorporation as originally forming and composing the corporation and who are
signatories thereof.
26. what is the significance of being an incorporator?

- Incorporators are the organizers of the corporation upon its inception. They are
mentioned in the AIC as originally forming and composing the corporation, and who are
signatories thereof. They remain in the AIC even if no longer a stockholder.
27. What are shares of stocks?

- Represent ownership
28. what do you mean by the doctrine of equality of shares? p 155

- Each share shall be equal in all respects to every other share, except as otherwise
provided in the AOI and stated in the certificate of stock.
29. what are the classes of shares?

- Common shares
xvii. Cannot be denied the right to vote
xviii. Entitle the holders to a pro rata share in the profits of the corporation without
preference over the other stockholders. They are given voting rights. The most
common type of shares, which enjoy no preference, but the owners thereof are
entitled to management of the corporation (via the exclusive right to vote), and
to equal pro-rata division of profits after preference. It represents a residual
ownership interest in the corporation.

8
xix. Gets dividends upon declaration of the board
- Preferred shares
xx. Shares having certain rights and privileges not available to holders of common
shares.
xxi. Here, there is already a specific dividend rate mentioned in advance. But the
rate is not in terms of number of peso etc. but in percentage form
xxii. Preferred shareholders are not a creditor of a corporation
1. Comparison to a creditor
a. A creditor will get an interest of 5% of what he lent/invent, while a
preferred share holder will get 5% dividend per year but nominated
as a percentage form; he is like a creditor who has lent a money
that will receive a percentage
b. Preferred shareholder has a term (sometimes perpetual)-you lend
money with 5% interest per annum, is also possible that you invest
in a corp as a preferred shareholder you buy 5 yrs preferred shares
paying dividends of 5% per annum. Hence, it looks like a creditor
but he is not really a creditor but he is not really lending because he
is an investor in equity/an owner, only that he did not invest in
common shares but he invested in preferred shares.
2. Advantage of preferred share to enterprise:
a. You can determine when is the period to pay the preferred
shareholder
b. It is part of your equity and not part on your liability. Mas dako
capital and mas gamay imo utang although the nature of preferred
share is similar to utang.
i. Companies like san mig, petron, Borrowing funds through
preferred share so when the debt equity ratio (utang v.
capita, i.e., sa 1 centavo capital pila ang utang) will be
checked. So it cannot be seen that dako kag utang because
of preferred shares)
- Par value share
xxiii. Par value is the minimum issue price of a share of stock which must be stated
in the AOI and in the Certificate of Stock (COS). If the incorporators agreed to
the price, that is the price at which the shares will be sold to the public.
- No par value
xxiv. These are shares without a stated value.
xxv. You still have to pay for these shares, but its value is not stated in the AOI and
in the COS. There is no fixed value stated in the Articles of Incorporation but
issued for a consideration not less than five (5) pesos per share.
30. DIFFERENTIATE PAR VALUE, BOOK VALUE, MARKET VALUE

- Book value → Net assets ÷ no. of outstanding shares
xxvi. The amount per share that each shareholder would receive if the corporation
were liquidated without incurring any further expenses and if assets were sold
and liabilities liquidated at their recorded amounts.
xxvii. It can be higher or lower than the par value

9
1. It is lower than the par value when

2. It is higher than part value when
When is the book value over the par value?

• When the corporation makes profit, when it makes profit it increases its
capital. Because you have additional earnings, you call that the
unrestricted retained earnings/or even restricted earnings, your profit
becomes part of your retained earnings which eventually becomes part
of your capital.
o So when you make earnings, that your capital divided by
number of shares , the original number of shares nadugangan
naman to imo capital tungod saimo ginansya mao ng book
value will go up.
• Book value it will go down kung alkanse ka because imong kapital
gikaon na sa alkanse
Meaning: if corp makes good money, book value goes up
If corp makes losses, the book value will go down
- Market value → The value that buyers in the market are willing to buy and the value that
shareholders are willing to sell. It generally increases if the business of the corporation
is doing well, and decreases if the business is doing bad. It may be higher or lower than
the par value.
- Par value → A pre-determined value
31. what are the kinds of preferred shares as to dividends? 6 kinds

- Cumulative preferred shares
xxviii. Shares which entitle the holder not only to the payment of current dividends but
also to dividends in arrears.
xxix. If there are retained earnings from last year that are not distributed, pay it in the
following year
- Non-cumulative preferred shares
xxx. opposite
- Participating preferred shares
xxxi. They may receive twice or thrice a year if there is excess money of corporation/
if common shareholders gets dividends twice a year-then they can also be
given twice a year-participate.
xxxii. Preferred shareholders already earned premium for their preferred shares and
they still participate in the distribution of the common shares. They take both –
they have preference and they also participate.
- Non-participating preferred shares
- Non-cumulative and non-participating
- Cumulative and participating
Best form of preferred shares as to dividend: Cumulative and participating
There are also certain preferred shares that are convertible to common at a certain time
32. what are the differences between par value, book value, market value?
33. where can you find the par value? cert of stocks

10
34. how to determine the par value? check in the stock exchange or the market value (price of
the willing buyer to buy and the willing seller to sell)
35. how to determine the book value? give formula
When company makes earnings/profits, it will add up in the capital and book value goes up
36. SENATE BILL- LLIDO’S REPORT You classify public utility into a public service so that the
limitation to foreign ownership will no longer be there. Because the limitation is on public utility.
So, when you classify it into public service, there’s no more limitation. Be open to foreign
investment.- effect: more competition; better for consumers; prevent oligarchs to rule; better for
retail business
Example: telecommunications
- Globe ownership- singapore
- Smart- Indonesian
37. Founders shares
- Founders’ shares may be given certain rights and privileges not enjoyed by the owners
of other stock. Where the exclusive right to vote and be voted for in the election of
directors is granted, it must be for a limited period not to exceed five (5) years from the
date of incorporation: Provided, That such exclusive right shall not be allowed if its
exercise will violate Commonwealth Act No. 108, otherwise known as the "Anti-Dummy
Law"; Republic Act No. 7042, otherwise known as the "Foreign Investments Act of
1991"; and otherwise known as "Foreign Investments Act of 1991"; and other pertinent
laws.
38. Treasury shares

- Section 9. Treasury Shares. - Treasury shares are shares of stock which have been
issued and fully paid for, but subsequently reacquired by the issuing corporation through
purchase, redemption, donation, or some other lawful means. Such shares may again
be disposed of for a reasonable price fixed by the board of directors.
- The corp may reissue this treasury shares
- Example, if original par value of the share is 10 pesos per stockholder, then corp
reacquire it, can the corp can reissued it lower than the original par value like 5 pesos?
Or when book value is higher or more than par value, then it acquired treasury shares,
can it sell it for lesser? Note example: book value is 20, then par value 10pesos
xxxiii. Yes, because treasury shares were originally issued and are paid for at the
stated original par value. Hence, no prohibition anymore for the amount lesser if
reissued again.
- Limitations to treasury shares:
xxxiv. Can neither vote not be voted upon
xxxv. Neither can they receive dividends because it is owned by corp, and corp
cannot vote itself nor give it dividends/place money from one pocket to another.
39. Redeemable shares

- Section 8. Redeemable Shares. - Redeemable shares may be issued by the corporation
when expressly provided in the articles of incorporation. They are shares which may be
purchased by the corporation. They are shares which may be purchased by the
corporation from the holders of such shares upon the expiration of a fixed period,
regardless of the existence of unrestricted retained earnings in the books of the
corporation, and upon such other terms and conditions stated in the articles of

11
incorporation and the certificate of stock representing the shares, subject to rules and
regulations issued by the Commission.
xxxvi. Sinking fund: The corporation is required to maintain a sinking fund to answer
for redemption price if the corporation is required to redeem. It is sunk into a
fund so it will not be used/recovered. It is used to redeem the redeemable
shares.
BEST BAR EVER (2022)- Corporation Law

Question 2: medical malpractice
Answer: not tenable. It is a juridical person and can be sued. One of the properties of a juridical
person is the ability to sue and be sued.
Question 7: problem in property or succession but question is: should the court allow the partition?
Answer: SC in one case: you can sell your imaginative share and it can be partitioned after it is
purchased
Question 16: One Person Corporation

Answer: Single parent to register allowed. One person corporation.
Question 17: Required to have independent director?

Answer: Under RCP, you are required to have an independent director. Independent director 60M,
200 stockholders.
Question 18: Is she allowed to vote?

Answer: yes, there are 7 actions wherein non-voting shares are allowed to vote, i.e., when you
dispose of all or substantially all of the assets of the corporation.
TITLE I I:INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS
1. What are the qualifications of becoming an incorporators and the number of

incorporators required?
Section 10. Number and Qualifications of Incorporators. – Any person, partnership, association
or corporation, singly or jointly with others but not more than fifteen (15) in number, may
organize a corporation for any lawful purpose or purposes: Provided, That natural persons
who are licensed to practice a profession, and partnerships or associations organized for the
purpose of practicing a profession, shall not be allowed to organize as a corporation unless
otherwise provided under special laws. Incorporators who are natural persons must be of legal
age.
Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share
of the capital stock.
A corporation with a single stockholder is considered a One Person Corporation as described
in Title XIII, Chapter III of this Code.
Note:
12
• Jurisprudence and commentaries provide that partnership before are not allowed as an
incorporator of a corporation or be a major stockholder, and incorporators cannot be a
partner also in a partnership.
o Why? In a corporation, the power, management etc resides on the board, and
imagine if a corporation is a partner in a partnership. Note that in a partnership,
each partners are agent of the partnership. So it happens that a person who is
not a member of the board will decide for the corporation, because he is an agent
of the partnership. So his relation will affect the corporation. Hence, corporation
is not allowed to join into partnership and partnership were not allowed to be
incorporator of the corporation.
o Note: under RCCP they are allowed. No jurisprudence landmark case yet.
2. What is new in RCCP

13
In incorporators: juridical persons may be incorporators, old code: not allowed

In practice of profession: This is open now, professionals can form as long as special law
allows.
3. What is the reason why lawyers are not allowed to form corporation before?
Corporations are supposed to be organized to be making profit. And the practice of profession
is not supposed to be making profit, but service to community.
4. How would an individual with natural persons sign the AIC or By-laws ? (because take
note a corporation cannot sign because it is a juridical person, so how will this
individual sign in behalf of the corporation? What are the information that the person
should include upon signing?
Name; in representation of; tin of principal; signature
5. Can foreigners be incorporators of domestic corporations?

Yes, the RCCP, citizenship no longer required unless it is a nationalized corporation
6. Is shared ownership a continuing requirement to become an incorporator?

No, because if you are an incorporator it is already an accomplished fact so even if you no
longer has shared ownership/ not a stockholder, incorporators will remain in the AIC.
7. May the SEC reject the application of incorporation?

- No, as a general rule they cannot reject for it is their ministerial duty.
- Unless Sec. 16:
- Articles or amendment is not substantially in accordance with the form prescribed
by law;
- The purpose/s of the corporation is patently unconstitutional, illegal, immoral, or
contrary to government rules and regulations.
- Certification concerning the amount of capital stock subscribed and/or paid is false.
- Percentage of Filipino ownership of capital stock under existing laws or the
Constitution is not complied with.
8. Can two persons form a corporation?

Yes, no more minimum. Before, 5 incorporators. Now, even one may form a corporation.
9. What do you mean by corporate term? Perpetual term Fixed term

Section 11. Corporate Term. – A corporation shall have perpetual existence unless its
articles of incorporation provides otherwise.
Corporations with certificates of incorporation issued prior to the effectivity of this Code and
which continue to exist shall have perpetual existence, unless the corporation, upon a vote of
its stockholders representing a majority of its articles of incorporation: Provided, That any
change in the corporate right of dissenting stockholders in accordance with the provisions of
this Code.
A corporate term for a specific period may be extended or shortened by amending the articles
of incorporation: Provided, That no extension may be made earlier than three (3) years prior to
the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier

14
extension as may be determined by the Commission: Provided, further, That such extension of
the corporate term shall take effect only on the day following the original or subsequent expiry
date(s).
A corporation whose term has expired may apply for revival of its corporate existence, together
with all the rights and privileges under its certificate of incorporation and subject to all of its
duties, debts and liabilities existing prior to its revival. Upon approval by the Commission, the
corporation shall be deemed revived and a certificate of revival of corporate existence shall be
issued, giving it perpetual existence, unless its application for revival provides otherwise.
No application for revival of certificate of incorporation of banks, banking and quasi-banking

institutions, preneed, insurance and trust companies, non-stock savings and loan associations
(NSSLAs), pawnshops, corporations engaged in money service business, and other financial
intermediaries shall be approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency.
10. What should you do as the only shareholder if you don't want a perpetual corporate
term?
Exercise your appraisal right- ask for his share
11. Upon implementation of the law there are corporations’ terms already expired. What are
the remedies?
Reincorporation and survival.
12. Explain; authorized capital stocks; what is significant about it?

It is the amount fix in AIC and it is the maximum number of shares to issue to SH without
amending the AIC
13. Explain subscribed stocks

That portion of the authorized capital stock that is covered by subscription agreements whether
fully paid or not
14. Explain outstanding capital stocks

Refers to total shares of stock issued to subscribers or stockholders, whether or not fully paid
or partially paid except treasury shares so long as there is a binding subscription agreement.

15
15. Is subscribe and outstanding the same?

Answer in your own opinion
16. Paid up capital stock?

Portion of the authorized capital that is subscribed and paid
17. How much of the authorized cs should be subscribed and paid up upon incorporation
under RCCP?
RCCP- no more requirement of 25% subscription and 25% payment
Then, is partial payment allowed for stock subscription? Under what conditions? Is
there any new development that may affect this case?
i. Gamboa VS Teves, GR#176579, June 28, 2011/MR (NOT RECITED)
1. On the distinction – public utility public service
2. Dean sent an article! Read.

16
18. What are the new revisions of RCCP?

- Arbitration agreement/clause (article 181 RCCP): in intercorporate disputes
ii. An arbitration agreement may be provided in the bylaws pursuant to Sec. 181
of this Code.
- Filing of AIC can be in a form of electronic document/electronic filing as prescribed by
SEC
- Change of name can be changed etc
- One Person Corporation
- Subscribe capital- no minimum requirement
- Incorporators- no residency requirement
- In the content of AIC: Treasury’s affidavit no longer required
19. What are the functions of the article of incorporation? What is its importance?
Contract between the state and the corporation. You can only operate when granted by state.
20. Why is it important to indicate the principal office of the corporation?

For delivery of notices or service of summons
21. What is required in an amendment?

- By a majority vote of the Board of Directors or Board of Trustees
- Vote or the written assent of the stockholders of at least 2/3 representing the outstanding
capital stocks
- Dissent to amendment: exercise appraisal right – no right for written dissent
22. A person is an incorporator and he found out his real surname is different from his
former, can he ask the corporation to amend his name?
No it cannot be undone, he may request from the corporate secretary to change it only being a
stockholder, may be found in the Stock And Transfer Book.
17
23. What are the grounds for disapproval of the amendment of article of incorporation?
- If not compliant of the forms
- If purpose is unlawful
- Capital stock is false
- Required percentage of Filipino is not complied with
24. What is the importance of a corporate name?

- Essential to the existence of the corporation since it is through it that the corporation
can sue and be sued, and perform all legal acts.
- Importance: For identification purposes; the name is important in order to distinguish it
from other organizations.
25. What are the requirements of a valid corporate name

- Distinguishable name which is not already reserved to another corp
- Not protected yet by law
- Not contrary to law, rules and regulation
26. What are the terms that should be followed in the name of corporation?
It must contain Corporation, OPC, or Incorporated
27. Can the name of the corporation or partnership being revoked or dissolved can it be
used by a new corporation?
Only after 5 yrs or the former corp gave consent
28. What is the doctrine of secondary meaning?

- Used by corp and acquired a secondary meaning for a long time but not
registered
- The doctrine of secondary meaning originated in the field of trademark law. Its
application has, however, been extended to corporate names since the right to use a
corporate name to the exclusion of others is based upon the same principle which
underlies the right to use a particular trademark or tradename
29. Give an example where this is applied;

Xavier University; Ateneo de Cagayan…. Ateneo word is a generic name meaning where
people gather/ academy, then Jesuits used it for a long time and now owns it. Like liceo/
lyceum meaning a place of education. Hence, even if Ateneo is a generic name, it is owned.

18
30. If you change a corporate name does it also change it as a corporation?

No, successor of the old corporate name. same certificate issued to the same corporation.
31. When is the commencement of the corporation?

Upon the issuance of cert of incorporation by SEC
32. What is a de facto corporation?

Section 19. De Facto Corporations. - The due incorporation of any corporation claiming
in good faith to be a corporation under this Code, and its right to exercise corporate
powers, shall not be required into collaterally in any private suit to which such
corporation may be a party. Such inquiry may be made by the Solicitor General in a quo
warranto proceeding.
33. What are the elements/requisites of a de facto corporation?

(1) There is a valid law that deems to establish a corporation;
(2) Substantial compliance with the requirements or a colorable attempt to organize a
corporation under such law;
(3) Good faith on the part of the corporation in exercising corporate powers.
34. What is a corporation by estoppel

Section 20. Corporation by Estoppel. - All persons who assume to act as a corporation
knowing it to be without the authority to do so shall be liable as general partners for all debts,
liabilities and damages incurred or arising as a result thereof: Provided, however, That when
any such ostensible corporation is sued on any transaction entered by its as a corporation or
on any tort committed by it as such, it shall not be allowed to use on any its lack of corporate
personality as a defense. Anyone who assumes an obligation to an ostensible corporation as
such cannot resist performance thereof on the ground that there was in fact no corporation.
35. May a corporation by estoppel be sued?

Yes pursuant to equity principle
36. Who can sue a corporation by estoppel? Suppose a person part or member of a
corporation by estoppel, can he use corporation by estoppel as part of his argument?
No, this is only available to third person.
37. Who can invoke this doctrine of estoppel?

Only the third party can invoke.
38. When is the corporation formally organized and when can it commence its business?
Upon its incorporation.
39. What if it failed to operate?

Effects of Non-Use of Corporate Charter and Continuous Inoperation. - If a corporation
does not formally organize and commence its business within five (5) year 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)-year period.

19
However, if a corporation has commenced its business but subsequently becomes inoperative
for a period of at least five (5) consecutive years, the Commission may, after due notice and
hearing, place the corporation under delinquent status.
A delinquent corporation shall have a period of two (2) years to resume operations and comply
with all requirements that the Commission shall prescribed. Upon the compliance by the
corporation, the Commission shall issue an order lifting the delinquent status. Failure to comply
with the requirements and resume operations within the period given by the Commission shall
cause the revocation of the corporation's certificate of incorporation.
The Commission shall give reasonable notice to, and coordinate with the appropriate
regulatory agency prior to the suspension or revocation of the certificate of incorporation of
companies under their special regulatory jurisdiction.
TITLE I II: BOARD OF DIRECTORS/TRUSTEES/OFFICERS
1. Function of board of directors
(1) exercises all powers • The board of directors is the directing and controlling body of
provided for under the RCCP the corporation
and other existing laws; • filing of cases should be upon prior approval of the Board
sole authority to determine policies, enter into contracts, and
conduct the ordinary business of the corporation within the
scope of its charter
• restricted to the management of the regular business affairs
of the corporation, unless more extensive power is expressly
conferred
• Board is the central power that authorizes the executive
agents to enter into contracts and to embark on a business
• acts of management pertain to the board;
• and those of ownership, to the stockholders or members. In
the latter case, the board cannot act alone, but must seek
approval of the stockholders or members.
• one of the most important rights of a qualified shareholder or
member is the right to vote — either personally or by proxy
• Once the directors or trustees are elected, the stockholders
or members relinquish corporate powers to the board in
accordance with law.
(2) conducts all business of Since the Board controls and administers the properties of the
the corporation; corporation, the Board can give authority to corporate officers or
stockholders to enter into or take corporate properties.
(3) controls and holds all • Director cannot sell the property of the corporation without
properties of the authority from the Board itself
corporation • A director cannot even delegate his powers as director to
another person.

20
The board (management) controls, operates and exercises the powers of the corporation
Unless otherwise provided in the RCC, the board of directors or trustees shall exercise: Section 22
- the corporate powers,

- conduct all business, and
- control all properties of the corporation
Stated otherwise, corporate acts must be approved by the Board of Directors, otherwise, such
acts are generally not binding on the corporation. They do not create rights nor impose obligations
upon the corporation. Thus, if a corporation will enter into contracts, initiate legal action or perform
any of the corporate acts under the RCC, the same must be supported by a resolution that the Board
has duly adopted authorizing such acts and designating the person who will carry them out on behalf
of the corporation.
Example: Sale of property has to be approved by the board of directors, given that it exercises
corporate powers and controls the property of the corporation.
Term of Board of Directors or Trustees of a Corporation

Section 22 of the RCCP states the following rules:
SC: "the term of the members of the board of directors shall be only for one year; and that their term
expires one year after election to the office."
• Directors shall be elected for a term of one (1) year from among the holders of stocks registered
in the corporation’s books;
• Trustees shall be elected for a term not exceeding three (3) years from among the members of
the corporation; and
• Each director and trustee shall hold office until the successor is elected and qualified.
o The holdover period — that time from the lapse of one year from a member's election
to the Board and until his successor's election and qualification — is not part of the
director's original term of office, nor is it a new term; the holdover period, however,
constitutes part of his tenure The vacancy can only be filled by the stockholders in a
meeting called for the purpose and not by the board of directors even though the
remaining directors may still constitute a quorum
o The By-Laws cannot provide for a longer term. The rationale for a one-year term “is
to protect the corporation, as well as its creditors and the public dealing with it so that if
an improvident or wrongful act is committed by the board of directors, the subsequent
board can redress or prevent the perpetration of the wrong, and thereby protect its
stockholders, creditors and the public having dealings with it. The tenure may be
SHORTER tenure represents his actual incumbency (holding of an office)
2. How is the board authorized to act?

Through Board Resolution
• Where the Board acts as a BODY.

o The Board must act, not individually or separately, but as a body in a lawful meeting.
o The actions of the Board are expressed in resolutions passed in its meetings.
o The Board of Directors or Trustees acts as a body and the directors are not agents
individually. The collective action of the directors is required in order that action may be
deliberately taken after opportunity for discussion and an interchange of views.

21
Approval of BOARD RESOLUTION
Majority of the number of directors or trustees as fixed in the Articles of Incorporation shall
constitute a quorum for the transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which there is a quorum shall be
valid as a corporate act.
Proof of BOARD RESOLUTION
- A Secretary’s Certificate — a certificate issued by the Corporate Secretary of the

corporation is sufficient proof of the existence of a resolution adopted by the Board.
- Minutes of Meeting of the Board of Directors
3. What is the doctrine of centralized management?

There is centralized power vested to group of people called the Board of Directors. All
business of the corporation shall be conducted and all its properties shall be controlled and
held by the Board of Directors or Trustees. A corporation can act only through its directors and
officers. Acts of management pertain to the board and those of ownership to the stockholders.
(It means that corporate powers are vested in a body, called board of directors for a stock
corporation and board of trustees for a non-stock corporation. Except in those instances where
stockholders’ or members' approval is required for certain acts under the RCC or the
corporation’s bylaws, it is the board which exercises corporate powers. The stockholders or
members, regardless of number, will have to delegate the power to manage the corporation to
the board.
The concentration in the board of the powers of control of the corporate business and
appointment of corporate officers and managers is necessary for efficiency in any large
organization. Stockholders are too numerous, scattered and unfamiliar with the business of a
corporation to conduct its business directly. And so the plan of corporate organization is for the
stockholders to choose the directors who shall control and supervise the conduct of corporate
business.)
4. What are the 3 levels of control in the corporation and responsibility in each level?
CITIBANK v CHUA
https://lawphil.net/judjuris/juri1993/mar1993/gr_102300_1993.html
i. The board of directors, which is responsible for corporate policies and the
general management of the business affairs of the corporation;
ii. The corporate officers, who in theory execute the policies laid down by the
board, but in practice often have wide latitude in determining the course of
business operations; and
iii. The stockholders who have the residual power over fundamental corporate
changes, like amendments of the articles of incorporation.
5. Principle of business judgment rule?

Under this principle, the stockholders cannot review the decisions of the Board. If they do not
want the decision of the Board, they cannot go to court and change the decision.

22
Questions of policy and management are left to the sound discretion and honest decision of the
officers and directors of a corporation, and the courts are without authority to substitute their
judgment for the judgment of the board of directors. The board is the business manager of the
corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.
- Courts are barred from intruding into the business judgments of the corporation when the
same are made in good faith
- stockholders cannot interfere with the board in conducting the business affairs of the
corporation.
▪ Their remedies consist of replacing the board members upon expiration of their
term, or vote for their removal.
The business judgment rule is not absolute. Corporate acts cannot be justified under the
business judgment rule if they are contrary to law.
• For instance, the board cannot invoke this rule to declare dividends when there is no surplus
profit or declare dividends out of reappraisal surplus, or to pay compensation to directors, as this
power is lodged with the stockholders.
• It cannot be relied upon to support a request for a new stock and transfer book on the pretext
that the original is lost (when in fact it is not) and declare entries in the supposed lost stock and
transfer book as invalid
Majority of the Board members controls in corporate affairs, and contracts intra vires entered
into by the board of directors are binding on the corporation and courts will not interfere unless
such contracts are so unconscionable and oppressive as to amount to a wanton destruction of
rights of the minority.
Questions of policy or management 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 Board of Directors;
The Board is the business manager of the corporation and so long as it acts in good faith its
orders are not reviewable by the courts or the SEC
Business judgment rule shields the directors only if the following are present:
1. the presence of a business decision including decisions on policy, management and

administration,
2. the decision must be intra vires and must comply with the procedural and substantive
requirements of law,
3. good faith,
4. due care in making the decision, and
5. the director must not have personal' interest or must not be self-dealing or must not otherwise
be in breach of the duty of loyalty governed by provisions of the RCCP, specifically Sections 30,
31, 32, and 33 thereof (previously Sections 31-34 of the Corporation Code
6. Can they be held liable if they commit errors?

- Suppose the acts are: Simple negligence: not liable, only gross negligence
- it is an oblique/hiwi act equivalent to gross negligence

23
GR: Directors cannot be held liable for mistakes or errors in the exercise of their business
judgment as long as they acted in good faith, with due care and prudence. Contracts entered
into by the BOD are binding upon the corporation and courts will not interfere.
(1) If the contracts are so unconscionable and oppressive as to amount to a wanton

destruction of the rights of the minority. (Ingersoll vs. Malabon Sugar, G.R. No. L-27770, 1927)
(2) If they violate their duties under Sec. 30 (director willfully and knowingly assents to patently
unlawful acts of the corporation, or are guilty of gross negligence or bad faith); and
(3) If they violate Sec. 33 (disloyalty of a director who acquires for himself a business
opportunity that should have belonged to the corporation, unless his act is ratified by a 2/3 vote
of the stockholders).
Note: The director 3 main responsibility, must be loyal, obedient, diligent (opposite: is
negligent)
7. Can the board of directors create positions or committees?

Section 34. Executive Management, and Other Special Committees. - If the bylaws so provide,
the board may create an executive committee composed of at least three (3) directors. Said
committee may act, by majority of vote of all its members, on such specific matters within the
competence of the board, as may be delegated to it in the bylaws or by majority vote of the
board, except with respect to the: (a) approval of any action for which shareholders' approval is
also required; (b) filing of vacancies in the board; (c) amendment or repeal of bylaws or the
adoption of new bylaws; (d) amendment or term is not amendable or repealable; and (e)
distribution of cash dividends to the shareholders.
The board of directors may create special committees of temporary or permanent nature and
determine the members' term, composition, compensation, powers, and responsibilities.
Additional:
Yes, the board has the power to create positions, committees, or offices as may be
necessary to conduct the business affairs of the corporation. This is covered by the
business judgment rule. It was held that the determination of the necessity for additional
offices and/or positions is a management prerogative which courts are not wont to
review in the absence of any proof that such prerogative was exercised in bad faith. In
fact, this power is now explicit under the RCC which provides that the board of directors
may create special committees of temporary or permanent nature and determine the
members' term, composition, compensation, powers, and responsibilities.308 However,
the board cannot create the executive committee referred to under Section 34 of the
RCC nor a corporate office, because these are required to be created by the bylaws.
8. What are the qualifications of the directors?

- Natural person
- Own at least one share of stock
- Natural person
More details:

24
The directors and trustees must have all the qualifications provided under Section 22, in relation
to Sections 10, 13, and 91, of the RCC as well as those provided under the bylaws, and none of
the disqualifications under Section 26 of the RCC and the bylaws.
Below are the qualifications for directors or trustees under the RCC:
a. Since any person, partnership, association or corporation, singly or jointly with others but not
more than fifteen (15) in number, may now organize a corporation for any lawful purpose or
purposes, directors or trustees need not be natural persons. However, juridical persons, as
directors, need to be represented by their nominees.
b. if the director or trustee is a natural person, he must be of legal age.
c. The director must own at least one (1) share of stock of the corporation and the trustee must
be a member of the corporation.
• Rationale: for protection of the corporation It has been opined, however, that a person
who does not own any stock at the time of his election or appointment is not disqualified
as director if he becomes a shareholder before assuming the duties of his office
• Non-voting shares cannot participate in the management and the holders of such shares
cannot be elected to a position that is purposely created to manage the corporation
• Except with respect to independent trustees of nonstock corporations vested with public
interest, only a member of the corporation shall be elected as trustee.
• Trustees of educational institutions organized as nonstock corporations or religious
societies shall not be less than five (5) nor more than fifteen (15). However, with respect
to educational institutions, the number of trustees shall only be in multiples of five (5).
d. The number of directors shall not be more than fifteen (15) while the number of trustees may
be more than fifteen (15).
e. He must not be disqualified under the RCCP or any applicable special law or rules;
f. He must possess other qualifications as may be prescribed in special laws or regulations or in

the by-laws of the corporation.
• A director or trustee must be a natural person.

• The RCCP expressly allows corporations, partnerships and associations to be
incorporators.
• While a corporation cannot be elected as a director, its duly authorized officer, agent or
trustee who has been designated as “nominee” may be eligible to be elected as director.\
If said proxy is not a member in his own right, he cannot be elected as a director or trustee
Requirements as to:
• RESIDENCE
NO requirement of residence it is possible that a majority or even all directors or trustees may
be non-residents.
• AGE
There is no express statement in Section 22 requiring directors to be of legal age. Nevertheless,

minority restricts an individual’s capacity to act; they will not be able to participate in all corporate
25
acts; it is likewise submitted that the requirement for incorporators to be of legal age under
Section 14 of the RCCP should also be applied to subsequent directors.
• Disqualification.
A director who ceases to own at least one (1) share of stock or a trustee who ceases to be a
member of the corporation shall cease to be such.
• CITIZENSHIP
GR: There is no citizenship requirement for directors and trustees under the RCCP. Foreigners
can be elected as directors or trustees subject to the provisions of special laws.
Expns: However, if the corporation is engaged in nationalized activities, citizenship becomes a

qualification, foreigners cannot be appointed to the board of corporations engaged in wholly-
nationalized activities.
For partly nationalized activities, foreigners can be elected to the board of directors in proportion
to their foreign equity, as allowed by law Dual Citizens - They can be directors and officers of
corporations engaged in partly nationalized or wholly nationalized industries even if they possess
“dual citizenship
• SPECIAL LAWS
Other special laws may provide for qualifications and disqualifications of directors or trustees.
For example, those who are to be elected as directors of banks are also subject to the other
requirements of the General Banking Law and circulars issued by the Bangko Sentral ng Pilipinas
• Qualifications under the By-Laws
RCCP provides that a corporation is empowered to provide in its ByLaws the qualifications and
disqualifications of members of the Board. Qualification cannot be waived but can be amended
in the By laws For instance, a provision in the By-Laws disqualifying stockholders who are
already directors in competing corporations or the controlling stockholder thereof is considered
a valid provision in the By-Laws The directors or trustees should come from the stockholders or
members. Hence, a proposal that the directors or trustees shall come from the officers is not in
accordance with law
9. Can the by-laws require the directors to own more than one share?
Yes, the bylaws may enlarge the share ownership requirement provided that it is not intended
to deprive minority representation. In the absence of a provision in the By-Laws, a corporation
cannot require additional qualifications for directors other than those provided in Sections 22
and 91 of the RCCP as well as other pertinent special laws.
10. What about the residency and citizenship requirement? Is it required to Ordinary
director?
- Residency requirement no longer present
- Citizenship requirement is only for nationalized corporation
11. What is an independent director?

26
It is a person who, apart from shareholdings and fees received from the corporation, is
independent of 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.
- 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, the
maximum number of board memberships, and other requirements that the SEC will
prescribe to strengthen their independence and align with international best practices.
- The RCC requires the election of independent directors for corporation vested with public
interest who should constitute at least twenty percent (20%) of such Board. The
requirement of electing independent directors was already laid down in the SRC for public
company. Specifically, the SRC only requires public companies to have “at least two (2)
independent directors or such independent directors shall constitute at least twenty
percent (20%) of the members of such board, whichever is the lesser.
General Banking Law:
Thus, the number of independent directors for banks and public companies should constitute
20% of the board, but not less than two (2). In any case, it will be best for affected corporations
to have at least two (2) independent directors to ensure more effective corporate governance.
Additional: Corporations vested with public interest:

Public companies as described under SRC Banks and quasi-banks, NSSLAs, pawnshops,
corporations engaged in money service business, preneed, trust and insurance companies,
and other financial intermediaries. Other corporations engaged in businesses vested with
public interest similar to the above, as may be determined by the SEC.
12. What are the methods of voting?
Straight voting- Straight voting means voting such number of shares for as many persons as
there are directors to be elected.
i.For example, if a shareholder owned 100 shares and three directors were up for election, the
shareholder can cast up to 100 votes per director for a total of 300 votes. Note that each director
can only be voted up to 100 – the shareholder cannot allocate more than the number of shares
owned to each board member.
Cumulative voting- may cumulate said shares and give one (1) candidate as many votes as
the number of directors to be elected multiplied by the number of the shares owned or
distribute them on the same principle among as many candidates as may be seen fit:
Provided, That the total number of votes cast shall not exceed the number of shares owned by
the stockholders as shown in the books of the corporation multiplied by the whole number of
directors to be elected.

27
The privilege of cumulative voting is permitted for the purpose of giving minority stockholders
representation in the BOD. Stockholders shall have the right to vote the number of shares of
stock standing in their own names.
A director elected because of the vote of the minority stockholders who untied in cumulative
voting cannot be removed without cause.
13. Basic duties of a director are:

Duty of obedience: Sec. 23 xxx (4th paragraph) The directors or trustees elected shall perform
their duties as prescribed by law , rules of good corporate governance, and bylaws of the
corporation.
Prescribed law (articles, bylaws, RCCP, other related laws on corporations)
Duty of diligence: opposite is negligence.

Sec. 30. SEC. 30. Liability of Directors, Trustees or Officers. – Directors or trustees who
willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
Duty of loyalty:
Sec. 30 (last paragraph) A director, trustee, or officer shall not attempt to acquire, or acquire
any interest adverse to the corporation in respect of any matter which has been reposed in
them in confidence, and upon which, equity imposes a disability upon themselves to deal in
their own behalf; otherwise the said director, trustee, or officer shall be liable as a trustee for
the corporation and must account for the profits which otherwise would have accrued to the
corporation.
SEC. 33. Disloyalty of a Director. – Where a director, by virtue of such office, acquires a
business opportunity which should belong to the corporation, thereby obtaining profits to the
prejudice of such corporation, the director must account for and refund to the latter all such
profits, unless the act has been ratified by a vote of the stockholders owning or representing at
least two thirds (2/3) of the outstanding capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked one’s own funds in the venture.
14. I am a stockholder, I have 1 share, and there are 5 elected directors to be voted upon.
How to vote cumulative? How to cumulate?
He can cumulate 5 of those for 1 candidate, or opt to divide the votes among two or more of
the candidates he wants to elect.
15. What shares are not included in determining outstanding capital stock during election?
- Non-voting shares
- Treasury shares
- Delinquent shares
However, unpaid shares which are not delinquent are included in the said determination of the
majority.

28
16. Can a non-stock corporation also include cumulative voting?

- General rule: in the election of board of trustees in NS corporation, each member is only
entitled to one vote.
- Expn: if it is stated in the AIC, or bylaws then a NSCorp can adopt the cumulative voting
Reviewer:
General rule for the election of trustees of a non-stock corporation is that members may
cast as many votes as there are trustees to be elected but may cast only one vote per
candidate.
By way of exception, a non-stock corporation may adopt other modes of casting votes,
including, but not limited to, cumulative voting, if the same is authorized in its articles of
incorporation or bylaws
17. Stock corp, can the bylaws of that stock corp denied the stockholders of cumulative
voting?
No, since such is provided in RCCP, which allowed cumulative voting. To disallow is contrary
to RCCP.
18. What are the statutory officers of the corporation?

- President – must be a director and as such, should also be a stockholder. He must not
concurrently hold the positions of Secretary or Treasurer.
For a one-person corporation, the President/Sole stockholder may likewise be the

self-appointed treasurer of the corporation but he is required to give a BOND to
the SEC in such a sum as may be required
- The Secretary must be a citizen and resident of the Philippines.

- The Treasurer should be a resident.
- All of them must also possess all of the qualifications and none of the disqualifications
under the bylaws of the corporation.
- Other officers indicated: in corp vested with public interest requires compliance officers
Note: RCCP does not allow president to be secretary or president and treasurer at the
same time
Thus, a provision in the bylaws that not all officers are required to be stockholders is void
because the President, being required to be a director, must also be a stockholder of the
corporation.
Only the Corporate Secretary is required to be a Filipino citizen.
The President, Treasurer and other officers of the corporation are not required to be citizens of
the Philippines unless the corporation is engaged in economic activities which are reserved for
Filipinos, in whole or in part, in which case, the Anti-Dummy law prohibits their appointment

29
19. Can the board create special committees, offices/positions, officers?

Yes, even in the absence of bylaws stipulation. RCCP now allows this.
The board has the power to create positions, committees, or offices as may be necessary to
conduct the business affairs of the corporation. This is covered by the business judgment rule.
It was held that determination for additional offices is a management prerogative. (Filipinas Port
Services v. Victoriano Go. )
The board can also create ordinary positions, offices, and even departments under the business
judgment rule. However, the board has no power to create corporate offices without first
amending the corporate bylaws to include therein the newly created corporate office. Though
the board may create appointive positions, the persons occupying such positions cannot be
viewed as corporate officers under Section 24 of the RCC it was held that a position must be
expressly mentioned in the bylaws in order to be considered as a corporate office.
20. Doctrine of Apparent Authority

The doctrine of apparent authority provides that a corporation will be estopped from denying
the agent's authority if it knowingly permits one of its officers or any other agent to act within
the scope of an apparent authority, and it holds him out to the public as possessing the power
to do those acts.
21. After an election of directors and corp officers or trustess, what does the secretary do?
The secretary, or any other officer of the corporation, is required under Section 25 of the
RCC to submit to SEC the: names, nationalities, shareholdings, and residence addresses of
the directors, trustees, and officers elected. These details must be indicated in the corporation’s
General Information Sheet
Duty to report to the sec, and to give rescheduled election upon failure to hold election
1. The non-holding of elections and the reasons therefor shall be reported to the SEC within
thirty (30) days from the date of the scheduled election. The report shall specify a new
date for the election, which shall not be later than sixty (60) days from the scheduled date.
If no new date has been designated, or if the rescheduled election is likewise not held,
the SEC may, upon the application of a stockholder, member, director or trustee, and
after verification of the unjustified non holding of the election, summarily order that an
election be held.
22. Emergency quorum not the same with ordinary quorum. Why is it called emergency q?
Because the required number of quorum cannot be attained, hence, an emergency quorum.
The quorum required in bylaws will not be considered. So number of stockholders present in
that meeting is considered a quorum even if it has lesser number required by the bylaws.
Additional:
Emergency quorum means that, in certain cases, stock or membership represented in a
meeting called by the SEC may constitute a quorum to elect directors of corporation even
though the number of share or members present is less than majority of the outstanding capital
30
stock or total members, or the quorum required under the articles and bylaws of the
corporation the shares of stock or membership represented at such meeting called by SEC
and entitled to vote shall constitute a quorum for purposes of conducting an election.
23. What are the disqualifications of the director?

SEC. 26. Disqualification of Directors, Trustees or Officers. – A person shall be
disqualified from being a director, trustee or officer of any corporation if, within five (5) years
prior to the election or appointment as such, the person was:
(a) Convicted by final judgment:
(1) Of an offense punishable by imprisonment for a period exceeding six (6) years;
(2) For violating this Code; and
(3) For violating Republic Act No. 8799, otherwise known as “The Securities Regulation
Code”;
(b) Found administratively liable for any offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and (b) above.
The foregoing is without prejudice to qualifications or other disqualifications, which the

Commission, the primary regulatory agency, or the Philippine Competition Commission may
impose in its promotion of good corporate governance or as a sanction in its administrative
proceedings.
24. Can a director be removed? Yes

SEC. 27. Removal of Directors or Trustees. – Any director or trustee of a corporation may be
removed from office by a vote of the stockholders holding or representing at least two-thirds
(2/3) of the outstanding capital stock, or in a nonstock corporation, by a vote of at least two-
thirds (2/3) of the members entitled to vote: Provided, That such removal shall take place
either at a regular meeting of the corporation or at a special meeting called for the purpose,
and in either case, after previous notice to stockholders or members of the corporation of the
intention to propose such removal at the meeting
25. Can the Commission remove a director? Yes

The Commission shall, motu proprio or upon verified complaint, and after due notice and
hearing, order the removal of a director or trustee elected despite the disqualification, or whose
disqualification arose or is discovered subsequent to an election. The removal of a disqualified
director shall be without prejudice to other sanctions that the Commission may impose on the
board of directors or trustees who, with knowledge of the disqualification, failed to remove such
director or trustee.
26. Compensation of directors or trustees

SEC. 29. Compensation of Directors or Trustees. – In the absence of any provision in the
bylaws fixing their compensation, the directors or trustees shall not receive any compensation
in their capacity as such, except for reasonable per diems: Provided however, That the
stockholders representing at least a majority of the outstanding capital stock or majority of the
members may grant directors or trustees with compensation and approve the amount thereof
at a regular or special meeting.
In no case shall the total yearly compensation of directors exceed ten (10%) percent of the net
income before income tax of the corporation during the preceding year.
31
Directors or trustees shall not participate in the determination of their own per diems or
compensation.
Corporations vested with public interest shall submit to their shareholders and the
Commission, an annual report of the total compensation of each of their directors or trustees.
Example: when director is only employed as the lawyer of the corporation – compensated
27. What is an emergency board?

An emergency board may be constituted when a vacancy prevents the remaining directors from
constituting a quorum and an emergency action is required to prevent grave, substantial, and
irreparable loss or damage to the corporation.
The vacancy may be temporarily filled from among the officers of the corporation;
The appointment must be made by the unanimous vote of the remaining directors or trustees;
and
The action by the designated director or trustee shall be limited to the emergency action
necessary, and the term shall cease within a reasonable time from the termination of the
emergency or upon the election of the replacement director or trustee, whichever comes earlier
28. Do the directors, officers be held liable for certain actions that they have taken in behalf
of the corporation?
GR: No, because they only act on behalf of the corporation and they did not act on their private
personal capacities
EXPN:
SEC. 30. Liability of Directors, Trustees or Officers. – Directors or trustees who willfully
and knowingly vote for or assent to patently unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered
by the corporation, its stockholders or members and other persons.
A director, trustee, or officer shall not attempt to acquire, or acquire any interest adverse
to the corporation in respect of any matter which has been reposed in them in
confidence, and upon which, equity imposes a disability upon themselves to deal in their
own behalf; otherwise the said director, trustee, or officer shall be liable as a trustee for
the corporation and must account for the profits which otherwise would have accrued to
the corporation.
Additional: when he admit to be solidarily liable with the corporation

Example: Bouncing Check Law- before, such law states that whoever is the signatory is
liable criminally. But court found out that signatories are not really involved in the
treasury because it was actually the treasury that handles the task, and senior officer

32
will just sign it not knowing if there are available funds or not. Court construed the law
differently (because they cannot change such law)
Other laws where corporate officers may be held liable:

- Money laundering
- Anti-dummy law
- AMLA
- Philippine competition act
- Insurance Code , and others.
Again, obligations incurred as a result of the directors’ and officers’ acts as corporate
agents are not their personal liability but the direct responsibility of the corporation they
represent As such, as a general rule, directors or officers are not liable for any action
taken on behalf of the corporation, but with expn.
i. Watered stocks
ii. patently unlawful acts ex. Forgery (acts construed immediately as felony)
iii. Bad faith, gross negligence
iv. Putting his interest first
v. He himself held himself personally liable
2. What are the instances when personal liability may attach to directors, trustees or officers
of the corporation?
A director, officer or trustee may be held personally liable in the following cases:
• Knowingly voting for or assenting to patently unlawful acts of the corporation

o no informing the termination of employment of an EE
• Gross negligence or bad faith in directing the affairs of the corporation;
o Gross negligence is a conscious, voluntary act or omission in reckless disregard of a legal
duty and of the consequences to the other party.
o willfully and intentionally with a conscious indifference to consequences in sofar as other
persons may be affected.
o Stockholders are liable only to the extent of their subscription4,9unless they also act as
directors, officers, or agents of the corporation.
• Acquiring any personal or pecuniary interest in conflict with his duty as director or trustee or
officer resulting in damage to the corporation
• He consents to the issuance of watered stocks(shares of a company that is issued at a much
greater value than its underlying assets, usually as part of a scheme to defraud investors.) or
who, having knowledge thereof, does not forthwith file with the corporate secretary his written
objection thereto;
• He agrees to hold himself personally liable with the corporation; and
• He is made, by a specific provision of law, to personally answer for his corporate action
29. Discuss self-dealing of the corporation

SEC. 31. Dealings of Directors, Trustees or Officers with the Corporation. – A contract of the
corporation with (1) one or more of its directors, trustees, officers or their spouses and
relatives within the fourth civil degree of consanguinity or affinity is voidable, at the option of
such corporation, unless all the following conditions are present:

33
(a) The presence of such director or trustee in the board meeting in which the contract was
approved was not necessary to constitute a quorum for such meeting;
(b) The vote of such director or trustee was not necessary for the approval of the contract;
(c) The contract is fair and reasonable under the circumstances;
(d) In case of corporations vested with public interest, material contracts are approved by at
least two-thirds (2/3) of the entire membership of the board, with at least a majority of the
independent directors voting to approve the material contract; and
(e) In case of an officer, the contract has been previously authorized by the board of
directors.
Where any of the first three (3) conditions set forth in the preceding paragraph is absent, in
the case of a contract with a director or trustee, such contract may be ratified by the vote of
the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at
least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full
disclosure of the adverse interest of the directors or trustees involved is made at such
meeting and the contract is fair and reasonable under the circumstances.
Self-dealings: common in family corporation
30. Contracts between corporations with interlocking interest

SEC. 32. Contracts Between Corporations with Interlocking Directors. – Except in cases
of fraud, and provided the contract is fair and reasonable under the circumstances, a contract
between two (2) or more corporations having interlocking directors shall not be invalidated on
that ground alone: Provided, That if the interest of the interlocking director in one (1)
corporation is substantial and the interest in the other corporation or corporations is merely
nominal, the contract shall be subject to the provisions of the preceding section insofar as the
latter corporation or corporations are concerned.
Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be
considered substantial for purposes of interlocking directors.
Note:
Interlocking Directors is the mere fact that there is a contract between two (2) corporations with
common directors is not a ground to invalidate the said contract. However, the contract must
be fair and reasonable under the circumstances and should not be tainted with fraud. There is
nothing wrong with the above transactions because a corporation is not expected to give its
business to a competitor but to an affiliated company. What will make it wrong is the existence
of fraud and/or unfairness elements and not the interlocking directorship.
31. Law that prohibit or regulate interlocking directors

- Batas Pambansa 65- amending the investment houses law
- The one who is holding concurrent position in a investment house and a bank is
prohibited and it is unauthorized by monetary board.

34
Note: universal banks has its own investment banks which are their whole owned
subsidiaries. Sometimes senior officers of the bank are assigned to these subsidiaries
or shift to the mother company.
Additional notes:
- Under Section 1 of Batas Pambansa Bilang 66 (An Amending the Investment Houses
Law), holding concurrent positions in an investment house and a bank is prohibited unless
authorized by the Monetary Board.
- The Manual of Regulations for Banks (“MORB”) prescribes certain restrictions to guard
against the disadvantages resulting from indiscriminate concurrent directorship. Section
137 provides448:
o Except as may be authorized by the Monetary Board or as otherwise provided
hereunder, there shall be no concurrent directorships between banks or between
a bank and a quasi-bank (QB) or a non-bank financial institution (NBFI).
o Without the need for prior approval of the Monetary Board, concurrent
directorships between entities not involving an investment house shall be allowed
in the following cases:
1) Banks not belonging to the same category: Provided, That not more than
one (1) bank shall have quasi- banking functions;
2) A bank and an NBFI
3) A bank without quasi-banking functions and a QB; and
4) A bank and one (1) or more of its subsidiary bank/s, QB/s an NBFI/s.
32. Doctrine of corporate opportunity

SEC. 33. Disloyalty of a Director. – Where a director, by virtue of such office, acquires a
business opportunity which should belong to the corporation, thereby obtaining profits to the
prejudice of such corporation, the director must account for and refund to the latter all such
profits, unless the act has been ratified by a vote of the stockholders owning or representing at
least twothirds (2/3) of the outstanding capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked one’s own funds in the venture.
Additional:
The doctrine of corporate opportunity means that if the director acquired for himself a business
opportunity that should belong to the corporation, he must account to the corporation for all the
profits he obtained unless his act was ratified by the stockholders representing at least 2/3s of
the outstanding capital stock. Under such doctrine, a director of the corporation is prohibited
from competing with the business in which the corporation is engaged in, as otherwise, he
would be guilty of disloyalty, where profits he may realize will have to go to the corporate funds
except if the disloyal act is ratified
33. Executive committee and its functions

It is a committee that the board creates pursuant to an authority granted under the
corporation’s bylaws, composed of at least three members of the Board, that can act on
matters falling within the board’s competence
SEC. 34. Executive, Management, and Other Special Committees. – If the bylaws so provide,
the board may create an executive committee composed of at least three (3) directors. Said
committee may act, by majority vote of all its members, on such specific matters within the

35
competence of the board, as may be delegated to it in the bylaws or by majority vote of the
board, except with respect to the: (a) approval of any action for which shareholders’ approval is
also required; (b) filling of vacancies in the board; (c) amendment or repeal of bylaws or the
adoption of new bylaws; (d) amendment or repeal of any resolution of the board which by its
express terms is not amendable or repealable; and (e) distribution of cash dividends to the
shareholders. The board of directors may create special committees of temporary or
permanent nature and determine the members’ term, composition, compensation, powers, and
responsibilities.
Note: there is also a management committee, the function of the execom is similar to the
board, the management committee function is similar to the officers who run the operation from
day to day.
34. What are the powers of an executive committee?
Executive committee can do almost all the authorized acts board under the RCC, except for the
following:
a. any corporate act requiring stockholders approval;

b. filling of vacancies in the board;
c. amendment or repeal of bylaws, or the adoption of new bylaws;
d. amendment of a board resolution, which by its express terms is not amendable or repealable;
and e. distribution of cash dividends to shareholders
TITLE IV: POWERS OF CORPORATION
1. Classifications of the power of corp, explain each

1. Express
-expressly provided in the RCCP, applicable special laws, administrative regulations, and
the AOI.
2. Implied
-exercise other powers as may be essential to carry out the business. 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. (Sec. 35 K)
3. Incidental powers are powers that are deemed conferred on the corporation because they
are incidental to the existence of the 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 and Sec. 44 (No corporation shall possess or exercise
corporate powers other than those conferred by this Code or by its articles of incorporation
and except as necessary or incidental to the exercise of the powers conferred.)
examples are:
1. right to succession
2. right to have a corporate name,
3. right to make by-laws
4. right to sue and be sued
36
5. right to acquire and hold properties.
2. Theory of general capacity of the corporation

- Corp would hold such powers not withheld from it by law
- All In Sec. 35 are all general 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
5. to adopt bylaws not contrary to Law, Morals, public policy and to amend or repeal the
same
6. In case of stock corporations, to issue or sell stocks and to sell treasury stocks and to
admit members to the corporation if its a nonstock corpo.
7. To enter into a partnership,merger, join venture
8. to make reasonable donations to for public welfare, for hospital, charity
9. to establish pension and retirement for the Directors,Trustees,Officers and Employees
3. What is a Theory of Specific Capacity

Those granted in the laws, by-laws or articles of incorporation
Under this theory, a corporation cannot exercise powers except those expressly or impliedy
given to it.
1. Power to extend or shorten corporate term

2. Power to increase or decrease capital sotck
3. Power to deny preemptive right
4. sale or disposition of assets
5. Power to acquire own shares
6. Power to invest corporate funds in another corporation or business
7. power to declare dividends
8. power to enter into management contract
Sec 36-43 of RPC

What is not included is deemed excluded
4. Why do we need to increase the capital stock of a corporation?

- 3 reasons

37
5. What are the new requisites under RPC for the increase / decrease or in bonded
indebtedness?
- The approval of the Philippine Competition Commission on the corporation’s increase or
decrease of the capital stock or in incurring, creating or increasing of any bonded
indebtedness is required in certain cases.
- The RCC prescribed a period of 6months from the date of the approval of the board and
stockholders, to file the application with the SEC. Such period may be extended
provided there are justifiable reasons therefore.
6. What are the ways of increasing or decreasing capital stock?

The increase or decrease in the capital stock can be affected by:
1. Increasing or decreasing the number of shares and retaining the par value
2. Increasing or decreasing the and retaining the number of shares
3. Increasing or decreasing both the number of shares and the par value
7. Distinction between issuance of shares from the increase in capital stock and
subscription to the unissued portion of the authorized capital stock
8. May a corporation increase its capital stock even if its authorized capital stock is not yet
fully subscribed?
Yes
9. Distinction between issuance of shares arising from the increase in capital stock (new
shares) and subscription to the unissued portion of the authorized capital stock. Are the
rules the same for both?
- For the former, needs BOD approval of majority, then 2/3 of SH holder of outstanding
cs, the latter only require quorum of the BOD
- At least 25% of the increase cos must be subscribed and at least 25% must be paid ,
while required payment of the latter depends of the amount the BOD approve which can
be higher or lower than 25% of the subscription
10. How may a corporation decrease its capital stock through a decrease in the number of
authorized share? In what way? Do not answer the procedure?
- Redemption of redeemable shares
- Purchase by the corp of its own shares and then canceling or retiring them
- canceling shares that have not yet been issued
38
11. When is the increase or decrease of the capital stock effective?

- When it is approve by SEC and its issuance of a certificate of filing of increase or
decrease of capital stock
12. What is a bonded indebtedness? What are its features?

- It is a borrowing by the corporation which is long-term in nature involving a large
number of lenders and secured by the encumbrance on corporate assets. Since bonds
are securities, they should also be registered with the SEC.
- https://www.bilyonaryo.com/2022/01/28/sy-blings-bdo-gets-resounding-vote-of-
confidence-from-investors-raises-record-p52-7b-from-first-green-bond/ Sy-blings’ BDO
gets resounding vote of confidence from investors, raises record P52.7B from
first green bond
- Called bonded indebtedness because they are in a way similar to preferred shares or
redeemable shares- long term- they have their terms and they have interest- but bond
are debt instrument, preferred share are equity instrument .
- Not all bond are secured by properties- called debenture –you can demand high interest
rate.in preference of credit debenture is in the lowest level.
13. What is a preemptive right? What is the rationale behind this?

- It is the right of SH to subscribe to all issues or disposition of shares of any class by the
corporation, in proportion to their respective shareholdings. In practical terms, this
means that the shares of stock of corporation should first be offered proportionately to
the stockholders before they can be issued or sold to non-stockholders.
- Rationale: the foundation or underlying basis of this right is to maintain the proportionate
voting strength and control of existing SH that is, the existing ratio of their interest and
voting power in the corporation. This right prevents the dilution and impairment of the
stockholders’ interest in the corporation.
14. Is the pre-emptive right available to unissued authorized but unissued shares or is it
only available to new issuance of shares?
- Available to all shares of stock
15. May the by-laws of a corporation withdraw/refuse the preemptive right of a

shareholder?
- No (in recits)
- Yes (in reviewer), preemptive right may be restricted or denied under the Articles of
Incorporation, and subject to certain exceptions and limitations. Denial of preemptive
right is not contrary to public policy. It was explained that a shareholder who feels that
he does not desire to invest because he does not have the preemptive right should not
invest.
16. Instances where preemptive rights does not apply.

1. In case there is denial of Preemptive right in the AOI
2. Waiver of such right by the stockholder, whether express or implied

39
3. If there are shares issued in compliance with laws requiring minimum stock ownership
by the public
4. Shares being offered again by the corporation after they were already initially offered
with all other shares
5. Issuance of shares in exchange of property given for a corporate purpose
6. Issuance of share in payment of debt made in good faith, if approved by the
stockholders representing ⅔ of the outstanding capital stock in exchange for property
needed for corporate purposes
7. Shares issued with the approval of SH representing 2/3 of OCS in payment of
previously contracted debt
8. In case of non-stock corporation
9. Where the assignors have previously exercised the right
17. If the majority of the stockholders waive their preemptive rights will the minority of the
stockholders be deemed to have also waived their preemptive rights?
Being a personal right, such waiver should be executed individually by the stockholders
concerned or he may authorize somebody to execute the same for and on his behalf by way of
a special power of attorney. Hence, a stockholder cannot be forced to waive this right even if
the majority of the stockholders op to waive it. A stockholder can only be denied this right when
it is provided for in the articles of incorporation or an amendment thereto.
18. What is the remedy of the stockholder if he is against to the waiving of his preemptive
rights?
Exercise the appraisal right
19. What are these two types of sale or disposition of all or substantially all of the assets of
the corporation?
- First, is the sale, encumbrance or disposition of any of its property and assets if it is
necessary for the usual course of business of the corporation.
- 2nd, is the disposition of all or substantially all of the properties of the corporation.
20. What are the other laws relevant to the sale “””
- Bulk sales law
i. What are its procedure and/or requirements
- Philippine competition act
- The General Banking Law for banks
21. Two tests to determine the sale or disposition

- Quantitative- If corp owned 10M, and its selling all or substantially all, that is quantitative
test
- Qualitative- Example is when corp is engaged in rice milling, corp owns property worth
50m, and the rice mill is located in one corner of 50m prop, rice mill value is 10m is only
⅕ of xxxx dijudkokaapas huhu

40
22. Explain Nell Doctrine
Divina:
The general rule is that 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.
If Aquino explanation:
- This is by way of exception of the transferee not being liable.

- Transferee-corporation is liable to debts of transferor-corporation
i.There is an express or implied assumption of liability
ii.The transaction amounts into a consolidation or merger
iii.Transaction entered into fraudulently inorder to escape liability from debtors
iv.If the purchaser becomes continuation of the seller
Exceptions:
1. When the buyer expressly or impliedly assumes the liabilities of the seller
2. if the sale amounts to a merger or consolidation
3. if the sale is entered into fraudulently or made in bad faith; and
4. if the buyer is merely a continuation of the personality of the seller or the so-called business-
enterprise transfer rule.
5.
23. May a corporation acquire its own shares of stocks?
Generally, a stock corporation has no power to acquire its own shares as it is illogical for the
corporation to be its own shareholder. Moreover, the funds of the corporation should be devoted
to attain the purposes of incorporation. However, the RCC allows the corporation to acquire or
purchase its own share in certain instances.
Certain instances RCC allows corporations to acquire or purchase its own shares:
- it is for legitimate and proper corporate purpose

- there shall be an unrestricted retained earnings to purchase the same and its capital is not
impaired
- the corporation acts in good faith without prejudice to the rights of the creditors and
stockholders the conditions of corporate affairs warrant it.
o It is important that there must be unrestricted retained earnings before the corp may
purchase its own shares. Otherwise this would lead to an unauthorized increase of
shares of stock and violation of the trust fund doctrine
24. How would fractional share arise?

Through issuance of stock dividends.

41
1. Dividends
2. Are profits same with dividends?

No, profits only become dividends when set aside and declared by the Board
3. Conditions of corporation to declare dividends
4. What are retained earnings

42
a. Assets minus liabilities

43
5. Is it necessary to wait for approval of SEC before it can declare dividends?

a. No
6. Requisites to declare cash dividends
7. Can a corporation declare dividends even if there is no surplus profits?

a. Yes, in liquidating assets, or wasting assets
Wasting asset because once you remove them, they do not grow anymore, they are wasted.
Example: once you mine it, its wasted, wala na. also in timber etc.
8. What is a trust fund doctrine?

44
9. What is a trust fund?

It is the prevailing doctrine in US courts that the capital stock is a trust fund to be used
particularly for the security of creditors, who presumably deal with it on the credit of the capital
stock
10. What is a management contract?

Codal
11. Can a corporation distribute treasury shares as dividends? And in what course? What
kind of dividends?
Yes, no further questions
12. What is revaluation surplus?

Known as appraisal surplus wherein the assets of a company, the value of it increases. This is
not a part of the retained earnings because this is considered to be merely an increment in the
value of the said assets and the property and subject to fluctuations.
13. Can the revaluation surplus be declared as dividends?

Can you issue dividends out of revaluation surplus?
Generally not, however, when this revaluation surplus or property whose value increases is
either sold then the gains from the sale of real property can be part of the retained earnings
and can be distributed as retained earnings.
Yes just follow SEC regulation (Lahi akong nakita sa DIVINA)

45
Aquino - By way of exception, the SEC allowed the distribution of the portion of the increase in
the value of fixed assets as a result of revelation after the assets are depreciated and the
depreciation is charged against the operation provided the following conditions are complied
with:
1.) The company has sufficient income from the operations from which the depreciation
on the appraisal increase is charged
2.) the company has no deficit at the time the depreciation on the reappraisal increase
was charged to operations;
3.) such depreciation on the appraisal increase previously charged to operations is not
erased or impaired by subsequent losses, otherwise only that portion not impaired by
subsequent losses is AVAILABLE FOR DIVIDEND.
14. If not yet accrued revaluation surplus, can they be declared as dividends?
Yes, it can be declared as long as you follow certain rules issued by the SEC. because the
SEC allowed to declare dividends out of revaluation surplus. Abovementioned list of aquino 1-
3.
15. What is a ultra vires act?
Corporate acts that are outside those express definitions under the law or the Articles of
Incorporation or those committed outside the object for which a corporation is created are ultra
vires.
An Ultra Vires act is an act done by a corporation outside of the express and incidental powers
vested in it by its charter and by law.
There are 3 types of ultra vires acts:
a. Acts done beyond the powers of the corporations as provided by law or its AIC
b. Acts entered into on behalf of the corporation by persons who have no corporate
authority or exceed the scope of their authority
c. Acts or contracts, which are per se illegal as being contrary to law.
16. Can it be ratified?
However, jurisprudence provides that an ultra vires act, which is not an illegal act, maybe ratified by the
stockholders of the corporation.

46
After Midterms Topics
TITLE V BY-LAWS
1. What are by-laws?
By-laws are the rules and regulations or private laws enacted by the corporation to regulate, govern and
control its own actions, affairs and concerns and of its stockholders/members, directors/trustees, and
officers in relation thereto and among themselves in relation to the corporation.
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, in whole or in part, of its
affairs and activities
2. How many ways can you adopt by-laws
The affirmative vote of the stockholders representing at least a majority of the outstanding capital stock OR
of at least a majority of the members in case of non-stock corporators.
3. What are the contents of by-laws

a. Time, place & manner of calling/conducting of regular/special meetings
b. Time, place & manner of notifying regular stockholders/members
c. Required quorum
d. Modes by which SMDT may attend meetings and cast votes
e. Form for proxies of SM
f. Ds&Ts duties and responsibilities; guidelines for compensation
g. Time for holding annual election of DTs; mode of notice
h. Manner of election or appointment
i. Penalties
j. Manner of issuing stock certificates
k. Other matters
4. What’s the process of adopting the by-laws
By affirmative vote of stockholders representing at least majority of the outstanding capital stock
or at least majority of the members, in case of non-stock corporations, shall be necessary.
By-laws shall be signed by stockholders/members voting for them and be kept in the principal office
of the corporation, subject to the inspection of the stockholders/members during office hours.
A copy thereof, shall be duly certified by a majority of the directors or trustees AND countersigned by the
corporate secretary of the corporation, shall be filed with SEC and attached to the original AOI.
By-laws may be adopted and filed prior to incorporation; in such case, the by-laws shall be approved and
signed by ALL incorporators and submitted to SEC, together with the AOI
47
The Commission shall not accept for filing the bylaws or any amendment thereto of any bank, banking
institution, building and loan association, trust company, insurance company, public utility, educational
institution, or any other corporations governed by special laws, unless accompanied by a certificate of the
appropriate government agency to the effect that such by laws or amendments are in accordance with law.
5. What are the requisites of a valid by-laws

a. Must be consistent with the RCCP/Consti
b. Must be consistent with the AOI
c. Not contrary to morals or public policy
d. Must not disturb vested rights, impair contracts or property rights of shareholders or members or
create obligations not sanctioned by law
6. What are the ways of amending by-laws? (explain each)
Under Section 47 of the RCC, bylaws may be amended by at least majority of the board of directors or
trustees and the owners of at least majority of the outstanding capital stock in case of a stock corporation
or of the members in case of a non-stock corporation, at a regular or special meeting duly called for the
purpose.
Owners of two-thirds (2/3) of the outstanding capital stock of stock corporations or two-thirds (2/3) of the
members in a nonstock corporation can delegate to the board of directors or trustees the power to amend
or repeal the bylaws or adopt new bylaws. This delegation is revoked by the vote of stockholders owning or
representing a majority of the outstanding capital stock or a majority of the members at a regular or special
meeting.
Whenever the bylaws are amended or new bylaws are adopted, the corporation shall file with the SEC such
amended or new bylaws and, if applicable, the stockholders’ or members’ resolution authorizing the
delegation of the power to amend and/or adopt new bylaws, duly certified under oath by the corporate
secretary and a majority of the directors or trustees
7. How are the stockholders given this power? (amend or repeal)

a. Owners of ⅔ of the outstanding capital stock or ⅔ of the members in a nonstock corporation may
delegate to the board of directors or trustees.
b. power delegated to the board of directors or trustees
8. Is the power to amend or repeal forever?
No. REVOKED WHEN: When stockholders owning or representing a majority of the outstanding capital
stock/ majority of the members in a NSC, shall vote in a regular/special meeting.
9. What are the kinds of meeting? What are the notices needed for these meetings

48
KIND OF DATE OF MEETING REQUIRED NOTICE

MEETING
The date fixed in the bylaws Within the period required in the
Regular bylaws
Meeting
If there is no date in the bylaws– on any In the absence of provision in the

date after April 15 of every year as bylaws– at least 21 days prior to the
determined by the Board meeting
Any time deemed necessary Within the period provided in the

Special bylaws
Meeting As provided in the bylaws
If there is no provision in the bylaws–
at least 1 week prior to the meeting.
10. What are the ways/modes in which a stockholder may attend a meeting? (3)
Physical attendance, remote communication/in absentia and by proxy (proxy form is needed to be submitted
to corpo secretary before the meeting)
Follow up incase:
How can a proxy be valid?
a. Shall be in writing
b. Shall be signed and filed by the stockholder or member
c. Shall be in any form authorized in the bylaws
d. Must be received by the corp. secretary within a reasonable time before the
scheduled meeting
e. Valid ONLY FOR THE MEETING FOR WHICH IT IS INTENDED
f. No proxy shall be valid and effective for a period longer than 5 years
11. What are the determinants for a quorum (Not sure ko sa akong giput na answer- Joan)
Unless otherwise provided in the Corporation Code or in the bylaws, a quorum shall consist of the
stockholders representing a majority of the outstanding capital stock. Quorum is based on the totality
of the shares which have been subscribed and issued, whether it be founders’ shares or common
shares. The totality of shares issued is not only based on the stock and transfer book of the corporation but
also the articles of incorporation and all records of the corporation.
To be more precise, for stock corporations, the quorum is the majority of the outstanding voting stocks
whereas for a non-stock corporation, the basis in determining the presence of quorum in non-stock
49
corporations is the numerical equivalent of all members who are entitled to vote, unless some other
basis is provided by the bylaws of the corporation. The bylaws, for instance, may provide that members
who are delinquent in the payment of their dues are not entitled to vote, in which case, they are not included
in the computation of quorum
12. How many times mag meeting?
Meetings are held annually. codal
13. How can the directors participate in the meeting? In what way?
May physically attend meetings. However, Since proxies are not allowed, directors who may not physically
attend the meeting may participate through remote communication such as teleconferencing,
videoconferencing, or some other mode of communication. PROVIDED that the board members are able to
attain reasonable opportunities to participate.
NOTE: Meetings in another country are valid.
TELECON advantages:
● People who would not normally attend a distant f2f meeting can participate
● Follow up to earlier meetings can be done with relative ease and expense
● Socializing is minimal compared to f2f meeting therefore meetings are shorter and more oriented to
the purpose of the meeting
● Communication between home office and field staff is maximized
● For severe climate conditions that may necessitate a telecon
● Generally better prepared than f2f meetings
● Group members participate more equally in telecons than f2f meetings
14. Is there a Roll call in remote meetings?

a. Yes. AT the start of a meeting, Presiding officer (CHAIRMAN; in the absence of, PRESIDENT)
shall instruct the corporate secretary to state for the record the ff:
b. Full name and position
c. Location
d. Confirmation that he/she can clearly hear/see other attendees
e. Confirmation that he/she received the notice of the meeting including the agenda and materials
f. Specify device being used
15. What is a Roll Call?
Calling out of a list of names to establish presence/attendance. (google)
16. What shall the attendees state in the roll call?

a. Full name and position
b. Location

50
c. Confirmation that he/she can clearly hear/see other attendees

d. Confirmation that he/she received the notice of the meeting including the agenda and materials
e. Specify device being used
17. When one executes a proxy for another, when there’s a conflict what law will apply? (confusing
question)
· Law on Agency
Duration of proxy:
Specific proxy refers to one where authority granted the proxy holder is merely for a PARTICULAR
MEETING on a SPECIFIC DATE
Continuing proxy not limited to a specific meeting and it continues for a certain period but shall not exceed
for a period of 5 years at any time
18. Voting trust agreement
A voting trust agreement is a contractual agreement in which shareholders with voting rights transfer their
shares to a trustee, in return for a voting trust certificate.
19. Distinguish between Voting trust agreement vs Proxy
While the proxy may be a temporary or one-time arrangement, often created for a specific vote, the voting
trust is usually more permanent, intended to give
VTA: Not governed by law on agency. Unlike agency, a VTA is not revocable at will. To allow indiscriminate
revocation of VTA may defeat precisely the reason for the creation of trust
Proxy: Proxy is a form of agency created in instances when a person is unable to personally cast his/her
vote; hence, the act of voting is delegated to another person.

51
20. Cancellation : VTA vs Proxy
Proxy may be revoked at any time, unless said proxy is coupled with interest, even though it may appear
by its terms to be irrevocable.
May be revoked in writing, orally or by conduct.
21. What is the purpose of a voting trust agreement?
Voting trust is a control device by which a group may gain or retain control over the management of the
corporation. This control device is allowed as long as it is not entered into for purposes of circumventing
the laws against anti-competitive agreements, abuse of dominant position, anti-competitive mergers and
acquisitions, violation of nationality and capital requirements, or for the perpetuation of fraud.
One or more stockholders of stock corporation may create a voting trust for the purpose of conferring
upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not
exceeding five (5) years at any time:
52
Provided, That in the case of a voting trust specially required as a condition in a loan agreement, said voting
trust may be for a period exceeding five (5) years but shall automatically expire upon full payment of the
load. A voting trust agreement must be in writing and notarized, and shall specify the terms and conditions
thereof.
TITLE 7: STOCKS AND STOCKHOLDERS
1. “Subscription agreement”
a contract by which the subscriber agrees to take a certain number of shares of capital stock of a
corporation — paying the consideration thereof OR expressly or impliedly promise to pay the same any
contract for the acquisition of unissued stocks in an existing corporation or a corporation still to be formed
CODAL- Any contract for the acquisition of unissued stock in an existing corporation or a corporation still
to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that
the parties refer to it as a purchase or some other contract.
Rules on pre-incorporation subscription
A subscription of shares in a corporation still to be formed shall be irrevocable for a period of at least six (6)
months from the date of subscription, unless all of the other subscribers consent to the revocation, or the
corporation fails to incorporate within the same period or within a longer period stipulated in the contract of
subscription. No pre-incorporation is submitted to the Commission .
2. Two ways of acquiring stocks
Purchase and Subscription
a. Stock option (SO)

b. Warrant- period to subscribe must not be less than 1 yr but not more than 5 years
c. To whom issued – SO (Subscriber) and Warrant (Wala ko kabalo huhu basta kay pwede siya
maoffer sa public)

53
d. Trust fund doctrine
a. How violated

54
3. Consideration for stocks – elaborate each
Section 61. Consideration for Stocks. - Stocks shall not be issued for a consideration less than the par
or issued price thereof. Consideration for the issuance of stock may be:
1(a) Actual cash paid to the corporation;
➢ Obviously acceptable
➢ SEC no longer requires a Bank Certificate. UNLESSm foreign subscribers
2(b) Property, tangible or intangible, actually received by the corporation and necessary or convenient for
its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued;
➢ It is required that:
1. The property is actually received by the C
2. The property is necessary or convenient for its use and lawful purposes
3. It must be subject to a fair valuation equal to the par or issued par value of the stock
issued
4. Valuation shall initially be determined by the SH or the BODs
5. Valuation is subject to approval by the SEC (this is necessary to prevent watering of
stocks)
➢ Intangible properties that may be used include patents, copyrights.
3(c) Labor performed for or services actually rendered to the corporation;

55
➢ Shares can be used as bonus as compensation for the service rendered. Bonus takes the form
of additional expenses on the part of C for the services rendered by the grantee
➢ Future services are NOT ACCEPTABLE
4(d) Previously incurred indebtedness of the corporation;
➢ Indebtedness (one that is acknowledged by the Board). Still subject to the confirmation of SEC
5(e) Amounts transferred from unrestricted retained earnings to stated capital;
➢ Happens when theres a declaration of stock dividends
6(f) Outstanding shares exchanged for stocks in the event of reclassification or conversion;
➢ Considered as property. Acceptance of shares is subject to the rule on approval of valuation of property
7(g) Shares of stock in another corporation; and/or
8(h) Other generally accepted form of consideration.
Subject to ff CONDITIONS:
Where the consideration is other than actual cash, or consists of intangible property such as patents or
copyrights, the valuation thereof shall initially be determined by the stockholders or the board of directors,
subject to the approval of the Commission (SEC).
Shares of stock shall not be issued in exchange for promissory notes or future service. The same
considerations provided in this section, insofar as applicable, may be used for the issuance of bonds by the
corporation.
The issued price of no-par value shares may be fixed in the articles of incorporation or by the board of
directors pursuant to authority conferred by the articles of incorporation or the bylaws, or if not so fixed, by
the stockholders representing at least a majority of the outstanding capital stock at a meeting duly called for
the purpose.
4. Example of a property convenient for the use of the corp.
Land for parking space in a car rental business
5. Rules on cert of stocks and their transfer - requisites
For a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed by law.
The requirements are:
a. There must be a delivery of the stock certificate;
b. The certificate must be endorsed by the owner or his attorney-in fact or other persons legally authorized
to make the transfer; and,
c. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates, and the number of shares transferred
6. Validity of transfer - sec. 62

56
What if not recorded? Valid but only between parties. Cannot bind third persons
Recording in the book - contents
7. Formalities of certificate of stock
Section 62 provides that:

a. Certificates of stock are signed by the Pres or VP
b. Countersigned by the Secretary or Asst Sec
c. Sealed w the seal of the Corporation (w/c is described in the by-laws)
d. Certificate shall be issued in accordance w the By-laws
**1. Cert must be delivered,
2. Full amount of subscription is fully paid,
3. Orig cert must be surrendered where person requesting issuance of a cert is a transferee from a
SH
8. Can there be a transfer without a certificate? If yes, how? If no, why?
Yes. A "deed of assignment" on the other hand is necessary only when no certificate of stock has yet been
issued or where the same is not in the possession of the transferor.
PONCE v. ALSONS
Deed of assignment must be duly recorded in the books of the corporation. The registered owner must
execute a SPA authorizing the transferee to demand the transfer in the stock and transfer books. It is
believed however that this authority may be included in the deed of assignment or document of transfer
itself.
**** What do you need to present if there is no certificate? Deed of assignment and SPA
9. Watered stocks + liabilities if it is issued
Stocks that are issued for a consideration less than the par or issued price of the stock.
(Par value- the value of a single common share as set by a corporation’s charter)
10. Distinguished from bonus stocks- issued without any valuable consideration
11. Instances to be liable when WATERED STOCKS are issued
A director or officer of a corporation who:
(a) consents to the issuance of stocks for a consideration less than its par or issued value
(b) consents to the issuance of stocks for the consideration other than cash, valued in excess of its
fair value; or
(c) having knowledge of the insufficient consideration, does not file written objection with the
corporate secretary, — shall be liable to the corporation or its creditors, solidarily with the stockholder
concerned for the difference between the value receive at the time of issuance of the stock and the par or
issued value of the same.
12. Delinquency + delinquency sale
Section 65. Interest on Unpaid Subscriptions. - Subscribers to stock shall be liable to the corporation for
interest on all unpaid subscriptions from the date of subscription, if so required by and at the rate of interest

57
fixed in the subscription contract.If no rate of interest is fixed in the subscription contract, the prevailing
legal rate shall apply.
Section 66. Payment of Balance of Subscription. - Subject to the provisions of the subscription contract,
the board of directors may, at any time, declare due and payable to the corporation unpaid subscription and
may collect the same or such percentage thereof, in either case, with accrued interest, if any, as it may
deem necessary.
Payment of unpaid subscription or any percentage thereof, together with any interest accrued, shall be made
on the date specified in the subscription contract or on the date stated in the call made by the board. Failure
to pay on such date shall render the entire balance due and payable and shall make the stockholder liable
for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription
contract. The interest shall be computed from the date specified, until full payment of the
subscription. If no payment is made within thirty (30) days from the said date, all stocks covered by
the subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided,
unless the board of directors orders otherwise.
Section 67. Delinquency Sale. - The board of directors may, by resolution, order the sale of delinquent
stock and shall specifically state the amount due on each subscription plus all accrued interest, and the
date, time and place of the sale which shall not be less than thirty (30) days nor more than sixty (60) days
from the date the stock become delinquent.
Notice of the sale, with a copy of the resolution, shall be sent to every delinquent stockholder either
personally, by registered mail, or through other means provided in the bylaws. The same shall be published
once a week for two (2) consecutive weeks in newspapers of general circulation in the province or city where
the principal office of the corporation is located.
Unless the delinquent stockholder pays to the corporation, on or before the date specified for the sale of the
delinquent stock, the balance due on the former's subscription, plus accrued interest, costs of advertisement
and expenses of sale, or unless the board of directors otherwise orders, said delinquent stock shall be sold
at a public auction to such bidder who shall offer to pay the full amount of the balance on the subscription
together with accrued interest, costs of advertisement and expenses of sale, for the smallest number of
shares or fraction of a share. The stock so purchased shall be transferred to such purchaser in the books of
the corporation and a certificate for such stock shall be issued in the purchaser's favor. The remaining
shares, if any, shall be credited in favor of the delinquent stockholder who shall likewise be entitled to the
issuance of a certificate of stock covering such shares.
Should there be no bidder at the public auction who offers to pay the full amount of the balance on the
subscription together with accrued interest, costs of advertisement, and expenses of sale, for the smallest
number of shares or fraction of a share, the corporation may, subject to the provisions of this Code, bid for
the same, and the total amount due shall be credited as fully paid in the books of the corporation. Title to
all the shares of stock covered by the subscription shall be vested in the corporation as treasury
shares and may be disposed of by said corporation in accordance with the provisions of this Code.
Section 68. When Sale May be Questioned. - No action to recover delinquent stock sold can be sustained
upon the ground of irregularity or defect in the notice of sale, or in the sale itself of the delinquent stock,
unless the party seeking to maintain such action first pays or tenders to the party holding the sum for which
the same was sold with interest from the date of sale at the legal rate. No such action shall be maintained
unless a complaint is filed within six (6) months from the date of sale.
13. Req. for a derivative suit

58
g. 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
h. He exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of
incorporation, by-laws, laws or rules governing the corporation or partnership to
obtain the relief he desires
i. No appraisal rights are available for the act or acts complained of; and
j. The suit is not a nuisance or harassment suit)
14. Rules on Loss or destroyed of certificate of stock

59
TITLE 8-10: Corporate Books and Record, Merger and Consolidation,

Appraisal Right
1. In an appraisal right who bears the cost of appraisal?
2. What happens to the certificate of stock of the stockholder?
3. What book should be kept? Where should it be kept?
4. What is a stock and transfer book?
A stock and transfer book is a record of all stocks in the names of the stockholders alphabetically arranged;
the installments paid and unpaid on all stocks tor which subscription has been made, and the date of
payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof,
by and to whom made; and such other entries as the bylaws may prescribe.
It is the quintessential (representative of a particular kind of thing; typical example of a quality or

class) record of all stockholders and their corresponding stockholdings in the corporation. It is the best
evidence to prove the status of a person as a stockholder of the corporation. However, the same is not
conclusive in nature to prove one’s stockholdings. Should the STB be lost or destroyed, other pieces of
evidence such as but not limited to the latest General Information Sheet of the corporation or the stock
certificate may be presented to substantiate one’s claim as a stockholder
5. Best evidence rule?
It is the best evidence to prove the status of a person as a stockholder of the corporation. However, the
same is not conclusive in nature to prove one’s stockholdings. Should the STB be lost or destroyed, other
pieces of evidence such as but not limited to the latest General Information Sheet of the corporation or
the stock certificate may be presented to substantiate one’s claim as a stockholder
6. When will appraisal be exercised? Under what situation or condition?
The appraisal right can be exercised by a dissenting stockholder in the 1 following cases:
a. In case an 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.

60
b. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all
of the corporate property and assets.
c. In case of merger or consolidation.
d. In case of investment of corporate funds for any purpose other than the primary purpose of the
corporation.
e. In close corporation, a stockholder may, for any reason, compel the said corporation to purchase his
share at their fair value, which shall not be less than their par or issued value, when the corporation has
Continuation: has sufficient assets in its books to cover its debts and liabilities exclusive of capital stock
7. Rules of the stockholder's right to the financial statement?
8. When should it be given?
a. The corporation shall furnish stockholders or members, within ten (10) days from receipt of their written
request, its most recent financial statement, in the form and substance of the financial reporting required by
the SEC.
b. At the regular meeting of stockholders or members, the board of directors or trustees shall present to
such stockholders or members a financial report of the operations of the corporation for the preceding year,
which shall include financial statements, duly signed and certified in accordance with the RCC and the rules
the SEC may prescribe
However, if the total assets or total liabilities of the corporation are less than Six hundred thousand pesos
(P6oo,ooo.oo), or such other amount as may be determined appropriate by the Department of Finance, the
financial statements may be certified under oath by the treasurer and the president.
9. What is the difference between merger and consolidation, define each then distinguish
A merger is a reorganization of two or more corporations that results in their consolidating into a single corporation,
which is one of the constituent corporations, one disappearing or dissolving and the other surviving.
To put it another way, merger is the absorption of one or more corporations by another existing corporation, which
retains its identity and takes over the rights, privileges, franchises, properties, claims, liabilities and obligations of
the absorbed corporation(s). The surviving corporation continues its existence while the life or lives of the other
corporation(s) is or are terminated
Consolidation is the union of two or more existing corporations to form a new corporation called the consolidated
corporation. It is a combination by agreement between two or more corporations by which their rights, franchises,
and property are united and become those of a single, new corporation, composed generally, although not
necessarily, of the stockholders of the original corporations.
— Distinguish
In merger, the constituent corporations cease to exist except the surviving corporation which retains its corporate
identity but acquires all the rights and liabilities of the acquired corporation/s whereas in asset sale, both the seller
corporation and buyer corporation continue to exist. The seller corporation is not dissolved even though it may not
have any asset left.
In merger, the surviving corporation assumes all the liabilities of the absorbed corporation whereas in asset sale,
61
the buyer, as a general rule, does not assume the liabilities of the seller.
10. What are the effects of merger and consolidation?
a. The constituent corporations shall become a single corporation which, in case of merger, shall be the
surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the
consolidated corporation designated in the plan of consolidation.
b. The separate existence of the constituent corporations shall cease, except that of the surviving or the
consolidated corporation.
c. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities, and
powers and shall be subject to all the duties and liabilities of a corporation organized under the RCC. (under
the law)
d. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and
franchises of each constituent corporation; and all real or personal property, all receivables due on whatever
account, including subscriptions to shares and other choses in action, and every other interest of, belonging
to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or
consolidated corporation without further act or deed.
e. The surviving or consolidated corporation shall be responsible for all the liabilities and obligations of each
constituent corporation as though such surviving or consolidated corporation had itself incurred such
liabilities or obligations; and any pending claim, action or proceeding brought by or against any constituent
corporation may be prosecuted by or against the surviving or consolidated corporation. The rights of
creditors or liens upon the property of such constituent corporations shall not be impaired by the merger or
consolidation.8
11. What is the rule of the Philippine constitutional commission with regard to merger and
consolidation?
12. What do you mean by relevant market?

62
TITLE 11-13: Non-stock Corporation, Close Corporation,

Religious Corporation, OPC
1. What is a non-stock corporation? (according sa RCCP ang answer dapat)
A non-stock corporation is one where no part of its income is distributed as dividends to its members,
trustees or officers. Provided that any profit which a nonstock corporation may obtain incidental oto
its operations shall be used for the furtherance of the purpose or purposes for which the corporation
was organized.
- A non-stock corporation is one without a capital stock and/or where no part of its income is
distributable as dividends to its members, trustees, or officers, subject to the provision on
dissolution.
- 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.
2. How are trustees elected in a non-stock corporation? What is its term?

- number of trustees is fixed in the AOI or bylaws which may or may not be more than 15
- They shall hold office for not more than 3 years until their successors are elected and qualified
- If they are elected to fill vacancies before the expiration of a term, they shall hold office only for the
unexpired period
- Except with respect to independent trustees of nonstock corporations vested with public interest,
only a member of the corporation shall be elected as trustee
- Unless stated otherwise in the AOI, the members may directly elect officers of a nonstock corporation
- Members may cast as many votes as there are trustees to be elected; one vote per candidate
only;
- Voting rights are limited, broadened or denied by AOI or bylaws
- Members may vote personally or in absentia or remote communication or by proxy
- Top candidates with highest number of votes shall be deemed elected trustees
- Term of office- 3 years
3. What is a minute book?

- A Minute Book is a corporate record book that contains all of the most important
documentation about a corporation and its history. Some of the documents found in a minute
book include: Articles of Incorporation or Constating Documents. By-Laws.
- It is a repository for tracking important dates and changes in business structure or
ownership, along with notes pertaining to important events in the company.
- A One Person Corporation shall maintain a minutes book which shall contain all actions,
decisions, and resolutions taken by the One Person Corporation.
4. What if there’s no meeting, what will be recorded?

63
5. What is a close corporation? (according sa RCCP ang answer dapat)

- One where the AOI provides that:
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 20
b. All the issued stick of all classes shall be subject to one or more specified restrictions on
transfer permitted by this Title
c. The corporation shall not list in any stock exchange or make any public offering of its stocks
of any class
- A corporation shall not be deemed a close corporation when at least ⅔ of its voting stock or voting rights is
owned or controlled by another corporation which is not a close corporation within the meaning of the RCC
6. In a non-stock corp, what are the terms and election of board of trustees?
7. What is a sole corporation?

- “Corporation Sole” is one which is formed by the chief archbishop, bishop, priest, minister, rabbi, or
other presiding elder of a religious denomination, sect or church for the purpose of administering and
managing, as trustee, the affairs, property and temporalities of such religious denomination, sect or
church.
- “One Person Corporation” is a corporation with a single stockholder. Provided that only a natural
person, trust, or an estate may form an OPC.
8. Who is a provisional director?
A provisional director, under the RCC, shall be an impartial person who is neither a stockholder nor a creditor
of the corporation or any of its subsidiaries or affiliates, and whose further qualifications, if any, may be
determined by the SEC.
A provisional director is not a receiver of the corporation and does not have the title and powers of a
custodian or receiver. A provisional director shall have all the rights and powers of a duly elected director,
including the right to be notified of and to vote at meetings of directors until removed by order of the SEC or
by all the stockholders.
The compensation of the provisional director shall be determined by agreement between such director and
the corporation, subject to the approval of the SEC, which may fix the compensation absent an agreement
or in the event of disagreement between the provisional director and the corporation. - Divina book
9. What is required for an ordinary corporation to be converted into an OPC? And vice versa
- When a single stockholder acquires all the stocks of an ordinary stock corporation, the latter may
apply for conversion into an OPC, subject to the submission of such documents as the SEC may
require.
- If the application for conversion is approved, the SEC shall issue a certificate of filing of amended
AOI reflecting the conversion.
- The OPC converted from an ordinary stock corporation shall succeed the latter and be legally
responsible for all the latter’s outstanding liabilities as of the date of conversion.

64
- An OPC may be converted to an Ordinary Stock Corporation when:

a. After due notice to the SEC of such fact and of the circumstances leading to the conversion, and
after compliance with all other requirements for stock corporations under the RCC and applicable
rules
b. In case of death of the single stockholder, the nominee or alternate nominee shall transfer the shares
to the duly designated legal heir or estate within 7 days from receipt of either an affidavit of heirship
or self-adjudication executed by a sole heir, or any other legal document declaring the legal heirs of
the single stockholder and notify the SEC of the transfer.
Section 131. Conversion from an Ordinary Corporation to a One Person Corporation. When a single stockholder
acquires all the stocks of an ordinary stock corporation, the latter may apply for conversion into a One Person
Corporation, subject to the submission of such documents as the Commission may require. If the application for
conversion is approved, the Commission shall issue a certificate of filing of amended articles of incorporation reflecting
the conversion.
The One Person Corporation converted from an ordinary stock corporation shall succeed the later and be legally
responsible for all the latter's outstanding liabilities as of the date of conversion.
Section 132. Conversion from One Person Corporation to an Ordinary Stock Corporation. - A One Person
Corporation may be converted into an ordinary stock corporation after due notice to the Commission of such fact and of
the circumstances leading to the conversion, and after compliance with all other requirements for stock corporations
under this Code and applicable rules. Such notice shall be filed with the Commission within sixty (60) days from the
occurrence of the circumstances leading to the conversion into an ordinary stock corporation. If all requirement a have
been complied with, the Commission shall issue a certificate of filing or amended articles of incorporation reflecting the
conversion.
In case of death if the single stockholder, the nominee or alternate nominee shall transfer the shares to the duly
designated legal heir or estate within seven (7) days from receipt of either an affidavit of heirship or self-adjudication
executed by a sole heir, or any other legal document declaring the legal heirs of the single stockholder and notify the
Commission of the transfer. Within sixty (60) days from the transfer of the shares, the legal heirs shall notify the
Commission of their decision to either wind up and dissolve the One Person Corporation or convert it into an ordinary
stock corporation.
The ordinary stock corporation converted from One Person Corporation shall succeed the latter and be legally
responsible for all the latter's outstanding liabilities as of the date of conversion.
10. What is the method of dissolution?
11. Function of corpo secretary in OPC
Section 123. Special Functions of the Corporate Secretary. - In addition to the functions designated by the One Person
Corporation, the corporate secretary shall:
(a) Be responsible for maintaining the minutes book and/or records of the corporation;
(b) Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which notice shall be
given no later than five (5) days from such occurrence;
(c) Notify the Commission of the death of the single stockholder within five (5) days from such occurrence and stating in
such notice he names, residence addresses, and contact details of all known legal heirs; and
(d) Call the nominee or alternate nominee and the known legal heir to meeting and advise the legal heirs with regard to,
among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or
65
consequential matters.
TITLE 14-17: Dissolution until SRC
Title Topics: Dissolution until SRC

1. In SRC, What is an insider?
2. What is a tender offer? What is the procedure?

66
3. What is a foreign corporation in RCC?
4. In the case of Mentholatum? Explain the substance test and continuity test? Doing business in the
Philippines mean?
a. ans . page 870 aquino

67
5. Who is a resident agent? Function of a resident agent

68
6. What is the rule regarding a foreign corp who does business without a license?
7. What are those activities considered doing business? And not doing business?

69

70
8. Under the SRC what is considered exempt securities?

a. What do we mean by exempt?

71

BMMZ Corporation Law Notes Midterms Finals

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

BMMZ Corporation Law Notes Midterms Finals

Uploaded by

Copyright:

Available Formats

1

PART I CORPORATIONS AND TITLE I ON GENERAL PROVISIONS

1. What are the types of business organizations in Philippines?

Book: Corporations have their origin in Roman Law.

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

3. Corporation laws in the Phil?

6. What are the attributes of a corporation?

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

7. What is an artificial being?

8. What is the right of a corporation as a being?

9. Can a corporation be criminally prosecuted?

10. Stonehill v Diokno (might happen again in the Philippines)

11. What do you mean by created by operation of law?

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

Japan partnership 50-50-violation of Constitution), Smart-Meralco-

12. What is right of succession? what are the options?

14. Distinctions between partnership and corporation?

15. What is doctrine of limited liability?

16. Doctrine of separate juridical personality?

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

17. Doctrine of piercing the veil of corporate fiction?

18. Recent news: https://www.forbes.com/sites/jonathanburgos/2022/01/26/philippines-

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

20. What areas of doctrine of piercing the veil apply?

21. What are the types of corporation as to legal status

22. Classes/Kinds of corporation: page 135

23. How to determine the nationality of the corporation?

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

xiv. Basis of doubt: in nationalized industry – like exploitation of natural resources,

24. who is a promoter?

25. who are corporators? p149

26. what is the significance of being an incorporator?

27. What are shares of stocks?

28. what do you mean by the doctrine of equality of shares? p 155

29. what are the classes of shares?

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

xix. Gets dividends upon declaration of the board

30. DIFFERENTIATE PAR VALUE, BOOK VALUE, MARKET VALUE

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

1. It is lower than the par value when

When is the book value over the par value?

31. what are the kinds of preferred shares as to dividends? 6 kinds

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

38. Treasury shares

39. Redeemable shares

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

BEST BAR EVER (2022)- Corporation Law

Question 16: One Person Corporation

Question 17: Required to have independent director?

Question 18: Is she allowed to vote?

TITLE I I:INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

1. What are the qualifications of becoming an incorporators and the number of

2. What is new in RCCP

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

In incorporators: juridical persons may be incorporators, old code: not allowed

5. Can foreigners be incorporators of domestic corporations?

6. Is shared ownership a continuing requirement to become an incorporator?

7. May the SEC reject the application of incorporation?

8. Can two persons form a corporation?

9. What do you mean by corporate term? Perpetual term Fixed term

Consolidated notes of Bajao, Matanog, Migullas, and Zayas

No application for revival of certificate of incorporation of banks, banking and quasi-banking