Corporation

Enabling Law – BP 68 as Amended by RA No. 11232 - Revised Corporation Code of the Philippines (RCC)

A. Definition of Corporation – Sec. 2, RCC

What is the simple definition of corporation?

A corporation is a legal entity separate from its owners, made up of individuals, groups, or other
corporations, that has the power to conduct business and to own property, assets, and liabilities.

Sec. 2. Corporation defined. — 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 incident to its existence. (2)

Explanation: A special kind of organization that is not a real person but is recognized by the law as if it were one. It
can
do things like own property, make contracts, and sue or be sued in court. It's created by the government, and it
can continue to exist even if the people who started it are no longer around. The things it can do are either
specifically allowed by the law or are just a natural part of being a corporation. So, it's like a legal entity that can
act like a person in many ways, but it's not a real person.

B. Nature of Corporation

a. Composition
Attributes of a corporation.
An analysis of the definition in Section 2 reveals the following attributes of a corporation:
(1) It is an artificial being;
(2) It is created by operation of law;
(3) It has the right of succession; and
(4) It has only the powers, attributes and properties expressly authorized by law or incident
to its existence.

b. Juridical Personality

Explanation: Juridical personality in a corporation means that the law recognizes the corporation as a separate and
distinct entity from the people who own or run it. In easy terms, it's like the law treats the corporation as if it were
its own "person" in certain situations. This concept allows the corporation to own property, enter contracts, sue,
and be sued, just like an individual can. So, it's like giving the corporation its own legal identity and rights, even
though it's not a real person.

c. Limited Liability Rule

 Liability for acts or contracts

a. When a corporation does something or signs a contract through its authorized representatives, it's
responsible for those actions or contracts. It's like a company taking responsibility for its own deeds.

b. Usually, you can't sue the individual stockholders (owners) of a corporation for what the corporation did. The
law treats them as separate from the corporation. So, if the corporation owes money, you can't just go after
the personal assets of the stockholders.

c. Corporate officers (like the president or manager) aren't personally responsible for the corporation's actions,
as long as they acted in good faith and within their authority. If they fire an employee as part of their job, they
won't be personally on the hook for it.
 d. Contracts made in the name of the corporation are the responsibility of the corporation, not the
individual stockholders or officers. The personal debts or credits of stockholders are not the
corporation's, and vice versa.

e. The corporation's property belongs to the corporation, not the stockholders or members. They can't sell it
without the corporation's proper authorization.

f. The law treats a corporation as a separate entity, and this separation protects its officers from personal liability
for the corporation's actions. However, in cases of illegal dismissal (like wrongful firing of employees), officers can
be held liable if they acted with malice or bad faith.

 Liability when exceptional circumstances warrant

General Rule: Normally, the people who run a corporation (like directors, officers, or trustees) are not personally
responsible for what the corporation does.

Exceptional Circumstances: However, in rare cases, there can be exceptions. Personal or shared responsibility
(personal or solidary liability) can be put on these individuals under special circumstances.

When Can This Happen? Exceptional circumstances might include situations where the director, officer, or trustee:
a. Acted with bad intentions, like doing something malicious or in bad faith.
b. Were really careless in their actions, amounting to gross negligence.
c. Voluntarily agreed to be personally and solidarily responsible along with the corporation, often by signing a
contract that says so.
d. Broke a specific law that holds them personally responsible for what the corporation did.
e. Used the separation of the corporation from its owners or operators to trick or cheat someone (defraud a third
party) or for unlawful purposes.

C. Formation
a. Components

Sec. 5. Corporators and incorporators, stockholders and members. — Corporators are those who compose a corporation, whether as
stockholders or members. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally
forming and composing the corporation and who are signatories thereof. Corporators in a stock corporation are called stockholders
or shareholders. Corporators in a non-stock corporation are called members. (4a)

Explanation:
a. Corporators: These are the people who make up a corporation, and they can be either
stockholders or members. They include both the initial creators (incorporators) and people who
become stockholders or members after the corporation is formed.
b. Incorporators: These are the specific individuals who originally create the corporation by signing the
articles of incorporation. They ensure the corporation becomes a legal entity. While all incorporators
are corporators, not all corporators are incorporators. Incorporators play a critical role in the
corporation's formation and retain their status as incorporators permanently, even if they stop being
corporators. Only real people, not companies, can be incorporators.
c. Stockholders (Shareholders): These are the people who own shares of stock in a stock corporation.
They're often called shareholders because they own parts of the corporation. Stockholders can be
either natural persons (individuals) or juridical persons (like other corporations).
d. Members: These are the people who make up a corporation that doesn't have shares of stock (non-
stock corporation). All incorporators in a stock corporation must own or subscribe to at least one
share of the capital stock. However, under the old rules, members also included incorporators who
didn't own shares of stock. In a stock corporation, you have stockholders and, in some cases,
members. Members are usually in non-stock corporations.
Three Other Classes:
1) Promoters: These are the people who kickstart the process of creating a corporation. They bring together
the folks who want to start the corporation, get them to invest money, and get everything in motion for
the corporation to be born. Just signing and agreeing to buy shares isn't enough to be a promoter;
they're the ones who lay the foundation for the corporation.
2) Subscribers: Subscribers are people who agree to buy new shares in a corporation when it's being formed.
But they don't become actual shareholders until the corporation accepts their offer to buy shares. Being a
subscriber doesn't make you a shareholder unless the corporation officially records you as one.
3) Underwriters: These are usually professionals, often investment bankers. They do one of these things:
(a) agree to buy an entire batch of securities (like shares or bonds) at a set price,
(b) promise to make sure the securities get sold by buying any that don't get sold at an agreed price,
(c) commit to trying their best to sell all or part of a batch of securities, or
(d) offer for sale stock they've bought from a controlling stockholder. Underwriters help
corporations raise money by making sure their securities get sold to investors. They often take on some
financial risk in the process.

b. Certificate of Incorporation

Sec. 19. Commencement of corporate existence. — A private corporation formed or organized under this Code
commences to have corporate existence and juridical personality and is deemed incorporate from the date the
Securities and Exchange Commission issues a certificate of incorporation under its official seal; and thereupon the
incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the
name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or
the corporation is sooner dissolved in accordance with law. (11)

Explanation:
 The corporate journey begins when the Securities and Exchange Commission (SEC) officially issues a
certificate of incorporation. This certificate is like a birth certificate for the corporation, and it has the
SEC's official stamp on it.
 Once the SEC gives this certificate, the corporation gains legal existence. It becomes a recognized
"person" under the law, separate from the people who created it. This is when the corporation
officially comes to life.

From this point on, the people who formed the corporation (incorporators) and those who own shares or are
members will make up the corporate body. They will act as one legal entity under the name mentioned in the
articles of incorporation. This status continues for the period mentioned in the articles of incorporation unless it's
extended or the corporation is dissolved following the legal rules

1.)Issuance of Certificate of Incorporation:

The crucial moment when a corporation gains its legal existence and juridical personality is when the Securities
and Exchange Commission (SEC) officially issues a certificate of incorporation. This certificate is like a legal birth
certificate for the corporation, and it has the SEC's official seal on it.
a. This certificate confirms that the corporation has the legal right and capability to do business and enter
into contracts in its name. Without this certificate, the entity is considered "unregistered," and the
individual members or founders would be personally responsible for the corporation's actions, not the
corporation itself.
b. The certificate not only gives the corporation legal status, but it also places it under the authority and
regulation of the SEC. This control remains intact even if another regulatory body withdraws permission
for the corporation to engage in specific activities.
However, it's important to note that just getting the certificate isn't enough. The corporation must also
 formally organize itself and start its business or projects within two years from the date of incorporation. If
it doesn't, its corporate powers will cease, and it will be considered dissolved. Additionally, depending on
the type of business, the corporation might need additional permits or licenses from other government
agencies to operate legally.

2.) Filing of articles of incorporation:

 For religious corporations, they don't need a certificate of incorporation from the Securities and Exchange
Commission (SEC). Instead, when they file their articles of incorporation with the SEC, the religious leader
(chief archbishop, etc.) becomes a "corporation sole." This means that the religious leader becomes a
single legal entity responsible for the religious organization.

3.) Registration of cooperative

 For cooperatives, they gain juridical personality when they register with the Cooperatives
Development Authority. They don't need to register with the SEC. Once they complete the
registration process with the Cooperatives Development Authority, they become a recognized legal
entity as a cooperative.

c. Articles of Incorporation

Articles of Incorporation are like the instruction manual and legal foundation for a corporation. It's a
document that people who want to start a corporation prepare, and then they file it with the Securities and
Exchange Commission (SEC).

Think of it as the "corporate rulebook" that explains how the corporation should operate and the rules it needs to
follow. These articles are essential because they define the corporation's character, its relationship with the
government, its responsibilities to its owners (stockholders), and the rights and duties of the stockholders
themselves. Once the SEC approves these articles and issues a certificate of incorporation (a kind of official
approval), the document essentially becomes the corporation's official rulebook, enabling the corporation to legally
exist and carry out its activities. It's important to note that if a corporation is created through a special law, it won't
have articles of incorporation because its rules and structure are defined by that special law instead.

SEC.14 page 145 The Corporation Code of the Philippines

Contents of Articles of Incorporation

a. Name of the Corporation: You have to give your corporation a name.
b. Purpose: You need to state the specific reason or reasons why you're creating the corporation. If there's more
than one purpose, you must identify which one is the primary purpose and which are secondary purposes.
However, non-stock corporations must stick to purposes that fit their nature.
c. Location: Mention where the main office of the corporation will be situated, and it must be within the Philippines.
d. Duration: Specify how long the corporation will exist.
e. Incorporators: List the names, nationalities, and addresses of the people who are creating the corporation.
f. Directors or Trustees: Indicate how many directors or trustees will be in charge of the corporation. This number
should be between 5 and 15.
g. Initial Directors or Trustees: Mention the names, nationalities, and addresses of the people who will act as
directors or trustees until the first regular directors or trustees are elected according to the law.
h. For Stock Corporations: If it's a stock corporation, provide details about the authorized capital stock, the number of
shares, the par value of each share (if applicable), the names, nationalities, and addresses of the original subscribers,
and the amount they've subscribed and paid for their shares.
i. For Non-Stock Corporations: If it's a non-stock corporation, specify the amount of capital, the names,
nationalities, and addresses of the contributors, and the amount each person has contributed.
j. Other Necessary Matters: Include any additional information that the incorporators believe is necessary and
convenient for the corporation.

Additional: The Securities and Exchange Commission (SEC) won't accept the articles of incorporation for a stock corporation
unless it's accompanied by a sworn statement from the Treasurer elected by the subscribers. This statement must confirm
that at least 25% of the authorized capital stock has been subscribed, and at least 25% of the total subscription has been fully
paid, with an actual cash payment and/or property that's valued at 25% of the subscription. This paid-up capital must not be
less than 5,000 pesos.

SEC. 15 page 147 The Corporation Code of the Philippines

Form of Articles of Incorporation

a. Name of Corporation: The document starts by stating the name of the corporation they want to create.
b. Purpose: It explains the specific reason for creating the corporation, which could be one or more purposes.
c. Location: It mentions where the corporation's main office will be located, and it must be in the Philippines.
d. Duration: It specifies how long the corporation will exist.
e. Incorporators: Lists the names, nationalities, and addresses of the people who are creating the corporation.
f. Directors or Trustees: States the number of directors or trustees who will manage the corporation and gives their
names, nationalities, and addresses.
g. Capital Stock: If it's a stock corporation (one that can issue shares of stock), it mentions the amount of money (in
Philippine pesos) that the corporation is authorized to use as capital.
h. Shares: It explains how the capital stock is divided into shares, including the par value (if any) of each share. If some
shares don't have a specific value, it mentions that as well.
i. Subscription: It indicates that at least 25% of the authorized capital stock has been subscribed (promised by
shareholders) and at least 25% of that amount has been paid.
j. Treasurer: It identifies the Treasurer of the corporation, who is authorized to receive payments from subscribers.
k. Ownership Restriction: It includes a note that if the corporation is engaging in a business reserved for Filipino
citizens, the ownership cannot be transferred in a way that reduces Filipino ownership below the required
percentage.

Additional: The document is then signed by the incorporators and acknowledged by a Notary Public, along with the
Treasurer's affidavit confirming the capital subscription and payment.

d. Capital Requirement

Sec. 13. Amount of capital stock to be subscribed and paid for purposes of incorporation. — At least twenty-five percent (25%) of
the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least
twenty-five percent (25%) of the total subscription must be paid upon subscription, the balance to be payable on a date or dates
fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the
board of directors: Provided, however, That in no case shall the paid-up capital be less than five thousand pesos (P5.000.00). (n)

 At least 25% of the total amount of money you plan to use as the corporation's capital (the authorized capital
stock, as mentioned in the articles of incorporation) must be promised by people who want to be part of the
corporation. This is called "subscribing."
 Out of that 25%, at least 25% of the money that people promised (from the first step) must be actually
paid right away when they subscribe. This is the initial payment.
 The rest of the money that people promised (the remaining 75%) can be paid on a specific date or
dates mentioned in the contract of subscription (the agreement they sign to become part of the
corporation). If no date is specified, the corporation's board of directors can ask for this money when
needed.
 However, no matter what, the total amount of money already paid (the paid-up capital) can't be less than
5,000 pesos.
D. Classes of Corporation

a. Stock v Non-Stock (Sec. 3, RCC)

Sec. 3. Classes of corporations. — Corporations formed or organized under this Code may be stock or non-stock
corporations. Corporations which have capital stock divided into shares and are authorized to distribute to the holders of such
shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All other corporations are
non-stock corporations. (3a)*

Explanation: Stock corporations are for-profit businesses where people own and trade shares, while non-stock
corporations often have other purposes, like non-profit organizations or community groups.

a) Stock Corporations: These are regular businesses created to make money. They have something called
"shares" that represent ownership in the company. When these businesses make a profit, they can share
that profit with their shareholders, giving them money based on how many shares they own. So, stock
corporations are all about making a profit and sharing it with their owners.

b) Non-Stock Corporations: These are different. They don't have shares or pay dividends like stock
corporations. They exist for reasons other than making money, such as doing good deeds or supporting a
cause. You'll find non-stock corporations in areas like charity, religion, education, or community service.
They are not out to make profits for their members; instead, they aim to serve the public or a particular
purpose.

 Similar Rules: While stock and non-stock corporations have some differences, many of the rules that
apply to stock corporations also apply to non-stock ones, unless there are specific rules just for non-
stock corporations. So, the basic rules for creating and running a corporation are quite similar, whether
 it's for making money or serving a noble cause.

 Special Cases: Some types of corporations, like banks or close corporations, can only be organized as
stock corporations. Religious corporations are always non-stock because they're typically focused on a
religious or charitable mission rather than making money.

b. Created under RCC v. Special Charter (Sec. 4, RCC)

Sec. 4. Corporations created by special laws or charters.— Corporations created by special laws or charters shall be governed
primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this
Code, insofar as they are applicable, (n)*

Explanation: This section tells us that some corporations are created not under the general Corporation Code but by
special laws or specific charters made for them. These special laws or charters are like their unique rule books.
They follow those rules first and foremost. However, if the special laws or charters don't cover something, they
then turn to the Corporation Code to fill in the gaps. So, think of the special laws or charters as their main set of
rules, with the Corporation Code providing additional rules when needed.

Incorporation of a private corporation by a special act

Section 4 allows for the creation of private corporations through special laws or charters. However, there's a crucial
limitation: these corporations must be owned or controlled by the government, as stated in the Philippine
Constitution.

Why is this limitation in place? It serves a couple of important purposes:

1) To prevent special privileges: It ensures that certain groups or individuals don't receive exclusive
benefits or advantages. Instead, everyone should have equal opportunities to create similar
corporations.
2) To combat corruption: It also helps prevent corruption and bribery in the legislative process. If private
entities could be created without government ownership or control, it might lead to unfair practices or
influence over lawmakers.

Governing Law
1. Special Law or Charter Corporations: Corporations created by special laws or charters are primarily
governed by those specific laws or charters. They may also apply provisions from the Corporation Code
if they are not inconsistent with the special law or if the law expressly makes them applicable. For
example, the Philippine National Bank (PNB) has its own charter, and certain provisions of the
Corporation Code don't apply to it because its charter contains its rules.
2. Government-Owned or -Controlled Corporations: Officers and employees of government-owned or
- controlled corporations with original charters (created by special laws) are under the Civil Service.
This means they are subject to the Civil Service Law. On the other hand, those incorporated under
the general incorporation law, the Corporation Code, follow the rules outlined in the Labor Code.
3. Choice of Incorporation: A government-owned or -controlled corporation can choose to organize
itself under the provisions of the Corporation Code, rather than through a special law or charter. This
provides more flexibility and allows for easier amendments, such as increasing capitalization,
without requiring new legislation from Congress.
 Government as a member of a corporation.

1. Jurisdiction of SEC: The Securities and Exchange Commission (SEC) doesn't have authority over
corporations with an original charter or those created by special laws. However, the SEC can determine if a
corporation qualifies as a government-owned or -controlled corporation (GOCC) of this type.
2. Rights and Status: The government, when acting as a member in a corporation, does not exercise its
sovereignty but functions as a regular member or shareholder. The fact that the government may be a
major shareholder in a corporation does not automatically make it a public corporation. As a private
corporation, it holds no greater rights, powers, or privileges than any other corporation formed for a
similar purpose under the Corporation Code.

c. Public v. Private

 Public Corporations: These are established for the government and the general welfare of a specific part
of the state. They serve public or government-related functions and are often associated with the
administration of government affairs. An example would be a municipal or city government.
 Private Corporations: These are formed for private purposes, benefits, or specific ends that serve the
interests of individuals or private entities. They can be further divided into stock or non-stock corporations,
government- owned or -controlled corporations, or quasi-public corporations, depending on their
ownership and control structures.
 Government-Owned or - Controlled Corporations: These are private corporations in which the government
holds the majority of the stock. While the government has a significant stake, these corporations are not
considered public corporations because they are not primarily established for governing a specific part of
the state. They function as private businesses, subject to the rules governing private corporations.
Examples include the Government Service Insurance System, National Power Corporation, and Philippine
National Railways.

a) Quasi-Public Corporations: These are private corporations that have received a grant of franchise or
contract from the government to perform public duties, often in industries vital to the general public.
They operate for profit but provide essential services or goods that cannot be adequately supplied
through normal private businesses. They are also known as "public utilities" or "public service
corporations." Examples include electric, water, telephone, and transportation companies.

Additional: The key distinction is that quasi-public corporations, despite being privately owned, are authorized by
the government to provide services that are of public interest. They often have certain public powers, such as
eminent domain, to fulfill their public service obligations. This sets them apart from regular private corporations,
which primarily aim to benefit their stockholders.

d. De Jure v. De Facto

Sec. 20. 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 inquired 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, (n)

Explanation:
a) If a corporation believes in good faith that it has been correctly incorporated under the laws outlined in
the Corporation Code, its incorporation and its ability to use corporate powers will not be questioned in
private lawsuits. In other words, if a corporation genuinely thinks it's legitimate, it's treated as such in legal
proceedings.
b) The validity of its incorporation can be challenged only through a special legal process called a "quo
warranto proceeding." This is a legal action initiated by the Solicitor General, a government lawyer, to
investigate the legitimacy of the corporation.
In essence, this section ensures that in regular private lawsuits involving the corporation, its status as a
corporation will not be a point of dispute. Any challenges to its legitimacy must be made through the specific legal
procedure of a quo warranto proceeding led by the Solicitor General.

a) De Jure Corporation:A De Jure corporation is a corporation that has been created following all the
mandatory legal requirements set forth by the relevant statutes or laws.
This type of corporation has the legal right to exist, and its status as a corporation cannot be successfully challenged
by anyone, even the government, in a direct legal action aimed at questioning its status.

b) De Facto Corporation:A De Facto corporation, on the other hand, is a corporation that exists in
practice and operates as one but has not fully complied with all the legal requirements for
incorporation.

While it doesn't meet all the necessary legal criteria, it is treated as a corporation concerning interactions with
third parties. However, its status as a corporation may not be recognized by the government.

Requisite of de facto corporation

1. Valid Law: There must be a real and valid law in place that allows the creation of a corporation with
the powers assumed by the de facto corporation. In other words, there must be a legal framework
for such a corporation to exist.
2. Bona Fide Attempt: Those involved must genuinely attempt to organize a corporation following the
law. This means they're trying to create a corporation in good faith, even if they might not fully meet
all the legal requirements.
3. Actual Use of Corporate Powers: The de facto corporation must actually use or exercise the corporate
powers granted by law. This means they need to act as if they were a real corporation, engaging in
business activities or transactions in good faith.

e. Corporation by Estoppel

Sec. 21. Corporation by estoppel. — All persons who assume to act as a corporation knowing it to be without 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 it as a corporation or on any tort committed by it as
such, it shall not be allowed to use as a defense its lack of corporate personality. One who assumes an obligation to an ostensible
corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation, (n)

Explanation: If a group of people acts like a corporation, even though they aren't officially registered as one, and they
know they don't have the legal authority to be a corporation, they can be held personally responsible for any
debts, liabilities, or damages that occur as a result of their actions. In other words, they can't hide behind the claim
that they're not a real corporation to avoid legal consequences.

However, if this group, acting as a pretend corporation, gets into a legal dispute related to a business deal they
made or a wrongdoing they committed while pretending to be a corporation, they can't use the argument that
they're not a real corporation as a defense. They'll still be held accountable for their actions, even if they weren't a
legally recognized corporation. So, they can't escape their responsibilities by saying they weren't a real
corporation.

f. Domestic v. Foreign

Domestic Corporation: Think of this as a corporation that's like a local citizen. It's created and operates under the
laws of the Philippines. It's a homegrown business.

Foreign Corporation: Now, this is like a corporation from another country. It's not a local business; it's born and
 follows the laws of a different place. This also includes multinational corporations – they're like the world
travelers of the corporate world.

Resident vs. Non-Resident (for tax purposes): When it comes to taxes, a foreign corporation can be seen as a
resident or non-resident. If it acts in the Philippines like it's a local business, it's considered a resident for tax
purposes. But if it just has a presence here without fully acting like a local business, it's considered a non-resident
for tax purposes.

g. Aggregate v. Sole v. One Person Corporation

Corporation Aggregate:
 Imagine a corporation like a group of people (members or corporators) working together to run a company.
 According to the law mentioned, a corporation aggregate is any corporation with more than one
member. So, there are multiple people involved in making decisions and owning shares in the company.
 It takes at least five people to form a corporation
aggregate.

Corporation Sole:
 Now, think of a corporation sole as a special type of corporation, often associated with religious figures,
like a bishop.
 The key feature of a corporation sole is that it has only one member or corporator at a time, typically a
religious leader.
 This one member, like a bishop, can pass the responsibilities and ownership to their successors. So,
when one bishop retires or passes away, the next one takes over.
 This structure is unique and distinct from a corporation aggregate where you have multiple members.

Additional: Just because a corporation aggregate might temporarily have all its shares owned by one person, it
doesn't become a corporation sole. The shares can be sold or transferred to others, but during that time, the one
person and the corporation are often treated as the same entity.In simple terms, a corporation aggregate involves
many people in its ownership and decision-making, while a corporation sole has only one member at a time, often in
religious contexts, and that single member's position can be passed to others when they leave their role.

h. Close Corporation/Open Corporation

Close Corporation:
A close corporation is like a private club. It's limited to specific people or a select group, often family members or
close associates. These individuals are usually the only ones allowed to be stockholders or members of the
corporation.

Close corporations are not open to just anyone who wishes to become a
stockholder.

Open Corporation:
An open corporation, on the other hand, is open to the public. It's like a public event that anyone can attend if they
want to.In an open corporation, any person who wishes to become a stockholder or member can do so. There are
typically no restrictions on who can join.

i. Educational Corporation

Sec. 106. Incorporation. — Educational corporations shall be governed by special laws and by the general
provisions of this Code, (n)

Purpose: An educational corporation is set up with the main goal of offering a place for teaching and learning. It's all
about education.Typically, educational corporations have things like regular teachers (called a faculty), a well-
structured educational program (curriculum), and a group of students who attend regularly.They do these
educational activities at a specific place, like a school or college, where students come regularly for learning.

Laws Applicable
 Educational Corporations: These are special types of organizations that focus on education. They are
different from regular non-stock corporations created for educational purposes.
 Special Laws: Educational corporations have their own set of rules and regulations that apply
specifically to them. These special laws are the primary guidelines they follow.
 General Rules: In addition to the special laws, educational corporations also need to follow the
general rules outlined in the Corporation Code. These general rules are like the basic principles that all
corporations must follow.
 Stock vs. Non-Stock: Some educational corporations might be structured as stock corporations, which
means they have shares of stock and shareholders. If they are organized this way, they also need to follow
the rules that apply to stock corporations, especially when it comes to the number and term of directors
(the people who make important decisions for the corporation).

j. Religious Corporation

Sec. 109. Classes of religious corporation. — Religious corporations may be incorporated by one or more persons. Such corporations
may be classified into corporations sole and religious societies. Religious corporations shall be governed by this Chapter and by the
general provisions on non-stock corporations insofar as they may be applicable, (n)

 Religious Corporations: These are special organizations associated with religious purposes or groups.
 Incorporated by One or More Persons: Religious corporations can be created by either one person or a
group of people. It can be just one individual or several individuals working together to form the
organization.

Classes of Religious Corporations: There are two main types of religious corporations:

Corporations Sole: These are religious corporations led by a single person, like a bishop or a religious leader.

 Religious Societies: These are religious corporations with more than one person involved in their leadership
and activities.
 Governed by This Chapter: Religious corporations have their own specific rules and guidelines defined in this
chapter of the law.
 General Provisions on Non-Stock Corporations: Additionally, they must also follow the general rules that
apply to non-stock corporations, to the extent that these general rules are relevant to religious corporations.

E. Corporation as Distinguished from a Contract of Partnership:

1. Manner of Creation:
Partnership: It's created by an agreement between people. Basically, when a group decides to work together.
Corporation: It's established by law or the government, and it exists even without a specific agreement between
individuals.

2. Number of Incorporators:
Partnership: Can be set up by just two people.
Corporation: Generally requires at least five people (except for a special type called a corporation sole).

3. Commencement of Juridical Personality:

Partnership: Becomes official as soon as people agree and sign a partnership contract.
Corporation: Only gets its official status when it receives a certificate of incorporation from a government authority.

4. Powers:
Partnership: Can do anything as long as it's legal and doesn't go against good morals, public order, or public policy.
Corporation: Can only do what the law allows or what is implied by its existence.

5. Management:
Partnership: If not specified otherwise, every partner can make
decisions. Corporation: Decisions are usually made by a board of
directors or trustees.

6. Effect of Mismanagement:
Partnership: Partners can sue each other if someone mismanages.
Corporation: If someone on the board mismanages, the corporation must sue, not the individual members.

7. Right of Succession:
Partnership: Doesn't continue if a partner leaves.
Corporation: Can continue even if shareholders
change.

8. Liability to Third Persons:

Partnership: Partners are personally and often jointly responsible for the partnership's
debts. Corporation: Shareholders are only responsible up to the amount they invested.

9. Transferability of Interest:
Partnership: Partners need permission to transfer their interests.
Corporation: Shareholders can usually transfer shares without needing permission.

10. Term of Existence:

Partnership: Can be created for any length of time agreed upon by the
partners. Corporation: Typically has a limit of 50 years, but this can be
extended.

11. Firm Name:

Partnership: Limited partnerships must add "Ltd." to their name.
Corporation: Can choose any name that's not already in use.

12. Dissolution:
Partnership: Can be dissolved by the will of the partners.
Corporation: Can only be dissolved with the consent of the government.

13. Laws that Govern:

Partnership: Governed by the Civil Code.
Corporation: Governed by the Corporation
Code