Corpo -Dr.
Lim 07/10/24 But Participation should be no more than
RCC – added more sections on Penalties (New
section included 17 sections on One Person
Corporation, Visitorial powers, Implementation of
Electronic filing, Mandatory creation of arbitration
tribunal intra-corporate dispute) between corp and
BOD and Officers and Corp and stockholders if not,
RTC Commerisl wourt
Criminal cases ]]
Position is in the by-laws, u were dismissed –
If not, arbigfstion
More than 15 trustees in Non-stock
How many BOD in Stock?
SEC doesn’t have jurisdiction over party-list
application or registration, now COMELEC
RCC will apply and cover all existing (given 2 years
to comply) and to be created corporations
Profit belongs to the Corporation
Dividends to the stockholders
GR: Corporations are not allowed to acquire their
own shares.
If Stockholder wants a way out, he can’t go to
Corporation and return his shares.
WHAT HE CAN DO: Sell shares to other
One-Person Corporation
- His personal properties are
separate/segregated and cannot be attached
to satisfy debts from creditors
Corporators ( any 1 of the 4)
Incorporators maximum of 15– founders of the
Corp
BOD
Officers(employees with titles), employees
Stockholders
Non-stock and merged bank
- Can have more than 15 members
- Board of Investors – Stock Corporation
- Board of Trustees – Non-Stock Corporation
Can Foreigners as Incorporators/Directors
40% of the capital of the business
Source of Capital
-iInvestments/Selling shares/ inviting
investors
-Profit
-Loans
Incorporators will declare in SEC how much
money they are gonna get from the investing
public (called CAPITAL STOCK)
Ex: 5 Incorporators
Business: Import/Export
250k to 1.25m
Capital stock 500m (maximum amount the
corporation can get from the pubic (divide
into units
(Capital) money u intend to get from the
public divide by money flow
ACS = 500,000,000
#s = 50,000,000
PV = 10.00/pv
Par value – fixed price
Watered stocks – below par value
Premium shares – higher than par value
IF shares bought not from corporation
(purchaser) paid in full
IF shares bought directly from corporation at
par value (subscriber) can be on
installments
Stock Transfer Book – possession of a
certificate is not a stockholder. Bring those
certificates to the Corporate secretary for her
to cancel the prev names and list your name
to the STB (no need of DOAS and Deed of
Transfer/Deed of Assignment)
Perfection of Transfer as required by the
law: Endorsement and delivery ONLY
What if Dividends were issued but was
issued to name that previously owned, he is
a mere Trustee, the dividends are still yours.
AI – Articles of Incorporation
From the issuance of Certificate of
Incorporation (haha birth certificate of start
 within 5 years OTHERWISE AUTOMATIC
DISSOLVE (Doctrine of _____
25% subscribe & 25% paid up requirement
(still used in increasing capital stock)
Original agreement of the Incorporators (ung
nagtatag) – should put out money not
services (legwork/efforts)
Non-resident can be incorporators
Treasurer- should be a resident of the Phils
Subscribers – buying shares of original and directly
bought stocks from the Corporation
Consent from Stockholders (subscribers) even if
majority decided by BOD
OCS – Outstanding Capital Stock (subscribers only
not ALL, just those who hold big shares)
2/3 = 67% only those with big
Ex:
A has 20%
B has 40%
C has 1%
D has 1%
.
. What if Corporation wants a term (example: 20
. years) some want a limited term corporation so that
. by the end they can dissolve and liquidate
Just talk to A & B to reach majority of 51%
Subscription Balance (implied by the law) always
interest bearing
Corporate Names
- Cannot use international corporation
registered-names
- Lawyer name when dead cannot use it again
- Business name if owner died and the heirs
want to continue, put ‘New’ before the name
AI vs By-Laws
AI: original agreements, stipulations etc
By-laws: can come after AI. These are self-imposed
rules and regulations i.e. policies(stockholders
make) contains Arbitration agreement (takes effect
after 15 days) to resolve controversies, criminal
cases and interest of parties NOT INCLUDED
Must be notarized, principal office must be
identified (general city or address will suffice)
Failure to submit By-laws to SEC will result to De
Facto Corporation (SEC)
Corporation that has no by-laws is a De Facto
Corporation (can be dissolved by the SolGen via
Quo Warranto
Board decision is a corporate decision
Annual Stockholders Meeting – mandatory election
1 Year term of President
Powers are from By-Laws
3 Modes of Increasing Capital Stock
1. Increase Par Value - maintain #S
2. Maintain PV – Increase #S
3. Increase PV – Increase #S
Pro Life
Once incorporated automatic lifetime (perpetual)
existence (applied retroactively ex: incorporated in
2001, 30 years term, can now be extended despite
term)
What if despite RCC, and perpetual existence, but
still wanted 30 years and in the future actually
realized want to extend, how to extend:
Extension: Last work on it in 3 years of your
corporate life
What to do (apply Double Majority): BOD decide
and forward to (OCS) SH aka the subscribers for
them to approve then submit that they only want 20
years
If you don’t want, use Right of Appraisal (tell the
BOD) Sec. 80 – you want to demand the return of
your investment (when you don’t want the instance
your corporation is doing)
EXAMPLE:
BOD wants perpetual existence – approve
Notify ALL for special meeting but in calculation
51% majority OCS – approved also
Dr. Lim SH who attended the meeting– doesn’t
want perpetual existence “dissenting SH/shares”
Communicates her Right of Appraisal
While waiting for ROI, still considered an SH until
CANCELLED
Return of Capital – return as is
HOW MUCH CAN YOU DETERMINE THE BV
Total # of shares , net assets divided by No. of
outstanding common shares

In Close Corporation = RTC will determine the
right price is 3-man(?) month(?) committee in
exercising the right of appraisal
Dissolved – all properties dissolve, satisfy creditors,
if there is remaining, return of capital (as is), if there
is remaining (return of investments)
Lazarus Doctrine – dead corporation that wants to
revive
What can’t be revived – those who liquidated
already
Resume
Revoking of CI is costly
Subject to DST also when Reincorporates
Sole Proprietor registration is in DTI
Partnership and Corporation registration is in SEC
Business Name then on the side OPC (to serve as
warning to creditors)
Like Limited Partnership “Ltd.”
Incorporation Rule
Central Management Test-find out where the head
of office is located
Control Test if majority of investors
Nationalized activities – activities not allowed for
foreigners
Advertising companies – 30-70%
Shares of Stocks as Payment
Future services or non-existing = no
Previously incurred indebtedness = yes
Educational Non-stock
BOT
15/5 = 3
Determine how to change BOD when election
comes
Hold-over Directors – holds their position cannot
step down or asked by law to continue in their
positions until the next election bc those elected are
not eligible
Incorporating Directors (1st Set) the
founders/incorporators who want to sit as directors
for the first few years they can elect themselves and
they can issue Founder’s shares
First 5 years from incorporation, when Founder’s
shares are available, common shares cannot vote
Close Corporation – people in the corporation have
members/participants 19 and below
- Also called Family Corporation
- Preferred if odd number so that there is a tie-
breaker
Directors cannot remove their co-ranks/co-directors
Only SH
Directors can be removed with or without just cause
EXCEPT those who represent the minority
Voting Trust Agreement
- Good for 5 years you cannot vote only the
directors (right to vote is given to somebody else)
-You must surrender your certificate that will be
cancelled and issued in the name of the bank.
-Bank people will be able to vote
-Only voting right is surrendered, all other rights are
intact
-for loan
No proxy in Board Meeting only in meeting with
stockholders meeting
Corporate Treasurer – Chief Finance Officer
Corporate President - Chief Executive Officer
Compliance Officer – evaluates officers,
assessments
Can the Board fill up the vacancies?
Quorum = ½
Where to choose? From the list of stockholders
1 – died
2 – abroad
1 – abandoned
11-4 = 7 still a quorum
If you are a Director you cannot engage in a
business similar to the corporation
You cannot compete with your corporation. Not
applicable with SH
New seats in the board
Foreigner = can sit; foreign equity of 40%
Not disqualified. Only excluded in schools
Person found RSC or Insider’s Trading etc =
disqualified
When to fill up vacancies = 45 days
Self Dealing Directors = you sell land to
corporation but needs to prove your presence is not
necessary or not needed to approve the contract and
the contract is transparent, fair, and reasonable
When to know contract SDD entered is valid?
“Ex-officio director” no functions but can gather or
still influential
Composition of Board (engaged in public interest)
20% of 15 = 3 independent
Material Contract to be approved (2/3) involving
real property: majority of the independent directors
should approve, if not majority, cannot be approved
Emergency Board
Example 11 directors
During the board meeting no quorum. More than ½
did not attend = no business
New Powers of the Corporation
- Corporations now can enter into contracts
and partnerships with juridical and natural
persons
- Allowed to donate to politicians, to support
partisan activities (EXC FOREIGN CORPS)
To protect minority SH
- Appointing independent directors
- Appointing compliance officers
One -Person Corporation
New corporation can it be registered as OPC? Yes
Existing? Convert
OPC
-doesn’t have a director
-owner can be president and treasurer at the same
time but if he is to be treasurer, must secure a bond
-but cannot be president and secretary
- but cannot be a corporation vested with public
interest because you’re only one cannot have
independent directors
- cannot be formed from persons selling profession
or services
-any amount of capital
- easier for small-medium business, agility you can
run your business on your own terms, limited
liabilities, separate properties, can decide on your
own pace
-limited capital (biggest disadvantages)
-limited credit, higher taxes
-more reportorial requirement
-in case of insolvency, if did not separate personal
properties can be solidarily liable
- Dr. Lim, if I were to choose I’d prefer Close
Corporation “two heads are better than 1”
- non-stock, non-chartered GOCCs (created by
Congress, no CI, no AI, not within the jurisdiction
of the SEC) cannot convert to OPC
READ: Distinction of Corporation vs Partnership
Doctrine of Piercing the Veil of Corporate Entity
- We will disregard the personality of the
corporation
SP (Sole Proprietor)
X HARDWARE STORE
- 8 employees
- Went to LA
- Awarded by LA
- X Hardware transferred to Y Corporation
their assets to prevent 8 employee’s
execution of judgment
- Y is only covering X’s liability
- Only the Court has the power to pierce
through the veil
Outsider Reverse Piercing
Creditors hopes
Insider Piercing
Nell Doctrine
X sells his store to B
Does not mean B also buys the credits of X
Only happens in Merger. This is not merger, only
buy and sell (liability isn’t
included/absorbed/transferred) exc in the purchaser
expressly/impliedly assume
Business Enterprise Transfer
When the buying corp is a mere continuation of the
selling corp, then it will be liable
Theory of General Capacity
Aka (Theory of Separate Capacity) everything is
prohibited unless permitted
Like in Corpo Law, application in SEC, stated that
business is import export business, cannot do other
business (trading/ real estate etc)
If you want to change business, amend AI; get all
consent and other formalities
AI should “tumutugma” sa actual business mo
Corporation does not have mobility because limited
in jurisdiction (where head office is located)
Stated Capital
No par value price stated at the time they were sold
(agreed upon by SH)
Legal capital
All the money from par value shares
Corporation by Estoppel
-never registered in the SEC
Liability if you joing fake corporation – liable as a
General Partner ( all your properties will be
attached to answer for debts)
Ultra Vires Act
-actions, transactions, that were undertaken by a
corporation that were not in the AI (not illegal, but
corp is not allowed to enter it because it was not
stated in the AI) therefore are VOID
Ex: registered in the SEC as import/export but does
realty business, realty business transactions are
ULTRA VIRES ACT and therefore VOIDx
Doctrine of Loyalty of Directors
-obedience
-loyalty
-diligence
Best Judgment Rule
-Director who acted in good faith is not liable in
case of mistakes/errors in the exercise of judgment
in the corporation
Wrong decision is not bad faith
BAR ZONE: Acquiring secret profit
Assume personal liability
Grossly negligent in duty as BOD
Director dismissing employees in bad faith
(ABSOLUTE) Pre-emptive Right of Stockholder
Everytime the corporation issues new shares, SH
has 30 days to acquire offer
When is a SH not allowed to exercise Pre-emptive
rights
- When PAID-W (mnemonics)
- Pre-emptive Right
- Re emptive right is denied in the Articles of
Incorporation
- IPO initial public offering of the
Government shares that
- Elements of existing Debts
- Waive/ surrender of right
Ex: 500, 000,000.00
Law said 33 ½% standing order should set aside to
sell at par value of for ordinary small investors to
buy
(not available for existing SH)
Every December corporations IPO (original shares
of corporation for sale to non SH at par value)
This December Jollibee might sell IPOs
Dr. Lim: buy stocks don’t put your money in the
bank
Cumulative Voting
-guarantees minority voting (representation)
Derivative Suit (Corporation X vs the BOD)
- Class suit Complainant is the Corporation
(filed by the aggrieved complaining SH
(called “Nominal Party” they should be
stockholder of record to have personality to
file) vs BOD
- SH are prejudiced by the acts of BOD
- Requisuites: 1 corporation is damaged
- 2 refusal to act upon it by the BOD after SH
complained
- SH must show there was exhaustion of intra-
corporate remedies
Representative Suit
- Election time
Voting:
Cumulative
Straight
What actions of the Board will require the # of
majority concurring votes
Can a person buy stocks/registered in the name of a
minor or an unborn child? YES provided Legal
Guardian is identified

Shares of Stocks are documents of title (documents
that have value)
First Option Clause
- Right of first refusal
- Right of a corp to buy the shares of a selling
corporation
IPO - SH no Pre-emptive rights
IN CLOSE CORPORATION
Buy-Sell Agreement
Someone died (member) in the corporation, can be
stipulated that his shares can be bought by the
Corporation or other members
Cross Purchase Plan
Deceased’s shares can be sold outside (to third
persons) because there is no stipulation
Doctrine of Individuality of Subscription
Upon the creation of the corporation the
individuality of the incorporators
Limited Liability
Doctrine of Equality of Shares
All shares issued by the corporation are deemed
Equal in rights, libilities, and privileges
Trust Fund Doctrine (Sec 66 & 139)
In 66:
In 139: no corporate property be in the name of a
private person, only keeper of the property, held in
trust only, you have an obligation to return the
property
MERE INVESTOR – NOT A CREDITOR
Kinds of Shares of Stocks
1. Common
2. Preferred – shares with special privileges
Ex: Preferred: 3% preferred meaning upon
distribution of dividend, you are entitled to
3% more (special advantage)1
Residue
First to be paid = preferred sh
Non-voting SH (why? Not all privileges are given)
“equalize the playing field”
Preferred:
1 Participating – paid twice (in your capacity as
Preferred and in your capacity as common SH)
2 Cummulative
When corporation declares dividends, all the years u
didn’t get dividends, you will be given
Treasury Shares
-was reacquired by the corporation in 1 way or the
other (SH borrowed money from corp and when
debt matured, SH asked the BOD if he can pay
using so the corp calls it “treasury shares”
Not non-par value when was reacquired bc the first
time they were sold they already were sold at par
value so when they were reacquired by the corp,
and they eventually sell it again no need to sell them
at par value
Redeemable Shares
-best shares bc they guarantee the return of your
investments along with all your other rights
-corporation who wants to maintain redeemable
shares must maintain a sinking fund
-when it is time to redeem surrender your shares
When?
When redeeming those shares will cause insolvency
to the company
Doctrine of Corporate Negligence
Surplus Profit
20M
-
-
-
-
Earmarked what to be paid
What’s left
Stock Dividends
There was surplus profit, buy unissued shares
(must be present), that’s stock dividends to be
distributed
Voting Shares =
Subscription Contract – still a letter of intent, for
approval
Can be for installment
SC – BOD
300,000 (per value)
100 000 (paid up cap)
P 200 000.00 (subscription balance) where
corporations get money to pay credit, interest-
bearing, never waived,(Quason doctrine) are
indivisible payable in whole, contracts if no interest
stipulation written, cannot be paid
Dividends are not allowed to be used for payment of
subscription balance (Dexter Doctrine) bc dividends
are not guaranteed, there’s always a possibility of
loss
Option contract
Call – formal demand to pay subscription balances,
when you receive a call, you have to settle your
balance from 30 days
Who can call? Creditors (given the power to make a
call) not BOD bc they also might have
What if you cannot pay?
Declared delinquent ( should be delinquent) once
declared, can be sold to the public [public sale of
shares of sticks] (price is original)
Highest Bidder – person who is able to meet the
floor price and is willing to get the least shares
Failure of Bid – when does the corporation bid
when there is money in the UREA account
Tender Offer (in a corporate setup)
- Used in public corporations
- If u want to buy within 15%
- Intend to buy within a period of 12 mos,
more than 30% shares
- No percentile, 1If you reach 51%
-
Public Corporation
- Owned by the government, your shares can
be bought from the exchanges
- Listed in the Exchanges
- Assets if added together amount to 50m
above
- 250 Investors needed ex 500 SH (where 200
investors have 100 shares)
BANKING
Bank Reserves – when you print money, you don’t
just print, you need to have gold bouillons and or
treasury certificates to prove to IBA ( international
banking associations) they they can support
whatever money they want to print
Example: 1php for every 1thousand
BSP – prescribes interest rates
Transaction Discounting – buying checks at
discounted price; subject to tax
Bangin sementeryo
What if you have 1.2m
PDIC insured 500,000.00 ( 2 years to claim)
You get back 500,000.00
700,000.00 (excess) you file your personal claim in
the Liquidation court
Banking Laws
Letters of Credits – commercial transactions that
will facilitate the payment for buyers not in the
same place, remedy
Notifying Bank – asks the seller if he has the
request of the buyer
Opening Bank – local bank
Seller didn’t have dyes buyer wanted so he resorted
to
defect in the goods purchased
Strict Compliance Rule
If the instructions of the buyer was followed, buyer
has to pay strictly
Independence Principle Rule
Opening Bank and Seller no privy of relation
Banks can only hold foreclosed properties up to 5
years. Beyond that they are obliged to pay the taxes.
Taxable property to the bank
Rural Banks – no foreign equity
Bc involved in nationalized activities
Foreign Banks may now operate in the country
Ex: Bank of China, Maybank (Malaysian) 100%
foreign owned
Can Banks escalate interest rates without your
notification? Yes. Provided they also lower it when
the interests are low

Banks can automatically withdraw in payment of

maturing debts

When the bank closes, and you deposited money,

you cant withdraw, the ff cannot be filed:
Estafa
Breach of contract
Impairment clause
Petition for mandamus to return the money

Doesn’t apply in banks closing

Bailor-Bailee Relationship
Relationship when u deposit a safety box In the
bank

Negotiated Order of Withdrawal Account

Checking account with interest

DOSRI Group
Total of unencumbered deposit (where? Anywhere
even other bank) + the book value of your paid up
capital

AMLA
One-time more than Php 500,000.00 deposit
Suspicious deposit- should answer within 72h
CA – freezes account
Banks never ask information or send information
via cellphone

SEC- Any question about Shares of stocks

All shares should be issued by the corporation
without registering, criminal liability file SEC
Failure is not permanent
Only when u quit