zCHAPTER IV:

POWERS OF
CORPORATIONS
 z
Title IV treats general and special powers of the
corporation. A corporation is granted sufficient
powers to pursue its purpose. In addition, the law
vests it with “such other powers as may be
essential or necessary to carry out its purpose or
purposes as stated in the articles of incorporation.”
The approval by the Commission of any of the
corporation’s purpose or purposes carries with it
the grant by the state of essential or necessary
powers, although not specifically mentioned in law.
Unless otherwise provided in the Code, the board
exercises these corporate powers.
 z
The exercise of special powers affects
fundamental corporate relations. These refer
to those which require explicit board action
under the law, charter or bylaws. The law
generally requires consent or approval of
shareholders or members, and in proper
cases the Commission. In extreme cases,
dissenting shareholders may exercise their
appraisal right by surrendering and
demanding for payment the fair value of their
shares.
The board has the sole authority to
initiate the exercise of these special
power, subject to shareholders’ or
members’ approval. Despite such
approval, the board has the option
to abandon the exercise of such
powers.
 Changes introduced by the Code
z

 The Code recognized the Commission’s

policy of permitting corporations to
“enter into a partnership, joint venture
xxx or any other commercial agreement
with natural and juridical persons.” It
also lifted the prohibition against
domestic corporations from making
campaign or political contributions.
The law likewise incorporates the PCC
merger clearance requirement, when
applicable under the circumstances. In
relation to the increase or decrease in
capital stock, or incurring, creating or
increasing any bonded indebtedness, apart
from the requirement of prior approval of the
Commission and the PCC. The code requires
the filing of the application with the
Commission within six months from the date
of approval of the board of directors and
stockholders. This period may be extended
for justifiable reasons.
SEC. 35. Corporate Powers and Capacity. - Every
corporation incorporated under this Code has the power and
capacity:
 
a) To sue and be sued in its corporate name;
b) To have perpetual existence unless the certificate of
incorporation provides otherwise;
c) To adopt and use a corporate seal; 
d) To amend its articles of incorporation in accordance
with the provisions of this Code;
e) To adopt bylaws, not contrary to law, morals or public
policy, and to amend or repeal the same in accordance
with this Code;
f) In case-of-stock corporations, to issue or sell stocks
to subscribers and to sell treasury stocks in accordance
with the provisions of this Code: and to admit members to
the corporation if it be a nonstock corporation;
g) To purchase , receive, take or grant, hold, convey, sell, lease,
pledge, mortgage, and otherwise deal with such real and
personal property, including securities and bonds of other
corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to
the limitations prescribed by law and the Constitution;
h)  To enter into a partnership, joint venture, merger,
consolidation, or any other commercial agreement with natural
and juridical persons;
i) To make reasonable donations, including those for the public
welfare or for hospital, charitable, cultural, scientific, civic, or
similar purposes: Provided, That no foreign corporation shall
give donations in aid of any political party or candidate or for
purposes of partisan political activity;
j)   To establish pension, retirement, and other plans for the
benefit of its directors, trustees, officers, and employees; and
k) 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.
 As a person with separate juridical
personality and the capacity to enter into a
contract, a corporation may sue and be sued in
its corporate name, adopt and use a corporate
seal. It may deal with real and personal
properties, whether tangible or intangible. It
may enter into any commercial agreement with
natural and juridical persons. It may make
reasonable donations, including campaign or
political contributions. It may provide pension,
retirement, health, and other plans for the
benefit of its directors, trustees, officers, and
employees.
 
Power to enter into a partnership -
 
The general rule is that a corporation cannot enter into a
partnership with natural persons or other corporations. In
contrast, it is generally accepted that a corporation may
enter into a joint venture is in accordance with its corporate
purpose or purposes. This rule is based on the notion that in
a partnership the corporation would be bound by acts of
persons other than its own directors, trustees or officers.
However, over the years, this view became less popular.
Even the Commission opined that such view no longer
reflects the current practice in corporation law.
The Commission provided the conditions to be satisfied
in order that a corporation may enter into a
partnership:

(a)The authority to enter into a partnership relations is

expressly provided for in the articles of
incorporation;
(b)The business of the partnership is in line with the
purpose or purposes in the articles of incorporation;
(c)The articles of partnership provide that all partners
manage the partnership and stipulate that all of them
are jointly and severally liable for the obligations of
the partnership; and
(d)If its a foreign corporation, it must obtain a license
to do business in the Philippines.
 The Commission later opined that a
corporation could be a limited partner, instead of
a general partner. This means that it would be
bound only to the extent of its investment for the
acts of the other partners, unless the latter are
its own authorized agents and officers. The
justification for this opinion is in the Code itself
allowing a corporation to invest its funds in
another corporation. Such allowance does not
require that the investor-corporation be involved
in the management of the investee corporation.
Similarly, in a partnership, the partner-
corporation may abstain from participating in
partnership management and affairs.
 The Civil Code provisions on partnership are sources of
differing views on whether a corporation may be a partner.
For example, the liability of a partner is unlimited, insofar as
the creditors of the partnership are concerned. On the other
hand, corporate creditors may only look toward corporate
assets and properties. They may not claim from any of the
shareholders, excepting unpaid subscription that is
receivable in favor of the corporation. Further, a corporation
is only bound by the acts of its duly authorized directors,
officers or agents. A partnership is bound by the acts of a
partner, singly or jointly with other partners. In a partnership
and corporation, their partners and directors, with due
diligence and good faith. Otherwise, in the case of the
corporation, the liability of the director, officer, or agent
becomes personal. In the case of the partnership, the erring
partner may be liable to the other partners who exercise due
diligence, were in good faith and did not personally take part
nor was responsible for the impermissible act.
Power to enter into a joint venture -
 
A corporation may enter into a join
venture with another corporation,
provided
(a)it is sanctioned by its charter, and
(b)the venture is consistent with its
purpose or purposes.