COMMERCIAL LAW Corporation vs.

Partnership a Partnership is a formation of 2 or more persons engaged in some kind of business for purposes of distribution of shares although it depends to the articles of partnership there may be some other agreements by and between among them a Corporation is formed by five or at least more than 5 but not more than 15 incorporators there may be other persons who may participate in the formation of the corporation it could be more than 15 therefore being 30 who may form a corporation but only the 15 shall sign the AIO. Well the rest may become a stockholders or subscribers although they are considered as stockholders. Legal personality DOCTRINE OF LEGAL FICTION : applicable to partnership and corporation Corporation has separate and distinct personality from its officers and etc. A partnership has also a separate and distinct personality but this is limited The partners shall be liable only to the extent of their contribution to the common fund. Perpetual existence- it shall exist despite the designation of officers or stockholders. Withdrawal and designation shall dissolve the partnership.

Partnership- legal person; there are limitations. GENERAL RULE: 3rd persons can only proceed against the common fund EXCEPTIONS: 3rd persons can also proceed against the personal funds of a partner in the event that the common fund has been exhausted As a partner, you have to form legally, officially the articles of partnership Corporation: formal Advantages would depend on the kind of business that an individual have Small time business- Partnership is better Minimum Paid up capital P5k ; the authorized and subscribed capital would be the same

Q: Which is better Partnership or Corporation? It depends on the kind of business that the clients would engage to and the amount of capital. In partnership, be careful with your partners. When a partner withdraws or dies the partnership is dissolved unlike in the Corporation In partnership there is no fixed amount of contributions. In a corporation, as long as you subscribe to the capital stocks you are considered as an INCORPORATOR JOINT VENTURE VS CORPORATION VS PARTNERSHIP 1. JOINT VENTURES: also a contract 2 or more persons ( includes legal personalities )

GENERAL PRINCIPLES

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2. CORPORATION: natural persons are the only incorporators EXCEPT: Rural banks, domestic banks, incorporators of rural banks, cooperatives 3. PARTNERSHIPS: only natural persons otherwise it would become a joint venture NON PROFIT VS PROFIT Rule: any profit earned by a corporation (non profit) shall be used to the furtherance of the objective of a corporation. There are no incomes or dividends. Use all profits before declaration of income or dividends

FORMATION OF A CORPORATION General law: BP68 Private corporations: it is an artificial being; indivisible; created by operation of a general law having the powers of succession PERPETUAL: it is endless, regardless of the death, withdrawal or incapacity the corporation still exists Right of succession, powers, attributes &properties Once the SEC approves the articles of incorporation it becomes a LEGAL PERSON entitled to powers and rights Powers &rights are incidental or implied from its creation (rights under the constitution) DOCTRINE OF CONCESSION It is the SEC that gives you the right to exists

Once the SEC issues the certificate of incorporation, it is considered as an acceptance as a legal person That corporation will be liable for everything as a legal person, an individual cant proceed against the incorporators, stockholders & etc. for the acts of the corporation DOCTRINE OF APPARENT AUTHORITY The corporation that one you are dealing with shall be liable to the acts of such individual Any act, transaction made by the individual representing the corporation has that authority to deal with other persons DOCTRINE OF BUSINESS JUDGMENT RULE An individual cant be discussing or transacting with others if that individual has not have such apparent authority The judgment of such person binds the corporation Even if the that person acted outside the scope of his authority, if one has led to believe that he is representing the corporation, there is no fraud and the corporation benefited from the transaction, such transaction has no approval

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from the board; in good faith- the corporation shall be deemed liable and one cant proceed against such individual representing the corporation DOCTRINE OF PIERCING THE CORPORATE VEIL The person representing the corporation acted outside his scope of authority PURPOSE: to make such person liable for his own acts not the corporation Only the courts can pierce the corporate veil 1. When that corporation is used as a dummy to transact certain business using the name of the corporation 2. To commit fraud or illegal acts 3. To justify a wrong or any crime by using the corporation 4. Used the corporation as an alter ego 5. Used as a shield to make such persons not liable for their own unlawful acts GENERAL RULE: the corporation is always liable DOCTRINE OF CORPORATE OPPORTUNITY Where officers or board is presumed to be wealthy, you have the tendency to seize certain

opportunities that belong to the corporation Any profit or income derived therefrom shall be refunded to the corporation as a TRUST FUND for and in behalf of a corporation UNLESS it is ratified Q: What is the nationality of the Corporation? PLACE OF INCORPORATION TEST as a general rule RECIPROCITY RULE Foreign corporation is authorized to engage in trade or business here in the Philippines provided that they secure a license from the SEC and has complied with the requirements provided for by lawFOREIGN NATIONALITY GRANDFATHER RULE CONTROL TEST Improvement of grand father rule When the nationality of the investing corporation is a foreign, the investee is controlled by Filipinos, the investor foreign stockholders, the investing corporation it follows the nationality of foreign investing corporation

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For purposes of computation only, if there is a compliance with the constitution or the foreign investment act However if the investing corporation being foreign, place of incorporation is in another country, controlled by Filipino stockholders, the nationality of such company would be Filipino nationality Even the constitution in so far as businesses of public utilities are concerned, to operate such you must be a Filipino citizen or a corporation, partnership or association with 60-40% capital 60%- Filipino; 40%- foreign For purposes of determining the capital equity requirement, under the FIC, there is such thing as Foreign Investments Negative List Foreign Investments Negative list- restricted for the foreign corporation to engage into as an exception to the 60/40

respective corporations regardless the purchase, transfer or assignment of the shares or even in sequestration cases Sequestration of the majority shares of stocks used to elect officers or board of directors however as a Conservator- you cant use the shares of stocks to sit in the board Example: PCGG in a later decision, little by little.

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(NOTE: GAMBOA CASE 2013) DIFFERENT CLASSIFICATIONS OF CORPORATIONS 1. PRIVATE CORPORATION Formed under the general law BP68 2. PUBLIC CORPORATION Formed by congress, special law Where a public corporation buys a private corporation or vice versa, it does not change the nationality of the

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