Академический Документы
Профессиональный Документы
Культура Документы
Corporation Code
Maria Zarah Villanueva - Castro
1. Uniformity Consequences/Implications of
Separate Personality:
2. To avoid corruption
1. It is entitled to own properties in
General Rule: Congress is prohibited to its own name and its properties
enact a law directly forming a private are not the properties of its
corporation. stockholders, directors and
Exception: GOCC may be created by officers.
special charter.
Cases: Magsaysay-Labrador v
*GOCC is a private corporation with regard CA; Sulo ng Bayan v Araneta
to function and in the meantime a public
corporation with regard to ownership. *The interest of the stockholders
over the properties of the
Twin Conditions must be present in corporation is merely inchoate.
forming a GOCC:
1. Interest in the common good *Merely inchoate because there
2. Subject to the test of economic viability are still condition precedents
- Means can survive alone in the before the shareholders get their
market; can generate income which share, viz, in Asset, there are
they can use for their operating dissolution and satisfaction of
expenses claims; in profit-sharing, there are
unrestricted retained earnings
CONCEPT AND ATTRIBUTES OF A and declaration by the Board of
CORPORATION: Directors.
A. Statutory definition of a Corporation 2. It can incur obligations and its
obligations are not the obligations
1
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
3
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
for the existence of a de facto directors can be elected either directly or indirectly
corporation. by such other corporation. It is always controlled.
Requisites:
1. The existence of a valid law under Open Corporation – one which is open to any
which it may be incorporated; person who may wish to become a stockholder or
2. An attempt in good faith to incorporate; member thereto.
3. Use of corporate powers; Close Corporation – those whose shares of stock
4. Filing of the Articles of Incorporation; are held by limited number of persons like the family
5. Subsequent compliance with the or other closely knit group. (Sec. 96)
requirement of law.
*In both corporations, there must be a FORMATION AND ORGANIZATION OF A
certificate of registration issued. PRIVATE CORPORATION:
5
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
*The phrase “Ang Mga Kaanib” are *Only one primary purpose. Primary
words merely descriptive of membership purpose defines the business activities of
while the phrase “Sa Bansang Pilipinas” the corporation. It is the ordinary course
are merely descriptive of the place. of business of the corporation.
As a rule, generic name or descriptive *In case the primary purpose is not viable
word may be used as a corporate name. then secondary purpose may be used.
• Principal Office
6
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
*The principal place of business may back to the date of the passage of the
determine the venue of court cases resolution of the stockholders to extend
involving corporations. It may also the life of the corporation. However, the
determine if service of summons and doctrine of relations applies if the failure
notices was properly made. It is also to file the application for existence within
important for tax purposes (local the term of the corporation is due to
taxation). neglect of the officer with whom the
certificate is required to be filed or to
*The SEC requires the exact address to wrongful refusal on is part to receive it.
be indicated in the Articles of
Incorporation. *The delay in submitting the application
for extension is justifiable.
*It is the residence of the corporation. It
is where the corporation maintains its Keywords:
books and records and where normally
the bulk of its business is being 1. Excusable delay;
conducted or undertaken. 2. Beyond the control of the corporation
*For personal action, venue is the (insuperable intervening causes)
residence.
• Incorporators
• Term of Existence
*Once an incorporator always an
*A corporation has a maximum term of incorporator. (Fait accompli – an
50 years. It may be extended for a period accomplished fact which cannot be
not exceeding 50 years in any single altered)
instance. *They are the signatories to the Articles
As a rule, no extension can be made of Incorporation.
earlier than 5 years prior to the expiration *They are originally forming the
of the term. corporation
*No limitations regarding number of Q: What is the reason behind the phrase
extension can apply. that an incorporator is not always a
Reason: To compel the stockholders to corporator?
meet the corporation’s term. A: To be an incorporator it is not
Exception: If for compelling reasons, necessary to own a share unlike as a
earlier extension will be allowed. corporator.
As a rule, after the term has expired, no *There is no citizen requirement but
more extensions be allowed or special laws may require otherwise.
entertained by the SEC.
*Majority must be a resident of the
Reason: No more period to extend. Philippines.
*The Board of Directors is the governing Subscribed Capital – that portion of the
body in a stock corporation while Board authorized capital stock that is covered
of Trustees is the governing body in a by subscription agreements whether fully
non-stock corporation. paid or not.
*They exercise the powers of the Paid-Up Capital – the portion of the
corporation. authorized capital stock which has been
subscribed and actually paid.
Qualifications:
Outstanding Capital Stock – the total
1. Every director must own at least one shares of stock issued to subscribers or
(1) share of the capital stock; stockholders, whether or not fully or
partially paid except treasury shares so
2. Majority of the directors or trustees
long as there is a binding subscription
must be residents of the Philippines.
agreement.
*Any director who ceases to be the
owner of at least one share of the capital • Shares of stock
stock of the corporation of which he is a
Q: Why shares of stock?
director shall thereby cease to be a
director. A: Because there is a share on the
capitalization.
*Trustees of non-stock corporations must
be members thereof. Economic Value:
*Initial directors/trustees shall hold office 1. expectancy on the share in the profits
for one year until their successors are
elected and qualified. 2. expectancy on the share of assets in
case of dissolution/liquidation.
• Capitalization
Political Value:
Section 14(8) states that: “If it be a stock
corporation, the amount of its authorized 1. vote
capital stock in lawful money of the 2. control in the management of the
Philippines, the number of shares into corporation.
which it is divided, and in case the share
are par value shares, the par value of Doctrine of Equality of Shares –
each, the names, nationalities and “Except as otherwise provided in the
residences of the original subscribers, articles of incorporation and stated in the
and the amount subscribed and paid by certificate of stock, each share shall be
each on his subscription, and if some or equal in all respects to every other
all of the shares are without par value, share.”
such fact must be stated.”
- Provides that where the Article of
*It is required that at least 25% of the Incorporation do not provide for any
subscribed capital must be paid and in distinction of the shares of stock, all
no case may be paid-up capital be less shares issued by the corporation are
than P5,000. presumed to be equal and enjoy the
same rights and privileges and are also
Authorized Capital Stock – the amount subject to the same liabilities.
fixed in the articles of incorporation to be
subscribed and paid by the stockholders Classes of Shares:
of the corporation.
1. Par Value Share – shares that have
*Shows the total number of shares a nominal value in the certificate of
stock.
8
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
9
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
10
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
*Retired thus can no longer be re- General Rule: 25% must be subscribed
issued. and 25% must be paid.
*They are not entitled to dividends. Exception: If the law provides otherwise,
i.e., special laws.
*They are not entitled to voting rights.
Rationale: to prevent abuse by the
management.
C. Grounds for rejection of the Articles of
*These shares may again be Incorporation
disposed of for a reasonable price
fixed by the Board of Directors. 1. The articles of incorporation or any
amendment thereto is not substantially in
9. Founders’ Shares – classified as accordance with the form prescribed
such in the articles of incorporation herein;
may be given certain rights and
privileges not enjoyed by the owners 2. The purpose or purposes of the
of other stocks, provided that where corporation are patently unconstitutional,
the exclusive right to vote and be illegal, immoral, or contrary to
voted for in the election of directors is government rules and regulations;
granted, it must be for the limited 3. The Treasurer’s Affidavit concerning the
period not to exceed 5 years subject amount of capital stock subscribed
to the approval of the SEC. The 5 and/or paid is false;
year period shall commence from the
date of the approval by the SEC. 4. The percentage of ownership of the
capital stock to be owned by citizens of
• Treasurer’s affidavit the Philippines has not been complied
with as required by existing laws or the
*The SEC shall not accept the Articles of
Constitution.
Incorporation of any stock corporation
unless accompanied by a sworn Dual Franchise Requirement: No articles of
statement of the Treasurer elected by the incorporation or amendment to articles of
subscribers showing that at least 25% of incorporation of banks, banking and quasi-
the authorized capital stock of the banking institutions, building and loan
corporation has been subscribed, and at associations, trust companies and other
least 25% of the total subscription has financial intermediaries, insurance
been fully paid to him in actual cash companies, public utilities, educational
and/or in property the fair valuation of institutions, and other corporations governed
which is equal to at least 25% of the said by special laws shall be accepted or
subscription, such paid up capital being approved by the Commission unless
not less than P5,000. accompanied by a favourable
recommendation of the appropriate
*If the Treasurer’s affidavit is false such
government agency to the effect that such
act is tantamount to fraud. (PD 902-A)
articles or amendment is in accordance with
*Fraud on the part of the corporation is a law.
ground for revocation or suspension of
D. Commencement of Corporate Existence
license depending upon the extent of the
violation committed. Sec. 19 of the Corporation Code states
that “ A private corporation formed or
*If there’s no Treasurer’s Affidavit, the
organized under this Code commences to
first ground shall apply, i. e.,
have corporate existence and juridical
noncompliance with the minimum
personality and is deemed incorporated from
requirement.
the date the SEC issues a certificate of
11
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
incorporation under its official seal; and commenced the transaction of its business
thereupon the incorporators, but subsequently becomes continuously
stockholders/members and their successors inoperative for a period of at least 5 years,
shall constitute a body politic and corporate the same shall be a ground for the
under the name stated in the articles of suspension or revocation of its corporate
incorporation for the period of time franchise or certificate of incorporation. This
mentioned therein, unless said period is provision shall not apply if the failure to
extended or the corporation is sooner organize, commence the transaction of its
dissolved in accordance with law.” businesses or the construction of its works,
or to continuously operate is due to causes
*For purposes of determining whether a beyond the control of the corporation as may
corporation enjoys the status of a de facto be determined by the SEC.”
corporation, it must have been at least
issued a certificate of registration. *The period must be counted from the
issuance of the Certificate of Incorporation.
who shall hold office for one year until cause losses to the corporation or
their successors are elected and decrease the profits of a department.
qualified.”
*Great respect is accorded to the
Powers of the Board of Directors: decisions of the Board of
Directors/Trustees.
1. Corporate Powers;
*The directors are not liable to the
2. Manage the Corporation; and stockholders in performing such acts.
3. Control over and hold the properties of • Qualifications of the Board Members
the Corporation.
Sec. 23 of the Corporation Code states
*Board of Directors/Trustees is the
that: “Every director must have at least
statutory representative of the
one share of the capital stock of the
corporation.
corporation of which he is a director,
General Rule: All corporate powers which share shall stand in his name on
emanate from the Board of the books of the corporation. Any director
Directors/Trustees. who ceases to be the owner of at least
one share of the capital stock of the
Exception: Unless otherwise provided in corporation of which he is a director shall
this Code. (Limiting Clause) thereby cease to be a director. Trustees
of non-stock corporations must be
The limiting clause means that there members thereof. A majority of the
are certain corporate matters that cannot directors or trustees of all corporations
be done by the Board by reason that organized under this Code must be
such matters fall upon the shareholders; residents of the Philippines.”
or corporate matters that cannot be
resolved by the Board alone, i.e., it must *In order to be eligible as director, what is
be done with the approval of the material is the legal title to and not
shareholders. beneficial title or ownership of the stocks
appearing on the books of the
• Business Judgment Rule corporation.
Business Judgment Rule – questions *The directors/trustees must be natural
of policy or management are left solely to persons.
the honest decision of officers and
directors of a corporation and the courts *They must also be of legal age.
are without authority to substitute their
*He must possess other qualifications as
judgment for the judgment of the board of
may be prescribed in the by-laws of the
directors; the board is the business
corporation.
manager of the corporation and so long
as it acts in good faith its orders are not *Under Sec. 27 of the Corporation
reviewable by the courts or the SEC. Code: “No person convicted by final
judgment of an offense punishable by
- A resolution or transaction pursued
imprisonment for a period exceeding 6
within the corporate powers and
years, or a violation of this Code
business operations of the corporation,
committed within 5 years prior to the date
and passed in good faith by the board of
of his election or appointment, shall
directors/trustee, is valid and binding,
qualify as a director, trustee or officer of
and generally the courts have no
any corporation.”
authority to review the same and
substitute their own judgment, even Reason: The position is based on trust
when the exercise of such power may and confidence.
13
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
elected. X has 50 votes (10x5) available *The one year period does not apply to
to him. X may opt to concentrate all his directors initially elected for purposes of
50 votes to a particular candidate. incorporation.
15
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
corporation may be removed from office 3. The removal must be by a vote of the
by a vote of the stockholders holding or stockholders representing 2/3
representing at least 2/3 of the outstanding capital stock or 2/3 of
outstanding capital stock, or if the members;
corporation be a non-stock corporation,
by a vote of at least 2/3 of the members 4. The director may be removed with or
entitled to vote: Provided, that such without cause unless he was elected by
removal shall take place either at a the minority, in which case, it is required
regular meeting of the corporation or at a that there is cause for removal.
special meeting called for the purpose, Reason: The functions of directors are
and in either case, after previous notice fiduciary in nature.
to stockholders or members of the
corporation of the intention to propose Requisites for the removal of minority
such removal at the meeting. A special directors are:
meeting of the stockholders or members
of a corporation for the purpose of 1. Justifiable cause;
removal of directors or trustees, or any of
2. Satisfaction of the voting
them, must be called by the secretary on
requirements, i.e., 2/3 of OCS or
order of the president or on the written
members.
demand of the stockholders representing
or holding at least a majority of the *It is the secretary of the corporation
outstanding capital stock, or, if it be a upon order of the president or in case
non-stock corporation, on the written there is no secretary, stockholder
demand of a majority of the members representing majority of the outstanding
entitled to vote. Should the secretary fail capital stocks or member signing the
or refuse to call the special meeting upon demand who may call a meeting for the
such demand or fail or refuse to give the purpose of removal.
notice, or if there is no secretary, the call
for the meeting may be addressed • Vacancies in the Board
directly to the stockholders or members
Sec. 29 of the Corporation Code
by any stockholder or member of the
provides that: “Any vacancy occurring in
corporation signing the demand. Notice
the board of directors or trustees other
of the time and place of such meeting, as
than by removal by the stockholders or
well as of the intention to propose such
members or by expiration of term, may
removal, must be given by publication or
be filled by the vote of at least a majority
by written notice prescribed in this Code.
of the remaining directors or trustees, if
Removal may be with or without cause:
still constituting a quorum; otherwise,
Provided, that removal without cause
said vacancies must be filled by the
may not be used to deprive minority
stockholders in a regular or special
stockholders or members of the right of
meeting called for that purpose. A
representation to which they may be
director or trustee so elected to fill a
entitled under Sec. 24 of this Code.”
vacancy shall be elected only or the
Requisites: unexpired term of his predecessor in
office. A directorship or trusteeship to be
1. It must take place either at a regular filled by reason of an increase in the
meeting or special meeting of the number of directors or trustees shall be
stockholders or members called for the filled only by an election at a regular or at
purpose; a special meeting of stockholders or
members duly called for the purpose, or
2. There must be previous notice to the
in the same meeting authorizing the
stockholders or member of the intention
to remove;
16
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
17
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
board of directors. Where any of the first 4. In case of an officer, the contract has
two conditions set forth in the preceding been previously authorized by the board
paragraph is absent, in the case of a of directors.
contract with a director or trustee, such
contract may be ratified by the vote of the Reason: A’s presence in the board
stockholders representing at least 2/3 of meeting might affect the status of the
the outstanding capital stock or of at contract.
least 2/3 of the members in a meeting
called for the purpose: Provided, That full
disclosure of the adverse interest of the Self-Dealing Directors/Officers –
directors or trustees involved is made at directors/officers who transact business
such meeting: Provided, however, that with their own corporation.
the contract is fair and reasonable under
the circumstances.” - This is not prohibited by law.
19
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
*It must be stated in the By-Laws. possess or exercise any corporate powers
except those conferred by this Code or by its
*Board Resolution is not sufficient if there is articles of incorporation and except such as
no provision in the By-Laws. are necessary or incidental to the exercise of
powers so conferred.”
*The decision of the executive committee is
considered a Board Resolution. Ultra Vires Acts – an act committed outside
the object for which a corporation is created
*The decision of the executive committee is
as defined by the law of its organization and
not subject to appeal to the board. However,
therefore beyond the power conferred upon it
if the resolution of the Executive Committee
by law.
is invalid it may be ratified by the Board.
Effects of Ultra Vires Acts:
*The decision of the executive committee
needs no confirmation from the Board. 1. Executed Contract – courts will not set
aside or interfere with such contracts.
Case: Filipinas Port, Inc.
2. Executory Contract – no enforcement
*The corporation may create other
even at the suit of either party.
committees.
3. Partly executed and Partly executory
Distinction: In executive committee, there is
contract – principle against unjust
a statutory restriction on members whereas
enrichment shall apply.
in other committee there is no such
restriction.
Exceptions: 3. Incidental
3. The amendment or repeal of by-laws or • Implied – those that can be inferred from
the adoption of new by-laws; or necessary for the exercise of the
express powers.
4. The amendment or repeal of any
resolution of the board which by its • Incidental – those that are incidental to
express terms is not so amendable or the existence of the corporation.
repealable;
Doctrine of Necessary Implication – those which
5. A distribution of cash dividends to the can be reasonably inferred from the express powers
shareholders. given since they are necessary for the corporation to
perform a particular act are deemed part of such
CORPORATE POWERS:
powers.
A. Doctrine of Limited Capacity; Concept of
C. Statutory Powers of a Corporation and the
Ultra Vires Act
Limitations on their Exercise
Sec. 45 of the Corporation Code states
Sec. 36 of the Corporation Code states
that: “No corporation under this Code shall
that: “Every corporation incorporated under
21
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
this Code has the power and capacity: 1. To outstanding capital stock, without
sue and be sued in its corporate name; 2. Of prejudice to the appraisal right of
succession by its corporate name for the dissenting stockholders in accordance
period of time stated in the articles of with the provisions of this Code, or the
incorporation and the certificate of vote or written assent of at least 2/3 of
incorporation; 3. To adopt and use a the members if it be a non-stock
corporate seal; 4. To amend its articles of corporation.”
incorporation in accordance with the
provisions of this Code; 5. To adopt by-laws, *The following are excluded in counting
not contrary to law, morals, or public policy, the outstanding capital stock: 1. Treasury
and to amend or repeal the same in stock; 2. Unissued shares.
accordance with this Code; 6. In case of *Aside from the votes of majority of the
stock corporations, to issue or sell stocks to board and assent of the 2/3 of the OCS,
subscribers and to sell treasury stocks in the approval of the SEC is necessary for
accordance with the provisions of this Code; the amendment of the AOI.
and to admit members to the corporation if it
be a non-stock corporation; 7. To purchase, *There is an implied approval of the SEC,
receive, take or grant, hold, convey, sell, i.e., failure to act on the application filed
lease, pledge, mortgage and otherwise deal by the corporation within 6 mos.
with such real and personal property,
including securities and bonds of other Q: How to get the approval of the
corporations, as the transaction of the lawful stockholders?
business of the corporation may reasonably
A: 1. Call for a meeting; 2. Obtain the
and necessarily require, subject to the
written assent of the stockholders.
limitations prescribed by law and the
Constitution; 8. To enter into merger or *In Tan v Sycip, the Supreme Court held
consolidation with other corporations as that in case of a non-stock corporation,
provided in this Code; 9. To make membership is personal and non-
reasonable donations, including those for the transferrable unless the by-laws provides
public welfare or for hospital, charitable, otherwise. The deceased member is not
cultural, scientific, civic, or similar purposes: entitled to vote.
Provided, That no corporation, domestic or
foreign, shall give donations in aid of any Four changes in Articles of Incorporation that
political party or candidate or for purposes of require the approval of the stockholders.
partisan political activity; 10. To establish 1. Extension of corporate term;
pension, retirement, and other plans for the 2. Shortening of corporate term;
benefit of its directors, trustees, officers and 3. Increase or Decrease of Capital Stock;
employees; and 11. To exercise such other 4. Increase or Decrease of Bonded indebtedness.
powers as may be essential or necessary to *Approval of Stockholders is necessary in these
carry out its purpose or purposes as stated in changes because they are necessary for the
the articles of incorporation.” corporation’s existence.
Sec. 16 of the Corporation Code states Sec. 37 of the Corporation Code states
that: “Unless otherwise prescribed by this that: “A private corporation may extend
Code or by special law, and for legitimate or shorten its term as stated in the
purposes, any provision or matter stated articles of incorporation when approved
in the articles of incorporation may be by a majority vote of the board of
amended by a majority vote of the board directors or trustees and ratified at a
of directors or trustees and the vote or meeting by the stockholders representing
written assent of the stockholders at least 2/3 of the outstanding capital
representing at least 2/3 of the stock or by at least 2/3 of the members in
22
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
23
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
24
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
despite the disposition of all its properties during said sale; and 3. To pay
and assets. dissenting or withdrawing stockholders
entitled to payment for their shares under
Q: Will the buying corporation be made the provisions of this Code.”
answerable for the liabilities of the selling
corporation? Requisites:
1. Majority vote of the Board *The fact that the corporation has surplus
earning does not mean that it is
2. Vote of the stockholders representing mandated to declare dividends; it is still
2/3 OCS. upon the sound discretion of the board of
directors.
• Declaration of Dividends
Reason: Trust Fund Doctrine
Sec. 43 of the Corporation Code states
that: “The board of directors of a stock *There must be a unrestricted retained
corporation may declare dividends out of earnings before dividends may be
the unrestricted retained earnings which declared.
shall be payable in cash, in property, or
*The board may opt to restrict its
in stock to all stockholders on the basis
earnings, as the earnings may be
of outstanding stock held by them:
allocated to legitimate business purpose.
Provided, That any cash dividends due
on delinquent stock shall first be applied
to the unpaid balance on the subscription
plus costs and expenses, while stock CASH DIVIDENDS STOCK
dividends shall be withheld from the DIVIDENDS
delinquent stockholder until his unpaid does not require Requires
subscription is fully paid: Provided, stockholders’ stockholders’
approval approval
further, That no stock dividend shall be
The stockholders The stockholders
issued without the approval of receive cash receive stocks
stockholders representing not less than Creditor-debtor No creditor-debtor
2/3 of the outstanding capital stock at a relationship relationship
regular or special meeting duly called for
the purpose. Stock corporations are
prohibited from retaining surplus profits in Requisites for declaration of
excess of 100% of their paid-in capital cash/property dividends:
stock, except: 1. When justified by
1. Board approval
definite corporate expansion projects or
programs approved by the board of 2. Unrestricted Retained Earnings
directors; or 2. When the corporation is
prohibited under any loan agreement Requisites for declaration of stock
with any financial institution or creditor, dividends:
whether local or foreign, from declaring 1. Unrestricted Retained Earnings;
dividends without its/his consent, and 2. Board approval;
such consent has not yet been secured; 3. Ratification by the stockholders.
or 3. When it can be clearly shown that Q: Why stockholders’ ratification is
such retention is necessary under necessary in the declaration of stock
special circumstances obtaining in the dividends?
26
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
A: Because the earnings are capitalized. A: NO. The parties are not mutually
It is considered to be a corporate assets. creditor-debtor of each other. The
Q: May the board be compelled to requisites under the Civil Code on legal
declare dividends? compensation are not present.
A: General Rule: NO. • Management Contract
Exception: Stock corporations are Sec. 44 of the Corporation Code states
prohibited from retaining surplus profits in that: “No corporation shall conclude a
excess of 100% of their paid-in capital management contract with another
stock. corporation unless such contract shall
Exceptions to the Exception: have been approved by the board of
1. Corporate expansion directors and by stockholders owning at
2. Pursuant to loan agreement least the majority of the outstanding
3. Special circumstances/contingent capital stock, or by at least a majority of
liabilities the members in the case of a non-stock
Q: Are the stock dividends considered as corporation, of both the managing and
watered stocks because the stockholder the managed corporation, at a meeting
concerned does not pay anything duly called for the purpose: Provided,
therefor? That 1. Where a stockholder or
A: NO. The unrestricted retained stockholders representing the same
earnings are considered to be a interest of both the managing and the
consideration thus dividends received managed corporations own or control
through stocks are not watered stocks. more than 1/3 of the total outstanding
*The source of payment is the capital stock entitled to vote of the
unrestricted retained earnings. managing corporation; or 2. Where a
Q: Are delinquent stockholders entitled to majority of the members of the board of
receive dividends? directors of the managing corporation
A: YES. But only in terms of cash also constitute a majority of the members
dividends. of the board of directors of the managed
Q: Who are entitled to receive dividends? corporation, then the management
A: Stockholders contract must be approved by the
*In Nielson case, the SC held that stockholders of the managed corporation
dividends cannot be given to non- owning at least 2/3 of the total
stockholders. outstanding capital stock entitled to vote,
*If there is date of record – Dividends or by at least 2/3 of the members in the
may be received by those persons who case of a non-stock corporation. No
are holders of stocks as of date of management contract shall be entered
record. into for a period longer than 5 years for
*If there is no date of record – dividends any one term. The provisions of the next
may be received by those persons who preceding paragraph shall apply to any
are holders of stocks as of the contract whereby a corporation
declaration. undertakes to manage or operate all or
Q: When the corporation declares stock substantially all of the business of
dividends, would it likewise create a another corporation, whether such
creditor-debtor relationship between the contracts are called service contracts,
corporation and the stockholder? operating agreements or otherwise:
A: NO. Stock dividends will not bring Provided, however, That such service
about a creditor-debtor relationship. contracts or operating agreements which
When it comes to shareholdings, the one relate to the exploration, development,
holding the shares are considered exploitation or utilization of natural
investors; risk-takers. resources may be entered into for such
Q: Will legal compensation possible to periods as may be provided by the
occur? pertinent laws or regulations.”
27
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
institution or other special corporations Constitution, this Code, other special laws,
governed by special laws, unless and the articles of incorporation, a private
accompanied by a certificate of the corporation may provide in its By-Laws for: 1.
appropriate government agency to the effect The time, place and manner of calling and
that such By-Laws or amendments are in conducting regular or special meetings of the
accordance with law.” directors or trustees; 2. The time and manner
of calling and conducting regular or special
*Submission of By-Law is not a requirement meetings of the stockholders or members; 3.
for acquisition of corporate existence, The required quorum in meetings of
however, for the corporation to be able to stockholders or members and the manner of
continue its corporate existence, the voting therein; 4. The form for proxies of
corporation is required to submit the stockholders and members and the manner
corporate By-Law. of voting them; 5. The qualifications, duties
and compensation of directors or trustees,
*Non-submission of the By-Laws within the
officers and employees; 6. The time for
prescribed period allowed by law is a ground
holding the annual election of directors or
for the dissolution of the corporation.
trustees and the mode or manner of giving
*In Loyola Grandvillas Homeowners notice thereof; 7. The manner of election or
Association v CA, the SC held that failure appointment and the term of office of all
to adopt a set of By-Laws within the officers other than directors or trustees; 8.
prescribed period, notwithstanding the word The penalties for violation of the By-Laws; 9.
used in the Code, the same would not result In the case of stock corporations, the manner
to automatic dissolution of the corporation. of issuing stock certificates; and 10. Such
The failure to file by-laws would not, by itself, other matters as may be necessary for the
amount to dissolution or extinguishment of proper or convenient transaction of its
the corporate existence. corporate business and affairs.”
special meeting duly called for the purpose, stockholders, or members may be regular or
may amend or repeal any By-Laws or adopt special.”
new By-Laws. The owners of 2/3 of the
outstanding capital stock or 2/3 of the Kinds:
members in a non-stock corporation may a. Stockholders/Members:
delegate to the board of directors or trustees
the power to amend or repeal any By-Laws 1. Regular meeting
or adopt new By-Laws: Provided, That any
power delegated to the board of directors or 2. Special meeting
trustees to amend or repeal any By-Laws or
b. Directors/Trustees:
adopt new By-Laws shall be considered as
revoked whenever stockholders owning or 1. Regular meeting
representing a majority of the outstanding
capital stock or a majority of the members in 2. Special meeting
non-stock corporations, shall so vote at a Sec. 50 of the Corporation Code provides
regular or special meeting. Whenever any that: “Regular meetings of stockholders or
amendment or new By-Laws are adopted, members shall be held annually on a date
such amendment or new By-Laws shall be fixed in the by-laws, or if not so fixed, on any
attached to the original By-Laws in the office date in April of every year as determined by
of the corporation, and a copy thereof, duly the board of directors or trustees: Provided,
certified under oath by the corporate That written notice of regular meetings shall
secretary and a majority of the directors or be sent to all stockholders or members of
trustees, shall be filed with the SEC the record at least 2 weeks prior to the meeting,
same to be attached to the original articles of unless a different period is required by the
incorporation and original By-Laws. The by-laws. Special meetings of stockholders or
amended or new By-Laws shall only be members shall be held at any time deemed
effective upon the issuance by the SEC of a necessary or as provided in the by-laws:
certification that the same are not Provided, however, That at least 1 week
inconsistent with this Code.” written notice shall be sent to all
stockholders or members, unless otherwise
provided in the by-laws. Notice of any
meeting may be waived, expressly or
F. By-Laws in relation to Third Parties
impliedly, by any stockholder or member.
*In China Banking Corporation v CA, the Whenever, for any cause, there is no person
SC held that in the absence of evidence that authorized to call a meeting, the SEC, upon
China Bank is aware of the provisions of the petition of a stockholder or member on a
By-Laws, China Bank is not bound to showing of good cause therefor, may issue
observe the provisions of the By-Laws. an order to the petitioning stockholder or
Hence, China Bank must be allowed to member directing him to call a meeting of the
register the shares in its name. corporation by giving proper notice required
by this Code or by the by-laws. The
General Rule: Third parties are not affected petitioning stockholder or member shall
by the By-Laws. preside thereat until at least a majority of the
stockholders or members present have been
Exception: If the third party has actual chosen one of their number as presiding
knowledge of the provisions of the By-Laws. officer.”
CORPORATE MEETINGS: *Regular meeting of stockholders/members
shall be held annually on a date fixed in the
A. Kinds of Corporate Meetings by-laws or if not so fixed, on any date in April
of every year. Written notice of regular
Sec. 49 of the Corporation Code provides meetings shall be sent 2 weeks prior to the
that: “Meetings of directors, trustees,
30
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
31
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
majority of the members in the case of non- *Delinquency arises upon default in
stock corporations.” payment of subscription.
General Rule: Majority of the OCS or
Majority of the members Q: Are they included for quorum and
Exception: Unless otherwise provided by voting purposes?
the Code or by the By-Laws. A: NO.
*In Tan v Sycip, deceased member is not
entitled to vote Q: Even if there are proxies?
Sec. 54 of the Corporation Code provides
that: “The president shall preside at all A: YES.
meetings of the directors or trustees as well
Q: Shares not yet fully paid but not
as of the stockholders or members, unless
yet delinquent, are they entitled to
the by-laws provide otherwise.”
vote?
C. Right to Vote of Stockholders
A: YES.
• Instances when voting right not available *Delinquent stock is not entitled to
Sec. 6 of the Corporation Code vote and his presence would not be
provides that: “Except as provided in the taken for purposes of quorum.
immediately preceding paragraph, the *The only right remain is the right to
vote necessary to approve a particular receive dividends subject to the
corporate act as provided in this Code provision of Section 43.
shall be deemed to refer only to stocks
with voting rights.” 2. Escrow Shares
Instances when voting right is not *Escrow shares are not entitled to
available: vote before the fulfillment of the
condition imposed thereon.
1. Delinquent shares
3. Unpaid Shares
2. Treasury shares
Sec. 72 of the Corporation Code
3. Fractional shares provides that: “Holders of subscribed
4. Escrow shares shares not fully paid which are not
delinquent shall have all the rights of
• Rules on: a stockholder.”
A: General Rule: No. PCGG cannot and other legal representatives duly
vote for the sequestered shares appointed by the court may attend
because being a and vote in behalf of the stockholders
conservator/administrator, it should or members without need of any
only perform acts of administration written proxy.”
and not acts of ownership.
Q: Can the pledgee/mortgagee
Exception: If there is a strong exercise the right to vote?
evidence that indeed the shares have
been purchased through public A: General Rule: No. The right to
funds. vote remains to the owner thus, it is
the pledgor/mortgagor that can
Requisites: exercise it.
34
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
Any other stockholder may transfer his Q: Who brings the suit?
shares to the same trustee or trustees upon
the terms and conditions stated in the voting A: Any stockholder/member usually minority
trust agreement, and thereupon shall be stockholder.
bound by all the provisions of said Q: Whose cause of action?
agreement. No voting trust agreement shall
be entered into for the purpose of A: It is the corporation’s cause of action.
circumventing the law against monopolies
and illegal combinations in restraint of trade Q: Are we in violation of the Code?
or used for purposes of fraud. Unless
A: No. Because the power to sue lies on the
expressly renewed, all rights granted in a
board thus when the board refuses to take
voting trust agreement shall automatically
action in order to protect the corporation
expire at the end of the agreed period, and
derivative suit may be allowed.
the voting trust certificates as well as the
certificates of stock in the name of the Compelling Reason: Inaction of the officers.
trustee or trustees shall thereby be deemed Failure to discharge their responsibilities.
cancelled and new certificates of stock shall Requisites:
be reissued in the name of the transferors.
The voting trustee or trustees may vote by 1. The stockholder bringing the suit must be
proxy unless the agreement provides one of record as of the time the cause of
otherwise.” action accrues as well as of the time the
Consequence: The stockholder entering action is brought unless the cause of
into a voting trust agreement ceases to be a action is a continuing offer.
stockholder of record.
*The stockholder must implead the real
*In case of Lee v CA, the SC held that the
party in interest, i.e. the corporation.
stockholder concerned loses his legal title to
the shares so that if the stockholder is, at the *In Chua v CA, the SC held that the
same time, a director of the corporation, corporation must be impleaded since it is
automatically he is disqualified to continue the real party in interest.
performing the duties of a director because
the law requires each and every director to 2. The action must be named under the
have legal, not beneficial title to at least one corporation’s name
share.
3. General Rule: The stockholder bringing
E. Derivative Suit; Concept and Requisites the suit must have exhausted intra-
corporate remedies within the
Derivative Suit is a suit brought by any corporation.
stockholder, usually a minority shareholder,
to redress a wrong committed against the Exception: If the very person to be sued
corporation whenever the responsible is the responsible officers themselves.
officers refuse to take any action thereon or
**This is a condition precedent.
are the very person to be sued.
4. The suit is not intended to harass the
*This prerogative is developed through
defendant, not a nuisance or harassment
jurisprudence.
suit.
*This is expressly mandated by Sec. 31 of
5. Appraisal right must not be an available
the Corporation Code.
remedy.
Q: Why derivative?
Individual suit is a suit filed by the
A: From the word derive. The one bringing stockholder because his personal right has
the suit derives the cause of action from the been violated. The cause of action is
corporation.
35
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
37
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
Certificate of Stock is a written evidence of P10 per share; payment made is P6000
the shares of stock but it is not the share covering 1000 shares. The P6000 shall
itself. be allocated equally to all shares. P6 per
share has been paid. P4 per share is the
*Does not represent credit. liability.
Q: How important is a stock certificate? • Certificate of Stock, quasi-negotiable
A: It is an evidence of ownership of stocks.
Q: can the stock certificate be treated as
Q: Who issue stock certificate? negotiable instrument under NIL?
A: Stock certificates must be signed by the A: No. The requisites are not complied
president or vice-president, countersigned by with. There is no engagement to pay in
the secretary or assistant secretary. sum certain in money.
Q: What will happen to the payment *To make the transfer binding to the
already made by the subscriber? corporation and third person, the transfer
must be recorded in the stock and transfer
A: The payment partially made shall be
book of the corporation.
applied proportionately to all the shares
covered by the subscription. Q: Who is the owner of the share?
38
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
excerpts from its records or minutes, in *Keeping of books and records are
accordance with the provisions of this Code, mandatory.
shall be liable to such director, trustee,
stockholder or member for damages, and in Books required to be kept:
addition, shall be guilty of an offense which 1. Book of minutes – reflects the decisions
shall be punishable under Section 144 of this and actions of the Board of
Code: Provided, That if such refusal is made Directors/Stockholders.
pursuant to a resolution or order of the board
of directors or trustees, the liability under this 2. Record of all business transactions
section for such action shall be imposed
upon the directors or trustees who voted for 3. Stock and Transfer Book/Membership
such refusal: and Provided, further, That it Book
shall be a defense to any action under this
4. Books of Proceedings
section that the person demanding to
examine and copy excerpts from the
corporation’s records and minutes has
improperly used any information secured B. Right to Inspect Corporate Books
through any prior examination of the records
• Basis and Extent of the Right of
or minutes of such corporation or of any
Inspection
other corporation, or was not acting in good
faith or for a legitimate purpose in making his Q: Is the keeping of these books
demand. Stock corporations must also keep mandatory?
a book to be known as the “stock and
transfer book,” in which must be kept a A: YES. Section 144 of the Corporation
record of all stocks in the names of the Code provides penalty for any violation of
stockholders alphabetically arranged; the the provision of the Code.
installments paid and unpaid on all stock for
which subscription has been made, and the Rationale: Right of inspection would be
date of payment of any installment; a futile. Right of inspection would not be
statement of every alienation, sale or transfer exercised.
of stock made, the date thereof, and by and
• Limitations on the Right of Inspection
to whom made; and such other entries as the
by-laws may prescribe. The stock and 1. The books and records shall be open
transfer book shall be kept in the principal to inspection at reasonable hours on
office of the corporation or in the office of its business days.
stock transfer agent and shall be open for
inspection by any director or stockholder of 2. The books and records shall not be
the corporation at reasonable hours on improperly used any information
business days. No stock transfer agent or secured through any prior
one engaged principally in the business of examination of the books or records.
registering transfers of stocks in behalf of a
3. The stockholder’s demand must be in
stock corporation shall be allowed to operate
good faith or for a legitimate purpose.
in the Philippines unless he secures a
*Inspection can be done personally or
license from the SEC and pays a fee as may
through agent.
be fixed by the Commission, which shall be
• Remedies to Enforce Right of Inspection
renewable annually: Provided, That a stock
corporation is not precluded from performing *In case of refusal to exercise the right of
or making transfer of its own stocks, in which inspection, the stockholder concerned
case all the rules and regulations imposed may file an action for mandamus before
on stock transfer agents, except the payment the RTC.
of a license fee herein provided, shall be
applicable.” *Can also claim damages.
40
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
A+B=C
C. Effects of Merger or Consolidation
A+B+C=D
1. All property, real or personal, and all
A + B + C = ABC receivables due to, and all other interest
of each constituent corporation, shall be
A + B + C = XYZ
deemed transferred to and vested in
such surviving or consolidated
corporation without further act or deed.
B. Requisites of and Procedure for Merger and
Consolidation 2. The surviving or consolidated corporation
shall be responsible for all the liabilities
1. Approval by majority vote of the Board of and obligations of each of the constituent
Directors of each corporation. corporations.
41
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
combination thereof, subject to the special such conditions which may be prescribed by,
provisions of this Title governing particular the SEC.”
classes of non-stock corporations.” General Rule: Sec. 58
Exception: Sec. 89. This provision allows
*The purpose of a non-stock corporation denial of proxy.
is related to public welfare. Reason: To promote camaraderie,
togetherness, unity and familiarity.
*A member is entitled to 1 vote. However,
B. Distinguished from Stock Corporation such right may be limited, broadened or
denied in the Articles of Incorporation or By-
Non- stock Stock Corporation Laws. Thus, the By-laws of a non-stock
Corporation corporation may provide for the desired
Public welfare For profit
voting rights of members including the
Board of Trustees Board of directors
number of votes.
Generally, the term 1 year subject to
of office of trustees is hold-over principle Sec. 90 of the Corporation Code provides
3 years that: “Membership in a non-stock corporation
By-laws can provide City or municipality and all rights arising therefrom are personal
for a different venue where the principal and non-transferable, unless the articles of
as long as it is within office is located incorporation or the by-laws otherwise
the Philippines provide.”
Member may be Proxy is allowed
General Rule: Membership is non-
deprived of their right
to designate proxies transferable.
by provisions in the Exception: If the Articles of Incorporation or
articles of the By-laws provide otherwise.
incorporation or by- Sec. 91 of the Corporation Code provides
laws that: “Membership shall be terminated in the
Reason: To promote manner and for the causes provided in the
camaraderie,
articles of incorporation or the by-laws.
togetherness, unity
and familiarity. Termination of membership shall have the
Generally, members Election is vested effect of extinguishing all rights of a member
could directly elect upon Board of in the corporation or in its property, unless
officers. Except Directors otherwise provided in the articles of
unless AOI provides incorporation or the by-laws.”
otherwise. Rules on Place of Meeting:
General Rule: Sec. 51
C. Membership in a Non-Stock Corporation Exception: Sec. 93
corporation shall not list in any stock Distinctions from Open Corporations:
exchange or make any public offering of any
of its stock of any class. Notwithstanding the Open Corporation Close Corporation
foregoing, a corporation shall not be deemed Its articles of Its articles must
incorporation need contain the special
a close corporation when at least 2/3 of its only contain the matters prescribed
voting stock or voting rights is owned or general matters by Section 97 aside
controlled by another corporation which is enumerated in from the general
not a close corporation within the meaning of Section 14 of the matters in Section
this Code. Any corporation may be Corporation Code 14. Failure to do so
incorporated as a close corporation, except precludes a de jure
close corporation
mining or oil companies, stock exchanges,
status
banks, insurance companies, public utilities,
Its status as an 2/3 of its voting stock
educational institutions and corporations ordinary stock or voting rights must
declared to be vested with public interest in corporation is not not be owned or
accordance with the provisions of this Code. affected by the controlled by another
The provisions of this Title shall primarily ownership of its corporation which is
govern close corporations: Provided, That voting stock or voting not a close
rights corporation
the provisions of other Titles of this Code
Its articles cannot Its articles may
shall apply suppletorily except insofar as this
classify its directors classify its directors
Title otherwise provides.” Business of the Business of the
corporation is corporation may be
*Whether open or close corporation depends managed by the managed by the
on its charter. board of directors stockholders if the
articles so provide,
Case: San Juan Structural but they are liable as
directors
The following must be stated in the The corporate Its articles may
Articles of Incorporation: officers and provide that any or all
employees are of the corporate
1. Membership is limited to 20 elected by a majority officers or employees
vote of all the may be elected or
2. Transfer or disposition of shares is members of the appointed by the
subject to specified restrictions board of directors stockholders
The pre-emptive right The pre-emptive right
3. Prohibition against offering to the public is subject to the is subject to no
of the shares or listing in the stock exceptions found in exceptions unless
exchange. Section 39 of the denied in the articles
Corporation Code
General Rule: Any corporation may be The appraisal right The appraisal right
incorporated as close corporation. may be exercised by may be exercised
a stockholder only in and compelled
Exceptions: the cases provided in against the
Sections 81 and 42 corporation by a
1. Mining or oil companies of the Corporation stockholder for any
Code reason
2. Stock exchanges Except as regards In case of an
redeemable shares, arbitration of an
3. Banks the purchase by the intracorporate
corporation of its own deadlock by the
4. Insurance companies stock must always be SEC, the corporation
made from the may be ordered to
5. Public utilities
unrestricted retained purchase its own
earnings shares from the
6. Educational institutions
stockholders
7. Corporations declared to be vested with regardless of the
availability of
public interest
46
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
47
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
49
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
Liquidation is a process by which all the 2. Through a trustee to whom the properties
assets of the corporation are converted into are conveyed
liquid assets in order to facilitate the payment
of obligations to creditors, and the remaining 3. By management committee or
balance if any is to be distributed to the rehabilitation receiver
stockholders. Q: Can the 3 year period be extended?
A: NO.
*Liquidation takes place after dissolution.
Reason: Beyond the 3 year period, there is
Sec. 122 of the Corporation Code provides no corporate existence for all purposes
that: “Every corporation whose charter subject to doctrine of relation.
expires by its own limitation or is annulled by Remedy: Before the expiration of the 3 year
forfeiture or otherwise, or whose corporate period, appoint a trustee/receiver.
existence for other purposes is terminated in Q: During the 3 year period, does the
any other manner, shall nevertheless be corporation enjoy corporate existence?
continued as a body corporate for three (3) A: YES. But for limited purpose only, i.e., for
years after the time when it would have been liquidation purposes only. (Limited existence)
so dissolved, for the purpose of prosecuting Q: May such corporation sue during the 3
and defending suits by or against it and year period?
enabling it to settle and close its affairs, to A: YES. But only when the subject matter is
dispose of and convey its property and to related to liquidation and winding up of its
distribute its assets, but not for the purpose remaining affairs.
of continuing the business for which it was *In case trustee/receiver is appointed, he is
established. At any time during said three (3) not bound by the 3 year period.
years, the corporation is authorized and *In Gelano v CA, the SC held that the lawyer
empowered to convey all of its property to of the corporation can be considered as
50
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
trustee. The term trustee must be considered otherwise whether enforcement is by court or
in its generic sense. Anyone who has been not, until rehabilitation proceedings are
designated by the corporation to act on its terminated.
behalf could be considered as trustee for Cases: PAL v Garcia; Sobrejuanite;
purposes of pursuing a claim for and on Lingkod Manggagawa ng Rubberworld v
behalf of the corporation. A lawyer falls Rubberworld Philippines; RCBC v IAC
within the ambit of the word “trustee.” *In PAL v Garcia, the SC held that stay
*Appointment of trustee can be inferred from order suspends all enforcement in all stages
the conduct of the corporation. This is by of the proceedings.
Implication. *In Lingkod Manggagawa sa Rubberworld
*If the corporation is the creditor appoint a v Rubberworld Philippines, the SC held
trustee. If the corporation is the debtor that labor claims are likewise affected by the
appoint a receiver. Stop order.
Q: What if the corporate properties have *In RCBC v IAC, the SC held that whether
already been distributed among the creditors are secured or not, stay order will
shareholders without trustee/receiver? still affect them. The preference still remains
A: Remedy: Run after the erring directors it is just the enforcement that is suspended.
and officers.
FOREIGN CORPORATIONS:
E. Concept of Rehabilitation; Effects of
Appointment of Management Committee or A. Concept of Foreign Corporation
Receiver Foreign Corporation is a corporation
Rehabilitation connotes a reopening or formed, organized or existing under any law
reorganization. Contemplates a continuance other than those of the Philippines, and
of corporate existence in an effort to restore whose laws allow Filipino citizens and
the corporation to its former successful corporations to do business in its own
operation. country or state.
*This is a remedy expressly allowed under Sec. 123 of the Corporation Code provides
Section 6 of PD 902-A. that: “For the purposes of this Code, a
foreign corporation is one formed, organized
Purpose: To make the corporation or existing under any laws other than those
financially viable again. of the Philippines and whose laws allow
Filipino citizens and corporations to do
Substantive Grounds: business in its own country or state. It shall
have the right to transact business in the
1. When there is imminent danger of
Philippines after it shall have obtained a
dissipation or wastage of corporate
license to transact business in this country in
assets
accordance with this Code and a certificate
2. Serious paralyzation of business which of authority from the appropriate government
would work to the prejudice of the agency.”
stockholders and creditors of the
Reciprocity Clause provides that the foreign
corporation
laws allow Filipino citizens and corporations
*Mere misconduct of an officer is not a
to do business in its own country or state.
ground for corporate rehabilitation.
*A corporation cannot ask for corporate
rehabilitation and at the same time
dissolution. B. Tests to Determine Nationality of a
*With the passage of RA8799, the remedy Corporation
could now be instituted with the proper RTC.
Effect: Stay Order - stops or suspends the
enforcement of all claims for money or
51
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
*Lack of license does not affect the validity of 1. They are placed under the jurisdiction of
the transaction. the Philippine courts
*License is for regulatory purposes. 2. They are placed under the same footing
as domestic corporations
*License requirement does not prevent
performance of acts that are isolated from 3. The public is protected in dealing with
the main business of the corporation and foreign corporations.
there is no intent to continue the same in the
Philippines.
E. Revocation and Withdrawal of License
*If the foreign corporation is not licensed to
do business in the Philippines, General Grounds for Revocation:
52
Commercial Law Review
Corporation Code
Maria Zarah Villanueva - Castro
53