PARCORP FINAL EXAM – CORPORATIONS

CORPORATION CODE B.P. Blg. 68 SEC. 4 – CORPORATIONS CREATED BY SPECIAL LAWS OR

CHARTERS
SEC. 2 – CORPORATION DEFINED
 Governed primarily by the special law and supplemental
 Artificial – juridicial personality
by Corp Code
 Created by operation of law – permission from the govt
 Right of succession – stockholders/BOD die, corp may SEC. 5
still subsist
 Corporators - compose the corporation – stock/NS
 Express, incidental powers
 Incorporators – who originally composed
Doctrine of Piercing the veil of corporate entity or  Stockholders - owners of stock
disregarding the fiction of corporate entity or doctrine of  Members – non-stock corporations
corporate alter ego – where the fiction of corporate entity  Promoters, subscribers, underwriter
used as a cover for fraud or illegality, this fiction will be
disregarded; the law will not recognize separate corporate SEC. 6 – CLASSIFICATION OF SHARES
existence, when it is clearly established that it is used as a Common – 1 vote/share
shield for wrongdoing
Preferred – mauunang bigyan ng dividends; may be deprived
PARTNERSHIP CORPORATION of voting rights except 8 acts; with par value only
Creation By agreement By law
Incorporators 2 or more 5 Redeemable – ib’buy back; may be deprived of voting rights
Contract of Certificate of except 8 acts:
Commencement
partnership incorporation
Authorized by Express, implied, 1. Amendment of articles
Powers 2. Adoption and amendment of by-laws
partners incidental
Management Partners - agents Board of directors 3. Disposition of all or substantially all corp prop
Mismanagement Sue co-partner In name of corp 4. Bonded indebtedness
Succession None has 5. Increase/decrease of capital stock
Transferability Cannot Can 6. Merger and consolidation
Term Any period 50 years 7. Investment in another corp
Firm name Limited – “Ltd.” any 8. Dissolution
Consented by
Dissolution Any time by will Par value – in articles of incorporation
state
Law Civil Code Corporation Code Capital stock / number of shares = par value

No par value
SEC. 3 – CLASSES OF CORPORATIONS
 from time to time pwedeng baguhin ng incorporators
 Stock – has shares and dividends
 deemed fully paid
 Non-stock - all other corporations
 not liable to corp and its creditors
 not less than P5.00
 Domestic corporation – incorporated under Corp Code
 treated as capital
 Foreign corporation – any laws other than Corp Code
 not for distribution of dividends
 Close corporation – selected persons, family corp
 Cannot issue no par value shares: banks, trust
companies, insurance companies, public utilities,
 Public corporation
building, loan associations
o for the government
o created by a law not under the Corp Code, SEC. 7 – FOUNDERS’ SHARES – in the articles, exclusive right
o governed by the law that created them (GSIS, SSS, to vote and be voted for, 5 year limit
BSP)
SEC. 8 – REDEEMABLE SHARES – in the articles, redeemable
 Private corporation
by the corporation at a fixed date, regardless of the existence
o created by the Corp Code
of unrestricted retained earnings
*Test of distinction between public and private corp – the
SEC. 9 – TREASURY SHARES – reacquired by issuing corp, no
law that created the corporation
right to vote, any price even below par value

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PARCORP FINAL EXAM – CORPORATIONS
INCORPORATION AND ORGANIZATION OF PRIVATE CORP.
SEC. 10 – INCORPORATORS
 5 – 15 except corporation sole
 Legal age
 Majority residents – pwede alien
 Lawful purpose
 Incorporators – subscribed to at least 1 share
Stages of creation: Promotion, incorporation, organization
and commencement of business
SEC. 11 – CORPORATE TERM – 50 YEARS unless sooner
dissolved/extended, no extension 5 years earlier prior to
expiration (40th – no, 45th – yes)
SEC. 12 – MINIMUM CAPITAL STOCK NOT REQUIRED EXCEPT
BY SPECIAL LAW
SEC. 13 – CAPITAL STOCK FOR INCORPORATION
25% subscribed, 25% total paid-up not less than P5,000
SEC. 14 – Contents of Articles – official languages, signed and
acknowledge by all incorporators
 Name
 Primary purpose and secondary purpose/s
 Principal office
 Term
 Incorporators
 Directors
 Acting directors until election
 Authorized capital stock, number of shares, par value,
original subscribers paid-up, no par value
 Sworn statement of treasurer showing 25% sub 25%
paid not <5k
SEC. 15 – FORMS OF DOMESTIC CORP ARTICLES
SEC. 16 – AMENDMENT OF ARTICLES – BOD majority, 2/3
stockholders
SEC. 17 – GROUNDS OF REJECTED ARTICLES/AMENDMENTS
 Not in compliance with code
 Not substantially in accordance with the form
 Unconstitutional, illegal, immoral, contrary to govt
 False 25% 25%
 Filipino ownership percentage not complied
GR: NO ARTICLES/AMENDMENTS banks, banking institutions,
building and loan assc., trust companies, financial
intermediaries, insurance companies, public utilities,
educational institutions
EXP: Favorable recommendation of appropriate government
agency
SEC. 18 – CORPORATE NAME – identical, deceptive,
confusingly similar, already existing, contrary to laws
SEC. 19 – COMMENCEMENT – ISSUANCE OF CERTIFICATE OF
INCORPORATION BY SEC
SEC. 20 – DE FACTO CORPORATION – flaws in its existence
but with certificate of incorporation, cannot be questioned by
state or individuals unless in quo warranto proceeding by
SolGen
De jure – strict compliance with requirements
SEC. 21 – CORPORATION BY ESTOPPEL – liable as general
partners for all debts, liabilities, and damages, not allowed to
use defense its lack of corporate personality, cannot resist
performance bc no corporation exists
SEC. 22 – EFFECTS OF NON-USE AND INOPERATION
1. Automatic dissolution
 Does not formally organize and commence
 Within 2 years
2. Ground for suspension or revocation of Cert.
 Commenced business
 Subsequently continuously inoperative
 For 5 years
BOARD OF DIRECTORS/TRUSTEES/OFFICERS
SEC. 23 – BOD/BOT
 5 – 15
 1-year term
 At least 1 share – cease to be director if cease to own
 Majority PH resident
SEC. 24 – ELECTION OF BOD
Number of directors × Number of shares = Number of votes
 Straight voting – equally (Ex. 100 shares, 5 candidates =
500 votes = 100 votes/candidate)
 Cumulative voting for one candidate – for minority
stockholders
 Cumulative voting by distribution – depends on him
how many candidates he wants to vote (Ex. 500 votes, 5
candidates = A 100 votes, B 150 votes, C 250 votes)
SEC. 25 – CORPORATION OFFICERS, QUORUM
 President - director
 Treasurer – may (not) be a director
 Secretary – resident citizen, may (not) be a director
 GR: Can hold 2 or more positions
 EXP: No Pres-Sec and Pres-Tre (conflict of interest)
 Quorum – half + 1 or by-laws – valid corporate act
 No proxy at board meetings
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PARCORP FINAL EXAM – CORPORATIONS

SEC. 26 – REPORT OF ELECTION OF DTO TO SEC GR: Valid contract if fair and reasonable

DTO – Directors, trustees, officers EXP: Fraud

Dies, resigns, cease to hold office – heirs, sec, officer, SEC. 34 – DISLOYALTY OF DIRECTOR
director, trustees, or officer himself report such fact to SEC
Doctrine of Corporate Opportunity – kinumpetensya ni
SEC. 27 – DISQUALIFICATION OF DTO director si corporate business

1. IMPRISONMENT FOR 6 YEARS OR MORE  Refund all profits

2. VIOLATION WITHIN 5 YEARS AFTER ELECTION  No refund if ratified by 2/3 stockholders

SEC. 28 – REMOVAL OF DT – 2/3 vote of stkh/mem at SEC. 35 – EXECUTIVE COMMITTEE

meeting
 By-laws
 Removal may be with or without cause.  3 members appointed by the board
 Minority DT cannot be removed without cause.
GR: May act with majority vote - EXP:
SEC. 29 – VACANCIES (other than removal/expiration of term)
1. Approval of stockholders required
 With quorum – BOD/BOT majority vote 2. Filing vacancies in the board
 death, resignation, abandonment by board with 3. Amend/repeal/adopt by-laws
quorum 4. Amend/repeal resolution of the board
 By stockholders – meeting 5. Distribution of cash dividends
 Elected only for unexpired term
TITLE IV – POWERS OF CORPORATIONS
 Increase of D/T – meeting of stockholders/members
SEC. 36 – CORPORATE POWERS AND CAPACITY
SEC. 30 – COMPENSATION OF DIRECTORS
 Express powers – by law
GR: No compensation. Only per diems.
 Implied powers – reasonably necessary to exercise
EXP: By-laws, stockholders grant with majority vote  Incidental/inherent powers – necessary to corporate
existence
LIMIT: Total yearly compensation exceeds 10% of net income
1. Sue and be sued – incident to corporate existence,
before income tax of the corp of preceding year
cannot be awarded with moral damages unless with
SEC. 31 – LIABILITY OF DTO - Liable jointly and severally for good reputation besmirched
all damages 2. Corporate name
3. Corporate seal
 Willfully and knowingly vote/assent to unlawful acts 4. Amend articles
 Gross negligence 5. Adopt by-laws
 Bad faith 6. Issue/sell (treasury) stocks and admit members –
 Personal interest conflict with their duty acquire shares of another corporation as investment
 Attempts – liable as trustee with URE
7. Acquire and convey property, securities and bonds
SEC. 32 – DEALINGS OF DTO WITH CORPORATION LIMIT: Corp may not hold alienable lands of the public
GR: Self-dealing DTO contracts are voidable domain
EXP: by lease for 25 years, renewable for 25 years, only
EXP: 1,000 hectares
8. Merger or consolidation
1. BOD quorum without D/T
9. Donations – not to political party/candidate
2. Vote of D/T/ not necessary for approval
10. Pension, retirement plans
3. Fair and reasonable contract
11. Essential, necessary powers
4. Previously authorized by BOD/BOT
5. Ratified 2/3 stockholders/members SEC. 37 – POWER TO EXTEND/SHORTEN CORPORATE TERM
SEC. 33 – CONTRACTS BET. CORPORATIONS WITH  Majority vote BOD
INTERLOCKING DIRECTORS  2/3 vote stockholders/members
Interlocking directors – stockholdings exceeding 20%  Dissenting stockholder with appraisal right

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PARCORP FINAL EXAM – CORPORATIONS
SEC. 38 – POWER TO INCREASE/DECREASE CAPITAL STOCK;
INCUR, CREATE OR INCREASE BONDED INDEBTEDNESS
(pagkakautang)
 Majority vote BOD at stockholders’ meeting
 2/3 vote outstanding capital stock
 Certificate in duplicate – signed by majority directors,
countersigned by chairman and secretary at
stockholders’ meeting
LIMITATIONS:
 Cannot decrease capital stock relieving subscribers from
paying unpaid subscriptions
 Cannot issue stock in excess allowed in articles
NECESSITY OF INCREASE:
 new shares to be issued
 issuance of stock dividends
SEC. 39 – POWER TO DENY PRE-EMPTIVE RIGHT
Pre-emptive right - capital stock increased and new shares
issued – new issue must be first offered sa naunang
stockholders bago sa public
UNLESS DENIED BY ARTICLES
SEC. 40 SALE OR OTHER DISPOSITION OF ASSETS
ALL OR SUBSTANTIALLY ALL OF ITS PROPERTY, ASSETS AND
GOOD WILL – incapable of continuing business or
accomplishing purpose
 Majority vote BOD
 2/3 stockholders/members
 Dissenting stockholder – appraisal right
 May abandon SLEMPD w/o approval by Stkh/Mem
 If usual course of business, no approval needed
 Non-stock corp – no voting rights – majority vote of
trustees
SLEMPD – sale, lease, exchange, mortgage, pledge, dispose
SEC. 41 – POWER TO ACQUIRE OWN SHARES with URE
including:
1. Eliminate fractional shares – less than 1 share
2. Collect/compromise an indebtedness
3. Pay dissenting/withdrawing stockholders
Trust fund doctrine – no distribution of assets to
stockholders without first making the payment of corporate
debts
SEC. 42 – POWER TO INVEST CORPORATE FUNDS IN
ANOTHER CORPORATE/BUSINESS/PURPOSE
 Majority vote BOD/BOT
 2/3 stockholders/members
 Written notice
 Dissenting stockholder – appraisal right
 If investment is reasonably necessary, approval by
stkh/mem not needed
SEC. 43 – POWER TO DECLARE DIVIDENDS
 Out of URE by cash/property/stock
 Delinquent stock – cash dividends applied first to
unpaid balance plus costs and expenses; stock dividends
withheld until fully paid
 Stock dividends – issued with approval of 2/3 vote
stockholders
 Pwedeng hindi magdeclare ng dividends
 PROHIBITED: Retaining surplus profits in excess of
100% of paid-in capital stock
EXP: expansion projects/programs, prohibited by loan
agreement. Retention is necessary
 Example: 500k retained earnings 100k capital stock – in
excess of 100% - must declare dividends
Unrestricted Retained Earnings – excess of assets of the
corporation over its liabilities including legal or stated capital;
for dividend distribution; kapag walang allotment ang
retained earnings
Retained earnings = assets – (liabilities and capital)
SEC. 44 – POWER TO ENTER INTO MANAGEMENT CONTRACT
 Managing Corporation
o Majority vote BOD and stockholders/members
 Managed Corporation
o Majority vote BOD and stockholders/members
o 2/3 vote stockholders/members
GR: 5 YEARS MAX service contracts/operating agreements
EXP: Exploration, development, exploitation, utilization of
natural resources provided by pertinent laws
SEC. 45 – ULTRA VIRES – beyond authorized powers, intra
vires – legitimate powers
TITLE V – BY-LAWS
SEC. 46 – ADOPTION OF BY-LAWS
 1 month after certificate of incorporation
 Majority vote stockholders/members
 Kept in principal office
 Inspection of stockholders/members during office hours
 Copy filed with SEC, attached to articles
 May adopt prior to incorporation when approved and
signed by all incorporators
 Certificate of the appropriate government agency
needed – bank, banking institution, building and loan
association, trust company, insurance company, public
utility, educational institution, other special
corporations
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PARCORP FINAL EXAM – CORPORATIONS

SEC. 47 – CONTENTS OF BY-LAWS SEC. 60 – SUBSCRIPTION CONTRACT – unissued stocks of

existing corp/corp still to be formed
1. Meetings of D/T
2. Meetings of s/m SEC. 61 – PRE-INCORPORATION SUBSCRIPTION
3. Quorum and manner of voting
GR: Irrevocable for 6 months
4. Proxies
5. Qualification, duties, compensation of D/T/O/Ee EXP: lapse of 6 months, consented revocation, fails to
6. Annual election materialize
7. Election or appointment and term of office
8. Penalties EXP TO EXP: Not revoked after submission of articles
9. Certificates for stock corp.
SEC. 62 – CONSIDERATION FOR STOCKS
10. Other matters
1. Cash
SEC. 48 – AMENDMENTS TO BY-LAWS
2. Property
1. Majority vote BOD and capital stock/members 3. Labor
2. 2/3 S/M may delegate to the board amend/repeal 4. Indebtedness
power 5. URE to capital
3. Majority vote S/M revoke delegation 6. Outstanding shares reclassified or converted
 Not less than par
TITLE VI – MEETINGS  No promissory notes/future services
SEC. 49 – KINDS OF MEETINGS – Regular or special No par-value shares – articles/board/by-laws/stockholders
SEC 50, 51, 53 - REGULAR AND SPECIAL MEETINGS OF SEC. 63 – CERTIFICATE OF STOCK AND TRANSFER OF SHARES
STOCKHOLDERS/MEMBERS AND DIRECTORS/TRUSTEES
 Certificate – signed by P/VP, countersigned by Sec/Asec,
S/M BOARD OF D/T sealed
Regular Annual Monthly
 Transfer - endorsement and delivery
Special Any time Any time
 Registration – recorded in the books (except as between
When April or by-laws
the parties)
City/municipality of
principal office Anywhere in or  No transfer of unpaid claims
Where
*Metro Manila – outside PH SEC. 64 – ISSUANCE OF STOCK CERTIFICATES – FOR FULLY
city/municipality
PAID ONLY WITH INTEREST AND EXPENSES on delinquent
shares
SEC. 52 – QUORUM IN MEETINGS – MAJORITY (half + 1)
Derivative suit – stockholder for corporation vs. X – usually
SEC. 54 – WHO SHALL PRESIDE AT MEETINGS – PRESIDENT against officers
unless by-laws provide
Individual suit – stockholder vs. corporation
SEC. 55 – RIGHT TO VOTE OF PLEDGORS, MORTGAGORS,
Representative suit – stockholdersss vs. corporation
AND ADMINISTRATORS – meron unless by-laws prohibit
SEC. 65 – LIABILITY OF DIRECTORS FOR WATERED STOCKS
SEC. 56 – VOTING IN CASE OF JOINT OWNERSHIP OF STOCK
 Watered stocks – less than par, no value, no retained
 Consent of all co-owners unless written proxy
earnings/surplus
 “and/or” capacity
 Who is liable – consented/no objection if had
SEC. 57 – NO VOTING RIGHT FOR TREASURY SHARES knowledge - solidarily liable for the difference

SEC. 58 – PROXIES – in writing signed by S/M – valid only for SEC. 66 – INTEREST ON UNPAID SUBSCRIPTIONS – by-laws or
the meeting – LIMIT 5 YEARS legal rate 6%

SEC. 59 - VOTING TRUSTS – Group of stockholders appoint a SEC. 67 – PAYMENT OF BALANCE OF SUBSCRIPTION
person to vote for them – LIMIT 5 YEARS
1. Call or contract date
TITLE VII – STOCKS AND STOCKHOLDERS 2. 30 days unpaid
3. Declared as delinquent stock
4. Subject to sale at public auction

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PARCORP FINAL EXAM – CORPORATIONS
SEC. 68 – DELINQUENCY SALE
Delinquent stock holder – pays balance, interest,
advertisement, expenses BIAE OR
BOD – public auction to a bidder paying full amount BIAE; if
no bidder, corporation may bid – treasury shares
SEC. 69 – WHEN SALE MAY BE QUESTIONED
 No recovery of DS if there is ground of
irregularity/defect in notice or sale itself
 UNLESS pays within 6 months from the date of sale
SEC. 70 – COURT ACTION TO RECOVER UNPAID
SUBSCRIPTION – sale at public auction or institute court
action
SEC. 71 – EFFCT OF DELINQUENCY – No voting rights but has
right to dividends (applied first to the unpaid balance)
SEC. 72 – RIGHTS OF UNPAID SHARES – HAS ALL RIGHTS
(vote) – shares not yet declared delinquent
SEC. 73 – LOST OR DESTROYED CERTIFICATES
1. Affidavit with evidence
2. Publish notice in newspaper for 3 weeks
3. No new issue if fraud, bad faith, negligence
TITLE VIII – CORPORATE BOOKS AND RECORDS
SEC. 74 – BOOKS TO BE KEPT; STOCK TRANSFER AGENT
 Kept at principal office
 Inspection at business hours
 Refuse to allow examine of have copy – liable to
damages, punishable under Sec 144
 Defense to any action - improperly used information
 Stock and transfer book
SEC. 75 – RIGHT TO FINANCIAL STATEMENTS of STKH/MEM
– balance sheet and income statement
< 50,000 paid up capital – certified under oath by treasurer
> 50,000 paid-up capital - certified by independent CPA
TITLE IX – MERGER AND CONSOLIDATION
SEC. 76 – PLAN OF MERGER OR CONSOLIDATION
1. Names of corporations - constituent corporation
2. Terms and mode
3. Statement of changes in articles
4. Necessary provisions
 2 or more corporations merge – constituent corporation
 New single corporation – consolidated corporation
SEC. 77 – STOCKHOLDERS’/MEMBERS’ APPROVAL
 Majority vote BOD/BOT
 2/3 vote of stockholders/members
 Dissenting stockholder – appraisal right
 If plan abandoned, no appraisal right
 Amendment to plan – majority vote BOD/T, 2/3
stkh/mem – agreement of merger or consolidation
SEC. 78 – ARTICLES OF MERGER OR CONSOLIDATION
 Signed by P/VP, countersigned Sec/Asec of each corp
 Plan of M/C
 Number of outstanding shares/members
 Voting for and against the plan
SEC. 79 – SEC APPROVAL AND EFFECTIVITY OF M/C
 Articles submitted to SEC in quadruplicate for approval
 Banks, banking institutions, building and loan assc., trust
companies, financial intermediaries, insurance
companies, public utilities, educational institutions,
special corporations – favorable recommendation of
appropriate govt agency
 SEC – issue certificate of merger/consolidation
 If believed contrary to code – SEC set hearing
SEC. 80 – EFFECTS OF M/C
1. Becomes single corporation
2. Separate existence ceases
3. Possess rights, duties and liabilities
4. Rights, properties, receivables, choses in action, interest
deemed transferred
5. Liable for al liabilities and obligations
 Right of creditors/liens shall not be impaired
TITLE X – APPRAISAL RIGHT
SEC. 81 – INSTANCES OF APPRAISAL RIGHT - dissent and
demand payment of fair value of shares from URE
1. Amendment to articles affecting shares/preferences
2. Extending/shortening corporate term
3. SLEMPD of all or substantially all corporate property
4. Merger or consolidation
SEC. 82 – HOW RIGHT IS EXERCISED
1. Dissent
2. Written demand 30 days after vote taken (waived if no
demand)
3. Appraisal by STKH/CORP
4. Appraisal by 3 disinterested persons (if cannot agree)
5. Payment from URE
SEC. 83 – EFFECT OF DEMAND AND TERMINATION OF RIGHT
 All rights – voting and dividends – SUSPENDED except
fair value payment
SEC. 84 – WHEN RIGHT TO PAYMENT CEASES
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PARCORP FINAL EXAM – CORPORATIONS

GR: No withdrawal of demand SEC. 91 – TERMINATION OF MEMBERSHIP – in articles/by-

laws – extinguishes all rights
EXP:
CHAPTER II – TRUSTEES AND OFFICERS
 Withdrawn by stkh, consented by corp
 Corporate action abandoned/rescinded SEC. 92 – ELECTION AND TERM OF TRUSTEES
 SEC disapproved
 May be more than 15
All rights are restored. Fair value of payment ceases.  3 years term
Dividends accrued shall be paid.  1/3 expires yearly
 Annual election
SEC. 85 – WHO BEARS THE COST OF APPRAISAL
 Vacancies – unexpired portion
Corporation  Must be a member to be a trustee unless articles/by-laws
provide
1. Corp offered to pay lower than fair value determined
by appraisers SEC. 93 – PLACE OF MEETINGS – any place in PH
2. Refusal is justified in an action filed by stkh
CHAPTER III – DISTRIBUTION OF ASSETS IN NON-STOCK
Dissenting stockholder CORPORATIONS

1. Corp offered same as fair value
2. Refusal is unjustified in an action filed by stkh
SEC. 68 – NOTAATION ON CERTIFICATES; RIGHT OF
TRANSFEREE
 Submit stock certificate for notation of dissenting
shares
 Failure terminates his rights
 Transferred noted shares – transferee has all rights with
dividend rights
 If transferred, no more fair value payment
SEC. 94 – RULES FOR DISTRIBUTION in case of dissolution
1. All liabilities and obligations paid
2. Assets held requiring return, transfer, or conveyance
3. Assets received and held only for
charitable/religious/benevolent/educational purposes be
transferred or conveyed to another corp/societies/org
4. Assets other than those mentioned
5. Assets distributed to persons, societies, org, corp for
profit or not
SEC. 95 – PLAN OF DISTRIBUTION OF ASSETS

TITLE XI – NON-STOCK CORPORATIONS  Majority vote BOT

 2/3 vote members with voting rights
SEC. 87 – DEFINITION
TITLE XII – CLOSE OR FAMILY CORPORATIONS
 Non-profit
 No stocks issued SEC. 96 – DEFINITION AND APPLICABILITY OF TITLE
 No dividends distributed  Issue stocks of all classes except treasury shares
 For public welfare  20 persons
 Capital is from contribution and donations  Restrictions on transfer
 Profit obtained – for furtherance of its purpose  Not list in any stock exchange or public offering
(incidental profits)
 2/3 stocks owner by another corp is not a close corp
SEC. 88 – PURPOSES  Any corp may be incorporated as close corp
 Mining or oil companies, stock exchanges, banks,
Charitable, Religious, Educational, Professional, Cultural, insurance companies, public utilities, educational
Recreational, Fraternal, Literary, Scientific, social, civic institutions and corporations vested with public interest
service, similar purposes
SEC. 97 – ARTICLES OF INCORPORATION
CHAPTER 1 – MEMBERS
1. Classification of shares and qualifications of owning
SEC. 89 – RIGHT TO VOTE – 1 VOTE PER MEMBER – may be 2. Classification of directors into one or more classes
denied, limited, broadened, by proxy, by mail, similar means 3. Greater quorum or voting requirements
SEC 90. – NON-TRANSFERABILITY OF MEMBERSHIP unless  May provide stockholders to manage business – no
articles/by-laws provide meeting for election of BOD, deemed directors, subject
to directors’ liabilities
 May provide all O/Ee be elected/appointed by stkh

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PARCORP FINAL EXAM – CORPORATIONS

SEC. 98 – VALIDITY OF RESTRICTION ON TRANSFER OF 3. Directing or prohibition any act

SHARES 4. Requiring purchase at fair value of shares
5. Provisional director
 GR: not binding unless: 6. Dissolution
 In articles/by-laws and stock certificate
 Right of first refusal/ option to purchase the shares of Provisional director – impartial person
transferring stockholder
 not receiver of corp
SEC. 99 – EFFECTS OF ISSUANCE OR TRANSFER OF STOCK OF  all rights and powers of duly elected director
A CLOSE CORPORATION IN BREACH OF QUALIFYING  right to notice and vote
CONDITIONS  removed by order or by all stockholders
 Compensation by agreement of him and corp with SEC
GR:
approval
1. Not entitled to be a stockholder
SEC. 105 – WITHDRAWAL OF STOCKHOLDER OR
2. More than the number of persons (exceeds 20)
DISSOLUTION OF CORPORATION
3. Violation of restriction
4. Corporation refuses to register the transfer of stock  Compel corporation to purchase his shares at fair value
 Compel dissolution by written petition
EXP: consented by all, amended articles
 when any directors’ acts are illegal, fraudulent,
*** Transfer may include donations dishonest, oppressive, unfairly prejudicial, wasted or
misapplied corporate assets
SEC. 100 – Valid AGREEMENTS BY STOCKHOLDERS
TITLE XIII – SPECIAL CORPORATIONS
1. Survive the incorporation
2. Shares be voted CHAPTER I – EDUCATIONAL CORPORATIONS – stock/non-
3. No provision relating to corporate affairs be invalidated stock
making them partners among themselves
SEC. 106 – INCORPORATION – Governed by special laws,
4. Not invalidated - conduct of business and corporate
suppletorily by the code
affairs restricting or interfering with BOD – liable for
managerial acts SEC. 107 – PRE-REQUISITES TO INCORPORATION – Favorable
5. Management or operation of business and affairs- recommendation from DepEd to accept articles and by-laws
personally liable for corporate torts of any educ. inst.
SEC. 101 – WHEN BOARD MEETING IS UNNECESSARY OR SEC. 108 – BOARD OF TRUSTEES
IMPROPERLY HELD - acts valid even w/o meeting
 5, 10, 15 trustees
1. Written consent of all directors  5 years term
2. Have knowledge without objection  Expire 1/5 yearly
3. Informal action with acquiescence of all STKH  Quorum for business transactions
Meeting without notice or call – action deemed ratified by CHAPTER II – RELIGIOUS CORPORATIONS – composed of
director who failed to attend unless written objection spiritual persons for furtherance of religion
SEC. 102 – PRE-EMPTIVE RIGHT IN CLOSE CORPORATIONS – SEC. 109 – CLASSES OF RELIGIOUS CORPORATIONS - one or
all stock to be issued including reissuance of treasury shares more persons
SEC. 103 – AMENDMENT OF ARTICLES OF INCORPORATION
 Corporation sole
 Delete or remove provision required by code invalid  Religious societies
 UNLESS 2/3 vote stockholders with or without voting SEC. 110 – CORPORATION SOLE – administer/manage -
rights formed by chief archbishop, bishop, priest, minister, rabbi,
SEC. 104 – DEADLOCKS other presiding elder

SEC arbitrate dispute ordering SEC. 111 – ARTICLES OF INCORPORATION – filed with SEC –
desire of corporation, Ru&Reg&Discipline, administration and
1. Cancelling or altering provision in articles/by-laws/STKH management, vacancy, principal office
agreement
2. Cancel, alter, enjoin resolution or act SEC. 112 – SUBMISSION OF ARTICLES OF INCORPORATION

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PARCORP FINAL EXAM – CORPORATIONS

1. Verified with affidavit or affirmation 3. Publication for 3 consecutive weeks in place of principal
2. Accompanied by copy of commission, certificate of office or if none, general circulation in PH
election or letter of appointment 4. Resolution by the board
3. Documents notarized 5. Certificate of dissolution from SEC
 Properties held in trust by him for sole benefit of his
SEC. 119 – VOLUNTARY DISSOLUTION WHERE CREDITORS
church...
ARE AFFECTED
SEC. 113 – ACQUISITION AND ALIENATION OF PROPERTY
1. Petition for dissolution signed by BOD/T
 Purchase real and personal property 2. 2/3 vote stockholders/members
 Sell and mortgage real property by order from RTC 3. SEC order for objections by any person
 Application for leave to RTC to sell/mortgage by petition 4. Order published for 3 weeks in general circulation in
made by him and may be opposed by the members place of principal office or 3 places
5. SEC hear and try objections
SEC. 114 – FILLING OF VACANCIES – successors permitted to 6. No sufficient objections – judgment to dissolve
transact business, administer properties, exercise all powers 7. May appoint receiver to collect assets and pay debts
SEC. 115 – DISSOLUTION – voluntary declaration of SEC. 120 – DISSOLUTION BY SHORTENING CORPORATE
dissolution – cease operations except for winding up TERM – approved amended articles, subject to liquidation
1. Name of corp SEC. 121 – INVOLUNTARY DISSOLUTION – SEC order
2. Reason
3. Authorization by religious denomination  Violations of the code
4. Who will supervise winding up  Deadlocks in close corporations
 Mismanagement of a close corporation
SEC. 116 – RELIGIOUS SOCIETIES - Non-stock corporation  Suspension or revocation of certificate of registration
governed by a board but with religious purposes. It is
SEC. 122 – CORPORATE LIQUIDATION
incorporated by an aggregate of persons, e.g. religious order,
diocese, synod, sect, etc. 1. By corporation
 Written consent and/or 2/3 votes of mem 2. By appointed receiver – 3-year period not applicable
 Incorporate for administration 3. By trustees to whom assets are conveyed – may (be)
 BOT 5-15 sue(d)
 3 years for winding up/liquidation
TITLE XIV – DISSOLUTION  Prosecute/defend suits, settle affairs, distribute assets,
not continue business
SEC. 117 – METHODS OF DISSOLUTION - termination of
 Convey all properties to trustees for the benefit of
corporate existence
STKH/MEM/CR/other persons in interest
 Voluntary  Corporation – all interest terminates
o Vote of BOD/T no creditors  Trustees – legal interest
o SEC judgment after hearing of petition  STKH/MEM/CR/Others – beneficial interest
o Shortening of corporate term  Unknown/cannot be found STKH/MEM/CR – assets
o Corporation sole – declaration of dissolution distributable shall be escheated to the city/municipality
 Involuntary where assets are located
o Expiration of term GR: No corporation shall distribute any of its assets/property
o Legislative enactment - whenever the common good (trust fund doctrine)
so requires EXP: Decrease of capital stock or lawful dissolution and
o Failure to formally organize in 2 years – Sec. 22 payment of debts and liabilities
o Order of SEC
o Insolvency or bankruptcy TITLE XV – FOREIGN CORPORATIONS
 Change of name does not dissolve SEC. 123 – DEFINITION AND RIGHTS
 Formed under laws other than the Code (Incorporation
SEC. 118 – VOLUNTARY DISSOLUTION WHERE NO
test) and whose laws allow Filipino citizens and
CREDITORS ARE AFFECTED
corporations to do business in its own country or state
1. Majority vote of BOD/T (Reciprocity rule)
2. 2/3 vote stockholders/members

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PARCORP FINAL EXAM – CORPORATIONS
 Right to transact business in the PH after obtaining
license and certificate of authority from appropriate
govt agency
 Control test – wartime – domestic corporation controlled
by enemy alien deemed foreign corporation
 No legal existence
SEC. 124 – APPLICATION TO EXISTING FOREIGN
CORPORATIONS – license issued
SEC. 125 – APPLICATION FOR A LICENSE
 Articles, by-laws translated to official language in PH
 In good standing
 Solvent and in good financial condition
 Setting forth assets and liabilities not exceeding 1 year
prior
 Authority from the appropriate government agency
 Foreign banking, financial and insurance companies -
other provisions
SEC. 126 – ISSUANCE OF A LICENSE
 Commencement – license issued
 Term – as long as it retains authority unless sooner
surrendered, revoked, suspended, annulled
 Deposit securities for future and present creditors of the
licensee in PH in the actual market value of at least
P100,000
 6 months after each fiscal year of the license – deposit
additional securities equivalent in actual market value of
2% of gross income exceeding P5 million
 Additional deposit increased if actual market value
decreased by at least 10% at the time they were
deposited
 Entitled to collect interest or dividends on the securities
deposited
 If cease to do business in PH, deposit to be returned
when licensee has no liability to PH residents and govt
SEC. 127 – WHO MAY BE A RESIDENT AGENT – resident
individual or domestic corporation of good moral character
and of sound financial standing
SEC. 128 – RESIDENT AGENT; SERVICE OF PROCESS
 Written power of attorney designating resident agent
 Summons made – SEC mail copy at its home or principal
office – necessary part to complete service
 Expenses incurred by SEC paid in advance at whose
instance the service is made
 Resident agent – change of address must notify SEC
ASAP!
Resident agent – to receive in behalf of a foreign corp any
summons and other legal processes in all actions or legal
proceedings against corporation
“TRANSACTING BUSINESS” – continuous not temporary,
soliciting contracts, opening offices, appointing reps or
distributors, participating in mgmt supervision or control of
any domestic business, commercial dealings – investments
not included
SEC. 129 – LAW APPLICABLE – bound by laws applicable to
domestic corporations of the same class except for creation,
formation, organization, dissolution
SEC. 130 – AMENDMENTS TO ARTICLES OF INCORPORATION
OR BY-LAWS OF FOREGIN CORPORATIONS – filed with SEC,
with appropriate govt agency, not altering or enlarge
purpose/s
SEC. 131 – AMENDED LICENSE – Change of corporate name
and other or additional purpose/s – endorsed by appropriate
govt agency
SEC. 132 – MERGER OR CONSOLIDATION INVOLVING A
FOREIGN CORPORATION LICENSED IN THE PHILIPPINES
With a domestic corporation
 Permitted by PH laws, law of incorporation in its home
country
 Requirements of merger or consolidation
With another foreign corporation:
 Files articles of M/C
 If it is the absorbed corp, petition for withdrawal of its
license
SEC. 133 – DOING BUSINESS WITHOUT A LICENSE
By FC – no suits permitted to be maintained or intervened
UNLESS:
 Isolate business transaction in PH
 Protection of its trade name or trademark in PH
 Non-business transactions
To FC – may be sued before PH courts on any valid cause of
action
VALIDITY OF CONTRACTS OF UNLICENSED FC
 Contract void
 Valid to innocent parties i=
 Enforceable upon compliance with the law
SEC. 134 – REVOCATION OF LICENSE – grounds
1. Faiure to file annual report/pay fees
2. Faiure to appoint/maintain resident agent
3. Faiure to change address of resident agent
4. Faiure to submit authenticated copy of amendment
of articles inc,m/c, by-laws
5. Misrepresentation
6. Faiure to pay taxes, impost, assessments, penalties
lawfully due
7. Outside purpose
8. Transactions as agent acting for and in behalf of any
FC unlicensed
9. Unfit to transact business
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PARCORP FINAL EXAM – CORPORATIONS

SEC. 135 – ISSUANCE OF CERTIFICATE OF REVOCATION and

copy to appropriate govt agencyL

SEC. 136 – WITHDRAWAL OF FOREIGN CORPORATIONS -

petition for withdrawal

Requirements:

 Claims paid, compromised, settled

 Taxes, imposts, assessments, penalties lawfully due paid
 Published for 3 weeks in general circulation in PH

-oOo-

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