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NATIONALITY OF CORPORATIONS:

Tests:
1. Control Test: Determine whether 60% of the voting outstanding capital stock of the corporate investor is of Filipino ownership.
- When used: If Filipino nationality requirement is 60%

2. Grandfather Rule: Determine the nationality of the corporate investors of the corporate investors
- When used:
a. Filipino nationality requirement is more than 60%
b. If after applying the control test, it appears that the Filipino ownership of the corporate investor is less than 60%
c. When there is doubt (Narra doctrine)

CONTROL AND MANAGEMENT OF CORPORATIONS:

Other
Shareholders Board of Directors Officers
committees

Stockholders/members Directors/Trustees Executive President


Name Committee Secretary
Treasurer
Stock corporations: Stock corporations: At least 3
Min – 5; max – none Min – 5; max – 15 members from the
EXN: Merger and consolidation, BOD. Other
Non-stock corporations: there can be up to 21 directors committee
Min – 5; max – none members who are
Non-stock corporations: not directors
Number
Corporation sole: Min – 5; max – none cannot vote
Min – 1
Close corporations: Educational institutions:
Min – 5; max – 20 Min – 5; max – 15 (but always in
multiples of 5)

GR: No nationality requirement Secretary is


EXN: See Foreign Investment Negative required to
Nationality
List be a PH
citizen
Only on incorporators and directors Majority are residents Secretary is
majority of whom are required to be required to
Residence
residents be a
resident
Personality Natural or Juridical Natural Natural Natural
None 1. Must be a stockholder/member President
Qualifications 2. Of legal age must be a
director
None except in industries in the 1. Must not have been convicted Same as
Foreign Investment Negative List of an offense punishable by directors
wherein foreign nationals are not imprisonment for a period
allowed to be SHs exceeding 6 years
Disqualifications
2. Must not have committed a
violation of the Code within 5
years prior to the date of
election or appointment
Common shares have no term Stock corporations: 1 year
Redeemable shares have a term
Non-stock corporations:
Generally, 3 years; term is
staggered:
The term of office of 1/3 of their
Term number shall expire every year.
Subsequent elections of trustees
comprising of 1/3 of the board shall
be held annually and trustees so
elected shall have a term of 3 years.
Example:
6 trustees
2 trustees will serve for 1 year
2 trustees will serve for 2 years
2 trustees will serve for 3 years

Educational institutions:
Generally, 5 years
Same staggered term as non-stock
corporation trustees but change 1/3
to 1/5

Majority of VOTING OUSTANDING Majority of number of directors as


SHARES; By-laws may provide for a stated in the AOI; By-laws may
higher quorum provide for higher quorum
Quorum
EXN: quorum is majority of ALL
SHARES for cases which require even
non-voting shares to vote
Voting Personal/proxy/VTA Personal Personal
GR: all matters requiring voting of SEC circular allows BOD to meet
stockholders require a meeting: via telecom
1. Extending or shortening
corporate term
2. Increasing or decreasing
capital stock
3. Creating or increasing bonded
indebtedness
4. Waiver of pre-emptive right:
Approval of SHs for the
corporation to issue shares in
exchange for property needed
for corporate purposes or in
payment of a previously
contracted debt
5. Sale or disposition of
corporate assets
6. Investment of corporate funds
in another corporation or
business or for any other
purpose that is not necessary
Meetings
to accomplish the
corporation’s primary purpose
as stated in the AOI
7. Declaration of stock dividends
8. Entering into a management
contract
9. Amendment to By-laws
10. Revocation of delegation to
the BOD of power to amend
By-laws

EXN: Code allows written assent or


voting by mail
1. Amendment of AOI involving
matters other than the above
– code allows for a written
assent
2. Close corporations, involving
any matter, when by-law
allows for voting by mail

Venue of Principal place of business Anywhere Anywhere Anywhere


meetings
Frequency of At least once a year At least once a month
meeting
Regular meeting: 2 weeks prior 1 day prior
Special meeting: 1 week prior
Notice Notice requirement may be waived
Notice requirement may be waived expressly or impliedly
expressly or impliedly. Any meeting
improperly called shall be valid
provided ALL SHs are present

Voting table

Stockholders’ Approval Directors’ Approval

Resolutions Majority 2/3 Majority of all Majority of quorum


Amendment of AOI 
(V & NV)


Adoption or Amendment

of By-Laws
(V & NV)

Delegate to directors 
amendment of by-laws

Revocation of delegation 

Removal of Directors 

Election, appointment or
removal of corporate 
officers


Delegation of powers to
Executive Committee (If BOD is authorized by
the by-laws)

If there is no longer a
quorum in BOD

In cases of vacancy
Filling of Vacancies
resulting from expiration If still constitute a
of term or removal quorum

In case of vacancy
resulting from increase
in number of directors


Compensation of
Directors (10%)

Extend or shorten term  

Fixing the par of no par 



shares, unless authority
delegated to Directors in
If there is delegation
AOI

Entering into 

Management Contract

Management Contract, if 
1/3 managed corp is
controlled by managing (of managed corp)
corp

Contracts w/ Directors 
(Sec 33)

Contracts w/ corps w/ 
interlocking Directors
(Sec 37)

Distribution of stock 
dividends (Cash Divs>
BOD)


Sale of all or

substantially all assets
(V & NV)

Sale, mortgage,
disposition in ordinary 
course of business

Investment corporate
funds in another 
corporation or for any

other purpose not
(V & NV)
related to primary
purpose

Investment for primary



purpose


Merger & consolidation 
(V & NV)
Increase or Decrease 
AKS or Bonded 
Indebtedness (V & NV)


Dissolution (includes
shortening of term)
(V & NV)

Declaration of cash

dividends

Declaration of stock
 
dividends

Case requiring V & NV



to vote

CORPORATION BY ESTOPPEL

1. De jure?
2. De facto?
3. Who is claimant? Did he contract with the ostensible corp believing that the latter is a de jure one? If yes, he cannot enforce
personal liability
4. Corporation by estoppel
- Was there misrepresentation? If yes, then corpo members are liable as general partners (???)
- Those acting in behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held to be
liable as general partners
5. In any case, liability cannot be escaped by alleging that there is no corporate personality

ULTRA VIRES DOCTRINE

Questions to ask:
1. Is it in excess of the power granted in AOI?
2. If it’s not a power granted in AOI, is it necessary and incidental?
3. If the power is granted in the AOI, is it illegal?

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