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REVIEWER: CORPORATION LAW

Sec. 1. Title of the Code. – This Code shall 3. The stockholders and members
be known as “The Corporation Coder of the among themselves; and
Philippines”. 4. The corporation and 3rd persons

Corporation Code of the Philippines – Constitutional rights of a corporation:


B.P. 68:
1. Due process
 Was enacted on March 1, 1906 2. Equal protection of the law
 Approved on April 1, 1906 3. Protection against unreasonable
 Took effect on May 1, 1906 searches and seizures

What happened to existing corporations Concession Theory – a corporation is an


after the enactment of the law? artificial creature without any existence until
it has received the approval of the state
All corporations created before B.P. acting according to law through the
68 were given two years to comply with the Securities and Exchange Commission.
provisions of the law. Thus, all corporations
established before and after enactment of Doctrine of Separate Personality – a
B.P. 68 shall be governed by such law. corporation has a juridical personality
separate and distinct from that of its
Note: The provisions of the Civil Code stockholders or members.
regarding AGENCY is suppletory to B.P.
68. Doctrine of Piercing the Veil Doctrine –
requires the court to see through the
Sec.2. Corporation defined. - A corporation protective shroud which exempts its
is an artificial being created by operation of stockholders from liabilities that they would
law having the right of succession and the ordinarily be subject to, or distinguishes a
corporation from a seemingly separate one,
powers, attributes and properties expressly
were it not for the existing corporate fiction.
authorized by law or incident to its
existence. Legal fiction is disregarded when:
Attributes of a Corporation: The corporation is being used as a cloak to
cover for:
1. It is an artificial being.
2. It created by operation of law. 1. Fraud or illegality
3. It enjoys the rights of succession. 2. Defeating public convenience
4. It has the powers, attributes and 3. Protecting a fraud; or
properties expressly authorized by 4. Defending a crime
law or incident to its existence.
Sec.3. Classes of corporations. –
A corporation is contract between:
Corporations formed or organized under this
1. The corporation and the state Code may be stock or non-stock
2. The corporation and its stockholders corporations. Corporations which have
or members capital stock divided into shares and are
authorized to distribute to the holders of
REVIEWER: CORPORATION LAW

such shares dividends or allotments of the 5-15 number


surplus profits on the basis of shares held are
stock corporations. All other corporations Must have May be such through
are non-stock corporations. contractual capacity a guardian

Sec.3. Classes of corporations. –


Sec.4. Corporations created by special laws Corporations formed or organized under this
or charters. – Corporations created by Code may be stock or non-stock
special laws or charters shall be governed corporations. Corporations which have
primarily by the provisions of the special capital stock divided into shares and are
law or charter creating them or applicable to authorized to distribute to the holders of
them, supplemented by the provisions of this such shares dividends or allotments of the
Code, insofar as they are applicable. surplus profits on the basis of shares held are
stock corporations. All other corporations
Sec.5. Corporators and incorporators, are non-stock corporations.
stockholders, and members. – Corporators
are those who compose a corporation, Components of a corporation:
whether as stockholders or members.
a. Board of Trustees/Directors
Incorporators are those stockholders or
b. Members/Shareholders
members mentioned in the articles of
c. Corporate Officers
incorporation as originally forming and
composing the corporation and who are 1. Corporators – are those who composing
signatories thereof. a corporation, whether as stockholders of
members. The term includes incorporators,
Corporators in a stock corporation are called
stockholders or members.
stock-holders or shareholders. Corporators
in a non-stock corporation are called 2. Incorporators – are those stockholders or
members. members mentioned in the articles of
incorporation as originally forming and
Incorporators Corporators
Signatory to the Stockholder (stock composing the corporation and who are
Articles of corporation) or signatories thereof.
Incorporation member (non-stock
corporation) 3. Stockholders or shareholders – are
those corporators in a stock corporation.
Fait Accompli; They may cease to
accomplished fact be such if they 4. Members – are those corporators in a
(the Articles of subsequently lose non-stock corporation.
Incorporation cannot their qualification
be amended to Sec.6. Classification of shares. – The shares
replace them) of stock of stock corporations may be
divided into classes or series of shares, or
Number is limited to No restriction as to both, any of which classes or series of shares
REVIEWER: CORPORATION LAW

may have such rights, privileges or shares without par value may not be issued
restrictions as may be stated in the articles of for a consideration less than the value of five
incorporation: Provided, That no share may (P5.00) pesos per share: Provided, further,
be deprived of voting rights except those That the entire consideration received by the
classified and issued as “preferred” or corporation for its no-par value shares shall
“redeemable” shares, unless otherwise be treated as capital and shall not be
provided in this Code: Provided, further, available for distribution as dividends.
That there shall always be a class or series
of shares which have complete voting rights. A corporation may, furthermore, classify its
shares for the purpose of insuring
Any or all of the shares or series of shares compliance with constitutional or legal
may have a par value or have no par value as requirements.
may be provided for in the articles of
incorporation: Provided, however, that
banks, trust companies, insurance Except as otherwise provided in the articles
companies, public utilities, and building and of incorporation and stated in the certificate
loan associations shall not be permitted to of stock, each share shall be equal in all
issue no-par value shares of stock. respects to every other share. Where the
Preferred shares of stock issued by any articles of incorporation provide for non-
corporation may be given preference in the voting shares in the cases allowed by this
distribution of the assets of the corporation Code, the holders of such shares shall
in case of liquidation and in the distribution nevertheless be entitled to vote on the
of dividends, or such other preferences as following matters:
may be stated in the articles of incorporation 1. Amendment of the articles of
which are not violative of the provisions of incorporation.
this Code: Provided, That preferred shares
of stock may be issued only with a stated par 2. Adoption and amendment of by-laws.
value. The board of directors, where
3. Sale, lease, exchange, mortgage, pledge
authorized in the articles of incorporation,
or other disposition of all or substantially all
may fix the terms and conditions of
of the corporate property.
preferred shares of stock or any series
thereof: Provided, That such terms and 4. Incurring, creating or increasing bonded
conditions shall be effective upon the filing indebtedness.
of a certificate thereof with the Securities
and Exchange Commission. 5. Increase or decrease of capital stock.

Shares of capital stock issued without par 6. Merger or consolidation of the


value shall be deemed fully paid and corporation with another corporation or
nonassessable and the holder of such shares other corporations.
shall not be liable to the corporation or to its
creditors in respect thereto: Provided; That
REVIEWER: CORPORATION LAW

7. Investment of corporate funds in another


corporation or business in accordance with
this Code.

8. Dissolution of the corporation.

Except as provided in the immediately


preceding paragraph, the vote necessary to
approve a particular corporate act as
provided in this Code shall be deemed to
refer only to stocks with voting rights.

DEFINITIONS:

A “stock” or share of stock – is one of the


units into which the capital stock has been
divided. It represents the interest or right
that the holder of the stock or stockholder
has in the corporation.

A stock certificate – certifies that one is a


holder or owner of a certain number of
shares of stock in the corporation. It is a
mere documentary evidence of the holder’s
ownership of shares and a convenient
instrument for the transfer of title.

It is a written acknowledgment by the


corporation of the inter

Incorporation – is the performance of


conditions, acts, deeds, and writings by
incorporators, and the official acts,
certification or records, which give the
corporation its existence.

Grandfather Rule –

Domestic Corporations – one incorporated


under the laws of the Philippines.

Foreign Corporation – one formed and


organized under any laws other than those of
the Philippines.

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