Earl M.

Tabasuares
JD III
CORPORATION LAW

1.) Will Mandamus lie to compel the Securities and Exchange Commission to approve an
amendment to the Articles of Incorporation?

Answer: It depends. Mandamus will lie if such amendment to the Articles of Incorporation is
in compliance with the Revised Corporation Code of the Philippines. On the other hand, the
Securities and Exchange Commission cannot be compelled by Mandamus if it appears that any
amendment to the Articles of Incorporation is not in compliance with the requirements of the
Revised Corporation Code of the Philippines.

2.) Can a corporation which has acquired the name and assets of a dissolved corporation, prevent
the use of the corporate name by another?

Answer: Yes. A corporation which has acquired the property and name of a dissolved
corporation is in the same position as the original corporation would have been had it
continued to exist and may therefore, in any proper case, enjoin the use of such name by
another.

3.) Distinguish a corporation de facto from a corporation de jure.

Answer: A corporation de facto is one which actually exists for all practical purposes as a
corporation but which has no legal right to corporate existence as against the State. It is a
corporation from the fact of its acting as such, though not in law or right a corporation.

Whereas, a de jure corporation is one created in strict or substantial conformity with

the mandatory statutory requirements for incorporation and the right of which to exist as a
corporation cannot be successfully attacked or questioned by any party even in a direct
proceeding for that purpose by the State.

4.) Mr. X issued a promissory note in favor of Corporation Y. In an action for collection can Mr. X
interpose the defense that Corporation Y is a de facto corporation and cannot be a party to a
judicial action?

Answer: No, because Mr. X is attacking the existence of Corporation Y collaterally. The
defense of Mr. X is merely an incident to the main action or principal case the purpose of
which is to enforce the contract of Corporation Y with Mr. X.

The right of Corporation Y to exist as a corporation can only be inquired into directly
in a quo warranto proceeding which is brought precisely for the purpose and this proceeding
can only be instituted by the Government through the Solicitor General and not by Mr. X.
5.) Who has the authority to question the existence of a corporation de facto?

Answer: Pursuant to section 19 of the Revised Corporation Code of the Philippines, the
Solicitor General has the authority to question the existence of a corporation de facto, in a
quo warranto proceeding.

6.) What is a corporation by estoppel? What are the liabilities of persons who ostensibly present
themselves as a corporate personality knowing that it has no authority to do so?

Answer: Under section 20 of the Revised Corporation Code of the Philippines, a Corporation
by estoppel refers to all persons who assume to act as a corporation knowing it to be without
authority to do so and are therefore estopped from denying its corporate existence.

All persons who assumes to act as a corporation shall be liable as general partners for
all debts, liabilities and damages incurred or arising as a result thereof.

7.) What are the rules as provided by the Corporation Code as to the non-use or non-
commencement of operation by a corporation after the issuance of its Certificate of
Registration?

Answer: Section 21 of the Revised Corporation Code of the Philippines provides that the non-
use or non-commencement of operation by a corporation within 5 years after the issuance of
its Certificate of Registration shall be deemed revoked as of the day following the end of the
5 year period.

8.) What are the qualifications for a person to be eligible as director or trustee in a domestic
corporation duly incorporated?

Answer: The qualifications for a person to be eligible as director or trustee in a domestic

corporation under the Revised Corporation Code of the Philippines are the following: that
every director(including an incorporating director) must own at least one (1) share of the
Capital Stock; the share of stock held by the director must be registered in his name on the
books of corporation; and every director must continuously own at least a share of stock
during his term, otherwise, he shall cease to be a director.

A person who has the disqualification mentioned in section 26 of the Revised

Corporation Code of the Philippines is not qualified to hold the position of director or trustee.

9.) What do you understand by the “business judgment rule”?

Answer: The business judgment rule provides that resolutions and transaction entered into
by the Board within the powers of the corporation cannot be reversed by the courts not even
on the behest of the stockholders.

Directors and officers acting within such business judgment cannot be held personally
liable for such acts.
10.) What is the usual term of office of directors and trustees? What is the principle of hold-over?

Answer: Section 22 of the Revised Corporation Code of the Philippines provides that the term
of office of members of the Board of Directors of stock corporations is for a (1) year term of
office.

The term of office of members of the Board of Trustees of a non-stock corporations,

section 22 of the Revised Corporation Code of the Philippines provides that all Trustees shall
now be elected for a term not exceeding (3) years.

The Principle of hold-over refers to a situation which arises when no successor is

elected due to a valid and justifiable reason such as a pending election protest on the outcome
of the annual election, in which case the incumbent holds over and continues to function until
another officer is chosen and qualified.

11.) When does a citizenship requirement for Directors or Officers of a corporation apply?

Answer: The citizenship requirement for Directors or officers of a corporation apply in

corporations not organized under the Code.

Thus, in case of domestic banks, the general Banking Law of 2000 allows non-Filipino
citizens to become members of the board of directors to the extent of the foreign participation
in the equity of said bank.

For Rural Banks (sec.5, RA No. 7353), registered investment companies (sec. 15, RA
No. 2029), and private development banks (sec. 4, RA No. 4093), all the members of the board
of directors must be citizens of the Philippines.

Under the 1987 Constitution of the Philippines, aliens may not be elected as directors
or officers of corporations engaged in business or industries which are totally or partially
nationalized business or industries.