Corporate Powers

Kinds
1. Express those that are expressly
authorized in the Corpo Code, other laws, Art of
Incorpo or Charter
2. Incidental those that are incidental to its
existence
3. Implied necessarily implied from the
exercise of their expressed powers
a. acts in the usual course of business
b. acts to protect debts owing to the
corpo
c. embarking on a different buss usually
to collect debts out of profits
d. acts to protect or aid employees
e. act to increase business
General Powers and Capacity (Sec. 36)
1. To sue and be sued
2. Of succession
3. To adopt and use a corporate seal
4. To merger and consolidation
5. For stock corp: to sell and issue stocks
and treasury shares; non-stock: admit
members
6. To sell, purchase, MG, pledge, deal with
personal and real props
7. To exercise powers incidental to carrying
out its purposes
8. To amend its AoI
9. To create bylaws
10. To make reasonable donations to
charitable, civic, cultural institutions and
the like except to pol candidates, parties
or activities of partisan politics
11. To establish pension, retirement plans
for dir, officers, trustees, employees
Other Powers
1. Extension or shortening of corporate
term (Sec. 37)
a. Approval by majority of the
board of dir/trustees
b. Notice to each stockholder of the
proposed action, time and place
of meeting
c. Ratification
by
stockholders
representing
2/3
of
the

outstanding capital stock; if nonstock 2/3 of the members

2. Power to decrease or increase capital
stock (Sec. 38)
a. By increasing or decreasing the
number of shares but retaining
the par value
b. By increasing or decreasing the
par value but retaining the
number of shares
c. By increasing or decreasing both
- REQ: a,b,c of No. 1 plus:
o Duplicate
certificate
signed by majority of the
board, countersigned by
the chairman and sec of
the stockholders
o If
increase:
25%
of
increased cptl must be
subscribed, 25% of w/c
paid in cash or prop
o If decrease: must not
prejudice the creditors
o Filing of cert to and
approval by the SEC
3. Power to incur, create or increase
bonded indebtedness (Sec. 38)
- Corporate bond refers to the
obligation to pay an amount of
money at a fixed rate of interest
on at a future time, whether
secured or not, evidenced by a
written
instrument
called
debenture (serial obli or notes
issued on the basis of the corpo
general
credit)
or
bonded
indebtedness (secured by a MG
on corporate property)
4. Sell, dispose, lease, encumber all or
substantially all corporate assets (Sec.
40)
- REQ: a,b,c of No. 1 plus:
o Sale of assets shall be
subject to laws on illegal
combinations
and
monopolies

Any
dissenting
stockholder may exercise
right to appraisal
o In a non-stock corpo w/o
voting
rights
among
members, majority vote
of board of trustees
enough to enter into any
transaction authorized by
Sec 40
- Sale or disposition shall be
deemed to cover substantially all
assets if:
o Corpo will not be able to
continue its business
o Corpo will not be able to
carry out the purposes for
w/c it was incorpo
- No need for ratificatory vote of
stockholders/members if:
o Proceeds to be used for
the
conduct
of
the
remaining business
o Necessaryin the usual and
regular course of business
5. Power to acquire own shares (Sec. 41)
- Provided
the
corpo
has
unrestricted reatined earnings
Instances:
a. To eliminate fractional shares
from stock dividends
b. To collect or compromise
indebtedness
to
the
corporation, arising out of
unpaid subscription, in a
delinquency sale and to
purchase delinquent shares
sold
c. To
pay
dissenting
or
w/drawing
stockholders
entitled to payment
6. Invest corporate funds in another corpo
or business engaged in purpose other
than primary purpose (Sec. 42)
- May invest corpo prop in buss
engaged in purposes other than
primary purpose PROV one of the
secondary purposes in Sec. 42
o

Investment of money or prop

PROV it complies with SEC
requirements
o Prop not used by corpo or
lease is not on a reg basis
o More useful as investment
rather than to remain idle
o No express restrictions in
the by-laws or AoI
o Not a scheme to prejudice
creditors or not resulting
to infringement of Trust
Fund Doctrine
o Compliance w/Sec. 42

REQ:
a. Reso by majority of the board
b. Reso by 2/3 controlling interest
of stockholders
c. Prior notice
d. Ratification to be made in a
meeting duly called for the
purpose
e. Dissenting
stockholder
may
exercise right to appraisal
f. Corpo not allowed to engage in a
buss not enumerated in the AoI
unless amended to conform
7. Power to declare dividends out of
unrestricted retained earnings
Retained Earnings
Assets - Liabilities and Legal
Capital
Unrestricted
- If retained earnings not set aside
by the board for corpo purpose
Dividends
- Corpo profits set aside and
declared by the board to be
distributed among shareholders
at a fixed time
- Forms: cash, prop, stock
Corporations are prohibited from retaining
surplus profits in excess of 100% of their paidin capital EXC:
a. When justified by definite corporate
expansion approved by the board
b. When prohibited under any contract
w/financial insti or creditor to declare

dividends w/o its consent and consent

not yet secured
c. When clearly seen under the special
circumstances that there is a need to
reserve
such
as
for
probable
contingencies
8. Power to enter into management
contract (Sec. 44)
Management Contracts whereby the corpo
enters into a contract to manage or operate
all or substantially all of the buss of another
corpo
- Sec. 44 refers to mngt contracts
w/other
corpo
not
natural
persons
REQ:
a. Approval by the majority of the
quorum of the board
b. Ratification
by
stockholders
representing
majority
of
outstanding capital stock or
members of both managed and
managing corpo
c. Approval by 2/3 stockholders of
the managed corpo when:
i.
Stockholder/s
representing interest of
both the managed and
managing corpo owns 1/3
of the total outstanding
capital
stock
of
the
managing corpo
ii.
Majority of members of
the
managed
also
compose majority of the
members of the managed