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68)
A. Definition and Attributes of a Corporation
Corporation
A corporation is an artificial being created by operation of law, having the right
of succession and the powers, attributes and properties expressly authorized
by law or incident to its existence.
Attributes of a corporation
1. It is an artificial being
2. It is created by operation of law
3. It has the right of succession
4. It has the powers, attributes and properties expressly authorized by law
or incident to its existence.
Corporation as an artificial being
A corporation is a juridical entity with a personality separate and distinct from
its members or stockholders. It is not a person but the law treats it as though it
is a person. The stockholders or members compose the corporation but they
are not the corporation.
Doctrine of Piercing the Veil of Corporate Entity
Being a mere creature of law, a corporation may be allowed to exist solely for
lawful purposes. But where the fiction of corporate entity is being used as a
cloak or cover for fraud or illegality, this fiction will be disregarded and the
individuals composing it will be treated as identical.
Corporation as a creation of law or by operation of law
General Rule:
A corporation cannot come into existence by mere agreement of the parties as
in the case of business partnership. They require special authority or grant
from the State. This power is exercised by the State through the legislative
department either by a special incorporation law which directly creates the
corporation (Examples: GSIS, SSS, Pag-Ibig, etc.) or by means of a general
incorporation law (BP Blg. 68) under which, by operation of said law, persons
desiring to be and act as a corporation may incorporate.
Exception:
Corporations by prescription (Example: Roman Catholic Church) need not
obtain legislative grant or authority to exist.
Right of Succession
A corporation has the capacity of continuous existence regardless of the death,
withdrawal, insolvency or incapacity of the individual members of the
stockholders and regardless of the transfer of their interest or shares. However,
this does not mean that a corporation is immortal.
Under the Corporation Code, a corporation has a life expectancy of fifty (50)
years from the date of its incorporation (Secs. 14 and 15) unless sooner
dissolved or unless said period is extended (Sec. 11)
Powers, attributes and properties of the corporation
A corporation, being a mere creation of law, may exercise only such powers as
are granted by law of its creation. An express grant, however, is not necessary.
All powers which may be implied from those expressly provided by law and
those which are incidental or essential to the corporations existence may also
be exercised.
PARTNERSHIP
CORPORATION
How Created
Mere agreement.
By operation of law.
Number of Incorporators
At least 2 parties
At least 5 (except corporation sole).
Commencement of Juridical Personality
Upon execution of contract of
Upon issuance of certificate of
partnership.
incorporation (except corporation
sole).
Powers
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Disadvantages:
To have a valid and binding corporate act, formal proceedings, such as board
meetings are required;
The business transactions of a corporation is limited to the State of its
incorporation and may not act as such corporation in other jurisdiction unless
it has obtained a license or authority from the foreign state;
The shareholders limited liability tends to limit the credit available to the
corporation as a separate legal entity;
By the very nature of shares of stock which are personal properties,
transferable at will by the owners thereof, transfer of shares may result to
uniting incompatible and conflicting interests;
The minority shareholders have practically no say in the corporate affairs;
In large scale enterprises, stockholders voting rights may become merely
fictitious and theoretical because of disinterest in management, wide-scale
ownership and inaccessible place of meeting;
Double taxation may be imposed on corporate income;
Corporations are subject to governmental regulations supervision and control
including submission of reportorial requirements not otherwise imposed in
other business form.
Government powers in relation to corporations
B. Classification of Corporations
1. Stock and non-stock corporations
2. Corporations created by special law
3. Public and private corporations
4. Ecclesiastical and lay corporations
5. Aggregate and sole corporations
2) Corporation by estoppel
e. Organization and commencement of business
1) Corporate organization
2) Commencement of business transaction