Escolar Documentos
Profissional Documentos
Cultura Documentos
o But such must be specifically stated in the - NS CORP. cannot be converted to a Stock corp. by
BL mere amendment
o There must be A DISSOLUTION FIRST
Governing Boards o Conversion by mere amendment is
- Such may be created tantamount to distribution of
- Provided it is allowed in the AOI/BL assets/income of the corporation to its
members
In as much as members become
Note: automatic SHs
1. No. Of Trustees that must be members- o This scheme defrauds the public especially
May be more than 15 those who have given support/donations
2. No. Of incorporating trustees-
Not more than 15 Membership
EXPN: Unless otherwise provided in the AOI/BL Approval of admission of new members
See Sec. 23
Note: Although staggered terms are allowed the rules on
election (Sec. 24) and vacancy (Sec. 29) must be applied Mode
- Not uniform, depends upon the corporation
Trustees subsequently elected - Provided in the BL
Term: 3 consecutive years
- It may be limited to one year (Sec.23) Note: members may be adopted even before the adoption of
corporate BL
Note: Notwithstanding a provision in its AOI that additional members
Founders Share under Sec. 7 is also applicable in accordance of may be accepted pursuant to the BL of the corporation
Sec. 87 par. 2
Amendment of BL
Meetings - Membership fee cannot be increased by a mere
resolution
GR: Board meetings may be held anywhere inside or outside
the Philippines
Note: When the BL provides for the holding of members Nature of Membership Rights
meeting at the principal office of a non-stock corporation - All rights arising therefrom are NON-TRANSFERABLE
conformably with the General rules in accordance with SEC.51 o Unless otherwise provided in the BL
- Meetings cannot take place anywhere else
- EXPN: there is an amendment Power of the Court
Read: Chinese YMCA of Phil. Islands v. Ching
If not place was set: Cannot do it outside the place where the
principal place is located Termination of membership
Only those provided in the BL
The authority to transfer the place of members meetings Expulsion: must be based on just and reasonable grounds
outside the place where the principal office is located must be - After notice and hearing
expressly granted by the BL. - w/o waiver he is entitled to due process
- otherwise he may claim damages
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Issue: WON MECO is a GOCC hence subject to COAs audit Note: A close corporation is also described as a Corporation de
jure and Partnership de facto
Doctrine: it is a non-stock corp but still subject to COAs audit .
A CC is essentially an Incorporated Partnership
Determining factor whether a corporation is private or gocc is A close corporation is organized primarily for the purpose of
the CREATION OF THE CORPORATION assuring limited liability to all the participants
- MECO was created under the Corporation Code, - The very objective of CC form is to enjoy the
hence, it is a PRIVATE NON-STOCK CORPORATION advantages of corporate organization
But it is still subject to COAs audit because it represents the o Ex: limitation of personal Liability at the
government and serves as the one responsible for collecting same time to retain internally the
fees for the benefit of the government partnership form of doing business
Definition
A corporation in which the stock is held in a few hands, or in Sec Opinion:
few families, and which stock is not at all or only rarely dealt in While a corporation with more than 20 SHs due to subsequent
buying and selling. transfers may no longer be classified as a close corporation
- The same will not be treated as a publicly held
One which the directors and officers have the power to fill the corporation
vacancies in their own numbers, without allowing to the o If the corporation has no intention of going
general body of stockholders and any choice or vote in their public and
election o provided that the subsequent transfers of
shares have the prior approval of the SEC
Peculiarity of a close corporation o and the offering is of limited character
1. Identity between stock ownership and active
management
- All the outstanding stocks is owned by the persons Dean R.
who are active in the management and conduct of 1. Limited Liability C...(03/06/17)
the business. - It can be ran like a partnership or corporation
- Hence, the public does not own any stocks
2. Essentially an incorporated partnership 2. Specify what kind of interest
- The stockholders consider each other as partners
- But the law treats them as a corporation
(2) all the issued stock of all classes shall be subject to one or 1. Classifications of Directors into one or more
more specified restrictions on transfer permitted by this Title; classes
and 2. Quorum and voting requirements
3. Management of the corporation by the SHs
(3) The corporation shall not list in any stock exchange or make 4. Election or appointment of officers directly
any public offering of any of its stock of any class. by the SHs
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Section 103
Note: A president of a Close Corporation who actually manages Amendment of AOI
the business is considered an EMPLOYER The amendment must be proved by the SHs in a meeting called
- Hence, he may be held jointly and severally liable for for the purpose
the obligations of the corporation to its illegally - Mere written assent not enough (Different form Sec.
dismissed employees 16)
- Applicable See Sec. 96
1. Before or after such action is taken, written consent Note: Such authority of SEC cannot be avoided by any
thereto is assigned by all the directors or agreement or provision in the AOI
2. All of the SHS have actual or implied knowledge of the
action and make no prompt objection thereto in - The SEC may order Dissolution if it will be beneficial
writing or for the SH or may provisional or additional M/T/D
- Ratification cannot take place where the action taken at a
meeting held without proper call or notice is beyond the Dissolution in case of Deadlock
corporate powers
(See Sec. 45)
Section 104 and other statutes provide for the dissolution of a
3. The directors are accustomed to take informal action
corporation in case of Deadlock
with the express or implied acquiescence of all the
- This is available to EVENLY DIVIDED BOARD
SHs or
- Not available to uneven board
4. All the directors have express or implied knowledge
o EXP: when the ODD MAN is a DUMMY
of the action in question and none of them makes
Note:
prompt objection thereto in writing
Where dissolution in case of deadlock is proper or more
beneficial -
Note: If a directors meeting is held without proper call or notice
Equity Partnership
- An action taken therein within the corporate power
- small corporations being really partnerships between
o Is deemed ratified by a director who failed
two or three people
to attend
- Who contribute their capital, skills, experience, labor,
o Unless he promptly files his written
should be treated by the court of equity as
objection with the secretary of the
partnerships in many respects
corporation after having knowledge thereof
Compared to a large corporation or who has a chance of
- This is different from Section 53, where an oral
becoming a large one, an equity partnership has a lesser chance
objection is sufficient
of improvement
Section 105
Section 102
Withdrawal of Stockholder or dissolution of Corporation
Pre-emptive right in close corporation
Right of a SH to withdraw/dissolve the corporation
- This extends to ALL stock to be issued
- Whether common or preferred
Right to WITHDRAW
- Including treasury shares
- may be exercised for any reason
o As long as they remain in the treasury
- Provided the corporation has sufficient assets to
o They really have the status of unissued
cover its debts and liabilities exclusive of capital stock
authorized shares to issue(reissue is the
Right to have the corporation dissolved
more proper term) at some future time
- Exercised by filing a written petition to SEC
- It must be founded on a legal ground
Hence, pre-emptive right is a matter of right on the part of the
SH
TITLE XIII
SPECIAL CORPORATIONS
EXCEPT: when limited or curtailed by the articles of
incorporation
CHAPTER 1- EDUCATIONAL CORPORATIONS
- Exceptions under Sec. 39 not applicable
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
Section 111
AOI
Section 107
Prerequisites to incorporation Section 112
Submission of the AOI
Incorporation
Section 113
Re Educational Institution: Acquisition and Alienation of Property
- Educational Institutions other than those established
by religious groups and mission boards Section 114
1. Shall be owned solely by PH citizens Filling of Vacancies
2. or corporations or associations , 60% of the
capital stock of which owned by PH citizens Section 115
Dissolution
NOTE:
- NS educational institution is not allowed to convert to Section 116
a NON-PROFIT educational foundation Religious Societies
o When is the conversion allowed?
Amend the AOI and BL Definition of Religious Corporation
And specify the sources and - Composed entirely of spiritual persons
application of funds in the - And which is organized for the furtherance of a
amendment religion or for perpetuating the rights of the church or
- But a STOCK corporation may be converted to a non- for the administration of church or religious work or
profit education foundation property
Section 108
Board of Trustees
Corporation Sole
Board of Trustees or directors Component|Purpose|power to hold and transmit property
1. NS Educational Corp
a. Trustees : - Corporation sole if a special form of corporation
not less than 5 usually associated with the clergy
nor more than 15 - Introduced into common law due to necessity
- it must be in multiple of 5(mandatory) - The unhappy freak of English law
- TERM of office shall be staggered with 1 year interval - It consist of one person only
(mandatory) - In this legal fiction, church properties is passed upon
o Unless otherwise provide in the AOI/BL death by operation of law
- Trustees subsequently elected shall have a term of 5 - But not to his heirs but to his successor in office
years - The corporation sole is created not just to hold but
- Trustees elected to fill vacancies occurring before the also to transmit
expiration of a particular term, shall hold office only
for the unexpired period - MERE Administrator or properties of the church
- Majority shall constitute a quorum
- Powers and authority shall be defined on the BL - IT HAS NO NATIONALITY
subject to the provisions of Cannot be considered as an alien
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
Note: after the formal dissolution, any of its SHs may form
In determining the percentage requirement another corporation which will engage in the same line of
- The nationality of the constituents of the diocese and business even if it is done during the liquidation period
not the nationality of the actual incumbent of the
parish must be taken into consideration Methods/causes of corporate dissolution
Voluntary
TITLE XIV
DISSOLUTION 1. By the vote of the BOD/T
- And the SH/Ms where no creditors are affected
Section 117 2. By judgement of SEC after hearing the petition for
Methods of Dissolution voluntary dissolution where creditors are affected
3. By amending the AOI to shorten the corporate term
Meaning of Dissolution 4. In case of corporation sole, by submitting to the SEC a
This signifies the extinguishment of its franchise to be a verified declaration of dissolution approval
corporation
Involuntary
And the termination of its corporate existence
1. By expiration of the term provided for in the original
Power to dissolve corporation AOI
2. By legislative enactment
GR: the life of a corporation may be extinguished only by the 3. By failure to formally organize and commence the
act or with the approval of the sovereign power by which it was transaction of its business within 2 years from the
established date of incorporation
- Being a creation of the state it may only be dissolved 4. By order of SEC
with the consent of the state
Note: Methods are exclusive
EXP: when the law allows it and in instances when the SH/M do
it without judicial proceedings Section 118
Voluntary dissolution where no creditors are affected
De Jure Dissolution
- Dissolution in law adjudged and determined by Voluntary dissolution
judicial sentence or brought about by an act of or
with the consent of the sovereign power Compliance with legal requirements
- Or which results from the expiration of the charter
period of corporate life Note: a mere resolution for dissolution is not sufficient
De facto Dissolution
- One takes place in substance When corporation deemed dissolved
- When the corporation by reason of insolvency,
cessation of business, or otherwise, suspends all its If the dissolution is effected by the SEC
operations - It shall be deemed dissolved upon the issuance of
o And may proceed to liquidation CERTIFICATE OF DISSOLUTION
o But the franchise still remains
Voluntary dissolution where creditors are affected
Note: the mere fact that the corporation has quit doing - Judgement rendering the dissolution
business does not necessarily constitute even a de facto
dissolution By amending the AOI
- Approval of the amendment by the SEC
Two legal steps in corporate dissolution
1. Termination of corporate existence Shortened term
- At least as far as the right to go on doing ordinary - Expiration of the term
business is concerned
2. Winding up of its affairs Corporation Sole
- Payment of debts - verified declaration of dissolution
- Distribution of assets among SH/Ms and other
persons interested If no dissolution papers are filed
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
- even if it has ceased its operations The right of SHs to voluntary dissolve the corporation by vote
of a prescribed percentage thereof is not absolute
EXP: Dissolution by judicial decree and the court order has not
been submitted to SEC Section 119
Voluntary Dissolution where creditors are affected
Corporation Sole
Section 115 Section 120
Dissolution by shortening corporate term
Voluntary Dissolution where no creditors are affected
Dissolution by shortening of term
How effected
1. Vote by the BOD/T - The AOI must be amended
2. Resolution duly adopted by the SH/Ms - It must be approved by SEC
3. Even non-voting shares may vote - Upon approval and expiration of the term
4. Publication requirement o No further action or proceeding is required
for its dissolution
Note: in SEC 118, a private corporation may be dissolved
voluntarily without the necessity of going to the SEC or Court Publication of notice of dissolution
for dissolution An affidavit of publication of dissolution of the corporation
- When it does not affect any creditor must be executed by the publisher of the print medium
Issuance of Certificate of dissolution - It cannot be dispensed with by alleging that the same
- SEC is required is not required in Section 120
- CORP. SOLE : the verified declaration of dissolution - The publication serves as a protection of the rights of
must be approved by SEC existing creditors
Sale of Assets in anticipation of voluntary dissolution Note: creditors enjoy the preference in the distribution of
assets before the SHs are finally entitled to return of their
Section 40. Sale or other disposition of assets. - Subject to the provisions of investments
existing laws on illegal combinations and monopolies, a corporation may, by a
majority vote of its board of directors or trustees, sell, lease, exchange, mortgage,
pledge or otherwise dispose of all or substantially all of its property and assets, Dissolution by legislative enactment
including its goodwill, upon such terms and conditions and for such consideration,
which may be money, stocks, bonds or other instruments for the payment of Reserved power of congress to dissolve corporations
money or other property or consideration, as its board of directors or trustees
may deem expedient, when authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or in case This is subject to the limitation of the constitutional right of the
of non-stock corporation, by the vote of at least to two-thirds (2/3) of the non-impairment of obligations of contract
members, in a stockholder's or member's meeting duly called for the purpose.
Written notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence as Franchise of Public Utilities
shown on the books of the corporation and deposited to the addressee in the - Reserved under the constitution
post office with postage prepaid, or served personally: Provided, That any o Neither shall any such franchise or right be
dissenting stockholder may exercise his appraisal right under the conditions
provided in this Code. granted except under the condition that it
shall be subject to amendment, alteration,
Distribution of Corporate assets Prohibited or repeal by the congress when the
common good so requires
A corporation can validly liquidate its debt prior to its
dissolution Limitations to power
1. Consti: the amendment/alteration/repeal of the
But it cannot distribute any of its assets or property except corporate franchise of a public utility shall be made
upon lawful dissolution and after payment of all its debts and only when common good so requires
liabilities 2. Sec 145 of the Code
- It cannot distribute until the issuance of CERTIFICATE Section 145. Amendment or repeal. - No right or remedy in favor of or
against any corporation, its stockholders, members, directors, trustees,
OF DISSOLUTION
or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be
Right of minority SHs to oppose dissolution removed or impaired either by the subsequent dissolution of said
corporation or by any subsequent amendment or repeal of this Code or
GR: the court will not interfere of any part thereof.
EXP: When the dissolution is in BF or the dissolution was 3. Should not impair OBLICON
superinduced by fraud or undue influence
- Whe it is to unjustly oppress the minority Inherent power of Congress to amend or repeal laws
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
Dissolution by failure to formally organize and commence A transfer of ALL property of a corporation whatever is the legal
transaction of business effect on the life of the corporation may be, is generally for
practical purposes
Cessation of corporate powers (deemed dissolved Sec 22) - a dissolution, particularly when the corporation is
- Failure to organize and commence the transaction of insolvent or nearly so
its business or the construction of its works within - an conveys its entire property with a view of going
two years from the date of its incorporation out of business
Note: the attempted completion of the organization after such State of suspended animation
time is ineffective and will not give rise to a de facto
corporation - even if there is a de facto or practical dissolution
- when the corporation can still repurchase the
- However there is no automatic dissolution until properties disposed or other property and resume
lawfully declared by SEC business
o After due notice and hearing - the corporation may still exist without property
o But the effect of declaration will retroact to - hence, there is a state of suspended animation
the time the corporation should be deemed
dissolved Ground for Voluntary dissolution
A legal dissolution of a corporation may result from the transfer Section 121
of sale of all its properties and assets Involuntary Dissolution
- as where it virtually amounts to a surrender of the
corporate charter By order of SEC
- with the consent of the state
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
- By asking the proper court for the appointment of the Equality among creditors
receiver or trustee within the winding up period Subject to the rules on preference of credit
- The trustee may sue or be sued beyond the 3 year
period Read Alemars Sibal and Sons inc. v. Elbinias 1990
o When there is no time limit within which Alemars Sibal and Sons Inc. v. NLRC 2000
the trustee must finish the liquidation
Duration of Receivership
Note: A counsel who prosecuted and defended the interest of a Indefinite except if specifically limited
dissolved corporation may be considered a trustee with respect - He may act beyond the period
to the matter in litigation
Appointment of receivership
And the BOD may be permitted to complete the liquidation by
continuing as trustees by legal implication Discretionary
A receiver may also be appointed even if there is no dissolution
Read Gelano v. CA 1981 - When there has been a final and executor judgement
Clemente v. CA 1995 against the corporation which is in unstable financial
Reburiano v. CA condition
- Or to protect the right of the minority
Action against Liquidators/Sh
Receivership is the last remedy
Dissolution does not extinguish the debts of the corporation - Must not be resorted to unless there is no other
remedy available
See Sec145
Liquidation by a trustee
Approval of Sec not Required
Conveyance of Corporate Property
- By a resolution by SH/M made within the 3 year
Authority of HOLD Over officers period
- They have the authority to wind-up or liquidate
- The disposition of the remaining undistributed assets Effect of Conveyance
must necessarily continue after such period - Trustee : Legal owner
- Creditors/SH etc. : beneficial owner
Liquidation by Reciever Period
Who will appoint? - Until liquidation is terminated
- Even after the 3 year period
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
GR: Except by decrease of its capital stock ( Sec 38) and 3. REMAINDER- distributed among the SH/M in
otherwise provided by the code ( sec 8,9,41, 43, 104-par 1(4) proportion to their shareholdings or interest
and 105) - In the absence of any provision to the contrary
- No corporation shall distribute its assets except upon o Preferred (preferred re the surplus of
lawful dissolution and after payment of the debts and proceeds of the assets)
liabilities Note: the amount of capital refund that a Sh may get in case if
- In accordance with the trust fund doctrine liquidation will depend upon the financial condition at that time
Distribution in exchange of Stock In case, after payment to SH, unpaid debts debts shall appear
- Property contributed to the corporation exchange of the SH are liable to pay the debts to the extent of the value of
shares of stock and forming part of the assets of the the assets received by them
corporation cannot be withdrawn by the subscriber
- But only by the approval of the board and SHs
- But assignment is not prohibited Note: the distributive shares of the assets of the corporation
upon its dissolution are available for general distribution among
Distribution in pursuance of liquidation the whole class of SHs
the purpose of the liquidation, as well as the
distribution of the assets of the corporation, is to Reason: upon the dissolution of the corporation the
transfer their title from the corporation to the asset become the trust fund with the title of the SHs
stockholders in proportion to their shareholdings, becoming equitable right to distributive share therein
and this is in effect the purpose which they seek to - The SHs are not mere creditors as to the liquidating
obtain from the Register of Deeds of Manila, that dividends
transfer cannot be effected without the o The money actually belongs to them
corresponding deed of conveyance from the severally in equity
corporation to the stockholders. It is, therefore, fair o Therefore not available for general
and logical to consider the certificate of liquidation as distribution
one in the nature of a transfer or conveyance. (SH of
Guanzon & Sons Inc. v. RD) Liquidation need not be approved by SEC
1. In case of insolvency, the corporate creditors GR: Refund shall only be the amount equal to the PAR VALUE
a. Secured creditors are preferred of each of the shares which they hold
b. Unsecured - Even if they have paid more than the par value when
they acquired the shares
ARTICLE 2246. Those credits which enjoy preference with respect to specific
movables, exclude all others to the extent of the value of the personal property to EXP: when the AOI/BL/Certificate provides for the amount of
which the preference refers.
the refund
ARTICLE 2247. If there are two or more credits with respect to the same specific
movable property, they shall be satisfied pro rata, after the payment of duties, No par value
taxes and fees due the State or any subdivision thereof. (1926a)
The amount they have paid to the corporation for the shares
ARTICLE 2248. Those credits which enjoy preference in relation to specific real
property or real rights, exclude all others to the extent of the value of the - If received at the different prices and time
immovable or real right to which the preference refers. o Then the amount depends the price of each
ARTICLE 2249. If there are two or more credits with respect to the same specific EXP: AOI provision to the contrary
real property or real rights, they shall be satisfied pro rata, after the payment of
the taxes and assessments upon the immovable property or real right. (1927a) Shares acquired from prior SH
ARTICLE 2250. The excess, if any, after the payment of the credits which enjoy
The amount ORIGINAL SH could have been entitled
preference with respect to specific property, real or personal, shall be added to
the free property which the debtor may have, for the payment of the other TITLE XV
credits. (1928a) FOREIGN CORPORATION
2. SH/M/D/O
- Who are also creditors as a result of legitimate or Definition (General)
proper loan or claim
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
But the absence of such license/certificate does not mean Purpose of the 60% requirement
that the foreign corporation is a juridical person
To ensure that corporations and association allowed to operate
When may a FC even without a license? a public utility should be controlled by Filipino Citizens
When the FC sues on an isolated transaction
Determination of nationality
Determining Board Seats allowable for foreign corporations
1. Incorporation Test
- The nationality of a corporation is that of the state of Constitution:
incorporation regardless of the nationality of its SHs The allowable foreign investment in a public utility is only up to
the extent of 40% of the outstanding capital stock and foreign
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
The corporation may continue as long as it retains the authority The contract was amended for three times
to act as a corporation under the laws of the state of its On the third amendment NMC was required to put up a
incorporation performance bond equivalent to $451,500
The bond was to guarantee NMCs performance to deliver
EXP: when such license is sooner surrendered, revoked, the molasses during the prescribed shipment periods
suspended or annulled in accordance with the Code or Special In compliance of such, INTRA STRATA issued a
laws performance bond worth $11.2K to guarantee NMCs
delivers of the 10.5k tons of molasses
Additional And Intra also issued a surety bond worth $9.9K to
guarantee the repayment of the downpayment as provided
a. It shall transact only for the purpose(s) for
in the contract
which it is authorized under its license
But NMC was only able to deliver 219 metric tons of
b. Within 60 days after the issuance of the
molasses
license
Hence, Cargill sent demand letters to respondent claiming
The licensee (except banking or payment under the performance and surety bonds
foreign corporations) shall deposit NMC refused to pay
with SEC Securities in the actual Hence, CARGILL filed a complaint for sum of money against
market value of at least 100k NMC and Intra
For the benefit of Cargill and NMC entered into a compromise agreement w/c
present and future the trial court approved
creditors in PH NMC however again failed to comply with the agreement
c. Within 6 months after each fiscal year of Hence, Cargill proceeded with the case
the license
RTC: Intra Strata and NMC are solidarily liable to pay Cargill P16.9M
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
5. Maintaining a stock of goods in the Philippines solely for the purpose of having the same
Issue(s): processed by another entity in the Philippines;
8. Performing services auxiliary to an existing isolated contract of sale which are not on a
Ruling: continuing basis, such as installing in the Philippines machinery it has manufactured or
exported to the Philippines, servicing the same, training domestic workers to operate it, and
similar incidental services.
Doing Business in the Philippines and Capacity to Sue
Sec. 133. Doing business without a license. No foreign corporation transacting Activities within Philippine jurisdiction that do not create
business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or
earnings or profits to the foreign corporation do not
administrative agency of the Philippines; but such corporation may be sued or constitute doing business in the Philippines
proceeded against before Philippine courts or administrative tribunals on any valid the contract between petitioner and NMC involved the
cause of action recognized under Philippine laws. purchase of molasses by petitioner from NMC. It was NMC,
the domestic corporation, which derived income from the
Section 1 of Republic Act No. 5455 (RA 5455),[14] provides that: transaction and not petitioner. To constitute doing business,
the activity undertaken in the Philippines should involve
x x x the phrase doing business shall include
5. soliciting orders, profit-making.[20] Besides, under Section 3(d) of RA 7042,
6. purchases, soliciting purchases has been deleted from the enumeration
7. service contracts, of acts or activities which constitute doing business.
8. opening offices, whether called liaison offices or
branches; Other factors which support the finding that petitioner is not
9. appointing representatives or distributors who are doing business in the Philippines are:
domiciled in the Philippines or
10. who in any calendar year stay in the Philippines
(1) petitioner does not have an office in the
for a period or periods totalling one hundred Philippines;
eighty days or more; (2) petitioner imports products from the
11. participating in the management, supervision or Philippines through its non-exclusive local broker, whose
control of any domestic business firm, entity or
corporation in the Philippines; authority to act on behalf of petitioner is limited to soliciting
12. and any other act or acts that imply a purchases of products from suppliers engaged in the sugar
continuity of commercial dealings or trade in the Philippines; and
arrangements, and contemplate to that extent
the performance of acts or works,
(3) the local broker is an independent contractor
13. or the exercise of some of the functions and not an agent of petitioner.
normally incident to,
14. and in progressive prosecution of,
commercial gain or of the purpose and object To be doing or transacting business in the Philippines for
of the business organization. purposes of Section 133 of the Corporation Code, the
foreign corporation must actually transact business in the
The determination of whether a foreign corporation is doing Philippines, that is, perform specific business transactions
business in the Philippines must be based on the facts of within the Philippine territory on a continuing basis in its own
each case. name and for its own account. Actual transaction of
business within the Philippine territory is an essential
What must be proved by the respondent? requisite for the Philippines to to acquire jurisdiction over a
That Cargills business activities in the Philippines were not just casual foreign corporation and thus require the foreign corporation
or occasional to secure a Philippine business license.
- But so systematic and regular to manifest continuity and
permanence of activity to constitute doing business in the
Philippines Held: CAs decision reversed. RTCs decision reinstated
Cargill and NMC amended their contract three times to give a chance to
NMC to deliver to petitioner the molasses, considering that NMC
already received the minimum price of the contract. There is no
showing that the transactions between petitioner and NMC signify the
intent of petitioner to establish a continuous business or extend Global Business Holdings Inc. v. Surecomp Software
its operations in the Philippines.
Facts:
The Implementing Rules and Regulations of RA 7042 provide under Section 1(f), Rule I,
that doing business does not include the following acts:
Surecomp is a foreign corporation organized under the laws
1. Mere investment as a shareholder by a foreign entity in domestic of Netherlands
corporations duly registered to do business, and/or the exercise
of rights as such investor;
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
In order to subject a foreign corporation doing business in the country 1. STEEL CASE is an UNLICENSED FC NOT DOING
to the jurisdiction of our courts, BUSINESS IN PH
1. it must acquire a license from the Securities and Exchange
Commission and Foreign Investment Act Sec 3(d)
2. appoint an agent for service of process That the phrase doing business shall not be deemed to include
1. mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or
EXP: Estoppel
the exercise of rights as such investor;
A foreign corporation doing business in the Philippines without license 2. nor having a nominee director or officer to represent its
may sue in Philippine courts a Filipino citizen or a Philippine entity that interests in such corporation;
had contracted with and benefited from it. 3. nor appointing a representative or distributor domiciled
in the Philippines which transacts business in its own
A party is estopped from challenging the personality of a name and for its own account;
corporation after having acknowledged the same by entering into
a contract with it.
The following acts shall not be deemed doing
The principle is applied to prevent a person contracting with a business in the Philippines:
foreign corporation from later taking advantage of its
noncompliance with the statutes, chiefly in cases where such 1. Mere investment as a shareholder by a foreign
person has received the benefits of the contract entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such
investor;
Due to Globals merger with ABC and because it is the surviving
corporation, it is as if it was the one which entered into contract with 2. Having a nominee director or officer to represent its
Surecomp. In the merger of two existing corporations, one of the interest in such corporation;
corporations survives and continues the business, while the other is
dissolved, and all its rights, properties, and liabilities are acquired by 3. Appointing a representative or distributor
the surviving corporation. domiciled in the Philippines which transacts
business in the representative's or distributor's
own name and account;
Steel case Inc. v. Design International Selections
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NIELGEM SABAY BEJA|Corporation Law Notes|Dean R. Villanueva 2016|Finals
Ruling: CA reversed
Steels complaint reinstated and remanded to RTC for appropriate
action
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