Limited Liability Rule​ a stockholder is personally liable for the financial obligations of the corporation to

the extent of his unpaid subscription. While stockholders are generally not liable,

the stockholders may be liable if they

d the

subscription price (Ponnina C. Halley v.

Printwell, Inc., G.R. No. 157549, May 30,

2011). This is still consistent with the

separate personality of the corporation

have not or have n

because the unpaid subscriptions a

assets of the corporation in the form

of "receivables" that can be made to

answer for corporate obligations. The

ersonality of the corporation is not ac-

tually pierced to make the stockholder

liable; the stockholder is just being

made to pay a debt to the corporation.

Nationality. Generally, the co

considered a national of the cou

it was incorporated

Test; Sec. 123, CCP).

corporation is

tea-てPlace oftncorporation

tionality of a corporation is determined

by the nationality of the controlling

stockholders (War-time Control Test)

G) Public Enemy- in times of war,

Grandfather Rule is the method of attrib-

ng the shareholdings of a given corporate

shareholder to the second or even the sub-sequent tier of ownership to determ

ultimate ownership in a corporation, Ths

consistent with the rule that the "b s

ownership" of corporations engaged in n

tionalized activities must reside in the hand

of Filipino citizens. In the case of a

tiered corporation, the stock attribution rule

must be allowed to run continuously alon

the chain of ownership until it finally reach

es the individual stockholders (Narra Nickel

Mining and Development Corp. v. Redmont

Consolidated Mines, Corp., G.R. No. 195580

Jan. 28, 2015). It is a method of determining

the nationality of a corporation which owns

shares in another corporation by breaking

down the equity structure of the sharehold-

ers of the corporation

Nationalization Laws. For purposes of ap-

plying the nationalization laws (Example:

public utilities where 40% is the maximum

foreign ownership; see note 5.04 below), the

Voting Control Test and Beneficial Owner-

ship Test should both be applied full ben-

eficial ownership of the stocks, coupled with

voting rights is essential.

doctrine of

piercing the veil of corporate entity? The doo

trine that a corporation is a legal entity distinct

rom the persons composing it. It is a theory in

troduced for the purposes of convenience and to

serve the ends of justice. But when the veil of cor-

porate fiction is used as a shield to perpetuate fraud,

to defeat public convenience, justify wrong or defena

n shall be disregarded and the in-

dividuals composing it will be treated identically

TEST: The following elements must be es-

tablished to justify the piercing of the veil of

corporate fiction under the test that is often

used by the Supreme Court which is called

the Instrumentality Rule or the Control Test.

2)

Control-not mere stock control, but

complete dominationnot only of

finances, but of policy and business

practice in respect to the transaction at

acked and must have been such that

the corporate entity as to this transac-tion had at the time no separate mind

will or existence of its own;

(ii) Such control must have been used b

the defendant to commit a fraud or

wrong to perpetuate the violation ofa

statutory or other positive legal breach

of duty, or a dishonest and an unjust

act in contravention of the plaintiff's

legal right; and

(iii) The said control and breach of duty

must have proximately caused the

injury or unjust loss complained of

CONCESSION THEORY

It is a principle in the creation of cor

corpora-

tions, under which a corporation is an artif

creature without any existence until it has

ceived the imprimatur of the State

ccord

ing to law, through the SEC. The life of the cor

ration is a concession made by the State

RIGHT OF SUCCESSIONca

_ capacity to have

continuity of existence despite the changes on the

persons who compose it. Thus, the personality

continues despite the change of stockholders, members,

board members or officers.

Theory of Special Capacities/Limited Capacity

Doctrine

No corporation, under the Code, shall pos

sess or exercise any corpora

te powers, except those

conferred by law, its Articles of Incorporation,

those implied from express powers and those as

are necessary or incidental to the exercise of the powers conferred. The corporation’s capacity is limites
to such express, implied and incidental powers.

ACCOMPLISHED FACT RULE

there are entries in the Articles of Incorporation

that cannot be amended because they are ac-

complished facts. Example: The names of the

incorporators and the original directors cannot

be amended because the same are accomplished

facts. The incorporators and original directors are

always the same even if there is a change in the stockholders or directors.

ULTRA VIRES ACTS

a) ultra vires acts of the corporation

CCP)

An ultra
vires act is one committed outside the ebject for

which a corporation is created as defined by the law of its organization and therefore beyond the

power conferred upon it by law

NELL DOCTRINE

(Nell v. Pacific Farms, Inc, 15 SCRA 415

RINE

511965]

the GENERAL RULE is that the transferee/buyer

of all or substantially all of the assets (or even

shares) willnot be liable for the debts of the trabnsferror..

Exceptions:

1) if there is an express assumption of liabilies

2) there is a consolidation or merger

3) if the purchase was in fraud of creditors; and

4) if the purchaser becomes a continuation of

the seller.

Business Judgment Rule" Questions of policy or

management are left solely to the honest decision of

officers and directors of a corporation and the courts

are without authority to substitute their judgment for

the judgment of the board of directors; the board is the

business manager of the corporation and so long as it

acts in good faith, its orders are not reviewable by the

courts or the SEC. The directors are also not liable to

the stockholders in performing such acts (Monteliband

v. Bacolod-Murcia Milling Co.,

DOCTRINE OF CORPORATE OPPORTUNI

a)

9.06.

If there is presented to a corporate director a busi-

ness opportunity which:

"(1) corporation is financially able to undertake;

(2) from its nature, is in line with corporations

business and is of practical advantage to it;

and

(3)

one in which the corporation has an interest

or a reasonable expectancy.

b)l| By embracing the opportunity, the selnterest o

the director will be brought into conflict with that

of his corporation. Hence, the law does not per-

mit him to seize the opportunity even if he will

use his own funds in the venture.

General Rule: If a director seizes the opportunity

thereby obtaining.profits.to the-expense忒the

the profits by re

funding the same to the corporation. Exception:

The contract or act may be ratified by a vote of

the stockholders owning or representing at least

two-thirds (2/3) of the outstanding capital stock

0. TRUST FUND DOCTRINE

10.01. Trust Fund Doctrine. The capital stock, property and

equity

n in trust for the payment of the corporate creditors. The

subscribed capital stock of the corporation is a trust

fund for the payment of debts of the corporation which

the creditors have the right to look up to satisfy their

credits. Corporation may not dissipate this and the

creditors ma sue stockholders directly for the unpaid

subscription

Doctrine of Individuality and Indivisib

A subscription is one, entire and in

whole contract even if two or more sha

covered. The subscriber is notentitledtothe

cer

tificate for part or all of certificates.covered uw

full payment of the subscri

ption price.

doctrine of equality of shares?

Doctrine of Equality of Shares provides that

o not pro-

all

n of the shares of stock

vide for any distinctio

shares issued by the corporation are presumed to

be equal and enjoy the same rights and privileges

and are also subject to the same liabilities

What constitutes "doing business" in the Philippines

for foreign corporations?

Under the Continuity, Test, doing business implies

a continuity of commercial dealings and arrangements,

and contemplates to some extent the performance

of acts or works or the exercise of some functions

normally incident to and in progressive prosecution

of, the purpose and object of its organization

Under the Substance Test, a foreign corporation

is doing business in the country if it is continuing the

body or substance of the enterprise of business for

which it was organized.

Note: The two (2) tests are referred to as the "Twin-

Characterization Test"

Contract Test of "doing business" in the

tut

4. Exp

Philippines

a)

An essential condition to be considered as

"doing business" in the Philippines is the actual

performance of specific commercial acts within

the territory of the Philippines for the plain reason

that the Philippines has no jurisdiction over

commercial acts performed in foreign territories