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MEETINGS

Sec. 49. Kinds of meetings- meetings of directors, stockholders, or members may be regular or special. (n) trustees,

Necessity of meetings Meetings, whether those of the board of directors or trustees, or of the stockholders or members, are necessary in order that any corporate act may be decided upon only after deliberation and consultation among themselves. A.) Kinds of meetings of stockholders or members a. Regular meeting b. Special meeting 1. Place of meetings of stockholders or members, whether regular or special They shall be held in the city or municipality where the principal office of the corporation is located, and if practicable, in the principal office of the corporation. 2. Quorum in meetings of stockholders or members This is majority of the outstanding capital stock or majority of members, unless a greater majority is provided for in the Corporation Code or in the by-laws 3. Presiding officer in meetings of stockholders or members The president shall preside at all meetings of stockholders or members, unless the by-laws provide otherwise. 4. Who may call meetings of stockholders or members a. The person authorized in the by-laws. b. Director, trustee, or officer entrusted with the management of the corporation c. A petitioning stockholder or member d. Secretary of the corporation 5. Requisites for a valid meeting of stockholders or members a. It must be held at the proper place b. It must be held at the stated and time c. It must be called by the proper person d. Previous notice must have been given e. There must be a quorum 6. Effect if meeting of stockholders or members is improperly held or called They must be within the powers or authority of the corporation All the stockholders or members are present or duly represented at the meeting 7. Manner of Voting Stockholders vote by shares Right to vote B.) Kinds of meetings of directors or trustees a. Regular meeting b. Special meeting 1. Place of meeting, whether regular or special

a. b.

a. b.

It must be held anywhere in or outside the Philippines, unless the by-laws provide otherwise. 2. Quorum in meetings Majority of the number of directors or trustees stated in the articles of incorporation must be present, unless such articles or the by-laws provide for a greater majority. 3. Presiding officer The president shall preside at all meetings of directors or trustees, unless the by-laws provide otherwise. 4. Member of voting: presence required Directors or trustees vote during board meetings per head. C.) Manner of voting for stockholders or members a. Stock corporations stockholders vote by shares. b. Non-stock corporations Members vote on a per head basis. 1. How right to vote is exercised a. Directly or personally by the stockholder or member b. By representative voting By means of proxy By means of a voting trust agreement Through legal representatives. No voting for treasury shares

2.

D.) Proxy It refers not only to the formal authority given by a stockholder or a member to another person to exercise the voting right, but also the person himself who was given the authority to exercise the voting right E.) Voting trust It is an agreement in writing whereby one more stockholders of a corporation transfer their shares to a trustee or trustees, for the purpose of conferring in the latter, voting other rights pertaining to such shares. F.) Rights of stockholders 1. Right to vote 2. Right to dividends 3. Right to inspect corporate books and records 4. Right to elect and remove directors 5. Right to a stock certificate 6. Right to pre-emption 7. Right to enter into voting trust agreement 8. Right to ask for the dissolution of the corporation in certain cases 9. Right to recover shares illegally sold 10. Right to withdraw and demand payment for the fair value of his shares. 11. Right to bring derivative suit G.) Derivative suit A derivative suit is one filed by a stockholder in the name and in behalf of the corporation to protect corporate rights or redress wrongs committed against the corporation, whenever corporate officers refuse to bring such actions or such officers are the ones to be sued held liable.

BY-LAWS
Sec. 46. Adoption of by-laws Every corporation formed under this code must, within one month after receipt of official notice of the issuance of its certificate of incorporation by the S.E.C., adopt a code of by-laws for its government not inconsistent with this code. Are the rules of action adopted by a corporation for its internal government and for the government of its internal government and for the government of its stockholders or members and those having the direction, management and control of its affairs. A.) Requisites of by-laws 1. They must be consistent with the charter of the corporation. 2. They must be consistent with public policy. 3. They must be uniform in application and not directed against a particular individual. 4. They must be reasonable 5. They must not disturb vested rights or impair the obligation of contracts B.) Endorsement of by-laws for special corporations 1. Bank 2. Banking institution 3. Building and loan association 4. Trust company 5. Insurance company 6. Public utility 7. Educational institution 8. Other special corporation governed by special laws C.) Binding effect of by-laws 1. As to directors, trustees, officers, stockholders, and members 2. As to third persons D.) Contents of by-laws 1. Place of meetings- Meetings of directors or trustees 2. Quorum- Meeting of stockholders or members 3. Proxies- Election of directors or trustees and election or appointment of officers 4. Qualification of directors- The qualifications, duties and compensation of directors or trustees, officers and employees. 5. Election & term of office- The penalties for violation of the bylaws 6. Disqualification for position- In the case of stock corporations, the manner of issuing stock certificates. 7. Compensation to members- Such other matters as may be necessary for the proper or convenient transaction of its corporate business and affairs. E.) Amendment, repeal or adoption of new by-laws 1. Voting requirement 2. Delegation of power to amend, repeal or adopt new by-laws to board of directors or trustees 3. Revocation of the power delegated to the board F.) When amendment or new by-laws become effective

The amended by laws or the new by-laws shall become effective upon the issuance by the Securities and Exchange Commission of a certificate that they are not inconsistent with the Corporation Code.

STOCKS AND STOCKHOLDERS


Sec. 60. Subscription contract any contract for the acquisition of unissued stock in an existing corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase or some other contract. (n) 1.) How one becomes a stockholder a. By subscription of unissued shares b. By purchase of treasury shares covers issued shares. c. By transfer from a stockholder covers issued shares. Sale Barter or exchange Donation Succession 2.) Subscription It is a contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed. 3.) Kinds of subscription a. Pre-incorporation subscription subscription to the unissued stock of a corporation still to be formed b. Post-incorporation subscription subscription to the unissued stock of a corporation that has been formed. 4.) Consideration for stocks Subscription to unissued shares of stock, being a contract, must have all the requisites of a contract including cause or consideration. a. Amount of consideration Par value shares the consideration should not be less than the par value. No-par value shares the consideration should not be less than the issued price. b. Prohibited considerations Promissory notes Future services 5.) Consideration for bonds The consideration for stocks may be used for the issuance of bonds by the corporation insofar as they may be applicable.

6.) Certificate of stock Certificate of stock is the written acknowledgement by the corporation of a stockholders interest in the management, profits and assets of the corporation.

7.) Liability of stockholders

a. b. c. d. e. f.

Liability Liability Liability Liability Liability Liability

to the corporation for unpaid subscriptions to the corporation for interest on unpaid subscriptions. to corporate creditors for unpaid stock subscriptions. to the corporation and its creditor for watered stock for dividends unlawfully received. for failure to incorporate.

8.) Watered stock It is stock issued below its par or issued value, either without consideration or for no adequate consideration. 9.) Rate of interest a. The rate of interest fixed in the by-laws b. If no rate of interest is fixed in the by-laws, the rate shall be the legal rate. 10.) Liability for balance of subscription a. Date and amount of payment b. Effect of failure to pay subscription on due date

11.)

Delinquency sale The board of directors may, by resolution, order the sale of delinquent stock and shall specifically state the amount due on each subscription all accrued interest, and date, time, and place of the sale which shall not be less than thirty days nor more than sixty days from the date, the stocks become delinquent. Effect of delinquency Stocks declared delinquent shall not entitle the holder thereof to any of the rights of a stockholder including the right to be voted or to vote or to representation at any stockholders meeting, except the right to dividends. Rights of unpaid shares Holders of subscribed shares shall not fully paid which are not delinquent shall have all the rights of a stockholders.

12.)

13.)

MERGER AND CONSOLIDATION


Sec. 76. Plan of merger or consolidation two or more corporations may merge into a single corporation which shall be one of the constituent corporations or may consolidate into a new single corporation which shall be the consolidated corporation. 1.) Merger and consolidation concept Merger is the union of two or more corporations whereby one or more but not all the constituent corporations are absorbed by one which continues in existence and retains its name and corporate identity, called the surviving corporation. Consolidation is the union of two or more corporations whereby the existence of the constituent corporations is terminated and a new one, called the consolidated corporation, is created. 2.) Procedure for a merger or consolidation a. The board of directors or trustees of each corporation, party to the merger or consolidation, shall approve a plan of merger or consolidation. b. The plan of merger or consolidation shall be submitted for approval by the stockholders or members of each constituent corporation at separate meetings duly called for the purpose c. Articles of merger or consolidation shall be executed by each of the constituent corporation, signed by the president or vicepresident, and certified by the secretary or assistant secretary, of each corporation. d. The article of merger or consolidation shall be submitted to the Securities and Exchange Commission for approval. e. The Securities and Exchange Commission shall issue a certificate of merger or consolidation at which time, the merger or consolidation shall be effective. 3.) Effects of merger or consolidation a. The constituent corporations shall become a single coronation b. The separate existence of the constituent corporation shall cease, except that the surviving corporation, or the consolidate corporation. c. The surviving or consolidated corporation shall possess all the rights, privileges, immunities and powers. d. The surviving or consolidated corporation shall possess all the rights, privileges, franchises, property, and all interest of the constituent corporation. e. The surviving or consolidated corporation shall be liable for all the liabilities of each of the constituent corporation.

4.) Common forms of corporate combinations a. Sales of asset b. Lease of asset c. Sale of stock d. Merger e. Consolidation

DISSOLUTION AND WINDING UP


Sec. 117. Methods of dissolution A corporation formed or organized under the provisions of this Code may be dissolved voluntarily or involuntarily. (n) 1.) Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business. 2.) Winding up - is the process of settling the business or partnership affair after dissolution. 3.) Termination is that point in time when all partnership affairs are completely wound up and final settled. 4.) Causes of dissolution a. It will be noted that dissolution may be caused without violation of the agreement between the partners b. It may be voluntary when cause by the will one or more or all the partners. c. The dissolution of partnership may also be effected extra judicially. d. It will also be observed that the causes provided in article 1830 result in the automatic dissolution of the partnership. 5.) Without violation of partnership agreement a. Termination of the definite term or particular undertaking. b. By the express will of any partner c. By the express will of the partners d. By expulsion of any partner 6.) In contravention of partnership agreement a. Dissolution may be for any cause b. Power of dissolutions always exists c. Legal effects of dissolution 7.) Grounds for dissolution by decree of court

a. On application by a partner Insanity the partner may have been previously declared insane in a judicial proceeding Incapacity the incapacity must be one which affects the ability of the partner to perform his duties as a partner. Misconduct and persistent breach of partnership agreement like incapacity, conduct prejudicial to the carrying on the business. Business can be carried on only at a lost since the purpose of a partnership is the carrying of the business for profit. Other circumstances are abandonment of the business, fraud in the management of the business, refusal without justifiable cause to render accounting of partnership affairs.

b. On application by a purchaser of a partners interest

8.) Effect of dissolution on authority of partner a. General rule unless otherwise stipulated, every partner is considered the agent of the partnership with authority to bind the partnership as well as the other partners with respect to the transaction of its business. b. Qualifications to the rule the foregoing role, however, is a general rule that is subject to the qualification set forth in articles 1833 and 1834 in relation to article 1832. In so far as the partners themselves are concern With respect to third persons 9.) Notice of dissolution to creditors a. As to persons who extended credit to partnership prior to dissolution b. As to persons who had known of partnership existence c. Where acting partner has no authority to wind up partnership affairs d. Where acting partner has become insolvent

10.) Manner of winding up a. Judicially under the control and direction of the proper court upon cause shown by a partner, his legal representative, or his assignee. b. extra judicially intervention of the court. by the partners themselves without the

11.) Persons authorized to wind up a. the partners designated by the agreement

b. In the absence of such agreement, the entire partners who have not wrongfully deserve the partnership. c. The legal of the last representative of the last surviving partner (when all the partners are already dead), not insolvent.

12.) Rights where dissolution in contravention of agreement. a. Rights of partner who has not caused the dissolution wrongfully b. Rights of partner who wrongfully caused the dissolution

13.) Rights of injured partner where partnership contract rescinded a. Right of a lien on, or retention of, the surplus of partnership property after satisfying partnership liabilities for any sum of money paid or contributed by him b. Right to subrogation in place of partnership of creditors after payment of partnership liabilities c. Right of indemnification by the guilty partner against all debts and liabilities of the partnership

14.) Rules in setting accounts between partners after dissolution a. Assets of the partnership Partnership property Contributions of the partners necessary for the payment of all liabilities in accordance with Article 1797

b. Order of application of the assets. First, those owing to partnership creditors Second, those owing to partners other than for capital profits such as loans given by the partners or advances for business expenses Third, those owing for the return of the capital contributed by the partners Finally, the share of the profits, if any, due to each partner c. Right of a partner where assets insufficient d. Liability of deceased partners individual property e. Priority to payment of partnership creditors/partners creditors f. Distribution of property of insolvent partner First, to those owing to his separate creditors

Then, to those owing to partnership creditors Lastly, to those owing to partners by way of contribution Winding up/ Liquidation

I. Methods of Liquidation A. By receivership a. Discretionary b. Substitution of corporation by receiver c. Duration 1. Indefinitely - until the affairs of the dissolved corporation shall have been completely settled and liquidated. 2. Indeterminate if the appointment fixes no time for the duration of the receivership and can only be terminated by an order of the court

B. By the corporation itself through its directors, officers and creditor.

C. By trusteeship a. When may conveyance to trustees be made- within the winding up period of 3 years b. Substitution of corporations by trustees

II. Distribution of Assets A. Priority of Creditors B. Priorities between stockholders a. Division of assets to stock subscribers must be made on an equitable basis. It must be in proportion to the par value of their shares although they paid a premium thereof. b. Stocks preferred as to dividends where the preference is only as to dividends, the holders of the preferred stock share with the holders of the common stock in the distribution of the surplus after the payment of corporate debts. c. Stocks preferred as to assets - preferred stockholders have a preference over holders of common stock in the distribution of the surplus assets of the dissolved corporation to the extent of the amount fixed in the certificate of stock issued by the corporation to stockholders.

FOREIGN CORPORATION
Sec. 123. Definition and rights of foreign corporations For the purpose of this Code, a foreign corporation is one formed, organized or existing under the laws other than those of the Philippines and whose laws allow Filipino

citizens and corporations to do business in its own country or state. It shall have the right to transact a business in the Philippines after it shall have obtained a license to transact a business in this country in accordance with this Code and a certificate of authority from the appropriate government agency.

1.) Foreign corporation - is a corporation created by or under the laws of another state or country

2.) Objectives of regulation of foreign corporation a. To place them on an equality with domestic corporations b. To subject them to inspection so that their condition may be known c. To protect the residents of the state doing business with them by subjecting them to the courts of the state. 3.) Application for and issuance of license a. Submission of required documents b. Accompanying documents to application c. Compliance with special laws 4.) Resident agent is an individual who must be of good moral character and of sound financial standing, residing in the Philippines, or a domestic corporation lawfully transacting business in the Philippines.

5.) Purpose of law in requiring license the object of the statue was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts.

6.) Meaning of transacting business a. Circumstances of each case b. Acts included Soliciting orders, purchases, and service contracts Opening offices, whether called liason offices or branches Appointing representatives or distributors who are domiciled in the Philippines or who, in any calendar year, stay in the Philippines for a period or periods totaling 180 days or more Participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines Any other act or acts that imply a continuity of commercial billings or arrangements, and contemplate to that extent the performance of acts or works c. Acts not included

Mere investment as a share holder by a foreign entity in domestic corporations duly registered to do business The exercise of rights as such investor Having a nominee director or officer to represent its interest in such corporation Appointing a representative or distributor domiciled in the Philippines which transact business in its own name and for its own account 7.) Laws applicable to foreign corporations a. Philippine laws- a foreign corporation license to do business in the Philippines subject to the laws of the Philippines b. Laws of state of creation The creation, formation, organization or dissolution of corporation The relations, liabilities, responsibilities, or duties of members, stock holders, or officers of corporations to each other or to the corporation, are governed by the laws of the state of its creation 8.) Amendment of articles of incorporation, and by-laws a. Effectivity b. Need for amended license 9.) When amended license required a. It changes its corporation name b. It desires to pursue in the Philippines other or additional purposes 10.) Merger or consolidation involving a foreign corporation a. With a domestic corporation b. with another foreign corporation 11.) Effect of doing business without a license a. Suit by a foreign corporation b. Suit against a foreign corporation 12.) Suit by and against an unlicensed foreign corporation a. Isolated business transaction in the Philippines b. Protection of its trade name or trade mark in the Philippines c. Non-business transactions in the Philippines d. Non-exemption from suit in the Philippines 13.) Validity of contracts of unlicensed foreign corporations a. Contract void b. Contract void as to innocent parties c. Contract enforceable upon compliance with the law 14.) Revocation of license of a foreign corporation- the grounds are without prejudice to other grounds provided by the special laws

15.) Effects of revocation a. Revocation of license, cannot affect the validity of contracts entered into by the foreign corporation before the revocation nor its right to maintain an action to enforce them b. Such foreign can no longer transact business in the Philippines, and it cannot maintain any suit or action in any court or administrative agency in the Philippines

16.) Withdrawal of a foreign corporation a. A petition for withdrawal of license must be filed with the SEC which shall issue a certificate of withdrawal only after compliance with all the requirements mention b. To a certain that the foreign corporation has no outstanding liabilities to residents in the Philippines, the commission shall have t make an examination and inspection of its books and records c. The courts must review its action of the commission approving the withdrawal of a foreign corporation for the law should not be interpreted as to permit a foreign corporation to escape the result of pending action

BUSINESS LAW 2
(Corporation & Partnership)

Submitted By: CRUZ, Ma. Faustina I.

Submitted to: Atty. Bacalla