Escolar Documentos
Profissional Documentos
Cultura Documentos
An Outline
By: Atty. Alfred Gaccion
Historical Background
Ethnological Theory
manifestation of the
gregarious instinct in man, existing inchoate from
earliest times and before law itself became an
effective social Force.
Imitative Theory
Development.
- Laws Fathered by the Hellenic jurist permitted the
formation of private corporation for certain
purposes, upon condition that they do not operate in
violation of the laws of the state.
Sociedad anonima
corporate entity
- Governed by Art. 151 to 159 of the Code of Commerce
B.P. 68
Corporation Definitions
Corporation
Attributes of a Corporation
Artificial Being
Created by Operation of Law
Right of Succession
Powers, Attributes and Properties
expressly authorized by law or
incident to its existence.
As an Artificial Being
Juridical Person
May be
liable for obligations incurred by the corporation
through its authorized agents.
- Any suit against a Stockholder, Director, or officer
cannot be a suit against the corporation without
impleading the corporation itself
bring
civil
and
Possesses
and owns properties as separate and distinct from
its stockholders, officers or members.
-
Citizenship
Grounds
Effects:
- Corporation may be
treated as an association of
individuals.
- In cases of two
Corporation, it may be
merged
into
one.
- Legitimate purpose of
the corporation may still be
allowed.
Cases
As Creation of Law
Modes of creating a Corporation
A. Special Law or charter Direct act
of Legislature.
B. General Corporation law BP 68
Right of succession
- independent from its members
- not more than 50 years
Distinction as of partnership
from corporation
Partnership
Corporation
1.
2.
1.
2.
3.
4.
5.
6.
3.
4.
5.
6.
Corporation as Partner:
General Rule Cannot ordinarily enter into a contract of
partnership.
Reason:
- The identity of the corporation will be lost or merged.
- Against public policy. Corporation will be bound by the
act of persons not its authorized agents.
- Permit corporate assets be subjected to risk
Exceptions:
a. Joint Ventures in line with the business provided by its charters
b. Other Partnerships provided the ff conditions presents:
1. All Corporation Partners must be managing partners
and must be solidarily liable
2. The respective charters or articles of incorporation
expressly allow the corporation to enter into partnership agreement and the
nature of the busniess venture is in line with the business authorized by law
or its articles.
3. When one partner is a foreign corporation it must obtain
a license to transact business in the country.
Non-Stock Corporation
1. Created not for profit but
for public good and
welfare
2. Do not have capital stock
divided into shares
3. Does not distribute
dividends or allotments
Corporation X
Authorized Capital Stock = P1,000,000.00
Shares = 10,000
Par value = P100.00/share
Subscribed = P250,000.00
Types of Shares :
Par Value Shares one with a specific money value fixed in the articles and
on the certificate of stock
No Par Value without any stated value appearing on the face of the
certificate of stock. But must have an issued value.
Voting Share with right to vote
Non Voting Share without a right to vote
Common Share one which entitles the holder thereof to a pro rata division
of the profits if any and in its assets upon dissolution.
Preferred Share with stated par value which entitles the holderto certain
preferences over the holders of common stock. cummulative, noncumulative,
participating, nonparticipating, cummulative-paticipating
Promotion share those that are issued to promoters for incorporating the
company or for services rendered in launching or promoting the company.
Share in escrow share in deposited by the grantor or his agent with a third
person to be kept by the depository until performance of a certain condition.
Subject of suspensive condition. Ownership is not transferred untill fulfillment
of the condition
Convertible share Share convertible from one class to another class. Not
automatic, the articles must be amended to formally convert the share.
Par Value = Book Value = Market Value
Ref. CE = CS/Issued S = Supply and demand
Sec. 10 Number and Qualification of incoporatorsWho May Form a corporation? May foreigners form a corporation under the laws
of the philippines? May a corporation be a stockholder? May a corporation be an
incorporator?
Natural Persons not less than 5 but not more thatn 15 and majority of
whom are residents of the philippines may form a corporation for legitimate
purpose or purposes.
-Incorporation under the jurisdiction of the philippines is not a matter of natural or
civil right but a priveledge conferred upon group of person. It becomes a matter
of right only after it is in accordance with the code.
-Corporations Vs. Association
Courts will not interfere with the internal affairs of an unincorporated
associations.
Corporation as a Concept of Franchise
Any special privilege or right affected with public interest, conferred by
the state on corporations or persons and which does not belong to the citizens of
the country generally as a matter of right.
The Right to exist as a corporation is a franchise.
- inviduals may not exercise by their own will and pleasure
- must be under conditions set forth by government
Promotion:
Business operation by which a compoany is generally brought into
existence
May a Corporation Formed without promoters?
Who is a promoter?
- one who, alone or with others takes upon himself to organize a
corporation: To procure the necessary legislation, subscribers to the articles of
incorporation, and other necessarry requirements.
- Not necessarily an agent of the corporation except after formation and
with assent of the corporation
- quasi trust relation with the corporation after the corporation is formed
hence imposed upon the duty to act in good faith in all dealings of the
corporation.
- May be an agent to the subscribers or corporators provided there is an
agreement to the effect.
- In the absence of character or statutory provision, a corporation is not
liable to its promoters in respect to any payment of services rendered, unless
after incorporation it expressly agreess to make such payments
May a Corporation be held Liable for Contracts entered into by promoters for its
behalf?
What are the liability of the promoters in cases of failure to organize a
corporation?
1.To Subscribers obligation to return except contrary agreement
2.To Each other general laws but if business is carried on laws of partnership
Incorporation
- Substantial Compliance with the requirements and conditions imposed
by the Corporation code SEC may not refuse registration of a Corporation.
- A corporation may become a stockholder of another corporation by
subscribing to or purchasing the latters stock.
- Incorporators must have capacity to enter into contracts.
- Residents of incorporators must be referred to as domicile. A place of
habitual residence of a corporation, where one has his true, fixed, permanent
home and to which whenever he is absent has the intention of returning.
- Requirement regarding the minimum number of incorporators is
mandatory which however may reduce after incorporation.
-Upon the Expiration of the term the corporation ceases to exist and is
dissolve ipso facto.
Sec 12 Minimum Capital Stock required of a stock corporation
Sec 13 Amount of Capital Stock to be subscribed and paid for purposes of
incorporation
-There is no minimum capital stock required for the creation of the
corporation except as that required under section 13 or that may be
required under special laws such as educational corporations, Banking
corporations, Financing Companies
Minimum Paid up Capital
- 25 % of the subscribe capital stock but not less than 5,000
pesos.
- 25 % must be based on the aggregate subscribe capital stock
and not on the individual stock subscribed by the stockholder.
-The only remedy for internal dissensions is only through Corporate Election.
-The Powers of the Board of directors or trustees are original and undelegated.
The stockholders of members don not confer, nor can they revoke, those powers.
Derivative only in the sense of being received from the state in the act of
incorporation.
-A director is presumed to serve without compensation and in the absence of
express agreement or resolution, the same cannot be asserted.
Genral Rule:
Directors or trustees can bind the corporation only by actions taken at a
board meeting:
Reason:
1. For Purposes of Discussion and an interchange of views
2. As Agents of tthe corporation manging its affairs, directors or trustees
have no power to act other than as a board
Exception:
Extra Ordinary Situation or conditions to justify the act
Illustration:
- Contract entered by a director where he is the sole stockholder
-Contract entered into by a corporate officer authorized by the board (Board of
liquidators vs. Heirs of Maximo Kalaw)
-Subsequent ratification by the board
-Apparent Authority
Delegation of Directors/trustees authority
General rule - May be delegated expressly or impliedly subject to
qualification as provided by ABS CBN Case. (1) Specific Purpose except for
Executive committee (2) subject to the rules on agency
Exceptions Discretionary powers (e.g. Power to Declare Dividends)
Entire Supervision and Control of the Corporation
Special Powers especially conferred upon it by a
resolution.
Term of Office
- As Fixed in the by-laws ; or one year and until the successors are elected and
qualified
Hold over arises when no successor is elected due to valid and justifiable
reason.
Number of Directors:
Stock = Not less than 5 nor more than 15
Non Stock = Not less than 5 may be more than 15
Qualifications of a director or trustee:
Stock Corporation Must own at least one share of the capital stock
Must be registered in his name in the books
Must continuously own the share during his term
Majority must be a resident of the Philippines
Non Stock Must be a resident of the philippines
-Only the by-laws can enumerate the officers of the corporation and the board
cannot create new offices without amending the by-laws except as it may be
empowered under the by- laws or merely appointive officers which are the
corporate officers.
Election of Officers:
- Majority of all members of the board
Corporate acts:
- Majority of the members present
President Must be a director hence must own a shares of stock in his own
name
- Acts may bind the corporation for contracts entered in the ordinary
course of business, provided the same is reasonable under the circumstances.
Exception : Acts which are beyond his power as may be
granted only to the directors.
- Corporation must prove that the said act is beyond the power of the
officer and that it is free from any ratification.
Vice president may not be a director except when the by laws provides that
the VP shall take place as president during his absence.
Filling of Vacancies
1.By Stockholders
A. Vacancy results from removal or expiration of the term
B. Other than removal or expiration and directors remaining
does not constitute a quorum.
C. Referral by the Board
D. Vacancy created by reason of an increase in the number of
directors
2. By the members of the Board
A. If still constituting a quorum, majority of members may fill in
vacancies that arose other than removal or expiration of the term.
Sec. 30 Compensation of Directors
-General Rule:
In the absence of any provisions the directors shall not
receive any compensation except for reasonable per diems.
The compensation is granted by the stockholders
representing majority of the outstanding capital stock in a regular or special
stockholders meeting.
-Limitation
Written
demand for
removal of a
director (Sec.
28)
Stockholders
Removal of a
representing 2/3 Director (Sec.
of the OCS
28)
Majority of the
quorum by BOD
Corporate
Acts/Resolutions
(Sec. 25)
Majority of
Members of
BOD
Election of
Officers (Sec.
25)
Fixing
directors
Compensation
other than per
Diem (Sec. 30)
Ratification for
contracts of self
dealing
directors (Sec.
32)
Filling of
Vacancies
caused other
than removal or
expiration (Sec.
29)
Ratification for
contracts/acts of
a disloyal
director (sec.
34)
Requisites:
1.Approve by the Majority of the board of directors
2.Favored by 2/3 of the outstanding capital stock in a meeting duly called for
the purpose.
3.Written notice of the proposal must be given to the stockholders.
4.A Certificate Duplicate must be filed in the SEC stating matters mentionedd
under sec. 38
5.The increased capital stock, 25 % thereof must be subscribed and 25%
thereof must be paid in form of cash or property and stated through a
treasurers affidavit.
6.No decrease is allowed if its effect will prejudice the rights of the corporate
creditors.
7.In non stock corporation it may create, incur, increase bonded indebtedness
by a majority vote of the trustees and approved by 2/3 of the members.
-The capital stock of a corporation stands increased or decreased only from
and after approval and the issuance by the Sec of its certificate of filing.
Over issue stock/spurious stocks an issue of stock by a corporation in
excess of the amount prescribed or limited by its articles of incorporation
(b) Unrealized foreign exchange gains, except those attributable to cash and
cash equivalents.
(C) Unrealized acturial gains which results when the company opts to recognize
actuarial gain
Etc.
(3) Additional paid in capital shall neither be declared as dividends
-Unrestrected earnings from which dividends may be declared are not limited to
the accumulated earned surplus of the corporation but may also include other
gains not arising from its business.
- proceeds from shares issued above par does not form part of the capital.
Action to enforce declaration of dividends:
General Rule
Director may not be compelled by mandamus to declare dividends
Exception
Sufficient net profits have been earned to obligate the corporation
- A director may be held liable to the improper declaration of dividends.
Delinquent stocks:
Stock witheld until unpaid subscription be fully paid
Cash application to unpaid subscription first
The stock however must be declared to be delinquent.
Sec. 44 Power to enter into management contract
-Purposes
A. Presence of Quorum Meetings
B. Exercise the right to vote despite absence
C. Voting and management control
-Voting by proxy however is not allowed in board meetings under Section 25
-A corporation cannot restrict the right of the stockholder to appoint any person
he sees fit to represent him nor can a corporation deprived a stockholder to
vote by proxy it being a personal right of the stockholder, except in non-stock
corporation
-The agent may only act through in so far as the right is available of his
principal.
Limitations:
1.Proxies must be in writing and signed by the stockholder or member and filed
before the scheduled meeting.
2.As a general rule a proxy is valid only for the meeting it was intended.
3.A continuing proxy must not exceed 5 years at any one time.
Types of proxies
1.General proxies confers a general discretionary power of attorney to attend
and vote at an annual meeting to vote for directors and all ordinary matters that
may properly come before a regular meeting.
2.Limited Proxies limits the power conferred. It may restrict the authority to
vote to specified matters only and may direct the manner in which the vote shall
be cast.
3.Continuing proxies confers a continuing proxy but not exceeding 5 years
4.Limited and specific proxies used only for a specific meeting
-Proxies may be revoked expressly or impliedly.
Sec. 59 Voting Trust
-Results in the separation of the voting rights of a stockholder from his other
right. The transferring stockholder departs his voting power but retains the
equitable or the beneficial ownershipt of the stock.
Rights of the voting trustee:
1.The right to vote
2.May vote in person or by proxy
3.May exercise right to inspect corporate books and record
4.Qualified to be a director
For considerations other than cash, its value must be worth the value of the stocks
issued. (true value rule)
Good faith rule the value is a matter about which men may honestly differ and in
which further questions of intention, good faith and fraud are submitted to the
court. No other devices is allowed but margin is considered for the difference in
valuation
Property in payment of stock
-Must be of a kind which the corporation may lawfully acquire and hold in carrying
out the purposes of its incorporation and which is necessary or proper for it to own
in carrying on its business
-Services in payment of stock only to labor performed provided the transaction is
in good faith and no fraud is perpetrated upon the stockholders or creditors.
-An agreement to issue stock for sevices before the same is rendered is void
Sec. 63 Certificate of stock and transfer of shares
Certificate of Stock written instrument signed by the proper officer of a
corporation stating or acknowleging that the person named therein is the owner of
DISSOLUTION
Sec. 117 Methods of dissolution
Dissolution signifies the extinguishnment of a corporations franchise and the
termination of its corporate existence
-A condition of law and fact which ends the capacity of the body corporate to act
as such and necessitates a liquidation and extinguishment of all legal relations
existing in respect of corporate enterprise
- A corporation may come to end and its life extinguished only by the act or with
approval of the sovereign power vy which it was establish.
Two legal steps in corporate dissolution
1.Termination of corporate existence
2.Winding up of affairs
Methods in dissoving a corporation
1.Voluntarily
2.Involuntarily
3.Expiration of the term of the corporation
4.Shortening the corporate termFailure to organize and commence business
5.Legislative dissolution
Voluntary Dissolution
1. By a vote of the board of directors/trustees and
stockholders/members where no creditors are affected
2. Judgment by SEC after hearing a petition for voluntary dissolution
where creditors are affected
3. by amending the articles of incorporation
4. In corporation sole, by submitting to the SEC verified declaration
Involuntary dissolution
1. By expiration of terms
2. by legislative enactment
3. failure to organize within two years
4. by order of the SEC
Sec. 118 Voluntary dissolution where no creditors are affected
Corporation is deemed dissolved upon:
1.Issuance of certificate of dissolution under sec. 118
2.Judgment rendered under sec. 119
3.Approval of the articles under sec 120
4.Approval of the verified declaration of dissolution sec. 115
Foreign Corporation
Consent doctrine a corporation may do business with another state only upon
consent of the latter
Determination of Nationality
Incorporation Test the nationality of the corporation is determined by the state
of which it was incorporated regardless the nationality of its stockholders
Control Test depends upon the nationalities of the controlling stockholders
Grand father rule method of determining the nationality of a corporation which
is owned in part by another corporation by breaking down the equity structure of
the shareholder corporation
Foreign Corporations a corporation that is organized other than under the laws
of the Philippines
Suability of the Corporation
Doing Business in the Philippines with license may sue and be sued
Doing business withoput license cannot sue but may be sued
Not doing business in the Philippines - may sue
SEC
Collegial Body Composed of the Chairman and Four Commissioners
Appointed by the president for a terms of Seven years
Natural Born fiLIPINO Citizens, majority of whom, including chairperson must be
lawyers
Shall meet at least weekly
SEC Powers and Functions (Sec. 5)
-Shall have jurisdiction and supervision over all corporation, partnerships or
associations who are grantees of primary franchise
-Formulate policies and recommendations on securities market, advise congress
and other government agencies on all aspects of securities market and propose
legislation and amendments thereto;
-Approve, reject, suspend, revoke, or require amendments to, registration
statements, and registration and licensing applications;
-Regulate, investigate or supervise activities of persons to ensure compliance;
-Supervise, monitor suspend or take over activities of exchanges, clearing
agencies and SROs
-Impose sanctions for violation of laws and rules, regulations and orders;
-Prepare, approve, amend or repeal rules and regulations and orders, and issue
opinions and provide guidance on and supervise compliance therewith;
-Enlist aid and support and/or deputize any and all enforcement agencies of
Government as well as private institution, corporation, firm or association or person
in the implementation of its powers and function;
-Issue cease and desist orders to prevent fraud or injury to investing public;
-Punish for both direct and indirect contempt;
-Compel corporate officers to call meetings of stockholders or members thereof
under its supervision
-Issue Subpoena duces tecum and summons witnesses, and order the examination,
search and seizure of all documents, paper, files and records, tax returns, and
books of accounts of any entity or person under investigation;
-Suspend or revoke, after proper notice and hearing, franchise or certificate or
registration of corporations partnerships or associations; EXCEPTION:
Cooperatives, Homeowners assn, labor unions.. SEC VS. Ca 246 S 738
-Exercise such other powers as may be provided by law, implied from or which are
necessary or incidental to the carrying out of the express powers;
Transfer of Jurisdiction under PD 902-A
- All cases enumerated under PD 902-A Sec. 5 (Fraud schemes cases, intracorporate disputes, election cases, petitions for suspension of payments and/or
rehabilitation proceedings) has been transferred to RTC
Registration of Securities
Security shares, participation or interest in a corporation or in a commercial
enterprise of profit-making venture and evidence by a certificate, contract ,
instruments, whether written or electronic in character
Genral Rule:
Securities shall not be sold or offered for sale or distribution within the
philippines
- Without registration statement duly filed with and approved by the SEC
- and Prior to such sale, information on the securities, in such form and
with such substance as SEC may prescribe, shall be made available to each
prospective purchaser
Principle of Full material Disclosure
- A Fact is deemed material if it tends to induce or otherwise effect the
sale or purchase of its securities
Exception:
Exempt Securities: (Sec. 9)
Those issued or guaranteed by the government or by any political subdivision,
agency or by any person controlled or supervised by, and acting as instrumentality
of the government
Those issued or guaranteed by the government of any country with which the
Philippines has diplomatic relations , or by any state, province or political
subdivisions thereof on the basis of reciprocity, althoug SEC may require
compliance with the form and content of disclosures
Certificates issued by receiver or by trustees in a bankcruptcy duly approved by
proper adjudicatory body
Any security or derivatives the sale or transfer of which by law, is under the
supervision and regulation of OIC, HLURB or BIR
Any securities issued by a bank ecept its own shares
Exempt Transactions:
Anny Judicial Sale, or by an executor, administrator, guardian, receiver or trustee
in insolvency or bankcruptcy
Those sold by a pledgee, mortgageee, or any other similar lienholder, to liquidate
a bona fide debt, a security pledge in good faith as security for such debt.
Those sold or offered for sale in isolated trasaction, subscription or delivery by
owner or for his account, such transaction not being made in the course of
repeated and succesive transactions and such owner not being underwriter.
Distribution by a corporation, actively engaged in business authorized by its
articles of incorporation, of securitis to its stockholders or other security holders as
stock dividend or other distribution out of surplus.
Sale of Capital stock of a corporation to its own stockholders exclusively, where
no commission or other renumeration is paid or given directly or indirectly
Issuance of secured bonds or notes where entire mortgage together with all
bonds or notes secured thereby are sold to single purchaser at single sale;
Issue and delivery of security in exchange for any other security of the same
issuer pursuant to right of conversion provided that security so surrendered has
been registered or was when sold exempt from registration;
Brokers trasaction, executed upon customers order but not those made upon
brokers solicitation thereof;
Share subscription prior to incorporation or in pursuance of an increase in its
increase in its authorized capital stock, when no expense is incurred, or no
commission, compensation, or remuneration is paid or given in connection with the
sale or disposition of such securities
Exchange of securities by issuer with its existing security holders exclusively,
where no commisions or other renumeration is paid
Sale by the issuer to fewer that 20 persons in the Philippines during the 12month period
Sale to any number of qualified buyers:
- Banks
- Investment house
-Insurance companies
- pension fund or retairment plan
-INVESTMENT COMPANY
SUCH OTHER PERSON AS sec MAY BY RULE DETERMINE
Scalping where a person, like an investment advisor, purchases securities for his
own account before recommending that security and then sells the share at a profit
upon the rise in the market price following the recommendation
Daisy chain a pattern of fictitious trading activity by a group of persons who lures
innocent people into the scheme
Flipping operated where on office buys a particular stock for customers while
another office simultaneously recommends that its customers sell the stock, with the
stock being shifted from one office to another and the firm makes a profit and the
brokers earn there commissions
PD 902-A Sec. 5
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations,
partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases involving.
(a)Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to
fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of
associations or organizations registered with the Commission;
(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates;
between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or
right to exist as such entity; and
(c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or
associations
Power of the Rehabilitation receiver shall oversee and monitor only the
operations of the debtor during the pendency of the proceedings
> Considered as an officer of the court
Grounds for dismissal of Rehab Receiver
a.Fails without just cause to perform any of his powers and function
b.Any gorunds for removing a trustee under general principle of trust
Neccesity of submitting rehabilitaiton plan Sec. 18
The rehabilitation plan shall include
(a) the desired business targets or goals and the duration and coverage of
the rehabilitation; (b) the terms and conditions of such rehabilitation which
shall include the manner of its implementation, giving due regard to the
interests of secured creditors such as, but not limited, to the nonimpairment
of their security liens or interests; (c) the material financial
commitments to support the rehabilitation plan; (d) the means for the
execution of the rehabilitation plan, which may include debt to equity
conversion, restructuring of the debts, dacion en pago or sale or exchange
or any disposition of assets or of the interest of shareholders, partners or
members; (e) a liquidation analysis setting out for each creditor that the
present value of payments it would receive under the plan is more than that
which it would receive if the assets of the debtor were sold by a liquidator
within a six-month period from the estimated date of filing of the petition;
and (f) such other relevant information to enable a reasonable investor to
make an informed decision on the feasibility of the rehabilitation plan.