Partnership 1. Characteristics of a partnership: a. Consensual b. Onerous - cont contri ribu buti tion on of mone money, y, prop proper erty ty,, or indu indust stry ry into into a common fund c. Nominate - Designated Name d. Preparatory - Its organization is followed by other contracts to carry out its purpose e. Principal - It can stand alone multilateral - or more persons f. Bilateral or multilateral g. Agency - each partner is an agent to partnership and to each other
Legal personali personality ty . !rofe !rofessi ssiona onall partne partnersh rship ip has no legal legal person personali ality ty.. Legal means that a partnership can sue and be sued, enter into contracts, ac"uire property in its own name, can incur obligations. #. $ partnership can be a partner in another partnership or a stoc%holder in a corporation because it has a &uridical personality to enter into contracts '. ()en if a partner transfers all interests to another, the transferee does not become a partner unless all other partners consent. *his is based on the prin princi cipl ple e of dele delect ctus us pers person onar arum um +pri +princ ncip iple le of mutu mutual al trus trustt and and condence. . /imited partner would be liable as a general partner if he include his surname in the partnership name and ta%es part in the control of business 0. General-limited reimbursement
-
liable
up
to
personal
assets
b ut
sub&ect
to
partnership, insanity of a general partner does not result in . In a general partnership the automatic dissolution of the partnership but only ser)es as a ground for the application for &udicial dissolution 2. Death, retirement, insanity or ci)il interdiction +D3ICI of a general partner in a limited partnership , automatically dissol)es the partnership. 4ut ci)il interdiction of a limited partner does not so. 5. $cts of a partner who is insol)ent, does not ha)e a right to wind up the a6airs of the partnership and the business is unlawful doesn7t bound the partnership. 18. If the partner who acts after dissolution and at fault, he alone ultimately liabl liable e to the the cred credit itor ors. s. *he *he part partne ners rs can can see% see% reimb eimbur urse seme ment nt from from the the partner who is guilty.
11. New creditor is deemed to ha)e %nowledge of the dissolution. 9e is not therefore, protected by law. !artnership is not bound 1. $ partnership begins from the moment of eecution of the contract but there can be stipulation otherwise. 1#. Contract of co-ownership - no intention of using the asset for business purposes 1'. $ partnership cannot be formed for a charitable purpose 1. Corporation;s legal personality commences from the time it is issued a certicate of incorporation by the <(C 10. Corporation;s nationality is determined by the nation;s whole laws for which it was created. 1. Death of the president or chairman does not dissol)e the rm 12. !artner 12. artnershi ship p is go)er go)erned ned by the Civil Code of the Philippines while corporation is under Corporation Code of the Philippines 15. Corporation can only be dissol)ed by the consent of the state 8. $ contract of partnership may be made in any form or manner ecept if a specic form is re"uired by law for its )alidity or enforceability 1. It may be made orally or in pri)ate instrument if the total contribution of money or other personal property is less than #,888. If it is more than #,888 or more, it shall be recorded in the <(C. Noncompliance of which does not ma%e the contract )oid. 9owe)er, if immo)able property or real rights are contributed, it must be made in public instrument. . $ limited partnership must be registered with the <(C, otherwise, it is deemed to be a general partnership #. niversal partnership of all pro!ts - any property belonging to them at the time of the eecution of the contract belongs to them but the usufruct +use and en&oyment of such property belongs to the partnership. =nly the fruits of the property as well as whate)er property ac"uired by the partners through industry during the eistence of the contract, are contributed to the common fund. '. Partnership de facto - a partnership in fact but not in law. law. It is still )alid partnership although it lac%s certain re"uirements re"uirements for its legality
. $ husband and wife cannot enter into a contract of uni)ersal partnership because this has the e6ect of donation and there are prohibited from gi)ing donation to each other. *hey can enter into a particular partnership but not to go)ern their property relations. relations. 0. *he liability of an industrial partner is always that of a general partner . $ person may be a general partner and a limited partner in the same partnership at the same time, pro)ided this fact is stated in the certicate of a limited partnership
limite ted d part partne ner r cannot 2. $ limi cannot contr contribu ibute te ser)i ser)ices ces hence hence it is always always a capitalist and a silent partner 5. $ capitalist partner will be obliged to sell his interest to the other partners when in case of imminent loss of the business of the partnership he refuses to gi)e additional contribution. #8. Capitalist partner cannot engage in the same or similar business of the rm unless permitted by all others
Capitalist st partner partner canno #1. Capitali cannott enga engage ge in any %ind of busi busine ness ss unle unless ss permitted permitted to do so. $ll his industry is supposed to be contributed to the rm #. "ndustrial partner is eempted as to losses between partners but is liable to strangers but with right to be reimbursed from the capitalists. ##. $n agreement that e)en the industrial partner shall be liable for losses is permissible. #'. If a partner gi)es a receipt for the rm, it is the rm;s credit that has been collected. If it his own receipt, payment of the debtor will be pro-rated between the rm and the partner recei)ing the payment. #. $ partner has the right to be reimbursed by the partnership for the amou amount nt disb disbur urse sed d on beha behalf lf of the the part partne ners rshi hip p and and the the righ rightt to as% as% for for dissolution of the rm at the proper time. #0. $ partner has the right in a specied partnership property to use it for business purposes only. #. *he right to inspect and copy boo%s is not a)ailable to the partnership pending dissolution nor in one already dissol)ed #2. $s a rule, no formal account is demandable until after dissolution. *his is
because partners ha)e access to the boo%s. 4ut if a partner is wrongfully ecluded ecluded from the business, he can demand it at any a ny reasonable time #5. #oint management arises when two or more partners are appointed managers with an agreement that one cannot act without the consent of the others. *he appro)al of all the managers is necessary for the )alidity of one;s act.
$olidary ary manage manageme ment nt ta% '8. $olid ta%es plac place e when hen or more ore appo appoiinted nted managers may separately eecute all acts of administration. 4ut if one of them should oppose the acts of the others, the decision of the ma&ority shall pre) pre)ail ail.. In case case of a tie, tie, the the matt matter er sh shal alll be deci decide ded d by the the cont contro roll llin ing g partners. '1. !articipation in the selection of the managing partner is held by law as ta%ing part in the control of the business '. >ene '. >enera rall or limi limite ted d part partne nerr partn partner ers s may may eerci ercise se some some righ rights ts not not a)ailable in the general partnership, if the same are gi)en and indicated in the certicate such as the remaining general partners may continue the business e)en upon death, retirement, ci)il interdiction of a general partner or the limited partner to demand and recei)e property other than cash in return return for his contribution '#. If the rm upon dissolution is not sol)ent, a limited partner does not en&oy the same preference as an outside creditor. ''. $ limi ''. limite ted d partn partner er who who is held held liabl liable e as a gene genera rall part partne nerr does does not howe)er get the rights of the latter '. Insanity, incapability, pre&udicial conduct of a partner, unfair competition, the business can only be carried at a loss are only grounds for the petition of a partner in the court to dissol)e the rm '0. Civil "nterdiction is an accessory penalty imposed on a con)ict when the crime committed is punishable from 1 years and 1 day to #8 years that depri)es the con)ict of his rights of parental authority, guardianship, marital authority, the right to manage his property and of the right to dispose of his property.
Corporation $ copy of the articles led which is returned with the certicate of incorporation issued by the commission under its o?cial seal becomes its corporate charter. 1.
2.
$ corporation created by special law has no articles of incorporation
$ corpor corporati ation on has the power of succes successio sion n by its corporat corporate e name. name. Character of a corporation is not necessarily determined determined by its name.
3.
*he purposes should be stated denitely. denitely. *he main purpose and secondary purposes shall be distinguished from each other. @ain purpose must be specied. $ non-stoc% corporation may not include a purpose which would change or contradict its nature 4.
*he purposes, where there is more than one, must be capable of being lawfully combined. combined. *hus, ban%s which are go)erned by the general ban%ing law of 888 are prohibited from directly engaging in non-ban%ing acti)ities such as insurance.
*he main reason for stating the purpose of the corporation is to determine whether the acts performed by the corporation are authorized or beyond its powers. In the latter case, they will be %nown as ultra )ires acts.
7.
8.
*he principal place must be within the !hilippines +city or town.
*he place of principal o?ce does not necessarily necessarily mean the place where where the business of the corporation is transacted but the place where its books
9.
and records are ordinarily kept and its ocers usually meet for the purpose of managi managing ng the aairs aairs and transa transacti cting ng the busine business ss of the corpor corporati ation. on. If the new address is located within the same city or municipality, no corporate document is re"uired to be led with the <(C ecept a notice regarding the change of address. 10.
*he incorporating directors or trustees shall hold o?ce until their successors are duly elected and "ualied. *hey are intended to hold o?ce for one year when the corporation is organized
11.
()ery director must ha)e at least one share of capital stoc% of the corporation of which he is director.
12.
If some or all of the shares are without par )alue, such fact shall be stated in the articles
13.
If the shares ha)e par )alue, the amount of the authorized capital stoc% in pesos is specied in the articles, but if they ha)e no par )alue, no amount of capital stoc% is specied in the articles which need only state the number of shares into which said capital stoc% is di)ided. *he reason is that the price of no-par )alue shares may )ary from time to time and therefore the total amount of the capital stoc% cannot be %nown until all the shares are issued. 14.
Corporations which will engage in any business or acti)ity reser)ed for Ailipino citizens shall pro)ide in their articles of incorporation the restriction against the transfer of stoc% or interest which will reduce the ownership of Ailipino citizens to less than the re"uired percentage of the capital stoc% as pro)ided by eisting laws.
15.
*he general amendment may also be e6ected by the Bwritten Bwritten assent of the stoc%holders representing # of the outstanding capital stoc% or # of its members, meaning that such action need not be ta%en at a meeting and upon a )ote.
16.
If the amendment consists in etending or shortening the corporate term erm, a meeting of the stoc%ho %holders or members is necessary.
17.
18.
*he amendments shall ta%e e6ect only upon their appro)al of the <(C
In ban%ing institutions co)ered by special law, the amendments must be accompanied by a favo favora rabl ble e reco recomm mmen enda dati tion on of the the appr approp opri riat ate e government government agency agency with with respe espect ct to it that that it is in acco accord rdan ance ce with with law law. 19.
20.
Corp Corpor orat atio ions ns must must form formal ally ly organ organiz ize e thei theirr a6ai a6airs rs with within in year years, s,
otherw otherwise ise,, deemed deemed dissol dissol)ed )ed.. If become becomes s contin continuou uously sly inoper inoperati ati)e )e for year ears aft after its its orga organi niz zatio ation, n, tempo emporrari arily su susp spe ended nded or re)o% )o%ed. Ehen a change of name is appro)ed, a ppro)ed, it is re"uired that the commission must must iss issue ue an amende amended d certi certicat cate e of incor incorpor porati ation on under under the amende amended d name. 21.
In the case of religious corporations, the code does not re"uire the <(C to issue a certicate of incorporation. Arom Arom and after a fter the ling of articles, a rticles, the chief archbishop shall become a corporation sole. 22.
%e facto is the one that has not complied with all the re"uirements necessary to be a de &ure corporation but has complied su?ciently to be accorded corporate status as against third parties although not against the state 23.
$ corporation &y estoppel has no real eistence in law. It is neither de &ure nor a de facto corporation, but does a mere ction eist for the particular case. It eists only between the persons who misrepresented their status a nd the parties who relied on the misrepresentation.
24.
@andatory pro)isions prescribe formalities for incorporation which are designed to protect the public.
25.
27.
can
$cts of stoc%holders are not binding on the corporation. $ corporation act only through the 4=D.
4=D cannot perform constituent acts in)ol)ing fundamental or ma&or chang hange es in the cor corpor porati ation su suc ch as ame amendm ndment ent of the art articl icles of incorporation 28.
4=D holds a duciary relation +trust and condence to the corporation and the stoc%h stoc%hold olders ers or membe members rs they they repr represe esent. nt. *hey *hey are are re"ui re"uire red d to discharge their duties in good faith and with diligence, care and s%ill. *hey are liable if they breach their duciary duty. 29.
Aor Aor 4=D 4=D to eer eerci cise se their their power powers, s, they they must must meet meet as direct directors ors or trustees and act at a meeting at which there is a quorum
30.
Directors are not agents of the corporation and thus ha)e no power acting indi)idually to bind the corporation 31.
32.
"n a close corporation' any action &y the directors without a
meeting or at a meeting improperly held is deemed valid or rati!ed. $ corp corpor orat atio ion n is epr epres essl sly y allo allowe wed d to ente enterr into into a manag managem emen entt contract under which it delegates the management of its a6airs to another corporation for a certain period of time. 4=D can also delegate its power, impliedly or epressly to other o?cers an d agents
33.
34.
in
=ne disad)antage of corporation is that stoc%holders ha)e little )oice the conduct of the business.
Fnde Fnderr the the doct doctri rine ne of pier pierci cing ng the the )eil )eil of corp corpor orat ate e enti entity ty,, the the corporation and the persons composing it will be treated as one and identical person person +insta +instance nces s such such as fraud, fraud, ta e)asi e)asion, on, and a)oidi a)oiding ng obliga obligatio tion. n. 35.
In a non-stoc% corporation, minimum members are and may be more than 1. Number of members must be multiple of . No part of income shall be distributed as di)idends to members.
36.
Civil Corporation is one organiz (leemosynary ary is for organized ed for prot. prot. (leemosyn charitable 37.
38.
persons. s. In clos close e corp corpor orat atio ion, n, stoc stoc%h %hol olde ders rs sh shal alll not not ece eceed ed )* person
A part partne ners rshi hip p can can &e a corp corpor orat ator or in a corp corpor orat atio ion n &ut &ut a corporation cannot &e a partner in a partnership
39.
40.
bu t
$ corporation can subscribe after another corporation7s incorporation not if made before.
A corporation can &e a corporator &ut never an incorporator in another corporation e+cept in rural &an, law
41.
$ mar married ried woma woman n can can be an inco incorp rpor orat ator or with with the the conse consent nt of the the husband if it in)ol)es conjugal or conjugal or absolute community property. If it in)ol)es her eclusi)e property, consent is not re"uired
42.
@a&o @a&ori rity ty must must be resid esiden ents ts of the the !h !hil ilip ippi pine nes s to for form a pri) pri)at ate e corporation. 43.
4y-law 4y-l aws s need need not not be notar notariz ized ed but but re"ui e"uirred to be sign signed ed by the the incorporators and stoc%holders and led with <(C. It is mandatory. It shall be e6ecti)e upon issuance of the <(C of certicate certifying that the by-laws are not inconsistent with the code. 44.
$rticles of Incorporation are adopted by the incorporators as C9$3*(3 of the the corp corpor orat atio ion n whil while e by-l by-law aws s are are for for thei theirr inte interrnal nal go)e go)errnmen nmentt 45.
egular meetings - it shall be held annually on a date ed in the bylaws or if not so ed, on any date in $pril of e)ery year
46.
47.
!lace ace of meeti eeting ngs s must be hel held in the pri princi ncipal pal plac place e of the the corporation. $ny pro)ision changing such place is illegal
48.
*he "uorum of board meetings shall be ma&ority of all members of the 4=D or board of trustee.
49.
()ery ()ery corpor corporati ation on must must ha)e ha)e at least least a 4=D, 4=D, !resi !residen dent, t, *reasu reasure rer, r,
51.
$
president
must
be
a
director
52.
$ secr secret etar ary y must must be a resid esiden entt and and a citi citize zen n of the the !h !hil ilip ippi pine nes s
$ny or more positions may be held concurrently by the same person ecept a president and and secretary or treasu surrer at the same time 53.
Cumulati)e )oting for one candidateGa stoc%holder cumula cumulates tesco conce ncentr ntrate ates s all his shares shares and gi)es gi)es one candid candidate ate as many many )otes )otes as the number of directors to be elected multiplied by the number of his shares 55.
Cumulati)e )oting by distributionGdistributes shares among as many candidates he sees t.
56.
57.
=ne
stoc%
is
e"ual
to
1
)ote
=nly the stoc%holders can remo)e a director. # of the outstanding capital stoc% or members is re"uired
58.
Hacancy in the 4=D is lled up by the remaining directors constituting a "uoru "uorum m +ma&o +ma&ori rity ty sh shal alll remai emain n if the the caus cause e of )aca )acanc ncy y is othe otherr than than remo) emo)al al,, epi epira rati tion on of ter term or incr increa ease se in the the numb number er of dir director ectors s or trus truste tees es.. If not, not, su such ch )aca )acanc ncy y will will be lle lled d up by the the stoc stoc%h %hol olde ders rs.. 59.
60.
3egular
meetings
of
the
board
shall
be
held
monthly
62.
!lace
of
meetings
may
be
anywhere
Directors or trustees are not allowed to )ote or attend by proy and they do not recei)e compensation in the absence of any pro)ision in the bylaws ing their salary
63.
Jou Jou cannot be a director in or more corporations. =ne cannot ser)e masters at the same time 65.
66.
#
corporate
powers:
+1epress
+implied
+#
incidental
@ost of the decision by ma&ority of the directors re"uire appro)al or ratication by at least # outstanding capital stoc%. *his is true in case of an y amendment to articles of incorporation 67.
$ corporation engaged in transportation cannot engage in any other business alien to transportation
68.
Corporations engaged in agriculture are prohibited from ha)ing any other interest in any other corporati ation engagi aging in agr agriculture 69.
!ri)ate corporations engaged in retail trade and rural ban%ing must be 188 percent Ailipino-owned. Aor !ublic Ftility de)elopment and eploitation of natural resource must be at least 08K Ailipino owned. Aor pawnshop, at least 8K 70.
Fltra )ires act may be ratied by appro)al. If fully or partially eecuted can bind the parties. $n illegal act can ne)er be binding to the corporation.
71.
72.
$t least least percen percentt of the author authorize ized d must must be subscr subscribe ibed. d. !aid-up aid-up capital upon incorporation shall not be less than percent of the subscribed capital.- rule
73.
Aounder7s shareGright to )ote and be )oted in the election of directors must be for a limited period not to eceed years. 74.
Non-)oti Non-)oting ng shares: shares: +1 prefer preferred red + redeem redeemable able +# treasur treasury y. *hey ne)ertheless ha)e two rights: $mendment of articles of incorporation and adoption an d amendment of by-laws. 75.
76.
!referred
share
is
always
a
par-)alue
share
78.
or
Certicate of
79.
$ subscriber is entitled to all the rights of a fully paid stoc%holder for as long as he has not been declared delin"uent
80.
81.
*ransferr *ransferror or
has
the
right
to
)ote
$fter incorporation, full payment is re"uired for purchasers to become stoc%holders. 82.
!erso ersons ns con) con)ic icte ted d by nal nal &udg &udgme ment nt of an o6en o6ense se puni punisha shabl ble e by imprisonment for a period eceeding si years and guilty of )iolation the Code within years prior to the date of election or appointment shall be dis"ualied to be a director, trustee or o?cer
83.
3emo) emo)al al of dir directo ectors rs or trust trustee ees s may may be with with or with withou outt cause cause.. 3emo)al without cause may not be used to depri)e minority stoc%holders of the right of representation inn the board of directors. =therwise, the basic purpose of cumulati)e )oting which is to allow minority stoc%holders to unite and and elec electt thei theirr repr epresen esenta tati ti)e )e in the the boar board d will will be render endered ed us usel eles ess. s. 84.
$ director elected to ll a )acancy shall ser)e only for the unepired portion of the term of his predecessor in o?ce
85.
It is on the presu presumpt mption ion that that direct directors ors and trust trustees ees rende renderr ser)ic ser)ice e gratuitously and that the return upon their shares ade"uately furnishes the moti)es for ser)ice, without compensation. 86.
*hey are entitled only to compensation if it is ed in the by-laws or when hen the the gi) gi)ing of comp compe ens nsat atio ion n is appr appro) o)ed ed by the stoc stoc%h %ho older lders s repr represe esenti nting ng at least least a ma&ori ma&ority ty of the outsta outstandi nding ng capita capitall stoc%. stoc%. 4oard 4oard appro)al is su?cient 87.
Direct Directors ors are are liable liable to the corpor corporati ation, on, stoc%h stoc%hold older er or member members s or othe otherr per persons sons who su su6e 6err damag amage es. Natu Naturre of liab liabiility lity is sol solidar idary y. 88.
$ special meeting of the stoc%holders for the purpose of remo)al of dir directo ectors rs or trus truste tees es must must be call called ed by the the secr secret etar ary y on orde orderr of the the president or on the written demand of the stoc%holders +only the ma&ority is re"uired. In remo)al of directors, # is re"uired. 89.
$ director can "uit any time but by reason of duciary nature of the position they occupy, he cannot resign as part of a fraudulent scheme to pre&udice the corporation. 9e should repair and ma%e good such loss in case of loss of prots. 91.
Ehere a director accepts a position in which his duties are are inco incomp mpat atib ible le with with thos those e as su such ch dir directo ector, r, it is pres presum umed ed that that he has has abandoned his o?ce as director 92.
94.
=nly the ma&ority is re"uired to authorize compensation of directors.
95.
$ director is entitled to be reimbursed for legitimate epenses incurred behalf of the corporation.
in
$ pri)ate corporation is authorized to pro)ide in its by-laws for the compensation of directors or trustees.
96.
*he per diems granted to the directors should not be included in their tota totall year yearly ly comp compen ensa sati tion on for for purp purpos oses es of the the 18 per percent cent limi limita tati tion on 97.
98.
*he
agents
of
the
corporation
are
the
directors.
$ contract of the corporation with one or more of its directorstrustees or o?ce o?cers rs is )oid )oidab able le at the the opti option on of su such ch corp corpor orat atio ion n unle unless ss all all the the condition enumerated in sec # are all present. In the case of a contract with a director or trustee, only that the contract is fair and reasonable, if the contract is ratied the # 99.
188. 18 8. It is a )ali )alid d cont contra ract ct betw betwee een n or mor more corp corpor orat atio ion n whic which h ha)e ha)e
interloc%ing directors as long as there is no fraud and the contract is fair and reasonable under circumstances. circumstances. 181. *he guilty director will only be eempted from liability to the corporation if his disloyal act is ratied by # 18. *he eecu 18. eecuti) ti)e e commit committee tee must must be pro)i pro)ided ded for in the by-la by-laws ws and composed of not less than # members of the board. *he committee may act on sp spec eci ic c matte atters rs with within in the the comp compet eten ence ce of the the boar board, d, as may be delegated to it by the board or in the by-laws ecept those to which only the board duly called a nd assembled as such can act upon. 18#. *he restri 18#. estricti ctions ons on the power power of the eecu eecuti) ti)e e commit committee tee may be enlarged by the board to co)er other matters. *he eecuti)e committee may amend or repeal a ny resolution of the board. 18'. Committee cannot delegate its authority e)en to one of its members since it can only bind the corpora oration through ma&o a&ority of )otes 18. $ll 18. $ll memb member ers s of an eec eecut uti) i)e e comm commit itte tee e must must be dir directo ectors rs of the the corpo orporratio ation. n. 9owe) owe)e er if all all acts cts of the the comm commiittee ttee will be merel erely y recommendatory in nature and shall not be carried out without the formal of the 4=D, some members may not be directors. 180. Doctrine of limited capacityGonly those that are epress, implied or incidental 18. Intra )iresGacted within the powers 182. $ corporation may not engage in a business di6erent from that for which it was created as a regular and a permanent part of its business. *his is especi especiall ally y true true in ban%ing ban%ing and insura insurance nce compani companies es organ organize ized d under under special laws. 185. *he use of corpor 185. corporate ate seal in certi certica cates tes of stoc% stoc% must must be deemed deemed directory rather than mandatory. $ corporation may eist e)en without a seal. $ny seal adopted and used by the corporation may be altered by it at its pleasure. 118. !ower to ac"uire and con)ey property has always been regarded as an incident to e)ery corporation 111. $ stoc 111. stoc%h %hol olde derr has has abso absolu lute te righ rightt to us use, e, en&o en&oy y and disp dispos ose e of his his prop proper erti ties es,, to perf perfor orm m all all acts acts and to ma% ma%e all all cont contra ract cts s witho without ut any any restriction ecept when they are prohibited by law. 11. $ corporation cannot do acts not epressly or impliedly gi)en by law
11#. Implied powers are those powers which are reasonably necessary to eercise the epress powers and to accomplish or carry out the purposes for which the corporation was formed. 11'.$ corporation which has been dissol)ed after the epiration of the #-year winding winding up period period ceases ceases to be de &ure &ure de facto and therefor therefore e it cannot cannot sue or be sued 11. $ corporation must be rst duly registered in accordance with law to ha)e the power to sue 110. $ seal 110. seal is a de)i de)ice ce us used ed to iden identi tify fy or repla eplace ce the the sign signat atur ure e of an indi)idual or organization and to authenticate written matter 11. !urchasing or holding real and personal property, to adopt and use a corp corpor orat ate e seal seal,, to cont contra ract ct and and ma%e a%e by-l by-law aws s are are inci incide dent ntal al powe powers rs 112. $ corporation may not hold alienable lands of a public domain ecept ecept by lease for a period not eceeding years, renewable for not more than years an d not to eceed 1,888 hectares in area. 115. Natu 115. Natura rall resou esourrces ces belo belong ng to the the stat state e and and cann cannot ot be alie alienat nated ed to corpor corporati ations ons.. *heir *heir eplo eplorat ration ion and de)elo de)elopme pment nt and utiliz utilizati ation on shall shall be under the full control a nd super)ision of the
!reempti)e
right
is
not
absolute
1.
10. *he 10. *he )ote )ote of the the ma&o ma&ori rity ty of the the trust trustee ees s in o?ce o?ce will will be su su?c ?cie ient nt authorization for the corporation to enter into any transaction because there are no members with )oting rights. 1. $ny disposition which does not in)ol)e all or substantially all of the corporate assets made in the ordinary course of business does not re"uire the the appr appro) o)al al of the the stoc stoc%ho %hold lder ers s and and woul would d not not enti entitl tle e any any disse dissent ntin ing g stoc%holders to eercise eercise his appraisal right. It can only eercise eercise the same if it is on the sale of all or substantially all of the corporate assets as such which woul would d rende enderr the the corp corpor orat atio ion n inca incapa pabl ble e of cont contin inui uing ng the the busi busine ness ss or accomplishing the purpose for which it was incorporated. 12. *he ac"uisition of shares shall be for legitimate purposes, its capital is not impaired, in good faith without pre&udice to the rights of the stoc%holders and creditors and that there is an unrestricted retained earnings to co)er the shares ac"uired. 15.
borrowed money is not prots but money may be borrowed temporarily for the purpose of paying di)idends if the corporation has used its surplus assets to ma%e a%e impro) pro)em eme ents nts for for which hich it might ight ha)e a)e bor borrowe owed mone oney. 1#.
Di)idends
may
not
be
declare ared
so long
as
decit
eists sts
1#2. *he directors are the &udges on how and when to spend corporate funds. 1#5. *he corporation may be compelled by the <(C to declare di)idends to its stoc%holders if it retains surplus prots in ecess of 188percent of their paid-in capital stoc% 1'8. !ayment of subscription from di)idends +stoc%, cash, Bto be declared is illegal for it obligates the subscriber subscriber to pay nothing for the shares ecept ecept as di)idends may accrue upon the stoc%. 1'1. *he 1'1. *he stoc stoc%h %hol olde derr is stil stilll enti entitl tled ed to recei ecei)e )e cash cash di)i di)ide dend nds s due due on deli delin" n"ue uent nt stoc stoc% % but but the the di)i di)ide dend nds s sh shal alll rst rst be appli applied ed to the the unpa unpaid id balance on the subscription plus costs and epenses while stoc, dividends shall &e withheld from the delinuent stoc,holder until his unpaid su&scription is fully paid. 1'.
1'2. Fpon the issuance of the certicate of incorporation, the corporation comes into eistence b ut not yet otganized. 1'5. 4y-laws shall be adopted within one month after receipt of o?cial notice of the issuance of its certicate of incorporation by the <(C. Ne)ertheless, by-laws may be adopted and led prior to incorporation with the articles of incorporation. Aailure to le a code of by-laws within one month from the date of incorporation with the <(C shall render the corporation liable to the re)ocation of its registration 18. 4y-laws must be general and uniform in their operation and not directed against part articular indi ndi)iduals, and must not be discriminato atory. 11. 4y-laws are not binding to a party who doesn7t ha)e %nowledge of its pro)ision. 1. $t least directors must be residents of the !hilippines. 1#. Corporation cannot pro)ide in the by-laws for the manner of election and the term of o?ce of directors or trustees which are already regulated by law. 1'. *he power to ma%e and repeal by-laws can only be eercised at a regular or special meeting duly called for the purpose. It can be delegated +# to directors. 4ut the power to amend the articles of incorporation lies with the stoc%holders members and cannot be delegated to directors. 1. *o re)o%e the delegated power, the law merely re"uires the )ote of ma&ority of the outstanding capital stoc%. 10. 3e)ocation 3e)ocation is )alid notwithstanding that no pre)ious notice was gi)en to stoc%holders or members of the intention to propose p ropose such re)ocation. 1. $rticles of incorporation constitutes the charter or fundamental law of the corporation. *he ling of articles of incorporation is a condition precedent to corporate eistence, while the ling of by-laws is a condition subse"uent. 12. *he president shall preside at all meetings of directors or trustees and of the stoc%holders or members, e)en where the chairman of the board is present, unless otherwise pro)ided in the by-laws. 15. *he directors or trustees are not a corporate body they are, when acting as a board, agents of the corporation. 108. In the absence of pro)ision in the by-laws, the meeting may be called
by a director or trustee or by an o?cer entrusted with the management of the corporation. 18. $ stoc%holder may ma%e the call on order of the <(C whene)er for any cause, there is no person authorized to call a meeting. 11. *he special meeting for the remo)al of directors may be called by the secretary of the corporation or by a stoc%holder. stoc%holder. 1. Ehether regular or special, notice must be gi)en when re"uired by the law or by the by-laws of the corporation. 1#. Eritten Eritten notice of e)en regular meetings must be sent to stoc%holders or members at least wee%s before the meeting pr at least 1 wee% for special meeti meetings ngs.. 9owe)e 9owe)er, r, notice notice of any meeti meetings ngs may be wai)e wai)ed d epr epressl essly y or impliedly, by a stoc%holder or member. In meetings ordered by the <(C, It is e)ident that notice is necessary. 1'. $ny business transacted at any meeting of stoc%holders shall be )alid e)en if the meeting be improperly held or called pro)ided that acts are not ultra )ires and that all the stoc%holders are present or represented at the meeting 1. Fnless otherwise pro)ided in the by-laws or in the code, a "uorum shall consist of the stoc%holders representing a ma&ority of the outstanding capital stoc% or a ma&ority of the members in the case of nonstoc% corporation. $ ma&ority )ote, in the absence of epress pro)ision in the by-laws and unless the )ote of a greater number is re"uired by law, is su?cient to decide any "uestion properly presented. 10. *o amend the articlesGma&ority )ote of 4=D and )ote or written assent of # 1. *o elect directorsGma&ority 12. *o remo) 12. remo)e e direct directors orsG G# # of the outsta outstandi nding ng stoc% stoc% or of membe members rs entitled to )ote 15. *o ratify a contract of director or o?cerG# 128. *o etend or shorten corporate termGma&ority of 4=D and # 121. *o increase or decrease the capital stoc%Gma&ority of 4=D and # 12. *o incur, create, or increase bonded indebtednessGa ma&ority of 4=D and #
12#. *o sell 12#. sell,, leas lease, e, echan change ge,, mort mortga gage ge or othe otherw rwis ise e disp dispos ose e all all or substantially all of the corporate assetsGma&ority of 4=D and # 12'. *o in)est corporate funds in another corporation or business or for any purpose other than the primary purposeGma&ority )ote of 4=D and # 12. *o issue stoc% di)idendsGma&ority of the "uorum of 4=D and #. *he appro)al of stoc%holders is not re"uired with respect to other di)idends such as cash and bond di)idends. 120. *o enter into management contractGma&ority of the "uorum of 4=D and a ma&ority of the outstanding capital stoc% of both managing and managed corporations and in some cases, # of the total outstanding capital stoc% entitled to )ote or of the members, with respect to the managed corporation. 12. *o adopt by-lawsGa ma&ority of the outstanding capital stoc% or of the members. 122. *o the issued price of no par )alue sharesGa ma&ority of the "uorum of 4=D if authorized by the articles of incorporation or in the absence of such authority, by a ma&ority of the outstanding capital stoc%. 125. *o *o e6ect or amend a plan of merger or consolidationGa ma&ority of )ote of 4=D and # of the outstanding capital stoc% or of the members of the constituent corporation 158. *o dis 158. dissol sol)e )e the corpor corporati ationG onGa a ma&ori ma&ority ty )ote )ote of 4=D 4=D and # of the outstanding capital stoc% or of the members 151. *o adopt a plan of distribution of assets of a nonstoc% corporationGa ma&ority )ote of trustees and # of the members ha)ing )oting rights. 15. $ corpor 15. corporati ation on may presc prescrib ribe e a great greater er )oting )oting re"ui re"uire remen mentt for the appro)al of any of the abo)e corporate acts in its articles of incorporation andor by-laws in order to protect the rights of minority stoc%holders 15#. Noti 15#. Notice ce of a regul egular ar meet meetin ing g need need not not be gi)e gi)en n if the the arti articl cles es of incorporation or by-laws specify the time of the meeting +ecept when it is to be held at another place. $ director trustee may wai)e the re"uirement of notice of any meeting, epressly epressly or impliedly 15'. If the presiding o?cer is not present at the time for a meeting to con)ene, a stoc%holder who ta%es the Loor may temporarily preside at the meeting of stoc%holders pending the selection of the presiding o?cer. o?cer. Fnless
the contrary is pro)ided by the by-laws, the presiding o?cer may be selected by the )ote of the stoc%holders present. 15. =ne cannot )ote if he does not appear to be a stoc%holder in the boo%s of the corporation 150. (ach member, regardless regardless of class, shall be entitled to one )ote 15. !ledgees or mortgagees of shares in stoc% corporation ha)e the right to attend and )ote at meetings of stoc%holders only when epressly gi)en such right in writing by the pledgor or the mortgagor as the latter remains the owner of the stoc% pledged or mortgaged. *he authorization is re"uired by the code to be recorded on the appropriate corporate boo%s by such pledgor or mortgagor. 152. $ proy may refer to a person or a formal written authority 155. *he right to )ote by proy is a special form of agency. No proy shall be )alid and e6ecti)e for a period longer than years. 88. Directors cannot attend or )ote by proy at board meetings 81. !roi 81. roies es are are irre irre)oc )ocabl able e at any time time unless unless made made irre irre)oc )ocabl able e by the gi)er. It becomes irre)ocable when the holder of proy has gi)en or promised a stoc stoc%h %hol olde derr a cons consid ider erat atio ion n or inte interrest est +loa +loan n of mone money y in retur eturn n for for irre)ocable proy. 8. In )oting trust agreement+must be in writing, notarized and led with <(C, a stoc%holder of a corporation parts with the )oting power only but retains the benecial ownership of stoc%. $ )oting trustee is only a share owner )ested with legal title for the sole purpose of )oting upon stoc% that he does not own. New certicate is issued to the trustee. 8#. *rustee is the legal title holder or owner of the shares so transferred under the agreement. 9ence, he is "ualied to be a director. 8'. *he ultimate control of the corporation depends upon the )otes of the stoc%holders 8. Hoting trust agreement, if )alidly eecuted is irre)ocable while a proy must be coupled with interest before it becomes irre)ocable. irre)ocable. 80M. *he stoc%holders ha)e the power to ll )acancy in the 4=D if the cause is any of the 6: +1remo)al + (piration of term +# Increase in the number of directors
8M. 4=D can ll the )acancy if the cause of )acancy is other than remo)al, epiration of term or increase in the number of director and the remaining directors still constitute a "uorum 82M. Directors are entitled to compensation if the gi)ing of compensation is ed in the by-laws, appro)ed by the stoc%holders representing at least a ma&ority of the outstanding capital stoc% or when the compensation refers to reasonable per diem 85. $ contract of the corporation with one or more its directors or trustees is )oidable unless all the 6 conditions are present: +1 that the presence of such director is not necessary to constitute a "uorum + that the )ote of such direct director or was not necessar necessary y for the appro)al appro)al of the contract contract +# +# that that the contract is fair and reasonable under the circumstances.. Ehen any of the rst two conditions is absent, such contract may be ratied by the )ote of #. Aull disclosure of the ad)erse interest of the director in)ol)ed must be made at such meeting. 18. *here 18. *here is interl interloc% oc%ing ing direct directora orate te when when a direct director or holds holds seats seats in the board of directors of or more corporations. *here is no prohibition in the corporation code regarding this. 9owe)er, law pro)ides for re"uisites when corp corpor orat atio ions ns with with inte interl rloc oc%i %ing ng dir directo ectors rs cont contra ract ct with with each each othe otherr. *he *he re"uisites are +if the interest of the director is substantial, 8percent and nominal in the other: +1 there is no fraud + the contract is fair and reasonable +# the presence is not re"uired for a "uorum and appro)al, )ote. If the interest is both nominal or substantial, re"uirement +# is no longer re"uired. 11. *he doctrine of corporate opportunity prohibits directors from ac"uiring busi busine ness ss oppor pportu tuni nitties ies for for his his per persona sonall gain ain at the the epe pense of the the corp corpor orat atio ion n +br +breach eaches es his his duc ducia iary ry duty duty. . 9e must must rst rst disc disclo lose se to the the corporation the opportunity and if the latter refuses to ta%e it, he can ta%e it. If breached, he must account to the corporation the prots by refunding the same. 1. (ecu 1. (ecuti) ti)e e commit committee tee is compos composed ed of not less less than # direct directors ors and whose creation is pro)ided in the by-laws. It acts on routine matters or on those which do not re"uire board meeting because it is di?cult to con)ene due to "uorum re"uirement. *hus small number is appointed among them. It cannot repeal or adopt by-laws and cannot ll )acancies in the board. 1#. $ donation must be for a public welfare and not for political purpose 1'.
1. $ll stoc%holders must gi)e their consent for the ratication of an ultra )ires act. 10. $ corporator in a stoc% corporation must be a stoc%holder. 9onorary membership in a business corporation is not allowed by law 1. !ri)ate corporation may be organized by pri)ate or by the state or both for pri)ate ends, aims, benets or purpose 12. In poli 12. politi tica call law, law, publ public ic corp corpor orat atio ions ns are are comm commonl only y refer eferrred as to municipal corporation 15. >o)ernment created pri)ate corporation to augment its income. *he corp corpor orat atio ion n is then then su sub& b&ec ectt to the the rule rules s of the the law law go)e go)errning ning pri) pri)at ate e corporation. (amples are: >
/uasi-pu&lic corporations - are 8. /uasi-pu&lic are in reali eality ty organ organiz ized ed as a pri) pri)at ate e corporation but perform public functions. (amples: !/D*, @(3$/C=, !$/, E> and $ 1. !re-incorporation !re-incorporation subscription shall be irre)ocable within 0 months from subscription . *he 4=D may the issued price of no-par )alue shares if authorized by the articles of incorporation. In absence of it, by the stoc%holders. #. *he issued price of no par shares may )ary from time to time as it is usually ed on the basis of their boo% )alues. '. ()ery '. ()ery certi certicat cate e of stoc% stoc% must must be sig signed ned by the preside president nt or )ice )ice president, countersigned by the corporate secretary and sealed with the seal of the corporation. . Fnregistered Fnregistered transfer shall not be )alid ecept as between the parties. It is the the con) con)ey eyan ance ce not not the the act act of regis egistr trat atio ion n whic which h gi)e gi)es s titl title e to the the transferee. 0. *here can be no )alid transfer if deli)ery is not made. . =nly absolute transfers need to be registered. !ledges and mortgages need not be registered or noted on the boo% for their )alidity since they do not in)ol)e absolute alienation of ownership of stoc%. 2. *o a6ect #rd persons, date and description of shares pledged appear in a public instrument is enough.
5. *he shares which may be alienated are those co)ered by certicates of stoc%. #8.
+bboo%s of foreign corp +ctrade secrets +dreasonable hours. ''. $ stoc%holder cannot, without order of the court be permitted to ta%e boo%s from the o?ce of the corporation. #. In gene #. genera ral, l, righ rightt of the the stoc stoc%h %hol olde derr eten tends ds to all all boo% boo%s, s, pape papers rs,, contracts, minute boo%s or other instruments from which he can deri)e any information that will enable him to better protect his interest. #0. >enera #0. >enerally lly,, where where one corpor corporati ation on sells sells or otherw otherwise ise transf transfer ers s all its assets to another corporation, the latter is not liable for the debts of the transferror transferror unless the transferee assumed the liabilities of the former. former.
''. @embership and all rights are personal and non-transferable, unless the articles or by-laws otherwise pro)ide. '. *ermination etinguishes all rights of a member in the corporation or in its property, unless otherwise pro)ided in the articles of incorporation. '0. *he term of o?ce of trustees shall be # years +non-stoc% '. If rst elected, 1# of the 4=* members shall epire e)ery year and subse"uent trustees shall ha)e # years. *rustees elected to ll )acancies occurring before the epiration of a particular term shall hold o?ce only for the unepired period '2. Non-st '2. Non-stoc% oc% may in)est in)est its its accumu accumulat lated ed funds funds for prot prot purpos purposes es but such power must be included in its articles in order that in)estment may not be considered ultra )ires. '5. *he right to )ote of members may be limited, broadened or were denied in the articles of incorporation or the by-laws. 8. (ach member shall be entitled only to 1 )ote in the election of trustees unless cumulati)e )oting is authorized. 1. Hoting Hoting by mail or other similar means may be authorized. . =?cers . =?cers may be direct directly ly electe elected d by the membe members rs unless unless otherw otherwise ise pro)ided. #. Non-stoc% may designate their go)erning boards by any name other than 4=*. *rustees ha)e duties similar to those of stoc% corporation. '. $ corporation ehibiting the characteristics of close corporation: +1 persons shall not eceed 8. + Issued shares are sub&ect to restrictions or transfer +# *he corporation shall not list in any stoc% echange or ma%e a stoc% o6ering to public. It is deem deemed ed not not a clo close se corp corpor orat atio ion n if if at at lea least st # # of of iits ts )oti )oting ng stoc%rights is owned by another which is not a close corporation. . *hos . *hose e corp corpor orat atio ion n )est )ested ed with with publ public ic inte interrest est canno cannott be a clos close e corporation mining or oil companies, ban%s, insurance, educational and stoc% echange. 0. Close corporation has been described as a corporation de &ure and partnership de facto and has been often referred to as an incorporated partnership because of its intimate business associates acting li%e partners
among themsel)es. . @anag . @anagem emen entt of a stoc stoc% % corp corpor orat atio ion n may may be by the the stoc stoc%ho %hold lder er if pro)ided in the articles.
