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History:

Corporation Law Act No. 1459 first


general law on corporation
-passed by the Philippine Commission
in 1906

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ection 1. Title of the


Code.-This Code shall be
known as The
Corporation Code of the
Philippines.

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CORPORATION LAW

comply with the new


requirements of the Code.
PURPOSE
a. Defines the area within which
the parties are free to allocate
risk, control and profit as they
wish
b. To prescribe the allocation of
these elements in the absence
of express agreement
c. Aims to regulate both relations
between the groups and within
the groups e.g. stockholder,
directors, officers and creditors

Batasang Pambansa Blg. 68 The


Corporation Code of the Philippines
repealed Act No. 1459

SCOPE

Corporation Code

The Code provides: F2D2P

Applies to all corporation


already in existence at the time
the code took effect
- Consistent with the
mandate of the
Constitution (Sec 16, Art.
XII)
- For Congress to prescribe
all the criteria for the
formation, organization
or regulation of private
corporations in a general
law applicable to all
without discrimination
Section 148 of the Corporation
Code provides that all lawfully
existing corporations in the
Philippines on the date of its
effectivity are thereafter
authorized, licensed or
registered by SEC shall be
deemed to be authorized and
licensed under the provisions of
the code but subject to certain
conditions.
The existing corporations are
given not more than 2 years to

a. Formation and organization of


corporations
b. Defines their powers
c. Fix the duties of the directors
and other officers thereof
d. Declares liabilities of
shareholders and members
e. Prescribe the conditions under
which corporations may
transact business
APPLICATION OF THE
CORPORATION CODE
REMEMBER: As between a general
and special law the latter will
prevail. The former will only apply
as suppletorily insofar as they are
not in conflict with the provisions
of the special law.
EXAMPLES:
Banks General Banking Law and New
Central Bank Act are primary laws on
banks
Insurance Companies Insurance
Code of the Philippines

OTHER APPLICABLE LAWS AND


RULES
Securities Regulation Code or RA 8799
The Foreign Investment act of 1997
New Civil Code supplies missing
details in the Corporation Law like
agency rules applies to acts of
directors, officers or stockholders in
the absence of any applicable
provisions in the Corporation Code.
SEC Rules and Regulations only have
force and effect when as a collegial
body the SEC en banc can adopt
rules and regulation.
Exemptions:
SEC officers implement the statutory
provisions and even act in a specific
way in the absence of a statutory rules
or regulations promulgated by the SEC
en banc.

ection 2. Corporation
defined A corporation is
an artificial being created
by operation of law having
the right of succession and the
powers, attributes and properties
expressly authorized by law or
incident to its existence.

According to CJ Marshall of the US SC


corporations are an artificial being,
invisible intangible and existing only in
contemplation of law

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Pre-Need Companies Pre-Need Code


or RA 9829

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Attributes of a Corporations
derived from Sec 2.
a. It is an artificial being
b. It is created by operation of
law
c. It has the right of
succession
d. It has the powers, attributes
and properties expressly
authorized by law or
incident to its existence.
THEORIES
1. Concession Theory
corporation owes its life to the
State and its birth is purely
dependent of the States will.
a. Also known as Fiat
theory, Government
Paternity Theory or
Franchise Theory
2. Fletcher: A Corporation is not
in fact and reality a person, but
law treats it as though it were a
person by process of fiction, or
by regarding it as an artificial
person distinct and separate
from its individual stockholders.
a. Created for certain
specific purposes, extent
of existence, power and
liberties are fixed by its
charter.
3. Other Theories that may
influence the development of
corporation law:
a. Realist or inherence
Theory the legal
recognition of group of
interest that, as a
practical matter, already
exist.
i. Its focus is on
voluntary
associational
activities of

CORPORATION LAW

ii. Special or
secondary
Franchise - certain
rights are
conferred of
existing
corporations. E.g
rights to use the
streets of
municipalities lay
pipes of tracks etc.
B. Vested in
the
corporation,
may
ordinarily be
conveyed or
mortgaged
under a
general
power
granted to a
corporation
to dispose
its property.

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individuals provide
a basis for invoking
the usual
constitutional and
other legal
protection for
individuals
b. Enterprise Theory
stresses the underlying
commercial enterprise
without emphasis on
entity-aggregate
distinctions of the
components
c. Symbol Theory a
corporation is a symbol
for the aggregate of the
associates in their group
personalities
4. Franchises a corporation is
granted by the state the right to
exist by virtue of a primary
franchise.
a. Is a special privilege
conferred by a
governmental authority
and which does not
belong to citizens of the
country generally as a
matter of common right.
b. Franchises relating to
corporations are divisible
into:
i. Corporate or
General franchise
exist as a
corporation
A. Vested in
the
individuals
who
compose the
corporation
and not the
corporation
itself

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The right to be and act as a


corporation is not a natural or civil
right of any person. Thus without
registration and without authority of
the State groups of individuals would
only be considered an association, or
at most partnership.
Creation by Special Law
The Constitution provides that
the only GOCC may be created by
special law.
Some special laws may also recognize
that certain entities may acquire
juridical personality without conferring
a corporate status automatically by
mere passage of law.
e.g.

5. Contract Theory incorporation


involve contracts among the
members, between the
members and the corporation,
and between the members or
the corporation and the State.
a. Thus, because of the
contract between the
State and corporation,
the corporation is entitled
to the right against
impairment of contracts.
The state cannot likewise
take the life of the
corporation without due
process
b. Contract is governed and
evidenced by the Articles
of Incorporation
c. There is also a contract
between the corporation
and its stockholders ergo,
members cannot
disregard the provisions
of the Articles of
Incorporation and its Bylaws. In return the
corporation cannot
disregard the rights of its
shareholders provided in
the article and by-laws.
6. Right of Succession also
known as perpetual succession.
That continuous
existence which enables
a corporation to manage

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Local Water Districts they are


created pursuant to PD 198 that
constitutes their special charter.

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its affairs, and hold


property without the
necessity of perpetual
conveyances, for the
purpose of transmitting
it.
a. It is chiefly for the
purpose of clothing
bodies of men in
succession with these
qualities and capacities
that corporation were
invented, and are in use.
b. Purpose is for the
promotion of the
particular object, like one
immortal being.
c. A corporation continues
to exist even if there is a
change in those who
compose it. Death of a
shareholder or transfer of
shares will not affect the
continued existence of
the corporation.
d. Perpetual succession
does not imply corporate
immortality. The term of
the corporation is 50
years subject to further
extension of its term
under Sec 11 of the Code.
7. Doctrine of Separate
Personality the corporation
has a personality separate and
distinct from its members.
a. Basis Art. 44 of the Civil
Code