ParCor Reviewer

(pat, jhea, jess)

1. What are the requirements for a corp to do business?

- Obtain a license to do business from the Philippine Securities and Exchange Commission
(“SEC”).
(a) soliciting orders or service contracts;
(b) opening offices (whether called “liaison” offices or branches);
(c) appointing representatives or distributors domiciled in the Philippines or who in any calendar
year stay in the country for a period or periods totaling one hundred eighty (180) days or more;
(d) participating in the management, supervision or control of any domestic business, firm, entity
or corporation in the Philippines; or
(e) any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions
normally incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization.

- A foreign corporation doing business in the Philippines without the required license will not be
permitted to maintain or intervene in any judicial or administrative action in the Philippines;
however, such foreign corporation may be sued or proceeded against before Philippine courts
or administrative tribunals on any valid cause of action recognized under Philippine law.

2. What is a foreign corporation?

- One formed, organized or existing under any laws other than those of the Philippines and whose
laws allow Filipino citizens and corporations to do business in its own country or state.

3. Can it do business in the absence of registration?

- No foreign corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such corporation may
be sued or proceeded against before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws

4. Can it do indirect business in the Philippines?

GR: NO
Exception: Isolated Transactions
Exception to the exception: where a single act or transaction however, is not merely incidental or
casual but indicates the foreign corporation’s intention to do other business in the Philippines, said
single act or transaction constitutes doing or engaging in or transacting business in the Philippines.

5. How does foreign corp acquire personality?

- Foreign corporations intending to operate in the Philippines through the modes allowed by law,
should register with the Philippine Securities and Exchange Commission [SEC]. Such
registration is necessary to give legal personality thereto.

6. What is 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
7. Natural v. Juridical Persons
- Natural = human being not created by law
- Juridical = is a body of person, a corporation, a partnership, or other legal entity that is
recognized by law which grants a juridical personality separate and distinct from that of a
shareholder, partner, or member

8. Corporate term
- 50 years from the date of incorporation unless sooner dissolved or unless said period is
extended
- Renewal: 5 years before the expiration of the term

9. How can corp power be extended?

- A private corporation may extend or shorten its term as stated in the articles of incorporation when
approved by a majority vote of the board of directors or trustees and ratified at a meeting by the
stockholders representing at least 2/3 of the members in case of non- stock corporations.

10. When can the corp power be extended?

- A corporation shall exist for a period not exceeding fifty (50) years from the date of
incorporation unless sooner dissolved or unless said period is extended. The corporate term as
originally stated in the articles of incorporation may be extended for periods not exceeding fifty
(50) years in any single instance by an amendment of the articles of incorporation, in
accordance with this Code; Provided, That no extension can be made earlier than five (5) years
prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an
earlier extension as may be determined by the Securities and Exchange Commission.

11. Classification of corp powers

a. Expressly granted or authorized by law

1. To sue and be sued in its corporation name.

2. Of succession by its corporate name for the period of time stated in the articles of incorporation
and the certificate of incorporation.

3. To adopt and use a corporate seal.

4. To amend its articles of incorporation in accordance with the provisions of this code.

5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same
in accordance with this Code.

6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this code; and to admit members to the corporation if it be a non-
stock corporation.

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise
deal with such real and personal property, including securities and bonds of other corporations, as
the transaction of the lawful business of the corporation may be reasonably and necessarily require,
subject to the limitations prescribed by law and the Constitution.

8. To enter into with other corporations merger or consolidation as provided in this code.
 9. To make reasonable donations, including those for the public welfare or for hospital, charitable,
cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign,
shall give donations in aid of any political party or candidate or for purposes of partisan political
activity.

10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers
and employees.

11. To exercise such other powers as may be essential or necessary to carry out its purpose or
purposes as stated in its articles of incorporation.

b. Implied powers – reasonably necessary to exercise the express powers and to accomplish or
carry out the purposes for which the corp was formed.

1. Acts in the usual course of business- borrowing money, making ordinary contracts,
executing promissory notes etc.
2. Acts to protect debts owing to a corp
3. Embarking in different business
4. Acts in part or wholly to protect or aid employees
5. Acts to increase business

c. Incidental/Inherent powers- powers which a corp can exercise by mere fact of its being a
corp or powers which are necessary to corp existence and are, therefore, impliedly granted.

1. Power of succession
2. To be sue and be sued
3. To have a corp name
4. To purchase and hold real & personal prop
5. To adopt and use a corp seal
6. To contract
7. To make by-laws

12. Non use of corp charter

- If a corporation does not formally organize and commence the transaction of its business or the
construction of its works within two (2) years from the date of its incorporation, its corporate
powers cease and the corporation shall be deemed dissolved. However, if a corporation has
commenced the transaction of its business but subsequently becomes continuously inoperative
for a period of at least five (5) years, the same shall be ground for the suspension or revocation
of its corporate franchise or certificate of incorporation.

- This provision shall not apply if the failure to organize, commence the transactions of its
businesses or the construction of its works, or to continuously operate is due to causes beyond
the control of the corporation as may be determined by the Securities and Exchange
Commission.

13. When does a corp acquire a separate personality from incorporators?

- If the certificate of incorporation is already issued
- Issuance of cert of incorp = birth of corp
14. De facto v. De Jure
- De facto = generally refer to organizations exercising power under colour of a more or less
legally constituted corp

Elements:
1. Existence of a valid law under which a corporation can be organized.
2. An attempt in good faith to incorporate.
3. Actual exercise of incorporate powers.

Can its existence be attacked? No bec quo warranto (an inquiry made into the right of a
corporation to conduct business) cannot be attacked indirectly/collaterally

- De jure = one created in strict or substantial conformity with the statutory requirements for
incorporation and whose right to exist as a corporation cannot be successfully attacked even in
a direct proceeding for that purpose by the State.

15. Piercing the veil of Corp existence

- while the corporation cannot be generally held liable for acts or liabilities of its stockholders
or members, and vice versa because a corporation has a personality separate and distinct from
its members or stockholders, however, the corporate existence is disregarded under this
doctrine when the corporation is formed or used for illegitimate purposes, particularly, as a
shield to perpetuate fraud, defeat public convenience, justify wrong, evade a just and valid
obligation or defend a crime.

16. Doctrine of business opportunity

- Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts
of the corporation who are guilty of gross negligence or bad faith in directing the affairs of the
corporation or acquire any personal or pecuniary interest in conflict with their duty as such
directors or trustees shall be liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or members and other persons.
- When a director, trustee or officer attempts to acquire or acquires in violation of his duty, any
interest adverse to the corporation in respect of any matter which has been reposed to him in
confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall
be liable as a trustee for the corporation and must account for the profits which otherwise would
have been accrued to the corporation.

17. Qualifications of BOD

- STOCK CORPORATIONS:
a. Every director must own atleast one share of capital stock.
b. The share of stock held by the director must be registered in his name on the books of the
corporation.
c. Every director must continuously own atleast a share of stock during his term, otherwise, he
shall automatically cease to be a director.
d. A majority of the directors must be residents of the Philippines

- NON STOCK CORPORATIONS- Trustees of Non stock must be members in good standing
thereof and like in stock corporations, a majority of them must be "residents of the Philippines".

*REQUIRED TO BE A FILIPINO? There is no citizenship requirement demanded of the

members of the board of directors under the Code.
18. How many shares of stocks?
- Every director must own atleast one share of the capital stock of the corporation of which he is
a director, which share shall stand in his name on the books of corporation.

19. Can he be a director & secretary at the same time?

- Any two or more positions may be held concurrently by the same person, except that no one
shall act as president and secretary or president and treasurer at the same time.

20. Nationality of Sec.

- The secretary must be a resident and a citizen of the Philippines. He is not allowed to act as a
president and secretary.

21. Right of Withdrawal & Appraisal

- Instances of appraisal right: Any stockholder of a corporation shall have the right to dissent
and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in any
respect superior to those of outstanding shares of any class, or of extending or shortening the
term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation
- Withdrawal: In addition and without prejudice to other rights and remedies available to a
stockholder under this Title, any stockholder of a close corporation may, for any reason, compel
the said corporation to purchase his shares at their fair value, which shall not be less than their
par or issued value, when the corporation has sufficient assets in its books to cover its debts
and liabilities exclusive of capital stock: Provided, That any stockholder of a close corporation
may, by written petition to the Securities and Exchange Commission, compel the dissolution
of such corporation whenever any of acts of the directors, officers or those in control of the
corporation is illegal, or fraudulent, or dishonest, or oppressive or unfairly prejudicial to the
corporation or any stockholder, or whenever corporate assets are being misapplied or wasted.

22. Corp by Estoppel

- Estoppel – It is preclusion, which prevent a man from denying a fact in consequences of his
own previous act, allegations, or denial of a contrary tenor. The object of the principle of
estoppel is to prevent injustice to an otherwise innocent person.
- All persons who assume to act as a corporation knowing it to be without authority to do so shall
be liable as general partners for all debts, liabilities and damages incurred or arising as a result
thereof: Provided, however, that when any such ostensible corporation is sued on any
transaction entered by it as a corporation or on any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate personality.
- On who assumes an obligation to an ostensible corporation as such, cannot resist performance
thereof on the ground that there was in fact no corporation.

*Is a corporation by estoppel in existence? A corporation by estoppel has no real existence, in

law. It is neither in de jure nor de facto corporation, but is a "mere fiction existing for the particular
case" where the element of estoppel is present.
23. Limited Partnership
- A limited partnership is one formed by two or more persons under the provisions of the
following article, having as members one or more general partners and one or more limited
partners. The limited partners as such shall not be bound by the obligations of the partnership.

24. Can a limited partner be a general partner?

- A person may be a general partner and a limited partner in the same partnership at the
same time, provided that this fact shall be stated in the certificate provided for in Article
1844.
- A person who is a general, and also at the same time a limited partner, shall have all
the rights and powers and be subject to all the restrictions of a general partner; except
that, in respect to his contribution, he shall have the rights against the other members
which he would have had if he were not also a general partner.

25. Dissolution of Corp

 Voluntary- It may be effected:
1. By the vote of the BOD/ trustees and stockholders/members, where no creditors are
affected
2. By judgment of the Securitiess and Exchange Comission after hearing of petition for
voluntary dissolution, where creditors are affected
3. By amending the articles of incorporation to shorten the corporate term
4. In the case of a corporation sole, by submitting to the Securities and Exchange
Commission a verified declaration of dissolution for approval.
 Involuntary- it may be effected:
1. By expiration of term provided for in the original articles of incorporation
2. By legislative enactment
3. By failure to formally organize and commence the transaction of its business within
two (2) years from date of incorporation.
4. By order of the Securities and Exchange Commission.

The change of name of a corporation does not result in its dissolution.

26. BOD main functions

a. provide general policy direction;
b. formulate the strategic development plan;
c. determine and prescribe the organizational and operational structure;
d. review the Annual Plan and Budget and recommend for the approval of the GA
e. establish policies and procedures for the effective operation and ensure proper
implementation of such;
f. evaluate the capability and qualification and recommend to the GA the engagement
of the services of the External Auditor;
g. appoint the members of the Mediation/ Conciliation and Ethics Committees and
other Officers as specified in the Code and cooperative By-laws;
h. declare the members entitled to vote;
i. decide election related cases involving the Election Committee and its members;
 j. act on the recommendation of the Ethics Committee on cases involving violations
of Code of Governance and Ethical Standards; and
k. perform such other functions as may be prescribed in the By-laws or authorized by
the GA.

27. Stockholders
- Stockholders do not simply turn their money over to a corporation and surrender any say in
how that money is used. Instead, stockholders may vote on different matters of business within
the corporation, such as the appointment of new members to the board of directors.
Stockholders also receive a certain portion of the dividends earned by the corporation,
according to the number of shares each stockholder purchases. Stockholders generally have
one vote per share of the company that they own. If one stockholder owns the majority of the
corporation’s stocks, or 51 percent of the stocks or more, then that stockholder has the ability
to outvote other stockholders.
- Any or all of the shares or series of shares may have a par value or have no par value as may
be provided for in the articles of incorporation: Provided, however, That banks, trust
companies, insurance companies, public utilities, and building and loan associations shall not
be permitted to issue no-par value shares of stock.