corporation quick look

7/29/2019 Corporation Quick Look

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LAW 22 D

I.1. Artificial being

Title IISec. 20 De Facto Corporation

Sec. 21 Corporation by estoppelsTitle IV

Sec. 36 Corporate powers and capacity

2. Created by the operation of lawTitle I

Sec. 3 Classes of corporationSec. 4 Corporation created by special laws or charactersSec. 5 Corporators and incorporators, stockholders and membersSec. 7 Founders sharesSec. 8 Redeemable shares

Sec. 9 Treasury sharesTitle II

Sec. 10 Number and qualifications of incorporatorsSec. 12 Minimum Capital stock required of stock corporationsSec. 13 Amount of capital stock to be subscribed and paid for purposes of

incorporationSec. 14 Contents of articles of incorporationSec. 15 Form of Articles of IncorporationSec. 17 Grounds when articles of incorporation or amendment may berejected or disapprovedSec. 19 Commencement of corporate existenceSec. 20 De Facto CorporationSec. 21 Corporation by estoppelSec. 22 Effects of non-use of corporate charter and continuous inoperation ofa corporation

Title IVSec. 37 Powers to extend or shorten corporate termSec. 38 Power to increase or decrease capital stock;; incur, create or increase

bonded indebteness

3. Has the right of successionTitle II

Sec. 11 Corporate term

4. Powers, attributes and properties expressly authorized by law orincident to its existence

Title ISec. 6 Classification of sharesSec. 7 Founders sharesSec. 8 Redeemable sharesSec. 9 Treasury sharesSec. 14 Contents of articles of incorporation


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Title IISec. 17 Grounds when articles of incorporation or amendment may berejected or disapprovedSec. 18 Corporate nameSec. 20 De Facto CorporationSec. 21 Corporation by estoppels

Title IVSec. 36 Corporate powers and capacitySec. 37 Powers to extend or shorten corporate termSec. 38 Power to increase or decrease capital stock;; incur, create or increase

bonded indebtednessSec. 39 Power to deny pre-emptive rightSec.40 Sale or other disposition of assetssection 43 : power to declare dividends

Section 44 : power to enter into management contract

Section 45: ultra vires acts of corporations

II. BOARD OF DIRECTORSSec. 23 The board of directors or trustees

Must own at least one share of the capital stock of the corporation

Majority must be residents of the PhilippinesConsequence:

Any director who ceases to be the owner of at least one share wouldcease to be a director

Sec. 25 Corporation officers, quorum

Directors or trustees cannot attend or vote by proxy at board meetingsSec. 27 Disqualification of directors, trustees or officers

A person is not qualified to be a director if:

he is convicted by final judgment of an offense punishable byimprisonment for a period exceeding 6 years

He violated the Code within 5 years prior to the date of his election orappointment

Sec. 30 Compensation of directors

In the absence of any provision in the by-laws, they shall not receive anycompensation, except for reasonable per diems (daily allowance).-but compensation may be granted by the vote of the majority of thestockholders

In no case shall their total yearly compensation exceed 10% of the netincome before income tax of the corporation during the preceding year

Sec. 31 Liability of directors, trustees or officers

Directors or trustees shall be liable solidarily for damages resulting from:o Voting for or assenting to patently unlawful acts of the corporation

o Directing the affairs of the corporation in bad faith or gross

negligence


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o Acquiring personal or pecuniary (monetary) interest in conflict with

their duty

A director is liable as a trustee for the corporation and must account forthe profits which should have been accrued to the corporation when heattempts to acquire or acquires any interest adverse to the corporation

Sec. 34 Disloyalty of a director

When a director acquires for himself a business opportunity which shouldbelong to the corporation thereby obtaining profits to the prejudice ofsuch corporation, he must account for all the profits by refunding thesame, unless his act has been ratified by 2/3 of the stockholders


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III. CONSTITUENT DECISIONSA. Decisions requiring the vote of stockholders

Nature ofconstituent

Decision

Definitionof

constituen

t decision

RequiredBOD vote

Requiredvote of

sharehold

ers

Appraisalright

Distinguishing

feature

Amendmentof Articles ofIncorporationRight ofSuccession

Extend forperiods notexceedingfifty yearsin anysingleinstance byanamendmentof articles ofincorporation

Majority ofBOD

2/3 ofOutstandingCapitalStock

Applicablefordissentingshareholders

Provided,that noextensioncan bemadeearlier thanfive yearsprior to theoriginal orsubsequentexpiry datesunless thereare

justifiablereasons foran earlierextensionas may bedeterminedby theSecuritiesandExchangeCommission

Powers toextend orshortencorporateterm

A privatecorporationmay extendor shortenits terms asstated inthe articlesofincorporation

Majority ofBOD



Contrast totheAmendmentof Articles ofIncorporation, merewrittenassentwould notbe sufficient

Power toincrease ordecreasecapitalstock;; incur,create orincreasebondedindebtednes

Increase ordiminutionof thecapitalstock, ortheincurring,creating orincreasing

Majority ofBOD 2/3 ofOutstandingCapitalStock


Providedthat the SECshall notaccept forfiling anycertificateof increaseor decreaseunless at


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s of anybondedindebtedness

least 25% ofsuchincreasedcapitalstock hasbeen

subscribedPower todeny pre-emptiveright

Allstockholders of a stockcorporationshall enjoypre-emptiveright tosubscribe toall issues ordispositionof shares ofany class

N/A 2/3 of OutstandingCapitalStock

Unless suchright isdenied bythe ArticlesofIncorporation

Such rightsshall notextend toshares to beissued incompliancewith lawsreq. stockofferings orminimumstockownershipby thepublic

Sale or otherdispositionof assets

Sell, lease,exchange,mortgage,pledge orotherwisedispose ofall orsubstantially all of itspropertyand assets

Majority ofBOD



Such actshall bedeemed tocoversubstantially all thecorporatepropertyand assetsif therebythecorporationwould berenderedincapable ofcontinuingbusiness

Power toenter intomanagemen

t contract

Nocorporationshall

conclude amanagement contractwithanothercorporationprior to thefulfillmentof the

Majority ofBOD

2/3 ofOutstandingCapital

Stock

N/A Provided,where astockholder/

srepresenting the sameinterest ofboth themanagingand themanagedcorporations


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followingrequsites.

own orcontrolmore than1/3 of thetotaloutstanding

capitalstockentitled tovote of themanagingcorporation.

Adoption ofby-laws

Adoption ofby-lawsshouldalways beconsistentwith the lawand shouldbe.attached tothe articlesofincorporation.

N/A 2/3 of OutstandingCapitalStock

N/A By-lawsmay beadoptedand filesprior toincorporation.

SEC will notaccept forfiling of by-laws or anyamendmentof any bank,bankinginstitute,building andloanassociation,trustcompany,insurancecompany, orotherspecialcorporationsgoverned byspeciallaws,

Power todeclaredividends

The boardof directorsof a stockcorporationmay declaredividendsout of theunrestrictedearnings.

Majority ofBOD


N/A Providedthat anycashdividendsdue ondilingquentstock shallfirst beapplied to


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unpaidbalancesandexpenses.

While stock

dividendsshall bewithheldfrom thedilinquentstockhodlerpending fullpayment ofsubscription


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B. Decisions the BOD can make on its own

Nature ofconstituent Decision

Definition of constituentdecision

RequiredBOD vote

DistinguishingFeature

Election ofofficers

President- shall be a director,Treasurer- may/may not be adirectorSecretary-a resident and citizenof the Philippines

Majority ofthe BOD

Any 2 or morepositions may beheld concurrently bythe same person,except that no oneshall be president &secretary orpresident & treasurerat the same time

Creation ofanexecutivecommittee

Composed of not less than 3members;May act by majority vote of itsmembers except with respect to:

a. Approval of any actionwhich requires theapproval of shareholders

b. Filling of vacancies of theboard

c. Amendment or repeal ofby-laws or the adoption of

d. Amendment or repeal ofany resolution of the BODwhich by its express termsis not amendable orrepealable

e. Distribution of cashdividends to shareholders

Majority ofthe BOD

IF creation of thecommittee is statedin the by-laws, noneed for the vote ofthe BOD

Amendments to by-laws

Amendment and rescission ofany by-laws or the adoption ofnew by-laws.

Majority ofBOD

Provided, that anypower delegated tothe BOD shall beconsidered asrevoked wheneverowners ofstockholdersrepresenting a

majority of theoutstanding capitalstock shall vote at aregular meeting.


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1. Lanuza vs. CA

2. Phil First Insurance vs Hartigan

3. Javier and Sons vs. CA

4. Cagayan Devt v. Sandiko

5. Pilipinas Loan vs SEC

6. Hall v. Piccio;

7. Ramirez v. Orientalist Co.

8. Sawadjaan v. CA;

9. Gokongwei v. SEC (89 SCRA 336 [1979])

10. tramat mercantile v. Ca

11. llamado v. Ca

12. pascual v. Orozco

13.republic bank v. Cuaderno

14.prime white cement v. Iac

15. montelibano v. Bacolod-murcia

16. alhambra v. SEC; phil. Trust v. Rivera

17. benito v. Sec

18. islamic directorate v. Ca

19. steinberg v. Velasco

20.lanuza v. Ca

21.lee v. Ca

22. Bayla v. Silang Traffic;

23. China Bank v. CA

24. Trillana v. Quezon College;

25. Fua Cun v. Summers

26.Escano v. Filipinas Mining; Apocada v. NLRC

27.Razon v. IAC;

28.PNB v. Bitulok Sawmill

29.Rural Bank of Salinas v. CA


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30. Velasco v. Poizat

31. Pardo v. Hercules Lumber

32.Philpotts v. PMC

33.Lanuza v. CA (again)

34.Associated Bank v. CA

35. Chinese YMCA v. Ching

36. Lions Club International v. Amores

37. San Juan Structural & Steel Fabricators v. CA; Republic v. IAC

38.Manuel Dulay Enterprises v. CA

39.Barlin v. Ramirez

40.IEMELIF v. Juane

41.Santos v. RC Bp. of Nueva Caceres

42. - Lozano v. Delos Santos

43. - yao ka sin trading v. Ca;

44. western institute v. Salas

45. nielson & co v. Lepanto consolidated

46. grace christian high school v. Ca

47. - National Exchange v. Dexter;

48. Lao v. Lao

49. - Veraguth v. Isabela Sugar

50.- RC Bp. of Davao v. LRC

51. Harden v. Benguet;

52. Jardine Davis v. JRB Realty

53. Guanzon v. Register of Deeds;

54. CIR v. Club Filipino de Cebu

55. Palacio v. Fely Transportation;

56. Gonzales v. PNB

57.Remo v. IAC;

58.Sunset View v. Campos


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59.Pamplona Plantation v.

60.Tinghil; Castillo v. Balinghasay

61. Municipality of Malabng v. Benito;

62. San Juan Structural Steel v. CA

63.Albert v. University Publishing

64.Georg Grotjahn EMBH v. Isnani

65. ong yong v. Tiu;

66. central cooperative exchange v. Tibe

67. board of liquidators v. Heirs of M. kalaw

68.premium marble v. Ca

69.roxas v. Dela rosa

70.valle verde v. Africa

71. dela rama v. Ma-ao sugar central

72.gokongwei v. Sec;

73.pirovano v. Dela rama

74.republic v. Acoje mining

75.japanese war notes v. Sec

76. lgv v. Ca

77. salafranca v. Philamlife

78.gokongwei v. Sec;

79.board of directors v. Tan

80.commissioner v. Manning;

81. Alhambra Cigars vs. SEC

Gokongwei v SEC


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Doctrine:

o The doctrine of corporate opportunity is a recognition by the courts

that the fiduciary standards could not be upheld where the fiduciary

was acting for 2 entities with competing interests. This doctrine rests

on unfairness, in particular circumstances, of an officer or directortaking advantage of an opportunity for his own personal profit when

the interest of the corporation unjustly calls for protection.

Mini Digest:

o Facts: John Gokongwei, a stockholder of SMC, filed a petition for

declaration of nullity of amended by-laws, cancellation of certificate

of filing of the amended-by laws, injunction and damages against the

majority of the members of the Board of Directors of the SMC based on

the following grounds:

corporations have no inherent power to disqualify a stockholder

from being elected as director depriving him of his vested right

because he is an officer of a competitor company.

he corporation has been investing corporate funds in other

corporations and business outside of the primary purpose of the

corporation

o Issue: WON the corporation has the power to disqualify a competitor

from being elected to the board of directors as a reasonable exercise

of corporate authority?

o Ratio: Yes. Any corporation may amend its articles of incorporation by

a vote or written assent of the stockholders representing at least 2/3 of

the subscribed capital stock of the corporation. It cannot be said that

prior to this, Gokongwei has a vested right to vote and be voted for in

the face of the fact that the law at the time such right as stockholder

was acquired contained the prescription that the corporate charter and

the by-law shall be subject to amendment, alteration and modification

Every person who buys a stock with a corporation

impl iedly contracts that the will of the majority shall govern inall matters within the limits of the act of incorporation and

lawfully enacted by-laws and not forbidden by law

A director's relationship with the corporation is of a fiduciary

nature. He who is in such a fiduciary position cannot serve

himself first and his cestuis second. He cannot manipulate the


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affairs of his corporation to their detriment and disregard of the

standards of common decency.

It is obviously to prevent the creation of an opportunity

for an officer or director of San Miguel Corporation, who is

also the officer or owner of a competing corporation, fromtaking advantage of the information

which he acquires as director to promote his individual or

corporateinterests to the prejudice of San Miguel

Corporation and its stockholders

Applicable Law:

o Section 47: The Corporation could provide other

qualifications/disqualifications in the by laws which may require more

than ownership of one share.

o Section 42: Corporations have power to invest corporate funds in

another corporation or business or for any other purpose by majority

vote of the Board and 2/3 vote of outstanding stock or members

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