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CORPORATION LAWDEFINITION OF TERMS: Sections 1-70
(Reference: Aquino; De Leon)
Aggregate Corporation: A corporation consisting of one or morethan one member and has been defined as an artificial body of
men, composed of diverse individuals
Articles of Incorporation: document prepared by the personsestablishing a corporation and filed with SEC containing matters
required by the Code.
Authorized Capital Stock: is the number of capital stock(common and preferred) stated in the charter that the
corporation can sell; Number of shares authorized multiplied by
the par value of shares
Board of Directors: a group of persons which sets the policiesfor the corporation and appoints officers
Book Value: determined by dividing the net value of totalcorporate assets (capital and surplus) by the number of shares
issued or outstanding
By- Laws: a set of rules and regulations adopted to besubmitted to SEC within one month from the issuance of the
certificate of incorporation which act as the constitution
governing the corporation
Capital Stock: amount fixed in the articles of incorporation, tobe subscribed and paid in by the shareholders of thecorporation, either in money or property, labor or services, at
the organization of the corporation or afterwards and upon
which it is to conduct its operation; represents the equity of the
stock holders in the corporate assets; Amount invested by the
stockholders plus the undistributed earnings less losses and
expenses
Certificate of Incorporation/ Corporate Charter: documentissued by SEC to acknowledge the legal existence of a
corporation
Certificate of Stock: a written acknowledgement by thecorporation of the interest, right, and participation of a person
in the management, profits, and assets o a corporation.
Civil Corporation: A corporation not for the purpose of charitybut for the benefit, pecuniary or otherwise, of its members
Close Corporation: corporation whose articles of incorporationprovide that : (1) All the corporation's issued stock of all classes,
exclusive of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding twenty (20);(2) all the issued stock of all classes shall be subject to one or
more specified restrictions on transfer permitted by this Title;
and (3) The corporation shall not list in any stock exchange or
make any public offering of any of its stock of any class.
Common Stock: is the most basic form of capital stockrepresenting residual equity of a corporation; entitles holder
thereof to pro-rata division of profits if theres any without any
preference or advantage
Concept of perpetual succession: A corporation continues toexist even if there is a change in those who compose it. Corporate Bond: an obligation to pay a definite sum of money
at a future date at fixed rate of interest
Corporate Governance: refers to the system wherebyshareholders, creditors, and other stakeholders of a corporation
ensure that the management enhances the value of the
corporation as it competes in an increasingly global market
place
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Corporate Officers: Officers who are designated as such by law,AOI and by-laws of the corporation
Corporate Officers; Comptroller: as distinguished fromtreasurer, officer appointed to control accounts and to check
expenditures.
Corporate Officers; De facto: person acting as an officer, undersuch color of authority (authority derived from election or
appointment, although irregular or informal, so that the
incumbent must be more than a volunteer), through election or
appointment.
Corporate Officers; General Manager: entrusted to themanagement of corporations with the power to bind the
corporations by acts within the scope of his apparent authority
Corporate Officers; President: President must be the director ofthe corporation but cannot be : Pres/Se. or Pres/Treas.
Corporate Officers; Secretary: duty is to make and keep recordsand to make proper entries of votes, resolutions and
proceedings of stockholders and directors in the management
of the corporation and all matter required to be entered on the
record.
Corporate Officers; Treasurer: entrusted with the authoritytoreceive and keep the money of the corporation and disburse
them as he may be authorized
Corporate Officers; Vice President: acts in the vacancy of thepresident
Corporate Sole: religious corporation composed of onemember/ corporator only and his successors
Corporation by Estoppel: a group of person which holds itselfout as a corporation and enters into a contract with a third
person on the strength of such appearance cannot be permitted
to denu its existence in as action under said contract
Corporation by Prescription: a corporation that was notformally organized as such but has been duly recognized by
immemorial usage as a corporation, with rights and duties
enforceable in law.
Corporation by prescription: one which has exercised corporatepowers for an indefinite period without interference on the partof the sovereign power and which, by fiction of law, given the
status of a corporation
Corporation: Artificial being created by operation of law, havingthe right of succession and the powers, attributes and
properties expressly authorized by law or incident to its
existence
Corporators: Those who compose the corporation whetherstockholders or members
De facto Corporation: a corporation which is formed wherethere exists a flaw in its incorporation but there is colorable
compliance with the requirements of law
De Jure Corporation: Corporation organized in accordance withthe requirements of the law
Dividends: a distribution of earnings by a corporation to itsstockholders in proportion to the number of shares held.
Dividends; Cash: cash distribution of earnings by a corporationto its stockholders
Dividends; Liquidating: return of all or part of the stockholdersinvestment
Dividends; Property: distribution of earnings by a corporationto its stockholders in assets rather than cash
Dividends; Scrip Property means that instead of paying thedividends now, the corporation decided to pay such at a later
date
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Dividends; Stock: distribution of additional shares of acorporation stock to the shareholders based on the number of
shares they already own
Doctrine of Forum non conveniens: courts may refuse to takejurisdiction over matters where there is a more appropriate
forum available to the parties. Doctrine of separate personality: A corporation has a
personality separate and distinct from its members.
Domestic Corporation: a corporation formed, organized and/orexisting under Philippine Laws
Ecclesiastical Corporation: One organized for religious purposes Ecclesiastical Corporations: Corporations composing entirely of
spiritual persons like bishops, clergies and the like and are
established for the furtherance of the religion for perpetuating
the rights of the church
Eleemosynary/ Charitable Corporation: Created not for privategain but for charitable purposes for the administration f
charitable trust
Executive Committee: composed of not less than threemembers of the board, to be appointed by the board. Said
committee may act, by majority vote of all its members, on such
specific matters within the competence of the board, as may be
delegated to it in the by-laws or on a majority vote of the board,
except with respect to: (1) approval of any action for which
shareholders' approval is also required; (2) the filing of
vacancies in the board; (3) the amendment or repeal of by-laws
or the adoption of new by-laws; (4) the amendment or repeal of
any resolution of the board which by its express terms is not so
amendable or repealable; and (5) a distribution of cash
dividends to the shareholders.
Foreign Corporation: A corporation formed and organized orexisting under the laws other than those of the Philippines and
whose laws allow Filipino citizens and corporations to do
business in its own country or state
Founders Shares: shares issued to organizers and promoters ofa corporation in consideration f some supposed right or
property. Often given special privileges over other stock such as
voting and in the division of profits in excess of a minimumdividend on the common stock
Franchise Kind; Corporate/general franchises- franchise toexists as a corporation
Franchise Kind; Primary franchises- right to exist as such isvested among the individuals composing the corporation and
not the corporation itself.
Franchise Kind; Special franchises- privilege conferred uponexisting corporation
Franchise: a special privilege conferred by governmentalauthority and which does not belong to the citizens of the
country generally as a matter of common right.
Incorporators: those corporators mentioned in the articles ofincorporation as originally forming and composing the
corporation and who executed and signed the AOI as such.
Lay Corporation: all corporations other than ecclesiastical; oneorganized for a purpose other than for religion
Legal Capital: amount equal to the aggregate par value and/orissued value of outstanding capital stock; an amount that the
corporation must retain n the business for protection of
creditors
Management Contract: an agreement whereby a corporationundertakes to manage or operate all or substantially all of the
business of another corporation, whether such contracts are
called service contract, operating agreements or otherwise.
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Market Value: price a willing seller would sell and a willingbuyer would buy neither being under normal pressure to buy or
sell. Affected by market forces
Meetings- Directors; Regular: those held by the board monthlyunless provided in the by-laws
Meetings- Directors; Special: those held by the board anytimeupon the call of the president or as provided in the by-laws
Meetings- Stockholders; Regular: those held annually on a datefixed in the by-law or if not fixed, on any date in April of every
year as determined by the Board o Directors or Trustees
Meetings- Stockholders; Special: those held at the timedeemed necessary or as provided by the by-laws
Members: Corporators of a corporation without capital stock No Par Stock: stock without par value but may or may not have
stated value; one without any stated or par value appearing on
the face of the certificate of stock; stock which does not state
how much money it represents
Non-stock Corporation: A corporation that does not issuestocks and does not distribute to their members
Organization Cost: Are cost such as incorporation fees, attorneyfees, promotional expense and cost of printing stock certificates
that must be incurred to organize a corporation
Outstanding Capital Stock: portion of the capital stock which isissued and held by persons other than the corporation itself;
total shares of stock issued to subscribers or stockholders
whether fully or partially paid (as long as there is a binding
subscription agreement), except treasury shares
Paid-In Capital: amount that stockholders have invested I thebusiness; portion of the subscribed or outstanding capital stock
that is paid
Par Value Share: one with specific money value fixed in thearticles of incorporation and appearing in the certificate of
stocks for each share of stock of the same issue
Par Value: An Arbitrary value placed on each share at the timeof authorization printed on the stock certificates and used in
accounting entries to credit capital stock account Patent/ Holding Corporation: one which is so related to
another corporation that it has the power to either, directly or
indirectly, elect the majority of directors of such other
corporation
Pre-Emptive Right: right of the shareholders to subscribe to allissues or disposition of shares of any class in proportion to their
shareholdings
Preferred Shares; Cumulative: will accumulate any dividendthat is not paid when due; will entitle not only to current
dividends but also those in arrears
Preferred Shares; Non Cumulative: Preferred stock for whichunpaid dividends do not accrue.
Preferred Stock: class of stocks that entitle its owners to certainrights and preferences over common stockholders; no voting
powers
Promoters: persons who bring about or cause to bringaboutthe formation and organization of a corporation
Promotion Share: shared that is issued to promoters or those insome way interested in the company
Proxy: written authorization given y one person to another sothat the second person can act for the first such as that given by
the shareholder to someone else to represent him and vote his
shares in the shareholders meeting
Proxy; Continuing: not limited to a specific meeting and itcontinues for a certain period
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Proxy; Specific: refers to one where the authority granted ismerely for a particular meeting
Quorum: such number of membership of a collective body as iscompetent to transact its business or do any corporate act; Sec.
25 says: [U]nless the articles of incorporation or the by-laws
provide for a greater majority, a majority of the number ofdirectors or trustees as fixed in the articles of incorporation
shall constitute a quorum for the transaction of corporate
business, and every decision of at least a majority of the
directors or trustees present at a meeting at which there is a
quorum shall be valid as a corporate act, except for the election
of officers which shall require the vote of a majority of all the
members of the board.
Redeemable Shares: usually preferred, shares of stocks issuedby a corporation which said corporation can purchase or takeup from their holders as expressly provided in the AOI and
certificates of stocks representing shares
Retained Earnings: accumulated profits or earnings that areretained or kept in the corporation
Retained Earnings; Paid-In Surplus: difference between parvalue and issued value/selling price of the shares and are not
considered as profits earned in the conduct of the business of
the corporation; NOT declared as dividend since its part of the
capital
Retained Earnings; Reduction Surplus: arises from thereduction of par value of the issued shares of stocks
Retained Earnings; Revaluation Surplus: exists if there is anincrease in the value of the assets and cannot be declared as
dividend because they are not considered as earnings of the
corporation
Seal: a device used to identify or replace the signature of anindividual or organization and to authenticate written matters
purportedly emanating from such individual or organization
Share in Escrow: share subject to an agreement by virtue ofwhich the share is deposited by the grantor or his agent with a
third person to be kept by depositary until performance ofcertain condition in the agreement
Shareholders: owners of shares of stock with interest on themanagement (control), income (dividends) and assets (Shares
upon liquidation in a stock corporation
Special Corporation: this includes educational corporation andreligious corporation
Steps (1); Promotion: bringing together of persons who areinterested in the formation of the corporation as incorporators;
includes procuring subscriptions of its capital stock, makingarrangement to finance the enterprise and preparation of
contracts
Steps (2); Incorporation: Process of filling the Articles ofIncorporation, pay the required fees and file the other required
documents to SEC
Steps (3); Organization and Commencement of Business:includes the adoption of by-laws within one month from the
issuance of the certificate of incorporation, election of the
Board of Directors and officers of the corporation stated in the
by-laws
Stock Corporation: A corporation with capital stock dividedinto shared and is authorized to distribute to holders thereof
such shares dividends or allotments of the surplus profits on the
basis of the shares held
Stock Split: is an increase in the number of outstanding sharesof stocks coupled with proportionate reduction in the par or
stated value of the stock
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Stock/ Share of Stock: one of the units into which the capitalstock is divided.
Subscribed Capital Stock: amount of capital stock subscribedwhether fully paid or not; temporary stockholders equity
account for stocks subscribed until fully paid that is recorded at
par value Subscribers: persons who agreed to take and pay for original,
unissued shares of the corporation formed or to be formed.
Only when their subscriptions are accepted by the corporation
they become stockholders.
Subscription Contract: a contract by which the subscriberagrees to take a certain number of shares of the capital stock of
a corporation, paying the consideration therefore or expressly
or impliedly promising to pay the same
Subscription Receivables: amount due from subscribers(Common or preferred) whose subscriptions are not fully paid
Subsidiary Corporation: One which is so related to anothercorporation that the majority of its directors can be directly or
indirectly elected by such other corporation.
Substantially All: substantially all corporate property andassets, as to sale or other disposition, if corporation would
thereby be rendered incapable of continuing the business or
accomplishing the purpose for which it was incorporated
Theory of Special or Limited Capacities: Corporation has powerand attributes expressly authorized by law or incident to its
recognition of what is known as a corporation
Treasury Shares: shares of stock which have been issued andfully paid for, but subsequently reacquired by the issuing
corporation by purchase, redemption, donation or through
some other lawful means. Such shares may again be disposed of
for a reasonable price fixed by the board of directors. NO voting
rights AS LONG as they remain in the treasury.; NOT entitled to
dividends or assets
Trust Fund Doctrine: holds that the assets of the corporation asrepresented by its capital stocks are trust funds to be
maintained unimpaired and to be used to pay corporate
creditors in the sense that there can be no distribution of suchassets among the stockholders without provision being first
made for payment of corporate debts and that any such
disposition of it is a fraud on the creditors of the corporation
and, therefore, is void
Ultra Vires: one committed outside the object for which acorporation is created by the law of its organization and
therefore beyond the powers conferred to it by law
Underlying Shares: Unissued shares of a corporation which maybe purchased by the warrant holder upon the exercise of theright granted in the warrant
Underwriter: An investment bank that acts as an intermediarybetween the issuing company and the investors who purchase
the company's debt instruments and/or stock at the Initial
Public Offering (IPO). The underwriter buys the newly issued
securities from the company and sells them to investors on the
secondary market through a stock exchange.
Unissued Capital: That portion of the capital stock that is notissued nor subscribed; does not vote and draws no dividends
Unrestricted Retained Earnings: undistributed earnings of thecorporation which have not been allocated for any managerial,
contractual or legal purposes and which are free for distribution
to stockholders as dividends.
Voting Methods; Cumulative Voting: method of concentratingvotes devised to give sufficient opportunity to minority
shareholders to secure representation in the board
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Voting Methods; Straight Voting: stockholder can cast one voteper share for each director
Voting Share: share with right to vote; the rule is NOT onestockholder one vote but RATHER ne share, one vote
because representation in a corporation is commensurate to
extent of ownership
Voting Trust: an agreement whereby a stockholder of a stockcorporation confers upon a trustee or trustees to vote and
other rights pertaining to the shares for a period not exceeding
5 years at any time (except when specifically required as a
condition in a loan)
Watered Stocks: stocks issued for a consideration lesser thanthe par.