02 Law on Corporations

Question 1

An artificial being created by operation of law, having the right of succession and the powers, attributed and properties expressly authorized by law or incident to its existence.

Answer 1

Corporations

Question 2

Having a juridical personality separate and distrinct from the persons composing it

Answer 2

artificial being

Question 3

As a legal entity, the corporation is possessed with a juridical personality separate and distinct from the individual stockholders or members and is not affected by the personal rights, obligations or transactions of the latter.

Answer 3

Corporate Entity Theory

Question 4

Applicability of the corporate entity theory is confined to legitimate transactions and is subject to equitable limitations to prevent its being used as a cloak or cover for fraud or illegality or to work injustice.

Answer 4

Piercing the Veil of Corporate Entity

Question 5

When can you use pierceing the veil of corporate entity?

Answer 5

Defeat public convenience
Justify wrong
Protect fraud
Defend crime
Alter ego

Question 5

When is the commencement of corporate existence? What are the exceptions?

Answer 5

Issuance of Certificate of Incorporation

Exceptions:
a. Estoppel
b. Created by special laws
c. Sole corporation - from filing of verified articles

Question 5

Formal requirement of the State’s consent through compliance with requirements imposed by law is necessary for its creation such that the mere agreement of the persons composing it does not warrant thte grant of its independent existence as a juridical entity.

Answer 5

Created by Operation of Law

Question 6

Stockholder death, incapacity, etc. does not result to dissolution

Answer 6

Right of Succession

Question 7

Can exercise only such powers and can hold such properties as granted to it by enable statutes unlike natural persons.

Answer 7

Powers, attributes and properties expressly authorized by law

Question 8

Powers of a corporation

Answer 8

a) express
b) implied
c) incidental

Question 9

What are the specific powers of a Corporation?

Question 10

Can corporations donate to political candidates?

Answer 10

Yes only local corporations

Question 10

Can Corporations form partnerships?

Answer 10

Yes under Revised Corpo Code, except for profession

Question 11

Acts which cannot be executed or performed by a corporation because they are not within express, inherent or implied powers as defined by its Articles of Incorporation.

Answer 11

UIltra Vires Acts

Question 12

Are all ultra vires acts illegal?

Answer 12

No, it can be ratified if not illegal
If illegal, void

Question 13

Classification of corporations

Question 14

Requisites for de facto corporation

Answer 14

1. valid law under which it may be incorporated
2. attempt in good faith to incorporate (colorable compliance - attempt to file)
3. use of corporate powers

Question 15

Is there distinct and separate personality from stockholders in:
De jure corporation?
De facto corporation?
Corporation by estoppel?

Answer 15

Yes
Yes
No

Question 16

Are promoters personally liable on contracts made by him for the benefit of the corporation he intends to organize even prior to the corporation’s existence?

Answer 16

Yes

Question 17

What are the contents of the Articles of Incorporation?

Answer 17

• Name
• Specific purpose/s
• Place where principal office is to be located (within PH)
• Term of existence if not perpetual
• Names, nationalities, residence addresses of the incorporators
• Number of directors which shall not be more than 15 or trustees which can be more than 15
• Names, nationalities, residences of directors/trustees
• Stock: Autorized capital stock, number of shares, par value, names/nationalities/residences of original subscribers and amount subscribed and paid by each on subscription
• Non-stock: Capital, names, nationalities, residence addresses of contributors and amount each
• other matters

Question 18

Are watered shares allowed?

Answer 18

No

Question 18

How to ammend AOI?

Answer 18

a) majority of board
b) written assent of stockholders representing 2/3 of o/s or members for non-stock
c) approval of SEC (if after 6 months, SEC did not act on application, it is deemed approved)

Question 19

Can promissory note or future service be payment for shares?

Answer 19

No

Question 20

Supreme authority in matter of management of the regular and ordinary business affairs of the corporation.

Answer 20

BOD

Question 21

BOD/T shall exercise corporate powers, conduct all business and control all properties of the corporation.

Answer 21

Doctrine of Centralized Management

Question 22

Qualification of director/trustee

Answer 22

Own at least 1 share in their own names (directors)
Be a member (trustee)

Question 23

Questions of policy and management are left to the judgment of officers and directors of a corporation and the courts have no authority to substitute the board’s judgment with theirs.

Answer 23

Business Judgment Rule

Question 24

Disqualifications of director, trustee or officer

Answer 24

1. conviction in the last 5 years - violate corpo code, securities code, imprisonment of 6 years or more
2. found liable fraud acts
3. convicted by foreign court with similar cause
4. by-laws

Question 26

Places a director of a corporation in the position of a fiduciary and prohibits him from seizing a business opportunity and/or developing it at the expense and with the facilities of the corporation. He c annot appropriate to himself opportunity which in fairness should belong to the corporation.

Answer 26

Corporate Opportunity Doctrine