1 - Classification of Corporations

Question 1

When does the SEC take jurisdiction?

Answer 1

(a) Devices and schemes or acts by the BOD, associates, officers or partnerships amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission;
(b) Intra-corporate controversies;
(c) Controversies in the election/appointment of directors of such corporations

Question 2

Intra-corporate controversies

Answer 2

C-P (a) between the corporation, partnership or association and the public;
C-S (b) between the corporation, partnership or association and its stockholders, partners, members, or officers;
C-St (c) between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate is concerned;
S-S (d) and among the stockholders, partners or associates themselves.

Question 3

Abejo v. Dela Cruz (1987)

Answer 3

A corporate secretary’s act of not registering and issuing the new stock cert in favor of the new majority shareholder is an intra-corporate dispute

Question 4

Union Glass v SEC (1983)

Answer 4

A stockholder who mortgaged her own property for the corporation battling the new owner of the property is not an intra-corporate dispute

Question 5

SEC v. Subic Bay (2015)

Answer 5

SEC only has authority over their orders to: make an amendment to their project prospectus and to stop their permit to sell shares to the public.

The order to refund the shares sold is only within RTC, it being an intra-corporate dispute

Question 6

Relationship test (SEC v. Subic Bay)

Answer 6

The dispute be between a corporation/ partnership/ association and the public; a corporation/ partnership/ association and the state regarding the entity’s franchise, permit, or license to operate; a corporation/partnership/association and its stockholders, partners, members, or officers; and among stockholders, partners, or associates of the entity.

Question 7

Nature of controversy test (SEC v. Subic Bay)

Answer 7

Requires that the action involves the enforcement of corporate rights and obligations whether under the Corpo Code or the regulations within the own corporation

Question 8

Medical Plaza Condo v. Cullen (2013)

Answer 8

HLURB does not have jurisdiction over condo owner and condominium, its a intracorporate dispute so RTC as SCC has jurisdiction– solution is to reraffle

Question 9

Government instrumentality (BCDA)

Answer 9

Any agency of the National Government. not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers

Question 10

GOCC (BCDA)

Answer 10

Must be organized as a stock or non-stock corporation

Question 11

Stock corporation (3)

Answer 11

1) Capital stock is divided into shares and
2) Authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held

Question 12

Non-stock corporation

Answer 12

Organized tor charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade industry, agricultural and like chambers, or any combination thereof.

• They don’t distribute stocks to its members
  EXC: When they provide for distribution of assets among its members upon dissolution
  EXC to the EXC: Those assets received by it that are subject to restriction as to use/return

Question 13

What if you file a case wrongly with Makati SCC when it must have been filed in QC? (Gonzales)

Answer 13

Your case will be dismissed

Question 14

When does SEC have jurisdiction (Roman Jr. v. SEC)

Answer 14

The invocation of authority is confined only:
1) To the extent of ensuring compliance with the law and the rules, as well as
2) To impose fines and penalties for violation thereof; and
3) to investigate even motu proprio whether corporations comply with the Corporation Code, the SRC and the implementing rules and regulations.

Question 15

Roman Jr. v SEC

Answer 15

SEC was never dispossessed of the power to assume jurisdiction over complaints, even if these are riddled with intra-corporate allegations, if their invocation of authority is confined only
1) to the extent of ensuring compliance with the law and the rules, as well as to impose fines and penalties for violation thereof; and
2) to investigate even motu proprio whether corporations comply with the Corporation Code, the SRC and the implementing rules and regulations.

Question 16

CIR v. Club Filipino

Answer 16

In the case at bar, while the respondent Club’s capital stock is divided into shares, nowhere in its articles of incorporation or by-laws could be found an authority for the distribution of its dividends or surplus profits.

Question 17

Dulay Enterprises v. CA

Answer 17

Petitioner corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president.

Virgilio Dulay’s defense of innocence is hard to believe because he was privy to the transactions taking place.

Question 18

Dulay Enterprises v. CA

Answer 18

Petitioner corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president.

Virgilio Dulay’s defense of innocence is hard to believe because he was privy to the transactions taking place.

Sir’s note: This is not a close corp– wrong application

Question 19

When a board meeting is unnecessary/improperly held (100)

Answer 19

Any action by directors of a close corp with NO MEETING PROPERLY HELD and WITH DUE NOTICE is deemed VALID if:
(a) Before or after, written consent is signed by all directors;
(b) All stockholders have implied/actual knowledge & made no objection in writing;
(c) Directors are accustomed to informal action with the express/implied acquiescence of all stockholders; or
(d) All directors have express/implied knowledge of the action but make no prompt objection in writing

If there is A MEETING without PROPER NOTICE, it’s still ratified by an absentee director if they did not promptly file a written objection with the secretary after obtaining knowledge

Question 20

Corporation (2)

Answer 20

An (1) artificial being (2) created by operation of law having (3) the right of succession and (4) powers, attributes and properties expressly authorized by law/incidental to its existence

Question 21

Corps created by special law/charter (4)

Answer 21

Governed primarily by the provisions of the special law creating them, supplemented by the CC

Question 22

Corporators (5)

Answer 22

Those who compose a corporation as stockholders/shareholders or as members

Question 23

Incorporators (5)

Answer 23

Stockholders mentioned in the articles as originally forming and composing the corp

Question 24

Corporate Name (17)

Answer 24

Needs to be:
1) Distinguishable from that already reserved/registered for the use of another corp
2) Not be protected by law
3) Its use not contrary to existing law, RR