CORP

Question 1

Corporation, defined

Answer 1

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.

Question 2

Corporation has four attributes:

Answer 2

1. Artificial being
2. Created by operation of law
3. Right of succession
4. Powers, Attributes and properties expressly authorized by law or incident to its existence.

Question 3

Doctrine of Separate Juridical Personality

Answer 3

Provides that a corporation has a legal personality separate and distinct from that of people comprising it.

Ex. Stockholders of a corporation enjoy Principle of Limited Liability

Question 4

Principle of Limited Liability:

Answer 4

The corporate debt is not the debt of the stockholder

Question 5

Share of stock

Answer 5

Represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, hist interest in the corporate property being equitable or beneficial in nature.

Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as distinct legal person.

Question 6

The doctrine of Piercing the Veil

Answer 6

The doctrine applies only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation

Under the Doctrine, when the corporate form is used to perpetuate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts may disregard the corporate entity and hold its individual shareholders liable for the actions of the corporation.

To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and convincingly. it cannot be presumed.

The principle is basically applied only to determine established liability

Question 7

The Doctrine of Piercing the Corporate Veil applies only in three basic areas, namely: page 7

Answer 7

1. Defeat of public convenience
2. Fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime
3. Alter ego cases

mere ownership of a subsidiary does not justify the imposition of liability on the parent company. It must be further appear that to recognize a parent and a subsidiary as separate entities would aid in the consummation of wrong
Unless the fact show that such separate corporate existence is a mere sham, bogus; false.
“a clergyman who arranged a sham marriage” or has been used as an instrument for concealing the truth.

Question 8

Under the Alter ego theory, piercing the veil of corporate fiction may be allowed only if the following elements concur: page 9

Answer 8

1.Control- not mere stock control, but complete domination. Page 10

2.Fraud - Such control must have been used by the defendant to commit a fraud or a wrong. Page 12

3.Harm or causal connection - the said control and breach of a duty must have Proximately caused the injury or unjust loss complained of

The control necessary to invoke the instrumentality or alter ego rules is not majority or even complete stock control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal.

Question 9

What are the doctrines of “ Separate Juridical Personality” and “Limited Liability”

Answer 9

The Doctrine of Separate Juridical Personality provides that a corporation has a legal personality separate and distinct from that people comprising it. By virtue of that doctrine, stockholders of a corporation enjoy the Principle of Limited Liability: The corporate debt is not the debt of the stockholder.

Question 10

Reverse Piercing or Reverse Corporate Piercing or Piercing the Corporate Veil “ In Reverse”

Answer 10

In a traditional veil-piercing, a court deisregards the existence of the corporate entity so a claimant can reach the assets of a corporate insider.

In reverse piercing action, however, the plaintiff seeks to reach the assets of a corporation to satisty claims againts corporate insider. Reverse-piercing flows in the opposite direction of traditional corporate veil-piercing and makes the corporation liable for the debt of the shareholders.

Question 11

Reverse piercing; it has two types:

Answer 11

Outsider reverse piercing and insider reverse piercing

Question 12

Corporation vs. Partnership vs. Sole Proprietorship

Answer 12

See page 24

Question 13

Stock vs. non-stock

Answer 13

see page 26

Question 14

The true criterion to determine whether a corporation is public or private?

Answer 14

Is found in the totality of the relation of the corporation to the state

Question 15

Control test vs. Grandfather Rule

Answer 15

page 32

Question 16

the Grandfather Rule

Answer 16

As further defined by Dean Cesar Villanueva, the Grandfather Rule is “the method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other nationalization laws, is computed, in cases where corporate shareholders are present, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate shareholder.”[4] Thus, to arrive at the actual Filipino ownership and control in a corporation, both the direct and indirect shareholdings in the corporation are determined.

Question 17

What is articles of incorporation in the Philippines?

Answer 17

The Articles of Incorporation states the name, purpose, place of office, incorporators, capital stock, and term of the Company upon its establishment. The By-Laws outline the rules on annual and special meetings, voting, quorum, notice of meeting and auditors and inspectors of election.

Question 18

What is incorporators?

Answer 18

Are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

Question 19

The incorporators and their quialifications are:

Answer 19

Any person
Not more than 15 in number; Single stockholder is considered a One Person Corporation
Natural persons must be of legal age
Each incorporator of a stock corporation must own or be a subsriber to atleast 1 share

Question 20

Natural persons who are licensed to practice a profession, partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation? True or false

Answer 20

False, unless provided under special laws

Question 21

What is the mininum and maximum number of incorporators required to incorporate a stock corporation?

Answer 21

One corporation, 1 and as in the case of domestic corporations, it is mininum of 2 and maximum 15

Question 22

Corporate term

Answer 22

Under Section 11, a corporation shall have perpetual existence unless its articles of incorporation provide otherwise

Question 23

Why is name so important?(Corporate name p60)

Answer 23

A name is is necessary to the very existence of a corporation. Its name is one of its attributes, an element of its existence, and essential identity.