Corp D Book 1-1

Question 1

Describe the process by which a corporation is created.

Answer 1

A corporation is not created by mere agreement of the incorporators or by their execution of the articles of incorporation. It is created by a law from which the corporation derives its legal existence.

Question 2

Define the right of succession in relation to a corporation.

Answer 2

The right of succession of a corporation means that it has the power to exist continuously, either by opting to have perpetual succession.

Question 3

How is the legal existence of a corporation established?

Answer 3

The legal existence of a corporation is established through a law, which can be a general law governing private corporations or a special law passed by Congress for government-owned corporations.

Question 4

Describe the consequences of besmirching or tarnishing the goodwill of a corporation.

Answer 4

Besmirching or tarnishing the goodwill of a corporation can entitle the corporation to moral damages.

Question 5

What is the implication of a corporation having the right of succession?

Answer 5

Having the right of succession does not mean a corporation is immortal; it simply means it has the power to exist continuously.

Question 6

Explain why a law enacted by the legislature to create a private corporation is considered unconstitutional.

Answer 6

It is unconstitutional because the Constitution precludes the passage of such statutes, particularly under Section 16, Article XII of the 1987 Constitution.

Question 7

Describe the concept of ultra vires in relation to corporations.

Answer 7

Ultra vires refers to actions by a corporation that are beyond the powers authorized by law, its articles of incorporation, or incidental to its existence.

Question 8

Define sole proprietorship and explain how it differs from a corporation.

Answer 8

A sole proprietorship is a business owned by an individual without a separate legal entity, unlike a corporation which has a distinct legal personality separate from its owners.

Question 9

How does a corporation’s legal personality differ from that of its owners in terms of liability?

Answer 9

A corporation’s legal personality shields its owners from personal liability for the corporation’s obligations, while in a sole proprietorship, the owner’s personal assets can be used to settle business debts.

Question 10

Explain the principle that governs a corporation’s ability to act within its powers.

Answer 10

A corporation can only act within the powers conferred upon it by law, its articles of incorporation, or those implied from the conferred powers, and any act outside these powers is considered ultra vires.

Question 11

Differentiate between a corporation and other forms of business organizations like partnerships or sole proprietorships.

Answer 11

Unlike partnerships or sole proprietorships, a corporation has a separate legal personality from its owners, providing limited liability and perpetual existence.

Question 12

Describe the restrictions placed on corporations regarding their activities and the acquisition of assets.

Answer 12

Corporations are limited to activities and acquisitions that are related to or in furtherance of their stated purposes, ensuring that their actions are within the scope of their authorized powers.

Question 13

How does the concept of ultra vires impact the decision-making process of a corporation?

Answer 13

The concept of ultra vires influences corporate decision-making by requiring actions to align with the corporation’s authorized powers and purposes, preventing activities that are beyond its legal scope.

Question 14

Explain the legal requirements for establishing a sole proprietorship compared to incorporating a business.

Answer 14

Establishing a sole proprietorship involves fewer formalities such as securing licenses and permits, while incorporating a business requires compliance with specific legal procedures to create a separate legal entity.

Question 15

Describe the significance of a corporation having a separate legal personality.

Answer 15

Having a separate legal personality allows a corporation to enter contracts, own assets, and incur liabilities in its own name, distinct from its shareholders or owners.

Question 16

Describe the difference in composition between a partnership and a corporation.

Answer 16

A partnership requires at least two partners, while a corporation can be composed of one person.

Question 17

Define the liability difference between stockholders in a corporation and general partners in a partnership.

Answer 17

Stockholders’ liability in a corporation is limited to their subscription to the capital stock, while general partners in a partnership may be held liable beyond their contribution.

Question 18

How is a partnership created compared to a corporation?

Answer 18

A partnership is created by agreement, while a corporation is created by the operation of law.

Question 19

Define a partnership according to the Civil Code of the Philippines.

Answer 19

A partnership is an agreement where two or more persons contribute money, property, or industry to a common fund with the intention of dividing profits among themselves.

Question 20

Describe a corporation according to the Civil Code of the Philippines.

Answer 20

A corporation is an artificial being created by operation of law, with the right of succession and powers authorized by law.

Question 21

How does a partnership acquire juridical personality compared to a corporation?

Answer 21

A partnership acquires juridical personality when two or more persons agree to form it, while a corporation gains juridical personality upon issuance of a Certificate of Incorporation by the SEC.

Question 22

Describe the management structure differences between a corporation and a partnership.

Answer 22

A corporation is generally managed by the Board of Directors, while a partnership is managed by the Managing Partner designated in the Articles of Partnership or by any general partner in the absence of designation.

Question 23

How do corporations and partnerships differ in the exercise of powers?

Answer 23

A corporation can only exercise powers conferred by law, articles of incorporation, or implied from expressly-conferred powers, while a partnership can perform any act unless it goes against laws, morals, custom, public order, or public policy.

Question 24

Define the transfer of shares or rights in corporations and partnerships.

Answer 24

In a corporation, a stockholder can sell fully-paid shares without needing consent, whereas in a partnership, a partner cannot assign interest to a third party without partner consent due to the trust-based nature of partnerships.

Question 25

What are the classes of corporations based on the existence of shares of stock?

Answer 25

Corporations can be classified as Stock Corporations, which have capital stock divided into shares and can distribute dividends or surplus profits based on the shares held.

Question 26

Describe the requirements for a valid articles of incorporation in a Stock Corporation.

Answer 26

A valid articles of incorporation for a Stock Corporation must specify the amount of authorized capital stock and the number of shares by which it is divided.

Question 27

How does the absence of provisions on dividend declaration authority impact the classification of a corporation?

Answer 27

The absence of provisions on dividend declaration authority in the articles of incorporation or bylaws does not automatically make a corporation a nonstock corporation.

Question 28

Describe the governance of a Government-owned controlled corporation (GOCC)

Answer 28

CCs are governed by the special law creating them and the provisions of the RCC, with the special law prevailing in case of conflict.

Question 29

What distinguishes a Private corporation in terms of governance?

Answer 29

Private corporations are governed by the RCC, including non-chartered GOCCs.

Question 30

Define a Nonstock Corporation

Answer 30

A nonstock corporation has no capital stock and is not authorized to distribute dividends to its members.

Question 31

How are Public and Private corporations organized in terms of organizers?

Answer 31

Public corporations are organized by the State only, while Private corporations are organized by private persons alone or with the State.

Question 32

Describe the purposes of a Nonstock Corporation

Answer 32

A nonstock corporation may be organized for any purposes except for profit and political ends.

Question 33

Explain the difference in function between Public and Private corporations

Answer 33

Public corporations are organized for the government of a portion of the State, while Private corporations are usually organized for profit.

Question 34

Describe the concept of a holding corporation in business organizations.

Answer 34

A corporation that holds stocks in other companies for the purpose of control rather than mere investment, often part of a conglomerate or umbrella structure with other subsidiaries.

Question 35

Define De Jure in the context of legal status of a corporation.

Answer 35

De Jure refers to a corporation that has fulfilled all legal requirements and can resist a state’s challenge to its existence.

Question 36

How is De Facto status of a corporation characterized?

Answer 36

De Facto status means the corporation is organized with colorable compliance with valid laws, and its existence cannot be questioned collaterally.

Question 37

Describe the concept of corporate existence by Estoppel.

Answer 37

Corporate existence by Estoppel occurs when individuals act as a corporation without authority, making them liable as general partners for debts and damages.

Question 38

Explain the concept of corporate existence by Prescription.

Answer 38

Corporate existence by Prescription refers to a corporation that has exercised corporate powers for an indefinite period without interference from the sovereign power.

Question 39

What is the significance of the Roman Catholic Church in the context of corporate existence by Prescription?

Answer 39

The Roman Catholic Church is an example of a corporation that has exercised corporate powers for an indefinite period without interference, illustrating corporate existence by Prescription.

Question 40

Describe the purpose of the Bases Conversion and Development Authority (BCDA).

Answer 40

The BCDA is created to own, hold, and administer military reservations in the country and implement their conversion to other productive use.

Question 41

Define a One-Person Corporation.

Answer 41

A corporation where all of the stocks are held directly or indirectly by one person.

Question 42

How is the BCDA different from a stock corporation?

Answer 42

The BCDA is neither a stock nor a nonstock corporation; it is a governmental authority vested with corporate powers, not divided into shares of stock, and has no voting shares or provision for dividends.

Question 43

Do religious corporations fall under special corporations in the Philippines?

Answer 43

Yes, religious corporations, including corporation sole and religious societies, are considered special corporations in the Philippines.

Question 44

Describe the doctrine of piercing the veil in corporate law.

Answer 44

The doctrine of piercing the veil may be applied when a corporation does not follow the law throughout its existence and conducts its business affairs unlawfully.

Question 45

What is the authorized capital of the Bases Conversion and Development Authority (BCDA)?

Answer 45

The BCDA has an authorized capital of One Hundred Billion pesos (P100,000,000.00), which may be fully subscribed by the Republic of the Philippines.

Question 46

Describe the process of creating a de facto corporation according to the content.

Answer 46

Creating a de facto corporation involves enacting a law to establish a private corporation, ensuring it is owned and controlled by the government, and obtaining a certificate of incorporation from the SEC.

Question 47

Define de facto corporation based on the information provided.

Answer 47

A de facto corporation is one that has not fulfilled all legal requirements for incorporation but is recognized as a corporation due to a good faith attempt to incorporate and obtaining a certificate of incorporation from the SEC.

Question 48

How is the existence of a de facto corporation determined according to the content?

Answer 48

The existence of a de facto corporation is determined by the act of registration with the SEC and the issuance of a certificate of incorporation.

Question 49

Describe examples of defects in the formation of a corporation that lead to de facto existence.

Answer 49

Defects in formation include false treasurer’s affidavit on subscription, failure to meet required Filipino ownership percentage, and misrepresentation of incorporators’ age.

Question 50

Do stockholders of a de facto corporation have liability as general partners?

Answer 50

No, stockholders of a de facto corporation have liability similar to those in a de jure corporation, limited to the extent of their subscription to the corporation.

Question 51

Explain the significance of obtaining a certificate of incorporation for a de facto corporation.

Answer 51

Obtaining a certificate of incorporation from the SEC is essential for the existence of a de facto corporation and marks the beginning of its corporate existence.

Question 52

Describe a corporation by estoppel.

Answer 52

A corporation by estoppel exists when individuals act as a corporation despite lacking the authority to do so.

Question 53

What liabilities arise under the doctrine of corporation by estoppel?

Answer 53

Individuals assuming to act as a corporation without authority are liable as general partners for all debts, liabilities, and damages incurred.

Question 54

Are all subscribers for the stock of a proposed but legally unformed corporation liable as general partners?

Answer 54

No, the doctrine of corporation by estoppel does not apply to passive subscribers who only invested in the proposed corporation.

Question 55

Define the doctrine of corporation by estoppel.

Answer 55

The doctrine holds individuals accountable as general partners for debts and liabilities when they act as a corporation without proper authority.

Question 56

How does the doctrine of corporation by estoppel impact individuals who illegally recruit workers for overseas employment?

Answer 56

Those representing themselves as officers of a corporation, knowing it is not incorporated, are liable for all resulting debts and damages.

Question 57

What happens when an ostensible corporation is sued for transactions or torts committed as a corporation?

Answer 57

The lack of corporate personality cannot be used as a defense, and obligations to the ostensible corporation must be fulfilled.

Question 58

Describe the concept of corporation by estoppel in legal terms.

Answer 58

Corporation by estoppel allows an entity to be treated as a corporation in legal proceedings even if it is not formally incorporated, based on the principle that it should not be allowed to deny its corporate status if others relied on its representations.

Question 59

Define the term ‘juridical person’ in the context of corporations.

Answer 59

A juridical person is an entity that is recognized by law as having legal personality, allowing it to enter into contracts, sue, and be sued.

Question 60

How does the doctrine of corporation by estoppel affect legal liability in cases involving unincorporated entities?

Answer 60

The doctrine of corporation by estoppel allows unincorporated entities to be held liable for damages and injuries they may cause, as long as they possess the attributes of a juridical person.

Question 61

Describe a scenario where the doctrine of corporation by estoppel cannot be invoked.

Answer 61

The doctrine of corporation by estoppel cannot be invoked when a party is not trying to escape liability from a contract but rather the one claiming benefits from the contract.

Question 62

Do all parties involved in a legal dispute have the right to invoke the doctrine of corporation by estoppel?

Answer 62

No, the doctrine of corporation by estoppel can only be invoked by the aggrieved party who relied on the representations by others that they are legally formed as a corporation, not by the party benefiting from the transaction.

Question 63

How did the court rule in the case of Macasaet v. Francisco regarding the application of the doctrine of corporation by estoppel?

Answer 63

The Supreme Court held that the ostensible corporation could be impleaded as a party defendant, as it possessed the attributes of a juridical person and could be held liable for damages and injuries inflicted on others.

Question 64

Describe the doctrine of corporation by estoppel.

Answer 64

It prevents a person from denying the existence of a non-existent corporation after transacting with it as if it were duly incorporated.

Question 65

Do you need to be registered with the SEC to be considered a de facto corporation?

Answer 65

Yes, filing articles of incorporation and obtaining a certificate of incorporation are essential for the existence of a de facto corporation.

Question 66

Define the Place of Incorporation test for determining the nationality of a corporation.

Answer 66

It states that the nationality of a corporation is based on the state where it is incorporated, regardless of the shareholders’ nationality.

Question 67

How does the Place of Incorporation test apply to Philippine corporations?

Answer 67

A corporation is considered a Philippine national if it is organized and existing under Philippine laws, irrespective of the shareholders’ nationality.

Question 68

Describe the concept of a de facto corporation.

Answer 68

It refers to a corporation that has not completed the necessary legal requirements for incorporation but is treated as if it were a corporation by estoppel.

Question 69

Explain the significance of the doctrine of corporation by estoppel in contract enforcement.

Answer 69

It prevents individuals from denying the existence of a corporation to avoid fulfilling contractual obligations if they have treated the entity as if it were legally incorporated.

Question 70

Describe the purpose of the rule mentioned in the content.

Answer 70

The purpose of the rule is to trace the nationality of the stockholder of investor corporations to ascertain the nationality of the corporation where the investment is made.

Question 71

Define the control test in the context of determining the nationality of a corporation.

Answer 71

The control test is a mode of determining the nationality of a corporation engaged in nationalized areas of activities by ascertaining the nationality of the controlling stockholder.

Question 72

How is the nationality of a corporation determined under the control test when corporate shareholders with foreign shareholdings are present?

Answer 72

The nationality of the corporation is determined by ascertaining the nationality of the controlling stockholder if corporate shareholders with foreign shareholdings are present.

Question 73

Describe the grandfather rule mentioned in the content.

Answer 73

The grandfather rule is a method used to accurately compute the percentage of Filipino equity in a corporation engaged in nationalized activities by attributing the nationality of the second or subsequent tier of ownership.

Question 74

Define the stock attribution rule mentioned in the content.

Answer 74

The stock attribution rule is a method used to determine the actual Filipino ownership and control in a corporation by allowing the rule to run continuously along the chain of ownership until it reaches the individual stockholders.

Question 75

What happens if the capital of the investing Corporation is at least 60% owned by Filipinos according to the content?

Answer 75

If the capital of the investing Corporation is at least 60% owned by Filipinos, then the entire shareholdings of the investing Corporation shall be recorded as Filipino-owned, making both the investing and investee corporations Philippine national.

Question 76

Describe the Control Test and the Grandfather Rule in determining foreign ownership restrictions in nationalized economic activities.

Answer 76

The Control Test and the Grandfather Rule are methods used jointly to determine ownership and control of corporations in nationalized economic activities.

Question 77

Define the Grandfather Rule in the context of Filipino ownership and control in a corporation.

Answer 77

The Grandfather Rule is a rule that should not be used alone to determine Filipino ownership and control in a corporation, as it could allow a foreign corporation to engage in nationalized activities.

Question 78

How are the Control Test and the Grandfather Rule used together in ownership determination?

Answer 78

The Control Test and the Grandfather Rule can be used cumulatively to determine ownership and control of corporations engaged in nationalized activities.

Question 79

Describe the scenario where the Grandfather Rule is not applicable in determining Filipino ownership and control in a corporation.

Answer 79

The Grandfather Rule is not applicable when the Control Test shows that the corporation falls below the 60% Filipino ownership threshold.

Question 80

Do the Control Test and the Grandfather Rule work independently of each other in determining ownership and control of corporations?

Answer 80

No, the Control Test and the Grandfather Rule can be used jointly and are not incompatible methods.

Question 81

How does the Supreme Court view the application of the Control Test and the Grandfather Rule in cases of Filipino ownership and control?

Answer 81

The Supreme Court emphasizes that when Filipino ownership is not in doubt, the Control Test prevails over the Grandfather Rule.

Question 82

Describe the Grandfather Rule in the context of Filipino ownership in a corporation.

Answer 82

The Grandfather Rule allows for counting only the number of shares corresponding to the percentage of Filipino ownership in a corporation if it is less than 60%.

Question 83

Define the Control Test in business organizations.

Answer 83

The Control Test is a method used to determine the nationality of a corporation based on the percentage of ownership and control by Filipinos.

Question 84

How is the application of the Grandfather Rule different from the Control Test in determining Filipino ownership in a corporation?

Answer 84

The Grandfather Rule focuses on counting shares based on ownership percentage, while the Control Test considers both ownership and control to ascertain Filipino ownership.

Question 85

Do the Grandfather Rule and Control Test have specific thresholds for Filipino ownership in a corporation?

Answer 85

Yes, both the Grandfather Rule and Control Test are concerned with ensuring at least 60% of the capital of a corporation is owned by Filipinos.

Question 86

Describe a scenario where the Grandfather Rule would be applied in assessing Filipino ownership in a corporation.

Answer 86

The Grandfather Rule is applied when the combined totals of Filipino ownership in an Investing Corporation and an Investee Corporation fall below the 60% ownership requirement.

Question 87

Describe the ownership structure of ABC Corporation as outlined in the content.

Answer 87

60% owned by XYZ, 40% owned by foreigners, with XYZ being 60% owned by Filipinos and 40% by the same foreigners who directly own 40% of ABC.

Question 88

How is the nationality of a corporation engaged in nationalized activities determined according to the control test?

Answer 88

If the corporation is at least 60% owned by Filipinos, it is considered a Philippine national under the control test.

Question 89

Describe the significance of the control test in relation to the ownership structure of XYZ and ABC Corporations.

Answer 89

The control test ensures that both XYZ and ABC are considered Philippine nationals if at least 60% of their capital is owned by Filipinos.

Question 90

How does the control test impact the computation of foreign ownership in a corporation like ABC?

Answer 90

The control test requires that the entire shareholding of XYZ be recorded as Filipino-owned, preventing the attribution of foreign ownership to specific shares.

Question 91

Explain why the control test is often referred to as the liberal test in determining the nationality of a corporation.

Answer 91

The control test is considered liberal because it allows for a broader interpretation of ownership, ensuring compliance with nationality requirements.

Question 92

Describe the implications of incorrectly attributing foreign ownership in the computation of ABC Corporation’s ownership structure.

Answer 92

Incorrect attribution of foreign ownership could lead to non-compliance with the Constitution’s ownership limits, jeopardizing ABC’s status as a Philippine national.

Question 93

How does the control test ensure compliance with the Constitution’s ownership requirements for corporations engaged in nationalized activities?

Answer 93

By mandating that at least 60% of a corporation’s capital must be owned by Filipinos, the control test ensures adherence to the Constitution’s ownership regulations.

Question 94

Describe the ownership structure of XYZ and in the given illustration.

Answer 94

XYZ 90,000 of ABC, with 10,000 shares held by foreigners. XYZ is 50% owned byinos and 50% by foreigners.

Question 95

What determines whether ABC is considered a Philippine national in the scenario provided?

Answer 95

ABC is not considered a Philippine national because XYZ is not at least 60% owned by Filipinos, failing the control test.

Question 96

How should the shares owned by Filipinos and foreigners be recorded in the books of the corporation according to the rules outlined?

Answer 96

The shares corresponding to Filipinos (50% of 90,000 shares) should be registered as Filipino-owned, while the rest must be recorded as foreign-owned.

Question 97

Define the concept of the control test in the context of determining national ownership.

Answer 97

The control test requires a certain percentage of ownership by nationals to consider a corporation as a national entity.

Question 98

What is the implication of the aggregate shareholdings exceeding the allowable 40% limit in the scenario provided?

Answer 98

Exceeding the 40% limit means the corporation may not qualify as a national entity and may have to adjust ownership records accordingly.