Corp Reviewer Flashcards
Describe the three basic areas where piercing the corporate veil is allowed.
- Defeat of public convenience, 2. Fraud cases, 3. Alter ego cases.
Define alter ego cases in the context of piercing the corporate veil.
Alter ego cases involve a corporation being a mere facade or conduit for another entity, controlled to the extent that it lacks separate existence.
How is the alter ego theory applied in legal cases?
It is determined through a three-pronged test involving instrumentality or control, fraud, and complete domination over the corporate entity.
Do all cases of piercing the corporate veil follow a strict set of rules?
No, each case is considered on its own merits as there is no universal guideline.
Describe the fraud test in the context of piercing the corporate veil.
The fraud test involves using control over the corporation to commit fraud or wrong.
Define the instrumentality or control test in the context of piercing the corporate veil.
It requires complete domination over the corporation, not just in finances but also in policy and business practices for the transaction in question.
Describe the characteristics of a subsidiary corporation according to PNB v. Ritratto Group.
A subsidiary corporation is described as a department or division of the parent corporation, uses the parent corporation’s property, has directors who take orders from the parent corporation, and may not observe formal ledger requirements.
Define the successor corporation rule in the context of corporate law.
The successor corporation rule refers to a situation where a corporation pretends to dissolve or cease but actually continues to exist under a different name.
How does the successor corporation rule apply in labor cases according to Claparols v. CIR?
It applies when there is a consecutive date of cessation and commencement of a subsequent entity, ownership and control by the former controlling stockholder, and turnover of assets.
Describe the indicators pointed out in Livesey v. Binswanger to identify a successor corporation.
The indicators include having the same officers, same office, and continuation of the business.
What does SME v. De Guzman allow in cases of asset sales between predecessor and successor corporations?
It allows for the defense of good faith, stating that the seller can dismiss affected employees but is liable for separation pay, while the buyer is not obliged to absorb the employees but can give preference to qualified separated personnel.
How does the rule differ between asset sales and stock sales in terms of employee obligations during a corporate transition?
In asset sales, the seller is liable for separation pay, while the buyer is not obliged to absorb employees. In stock sales, a shift in shareholders does not affect the corporation’s existence and continuity.
Describe reverse corporate piercing.
Reverse corporate piercing makes the corporation liable for the debt of the shareholders, flowing in the opposite direction of traditional corporate veil-piercing.
Define sole proprietorship, partnership, and corporation in terms of legal personality.
Sole proprietorship is merged with the owner, partnership is separate from the partners, and corporation is a separate legal entity.
How does the extent of liability of owners differ between sole proprietorship, partnership, and corporation?
In a sole proprietorship and partnership, owners have unlimited liability, while in a corporation, owners have limited liability.
Do shareholders have a claim on corporate property in a corporation?
No, shareholders do not have a claim on corporate property as it is owned by the corporation as a juridical person.
Describe the management structure in a sole proprietorship, partnership, and corporation.
In a sole proprietorship, the owner manages the business; in a partnership, management is by partners; in a corporation, it is by the Board of Directors/Trustees.
How does insider reverse piercing differ from outsider reverse piercing?
Insider reverse piercing involves controlling members ignoring the corporate fiction for personal benefit, while outsider reverse piercing involves a party with a claim against an individual or corporation seeking repayment from a corporation owned by the defendant.
Define the concept of piercing the corporate veil.
Piercing the corporate veil is a legal decision to treat the rights or liabilities of shareholders and a corporation as the same, disregarding the separate legal personality of the corporation.
Describe the power of a sheriff in relation to piercing the corporate veil.
A sheriff does not have the power to pierce the corporate veil; this authority belongs to the court.
How does the duration or existence differ between a sole proprietorship, partnership, and corporation?
A sole proprietorship exists for the life of the owner, a partnership exists as per the partners’ agreement, and a corporation has perpetual existence.
Describe the standing doctrine regarding corporations and damages.
Corporations are not entitled to moral as they are incapable feelings or mental anguish, with exceptions applying pro hac vice.
What actions did BNL Management take in response to concerns the Imperial Bayfront Tower Condominium?
BNL Management withheld paying monthly dues, deposited them in escrow, and filed a complaint against Uy, et al., for damages and specific performance.
Define the legal concept of a corporation.
A corporation is a legal entity created as a separate entity from its owners, with its own rights, responsibilities, and liabilities.
How did the building administrator respond to BNL Management’s concerns at the condominium?
The building administrator explained issues were due to lack of funds from nonpayment of dues and informed BNL Management of power outage and water disconnection consequences.
Describe the court’s ruling on BNL Management’s claim for moral damages.
The court ruled that BNL Management Corporation is not entitled to moral damages as a corporation is incapable of emotions or feelings.
What is the significance of the legal fiction concept in relation to corporations?
Legal fiction means that a corporation is treated as a separate legal entity from its owners, with its own rights and liabilities, despite not being a natural person with emotions or senses.
Describe the voting rights of shareholders in a corporation.
One class of shares must always have complete voting rights, while the right to vote of members of any class may be denied in the Articles of Incorporation or By-Laws.
Define transfer of membership in a corporation.
Transfer of membership cannot be made without consent of the corporation, and membership is not personal to the stockholder.
How can a shareholder vote in a corporation?
Shareholders may always vote by proxy, but this right can be denied in the Articles of Incorporation or By-Laws.
Do shareholders have rights upon the transfer of shares in a corporation?
Upon transfer of shares, the seller is no longer part of the corporation, and the transfer may be subject to restrictions noted in the AOI, BL, and stock certificate.
Describe the termination of membership in a corporation.
Membership may be terminated according to causes provided in the By-Laws.
Define One Person Corporations.
One Person Corporations are entities with a single stockholder, limited to natural persons, trusts, or estates, excluding certain entities like banks, insurance companies, and publicly-listed corporations.
How are One Person Corporations different from other corporations in terms of ownership?
One Person Corporations have a single stockholder, while other corporations can have multiple shareholders.
Describe a Public Corporation.
A Public Corporation is formed for the government of a portion of the state, aiming for the general good and welfare of the public.
Describe the limitations on the number of corporators in a corporation according to the content.
There is no limit to the number of corporators allowed by authorized shares, but not more than 20 according to the Articles of Incorporation.
Define the powers exercised by the board in a corporation as per the content.
The powers in a corporation are exercised by the board, which is elected by the stockholders.
How are officers elected in a corporation based on the content?
In a corporation, the Board of Directors elects officers, unless shareholders, as directors, directly elect officers as provided by the Articles of Incorporation.
Describe the difference in the dissolution process between any stockholder and the SEC according to the content.
Any stockholder may petition for dissolution for stated grounds, while the SEC may intervene in the management of the corporation in case of deadlocks.
What are the restrictions on the types of businesses that can be organized as a close corporation according to the content?
Mining, Oil, Exchange, Banks, Insurance, Public Utility, Educational, and Public Interest businesses cannot be organized as close corporations.
Define the concept of pre-emptive rights in a corporation as per the content.
Pre-emptive rights in a corporation are subject to limitations and include the sale of treasury shares and acquisition of properties.
How is the appraisal right different in terms of reasons and requirements as outlined in the content?
The appraisal right must be for reasons listed in the Code, while it can be for any cause without the need for unrestricted retained earnings, as long as the corporation would not become insolvent.
Describe the role of an arbitration agreement in unlisted corporations according to the content.
An arbitration agreement may be provided in the Articles of Incorporation or By-Laws of unlisted corporations, and arbitration is allowed.
How are educational corporations structured in terms of trustees and directors based on the content?
For educational corporations organized as non-stock corporations, trustees shall not be less than five nor more than fifteen, while for stock corporations, the number and term of directors are governed by the provisions on stock corporations.
Describe the concept of a de jure corporation mentioned in the content.
A defectively formed corporation that is considered legally valid in all cases except when parties are estopped from defending.
Define ultra vires act based on the information provided.
An act by a corporation that goes beyond the powers granted by the Corporation Code or its Articles of Incorporation.
How are corporations created by special laws or charters governed according to the content?
They are primarily governed by the provisions of the special law or charter creating them, supplemented by the provisions of the Corporation Code.
Do government instrumentalities have the ability to possess corporate powers while retaining their classification?
Yes, a government instrumentality can have corporate powers and still be classified as a government instrumentality, not necessarily a GOCC.
Describe the two classes of corporations recognized by the Constitution as per the content.
Private corporations under a general law and GOCCs created by special charters.
How does the Constitution restrict the creation of private corporations according to the content?
Private corporations can only be created by a general law applicable to all citizens, prohibiting special charters that grant specific privileges to certain individuals or groups.
Describe the role of corporators and incorporators in a corporation.
Corporators are individuals who compose a corporation, either as stockholders in a stock corporation or as members in a nonstock corporation. Incorporators are the stockholders or members mentioned in the articles of incorporation as the original founders of the corporation.
What is the significance of being an incorporator in a corporation?
One of the main privileges of being an incorporator is the ability to create the initial rules (bylaws) of a corporation.
How do the powers within a corporation differ between corporators and directors/trustees?
The powers of a corporation are held by the directors (stock) or trustees (non-stock), not by the corporators who are essentially the owners.
Define the Trust Fund Doctrine in the context of corporate governance.
The Trust Fund Doctrine is in place to protect the creditors of a corporation, considering the subscribed capital as a trust fund for the payment of corporate debts.
What is the main purpose of the Trust Fund Doctrine in corporate governance?
The Trust Fund Doctrine aims to ensure that creditors have a right to the subscribed capital for the satisfaction of their claims, prioritizing them over stockholders in the distribution of corporate assets.
Describe the relationship between the Board and corporators in the management of a corporation.
The Board holds supreme authority in managing a corporation, while corporators are responsible for selecting and electing the members of the Board.
How does the status of an incorporator change if they transfer or lose their membership in a corporation?
Incorporators do not lose their status as incorporators even if they transfer or lose their membership in a corporation.
Do corporators have the ultimate decision-making power in a corporation?
No, the ultimate decision-making power in a corporation lies with the directors (stock) or trustees (non-stock), not with the corporators who are the owners.
Describe the nature of shares of stock in a.
Shares of stock represent the holder’s interest in participating in management, sharing profits, and receiving assets upon liquidation.
Define the Doctrine of Equality of Shares in a corporation.
It presumes that all shares issued by a corporation are equal, enjoying the same rights, privileges, and liabilities when the Articles of Incorporation do not specify distinctions.
How can shares in stock corporations be divided according to the content?
Shares can be divided into classes or series, ensuring there is always a class with complete voting rights.
Do preferred or redeemable shares have voting rights according to the content?
Preferred or redeemable shares may be deprived of voting rights.
Describe the ruling in Castillo v. Balinghasay (2004) regarding voting rights of stockholders.
Only holders of preferred or redeemable shares can be deprived of voting rights without their consent.
How are nonvoting shares allowed to vote on certain corporate matters according to the content?
Nonvoting shares can vote on specific matters like amending the articles of incorporation or increasing bonded indebtedness, among others, as exceptions to the general rule.
Describe what no par value shares are in a corporation.
No par value shares are shares without a stated value in the Articles of Incorporation, deemed fully paid and nonassessable, issued at a minimum price, and treated as capital not available for dividend distribution.
Define the limitations on issuing no par value shares in a corporation.
Limitations include a minimum issue price, being fully paid and non-assessable upon issuance, treating all consideration as capital, prohibition on issuing as preferred stock, and restrictions on certain types of corporations.
How are shareholders of no par value shares protected from additional capital contributions?
Shareholders of no par value shares are protected as they are deemed fully paid and nonassessable, meaning they cannot be asked for additional paid-in capital or be liable to the corporation or its creditors.
Do no par value shares allow for distribution as dividends?
No, the total amount received from issuing no par value shares is treated as capital and cannot be distributed as dividends.
Describe the rights of a stockholder in terms of voting in a corporation.
A stockholder has the right to participate in the control and management of the corporation through voting, which is inherent to stock ownership and considered a property right.
How can the right to vote of a stockholder be impaired in a corporation?
The right to vote of a stockholder cannot be deprived or essentially impaired without consent, whether by legislative changes, charter amendments, or by-laws modifications.
Describe the tax treatment of stock dividends according to the doctrine mentioned in the content.
Stock dividends representing the transfer of surplus to capital account are not subject to tax until the gain is realized.
What is the significance of the redemption or cancellation of stock dividends in terms of taxation, as per the content?
Redemption or cancellation of stock dividends can be equivalent to a distribution of taxable dividends, making the proceeds taxable if it represents profits.
Define the term ‘treasury shares’ as mentioned in the content.
Treasury shares are common shares that a company has issued and subsequently repurchased, holding them in its treasury.
How did ANSCOR use the redemption of common shares from Don Andres’ estate for business purposes?
ANSCOR redeemed shares to partially retire them as treasury shares, aiming to reduce foreign exchange remittances in case cash dividends were declared.
Describe the outcome of the tax assessments on ANSCOR’s redemption of stocks as per the Court of Tax Appeals decision.
The Court of Tax Appeals reversed the tax assessments on the redemptions and exchange of stocks, finding sufficient evidence to overcome the correctness of the assessments.
Explain the ruling regarding the taxability of ANSCOR’s redemption of stocks according to the content.
The redemption of stocks by ANSCOR was deemed equivalent to the distribution of taxable dividends, making the proceeds taxable as it represented profits.
Describe the requirement for terms conditions of shares in the AOI certificate of stock.
The terms and affecting shares must be stated in both the AOI and the certificate of stock.
sinking fund in relation to redeemable.
A sinking fund is a fund set up by the corporation to gradually accumulate the amount necessary to meet the redemption price of redeemable shares at specific future dates.
How are redeemable shares treated upon redemption according to SEC rules?
Redeemable shares are deemed retired upon redemption, unless the AOI allows for reissuance of such shares.
Do redeemable shares require URE before redemption?
Redeemable shares do not require URE (Unrestricted Retained Earnings) before redemption, but there must be sufficient assets to pay creditors and cover operations.
Describe the condition under which redemption cannot be made according to SEC opinion.
Redemption cannot be made if it will result in insolvency or the inability of the corporation to meet its obligations.
Explain the effect of redemption on redeemable shares according to SEC rules.
Redemption of redeemable shares does not necessarily make them treasury shares; they are deemed retired unless specified otherwise in the AOI.
Describe treasury shares in the context of a corporation.
Treasury shares are shares of stock that were once issued and fully paid for by the corporation but were later reacquired through legal means like purchase, redemption, or donation.
How are treasury shares different from outstanding shares?
Treasury shares, being fully paid shares re-acquired by the corporation, are not considered outstanding and can be re-issued and resold.
Define the treatment of treasury shares in terms of the corporation’s assets.
Treasury shares are considered assets of the corporation and are not reverted to unissued shares but can be reissued or resold at a price set by the Board of Directors.
What is the requirement for reacquiring shares without affecting the corporate trust fund?
Shares can be reacquired without impacting the corporate trust fund as long as the corporation uses assets up to the extent of its unrestricted retained earnings.
Describe the reissuance process of treasury shares.
Treasury shares can be disposed of again at a reasonable price determined by the Board of Directors, with stockholders having preemptive rights unless stated otherwise in the articles of incorporation.
Do delinquent stocks have the potential to become treasury stocks?
Yes, delinquent stocks, which are unpaid, can become treasury stocks if the corporation bids on them in the absence of other bidders.
Explain the limitations on reissuing treasury shares.
Treasury shares can be re-issued or sold again for a reasonable price set by the Board of Directors, and they cannot be divided or split.
Describe the requirement under the Old Corporation regarding the subscription and payment of stock at the time of incorporation for a stock corporation.
At least 25% of the authorized capital stock must be first subscribed at the time of incorporation, with at least 25% of the total subscription to be paid upon subscription.
Define the issue in the case of Fong v. Duenas (2015) regarding the misappropriation of cash advance by the Respondent.
The issue was whether or not Respondent misappropriated Petitioner’s cash advance, violating the original agreement, which was affirmed as YES.
How did Respondent in the case of Fong v. Duenas (2015) err in handling Petitioner’s cash advances?
Respondent erred by investing Petitioner’s contributions in his own companies instead of using them for the joint venture’s capital and incorporation.
Describe the doctrine established in Guillen v. Arnado (2017) regarding the business name City Grill Restaurant.
The business name City Grill Restaurant, even if used for a short period, was never dissolved in accordance with the law and had acquired goodwill among residents and customers.
Do you think the Respondent in Fong v. Duenas (2015) was justified in using Petitioner’s cash advances for his own companies?
No, the Respondent was not justified as the cash advances were meant for the joint venture’s capital and incorporation, not for his personal companies.
Define the joint venture agreement between Petitioner and Respondent in Fong v. Duenas (2015).
They agreed to contribute to the capital, with the Petitioner providing cash and the Respondent using his two companies, alongside financial documents indicating the combined value.
Describe the role of incorporators in forming a.
Incorporators form the corporation and attest to the truthfulness of the proposed corporate charter.
Define the doctrine related to the Articles of Incorporation (AOI) regarding incorporators.
The AOI must state the names, nationalities, and residences of the incorporators to inform the public about the individuals organizing the corporation.
How does the unauthorized use of aliases by incorporators affect the validity of a corporation’s registration?
The unauthorized use of aliases by incorporators constitutes fraud, leading to misrepresentation of identity and potential revocation of the corporation’s registration.
Do all incorporators need to be subscribers to the capital stock of a corporation?
Yes, all incorporators must subscribe to at least one share of the capital stock.
Describe the significance of vigilance against fictitious names among incorporators.
Vigilance against fictitious names is crucial as it can lead to confusion, defeat claims against incorporators, and potentially subject them to personal liabilities.
Define the purpose of the majority of incorporators no longer needing Philippine residency according to the RCC.
The RCC removed the Philippine residency requirement to facilitate the incorporation process and attract a more diverse pool of incorporators.
Describe the process of extending or short a corporation’s term as per the articles incorporation.
endment of AOI is required, and it can be done as early as three years before the term expires, with exceptions for justifiable reasons determined by SEC. Approval by a majority vote of the BOD/T and ratification by at least two-thirds of the OCS or its members are requisites.
Define the revival of a corporation with an expired term.
Upon revival, the corporation’s term becomes perpetual unless specified otherwise. A favorable recommendation from the regulating government agency is required for certain institutions. The SEC issues a certificate of revival, granting perpetual existence with all rights, privileges, duties, debts, and liabilities.
How does a dissenting stockholder benefit during the extension of a corporate term?
A dissenting stockholder may exercise the right of appraisal during the extension of a corporate term.
Describe the process for voluntary dissolution of a corporation by controlling stockholders or members.
Controlling stockholders or members must represent at least two-thirds of the OCS/membership in the application for voluntary dissolution. Dissenting stockholders cannot exercise their appraisal right.
Do shareholders need to agree to extend or shorten a corporation’s term?
Yes, shareholders need to agree by majority vote for the extension or shortening of a corporation’s term.
Define the significance of the Alhambra Cigar v. SEC (1968) case.
The case established that upon dissolution, a corporation becomes legally dead for all purposes unless statutory authorizations are provided for its continuance for limited and specified purposes incident to complete liquidation of its affairs.
Describe the concept of Authorized Capital Stock (ACS) in a corporation.
Authorized Capital Stock is the minimum amount of capital a corporation will receive when it issues all its shares, calculated by multiplying the par value of each share by the total number of shares authorized in the charter.
Define Outstanding Capital Stock (OCS) in the context of a corporation.
Outstanding Capital Stock refers to the total shares of stock issued to subscribers or stockholders, regardless of whether they are fully or partially paid, excluding treasury shares.
How can one become a stockholder in a corporation according to the content?
One can become a stockholder by subscribing to shares before or after incorporation, or by acquiring already issued shares.
Describe Subscribed Capital Stock (SCS) in a corporation.
Subscribed Capital Stock is the committed amount of capital that the corporation will receive from its existing subscribers, even if full payment is not required upfront.
What is the significance of Additional Paid-In Capital (APIC) in a corporation’s trust fund?
APIC represents money received above the par value of shares, which is considered part of the trust fund. It includes any amount raised above the authorized capital stock.
Explain the concept of Paid-Up Capital Stock in a corporation.
Paid-Up Capital Stock refers to the received or fully paid portion of the subscribed amount, which forms part of the corporation’s trust fund.
What are the requirements for minimum capital stock in stock corporations under the Revised Corporation Code (RCC)?
Stock corporations are not required to have a minimum capital stock under the RCC, except as specifically provided by special law. The previous requirement of at least 25% subscription and payment upon incorporation has been removed.
Describe the process of becoming a stockholder through subscription in a corporation.
Becoming a stockholder through subscription involves offering to subscribe to shares, which is accepted by the corporation. This can happen before or after incorporation, and the consideration may be fully paid or not.
