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CORPO Flashcards

1
Q

NON-STOCK CORPORATIONS

A

SEC. 86. Definition. - For purposes of this Code
and subject to its provisions on dissolution, a nonstock
corporation is one where no part of its income is
distributable as dividends to its members, trustees, or
officers: Provided, That any profit which a nonstock
corporation may obtain incidental to its operations
shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the
corporation was organized, subject to the provisions of
this Title.
The provisions governing stock corporations, when
pertinent, shall be applicable to nonstock corporations,
except as may be covered by specific provisions of this
Title.

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2
Q

Merger

A

Merger is a union whereby one corporation absorbs one or more existing corporations, and the absorbing corporation survives and continues the combine business

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3
Q

The single stockholder may not be appointed as the corporate secretary, but may assume the role of a Treasurer. True or false

A

True

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4
Q

SEC. 87. Purposes. - Nonstock corporations

A

Nonstock corporations may be formed or organized for 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, subject to the special provisions
of this Title governing particular classes of nonstock
corporations.

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5
Q

Is membership in a non-stock corporation and rights arising therefrom transferable?

A

No, membership in a non-stock corporation and all rights arising therefrom are personal and nonstransferable, except the articles of incorporation or the bylaws otherwise provided.

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6
Q

Does it mean that a non-stock corporation cannot have any income or profit?

A

No, it only means that the income or profit generated must be ploughed (When profits are “ploughed back” into a business, it means that instead of being taken out as dividends or earnings, they are reinvested into the company to help it grow. Think of it like planting seeds back into the soil to grow more plants for the next season instead of eating all the fruits right away.) back for the furtherance of the purpose or purposes for which the corporation was organized.

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7
Q

in Non-stock corporation how many votes allowed?

(Membership; Right to vote)

A

The right of the members of any class or classes to vote may be limited, broadened, or denied to the extent specified in the articles of incorporation or the bylaws.

Shall be entitled to one vote

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8
Q

What is the manner of voting of a nonstock corporation?

(Membership; Right to vote)

A

Manner of voting:
1. In person
2. Unless otherwise provided in the articles of incorporation or by the bylaws, by proxy
3. Remote communication and/or in absentia

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9
Q

Non-stock corporation (Termination of membership)

A

Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the bylaws. Termination of membership shall extinguish all rights of a member in the corporation or in its property, unless otherwise provided in the articles of incorporation or the bylaws.

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10
Q

How many number of trustees are there in a Nonstock corporation ?

A

The number of trustees shall be fixed in the articles of incorporation or bylaws which may or may not be more than fifteen(15).

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11
Q

How long does a trustee shall hold office?

A

They shall hold office for not more than three years until their successors are elected and qualified. Trustees elected to fill vacancies occuring before the expiration of a particular term shall hold office only for the unexpired period.

Except with respect to independent trustee or non-stock corporations vested with public interest, only a member of the corporation shall be elected as trustee.

Unless otherwise provided in the articles of incorporation or the bylaws, the members may directly elect officers or a non-stock corporation

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12
Q

Can an independent trustee or non-stock corporations vested with public interest be elected as trustee?

A

only a member of the corporation shall be elected as trustee.

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13
Q

The list of its members and their proxies shall be updated for how many days prior to any scheduled election?

(List of Members and proxies;)

A

The list shall be updated to reflect the members and proxies of record twenty (20) days prior to any scheduled election

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14
Q

Non-stock corporation (Place of meetings)

A

The bylaws may provide that the members of a non-stock corporation may hold their regular or special meetings at any place even outside the place where the principal office of the corporation is located.

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15
Q

The Bylaws may provide that the members of a non-stock corporation may hold their regular or special meetings at any place even outside the place where the principal office of the corporation is located, provided:

A
  1. Proper notice is sent to all members indicating the date, time and place of the meeting
  2. The place of meeting shall be within Philippine territory.
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16
Q

Definition of Close Corporations

A

SEC. 95. Definition and Applicability of Title. - A
close corporation, within the meaning of this Code, is
one whose articles of incorporation provides that:

(a) all the corporation’s issued stock of all classes, exclusive (not counting)
of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding
twenty (20);

(b) all the issued stock of all classes shall
be subject to one (1) or more specified restrictions on
transfer permitted by this Title; and

(c) the corporation shall not list in any stock exchange or make any public
offering of its stocks of any class. Notwithstanding the
foregoing, a corporation shall not be deemed a close
corporation when at least two-thirds (2/3) of its voting
stock or voting rights is owned or controlled by another
corporation which is not a close corporation within the
meaning of this Code.

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17
Q

Any corporation may be incorporated as a close
corporation, except?

A

A. mining or oil companies
B. Stock exchanges
C.Banks
D. Insurance companies
E. Public utilities
F.Educational institutions
G. Corporations declared to be vested with public interest (Vested with public interest means that something is so important that it affects everyone in the community or society. For example, a public park is vested with public interest because everyone can use and enjoy it. It’s like saying this thing is valuable and important for the well-being of all people, not just a few.)

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18
Q

Requisites. A stock corporation cannot be considered
a close corporation within the meaning of the RCCP if any of the
following requisites is absent in its Articles of Incorporation:

A

(1) All of the corporation’s issued stock of all classes,
exclusive of treasury shares; shall be held of record by not more
than a specified number of persons, not exceeding 20;

(2) All the issued stock of all classes shall be subject
to one or more specified restrictions on transfer permitted by
Title XII of the RCCP, particularly, a preemption of shares is
restricted in favor of any stockholder or of the corporation; and

(3) The listing of the corporate stocks in any stock
exchange or making a public offering of those stocks is
prohibited. 1

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19
Q

When a Board Meeting is Unnecessary or Improperly held

A
  • Still valid, if before after such action is taken, a written consent thereto is signed by all the directors
  • Implied knowledge
  • Directors are accustomed to take informal action
  • None of the Directors makes a prompt objection in writing

An action should be ratified by a director who failed to attend until the director files his written objection

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20
Q

Preemptive right of Close Corporation

A

The preemptive right of stockholders in close corporations shall extend to all stock to be issued, including reissuance of treasury notes, whether for money, property or personal services, or in payment of corporate debts, unless the articles of incorporation provide otherwise.

Preemtive right meaning: If the company wants to sell more shares, the people who already have shares get to buy the new ones first before anyone else can.

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21
Q

Amendment of Articles of Incorporation Close Corporation

A

shall require the affirmative vote of** atleast 2/3 of the outstanding capital stock, whether with or without voting rights** or of such greater proportion of shares as may be specifically provided in the articles of incorporation for amending, deleting or removing any of the aforesaid provisions, at a meeting duly called for the purpose

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22
Q

In case of deadlocks Close corporation

A

the SEC, upon written petition by any stockholder, shall have the power to arbitrate the dispute.
In the exercise of such power, the SEC shall have authority to make appropriate orders, such as:

  1. Cancelling or altering any provision constained in the AOI, bylaws, or any stockholders agreement
  2. Cancelling, altering or enjoining a resolution
  3. directing or prohibiting
  4. requiring the purchase
  5. appointing a provisional director
  6. dissolving corporation
  7. granting such reliefs
23
Q

A Provisional Director

A

Shall be an impartial person who is neither a stockholder nor a creditor of the corporation or any of its subsidiaries or affiliates, and whose further qualifications, if any, may be determined by the SEC

24
Q

Powers of Provisional Director

A

A provisional director shall have all the rights and powers of a duly elected director, including the right to be notified of and to vote at meetings of directors until removed by order of the SEC or by all stockholders

25
Q

Withdrawal of stockholder (Close Corporations)

A

Any stockholder of a close corporation may, for any reason, compel the corporation to purchase shares held at fair value,

  • which shall not be less than the par or issued value,
  • when the corporation has sufficient assets in its books to cover its debts and liabilities exclusive of capital stock.
26
Q

Dissolution of Corporation ( Close Corporations)

A

Any stockholder of a close corporation may, by written petition to the SEC, compel the dissolution of such corporation whenever:
* Any acts of the directors, officers or those in control of the corporation are Illegal
* Fraudulent
* dishonest
* oppressive
* unfairly prejudicial to the corporation or any stockholder
* Corporate assets are being misapplied or wasted

27
Q

Board of Trustees of Educational Corporations?

A

The Trustees of educational institutions organized as non-stock corporations shall not be less than 5 nor more than fifteen; Provided (“on the condition that” or “with the stipulation that.” It is often used to specify that a certain condition must be met for something to happen or be true.) That the number of trustees shall be in multiples of five

28
Q

What is the term of office of the trustees of incorporated schools, colleges or other institutions of learning?

A

As soon as organized, so classify themselves that the term of office of one-fifth of their number shall expire every year.

  • Trustees thereafter elected to fill vacancies, occuring before the expiration of a particular term, shall hold office only for the unexpired period.
  • Trustees elected thereafter to fill vacancies caused by expiration of term shall hold office for five years.

The powers and authority of trustees shall be defined in the bylaws

For institutions organized as stock corporations, the number and term of directors shall be governed by the provisions on stock corporations.

29
Q

(Religious Corporations) Such corporations may be classified into:

A

Corporations sole and religous societies

30
Q

Corporation sole v religious societies

A

In contrast to a corporation sole, religous societies are formed by more than one person. Read section 14 RCCP

31
Q

Can a corporation sole be converted into a coporation aggregate by mere amendment of its articles of incorporation?

A

Yes, it is feasible. The corporate being remains distinct from its members, whatever their number.

The one member, with the concurrence of two-thirds of the membership of the organization for whom he acts as a trustee, can self-will the amendment. He can, with membership concurrence, increase the technical number of the members of the corporation from “sole” or one to the greater number authorized by its amended articles

32
Q

Where do you file the Articles of Incorporation of Religious Societies?

A

Under Section 114, this is filed with the SEC, verified by the affidavit of the presiding elder,secretary, or clerk or other member of such religious society or religous order, or diocese, synod, or distinct organization of the religous denomination, sect, or church, setting forth the following:

(a) That the religious society or religious order, or diocese, synod, or district organization is a religious organization of a religious denomination, sect or church;
(b) That at least two-thirds (2/3) of its membership has given written consent or has voted to incorporate, at a duly convened meeting of the body;
(c) That the incorporation of the religious society or religious order, or diocese, synod, or district organization is not forbidden by competent authority or by the Constitution, rules, regulations or discipline of the religious denomination, sect or church of which it forms part;
(d) That the religious society or religious order, or diocese, synod, or district organization desires to incorporate for the administration of its affairs, properties and estate;
(e) The place within the Philippines where the principal office of the corporation is to be established and located; and
(f) The names, nationalities, and residence addresses of the trustees, not less than five (5) nor more than fifteen (15), elected by the religious society or religious order, or the diocese, synod, or district organization to serve for the first year or such other period as may be prescribed by the

33
Q

What is One Person Corporation?

A

An One Person Corporation is a corporation with a single stockholder. Only a natural person, trust or an estate may form an OPC

34
Q

Why the creation of an One Person Corporations?

A

The real reason for allowing one person is to give him control, especially when his business is still in the early stages. The One Person Corporations is a good starting point to start a business.

35
Q

What is the term of existence of the OPC?

A

Shall be perpetual. However, in the case of the trust or estate, its term of existence shall be co-terminous with the existence of trust or estate.

Also, under the said Circular, a foreign national may put up an OPC, Subject to the applicable capital requirement and constitutional and statutory restrictions on foreign participation in certain investment areas or activities.

An OPC shall not be required to have a minimum authorized capital stock except as otherwise provided by special law

36
Q

Who are not allowed to form OPCs?

A
  • Banks and quasi-banks
  • preneed
  • trust
  • insurance
  • public and publicly-listed companies, and
  • non-chartered government-owned and controlled corporations may not incorparate as OPC. Neither may a natural person who is licensed to exercise a profession organize as an OPC for for the purpose of exercising such profession except as otherwise provided under special laws.
37
Q

Directors and Officers of OPC

A

The single stockholder shall be the sole director and president of the OPC

Within 15 days from the issuance of its certificate of incorporation, the OPC shall appoint a Treasurer, Corporate secretary, and other officers as may deem necessary, and notify the SEC thereof withing five days from appointment

38
Q

True or false; The single stocholder may not be appointed as the corporate secretary

A

True, but may assume the role of a stockholder/treasurer.

39
Q

The stockholder/treasurer shall give what? to the SEC in such a sum as may be required.

A

Bond

40
Q

The bond shall be renewed every how many years or as often as may be required?

A

two

41
Q

Special Functions of the Corporate Secretary (OPC)

A
  • Maintaining the minutes of book
  • Notify the nominee or alternate nominee of the death of incapacity of the single stockholder not later 5 days
  • Notify the SEC of the death of the single stockholder within 5 days from such occurence
  • call the nominee or alternate nominee and the known legal heirs
42
Q

The two general tests to determine whether or not a foreign corporation can be considered as doing business in the Philippines

A

Substance test - the true test for doing business, however, seems to be whether the foreign corporation is continuing the body of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another

Continuity test - The term doing business implies a continuity of commercial dealings and arrangements, and contemplates to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in the progressive prosecution of, the purpose and object of its organization.

43
Q

Securities Regulation Code Purpose

A

Its purpose is to protect the public against the imposition of unsubstantial schemes and the securities based thereon. To protect legitimate business seeking to obtain capital through honest presentation against competition from crooked promoters and to prevent fraud in the sale of securities.

It was designed not only to provide investors with adequate information upon which to base their decisions to buy and sell securities, **but to protect legitimate business. ** seeking to obtain capital (Seeking to obtain capital refers to the process of acquiring funds or financial resources needed for business operations, investments, or other financial ventures. This can be done through various methods, depending on the needs and circumstances of the individual or business.) Through honest presentation against competition from crooked promoters and to prevent fraud in the sale of securities.

Unsubstantial schemes - refer to plans or ideas that are lacking in strength, substance, or likelihood of success. These schemes are often poorly thought out, unrealistic, or not supported by strong evidence or resources.

44
Q

Define Securities

A

Securities are financial instruments that represent some type of financial value. They can be broadly categorized into two main types:

Equity Securities: These represent ownership in a company, such as stocks. When you buy a stock, you become a partial owner of the company and may have a claim on part of its assets and earnings.

Debt Securities: These represent money that is borrowed and must be repaid, such as bonds. When you buy a bond, you are essentially lending money to a corporation or government, which promises to pay you back with interest.

In simpler terms, securities are like pieces of paper that have financial value and can be traded between people or institutions. They are a way for companies to raise money and for investors to potentially earn returns on their investments.

45
Q

Securities Include:

A
  1. Shares of Stocks, Bonds, Debenstures, notes, evidences of indebtedness, Asset backed Securities
  2. Investment Contracts
  3. Fractional Undivided interest
  4. Derivatives like option and warrants
  5. Certificates of assignments
  6. Proprietary or nonproprietary
  7. other instruments
46
Q

Debenture

A

Is a promissory note or bond backed by the general credit of a corporation and usually not secured by a mortgage or lien on any specific property

47
Q

Asset-backed securities

A

Asset-backed securities (ABS) are financial instruments that are backed by a pool of assets, such as loans, leases, credit card debt, or receivables. These assets are bundled together and sold to investors, who then receive payments from the interest and principal of the underlying asset

Imagine a bank has issued a large number of car loans. Instead of waiting for years to receive the loan payments, the bank can bundle these loans together and sell them as asset-backed securities to investors. The investors then receive the loan payments as they are made by the borrowers.

48
Q

Investment Contract

A

Refers to a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. It is presumed to exist whenever a person seeks to use the money or property or others on the promise of profits.

49
Q

Common enterprise

A

In a general sense, a common enterprise refers to a group of individuals or entities that come together to achieve a shared goal or objective. This concept is often associated with business and legal contexts. Here are a couple of examples:

Business Partnerships: In a business context, a common enterprise might refer to a partnership or joint venture where multiple companies or individuals collaborate on a project or business venture with the aim of sharing profits and responsibilities.

Legal Context: In legal terms, especially in the context of securities and investments, a common enterprise refers to an arrangement where the financial success of the participants is interlinked. This is often a key consideration in determining whether an investment scheme qualifies as a security under the Howey Test in the United States.

50
Q

What is Howey Test:

A

he Howey Test is a legal principle used to determine whether a transaction qualifies as an “investment contract” and therefore a security. The test considers:

A contract, Transaction

An investment of money.

In a common enterprise.

With an expectation of profits.

Derived from the efforts of others.

Common enterprises can take various forms depending on the context and the specific goals of the participants involved.

51
Q

Investment Contract sample

A

So, if your friends give you money, you’re all working together, and they’re expecting you to make money for them, then it’s like a magic rule that says you’ve made an “investment contract.”

52
Q

In determining whether a dispute constitutes an intra-corporate controversy, there are two tests, namely:

A

The relationship test and the nature of the controversly test.

53
Q

In determining whether a dispute constitutes an intra-corporate controversy, there are two types, namely the relationship test and the nature of the controversy test.

An intra-corporate controversy is one which pertains to any of the following relationships:

A
  1. Between the corporation, partnership or association and the public
  2. Between the corporation partnership or association and the state insofar as its franchise, permit or license or operate is concerned
  3. Between the corporation, partnership or association and its stockholders, partners members or officers
  4. Among the stockholders, partners, or associates themselves.

Thus, under the relationship test, the existence of any of the above intra-corporate relations makes the case intra-corporate.

54
Q

Quasi-Judicial Power

A

Yes, the Securities and Exchange Commission (SEC) has quasi-judicial powers over intra-corporate disputes:

Quasi-judicial powers
The SEC has the authority to investigate facts, hold hearings, and draw conclusions to exercise judicial discretion.

Scope of quasi-judicial powers
The SEC’s quasi-judicial powers include:
Intra-corporate and partnership relations, including elections and appointments
State and corporate affairs, including the legal existence of corporations, partnerships, and associations
Investors and corporate affairs, including fraudulent practices by directors, officers, and other stockholders
The SEC’s powers and functions have been expanded through several presidential decrees and acts, including:
Presidential Decree No. 902-A
Reorganized the SEC as a collegial body with a Chairman and four Associate Commissioners
Batas Pambansa Blg. 98
Also known as the Corporation Code of the Philippines, this act mandated the SEC to register corporations and collect fees
Republic Act No. 8799
Also known as the Securities Regulation Code, this act reorganized the SEC to improve its structure and operations

AFTERMID24 (18 decks)

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