CORPORATION Flashcards
Majority BOD + 2/3 outstanding capital stock
Pre, AI capital are bonded terms of MS PAVc, managing 1/3
AI - amend
Bonded indebtedness - incur, create, increase
Capital stock - increase decrease
Merger consolidation
Stock dividend declaration
Pre-emptive right - deny
All or substantially all of corporate assets - sale, exchange, pledge, mortgage
Dissolution - voluntary creditors are affected
Invest corporate funds other than primary purpose
Extend or shorten corporate term
Management contract
- Managing corporation owns 1/3 of outstanding capital stock or majority of BOD of managed corporation
- limit is 5 years for any one term
Majority BOD + majority outstanding capital stock
BVM
- Management contract other than the one above
- adopt, amend, or repeal by-laws
- dissolution - voluntary no creditors affected
Without BOD + 2/3 stockholders
self- removal is opportunity by- AM- delegation
- Delegate to the board the power to AMEND* by-laws
- Remove a member of BOD - vote required
- ratify business opportunity entered into by a member of the board
- ratify self- dealing directors, where presence or vote is required to constitute a quorum
*does not include adoption kasi the act of delegation itself is an action that must be documented in a by-law. pag mag aadopt pa lang, anong mag gogovern na procedure sa delegation? wala <3
Without BOD + majority stockholders
call it special to remove, CIDeR
- revoke delegated power to amend by-laws
- calling special meeting to remove directors
- fix compensation of directors
- fix issue price or stated value of no par value
- election of directors (quorum required)
General/ corporate franchise as to 1. purpose 2. to whom it is vested 3. saleability
- exist as a corporation
- conferred in the individuals who compose the corporation and not in the corporation itself
- cannot be sold in the absence of a legislative authority so to do
Secondary franchise as to 1. purpose 2. to whom it is vested 3. saleability
Secondary franchise
- certain rights and privileges conferred upon existing corporations
- right to use the streets of a municipality to lay pipes or tracks, erect poles or string wires.
- vested in the corporation
- may ordinarily be conveyed or mortgaged under a general power granted to a corporation to dispose of its property except such special or secondary franchises as are charged with a public use
strong juridical personality
Right of Succession
legal existence and juridical personality of corporation starts when
COI is issued Exceptions: (SSC) 1. Special law (it provides) 2. Sole corporation ( filing of AI) 3. Corporation by estoppel
Corporation as to
- criminality liability
- moral damages
- right against self- incrimination
1. GR: not liable
Ex: fines and corporate fines
2. GR: not entitled
Ex: libel or defamation
3. GR: not entitledCorporation owes its existence to the law and the state.
Concession theory
Acts outside the object for which a corporation is created
Ultra Vires act
Ultra Vires Acts by the corporation
Illegal
Null and Void
Ultra Vires Acts by the corporation
Failure to comply with voting formality required by law
Null and void but declaration of nullity may be barred by estoppel
Ultra Vires Acts by the corporation
For being outside the primary and secondary purpose
Voidable on the part of the other party
Ultra Vires Acts by the corporate officers
Illegal
Null and void
Ultra Vires Acts by the corporate officers
unauthorized or exceed authority
Unenforceable but may be enforceable
- ratification by the corporation
- estoppel
- apparent authority of corporate officers
Corporation as to Surplus
- stock - may declare dividend
2. non-stock - no dividends; maybe divided into shares
Corporation as to Law (Incorporation Test)
- domestic
2. foreign
Corporations as to listing of stocks
- Close
- cannot be listed
- maximum 20 shareholders - Open
- open to public
- maybe listed
Corporations as to purpose
- Private
- private good and welfare; franchise is a privilege
- Public
- public good and welfare; for the gov; cities, municipalities Article 10
Corporations as to Religion
- Ecclesiastical
- spiritual purposes or administering properties for religious ones
- organized to secure public worship…. - Lay
- other than religion
a. Eleemosynary - charitable and benevolent purpose (hospitals, sick, aged)
b. Civil - benefit of its members
Corporations as to person composing it
- Aggregate
- Sole corporation - bishop, priest….
- OPC
Corporations as to Validity
Direct Collateral
De jure N N
De facto Y quo warranto N
Corporate by Estoppel N N
As to compliance and separate personality
De Jure
De facto
Corporate by Estoppel
Full; separate
colorable; separate
none; none liable as general partners
Requisites for existence of De facto Corporation
- Valid law under which it may be incorporated
- Attempt in Good faith to incorporate
(bare minimum: filing of AI) - Use of corporate powers
the very subject of the case is the legal existence or personality of corporation
Direct attack
The subject of the case is other than attacking the personality of the corporation, but it is questioned as a side subject.
Collateral attack
Liability of promoters
GR: personally liable on contracts made by him for the
benefit of the corporation
continues even after formation
Exception: when novation or other agreement to release him from liability
Contents of AOI
- Name
- Specific purpose/ purposes
- Principal office (City/ Municipality, Province)
- Term
- Name, nationalities, residences of Incorporators
- Number of Directors or Trustees
- Names, nationalities, residences of Incorporating BOD/ BOT (kasama sa BOD qulaifications)
- Authorized stock capital, number of shares divided, par value, if no par value, the statement that it is no par value; Names, nationalities, residences of subscribers, amount subscribed and paid
- non-stock corporation, the capital, NNR of the contributors and each contributions.
Independent directors requirement
at least 20% of such board
Independent directors is required for
those with publicly vested interest
- Corporations covered by SEC
- Banks and similar institutions, preneed, NSSLA, pawnshops, money service business, trust and insurance companies, other financial intermediaries
- vested with public interest
Other matters to be indicated in AOI
- Name of treasurer
- No transfer clause (to monitor the those with ownership requirement)
- Execution clause
- Notarial acknowledgment
- Restrictions or preferences
a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director
Independent director
Number of directors for stock corporations
maximum 15
Number of trustees for non-stock corporations
GR: may exceed 15 directors
Educational: multiples of 5
Restrictions and preferences must be stated in __________
GR: AI and cert for stock corporations
ABC (AI, By-laws, Cert) for close corporation
Otherwise, restrictions and preferences not binding in the purchaser in good faith
Minimum subscription and paid- up capital
- No longer applicable in incorporation
2. Applies only to increase in authorized capital stock
maximum amount in the AOI to be subscribed and paid in
maximum number of shares that a corporation can issue
authorized capital stock
- covered by subscription contracts
- portion of the capital stock that is already promised to be paid for.
subscribed capital stocks
Invalid considerations for stocks
promissory notes or future services
Valid considerations for stocks
remember dapat past tense lahat
- Actual cash paid
- Labor performed
- Existing debt
- Property, tangible / intangible
- Stock dividends
- Conversion/ reclassification
- Stocks in another corporation
Powers of SEC when name of corporation does not pass with the SEC
- issue cease and desist order if name is
- not distinguishable
- protected by law
- contrary to law,…. - removal of all visible signages
- hold corporation and responsible directors or officers in contempt/ criminally/civilly liable
- revoke COR
Why do we add the purpose of the corporation?
- minimum Filipino ownership required
- to determine the need of special franchise, capitalization requirements
- lawful combination of multiple purposes
Number of incorporators
max 15
Term of corporation
GR: perpetual existence
Exceptions:
1. Articles provide specific term
2. majority vote of stockholders retains the specific term
with notification to SEC (dissenting stockholders can exercise appraisal right)
Extension for existence of corporation
clue: Ext.
GR: no earlier than 3 years prior to expiry date
Exception: justifiable reason for earlier extension application is allowed
If a corporate term already expired, it can no longer revived
False
Revival is allowed now in RCC
Original stockholders
Incorporators
founders of corporation
Incorporators
compose the corporation at any given time
Corporators
Principal Place of Office
within the Philippines
Importance of Principal Place of Office
- proper venue of actions
- registration of chattel mortgage of shares
- venue for validity of stockholders’ or members’ meetings
Qualifications of Incorporators
clue: MONA
- natural persons or artificial
(partnership, association, corporation - domestic or
foreign)
legal age implicit qualification for natural persons - own at least 1 share
- maximum 15
Effectivity of extension of corporate term
the day following the original expiry date
Citizenship requirement for corporations
M - 100%
A - 70%
EPEO -60%
Mass
Advertising
Educational, Public utility, Exploration, evaluation, ownership of land
shares issued + subscribed - treasury shares
Outstanding capital stock
Grounds for Disapproval of Application of Incorporation
- AI or amendment is not SUBSTANTIALLY IN ACCORDANCE with the form prescribed
- purpose is illegal, unconstitutional, immoral
- false, Treasurers’ Affidavit (amount paid or subscribed)
- incompliant in stock ownership requirement
- recommendation was not acquired
Examples of Corporations Needing Recommendations
- NSSLA
2. Pawnshops
Examples of Corporations NOT Needing Recommendations
- educational
2. governed by special laws
How to amend AI
- Maj BOD resolution
- Written assent 2/3 outstanding capital stock
- SEC approval
Governing body of the corporations and direct affairs.
BOD
GR as to the classification of powers of the BOD/ BOT
corporation is bound by the acts of its officers which act within the scope of the classifications of powers of corporate agents.
Qualifications of BOD
clue: RBO
- Resident - majority *
- By-laws additional requirement
- One share- at least
*Exception: activities reserved to Filipino citizens like the management of educational institutions and those governed by the Retail Trade Law.
Disqualifications of BOD
- 5 convicted by final judgment
RCC, SRC, more than 6 imprisonment
- admin fraud
- equivalent- Convicted by final judgment, within 5 years prior to election
- offense is punishable by imprisonment for a period of more than 6 years
- violation of Corporation Code
- violation of SRC
- fraud acts - administratively liable
- foreign courts or equivalent similar to abovementioned acts.
Under Revised Code of Corporate Governance
Permanent Disqualification of BOD
- judicially insolvent
- conviction by final judgment or order for crimes involving
a. securities transactions OR*
b. fiduciary relationship with banks and other
financial institutions*
c. moral turpitude, fraud, embezzlement, theft,
estafa, counterfeiting, misappropriation, forgery,
bribery, false affirmation, perjury, or other
fraudulent actsd. violation of SRC or RCC
- misconduct + final judgment
- currently the subject of ….
- elected independent director who becomes officer, employee, consultant of the corporation
- foreign courts or equivalent similar to abovementioned acts.
- Convicted by final judgment, within 5 years prior to election of an offense is punishable by imprisonment for a period of more than 6 years
Under Revised Code of Corporate Governance
Temporary Disqualification of BOD
- if complied within 60 business days from disqualification, disqualification will be lifted*
- failure or refusal based on unjust reason will make the temporary disqualification PERMANENT
- refusal to comply with the disclosure requirement
- absence in more than 50% of all REGULAR AND SPECIAL meetings during his incumbency or any 12 months; disqualification applies in the next election.
VALID excuse: illness, death in immediate family, serious accident
- Dismissal or termination for cause as director of ANY corporation: Clear your name
- Independent director: beneficial equity ownership in the corporation OR subsidiaries AND affiliates > 2% of its subscribed capital stock
- ongoing hearing for permanent disqualification
decision of BOD on matters of management cannot be changed by the court unless such management decision in ultra vires or destructive of the interest of minority stockholders
Business Judgment Rule or Doctrine of Management Prerogative
Minimum required voted for BOD election
none
Report requirement for postponement of BOD election
within 30 days from original date of election +
new date of election which is not later than 60 days from original date
In case of no new date for Director’s election, what to to do?
SEC may summarily order the election upon application by stockholder, member, director or trustee
Report requirement for vacancy BOD, corporate officer, trustee
7 days from knowledge thereof
Cumulative Voting Rule
Stock
Non-stock
- Stock corporation
GR: for stocks with voting rights
Except: not allowed in AI OR By-law - Non- stock corporation
GR: Not allowed
Except: when allowed in AI OR By-law
How to remove BOD?
Grounds in the by-laws
- directors representing minority - WITH cause
- Directors for majority - with or without just cause
