Corporation Code - Title I - Part 1

Question 1

How is a corporation defined?

Answer 1

A corporation is an artificial being created by operation of law having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.

Question 2

What are the attributes of a corporation (AOSPap)?

Answer 2

It is an artificial being.
It is created by operation of law.
It has the right of succession.
It has only the powers, attributes, and properties expressly authorized by law or incident to its existence.

Question 3

What are the similarities between a partnership and a corporation (JACDLIt)?

Answer 3

Juridical personality separate and distinct from the individuals composing it.
Act only through its agents.
Composed of an aggregate of individuals.
Distribute profits to those who contribute to capital.
May be organized only when there is a law authorizing it.
Subject to income tax.

Question 4

Distinguish between partnership and corporations as to the following:

1. Manner of Creation
2. Number of parties
3. Commencement of Juridical Personality
4. Powers
5. Management
6. Right of succession
7. Extent of Liability to Third Persons
8. Transferability of Interest
9. Term of Existence
10. Firm Name
11. Dissolution
12. Governing Laws

Answer 4

1. Manner of Creation
   Partnership: By mere agreement of the parties.
   Corporation: By law or operation of law.
2. Number of parties
   Partnership: Requires a minimum of two (2) persons.
   Corporation: Requires at least five (5) incorporators.
3. Commencement of Juridical Personality
   Partnership: Generally from the moment of execution of the contract.
   Corporation: From the date of the issuance of the certificate of incorporation by the Securities and Exchange Commission (SEC).
4. Powers
   Partnership: May exercise powers authorized by partners, provided they are not contrary to law, morals, good customs, public policy, or public order.
   Corporation: Can exercise only the powers expressly granted by law or incident to its existence.
5. Management
   Partnership: When not agreed upon, each partner is an agent of the partnership.
   Corporation: Management is vested in the board of directors or trustees.
6. Right of succession
   Partnership: No right of succession.
   Corporation: Possesses the right of succession.
7. Extent of Liability to Third Persons
   Partnership: Partners (except limited partners) are liable personally and subsidiarily for partnership debts to third persons.
   Corporation: Stockholders are liable only to the extent of their investments as represented by the shares subscribed by them.
8. Transferability of Interest
   Partnership: A partner cannot transfer interest without the consent of all other existing partners.
   Corporation: A stockholder has the right to transfer shares without the prior consent of other stockholders.
9. Term of existence
   Partnership: May be established for any period of time stipulated by the partners.
   Corporation: Perpetual
10. Firm Name
    Partnership: A limited partnership is required to add the word ‘Ltd.’ to its name.
    Corporation: A corporation may adopt a firm name provided it is not identical or deceptively similar to any registered firm name or contrary to existing laws.
11. Dissolution
    Partnership: May be dissolved at any time by the will of any or all partners.
    Corporation: May only be dissolved with the consent of the state.
12. Governing Laws
    Partnership: Civil Code.
    Corporation: Corporation Code.

Question 5

What are the advantages of a corporate form of
business organizations (CECTCS)?

Answer 5

1. The capacity to hold property, to contract, to sue and be sued as a legal unit or distinct entity.
2. Exemption of shareholders from individual liability.
3. Continuity of existence in spite of death or changes of members.
4. Transferability of shares.
5. Centralized management under a board of directors.
6. Standardized methods of organization, management and finance for the protection of shareholders and creditors under statutory regulations.

Question 6

What are the disadvantages of a corporate form of
business organizations (LTMVSGST)?

Answer 6

1. The limited liability of the stockholders serves to limit the credit available to the corporation.
2. The transferability of shares permits the uniting of incompatible and conflicting interests in one enterprise.
3. The minority stockholders are usually subservient to the wishes of the majority.
4. In big corporations, the stockholders’ voting rights have become largely theoretical because of widespread ownership, lukewarmness and disinterest in management, inertia, and inaccessible meeting places.
5. In large corporations, management and control has been separated from ownership.
6. By and large corporations are subject to governmental restrictions, controls, and report requirements not imposed on other forms of business organizations.
7. Corporate sphere of activity is limited in the transaction of its business to the state of the organization.
8. The corporate form involves “double taxation” on corporation income.

Question 7

1. What types of corporations are recognized under the relevant code?
2. How is a stock corporation defined under the code?

Answer 7

1. Corporations formed or organized under the relevant code may be classified as either stock or non-stock corporations.
2. A stock corporation is characterized by having capital stock divided into shares, with the ability to distribute dividends or surplus profits to shareholders based on their shareholdings.

Question 8

What are the other kinds of corporations (other than stock and non-stock) (QQGDFCCRELECCOMND)?

Answer 8

1. Quasi-corporations
2. Quasi-public
3. Government-owned or controlled
4. Domestic
5. Foreign
6. Corporation aggregate
7. Corporation sole
8. Religious corporations, sole or aggregate
9. Ecclesiastical
10. Lay
11. Eleemosynary
12. Civil
13. Close
14. Open
15. Multi-national
16. Non-profit
17. De Jure

Question 9

What are quasi-corporations, and what does the term “quasi” imply?

Answer 9

Quasi-corporations are entities that, despite not being traditional corporations, are treated as if they were. The term “quasi” suggests that they possess characteristics or functions similar to those of corporations.

Question 10

What are quasi-public entities, and what privileges do they typically have? Provide examples.

Answer 10

Quasi-public entities are organizations that provide essential services of significant public importance. They are entitled to certain privileges, such as eminent domain or the use of public property. Examples include electric, gas, water, and telephone companies.

Question 11

What is a corporation aggregate?

Answer 11

A corporation aggregate is a type of corporation composed of more than one member or incorporator.

Question 12

What is a corporation sole?

Answer 12

A corporation sole consists of one member or corporator and his successors.

Question 13

What is the difference between religious corporations, sole or aggregate, and ecclesiastical corporations?

Answer 13

Religious corporations, sole or aggregate, are organized, either as sole or aggregate, to administer properties of the church. On the other hand, ecclesiastical corporations are organized for religious purposes in general.

Question 14

What are the distinctions between ecclesiastical, lay, eleemosynary, and civil corporations?

Answer 14

Ecclesiastical: These corporations are organized specifically for religious purposes.
Lay: Unlike ecclesiastical corporations, lay corporations are organized for purposes other than religious activities.
Eleemosynary: Eleemosynary corporations are established for charitable endeavors

Question 15

What distinguishes civil corporations from ecclesiastical and eleemosynary corporations?

Answer 15

Civil corporations encompass entities that are neither ecclesiastical nor eleemosynary, whether they operate in the public or private sector.

Question 16

What distinguishes a close corporation from an open corporation?

Answer 16

In a close corporation, all outstanding stock is owned by individuals active in management, while in an open corporation, all members or shareholders have a vote in electing directors and officers.

Question 17

What characterizes a de jure corporation?

Answer 17

A de jure corporation is one created in strict conformity with statutory requirements for incorporation, and its right to exist cannot be successfully challenged by the state, even in a direct proceeding.

Question 18

What primarily governs corporations created by special laws or charters?

Answer 18

Corporations created by special laws or charters are primarily governed by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of the Corporation Code, insofar as they are applicable.

Question 19

What are the components of a corporation?

Answer 19

1. Corporator
2. Incorporator
3. Stockholders or shareholders
4. Members
5. Promoters

Question 20

What is the difference between corporators and incorporators?

Answer 20

Corporators are those who compose a corporation, whether as stockholders or members, while incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

Question 21

What is the difference between corporators in a stock corporation and a non-stock corporation?

Answer 21

Corporators in a stock corporation are called stockholders or shareholders, while corporators in a non-stock corporation are called members.

Question 22

What is a promoter according to the Code?

Answer 22

A promoter is a self-constituted organizer who finds an enterprise or venture, attracts investors, forms a corporation, and launches it in business, all with a view to promotion profits.

Question 23

What is promotion according to the Code?

Answer 23

Promotion is the act of procuring the initial finances and making all preparations necessary to launch a corporation.

Question 24

Q: What are the activities of a promoter (DFAFR)?

Answer 24

1. The discovery and investigation of a promising business opportunity.
2. The formulation of business and financial plans.
3. Assembling the enterprise by negotiations and obtaining some control over the subject matter by option or contracts made on behalf of the proposed corporation or on his own credit.
4. The making of arrangements for financing the enterprise and the floatation of securities.
5. Arrange tactful and painless methods for getting his own reward for the task of promotion out of the prospective investors and for reimbursement for his expenses, contracts, and services without frightening away those who are expected to provide the funds.