DOCTRINE OF OF CORPORATE ENTITY

Question 1

What is the Doctrine of Corporate Entity?

Answer 1

A corporation comes into existence upon the issuance
of the certificate of incorporation (Sec. 19). Then and
only then will it acquire a juridical personality to sue
and be sued, enter into contracts, hold or convey
property or perform any legal act, in its own name
(Corporation Code of the Philippines, Ruben C. Ladia,
2001 Ed.).

Question 2

Can corporation come into existence by mere agreement of the parties?

Answer 2

Corporations cannot come into existence by mere
agreement of the parties as in the case of business
partnerships. They require special authority or grant
from the State. This power is exercised by the State
through the legislature, either by a special
incorporation law or charter which directly creates the
corporation or by means of a general corporation law
under which individuals desiring to be and act as a
corporation may incorporate (The Corporation Code of
the Philippines, Hector S. De Leon & Hector M. De
Leon, Jr., 2006 ed.).

Question 3

FRANCHISES OF CORPORATION (Primary/Secondary)

Answer 3

1. Primary or corporate franchise/General franchise
   The right or privilege granted by the State to individuals
   to exist and act as a corporation after its incorporation.
2. Secondary or special franchise
   The special right or privilege conferred upon an
   existing corporation to the business for which it was
   created. e.g. use of the streets of a municipality to lay
   pipes or tracks, or operation of a public utility or a
   messenger and express delivery service

Question 4

Distinguish Primary from secondary Franchise

Answer 4

1. Primary refers to franchise of being or existing as a corporation while secondary refers to the exercise of right or privilege (ex. public utility, telcom)

2. Primary Franchise is vested in the
individuals who
compose the
corporation while Secondary franchise is Vested in the
corporation after its
incorporation and not
upon the individuals
who compose the
corporation.

3. Primary franchise Cannot be sold or
transferred, in the
absence of
legislative authority
to do so. This is
because it is
inseparable from
the corporation
itself while Secondary franchise May be sold or
transferred under a
general power granted
to a corporation to a
corporation to dispose
of its properties; may
also be subject to sale
on execution or levy.

Question 5

What does the RIGHT TO SUCCESSION in Corporation refer to?

Answer 5

It is the capacity to have continuity of existence despite the
changes on the persons who compose it. Thus, the
personality continues despite the change of stockholder,
members, board members or officers (Reviewer in
Commercial Law, Jose R. Sundiang & Timoteo Aquino,
2005 ed.).

Question 6

What is the THEORY OF SPECIAL CAPACITIES/LIMITED CAPACITY

DOCTRINE?

Answer 6

No corporation under the Code, shall possess or
exercise any corporate power, except those conferred
by law, its Articles of Incorporation, those implied from
express powers and those as are necessary or
incidental to the exercise of the powers so conferred.
The corporation’s capacity is limited to such express,
implied and incidental powers (Reviewer in
Commercial Law, Jose R. Sundiang & Timoteo Aquino,
2005 ed.).
 If the act of the corporation is not one of those express,
implied or incidental powers, the act is ultra vires.
(Reviewer in Commercial Law, Jose R. Sundiang &
Timoteo Aquino, 2005 ed.).