Organization of a Corporation Flashcards
Who may be permitted to organize a corporation?
Generally, anyone (singly or jointly) , not more than 15 in number, may organize a corporation for any lawful purpose.
Exception:
(a) Natural persons licensed to practice a profession
(b) Partnerships or associations organized for the purpose of practicing a profession
How long can a corporation exist?
Generally, a corporation has perpetual existence, unless otherwise provided in its articles of incorporation.
Can a corporation shorten or extend its corporate term? Is ther any limitations to it?
Yes, by amending the articles of incorporation.
Generally, no corporation can extend their corporate term three years before the original expiration date. An exception to this rule is unless there is a justifiable reason to do so, to be determined by the Securities and Exchange Commission.
Can an expired corporation revive their corporate existence? What is its effect?
Yes, they can, through approval by the Securities and Exchange Commission.
The effects of the revival are the following:
(a) All the rights and privileges, as well as its duties, debts, and liabilities will be revived with it.
(b) A certificate of revival of corporate existence will be issued
(c) The corporate will be given perpetual existence, unless otherwise provided in its articles of incorporation
What is the Articles of Incorporation?
The articles of incorporation have been described as one that defines the charter of the corporation and the contractual relationships between the State and the corporation, the stockholders and the State, and between the corporation and its stockholders. The contents of the articles of incorporation are binding, not only on the corporation, but also on its shareholders.
How is the Articles of Incorporation amended?
Unless otherwise prescribed by the Revised Corporation Code, by special law, and for legitimate purposes, any provision or matter in the articles of incorporation of a stock corporation may be amended by:
(a) A majority vote of the board of directors or trustees
(b) The vote or written assent of the stockholders representing at least two-thirds of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders.
in the case of non-stock corporation, the articles of incorporation may be amended by the vote or written assent of majority of the trustees and at least two-thirds of the members.
When do amendments to the articles of incorporation take effect?
Generally, upon the approval of the Securities and Exchange Commission.
However, if the Securities and Exchange Commission have not acted on the amendments after six months from the filing date for a cause not attributable to the corporation, the amendment takes effect from the filing date.
What are the grounds where the articles of incorporation or the amendments thereto may be disapproved by the Securities and Exchange Commission?
Does the Securities and Exchange Commission disapproves these outright?
(a) The articles of incorporation or any amendment thereto is not substantially in accordance with the form subscribed therein.
(b) The purpose or purposes of the corporation are patently unconstitutional, illegal, moral, or contrary to government rules and regulations.
(c) The certification concerning the amount of capital stock subscribed and/or paid is false.
(d) The required percentage of Filipino ownership of the capital stock under existing laws or the Constitution has not been complied with.
It is important to note that before the Securities and Exchange Commission disapprove an article of incorporation or amendments thereto, it must give reasonable time to the members of the corporation to modify the questionable portions
What is the rule with regards to corporate name?
No corporate name shall be allowed by the Securities and Exchange Commission if it is not distinguishable from that already reserved or registered for the use of another corporation, or if such name is already protected by law, or when its use is contrary to existing law, rules, and regulations.
What are the two requisites to fall within the prohibition on corporate names?
(a) The complainant corporation acquired a prior right over the use of such corporate name.
(b) The proposed name is either: (1) identical, (2) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law, and (3) patently deceptive, confusing, or contrary to existing law.
How does a corporation come into existence?
(1) The persons desiring to incorporate shall submit the intended name to the Commission for verification.
(2) The name will be reserved in favor of the persons if the Commission finds the name to be distinguishable.
(3) The incorporators will submit their articles of incorporation and bylaws to the Commission.
(4) The Commission will issue the certificate of incorporation after it finds that the submitted documents and informations is in compliance with the Revised Corporation Code.
(5) The corporate existence and juridical personality commences from the date the Commission issues the certificate of incorporation, where the incorporators will constitute a body corporate within the period of time mentioned therein, otherwise, it will be dissolved, unless such period is extended.
What is a de jure corporation?
A de jure corporation is a corporation existing in fact and in law. It has complied with all the requirements.
What is a de facto corporation? What are its requisites?
A de facto corporation is a corporation existing in fact, but not in law. It has not complied with all the requirements yet.
Its requisites for it to be a de facto corporation are the following:
(a) Organized under a valid law
(b) Bonafide compliance with formalities of law
(c) Use of incorporate powers
(d) SEC Issuance of certificate of incorporation
What is a corporation by estoppel?
A corporation by estoppel happens when any group of persons assumed to act as a corporation knowing that they don’t have any authority to do so.
What are the liabilities of a corporation by estoppel?
If the corporation incurs debts, liabilities, and damages, they will be liable as general partners.
If the ostensible corporation is sued on any transaction it has entered, or torts it has committed, they cannot use the defense that it has no corporate personality.
