LAW 22 D I. 1. Artificial being Title II Sec. 20 De Facto Corporation Sec. 21 Corporation by estoppels Title IV Sec.

36 Corporate powers and capacity 2. Created by the operation of law Title I Sec. 3 Classes of corporation Sec. 4 Corporation created by special laws or characters Sec. 5 Corporators and incorporators, stockholders and members Sec. 7 Founders shares Sec. 8 Redeemable shares Sec. 9 Treasury shares Title II Sec. 10 Number and qualifications of incorporators Sec. 12 Minimum Capital stock required of stock corporations Sec. 13 Amount of capital stock to be subscribed and paid for purposes of incorporation Sec. 14 Contents of articles of incorporation Sec. 15 Form of Articles of Incorporation Sec. 17 Grounds when articles of incorporation or amendment may be rejected or disapproved Sec. 19 Commencement of corporate existence Sec. 20 De Facto Corporation Sec. 21 Corporation by estoppel Sec. 22 Effects of non-use of corporate charter and continuous inoperation of a corporation Title IV Sec. 37 Powers to extend or shorten corporate term Sec. 38 Power to increase or decrease capital stock;; incur, create or increase bonded indebteness 3. Has the right of succession Title II Sec. 11 Corporate term 4. Powers, attributes and properties expressly authorized by law or incident to its existence Title I Sec. 6 Classification of shares Sec. 7 Founders shares Sec. 8 Redeemable shares Sec. 9 Treasury shares Sec. 14 Contents of articles of incorporation

Title II Sec. 17 Grounds when articles of incorporation or amendment may be rejected or disapproved Sec. 18 Corporate name Sec. 20 De Facto Corporation Sec. 21 Corporation by estoppels Title IV Sec. 36 Corporate powers and capacity Sec. 37 Powers to extend or shorten corporate term Sec. 38 Power to increase or decrease capital stock;; incur, create or increase bonded indebtedness Sec. 39 Power to deny pre-emptive right Sec.40 Sale or other disposition of assets section 43 : power to declare dividends Section 44 : power to enter into management contract Section 45: ultra vires acts of corporations

II. BOARD OF DIRECTORS Sec. 23 The board of directors or trustees Must own at least one share of the capital stock of the corporation Majority must be residents of the Philippines Consequence: Any director who ceases to be the owner of at least one share would cease to be a director Sec. 25 Corporation officers, quorum Directors or trustees cannot attend or vote by proxy at board meetings Sec. 27 Disqualification of directors, trustees or officers A person is not qualified to be a director if: he is convicted by final judgment of an offense punishable by imprisonment for a period exceeding 6 years He violated the Code within 5 years prior to the date of his election or appointment Sec. 30 Compensation of directors In the absence of any provision in the by-laws, they shall not receive any compensation, except for reasonable per diems (daily allowance). -but compensation may be granted by the vote of the majority of the stockholders In no case shall their total yearly compensation exceed 10% of the net income before income tax of the corporation during the preceding year Sec. 31 Liability of directors, trustees or officers Directors or trustees shall be liable solidarily for damages resulting from: o Voting for or assenting to patently unlawful acts of the corporation o Directing the affairs of the corporation in bad faith or gross negligence

Acquiring personal or pecuniary (monetary) interest in conflict with their duty A director is liable as a trustee for the corporation and must account for the profits which should have been accrued to the corporation when he attempts to acquire or acquires any interest adverse to the corporation Sec. 34 Disloyalty of a director When a director acquires for himself a business opportunity which should belong to the corporation thereby obtaining profits to the prejudice of such corporation, he must account for all the profits by refunding the same, unless his act has been ratified by 2/3 of the stockholders o

III. CONSTITUENT DECISIONS A. Decisions requiring the vote of stockholders Nature of constituent Decision Amendment of Articles of Incorporatio nRight of Succession Definition of constituen t decision Extend for periods not exceeding fifty years in any single instance by an amendment of articles of incorporatio n Required BOD vote Majority of BOD Required vote of sharehold ers 2/3 of Outstanding Capital Stock Appraisal right Applicable for dissenting shareholder s Distinguis hing feature Provided, that no extension can be made earlier than five years prior to the original or subsequent expiry dates unless there are justifiable reasons for an earlier extension as may be determined by the Securities and Exchange Commission Contrast to the Amendment of Articles of Incorporatio n, mere written assent would not be sufficient Provided that the SEC shall not accept for filing any certificate of increase or decrease unless at

Powers to extend or shorten corporate term

Power to increase or decrease capital stock;; incur, create or increase bonded indebtednes

A private corporation may extend or shorten its terms as stated in the articles of incorporatio n Increase or diminution of the capital stock, or the incurring, creating or increasing

Majority of BOD

2/3 of Outstanding Capital Stock

Applicable for dissenting shareholder s

Majority of BOD

2/3 of Outstanding Capital Stock

Applicable for dissenting shareholder s

of any bonded indebtednes s

Power to deny preemptive right

All stockholder s of a stock corporation shall enjoy pre-emptive right to subscribe to all issues or disposition of shares of any class

N/A

2/3 of Outstanding Capital Stock

Unless such right is denied by the Articles of Incorporatio n

Sale or other Sell, lease, disposition exchange, of assets mortgage, pledge or otherwise dispose of all or substantiall y all of its property and assets

Majority of BOD

2/3 of Outstanding Capital Stock

Applicable for dissenting shareholder s

Power to enter into managemen t contract

No corporation shall conclude a manageme nt contract with another corporation prior to the fulfillment of the

Majority of BOD

2/3 of Outstanding Capital Stock

N/A

least 25% of such increased capital stock has been subscribed Such rights shall not extend to shares to be issued in compliance with laws req. stock offerings or minimum stock ownership by the public Such act shall be deemed to cover substantiall y all the corporate property and assets if thereby the corporation would be rendered incapable of continuing business Provided, where a stockholder/ s representin g the same interest of both the managing and the managed corporations

following requsites.

Adoption of by-laws

Adoption of by-laws should always be consistent with the law and should be. attached to the articles of incorporatio n.

N/A

2/3 of Outstanding Capital Stock

N/A

own or control more than 1/3 of the total outstanding capital stock entitled to vote of the managing corporation. By-laws may be adopted and files prior to incorporatio n. SEC will not accept for filing of bylaws or any amendment of any bank, banking institute, building and loan association, trust company, insurance company, or other special corporations governed by special laws, Provided that any cash dividends due on dilingquent stock shall first be applied to

Power to declare dividends

The board of directors of a stock corporation may declare dividends out of the unrestricted earnings.

Majority of BOD

2/3 of Outstanding Capital Stock

N/A

unpaid balances and expenses. While stock dividends shall be withheld from the dilinquent stockhodler pending full payment of subscription

B. Decisions the BOD can make on its own Nature of constituen t Decision Election of officers Definition of constituent decision President- shall be a director, Treasurer- may/may not be a director Secretary-a resident and citizen of the Philippines Required BOD vote Majority of the BOD Distinguishing Feature Any 2 or more positions may be held concurrently by the same person, except that no one shall be president & secretary or president & treasurer at the same time IF creation of the committee is stated in the by-laws, no need for the vote of the BOD

Creation of an executive committee

Amendment s to by-laws

Composed of not less than 3 members; May act by majority vote of its members except with respect to: a. Approval of any action which requires the approval of shareholders b. Filling of vacancies of the board c. Amendment or repeal of by-laws or the adoption of d. Amendment or repeal of any resolution of the BOD which by its express terms is not amendable or repealable e. Distribution of cash dividends to shareholders Amendment and rescission of any by-laws or the adoption of new by-laws.

Majority of the BOD

Majority of BOD

Provided, that any power delegated to the BOD shall be considered as revoked whenever owners of stockholders representing a majority of the outstanding capital stock shall vote at a regular meeting.

1. Lanuza vs. CA 2. Phil First Insurance vs Hartigan

3. Javier and Sons vs. CA 4. Cagayan Devt v. Sandiko 5. Pilipinas Loan vs SEC
6. Hall v. Piccio; 7. Ramirez v. Orientalist Co. 8. Sawadjaan v. CA; 9. Gokongwei v. SEC (89 SCRA 336 [1979]) 10. tramat mercantile v. Ca 11. llamado v. Ca 12. pascual v. Orozco

13. republic bank v. Cuaderno 14. prime white cement v. Iac

15. montelibano v. Bacolod-murcia 16. alhambra v. SEC; phil. Trust v. Rivera 17. benito v. Sec 18. islamic directorate v. Ca 19. steinberg v. Velasco

20. lanuza v. Ca 21. lee v. Ca

22. Bayla v. Silang Traffic; 23. China Bank v. CA 24. Trillana v. Quezon College; 25. Fua Cun v. Summers

26. Escano v. Filipinas Mining; Apocada v. NLRC 27. Razon v. IAC; 28. PNB v. Bitulok Sawmill 29. Rural Bank of Salinas v. CA

30. Velasco v. Poizat 31. Pardo v. Hercules Lumber

32. Philpotts v. PMC 33. Lanuza v. CA (again) 34. Associated Bank v. CA

35. Chinese YMCA v. Ching 36. Lions Club International v. Amores 37. San Juan Structural & Steel Fabricators v. CA; Republic v. IAC

38. Manuel Dulay Enterprises v. CA 39. Barlin v. Ramirez 40. IEMELIF v. Juane 41. Santos v. RC Bp. of Nueva Caceres 42. - Lozano v. Delos Santos
43. - yao ka sin trading v. Ca; 44. western institute v. Salas 45. nielson & co v. Lepanto consolidated 46. grace christian high school v. Ca

47. - National Exchange v. Dexter;

48. Lao v. Lao 49. - Veraguth v. Isabela Sugar

50. - RC Bp. of Davao v. LRC

51. Harden v. Benguet; 52. Jardine Davis v. JRB Realty 53. Guanzon v. Register of Deeds; 54. CIR v. Club Filipino de Cebu 55. Palacio v. Fely Transportation; 56. Gonzales v. PNB

57. Remo v. IAC; 58. Sunset View v. Campos

59. Pamplona Plantation v. 60. Tinghil; Castillo v. Balinghasay

61. Municipality of Malabng v. Benito; 62. San Juan Structural Steel v. CA

63. Albert v. University Publishing 64. Georg Grotjahn EMBH v. Isnani

65. ong yong v. Tiu; 66. central cooperative exchange v. Tibe 67. board of liquidators v. Heirs of M. kalaw

68. premium marble v. Ca 69. roxas v. Dela rosa 70. valle verde v. Africa
71. dela rama v. Ma-ao sugar central

72. gokongwei v. Sec; 73. pirovano v. Dela rama 74. republic v. Acoje mining 75. japanese war notes v. Sec
76. lgv v. Ca 77. salafranca v. Philamlife

78. gokongwei v. Sec; 79. board of directors v. Tan 80. commissioner v. Manning;
81. Alhambra Cigars vs. SEC

Gokongwei v SEC

 Doctrine: o The doctrine of corporate opportunity is a recognition by the courts that the fiduciary standards could not be upheld where the fiduciary was acting for 2 entities with competing interests. This doctrine rests on unfairness, in particular circumstances, of an officer or director taking advantage of an opportunity for his own personal profit when the interest of the corporation unjustly calls for protection.

Mini Digest: o Facts: John Gokongwei, a stockholder of SMC, filed a petition for declaration of nullity of amended by-laws, cancellation of certificate of filing of the amended-by laws, injunction and damages against the majority of the members of the Board of Directors of the SMC based on the following grounds: corporations have no inherent power to disqualify a stockholder from being elected as director depriving him of his vested right because he is an officer of a competitor company. he corporation has been investing corporate funds in other corporations and business outside of the primary purpose of the corporation

Issue: WON the corporation has the power to disqualify a competitor from being elected to the board of directors as a reasonable exercise of corporate authority? Ratio: Yes. Any corporation may amend its articles of incorporation by a vote or written assent of the stockholders representing at least 2/3 of the subscribed capital stock of the corporation. It cannot be said that prior to this, Gokongwei has a vested right to vote and be voted for in the face of the fact that the law at the time such right as stockholder was acquired contained the prescription that the corporate charter and the by-law shall be subject to amendment, alteration and modification Every person who buys a stock with a corporation impliedly contracts that the will of the majority shall govern in all matters within the limits of the act of incorporation and lawfully enacted by-laws and not forbidden by law A director's relationship with the corporation is of a fiduciary nature. He who is in such a fiduciary position cannot serve himself first and his cestuis second. He cannot manipulate the

affairs of his corporation to their detriment and disregard of the standards of common decency. It is obviously to prevent the creation of an opportunity for an officer or director of San Miguel Corporation, who is also the officer or owner of a competing corporation, from taking advantage of the information which he acquires as director to promote his individual or corporateinterests to the prejudice of San Miguel Corporation and its stockholders

Applicable Law: o Section 47: The Corporation could provide other qualifications/disqualifications in the by laws which may require more than ownership of one share. Section 42: Corporations have power to invest corporate funds in another corporation or business or for any other purpose by majority vote of the Board and 2/3 vote of outstanding stock or members