It is organized for profit.

Notes:
(1) Moral Damages
cannot be awarded in favor of
corporations because they do not have feelings and
mental state. They may not even claim moral damages
for besmirched reputation (NAPOCOR v. Philipp Brothers
Oceanic, 2001).However, a corporation can recover
moral damages under Art 2219 (7) if it was the victim of
defamation (Pilipinas Broadcasting Network v. Ago
Medical and Educational Center, 2005).
(2) Criminal Liability Since a corporation as a person is a
mere legal fiction, it cannot be proceeded against
criminally because it cannot commit a crime in which
personal violence or malicious intent is required.
Criminal action is limited to the corporate agents guilty
of an act amounting to a crime and never against the
corporation itself (West Coast Life Ins. Co. v. Hurd [1914],
Time Inc. v. Reyes, 1971)
(2) Doctrine of Separate Personality: A corporation, upon
coming into existence, is invested by law with a
personality separate and distinct from those persons
composing it as well as from any other legal entity to
which it may be related. (Yutivo Sons Hardware v. CTA,
1961)

One organized for a charitable purpose

DOMESTIC CORPORATION

One formed, organized, or existing under the laws of the

Philippines.

PUBLIC CORPORATION (ASKED IN 2004)

One formed or organized for the government of a portion of

the state. Its purpose is for the general good and welfare
(Sec. 3, Act 1456).

HAS THE RIGHT OF SUCCESSION

Its continued existence during its stated term cannot be

affected by any change in the members or stockholders or
rd
by any transfer of shares by a stockholder to a 3 person.

corporation

OTHER CORPORATIONS

ELEEMOSYNARY CORPORATION

Corporation aggregate is a religious

incorporated by more than one person.

A corporation sole has no nationality (Roman Catholic

Apostolic, etc v. Register of Deeds of Davao City, 1957).

A corporation comes into existence upon the issuance of the

certificate of incorporation. Then and only then will it
acquire juridical personality to sue and be sued, enter into
contracts, hold or convey property or perform any legal act
in its own name (Ladia)

Even if there is a statement of capital stock, the corporation

is still NOT a stock corporation if dividends are NOT
supposed to be declared, that is, there is no distribution of
retained earnings. (CIR v. Club Filipino de Cebu, 1962)

RELIGIOUS CORPORATIONS

There are two elements for a stock corporation to exist:

(1) Capital stock divided into shares, and
(2) An authority to distribute to the holders of such shares,
dividends or allotments of the surplus profits on the
basis of shares held. (Test of WON a stock corporation)

Corporation sole is one formed for the purpose of

administering and managing, as trustee, the affairs,
property and temporalities of any religious denomination,
sect, or church, by the chief archbishop, bishop, priest, rabbi,
or other presiding elder of such religious denomination, sect
or church (Sec.110)

One organized for educational purposes (Sec. 106).

EDUCATIONAL CORPORATION

Notwithstanding the foregoing, a corporation shall not be

deemed a close corporation when at least two-thirds (2/3)
of its voting stock or voting rights is owned or controlled by
another corporation which is not a close corporation within
the meaning of this Code.

Its governing body is usually the Board of Trustees.

Not organized for profit.

One where no part of the income is distributable as

dividends to its members, trustees, or officers, subject to the
provisions of the Code on dissolution(Sec. 87).

NON-STOCK CORPORATION (Asked in 2004)

All other corporations are non-stock corporations (Sec. 3)

One whose articles of incorporation provide that: (1) All the

corporation's issued stock of all classes, exclusive of
treasury shares, shall be held of record by not more than a
specified number of persons, not exceeding twenty (20); (2)
all the issued stock of all classes shall be subject to one or
more specified restrictions on transfer permitted by this
Title; and (3) The corporation shall not list in any stock
exchange or make any public offering of any of its stock of
any class (see Sec. 96).

CLOSE CORPORATION

The test to determine whether a corporation is governmentowned or controlled, or private in nature, is if a corporation
is created by its own charter for the exercise of a public
function, or by incorporation under the general corporation
law (Baluyot v. Holganza, 2000).

One formed for some private purpose, benefit, aim or

end(Sec. 3, Act 1456); it may be either stock or non-stock,
government-owned or controlled or quasi-public.

PRIVATE CORPORATION ( ASKED IN 2004)

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BAR OPERATIONS COMMISSION

in

accordance

with

the

All persons who assume to act as a corporation knowing it

to be without authority to do so shall be liable as general
partners for all debts, liabilities and damages incurred or
arising as a result thereof.

Where a group of persons misrepresent themselves as a

corporation, they are subsequently estopped from claiming
lack of corporate life in order to avoid liability

CORPORATION BY ESTOPPEL

Requisites of De Facto Corporation

(1) Organized under a valid law
(2) Bona fide compliance with formalities of law
(3) User of corporate powers
(4) SEC issuance of certificate of incorporation (Hall v.
Piccio, 86 Phil 603 [1950])

Grant of juridical personality is an exercise of State power

and not a matter of private affair. Consequently, under the
de facto corporation doctrine, the defect in the juridical
personality of a corporation cannot be inquired into by
private individuals, much less used as a defense to avoid
claims, except in quo warranto proceedings brought on
behalf of the State where the main action is to question the
validity or existence of such juridical personality (Villanueva)

Rule on De Facto Corporations

The due incorporation of any corporation claiming in good
faith to be a corporation under this Code, and its right to
exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such corporation
may be a party. Such inquiry may be made by the Solicitor
General in a quo warranto proceeding (Sec. 20).

A corporation where there exists a flaw in its incorporation

DE FACTO CORPORATION

A corporation organized
requirements of the law.

CORPORATION DE JURE

Its control lies in its power, directly or indirectly, to elect the

ontrolling its management
policies.

PARENT CORPORATION

One in which control, usually in the form of ownership of

majority of its shares, is in another corporation (the parent
corporation).

SUBSIDIARY CORPORATION

Corporations which are governed primarily by the provisions

of the special law or charter creating them. Corporation
Code has suppletory application. (Sec. 4)

CORPORATION CREATED BY SPECIAL LAWS OR CHARTER

One formed, organized or existing under any laws other

than those of the Philippines and whose law allows Filipino
citizens and corporations to do business in its own country
and state (Sec. 123).

FOREIGN CORPORATION

CORPORATION CODE

Beyond cavil, a government-owned and controlled

corporation has a personality of its own, distinct and
separate from that of the government, and the intervention
in a transaction of the Office of the President through the
Executive Secretary does not change the independent
existence of a government entity as it deals with another
government entity (Polytechnic University of the Phils. V.
Court of Appeals, 2001).

UP COLLEGE OF LAW

Note: Under Sec. 43 of the Corporation Code, a corporation is

deemed to have the power to declare dividends. Thus, so
long as the corporation has capital stock and there is no
prohibition in its Articles of Incorporation or in its by-laws
for it to declare dividends, such corporation is a stock
corporation.

Mere consent of the parties to form a corporation is not

sufficient. The State must give its consent either through a
special law (in case of government corporations) or a
general law (i.e., Corporation Code in case of private
corporations).

CREATED BY OPERATION OF LAW

STOCK CORPORATION (Asked in 2001 and 2004)

Corporations which have capital stock divided into shares
and are authorized to distribute to the holders of such
shares dividends or allotments of the surplus profits on the
basis of shares held (Sec. 3)

Being only a juridical entity, the physical acts of the

corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the
purpose by corporate by-laws or by a special act of the
Board of Directors (Shipside, Inc. v. Court of Appeals, 2001).

The governing body of a stock corporation is usually the

Board of Directors (except in certain instances, e.g. close
corporations).

Classes of Corporations

A corporation exists by fiction of law. Hence, it can act only

through its directors, officers and employees.

AN ARTIFICIAL BEING

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DEFINITION
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. (Sec. 2, unless otherwise indicated,
all sections cited herein are from B.P. 68, or the Corporation
Code)

ATTRIBUTES OF THE CORPORATION

A corporation has no power except those expressly

conferred on it by the Corporation Code and by its articles of
incorporation, those which may be incidental to such
conferred powers, those that are implied from its existence,
and those reasonably necessary to accomplish its purposes.
In turn, a corporation exercises said powers through its
Board of Directors and/or its duly authorized officers and
agents. (Monfort Hermanos Agricultural Dev. Corp. v.
Monfort III, 2004).

BAR OPERATIONS COMMISSION

HAS THE POWERS, ATTRIBUTES AND PROPERTIES

EXPRESSLY AUTHORIZED BY LAW OR INCIDENT TO ITS EXISTENCE

CORPORATION CODE

Corporation

UP COLLEGE OF LAW