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Corporation Law Course Syllabus

Part I – General Provisions

A. Corporation, defined (Sec. 2)

Cases:
a. Tayag v. Benguet Consolidated, 26 SCRA 242
b. Torres v. Court of Appeals, 278 SCRA 793
c. Philippine Stock Exchange, Inc. v. Court of Appeals, 281 SCRA 232

1. Art. XII Section 16, 1987 Philippine Constitution

Case:
a. Feliciano v. COA, G.R. No. 147402, January 14, 2004

2. Attributes of a Corporation
3. Similarities and Distinctions between Contract of Partnership and Corporations
4. Corporations Created by Special Laws or Charter

Cases:
a. National Coal Co. v. Collector of Internal Revenue, 46 Phil. 583
b. Marilao Water Consumers Association, Inc. v. IAC, 201 SCRA 437

B. Classification of Corporations

1. Under the Corporation Code (Sec. 3)


2. Sole and Aggregate
3. Ecclesiastic and Civil
4. Eleemosynary and Civil
5. Domestic and Foreign
6. De Jure and de facto corporations

6.1. Requisite of De Facto Corporation


6.2. Quo Warranto

Case:
a. Sawadjaan v. Court of Appeals, G.R. No. 141735, June 8, 2005

C. Nationality of Corporations

1. Control Test
2. Grandfather rule

Case:
a. Wilson Gamboa v. Sec. Margarito Teves, G.R. No. 176579, June 28, 2011

D. Corporations created by special laws (Sec. 4)

E. Corporators and incorporators, stockholders and members (Sec. 5)

F. Corporate juridical personality

1. Doctrine of separate juridical personality (or Doctrine of Corporate Entity)

Case:
Cease v. CA, G.R. No. 33172, October 18, 1979

2. Doctrine of piercing the corporate veil

a) Grounds for application of doctrine


b) Test in determining applicability

Cases:
a. CIR v. Norton and Harrison Company, G.R. No. 17618, August 31, 1964
b. McLeod v. NLRC, G.R. No. 146667, January 23, 2007
c. DeAsis and Co. v. Court of Appeals, G.R. No. L-61549, May 27, 1985
d. Martinez v. Court of Appeals, G.R. No.131673, September 10, 2004
e. Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No.
153535, July 28, 2005
f. Yamamoto v. Nishino Leather Industries, Inc., G.R. No. 150283, April 16,
2008
g. ASJ Corporation v. Sps. Evangelista, G.R. No. 158086, February 14, 2008

3. Entitlement to constitutional rights

a) Due process

Case:
a. Albert v. University Publishing, Inc., G.R. No. 10118, June 16, 1965

b) Equal protection of the law


c) Protection against unreasonable searches and seizure

4. Entitlement to Moral Damages

Cases:
a. ABS-CBN v. Court of Appeals, G.R. No. 128690, January 21, 1999
b. Coastal Pacific Trading, Inc. v. Southern Rolling Mills Co., Inc., G.R. No.
118692 July 28, 2006

5. Libel

Case:
a. Filipinas Broadcasting v. Ago Medical Center, G.R. No. 141994, January 17, 2005

6. Liability for torts

Case:
PNB v. CA, G.R. No. 27155, May 18, 1978

7. Doctrine of Corporate Negligence

Case:
a. Professional Services Inc., v. Court of Appeals, G.R. No. 126297, February 2,
2010

8. Liability for crime

G. Classification of Shares (Sec. 6)

1. Par value or no par value


2. Voting or non-voting
3. Common or preferred
4. Promotion share
5. Share in escrow
6. Convertible stock
7. Founder’s share (Sec. 7)
8. Redeemable share (Sec. 8)
9. Treasury share (Sec. 9)

Part II – Incorporation and Organization of Private Corporations

A. Number and qualifications of incorporators (Sec. 10)

1. Capital stock (distinguish from capital)


2. Authorized capital stock
3. Subscribed capital stock
4. Outstanding capital stock
5. Paid-up capital stock
6. Unissued capital stock
7. Legal capital (distinguish from capital stock)
8. Par value
9. Certificate of stock
Case:
a. Kukan International Corp. v. Reyes, G.R. No. 182729, September 29, 2010

B. Theory on Multiple Corporate Personalities

C. Minimum capital stock and subscription requirements

1. Incorporation and organization

a. Promoter
a.1. liability of promoter
a.2. liability of corporation for promoter’s contracts

2. Subscription contract

Cases:
a. Jaka Investments Corp. v. CIR, G.R. No. 147629, July 28, 2010
b. Ong Yong v. Tiu, G.R. No. 144476, April 8, 2003

3. Pre-incorporation subscription agreements


4. Consideration for stocks
5. Filipino ownership requirement based on specific constitutional and legal grounds

D. Corporate term (Sec. 11)

1. Doctrine of Relation (Relating Back Doctrine)

Cases:
a. Alhambra Cigar & Cigarette Manufacturing Company, Inc. v. SEC, G.R. No. L-
23606, July 29, 1968
b. PNB v. CA, G.R. No. 63201, May 27, 1992

E. Articles of Incorporation (Sec. 14)

1. Contents
2. Non-amendable items
3. Doctrine of substantial compliance

F. Grounds for rejection (Sec. 17)

G. Corporate name (Sec. 18)

H. Commencement of corporate existence (Sec. 19)

1. Genossenschaft Theory
2. Theory on concession
3. Theory of Corporate Enterprise or Economic Unit

I. De facto corporation (Sec. 20)

1. Difference between de jure, de facto and corporation by estoppels

Case:
a. Seventh Day Adventist Conference Church of Southern Philippines, Inc. v.
Northeastern Mindanao Mission of Seventh Day Adventist, Inc. G.R. No. 150416,
July 21, 2006

J. Corporation by estoppel (Sec. 21)

K. Non-use of corporate charter (Sec. 22)

Part III – Board of Directors/ Trustees/ Officers

A. The Board of Directors or Trustees (Sec. 23)

1. Fiduciary duties

B. Election of directors or trustees (Sec. 24)

1. Methods of voting
a. Straight voting
b. Cumulative voting

2. Non-stock corporation

C. Corporate officers, quorum (Sec. 25)

Case:
a. Matling Industrial and Commercial Corp. v. Coros, G.R. No. 157802, October 13,
2010

D. Report of election (Sec. 26)

E. Disqualification of directors, trustees or officers (Sec. 27)

F. Removal of directors or trustees (Sec. 28)

G. Vacancies in the office of director or trustee (Sec. 29)

H. Compensation of directors (Sec. 30)

Cases:
a. Valle Verde Country Club, Inc. v. Africa, G.R. No. 151969, September 4, 2009
b. Tan v. Sycip, G.R. No. 153468, August 17, 2006

I. Liability of directors, trustees, or officers (Sec. 31)

1. Corporate opportunity doctrine

J. Dealings of directors, trustees, or officers with the corporation (Sec. 32)

K. Contracts between corporations with interlocking directors (Sec. 33)

L. Disloyalty of a director (Sec. 34)

M. Executive committee (Sec. 35)

N. Business Judgment Rule

Case:
a. Saber v. Court of Appeals, G.R. No. 132981, August 31, 2004

Part IV – Powers of Corporations

A. Classification of powers

1. Express powers
2. Implied powers
3. Incidental or inherent powers

Cases:
a. Cebu Bionic Builders Supply, Inc. v. DBP, G. R. No. 154366, November 17, 2010
b. Shipside Incorporated v. CA, G.R. No. 143377, February 20, 2001

B. Corporate powers and capacity (Sec. 36)

1. General powers, theory of general capacity

2. Specific powers, theory of specific capacity

a) Power to extend or shorten corporate term (Sec. 37)


a.1) Appraisal right of dissenting stockholders

b) Power to increase or decrease capital stock or incur, create, increase bonded


indebtedness (Sec. 38)
b.1) Limitation
b.2) Necessity

c) Power to deny pre-emptive rights (Sec. 39)


c.1) as to treasury shares

d) Power to sell or dispose of corporate assets (Sec. 40)


d.1) Appraisal right of dissenting stockholder

e) Power to acquire own shares (Sec. 41)


e.1) Conditions for the exercise of the power
e.2) Trust fund doctrine

f) Power to invest corporate funds in another corporation or business (Sec. 42)


g) Power to declare dividends (Sec. 43)
g.1) Concept of dividends (distinguished from profits)
g.2) Classes of individuals
g.3) Unrestricted retained earnings

h) Power to enter into management contract (Sec. 44)

i) Ultra vires acts (Sec. 45)

i.1) Applicability of ultra vires doctrine

i.2) Consequences of ultra vires acts

Cases:
a. Zomer Development Company, Inc. v. International Exchange Bank, G.R.
No. 150694, March 13, 2009
b. Republic v. Acoje Mining, Inc., G.R. No. L-18062, February 28, 1963

i.3) Ratification

j) Doctrine of apparent authority

Cases:
a. Westmont Bank v. Inland Construction and Development Corp., G.R. No.
123650, March 23, 2009
b. BPI Family Savings Bank v. First Metro Investment Corp., G.R. No. 132390,
May 21, 2004

k) Doctrine of individuality of subscription

l) Doctrine of equality of shares

m) Trust fund doctrine

Part V – By Laws

A. Adoption of by-laws (Sec. 46)

a) Requisites of valid by-laws


b) Binding effects
c) Contents (Sec. 47)
d) Amendments (Sec. 48)

Case:
a. PMI Colleges v. NLRC, G.R. No. 121466, August 15, 1997

Part VI – Meetings

A. Kinds (Sec. 49-50)

1. Necessity of meetings

B. Place and time of meeting of stockholders or members (Sec. 51)

Case:
a. Expertravel & Tours, Inc. v. Court of Appeals, G.R. No. 1512392, May 26, 2005
C. Quorum (Sec. 52)

1. Requisites for a valid meeting of stockholders


2. Specific number of votes required by law

D. Regular and special meetings of directors or trustees (Sec. 53)

1. Business judgment rule


2. Solidary liabilities for damages

E. Who shall preside (Sec. 54)

F. Pledgors, mortgagors and administrators (Sec. 55)

G. Voting in case of joint ownership (Sec. 56)

H. Voting right for treasury shares (Sec. 57)

I. Proxies (Sec. 58)

J. Voting trust (Sec. 59)

Case:
a. Lee vs. Court of Appeals, G.R. No. 14441, December 17, 1996

Part VII – Stocks and Stockholders

A. Rights of stockholders in general

B. Derivative suit

C. Liabilities of stockholders

D. Subscription contract (Sec. 60)

E. Pre-incorporation subscription (Sec. 61)

F. Certificate of stock

1. Nature of the certificate


2. Uncertificated shares
3. Negotiability
4. Requirements for valid transfer of stocks
5. Issuance
6. Full payment
7. Payment pro-rata
8. Stock and transfer book
9. Lost or destroyed certificates
10. Situs of the shares of stock

G. Consideration for stocks (Sec. 62)

H. Certificate of stock and transfer of shares (Sec. 63)

I. Issuance of stock certificate (Sec. 64)


J. Liability of directors for watered stocks (Sec. 65)

K. Interest on unpaid subscription (Sec. 66)

L. Payment of balance (Sec. 67)

M. Delinquency sale (Sec. 68)

N. When sale may be questioned (Sec. 69)

O. Court action to recover unpaid subscription (Sec. 70)

P. Effect of delinquency (Sec. 71)

Q. Rights of unpaid shares (Sec. 72)

R. Lost or destroyed certificates (Sec. 73)

Part VIII – Corporate Books and Records (Secs. 74-75)

A. Contents

B. Who may make valid entries

Part IX – Merger and Consolidation

a. Merger and consolidation (Sec. 76)

b. Approval required (Sec. 77)

c. Articles of merger or consolidation (Sec. 78)

d. Effectivity (Sec. 79)

e. Effects (Sec. 80)

Part X – Appraisal Right

A. Instances of appraisal right (Sec. 81)

B. How right is exercised (Sec. 82)

C. Effect of demand and termination of right (Sec. 83)

D. When right to payment ceases (Sec. 84)

E. Who bears the costs of appraisal (Sec. 85)

F. Notation on certificates; rights pf transferee (Sec. 86)

Part XI – Non-stock Corporations

A. Definition (Sec. 87)

B. Purposes (Sec. 88)

C. Members right to vote (Sec. 89)


D. Non-transferability of membership (Sec. 90)

E. Termination of membership (Sec. 91)

F. Election and term of trustees (Sec. 92)

G. Place of meetings (Sec. 93)

Part XII – Distribution of Assets in Non-stock Corporations

A. Rules of distribution (Sec. 94)

B. Plan of distribution of assets (Sec. 95)

Part XIII – Close Corporations

A. Definition and applicability of Title (Sec. 96)

B. Articles of incorporation (Sec. 97)

C. Validity of restrictions on transfer of shares (Sec. 98)

D. Effects of issuance or transfer of stock in breach of qualifying conditions (Sec. 99)

E. Agreement by stockholders (Sec. 100)

F. When board meeting is unnecessary or improperly held (Sec. 101)

G. Pre-emptive right in close corporations (Sec. 102)

H. Amendment of articles of incorporation (Sec. 103)

I. Deadlocks (Sec. 104)

J. Withdrawal of stockholder or dissolution of corporation (Sec. 105)

Part XIV – Special Corporations

A. EDUCATIONAL CORPORATIONS

1. Incorporations (Sec. 106)


2. Pre-requisites to incorporation (Sec. 107)
3. Board of trustees (Sec. 108)

B. RELIGIOUS CORPORATIONS

1. Classes of religious corporations (Sec. 109)


2. Corporation sole (Sec. 110)
3. Articles of incorporation (Sec. 111)
4. Submission of the articles of incorporation (Sec. 112)
5. Acquisition and alienation of property (Sec. 113)
6. Filing of vacancies (Sec. 114)
7. Dissolution (Sec. 115)
8. Religious societies (Sec. 116)

Part XV – Dissolution
A. Methods of dissolution (Sec. 117)

B. Voluntary dissolution where no creditors are affected (Sec. 118)

C. Voluntary dissolution where creditors are affected (Sec. 119)

D. Dissolution by shortening corporate term (Sec. 120)

E. Involuntary dissolution (Sec. 121)

F. Corporate liquidation (Sec. 122)

Part XVI – Foreign Corporations

A. Definition and rights of foreign corporations (Sec. 123)

B. Application to existing foreign corporations (Sec. 124)

C. Application for a license (Sec. 125)

D. Issuance of a license (Sec. 126)

E. Who may be a resident agent (Sec. 127)

F. Resident agent; service of process (Sec. 128)

G. Law applicable (Sec. 129)

H. Amended license (Sec. 131)

I. Merger or consolidation involving a foreign corporation licensed in the Philippines (Sec.


132)

J. Doing business without a license (Sec. 133)

K. Revocation of license(Sec. 134)

L. Issuance of certificate of revocation (Sec. 135)

M. Withdrawal of foreign corporations (Sec. 136)

Part XVII – Foreign Investments Act (R.A. No. 7042)

1. Policy of the Law

2. Definition of Terms

a. Foreign Investment
b. ‘Doing Business” in the Philippines
c. Export Enterprise
d. Domestic Market Enterprise

3. Registration of Investments on Non-Philippine Nationals

4. Foreign Investments in Export Enterprise


5. Foreign Investments in Domestic Market Enterprise

6. Foreign Investment Negative List

Part XVIII – Securities Regulation Code (R.A. No. 8799)

A. State Policy, Purpose

B. Securities Required to be Registered

1. Exempt Securities
2. Exempt Transactions

C. Procedure for Registration of Securities

D. Prohibitions on Fraud, Manipulation and Insider Trading

1. Manipulation of Security Prices


2. Short Sales
3. Fraudulent Transactions
4. Insider Trading

E. Protection of Investors

1. Tender Offer Rule


2. Rules on Proxy Solicitation
3. Disclosure Rule

F. Civil Liability

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