I.

>Place of Incorporation Test – basic and primary test

>Control Test , Grandfather Rule, Kinds of Franchise(Primary Secondary) – for
Nationalized/Partly nationalized activities/businesses

II. Defective Incorporation and Rules on Liability (See Pioneer case, Lim Tong Lim case)

III. > Doctrine of Separate Juridical Personality( Remember: Commencement of Juridical

Personality of Corp – upon issuance of Certificate of Incorp.)

ETR of Separate Juridical Personality:

1)Express waiver in contract (an agent/officer stipulating that he is personally

liable)

2)Piercing the Veil of Corporate Fiction

 3-tiered test (concept builders case)

 Res adjudicata effect (Koppel case)
 Victim-standing (Araneta case)
 Undercapitalization / no visible assets (McConnel case)
 Essentially judicial prerogative(Dalisay case)
*but administrative agencies may also pierce by virtue of their quasi-judicial
powers

IV. Pre-subscription Agreements ( Rules on revocation )

GR: cannot be revoked within 6 months from subscription
ETR: if other subscribers consent, if incorp. of corpo did not materialize within the
period unless a longer period is stipulated in subscription agreement
ETE: IRREVOCABLE after the filing of Articles of Incorp. with SEC

V. Corporation’s liability on Promoter’s / Pre-incorporation agreements

GR: not automatically liable , ratification needed
ETR: if it accepted benefits under the contract

VI. >De Facto Corpo – important effect : third persons cannot collaterally attack the
juridical person of corp, attack must be in a direct proceeding.

>De facto Corpo vs. Corpo by Estoppel (Art. 21)

 >Doctrine of Apparent Authority
If a corporation knowingly permits its officer/agent to perform acts within the
scope of an apparent authority,
holding him out to the public as possessing said powers,
the corporation will be stopped from denying such authority
as against the party dealing in good faith with it thru its agent.

VII. Articles of Incorporation vs. By-Laws

(WHAT IS IT, WHEN IT SHOULD BE ADOPTED, WHO SHOULD APPROVE)

VIII. Steps in Incorporation

1. Draft AOI – What it must Contain
2. File with SEC together with:
a. Treasurer’s Affidavit ( when should the balance of subscription be paid? 1.
Date fixed in the contract of subscription 2. In the absence thereof, on the
date as per the call of the Board of Directors )
b. Certificate of Deposit
c. Letter of Authority
d. Written Undertaking to Change Name
3. Payment of required fees
4. Issuance of Certificate of Incorporation

IX. Amendment of Articles of Incorp(BOD/BOT majority+2/3 Stockholder/member)

Amendment of By-Laws(majority+majority)

X. Grounds for Disapproval of Articles pf Incorp. or amendment thereto (4)

XI. Ultra-vires Test (Montelibano Case) :

“whether the act in question is

in direct and immediate furtherance of the corp’s business,
fairly incident to its express powers,
and reasonably necessary to their exercise

If so, the corporation has the power to do it.

Otherwise, not.”

*apply this test only if there are no limiting words on the articles of incorporation as
regards the particular act in question, and the act is not illegal per se.

XII. Illegal Acts (void ab initio)

Ultra Vires Acts that are not illegal per se ( Voidable and may be valid and binding upon
performance, ratification, or estoppel)
XIII. Express Powers v. Implied v. Incident Powers

XIV. Business Judgment Rule – good faith dapat. IF in BAD FAITH, reviewable na yung actions
nila by courts. Also, minority stockholders may file a derivative suit ON BEHALF OF THE
CORP against the erring officers)

XV. Appraisal Right – right of a dissenting stockholder to demand payment of fair value of
his shares by the corporation(meaning: i-cocompel nya yung corpo na bilhin yung shares
nya. Kapag binili ng corpo, magiging treasury shares na yun.)

>When it may/ may not be exercised?

XVI. Rules on Power to Sell/Lease/ Encumber/ Dispose Assets

Disposition covers all/substantially all properties
BOD/BOT majority + 2/3 stockholders/members

No stockholder or member’s approval is needed if the disposition is:

1. Necessary to the ordinary and regular course of business
2. Proceeds of disposition will be appropriated for the conduct of REMAINING
business(NOT PUTTING UP A NEW BUSINESS)

 Abandonment of Action Principle (tinanong to during recit)

The BOD/BOT may abandon the sale of all/substantially all of corporate
property without further approval of the stockholders or members,
SUBJECT to the rights of third persons.

XVII. Rule on incurring or increasing Bonded indebtedness ( BOD/BOT majority + 2/3

Stockholder/member)
Versus Rule on incurring Debentures – BOD only

XVIII. Power to Declare Dividends

Voting requirement
Stock dividends ( BOD Majority + 2/3 shareholders)
Cash dividends (BOD Majority only)

XIX. Power to Acquire Shares (requisites)

Wala ako book na luma pero verify this

1. Acquisition must be for legitimate purpose

2. Corporation must have unrestricted retained earnings to cover the purchase
XX. Kapag yung transaction kailangan ng vote ng BOD/ BOT, at ang underlying issue sa
problem ay kung na obtain ba yung required majority vote ng board, ito yung flow of
reasoning:
1. Dapat may “quorum” – quorum is the number of directors/trustees
sufficient to transact business.

Quorum in meeting of BOD/BOT –

GR: Majority of the number of directors/trustees fixed in the Articles of
Incorp (so kung 15 ang directors na nakastate sa Articles of Incorp,
8 directors ang kailangan to have a Quorum)

ETR: if the AOI or by-laws provide a greater number for a quorum

2. Following the above example kung 8 directors constitute a Quorum,

then the majority of 8 directors is 5 directors.
The affirmative vote of 5 directors is the MAJORITY VOTE OF THE BOARD.

XXI. STRAY QUESTION: Partnership v. Corpo