CORPORATION LAW Course Outline Atty. Maria Zarah R.

Villanueva-Castro

I.

INTRODUCTION Historical Bac !roun" o# $hilli%%ine Cor%orate &a'

II.

CONC($T AND ATTRIBUT() O* A COR$ORATION A. )tatutory "e#inition o# a cor%oration +)ection ,- CC. B. Attri/utes o# a cor%oration 0. Arti#icial /ein! a. Doctrine o# Cor%orate (ntity +i. resi"ence an" nationality +ii. constitutional ri!hts +iii. cri1inal lia/ility +iv. ri!ht to recover 1oral "a1a!es /. Doctrine o# $iercin! the Veil o# Cor%orate (ntity +i. alter e!o %rinci%le an" instru1entality rule +ii. %ro/ative #actors o# i"entity ,. Creature o# &a' +)ee constitutional li1itations on the creation o# a %rivate cor%oration- Article 0,- )ection 02Constitution3 Concession theory. 4. Ri!ht o# )uccession 5. Creature o# (nu1erate" $o'ers- Attri/utes an" $ro%erties a. Doctrine o# li1ite" ca%acities as co1%are" to the Doctrine o# !eneral ca%acities. /. Ultra vires "octrine Classi#ication o# $rivate Cor%orations 0. stoc an" non-stoc ,. "o1estic an" #orei!n 4. dejure an" de facto +)ec. ,6- CC.
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+)ee7 "octrine o# cor%oration /y esto%%el 8)ec. ,0- CC9. 5. hol"in!- a##iliate an" su/si"iary :. o%en an" close CASES: *eliciano vs. COA- ;anuary 05- ,6653 Manila International Air%ort Authority vs. CA- ,6 ;uly ,6623 Ma!saysay-&a/ra"or vs. CA- 0<6 )CRA ,223 )ulo n! Bayan vs. Araneta- =, )CRA ,5=3 Bataan )hi%yar" vs. $C>>- 0:6 )CRA 0<03 &u?uria Ho1es vs. CA- 46, )CRA 40:3 Conce%t Buil"ers vs. N&RC- ,:= )CRA 05@3 Villarey Transit vs. *errer,: )CRA <5:3 *rancisco Motors vs. CA- 46@ )CRA =,3 &i%at- et al. vs. $aci#ic Ban in! Cor%.- >R No. 05,54:- A%ril 46- ,6643 Ti1es Trans%ortation Co1%any vs. )antos )otelo- et. al.- >R No. 024=<2. *e/ruary 02- ,66:3 Aao- )r. vs. $eo%le- et al.- 0@ ;une ,66=3 Hall vs. $iccio- <2 $hil 2643 )eventh Day A"ventist vs. Northeastern Min"anao Mission- ,0 ;uly ,6623 &i1 Ton! &i1 vs. CA- 40= )CRA =,<3 International (?%ress Travel an" Tour )ervices vs. CA- Octo/er 0@,6663 *ili%inas Broa"castin! Net'or - Inc. vs. A!o Me"ical an" ("ucational Center-Bicol Christian Colle!e o# Me"icine- >.R. No. 050@@5- ;anuary 0=- ,66:3 Coastal $aci#ic Tra"in!- Inc. vs. )outhern Rollin! Mills Co.- Inc. 5@= )CRA 00- ,< ;uly ,662 III. *ORMATION AND OR>ANIZATION O* A $RIVAT( COR$ORATION

A. )u/1ission o# articles o# incor%oration3 contractual si!ni#icance B. Contents an" #or1 o# the Articles o# Incor%oration +)ec. 05 B 0:- CC. 0. cor%orate na1e a. statutory li1itations on the use o# cor%orate na1e +)ec. 0<- CC. /. )(C !ui"elines on the use o# cor%orate na1e c. Doctrine o# secon"ary 1eanin! ". Chan!e o# cor%orate na1e ,. %ur%ose clause 4. %rinci%al o##ice 5. ter1 o# e?istence a. "octrine o# relation :. incor%orators 2. "irectors an" trustees =. ca%italiCation <. shares o# stoc +)ec. 2- CC. a. "octrine o# eDuality o# shares /. classes o# shares +i. %ar an" no %ar
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+ii. votin! an" non-votin! +iii. co11on an" %re#erre" +iv. re"ee1a/le- treasury an" #oun"erEs shares @. treasurerEs a##i"avit C. >roun"s #or reFection o# the Articles o# Incor%oration +)ec. 0=CC. D. Co11ence1ent o# cor%orate e?istence +)ec. 0@- CC. (. A1en"1ent o# the articles o# incor%oration +)ec. 02- CC. *. (##ects o# non-use o# cor%orate charter +)ec. ,,- CC. CASES: &yceu1 o# the $hili%%ines vs. CA- ,0@ )CRA 20,3 An! M!a Gaani/ sa I!lesia n! Dios vs. I!lesia n! Dios Gay Gristo ;esus- Dece1/er 0,- ,6603 In"ustrial Re#ractories Cor%oration o# the $hils. vs. Re#ractories Cor%. o# the $hils.- Oct. 4- ,66,3 ;> )u11it Hol"in!s vs. CA- )e%te1/er ,5- ,6643 Aoun! Auto )u%%ly vs. CA- ,,4 )CRA 2=63 Re%u/lic $lanters Ban vs. A!ana- ,2@ )CRA 03 Castillo- et. al. vs. Balin!hasay- et. al. >.R. No. 0:6@=2- Octo/er 0<- ,665 IV. CONTRO& AND MANA>(M(NT O* A COR$ORATION A. &evels o# cor%orate control B. Boar" o# DirectorsHTrustees 0. !eneral %o'ers o# the /oar" +)ec. ,4- CC. ,. /usiness Fu"!1ent rule 4. Duali#ications o# the /oar" 1e1/ers +)ec. ,4 B ,=- CC. 5. election o# the /oar" 1e1/ers +)ec. ,5 B ,2- CC.3 )ee cu1ulative votin! %roce"ure :. ter1 o# o##ice 2. Duoru1 reDuire1ent in /oar" 1eetin!s +)ec. ,:- CC. =. re1oval o# /oar" 1e1/ers +)ec. ,<- CC. <. vacancies in the /oar" +)ec. ,@- CC. @. co1%ensation o# /oar" 1e1/ers +)ec. 46- CC. C. Cor%orate O##icers 0. conce%t o# cor%orate o##icers ,. vali"ity an" /in"in! e##ect o# acts o# cor%orate o##icers 4. "octrine o# a%%arent authority D. &ia/ility o# "irectors- trustees an" o##icers 0. instances 'hen cor%orate o##icersH"irectors are hel" soli"arily lia/le +)ec. 40- CC. ,. sel#-"ealin! "irectorsHo##icers +)ec. 4,- CC. 4. contracts involvin! inter-loc in! "irectors +)ec. 44- CC. 5. "octrine o# cor%orate o%%ortunity +)ec. 45- CC.
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(. (?ecutive co11ittee +)ec. 44- CC. CASES: >race Christian Hi!hschool vs. CA- ,<0 )CRA 0443 >o on!'ei vs. )(C- <@ )CRA 4423 Iestern Institute o# Technolo!y vs. )alas- ,=< )CRA ,023 Nac%il vs. International Broa"castin! Cor%.- March ,0- ,66,3 $eo%leEs Aircar!o vs. CA- Oct. =- 0@@<3 $ri1e Ihite Ce1ent vs. IAC,,6 )CRA 0643 )antos vs. N&RC- ,:5 )CRA 2=43 )%s. Davi"- et al vs. Construction In"ustry an" Ar/itration Co11ission- >.R. No. 0:@=@:;uly 46- ,6653 Malayan! )a1ahan n! 1!a Man!!a!a'a vs. Ra1osA%ril ,6- ,6603 Inter-Asia Invest1ents In"ustries vs. CA- >R 0,:==<;une 06- ,6643 &a%u-la%u *oun"ation- Inc. vs. CA- >R 0,2662- ;anuary ,@- ,6653 Hy"ro Resources Contractors Cor%oration vs. National Irri!ation A"1inistration- >.R. No. 026,0: Nove1/er 06- ,6653 Mon#ort Her1anos A!ricultural Develo%1ent Cor%. vs. Mon#ort- IIIet.al.- >.R. No. 0:,:5,- ;uly <- ,6653 Mc&eo" vs. N&RC- et al.- ,4 ;anuary ,66=3 Cara! vs. N&RC- 6, A%ril ,66= V. COR$ORAT( $OI(R) A. Doctrine o# li1ite" ca%acity3 conce%t o# ultra vires act +)ec. 5:- CC. B. Classes o# cor%orate %o'ers +e?%ress- i1%lie" an" inci"ental. C. )tatutory %o'ers o# a cor%oration an" the li1itations on their e?ercise +)ec. 42- CC. 0. a1en"1ent o# articles o# incor%oration +)ec. 02- CC. ,. e?tensionHshortenin! o# cor%orate ter1 +)ec. 4=- CC. 4. increase or "ecrease o# ca%ital stoc +)ec. 4<- CC. 5. incurrence- creation or increase o# /on"e" in"e/te"ness +)ec. 4<- CC. :. sale or "is%osition o# assets +)ec. 56- CC. 2. acDuisition o# cor%orate shares +)ec. 50- CC. +)ee Trust *un" Doctrine. =. invest1ent o# cor%orate #un"s +)ec. 5,- CC. <. "eclaration o# "ivi"en"s +)ec. 54- CC. @. 1ana!e1ent contract +)ec. 55- CC. 06. a"o%tionHa1en"1ent o# By-la's a. Conce%t- use an" nature o# /y-la's /. By-la's in relation to articles o# incor%oration c. A"o%tion o# /y-la's +)ec. 52- CC.3 e##ect o# non-#ilin! 'ithin the %rescri/e" %erio"

". Contents o# /y-la's3 reDuisites o# a vali" /y-la' %rovision e. A1en"1ent to /y-la's +)ec. 5<- CC. #. By-la's in relation to thir" %arties 00. 1er!er an" consoli"ation a. ReDuisites o# an" %roce"ure #or 1er!er an" consoli"ation +)ec. ==CC. /. (##ects o# 1er!er or consoli"ation +)ec. <6- CC.

CASES: Nielson B Co. vs. &e%anto Consoli"ate" Minin! Co.- ,2 )CRA :563 Isla1ic Directorate vs. CA- ,=, )CRA 5:53 Dee vs. )(C- 0@@ )CRA ,4<3 $NB vs. An"ra"a (lectric- A%ril 0=- ,66,3 &oyola >ran"villas Ho1eo'ners Association vs. CA- ,=2 )CRA 2<03 China Ban in! Cor%oration vs. CA- ,=6 )CRA :643 Associate" Ban vs. CA- ,@0 )CRA :003 Ba/st vs. CA- ;anuary ,2- ,6603 Min"anao )avin!s vs. Iill o1- 00 Octo/er ,606 VI. RI>HT) O* )HAR(HO&D(R) A. Ri!ht to atten" 1eetin!s 0. Gin"s o# 1eetin!s ,. ReDuire1ents o# a 1eetin! B. Ri!ht to vote 0. instances 'hen votin! ri!ht not availa/le ,. rules on7 a. "elinDuent shares3 +)ec. =0- CC. /. escro' shares3 c. un%ai" shares3 +)ec. =,- CC. ". seDuestere" shares3 e. %le"!or- 1ort!a!or- or a"1inistrator o# shares +)ec. ::- CC. #. shares Fointly o'ne" +)ec. :2- CC. B. Ri!ht to a%%oint %ro?y +)ec. :<- CC. C. Ri!ht to e?ecute votin! trust a!ree1ent +)ec. :< B :@- CC. D. Ri!ht o# Ins%ection 0. Boo s reDuire" to /e e%t /y a cor%oration +)ec. =5- CC. ,. Ri!ht to ins%ect cor%orate /oo s 4. Basis an" e?tent o# the ri!ht o# ins%ection 5. &i1itations on the ri!ht o# ins%ection :. Re1e"ies to en#orce ri!ht o# ins%ection

(. $re-e1%tive ri!ht +)ec. 4@- CC. *. A%%raisal Ri!ht 0. Conce%t o# a%%raisal ri!ht ,. Instances o# a%%raisal ri!ht +)ec. <0- )ec. ==- )ec. 5,CC. 4. ReDuire1ents #or a vali" e?ercise o# a%%raisal ri!ht +)ec. <,- CC. 5. (##ects o# e?ercisin! a%%raisal ri!ht +)ec. <4- CC. (. Derivative suit3 conce%t an" reDuisites CASES: &ee vs. CA ,6: )CRA =,:3 Re%u/lic vs. )an"i!an/ayan- A%ril 46- ,6643 Re%u/lic vs. Coco#e"- Dece1/er 0,- ,6603 (van!elista vs. )antos- <2 )CRA 4<=3 Chua vs. CA- >R No. 0:6=@4- Nove1/er 0@,6653 (?%ert Travel B Tours- Inc. vs. Court o# A%%eals an" Gorean Airlines >R No. 0:,4@,- May ,2- ,66:3 >onCales vs. $NB- 0,, )CRA 5<@

VII.

)UB)CRI$TION CONTRACT

A. Iays to /eco1e a stoc hol"er o# a cor%oration B. Conce%t o# su/scri%tion contract C. Gin"s o# su/scri%tion +%re an" %ost incor%oration su/scri%tion)ec. 20- CC. D. Consi"eration #or the issuance o# shares +)ec. 2,- CC. (. $ay1ent o# su/scri%tion 0. re1e"ies to en#orce %ay1ent o# su/scri%tion +)ec. 2<2@ B =6- CC. ,. 'hen shares are consi"ere" "elinDuent +)ec. 2=- CC. *. Certi#icate o# )toc +)ec. 24- CC. 0. "octrine o# in"ivisi/ility o# su/scri%tion contract ,. certi#icate o# stoc - Duasi-ne!otia/le >. Trans#er o# shares H. &ost an" "estroye" certi#icate o# stoc +)ec. =4- CC. CASES: Nava vs. $eers Mar etin!- =5 )CRA 2:3 &i1 Tay vs. CAAu!ust :- 0@@<3 Rural Ban o# &i%a vs. CA- )e%t. ,<- ,6603 $once vs. Alsons Ce1ent- Dec. 06- ,66,3 On! Aon!- et al. vs. Tiu- et al.- >.R. Nos. 0555=2 B 0552,@- A%ril <- ,664

VIII.

NON-)TOCG COR$ORATION) De#inition an" %ur%oses o# a non-stoc cor%oration +)ec. <= B <<- CC. Distin!uishe" #ro1 stoc cor%oration Me1/ershi% in a non-stoc cor%oration Rule on "istri/ution o# assets +)ec. @5- CC.

CASES: &on! vs. Basa- et al. - )e%t. ,=- ,6603 )ta. Clara Ho1eo'nersE Association vs. )%s. >aston- ;an. ,4- ,66,3 $a"co1 vs. Orti!as CenterMay @- ,66,3 Tan vs. )yci% 0= Au!ust ,662

IJ.

C&O)( COR$ORATION) A. Conce%t3 "istin!uishe" #ro1 o%en cor%orations +)ec. @2- @=060- B 06,- CC. B. $er1issive %rovisions in the articles o# incor%oration +)ec. @=-

CC. C. Restrictions on trans#er o# shares +)ec. @< B @@ CC. CASES: Dulay (nter%rises vs. CA- ,,: )CRA 2=<3 )an ;uan )tructural )teel *a/ricators- ,@2 )CRA 24,

J.

R(&I>IOU)H(DUCATIONA& COR$ORATION) A. Classes o# Reli!ious Cor%oration 0. cor%oration sole ,. reli!ious society B. ("ucational Cor%oration

CASE: I!lesia (van!elica vs. Bisho% &aCaro- 2 ;uly ,606 JI. COR$ORAT( DI))O&UTIONH&IKUIDATION

A. Metho"s o# voluntary cor%orate "issolution an" the reDuire1ents there#or B. Conce%t o# involuntary "issolution an" the !roun"s there#or +)ec. 0,0- CC. C. Cor%orate liDui"ation +)ec. 0,,- CC. D. Metho"s o# liDui"ation or 'in"in! u%

(. Conce%t o# Reha/ilitation3 1ana!e1ent co11ittee or receiver

(##ects

o#

a%%oint1ent

o#

CASES: >elano vs. CA- 064 )CRA @63 Vesa!as vs. CA- Dec. :- ,66,3 $hil. Veterans vs. Ve!a- ;une ,<- ,6603 Tan Tion! Bio vs. CIR- 5 )CRA @<23 Re/olli"o vs. CA- 0=6 )CRA <663 Clarion $rintin! House- Inc. vs. N&RC- >R No. 05<4=,- ;une ,=- ,66:3 &in! o" Man!!a!a'a sa Ru//er'orl" vs. Ru//er'orl" $hils.- Inc. ,@ ;anuary ,66=3 >arcia- et al vs. $A&- ,@ Au!ust ,66=3 )o/reFuanite vs. A)B- 46 )e%te1/er ,66:3 RCBC vs. IAC- 6@ Dece1/er 0@@@3

JV. *OR(I>N COR$ORATION) A. B. C. Conce%t o# #orei!n cor%oration Tests to "eter1ine nationality o# a cor%oration Conce%t o# L"oin! /usinessL an" the license reDuire1ent there#or3 )ee also )ec. 4+".- RA =65, D. (##ects o# /ein! issue" a license (. Revocation an" 'ith"ra'al o# license CASES: *acilities Mana!e1ent vs. De la Osa- <@ )CRA 0403 Ho1e Insurance vs. (astern )hi%%in! &ines- 0,4 )CRA 5,53 Mentholatu1- Inc. vs. Man!ali1an- =4 $hil :,53 (ri s vs. CA- ,2= )CRA :2=3 MR Hol"in!s vs. )heri## BaFar- A%ril 00- ,66,3 Hutchison $orts vs. )BMA- Au!ust 40,6663 Anta1 Consoli"ate" vs. CA- 054 )CRA ,<<3 Mentholatu1 vs. Man!ali1an- =, $hil :,53 Merrill &ynch *utures- Inc. vs. CA- ,00 )CRA <,53 A!ilent Technolo!ies )in!a%ore vs. Inte!rate" )ilicon Technolo!y $hili%%ines Cor%oration- >.R. No. 0:520<- A%ril 05- ,6653 (?%ertravel B Tours- Inc. vs. Court o# A%%eals an" Gorean Airlines >R No. 0:,4@,May ,2- ,66:3 B. Van Zui"en vs. >TV&- ,< May ,66= JVI. )(C ;URI)DICTION A. $o'ers an" #unctions o# the )(C B. Cases trans#erre" to the RTC CASES: AuFuico vs. Kuia1/ao- ,@ ;anuary ,662 3 Baviera vs. $a!lina'an- 6< *e/ruary ,66=3 )(C vs. $er#or1ance *orei!n (?chan!e Cor%.- ,6 ;uly ,662