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COLLEGE OF LAW
Diliman, Quezon City
CORPORATION LAW (BUSINESS ORGANIZATION II1)
2ND semester, AY 2013-2014
Atty. Leilanie Bernadette C. Cabras
CORPORATION CODE
(Batas Pambansa Blg. 68)
I.
A.
Corporate Attributes
Theories in the formation of a corporation
Tayag vs. Benguet Consolidated, 26 SCRA 242 (1968)
Ang Pue & Co. vs. Secretary, 5 SCRA 645 (1962)
1. Theory of Concession
2. Theory of Enterprise Entity
b.
c.
d.
e.
4.
f.
2.
a.
b.
As to place of incorporation
- Domestic
- Foreign (Section 123 of the Corporation Code)
c.
d.
As to purpose of incorporation
- Municipal
- Religious
(Sections 109 and 116 of the Corporation Code)
- Educational (Sections 106 to 108 of the Corporation Code)
As to number of members
- Aggregate Corporation
- Corporation Sole (Sec. 110 to 115 of the Corporation Code)
Roman Catholic Administrator vs. LRC, 102 PHIL 597 (1957)
Republic vs. Villanueva, 114 SCRA 875 (1982)
f.
g.
h.
B.
FORMATION OF CORPORATIONS
1.
a.
Promoters
b.
Subscription Contracts
(Sections 60 and 72 of the Corporation Code)
Trillana vs. Quezon College, 93 PHIL 383
1.
Purchase Agreement
Bayla vs. Silang Traffic, Co., 73 PHIL 557 (1942)
2.
3.
2.
Pre-Incorporation Subscription
(Sec. 61 of the Corporation Code)
- Offer Theory
- Contract Theory
Release from subscription obligation
Velasco vs. Poizat, 37 PHIL 802
PNB vs. Bitulok Sawmill, Inc., 23 SCRA 1366
Formalities in Organizing
a.
Generally
Government of the PI vs. Manila Railroad, 103 PHIL 757 (1929)
Rural Bank of Salinas vs. CA, 210 SCRA 510 (1992)
b.
Articles of Incorporation
1. Procedure and Documentary Requirements
- As to contents and form (Section 14 and 15)
- As to corporate name (Section 18)
Red Line Transit vs. Rural Transit, 60 PHIL 549 (1934)
Philippine Insurance vs. Hartigan, 34 SCRA 252 (1970)
Universal Mills vs. Universal Textile, 78 SCRA 62 (1977)
Ang mga Kaanib sa Iglesia ng Dios kay Kristo Hesus vs. Iglesia ng Dios
kay Cristo Hesus, GR No. 137592, December 12, 2001
2. As to purpose (Section 14 [2])
Uy Siuliong vs. Director, 40 PHIL 514 (1919)
3. As to principal office (Section 14 [3])
Clavecilla vs. Antillon, 19 SCRA 379 (1967)
4. As to Corporate Term (Section 11)
Alhambra Cigar & Cigarette vs. SEC, 25 SCRA 269 (1968)
Benguet Consolidated vs. Pineda, 98 PHIL 711 (1956)
5. As to number and residency of Incorporators (Section 10)
6. As to minimum capitalization (Section 12)
7. As to subscription and paid-up requirements (Section 13)
8. Grounds for Disapproval (Section 17)
Asuncion vs. De Yriate, 28 PHIL 67 (1914)
9. Commencement of Corporate Existence (Section 19)
c.
By-Laws
Loyola Grand Villas vs. CA, GR No. 117188 [07 August 1997]
PMI Colleges vs. NLRC, GR No. 121466 [15 August 1997]
Pena vs. CA, 193 SCRA 7117 (1991)
a.
b.
c.
C.
Defective Incorporation
1. De jure
2. De facto (Section 20 of the Corporation Code)
i. Rationale for the doctrine
Tayko vs. Capistrano, 53 PHIL 866 (1928)
ii. Requisites
Fernandez vs. Cuerva, 21 SCRA 1095 (1967)
Hall vs. Piccio, 86 PHIL 603 (1950)
Benguet Consolidated vs. Pineda, 98 PHIL 711 (1956)
3. Corporation by estoppel (Sec 21 of the Corporation Code)
i. Rationale for the doctrine
Asia Banking vs. Standard Products, 46 PHIL 144 (1924)
Vda. De Salvatierra vs. Garlitos, 103 PHIL 757 (1958)
Albert vs. University Publishing, 13 SCRA 84 (1965)
Lim vs. Philippine Fishing Gear (G.R. No. 136448 [1999])
3.
D.
4.
Due Process
McConnel vs. CA, 1 SCRA 723 91961)
Emilio Cano Enterprises vs. CIR, 13 SCRA 291 (1965)
NAMARCO vs. Associated Finance Co. Inc., 19 SCRA 962
Jacinto vs. CA, 198 SCRA 211 (1992)
Arcilla vs. CA, 215 SCRA 120 (1986)
AC Ransom Labor Union vs. NLRC, 142 SCRA 269
Lim vs. NLRC, 171 SCRA 328 (1989)
De Guzman vs. NLRC, 211 SCRA 723 (1992)
5.
Anti-Trust Issues
Garcia vs. Executive Secretary (G.R. No. 132451 [1999])
Standard Oil Co. vs. US, 221 U.S. 1 (1910)
CORPORATE POWERS
1.
a.
b.
Specified Powers
1.
2.
3.
4.
5.
6.
7.
8.
9.
2.
10.
11.
d.
3.
For Torts
PNB vs. CA, 83 SCRA 237 (1978)
Criminal Liability
People vs. Tan Boon Kong, 54 PHIL 607 (1930)
Sia vs. People, 121 SCRA 655 (1983)
Moral Damages
ABS-CBN vs. CA (G.R. No. 128690 [January 1999])
Filipinas Broadcasting vs. AMEC-BCCM (GR No. 141994 [2005])
II.
FINANCIAL STRUCTURE
A.
DEBT SECURITIES
Generally - Lirag Textile Mills, Inc., vs. SSS (GR No. L-33205 [1987])
1.
Authority to Issue Debt Securities
- Power to incur, create or increase bonded indebtedness
(Section 38 of the Corporation Code)
2.
B.
EQUITY SECURITIES
Generally - Garcia vs. Lim Chu Sing, 59 PHIL 562
1.
a.
b.
c.
d.
e.
f.
g.
2.
Issuance of Shares
Certificate of Stock (Section 63 of the Corporation Code)
Pre-Emptive Rights (Section 39 of the Corporation Code)
Consideration (Section 62 of the Corporation Code)
National Exchange vs. Dexter, 51 PHIL 601
1. Par Value
2. No Par Value
Payment of the Balance of the Subscription
(Sections 66 and 67 of the Corporation Code)
Lingayen Gulf vs. Baltazar, 93 PHIL 404
Liability for Unpaid Subscriptions
Keller vs. COB Group, 141 SCRA 86
Delinquency Subscription
(Sections 68 to 71 of the Corporation Code)
Phil Trust vs. Rivera, 44 PHIL 496
Miranda vs. Tarlac Rice Mill, 57 SCRA 619
De Silva vs. Aboitiz, 44 PHIL 755
Fun Cun vs. Summers, 44 PHIL 705
Nava vs. Peers Marketing, 74 SCRA 65
Trust Fund Doctrine (Sections 43 and 122 of the Corporation Code)
Classes of Shares
C.
D.
Stock Splits
2.
3.
4.
Ownership of Securities
Transfer of Securities
f.
III.
MANAGEMENT STRUCTURE
A.
CORPORATE GOVERNANCE
1.
Powers of the Board or Trustees
(Section 23 of the Corporation Code)
Gamboa vs. Victoriano, 90 SCRA 40 (1979)
Gokongwei vs. SEC, 89 SCRA 336, (1979)
B.
a.
b.
Executive Committee
(Section 35 of the Corporation Code)
ROLE OF SHAREHOLDERS
Right to Vote and Attend Meetings (Section 89 of the Corporation Code)
Price vs. Martin, 58 PHIL 707
a. Instances:
- Election of Directors and Trustees
(Section 24 of the Corporation Code)
- Amendment of Articles of Incorporation
(Section 16 of the Corporation Code)
- Investment in another Business
(Section 42 of the Corporation Code)
Dela Rama vs. Ma-ao Sugar, 27 SCRA 247
Gokongwei vs. SEC, 89 SCRA 336, (1979)
- Merger and Consolidation
(Section 77 of the Corporation Code)
- Increase and Decrease of Capital Stock
(Section 38 of the Corporation Code)
- Adoption, Amendment, and Repeal of By-Laws
(Section 48 of the Corporation Code)
- Declaration of Stock Dividends
(Section 43 of the Corporation Code)
- Management Contracts
(Section 44 of the Corporation Code)
- Fixing of Consideration for Par Value Shares
(Section 62 of the Corporation Code)
b. Treasury Shares (Section 57 of the Corporation Code)
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D.
a. Right to Inspect
1. Specified Records (Sections 74 and 75 of the Corporation Code)
2. Remedies
Philpots vs. Phil Manufacturing, 40 PHIL 471
Pardo vs. Hercules, 46 PHIL 964
Veraguth vs. Isabela Sugar, 57 SCRA 266
Gonzales vs. PNB, 122 SCRA 489
3. Confidential Nature of SEC Examinations
(Section 142 of the Corporation Code)
b.
Appraisal Right (Sections 81 to 86 of the Corporation Code)
c.
Derivative Suits
Richardson vs. Arizona Fuels Corp., 614 P.2d 636
Bitong vs. CA (GR No. 123553 [1998])
SMC vs. Khan, 176 SCRA 447
Pascual vs. Orosco, 19 PHIL 83
Evangelista vs. Santos, 86 PHIL 387
Republic Bank vs. Cuadero, 19 SCRA 671
Reyes vs. Tan, 3 SCRA 198
ROLE OF DIRECTORS AND OFFICERS
1.
a.
2.
11
5.
Officers
(Section 25 of the Corporation Code)
Ongkingco vs. NLRC, 270 SCRA 613 [1997]
Tabang vs. NLRC, 266 SCRA 462 [1997]
Gurrea vs. Lezama, 103 PHIL 553 (1958)
PSBA vs. Leano, 127 SCRA 778 (1984)
Pearson & George vs. NLRC, 67 SCAD 698, 30 Jan 1996 (113928)
Reahs Corporation vs. NLRC, GR No. 117473 [14 April 1997]
6.
12
FUNDAMENTAL CHANGES
A.
CHARTER AMENDMENTS
a.Articles of Incorporation (Section 16 of the Corporation Code)
b.By Laws (Section 48 of the Corporation Code)
B.
COMBINATIONS
a.Concept of Merger and Consolidation
PNB vs. Andrada Electric (GR No. 142936 [2002])
b. Procedure
- Plan of Merger or Consolidation
(Section 76 of the Corporation Code)
- Stockholders or Members Approval
(Section 77 of the Corporation Code)
- Articles of Merger or Consolidation
(Section 78 of the Corporation Code)
- Approval by the SEC
(Section 79 of the Corporation Code)
c. Effects of Merger or Consolidation
(Section 80 of the Corporation Code)
Associated Bank vs. CA (GR No. 123793 [1998])
Filipinas Port Services, Inc. vs. NLRC (GR No. 97237 [1991])
C.
REHABILITATION
PVB Employees Union-N.U.B.E. vs. Vega (G.R. No. 105364 [2001])
PAL vs. Spouses Sadic (GR No. 146698 [2002])
RCBC vs. IAC (GR No. 74851 [1999])
D.
DISSOLUTION
a. Dissolution (Section 177 of the Corporation Code)
1. Voluntary
- No creditors are affected
(Section 188 of the Corporation Code)
- Creditors are affected
(Section 119 of the Corporation Code)
2. Involuntary Dissolution
(Section 121 of the Corporation Code, Section 6)
(Section 2 of Rule 66 of the Rules of Court)
Quo-Warranto
Republic vs. Bisaya Land Transportation, 81 SCRA 9
Government vs. Philippine Sugar Estate, 38 PHIL 15
Republic vs. Security Credit, 19 SCRA 58
3. Expiration of Term (Section 122 of the Corporation Code)
13
Foreign Corporation
a. Definition (Section 123 of the Corporation Code)
Avon Insurance PLC vs. CA (GR No. 97642 [1997])
b. Concept of Doing Business
(Article 44 of the Omnibus Investments Code)
(Section 1 (f) of the Implementing Rules of the Omnibus Investments Code)
- Application for License
(Section 124 and 125 of the Corporation Code)
(Article 48 of the Omnibus Investments Code)
- Issuance of a License (Section 126 of the Corporation Code)
(Article 49 of the Omnibus Investments Code)
- Amendment of License (Section 131 of the Corporation Code)
Columbia Pictures, Inc. vs. CA (GR No. 110318 [1996])
Granger Associates vs. Microwave Systems, 189 SCRA 631
Marubeni vs. Tensuan, 190 SCRA 105
Facilities Management vs. Dela Osa, 89 SCRA 131
Top-Weld vs. ECER, 138 SCRA 118 (GR 44944 (1985)]
Schmid vs. Oberly, 116 SCRA 186
Mentholatum vs. Mangaliman, 72 PHIL 525
Aetna Casualty vs. Pacific Star Line, 80 SCRA 635
Agilent Technologies Singapore (PTE) LTD. vs.
Integrated Silicon
Technology Philippines Corporation
(GR No. 154618 [2004])
- Effects of Failure to Obtain License
(Sec. 133 of the Corporation Code)
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