Partnership

1. Characteristics of a partnership:
a. Consensual
b. Onerous - contribution of money, property, or industry into a
common fund
c. Nominate - Designated Name
d. Preparatory - Its organization is followed by other contracts to
carry out its purpose
e. Principal - It can stand alone
f. Bilateral or multilateral - 2 or more persons
g. Agency - each partner is an agent to partnership and to each other
2. Professional partnership has no legal personality. Legal personality
means that a partnership can sue and be sued, enter into contracts, acquire
property in its own name, can incur obligations.
3. A partnership can be a partner in another partnership or a stockholder in a
corporation because it has a juridical personality to enter into contracts
4. Even if a partner transfers all interests to another, the transferee does not
become a partner unless all other partners consent. This is based on the
principle of delectus personarum (principle of mutual trust and
confidence).
5. Limited partner would be liable as a general partner if he include his
surname in the partnership name and takes part in the control of business
6. General-limited
reimbursement

liable

up

to

personal

assets

but

subject

to

7. In a general partnership, insanity of a general partner does not result in

the automatic dissolution of the partnership but only serves as a ground for
the application for judicial dissolution
8. Death, retirement, insanity or civil interdiction (DRICI) of a general partner
in a limited partnership, automatically dissolves the partnership. But civil
interdiction of a limited partner does not so.
9. Acts of a partner who is insolvent, does not have a right to wind up the
affairs of the partnership and the business is unlawful doesnt bound the
partnership.
10. If the partner who acts after dissolution and at fault, he alone ultimately
liable to the creditors. The partners can seek reimbursement from the
partner who is guilty.

11. New creditor is deemed to have knowledge of the dissolution. He is not

therefore, protected by law. Partnership is not bound
12. A partnership begins from the moment of execution of the contract but
there can be stipulation otherwise.
13. Contract of co-ownership - no intention of using the asset for business
purposes
14. A partnership cannot be formed for a charitable purpose
15. Corporation's legal personality commences from the time it is issued a
certificate of incorporation by the SEC
16. Corporation's nationality is determined by the nation's whole laws for
which it was created.
17. Death of the president or chairman does not dissolve the firm
18. Partnership is governed by the Civil Code of the Philippines while
corporation is under Corporation Code of the Philippines
19. Corporation can only be dissolved by the consent of the state
20. A contract of partnership may be made in any form or manner except if a
specific form is required by law for its validity or enforceability
21. It may be made orally or in private instrument if the total contribution of
money or other personal property is less than 3,000. If it is more than 3,000
or more, it shall be recorded in the SEC. Noncompliance of which does not
make the contract void. However, if immovable property or real rights are
contributed, it must be made in public instrument.
22. A limited partnership must be registered with the SEC, otherwise, it is
deemed to be a general partnership
23. Universal partnership of all profits - any property belonging to them
at the time of the execution of the contract belongs to them but the usufruct
(use and enjoyment) of such property belongs to the partnership. Only the
fruits of the property as well as whatever property acquired by the partners
through industry during the existence of the contract, are contributed to the
common fund.
24. Partnership de facto - a partnership in fact but not in law. It is still valid
partnership although it lacks certain requirements for its legality

25. A husband and wife cannot enter into a contract of universal partnership
because this has the effect of donation and there are prohibited from giving
donation to each other. They can enter into a particular partnership but not
to govern their property relations.
26. The liability of an industrial partner is always that of a general partner
27. A person may be a general partner and a limited partner in the same
partnership at the same time, provided this fact is stated in the certificate of
a limited partnership
28. A limited partner cannot contribute services hence it is always a
capitalist and a silent partner
29. A capitalist partner will be obliged to sell his interest to the other
partners when in case of imminent loss of the business of the partnership he
refuses to give additional contribution.
30. Capitalist partner cannot engage in the same or similar business of the
firm unless permitted by all others
31. Capitalist partner cannot engage in any kind of business unless
permitted to do so. All his industry is supposed to be contributed to the firm
32. Industrial partner is exempted as to losses between partners but is
liable to strangers but with right to be reimbursed from the capitalists.
33. An agreement that even the industrial partner shall be liable for losses is
permissible.
34. If a partner gives a receipt for the firm, it is the firm's credit that has
been collected. If it his own receipt, payment of the debtor will be pro-rated
between the firm and the partner receiving the payment.
35. A partner has the right to be reimbursed by the partnership for the
amount disbursed on behalf of the partnership and the right to ask for
dissolution of the firm at the proper time.
36. A partner has the right in a specified partnership property to use it for
business purposes only.
37. The right to inspect and copy books is not available to the partnership
pending dissolution nor in one already dissolved
38. As a rule, no formal account is demandable until after dissolution. This is

because partners have access to the books. But if a partner is wrongfully

excluded from the business, he can demand it at any reasonable time
39. Joint management arises when two or more partners are appointed
managers with an agreement that one cannot act without the consent of the
others. The approval of all the managers is necessary for the validity of one's
act.
40. Solidary management takes place when 2 or more appointed
managers may separately execute all acts of administration. But if one of
them should oppose the acts of the others, the decision of the majority shall
prevail. In case of a tie, the matter shall be decided by the controlling
partners.
41. Participation in the selection of the managing partner is held by law as
taking part in the control of the business
42. General or limited partner partners may exercise some rights not
available in the general partnership, if the same are given and indicated in
the certificate such as the remaining general partners may continue the
business even upon death, retirement, civil interdiction of a general partner
or the limited partner to demand and receive property other than cash in
return for his contribution
43. If the firm upon dissolution is not solvent, a limited partner does not
enjoy the same preference as an outside creditor.
44. A limited partner who is held liable as a general partner does not
however get the rights of the latter
45. Insanity, incapability, prejudicial conduct of a partner, unfair competition,
the business can only be carried at a loss are only grounds for the petition of
a partner in the court to dissolve the firm
46. Civil Interdiction is an accessory penalty imposed on a convict when
the crime committed is punishable from 12 years and 1 day to 30 years that
deprives the convict of his rights of parental authority, guardianship, marital
authority, the right to manage his property and of the right to dispose of his
property.

Corporation
1.
A copy of the articles filed which is returned with the certificate of
incorporation issued by the commission under its official seal becomes its
corporate charter.
2.

A corporation created by special law has no articles of incorporation

3.
A corporation has the power of succession by its corporate name.
Character of a corporation is not necessarily determined by its name.
4.
The purposes should be stated definitely. The main purpose and
secondary purposes shall be distinguished from each other. Main purpose
must be specified.
A non-stock corporation may not include a purpose which would change or
contradict
its
nature
6.
The purposes, where there is more than one, must be capable of being
lawfully combined. Thus, banks which are governed by the general banking
law of 2000 are prohibited from directly engaging in non-banking activities
such as insurance. Similarly, Insurance companies are not allowed to engage
in
banking
operations.
7.
The main reason for stating the purpose of the corporation is to
determine whether the acts performed by the corporation are authorized or
beyond its powers. In the latter case, they will be known as ultra vires acts.
8.

The principal place must be within the Philippines (city or town).

9.
The place of principal office does not necessarily mean the place where
the business of the corporation is transacted but the place where its books

and records are ordinarily kept and its officers usually meet for the purpose
of managing the affairs and transacting the business of the corporation.
10.
If the new address is located within the same city or municipality, no
corporate document is required to be filed with the SEC except a notice
regarding
the
change
of
address.
11.
The incorporating directors or trustees shall hold office until their
successors are duly elected and qualified. They are intended to hold office
for
one
year
when
the
corporation
is
organized
12.
Every director must have at least one share of capital stock of the
corporation
of
which
he
is
director.
13.
If some or all of the shares are without par value, such fact shall be
stated
in
the
articles
14.
If the shares have par value, the amount of the authorized capital
stock in pesos is specified in the articles, but if they have no par value, no
amount of capital stock is specified in the articles which need only state the
number of shares into which said capital stock is divided. The reason is that
the price of no-par value shares may vary from time to time and therefore
the total amount of the capital stock cannot be known until all the shares are
issued.
15.
Corporations which will engage in any business or activity reserved for
Filipino citizens shall provide in their articles of incorporation the restriction
against the transfer of stock or interest which will reduce the ownership of
Filipino citizens to less than the required percentage of the capital stock as
provided
by
existing
laws.
16.
The general amendment may also be effected by the written assent
of the stockholders representing 2/3 of the outstanding capital stock or 2/3 of
its members, meaning that such action need not be taken at a meeting and
upon
a
vote.
17.
If the amendment consists in extending or shortening the corporate
term, a meeting of the stockholders or members is necessary.
18.

The amendments shall take effect only upon their approval of the SEC

19.
In banking institutions covered by special law, the amendments must
be accompanied by a favorable recommendation of the appropriate
government agency with respect to it that it is in accordance with law.
20.

Corporations must formally organize their affairs within 2 years,

otherwise, deemed dissolved. If becomes continuously inoperative for 5

years after its organization, temporarily suspended or revoked.
21.
When a change of name is approved, it is required that the commission
must issue an amended certificate of incorporation under the amended
name.
22.
In the case of religious corporations, the code does not require the SEC
to issue a certificate of incorporation. From and after the filing of articles, the
chief
archbishop
shall
become
a
corporation
sole.
23.
De facto is the one that has not complied with all the requirements
necessary to be a de jure corporation but has complied sufficiently to be
accorded corporate status as against third parties although not against the
state
24.
A corporation by estoppel has no real existence in law. It is neither
de jure nor a de facto corporation, but does a mere fiction exist for the
particular case. It exists only between the persons who misrepresented their
status and the parties who relied on the misrepresentation.
25.
Mandatory provisions prescribe formalities for incorporation which are
designed
to
protect
the
public.
26.
Stockholders have indirect control of the corporation through their
votes.
27.
can

Acts of stockholders are not binding on the corporation. A corporation

act
only
through
the
BOD.

28.
BOD cannot perform constituent acts involving fundamental or major
changes in the corporation such as amendment of the articles of
incorporation
29.
BOD holds a fiduciary relation (trust and confidence) to the corporation
and the stockholders or members they represent. They are required to
discharge their duties in good faith and with diligence, care and skill. They
are
liable
if
they
breach
their
fiduciary
duty.
30.
For BOD to exercise their powers, they must meet as directors or
trustees and act at a meeting at which there is a quorum
31.
Directors are not agents of the corporation and thus have no power
acting
individually
to
bind
the
corporation
32.

In a close corporation, any action by the directors without a

meeting or at a meeting improperly held is deemed valid or ratified.

33.
A corporation is expressly allowed to enter into a management
contract under which it delegates the management of its affairs to another
corporation for a certain period of time. BOD can also delegate its power,
impliedly
or
expressly
to
other
officers
and
agents
34.
in

One disadvantage of corporation is that stockholders have little voice

the
conduct
of
the
business.

35.
Under the doctrine of piercing the veil of corporate entity, the
corporation and the persons composing it will be treated as one and identical
person (instances such as fraud, tax evasion, and avoiding obligation).
36.
In a non-stock corporation, minimum members are 5 and may be more
than 15. Number of members must be multiple of 5. No part of income shall
be
distributed
as
dividends
to
members.
37.
Civil Corporation is one organized for profit. Eleemosynary is for
charitable
38.

In close corporation, stockholders shall not exceed 20 persons.

39.
A partnership can be a corporator in a corporation but a
corporation
cannot
be
a
partner
in
a
partnership
40.
but

A corporation can subscribe after another corporations incorporation

not
if
made
before.

41.
A corporation can be a corporator but never an incorporator in
another
corporation
except
in
rural
bank
law
42.
A married woman can be an incorporator with the consent of the
husband if it involves conjugal or absolute community property. If it involves
her
exclusive
property,
consent
is
not
required
43.
Majority must be residents of the Philippines to form a private
corporation.
44.
By-laws need not be notarized but required to be signed by the
incorporators and stockholders and filed with SEC. It is mandatory. It shall be
effective upon issuance of the SEC of certificate certifying that the by-laws
are
not
inconsistent
with
the
code.
45.
Articles of Incorporation are adopted by the incorporators as CHARTER
of the corporation while by-laws are for their internal government

46.
Regular meetings - it shall be held annually on a date fixed in the bylaws or if not so fixed, on any date in April of every year
47.
Special meetings shall be held at any time necessary or as provided in
the by-laws, provided however that at least one week written notice shall be
sent
to
all
stockholders
48.
Place of meetings must be held in the principal place of the
corporation.
Any
provision
changing
such
place
is
illegal
49.
The quorum of board meetings shall be majority of all members of the
BOD
or
board
of
trustee.
50.
Every corporation must have at least a BOD, President, Treasurer,
Secretary
51.

president

must

be

director

52.

A secretary must be a resident and a citizen of the Philippines

53.
Any 2 or more positions may be held concurrently by the same person
except a president and secretary or treasurer at the same time
54.
Straight voting - a stockholder may vote his number of shares for as
many
persons
as
there
are
directors
to
be
elected.
55.
Cumulative
voting
for
one
candidatea
stockholder
cumulates/concentrates all his shares and gives one candidate as many
votes as the number of directors to be elected multiplied by the number of
his
shares
56.
Cumulative voting by distributiondistributes shares among as many
candidates
he
sees
fit.
57.

One

stock

is

equal

to

vote

58.
Only the stockholders can remove a director. 2/3 of the outstanding
capital
stock
or
members
is
required
59.
Vacancy in the BOD is filled up by the remaining directors constituting
a quorum (majority shall remain) if the cause of vacancy is other than
removal, expiration of term or increase in the number of directors or
trustees. If not, such vacancy will be filled up by the stockholders.

60.

Regular

meetings

of

the

board

shall

be

held

monthly

61.
Special meetings may be held at any time upon the call of the
president
62.

Place

of

meetings

may

be

anywhere

63.
Directors or trustees are not allowed to vote or attend by proxy and
they do not receive compensation in the absence of any provision in the bylaws
fixing
their
salary
64.
Should the stockholders representing the majority grant them
compensation; such total yearly compensation shall not exceed ten percent
of income before tax of the corporation during the preceding year.
65.
You cannot be a director in 2 or more corporations. One cannot serve 2
masters
at
the
same
time
66.

corporate

powers:

(1)express

(2)implied

(3)

incidental

67.
Most of the decision by majority of the directors require approval or
ratification by at least 2/3 outstanding capital stock. This is true in case of
any
amendment
to
articles
of
incorporation
68.
A corporation engaged in transportation cannot engage in any other
business
alien
to
transportation
69.
Corporations engaged in agriculture are prohibited from having any
other interest in any other corporation engaging in agriculture
70.
Private corporations engaged in retail trade and rural banking must be
100 percent Filipino-owned. For Public Utility development and exploitation of
natural resource must be at least 60% Filipino owned. For pawnshop, at least
70%
71.
Ultra vires act may be ratified by approval. If fully or partially executed
can bind the parties. An illegal act can never be binding to the corporation.
72.

Stated value of no-par value shares shall not be less than 5

73.
At least 25 percent of the authorized must be subscribed. Paid-up
capital upon incorporation shall not be less than 25 percent of the subscribed
capital.25-25
rule
74.
Founders shareright to vote and be voted in the election of directors
must
be
for
a
limited
period
not
to
exceed
5
years.

75.
Non-voting shares: (1) preferred (2) redeemable (3) treasury. They
nevertheless have two rights: Amendment of articles of incorporation and
adoption
and
amendment
of
by-laws.
76.

Preferred

share

is

always

par-value

share

77.
Shares of stock are deemed issued from the moment subscription is
accepted
whether
fully
paid
or
not(incorporation)
78.
or

Subscribers become stockholders upon subscription whether fully paid

not
(incorporation).

79.
Certificate of Stock is a personal property and may be mortgaged or
pledged
or
transferred
80.
A subscriber is entitled to all the rights of a fully paid stockholder for as
long
as
he
has
not
been
declared
delinquent
81.

Transferror

has

the

right

to

vote

82.
After incorporation, full payment is required for purchasers to become
stockholders.
83.
Persons convicted by final judgment of an offense punishable by
imprisonment for a period exceeding six years and guilty of violation the
Code within 5 years prior to the date of election or appointment shall be
disqualified
to
be
a
director,
trustee
or
officer
84.
Removal of directors or trustees may be with or without cause.
Removal without cause may not be used to deprive minority stockholders of
the right of representation inn the board of directors. Otherwise, the basic
purpose of cumulative voting which is to allow minority stockholders to unite
and elect their representative in the board will be rendered useless.
85.
A director elected to fill a vacancy shall serve only for the unexpired
portion
of
the
term
of
his
predecessor
in
office
86.
It is on the presumption that directors and trustees render service
gratuitously and that the return upon their shares adequately furnishes the
motives
for
service,
without
compensation.
87.
They are entitled only to compensation if it is fixed in the by-laws or
when the giving of compensation is approved by the stockholders
representing at least a majority of the outstanding capital stock. Board
approval
is
sufficient

88.
Directors are liable to the corporation, stockholder or members or
other persons who suffer damages. Nature of liability is solidary.
89.
A special meeting of the stockholders for the purpose of removal of
directors or trustees must be called by the secretary on order of the
president or on the written demand of the stockholders (only the majority is
required).
In
removal
of
directors,
2/3
is
required.
90.
Stockholders or members who have removed a director or trustee are
also given the power to choose his replacement at the same meeting.
91.
A director can quit any time but by reason of fiduciary nature of the
position they occupy, he cannot resign as part of a fraudulent scheme to
prejudice the corporation. He should repair and make good such loss in case
of
loss
of
profits.
92.
Where a director accepts a position in which his duties are
incompatible with those as such director, it is presumed that he has
abandoned
his
office
as
director
93.
Stockholders may be filled by stockholders if the cause is removal,
increase in the number of directors or the expiration of term. Also if other
than removal or expiration if the remaining directors do not constitute a
quorum
94.

Only the majority is required to authorize compensation of directors.

95.
in

A director is entitled to be reimbursed for legitimate expenses incurred

behalf
of
the
corporation.

96.
A private corporation is authorized to provide in its by-laws for the
compensation
of
directors
or
trustees.
97.
The per diems granted to the directors should not be included in their
total yearly compensation for purposes of the 10 percent limitation
98.

The

agents

of

the

corporation

are

the

directors.

99.
A contract of the corporation with one or more of its directors/trustees
or officers is voidable at the option of such corporation unless all the
condition enumerated in sec 32 are all present. In the case of a contract with
a director or trustee, only that the contract is fair and reasonable, if the
contract
is
ratified
the
2/3
100. It is a valid contract between 2 or more corporation which have

interlocking directors as long as there is no fraud and the contract is fair and
reasonable under circumstances.
101. The guilty director will only be exempted from liability to the corporation
if
his
disloyal
act
is
ratified
by
2/3
102. The executive committee must be provided for in the by-laws and
composed of not less than 3 members of the board. The committee may act
on specific matters within the competence of the board, as may be
delegated to it by the board or in the by-laws except those to which only the
board
duly
called
and
assembled
as
such
can
act
upon.
103. The restrictions on the power of the executive committee may be
enlarged by the board to cover other matters. The executive committee may
amend
or
repeal
any
resolution
of
the
board.
104. Committee cannot delegate its authority even to one of its members
since it can only bind the corporation through majority of votes
105. All members of an
corporation. However if
recommendatory in nature
the
BOD,
some

executive committee must be directors of the

all acts of the committee will be merely
and shall not be carried out without the formal of
members
may
not
be
directors.

106. Doctrine of limited capacityonly those that are express, implied or

incidental
107.
Intra
viresacted
within
the
powers
108. A corporation may not engage in a business different from that for
which it was created as a regular and a permanent part of its business. This
is especially true in banking and insurance companies organized under
special
laws.
109. The use of corporate seal in certificates of stock must be deemed
directory rather than mandatory. A corporation may exist even without a
seal. Any seal adopted and used by the corporation may be altered by it at
its
pleasure.
110. Power to acquire and convey property has always been regarded as an
incident
to
every
corporation
111. A stockholder has absolute right to use, enjoy and dispose of his
properties, to perform all acts and to make all contracts without any
restriction
except
when
they
are
prohibited
by
law.
112. A corporation cannot do acts not expressly or impliedly given by law

113. Implied powers are those powers which are reasonably necessary to
exercise the express powers and to accomplish or carry out the purposes for
which
the
corporation
was
formed.
114.A corporation which has been dissolved after the expiration of the 3-year
winding up period ceases to be de jure de facto and therefore it cannot sue
or
be
sued
115. A corporation must be first duly registered in accordance with law to
have
the
power
to
sue
116. A seal is a device used to identify or replace the signature of an
individual or organization and to authenticate written matter
117. Purchasing or holding real and personal property, to adopt and use a
corporate seal, to contract and make by-laws are incidental powers
118. A corporation may not hold alienable lands of a public domain except by
lease for a period not exceeding 25 years, renewable for not more than 25
years
and
not
to
exceed
1,000
hectares
in
area.
119. Natural resources belong to the state and cannot be alienated to
corporations. Their exploration and development and utilization shall be
under
the
full
control
and
supervision
of
the
State
120. If a corporation acquires shares or securities of other corporation and it
is done in pursuance of its purpose for which it was created, the approval of
the stockholders is not needed unless it is done solely for investment.
121. Appraisal right applies only to a stockholder of a stock corporation
122. Excess stock issued is void even in the hands of a bona-fide purchaser
for
value
123. Any incurring, creating, or increasing by the corporation of any bonded
indebtedness is subject to prior approval of the Securities and Exchange
Commission (SEC). The bonds issued by the corporation have to be
registered
with
the
corporation
124.

Preemptive

right

is

125. Shareholders cannot be compelled to subscribe

stockholder whose pre-emptive right is violated may
compel the corporation to give him that right. If
amendment to the articles of incorporation, he may
right

not

absolute

to a class different. A
maintain an action to
the denial is by an
exercise his appraisal

126. The vote of the majority of the trustees in office will be sufficient
authorization for the corporation to enter into any transaction because there
are
no
members
with
voting
rights.
127. Any disposition which does not involve all or substantially all of the
corporate assets made in the ordinary course of business does not require
the approval of the stockholders and would not entitle any dissenting
stockholders to exercise his appraisal right. It can only exercise the same if it
is on the sale of all or substantially all of the corporate assets as such which
would render the corporation incapable of continuing the business or
accomplishing the purpose for which it was incorporated.
128. The acquisition of shares shall be for legitimate purposes, its capital is
not impaired, in good faith without prejudice to the rights of the stockholders
and creditors and that there is an unrestricted retained earnings to cover the
shares
acquired.
129. Section 41 does not authorize a corporation to arbitrarily purchase the
shares it issued to any of its stockholders indebted to it for the purpose of
applying the proceeds for the satisfaction of its claim against them.
130. Redeemable shares may be purchased by the corporation regardless of
the existence of the unrestricted retained earnings in the books of the
corporation
131. In view of trust fund doctrine, buyback of shares or distribution of assets
among stockholders is a fraud against creditors and therefore void.
132. A corporation may invest its funds in another business which is incident
or auxiliary to its primary purpose as stated in the articles of incorporation
without the approval of the stockholders. In such case, dissenting
stockholders
shall
have
no
appraisal
right.
133. Stock dividend shall not be issued without the approval of 2/3. The
board may declare dividends other than stock without need of stockholders
approval.
134. A corporation cannot make a valid contract to pay dividends other than
from retained earnings or profits and an agreement to pay such dividends
out
of
capital
is
unlawful
and
void.
135. Stockholders should only receive dividends from their investment and
not
from
their
investment
itself.
136. As a rule, dividends cannot be declared out of borrowed money for

borrowed money is not profits; but money may be borrowed temporarily for
the purpose of paying dividends if the corporation has used its surplus assets
to make improvements for which it might have borrowed money.
137. Dividends

may not be declared so long as deficit exists

138. The directors are the judges on how and when to spend corporate
funds.
139. The corporation may be compelled by the SEC to declare dividends to
its stockholders if it retains surplus profits in excess of 100percent of their
paid-in
capital
stock
140. Payment of subscription from dividends (stock, cash, to be declared)
is illegal for it obligates the subscriber to pay nothing for the shares except
as
dividends
may
accrue
upon
the
stock.
141. The stockholder is still entitled to receive cash dividends due on
delinquent stock but the dividends shall first be applied to the unpaid
balance on the subscription plus costs and expenses while stock dividends
shall be withheld from the delinquent stockholder until his unpaid
subscription
is
fully
paid.
142. Some courts take the view that unlawful dividends received in good
faith by the stockholders may not be recovered if the corporation is solvent.
143. In the absence of a record date, the dividend belongs to the person who
is the owner of the shares of stock at the time of declaration.
144. Declaration of stock dividends may be rescinded at any time before the
actual issuance.
145. The participation of each stockholder in the earnings of the corporation
is based on his total subscription. The reason is that stockholders entire
subscription represents his holdings in the company for which he pays
interest
on
any
unpaid
portion.
146. Only in cases where a stockholder is delinquent in the payment of his
unpaid subscription that he loses his privilege in a corporation where he has
holdings, except his right to receive cash dividends, which however shall first
be applied to his unpaid balance on the subscription plus cost and expenses.
147. The contract must be approved by a majority of the quorum of BOD and
prescribed vote of the stockholders of both the managing and the managed
corporation. The period of the contract must not be longer than 5 years for
any
one
term.

148. Upon the issuance of the certificate of incorporation, the corporation

comes
into
existence
but
not
yet
otganized.
149. By-laws shall be adopted within one month after receipt of official notice
of the issuance of its certificate of incorporation by the SEC. Nevertheless,
by-laws may be adopted and filed prior to incorporation with the articles of
incorporation. Failure to file a code of by-laws within one month from the
date of incorporation with the SEC shall render the corporation liable to the
revocation
of
its
registration
150. By-laws must be general and uniform in their operation and not directed
against particular individuals, and must not be discriminatory.
151. By-laws are not binding to a party who doesnt have knowledge of its
provision.
152. At least 2 directors must be residents of the Philippines.
153. Corporation cannot provide in the by-laws for the manner of election
and the term of office of directors or trustees which are already regulated by
law.
154. The power to make and repeal by-laws can only be exercised at a
regular or special meeting duly called for the purpose. It can be delegated
(2/3) to directors. But the power to amend the articles of incorporation lies
with the stockholders members and cannot be delegated to directors.
155. To revoke the delegated power, the law merely requires the vote of
majority of the outstanding capital stock.
156. Revocation is valid notwithstanding that no previous notice was given to
stockholders or members of the intention to propose such revocation.
157. Articles of incorporation constitutes the charter or fundamental law of
the corporation. The filing of articles of incorporation is a condition precedent
to corporate existence, while the filing of by-laws is a condition subsequent.
158. The president shall preside at all meetings of directors or trustees and
of the stockholders or members, even where the chairman of the board is
present, unless otherwise provided in the by-laws.
159. The directors or trustees are not a corporate body; they are, when
acting as a board, agents of the corporation.
160. In the absence of provision in the by-laws, the meeting may be called

by a director or trustee or by an officer entrusted with the management of

the corporation.
170. A stockholder may make the call on order of the SEC whenever for any
cause, there is no person authorized to call a meeting.
171. The special meeting for the removal of directors may be called by the
secretary of the corporation or by a stockholder.
172. Whether regular or special, notice must be given when required by the
law or by the by-laws of the corporation.
173. Written notice of even regular meetings must be sent to stockholders or
members at least 2 weeks before the meeting pr at least 1 week for special
meetings. However, notice of any meetings may be waived expressly or
impliedly, by a stockholder or member. In meetings ordered by the SEC, It is
evident that notice is necessary.
174. Any business transacted at any meeting of stockholders shall be valid
even if the meeting be improperly held or called provided that acts are not
ultra vires and that all the stockholders are present or represented at the
meeting
175. Unless otherwise provided in the by-laws or in the code, a quorum shall
consist of the stockholders representing a majority of the outstanding capital
stock or a majority of the members in the case of nonstock corporation. A
majority vote, in the absence of express provision in the by-laws and unless
the vote of a greater number is required by law, is sufficient to decide any
question properly presented.
176. To amend the articlesmajority vote of BOD and vote or written assent
of 2/3
177. To elect directorsmajority
178. To remove directors2/3 of the outstanding stock or of members
entitled to vote
179. To ratify a contract of director or officer2/3
180. To extend or shorten corporate termmajority of BOD and 2/3
181. To increase or decrease the capital stockmajority of BOD and 2/3
182. To incur, create, or increase bonded indebtednessa majority of BOD
and 2/3

183. To sell, lease, exchange, mortgage or otherwise dispose all or

substantially all of the
corporate assetsmajority of BOD and 2/3
184. To invest corporate funds in another corporation or business or for any
purpose other than the primary purposemajority vote of BOD and 2/3
185. To issue stock dividendsmajority of the quorum of BOD and 2/3. The
approval of stockholders is not required with respect to other dividends such
as cash and bond dividends.
186. To enter into management contractmajority of the quorum of BOD and
a majority of the outstanding capital stock of both managing and managed
corporations and in some cases, 2/3 of the total outstanding capital stock
entitled to vote or of the members, with respect to the managed corporation.
187. To adopt by-lawsa majority of the outstanding capital stock or of the
members.
188. To fix the issued price of no par value sharesa majority of the quorum
of BOD if authorized by the articles of incorporation or in the absence of such
authority, by a majority of the outstanding capital stock.
189. To effect or amend a plan of merger or consolidationa majority of vote
of BOD and 2/3 of the outstanding capital stock or of the members of the
constituent corporation
190. To dissolve the corporationa majority vote of BOD and 2/3 of the
outstanding capital stock or of the members
191. To adopt a plan of distribution of assets of a nonstock corporationa
majority vote of trustees and 2/3 of the members having voting rights.
192. A corporation may prescribe a greater voting requirement for the
approval of any of the above corporate acts in its articles of incorporation
and/or by-laws in order to protect the rights of minority stockholders
193. Notice of a regular meeting need not be given if the articles of
incorporation or by-laws specify the time of the meeting (except when it is to
be held at another place). A director trustee may waive the requirement of
notice of any meeting, expressly or impliedly
194. If the presiding officer is not present at the time for a meeting to
convene, a stockholder who takes the floor may temporarily preside at the
meeting of stockholders pending the selection of the presiding officer. Unless

the contrary is provided by the by-laws, the presiding officer may be selected
by the vote of the stockholders present.
195. One cannot vote if he does not appear to be a stockholder in the books
of the corporation
196. Each member, regardless of class, shall be entitled to one vote
197. Pledgees or mortgagees of shares in stock corporation have the right to
attend and vote at meetings of stockholders only when expressly given such
right in writing by the pledgor or the mortgagor as the latter remains the
owner of the stock pledged or mortgaged. The authorization is required by
the code to be recorded on the appropriate corporate books by such pledgor
or mortgagor.
198. A proxy may refer to a person or a formal written authority
199. The right to vote by proxy is a special form of agency. No proxy shall be
valid and effective for a period longer than 5 years.
200. Directors cannot attend or vote by proxy at board meetings
201. Proxies are irrevocable at any time unless made irrevocable by the
giver. It becomes irrevocable when the holder of proxy has given or promised
a stockholder a consideration or interest (loan of money in return for
irrevocable proxy.
202. In voting trust agreement(must be in writing, notarized and filed with
SEC), a stockholder of a corporation parts with the voting power only but
retains the beneficial ownership of stock. A voting trustee is only a share
owner vested with legal title for the sole purpose of voting upon stock that
he does not own. New certificate is issued to the trustee.
203. Trustee is the legal title holder or owner of the shares so transferred
under the agreement. Hence, he is qualified to be a director.
204. The ultimate control of the corporation depends upon the votes of the
stockholders
205. Voting trust agreement, if validly executed is irrevocable while a proxy
must be coupled with interest before it becomes irrevocable.
206*. The stockholders have the power to fill vacancy in the BOD if the cause
is any of the ff: (1)removal (2) Expiration of term (3) Increase in the number
of directors

207*. BOD can fill the vacancy if the cause of vacancy is other than removal,
expiration of term or increase in the number of director and the remaining
directors still constitute a quorum
208*. Directors are entitled to compensation if the giving of compensation is
fixed in the by-laws, approved by the stockholders representing at least a
majority of the outstanding capital stock or when the compensation refers to
reasonable per diem
209. A contract of the corporation with one or more its directors or trustees is
voidable unless all the ff conditions are present: (1) that the presence of such
director is not necessary to constitute a quorum (2) that the vote of such
director was not necessary for the approval of the contract (3) that the
contract is fair and reasonable under the circumstances.. When any of the
first two conditions is absent, such contract may be ratified by the vote of
2/3. Full disclosure of the adverse interest of the director involved must be
made at such meeting.
210. There is interlocking directorate when a director holds seats in the
board of directors of 2 or more corporations. There is no prohibition in the
corporation code regarding this. However, law provides for requisites when 2
corporations with interlocking directors contract with each other. The
requisites are (if the interest of the director is substantial, 20percent and
nominal in the other): (1) there is no fraud (2) the contract is fair and
reasonable (3) the presence is not required for a quorum and approval, vote.
If the interest is both nominal or substantial, requirement (3) is no longer
required.
211. The doctrine of corporate opportunity prohibits directors from acquiring
business opportunities for his personal gain at the expense of the
corporation (breaches his fiduciary duty). He must first disclose to the
corporation the opportunity and if the latter refuses to take it, he can take it.
If breached, he must account to the corporation the profits by refunding the
same.
212. Executive committee is composed of not less than 3 directors and
whose creation is provided in the by-laws. It acts on routine matters or on
those which do not require board meeting because it is difficult to convene
due to quorum requirement. Thus small number is appointed among them. It
cannot repeal or adopt by-laws and cannot fill vacancies in the board.
213. A donation must be for a public welfare and not for political purpose
214. Specific express powers are to shorten or extend corporate life, increase
or decrease capital stock, power to incur create or increase bonded
indebtedness and power to deny preemptive right.

215. All stockholders must give their consent for the ratification of an ultra
vires act.
216. A corporator in a stock corporation must be a stockholder. Honorary
membership in a business corporation is not allowed by law
217. Private corporation may be organized by private or by the state or both
for private ends, aims, benefits or purpose
218. In political law, public corporations are commonly referred as to
municipal corporation
219. Government created private corporation to augment its income. The
corporation is then subject to the rules of the law governing private
corporation. Examples are: GSIS, PNR, LRT, PNB, NAWASA, NAPOCOR
220. Quasi-public corporations - are in reality organized as a private
corporation but perform public functions. Examples: PLDT, MERALCO, PAL,
WG and A
221. Pre-incorporation subscription shall be irrevocable within 6 months from
subscription
222. The BOD may fix the issued price of no-par value shares if authorized by
the articles of incorporation. In absence of it, by the stockholders.
223. The issued price of no par shares may vary from time to time as it is
usually fixed on the basis of their book values.
224. Every certificate of stock must be signed by the president or vice
president, countersigned by the corporate secretary and sealed with the seal
of the corporation.
225. Unregistered transfer shall not be valid except as between the parties. It
is the conveyance not the act of registration which gives title to the
transferee.
226. There can be no valid transfer if delivery is not made.
227. Only absolute transfers need to be registered. Pledges and mortgages
need not be registered or noted on the book for their validity since they do
not involve absolute alienation of ownership of stock.
228. To affect 3rd persons, date and description of shares pledged appear in
a public instrument is enough.

229. The shares which may be alienated are those covered by certificates of
stock.
230. Shares of stock which is not fully paid shall not be transferable on the
books of the corporation.
231. Unless prohibited by by-laws, certificate of stocks may be issued for less
than the number of shares subscribed for, provided the par value of each
share is fully paid for.
232. Unpaid subscription is an asset to which corporate creditors may look
for payment. Hence a stock corporation has no power to release an original
subscriber from paying for his shares without valuable consideration for such
release or without unanimous consent of the stockholders.
233. Stockholder is not a co-owner of the corporate property nor is he
entitled to the possession of any definite portion if its property or assets.
234. In a derivative suit, the wrong is inflicted directly on the corporation and
indirectly upon the stockholders.
235. Individual suit is wrong committed on a stockholder(right to vote)
236. Creditors, corporations and stockholders can set up the inadequacy of
the consideration for the issuance of the stock.
237. The liability of the consenting director/officer for the "water" in the
stock is solidary with the stockholder concerned.
238. A call cannot be of such character as to permit the directors to practice
favoritism or act oppressively.
239. A call without notice is practically no call at all.
240. Reasonable hours must not be understood to mean reasonable hours on
business days throughout the year and not merely during some arbitrary
period of a few days chosen by the directors (10days prior to the annual
meeting)
241. The main purpose of right of inspection of corporate books is to protect
stockholders interest.
242. You must act in good faith to be allowed to inspect the books.
243. Right of inspection not absolute, factors: (a) purpose of inspection

(b)books of foreign corp (c)trade secrets (d)reasonable hours.

244. A stockholder cannot, without order of the court be permitted to take
books from the office of the corporation.
235. In general, right of the stockholder extends to all books, papers,
contracts, minute books or other instruments from which he can derive any
information that will enable him to better protect his interest.
236. Generally, where one corporation sells or otherwise transfers all its
assets to another corporation, the latter is not liable for the debts of the
transferror unless the transferee assumed the liabilities of the former. Sale of
the assets to another corporation for stock, if followed by dissolution, has the
effect of a merger.
237. Merger or consolidation involve a transfer of the assets of the
constituent corporation in exchange for securities in the new or surviving
corporation but neither involves winding up of the affairs of the constituent
corporation in the sense that the assets are distributed to the stockholders.,
there is then the automatic assumption of liability of the absorbed
corporation or constituent corporation.
238. Any stockholder of a close corporation may, for any reason, compel said
corporation and purchase his share at fair value which shall not be less than
their par value or issued value, when the corporation has sufficient assets in
its books to cover its debts and liabilities exclusive of capital stock.
239. The dissenting stockholder shall make a written demand on the
corporation within 30 days after the date on which the vote was taken for
payment of the fair value of his share. The corporation shall pay to such
stockholder upon surrender of the corresponding certificate of stock within
10 days after demanding the fair value of his shares.
240. Failure of the stockholder to make demand within 30-day period shall be
deemed a waive of his appraisal right.
241. Payment of appraisal right shall be made only if the corporation has
unrestricted retained earnings.
242. Once the dissenting stockholder demands payment of the fair value if
his shares, all right shall be suspended. If he is not paid within 30 days, his
voting and dividends rights shall be restored.
243. If there are nine trustees to be elected, a member shall be entitled to 9
votes, except that he cannot cast more than 1 vote in favor of 1 candidate.

244. Membership and all rights are personal and non-transferable, unless the
articles or by-laws otherwise provide.
245. Termination extinguishes all rights of a member in the corporation or in
its property, unless otherwise provided in the articles of incorporation.
246. The term of office of trustees shall be 3 years (non-stock)
247. If first elected, 1/3 of the BOT members shall expire every year and
subsequent trustees shall have 3 years. Trustees elected to fill vacancies
occurring before the expiration of a particular term shall hold office only for
the unexpired period
248. Non-stock may invest its accumulated funds for profit purposes but
such power must be included in its articles in order that investment may not
be considered ultra vires.
249. The right to vote of members may be limited, broadened or were denied
in the articles of incorporation or the by-laws.
250. Each member shall be entitled only to 1 vote in the election of trustees
unless cumulative voting is authorized.
251. Voting by mail or other similar means may be authorized.
252. Officers may be directly elected by the members unless otherwise
provided.
253. Non-stock may designate their governing boards by any name other
than BOT. Trustees have duties similar to those of stock corporation.
254. A corporation exhibiting the characteristics of close corporation:
(1) persons shall not exceed 20.
(2) Issued shares are subject to restrictions or transfer
(3) The corporation shall not list in any stock exchange or make a stock
offering to public.
It is deemed not a close corporation if at least 2/3 of its voting
stock/rights is owned by another which is not a close corporation.
255. Those corporation vested with public interest cannot be a close
corporation mining or oil companies, banks, insurance, educational and stock
exchange.
256. Close corporation has been described as a corporation de jure and
partnership de facto and has been often referred to as an "incorporated
partnership" because of its intimate business associates acting like partners

among themselves.
257. Management of a stock corporation may be by the stockholder if
provided in the articles.