BUSINESS ORGANIZATION II

Atty. Hilario N. Magsino, Jr.

CORPORATION CODE
(Batas Pambansa Blng. 68)

I. NATURE AND FORMATION

1. Definition of a corporation – Section 2 of the Corporation Code
2. Tri-Level Existence in the Corporate Setting

A. NATURE OF CORPORATIONS
1. Corporate Attributes
a. 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. Creature of the Law
1. Constitution – Section 16, Article XII of the Constitution
NDC vs. Phil. Veterans Bank, 192 SCRA 257 (1990)
2. Civil Code - Articles 44 and 45 of the Civil Code
3. Franchise
JRS vs. Imperial Insurance, 11 SCRA 634 (1964)
c. Four attributes of a corporation
d. Advantages and Disadvantages of the Corporate Form
e. The Corporate entity compared with other business endeavors
1. Sole Proprietorship
2. Partnership (Article 1768, 1772 and 1775 of the Civil Code)
J. M. Tuazon vs. Bolaños, 95 PHIL 106 [28 May 1954]
3. Joint Venture
Aurbach vs. Sanitary Wares, 180 SCRA 130 (1989)
4. Business Trusts (Article 1441 of the Civil Code)
f. The Corporation and the Bill of Rights
1. Equal Protection
Smith Bell vs. Natividad, 40 PHIL 136 (1919)
2. Unreasonable search and seizure
Stonehill vs. Diokno, 20 SCRA 283 (1967)
Bache & Co. vs. Ruiz, 37 SCRA 823 (1971)
3. Self-incrimination
Bataan Shipyard vs. PCGG, 150 SCRA 181 (1987)
(Only as to the issues of self-incrimination and search/seizure)
2. Classification Of Corporations

a. In relation to the State

- Public
- Private
National Coal Co. vs. CIR, 46 PHIL 583 (1924)
Philippine Society vs. COA, GR No. 169752 (2007)
- Quasi-Public
Davao Water District vs. CSC, 201 SCRA 593 (1991)

b. As to place of incorporation
- Domestic
- Foreign (Section 123 of the Corporation Code)
c. As to nationality (Section 140 of the Corporation Code)
Tests - Place of Incorporation Control
- Principal Place of Business
- Investment Test
1. Exploitation of Natural Resources
Register of Deeds vs. Ung Sui Si Temple, 97 PHIL 58 (1955)
2. Public Utilities - Section 11, Art. XII of the Constitution
People vs. Quasha, 93 PHIL 333 (1953)
3. Mass Media - Section 11 (1), Art. XVI of the Constitution
4. Advertising Industry
- Section 11 (2), Art. XVI of the Constitution
5. War-Time test
Filipinas Comania vs. Christern, 89 PHIL 744 (1952)
6. Grandfather Rule
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)
(Section 25, BP 232)
- Charitable, Scientific or Vocational
- Business Corporation
e. 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. As to existence of shares (Secs. 3 and 5 of the Corporation Code)

- Stock
- Non-Stock (Sections 87 and 88 of the Corporation Code)
CIR vs. Club Filipino, 5 SCRA 321 (1962)
g. As to relationship of management and control
- Holding company
- Affiliate company
 - Parent and subsidiary company

h. Close Corporations
- Definition (Section 96 of the Corporation Code)
- Articles of Incorporation Requirements
(Section 97 of the Corporation Code)
- Pre-emptive Rights (Section 102 of the Corporation Code)
- Amendment (Section 103 of the Corporation Code)
- Restriction on Transfer of Shares
(Sections 98 and 99 of the Corporation Code)
- Agreements by Stockholder
(Section 100 of the Corporation Code)
- No Necessity of Board (Section 101 of the Corporation Code)
Dulay Enterprises, Inc. vs. CA (G.R. No. 91889 [1993])
- Deadlocks (Section 104 of the Corporation Code)
- Withdrawal and Dissolution (Section 105 of the Corporation Code)
Financing Corp vs. Teodoro, 93 PHIL 678