Partnership Partnership
NOTES
1. Charac Character terist istics ics of a partne partnersh rship: ip: a. Consensual b. Onerous—contribution of money, money, property, property, or industry into a common fund c. Nomi Nominat nate— e—De Desi signa gnate ted d Name Name d. Preparatory Preparatory—Its —Its organia organiation tion is follo! follo!ed ed by other other contracts contracts to carry carry out its purpose e. Prin Princi cipa pal— l—It It can can sta stand nd alone alone f. "ilate "ilateral ral or or mult multila ilater teral— al—# # or more more pers persons ons g. $gency—each $gency—each partner partner is is an agent agent to to partnersh partnership ip and to to each other other #. Profession Professional al partnershi partnership p has no legal personali personality ty.. %egal personali personality ty means that that a partnership can sue and be sued, enter into contracts, ac&uire property in its o!n name, can incur obligations. '. $ partne partnership rship can can be a partner partner in another another partnershi partnership p or a stoc(holder stoc(holder in in a corporation because it has a )uridical personality to enter into contracts *. +en if a partner partner transfers transfers all all interests interests to another, another, the the transferee transferee does not become become a partner unless all other partners consent. -his is based on the principle of delectus personarum principle of mutual trust and confidence/. 0. %imited %imited partner partner !ould !ould be liable liable as a general partne partnerr if he include include his surnam surnamee in the partnership name and ta(es part in the control of business . 2eneral3li 2eneral3limite mited—lia d—liable ble up to personal personal assets assets but sub)ect sub)ect to to reimbursem reimbursement ent 4. In a general partnership, partnership, insanity of a general partner does not result in the automatic dissolution of the partnership but only seres as a g round for the application for )udicial dissolution 5. Death, Death, retirement, retirement, insanity insanity or ciil ciil interdict interdiction ion D6ICI/ D6ICI/ of a general general partner partner in a limited partnership, partnership, automatically dissoles the partnership. "ut ciil interdiction of a limited partner does not so. 7. $cts of a partne partnerr !ho is insolent insolent,, does not hae hae a right to to !ind up the the affairs affairs of the partnership and the business is unla!ful doesn8t bound the partnership. 19. If the partner !ho acts acts after dissolution dissolution and at fault, he alone ultimately ultimately liable to the creditors. -he partners can see( reimbursement from the partner !ho is guilty. 11. Ne! creditor is deemed to to hae (no!ledge of the dissolution. e is not therefore, protected by la!. Partnership Partnership is not bound 1#. $ partnership begins from the the moment of e;ecution of the contract contract but there can be stipulation other!ise. 1'. Contract of co3o!nership3 no intention intention of using the asset asset for business purposes purposes 1*. $ partnership cannot be formed for a charitable purpose 10. Corporation
15. Partnership is goerned by the Ciil Code of the Philippines !hile corporation is under corporation code of the Philippines 17. Corporation can only be dissoled by the consent of the state #9. $ contract of partnership may be made in any form or manner e;cept if a specific form is re&uired by la! for its alidity or enforceability #1. It may be made orally or in priate instrument if the total contribution of money or other personal property is less than ',999. If it is more than ',999 or more, it shall be recorded in the =+C. Noncompliance of !hich does not ma(e the contract oid. o!eer, if immoable property or real rights are contributed, it must be made in public instrument. ##. $ limited partnership must be registered !ith the =+C, other!ise, it is deemed to be a general partnership #'. >niersal partnership of all profits—any property belonging to them at the time of the e;ecution of the contract belongs to them but the usufruct use and en)oyment/ of such property belongs to the partnership. Only the fruits of the property as !ell as !hateer property ac&uired by the partners through industry during the e;istence of the contract, are contributed to the common fund. #*. Partnership de facto3 a partnership in fact but not in la!. It is still alid partnership although it lac(s certain re&uirements for its legality #0. $ husband and !ife cannot enter into a contract of uniersal partnership because this has the effect of donation and there are prohibited from giing donation to each other. -hey can enter into a particular partnership but not to goern thair property relations. #. -he liability of an industrial partner is al!ays that of a general partner #4. $ person may be a general partner and a limited partner in the same partnership at the same time, proided this fact is stated in the certificate of a limited partnership #5. $ limited partner cannot contribute serices hence it is al!ays a capitalist and a silent partner #7. $ capitalist partner !ill be obliged to sell his interest to the other partners !hen in case of imminent loss of the business of the partnership he refuses to gie additional contribution '9. capitalist partner cannot engage in the same or similar business of the firm unless permitted by all others '1. Cannot engage in any (ind of business unless permitted to do so. $ll his industry is supposed to be contributed to the firm '#. Industrial partner is e;empted as to losses bet!een partners but is liable to strangers but !ith right to be reimbursed from the capitalists ''. $n agreement that een the industrial partner shall be liable for losses is permissible '*. If a partner gies a receipt for the firm, it is the firm
'. $ partner has the right in a specified partnership property to use it for business purposes only '4. -he right to inspect and copy boo(s is not aailable to the partnership pending dissolution nor in one already dissoled '5. $s a rule, no formal account is demandable until after dissolution. -his is because partners hae access to the boo(s. "ut if a partner is !rongfully e;cluded from the business, he can demand it at any reasonable time '7. ?oint management arises !hen t!o or more partners are appointed managers !ith an agreement that one cannot act !ithout the consent of the others. -he approal of all the managers is necessary for the alidity of one
Corporation 1. $ copy of the articles filed !hich is returned !ith the certificate of incorporation issued by the commission under its official seal becomes its corporate charter. 2. $ corporation created by special la! has no articles of incorporation 3. $ corporation has the po!er of succession by its corporate name. Character o f a corporation is not necessarily determined by its name. 4. -he purposes should be stated definitely. -he main purpose and secondary purposes shall be distinguished from each other. @ain purpose must be specified. 5. $ nonstoc( corporation may not include a purpose !hich !ould change or contradict its nature 6. -he purposes, !here there are more than one, must be capable of being lawfully combined . -hus, ban(s !hich are goerned by the general ban(ing la! of #999
are prohibited from directly engaging in non3ban(ing actiities such as insurance. =imilarly, Insurance companies are not allo!ed to engage in ban(ing operations. 7. -he main reason for stating the purpose of the corporation is to determine !hether the acts performed by the corporation are authoried or beyond its po!ers. In the latter case, they !ill be (no!n as ultra ires acts. 8. -he principal place must be !ithin the Philippines city or to!n/. 9. -he place of principal office does not necessarily mean the place !here the business of the corporation is transacted but the place where its boos and records are ordinarily ept and its officers usually meet for the purpose of managing the affairs and transacting the business of the corporation. 1!. If the ne! address is located !ithin the same city or municipality, no corporate document is re&uired to be filed !ith the =+C e;cept a notice regarding the change of address. 11. -he incorporating directors or trustees shall hold office until their successors are duly elected and &ualified. -hey are intended to hold office for one year !hen the corporation is organied 12. +ery director must hae at least one share of capital stoc( of the corporation of !hich he is director. 13. If some or all of the shares are !ithout par alue, such fact shall be stated in the articles 14. If the shares hae par alue, the amount of the authoried capital stoc( in pesos is specified in the articles, but if they hae no par alue, no amount of capital stoc( is specified in the articles !hich need only state the number of shares into !hich said capital stoc( is diided. -he reason is that the p rice of no3par alue shares may ary from to time and therefore the total amount of the capital stoc( cannot be (no!n until all the shares are issued. 15. Corporations !hich !ill engage in any business or actiity resered for Ailipino citiens shall proide in their articles of incorporation the restriction against the transfer of stoc( or interest !hich !ill reduce the o!nership of Ailipino citiens to less than the re&uired percentage of the capital stoc( as proided by e;isting la!s. 16. -he general amendment may also be effected by the B!ritten assent of the stoc(holders representing #' of the outstanding capital stoc( or #' of its members, meaning that such action need not be ta(en at a meeting and upon a ote. 17. If the amendment consists in e;tending or shortening the corporate term, a meeting of the stoc(holders or members is necessary. 18. -he amendments shall ta(e effect only upon their approal of the =+C 19. In ban(ing institutions coered by special la!, the amendments must be accompanied by a fa"orable recommendation of the appropriate go"ernment agency !ith respect to it that it is in accordance !ith la!. 2!. Corporations must formally organie their affairs !ithin # years, other!ise, deemed dissoled. If becomes continuously inoperatie for 0 years after its organiation, temporarily suspended or reo(ed. 21. Ehen a change of name is approed, it is re&uired 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 re&uire the =+C to issue a certificate of incorporation. Arom and after the filing of articles, the chief archbishop shall become a corporation sole. 23. De facto is the one that has not complied !ith all the re&uirements necessary to be a de )ure corporation but has complied sufficiently to be accorded corporate status as against third parties although not against the state 24. $ corporation by estoppel has no real e;istence in la!. It is neither de )ure nor a de facto corporation, but does a mere fiction e;ist for the particular case. It e;ists only bet!een the persons !ho misrepresented their status and the parties !ho relied on the misrepresentation. 25. @andatory proisions prescribe formalities for incorporation !hich are designed to protect the public. 26. =toc(holders hae indirect control of the corporation through their otes. 27. $cts of stoc(holders are not binding on the corporation. $ corporation can act only through the "OD. 28. "OD cannot perform constituent acts inoling fundamental or ma)or changes in the corporation such as amendment of the articles of incorporation 29. "OD hold a fiduciary relation trust and confidence/ to the corporation and the stoc(holders or members they represent. -hey are re&uired to discharge their duties in good faith and !ith diligence, care and s(ill. -hey are liable if they breach their fiduciary duty. 3!. Aor "OD to e;ercise their po!ers, they must meet as directors or trustees and act at a meeting at !hich there is a #uorum 31. Directors are not agents of the corporation and thus hae no po!er acting indiidually 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. $ corporation is e;pressly allo!ed to enter into a management contract under !hich it delegates the management of its affairs to another corporation for a certain period of time. "OD can also delegate its po!er, impliedly or e;pressly to other officers and agents 34. One disadantage of corporation is that stoc(holders hae little oice in the conduct of the business. 35. >nder the doctrine of piercing the eil of corporate entity, the corporation and the persons composing it !ill be treated as one and identical person instances such as fraud, ta; easion, and aoiding obligation/. 36. In nonstoc( corporation, minimum members are 0 and may be more than 10. Number of members must be multiple of 0. No part of income shall be distributed as diidends to members. 37. Ciil Corporation is one organied for profit. +leemosynary is for charitable 38. In close corporation, stoc(holders shall not e;ceed # 9persons. 39. A partnership can be a corporator in a corporation but a corporation cannot be a partner in a partnership 4!. $ corporation can subscribe after another corporation8s incorporation but not if made before.
41. A corporation can be a corporator but never an incorporator in another corporation except in rural bank law 42. $ married !oman can be an incorporator !ith the consent of the husband if it inoles con$ugal or absolute community property. If it inoles her e;clusie property, consent is not re&uired 43. @a)ority must be residents of the Philippines to form a priate corporation. 44. "y3la!s need not be notaried but re&uired to be signed by the incorporators and stoc(holders and filed !ith =+C. It is mandatory. It shall be effectie upon issuance of the =+C of certificate certifying that the by3la!s are not inconsistent !ith the code. 45. $rticles of Incorporation are adopted by the incorporators as C$6-+6 of the corporation !hile by3la!s are for their internal goernment 46. 6egular meetings3 it shall be held annually on a date fi;ed in the by3la!s or if not so fi;ed, on any date in $pril of eery year 47. =pecial meetings shall be held at any time necessary or as proided in the by3 la!s, proided ho!eer that at least one !ee( !ritten notice shall be sent to all stoc(holders 48. Place of meetings must be held in the principal place of the corporation. $ny proision changing such place is illegal 49. -he &uorum of board meetings shall be ma)ority of all members of the "OD or board of trustee. 5!. +ery corporation must hae at least a "OD, President, -reasurer, =ecretary 51. $ president must be a director 52. $ secretary must be a resident and a citien of the Philippines 53. $ny # or more positions may be held concurrently by the same person e;cept a president and secretary or treasurer at the same time 54. =traight oting—a stoc(holder may ote his number o f shares for as many persons as there are directors to be elected. 55. Cumulatie oting for one candidate—a stoc(holder cumulatesconcentrates all his shares and gies one candidate as many otes as the number of directors to be elected multiplied by the number of his shares 56. Cumulatie oting by distribution—distributes shares among as many candidates he sees fit. 57. One stoc( is e&ual to 1 ote 58. Only the stoc(holders can remoe a director. #' of the outstanding capital stoc( or members is re&uired 59. Facancy in the "OD is filled up by the remaining directors constituting a &uorum ma)ority shall remain/ if the cause of acancy is other than remoal, e;piration of term or increase in the number of directors or trustees. If not, such acancy !ill be filled up by the stoc(holders. 6!. 6egular meetings of the board shall be held monthly 61. =pecial meetings may be held at any time upon the call of the president 62. Place of meetings may be any!here 63. Directors or trustees are not allo!ed to ote or attend by pro;y and they do not receie compensation in the absence of any proision in the by3la!s fi;ing their salary
64. =hould the stoc(holders representing the ma)ority grant them compensationG such total yearly compensation shall not e;ceed ten percent of income before ta; of the corporation during the preceding year. 65. Hou cannot be a director in # or more corporations. One cannot sere # masters at the same time 66. ' corporate po!ers: 1/e;press #/implied '/ incidental 67. @ost of the decision by ma)ority of the directors re&uire approal or ratification by at least #' outstanding capital stoc(. -his is true in case of any amendment to articles of incorporation 68. $ corporation engaged in transportation cannot engage in any other business alien to transportation 69. Corporations engaged in agriculture are prohibited from haing any other interest in any other corporation engaging in agriculture 7!. Priate corporations engaged in retail trade and rural ban(ing must be 199 percent Ailipino3o!ned. Aor Public >tility deelopment and e;ploitation of n atural resource must be atleast 9filipino o!ned. Aor pa!nshop, at least 49 71. >ltra ires act may be ratified by approal. If fully or partially e;ecuted can bind the parties. $n illegal act can neer be binding to the corporation. 72. =tated alue of no3par alue shares shall not be less than 0 73. $t least #0 percent of the authoried must be subscribed. Paid3up capital upon incorporation shall not be less than #0 percent of the subscribed capital.#03#0 rule 74. Aounder8s share—right to ote and be oted in the election of directors must be for a limited period not to e;ceed 0 years. 75. Non3oting shares: 1/ preferred #/ redeemable '/ treasury. -hey neertheless hae t!o rights: $mendment of articles of incorporation and adoption and amendment of by3la!s. 76. Preferred share is al!ays a par3alue share 77. =hares of stoc( are deemed issued from the moment subscription is accepted !hether fully paid or notincorporation/ 78. =ubscribers become stoc(holders upon subscription !hether fully paid or n ot incorporation/. 79. Certificate of =toc( is a personal property and may be mortgaged or pledged or transferred 8!. $ subscriber is entitled to all the rights of a fully paid stoc(holder for as long as he has not been declared delin&uent 81. -ransferror has the right to ote 82. $fter incorporation, full payment is re&uired for purchasers to become stoc(holders. 83. Persons conicted by final )udgment of an offense punishable by imprisonment for a period e;ceeding si; years and guilty of iolation the Code !ithin 0 years prior to the date of election or appointment shall be dis&ualified to be a director, trustee or officer 84. 6emoal of directors or trustees may be !ith or !ithout cau se. 6emoal !ithout cause may not be used to deprie minority stoc(holders of the right of representation in the board of directors. Other!ise, the basic purpose of
cumulatie oting !hich is to allo! minority stoc(holders to unite and elect their representatie in the board !ill be rendered useless. 85. $ director elected to fill a acancy shall sere only for the une;pired portion of the term of his predecessor in office 86. It is on the presumption that directors and trustees render serice gratuitously and that the return upon their shares ade&uately furnishes the moties for serice, !ithout compensation. 87. -hey are entitled only to compensation if it is fi;ed in the by3la!s or !hen the giing of compensation is approed by the stoc(holders representing at least a ma)ority of the outstanding capital stoc(. "oard approal is sufficient 88. Directors are liable to the corporation, stoc(holder or members or other persons !ho suffer damages. Nature of liability is solidary. 89. $ special meeting of the stoc(holders for the purpose of remoal of directors or trustees must be called by the secretary on order of the president or on the !ritten demand of the stoc(holders only the ma)ority is re&uired/. In remoal of directors, #' is re&uired. 9!. =toc(holders or members !ho hae remoed a director or trustee are also gien the po!er to choose his replacement at the same meeting. 91. $ director can &uit any time but by reason of fiduciary nature of the position they occupy, he cannot resign as part of a fraudulent scheme to pre)udice the corporation. e should repair and ma(e good such loss in case of loss of profits. 92. Ehere a director accepts a position in !hich his duties are incompatible !ith those as such director, it is presumed that he has abandoned his office as director 93. =toc(holders may be filled by stoc(holders if the cause is remoal, increase in the number of directors or the e;piration of term. $lso if other than remoal or e;piration if the remaining directors do not constitute a &u orum 94. Only the ma)ority is re&uired to authorie compensation of directors. 95. $ director is entitled to be reimbursed for legitimate e;penses incurred in behalf of the corporation. 96. $ priate corporation is authoried to proide in its by3la!s for the compensation of directors or trustees. 97. -he per diems granted to the directors should not be included in their total yearly compensation for purposes of the 19 percent limitation 98. -he agents of the corporation are the directors. 99. $ contract of the corporation !ith one or more of its directorstrustees or officers is oidable at the option of such corporation unless all the condition enumerated in sec '# are all present. In the case of a contract !ith a director or trustee, only that the contract is fair and reasonable, if the contract is ratified the #' 199. It is a alid contract bet!een # or more corporation !hich hae interloc(ing directors as long as there is no fraud and the contract is fair and reasonable under circumstances. 191. -he guilty director !ill only be e;empted from liability to the corporation if his disloyal act is ratified by #' 19#. -he e;ecutie committee must be proided for in the by3la!s and composed of not less than ' members of the board. -he committee may act on specific matters !ithin the competence of the board, as may be delegated to it by the board or in the
by3la!s e;cept those to !hich only the board duly called and assembled as such can act upon. 19'. -he restrictions on the po!er of the e;ecutie committee may be enlarged by the board to coer other matters. -he e;ecutie committee may amend or repeal any resolution of the board. 19*. Committee cannot delegate its authority een to one of its members since it can only bind the corporation through ma)ority of otes 190. $ll members of an e;ecutie committee must be directors of the corporation. o!eer if all acts of the committee !ill be merely recommendatory in nature and shall not be carried out !ithout the formal of the "OD, some members may not be directors. 19. Doctrine of limited capacity—only those that are e;press, implied or incidental 194. Intra ires—acted !ithin the po!ers 195. $ corporation may not engage in a business different from that for !hich it !as created as a regular and a permanent part of its business. -his is especially true in ban(ing and insurance companies organied under special la!s. 197. -he use of corporate seal in certificates of stoc( must be deemed directory rather than mandatory. $ corporation may e;ist een !ithout a seal. $ny seal adopted and used by the corporation may be altered by it at its pleasure. 119. Po!er to ac&uire and coney property has al!ays been regarded as an incident to eery corporation 111. $ stoc(holder has absolute right to use, en)oy and dispose of his properties, to perform all acts and to ma(e all contracts !ithout any restriction e;cept !hen they are prohibited by la!. 11#. $ corporation cannot do acts not e;pressly or impliedly gien by la! 11'. Implied po!ers are those po!ers !hich are reasonably necessary to e;ercise the e;press po!ers and to accomplish or carry out the purposes for !hich the corporation !as formed. 11*.$ corporation !hich has been dissoled after the e;piration of the '3year !inding up period ceases to be de )ure de facto and therefore it cannot sue or be sued 110. $ corporation must be first duly registered in accordance !ith la! to hae the po!er to sue 11. $ seal is a deice used to identify or replace the signature of an indiidual or organiation and to authenticate !ritten matter 114. Purchasing or holding real and personal property, to adopt and use a corporate seal , to contract and ma(e by3la!s are incidental po!ers 115. $ corporation may not hold alienable lands of a public domain e;cept by lease for a period not e;ceeding #0 years, rene!able for not more than #0 years and not to e;ceed 1,999 hectares in area. 117. Natural resources belong to the state and cannot be alienated to corporations. -heir e;ploration and deelopment and utiliation shall be under the full control and superision of the =tate 1#9. If a corporation ac&uires shares or securities of other corporation and it is done in pursuance of its purpose for !hich it !as created, the approal of the stoc(holders is not needed unless it is done solely for inestment. 1#1. $ppraisal right applies only to a stoc(holder of a stoc( corporation
1##. +;cess stoc( issued is oid een in the hands of a bonafide purchaser for alue 1#'. $ny incurring, creating, or increasing by the corporation of an y bonded indebtednessis sub)ect to prior approal of the =ecu rities and +;change Commission. -he bonds issued by the corporation hae to be registered !ith the corporation 1#*. Preemptie right is not absolute 1#0. =hareholders cannot be compelled to subscribe to a class different. $ stoc(holder !hose pre3emptie right is iolated may maintain an action to compel the corporation to gie him that right. If the denial is by an amendment to the articles of incorporation, he may e;ercise his appraisal right 1#. -he ote of the ma)ority of the trustees in office !ill be sufficient authoriation for the corporation to enter into any transaction because there are no members !ith oting rights. 1#4. $ny disposition !hich does not inole all or substantially all of the corporate assets made in the ordinary course of business does not re&uire the approal of the stoc(holders and !ould not entitle any dissenting stoc(holders to e;ercise his appraisal right. It can only e;ercise the same if it is on the sale of all or substantially all of the corporate assets as such !hich !ould render the corporation incapable of continuing the business or accomplishing the purpose for !hich it !as incorporated. 1#5. -he ac&uisition of shares shall be for legitimate purposes, its capital is not impaired, in good faith !ithout pre)udice to the rights of the stoc(holders and creditors and that there is an unrestricted retained earnings to coer the shares ac&uired. 1#7. =ection *1 does not authorie a corporation to arbitrarily purchase the shares it issued to any of its stoc(holders indebted to it for the purpose of applying the proceeds for the satisfaction of its claim against them. 1'9. 6edeemable shares may be purchased by the corporation regardless of the e;istence of the unrestricted retained earnings in the bo o(s of the corporation 1'1. In ie! of trust fund doctrine, buybac( of shares or distribution of assets among stoc(holders is a fraud against creditors and therefore oid. 1'#. $ corporation may inest its funds in another business !hich is incident or au;iliary to its primary purpose as stated in the articles of incorporation !ithout the approal of the stoc(holders. In such case, dissenting stoc(holders shall hae no appraisal right. 1''. =toc( diidend shall not be issued !ithout the approal of #'. -he board may declare diidends other than stoc( !ithout need of stoc(holder8s approal. 1'*. $ corporation cannot ma(e a alid contract to pay diidends other than from retained earnings or profits and an agreement to pay such diidends out of capital is unla!ful and oid. 1'0. =toc(holders should only receie diidends from their inestment and not from their inestment itself. 1'. $s a rule, diidends cannot be declared out of borro!ed money for borro!ed money is not profitsG but money may be borro!ed temporarily for the purpose of paying diidends if the corporation has used its surplus assets to ma(e improements for !hich it might hae borro!ed money. 1'4. Diidends may not be declared so long as deficit e;ists 1'5. -he directors are the )udges on ho! and !hen to spend corporate funds.
1'7. -he corporation may be compelled by the =+C to declare diidends to its stoc(holders if it retains surplus profits in e;cess of 199percent of their paid3in capital stoc( 1*9. Payment of subscription from diidends stoc(, cash, Bto be declared/ is illegal for it obligates the subscriber to pay nothing for the shares e;cept as diidends may accrue upon the stoc(. 1*1. -he stoc(holder is still entitled to receie cash diidends due on delin&uent stoc( but the diidends shall first be applied to the unpaid balance on the subscription plus costs and e;penses !hile stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid. 1*#. =ome courts ta(e the ie! that unla!ful diidends receied in good faith by the stoc(holders may not be recoered if the corporation is solent. 1*'. In the absence of a record date, the diidend belongs to the person !ho is the o!ner of the shares of stoc( at the time of declaration. 1**. Declaration of stoc( diidends may be rescinded at any time before the actual issuance. 1*0. -he participation of each stoc(holder in the earnings of the corporation is based on his total subscription. -he reason is that Bstoc(holder8s entire subscription represents his holdings in the company for !hich he pays interest on any unpaid portion. 1*. Only in cases !here a stoc(holder is delin&uent in the payment of his unpaid subscription that he loses his priilege in a corporation !here he has holdings, e;cept his right to receie cash diidends, !hich ho!eer shall first be applied to his unpaid balance on the subscription plus cost and e;penses. 1*4. -he contract must be approed by a ma)ority of the &uorum of "OD and prescribed ote of the stoc(holders of both the managing and the managed corporation. -he period of the contract must not be longer than 0 years for any one term. 1*5. >pon the issuance of the certificate of incorporation, the corporation comes into e;istence but not yet organied. 1*7. "y3la!s shall be adopted !ithin one month after receipt of official notice of the issuance of its certificate of incorporation by the =+C. Neertheless, by3la!s may be adopted and filed prior to incorporation !ith the articles of incorporation. Aailure to file a code of by3la!s !ithin one month from the date of incorporation !ith the =+C shall render the corporation liable to the reocation of its registration 109. "y3la!s must be general and uniform in their operation and not directed against particular indiiduals, and must not be discriminatory. 101. "y3la!s are not binding to a party !ho doesn8t hae (no!ledge of its proision. 10#. $t least # directors must be residents of the Philippines. 10'. Corporation cannot proide in the by3la!s for the manner of election and the term of office of directors or trustees !hich are already regulated by la!. 10*. -he po!er to ma(e and repeal by3la!s can only be e;ercised at a regular or special meeting duly called for the purpose. It can be delegated #'/ to directors. "ut the po!er to amend the articles of incorporation lies !ith the stoc(holders members and cannot be delegated to directors. 100. -o reo(e the delegated po!er, the la! merely re&uires the ote of ma)ority of the outstanding capital stoc(.
10. 6eocation is alid not!ithstanding that no preious notice !as gien to stoc(holders or members of the intention to propose such reocation. 104. $rticles of incorporation constitutes the charter or fundamental la! of the corporation. -he filing of articles of incorporation is a condition precedent to corporate e;istence, !hile the filing of by3la!s is a cond ition subse&uent. 105. -he president shall preside at all meetings of directors or trustees and of the stoc(holders or members, een !here the chairman of the board is present, unless other!ise proided in the by3la!s. 107. -he directors or trustees are not a corporate bodyG they are, !hen acting as a board, agents of the corporation. 19. In the absence of proision in the by3la!s, the meeting may be called by a director or trustee or by an officer entrusted !ith the management of the corporation. 149. $ stoc(holder may ma(e the call on order of the =+C !heneer for any cause, there is no person authoried to call a meeting. 141. -he special meeting for the remoal of directors may be called by the secretary of the corporation or by a stoc(holder. 14#. Ehether regular or special, notice must be gien !hen re&uired by the la! or by the by3la!s of the corporation. 14'. Eritten notice of een regular meetings must be sent to stoc(holders or members at least # !ee(s before the meeting pr at least 1 !ee( for special meetings. o!e er, notice of any meetings may be !aied e;pressly or impliedly, by a stoc(holder or member. In meetings ordered by the =+C, It is eident that notice is necessary. 14*. $ny business transacted at any meeting of stoc(holders shall be alid een if the meeting be improperly held or called proided that acts are not ultra ires and that all the stoc(holders are present or represented at the meeting 140. >nless other!ise proided in the by3la!s or in the code, a &uorum shall consist of the stoc(holders representing a ma)ority of the outstanding capital stoc( or a ma)ority of the members in the case of nonstoc( corporation. $ ma)ority ote, in the absence of e;press proision in the by3la!s and unless the ote of a greater number is re&uired by la!, is sufficient to decide any &uestion properly presented. 14. -o amend the articles—ma)ority ote of "OD and ote or !ritten assent of #' 144. -o elect directors—ma)ority 145. -o remoe directors—#' of the outstanding stoc( or of members entitled to ote 147. -o ratify a contract of director or officer—#' 159. -o e;tend or shorten corporate term—ma)ority of "OD and #' 151. -o increase or decrease the capital stoc(—ma)ority of "OD and #' 15#. -o incur, create, or increase bonded indebtedness—a ma)ority of "OD and #' 15'. -o sell, lease, e;change, mortgage or other!ise dispose all or substantially all of the corporate assets—ma)ority of "OD and #' 15*. -o inest corporate funds in another corporation or business or for any purpose other than the primary purpose—ma)ority ote of "OD and #' 150. -o issue stoc( diidends—ma)ority of the &uorum of "OD and #'. -he approal of stoc(holders is not re&uired !ith respect to other diidends such as cash and bond diidends. 15. -o enter into management contract—ma)ority of the &uorum of "OD and a ma)ority of the outstanding capital stoc( of both managing and managed corporations and in some
cases, #' of the total outstanding capital stoc( entitled to ote or of the members, !ith respect to the managed corporation. 154. -o adopt by3la!s—a ma)ority of the outstanding capital stoc( or of the members. 155. -o fi; the issued price of no par alue shares—a ma)ority of the &uorum of "OD if authoried by the articles of incorporation or in the absence of such authority, by a ma)ority of the outstanding capital stoc(. 157. -o effect or amend a plan of merger or consolidation—a ma)ority of ote of "OD and #' of the outstanding capital stoc( or of the members of the constituent corporation 179. -o dissole the corporation—a ma)ority ote of "OD and #' of the outstanding capital stoc( or of the members 171. -o adopt a plan of distribution of assets of a nonstoc( corporation—a ma)ority ote of trustees and #' of the members haing oting rights. 17#. $ corporation may prescribe a greater oting re&uirement for the approal of any of the aboe corporate acts in its articles of incorporation andor by3la!s in order to protect the rights of minority stoc(holders 17'. Notice of a regular meeting need not be gien if the articles of incorporation or by3 la!s specify the time of the meeting e;cept !hen it is to be held at another place/. $ director trustee may !aie the re&uirement of no tice of any meeting, e;pressly or impliedly 17*. If the presiding officer is not present at the time for a meeting to conene, a stoc(holder !ho ta(es the floor may temporarily preside at the meeting of stoc(holders pending the selection of the presiding officer. >nless the contrary is proided by the by3 la!s, the presiding officer may be selected by the ote of the stoc(holders present. 170. One cannot ote if he does not appear to be a stoc(holder in the boo(s of the corporation 17. +ach member, regardless of class, shall be entitled to one ote 174. Pledgees or mortgagees of shares in stoc( corporation hae the right to attend and ote at meetings of stoc(holders only !hen e;pressly gien such right in !riting by the pledgor or the mortgagor as the latter remains the o!ner of the stoc( pledged or mortgaged. -he authoriation is re&uired by the code to be recorded on the appropriate corporate boo(s by such pledgor or mortgagor. 175. $ pro;y may refer to a person or a formal !ritten authority 177. -he right to ote by pro;y is a special form of agency. No pro;y shall be alid and effectie for a period longer than 0 years. #99. Directors cannot attend or ote by pro;y at board meetings #91. Pro;ies are irreocable at any time unless made irreocable by the gier. It becomes irreocable !hen the holder of pro;y has gien or promised a stoc(holder a consideration or interest loan of money in return for irreocable pro;y. #9#. In oting trust agreementmust be in !riting, notaried and filed !ith =+C/, a stoc(holder of a corporation parts !ith the oting po!er only but retains the beneficial o!nership of stoc(. $ oting trustee is only a share o!ner ested !ith legal title for the sole purpose of oting upon stoc( that he does not o!n. Ne! certificate is issued to the trustee. #9'. -rustee is the legal title holder or o!ner of the shares so transferred under the agreement. ence, he is &ualified to be a director. #9*. -he ultimate control of the corporation depe nds upon the otes of the stoc(holders
#90. Foting trust agreement, if alidly e;ecuted is irreocable !hile a pro;y must be coupled !ith interest before it becomes irreocable. #9J. -he stoc(holders hae the po!er to fill acancy in the "OD if the cause is any of the ff: 1/ remoal #/ +;piration of term '/ Increase in the number of directors #94J. "OD can fill the acancy if the cause of acancy is other than remoal, e;piration of term or increase in the number of director and the remaining directors still constitute a &uorum #95J. Directors are entitled to compensation if the giing of compensation is fi;ed in the by3la!s, approed by the stoc(holders representing at least a ma)ority of the outstanding capital stoc( or !hen the compensation refers to reasonable per diem #97. $ contract of the corporation !ith one or more its directors or trustees is oidable unless all the ff conditions are present: 1/ that the presence of such director is not necessary to constitute a &uorum #/ that the ote of such director !as not necessary for the approal of the contract '/ that the contract is fair and reasonable under the circumstances.. Ehen any of the first t!o conditions is absent, such contract may be ratified by the ote of #'. Aull disclosure of the aderse interest of the director inoled must be made at such meeting. #19. -here is interloc(ing directorate !hen a director holds seats in the board of directors of # or more corporations. -here is no prohibition in the corporation code regarding this. o!eer, la! proides for re&uisites !hen # corporations !ith interloc(ing directors contract !ith each other. -he re&uisites are if the interest of the director is substantial, #9percent and nominal in the other/: 1/ there is no fraud #/ the contract is fair and reasonable '/ the presence is not re&uired for a &uorum and approal, ote. If the interest is both nominal or substantial, re&uirement '/ is no longer re&uired. #11. -he doctrine of corporate opportunity prohibits directors from ac&uiring business opportunities for his personal gain at the e;pense of the corporation breaches his fiduciary duty/. e must first disclose to the corporation the opp ortunity and if the latter refuses to ta(e it, he can ta(e it. If breached, he must account to the corporation the profits by refunding the same. #1#. +;ecutie committee is composed of not less than ' directors and !hose creation is proided in the by3la!s. It acts on routine matters or on those !hich do not re&uire board meeting because it is difficult to conene due to &uorum re&uirement. -hus small number is appointed among them. It cannot repeal or adopt by3la!s and cannot fill acancies in the board. #1'. $ donation must be for a public !elfare and not for political purpose #1*. =pecific e;press po!ers are to shorten or e;tend corporate life, increase or decrease capital stoc(, po!er to incur create or increase bonded indebtedness and po!er to deny preemptie right. #10. $ll stoc(holders must gie their consent for the ratification of an ultra ires act. #1. $ corporator in a stoc( corporation must be a stoc(holder. onorary membership in a business corporation is not allo!ed by la! #14. Priate corporation may be organied by priate or by the state or both for priate ends, aims, benefits or purpose #15. In political la!, public corporations are commonly referred as to municipal corporation
#17. 2oernment created priate corporation to augment its income. -he corporation is then sub)ect to the rules of the la! goerning priate corporation. +;amples are: 2=I=, PN6, %6-, PN", N$E$=$, N$POCO6 ##9. Kuasi3public corporation—are in reality organied as priate corporation but performs public functions. +;amples: P%D-, @+6$%CO, P$%, E2 and $ ##1. Pre3incorporation subscription shall be irreocable !ithin months from subscription
%$yap =ource: De %eon and ?udge "etonio
