CORPORATION LAW

Identity Doctrine
Separate juridical personality
If the plaintiff can show that there was such a unity interest and ownership
A corporation has a personality separate and distinct from that of its that the independence of the corporation had in effect ceased or had never
stockholders and officers. Hence, the stockholders or the managers begun, and adherence to the fiction of separate identity would serve only to
CANNOT be held solidarily liable for the obligations incurred by the defeat justice and equity.
corporation.
Alter Ego Doctrine
Piercing the veil of corporate fiction It must be shown that there is ​unity of interest and ownership that the
separate personalities of the corporation and the individual no longer exist
GR: ​A corporation is vested by law with a personality separate and distinct and that if the acts are treated as those of the corporation alone, an
from that of each person composing or representing it. inequitable result will follow.

XPN: Doctrine of Piercing the Veil of Corporate Fiction – A corporation’s In this case, a corporation may be a dummy/sham/serves no business
separate juridical personality may be disregarded when there is abuse of the purpose.
corporate form
Fraud is not an essential element​. Even if there is no finding of fraud, the
Instrumentality Doctrine veil may be pierced when there is ​substantial ownership of all the stocks
1. Control​, not mere majority or complete stock control, but complete coupled with other circumstances like failure to observe corporate formalities,
domination, not only of finances but of policy and business practice non-payment of dividends, use of funds of the corporation by the stockholder,
in respect to the transaction attacked so that the corporate entity as etc.
to this transaction had at the time no separate mind, will or existence
of its own;
2. Such control must have been used by the defendant to commit fraud Articles of incorporation
or wrong, to perpetuate the violation of a statutory or other positive A document that defines the charter of the corporation stating its name,
legal duty, or dishonest and unjust act in contravention of plaintiff’s purpose or purposes, its capital stock, as well as the description of its
legal right; and governing board as well as other stipulations under this section.
3. The aforesaid control and breach of duty must have proximately
caused the ​injury​ or unjust loss complained of. The contents of the AOI are binding, not only on the corporation and its
stockholders, but also the State. The State cannot disregard the provisions of
The ABSENCE of any one of these elements ​prevents piercing the corporate the Articles without any valid reason. It cannot whimsically revoke the AOI.
veil.
It constitutes the constitution of a corporation. An entry in the articles of Vested in the individuals who compose the corporation and not in the
incorporation is evidence of the factual stipulations therein. corporation itself, and CANNOT be conveyed in the absence of legislative
authority to do so.
By-laws
Secondary Franchise
Relatively permanent and continuing rules of action adopted by the
corporation for its own government and that of the individuals composing it Rights and privileges conferred upon existing corporations.
and those having the direction, management and control, in whole or in part,
of its affairs and activities. Example: Corporate Franchise from the SEC to establish a corporation and
Secondary Franchise from the BSP to operate as a bank.
Power to make and adopt by-laws is inherent in every private corporation
Common shares
By-laws are ​unnecessary to corporate existence or to the valid exercise of
corporate powers. Shares that represent the residual ownership interest in the corporation and
is a basic class of stock ordinarily and usually issued without extraordinary
“Not all corporators are incorporators, all incorporators are rights or privileges and entitles the shareholder to a pro rata division of
corporators.” profits.

Corporators
Preferred shares
Those who compose a corporation, whether as:
a. Stockholders or shareholders in a stock corporation; or Shares that entitle the shareholder to some priority on dividends and/or asset
b. Members in a non-stock corporation. distribution.
a. Preferred Shares as to Assets – preferred shares which give the
holder thereof preference in the distribution of the assets of the
Incorporators
corporation in case of liquidation.
Those stockholders or members mentioned in the articles of incorporation as b. Preferred Shares as to Dividends – preferred shares which the
originally forming and composing the corporation and who are signatories holder is entitled to receive dividends on said share to the extend
thereof. agreed upon before any dividends at all are paid to the holders of
common shares.
i. Cumulative – if a dividend is omitted in any year, it must be
Primary Franchise
made up in a later year before any dividend may be paid on
The franchise to exist as a corporation. the common in the later year.
ii. Non-cumulative – no need to make up for undeclared
dividends.
 iii. Participating – entitled to participate with the common 2. The redeemed shares ​will not be considered retired and will
shares in excess distribution. become treasury shares ​if the Articles of Incorporation expressly
iv. Non-participating – not entitled to participate with the provides that once redeemed, the redeemable shares shall be
common shares in excess distribution classified as treasury shares.
3. If the redeemable shares are considered retired, ​the authorized
The board of directors, when authorized in the articles of incorporation, may capital stock of the corporation is in effect reduced by the
fix the ​terms and conditions of preferred shares of stock or any series corresponding number of shares because the redeemed shares ​can
thereof. no longer be reissued​. The Articles of Incorporation must be
○ Such terms and conditions shall be effective upon filing of a amended accordingly.
certificate thereof with the Securities and Exchange Commission.
Founders shares
Redeemable shares
Shares that are given to those who helped organize the corporation. This
Shares which may be purchased by the corporation from the holders of such may be a form of reward to the founders.
shares upon the expiration of a fixed period.
The special right given to the founders may also be by reason of some
Redeemable shares may be issued as long as: business concerns such that the business of the corporation is of a character
1. It is expressly provided for in the articles of incorporation and in the where it is necessary that for a period of time its control must be granted to a
stock certificate; and certain group of individuals.
2. Subject to rules and regulations issued by the Commission.
Five Year Limitation
Redeemable shares ​may be issued ​regardless of ​the existence of The five-year limitation imposed by Section 7 refers only to the right to vote
unrestricted retained earnings​. and be voted for in the election of directors.
○ However, this is subject to the condition that the corporation ​has, ○ After the expiration of the limitation period, founders’ shares shall
after such redemption, assets in its books to cover debts and have equal rights with the holders of common shares
liabilities​ inclusive of capital stock.
○ Redemption, therefore, may not be made where the corporation is
Treasury shares/Stock buybacks
insolvent or if such redemption will cause insolvency or inability of
the corporation to meet its debts as they mature. Shares of stock which have been ​issued and fully paid for, but ​subsequently
reacquired​ by the issuing corporation through:
Effect of Redemption 1. Purchase;
1. When the redeemable shares are redeemed, the same shall be 2. Redemption;
considered ​retired ​and ​no longer issuable unless otherwise 3. Donation; or
provided for in the Articles of Incorporation. 4. Some other lawful means.
 GR: A corporate term for a specific period may be extended or shortened by
amending​ the articles of incorporation.
Authorized capital stock
The amount fixed in the articles of incorporation to be subscribed and paid by XPN: No extension may be made earlier than three (3) years prior to the
the stockholders original or subsequent expiry date(s) ​unless there are justifiable reasons for
an earlier extension as may be determined by the Commission.
Subscribed capital stock
That portion of authorized capital stock that has already been subscribed or Address of a corporation
covered by subscription agreements whether fully paid or not. SEC-OGC Opinion No. 12-12 (August 9, 2012)
Query: ​When is the Articles of Incorporation required to be amended when
Paid-in or paid–up capital there is a change in the principal office of the corporation?

The amount of outstanding capital stock and additional paid-in capital or There is no need to amend the AOI, if the transfer is merely to ​another floor
premium paid over the par value of the shares. (The portion of the of the same building​, inasmuch as locating the principal office of the
subscribed capital that has been paid) corporation in this circumstance, will still be possible.

No Minimum Subscribed Capital Stock & Paid-up Capital However, if the change of address is ​from one building to another
Section 13 of the Old Corporation Code (B.P. Blg. 68) required that at least building​, even if within the same municipality or city, an amendment of the
25% of authorized capital stock to be subscribed at the time of incorporation, Articles of Incorporation is REQUIRED. This is so, because if the change of
and at least 25% of the subscribed capital stock to be paid upon subscription address resulting from the change of building is not properly reflected, a
(25-25 rule). This provision has been removed by the Revised Corporation difficulty arises in locating the principal office as a necessary consequence of
Code. the transfer. Thus, it is not enough to reflect such change merely in the GIS,
especially since not all corporations regularly comply with this reportorial
Term or Life of a Corporation requirement.

GR: ​The corporation shall have perpetual existence. That said, it is with more reason that the Articles of Incorporation should be
amended when the transfer is ​from one street to another​.
XPN: Unless the corporation, upon a vote of its stockholders representing a
MAJORITY of its outstanding capital stock​, notifies the Commission that it
elects to retain its specific corporate term pursuant to its articles of Name Verification and Reservation (Secs. 17 & 18)
incorporation. For ​New Corporations​, no corporate name shall be allowed by the
○ Provided that any change in the corporate term under this section is Commission if:
without prejudice to the ​appraisal right​ of dissenting stockholders.
 1. It is ​not distinguishable from that already reserved or registered for of an existing corporate name or even ​a trademark belonging to
the use of another corporation; or another​.
2. If such name is ​already protected by law​; or
3. When its use is ​contrary​ to existing law, rules and regulations. The name cannot likewise be used if it is the ​essential and distinguishing
feature of another​ corporation’s registered and protected corporate name.
​ xisting​ ​Corporations​:
For E
The Commission may, when one of the instances above are present, Examples
summarily order the corporation to immediately ​cease and desist from using 1. Universal Mills Corporation vs. Universal Textile Mills, Inc.
such name and ​require the corporation to ​register a new one​. 2. Philips Electrical Lamps, Inc. and Philips Industrial Development, Inc.
○ Upon the approval of the new corporate name, the Commission shall vs. Standard Philips Corporation
issue a certificate of incorporation under the amended name.
Doctrine of Secondary Meaning
The Corporation may not refuse the order of the Commission because Sec. A word or phrase, which is ​originally incapable of exclusive appropriation
14 requires such undertaking to be indicated in its Article of Incorporation, to because the word or phrase is geographic or otherwise descriptive​,
wit: might nevertheless have been used for so long and so exclusively by one
“Tenth: That ​the incorporators undertake to change the name of producer with reference to an article ​and the purchasing public has
the corporation immediately upon receipt of notice from the considered the word or phrase as associated to his product.
Commissio​n that another corporation, partnership or person has
acquired a prior right to the use of such name, that the name has Thus, if a corporate name, though descriptive, has been ​used for so long
been declared not distinguishable from a name already registered or and exclusively by one corporation ​and has become associated with
reserved for the use of another corporation, or that it is contrary to that corporation alone in the mind of the public​, another corporation
law, public morals, good customs or public policy.” cannot register said name as a corporate name.

Priority of Adoption Rule Failure to comply

The corporation that first adopts a corporation name has the right thereto and If the corporation fails to comply with the Commission's order, the
a subsequent corporation cannot use the same name. Commission may hold the corporation and its responsible directors or officers
in contempt ​and/or hold them ​administratively, civilly and/or criminally
Dominancy Test liable under this Code and other applicable laws ​and/or ​revoke the
Under the Dominancy Test that is incorporated in the Intellectual Property registration of the corporation​.
Code, there will be an infringement if the mark contains the dominant feature
of the mark of a trademark belonging to another. Process for Incorporation
1. A person or group of persons desiring to incorporate shall submit the
This rule applies to corporate names. Thus, the name cannot be used if the intended corporate name to the Commission for verification.
name indicated in the Articles of Incorporation adopts the ​dominant feature
 2. If the Commission finds that the intended corporate name complies
direct.
with Sec. 17, the name shall be ​reserved in favor of the
incorporators. Existence may be inquired into and Existence may not be inquired into
3. The incorporators shall then submit their articles of incorporation and forfeited by the State in a ​quo and forfeited by the State.
by-laws to the Commission. warranto proceeding made by the
4. If the Commission finds that the submitted documents and Solicitor General.1
information are fully compliant with the requirements of this Code,
Stockholders possess the same rights unless otherwise provided by the
other relevant laws, rules and regulations, the Commission shall
statute but no greater rights than the de jure stockholders.
issue the certificate of incorporation.
Generally, there is no difference between the liabilities of the stockholders.
De facto corporation
A corporation that is formed where there exists a flaw in its incorporation but Corporation by estoppel
there is colourable compliance with the law.
An unincorporated association, which represented itself to be a corporation,
will be ​estopped f​rom denying its corporate capacity in a suit against it by a
Requisites:
third person who relied in good faith on such representation.
1. A valid ​law​ under which the corporation is organized

It CANNOT allege lack of personality to be sued to evade its responsibility for

2. An attempt in ​good faith​ to incorporate
a contract it entered into, by virtue of which it received advantages on
○ there must be colorable compliance with the law.
benefits, or on any tort committed by it.
○ No good faith to incorporate if the SEC issues no Certificate
of Incorporation. All incorporators know or ought to know that
Reverse Estoppel
the personality of a corporation begins to exist only from the
A third party who, knowing an association to be unincorporated, nonetheless
time the certificate is issued.
treated it as a corporation and received benefits from it, may be barred from
denying its corporate existence in a suit brought against the alleged
3. An assumption of ​corporate powers
corporation.
○ A corporation must have exercised its franchise to be a
corporation by doing business under it
Non-user of Corporate Franchise;
Continuous Inoperation
DE FACTO DE JURE
(Sec. 21)
Has a right to corporate existence Has a right to corporate existence 1. Certificate of incorporation shall be revoked
even against the State ​if the attack even against the State.
is collateral but not if the attack is
1
Rule 66 Sec. 1(c) of RoC
 ○ Non-Use of Corporate Charter: ​If a corporation does not formally 1. Obedience
organize and commence its business ​within five (5) years from the 2. Diligence
date of its incorporation​. 3. Loyalty
○ If a delinquent corporation (#2) fails to resume operations and
comply with all requirements that the Commission shall prescribe
Theory of concession
within a period of two (2) years​.
A corporation is an artificial being created by operation of law. It owes its life
2. Corporation under delinquent status to the State and its birth is purely dependent on the State. It is the State that
● Continuous Inoperation: If, after due notice and hearing, a permits the directors/trustees to perform only such functions as the State
corporation has commenced its business but ​subsequently allows.
becomes inoperative for a period of at least five (5) consecutive
years Theory of delegated power
All powers reside in the stockholders and are just delegated to the Board of
Board of directors Directors/Trustees as agents.
Unless otherwise provided in this Code, the board of directors or trustees
shall ​exercise the corporate powers​, ​conduct all business​, and ​control Qualifications and disqualifications of a director
all properties of the corporation​.
Qualifications
He must own at least one share of the capital stock of the corporation in his
Director Trustee own name or if the corporation is a non-stock corporation, he shall be a
member thereof.
Each director and trustee shall hold office until the successor is elected
and qualified. ○ One cannot be a director if he is merely an assignee of the share
and the assignment in his favor is not yet registered in the books of
Elected for a term of ​one (1) year Elected for a term ​not exceeding the corporation.
from among the holders of stocks. three (3) years from among the
members. Majority of the directors/trustees must be residents of the PH.
○ Residence is equivalent to domicile.
Must own at least one share of Must be a member.
○ Domicile is the physical presence in the State and an intention to
stock.
remain therein

Disqualifications
Duties of a director A person shall be disqualified from being a director, trustee or officer of any
corporation if, ​within five (5) years p
​ rior to the election or appointment as
In a broad sense, management has three paramount duties, namely:
such​, the person was:
 (a) Convicted by final judgment:
Cumulative voting
(1) Of an offense punishable by imprisonment for a period
exceeding six (6) years; Cumulate said shares and give one (1) candidate as many votes as the
(2) For violating this Code; and number of directors to be elected multiplied by the number of the shares
(3) For violating Republic Act No. 8799, otherwise known as owned.
"The Securities Regulation Code";
(b) Found administratively liable for any offense involving fraudulent Example
acts; and If Mr. A has 10 shares and there are 5 directors to be elected, he can cast 50
(c) By a foreign court or equivalent foreign regulatory authority for acts, votes (10 shares x 5 directors) which he can give to one candidate or
violations or misconduct similar to those enumerated in paragraphs distribute in the proportion that he may deem fit. He may also divide the
(a) and (b) above. votes among two or more candidates.
The basic effect of cumulative voting is to increase the chances of minority
NOTE: ​This is without prejudice to qualifications or other disqualifications, stockholders to elect a director. Cumulative voting ensures minority
which the SEC or the Philippine Competition Commission may impose in its representation in the board.
promotion of good corporate governance or as a sanction in its administrative
proceedings. Removal of a director (Sec. 27)

Other grounds may be provided for in the articles of incorporation or by-laws. Any director or trustee of a corporation may be removed from office by:
1. A vote of the stockholders holding or representing at least 2/3 of the
outstanding capital stock, or
Qualifications 2. In a nonstock corporation, by a vote of at least ​2/3 of the members
entitled to vote.
President Must be a director
3. The Commission shall, motu proprio ​or upon verified complaint, and
Corporate Secretary Must be a resident after due notice and hearing, order the removal of a director or
trustee ​elected despite the disqualification​, ​or whose
Treasurer Must be a citizen & resident disqualification arose or is discovered subsequent to an
election.
Such other officers As may be provided in the bylaws
Limitations for Nos. 1 & 2:
Compliance officer Corporation vested with public 1. Such removal shall take place either at a ​regular meeting of the
interest corporation or at a ​special meeting​ called for the purpose; and
2. Previous notice to stockholders or members of the corporation of the
intention to propose such removal at the meeting.
Special meeting Any vacancy occurring in the board of directors or trustees other than by
A special meeting of the stockholders or members for the purpose of removal or by expiration of term may be filled by:
removing any director or trustee ​must​ be called by the secretary​: 1. The vote of at least a ​majority of the ​remaining directors or trustees​,
1. On order of the president; or if​ still constituting a quorum; otherwise
2. Upon written demand of the stockholders representing or holding at 2. Filled by the stockholders or members in a ​regular or special
least a majority of the outstanding capital stock; or meeting​ called for that purpose.
3. A majority of the members entitled to vote. ○ The election must be held ​no later than 45 days from the
time the vacancy arose.
If there is ​no secretary​, or if the secretary, ​despite demand, fails or
refuses to call the special meeting or to give notice ​thereof, the Vacancy Due to Expiration of Term
stockholder or member of the corporation signing the demand may ​call for When the vacancy is due to term expiration, the election shall be held ​no
the meeting ​by directly addressing the stockholders or members​. ​ eeting​ called for that purpose.
later than the day of such expiration​ at a m

Cause for removal Vacancy Due to Removal

GR: Removal may be with or without cause When the vacancy arises as a result of removal by the stockholders or
XPN: Removal without cause may not be used to deprive minority members, the election may be held on the ​same day of the meeting
stockholders or members of the right of representation to which they may be authorizing the removal ​and ​this fact ​must be so stated in the agenda and
entitled under Section 23 of this Code. notice​ of said meeting.

Disqualified Director Increase in Directors & Trustees

Removal should be distinguished from ouster because of disqualification. Any directorship or trusteeship to be filled by reason of an increase in the
○ There is no need to follow the procedure of removal required under number of directors or trustees shall be ​filled only by an ​election at a
Sec. 27 if the director is disqualified pursuant to Sec. 26. regular or at a special meeting of stockholders or members duly called
○ By operation of law, such director is disqualified to act as director for the purpose​, ​or ​in the same meeting authorizing the increase of
thereby creating vacancies in the Board. Mere declaration of directors or trustees​ if so stated in the ​notice​ of the meeting.
disqualification as the cause of vacancy is sufficient. ○ The Same Meeting: Amending the Articles of Incorporation
authorizing the Increase of Directors/Trustees + Election of New
Effect on shares Directors/Trustees.
Generally, the removal of the director does not result in the transfer of his
shares; the removed director ​remains​ a shareholder. Election for Vacancies
In all elections to fill vacancies under this section, the procedure set forth in
Sections 23 and 25 of this Code shall apply.
Vacancy in the board of directors (Sec. 28)
○ Cumulative voting for election of replacement or new directors.
Vacancy other than Removal or Expiration of Term
 4. If the director or a trustee serves as an officer of the corporation
Emergency director/Emergency board (Sec. 28)
(SEC Opinion, Aug. 19, 1992)
Replacement Director
A director or trustee elected to fill a vacancy shall be referred to as Limitations:
replacement director or trustee and shall ​serve only for the unexpired term 1. In no case shall the total yearly compensation of directors exceed
of the predecessor​ in office. 10% of the net income ​before income tax of the corporation during
the preceding year.
Emergency Board 2. Directors or trustees shall not participate in the determination of their
When the vacancy ​prevents the remaining directors from constituting a own per diems or compensation.
quorum and emergency action is required to ​prevent grave, substantial, and 3. Corporations vested with public interest shall submit to their
irreparable loss or damage to the corporation, ​the vacancy may be shareholders and the Commission, an annual report of the total
temporarily filled from among the officers of the corporation by ​unanimous compensation of each of their directors or trustees.
vote​ of the remaining directors or trustees​.
SEC Opinion (June 13, 1991)
The action by the designated director or trustee shall be ​LIMITED to the Q: ​Does the total yearly compensation of directors mentioned in Sec. 29
emergency action necessary​, and the term shall ​cease within a reasonable include per diems?
time ​from the termination of the emergency or ​upon election of the
replacement director or trustee​, whichever comes earlier. The express exception in Sec. 29 clarifies the intention of the law that ​"per
diems" are not included in the limitation clause of yearly compensation
The corporation must notify the Commission ​within three (3) days from the of directors​.
creation of the emergency board, stating therein the reason for its creation.
However, there is a limitation that "per diems" must be ​reasonable​. Thus,
Compensation of directors stockholders may review such board resolution fixing or increasing per diems
of the members of the Board and may inquire into its reasonableness, and if
GR: Directors or trustees shall NOT receive any compensation in their found excessive, to afford adequate relief therefrom.
capacity as such.
Q: ​Can the 10% limit be exceeded upon by a unanimous vote of holders of
XPNs: all the outstanding shares of stock of the corporation?
1. A provision in the bylaws fixing their compensation
2. Reasonable per diems The phrase “in no case shall . . . exceed” in the provision connotes that the
3. Stockholders representing at least a majority of the outstanding 10% limitation on the amount of compensation of directors does ​not admit an
capital stock or majority of the members may grant directors or exception. The limitation is intended for the protection not only of the
trustees with compensation and approve the amount thereof at a stockholders but also for the corporate creditors and prospective investors.
regular or special meeting Hence, the same should be strictly observed.
 If the compensation being received by the directors, apart from the per diem,
SEC Opinion (August 19, 1992) have the tacit approval of the stockholders and do not exceed the ten (10%)
Q: ​When the directors of a corporation receiving compensation as such percent, can this be considered legal even if it is not explicitly provided for in
directors, apart from per diem, receive also other compensation such as the by-laws of the corporation? If this has been the practice and if found to be
incentive bonus, consultant's fee, salary, without the benefit of the required improper or illegal, how can this be corrected?
approval or vote of the stockholders, should such other compensation be
included in the ten (10%) percent limit? Salaries to officers and directors, made ​without proper authorization​, may
ordinarily be ​recoverable in a stockholders' suit​. Such a cause of action is
As to what covers "total compensation", usually it includes properly brought in a court of equity, and is common to all of the stockholders
salaries/remuneration, bonuses/gifts, or any incentive compensation for and is one for which one stockholder may sue for the benefit of all, but ​a
services rendered for the corporation. The phrase "in no case shall . . . derivative action by stockholders complaining of ​alleged excessive
exceed” connotes that the 10% limitation on the amount of compensation of salaries v ​ oted by the directors to certain officers will be barred by
directors does not admit an exception. laches​, especially after the lapse of many years since the action complained
of occurred.
Q: ​When the directors of a corporation receiving compensation as such
directors also serve as the officers of the corporation, should their salaries as
Business Judgment Rule
officers of the corporation be included in the same ten (10%) percent limit?
A defense available to Directors, Trustees and Officers to avoid liability
Relative to compensation of officers, since, the Board of Directors under Sec. 30
appoints/elects the corporate officers, ordinarily then and as manager of the
corporate affairs, it is within the Board's power to fix the salaries of the Under the Business Judgement Rule, the will of the majority of the Board
officers by way of a resolution to that effect. If there is such an authority, ​a members controls in corporate affairs, and contracts intra vires entered into
director who is also an officer may collect a salary for his services done by the Board are binding on the corporation and courts will not interfere
as an officer​. Considering that the board of directors and officers have unless such contracts are so unconscionable and oppressive as to amount to
different functions, we believe that ​the above 10% limitation excludes a wanton destruction of rights of the minority.
salaries for services rendered by officers​.
Questions of policy or management are left ​solely to the honest
Q: ​Are the directors receiving compensation as aforesaid, apart from per decision of officers and directors of a corporation ​and the ​courts are
diem, individually liable to return what they have received without the without authority to substitute their judgement for the judgement of the
approval of the stockholders? If such had been the practice for a long time Board.
already, will this extinguish or mitigate the liability, if any, of the directors
concerned? Even if there was mismanagement resulting in corporate damages and/or
business losses, still the directors/trustees may not be held liable in the
absence of bad faith in doing the acts complained of.
 3. Acquire any ​personal or pecuniary interest ​in conflict with their
duty as such directors or trustees
Doctrine of Corporate Opportunity (Sec. 33)
○ Such Directors and Trustees shall be liable jointly and
A director, trustee or officer shall not attempt to acquire, or acquire any severally for all damages resulting therefrom suffered by the
interest ​adverse to the corporation in respect of any matter which has been corporation, its stockholders or members and other persons.
reposed in them in confidence, and upon which, equity imposes a disability
upon themselves to deal in their own behalf.
Self-dealing director (Sec. 31)
○ Otherwise, the said director, trustee or officer shall be ​liable as a
trustee for the corporation and ​must account for the profits which GR: A contract of the corporation with one (1) or more of its directors,
otherwise would have accrued to the corporation. trustees, officers or their spouses and relatives within the fourth civil degree
of consanguinity or affinity is ​voidable​, at the option of such corporation,
Director unless all the following conditions are present:
GR: Where a ​director​, by virtue of such office, acquires a business
opportunity which ​should belong to the corporation​, thereby obtaining profits (XPN) ​Valid​ if A
​ LL​ the following conditions are present:
to the prejudice of such corporation, the director must ​account for and 1. The presence of such director or trustee in the board meeting in
refund to the latter all such profits​. which the contract was approved was not necessary to constitute a
○ This provision shall be applicable, notwithstanding the fact that the quorum for such meeting;
director risked one's own funds in the venture. 2. The vote of such director or trustee was not necessary for the
approval of the contract;
XPN: Unless the act has been ​ratified by a vote of the stockholders owning 3. The contract is fair and reasonable under the circumstances;
or representing at least two-thirds ​(2/3)​ of the outstanding capital stock. 4. In case of corporations vested with public interest, material contracts
are approved by at least two-thirds (2/3) of the entire membership of
the board, with at least a majority of the independent directors voting
Liability of directors (Sec. 30)
to approve the material contract; and
GR: Directors and Trustees are not personally or solidarily liable with the 5. In case of an officer, the contract has been previously authorized by
corporation. Obligations incurred by them, acting as such corporate agents, the board of directors.
are not theirs but the direct accountabilities of the corporation they represent.
Ratification
XPNs: J​ oint and several liability may be incurred by Directors and Trustees Where any of the ​first three (3) conditions set forth in the abovementioned
who: requirements is ​ABSENT​, in the case of a contract with a director or trustee,
1. Willfully and knowingly vote for or assent to patently ​unlawful acts such contract may be ratified by the vote of the stockholders representing at
of the corporation; least two-thirds ​(2/3) ​of the outstanding capital stock or of at least two-thirds
2. Are guilty of ​gross negligence or bad faith in directing the affairs of (2/3)​ of the members in a meeting called for the purpose.
the corporation;
 ○ Provided, that ​full disclosure of the adverse interest ​of the
directors or trustees involved is made at such meeting ​AND ​the Ratification
contract is fair and reasonable ​under the circumstances. In the ​absence of any of the first two requisites​, the contract can be
○ The fourth and fifth requisite must still be present. ratified by the corporation where the ​interest of the interlocking director is
merely nominal ​through a vote of the stockholders representing at least
twothirds ​(2/3) ​of the outstanding capital stock, ​so long as the following
Interlocking directors (Sec. 32)
requisites are present:
There is an ​interlocking director in a corporation when one (or some or all) of 1. There must be full disclosure of the adverse interest of the
the directors in ​one corporation is (or are) a director(s) in ​another interlocking director and;
corporation. 2. The contract is fair and reasonable under the circumstances.

The interest of the interlocking director in the corporation is ​substantial if his

Executive/management committee (Sec. 34)
stockholdings ​exceed 20% of the outstanding capital stock​. The interest
of the director is ​nominal if his stockholdings is ​20% or less of the The Board may create an executive committee, under the following
outstanding capital stock​. conditions:
1. The ​by-laws​ must so provide; and
Effect of Interlocking DIrectorship 2. The executive committee must be composed of ​at least three
GR: Provided the contract is fair and reasonable under the circumstances, a directors​.
contract between two (2) or more corporations having interlocking directors
shall not be invalidated on that ground alone. Functions
○ XPN: Except in cases of fraud. GR: Said committee may act, by ​majority vote of all its members​, on such
specific matters within the competence of the board, as may be ​delegated to
Effect on Contracts it in the bylaws ​or​ by majority vote of the board​.
If the ​interest of the interlocking director in one (1) corporation is
substantial AND the ​interest in the other corporation or corporations is XPNs: The committee may NOT act on the following:
merely ​nominal​, a contract between two corporations shall be VALID, if the 1. Approval of any action for which shareholders' approval is also
following conditions are met: required
1. The presence of the interlocking director in the board meeting of the 2. Filling of vacancies in the board
corporation where his interest is merely nominal in which the contract 3. Amendment or repeal of bylaws or the adoption of new bylaws
was approved was not necessary to constitute a quorum for such 4. Amendment or repeal of any resolution of the board which by its
meeting; express terms is not amendable or repealable
2. The vote of such interlocking director was not necessary for the 5. Distribution of cash dividends to the shareholders
approval of the contract; and
3. The contract is fair and reasonable under the circumstances. SEC Opinion (September 27, 1993)
Queries: must investigate the legality of the title of each corporation officer as a
(1) Is it mandatory that the by-laws expressly provide for the creation of an condition precedent to a business transaction.
executive committee? ​YES
(2) If yes, will not a provision in the by-laws "authorizing the board to create It is thus advised that if the present by-laws of the corporation is silent on the
such committees as the board may deem necessary", be a substantial authority to create an "Executive Committee", it should be amended in
compliance with the requirement of the law? ​NO accordance to reflect such authority so as to legalize the creation and
(3) If no, what would be the status of an executive committee that is created appointment of said corporate body.
without an express authority in the by-laws? Will it constitute an ultra-vires
act of the corporation? ​PRINCIPLE OF DE FACTO OFFICERS
Ultra vires act (Sec. 44)

It is construed from Sec. 34 that the "Executive Committee" can only be Ultra vires acts of corporation refers to acts:
created by virtue of a provision in the by-laws. In other words, the Board of 1. Not within the corporate powers conferred by the Corporation Code
Directors cannot simply create or appoint an executive committee to perform 2. Not within the corporate powers conferred by the Articles of
some of its functions if there is no such authority in the by-laws. Incorporation
3. Not necessary or incidental in the exercise of the powers so
Relative to the second query, because of the nature of the function of the conferred
"Executive Committee", ​the authority to appoint such body should be
clearly spelled out in the by-laws​, and a provision in the by-laws which Effects of Ultra Vires Acts
states that "authorizing the board to create such committees as the board GR: Ultra vires acts of a corporation are ​void​, e.g. selling of shares beyond
may deem necessary" is not a sufficient authority for its creation and the authorized capital stock (over-issuance).
appointment. And so, to avoid any doubt as to whether this practice of
creating an "executive committee" to perform certain delegated functions of XPNs:
the Board is proper or not, the Corporation Code requires that before it can 1. Voidable [should be ​Unenforceable​] contracts of ​self-dealing
be done, it has to be expressly authorized in the by-laws. directors/trustees/officers​; subject to ratification (see Art. 31)
2. Voidable contracts ​between corporations with interlocking directors​;
Anent the third query, ​the principle on "de facto officers" may be applied subject to ratification (see Art. 32)
in so far as third parties are concerned​. The doctrine of the validity of the 3. Doctrine of Apparent Authority​; estoppel (see p. 21)
acts of officers de facto rests on public policy and justice. The official
dealings of directors de facto with third persons are sustained as rightful and Doctrine of apparent authority
valid, on the ground of continuous acquiescence by the corporation, and
suffering them to hold themselves out as having such authority; thereby IIf a corporation ​knowingly permits one of its officers, or any other agent, to
inducing others to deal with them in such capacity. Clearly it would be act within the scope of an apparent authority, it holds him out to the public as
impracticable for third persons to deal with corporations at all, if each one possessing the power to do those acts; and thus, ​the corporation will, ​as
against anyone who has in good faith dealt with it through such agent​, 3. Hold control of the corporation.
be estopped from denying the agent’s authority​.
The stockholder’s right to file a derivative suit is not based on any express
provision of The Revised Corporation Code, but is impliedly recognized when
Individual suit
the law makes corporate directors or officers liable for damages suffered by
Actions brought by the shareholder in his own name against the corporation the corporation and its stockholders for violation of their fiduciary duties.
when a wrong is directly inflicted against him personally and to determine his
individual right. The cause of action pertains to the shareholder and the Requisites for Derivative Suit
action is meant directly to protect his interest. 1. The party bringing suit should be a ​shareholder as of the time of the
act or transaction complained of, the number of his shares not being
An example of when a SH can bring an individual action is when he is denied material;
access to corporate books or if there is denial of dividends to a stockholder. 2. He has tried to ​exhaust intra-corporate remedies​, i.e., has made a
demand on the board of directors for the appropriate relief but the
Representative suit latter has failed or refused to heed his plea; and
○ While it is true that the complaining stockholder must
Actions brought by the stockholder in behalf of himself and all other satisfactorily show that he has exhausted all means to
stockholders similarly situated when a wrong is committed against a group of redress his grievances within the corporation; such remedy
stockholders. is no longer necessary where the corporation itself is under
the complete control of the person against whom the suit is
Where the wrong is done to a group of stockholders, as where the preferred being filed. The reason is obvious: a demand upon the board
shareholders’ rights are violated, a class or representative suit will be proper to institute an action and prosecute the same effectively
for the protection of all shareholders belonging to the same group. would have been useless and an exercise in futility.
3. The ​cause of action ​actually devolves on the corporation​, the
Derivative suit wrongdoing or harm having been, or being ​caused to the corporation
and ​not to the particular stockholder bringing the suit.​
A derivative action is ​a suit by a shareholder ​to enforce a corporate cause
of action​.
Individual Representative Derivative
Under the RCC, where a corporation is an injured party, its power to sue is
Actions brought ​by the Actions brought by the Actions brought by ​one
lodged with its board of directors or trustees. But an individual stockholder
stockholder or member stockholder or member or more stockholders
may be permitted to institute a derivative suit on behalf of the corporation in in behalf of himself or members in the
in his own name
order to protect or vindicate corporate rights whenever the officials of the and all other name and on behalf
against the corporation
corporation: stockholders or of the corporation ​to
when a wrong is
1. Refuse to sue; members similarly redress wrongs
directly inflicted against
2. Are the ones to be sued, or
 him personally and to situated when a wrong committed against it, or
is committed ​against a to protect or vindicate 2. Continuous Proxy: Refers to one where the authority is ​not limited
determine his
group of stockholders corporate rights to a specific meeting and ​continues for a specific period​.
individual right.
or members.​ whenever the officials ○ However, under Sec. 57, the continuing proxy shall ​not be
of the corporation valid and effective ​for a period longer than 5 years at any
refuse to sue; are the one time.
ones to be sued, or ○ The five-year period ​can be extended upon expiration​,
hold control of the provided that the extension period is not more than 5 years.
corporation.

The cause of action The cause of action The cause of action Revocation of Proxies
pertains to the pertains to the ​group pertains to the GR: One who has given a proxy the right to vote may ​revoke the same at
individual of stockholders or corporation​. any time​.
stockholder or members​. ○ XPN: Unless said proxy is ​coupled with interest​, even though it
member​. may appear by its terms to be irrevocable.

Where ​two or more persons are given separate proxies ​but ​they are not
Proxy (Sec. 57)
intended to be joint proxies​, the giving of the last proxy is deemed a
Proxies shall be: revocation of all former proxies. ​The last proxy given revokes all previous
1. In ​writing​; proxies​.
2. Signed and filed​, by the stockholder or member, ​in any form ○ Thus, when two or more proxies are submitted, ​the proxy that is
authorized in the bylaws; and received latest ​or appears from the evidence to have been last
3. Received by the corporate secretary ​within a reasonable time executed​ will be accepted and counted.
before the scheduled meeting.
SEC Opinion (October 28, 1991)
Validity of Proxies Q: ​Is a proxy form duly accomplished yet undated, valid?
GR: Proxies shall be valid ​only​ for the meeting for which it is intended​.
Yes, as long as the bylaws of the corporation do not contain a provision
XPN: Unless otherwise provided in the proxy form. requiring proxies to be dated. It requires only that the same be designated by
○ No proxy shall be valid and effective for a period longer than five (5) the members "in, writing, which designation shall be registered with the
years at any one time. Corporate Secretary and/or his representative, prior to the opening of a
meeting".
Kinds of Proxies
1. Specific Proxy: refers to one where the authority granted the proxy As long as the proxy is executed in accordance with Sec. 57 of RCC, the
holder is ​merely for a particular meeting on a specific date​. corporation is duly bound to honor the same, even if it is undated. Where a
corporation receives an undated proxy, the post mark date or actual date of executed will be accepted and counted under the theory that the
presentation is considered. latter — i.e., more recent proxy, constitutes the revocation of the
former.
Q: ​Can a designated proxy further re-designate another under the same
proxy? Q: ​Is ​the proxy valid if two or more persons are designated in the alternative
as proxies in one and same authorization?
No. Sec. 57 provides that “Proxies shall be in writing, signed and filed, by the
stockholder or member.” ​The appointment of proxy, therefore, is purely It must be noted that the power to act as proxy has its source in the
personal​. Thus, it was held that "the right to vote is inseparable from the principal's consent, as borne out of the terms of the proxy. Hence, such
right of ownership of stock without the owner's consent, and therefore a authority will extend to the alternate proxy designated therein. T​he alternate
proxy to vote stock, to be valid, must have been given by the person who is proxy however, can only act as proxy in the event of ​non-attendance of
the legal owner of the stock and entitled to vote the same at the time it is to the other designated person​.
be voted".
Q: ​How is proxy revoked? Can there be implied revocation of proxy? If so
Accordingly, unless the stockholder or member who executed the proxy under what circumstances?
consents in writing to the re-designation of proxy, your query is answered in
the negative. As a general rule, one who has given a proxy the right to vote the stock
owned by him may revoke the same at any time, unless said proxy is
Q: ​When two or more individuals are designated as proxies by one and the coupled with an interest, even though it may in terms be irrevocable.
same person, which proxy designation should prevail where: (a) they contain
different dates; (b) they are sent through mail; (c) they are hand-carried Therefore, proxies constituting an agreement between stockholders to vote
during election of the Board; (d) one is dated and the other undated; (e) both their stock in a specified manner or for a specified purpose not supported by
are presented at the same time. any consideration other than ​a mutual agreement of the stockholders to
vote ​as stated in the proxy would be REVOCABLE.
Where a corporation receives ​more than one proxy from the same
stockholder and they are ALL undated​, ​the postmark dates become Revocation of a proxy ​need not be made by a formal notice to the
important​. corporation unless the statute prescribes otherwise. Thus, it may be revoked
○ If both are mailed on the same date, the ​one bearing the latest orally or ​by conduct​. Revocation may also be expressed to the proxy holder
time of day of postmark ​is​ c​ ounted. by subsequent proxy to another. In a number of cases, the Court held that
○ If the proxies are not mailed, then the ​time of their actual "where the same person gives two or more proxies, the one last given is to
presentation is considered. That which is ​presented latest is the be deemed a revocation of all former proxies holding that "last proxy given
one counted. revokes all previous proxies.”
○ When two or more proxies are submitted, the proxy that which is
received latest or appears from the evidence to have been last
 1. That the voting rights of the stock are ​separated ​from the other
Voting Trust Agreement (Sec. 58)
attributes of ownership​;
A voting trust is a written agreement duly notarized whereby ​the 2. That the voting rights granted are ​intended to be irrevocable ​for a
stockholder ​transfers their shares of stock to a ​trustee for the purpose of definite period of time​; and
vesting upon the trustee ​the right to vote and other rights pertaining to the 3. That the ​principal purpose of the grant of voting rights is ​to acquire
shares​, for a ​period not exceeding five years​ at any time. voting control​ of the corporation.

Limitations
Voting Trust Agreement Proxy
1. A voting trust agreement ​must not exceed the period of five years
at any time. Irrevocable Generally revocable
2. In the case of a voting trust specifically ​required as a condition in a
loan agreement,​ said voting trust ​may be for a period exceeding five Legal title is ​transferred​ to the No transfer​ of legal title
(5) years but shall ​automatically expire upon full payment of the trustee
loan​.
Share certificate shall be ​cancelled No cancellation​ of certificate shall
3. A voting trust agreement must be ​in writing and notarized​,
and ​transferred​ to trustee be made
4. A voting trust agreement shall specify the ​terms and conditions
thereof. Must be notarized Need not be notarized
5. No voting trust agreement shall be entered into for purposes of
circumventing the laws against anti-competitive agreements, abuse Trustor-shareholder ​cannot​ vote Shareholder ​retains​ his right to
of dominant position, anti-competitive mergers and acquisitions, vote
violation of nationality and capital requirements, or for the
Cannot be for a specific meeting Can be for a specific meeting
perpetuation of fraud.
Trustee ​can vote by proxy Proxy ​cannot further delegate​ his
Rights of Trustee authority to vote and must
1. Right to vote and other rights​ pertaining to the share. therefore vote in person
2. Right of inspection of all corporate books and records in
accordance with the provisions of the Revised Corporation Code. Trustee votes ​in his own right​ as Proxy is the ​agent of the
3. Voting trustee or trustees ​may vote by proxy or in any manner holder of legal title shareholder
authorized under the bylaws ​unless the agreement provides
Trustee ​can be elected​ as a Proxy ​cannot be elected​ as
otherwise​. director director

Distinguished from Proxy

In order to distinguish a voting trust agreement from proxies and other
voting pools and agreements, it must pass ​three criteria or tests​, namely: Increase/Decrease in authorized capital stock (Sec. 37)
Note: Increase in Subscribed Capital Stock and Paid-up Capital is not d. The amount of stock represented at the meeting; and
covered by Sec. 37. e. The vote authorizing the increase or decrease of the capital
stock.
The authorized capital stock may be ​increased​ by: 4. Treasurer’s affidavit showing that at least twenty-five percent (25%)
1. Increasing the number of shares and retaining the par value of the increase in capital stock has been subscribed and that at least
2. Increasing the par value of existing shares without changing the twenty-five percent (25%) of the amount subscribed has been paid in
number of shares actual cash to the corporation or that property, the valuation of which
3. Increasing the number of shares and increasing the par value is equal to twenty-five percent (25%) of the subscription, has been
transferred to the corporation; and
The authorized capital stock may be ​decreased​ by: 5. Approval of the Amended Articles of Incorporation by the SEC​,
1. Decreasing the number of shares and retaining the par value and where appropriate, of the Philippine Competition Commission.
2. Decreasing the par value of existing shares without changing the ○ Application with the SEC shall be made within six (6) months
number of shares from the date of approval of the board of directors and
3. Decreasing the number of shares and decreasing the par value stockholders, which period may be extended for justifiable
reasons.
Requirements for increase/decrease of the authorized capital stock ○ The amendments shall take effect upon their approval by the
1. Approved by a ​majority​ vote of the board of directors; Commission or from the date of filing with the said
2. Approved by at least two-thirds ​(2/3) of the outstanding capital stock Commission if not acted upon within six (6) months from the
at a stockholders' meeting duly called for the purpose; date of filing for a cause not attributable to the corporation.
3. Certificate signed by a majority of the directors of the corporation
and countersigned by the chairperson and secretary of the Stock Split
stockholders' meeting, setting forth: A share is divided or converted into two or more shares but the amount of the
a. That the requirements of Sec. 37 have been complied with; outstanding capital remains the same because the par value is also divided
b. The amount of the increase or decrease of the capital stock; in as many shares.
c. In case of an increase of the capital stock, the amount of
capital stock or number of shares of no-par stock thereof Reverse Stock Split
actually subscribed, the names, nationalities and addresses The pro-rata combination of all the outstanding shares of a specified class
of the persons subscribing, the amount of capital stock or into smaller number of shares of that class. A reverse stock split may be
number of no-par stock subscribed by each, and the amount required to increase the market value per share or it may be designed to
paid by each on the subscription in cash or property, or the eliminate minority stockholders.
amount of capital stock or number of shares of no-par stock
allotted to each stockholder if such increase is for the SEC Opinion No. 03-05 (April 27, 2005)
purpose of making effective stock dividend therefor The issuance of additional shares out of the unissued portion of the
authorized; authorized capital stock of the corporation may require only the approval by
the board of directors. Well-settled is the rule that issuance of shares out of
the unsubscribed shares of authorized capital stock of the corporation may Since it would be impossible to execute a mortgage in favor of the
be exercised by the Board of Directors thru a Board Resolution without creditor-mortgagees which could number hundreds to thousands, a Mortgage
need of stockholders' approval​. Trust Indenture is thus created.

“No decrease in capital stock shall be approved by the Commission if A Mortgage Trust Indenture is a trust agreement whereby the corporate
its effect shall prejudice the rights of corporate creditors.” properties are mortgaged in favor of a Trustee for the benefit of the various
creditors.
Trust fund doctrine
The Trust Fund Doctrine provides that subscriptions to the capital stock of a Creation or Increase of Bonded Indebtedness (reqs):
corporation constitute a ​fund to which the creditors have a right to look for 1. Approved by a ​majority​ vote of the board of directors or trustees;
the satisfaction of their claims​. 2. Approved by at least two-thirds (2/3) of the outstanding capital stock
or at least two-thirds ​(2/3)​ of the members;
It is a principle of judicial invention which says that ​corporate assets are held 3. Certificate signed by a majority of the directors or trustees of the
as a trust fund for the ​benefit of shareholders and creditors and that the corporation setting forth:
corporate officers have a fiduciary duty to deal with them properly. a. That the requirements of Sec. 37 have been complied with;
b. Any bonded indebtedness to be incurred, created or
Consistent with the Trust Fund Doctrine, ​a stockholder has no right to increased;
demand for the return of his investment​. His investment is ​“locked-in” c. The amount of stock represented at the meeting or the
until liquidation of the corporation​. A stockholder cannot, without violating number of members present at the meeting; and
the Trust Fund Doctrine, compel the corporation to return his investments d. The vote authorizing the creating or increasing of any
without the consent of all the stockholders. Neither does he have the right to bonded indebtedness.
withdraw even when all stockholders assent thereto if there is prejudice to 4. Approval of the Amended Articles of Incorporation by the SEC, and
corporate creditors. where appropriate, of the Philippine Competition Commission.
○ Application with the SEC shall be made within six (6) months
The underlying reason for the restriction springs from the necessity of from the date of approval of the board of directors and
imposing safeguards against the depletion by a corporation of its assets and stockholders, which period may be extended for justifiable
the impairment of its capital needed for the protection of its creditors. reasons.
○ The amendments shall take effect upon their approval by the
Bonded indebtedness/corporate bond (Sec. 37) Commission or from the date of filing with the said
Commission if not acted upon within six (6) months from the
Bonded indebtedness refers to ​secured indebtedness ​or those ​secured by date of filing for a cause not attributable to the corporation.
real or personal property that are ​covered by certificates​. They refer to 5. The bonds must be registered with the SEC.
negotiable corporate bonds secured by mortgage on corporate property.
 1. A ​majority​ vote of its board of directors or trustees; and
Debenture
2. The vote of the stockholders representing at least two-thirds ​(2/3) of
Debentures are serial obligations or "notes" representing indebtedness but the outstanding capital stock​, or at least two-thirds ​(2/3) of the
not ordinarily secured by any specific mortgage, lien or pledge of members​, in a stockholders' or members' meeting duly called for the
security. purpose.

Debentures are issued on the basis of the general credit of the corporation, The determination of whether or not the sale involves all or substantially all of
and since debentures are not secured by collaterals, they are not bonded the corporation's properties and assets must be computed ​based on its net
indebtedness in the true sense, and are therefore ​not covered by Sec. 37​. asset value​, as shown in its latest financial statements.
A sale or other disposition shall be deemed to cover substantially all the
SEC Opinion (April 29, 19876) corporate property and assets ​if thereby the ​corporation would be rendered
Query: incapable of continuing the business or accomplishing the purpose for
(1) Does the term "bonded indebtedness" refer to secured indebtedness only which it was incorporated.
or does it cover all forms of indebtedness whether secured or unsecured?
(2) Are debentures which are unsecured and merely debt instruments Effect on Creditors
covered by the term “bonded indebtedness”? GR: The ​transferee-corporation​ of all or substantially all of the assets (or
"Bonded indebtedness" refers to ​negotiable corporate bonds which are even shares) of the transferor-corporation will​ not be liable ​for the debts of
secured by mortgage on corporate property​. said transferor-corporation.

On the other hand, "debentures" are serial obligations or "notes" XPNs: ​The Nell Doctrine​ – However, the transferee-corporation is liable if:
representing indebtedness but not ordinarily secured by any specific 1. There is an express or implied ​assumption of liabilities​;
mortgage, lien or pledge of security. They are usually issued under an 2. The transaction amounts to a ​consolidation or merger​;
indenture, in which a trust company agrees to supervise the execution of the 3. The transaction is entered into ​fraudulently​ in order to escape
covenants of the debtor for the benefit of all the holders. liability from debtors or purchase was in fraud of creditors; and
4. The purchaser becomes ​a continuation of the seller​.
Debentures are issued on the basis of the general credit of the corporation,
and since debentures are not secured by collaterals, they are not bonded Bulk Sales Law
indebtedness in the true sense, and will not, therefore, require approval of It is the duty of the corporation to give a sworn written statement to the buyer
the stockholders ​although it is a good corporate policy to require it. the names and addresses of all creditors to whom the corporation may be
indebted, together with the amount of indebtedness due or owing, or to
Sale of all or substantially all of assets (Sec. 39) become due or owing by said corporation to each of said creditors. Further,
the purchaser in turn notifies such creditors of the proposed sale a stipulated
A sale of all or substantially all of the corporation's properties and assets, time in advance.
including its goodwill, must be authorized by:
If the corporation fails to give the written statement required, the said sale 3. Notice of the proposed investment and the time and place of the
shall be fraudulent and void, and not subject to ratification. meeting​ shall be addressed to each stockholder or member…

SEC Opinion (July 8, 1987)

Pre-emptive right (Sec. 38)
A transfer of all the property and franchise of a corporation ​does not
necessarily dissolve the corporation or terminate the corporate GR: ​All stockholders of a stock corporation shall enjoy preemptive right to
existence​. If one corporation sells all of its assets to another corporation and subscribe to all issues or disposition of shares of any class, in proportion to
there is no intent to combine, the considerations for the sale could be in cash their respective shareholdings.
or other property, and the selling corporation ​may continue in a state of
suspended animation​. Hence, subject to the above legal limitations XPNs: ​Preemptive right is not available in the following instances:
provided by Sec. 39 of the Revised Corporation Code and the Bulk Sales 1. When such right is ​denied by the articles of incorporation or an
Law, the corporation may proceed to sell all its properties and assets without amendment thereto;
dissolving the corporation. 2. When shares are ​issued in compliance with laws requiring stock
offerings or minimum stock ownership by the public; and
3. When shares are ​issued in good faith with the approval of the
Investment of corporate cash or funds (Sec. 41)
stockholders representing two-thirds ​(2/3) ​of the outstanding capital
Investment pursuant to Primary Purpose stock, ​in exchange for property needed for corporate purposes ​or in
Where the investment by the corporation is ​reasonably necessary to payment of a previously contracted debt​.
accomplish its primary purpose as stated in the articles of incorporation, ​the
approval of the stockholders or members shall NOT be necessary​. Section 38 does not distinguish and states that stockholders shall enjoy a
preemptive right to subscribe to ​all issues or disposition of shares of any
Investment of a corporation in a business, which is ​in line with its primary class​. Thus, the preemptive right is available to:
purpose​, requires ​only​ ​approval of the board of directors/trustees​. 1. Unissued/unsubscribed shares of the original authorized capital
stock
Examples: Starbucks purchasing shares of Coffeebean, Jollibee purchasing 2. Newly issued shares as a result of an increase in the authorized
shares of McDonald’s capital stock

Investment pursuant Purpose other than the Primary Purpose SEC Opinion (January 25, 1990)
The following requisites must concur: Query: ​Batangas Sugar Central Inc. proposes to increase its authorized
1. Approved​ by a ​majority​ of the board of directors or trustees; capital stock from P10M to P50M.
2. Ratified by the stockholders representing at least two-thirds ​(2/3) of
the outstanding capital stock​, or by at least two-thirds ​(2/3) of the (1) Who has the right to subscribe to the additional P40 M. authorized capital
members in the case of nonstock corporations, at a meeting duly ​ LL EXISTING STOCKHOLDERS at the time of increase
Stock? A
called for the purpose; and
(2) Can the original stockholders waive their right to subscribe to the is available to existing shareholders of PSE upon its issuance of
additional P40M in favor of the present stockholders? ​YES unsubscribed authorized capital stock to potential strategic investors.
(3) As to what extent may the present stockholders subscribe to the
additional P40M authorized capital stock? ​In proportion to the number of
Right of first refusal (Sec. 62)
shares held by them
GR: ​Corporate shares are ​freely transferable and ​does not need the
Sec. 38 of the Revised Corporation Code expressly recognizes the consent of other stockholders​.
pre-emptive right of stockholders to subscribe to all issues and disposition of
shares of any class, in proportion to their respective shareholdings. Thus, XPN: ​The Articles of Incorporation may provide a right of first refusal to
unless specifically denied in the articles of incorporation or the issuance falls stockholders as a ​limitation on transfer​.
under the exceptions, when a corporation increases its authorized capital
stock, all existing stockholders at the time of the increase have the right, in For example, the Articles of Incorporation may provide that any stockholder
preference to any other person, and as between themselves, to subscribe to who intends to sell his share must ​first offer the same to the other
the new stocks in proportion to the number of shares held by them. stockholders who are given a ​period to purchase the share​. The right of first
refusal may also be based purely on contract.
However, a stockholder who neither desires nor intends to buy any of the
stocks may waive such right, in which event, the shares may be offered to Cash dividends
any interested persons acceptable to the corporation.
Dividends in the form of cash
SEC-OGC Opinion No. 41-11 (October 5, 2011)
Q: ​Are preemptive rights available when the shares to be offered to the Cash Dividend Declaration Requirements (CAIPR)
strategic investors are ​not new shares​, but are sourced from the 1. Certification under oath by the corporate secretary of the board
unsubscribed capital stock? resolution declaring cash dividends
2. Audited financial statements as of the last fiscal year, stamped and
Since Section 38 uses the phrase "all issues or disposition of shares of any received by the SEC and BIR
class, ​"pre-emptive right extends not only to ​issuance of new shares 3. Interim audited financial statements used as basis for such
resulting from an increase in capital stock​, but also to ​issuance of declaration
previously unsubscribed shares which form part of the existing a. to be submitted even if the basis is other than #2
authorized capital stock, as well as to disposition of treasury shares​. 4. Projected income statement for the remaining period certified by the
Ubi lex non distinguit nec nos distinguere debemos. Where the law does not company accountant
distinguish, courts should not distinguish. Considering that Section 38 of the 5. Reconciliation of retained earnings available for dividend declaration
Revised Corporation Code does not distinguish between newly issued certified by an independent auditor [SEC Memo Circ No. 11]
shares and previously unsubscribed shares, we opine that pre-emptive right
Any cash dividends due on ​delinquent stock ​shall first be applied to the Stock dividends shall be ​withheld from the delinquent stockholders ​until
unpaid balance​ on the subscription plus costs and expenses, their unpaid subscription is fully paid 


Property dividends Promoter’s contract

Dividends paid in property instead of cash where the surplus is in that form Promoters - persons who are acting alone or with others, ​take initiative in
and it is practicable to so distribute them among the shareholders. founding and organizing the business or enterprise.
Activities include: Discovery, Investigation, and Assembly.
SEC rules provide that the property to be distributed as dividends shall
consist only of property which is ​no longer intended to be used in the General rule: ​acts of the promoter are N
​ OT binding​ on the corporation.
operation of the business of the corporation and which are practicable to Exception:​ Some contracts entered into by the promoter may bind the
be distributed as dividends Corporation.

When the distribution of dividends is made where some stockholders will

Subscription contract (Sec. 59)
receive cash and others will receive property
● The prevailing market value of the property, as agreed upon by the A subscription contract is a contract for the ​acquisition of unissued stock
stockholders, shall be considered in determining the equitable in an ​existing corporation ​or ​a corporation still to be formed​, notwithstanding
distribution of total dividends the fact that the parties refer to it as a purchase or some other contract.

A subscription contract is ​perfected by an ​offer by one of the parties, the

Stock dividends
corporation or the subscriber, as the case may be, and an ​acceptance of
Earnings are distributed to the stockholders in the form of shares of stock this
It is the distribution of current or accumulated earnings to the offer by the other.
shareholders of a corporation pro rata based on the number of shares ○ There is a ​binding contract of subscription as soon as the OFFER to
owned. take shares made by a person to a corporation is ACCEPTED by the
It cannot be said that no consideration is involved in the issuance of corporation, or as soon as the person to whom the offer is made
stock dividends. The declaration of stock dividends is akin to a forced accepts an offer of shares by a corporation.
purchase of stocks.
No formality is necessary for the perfection, validity or enforceability of the
(Codal) subscription contract. ​The subscriber becomes a shareholder ​when the
No stock dividend shall be issued without the approval 
 of stockholders contract takes effect​, or ​when the corporation’s life commences in
representing at least ​two-thirds (2/3) of the outstanding capital stock at a pre-incorporation subscription agreements.
regular or special meeting duly called for the purpose.
PRE-INCORPORATION SUBSCRIPTION (Sec. 60)
GR: A subscription of shares in a ​corporation still to be formed shall be
irrevocable for a period of at least six (6) months ​from the date of “No shares of stock against which the corporation holds any unpaid
subscription​. claim shall be transferable in the books of the corporation.”

XPNs:
Delinquency call (Sec. 66)
1. Unless all of the other subscribers ​consent​ to the revocation; or
2. Unless the corporation ​fails to incorporate ​within the same period Subject to the provisions of the subscription contract, the board of directors
or ​within a longer period stipulated​ in the contract of subscription. may, ​at any time​, ​declare ​due and payable to the corporation unpaid
subscriptions ​and ​may collect the same or such percentage ​thereof, in
“No pre-incorporation subscription may be revoked after the articles of either case, with accrued interest, if any, as it may deem necessary.
incorporation is ​submitted​ to the Commission.”
A CALL is therefore the resolution or formal declaration of the board that
the unpaid subscriptions are due and payable​.
Purchase Subscription
○ The unpaid subscription is not due and payable without the call​.
Made only after incorporation Can be made before or after A corporation cannot file an action to recover the unpaid price if the
incorporation action is not preceded by a call; until a call is made, no cause of
action accrues.
Purchaser under the deed of In the absence of an agreement, A call is not necessary when:
assignment or sale must ​fully pay subscriber need not pay​ u​ nless 1. The ​date of payment is specified​ in the subscription agreement
the purchase price ​at the time the there is a call 2. When the corporation becomes ​insolvent
shares are transferred
3. When a subscription is ​payable​, not upon call or demand by the
Stockholder who sells his shares Subscriber ​cannot be released directors or stockholders, but ​immediately, or on specified day, or
can ​condone the ​obligation of the from his obligation to pay the on or before a specified day
purchaser to pay subscription price 4. When the subscription is ​payable in installments​ at specified times

Applies if the price is not less than Statute of frauds do not apply
P500 Delinquent shares (Sec. 66)
GR: If no payment is made ​within thirty (30) days ​from the date fixed in the
subscription contract or in the call​, all stocks covered by the subscription
shall thereupon become ​delinquent and shall be ​subject to sale as
Unpaid subscription
hereinafter provided.
Unpaid Claim refers to any unpaid claim ​arising from unpaid subscription
and ​not to any indebtedness which a subscriber may owe the corporation XPNs: Unless the board of directors orders otherwise that such shares shall
arising from any other transactions. not be considered delinquent.
 After the delinquency sale, the delinquent stockholder may file an action to
recover the delinquent stocks that were sold if the following requirements are
Delinquency sale (Sec. 67)
complied with:
Sec. 67 prescribes a ​mandatory procedure for the delinquency sale. 1. The action to recover delinquent stock is filed on the ground of
The steps that must be strictly complied with in a delinquency sale are irregularity or defect in the notice of sale, or in the sale itself of the
as follows: delinquent stock;
1. Resolution ​– The board of directors may, by resolution, order the 2. The party seeking to maintain such action first ​pays or tenders to
sale of delinquent stock. the party holding the stock the sum for which the same was sold,
2. Notice – Notice of the sale, with a copy of the resolution, shall be with interest from the date of sale at the legal rate; and
sent to every delinquent stockholder either personally, by registered 3. The ​complaint​ ​is​ ​filed within six (6) months ​from the date of sale.
mail, or through other means provided in the bylaws.
3. Publication – Notice of the sale, with a copy of the resolution shall
Indivisibility of subscription contract (Sec. 63)
be published once a week for two (2) consecutive weeks in a
newspaper of general circulation in the province or city where the Sec. 63 implicitly sets forth the doctrine that ​a subscription is one, entire
principal office of the corporation is located. and indivisible whole contract​. It cannot be divided into portions, so that
4. Sale – Said delinquent stock shall be sold at a public auction to be the stockholder shall ​not be entitled to a certificate of stock ​until he has
held not less than thirty (30) days nor more than sixty (60) days from remitted the full payment ​of his subscription together with any interests and
the date the stocks become delinquent. expenses, if any is due.
5. Transfer – The stock so purchased shall be transferred to such
purchaser in the books of the corporation and a certificate for such If the stockholder ​has not paid the full amount​ of his subscription, ​he cannot
stock shall be issued in the purchaser’s favor. transfer part of it in view of the indivisible nature of subscription contract. ​It
6. Credit of Remainder – The remaining shares, if any, shall be is only upon full payment of the whole subscription that a stockholder
credited in favor of the delinquent stockholder who shall likewise be can transfer the same to several transferees​.
entitled to the issuance of a certificate of stock covering such shares. ○ However, ​the ENTIRE subscription​, although not yet fully paid, may
be transferred to a ​single transferee​, who as a result of the transfer,
Cancellation of Sale must assume the unpaid balance​.
The delinquency sale may be cancelled if: ○ It is necessary, however, to secure the consent of the corporation
1. The delinquent stockholder ​pays to the corporation, ​on or before the since the transfer of subscription right contemplates a novation of
date specified for the sale of the delinquent stock​, the balance due contract which under Article 1293 of the Civil Code cannot be made
on the former’s subscription, plus accrued interest, costs of without the consent of the creditor.
advertisement and expenses of sale; or
2. When the board of directors otherwise orders. Likewise, because of the principle of indivisibility of subscription, a
stockholder ​may not assign the balance of the subscription to third persons in
Action to Recover such a manner that ​the stock certificates will be issued to the
stockholder for the paid portion ​and ​the balance to the third person The stock and transfer book shall be kept in the principal office of the
who assume the payment of the balance of the subscription​. corporation or in the office of its stock transfer agent and shall be open for
○ The subscription cannot be divided into portions. inspection by any director or stockholder of the corporation at reasonable
○ Neither can the stockholder assign the paid portion to one transferee hours on business days.
and the unpaid portion to another transferee. A transfer of shares of stock not recorded in the stock and transfer book of
the corporation is non-existent as far as the corporation is concerned (Sec.
62). Where a transferee is not yet recognized as a stockholder, the
Stock certificate (Sec. 63)
corporation is under no specific legal duty to issue stock certificates in the
A stock certificate is a written instrument signed by the proper officer of a transferee’s name.
corporation stating or acknowledging that ​the person named in the
document is the owner of a designated number of shares of stock​. Loss and Destruction of the Original STB
When the original stock and transfer book of a corporation has been lost or
A stock certificate is the ​paper representation or tangible evidence of the destroyed, ​secondary or extrinsic evidence may be introduced to
share, but not the share itself. reconstitute its contents​.

A certificate of stock is not necessary to render one a stockholder in a In line, however, with our rules requiring the maintenance of a stock and
corporation. It expresses the ​contract between the corporation and the transfer book, said new book should be presented to this Commission for
stockholder, but it is ​not essential ​to the existence of a share in stock or proper registration, accompanied by a sworn statement executed by any
the creation of the relation of shareholder to the corporation​. In fact, it responsible corporate officer setting forth the circumstances attending the
rests on the will of the stockholder whether he wants to be issued stock loss.
certificates, and a stockholder may opt not to be issued a certificate.

General information sheet

Stock and transfer book (Sec. 59)
The document submitted to the SEC which contains the information required
Stock corporations must keep a stock and transfer book, which shall contain: by Sec. 25 (the names, nationalities, shareholdings, and residence
○ A record of all stocks in the names of the stockholders alphabetically addresses of the directors, trustees and officers elected).
arranged; ○ The GIS, however, is only a piece of evidence and is subject to
○ The installments paid and unpaid on all stocks for which subscription stronger proof if entries therein are in question.
has been made, and the date of payment of any installment;
○ A statement of every alienation, sale or transfer of stock made, the Mere ​inclusion as shareholder in the General Information Sheet of the
date thereof, by and to whom made; and corporation is ​insufficient proof that they are shareholders of the company.
○ Such other entries as the bylaws may prescribe. The information in the GIS will still have to be correlated with the corporate
books of the corporation. They must also appear in the corporate books as
registered shareholders.
 ○ unless the bylaws provide otherwise.
Right to inspect corporate books (Sec. 59)
Notice for regular and special meetings of directors (Sec. 52)
Corporate records, regardless of the form in which they are stored, shall be
open to inspection by any director, trustee, stockholder or member of the Notice of regular or special meetings stating the date, time and place of the
corporation in person or by a representative, provided the following requisites meeting must be sent to every director or trustee
are present: ● at least ​two (2) days p​ rior​ to the scheduled meeting,
1. It must be exercised at​ reasonable hours​ on business days; ● unless a longer time is provided in the bylaws.
2. The demand shall be made​ in writing​; and ● A director or trustee ​may waive this requirement, either expressly or
3. The inspecting or reproducing party shall remain bound by impliedly.
confidentiality rules under prevailing laws
Place and time for regular and special meetings of ​directors​ (Sec. 52)
Regular and special meetings of directors (Sec 52)
Regular meetings ​of the board of directors or trustees of every corporation
(IDK pa ilalagay coz covered na sa next few, so lagay ko na lang yung wala shall be
haha) ● held ​monthly​,
● unless the bylaws provide otherwise.
Directors or trustees who cannot physically attend or vote at board
meetings can Special meetings​ ​of the board of directors or trustees may be
● participate and vote through remote communication such as ● held at ​any time​ upon the ​call of the president​ or
videoconferencing, teleconferencing, or other alternative modes of ● as provided in the bylaws.
communication that allow them reasonable opportunities to
participate. (Place) Meetings of​ directors or trustees of corporations may be
● Directors or trustees ​cannot attend or vote ​by proxy at board ● held ​anywhere​ in or outside of the Philippines,
meetings. ● unless the bylaws provide otherwise.
A director or trustee who has a potential interest in any related party
transaction must recuse from voting on the approval of the related party
Quorum for meetings of directors (Sec. 52)
transaction without prejudice to compliance with the requirements of Section
31 of this Code. A ​majority of the directors or trustees ​as stated in the articles of
incorporation shall constitute a ​quorum to ​transact corporate business​,
Who Shall Preside at Meetings (Sec. 53) and
● The ​chairman​ or, ● Unless the articles of incorporation or the bylaws provides for a
● in his absence, the ​president shall preside at all meetings of the greater majority
directors or trustees as well as of the stockholders or members, every decision reached by at least a majority of the directors or trustees
constituting a quorum ​shall be valid as a corporate act.
 ● except for the election of officers which shall require the vote of a Notice of meetings shall be sent through the ​means of communication
majority of all the members of the board provided in the bylaws​, which notice shall state the time, place and
purpose of the meetings.
Vote required for a valid board resolution
Each notice of meeting shall further be accompanied by the following:
(Not super sure but feel ko kasama ng general rule under Section 52) ● (a) The ​agenda​ for the meeting;
● (b) A ​proxy form which shall be submitted to the corporate secretary
Unless the articles of incorporation or the bylaws provides for a greater within a reasonable time prior to the meeting;
majority, a ​majority of the directors or trustees as stated in the articles of ● (c) When attendance, participation, and voting are allowed ​by
incorporation shall ​constitute a quorum to transact corporate business​, remote communication or in absentia,​ the requirements and
and every decision reached by at least a majority of the directors or trustees procedures to be followed when a stockholder or member elects
constituting a quorum, except for the election of officers which shall require either option; and
the vote of a majority of all the members of the board, shall be ​valid as a ● (d) When the meeting is for the election of directors or trustees,​
corporate act. the requirements and procedure for nomination and election.

Notice for regular and special meetings of stockholders (Sec. 49 & All proceedings and any business transacted at a meeting of the
50) stockholders or members, ​if within the powers or authority of the corporation,​
shall be ​valid​ even if the meeting is improperly held or called:
Regular Meetings ○ Provided, That ALL the stockholders or members of the corporation
● Written notice of regular meetings shall be sent to all stockholders or are present or duly represented at the meeting and ​not one of
members of record ​at least twenty-one (21) days prior to the them expressly states at the beginning of the meeting that the
meeting​, ​unless a different period is required in the bylaws, law, or purpose of their attendance is ​to object to the transaction of any
regulation: business because the meeting is not lawfully called or convened.
○ Provided, further, That written notice of regular meetings
may be sent to all stockholders or members of record
through electronic mail or such other manner as the Place and time for regular and special meetings of stockholders
Commission shall allow under its guidelines. (Sec 49 & 50)
Regular​ ​meetings​ of stockholders or members shall be
Special Meetings ● held ​annually​ on a date fixed in the bylaws​, or
● at least ​one (1) week written notice ​shall be sent to all stockholders ● if not so fixed, on any date ​after April 15 ​of every year as
or members, ​unless a different period is provided in the bylaws, law determined by the board of directors or trustees.
or regulation.
Special meetings​ ​of stockholders or members shall be
● held at ​any time​ deemed necessary​ or
 ● as provided in the bylaws. (b) In case of sale, lease, exchange, transfer, mortgage, pledge or other
disposition of all or substantially all of the corporate property
Place of Stockholders’ or members’ meetings​ (whether regular or special) and assets​ as provided in this Code;
● in the ​principal office of the corporation as set forth in the articles of (c) In case of ​merger or consolidation​; and
incorporation, or, (d) In case of ​investment of corporate funds ​for any purpose other
● if not practicable, in the ​city or municipality where the principal than the primary purpose​ of the corporation.
office of the corporation is located:
○ Provided, That any city or municipality in Metro Manila,
Merger (Sec. 75)
Metro Cebu, Metro Davao, and other Metropolitan areas
shall, for purposes of this section, be considered a city or Merger - ​Two (2) or more corporations may merge into a single corporation
municipality. which shall be one of the constituent corporations

A merger is where a corporation ​absorbs another corporation and remains in

Quorum for meetings of stockholders (Sec 51)
existence while the other is dissolved.
General Rule: ​a quorum shall consist of the stockholders representing a
majority of the outstanding capital stock or a majority of the members in SEC Opinion (August 4, 1998)
the case of nonstock corporations. Q:​ ​May members, who are unable to attend the general membership meeting
for the ratification of a proposed merger of two non-stock corporations, ratify
Exception:​ Unless otherwise provided in this Code or in the bylaws the merger by mail, facsimile or other electronic means? ​NO

While under Section 88 of the RCC, members of a nonstock corporation may

Vote required for the different kinds of stockholders’ resolutions (2/3
be allowed to vote by mail or other similar means, the same should be
or majority)
treated as ​a general provision for non-stock corporation applicable only in the
Check Atty. Lipardo’s absence of a specific provision in the Revised Corporation Code on a
particular subject matter. It should be noted that ​Section 76 of the Code
Right of appraisal (Sec. 80) specifically provides for the procedure in approving merger
agreements applicable to both stock and non-stock corporations​. Being
Appraisal right is the right of a stockholder of a corporation ​to dissent and a specific provision, it should be treated as an ​exception to Section 88​.
demand payment ​of the ​fair value of their shares​ in the following instances:
(a) In case an amendment to the articles of incorporation has the effect Sec. 88 explicitly requires corporate mergers to be approved by the
of ​changing or restricting the rights of any stockholder or class of stockholders or members at a meeting duly called for the purpose. The
shares, or of ​authorizing preferences in any respect superior to Commission, on several occasions, has opined that in cases where the law
those of outstanding shares of any class, or of ​extending or requires a duly called meeting to carry out a corporate transaction,
shortening the term​ of corporate existence;
"constructive" or "electronic presence" is not a substitute for "actual Consolidation ​is ​one where a new corporation is created, and consolidating
presence." corporations are extinguished.

NOTE: ​Section 57 of the Revised Corporation Code, quoted hereunder,

MERGER CONSOLIDATION
allows voting either in person or by authorized representative (proxy). Thus,
unless proxy voting is denied in the articles of incorporation or by-laws, a Corporation ABSORBS another A NEW corporation is created, and
member of a non-stock corporation who cannot attend in person may appoint corporation and REMAINS IN constituent corporations are
a proxy to represent him/her in the membership meeting. EXISTENCE while the other is EXTINGUISHED.
DISSOLVED.
SEC-OGC Opinion No. 09-13 (Jul 1, 2009)
The articles of merger provide for the effectivity date of the merger,
notwithstanding issuance by the SEC of the certificate of merger at an Voluntary dissolution (Sec. 134 & 135)
earlier time.

Requisites for voluntary dissolution of corporation by shortening

Notwithstanding Sec. 78 of the RCC, where it is stated that merger shall be
corporate term (IMPT since Ampil repeated this 3 times.)
effective upon the ​issuance by the Commission of the certificate of merger​,
● Term must expire. 

the stipulation may be allowed in view of the following:
● AoI amending the corporate term must be approved by SEC. 

1. Public policy considerations. The spirit, rather than the letter of a
law determines its construction; hence, a statute, as in this case,
must be read according to its spirit and intent. In this instance, the DISSOLUTION WHERE ​NO DISSOLUTION WHERE
Code should be given a judicious, not stern and discordant CREDITORS ARE PREJUDICED CREDITORS ARE PREJUDICED
interpretation, which will promote and uplift the development of trade
relations and which will encourage friendly commercial intercourse Both the BoD and stockholders Both the BoD and stockholders must
among corporations provided that its primordial end (protection of must affirm the dissolution: affirm the dissolution:
public interests) is served. ○ ​Majority vote ​of the BoD or ○ ​Majority vote ​of the BoD or
trustees is required 
 trustees is required 

2. No party will be prejudiced thereby. Prior to the approval of the ○ Affirmative vote of ​at least ○ Affirmative vote of ​at least ​2/3 ​of
proposed stipulation, a confirmation was made by the applications majority ​of the Outstanding the Outstanding Capital Stock 
or at
that the same would not adversely affect any third party, nor would it Capital Stock 
or at least Majority least Majority of the members 

cause a decrease in tax dues of the corporations involved. of the members 

Notice must be given
Notice must be given
Consolidation (Sec. 75)
What must be filed with the SEC What are the requirements of a Involuntary dissolution (Sec. 138)
for dissolution? verified petition for dissolution
A corporation may be dissolved by the Commission ​motu proprio or upon
● Verified request ​for that is to be filed with the SEC?
filing of a ​verified complaint by any interested party. The following may be
dissolution. Note that this ● Must be ​signed by majority
grounds​ for dissolution of the corporation:
is different from a ​verified of corporation’s BoD ​or
1. (a) ​Non-use of corporate charter as provided under Section 21 of
petition ​which is required trustees 

this Code;

for voluntary dissolution ● Verified ​by its president or
2. (b) ​Continuous inoperation of a corporation as provided under
where creditors are secretary or one of its
Section 212 of this Code;
affected 
 directors or trustees 

3. (c) Upon receipt of a ​lawful court order​ dissolving the corporation;
● Copy of resolution ● Sets forth all claims ​and
4. (d) Upon finding by ​final judgment that the corporation ​procured its
authorizing dissolution demands by creditors against
incorporation through​ ​fraud​;
○ Must be certified corporation 

5. (e) Upon finding by ​final judgment​ that the corporation:
by majority of BoD ● Sets forth that there was an
1. Was created for the purpose of committing, concealing or
or trustees affirmative vote of
aiding the commission of ​securities violations, smuggling, tax
○ Must be stockholders representing
evasion, money laundering, or graft and corrupt practices​;
countersigned by 2⁄3 of the OCS or at least
2. Committed or aided in the commission of ​securities
corporate 2⁄3 of members ​at a meeting
violations, smuggling, tax evasion, money laundering, or
secretary 
 called for that purpose. 

graft and corrupt practices,​ and its s​ tockholders knew​; and
● Proof of publication 
 ● Copy of resolution
3. Repeatedly and knowingly ​tolerated the commission of graft
● Favorable authorizing dissolution
and corrupt practices or other fraudulent or illegal acts ​by its
recommendation from ○ Must be certified by
directors, trustees, officers, or employees.
appropriate regulatory majority of BoD or
● If the corporation is ordered dissolved by final judgment
agency, if needed. 
 trustees 

pursuant to the grounds set forth in subparagraph (e) hereof,
○ Must be
its ​assets​, after payment of its liabilities, shall, upon petition
countersigned by
corporate secretary 
 2
SEC. 21. Effects of Non-Use of Corporate Charter and Continuous Inoperation. – If a corporation does not
● List of all its creditors ​
 formally organize and commence its business within five (5) years from the date of its incorporation, its
certificate of incorporation shall be deemed revoked as of the day following the end of the five (5)-year period.
However, if a corporation has commenced its business but subsequently becomes inoperative for a period of
at least five (5) consecutive years, the Commission may, after due notice and hearing, place the corporation
under delinquent status.
IMPT Note: dissolution takes effect ​only ​upon ISSUANCE by SEC of A delinquent corporation shall have a period of two (2) years to resume operations and comply with all
the certificate of dissolution. requirements that the Commission shall prescribe. Upon compliance by the corporation, the Commission shall
issue an order lifting the delinquent status. Failure to comply with the requirements and resume operations
within the period given by the Commission shall cause the revocation of the corporation’s certificate of
incorporation.
The Commission shall give reasonable notice to, and coordinate with the appropriate regulatory agency prior
to the suspension or revocation of the certificate of incorporation of companies under their special regulatory
jurisdiction.
 of the Commission with the appropriate court, ​be forfeited in (c) Failure, after ​change of its resident agent or address​, to
favor of the national government. Such forfeiture shall be submit to the Commission a statement of such change as required
without prejudice to the rights of innocent stockholders and by this Title;
employees for services rendered, and to the application of (d) Failure to ​submit to the Commission an ​authenticated copy
other penalty or sanction under this Code or other laws. of any amendment ​to its articles of incorporation or bylaws or of any
articles of merger or consolidation within the time prescribed by this Title;
The Commission shall give reasonable notice to, and coordinate with, the (e) A ​misrepresentation of any material matter in any
appropriate regulatory agency prior to the involuntary dissolution of application, report, affidavit or other document ​submitted by such
companies under their special regulatory jurisdiction. corporation pursuant to this Title;
(f) Failure to ​pay any and all taxes, imposts, assessments or
penalties​, if any, lawfully due to the Philippine Government or any of its
Extension and expiration of corporate term (Sec. 36)
agencies or political subdivisions;
Extension and shortening of the term (reqs): (g) Transacting business in the Philippines ​outside of the
1. Approved by a ​majority​ vote of the board of directors or trustees; purpose or purposes ​for which such corporation is authorized under its
2. Ratified at a meeting by the stockholders or members representing license;
at least two-thirds ​(2/3) of the outstanding capital stock or of its (h) Transacting business in the Philippines ​as agent of or acting
members; and on behalf of any foreign corporation or entity ​not duly licensed to do
3. The Amended Articles of Incorporation must be ​approved by the business in the Philippines; or
SEC​. (i) Any other ground as would render it unfit to transact business
in the Philippines.
The amendments shall take effect upon their ​approval by the Commission
or ​from the date of filing with the said Commission i​ f not acted upon
Lifting of revoked license
within six (6) months from the date of filing for a cause not attributable to
the corporation. Sec Memorandum Circular No. 5 Series of 2016
Petitions to set aside Revocation Orders can now be filed anytime.
○ This shall not, however, apply to corporations whose corporate terms
Revocation of license (Sec. 151)
have already expired and to corporations whose certificates of
Grounds for revocation of license of a foreign corporation to transact incorporation were revoked or suspended due to fraud and/or
business in the Philippines:3 misrepresentation in the procurement of certificate of registration.
(a) Failure to ​file its annual report or ​pay any fees as required
by this Code; Requirements
(b) Failure to appoint and maintain a ​resident agent in the 1. Verified petition which shall include a certification (check memo;
Philippines as required by this Title; basically certification that the latest financial statements are
accurate)
3
Without prejudice to other grounds provided under special laws,
 2. Director’s or Trustee’s Certificate Grounds
3. Lates due Audited Financial Statements ● annulled by forfeiture​, or
4. Latest due General Information Sheet ● whose corporate existence is ​terminated in any other manne​r,
5. Copies of Certificate of Incorporation and latest Certificate of filing of
Amended AOI or By-laws (if any) together with latest AOI and Three years after the effective date of dissolution
By-laws ● shall nevertheless ​remain as a body corporate
6. Copy of registration of stock and transfer book or membership book ○ for the purpose of ​prosecuting and defending suits by or
7. Secretary’s Certificate of No Intra Corporate Controversy against it and enabling it to settle and close its affairs,
8. Sworn certification by External Auditor dispose of and convey its property, and distribute its assets,
9. Proofs of operation for each year, starting from the date of revocation ○ but ​not for the purpose of continuing the business for
or date of incorporation (for a suspension order) up to the time of which it was established.
filing of the petition, any of the following but not limited to: ● the corporation is authorized and empowered to convey all of its
a. Audited Financial Statements property to trustees for the benefit of stockholders, members,
b. Income Tax Returns creditors and other persons in interest.
c. Mayor’s or Business Permits ● After any such conveyance by the corporation of its property in trust
d. Contracts for the benefit of its stockholders, members, creditors and others in
e. Receipts showing payment of Real Estate tax interest, ​all interest which the corporation had in the property
f. Certifications/Recognitions/Annual Conventions; or terminates​,
g. Any similar/related documents ○ the ​legal interest v​ ests in the trustees,
○ and the ​beneficial interest ​in the stockholders, members,
NOTE: With regard to covered corporations with pending intra-corporate creditors or other persons-in-interest.
dispute between 2 or more groups claiming ownership or right over the
same, their petition shall only be accepted ​upon the finality of a court Except as otherwise provided for in Sections 93 and 94 of this Code, upon
decision​. the winding up of corporate affairs, ​any asset distributable to any creditor or
stockholder or member who is unknown or cannot be found shall be
escheated in favor of the national government.
Liquidation or winding-up (Sec. 139)
Corporate Liquidation4. – every corporation whose charter expires pursuant Except by decrease of capital stock and as otherwise allowed by this Code,
to its articles of incorporation, is no corporation shall distribute any of its assets or property except upon lawful
dissolution and after payment of all its debts and liabilities.

4
Except for banks, which shall be covered by the applicable provisions of DISSOLUTION LIQUIDATION
Republic Act No. 7653, otherwise known as the “New Central Bank Act”, as
amended, and Republic Act No. 3591, otherwise known as the Philippine
Deposit Insurance Corporation Charter, as amended,
 The provisions of this Title shall primarily govern close corporations:
Extinguishment of the franchise of a Conversion of corporation assets to
Provided, That other Titles in this Code shall apply suppletorily, except as
corporation and the termination of liquid assets to pay off creditors and
otherwise provided under this Title.
its corporate existence the remaining balance is distributed
to stockholders. 

Non-stock corporation (Sec. 86)
SEC has jurisdiction concerning Courts have jurisdiction with regard
NON-STOCK CORPORATION
dissolution 
 to liquidation. RTC usually. 

● where no part of its income is distributable as dividends to its
members, trustees, or officers:
Close corporation (Sec. 95) ● Provided, That any profit which a nonstock corporation may obtain
incidental to its operations shall, whenever necessary or proper, be
Close Corporation​ is one whose articles of incorporation provides that: used for the furtherance of the purpose or purposes for which the
(a) all the corporation’s issued stock of all classes, exclusive of corporation was organized, subject to the provisions of this Title.
treasury shares, shall be held of record by not more than a specified
number of persons,​ not exceeding twenty​ (20); The provisions governing stock corporations, when pertinent, shall be
(b) all the issued stock of all classes shall be subject to ​one or more applicable to nonstock corporations, except as may be covered by specific
specified restrictions on transfer ​permitted by this Title; and provisions of this Title.
(c) the corporation shall ​not list in any stock exchange or make
any public offering ​of its stocks of any class. PURPOSES (Sec. 87)
● charitable,
Notwithstanding the foregoing, a corporation shall ​not be deemed a ● religious,
close corporation when at least ​two-thirds (2/3) of its voting stock ● educational,
or voting rights is owned or controlled by another corporation ● professional,
which is not a close corporation within the meaning of this Code. ● cultural,
● fraternal,
Who may not be a close corporation? ● literary,
● mining or oil companies, ● scientific,
● stock exchanges, ● social,
● banks, ● civic service, or similar purposes, like trade, industry, agricultural and
● insurance companies, like chambers,
● public utilities, ● or any combination thereof, subject to the special provisions of this
● educational institutions and Title governing particular classes of nonstock corporations.
● corporations declared to be vested with public interest in accordance
with the provisions of this Code. One Member, One Vote
Each member, regardless of class, of a non-stock corporation shall be outside the place where the principal office of the corporation is
entitled to 1 vote. located:
○ Unless limited, broadened, or denied to the extent specified in the ○ Provided, That ​proper notice is sent to all members
AOI or by-laws indicating the date, time and place of the meeting:
○ Provided, further, That the place of meeting ​shall be within
Non-transferability of Membership Philippine territory.
Membership in an non-stock corporation and all rights arising therefrom are
PERSONAL and NON-TRANSFERABLE.
CONDOMINIUM CORPORATION
○ Unless AOI or bylaws provide otherwise.
RA 4726
Sec. 2. ​A condominium is an ​interest in real property ​consisting of
Board of trustees (Sec. 91)
○ Separate interest in a unit in a residential, industrial or commercial
Board of Trustees building and
● May or may not​ be more than fifteen (15) ○ An undivided interest in common​, directly or indirectly, in the land
● Shall hold office for ​not more than three (3) years until their on which it is located and in other common areas of the building.
successors are elected and qualified. ○ A condominium may include, in addition, ​a separate interest in
○ Trustees ​elected to fill vacancies occurring before the other portions of such real property.
expiration of a particular term shall ​hold office only for the
unexpired period​. Title to the common areas​, including the land, or the appurtenant interests in
● Only​ a ​member​ of the corporation shall be elected as trustee such areas, may be ​held by a corporation specially formed for the
○ Except with respect to independent trustees of nonstock purpose ("condominium corporation")
corporations vested with public interest - in which the ​holders of separate interest shall ​automatically be
Unless otherwise provided in the articles of incorporation or the bylaws, the members or shareholders, to the exclusion of others, ​in proportion to
members may directly elect officers of a nonstock corporation. the appurtenant interest of their respective units in the common
areas
List of Members and Proxies (Sec. 92)
● The corporation shall, at all times, keep a list of its members and The real right in condominium may be ownership or any other interest in real
their proxies in the form the Commission may require. property recognized by law, on property in the Civil Code and other pertinent
● The list shall be updated to reflect the members and proxies of laws.
record twenty (20) days prior to any scheduled election.
Sec. 5. Any ​transfer or conveyance of a unit or an apartment, office or
Place of meeting (Sec. 92) store or other space therein, shall ​include​ the transfer or conveyance of
● The bylaws may provide that the members of a nonstock corporation ○ the undivided interests in the common areas or, in a proper case,
may hold their regular or special meetings at any place ​even ○ the membership or shareholdings in the condominium corporation.
 ○ When a member or stockholder ​ceases to own a unit in the project in
COMMON AREAS OWNED AS CO-OWNERS which the condominium corporation owns or holds the common
Provided,​ however, That where the ​common areas in the condominium areas, ​he shall automatically cease to be a member or
project are ​owned by the owners of separate units as ​co-owners thereof​, stockholder of the condominium corporation​.
no condominium unit therein shall be conveyed or transferred to persons
other than ​Filipino citizens, or corporations at least 60% of the capital The term of a condominium corporation shall be co-terminus with the
stock of which belong to Filipino citizens​, ​EXCEPT in cases of ​hereditary duration of the condominium project, the provisions of the Corporation Law to
succession​. the contrary notwithstanding.

COMMON AREAS HELD BY A CORPORATION

Corporate sole (Sec. 108)
Where the ​common areas in a condominium project are ​held by a
corporation​, NO transfer or conveyance of a unit shall be ​valid ​if the Formed by one person only
concomitant transfer of the appurtenant membership or stockholding in the ○ Priest, Bishop, Rabbi, etc.
corporation ​will cause the alien interest in such corporation to exceed ○ Can be other presiding elder of such religious denomination, sect or
the limits imposed by existing laws​. church.

Sec. 10. ​Whenever the common areas in a condominium project are HELD Such corporation sole is a ​mere trustee who manages affairs and property
BY A CONDOMINIUM CORPORATION, ​such corporation shall constitute of the religious denomination.
the ​management body​ of the project​. ○ The corporation sole doesn’t own the property, so it is unnecessary
that such priest, bishop, etc. be a Filipino citizen.
The corporate purposes of such a corporation shall be ​limited
○ to the ​holding of the common areas​, either ​in ownership or ​any A corporation sole can convert into a corporation aggregate or a religious
other interest​ in real property recognized by law, society by mere amendment of the AoI
○ to the ​management​ of the project, and ○ No need to first dissolve corporation sole, just amend the AoI.
○ to such other purposes as may be necessary, incidental or
convenient to the accomplishment of said purposes. Religious society (Sec. 114)

The articles of incorporation or by-laws of the corporation shall NOT contain Religious Societies
any provision contrary to or inconsistent with the ​provisions of this Act​, the ● any religious society, religious order, diocese, synod, or district
enabling or master deed​, or the ​declaration of restrictions of the project​. organization of any religious denomination, sect or church, ​may​,
upon ​written consent and/or by ​an affirmative vote at a meeting
Membership in a condominium corporation, regardless of whether it is a called for the purpose of at least two-thirds (2/3) of its membership,
stock or non-stock corporation, shall NOT be transferable ​separately from
the condominium unit of which it is an appurtenance.
 incorporate5 for the administration of its temporalities or for the
One person corporation (Sec. 116)
management of its affairs, properties, and estate by filing with the
Commission, articles of incorporation verified by the affidavit of the One Person Corporation
presiding elder, secretary, or clerk or other member of such religious ● a corporation with a single stockholder:
society or religious order, or diocese, synod, or district organization ● Provided, That only a ​natural person, trust, or an estate may form
of the religious denomination, sect or church, setting forth the a One Person Corporation.
following:
(a) That the religious society or religious order, or diocese, Foreign corporation (Sec. 140)
synod, or district organization is a religious organization of a
religious denomination, sect or church; Foreign corporation
(b) That at least two-thirds (2/3) of its membership has given ● one formed, organized or existing under laws other than those of the
written consent or has voted to incorporate, at a duly Philippines’ and
convened meeting of the body; ● whose laws allow Filipino citizens and corporations to do business in
(c) That the incorporation of the religious society or religious its own country or State.
order, or diocese, synod, or district organization is not ● It shall have the ​right to transact business in the Philippines after
forbidden by competent authority or by the Constitution, obtaining a ​license for that purpose in accordance with this Code
rules, regulations or discipline of the religious denomination, and a certificate of authority from the appropriate government
sect or church of which it forms part; agency.
(d) That the religious society or religious order, or diocese,
synod, or district organization desires to incorporate for the Control test
administration of its affairs, properties and estate;
(e) The place within the Philippines where the principal office Control Test
of the corporation is to be established and located; and ● the nationality of the corporation depends upon the ​nationality of
(f) The names, nationalities, and residence addresses of the the controlling stockholders​ 

trustees, not less than five (5) nor more than fifteen (15),
elected by the religious society or religious order, or the Grandfather test
diocese, synod, or district organization to serve for the first
Grandfather Rule
year or such other period as may be prescribed by the laws
● the combined totals in the investing corporation and the investee
of the religious society or religious order, or of the diocese,
corporation must be traced (i.e. “grandfathered”) to determine the
synod, or district organization.
total percentage of Filipino ownership.

5
Unless forbidden by competent authority, the Constitution, pertinent rules, When foreign corporation can sue as plaintiff
regulations, or discipline of the religious denomination, sect or church of
which it is a part AQUINO
 1. If it does NOT do business in the Philippines, it needs NO license to
Intra-corporate controversy
sue before the Philippine courts ​on an isolated transaction or on ​a
cause of action entirely independent of any business SEC jurisdiction (now RTC) is determined by the concurrence of 2
transaction​. elements: (1) the status or relationship of the parties and (2) the nature
2. If it does business in the Philippines ​with the required license​, it of the question that is the subject of their controversy.
can sue before the Philippine courts on any transaction
3. If it does business in the Philippines without a license, a Philippine Relationship test
national who has contracted with said corporation might be estopped
from challenging the foreign corporation’s personality in a suit before The controversy must arise out of intra-corporate relations.
Philippine courts. ​(Doctrine of Estoppel) (a) between the corporation, partnership or association and the public;
(b) between the corporation, partnership or association and its
AMPIL SAYS stockholders, partners, members, or officers;
GR: A foreign corporation transacting business in the Philippines cannot SUE (c) between the corporation, partnership, or association and the state so
but can be SUED far as its franchise, permit, or license to operate is concerned; and
(d) among the stockholders, partners, or associates themselves.
XPNs:
1. If it obtains a license Nature of controversy test
2. If it is “NOT doing business” in the Philippines (i.e. No intention to do
business in the Philippines) Dispute among the parties be intrinsically connected with the regulation of
3. Doctrine of Estoppel the corporation, partnership or association or deal with the internal affairs ​of
the corporation, partnership or association.

When foreign corporation can be sued as defendant The incidents of that relationship must also be considered for the purpose of
All the time ​daw sabi ni Honey, as thumbs up-ed by boss MM. ascertaining whether the controversy itself is intra-corporate. The controversy
must not only be rooted in the existence of an intra-corporate relationship,
SEC. 150. Doing Business Without a License. – No foreign corporation but must as well pertain to ​the ​enforcement of the parties’ correlative
transacting business in the Philippines without a license, or its successors or rights and obligations under the Corporation Code and ​the ​internal and
assigns, shall be permitted to maintain or intervene in any action, suit or intra-corporate regulatory rules of the corporation​.
proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine courts Jurisdiction – SEC or RTC re: intra-corporate controversy/dispute
or administrative tribunals on any valid cause of action recognized
under Philippine laws. PD 902-A had been amended by RA 8799 (approved on July 19, 2000)
which mandated the transfer of jurisdiction over intra-corporate
controversies, subject of the counterclaims, to ​RTCs​.
 ○ Now, if the person is merely appointed by the Board of Directors or
Jurisdiction – SEC or RTC or NLRC re: corporate officers
Trustees but the position does not appear in the bylaws, he will only
Under the Corporation Code, the ​corporate officers are the ​president​, be treated as an employee.
secretary​, ​treasurer and ​such other officers as may be provided for in the
by-laws​.
Jurisdiction – SEC or RTC or BSP re: financial institutions
○ Such being the case, ​removal of corporate officers controversies
should be ​lodged with the SEC ​(NOW RTC)6 and not with the batch ung sa tanong mo sa gc ang alam ko SEC kung violation of the code
NLRC. tapos notice lang to the regulatory agency (Del Rosario, 2020)
○ If not corporate officers, the case should be filed before NLRC
pursuant to the Labor Code. SEC. 183. Applicability of the Code. – Nothing in this law shall be construed
as amending existing provisions of special laws governing the registration,
Tabang and Nacpil Cases regulation, monitoring and supervision of special corporations such as banks,
An "​office​" is created by the charter of the corporation and the ​officer is nonbank financial institutions and insurance companies.
elected by the directors or stockholders​.
Jurisdiction – SEC or RTC or HLURB re: condominiums
On the other hand, an "​employee​" usually ​occupies no office ​and generally
/homeowners associations
is employed NOT by action of the directors or stockholders ​but by the
managing officer of the corporation who also determines the compensation to HLURB
be paid to such employee. In the exercise of its functions to regulate the real estate trade and business,
the ​HLURB shall have EXCLUSIVE JURISDICTION to hear and decide
Matling Case (latest jurisprudence) cases involving ​specific performance of contractual and statutory obligations
A position must be expressly mentioned in the ​By-Laws in order to be filed by buyers of subdivision lots or condominium units ​against the owner,
considered as a corporate office. Thus, if the position is not expressly developer, dealer, broker or salesman​. ​(Sec. 1(c) of PD 1344)
mentioned in the by-laws, the person is only an EMPLOYEE of the
corporation. RTC
If the issue involves ​intra-corporate controversies​, jurisdiction lies with the R
AMPIL SAYS: The Matling case, penned by Justice Bersamin, restricted the TC, acting as a special commercial court. Section 5.2 of Republic Act No.
jurisdiction of the SEC. In ​Tabang and Nacpil​, mere election/appointment of 8799 (R.A. No. 8799) effectively transferred to the appropriate RTCs
the Board is enough to create an office. In ​Matling​, to be considered a jurisdiction over all cases enumerated under Section 5 of Presidential Decree
corporate officer, the position must be EXPRESSLY mentioned in the No. 902-A
By-Laws, Corporation Code, or Articles of Incorporation. (a) Devices or schemes employed by or any acts, of the board of
directors, business associates, its officers or partnership, amounting
to fraud and misrepresentation which may be detrimental to the

6
RA 8799
 interest of the public and/ or of the stockholder, partners, members of
associations or organizations registered with the Commission;
(b) Controversies arising out of intra-corporate or partnership relations,
between and among stockholders, members, or associates; between
any or all of them and the corporation, partnership or association of
which they are stockholders, members or associates, respectively;
and between such corporation, partnership or association and the
state insofar as it concerns their individual franchise or right to exist
as such entity; and
(c) Controversies in the election or appointments of directors, trustees,
officers or managers of such corporations, partnerships or
associations.