The document discusses the key attributes and differences between partnerships and corporations. It provides 3 main points of comparison:
1) Corporations have perpetual existence and are not affected by changes in ownership, while partnerships dissolve upon a partner's death or withdrawal unless otherwise agreed.
2) Partners are personally liable for a partnership's debts, while corporate shareholders have limited liability and are not personally responsible for a corporation's obligations.
3) Corporations are managed by a board of directors according to their charter, while partnerships distribute management responsibilities among all partners through unanimous agreement.
The document discusses the key attributes and differences between partnerships and corporations. It provides 3 main points of comparison:
1) Corporations have perpetual existence and are not affected by changes in ownership, while partnerships dissolve upon a partner's death or withdrawal unless otherwise agreed.
2) Partners are personally liable for a partnership's debts, while corporate shareholders have limited liability and are not personally responsible for a corporation's obligations.
3) Corporations are managed by a board of directors according to their charter, while partnerships distribute management responsibilities among all partners through unanimous agreement.
The document discusses the key attributes and differences between partnerships and corporations. It provides 3 main points of comparison:
1) Corporations have perpetual existence and are not affected by changes in ownership, while partnerships dissolve upon a partner's death or withdrawal unless otherwise agreed.
2) Partners are personally liable for a partnership's debts, while corporate shareholders have limited liability and are not personally responsible for a corporation's obligations.
3) Corporations are managed by a board of directors according to their charter, while partnerships distribute management responsibilities among all partners through unanimous agreement.
The document discusses the key attributes and differences between partnerships and corporations. It provides 3 main points of comparison:
1) Corporations have perpetual existence and are not affected by changes in ownership, while partnerships dissolve upon a partner's death or withdrawal unless otherwise agreed.
2) Partners are personally liable for a partnership's debts, while corporate shareholders have limited liability and are not personally responsible for a corporation's obligations.
3) Corporations are managed by a board of directors according to their charter, while partnerships distribute management responsibilities among all partners through unanimous agreement.
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SECTION 2
Attributes of a corporation
1) Artificial Being (capacity to contract and transact business)
-has a personality with capacity to enter into contractual relations, separate and distinct from those persons comprising it as well as from any other legal entity to which it may be related - A corporation exists by fiction of law. Hence, it canact only through its directors, officers, and employees.
2) Created by operation of law (Creature of law)
-dependent on the consent or grant of the State -corporation cannot come into existence by mere consent of the parties, there must be a law granting it -fact that a corporation is created by operation of law ensures its strong juridical personality - the state must give its consent either through a special law (in case of govt corp) or a general law (ie Corp Code in case of a private corp)
3) Right of Succession (strong juridical personality)
- a corporation has the capacity for continuous existence despite changes in stockholders/members or by any transfer of shares by a stockholder to a 3rd person -it can exist continuously despite the death or replacement of its stockholders or members
4) has the powers, attributes, and properties expressly authorized by kaw or incident to its existence (a creature of limited powers) - as a mere creature of law, it can exercise only such powers as the law may choose to grant it, either expressly or impliedly.
SECTION 3
purpose.
Stock corporations are organized for profit to be enjoyed by stockholders.
Non-stock corporations are organized for purposes other than profit.
distribution of profits.
In stock corporations, profits are declared and they are distributed to stockholders. On the other hand, profits in non-stock corporations are not so distributed but used to further its own purposes.
composition.
Stock corporations are composed of stockholders (also called shareholders or share owners) while non-stock corporations are composed of members.
governing board.
A stock corporation is governed by a board of directions (BOD) while a
non-stock corporation is governed by what is generally called a board of trustees (BOT). Franchises of Corporations
-PRIMARY/CORPORATE/GENERAL: Franchise to exist as a corporation, vested in the individuals who compose the corporation, and cannot be conveyed in the absence of a legislative authority to do so. right to exist as such, is vested "in the individuals who compose the corporation and not in the corporation itself”
-SECONDARY/SPECIAL: Rights and privileges conferred upon existing corporations, vested in the corporation, and may be conveyed or mortgaged under a general power granted to a corporation, except such special franchises charged with public use. is the powers granted to a corporation by the sovereign and specified in its charter or by statute. It refers to any of those franchises of a corporation other than its right or franchise to be a corporation, which is the primary franchise.
Franchise
a special privilege conferred by governmental authority, and which does not belong to citizens of the country generally as a matter of common right
Partnership
form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates.
Partnership vs. Corporation
A partnership is set up easier and has less paperwork, legal requirements, and tax obligations than a corporation.
Life. A corporation continues until dissolved by law while a partnership has a specified duration or may dissolve due to the death of a partner.
Entity. A corporation is a separate entity while a partnership isn’t separate from the owners.
Liability. General partners are liable for the business’s obligations while limited partners are considered liable up to their contribution amount. In a corporation, a stockholder isn’t liable but can be if the corporate veil is pierced.
Only the corporation is responsible for the business’s legal fees or obligations. They will not hold shareholders or managers personally liable for any business obligations or debts.
Ownership changes. Stock, or ownership, of a corporation, can be sold or transferred easily. With a
partnership, a change in ownership means that a new partnership must be created. Generating capital. A corporation can raise capital by selling stocks, bonds, or securities. A partnership can only generate capital in the form of a loan or increased member contributions.
Policies. In the corporation, a board of directors makes the policies. In a partnership, the members usually have to agree unanimously about new policies.
Management. A corporation hires managers while a partnership’s owners are the managers.
DISTINCTIONS BETWEEN PARTNERSHIP AND CORPORATION
PARTNERSHIP CORPORATION
According to the manner of Creation Partnership becomes established A private corporation is created by through the simple expediency of an operation of law agreement among the members thereof.
With respect to Juridical Personality Juridical personality obtained by the Private corporation acquires legal partnership from the moment the personality from the date the agreement among the partners has certification is issued by the SEC been reached and the papers for registration filed with the Security and Exchange Commission (SEC)
Term of Existence - a partnership may be stipulated in -shall not be in excess of fifty years, the articles of agreement by the although such term may be extended partners. prior to its expiration for a like period.
Right of succession it cannot be said to be true of a - the right of succession is enjoyed by
partnership. a private corporation
Powers A partnership can engage in any The operation of a private
field of business as the partners may corporation is limited to what is decide provided it is not contrary to specifically stipulated in its law, morals, or public policy. existence. Hence, if a private corporation is to operate in a particular line of economic activity or business other then what the law authorizes, it must first obtain an amendment to its charter from competent authority.
Delectus Personae the principle of delectus personae It may admit new stockholders into prevails. No new members may be the corporation without the need of admitted into the partnership obtaining the prior consent or without the unanimous consent of approval of the other stockholder. all partners.
Management Partnership may operate even Private corporation is run by a board
without a designated manager. In of directors. It exercises its powers such case, all the general partners of through the board the partnership shall be deemed to act for the partnership.
Liability to third parties With the exception of limited One main advantage of private partners, the members of a corporation over partnerships is partnership are liable jointly (as a that the stockholders are not liable group) and severally, meaning for over and above what they have individually, for all the liabilities of subscribed from shares of stocks. the business.
Dissolution It may be dissolved almost If it is agreed by the stockholders to
immediately, subject to the dissolve the corporation for expressed will of the partners. whatever reason or reasons, such intention shall require the prior consent of the proper government authority. - general corporation may be dissolved at any time by legislative enactment, as when its charter or franchise is cancelled by the government.
SEC. 7. Founders’ Shares
The Anti-Dummy Law is a law created to penalize those who violate foreign equity restrictions and evade nationalization laws of the Philippines. The Anti-Dummy Law prohibits an arrangement usually done by a foreigner to evade nationality restrictions.
NATIONALITY OF CORPORATION
1. Place of Incorporation Test
- A corporation is a national of the country under whose laws it has been organized and registered. - Determined by the state of incorporation, regardless of the nationality of the stockholders.
Place-of-Incorporation-Test.pdf 2. Control Test Nationality is determined by the nationality of the majority of the stockholders on whom equity control is vested. (Once a corporation appears to be 60% Filipino owned, it is already considered as a Philippine corporation.) 2007OpinionNo07-20.pdf
3. Grandfather Rule - Nationality is attributed to the percentage of equity in the corporation used in nationalized or partly nationalized area.
-Mere legal title is insufficient to meet the 60 percent Filipino-owned “capital” required in the Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is “considered as non Philippine national[s].”
Narra Nickel Mining and Dev’t Corp., et al. v. Redmont Consolidated Mines Corp., G.R. No. 195580.docx
4. Domiciliary test – Determined by the principal place of business of the corporation.
As a general rule, the stockholders or the managers cannot be held solidarily liable for the obligations incurred by the corporation. The corporation has a separate and distinct personality from that of the stockholders and managers. The latter are presumed to be acting in good faith in continuing the operation of the corporation. The obligations incurred by the corporation are those of the corporation which alone is liable therefor. However, when the corporation is already insolvent, the directors and officers become trustees of the business and assets of the corporation for the benefit of the creditors and are liable for negligence or mismanagement.
The separate juridical personality of the corporation enables it to act as though it were a person. As an artificial being, it may own properties, transact and commit acts expressly authorized by law or incidental to its existence. Unless otherwise provided by law, the corporation can only act through its board of directors (for stock corporations) or board of trustees (for non-stock corporations). These acts are usually embodied in board resolutions and confirmed in the certificates issued by the corporate secretary. However, it bears great emphasis that the board of directors may expressly delegate specific powers to any of its officers. Nonetheless, the power of the board is not without limitation. There are certain corporate acts which require the approval of the stockholders such as extending or shortening the corporate term, increasing or decreasing the capital stock and investing in a business for a purpose other than the primary purpose for which the corporation was organized, among others.
Doctrine of Piercing the Corporate Veil
"Piercing the corporate veil" refers to a situation in which courts put aside limited liability and hold a corporation's shareholders or directors personally liable for the corporation’s actions or debts. Veil piercing is most common in close corporations.
Corporate Shield or Corporate Veil
The corporate shield or corporate veil is a term used to describe the separation of a corporation from its owners. As a separate entity, a corporation (including an S corporation) or limited liability company (LLC) is set up to "shield" the owners of the corporation (or members of the LLC) from personal liability for the debts or negligence of the business.
Piercing the Corporate Veil
The phrase piercing the corporate veil is used to describe the action of a court to hold corporate shareholders and LLC owners personally liable for the debts and liabilities of a corporation.
Corporations are separate entities from their shareholders, and in normal circumstances, if a corporation is sued, the individual shareholders and officers cannot be brought into the lawsuit. But there are cases in which the corporation's officers and shareholders could be sued for negligence or for debts; the action of bringing in these shareholders to be sued is called "piercing the corporate veil" or "lifting the corporate veil."
In the same way as corporate shareholders, the owners of a limited liability company (LLC), called "members," may also be sued personally for business debts and actions.
