SECTION 1 – Revised Corporation Code of the In a corporation, a stockholder can transfer his shares to

Philippines another person without the consent of the other

SECTION 2 – Corporation Defined stockholders. In a partnership: a partner cannot transfer his
Corporation- artificial being created by operation of law, interest to a third-person for the purpose of making the
- Separated by law by a dividing line from its latter a partner without the consent of the other partners),
stockholders. by reason of the element of delectus personae which is
inherent in a partnership contract.
2 kinds of person
 Natural persons 9.) Dissolution
 Artificial persons A corporation cannot be dissolved without the consent of
the State, while a partnership may be dissolved by the
Separate personality of a corporation partners.
- Intended to protect its stockholders from liability for
corporate acts. Section 3- Classes of Corporations
Primary consequence of piercing the veil is to hold the
stockholders directly liable for corporate acts or Classes of corporations
obligations . In general

Ultra vires – any act performed beyond the range of such 1) Stock corporation
powers. One that has capital stock divided into shares and is
authorized to distribute-dividend. or allotments of
Distinctions between partnership and corporation surplus profits on the basis of the shares held.

1)Manner of creation 2) Nonstock corporation

A corporation is created by operation of law, while a One no part of the income of which is distributable as
partnership is created by the mere agreement of the dividends to its members, trustees or officers.
partners.
1. Domestic corporation
2.) Number of organizers One incorporated under Philippine laws (or one operating
A corporation may be formed singly or jointly with others, within the country under whose laws it was incorporated).
but the number should not exceed 15. A partnership may
be formed by two or more persons. 2. Foreign corporation
One formed, organized and existing under any laws other
3.) Right of succession than those of the Philippines and whose laws allow
A corporation has the right of succession, while a Filipino citizens.
partnership has no such right.
1. Incorporation test-
4) Powers The nationality of a corporation follows that of the
A corporation can exercise only the powers expressly country under whose laws it was incorporated.
authorized by law, those implied from the exercise of such
express powers, and those incidental to its existence. A 2. Control test-
partnership may exercise any power provided it is The nationality of a corporation follows that of the
authorized by the partners and it is not contrary to law, stockholders owning the controlling interest. This is
morals good customs, public order or public policy. applied during (wartime for the purpose of the security
of the State.
5) Management 3. Business domiciliary test
A corporation acts through its board of directors, while a The nationality of a corporation is that of the country
partnership acts through all the general partners each one where its principal business is conducted.
of whom is considered an agent of the partnership, unless
otherwise agreed. "Grandfather Rule" is a method by which the
percentage of Filipino equity in corporations engaged
6.) Liability of members for debts in nationalized and/or partly nationalized areas of
The stockholders or members are not liable for the activities, 60%:40%
obligations of the corporation, while the general partners
of a partnership are liable with their separate property for As to number of persons composing them
partnership debts.
1. Corporation aggregate - One that is composed of
more than one corporator.
2. Corporation sole -One composed of only one person
7.) Commencement of existence like a bishop or a rabbi, or a "One Person
A corporation commences to have juridical personality on Corporation"
the date of the issuance of its certificate of incorporation.
A partnership. on the other hand, commences to have As to whether its purpose is public or private
juridical personality upon the execution of the partnership 1. Public corporation - One that is organized for the
contract unless a different date is set by the partners. government of a portion of the State, like
provinces, cities, municipalities and barangays.
8) Transferability of interest
 2. Private corporation - One that is formed for a 2. Open corporation - One whose shares are open to the
private purpose or end, like San Miguel public, such as those whose shares are listed in the
Corporation. stock exchanges.

Private corporations include the following: Other classifications

a. Government-owned or -controlled corporations 1. Corporation by prescription - One which has

These refer to corporations created by special law exercised corporate owners for such a length of time
other than those for the government of a portion of without interference from the State and which by
the State. fiction of law, is given the status of a corporation.
b. Quasi-public corporations - Those organized for such as the Roman Catholic Church.
profit which are granted a franchise by the State to
perform public service, such as Meralco. 2. Corporation by estoppel - One which is not in
-species of private corporation reality a corporation but is considered as one with
respect to those who are precluded by their
As to whether its purpose is religious or not admission or conduct from denying its existence.

1) Ecclesiastical or religious corporation - One formed Components of a corporation

for a religious purpose.
a. Corporators - Those who compose a corporation,
2) Lay corporation - One formed for a purpose other whether as stockholders or members.
than ecclesiastical or religious. b. Stockholders - Corporators of a stock corporation.
c. Members - Corporators of a non-stock
As to whether its purpose is charitable or not corporation.
d. Incorporators - Those stockholders or members
1) Eleemosynary corporation - One organized for mentioned in the articles of incorporation as
public charity. originally forming and composing the corporation
and are signatories of such document.
2) Civil corporation - One organized for profit.

As to their legal right to corporate existence

Promoter - is a person, natural or juridical, who
1) De jure corporation - One that has been created in usually discovers a prospective business and brings
strict compliance with all the legal requirements and persons interested to invest in it through the formation
whose right to exist as a corporation cannot be of a corporation.
successfully attacked in a direct proceeding for that
purpose by the State. A promoter is personally liable for contracts made for
the benefit of the proposed corporation. If the
2) De facto corporation - One that is defectively incorporation of the corporation does not materialize,
created but there is an actual exercise of corporate the promoter remains personally liable.
rights and franchise resulting from an attempt in good
faith to incorporate on the part of the members. It has newly-formed corporation - is not automatically liable
all the powers of a de jure corporation but its due for pre-incorporation contracts entered into by a
existence can be attacked directly in a quo warranto promoter in its behalf.
proceeding
a. Capital stock - The amount specified in the articles
As to their relation to another corporation or other of incorporation paid in, or procured to be paid in
corporations for the carrying on of the business of the
corporation.
1) Parent or holding corporation - One which owns the
shares of another corporation and having the power, b. Authorized capital stock - The total amount of
directly or indirectly, over the latter including the shares which a corporation is allowed to issue if
election of the directors thereof. the shares have par value.

2) Subsidiary corporation - One whose shares of c. Subscribed capital stock - This is the part of the
stock are owned by another corporation, called the capital stock which is subscribed, whether paid or
parent corporation, which has the power to elect unpaid.
its directors.
d. Outstanding capital stock - This refers to the total
As to whether its shares may be held by the public or shares of stock issued to subscribers or
not stockholders, whether fully or partially paid (as
long as there is a binding subscription contract),
1. Close corporation - One whose articles of except treasury shares.
incorporation provide that its shares are limited to a
few, restricted as to their transfer, and not listed in any e. Paid-up capital stock The part of the subscribed
stock exchange. capital stock paid to the corporation.
 f. Unissued capital stock-That part of the capita' c) Participating preferred stock - Those that entitle the
stock which is not issued or subscribed. holder to participate with the holders of common
shares in the surplus profits after the amount stipulated
g. Legal capital -Refers to the total par value of all has been paid to the holders of preferred shares.
issued par value shares, or the total cash or
consideration received for all issued no-par value d) Non-participating preferred stock - Those that entitle
shares. the holders only to the stipulated preferred dividend.

h. Stated capital - The capital with which the c. Par value stock - One the nominal value of which
corporation issuing shares without par value begins appears on the stock certificate.
business, increased by any additions thereto, or d. No-par value stock - One without any nominal or par
diminished by any deductions therefrom. value appearing on the stock certificate.
e. Redeemable shares - Those that grant the issuing
i. Capital-Refers to the actual property of the corporation the power to redeem or purchase them
corporation in money and other property. after a certain period.
f. Founders' shares - Those that grant the founders
certain rights and privileges not enjoyed by other
share of stock - is one of the units into which the capital shares. limitation
stock is divided. It represents the intangible interest or right g. Treasury shares - Those that have been issued and
fully paid for, but subsequently reacquired by the
Distinguished from stock certificate issuing corporation by purchase, redemption, donation
or through some other lawful means.
1) Share of stock represents the rights and interest of h. Watered stock Those issued without consideration or
a stockholder in a corporation. Stock certificate is for an inadequate consideration.
the written evidence of such rights and interest. i. Voting stock - Those entitled to vote in meetings of
2) Share of stock is intangible personal property, the voting rights corporation.
while stock certificate is tangible personal j. Nonvoting stock -Those without voting rights, except
property. in certain cases.
3) Share of stock may be issued even if not fully paid,
except shares without par value which are deemed
fully paid and non-assessable upon issuance. Stock Founders' shares - are shares issued by a corporation,
certificate is issued only if the subscription is fully classified as such in the articles of incorporation and
paid. which grant the holders thereof certain rights and
privileges not enjoyed by other shares such as the
Classes of stock exclusive right to vote and be voted for in election of
directors or preference in the distribution of dividends.
a. Common stock - The ordinary stock of a corporation
that entitles the holder to a pro rata division of the Redeemable shares are shares that grant the issuing
dividends, without any preference or advantage over corporation the power to purchase them upon the
other stockholders. expiration of a fixed period.
b. Preferred stock - One that entitles the holder to Treasury shares refer to shares which have been issued
certain preferences over other stockholders. Such and fully paid for, but subsequently reacquired by the
preferences may be as follows: issuing corporation through purchase, redemption,
donation or some other lawful means.
1) Preferred stock as to asset - One that entitles the
holder to preference in the distribution of assets
over common stock upon liquidation of the
corporation.
2) Preferred stock as to dividend -One that entitles
the holder to preference in the distribution of
dividends over common stock.

The following are the kinds of preferred stock as to

dividends:

a) Cumulative preferred stock - Those which entitle the

holder to payment not only of current dividends but
also those in arrears, when dividends are declared, to
the extent stipulated, before holders of common shares
are paid.

b) Non-cumulative preferred stock- Those that entitle

the holder to payment of current dividends but not
those in arrears before holders of common shares are
paid.