Corpo Midterms Reviewer

8/9/2019 Corpo Midterms Reviewer

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Types of Business Organizations1. Sole Proprietorship: business organization with only one proprietary owner. A single individual

conducts business under his own name or under a business name. A sole proprietorship hasno legal personality separate from its proprietor.

2. Partnerships: where two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves

• egistration with the S!" is necessary where the capital is P#,$$$ or more. %ut merefailure to register does not invalidate a contract of partnership. &ailure to register doesnot affect the liability of the partnership and the partners to third persons.

Partnership "orporation

'anner of "reation 'ere agreement &rom the issuance of acertificate of registration of theS!" or passage of a special law

(umber of )rganizers 2 or more At least *

Powers Sub+ect to what may be agreedupon by the parties

'ore restricted because of itslimited personality

Authority of those whocompose

'utual agency each generalpartner can represent and bindthe partnership

Stoc-holders are not agents of the corporation in the absenceof epress authority

/ransfer of interest 0nterest cannot be transferredwithout the consent of the other partners

"orporate shares are freelytransferable without the consentof other stoc-holders unlessthere is stipulation

iability of those who compose iable beyond their investment iable only up to the etent oftheir investment

Succession (one death of a partner etinguishes the partnership

es

#. 3oint Accounts 4Cuentas en Participation5: an arrangement whereby the merchants mayinterest themselves in the transaction of other merchants, contributing thereto the capital theymay agree upon, and participating in the results thereof in the proportion they may determine

6. %usiness /rust: a legal relation whereby a trustor conveys a peroperty to another for thebenefit of a beneficiary. /he person in whom confidence is reposed is called the trustee.*. 3oint 7enture: an association of persons or companies +ointly underta-ing some commercial

enterprise. All contribute assets and share ris-s8. "ooperative: an autonomous and duly registered association of persons, with a common

bond of interest, who have voluntarily +oined together to achieve their social, economic, andcultural needs and aspirations by ma-ing e9uitable contributions to the capital re9uired,patronizing their products and services and accepting a fair share of the ris-s and benefits of the underta-ing.

. Syndicate: a group of people who come together to wor- for a common aim. Anunincorporated business association, often in insurance companies who may be underwritinga large ris- or ban-s that are lending a huge amount. Syndication is the practice of dividinginvestment ris- between several persons in order to minimize individual ris-.

;. <omeowners= Associations: a non>stoc-, non>profit corporation registered with the <?% or <ome @uaranty "orporation or S!", organized by owners or purchasers of a lot in asubdivisionvillage

B. "orporation:

• "haracteristics

1. legal personality2. limited liability#. transferability of shares6. delegated management under a board structure*. investor ownership

• Advantages

1. /he capacity to act as a legal unit2. imitation of or eemption from individual liability of shareholders

#. "ontinuity of eistence6. /ransferability of shares



*. "entralized management of board of directors8. Professional management. Standardized method of organization and finance;. !asy capital generation

• Cisadvantage

1. Prone to double taation

2. Sub+ect to greater governmental regulation and control#. 'ay be burdened with an inefficient management if stoc-holders cannot organize

to oppose management6. imited liability of stoc-holders may translate into limited liability to raise credit or

capital*. <arder to organize8. 'ore complicated to maintain. /he ownersstoc-holders do not participate in day>to>day management

Legislative and Historical Background of Corporate Law

"orporation aw 4Act (o. 16*B5 /he "orporation "ode of the Phils 4%P %lg. (o. 8;5

Purpose of Corporate Law

1. Cefining the area within which the parties are free to allocate ris-, control and profit2. Prescribing the allocation of these elements in the absences of epress agreement#. /o lay down rules and regulations of the organizations with a view of protection of the public

interest, but at the same time promote economic and social development of the country

Suppletory Application: /he "" is a general law that applies to all types of corporations while the(ew "entral %an- Act are the primary laws on ban-.

Section ! Corporation defined. D A corporation is an artificial being created by operation of law,having the right of succession and the powers, attributes and properties epressly authorized by lawor incident to its eistence.

Attributes of a Corporation1. Artificial being2. "reated by operation of law#. <as the right of succession6. <as the powers, attributes epressly authorized by law or incident to its eistence.

A"T#$#C#AL B%#&'

(octrine of coporate entity) A corporation has a personality separate and distinct from itsmemberspersons composing it as well as from that of any other entity to which it may be related.

Secosa et al v. Heirs of Francisco: 0t is a settled precept in this +urisdiction that a corporation isinvested by law with a personality separate from that of its stoc-holders or members. 0t has apersonality separate and distinct from those of the persons composing it as well as from that of anyother entity to which it may be related. 'ere ownership by a single stoc-holder or by another corporation of all or nearly all of the capital stoc- of a corporation is not in itself sufficient ground for disregarding the separate corporate personality. A corporation=s authority to act and its liability for itsactions are separate and apart from the individuals who own it.PNB v. Aznar: Aznar, et al. have no right to as- for the 9uieting of title of the properties at issuebecause they have no legal andor e9uitable rights over the properties that are derived from theprevious registered owner which is 0S"), as provided by Section 2 of the "orporation "ode 4%atasPambansa %lg. 8; 5, which states that EFaG corporation is an artificial being created by operation of law,having the right of succession and the powers, attributes and properties epressly authorized by lawor incident to its eistence.H As a conse9uence thereof, a corporation has a personality separate and

distinct from those of its stoc-holders and other corporations to which it may be connected.

Separate Properties) Properties of the corporation are no the properties of its shareholders,



members or officers. A stoc-holder cannot sell, transfer, mortgage or encumber the properties withoutproper authority. A shareholder has no right to file in his own name an action to 9uiet title of theproperties of the corporation.

&ature of Stock*olders+ #nterest) 0(C0!"/. ")(/0(@!(/. 0("<)A/!. /he interest becomesactual, direct and eisting only upon li9uidation of assets

Li,ited Liability "ule) A stoc-holder is personally liable for the financial obligations of thecorporation to the extent of his unpaid subscription. Ihile stoc-holders are generally not liable, thestoc-holders may be liable if they have not or have not fully paid the subscription price.

&AT#O&AL#T-: a corporation cannot be considered a citizen because such term is limited to naturalpersons.Control Test .T*e Aggregate Test/: loo-s into the nationality, domicile, or residence of theindividuals who control the corporation

• Shares belonging to corporations or partnerships at least 8$J of the capital of which

is owned by &ilipino citizens shall be considered as of Philippine nationality, but if thepercentage of &ilipino ownership is less than 8$J, only the number of sharescorresponding to such percentage shall be counted as of Philippine nationality.

• A corporation organized under Philippine laws of which 8$J of the capital stoc-outstanding and entitled to vote is owned and held by &ilipino citizen or a corporationorganized abroad and registered as doing business in the Philippines under the"orporation "ode of which 1$$J of the capital stoc-s entitled to vote belong to&ilipinos

'randfat*er "ule) method of determining the nationality of a corporation which in turn is owned byanother corporation by brea-ing down the e9uity structure of the shareholders of the corporation.

• /he percentage of &ilipino e9uity in the corporation is computed by attributing the

nationality of the second or even subse9uent tier of ownership to determine thenationality of the corporate shareholder. 0t involves computation of &ilipino ownershipin which corporation of partly &ilipino and partly foreign e9uity owns capital stoc-. /hepercentage shares held by the second corporation in the first is multiplied by thelatter=s own &ilipino e9uity, and the product of these percentages is determined to bethe ultimate &ilipino ownership of subsidiary corporation.

#ncorporation Test .T*e %ntity Test/) loo-s into the nation where the corporation was incorporated

/he sovereignty by which a corporation was created, under whose laws it was

organized, determines its national character and the fact that some of itsincorporators were residents and citizens of a foreign country does not change therule

0oting Control Test and Beneficial Owners*ip Test: full beneficial ownership of the stoc-s andvoting rights is essential in determining whether the corporation is a Philippine (ational

CO&ST#T1T#O&AL "#'HTSBache and Co. Inc vs. uiz: A corporation is, after all, but an association of individuals under anassumed name and with a distinct legal entity. 0n organizing itself as a collective body it waives no

constitutional immunities appropriate to such body. 0ts property cannot be ta-en withoutcompensation. 0t can only be proceeded against by due process of law, and is protected, under the16th Amendment, against unlawful discrimination.S!ith Bell vs. Natividad: Ie are inclined to the view that while Smith, %ell K "o. td., a corporationhaving alien stoc-holders, is entitled to the protection afforded by the due>process of law and e9ualprotection of the laws clause of the Philippine %ill of ights, nevertheless, Act (o. 281 of thePhilippine egislature, in denying to corporations such as Smith, %ell K. "o. td., the right to register vessels in the Philippines coastwise trade, does not belong to that vicious species of class legislationwhich must always be condemned, but does fall within authorized eceptions, notably, within thepurview of the police power, and so does not offend against the constitutional provision.Bataan Ship"ard vs. PC##: P"@@ issued an order re9uiring %AS!") to produce corporate recordsin the eercise of its powers under !) (o. 2. %AS!") 9uestioned the order alleging that there wasviolation of the right against unreasonable searches and seizures and self>incrimination. /he S"

re+ected the argument because there was in fact no search and seizure in the case and %!S!") as acorporation is not entitled to the right against self>incrimination.



C#0#L A&( C"#2#&AL L#AB#L#T- PNB vs. CA: P(% should be liable for tort. Ihile /apnio had the ultimate authority of

approving or disapproving the proposed lease since the 9uota was mortgaged to the ban-, itcertainly "A(()/ escape its responsibility of observing, for the protection of the interest of /apnio and /uazon, that the degree of care, precaution and vigilance which the circumstances +ustly demand in approving or disapproving the lease of said sugar 9uota. Art. 21 of the "ivil

"ode: any person who wilfully causes loss or in+ury to another in a manner that is contrary tomorals, good customs or public policy shall compensate the latter for the damage.

Professional Services vs. "A: PS0 should be liable for tort. Ihile PS0 had no power to control

the meansmethod by which Cr. Ampil conducted the surgery on (atividad, they had the power toreview or cause the review. PS0 had the duty to tread on as captain of the ship for the purpose of ensuing the safety of the patients availing themselves of its services and facilities. PS0 defined itsstandards of corporate conduct:

1. !ven after her operation to ensure her safety as a patient2. ()/ limited to record the 2 missing gauzes#. !tended to determining Cr. Ampils role in it, bringing the matter to his attention and

correcting his negligence Admission bars itself from arguing that its corp. resp. is ()/ yet in eistence at the

time (atividad underwent treatment.>Cr. Ampil > medial negligence>PS0 > "orporate (egligence

Child $earnin% Center vs. &a%ario: 0n every tort case filed under Article 218 of the "ivil "ode,

plaintiff has to prove by a preponderance of evidence: 415 the damages suffered by the plaintiff425 the fault or negligence of the defendant or some other person for whose act he must respondand 4#5 the connection of cause and effect between the fault or negligence and the damagesincurred.

0n this tort case, respondents contend that "" failed to provide precautionary measures to avoidharm and in+ury to its students in two instances: 415 failure to fi a defective door -nob despite

having been notified of the problem and 425 failure to install safety grills on the window where/imothy fell from. Curing trial, it was found that the loc- was defective. /he architect witnesstestified that he did not verify if the door-nob at the comfort room was actually put in place.&urther, the fact that /imothy fell out through the window shows that the door could not be openedfrom the inside. /hat sufficiently points to the fact that something was wrong with the door, if notthe door -nob, under the principle of res ipsa lo'uitor . /he doctrine of res ipsa lo'uitor applieswhere 415 the accident was of such character as to warrant an inference that it would not havehappened ecept for the defendant=s negligence 425 the accident must have been caused by anagency or instrumentality within the eclusive management or control of the person charged withthe negligence complained of and 4#5 the accident must not have been due to any voluntaryaction or contribution on the part of the person in+ured. Petitioners are clearly answerable for failure to see to it that the doors of their school toilets are at all times in wor-ing condition. /hefact that a student had to go through the window, instead of the door, shows that something waswrong with the door. As to the absence of grills on the window, petitioners contend that there wasno such re9uirement under the %uilding "ode. (evertheless, the fact is that such window, aspetitioners themselves point out, was approimately 1.* meters from the floor, so that it was withinreach of a student who finds the regular eit, the door, not functioning. Petitioners, with the duediligence of a good father of the family, should have anticipated that a student, loc-ed in the toiletby a non>wor-ing door, would attempt to use the window to call for help or even to get out."onsidering all the circumstances, therefore, there is sufficient basis to sustain a finding of liabilityon petitioners= part. Petitioners= argument that "" eercised the due diligence of a good father of a family in the selection and supervision of its employees is not decisive. Cue diligence in theselection and supervision of employees is applicable where the employer is being heldresponsible for the acts or omissions of others under Article 21;$ of the "ivil "ode. 0n this case,""=s liability is under Article 218 of the "ivil "ode, premised on the fact of its own negligence innot ensuring that all its doors are properly maintained. /he "ourt=s pronouncement that /imothyclimbed out of the window because he could not get out using the door, negates petitioners= other contention that the proimate cause of the accident was /imothy=s own negligence. /he in+uries



he sustained from the fall were the product of a natural and continuous se9uence, unbro-en byany intervening cause, that originated from ""=s own negligence

Sia v. People: Sia was ac9uitted. "A decision is reversed. An officer of a corporation can be held

criminally liable for acts or omissions done in behalf of the corporation only where the law directlyre9uires the corporation to do an act in a given manner. 0n he absence of a law ma-ing a

corporate officer liable for a criminal offense committed by the corporation, the eistence of thecriminal liability of he former may not be said to be beyond doubt. <ence in the absence of anepress provision of law ma-ing Sia liable for the offense done by ''"P of which he isPresident, as in fact there is no such provision under the evised Penal "ode, Sia cannot be saidto be liable for estafa.

(spiritu )r. vs. Petron: As to the liability of stoc-holders and members of the board: %icol @as is a

corporation. As such, it is an entity separate and distinct from the persons of its officers, directors,and stoc-holders. 0t has been held, however, that corporate officers or employees, throughwhose act, default or omission the corporation commits a crime, may themselves be individuallyheld answerable for the crime. /he employees of %icol @as acted under the direct orders of itsowners and that Ethe owners of %icol @as have full control of the operations of the business.H /heEownersH of a corporate organization are its stoc-holders and they are to be distinguished from its

directors and officers. /he petitioners here are being charged in their capacities as stoc-holdersof %icol @as. %ut the "A forgets that in a corporation, the management of its business isgenerally vested in its board of directors, not its stoc-holders. Stoc-holders are basically investorsin a corporation. /hey do not have a hand in running the day>to>day business operations of thecorporation unless they are at the same time directors or officers of the corporation. %efore astoc-holder may be held criminally liable, therefore, it must be shown that he had -nowledge of the criminal act committed in the name of the corporation and that he too- part in the same or gave his consent to its commission, whether by action or inaction.

#osiaco vs. Chin%: Ihen a corporate officer issues a worthless chec- in the corporate name he

may be held personally liable for violating a penal statute. /he statute imposes criminal penaltieson anyone who with intent to defraud another of money or property, draws or issues a chec- onany ban- with -nowledge that he has no sufficient funds in such ban- to meet the chec- on

presentment. 'oreover, the personal liability of the corporate officer is predicated on the principlethat he cannot shield himself from liability from his own acts on the ground that it was a corporateact and not his personal act. (owhere in %.P. %lg. 22 is it provided that a +uridical person may beimpleaded as an accused or defendant in the prosecution for violations of that law, even in thelitigation of the civil aspect thereof. <)I!7!, @osiaco canLt be prevented from recoveringamounts due and demandable to him. S!PAA/! "070 A"/0)( A@A0(S/ /<! (A/?AP!S)( "<A@!C I0/< /<! %P 22 70)A/0)(, including such corporate officer who hadsigned the bounced chec-. %.P. %lg. 22 imposes a distinct civil liability on the signatory of thechec- which is distinct from the civil liability of the corporation for the amount represented fromthe chec-. /he civil liability attaching to the signatory arises from the wrongful act of signing thechec- despite the insufficiency of funds in the account, while the civil liability attaching to thecorporation is itself the very obligation covered by the chec- or the consideration for its eecution.

"%CO0%"- O$ 2O"AL (A2A'%S ABS CBN Broadcastin% vs. CA: <owever, the "ourt find for A%S>"%( on the issue of damages.

'oral damages are in the category of an award designed to compensate the claimant for actualin+ury suffered and not to impose a penalty on the wrongdoer. T*e award of ,oral da,agescannot be granted in favor of a corporation because3 being an artificial person and *avinge4istence only in legal conte,plation3 it *as no feelings3 no e,otions3 no senses! #tcannot3 t*erefore3 e4perience p*ysical suffering and ,ental anguis*3 w*ic* can bee4perienced only by one *aving a nervous syste,! /he statement that a corporation mayrecover moral damages if it Ehas a good reputation that is debased, resulting in social humiliationHis an obiter dictum. )n this score alone the award for damages must be set aside, since %S isa corporation.

Filipinas Broadcastin% Net*or+ vs. A%o ,edical and (ducational Center: A +uridical person is

generally not entitled to moral damages because, unli-e a natural person, it cannot eperiencephysical suffering or such sentiments as wounded feelings, serious aniety, mental anguish or moral shoc-. (evertheless, A'!"=s claim, or moral damages fall under item of Art D 221B of the



("". /his provision epressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Art 221B 45 does not 9ualify whether the plaintiff is a natural or +uridical person. /herefore, a +uridical person such as a corporation can validly complain for libelor any other form of defamation and claim for moral damages. 'oreover, where the broadcast islibelous per se, the law implied damages. 0n such a case, evidence of an honest mista-e or thewant of character or reputation of the party libeled goes only in mitigation of damages. 0n this

case, the broadcasts are libelous per se. thus, A'!" is entitled to moral damages. <owever, wefind the award P*$$,$$$ moral damages unreasonable. /he record shows that even though thebroadcasts were libelous, per se, A'!" has not suffered any substantial or material damage toits reputation. /herefore, we reduce the award of moral damages to P1*$-.

,anila (lectric Co. vs. &(A, Corp: S" deems it proper to delete the award of moral damages.

/!"Ls claim was premised allegedly on the damage to its goodwill and reputation. As a rule, A")P)A/0)( 0S ()/ !(/0/!C /) ')A CA'A@!S %!"A?S!, ()/ %!0(@ A(A/?A P!S)(, 0/ "A(()/ !MP!0!("! P<S0"A S?&&!0(@ ) S!(/0'!(/S li-ewounded feelings, serious aniety, mental anguish, and moral shoc-. /he only !M"!P/0)( tothis rule is when the corporation has a reputation that is debased, resulting in its humiliation in thebusiness realm. but in such a case, it is imperative for the claimant to present proof to +ustify theaward. 0t is essential to prove the eistence of the factual basis of the damage and its causal

relation to petitionerLs acts. 0n the present case, the records are bereft of any evidence that thename or reputation of /!"/P" has been debased as a result of petitionerLs act. %esides, the trialcourt simply awarded moral damages in the dispositive portion of its decision without stating thebasis thereof.

Cr"stal vs. Ban+ of Phil Islands: 0t is a fundamental principle of corporation law that a corporation

is an entity separate and distinct from its stoc-holders and from other corporations to which it maybe connected. %ut, this separate and distinct personality of a corporation is merely a fictioncreated by law for convenience and to promote +ustice. So, when the notion of separate +uridicalpersonality is used to defeat public convenience, +ustify wrong, protect fraud or defend crime, or isused as a device to defeat the labor laws, this separate personality of the corporation may bedisregarded or the veil of corporate fiction pierced. /his is true li-ewise when the corporation ismerely an ad+unct, a business conduit or an alter ego of another corporation. /he conditions

under which the +uridical entity may be disregarded vary according to the peculiar facts andcircumstances of each case, to wit: 415 Stoc- ownership by one or common ownership of bothcorporations 425 0dentity of directors and officers 4#5 /he manner of -eeping corporate boo-s andrecords and 465 'ethods of conducting the business. /he S!" en banc eplained theNinstrumentality ruleN which the courts have applied in disregarding the separate +uridicalpersonality of corporations as NIhere one corporation is so organized and controlled and itsaffairs are conducted so that it is, in fact, a mere instrumentality or ad+unct of the other, the fictionof the corporate entity of the NinstrumentalityN may be disregarded. /he control necessary toinvo-e the rule is not ma+ority or even complete stoc- control but such domination of instances,policies and practices that the controlled corporation has, so to spea-, no separate mind, will or eistence of its own, and is but a conduit for its principal. 0t must be -ept in mind that the controlmust be shown to have been eercised at the time the acts complained of too- place. 'oreover,the control and breach of duty must proimately cause the in+ury or un+ust loss for which the

complaint is made.N /he test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as 415 "ontrol, not mere ma+ority or complete stoc- control, but completedomination, not only of finances but of policy and business practice in respect to the transactionattac-ed so that the corporate entity as to this transaction had at the time no separate mind, willor eistence of its own 425 Such control must have been used by the defendant to commit fraudor wrong, to perpetuate the violation of a statutory or other positive legal duty or dishonest andun+ust act in contravention of plaintiffLs legal rights and 4#5 /he aforesaid control and breach of duty must proimately cause the in+ury or un+ust loss complained of. /he absence of any one of these elements prevents Npiercing the corporate veil.N 0n applying the NinstrumentalityN or Nalter egoN doctrine, the courts are concerned with reality and not form, with how the corporationoperated and the individual defendantLs relationship to that operation. /hus the 9uestion of whether a corporation is a mere alter ego, a mere sheet or paper corporation, a sham or asubterfuge is purely one of fact. <ere, while "%0 claimed that it ceased its business operations on2B April 1B;8, it filed an 0nformation Sheet with the Securities and !change "ommission on 1*'ay 1B;, stating that its office address is at #** 'aysan oad, 7alenzuela, 'etro 'anila. )n



the other hand, <PP0, the third>party claimant, submitted on the same day, a similar informationsheet stating that its office address is at #** 'aysan oad, 7alenzuela, 'etro 'anila. &urther,both information sheets were filed by the same 7irgilio ). "asiOo as the corporate secretary of both corporations. %oth corporations had the same president, the same board of directors, thesame corporate officers, and substantially the same subscribers. &rom the foregoing, it appearsthat, among other things, the "%0 and the <PP0 shared the same address andor premises. ?nder

these circumstances, it cannot be said that the property levied upon by the sheriff were not of "%0Ls. "learly, "%0 ceased its business operations in order to evade the payment to 'arabe, et.al. of bac- wages and to bar their reinstatement to their former positions. <PP0 is obviously abusiness conduit of "%0 and its emergence was s-illfully orchestrated to avoid the financial liabilitythat already attached to "%0. #ndeed3 w*ile t*e Court ,ay allow t*e grant of ,oral da,agesto corporations3 it is not auto,atically granted! T*ere ,ust be proof of t*e e4istence of t*efactual basis of t*e da,age and its causal relation to t*e defendant+s acts! T*is is sobecause ,oral da,ages3 t*oug* incapable of pecuniary esti,ation3 are in t*e category of an award designed to co,pensate t*e clai,ant for actual in5ury suffered and not to i,posea penalty on t*e wrongdoer!

(OCT"#&% O$ P#%"C#&' TH% 0%#L O$ CO"PO"AT% $#CT#O& A corporation has a separate personality distinct from its stoc-holders and from other corporations to

which it may be connected. <owever, the corporation=s separate +uridical personality may bedisregarded when there is an abuse of the corporate form.

Ihen to pierce the veil of corporate entity-hen it is used to:

defeat public convenience

+ustify wrong

protect fraud

defend a crime

-here the corporation is a mere alter ego or business conduit of a person

so organized and controlled and affairs are so conducted as to ma-e it merely an

instrumentality, agency, conduit or ad+unct of another corporation

#nstru,entality (octrinecases when there is no intent to commit a wrongful act in organizing the corporation or operation of the corporation but in+ustice and ine9uity may result if the corporate veil is not pierced

Concept Builders Inc vs. N$C: /he test in determining the applicability of the doctrine of

piercing the veil of corporate fiction is as415 "ontrol, not mere ma+ority or complete stoc- control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attac-ed so that thecorporate entity as to this transaction had at the time no separate mind, will or eistence of itsown425 Such control must have been used by the defendant to commit fraud or wrong, to

perpetuate the violation of a statutory or other positive legal duty or dishonest and un+ust actin contravention of plaintiffLs legal rights and4#5 /he aforesaid control and breach of duty must proimately cause the in+ury or un+ust losscomplained of. /he absence of any one of these elements prevents Npiercing the corporateveil.N

0n applying the NinstrumentalityN or Nalter egoN doctrine, the courts are concerned with realityand not form, with how the corporation operated and the individual defendantLs relationship tothat operation. /hus the 9uestion of whether a corporation is a mere alter ego, a mere sheetor paper corporation, a sham or a subterfuge is purely one of fact.

Alter %go (octrine>cases when fraud or other wrongful acts or omissions are present>/he corporation is a mere alter ego or business conduit of a person, or where the corporation is so

organized and controlled and its affairs are so conducted as to ma-e it merely an instrumentality,agency, conduit, or ad+unct of another person. &raud or wrongful act is not an element in this case.Ihat is being considered is that the stoc-holders did not treat the corporation as such and considered



and operated the same not as a separate entity but only as part of the property or business of anindividual or group of individuals or another corporation.

Heirs of Paarillo vs. CA: 0t is a fundamental principle of corporation law that a corporation is

an entity separate and distinct from its stoc-holders and from other corporations to which itmay be connected. <owever, this separate and distinct personality of a corporation is merelya fiction created by law for convenience and to promote +ustice. <ence, when the notion of

separate +uridical personality is used to defeat public convenience, +ustify wrong, protect fraudor defend crime, or is used as a device to defeat labor laws, this separate personality of thecorporation may be disregarded or the veil of the corporate fiction pierced. /his is trueli-ewise when the corporation is merely an ad+unct, a business conduit or an alter ego of another corporation. /he corporate mas- may be lifted and the corporate veil may be piercedwhen a corporation is but the alter ego of a person or another corporation.

&o!as $ao Construction vs N$C: Public respondent (" did not err in disregarding the

veil of separate corporate personality and holding petitioners +ointly and severally liable for private respondents= bac- wages and separation pay. /he records disclose that the three 4#5corporations were in fact substantially owned and controlled by members of the ao familycomposed of ao <ian %eng alias /omas ao, "hiu Sio- ian 4wife of /omas ao5, Andrew ".ao, ao . <eng, 7icente ao "hua, ao !. /in, !mmanuel ao and 0smaelita 'aluto. A

ma+ority of the outstanding shares of stoc- in 7' and /K3 is owned by the ao family. /K3is 1$$J owned by the aos as reflected in its Articles of 0ncorporation. /he ao @roup of "ompanies therefore is a closed corporation where the incorporators and directors belong toa single family. ao <ian %eng is the same /omas ao who owns /omas ao "orporationand is the ma+ority stoc-holder of /K3. Andrew ". ao is the 'anaging Cirector of 7'"onstruction, and President and 'anaging Cirector of the ao @roup of "ompanies. Petitioners are engaged in the same line of business under one managementand use the same e9uipment including manpower services. Ihere it appears that FthreeGbusiness enterprises are owned, conducted and controlled by the same parties, both law ande9uity will, when necessary to protect the rights of third persons, disregard the legal fictionthat the FthreeG corporations are distinct entities, and treat them as identical. "onsonant withour earlier ruling, we hold that the liability of petitioners etends to the responsible officersacting in the interest of the corporations. 0n view of the peculiar circumstances of this case,

we disregard the separate personalities of the three 4#5 corporations and at the same timedeclare the members of the corporations +ointly and severally liable with the corporations for the monetary awards due to private respondents. 0t should always be borne in mind that thefiction of law that a corporation as a +uridical entity has a distinct and separate personality wasenvisaged for convenience and to serve +ustice therefore it should not be used as asubterfuge to commit in+ustice and circumvent labor laws.

#eneral Credit Corp vs Alsons /evelop!ent: /here is no rigidity or eactitude in the

application of the doctrine of piercing the veil. /hus in many cases, it did not recognize pure Alter (%o cases. !ven in cases where the "ourt ruled that the corporations in 9uestion weremere conduits of another person or entity, the high "ourt used fraud and other irregularities to +ustify the piercing of the veil of corporate fiction. !ven the Instru!entalit" ule re9uirewrongful act as an element. /he first group cited by the S" D where public convenience maybe defeated D may even be included or subsumed in either of the two other groups, Alter (%oCases and Fraud Cases.

#dentity (octrine60f the plaintiff can show that there was such a unity interest and ownership that the independence of the corporations had in effect ceased or had never begun, and adhenerence to the fiction of separateidentity would serve only to defeat +ustice and e9uity by permitting the economic entity to escapeliability arising out of an operation of one corporation for the benefit of the whole enterprise.

Ot*er cases Francisco ,otors vs. CA: /he courts will treat the corporation as a mere aggrupation of

persons and the liability will directly attach to them.

/he rationale behind piercing a corporation=s identity is to remove the barrier between thecorporation from the persons comprising it to thwart the fraudulent and illegal schemes of



those who use the corporate personality as a shield for underta-ing certain proscribedactivities. <owever, in this case, instead of holding certain individuals responsible, thesituation has been reversed. 0t is the petitioner as a corporation that is being ordered toanswer for the personal liability of certain individual directors, officers and incorporatorsconcerned. <ence it appears that the doctrine has been turned upside odwn because of itserroneous invocation.

Sarona vs. N$C0 -ensha Spa vs. 1un%0 Hi2Ce!ent and Holdin%s Corp vs. Insular Ban+ of Asia and A!erica: 'ere ownership by a single stoc-holder or by another corporation of all or nearly all of the capital stoc- of the corporation is not in itself sufficient ground for disregardingthe separate corporate personality.

(nri'uez Securit" Services vs. Cabotae: A security guard used to wor- for a dissolved

corporation. After the dissolution, the guard was transferred to a new corporation. Ihen theguard retired, the time that he wor-ed for the dissolved corporation was not included in thelength of service that was used for his retirement pay. /he S" ruled that the attempt to ma-ethe two security agencies as two separate entities, when in reality they were one, was adevise to defeat the law. /he veil of corporate fiction was diregarded because the same wasused to perpetuate in+ustice or as a vehicle to evade obligations.

C"%AT%( B- OP%"AT#O& O$ LA7

A corporation is therefore created by operation of law when it is granted a franchise either through aspecial law or it is organized under a general law. /he general law under which a corporation can beorganized in the Philippines is the "orporation "ode.

Sec 6 D "orporations created by special laws or charters shall be governed primarily by the provisionsof the special law or charter creating them or applicable to them, supplemented by the provisions ofthis "ode, insofar as they are applicable.

Created by Special Law)nly @)""s may be created by special law. <owever, not all @)""s are created by special law.

• Private corporations are organized under the "orporation "ode

• @)"" with original charter is created by "ongress through an A or PC

• Special laws may also recognize that certain entities ac9uire +uridical personality

without directly conferring corporate status automatically bu mere passage of law.

• ICs are created are @)""s with special charters since they are created pursuant

to PC 1B;. /hey are not created under the "orporation code. ICs do not eistautomatically upon the passage of PC 1B;. /hey are created pursuant to PC 1B; thatconstitutes their special charter.

Created under a general lawSection 18, Art 12, 1B; "onstitution D /he "ongress shall not, ecept by general law, provide for theformation, organization, or regulation of private corporations. @overnment>owned or controlledcorporations may be created or established by special charters in the interest of the common goodand sub+ect to the test of economic viability.

"#'HT O$ S1CC%SS#O& A corporation, being a mere creature of law, possesses only the properties which the charter of itscreation confers upon it. Among the most important are immortality and individuality, properties bywhich a perpetual succession of persons are considered the same, and may act as a single individual./he perpetual succession of individuals are capable of acting for the promotion of a particular ob+ect.

Perpetual succession is that continuous eistence which enables a corporation to manage its affairs,and hold property without the necessity of perpetual conveyances, for purposes of transmitting it. /hisideal and artificial person remains the same though fre9uent changes may be made of its members.Ceath of a shareholder or transfer of his shares will not affect the continued eistence of thecorporation.

• S,( Ban+ Inc. vs. /e #uz!an et al: A shift in the composition of the shareholders of a

corporation would not affect its eistence and continuity. /he +uridical entity remains and the

corporation continues to be the employer of its people and continues to be liable for thepayment of their +ust claims.



POSS%SS PO7%"S3 ATT"#B1T%S A&( P"OP%"T#%S

T*eory of special capacitiesT*eory of general capacities

CLASS#$#CAT#O& A&( C"%AT#O& O$ CO"PO"AT#O&S

Stock and &on6stockSec # D "orporations formed or organized under this "ode may be stoc- or non>stoc- corporations."orporations which have capital stoc- divided into shares and are authorized to distribute to theholders of such shares dividends or allotments of the surplus profits on the basis of the shares heldare stoc- corporations. All other corporations are non>stoc- corporations.

Stoc- "orporation (on>stoc- "orporation

1. "apital stoc- divided into shares2. An authority to distribute to the holders of

such shares, dividends or allotments ofsurplus profis on the basis of the shares

held

1. /here must be members2. /he corporation must not distribute any

part of their income to the members

Corporators3 incorporators3 stock*olders3 ,e,bers .Sec 8/

Corporators #ncorporators

/hose who compose a corporation, whether asstock*olders or as ,e,bers.

/hose stoc-holders or members ,entioned int*e articles of incorporation as originally

for,ing and co,posing the corporation andwho are signatories thereof.

Stock*olders9s*are*olders 2e,bers

"orporators in a stoc- corporation "orporators in a non>stoc- corporation

&u,ber and :ualification of incorporators

Sec 1$ D Any number of natural persons not less t*an five .8/ but not ,ore t*an fifteen .;8/, all oflegal age and a ,a5ority of w*o, are residents of t*e P*ilippines, may form a private corporationfor any lawful purpose or purposes. !ach of the incorporators of s stoc- corporation ,ust own or bea subscriber to at least one .;/ s*are of t*e capital stock of the corporation.

"lasses of Shares 4Sec 8>B5Q

Co,,on Preferred

Part of the corporation=s capital stoc- and both stoc-holders are no different from ordinary investors

epresent the residual ownership interest in thecorporation

(ot creditors of the corporation

A basic stoc- ordinarily and usually issuedwithout etraordinary rights or privileges

!ntitle the shareholder to some priority ondividends and asset distribution

!ntitles the shareholder to a pro rata division ofprofits

)btains neither enforceable claim to interest andrepayment of the principal nor the rights of

residual owner



Preferred S*ares

A person as principal cannot create a contract between himself as owner and himself as

creditor. et all preferred stoc- contracts are fundamentally attempts to enfow certain ownerswith rights analogous to creditor rights. /his is to ma-e preferred shares attractive to theinvestors.

Preferred stoc-s are issued for the ff. reasons:

i. to avoid the use of bonds that have fied interest charges that must be paidregardless of net income

ii! to avoid issuing so many additional common shares that earnings per share will beless in the current year than in prior years

iii! to avoid diluting the common shareholders+ control of the corporation since preferredshares usually have no voting rights

Preferred shares are often ecluded from any control, including the right to vote in the

election, on the theory that their shares are merely investors in the corporation for income inthe same manner as shareholders.

/here is no guaranty that the holder of preferred shares will receive any dividends. Cividends

may be declared only out of unrestricted retained earnings or is dependent upon theavailability of surplus profit. /here is no lien upon the property of the corporation nor does itma-e them creditors of the corporation.

Interest bearin%: Preferred shares are interest bearing on which the corporation agrees to pay

interest before dividends are paid to common stoc-holders, and is legal only when construedas re9uiring payment of interest as dividends from net earnings or surplus.

3inds:

As to assets A share which gives the holder preference inthe distribution of assets in case of li9uidation

As to dividends A share which is entitled to receive dividendson said share to the etent agreed uponbefore any dividends at all are paid to theholders of common stoc-

Cu,ulative 0f a dividend is omitted in any year, it must bemade up in a later year before any dividendmay be paid of the common in the later year

&on6cu,ulative (o need to ma-e up for undeclareddividends. (o right survives as to theundeclared dividends. /he non>cumulativepreference serves to restrict the dividendsource to earning of the particular year

Participating !ntitled to participate with the commonshares in ecess distribution entitled to fiedcumulative dividend

(octrine of %:uality of S*ares



All stoc-s issued by the corporation are presumed to be e9ual with the same privileges and liabilities.Q

Par 0alue &o Par 0alue

/hose with fied value stated in the A)0 and theshare certificate an arbitrary amount assigned to

the share and epressed in the certificate

Shares without the arbitrary amount providesfleibility on the part of the corporation resorted

to maintain fleibility on the price

0ssued or stated value may be higher than thepar value

/he stated or issued value cannot be less thanP*.$$

Conditions for #ssuance of &o Par 0alue S*ares

1. Shares of capital stoc- issued without par value shall be deemed fully paid and non>assessable and the holder of such shares shall not be liable to the corporation or its creditorsin respect thereto

2. /he shares without par value may not be issued for a consideration less than the value ofP*.$$ per share

#. /he entire consideration received by the corporation for its no>par value shares shall betreated as capital and shall not be available for distribution as dividends

S*ares t*at Cannot be &o Par 0alue S*ares

• Preferred shares

• Shares in ban-s

• Shares in trust companies

• Shares in insurance companies

• Shares in public utilities

• Shares in building and load associations

Q

0oting &on6voting

0n the absence of a provision in the A)0 andconsistent with the Coctrine of e9uality of shares,share in a stoc- corporation re considered votingshares. All shareholders other than holders ofpreferred or redeemable shares are entitled tovote.

<olders of non>voting may vote in the ff.instances:

1. Amendment of the A)02. Adoption K amendment of by>laws#. Sale, lease, echange, mortgage, pledge

or other disposition of all or substantiallyall of the corporate property

6. 0ncurring, creating, increasing bondedindebtedness

*. 0ncrease of decrease of capital stoc-8. 'erger or consolidation of the

corporation with another . 0nvestment of corporate funds in another

corporation or business;. Cissolution of the corporation

Q)nly preferredredeemable shares may be madenon>voting shares. /here must remain othershares with full voting rights. /he non>votingshares may still vote in the matters enumeratedabove

Treasury S*aresSec. B D /reasury shares are shares of stoc- which have been issued and fully paid for, butsubse9uently reac9uired by the issuing corporation by purchase, redemption, donation or throughsome other lawful means. Such shares may again be disposed of for a reasonable price fied by theboard of directors

"edee,able S*ares



Sec. ; D edeemable shares may be issued by the corporation when epressly so provided in thearticles of incorporation. /hey may be purchased or ta-en up by the corporation upon the epiration of a fied period, regardless of the eistence of unrestricted retained earnings in the boo-s of thecorporation, and upon such other terms and conditions as may be stated in the articles ofincorporation, which terms and conditions must also be stated in the certificate of stoc- representingsaid shares.

Shares issued by a corporation which said corporation can purchase or ta-e up from their holders asepressly provided for in the A)0 and certificates of stoc-s. /hese are usually preferred shares.edemption can be made without the need of unrestricted retained earnings. Payment may comefrom capital.

4nrestricted retained earnin%s: the amount of accumulated profits and gains realized out of thenormal and continuous operations of the company after deducting the distributions of stoc-holdersand transfers to capital stoc- or other accounts, and which is:

1. not appropriated by its %)C for corporate epansion pro+ects2. not covered by a restriction for dividend declaration under a load agreement#. not re9uired to be retained under special circumstances obtaining in the corporation such as

when there is a need for a special reserve for probable contingencies.

$ounders+ S*aresSec. R &ounders= shares classified as such in the articles of incorporation may be given certainrights and privileges not en+oyed by the owners of other stoc-s, provided that where the eclusiveright to vote and be voted for in the election of directors is granted, it must be for a limited period notto eceed five 4*5 years sub+ect to the approval of the Securities and !change "ommission. /he five>year period shall commence from the date of the aforesaid approval by the Securities and !change"ommission.

/hese are shares given to those who helped organize the corporation, a form of reward to thefounders.

Q

Public Private

"reated for public purpose

"reated for the purpose of the government andmanagement of public affairs founded by theState and managed by it for governmentalpurposes

(ot government owned or controlled. %ut not all@)""s are ipso facto private.

A corporation formed for some private purpose,benefit, aim or end.

<uasi Publici-e railroad and canal corporations that are engaged in private business affected with public interest'OCC

1. with original charter or created by special law2. incorporated under a general law 4"orporation code5

Any agency organized as a stoc- or non>stoc- corporation vested with functions relating to public

needs whether governmental or propriety in nature, and owned by the @overnment directly or throughits instrumentalities wholly or where applicable to the etent of at least *1J of its capital stoc-

e9uisites:1. /here must be an agency organized as a stoc- or non>stoc- corporation2. /he corporation must be vested with functions relating to public needs whether governmental

or proprietary in nature#. /he corporation must be owned directly by the government or through its instrumentalities

either wholly or where applicable as in the case of stoc- corporations, to the etent of at least*1J of its capital stoc-.

C*artered 'OCC: a @)"", including @overnment &inancial 0nstitutions, created and vested withfunctions by a special law.&onc*artered 'OCC) created or established through the "orporation "ode

(e 5ure Corporation



A corporation organized in accordance with the re9uirements of law(e facto Corporation A corporation that is formed where there eists a flaw in its incorporation but there is colorablecompliance with the re9uirements of lawCorporation by estoppel A group of persons which holds itself out as a corporation and enters into a contract with a third

person and on the strength of such appearance cannot be permitted to deny its eistence in an actionunder said contract.

Sa*adaan vs. CA: A00%P has a +uridical personality to act as corporation. /he A00%P was created byep. Act (o. 8;6;. 0t has a main office where it conducts business, has shareholders, corporateofficers, a board of directors, assets, and personnel. 0t is, in fact, here represented by the )ffice of the@overnment "orporate "ounsel, Nthe principal law office of government>owned corporations, one of which is respondent ban-.N At the very least, by its failure to submit its by>laws on time, the A00%P maybe considered a de facto corporation whose right to eercise corporate powers may not be in9uiredinto collaterally in any private suit to which such corporations may be a party. 'oreover, a corporationwhich has failed to file its by>laws within the prescribed period does not ipso facto lose its powers assuch. /he S!" ules on Suspensionevocation of the "ertificate of egistration of "orporations,details the procedures and remedies that may be availed of before an order of revocation can be

issued. /here is no showing that such a procedure has been initiated in this case. 0n any case,petitioner=s argument is irrelevant because this case is not a corporate controversy, but a labor dispute and it is an employer=s basic right to freely select or discharge its employees, if only as ameasure of self>protection against acts inimical to its interest. egardless of whether A00%P is acorporation, a partnership, a sole proprietorship, or a sari>sari store, it is an undisputed fact that A00%Pis the petitioner=s employer. A00%P chose to retain his services during its reorganization, controlled themeans and methods by which his wor- was to be performed, paid his wages, and, eventually,terminated his services.

$i! vs. Phil Fishin% #ear Industries Inc.: /he "ourt ruled that having reaped the benefits of thecontract entered into by "hua and ao, with whom he had an eisting relationship, petitioner im isdeemed a part of said association and is covered by the doctrine of corporation by estoppel. /he"ourt also ruled that under the principle of estoppel, those acting on behalf of a corporation and those

benefited by it, -nowing it to be without valid eistence, are held liable as general partners. 0t isapparent from the factual milieu that the three decided to engage in a fishing business. 'oreover,their "ompromise Agreement had revealed their intention to pay the loan with the proceeds of thesale and to divide e9ually among them the ecess or loss. /he boats and e9uipment used for their business entails their common fund. /he contribution to such fund need not be cash or fied assets itcould be an intangible li-e credit or industry. /hat the parties agreed that any loss or profit from thesale and operation of the boats would be divided e9ually among them also shows that they hadindeed formed a partnership. /he principle of corporation by estoppel cannot apply in the case as im/ong im also benefited from the use of the nets in the boat, which was an asset of the partnership.?nder the law on estoppel, those acting in behalf of a corporation and those benefited by it, -nowing itto be without valid eistence are held liable as general partners. <ence, the 9uestion as to whether such was legally formed for un-nown reasons is immaterial to the case. Although petitioner did notdirectly act on behalf of the corp., having reaped the benefits of the contract entered into by persons

w whom he previously had an eisting rel., he is deemed to be part of said assoc. and covered by thedoctrine of estoppel.

International (xpress &ravel 5 &ours Inc. vs. CA: P&&, upon its creation, is not automaticallyconsidered a national sports association. 0t must first be recognized and accredited by the Philippine Amateur Athletic &ederation and the Cepartment of outh and Sports Cevelopment. /his fact wasnever substantiated by ahn. As such, P&& is considered as an unincorporated sports association. And under the law, any person acting or purporting to act on behalf of a corporation which has novalid eistence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. ahn is therefore personally liable for the contract entered intoby P&& with 0!//0. /here is also no merit on the finding of the "A that 0!//0 is in estoppel. /heapplication of the doctrine of corporation by estoppel applies to a third party only when he tries toescape liability on a contract from which he has benefited on the irrelevant ground of defective

incorporation. 0n the case at bar, 0!//0 is not trying to escape liability from the contract but rather isthe one claiming from the contract.



ahn is personally liable. P&& is unincorporated. 0!//0 is not in estoppel. /he Coctrine of "orporate!stoppel applied to #rd party only when he tries to escape the liability on a contract from which he hasbenefited on the irrelevant ground of defective corporation.

(o,estic

A corporation formed, organized or eisting under Philippine laws.$oreign A corporation formed, organized or eisting under any laws other than those of the Philippines andwhose laws allow &ilipino citizens and corporation to do business in its own country or state.

Parent A corporation that has control over another corporation, directly or indirectly, through one or moreintermediaries. 0t is the corporation that owns all or substantially all of the controlling shares in thesubsidiary.Subsidiary A corporation more than *$J of the voting stoc- of which is owned or controlled directly or indirectlythrough one or more intermediaries by another corporation which thereby become the parentcompany

Affiliate A corporation that directly or indirectly, through one or more intermediaries, is controlled by, or isunder the control of another corporation, which thereby becomes its parent company.

Open)ne which is open to any person who may want to become a member or stoc-holder theretoClose)ne which is limited to not more than a specified number of persons, not eceeding 2$. imited toselected persons or members of the family

epublic vs. Cit" of Parana'ue: %ased on Section 241#5 of the 0ntroductory Provisions of the Administrative "ode of 1B; it is clear that a @)"" must be Norganized as a stoc- or non>stoc-corporationN while an instrumentality is vested by law with corporate powers. i-ewise, when the law

ma-es a government instrumentality operationally autonomous, the instrumentality remains part of the(ational @overnment machinery although not integrated with the department framewor-.Ihen the law vests in a government instrumentality corporate powers, the instrumentality does notnecessarily become a corporation. ?nless the government instrumentality is organized as a stoc- or non>stoc- corporation, it remains a government instrumentality eercising not only governmental butalso corporate powers. 0n the case at bench, PA is not a @)"" because it is neither a stoc- nor anon>stoc- corporation. 0t cannot be considered as a stoc- corporation because although it has acapital stoc- divided into no par value shares as provided in Section of P.C. (o. 1$;6, it is notauthorized to distribute dividends, surplus allotments or profits to stoc-holders. /here is no provisionwhatsoever in P.C. (o. 1$;6 or in any of the subse9uent eecutive issuances pertaining to PA,particularly, !.). (o. *2*, !.). (o. 8* and !) (o. B; that authorizes PA to distribute dividends,surplus allotments or profits to its stoc-holders. /his "ourt is convinced that PA is not a @)""either under Section 24#5 of the 0ntroductory Provisions of the Administrative "ode or under Section

18, Article M00 of the 1B; "onstitution. /he facts, the evidence on record and +urisprudence on theissue support the position that PA was not organized either as a stoc- or a non>stoc- corporation.(either was it created by "ongress to operate commercially and compete in the private mar-et.0nstead, PA is a government instrumentality vested with corporate powers and performing anessential public service pursuant to Section 241$5 of the 0ntroductory Provisions of the Administrative"ode. %eing an incorporated government instrumentality, it is eempt from payment of real propertyta. "learly, respondent has no valid or legal basis in taing the sub+ect reclaimed lands managed byPA. )n the other hand, Section 2#64a5 of the @", in relation to its Section 1##4o5, eempts PAfrom paying realty taes and protects it from the taing powers of local government units. /he realproperty owned by the epublic of the Philippines 4the epublic5 is eempt from real property taunless the beneficial use thereof has been granted to a taable person. 0n this case, there is no proof that PA granted the beneficial use of the sub+ect reclaimed lands to a taable entity. /here is noshowing on record either that PA leased the sub+ect reclaimed properties to a private taable entity.



Bo" Scouts of the Phil vs. C6A: "ommonwealth Act (o. 111 4%oy Scout "harter5, or An Act to "reatea Public "orporation to be nown as the %oy Scouts of the Philippines, and to Cefine its Powers andPurposes: Section #./he purpose of this corporation shall be to promote, through organization, andcooperation with other agencies, the ability of boys to do things for themselves and others, to trainthem in scoutcraft, and to teach them patriotism, courage, self>reliance, and -indred virtues, using themethods which are now in common use by boy scouts. Section 2415, Article 0M>C of the "onstitution

provides that ")A shall have the power, authority, and duty to eamine, audit and settle all accountspertaining to the revenue and receipts of, and ependitures or uses of funds and property, owned or held in trust by, or pertaining to, the @overnment, or any of its subdivisions, agencies or instrumentalities, including government>owned or controlled corporations with original charters

>A/ 00> Article 66 of the "ivil "ode:/he following are +uridical persons:415/he State and its political subdivisions425)ther corporations, institutions and entities for public interest or purpose created by lawtheir personality begins as soon as they have been constituted according to law4#5"orporations, partnerships and associations for private interest or purpose to which the lawgrants a +uridical personality, separate and distinct from that of each shareholder, partner or member

/he %SP is a public corporation and its funds are sub+ect to the ")ALs audit +urisdiction. /he %SP is apublic corporation whose functions relate to the fostering of public virtues of citizenship and patriotismand the general improvement of the moral spirit and fiber of the youth. /he functions of the %SPinclude, among others, the teaching to the youth of patriotism, courage, self>reliance, and -indredvirtues, are undeniably sovereign functions enshrined under the "onstitution. Any attempt to classifythe %SP as a private corporation would be incomprehensible since no less than the law which createdit had designated it as a public corporation and its statutory mandate embraces performance of sovereign functions. /he manner of creation and the purpose for which the %SP was createdindubitably prove that it is a government agency.

'oreover, there are three classes of +uridical persons under Article 66 of the "ivil "ode and the %SP,as presently constituted under epublic Act (o. 2;, falls under the second classification. /he

purpose of the %SP as stated in its amended charter shows that it was created in order to implementa State policy declared in Article 00, Section 1# of the "onstitution. !vidently, the %SP, which wascreated by a special law to serve a public purpose in pursuit of a constitutional mandate, comes withinthe class of Npublic corporationsN defined by paragraph 2, Article 66 of the "ivil "ode and governed bythe law which creates it.

7eterans Federation vs. e"es: es, petitioner is a public corporation. 0n aurel v. Cesierto, publicoffice is defined as the right, authority and duty, created and conferred by law, by which, for a givenperiod, is invested with some portion of the sovereign functions of the government, to be eercised for the benefit of the public. 0n the instant case, the functions of 7&P D the protection of the interests of war veterans which promotes social +ustice and reward patriotism D certainly fall within the category of sovereign functions. /he fact that 7&P has no budgetary appropriation is only a product of erroneousapplication of the law by public officers in the C%' which will not bar subse9uent correct application.

<ence, placing it under the control and supervision of C(C is proper.

$e"son )r. vs. 6ffice of the 6!buds!an:

$iban vs. #ordon: &ormerly, in its Cecision dated 3uly 1*, 2$$B, the "ourt, voting >*,F1G held thattheoffice of the P(" "hairman is ()/ a government office or an office in a @)"" for purposes of theprohibition in Sec. 1#, Article 70 of the 1B; "onstitution. /he P(" "hairman is elected by theP(" %oard of @overnors he is not appointed by the President or by any subordinate governmentofficial. 'oreover, the P(" is ()/ a @)"" because it is a privately>owned, privately>funded, andprivately>run charitable organization and because it is controlled by a %oard of @overnors four>fifths of which are private sector individuals. /herefore, respondent @ordon did not forfeit his legislative seatwhen he was elected as P(" "hairman during his incumbency as Senator. /he "ourt however heldfurther that the P(" "harter, .A. B*, as amended by PC 1286 and 186#, is void insofar as it

creates the P(" as a private corporation since Section , Article M07 of the 1B#* "onstitution statesthat EFtGhe "ongress shall not, ecept by general law, provide for the formation, organization, or



regulation of private corporations, unless such corporations are owned or controlled by the@overnment or any subdivision or instrumentality thereof.H/he "ourt thus directed the P(" toincorporate under the "orporation "ode and register with the Securities and !change "ommission if it wants to be a private corporation.

Feliciano vs. C6A: Petition lac-s merit. /he "onstitution under Sec. 2415, Article 0M>C and eisting

laws mandate ")A to audit all government agencies, including government>owned and controlledcorporations with original charters. An IC is a @)"" with an original charter. /he "onstitutionrecognizes two classes of corporations. /he first refers to private corporations created under ageneral law. /he second refers to government>owned or controlled corporations created by specialcharters. ?nder eisting laws, that general law is the "orporation "ode. )bviously, IC=s are notprivate corporations because they are not created under the "orporation "ode. IC=s are notregistered with the Securities and !change "ommission. Section 16 of the "orporation "ode statesthat Eall corporations organized under this code shall file with the S!" articles of incorporation .HICs have no articles of incorporation, no incorporators and no stoc-holders or members. /here areno stoc-holders or members to elect the board directors of ICs as in the case of all corporationsregistered with the S!". /he local mayor or the provincial governor appoints the directors of ICs for a fied term of office. /he board directors of ICs are not co>owners of the ICs. /he boarddirectors and other personnel of ICs are government employees sub+ect to civil service laws and

anti>graft laws. "learly, an IC is a public and not a private entity, hence, sub+ect to ")A=s audit +urisdiction

#&CO"PO"AT#O& A&( O"'A&#=AT#O& O$ A P"#0AT% CO"PO"AT#O&

(OC12%&TA"- "%<1#"%2%&TS&a,e 0erification Slip%efore A)0 is drafted, it is advisable to verify with the S!" if the proposed name is still available for registration. 0f yes, reservation can be made for a limited period of time after payment of fees.<owever, the reservation and notice of availability of the corporate name shall not constitute anapproval of the use of such name.

>>>2%2O"#=% S%CT#O&S ;?6;8>>>

CO"PO"AT% &A2%4niversal ,ills Corp vs. 4niversal &extile ,ills: es. /here is definitely confusion as it was evidentfrom the facts where the investors of ?/'0 mista-enly believed that it was ?/'0=s warehouse thatwas destroyed. Although the corporate names are not really identical, they are indisputably so similar that it can cause, as it already did, confusion. /he S!" did not act in abuse of its discretion when itordered ?'" to drop its name because there was a factual evidence presented as to the confusion.&urther, when ?'" filed its petition for change of corporate name, it made an underta-ing that it shallchange its name in the event that there is another person, firm or entity who has obtained a prior rightto the use of such name or one similar to it. /hat promise is still binding upon the corporation and itsresponsible officers.

An% ,%a 3aanib sa I%lesia HS3 vs. I%lesia n% /i"os 3a" Cristo Hesus: Section 1; of the "orporation

"ode provides:"orporate (ame.>>> (o corporate name may be allowed by the Securities and !change"ommission if the proposed name is identical or deceptively or confusingly similar to that of any eisting corporation or to any other name already protected by law or is patentlydeceptive, confusing or is contrary to eisting laws. Ihen a change in the corporate name isapproved, the "ommission shall issue an amended certificate of incorporation under theamended name.

/he pertinent portion of the S!" @uidelines on "orporate (ames states:4d5 0f the proposed name contains a word similar to a word already used as part of the firmname or style of a registered company, the proposed name must contain two other wordsdifferent from the name of the company already registered

Petitioners=s name cannot be registered because it is tri-ingly similar to the name of that of respondent. Adding the words EAng 'ga aanibH and ESa %ansang Pilipinas, 0nc.H will not matter becayse the same words are merely descriptive of and referring to the members or the corporation./hese words can hardly serve as an effective differentiating medium to avoid confusion, especially so,



since both petitioner and respondent corporations are using the same acronym >>> <.S. and both areespousing religious beliefs and operating in the same place.

0n holding out their corporate name to the public, petitioner highlights the dominant wordsE0@!S0A(@ C0)S A 0S/) <!S?S, <A0@0 A/ SA0@A( (@ A/)/)<A(A(,H which is stri-inglysimilar to respondentLs corporate name, ma-ing it even more evident that the additional words EAng

'ga aanibH and ESa %ansang Pilipinas, 0nc.H, are merely descriptive of and pertaining to themembers of respondent corporation.

Significantly, the only difference between the corporate names of petitioner and respondent are thewords SA0@A( and S?<A which both mean ground, foundation or support. /he fact that there areother non>stoc- religious societies or corporations using similar names is of no conse9uence. 0t doesnot authorize the use by petitioner of the essential and distinguishing feature of respondentLsregistered and protected corporate name.

Industrial efractories Corp. Phils vs. CA: es, the petitioner and respondent "P=s corporate namesare confusingly and deceptively similar. &urther, Section 1; of the "orporation "ode epresslyprohibits the use of a corporate name which is Nidentical or deceptively or confusingly similar to that of any eisting corporation or to any other name already protected by law or is patently deceptive,

confusing or contrary to eisting lawsN. /he policy behind said prohibition is to avoid fraud upon thepublic that will have occasion to deal with the entity concerned, the evasion of legal obligations andduties, and the reduction of difficulties of administration and supervision over corporation. /heSupreme "ourt denied the petition for review on certiorari due for lac- of merit.

Phillips (xport B7 vs. CA: A corporation=s right to use its corporate and trade name is a property right,a right in rem, which it may assert and protect against the whole world. According to Sec. 1; of the"orporation "ode, no corporate name may be allowed if the proposed name is identical or deceptivelyconfusingly similar to that of any eisting corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to eisting law.&or the prohibition to apply, 2 re9uisites must be present: 415 the complainant corporation must haveac9uired a prior right over the use of such corporate name and425 the proposed name is either identical or deceptively or confusingly similar to that of any eisting

corporation or to any other name already protected by law or patently deceptive, confusing or contraryto eisting law.Iith regard to the 1st re9uisite, P!%7 adopted the name EPhilipsH part of its name 28 years beforeStandard Philips. As regards the 2nd, the test for the eistence of confusing similarity is whether thesimilarity is such as to mislead a person using ordinary care and discrimination. Standard Philips onlycontains one word, EStandardH, different from that of P!%7. /he 2 companies= products are also thesame, or cover the same line of products. Although P!%7 primarily deals with electrical products, ithas also shipped to its subsidiaries machines and parts which fall under the classification of Echains,rollers, belts, bearings and cutting sawH, the goods which Standard Philips also produce. Also, amongStandard Philips= primary purposes are to buy, sell trade electrical wiring devices, electricalcomponent, electrical supplies. @iven these, there is nothing to prevent Standard Philips from dealingin the same line of business of electrical devices. /he use of EPhilipsH by Standard Philips tends toshow its intention to ride on the popularity and established goodwill of P!%7.

(octrine of Secondary 2eaning A word or phrase, which is originally incapable of eclusive appropriation because the word of phraseis geographic or otherwise descriptive, might nevertheless have been used for so long and soeclusively by one producer with reference to an article and the purchasing public has considered theword or phrase as associated to his product. /hus, another corporation cannot register said name asa corporate name.

$"ceu! of the Phil. Inc. vs. CA: Ie do not consider that the corporate names of private respondentinstitutions are Eidentical with, or deceptively or confusingly similarH to that of the petitioner institution./rue enough, the corporate names of private respondent entities all carry the word EyceumH butconfusion and deception are effectively precluded by the appending of geographic names to the wordEyceum.H /hus, we do not believe that the Eyceum of AparriH can be mista-en by the general publicfor the yceum of the Philippines, or that the Eyceum of "amalaniuganH would be confused with theyceum of the Philippines. ?nder the corporation code, no corporate name may be allowed by the



S!" if the proposed name is identical or deceptively or confusingly similar to that of any eistingcorporation or to any other name already protected by law or is patently deceptive, confusing or contrary to eisting laws. /he policy behind this provision is to avoid fraud upon the public, whichwould have the occasion to deal with the entity concerned, the evasion of legal obligations and duties,and the reduction of difficulties of administration and supervision over corporations.

/he corporate names of private respondents are not identical or deceptively or confusingly similar tothat of petitioner=s. "onfusion and deception has been precluded by the appending of geographicnames to the word EyceumH. &urthermore, the word EyceumH has become associated in time withschools and other institutions providing public lectures, concerts, and public discussions. /hus, itgenerally refers to a school or an institution of learning. Petitioner didnLt present evidence, whichprovided that the word EyceumH ac9uired secondary meaning. /he petitioner failed to adduceevidence that it had eclusive use of the word. !ven if petitioner used the word for a long period of time, it hadn=t ac9uired any secondary meaning in its favor because the appellant failed to prove that ithad been using the same word all by itself to the eclusion of others.

Purposes of the prohibitions1. avoidance of fraud upon the public which would have occasion to deal with the entity2. the evasion of legal obligations and duties

#. the reduction of difficulties of administration and supervision over corporations

Purpose Clause0mportant to assure that persons who invest in corporate entities would be aware of the business thecorporation is designed to engage in. 0f there is more than one purpose, it is necessary to specifythem to determine which one is primary or secondary. Pri,ary purpose determines the classificationof a corporation. <owever, where the corporation engages in one of its secondary purposes, it mayalso be classified in accordance with the secondary.

'eneral Li,itations1. cannot be created for a purpose or function of which a corporate body is incapable8. cannot be created for a purpose contrary to law, morals, or public policy9. cannot be organized for 2 or more incompatible purposes

. may not be organized for a purpose that is contrary to its nature

#ala et al vs. (llice A%ro2Industrial Corp: A perusal of the Articles of 0ncorporation of !llice and 'argoshows no sign of the allegedly illegal purposes that petitioners are complaining of. And even assumingthat the petitioner=s allegations were true, the legality of the purposes for which the two corporationswere formed should be first threshed out in an administrative case before the Securities and!change "ommission. 4Coctrine of Primary 3urisdiction5. 'oreover, on the contention that !llice and'argo were meant to be tools for the avoidance of estate taes, the court said that E...the legal right of a tapayer to reduce the amount of what otherwise could be his taes or altogether avoid them, bymeans which the law permits, cannot be doubted. T*e best proof of t*e purpose is t*e AO#! #f t*epurpose t*erein is unlawful3 t*en t*e S%C *as no aut*ority to in:uire w*et*er t*e corporation*as purposes ot*er t*an t*ose stated3 and ,anda,us will lie to co,pel it to issue t*ecertificate of incorporation! "ollateral attac- on the legality of the purpose is not allowed.

Principal Office A)0 must state the "ity or 'unicipality where the principal office is to be established which is withinthe Philippines.

specific street number, street name, barangay, citymunicipality, specific address of the

incorporator, directors, or trustee. 'etro 'anila shall no longer be allowed as a principal office.

(o need to amend A)0 when corporations change offices from one floor to another of the

same building. %ut there is a need to amend when the change is from one building to another,or one street to another.

Principal office is considered its place of residence, for ta purposes, to determine venue of

cases or proper notices.

Ter, of %4istenceSec 11 D A corporation shall eist for a period not eceeding fifty 4*$5 years from the date ofincorporation unless sooner dissolved or unless said period is etended. /he corporate term as



originally stated in the articles of incorporation may be etended for periods not eceeding fifty4*$5 years in any single instance by an amendment of the articles of incorporation, in accordancewith this "ode Provided, /hat no etension can be made earlier than five 4*5 years prior to theoriginal or subse9uent epiry date4s5 unless there are +ustifiable reasons for an earlier etensionas may be determined by the Securities and !change "ommission.

0f the corporation will not be able to etend its corporate term, remedy is to file new A)0 andsecure a new term.

(octrine of "elation Alha!bra Ci%ar and Ci%arette ,f%. Co vs. S(C: Ihen a corporation is li9uidating pursuant to thestatutory period of three years to li9uidate, it is only allowed to continue for the purpose of final closureof its business and no other purposes. 0n fact, within that period, the corporation is en+oined fromEcontinuing the business for which it was establishedH. <ence, Alhambra=s board cannot validly amendits articles of incorporation to etend its lifespan.

,aorit" Stoc+holders of ub" Industrial vs. $i!: Iith the nullification of the evised %!(<A?%Plan by both "A and S" on 3an 2$, 1BB;, the legitimate concerns of the minority stoc-holders and'A(")' who ob+ected to the capital infusion which resulted in the dilution of their shareholdings, theepiration of ?%=s corporate term and the pending incidents on the void deeds of assignment ofcredit D all these should have been duly considered and acted upon by the S!" when the case wasremanded to it for further proceedings. Iith the final re+ection of the courts of the evised%!(<A?% Plan, it was grave error for the S!" not to act decisively on the motions filed by theminority stoc-holders who have maintained that the issuance of additional shares did not helpimprove the situation of ?% ecept to stifle the opposition coming from the 'A(")' and minoritystoc-holders by diluting the latter=s shareholdings. T*ere is an invalid a,end,ent to e4tend t*eter, because t*e process was not properly followed!

#ncorporators

(atural persons

'ust not be less than * or more than 1*

'a+ority of incorporators must be residents of the Philippines

!ach of the incorporators must own or be a subscriber to at least one share of the capital

stoc-

All must sign and subscribe or ac-nowledge the A)0, otherwise the A)0 shall be defective.

(irectors 'ust not be less than * nor more than 1*

)riginal directors in the A)0 will be replaced by regular ones after the issuance of certificate of

incorporationCapital Stock

Sec. 12 D Stoc- corporations incorporated under this "ode shall not be re9uired to have anyminimum authorized capital stoc- ecept as otherwise specifically provided for by special law,and sub+ect to the provisions of the following section.

'andatory to state the authorized capital stoc-, number of shares into which it is divided and

the par value of the shares in lawful money of the Philippines. 0f shares are no par value, onlythe number of shares need to be stated.

Shares may be divided into classes or series of shares or both, any of which classes or series

of shares may have such rights, privileges or restrictions, as may be provided for in the A)0.%ut no share must be deprived of voting rights ecept preferred and redeemable. Shares ofstoc-s without par value may not be issued for a consideration less than P*.$$ per share.

/he amount subscribed must be at least 2*J of the authorized capital stoc-. /he names,

addresses and amounts subscribed and paid by them must also be stated. /he total amount on account of subscriptions shall be stated ecept where the capital stoc-

consists of no par value shares in which case the subscriptions must be fully paid.Subscribed and Paid 1p Capital

Sec 1# D At least twenty>five percent 42*J5 of the authorized capital stoc- as stated in thearticles of incorporation must be subscribed at the time of incorporation, and at least twenty>five



42*J5 per cent of the total subscription must be paid upon subscription, the balance to bepayable on a date or dates fied in the contract of subscription without need of call, or in theabsence of a fied date or dates, upon call for payment by the board of directors: Provided,however, /hat in no case shall the paid>up capital be less than five /housand 4P *,$$$.$$5 pesos.

Paid up capital

/hat portion of the authorized capital stoc- that has been subscribed and paid "ash: must not be less than P*,$$$.$$ must be deposited with a ban- in the name of the

proposed corporation or treasurer>in>trust Property: verification of its ownership, physical eistence, and reasonableness of the

valuation at which it is being transferred to the corporation documents that support ownershipare re9uired to be submitted written consent of the mortgagee if property is mortgagedappraisal report of a licensed appraiser if the transfer value is higher than the assessed value

$anuza vs. CA:Articles of #ncorporationCefines the charter of the corporation and the contractual relationships between the State and thecorporation, the stoc-holders and the State, and between the corporation and its stoc-holders."ontents are binding, not only on the corporation, but also on its shareholders.Stock and transfer book%oo- which records the names and addresses of all stoc-holders arranged alphabetically, theinstallments paid and unpaid on all stoc- for which subscription has been made, and the date of payment thereof a statement of every alienation, sale or transfer of stoc- made, the date thereof andby and to whom made and such other entries as may be prescribed by lawnecessary as a measure of precaution, epediency and convenience since it provides the only certainand accurate method of establishing the various corporate acts and transactions and of showing theownership of stoc- and li-e matters. (ot public record, and thus is not eclusive evidence of thematters and things which ordinarily are or should be written therein

0n this case, the articles of incorporation indicate that at the time of incorporation, the incorporatorswere bona fide stoc-holders of $$ founders= shares and 8 common shares. <ence, at that time, thecorporation had 8 issued and outstanding shares. According to Sec. *2 of the "orp "ode, Ea9uorum shall consist of the stoc-holders representing a ma+ority of the outstanding capital stoc-.H Assuch, 9uorum is based on the totality of the shares which have been subscribed and issued, whether it be founders= shares or common shares. /o base the computation of 9uorum solely on the obviouslydeficient, if not inaccurate stoc- and transfer boo-, and completely disregarding the issued andoutstanding shares as indicated in the articles of incorporation would wor- in+ustice to the ownersandor successors in interest of the said shares. /he stoc- and transfer boo- of P''S0 cannot beused as the sole basis for determining the 9uorum as it does not reflect the totality of shares whichhave been subscribed, more so when the articles of incorporation show a significantly larger amountof shares issued and outstanding as compared to that listed in the stoc- and transfer boo-. 0t is noless than the articles of incorporation that declare the incorporators to have in their name the foundersand several common shares. /hus, to disregard the contents of the articles of incorporation would beto pretend that the basic document which legally triggered the creation of the corporation does noteist and accordingly to allow great in+ustice to be caused to the incorporators and their heirs.

Halle" vs. Print*ell Inc: Such stoc-holder should be made liable up to the etent of her unpaidsubscription. 0t was found that at the time the obligation was incurred, %'P0 was under the control of its stoc-holders who -now fully well that the corporation was not in a position to pay its account 4thinlycapitalized5. And, that the stoc-holders personally benefited from the operations of the corporationeven though they never paid their subscriptions in full. /he stoc-holders cannot now claim thedoctrine of corporate fiction otherwise 4to deny creditors to collect from S<5 it would create an in+usticebecause creditors would be at a loss 4limbo5 against whom it would assert the right to collect.

Treasurer+s Affidavit Accompanies the A)0 relates to the minimum subscribed capital and the minimum paid>up capital./he treasurer may be made liable if the corporation does not comply with the re9uirement of the law.

@oint Affidavit of two incorporators undertaking to c*ange corporate na,e



Additional "e:uire,ents &or non>stoc- corporations, state the names and the amount of their contribution

A foundation must have a capitalization or contribution of not less than P1 million.

A2%&(2%&T O$ TH% A"T#CL%S O$ #&CO"PO"AT#O&>>>2%2O"#=% S%C ;>>>

,a5ority vote of the board of directors or trustees and the vote or written assent of thestoc+holders representing at least two6t*irds .9/ of t*e outstanding capital stock, withoutpre+udice to the appraisal right of dissenting stoc-holders in accordance with the provisions ofthis "ode, or the vote or written assent of at least two6t*irds .9/ of t*e ,e,bers if it be anon>stoc- corporation.

4nited Church of Christ in the Phils vs. Bradford 4CCP: /he %y>laws provide that ?""P=s control andauthority over its local churches is not full and supreme membership of the local churches in the?""P is voluntary and not perpetual local churches en+oy independence and autonomy and maymaintain or continue church>life with or without ?""P. /hus, %?""0 may validly bring about itsdisaffiliation from ?""P through the amendment of its Articles of 0ncorporation and %y>laws.Significantly, S!" approved the amendments, which approval has in its favor the presumption of regularity. Anent the continued use by respondents of %?""0, the "ourt li-ewise sustains the rulingsof S!" and "A as follows: As held in Philips !port %.7. vs. "ourt of Appeals to fall within theprohibition of the law, two re9uisites must be proven, to wit: 415 that the complainant corporationac9uired a prior right over the use of such corporate name and 425 the proposed name is either: 4a5identical, or 4b5 deceptively or confusingly similar to that of any eisting corporation or to any other name already protected by law or 4c5 patently deceptive, confusing or contrary to eisting law. /herespondent %?""0=s church history would show that it has a better right to use its corporate name onthe ground of priority of adoption. /he evolution of respondent %?""0 to what it is today undoubtedlyestablishes that it had ac9uired the right to ma-e use of its corporate name.

'rounds of re5ection9disapproval of t*e Articles of #ncorporation or its a,end,ents .Sec ;/1. /hat the articles of incorporation or any amendment thereto is not substantially inaccordance with the form prescribed herein2. /hat the purpose or purposes of the corporation are patently unconstitutional, illegal,immoral, or contrary to government rules and regulations#. /hat the /reasurer=s Affidavit concerning the amount of capital stoc- subscribed andorpaid is false6. /hat the percentage of ownership of the capital stoc- to be owned by citizens of thePhilippines has not been complied with as re9uired by eisting laws or the "onstitution.

(o articles of incorporation or amendment to articles of incorporation of ban-s, ban-ing and9uasi>ban-ing institutions, building and loan associations, trust companies and other financialintermediaries, insurance companies, public utilities, educational institutions, and othercorporations governed by special laws shall be accepted or approved by the "ommission unlessaccompanied by a favorable recommendation of the appropriate government agency to the effectthat such articles or amendment is in accordance with law.

Phil. Statehood 4SA vs. S(C: /he Articles of 0ncorporation may be re+ected if the declared purposeof the corporation is to promote and enhance the incorporation of the Philippines as an AmericanState.

Commencement of Corporate ExistenceSec 18 D A private corporation formed or organized under this "ode commences to havecorporate eistence and +uridical personality and is deemed incorporated fro, t*e date t*eSecurities and %4c*ange Co,,ission issues a certificate of incorporation under itsofficial seal.

&on6use of corporate c*arter 0

Sec 22 D 0f corporation does not formally organize and commence the transaction of its businessor the construction of its wor-s *ithin t*o ;8< "ears fro! the date of its incorporation , its



corporate powers cease and the corporation s*all be dee,ed dissolved. <owever, if acorporation has co!!enced the transaction of its business but subse'uentl" beco!escontinuousl" inoperative for a period of at least five ;=< "ears, the same shall be a ground fort*e suspension or revocation of its corporate franc*ise or certificate of incorporation.

CO"PO"AT% 2A&A'%2%&T A&( CO&T"OL

All businesses of the corporation shall be conducted and all its properties shall be controlled andheld by the %oard of directors or trustees.

Powers Sec 1. !ercises all powers provided for under the "ode2. "onducts all business of the corporation#. "ontrols and holds all property of the corporation

<ualifications1. <e must own at least one share of the capital stoc- of the corporation in his own name or

if the corporation is a non>stoc-, he must be a member thereof.2. A ma+ority of the directorstrustees must be residents of the Philippines.

#. <e must not have been convicted by final +udgment of an offense punishable byimprisonment for a period eceeding 8 years or a violation of the "orporation "ode,committed within * years prior to his election

6. <e must be of legal age*. <e must possess other 9ualifications that may be prescribed in special laws or

regulations or in the by>laws of the corporation

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