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Law on Corporation (Revised Corporation Code RA 11232) - Coggle Diagram
Law on Corporation (Revised Corporation Code RA 11232)
Definition
Created by operation of law
- commencement of corporate existence and separate juridical personality will start is at the time of issuance of cert. of incorporation or registration
XPN: corpo by estoppel, by special laws, corporae sole
Right of succession
Artificial being
- juridical personality, separate and distinct from person composing it
XPN: Piercing the veil of corporate entity, can be used when (DJ-PDA)
protect fraud
defend crime
justify wrong
alter ego cases
3 way test
the control is used to commit fraud/wrong doings
is the control the proximate cause of injury
control
defeat public convenience (multi suit for similar cases)
Powers, attributes and properties expressly authorized by law
- doctrine of limited capacity
express powers
amend AOI
adopt by laws, amend or repeal
adopt and use corporation seal
if stock corpo -issue or sell stocks/treasury stock to subs and admit members if non-stock
rights of succession
acquire properties, do anything related to ownership, subject to limitation
sue and be sued
enter merger or conso. (now can form partnership and JV)
make reasonable donations (except foreign corpo), in aid only to any political party/candidate or for purposes of partisan political party
establish pension, retirement and other plan
add'l note: ultra vires act - those which cannot be executed or performed by corpo. because they are not within its express, inherent or implied powers (not all ultra vires act are illegal,but all illegal act is ultra vires act)
implied powers - essential to carry out its purpose/s and express power
Classes of corporations
As to purpose
private
public - GOCCs, LGUs
For religious purpose
lay
eleemosynary -charitable and benevolent purpose
civil - public charity
ecclesiastical corpo - spiritual purposes, to secure public worship
Whether public can own shares
close corporation
open corporation
Number of person composing it
aggregate
corporate sole
Under what law it was created
domestic
foreign
as to validity of formation
de jure
full compliance
separate and distinct
both exist in law and in fact
no direct and collateral attack
de facto
colorable compliance
separate and distinct
can direct attack via quo warranto, but can't collateral attack
requisites
exists valid law
attempt in good faith to incorporate
use of corporate power
corporation by estoppel
not separate and distinct
can direct and collateral attack
no compliance at all
Authority to distribute surplus profits
stock
non-stock
Organization and incorporation
promotional stage
organizers/promoters enter into contract in their own or in the name of corpo
PERSONALLY LIABLE even after the formation of corpo. unless there's novation or other to release him from liability
Process of incorporation
preparation of additional and supported docs
filing to sec
drafting of articles
issuance of certificate of incorporation
contents
place of principal office
of corpo (must be within PH), AOI must also specify province/city/municipality, it serves as RESIDENCE of the corpo. and important in
reg. of chattel mortgage of SHARES
validity of meetings of SH
venue of actions
specific purpose/purposes
if more than 1 - state which is primary and which is/are the the secondary (no restriction/limit of no.)
non-stock corpo. may not include a purpose which would change/contradicts its nature
defines the scope of authority of the enterprise
general limitations
lawful
specific or stated concisely attached to broader general terms
separate primary and secondary
purposes combined is capable of being lawful
reasons for requiring a statement of purposes
BOD and mgt authorized act
anyone who deals with company may ascertain a contract/transactions is within general authority of mgt
for SHs investments
name of corpo.
- to sue and be sued
Term
, if not perpetual - just notify the SEC after it MAJORITY VOTE OF SH
Definite term - EXTENSION NO EARLIER THAN 3 YEARS prior expiry date unless there's justifiable reasons
Revival - AFTER EXPIRATION, UPON APPROVAL OF COMMISSION AND ISSUANCE OF REVIVAL OF CORPORATE EXISTENCE, giving it perpetual existence unless application if definite term
Shares, nationalities, and residence of incorporators
Corporators
Incorporators - mentioned in AOI originally forming corpo. and signatories of AOI, they can be corporator as long as continues to be SH/member
qualification
legal age
own/subscribe AT LEAST 1 SHARE
natural persons
No. of directors/trustees
which shall not be less than 5 nor more than 15, if trustees - can be 15
independent directors
if public interest corporation - shall have AT LEAST 20% INDEPENDENT DIRECTORS of:
banks, quasi banks, pawnshop, etc...
other corpo. engaged in business vested with public interest similar above
corpo. covered by SRC (reg. with SEC)
Names, nationalities, and residence of persons who shall act as directors/trustees until the first regular directors/trustees are duly elected and qualified
If stock corpo, info about
no. of shares
par value shares
names/nationalities/residence of original subscriber, amount subs and paid
if some or all which par value if applicable
amount of authorized capital stock
add'l note: actual consideratios for stock
shares of stock in another corpo; and/or
other general accepted form of consideration
outstanding shares exchanged for stocks
previously indebtedness incurred of corpo.
amounts transferred from UNRESTRICTED RE to stated capital
labor
property tagible/intangible (use and lawful purposes) - MUST BE APPROVED BY SEC FOR EVALUATION
actual cash paid
add'l notes:
stocks cannot be issued less than the par/issue price (watered stocks)
promissory notes or future services not considered consideration for stocks
if non-stock
, info about:
amounts of its capital
names/nationalities/residence of contributions and amount each
other matters of consistent with laws
and which incorporators may deem necessary and convenient
Restrictions and preferences
MUST BE INDICATED IN AOI and ALL STOCK CERTIFICATES, failure would not bind the purchase in good faith even the restriction/prefence indicated in by-laws
if non-stock, MUST ALSO APPEAR IN BY-LAWS
Other matters to be included in AOI
no transfer clause - in case corpo. is required to maintain a required minimum filipino ownership (no transfer shall reduce the ownership of filipino citizen)
Execution clause - names and signature of incorporators
have of treasurer duly elected by subscribes
Notarial acknowledgement
As those who should be needing a favorable recommendation from government agency
non-stock and loans association' and
pawnshop (banks, quasi banks, etc..)
Amendment of AOI, reqs in general
Written assent of SH representing 2/3 of OS
Approval of SEC
if no approval WITHIN 6 MONTHS from date of filing it'll be DEEMED APPROVED
MAJORITY approval of MEMBERS OF BOARD
Board of directors
Business judgment rule - questions of policy and management are left to judgment of officers and directors, courts have no authority to substitute board's judGment (as long as good faith and within the authority of BOD)
Qualifications
Minimum requirement: MUST OWN AT LEAST 1 SHARE in their own names/a member (cease holder = cease director)
Doctrine of centralized management - BOD/trustees shall exercise corpo power, conduct all business, control all propoerties of corpo.
Disqualification
found administratively liable - fraud acts
similar foreign offenses under the PH code
Within 5 years prior to election or appointment, convicted by final judgment
offense, punishable by imprisonment for exceeding 6 years
violation of corpo code
violation of SRC
by laws
Election
MAJORITY of OS stock, in person or by written proxy must be present, if non-stock - MAJORITY OF ENTITLED TO VOTE
if not obtained, may be adjourned
now can vote remote communication if allowed by laws, or by authorized by MAJORITY OF BOARDS
on request by ANY VOTING SH/MEMBER, it may be held by ballot otherwise viva voce would suffice
highest vote = elected
allowed methods of voting
straight voting - 1k shares = 1k votes each seat
cummulative voting = no. shares x no. of elected
for 1 person
by distribution
add'l notes: CV is not allowed in non-stock because they only have 1 vote per head, unless allowed by AOI or by laws
Reporting requirement
holding elections
report to SEC within 30 days after election
names
nationality
shareholders
residence address
non-holding election (di natuloy)
still required to report to SEC within 30 days, which inlude a new date of election which shall not be later than 60 days from scheduled date
if no new date, SEC will have the authority to set new date upon application of SH/member/director/trustees
vacancy - director/trustee/offices/ heirs if death = 7 days from knowledge thereof, writing to SEC
Removal of directors
- by-laws may provide for causes or grounds
director representing minority - may not be removed except by those causes
director not representing minority - may not be removed even with those causes
amendment: SEC is now empowered to motu proprio, and after due notice and hearing, order to removal of director/trustee
Requirement for valid removal
vote of SH - 2/3 of OS capital stock or members
take place by general/special meeting duly call for that purpose
previous notice to SH/members either publication or written notice
filing up vacancies - see notes on tab
Replacement or hold over director
- if not yet replaced, the director can continue to function
if he RESIGNS - SH WILL REPLACE him even if remaining directors constitute a quorum (BOD can fill up vacancy only if the director resign BEFORE expriration)
emergency board
when
vacancy prevents remaining directors from constituting a quorum
emergency action is required to present irreparable loss/damage, it qill be temporarily filed among offices by UNANIMOUS VOTE OF REMAINING DIRECTORS/TRUSTEES
term shall cease (whichever comes earlier)
reasonable time from termination of emergency
upon election of replacement
report: notify SEC within 3 days from creating, stating the reason
Compensation of directors
GN: not entitled
XPN
Majority vote of SH
By laws
Reasonable per diems