GENERAL PROVISIONS
They are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.
Incorporators
What is the corporate term of a corporation under the Revised Corporation Code? Can this be changed?
A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
An ______________ is a person who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
independent director
It is the right to dissent and demand payment of the fair value of the shares when corporate actions occur.
The right of appraisal of a stockholder
What is the doctrine of equality of shares?
Each share shall be equal in all respects to every other share, except as otherwise provided in the Articles of Incorporation and in the certificate of stock.
Under the doctrine of ____________________________, the court looks at the corporation as a mere collection of individuals or an aggregation of persons undertaking business as a group, disregarding the separate juridical personality of the corporation unifying the group.
piercing the veil of corporate fiction
What is needed before the SEC can issue the certificate of incorporation?
1. Distinguishable Corporate Name
2. Articles of Incorporation
3. By-Laws
How long is the term of a director and a trustee in a corporation?
Directors shall be elected for a term of 1 year from among the holders of stocks registered in the corporation's books, while trustees shall be elected for a term not exceeding 3 years from among the members of the corporation.
When is higher stockholder approval required for a management contract?
A higher approval threshold of 2/3 of the stockholders (or members for a nonstock corporation) is required:
1. Where a stockholder or stockholders representing the same interest of both the managing and the managed corporations own or control more than 1/3 of the total outstanding capital stock entitled to vote of the managing corporation; or
2. Where a majority of the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation.
The number of directors shall not be more than 15, but the number of trustees may be more than 15.
What is a corporation under the Revised Corporation Code?
A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence.
Distinguish a de facto corporation from a corporation by estoppel.
A de facto corporation is one which is formed where there exists a flaw in its incorporation, but there is colorable compliance with the requirements of law.
A corporation by estoppel contemplates persons who hold themselves out as a corporation and enter into contract with a third person on the strength of such appearance.
Who are the corporate officers of a corporation, and what are their basic qualifications?
1. A President, who must be a director;
2. A Treasurer, who must be a resident;
3. A Secretary, who must be a citizen and resident of the Philippines; and
4. Such other officers as may be provided in the bylaws.
5. If the corporation is vested with public interest, the board shall also elect a Compliance Officer.
When can the board of directors of a stock corporation declare dividends, and what are the kinds of dividends that can be declared?
The board of directors may declare dividends only if the corporation has unrestricted retained earnings.
These dividends can be paid to stockholders based on their outstanding shares in cash, property, or stock.
What is the doctrine of limited capacity?
No corporation shall possess or exercise corporate powers other than those conferred by this Code or by its articles of incorporation and except as necessary or incidental to the exercise of the powers conferred.
Give at least four corporate acts that can be voted on by non-voting shares.
(a) Amendment of the Articles of Incorporation; (b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation with another corporation;
(g) Investment of corporate funds in another corporation or business;
(h) Dissolution of the corporation.
What are the grounds for disapproval of the amendments of the Articles of Incorporation?
The following are grounds for such disapproval:
1. The articles of incorporation or any amendment thereto is not substantially in accordance with, the form prescribed herein;
2. The purpose or purposes of the corporation are patently unconstitutional, illegal, immoral or contrary to government rules and regulations;
3. The certification concerning the amount of capital stock subscribed and/or paid is false; and
4. The required percentage of Filipino ownership of the capital stock under existing laws or the Constitution has not been complied with.
What are the required votes for the following:
1. Removal of Director
2. Election of Directors in a stock corporation where 5 director positions are to be filled.
3. Filling of vacancy caused by resignation of a director if the board still has a quorum.
4. Granting of Compensation of Directors
1. Vote of Stockholders representing 2/3 of the outstanding capital stock
2. None. The 5 nominees for directors receiving the highest number of votes shall be declared elected even if one of those nominees only gets 1 vote.
3. Vote of at least a majority of the remaining directors.
4. Vote of Stockholders holding a majority of the outstanding capital stock
What is the preemptive right of stockholders and when do stockholders not have any preemptive right?
All stockholders of a stock corporation shall enjoy the preemptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, except:
1. When such right is denied by the articles of incorporation or an amendment thereto.
2. When the shares are issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or
3. When the shares are issued in good faith with the approval of the stockholders representing 2/3 of the outstanding capital stock in exchange for property needed for corporate purposes or in payment of previously contracted debt.
Fill in the blanks.
A person shall be disqualified from being a director, trustee or officer of any corporation if, within ___ years prior to the election or appointment as such, the person was:
1. __________ by final judgment:
a. Of an offense punishable by imprisonment for a period exceeding __ years;
b. For violating this Code; and
c. For violating Republic Act No. 8799, otherwise known as "The Securities Regulation Code";
2. Found administratively liable for any offense involving __________ acts; and
3. By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to those enumerated in paragraphs (a) and (b) above.
1. 5
2. Convicted
3. 6
4. fraudulent
Define and explain the following:
1. Preferred Shares
2. Founder's Shares
3. Redeemable Shares
4. Treasury Shares
Which among these shares may be deprived of voting rights?
1. Preferred shares are shares given preference in the distribution of dividends, corporate assets upon liquidation, or other preferences. They may be issued only with a stated par value.
2. Founders' shares may be given certain rights and privileges not enjoyed by other stockholders, including the exclusive right to vote and be voted for in the election of directors, but this exclusive right is limited to a period not exceeding 5 years from the date of incorporation and must not violate the Anti-Dummy Law, the Foreign Investments Act, or other pertinent laws.
3. Redeemable shares are shares that a corporation may repurchase from their holders after a fixed period or under specified terms, regardless of whether there are unrestricted retained earnings. Their issuance must be expressly provided for in the AOI.
4. Treasury shares are shares that have been issued and fully paid for, but subsequently reacquired by the issuing corporation through purchase, redemption, donation, or other lawful means. These shares may again be disposed of for a reasonable price fixed by the board of directors.
Answer the following questions:
1. What is the vote required when giving notification to the SEC that the Stock Corporation elects to retain its specific corporate term pursuant to its AOI?
2. What is the vote required when amending the AOI of a Stock Corporation?
3. Fill in the blanks. If a corporation does not formally organize and commence its business within _____ years from the date of its incorporation, its certificate of incorporation shall be deemed revoked as of the day following the end of the ____-year period.
4. A delinquent corporation shall have a period of _____ years to resume operations and comply with all requirements that the Commission shall prescribe.
1. Vote of stockholders representing a majority of its outstanding capital stock.
2. Majority vote of the board of directors and the vote or written assent of the stockholders representing at least 2/3 of the outstanding capital stock.
3. 5 & 5
4. 2
What are the 5 conditions that should be met for a contract between a corporation and one of its directors to be not voidable?
1. The director or trustee’s presence was not needed to constitute a quorum;
2. Their vote was not necessary for approval;
3. The contract is fair and reasonable;
4. For corporations vested with public interest, material contracts must be approved by at least two-thirds (2/3) of the board, including a majority of independent directors; and
5. If it involves an officer, the board must have authorized the contract beforehand.
Give at least 5 specific powers of a corporation and their required votes, if there is any.
To extend or shorten the corporate term (Sec. 36, RCC);
To revive its corporate existence (Sec. 11, RCC);
To amend the Articles of Incorporation (Sec. 16, RCC);
To increase or decrease capital stock (Sec. 37, RCC);
To incur, create or increase bonded indebtedness (Sec. 37, RCC);
To deny pre-emptive right (Sec. 38, RCC);
To sell or dispose all or substantially all of the assets of the corporation (Sec. 39, RCC);
To acquire its own shares (Sec. 40, RCC);
To invest corporate funds in another corporation, business or for any other purpose (Sec. 41, RCC)
To declare dividends (Sec. 42, RCC); and
To enter into a management contract (Sec. 43, RCC)
What is the trust fund doctrine, and when is it violated?
Under the trust fund doctrine, subscriptions to the capital stock of a corporation constitute a fund to which the creditors have a right to look for the satisfaction of their claims.
The Trust Fund Doctrine is violated in the following instances:
1. When the corporation releases or condones payment of the unpaid subscription and the stockholder has no right to demand the refund of his investment;
2. When there is payment of dividends without unrestricted retained earnings;
3. When properties are transferred in fraud of creditors; and
4. When properties are disposed or undue preference is given to some creditors even if the corporation is insolvent.