What is partnership?
By the contract of partnership:
1. Two or more persons bind themselves to contribute to a common fund: a. money;
b. property; or
c. industry
2. With the intention of dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession. [Art.
1767, NCC]
Elements
1. Two or more persons bind themselves to contribute money, property, or industry to a
common fund
2. With the intention of dividing the profits among themselves
Characteristics
1.
2.
3.
4.
5.
6.
7.
Principal – does not depend on other contracts;
Preparatory – entered as a means to an end;
Commutative – undertaking of each one is considered equal with others;
Consensual – perfected by mere consent;
Bilateral – entered by two or more persons;
Onerous – contributions have to be made, and
Nominate – has a special designation in law.
Rights and obligations of partnership
1. Right to Contribution, Right to Warranty
2. Right to Have Sums Applied Pro Rata
3. Right to be Compensated
4. Right to Accounting of Profits Received without the Consent of the Other Partners
5. Obligation to Reimburse Partners
6. Right to ADDITIONAL CAPITAL CONTRIBUTION
Rights and obligations of partners
a. Obligations of the partners among themselves
1. Right to Associate Another in Share
2. Right to Inspect Partnership Books
3. Right to Formal Account
4. Property Rights of Partners
5. Right to be Reimbursed by the Partnership
6. Right to Ask for Dissolution
7. Obligation to Render True and Full Information
8. Obligation to Account and Act as Trustee
9. Obligation not to Engage in Another Business
10. Obligation to Share in the Profits/Losses
Obligations of partnership/partners to third persons
1.
2.
3.
4.
5.
6.
7.
8.
Operate Under a Firm Name
Liability for Partnership Debts
Liability of Partners for Partnership Contracts
Liability for Admission by a Partner
Liability for Misapplication of Money or Property
Liability in Case of Partnership by Estoppel
Liability of an Incoming Partner
Liability with Regard to Personal Creditors of Partners
Partnership by Estoppel
Exits when a person who, by words spoken or written or by conduct: (1) represents himself
as a partner or (2) consents to another representing him to anyone as a partner –
1. In an existing partnership; or
2. With one or more persons not actual partners [par. 1, Art. 1825, NCC].
What is a corporation?
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 incident to its
existence (sec. 2)
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Grandfather rule
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Controlled test
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Piercing of corporate veil
This fictional veil, however, can be pierced by the very same law which created it when "the
notion of the legal entity is used as a means to perpetrate fraud, an illegal act, as a vehicle for
the evasion of an existing obligation, and to confuse legitimate issues
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Separate juridical personality
As a general rule established by legal fiction, the corporation has a personality separate and
distinct from its officers, stockholders and members. Hence, officers of a corporation are not
personally liable for their official acts unless it is shown that they have exceeded their authority.
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Corporate powers
A) GENERAL POWERS OF THE CORPORATIONSECTION 36. Corporate powers and capacity. —
� POWER TO EXTEND OR SHORTEN CORPORATE TERM (sec. 37)
C) POWER TO INCREASE OR DECREASE CAPITAL STOCK; INCUR, CREATE OR
INCREASE BONDED INDEBTEDNESS (sec. 38)
D) POWER TO DENY PRE-EMPTIVE RIGHTS (sec. 39)
E) SEC. 39. Sale or Other Disposition of Assets
F)SEC. 40. Power to Acquire Own Shares.
G)POWER TO INVEST CORPORATE FUNDS IN ANOTHER CORPORATION OR
BUSINESS (sec 42)
H)POWER TO DECLARE DIVIDENDS (sec. 43).
I) POWER TO ENTER INTO MANAGEMENT CONTRACTS (sec. 44)
J)POWER TO ISSUE A CERTIFICATE OF STOCK(sec. 63)
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Amendments to corporation
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What do you mean by the TRUST FUND DOCTRINE?
The doctrine considers this subscribed capital as a trust fund for the payment of the
debts of the corporation, to which the creditors may look for satisfaction.
Until
the liquidation of the corporation, no part of the subscribed capital may be
returned or
released to the stockholder (except in the redemption of redeemable
shares) without
violating this principle.
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Ultra vires vs illegal act
SEC. 44. Ultra Vires Acts of Corporations. – 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.
Ultra Vires Acta) An act outside or beyond corporate powers
b) May be voidable; and
c) Maybe enforced by virtue of performance,
ratification or estoppel
NOTE: NOT ALL ACTS CAN BE RATIFIED (Article 5, C.C.)
Illegal Acta) Necessarily ultra vires;
b) Void; and
c) Cannot be convalidated, inexistent and not
susceptible of ratification
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How to create a corporation
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Electronic filing
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One person corporation
SEC. 116. One Person Corporation. – A One Person Corporation is a corporation with a
single stockholder: Provided, That only a natural person, trust, or an estate
may form a
One Person Corporation.
Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed
companies, and non-chartered government- owned and -controlled corporations
may not incorporate as One Person Corporations: Provided further, That a
natural person who is licensed to exercise a profession may not organize as a
One Person Corporation for the purpose of exercising such profession except as
otherwise provided under special laws.
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How to dissolve a corporation
What are the different Modes of Dissolution?
a) Voluntary dissolution
b) Involuntary dissolution
VOLUNTARY
What are the 2 WAYS TO EFFECT VOLUNTARY DISSOLUTION:
1) Application by the corporation with the SEC
i) where no creditors are affected- by a majority vote of the board of directors or
trustees and approved by the stockholders owning at least 2/3 of the outstanding capital stock
or at least 2/3 of the members, as the case may be, in a meeting called for that purpose duly
published for 3 consecutive weeks and notice thereof given to the shareholders or members
(sec. 118).
ii) where creditors are affected- by a Petition with the SEC to afford an opportunity to be
heard to all parties concerned (sec. 119)
2) By shortening the corporate term by amending the AofI.
INVOLUNTARY
When is a corporation dissolved by involuntary dissolution?
A corporation may be dissolved by:
1) Expiration of the term;
2) Failure to organize and commence business within
two (2) years from date of issuance of the certificate of incorporation;
3) Legislative dissolution; or
4) Dissolution by the SEC upon a verified complaint and after proper notice and hearing on the
following grounds:
a) The corporation was illegally organized;
b) continuous inactivity for at least 5 years;
c) Serious dissention in the corporation;
d) Commission of ultra vires act or illegal acts.
NOTE: The SEC is empowered to suspend or revoke on proper grounds, after proper notice and
hearing, the franchise or certificate of incorporation or partnership.
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Merger vs consolidation
What do you mean by Consolidation?
Consolidation is the union of two or more existing entities to form a new entity
called the consolidated corporation.
What do you mean by Merger?
Merger is the union whereby one or more existing corporations are absorbed by
another corporation that survives and continues the combined business.
What are the requisites in order for merger and consolidation to be valid?
1) The articles of merger or consolidation must be
approved by the SEC;
2) The articles must also be duly approved by a
majority of the respective stockholders of the constituent corporations (PNB
vs. Andrada, GR No. 142936).