Corporation – artificial being created by operation of law, having right of succession
and the powers, attributes, and properties expressly authorized by law or incidental to
its existence.
CHARACTERISTICS of a CORPORATION
1. Artificial Being – has personality separate and distinct from its owners
(Stockholders, BOD/Trustees, and Officers).
2. Created by operation of Law – ONLY the state through the SEC can grant a
business license to operate as a corporation.
3. Has the right of succession – continues to exist regardless of the changes of
the ownership.
4. Has limited capacity (in line with the Doctrine of Limited Capacity)
• Can exercise only the powers EXPRESSLY conferred upon it by law
and its articles of incorporation.
• IMPLIED from such powers expressly granted
• Those that are INHERENT to its existence.
MAJOR CLASSES OF CORPORATION
1. Stock Corporations – Those have capital stock AUTHORIZED to distribute to
the holders
2. Non-stock Corporations – NO PART OF ITS INCOME IS DISTRIBUTABLE.
Note: Members tawag sa mga so called “owners or shareholder” sa non-stock.
OTHER CLASSES OF CORPORATION
1. Public Corporation – those formed or organized for the government of a portion
of the state whick have for their purpose the general good and welfare.
2. Private Corporation – formed for some private, purpose, benefit, and aim.
3. Quasi-public Corporation – a public corporation SUPPORTED by the
government in the performance of public duties.
4. Government-owned and Controlled Corporation (GOCC)
• An agency as a stock or non-stock OWNED BY THE GOVERNMENT
or THROUGH ITS INSTRUMENTALITIES either wholly or where
applicable in the case of stock corporations, to the extent of atleast a
majority of its shares.
Corporation by prescription
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A corporation that has existed longer than the memory of man can
remember and is presumed to have acquire its juridical personality
from the long time ago.
Note: Foreign Corporation is formed or organized under the laws OTHER THAN those
of the Philippines WHICH ALLOWS Filipino Citizens to do business in its own country.
How to determine the nationality of a corporation? *Incorporation Test
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Where in a corporation is considered a national of the country WHOSE
LAWS it was incorporated.
*Control Test (Liberal Rule) – used to determine the eligibility of a corporation, which
has foreign equity participation in its ownership structure, to engage in nationalized
or partly nationwide. If a corporation is at least 60% Filipino-owned, all shares
(100%) are recorded as Filipino shares.
Note: Liberal Rule means it is not strict
If not engaged in nationalize or partly nationalized industries, use Incorporation Test.
WHOLLY/PARTLY NATIONALIZED INDUSTRIES
No foreign equity – for Mass Media (mandated by 1987 Constitution)
Up to 25% foreign equity – for private recruitment, whether for local or overseas
employment (mandated by PD No. 442)
Up to 40% foreign equity – Ownership of private lands
*Grandfather Rule (Strict Rule) – If corporation is less than 60% Filipino-owned
shares, yung percentage belonging to Filipino yung only shares na recorded as
Filipino shares. Applied to corporation where the 60-40 Filipino-Foreign
ownership is in doubt.
*Can a corporation become a partner in a partnership? No
Exceptions:
- if the authority to enter into a partnership is expressly conferred by the charter of the
articles of incorporation of the corporation.
- The nature to be undertaken by the partnership is in line with business of the
corporation.
- If foreign corp, must obtain license to transact business in the Philippines.
*Is a corporation liable for torts (quasi-delict)? YES
- if there is a tortuous act made by an officer or agent under the EXPRESS authority or
direction of the stockholders or members acting as a body, or generally, from the
directors as the governing body.
*Is a corporation liable for crimes? NO
- because a corporation is a mere legal fiction (artificial being), and cannot be held
liable for a crime committed by its officers and does not have the essential element of
malice; in such case, the responsible officers would be criminally liable.
Exceptions: if the penalty of the crime is only fine or forfeiture of license or franchise.
*Can a corporation recover damages? YES
Exception: Moral Damages;
Note: BUT it may be IF a corporation, as a juridical person, can validly complain for
libel or any other form of defamation and claim moral damages.
Basis of the exception of the exception: Article 2219 of the New Civil Code.
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Fraud Test
Alter-Ego or Instrumentality Test
Public Convenience
Equity Cases/Test