TITLE II - INCORPORATION AND ORGANIZATION OF PRIVATE 4 CORPORATIONS TIT RGANIZATION OF INCORPORATION AND ORG! INCOR ORIVATE CORPORATIONS SEC. 10. Number and Qualifications of Incorporators. ~ Any ng partnership, association or corporation, singly or jointly with oa but not more than fifteen (15) in number, may organize a corporaiy for any lawful purpose or purposes: Provided, That natural person, are licensed to practice a profession, and partnerships or SSoctatiog organized for the purpose of practicing a profession, shall ng, Gllewed to organize as a corporation unless otherwise provided iy special laws. Incorporators who are natural persons must be of je, age. stock corporation must own or be, Each incorporator of a hare of the capital stock. subscriber to at least one (1) sl ingle stockholder is considered a Om A corporation with a si Chapter II of this Code, Person Corporation as described in Title XIII, ONE PERSON CORPORATION A One Person Corporation is a corporation with a single stockholde. Only a natural person, trust, or an estate may form a One Person Corporatin Banks and quasi-banks, preneed, trust, insurance, public at 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 exercis# profession may not organize as a One Person Corporation for the purposed! exercising such profession except as otherwise provided under special laws! Incorporator vs. Corporator Those stockholders or members | Those who com| ee e h n pose a corpora mentioned inthe articles of | whether as_ stockholders (soa incorporation as originally forming | corporati smbers (10 and composing the corporation and | stockcorpenaton). who are signatories thereof, P " A sia of the articles of | May or may not bea si tory oft articles of incorporation. Does not cease to bean oon al Ceas sale ior yo ae of haere 4 : corporation, In case ofa no0S + e116 Rese Corporation Code ofthe Philippines (RCCP) 218TITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS corporation, when the corporator ceases to be a member. Not more than 15 persons. There is no restriction as to number except for a close corporation. Steps in the creation of a corporation 1, Promotion ‘This includes activities done by promoter for the founding and organizing of the business or enterprise of the issuer. 2, Incorporation Steps of incorporation a. Execution of the articles of incorporation by the incorporators and other documents required for registration of the corporation. b. Filing of the articles of incorporation with the SEC together with the treasurer's affidavit. In case the corporation is governed by special Jaw (eg educational institution), a favorable recommendation of the appropriate government agency (eg. CHED or DepEd) that such articles of incorporation and by-laws is in accordance with law. 3, Formal organization and commencement of business transactions Examples of formal organization: «a, Adoption of by-laws and filing the same with the SEC Election of board of directors or board of trustees and officers c. Payment of shares Note: “Any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. Note: Natural persons who are licensed to practice a profession, and ed for the purpose of practicing a profession, partnerships or associations organizeé pall not be allowed to organize as a corporation unless otherwise provided under special laws. SEC. 14. Corporate Term. - A corporation shall have existence unless its articles of incorporation provides ee, Corporations with certificates of in. effectivity of this Code, and which continue eau mn issued priorto the cinecee, wiles the cerporation, wpe a Yote of lis mine representing a majority of its outstanding capital stoc! stockholders Commission that it elects to retain its specific co , notifies the to its articles of incorporation: Provided, ae term pursuant 219 vinat any change in theTITLEI- INCORPORATION AND ORGANIZATION OP PRIVat, CORPORATIONS | without prejudice to the | ite term under this section is witho x im right of dissenting ‘stockholders in accordance with the Prove’ this Code. ry ‘A corporate term for a specific period may be extengey shortened by amending the articles. of Incorporasee: Provided, Tt] extension may be made earlier than three (3) Years Prior tothe ong or subsequent expiry date(s) unless there are justifiable reasons jy. earlier extension as may be determined by the Commission; Provide | further, That such extension of the corporate term shall take effect," ‘on the day following the original or subsequent expiry date(s), A corporation whose term has expired may apply for a revivaly its corporate existence, together with all the rights and privileges unjg | its certificate of incorporation and subject to all of its duties, debts ay liabilities existing prior to its revival. Upon approval by ty Commission, the corporation shall be deemed revived and a certifica, of revival of corporate existence shall be issued, giving it perpeud existence, unless its application for revival provides otherwise. No application for revival of certificate of incorporation of bank, banking and quasi-banking institutions, preneed, insurance and ts | companies, nonstock savings and loan associations, pawnshop, corporations engaged in money service business, and other finandd intermediaries shall be approved by the Commission umes accompanied by a favorable recommendation of the appropritt government agency. General rule: | corporation shall have perpetual existence, Exception: Sen j{itearates of incorporation provides otherwise or ifit provides™ Note: A corporate term for a sper nell amending the articles of incorporat cific period may be extended or short tion, Note: A corporation for a s ie Period is is dissolved facto upon the expiration ofthe pert neat eees 2 exist ands dis in the absence of compliance with the original articles of incor legal requisites of extension of per 220TITLE II - INCORPORATION AND ORGANIZATION. ATE CORPORATIONS OF PRIV: REVIVAL OF CORPORATE EXISTENCE A corporation whose term has expired may apply for a revival of its corporate existence. General Rule: Upon approval by the Commission, the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence. Exception: If its application for revival provides otherwise or provides for a specific period, Note: The following corporations require the favorable recommendation of the ‘appropriate government agency before the SEC will approve the application for revival of certificate of incorporation: Banks; Banking and quasi-banking institutions; Preneed; Insurance and trust companies; Nonstock savings and loan associations; Pawnshops; Corporations engaged in money service business; and Other financial intermediaries, PNA AWN E SEC, 12. Minimum Capital Stock Not Required of Stock Corporations. ~ Stock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law. General rule: There is no minimum authorized capital stock. Exception: If provided by special law. SEC. 13. Contents of the Articles of Incorporation. - Al i shall file with the Commission articles ot Rooepmraticn liegt the official languages, duly signed and acknowledged or authenticated, in Such form and manner as may be allowed by the Commi: ic containing substantially the following matters, except as oth aston, Prescribed by this Code or by special law: erwise 221TITLE Il - INCORPORATION AND ORGANIZATION OF PRivayp ’ CORPORATIONS (a) The name of the corporation; % ‘The specific purpose or purposes for which the corpo, is being formed. Where a corporation has more tha, “% stated purpose, the articles of incorporation shall in, lege the primary purpose and the secondary p purposes: Provided, That a nonstock corporation may ,* include a purpose which would change or Contradict jg nature as such; (6) The place where the principal office of the corporation ig, be located, which must be within the Philippines; (a) The term for which the corporation is to exist, if g, corporation has not elected perpetual existence; (c) The names, nationalities, and residence addresses of ti, incorporators; ( The number of directors, which shall not be more tha fifteen (15) or the number of trustees which may be more than fifteen (15); (g) The names, nationalities, and residence addresses of persons who shall act as directors or trustees until the fist regular directors or trustees are duly elected and qualifie in accordance with this Code; (h) If it be a stock corporation, the amount of its authorized capital stock, number of shares into which it is divided, the par value of each, names, nationalities, and resident addresses of the original subscribers, amount subscribed and paid by each on the subscription, and a statement that some or all of the shares are without par value, if applicable (i Ifitbe a nonstock corporation, the amount of its capital tht names, nationalities, and residence addresses of Ut contributors, and amount contributed by each; and oO =e other matters consistent with law and which & corporators may deem necessary and convenient. An arbitration agr. e¢ a df incorporation pursuant ty gene ny, be Provided in the articles it to Section 181 of, this Code. ser ie wt pci anit document, in accordance wissammission in the form of an elec gs on electronic filing ¢ Commission's rules and regu SEC. 14. Form of Artict prescribed by special law, the sr "oration, - Unless oer , the articl corporations shall comply substantisiy y wtaeperation af al i 0 222 ]TITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS Articles of Incorporation of (Name of Corporation) The undersigned incorporators, all of legal age, have voluntarily agreed to form a (stock) (nonstock) corporation under the laws of the Republic of the Philippines and certify the following: First: That the name of said corporation shall be “ Inc, Corporation or OPC”; Second: That the purpose or purposes for which such corporation is incorporated are: (If there is more than one Purpose, indicate primary and secondary purposes); Third: That the principal office of the corporation is located in the City/Municipality of Province of Philippines; Fourth: That the corporation shall have perpetual existence or aterm of ____ years from the date of issuance of the certificate of incorporation; Fifth: That the names, nationalities, and residence addresses of the incorporators of the corporation are as follows: Name Nationality Residence Sixth: That the number of directors or trustees of the corporation shall be _______; and the names, nationalities, and residence addresses of the first directors o. trustees of the corporation are as follows: Name Nationality Residence a the te ss ats em ek Hn im| TITLE Il - INCORPORATION AND ORGANIZATION OF PRivare CORPORATIONS Seventh: That the authorized capital stock of the corporatig, is________— PESOS (P- ), divided into shares wi the par value of. PESOS (P. ) per share (In case all the shares are without par value): Tha, the capital stock of the corporation is hance without par value. (In case some shares have par value and some are without par value): That the capital stock of said corporation consists of ____ shares, of which shares have a par value of PESOS (P. each, and of which___—————_ shares are without par value. Eighth: That the number of shares of the authorized capital stock above-stated has been subscribed as follows: Nameof | x atonatity| No-ofShares | Amount | Amount] Subscriber | Nationality! “subscribed | Subscribed| Paid (Modify No. 8 if shares are with no-par value. In case the corporation is nonstock, Nos. 7 and 8 of the above articles may be modified accordingly, and it is sufficient if the articles state the amount of capital or money contributed or donated by specified persons, stating the names, nationalities, and residence addresses of the contributors or donors and the respective amount given by each.) Ninth: That ‘ —=——_—_—___ has been elected by the subscribers as Treasurer of the Corporation to act as such until after the successor is ¢ i : uly elected and qualified it accordance {ith the bylaws, that as Treasurer, authority bas gi receive in the name and for the benefit of the 224TITLE Il - INCORPORATI CORPORATIONS TON AND ORGANIZATION OF PRIVATE and/or property for th ; ea eon benefit and credit of the corporation Tenth: That the incorporators undertake to chan; ame of the corporation immediately upon receipt ar eetice fom the Commission that another corporation, partnership or person has acquired a prior right to the use of such name, that the name has been declared not distinguishable from a name already registered or reserved for the use of another corporation, or that it is contrary to law, public morals, good customs or public policy. Eleventh: (Corporations which will engage in any business or activity reserved for Filipino citizens shall provide the following): “No transfer of stock or interest which shall reduce the ownership of Filipino citizens to less than the required percentage of capital stock as provided by existing laws shall Pe allowed or permitted to be recorded in the proper books of the corporation, and this restriction shall be indicated in all stock certificates issued by the corporation.” IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation, this day of 20___ in the City/Municipality of. Republic of the Philippines. ie aaa Province of Se (Names and signatures of the incorporators) (Name and signature of Treasurer) Subscription Awritten contract bonds. Also termed stock subscrij to purchase newly issued shares of stock or ption? What is paid-up capital? Paid-up capital is has been both subscribed and pai authorized capital stock of the corporation, st up. that portion of the authorized capital stock which id. To reiterate, such must form part of the ubscribed and then actually paid "sep. 165, Black's Law Dictionary, Tenth Baton 225TITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE | CORPORATIONS | ARTICLES OF INCORPORATION ‘ ‘The articles of incorporation has been described as one that " i; Aefing the charter of the corporation and the contractual relationships betweq State and the coarparton, the stockholders and the State, and betweengt corporation and its stockholders.* There is no gainsaying that the contents of the artic , incorporation are binding, not only on the corporation, but also on 4. shareholders.* Three-fold nature of the articles of incorporation 1. A contract between the State and the corporation; 2. A contract between the corporation and its stockholders; and 3. Acontract between the stockholders inter se. ‘THE NAME OF THE CORPORATION ‘Aname is peculiarly important as necessary to the very existencedt acorporation. Its name is one of its attributes, an element of its existence, ani essential to its identity. The general rule as to corporations is that ead corporation must have a name by which it is to sue and be sued and doal legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name of an individual designates the person; and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted.5 Limitations on the use of corporate name The name must not be identical; deceptively or confusingly similar'® that of any existing corporation or to any other name already protected 5! law; or patently deceptive, confusing or contrary to law. It must contain the word “Inc, Corporation, or OPC.” Change of corporate name A corporation can change i _— sages incorporation. ige its name by amending its article PURPOSE CLAUSE This will confer, as well as limit, the powers which a corporat” the primary purpose and which i/** yet stk vmaavianl alle iad ac Forhaas atcha GR Ne atne nee 220 is ‘Lepanto Consolidated Mining Cor ipany, G.R. No. 175799 226‘TITLE II - INCORPORA’ CORPORATIONS TION AND ORGANIZATION OF PRIVATE the secondary purpose or ° purposes to determine which investment of corporate funds require the authority of both the Board and Stockholders. Note: Soci 4 ofits Code provides: subject to the provisions of this Code, a i i it ; ic »,a private corporation may invest its funds in any other corporation, business, or for any parpose ther than he ies | purpose for which it was organized, when approved by a majority ofthe boa of eo oF trustees and ratified by the stockholders representing at least aed ids (2/3) ofthe outstanding capital stock, or by atleast two-thirds (2/3) of ‘e members in the case of nonstock corporations, at a meeting duly called for the (purpose. XXX. PRINCIPAL OFFICE OF THE CORPORATION Purpose: To fix the residence of the corporation in a definite place: 2 To determine the venue of court cases involving corporation: 3: For purposes of stockholders or members meeting: and 3 Tocdetermine the place where the books and records ofthe corporation are ordinarily kept. Problem: Y Corp. is a domestic corporation with address at Makati City. On the other hand, X Corp. isa domestic corporation similarly engaged in the business of selling, installing ‘and maintaining/servicing elevators, escalators and parking ‘equipment, with address at Makati, as stated in its [Articles of Incorporation. X Corp. filed a Complaint for unfair trade practices against Z Corp, alleging among others, that: it Wis appointed by Z Corp. as the exclusive distributor of Z elevators and escalators in the Philippines exter a Distributorship Agreements * X Z Corp. terminated the Exclusive Distributorship Agreement: =. ‘X Corp. filed a motion to amend the complaint, alleging that subsequent to the filing of the complaint, it learned that Z Corp. transferred all its organization, assets and goodwill, as a consequence of joint venture agreement with ¥ CrP Consequently, in order to afford ree ¥ Corp. was to be additionally impleaded as a party Sefendant. Hence, in the Amended Complaint, X Corp. impleaded xxx Y Corp. as a party-defendant. orp filed a Motion to Dismiss the amended complaint, raising yitnat the venue was improperly laid, as neither X Corp. nor Y ein Mandaluyong City, where the original case was filed. vat is the meaning of residence as regards corporations? as grow Corp. resid Whi 227TITLE II - INCORPORATION AND ORGANIZATION OF PRIvatg “y CORPORATIONS Answer: 4 ‘Since both parties to this case are corporations, there is a neg Clarify the meaning of residence. ‘The law recognizes two type persons: (1) natural and (2) juridical. Corporations come under thejay,"" rants the permanent home ~the place to which, wheng,. absent for business or pleasure, one intends to return. Residence jg ye when dealing with venue. A corporation | however, has no residence the same sense in which this term is applied to a natural person. Thi precisely the reason why the Court in Young ‘Auto Supply Company Court of Appeals ruled that for practical purposes, & corporation isin, metaphysical sense a resident of the place where its principal off. is located as stated in the articles of incorporation. Even before thi, ruling, it has already been established that the residence of a corporay is the place where its principal office is established. ‘The place where the principal office of the corporation is to be located ig one of the required contents of the articles of incorporatio, which shall be filed with the Securities and Exchange Commission (SEC) ‘TERM OF EXISTENCE ‘A corporation shall have perpet incorporation provides otherwise. ual existence unless its articles of NUMBER OF BOARD OF DIRECTORS OR TRUSTEES ‘The number of directors shall not be more than fifteen number of trustees may be more than fifteen (15). (15). The AUTHORIZED CAPITAL STOCK This is the maximum amount fixed in the articles of incot that may be subscribed and paid by the stockholders of the corporation. ‘The articles of incorporation of a stock corporation should contait the amount of its authorized capital stock in lawful money of the Philippines the number of shares into which it is divided, and in case the share are F¥ value shares, the par value of each, the names, nationalities and residen™ the original subscribers, and the amount subscribed and paid by each 0" subscription, and if some or all of the shares are without par value, SU“ must be stated. poration SEC. 15. Amendment of Articles of Incorpot _ - uales otherwise prescribed by this Code or by spain ar ee legit purposes, any provision or matter stated in the articles orincorpore, may be amended by a majority vote of the board of directors of &™ and the vote or written assent of the stockholders representing 2! —— ooo «see Hyatt Elevators and Escalators Corporation vs, Goldstar ao 2005. Bevators, Pi, nc, GR, No, 161026 00%" 228 >|TITLE II - INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the rovisions of this Code. The articles of incorporation of a nonstock corporation may be amended by the vote or written assent of majority ofthe trustees and atleast two-thirds (2/3) of the members. The original and amended articles together shall contain all ons required by law to be set out in the articles of incorporation. Kmendments to the articles shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees, with a statement that the amendments have been duly approved by the required vote ‘of the stockholders or members, shall be. submitted to the Commission. rovisi their approval by the jission if not e not ‘The amendments shall take effect upon Commission or from the date of filing with the said Commi red upon within six (6) months from the date of filing for a caus attributable to the corporation. in the amendment of the articles of incorporation endment must be for legitimate purposes and mus oration Code and special laws; roved by a majority of the board of Limitations t not be 1. The am contrary to the Corp. 2.The amendment must be app! directors or board of trustees; 3, The amendment requires the vote or written assent of stockholders’ representing 2/3 of the outstanding capital stock or 2/3 members if it be anon-stock corporation; 4. The original and amend required by law to be set articles, as amended, shall be indicated made; 5 cavtifcation under oath by the corporate secretary and a majority of the board of directors or board of trustees stating the fact that said amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to the SEC; 6. The amendment must be approved by the SEC; 7. The amendment must be accompanied by a favorable recommendation ofthe appropriate government agency in cases of : a. Banks; b. Banking and quasi-banking institutions; © Preneed; d. Insurance and trust companies; . Nonstock savings and loan associations (NSSLAs); Pawnshops; and ed articles together shall contain all provisions ‘tout in the articles of incorporation. Such by underscoring the changes 229TITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE q CORPORATIONS Other financial intermediaries. SEC. 16. Grounds When Articles of Incorporation or Amending, may be Disapproved. - The Commission may disapprove: the artictee incorporation or any amendment thereto if ee same iS not compl with the requirements of this Code: Provided, TI os ie commission shay give the incorporators, directors, trustees, OF o! nate reasonable ting from receipt of the disapproval within whicl 7 Modify 4. objectionable portions of the articles or amendment. The following .- grounds for such disapproval: (@) The articles of incorporation or any amendment theretg, not substantially in accordance with the form prescrip, herein; () The purpose or purposes of the corporation are patent unconstitutional, illegal, immoral or contrary 1 government rules and regulations; (©) The certification concerning the amount of capital stox subscribed and/or paid is false; and (d) The required percentage of Filipino ownership of the capita stock under existing laws or the Constitution has not been complied with. No articles of incorporation or amendment. to articles of incorporation of banks, banking and quasi-banking institutions, preneed, insurance and trust companies, nonstock savings and loan associations (NSSLAs), pawnshops, and other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency t0 the effect that such articles or amendment is in accordance with law. Note: Before disapproving the articles of inco it the p rporation or its amendments, ‘SEC should give the incorporators, directors, trustees, or officers, a reasonable tim within which to correct or modify the objech z ies of amendment. IP the objectionable portions of the artic Problem: with Bichon 2 Bishop Z established the X church asa corporation later in 1948, X chon eanetal Superintendent." Thirty-nine Year tsheda Sy acted and registered its bylaws fae ayabreme Elders, made up of cnet niet, oa were a General Supe ne by-laws empowered the Supreme klderst0el easurer General one ace Secretary, General Evangelist.@ a Treasurer General who would manage the dfore athe aren 230——_— ‘TITLE II - INCORPO CORPORATIONS RATION AND ORGANIZATION OF PRIVATE For all it Neer hates purposes, the Supreme Elders served as X church's Apparently, although X church remained a cot rporation sole on paper (with all corporate powers theoretically lodged in the hands of one member, the General Superintendent), it had always acted like a oorperaemakine paver The Supreme Elders exercised X church's doer making powers without ever being challenged. Subsequently, git mneral Conference, the general membership voted to put things right by changing X church's organizational structure from a corporation sole to a corporation aggregate. On, May 7, 1973 the Securities and Exchange Commission (SEC) approved the vote. For some reasons, however, the corporate papers of the X church remained unaltered as a corporation sole. Only in 2001, about 28 years later, did the issue answer to a query from X church, the SEC replied on April 3, although the SEC ‘Commissioner did not in 1948 object to the conversion oF X church into a corporation aggregate, that conversion WS not properly carried outand documented, The SEC said thatX church needed to amend its articles of incorporation for that purpose ‘Acting on this advice, the Supreme elders resolved to convert X church to a corporation aggregate. Bishop 1, its General Superintendent, instructed all their congregations to take up the matter with their respective members for resolution. Subsequently, the general membership approved the conversion, prompting X church to file amended articles of incorporation with the SEC. Bishop L filed an ort of the conversion. affidavit-certification in supp ‘church's Reverend P, etal, which belonged {0 4 faction that did not support the conversion, filed a cvil case for "Declaration of Nullity of ‘Amended Articles of Incorporation from Corporation Sole to Corporation inst members of its Supreme in X church's name agai Aegree ney claim that a complete shit from church's status as a forporation sole to a corporation aggregate required, not just an corporatent of X church's articles of incorparatioy but a complete aretution of the existing corporation sole followed by a re- incorporation. (atom: orporation sole be converted into corporation aggregate by mere amendment of its articles of incorporation? Answer: True, the (old) Corporation Code provides no specific mechanisia for amending the articles of incorporation of corporation Section 109 of the (Old) Corporation sole, But, as the RTC correctly held, Code allows the application to religious corporations of the general provisions governing non-stock corporations. "Theve is no point to dissolving the corporation sole of one member to enable the corporation aggregate to emerge from it. 231 reemerge. In 2001 that, nd‘TITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE ' CORPORATIONS Whether it is a non-stock corporation ora corporation sole, the co, being remains distinct from its members, whatever be their number increase in the number of its corporate membership does not cha ie complexion of its corporate responsibility to third parties, te member, with the concurrence of two-thirds of the membership one organization for whom he acts as trustee, can self-will the amending? He can, with membership concurrence, increase the technical numjert the members of the corporation from sole” or one to the greater nuns authorized by its amended articles. | The amendment of the articles of incorporation, requires m that a) the amendment is not contrary to any provision or requireme under the Corporation Code, and that b) it is for a legitimate purpos. Section 17 of the Corporation Code (now Section 16, Revise, Corporation Code) provides that amendment shall be disapproved among others, or if the purpose or purposes of the government rules and regulations, or if v ii i . These impediments do not appear inthe Dora case of X church.” SEC. 17. Corporate Name. - No corporate name shall be allowed by the Commission if it is not distinguishable from that already reserved or registered for the use of another corporation, or if such name is already protected by law, or when its use is contrary to existing lav, rules and regulations. Aname isnot distinguishable even if it contains one or more oftht following: (a) The word “corporation” ‘company’, “incorporatet’ “limited”, “limited liability”, or an abbreviation of oné such words; and (b) Punctuations, articles, Prepositions, abbreviations, number of the same word or conjunctions, —_contractios, different tenses, spacin& Phrase, The Commissio; i e aed om aro ath corpora the use of another corporation; (2) alent, aeael| sriaw contrary to law, rules and regulations, ae oe order corporation to immediately cease and desist mans using such name? a © conporation to register a new one, The Commissio8 so 7 selena Evangelea Meola Eo Las nna ethane Lazare tals No, 284068, july 2019; ELIF (Corporation oe. nc tal vs BO? 232—_— ‘TITLE II - INCORPORATION AND ORGANIZATION PRIVATE CORPORATIONS a also cause the removal of all visible signages, marks, advertisements, labels, prints and other effects bearing such corporate name. Upon the approval of the new corporate name, the Commission shall issue 2 certificate of incorporation under the amended name. Ifthe corporation fails to comply with the Commission's order, the Commission may hold the corporation and its responsible directors oF officers in contempt and/or hold them administratively, civilly and/or criminally liable under this Code and other applicable laws and/or revoke the registration of the corporation. the Commission if it is not ered for the use of another or when its use is contrary No corporate name shall be allowed by distinguishable from that already reserved or regis torporation, or ifsuch name is already protected by law, toeristing law, rules and regulations. essary to the very existence an element of its existence, corporations Is that each ‘Aname is peculiarly important as nec ofa corporation. Its name is one of its attributes, ‘and essential to its identity. The general rule as to corporation must have a name by which itis to sue and be sued and do all {egal acts, The name of a corporation in this. respect designates the corporation in the same manner as the name of an individual designates the person; and the right to use its corporate name is as much a part of the orporate franchise as any other privilege granted. SEC, 18. Registration, Incorporation and Commencement of Conporate Existence. - A person or group of persons desiring to incorporate shall submit the intended corporate nalle to the saerrsion for verification. If the Commission finds that the name is distinguishable from a name already reserved or registered for the use ofanother corporation, not protected by law and is not contrary to law, rules and regulations, the name shall be reserved in favor of the incorporators. The incorporators shall then submit their articles of incorporation and bylaws to the Commission. submitted documents and requirements of this Code, the Commission shall issue If the Commission finds that the information are fully compliant with the other relevant laws, rules and regulations, the certificate of incorporation. oS (NM Rothachild& Sons « (Australia) Limited vs. Lepanto Consolidated Mining Company, ‘ett on (rat) Linde Lapa Cosa ted Mining Company, GR. No. 175799, 233TITLE Il - INCORPORATION AND ORGANIZATION OF PRivate q CORPORATIONS A private corporation organized under this Code comm, conporats calitedine and juridical personality from the dat Commission issues the certificate of incorporation under its offigi,, te and thereupon the incorporators, stockholders/members ang ,°! successors shall constitute a body corporate under the name stay the articles of incorporation for the period of time mentioned they" unless said period is extended or the corporation is sooner’ issoled accordance with law. It i corporation and places it Exchange Commission. under the jurisdiction of the Securities af A corporation commences its corporate existence and juridicy and is deemed incorporated from the i SEC. 19. De facto Corporations. - The due incorporation of ayy corporation claiming in good faith to be a corporation under this Code and its right to exercise corporate powers, shall not be inquired inty collaterally in any private suit to which such corporation may bea ary. Such inquiry may be made by the Solicitor General in a quo warrmts proceeding. Requirements before one can qualify as a de facto corporation: 1. The existence of a valid law under which it may be incorporated; 2. An attempt in good faith to incorporate; and 3. Assumption of corporate powers. Note: The filing of articles of incorporation and the issuance of ® certificate of incorporation are essential for the existence of % ‘facto corporation. The Supreme Court held that an organization not regi with the Securities and Exchange Commission (SEC) cannot be considered # corporation in any concept, not even as a corporation de facto.!° ‘Two conflicting public interest under de facto doctri ctrine The defacto doctrine thus effects i al conflicting public interests: SE Eee ‘9 Seventh Day Adventist Conference Church of Southern one orem i rm a egy ug ak een uurch of Sout i y cron Aenea ce st ln tava Mai 234‘TITLE Il - INCORPORATION AND O1 CORPORATIONS RGANIZATION OF PRIVATE 1. The one opposed to an unauthorized assur Q NF imption of corporate privileges: 2. The other in favor of doing justice to the parties and of establishing 2 general assurance of security in business dealing with corporations. Generally, the de facto doctrine exists to protect the public dealing with supposed corporate entities, not to favor the defective or non-existent corporation.1t SEC. 20. Corporation by Estoppel. - All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities. ‘and damages incurred or arising as a result thereof: Provided, however, ‘That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be ‘Allowed to use its lack of corporate personality as a defense. Anyoné who assumes an obligation to an ostensible corporation as such cannot resist performance thereof on the ground that there was in fact no corporation. Doctrine of estoppel ‘The doctrine of estoppel is predicated on, and has its origin in, equity | which, broadly defined, is justice according to natural law and right. It isa | principle intended to avoid a clear case of injustice. The term is hardly Fietinguishable from a waiver of right. Estoppel lke its said counterpart, must te unequivocal and intentional for, when misapplied, it can easly become 6 aoc ventent and effective means of injustice. Etoppel isnot understood ro beaprinciple that, as a rule, should prevalently apply but, such ast cconcededly ie tea mere exception from the standard legal norms of general application that can be invoked only in highly exceptional and justifiable cases.!? Problem: X filed a case for damages against Y.X alleged that he was the president ofthe K Jeepney Drivers’ Association, Inc. (K, Inc.) while ¥ was the president of the S Jeepney Operators’ and Drivers’ Association, Inc: (S. inc); Upon the request of the Sangguniang Bayan X and Y agreed to congoliate their respective associations and form the Unified Jeepney Operators’ and Drivers! Association, Inc. (U, Inc); Xand ¥ also agreed to lect one set of officers who shall be given the sole authority to collect the daily dues from the members of the consolidated association; elections were held and both X and Y ran for president; X won; Y protested and, alleging fraud, refused to recognize the results of the election; Yalso refused to abide by their agreement and continued collecting the dues 2 Seventh Day Adventist Confer Church of Southern Phill oman Conference Church of Southern Pilpines, Inc tal vs Northeastern Serhan. GR. No, S046 a 21,206 theastern Mindanao Mission al Drop Corporation ve Ch and Wilson C Yao, GR, No, 103200, August 31,1998, 235 aTITLE Il - INCORPORATION AND ORGANIZATION OF PRivary 7 CORPORATIONS i ite several demands from the members of his association despit fits was thus constrained to file the complaint to restrain y a ing the dues. * ; coe ye ces ine of corporation by estoppel applicable jy he present case? Answer: There is no intracorporate nor partnership relation bet and Y.The controversy between them arose out of their plan, consolidate their respective jeepney drivers’ and operators’ associating into a single common association. This unified association was, howey still a proposal, Consolidation becomes effective not upon me agreement of the members but only upon issuance of the certificate consolidation by the SEC. 5 Corporation by estoppel is founded on principles of equityay is designed to prevent injustice and unfairness. It applies when perso assume to form a corporation and exercise corporate functions and ent, into business relations with third persons. Where there is no third peraa involved and the conflict arises only among those assuming the format: corporation, who therefore know that it has not been registered, thers no corporation by estoppel.!? The doctrine of corporation by estoppel may apply to te alleged corporation and to a third party.In the first instance, a unincorporated association, which represented itself to be a corporati, will be estopped from denying its corporate capacity in a suit against by a third person who relied in good faith on such representationt cannot allege lack of personality to be sued to evade its responsibility!* a contract it entered into and by virtue of which it received advantag® and benefits. __Onthe other hand, a third party who, knowing an association? be re reerates, nonetheless treated it as a corporation and me suit brought ~ nies barred from denying its corporate existence eoanein 1 ah alleged corporation. In such case, all thst despite lan transaction made by the ostensible corpo" Fane sronedse ofits legal defects, may be held liable for 02M ey impliedly assented to or took advantage of.14 ingot oe °f Non-Use of Corporate Charter and contin” commence its business wns, sss not formally organi incorporation, its certificate of inne, °), Years from the 4: inco1 ‘ revd as of the day following the end ar thea ea be deemed 13 se Reynaldo M, Lozano vs: NonEiezer Rg ++ Lim Tong Lim ve. Philippine Las Santos i” ne Pig Cea industries ng tone Ata, GR No, 125224.) 236 136448, November 3, 1999. ATITLE II - INCORPO a CORPORATIONS RATION AND ORGANIZATION OF PRIVATE However, if a co i poration has commenced its business but fraps aioe inoperative for a period of at least five (5) om ; the Commission may, after due notice and hearing, place the corporation under delinquent status. A delinquent corporation shall have a period of two (2) years to resume operations and comply with all requirements that the Commission shall prescribe. Upon compliance by the corporation, the Conninlssion shall issue an order lifting the delinquent status. Failure to comply with the requirements and resume operations within the period given by the Commission shall cause the revocation of the corporation's certificate of incorporation. The Commission shall give reasonable notice to, and coordinate with the appropriate regulatory agency prior to the suspension or revocation of the certificate of incorporation of companies under their special regulatory jurisdiction. 1. Failure to formally organize and commence its business within 5 years from the date of its incorporation The certificate of incorporation shall be deemed revoked as of the day following the end of the five (5) year period. Examples of acts constituting formal organization 1. Adoption of by-laws and filing of the same with the SEC. 2 Election of Board of Directors or Board of Trustees as well asthe officers like the President, Secretary, Treasurer and other officers as stated in its by laws. 3, Establishment of the principal office. “4 Providing for the subscription and payment of its shares of stock. 5 Other acts necessary to enable the corporation to transact business or ‘accomplish the purpose for which it was created. Examples of acts constituting commencement of business 1 Entering into contracts or negotiation for lease or sale of properties to be used as business or factory site. 2. Making plans for and the construction of the factory. 3 Taking steps to expedite the construction of the corporation's working equipment. IL. Continuous inoperation for at least 5 consecutive years The SEC may, after due notice and hearing, place the corporation under delinquent status. 237TITLE Il - INCORPORATION AND ORGANIZATION OF PRivar, “Y CORPORATIONS Note: - A delinquent corporation shall have a period s fewo ° 2) years = . operations and comply with all requirements that he “Ans al Upon compliance by the corporation, the Commission shal sus an order ia delinquent status. Failure to comply with the Se aoa _ resume opera within the period given by the Commission shal revocation corporation's certificate of incorporation. 238TITLE Il - INCORPORATION AND ORGANIZATIOI CORPORATIONS IN OF PRIVATE MULTIPLE CHOICE 1. L Any person, partnership, association or corporation, singly or jointly with others but not more than 15 in number, may organize a corporation for any lawful purpose or purposes Il, Natural persons who are licensed to practice a profession, partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation. a, Only lis true b. Only lis true c. Bothare true d. Bothare false and 2. |. Incorporators who are natural persons must be of legal age. Il. Each incorporator of a stock corporation must own 01 subscriber to at least 1 share of the capital stock. a. Only lis true b. Only His true c. Bothare true 4. Bothare false r be a 3, Awritten contract to purchase newly issued shares of stock: a. Subscription contract b. Sales contract c. Redemption contract d. Purchase contract 4. Is that portion of the authorized capital stock which has been both subscribed and paid. a. Authorized capital stock b. Paid-up capital c. Unissued capital d. Outstanding capital articles of incorporation are binding, not only on the corporation, but also on its shareholders. Il The general rule as to corporations is that each corporation must have a hame by which itis to sue and be sued and do all legal acts. a. Only lis true b. Only Ilis true Bothare true d. Both are false 5. I. The contents of th sn can change its name by amending its by-laws. 6. 1A corporation a single stockholder is considered a One Person II. A corporation wi Corporation. a. Only Jistrue b. Only His true 239TITLE II - INCORPORATION AND ORGANIZATION OF PRivay, ’ CORPORATIONS cc. Bothare true 4. Bothare false 7. The following are the reasons that a principal office of the co, must be stated in its articles of incorporation, except: a, To fix the residence of the corporation in a definite place, b. Todetermine the venue of court cases involving corporation, . For purposes of board of directors’ meeting, a. To determine the place where the books and records oy corporation are ordinarily kept. Pert 8. 1.A corporation is ina metaphysical sense a resident of the place wig, its principal office is located as stated in the articles of incorporation, Il. The place where the principal office of the corporation is tg located is one of the required contents of the by-laws. a. Only lis true b. Onlyllis true ¢. Bothare true d. Both are false 9. 1. Only a natural person, trust, or an estate may form a One Persey Corporation. I Banks and quasi-banks, preneed, trust, insurance, public arj publicly-listed companies, and non-chartered government-owned ani- controlled corporations may not incorporate as One Pers Corporations. a. Onlylistrue b. Only lis true c. Botharetrue d. Both are false 10. This is the maximum amount fixed in the articles of incorporation tt may be subscribed and paid by the stockholders of the corporation. a. Outstanding capital stock b, Authorized capital stock c. Paid-up capital stock d. None ofthe above 11. The following are limitations j cles incorporation exept in the amendment of the arti a The amendment must be for legitimate purposes and must 00°" b. The amendment must be spose and special laws. rid ©TITLE Il - INCORPORATION AND. CORPORATIONS ORGANIZATION OF PRIVATE d. The original and amended articles together shall contain all provisions required by |; i provisions, re y law to be set out in the articles of 12, |. A corporation shall have is 1 i perpetual existence unl incorporation provides otherwise. ee unless is ars of t The general i i corporations i that each corporation must ea name by which it is to sue and be sued and di hvetaeee ied and do all legal acts. b. Only lis true c. Bothare true d. Bothare false 13. L Itis the certificate of incorporation that gives juridical personality to ‘a corporation and places it under the jurisdiction of the Securities and Exchange Commission. Il. A corporation commences its corporate existence and juridical personality and is deemed incorporated from the date the DTI issues certificate of incorporation under its official seal. a. Only lis true b. Only lis true cc. Bothare true d. Bothare false ‘The following are the requirements before one can qualify as ade facto corporation, except: aoe The existence of a Valid law under which it may be incorporated. b. Anattempt in good faith to incorporate. Assumption of corporate powers. d. None of the above. 14. poration and the issuance of the 15, 1, The filing of articles of incor essential for the existence of ade certificate of incorporation are {facto corporation. Tl. An organization not corporation in any concept, a. Only lis true b. Only Ilis true ¢. Bothare true d. Bothare false 1 registered with the SEC cannot be considered a not even as a corporation de facto. s assume to form a corporation and exercise 16. It applies when person: d enter into business relations with third corporate functions an persons. a. Corporation by estoppel b. De facto corporation © Corporation by prescription 241C—O ‘TITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE 7 CORPORATIONS 4. De jure corporation | 17. 1. Stock corporations shall not be required to have a minimym, ey ‘stock. i. Il. All corporations shall file with the Commission artiq., incorporation in any of the official languaBes a a. Only lis true b. Only fis true c. Bothare true a. Bothare false 18. L An unincorporated association, which represented itself to by, corporation, will be estopped from denying its corporate capacity jy, Suit against it by a third person who relfed in good faith on sug representation. a TA third party who, knowing an association to be unincorporay nonetheless treated it as a corporation and received benefits from , nay be barred from denying its corporate existence in sult brow against the alleged corporation. a. Onlylistrue b. Only lis true c. Bothare true d. Both are false 19. 1. Corporation by estoppel is founded on principles of equity ands designed to prevent injustice and unfairness. IL Consolidation becomes effective not upon mere agreement of the members but only upon issuance of the certificate of consolidation by the SEC. a. Only lis true b. Onlyllis true c Botharetrue d. Bothare false 20. a amabaeer i articles of incorporation, requires merely that ent is not contrary to any provision or requirem under the Corporation Code. Il, Itis fora legitimate purpose. a. Onlylistrue b. Only lis true c. Bothare true d._ Bothare false 21. The following are _ except: g are the three-fold nature of the articles of incorpo” a. Acontract between b. Acontract between the cap the corporation. 3a tion and its stockholders- —<—<$—$— ATITLE Il - INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS c, Acontract between the stockholders inter se. d. Acontract between the corporations inter se. 22, The purpose of the principal of the corporation are the following, except: a. Tofix the residence of the corporation in a definite place. b. To determine the venue of court cases involving the stockholders. c. For purposes of stockholders or members meeting. d. To determine the place where the books and records of the corporation are ordinarily kept. 23. 1. The number of directors shall not be more than 15. IL The number of trustees may be more than 15. a. Onlylis true b. Onlyllis true . Bothare true d. Both are false 24. The articles of incorporation of a nonstock corporation may be amended by the vote or written assent of majority of the trustees and at least 2/3 of the members. ‘The amendment of the articles of incorporation shall take effect upon their approval by the SEC or from the date of filing with the SEC if not acted upon within 9 months from the date of filing for a cause not attributable to the corporation. a. Onlylistrue b. Only Ilis true ¢ Bothare true d. Both are false 25. The following are grounds for such disapproval, except: a. The articles of incorporation or any amendment thereto is not substantially in accordance with the form prescribed by the Philippine Cooperative Code. b. The purpose or purposes of the corporation are patently unconstitutional, illegal, immoral or contrary to government rules and regulations. The certification concerning the amount of capital stock subscribed and/or paid is false. , The required percentage of Filipino ownership of the capital stock under existing laws or the Constitution has not been complied with, 26. No corporate name shall be allowed by the SEC i fF it is not distinguishable from that already reserved or registered for the use of 243CORPORATIONS 27. 28. ration. A name is not distinguishable even if jt another corpo iy one or more of the following: . in, 1. The word ‘corporation’, “company”, “incorporated”, “tin, “limited liability’, or an abbreviation of one of such words; ; Il. Punctuations, articles, conjunctions, contractions, preposi, abbreviations, different tenses, spacing, or number of the same wor phrase. a. Onlylistrue b. Only lis true c. Bothare true d._ Both are false I. If a corporation does not formally organize and commence iy business within 5 years from the date of its incorporation, its certifate of incorporation shall be deemed revoked. IL. If a corporation has commenced its business but subsequenty becomes inoperative for a period of at least 5 consecutive years the SEC may, after due notice and hearing, place the corporation under delinquent status. a. Onlylistrue b. Onlyllistrue ¢. Botharetrue d. Bothare false A delinquent corporation shall have a period of 2 years to result operations and comply with all requirements that the SEC prescribe. I Upon compliance by the corporation, the SEC shall issue an onde lifting the delinquent status. Failure to comply with the requireme® and resume operations within the period given by the SEC shall a the revocation of the corporation’s c 7 shes al certificate of incorporation. b. Only lis true c. Botharetrue d. Both are false 244