● Definition of 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

incidental to its existence. (SEC. 2)

● Attributes of Corporation
Artificial being:

Section 2 of the Revised Corporation Code explicitly states that a corporation is "an
artificial being created by operation of law" with a legal personality separate and distinct
from its shareholders or members.

Created by operation of law:

Section 2 also supports this attribute by stating that a corporation is created by law and
can only be brought into existence through registration with the Securities and Exchange
Commission (SEC). It cannot exist by mere agreement of the parties.

Right of succession:

Section 2 grants corporations the capacity for continuity of existence beyond the lives of
its incorporators, shareholders, or members. Corporations enjoy perpetual existence
unless otherwise specified or dissolved by law or voluntary action.

Powers, attributes, and properties authorized by law:

Section 35 of the Revised Corporation Code enumerates the general powers of a

corporation. This includes the ability to:

○ Sue and be sued

○ Acquire and hold properties
○ Enter into contracts
○ Adopt bylaws

● Classes of Corporation
Corporation Code Classification
● Stock Corporations - have capital stocks and authorized to distribute dividends
● Nonstock Corporations - no income is distirbuteable as dividends
SEC3

● Distinction of Corporation and Partnership

Art. 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession.
(1665a)

Art. 1768. The partnership has a judicial personality separate and distinct from that of
each of the partners, even in case of failure to comply with the requirements of Article
1772, first paragraph.

SEC. 10. Number and Qualifications of Incorporators. – 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: Provided, That
natural persons who are licensed to practice a profession, and partnerships or
associations organized for the purpose of practicing a profession, shall not be allowed to
organize as a corporation unless otherwise provided under special laws. Incorporators
who are natural persons must be of legal age. Each incorporator of a stock corporation
must own or be a subscriber to at least one (1) share of the capital stock.

Pagnamatay yung partner art 1830 p5

● De facto corporations v. De jure corporations

SEC. 19. De facto Corporations. – The due incorporation of any corporation claiming in good

faith to be a corporation under this Code, and its right to exercise corporate powers, shall not be
inquired into collaterally in any private suit to which such corporation may be a party. Such

inquiry may be made by the Solicitor General in a quo warranto proceeding.

A de jure corporation is one that has fully complied with all the legal requirements for
incorporation under the law.
When all the legal requirements (such as filing of the Articles of Incorporation, compliance with
capital stock requirements, and registration with the Securities and Exchange Commission)
have been met, the corporation is considered de jure.
Section 13 and Section 14 of the RCCP outline the necessary content of the Articles of
Incorporation and the steps for registration, which must be followed to achieve this status.

● Advantages and disadvantages of a corporation

ADVANTAGE
● Shareholders of a corporation are only liable to the extent of their investment. The
corporation, as a juridical person, has its own separate legal personality, protecting
shareholders from personal liability beyond their shareholdings.
● This means that if the corporation incurs debt or is sued, the personal assets of
shareholders are generally protected.
● Corporations have the ability to issue shares of stock and raise capital through equity
financing. This is explicitly provided as part of the powers of a corporation to sell or
dispose of shares to attract investments from shareholders or the public.
● This allows corporations to raise significant amounts of capital, more than what most
sole proprietorships or partnerships can raise.
● Corporations are granted perpetual existence, meaning the death, withdrawal, or
incapacity of any shareholder does not dissolve the corporation. This allows corporations
to operate continuously unless dissolved by law or by voluntary action.

DISADVANTAGE

Corporations are subject to stricter regulatory requirements compared to other business

forms. These include:

● Filing of Articles of Incorporation and other documents with the SEC (Section 14).
● Compliance with corporate governance rules (Sections 46, 63).
 ● The need to hold annual stockholders' meetings and submit periodic reports.

Corporations are subject to double taxation in some jurisdictions, including the Philippines.
This means:

● The corporation pays income tax on its profits (corporate tax).

● Shareholders may also be taxed when dividends are distributed (dividend tax under the
NIRC).

● Formation of Corporation
Sections 13-16, Revised Corporation Code
The formation requires a set number of incorporators (at least 2, but no maximum under the
Revised Corporation Code), the submission of Articles of Incorporation, and registration with the
Securities and Exchange Commission (SEC).

● Articles of Incorporation
Legal Basis: Section 14, Revised Corporation Code
Explanation: The Articles of Incorporation is the document that creates the corporation. It
must be filed with the SEC and include basic details like the corporate name, purpose,
and capital structure.
Di ko na nilagay dito tangina 2 page yung section 14

● By-Laws
Legal Basis: Sections 45-48, Revised Corporation Code
Explanation: By-laws govern the internal affairs and operations of the corporation,
including how meetings are held, how directors are elected, etc.

● Doctrine of the Corporate Fiction/ piercing the veil of corporation

Doctrine of Corporate Fiction:

● This doctrine establishes that a corporation has a separate legal personality from its
shareholders, directors, and officers. This principle is recognized in Section 2 of the
 Revised Corporation Code, which provides that a corporation is a juridical person with its
own legal identity, distinct from its members.

Piercing the Corporate Veil:

● The courts may disregard or "pierce" the corporation’s separate personality when the
corporate entity is used to commit fraud, evade obligations, or justify wrongdoings.

Courts usually pierce the corporate veil when:

Piercing the corporate veil happens when a court or regulatory body (like the SEC)
decides to treat the actions of the corporation as the actions of its shareholders or
directors. This typically happens in cases of:

1. Fraud: The corporation is being used to commit fraud or illegal activities.

2. Evasion of Obligations: Shareholders or directors are using the corporation to evade
personal liability or other legal obligations.
3. Alter Ego: The corporation is simply an alter ego or instrumentality of the individuals
behind it, with no real separation of interests.
4. Defeating Public Convenience: The corporate structure is used to justify wrongdoings
that would otherwise harm the public.

● Powers of corporation
legal Basis: Section 35, Revised Corporation Code
Explanation: Corporations have powers conferred by the law, such as the power to sue
and be sued, purchase properties, and conduct lawful business.

● Board of Directors and Trustees and Officers and Meetings

Legal Basis: Sections 22-29, Revised Corporation Code
Explanation: These sections provide for the structure and operation of the board of
directors (for stock corporations) or trustees (for non-stock corporations), their
qualifications, powers, and how meetings are conducted.

● Rights and Obligations of Stockholders

Legal Basis: Sections 23-31, 71, 73-75, Revised Corporation Code
Explanation: Stockholders have rights such as voting, dividend entitlement, pre-emptive
rights, inspection of corporate books, and the right to sue the corporation in derivative
suits.

● Merger and Consolidation

Legal Implications:

● Merger:
 ○ The acquiring corporation retains its original name and legal identity.
○ The target corporation is dissolved and ceases to exist.
○ Shareholders of the target corporation typically receive shares in the acquiring
corporation or other compensation in exchange for their shares.
● Consolidation:
○ A new corporation is formed, which has a distinct legal identity separate from the
original corporations.
○ Both original corporations are dissolved.
○ Shareholders of both corporations exchange their shares for shares in the newly
formed corporation.

Legal Basis: Sections 76-80, Revised Corporation Code

Explanation: The legal provisions cover the process of merging or consolidating two or more
corporations, including approval from the SEC.

● Foreign Corporations

Foreign Corporations

● Legal Basis: Sections 140-143, Revised Corporation Code

● Explanation: Foreign corporations must secure a license to transact business in the
Philippines and are subject to certain reporting requirements.

● Non-Stock / Special Corporations

Non-Stock / Special Corporations

● Legal Basis: Sections 86-103, Revised Corporation Code

● Explanation: Non-stock corporations do not issue shares and are organized for
charitable, educational, cultural, or social purposes.

● Corporate Rehabilitation

Corporate Rehabilitation

Legal Basis:

● Financial Rehabilitation and Insolvency Act of 2010 (RA 10142):

 ○ This law governs the process of corporate rehabilitation in the Philippines. It
provides a legal framework for companies facing financial difficulties to
restructure their debts and operations in a way that allows them to continue their
business and avoid insolvency.

Key Provisions of RA 10142:

● Definition:
○ The law defines corporate rehabilitation as a legal process aimed at helping
financially distressed companies regain their financial stability and operational
viability.
● Application:
○ The rehabilitation process can be initiated by the corporation itself or by its
creditors. The application must be filed with the appropriate court, typically the
Regional Trial Court (RTC) where the corporation’s principal office is located.
● Rehabilitation Plan:
○ The corporation must propose a rehabilitation plan detailing how it intends to
address its financial difficulties, including restructuring debts, operational
changes, and potential investment or financing strategies.
● Court Approval:
○ The proposed rehabilitation plan requires court approval. The court will review
the plan to ensure it is feasible and that it protects the interests of creditors and
stakeholders.
● Stay Order:
○ Upon filing for rehabilitation, the court may issue a stay order, which temporarily
halts legal actions against the corporation and its assets, allowing it time to
implement the rehabilitation plan without the threat of immediate liquidation or
foreclosure.
● Creditor Protection:
○ The law ensures that creditors' rights are balanced with the corporation's need for
rehabilitation. Creditors are given a chance to vote on the proposed rehabilitation
plan.
● Completion of Rehabilitation:
○ If successful, the rehabilitation process allows the corporation to emerge with a
viable business model and restored financial health, enabling it to continue
operations and meet its obligations.

Purpose and Importance:

● The primary purpose of corporate rehabilitation is to allow financially distressed

companies to recover and become viable again, which can preserve jobs, protect
investments, and benefit the economy.
● It serves as an alternative to outright liquidation, where assets are sold off to pay
creditors, often resulting in loss of business and jobs.
 ● Dissolution and Winding up
Legal Basis: Sections 134-138, Revised Corporation Code
Explanation: Dissolution can be voluntary or involuntary, with the corporation undergoing a
winding-up process to settle debts and distribute assets.