Buslaw2.docx

Definition of corporation: A corporation is an artificial being created by operation of law, having the right of succession and powers, attributes and properties expressly authorized by law or incident to its existence. What does it mean by an artificial being? Because it is treated as if it’s a person Having the right of succession, means continuous existence. Submit to SEC  Articles of incorporation  Certificate of corporation Why choose one-person corporation instead of sole proprietorship? Limited liability, and sole proprietorship has no separate juridical personality Corporation:  Created by law  At least 1 person/incorporator (OPC) Before: at least 5 persons  Terms of existence-in perpetuity Before: limited to 50 years  Consent of the state-dissolution Classes of corporations: 1. Stock - operated for the purpose of profit  

Requisites of stock corporation Capital stock divided into shares Authorized to distribute dividends

2. Non-stock corporation - No part of their income is distributable as dividends - For public good and welfare Roman Catholic Church is a corporation by prescription, meaning they exist for an

indefinite period of time with no interference by sovereign power. Other classes of corporations: Ecclesiastical corporation - Religious purposes - For spiritual purposes or for administering properties held for religious ones. Lay corporation  Eleemosynary corporations o Created for charitable purposes  Civil corporations o For the benefit, pecuniary or otherwise, of its members Close Corporation - Stocks held by limited number of persons Open Corporation - Formed to openly to accept outsiders as stockholders De Jure Corporation - Existing in fact and in law De Facto Corporation - Existing in fact but not in law Components of a Corporation Corporators - Compose the corporation, whether stockholders or members Incorporators - Originally formed the corporation Who can be an incorporator? People/Person, Partnership, Association and Corporation

A corporation cannot use a name identical to that of any existing corporation, it must be DISTINGUISHABLE. Common and Preferred Stocks Common stock  Stock which entitles its owner to an equal pro rata division of profits.  Complete voting rights Preferred stock  Stock that gives the holder a preference over the holder of common stocks  Redeemable shares-shares previously issued by the corporation

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Absentia

Corporate Officers  President, who must be a director  Treasurer, who must be a resident  Secretary, must be citizen and resident of the Philippines o Certifies the actions of the president Board of Directors-Corporate officers 2/3 majority of the capital stock Powers of Corporations Preemptive rights- first dibs

Preferred stock and Redeemable stock are deprived of voting rights. Par and no par value shares Par value shares  Values are fixed in the articles of incorporation and certificate.  Cannot be issued nor sold by corporation less than par. (watered stocks) No par value shares  Price are not stated in the certificate of stock but maybe fixed in the articles of incorporation. (trust fund doctrine) URE (Unrestricted Retained Earnings) Treasury Shares  Shares which have been issued and fully paid, but subsequently reacquired by the corporation.  No voting rights  No dividend rights Ways of voting  Personal  Proxy

Dissolution

Methods of dissolution  Voluntarily  Involuntarily 20 days before meeting, notice shall be given to each shareholder. Notice of the time, place and object shall be published in a newspaper published in the place where the principal office is located If no newspaper is published, publish in newspaper of GENERAL CIRCULATION in the Philippines. Valid request for dissolution: 1. Reason for dissolution 2. Form, manner and time notice were given 3. Names of the stockholders and directors who approved the dissolution 4. Date, place, and time of the meeting 5. Details of publication Corporation shall submit: 1. Copy of resolution authorizing the dissolution 2. Proof of publication 3. Favorable recommendation Voluntary Dissolution Where Creditors are Affected Petition shall be filed with the Commission: 1. Signed by majority of BOD 2. Verified by its president or secretary 3. Set forth all claims and demands against it 4. Vote at least 2/3 of the outstanding capital stock or 2/3 of the members at a meeting

Filing objections to the petition

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Not be less than 30 days nor more than 60 days after the entry of the order

Dissolution by Shortening Corporate Term  Effected by amending the articles of incorporation  A copy of the amended articles shall be submitted to SEC  Upon the expiration of the term, corporation shall be deemed dissolved  No need issuance of certificate of dissolution Withdrawal of Request and Petition for Dissolution  Made in writing  Verified by any incorporator, director, trustee, shareholder or member  Signed by the same number of the said positions necessary to request for dissolution Withdrawal shall be submitted:  No later than 15 days from receipt of Commission of request for dissolution Upon receipt of withdrawal, Commission shall withhold action on the request for dissolution and shall, after investigation: 1. Make a pronouncement that the request for dissolution is deemed withdrawn 2. Direct a joint meeting of the BOD and the stockholders whether to proceed with dissolution 3. Issue such other orders as it may deem appropriate

Corporate Liquidation

Every corporation whose charter expires, is annulled by forfeiture Whose corporate existence is terminated in any other manner, shall nevertheless remain as body corporate for 3 years after the effective date of dissolution

f) Name and address of directors and officers g) Statement of authorized capital stock h) Statement of outstanding capital stock i) Amount actually paid in

Foreign Corporation

Resident Agent  An individual residing in the PH or domestic corporation lawfully transacting business in the PH  Purpose: receiving summons and other legal processes in any legal actions  Must be of good moral character and of sound financial standing

Definition and Rights: One formed, organized or existing under laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or State. Right to transact business in the PH  License for that purpose  Certificate of authority Application for License:  Submit to SEC a copy of its articles of incorporation and bylaws Test to Identify: a) Incorporation test  Corporation organized under PH law-Domestic  Corporation organized under other state-Foreign b) Control Test  Nationality of Control Group c) Grandfather Rule  Indirect possession of shares The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the ff: a) Date and term b) Address of principal office c) Name and address of resident agent d) Place in the Philippines e) Specific purposes

Corporation will file with the commission a written power of attorney. In case resident agent is not found, the service of any summons may be made upon the Commission. The Commission shall, within 10 days thereafter, transmit by mails copy of such summons to the principal office. Merger or Consolidation Involving a Foreign Corporation Licensed in the PH A foreign corporation authorized to transact business in the PH shall be a party to a merger or consolidation in its home country or state as permitted by law authorizing its incorporation, such foreign corporation shall:  Within 60 days after the effectivity of merger or consolidation, a copy of the articles of merger or consolidation duly authenticated by the proper officials of the country or State. Doing Business without a License The corporation cannot sue but can be sued. Revocation of License

The license of a foreign corporation to transact business in the PH may be revoked upon any of the ff grounds: a) Failure to file annual report b) Failure to appoint and maintain a resident agent c) Failure to submit a statement of such change d) Failure to submit an authenticated copy of the amended articles of incorporation or bylaws or articles of merger or consolidation e) Misrepresentation of any material f) Failure to pay taxes, imposts, assessments or penalties g) Transacting business outside the purpose h) Transacting business as an agent or on behalf of any foreign corporation i) Any other ground as would render it unfit to transact business in the PH Issuance of Certificate of Revocation The Commission shall issue a corresponding certificate of revocation. Withdrawal of Foreign Corporations A foreign corporation licensed to transact business in the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by the Commission unless all the ff requirements are met: a) All claims which have accrued in the PH have been paid or settled b) All taxes, imposts, assessments, and penalties, if any, lawfully due to the PH Government c) The petition for withdrawal of license has been published once a week for 3 consecutive weeks in a newspaper of general circulation Merger and Consolidation

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2 or more corporations may merge into a single corporation or may be consolidate into a new single corporation

Procedures: 1. Board of Directors – plan 2. Present plan to stockholders – both corporation will have meeting 3. Articles of Merger or Consolidation 4. Submit to SEC - Can backout after vote