Corpo Batch 2.docx

Classes of Corporations

Nationality of Corporations Narra Nickel and Dev Corp vs Redmont Consolidated Mines (April 21 2014) Narra Nickel and Dev Corp vs Redmont Consolidated Mines (28 January 2015) Gamboa vs Teves (June 28 2011) Gamboa vs Teves (October 12, 2012) Roy vs Herbosa Corporators and Incorporators, Stockholders & Members

Classification of Shares

Incorporation and Organization of Private Corporations

Sec 3. Corporations formed or organized under this Code may be stock or non-stock corporations. Corporations which have capital stock divided into shares and are authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All other corporations are non-stock corporations. Public Corporation – formed by the government for the common good and public welfare Private Corporation – organized for private purpose, benefit, or profit

Corporators – those who compose a corporation, whether as stockholders or as members a. Stockholders – in a stock corporation b. Members – in a non-stock corporation Incorporators – Those stockholders or members mentioned in the Articles of Incorporation as originally forming and composing the corporation and who are signatories thereof. They must be natural persons because they have to sign the articles. Also they must be at least 5, but not more than 15. Impt: only incorporators are required to be natural persons. Thus artificial persons can be stockholders. Publicly listed Corporations – a list of private corporations offered and open to the public. If an individual wants to be a shareholder, he can buy shares of stocks from these private corporations any time of the day. (San Miguel, Ayala) They are not public corporations but corporations that are listed publicly in the stock exchange. Holding or Parent Corp – a corporation which holds ownership of various corporations, thereby having control over such corporations. Subsidiary – a corporation which is owned and controlled by another corporation. Holding corporation and subsidiary are related which is why they are called Affiliates. H Corp can control Corp A B C by owning majority of shares in all 3 corps perhaps by 75%. Stock – has capital stocks divided into shares and are authorized to distribute dividends to the holders of such shares. The share holders expect a return through dividends. Non-stock – all other corporations which do not fall under stock corporations. Its members are not entitled for profits. There is no distribution of profits. The profits are used to improve its facilities, service or hire more people. TN: The purpose of dividing the capital into shares of stocks in a stock corporation is to measure dividends. If he owns 25% shares of stocks, upon distribution of dividends, he will be entitled to 25% of the total dividends. TN: Dividends are relevant only in stock corps. This is because there is no distribution of profits in a non-stock corp. However it is not accurate to stay that non-stock corps do not earn profit. They do, only they are not distributed as dividends but rather plowed back to the company to improve its facilities, service, etc. Close – limited to selected persons or members of the family Open – open to any person who may wish to become a share holder Some prefer close corporation, this usually happens In a family corporations, they would prefer a close corporation because they want the business to be run solely by family members. They want complete control only be the family. The corporation is kept close through the right of first refusal. Once shares are issued, they cannot be sold directly to the public. The corporation must first offer it to the current stockholders and must state in the articles. TN: The right of first refusal does not limit one’s right of ownership because it is not an absolute prohibition, but only qualified (relative or limited). An absolute prohibition is what violates one’s right of ownership. Here, the prohibition only applies to first offer. After that, you may sell it to other interested buyers. Par value – value stated in the articles of incorporation and certificate of stock Non-par value – value not stated in the articles or certificate of stock TN: The purpose of indicating the par value in the certificate is to fix the minimum price of each share. That’s the price you have to pay if you want to subscribe. It does not indicate any relationship to the assets. Non-par value shares does not mean they have no value at all, rather it has an issued value which must be not less than P5.00 according to the law. The issued value is the amount you have to pay if you want to subscribe in non-par value shares. It is a fized amount that you have to pay but not indicated in the articles of incorporation. Because you are investing, that non-par value shares represent your investment in relation to the assets of the corp. It represents an aliquot part of the assets of the corp. Common shares – basic classification of shares Preferred shares – shares which enjoy certain types of preferences either in (a) payment of dividends, or (b) in liquidation TN: It is the incorporators that initially decide what type of shares to issue. However, later on, the Board may decide to issue additional classes of shares by amending the articles. They may further classify the shares into diff sub-classifications such as common a shares, common b shares etc example for better monitoring of the nationalized corporations’ compliance with the constitutional requirement of 60-40% ownership. Nationalized activities refer to businesses which are offered only to Filipinos ie exploitation of natural resources, operation of public utilities, opening of schools, media. These are reserved for Filipinos or by corporations at least 60% of which are owned by Filipinos. In order to check whether the corporation complies with the 60-40 shareholding with regard to nationalized activities, we sub classify the common shares such that there will be a particular class of common shares which are only available to foreigners. Voting shares – shares which possess the right to vote on any issue; Non-voting shares – shares with no right to vote, subject to 8 exceptions: amendment of AOI, adoption and amendment of by-laws, sale lease mortgage pledge or other disposition of corporate property, incurring indebtedness, increase/decrease of capital stock, merger of corporation with another, investment of corporation funds, dissolution. All these constitute a change in their fundamental agreement, thus, even non—voting shares may vote. Convertible shares – shares which can be changed from one classification to another example preferred share to a common share (if allowed in the articles) Founder’s shares – shares issued to the organizers and promoters as an incentive for incorporating the corporation. For a period of 5 years, the holders thereof have an exclusive right to vote and be voted for. These are issued to the organizers because they were the ones who had the vision for the corporation and who had the plan on how to carry it out. So, they are given by law the privilege to stay in the management for at least 5 years, which the law considers to be enough for the corporation to be able to stand on its own feet. Redeemable shares – those shares which are issued by the corporation to the public but can be redeemed at a fixed date or at the option of the corporation or the stockholder. The purpose of issuing redeemable shares is to attract more investments. When a corporation issues redeemable shares, it will be considered as an instrument and additional capital. Treasury shares – shares that were lawfully issued by the corporation and fully paid for and later reacquired by it ether by purchase, redemption, donation, forfeiture, or other lawful means. Sec 10. Any number of natural persons not less than 5 but nor more than 15, all of legal age and a majority of whom are residents of the PH, may form a private corporation for any lawful purpose/s. Each of the incorporators of a stock corporation must own or be a subscriber to at least 1 share of the capital stock of the corporation.

a.

Number and Qualification of Incorporators

b.

Contents of Articles of Incorporation Corporate Name

1.

Industrial Retractories Corp of the PH vs Refractories Corp of PH

Ang Mga Kaanib ng Iglesia vs Iglesia ng Dios

2.

Corporate Term

3.

Authorized Capital Stock and Minimum Subscribed and Paidup Capital

c.

Amendment of Articles of Incorporation

Zuellig Freight and Cargo Systems vs NLRC

d.

Commencement of Corporate Existence Seventh Day Adventist Conference Church of Southern Inc vs Northeastern Mindanao Mission of Seventh Day Adventist

All incorporators may be foreigners. Citizenship is not important, but residence. Even if all are foreigners, they can incorporate here in the PH example Japanese can incorporate here in PH so long as they are residents of the PH. However, there are nationalized enterprises which the constitution requires that they should be either solely owned by the Filipinos or 60% of the stockholdings is owned by the Filipinos. Important contents: Name, Purpose, Principal Place of Business Sec 18. No corporate name may be allowed by the SEC if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name. >Policy behind: is to avoid fraud upon the public that will have to deal with the entity concerned, evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporation. 2 corps, both the only local suppliers of monolithic gunning mix.RCP wants petitioner to change its corp name, public may be confused 1.It has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption. RCP – Oct 13 1976; petitioner incorporated on Aug 23 1979 under Synclaire Manufacturing Corp, it only started using the name Industrial Refractories Corp when it amended its AOI on Aug 23 1985 or 9 years after RCP has acquired the right to use the word “Refractories” as part of corp name. 2.In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination. In this case, the only word that distinguishes petitioner from RCP is “Industrial” which merely identifies a corporation’s general field of activies. Confusion might arise, both cater the same clientele which is the steel industry. Soriano et al disassociated with ID H Suhay and registered a new corp ID H Saligan. Suhay wants Saligan to change corp name. During pendency, Soriano caused the registration of Saligan to Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, HSK (Haligi at Saligan ng Katotohanan), compelled to change again. SC: The additional words Ang mga Kaanib and Sa Bansang Pilipinas Inc are merely descriptive. These words can hardly serve as an effective differentiating medium necessary to avoid confusion. Both corp using the same acronyms HSK, both espousing religious beliefs, operating in the same place, only difference Saligan and Suhay. The wholesale appropriation by petitioner of respondent’s corporate name cannot find justification under the generic word rule. A contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name, to the detriment of the public. The corporation shall exist for a period of not exceeding fifty years from the date of incorporation. It can be extended for periods not exceeding 50 years in every single instance of amendment of Articles of Incorporation. Authorized Capital Stock - stock corporations incorporated under this code shall not be required to have any minimum authorized capital stock except as otherwise specifically provided for by special law, and subject to the provisions of the following section Subscribed Capital Stock – considered the legal capital, this is the actual capital of the corporation, also referred to as the outstanding capital because it is out already, it cannot be subscribed by anyone anymore. TN: Legal capital is fixed, because the SCS is fixed, it never fluctuates. Mere Capital – refers to the assets of the corporation, which may fluctuate. Sometimes the assets may go up, thus there are profits. If it goes down, only when the assets depreciates or they are reduced. 1.Must be initiated by the board itself and must be approved by the majority of the members of the board 2. Once approved, it must be submitted to the stockholders for approval, written assent by the stockholders representing at least 2/3 of the outstanding capital stock 3.Submitted for approval with SEC Ronaldo San Miguel brought a complaint for unfair labor practice, illegal dismissal against Zeta, they would informed that zeta would cease operations. Zeta claims that termination is authorized due to the cessation of business operations. LA, NLRC, CA united in saying that there was illegal dismissal, there was only mere change of business name, Zuellig Zeta one and the same. The mere change in the corporate name is not considered under the law as the creation of a new corporation; hence the renamed corporation remains liable for the illegal dismissal of its employee separated under that guise. The amendments of AOI of Zeta to change corp name to Zeullig did not produce the dissolution of the former as corporation (not one of the modes to dissolve corporation). The effect of the change of name was not a change of the corporate being. The change of name did not give Zeta the license to terminate employees like San Miguel without just or authorized cause. Must respect security of tenure. Corporate existence begins only from the moment a certificate of incorporation is issued. Spouses donated land to SDA South Church, allegedly accepted by one Liberato Rayos. 21 years later, sold to SDA Northeastern, and TCT was issued in their name. SDA South asserted ownership of the property. SC: Alleged donation was void, requisite of acceptance is wanting considering that there was no one to accept it as the entity is inexistent at the time “donation” was made, it had neither juridical personality nor capacity to accept such gift. SDA South claims to be a de facto corp but there is no proof that there was an attempt to incorporate at that time (requisite). SDA South even admitted that they were not registered with SEC at the time of donation. Corporate existence begins only from the moment a cert of incorporation is issued. None, in this case, some reps not even members of local church then. There is sufficient basis to affirm title of SDA Northeastern, essential requisites of contracts, no evidence of FAME adduced by SDA South, cert title conclusive evidence of ownership, and remarkably, this action was instituted almost seven years after the cert of title in SDA north eastern issued in 1980