Corporations.docx

CORPORATIONS-AS DEFINED IN THE CORPORATION CODE OF THE PHIL. HAS THE FF ATTRIBUTES: 1. AN ARTIFICIAL BEING - WITH A PERSONALITY SEPARATE AND APART FROM ITS INDIVIDUAL SHAREHOLDERS OR MEMBERS. IT 2. CREATED BY OPERATION OF LAW- (NOT BY MERE AGREEMENT OF THE PARTIES LIKE IN THE THE CASE OF PARTNERSHIPS) IT IS ALSO CALLED A JURIDICAL PERSON. -COMPOSED OF 5 OR MORE PERSONS NOT EXCEEDING 15. 3. HAS THE RIGHT OF SUCCESSION- HAS THE CAPACITY OF CONTINED EXISTENCE , SUBJECT TO THE PERIOD STATED IN THE ARTICLES OF INCORPORATION. IT CAN EXIST FOR A PERIOD NOT EXCEEDING 50 YRS FROM DATE OF INCORP. AND MAY BE EXTENDED FOR PERIODS NOT EXCEEDING 50 YRS SUBJECT TO AMENDMENTS OF THE ART. (ACC. TO SEC 11). PROVIDED THAT NO EXTENSIONS SHALL BE MADE EARLIER THAN 5 YRS BEFORE THE ORIGINAL EXPIRY DATE. 4. HAS THE POWERS, ATTRIBUTES AND PROPERTIES EXPRESSLY AUTHORIZED BY LAW OR INCIDENT TO ITS EXISTENCE. A CORP CAN NOT ENTER INTO A CONTRACT OF PARTNERSHIP ONLY IN A JOINT VENTURE. ULTRA VIRES –CONTRACT BEYOND ITS POWERS (ILLEGAL AND VOID) INTRA VIRES- WITHIN LEGITIMATE POWERS ILLEGAL ACTS- CONTRARY TO LAW, MORALS, GOOD CUSTOMS,PUBLIC ORDER,POLICY, ADVANTAGES: 1. 2. 3. 4. 5. 6. 7.

LEGAL CAPACITY TO ACT AS A LEGAL ENTITY SHAREHOLDERS HAVE LIMITED LIABILITY CONTINUITY OF EXISTENCE SHARES OF STOCKS CAN BE TRANSFERRED W/O CONSENT OF THE OTHER SHAREHOLDERS MGMT CENTRALIZED TO THE BOARD OF DIRECTORS SHAREHOLDERS ARE NOT GENERAL AGENTS OF BUSINESS GREATER ABILITY TO ACQUIRE FUND

DISADVANTAGES: 1. 2. 3. 4. 5. 6. 7.

COMPLICATED IN FORMATION AND MGMT. GREATER DEGREE OF GOVT. CONTROL HIGH COST OF FORMULATION AND OPERATION HIGHER TAXATION MIN. SHAREHOLDER SUBSERVIENT TO THE WISHES OF THE MAJORITY MGMT &CONTROL SEPARATE FROM OWNERSHIP TRANSFERABILITY OF SHARES PERMITTING INCOMPATIBLE AND CONFLICTING ELEMENTS IN ONE VENTURE.

MAJOR CLASSES OF CORPORATIONS:

1. STOCK CORP.- SHARE CAPITAL DIVIDED INTO SHARES AND ARE AUTHORIZED TO DISTRIBUTE TO THE HOLDERS OF SUCH SHARES DIVIDENDS OR ALLOTMENTS OF THE SURPLUS PROFIT ON THE BASIS OF SHARES HELD. 2. NON-STOCK CORP.- NO PART OF INCOME IS DISTRIBUTED OR DIVIDENDS TO ITS MEMBERS, TRUSTESS OR OFFICERS.

OTHER CLASSES OF CORPORATION 1. NO. OF PERSONS a. CORPORATION AGREGATE- 1 CORPORATOR b. CORPORATION SOLE OR SPECIAL FORM –ASSOCIATED WITH THE CLERGY 2. NATIONALITY a. DOMESTIC –ORGANIZED UNDER PHIL LAWS b. FOREIGN – ORGANIZED UNDER FOREIGN LAWS 3. ACCDG. TO PURPOSE a. PUBLIC CORP- ORGANIZED FOR THE CORP. b. PRIVATE – ORGANIZED FOR PRIVATE AIM 4. CHARITABLE PURPOSE OR NOT a. ECCLESIASTICAL –RELIGIOUS PUPOSES b. ELEEMOSYNARY – FOR PUBLIC CHARITY c. CIVIL-FOR BUSINESS OR PROFIT 5. LEGAL RIGHT TO CORPORATE EXISTENCE a. DE JURE- EXISTING IN FACT AND IN LAW b. DE FACTO –EXISTING IN FACT BUT NOT IN LAW 6.DEGREE OF PUBLIC PARTICIPATION AS TO OWNERSHIP a. CLOSED CORP.-LIMITED TO SELECTED PERSONS OR MEMBERS, USUALLY OF A FAMILY NOT EXCEEDING 20 PERSONS. b. OPEN CORP.- SHARES ARE AVAILABLE FOR SUBSCRIPTION OR PURCHASE BY ANY PERSON c. PUBLICLY-HELD CORP- WITH CLASS OF EQUITY SHARES LISTED ON AN EXCHANGE OR WITH ASSETS IN EXCESS OF 50M AND HAVING 200 OR MORE HOLDERS OR AT LEAST 200 HOLDING AT LEAST 100 SHARES OF A CLASS OF ITS EQUITY SECURITIES

` 7.ACCORDING TO RELATION TO ANOTHER PERSONA. PARENT OR HOLDING CORP. –RELATED TO ANOTHER CORP. WITH THE POWER TO EITHER

DIRECTLY OR INDIRECTLY ELECT THE MAJORITY OF THE DIRECTORS OF THE SUBDIDIARIES. B. SUBSIDIARY CORP- CONTROLLED BY ANOTHER CORP. KNOWN AS APARENT CORP. 8. GOVERNMENT OWNED AND CONTROLLED CORPORATIONS – CORPORATIONS CONTROLLED BY THE GOVT. CREATED FOR SPECIFIC PUBLIC PURPOSES ( GSIS,SSS,PAG-IBIG, LBP,DBP)

STEPS IN THE CREATION OF A CORP.1. PROMOTION- BRINGING TOGETHER INCORPORATORS OR PERSONS INTERESTED IN THE BUSINESS 2. INCORPORATION-PAPERWORKS

3. FORMAL ORGANIZATION AND COMMENCEMENT –ADOPTION OF BY-LAWS AND THE ELECTION OF THE BOARD OF DIRECTORS AND ADMINISTRATIVE OFFICERS -AND OTHER NECESSARY STEPSTO ENABLE THE CORP TO TRANSACT LEGITIMATE BUSINESS FOR WHICH IT WAS CREATED

CORPORATION CODE OF THE PHILS. –THE GENERAL LAW THAT GOVERNS THE CREATION OF PRIVATE CORP. IN THE PHILIPPINES. WHILE GOCC’S ARE GOVERNED BY SPECIAL LAWS SEC. 14 PROVIDES THAT ALL CORP ORGANIZED UNDER THIS CODE SHALL FILE THE ARTICLES OF INCORPORATION WHICH SPECIFIES VITAL DETAILS ABOUT THE CORP. -NAME OF THE CORP -PURPOSE -PLACE OF BUS. -TERM OF EXISTENCE –NOT EXCEEDING 50 YRS BUT CAN BE EXTENDED PROVIDED THAT THE EXTENSION SHOULD BE FILED 5 YEARS BEFORE THE EXPIRATION OF ITS TERM. -NAMES, NATIONALITIES AND RESIDENCE OF INCORPORATORS -NO. OF DIRECTORS OR TRUSTEES NOT LESS THAN 5 NOR MORE THAN 15 -NAMES OF ACTING DIRECTORS UNTIL DULY ELECTED -STOCK OR NON-STOCK CORP. -AMOUNT OF SHARE CAPITAL, PAR VALUE AND THE NO. OF SHARES INTO WHICH IT IS DIVIDED IF NO PAR VALUE SHARE, STATE ONLY THE NO. OF SHARES

AUTHORIZED SHARE CAPITAL (AUTHORIZED CAPITAL STOCK)-MAXIMUM NO. OF SHARES AS STATED IN THE ARTICLES OF INCORPORATION MULTIPLIED

BY THE PAR VALUE -AMOUNT OF SHARE CAPITAL ACTUALLY SUBSCRIBED OR THE NO. OF NO PAR SHARES SUBSCRIBED, INCLUDING NAMES AND RESIDENCES OF THE SUBSCRIBER.

MANDATORY REQUIREMENTS ON SUBSCRIPTIONS SUBSCRIBED CAPITAL STOCK AT THE TIME OF INCORPORATION – AT LEAST 25% OF THE AUTHORIZED CAPITAL STOCK OR SHARED CAPITAL AS STATED IN THE ART. OF CORP. MUST BE SUBSCRIBED PAID-IN CAPITAL UPON SUBSCRIPTION- AT LEAST 25% OF THE TOTAL SUBSCRIPTION MUST BE PAID -THE BALANCE PAYABLE ON DATES FIXED IN THE CONTRACT OF SUBCRIPTION W/O ANY CALL OR IF W/O DATE UPON CALL OF THE BOARD OF DIRECTORS. -PAID IN CAPITAL SHALL NOT BE LESS THAN P 5,000.00 (CORP. CODE OF THE PHIL . SEC 13)

AFTER FILING OF THE ARTICLES OF INCORPORATION, THE CORP . COMMENCES TO HAVE JUDICIAL PERSONALITY AND LEGAL EXISTENCE ONLY UPON THE ISSUANCE OF THE CERTIFICATE OF INCORPORATION BY THE SEC. THE CORP. SHOULD FORMALLY ORGANIZE AND COMMENCE OPERATIONS WITHIN 2 YEARS FROM THE DATE OF ITS INCORPORATION.

BY-LAWS –RULES OF ACTION ADOPTED BY THE CORPORATION FOR ITS INTERNAL GOVERNMENT AND -

FOR THE GOVERNMENT OF ITS OFFICERS, SHAREHOLDERS OR MEMBERS. IT SHALL BE ADOPTED WITHIN ONE MONTH FROM THE ISSUANCE OF THE CERTIFICATE OF INCOPORATION BY THE SECURITY AND EXCHANGE COMMISSION. FAILURE TO DO SO WILL REVOKE ITS REGISTRATION.

CONTENTS OF THE BY-LAWS 1. MEETINGS OF SHAREHOLDERS AND DIRECTORS-- TIME, PLACE, MANNER OF CALLING, RULES. SHAREHOLDERS MEETING SHOULD BE IN THE PRINCIPAL PLACE OF BUSINESS. 2. BOARD OF DIRECTORS- NO., QUALIFICATIONS, DUTIES, POWERS AND LENGTH OF OFFICE. HE MUST BE A REGISTERED OWNER OF AT LEAST 1 SHARE OF STOCK, AND MAJORITY SHOULD BE RESIDENTS OF THE PHILIPPINES.

3. CORPORATE OFFICERS- APPOINTMENT, DUTIES, POWERS, COMPENSATION AND LENGTH OF OFFICE. PRESIDENT IS USUALLY THE CHAIRMAN OF THE BOARD. 4. SHARE CERTIFICATES- MANNER OF ISSUANCE 5. METHOD OF AMENDING THE BY-LAWS

6. OTHERS- RULES GOVERNING THE ACTS OF OFFICERS AND DIRECTORS

COMPONENTS OF A CORP.1.CORPORATORS-THOSE WHO COMPOSE A CORPORATION . INCORPORATORS, SHAREHOLDERS OR MEMBERS. 2.INCORPORATORS- SHAREHOLDERS OR MEMBERS MENTIONED IN THE ARTICLES OF INCORPORATION, ORIGINALLY FORMING THE ARTICLES OF INCORPORATION. 3.SHAREHOLDERS-STOCKHOLDERS IN A STOCK CORP. -RIGHT TO BE ISSUED A CERTIFICATE OF STOCK OR EVIDENCE SHOWING OWNERSHIP AND TRANSFER SUCH SHARES. -RIGHT TO ATTEND AND VOTE IN PERSON OR BY PROXY IN SHAREHOLDERS MEETINGS -RIGHT TO ELECT AND REMOVE DIRECTORS -RIGHT TO ADOPT, AMEND AND REPEAL LAWS. 4. MEMBERS- CORPORATORS OF A NON-STOCK CORP. 5.SUBSCRIBERS- PERSONS WHO HAVE AGREDD TO TAKE AND PAY FOR ORIGINAL AND UNISSUED SHARESOF A CORP FORMED OR TO BE FORMED. 6.PROMOTERS-PERSONS WHO BRING ABOUT THE FORMATION AND ORGANIZATION OF THE CORP. 7.UNDERWRITERS-INVESTMENT BANKERS 8.INDEPENDENT DIRECTOR- NO OTHER BUS. RELATIONSHIPS THAT COULD INTERFERE WITH HIS INDEPENDENT JUDGEMENTNIN CARRYING HIS RESPONSIBILITIES AS DIRECTOR

CORPORATE ORGANIZATIONAL STRUCTURE -ULTIMATE CONTROL REST ON THE SHAREHOLDERS (OWNERS).THEY ELECT THE TOP GOVERNING BODY OF THE CORP, OR THE MEMBERS OF THE BOARD OF DIRECTORS (THE CORP. ANNUALY HOLD A SHAREHOLDERS MEETING WHEREIN THE BOARD OF DIRECTORS ARE ELECTED.) MEMBERS OF THE BOARD OF DIRECTORS –RESPONSIBLE FOR THE FORMULATION OF THE OVER-ALL POLICIES FOR THE CORP AND FOR THE EXERCISE OF CORP. POWERS. -THEY ELECT AMONG THEMSELVES THE CHAIRMAN OF THE BOARD -THEY ELECT THE OFFICERS OF THE CORP

ADM. OFFICERS OF THE CORP.- IMPLEMENT THE POLICIES OF THE BOARD OF DIRECTORS AND ACTIVELY MANAGE THE DAY TO DAY ACTIVITIES OF THE CORP. - THEY HIRE THE EMPLOYEES OF THE CORP PRESIDENT – HE SHOULD ALSO BE A BOARD DIRECTOR, USUALLY HE IS ALSO THE CHAIRMAN OF THE

BOARD. CORP. SECRETARY- MAINTAINS AND KEEPS THE RECORDS OF THE CORP REGARDING ALL ITS AFFAIRS CORPORATE TREASURER- ENTRUSTED TO RECEIVE AND KEEP THE MONEY OF THE CORP.

CORPORATE BOOKS AND RECORDS. 1. MINUTES BOOKS –CONTAINS THE MINUTES OF THE MEETINGS 2. STOCK AND TRANSFER BOOK- RECORD OF NAMES OF SHAREHOLDERS AND ALL STOCK TRANS. 3. BOOKS OF ACCOUNTS –RECORD OF ALL BUSINESS TRANSACTIONS. NORMALLY THE JOURNAL AND LEDGER 4. SUBSCRIPTION BOOK- BOOK OF PRINTED BLANK SUBSCRIPTION 5. SHAREHOLDERS LEDGER – DETAILS THE NO OF SHARES ISSUED TO EACH SHAREHOLDER 6. SUBCRIBERS LEDGER- SUBSIDIARY LEDGER FOR THE SUBSCRIOTION RECEIVABLE ACCT - REPORTS THE INDIVIDUAL SUBSCRIPTION OF THE SUBSCRIBERS 7. STOCK CERTIFICATE BOOK- BOOK OF PRINTED BLANK CERTIFICATE OF STOCKS

ORGANIZATION COST- COST INCURRED IN FORMING OR ORGANIZING THE CORP. (EXPENSED IMMEDIATELY EXCEPT FOR SHARE ISSUANCE COST) 1. LEGAL FEES 2. INCORPORATION FEES 3. SHARE ISSUANCE COST “TRUST FUND DOCTRINE”- RESOURCES ENTRUSTED TO THE CORP. BECOME THE ACCOUNTABILITY OF THE FIRM

THE OWNER’S EQUITY SECTION IS CALLED SHAREHOLDERS EQUITY – RESIDUAL INTEREST OF THE OWNERS IN THE NET ASSETS OF A CORP. MEASURED BY THE EXCESS OF ASSETS OVER LIABILITIES .