Revised Corporation Code

I. Definition and Attributes of a Corporation

SEC. 2. Corporation Defined – 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.
a. ATTRIBUTES
i. WHAT ARE THE ATTRIBUTES OF A CORPORATION
1. It is an artificial being
– By operation of law, it becomes a being with the attributes of an individual with full capacity to enter into contractual
relations. It is a legal or juridical person with a personality separate and distinct from its individual members.
2. Created by operation of law
– The juridical existence of a corporation is dependent on the consent or grant of the State. – Under the theory of
concession, a corporation cannot come into being by mere consent of the parties; there must be a law granting it, and
once granted, forms the primary franchise of the corporation.
3. It has the right of succession
– The continuation of a corporation’s legal status despite the death or replacement of its shareholders/members for it has a
personality distinct from those who compose it.
4. It has the powers, attributes and properties expressly authorized by the law
– Under the classic concession theory, once a corporation has been granted juridical personality by the State, it is
allowed only and can legally exercise only such powers granted by law for its creation, as opposed to a natural person,
who has the ability to exercise any power and enter to any business activity provided that it is not contrary to law,
morals and public policy.

ii. CORPORATE ENTITY THEORY

- A corporate has a legal personality separate and distinct from that of the people comprising it
- By virtue of this doctrine, stockholders of a corporation enjoy the principle of limited liability : the corporate debt is not the
debt of the stockholder
– Under this theory, the corporate entity takes it being primarily from the reality of the underlying enterprise, formed or
information; that the State‘s approval of the corporate form sets up a prima facie case that the assets, liabilities, and
operations of the corporation are those of the enterprise. But that where the corporate entity is defective, or otherwise
 challenged, its existence, extent and consequences may be determined by the actual existence and operations of the
underlying enterprise, which by these very qualities and operations acquires a being of its own, recognized by law.
iii. “PIERCING THE VEIL OF CORPORATE FICTION” OR “INSTRUMENTALITY” OR “ALTER EGO” DOCTRINE
Generally, in the absence of fraud or malice, the separate juridical personality of the corporation shall be respected,
and no corporate liability may be enforced against a stockholder or a group of stockholders. This remains true even if the
stockholder is the President of the corporation or the owner of all or substantially all of the capital stock of the corporation.
The principle of separate juridical personality likewise applies in favor of corporations, such that a liability of a corporation
may not be enforced against a sister or parent corporation even if they have a common director or interlocking
incorporators.
However, the Courts would not hesitate to disregard the separate juridical personality bestowed upon the corporation
if the corporation is being used to commit a wrong. This is the concept of “piercing the veil of corporate fiction”. There is no
hard and fast rule however in determining the “wrong” sufficient to “pierce the veil”.
Given that the “veil” has been lifted, the stockholders composing the corporation shall be held directly liable for the
acts of the corporation, as if they had done it directly.
It must be noted however that the power to “pierce the veil” is essentially the power of a court or tribunal vested with
the power to make binding decisions. It cannot be exercised by a sheriff in enforcing a court judgment by collecting a debt of
a corporation against a stockholder or a sister company.

Elements of piercing the veil of corporate fiction: Piercing may be allowed only if the following elements occur:
1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect
to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention of plaintiff's legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of

The absence of any one of these elements prevents or disauthorizes the piercing of the corporate veil. In applying the 'instrumentality' or 'alter ego'
doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant's relationship to that
operation.

In applying the “instrumentality” or “alter ego” doctrine, the courts are concerned with reality not form, and with how the corporation operated and
the individual defendant’s relationship to the operation.
iv. GRANDFATHER RULE
- method used to determine the nationality of a corporation, especially in sectors where foreign ownership is restricted. This
rule is applied when there is a need to ascertain the percentage of Filipino equity in a corporation engaged in nationalized or
partly nationalized activities.
How it works:
The Grandfather Rule attributes the nationality of the second or even subsequent tier of ownership to determine the
nationality of the corporate shareholder. This means that if a corporation has multiple layers of ownership, the rule looks
through these layers to assess the actual percentage of Filipino ownership.
This rule is particularly important in ensuring compliance with the constitutional and statutory requirements that mandate a
certain percentage of Filipino ownership in specific industries
Ex., In case of public utilities, the Constitution requires 60% capital Filipino ownership, said corporation shall be considered
as of Philippine nationality. If it has less than 60%, only the number of shares corresponding to such percentage shall be
counted as Philippine nationality.

v. WHEN IS THE COMMENCEMENT OF CORPORATE EXISTENCE? (Sec 19)

- A private corporation organized under this Code commences its corporate existence and juridical personality from the date
the Commission issues the certificate of incorporation under its official seal and thereupon the incorporators,
stockholders/members and their successors shall constitute a body corporate under the name stated in the articles of
incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved
in accordance with law.

vi. POWERS OF A CORPORATION

CLASSIFICATION
1. Express Powers – those expressly authorized by the Corporation Code and other laws, and its Articles of Incorporation
2. Implied Powers – those that can be interfered from or necessary for the exercise express powers
- To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation.
3. Incidental Powers – those that are incidental to the existence of the corporation --- sec. 2 RCC

1. Express Powers
 Sec. 35. Corporate Powers and Capacity. – Every corporation incorporated under this Code has the power and capacity:
(a) To sue and be sued in its corporate name;
To sue; derivative suit is an action brought by a stockholder on behalf of the corporation to enforce corporate rights against the
corporation’s directors, officers or other inisiders
(b) To have perpetual existence unless the certificate of incorporation provides otherwise;
(c) To adopt and use a corporate seal;
(d) To amend its articles of incorporation in accordance with the provisions of this Code;
(e) To adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the same in accordance with this Code;
(f) In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code;
and to admit members to the corporation if it be a nonstock corporation;
(g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal property,
including securities and bonds of other Page 18 of 73 corporations, as the transaction of the lawful business of the corporation may reasonably
and necessarily require, subject to the limitations prescribed by law and the Constitution;
(h) To enter into a partnership, joint venture, merger, consolidation, or any other commercial agreement with natural and juridical persons;
(i) To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes:
Provided, That no foreign corporation shall give donations in aid of any political party or candidate or for purposes of partisan political activity;
(j) To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers, and employees; and
(k) To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation.
 SEC. 36. Power to Extend or Shorten Corporate Term.
REQUIREMENTS:
1. Approval by a majority vote of the board of directors or trustees
2. Ratificationby the stockholders representing atleast 2/3 of the outsanding capital stock or atleast 2/3 of the members for non-stock
corporations
3. Written notice of the proposed action and the time and place of the meeting shall be sent to each stockholder or member at his place of
residence and must be deposited to the addressee in the post office with postage prepaid, served personally, or sent electronically(when
allowed in the bylaws or done with consent of the stockholder)
4. In case of extension, a dissenting stockholder may exercise his appraisal right under the conditions provided in this code.
 SEC. 37. Power to Increase or Decrease Capital Stock; Incur, Create or Increase Bonded Indebtedness.
- No corporation shall increase or decrease its capital stock or incur, create or increase any bonded indebtedness unless approved by a
majority vote of the board of directors and by two-thirds (2/3) of the outstanding capital stock at a stockholders’ meeting duly called for the
purpose.
- Written notice of the time and place of the stockholders’ meeting and the purpose for said meeting must be sent to the stockholders at their
places of residence as shown in the books of the corporation and served on the stockholders personally, or through electronic means
recognized in the corporation’s bylaws and/or the Commission’s rules as a valid mode for service of notices.
A certificate must be signed by a majority of the directors of the corporation and countersigned by the chairperson and secretary of the
stockholders’ meeting, setting forth:
(a) That the requirements of this section have been complied with;
(b) The amount of the increase or decrease of the capital stock;
(c) In case of an increase of the capital stock, the amount of capital stock or number of shares of no-par stock thereof actually subscribed, the
names, nationalities and addresses of the persons subscribing, the amount of capital stock or number of no-par stock subscribed by each,
and the amount paid by each on the subscription in cash or property, or the amount of capital stock or number of shares of no-par stock
allotted to each stockholder if such increase is for the purpose of making effective stock dividend therefor authorized;
(d) Any bonded indebtedness to be incurred, created or increased;
(e) The amount of stock represented at the meeting; and
(f) The vote authorizing the increase or decrease of the capital stock, or the incurring, creating or increasing of any bonded indebtedness.
Any increase or decrease in the capital stock or the incurring, creating or increasing of any bonded indebtedness shall require prior
approval of the Commission, and where appropriate, of the Philippine Competition Commission. The application with the Commission shall
be made within six (6) months from the date of approval of the board of directors and stockholders, which period may be extended for
justifiable reasons.
Copies of the certificate shall be kept on file in the office of the corporation and filed with the Commission and attached to the original
articles of incorporation. After approval by the Commission and the issuance by the Commission of its certificate of filing, the capital stock
shall be deemed increased or decreased and the incurring, creating or increasing of any bonded indebtedness authorized, as the certificate of
filing may declare: Provided, That the Commission shall not accept for filing any certificate of increase of capital stock unless accompanied by
a sworn statement of the treasurer of the corporation lawfully holding office at the time of the filing of the certificate, showing that at least
twenty-five percent (25%) of the increase in capital stock has been subscribed and that at least twenty-five percent (25%) of the amount
subscribed has been paid in actual cash to the corporation or that property, the valuation of which is equal to twenty-five percent (25%) of
the subscription, has been transferred to the corporation: Provided, further, That no decrease in capital stock shall be approved by the
Commission if its effect shall prejudice the rights of corporate creditors.
Nonstock corporations may incur, create or increase bonded indebtedness when approved by a majority of the board of trustees and
of at least two-thirds (2/3) of the members in a meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with the Commission, which shall have the authority to determine the sufficiency
of the terms thereof.
  SEC. 38. Power to Deny Preemptive Right.
 SEC. 39. Sale or Other Disposition of Assets.
 SEC. 40. Power to Acquire Own Shares
 SEC. 41. Power to Invest Corporate Funds in Another Corporation or Business or for Any Other Purpose.
 SEC. 42. Power to Declare Dividends.
 SEC. 43. Power to Enter into Management Contract.
 SEC. 44. ULTRA VIRES ACTS OF CORPORATIONS

vii. WHO EXERCISES CORPORATE POWER?

1. BUSINESS JUDGMENT RULE
a. METROPLEX BERHAD AND PAXELL INVESTMENT LIMITED VS. SINOPHIL CORPORATION, G.R. NO. 208281, JUNE 28,
2021
b. CAN A CORPORATION RECOVER DAMAGES?
i. ABS-CBN BROADCASTING CORPORATION VS. COURT OF APPEALS, G.R. NO. 128690 JANUARY 21, 1999
c. SUBSIDIARY COMPANY'S SEPARATE CORPORATE PERSONALITY
i. MARICALUM MINING CORPORATION VS. FLORENTINO, ET. AL, G.R. NO. 221813, JULY 23, 2018
d. PERSONAL LIABILITY OF CORPORATE DIRECTOR
i. PIONEER INSURANCE SURETY CORPORATION VS. MORNING STAR TRAVEL & TOURS, INC., G.R. NO. 198436, JULY 8, 2015
e. ULTRA VIRES ACT
i. SEC. 44 RCC
ii. CLASSIFICATION OF ULTRA VIRES ACT
1. WATERFRONT PHILIPPINES, INC. VS. SSS, G.R. NO. 249337, JULY 06, 2021
II. CLASSES OF CORPORATION
III. ORGANIZATION AND INCORPORATION
a. PROMOTIONAL STAGE
b. PROCESS OF INCORPORATION
i. ARTICLES OF INCORPORATION (AOI)
ii. CONTENTS OF AOI
iii. REQUISITES FOR AMENDMENT OF AOI
IV. BOARD OF DIRECTORS
a. QUALIFICATIONS AND DISQUALIFICATIONS
 b. ELECTION
c. METHODS OF VOTING
d. REMOVAL AND FILLING OF VACANCIES
e. EMERGENCY BOARD
f. DIRECTOR’S DUTY OF LOYALTY
i. CORPORATE OPPORTUNITY RULE DOCTRINE
g. SELF-DEALING DIRECTORS
h. INTERLOCKING DIRECTORS
i. REMEDIES AGAINST ERRING DIRECTORS
i. INDIVIDUAL OR PERSONAL ACTION
ii. REPRESENTATIVE OR CLASS SUIT
iii. DERIVATIVE SUIT
V. COMMITTEES
VI. CORPORATE OFFICERS
VII. SHARES OF STOCK
VIII. RIGHTS OF A STOCKHOLDER
IX. BY-LAWS
X. MEETINGS
XI. MERGER AND CONSOLIDATION
XII. NON-STOCK CORPORATION
XIII. CLOSE CORPORATION
XIV. ONE PERSON CORPORATION
XV. FOREIGN CORPORATION
XVI. DISSOLUTION
a. INCORPORATORS
b. CORPORATORS
c. DIRECTORS AND TRUSTEES
d. CORPORATE OFFICERS
XVII. ARTICLES OF INCORPORATION
a. WHAT IS AOI
b. CONTENTS OF THE AOI
XVIII. WHAT IS TREASURER’S AFFIDAVIT?
XIX. BY-LAWS
XX. WHAT IS A STOCK AND TRANSFER BOOK?
XXI. DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION AND THE GRANDFATHER RULE
XXII. STOCKHOLDERS AND SHARES OF STOCK
a. REQUISITES TO BECOME A SHAREHOLDER
b. VOTING AND NON-VOTING SHARES
i. COMMON SHARES
ii. PREFERRED SHARES
iii. FOUNDER’S SHARES
c. PAR VALUE AND NO-PAR VALUE
d. CERTIFICATE OF STOCK
iv. DOCTRINE OF INDIVIDUALITY OR INDIVISIBILITY OF SUBSCRIPTION?
e. REDEEMABLE SHARES
f. TREASURY SHARES
g. WATERED STOCKS
XXIII. DIVIDENDS
a. TRUST FUND DOCTRINE
XXIV. DIRECTORS AND OFFICERS OF THE CORPORATION
a. QUALIFICATIONS OF DIRECTORS?
b. BUSINESS JUDGMENT RULE
c. ELECTION OF DIRECTORS
XXV. RIGHTS AND OBLIGATIONS OF STOCKHOLDERS
a. VOTING RIGHTS
b. RIGHT TO DIVIDENDS
c. APPRAISAL RIGHT
d. RIGHT TO ISSUANCE OF STOCK CERTIFICATE FOR FULLY PAID SHARES
e. PROPORTIONATE PARTICIPATION IN THE DISTRIBUTION OF ASSETS IN LIQUIDATION
f. RIGHT TO TRANSFER OF STOCKS IN CORPORATE BOOKS
g. PRE-EMPTIVE RIGHT
h. RIGHT TO FILE INDIVIDUAL, REPRESENTATIVE AND DERIVATIVE SUITS
 i. REQUISITES OF DERIVATIVE ACTION
j. OBLIGATIONS OF A STOCKHOLDER
XXVI. MERGER OR CONSOLIDATION
a. EFFECT
b. PROCEDURE
XXVII. CORPORATE DISSOLUTION
a. MODES OF DISSOLUTION
b. EFFECT
XXVIII. FOREIGN CORPORATIONS
c. WHAT CONSTITUTES “DOING BUSINESS IN THE PHILIPPINES?
d. DOING BUSINESS UNDER THE FOREIGN INVESTMENT ACT OF 1991
XXIX. ONE PERSON CORPORATION