MERCANTILE LAW AND TAXATION

2024 Bar Examination

Office of Associate Justice Mario V. Lopez

I. CORPORATION LAW (R.A. No. 11232, Revised Corporation Code)

A. General Principles
1. Nature and Attributes (R.A. No. 11232, Section 2)
2. Nationality of Corporations
a. Control Test
b. Grandfather Rule
3. Doctrine of Separate Judicial Personality
4. Doctrine of Piercing the Corporate Veil; Liability of Directors and Officers
5. Trust Fund Doctrine

B. Kinds of Corporation
1. Stock Corporation – R.A. No. 11232, Section 3
2. Non-Stock Corporation –R.A. No. 11232, Sections 86-87
3. Close Corporation –R.A. No. 11232, Section 95
4. Educational Corporations –R.A. No. 11232, Section 105
5. Religious Corporation– R.A. No. 11232, Sections 107-08
6. One Person Corporation— R.A. No. 11232, Section 115

C. Incorporation and Organization

1. Number and Qualification of Incorporators –R.A. No. 11232, Section 10,
2. Corporate Name –R.A. No. 11232, Section 14, 17-18
3. Capitalization – R.A. No. 11232, Section 12
4. Corporate Term – R.A. No. 11232, Section 11
5. Classification of Shares – R.A. No. 11232, Sections 6-9
6. Articles of Incorporation - R.A. No. 11232, Sections 13-15
7. By-Laws - R.A. No. 11232, Sections 45-47
8. Corporate Officers –R.A. No. 11232, Section 24
9. De Facto Corporation –R.A. No. 11232, Section 19
10. Corporation by Estoppel –R.A. No. 11232, Section 20

D. Directors and Trustees

1. Qualifications and Disqualifications – R.A. No. 11232, Sections 22-26
2. Elections –R.A. No. 11232, Sections 23 and 25, 91
3. Independent Directors –R.A. No. 11323, Section 22
4. Term, Holdover, and Removal –R.A. No. 11232, Section 22 and 27
5. Compensation – R.A. No. 11232, Section 29
6. Vacancy –R.A. No. 11232, Sections 28 and 25
7. Voting Requirements
8. Duties and Liabilities
9. Doctrine of Centralized Management
10. Business Judgment Rule
11. Doctrine of Apparent Authority
12. Doctrine of Ratification or Estoppel

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 E. Powers of Corporations; Incidental Powers; Ultra Vires Doctrine (R.A. No.
11232, Sections 35-44)

F. Stockholders and Members

1. Doctrine of Equality of Shares
2. Participation in Management; Voting Requirements
3. Proprietary Rights
a. Right to Dividends –R.A. No. 11232, Section 42
b. Right to Inspection –R.A. No. 11232, Sections 73-74
c. Pre-Emptive Right –R.A. No. 11232, Section 38
e. Appraisal Right –R.A. No. 1123, Sections 80-85
4. Derivative Suit/Intra-Corporate Suit
5. Delinquency –R.A. No. 11232, Sections 67-70
6. Certificate of Stock –R.A. No. 11232, Sections 62 and 63

G. Mergers and Consolidations – R.A. No. 11232, Sections 75-79

1. Asset Only Transfer
2. Business Enterprise Transfer

H. Corporate Dissolution and Liquidation (R.A. No. 11232, Sections 133-138)

I. Foreign Corporations –R.A. No. 11232, Sections 140-153

1. Personality to Sue and Suability
2. Foreign Investments Act (R.A. No. 7042, as amended by R.A. No. 11647)
a. “Doing Business in the Philippines”
b. Registration Requirement– Section 5, RA 7042, as amended
c. Nationalized Activities and the Negative List

II. PARTNERSHIP
A. General Provisions
1. Definition –Civil Code, Article 1767
2. Rules to Determine Existence – Civil Code, Articles 1769
3. Separate personality – Civil Code, Articles 1768
4. Partnership by Estoppel – Civil Code, Article 1825
5. Kinds of Partnership – Civil Code, Articles 1776- 1785

B. Obligations of Partners Among Themselves - Civil Code, Articles 1784-1809

C. Property Rights of Partners – Civil Code, Articles 1810-1814,

D. Obligations of Partnership/Partners to Third Persons –Civil Code, Articles

1815-1827

E. Dissolution and Winding Up – Civil Code, Articles 1827-1842

F. Limited Partnership – Civil Code, Articles 1843-1867

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III. INSURANCE LAW (P.D. No. 612, as amended by R.A. No. 10607)
A. Concept of Insurance –R.A. No. 10607, Sections 2-9

B. Insurable Interest –R.A. No. 10607, Sections 10-25

C. Concealment – R.A. No. 10607, Sections 26-35, 51

D. Representation –R.A. No. 10607, Sections 36-48, 51

E. Policy –R.A. No. 10607, Sections 49-66

F. Warranties –R.A. No. 10607, Sections 67-76

G. Premium –R.A. No. 10607, Sections 77-84

H. Loss –R.A. No. 10607, Sections 85-89

I. Notice and Proof of Loss – R.A. No. 10607, Sections 90-94

J. Double Insurance; Overinsurance– R.A. No. 10607, Sections 95-96

K. Reinsurance –R.A. No. 10607, Sections 97-100

L. Classes of Insurance
a. Casualty –R.A. No. 10607, Section 176
b. Suretyship – R.A. No. 10607, Sections 177-180
c. Life Insurance – R.A. No. 10607, Sections 181-186
d. Compulsory Motor Vehicle Liability Insurance –R.A. No. 10607,
Sections 386-402

IV. TRANSPORTATION LAW

A. General Principles of Common Carriers – Civil Code, Article 1732
1. Test to Determine if Common Carrier
2. Common Carrier v. Private Carriers
3. Diligence Required – Civil Code, Article 1733
4. Vigilance over Goods – Civil Code, Articles 1744-1754
5. Safety of Passengers – Civil Code, Articles 1755-1763
6. Sources of Liability

B. Maritime Law
1. Limited Liability Rule; Exceptions; Abandonment (Code of Commerce,
Articles 587, 590, 643, 837)
2. Charter Parties
3. Collisions; Rules on Liability (Code of Commerce, Articles 826-832,
837)
4. Arrival under Stress (Code of Commerce, Articles 819-825)
5. Shipwreck (Code of Commerce, Articles 840-845)
6. Prescription (CA No. 65, Section 6; Code of Commerce, Article 366)

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 7. Salvage Law (Act No. 2616)

C. The Montreal Convention

1. Applicability
2. Extent of Liability of Air Carrier
a. Passenger
b. Baggage
c. Limitations to Liability
3. Liability for Delay

V. BANKING LAWS
A. The New Central Bank Act
1. Banks in Distress –R.A. No. 7653, as amended, Sections 29-30
2. Remedy of Closed Banks - R.A. No. 7653, as amended, Section 30

B. Secrecy of Bank Deposits (R.A. No. 1405, and R.A. No. 6426, as amended)
1. Prohibited Acts
2. Exceptions from Coverage
3. Garnishment of Deposits

C. General Banking Law (R.A. No. 8791)

1. Nature of Bank Funds and Bank Deposits
2. Required Diligence of Banks
3. Prohibited Transactions by Bank Directors and Officers

D. Anti-Money Laundering Act (R.A. No. 9160, as amended by R.A. No. 9194,
10167, 10365, 10927, and 11521)
1. Policy –R.A. No. 9160, as amended, Section 2
2. Covered Institutions and their Obligations –R.A. No. 9160, as amended,
Section 3
3. Covered Transactions - R.A. No. 9160, as amended, Section 3
4. Suspicious Transactions - R.A. No. 9160, as amended, Section 3
5. Safe Harbor Provision - R.A. No. 9160, as amended, Section 9
6. Money Laundering
a. How Committed - R.A. No. 9160, as amended, Section 4
b. Predicate Crimes - R.A. No. 9160, as amended, Section 3
7. Authority to Inquire; Freezing and Forfeiture –R.A. No. 9160, as
amended, Sections 10-12

VI. INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES (R.A. No. 8293)

A. Patents –R.A. No. 8293, Section 21
1. Patentable vs. Non-patentable Inventions –R.A. No. 8293, Section 22
2. Ownership of a Patent –R.A. No. 8293, Sections 28-30
3. Rights and Limitations of Patent Owner –R.A. No. 8293, Sections 71-77
4. Patent Infringement - R.A. No. 8293, Sections 76-84
5. Remedies for Infringement –R.A. No. 8293, Sections 79-80
6. Cancellation –R.A. No. 8293, Sections 61-66
7. Compulsory Licensing –R.A. No. 8793, Sections 93-102

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 8. Voluntary Licensing – R.A. No. 8793, Sections 85-92,

B. Trademarks –R.A. No. 8293, Section 121

1. Marks vs. Collective Marks vs. Trade Names –R.A. No. 8293, Section 121,
2. Non-Registrable Marks –R.A. No. 8293, Section 123
3. Ownership and Registration –R.A. No. 8293, Section 152
4. Rights and Limitations of Trademark Owner – R.A. No. 8293, Section 147
5. Trademark Infringement – R.A. No. 8293, Section 155
6. Unfair Competition – R.A. No. 8293, Section 168
7. Cancellation – R.A. No. 8293, Sections 151-15

C. Copyrights – R.A. No. 8293, Section 172

1. Copyrightable Works –R.A. No. 8293, Sections 172-173
2. Non-Copyrightable Works –R.A. No. 8293, Section 175-176
3. Rights Conferred by Copyright –193-199 R.A. No. 8293, Section 177
4. Ownership of a Copyright –R.A. No. 8293, Section 178
5. Limitations on Copyright –R.A. No. 8293, Sections 184-185
6. Copyright Infringement –R.A. No. 8293, Section 216
7. Art Forgery Act (R.A. No. 9105, Section 4)

VII. DATA PRIVACY ACT OF 2000 (R.A. No. 10173)

A. Personal vs. Sensitive Personal Information; Scope – R.A. No. 10173, Section 3

B. Processing of Personal and Sensitive Personal Information; Lawful Basis – R.A.

No. 10173, Sections 12-13

C. General Data Privacy Principles –R.A. No. 10173, Section 11

D. Rights of Data Subject – R.A. No. 10173, Section 16

VIII. SECURITIES REGULATION CODE (R.A. No. 8799)

A. Framework for Regulating of Securities Trading – R.A. No. 8799, Sections 8-10

B. Concept of Securities; Howey Test – R.A. No. 8799, Section 3

IX. ELECTRONIC COMMERCE ACT (R.A. No. 8792)

A. Legal Recognition of Electronic Data Messages – R.A. No. 8792, Sections 8-11

B. Obligation of Confidentiality - R.A. No. 8792, Section 32

X. ACCESS DEVICES REGISTRATION ACT (R.A. No. 8484)

A. Access Devices – R.A. No. 8484, Section 3

B. Prohibited Acts – R.A. No. 8484, Section 9

C. Frustrated and Attempted Access Device Fraud – R.A. No. 8484, Section 12

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XI. PHILIPPINE COMPETITION ACT (R.A. No. 10667)
A. Anti-Competitive Agreements – R.A. No. 10667, Section 14

B. Abuse of Dominant Position – R.A. No. 10667, Section 15

C. Mergers and Acquisitions – R.A. No. 10667, Sections 16-22

XII. PUBLIC SERVICE ACT (C.A. No. 146, as amended by R.A. No. 11659)
A. Public Service as Public Utility – C.A. No. 146, as amended, Section 13

B. Critical Infrastructure – R.A. No. 11659, Section 2(e)

C. Powers of the President – R.A. No. 11659, Section 23

D. Reciprocity – R.A. No. 11659, Section 25

XIII. NEGOTIABLE INSTRUMENTS LAW (Act No. 2031)

A. Requisites for Negotiability

B. Form and Interpretation – Act No. 2031, Sections 1-12

C. Types of Negotiable Instruments

D. Liabilities of the Parties – Act No. 2031, Sections 60-69

E. Defenses – Forgery, Want of Delivery, and Material Alteration

F. Relationship among Drawer, Drawee, and Holder, and their corresponding

rights and obligations

XIV. TAXATION LAW (R.A. No. 8424, as amended by R.A. No. 10963; R.A. 11534)
A. Definition, Characteristics, and Purpose

B. Distinguished from Police Power and Eminent Domain

C. Inherent and Constitutional Limitations

D. Requisites of a Valid Tax (1987 CONST., art. VI, sec. 28)

E. Distinguished from Other Forms of Exactions

F. Doctrines in Taxation
1. Lifeblood Theory
2. Construction and Interpretation of Tax Laws, Rules, and Regulations
3. Prospectivity of Tax Laws
4. Imprescriptibility of Taxes
5. Double Taxation
6. Escape from Taxation

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 7. Prohibition on Compensation and Set-Off
8. Compromise and Tax Amnesty

G. Income Taxation
1. Kinds of Taxpayers (R.A. No. 8424, as amended, sec. 23)
2. Income; Definition and Nature; When Taxable
3. Situs of Income Taxation (R.A. No. 8424, as amended, sec. 42)
4. Gross Income
a. Definition; Concept of Income from Whatever Source Derived
(R.A. No. 8424, as amended, sec. 32)
b. Sources of Income Subject to Tax (R.A. No. 8424, as amended, sec.
24, RR No. 2-98, as amended)
i. Compensation Income
ii. Fringe Benefits
iii. Professional Income
iv. Income from Business
v. Income from Dealings in Property
vi. Passive Investment Income
vii. Annuities, Proceeds from Life Insurance or Other Types
viii. Prizes and Awards
ix. Pensions, Retirement Benefit, or Separation Pay
x. Capital Assets vs. Ordinary Assets (R.A. No. 8424, as
amended, sec. 39-40)
c. Exclusions from Gross Income (R.A. No. 8424, as amended, sec.
32(B))
d. Deductions from Gross Income (R.A. No. 8424, as amended, secs.
34, 36)
i. Itemized Deductions
ii. Optional Standard Deduction
iii. Non-deductible Items

5. Taxable Individuals (R.A. No. 8424, as amended)

a. Resident Citizens, Non-Resident Citizens, and Resident Aliens
b. Non-Resident Aliens Engaged in Trade or Business
c. Non-Resident Aliens Not Engaged in Trade or Business

6. Taxable Corporations (R.A. No. 11534)

a. Domestic Corporations and Resident Foreign Corporations (R.A.
No. 8424, as amended, sec. 27)
i. Itemized Deductions
ii. Optional Standard Deduction
iii. Minimum Corporate Income Tax
b. Non-Resident Foreign Corporations
c. General Professional Partnerships

H. Withholding Taxes; Concept (R.A. No. 8424, as amended, sec. 76)

I. Transfer Taxes

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 1. Estate Tax; Basic Principles and Concepts
2. Donor’s Tax; Basic Principles and Concepts

J. Value-Added Tax (VAT); (R.A. No. 8424, as amended, R.R. No. 16-2005, as
amended)
1. Concept
2. Elements of VATable Transactions
3. Destination Principle and Cross-Border Doctrine
4. Transactions Deemed Sale Subject to VAT
5. Zero-Rated Transactions
6. VAT-Exempt Transactions
7. Input and Output VAT
8. VAT Refund or Credit (R.A. No. 8424, as amended, sec. 112)

K. Tax Remedies
1. Government
a. Assessment of Internal Revenue Taxes
i. Requisites of a Valid Assessment
ii. False Returns, Fraudulent Returns, Non-Filing of Returns
b. Collection of Delinquent Taxes
i. Requisites
ii. Civil action for Collection
iii. Criminal action for Collection
iv. Injunction (R.A. No. 8424, as amended, sec. 218, R.A. No.
9282, as amended, sec. 11)
c. Statute of Limitations

2. Taxpayer’s Remedies
a. Administrative
b. Judicial
c. Compromise and Abatement of Taxes
d. Refund of Tax Erroneously or Illegally Collected (R.A. No. 8424,
sec. 229)

3. Civil Penalties
a. Tax Delinquency, Tax Deficiency
b. Surcharge

4. Compromise Penalty

L. Local Taxation (R.A. No. 7160, Book II, Title I)

1. General Principles (R.A. No. 7160, secs. 130, 132)
2. Common Limitations on the Taxing Powers of Local Government Units
(R.A. No. 7160, sec. 133)
3. Local Business Tax (R.A. No. 7160, secs. 143, 145, 146)
4. Validity of a Local Tax Ordinance (R.A. No. 7160, sec. 187)
5. Taxpayer’s Remedies
a. Administrative (R.A. No. 7160, sec. 195)

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 b. Judicial
c. Refund (R.A. No. 7160, sec. 196)
6. Assessment and Collection of Local Taxes (R.A. No. 7160, sec. 194)
a. Remedies of Local Government Units
b. Prescriptive Period
c. Injunction

M. Real Property Taxation (R.A. No. 7160, Book II, Title II)
1. Fundamental Principles; Nature
2. Exemption from Real Property Tax (R.A. No. 7160, sec. 234; )
3. Government’s Remedies
a. Real Property Tax Assessment
b. Collection
4. Taxpayer’s Remedies
a. Administrative
b. Judicial
c. Refund

N. Judicial Remedies
1. Jurisdiction of the Court of Tax Appeals (R.A. No. 1125, as amended by
R.A. No. 9282, A.M. No. 05-11-07-CTA, R.A. No. 11576)
a. Civil Cases
b. Criminal Cases
c. Institution of Civil Action in Criminal Action
d. Certiorari jurisdiction
2. Suspension of Collection of Taxes
3. Petition for Review on Certiorari to the SC

NOTE: All Bar candidates should be guided that only laws, rules, issuances, and
jurisprudence pertinent to the topics in this syllabus as of June 30, 2023 are within the
coverage of the 2024 Bar Examinations.

-NOTHING FOLLOWS-