Corporation Law
Introduction:
Under Spain – business organizations are governed by the Code of Commerce
Business Organizations provided by the Code of Commerce are the following:
(1) Sociedad en comandita (limited partnership)
(2) sociedad regular colectiva(general partnership)
(3) sociedad anonima, and
(4) sociedad de cuentas en participacion (joint accounts)
Among the four types of business organizations during the Spanish Regime, Sociedad anonima has an affinity but
not exactly the same with corporation.
The similarities between Sociedad anonima and corporation is that limited liability rule was also applicable to
Sociedad anonima.
The allowance to create Sociedad Anonima was then abrogated by the Corporation Law.
During the enactment of the Corporation Law, existing Sociedad anonima were given the choice to reorganize and
be governed by the Corporation Law or continue as it is and still be governed by the code of commerce, however,
their relationship with the state should be governed by the Corporation Law.
Types of Business Organizations:
1. Sole Proprietorship - This is a form of business organization with only one proprietary owner; a single
individual conducts business under his own name or under a business name. Manages and exercises complete
control over the conduct of his business.
No legal personality separate and distinct from its proprietor or owner of the enterprise. The owner has unlimited
personal liability for all the debts and obligations of the business.
2. Joint Accounts (Cuentas en Participacion)
3. Joint Venture - is an association of persons
or companies jointly undertaking some commercial enterprise;
generally all contribute assets and share risks.
Rationale for Joint Ventures:
(1) Joint ventures reduce the investment required
of any one company and distribute the risk of undertaking
an expensive and risky venture because some projects are
of such magnitude that they strain the financial reserves of
corporations;
(2) Joint ventures pool "know-how," thereby permitting
the members to achieve diversification that it would have
difficulty achieving alone;
The contract or agreement
need not be registered with the Securities and Exchange Commission
provided that the joint venture will not result in the formation of a
partnership or corporation.
merchants are:
1. Those who, having legal capacity to engage
in commerce, habitually devote themselves to it;
2. The commercial or industrial companies
which may be created in accordance with [this Code]
existing legislation.
Art. 4. Persons who possess the following
qualifications shall have legal capacity to habitually
engage in commerce:
1. Having completed the age of twenty-one years.
2. Not being subject to the authority of the father or of the mother nor to marital authority.
3. Having the free disposition of their property.
Art. 13. The following may not engage in commerce nor hold office or have any direct administrative or
'financial intervention in commercial or industrial
_ Otnpanies:
1. Those sentenced to the penalty of civil
11terdiction, while they have not served their sentence
or have not been amnestied or pardoned.
2. Those declared bankrupt, while they have not
obtained their discharge or have not been authorized, by
virtue of an agreement accepted at a general meeting of
creditors and approved by judicial authority, to continue
at the head of the establishment, the authority being
understood in such case as limited to that expressed in
the agreement.
3. Those who on account of special laws or
provisions can not trade.
Art. 15. Foreigners and companies created abroad
may engage in commerce in the Philippines, subject to
the laws of their country with respect to their capacity to
contract, and to the provisions of this Code as regard the
creation of their establishments in Philippine territory,
their mercantile operations, and the jurisdiction of the
courts of the nation.
The provisions of the article shall be understood
to be without prejudice to what, in particular cases, may
be established by treaties or agreements with other
powers.
11
b. Article 14 of the Code of Commerce enumerates the
persons who are subject to relative disqualification. Article 14
provides:
Art. 14. The following cannot engage in the
Mercantile
4. Partnerships - Under the Civil Code, there is a partnership when two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of_ dividing the profits among
themselves.
Distinguish Partnership from a corporation: READ page 16
5.Cooperative - is an autonomous and duly
registered association of persons, with a common bond of interest,
who have voluntarily joined together to achieve their social,
economic, and cultural needs and aspirations by making equitable
contributions to the capital required, patronizing their products and
services and accepting a fair share of the risks and benefits of the
undertaking in accordance with universally accepted cooperative
principles.
d. Although cooperatives are not primarily governed by the
Corporation Code, they are also treated as a corporate entity with
their own acts and liabilities. A cooperative is vested with powers
and capacities under Article 9 of the Philippine Cooperative Code
of 2008, including the power to the exclusive use of its restered
name, the power to sue and be sued and the right of success_10n. The
law also expressly provides that a duly registered cooperative shall
have limited liability.80
7. Business Trust - It is a legal relation whereby one person,
Called the "trustor," conveys a property to another for the benefit of
Another called the "beneficiary." The person in whom confidence is.
reposed aa regards the property is called the "trustee. "59
a. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties.
Implied trust came into being by operation of law.60
8. Syndicate - Syndicate. A syndicate is a group of people who come
together to work for a common aim.83 This unincorporated business
association is often encountered among insurance companies who
may be underwriting a large risk or banks that are lending a huge
amount. Syndication is therefore the practice of dividing investment
risk between several persons in order to minimize individual risk.84
CORPORATION:
Core Features. Its separate personality (under
the Doctrine of Separate Personality98) and the limited liability
of its components (Limited Liability Rule)99 make a corporation
the most desirable business organization for many businessmen.
Corporations as investment vehicles involve the pooling of money
capital from shareholders and human capital from management. 100
Business corporations have five core characteristics, namely:
(1) Legal personality;
(2) Limited liability of shareholders;
(3) Transferability of shares;
(4) Delegated management under a board structure, and
(5) Investor ownership
Advantages of a corporation:
(1) The capacity to act as a legal unit;
(2) Limitation of or exemption from, individual liability
f hareholders;
(3) Continuity of existence;
( 4) Transferability of shares;
(5) Centralized management of board of directors;
(6) Professional management;
(7) Standardized method of organization, and finance;
and
(8) Easy capital generation.
11.03. Disadvantages of Corporations. The disadvantages
fa corporate form are as follows:104
(1) It is prone to "double taxation";
(2) They are subject to greater governmental regulation
and control;
(3) A corporation may be burdened with an inefficient
management if stockholders cannot organize to oppose
management;
(4) Limited liability of stockholders may at times
translate into limited ability to raise creditor capital;
(5) It is harder to organize compared to other business
organizations;
(6) It is harder or more complicated to maintain; and
(7) The "owners" or stockholders do not participate in
the day-to-day management.
Purpose of the Revised Corporation Code
Enhancing the Ease of Doing Business
To _contribute to the ease of doing business, the proposed Revised
Corporat1_on Cde would streamline the process of incorporation - with the
name venfica10n process simplified. In addition, the proposed measure will
allow compames to perpetually exist. It will permit a single person to form a
"one-person corporation." Likewise, stockholder voting may now be through
remote communication, or in absentia ..
Prioritizing Corporate and Stockholder Protection
The second reform cluster includes provisions on: (a) the creation of
emergency boards; (b) the revised rules on the right to inspect corporate
books; (c) modified quorum requirements; and (d) expanded grounds for
disqualification of directors.
Instilling Corporate and Civic Responsibility
corporations are not mere business organizations exclusively intended to serve personal interests, but are social
institutions in which all sectors of society have an interest."
we want to create
corporate entities which would be effective vehicles for the accumulation
of capital, production of goods, and delivery of services.
Strengthening the Policy and Regulatory Corporate Framework
Efficiency and transparency in corporate dealings from formation to daily operations. In line with global best practice
that will allow the Philippines to be an investment attractive country, and therefore, can generate jobs and help our
country and our people
SECTION 1. Title of the Code. - This Code shall
be known as the "Revised Corporation Code of the
Philippines".
-The first general law on corporations in the Philippines was Act No. 1459,
known as the Corporation Law, which took effect on April 01, 1906
-"The Corporation Code of the Philippines", repealed Act No. 1459 in 1980. 2
The Corporation Code took effect on May 1, 1980.
-The Corporation Code was expressly repealed by Republic
·Act No. 11232, otherwise known as the "Revised Corporation Code
of the Philippines" (RCCP).
- the RCCP took effect on February 23, 2019
Applicability of RCCP. The Revised Corporation
Code applies to all corporations already in existence at the time the
RCCP took effect
