°definition of corporations
An artificial being created by operation of law having the right of succession
and the powers, attributes and properties expressly authorized by law or
incident to its existence.
°advantages of corporations
-limited liability of shareholders
Corporate stockholders are liable only to the extent of their subscriptions.
They are not held liable for corporate liabilities not covered by corporate
assets.
- Transferability of shareholders
A shareholder can sell and transfer his acquired share capital even without
the knowledge or consent of all the stockholders. It is sufficient that proper
annotation of transfer is made in the Corporate Stock and Transfer Book.
-continued life existence
A corporation can continue to exist for the duration of its lifetime, unaffected
by the internal changes which may arise within the corporation, such as
death, insanity, insolvency of any of its shareholders, directors, officers,
agents or employees.
-greater source of funds
When there is a need for a large amount of capital in establishing a business,
parties will normally find it necessary to adopt the corporate form of
organization.
The corporation sources its funds from the public through the issuance of the
authorized capital stock
°kinds of corporations:
-stock corporation
Stock Corporations. These corporations issue shares of stock to the
shareholders, who are entitled to receive dividends representing the earnings
from the corporation. These corporations are subject to income and business
taxes.
-non-stick corporation
These corporations do not issue share of stock because they are created for
civic, charitable, or religious purposes. They are composed of members, not
shareholders. These corporations are generally tax-exempt.
-as to number of persons
A. Sole Corporation. A corporation owned and registered by only one
corporator or member and his successors, who are members of a religious
denomination.
b. Aggregate Corporation. A corporation comprised of more than one
corporator or member.
-as to extent of membership
a. Open Corporation. The stocks of this corporation are open to public
subscription. Generally, stockholders are not related to each other.
b. Close Corporation. This is owned and managed by a family or close
relatives not exceeding 20 persons. The stocks of this corporation are not
open for public subscription.
-as to relations to other corporation
a. Parent or Holding Corporation. A corporation that acquires significant
influence over another corporation and has the power to elect directly or
indirectly the majority directors of a subsidiary corporation.
B. Subsidiary corporation
This corporation is controlled by the parent or holding corporation.
°steps in organizing a corporation
1. Promotion
A “promoter” undertakes the promotional stage of a corporation.
- As one of the preliminary steps to the organization of a corporation, a
promoter work involves issuing of prospectus, procuring of
subscriptions from prospective investors, and securing a charter for the
proposed corporation by the persons interested in the firm.
2. Incorporation
Incorporation includes the following processes:
1. Registration of Corporate Name with SEC. The name of the corporation
should not be the same as or similar to the name of existing registered
corporation.
2. Drafting and Execution of the Articles of Incorporation. The
incorporators shall draft this corporate basic instrument which must be
duly executed and acknowledged by a notary public.
3. Execution of Sworn Affidavits and Bank Deposit Certificate. The Articles
of Incorporation should be submitted to the SEC together with a
corporate temporary treasurer’s sworn statements regarding the
capital subscribed and paid-up, and the statements of the
corporation’s asset and liabilities.
The Incorporators should also attach the bank deposit certificate to the credit
of the corporation evidencing payment of the 25% of the subscribed capital
stock.
4. Payment of the filing and publication fees, 13
5. Issuance of Certificate of Incorporation. The SEC issues certificate of
incorporation to evidence approval of incorporation.
3. Formal Organization
Formal organization requires the adoption of by-laws and the election of the
board of directors (or trustees) and of the officers by the board pursuant to
the by-laws.
-It also includes the taking of other steps that are necessary to enable the
corporation to transact the legitimate business or accomplish the purpose for
which it was created.
3.1 Commencement of Corporate Business
Section 22 of the Corporation Code of the Philippines states:
“If a corporation does not formally organize and commerice the transaction
of its business or the construction of its works within two (2) years from the
date of its incorporation. Its corporate powers cease and the corporation
shall be deemed dissolved.
°By laws
A By-Law is the regulations, ordinances, rules or laws adopted by any
association or corporation for its government. 20
The contents of corporate by-laws are provided in Sec 47 of the Corporate
Code of the Philippines which states:
“Subject to the provisions of the Constitution, this Code, other special law,
and the Articles of Incorporation, a private corporation may provide in its by-
laws for:
1. The time, place and manner of calling and conducting regular or
special meetings of the directors or trustees;
2. The time and manner of calling and conducting regular or special
meetings of the stockholders or members;
3. The required quorum in meetings of stockholders or members and the
manner of voting there to;
4. The form for proxies of stockholders and members and the Manner of
voting them;
5. The qualifications, duties and compensation of directors,Trustees,
officers and employees;
6. The time for holding the annual election of directors or Trustees and the
mode or manner of giving notice thereof;
7. The manner of election or appointment and term of office of all officers
other than directors or trustees;
8. The penalties of violation of the by-laws;
9. In the case of stock corporation, the manner of issuing stock
certificate; and
10. Such other matters as may be necessary for the proper or
convenient transaction of its corporate business and affairs
°pre-incorporation subscription requirements
