CORPORATION LAW o The 25/25 requirement is

R.A. No. 11232, Revised Corporation Code MANDATORY in the increase of the
authorized capital stock
SIGNIFICANT PROVISIONS AND RULES o Hence, when the corporation would
like to expand its capital, the 25/25
SEC. 10. Number and Qualifications of rule is MANDATORY; in other words,
Incorporators. – Any person, partnership, if the corporation is ALREADY
association or corporation, singly or jointly with REGISTERED and would like to
others but not more than 15 in number, may increase its authorized capital
organize a corporation for any lawful purpose or stock (pursuant to section 37), then
purposes: x x x the increase in the authorized
capital stock requires compliance
 Incorporators are not limited to NATURAL with the 25/25 requirement under
PERSONS; may include JURIDICAL Section 37.
PERSONS
o May be a partnership or another  Statutory basis
corporation SEC. 37. Power to Increase or
 Effect of the rule: Decrease Capital Stock; Incur, Create
or Increase Bonded Indebtedness. x x
x That the SEC shall not accept for filing
any certificate of increase of capital stock
unless accompanied by a sworn statement
of the treasurer of the corporation x x x,
showing that at least 25% of the increase
in capital stock has been subscribed and
that at least 25% of the amount
SEC. 13. Contents of the Articles of subscribed has been paid in actual cash to
Incorporation. x x x the corporation x x x

 The 25/25 requirement is no longer  Effects of the Rule:

mandatory during the incorporation stage

CORPORATE TERM
In the old code, there is a maximum term of 50
years for a corporation, meaning, it shall not
exceed 50 years
o The SEC may allow an
incorporation of an entity even if  SEC. 11. Corporate Term. – A
that entity has not satisfied the corporation shall have perpetual existence
25/25 requirement unless its articles of incorporation provides
o No required paid-up capital otherwise.
(previously, a P5,000 paid up o The 50 years maximum term is no
capital is required) longer effective
o Statutory basis: o Hence, if a corporation already
existed for 50 years and yet
continued to operate, then the
corporation is not violating the
Rules of the Revised Corporation
Code because the current law
allows corporations to have
perpetual existence
 Effects of the Rule
 Applicability of the new rule to
corporations already existing upon the
effectivity of the RCC
SEC. 11. Corporate Term. x x x
o Will only apply to entities ABOUT Corporations with certificates of
TO BE REGISTERED; meaning, at incorporation issued prior to the effectivity
the stage of INCORPORATION ONLY of this Code, and which continue to exist,
shall have perpetual existence, unless the
 Note: corporation, upon a vote of its
stockholders representing a majority of its
outstanding capital stock, notifies the
Commission that it elects to retain its
specific corporate term pursuant to its
articles of incorporation. x x x

1
 o If the corporation was already  The corporation shall be revived despite
existing by virtue of BP 68 the fact that its corporate existence has
providing for a 50-year corporate already been dissolved
term and yet continued to exist o Because the law authorizes now
upon the enactment of RA 11232, the REVIVAL of a dissolved
that corporation, although existing corporation
by virtue of BP 68, will nonetheless o Once a corporation is revived, all
have perpetual existence UNLESS the franchises, licenses will be
the corporation itself, by a vote of revived as well, as if the
majority of its outstanding capital, corporation has never been
would elect to retain its corporate dissolved.
term stated in its AOI. o Hence, the corporation can
o Therefore, if there is no notice with continue its business
the SEC that the corporation is
opting to retain its original  Effect of the Rule
corporate term as indicated in its
AOI, then the default there is that
the corporation opted to have
perpetual existence.
o If the corporation created under BP
68 would not inform SEC that they
want to retain their corporate
existence, then it is deemed that
they elected perpetual existence
o The only way these corporations
will have a shorter period than a
perpetual existence is if they will
notify the SEC that they are
retaining their original corporate RULE ON NON-COMMENCEMENT OF
term as stated under their AOI; if BUSINESS
no notice was given to SEC, the New rule; in the old code, the corp must
default is that they opted to have a commence its operation within 2 yrs from the
PERPETUAL EXISTENCE date of issue of SEC-COI

 Effects of the Rule  New rule

 Statutory basis
SEC. 21. Effects of Non-Use of
Corporate Charter and Continuous
Inoperation. – If a corporation does not
RULE ON REVIVAL OF CORPORATE TERM formally organize and commence its
Under the old code, if the corporation has been business within 5 years from the date of
dissolved because they applied with the SEC for its incorporation, its certificate of
dissolution (using for example the shortening of incorporation shall be deemed revoked as
corporate term), when that period indicated in of the day following the end of the 5-year
the amended AOI shortening their corporate term period. x x x
arise, then the corporation is deemed dissolved,
and revival of the corporation is not possible.  Impact of the rule

 If the corporation applied for voluntary

dissolution, through shortening of its
corporate term, and that period has
already arrived, therefore that corporation RULE ON THE PERIOD OF BUSINESS
shall be deemed DISSOLVED; and even if INACTIVITY
the corporation was dissolved, it may still This case is when the corporation was able to
be REVIVED. commence operation within the 5-year period but
SEC. 11. Corporate Term. – x x x A because of certain external situations beyond its
corporation whose term has expired may control, the corp. cannot continue its business
apply for a revival of its corporate and therefore, went into inactivity.
existence, together with all the rights and
privileges under its certificate of In the old code, the corp which has commenced
incorporation and subject to all of its its business but failed to continue and therefore
duties, debts and liabilities existing prior is now inactive, will have 5 years from date of
to its revival. x x x cessation of operations, within which to resume
operations. after 5 years without operation, the
corporation shall be deemed dissolved.

2
  Rule: o Veterans Bank v Callangan: the
SC held that a corp, although not
listed in PSE, may still be
considered as a public company
under the SRC, if they will meet the
3 requirements: a) asset size of at
 Statutory basis least 50M pesos; b) number of
SEC. 21. Effects of Non-Use of shareholders which shall be at least
Corporate Charter and Continuous 200 stockholders of a particular
Inoperation. – x x x However, if a share; and c) at least 100 shares
corporation has commenced its business held by each stockholder.
but subsequently becomes inoperative for o If the above 3 reqs are present,
a period of at least 5 consecutive years,
although not listed as a publicly
the SEC may, after due notice and
listed company in PSE or at the
hearing, place the corporation under
Philippine Dealing system, will
delinquent status.
nonetheless be considered as a
o Hence, the corp will not be
public company, and therefore
dissolved but will be tagged as under the RCC, will be treated as a
DELINQUENT corporation vested with public
A delinquent corporation shall have a interest.
period of 2 years to resume operations o In this case, Veterans Bank is not a
and comply with all requirements that the
listed company and not selling
SEC shall prescribe. Upon compliance by
shares at the PSE but SC declared
the corporation, the SEC shall issue an
that Veterans Bank is a public
order lifting the delinquent status.
company under the SRC because
o Total of SEVEN YEARS = the current
its asset size is higher that 50M, its
code has extended the period to 7 stockholders are more than 200
years (5 years for delinquency + and each SH hold at least 100
another 2 years after delinquency shares of equity shares. Hence,
to resume their operation) Veterans Bank is deemed as a
Failure to comply with the requirements public company under the SRC, and
and resume operations within the period under RCC, a corporation vested
given by the Commission shall cause the with public interest
revocation of the corporation’s certificate
of incorporation.
o Period = 2 year period

 Effect of the rule o Not required to memorize

o But REMEMBER: when the business
of the corp involves CUSTODY OF
FUNDS OWNED BY THEIR
CUSTOMERS, then they would likely
be considered as corporation
vested with public interest.
o MONEY SERVICE BUSINESS –
includes businesses which are not
o If the corporation will resume its considered performing banking
operation within the 2-year period, functions but nonetheless manage
the corp will be treated as a regular the funds of their customers (e.g.
corporation, meaning, the gcash, remittance companies)
delinquency status will be lifted.

CORPORATIONS VESTED WITH PUBLIC

INTEREST
In the old code, there is no corporation vested o SEC is given the discretion to
with public interest declare a particular business as a
corporation vested with public
interest

 Implication of the Rule:

Corporations vested with public interest
 Corporations considered vested with MUST comply with the following: (Section
public interest: (Section 22) 22)

o Corporation vested with public

interest cannot ……

3
 x x x An independent director is a
person who, apart from shareholdings and
fees received from the corporation, is
independent of management and free
from any business or other relationship
which could, or could reasonably be
perceived to materially interfere with the o A lawyer can establish an OPC
exercise of independent judgment in provided that the business is not
carrying out the responsibilities as a among those excepted to be
director. x x x formed as an OPC
o This is the director who is supposed o Ex. A lawyer can establish a
to receive only his per diem as a restaurant business
director. he should not be o Hence, a lawyer cannot put up an
pecuniarily interested with the OPC for the purpose of establishing
affairs of the corporation his profession

 On AOI and By-Laws

o Under the old code, there are 3

named corporate officers –
president, secretary, treasurer
o Under RCC, there is now a
requirement of a COMPLIANCE
OFFICER if the corporation if
o AOI is required because it is a pre-
vested with public interest.
incorporation document required
by law
ONE PERSON CORPORATION
o By-Laws is a document that
New type of corporation under RCC
governs the internal relationship of
the corp with the officials and vice
 Nature of OPC
versa. Since an OCP will be
SEC. 116. One Person Corporation. – A
managed by that single SH, then
One Person Corporation is a corporation
the by-laws will not be necessary in
with a single stockholder: x x x
the operation of the corporation
o Like a sole proprietorship
o One where there is only 1 SH
 Corporate Structure and Officers
 Who may form an OPC? (NET)
SEC. 116. One Person Corporation. – x
x x Provided, That only a natural person,
trust, or an estate may form a One Person
Corporation. o The single SH shall be the SOLE
o Estate – properties left by a INVESTOR, SOLE DIRECTOR, and
decedent PRESIDENT of the OPC
o Trust – pertains to the FUNDS being  These 3 roles will be played
set up by the trustor in favor of the by a single individual
beneficiary; the trustor may set
aside a particular fund for the
benefit of the beneficiary who may
be legally disqualified to take hold
of a property (ex. minor, and
money set up by parents may be o In a regular corporation, the
used to established an OPC) President cannot be at the same
 Trust being referred is not time be the Treasurer and
synonymous with an entity Corporate Secretary.
or company like a bank o In OPC, the President cannot be at
the same time be the Corporate
 Excepted to form OPC Secretary:

o But the single SH may appoint

himself as a Treasurer provided he
gives a BOND:
o TRUST – entity aligned with a bank

4
  Rule on Designation of Nominee and
Alternate Nominee
o In case of death or permanent
incapacity

o Once SEC issues the certificate

approving the amended AOI, then
the ordinary stock corp shall be
deemed converted to OPC
o This nominee and alternate
nominee must be DESIGNATED IN
 Requirements for conversion of OPC to
THE OPC’S AOI
ordinary stock corp

 LIABILITY OF SINGLE SHAREHOLDER

o If the OPC will incur monetary
obligations and is unable to pay, RULES ON BOD / BOT
the single SH may not be made In the old code, the disqualification was simple
liable
 Grounds for Disqualification
SEC. 26. Disqualification of Directors,
Trustees or Officers. – A person shall be
disqualified from being a director, trustee
or officer of any corporation if, within five
(5) years prior to the election or
appointment as such, the person was:
o The onus of proving that there is a
strict separation between the (a) CONVICTED BY FINAL JUDGMENT:
property of the single SH and that (1) Of an offense punishable by
of the corporation lies with the imprisonment for a period
single SH; he must prove that there exceeding 6 years;
is a separation between the o If a person is appointed as a
properties of the OPC and his own director and within the 5 yr period,
personal property it was discovered that prior to his
o The moment there is a comingling election, he was convicted for the
of funds of the OPC and the crime of illegal possession of a
personal funds fo the single SH, bladed weapon for which he was
then the single SH shall be jointly imprisoned for 6 months – this is
and severally liable not a ground for disqualification
(2) For violating RCC; and
(3) For violating Republic Act No. 8799
(SRC)
o For numbers 2 &3 – regardless of
penalty
o It is incumbent upon the single SH
o Ex of violation: insider trading
to prove that there was a
delineation between his funds and
(b) FOUND ADMINISTRATIVELY LIABLE
the funds of the OPC; failure of the
FOR ANY OFFENSE INVOLVING
single SH to prove, then the single
FRAUDULENT ACTS; and
SH will be liable for the obligations
o Not prison terms and conviction of
of the OPC, applying the piercing
the veil of corporate fiction a crime
o Mere administrative penalty for any
 Requirements for conversion of an offense involving fraudulent act is
ordinary stock corporation to OPC sufficient
o administrative liability imposed
upon the offender for a fraudulent
action will disqualify the offender
from becoming a
director/trustee/corporate officer

(c) BY A FOREIGN COURT OR

EQUIVALENT FOREIGN
REGULATORY AUTHORITY FOR
5
 ACTS, VIOLATIONS OR
MISCONDUCT SIMILAR TO THOSE
ENUMERATED IN PARAGRAPHS (A)
AND (B) ABOVE.
o Ex. a person is convicted in US for
insurance fraud claim and that
person was convicted and evaded
the sentence by going back to the
Phils. He was then elected by a
director in a stock corp. it was
discovered later that he was RULE ON THE CONSTITUTION OF AN
convicted by a foreign court EMERGENCY BOARD
involving insurance fraud. – in this
example, he may be disqualified in  Statutory Basis:
becoming a director SEC. 28. Vacancies in the Office of
Director or Trustee; Emergency
 Ex. Person A was administratively Board. – x x x However, when the
sanctioned by SEC for a fraudulent act vacancy prevents the remaining directors
after 7 years. After 7 years, he was elected from constituting a quorum and
as a director in a stock corp. Can the prior emergency action is required to prevent
conviction of the administrative (or even grave, substantial, and irreparable loss or
criminal) offense be a ground to disqualify damage to the corporation, the vacancy
the director? may be temporarily filled from among the
o NO. because the time period is only officers of the corporation by unanimous
5 YEARS from date of such vote of the remaining directors or trustees.
conviction or sanctioned by the xxx
SEC
 Impact of the Rule
 Impact of the rule:

 Power of the SEC to REMOVE members of CORPORATE POWERS

BOD/BOT:
 Additional corporate powers, namely:

o SEC is authorized to remove a

sitting director / trustee / officer if o A corporation under the RCC may
the above disqualifications are now enter into a partnership, joint
present. venture or any other commercial
o The authority given to SEC to agreement with a natural person or
disqualify a member of the board is with another corporation
limited only to those instances
where the disqualification is
present; if disqualification is not
present, or for any other grounds,
the SEC has no authority to remove
a sitting director or officer

 Rule: o Foreign corporations cannot donate

for partisan political activity
o Therefore, domestic corps can now
donate to political parties or to a
political candidate
o Ex. Jollibee can send hamburgers to
a political candidate in a political
candidate. Mcdo cannot do this
because it is a foreign corporation

RULE ON NOTICE OF MEETINGS

 Impact of Current Rule

6
  Statutory basis: majority of the outstanding capital
approved the dissolution proposal. When
submitted to the SEC, SEC refused to
accept the dissolution arguing that the
required 2/3 votes of the outstanding
capital has not been achieved and only a
majority was achieved.
o SEC is incorrect because the law
requires only a MAJORITY
RULE ON MODE OF VOTING
o Departure from old rule requiring
2/3 oustanding capital or 2/3 of the
members of non-stock corp to
Before the only allowed mode of voting is through approve the dissolution
physical presence during the meeting of the SHs, o Dissolution may be affirmed
or through absentia voting through proxy voter owning a majority of the
outstanding capial – NO
 3rd mode  through remote CREDITORS AFFECTED
communications or video conferencing
 Statutory Basis:
 Statutory basis:

 Impact of the Rule:

RULE ON THE DISSOLUTION OF
CORPORATIONS BY SHORTENING
CORPORATE TERM

o If the dissolution of the corp is done

RULE ON THE EFFECT OF ATTENDANCE
through the shortening of corporate
THROUGH REMOTE COMMUNICATION
term, the law will no longer wait or
require for certificate of dissolution
to be issued by the SEC before the
corporation shall be deemed
dissolved.
o The law already says that when the
corp has applied for the shortening
 Statutory basis: of corporate term, the dissolution
shall take effect immediately upon
the arrival of the last day of
corporate term as in indicated in
the amended AOI. Therefore the
corp should no longer wait for the
cert. of dissolution to be issued by
the SEC before considering itself as
 Impact of the Rule dissolved.

 Statutory basis:

RULE ON DISSOLUTION OF CORPORATIONS

WHERE NO CREDITORS ARE AFFECTED
INVOLUNTARY DISSOLUTION
Involuntary – the dissolution is being effected not
on the instance of the corporation but at the
instance of the SEC

 Ex. BOD of a corporation voted to dissolve

the corporation and the corp has no
creditors, the directors then called for a  Grounds for Involuntary Dissolution
special SHs meeting and SHs owning
7
  a. that the illegal actions
committed by the corp was
o If the corp, despite the period of 5 done with the KNOWLEDGE
years, failed to commence their of the stockholders
operation after 5 years from date of  if SHs are not aware
issuance of COI, the corporation of the illegal act
may be dissolved by the SEC for committed by the
NON-USE OF CORPORATE CHARTER corp, then the corp
cannot be dissolved
because thos illegal
acts can be
considered as ultra
o A corporation must resume vires act of the corp
business operation after falling into
inactivity for a period of totaling 7
years. Assuming that after the
additional 2 years after being
declared as delinquent, the corp
was still inactive or still not
resuming operations, the
corporation may be involuntary
o there should be TOLERATION of the
dissolved by the SEC for continuous
inoperation of a corp illegal activities of the corp by the
directors, officers, or employees

PROBLEM AREAS AND LATEST

o A quo warranto proceeding was JURISPRUDENCE IN CORPORATION LAW
issued to the corp. The corp cannot
insist that the dissolution is invalid SEPARATE CORPORATE PERSONALITY RULE
because it did not come from the
SEC.  Concept
o Reason: court has the power to
dissolve a corporation

 GENERAL RULE
o If found out that the corp
committed fraudulent acts in order
to secure COI. In this case, the corp
can be considered as dissolved by
the SEC

o When asked for the liability of

corporate agents particularly the
directors, officers, and even
stockholders of the corp, there
o This rule presupposes that the corp should always be reference as a
was created for that particular GENERAL RULE on the SEPARATE
illegal purpose PERSONALITY RULE
o So this requires evidence that the o Default answer pertaining to the
corp was created for the particular liability of a corporate agent shall
illegal purpose always be the APPLICATION of the
o Villanueva v People: a corp was SEPARATE PERSONALITY as a RULE
used for the purpose of defrauding o Team Pacific Corp v. Parente:
the government into entering a case involving dismissal of an
simulated bidding. In this case, the employee of Team Pacific Corp. The
corp may be dissolved because employee was dismissed and the
they were guilty of constituting employee went back against the
graft and corruption practices president and corporate officers.
 Issue: in an illegal dismissal
case, can the claim of the
dismissed employee be
enforced against the
corporate agent that may
have enforced the dismissal
of the employee concerned?
o 2 requirements needed:

8
  SC: the SEPARATE piercing the veil doctrine will take
PERSONALITY RULE shall over
apply:
 Rule

o When there is an abuse in the

application of the SCP, and such
o If an employee has been dismissed
abuse will lead to an injustice, the
and would file a case against the
SC will not hesitate to set aside the
company, impleading in the labor
SCP Rule and instead apply the
complaint certain corporate
PVCF
officials, and eventually the court
would rule in favor of the employee
 Application (individual liable with corp)
concerned, the liability as a rule
o Atienza v. Golden Ram
will not be imposed upon the
Engineering Equipment Corp:
corporate officers applying the
Atienza ordered eqpt from Golden
RULE ON SEPARATE CORPORATE
Ram which was subsequently
PERSONALITY. Hence, only the
defective. Golden Ram promised to
corporation will be liable.
replace the eqpt but to no avail.
Upon inspection, it was found out
 Applicability in case of corporate entities
that what was delivered to Atienza
o Instance where liability is being
was demo units and not brand new
imposed upon another entity which
units. Atienza filed a case and
is related to the respondent
impleaded Bartolome Torres as
corporation
party defendant (president of
o Meaning, there are 2 related
Golden Ram).
entities via a common ownership

o The liability imposed upon the

parent corp CANNOT be imposed to
the subsidiary corp because the 2 o The delivery of the demo units will
entities have legal personalities already create a judgment that
that is separate and distinct from Bartolome was in bad faith
one another
 Applicability in case of Corporate Entities
o Instance when liability of a
corporation may be imposed to
another corporation (like a
subsidiary or parent corporation)
o Esico v Alphaland Corp: Esico
was employed by 2 corporations
namely PhilWeb and Alphaland.
And despite that, he was not
DOCTRINE OF PIERCING THE VEIL OF receiving double compensation.
CORPORATE FICTION Esico filed a labor complaint
against Alphaland. Alphaland
GENERAL RULE: SEPARATE CORPORATE raised the defense of Separate
PERSONALITY RULE Corporate Personality
EXCEPTION: DOCTRINE OF PIERCING THE
VEIL OF CORPORATE FICTION

 Concept

o In this case, Esico was servicing 3

companies and yet he was only
receiving compensation from 1
entity.
o Therefore, liability is imposed
against all the 3 entities.
o The separate corporate personality
as a rule will be set aside and the

9
 approval is not considered ultra
vires, the decision of the board
shall be binding upon the corp.
hence, the courts (even the SEC)
has no right to set aside the
decision of the board

 Powers of the BOD (ECC)

o The Board of Directors EXERCISES
CORPORATE POWERS
 Application in case of ILLEGAL ACTS o The Board of Directors CONDUCTS
o Liability of corporate officials for THE BUSINESS OF THE
illegal acts committed by the CORPORATION
corporation o The Board of Directors has
o When talking about liability for the CONTROL OVER ALL THE
ILLEGAL ACTS of the corporation, PROPERTIES OF THE CORPORATION
as a rule, criminal liability shall be  Hence, what the BOD would decide, will be
imposed upon the corporate official binding upon the corporation whether or
who was guilty of the offense not the decision is wrong, is not for the
committed. It cannot be imposed court to examine
upon the corporation because  The court will only look whether the
obviously, the corp cannot go to decision of the board was done in good
jail. faith
o Villanueva v People:
 Rule:

o The court allowed the criminal case o If the decision of the board is
to proceed against Villanueva tainted with bad faith, it is only
because although there is a then when the decision of the
separate corporate personality, board will be set aside by the court.
Villanueva was the owner of the 2 But absent bad faith, the fact that
entities and that Villanueva is a the decision was wrong is not
party to the fraudulent schemes enough for the courts to set aside
committed. the board’s decision.

 Application:
o Metroplex Berhad v Sinophil:
metroplex was questioning the
decision of sinophil in decreasing it
authorized capital stock

BUSINESS JUDGMENT RULE DOCTRINE OF APPARENT AUTHORITY

 Concept  Rule

o When the BOD has approved a o There is also a principle in

particular contract and the corporation law that corporate

10
 officers must only act within the
scope of their powers. When they
act beyond the scope of their
authority, then the corporate
officer who committed such action
shall be liable for his action and the
corporation may deny liability
arising from the unauthorized
action of the corporate officer
o In the Doctrine of Apparent
Authority, a corporate officer acting
beyond the scope of his authority
through his corresponding
negligence or deceit on the part of
the principal (corporation), then the
corporation cannot later on deny
the authority of the corporate
officer by claiming that the action DOCTRINE OF RATIFICATION
of the corporate officer was made
without authority
o The corporation after having made
it appear to the public that the
corporate officer has the apparent
authority cannot later ignore or
question the officer’s action.
 In this case, a corporate officer, what
 Application would have been otherwise an ultra vires
o Agro Food and Processing act, without any approval from the
corporation or board of directors
Corp. v Vitarich corp: the 2 corps
 Effect: the corporate officer who does an
agreed to come up with 2 MOAs.
act that is unauthorized will not make the
Vitarich went to court and
corporation liable
demanded payment of the unpaid
agreement.
 Rule:
o Issue: can agro be bound by the
agreement made by its corporate
officers?

 Application
o Jorgenitics Swine Corp. v Thick
and Thin Agri-Products Inc: the
president and chairman of the corp
filed a case for injunction against
another party. At the time the
petition was filed, there was no
board authorization that would
indicate that the action of the
president was authorized by the
board. After the petiion was filed, a
subsequent resolution was passed
o Hence, Agro cannot successfully by the board ratifying the action of
raise the defense that the the president.
corporate officer who transacted
with Vitarich had no authority

 Allied Banking Corp v Spouses

Macam: fraudulent activities which
affected the Spouses Macam. Spouses
macam’s account was deducted an
amount. Upon investigation by the bank,

11
 o What otherwise was an o SC: the president can be made
unauthorized act, can be validated liable not because he is the
through a subsequent ratification president (because there is a
made by the BOD separate corporate personality) but
because he agreed to hold himself
LIABILITY OF DIRECTORS personally liable for the corporation

 Notwithstanding the separate corporate

personality, the law enumerated certain
instances whereby a corporate director / o Oscares was an OFW who was hired
officer may be personally or solidarily
by Magsaysay Maritime Corp.
liable with the corporation:
o Oscares impleaded not only the
company but also the president of
Magsaysay (Javier)
o Issue: Can Javier be made liable
with the manning agency?
o SC: Yes, Javier is liable because
o In this case, the corp committed an there is a specific provision of law
unlawful act and validly patently that imposes personal liability upon
approved by officers of the the president of a corporation
corporation whereby they were hiring OFWs
under the Migrants Workers Act

DOCTRINE OF CORPORATE OPPORTUNITY

DOCTRINE OF RATIFICATION
 Application

o Refer to the previous discussion

 Chang was a very good executive of

TOPROS. At latter part of his employment
with TOPROS, he was able to establish
several corporations which he owns and
having the same nature of business with
TOPROS. The BOD of TOPROS discovered
that there was a sharp decline with the
income of TOPROS. Upon investigation, it
was find out that its customers and
business clients were being channeled by
Chang to his personal businesses.

o In this case, SC imposed liability on  Rule on DISLOYALTY OF A DIRECTOR:

persons who made or agreed to
hold himself personally liable with
the corp.
o Sps Fernandez (specifically the
husband), has agreed to be
personally liable with the corp for
whatever paid subscription that will
be incurred by the corporation. The
respondent signed the MOA and
also issued an undertaking holding
himself liable for whatever unpaid
obligations that the corp will incur o In this case, Chang said that he
with smart communications should not be held liable to account
for the income / proceeds that
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 should rightfully belong to TOPROS
because in establishing the  Application
corporations under his name, he
used his own funds, and by using
his own funds, it is subject to
possible losses. Because of this, he
should rightfully be allowed to
retain whatever income theses
corporations may have amassed. o NOTE: a foreign corp. is not allowed
o SC: applied the DOCTRINE OF to avail of the processes of the
CORPORATE OPPORTUNITY – Chang local courts if that foreign corp. will
should return the funds belonging conduct business in the phils
to the corporation without a license
o If the foreign corp. is doing
 Consequence of the rule (GENERAL business in the phils without a
RULE) license, then it is not permitted,
under our laws, to file a case
against another party

 Concept of ISOLATED TRANSACTION

 EXCEPTION

o If a foreign corp in an isolated

manner, meaning a single instance
only, the foreign corp can still sue
in the Philippines even if it doesn’t
o Hence, even if there is violation of have a license, PROVIDED it is in
the corporate opportunity rule, if the concept of an ISOLATED
such violation has been permitted / TRANSACTION
countenanced by SHs owning at
least 2/3 of the outstanding capital
stock, then the corporate agent will
no longer be liable to return
whatever fund was obtained which
rightfully belongs to the
corporation
o ISOLATED TRANSACTIONS – it
doesn’t follow that when there are
 Application several transactions, it will already
constitute doing business; in the
same manner, not because there is
just only one transaction, that is
already an isolated transaction,
because only if there is only 1
transaction, but it will involve
several actions to complete the
agreement, that particular
transaction will qualify as an
isolated transaction.

FOREIGN CORPORATION o This is because, the totality of the

activity that will be performed by
 RULE WHEN A FOREIGN CORP IS “DOING Andersen coupled with the purpose
BUSINESS IN THE PHIL.” of his business will belie an isolated
transaction

 GENERAL RULE : prohibited in filing a

case in the Philippines

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  EXCEPTION

GRANDFATHER RULE:
- Especially applicable only to businesses
that will engage in business reserve for
FILIPINOS or at least 60% owned by
Filipinos
- Case in point  Narra Nickel Mining case
o Court applied grandfather rule
instead of control test in addressing
whether the corp can be
considered as qualified to engage
in mining operation
o In looking whether the business
can be entered into by that corp,
the court analyzed the ownership
of the corp.
o The corp is owned partly by
Filipinos and partly by foreigners
but with respect to ownership of
the foreigners, at the level of the
corporation owning that will
engage in mining, there are also
corporation that are SH of that
mining entity. The owned shares of
the mining entity, there where
foreigner…..

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