Specific express powers of a corporation under the Corporation Code

Specific express powers Requisites Other information

General requisite: vote required
1. majority of the board of directors or trustees;
and
2. 2/3 of the outstanding capital stock/members
in a meeting called for the purpose
(except for powers #4, 6, 8, and 9)
1. power to extend or shorten corporate *articles or incorporation are amended *stockholder may exercise his appraisal right:
term right to demand payment of the fair value of his
shares when he dissents from certain corporate
acts
2. power to increase or decrease capital (a) certified to in a certificate duly signed by a *Trust fund doctrine: the capital stock & assets
stock majority of the directors and countersigned by of the corporation are held in trust for creditors;
the chairman and the secretary of the no distribution of assets to shareholders until
stockholders’ meeting the claims of the creditors have been paid or an
(b) subscription and paid-in capital appropriation of such assets has been made for
requirements the payment of such claims
(c) should not prejudice the rights of corporate
creditors (i.e. should not violate the Trust Fund
Doctrine)
(d) must be approved by the SEC
3. power to incur, create, or increase (a) certified to in a certificate duly signed by a
bonded indebtedness majority of the directors and countersigned by
the chairman and the secretary of the
stockholders’ meeting
(b) must be approved by the SEC
(c) bonds so issued must be registered with SEC
4. power to deny pre-emptive right when right not available: *pre-emptive right: right of existing
(a) denied by the articles of incorporation stockholders to purchase or subscribe to all
(b) shares are to be issued in compliance with issuances or disposition of shares of any class,
laws requiring stock offerings or min stock in proportion to their respective stockholdings,
ownership by the public before such shares are offered to the public
(c) shares are to be issued in good faith
5. power to sell, lease, exchange, When vote of the BOT or BOT is sufficient:
mortgage, pledge or otherwise dispose all (a) when necessary in the usual and regular
or substantially all of its property course of business
(b) when the proceeds of such sale or
disposition are to be appropriated for the
conduct of the remaining business of the
corporation
6. power to acquire its own shares (a) acquisition must be for a legitimate purpose
or purposes
(b) corporation must have unrestricted retained
earnings to cover the purchase of the shares
7. power to invest corporate funds in *When vote of the BOT or BOT is sufficient:
another corporation or business or for any -reasonably necessary to accomplish its primary
other purpose purpose
* stockholder may exercise his appraisal right
8. power to declare dividends voting requirement *dividends: portion of the accumulated profits
(a) stock dividend: general req. stated above of a corporation which is set aside by the
(b) cash dividend: majority vote of the directors directors for distribution to stockholders
present provided there is a quorum *property dividends are actually cash dividends
payable in property
*paid-in surplus may be declared only as stock
dividends but not cash dividends, per SEC ruling
9. power to enter into management management contract must be approved by: *management contract: contract whereby a
contract (a) majority vote of the BOD or BOT present corporation delegates the management or
provided there is a quorum operation of its business to another corporation;
(b) majority of the outstanding capital stock or shall not exceed 5 years for any one term
majority of the members entitled to vote in a
meeting called for the purpose

Notes by: Mich Calanog

CORPORATION
 Must be classified as such in the articles of
 Artificial being created by operation of law, having incorporation
the right of succession and the powers, attributes  Limitations: exclusive right to vote and be voted for
and properties expressly authorized by law or in the election of directors must be for a limited
incident to its existence period not exceeding 5 years which begins from the
 Doctrine of piercing the veil of corporate entity or date of the said approval
corporate fiction: separate personality of a
corporation may be disregarded if such entity is Treasury shares
used to defeat public convenience, justify a wrong,  They shall have no voting rights as long as they
protect fraud, or defend crime remain in the Treasury
 Doctrine of limited capacity: corporation can  They may again be disposed of for a reasonable
exercise only the powers expressly conferred upon it price fixed by the BOD
by law and its articles of incorporation
 Incorporation test: nationality of a corporation *Only those classified as redeemable or preferred shares may
follows that of the country under whose laws it was be deprived of the voting right, unless otherwise provided by
incorporated; test applied in our jurisdiction the Corporation Code
 Control test: nationality of a corporation follows that
of the stockholders owning the controlling interest; Limitations when no-par shares are issued
applied during wartime (a) Subscriptions to no-par shares shall be deemed fully
paid and non-assessable & the holder of such shares
Requisites for a de facto corporation to exist shall not be liable to the corporation or to its
(1) There must be valid law under which it is creditors in respect thereto
incorporated (b) Shares without par value may not be issued for a
(2) There must be an attempt in good faith to consideration less than P5/share
incorporate (c) The entire consideration received for no-par shares
(3) There must be an actual exercise of corporate shall all be treated as capital and shall not be
powers available for distribution as dividends
(4) A certificate of incorporation is issued despite a
defect in its incorporation Incorporation and Organization od Private
Corporations
Promoter (1) Verification with the SEC of the name to be used.
 A person, natural or juridical, who usually discovers (2) Drafting and execution of the articles of
a prospective business and brings persons incorporation signed by the incorporators
interested to invest in it through the formation of a (3) Filing of the articles of incorporation with SEC
corporation (4) Payment of the filing, publication, and other fees
 Personally liable for contracts made for the benefit (5) Issuance of the certificate of incorporation by the
of the proposed corporation until the corporation SEC
ratifies  Operative act that will grant juridical
personality to the corporation
*Legal capital: total par value of all issued par value share or  Kinds of franchise
the total cash or consideration received for all issued no par o Primary franchise/corporate franchise:
value shares refers to the right and privilege
*Share of stock may be issued even if not fully paid, except granted by the State to exist as a
shares without par value which are deemed fully paid and corporation; vested in the individuals
non-assessable upon issuance; stock certificate is issued only who compose the corporation and not
if the subscription is fully paid on the corporation itself
o Secondary franchise: different rights,
Shares privileges, and powers which are
Rules on redeemable shares obtained by the corporation which are
(a) They may be issued by the corporation only if not a prerequisite to corporate
expressly provided in the articles of incorporation existence
(b) They may be deprived of voting rights
(c) They may be purchased or taken up by the Contents of the articles of incorporation
corporation upon the expiration of a fixed period, (1) name of the corporation
regardless of the existence of unrestricted RE in the (2) purpose/s of the corporation
books of the corporation (3) place of the principal office which must be in the
(d) The terms and conditions for their redemption must Philippines
be stated in the articles of incorporation and the (4) term of existence
stock certificate representing the said shares a. may be shortened
b. may be extended for periods not
Founders’ shares exceeding 50 years in any single instance
 Those that grant to the founders certain rights and i. extension may not be made
privileges not enjoyed by other shares earlier than 5 years prior to the

Notes by: Mich Calanog

 original or subsequent expiry expiration of their term if they have yet no
date(s) successors
c. shortening or extension requires
amendment of articles of incorporation Election of directors or trustees
(5) names, nationalities and residences of incorporators  stock corporation: cumulative voting
(6) names, nationalities and residences of  non-stock corporation: a member may cast as many
directors/trustees votes as there are trustees to be elected but may
(7) amount of authorized capital stock in lawful money not cast more than one vote for one candidate
of the Philippines, the # of shares, and the par
value of each Corporate officers
(8) names of subscribers, nationalities, # of shares  president: must be a director
subscribed, amount subscribed, and amount paid-in  treasurer: may be a director or not
(9) other matters  secretary: must be a resident and citizen of the Phil
(10) name of the temporary treasurer elected (treasurer-  no one can be the president and secretary or
in-trust) president and treasurer at the same time
(11) notarial acknowledgement
(12) treasurer’s affidavit Meeting of directors or trustees
 quorum: # of directors or trustees sufficient to
Amendment of the articles of incorporation transact business
 vote required  majority of the # of directors or trustees fixed in the
o majority vote of the directors articles of incorporation, unless by-laws provide for
o vote or written assent of 2/3 of the a greater number
outstanding capital stock/members
 requirements of amendments Executive committee
o original & the amended articles shall  small group within a corporation composed of not
contain all provisions required by law to be less than 3 members of the board the creation of
set out in the articles of incorporation which is provided in the by-laws
o amendment shall be indicated by  serve as a screening committee
underscoring the change or changes made  take immediate action on important matters without
the need of a board meeting
Effect of non-use of corporate charter for 2 years
 deemed dissolves, unless the cause is beyond the Removal of directors or trustees
control of the corporation as may be determined by  previous notice of the intention to propose such
the SEC removal must have been given to the stockholders
or members
Effect of continuous non-operation for 5 years  2/3 of the outstanding capital stock/members
 ground for the revocation of its corporate franchise  cause of removal may be with or without cause but
or certificate of incorporation, unless the cause is must not be used to deprive minority stockholders
beyond the control of the corporation as may be or members of the representation in the BOD/BOT
determined by the SEC
Compensation of directors
Board of Directors, Trustees, and Officers  directors are not entitled to compensation as such
 governing body of a corporation directors except:
 these individuals cannot bind the corporation o when fixed in the by-laws
separately as directors or trustees o when the giving of compensation is
 principal functions: approved by the stockholders representing
o exercise corporate powers at least a majority of the outstanding
o conduct all corporate business capital stock
o control and hold corporate property o when the compensation refers to
reasonable per diem
Qualifications of a director or trustee
(1) must be the owner of at least 1 share of stock Rule on self-dealing directors, trustees or officers
(2) majority of the directors or trustees must be  voidable at the option of the corporation, unless:
residents of the Philippines o the presence of such director or trustee in
(3) must not be less than 5 nor more than 15 the board meeting in which the contract
(4) must not have been convicted by final judgment of was approved was not necessary to
an offense punishable for a period exceeding 6 constitute a quorum at such meeting
years committed within 5 years prior to his election o the vote of such director or trustee was
not necessary for the approval of the
Term of office contract
 shall hold office for 1 year and until their successors o the contract is fair & reasonable under the
are elected and qualified circumstances
 principle of holdover: the incumbent directors do not o authorized by the BOD/BOT
automatically cease to hold office upon the

Notes by: Mich Calanog

Rule on contracts between corporations with o General manner in which the corporation
interlocking directorate holds out an officer or agent as having the
 interlocking directorate: when a director holds seats power to act
in the BOD of 2 or more corporations o The acquiescence in his acts of a particular
 requisites for validity of contract between 2 or more nature, with actual or constructive
corporations with interlocking directorate knowledge thereof, within or beyond the
o no fraud scope of his ordinary powers
o contract is fair and reasonable under the
circumstances By- Laws
o interest of the interlocking director in one  Rules of action adopted by a corporation for its own
corporation(s) is merely nominal government and for the government of its
 the presence of such director or stockholders or members and those having the
trustee in the board meeting in direction, management and control of its affairs
which the contract was approved  Effective upon the issuance of the SEC of a
was not necessary to constitute a certification
quorum at such meeting
 the vote of such director or When by-laws are adopted and filed; by whom
trustee was not necessary for the adopted
approval of the contract prior to corporation - submitted together with the
articles of incorporation to
Fiduciary duties of directors the SEC
 duty of obedience - approved and signed by all
o directors must restrict their acts within the the incorporators
scope of the powers of the corporation after incorporation - submitted within 1 month
 duty of diligence after the receipt of the
o directors are obligated to perform their official notice of the
duties with the degree of due care issuance of certificate of
 duty of directors or trustees for damages incorporation
o forbids a director from acquiring business - approved by the
deals that belong to the corporation or stockholders representing at
prejudicing the corporation because of least a majority of the
undisclosed conflict of interest outstanding capital stock, or
o doctrine of corporate opportunity by a majority of the
members.
Powers of Corporations
Effect of failure to file by-laws within the period
Kinds of powers required
(1) express powers: expressly granted to a corporation  SEC may revoke or suspend the certificate of
by its charter registration of the corporation
(2) implied powers: powers which are necessary to
carry into effect powers which are expressly Articles of incorporation vs by-laws
granted, and which must therefore be presumed to Articles of incorporation By-laws
have been the intention in the grant of the franchise constitute the charter of the rules of action adopted by a
(3) incidental or inherent powers: powers that a corporation corporation
corporation may exercise by reason of its very executed before adopted before or after
existence as a corporation incorporation incorporation
adopted by the incorporators adopted by the incorporators,
Specific express powers of a corporation under the stockholders, or members
Corporation Code filing is a condition precedent condition subsequent thereto
(see table) for the acquisition by the
corporation of juridical
Ultra-vires acts personality
 an act or contract which is beyond the powers that a
corporation can lawfully exercise
Meetings of directors or trustees, stockholders or
 act performed outside the express, implied, and
members
incidental powers of a corporation
 Requisites:
Meetings of directors or trustees
o Act must be consummated
Regular meeting Special meeting
o Creditors are not prejudiced or all of them
date of meeting monthly, unless any time upon the
have given their consent thereto
provided call of the
o Rights of the public or of the State are not
otherwise president or as
involved
provided by the
o All stockholders must give their consent
by-laws
 Doctrine of apparent authority: existence may be
notice and must be sent at least a day before
ascertained through

Notes by: Mich Calanog

contents must be sent at least a day before
place of meeting anywhere in or outside the Phil
quorum majority of the directors or trustees
stated in the AIC
presiding officer president shall preside at all meetings
manner of voting per head; proxy nor allowed

Meetings of stockholders or members

Regular meeting Special meeting
date of meeting held annually on a anytime deemed
date fixed in the necessary
by-laws
if not fixed, any
date in April as
determined by the
BOD/BOT
notice and written notice at at least 1 week
contents least 2 weeks prior prior to the
to the meeting meeting
place of meeting in the city or municipality where the
principal office of the corporation is
located
*Metro Manila shall be considered a city
or municipality
quorum majority of the outstanding capital
stock/members
presiding officer president shall preside at all meetings
who may call - person authorized in the by-laws
meeting - director, trustee, or officer entrusted
with the management of the
corporation
- petitioning stockholder or member, on
order of the SEC
- secretary of the corporation,
stockholder, or member in case of
meeting to remove directors/trustees
requisites for a
valid meeting
effect if meeting is
improperly held or
called
manner of voting

Notes by: Mich Calanog