A corporation is 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

Article XII, Section 16 of the 1987 Constitution provides that Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Governmentowned and controlled corporations may be
created or established by special charters in the interest of the common good and subject to the test of economic viability.

GOCCs are "stock or non-stock"corporations "vested with functions relating to public needs" that are "owned by the
Government directly or through its instrumentalities."

Stockholders are liable only to the extent of the shares subscribed by them whether paid or not.

Stock –one which has: 1. Capital stock divided into shares; and 2. Are authorized to distribute to the holders of such
shares dividends or allotments or the surplus profits on the basis of the shares held

Non-Stock – is one which does – not issue shares and is - created not for profit but for public good and welfare and
where no part of its income is distributable as dividends to its members, trustees, or officers.

a. Corporation Aggregate- corporation consisting of more than one member or corporator. The CC requires that these
corporations must be formed by “not less than 5 persons”

b. Corporation Sole ‐ Religious corporation which consists of one member which is the head of the religious sect or
corporator only and his successor.

Ecclesiastical Corporation ‐ one organized for religious purpose.

Lay Corporation ‐ one organized for a purpose other than for religion.

Eleemosynary ‐ one established for charitable purposes.

Civil ‐ one established for business or profit.

Domestic ‐ incorporated under the laws of the Philippines.

Foreign ‐ formed, organized, or existing under any laws other than those of the Philippines and whose laws allow Filipino
citizens and corporations to do business in its own country or state

De jure ‐existing both in fact and in law.

De facto ‐existing in fact but not in law.

Close ‐limited to selected persons or members of the family

Open ‐open to any person who may wish to become a stockholder or member thereto.

Parent or Holding ‐ related to another corporation that it has the power either, directly or indirectly to, elect the majority
of the director of such other corporation.

Subsidiary ‐ so related to another corporation that the majority of its directors can be elected either, directly or indirectly,
by such other corporation

True ‐ exists by statutory authority

Quasi ‐ exist without formal legislative grant:

i. Corporation by prescription ‐ has exercised corporate powers for an indefinite period without interference on the part
of the sovereign power and which by fiction of law, is given the status of a corporation;

ii. Corporation by estoppel ‐ in reality is not a corporation, either de jure or de facto, because it is so defectively formed,
but is considered a corporation in relation to those only who, by reason of theirs acts or admissions, are precluded from
asserting that it is not a corporation

a) Public - formed or organized for the government of a portion of the State (like cities and municipalities) for the purpose
of serving the general good and welfare.

b) Private - one formed for some private purpose, benefit or end. It may either be a stock or non-stock (Aquino, 2014).

One who has induced another to act upon his willful misrepresentation that a corporation was duly organized and
existing under the law, cannot thereafter set up against his victim the principle of corporation by estoppel.

c. The president who negotiated with Albert is liable. A person acting or purporting to act on behalf of a corporation
which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered
into or for other acts performed as such agent

A corporation by estoppel has no real existence in law. It is neither a de jure nor de facto corporation, but is a “mere
fiction existing for the particular case, and vanishing where the element of estoppels is absent”

Clearly, under the law on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be
without valid existence, are held liable as general partners. Technically, it is true that Lim did not directly act on behalf of
the corporation.

Grandfather rule – Nationality is attributed to the percentage of equity in the corporation used in nationalized or partly
nationalized area. This test is an exception to the Control Test and was applied by the SEC in several cases

The doctrine of corporate juridical personality states that a corporation is a juridical entity with legal personality separate
and distinct from those acting for and in its behalf and, in general, from the people comprising it

The doctrine of piercing the corporate veil is the doctrine that allows the State to disregard, for certain justifiable reasons,
the notion that a corporation has a personality separate and distinct from the persons composing it.

this does not prove, in any way, that the corporation is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, or when it is made as a shield to confuse the legitimate issues, warranting that its separate and distinct
personality be set aside.

Incorporation

It is the performance of conditions, acts, deeds, and

writings by incorporators, and the official acts,

certification or records, which give the corporation

its existence.

The Articles of Incorporation (AOI) is one that

defines the charter of the corporation and the

contractual relationships between the State and the

corporation, the stockholders and the State, and

between the corporation and its stockholders

The documents to be submitted for the issuance

of a certificate of incorporation in favor of FSB

Savings & Mortgage Bank, Inc. are the following:

a. Articles of Incorporation

b. Treasurer’s Affid avit

c. Certificate of Authority by the Monetary Board of BSP

d. Verification slip from the records of the SEC whether or not the proposed name has already been registered under a
different entity

e. An undertaking stating the proposed name shall be changed in case another entity has been registered under the
proposed name

f. Registration sheet

g. Bank certificate of deposit covering the paid-up capital

h. Letter containing authorization to the SEC or Monetary Board or any of its duly authorized representative to inspect
bank records concerning the paid-up capital

i. Favorable endorsement from proper government agency in case of special corporations

CORPORATE ENTITY THEORY

The corporation is possessed with a personality

separate and distinct from the stockholders or

persons composing it.

By-laws are rules and regulations or private laws
enacted by the corporation to regulate, govern and

control its own actions, affairs and concerns and of

its stockholders or members and directors and

officers in relation thereto and among themselves in

their relation to it

The following are the requisites for the validity of

by-laws: (CoMorO-RAG)

1. Must be consistent with the COrporation Code,

other pertinent laws and regulations;

2. Must not be contrary to MORals and public

policy;

3. Must not impair Obligations and contracts or

property rights of stockholders;

4. Must be Reasonable;

5. Must be consistent with the charter or AOI; and

6. Must be of General application and not directed

against a particular individual.

The rule is that a

corporation is not restricted to the exercise of

powers expressly conferred upon it by its charter,

but has the power to do what is reasonably

necessary or proper to promote the interest or

welfare of the corporation.

To Sue and be sued;

2. Of Succession (To have perpetual existence

unless the certificate of incorporation provides

otherwise;);

3. To adopt and use of Corporate seal;

4. To amend its Articles of Incorporation;

5. To adopt its By-laws;

6. For Stock corporations: issue and sell stocks to

subscribers and treasury stocks; for non-stock

corporations: admit members;

7. To Purchase, receive, take or grant, hold,

convey, sell, lease, pledge, mortgage and deal

with real and personal property, securities and

bonds subject to the Constitution and existing

laws;

8. To Enter into merger or consolidation, (To

enter into a partnership, joint venture, merger,

consolidation, or any other commercial

agreement with natural and juridical persons);

9. To make reasonable Donations for public

welfare, hospital, charitable, cultural, scientific,

civic or similar purposes, provided that no

donation is given to any:

a. Political party,

b. Candidate and

c. Partisan political activity.

10. To establish pension, Retirement, and other

plans for the benefit of its directors, trustees,

officers and employees – basis of which is the

Labor code; and

11. To exercise Other powers essential or

necessary to carry out its purposes (CC, Sec. 36)

The following officers may sign even in the

absence of a board resolution:

a. Chairperson of the Board of Directors;

b. President;

c. General Manager;

d. Personnel Officer; or

e. Employment Specialist in labor case.

Theory of Specific Capacity

The specific powers of a corporation, also called

Theory of Specific Capacity, are the following:

(ESB-PA-SIDE-A)

1. Power to Extend or shorten corporate term (CC,

Sec. 37)

2. Increase or decrease corporate Stock (CC, Sec.

38)

Note: Now, Section 36 RCC, in addition to the

provision, ALLOWANCE OF SENDING OF

NOTICE OF MEETING REGARDING PROPOSED

ACTION THRU ELECTRONIC MEANS SUCH AS

ELECTRONIC DATA MESSAGES IF ALLOWED

BY THE BY-LAWS IN ACCORDANCE WITH ECOMMERCE

ACT)

3. Incur, create, or increase Bonded indebtedness

(CC, Sec. 38)

4. Deny Pre-emptive right (CC, Sec. 39)

5. Sell, dispose, lease, encumber all or

substantially all of corporate Assets (CC, Sec. 40)

6. Purchase or acquire Shares (CC, Sec. 41)

7. Invest corporate funds in another corporation

or business for other purpose other than

primary purpose (CC, Sec. 42)

8. Declare Dividends out of unrestricted retained

earnings (CC, Sec. 43)

9. Enter into management contract with another

corporation (not with an individual or a

partnership

Authority to enter into contract (1996 Bar)

The Board of Directors or Trustees must act

together as a body in order to bind the corporation

by their acts (

Pre-emptive right

It is the preferential right of shareholders to

subscribe to all issues or disposition of shares of any

class in proportion to their present shareholdings

no stock dividend shall be issued without

the approval of the stockholders representing not

less than 2/3 of the outstanding capital stock at a

regular or special meeting duly called for that

purpose. Conformably with Sec 50 of the CC, a

written notice of the holding of the regular meeting

sent to the shareholders will suffice. The notice

itself specified the said subject matter.

ULTRA VIRES ACTS (UVA)

No corporation shall possess or exercise any

corporate powers except those conferred by this

Code or by its articles of incorporation and except

such as are necessary or incidental to the exercise of

the powers so conferred

Doctrine of apparent authority

If a corporation knowingly permits one of its

officers, or any other agent, to act within the scope

of an apparent authority, it holds him out to the

public possessing the power to do those acts; and

thus, the corporation will, as against anyone who

has in good faith dealt with it through such agent, be

estopped from denying the agent’s authority.

: YES, the corporation may be compelled. A bank is

liable to innocent third persons where

representation is made in the course of its normal

business by an agent like the bank manager, even

though such agent is abusing her authority. Clearly,

persons dealing with her could not be blamed for

believing that she was authorized to transact

business for and on behalf of the bank. The bank is

estopped from questioning the authority of the bank

manager to enter into the contract of sale. If a

corporation knowingly permits one of its officers or

any other agent to act within the scope of an

apparent authority, it holds the agent out to the

public as possessing the power to do those acts;

thus, the corporation will, as against anyone who

has in good faith dealt with it through such agent, be

estopped from denying the agent’s

authority. Unquestionably, the bank has authorized

its manager to enter into the Deed of Sale.

Accordingly, it has a clear legal duty to issue the

board resolution sought by. Having authorized her

to sell the property, it behooves the bank to confirm

the Deed of Sale so that the buyers may enjoy its full

use

YES. The authority of a corporate officer or agent

in dealing with third persons may be actual or

apparent. Accordingly, the authority to act for and

to bind a corporation may be presumed from acts of

recognition in other instances, wherein the power

was exercised without any objection from its board

or shareholders. Undoubtedly, Associated Bank

had previously allowed Atty. Soluta to enter into the

first agreement without a board resolution

expressly authorizing him; thus, it had clothed him

with apparent authority to modify the same via the

second letter-agreement. It is not the quantity of

similar acts which establishes apparent authority,

but the vesting of a corporate officer with the power

to bind the corporation

NO. The Court would be unduly stretching the

doctrine of apparent authority if the Court would

consider the power to undo or nullify solemn

agreements validly entered into as within the

doctrine’s ambit. Although a branch manager,

within his field and as to third persons, is the

general agent and is in general charge of the

corporation, with apparent authority

commensurate with the ordinary business

entrusted him and the usual course and conduct

thereof, yet the power to modify or nullify corporate

contracts remains generally in the board of

directors. Being a mere branch manager alone is

insufficient to support the conclusion that Mondigo

has been clothed with “apparent authority” to

verbally alter terms of written contracts, especially

when viewed against the telling circumstances of

this case: the unequivocal provision in the mortgage

contract; PCRB’s vigorous denial that any

agreement to release the mortgage was ever

entered into by it; and, the fact that the purported

agreement was not even reduced into writing

considering its legal effects on the parties’

interests. To put it simply, the burden of proving

the authority of Mondigo to alter or novate the

mortgage contract has not been established

TRUST FUND DOCTRINE

The subscribed capital stock of the corporation is a

trust fund for the payment of debts of

corporation which the creditors have the right to

look up to satisfy their credits, and which the

corporation may not dissipate. The creditors may

sue the stockholders directly for the latter’s unpaid

subscription. (