CORPORATION LAW PCGPINEDA,RN,MAN2014Page3

Section 1. Title of the Code.-This Code shall be known as The Corporation Code of the Philippines.

History:Corporation Law Act No. 1459 first general law on corporation-passed by the Philippine Commission in 1906Batasang Pambansa Blg. 68 The Corporation Code of the Philippines repealed Act No. 1459Corporation Code Applies to all corporation already in existence at the time the code took effect Consistent with the mandate of the Constitution (Sec 16, Art. XII) For Congress to prescribe all the criteria for the formation, organization or regulation of private corporations in a general law applicable to all without discrimination Section 148 of the Corporation Code provides that all lawfully existing corporations in the Philippines on the date of its effectivity are thereafter authorized, licensed or registered by SEC shall be deemed to be authorized and licensed under the provisions of the code but subject to certain conditions. The existing corporations are given not more than 2 years to comply with the new requirements of the Code.PURPOSEa. Defines the area within which the parties are free to allocate risk, control and profit as they wishb. To prescribe the allocation of these elements in the absence of express agreementc. Aims to regulate both relations between the groups and within the groups e.g. stockholder, directors, officers and creditorsSCOPEThe Code provides: F2D2Pa. Formation and organization of corporationsb. Defines their powersc. Fix the duties of the directors and other officers thereofd. Declares liabilities of shareholders and members e. Prescribe the conditions under which corporations may transact business APPLICATION OF THE CORPORATION CODEREMEMBER: As between a general and special law the latter will prevail. The former will only apply as suppletorily insofar as they are not in conflict with the provisions of the special law. EXAMPLES:Banks General Banking Law and New Central Bank Act are primary laws on banksInsurance Companies Insurance Code of the Philippines Pre-Need Companies Pre-Need Code or RA 9829

OTHER APPLICABLE LAWS AND RULESSecurities Regulation Code or RA 8799The Foreign Investment act of 1997 New Civil Code supplies missing details in the Corporation Law like agency rules applies to acts of directors, officers or stockholders in the absence of any applicable provisions in the Corporation Code. SEC Rules and Regulations only have force and effect when as a collegial body the SEC en banc can adopt rules and regulation. Exemptions:SEC officers implement the statutory provisions and even act in a specific way in the absence of a statutory rules or regulations promulgated by the SEC en banc.

Section 2. Corporation defined 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.

According to CJ Marshall of the US SC corporations are an artificial being, invisible intangible and existing only in contemplation of law

Attributes of a Corporations derived from Sec 2.a. It is an artificial being b. It is created by operation of law c. It has the right of succession d. It has the powers, attributes and properties expressly authorized by law or incident to its existence. THEORIES1. Concession Theory corporation owes its life to the State and its birth is purely dependent of the States will.a. Also known as Fiat theory, Government Paternity Theory or Franchise Theory 2. Fletcher: A Corporation is not in fact and reality a person, but law treats it as though it were a person by process of fiction, or by regarding it as an artificial person distinct and separate from its individual stockholders.a. Created for certain specific purposes, extent of existence, power and liberties are fixed by its charter.3. Other Theories that may influence the development of corporation law:a. Realist or inherence Theory the legal recognition of group of interest that, as a practical matter, already exist. i. Its focus is on voluntary associational activities of individuals provide a basis for invoking the usual constitutional and other legal protection for individuals b. Enterprise Theory stresses the underlying commercial enterprise without emphasis on entity-aggregate distinctions of the components c. Symbol Theory a corporation is a symbol for the aggregate of the associates in their group personalities 4. Franchises a corporation is granted by the state the right to exist by virtue of a primary franchise.a. Is a special privilege conferred by a governmental authority and which does not belong to citizens of the country generally as a matter of common right.b. Franchises relating to corporations are divisible into:i. Corporate or General franchise exist as a corporationA. Vested in the individuals who compose the corporation and not the corporation itself ii. Special or secondary Franchise - certain rights are conferred of existing corporations. E.g rights to use the streets of municipalities lay pipes of tracks etc. B. Vested in the corporation, may ordinarily be conveyed or mortgaged under a general power granted to a corporation to dispose its property.The right to be and act as a corporation is not a natural or civil right of any person. Thus without registration and without authority of the State groups of individuals would only be considered an association, or at most partnership.Creation by Special LawThe Constitution provides that the only GOCC may be created by special law.Some special laws may also recognize that certain entities may acquire juridical personality without conferring a corporate status automatically by mere passage of law. e.g. Local Water Districts they are created pursuant to PD 198 that constitutes their special charter.5. Contract Theory incorporation involve contracts among the members, between the members and the corporation, and between the members or the corporation and the State.a. Thus, because of the contract between the State and corporation, the corporation is entitled to the right against impairment of contracts. The state cannot likewise take the life of the corporation without due processb. Contract is governed and evidenced by the Articles of Incorporationc. There is also a contract between the corporation and its stockholders ergo, members cannot disregard the provisions of the Articles of Incorporation and its By-laws. In return the corporation cannot disregard the rights of its shareholders provided in the article and by-laws.6. Right of Succession also known as perpetual succession. That continuous existence which enables a corporation to manage its affairs, and hold property without the necessity of perpetual conveyances, for the purpose of transmitting it.

a. It is chiefly for the purpose of clothing bodies of men in succession with these qualities and capacities that corporation were invented, and are in use.b. Purpose is for the promotion of the particular object, like one immortal being.c. A corporation continues to exist even if there is a change in those who compose it. Death of a shareholder or transfer of shares will not affect the continued existence of the corporation.d. Perpetual succession does not imply corporate immortality. The term of the corporation is 50 years subject to further extension of its term under Sec 11 of the Code.7. Doctrine of Separate Personality the corporation has a personality separate and distinct from its members.a. Basis Art. 44 of the Civil Code