when the code was passed? Ferdinand Marcos Batas Pambansa not RA Philippines was not a Republic but a Parliament Section 1. Title of the Code- This code shall be known as The Corporation Code of the Philippines. The law that governs private corporations in the Philippines. Took effect on May 1, 1980 Replaced the Corporation Law which was enacted on March 1, 1906 during the American Regime through the Philippine Commission. Aims corporations to become effective partners of the national government
2. Is SGV & Co. a form of Corporation? SyCip Gorres Velayo & Co (SGV & Co.) is currently the Philippines' largest multidisciplinary professional services firm with eight offices across the country. No. It is a form of Limited Partnership. 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. I. ATTRIBUTES OF A CORPORATION 1. It is an artificial being with separate and distinct personality. (Doctrine of Separate Personality) 2. It is created by operation of law. 3. It enjoys the right of succession. 4. It has the powers, attributes and properties expressly authorized by law or incident to its existence. Advantages of the Corporate Organizations 1. Separate juridical personality Advantages of the Corporate Organizations 2. Limited liability to investors
General rule: Where a corporation buys all the shares of another corporation, this will not operate to dissolve the other corporation and as the two corporations still maintain their separate corporate entities, one will not answer for the debts of the other. [Nell v Pacific Farms (15 SCRA 415), Nov. 23, 1965] Advantages of the Corporate Organizations
Exceptions: o If there is an express assumption of liabilities; o There is a consolidation or merger; o If the purchase was in fraud of creditors; o If the purchaser becomes a continuation of the seller; o If there are unpaid subscriptions (stockholder is liable for the unpaid balance).
Advantages of the Corporate Organizations 3. Free transferability of units of ownership 4. Centralized Management Partnership vs. Corporation Both have a separate juridical personality. Both are artificial persons ie. They have no bodily existence, and can only act through agents Both are composed of a group of persons with the exception of a corporate sole. A partnership, with the exception of a general professional partnership, is taxed as a corporation.
Partnership vs. Corporation Partnership Corporation Extent of Liability partners are personally liable for the debts of the partnership Stockholders cannot be made to personally answer to corporate creditors Creation Mere agreement of the partners Created by the operation of law Number of Organizer mere agreement of the parties, w/c can be composed of just 2 persons, Formed by 5 or more persons but not exceeding 15 Management In most cases, all the owners actively participate in management, w/ capacity to bind it by any usual contract management is centralized in the board of directors w/c has exclusive power to bind the corp Right of Succession No right Has right Partnership vs. Corporation Partnership Corporation Nature of Relationship based on mutual trust and confidence (delectus personae) so that its existence is precarious because of the facility w/ which it can be dissolved (i.e. through the death or unilateral act of a partner); Has more stability as it enjoys the right of succession and is not affected by the death or insolvency of a stockholder; also, dissolution before a corp.s term requires a2/3rds vote of the stock Powers May exercise any power provided it is authorized by partners and is not contrary to law, morals, good customs, public order or public policy. Can exercise only the powers expressly authorized by law or incident to its existence Commencement of existence upon the execution of the partnership contract unless a different date is set by the partners. On the date of the issuance of its certificate of incorporation Partnership vs. Corporation Partnership Corporation Transferability of interest A partner cannot transfer his shares to another person without partners consent
Can transfer his shares to another person without the consent of other stockholders Term of existence May be formed for an indefinite period May exist for a period not exceeding 50 years Dissolution May be dissolved by a partner Cannot be dissolved without the consent of the state Sec. 3. Classes of corporations. - Corporations formed or organized under this Code may be stock or non-stock corporations. Corporations which have capital stock divided into shares and are authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All other corporations are non-stock corporations. Stock corporation One which has a capital stock divided into shares and is authorized to distribute to the holders of such shares dividends or allotments of the surplus profits (i.e., retained earnings on the basis of the shares held It is organized for profit. The governing body of a stock corporation is usually the Board of Directors (Except in certain instances for close corporations) Non-stock corporation All other corporations are non-stock corporations One where no part of the income is distributable as dividends to its members, trustees, or officers, subject to the provisions of the Code on dissolution. Not organized for profit. Its governing body is usually the Board of Trustees. 1. Public corporation - One formed or organized for the government or a particular state. Its purpose is for the general good and welfare. 2. Private corporation - One formed for some private purpose, benefit, aim or end Other kinds of corporations The true test is the purpose of corporation.
If corporation is created for political or public purpose connected with the administration of government, then it is a public corporation.
If not, it is a private corporations although the whole or substantially the whole interest in the corporation belongs to the state. Other kinds of corporations In the Philippines, public corporations are the Provinces, cities, municipalities, and barangays. They are also called Municipal corporations or local government.
The code eliminated the classification of corporations into public or private obviously for the reason that it applies only to private corporations. Other kinds of corporations Other kinds of corporations Private corporations include:
a. Government- owned or controlled corporations (GOCC) or those directly created by Special law (Sec 4) or if organized under the general corporation law (B.P. Blg. 68) These corporations are private not public corporations because they are not established for the government of a portion of the state. Private corporations include:
b. Quasi- public corporations or those which have accepted from the state the grant of a franchise or contract involving the rendition or performance of some public duties or service but which are organized for profit. Other kinds of corporations (1) As to number of persons who compose them: a. Corporation Aggregate- corporation consisting of more than one member or corporator b. Corporation sole or religious corporation- consists of one member or corporator only and his successors, such as bishop Other kinds of corporations 4. Educational corporation (106) Those corporations which are organized for educational purposes. This type of corporation is governed by Section 106 of the Corporation Code. Other kinds of corporations Sec. 4. Corporations created by special laws or charters. - Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable. Corporations created by special laws shall be owned or controlled by the government. All because:
1. To give everyone equal opportunity to access the special privilege granted. 2. To prevent bribery and corruption of the legislature. Sec. 5. Corporators and incorporators, stockholders and members. Corporators- those who compose a corporation, whether as stockholders or as members. Incorporators- those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories of such document. Note: Ones name may be mentioned in the articles of incorporation as a subscriber or a member, but if he is not a signatory thereto, he is a mere stockholder or a member, not incorporator. Sec. 5. Corporators and incorporators, stockholders and members. Stockholders- the corporators of a stock corporation. Members- the corporators of a non- stock corporation. Other Classes Promoters- persons who bring about or cause to bring about the formation and organization of a corporation by bringing together the incorporators or the persons interested in the enterprise . They lay the groundwork for corporate existence. Subscribers- persons who have agreed to take and pay for original, unissued shares of a corporation formed or to be formed. What do you call this thing??? Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock. Sec. 6. Classification of shares. (continued) Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The board of directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange Commission. Shares of capital stock issued without par value shall be deemed fully paid and non assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Sec. 6. Classification of shares. (continued) Provided; That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall betreated as capital and shall not be available for distribution as dividends. A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements. Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. Sec. 6. Classification of shares. (continued) Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock; Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. Sec. 6. Classification of shares. (continued) Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock; Sec. 6. Classification of shares. (continued) 6. Merger or consolidation of the corporation with another corporation with or other corporation. 7. Investment of corporate funds in another corporation or business. 8. Dissolution of the corporation Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights. Sec. 6. Classification of shares. (continued) Sec. 6. Classification of shares. Share of Stock A share of Stock is one of units in which the capital stock of the corporation is divided. stock certificate- the written acknowledgement by the corporation of the stockholders interest in the corporation and its property.
- Formal written evidence of ownership Share of Stock - tangible - Written evidence of that right - may not be issued unless subscription is fully paid - Not essential to ownership
- Incorporeal or intangible property - Represents the right or interest of a person in a corporation - May be issued even if the subscription is not fully paid except in no par shares vs Sec. 6. Classification of shares. - The ordinary stock of a corporation entitles the holder to a pro rata division of the dividends 1. Common Stock Sec. 6. Classification of shares. - Entitles the holder to certain preferences over the shareholders. 2. Preferred Stock a. Preferred stock as to asset- entitles the holder to preference in the distribution of assets over over common stock upon the liquidation of the corporation a. Preferred as to dividends- entitles the holder to preference in the distribution of dividends over common stock Sec. 6. Classification of shares. - The nominal value that appears on the stock certificate - Capital stock that has been assigned a value per share in the corporate charter. - Its primary purpose is to fix the minimum issue price of the shares 3. Par Value Stock Sec. 6. Classification of shares. - One without nominal value that appears on the stock certificate - Capital stock that has not been assigned a value in the corporate charter - Always has issued value - A corporation may issue no par value shares only or with par value - Does not represent any proportionate interest in the capital stock 3. No- Par Value Stock Power of a corporation to classify its own shares & Limitations thereto a. Voting and non voting shares b. Common and preferred shares c. Par Value and no par value shares d. Classification to insure compliance with constitutional or legal requirements 1. classification of corporation may include the following: Power of a corporation to classify its own shares & Limitations thereto 3. each share shall be equal in all respects to every other share. 2. Any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation. 4. Limitations when shares are deprived of the voting right: a. Only those classified as redeemable or preferred, otherwise provided by this code b. There shall always be a series of or class of shares that have complete voting rights
Power of a corporation to classify its own shares & Limitations thereto 4. Limitations when shares are deprived of the voting right (continued):
c. Non- voting shares may nevertheless vote on the following matters previously mentioned from this section.
5. Limitations when no- par shares are issued. a. Subscribers to no- par b. Preferred shares may be issued only with a stated par value
Poer of a corporation to classify its own shares & Limitations thereto 4. Limitations when shares are deprived of the voting right (continued): c. Non- voting shares may nevertheless vote on the following matters previously mentioned from this section. Sec. 7. Founders' shares. - Founders' shares classified as such in the articles of incorporation may be given certain rights and privileges not enjoyed by the owners of other stocks, provided that where the exclusive right to vote and be voted for in the election of directors is granted, it must be for a limited period not to exceed five (5) years subject to the approval of the Securities and Exchange Commission. The five-year period shall commence from the date of the aforesaid approval by the Securities and Exchange Commission. Sec. 7. Founders' shares. - Those that grant to the founders certain rights and privileges not enjoyed by others shares. Rules on Founders shares a. Must be classified as such in the articles of corporation b. Certain rights and privileges subject to the ff. limitations: - if the exclusive right to vote and be voted for the election of director is granted, it must be for a limited period not exceeding 5 years subject to approval of SEC - the five- year period begins at the said approval Sec. 8. Redeemable shares. - Redeemable shares may be issued by the corporation when expressly so provided in the articles of incorporation. They may be purchased or taken up by the corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books of the corporation, and upon such other terms and conditions as may be stated in the articles of incorporation, which terms and conditions must also be stated in the certificate of stock representing said shares. Sec. 8. Redeemable shares. - Those which grant the issuing corporation the power to redeem or purchase them after a certain period. Rules on Redeemable shares a. They may be issued by the corporation only if expressly provided in the articles of incorporation b. They may be deprived of their voting rights c. They may be purchased or taken up by the corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books of corporation/ d. The terms and conditions for their redemption must be stated in the articles of incorporation and the stock certificate representing the said shares. Sec. 9. Treasury shares. - Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board of directors. Sec. 9. Treasury shares. - is a corporations own stock that it has issued and subsequently reacquired from shareholder (Principles of Accounting, Kieso). A corporation may acquire treasury stock for various reasons: 1. To reissue the shares to officers and employees under bonus and stock compensation plans. 2. To signal to the stock market that management believes the stock is under priced, in the hope of enhancing its market value. 3. To have additional shares available for use in the acquisition of other companies. 4. To reduce the number of shares outstanding and thereby increase earnings per share.
Another infrequent reason for purchasing shares is that management may want to eliminate hostile shareholders by buying them out. Sec. 9. Treasury shares. - Rules on Treasury Shares: a. They shall have no voting rights (Sec. 57) b. Although they are part of the subscribed stock, they are not considered outstanding shares. (Sec 137) c. Being owned by the corporation, they are not entitled to dividends d. They may be again disposed for a reasonable price fixed by the board of directors