235501422 Law On Partnership And Corporation Notes 1v311y

Partnership 1. Characteristics of a partnership: a. Consensual b. Onerous - contribution of money, property, or industry into a common fund c. Nominate - Designated Name d. Preparatory - Its organization is followed by other contracts to carry out its purpose e. Principal - It can stand alone f. Bilateral or multilateral - 2 or more persons g. Agency - each partner is an agent to partnership and to each other 2. Professional partnership has no legal personality. Legal personality means that a partnership can sue and be sued, enter into contracts, acquire property in its own name, can incur obligations. 3. A partnership can be a partner in another partnership or a stockholder in a corporation because it has a juridical personality to enter into contracts 4. Even if a partner transfers all interests to another, the transferee does not become a partner unless all other partners consent. This is based on the principle of delectus personarum (principle of mutual trust and confidence). 5. Limited partner would be liable as a general partner if he include his surname in the partnership name and takes part in the control of business 6. General-limited reimbursement

-

liable

up

to

personal

assets

but

subject

to

7. In a general partnership, insanity of a general partner does not result in the automatic dissolution of the partnership but only serves as a ground for the application for judicial dissolution 8. Death, retirement, insanity or civil interdiction (DRICI) of a general partner in a limited partnership, automatically dissolves the partnership. But civil interdiction of a limited partner does not so. 9. Acts of a partner who is insolvent, does not have a right to wind up the affairs of the partnership and the business is unlawful doesn’t bound the partnership. 10. If the partner who acts after dissolution and at fault, he alone ultimately liable to the creditors. The partners can seek reimbursement from the partner who is guilty.

11. New creditor is deemed to have knowledge of the dissolution. He is not therefore, protected by law. Partnership is not bound 12. A partnership begins from the moment of execution of the contract but there can be stipulation otherwise. 13. Contract of co-ownership - no intention of using the asset for business purposes 14. A partnership cannot be formed for a charitable purpose 15. Corporation's legal personality commences from the time it is issued a certificate of incorporation by the SEC 16. Corporation's nationality is determined by the nation's whole laws for which it was created. 17. Death of the president or chairman does not dissolve the firm 18. Partnership is governed by the Civil Code of the Philippines while corporation is under Corporation Code of the Philippines 19. Corporation can only be dissolved by the consent of the state 20. A contract of partnership may be made in any form or manner except if a specific form is required by law for its validity or enforceability 21. It may be made orally or in private instrument if the total contribution of money or other personal property is less than 3,000. If it is more than 3,000 or more, it shall be recorded in the SEC. Noncompliance of which does not make the contract void. However, if immovable property or real rights are contributed, it must be made in public instrument. 22. A limited partnership must be ed with the SEC, otherwise, it is deemed to be a general partnership 23. Universal partnership of all profits - any property belonging to them at the time of the execution of the contract belongs to them but the usufruct (use and enjoyment) of such property belongs to the partnership. Only the fruits of the property as well as whatever property acquired by the partners through industry during the existence of the contract, are contributed to the common fund. 24. Partnership de facto - a partnership in fact but not in law. It is still valid partnership although it lacks certain requirements for its legality

25. A husband and wife cannot enter into a contract of universal partnership because this has the effect of donation and there are prohibited from giving donation to each other. They can enter into a particular partnership but not to govern their property relations. 26. The liability of an industrial partner is always that of a general partner 27. A person may be a general partner and a limited partner in the same partnership at the same time, provided this fact is stated in the certificate of a limited partnership 28. A limited partner cannot contribute services hence it is always a capitalist and a silent partner 29. A capitalist partner will be obliged to sell his interest to the other partners when in case of imminent loss of the business of the partnership he refuses to give additional contribution. 30. Capitalist partner cannot engage in the same or similar business of the firm unless permitted by all others 31. Capitalist partner cannot engage in any kind of business unless permitted to do so. All his industry is supposed to be contributed to the firm 32. Industrial partner is exempted as to losses between partners but is liable to strangers but with right to be reimbursed from the capitalists. 33. An agreement that even the industrial partner shall be liable for losses is permissible. 34. If a partner gives a receipt for the firm, it is the firm's credit that has been collected. If it his own receipt, payment of the debtor will be pro-rated between the firm and the partner receiving the payment. 35. A partner has the right to be reimbursed by the partnership for the amount disbursed on behalf of the partnership and the right to ask for dissolution of the firm at the proper time. 36. A partner has the right in a specified partnership property to use it for business purposes only. 37. The right to inspect and copy books is not available to the partnership pending dissolution nor in one already dissolved 38. As a rule, no formal is demandable until after dissolution. This is

because partners have access to the books. But if a partner is wrongfully excluded from the business, he can demand it at any reasonable time 39. t management arises when two or more partners are appointed managers with an agreement that one cannot act without the consent of the others. The approval of all the managers is necessary for the validity of one's act. 40. Solidary management takes place when 2 or more appointed managers may separately execute all acts of istration. But if one of them should oppose the acts of the others, the decision of the majority shall prevail. In case of a tie, the matter shall be decided by the controlling partners. 41. Participation in the selection of the managing partner is held by law as taking part in the control of the business 42. General or limited partner partners may exercise some rights not available in the general partnership, if the same are given and indicated in the certificate such as the remaining general partners may continue the business even upon death, retirement, civil interdiction of a general partner or the limited partner to demand and receive property other than cash in return for his contribution 43. If the firm upon dissolution is not solvent, a limited partner does not enjoy the same preference as an outside creditor. 44. A limited partner who is held liable as a general partner does not however get the rights of the latter 45. Insanity, incapability, prejudicial conduct of a partner, unfair competition, the business can only be carried at a loss are only grounds for the petition of a partner in the court to dissolve the firm 46. Civil Interdiction is an accessory penalty imposed on a convict when the crime committed is punishable from 12 years and 1 day to 30 years that deprives the convict of his rights of parental authority, guardianship, marital authority, the right to manage his property and of the right to dispose of his property.

Corporation 1. A copy of the articles filed which is returned with the certificate of incorporation issued by the commission under its official seal becomes its corporate charter. 2.

A corporation created by special law has no articles of incorporation

3. A corporation has the power of succession by its corporate name. Character of a corporation is not necessarily determined by its name. 4. The purposes should be stated definitely. The main purpose and secondary purposes shall be distinguished from each other. Main purpose must be specified. A non-stock corporation may not include a purpose which would change or contradict its nature 6. The purposes, where there is more than one, must be capable of being lawfully combined. Thus, banks which are governed by the general banking law of 2000 are prohibited from directly engaging in non-banking activities such as insurance. Similarly, Insurance companies are not allowed to engage in banking operations. 7. The main reason for stating the purpose of the corporation is to determine whether the acts performed by the corporation are authorized or beyond its powers. In the latter case, they will be known as ultra vires acts. 8.

The principal place must be within the Philippines (city or town).

9. The place of principal office does not necessarily mean the place where the business of the corporation is transacted but the place where its books

and records are ordinarily kept and its officers usually meet for the purpose of managing the affairs and transacting the business of the corporation. 10. If the new address is located within the same city or municipality, no corporate document is required to be filed with the SEC except a notice regarding the change of address. 11. The incorporating directors or trustees shall hold office until their successors are duly elected and qualified. They are intended to hold office for one year when the corporation is organized 12. Every director must have at least one share of capital stock of the corporation of which he is director. 13. If some or all of the shares are without par value, such fact shall be stated in the articles 14. If the shares have par value, the amount of the authorized capital stock in pesos is specified in the articles, but if they have no par value, no amount of capital stock is specified in the articles which need only state the number of shares into which said capital stock is divided. The reason is that the price of no-par value shares may vary from time to time and therefore the total amount of the capital stock cannot be known until all the shares are issued. 15. Corporations which will engage in any business or activity reserved for Filipino citizens shall provide in their articles of incorporation the restriction against the transfer of stock or interest which will reduce the ownership of Filipino citizens to less than the required percentage of the capital stock as provided by existing laws. 16. The general amendment may also be effected by the “written assent” of the stockholders representing 2/3 of the outstanding capital stock or 2/3 of its , meaning that such action need not be taken at a meeting and upon a vote. 17. If the amendment consists in extending or shortening the corporate term, a meeting of the stockholders or is necessary. 18.

The amendments shall take effect only upon their approval of the SEC

19. In banking institutions covered by special law, the amendments must be accompanied by a favorable recommendation of the appropriate government agency with respect to it that it is in accordance with law. 20.

Corporations must formally organize their affairs within 2 years,

otherwise, deemed dissolved. If becomes continuously inoperative for 5 years after its organization, temporarily suspended or revoked. 21. When a change of name is approved, it is required that the commission must issue an amended certificate of incorporation under the amended name. 22. In the case of religious corporations, the code does not require the SEC to issue a certificate of incorporation. From and after the filing of articles, the chief archbishop shall become a corporation sole. 23. De facto is the one that has not complied with all the requirements necessary to be a de jure corporation but has complied sufficiently to be accorded corporate status as against third parties although not against the state 24. A corporation by estoppel has no real existence in law. It is neither de jure nor a de facto corporation, but does a mere fiction exist for the particular case. It exists only between the persons who misrepresented their status and the parties who relied on the misrepresentation. 25. Mandatory provisions prescribe formalities for incorporation which are designed to protect the public. 26. Stockholders have indirect control of the corporation through their votes. 27. can

Acts of stockholders are not binding on the corporation. A corporation act only through the BOD.

28. BOD cannot perform constituent acts involving fundamental or major changes in the corporation such as amendment of the articles of incorporation 29. BOD holds a fiduciary relation (trust and confidence) to the corporation and the stockholders or they represent. They are required to discharge their duties in good faith and with diligence, care and skill. They are liable if they breach their fiduciary duty. 30. For BOD to exercise their powers, they must meet as directors or trustees and act at a meeting at which there is a quorum 31. Directors are not agents of the corporation and thus have no power acting individually to bind the corporation 32.

In a close corporation, any action by the directors without a

meeting or at a meeting improperly held is deemed valid or ratified. 33. A corporation is expressly allowed to enter into a management contract under which it delegates the management of its affairs to another corporation for a certain period of time. BOD can also delegate its power, impliedly or expressly to other officers and agents 34. in

One disadvantage of corporation is that stockholders have little voice the conduct of the business.

35. Under the doctrine of piercing the veil of corporate entity, the corporation and the persons composing it will be treated as one and identical person (instances such as fraud, tax evasion, and avoiding obligation). 36. In a non-stock corporation, minimum are 5 and may be more than 15. Number of must be multiple of 5. No part of income shall be distributed as dividends to . 37. Civil Corporation is one organized for profit. Eleemosynary is for charitable 38.

In close corporation, stockholders shall not exceed 20 persons.

39. A partnership can be a corporator in a corporation but a corporation cannot be a partner in a partnership 40. but

A corporation can subscribe after another corporation’s incorporation not if made before.

41. A corporation can be a corporator but never an incorporator in another corporation except in rural bank law 42. A married woman can be an incorporator with the consent of the husband if it involves conjugal or absolute community property. If it involves her exclusive property, consent is not required 43. Majority must be residents of the Philippines to form a private corporation. 44. By-laws need not be notarized but required to be signed by the incorporators and stockholders and filed with SEC. It is mandatory. It shall be effective upon issuance of the SEC of certificate certifying that the by-laws are not inconsistent with the code. 45. Articles of Incorporation are adopted by the incorporators as CHARTER of the corporation while by-laws are for their internal government

46. Regular meetings - it shall be held annually on a date fixed in the bylaws or if not so fixed, on any date in April of every year 47. Special meetings shall be held at any time necessary or as provided in the by-laws, provided however that at least one week written notice shall be sent to all stockholders 48. Place of meetings must be held in the principal place of the corporation. Any provision changing such place is illegal 49. The quorum of board meetings shall be majority of all of the BOD or board of trustee. 50. Every corporation must have at least a BOD, President, Treasurer, Secretary 51.

A

president

must

be

a

director

52.

A secretary must be a resident and a citizen of the Philippines

53. Any 2 or more positions may be held concurrently by the same person except a president and secretary or treasurer at the same time 54. Straight voting - a stockholder may vote his number of shares for as many persons as there are directors to be elected. 55. Cumulative voting for one candidate—a stockholder cumulates/concentrates all his shares and gives one candidate as many votes as the number of directors to be elected multiplied by the number of his shares 56. Cumulative voting by distribution—distributes shares among as many candidates he sees fit. 57.

One

stock

is

equal

to

1

vote

58. Only the stockholders can remove a director. 2/3 of the outstanding capital stock or is required 59. Vacancy in the BOD is filled up by the remaining directors constituting a quorum (majority shall remain) if the cause of vacancy is other than removal, expiration of term or increase in the number of directors or trustees. If not, such vacancy will be filled up by the stockholders.

60.

Regular

meetings

of

the

board

shall

be

held

monthly

61. Special meetings may be held at any time upon the call of the president 62.

Place

of

meetings

may

be

anywhere

63. Directors or trustees are not allowed to vote or attend by proxy and they do not receive compensation in the absence of any provision in the bylaws fixing their salary 64. Should the stockholders representing the majority grant them compensation; such total yearly compensation shall not exceed ten percent of income before tax of the corporation during the preceding year. 65. You cannot be a director in 2 or more corporations. One cannot serve 2 masters at the same time 66.

3

corporate

powers:

(1)express

(2)implied

(3)

incidental

67. Most of the decision by majority of the directors require approval or ratification by at least 2/3 outstanding capital stock. This is true in case of any amendment to articles of incorporation 68. A corporation engaged in transportation cannot engage in any other business alien to transportation 69. Corporations engaged in agriculture are prohibited from having any other interest in any other corporation engaging in agriculture 70. Private corporations engaged in retail trade and rural banking must be 100 percent Filipino-owned. For Public Utility development and exploitation of natural resource must be at least 60% Filipino owned. For pawnshop, at least 70% 71. Ultra vires act may be ratified by approval. If fully or partially executed can bind the parties. An illegal act can never be binding to the corporation. 72.

Stated value of no-par value shares shall not be less than 5

73. At least 25 percent of the authorized must be subscribed. Paid-up capital upon incorporation shall not be less than 25 percent of the subscribed capital.25-25 rule 74. Founder’s share—right to vote and be voted in the election of directors must be for a limited period not to exceed 5 years.

75. Non-voting shares: (1) preferred (2) redeemable (3) treasury. They nevertheless have two rights: Amendment of articles of incorporation and adoption and amendment of by-laws. 76.

Preferred

share

is

always

a

par-value

share

77. Shares of stock are deemed issued from the moment subscription is accepted whether fully paid or not(incorporation) 78. or

Subscribers become stockholders upon subscription whether fully paid not (incorporation).

79. Certificate of Stock is a personal property and may be mortgaged or pledged or transferred 80. A subscriber is entitled to all the rights of a fully paid stockholder for as long as he has not been declared delinquent 81.

Transferror

has

the

right

to

vote

82. After incorporation, full payment is required for purchasers to become stockholders. 83. Persons convicted by final judgment of an offense punishable by imprisonment for a period exceeding six years and guilty of violation the Code within 5 years prior to the date of election or appointment shall be disqualified to be a director, trustee or officer 84. Removal of directors or trustees may be with or without cause. Removal without cause may not be used to deprive minority stockholders of the right of representation inn the board of directors. Otherwise, the basic purpose of cumulative voting which is to allow minority stockholders to unite and elect their representative in the board will be rendered useless. 85. A director elected to fill a vacancy shall serve only for the unexpired portion of the term of his predecessor in office 86. It is on the presumption that directors and trustees render service gratuitously and that the return upon their shares adequately furnishes the motives for service, without compensation. 87. They are entitled only to compensation if it is fixed in the by-laws or when the giving of compensation is approved by the stockholders representing at least a majority of the outstanding capital stock. Board approval is sufficient

88. Directors are liable to the corporation, stockholder or or other persons who suffer damages. Nature of liability is solidary. 89. A special meeting of the stockholders for the purpose of removal of directors or trustees must be called by the secretary on order of the president or on the written demand of the stockholders (only the majority is required). In removal of directors, 2/3 is required. 90. Stockholders or who have removed a director or trustee are also given the power to choose his replacement at the same meeting. 91. A director can quit any time but by reason of fiduciary nature of the position they occupy, he cannot resign as part of a fraudulent scheme to prejudice the corporation. He should repair and make good such loss in case of loss of profits. 92. Where a director accepts a position in which his duties are incompatible with those as such director, it is presumed that he has abandoned his office as director 93. Stockholders may be filled by stockholders if the cause is removal, increase in the number of directors or the expiration of term. Also if other than removal or expiration if the remaining directors do not constitute a quorum 94.

Only the majority is required to authorize compensation of directors.

95. in

A director is entitled to be reimbursed for legitimate expenses incurred behalf of the corporation.

96. A private corporation is authorized to provide in its by-laws for the compensation of directors or trustees. 97. The per diems granted to the directors should not be included in their total yearly compensation for purposes of the 10 percent limitation 98.

The

agents

of

the

corporation

are

the

directors.

99. A contract of the corporation with one or more of its directors/trustees or officers is voidable at the option of such corporation unless all the condition enumerated in sec 32 are all present. In the case of a contract with a director or trustee, only that the contract is fair and reasonable, if the contract is ratified the 2/3 100. It is a valid contract between 2 or more corporation which have

interlocking directors as long as there is no fraud and the contract is fair and reasonable under circumstances. 101. The guilty director will only be exempted from liability to the corporation if his disloyal act is ratified by 2/3 102. The executive committee must be provided for in the by-laws and composed of not less than 3 of the board. The committee may act on specific matters within the competence of the board, as may be delegated to it by the board or in the by-laws except those to which only the board duly called and assembled as such can act upon. 103. The restrictions on the power of the executive committee may be enlarged by the board to cover other matters. The executive committee may amend or repeal any resolution of the board. 104. Committee cannot delegate its authority even to one of its since it can only bind the corporation through majority of votes 105. All of an corporation. However if recommendatory in nature the BOD, some

executive committee must be directors of the all acts of the committee will be merely and shall not be carried out without the formal of may not be directors.

106. Doctrine of limited capacity—only those that are express, implied or incidental 107. Intra vires—acted within the powers 108. A corporation may not engage in a business different from that for which it was created as a regular and a permanent part of its business. This is especially true in banking and insurance companies organized under special laws. 109. The use of corporate seal in certificates of stock must be deemed directory rather than mandatory. A corporation may exist even without a seal. Any seal adopted and used by the corporation may be altered by it at its pleasure. 110. Power to acquire and convey property has always been regarded as an incident to every corporation 111. A stockholder has absolute right to use, enjoy and dispose of his properties, to perform all acts and to make all contracts without any restriction except when they are prohibited by law. 112. A corporation cannot do acts not expressly or impliedly given by law

113. Implied powers are those powers which are reasonably necessary to exercise the express powers and to accomplish or carry out the purposes for which the corporation was formed. 114.A corporation which has been dissolved after the expiration of the 3-year winding up period ceases to be de jure de facto and therefore it cannot sue or be sued 115. A corporation must be first duly ed in accordance with law to have the power to sue 116. A seal is a device used to identify or replace the signature of an individual or organization and to authenticate written matter 117. Purchasing or holding real and personal property, to adopt and use a corporate seal, to contract and make by-laws are incidental powers 118. A corporation may not hold alienable lands of a public domain except by lease for a period not exceeding 25 years, renewable for not more than 25 years and not to exceed 1,000 hectares in area. 119. Natural resources belong to the state and cannot be alienated to corporations. Their exploration and development and utilization shall be under the full control and supervision of the State 120. If a corporation acquires shares or securities of other corporation and it is done in pursuance of its purpose for which it was created, the approval of the stockholders is not needed unless it is done solely for investment. 121. Appraisal right applies only to a stockholder of a stock corporation 122. Excess stock issued is void even in the hands of a bona-fide purchaser for value 123. Any incurring, creating, or increasing by the corporation of any bonded indebtedness is subject to prior approval of the Securities and Exchange Commission (SEC). The bonds issued by the corporation have to be ed with the corporation 124.

Preemptive

right

is

125. Shareholders cannot be compelled to subscribe stockholder whose pre-emptive right is violated may compel the corporation to give him that right. If amendment to the articles of incorporation, he may right

not

absolute

to a class different. A maintain an action to the denial is by an exercise his appraisal

126. The vote of the majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction because there are no with voting rights. 127. Any disposition which does not involve all or substantially all of the corporate assets made in the ordinary course of business does not require the approval of the stockholders and would not entitle any dissenting stockholders to exercise his appraisal right. It can only exercise the same if it is on the sale of all or substantially all of the corporate assets as such which would render the corporation incapable of continuing the business or accomplishing the purpose for which it was incorporated. 128. The acquisition of shares shall be for legitimate purposes, its capital is not impaired, in good faith without prejudice to the rights of the stockholders and creditors and that there is an unrestricted retained earnings to cover the shares acquired. 129. Section 41 does not authorize a corporation to arbitrarily purchase the shares it issued to any of its stockholders indebted to it for the purpose of applying the proceeds for the satisfaction of its claim against them. 130. Redeemable shares may be purchased by the corporation regardless of the existence of the unrestricted retained earnings in the books of the corporation 131. In view of trust fund doctrine, buyback of shares or distribution of assets among stockholders is a fraud against creditors and therefore void. 132. A corporation may invest its funds in another business which is incident or auxiliary to its primary purpose as stated in the articles of incorporation without the approval of the stockholders. In such case, dissenting stockholders shall have no appraisal right. 133. Stock dividend shall not be issued without the approval of 2/3. The board may declare dividends other than stock without need of stockholder’s approval. 134. A corporation cannot make a valid contract to pay dividends other than from retained earnings or profits and an agreement to pay such dividends out of capital is unlawful and void. 135. Stockholders should only receive dividends from their investment and not from their investment itself. 136. As a rule, dividends cannot be declared out of borrowed money for

borrowed money is not profits; but money may be borrowed temporarily for the purpose of paying dividends if the corporation has used its surplus assets to make improvements for which it might have borrowed money. 137. Dividends

may not be declared so long as deficit exists

138. The directors are the judges on how and when to spend corporate funds. 139. The corporation may be compelled by the SEC to declare dividends to its stockholders if it retains surplus profits in excess of 100percent of their paid-in capital stock 140. Payment of subscription from dividends (stock, cash, “to be declared”) is illegal for it obligates the subscriber to pay nothing for the shares except as dividends may accrue upon the stock. 141. The stockholder is still entitled to receive cash dividends due on delinquent stock but the dividends shall first be applied to the unpaid balance on the subscription plus costs and expenses while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid. 142. Some courts take the view that unlawful dividends received in good faith by the stockholders may not be recovered if the corporation is solvent. 143. In the absence of a record date, the dividend belongs to the person who is the owner of the shares of stock at the time of declaration. 144. Declaration of stock dividends may be rescinded at any time before the actual issuance. 145. The participation of each stockholder in the earnings of the corporation is based on his total subscription. The reason is that “stockholder’s” entire subscription represents his holdings in the company for which he pays interest on any unpaid portion. 146. Only in cases where a stockholder is delinquent in the payment of his unpaid subscription that he loses his privilege in a corporation where he has holdings, except his right to receive cash dividends, which however shall first be applied to his unpaid balance on the subscription plus cost and expenses. 147. The contract must be approved by a majority of the quorum of BOD and prescribed vote of the stockholders of both the managing and the managed corporation. The period of the contract must not be longer than 5 years for any one term.

148. Upon the issuance of the certificate of incorporation, the corporation comes into existence but not yet otganized. 149. By-laws shall be adopted within one month after receipt of official notice of the issuance of its certificate of incorporation by the SEC. Nevertheless, by-laws may be adopted and filed prior to incorporation with the articles of incorporation. Failure to file a code of by-laws within one month from the date of incorporation with the SEC shall render the corporation liable to the revocation of its registration 150. By-laws must be general and uniform in their operation and not directed against particular individuals, and must not be discriminatory. 151. By-laws are not binding to a party who doesn’t have knowledge of its provision. 152. At least 2 directors must be residents of the Philippines. 153. Corporation cannot provide in the by-laws for the manner of election and the term of office of directors or trustees which are already regulated by law. 154. The power to make and repeal by-laws can only be exercised at a regular or special meeting duly called for the purpose. It can be delegated (2/3) to directors. But the power to amend the articles of incorporation lies with the stockholders and cannot be delegated to directors. 155. To revoke the delegated power, the law merely requires the vote of majority of the outstanding capital stock. 156. Revocation is valid notwithstanding that no previous notice was given to stockholders or of the intention to propose such revocation. 157. Articles of incorporation constitutes the charter or fundamental law of the corporation. The filing of articles of incorporation is a condition precedent to corporate existence, while the filing of by-laws is a condition subsequent. 158. The president shall preside at all meetings of directors or trustees and of the stockholders or , even where the chairman of the board is present, unless otherwise provided in the by-laws. 159. The directors or trustees are not a corporate body; they are, when acting as a board, agents of the corporation. 160. In the absence of provision in the by-laws, the meeting may be called

by a director or trustee or by an officer entrusted with the management of the corporation. 170. A stockholder may make the call on order of the SEC whenever for any cause, there is no person authorized to call a meeting. 171. The special meeting for the removal of directors may be called by the secretary of the corporation or by a stockholder. 172. Whether regular or special, notice must be given when required by the law or by the by-laws of the corporation. 173. Written notice of even regular meetings must be sent to stockholders or at least 2 weeks before the meeting pr at least 1 week for special meetings. However, notice of any meetings may be waived expressly or impliedly, by a stockholder or member. In meetings ordered by the SEC, It is evident that notice is necessary. 174. Any business transacted at any meeting of stockholders shall be valid even if the meeting be improperly held or called provided that acts are not ultra vires and that all the stockholders are present or represented at the meeting 175. Unless otherwise provided in the by-laws or in the code, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the in the case of nonstock corporation. A majority vote, in the absence of express provision in the by-laws and unless the vote of a greater number is required by law, is sufficient to decide any question properly presented. 176. To amend the articles—majority vote of BOD and vote or written assent of 2/3 177. To elect directors—majority 178. To remove directors—2/3 of the outstanding stock or of entitled to vote 179. To ratify a contract of director or officer—2/3 180. To extend or shorten corporate term—majority of BOD and 2/3 181. To increase or decrease the capital stock—majority of BOD and 2/3 182. To incur, create, or increase bonded indebtedness—a majority of BOD and 2/3

183. To sell, lease, exchange, mortgage or otherwise dispose all or substantially all of the corporate assets—majority of BOD and 2/3 184. To invest corporate funds in another corporation or business or for any purpose other than the primary purpose—majority vote of BOD and 2/3 185. To issue stock dividends—majority of the quorum of BOD and 2/3. The approval of stockholders is not required with respect to other dividends such as cash and bond dividends. 186. To enter into management contract—majority of the quorum of BOD and a majority of the outstanding capital stock of both managing and managed corporations and in some cases, 2/3 of the total outstanding capital stock entitled to vote or of the , with respect to the managed corporation. 187. To adopt by-laws—a majority of the outstanding capital stock or of the . 188. To fix the issued price of no par value shares—a majority of the quorum of BOD if authorized by the articles of incorporation or in the absence of such authority, by a majority of the outstanding capital stock. 189. To effect or amend a plan of merger or consolidation—a majority of vote of BOD and 2/3 of the outstanding capital stock or of the of the constituent corporation 190. To dissolve the corporation—a majority vote of BOD and 2/3 of the outstanding capital stock or of the 191. To adopt a plan of distribution of assets of a nonstock corporation—a majority vote of trustees and 2/3 of the having voting rights. 192. A corporation may prescribe a greater voting requirement for the approval of any of the above corporate acts in its articles of incorporation and/or by-laws in order to protect the rights of minority stockholders 193. Notice of a regular meeting need not be given if the articles of incorporation or by-laws specify the time of the meeting (except when it is to be held at another place). A director trustee may waive the requirement of notice of any meeting, expressly or impliedly 194. If the presiding officer is not present at the time for a meeting to convene, a stockholder who takes the floor may temporarily preside at the meeting of stockholders pending the selection of the presiding officer. Unless

the contrary is provided by the by-laws, the presiding officer may be selected by the vote of the stockholders present. 195. One cannot vote if he does not appear to be a stockholder in the books of the corporation 196. Each member, regardless of class, shall be entitled to one vote 197. Pledgees or mortgagees of shares in stock corporation have the right to attend and vote at meetings of stockholders only when expressly given such right in writing by the pledgor or the mortgagor as the latter remains the owner of the stock pledged or mortgaged. The authorization is required by the code to be recorded on the appropriate corporate books by such pledgor or mortgagor. 198. A proxy may refer to a person or a formal written authority 199. The right to vote by proxy is a special form of agency. No proxy shall be valid and effective for a period longer than 5 years. 200. Directors cannot attend or vote by proxy at board meetings 201. Proxies are irrevocable at any time unless made irrevocable by the giver. It becomes irrevocable when the holder of proxy has given or promised a stockholder a consideration or interest (loan of money in return for irrevocable proxy. 202. In voting trust agreement(must be in writing, notarized and filed with SEC), a stockholder of a corporation parts with the voting power only but retains the beneficial ownership of stock. A voting trustee is only a share owner vested with legal title for the sole purpose of voting upon stock that he does not own. New certificate is issued to the trustee. 203. Trustee is the legal title holder or owner of the shares so transferred under the agreement. Hence, he is qualified to be a director. 204. The ultimate control of the corporation depends upon the votes of the stockholders 205. Voting trust agreement, if validly executed is irrevocable while a proxy must be coupled with interest before it becomes irrevocable. 206*. The stockholders have the power to fill vacancy in the BOD if the cause is any of the ff: (1)removal (2) Expiration of term (3) Increase in the number of directors

207*. BOD can fill the vacancy if the cause of vacancy is other than removal, expiration of term or increase in the number of director and the remaining directors still constitute a quorum 208*. Directors are entitled to compensation if the giving of compensation is fixed in the by-laws, approved by the stockholders representing at least a majority of the outstanding capital stock or when the compensation refers to reasonable per diem 209. A contract of the corporation with one or more its directors or trustees is voidable unless all the ff conditions are present: (1) that the presence of such director is not necessary to constitute a quorum (2) that the vote of such director was not necessary for the approval of the contract (3) that the contract is fair and reasonable under the circumstances.. When any of the first two conditions is absent, such contract may be ratified by the vote of 2/3. Full disclosure of the adverse interest of the director involved must be made at such meeting. 210. There is interlocking directorate when a director holds seats in the board of directors of 2 or more corporations. There is no prohibition in the corporation code regarding this. However, law provides for requisites when 2 corporations with interlocking directors contract with each other. The requisites are (if the interest of the director is substantial, 20percent and nominal in the other): (1) there is no fraud (2) the contract is fair and reasonable (3) the presence is not required for a quorum and approval, vote. If the interest is both nominal or substantial, requirement (3) is no longer required. 211. The doctrine of corporate opportunity prohibits directors from acquiring business opportunities for his personal gain at the expense of the corporation (breaches his fiduciary duty). He must first disclose to the corporation the opportunity and if the latter refuses to take it, he can take it. If breached, he must to the corporation the profits by refunding the same. 212. Executive committee is composed of not less than 3 directors and whose creation is provided in the by-laws. It acts on routine matters or on those which do not require board meeting because it is difficult to convene due to quorum requirement. Thus small number is appointed among them. It cannot repeal or adopt by-laws and cannot fill vacancies in the board. 213. A donation must be for a public welfare and not for political purpose 214. Specific express powers are to shorten or extend corporate life, increase or decrease capital stock, power to incur create or increase bonded indebtedness and power to deny preemptive right.

215. All stockholders must give their consent for the ratification of an ultra vires act. 216. A corporator in a stock corporation must be a stockholder. Honorary hip in a business corporation is not allowed by law 217. Private corporation may be organized by private or by the state or both for private ends, aims, benefits or purpose 218. In political law, public corporations are commonly referred as to municipal corporation 219. Government created private corporation to augment its income. The corporation is then subject to the rules of the law governing private corporation. Examples are: GSIS, PNR, LRT, PNB, NAWASA, NAPOCOR 220. Quasi-public corporations - are in reality organized as a private corporation but perform public functions. Examples: PLDT, MERALCO, PAL, WG and A 221. Pre-incorporation subscription shall be irrevocable within 6 months from subscription 222. The BOD may fix the issued price of no-par value shares if authorized by the articles of incorporation. In absence of it, by the stockholders. 223. The issued price of no par shares may vary from time to time as it is usually fixed on the basis of their book values. 224. Every certificate of stock must be signed by the president or vice president, countersigned by the corporate secretary and sealed with the seal of the corporation. 225. Uned transfer shall not be valid except as between the parties. It is the conveyance not the act of registration which gives title to the transferee. 226. There can be no valid transfer if delivery is not made. 227. Only absolute transfers need to be ed. Pledges and mortgages need not be ed or noted on the book for their validity since they do not involve absolute alienation of ownership of stock. 228. To affect 3rd persons, date and description of shares pledged appear in a public instrument is enough.

229. The shares which may be alienated are those covered by certificates of stock. 230. Shares of stock which is not fully paid shall not be transferable on the books of the corporation. 231. Unless prohibited by by-laws, certificate of stocks may be issued for less than the number of shares subscribed for, provided the par value of each share is fully paid for. 232. Unpaid subscription is an asset to which corporate creditors may look for payment. Hence a stock corporation has no power to release an original subscriber from paying for his shares without valuable consideration for such release or without unanimous consent of the stockholders. 233. Stockholder is not a co-owner of the corporate property nor is he entitled to the possession of any definite portion if its property or assets. 234. In a derivative suit, the wrong is inflicted directly on the corporation and indirectly upon the stockholders. 235. Individual suit is wrong committed on a stockholder(right to vote) 236. Creditors, corporations and stockholders can set up the inadequacy of the consideration for the issuance of the stock. 237. The liability of the consenting director/officer for the "water" in the stock is solidary with the stockholder concerned. 238. A call cannot be of such character as to permit the directors to practice favoritism or act oppressively. 239. A call without notice is practically no call at all. 240. Reasonable hours must not be understood to mean reasonable hours on business days throughout the year and not merely during some arbitrary period of a few days chosen by the directors (10days prior to the annual meeting) 241. The main purpose of right of inspection of corporate books is to protect stockholders interest. 242. You must act in good faith to be allowed to inspect the books. 243. Right of inspection not absolute, factors: (a) purpose of inspection

(b)books of foreign corp (c)trade secrets (d)reasonable hours. 244. A stockholder cannot, without order of the court be permitted to take books from the office of the corporation. 235. In general, right of the stockholder extends to all books, papers, contracts, minute books or other instruments from which he can derive any information that will enable him to better protect his interest. 236. Generally, where one corporation sells or otherwise transfers all its assets to another corporation, the latter is not liable for the debts of the transferror unless the transferee assumed the liabilities of the former. Sale of the assets to another corporation for stock, if followed by dissolution, has the effect of a merger. 237. Merger or consolidation involve a transfer of the assets of the constituent corporation in exchange for securities in the new or surviving corporation but neither involves winding up of the affairs of the constituent corporation in the sense that the assets are distributed to the stockholders., there is then the automatic assumption of liability of the absorbed corporation or constituent corporation. 238. Any stockholder of a close corporation may, for any reason, compel said corporation and purchase his share at fair value which shall not be less than their par value or issued value, when the corporation has sufficient assets in its books to cover its debts and liabilities exclusive of capital stock. 239. The dissenting stockholder shall make a written demand on the corporation within 30 days after the date on which the vote was taken for payment of the fair value of his share. The corporation shall pay to such stockholder upon surrender of the corresponding certificate of stock within 10 days after demanding the fair value of his shares. 240. Failure of the stockholder to make demand within 30-day period shall be deemed a waive of his appraisal right. 241. Payment of appraisal right shall be made only if the corporation has unrestricted retained earnings. 242. Once the dissenting stockholder demands payment of the fair value if his shares, all right shall be suspended. If he is not paid within 30 days, his voting and dividends rights shall be restored. 243. If there are nine trustees to be elected, a member shall be entitled to 9 votes, except that he cannot cast more than 1 vote in favor of 1 candidate.

244. hip and all rights are personal and non-transferable, unless the articles or by-laws otherwise provide. 245. Termination extinguishes all rights of a member in the corporation or in its property, unless otherwise provided in the articles of incorporation. 246. The term of office of trustees shall be 3 years (non-stock) 247. If first elected, 1/3 of the BOT shall expire every year and subsequent trustees shall have 3 years. Trustees elected to fill vacancies occurring before the expiration of a particular term shall hold office only for the unexpired period 248. Non-stock may invest its accumulated funds for profit purposes but such power must be included in its articles in order that investment may not be considered ultra vires. 249. The right to vote of may be limited, broadened or were denied in the articles of incorporation or the by-laws. 250. Each member shall be entitled only to 1 vote in the election of trustees unless cumulative voting is authorized. 251. Voting by mail or other similar means may be authorized. 252. Officers may be directly elected by the unless otherwise provided. 253. Non-stock may designate their governing boards by any name other than BOT. Trustees have duties similar to those of stock corporation. 254. A corporation exhibiting the characteristics of close corporation: (1) persons shall not exceed 20. (2) Issued shares are subject to restrictions or transfer (3) The corporation shall not list in any stock exchange or make a stock offering to public. It is deemed not a close corporation if at least 2/3 of its voting stock/rights is owned by another which is not a close corporation. 255. Those corporation vested with public interest cannot be a close corporation mining or oil companies, banks, insurance, educational and stock exchange. 256. Close corporation has been described as a corporation de jure and partnership de facto and has been often referred to as an "incorporated partnership" because of its intimate business associates acting like partners

among themselves. 257. Management of a stock corporation may be by the stockholder if provided in the articles.