Partnership NOTES

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

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—liable up to personal assets but subject to reimbursement

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 contractvoid. However, if immovable property or real rights are contributed, it must be made in
public instrument.

22. A limited partnership must be registered 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 ofthe 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 thair 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 atthe 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 incase 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. 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 account is demandable until after dissolution. This is becausepartners have access to the
books. But if a partner is wrongfully excluded from the business, he can demand it at any reasonable time
39. Joint 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
administration. But if one of them should oppose theacts 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 partnerin 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 rightto 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.

5. A nonstock corporation may not include a purpose which would change or contradict its nature

6. The purposes, where there are 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 whetherthe 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 recordsare 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 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 toless 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 members, 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
members 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 issuean 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 bea de jure corporation but
has complied sufficiently to be accorded corporate statusas 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. Acts of stockholders are not binding on the corporation. A corporation can 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 hold a fiduciary relation (trust and confidence) to the corporation and the stockholders or members
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. One disadvantage of corporation is that stockholders have little voice in 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 asfraud, tax evasion, and avoiding obligation).

36. In nonstock corporation, minimum members are 5 and may be more than 15. Number of members must be
multiple of 5. No part of income shall be distributed as dividends to members.

37. Civil Corporation is one organized for profit. Eleemosynary is for charitable

38. In close corporation, stockholders shall not exceed 20persons.

39. A partnership can be a corporator in a corporation but a corporation cannotbe a partner in a partnership

40. A corporation can subscribe after another corporation’s incorporation but 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 by-laws 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 members 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

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 members 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 ofterm 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 by-laws 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 thecorporation 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 aliento 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 percentFilipino-owned. For
Public Utility development and exploitation of natural resource must be atleast 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. Subscribers become stockholders upon subscription whether fully paid or 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 in 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 members 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 members 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. A director is entitled to be reimbursed for legitimate expenses incurred in 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 members 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 theby-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 theboard 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 members since it can only bind the corporation
through majority of votes

105. All members of an executive committee must be directors of the corporation. However if all acts of the
committee will be merely recommendatory in nature and shall not be carried out without the formal of the
BOD, some members 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 ratherthan 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 toevery 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 registered in accordance with law to have the powerto 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 bonafide purchaser for value

123. Any incurring, creating, or increasing by the corporation of any bonded indebtednessis subject to prior
approval of the Securities and Exchange Commission. Thebonds issued by the corporation have to be registered
with the corporation

124. Preemptive right is not absolute

125. Shareholders cannot be compelled to subscribe to a class different. A stockholder whose pre-emptive right
is violated may maintain an action to compel the corporation to give him that right. If the denial is by an
amendment to the articles of incorporation, he may exercise his appraisal right

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 members with voting rights.

127. Any disposition which does not involve all or substantially all of the corporate assetsmade 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 thestockholders. 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 theirinvestment itself.
136. As a rule, dividends cannot be declared out of borrowed money for borrowed moneyis 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 itmight 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 butthe 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 balanceon 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
organized.

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 ofoffice 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 members 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 members 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 members,
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 members 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 members 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 members 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 otherthan 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 members, with respect to the managed corporation.

187. To adopt by-laws—a majority of the outstanding capital stock or of the members.

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 members 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
members

191. To adopt a plan of distribution of assets of a nonstock corporation—a majority vote of trustees and 2/3 of
the members 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 considerationor 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 directorsof 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 interestis 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 account 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 numberis 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 membership 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 corporation—are in reality organized as private corporation but performs public functions.
Examples: PLDT, MERALCO, PAL, WG and A221. Pre-incorporation subscription shall be irrevocable within 6
months from subscriptionSource: De Leon and Judge Betonio