Business Laws and Regulations

Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP

TITLE 1: GENERAL PROVISIONS
Section 1.
Historical background
1. Corporation Law, Act No. 1459 – April 1, 1906
2. The Corporation Code of the Philippines, Batas Pambansa Bilang 68 – May 1, 1980
3. The Revised Corporation Code of the Philippines – February 23, 2019
Halos lahat ng provision ng corporation code ay na reproduce at nagkaroon ng substantial amendments
including ease of doing business in Phil, advancement in tech, governance of corporation easier,
redefined the powers of SEC and penalty for violations of the code, and the creation of one person
corporation.
Section 2.
Definition of Corporation – a body or artificial person with one or more persons or of individuals and other
corporations created by law and invested by law with certain legal capacities, as the capacity of succession, and
the capacity to sue and be sued, to make contracts, to take, hold, and convert property, and to do other acts,
however numerous its members may be, like a single individual.
The statutory definition can be found in section, and it only refers to private corporations or sa mga
corporation na naorganize under the revised corporation code.
Attributes of a Corporation
1. Artificial being – not a real person pero the law treats it as a real person.
• Doctrine of corporate entity – talks about the separate personality of the corporation. Ibig sabihin, iba
sa personality ng mga members ang personality ng corporation.
• Effects of juridical personality – ang corporation ay liable only sa corporate debts.
• Principle of limited liability – protection from the liability of shareholders. Ibig sabihin yung corporate
debt, ay hindi debts ng member.
• Right to bring actions – pwedeng kasuhan at mag kaso
• Right to acquire and possess properties – sa pangalan ng corporation nakapangalan.
• Lability for acts or contracts – obligations incurred by corporations or by its agents, the rule is that the
corporation will be made liable.
• Tax exemption/liability – yung tax exemption na meron ang corporation ay hindi nag eextend sa tax
ng mga dividends
• Changes in individual membership – changes sa individual membership will not affect the corporation.
Hindi magdidissolve pag nag change ng members.
• Doctrine of Piercing the veil of corporate fiction / Disregarding the fiction of corporate entity / doctrine
of corporate alter ego – dahil merong limited liab ang members, meron silang protection sa corporate
debts. However, may mga times na yung law ang mag iimpose ng personal liabilities. If yung
corporate entity ay involved sa fraud, mangyayari to.
2. Creation of law or by operation of law – Cannot come to existence by mere agreement of parties.
Nagrerequire ng special authority or grant from the state.
3. It has the right of succession – it can exist perpetually. It has the capacity of continuous existence.
4. It has only the powers, attributes, an dproperties expressly authorized by law or incident to its existence
– ang power na meron lang sila ay yung kung ano ang nakalagay sa general incorporation law and
articles of incorporation. Pwede ring implied power or yung mga incidental power na essential sa
existence nila.
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
Section 3.
Classes of Corporation Under RCCP
1. Stock Corporation – for profit and may capital stock divided into shares, authorized silang magdistribute
ng profits through dividends.
2. Non-stock corporation – not for profit but for public good or welfare, wala silang dinidistribute na
dividends.
3. One person corporation – formed by a single stockholder, a natural person, a trust or an estate.

Section 4.
Incorporation of a Private Corporation by a Special act or Charter / Special Corporations
- Hindi sila covered ng RCCP kasi for private corporations lang yon.
- Pwedeng mag create ng special corp pero may mga constitutional limitation na dapat owned or controlled
sila by the government.

Section 5.
Components of Corporation
1. Corporators – stockholders or members or any member na part ng corp
2. Incorporators – stockholders who originally formed and composed the corp, mga signatories to the
articles of incorporation.
3. Stockholders or shareholders – owners of shares of stock may be natural or juridical persons.
4. Members
5. Promoters – find subscribers, nagddraft ng docs, etc. “float the company”
6. Subscribers – sila yung bumibili ng mga shares of stocks.
7. Underwriter
Section 6.
Classification of Shares
1. Power to Classify Shares – ang corporation ay pwedeng mag issue ng isa or maraming klase ng share.
Pero, dapat merong one class na may complete voting rights.
2. Ang mga incorporators ang mag dedecide kung anong klase and number ng shares na iissue nila. And
isstate nila sa articles of incorporation.
3. Later on, pwedeng mag amend yung mga board or directors and stockholders kung gusto nila baguhin
yung unang napagusapan ng mga incorporators. Dapat majority ng BOD and at least 2/3 ng stockhodlers
based sa stocks.
4. Doctrine of equality of shares – in the absence ot any provision, may presumption na all stocks,
regardless of their class nomenclature, enjoy equal rights and privileges and subject to the same
liabilities.

Classes of Shares in General

1. Par value share – nasa cert of stock and nasa articles of incorporation
2. No par value share – walang stated par value na nasa cert of stock pero palaging merong issued value
and ang minimum consideration ay Php 5. Deemed fully paid and non-assessable.
3. Voting shares – common
4. Non-voting shares – preferred or redeemable share
5. Common share of stock – kung merong asset left over after liquidation, sila ang makakareceieve ng pro
rata share.
6. Preferred share of stock – always issued with par value.
7. Promotional stock
8. Shares in escrow – may grantor na gusto magbigay sa isang tao ng shares of stock pero nakapangalan
pa sa agent.
9. Convertible stock – changeable with a conversion ratio
10. Fractional Share
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
11. Over-issued stock – as a general ruled, issued as void sila.

Cases when Non-voting Shares are Allowed to Vote (ACIDRIP)

1. Amendment and adoption
2. Disposition of Property – may action na magdidispose ng lahat ng corporate property
3. Indebtedness
4. Capital Stock – any proposal sap ag increase or decresde ng capital stock
5. Corporate Restructuring – merger or consolidation
6. Investment – proposed investment of corporate funds
7. Dissolution – planned termination of corporate life.
Section 7.
Founder’s Shares – issued sa organizers or promoters of a corporation. May exclusive right sila to vote and to
be voted for sa election of BOD pero for 5 years lang starting from date of incorporation and may privilege din
sila sa division of profits.
Section 8.
Redeemable or Callable Share – usually preferred shares, redeemable sila at fixed date or at the option ng
stockholder or ng corporation or both
Section 9.
Treasury Shares – lawfully issued by corporation and fully paid for and later reacquired by it for one reason or
another. Hindi distributable as stock dividend or as cash dividend pero it can be distributed as property dividend.
It has no voting rights.
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
TITLE 2: INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATION
Section 10.
Incorporation of private corporation is a mere privilege – meaning it is not a civil right na dapat ipag laban but it
is granted by the law. Yung law na yon is yung RCCP
Steps in the Creation of a Corporation
1. Promotion – lahat ng activities ng promoters for founding yung corporation.
2. Incorporation – the incorporators will execute and sign yung articles of incorporation and upon the
approval or SEC and the issuance of articles of incorporation. Dapat two or more but not more than 15
persons kapag domestic. Pero yung one person corp, pwedeng isa lang. Steps – name veification,
reservation, drafting and execution, filing with SEC, payment of filing, and issuance by the SEC of the
cert of incorporation.
3. Formal organization and commencement of business operations

Section 11.
Term of Corporate Existence
General Rule – the existence is ad infinitum or perpetually.
Exception – Specific period is provided in articles of incorporation.
*Start yung date sa issuance ng certificate of incorporation.
*In case na incorporated sila under old code, automatically sila na magiging perpetual except kung gusto nila
iretain yung fixed period and dapat may resolution sila na ifafile.
*Pwede ring irevive ang mga expired corporation

Section 12.
Capital Stock Requirement
- No minimum authorized capital stock except as otherwise provided by special law.
- Ang basis is the amount sufficient to operate a business.
- Special laws may require a higher paid-up capital.
Section 13.
Articles of Incorporation – document prepared by the persons establishing the corporation and filed in SEC.
Incorporators may include such other matters as are not inconsistent with law and which they may deem
necessary and convenient.
1. Name of the corporation (Section 17) – yung mabubuong juridical personality ay under this name.
2. Purpose/s of the corporation – it will define the power and limit the power. Any act beyond the power –
ultra vires act. Any act within the power – intra vires act. The purpose must be lawful kapag hindi pwedeng
mareject. Kailangan sa purpose clause maliwanag yung business ng corporation, hindi vague. Kung may
several purpose, dapat yung primary purpose yung nasa name.
3. Principal office of the corporation – place where its books and records are ordinarily kept and kung saan
magmimeet nag officers. Kailangan specific yung address and within the Philippines dapat. Kapag may
change in address, kung same city pwedeng hindi iammend pero kailangan ilagay sa general information
sheet. Pero kung new city, kailangan may amendment within 15 of transfer.
4. Corporate Term (Section 11)
5. Incorporating directors or trustees – names, nationalities and residences must be specified. Kailangan
not more than 15 ang incorporators, tapos yung trustees pwedeng more than 15.
6. Capital Stock or Capital and subscribers or contributors – kailangan included yung amount ng authorized
cap stock, number ng shares , par value in peso, name, nationalities and residences ng original
subscribers and amount of capital stock subscribed and amount paid. Sa non-stock naman, amount of
its capital or money contributed or donated, name, nationalities, and residences ng contributors or
donors, and amount contributed by each.
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
7. Nationalized Corporation – kailangan may provision yung mag restriction na meron sa mga transfer of
stock.
Section 14. FORM OF ARTICLES OF INCORPORATION
Section 15.
Requisites to Amend Articles of Incorporation
1. Not contrary to law
2. Majority vote from BOD or trustees and at least 2/3 assent of stockholders in case of non-stock
3. Changes made should be underscored.

Ammendment shall take effect only upon their approval by the SEC. Kung di acted upon by SEC in six months,
automatic approved na.
In case of foreign corporation, hindi na required na magfile sa SEC pero dapat bigyan parin nila ng copy ang
SEC within 60 after it becomes effective.
Section 16.
Dissapproval of the articles of incorporation
- Kung ang articles ay wala sa form na required
- Purposes are illegal
- False certification about capital stock
- Hindi na complied yung percentage of Filipino ownership
Section 17. Corporate Name
Section 18.
Acquisition of Juridical Personality – Magsstart ang juridical personality sa issuance ng certificate of
incorporation. De jure na ang corp kung may issuance na from SEC. In case naman sa religious corporations,
hindi na required na mag issue ng cert of incorporation ang SEC, basta nagfile na ng articles of incorporation
corporation sole na sya. For cooperatives, hindi rin kailanagn iregister sa SEC.
Section 19.
Kinds of Corporation as to their legal right to corporate existence
1. De Jure Corporations – complied with all the requisites of law. It cannot be attacked collaterally or directly
by the state.
2. De Facto Corporation – exist for all practical purposes as a corporation pero for the state it is not
considered as corporation. In case of de facto corp, nag try sya mag comply sa requirements pero may
failure sya at some point. Dalawang requisites para maconsider na de facto corp. Una, dapat meron kang
pinagincorporatetan na law. Pangalawa, dapat may bona fide attempt or attempt in good faith. Pangatlo,
nagaact dapat sila as a corporation. Usually meron silang certificate of incorporation pero somewhere in
the registration meron silang defect. The proper action to question kung entitled ba talaga sya as
corporation ay co warranto.
Section 20.
Corporation by Estoppel – lahat ng nagpanggap ay liable generally. And walang effort to comply to legal
requirement.
Section 21.
Effects of non-use of corporate charter and continuous inoperation of the corporation – in case na hindi nag
commence in 5 years after the date of incorporation, marerevoke yung cert of incorporation as of the day
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
following the 5 year period. Kung meron nag operate naman nung una pero nag inoperate sila for 5 consecutive
years, yung sec na ang magbibigay ng delinquent status after due notice and hearing. Kapag delinquent corp
kailangan mag comply in 2 years. Also, ang revocation na ipapataw ng SEC ay immediately effective.
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
TITLE 3: BOARD OF DIRECTORS/TRUSTEES AND OFFICERS
Section 22.
Doctrine of Centralized Management – Ang general rule ay yung BOD and trustees ang may hawak sa
management and sila yung yung mag corporate power. Unlike sa partnership na kung walang managers, kahit
kanino sakanila are agents of partnership, dito sa corporation centralized lang sa BOD or trustees. Lahat ng
actions ng corporation kailangan dumaan talaga sa BOD and authorized nila.
Corporations vested with public interest – yung mga corporation na listed with an exchange or with asset of
atleast 50M pesos and 200 or more shareholder with at least 100 shares of class of its equity shares, saka yung
mga banks and quisi banks, NSSLAs, pawnshop etc. and yung mga iba pa na determined by the commission.
Term of office
1. Director – 1 year
2. Trustee – 3 years
Dapat yung director ay at least a holder of 1 share.

Business Judgement Rule – Generally, lahat ng acts and contracts na pinasok ng BOD binding sya sa
corporation unless nalang kung oppressive sa rights ng minority stockholders. Maqquestion lang ang BOD kung
meron silang nagawa in bad faith pero kung wala naman, magaapply nae tong rule na the court will respect yung
naunang decision nila.

Section 23.
Elections of directors or trustees
1. In person
2. Through a representative authorized to act by written proxy
3. Through remote communication or absentia when so authorized in the bylaws or by a majority of BOD,
the stockholders or members entitled to vote.

Section 24.
Corporate Officers
1. President – must be a director
2. Treasurer – must be a resident of the Philippines
3. Secretary – must be a citizen and resident of the Philippines
4. Other officers – as provided by the bylaws
5. Compliance officer – if the corporation is vested with public interest
Pwedeng ikaw ay at the same time treasurer at secretary pero ang president hindi na pwede mag double.
Section 25.
Section 26.
Disqualification of directors, trustees, or officers
1. Convicted of a final judgement:
- Yung penalty is more than 6 years kung convicted
- Kung may violation under RCCP
- Kung may violation sa The Securities Regulation Code
2. Kapag napasok sa mga fraudulent transactions and proven na liable yung person administratively
3. Kahit foreign court ang nag pataw sayo nung 1st and 2nd disqualifications

Section 27.
Removal of Directors or Trustees
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
1. Vote of the stockholders representing at least 2/3 of the outstanding capital stock. If non-stock naman at
least 2/3 ng mga members na entitled to vote.
2. Dapat nangyari yung removal ay at the regular meeting or a special meeting na pinropose ng secretary
or stockholder or member
3. Removal may be with or without cause

*Yung natanggal as director, magsstay parin as shareholder.

*For corporate officers naman kung sila ang tatanggalin, yung BOD ang pwedeng magtanggal nalang kasi sila
naman yung nagbigay ng authority.

Section 28.
Vacancies in the Office of Director or Trustees
General rule: Ififill sya by the vote of at least a majority of the remaining directors or trustees, if still constituting
a quorum.
Exception: Pwedeng mafilled ng stockholders yung vacancies kung may special meeting called for that purpose.
1. Due to the expiration of the term
2. Removal
3. Due to an increase in the number of directors or trustees
4. There is no quorum

Section 29.
Section 30.
Liability of Directors, Trustees or Officers
General Rule: Business Judgement Rules
Exception: Magiging liable sila if:
1. Bumoto sila willfully and knowingly sa patently unlawful acts of the corporation
2. Guilty sila of gross negligence or bad faoth in directing the affairs of the corporation
3. Nag acquire sila ng personal or pecuniary interest in conflict with their duty. For example, yung director
may company sya in conflict with the corporation kaya ma question na yung loyalty nya and commitment
sa corporation.

Section 31.
Dealing of directors, trustees or officers with the corporation
- Kapag merong contract yung director saka yung corp or yung asawa nila or relative within the 4th civil
degree, yung status ng contract ay voidable.
- Unless:
1. Yung presence nya naman sap ag approve ng contract ay hindi necessary
2. Hindi rin kailangan yung boto nya
3. Fair naman at reasonable yung contract
4. In case of corp vested with public interest, dapat approved by at least 2/3 of the entire membership
of the board
5. In case of an officers, kung authorized naman na ng BOD yung contract.

Section 32.
Contracts between corporations interlocking directors
When you say interlocking directors, yung directors ng isang corporation ay sya ring director ng
corporation. Sabi ng batas, hindi ito ground to invalidate any contract provided na hindi fraud and fair and
reasonable sya. Kung yung director ay may substantial interest sa isang corporation (20%) and nominal naman
dun sa isa, magiging grounds sa provision ng section 31. Kung nominal naman in both sides, okay lang.

Section 33.
Disloyalty of Directors; Doctrine of Corporate Opportunity
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
Kunyari yung isang director kinanya yung transaction na dapat ay sa corporation and dahil don nagkaroon sya
ng personal na kita. Dapat irefund nya yung kinita nya sa corporation unless nalang kung naratified yunga ct nya
through a vote of at least 2/3 nung stockholders. Even if ginamit nya yung sariling funds nya, applicable parin
itong provision

Test applied for the application of the doctrine:

1. Interest or expectancy test
2. Line of Business test
3. Fairness test – ethical standards
4. Mixed test

Section 34.
Executive management and other special committees
Sa BOD may kanya kanya silang committee and composed of at least 3 directors. Kapag may topic or agenda
or item na iaapprove kailangan Irefer nila sa committee for approval
Business Laws and Regulations
Atty. Jenica A. Aquino, CPA, JD PART 2 – RCCP
TITLE 4: POWERS OF CORPORATIONS
Section 35.
Corporate Powers and Capacity (EXPRESS POWERS)
a. To sue and be sued
b. To have perpetual existence unless otherwise incorporated
c. To adopt and use corporate seal
d. To amend its articles of incorporation in accordance with the provisions of this code
e. To adopt bylaws
f. In case of stock corp, to issue or sell stock to subsribers
g. To purchase, receive, take or grant, hold, convey, sell, lease etc.
h. To enter into partnership, joint venture, merger, etc.
i. To make reasonable donations
j. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and
employees
k. To exercise such other power as may be essential (implied powers)
Section 36.
Section 37.
Section 38.
Section 39.
Section 40.
Section 41.
Section 42.
Power to Declare Dividends – May declare dividends out of the unrestricted retained earnings. Walang stock
dividend na iiissue kung walang approval ng not less than 2/3 ng stockholders.
Yung mga stock corporation, bawal sila magretain ng more than 100% ng kanilang paid-in capital kung
magyayari yon masasubject yon sa improperly accumulated earnings tax. Except nalang may plano na
magexpand or long-term projects, kailangan gawin nilang restricted para alam na may pag-lalaanan. Or kung
yung corporation ay may utang and nasa loan agreement na bawal sila magdeclare ng dividend kung di
papayagan ng bank or creditor. Or kung may mag contingencies na nangyayari like ngayong pandemic.
Section 43.
Section 44.