CORPORATION LAW

COURSE OUTLINE1
2nd Term, AY 2014-2015
I.

GENERAL2
Read: Campos, Volume 1, Chapter I, pages 1-423
A. Definition and attributes of a corporation Sec. 2, Corporation Code4
B. Corporation differentiated from other types of business organizations
1) Individual proprietorship
2) Partnership
- Close corporations
3) Limited partnership
4) Joint venture
C. Advantages and disadvantages of the corporate entity
D. History
1) Sociedad anonima5
2) Cuentas en participacion
3) Corporation Law, Act 1459
E. Regulation of corporations
1) Corporation Code, Batas Pambansa Blg. 68
2) Securities Regulation Code (SRC)
3) PD 902-A as amended
4) SEC Memo Circular No. 11, 5 August 2003, clarifying the supervisory power
of the SEC over corporations
F. Interests within the corporation; the corporate hierarchy
G. Nationality
1) Nationalized and partly nationalized activities
2) Tests
a) Control test

1 LAW 501M, DLSU College of Law

2 Textbook will be Campos & Campos, Corporation Code of the Philippines, Volumes I and II
(1990). Updates (laws and regulations, Supreme Court decisions and other developments) are
indicated in this Course Outline and should be read together with the textbook.
3 Union Glass and Abejo cases may be excluded from the reading of this chapter
4 All references to Sections refer to provisions of the Corporation Code (B.P. Blg. 68) unless
there
is a reference to another statute or
regulation
5 The cases of Mead v. McCullough, G.R. No. 6217, 26 December 1911 and Benguet
Consolidated Mining v Pineda, G.R. No. L-7231, 28 March 1956 discuss the sociedad anonima
and will be good additional reading for interested students.

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b) Grandfather rule
3) Sec. 15 contents of Articles of Incorporation (see Item 11th)
Narra Nickel Mining v. Redmont Consolidated, GR 195580, 21 April 2014
Gamboa v Teves et al, G.R. No. 176579, 28 June 2011
II.

Classification of corporations
Read: Campos, Vol. 1, Chapter II, pages 43-49
A. Public corporations v private corporations
Sec. 4, Code
Article XII, Sec. 16, 1987 Constitution
National Coal v Collector of Internal Revenue, GR L-22619, 2 December 1924
PNOC EDC v NLRC, GR 79182, 11 September 1991, 201 SCRA 487
Liban v Gordon, GR 175352, 15 July 2009, 593 SCRA 68
B. Domestic corporations v foreign corporations - Sec. 123, Code
C. Private corporations
1) Stock corporations Sec. 3; 96
2) Non-stock corporations Sec. 3; 87; 88
Collector v Club Filipino de Cebu, GR L-12719, 31 May 1962, 5 SCRA 321
3) Close corporations Sec. 96, Code
4) Public corporations under SRC Sec. 17.2(c), SRC; SRC Rule 3.1[L];[O]
(registered, listed, reporting)
5) Educational Sec. 106; 107; see also R.A. 7798
6) Religious; corporation sole Sec. 109;110
7) Parent and subsidiary corporations; holding companies; affiliate companies

III.

Formation and Organization

Read: Campos, Chapter III
A. Who may form Sec. 10; pages 50-54
B. Steps in formation Campos, pages 54-63; 74-89
1) Promotion
2) Articles of Incorporation
Sec. 14 Contents
Sec. 15 Form
a) Name
Sec. 14(1); Sec. 18; Campos, pages 62-63; SEC Memo Circular No. 14,
24 October 2000, Revised Guidelines on Approval of Corporate and
Partnership Names
Red Line Trans. v Rural Transit, G.R. 41570, 60 Phil 549 (1934)
Universal Mills v Universal Textile Mills, L-28351, 78 SCRA 62 (1977)
Philips Export B.V. v CA, G.R. 96161, 21 Feb 1992, 206 SCRA 457
Lyceum of the Phil v CA, G.R. 101897, 5 March 1993, 219 SCRA 610
First Phil. Insurance v Hartigan, L-26370, 31 July 1970, 74 SCRA 252
PC Javier & Sons v CA, GR 129552, 29 June 2005, 462 SCRA 36
b) Purpose clause; primary purpose, secondary purpose
Sec. 14(2); Sec. 17(1)
Sec. 88 (purposes, non-stock corporation)
c) Principal office
Sec. 14

3
SEC Memo Circulars No. 3, 16 Feb 2006; No. 6, 20 February 2014; and
No. 16, 13 August 2014
Clavecilla Radio v Arcilla, L-22238, 18 Feb 1967, 19 SCRA 379
Hyatt Elevators v Goldstar, GR 161026, 24 Oct 2005,473 SCRA 705
d) Term Sec. 11
e) Incorporators
Sec. 5; Sec. 10; Sec. 14[5]
f) Number of directors; incorporating directors - Sec. 14[6][7]
g) Capital stock authorized, subscribed, paid-up
Sec. 12; 13, 14[8]; Sec. 15 [7th, 8th, 9th]
Non-stock Sec. 14[9]
Treasurer-in-trust (Sec. 15[10th])
Outstanding shares Sec. 137
h) Other matters
(i)
Compliance with nationality requirement Sec. 15[11th]
(ii)
Other matters not inconsistent with law Sec. 14(10) - eg
restrictions on share transfers; pre-emptive rights
3) Articles of close corporations Sec. 96
4) Articles of special corporations Sec. 106, 109
5) Form of Articles Sec. 15
6) Accompanying documents
Treasurers Affidavit - Sec. 15
Corporations governed by special laws - Sec. 17, last paragraph
SEC Rules on Documentary Requirements for Registration of Corporations
and Partnerships (as of 30 June 2013) available on SEC website (under
Guide to Registration)
7) Filing of Articles and payment of fees
8) Examination by SEC; grounds for rejection or disapproval - Sec. 17
9) Certificate of Registration; beginning of corporate existence - Sec. 19
10) De facto corporations Sec. 20; Campos, pages 86-106
Municipality of Malabang v Benito, L-28113, 28 March 1969, 27 SCRA 533
Bergeron v Hobbs see Campos, pages 94-98
Harill v Davis see Campos, pages 98-103
Hall v Piccio, GR L-2598, 29 June 1950
11) Corporation by estoppel Sec. 21; Campos, pages 106-108
Empire Manufacturing Company v Stuart see Campos, pages 108-109
Lowell-Woodward Hardware Company v Woods, et al Campos, pp 109-112
Asia Banking v Standard Products, GR 22106, 11 Sept 1924, 46 Phil 145
Salvatierra v Garlitos, et al, GR L-11442, 23 May 1958, 103 Phil 757
Albert v University Publishing, GR L-19118, 30 Jan 1965, 13 SCRA 84
Chiang Kai Shek School v CA, GR L-58028 18 April 1989, 172 SCRA 389
International Express Travel v CA, GR 119002, 19 Oct 2000, 243 SCRA 674
International Express Travel v CA, Gr 119002, 343 SCRA 674 (2000)
Georg Grotjhan GMBH v CA, GR 109272, 10 Aug 1994, 235 SCRA 216
12) Non-use of corporate charter; continuous inoperation Sec. 22
C. Internal organization of corporation Campos, pages 120-124
1) By-Laws
a) When to adopt; requirements for adoption Sec. 36(5), Sec. 46
b) Contents Sec. 47
c) SEC approval Sec. 46

4
Fleischer v Botica Nolasco, GR L-23241, 14 March 1925, 47 Phil 583
Government v El Hogar Filipino, GR L-26649, 13 July 1927, 50 Phil 1927
Loyola Grand Villas v CA, GR 117188, 7 Aug 1997, 276 SCRA 681
Sawadjaan v CA, GR 141735, 8 June 2005, 459 SCRA 516
2) Election of directors Sec. 24
3) Election of officers Sec. 25
4) Report of election of directors, trustees, officers Sec. 26

IV.

Corporate entity
Read: Campos, Volume I, Chapter IV
A. Separate corporate personality Campos, pages 137-138
B. Disregarding the corporate entity Campos, pages 149-151
C. Disregarding the corporate entity: parent-subsidiary?
Sulo ng Bayan v Araneta, L-31061, 72 SCRA 347 (1976)
Gallagher v Germania Brewing see Campos, pp 131-141
Stockholders of Guanzon & Sons v RD, GR L-18216, 6 SCRA 373 (1962)
Caram v CA, L-48627, 30 June 1987, 151 SCRA 373
Palay Inc. v Clave, L-50076, 21 September 1983, 124 SCRA 640
Cruz v Dalisay, AM R-181-P, 31 July 1987, 152 SCRA 482
Indophil Textile Mill Workers v Calica, GR. 96490, 3 Feb 1992, 205 SCRA 697
Mobilia Products v Umezawa, GR 149357 March 04, 2005, 452 SCRA 736
Jardine Davies, Inc. v JRB Realty, GR 151438, 15 July 2005, 463 SCRA 555
Child Learning Center v Tagario, GR 150920, 25 Nov 2005,476 SCRA 236
Yu v. NLRC, GR 111810-11, 16 June 1995, 245 SCRA 134
US v Milwaukee Refrigerator see Campos, pp 151-153
Laguna Transportation v SSS, GR L-14606, 28 April 1960, 107 Phil 833
Marvel Building Corp v David, GR L-5081, 24 Feb 1954, 94 Phil 376
Palacio et al v Fely Transportation, L-15121, 31 August 1962, 5 SCRA 1011
Tan Boon Hee & Co., L-41337, 30 June 1988, 163 SCRA 205
McConnell et al v CA, L-10510, 17 March 1961, 1 SCRA 721
Natl Marketing v Associated Financing, L-20886, 27 April 1967, 18 SCRA 162
Claparols v Court of Industrial Relations, L-30822, 31 July 1975, 65 SCRA 613
Villa Rey Transit, Inc. v Ferrer, et al., L-23893, 29 Oct 1968, 25 SCRA 849
Natl Federation of Labor Union v Ople, L-68661, 22 July 1986, 143 SCRA 125
Cease et al v CA, L-33172, 18 October 1979, 93 SCRA 483
Delpher Traders Corp v IAC, L-69259, 26 Jan 1988, 157 SCRA 349
Commissioner v Norton & Harrison, GR L-17618, 31 Aug 1964, 11 SCRA 714
La Campana Coffee Factory, Inc. v Kaisahan ng mga Manggagawa, GR L-5677,
25 May 1953, 93 Phil 160
De Leon et al v NLRC, GR 112661, May 30, 2001, 358 SCRA 274
Lipat v Pacific Banking, GR 142435, 30 April 2003, 402 SCRA 339
Pamplona Plantation v Tinghil, GR 159121, 3 February 2005, 450 SCRA 421
PNB v. Ritratto Group, Inc., G.R. No. 142616, 31 July 2001, 362 SCRA 216
Garett v Southern Railway see Campos, pp 200-203

5
Koppel (Phil) Inc. v Yatco, GR L-47673, 10 October 1946, 77 Phil 496
Liddell v Collector of Internal Revenue, L-9687, 30 June 1961, 2 SCRA 632
Yutivo v Court of Tax Appeals, L-13203, 28 January 1961, 1 SCRA 160
Stone et al v Eacho see Campos, pp 24-230
Berkey v Third Avenue see Campos, pp 230-235
D. Entitlement of corporation to moral damages
LBC Express, Inc. v CA, G.R. No. 108670 September 21, 1994, 236 SCRA 602
ABS CBN v CA, G.R. No. 128690, January 21, 1999, 361 SCRA 572
Filipinas Broadcasting Network v Ago Medical and Educational Center, GR
141994, 17 January 2005, 448 SCRA 413
E. Entitlement to constitutional guarantees
F. Criminal liability; civil liability for tort
People v Tan Boon Kong, GR L-35262, 15 March 1930, 54 Phil 607
Espiritu v Petron, G.R. No. 170891, 24 November 2009, 625 SCRA 245
People v Concepcion, GR L-19190, 29 November 1922, 54 Phil 607
Sia v People, GR L-30896, 28 April1983, 429 SCRA 81
Philippine National Bank v CA, GR L-27155 18 May 1978, 83 SCRA 237
V.

Promoters contracts prior to incorporation

Read: Campos, Vol. 1, pages 241; 253; 258-259; 267-269
A. Liability of corporation for promoters contracts
Mc Arthur v Times Printing Campos, pages 242-244
Cagayan Fishing Dev. Co. v Sandiko, GR L-43350, 23 December 1937
B. Corporate rights under promoters contracts
Builders Duntile Co. v Dunn Manufacturing, Campos, pages 253-255
Rizal Light and Ice Co. v Public Service Comm., L-20993, 25 SCRA 285 (1968)
C. Personal liability of promoter on pre-incorporation contracts Campos, page
258-267 (read cases)
D. Fiduciary relationship between corporation and promoter Campos, page 268 et
seq. (read cases)

VI.

Corporate Powers
Read: Campos, Corporation Code, Vol. 1, Chapter VI, pages 282-339
A. General Sec. 36
E.B. Villarosa & Partner Co. v Benito, GR 136426, 6 Aug 1999, 312 SCRA 65
Teresa Electric & Power v PSC, GR L-21804, 25 Sept 1967, 21 SCRA 198
National Power v Vera, GR 83558, 27 Feb 1989, 170 SCRA 721
B. Specific powers
1) Extend or shorten corporate life Sec. 37
Alhambra Cigar v SEC, GR L-23606, 29 July 1968, 24 SCRA 269
2) Increase or decrease capital stock; incur, create or increase bonded
indebtedness Sec. 38
Madrigal & Company v Zamora, GR L-48237, 151 SCRA 355 (1987)
3) Deny pre-emptive right Sec. 39
4) Sale or other disposition of assets (all or substantially all) Sec. 40; Sec. 81
Islamic Directorate v CA, G.R. No. 117897, 14 May 1997, 272 SCRA 454
Edward J. Nell v Pacific Farms, GR L-20850, 15 SCRA 415 (1965)
5) Acquisition of its own shares Sec. 41

6
a) Purpose
b) Retained earnings see definition in SEC Memo Circular No. 11, 5
December 2008
Steinberg v. Velasco, GR L-30460, 12 March 1929
6) Investment of corporate funds in another corporation or business or other
purpose Sec. 42
Gokongwei v SEC et al., L-45911, 11 April 1979, 89 SCRA 336
7) Power to declare dividends Sec. 43
a) Unrestricted retained earnings
b) Types cash, stock, property
c) Record date; payment date
d) Shareholders approval of stock dividend Sec. 43
e) Limitation on retention of surplus profit Sec. 43
SEC Memo Circular No. 11, 5 December 2008, Guidelines on the
Determination of Retained Earnings Available for Dividend Declaration
Madrigal & Company v Zamora, supra
Nielson & Co. v Lepanto Consolidated, GR L-21601, 26 SCRA 540 (1968)
8) Power to enter into management contracts Sec. 44
C. Ultra vires acts Sec. 45
Republic v Acoje Mining, GR L-18062, 28 February 1963, 7 SCRA 361
Carlos v Mindoro Sugar Co., 57 Phil 343 (1932)
Government v El Hogar Filipino, GR L-26649, 13 July 1927, 50 Phil 1927
Bissel v Michigan Southern see Campos, pp 313-321
Pirovano et al v de la Rama Steamship Co., 96 Phil 335 (1954)
Harden et al v Benguet Consolidated, GR.37331, March 18, 1933
VII.

Control and management of the corporation

Read: Campos, Vol. 1, Chapter VII, 340-640
A. The corporate hierarchy; allocation of power within the corporation
B. Board of Directors or trustees
Campos, Vol. 1, Chapter VII, pages 340-383
1) Corporate powers exercised by Board Sec. 23
Ramirez v Orientalist Co. and Fernandez, GR 11897, 24 September 1918
Barretto v La Previsora Filipina, GR L-34719, 8 December 1932
2) Election of directors Sec. 24
a) Qualifications of directors
Detective & Protective Bureau v Cloribel, GR L-23428, 26 SCRA 225
(1968)
Lee v Court of Appeals, G.R. 93695, 205 SCRA 752 (1992)
Independent directors (public companies) Sec. 38, SRC
b) When elected Sec. 24
c) Who can vote Sec. 24; Sec. 57
3) Term of office Sec. 23; 92
4) Removal of directors Sec. 28
Roxas v de la Rosa, L-26555, 16 November 1926, 49 Phil 609
5) Vacancies Sec. 29
Valle Verde CC v Africa, GR 151969, 4 Sept 2009, 598 SCRA 69
6) Meetings of the Board
a) Board must act as a body (collegial)

7
Tan et al v Sycip et al., G.R. No. 153468, 499 SCRA 216 (2008)
b) Kinds of meetings; quorum - Sec. 25; 49
c) When and where; who presides - Sec. 53; 54
d) Notice Sec. 53
e) Quorum Sec. 25
f) Close corporations - Sec. 97
SEC Memo Circ. 14, 20 Nov 2001 meetings by teleconference
Lopez v Ericta, L-32991, 45 SCRA 539 (1972)
Gokongwei v SEC et al., L-45911, 11 April 1979, 89 SCRA 336
7) Compensation Sec. 30
Western Institute of Technology v Salas, GR 113032, 278 SCRA 216 (1997)
8) Executive committee Sec. 34; Campos, pages 407-412
Filipinas Port Services v Go, G.R. No. 161886, 518 SCRA 453 (2007)
9) Board committees
C. Corporate officers and agents Campos, pages 383-389
1) Minimum set of officers Sec. 25
2) Qualifications and disqualifications Sec. 25; 27
3) When elected; report of election Sec. 25; 26
4) Authority; liability of corporate officers
Yu Chuck v Kong Li Po, L-22450, 3 December 1924, 46 Phil 608
Board of Liquidators v Heirs of Kalaw, GR L-18805, 20 SCRA 987 (1967)
Zamboanga Transportation v Bachrach Motor, G.R. L-27694, 24 Oct. 1928
Acuna v Batac Producers, GR L-20333, 20 SCRA 526 (1967)
Yao Ka Sin Trading v CA, GR L-53820, 209 SCRA 763 (1992)
Lopez Realty v Fotencia, G.R. No. 76801, 247 SCRA 183 (1995)
Pua Casim v Neumark & Co., GR L-21644, 2 October 1924
Francisco v GSIS, 7 SCRA 557 (30 March 1963)
Buenaseda v Bowen & Co., G.R. L-14985, 29 December 1960
Tramat Mercantile v CA, G.R. No. 111008, 238 SCRA 14 (1994)
D. Stockholders or members
Campos, pages 413-513
1) Right to vote Sec. 6; 24, 51; 55; 56; 57; 89
Gokongwei v SEC, et al., supra shareholder has no vested right to be
elected as director
2) Other proprietary rights of shareholders
a) Right to dividends
b) Right of appraisal
c) Right to inspect corporate records
d) Pre-emptive right
3) Stockholders or members meetings Sec. 50, 51, 93
4) Quorum Sec. 52
Johnston et al v Johnston et al., 61 O.G. No. 39, 6160 (1965) - Note: Court of
Appeals case see Campos, pages 424-432
5) Where no meeting called Sec. 50; Sec. 5(k), SRC; Sec. 6(f)
6) When shareholders vote is necessary; instances when non-voting shares
have the right to vote Sec. 6
a) Election of directors Sec. 24, 92
b) Removal of directors Sec. 28
c) Any amendment to articles of incorporation 2/3 of outstanding capital
d) Adoption of or amendment to By-Laws majority vote

8
e) Sale of all or substantially all assets; creation of bonded indebtedness
2/3 of outstanding capital
f) Investment of corporate funds in business other than the primary purpose
2/3 of outstanding capital
g) Denial of pre-emptive right 2/3 of outstanding capital; Sec. 39
h) Stock dividends 2/3 of outstanding capital; Sec. 43
i) Management contracts majority vote; 2/3 vote; Sec. 44
j) Merger and consolidation 2/3 of outstanding capital Sec. 77
k) Voluntary dissolution 2/3 vote; Sec. 118-119
7) Appraisal right Sec. 81 86
a) Corporate acts that give rise to appraisal right Sec. 81; Sec. 37; Sec.
40; 42; Sec. 76
b) How right is exercised Sec. 82
c) Effect of demand for appraisal Sec. 83
Turner v Lorenzo Shipping, GR 157479, 24 November 2010
E. Devices affecting control
1) Proxy Sec. 58; Campos, pages 514-518
Proxy rules - SEC Memo Circular No. 5, series of 1996
Special rules for publicly listed companies - SRC Rule 20 (IRR of SRC)
Alejandrino v De Leon, GR 49043 (1943) Campos, pages 530-540
2) Voting trust Sec. 59; Campos, pages 562-566
Natl Investment and Dev. Corp v Aquino, L-34192, 163 SCRA 153 (1988)
Lee v Court of Appeals, G.R. 93695, 205 SCRA 752 (1992)
3) Pooling and voting agreements Campos, pages 593-595; Sec. 100, Code
E.K. Buck Retail v Harkert - Campos, pages 602-612
Clark v Dodge - Campos, pages 616-620
4) Cumulative voting see Sec. 24; Campos, pages 620-624
5) Classification of shares see Sec. 6
6) Restrictions on share transfers Campos, pages 625
7) Prescribing qualifications of directors; Founders shares Sec. 7; Campos,
pages 625-626
8) Management contracts Sec. 44; Campos, pages 626-632 (with Ellis case)
9) Unusual voting requirements Campos, pages 632-633
VIII.

Duties of directors and controlling shareholders

Read: Campos, Vol. 1, Chapter VIII, pages 641-780
A. The 3-fold duties of directors: diligence, loyalty and obedience
B. Liability of directors, trustees, officers Sec. 31
C. Duty of diligence; the Business Judgment Rule
Otis v Pennsylvania Railroad, Campos, pages 643-650
Steinberg v. Velasco, GR L-30460, 12 March 1929
Board of Liquidators v Kalaw, GR L-18805, 20 SCRA 987 (1967)
Montelibano v Bacolod Murcia, GR 15092, 5 SCRA 36 (1962)
Litwin Rosemarin v Allen, Campos, pages 654-664
Walker v Man, Campos, pages 664-666
D. Fiduciary duties
Gokongwei v SEC et al., L-45911, 11 April 1979, 89 SCRA 336
San Miguel v Kahn, G.R. No. 85339, 176 SCRA 447 (1989)
Strong v Repide, 213 U.S. 419 (May 3, 1909)
E. Conflict of interest: Self-dealing director Sec. 32

F.
G.
H.

I.
J.
K.
L.
IX.

Related party transactions

Palting v San Jose Petroleum, GR L-14441, 17 December 1966
Prime White Cement v IAC, GR L-68555, 220 SCRA 103 (1993)
Mead v McCullough, G.R. No. 6217, 26 December 1911
Conflict of interest: Interlocking directors Sec. 33
Conflict of interest: Seizing corporate opportunity Sec. 34
Compensation of directors and officers Sec. 30
Central Cooperative v Tibe, et al., GR L-27972, 33 SCRA 596 (1970)
Barretto v La Previsora Filipina, GR 34719, 8 December 1932
Fogelson v American Woollen, Campos, pages 712-716
Using insider information Sec. 27, SRC; Sec. 23, SRC
Liability for watered stock Sec. 65
Duty of controlling shareholder - Campos, pages 771-772
Insuranshares Corp. v Northern Fiscal Corp., Campos, pages 773-780
Duty to creditors and other stakeholders

Right of inspection
Read: Campos, Vol. 1, Chapter IX, pages 781-818
A. Basis of Right
B. Records covered Sec. 74; 75
C. Extent of and limitations on right
1) Limitations as to time and place
2) Purpose
D. Liability for refusal Sec. 74
Gokongwei v SEC et al., L-45911, 11 April 1979, 89 SCRA 336
Republic v Sandiganbayan, G.R. No. 88809, 10 July 1991, 199 SCRA 39

X.

Derivative suits
Campos, Vol. 1, Chapter X
A. Nature and basis Campos, pages 819-820
B. Requirements Campos, pages 820-824
Pascual v Orozco, GR L-5174, 17 March 1911
Everett v Asia Banking Corp., GR L-25241, 3 November 1926
Liken v Shaffer, Campos, pages 835-840
Evangelista v Santos, GR L-1721, 19 May 1950
Republic v Cuaderno, GR L-22399, 19 SCRA 671 (30 March 1967)
Reyes v Tan, GR L-16982, 3 SCRA 198 (1961)
Chase v CFI of Manila, GR L-20457, 18 SCRA 602 (1966)
Gamboa v Victoriano, L-40620, 90 SCRA 40 (1979)
San Miguel v Kahn, G.R. No. 85339, 176 SCRA 447 (1989)
Western Institute of Technology v Salas, GR 113032, 278 SCRA 216 (1997)

XI.

Financing the corporation

Campos, Vol. 2, Chapter XI
A. Sources of financing Campos, Vol. 2, pp. 1-6
B. Shares of stock; kinds Sec. 6; Campos, Vol. 2 pp. 6-33

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C.

D.

E.
F.

XII.

1) Common
2) Preferred
a) Preference as to dividends
(i)
Participating and non-participating
(ii)
Cumulative and non-cumulative
- Discretionary
- Mandatory
- Earned cumulative or dividend credit
b) Voting rights
c) Preference upon liquidation
d) Preferred stockholder not a creditor
Ellingwood v Wolfs Head Oil, see Campos, Vol. 2, pp 12-17
Hay v Hay, see Campos, Vol. 2, pp. 17-27
Augusta Trust v. Augusta, Hallowell & Gardiner Railroad, Campos, 27-29
Garcia v Lim Chu Sing, GR L-39427, 24 February 1934
See also: Philippine Coconut Producers Federation (COCOFED) et al. v
Republic, G.R. Nos. 177857-58) Resolution dated 17 September 2009 re
conversion of common shares to preferred shares
3) Par or no par shares Sec. 14(7); Campos. Vol. 1, p 80; Vol. 2, pp 29-31
4) Treasury shares Sec. 9; 43; 137; 57; Campos, Vol. 2, pp 31-32; review:
power to acquire its own shares, VI(B)(5) of this outline
5) Redeemable shares Sec. 8; Campos, Vol. 2, pp 32-33
6) Founders shares Sec. 7; Campos, Vol. 1, pp 625-626
Subscription contract
1) Pre incorporation
2) Post-incorporation
Campos, Vol. 2, pages 33-52; Sections 13, 60, 61; 66; 80
Wallace v Eclipse Pocahontas Coal Co., Capos, Vol. 2, pp 4245
Bayla v Silang Traffic Co., Inc. G.R. Nos. L-48195 and 48196; 1 May 1942
Trillana v Quezon College, Inc., GR L-5003, 27 June 1953
Edward Keller v. COB Group, L-68097, 141 SCRA 88 (1986) (liability of
subscribers)
Lingayen Gulf Electric v Baltazar, GR L-6244, 30 June 1953 (unanimous consent
of other shareholders to release subscriber from obligation cannot prejudice
creditors of corporation)
Pre-emptive right Sec. 39; Campos, Vol. 2, pages 52-58; pages 62-63
Stokes v Continental, Campos, Vol. 2 pages 64-72; see note at pages 72-73
Thom v Baltimore, Campos, Vol. 2 pages 73-75
Fuller v Krogh, Campos, Vol. 2, pages 75-78
Benito v SEC, G.R. No. L-56655, July 25, 1983, 123 SCRA 722 (1983); Dee v
SEC, G.R. No. L-60502, G.R. No. L-63922 July 16, 1991, 199 SCRA 241 (1991)
Note: Benito and Dee cases decided under old Corporation Law
Debt securities Campos, Vol. 2, pages 90-92; 97-98; 110
Securities Regulation Code (SRC)
1) What are securities Sec. 3.1,SRC
2) Registration of securities Sec. 8, SRC
3) Exempt securities and exempt transactions Sec. 9, Sec. 10, SRC

Consideration for issuance of shares

A. Form of consideration Sec. 62; Campos, Vol. 2, pages 140-141
National Exchange Co. v Dexter, GR L-27872, 25 February 1928

11
B. Watered stock; liability of directors Sec. 65, Campos, Vol. 2, pages 142-144
Triplex Shoe Co. v Rice & Hutchins Inc., Campos, Vol. 2, pp 149
McCarty v Langdeau, Campos, Vol. 2, pp 149-152
Rhode v Dock-Hop Company, Campos, Vol. 2, pages 152-158
C. How payment of subscriptions enforced Campos, Vol. 2, pages 158-163
1) When balance on subscription payable Sec. 13
2) Payment of balance of subscription Sec. 67
3) Delinquency sale Sec. 68; 69
4) Recovery of unpaid subscription Sec. 69; 70
Velasco v Poizat, GR L-11528, 15 March 1918
Miranda v Tarlac Rice Mill, GR L-35961, 2 December 1932
De Silva v Aboitiz & Co., Inc., GR L-19893, 31 March 1923
National Exchange Co. v Dexter, GR L-27872, 25 February 1928
Lumanlan v Cura, GR L-39861, 21 March 1934
PNB v Bitulok Sawmill, GR L-24177-85, 29 June 1968, 23 SCRA 1366 (1968)
Edward Keller v. COB Group, L-68097, 141 SCRA 88 (1986)
Garcia v Suarez, GR 45493, 21 April 1939
5) Effect of delinquency Sec. 71
D. Unpaid but non-delinquent subscriptions Campos, Vol. 2, pp 186-208
1) Rights Sec. 72
2) Interest on unpaid subscription Sec. 62
3) Issuance of certificate of stock Sec. 63; 64
Fua Cun v Summers, G.R. No. L-19441, 27 March 1923
Baltazar v Lingayen Gulf Electric, GR L-16236, 14 SCRA 522 (1965)
Nava v Peers Marketing, L-28120, 74 SCRA 65 (1976)
E. Certificate of stock Sec. 63; 67
XIII.

Dividends and purchases by corporation of its own shares

A. Form of dividends Sec. 43; Campos, Vol. 2, pp 209 210
1) Cash
2) Stock
3) Property
Nielson & Co. v Lepanto Consolidated, GR L-21601, 28 Dec 1968; 26 SCRA 540
B. Sources of dividends Sec. 43; Campos, Vol. 2, 215-218; SEC Memo Circular
No. 11, 5 December 2008, Guidelines on the Determination of Retained Earnings
Available for Dividend Declaration
Berks Broadcasting v Craumer Campos, pp 218-221
Lich v United States Rubber, Campos, Vol. 2, pp 222-232
C. Authority to declare dividend - Campos, Vol. 2, pp 232-235
Keough v St. Paul Milk Co., Campos, Vol. 2, pp 235-239
Dodge v Ford Motor Co., Campos, pp. Vol. 2, 239-243
D. When right to dividends vests; rights of transferee Campos, V. 2, pp 250-251
McLaran v Crescent Planning Mill Co., Campos, Vol. 2, pp 251-256
E. Liability for illegal dividends Campos, Vol. 2, pp 256-258
F. Purchase by corporation of its own shares Sec. 41; Campos, Vol. 2, pp 258261; review treasury shares in this outline

XIV.

Amendments of charter
Campos, Vol. 2, pp 262-299; Sec. 145; 16; 36; 37; 38; 11; 17; 81
A. Power of shareholders to amend articles of incorporation
B. Limitations on power; grounds for rejection by SEC

12

XV.

XVI.

C. Effectivity of amendment
D. Special amendments
(1) Increase or decrease of capital stock Sec. 38; Sec. 122
Philippine Trust Co. v Rivera, GR L-19761, 29 January 1923
Hartford Accident & Indemnit Co. v W.S. Dickey Clay Mfg, Campos, 268-274
Marcus v RH Macy & Co., Campos, pp 274-277
Keller v Wilson & Co., Campos, pp 277-283
(2) Corporate term 11; 37; 81
Recall: Alhambra Cigar v SEC, GR L-23606, 29 July 1968, 24 SCRA 269
(3) Close corporations Sec. 16; 17; 37; 38; 103
Transfer of shares Sec. 63; 64; 71; Campos, Vol. 2, pp. 300-366
A. Manner and effectivity of transfer Campos, Vol. 2, 300-321
(1) Indorsement of stock certificate; registration in corporate books
(2) Effect of lack of registration
(3) Unpaid shares cannot be transferred; assignment of subscription
(4) Remedy if registration refused
Uson v Diosomito, GR No. L-42135, 17 June 1935
Montserrat v Ceron, G.R. No. 37078, 27 September 1933
Embassy Farms v CA, G.R. No. 80682 13 Aug. 1990, 188 SCRA 492 (1990)
Razon v IAC, G.R. No. 74306, 16 March 1992, 207 SCRA 234 (1992)
Rural Bank of Salinas v CA, GR No. 96674, 26 June 1992, 210 SCRA 510
Rural Bank of Lipa v CA, GR No. 124535, 28 Sept 2001, 366 SCRA 188 (2001)
Tan V SEC, G.R. No. 95696, 3 March 1992, 206 SCRA 740 (1992)
Tay v CA, G.R. No. 126891, 5 August 1998, 634 SCRA 293 (1998)
Nava v Peers Marketing, G.R. No. L-28120, 25 Nov 1976, 74 SCRA 65 (1976)
Lee Won v Wack Wack Golf & Country Club, GR No. L-10122, 30 August 1958
B. Restrictions on transfers Campos, Vol. 2, pp 321-332
(1) General rule: free transferability of shares
(2) Restrictions; validity; requirements
Padgett v Babcock & Templeton, GR No. 38684. 21 December 1933
Recall: Fleischer v Botica Nolasco, supra.
Allen v Biltmore Tissue Corp, Campos, VOl. 2, pp 337-341
C. Unauthorized transfers Campos, Vol. 2, pp 346-348
Santamaria v Hong Kong Shanghai, G.R. No. L-2808, 31 August 1951
De los Santos v Republic & McGrath, GR No. L-4818, 28 February 1955
D. Collateral transfers Campos, Vol. 2, pp 360-361
Chua Guan v Samahang Magsasaka, Inc., GR No. L-42091, 2 November 1935
E. Non-stock corporations non-transferability of membership
Dissolution Campos, Vol. 2, pp 367- 438
A. Causes of Dissolution Campos, Vol. 2, pp 367-389
(1) Expiration of corporate term
(2) Shortening corporate term
(3) Voluntary dissolution when no creditors affected Sec. 117; 118
(4) Voluntary dissolution where creditors affected Sec. 117; 119
(5) Failure to organize; continuous inoperation Sec. 22
(6) Dissolution by minority in close corporations Sec. 105
Financing Corporation v Teodoro, G.R. No. L-4900, 31 August 1953
(7) Involuntary
Campos, Vol. 2, pp. 385-389; Sec. 121; Sec. 5.1(m), SRC;
Sec. 6(e), PD
902-A; Sec. 144; Rule 66, Rules of Court

13
Government v Philippine Estates, 2 April 1918
Government v El Hogar Filipino, GR L-26649, 13 July 1927, 50 Phil 1927
Republic v Security Credit, GR 20583, 23 January 1967, 19 SCRA 59
Republic v Bisaya Land Transportation, L-31490, 6 Jan 1978, 81 SCRA 9
B. Effects of dissolution; winding up and dissolution Sec. 122
(1) Loss of juridical personality Campos, Vol. 2, pp 407-408
Buenaflor v Camarines Sur Industry, GR 14991-14994, 30 May 1960;
National Abaca v Pore, GR L-16779, 16 August 1961; 2 SCRA 989
Cebu Port Labor Union v State Marine, GR L-9350, 20 May 1957
Gonzales v Sugar Regulatory Administration, G.R. No. 84606, 28 June 1989,
174 SCRA 377
(2) Executory contracts Campos, Vol. 2, pp 414-414
(3) Methods of liquidation Campos, Vol. 2, pp 415-417
(4) Distribution of assets after payment of debts Campos, Vol 2, pp 417-418
Board of Liquidators v Kalaw, GR 18805, 15 Aug 1967, 20 SCRA 987
China Banking v Michelin, 1933
Sumera v Valencia, GR 45485, 3 May 1939
Gelano v CA, 1981, GR L-39050 24 February 1981, 103 SCRA 90
Republic v Marsman Development, L-18956, 27 April 1972, 44 SCRA 418
Tan Tiong Bio v Commissioner, GR L-15778, 23 April 1962
Chung Ka Bio v IAC, GR 71837, 26 July 1988, 163 SCRA 534
Clemente v CA, G.R. No. 82407, 27 March 1995, 242 SCRA 717
C. Distribution of assets of non-stock corporations Sec. 94; Campos, pp 437-438
XVII.

Corporate combinations
Campos, Vol. 2, pp 439-482
A. Purposes of combinations; methods
B. Merger and consolidation - Sec. 76; 77; 78; 79; 80
C. Sale of all or substantially all corporate assets Sec. 40; appraisal right; compared
with merger
Reyes v Blouse, GR L-4420, 19 May 1952
Edward J. Nell v Pacific Farms, GR 20850, 29 Nov 1965; 15 SCRA 415
D. Exchange of stocks

XVIII. Foreign corporations

Campos, Vol. 2, pp 483-606
Sec. 123 to 135, inclusive
Read ALL CASES in Campos under Effects of failure to secure SEC license and
What constitutes doing business
XIX.

Special corporations
A. Educational corporations Campos, pp 607- 614
B. Religious corporations Campos, Vol. 2, pp 612-617
C. Close corporations Campos, Vol. 2, Sec. 96- 105

XX.

Miscellaneous provisions
Sections 137-145