Chapter Iii - Formation and Organization of Corporation
Chapter Iii - Formation and Organization of Corporation
Chapter Iii - Formation and Organization of Corporation
COMPONENTS OF A CORPORATION
1. Promoter
2. Corporators
3. Incorporators
- (b) Board Must Act As Body (Sec. 25; The Board of Liquidators v.
Heirs of Maximo M. Kalaw, 20 SCRA 987 [1967]; Ramirez v. Orientalist
Co. and Fernandez, 38 Phil. 634 [1918]; Acuña v. Batac Producers
Cooperative Marketing Association, 20 SCRA 526 [1967]).
5. Subscriber
- A person who has agreed to take and pay for original and unissued
shares of a corporation formed and to be formed.
6. Underwriter
1. Natural Person;
2. Juridical Person (partnership, corporations, associations)
General Rule: Yes, provided the majority of them are residents of the
Philippines.
1. Promotion
2. Incorporation (Sec10)
3. Formal organization and commencement of business operations
(Section 22)
(1) PROMOTION
Q: Who is a promoter?
A: Is a person who brings about or cause to bring about the formation and
organization of a corporation by:
1. bringing together the incorporators or the persons interested in the
enterprise,
2. procuring subscriptions or capital for the corporation and
3. setting in motion the machinery which leads to the incorporation of the
corporation itself.
General Rule:
Exception:
A: All promoter(s) have joint personal liability for a corporation that was
never formed. He remains liable on contracts even after incorporation even
though the corporation adopts the contract.
The contract here was entered into not between Manuel Tabora and a
non-existent corporation but between Manuel Tabora as owner of the four
parcels of lands on the one hand and the same Manuel Tabora, his wife and
others, as mere promoters of a corporation on the other hand.
For reasons that are self-evident, these promoters could not have
acted as agent for a projected corporation since that which no legal
existence could have no agent. This is not saying that under no
circumstances may the acts of promoters of a corporation be ratified by the
corporation if and when subsequently organized, however, under the
peculiar facts and circumstances of the present the court declined to extend
the doctrine of ratification which would result in the commission of injustice
or fraud to the candid and unwary. A corporation, until organized, has no life
and therefore no faculties. Cagayan Fishing Dev’t Corp could not
and did not acquire the four parcels of land sold by Tabora, it also follows
that it did not possess
any resultant right to dispose of them by sale to the defendant, Teodoro
Sandiko. The
corporation had no juridical personality to enter into a contract.
[Rizal Light & Ice Co. v. Public Service Commission, G.R. No. L20993
(1968)]
A: No. Promoters are not agents of the corporation before it comes into
existence. Upon incorporation, the practice is for the BOD to pass a
resolution ratifying the contracts entered into by the incorporators with the
promoter. Then, they become agents of the corporation.
GR:
1. Pre‐incorporation subscription – entered into before the incorporation
and irrevocable for a period of six (6) months from the date of
subscription unless all other subscribers consent or if the corporation
failed to materialize. It cannot also be revoked after filing the Articles
of Incorporation with the SEC (Sec. 61)
A: Yes. As long as the shares are not considered delinquent, they are
entitled to all rights granted to it whether or not the subscribed capital
stocks are fully paid.
CORPORATE NAME
NOTE: The name of the corporation that has been dissolved or whose
registration has been revoked shall not be used by another corporation
within five (5) years from the approval of dissolution or five years from the
date of revocation, unless it has been allowed at the time of the dissolution
or revocation by the shareholders or members who represent a majority of
the outstanding capital stock or membership of the dissolved corporation as
the case may be.
Facts:
Issue:
Ruling:
Facts:
Issue:
YES.
The Court declared that a corporation’s right to use its corporate and
trade name is a property right, a right in rem, which it may assert and
protect against the world in the same manner as it may protect its tangible
property, real or personal, against trespass or conversion. It is regarded, to
a certain extent, as a property right and one which cannot be impaired or
defeated by subsequent appropriation by another corporation in the same
field.
A corporation acquires its name by choice and need not select a name
identical with or similar to one already appropriated by a senior corporation
while an individual’s name is thrust upon him. A corporation can no more
use a corporate name in violation of the rights of others than an individual
can use his name legally acquired so as to mislead the public and injure
another
Our own Corporation Code, in its Section 18, expressly provides that:
(1) that the complainant corporation acquired a prior right over the use of
such corporate name; and
(a) identical; or
GSIS Family Bank v. BPI Family Bank, G.R. NO. 175278 (2015)
Facts:
Petitioner was originally organized as Royal Savings Bank and started
operations in 1971. Beginning 1983 and 1984, petitioner encountered
liquidity problems. On July 9, 1984, it was placed under receivership and
later temporarily closed by the Central Bank of the Philippines. Two (2)
months after its closure, petitioner reopened and was renamed Comsavings
Bank, Inc. under the management of the Commercial Bank of Manila.
In 1987, the Government Service Insurance System (GSIS) acquired
the petitioner from the Commercial Bank of Manila. Petitioner’s management
and control was thus transferred to GSIS. To improve its marketability to the
public, especially to the members of the GSIS, petitioner sought Securities
and Exchange Commission (SEC) approval to change its corporate name to
“GSIS Family Bank, a Thrift Bank.” Petitioner likewise applied with the
Department of Trade and Industry (DTI) and Bangko Sentral ng Pilipinas
(BSP) for authority to use “GSIS Family Bank, a Thrift Bank” as its business
name. The DTI and the BSP approved the applications. Thus, petitioner
operates under the corporate name “GSIS Family Bank — a Thrift Bank,”
pursuant to the DTI Certificate of Registration No. 741375 and the Monetary
Board Circular approval.
Issue:
Ruling:
NO. In Philips Export B.V. v. Court of Appeals, this Court ruled that to
fall within the prohibition of the law on the right to the exclusive use of a
corporate name, two requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of
such corporate name; and
(a) identical or
(b) deceptive or confusingly similar to that of any existing corporation or to
any other name already protected by law; or
These two requisites are present in this case. In this case, respondent
was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family
Bank. Petitioner, on the other hand, was incorporated as GSIS Family —
Thrift Bank only in 2002, or at least seventeen (17) years after respondent
started using its name. Following the precedent in the IRCP case, we rule
that the respondent has the prior right over the use of the corporate name.
The second requisite in the Philips Export case likewise obtains on two
points: the proposed name is (a) identical or (b) deceptive or confusingly
similar to that of any existing corporation or to any other name already
protected by law.
Under the facts of this case, the word “family” cannot be separated
from the word “bank.” In asserting their claims before the SEC up to the
Court of Appeals, both petitioner and respondent refer to the phrase “Family
Bank '' in their submissions. This coined phrase, neither being generic nor
descriptive, is merely suggestive and may properly be regarded as arbitrary.
Arbitrary marks are “words or phrases used as a mark that appear to be
random in the context of its use. They are generally considered to be easily
remembered because of their arbitrariness. They are original and
unexpected in relation to the products they endorse, thus, becoming
themselves distinctive.” Suggestive marks, on the other hand, are marks
which merely suggest some quality or ingredient of goods. . . . The strength
of the suggestive marks lies on how the public perceives the word in relation
to the product or service.”
CORPORATE POWERS:
NOTE:
- Non-stock corporations
ISSUE: Whether or not the “residence” of the corporation is the same one
as stated in the Articles of Incorporation.
RULING: Yes, although the Rules of Court do not provide that when the
plaintiff is a corporation, the complaint should be filed in the location of its
principal office as indicated in its articles of incorporation. Jurisprudence has,
however, settled that the place where the principal office of a corporation is
located, as stated in the articles, indeed establishes its residence. This ruling
is important in determining the venue of an action by or against a
corporation, as in the present case.
(TAYABAN)
6. Treasury shares are shares of stock which have been issued and fully
paid for but subsequently reacquired by the issuing corporation by purchase,
redemption, donation or through some other lawful means. Such shares may
again be disposed of for a reasonable price fixed by the board of directors.
RIGHT TO VOTE AND RECEIVE DIVIDENDS. Treasury shares are not entitled
to votes and no dividends could be declared thereon as corporations cannot
declare dividends to itself.
Section 45. ADOPTION OF BY-LAWS. The by-laws may be adopted and filed
prior to incorporation; in such case, such by-laws shall be approved and
signed by all the incorporators and submitted to the Commission, together
with the articles of incorporation.
On the other hand, if the code of by-laws is adopted by the corporation after
incorporation, the following must be followed:
1. It must be approved by the affirmative vote of the stockholders
representing at least a majority of the outstanding capital stock, or of
at least a majority of the members in the case of non-stock
corporation;
2. A copy of the by-laws must be signed by the stockholders or
members voting for them, duly certified by a majority of the directors
or trustees and countersigned by the secretary of the corporation;
3. It should be filed with the Securities and Exchange Commission.
EFFECTIVITY. The by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws are
not inconsistent with this Code.
EFFECTIVITY. The amended or new bylaws shall only be effective upon the
issuance by the Commission of a certification that the same is in accordance
with this Code and other relevant laws.
• Corporate Officers – Section 24
A corporation shall elect the following corporate officers:
(c) a secretary, who must be a citizen and resident of the Philippines; and
Note: If the corporation is vested with public interest, they shall compliance
officer,
The same person may hold two (2) or more positions concurrently, except
that no one shall act as president and secretary or as president and
treasurer at the same time, unless otherwise allowed in this Code.
The officers shall manage the corporation and perform such duties as may
be provided in the bylaws and/or as resolved by the board of directors.