PARTNERSHIP

Limited Partnership
Art. 1843. A limited partnership is one formed by two or more persons
under the provisions of the following article, having as members one or
more general partners and one or more limited partners. The limited
partners as such shall not be bound by the obligations of the
partnership.
Art. 1844. Two or more persons desiring to form a limited partnership shall:

(1) Sign and swear to a certificate, which shall state –

(a) The name of the partnership, adding thereto the word "Limited";
(b) The character of the business;
(c) The location of the principal place of business;
(d) The name and place of residence of each member, general and limited partners being respectively designated;
(e) The term for which the partnership is to exist;
(f) The amount of cash and a description of and the agreed value of the other property contributed by each limited
partner;
(g) The additional contributions, if any, to be made by each limited partner and the times at which or events on the
happening of which they shall be made;
(h) The time, if agreed upon, when the contribution of each limited partner is to be returned;
(i) The share of the profits or the other compensation by way of income which each limited partner shall receive by
reason of his contribution;
(j) The right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and
conditions of the substitution;
(k) The right, if given, of the partners to admit additional limited partners;
(l) The right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions
or as to compensation by way of income, and the nature of such priority;
(m) The right, if given, of the remaining general partner or partners to continue the business on the death, retirement,
civil interdiction, insanity or insolvency of a general partner; and
(n) The right, if given, of a limited partner to demand and receive property other than cash in return for his
contribution.

(2) File for record the certificate in the Office of the Securities and Exchange Commission.
Definition: a limited partnership is one which complies with the following three (3) requisites:

1. As to composition: at least one general partner and at least one limited partner, and the organization thereof must be strictly
comply with Article

General partner: generally liable for partnership obligation beyond his capital contribution
Limited/special partner: liable for partnership obligation but only up to the extent of his capital contribution
Contribution of limited partner: cash or property, but not services

Art. 1845. The contributions of a limited partner may be cash or property, but not services.

3. As to form: partners must execute an Articles of Partnership that should contain the matters listed under Article 1844

Registration requirement: The Articles of Partnership must be registered with the Securities and Exchange Commission

False Statement in SEC Certificate: one who suffers loss by reason of reliance on such statement may hold
liable any party to the certificate who knew the statement to be false. Deliberate inclusion of false information makes the party liable,
and not just mere false information by sheer inadvertence or negligence.
Art. 1847. If the certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the
certificate who knew the statement to be false:
(1) At the time he signed the certificate, or
(2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to
file a petition for its cancellation or amendment as provided in Article 1865.

Requirements for Amendment:

1. Amendments must be in writing
2. To be signed and sworn to by all the members, including new members
3. Certificate, as amended, must be filed for record with SEC

Requirements for Cancellation of Certificate:

1. Cancellation of Certificate must be in writing
2. If cancellation is by virtue of court order – certificate must be coupled with a certified true copy of the court order

Characteristics:
1. formed by compliance with the statutory requirements
2. one or more general partners control the business and are personally liable to creditors
3. one or more LP contribute to the capital and share in the profits but do not participate in the management of the business and are not
personally liable for
partnership 4. obligations beyond the amount of their capital contributions
4. LP may ask of the return of their capital contributions under the conditions prescribed by law
5. Partnership debts are paid out of common fund and the individual properties of the GP
Name of limited partnership, rule:

GR: Same rule as in general partnership

EXC: name of limited partner must not appear in the firm name unless:
1. It is also the surname of a general partner
2. Prior to the time when the limited partner became such, the business has been carried on under a
name in which his surname
appeared

Violation of items [1] and [2]: limited partner is liable as a general partner to a partnership creditors who
extend credit to the
partnership without actual knowledge is not a general partner
 Rights of the partners
[1850-53, 1855-57, 1859]
General partners in limited partnership: same as in general partnership
(1810-1814; 1796,1805-06, 1809, 1830-31),

EXC:
(1) Do any act in contravention of the certificate;
(2) Do any act which would make it impossible to carry on the ordinary business of the partnership;
(3) Confess a judgment against the partnership;
(4) Possess partnership property, or assign their rights in specific partnership property, for other than a partnership
purpose;
(5) Admit a person as a general partner;
(6) Admit a person as a limited partner, unless the right so to do is given in the certificate;
(7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency
of a general
partner, unless the right so to do is given in the certificate.

Limited partners in limited partnership: same as with general partners (1851), except that limited
partners do not have a right to participate in the control of the partnership except in isolated
transactions
Specific Rights of Limited Partners:
1. To have the partnership books kept at the principal place of business of the partnership
2. To inspect and copy at a reasonable hour partnership books or any of them
3. To demand true and full information of all things affecting the partnership
4. To demand a formal account of partnership affairs whenever circumstances render it just and reasonable
5. To ask for dissolution and winding up by decree of court
6. To receive the return of his contributions provided the partnership assets are in excess of all liabilities
7. To receive a share of the profits or other compensation by way of income (1856)

Article 1856. A limited partner may receive from the partnership the share of the profits or the compensation by way of income
stipulated for in the certificate; provided, that after such payment is made, whether from property of the partnership or that of a
general partner, the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on
account of their contributions and to general partners.

8. To become a limited partner and a general partner at the same time (1853)
Note: Considering that he is also a general partner, insofar as third persons are concerned, he shall be liable as though he is
absolutely a general partner, and, therefore, liable with his separate properties for partnership liabilities. However, considering that
he is also a limited partner insofar as the partners are concerned, then, he may recover from the other partners what he may have
paid to third persons.
Article 1853. A person may be a general partner and a limited partner in the same partnership at the same time, provided that this fact shall
be stated in the certificate provided for in article 1844. A person who is a general, and also at the same time a limited partner, shall have all
the rights and powers and be subject to all the restrictions of a general partner; except that, in respect to his contribution, he shall have the
rights against the other members which he would have had if he were not also a general partner.

9. Granting loan to the partnership (1854)

10. Transacting other business with the partnership (1854)
11. Receiving a pro rata share of the partnership assets with general creditors (1854)

Note: 1854 is subject to the following prohibitions:

1. A limited partner is prohibited from receiving or holding as collateral security any partnership property (therefore, limited partner cannot
ask for any property that will serve as security, guaranty or collateral for the loan)
2. A limited partner is prohibited from receiving any payment, conveyance or release from liability if it will affect the right of third persons
(such that, in the priority of payments, the credit of the partnership to third persons must be first satisfied.Article 1854. A limited partner also
may loan money to and transact other
business with the partnership, and, unless he is also a general partner, receive on account of resulting claims against the partnership, with
general creditors, a pro rata share of
the assets. No limited partner shall in respect to any such claim:

(1) Receive or hold as collateral security any partnership property, or

(2) Receive from a general partner or the partnership any payment, conveyance, or release from liability if at the time the assets of the
partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners.

The receiving of collateral security, or payment, conveyance, or release in violation of the foregoing provisions is a fraud on the creditors of
thepartnership.
12. Among the limited partners, they may agree that one or some of them shall be preferred in the priority as to the
return of their contributions, compensation by way of income, or as to any other matter (1855)
Note: Provided the same is set forth in the Certificate of Limited Partnership
Article 1855. Where there are several limited partners the members may agree that one or more of the limited partners
shall have a priority over other limited partners as to the return of their contributions, as to their compensation by way of
income, or as to any other matter. If such an agreement is made it shall be stated in the certificate, and in the absence of
such a statement all the limited partners shall stand upon equal footing.

13. Right to assign one’s interest (see 1859)

Rights of assignee: To receive the limited partner’s share in the profits, compensation by way of income
Note: Assignee will acquire ALL the rights of a limited partner if he becomes a substituted limited partner

A substituted limited partner will become such if:

1. All the members have given their consent
2. The certificate of limited partnership is amended
3. The amended certificate is registered with the SEC
Article 1859. A limited partner's interest is assignable.
A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has
assigned his interest in a partnership.
An assignee, who does not become a substituted limited partner, has no right to require any information
or account of the partnership transactions or to inspect the partnership books; he is only entitled to
receive the share of the profits or other compensation by way of income, or the return of his contribution,
to which his assignor would otherwise be entitled.
An assignee shall have the right to become a substituted limited partner if all the members consent
thereto or if the assignor, being thereunto empowered by the certificate, gives the assignee that right.
An assignee becomes a substituted limited partner when the certificate is appropriately amended in
accordance with article 1865.
The substituted limited partner has all the rights and powers, and is subject to all the restrictions and
liabilities of his assignor, except those liabilities of which he was ignorant at the time he became a limited
partner and which could not be ascertained from the certificate.
The substitution of the assignee as a limited partner does not release the assignor from liability to the
partnership under articles 1847 and 1858.
14. Right for the return of his capital contribution
Note: Provided that the following conditions are complied with: Par 1, 1857
1. All liabilities of the partnership have been paid or if they have not yet been paid, the assets of the partnership are
sufficient to pay such liabilities
2. Consent of all the members (both general and limited partners) have been obtained.

Article 1857. A limited partner shall not receive from a general partner or out of partnership property any part of his
contributions until:
(1) All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their
contributions, have been paid or there remains property of the partnership sufficient to pay them;
(2) The consent of all members is had, unless the return of the contribution may be rightfully demanded under the
provisions of the second paragraph; and (3) The certificate is cancelled or so amended as to set forth the withdrawal
or reduction
LAW ON
RA No. 11232
BUSINESS Revised Corporation Code

ASSOCIATIONS
of the Philippines

Atty. Diana A. Velasco

Definition/Concept

Section 2. Corporation Defined. - A corporation is an artificial

being created by operation of law, having the right of succession
and the powers, attributes, and properties expressly authorized by
law or incidental to its existence.
A. Attributes

1. artificial being
2. created by operation of law
3. having the right of succession
4. and the powers, attributes and properties expressly authorized by
law or incident to its existence
Corporation as an artificial being, created by operation of law

Two views/theories of formation:

1. Concession theory: Corporation owes its life to the state, its birth being
purely depended on its will. It is a creature without any existence until it has
received the imprimatur of the state acting according to law

2. Theory of enterprise entity: Grant of primary franchise presupposes the

existence of consent or common venture among those who will form the
corporation. There can be no corporate existence without persons to compose
it, there can be no association without associates
A. Nationality of corporation

1. Place of incorporation test

Section 140. Definition of Rights of Foreign Corporations. - For purposes of this

Code, a foreign corporation is one formed, organized or existing under laws
other than those of the Philippines' and whose laws allow Filipino citizens and
corporations to do business in its own country or State. It shall have the right to
transact business in the Philippines after obtaining a license for that purpose in
accordance with this Code and certificate of authority from the appropriate
government agency.
2. Control test: nationality of the majority of the stockholders on whom equity
control is vested, as they would be able to elect BOD

3. Grand father rule: looks into the citizenship of the individuals who ultimately
own and control the shares of stock of a corporation for purposes of
determining compliance with the constitutional requirement of Filipino
ownership and nationality of the corporation

Case law: NARRA NICKEL MINING AND DEVELOPMENT CORP. vs. REDMONT CONSOLIDATED MINESCORP.,
28 JAN. 2015, GRN 195580
Doctrines

1. Doctrine of corporate fiction: The corporation is treated as an entity separate

and distinct from the individual persons composing the same. As such, the
personality of the corporation is distinct from the stockholders, board of
directors and corporate officers, even from the majority stockholders

2. Piercing the veil of corporate entity

Economic control is used to commit:

1. fraud
2. wrong
3. perpetuate violation of positive legal duty or
4. unjust act
RA No. 11232 Revised Corporation Code
of the Philippines
Rights of Corporation

1. Due process and equal protection

2. Right against unreasonable searches and seizures
3. Right against self - incrimination Corporation not entitled to moral damages (MAMBULAO
LUMBER COMPANY vs. PHILIPPINE NATIONAL BANK, 30 Jan. 1968, GRN L-22973)

A corporation, being an artificial person and having existence only in legal contemplation,
has no feeling, no emotions, no senses; therefore, it cannot experience physical suffering,
mental anguish, fright, serious anxiety, wounded feelings, etc.
Classes of Corporations
(Sec. 3)
a. Stock corporations vs. non-stock corporations

b. As to number of persons who compose them

i. Corporation aggregate vs. corporation sole vs. one person corporation (Sec. 115 – 132)
c. As to whether they are religious or not
i. Ecclesiastical corporation vs. lay corporation
d. As to whether they are for charitable purposes or not
i. Eleemosynary corporation vs. civil corporation

e. As to laws governing their creation

i. Domestic vs. foreign corporation

f. As to their legal right to corporate existence

i. De jure vs. de facto
g. As to whether they are open to the public or not
i. Close corporation vs. open corporation
h. As to their relation to another corporation
i. Parent or holding corporation vs. subsidiary vs. affiliated
i. As to whether they are public or private
i. Public vs. private purpose

j. As to whether they are corporations in a true sense or only in a limited sense

i. True corporation vs. Quasi-corporation (including corporation by
prescription, corporation by estoppel)
Stock corporations vs. non-stock corporations

Stock corporation: which has capital stock divided into shares and is authorized to
distribute to the holders of such shares, dividends, or allotments of the surplus profits on
the basis of the shares held.

Non stock: one where no part of its income is distributable as dividends to its members,
trustees or officers; it must have members.

Section 3. Classes of Corporations. - Corporations formed or organized under this Code

may be stock or nonstock corporations. Stock corporations are those which have capital
stock divided into shares and are authorized to distribute to the holders of such shares,
dividends, or allotments of the surplus profits on the basis of the shares held. All other
corporations are nonstock corporations.
As to number of persons who compose them

i. Corporation aggregate vs. corporation sole vs. one person corporation (Sec.
115 – 132)

Corporation aggregate: corporation with more than one

incorporator/stockholder

Corporation sole: with one member only, religious corporationOPC:

corporation with a single stockholder

Section 116. One Person Corporation. - A One Person Corporation is a corporation with a single stockholder:
Provided, That only a natural person, trust, or an estate may form a One Person Corporation.

Banks and quasi-banks, preneed, trust, insurance, public and publicly-listed companies, and non-chartered
government-owned and -controlled corporations may not incorporate as One Person Corporations: Provided,
further, That a natural person who is licensed to exercise a profession may not organize as a One Person
Corporation for the purpose of exercising such profession except as otherwise provided under special laws.

As to whether they are religious or not

Ecclesiastical corporation vs. lay corporation

a. Ecclesiastical corporation – Religious

b. Lay corporation – other than religious purpose (Either eleemosynary or civil)

As to whether they are for charitable purposes or not

i. Eleemosynary corporation vs. civil corporation

Eleemosynary corporation – Charitable

Civil corporation – Business of profit
As to laws governing their creation
i. Domestic vs. foreign corporation

Domestic corporation – incorporated under Philippine law

Foreign corporation – Incorporated under foreign law

Section 140. Definition of Rights of Foreign Corporations. - For purposes of this Code, a
foreign corporation is one formed, organized or existing under laws other than those
of the Philippines' and whose laws allow Filipino citizens and corporations to do
business in its own country or State. It shall have the right to transact business in the
Philippines after obtaining a license for that purpose in accordance with this Code and
certificate of authority from the appropriate government agency.
As to their legal right to corporate existence
De jure corporation – exist in fact and in law
De facto corporation – exist in fact but not in law

But there are stringent requirements before one can qualify as a de facto corporation:
(a) the existence of a valid law under which it may be incorporated;
(b) an attempt in good faith to incorporate; and
(c) assumption of corporate powers.

Section 19. De facto Corporations. - The due incorporation of any corporation claiming
in good faith to be a corporation under this Code, and its right to exercise corporate
powers, shall not be required into collaterally in any private suit to which such
corporation may be a party. Such inquiry may be made by the Solicitor General in a
quo warranto proceeding.
As to whether they are open to the public or not
i. Close corporation vs. open corporation

a. Close corporation – limited to selected persons

b. Open corporation – open to any person

Section 95. Definition and Applicability of Title. - A close corporation, within the meaning of this Code, is one whose
articles of incorporation provides that:

(a) all the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding twenty (20);
(b) all the issued stock of all classes shall be subject to one (1) or more specified restrictions on transfer permitted
by this Title; and
(c) the corporation shall not list in any stock exchange or make any public offering of its stocks of any class.

Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at
least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another
corporation which is not a close corporation within the meaning of this Code.
As to their relation to another corporation
Parent or holding corporation vs. subsidiary vs. affiliated

Parent corporation – Owner of more than 50% of another corporation

Subsidiary corporation – acquire of parent company

As to whether they are public or private

i. Public vs. private purpose

a. Public corporation: corporation intended to govern a specific portion of the state

b. Private corporation
As to whether they are corporations in a true sense or only in a limited sense
True corporation vs. Quasi-corporation (including corporation by prescription,
corporation by estoppel)

a. True corporation

b. Quasi corporation

c. Corporation by prescription – exercise power for indefinite period without

interference from sovereign power. (Roman Catholic Church)

d. Corporation by estoppel: persons who assume to act as a corporation knowing it to

be without authority to do so – liable as general partners, but once sued, cannot use
as a defense its lack of authority
Section 20. Corporation by Estoppel. - All persons who assume to act as a corporation
knowing it to be without the authority to do so shall be liable as general partners for
all debts, liabilities and damages incurred or arising as a result thereof: Provided,
however, That when any such ostensible corporation is sued on any transaction
entered by its as a corporation or on any tort committed by it as such, it shall not be
allowed to use on any its lack of corporate personality as a defense. Anyone who
assumes an obligation to an ostensible corporation as such cannot resist performance
thereof on the ground that there was in fact no corporation.
Corporations created by special laws or charters
(sec 4)

Section 4. Corporations Create by Special Laws or Charters. - Corporations created by special laws or charters shall
be governed primarily by the provisions of the special law or charter creating them or applicable to them,
supplemented by the provisions of this Code, insofar as they are applicable.

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of
private corporations. Governmentowned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of economic viability.
Government owned and controlled corporations with original charters:

We mean government owned or controlled corporation created by a special law and

not under the Corporation Code of the Philippines.

Examples: Cebu Ports Authority Land Bank of the Philippines Development Bank of the
Philippines

Components of a corporation (Sec. 5)

a. Corporators
i. Stockholder
ii. Member
b. Incorporators
c. Promoters
d. Subscribers
e. Underwriter
Section 5. Corporators and Incorporators, Stockholders and Members. - Corporators
are those who compose a corporation, whether as stockholders or shareholders in a
stock corporation or as a members in a nonstock corporations. Incorporators are those
stockholders or members mentioned in the articles of incorporation as originally
forming and composing the corporation and who are signatories thereof.
Distinction between corporators and
incorporators
CORPORATORS INCORPORATORS
• Limited depending on the available • Not more than 15, except in case of
authorized capital stock. board of trustees who may be
more than 15 in number.
• Not signatories in the article of
incorporation. • Originally formed and signatories
of the article of incorporation
• They cease to be corporators when
they are no longer a holder of • Remain as incorporators even no
shares of stock. longer a holder of shares of stock
Number and Qualifications of Incorporators

Section 10. Number and Qualifications of Incorporators. - Any person, partnership,

association or corporation, singly or jointly with others but not more than fifteen (15)
in number, may organize a corporation for any lawful purpose or purposes: Provided,
That natural persons who are licensed to practice a profession, and partnerships or
associations organized for the purpose of practicing a profession, shall not be allowed
to organize as a corporation unless otherwise provided under special laws.
Incorporators who are natural persons must be of legal age. Each incorporator of a
stock corporation must own or be a subscriber to at least one (1) share of the capital
stock. A corporation with a single stockholder is considered a One Person Corporation
as described in Title XIII, Chapter III of this Code.
1. At least 1 not more than 15
2. Natural person, association or juridical person: partnership or corporation
3. Natural persons must be of legal age
4. Must be an owner or subscriber of at least one (1) share of capital stock

Prohibited from forming a corporation:

1. Natural persons to exercise a profession

2. GPPs for the exercise of profession
Classification of Shares (Secs. 6-9)

Section 6. Classification of Shares. - The classification of shares, their corresponding rights, privileges, restrictions, and their stated
par value, if any, must be indicated in the articles of incorporations. Each share shall be equal in all respects to every other share,
except as otherwise provided in the articles of incorporation. Each share shall be equal in all respects to every other share, except
as otherwise provided in the articles of incorporation and in the certificate of stock. The share stock corporations may be divided
into classes or series of shares, or both. No share may be deprived of voting rights except those classified and issued as
"preferred" or "redeemable" shares, unless otherwise provided in this Code: Provided, That there shall be a class or series of
shares with complete voting rights.

Holders of nonvoting shares shall nevertheless be entitled to vote on the following matters;

(a) Amendment of the articles of incorporation;

(b) Adoption and amendment of bylaws;
(c) Sale, lease, echange, mortgage, pledge, or other disposition of all or substantially all of the corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another corporation or other corporations;
(g) Investment of corporate funds in another corporation or business in accordance with this Code; and
(h) Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote required under this Code to approve a particular corporate
act shall be deemed to refer only to stocks with voting rights. The shares or series of shares may or may not have a par value:
Provided, That banks, trust, insurance, and preneed companies, public utilities, building and loan associations, and other
corporations authorized to obtain or access funds from the public whether publicly listed or not, shall not be permitted to issue no-
par value shares of stock.

Preferred shares of stock issued by a corporation may be given preference in the distribution of dividends and in the distribution of
corporate assets in case of liquidation, or such other preferences: Provided, That preferred shares of stock may be issued only with
a stated par value. The board of directors, where authorized in the articles of incorporation, may fix the terms and conditions of
preferred shares of stock or any series thereof: Provided, further,That such terms and conditions shall be effective upon filing of a
certificate thereof with the Securities and Exchange Commission, hereinafter referred to as the "Commission".

Shares of capital stock issued without par value shall be deemed fully paid and nonassessable and the holder of such shares shall
not be liable to the corporation or to its creditors in respect thereto: Provided, That no-par value shares must be issued for a
consideration of at least Five pesos (₱5.00) per share: Provided, further, That the entire consideration received by the corporation
for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends. A corporation may
further classify its shares for the purpose of ensuring compliance with constitutional or legal requirements.
a. Par value vs. no par value
b. Voting or non-voting
c. Common vs. preferred
i. Preferred as to assets
ii. Preferred as to dividends
1. Cumulative vs. non-cumulative
2. Participating or non-participating

a. Promotion stock
b. Shares in escrow
c. Convertible stock
d. Founder’s shares (Sec. 7)
e. Redeemable shares (Sec. 8)
f. Treasury shares (Sec. 9; 56)
1. common vs. preferred

common: shares entitled to pro-rata share in the profits and assets, basic class of stock
preferred: with par value which entitles the holder to certain preferences over holders
of common shares

i. participating vs. non-participating;

ii. cumulative vs. non-cumulative

Doctrine on equality of shares: all stocks issued by the corporation are presumed
equal with the same privileges and liabilities, provided that the Articles of
Incorporation is silent on such differences
2. voting vs. non-voting non-voting may vote under Sec. 6:

(a) Amendment of the articles of incorporation;

(b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially
all of the corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another corporation or other
corporations;
(g) Investment of corporate funds in another corporation or business in accordance
with this Code; and
(h) Dissolution of the corporation
3. par value vs. no-par value

par value shares: one with fixed money value specified in the AOI and appearing in the
certificate of stock

no par value shares: no stated value appearing on the face of the certificate of stock, it
is deemed fully paid and non-assessible, value should not be less than P5.00

Corporations where only par value shares can be issued under Section 6:
1. Banks
2. Trust
3. Insurance
4. preneed companies
5. public utilities
6. building and loan associations
7. other corporations authorized to obtain or access funds from the public whether publicly listed or not
4. treasury shares

Section 9. Treasury Shares. - Treasury shares are shares of stock which have been
issued and fully paid for, but subsequently reacquired by the issuing corporation
through purchase, redemption, donation, or some other lawful means. Such shares
may again be disposed of for a reasonable price fixed by the board of directors.

5. Promotion stock – issued to promoter

6. Share in escrow – Subject to agreement where the stock is deposited to third and
kept by the depositary until the condition contained in agreement happened.
7. Convertible stock – Convertible to other shares
8. Founder share – issued to founder or organizer having a right granted. (Sec 7)
9. Redeemable share (Sec 8)
a. Must be expressly so provided in the articles of incorporation
b. Purchased or taken up by the corporation upon the expiration of a fixed period,
regardless of the existence of unrestricted retained earnings.
c. Terms and conditions must be stated in the articles of incorporation and certificate
of stock

Section 7. Founders' Shares. - Founders' shares may be given certain rights and
privileges not enjoyed by the owners of other stock. Where the exclusive right to vote
and be voted for in the election of directors is granted, it must be for a limited period
not to exceed five (5) years from the date of incorporation: Provided, That such
exclusive right shall not be allowed if its exercise will violate Commonwealth Act No.
108, otherwise known as the "Anti-Dummy Law"; Republic Act No. 7042, otherwise
known as the "Foreign Investments Act of 1991"; and otherwise known as "Foreign
Investments Act of 1991"; and other pertinent laws.
Section 8. Redeemable Shares. - Redeemable shares may be issued by the corporation
when expressly provided in the articles of incorporation. They are shares which may be
purchased by the corporation. They are shares which may be purchased by the
corporation from the holders of such shares upon the expiration of a fixed period,
regardless of the existence of unrestricted retained earnings in the books of the
corporation, and upon such other terms and conditions stated in the articles of
incorporation and the certificate of stock representing the shares, subject to rules and
regulations issued by the Commission.
h. As to their relation to another corporation
i. Parent or holding corporation vs. subsidiary vs. affiliated
i. As to whether they are public or private
i. Public vs. private purpose

j. As to whether they are corporations in a true sense or only in a limited sense

i. True corporation vs. Quasi-corporation (including corporation by
prescription, corporation by estoppel)
sole proprietorship
-obligation of the person and the business is the same.
-business owned and operated by one person only. The personality of
the business owner and that of
the business are the same or one.
Partnership (separate/juridical person/entity)
human a and human b = natural person
-whatever the obligation of the partnership, its different from the
individual partners.
Corporation (juridical entity)
-separate entity
-by law there is 6 persons if there are 5 shareholders.
Separate Personality
Corporation (less liability) and Partnership (more liability)
PARTNERSHIP
-Art. 1767. By the contract of partnership two or more persons bind
themselves to contribute money,
property, or industry to a common fund, with the intention of dividing
the profits among themselves.
-partnership exist if the presence of the 3 contracts
-if one of the 3 elements is not present then its void.
-simple contract
Two or more persons may also form a partnership for the exercise of a
profession
Two Types of Partnership:
01. Commercial/Business Partnership- 1st Paragraph
02. General Professional Partnership- 2ndParagraph
Essential features
1. Existence of a valid contract (consent-given as expressly or implied,
subject matter, and cause or
consideration)
2. Capacity of the parties to contract (consent)
3. Mutual contribution of the money, property or industry
4. Lawful object
E.X.
A has a broken bike and B knows how to fix the bike. Both agree that B
will fix and sell the bike in the
public.
Vid 1:
Partnership vs. Corporation
Partnership- consensual in nature, can be in writing or oral, two or more
person, partnership can
perform any power that has been approved by the partners, in the
hands of all the partners; each has
the right to participate in the management in the business,
mismanagement removal of one of the
partners, no right to succession; if one died then dissolvement, example:
if the asset of the partnership
is not sufficient to pay then general partnership comes in, right to be
part in the partnership; anyone in
the partner cannot just allow anyone to take their place without the
consent of the other person, with
specific term is allowed or without specific term, suffixes of partnership,
new civil code
Corporation-formal in nature, article of corporation and issuance of
certificate, at least 5 (BP. blg.68)
incorporators-now, 1 incorporator=one person corporation (RA. 11232),
whatever the corporation is
granted with is the only act that can be performed.
management is in the board of directors, N/A, withdrawal or retirement
will not affect the business,
whatever the asset of the corporation will be the only amount of that is
to be paid by the corporation to
the creditor; limited to its capital, transferable, (BP. Blg. 68) limited life
of 15 yrs. unless stipulated, suffix
incorporated, revise code /R.A. 11232
SIMILARITIES
1. Existence of separate juridical personality
2. Both act through agents
3. Both are an aggregate of individual
4. (For stock corporation) distribution of profits
5. Requires a law authorizing organization
6. Both are taxable
Other associations/Cannot be considered as Partnership
2. Co-ownership- a thing is owned by two or more persons.
3. Conjugal Partnership of Gains4. Voluntary Associations
5. Joint Venture- similar to limited partnership but very specific
6. Joint Accounts- bank account married individuals
7. Joint-Stock Company
8. Business Trust
9. Syndicate10. Agency- represent another person
11. Tenancy- contract of lease
Meet2
Common Forms of Partnership
1. As to forms
a. Verbal
b. Written
2. As to subject matter
a. universal partnership
A.1 UP of all present properties
Art.1778-1779.
a. all present properties that are actually belong to the partners at the
time ofthe
constitution of the partnership would belong to the properties of
partnership.
b. Profits that may be acquired therewith.c. Property that may be
acquired by each partner after the formation of thepartnership
but only if stipulated.
Exc. property received by inheritance, donation, legacy.
Exc. fruits if stipulated or agreed upon
B.2 UP of all profits
Art. 1780-1781-lesser transmission of rights
Composition
1. Everything acquired through industry or work
2. Usufruct of property owned
3. Partners remain as owners of the respective properties
4. Fruits of the foregoing
5. Profits and fruits, if stipulated, of the property acquired by each
partner afterthe
constitutions of the partnership.
b. A particular partnership
Art. 1783
1. determinate things as object, their use or fruits
2. specific undertaking
3. exercise of profession or vocation.
3. as to liability of partners
a. General Partnership- beyond limited contribution. Liability is place on
the part of the
partnership and the part of the general partner.
b. Limited Partnership- liable to what he already contributed.
4. as to duration
a. at will- exists for as long as it wishes
b. for a period- limited life
5. as to legality of existence
a. De jure partnership-validly created in accordance to law.
b. De facto partnership-failed to comply with the legal procedure but
still hadjuridical
personality
6. As to representation to others
a. ordinary partnership- any usual partnership in the law
b. partnership by estoppel or ostensible partnership- not a partnership
at all.
7. as to publicity
a. secret partnership-secret partners who are active in the management
but not to the public.
b. open or notorious-active in the management and known to the public.
8. as to purpose
a. commercial or trading
b. professional or non-trading
Kinds of Partners
1. Capitalist (contribute money or property, also can be capitalist and
industrial) vs. Industrial
2. General vs. Limited
3. Managing (appointed as manager to the partnership, all partners
have the right to participate
the management) vs. Liquidating (takes charge to liquidate the asset of
the partnership to pay the
creditors)
4. Incoming vs. Retiring
5. Ostensible vs. Secret vs. Silent vs. Dormant
Secret-active but not known, participate in management but not known
to the public
Silent- not active but known, not participate in the business but known
to the public
Dormant- not active and not known
6. Partner by estoppel- not a partner but treated as a partner for liability
of the representation.7. Sub partner-admitted by a partner and who’s
right to share the profit of surplus bythe
partner. Also, with the consent with other partners.
Rights of Partners in the Partnership
WHEN DO RIGHTS AND OBLIGATIONS COMMENCE?
Art. 1783. Partnership begins from the moment of the execution of the
contract, unless it is otherwise
stipulated.
PARTNERSHIP THAT IS CONSENSUAL IN NATURE AND IN WRITING
IN WRITING:
-Capitalization of a least 3,000 in cash or movable property.
-In form of immovable contributed by the partners of the partnership.
-Inventory
-Registration to SEC.
but still valid.
 Commercial Partnership-realization and distribution of profits.
Professional Partnership-exercise of a common profession.
Principal Rights
Art. 1810. The property rights of a partner are:
I. His rights to participate in the management of the partnership (Art.
1800-1803)
Rationale -all partners are agent of the partnership.
Limitations: Important alteration: unanimous
Except: court intervention if refusal is unjustly prejudicial to the
partnership (1803)
Rules of Management:
A. When a partner has been appointed manager in the articles of
partnership.
Scope of Authority: all acts of admission despite the opposition of his partners
unless he acts in bad faith
(1800).
Art. 1800. The partner who has been appointed manager in the
articles of the partnership may execute
all acts of administration despite the opposition of his partner, unless
acted in bad faith.
Acts of Administration- acts which are related to the management of
the business only
Acts of Strict Dominion- acts that be can be performed only by an
owner of the property.
Revocation of Authority of appointed managing partner in the AOP
a. with just or lawful cause- his appointment can be revoked by the
vote of the partners owning the
controlling interest (1800)
controlling interest- vote owned the majority of capital of the
partnership
b. without just or lawful cause- appointment can be revoked only
with the consent of all partners
including the managing partners including the managing partner
because such revocation would be a
novation or the terms thereof
Ex. if partnership owned a thing and partner A has been appointed as
the managing partner of the
partnership, the duty of the managing partner that has been
appointed is to make sure that the thing is
in good condition.
B. When a partner has been appointed manager after the partnership
has beenconstituted
Scope of authority: all acts of administration, but in case of
opposition by the other partners, the
partners owning the controlling interest may resort to voting for his
removal as manager.
Revocation of his appointment: may be removed with or without just
or lawful cause by the
vote of the partners owning the controlling interest. (1800)
C. When two or more persons have been appointed as
managersWhen there is specification of their respective duties
Scope of Authority: each managing partner shall perform only the
duties specified in his
appointment
No specification of their respective duties
Scope of Authority: each one may separately execute all acts of
administration
In case of opposition:
Numerical Majority
in case of tie: controlling majority
When the manner of management has not been agreed upon.
-all partners are agents of partnership
Rule as to Voting:
Opposition:
1. Majority
2. Unanimous
Unanimous- important alterations of immovable property
Except: if refusal is manifestly prejudicial to the interest of the
partnership, court to intervene
(1801)
II. Right to specific partnership property
Art.1811. In partnership, there is no co-ownership but co-possession
for partnership purposes. The
partnership can own a property in his own name is separate from the
ownership or rights of the owners.
All the partners have the right to co-possess at the same time, can be
used for personal reason if
consented with all the partners.
Attachment: process to be avail by the court in the event that a
monetary obligation is not paid by
debtor. Partnership has no attachment.
III. Interest in the partnership (1812)
Art. 1812. A partner's interest in the partnership is his share of the
profits and surplus.
Profits- excess of returns over expenditure in a transaction or series
of transactions
Surplus- partnership assets after partnership debts and liabilities are
paid and settled.
Rules in Profit-sharing
Art. 1797.
1.according to agreement
2.if there is none, then in proportion to their capital contribution
With industrial partner:
1. share of industrial partner is satisfied first, whatever is just and
equitable
2.share of capitalist partners
Rule in case of losses
1.agreement
2.share in the profits
3.in proportion to capital contribution
4.industrial partners are not liable to losses.
Incidents:
1.can be subject of attachment
2.can be subject of charging order
Art.1813
-allows a partner to actually assign his right to receive his profits to
his creditor
-allows the profit to be used to pay off a creditor in virtue of charging
order.RELATED RIGHTS:
1. Right to reimbursement for amounts advanced to the partnership
and indemnification for risks in
consequences of management 1796)
2.Right of access and inspection of partnership books(1805)
3. Right to true and full information of all things affecting the
partnership (1809)
4.Right to have the partnership dissolve (1830-31)
5.Right to formal account of partnership affairs under certain
circumstances (1809) (not absolute right)
1. If wrongfully excluded from the partnership business or possession
of its property by his copartners
2.If the right exists under the term of any agreement
3. 1807-use of partnership property other than for partnership
purposes
4. Whenever other circumstances render it just and reasonable.
Meet 3
When there is a Partnership validly created there is actually 4
relationships that are created.
1.Between among the partners themselves
 2.Between the partnership and the partners.
3.Of the partnership on one hand and the 3rd partnership in the
other hand.
4.the partners themselves as so far 3rd persons are concerns. 3rd
persons are whichthe
partners enter the contract with.
Obligations of the partners among themselves.
A. CAPITALIST PARTNERS: As to contribution of property
Art.1786. Every partner is a debtor of the partnership for whatever
he may have promised to
contribute thereto.
1. Delivery the PROPERTY (1786)
Determinate: there was to be obligation delivered at the diligence of a
good father. If lost the
obligation is extinguished.
Generic: in case of loss, there can be replacement.
2. To answer in case of eviction- E.X sale of a vender to the buyer. In
partnership, A partner
deliver a motor to the partnership but if Z has the better right over the
vehicle. Z can recover the motor
from the partnership and A need to replace the motor he had the
obligation to deliver a motor plus
damages.
3. Liability in case of loss (1795)
a. not fungible, only the use is contributed- partner- owner bears the
loss
-The partner remains the owner of the thing then in case of loss he
suffers the loss.
b. fungible or cannot be kept without deteriorating, or contributed to be
soldpartnership bears the loss
-If the thing intended to be sold by the partnership or the partners
transfer a thing to the
partnership is loss then partnership suffers. Example: ingredients for
baking=consumable, in case of loss
then the partnership shall replace.
B. CAPITALIST PARTNERS: As to contribution of money (1788)
Art. 1788. A partner who has undertaken to contribute a sum of money
and fails to do so
becomes a debtor for the interest and damages from the time he should
have complied with his
obligation.
a. To deliver the money
b. To be liable for interest, damages in case of delay computed from the
time the
obligation to deliver accrues.
Amount of capital contribution (1790):
Art. 1790. unless there is stipulation to the contrary, the partners shall
contribute equal shares
to the capital of the partnership.
3. Obligations in case of imminent loss- to put in additional capital
(1791). EXC: contrary stipulation.Art. (1791). If there is no agreement to
the contrary, in case of imminent loss of the business of
the partnership, any partner who refuses to contribute an additional
share to the capital, except an
industrial partner, to save the venture, shall be obliged to sell his
interest to the other partners.
Requisites for application of the rule:
1. presence of imminent loss
2. majority of the capitalist partners are of the opinion that an
additional contribution to the common
fund would save the business.
3. the capitalist partner refuses deliberately (not simply because of
financial disability)
4. there is no agreement
C. Both A and B
Art. 1808. the capitalist partners cannot engage for their own account in
any operations which is
of the kind of business in which the partnership is engaged, unless there
is a stipulation to the contrary.
Violation shall bring to the common fund any profits accruing to him
from his transactions, and
shall be personally bear all the losses.
D. INDUSTRIAL PARTNERS
Art. 1789. An industrial partner cannot engage in business for himself,
unless the partnership
expressly permits him to do so; and if should do so, the capitalist
partners may either exclude him from
the firm or avail themselves of the benefits which he may have obtained
in violation of this provision,
with a right to damages in either case.
1. not to engage business for himself. EXC: unanimous consent of
partners.
Violation:
- capitalist partners may exclude the industrial partners who has liability
for interest and damages.
-account whatever he may receive plus interest and damages.
E. RELATED OBLIGATIONS OF PARTNERS AMONG THEMSELVES.
1. obligations of a managing partner to apply the payment received to
partnership credit (1792)
Art. 1792. If a partner authorized to manage collects a demandable sum
which was owed to him
in his own name, from a person who owned the partnership another
sums also demandable, the sum
thus collected shall be applied to the two credits in proportion to their
amounts, even though he may
have given a receipt for his own credit only; but should he have given it
for the account of the
partnership credit, the amount shall be fully applied to the latter.
Understood without prejudice to the right granted to the other debtor
by Art. 1252, but only if
the personal credit of the partner should be more onerous to him.
Rule #1: receipt issued by partner: PROPORTION of partnership credit
and obligations to a
partner
Requisites:
1. At least 2 debts
2.Both are demandable
3. Recipient is a managing partner and is actively managing the business.
E.X.
Jan. 1, 2021: Z owes ABC & Co for P1,000,00.00
Jan. 1, 2021: Z owes A for P1,000,000.00
Jan. 30, 2021: Z paid P1,000,000.00, the payment was received by A
Options:
A: a issues a receipt in the name of the corporation, whole
P1,000,000.00 shall be credited to ABC & Co's
credit A.
B: A issues a receipt in his own name - apply the P1,000,000.00 in
proportion to the credit.
Proportionate
2. Obligations of partner who received his share of a partnership credit
(Art. 1793)
Art. 1793. A partner who has received, in whole or part, his share of a
partnership credit, when
the other partners have not collected theirs, shall be obliged, if the
debtor should thereafter become
insolvent, to bring to the partnership capital what he received even
though he may have given receipt
for his share only.Requisites:
a. a partnership has received, in whole or in part his share of the
partnership credit;
b. the other partners have not collected their shares.
c. the partnership debtor has become insolvent.
EX.
There are 3 partners; A, B and C, and lent money to Z, P30,000. As of
Dec. 2020, only 10,00 was paid
and is given to A. On January 2021, Z become insolvent only A was paid.
A is obliged to share what he
had receive from Z.
3. Obligations of partner for damages due to his fault, regardless of
profits and benefits he has brought
into the partnership of his industry. (1794)
Exc.: extra-ordinary profits
Art. 1794. Every partner is responsible to the partnership for damages
suffered by it through his
fault, and he cannot compensate them with the profits and benefits
which he may have earned for the
partnership by his industry. However, the court may equitably lessen
this responsibility if through the
partner's extraordinary efforts in other activities of the partnership,
unusual profits have been realized.
4. Obligations to account (1809)- the corresponding right of one partner
gives rise to the corresponding
obligations of the other partners and that of the partnership.
Art. 1809. Any partner shall have the right to a formal account as to
partnership affairs:
1. if he is wrongfully excluded from the partnership business or
possession of its property byhis
co-partners.
2. if the right exists under the terms of any agreement.
3. as provided by article 1807
4. Whenever other circumstances render it just and reasonable.
5. Reportorial Requirements
Art. 1805. The partnership books shall be kept, subject to any
agreement between the partners,
at the principal place of business hour have access to and may inspect
and copy any of them

OBLIGATIONS OF THE PARTNERSHIP TO THE PARTNERS

1. Obligation to reimburse partners of whatever amount advanced for
the partnership
Art. 1796. The partnership shall be responsible to every partner for the
amount he may have
disbursed on behalf of the partnership and for the corresponding
interest, from the time the expense is
made: have contracted in good faith in the interest of the partnership
business and for the risks in the
consequences of its management.
E.X. If a bill of the partnership has already due and not paid. If the
partner is willing to pay for the
amount because the partnership cannot pay the bill. Then the
partnership has to pay the partner the
amount with interest.
2. To distribute the profits and share the losses.
Art. 1797. The losses and profits shall be distributed in conformity with
the agreement. If only
the share of each in the losses shall be in the same proportion.
In absence of stipulation, the share of each partner in the profits and
losses shall be proportion
to what he may have contributed.
OBLIGATIONS OF THE PARTNERS WITH REGARDS TO THIRD PERSONS
1. Requirement of a firm name, obligation concomitant thereto (1815)
Art. 1815. Every partnership shall operate under a firm name, which
may or may not include the
name of one or more of the partners.
Those who, not being members of the partnership, include their names
in the firm, shall be
subject to liability of a partner.
Prohibitions:
1. not deceptively confusing.
2. not identical to any registered name of any business entityMay
person who are no longer in connection with partnership keep their
name in the partnership. yes,
but with conditions. Limited partner is not included in firm name.
2. OBLIGATION FOR CONTRACTUAL OBLIGATIONS
Art.1816. All partners, including industrial ones, shall be liable pro
rata/equal with all their
property and after all the partnership assets have been exhausted, for
the contract which may be
entered into in the name and for the account of the partnership, under
its signature and by a person
authorized to act for the partnership. However, any partner may enter
into a separate obligation to
perform a partnership contract.
(Equal payment to third person including industrial partners because it
is to the public)
Art.1817. Any stipulations against the liability laid down in the preceding
article shall be void,
except as among the partners.
PARTNERSHIP LIABILITY (1816)
1. contracts which may be entered into in the name;
2. for the account of the partnership
3. under its signature
4. by a person authorized to act for the partnership.
3. PARTNERSHIP LIABILITIES FOR ACTS OF PARTNERS
5. Art.1818. (doctrine of apparent authority) contracts entered into for
apparently carrying on in the
usual way the business of the partnership oof which he is a member
binds the partnership, unless the
partner so acting has in fact no authority to act for the partnership in
the particular matter, and the
person with whom he is dealing has knowledge of the fact that he has
no such authority.
6. Art.1819: conveyance of property in the name of the partnership
Who may execute the conveyance?
1. all partners2. partner, if executed in the partnership name:
partnership may recover ownership
3. if conveyed by a partner in his own name: ownership is not
transferred to buyer
4. if title is in the name of some partners in trust for partnership,
ownership is not transferred to buyer.
7. Art.1820: admission by partner of any matter within scope of his
authority.
Admission or representation made by any partner concerning
partnership affairs within
the scope of his authority in accordance with this Title i evidence against
the partnership.
8. 1821: Notice obtained by a partner binding on the partnership.
Art.1821. If a partner has notice of any matter that would give rise to a
liability. That notice of a
partner would actually serve as notice to the partnership. Even if one
partners notice it would be
binding to the partnership.
Notice to any partner of any matter relating to partnership affairs, and
the knowledge of the
partner acting in the particular matter, acquired while a partner or then
present to his mind, and the
knowledge of any other partner who reasonably could and should have
communicated it to the acting
partner, operate as notice to or knowledge of the partnership, except in
the case of fraud on the
partnership, committed by or with the consent of that partner.
9. 1822; Tort, liability is solidary
Art.1822.Where, by any wrongful act or omission of any partner acting
in the ordinary course of
the business of the partnership or with the authority of co-partners, loss
or injury is caused to any
person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable
therefor to the same extent as the partners so acting or omitting to act.
Ex. Through the negligence of one of the partners in a water refilling
company, the neighborhood
company of a printing service had suffered loss such as overflowing
water from the water company
flowed through the printing services company which made printed
papers in the floor got wet. The one
that needs to pay are the partnership and the partner who is negligent.
The liability is solidary.
10. 1823: Money or property received, liability is solidary
Art.1823. The partnership is bound to make good the loss:1. where one
partner acting within the scope of his apparent authority receives
money or property of a
third person and misapplies it; and
2. where the partnership in the course of its business receives money or
property of a third person and
the money or property so received is misapplied by any partner while it
is in the custody of the
partnership.
11. Partnership by estoppel (1825)
when a person:
a. represents himself or
b. consents to another to another representing him to anyone (he is an
agent of the persons
consenting to such representation)
when partnership
a. represents a person as a partner when he is not
b. allows that a representation is made by a partner to be a partner
when he is not
LIABILITY OF PARTNERSHIP
1. Any such persons to whom such representation has been made
2. The representation was made in public manner, he is liable to such
person, whether the
representation has or has not been made or such communicated to
such person.
PARTNERSHIP LIABILITY RESULT:
when all the members of the existing partnership consent to the
representation. Liable as
though he were an actual member of the partnership
NO PARTNERSHIP LIABILITY RESULT
He is liable pro rata with the other persons, if any, so consenting to the
contract or
representation as to incur liability, otherwise separately.
5. LIABILITIES OF INCOMING PARTNERS (1826)
Art.1826. A person admitted as a partner into an existing partnership is
liable for all the
obligations of the partnership arising before his admission as though he
had been a partner when such.

obligations were incurred, except that this liability shall be satisfied only
out of partnership property,
unless there is stipulation to the contrary. (Extent to his capital
contribution)
6. LIABILITIES TO CREDITORS (1827)
Art. 1827. The creditors of the partnership shall be preferred to those of
each partner as regard
the partnership property. Without prejudice to this right, the private
creditors of each partner may ask
the attachment and the public sale of the share of the latter in the
partnership assets.
III. DISSOLUTION AND WINDING UP [1828-1842]
1. Definition, concept [1828, 1836]
Art. 1828. The dissolution of a partnership is the change in the relation
of the partners
caused by any partner ceasing to be associated in the carrying on as
distinguished from the
winding up of the business
Dissolution viz:
a) Winding up – the process of settling the business of the partnership
affairs after dissolution
b) Termination – point in time when all partnership affairs are
completely wound up and finally
settled. It signifies the end of the partnership life
2. Grounds/Causes for dissolution [1830]
a. Extra-judicial [By the partners]
b. Judicial [1831]
3. Effects of dissolution [1829, 1832-34]
Dissolution does not automatically result in the termination of the legal
personality of the
partnership, nor the relations of the partners among themselves who
remain as co-partners among
themselves who remain as co-partners until the partnership is
terminated. Nevertheless, the
partnership, after dissolution, is considered as maintaining a limited
purpose of making good all
outstanding engagements, of taking and settling all accounts, and
collecting all the property, means and
assets of the partnership existing at the time of its dissolution for the
benefit of all interested.
a. Rights of partners to contribution
b. Power of partner to bind dissolved partnership to third persons
Art. 1832. Except so far as may be necessary to wind up partnership
affairs or to complete transactions
begun but not then finished, dissolution terminates all authority of any
partner to act for the
partnership:
(1) With respect to the partners:
(a) When the dissolution is not by the act, insolvency or death of a
partner; or
(b) When the dissolution is by such act, insolvency or death of a partner,
in cases where
article 1833 so requires;(2) With respect to persons not partners, as
declared in article 1834. (n)
Art. 1833. Where the dissolution is caused by the act, death or
insolvency of a partner, each
partner is liable to his co-partners for his share of any liability created by
any partner acting for the
partnership as if the partnership had not been dissolved unless:
(1) The dissolution being by act of any partner, the partner acting for
the partnership had
knowledge of the dissolution; or
(2) The dissolution being by the death or insolvency of a partner, the
partner acting for the
partnership had knowledge or notice of the death or insolvency.
General Rule:
A. Upon dissolution, the partnership ceases to be a going concern and
the partner’s power of
representation is confined only to acts incident to winding up or
completing transactions begun but not
then finished. The event of dissolution, therefore, terminates the actual
authority of a partner to
undertake new business for the partnership.
Exceptions (meaning, partners may contract with third persons, and
such contracts shall be
binding upon the partnership)
A. In so far as the partners themselves are concerned: the authority of
any partner to bind the
partnership by a new contract is immediately terminated when the
dissolution is not by the act,
insolvency, or death of a partner. (1832, NCC)
Ex: A, B and C were partners in ABC & Co.. The term of existence thereof
expired on 30 June
2012. Here, the dissolution was caused not by the act, insolvency or
death of a partner. If A obtains a
loan from a bank on 5 July 2012, any liability created Thereby shall be
the sole obligation of A and not
of the partnership.
B. The authority of a partner to act for the partnership may continue not
withstanding its dissolution,
except (simply, apply the General Rule, that is, partners authority is
terminated):
i. The dissolution being by act of any partner, the partner acting for the
partnership had
knowledge of the dissolution;
E.g. Dissolution by the express will of any partner
ii. The dissolution being by the death or insolvency of a partner, the
partner acting for the
partnership had knowledge or notice of the death or insolvency. (1833,
NCC)
Knowledge of a fact – when one has actual knowledge of a fact, or such
other facts as in the circumstances
showing bad faith.
Notice of a fact – when the existence of a fact has been duly
communicated to another by words, email,
etc.
Ex: A, B and C were partners. A informed B that A was resigning or
withdrawing from the
partnership. The partnership was, thus, dissolved b the act of A. C had
no knowledge of A’s withdrawal
and that of the dissolution. If C obtained a loan from a bank thereby
creating partnership liability because
of the contract entered into by C, A and B are bound to contribute their
share of the liability as if the
partnership had not been dissolved. To avoid being liable for his share
of partnership liability arising after
the dissolution, A should prove knowledge on the part of C that A had
already dissolved the partnership
at the time the contract was made. (Note: Applicable only if partnership
liability is created under Arts.
1818, 1820, 1821, 1822, 1823)
C. Where there is no notice to third persons of dissolution, third persons
enter into contracts with the
partnership with the assumption that the partnership is still existing; the
reason being that once a
partnership exists, in the absence of anything to prove termination, is
presumed to continue to
exists.(1834)
D. By any act appropriate for winding up partnership affairs or
completing transactions unfinished at
dissolution (1834)
E.g. Hiring of accountants for the settlement of the accounts of the
partnership; entering into
contracts for the sale of partnership properties
E. By any transaction which would bind the partnership if dissolution
had not taken place,
provided the other party to the transaction
(1834):
(a) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice
of the dissolution;
Customers of the partnership or persons who extended credit to the
partnership prior to its dissolution
must have knowledge or notice of the dissolution to relieve the
partnership from liability (see difference
bet. Knowledge and notice)
As to prior dealers or persons who have previously transacted with the
partnership, notice must be actual
to relieve the partnership from liability, without such actual knowledge
therefore, any loan, for instance,
contracted by one of the partners, holds the partnership liable and the
partners subsidiarily liable . Mere
mailing of notice through mailing is not sufficient.
A prior/former dealer is one who has extended credit on the faith of the
partnership, through confidence
in the solvency and probity of the firm.
E.g. T purchased goods from the partnership which is engaged in the
retail business. Thereafter, the
partnership was dissolved. Notice of dissolution was advertised in the
local newspaper. Without the
knowledge of the dissolution, or failure to read the newspaper
advertisement, T thereafter lent/extended
credit to the supposed partnership at the request of one of its former
partners, in connection with a
transaction not necessary for the liquidation of the business.
Here, partnership is not liability.
(b) Though he had not so extended credit, had nevertheless
known of the partnership prior to dissolution, and, having no knowledge
or notice of dissolution, the fact
of dissolution had not been advertised in a newspaper of general
circulation in the place (or in each place
if more than one) at which the partnership business was regularly
carried on.
As to persons who had not so extended credit prior to its dissolution,
but who had known of its existence,
the fact that the dissolution had been published in the newspaper
would be sufficient, even if they did
not actually read the advertisement, to relieve the partnership from
liability.
c. On partner’s existing liability [1835]

Art. 1835. The dissolution of the partnership does not of itself discharge
the existing liability of any
partner. A partner is discharged from any existing liability upon
dissolution of the partnership by an
agreement to that effect between himself, the partnership creditor and
the person or partnership
continuing the business; and such agreement may be inferred from the
course of dealing between the
creditor having knowledge of the dissolution and the person or
partnership continuing the business.
The individual property of a deceased partner shall be liable for all
obligations of the partnership incurred
while he was a partner, but subject to the prior payment of his separate
debts. (n)
E.g. A, B and C are partners of ABC & Co.. In 2011, the partnership
obtains a loan from a bank for
P1,000,000.00, but which the partnership failed to pay due to
insolvency, hence, the partners become
liable thereto. In June 2012, without the loan having been paid, the
partners agreed to dissolve the
partnership. After dissolution, if A has not yet paid his share in the
liability, he is not discharged from his
obligation to contribute his share to pay to the obligation even if the
partnership is already dissolved,
except, however, when there is an agreement.
Note: Relate par. 2, Art. 1835 to Article 1827 on preference of separate
creditors in the partners’separate
properties. Likewise, partnership creditors are preferred in partnership
properties.
4. Winding up of partnership affairs
a. Manner of winding up [1836]
i. Judicially – under the control and direction of the proper court upon
cause shown by any partner, his
legal representative, or his assignee
ii. Extra-judicially – by the partners themselves without intervention of
the court
Persons authorized to wind up the affairs of the partnership
1. Partners designated in the agreement;
2. In the absence of an agreement, all the partners who have not
wrongfully dissolved the partnership;
3. Legal representatives of the last surviving partner when all the
partners are already dead, provided such
legal representatives are not insolvent
Note: the court may appoint a receiver to wind up the partnership
affairs.
Powers of the liquidating partner:
1. Raise money to pay partnership debts;
2. Incur obligations necessary to the completion of existing contracts
and to incur debts or other
obligations necessary for the reasonable preservation of partnership
assets or in procuring a favorable
market for their disposal (e.g. obtaining loan for the payment of the
salaries and rightful claims of
employees)
3. Incur expenses necessary in the conduct of court litigation (e.g.
payment for lawyers, lawful court fees)
b. Effects [1837-38]
Note: If one is induced by fraud or misrepresentation to become a
partner, the contract is voidable or
annullable (Art. 1390 [2]).
5. Liquidation and distribution of assets of a dissolved partnership
[1839-42]DISSOLUTION NOT IN CONTRAVENTION OF PARTNERSHIP
AGREEMENT:
a. Rights of the partners:
1. To have the partnership property applied to discharge the liabilities of
the partnership;
2. To have the surplus, if any, applied to pay in cash the net amounting
owing to the respective partners.
3. When dissolution is caused by expulsion of a partner, the
expelled partner may be discharged from all partnership liabilities either
by payment or by an agreement
between him, the partnership creditors, and the other partners. He shall
have the right only to receive in
cash the net amount due him from the partnership.
4. If dissolution is proper or rightful, no partner is liable for any loss
sustained as a result of the dissolution.
DISSOLUTION IN CONTRAVENTION OF PARTNERSHIP AGREEMENT
a. Rights of a partner who has not caused the dissolution wrongfully:
1. To have partnership property applied for the payment of its liabilities
and to receive in cash his share
of the surplus;
2. To be indemnified for damages caused by the partner guilty of
wrongful dissolution;
3. To continue the business in the same name during the agreed term of
the partnership, by themselves
or jointly with others;
4. To possess partnership property should they decide to continue the
business.
b. Rights of a partner who has wrongfully caused the dissolution:
1. If the business is not continued by the other partners, to have the
partnership property applied to
discharge its liabilities and to receive in cash his share of the surplus less
damages caused by his wrongful
dissolution;
2. If the business is continued, to have the value of his interest in the
partnership at the time of the
dissolution, less any damage caused by the dissolution to his co-
partners, ascertained and paid in cash or
secured by bond;
3. If the business is continued, to be released from all existing and
future liabilities of the partnership
Note: innocent partners have more rights than the guilty partners and
that guilty partners are liable for
the damages caused upon the partnership.
Liquidation and distribution of assets of dissolved partnership:
Ø The law does not require a partnership to convert all its assets into
cash before making a distribution to
the partners.
Ø Property which may be made available for distribution includes, in
addition to the partnership property,
contributions which may be collected from the partners so far as may
be necessary for the payment of
partnership obligations to creditors and to partners.
Ø Each partner is entitled to a share in the surplus property of the
partnership, if any, in proportion to his
interest in the partnership.
Ø Capital contributed by partners – debt of the firm to the contributing
partners. If, on dissolution,
partnership assets are insufficient to repay capital investments, the
deficit is a capital loss which requires
contribution like any other loss. A partner who furnishes no capital but
contributes merely his skull and
services is not entitled to any part of the firm capital on dissolution in
the absence of agreement.
Ø Assets of the partnership:
 Partnership property, including goodwill
Contributions of the partners necessary for the payment of all
liabilities in accordance with Article
1797.
Ø If the assets are insufficient, the deficit is a capital loss which requires
contribution like any other loss.
Ø Order of application of the assets:
1. Those owing to partnership creditors;
2. Those owing to partners other than for capital and profits such as
loans given by the partners or
advances for business expenses;
3. Those owing for the return of the capital contributed by the partners;
4. Share of the profits, if any, due to each partner.
Ø Liability of deceased partner’s individual property – the individual
property of a deceased partner shall
be liable for his share of the contributions necessary to satisfy the
liabilities of the partnership incurred
while he was a partner.
Ø Distribution of property of insolvent partner
1. Those owing to separate creditors;
2. Those owing to partnership creditors;
3. Those owing to partners by way of contribution.
Ø Doctrine of the marshaling of assets: partnership assets to
partnership creditors, individual assets to
individual creditors; anything left from either goes to the other.
Art. 1840 (See 1840, NCC)
Ø A partnership dissolved, i.e. when a new partner is admitted, or a
partner retires or dies, the partnership
need not be subject to the procedure relating to dissolution and
winding up of its business affairs. The
remaining partners may elect to continue the business of the old
partnership without interruption by
simply taking over the business enterprise owned by the preceding
partner and continuing use of the old
name.
Ø The creditors of the old partnership and the new partnership are
treated alike in respect of preference
in the application of partnership assets (Yu vs. NLRC, 224 SCRA 75).
Ø The liability of the new or incoming partners shall be satisfied out of
partnership property.
Ø 1840, last par. – contemplates a hold-over situation preparatory to
formal organization
Art. 1841 (See 1841, NCC)Rights of retiring, or of estate of deceased
partner when business is continued:
1. To have the value of the interest of the retiring partner or deceased
partner in the partnership
ascertained as of date of dissolution
2. To receive thereafter, as an ordinary creditor, an amount equal to the
value of his share in the dissolved
partnership with interest, or, at his option, in lieu of interest, the profits
attributable to the use of his right.
Note:
Ø A partner’s share cannot be returned without first dissolving and
liquidating the partnership, for the
firm’s outside creditors have preference over the assets of the
enterprise.
Ø Liquidation may not be required for as long as the parties have fully
agreed and settled all the accounts
of the partners.

Capitalization = Investor
Investment - stocks that they will acquire in corporation
-Subscription and payment of stocks
Reason why not use word “PURCHASE” in stocks?
-No contract of sale and to the corporation
Nature of Investment
_Taking risk if the business is successful and that is the time
stockholders will earn.
Dividends – what stockholders will earn.
How do investor put a corporation in a share of corporation
Sec.59 Manner by which stockholders/ corporators / incoporators
acquire shares in the corporation
Through SUBSCRIPTION CONTRACT
A contract between corporation and stockholder, thereby
stockholders acquire share in a existing corporation or corporation yet
to be organize.
KINDS OF SUBSCRIPTION CONTRACT
1. Pre-corporation subscription
– contract for the subscription (purchase) of shares before
incorporation.
 -entered into a contract before corporation granted a certificate
of incorporation.
2. Post corporation subscription
- contract for the subscription (purchase) of shares after the
incorporation for the acquisition of unissued stocks.
- after the corporation has been granted a certificate of incorporation.
3. Conditional subscription
- one subject to a condition
- condition it could be investor is not a stockholder of competing
corporation
4. Absolute subscription
- not subject to any condition, the subscriber becomes liable on the
subscription and acquires the right of a stockholder from the time it is
accepted.
5. Subscription for specific term
Nature of Pre-corporation
1. BEFORE submission of articles of incorporation to the SEC
GR: IRRECVOCABLE for a period of at least six months from the date of
the subscription
(cannot cancel or withdraw the contract)
EXC: 2 instances that pre-corporation may revoked that stockholder
may back out from the contract
1. All of the other subscribers consent to the revocation
2. The corporation fails to incorporate within the same period or w/in
a longer of period stipulated in the contract of subscription.
*No pre-corporation subscription may be revoked after the articles of
incorporation is submitted to the Commission.
Nature of Post-corporation
2.AFTER submission of articles of incorporation to the SEC: No pre
incorporation subscription may be revoked
 It has to remain and stockholders are bound to the contract of
subscription.

Consideration for shares: par value (Sec.61)

FORMS OF PAYMENT
1. Actual cash paid to the corporation
2. Property actually received by the corporation and necessary or
convenient;
-(corporation cannot accept property that is not relatable to the
business)
3. Labor performed for services actually rendered to the corporation.
4. Previously incurred indebtedness to the corporation
-( no creditor –debtor relationship with the corporation and stockholder
because the contract entered into stockholder and corporation is a
contract of investment not sale or loan)
5. Amounts transferred from unrestricted retained earnings to stated
capital; and
3 kinds of dividends
1. CASH DIVIDENDS – profit in a form of cash and that is distributed to
the stockholder
2. PROPERT DIVIDENDS – personal or real property that acquire by the
corporation given declared or release to the stockholders as their share
in the profits.
3. STOCK DIVIDENDS – shares of stocks in the name of the corporation
which issues in favor of the stockholder as their share in the profits.
*The moment corporation issues stocks dividends- this are the profits of
corporation which are nevertheless use or utilize by the corporation to
be issued in favor of the stockholder such that stockholders are
receiving this shares of stocks will acquire greater number of shares in
that way profit is converted to stated capital.
6. Outstanding shares exchanged for stocks in the event of
reclassification or conversion.
Why should value of shares to be paid upon subscription?
Capitalization is divided into units, it fuels the business and source of
fund in the corporation like hires employee, purchases and etc.
Corporation has to have money to capitalize the business that’s why
shares of stocks must be given value and must be paid.
SEC. 64. Liability of Directors for Watered Stocks. – A director or officer
of a corporationwho: (a) consents to the issuance of stocks for a
consideration less than its par or issued value;
(b)consents to the issuance of stocks for a consideration other than cash,
valued in excess of its fair value; or (c) having knowledge of the
insufficient consideration, does not file a written objection with the
corporate secretary, shall be liable to the corporation or its creditors,
solidarily with the stockholder concerned for the difference between
the value received at the time of issuance of the stock and the par or
issued value of the same.

PROOF OF OWNERSHIP
SEC. 62. Certificate of Stock and Transfer of Shares. – The capital stock
of corporations shall be divided into shares for which certificates signed
by the president or vice president, countersigned by the secretary or
assistant secretary, and sealed with the seal of the corporation shall be
issued in accordance with the bylaws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate
or certificates indorsed by the owner, his attorneyin-fact, or any other
person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is
recorded in the books of the corporation showing the names of the
parties to the transaction, the date of the transfer, the number of the
certificate or certificates, and the number of shares transferred. The
Commission may require corporations whose securities are traded in
trading markets and which can reasonably demonstrate
their capability to do so to issue their securities or shares of stocks in
uncertificated or scripless form in accordance with the rules of the
Commission.
No shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation.

-Certificate of Stock
– is a proof of payment.
- to be issued by the corporation upon full payment of all subscription
including penalty and interest.
* If you issued 50 shares of stocks it is equivalent to 1 certificate of stock
under 1 subscription contract (not issued individually)
* All shares should be issued in the name of the corporation.
* shares of stocks can be sold assign or transfer of the stockholder.
* If the purchase of stocks are not register in the book of the
corporation, the sale of stock it will be considered as valid and binding.

SEC. 66. Payment of Balance of Subscription. – Subject to the provisions

of the subscription contract, the board of directors may, at any time,
declare due and payable to the corporation unpaid subscriptions and
may collect the same or such percentage thereof, in either case, with
accrued interest, if any, as it may deem necessary. Payment of unpaid
subscription or any percentage thereof, together with any interest
accrued shall be made on the date specified in the subscription contract
or on the date stated in the call made by the board. Failure to pay on
such date shall render the entire balance due and payable and shall
make the stockholder liable for interest at the legal rate on such balance,
unless a different interest rate is provided in the subscription contract.
The interest shall be computed from the date specified, until full
payment of the subscription. If no payment is made within thirty (30)
days from the said date, all stocks covered by the subscription shall
thereupon become delinquent and shall be subject to sale as
hereinafter provided, unless the board of directors orders otherwise.

When shares are to be paid

1. Maturity date fixed in the subscription contract
*(date fixed in by-laws contract)
2. Upon the call of the BOD
*Effects share unpaid:
- no effects in right of stockholder, generally
*refusal to pay shares after 30 days after – shares become delinquent.
*Delinquent shares- are not entitled to vote
- cannot be voted upon
- cannot exercise vote

SEC. 42. Power to Declare Dividends. – The board of directors of a stock

corporation may declare dividends out of the unrestricted retained
earnings which shall be payable in cash, property, or in stock to all
stockholders on the basis of outstanding stock held by them: Provided,
That any cash dividends due on delinquent stock shall first be applied to
the unpaid balance on the subscription plus costs and expenses, while
stock dividends shall be withheld from the delinquent stockholders until
their unpaid subscription is fully paid: Provided, further, That no stock
dividend shall be issued without the approval of stockholders
representing at least two-thirds (2/3) of the outstanding capital stock at
a regular or special meeting duly called for the purpose.

SEC. 69. Court Action to Recover Unpaid Subscription. – Nothing in this

Code shall prevent the corporation from collecting through court action,
the amount due on any unpaid subscription, with accrued interest, costs
and expenses.

Manner of collecting payment

1. Voluntary – (literally hand over the payment)
2. Collection form cash dividends and withholding of stock dividends –
Any cash dividends due on delinquent stock first be applied to the
unpaid balance on the subscription plus cost and expense, while stock
 dividends shall be withheld form the delinquent stockholder until his
unpaid subscription is fully paid.
3. Delinquency sale
4. Judicial by filling collection of sum of money – (be done by filling
complaint or case in court, complaint must be first found in the
corporation.

DELINQUENCY SALE
*BOD must approve the sale
* Publication must be done in the
principal place of the business
*Publication must be done in a newspaper and also once a week for two
consecutive weeks

*highest bidder- bidder who shall offers to pay the full amount of the
balance on the subscription together with accrued interest, cost of
advertisement and expense of sale for the smallest number of shares or
fraction of a share.
Treasury shares – shares of stock are in the name of the corporation.

SEC. 70. Effect of Delinquency. – No delinquent stock shall be voted for,

be entitled to vote, or be represented at any stockholder’s meeting, nor
shall the holder thereof be entitled to any of the rights of a stockholder
except the right to dividends in accordance with the provisions of this
Code, until and unless payment is made by the holder of such
delinquent stock for the amount due on the subscription with accrued
interest, and the costs and expenses of advertisement, if any.
SEC. 71. Rights of Unpaid Shares, Nondelinquent. – Holders of
subscribed shares not fully paid which are not delinquent shall have all
the rights of a stockholder.
LOST OR DESTROYED CERTIFICATE OF STOCKS

NATURE OF RIGHTS OF STCOKHOLDERS

BASIC RIGHTS OF STOCKHOLDER
1. Right to vote – (manner in participating management express
through vote)
2. Right to receive dividends – (to be release the moment acquire
100% of retained earnings)
3. Right to receive distribution upon liquidation of the corporation –
(happens in resolution and liquidation - how much stockholders receive
out of the profits of the corporation)
4. Right to inspect the books of the corporation
*(stockholders who have been declared delinquent do not have the
right to demand inspection of corporation books)
5. Right to issuance of stock certificates – (every stockholders have
the right to demand issuance of certificate of stocks for certificate
which has been lost or destroyed.)
6. Right to registration of names in stockholders’ names –
*in a corporation it is required that in the corporation to maintain
the stocks and transferred book.
*Stocks and transferred books- contains the name of the
stockholders
- numbers of certificate of stock that under their names
- total payable of corporation
- payment of subscription
*the moment stockholders shares their stocks, the one who buy it
has the right to demand his name to register in the stocks and
transferred book. The reason is only those who are listed in the stocks
and transferred book are entitled to exercise their rights in the
 corporation concerns.
7. Right to transfer or dispose of his fully paid shares if stocks
8. Right to file derivative suits
9. Pre-emptive rights – (a right of a stockholder to subscribe to newly
issued shares)
10. Appraisal Rights – (right available to a dissenting stockholder)
*dissenting stockholder- who oppose resolution who has been already
approved
 SUITS THAT STOCKHOLDER MAY BRING:

1. DERIVATIVE SUIT
2. INDIVIDUAL SUIT
3. REPRESENTATIVE SUIT

INSTANCES WHEN A STOCKHOLDER EXERCISE APPRAISAL RIGHT

 SEC. 80. When the Right of Appraisal May Be
Exercised. – Any stockholder of a corporation
shall have the right to dissent and demand
payment of the fair value of the shares in the
following instances:
(a) In case an amendment to the articles of
incorporation has the effect of changing or
restricting the rights of any stockholder or class
of shares, or of authorizing preferences in any
respect superior to those of outstanding shares
of any class, or of extending or shortening the
term of corporate existence;

(b) In case of sale, lease, exchange, transfer, mortgage, pledge or other

disposition of all or substantially all of the corporate property and assets as
provided in this Code;
(c) In case of merger or consolidation; and
(d) In case of investment of corporate funds for any purpose other than the
primary purpose of the corporation.

EXERCISES OF APPRAISAL RIGHTS

SEC. 58. Voting Trusts. – One or more stockholders of a stock corporation May
17, 2021 create a voting trust for the purpose of conferring upon a trustee or
trustees the right to vote and other rights pertaining to the shares for a period not
exceeding five (5) years at any time: Provided, That in the case of a voting trust
specifically required as a condition in a loan agreement, said voting trust may be
for a period exceeding five (5) years but shall automatically expire upon full
payment of the loan. A voting trust agreement must be in writing and notarized,
and shall specify the terms and conditions thereof. A certified copy of such
agreement shall be filed with the corporation and with the Commission; otherwise,
the agreement is ineffective and unenforceable. The certificate or certificates of
stock covered by the voting trust agreement shall be cancelled and new ones shall
be issued in the name of the trustee or trustees, stating that they are issued
pursuant to said agreement. The books of the corporation shall state that the
transfer in the name of the trustee or trustees is made pursuant to the voting
trust agreement.

The trustee or trustees shall execute and deliver to the transferors, voting trust
certificates, which shall be transferable in the same manner and with the same
effect as certificates of stock.
The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner as any
other corporate book or record:
Provided, That both the trustor and the trustee or trustees may exercise the right
of inspection of all corporate books and records in accordance with the provisions
of this Code. Any other stockholder may transfer the shares to the same trustee or
trustees upon the terms and conditions stated in the voting trust agreement, and
thereupon shall be bound by all the provisions of said agreement.
No voting trust agreement shall be entered into for purposes of circumventing the
laws against anti-competitive agreements, abuse of dominant position, anti-
competitive mergers and acquisitions, violation of nationality and capital
requirements, or for the perpetuation of fraud.
Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period. The voting trust certificates
as well as the certificates of stock in the name of the trustee or trustees shall
thereby be deemed cancelled and new certificates of stock shall be reissued in the
name of the trustors.
The voting trustee or trustees may vote by proxy or in any manner authorized
under the bylaws unless the agreement provides otherwise.

*A stockholder in attending the meeting in person or proxy or through voting trust

agreement.
Voting Trust Agreement – the right to avail of voting trust agreement
Proxy – could be a person or document depending on how it is use
*proxy could be a person- it is representative of a stockholder, it is allowed if the
stockholder signed authorization letter the right to attend on his/her behalf.

VOTING TRUST AGREEMENT PROXIES

 KINDS:
1. EXPRESS
2. IMPLIED
3. INCIDENTAL

SEC. 36. Power to Extend or Shorten

 Corporate Term. – A private corporation may
extend or shorten its term as stated in the
articles of incorporation when approved by a
majority vote of the board of directors or
trustees, and ratified at a meeting by the
stockholders or members representing at
least two-thirds (2/3) of the
outstanding capital stock or of its members. Written notice of the proposed action
and the time and place of the meeting shall be sent to stockholders or members at
their respective place of residence as shown in the books of the corporation, and
must either be deposited to the addressee in the post office with postage prepaid,
served personally, or when allowed in the bylaws or done with the consent of the
stockholder, sent electronically in accordance with the rules and regulations of the
Commission on the use of electronic data messages. In case of extension of
corporate term, a dissenting stockholder may exercise the right of appraisal under
the conditions provided in this Code.
NOTE: Appraisal right not available

Manner:
1. Increasing the number of shares, at same par value
2. Increasing par value, at same number of shares
3. Decreasing number of shares, at same par value
4. Decreasing par value, at same number of shares

3.Section 37: Power to incur, create or increase bonded indebtness

VOTE REQUIRED:
1. Approval of BOD
2. Ratification by 2/3
3. Approval of SEC, same with the Sec.36
Rationale: to ensure that BOD does not contract burdensome obligation
for the corporation.
4. Power to Deny Pre Emptive Rights
1. Shares issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public;
2. Or to shares issued in good faith with the approval of the
stockholders representing two-thirds 2/3 of the outstanding capital
stock, in exchange for property needed for corporate purposes or:
3. In payment of previously contracted debt

SEC. 38. Power to Deny Preemptive Right. – All stockholders of a stock corporation
shall enjoy preemptive right to subscribe to all issues or disposition of shares of
any class, in proportion to their respective shareholdings, unless such right is
denied by the articles of incorporation or an amendment thereto: Provided, That
such preemptive right shall not extend to shares issued in compliance with laws
requiring stock offerings or minimum stock ownership by the public; or to shares
issued in good faith with the approval of the stockholders representing two-thirds
(2/3) of the outstanding capital stock, in exchange for property needed for
corporate purposes or in payment of a previously contracted debt.

6.Power to purchase its own shares (Section 40)

Requirement: presence of unrestricted retained earnings because it involves
distribution of assets
When exercised:
a. To eliminate fractional shares arising out of stock dividends;
b. To collect or compromise an indebtedness to the corporation, arising
out of unpaid subscription, in a delinquency sale and to purchase
delinquent shares sold during said sale; and
c. To pay dissenting or withdrawing stockholders entitled to payment for
their shares under the provision of this Code

Kinds of dividends:
1. Cash
2. Property
3. Stock dividends

Requirements:
1. Cash:
a. Approval of BOD only
b.Any cash dividend shall be applied to the unpaid balance + cost + expenses
7.Power to invest corporate funds in another corporation or business (Section 41)
Nature: incidental, as a means of obtaining best return of investment funds.
VOTE REQUIRED:
a.BOD
b.Ratification by SH: 2/3, exc:
1. If other business is reasonably necessary to achieve its purpose
2. It’s a matter of business judgment
9.Power to enter into management contract (Section 43)
A management contract is one whereby a corporation undertakes to
manage or operate all or substantially all of the business of another corporation,
whether such contracts are called service contracts, operating agreements or
otherwise
Term: not to exceed 5 years

Requirements
1. Approval of BOD
2. Ratification by SH: majority of both the managing and managed corporations
EXC: SH representing 2/3 of the OCS of the managed corporations is required
a.Where a stockholder or stockholders representing the same interest of both
the managing and the managed corporation own or control more than one-
third of the total outstanding capital stock entitled to vote of the managinf
corporation.
b. where a majority if the members of the board of directors of the managing
corporation also constitute a majority of the members of the board of
directors of the managed corporation.

POWER TO ENTER MERGER AND CONSOLIDATION (SECTION 75)

 MEETINGS (SECTION 48-49)

SECTION 51 PERSON TO CALL THE MEETING

SPECIAL
Frequency: any time
Purpose: any
Notice: at least one week prior to the scheduled meeting

Who may cast their votes (Section 55-56)

BOARD OF DIRECTORS

SECTION 130. LIABILITY OF SINGLE SHAREHOLDER

SEC. 116. One Person Corporation. – A One Person
Corporation is a corporation with a single stockholder:
SEC. 117. Minimum Capital Stock Required for One Person
Provided, That only a natural person, trust, or an estate may Corporation. – A One Person Corporation shall not be required to
form a One Person Corporation. Banks and quasi-banks, pre- have a minimum authorized capital stock except as otherwise
need, trust, insurance, public and publicly-listed companies, provided by special law.
and non-chartered government-owned and -controlled
corporations may not incorporate as One Person
Corporations: Provided, further, That a natural person who is
licensed to exercise a profession may not organize as a One
SEC. 130. Liability of Single Shareholder. – A sole shareholder
Person Corporation for the purpose of exercising such claiming limited liability has the burden of affirmatively showing
profession except as otherwise provided under special laws. that the corporation was adequately financed. Where the single
stockholder cannot prove that the property of the One Person
Corporation is independent of the stockholder’s personal property,
the stockholder shall be jointly and severally liable for the debts and
other liabilities of the One Person Corporation. The principles of
piercing the corporate veil applies with equal force to One Person
Corporations as with other corporations
WHO MAY FORM:
1. NATURAL
2. ESTATE
3. TRUST

WHO MAY NOT FORM OPC:

 DOCUMENTARY REQUIREMENT (SECTION 118)

SEC. 118. Articles of Incorporation. – A One

Person Corporation shall file articles of
incorporation in accordance with the
requirements under Section 14 of this Code.
It shall likewise substantially contain the
following: (a) If the single stockholder is a
trust or an estate, the name, nationality, and
residence of the trustee, administrator,
executor, guardian, conservator, custodian,
or other person exercising fiduciary duties
together with the proof of such authority to
act on behalf of the trust or estate;
And (b) Name, nationality, residence of the nominee and alternate nominee, and the
extent, coverage and limitation of the authority
 SECTION 121. Single Stockholder as Director, President, -
The single stockholder shall be the sole director and
CORPORATE OFFICERS – SECTION 121- 122 president of the One Person Corporation.
SEC. 122. Treasurer, Corporate Secretary, and Other
Officers. – Within fifteen (15) days
from the issuance of its certificate of incorporation, the One
Person Corporation shall appoint a
treasurer, corporate secretary, and other officers as it may
deem necessary, and notify the
Commission thereof within five (5) days from
appointment.
The single stockholder may not be appointed as the
corporate secretary.
A single stockholder who is likewise the self-appointed
treasurer of the corporation shall
give a bond to the Commission in such a sum as may be
required: Provided, That the said
stockholder/treasurer shall undertake in writing to
faithfully administer the One Person
Corporation’s funds to be received as treasurer, and to
disburse and invest the same according to
Page 52 of 73
the articles of incorporation as approved by the
Commission. The bond shall be renewed every
two (2) years or as often as may be required.

PRELIM QUIZZES
Quiz 1
T Object or purpose of partnership should be lawful.
T By juridical personality, partnership becomes a personality distinct from the
partners.
F Partnership is a formal contract.
T If partnership is validly created, partnership is treated as another person.
F Partnership is composed of at least one person.
F Commercial partnership is for the exercise of profession.
T Industrial partners contribute services.
F In partnership, partners contribute money, property and industry.
T Capitalist partner may contribute property. F Partnership is an innominate
contract.
F Partnership, to be valid, requires to be registered with the Securities and
Exchange Commission.
F Partnership is cumulative.
T Children at least 16 years of age can become partners of partnership.
 T Partnership is a simple contract.
F Partnership is co ownership.
F Purely industrial partners need not contribute money or property.
T Express partnership can be verbal or in writing.
T Partnership is a principal contract.
F Partnership must appear in a public instrument.
T Capitalist partner may contribute money.
Quiz 2
 T- Actual contribution of money, property or industry is necessary to make the
partnership valid.
 T - The partnership purchased a parcel of land at the time of its organization.
The partnership must appear in a public instrument to be valid.
 T- A, B and C formed a partnership with a capitalization of P500,000.00. The
partnership is in writing but not duly notarized by a notary public. Partnership
acquired separate juridical personality.
 T- If the partnership has liabilities more than its assets, but the partners have
 more assets than liabilities, the partnership can be declared insolvent.
 F- Insolvency of the partners in a partnership carries with it the insolvency of
the partnership.
 F- Partnership must appear in a public instrument.
 F- Partnership is a real contract.
 F- Partnership is a classic example of an innominate contract.
 F- The partnership purchased a parcel of land at the time of its organization, it
is not registered with the Securities and Exchange Commission. If it borrows
money from the bank, the partners are personally liable for the loan.
 T- The partnership received a parcel of land at the time of its organization as
contribution from its partners, it is not registered with the Securities and
Exchange Commission. If it borrows money from the bank, the partners are
personally liable for the loan.
 F- A, B and C are partners. The partnership received a parcel of land at the
time of its organization as contribution from its partners, it is not registered
with the Securities and Exchange Commission. There are four persons before
 the eyes of the law, that is, including the partnership.
 T -Partnership is a contract.
 F- The main purpose of commercial partnership is common enjoyment of a
thing held in common.
 T- In partnership, partners contribute money, property or industry.
 T- Express partnership can be verbal or in writing.
 F- Capitalist partner must contribute money and property.
 T- Capitalist partner may contribute services at the same time.
 F- Partnership, to be valid, requires to be registered with the Securities and
Exchange Commission.
 T- The partnership must have an objective to be achieved in order to be valid.
 F- If partnership fails to prove the existence of the elements to be valid, the
partnership acquires separate juridical personality.
 F- If partnership fails to prove the existence of the elements to be valid, it may
enter into a contract of sale.
 T- Partnership is cumulative.
 T- Partnership is a principal contract.
 F- Partnership is co ownership.
 T- Every partner has a primary right to use partnership property for any
purpose.
 F- Right to use specific partnership property is a related right of every partner.
 F- A partner may be prohibited to use specific partnership property if the
partners have agreed thereto.
 T- Capitalist partners have a right to receive share in the profits.
 F- Industrial partners have the related right to participate in the management
of the partnership.
 T- Right to receive share in the surplus is an absolute right.
 T- A partner’s right to receive share in the profits is a principal right of a
partner.
 F- A partner’s right to receive share in the surplus is a related right of a partner.
 F- Right to use specific partnership property is assignable.
 T- A partner can assign or allow a third person to receive his share in the
profits.
 T- De jure partnership is partnership validly created.
 T- Partnership by estoppel is no partnership at all.
 T- A partnership de facto is one formed not in strict compliance with the
requirements of the law.
 F- Universal partnership cannot be formed by spouses.
 T- Universal partnership transfers all properties belonging to each partner to
the partnership.
 T- Particular partnership is one for specific object or purpose.
 T- Spouses can form a particular partnership.
 T- General professional partnership is a particular partnership.
 F- Accounting of partnership books is a primary right available to all partners.
 T- In universal partnership of all profits, properties of partners do not belong
to the partnership.
 Quiz 4
 T If A, a partner, fails to provide for his legitimate child, his share in the
profits can be subject of
 legal support.
 F If A, a partner, fails to provide for the educational needs of his children,
the partnership motor
 vehicle can be used to address such needs.
 T A partner may assign another person, not a partner, to receive his
(partner’s) share in the
 surplus.
 F A, a partner of ABC & Company, may authorize that his creditor would use
the building owned
 by the partnership to pay his (A’s) obligation to the creditor.
 T A, a partner of ABC & Company, may authorize his creditor to receive his
share in the profits.
 F If the partnership owns a commercial building, all partners are co –
 owners of the building.
 F If the partnership owns a piece of land, one of the three partners may sell
a 1/3 portion of the
 land to another.
 T All partners can use jointly partnership property for partnership
purpose T Only partners who contributed the specific partnership property
to the partnership shall have
 the right to use the property contributed.
 F An industrial partner cannot be a capitalist partner.
 F In case a partnership has an industrial partner, the share of the industrial
partner in the surplus
 will be paid last.
 F In case partnership has capitalist and industrial partners, partners can
agree that the industrial
 partner is not to be given his share in the profits and instead be given a salary.
 T Existence of partnership shall be determined principally through the
 written contract executed
 by the partners.
 F In the event that a person receives a salary from the partnership out of
the profits, that person is
 a partner.
 F Losses shall be shared by all partners – capitalist and industrial.
 F Right to demand to formal accounting is an absolute right.
 T Partners can demand for the reimbursement of the amounts advanced to
or from the
 partnership.
 F Right to use specific partnership property is a related right of every
partner.
 F A partner may be prohibited to use specific partnership property if the
partners have agreed
 thereto.
 F Only capitalist partners have a right to receive share in the profits.
 F Industrial partners may be given salary instead of share in the profits.
 T Right to receive share in the surplus is an absolute right.
 F Profits shall be divided proportionately among capitalist partners, as a
rule.
 T De jure partnership is partnership validly created.
 T De facto partnership acquires separate juridical personality.
 Quiz 5
 F Every partner who undertakes to deliver a determinate thing to the
partnership is obliged to
 observe extra-ordinary diligence pending delivery of the thing.
 T As a rule, if partner A undertakes to give P50,000.00 to the partnership,
partner B should give
 something, whether money or property, equivalent to P50,000.00.
 F Sharing of losses and profits shall solely be based on the agreement of the
partners.
 T A person admitted as a partner in an existing partnership is liable for all
obligations of the
 partnership including those already incurred even before his admission.
 F Dissolution winds up the partnership.
 F Whenever a partner assigns his share in the partnership, partnership is
dissolved.
 F Winding up should follow suit upon dissolution of partnership.
 F Insanity automatically dissolves partnership.
 T Insolvency automatically dissolves partnership.
 T Death of a partner ipso facto dissolves the partnership.
 F Whenever an industrial partner engages in another business and is
expelled from the
 partnership, partnership is deemed wound up.
 T Unprofitability is a valid ground to dissolve the partnership
 F The risk of specific and determinate things contributed to the partnership
 so that only their use
 and fruits may be for the common benefit, shall be borne by the partnership.
 F If the things contributed are fungible or if they were contributed to be
sold, the risk shall be
 borne by the partner.
 T The partners shall contribute equal shares to the capital of the
partnership, unless there is a
 stipulation to the contrary.
 T Every partnership shall operate under a firm name, which may or may not
include the name of
 one or more of the partners.
 T The partnership cannot use an identical or deceptively confusing or
similar name to that of any
 existing partnership or corporation or to any other name already protected by
law.
 T All partners shall be liable pro rata with all their property and after all the
 partnership assets
 have been exhausted, for the contracts which may be entered into in the
name and for the
 account of the partnership.
 T The act of every partner, including the execution in the partnership of any
instrument, for
 apparently carrying on in the usual way of business of the partnership of which
he is a member
 binds the partnership.
 T A partner who has received his share of a partnership credit, when the
other partners have not
 collected theirs, shall be obliged, if the debtor should thereafter become
insolvent, to bring to
 the partnership capital what he received even though he may have given
receipt for his share
 only.
 T The estate of a deceased partner is still liable for partnership obligations.
 F A managing partner who fails to contribute the funds/amount that he
promised to the
 partnership shall be liable for legal interest beginning on the maturity date.
 T A person admitted as a partner in an existing partnership is liable for all
obligations of the
 partnership including those already incurred even before his admission.
 T The partnership is liable to third persons where a managing partner
misappropriates money of
 third persons.
 T Partners’ contributions are assets of the partnership.
 F An appointed managing partner may sell properties used in the
partnership business provided
 the same is not classified as real property.
 T As a rule, if partner A undertakes to give P50,000.00 to the partnership,
partner B should give
 something, whether money or property, equivalent to P50,000.00.
 F The spouse of a deceased partner may wind up the affairs of the partner
 F Sharing of losses and profits shall solely be based on the agreement of the
partners.
 F Every partner who undertakes to deliver a determinate thing to the
partnership is obliged to
 observe extra-ordinary diligence pending delivery of the thing.
 F A managing partner may perform acts of strict dominion.
 F Winding up should follow suit upon dissolution of partnership.
 F In a partnership, a partner can not transfer his interest in the partnership
so as to make the
 transferee a partner without the consent of all the other existing partners; in a
corporation, a stockholder has generally the right to transfer his shares
without the prior consent of the other stockholders.
 T Each partner is under obligation to ensure that all the other partners shall
have access to partnership books and records.
 T A partner may exercise any power as representative of the partnership.
 T A partner who undertakes to deliver his photocopying machine to the
partnership shall be liable for the damage thereof in the event that such
machine would prove useless to the partnership’s business operation
 MIDTERM QUIZZES
 T- there must be a general partner in limited partnership.
 F- Limited partnership acquires separate juridical personality upon agreement
of the partners.
 F- When limited partnership is not reduced into writing, it still acquires
separate juridical personality.
 T- Limited partnership is formal partnership.
 T- An Articles of Limited Partnership must be registered with the Securities and
Exchange Commission
 T- Limited partners may aid the general partners with respect to decision-
making.

 F- Limited partners have the guaranteed right to demand that their capital
contribution be returned to them through means other than cash.
 F- There may be a general partner in limited partnership.
 F- Limited partnership may be formed through consent of the partners.
 F- A limited partner has no obligation for partnership obligations.
 F- A limited partner’s family name may not appear in the partnership name.
 F- A limited partnership is one composed of at least one limited partner.
 T- A limited partner may appoint a substituted limited partner.
 T- A substituted limited partner acquires all the rights of a limited partner.
 T- A limited partner has the rights of a general partner.
 T- A general partner in a limited partner has all the rights as though the
partnership is a general one.
 F- A limited partner has the guaranteed right to appoint a substituted limited
partner.
 F- Only general partners in a limited partnership are liable for partnership
 obligations.
 T- A corporation may have just one (1) incorporator.
 T- Death of the only limited partner dissolves the limited partnership.
 T- A limited partner may join, once in a while, in the affairs of the limited
partnership.
 F- Retirement of one of the limited partners dissolves the limited partnership.
 T- Death of a general partner dissolves the limited partnership.
 F- A corporation is dissolved in case of change of shareholders.
 F- A corporation, like a partnership, is consensual in nature.
 T- A limited partner whose name appears in the firm name is not liable to pay
partnership obligations.
 T- A corporation is a creation of the state and not of the individual
members/stockholders thereof.
 T- An Articles of Limited Partnership must be registered with the Securities and
Exchange Commission.
 T- A limited partner is liable for partnership obligations but his liability is only
 up to the extent of the capital contribution.
 F- A partner who erroneously believes that he is a limited partner is not liable
for partnership obligation upon ascertaining that he is indeed a limited partner.
 T- An incorporator is always a shareholder.
 F- Limited partners are exempt from paying the difference of the amount they
actually promise to contribute to the partnership and the amount they actually
tender to the partnership.
 T- A corporation by estoppel is no corporation at all.
 T- A corporation is a creation of the state and not of the individual
members/stockholders thereof.
 F- Partnership and corporation are similar in that they both acquire separate
juridical personality upon meeting of minds of the parties.
 T- A one person corporation is composed of one incorporator.
 T- A domestic corporation is one organized under RA No. 11232.
 T- Limited partnership which fails to organize because of lacking requirement
may be treated as a general partnership.
 F- Death of a limited partner in a limited partnership composed of 2 general
partners and 2 limited partners, dissolves the partnership.
 F- A limited partner is liable for partnership obligations beyond his capital
contribution.
 T- A, who was once a general partner, and whose name is in the firm of ABC &
Company limited may be a limited partner. Once a limited partner, his name
may be retained in the firm name.
 F- A corporation, as a person, is entitled to claim moral damages for wounded
feelings and sleepless nights.
 T- The separate personality of the corporation is a shield against personal
liability of its officers and stockholders.
 T- A limited partner may, from time to time, give advice as to how to run the
business of the limited partnership.
 F- A corporation is dissolved in case of change of shareholders.

 F- Partnership is the same as a corporation in a sense that a corporation must
 have at least five (5) incorporators.
 F- Dissolution terminates the juridical personality of a limited partnership.
 F- A corporation, like a partnership, is consensual in nature.
 F- A corporation which fails to comply with the documentary requirements
becomes a general partnership.
 F- Admission of new stockholder in the corporation dissolves the corporation.
 T- An incorporator is always a shareholder.
 T- Limited partnership is similar to corporation in a sense that the liability of
the persons composing the same is limited to capital contribution.
 F- A corporation with one stockholder owning 99% of the shares is a dummy
corporation and, as such, the corporate fiction thereof may be disregarded.
 F- In close corporations, the number of members do not exceed 20.
 F- Persons composing a non stock corporation are also known as stockholders.
 T- A corporation may have just one (1) incorporator.
 T- A redeemable share may be called back by the corporation regardless of the
existence of unrestricted retained earnings.
 T- The Government Service Insurance System (GSIS) is a private corporation.
 T- The corporation is under obligation to issue different classes or series, or
both, shares of stocks.
 T- Members are corporators.
 T- A preferred share is a voting share.
 T- All shares of a banking corporation are par value shares.
 T- A preferred share can be converted into common share.
 T- Preferred shares may be cumulative and participating at the same time.
 F- Treasury shares are outstanding shares.
 F- Members of a corporation must own at least one (1) share in a corporation.
 T- One (1) share in the corporation’s authorized capital stock is sufficient for
one to become an incorporator.
 T- A non-voting share is entitled to vote in case of amendment of the articles
of incorporation.
 T- A corporation cannot, in the middle of its operation, demand for the
 payment of no par value shares.
 F- No par value shares do not have any consideration.
 T- A barangay is a public corporation.
 T- An incorporator is always a shareholder.
 T- Under the principle on equality of shares, common shares and preferred
shares have the same rights, unless otherwise provided.
 T- The Government Service Insurance System (GSIS) is a private corporation.
 F- A corporation is a creation of the individual members/stockholders thereof,
and not of the state.
 T- Treasury shares are shares in the name of the corporation.
 F- A corporation with one stockholder owning 99% of the shares is a dummy
corporation and, as such, the corporate fiction thereof may be disregarded.
 F- A corporation can issue purely non voting shares.
 F- A corporation, like a limited partnership, is formal in nature.
 F- Value of par value shares should not be less than P5.00.
 T- The natural person who is the sole stockholder of the one person
corporation owns all shares of the corporation.
 F- A corporation cannot, in the middle of its operation, demand for the
payment of par value shares.
 F- A corporation, as a person, is entitled to claim moral damages for wounded
feelings and sleepless nights
 F- A redeemable share should be called back by the corporation provided
there is unrestricted retained earnings.
 T- A non-voting share is entitled to vote in case of dissolution of the
corporation.
 F- Members of a corporation must own at least one (1) share in a corporation.
 F- No par value shares are non assessible.
 T- Cebu City is a public corporation.
 T- A preferred share may be a non-voting share.
 F- A corporation is dissolved with the admission of new stockholders.
 T- An incorporator is always a corporator.
 T- Under the principle on equality of shares, common shares and preferred
shares have the same rights, unless otherwise provided.
 T- All shares of a banking corporation may be par value shares or no par value
shares.
 T- In OPC, the sole stockholder is the incorporator.
 T- The separate personality of the corporation is a shield against personal
liability of its officers and stockholders
MIDTERM EXAM
1. First No par value share always has an “issued value”.
Second Market value may be determined by dividing the net value of the
total corporate assets by the number of shares issued or outstanding.
Either statement is true.
2. Right of the stockholders to participate in the management of the
affairs of the corporation is manifested by
right to vote
3. A corporation cannot, in the middle of its operation, demand for the
 payment of par value shares.
False
4. In which of the following corporations will those composing the
corporation be liable as general partners?
Corporation by estoppel
5. A limited partner shall the following rights except
demand and accept collateral security for loan obligations
6. General partners shall have no right to perform the following acts
without the written consent or ratification by all the limited partners,
except
Admit a person as a limited partner, unless the right to do so is given in the
certificate
Admit a person as a general partner
To have the partnership books kept at the principal place of business of the
partnership
No answer given
7. All except one are the rights of a limited partner:
To ask for judicial or extrajudicial dissolution and winding up

8. In all of the following instances, a limited partner may be exempt from

any liability of the partnership except
Whenever a limited partner, upon ascertaining his mistake, promptly
renounces his interest in the profits of the business
9. Zarco & Sons is a limited partnership composed of three (3) partners,
namely Frank Anthony, Rodel and Filoteo. The partners are the sons of
Ana Liza Zarco who has retired from business but who suggested that they
include his name in the firm to give them an advantage since she is well-
known in the business community.
I. Ana Liza Zarco shall have all the rights of a general partner.
II. Ana Liza Zarco shall have all the liabilities of a general partner.

First statement is FALSE, second statement is SECOND.

10. A, B, C, D and E distributed calling cards identifying themselves as
directors of Summit Corporation, to several individuals during a business
conference. In reality, however, no such corporation is registered with the
Securities and Exchange Commission. X, who received a calling card
granted credit amounting to P50,000.00 to “Summit Corporation”
believing that such a corporation really existed. When the supposed
corporation was unable to pay, X brough a court action against it. At that
time, “Summit Corporation” had assets of P30,000.00. Which of the
following is correct?
X can go after the separate assets of A, B, C, D and E after exhausting the
assets of “Summit Corporation”.
11. What is a non-stock corporation?
A non-stock corporation is one where none of its income is declared as
dividends.
12. All, except one, are correctly arranged according to preference in the
distribution of assets of a limited partnership: (*P*=partnership,
 LP=limited partner, GP=general partner)
*P*-creditor, LP-creditor, GP-creditor, LP-profits, GP-profits
13. Nineteen (19) USJ-R Culinary students agree to form a corporation with
Philippine Culinary Corporation to be known as Great Asian Culinary, Inc.
(GAC), the latter being composed of fifty (50) stockholders. Each of the 19
student-stockholders owns one (1) share of the GAC.
First: Any student-stockholder of Great Asian Culinary, Inc. (GAC) may sell
or otherwise dispose of his share in the corporation.
Second: GAC, Inc. may impose that the affairs of the corporation shall be
managed by the Board of Directors, and not by the stockholders.
Either statement is true.
14. It is a corporation exercising corporate power for such a long length of
time as to raise assumption of the grant of an ancient charter to its
predecessors
Corporation by estoppel
15. This share can be acquired by the corporation even without
unrestricted retained earnings
Redeemable shares
16. A corporation engaged in real estate business may likewise engaged
into trading bottled waters to its clients provided the same is approved by
the management.
False
17. Which is correct about no par value shares?
No par value shares can not be issued with preference as to assets or as to
dividends
18. FIRST: Preferred stocks/shares are non-voting shares.
SECOND: Redeemable stocks/shares are voting shares.
First statement is FALSE, second statement is TRUE.
19. Which of the following is not true about the assignment of a limited
partner’s interest?
 The substitution of the assignee as a limited partner generally releases the
assignor from liability.
20. A corporation by estoppel is no corporation at all.
True
21. Corporation X has a statement of capital stock in its articles of
incorporation but it was stated in the same articles that dividends are not
supposed to be declared, that is, there is no distribution of retained
earnings. Corporation X is:
Non stock corporation
22. Randi Torregosa, Renato Galeon, Waldemar Gravador, Ramon
Torregosa, and Chevrolie Maglasang formed a limited partnership, with
Randi as a Limited Partner. Randi has the liability of a general partner
except:
His surname appears in the firm name
23. Limited partners have the guaranteed right to demand that their
capital.
 False
24. he holders of non-voting shares shall be entitled to vote on the
following matters, except
Election and removal of directors
25. A corporation is dissolved in case of change of shareholders.
False
26. Limited partnership is formal partnership.
True

27. SAROMINES, MONTEBON & MENCHAVEZ Law and Accounting Firm

(The Firm) opened a partnership in January 2013, with Jonathan
Saromines and Gemini Montebon as limited partners. In the course of
doing business, Jonathan Saromines, acting for and on behalf of the
partnership, contracted with LEAD Realty Development Corporation (the
Corporation) for the former to render its accounting services. The Firm
demanded, as it did receive, an advance payment in consideration of the
 contract of 50% of the contract price. A month after, The Firm made an
ninety-degree turn and returned all the documents and books of the
Corporation without any reason. Immediately, the Corporation, through
its President, demanded for the return of the amount advanced by The
Firm. Which of the following is/are correct?
No answer given.
28. Which of the following may be a cause for involuntary dissolution?
Insolvency of a partner
29. A non-voting share is entitled to vote in case of dissolution of the
corporation.
True
30. Corporations de facto cannot sue and be sued.
False
31. Ayala Holding, Inc. (AHI) owns Ayala Center Cebu, Inc.(ACCI). Majority
of the officers of ACCI are also officers of AHI. In its thrust to make
shopping more convenient and comfortable for the shoppers, ACCI
 constructed a new parking area/terminal for its customers, which will be
available free of any charge. In line therewith, ACCI contracted Makati
Construction Development Corp. (MCDC). Which of the following
statements is correct?
ACCI shall be liable for the contract price for the construction of its parking
area/terminal because it is a corporation separate and distinct from AHI.
32. An Articles of Limited Partnership must be registered with the
Securities and Exchange Commission.
True
33. First: Corporations must be composed of any number, but not more
than fifteen (15), stockholders/members.
Second: An eleemosynary corporation is one devoted for charitable or
benevolent purposes.
First statement is true, second statement is false.
34. The separate personality of the corporation is a shield against personal
liability of its officers and stockholders.
True
35. Thea subscribes to 1,000 common shares of Prime Philippines &
Jewelry Shop, Inc. at P10.00 per share or P10,000.00 . Before Thea could
pay off the P10,000.00, Prime Philippines & Jewelry Shop, Inc. register the
same in the name of its trustee, Asia Prime Holdings. The shares subscribe
by Thea are
shares in escrow
36. A corporation may have just one (1) corporation as an incorporator.
False
37. Mr. Taboada is elected as President of the Board of Directors of CJS
Janitorial Services Corporation. As part of his perks, Mr. Taboada is given
the privilege to maintain his own office. Accordingly, Mr. Taboada
instructed his secretary, Jeraly Nova, to call Moongold Furniture Industries,
with whom Jeraly Nova ordered for the delivery of classy and luxurious
sala set, cabinets and other stuffs for Mr. Taboada’s office. In payment of
the purchases, Mr. Taboada issued a post-dated check (PDC). Two (2)
 months have elapsed, CJS Janitorial Services sent Mr. Taboada a notice
that the PDC was dishonored for the reason “DRAWN AGAINST
INSUFFICIENT FUNDS”. Which of the following statements is/are correct?
CJS Janitorial Services Corporation is liable for the acts entered into for,
and in its own name.
38. A limited partner has no obligation for partnership obligations.
False
39. A de facto corporation has the same rights as a de jure corporation.
True
40. Persons composing a corporation by estoppel can deny liability by
alleging that such corporation has not been granted a corporate charter.
True
41. When can a limited partner receive his contributions without need of
unanimous consent?
Upon arrival of the date fixed in the certificate of its return
42. A corporation acquires juridical personality
 Upon the issuance of the certificate of incorporation.
43. First: A limited partner may assign his interest to another person.
Second: As a rule, a partner shall be liable as a general partner if he
allows the use of his surname to be included in the partnership name.
Third: A partner may be a limited and general partner at the same time.
Fourth: A partnership intended to be formed as a limited partnership but
without the word “Limited” or “Ltd.” appended to its name shall be
considered a general partnership.
All statements are TRUE.
44. In a limited partnership where there are four (4) partners:
It is enough that there is one limited partner; the rest may all be general
partners.
45. Which of the following statements is correct?
Lay corporation is one established for purposes other than religious.

46. A limited partner has all the rights of a general partner.

 False
47. A limited partnership is one formed by two or more persons who are:
Limited partner/s and general partner/s

QUIZ FINALS
 F- A Korean national may become an incorporator of a corporation
engaged in the business of beauty parlor/cosmetics.
 T- Nationalized corporations are those which the law requires to be
owned by a certain percentage of Filipino citizens.
 T- Persons composing a corporation by estoppel are liable as general
partners.
 T- Persons composing a corporation by estoppel can deny liability by
alleging that such corporation has not been granted a corporate
charter.
 F- A corporation engaged in real estate business may likewise engaged
into trading bottled waters to its clients provided the same is approved
 by the management.
 F- A corporation has a fixed term of fifty (50) years.
 F- As a rule, majority of the incorporators must be nationals of the
Philippines.
 T- An articles of incorporation may be amended and such amendment
shall take effect upon approval of the amendment or upon application
if the amendment has not been acted upon within six (6) months.
 F- The corporate charter is alienable/transferrable.
 T- The incorporation of a banking institution requires a prior of the
Bangko Sentral ng Pilipinas.
 F- The minimum paid-up capital stock of the corporation is P5,000.00.
 T- One (1) share in the corporation’s authorized capital stock is
sufficient for one to become an incorporator.
 F- A corporation acquires separate juridical personality from the
moment it receives the certificate of incorporation.
 T- A de facto corporation is entitled to the same rights as a de jure
 corporation.
 T- A corporation engaged into retail business must be wholly owned by
Filipino citizens.
 T- A corporation by estoppel is no corporation at all.
 F- Non-use of corporate power for a period of two (2) years is a ground
to revoke the corporate charter.
 T- A corporation may have just one (1) incorporator.
 F- The validity of the corporate charter of a de jure corporation may be
questioned by the state through the solicitor general by an action
known as quo warranto.
 F- A corporation whose paid up capital is just P5,000.00 cannot be
granted a corporate charter/franchise.
 F- If a corporation has its principal place of business in Cebu City, with
a branch office in Tagbilaran, Bohol, a case that may be filed against it
by a resident in Cebu City can be filed in Bohol.
 T- The name of the corporation must be registered with the Securities
 and Exchange Commission and is, thus, entitled to protection.
 F- If a corporation, after incorporation, has commenced business, but
stops to do so for a period of at least three (3) years, it can be
considered a delinquent corporation.
 F- An association which fails to submit the articles of incorporation but
represents itself as a corporation shall have the same rights as though
it is a de jure corporation.
 F- Once Articles of Incorporation has been amended, the corporation
acquires another personality.
 F- The minimum capital stock of a corporation is P5,000.00.
 T- The Articles of Incorporation is the contract of the corporation with
the state.
 T- A delinquent corporation has a separate juridical personality.
 F- A corporation which elects a fixed term of existence and whose
corporate charter has already expired, is required to file a new
application for registration.
 T- Upon issuance of a certificate of incorporation, the corporation has
the duty and obligation to conduct business.
 T- The validity of the corporate charter of a de facto corporation may
be questioned by the state through the solicitor general by an action
known as quo warranto.
 T- A lawyer may become an incorporator of a corporation.
 F- Corporations organized under BP Blg. 68 or the Corporation Code of
the Philippines have to elect a corporate term, otherwise, they shall
have a perpetual existence.
 T- There can be just one director in a stock corporation.
 F- A corporation, singly, may form another corporation.
 T- A new corporation cannot use a name which is not yet registered
with the Securities and Exchange Commission but has already been
reserved to be used by another entity.
 T- A Filipino citizen who is a resident of Singapore may become an
incorporator.
 T- A pawnshop which applies for registration with the Securities and
Exchange Commission requires to submit a favorable recommendation
from the Bangko Sentral ng Pilipinas.
 F- An association which fails to submit the articles of incorporation but
represents itself as a corporation is a de facto corporation.
 F- A foreign national has a right to become an incorporator of a
domestic corporation
 T- Election of directors can be attended by the stockholders
themselves or through the stockholders’ representatives.
 F- Interlocking directors are directors who transact business with the
corporation.
 T- The board of directors and corporate officers are frequently
referred to as the “management” of the corporation.
 T- Stockholders may, during the regular meeting of the corporation,
attend in person or by their representatives.
 F- The powers of the board of directors, as a rule, can be delegated.
 T- Banks need to have independent directors.
 T- An executive committee may enter into a contract on behalf of the
corporation for the sourcing out of janitorial services.
 T- The term of office of the directors is one (1) year or until their
successors are elected and have taken their oath.
 F- A director can be removed by the stockholders.
 T- A vacancy in the board due to removal or death of one of the
directors/trustees may be filled by the remaining directors/trustees,
provided they still constitute a quorum.
 T- The board of directors can have just one (1) director.
 T- A director elected to replace the director who has resigned from
office shall serve only the remaining term of office of the director who
has been replaced.
 T- A director cannot be removed if such removal would deprive
minority stockholders or members of the right of representation.
 F- Election of corporate officers can be attended by the directors
 themselves or through the representatives of the directors.
 F- The incumbent board of directors may pass a resolution to change
the date of the regular meeting.
 F- Self – dealing directors are directors of two or more corporations.
 T- The board of directors has the sole right over the properties of the
corporation.
 F- Directors are entitled to compensation.
 T- Contracts by self – dealing directors are valid.
 F- Independent directors need not be stockholders of the corporation.
 F- A compliance officer must be appointed for a corporation engaged
in food stall business.
 T- The corporation may waive its claim against a director who enters
into contracts in their personal capacity involving business
opportunities that ought to belong to the corporation.
 F- A director must be a citizen of the Philippines.
 F- The powers of the executive committee are merely delegated, as
 they emanate from the directors.
 F- A director has substantial interest in a corporation if he has 2%
interest in the outstanding capital stock of the corporation.
 F- The board of directors can delegate the power to manage the
corporation to the corporate officers.
 T- The authority of the directors to manage the affairs of the
corporation emanates from the stockholders.
 F- A treasurer must be a citizen and resident of the Philippines.
 T- A secretary may be a treasurer at the same time.
 F- If ABC, Inc. obtains a loan from the bank, represented by the
president, such president of the corporation is solidarily liable to pay
the loaned amount.
 T- A one – person corporation has a single director but may have
several corporate officers.
 F- The authority of directors to amend the articles of the corporation
may be done by the executive committee.
 F- A director must be a resident of the Philippines.
 T- A self – dealing director may attend the meeting during which the
contract between him and the corporation is sought to be approved.
 F- The directors and trustees can appoint their proxy in order to attend
the meeting.
 T-
 A provision in the by-laws providing that an interlocking stockholder
cannot be a director is valid.
 F- The contract between corporations with self – dealing directors who
have substantial interest in the corporation is, generally, rescissible.
 F- Term of office of directors is one year until their successors are
elected.
 T- If a director allows the issuance of watered stock, he is personally
liable to pay to the corporation for the value thereof, along with the
guilty stockholder.
 F- Hold – over provision extends the term of office of the directors.
 T- The purpose of voting trust agreement is only for the exercise of the
right to vote.
 T- Wasting assets corporation is one where capital of which is
necessarily exhausted in the carrying on of its operations.
 T- Pre incorporation subscription is irrevocable for a period of 6
months from date of subscription.
 T- Pre-emptive right is one available to all stockholders.
 T- Dividends are profits.
 T- Appraisal right is one available to a dissenting stockholder.
 T- In voting trust agreements, ownership of shares of stocks are
transferred to the trustee.
 F- Stockholders, as such, have the right to demand for the corporation
to declare dividends.
 T- Right of pre-emption is the right of stockholders to subscribe to all
issues or dispositions of shares of any class in proportion to their
original or prior share.
 F- In decrease of corporate term, no right of appraisal is available to
dissenting stockholders.
 T- Capital stock may be increased by increasing the number of shares.
 T- Stock dividends shall be withheld from the delinquent stockholder
until his unpaid subscription is fully paid.
 F- An unpaid share is a delinquent share.
 F- Dividends is demandable as a matter of right.
 T- In proxy, the authority of the representative is only to attend and
vote in a particular meeting; whereas in voting trust agreement, the
authority to representative is longer but not to exceed five years.
 F- As stockholders have the right to receive dividends, there is, in
effect, a debtor-creditor relationship between the corporation and the
stockholders.
 T- A proxy is revocable.
 F- Shares may be paid through checks.
 T- A stockholder may render services in payment for the shares of
 stocks subscribed.
 T- Cash dividend can be issued upon approval of the board of directors.
 F- Subscribers of shares of a corporation yet to be organized can
withdraw their subscription anytime.
 F- An unpaid share is a delinquent share.
 F- A stockholder who has paid his shares covered by one subscription
contract in part is entitled to the issuance of a certificate of stock.
 F- In proxy, the authority of the representative is to exercise all the
rights of the stockholders including the right to vote.
 F- A director who knows of the issuance of watered stock but who is
not a party to such issuance cannot be made solidarily liable for the
consideration thereof.
 F- Property dividends shall be withheld by the corporation in the event
that a stockholder has unpaid subscription.
 F- For lost or destroyed certificates, the affidavit stating the fact of loss
must be published for a year prior to issuance of a new certificate of
 stock.
 T- Unpaid shareholders have the right to vote.
 T- A stockholder who has failed to pay his subscription can attend
meetings of stockholders.
 F- A stockholder who dissents to the approval of a corporate action
may file exercise his appraisal right within ten (10) days from
knowledge of the approval of such corporate action.
 F- Call is the date fixed in the by – laws or subscription contract for the
payment of the consideration of the shares.
 F- A stockholder of a corporation who is likewise a stockholder of
another corporation may be prohibited from accessing corporate
books and records.
 F- A derivative suit is actually a suit filed by the corporation.

 T- The corporation may be paid of the consideration for the shares by
issuing stock dividends out of the excess of the unrestricted retained
 earnings.
 T- Appraisal right is available whenever a corporation with perpetual
existence elects that it’s term be instead to a specific period.
 T- A corporation engaged in real estate business may accept any form
of property as consideration for the shares issued.
 T- A stockholder with unpaid subscription for five years can vote and
may be voted upon.
 T- A watered stock is one, among others, with a consideration lower
than its issued value.
 F- A delinquent share is not entitled to dividends.
 F- A delinquency sale is one facilitated by the court.
 T- A stockholder who has unpaid subscription for four years from the
time of subscription is entitled to receive stock dividend.

 F- A derivative suit is instituted by the majority stockholders who
oppose to a corporate action.
 F- The corporation has the obligation to declare dividends at all times
 F- Regular meetings of directors is held annually.
 F- Directors’ regular meetings is held at the corporation’s principal
place of busines.
 F- Regular meetings of stockholders are those held annually or at any
time deemed necessary or as provided in the by-laws.
 T- Capital stock may be increased by increasing the number of shares.
 T- Special meetings may be attended by the stockholders’ authorized
representatives, ie proxy, agent.
 T- In OPC, the sole stockholder is the sole director.
 T- Right of pre-emption is the right of stockholders to subscribe to all
issues or dispositions of shares of any class in proportion to their
original or prior share.

 F- Meetings of stockholders is to be presided by any of the directors.
 T- Appraisal right is one available to a dissenting stockholder.
 F- Treasury shares are voting shares.
 F- Quorom required for stockholders meeting is, as a rule, majority of
the number of stockholders.
 T- Prior notice of meeting of directors may be waived by the directors.
 T- Unpaid shareholdings may vote in special stockholders meetings.
 T- If a corporation invests its funds to other activities necessary to
accomplish its purpose, approval of SEC must first be obtained.
 T- The corporation which buys or acquires all properties and assets of
the selling corporation is generally liable for the latter’s (selling
corporation) outstanding debts and obligations.
 T- Director’s special meetings may be held at places especially
designated by the directors, anywhere in the world.
 F- As stockholders have the right to receive dividends, there is, in
effect, a debtor-creditor relationship between the corporation and the
stockholders.
 F- Special meetings of stockholders may be held at places specially
 agreed upon by the parties.
 T- In the absence of any provision to the contrary, the person to call
the meeting of stockholders can be any of the corporate officers, ie
president, treasurer, corporate secretary.
 T- Pre-emptive right is one available to all stockholders.
 F- In decrease of corporate term, no right of appraisal is available to
dissenting stockholders.
 T- Stockholders meetings require one-week prior notice.
 F- Issuance of cash dividends is valid only if ratified by the stockholders.
 F- Pre emptive rights of stockholders may be denied in the event that
issuance of shares is for the purpose of reserving funds for future
indebtedness.

 T- The right of preemption is not absolute.
 T- Consolidation creates a new corporation.
 T- Accountants for the exercise of profession cannot form an OPC.
 T- The nominee in an OPC can be any person appointed by the
stockholder.
 F- A dissenting stockholder of the resolution affirming the increase of
capital stock may exercise his appraisal right.
 T- An OPC can have a Chief Executive Officer.
 F- Insurance companies cannot be formed as one person corporation.
 T- Special meetings of stockholders may be attended to by them in
person or in absentia.
 T- Regular meetings of board of directors only require two – week
notice.
 T- Lawyers may form an OPC.
 F- Notice of regular meetings of stockholders must be given at least 2
weeks prior to the date set therefor.
 T- Treasurer of the OPC can be the president.
 T- Vacancy in the board of trustees may be discussed and approved
during regular meetings of the members.
 T- Special meetings of board of directors must be attended to by them
in person or in absentia.
 F- The single stockholder in an OPC must submit the by – laws upon
incorporation.
 F- Regular meetings of stockholders may be held on any date in April if
the date is not fixed in the by – laws.
 F- Approval of the sale of personal properties of the corporation in the
usual course of business must be ratified by the stockholders during a
special meeting.
 F- When shares are given by way of pledge by the stockholder as
security for the payment for his loan, the creditor pledgee has the right
to vote for the shares.
 T- Consolidation, requires approval of the Security and Exchange
Commission.
 F- Involuntary dissolution may be initiated by the stockholders
themselves.
 F- Stockholders in close corporation do not have pre emptive rights.
 F- Change in the relationship of the stockholders causes dissolution.
 T- In merger, one of the constituent corporations retain its personality.
 T- Dissolution may be effected by amending the articles of
incorporation shortening the term of existence.
 T- In consolidation, none of the constituent corporations retain its
personality.
 T- Trustees in non stock corporation hold office for not more 3 years.
 T- In non stock corporations, purpose thereof may be any other than
for profit.
 T- In close corporations, stockholders may assign their shares to any of
the existing stockholders but not to the public.

 F- Close corporation are those which prohibit third persons from
becoming stockholders.
 T- Educational corporations may have trustees not less than five but
 not more than 15 in number.
 T- Non stock corporations have capitalization.
 T- Properties of the corporation are intended for the payment of
corporate creditors upon dissolution.
 T- Members of non stock corporation may cast just one (1) vote during
meetings.
 PRELIM EXAM
 All partners, including industrial ones, may participate in the
management of the partnership.
True
 Which statement is false? A partner who has been appointed as
manager
In the articles of partnership, may be revoked even without a just or
lawful cause provided a vote of the partners with controlling interest
has been made.
 Partnership is fiduciary in nature.
 True
 Which of the following is false with respect on sharing of profits and
losses?
 If there is no loss sharing agreement but there is a profit sharing
agreement in which the industrial partner is entitled to a profit ratio,
the industrial partner becomes liable for the losses of the partnership
in the same proportion as his profits sharing ratio.
 The rule is that the designation of the share of the partners in the
profits and losses cannot be entrusted to only one of the partners but
to all. However, the rule allows the designation of the share of the
partners to be entrusted to a third which can be questioned or
impugned by the partners if such designation is manifestly inequitable.
Within what time should the action or question be brought?
Within one (1) year from the time he had knowledge
 One or more, but less than all the partners, have no authority to
perform the following acts, except:
 A.Convey partnership property in the ordinary course of partnership
business.
B. of the partners.
C.Submit a partnership claim or liability to arbitration.
D.Renounce a claim of the partnership.
 General partnership is a formal contract.
False
 What is the remedy of capitalist partners against an industrial partner
who engaged in a business for himself without the express permission
from the partnership?
To expel him from the partnership and claim for damages
 Asela and Bernardita are partners in AB Partnership. The partnership
owns a building as a specific partnership property.
Q1: Suppose Asela wants to borrow money from Banco de Oro for
himself. Can he offer the partnership building as collateral for the loan
without the consent of his partners?
 Q2: In the preceding question, can Asela offer her one-half interest in
the building as collateral?
Q3: May Bernardita use her share in the partnership profit to support
the livelihood of her children?
No, No, Yes
 FIRST: As a general rule, a partner can manage the business of the firm.
Whereas, a stockholder cannot manage the affairs of the corporation.
SECOND: A partner can sue in his name a partner who mismanages.
Whereas, a stockholder cannot sue in his name a member of the Board
of Directors who mismanages.
True, True
 In case of winding up of a general partnership, partners are entitled for
the return of their capital contribution first before their share in the
profits.
True
 As a general rule, a partner cannot ask for a formal accounting of the
 affairs of the partnership during its existence and before it is dissolved,
except:
When a partner is wrongfully excluded from the partnership business;
All are correct.
When the right exists under the terms of any agreement;
 Charlie & Keith Company has a minimum capitalization of P50,000.00,
but the contract is not written in a public instrument and is not
recorded with the Securities and Exchange Commission. Which of the
following is correct?
The partnership still acquires juridical personality.
 Genson and Geonzon are partners, with Genson as the managing
partner. Gica is indebted to Geonzon in the amount of Php 100,000.00
and to the partnership in the amount of Php 50,000.00. Assuming that
both debts are due and demandable, Gica paid Geonzon Php
30,000.00. Which of the following is correct?
The Php 30,000.00 should be applied in full to Geonzon’s credit.
 1st Statement: The arrival of the term of a partnership with a fixed
term or period shall not dissolve the partnership if the partners
continue with the business of the partnership but such partnership
may be terminated anytime dependent on the will of the continuing
partners.
2nd Statement: The general rule is that the loss of the specific thing
contributed to the partnership dissolves the partnership when only the
use of the thing is contributed by the partner and such thing after its
transfer to the partnership which used the same for some time was
subsequently lost, the partnership is not dissolve. Which statement is
correct?
Both statements are true
 If upon the death of the wife, the husband continues to manage the
former conjugal properties now owned by him and the common
children, and said children allow their father to so manage the
property, without even causing their rights to the property to be
 recorded in the Office of the Register of Deeds or in the Assessor’s
Office, what kind of partnership is created?
De facto partnership
 A, B, C and D are partners where A contributed P400,000, B and C
P200,000 each and D is an industrial partner. ABCD partnership
became indebted to T in the amount of P 1,800,000.
T must first exhaust the partnership assets amounting to P800,000 and
then hold A, B, C and D jointly liable for the balance of P1,000,000. D
after paying T P250,000 can hold liable A B and C for reimbursement
so that in the end as industrial partner he does not become liable for
loss among themselves.
 Kioski & Company is composed of five (5) members - Apple, Mark
Anthony, Donna-Mae, Jenirose and Rechelle. In a case for collection of
sums of money filed by Banco de Oro (BDO) for the loan contracted by
the Company, BDO accepted an offer of compromise from Apple, Mark
Anthony and Donna-Mae to settle the case. Before BDO’s acceptance
 of the offer, Jenirose and Rechelle informed BDO that they opposed
the offer. Is the compromise binding upon the partnership?
NO, the act is not purely an act of administration which requires
unanimous decision.
 Unless otherwise provided in a general partnership agreement which
of the following statements is correct when a partner dies?
Q1: The deceased partner's executor would automatically become a
partner.
Q2: The deceased partner's estate would be free from any partnership
liabilities.
Q3: The partnership would be dissolved automatically.

No, No, Yes

 Boy, Charlene, Kristina and Toni are partners. Boy purchased in
installment basis, one unit Toyota Van, for and in behalf of the
corporation. On the due date, Boy used the money intended for the
 monthly amortization and, thus, failed to pay the monthly
amortization. Who can be held liable to pay the monthly amortization?
Boy and the partnership are solidarily liable.
 A partner whose connection with the partnership is open and public,
such as by including his name in the firm name of the partnership is
Ostensible partner
 All, except one, are characteristics of a contract of partnership:
 Commutative
 Principal
 Aleatory
 Preparatory
 Name of Partnership : ABAKADA Company
Name of Partners : Alfonso, Bachiller, Kapulong
and Domingo
Remaining partnership assets : P100,000
Profit and loss sharing : Equally
 Partnership Obligation : P60,000
Partnership Creditor : Emata
Q1: If Folloso is a personal creditor of Alfonso in the amount of
P20,000 will he be preferred over Emata?
Q2: If Gonowon is a personal creditor of Bachiller, will he be
preferred over Emata on the personal assets of Bachiller?
No, Yes
 Valle and Dizon entered into a real estate partnership. Valle learned
that Kilat is interested in buying a lot of the partnership worth Php
400,400 even at a price of Php 800,800. Without informing Dizon, Valle
convinced Dizon to sell to him his share in the partnership. Then Valle
sold the land to Kilat.
Valle is liable to Dizon for Php 200,200.
 Strictly speaking, the following are all essential elements of a
partnership, except:
Contribution to a common fund
 Intention to divide profits
Mutual Agency
Lawful object
 Pinong, Ondoy, Gabby and Isaac are partners in POGI Enterprise. Not
having established yet their credit standing, the four partners
requested Xerex, a well-known investor and businessman, to help
them to negotiate a contract of loan from Crisostomo, a money lender.
With the consent of Pinong, Ondoy, Gabby and Isaac, Xerex
represented himself as a partner of POGI Enterprise. Thereafter,
Crisostomo granted a loan of five hundred thousand pesos (P500,000)
in favor of POGI Enterprise. What kind of partner is Xerex?
Nominal Partner
 Alterra and Bavadia agreed on May 30, 2020 that they will contribute
P20,000 each to form a partnership for the purpose of engaging in the
business of buying and selling palay for a period of three (3) years.
They agreed to organize it on July 1, 2020 and start with the operation
 on July 15, 2020. They registered it with the SEC and the certificate of
registration was issued July 30, 2009. When is the partnership formed?
 May 30, 2020
 Newly admitted partners are liable for partnership obligations incurred
even before their admission.
True
 Which of the following constitutes a partnership?
The father and three sons co-own a coconut land which they inherited
from a deceased member of the family. They used the income of the
land in buying five (5) units of buses.
 A partnership suffered losses in the first year of its operation. Chloe, a
capitalist partner, cannot contribute an additional share to the capital
because of insolvency. Can Chloe be obliged to sell her interest to the
other partners?
NO, because her refusal is justifiable.
 Which of the following is not correct about a corporation and a
 partnership?
Both have successional rights.
 A partnership is created with the following contributions from the
partners:
Ariza - P50,000.00
Blanch - 30,000.00
Cathy - 20,000.00
Daniel - Industrial partner
The partnership incurred obligations from third persons which it failed
to pay off. After exhausting the assets of the partnership, there
remains an outstanding obligation of P10,000.00. How much shall be
the obligation of the partners?
Equal, that is, P2,500.00 each
 A and B are partners in buying and selling automobiles. A, by the
partner’s agreement, was authorized to buy any immovable on a cash
basis, never on the installment plan. One day A bought on installment
 plan a parcel of land with improvements from X, a client. X did not
know of A’s lack of authority. A’s purchase was made on behalf and in
the name of the partnership. Is the partnership bound?
 No, because A was not really authorized to buy on installment plan
and the same is not “apparently carrying on in the usual way the
business of the partnership”.
 The following may be causes for judicial dissolution by court decree,
except:
Any act which would amount to a violation of the partnership
agreement
 A partner who has no voice or say in the management of the affairs of
the partnership is
Silent partner
 A capitalist partner engaged for his own account in an operation that is
of the kind of business which the partnership is engaged. Said
capitalist partner can be
 Compelled to bring to the common funds of the partnership any
profits accruing to him from his transactions.
 Which is not a ground for the automatic dissolution of a partnership?
By the insanity of any partner
 De Vera and Dela Calzada contributed Php 20,000.00 each while
Lagustan, his time and effort. At the end of the year, their partnership
suffered a loss of Php 60,000.00. Assuming that Lagustan cannot
contribute additional share to the capital because of insolvency, can he
be obliged to sell his interest to the other partners on the ground of
such refusal?
Yes, because his refusal to contribute reflects lack of interest.
 Any partner can represent the partnership in obtaining loans from
banks.
False
 Partners who are creditors of the partnership have the right to
demand for the payment of their credits first even before partnership
 creditors, other than partners, get paid.
False
 A partner has a right to associate another person to his share.
True
 Ninoy, Nanay and Noynoy are partners in NNN Co.. Their contributions
are Php 50,000.00, Php 100,000.00, and hard work, respectively. After
paying partnership liabilities, the excess partnership assets is Php
30,000.00 only. In the absence of stipulation, what is the share of
Noynoy in the net assets?
Php 3,000.00 – a just and equitable share

 A partner’s right in the partnership property is assignable.

 False
 Jiecel, Ghenee and Ace are all capitalist partners, with Ace having
contributed the least amount to the partnership capital for financial
reasons. Ghenee and Ace are designated as the managing partners.
 They agreed that in case of profits, the three shall divide
proportionately divide the profits among themselves. However, in
case of loss, they agreed that Ace shall not share in the losses. The
partnership then purchased on credit three (3) units of fire
extinguisher with a total cost of P40,000.00. On the due date, the
partnership failed to pay off its obligation. May Ace be exempted from
liability?
NO, because the agreement to exempt any partner from liability is
void.
 C, a partner in “C” partnership, assigns his interests in “Y” partnership
to X, who is not made a partner. After assignment X asserts the right to:
 I. Participate in the management of “Y” partnership
 II. C’s share in the surplus profit
 III.May compel the other partners that he (X) becomes a partner
X is correct as to which of these rights?
II only
 Partnership with capitalization of P3,000.00 with Articles of
Partnership but not registered with the Securities and Exchange
Commission is valid.
True
 A and B are partners engaged in the real estate business. A learned
that C was interested in buying a parcel of land owned by the
partnership, even for a higher price. Without informing B, A was able
to make B sell to him (A) his (B’s) share in the partnership. Then A sold
the land at a big profit.
A is liable to B for the latter’s share in the profit.
 All, except one, of the following are rights of a partner:
 Right to admit another partner
 X, Y and Z are partners in a business with a total capital contribution of
P3,000,000. In the course of operating the business, the partnership
became indebted to C in the amount of P4,500,000. Subsequently, W
became indebted to C in the amount of P4,500,000. Subsequently, W
 was admitted as a new partner with a contribution of P1,000,000.
Much later, the partnership became indebted to T in the amount of
P4,000,000. The partnership is insolvent and the only assets is the
original capital of P3,000,000 plus the newly contributed capital of
P1,000,000 by W.
W is liable for the obligation of P4,500,000 although contracted before
he became a partner but only up to the extent of his contribution.
With respect to the P4,000,000 debt in favor of T, W will be liable for
its payment and subsidiarily up to the extent of his personal property
because it was incurred when he was already a partner in XYZ
partnership
 Which of the following contracts of partnership will not affect its
validity even if it is not contained in a public instrument?
Capital is a Php 1,000,000.00 bank deposit
 Alterios, Balmedina and Celino are partners in ABC Partnership. The lot
is registered in the name of the partnership. Balmedina sells the land
 to Damascus. Which of the following statements is false?
If the sale is in the name of but without authority of the partnership,
title passes to Damascus and will not be recovered from him by the
partnership if the act of selling is in the usual business and Damascus
did not know of the partner’s lack of authority.
 Unless authorized by the other partners, one or more but less than all
the partners have the authority to:
 Compromise a partnership claim or liability
 Assign the partnership property in trust for creditors
 Either A or B
 Neither A nor B