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
incident to its existence. (Sec. 2 Corporation Code)
This is the doctrine to the effect that the separate personality of a corporation may be
disregarded if such an entity is used to defeat public convenience, justify a wrong,
protect fraud, defend crime, such as when it is used to evade the faithful compliance of
obligations under a contract or for the benefit of a single person who controls the
corporation, or to evade taxes. Where the separate personality of the corporation is
disregarded, the corporation will be treated merely as an association of persons and the
stockholders or members will be considered as the corporation, i.e., liability will attach
personally or directly to the officers and stockholders.
A corporation, as a rule, continues to exist for the period for which it has been formed
regardless of the changes in the ownership of its stocks or in its membership. Its
existence is not affected by the death, insolvency, or incapacity of the individual
stockholders or members.
A corporation can exercise only the powers expressly conferred upon it by law and its
articles of incorporation, those implied from such powers expressly granted, and those
that are incident to its existence. Any act exercised outside of such powers are
unauthorized and considered ultra vires
❖ STOCK CORPORATION - One that has capital stock divided into shares and is
authorized to distribute dividends or allotments of the surplus profits on the basis
of shares held. (Sec. 3)
❖ NON-STOCK CORPORATION - One no part of the income of which is distributable
as dividends to its members, trustees or officers. (Sec. 87)
• DOMESTIC CORPORATION - One incorporated under Philippine laws.
• FOREIGN CORPORATION - One formed, organized and existing under any laws
other than those of the Philippines and whose laws allow Filipino citizens and
corporations to do business in its own country
- The nationality of a corporation follows that of the country
under whose laws it was incorporated. This is the test applied in our jurisdiction as can
be determined from the definition of a foreign corporation. (See Sec. 123.)
- The nationality of a corporation follows that of the stockholders
owning the controlling interest. This is applied during wartime for the purpose of the
security of the State. Accordingly, even if the corporation was formed under our
jurisdiction, it shall be considered a foreign corporation if controlled by foreigners.
✓ There must be valid law under which it is incorporated
✓ There must be an attempt in good faith to incorporate
✓ There must be an actual exercise of corporate powers.
✓ A certificate of incorporation is issued despite a defect in its incorporation.
➢ Purpose - It must be for a legitimate purpose or purposes.
➢ Vote required
➢ Majority vote of the Directors, and
➢ The vote or written assent* of 2/3 of the outstanding capital stock (for stock
corporations): 2/3 of the members (for non-stock corporation) *No meeting is
necessary except when required by the Corporation Code with respect to certain
corporate acts.
The corporation shall be deemed dissolved if it does not formally organize, commence
the transaction of its business or the construction of its works within 2 years from the
date of its incorporation, unless the same is due to causes beyond the control of the
corporation as may be determined by the SEC.
Formal organization includes the adoption of the by-laws and filing the same with the
SEC, election of directors, organizational meeting of directors to elect the president,
secretary, treasurer and other officers provided in the by-laws.
If a corporation has commenced the transaction of its business but subsequently
becomes continuously inoperative for a period of least 5 years, the same shall be a
ground for the revocation or corporate franchise or certificate of incorporation, unless
the same is due to causes beyond the control of the corporation as may be determined
by the SEC.
