Incorporation
Content
INCORPORATION RE requirements of the incorporators: 1.) natural persons, EXCEPT incorporators of rural banks under the Rural Banks Act. 2.) at least 5 and not more than 15 3.) all of legal age 4.) majority of whom are residents of the Phils; and 5.) each must own or subscribe to at least 1 share of the CS. Re term of corporate existence =contained in the aoi =which may be less but not more than 50 yrs., =renewable for a term not exceeding 50 years AT ANY ONE INSTANCE. RE pre-incorporation subscription requirement on STOCK CORPORATION =at least 25% of ACS appearing in the AOI must be subscribed AT THE TIME OF INCORPORATION AND at least 25% of the TOTAL SUBSCRIPTION must be paid UPON SUBSCRIPTION PROVIDED: That in no case the PUC be less than P5K. Situations: 1.) ”qualifying incorporators OR dummies” =does not affect the validity of the corporation AS LONG AS the doctrine of “piercing the veil of corporate entity” cannot be applied under circumstances of fraud. 2.) “25%-25% pre-incorporation subscription requirement” =no longer applies to the remaining UNSUBSCRIBED SHARES after the corporation shall have already been incorporated. Law: 1.) “no par value shares”
=at least 25 of the AUTHORIZED NUMBER OF SHARES must be subscribed and fully paid.] Why it is required to be paid in full? =because the law considers it fully paid and non-assessable ONCE it is subscribed. Effect if not fully paid: =the pre-incorporation subscription requirement IS NOT COMPLIED WITH. Situations: 1.) ”corporate subscribers” =required to pay their subscribers in full =BUT prohibits them to becoming incorporators. Why? Only natural persons can be incorporators. EXCEPT incorporators of rural banks under the Rural Banks Act. RE what is meant by AOI? =refers to the document containing all the legal requirements in forming a corporation that is submitted to the SEC for approval. Purpose clause “and for such other lawful purposes that may be proposed by the BOD and duly approved by the stockholders” =will be rejected because the corporation to be formed is NOT DEFINITELY STATED. Purpose clause “broad and general terms” =permissible RE AMENDMENT of the AOI 1. by the majority vote of the BODs or BOTs; AND 2. Vote OR written assent of the AT LEAST 2/3 of OCS or members. *a 2/3 vote, not just written, is necessary in the ff: 1. amendment increasing or decreasing the CS; 2. amendment extending or shortening the corporate term;
3. amendment in a CLOSE CORPORATION regarding: a. removal of any provision in the AOI; AND B. reduction of quorum or voting requirements. Q: when shall amendment takes effect? upon its approval by the SEC; OR within six months FROM the DOF for a cause not attributable to the corporation. So, DOF jan.1, 2010 Date of effectivity: July 1, 2010 RE limitations of the adoption of a corporate name? > No corporate name may be allowed by the SEC if the proposed name is: 1. identical or deceptively or confusingly similar to that of any existing corporation or to any other name protected by law; OR 2. patently deceptive, confusing OR contrary to existing laws.
What is quo warranto proceeding? =a proceeding or writ issued by the court to determine the right to use an office position or franchise, and to oust the person holding or exercising such OPF if his right is unfounded Or a person performed acts considered as grounds for forfeiture of said exercise of OPF. RE Corpn by ESTOPPEL = aka OSTENTIBLE CORPN. = it is NEITHER de jure or de facto corpn, but merely regarded as a corpn between the persons misrepresenting themselves as a corporation and the persons (3rd persons) who relied on their misrepresentation. Consequences: 1. failure of a corpn to formally organize and commence business transactions of its works WITHIN 2 years From THE DATE OF INCORPN =shall result into the cessation of its corporate powers AND it shall be deemed dissolved. 2. a SUBSEQUENT inoperation for at least 5 yrs. =shall be a ground for suspension or revocation of its corporate franchise or certificate of incorpn. NOTE: • (SEC) due process still required. “Due notice and hearing”
RE life of a corporation commence =commences on the date of issuance of the certificate of incorporation by the SEC. RE de jure corpn. DE JURE CORPN =is one which able to comply substantially with all the requirements of the law for its incorpn. =cannot be successfully attacked EVEN in a direct proceeding. de facto corpn. DE FACTO CORPN =is one that was able to make colorable compliance of the legal requirements for its incorpn. =Hence, it exists for all practical purposes as a corpn. =can be directly attacked in a quo warranto proceeding.
=at least 25 of the AUTHORIZED NUMBER OF SHARES must be subscribed and fully paid.] Why it is required to be paid in full? =because the law considers it fully paid and non-assessable ONCE it is subscribed. Effect if not fully paid: =the pre-incorporation subscription requirement IS NOT COMPLIED WITH. Situations: 1.) ”corporate subscribers” =required to pay their subscribers in full =BUT prohibits them to becoming incorporators. Why? Only natural persons can be incorporators. EXCEPT incorporators of rural banks under the Rural Banks Act. RE what is meant by AOI? =refers to the document containing all the legal requirements in forming a corporation that is submitted to the SEC for approval. Purpose clause “and for such other lawful purposes that may be proposed by the BOD and duly approved by the stockholders” =will be rejected because the corporation to be formed is NOT DEFINITELY STATED. Purpose clause “broad and general terms” =permissible RE AMENDMENT of the AOI 1. by the majority vote of the BODs or BOTs; AND 2. Vote OR written assent of the AT LEAST 2/3 of OCS or members. *a 2/3 vote, not just written, is necessary in the ff: 1. amendment increasing or decreasing the CS; 2. amendment extending or shortening the corporate term;
3. amendment in a CLOSE CORPORATION regarding: a. removal of any provision in the AOI; AND B. reduction of quorum or voting requirements. Q: when shall amendment takes effect? upon its approval by the SEC; OR within six months FROM the DOF for a cause not attributable to the corporation. So, DOF jan.1, 2010 Date of effectivity: July 1, 2010 RE limitations of the adoption of a corporate name? > No corporate name may be allowed by the SEC if the proposed name is: 1. identical or deceptively or confusingly similar to that of any existing corporation or to any other name protected by law; OR 2. patently deceptive, confusing OR contrary to existing laws.
What is quo warranto proceeding? =a proceeding or writ issued by the court to determine the right to use an office position or franchise, and to oust the person holding or exercising such OPF if his right is unfounded Or a person performed acts considered as grounds for forfeiture of said exercise of OPF. RE Corpn by ESTOPPEL = aka OSTENTIBLE CORPN. = it is NEITHER de jure or de facto corpn, but merely regarded as a corpn between the persons misrepresenting themselves as a corporation and the persons (3rd persons) who relied on their misrepresentation. Consequences: 1. failure of a corpn to formally organize and commence business transactions of its works WITHIN 2 years From THE DATE OF INCORPN =shall result into the cessation of its corporate powers AND it shall be deemed dissolved. 2. a SUBSEQUENT inoperation for at least 5 yrs. =shall be a ground for suspension or revocation of its corporate franchise or certificate of incorpn. NOTE: • (SEC) due process still required. “Due notice and hearing”
RE life of a corporation commence =commences on the date of issuance of the certificate of incorporation by the SEC. RE de jure corpn. DE JURE CORPN =is one which able to comply substantially with all the requirements of the law for its incorpn. =cannot be successfully attacked EVEN in a direct proceeding. de facto corpn. DE FACTO CORPN =is one that was able to make colorable compliance of the legal requirements for its incorpn. =Hence, it exists for all practical purposes as a corpn. =can be directly attacked in a quo warranto proceeding.
