CORPORATION LAW

Powers of a Corporation
 CORPORATION
EXPRESS POWERS
1) To sue and be sued in its corporate name;
2) To have perpetual existence unless the
certificate of incorporation provides otherwise;
3) To adopt and use a corporate seal;
4) To amend its articles of incorporation in
accordance with the provisions of this Code;
 CORPORATION
EXPRESS POWERS
5) In case of stock corporations, to issue or sell stocks to
subscribers and to sell treasury stocks in accordance with the
provisions of this Code; and to admit members to the
corporation if it be a nonstock corporation;
6) To purchase, receive, take or grant, hold, convey, sell, lease,
pledge, mortgage, and otherwise deal with such real and
personal property, including securities and bonds of other
corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to
the limitations prescribed by law and the constitution;
 CORPORATION
EXPRESS POWERS
7) To enter into a partnership, joint venture, merger,
consolidation, or any other commercial agreement with
natural and juridical persons;
8) To make reasonable donations, including those for the
public welfare or for hospital, charitable, cultural,
scientific, civic, or similar purposes: Provided, That no
foreign corporation shall give donations in aid of any
political party or candidate or for purpose s of partisan
political activity;
 CORPORATION
EXPRESS POWERS
9) To establish pension, retirement, and other
plans for the benefit of its directors, trustees,
officers, and employees; and
10) To exercise such other powers as may be
essential or necessary to carry out its purpose
or purposes as stated in the articles of
incorporation.
 BOARD OF DIRECTORS & TRUSTEES
POWER TO EXTEND OR SHORTEN CORPORATE TERM
REQUIREMENTS
a) Approval of majority vote of the board of directors or trustees,
b) Ratification at a meeting by the stockholders or members
representing at least two-thirds (2/3) of the outstanding capital
stock or of its members.
✓ In case of extension of corporate term, a dissenting stockholder
may exercise the right of appraisal under the conditions
provided in this Code.
BOARD OF DIRECTORS & TRUSTEES
APPRAISAL RIGHT
GROUNDS FOR APPRAISAL RIGHT
a) Amendment to the articles that has the effect of changing
or restricting the rights of shareholder, or of authorizing
preference over those of outstanding shares
b) Investment of corporate funds in another corporation or in
a purpose other than the primary purpose.
c) Merger or consolidations
BOARD OF DIRECTORS & TRUSTEES
APPRAISAL RIGHT
GROUNDS FOR APPRAISAL RIGHT
d) Changing corporate term whether shortening or extending
e) Sale, encumbrance or other disposition of all or
substantially all of the corporate property or assets.
f) In a Close corporation, a stockholder may for any reason,
compel the corporation to purchase his shares when the
corporation has sufficient assets in its books to cover its
debts and liabilities exclusive of capital stock.
BOARD OF DIRECTORS & TRUSTEES
APPRAISAL RIGHT
✓ The right of a dissenting stockholder to demand the payment of
the fair value of his shares after dissenting from a proposed
corporate action involving a fundamental change in the
corporation in the cases provided by law when such right is
available.
✓ This right may be waived by a shareholder if he has done so
knowingly and intelligently.
✓ There must be unrestricted retained earnings before the
stockholder in an ordinary corporation may exercise this right.
 BOARD OF DIRECTORS & TRUSTEES
POWER TO INCREASE/DECREASE CAPITAL STOCKS
REQUIREMENTS
a) Must be approved by majority vote of the board of directors and by
two-thirds (2/3) of the outstanding capital stock at a stockholders'
meeting duly called for the purpose.
b) Written notice of the time and place of the stockholders' meeting
and the purpose for said meeting must be sent to the stockholders
c) A certificate must be signed by a majority of the directors of the
corporation and countersigned by the chairperson and secretary of
the stockholders' meeting
 BOARD OF DIRECTORS & TRUSTEES
POWER TO INCREASE/DECREASE CAPITAL STOCKS
REQUIREMENTS
d) Must have prior approval of the Commission and where
appropriate, of the Philippine Competition Commission
e) Treasurer’s affidavit showing that at least 25% of such
increased capital stock has been subscribed and at least
25% of the amount subscribed has been paid.
f) No decrease of capital stock if it will prejudice right of
creditors
 BOARD OF DIRECTORS & TRUSTEES
POWER TO INCUR/CREATE BONDED INDEBTEDNESS
REQUIREMENTS
a) Must be approved by majority vote of the board of directors and by
two-thirds (2/3) of the outstanding capital stock at a stockholders'
meeting duly called for the purpose.
b) Written notice of the time and place of the stockholders' meeting
and the purpose for said meeting must be sent to the stockholders
c) A certificate must be signed by a majority of the directors of the
corporation and countersigned by the chairperson and secretary of
the stockholders' meeting
 BOARD OF DIRECTORS & TRUSTEES
POWER TO INCUR/CREATE BONDED INDEBTEDNESS
REQUIREMENTS
d) Must have prior approval of the Commission and where
appropriate, of the Philippine Competition Commission
e) Bonds issued by a corporation shall be registered with the
Commission, which shall have the authority to determine
the sufficiency of the terms thereof.
BOARD OF DIRECTORS & TRUSTEES
POWER TO DENY PRE-EMPTIVE RIGHTS
✓ Preferential right of all stockholders of a stock
corporation to subscribe to all issues or disposition of
shares of any class, in proportion to their respective
holdings
GENERAL RULE
✓ All stockholders of a stock corporation shall enjoy preemptive
right to in proportion to their respective shareholdings
EXCEPTION
✓ If right is denied by the articles of incorporation or an amendment
BOARD OF DIRECTORS & TRUSTEES
POWER TO DENY PRE-EMPTIVE RIGHTS
PRE-EMPTIVE RIGHT IS NOT AVAILABLE IN THE FOLLOWING:
✓ Shares issued in compliance with laws requiring stock
offerings or minimum stock ownership by the public; or
✓ 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 previously
contracted debt.
 BOARD OF DIRECTORS & TRUSTEES
POWER TO SELL OR DISPOSE OTHER ASSETS
REQUIREMENTS
a) Majority vote of its board of directors or trustees
✓ A sale of all or substantially all of the corporation's properties and
assets, including its goodwill, must be authorized by the vote of
stockholders representing at least two-thirds (2/3) of the
outstanding capital stock, or at least two-thirds (2/3) of the
members, meeting duly called for the purpose.
✓ Any dissenting stockholder may exercise the right of appraisal
BOARD OF DIRECTORS & TRUSTEES
POWER TO ACQUIRE OWN SHARES
INSTANCES
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 provisions of this Code.
BOARD OF DIRECTORS & TRUSTEES
POWER TO ACQUIRE OWN SHARES
INSTANCES
d) To acquire treasury shares
e) To redeem shares regardless of the existence of R.E.
f) To effect a decrease of capital stock
g) In a close corporation where there is a deadlock in the
management of the business or (2) when a stockholder of a
close corporation wants to exercise his appraisal right for
whatever reason or (3) in redemption of redeemable
preference shares in ordinary corporation.
BOARD OF DIRECTORS & TRUSTEES
POWER TO ACQUIRE OWN SHARES
TRUST FUND DOCTRINE
✓ The capital stock, property and other assets of the
corporation are regarded as equity in trust for the
payment of the corporate creditors.
BOARD OF DIRECTORS & TRUSTEES
POWER TO INVEST CORPORATE FUNDS
PRIMARY PURPOSE
✓ Approval by a majority of the board of directors
or trustees
✓ Where the investment by the corporation is
reasonably necessary to accomplish its primary
purpose as stated in the articles of incorporation,
the approval of the stockholders or members
shall not be necessary.
BOARD OF DIRECTORS & TRUSTEES
POWER TO INVEST CORPORATE FUNDS
OTHER PURPOSE
a) Approval by a majority of the board of directors or trustees
and ratified by the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock, or by at least
two-thirds (2/3) of the members in the case of nonstock
corporations at a meeting duly called for the purpose.
b) Notice of the proposed investment and the time place of
residence as shown in the books of the corporation
BOARD OF DIRECTORS & TRUSTEES
POWER TO INVEST CORPORATE FUNDS
✓ A dissenting stockholder may exercise the right
of appraisal under the conditions provided in this
Code.
BOARD OF DIRECTORS & TRUSTEES
POWER TO DECLARE DIVIDENDS
DIVIDENDS
✓ The amount of cash, property or the corporation’s own
shares given to outstanding shareholders in
proportion to their percentage share in the ownership
participation in the corporation; represents the
distribution of earnings to the stockholders; sourced
from retained earnings
BOARD OF DIRECTORS & TRUSTEES
POWER TO DECLARE DIVIDENDS
REQUIREMENTS
a) Existence of Unrestricted Retained Earnings
b) Resolution of the Board of Directors
c) For stock dividends, approval of stockholders
representing at least two-thirds (2/3)of the
outstanding capital stock and sufficient authorized
unissued shares
BOARD OF DIRECTORS & TRUSTEES
POWER TO DECLARE DIVIDENDS
UNRESTRICTED RETAINED EARNINGS
✓ Retained earnings which were not reserved or
set aside by the Board of Directors for any
corporate purpose
BOARD OF DIRECTORS & TRUSTEES
POWER TO DECLARE DIVIDENDS
GENERAL RULE
✓ Stock corporations are prohibited from retaining surplus profits in excess
of 100% of the paid in capital.
EXCEPTION TO G.R.
1) Justified by a definite corporate expansion/projects/programs approved
by the Board;
2) The corporation is prohibited under a loan agreement to declare
dividends without the creditor’s consent and such consent has not yet
been secured;
3) It can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation.
BOARD OF DIRECTORS & TRUSTEES
POWER TO ENTER INTO MANAGEMENT CONTRACT

MANAGEMENT CONTRACT
✓ Any contract 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.
BOARD OF DIRECTORS & TRUSTEES
POWER TO ENTER INTO MANAGEMENT CONTRACT

REQUIREMENTS
a) Approval by the board of directors and by the
stockholders owning at least the majority of the
outstanding capital stock, or by at least a majority
of the members in the case of a nonstock
corporation, or both the managing and the
managed corporation
BOARD OF DIRECTORS & TRUSTEES
POWER TO ENTER INTO MANAGEMENT CONTRACT

REQUIREMENTS
b) No management contracts shall be entered into for
period longer that five (5) years for any one term.
Thank you!