Philippines Corporation Code

Other kinds or Classes of Corporations

Corporations may be:

(1) De jure corporation, one which has been regularly created in compliance with all legal requirements and the right of which to exercise a corporate franchise is invulnerable against attack by the state in quo warranto proceedings. (2) De facto corporation, one organized as a corporation but lacking in compliance with certain requirements, now governed by Section 20 of the Corporation Code, infra.. (3) Corporation by estoppel, one in which the parties in a given transaction are estopped to deny corporate existence to protect innocent third persons, now governed by Section 21 of this Corporation Code, infra..(4) Corporation by prescription, one which, without formal incorporation, has claimed to be a corporation, exercising corporate powers for a long period of time, with the tolerance of the State, example of which is the Roman Catholic Church. (5) Corporation aggregate, one composed of several natural persons. (6) Corporation sole, which exists when a religious elder or leader incorporates himself to manage the properties of his Church, governed by Sections 110 to 115 of this Corporation Code, infra. (7) Eleemosynary corporation, one organized for public charity. (8) Civil corporation, one organized on matters or for purposes other than religious or ecclesiastical. (9) Religious corporations, those organized for ecclesiastical or religious purposes. (10) Close corporation, which have either of two meanings: (a) one in which the stock is held in few hands, or in few families and wherein it is not at all, or only rarely, dealt in; (b) one where vacancies in the board of directors are filled only by the remaining members of the board. (11) Open corporation, one which may have either of two meanings: (a) one where the stock is available for subscription or purchase by any person; or (b) one where the members of the board are elected or the vacancies thereof are filled by the stockholders. (12) Domestic corporation, one organized according to the laws of a particular State. (13) Foreign corporation, one organized in one State and licensed to do business in another State. (14) Subsidiary corporation, one the stocks of which are controlled by another corporation known as a parent or holding corporation. (15) Condominium corporation, one which may be stock or non- stock organized by owners of definite portions of a building for effective management thereof.

There is a large class of private corporations which on account of special franchise conferred on them owe a duty to the public which they may be compelled to perform. They are known as quasi- public corporations. A quasi-public corporation may be said to be a private corporation which has been given certain powers of a pub.. lie nature such as the power of eminent domain in order to enable it to discharge its duties for the public benefit in which respect it differs from an ordinary private corporation the powers of which are given, and exercised exclusively for the profit and advantage of shareholders. Quasi public corporations are not public corporations.

Quasi corporations are public bodies which resemble corporations to undertake public or state work for the general welfare. They are, in a limited sense, public corporations. They are public agencies of the State like municipal corporations.

When Government does business through a corporation-

It is well-settled doctrine that when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. By engaging in a particular business through the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations. (See Philippine National Railways vs. Union de Maquinistas, Fogoneros y Motormen, L-31948, July 25, 1978.)

Corporation distinguished from a cooperative-

Membership in a cooperative is not the same as ownership of stocks in ordinary corporations. While cooperatives may exercise some of the rights and privileges given to ordinary corporations pro.. vided under existing laws, such cooperatives enjoy other privileges not granted to the latter. Similarly, members of cooperatives have rights and obligations different from those of stockholders of ordinary corporations. Because of the special nature of cooperatives, its members-employees cannot form or join a labor union for purposes of collective bargaining. (Ben guet Electric Cooperative, Inc. vs. Callejai, et al., G.R. No. 79025, Dec. 29, 1989) A cooperative is by its nature different from an ordinary business concern being run either by persons, partnerships, or corporations. Its owners or members are the ones who run and operate the business while the others are its employees. Irrespective of the number of shares owned by each member, they are entitled to cast one vote each in deciding upon the affairs of the cooperative. Their share capital earn limited interest. An employee of a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for an owner cannot bargain with himself or his co-owners.

Concept of joint ventures; dangers of foreign control in violation of constitutional nd legal requirements

Participants in a joint venture in organizing the joint venture, deviate from the traditional pattern of corporation management. Just as in close corporations, shareholders' agreements in joint venture corporations contain certain provisions which do one or more of the following:

(1) require greater than majority vote for shareholder and director action; (2) give certain shareholders or group of shareholders power to select a specified number of directors; (3) give to the shazjho1ders control over the selection and retention )f employees; and (4) set up a procedure for settlement of disputes by arbitration. (Aurbach us. Sanitary Wares Mfg. Corp., G.R. ,NO.75875, Dec. 15, 1989). The legal concept of a joint venture is of common law origin. It has no precise definition but it has been generally understood to mean an organization formed for some temporary purpose. It is hardly distinguishable from the partnership, since their elements are similar -community of interest in the business, sharing of profits and losses, and a mutual right of control.

The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business with some degree of continuity while the joint venture is formed for the execution of the single transaction, and is thus of a temporary nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal and a particular partnership may have for its object a specific undertaking. It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnership. The Supreme Court had however recognized a distinction between these two business firms and has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others.

Quite often, Filipino entrepreneurs in their desire to develop ;he industrial and manufacturing capacities of a local firm are constrained to seek the technology and marketing assistance of huge multinational corporations of the developed world. Arrangements are formalized where a foreign group becomes a minority owner of a firm in exchange for its manufacturing expertise, use f its brand names and other such assistance. However, there is always a danger from such arrangements. The foreign group may, from the start, intend to establish its own sole or monopolistic operations and merely uses the joint venture arrangement to gain a foothold or test the Philippine waters, so to speak. Or the covetousness may come later. As the Philippine firm enlarges its operations and becomes profitable, the foreign group undermines the local majority ownership and actively tries to completely arid predominantly take over the entire company. This undermining of joint ventures is not consistent with fair dealing to say the least. To the extent that such subversive actions can be lawfully prevented, the courts should extend protection especially in industries where constitutional and legal requirements reserve controlling ownership to Filipino citizens.

Sec. 4. Corporations created 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.