Philippines Corporation Code

Laws governing corporations created by: special laws or charters----

Corporations created by special laws (like the National Grains Authority) or by charters (like the PNB, DBP, Land Bank, Veterans Bank, Amanah Bank or even the Central Bank) are governed:

(1) Primarily, by the special laws or charters creating such corporations; and (2) Supplementarily (or in case of deficiency of such special laws or charters), by the provisions of this Corporation Code, insofar as they are applicable. "Insofar as they are applicable" should mean if the provisions of the Corporation Code are not inconsistent with the special laws or charters, or are not contrary to the nature or character of the corporation concerned.

Sec. 5. Corporators and incorporators, stockholders and members.-Corporators are those who compose a corporation, whether as stockholders or members. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-stock corporation are, called members.

Components of a corporation-

The components of a corporation under the above section are the following:

(1) Corporators, those who compose a corporation, whether as stockholders or members, at any time. (2) Incorporators, those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and are signatories to said articles of incorporation; they are the pioneers or originators of the corporation. (3) Stockholders or shareholders, are Corporators in a stock corporation. (4) Members, are Corporations in a non-stock corporation.

Under the old Corporation Law, a member (one who does not own stock) may exist as incorporator in a stock corporation. This is no longer true in this Corporation Code. It is now required that all incorporators in a stock corporation must subscribe to or own, stock in such corporation. (Sec. 10, infra). Articles of incorporation cannot be amended to include additional incorporators

The articles of incorporation of an existing corporation cannot be amended so as to include additional incorporators. Incorporators who originally form a corporation are always the pioneers even if they subsequently sell their shareholdings to others. New stockholders (after incorporation) cannot be incorporators. Thus, it was opined that the articles of incorporation of an existing corporation cannot be amended by deleting the name of an incorporator and substituting therefore the name of another person. (SEC Opinion dated Sept. 4, 1969.)

Only natural persons can be incorporators-

The above section of the Corporation Code has not altered the settled rule that only natural persons (not suffering from incapacity) can be incorporators. A corporation cannot be an incorporator unless permitted by law as in the case of an established cooperative which could be an incorporator of a rural bank. But a corporation or any juridical entity like a partnership can own stocks in an existing corporation.

Promoter, defined-

A promoter is one who brings together the persons who become interested in the enterprise, and in procuring subscriptions and sets in motion the machinery which leads to the formation of the corporation itself. (Dickerman vs. Northern Trust Co., 176 U. S. 203) Activities of the promoter may include lending of money, rendition of advice, advance of incorporation and initial expenses and assistance in the selection and acquisition of properties or in the solicitation of subscriptions. (Rohrlich, p. 41)

All the promoters of a venture are, amongst, themselves, joint venturers, and, as such, they are under the equitable restraints imposed upon fiduciaries when dealing with the common project.

Promoters" contracts are usually adopted by the corporation. In the United States, the third-party contracting is still accorded the election to sue the promoter personally but this is true only in the absence of novation or appropriate limitations in the agreement. (Rohrlich, pp. 52-53) Failure on the part of the promoter to complete the incorporation does not relieve him from his contract liabilities. (Trumbo vs. Back of Berkerly, 176 P. 2d 376) And he is personally liable, whether or not the corporation is organized for any fraud in making the contract. (Noble vs. McKinley, 72 NYS 2d 515.)

A purchaser of a condominium unit who has not paid in full the purchase price is not, under a Master Deed, a stockholder of a condominium corporation-

Petitioner, a condominium corporation within the meaning of the Condominium Act in relation to a duly registered Amended Master Deed, filed separate suits against private respondents for collection of assessments. levied on their respective units in the condominium which they bought in installments and are not yet fully paid. Both complaints, one originally filed with respondent Court of First Instance and the other appealed to it from the city Court, were dismissed by respondent court on the ground that pursuant to Section 2 of the Condominium Act, private respondents were "holder(s) of separate interest(s)" and consequently shareholders of the petitioner condominium corporation, and that therefore, these cases "should be properly filed with the Securities and Exchange Commission which has exclusive original jurisdiction over controversies arising between shareholders of the corporation."

On certiorari, the Supreme Court held, that the Condominium Act leaves to the Master Deed the determination of when the share- holding in the condominium corporation will be transferred to the purchaser of a unit, which, in this case, is upon full payment by the buyer of the purchase price at which time he also becomes the owner of the unit; and that the instant case for collection cannot be a controversy arising out of intra-corporate relation between stockholders since private respondents, who have not yet fully paid the purchase price of their units, are not shareholders.

The assailed orders were set aside and the cases tried on the merits. (See Sunset View Condominium Corp. vs. Hon. Jose C. Campos, Jr., G.R. No. 52361, April 27, 1981; G.G. Vol. 78, No. 5, p.477)

Said the Supreme Court in the aforestated case:

"The share of stock appurtenant to the unit will be transferred accordingly to the purchaser of the unit only upon full payment of the purchase price at which time he will also become the owner of the unit. Consequently, even under the contract, it is only the owner of a unit who is a shareholder of the Condominium Corporation. Inasmuch as ownership is conveyed only upon full payment of the purchase price, it necessarily follows that a purchaser of a unit who has not paid the full purchase price thereof is not the owner of the unit and consequently is not a shareholder of the Condominium Corporation."

"Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant cases for collection cannot be a "controversy arising out of intra-corporate or partnership relations between and among stockholders, members or associations; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates respectively" which controversies are under the original and exclusive jurisdiction of the Securities and Exchange Commission pursuant to Section 5 (b) of PD No. 902-A. x x x" (Ibid.)

Sec. 6. Classification of shares.-The shares of stock in corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation; Provided, That 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, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation; Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code; Provided, That preferred shares of stock may be issued only with a stated par value. The Board of Directors,