All other corporations are non-stock corporations [Sec. 3].
Non-stock corporation – One where no part of the income is distributable as dividends to its members, trustees, or officers, subject to the provisions of the Code on dissolution [Sec. 87]. It is not organized for profit.
Its governing body is usually the Board of Trustees (BOT). However, non-stock corporations may, through their articles of incorporation or their by-laws, designate their governing boards by any name other than as board of trustees [Sec. 138].
Stock Non Stock
Purpose is profits for its shareholders
Exists for purposes other than profit Profits are distributed
to shareholders
Profits are for furtherance of its purposes
Stock Non Stock
Composed of stockholders Composed of members
C. OTHER CORPORATIONS
C.1. PUBLIC CORPORATIONPublic corporation – one formed or organized for the government of a portion of the state. Its purpose is for the general good and welfare [Sec. 3, Act 1456].
Beyond cavil, a GOCC has a personality of its own, distinct and separate from that of the government, and the intervention in a transaction of the Office of the President through the Executive Secretary does not change the independent existence of a government entity as it deals with another government entity. [Polytechnic University of
the Phils. v. CA (2001)]
Not all corporations which are not GOCC are ipso facto to be considered private corporations as there exists another distinct class of corporations or chartered institutions which are otherwise known as “public corporations.”
These corporations are treated by law as agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but to different criteria
relating to their public
purposes/interests or constitutional policies and objectives and their administrative relationship to the government or any of its Departments or Offices. [Boy Scouts of the Philippines v.
COA (2011)]
C.2. PRIVATE CORPORATION
Private corporation – One formed for some private purpose, benefit, aim or end
[Sec. 3, Act 1456]; it may be either stock or
non-stock, government-owned or controlled or quasi-public.
The test to determine whether GOCC or private corporation: if a corporation is created
PAGE 138 OF 320 by its own charter for the exercise of a public
function, then GOCC; if by incorporation under the general corporation law, then private corporation. [Baluyot v. Holganza
(2000)]
C.3. CLOSE CORPORATION
Close corporation - One whose articles of incorporation provide that:
(1) All issued stock, exclusive of treasury shares, shall be held by persons not exceeding 20;
(2) All issued stock shall be subject to one or more specified restrictions on transfer; and
(3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least 2/3 of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation. [Sec. 96]
Any corporation may be incorporated as a close incorporation, except:
(1) mining or oil companies; (2) stock exchanges;
(3) banks;
(4) insurance companies; (5) public utilities;
(6) educational institutions; and
(7) corporations declared to be vested with public interest [Sec. 96]
C.4. EDUCATIONAL CORPORATION
Educational corporation – One organized for educational purposes [Sec. 106]. C.5. RELIGIOUS CORPORATIONS
I. CORPORATION SOLE
Corporation sole – is one formed for the purpose of administering and managing, as
trustee, the affairs, property and temporalities of any religious denomination, sect, or church, by the chief archbishop, bishop, priest, rabbi, or other presiding elder of such religious denomination, sect or church [Sec.110].
A corporation sole has no nationality but for the purpose of applying nationalization laws, nationality is determined not by the nationality of its presiding elder but by the nationality of its members constituting the sect in the Philippines. Thus, the Roman Catholic Church can acquire lands in the Philippines even if it is headed by the Pope. [Roman Catholic Apostolic, etc v. Register of
Deeds of Davao City (1957)]
II. CORPORATION AGGREGATE
Corporation aggregate – is a religious corporation incorporated by more than one person.
C.6. ELEEMOSYNARY CORPORATION Eleemosynary corporation– One organized for a charitable purpose.
C.7. DOMESTIC CORPORATION
Domestic corporation– One formed, organized, or existing under the laws of the Philippines.
C.8. FOREIGN CORPORATION
Foreign corporation – One formed, organized or existing under any laws other than those of the Philippines and whose law allows Filipino citizens and corporations to do business in its own country and state [Sec.
123].
C.9. CORPORATION CREATED BY SPECIAL LAWS OR CHARTER
Corporation created by special laws or charter - Corporations which are governed primarily by the provisions of the special law or charter creating them. Corporation Code has suppletory application [Sec. 4].
PAGE 139 OF 320 C.10. SUBSIDIARY CORPORATION
Subsidiary corporation – One in which control, in the form of ownership of majority of its shares, is in another corporation [the parent corporation].
C.11. PARENT CORPORATION
Parent corporation – Its control lies in its power, directly or indirectly, to elect the subsidiary’s directors thus controlling its management policies.
Holding company – a parent company which has no other business aside from the holding of the shares of its subsidiaries, which it controls.
Investment company – a parent company which holds shares in other corporations not for the purpose of controlling them but merely to invest therein.
C.12 CORPORATION DE JURE
Corporation de jure – A corporation organized in accordance with the requirements of the law.
C.13. DE FACTO CORPORATION
De facto corporation – A corporation
where there exists a flaw in its incorporation.
I. RULE ON DE FACTO
CORPORATIONS
The due incorporation of any corporation claiming in good faith to be a corporation under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any private suit to which such corporation may be a party. Such inquiry may be made by the Solicitor General in a quo
warranto proceeding [Sec. 20].
General Rule: The defect in the juridical personality of a corporation cannot be inquired into by private individuals, much less used as a defense to avoid claims,
Exception: In quo warranto proceedings brought on behalf of the State where the main action is to question the validity or
existence of such juridical personality [Villanueva].
II. REQUISITES OF DE FACTO
CORPORATION:
(1) There is an apparently valid statute under which the corporation may be formed;
(2) There has been colorable compliance with the legal requirements in good faith; and
(3) There has been user of corporate powers, i.e. the transaction of business as if it were a corporation [Campos]. An association of persons cannot claim to be a corporation if it has not been issued a certificate of incorporation since that fact belies the claim of good faith compliance with the requirements of the law. [Hall v.
Piccio (1950)]
C.14 CORPORATION BY ESTOPPEL
Corporation by estoppel – Where a group of persons misrepresent themselves as a corporation, they are subsequently estopped from claiming lack of corporate life in order to avoid liability;
- Also, a third party who had dealt with an unincorporated association as a corporation is precluded from denying its corporate existence on a suit brought by the alleged corporation on the contract.
I. EFFECTS As to liability
All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof [Sec. 21].
As to the defense of lack of corporate personality
When such ostensible corporation is sued, it is precluded from raising the defense of lack of corporate personality [Sec. 21].
PAGE 140 OF 320 As to third party
One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation. [Sec. 21]
The doctrine of estoppel applies to a third party only when he tries to escape liability on a contract from which he has benefited on the ground of defective incorporation. It does not apply to a third party who is not trying to escape liability from the contract, but rather is the one claiming from the contract. [International Express Travel v. CA (2000)]
II. DE FACTO CORPORATION VS.
CORPORATION BY ESTOPPEL
De facto Estoppel
Where all the requisites of a de facto corporation are present, then the defectively formed corporation will have the status of a de jure corporation in all cases brought by or against it, except only as to the State in a direct proceeding
If any of the
requisites are absent, then the estoppel doctrine may be applied only if any of the parties is estopped from defending: (1) the defendant association is estopped from defending on the ground of its lack of capacity to be sued, or
(2) the defendant third party had dealt with the plaintiff as a corporation and is deemed to have admitted its existence.
III. Nationality of
Corporations
A. PLACE OF INCORPORATION TEST
The corporation is a national of the country under whose laws it is organized or incorporated [Sec. 123].
Domestic corporations – organized and governed under and by Philippine laws Foreign corporations – organized under laws other than those of the Philippines and can operate only in the territory of the state under whose laws it was formed. However, they may be licensed to do business here [Campos].
B. CONTROL TEST
A corporation shall be considered a Filipino corporation if the Filipino ownership of its capital stock is at least 60%, and where the 60-40 Filipino-alien equity ownership is NOT in doubt [SEC Opinion dated 6 November
1989; DOJ Opinion No. 18, s. 1989].
Therefore, its shareholdings in another corporation shall be considered to be of Filipino nationality when computing the percentage of Filipino equity of that second corporation [SEC Opinion dated 23 November
1993].
Control test is applied in the following: • Exploitation of natural resources -
“Only Filipino citizens or corporations whose capital stock is at least 60% owned by Filipinos can qualify to exploit natural resources.” [Sec. 2, Art. XII, Const.]
• Public Utilities - “… no franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least 60% of whose