Chapter 14- Corporations: Basic Considerations
Section 22 of the Corporation Code
- If corporation has commenced business but subsequently becomes continuously inoperative for a period of 5 years, same shall be a ground for suspension or revocation of its certificate of incorporation.
Endorsement from other government agencies
- If proposed by the corporation will engage in an industry regulated by the government, other requirements for corporations with foreign equity and additional requirements based on the kind of payments and subscriptions
Subscriber's Ledger
- It is a subsidiary ledger for the subscriptions receivable account - It reports the individual subscriptions of subscribers.
Stock certificate book
- It is the book of printed blank certificates of stock.
Subscription book
- It is the book of printed blank subscription.
Shareholder's ledger
- It is the ledger which details the number of shares issued to each shareholder.
Filing of the Articles
- Of incorporation with SEC together with the treasurer's affidavit, Balance Sheet, certificate of bank deposit, and certificate as to the name of the corporation.
No par value shares
- One without any value appearing on the face of the certificate of stock. A no-par value share may have a stated value which may be fixed in the articles of incorporation or by the board of directors or shareholders. Thus, the issue price may vary from time to time as it is usually fixed based on the book value of the corporation's shares.
Drafting and Execution
- Or the articles of incorporation by the incorporators where in the person elected as temporary treasurer must enter an affidavit regarding the share capital subscribed and paid up.
Promotion
- Process of bringing together the incorporators or persons interested in the business - procuring subscriptions or capital for the corporation and of setting in motion the machinery that leads to the incorporation of the corporation itself.
Stock and transfer book
- Record of the names of the shareholders, installments paid and unpaid by shareholders and dates of payment, any transfer of stock and dates thereof, by whom and whom made.
By Laws
- Shall be adopted within one month of issuance of the certificate of incorporation by the Securities and Exchange Commission.
Corporation Sole
- Special form of corporation usually associated with clergy - It is a corporation which consists of only one member or corporator and his successors such as the bishop.
By Laws
- These are rules of action adopted by the corporation for its internal government and for the government of its officers, shareholders, or members.
Books of accounts
- These represent the record of all business transactions.
Preference shares
- These shares entitle the holder to certain advantages or benefits over the holders of ordinary shares. - Tendency to pay higher - More regular dividends than common stock holders.
Ordinary shares
- These shares entitle the holder to equal pro-rata division of profits without any preference.
Civil Corporation
- Those established for business or profit.
Eleemosynary Corporation
- Those established for public charity
Promotion shares
- Those issued to promoters as compensation in promoting the incorporation of a corporation, or for services rendered in launching, or promoting the welfare of the corporation.
Voting shares
- Those issued with the right to vote.
Non Voting shares
- Those issued without the right to vote.
Ecclesiastical Corporation
- Those organized for religious purposes.
Corporators
- Those who compose a corporation whether as shareholders or members, at any time. - This term includes: incorporators, shareholders or members
Parent or holding corporation
- a corporation that is related to another corporation that it has power to either directly or indirectly elect the majority of the directors of the subsidiary corporation.
Publicly held Corporation
- a corporation with a class of equity securities listed on exchange or with assets in excess of P50,000,000 and having 200 or more holders, at least 200 of which are holding at least 100 shares of a class of its equity securities.
Shareholders or Stockholders
- are corporators in a stock corporation. - may be natural or juridical persons
Members
- are corporators of a non-stock corporation.
Promoters
- are persons who bring about or cause to bring about the formation and organization of a corporation.
Subscribers
- are persons who have agreed to take and pay for original, unissued shares of a corporation formed or to be formed.
Incorporators
- are shareholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and signatories to said articles of incorporation -must be natural persons as distinguished from artificial beings - an incorporator will always retain his status as such though no longer having an interest in the corporation.
Deposit
- by the treasurer of the cash paid for the shares subscribed in the bank in the name of the treasurer in trust for and to the credit of the corporation.
Minutes Book
- contains the minutes of the meetings of the directors and the shareholders.
Minimum stated value of a no par value share
- is five pesos (P5.00) per share (Sec. 6) -In addition, shares issued without par value are deemed fully paid. -bank, trust companies, insurance companies, public utilities and building and loan associations are not permitted to issue no-par value shares of stock.
Formal Organization and Commencement of business operations
- requires the adoption of by-laws and the election of the board of directors and of the administrative officers. - Also includes the taking of such other steps necessary to enable the corporation to transact the legitimate business. - Accomplish the purpose for which it was created.
rights to succession
-Corporations have the capacity of continued existence subject to the period stated in Articles of Incorporation. - Death, Withdrawal, Insolvency or Incapacity of the individual shareholders/ members will not dissolve the corporation. -Transfer of Ownership shares of stock does not dissolve corporation.
Special Incorporation Law or General Corporation Law
-Corporations require special authority from the state, either by:
created by operation of law
-It cannot come into existence by mere agreement as to the case of partnerships.
Par value shares
-One in which specific amount is fixed in the articles of incorporation and appearing on the certificate of stock. - The par value is the minimum issue price of shares. - Section 6 of the Code states that preference shares of stock may be issued only as par value shares.
Open Corporation
-a corporation where the share is available for subscription or purchase by any person.
Independent Director
-a person who apart from his fees and shareholdings is independent of the management and free from any businesses or other relationship which could or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out the responsibilities of a director.
Underwriters
-are usually investment bankers who: *agreed to buy at stated terms an entire or substantial part of an issue of securities * guaranteed the sale of an issue of agreement to buy from the issuing corporation any unsold portion at a stated price *agreed to use his best efforts to market all or part of an issue *offered for sales shares he has purchased from a controlling stockholder.
Close corporation
-corporation whose share ownership is limited to selected persons or members of the family not exceeding 20 persons.
Issuance by the SEC
-of certificate of incorporation.
De facto Corporation
A corporation existing in fact but not in law.
Articles of Incorporation
This must be filed with the Securities and Exchange Commission in any official languages duly signed and acknowledged by all the incorporators.
Stock Corporation
have share capital dividend into shares and authorized to distribute to the holders of such share dividends or allotments of the surplus outfits on the basis of the shares held.
shareholders
owners of the corporation.
professional management team
they implement the policies of the board of directors and actively manage the day to day affairs of the corporation.
Disadvantages of a Corporation
Complicated in formation and management Greater degree of government control and supervision Relatively high cost of formation and operation Subject to heavier taxation -Corporation Tax rate: 30% Minority shareholders are subservient to the wishes of the majority. In large corporations, management and control have been separated from ownership. Transferability of shares permits the uniting of incompatible and conflicting elements in one venture.
Advantages of a Corporation
Has legal capacity to act as legal entity Continuity of existence Shares of stock can be transferred without consent of other shareholders. Management centralized in the Board of Directors. Shareholders are not general agents of the business. Greater ability to acquire funds.
Subsidiary Corporation
- A corporation controlled by another corporation known as the parent corporation.
Private corporation
- A corporation created for private aim, benefit or purpose.
De jure Corporation
- A corporation existing in fact and in law. - Organized in strict conformity of the law.
Public Corporation
- A corporation formed and organized for the government of a portion of the state.
Domestic Corporation
- A corporation organized under Philippine Law.
Foreign Corporation
- A corporation organized under foreign laws.
Treasury shares
- A stock issued by the corporation as fully paid and later reacquired but not retired.
Convertible shares
- A stock which is convertible or changeable from one class to another class.
Corporation Aggregate
- Corporation consisting of more than one corporator
Payment of filing fees
- For AI, equivalent to 1/5 of 1% of authorized capital stock not less than P1000 - For by-laws, P510
Verification
- From records of the Securities and Exchange Commission that the proposed corporate name is not the same or similar to an existing corporation.
Section 22 of the Corporation Code
- If corporation does not formally organize and commence the transaction of its business within 2 years from date of its incorporation, its corporate powers shall cease and the corporation shall be deemed dissolved.
2. Incorporation
a. Verification b. Drafting and Execution c. Deposit d. Filing of the Articles e. Payment of filing fees f. Endorsement from other government agencies g. Issuance by the SEC
Corporation
an artificial being created by operation of law having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
powers, attributes and properties
expressly authorized by law or incident to its existence.
board of directors
is responsible for the formulation of the overall policies for the corporation and for the exercise of corporate powers.
corporate treasurer
is the proper officer entrusted with the authority to receive and keep the money of the corporation an to disburse them as he may be authorized.
corporate secretary
it is his/her duty to make and keep its records and to make proper entries of votes,resolutions, and proceedings of shareholders etc.
president
must be a director of the corporation
Non Stock Corporation
one where no part of its income is distributable as dividends to its members, trusteed and officers. -Any profit obtained as an incident to its operation for which as incident to its operation shall be used for the furtherance of the purpose or purposes for which the corporation was organized.
shareholders
where the ultimate control of the corporation rests.
artificial being
with a personality separate and apart from its individual shareholders or members.
