Corpo Law Terms

7/29/2019 Corpo Law Terms

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CORPORATION LAWDEFINITION OF TERMS: Sections 1-70

(Reference: Aquino; De Leon)

Aggregate Corporation: A corporation consisting of one or morethan one member and has been defined as an artificial body of

men, composed of diverse individuals

Articles of Incorporation: document prepared by the personsestablishing a corporation and filed with SEC containing matters

required by the Code.

Authorized Capital Stock: is the number of capital stock(common and preferred) stated in the charter that the

corporation can sell; Number of shares authorized multiplied by

the par value of shares

Board of Directors: a group of persons which sets the policiesfor the corporation and appoints officers

Book Value: determined by dividing the net value of totalcorporate assets (capital and surplus) by the number of shares

issued or outstanding

By- Laws: a set of rules and regulations adopted to besubmitted to SEC within one month from the issuance of the

certificate of incorporation which act as the constitution

governing the corporation

Capital Stock: amount fixed in the articles of incorporation, tobe subscribed and paid in by the shareholders of thecorporation, either in money or property, labor or services, at

the organization of the corporation or afterwards and upon

which it is to conduct its operation; represents the equity of the

stock holders in the corporate assets; Amount invested by the

stockholders plus the undistributed earnings less losses and

expenses

Certificate of Incorporation/ Corporate Charter: documentissued by SEC to acknowledge the legal existence of a

corporation

Certificate of Stock: a written acknowledgement by thecorporation of the interest, right, and participation of a person

in the management, profits, and assets o a corporation.

Civil Corporation: A corporation not for the purpose of charitybut for the benefit, pecuniary or otherwise, of its members

Close Corporation: corporation whose articles of incorporationprovide that : (1) All the corporation's issued stock of all classes,

exclusive of treasury shares, shall be held of record by not more

than a specified number of persons, not exceeding twenty (20);(2) all the issued stock of all classes shall be subject to one or

more specified restrictions on transfer permitted by this Title;

and (3) The corporation shall not list in any stock exchange or

make any public offering of any of its stock of any class.

Common Stock: is the most basic form of capital stockrepresenting residual equity of a corporation; entitles holder

thereof to pro-rata division of profits if theres any without any

preference or advantage

Concept of perpetual succession: A corporation continues toexist even if there is a change in those who compose it. Corporate Bond: an obligation to pay a definite sum of money

at a future date at fixed rate of interest

Corporate Governance: refers to the system wherebyshareholders, creditors, and other stakeholders of a corporation

ensure that the management enhances the value of the

corporation as it competes in an increasingly global market

place


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Corporate Officers: Officers who are designated as such by law,AOI and by-laws of the corporation

Corporate Officers; Comptroller: as distinguished fromtreasurer, officer appointed to control accounts and to check

expenditures.

Corporate Officers; De facto: person acting as an officer, undersuch color of authority (authority derived from election or

appointment, although irregular or informal, so that the

incumbent must be more than a volunteer), through election or

appointment.

Corporate Officers; General Manager: entrusted to themanagement of corporations with the power to bind the

corporations by acts within the scope of his apparent authority

Corporate Officers; President: President must be the director ofthe corporation but cannot be : Pres/Se. or Pres/Treas.

Corporate Officers; Secretary: duty is to make and keep recordsand to make proper entries of votes, resolutions and

proceedings of stockholders and directors in the management

of the corporation and all matter required to be entered on the

record.

Corporate Officers; Treasurer: entrusted with the authoritytoreceive and keep the money of the corporation and disburse

them as he may be authorized

Corporate Officers; Vice President: acts in the vacancy of thepresident

Corporate Sole: religious corporation composed of onemember/ corporator only and his successors

Corporation by Estoppel: a group of person which holds itselfout as a corporation and enters into a contract with a third

person on the strength of such appearance cannot be permitted

to denu its existence in as action under said contract

Corporation by Prescription: a corporation that was notformally organized as such but has been duly recognized by

immemorial usage as a corporation, with rights and duties

enforceable in law.

Corporation by prescription: one which has exercised corporatepowers for an indefinite period without interference on the partof the sovereign power and which, by fiction of law, given the

status of a corporation

Corporation: Artificial being created by operation of law, havingthe right of succession and the powers, attributes and

properties expressly authorized by law or incident to its

existence

Corporators: Those who compose the corporation whetherstockholders or members

De facto Corporation: a corporation which is formed wherethere exists a flaw in its incorporation but there is colorable

compliance with the requirements of law

De Jure Corporation: Corporation organized in accordance withthe requirements of the law

Dividends: a distribution of earnings by a corporation to itsstockholders in proportion to the number of shares held.

Dividends; Cash: cash distribution of earnings by a corporationto its stockholders

Dividends; Liquidating: return of all or part of the stockholdersinvestment

Dividends; Property: distribution of earnings by a corporationto its stockholders in assets rather than cash

Dividends; Scrip Property means that instead of paying thedividends now, the corporation decided to pay such at a later

date


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Dividends; Stock: distribution of additional shares of acorporation stock to the shareholders based on the number of

shares they already own

Doctrine of Forum non conveniens: courts may refuse to takejurisdiction over matters where there is a more appropriate

forum available to the parties. Doctrine of separate personality: A corporation has a

personality separate and distinct from its members.

Domestic Corporation: a corporation formed, organized and/orexisting under Philippine Laws

Ecclesiastical Corporation: One organized for religious purposes Ecclesiastical Corporations: Corporations composing entirely of

spiritual persons like bishops, clergies and the like and are

established for the furtherance of the religion for perpetuating

the rights of the church

Eleemosynary/ Charitable Corporation: Created not for privategain but for charitable purposes for the administration f

charitable trust

Executive Committee: composed of not less than threemembers of the board, to be appointed by the board. Said

committee may act, by majority vote of all its members, on such

specific matters within the competence of the board, as may be

delegated to it in the by-laws or on a majority vote of the board,

except with respect to: (1) approval of any action for which

shareholders' approval is also required; (2) the filing of

vacancies in the board; (3) the amendment or repeal of by-laws

or the adoption of new by-laws; (4) the amendment or repeal of

any resolution of the board which by its express terms is not so

amendable or repealable; and (5) a distribution of cash

dividends to the shareholders.

Foreign Corporation: A corporation formed and organized orexisting under the laws other than those of the Philippines and

whose laws allow Filipino citizens and corporations to do

business in its own country or state

Founders Shares: shares issued to organizers and promoters ofa corporation in consideration f some supposed right or

property. Often given special privileges over other stock such as

voting and in the division of profits in excess of a minimumdividend on the common stock

Franchise Kind; Corporate/general franchises- franchise toexists as a corporation

Franchise Kind; Primary franchises- right to exist as such isvested among the individuals composing the corporation and

not the corporation itself.

Franchise Kind; Special franchises- privilege conferred uponexisting corporation

Franchise: a special privilege conferred by governmentalauthority and which does not belong to the citizens of the

country generally as a matter of common right.

Incorporators: those corporators mentioned in the articles ofincorporation as originally forming and composing the

corporation and who executed and signed the AOI as such.

Lay Corporation: all corporations other than ecclesiastical; oneorganized for a purpose other than for religion

Legal Capital: amount equal to the aggregate par value and/orissued value of outstanding capital stock; an amount that the

corporation must retain n the business for protection of

creditors

Management Contract: an agreement whereby a corporationundertakes to manage or operate all or substantially all of the

business of another corporation, whether such contracts are

called service contract, operating agreements or otherwise.


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Market Value: price a willing seller would sell and a willingbuyer would buy neither being under normal pressure to buy or

sell. Affected by market forces

Meetings- Directors; Regular: those held by the board monthlyunless provided in the by-laws

Meetings- Directors; Special: those held by the board anytimeupon the call of the president or as provided in the by-laws

Meetings- Stockholders; Regular: those held annually on a datefixed in the by-law or if not fixed, on any date in April of every

year as determined by the Board o Directors or Trustees

Meetings- Stockholders; Special: those held at the timedeemed necessary or as provided by the by-laws

Members: Corporators of a corporation without capital stock No Par Stock: stock without par value but may or may not have

stated value; one without any stated or par value appearing on

the face of the certificate of stock; stock which does not state

how much money it represents

Non-stock Corporation: A corporation that does not issuestocks and does not distribute to their members

Organization Cost: Are cost such as incorporation fees, attorneyfees, promotional expense and cost of printing stock certificates

that must be incurred to organize a corporation

Outstanding Capital Stock: portion of the capital stock which isissued and held by persons other than the corporation itself;

total shares of stock issued to subscribers or stockholders

whether fully or partially paid (as long as there is a binding

subscription agreement), except treasury shares

Paid-In Capital: amount that stockholders have invested I thebusiness; portion of the subscribed or outstanding capital stock

that is paid

Par Value Share: one with specific money value fixed in thearticles of incorporation and appearing in the certificate of

stocks for each share of stock of the same issue

Par Value: An Arbitrary value placed on each share at the timeof authorization printed on the stock certificates and used in

accounting entries to credit capital stock account Patent/ Holding Corporation: one which is so related to

another corporation that it has the power to either, directly or

indirectly, elect the majority of directors of such other

corporation

Pre-Emptive Right: right of the shareholders to subscribe to allissues or disposition of shares of any class in proportion to their

shareholdings

Preferred Shares; Cumulative: will accumulate any dividendthat is not paid when due; will entitle not only to current

dividends but also those in arrears

Preferred Shares; Non Cumulative: Preferred stock for whichunpaid dividends do not accrue.

Preferred Stock: class of stocks that entitle its owners to certainrights and preferences over common stockholders; no voting

powers

Promoters: persons who bring about or cause to bringaboutthe formation and organization of a corporation

Promotion Share: shared that is issued to promoters or those insome way interested in the company

Proxy: written authorization given y one person to another sothat the second person can act for the first such as that given by

the shareholder to someone else to represent him and vote his

shares in the shareholders meeting

Proxy; Continuing: not limited to a specific meeting and itcontinues for a certain period


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Proxy; Specific: refers to one where the authority granted ismerely for a particular meeting

Quorum: such number of membership of a collective body as iscompetent to transact its business or do any corporate act; Sec.

25 says: [U]nless the articles of incorporation or the by-laws

provide for a greater majority, a majority of the number ofdirectors or trustees as fixed in the articles of incorporation

shall constitute a quorum for the transaction of corporate

business, and every decision of at least a majority of the

directors or trustees present at a meeting at which there is a

quorum shall be valid as a corporate act, except for the election

of officers which shall require the vote of a majority of all the

members of the board.

Redeemable Shares: usually preferred, shares of stocks issuedby a corporation which said corporation can purchase or takeup from their holders as expressly provided in the AOI and

certificates of stocks representing shares

Retained Earnings: accumulated profits or earnings that areretained or kept in the corporation

Retained Earnings; Paid-In Surplus: difference between parvalue and issued value/selling price of the shares and are not

considered as profits earned in the conduct of the business of

the corporation; NOT declared as dividend since its part of the

capital

Retained Earnings; Reduction Surplus: arises from thereduction of par value of the issued shares of stocks

Retained Earnings; Revaluation Surplus: exists if there is anincrease in the value of the assets and cannot be declared as

dividend because they are not considered as earnings of the

corporation

Seal: a device used to identify or replace the signature of anindividual or organization and to authenticate written matters

purportedly emanating from such individual or organization

Share in Escrow: share subject to an agreement by virtue ofwhich the share is deposited by the grantor or his agent with a

third person to be kept by depositary until performance ofcertain condition in the agreement

Shareholders: owners of shares of stock with interest on themanagement (control), income (dividends) and assets (Shares

upon liquidation in a stock corporation

Special Corporation: this includes educational corporation andreligious corporation

Steps (1); Promotion: bringing together of persons who areinterested in the formation of the corporation as incorporators;

includes procuring subscriptions of its capital stock, makingarrangement to finance the enterprise and preparation of

contracts

Steps (2); Incorporation: Process of filling the Articles ofIncorporation, pay the required fees and file the other required

documents to SEC

Steps (3); Organization and Commencement of Business:includes the adoption of by-laws within one month from the

issuance of the certificate of incorporation, election of the

Board of Directors and officers of the corporation stated in the

by-laws

Stock Corporation: A corporation with capital stock dividedinto shared and is authorized to distribute to holders thereof

such shares dividends or allotments of the surplus profits on the

basis of the shares held

Stock Split: is an increase in the number of outstanding sharesof stocks coupled with proportionate reduction in the par or

stated value of the stock


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Stock/ Share of Stock: one of the units into which the capitalstock is divided.

Subscribed Capital Stock: amount of capital stock subscribedwhether fully paid or not; temporary stockholders equity

account for stocks subscribed until fully paid that is recorded at

par value Subscribers: persons who agreed to take and pay for original,

unissued shares of the corporation formed or to be formed.

Only when their subscriptions are accepted by the corporation

they become stockholders.

Subscription Contract: a contract by which the subscriberagrees to take a certain number of shares of the capital stock of

a corporation, paying the consideration therefore or expressly

or impliedly promising to pay the same

Subscription Receivables: amount due from subscribers(Common or preferred) whose subscriptions are not fully paid

Subsidiary Corporation: One which is so related to anothercorporation that the majority of its directors can be directly or

indirectly elected by such other corporation.

Substantially All: substantially all corporate property andassets, as to sale or other disposition, if corporation would

thereby be rendered incapable of continuing the business or

accomplishing the purpose for which it was incorporated

Theory of Special or Limited Capacities: Corporation has powerand attributes expressly authorized by law or incident to its

recognition of what is known as a corporation

Treasury Shares: shares of stock which have been issued andfully paid for, but subsequently reacquired by the issuing

corporation by purchase, redemption, donation or through

some other lawful means. Such shares may again be disposed of

for a reasonable price fixed by the board of directors. NO voting

rights AS LONG as they remain in the treasury.; NOT entitled to

dividends or assets

Trust Fund Doctrine: holds that the assets of the corporation asrepresented by its capital stocks are trust funds to be

maintained unimpaired and to be used to pay corporate

creditors in the sense that there can be no distribution of suchassets among the stockholders without provision being first

made for payment of corporate debts and that any such

disposition of it is a fraud on the creditors of the corporation

and, therefore, is void

Ultra Vires: one committed outside the object for which acorporation is created by the law of its organization and

therefore beyond the powers conferred to it by law

Underlying Shares: Unissued shares of a corporation which maybe purchased by the warrant holder upon the exercise of theright granted in the warrant

Underwriter: An investment bank that acts as an intermediarybetween the issuing company and the investors who purchase

the company's debt instruments and/or stock at the Initial

Public Offering (IPO). The underwriter buys the newly issued

securities from the company and sells them to investors on the

secondary market through a stock exchange.

Unissued Capital: That portion of the capital stock that is notissued nor subscribed; does not vote and draws no dividends

Unrestricted Retained Earnings: undistributed earnings of thecorporation which have not been allocated for any managerial,

contractual or legal purposes and which are free for distribution

to stockholders as dividends.

Voting Methods; Cumulative Voting: method of concentratingvotes devised to give sufficient opportunity to minority

shareholders to secure representation in the board


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Voting Methods; Straight Voting: stockholder can cast one voteper share for each director

Voting Share: share with right to vote; the rule is NOT onestockholder one vote but RATHER ne share, one vote

because representation in a corporation is commensurate to

extent of ownership

Voting Trust: an agreement whereby a stockholder of a stockcorporation confers upon a trustee or trustees to vote and

other rights pertaining to the shares for a period not exceeding

5 years at any time (except when specifically required as a

condition in a loan)

Watered Stocks: stocks issued for a consideration lesser thanthe par.

Corpo Law Terms

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