Law on Partnership and Corporation (Notes)

8/12/2019 Law on Partnership and Corporation (Notes)

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Partnership

1. Characteristics of a partnership:a. Consensualb. Onerous - contribution of money, property, or industry into a

common fundc. Nominate- Designated Named. Preparatory - Its organization is followed by other contracts tocarry out its purposee. Principal- It can stand alonef. Bilateral or multilateral- or more personsg. Agency - each partner is an agent to partnership and to each other

. !rofessional partnership has no legal personality. Legal personalitymeans that a partnership can sue and be sued, enter into contracts, ac"uireproperty in its own name, can incur obligations.

#. $ partnership can be a partner in another partnership or a stoc%holder in acorporation because it has a &uridical personality to enter into contracts

'. ()en if a partner transfers all interests to another, the transferee does notbecome a partner unless all other partners consent. *his is based on theprinciple of delectus personarum +principle of mutual trust andcondence.

. /imited partner would be liable as a general partner if he include hissurname in the partnership name and ta%es part in the control of business

0. General-limited - liable up to personal assets but sub&ect toreimbursement

. In a general partnership, insanity of a general partner does not result inthe automatic dissolution of the partnership but only ser)es as a ground forthe application for &udicial dissolution

2. Death, retirement, insanity or ci)il interdiction +D3ICI of a general partnerin a limited partnership, automatically dissol)es the partnership. 4ut ci)ilinterdiction of a limited partner does not so.

5. $cts of a partner who is insol)ent, does not ha)e a right to wind up thea6airs of the partnership and the business is unlawful doesn7t bound thepartnership.

18. If the partner who acts after dissolution and at fault, he alone ultimatelyliable to the creditors. *he partners can see% reimbursement from thepartner who is guilty.


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11. New creditor is deemed to ha)e %nowledge of the dissolution. 9e is nottherefore, protected by law. !artnership is not bound

1. $ partnership begins from the moment of eecution of the contract but

there can be stipulation otherwise.

1#. Contract of co-ownership- no intention of using the asset for businesspurposes

1'. $ partnership cannot be formed for a charitable purpose

1. Corporation;s legal personality commences from the time it is issued acerticate of incorporation by the


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. $ husband and wife cannot enter into a contract of uni)ersal partnershipbecause this has the e6ect of donation and there are prohibited from gi)ingdonation to each other. *hey can enter into a particular partnership but notto go)ern their property relations.

0. *he liability of an industrial partner is always that of a general partner

. $ person may be a general partner and a limited partner in the samepartnership at the same time, pro)ided this fact is stated in the certicate ofa limited partnership

2. $ limited partner cannot contribute ser)ices hence it is always acapitalistand a silent partner

5. $ capitalist partnerwill be obliged to sell his interest to the other

partners when in case of imminent loss of the business of the partnership herefuses to gi)e additional contribution.

#8. Capitalist partnercannot engage in the same or similar business of therm unless permitted by all others

#1. Capitalist partner cannot engage in any %ind of business unlesspermitted to do so. $ll his industry is supposed to be contributed to the rm

#. "ndustrial partner is eempted as to losses between partners but isliable to strangers but with right to be reimbursed from the capitalists.

##. $n agreement that e)en the industrial partner shall be liable for losses ispermissible.

#'. If a partner gi)es a receipt for the rm, it is the rm;s credit that hasbeen collected. If it his own receipt, payment of the debtor will be pro-ratedbetween the rm and the partner recei)ing the payment.

#. $ partner has the right to be reimbursed by the partnership for theamount disbursed on behalf of the partnership and the right to as% fordissolution of the rm at the proper time.

#0. $ partner has the right in a specied partnership property to use it forbusiness purposes only.

#. *he right to inspect and copy boo%s is not a)ailable to the partnershippending dissolution nor in one already dissol)ed

#2. $s a rule, no formal account is demandable until after dissolution. *his is


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because partners ha)e access to the boo%s. 4ut if a partner is wrongfullyecluded from the business, he can demand it at any reasonable time

#5. #oint managementarises when two or more partners are appointedmanagers with an agreement that one cannot act without the consent of the

others. *he appro)al of all the managers is necessary for the )alidity of one;sact.

'8. $olidary management ta%es place when or more appointedmanagers may separately eecute all acts of administration. 4ut if one ofthem should oppose the acts of the others, the decision of the ma&ority shallpre)ail. In case of a tie, the matter shall be decided by the controllingpartners.

'1. !articipation in the selection of the managing partner is held by law asta%ing part in the control of the business

'. >eneral or limited partner partners may eercise some rights nota)ailable in the general partnership, if the same are gi)en and indicated inthe certicate such as the remaining general partners may continue thebusiness e)en upon death, retirement, ci)il interdiction of a general partneror the limited partner to demand and recei)e property other than cash inreturn for his contribution

'#. If the rm upon dissolution is not sol)ent, a limited partner does noten&oy the same preference as an outside creditor.

''. $ limited partner who is held liable as a general partner does nothowe)er get the rights of the latter

'. Insanity, incapability, pre&udicial conduct of a partner, unfair competition,the business can only be carried at a loss are only grounds for the petition ofa partner in the court to dissol)e the rm

'0. Civil "nterdictionis an accessory penalty imposed on a con)ict whenthe crime committed is punishable from 1 years and 1 day to #8 years thatdepri)es the con)ict of his rights of parental authority, guardianship, maritalauthority, the right to manage his property and of the right to dispose of his

property.


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Corporation

1. $ copy of the articles led which is returned with the certicate ofincorporation issued by the commission under its o?cial seal becomes itscorporate charter.

2. $ corporation created by special law has no articles of incorporation

3. $ corporation has the power of succession by its corporate name.Character of a corporation is not necessarily determined by its name.

4. *he purposes should be stated denitely. *he main purpose and

secondary purposes shall be distinguished from each other. @ain purposemust be specied.$ non-stoc% corporation may not include a purpose which would change orcontradict its nature

6. *he purposes, where there is more than one, must be capable of beinglawfully combined. *hus, ban%s which are go)erned by the general ban%inglaw of 888 are prohibited from directly engaging in non-ban%ing acti)itiessuch as insurance.


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and records are ordinarily kept and its ocers usually meet for the purposeof managing the aairs and transacting the business of the corporation.

10. If the new address is located within the same city or municipality, nocorporate document is re"uired to be led with the


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otherwise, deemed dissol)ed. If becomes continuously inoperati)e for years after its organization, temporarily suspended or re)o%ed.

21. Ehen a change of name is appro)ed, it is re"uired that the commissionmust issue an amended certicate of incorporation under the amended

name.

22. In the case of religious corporations, the code does not re"uire the


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meeting or at a meeting improperly held is deemed valid or rati!ed.

33. $ corporation is epressly allowed to enter into a managementcontract under which it delegates the management of its a6airs to anothercorporation for a certain period of time. 4=D can also delegate its power,

impliedly or epressly to other o?cers and agents

34. =ne disad)antage of corporation is that stoc%holders ha)e little )oicein the conduct of the business.

35. Fnder the doctrine of piercing the )eil of corporate entity, thecorporation and the persons composing it will be treated as one and identicalperson +instances such as fraud, ta e)asion, and a)oiding obligation.

36. In a non-stoc% corporation, minimum members are and may be morethan 1. Number of members must be multiple of . No part of income shall

be distributed as di)idends to members.

37. Civil Corporation is one organized for prot. (leemosynary is forcharitable

38. In close corporation, stoc%holders shall not eceed )* persons.

39. A partnership can &e a corporator in a corporation &ut acorporation cannot &e a partner in a partnership

40. $ corporation can subscribe after another corporation7s incorporation

but not if made before.

41. A corporation can &e a corporator &ut never an incorporator inanother corporation e+cept in rural &an, law

42. $ married woman can be an incorporator with the consent of thehusband if it in)ol)es conjugalor absolute community property. If it in)ol)esher eclusi)e property, consent is not re"uired

43. @a&ority must be residents of the !hilippines to form a pri)atecorporation.

44. 4y-laws need not be notarized but re"uired to be signed by theincorporators and stoc%holders and led with


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46. egular meetings- it shall be held annually on a date ed in the by-laws or if not so ed, on any date in $pril of e)ery year

47.


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60. 3egular meetings of the board shall be held monthly

61.


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88. Directors are liable to the corporation, stoc%holder or members orother persons who su6er damages. Nature of liability is solidary.

89. $ special meeting of the stoc%holders for the purpose of remo)al of

directors or trustees must be called by the secretary on order of thepresident or on the written demand of the stoc%holders +only the ma&ority isre"uired. In remo)al of directors, # is re"uired.

90.


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interloc%ing directors as long as there is no fraud and the contract is fair andreasonable under circumstances.181. *he guilty director will only be eempted from liability to the corporationif his disloyal act is ratied by #

18. *he eecuti)e committee must be pro)ided for in the by-laws andcomposed of not less than # members of the board. *he committee may acton specic matters within the competence of the board, as may bedelegated to it by the board or in the by-laws ecept those to which only theboard duly called and assembled as such can act upon.

18#. *he restrictions on the power of the eecuti)e committee may beenlarged by the board to co)er other matters. *he eecuti)e committee mayamend or repeal any resolution of the board.

18'. Committee cannot delegate its authority e)en to one of its members

since it can only bind the corporation through ma&ority of )otes

18. $ll members of an eecuti)e committee must be directors of thecorporation. 9owe)er if all acts of the committee will be merelyrecommendatory in nature and shall not be carried out without the formal ofthe 4=D, some members may not be directors.

180. Doctrine of limited capacityGonly those that are epress, implied orincidental18. Intra )iresGacted within the powers

182. $ corporation may not engage in a business di6erent from that forwhich it was created as a regular and a permanent part of its business. *hisis especially true in ban%ing and insurance companies organized underspecial laws.

185. *he use of corporate seal in certicates of stoc% must be deemeddirectory rather than mandatory. $ corporation may eist e)en without aseal. $ny seal adopted and used by the corporation may be altered by it atits pleasure.

118. !ower to ac"uire and con)ey property has always been regarded as an

incident to e)ery corporation

111. $ stoc%holder has absolute right to use, en&oy and dispose of hisproperties, to perform all acts and to ma%e all contracts without anyrestriction ecept when they are prohibited by law.

11. $ corporation cannot do acts not epressly or impliedly gi)en by law


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11#. Implied powers are those powers which are reasonably necessary toeercise the epress powers and to accomplish or carry out the purposes forwhich the corporation was formed.

11'.$ corporation which has been dissol)ed after the epiration of the #-year

winding up period ceases to be de &ure de facto and therefore it cannot sueor be sued

11. $ corporation must be rst duly registered in accordance with law toha)e the power to sue

110. $ seal is a de)ice used to identify or replace the signature of anindi)idual or organization and to authenticate written matter

11. !urchasing or holding real and personal property, to adopt and use acorporate seal, to contract and ma%e by-laws are incidental powers

112. $ corporation may not hold alienable lands of a public domain ecept bylease for a period not eceeding years, renewable for not more than years and not to eceed 1,888 hectares in area.

115. Natural resources belong to the state and cannot be alienated tocorporations. *heir eploration and de)elopment and utilization shall beunder the full control and super)ision of the


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10. *he )ote of the ma&ority of the trustees in o?ce will be su?cientauthorization for the corporation to enter into any transaction because thereare no members with )oting rights.

1. $ny disposition which does not in)ol)e all or substantially all of thecorporate assets made in the ordinary course of business does not re"uirethe appro)al of the stoc%holders and would not entitle any dissentingstoc%holders to eercise his appraisal right. It can only eercise the same if itis on the sale of all or substantially all of the corporate assets as such whichwould render the corporation incapable of continuing the business oraccomplishing the purpose for which it was incorporated.

12. *he ac"uisition of shares shall be for legitimate purposes, its capital isnot impaired, in good faith without pre&udice to the rights of the stoc%holdersand creditors and that there is an unrestricted retained earnings to co)er the

shares ac"uired.

15.


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borrowed money is not prots but money may be borrowed temporarily forthe purpose of paying di)idends if the corporation has used its surplus assetsto ma%e impro)ements for which it might ha)e borrowed money.

1#. Di)idends may not be declared so long as decit eists

1#2. *he directors are the &udges on how and when to spend corporatefunds.

1#5. *he corporation may be compelled by the


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1'2. Fpon the issuance of the certicate of incorporation, the corporationcomes into eistence but not yet otganized.

1'5. 4y-laws shall be adopted within one month after receipt of o?cial notice

of the issuance of its certicate of incorporation by the


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by a director or trustee or by an o?cer entrusted with the management ofthe corporation.

18. $ stoc%holder may ma%e the call on order of the


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12#. *o sell, lease, echange, mortgage or otherwise dispose all orsubstantially all of thecorporate assetsGma&ority of 4=D and #

12'. *o in)est corporate funds in another corporation or business or for anypurpose other than the primary purposeGma&ority )ote of 4=D and #

12. *o issue stoc% di)idendsGma&ority of the "uorum of 4=D and #. *heappro)al of stoc%holders is not re"uired with respect to other di)idends suchas cash and bond di)idends.

120. *o enter into management contractGma&ority of the "uorum of 4=D anda ma&ority of the outstanding capital stoc% of both managing and managedcorporations and in some cases, # of the total outstanding capital stoc%entitled to )ote or of the members, with respect to the managed corporation.

12. *o adopt by-lawsGa ma&ority of the outstanding capital stoc% or of themembers.

122. *o the issued price of no par )alue sharesGa ma&ority of the "uorumof 4=D if authorized by the articles of incorporation or in the absence of suchauthority, by a ma&ority of the outstanding capital stoc%.

125. *o e6ect or amend a plan of merger or consolidationGa ma&ority of )oteof 4=D and # of the outstanding capital stoc% or of the members of theconstituent corporation

158. *o dissol)e the corporationGa ma&ority )ote of 4=D and # of theoutstanding capital stoc% or of the members

151. *o adopt a plan of distribution of assets of a nonstoc% corporationGama&ority )ote of trustees and # of the members ha)ing )oting rights.

15. $ corporation may prescribe a greater )oting re"uirement for theappro)al of any of the abo)e corporate acts in its articles of incorporationandor by-laws in order to protect the rights of minority stoc%holders

15#. Notice of a regular meeting need not be gi)en if the articles ofincorporation or by-laws specify the time of the meeting +ecept when it is tobe held at another place. $ director trustee may wai)e the re"uirement ofnotice of any meeting, epressly or impliedly

15'. If the presiding o?cer is not present at the time for a meeting tocon)ene, a stoc%holder who ta%es the Loor may temporarily preside at themeeting of stoc%holders pending the selection of the presiding o?cer. Fnless


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the contrary is pro)ided by the by-laws, the presiding o?cer may be selectedby the )ote of the stoc%holders present.

15. =ne cannot )ote if he does not appear to be a stoc%holder in the boo%sof the corporation

150. (ach member, regardless of class, shall be entitled to one )ote

15. !ledgees or mortgagees of shares in stoc% corporation ha)e the right toattend and )ote at meetings of stoc%holders only when epressly gi)en suchright in writing by the pledgor or the mortgagor as the latter remains theowner of the stoc% pledged or mortgaged. *he authorization is re"uired bythe code to be recorded on the appropriate corporate boo%s by such pledgoror mortgagor.

152. $ proy may refer to a person or a formal written authority

155. *he right to )ote by proy is a special form of agency. No proy shall be)alid and e6ecti)e for a period longer than years.

88. Directors cannot attend or )ote by proy at board meetings

81. !roies are irre)ocable at any time unless made irre)ocable by thegi)er. It becomes irre)ocable when the holder of proy has gi)en or promiseda stoc%holder a consideration or interest +loan of money in return forirre)ocable proy.

8. In )oting trust agreement+must be in writing, notarized and led with


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8M. 4=D can ll the )acancy if the cause of )acancy is other than remo)al,epiration of term or increase in the number of director and the remainingdirectors still constitute a "uorum

82M. Directors are entitled to compensation if the gi)ing of compensation is

ed in the by-laws, appro)ed by the stoc%holders representing at least ama&ority of the outstanding capital stoc% or when the compensation refers toreasonable per diem

85. $ contract of the corporation with one or more its directors or trustees is)oidable unless all the 6 conditions are present: +1 that the presence of suchdirector is not necessary to constitute a "uorum + that the )ote of suchdirector was not necessary for the appro)al of the contract +# that thecontract is fair and reasonable under the circumstances.. Ehen any of therst two conditions is absent, such contract may be ratied by the )ote of#. Aull disclosure of the ad)erse interest of the director in)ol)ed must be

made at such meeting.

18. *here is interloc%ing directorate when a director holds seats in theboard of directors of or more corporations. *here is no prohibition in thecorporation code regarding this. 9owe)er, law pro)ides for re"uisites when corporations with interloc%ing directors contract with each other. *here"uisites are +if the interest of the director is substantial, 8percent andnominal in the other: +1 there is no fraud + the contract is fair andreasonable +# the presence is not re"uired for a "uorum and appro)al, )ote.If the interest is both nominal or substantial, re"uirement +# is no longerre"uired.

11. *he doctrine of corporate opportunity prohibits directors from ac"uiringbusiness opportunities for his personal gain at the epense of thecorporation +breaches his duciary duty. 9e must rst disclose to thecorporation the opportunity and if the latter refuses to ta%e it, he can ta%e it.If breached, he must account to the corporation the prots by refunding thesame.

1. (ecuti)e committee is composed of not less than # directors andwhose creation is pro)ided in the by-laws. It acts on routine matters or onthose which do not re"uire board meeting because it is di?cult to con)ene

due to "uorum re"uirement. *hus small number is appointed among them. Itcannot repeal or adopt by-laws and cannot ll )acancies in the board.

1#. $ donation must be for a public welfare and not for political purpose

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5. *he shares which may be alienated are those co)ered by certicates ofstoc%.

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+bboo%s of foreign corp +ctrade secrets +dreasonable hours.

''. $ stoc%holder cannot, without order of the court be permitted to ta%eboo%s from the o?ce of the corporation.

#. In general, right of the stoc%holder etends to all boo%s, papers,contracts, minute boo%s or other instruments from which he can deri)e anyinformation that will enable him to better protect his interest.

#0. >enerally, where one corporation sells or otherwise transfers all itsassets to another corporation, the latter is not liable for the debts of thetransferror unless the transferee assumed the liabilities of the former.


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''. @embership and all rights are personal and non-transferable, unless thearticles or by-laws otherwise pro)ide.

'. *ermination etinguishes all rights of a member in the corporation or inits property, unless otherwise pro)ided in the articles of incorporation.

'0. *he term of o?ce of trustees shall be # years +non-stoc%

'. If rst elected, 1# of the 4=* members shall epire e)ery year andsubse"uent trustees shall ha)e # years. *rustees elected to ll )acanciesoccurring before the epiration of a particular term shall hold o?ce only forthe unepired period

'2. Non-stoc% may in)est its accumulated funds for prot purposes butsuch power must be included in its articles in order that in)estment may notbe considered ultra )ires.

'5. *he right to )ote of members may be limited, broadened or were deniedin the articles of incorporation or the by-laws.

8. (ach member shall be entitled only to 1 )ote in the election of trusteesunless cumulati)e )oting is authorized.

1. Hoting by mail or other similar means may be authorized.

. =?cers may be directly elected by the members unless otherwisepro)ided.

#. Non-stoc% may designate their go)erning boards by any name otherthan 4=*. *rustees ha)e duties similar to those of stoc% corporation.

'. $ corporation ehibiting the characteristics of close corporation:+1 persons shall not eceed 8.+ Issued shares are sub&ect to restrictions or transfer+# *he corporation shall not list in any stoc% echange or ma%e a stoc%

o6ering to public. It is deemed not a close corporation if at least # of its )otingstoc%rights is owned by another which is not a close corporation.

. *hose corporation )ested with public interest cannot be a closecorporation mining or oil companies, ban%s, insurance, educational and stoc%echange.

0. Close corporation has been described as a corporation de &ure andpartnership de facto and has been often referred to as an incorporatedpartnership because of its intimate business associates acting li%e partners


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among themsel)es.

. @anagement of a stoc% corporation may be by the stoc%holder ifpro)ided in the articles.

Law on Partnership and Corporation (Notes)

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Transcript of Law on Partnership and Corporation (Notes)