CHAPTER 1

Much of the development in Corporate

Law can be expected to happen in
jurisprudential

INTRODUCTION (1)
Use of the Term Corporate Law
Proper Treatment of the Corporation
Code

(2) INTRODUCTION
USE OF THE TERM CORPORATE
LAW
The whole body of laws, principles and
doctrines
covering
private
corporations in the Philippines is
referred to in this book as Corporation
Law in order not to confuse the use of
such term with the ofcial name of the
old Corporation Law, or Act No. 1459
The
main
statutory
provisions
governing Philippine Corporate Law
are currently found in the Corporation
Code and complemented by special
provisions
on
publicly-listed
corporations and public companies
under the Securities Regulations Code,
or R.A. 8799.
PROPER
TREATMENT
CORPORATION CODE

OF

THE

Philippine Corporate Law comes from

the common law system of the United
States of America. Although we have
a Corporation Code that provides for
statutory
rules
and
principles,
Philippine Corporate Law was, and
continues to be, the product of
commercial developments.
Necessarily, the statutory corporate
provisions
and
principles
are
representations of a time when such
principles were the governing, or at
best, the general controlling inuence;
but by no means can be taken to
indicate changes in the eld that have
occurred since their adaptation, and
do not limit future developments.

rules that apply and adopt corporate

principles into the changing concepts
and mechanism of the commercial
world.
The Corporation Code should therefore
be seen as suggesting dated principles
and practices in Corporate Law, but
the real toss and tussle and the boiling
pot for current and future Corporate
Law development, would necessarily
be in commercial practices, most of
which would be reected in issues and
controversies put forth before the
courts
of
law
in
justiciable
controversies that arise therefrom,
and some of which would be
synthesized into jurisprudential law.
Once in a while of course, Legislature
comes up with pieces of legislation
meant to supplement or amend
existing Corporate Law doctrines or
rules; but often such legislative
enactments are meant to officially
incorporate
already
existing
commercial practices into statutory
language.
The
Securities
and
Exchange
Commission (SEC) has ruled: Further,
in the proper exercise of supervisory
and
regulatory
functions
over
corporations
and
partnerships
registered with the Commission, the
Corporation Code should be given a
reasonable or liberal construction
which will best execute its purpose,
even though such construction is not
within its strict literal interpretation. A
strict construction should not be

permitted to defeat the policy and

purpose of the Code. Therefore, a
literal interpretation is to be rejected if
it would be unjust or lead to absurd
results. . . .
It is worthy to mention that decisions
of
our
courts
have
frequently
enunciated the principle that the
intent of the legislature will govern.
Thus, the Corporation Code should be
given a judicious, not stern and
discordant interpretation, which will
promote and uplift the development of
trade
relations
and
which
will
encourage
friendly
commercial
intercourse
among
corporations
provided that its primordial end
(protection of public interests) is
served.

The updating of the set of

instruction by which to operate the
medium of the corporation can be
located in decisions of the Supreme
Court that have
INTRODUCTION (3)
reviewed
and
evaluated
the
contemporary
workings
of
the
corporate
vehicle
in
actual
controversies
and
commercial
transactions that have applied and
tinkered with its various facets.

ln another way of looking at it, since

the Corporation Code has for its
subject matter the corporation,
which is a"medium or tool" of doing
business, then the Code may be
viewed
as
the
manual
of
instructions by which to properly
operate the medium or the tool, that is
the corporation.

The study Of Philippine Corporate Law,

and the interpretation and application
of the various provisions of the
Corporation Code and other suppletory
statutory provisions, should therefore
take their approach on what the
Philippine Supreme Court held in a
leading cases that [t]he Corporation
Law must be given a reasonable, not
an unduly harsh, interpretation which
does not hamper the development of
trade relations and which fosters more
friendly
commercial
intercourse
among countries.

The corporation, however, is not a

static medium, but one that is
dynamic and continues to evolve in
response to the needs and demands of
businessmen,
entrepreneurs
and
investors, in particular, and society in
general,
in
the
ever-changing
transactions
and
elds
of
the
commercial world.

The objectives . . . are even more

relevant
today
when
we
view
commercial relations in terms of a
world economy, when the tendency is
to re-examine the political boundaries
separating one nation from another
insofar as they dene business
requirements or restrict marketing
conditions.

It should be expected that after a

given period, some portion of the
Corporation Code would have become
outdated or outmoded, by its original
provisions as a manual of instructions,
the Code would not have kept up-todate with the changes that have
affected the corporate vehicle and the
commercial world.

ln essence, Philippine Corporate Law

should be a dynamic system that
meets the developmental needs of a
country competing in a globalized
setting.
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