CORPORATION LAW

Part VIII

JGA Medina
Bus. Org II, Philippine Law School
 DISSOLUTION
Voluntary
• No Creditors Affected : 2/3 vote + publication
• Creditors Affected : 2/3 vote + publication and itemizing all
claims. SEC hearing.
• Expiration of Term : End of term w/out renewal or with 2/3 vote,
Shortening of corporate term.
Involuntary: Upon filing of a verified complaint and after proper notice
and hearing on the grounds provided by existing laws, rules and
regulations, SEC may revoke.
Company Registration and Monitoring Dept. v. Ching Bee Trading
G.R. No. 205291 (Notice), November 12, 2014

While the Court agrees that extension (including the SEC approval) must
happen before the expiration of the corporate term, the burden of doing so
does not only fall to the applicant, but also on the SEC. The requirement
pronounced in Alhambra, requiring that all steps must be undertaken while life
still subsists, is both the responsibility of the State, acting through the SEC, and
the corporation. To say that the corporation alone has this burden is unfair as
the Code does not impose this obligation solely on the corporation.

Therefore, so long as renewal filed before the expiry date, leads to renewal.
PNB v. CFI of Rizal
G.R. No. 63201, May 27, 1992

Upon the expiration of the period fixed in the articles of incorporation in the
absence of compliance with the legal requisites for the extension of the period,
the corporation ceases to exist and is dissolved ipso facto. When the period of
corporate life expires, the corporation ceases to be a body corporate for the
purpose of continuing the business for which it was organized. But it shall
nevertheless be continued as a body corporate for three years after the time
when it would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and of enabling it gradually to settle and close its
affairs, to dispose of and convey its property and to divide its assets. xxx When
such period expires and without any extension having been made pursuant to
law, the corporation is dissolved automatically insofar as the continuation of its
business is concerned.
Indian Chamber of Commerce Phils., Inc. v. Filipino Indian Chamber of
Commerce in the Philippines, Inc., G.R. No. 184008, August 3, 2016

When the term of existence of the defunct FICCPI expired on November

24, 2001, its corporate name cannot be used by other corporations within
three years from that date, until November 24, 2004. FICCPI reserved the
name "Filipino Indian Chamber of Commerce in the Philippines, Inc." on
January 20, 2005, or beyond the three-year period. Thus, the SEC was
correct when it allowed FICCPI to use the reserved corporate name
Section 122. Corporate liquidation. –

Shall continue as a body corporate for three (3) years after the time when it would have been so dissolved, for
the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to
dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the
business for which it was established.
During said three (3) years, is authorized and empowered to convey all of its property to trustees for the
benefit of stockholders, members, creditors, and other persons in interest. From and after any such
conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors
and others in interest, all interest which the corporation had in the property terminates, the legal interest vests
in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.
Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member
who is unknown or cannot be found shall be escheated to the city or municipality where such assets are
located.
Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any
of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.
Bio v. Intermediate Appellate Court, G.R. No. 71837, July 26, 1988

While we agree that the board of directors is not normally permitted to

undertake any activity outside of the usual liquidation of the business of the
dissolved corporation, there is nothing to prevent the stockholders from
conveying their respective shareholdings toward the creation of a new
corporation to continue the business of the old. Winding up is the sole activity
of a dissolved corporation that does not intend to incorporate anew. If it does,
however, it is not unlawful for the old board of directors to negotiate and
transfer the assets of the dissolved corporation to the new corporation
intended to be created as long as the stockholders have given their consent.
This was not prohibited by the Corporation Act. In fact, it was expressly allowed
by Section 28-1/2. xxxx
Alabang Development Corp. v. Alabang Hills Village Association

In the present case, petitioner filed its complaint not only after its
corporate existence was terminated but also beyond the three-year
period allowed by Section 122 of the Corporation Code. Thus, it is clear
that at the time of the filing of the subject complaint petitioner lacks the
capacity to sue as a corporation. To allow petitioner to initiate the subject
complaint and pursue it until final judgment, on the ground that such
complaint was filed for the sole purpose of liquidating its assets, would be
to circumvent the provisions of Section 122 of the Corporation Code.
 FOREIGN CORPORATIONS
• One formed, organized or existing under any laws other than those of the
Philippines.
• Must register with the SEC and secure license.
• Must maintain a Security Deposit with SEC (Sec Memorandum Circular No. 2,
Series of 2012)
• Must appoint a Resident Agent -
When the defendant is a foreign private juridical entity which is transacting or
has transacted business in the Philippines, service may be made on its
resident agent designated in accordance with law for that purpose, or, if there
be no such agent, on the government official designated by law to that effect,
or on any of its officers or agents within the Philippines.
Section 133. Doing business without a license. – No foreign
corporation transacting business in the Philippines without a license,
or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may
be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized
under Philippine laws.
FIA: Doing Business shall include:
• Soliciting orders, service contracts, opening offices, whether called "liaison" offices or
branches;
• Appointing representatives or distributors domiciled in the Philippines;
• In any calendar year stay in the country for a period totaling 180 days or more;
• participates in the management, supervision or control of any domestic business;
• Any other act or acts that imply a continuity of commercial dealings or arrangements;
Provided:
• Not be deemed to include mere investment as a shareholder by a foreign entity in
domestic corporations;
• Having a nominee director or officer to represent its interests in such corporation;
• Appointing a representative or distributor domiciled in the Philippines which transacts
business in its own name and for its own account.
Section 144. Violations of the Code. – Violations of any of the provisions of this Code or its amendments not
otherwise specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00)
pesos but not more than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days
but not more than five (5) years, or both, in the discretion of the court.
Lent v. Tullett Prebon (Philippines), Inc., G.R. Nos. 189158 & 189530, January 11, 2017
As Section 144 speaks, among others, of the imposition of criminal penalties, the Court is guided by the
elementary rules of statutory construction of penal provisions. xxx When there is doubt on the interpretation
of criminal laws, all must be resolved in favor of the accused. Since penal laws should not be applied
mechanically, the Court must determine whether their application is consistent with the purpose and reason of
the law." xxx

The Corporation Code was intended as a regulatory measure, not primarily as a penal statute. Sections 31 to 34
in particular were intended to impose exacting standards of fidelity on corporate officers and directors but
without unduly impeding them in the discharge of their work with concerns of litigation. Considering the
object and policy of the Corporation Code to encourage the use of the corporate entity as a vehicle for
economic growth, we cannot espouse a strict construction of Sections 31 and 34 as penal offenses in relation
to Section 144 in the absence of unambiguous statutory language and legislative intent to that effect.
Ang-Abaya v. Ang,
G.R. No. 178511, December 4, 2008
In order therefore for the penal provision under Section 144 of the Corporation Code to apply in a case of violation of a
stockholder or member's right to inspect the corporate books/records as provided for under Section 74 of the
Corporation Code, the following elements must be present:
• First. A director, trustee, stockholder or member has made a prior demand in writing for a copy of excerpts from the
corporation's records or minutes;
• Second. Any officer or agent of the concerned corporation shall refuse to allow the said director, trustee,
stockholder or member of the corporation to examine and copy said excerpts;
• Third. If such refusal is made pursuant to a resolution or order of the board of directors or trustees, the liability
under this section for such action shall be imposed upon the directors or trustees who voted for such refusal; and,
• Fourth. Where the officer or agent of the corporation sets up the defense that the person demanding to examine
and copy excerpts from the corporation's records and minutes has improperly used any information secured
through any prior examination of the records or minutes of such corporation or of any other corporation, or was not
acting in good faith or for a legitimate purpose in making his demand, the contrary must be shown or proved.
 DERIVATIVE SUIT CONCEPT & APPLICATION

A derivative action is a suit by a shareholder to enforce a corporate

cause of action. Under the Corporation Code, where a corporation is
an injured party, its power to sue is lodged with its board of directors
or trustees. But an individual stockholder may be permitted to
institute a derivative suit on behalf of the corporation in order to
protect or vindicate corporate rights whenever the officials of the
corporation refuse to sue, or are the ones to be sued, or hold control
of the corporation. In such actions, the corporation is the real party-
in-interest while the suing stockholder, on behalf of the corporation,
is only a nominal party.
Section 1, Rule 8 of A.M. No. 01-2-04-SC, otherwise known as the Interim Rules of
Procedure Governing Intra-Corporate Controversies under Republic Act No. 8799.

(1) The person filing the suit must be a stockholder or member at the time the acts or
transactions subject of the action occurred and the time the action was filed;

(2) He must have exerted all reasonable efforts, and alleges the same with particularity in
the complaint, to exhaust all remedies available under the articles of incorporation, by-
laws, laws or rules governing the corporation or partnership to obtain the relief he
desires;

(3) No appraisal rights are available for the act or acts complained of; and

(4) The suit is not a nuisance or harassment suit.

Florete, Jr. v. Florete,
G.R. No. 174909 & 177275, January 20, 2016

A stockholder may suffer from a wrong done to or involving a corporation,

but this does not vest in the aggrieved stockholder a sweeping license to
sue in his or her own capacity. The determination of the stockholder's
appropriate remedy — whether it is an individual suit, a class suit, or a
derivative suit — hinges on the object of the wrong done. When the
object of the wrong done is the corporation itself or "the whole body of
its stock and property without any severance or distribution among
individual holders," it is a derivative suit, not an individual suit or
class/representative suit, that a stockholder must resort to.
Florete Case:
A stockholder suing on account of wrongful or fraudulent corporate actions (undertaken through directors, associates,
officers, or other persons) may sue in any of three (3) capacities: as an individual; as part of a group or specific class of
stockholders; or as a representative of the corporation.
• Individual suits are filed when the cause of action belongs to the individual stockholder personally, and not to the
stockholders as a group or to the corporation, e.g., denial of right to inspection and denial of dividends to a
stockholder.
• If the cause of action belongs to a group of stockholders, such as when the rights violated belong to preferred
stockholders, a class or representative suit may be filed to protect the stockholders in the group.
• If a wrong is to the corporation itself, a derivative suit which is an action filed by stockholders to enforce a
corporate action. In a derivative suit, the real party in interest is the corporation, not the stockholders filing the suit.
The stockholders are technically nominal parties but are nonetheless the active persons who pursue the action for
and on behalf of the corporation.
The avenues for relief are, thus, mutually exclusive.
The determination of the appropriate remedy hinges on the object of the wrong done.