Revised Corporation Code of The Philippines: Republic ACT 11232
Revised Corporation Code of The Philippines: Republic ACT 11232
Revised Corporation Code of The Philippines: Republic ACT 11232
• Powers
– refer
to
Title
IV
sections
35
– 44.
Note
section
44
on
ultra
vires
acts
Classes
of
Corporations
• Stock
and
Non-‐Stock
(section
3)
• In relation to Non-‐Stock Corporation, refer to Title XI (sections 86-‐94)
• Refer
as
well
to
section
19
(De
Facto
Corporation),
section
20
(Corporation
by
Estoppel),
and
Title
XII
(Close
Corporation),
Title
XIII
(Special
Corporations
– Educational/Religious/
One
Person
Corporation)
Test
to
determine
whether
a
corporation
is
public
or
private
• Relate
to
Title
III
(Board
of
Directors);
Title
VII
(Stocks
and
stockholders)
• Each
share
shall
be
equal
in
all
respects
to
every
other
share,
except
as
otherwise
provided
in
the
Articles
and
in
the
Certificate
of
Stock.
• NO
share
may
be
deprived
of
voting
rights
except
those
classified
and
issued
as
preferred
or
redeemable
shares.
• Provided
that
there
shall
always
be
a
class
or
series
of
shares
with
complete
voting
rights.
Exceptions:
Where
non-‐voting
shares
may
still
vote
on
• Where
the
articles
of
incorporation
provide
for
non-‐voting
shares
in
the
cases
allowed
by
this
Code,
the
holders
of
such
shares
shall
nevertheless
be
entitled
to
vote
on
the
following
matters:
• 1.
Amendment
of
the
articles
of
incorporation;
• 2.
Adoption
and
amendment
of
by-‐laws;
• 3.
Sale,
lease,
exchange,
mortgage,
pledge
or
other
disposition
of
all
or
substantially
all
of
the
corporate
property;
• 4.
Incurring,
creating
or
increasing
bonded
indebtedness;
Exceptions:
Where
non-‐voting
shares
may
still
vote
on
• 5.
Increase
or
decrease
of
capital
stock;
• 6.
Merger
or
consolidation
of
the
corporation
with
another
corporation
or
other
corporations;
• 7.
Investment
of
corporate
funds
in
another
corporation
or
business
in
accordance
with
this
Code;
and
• 8.
Dissolution
of
the
corporation.
• Except as provided in the immediately preceding paragraph, the
vote necessary to approve a particular corporate act as provided in
this Code shall be deemed to refer only to stocks with voting rights.
• Share
or
series
of
shares
may
or
may
not
have
a
par
value
• The
following
are
NOT
allowed
to
issue
no
par
value
shares:
1. Banks
2. Trust
3. Insurance
4. Pre
need
companies
5. Public
Utilities
6. Building
and
Loan
Associations
7. Other
corporations
authorized
to
obtain
or
access
funds
from
the
public,
whether
publicly
listed
or
not
Preferred
Shares
• Shares
of
stock
issued
by
a
corporation
may
be
given
preference
in:
INCORPORATION
TEST
The
sovereignty
by
which
a
corporation
was
created,
under
whose
laws
it
was
organised,
determines
its
national
character,
and
the
fact
that
some
of
its
incorporators
were
residents
and
citizens
of
a
foreign
country
does
not
change
this
rule.
Note
section
140,
Definition
of
a
Foreign
Corporation
Section
176
– Stock
Ownership
in
corporations
Rule
in
this
jurisdiction
Control
Test
under
section
3
of
RA
7042
as
amended
by
RA
8179
otherwise
known
as
the
Foreign
Investment
Act
of
1991
Also
referred
to
as
the
“aggregate
test”
Shares
belonging
to
60%
of
the
capital
of
which
is
owned
is
Filipino
citizens
shall
be
considered
as
of
Philippine
nationality,
but
if
the
percentage
of
Filipino
ownership
is
less
than
60%,
only
the
number
of
shares
corresponding
to
such
percentage
shall
be
counted
as
of
Philippine
nationality.
Application
of
control
test
Exception
to
the
Control
Test,
but
can
be
applied
cumulatively
as
well.
Note
the
case
of
Narra
Nickel
Mining
Corporation
(2015)
Resort
to
the
Grandfather
Rule
is
necessary
if
doubt
exists
as
to
the
locus
of
the
“beneficial
ownership”
and
“control,”
particularly
n
cases
of
corporate
web
layering.
Application
of
the
rules
“Doubt”
refers
to
various
indicia
that
the
“beneficial
ownership”
and
“control”
of
the
corporation
do
not
in
fact
reside
in
Filipino
shareholders
but
in
foreign
stakeholders.
When
is
there
doubt:
1.
That
the
foreign
investors
provide
practically
all
the
funds
for
the
joint
investment
undertaken
by
these
Filipino
businessmen
and
their
foreign
partner;
2.
That
the
foreign
investors
undertake
to
provide
practically
all
the
technological
support
for
the
joint
venture;
3.
That
the
foreign
investors,
while
being
minority
stockholders,
manage
the
company
and
prepare
all
economic
viability
studies.
Nationality
Requirement
provisions
under
new
law
Names
and
Nationalities
of
Incorporators
must
be
stated
in
Articles
of
Incorporation
(section
13
),
Section
14
paragraph
11
(No
transfer
of
stock
or
interest
shall
reduce
ownership
of
Filipino
citizens…)
When
required
percentage
of
Filipino
ownership
of
the
capital
stock
under
existing
laws
or
the
Constitution
has
not
been
complied
with,
the
Articles
of
Incorporation
or
Amendment
may
be
disapproved
(section
16
[d.]
Section
176.
Stock
ownership
in
corporations.
NEDA
to
submit
report
to
congress
for
the
prevention
or
correction
of
errors
on
stock
ownership
requirements
if
the
corporate
vehicle
has
been
used
to
frustrate
the
law.
Power
of
Congress
Section
176.
Congress
may
set
maximum
limits
for
stock
ownership
to
prevent
anti-‐competitive
practices
as
provided
in
RA
10667
otherwise
known
as
the
“Philippine
Competition
Law”
Separate juridical personality
As
a
general
rule,
a
corporation
will
be
deemed
a
separate
legal
entity
until
sufficient
reason
to
the
contrary
appears.
But
the
rule
is
not
absolute.
A
corporation's
separate
and
distinct
legal
personality
may
be
disregarded
and
the
veil
of
corporate
fiction
pierced
when
the
notion
of
legal
entity
is
used
to
defeat
public
convenience,
justify
wrong,
protect
fraud,
or
defend
crime.
Siain Enterprises vs. Cupertino Realty Corp., et al., G.R. No. 170782, June 22, 2009
Separate
personality
The doctrine of piercing the veil of corporate entity applies when the
corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime or where a corporation is the mere alter
ego or business conduit of a person (Indophil Textile Mill Workers
Union-PTGWO vs.
Teodorico
P.
Calica,
G.R.
No.
96490,
February
3,
1992).
To disregard the separate juridical personality of a corporation, the
wrong-doing must be clearly and convincingly established. It cannot be
presumed
Del
Rosario
vs.
NLRC,
G.R.
No.
85416,
July
24,
1990;
James
Yu
vs.
National
Labor
Relations
Commission,
G.R.
Nos.
111810-‐11,
June
16,
1995
Nature
1. Control,
not
mere
majority
or
complete
control,
but
complete
domination,
not
only
of
finances
but
of
policy
and
business
practice
in
respect
to
the
transaction
attacked
so
that
the
corporate
entity
as
to
this
transaction
had
at
the
time
no
separate
mind,
will
or
existence
of
its
own.
2. Such
control
must
have
been
used
by
the
defendant
to
commit
fraud
or
wrong,
to
perpetuate
the
violation
of
a
statutory
or
other
positive
legal
duty,
or
dishonest
and,unjust
act
in
contravention
of
plaintiffs
legal
rights;
and,
3. The
aforesaid
control
and
breach
of
duty
must
proximately
cause
the
injury
or
unjust
loss
complained
of.
The
doctrine
of
piercing
the
corporate
veil
applies
only
in
three
(3)
basic
areas,
namely:
1)
defeat of public
convenience as when the corporate fiction is used
as a vehicle for the evasion of an existing obligation;
2)
fraud cases or when the corporate entity is used
to justify a wrong, protect fraud, or defend a crime;
or 3) alter ego cases, where
a
corporation
is
merely
a
farce
since
it
is
a
mere
alter
ego
or
business
conduit
of
a
person,
or
where
the
corporation
is
so
organized
and
controlled
and
its
affairs
are
so
conducted
as
to
make
it
merely
an
instrumentality,
agency,
conduit
or
adjunct
of
another
corporation.
Three
variants
to
the
doctrine
Identity
Doctrine
-‐ Unity
of
Interest
and
Ownership
that
independence
of
corporation
has
ceased
to
exist,
adherence
to
doctrine
will
defeat
justice
and
equity
Instrumentality
Rule
(Control
Test)
Alter
Ego
Doctrine
-‐ Corporation
is
a
mere
dummy,
unreal
or
a
sham,
serves
no
other
business
purpose
Totality
of
circumstances
test
Consider
all
circumstances
and
each
case
must
be
decided
on
its
own
set
of
facts.
Does
the
group
of
companies
have
a
personality
separate
and
distinct
from
its
component
corporations?
Group
of
Companies
refer
to
those
that
are
financially
related
to
one
another
as
parent
corporation,
subsidiaries
and
affiliates.
NO
separate
personality
distinct
from
each
of
the
aggregate
corporations,
except
in
cases
of
rehabilitation.
Note
RA
10142
“FRIA
Law”
Will the fact that a person acting as
President, Chairman and Treasurer of
the corporation justify already the
piercing of the veil of corporate
fiction based on the alter-ego
theory?
May the doctrine of piercing the veil
of corporate fiction apply to a
corporation not impleaded in the
suit?
Liability
FOR
TORT
• Section
30
– Liability
of
Directors,
Trustees
or
Officers
shall
be
jointly
and
severally
for
all
damages
resulting
therefrom
suffered
by
the
corporation,
its
stockholders
or
members
and
other
persons
• Section
130
– Liability
of
a
single
shareholder
shall
be
jointly
and
severally
for
the
debts
and
other
liabilities
of
the
OPC
should
the
said
stockholder
cannot
prove
that
the
property
of
the
OPC
is
independent
of
the
stockholder’s
property
Piercing
the
veil
of
Corporate
Fiction
under
the
New
Code
• Section
166
– Liability
of
Directors,
Officers,
Employees,
agents
or
representatives
are
engaged
in
graft
and
corrupt
practices.
• Natural or Juridical persons. Natural persons must be of legal age.
Shall
not
be
allowed
to
organize
a
corporation.
(section
10,
Title
II)
Not
allowed
to
organize
a
OPC
(sec.
116)
• 1.
Banks,
• 2.
Quasi-‐ Banks,
• 3.
Pre-‐Need,
• 4.
Trust,
• 5.
Insurance,
• 6.
Public
and
Publicly
listed
Companies
• 7.
Non-‐Chartered
GOCCs
• 8.
A
natural
person
who
is
licensed
to
exercise
a
profession
may
not
organize
a
OPC
for
the
purpose
of
exercising
such
a
profession
Number
and
Qualifications
(Private
Corporations)
• Section
10
– Not
more
than
15
may
organize.
• Qualifications
• One
Person
Corporation
organized
by
a
natural
person,
trust
or
estate
only
(section
116,
Chapter
III,
Title
XIII)
Corporate
Name;
Rules
and
Limitations
• Must
be
DISTINGUISHABLE
from
that
already
reserved
or
registered
for
the
use
of
another
corporation,
or
if
such
name
is
already
protected
by
law,
or
when
its
use
is
contrary
to
existing
law,
rules
and
regulations.
• No
corporate
name
shall
be
allowed
by
the
Commission
if
it
NOT
distinguishable
(section
17)
Corporate
Name
Ang
Mga
Kaanib
Sa
Iglesia
Ng
Dios
Kay
Kristo
Hesus
vs.
Iglesia
Ng
Dios
Kay
Cristo
Jesus,
G.R.
No.
137592,
December
12,
2001
Change
of
name
The
corporation,
upon
such
change
in
its
name,
is
in
no
sense
a
new
corporation,
nor
the
successor
of
the
original
corporation.
It
is
the
same
corporation
with
a
different
name,
and
its
character
is
in
no
respect
changed.
A
change
in
the
corporate
name
does
not
make
a
new
corporation,
and
whether
effected
by
special
act
or
under
a
general
law,
has
no
effect
on
the
identity
of
the
corporation,
or
on
its
property,
rights,
or
liabilities.
The
corporation
continues,
as
before,
responsible
in
its
new
name
for
all
debts
or
other
liabilities
which
it
had
previously
contracted
or
incurred.
Republic
Planters
Bank
vs.
Court
of
Appeals,
G.R.
No.
93073,
December
21,
1992
Property
right
A
corporation's
right
to
use
its
corporate
and
trade
name
is
a
property
right,
a
right
in
rem,
which
it
may
assert
and
protect
against
the
world
in
the
same
manner
as
it
may
protect
its
tangible
property,
real
or
personal,
against
trespass
or
conversion.
It
is
regarded,
to
a
certain
extent,
as
a
property
right
and
one
which
cannot
be
impaired
or
defeated
by
subsequent
appropriation
by
another
corporation
in
the
same
field.
The
name
of
a
corporation
is
essential
to
its
existence.
It
cannot
change
its
name
except
in
the
manner
provided
by
the
statute.
By
that
name
alone
is
it
authorized
to
transact
business.
The
law
gives
a
corporation
no
express
or
implied
authority
to
assume
another
name
that
is
unappropriated;
still
less
that
of
another
corporation,
which
is
expressly
set
apart
for
it
and
protected
by
the
law.
If
any
corporation
could
assume
at
pleasure
as
an
unregistered
trade
name
the
name
of
another
corporation,
this
practice
would
result
in
confusion
and
open
the
door
to
frauds
and
evasions
and
difficulties
of
administration
and
supervision.
Statutory
prohibition
EVEN IF IT CONTAINS ONE OR MORE OF THE FOLLOWING:
SEC,
shall
cause
the
removal
of
all
visible
signages,
marks,
advertisements,
labels,
prints
and
other
effects
bearing
such
corporate
name.
Upon
approval
of
new
corporate
name,
the
SEC
shall
cause
a
to
issue
a
new
certificate
of
incorporation
under
the
new
amended
name.
Consequences
of
non-‐compliance
Section 17 – SEC may hold the corporation and its responsible directors
or officers in contempt and/or hold them administratively liable, civilly
and/or criminally liable for failure to comply with the Commission’s order
to cease and desist from using a corporate name that has been
determined as not distinguishable.
Note
section
159
– Penalty
for
the
unauthorized
use
of
a
corporate
name.
Fine
ranging
from
P10,000.00
to
P200,000.00
Notes
on
Cease
and
Desist
Order
The
term
OCS
shall
mean
the
total
shares
of
stock
issued
under
binding
subscription
contracts
to
subscribers
or
stockholders,
whether
fully
or
partially
paid,
except
Treasury
Shares*
NO
minimum
capital
stock
requirement,
except
as
otherwise
specifically
provided
by
law
(section
12)
NO
more
requirement
on
25%
subscription,
NO
more
more
requirement
on
25%
paid-‐ in
capital
Note,
however
Section
16
(c.)
when
the
SEC
may
disapprove
an
Article
of
Incorporation
or
its
Amendment
– certification
concerning
the
amount
of
capital
stock
subscribed
and/or
paid
is
false.
Section
16
(c.)
must
be
read
in
relation
to
Section
37
(4th paragraph)
on
25%
of
the
increase
in
capital
stock
has
been
subscribed
and
that
at
least
25%
of
the
amount
subscribed
has
been
paid
in
actual
cash
or
that
the
property
valuation
is
is
equal
to
25%
of
their
subscription.
Subscription
Contract
(section
59,
Title
VII)
Any
contract
for
the
acquisition
of
unissued
stock
in
an
existing
corporation
or
a
corporation
still
to
be
formed
shall
be
deemed
a
subscription
contract,
notwithstanding
the
fact
the
parties
refer
to
it
as
a
purchase
or
some
other
contract.
(section
59)
Pre-‐Incorporation
Subscription
(section
60,
Title
VII)
Subscription
of
shares
in
a
corporation
still
to
be
formed
shall
be
irrevocable
for
a
period
of
at
least
6
months
from
the
date
of
subscription
.
Unless
all
the
other
subscribers
consent
to
the
revocation
or
the
corporation
fails
to
incorporate
within
the
same
period
or
within
a
longer
period
stipulated
in
the
contract
of
subscription.
The
articles
may
be
amended
by
the
vote
OR
written
assent
of
majority
of
the
Trustees
AND
at
least
2/3
of
the
members.
When
do
amendments
take
effect
The
amendments
shall
take
effect
upon
their
approval
by
the
Commission
OR
from
the
date
of
filing
with
the
said
Commission
if
not
acted
upon
within
6
months
from
the
date
of
filing
for
a
cause
not
attributable
to
the
corporation.
Grounds
for
disapproval
of
amendment
(sec.16)
If
the
same
is
not
compliant
with
the
requirements
PROVIDED:
That
the
Commission
shall
give
the
incorporators,
directors,
trustees
or
officers
a
reasonable
time
from
receipt
of
the
disapproval
within
which
to
modify
the
objectionable
portions
of
the
articles
or
amendment.
Grounds
for
Disapproval
The
by
laws
are
subordinate
to
the
Articles
and
the
Corporation
Code,
and
other
statutes.
Otherwise,
they
will
have
no
binding
effect.
In
case
of
conflict
between
the
by-‐laws
and
the
Code,
the
latter
shall
prevail.
Every
corporation
has
the
inherent
power
to
adopt
by-‐laws
'for
its
internal
government,
and
to
regulate
the
conduct
and
prescribe
the
rights
and
duties
of
its
members
towards
itself
and
among
themselves
in
reference
to
the
management
of
its
affairs.
Under
section
21
of
the
Corporation
Law,
a
corporation
may
prescribe
in
its
by-‐ laws
the
qualifications,
duties
and
compensation
of
directors,
officers
and
employees.
(John
Gokongwei,
Jr.
vs.
Securities
and
Exchange
Commission,
et
al.,
G.R.
No.
L-‐45911,
April
11,
1979
Vote
Requirement
for
valid
by-‐laws
and
Effectivity
Affirmative
vote
of
the
stockholders
representing
at
least
a
majority
of
the
OCS
Affirmative
vote
of
the
majority
of
the
members
in
a
Non-‐Stock
Corporation
Effective
only
upon
issuance
by
the
Commission
of
a
certification
that
the
bylaws
are
in
accordance
with
the
code.
This
applies
as
well
to
amendments
of
by
laws.
Note
SEC
shall
not
accept
for
filing
the
by
laws
or
any
amendment
thereto
of
corporations
with
public
interest,
unless
accompanied
by
a
certificate
of
the
appropriate
government
agency
to
the
effect
that
such
by
–laws
or
amendments
thereto
are
in
accordance
with
law.
Contents
and
Amendments
Section 46
An arbitration agreement may be provided in the by-‐laws pursuant to section 181 of the code.
Section 47 on Amendment and Repeal of By-‐Laws, and Adopt New One
May
be
delegated
to
the
Board
by
the
owners
of
2/3
of
the
OCS
or
2/3
of
the
members
in
a
non-‐stock
Any
power
delegated
may
be
revoked
whenever
stockholders
representing
a
majority
of
the
members
of
the
OCS
or
members
shall
vote
at
a
regular
or
special
meeting.
Commencement
of
Corporate
Existence
From
the
date
the
SEC
issues
the
certificate
of
incorporation
under
its
official
seal.
Provided,
any
change
in
corporate
term
shall
not
prejudice
the
right
of
appraisal
of
dissenting
stockholders.
Corporate
Term
Corporate
term
for
a
specific
period
may
be
extended
or
shortened
by
amending
the
articles.
NO
extension
may
be
made
earlier
than
3
years
prior
to
the
date
of
original
or
subsequent
expiry
date,
unless
there
is
justifiable
reasons
Such
extension
shall
take
effect
only
on
the
day
following
the
original
or
subsequent
expiry
dates.
Revival
Yes,
upon
approval
by
the
SEC
and
upon
issuance
of
a
certificate
of
revival
giving
It
perpetual
existence.
Note
applications
for
revival
by
corporations
with
public
interest
must
be
accompanied
by
appropriate
regulatory
body.
Theory of General vs.Specific Capacity
A
corporation
is
not
restricted
to
the
exercise
of
powers
expressly
conferred
upon
it
by
its
charter,
but
has
the
power
to
do
what
is
reasonably
necessary
or
proper
to
promote
the
interest
or
welfare
of
the
corporation.
(National
Power
Corporation
vs.
Honorable
Abraham
P.
Vera,
Presiding
Judge,
Regional
Trial
Court,
National
Capital
Judicial
Region,
Branch
90,
Quezon
City
and
Sea
Lion
International
Port
Terminal
Services,
Inc.,
G.R.
No.
83558,
February
27,
1989)
General
Capacity
Providing
gratuity
pay
is
one
of
the
express
powers
of
the
corporation
under
the
Corporation
Code
and
therefore,
resolutions
passed
by
the
board
approving
the
grant
of
gratuity
pay
to
the
employees
of
the
corporation
during
a
meeting
where
one
of
the
directors
was
not
notified
thereof
are
not
ultra
vires.
The
grant
of
gratuity
pay
does
not
require
shareholders’
approval
as
it
is
not
tantamount
to
the
sale,
lease,
exchange
or
disposition
of
all
or
substantially
all
of
the
corporation's
assets.(Lopez
Realty,
Inc.,
and
Asuncion
Lopez
Gonzales
vs.
FlorentinaFontecha,
et
al.,
and
the
National
Labor
Relations
Commission,
G.R.
No.
76801
August
11,
1995)
General
Capacity
The
power
of
a
corporation
to
sue
and
be
sued
is
exercised
by
the
board
of
directors.
The
physical
acts
of
the
corporation,
like
the
signing
of
documents,
can
be
performed
only
by
natural
persons
duly
authorized
for
the
purpose
by
corporate
bylaws
or
by
a
specific
act
of
the
board.
Absent
the
said
board
resolution,
a
petition
may
not
be
given
due
course.(LigayaEsguerra,
et
al.
vs.
Holcim Philippines,
Inc.,
G.R.
No.
182571,
September
2,
2013)
General
Capacity
The
general
rule
is
that
a
corporation
can
only
exercise
its
powers
and
transact
its
business
through
its
board
of
directors
and
through
its
officers
and
agents
when
authorized
by
a
board
resolution
or
its
bylaws.
The
power
of
a
corporation
to
sue
and
be
sued
is
exercised
by
the
board
of
directors.
The
physical
acts
of
the
corporation,
like
the
signing
of
documents,
can
be
performed
only
by
natural
persons
duly
authorized
for
the
purpose
by
corporate
bylaws
or
by
a
specific
act
of
the
board.
Absent
the
said
board
resolution,
a
petition
may
not
be
given
due
course.
Esguerra
vs.
Holcim Philippines
G.R.
No.
182571,
September
2,
2013
Business
Judgment
Rule
The
authority
of
a
corporate
officer
in
dealing
with
third
persons
may
be
actual
or
apparent.
The
doctrine
of
"apparent
authority,"
with
special
reference
to
banks,
was
laid
out
in
Prudential
Bank
vs.
Court
of
Appeals,
G.R.
No.
108957,
June
14,
1993,
where
it
was
held
that:
"Conformably,
we
have
declared
in
countless
decisions
that
the
principal
is
liable
for
obligations
contracted
by
the
agent.
The
agent's
apparent
representation
yields
to
the
principal's
true
representation
and
the
contract
is
considered
as
entered
into
between
the
principal
and
the
third
person
(citing
National
Food
Authority
vs.
Intermediate
Appellate
Court,
G.R.
No.
75640,
April
5,
1990).”
Apparent
authority
is
derived
not
merely
from
practice.
Its
existence
may
be
ascertained
through
(1)
the
general
manner
in
which
the
corporation
holds
out
an
officer
or
agent
as
having
the
power
to
act
or,
in
other
words,
the
apparent
authority
to
act
in
general,
with
which
it
clothes
him;
or
(2)
the
acquiescence
in
his
acts
of
a
particular
nature,
with
actual
or
constructive
knowledge
thereof,
whether
within
or
beyond
the
scope
of
his
ordinary
powers.
It
requires
presentation
of
evidence
of
similar
act(s)
executed
either
in
its
favor
or
in
favor
of
other
parties.
It
is
not
the
quantity
of
similar
acts
which
establishes
apparent
authority,
but
the
vesting
of
a
corporate
officer
with
the
power
to
bind
the
corporation.
People's Aircargo and Warehousing Co. Inc. vs. Court of Appeals, G.R. No. 117847,
October 7, 1998;Inter-Asia Investments Industries, Inc. vs. Court of Appeals, G.R. No.
125778, June 10, 2003
source
of
power
and
authority
is
with
the
board
Whatever
authority
the
officers
or
agents
of
a
corporation
may
have
is
derived
from
the
board
of
directors
or
other
governing
body,
unless
conferred
by
the
charter
of
the
corporation.
A
corporate
officer's
power
as
an
agent
of
the
corporation
must
therefore
be
sought
from
the
statute,
the
charter,
the
by-‐laws,
or
in
a
delegation
of
authority
to
such
officer,
from
the
acts
of
the
board
of
directors,
formally
expressed
or
implied
from
a
habit
or
custom
of
doing
business.
Ignacio
Vicente
vs
Ambrosio
M.
Geraldez,
G.R.
No.
L-‐32473,
July
31,
1973
board
as
trustees
of
the
stockholders
-‐
fiduciary
The
board
of
directors
of
a
corporation
is
a
creation
of
the
stockholders.
The
board
of
directors,
or
the
majority
thereof,
controls
and
directs
the
affairs
of
the
corporation;
but
in
drawing
to
itself
the
power
of
the
corporation,
it
occupies
a
position
of
trusteeship
in
relation
to
the
minority
of
the
stock.
The
board
shall
exercise
good
faith,
care,
and
diligence
in
the
administration
of
the
affairs
of
the
corporation,
and
protect
not
only
the
interest
of
the
majority
but
also
that
of
the
minority
of
the
stock.
Where
the
majority
of
the
board
of
directors
wastes
or
dissipates
the
funds
of
the
corporation
or
fraudulently
disposes
of
its
properties,
or
performs
ultra
vires
acts,
the
court,
in
the
exercise
of
its
equity
jurisdiction,
and
upon
showing
that
intracorporate
remedy
is
unavailing,
will
entertain
a
suit
filed
by
the
minority
members
of
the
board
of
directors,
for
and
in
behalf
of
the
corporation,
to
prevent
waste
and
dissipation
and
the
commission
of
illegal
acts
and
otherwise
redress
the
injuries
of
the
minority
stockholders
against
the
wrongdoing
of
the
majority.
The
action
in
such
a
case
is
said
to
be
brought
derivatively
in
behalf
of
the
corporation
to
protect
the
rights
of
the
minority
stockholders
thereof.
Santiago
Cua,
Jr.,
et
al.
vs.
Miguel
Ocampo
Tan,
et
al.,
G.R.
Nos.
181455-‐56
&
182008,
December
4,
2009
corporate
powers
with
the
board
The
power
and
the
responsibility
to
decide
whether
the
corporation
should
enter
into
a
contract
that
will
bind
the
corporation
are
lodged
in
the
board
of
directors,
subject
to
the
articles
of
incorporation,
by-‐laws,
or
relevant
provisions
of
law.
However,
just
as
a
natural
person
may
authorize
another
to
do
certain
acts
for
and
on
his
behalf,
the
board
of
directors
may
validly
delegate
some
of
its
functions
and
powers
to
officers,
committees
or
agents.
The
authority
of
such
individuals
to
bind
the
corporation
is
generally
derived
from
law,
corporate
by-‐laws
or
authorization
from
the
board,
either
expressly
or
impliedly
by
habit,
custom
or
acquiescence
in
the
general
course
of
business.
Cebu
Mactan
Members
Center,
Inc.
vs.
Masahiro
Tsukahara,
G.R.
No.
159624,
July
17,
2009
delegation
to
be
valid
all
corporate
powers
are
exercised,
all
business
conducted,
and
all
properties
controlled
by
the
board
of
directors.
A
corporation
has
a
separate
and
distinct
personality
from
its
directors
and
officers
and
can
only
exercise
its
corporate
powers
through
the
board
of
directors.
Thus,
it
is
clear
that
an
individual
corporate
officer
cannot
solely
exercise
any
corporate
power
pertaining
to
the
corporation
without
authority
from
the
board
of
directors.
This
has
been
our
constant
holding
in
cases
instituted
by
a
corporation.
Cagayan
Valley
Drug
Corp.
vs.
Commissioner
of
Internal
Revenue,
G.R.
No.
151413,
February
13,
2008
Heirs of Fausto C. Ignacio vs. Home Bankers Savings and Trust Co., et al., January 2013
Just
as
a
natural
person
may
authorize
another
to
do
certain
acts
in
his
behalf,
so
may
the
board
of
directors
of
a
corporation
validly
delegate
some
of
its
functions
to
individual
officers
or
agents
appointed
by
it.
Thus,
contracts
or
acts
of
a
corporation
must
be
made
either
by
the
board
of
directors
or
by
a
corporate
agent
duly
authorized
by
the
board.
Absent
such
valid
delegation/authorization,
the
rule
is
that
the
declarations
of
an
individual
director
relating
to
the
affairs
of
the
corporation,
but
not
in
the
course
of,
or
connected
with,
the
performance
of
authorized
duties
of
such
director,
are
held
not
binding
on
the
corporation.
Absent
such
valid
delegation
or
authorization,
the
rule
is
that
the
declarations
of
an
individual
director
relating
to
the
affairs
of
the
corporation,
but
not
in
the
course
of,
or
connected
with,
the
performance
of
authorized
duties
of
such
director,
are
held
not
binding
on
the
corporation.
Theory
of
Specific
Capacity;
Specific
Powers
While
as
a
rule
an
ultra
vires
act
is
one
committed
outside
the
object
for
which
a
corporation
is
created
as
defined
by
the
law
of
its
organization
and
therefore
beyond
the
powers
conferred
upon
it
by
law,
there
are
however
certain
corporate
acts
that
may
be
performed
outside
of
the
scope
of
the
powers
expressly
conferred
if
they
are
necessary
to
promote
the
interest
or
welfare
of
the
corporation
such
as
the
establishment
of
the
local
post
office
which
is
a
vital
improvement
in
the
living
condition
of
the
employees
and
laborers
who
came
to
settle
in
a
mining
camp
which
is
far
removed
from
the
postal
facilities.
The
term
ultra
vires
should
be
distinguished
from
an
illegal
act
for
the
former
is
merely
voidable
which
may
be
enforced
by
performance,
ratification,
or
estoppel,
while
the
latter
is
void
and
cannot
be
validated.
(Republic
of
the
Philippines
vs.
Acoje
Mining
Company,
Inc.,
G.R.
No.
L-‐18062,
February
28,
1963)
Unlike
illegal
acts
which
contemplate
the
doing
of
an
act
that
is
contrary
to
law,
morals,
or
public
policy
or
public
duty,
and
are
void,
ultra
vires
acts
are
those
which
are
not
illegal
but
are
merely
not
within
the
scope
of
the
articles
of
incorporation
and
by-‐ laws.
They
are
merely
voidable
and
may
become
binding
and
enforceable
when
ratified
by
the
stockholders.
(Maria
Clara
Pirovana,
et
al.vs.the De
La
Rama
Steamship
Co.,
G.R.
No.
L-‐5377,
December
29,
1954)
Section
44