Business Law Week 1 Module

PHILIPPINE WOMEN’S UNIVERSITY
CDCEC-TARLAC
FIRST WEEK MODULE
2ND SEMESTER AY 2019-2020
BUSINESS LAW
I. PRETEST
Without looking at your notes, kindly answer the following questions:
1. What is a Corporation?
2. What is the meaning of a “strong legal personality”?
II. LECTURE
Objectives:
At the end of this module, the students are expected to:

a. Understand the nature of a corporation; and
b. Identify the advantages and disadvantages of a corporate form.
Lecture Proper:
What law governs corporations?

 Republic Act 11232, or the Act Providing for the Revised Corporation Code of the
Philippines, was signed into law by President Rodrigo R. Duterte on 21 February
2019. It amends a 38-year-old Corporation Code in an effort to improve the ease
of doing business in the Philippines.
How did the abovementioned law define “corporation”?

 Under Section 2: A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.
By this definition alone, you can already have an idea of what corporation is:
 It is an artificial being.
o A corporation is an artificial being. Hindi siya natural. Wala siyang pisikal
na katawan na parang tao at wala itong sariling pag-iisip. So, it is
separate from the people that composes it. Meron siyang sariling
personality na hiwalay sa personalities ng mga tao na nagpapatakbo sa
kanya.
 It is created by operation of law.

o Ang corporation ay hindi natural dahil likha lamang siya ng batas.
 It has the right of succession.

o What does that mean? What are the forms of dissolution of a partnership?
One form? Death of a partner in a partnership. Now, death of a
stockholder does not dissolve the corporation kaya siya may right of
succession. Because even if namatay pa ang mga stockholders, it still
operates.
 It has limited powers.
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CDCEC-TARLAC
FIRST WEEK MODULE
BUSINESS LAW
o Dahil siya ay likha rin ng batas, nakalagay rin sa batas ang mga limitasyon
ng isang corporation. Ibig sabihin, hindi pwede gawin ng corporation lahat
ngf gusto niya. Dapat parin na sumusunod sa batas.
What are the advantages and disadvantages of the Corporate Form?
ADVANTAGES DISADVANTAGES
1. Strong Legal Personality 1. Abuse of Corporate Management
2. Centralized Management 2. Abuse of Limited Liability feature
3. Limited Liability to the investors 3. High cost of maintenance
4. Free Transferability of units of 4. Double Taxation
investment 5. Lack of Personal Element
Let’s first go to the advantages:
1. Strong Legal Personality

 The corporation has a legal capacity to act and contract as a distinct unit in its
own name; and has continuity of existence.
 Ang isang personality ng corporation ay iba sa personality ng mga stockholders.
May sarili rin itong funds. Kung may utang ito, hindi pwedeng dumiretso na
maningil sa mga stockholders.
 The law treats the corporation as though it were a person by process of fiction or
by regarding it as an artificial person distinct and separate from its individual
stockholders.
2. Centralized Management
 Sino ba ang nagma-manage ng isang corporation? Ito ay ang Board of Directors
or Board of Trustees.
 The exercise of corporate powers of the corporation rest in the Board of
Directors or Trustees save in those instances where the Corporation Code
requires stockholder’s approval for certain specific acts.
3. Limited Liability to the investors

 The liability in a corporation is limited to their shares.
 One of the advantages of the corporation is the limitation of an investor’s liablity
to the amount of investment, which flows from the legal theory that a corporate
entity is separate and distinct from its stockholders.
 Example nito ay kung ang isang director ay umutang para sa corporation at
ginawa niya ito in his official capacity. In case na sisingilin na ang payment, hindi
personally liable ang director sa utang kundi kukunin sa funds ng corporation
ang pambayad ng nasabing utang.
 Advantage ito kasi kung gusto mo mag-invest sa isang corporation, hindi mo na
aalahanin na may maghahabol sayo in case na hindi makapagbayad ng utang
ang isang corporation. Ang habol lang sa iyo ay ang hanggang amount ng share
mo lang sa corporation.
4. Free Transferability of units of investment
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CDCEC-TARLAC
FIRST WEEK MODULE
BUSINESS LAW
 As a general rule, the shares of stocks can be transferred without the consent of
other stockholders. This places more liquidity in the corporate setting and
encourages investors to channel their investments through corporate vehicles.
 May freedom ang directors kung saan gagamitin ang pera na na-invest ng isang
investor. (Syempre may limitation rin ito depende sa napag-usapan nila)
 Advantage ito kasi mas magiging “liquid” ang corporation at madali na
makahikayat ng iba pang investors.
Now, for the disadvantages:
1. Abuse of Corporate Management

 In a practical sense, investors have very little voice over the conduct of business
of the corporation.
 Remember na ang nagma-manage ay ang Board kaya kung isa kang investor at
ayaw mo ang ginagawa ng board pero hindi naman labag sa batas ginagawa
nila, medyo mahihirapan ka na mag-voice out ng gusto mo. Syempre may mga
remedies parin na available under the law. I will discuss that in the next
modules.
2. Abuse of Limited Liability feature

 Minsan inaabuso itong feature na ito at nadadamay ang mga inosente. Lalong
lalo na kung talagang may kasalanan ang corporation. Ginagawa kasi itong shield
ng corporation. Ngunit hindi naman huli ang lahat at may remedies available pa.
I will also discuss it in the next modules.
3. High cost of maintenance

 Hindi mura ang pag-maintain ng isang corporation. Complicated and costly ang
formation and maintenance ng isang corporation.
 Higit sa lahat, mas mataas ang degree of control ng gobyerno sa mga
corporation kumpara sa partnership at sa mga negosyante na sole proprietor.
4. Double Taxation
 Ito ang isa sa mga dahilan bakit mahal ang pag-form ng isang corporation.
 Bukod sa corporate income tax na kailangan bayaran, kailangan rin magbayad
ng mga stockholders ng income taxes nila.
5. Lack of Personal Element

 Dahil nga ang nagma-manage ay ang Board at alam natin na artificial being
lamang ang isang corporation, ang goal lang nito ay kumita kaya minsan
nagiging irresposable sila at nakakasakit na ng ibang tao or nakakasira na sa
kalikasan.
III. EXERCISE
Essay Type:
In answering the questions below, kindly explain and provide with legal basis. A mere
“yes” or “no” answer will not merit any points.
Facts of the case:
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CDCEC-TARLAC
FIRST WEEK MODULE
BUSINESS LAW
Bong Gora, Cynthia Bilyar, Peter Cathuman, Bato dela Rose, and Manny Pacayaw are all
duly elected members of the Board of Directors of Corona Corporation. Koko Paminta,
the general manager, entered into a face mask supply contract with a Chinese
company. The contract was approved by the Board of Directors. However, with the
knowledge and consent of Koko Paminta, no deliveries were made to the Chinese
Company. As a result of the non-delivery of the promised supplies, the Chinese
Company incurred damages. The Chinese Company would like to file a suit for
damages.
Questions:
Can the Chinese Company sue:
(a) The members of the Board of Directors individually, because they approved the
transaction?
(b) The corporation?
(c) Koko Paminta, the general manager, personally, because the non-delivery was with
his knowledge and consent?
IV. POST EVALUATION
Read the case of Joselito Hernand M. Bustos v. Millians Shoe, INC., et. Al., which was
decided by the Supreme Court on April 4, 2017.
Make a case digest or summary. Only focus on the issue of the doctrine of separate
juridical personality.
The case can be found in the link below:

https://lawphil.net/judjuris/juri2017/apr2017/gr_185024_2017.html
Prepared By: Noted: Approved:
ROSEL JOY A. PROVIDO DR. MARK ANTHONY R. CASEM DR. LUISITO G. DE JESUS
Instructor Dean of Studies School Administrator
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PHILIPPINE WOMEN’S UNIVERSITY

Without looking at your notes, kindly answer the following questions:

At the end of this module, the students are expected to:

What law governs corporations?

How did the abovementioned law define “corporation”?

 It is created by operation of law.

 It has the right of succession.

 It has limited powers.

What are the advantages and disadvantages of the Corporate Form?

Let’s first go to the advantages:

1. Strong Legal Personality

3. Limited Liability to the investors

4. Free Transferability of units of investment

Now, for the disadvantages:

1. Abuse of Corporate Management

2. Abuse of Limited Liability feature

3. High cost of maintenance

5. Lack of Personal Element

Facts of the case:

Can the Chinese Company sue:

(b) The corporation?

IV. POST EVALUATION

The case can be found in the link below:

Prepared By: Noted: Approved:

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