Explanation of The RCCP For BUSLAW II

Explanation of the RCCP for BUSLAW II
The Corporation
Of course, we start with the corporation. In the Philippines, the primary governing law
is the Revised Corporation Code of the Philippines (RCCP), or R.A. 11232.
This is what you will study. If you’re asking yourself, what should I expect in Corp. Law?
The answer is really just the provisions of the RCCP, jurisprudence on provisions of
the RCCP, and SEC Memorandum Circulars. No cool bonus laws, at least in my
experience.
The RCCP defines a corporation as “an artificial being created by operation of law,
having the right of succession and the powers, attributes, and properties
expressly authorized by law or incidental to its existence.” (Sec. 2)
The definition is a mouthful, but it can be divided into four parts: (attributes are:)
1. It is an artificial being. This means it isn’t a natural person, unlike you and me.
But as an artificial being (or a juridical person), the corporation is considered a
person in the eyes of the law. That also means it has a separate personality from
the natural persons who govern and comprise it. As a consequence, the
corporation is generally responsible for its obligations, so its stockholders or
members (the natural persons) are protected and cannot be held liable for
corporate obligations.
2. It is created by operation of law. This means the law gives it its personality, so
it basically has to follow what the law says.
3. It has the right of succession. This means that it remains the same artificial
being even if there are changes in its stockholders or members. It doesn’t
become a new corporation just because all its stockholders or members got
replaced.
4. It has the powers, attributes, and properties which are either (a) expressly
authorized by law, or (b) incidental to its existence. This means that corporations
have limited powers, attributes, and properties. They have only those (1)
expressly authorized/granted by law, or (e) incidental to its existence (i.e.,
incidental to the fact that it is a corporation). For example, corporations can’t get
married, since the law doesn’t expressly grant that, nor is it incidental to its
existence.
Corporations need to file Articles of Incorporation. (Sec. 13) The Articles is a required
document for the formation of a corporation, and it governs the corporation and its
components. Anyway, you can see it as the Constitution of the corporation. The Articles
contains the corporation name, purpose, office, term, incorporators, etc. The full list of
its contents of the Articles can be found in Sec. 13, which you should go through to get
a better understanding of what it is.
Anyway, under the RCCP (unlike before) one person can create a corporation (Sec.
116). It’s pretty cool because unlike in a single proprietorship where the owner is
basically personally liable all the time for business obligations, in a one person
corporation, the single stockholder can be protected and have the corporation held
liable instead.
A corporation generally has perpetual existence, unless a specific corporate term is
elected (Sec. 11). In other words, there is no limit for how long a corporation can exist. It
goes on forever unless otherwise terminated.
Stocks and Shares (this one, I really wish I understood at first)
Corporations may be either Stock or Non-stock. (Sec. 3)
(We’ll divide this definition, don’t worry) Under Sec. 3, Stock corporations are those
which have capital stock divided into shares and are authorized to distribute to the
holders of such shares, dividends or allotments of the surplus profits on the basis of the
shares held. All other corporation are non-stock corporations.
Again, another overwhelming definition for those with no background of corporations. I
don’t know why our lawmakers prefer constructing their sentences that way.
Let’s divide the definition of stock corporations. It has two elements: stock corporations
(a) have capital stock divided into shares, and (b) are authorized to distribute dividends
or surplus profits to the shareholders.
If one or both elements are missing, then the corporation is non-stock.
For letter (a), there are two concepts: capital stock, and shares.
Under Sec. 13, the Articles of Incorporation of a stock corporation must contain the
amount of its authorized capital stock and the number of shares into which it is divided.
What is an authorized capital stock? It has been defined as the amount fixed in the
Articles to be subscribed and paid by the stockholders of the corporation.
Basically, it is a number (in pesos) provided in the Articles, which will be divided into
shares. The shares are sold to shareholders. So the shareholders own shares of stock.
They own a share of the stock of the corporation. (In case this is a little confusing, I
have an illustrated example at the end of this part, if that helps!)
For example, in the Articles, let’s say that the authorized capital stock of a corporation is
P1,000,000. It is divided into 1,000 shares. Hence, the corporation can issue until 1,000
shares. If all 1,000 shares are already issued to other people (who are called
stockholders or shareholders), the corporation can no longer issue shares, unless it
increases the authorized capital stock of the corporation, which can be done by
amending the Articles.
How much do the shares cost? It depends. There are several values that are important.
We’ll focus on par value and market value. There are different kinds of shares, but for
simplicity, let’s assume all the shares are common shares (which are shares with no
extra privileges) with par value.
So first, par value. This is the amount (in pesos) assigned to a share, under the Articles.
Thus, as in our example earlier, the authorized capital stock is P1,000,000; the stock is
divided into 1,000 shares; the par value of each share is P1,000 (because P1,000,000
authorized capital stock divided by 1,000 shares = P1,000).
As you can see, the par value is just the number assigned to each share, according to
the Articles. It does not absolutely dictate how much a share is sold. It’s just the
minimum price.
On the other hand, the value that dictates how much a share is actually sold is the the
market value. Thus, the market value can be equal to or greater than the par value. The
market value is affected by the economy and income and other external factors.

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