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Types and Classifications of Corporations

Dec 13, 2024

Revised Corporation Code - Part 2: Classes of Corporations

Introduction

  • Focus on the current law: Republic Act 11232, the Revised Corporation Code.
  • No discussion on old corporation law except for reference.
  • Educational purposes only, not a substitute for legal advice or comprehensive study.

Corporation Basics

  • A corporation is created by law, requiring a special grant from the state (legislature or congress).
  • Grants can be through general law (for private corporations) or special law/charter (for public corporations).

Types of Corporations

Public vs. Private Corporations

  • Public Corporations: Created to perform governmental functions, governed by specific laws unless supplemented by the Revised Corporation Code.
    • Example: Government Service Insurance System (GSIS)
  • Private Corporations: Organized by private individuals, classified as stock or non-stock corporations.

Corporation Classifications

  • Stock Corporations: Have capital stock divided into shares; distribute dividends based on shares.
  • Non-Stock Corporations: No income distributed as dividends; organized for charitable, religious, educational, or similar purposes.

Par Value vs. No Par Value Corporations

  • Par Value Corporations: Share value is stated in the articles of incorporation and generally unchangeable.
  • No Par Value Corporations: Share value can change, determined by the corporation.

De Jure vs. De Facto Corporations

  • De Jure Corporations: Formed in strict conformity with law; their existence cannot be challenged.
  • De Facto Corporations: Defectively formed; substantial compliance allows them to exist without collateral challenge.
  • Corporation by Estoppel: Protects third parties relying on the perceived corporate existence.

Other Types

  • Quasi-Public Corporations: Private corporations performing public duties for profit.
  • Quasi-Corporations: Bodies recognized by law with specific duties or privileges.
  • Corporations by Prescription: Exercised corporate powers without sovereign interference (e.g., Roman Catholic Church).

Incorporation and Management

Domestic vs. Foreign Corporations

  • Domestic: Formed under Philippine laws.
  • Foreign: Formed under foreign laws, allowed operations in the Philippines if reciprocal.

Open vs. Closed Corporations

  • Open Corporations: Open to any stockholder.
  • Closed Corporations: Limited stockholders, specific transfer restrictions.

Holding, Subsidiary, and Affiliate Corporations

  • Holding Corporations: Control subsidiaries through management election power.
  • Subsidiary Corporations: Owned more than 50% by another corporation.
  • Affiliate Corporations: Related by ownership, management, or long-term lease.

Aggregate vs. Corporation Sole

  • Aggregate Corporations: More than one member.
  • Corporation Sole: Single member, usually for religious purposes.

One-Person Corporation

  • New concept allowing single member corporation, providing limited liability protection.
  • Certain entities (e.g., banks, insurance companies) are prohibited from forming one-person corporations.

Corporation by Purpose

  • Ecclesiastical Corporations: Organized for religious purposes.
  • Lay Corporations: Organized for non-religious purposes.
  • Eleemosynary Corporations: Charitable purposes.
  • Civil Corporations: Profit-driven purposes.
  • Condominium Corporations: Organized for residential or office building construction.

Conclusion: Understanding the different classes of corporations and their specific legal requirements is crucial for legal professionals and stakeholders involved in corporate structures.

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