Lecture Notes: Incorporation of Private Corporations

Introduction

• Topic: Incorporation (creating a private corporation)
• Issuance by the SEC of Certificate of Incorporation is essential for juridical personality.
• Focus on regular private corporations; special rules apply to banks and foreign equity.
• Public corporations are created by Congress.

Components of a Corporation

1. Promoter
   • Helps form a corporation.
   • Not an agent of the corporation itself.
2. Corporators
   • Compose a corporation (stockholders or members).
3. Incorporators
   • Create the corporation and sign the Articles of Incorporation.

Legal Provisions

• Section 10 allows organizing a corporation with max 15 incorporators.
• Natural persons licensed to practice a profession can't form a corporation unless a special law allows it.
• Incorporators must be of legal age and own at least one share.

Steps in Creating a Corporation

1. Choose a Name
   • Must comply with Section 17, not misleading, or identical to existing names.
   • Submit to SEC for verification.
2. Draft Articles of Incorporation
   • Defines corporate charter and contractual relations.
   • Must include name, purposes, principal office, term, directors, stock details.

SEC Approval Process

• Articles must be filed after name verification.
• Grounds for SEC disapproval include unlawful purposes and false certification.

Components After Creation

1. Stockholders and Members
   • Owners of shares in a stock corporation.
2. Board of Directors
   • Exercise corporate powers.
3. Officers
   • President, treasurer, secretary, compliance officer.

Capitalization

• Differentiate between capital stock and capital.
• Types of shares: par value, no par value.
• Importance of subscribed capital for creditors.

Bylaws

• Internal governance rules.
• Can be filed with articles or separately, but often required together.

Additional Requirements

• Business permits from LGU, registration with BIR, SSS, Pag-ibig, PhilHealth.

Key Points

• Corporation begins existence upon SEC certificate issuance.
• De facto corporations exist with good faith compliance.
• Delinquent status may lead to revocation if inactive for 5 years.

Conclusion

• Incorporation involves multiple steps and compliance with legal requirements.
• Future topics: One-person corporations, different kinds of shares.