Corporation Law: RCCP Title I Practice Q&A
Q: What is the Doctrine of Piercing the Veil of Corporate Fiction?
A: The Doctrine of Piercing the Veil of Corporate Fiction allows the court to disregard the separate legal personality of a corporation when it is abused or used to justify wrong, protect fraud, or evade legal obligations. This doctrine treats the corporation and its principal as one legal entity in such cases.
Q: Under what circumstances can the Doctrine of Piercing the Veil of Corporate Fiction be applied?
A: The doctrine can be applied when corporate identity is used to defeat public convenience, justify wrong, protect fraud, or defend crime. It can also be invoked when a corporation is a mere alter ego or business conduit of a natural person or another corporation.
Q: What is the difference between Traditional Veil-Piercing and Reverse Piercing?
A: Traditional Veil-Piercing occurs when a court disregards the corporate entity to hold corporate insiders liable for corporate obligations. Reverse Piercing happens when a party seeks to reach the assets of a corporation to satisfy claims against a corporate insider, either in Outsider Reverse Piercing or Insider Reverse Piercing.
Q: What are the factors that justify the application of the Doctrine of Piercing the Veil of Corporate Fiction?
A: The factors include commingling of funds, diversion of corporate assets for personal use, failure to maintain corporate formalities, identical ownership in multiple entities, and using the corporation as a shield for illegal activities.
Q: Can the Doctrine of Piercing the Veil of Corporate Fiction be applied in cases involving subsidiaries and parent corporations?
A: Yes, if a subsidiary is merely an instrumentality or alter ego of the parent corporation, the Doctrine of Piercing the Veil can be applied, making the parent corporation liable for the subsidiary's obligations.
Q: What is the significance of the Totality of Circumstances Test in applying the Doctrine of Piercing the Veil of Corporate Fiction?
A: The Totality of Circumstances Test focuses on various factors such as commingling of funds, common ownership, and disregard of legal formalities to determine the applicability of the doctrine. Each case is decided based on its unique set of facts.
Q: Can the Doctrine of Piercing the Veil of Corporate Fiction be invoked in insolvency cases?
A: Yes, if it can be proven that the corporation was used as a mere instrumentality to commit fraud or wrong, the doctrine can be applied in insolvency cases to make shareholders or officers personally liable.
Q: What role do probative factors play in cases involving the Doctrine of Piercing the Veil of Corporate Fiction?
A: Probative factors are essential in proving fraud or abuse of corporate form. These factors include stock ownership, identity of directors and officers, record-keeping methods, and business conduct.
Q: Can the Doctrine of Piercing the Veil of Corporate Fiction be applied retroactively?
A: No, the doctrine can only be invoked during a full-blown trial and cannot be applied retroactively to implead a person or corporation that was not part of the original parties.
Q: Who has the authority to pierce the corporate veil according to legal principles?
A: Courts and administrative tribunals, such as the NLRC, have the authority to pierce the corporate veil. Courts should be concerned with the reality of the corporate structure and its operation rather than just the formal legalities.
Q: What does it mean when it's said that a corporation's existence is artificial?
A: It means that a corporation does not have a physical existence; its personality is created by law and does not possess emotions, senses, or physical form.
Q: Can a corporation perform physical acts or commit omissions without involving natural persons?
A: No, due to its artificial nature, corporations can only perform actions through natural persons, such as the Board of Directors, officers, or employees.
Q: What are the primary rules of attribution when it comes to actions or knowledge acquired by individuals in a corporation?
A: The actions of the Board of Directors are treated as actions of the corporation. Acts of officers and employees can also be attributed to the corporation in proper cases.
Q: How is knowledge within a corporation attributed, and who should receive legal notices like summons?
A: Knowledge of facts acquired by an officer or agent within the scope of their authority is deemed notice to the corporation. Summons in civil cases may only be served to specific officers: President, General Manager, Corporate Secretary, Treasurer, In-House Counsel.
Q: Can a corporation be considered a citizen in the political law sense?
A: No, a corporation cannot be considered a citizen as citizenship in political law is limited to natural persons due to their capacity for allegiance and political rights.
Q: What are the two tests used to determine if a corporation is foreign or domestic?
A: The Aggregate/Control Test looks into the nationality, domicile, or residence of individuals who control the corporation, while the Entity/Place of Incorporation Test considers the nation where the corporation was incorporated.
Q: How does the Investment Test affect foreign ownership in certain activities or businesses?
A: The Investment Test limits foreign equity participation in specific activities. For example, in public utilities, the Constitution limits foreign equity to 40%, with at least 60% of the outstanding capital stock belonging to Filipinos.
Q: What is the Control Test, and how is the Grandfather Rule applied in determining a corporation's nationality?
A: The Control Test considers shares owned by corporations/partnerships with 60% Filipino ownership. The Grandfather Rule supplements this by breaking down the equity structure to determine ultimate Filipino ownership of a subsidiary corporation.
Q: Is there a situation where a corporation has no nationality?
A: Yes, in the case of a Corporation Sole, the Supreme Court ruled that it has no nationality as it acts only as an administrator of properties and does not possess nationality.
Q: Can a foreign corporation fully own land in the Philippines?
A: No, a foreign corporation cannot fully own land in the Philippines. The Constitution limits land ownership to Filipinos and corporations with at least 60% Filipino ownership. However, a foreign corporation can lease land.
Q: Can a foreign corporation manage a hotel beach resort in the Philippines?
A: Yes, a foreign corporation can manage a hotel beach resort in the Philippines. Management of a resort is not a nationalized activity, so there is no prohibition on foreign corporations managing resorts.
Q: Can a corporation recover moral damages?
A: Generally, a corporation cannot recover moral damages because it lacks feelings and emotions. However, in defamation cases, a corporation can recover moral damages if its reputation is debased, leading to humiliation in the business realm.
Q: What constitutional rights are applicable to corporations?
A: Corporations are entitled to constitutional rights such as due process, equal protection, protection against unreasonable searches and seizures, and protection against impairment of contracts. However, purely personal rights and liberties like the right against self-incrimination and liberty of abode and travel do not apply to corporations.
Q: Are corporations criminally liable under the Revised Corporation Code of the Philippines (RCCP)?
A: Yes, corporations are criminally liable under the RCCP. The law aims to instill corporate and civic responsibility, imposing corporate criminal liability and penalties for graft and corruption.
Q: Can corporations be punished for contempt?
A: Yes, corporations can be punished for contempt if they disobey court orders, and the SEC may hold a corporation and its responsible directors and officers in contempt.
Q: What are the Theory of Special Capacities and the Theory of General Capacities regarding a corporation's powers?
A: The Theory of Special Capacities states that a corporation can only exercise powers expressly authorized by law or incidental to its existence. The Theory of General Capacities suggests a corporation may exercise any and all powers that natural persons can.
Sec. 3. Classes of Corporations.
Sec. 4. Corporations Created by Special Laws or Charters.
Q: What are the different classifications of corporations recognized under the Revised Corporation Code (RCCP)?
A: The RCCP recognizes stock corporations, non-stock corporations, corporations created by special law, corporations created under a general law, and others including domestic corporations, foreign corporations, religious corporations, educational corporations, close corporations, and one-person corporations.
Q: What is the difference between a stock corporation and a non-stock corporation?
A: A stock corporation has a capital stock divided into shares, while a non-stock corporation has members but does not distribute any part of its income to its members.
Q: What types of corporations fall under the classification of "Corporation created by special law"?
A: Corporations directly created by Congress through a special law, as well as government-owned or controlled corporations, fall under this classification.
Q: What is a Close Corporation?
Answer: A Close Corporation is a corporation where all issued stock is held by not more than a specified number of persons (not exceeding 20), and there are restrictions on the transfer of stock. Additionally, it cannot list its stock on any exchange or make public offerings.
Q: Explain the concept of a Corporation Sole.
A: A Corporation Sole is a corporation consisting of only one person or member, usually the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder of a religious denomination. It is created to manage the affairs, property, and temporalities of a religious denomination, sect, or church.
Q: How is a One Person Corporation defined?
A: A One Person Corporation is a corporation with a single stockholder.
Q: What is the difference between a De Jure Corporation and a De Facto Corporation?
A: A De Jure Corporation is one organized in accordance with the legal requirements, whereas a De Facto Corporation is a corporation that is formed with a flaw in its incorporation but shows colorable compliance with the law.
Q: Can a corporation be considered a resident of a particular country or place?
A: Yes, a corporation can be considered a resident of a particular country or place for various purposes, such as taxation and venue rules.
Q: What is the distinction between a Public Corporation and a Private Corporation?
A: A Public Corporation is organized for the government of a portion of a state and serves the general good and welfare, while a Private Corporation is formed for some private purpose or benefit.
Q: Define Government-Owned or Controlled Corporations (GOCCs).
A: GOCCs are agencies organized as stock or non-stock corporations vested with functions relating to public needs, either governmental or proprietary in nature, and owned by the government directly or through its instrumentalities to the extent of at least 51% of its capital stock.
Q: What criteria must be met for the creation of private corporations through special laws according to the 1987 Constitution?
A: The creation of private corporations through special laws must meet the following criteria: the corporation must be government-owned or controlled, the creation must be in the interest of the common good, and the creation must meet the test of economic viability.
Q: How is the Philippine National Red Cross (PNRC) categorized?
A: The PNRC is considered sui generis, meaning it is a unique or special case. It is neither strictly private nor public in nature but serves as a private institution and a public service organization, an auxiliary of the government in the humanitarian field.
Q: What distinguishes a Subsidiary from an Affiliate in the context of corporations?
A: A Subsidiary is a corporation more than 50% of the voting stock of which is owned or controlled directly or indirectly by another corporation, which thereby becomes a parent company. An Affiliate is a corporation controlled by another corporation, either directly or indirectly, making the controlling corporation its parent company.
Q: How does a corporation become subject to the Doctrine of Immunity from Suit?
A: The application of the Doctrine of Immunity from Suit depends on whether the agency is engaged in a private or proprietary function or a governmental or sovereign function. Suits against state agencies engaged in private functions are not regarded as suits against the state.
Q: What is the significance of the distinction between Government-Owned or Controlled Corporations (GOCCs) and Government Instrumentalities?
A: GOCCs are corporations organized with corporate powers and are regarded as private corporations. Government Instrumentalities, on the other hand, are entities with corporate powers but are not considered corporations. They include agencies or instrumentalities of the government, such as MIAA, PPA, UP, and BSP.
Q: Explain the criteria for corporations to be declared as vested with public interest under the Revised Corporation Code.
A: Corporations vested with public interest include those listed with the Securities and Exchange Commission (SEC), banks, quasi-banks, pawnshops, corporations engaged in money service business, preneed, trust and insurance companies, and other financial intermediaries. The SEC considers factors such as minority ownership, nature of business operations, and public interest in determining public interest entities.
Q: What is the purpose of the RCCP's distinction between charted and non-charted Government-Owned or Controlled Corporations (GOCCs)?
A: The distinction between charted and non-charted GOCCs determines the jurisdiction and regulation of these entities. Charted GOCCs have their own charters primarily governing them, while non-charted GOCCs are incorporated under general laws like the Corporation Code, allowing the Securities and Exchange Commission to regulate them.
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