Corporation Law: The Revised Corporation Code of the Philippines - Sec 18

 THE REVISED CORPORATION CODE  OF THE PHILIPPINES  

Republic Act No. 11232 

TITLE II -  INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

Sec. 18. Registration, Incorporation and Commencement of Corporation Existence. -

A person or group of persons desiring to incorporate shall submit the intended corporate name to the Commission for verification. If the Commission finds that the name is distinguishable from a name already reserved or registered for the use of another corporation, not protected by law and is not contrary to law, rules and regulation, the name shall be reserved in favor of the incorporators. The incorporators shall then submit their articles of incorporation and bylaws to the Commission.

If the Commission finds that the submitted document s and information are fully compliant with the requirements of this Code, other relevant laws, rules and regulations, the Commission shall issue the certificate of incorporation.

A private corporation organized under this Code commences its corporate existence and juridical personality from the date the Commission issues the certificate of incorporation under its official seal thereupon the incorporators, stockholders/members and their successors shall constitute a body corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in accordance with law.

NOTES 

1. Certificate of Incorporation.

• The issuance of the certificate of incorporation by the Securities and Exchange Commission marks the commencement of the corporate term of corporations incorporated under the RCCP. 
• The certificate of incorporation is therefore an indispensable requirement before corporate life can ensue. 
• It is only then that the incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the name stated in the articles of incorporation for the period of time mentioned therein.
• There is no corporation to speak of prior to an entity's incorporation. And no contract entered into before incorporation can bind the corporation.
• Thus, a "Management Contract" providing for specific benefits to a General Manager that was entered into before incorporation is not binding on a corporation. 
• The corporation may be bound if there is proof that the corporation adopted, ratified or confirmed the "Management Contract" after incorporation. 
• A certificate of incorporation from the SEC is not necessary if the corporation is created through special law. 
• If a corporation is created by a special law without imposing a condition precedent, corporate existence commences as soon as the law takes effect and is expressly or impliedly accepted.
• If the act requires organization or the performance of conditions precedent, corporate existence commences only when there has been substantial performance.

2. Contract Law in Corporate Law.

• Ordinarily, a non-existent person cannot be a subject of a contract or transaction. 
• Thus, it is only after the issuance of the certificate of registration that a corporation can transact business. 
• Nevertheless, it is a peculiarity of corporate law that certain contracts may bind a corporation even if the same are entered into before incorporation. 
• For example, the RCCP makes irrevocable pre-incorporation subscription agreement for a period of six months.
• A subscription agreement is a contract between the corporation and the the subscriber.
• The law makes the pre-incorporation subscription agreement binding even if one of the parties - the corporation - is still legally non-existent.

Other Binding Pre-Incorporation Contracts.

• There are also other instances when both the corporation and the other party to a contract may be bound by pre-incorporation contracts even if the contracts were entered into before the corporation secured its Certificate of Incorporation.
• A contracting party, for instance, cannot claim that the contract is the personal contract of the officer who signed the agreement if it knew all along that the contract is supposed to be a corporate contract. 
• The fact that the corporation was only incorporated after the contract was entered into was not controlling because the contracting party is estopped from claiming that the contract (like lease) is not intended for the corporation.
• The corporation, on the other hand, is bound because it is deemed to have ratified the contract after its incorporation especially since it enjoyed all the contractual rights.

3. Promoters.

• Similarly, contracts entered into by the promoter may, in certain cases, bind a corporation. 
• The general rule, however, is that the acts of the promoter are not binding on the corporation that will be organized. 
• A basic definition of the term promoter can be found in the Securities Regulations Code (SRC for short). Under said  law, promoters are persons who, acting alone or with others, take initiative in founding and organizing the business or enterprise.
• However, the definition in the SRC pertains to the organization of issuer of securities and presupposes payment of consideration to the promoter.
• Promotional activities include:
1. Discovery
• consists of finding the business opportunity to be developed.
2. Investigation
• entails an analysis of the proposed business to determine whether or not it is economically feasible
3. Assembly
•  includes the bringing together of the necessary personnel, property and money to set the business in motion as well as the secondary details of setting up the corporation itself.
• Promoters could not act as agents for a projected corporation since that which has no legal existence could have no agent.
•  A corporation, until organized, has no life and therefore no faculties. 
• It is, as it were, a child in ventre sa mere. 
• in his/her mother's womb
• This is not saying that under no circumstances may the acts of promoters of a corporation be ratified by the corporation if and when subsequently organized. There are, of course, exceptional cases when a corporation can be deemed to have expressly or impliedly ratified the acts of promoters.
• It was further explained that a corporation should have a full and complete organization and existence as an entity before it can enter into any kind of a contract or transact any business.
• It should be pointed out, however, that the rule is not absolute and under certain circumstances the acts of promoters of a corporation may be ratified or accepted by the corporation if and when subsequently organized. 
• It will be noted that American courts generally hold that a contract made by the promoters of a corporation on its behalf may be adopted, accepted or ratified by the corporation when organized.
• The stockholders and the corporation cannot be held personally liable for the compensation claimed by the promoter for the services performed by him in the organization of the corporation. Even if the stockholders benefited from such services of the promoter, there is no justification to hold them personally liable therefor. 
• Nevertheless, any benefit derived by a promoter for the corporation should be given to the corporation.
• In a sense, promoters sustain a fiduciary relationship to the subscribers, the corporation and the stockholders and cannot deal unfairly with them or retain any secret profit.
• The promoter cannot appropriate for himself any b n fit that properly pertains to the corporation. 
• For example, the promoter must account for profits derived from transactions entered into in behalf of the prospective corporation.

4. Underwriters

• Promoters must be distinguished from underwriters. 
• An underwriter is a person who guarantees on firm commitment and/or declared best effort basis the distribution and ale of securities of any kind by another company.