Hello, everyone. I understand you guys are having difficulty with the transport strike.

So instead
of requiring a meeting tonight, I will be providing you a video lecture on the topics that we're
supposed to discuss tonight, which is really classes of corporations. So this is like an offshoot of
your group presentations. So during your group presentations, you were able to adequately
discuss the nationality restrictions and the manner by which a Philippine national is
determined. So I hope you keep that in mind. As I've said, it's one of my, that the group
presentation, the topic of the group presentation, topics of the group presentations are some
of my favorite topics. So you can be sure you will encounter those either in the midterms or
finals.
So make sure you study the group presentation materials. And jumping off from that, now that
you have an understanding of the nationality of corporations, we go back to why is it, why it is
important to determine what the nationality of a corporation is. And as you know from the
group reports, it's important because there's certain undertakings or businesses that are
reserved to Philippine nationals. Therefore, you will have to determine whether a corporation is
a Philippine national or not. But other than determining whether a corporation is a Philippine
national or not, you also have to familiarize yourself with the different classes of corporations.
So far, we have been discussing in all the cases we've been studying, you know, you've heard
about stock corporations, etc.
But actually, Other than a stock corporation, there are different classes of corporations out
there, which you have to understand and familiarize yourself with. So to start off the lecture,
the jump-off point by which we will base this whole topic or this whole session would be on the
definition of the class on Section 3 of the revised corporation code, which provides the classes
of corporations. Under Section 3 of the Revised Corporation Code, it's actually a description of
what corporations are covered by our subject matter or our course. So, ano ba yung mga
private corporations? And under the RCC Section 3, there are two classes of corporations under
the Revised Corporation Code. That would be the stock corporation or the non-stock
corporation. So obviously stock corporations are those, and this is important, the definition is
important, are those which have capital stock divided into shares and are authorized to
distribute the holders of such shares, dividends or allotments of the surplus profit on the basis
of the shares held.
All other corporations are non-stock corporations.
So you will note that the way non-stock corporation is described is dependent on the definition
of the stock corporation. In short, what the RCC is telling you is if it's not a stock corporation,
then it must be a non-stock corporation. Bakit merong confusion or why is there a need to
distinguish? Because obviously, stock and non-stock corporations would have
different requirements and also their AOI, their bylaws would be different. For one, stock
corporations will have directors while non-stock corporations will have trustees. And the
number of directors and trustees will also be varying based on the kind of corporation. So let's
look at the stock corporation. And don't forget the definition under section 3, which provides
that stock corporations are those which have
Capital stock divided into shares and are authorized to distribute to the holders of the shares.
Dividends or allotments are served as profits on the basis of the shares held. So authorized
capital stock. That means that the capital stock of a stock corporation is divided into shares. So
that's your first clue. If a corporation has shares, then that would likely mean that it is a stock
corporation. But the definition is too pronged. The second part of the definition is that a stock
corporation should be specifically authorized to distribute dividends. So without this specific
authorization, magkakaroon ng issue whether corporation is really a stock corporation or a non-
stock corporation. And this is all the more seen clearly, like the issue is seen very clearly in the
case of CIR versus Club Filipino Inc.
The case of CIR versus Club Filipino Inc. is interesting because Club Filipino Inc., I'm not sure if
you guys are familiar with Club Filipino. So it's a membership. It's really a club, a membership,
right? A club where only members can avail of the facility. So Club Filipino is a civic corporation
with an original authorized capital stock. of 22,000 pesos, which was subsequently increased to
200,000 pesos. And the purpose is to provide, operate, and maintain sports or recreation and
healthy training for its members and shareholders. Members and shareholders. It's confusing.
So what is Club Filipino? Is it a stock corporation or a non-stock corporation? Why is there such
an issue? Because the club now owns and operates a clubhouse a bowling alley a golf course a
bar restaurant you know where members and their guests can avail of services of the club and
the club collects fees from the use of all of these facilities or amenities so the club mainly
derives their its funds from membership juice and fees so dahil meron siyang bar restaurant
the BIR looked at this operation and determined that the club is actually required to pay
percentage tax. So, why percentage tax? Because there are supposedly gross receipts coming
from the bar and the restaurant. So, obviously the assumption is it's being run for profit, right?
So, while the club declared stock dividends, it did not declare any cash dividends to its
stockholders. So what happened is the DIR agent wanted to collect percentage tax. And the
crux of the issue is if the club is a non-stock corporation, then it will not be liable for the
percentage tax. But if it is determined to be a stock corporation, then it will be liable for
percentage tax earned in the bar and restaurant operations. So the court in this case held that,
in fact,
Filipino is a non-stock corporation. So the fact that it has capital stock divided into shares will
not detract from a finding that it is not engaged in the business of a bar and restaurant. So the
court looked at the object or purpose of the corporation as stated in its articles of incorporation
and bylaws and determined that it is non-profit. It is non-profit. And furthermore, when it
looked at the Articles of Incorporation, it did not find any authority for the corporation to
distribute dividends to its shareholders. Remember, going back to the definition of a stock
corporation in Section 3 of the Revised Corporation Code, that particular definition is still
wrong, remember? First is that it has capital stock divided into shares. But second, it must be
authorized to distribute dividends.
In the peculiar case of Club Filipino, the court found that while it had capital stock divided into
shares, it was not authorized to distribute dividends to its shareholders. Now you will ask, but
they were able to declare stock dividends, right? Right. So the same question ran to my mind.
But then the reasoning of the court is not that it made an actual distribution of the stock
dividends, but that it was not authorized to do so. So by its articles of incorporation and bylaws,
it was not authorized to do so. Therefore, it did not fall under the category of a stock
corporation. And if it's not a stock corporation, then it will be a non-stock corporation. We will
delve further into the other characteristics of a stock corporation later on, because, you know,
mainly the
provisions and stock corporations will apply also to non-stock corporations. But the more usual
form of business vehicle would be the stock corporation because the non-stock corporation has
a different purpose. So it's not really for profit. Non-stock would not really be for profit. And our
group project, the corporations that we will be simulating, would be stock corporations, not
non-stock corporations. All right, so that's stock corporation. On the other hand, what is a non-
stock corporation? A non-stock corporation as derived from Section 3 of the revised
corporation code is a non-stock corporation, meaning it's not a stock corporation. Furthermore,
you look at Section 86. Section 86 provides a deeper definition or a broader definition or a more
substantive definition of a non-stock corporation. And it says that a non-stock corporation is
one where no part of its income is distributable as dividends to its members, trustees, or
officers.
So any profit which a non-stock corporation may obtain, incidentally because of its operations,
will be used or should be used for furtherance of the purpose for which the corporation was
organized. So I mentioned like in Filipino, it was determined to be a non-stock corporation, but
it had a bar and restaurant, right? Where people come to pay for food. So whatever profit they
make out of that particular undertaking will be plowed back into the corporation. It should not
be distributed to its members or shareholders, okay? And it's important that the revised
corporation code says that whenever possible, whenever a whenever possible or whenever
relevant or pertinent, whatever the provision is in relation to stock corporations will also apply
to non-stock corporations, except if they may be covered by specific provisions of this particular
title.
So that means that all provisions in relation to the calling of meetings, the election of officers,
the election of directors or trustees We will be mostly referring to them in the context of stock
corporation, but they are also applicable to non-stock corporations. In summary, under the
RCC, the revised corporation code, there are two classes of corporations, stock and non-stock.
Aside from as a subcategory, those are the main categories, stock and non-stock. Aside from
that, there is also what we call a closed corporation. So a closed corporation is one where the
articles of incorporation provides that all the classes of shares, all the shares of that particular
corporation will be held off record but not more than 20 shareholders. So if you've ever heard
of a family corporation or a closely held corporation, a corporation where
there is no more than 20 shareholders would possibly fall under the category closed
corporation. But other than having less than 20 shareholders, the shares also must be subject
to one or more specific restrictions on transfer. So generally, in a stock corporation, if you're
the holder of shares, remember when we were discussing about advantages, and disadvantages
to corporations. One of the advantages is that there is free transferability of shares such that
the corporation will not be affected if a shareholder transfers his shares to a third party. In the
case of a closed corporation, there are restrictions imposed on free transferability of shares,
meaning the shareholders might not be able to transfer their shares to third parties without
consent of the other shareholders or without the right of first refusal.
We will be discussing them maybe a little bit later but in essence that there should be a
restriction on the transferability of shares. Also there is a restriction with respect to close
corporations in that it cannot be listed in a public exchange or make any public offering of its
shares. Also, for you to be considered a close corporation, you should specify in your articles of
incorporation that you are a close corporation. So let's say you are a family and let's say you
incorporate a corporation that is closely held, meaning just you and the members of your
family. Even though the number of shareholders in that corporation is less than 20, it will still
not be considered a closed corporation if you did not specify in the Articles of Incorporation
that it is a closed corporation.
So there must be a specific and expressed provision in your Articles of Incorporation stating
that you are in fact a closed corporation. Also, you will not be considered a closed corporation if
at least two-thirds of your voting rights is owned by another corporation. Generally, any and all
corporations may be incorporated as a closed corporation, except for certain industries. So
Section 95 tells you what those industries are. Mining or oil companies cannot be incorporated
as a closed corporation. Stock exchanges, banks, insurance companies, public utilities, which
now you have to tie up with the amended Public Service Act to determine what are public
utilities. and also educational institutions and corporations declared to be vested with public
interest in accordance with the provisions of the code.
So the provisions of the revised corporation code on closed corporations will only govern closed
corporations unless otherwise stated. However, all the other provisions in this particular title,
meaning provisions applying to closed corporations, may also apply suppletorily to ordinary
corporations. So one of those provisions would be on the acceptable restrictions. So under the
provisions on closed corporations, it said that restrictions should not be more than putting a
right of first refusal on the shares. So it has been interpreted to mean that even in ordinary
corporations, corporations, you cannot put a share transfer restriction more restrictive than a
right of first-degree society. Don't worry too much about these terminologies. We will go back
to it when we talk about share transferability later on. So aside from closed corporations,
there's also a subset class, which are the special corporations.
Special corporations are the educational, religious, one person and one person corporations. So
please uh take a look at the classwork tab there is a um there is a an assignment for you guys
oh sorry so um i will be putting up a synchronous task for you guys with respect to these special
corporations. So please check the classwork tab anytime within the week. And you will have to
submit that also before the midterm. So essentially, it will be a summary of the special
corporations, a summary of the provisions on the special corporations. Okay. So other than the
RCC classification of corporations, which would be stock, non-stock, closed, and special
corporations, there are also other classifications of corporations. based on different standards.
For example, there would be a different classification of corporations when you look at it in the
lens of its relationship with the state.
So remember, the subject matter of our class is private corporations. But in relation to the
state, you can actually distinguish private corporations from public corporations. Briefly, Of
course, you will be studying public corporations when you take up your local government
course or subject. But briefly, public corporations are those corporations which are formed or
organized for the government of a portion of the state or any of its political subdivisions, and
which have for their purpose the general good or bad. So examples of public corporations
would be your local government units, the City of Manila, Nakati City, city, those are all public
corporations or municipality of province of Tarlac. So the test to determine the nature of a
corporation is found in its relationship with the state.
So strictly speaking, a public corporation is one created for governmental purposes. So it is also
imbued with political powers which may be exercised for purposes connected with the public in
the administration of the civil government. However, public corporations may also be imbued
with proprietary powers which are similar to corporations. So, for example, the city of Manila,
while it has its public or governmental functions, it acts as an agent of the state for the
government of the territory and its inhabitants. It is also imbued with private or proprietary
functions which allows it to enter into private contracts with third parties. So this is for
purposes of administering the local affairs. That's why it can enter into a service contract with a
janitorial company to provide or to outsource janitorial services.
So all of these stem from its characteristic also as having private or proprietary functions. So
Compare that with private corporations. As we know, private corporations are formed for a
private purpose, benefit, aim, or end. And also, the purpose is really for profit or for whatever
purpose you put in your articles of incorporation if you are a non-stop corporation. So how do
you determine or how do you distinguish between a private corporation or a public
corporation? You look at these three standards. Purpose, who creates it and how it is, how it is
created. So a public corporation, the purpose is administration of local government. Okay,
administration of government functions. Private corporation, the purpose is private. Whatever
private purpose you can think of who creates it?
A public corporation is created by the state, either through a general act or a special app so um
pagcor i think has a special charter. So any Any institution that has a special charter, that will be
a public corporation. Universidad de Manila would have a special charter. On the other hand,
private corporations are created by the aggregations of private incorporators, subject to the
consent of the state through the SEC. How is it created? Public corporation is usually by
legislation, either local or local. local or general legislation and then private corporation would
be created by agreement of the members of the by agreement of the shareholders and by
consent of the state okay so basically your public and your private corporations are a little bit
easy to understand.
However, there are also certain corporations that, you know, can be a bit confusing because
they perform certain functions that seem very similar to the functions of a public corporation
and that's species of corporations would be what is called quasi-public corporation. So quasi-
public corporations are private corporations which have accepted from the state a grant of
franchise or contract which involves the performance of public duties. So it's sometimes applied
to corporations which are not strictly public in the sense that it's organized for governmental
purposes. However, its operations contribute to the convenience or welfare of the general
public. So example would be your telecommunication companies, your broadcasting
companies, your water and electric companies, which all require franchises from the
government to function. So they are known as either public utility or public service
corporations.
So some of your GOCCs,
you look at some GOCCs, GOCCs may not necessarily be a public corporation. it may be a
private corporation under the classification quasi-public corporation. So in order to determine
whether a GOCC is a public or private corporation, you check if it is operating under a special
charter or if it has been incorporated and a certificate of incorporation issued to it by
the SEC. So we have several cases that discuss quasi-public corporations public corporations
and private corporations. If you look at National Coal Coal versus Collector of Internal Revenue,
National Coal Coal was a corporation that was created for the purpose of developing the coal
industry in the Philippines. It was created under a special charter but that was prior to the time
the constitution mandated that all corporations be created under the one general law.
In this case, there was a national coal coal, which was incorporated for the purpose of
developing the coal industry. And the issue in this case is whether or not it is subject to,
whether or not it, because the government of the Philippine Islands was its majority
stockholder. So the question was whether it needed, whether or not it is a public corporation or
a private corporation. Corporation. The court said that it is a private corporation. Although the
government happens to be its majority stockholder, by and of itself does not make it a public
corporation. So, um, because as a private corporation, it has no greater rights, powers, or
privileges than any other corporation, which might be organized for the same purpose. It was
not intention of government, the court said, to give special privileges to national coal coal.
with respect to the mining of coal. The reason why this was an issue in the first place is because
there was Proclamation No. 39, which withdrew from the province of Zamboanga any sale or
disposition of coal-bearing public lands. Sabi ni National Coal Corps, we're exempted from that
because we're a government-supervised corporation. And the court said, no, you cannot be
considered a public corporation just because your majority stockholder is the government of
the Philippines. You are not given any special rights that is not available to other coal
corporations. So you will not be exempted from the provision of Proclamation No. 39. essence
of national COCO versus Collective Internal Revenue.

On the other hand, we have Manila International Airport Authority versus Court of Appeals.
MIA, okay, obviously the entity that is being questioned is Manila International Airport
Authority.
It is the operator of the Ninayakina International Airport. And the city, the Parana City sent
notices to MIA due to for the payment of real estate tax delinquencies. However, MIA failed to
settle the entire amount, so Paranaque City threatened to levy the land. What else? MIA
contends that as an instrumentality of the government, it is exempted from real estate tax. It
also contends that the land and buildings of NIA are actually a public dominion. Therefore, they
cannot be subjected to levy and auction sale okay on the other hand, the city of Parana claims
that it is a government owned and controlled corporation and not exempt from real estate
taxes. okay so question is whether or not the airport lands and buildings of NIA are exempted
from real estate tax.
The court said yes, they are. And the reason underlying reason for that is that because NIA is
not a government-owned and controlled corporation. It's not a government-owned and
controlled corporation. There is no contention, the court said, that a GOCC is not exempt from
real estate tax. A GOCC would still be liable to pay real estate tax. The problem is, MIA is not a
GOCC. Because a GOCC is an agency organized as a stock or non-stock corporation. MIA is not
organized as a stock or non-stock corporation. It has no capital stock divided into shares. It has
no stockholders. It has no voting shares. It's also not a non-stock corporation because it has no
members. It has no and there is no part and it doesn't fall under the definition of non-stock
corporation under the revised corporation code.
So even if we consider the government as the sole member of NIA, this will not make a non-
stock corporation because non-stock corporations cannot distribute any part of their income to
their members. On the other hand, NIA turns over whatever profit it makes to the government.
So what is NIA? NIA is simply put a government instrument instrumentality exercising certain
corporate powers. So it exercises these corporate powers in order to efficiently function. or
perform its government functions. So being neither a stock or non-stock, GOCC being a mere
instrumentality, MIA is not subject and its lands and buildings are not subject to real estate
taxes because they are outside the commerce of man. So the court said properties of public
dominion which are being used for the public would definitely not be subject to levy,
encumbrance, or disposition through any public or private sale.
Of course, the minority in this case objected and has some objections to that particular
interpretation because they say that Nia is indisputably a juridical person. having a separate
juridical personality. The majority denied this particular contention or interpretation. If you
have questions, please feel free to write it up or upload it or write it in the Google stream. So
that's classes of corporation in relation to the state. We also have classes of corporations as to
the place of incorporation. And you will be very familiar with this if you read the FIA. So place of
incorporation, you look at section 140 of the revised corporation code. It says, for purposes of
this revised corporation code, when you say foreign corporation, it means a corporation that is
formed, organized, or existing under laws other than those of the Philippines.
and whose law allows Filipino citizens to do business in its own country. A foreign corporation is
one formed, organized, or existing under a law other than Philippine law. That means a
corporation that is formed, organized, or existing under Philippine laws would be a Philippine
corporation. But when you say Philippine corporation, you really mean domestic corporation,
not necessarily a Philippine national. Because a corporation organized and existing in the
Philippines might not be a Philippine national under the definition of the Foreign Investment
Act, right? So definitely it is a domestic corporation, a Philippine corporation, which means that
it is under the jurisdiction of the Philippines. But whether or not it is qualified to undertake
certain activities would depend on whether that domestic corporation slash Philippine
corporation can be considered a Philippine national.
On the other hand, you might have a group of Filipinos who incorporate a corporation in the
British Virgin Islands. That BVI company will still be considered a foreign corporation even if all
of its shareholders are Philippine nationals. So for that BVI company, to transact business in the
Philippines, it will still require a license. Again, just juxtaposed to that, you can have a Philippine
corporation that is wholly foreign-owned, meaning all of its shareholders are foreigners, but it
will not be considered a Philippine national precisely because its stockholders are wholly uh it's
wholly owned by foreigners so you will now have occasion to apply the definition of philippine
national under the fia and under the secmc 8-2030 okay so that's classes of corporations as the
place of incorporation there's also the classes of corporations as to legal status and for this
particular classification or classes of corporation i would
suggest and highly recommend that you read the discussion of Villanueva with respect to the
different corporations based on legal status. What are the different corporations based on legal
status? First, you have the jury corporations. The jury corporations are easy. That means that
these are the corporations that were created or organized in strict and substantial compliance
with the statutory requirements for incorporation. This is what we want our corporation to be,
a de jure corporation. This means that if the corporation is a de jure corporation, its rights exist
and cannot be successfully attacked even by the state in a co-warrantor proceeding. Because
they are in effect incorporated by strict adherence to the requirements of law. So, de jure
corporation. Lahat ng requirements na pasa niya.
It complies strictly with all of the requirements. On the other hand, you also have a de facto
corporation. De facto corporations are those corporations which were regularly incorporated
but there exists an irregularity or defect. in its organization or constitution because of some
omissions to comply with certain conditions precedent by which corporations are existed. But
there is tolerable compliance with the requirement of the law. So what's the difference? If you
are merely a de facto corporation, then your right to exist can be attacked through a direct
action of co-warantor. It cannot be collaterally attacked unless it is through a direct action of
co-warrantor proceeding. Unfortunately, the revised corporation code does not really define
what a de facto corporation is. It merely provides that due incorporation of any corporation will
not be inquired into collaterally in any private suit and that the inquiry may only be made by
the solicitor general in a co-warrantor proceeding.
This is contained in section 19 of the revised corporation code. This is This principle is grounded
on public policy, actually, because if this is not the case, if this is not the rule, then it would
produce endless confusion and hardship. If the legality or the existence of a corporation may be
allowed to be questioned in every suit to which it is a party. So can you imagine if you sue a
corporation for non-payment of loan, and you raise in that same suit for collection of sum of
money, the fact that the issue of whether or not the corporation is properly incorporated. That
will create a lot of confusion and hardship with respect to the legal capacity of that particular
entity. So it's only the state which has the authority to question the legality or existence of a de
facto corporation.
through the proper co-warrantor proceeding. The theory is, if the state, which is the only entity
which can question the authority to incorporate, if in and of itself it remains silent, then an
individual will not be permitted to raise the inquiry. So, only the state can raise the inquiry. So,
there is also that, for example, there's also that term, colorable compliance with requirements
of incorporation. What does it really mean? What is meant by colorable compliance? So the
different authorities agree that um at the very least, it means that the corporation has obtained
a certificate of incorporation from the securities and exchange commission not withstanding
the defects in its incorporation. So, i don't know Example, um you file your application and in
your application you provide a false affidavit treasurer's affidavit as to the amount of
subscription received okay that will be a an irregularity or a defect right but uh there is
colorable compliance because when the sec examiner looks at your application it will rely on
the face of the document the face value of the document and then certainly if
everything else is in order, we will issue you a certificate of incorporation. So when you get a
certificate of incorporation issued by the SEC, then that means that you have tolerably
complied with the requirements of incorporation. Another example would be if there is non-
compliance with the nationality requirement for nationalized entities. For example, a
corporation that is incorporated for purposes of owning land. But the nationality is 100%
owned by foreigners, apparently. But on its face, they were declared as Filipino citizens. So the
corporation issued the certificate of incorporation. In that case, then, that corporation will be a
de facto corporation. De facto corporations will continue to exist as corporations, like a de jure
corporation, exactly the same with exactly the same rights and obligations until its legality is
declared void or annulled.
And you can only do that through the state through a co-warantor proceeding. Another class of
corporation would be a corporation by estopel. So this is one degree lower than a de jure
corporation. Because a corporation by estopel is a corporation that is so defectively formed,
that there is not even a colorable compliance with the requirements of incorporation. So this
means that there is no certificate of incorporation issued for that corporation. But the persons
who assume to act as a corporation probably represent themselves as a corporation to third
parties. So if that happens, you have a corporation by estopel and the And the result or
consequence would be that these persons who assume to act as a corporation will be liable as
general partners for all debts, liabilities, and damages incurred as a result of their
representation, meaning they cannot benefit from the limited liability feature of a corporation.
But when that ostensible corporation, that corporation by Estopel, is sued for any transaction
entered into by it as a corporation, it cannot raise as a defense the lack of corporate
personality. So because it cannot be allowed to use the lack of corporate personality as an
advantage. So while it will be treated as a corporation for purposes of its liabilities and
obligations, it cannot, on the other hand, use the lack of personal lack of corporate personality
as a defense to, um, defy its obligations. Okay, uh, the the last um another class of corporation
would be a corporation by prescription. Okay, corporation by prescription but we say, we said,
As we discussed, corporations can only have its existence when the state gives its consent or
authority to the creation of the corporation.
On the other hand, a corporation by prescription is a class of corporation that is exempted from
this consent. Remember when we were discussing early on about Sociedad Anónimas? In the
Spanish times, Sociedad Anónimas are a group... aggregation of persons that come together for
a common objective and they do not require registration. So the moment they come together
to form the Sociedad Anonymous, it is already recognized as a Sociedad Anonymous, right?
Same with partnerships okay even in modern times, when you form a partnership, you actually
don't need the consent of the state. Of course, you go to the sec to get your articles of
partnership registered, but you don't really need that for you to exist okay if you don't have an
article of Partnership, that doesn't mean that you are not a partnership okay so you might get
your articles of partnership for purposes of getting your business permit etc etc but if you don't
get your articles of Partnership, it doesn't mean that you do not exist as a partnership.
It's different for corporations incorporation, the approval of the application for incorporation,
for it to validly exist as a corporation. Otherwise, it will only be a corporation by SPPL. On the
other hand, corporations by prescriptions are those who have been a corporation for such a
long time that they already exist as a corporation in the eyes of the law without need of
consent. The perfect example for this would be the Roman Catholic Church. Roman Catholic
Church in the Philippines, you cannot find articles of incorporation or bylaws for the Roman
Catholic Church. It has been in existence as a corporate entity since time immemorial. So it will
not be required to get articles of incorporation. It will not be required to get consent to operate
as a corporation from the state.
So almost done. With respect to relationship of management and control, you can also have
different classes of corporation. I will share with you some materials on this. okay
so oh sorry Okay, so here you have different classes of corporations as to relationship of
management and control. So you might have what you call a parent or holding company. So in
this diagram, alphabet is the parent or holding company. It means it's a corporation which
controls another corporation or several other corporations which are known as its subsidiaries.
So holding companies are defined as corporations that confine its activities to owning stocks
and supervising the management and control of other companies. So a holding company would
be different from an investment company because an investment company's purpose primarily
is to buy and sell shares without necessarily supervising or managing the
corporations of which it holds. So a holding company, on the other hand, the purpose is to
manage, supervise and manage its subsidiaries. So you have a parent or holding company that
has interests, has controlling interests in other companies which are called subsidiaries. So in
this diagram, you have Calico, Google Ventures, Fiber, Google X, Google Capital, Nest, Google...
Those are all subsidiaries of the parent company of a debt. So the subsidiary companies are
those which are owned at least a majority of the shares of which are owned by another
corporation. So another corporation has actual control of a subsidiary company. Nonetheless, a
subsidiary company would be independent and would have separate and juridical personality
which is distinct from its parent company. Therefore, any claim or liability that you might have
against the subsidiary company, it will not pass on to the parent company.
Unless, as we mentioned, there is an occasion for piercing the veil of corporate protection. And
when is there an occasion? When you have bad faith, negligence, fraud, etc. Or there is intent
to subvert the ends of justice or to make the subsidiary just a conduit, okay? or an alter ego.
But otherwise, if there is no circumstance that would justify piercing the veil of corporate
fiction, parent company and subsidiary companies would be independent from each other and
would have separate juridical personalities. So other than that, there is also what we call
affiliate companies. Affiliate companies are those corporations which are subject to a common
control and operated as part of the system. Okay? So, they are called sister companies. So, in
this diagram, what would be the affiliates?
Calico will be an affiliate of Google Ventures, Fiverr, Google X, Google Capital, Nest, and Google.
So, yung mga subsidiaries, they are all affiliates of each other. Pwede rin maging affiliate yung
kunyari Alphabet owns another corporation but it does not have controlling or majority
interests, for example, Alphabet owns 20% of Netflix, then Alphabet and Netflix will be
considered
Those are the classes of corporations. Next week, We will I will want you to As I said, I will put
up a classwork and a synchronous task for you to do which will be sorry Which will also be due
Next Monday, okay Or maybe before midterms, but definitely before midterms midterms is
according to Nicole October March 20 So March 20, which
means that we have one more
which is good.
So we have one more session, and that session will be devoted to the special corporations. And
then after midterms, we will proceed with the week three topics. If you have questions, please
feel free to put them in the or to ask them in the Google Classroom. Basically, those are the
topics for today. Please make sure to refer to the syllabus and also do your own studying with
respect to this. Don't just rely on this lecture. Make sure you also independently study these
topics because they will be part of the midterm exam. So, essentially midterm exam will
from