Industrial Refractories Corp. of The Phils. v. Refractories Corp. of The Philippines, G.R. No. 122174, Oct. 3, 2002
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christine anglaIndustrial Refractories Corp. of The Phils. v. Refractories Corp. of The Philippines, G.R. No. 122174, Oct. 3, 2002
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christine anglaNOTES C - FORMATION OF A CORPORATION
Birth of a Corporation.
The life of a corporation commences from the issuance of the Certificate of Registration by
the SEC upon filing of the Articles of Incorporation and other documents.
Corporate name that cannot be used (Sec. 17 RCCP)
If it is not distinguishable from that already reserved or registered for the use of another
corporation
Name already protected by law;
Name which is contrary to law, morals, rules or regulations.
Note: A corporation which seeks to prevent another from using its name must show that it
(a) acquired prior right to use the name and
(b) the name is either of three (3) mentioned above
(Industrial Refractories Corp. of the Phils. v. refractories Corp. of the Philippines, G.R. No.
122174, Oct. 3, 2002)
What is the importance/significance of the principal place of business stated in the Article
of Incorporation?
The principal place of business may determine the venue of court cases involving
corporations. It may also determine if service of summons and notices was properly made
(Sy v. Tyson Enterprises, Inc. 119 SCRA 367 [1982]). (Note: A specific address is now
required; Metro Manila only is not allowed, SEC Circular No. 3, series of 2006).
Definition of Terms:
Authorized Capital Stock - the amount fixed in the articles of incorporation to be
subscribed and paid by the stockholders of the corporation (SEC Opinion, Aug. 11, 1997).
Subscribed Capital - that portion of the authorized capital stock that is covered by the
subscription agreements whether fully paid or not.
Paid-Up Capital - that portion of the authorized capital stock which has been subscribed
and actually paid (MSCI-NACUSIP Local Chapter v. National Wages and Productivity
Commission, 206 SCRA 173 [1997]).
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Outstanding Capital Stock – the total share of stock issued to subscribers or stockholders,
whether or not fully or partially paid except treasury shares so long as there is a binding
subscription agreement.
Capital – properties and assets of the corporation that are used for its business operation.
AMENDMENT OF ARTICLES OF INCORPORATION
Procedure. By Majority vote of directors or trustees, and written assent of the stockholders
representing 2/3 of outstanding capital or 2/3 of members of non-stock corporations, unless
otherwise prescribed by this Code or by special law, and for legitimate purposes, and
without prejudice to the appraisal right of dissenting stockholders.
When effective. Upon approval of SEC or if not acted upon by SEC within six (6) moths from
the date of filing provided that delay cannot be attributed to the corporation.
TRUST FUND DOCTRINE
Trust Fund Doctrine. The capital stock, property and other assets of the corporation are
regarded as equity in the trust for the payment of the corporate creditors. The subscribed
capital stock of the corporation is a trust fund for the payments of debts of the corporation
which the creditors have the right to look up to satisfy their credits. Corporation may not
dissipate this and the creditors may sue stockholders directly for the unpaid subscription
(Phil. Trust Co. v. Rivera, 44 Phil. 469 [1923]; Lumanlan v. Cura, 59 Phil. 746 [1934]; Commissioner of
Internal Revenue v. CA, 301 SCRA 152 [1999].
Money received for subscription of increase of authorized capital are not covered by the
trust fund doctrine prior to the approval of such increase by the SEC (Central Textile Mills v.
NWPC, 260 SCRA 368 [1996]).
Examples of cases where the trust fund doctrine is violated.
When the corporation releases or condones payment of the unpaid subscription.
When there is payment of dividends without unrestricted retained earnings.
When properties are transferred in fraud of creditors.
When the properties are disposed or undue preference is given to some creditors even if the
corporation is insolvent.
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