The Corporation

Attributes

The corporation has the following attributes:

1.) An artificial being

2.) Created by operation of law (the Corporation Code and other related laws)

3.) Has succession rights (even if its stockholders die, unlike a partnership)

4.) Its powers, properties and attributes are laid down by law or incidental to its existence (which is why they can manufacture and sell products that are related to their main product)

The corporation we are talking about here is the private corporation. A public corporation refers to an LGU. corporations owned by the government are called GOCCs (Government-Owned/Controlled Corporations.) GOCCs, like Napocor and GSIS, are not LGUs and do not serve public or political purposes. There are also what are known as quasi-public corporations. These are corporations that are given franchises to operate public utilities (ex. water, electricity, etc.) These franchises are granted by the legislature and can be withdrawn by a legislative act.

Believe it or not, a corporation can recover moral damages! It happens if the corporation's goodwill and reputation have been tarnished (Jardine Davies, Inc. vs CA, 333 SCRA 684.)

Corporations can be classified into stock and non-stock. Stock corporations possess capital stock divided into shares, which are owned by stockholders. All corporations organized for profit are stock corporations. Non-stock corporations are primarily not organized for profit, such as religious and charitable corporations.

Corporations are not allowed to partner with other corporations or with individuals (it's against public policy.) Doing so would make it liable for acts committed by people who aren't its authorized agents. There are exceptions to this, however:

1.) If they form a joint venture in line with their business

2.) If the articles of incorporation allow it and the partners are managing partners, once again if the partnering is in line with their business

3.) A foreign corporation can be a limited partner of a local one in a limited partnership

The Corporate Veil

The corporation, as the law permits it to be, is an entity separate and distinct from its officers and stockholders. Hence, it can acquire its own properties, enter into contracts, bind itself to perform obligations, incur liabilities and can sue and be sued. Suits therefore have to be filed, ordinarily, against the corporation.

However, this legal entity can be put aside and the officers and stockholders can be prosecuted if the corporation is being used for illegal purposes, fraud, crimes and similar acts. This setting aside of the corporate entity is known as "piercing the corporate veil." For that to happen, the following must be present:

1.) Complete control over the corporation

2.) This control is used to commit illegalities and fraud

3.) The same control and violation of obligation is the proximate cause of the injury or loss (Concept Builders vs. NLRC, 257 SCRA 149)

If somebody, for instance, is the dominant stockholder of 2 corporations and one of them is heavily in debt and it stops its operations and transfers its assets to the other corporation, then "piercing the corporate veil" can be resorted to.