Expressed Implied
Have to do largely with the main business, objects and purposes of the corporation.
Have to do largely with the means and methods of attaining those objects and purposes. Determined by the language of May change according to time,
2 Examples: Borrowing money, making ordinary contracts, executing promissory notes, acquiring personal property for use in connection with the business etc. Key: All acts necessary to run a business under ordinary circumstances.
3 It is generally held that a corporation may temporarily conduct an outside business to collect a debt out of its profits. See Section 36(11).
4
See Section 36(10).
5 A corporation may conduct contests or sponsor radio or television programs, or promote fairs and other gatherings to advertise and increase its business.
the corporate charter and the applicable law.
place, and surrounding circumstances.
The test is whether the powers are found in the words of the charter of the law
The test is whether they are fairly incidental to the (former) and reasonably necessary to carry them out in the furtherance of the corporation’s business.
Incidental or inherent power
Powers which a corporation can exercise by the mere fact of its being a corporation or powers which are necessary to corporate existence and are, therefore impliedly granted. (See Section 36 (11)).
As powers inherent in the corporation as legal entity, they exist independently of the express powers. (See Section 45)
These incidental powers are expressly recognized by Sections 2 and 45.
Some of the powers enumerated in Section 36 are incidental powers which can be exercised by a corporation even in the absence of an express grant.
Examples of incidental powers are: the power of succession; to sue and be sued; to have a corporate name; to purchase and hold real and personal property; to adopt and use a corporate seal; to contract; to make by-laws; etc.
Every corporation has implied or incidental power to establish branch offices here or abroad as the need or exigency of the business of the corporation may require. (SEC Opinion, May 17, 1990)
4.1 In General
Sec. 36. Corporate powers and capacity
Every corporation incorporated under this Code has the power and capacity:
1. To sue and be sued in its corporate name;
2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;
8. To enter into merger or consolidation with other corporations as provided in this Code;
9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity;
10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and 11. To exercise such other powers as may be essential or
necessary to carry out its purpose or purposes as stated in the articles of incorporation.
Section 36 of the Corporation Code enumerates some of the express powers of corporations (many of which even if not expressly provided for by law would constitute implied powers
of every entity. (Page 794 of CLV’s CLR, 2007)
Section 36 enumerates 10 powers that a corporation enjoys in addition to the special powers that may be provided for in the purpose clause of the articles of incorporation, which would also constitute express powers. (Page 795 of CLV’s CLR, 2007)
Sources of powers of express powers of a corporation: (Page 795 of CLV’s CLR, 2007)
(1) Those provided in the law (Corporation Code) (2) The Purpose clause of the AoI.
Section 45 recognizes also implied powers of every corporate entity emanating from its express powers.6
The rule is that in each case it is a question of the logical relation of the act to the corporate purpose expressed in the charter. IF the act is one which lawful in itself, and not otherwise, and is reasonably tributary to the promotion of those end, in a substantial and not in a remote and fanciful sense, it may fairly be considered within charter powers. The test to be applied is whether the act in question is in direct and immediate furtherance of the corporation’s business, fairly incidental to the express powers and reasonably necessary to their exercise. If so, the corporation has the power to do it, otherwise, no. (Montelibano v. Bacolod Murcia Milling Co, 1962 cited in (Page 795 of CLV’s CLR, 2007)
To sue and be sued in its corporate name
This power (Section 36(1)) is an incident to corporate existence. . (De Leon 2006 at 319)
6
No corporation…shall possess or exercise any corporate powers except those conferred by this Code or by its Articles of Incorporation and except such as necessary or incidental to the exercise of the powers so conferred.”
As a rule, suits are to be brought by or against the corporation in his own name.
Corporation de facto may sue or be sued but a corporation which has been dissolved after the expiration of 3-year winding-up period ceases to exist de jure or de facto.
Under Sec. 36 of Corporation Code, in relation to Sec. 23, where a corporation is an injured party, its power to sue is lodged with its Board of Directors. A minority stockholder who is a member of the Board has no such power or authority to sue on the corporation’s behalf. Tam Wing Tak v. Makasiar, 350 SCRA 475 (2001); Shipside Inc. v. Court of Appeals, 352 SCRA 334 (2001); SSS v. COA, 384 SCRA 548 (2002);
United Paragon Mining Corp v. CA, 2006)
Where the corporation is real party-in-interest, neither administrator or a project manager could sign the certificate against forum-shopping without being duly authorized by resolution of the Board of Directors (Esteban, Jr. v. Vda. de
Onorio, 360 SCRA 230 [2001]), nor the General Manager
who has no authority to institute a suit on behalf of the corporation even when the purpose is to protect corporate assets. (Central Cooperative Exchange Inc. v. Enciso, 162 SCRA 706 [1988]).
When the power to sue is delegated by the by-laws to a particular officer, such officer may appoint counsel to represent the corporation in a pre-trial hearing without need of a formal board resolution. Citibank, N.A. v. Chua, 220 SCRA 75 (1993).
For counsel to sign the certification for the corporation, he must specifically be authorized by the Board of Directors. BPI
Leasing Corp. v. CA, 416 SCRA 4 (2003); Mariveles Shipyard Corp. v. CA, 415 SCRA 573 (2003). Metro Drug Distribution Inc. v. Narciso, (2006).
A seal is a device (as an emblem, symbol, or word) used to identify or replace the signature of an individual or organization and to authenticate (as under common law) written matter purportedly emanating from such individual or organization. It may refer also to the impression of such a device on documents like certificates of stocks. . (De Leon 2006 at 323)
Any seal adopted and used by the corporation may be altered by it at pleasure. Where a corporation adopts a seal for a special occasion, different from its corporate seal, the seal adopted is the corporate seal only for that time or occasion. . (De Leon 2006 at 323)
A seal is not required for the validity of any corporate act. Under Section 63, certificates of stock issued by corporations are required to be sealed with the seal of the corporation. Nevertheless, the use of a corporate seal in certificates of stock must be deemed merely directory rather than mandatory.
A corporation may exist even without a seal.
The presence of a seal establishes, prima facie, that the instrument to which it is affixed is the act of the corporation. (18 Am Jur 2d)
Power to acquire and convey property
This power (Section 36(7)) which is also expressly conferred under the law has always been regarded as an incident to every corporation. A corporation need properties or assets to carry on its business. (De Leon 2006 at 323)
The power under Section 36(7) is qualified by the phrase ―as the transaction of the lawful business of the corporation may reasonably and necessary require.‖ (De Leon 2006 at 324)
Property obtained by a corporation which is foreign to the purposes for which it was organized is an unlawful acquisition. (De Leon 2006 at 324)
The transfer or sale of shares owned by a corporation in another corporation requires approval by the board of directors of the seller corporation and while a corporation is
expressly empowered by Section 36(&) to dispose corporate assets, such power is subject to the provisions of Section 40. (De Leon 2006 at 325)
The right or power of private corporations to deal in real as well as personal property is also subject to limitations or restrictions prescribed by special laws and the Constitution. (De Leon 2006 at 325)
Power to acquire shares or securities
Section 36(7) authorizes a private corporation to acquire shares or securities of other corporations. Such an act does not need the approval of the stockholders if done in pursuance of the purpose or purposes of the corporation as stated in its articles of incorporation. But when the purpose is done solely for investment, the approval of the stockholders as required by Section 42 is necessary. (De Leon 2006 at 326)
Power to acquire shares in other corporation is subject to specific limitations established by the Code, special laws and the Constitution. (De Leon 2006 at 326)
When a corporation subscribes to the capital stock of another corporation, it is required, as a rule, to pay its subscription in full. This is based upon the fact that while a corporation has an unlimited capacity to contract obligations, it has only a limited capacity to pay. (SEC Opinion, July 13, 1961)
A corporation may purchase its own stock, however, only when it has ―unrestricted retained earnings‖ to cover the shares to be purchased or acquired. (De Leon 2006 at 327)
Sell Land and Other Properties
When the corporation’s primary purpose is to market, distribute, export and import merchandise, the sale of land is not within the actual or apparent authority of the corporation acting through its officers, much less when acting through the treasurer. Likewise Articles 1874 and 1878 of Civil Code requires that when land is sold through an agent, the agent’s authority must be in writing, otherwise the sale is void. San
Juan Structural v. CA, 296 SCRA 631 (1998); AF Realty & Dev., Inc. v. Dieselman Freight Services Co., 373 SCRA 385 (2002); Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
Power to contribute to charity
Section 36(9) expressly vests in business corporations the authority to contribute for purely charitable purposes.
Basis: Section 36(9) gives recognition to the growing tendency to regard charitable gifts as within the scope of corporate authority. It is based on the modern view that business corporations are not organized solely as profit- making enterprises but also as economic and social institutions with corresponding public responsibility to aid in the betterment of economic and social conditions in the community in which such corporation are doing business.
Limitations: The limitation under the code is that the donations are: (a) the amount thereof must be reasonable; and (b) the donations must not be in aid of any political party or candidate or for purposes of partisan political activity.
Provide Gratuity Pay for Employees
Such powers are expressly permitted by the Code on the theory that such activities promote better relations between the corporation and its employees. (19 Am Jur 2d)
Providing gratuity pay for employees is an express power of a corporation under the Corporation Code, and cannot be considered to be ultra vires to avoid any liability arising from the issuance of resolution granting such gratuity pay. Lopez Realty v. Fontecha, 247 SCRA 183, 192 (1995).
Borrow Funds
The power to borrow money is one of those cases where even a special power of attorney is required under Art. 1878 of Civil Code. There is invariably a need of an enabling act of the corporation to be approved by its Board of Directors.
The argument that the obtaining of loan was in accordance with the ordinary course of business usages and practices of the corporation is devoid of merit because the prevailing practice in the corporation was to explicitly authorize an officer to contract loans in behalf of the corporation. China Banking Corp. v. Court of Appeals, 270 SCRA 503 (1997). Catindig Class Notes
Q: What is the catch-all provision as regards powers of corporations? A: Si Cris vinerbatim yung Section 36(11), haha. Yeah, that‟s the right answer.
4.2 Specific Powers
(a) To extend or shorten corporate term (Section 37
compare with Section 81)Sec. 37. Power to extend or shorten corporate term
A private corporation may extend or shorten its term as stated in the articles of incorporation when approved by a majority vote of the board of directors or trustees and ratified at a meeting by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members in case of non-stock corporations. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That in case of extension of corporate term, any dissenting stockholder may exercise his appraisal right under the conditions provided in this code. (n)
Sec. 81. Instances of appraisal right
Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence; 2. In case of sale, lease, exchange, transfer, mortgage, pledge or
other disposition of all or substantially all of the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation. (n)
Requirements for extending or shortening corporate life: (1) Majority vote of the BoD/T
(2) Ratification in a meeting by 2/3 of outstanding capital stock or 2/3 of the members, as the case may be.
The extension or shortening of corporate life actually requires the amendment of the articles of incorporation. But whereas, in general amendments of the articles can be made by written assent of the stockholder or members, without need of meeting, in the case provided for under Section 37, a meeting must be duly called for the purpose. (Page 816 of CLV’s CLR, 2007)
De Leon: Section 37 grants appraisal right to a dissenting stockholder (right of the stockholder in the cases provided by law to demand payment of the fair value of his shares) ―in case of extension of corporate term.‖ Such right should also be available to a dissenting stockholder if the corporate term is shortened as it is expressly recognized in Section 81(1). (Page 333 of De Leon, 2006) But wait, CLV has a different opinion.
CLV: The appraisal right should not be triggered when it comes to shortening of corporate life, because there is really no violation of the original contractual intent since. Therefore, the inclusion of the case of shortening of corporate life under Section 81 should not prevail over the specific provision under Section 37. (Page 237 of CLV’s Textbook)
CLV: The exercise of appraisal rights rightly belongs to a case of extension of corporate term because extension actually novates the corporate contract with each shareholder, which now seeks to extend the corporate relationship beyond the original term provided for in the articles of incorporation. (Page 237 of CLV’s Textbook)
Note that the appraisal right applies only to a stockholder of a stock corporation. (Page 333 of De Leon, 2006)
In case of extension of corporate term, any dissenting stockholder may exercise his appraisal right to have his shares bought back at fair value by the corporation. (Page 236 of CLV’s Textbook)