Corporation Code- De Leon (1) | Corporations | Legal Personality

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  THE CORPORATION CODE OF THE PHILIPPINES (Batas  Pambansa  Big.  68.) Introduction Different forms of business organization. With the development of business enterprise, there has been a gradual evolution in the form of business organization. Various influences and considerations enter into the  selection  of the business form for any particular business enterprise. (1)  Individual proprietorship.  — The primitive form of business is, of course, that of the individual proprietor. The individual, as a rule, operates a small business, usually with the limited capital, and is responsible alone for its success or failure. (2)  Partnership.  — The partnership is the first step towards a wider field of operation and a more complex organization. Often, it is a family affair. The business of the individual grows too large for his sole management and he takes his son or some other member of the family into partnership. In other cases, two men in the same business unite their capital in order to secure ad equate capital for the conduct of their business. Whatever the motive and the circumstances, the partnership is almost invariably a larger business unit than the proprietorship. It is common in retail trade, in the professions, and to a limited extent, among manufacturing establishments. As a form of business organization, it is losing ground. (3)  Joint stock company. —   The joint stock company is a form of business organization at one time frequent in connection with l registration to the DTIregistration to the SEC  2 THE CORPORATION CODE  OF  THE PHILIPPINES larger enterprises, which, so far as the United States is concerned, is now almost extinct. This form of company was highly popular in England during the seventeenth and early eighteenth centu ries. The joint stock company can be best considered as a combination of the partnership in that it is formed under a contract and requires no special sanction from the State. The members are liable, jointly and severally, for all the company's debts. It resembles the corporation in control and management. The members do not control the company but choose a board of directors who were the authorized agents and managers. Thus, while membership in the company might change thru death or transfer of membership interest, the company is not dissolved. (4)  Cooperative association.  — It represents another form of business organization which proved more popular in Europe than in America. This form of organization is not of sufficient interest or importance to the business world to require consideration in this text. (5)  Business trust.  — Another form of business organization less widely known is the business trust, sometimes called the Massachussets  trust. 1  The main feature of this form of organization is that it is formed by a contract and that the title to property and the conduct of business is in the hands of trustees who act for a large group of beneficiaries. (6)  Corporation.  — It is now the dominant form of organization in modern business. The corporation is a creature of law and all its rights, powers, and duties are derived from  legislation.  In some forms of business of a public or quasi-public nature like that of public utilities, railroads, insurance companies, and banking institutions, it is almost the exclusive form of business organization. In other fields of enterprise, the corporation competes with other forms of business organization. 'Membership  depends entirely upon the ownership of shares rather than on the agreement of the associates as in the partnership. The death of a partner does not dissolve the firm. The trustees (managers) have a legal title to its property and act as principals for the shareholders who have all the legal status of a  cestui que trust (beneficiaries). It bears such a close resemblance to a corporation that it is or has been frequently considered as a corporation. (Chester Rohlich, Organizing Corporate and Other Business Enterprises [1953], p. 155.) But it is not a corporation.   registration to the cooperative development authority  INTRODUCTION 3 (7)  Other business forms. —   They arise where different enter prises, whether organized in the same form or different forms, unite for a common purpose. The purpose may be temporary in character, giving us the syndicate, or it may contemplate more permanent associations, giving us varying forms of combinations, the trust, the holding company, and the like. (a) The distinguishing characteristic of the  syndicate  is that it is a temporary alliance of individuals, firms, or corporations, usually for the purpose of financing an enterprise. After the purpose of organization has been accomplished, the syndicate is dissolved. It is a form of organization used largely by bankers for underwriting purposes. Syndicates reflect the general state of business — when business is at a standstill, there is obviously little need for them and few are formed. (b)  Combinations  take varying forms. Their primary purpose is to secure the savings and other advantages which result from consolidation and large-scale operation. In the first phase, such combinations were really trusts in the sense above described, except that corporations formed the constituent elements and beneficiaries of the trust. This form of association having been in some instances declared to be illegal by the courts, resort has been had to other methods. (c) The practice followed in some cases is to organize a new corporation which buys the individual plants it wishes to bring into the combination and which thus becomes a single owner of all the establishments. In the largest combinations, however, the stock of the constituent companies is all brought by a unifying company called a  holding company.  The constituent companies retain their organization intact. They are controlled by the central corporation as a stockholder which has power to elect directors and officers at will and thus have complete power over the management. Though trusts as combinations of corporations have long ceased to have any existence, popular phraseology continues to use the word trust to designate any large aggregation of capital under unified direction and  control,  (see C.W.  Gestenberg,  4 THE CORPORATION CODE OF THE PHILIPPINES Organization and Control, in 3 Modern Business [1919], pp. 3-8.) In the Philippines, the only types of business  organization provided by law are the partnership (Arts. 1767-1806, Civil Code.) and the corporation. No prohibition, however, exists for the other forms. As distinguished from corporations, the other types of business organization are unincorporated. Theories as to srcin of corporations. (1)  Ethnological theory.  — There is authority for the statement that the concept of collective entity antedates that of the individual; that groups of men united by the reality or fiction of blood relationship into families, clans or tribes were recognized units of primitive society even before the individual was so regarded. Upon this assumed ethnological predicate has been erected the theory that the basic principle of corporate organization, the embodiment of which is now described as a fictitious, intangible person, created by law and existing only in contemplation thereof, is in reality but a manifestation of the gregarious instinct in man, existing inchoate from earliest times and before law itself became an effective social force. The law, it is argued, has done no more than to recognize the existence of this phase of human activity, guide its development, and define its functions and rela tions. In short, instead of the role of creator, assumed by the law for its own convenience, the relation would be more aptly described by assigning to the law the part of one who, having discovered a foundling upon his doorstep, clothes and feeds it and thereafter treats it as his own. Under this  theory,  the corporate idea, therefore, is the product of no one people and no one country, but, on the contrary, developed more or less independently, in varying forms among the several ethnological units. (2)  Imitative theory.  — The other theory as to the srcin of corporations is the imitative theory of jural development. This theory traces the genesis of the modern corporation to the Greece of Solon (638-559 B.C.), citing the writings of Gaius on Roman Law and passages from the Pandects of   Justinians,  as authority for the assertion that laws fathered by the great Hellenic jurist
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