II. Classes of Corporation

SEC. 3. Classes of Corporations. – Corporations formed or organized under this Code may be stock or nonstock corporations. Stock corporations are those which have capital stock divided into shares and are authorized to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held. All other corporations are nonstock corporations.

REQUISITES FOR CLASSIFICATION AS STOCK CORPORATION

1. They have a capital stock dividend into shares; and
2. That they are authorized to distribute dividends or allotments as surplus profits to its stockholders on the basis of the shares held by each of them.

SIGNIFICANCE: Profits obtained by a non-stock corporation cannot be distributed as dividends but are used merely for the furtherance of their purpose or purposes.

Sec. 4. Corporations created by special laws or charters. – Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable.

Example of corporations under Sec. 4:

• Philippine National Oil Company,
• National Development Company,
• Philippine Export and Foreign Loan Guarantee Corporation
• GSIS.

These are government-owned or controlled, operating under a special law or charter. SEC registration is not required for them to acquire legal and juridical personality because they owe their own existence not by virtue of their compliance with the requirements of registration under the Corporation Code but by virtue of the law that specially created them.

Does NLRC have jurisdiction for cases involving employment with GOCC’s?

The test whether a government-owned or controlled corporation is subject to Civil Service Law is the manner of its creation.

1. Those created by special charter are subject to its provision
2. Those created under the General Corporation Law are subject to the provisions of the Labor Law.

Thus, in the case of PNOC having its special charter, but its subsidiary, PNOC-EDC, having been incorporated under the General Corporation Law was held to be a GOCC whose employees are subject to the provisions of the Labor Code.
PNOC-EDC VS. NLRC (201 SCRA 487; Sept. 11, 1991)

OTHER CLASSES OF CORPORATIONS

Public and Private Corporations

1. Public Corporation – those 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 and welfare.  Strictly speaking, a public corporation is one that is created, formed, or organized for political or governmental purposes with political powers to be exercised for purposes connected with the public good in the administration of the civil government.
2. Private Corporations – those formed for some private purpose, benefit, aim or end. They are created for the immediate benefit and advantage of the individuals or members composing it and their franchise may be considered as privileges conferred by the State to be exercised and enjoyed by them in the form of the corporation.

Ecclesiastical and Lay Corporations

1. ECCLESIASTICAL OR RELIGIOUS CORPORATIONS – corporations exclusively organized for spiritual purposes or for administering properties held for religious ones. They are organized to secure public worship or perpetuating the right of a particular religion.
2. LAY CORPORATIONS – are those organized for purposes other than religion. They may further be classified as:
   1. ELEEMOSYNARY: created for charitable and benevolent purposes such as those organized for the purpose of maintaining hospitals and houses for the sick, aged or poor.
   2. CIVIL: organized not for the purpose of public charity but for the benefit, pecuniary or otherwise, of its members.

Aggregate and Sole Corporations

1. AGGREGATE CORPORATIONS – those composed of a number of individuals vested with corporate powers
2. CORPORATION SOLE – those consist of one person or individual only and who are made as bodies corporate and politic in order to give them some legal capacity and advantage which, as natural persons, they cannot have. Under the Code, a corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder or religious denominations, sects, or churches.

Close and Open Corporations

1. CLOSE CORPORATIONS – those whose shares of stock are held by a limited number of persons like the family or other closely-knit group. No public investors and the shareholders are active in the conduct of corporate affairs. (Sec. 95, Revised Corporation Code)
2. OPEN CORPORATIONS – those formed to openly accept outsiders as stockholders or investors. They are authorized and empowered to list in the stock exchange and to offer their shares to the public such that stock ownership can widely be dispersed.

Domestic and Foreign Corporations

1. DOMESTIC CORPORATIONS – those organized or created under or by virtue of the Philippine laws, either by legislative act or under the provisions of the General Corporation Law.
2. FOREIGN CORPORATIONS – those formed, organized or existing under laws other than the Philippines’ and whose laws allow Filipino citizens and corporations to do business in its own country or State. It shall have the right to transact business in the Philippines after obtaining a license for that purpose in accordance with this Code and a certificate of authority from the appropriate government agency (Sec. 140, Revised Corporation Code).

Parent/Holding Company, Subsidiary, and Affiliates

1. PARENT OR HOLDING COMPANY – a corporation that controls another corporation or several other corporations known as its subsidiaries. These corporations confine their activities to owning stocks and supervising the management of other companies. A holding company usually owns a controlling interest (more than 50% of the voting stock) in the companies whose stocks it holds.  Compared with an investment company which is active in the sale or purchase of shares of stocks or securities, parent or holding companies have passive portfolio and hold the securities merely for purposes of control and management.
2. SUBSIDIARY CORPORATIONS – a corporation which is being controlled by a parent or holding corporation by owning the majority of shares of the subsidiary corporation. A subsidiary corporation is an independent and separate juridical entity or personality, distinct from its parent company, hence any claim or suit against the subsidiary does not bind the parent or vice versa.
3. AFFILIATES – are those corporations that are subject to common control and operated as part of a system. They are sometimes called sister companies since the stockholdings of a corporation is not substantial enough to control the former.
   Example: XYZ company is owned by X, Y, and Z where 30% held by X, 30% held by Y, and 40% by Z. Thus,  – X, Y and Z are called affiliates.

Quasi-public Corporations

Otherwise called public service corporations. These are private corporations that have accepted from the state the grant of a franchise or contract involving the performance of public duties. The term is sometimes applied to corporations which are not strictly public in the sense of being organized for governmental purposes, but whose operations contribute to the convenience or welfare of the general public.
Example: telegraph and telephone companies, water companies, electric companies.

De Jure, De Facto, Corporation by Estoppel

1. DE JURE – juridical entities created or organized in strict or substantial compliance with statutory requirements of incorporation and whose rights to exist as such cannot be successfully attacked even by the State in a quo warranto proceeding. They are, in effect, incorporated by strict adherence to the provisions of the law of their creation.
2. DE FACTO – are those which exist by the virtue of an irregularity or defect in the organization or constitution or from some omission to comply with the conditions precedent by which corporations de jure are created, but there was colorable compliance with the requirements of the law under which they might be lawfully incorporated for the purpose and powers assumed, and user of the rights claimed to be conferred by law. Its existence can only be attacked by the direct action of quo warranto proceedings.SEC. 19. De facto Corporations. – The due incorporation of any corporation claiming in good faith to be a corporation under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any private suit to which such corporation may be a party. Such inquiry may be made by the Solicitor General in a quo warranto proceeding.
3. CORPORATION BY ESTOPPEL – those which are so defectively formed as not to be either de jure or de facto corporations but which are considered as corporations in relation only to those who cannot deny their corporate existence due to their agreement, admission, or conduct.SEC. 20. Corporation by Estoppel. – All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use its lack of corporate personality as a defense. Anyone who assumes an obligation to an ostensible corporation as such cannot resist performance thereof on the ground that there was in fact no corporation.