Attributes of a Corporation

What is a corporation? A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence. [1] What are the attributes of a corporation? [2] 1. It is an artificial being with separate and distinct personality from that of people comprising it; 2. It is created by operation of law; 3. It has the right to succession; and 4. It has powers, attributes, and properties conferred by law or incidental to its existence. What are the consequences of artificial being as a corporate attribute? 1. The penalty of imprisonment cannot be imposed. However, the corporation may be dissolved for violation of the provisions of the Corporation Code. [3] 2. If the crime is committed by a corporation or other juridical entity, the directors, officers, employees or other officers thereof responsible for the offense shall be charged and penalized for the crime, precisely because of the nature of the crime and the penalty therefor. [4] 3. As a rule, moral damages are not awarded to a corporation unless it enjoyed good reputation that the offender debased and besmirched by his actuations. [5] 4. It can claim for moral damages that falls under item 7 of Article 2219 of the Civil Code. This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages. [6] What is the consequence of separate and distinct personality? By virtue of the doctrine, stockholders of a corporation enjoy the principle of limited liability: the corporate debt is not the debt of the stockholder. Thus, being an officer or a stockholder of a corporation does not make one's property the property also of the corporation. [7] When can the separate and distinct personality of a corporation may be disregarded? When the application of the doctrine of piercing the corporate veil is warranted, as when "the separate personality of a corporation is used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to confuse legitimate issues." It is also warranted in alter ego cases "where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation." When the corporate veil is pierced, the corporation and persons who are normally treated as distinct from the corporation are treated as one person, such that when the corporation is adjudged liable, these persons, too, become liable as if they were the corporation.[8] What is the meaning of the attribute that private corporations are created by operation of law? It means that private corporations can only exist if the government, through the Securities and Exchange Commission, subject to clearances by appropriate government agencies, will approve its formation. What is the meaning of corporate right to succession? It means that death, replacement, or any changes in the composition of stockholders, members, directors, trustees or officers of a corporation will not affect its continued existence. What is the meaning of the attribute that a corporation has powers, attributes, and properties conferred by law or incidental to its existence? It means that the powers of a corporation will be limited to those conferred by law, its duly approved Articles of incorporation, and those incidental and necessary to the exercise of the powers so conferred. [1] Sec. 2, R.A. No. 11232 [2] Id. [3] Sec. 170, R.A. No. 11232 [4] Alfredo Ching vs. Secretary of Justice, G. R. No. 164317 (February 6, 2006) [5] San Fernando Regala Trading Inc. vs. Cargill Philippines Inc., G.R. No. 178008 (October 9, 2013) [6] Filipinas Broadcasting Network Inc. vs. Ago Medical and Educational Center, G.R. No. 141994 (January 17, 2005) [7] Joselito Bustos vs. Millians Shoe, Inc., G.R. No. 185024 (April 4, 2017) [8] IAME vs. Litton and Company, G.R. No. 191525 (December 13, 2017)