Who may form and operate a corporation? | SEC Philippines

Summary

This video explains the process of forming a corporation, including who can be incorporators, how ownership works, and the role of shareholders. It covers the capital structure, the rights of shareholders, and the limited liability principle, which protects personal assets from corporate debts. The video also delves into corporate governance, focusing on the election of directors and corporate officers. Key topics include the responsibilities of the board, the distinction between shareholders and directors, and the importance of bylaws in managing a corporation’s day-to-day operations. The concept of one-person corporations is also discussed.

Takeaways

• 😀 Corporations are formed by incorporators who are the original owners, and they go through the process of incorporation, including raising capital and signing documents like the articles of incorporation.
• 😀 Incorporators can either be natural persons (individuals) or artificial persons (organizations like partnerships or corporations), and they must meet certain legal requirements like being at least 18 years old.
• 😀 A corporation can have between 1 and 15 incorporators. If there’s only one, it’s called a one-person corporation (OPC).
• 😀 To become an incorporator, one must own at least one share of stock in the corporation, making them a shareholder as well.
• 😀 Shareholders are the owners of the corporation and have various rights, such as voting on major issues, receiving dividends, and claiming a share of assets if the corporation is liquidated.
• 😀 The authorized capital stock is the total amount of capital a corporation can raise, and it’s divided into shares, each with a par value. These shares can be bought by investors to become shareholders.
• 😀 The amount of ownership a shareholder has is proportional to the number of shares they own relative to the total number of shares in the corporation.
• 😀 Shareholders elect a board of directors to manage the corporation. The board sets policies and makes key decisions, but shareholders have the ultimate say on major issues like mergers or capital changes.
• 😀 One of the main advantages of corporations is the doctrine of limited liability, meaning shareholders are not personally liable for the corporation's debts beyond their investment.
• 😀 Shares of stock in a corporation are transferable, making it easier for shareholders to sell or donate their shares without disrupting the corporation’s operations.
• 😀 Corporate officers, such as the president, treasurer, and secretary, manage the day-to-day operations of the corporation, while the board of directors sets the overall direction and policies. The officers are elected by the board and must be shareholders.

Q & A

Who are the incorporators in the process of forming a corporation?

Incorporators are the persons who form a corporation. They can be natural persons (individuals) or artificial persons (organizations like partnerships or other corporations). Incorporators are responsible for raising capital, choosing the corporation's name, and preparing and signing the articles of incorporation and bylaws.

What is the minimum and maximum number of incorporators in a corporation?

A corporation can have between 1 and 15 incorporators. The minimum number is 1, while the maximum number is 15. If there is only one incorporator, the corporation is considered a one-person corporation.

What is the required age for a natural person to become an incorporator?

A natural person must be at least 18 years old to become an incorporator and participate in the process of incorporating a corporation.

What rights do shareholders have in a corporation?

Shareholders have several rights, including the right to vote on major matters affecting the corporation, the right to receive dividends, and the right to share in the net assets of the corporation when it is liquidated. The extent of these rights depends on the percentage of shares owned.

What is the concept of authorized capital stock in a corporation?

Authorized capital stock is the total amount of capital a corporation is authorized to raise, as stated in its articles of incorporation. This capital is divided into smaller units called shares of stock, each with a corresponding value (par value).

Can a corporation own shares in another corporation?

Yes, a corporation can own shares in another corporation. In fact, a corporation can be a shareholder of another corporation, just as individuals (natural persons) or organizations (artificial persons) can be shareholders.

What is the doctrine of limited liability in a corporation?

The doctrine of limited liability means that shareholders are only liable for the corporation's debts to the extent of their investment in the corporation. Their personal assets cannot be pursued to pay the corporation's debts, which makes corporations attractive to investors.

How does share transferability work in a corporation?

Shares of stock in a corporation are transferable. A shareholder can sell, donate, or transfer shares without needing the consent of other shareholders or the corporation. The corporation simply records the transfer and updates the ownership details.

What is the role of the board of directors in a corporation?

The board of directors is responsible for setting policies and the overall direction of the corporation. They make key decisions and authorize actions, such as contracts and corporate investments. The board meets regularly to oversee the corporation's governance.

Who can become a director of a corporation?

Directors must be natural persons and must own at least one share of stock in the corporation. Corporate shareholders can elect a natural person to represent them on the board. Directors are elected by shareholders during their annual meetings.