WHAT ARE CORPORATE POWERS?

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• A corporation is empowered to exercise any act which is in direct and immediate furtherance of its business.

• No corporation shall possess or exercise corporate powers other than those conferred by the Revised Corporation Code of the Philippines or its Articles of Incorporation.

• A corporation can perform acts as long as it is not prohibited by general law and not contrary to morals and public policy.

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. As an artificial being, a Corporation possess certain corporate powers.

 

 

What are the kinds of corporate powers?

The Corporate powers are of the following kinds: first, express powers, these powers are those expressly authorized by the Corporation Code, applicable to special laws, administrative regulations, and the articles of incorporation. Second, implied powers, these powers are those essential and necessary to carry out its purpose/s as stated in the articles of incorporation. And third, incidental powers, those are powers that are deemed conferred on the corporation because they are incidental to its existence.

The Corporation Code of the Philippines vests in the board of directors the exercise of the corporate powers of a stock corporation, save in those instances where the Code requires stockholders’ approval for certain specific acts.

 

Jurisprudence says:

There are three levels of control in the corporate hierarchy. First is the board of directors who are responsible for corporate policies and the general management of the business affairs of the corporation. Second are the officers of the corporation who execute the policies laid down by the board, but in practice often have a wide latitude in determining the course of business operations. And third, the stockholders who have residual power over fundamental corporate changes, like amendments of the articles of incorporation. (City Bank NA v. Chua, G.R. No. 102300, March 17, 1993)

 

What are the general powers of the corporation? The law says:

SEC. 35. Corporate Powers and Capacity. – Every corporation incorporated under this Code has the power and capacity:  

(a) To sue and be sued in its corporate name;  

(b) To have perpetual existence unless the certificate of incorporation provides otherwise; 

(c) To adopt and use a corporate seal; 

(d) To amend its articles of incorporation in accordance with the provisions of this Code; 

(e) To adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the same in accordance with this Code; 

(f) In case of stock corporations, to issue or 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 nonstock corporation; 

(g) 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; 

(h) To enter into a partnership, joint venture, merger, consolidation, or any other commercial agreement with natural and juridical persons; 

(i) To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no foreign corporation shall give donations in aid of any political party or candidate or for purposes of partisan political activity; 

(j) To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers, and employees; and 

(k) 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.

 

The Theory of General Capacity provides that a corporation can perform such acts as long as it is not prohibited by general law and not contrary to morals and public policy. A corporation is empowered to exercise any act which is in direct and immediate furtherance of its business, fairly incidental to the express powers, and reasonably necessary to their exercise, even if said power is not expressly granted in the Corporation Code.

 

What are specific powers of a corporation?

The specific powers of a corporation, also called Theory of Specific Capacity, are the following: power to extend or shorten corporate term; power to increase or decrease corporate stock; power to incur, create, or increase bonded indebtedness; power to deny pre-emptive right; power to sell, dispose, lease, encumber all or substantially all of corporate assets; power to purchase or acquire shares; power to invest corporate funds in another corporation or business for other purpose other than primary purpose; power to declare dividends out of unrestricted retained earnings; power to enter into management contract with another corporation whereby one corporation undertakes to manage all or substantially all of the business of the other corporation for a period not longer than five (5) years for any one term, and power to amend Articles of Incorporation.

Under the Theory of Specific Capacity, no corporation shall possess or exercise corporate powers other than those conferred by this Code or by its articles of incorporation except as necessary or incidental to the exercise of the powers conferred.

 

What are the implied powers of a corporation? Jurisprudence says:

A corporation is not restricted to the exercise of powers expressly conferred upon it by its charter but has the power to do what is reasonably necessary or proper to promote the interest or welfare of the corporation. (NAPOCOR v. Vera, G.R. No. 83558, February 27, 1989)

 

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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