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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A private corporation organized under this Code commences its corporate existence and juridical personality from the date the Commission issues the certificate of incorporation under its official seal thereupon the incorporators, stockholders/members and their successors shall constitute a body corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in accordance with law. (Section 18, Revised Corporation Code)
A de facto corporation is an association of persons existing with:
- A valid law under which a corporation is organized;
- A bona fide attempt in good faith to incorporate; and
- An assumption of corporate powers.
The law says:
“Section 18. Registration, Incorporation and Commencement of Corporation Existence. – A person or group of persons desiring to incorporate shall submit the intended corporate name to the Commission for verification. If the Commission finds that the name is distinguishable from a name already reserved or registered for the use of another corporation, not protected by law and is not contrary to law, rules and regulation, the name shall be reserved in favor of the incorporators. The incorporators shall then submit their articles of incorporation and bylaws to the Commission.
If the Commission finds that the submitted documents and information are fully compliant with the requirements of this Code, other relevant laws, rules and regulations, the Commission shall issue the certificate of incorporation.
A private corporation organized under this Code commences its corporate existence and juridical personality from the date the Commission issues the certificate of incorporation under its official seal thereupon the incorporators, stockholders/members and their successors shall constitute a body corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in accordance with law. (Section 18, Revised Corporation Code)
Jurisprudence says:
“There are stringent requirements before one can qualify as a de facto corporation:
(a) the existence of a valid law under which it may be incorporated;
(b) an attempt in good faith to incorporate; and
(c) assumption of corporate powers.” (Seventh Day Adventist Conference Church of Southern Philippines, Inc. v. Northeastern Mindanao Mission of Seventh Day Adventist, Inc., G.R. No. 150416, July 21, 2006)
Jurisprudence further says:
“The issuance of the Certificate of Incorporation is essential to the claim of good faith. An association of persons claiming to exercise the powers of a corporation knowing that no Certificate of Incorporation had yet been issued cannot claim to be exercising such powers in good faith.” (Hall v. Piccio, G.R. No. L-2598, June 29, 1950)
It must be noted that “the filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the existence of a de facto corporation.” (Missionary Sisters of Our Lady of Fatima v. Alzona, G.R. No. 224307, August 06, 2018)
What then is the consequence of being a de facto corporation?
A de facto corporation has the same rights, powers, obligations, and liabilities as a de jure corporation. However, the due incorporation of a de facto corporation may be directly inquired into by the Solicitor General in a quo warranto proceeding.
The law says:
“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 required 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.” (Section 19, Revised Corporation Code)
Related article: WHAT IS A PROFESSIONAL CORPORATION?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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