Special Corporations: Final Round

True or False:

Statement 1: The fiscal year of the OPC shall be the calendar year.

Statement 2: The OPC may be put in a delinquent status should it fail to submit the reportorial requirements three times, consecutively or intermittently, within a period of five years.

• True; True

• True; False

• False; False

• False; True

Answer explanation

Refer to Sec 129, par 2 and 3. Statement 1 is false because the fiscal year of an OPC shall be that set forth in its AOI or, in the absence thereof, the calendar year. Statement 2 is true.

Enumeration:  In an OPC, what must the single stockholder prove for limited liability to apply? (Choose one or more)

• That the corporation is adequately financed.

• That the corporation is at least 50% financed.

• That the personal property of the stockholder may be commingled with that of the OPC.

• That the property of the OPC is independent of the stockholder’s personal property.

Answer explanation

The single stockholder must prove:

(1)   That the corporation is adequately financed; and

(2)   That the property of the OPC is independent of the stockholder’s personal property.

Otherwise, the single stockholder shall be jointly and severally liable for the debts and other liabilities of the OPC.

Decide on this: You own XYZ, OPC, a one person corporation. On July 1, 2024, 4 additional shareholders were admitted to the corporation. You were only able to file with the Securities and Exchange Commission the Notice of Conversion of One Person Corporation into an Ordinary Corporation on September 1, 2024. What are the possible legal implications of this?

• XYZ, OPC may be allowed to convert to an ordinary corporation without any penalty as the notice of conversion was filed within the allowed period.

• XYZ, OPC may be allowed to convert to an ordinary corporation subject to the payment of penalty as the notice of conversion was filed beyond the allowed period.

• XYZ, OPC may not be validly converted to an ordinary corporation and may be dissolved as the notice of conversion was filed beyond the allowed period.

• None of the above

Answer explanation

Answer: (b) XYZ, OPC may be allowed to convert to an ordinary corporation subject to the payment of penalty as the notice of conversion was filed beyond the allowed period.

 

Explanation: Section 10 of SEC Memorandum Circular No. 27, Series of 2020 in connection to Section 132 of the RCC which provides for the requirements and procedure for conversion of an OPC to an ordinary corporation states that:

If the Notice of Conversion is filed with the Commission beyond 60 days from the transfer of shares, the OPC may still be approved for conversion into an Ordinary Corporation subject to prior payment of penalty if found liable for violation of Section 132, in relation to Section 158 of the RCC.

True or False:
Statement 1: The corporate secretary is responsible for maintaining the minutes book and records of the corporation.
Statement 2: The corporate secretary does not need to notify the nominee or alternate nominee of the death or incapacity of the single stockholder within five (5) days of such occurrence.

• True; True

• True; False

• False; False

• False; True

Answer explanation

b. True; False

Explanation: The first statement is true as per SEC. 123 (a). However, the second statement is false because the corporate secretary must notify the nominee or alternate nominee of the death or incapacity of the single stockholder within five (5) days of such occurrence.

Enumeration: In a One Person Corporation (OPC), what positions must the single stockholder occupy? (Choose one or more)

• Secretary

• Sole director

• President

• Treasurer

Answer explanation

Sec 121 of the RCCP provides that the single stockholder shall be the sole director and president of the OPC

Decide on this: Lebron is the sole stockholder of DEF, OPC, and has appointed James as his nominee. Unfortunately, Lebron suffers a temporary incapacity due to a medical condition. James is currently managing the affairs of DEF, OPC. After a few weeks, Lebron recovers and informs James that he is ready to resume his duties. Can James continue to act as the director even after Lebron has already recovered?

• No, James must step down immediately as Lebron has regained his capacity.

• No, James must step down provided Lebron formally notifies the Commission.

• Yes, James can continue to manage the affairs until Lebron formally notifies the Commission.

• Yes, James can remain as director indefinitely, even after Lebron's recovery.

• Yes, James must resign only if the incapacity becomes permanent.

Answer explanation

(A) No, James must step down immediately as Lebron has regained his capacity.

Explanation: According to SEC. 125, when the incapacity of the single stockholder is temporary, the nominee shall manage the affairs of the One Person Corporation only until the stockholder regains the capacity to assume such duties.

True or False:

Statement 1: A corporation sole is a special form of corporation usually associated with the clergy.

Statement 2: A corporation sole may be dissolved voluntarily by submitting to the Commission a verified declaration of dissolution.

• True; True

• True; False

• False; False

• False; True

Answer explanation

Sections 107 and 108 of the RCCP enumerates the classes of Religious Corporations and the purpose of a Corporation Sole. Section 113 on the other hand provides for the dissolution of a corporation sole.

Enumeration: What are the different kinds of religious denomination provided under the RCCP? (Choose one or more)

• Corporation sole

• Corporation aggregate/religious society

• Ordinary non-stock religious corporation

• Ordinary stock religious corporation

Answer explanation

Religious corporations provided for under the RCCP are as follows:

(1) Corporation sole under Sections 108 to 113 of the RCCP;

(2) Corporation aggregate/religious society under Section 114; or

(3) Ordinary non-stock religious corporation under Sections 86 to 94.

Decide on this matter: Enrique’s Iglesia, is a duly registered corporation sole by Bishop Nestor Enrique acting as its General Superintendent. Enrique’s Iglesia adopted a by-laws creating the Sorcerer Supreme of Elders, made up of church ministers, who were to serve for four years. In turn, the SSE  elected a Secretary, Evangelist, and Treasurer. The SSE exercised Enrique’s Iglesia’s decision-making powers. For 10 years, Enrique’s Iglesia acted as a corporation aggregate although on paper it is created as a corporation sole. Later on, a move to formally convert Enrique’s Iglesia into a corporation aggregate was approved. The original articles of incorporation were amended for the conversion. The members who are against the conversion contested that a corporation sole cannot be converted into a corporation aggregate by merely amending its Articles of Incorporation – it needs to be dissolved. Is the contention proper?

• Yes, a corporation sole and a corporation aggregate are formed for different purposes. As such, conversion from the former to the latter cannot be done through mere amendment of the AOI.

• Yes, a corporation sole and a corporation aggregate are composed of different number of members. The former is composed of one (1) while the latter is composed of more than one (1). As such, mere amendment of the AOI cannot result to such conversion.

• No, a corporation sole may convert to a corporation aggregate by amending its AOI, by applying the general provisions governing non-stock corporations.

• No, a corporation sole may convert to a corporation aggregate by amending its AOI, by applying the general provisions governing stock corporations.

Answer explanation

No, the contention of the non-agreeing members is not proper.

Jurisprudence provides that the conversion of a corporation sole to a corporation aggregate by amendment of its articles of incorporation is permissible. The doctrine of corporate continuity without dissolution underlines the fact that whether one deals with a non-stock corporation or a corporation sole, the entity’s legal standing remains distinct from that of its members. Hence, a corporation sole may seamlessly transition to a corporation aggregate through amendments of its AOI, provided it complies with the required formalities required by law and that the amendment is for a legitimate purpose and not contrary to the law. The law applicable is the general provisions governing non-stock corporations.

Explanation: See Iglesia Evangelica Metodista En Las Islas Filipinas (IEMELIF) vs. Bishop Nathanael Lazaro et al. (G.R. No. 176830)

True or False:

Statement 1: Trustees of educational institutions organized as stock corporations shall not be less than five (5) nor more than fifteen (15)

Statement 2: The number of trustees may or may not be multiples of five (5)

• True; True

• True; False

• False; False

• False; True

Answer explanation

Both statements are false. Section 106 of the RCCP provides Trustees of educational institutions organized as nonstock corporations shall not be less than five (5) nor more than fifteen (15): Provided, That the number of trustees shall be in multiples of five (5).