Rules on de facto corporations

A de facto corporation  is a corporation where there exists a flaw in its incorporation. In other words, it has not complied with all the essential requisites imposed by law for the creation of a corporation de jure.

Section 20 of the Corporation Code provides: "De facto corporations. - 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 inquired 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."

The defect in the juridical personality of a corporation cannot be inquired into by private individuals, except via quo warranto proceedings brought on behalf of the State where the main action is to question the validity or existence of such juridical personality. Such defect in juridical personality also cannot be used as a defense to avoid claims.

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