Direct, immediate furtherance of corporation's business

In the University of Mindanao case (G.R. Nos. 194964-65. January 11, 2016), the Supreme Court said that corporations were not limited to the express powers enumerated in their charters, but might also perform powers necessary or incidental thereto, to wit:
A corporation may exercise its powers only within those definitions. Corporate acts that are outside those express definitions under the law or articles of incorporation or those "committed outside the object for which a corporation is created" are ultra vires.
The only exception to this rule is when acts are necessary and incidental to carry out a corporation's purposes, and to the exercise of powers conferred by the Corporation Code and under a corporation's articles of incorporation.

Montelibano, et al. v. Bacolod-Murcia Milling Co., Inc. stated the test to determine if a corporate act is in accordance with its purposes:

It is a question, therefore, in each case, of the logical relation of the act to the corporate purpose expressed in the charter. If that act is one which is lawful in itself, and not otherwise prohibited, is done for the purpose of serving corporate ends, and is reasonably tributary to the promotion of those ends, in a substantial, and not in a remote and fanciful, sense, it may fairly be considered within charter powers. The test to be applied is whether the act in question is in direct and immediate furtherance of the corporation's business, fairly incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the power to do it; otherwise, not. (G.R. No. L-15092. May 18, 1962, citing Fletcher Cyc. Corp., Vol. 6, Rev. Ed. 1950, pp. 266-268)

Popular Posts