Vnotes - Corpo (Week 3)

VOLCANOTES 2020 | BUSINESS ORGANIZATION II
h. Directors/Trustees 1. Of an offense punishable by

ü Sec. 13 (f) of the Code requires the articles of imprisonment for a period
incorporation to indicate the number of directors or exceeding 6 years;
trustees, directors shall not be more than 15 or the 2. For violating this Code; and
trustees which may be more than 15. 3. For violating Republic Act No.
ü Sec. 13 (g) of the Code also requires the: 8799 otherwise known as
o Names “The Securities Regulation
o Nationalities, and Code”;
o Residence address b) Found administratively liable for any
Of persons who shall act as directors or trustees until offense involving fraudulent acts;
the first regular directors or trustees are duly elected and
and qualified in accordance with Code. c) By a foreign court or equivalent
ü “Directors” – used to designate the governing board in foreign regulatory authority for acts,
stock corporations violations or misconduct similar to
ü “Trustees” – used to designate governing board in those enumerated in paragraphs (a)
non-stock corporations. and (b) above.
ü By laws of a corporation – may provide for additional
qualifications and disqualifications of its members of The foregoing is without prejudice to
the board of directors or trustees. qualifications or other disqualifications,
o However, it may not do away with the which the Commission, the primary
minimum disqualifications laid down by the regulatory agency, or the Philippine
Code. (Sec. 22, 2nd par) Competition Commission may impose in
“A director who ceases to own at its promotion of good corporate
least one (1) share of stock or a governance or as a sanction in its
trustee who ceases to be a member administrative proceedings.
of the corporation shall cease to be
such.”
ü The Code requires mere residency, majority of them, i. Capitalization
in order to qualify to the office of the director. ü Sec. 13 (h) requires all domestic corporations
o Such being the case, even aliens, may be proposing to organize under PH laws to provide in its
elected as directors provided that the articles of incorporation its:
residency requirement [majority are PH o Authorized capital stock,
residents] is met. o The number of shares and /or kind of shares
o Aliens – may not qualify or elected as such, in into which the authorized capital is divided,
any activity or business undertaking o The par value of each share, if there be any
exclusively reserved to Filipino citizens, like o Names, nationalities, and residences of the
he management of educational institutions original subscribers, and the amount
(Art. XIV, Constitution) and those governed by subscribed and paid by each on his
Retail Trade Law. subscription.
 IF the business undertaking is only ü Authorized capital – the maximum amount fixed in
partially nationalized, aliens can be the articles to be subscribed and paid-in or secured to
elected as directors, but their be paid by the subscribers.
number shall only be in proportion o May also refer to the maximum number of
to their equity shares that the corporation can issue.
ü Disqualifications of Directors, Trustees or Officers – ü Subscribed capital stock – total number of shares and
Sec. 26. Disqualification of Directors, its total value for which there are contracts for their
Trustees or Officers – A person shall be acquisition or subscription.
disqualified from being a director, trustee, or o Stockholder’s equity account showing that
officer of any corporation if, within 5 years part of the authorized capital stock which has
prior to the election or appointment as such, been paid or promised to be paid, or that
the person was: portion of the authorized capital stock which
a) Convicted by final judgment: has been subscribed by the subscribers or
stockholders.
1
ü Paid up Capital Stock – also known as “paid-in the board of directors pursuant to authority
capital”, the actual amount or value which has been conferred by the articles of incorporation or
actually contributed or paid to the corporation in the bylaws, or if not so fixed, by the
consideration of the subscriptions made thereon. stockholders representing at least a majority
o May either be in cash, property or in the form of the outstanding capital stock at a meeting
of services actually rendered to the duly called for the purpose.
corporation.
o Consideration for Stocks –  Payment to subscription to the capital
Sec. 61. Consideration for Stocks – Stocks stock of a corporation may be in varied
shall not eb issued for a consideration less forms.
than the par or issued price thereof.  It may be one, or a combination of two
Consideration for the issuance of stock may or more forms provided therein, so
be: long as they are capable of valuation,
a) Actual cash paid in the fairly valued.
corporation;
b) Property, tangible or intangible, i. Shares of Stock and Classification
actually received by the ü Sec. 13 (h) and 14 (7) requires a stock corporation to
corporation and necessary or provide for the number of shares into which the
convenient for its use and lawful authorized capital stock is divided and in case the
purposes at a fair valuation equal shares are with par value, the par value of each, the
to the par or issued value of the names, nationalities and residences of the original
stock issued; subscribers and the amount subscribed and paid by
c) Labor performed for or services each on his subscription.
actually rendered to the ü Shares of stock – designate the units into which the
corporation; proprietary interest in a corporation is divided.
d) Previously incurred indebtedness The interest or right which the
of the corporation; owner, called the stockholders or
e) Amounts transferred form shareholder, has in the
unrestricted retained earnings to management of the corporation,
stated capital; and in the surplus profits and, in
f) Outstanding shares exchanged case of dissolution, in all of its
for stocks in the event of assets remaining after the
reclassification or conversion; payment of its debts.
g) Shares of stock in another ü Certificate of stock or stock certificate – a document
corporation; and/or or instrument evidencing the interest of a stockholder
h) Other generally accepted form of in the corporation.
consideration o Documentary evidence of the holders’
ownership of shares and a convenient
Where the consideration is other than actual instrument for the transfer of shares.
cash or consists of intangible property such as ü Sec. 6 Classification of Shares –
patents or copyrights, the valuation thereof o The classification of shares, their
shall initially be determined by the corresponding rights privileges, or
stockholders or the board of directors, restrictions, and their stated par value – must
subject to the approval of the Commission. be indicate din the AOI.
o NO share may be deprived of voting rights
Shares of stock shall not be issued in EXCEPT those classified as “preferred” or
exchange for promissory notes or future “redeemable” shares unless otherwise
service. The same considerations provided in provided.
this section, insofar as applicable, may be o There shall always be a class or series of
used for the issuance of bonds by the shares with complete voting rights.
corporation. o Holders of nonvoting shares shall
nevertheless be entitled to vote on the
The issued price or no-par value shares may following matters:
be fixed in the articles of incorporation or by
2
a) Amendment of the AOI;

b) Adoption and amendment of bylaws;
c) Sale, lease, exchange, mortgage,
pledge, or other disposition of all or
substantially all of the corporate
property;
d) Incurring, creating, or increasing
bonded indebtedness;
e) Increase or decrease authorized
capital stock;
f)Megers or consoled
Cagayan Fishing v. Sandiko

FACTS: Manuel Tabora is the registered owner of 4 parcels of
land. Tabora sold the land to the plaintiff company, said to be
under process of incorporation. A deed of sale was executed by
the terms of which the plaintiff sold and transferred to the
defendant all the rights, titles and interest over the land. He
eecuted a promissory note that he shall pay 25, 300 after a year
with interest. Unfortunately, Sandiko failed to pay, thus the
action for payment. The Court held the deed of sale was
invalid.
ISSUE: W/N Cagayan Fisihng has juridical capacity to enter into

a contract.
HELD: NO. The transfer made by Tabora to Cagayan Fishing was

only effected on May 31, 1930, and the actual incorporation of
it was effected on October 22, 1930. In other words, the
transfer was at most 5 months before the incorporation of the
company. Until organized, it does not possess the powers of
the corporation, one of which is entering into contracts.
Capital Stock vs Shares of Stock vs Certificate of Stock

Stock vs Shares
Stockholder vs Shareholder
Capital vs Stated Capital vs Legal Capital
working capital vs circulating capital
Voting vs. Non-voting shares
Cumulative v Non-cumulative preferred shares

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VOLCANOTES 2020 | BUSINESS ORGANIZATION II

h. Directors/Trustees 1. Of an offense punishable by

a) Amendment of the AOI;

Cagayan Fishing v. Sandiko

ISSUE: W/N Cagayan Fisihng has juridical capacity to enter into

HELD: NO. The transfer made by Tabora to Cagayan Fishing was

Capital Stock vs Shares of Stock vs Certificate of Stock

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