Holders of Nonvoting Shares Shall Nevertheless Be Entitled To Vote On The Following Matters (A) Amendment of The Articles of Incorporation

May 14, 2022
1. Section 2. Corporation Defined. - A corporation is an artificial being created by

operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence.
2. Montelibano Case
3. Ultra Vires
4. Section 35. Corporate Powers and Capacity. - Every corporation incorporated under
this Code has the power and capacity:
(a) To sue and be sued in its corporate name;

-the written consent of the Board is required
i. Philippine Numismatic And Antiquarian Society vs. Genesis Aquino, et.

Al., G.R. No. 206617, January 30, 2017
-the President can sign the pleading, but the President alone cannot
decide to file a case in behalf of the corporation; the consent of the
Board of Directors/Trustees is required
(b) To have perpetual existence unless the certificate of incorporation provides

otherwise;
-note Section 11: Corporation can decide not to opt for perpetual existence
thru the Certificate of Incorporation
-SEC can revoke the Corp’s registration for failure to operate within 3 years
(c) To adopt and use a corporate seal;

-needed when Corp issue shares of stocks
-exercised by the Board only
(d) To amend its articles of incorporation in accordance with the provisions of

this Code;
-note Section 15 – exercised by Board
-note Section 6 – holders of shares may amend AoI too:
Holders of nonvoting shares shall nevertheless be entitled to vote on the following
matters; (a) Amendment of the articles of incorporation;
(e) To adopt bylaws, not contrary to law, morals or public policy, and to amend
or repeal the same in accordance with this Code;
-Section 46-47
(f) In case of stock corporations, to issue or sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this Code; and to admit
members to the corporation if it be a nonstock corporation;
-exercised exclusively by the Board
-the issuance of stocks belongs solely to the authority of the Board
(g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage,
and otherwise deal with such real and personal property, including securities
and bonds of other corporations, as the transaction of the lawful business of
the corporation may reasonably and necessarily require, subject to the
limitations prescribed by law and the constitution;
-Section 39: GR exercised by the Board
-Exception: if ALL or SUBSTANTALLY ALL of the properties are sold; then
consent of the shareholders is required
(h) To enter into a partnership, joint venture, merger, consolidation, or any other
commercial agreement with natural and juridical persons;
- exercised exclusively by the Board
(i) To make reasonable donations, including those for the public welfare or for
hospital, charitable, cultural, scientific, civic, or similar purposes: Provided,
That no foreign corporation shall give donations in aid of any political party
or candidate or for purpose s of partisan political activity;
(j) To establish pension, retirement, and other plans for the benefit of its
directors, trustees, officers, and employees; and
(k) To exercise such other powers as may be essential or necessary to carry out
its purpose or purposes as stated in the articles of incorporation.
5. SECTION 36. Power to Extend or Shorten Corporate Term.
A private corporation may extend or shorten its term as stated in the articles of
incorporation when approved by a majority vote of the board of directors or trustees, and
ratified at a meeting by the stockholders or members representing at least two-thirds (2/3)
of the outstanding capital stock or of its membrs. Written notice of the proposed action and
the time and place of the meeting shall be sent to the stockholders or members at their
respective place of residence as shown in the books of the corporation, and must be
deposited to the addressee in the post office with postage prepaid, served personally, or
when allowed in the bylaws or done with the consent of the stockholder, sent electronically
in accordance with the rules and regulations of the Commission on the use of electronic
data messages. In case of extension of corporate term, a dissenting stockholder may
exercise the right of appraisal under the conditions provided in this Code.
6. Process to Extend:
a. Decision to Extend by the Board and the shareholders
b. Amendment of the Articles of Incorporation to be submitted to SEC
c. Wait for the Approval of SEC
-the extension shall take effect only on the day following the expiry date
7. Section 11. Corporate Term.
A corporate term for a specific period may be extended or shortened by amending the
articles of incorporation: Provided, That no extension may be made earlier than three (3)
years prior to the original or subsequent expiry date(s) unless there are justifiable reasons
for an earlier extension as may be determined by the Commission: Provided, further, That
such extension of the corporate term shall take effect only on the day following the original
or subsequent expiry date(s).
8. Outstanding Capital Stock (OCS)

-number of shares issued by the Corporations
9. The subscriber is not exempted from liability but his liability is only limited up to
the amount of his shares (capital contributed to the corporation)
10. Trust Fund Doctrine

-shareholders cannot withdraw their shares automatically
-they can sell their shares
11. Section 80 – Appraisal Right

Section 80. When the Right of Appraisal May Be Exercised. - Any stockholder of a
corporation shall have the right to dissent and demand payment of the fair value of
the shares in the following instances:
(a) In case an amendment to the articles of incorporation has the effect of changing
or restricting the rights of any stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence;
(b) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of
all or substantially all of the corporate property and assets as provided in this Code;
(c) In case of merger or consolidation; and
(d) In case of investment of corporate funds for any purpose other than the primary
purpose of the corporation.
Note: Section 36: In case of extension of corporate term, a dissenting stockholder may
exercise the right of appraisal under the conditions provided in this Code.
-Is this in conflict with Section 80? NO. Effect is still the same.
-Shareholder can demand payment of the fair value of his share in case of extension of corp
term: he can opt out from the corp and get his money
-How about in cases of shortening of corp term? Shareholder can exercise his appraisal
right pursuant to Sec. 80; mamba out and get his money
12. Power to increase or decrease Capital Stock – consent of shareholders is required

13. Is there a need to increase the authorized capital stock if the corp wants to acquire
an asset?
a. If the corp wants to increase its capital
-Sources of Capital: Equity (money from subscription – thru shares of stock) &
Debt (usually from a bank)
b. -
c. consider if there is a government regulation
14. Section 37. Power to increase or Decrease Capital Stock; Incur, Create or Increase
Bonded Indebtedness.
That the Commission shall not accept for filing any certificate of increase of capital stock unless
accompanied by a sworn statement of the treasurer of the corporation accompanied by a sworn
statement of the treasurer of the corporation lawfully holding office at the time of the filing of
the certificate, showing that at least twenty-five percent (25%) of the increase in capital stock
has been subscribed and that at least twenty-five percent (25%) of the amount subscribed has
been paid in actual cash to the corporation or that property, the valuation of which is equal to
twenty-five percent (25%) of the subscription, has been transferred to the corporation:
Ex. 1 million to 20 million: 19m increase: 25% must be subscribed i.e. 4,750,000; 25% of this or
1,187,500 must be paid up in cash
NOTE: Subscription is still considered floating if the amendment has not yet been approved by
the SEC. Thus, such may not be subjected to payment or garnishment.
15. Right of First Refusal; Preemptive Right

Section 38. Power to Deny Preemptive Right. - All stockholders of a stock corporation shall enjoy
preemptive right to subscribe to all issues or disposition of shares of any class, in proportion to
their respective shareholdings, unless such right is denied by the articles of incorporation or an
amendment thereto: Provided, That such preemptive right shall not extend to shares issued in
compliance with laws requiring stock offerings or minimum stock ownership by the public ; or to
shares issued in good faith with the approval of the stockholders representing two-thirds (2/3)
of the outstanding capital stock in exchange for property needed for corporate purposes or in
payment of previously contracted debt.
16. Section 39. Sale or Other Disposition of Assets. - Subject to the provisions of Republic Act
No. 10667, otherwise known as the "Philippine Competition Act", and other related laws a
corporation may, by a majority vote of its board of directors or trustees, sell, lease,
exchange, mortgage, pledge, or otherwise dispose of its property and assets, upon such
terms and conditions and for such consideration, which may be money, stock, bonds, or
other instruments for the payment of money or other property or consideration, as its
board of directors or trustees may deem expedient.
A sale of all or substantially all of the corporation's properties and assets, including its
goodwill, must be authorized by the vote of stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, or at least twothirds (2/3) of the members, meeting
duly called for the purpose.
Note: Determine what is sold? Is it all the assets or substantially all?
The determination of whether or not the sale involves all or substantially all of the
corporation's properties and assets must be computed based on its net asset value, as
shown in its latest financial statements. A sale or other disposition shall be deemed to cover
substantially all the corporate property and assets if thereby the corporation would be
rendered incapable of continuing the business or accomplishing the purpose of which it was
incorporated.
17. Question: Can the shareholder invoke his appraisal right if there is an amendment of the
Articles of Incorporation denying preemptive right?
Is denial of preemptive right a restriction to the right of a stockholder?

Note: Section 80 - In case an amendment to the articles of incorporation has the effect of
changing or restricting the rights of any stockholder or class of shares.
18. Sec. 40
19. Sec. 41
20. Sec. 42 Power to Declare Dividends – exclusively exercised by the Board; exception: stocks –
consent of shareholders is required
-Note other exceptions

Holders of Nonvoting Shares Shall Nevertheless Be Entitled To Vote On The Following Matters (A) Amendment of The Articles of Incorporation

Uploaded by

Copyright:

Available Formats

Holders of Nonvoting Shares Shall Nevertheless Be Entitled To Vote On The Following Matters (A) Amendment of The Articles of Incorporation

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Holders of Nonvoting Shares Shall Nevertheless Be Entitled To Vote On The Following Matters (A) Amendment of The Articles of Incorporation

Uploaded by

Copyright:

Available Formats

May 14, 2022

1. Section 2. Corporation Defined. - A corporation is an artificial being created by

(a) To sue and be sued in its corporate name;

i. Philippine Numismatic And Antiquarian Society vs. Genesis Aquino, et.

(b) To have perpetual existence unless the certificate of incorporation provides

(c) To adopt and use a corporate seal;

(d) To amend its articles of incorporation in accordance with the provisions of

5. SECTION 36. Power to Extend or Shorten Corporate Term.

8. Outstanding Capital Stock (OCS)

10. Trust Fund Doctrine

11. Section 80 – Appraisal Right

12. Power to increase or decrease Capital Stock – consent of shareholders is required

15. Right of First Refusal; Preemptive Right

Note: Determine what is sold? Is it all the assets or substantially all?

Is denial of preemptive right a restriction to the right of a stockholder?

You might also like