Sec. 6. Classification of shares.

- The shares A corporation may, furthermore, classify its

of stock of stock corporations may be divided shares for the purpose of insuring compliance
into classes or series of shares, or both, any of with constitutional or legal requirements.
which classes or series of shares may have
Except as otherwise provided in the articles
such rights, privileges or restrictions as may
of incorporation and stated in the certificate
be stated in the articles of incorporation:
of stock, each share shall be equal in all
Provided, That no share may be deprived of
respects to every other share.
voting rights except those classified and
issued as "preferred" or "redeemable" Where the articles of incorporation provide
shares, unless otherwise provided in this for non-voting shares in the cases allowed by
Code: Provided, further, That there shall this Code, the holders of such shares shall
always be a class or series of shares which nevertheless be entitled to vote on the
have complete voting rights. Any or all of the following matters:
shares or series of shares may have a par
value or have no par value as may be 1. Amendment of the articles of
provided for in the articles of incorporation: incorporation;

Provided, however, That banks, trust 2. Adoption and amendment of by-laws;

companies, insurance companies, public 3. Sale, lease, exchange, mortgage, pledge or
utilities, and building and loan associations other disposition of all or substantially all of
shall not be permitted to issue no-par value the corporate property;
shares of stock.
4. Incurring, creating or increasing bonded
Preferred shares of stock issued by any indebtedness;
corporation may be given preference in the
distribution of the assets of the corporation in 5. Increase or decrease of capital stock;
case of liquidation and in the distribution of 6. Merger or consolidation of the corporation
dividends, or such other preferences as may with another corporation or other
be stated in the articles of incorporation corporations;
which are not violative of the provisions of
this Code: 7. Investment of corporate funds in another
corporation or business in accordance with
Provided, that preferred shares of stock may this Code; and
be issued only with a stated par value. The
board of directors, where authorized in the 8. Dissolution of the corporation.
articles of incorporation, may fix the terms Except as provided in the immediately
and conditions of preferred shares of stock or preceding paragraph, the vote necessary to
any series thereof: approve a particular corporate act as
Provided, that such terms and conditions provided in this Code shall be deemed to
shall be effective upon the filing of a refer only to stocks with voting rights.
certificate thereof with the Securities and Preferred share of stock is one with a stated par
Exchange Commission. value which entitles the holder thereof to certain
Shares of capital stock issued without par preferences over the holders of common stock.
value shall be deemed fully paid and non- 1. Preferred shares of stock may be issued
assessable and the holder of such shares shall only with a stated par value
not be liable to the corporation or to its 2. The preferences are designed to induce
creditors in respect thereto: persons to subscribe for shares of a
Provided; That shares without par value corporation.
may not be issued for a consideration less 3. The term guaranteed stock is sometimes
than the value of five (P5.00) pesos per share: used as synonymous with preferred
Provided, further, That the entire stock on which the payment of dividend
consideration received by the corporation for is guaranteed and a distinction is
its no-par value shares shall be treated as sometimes drawn to the effect that
capital and shall not be available for guaranteed stock is entitled to arrear in
distribution as dividends. dividends, while ordinary preferred
stock is not.
Common share of stock is one which entitles the lawful means. Such shares may again be
holder thereof to a pro rata division of the disposed of for a reasonable price fixed by
profits, if there are any, and in its assets upon the board of directors.
dissolution, without any preference or advantage
Redeemable or callable shares are shares,
in that respect over their stockholders or class of
usually preferred, which by their terms are
stockholders but equally with all other
redeemable at a fixed date or at the option of
stockholders except preferred stockholders.
either the issuing corporation or the stockholder
1. It is so-called because it is the basic class or both at a certain redemption price.
of stock which private corporations
Sec. 10. Number and qualifications of
generally issue, or because its holders
incorporators. - Any number of natural
stand upon equal footing, without
persons not less than five (5) but not more
extraordinary rights or privileges.
than fifteen (15), all of legal age and a
2. Common shares have complete voting
majority of whom are residents of the
rights.
Philippines, may form a private corporation
3. Common stockholders are the residual
for any lawful purpose or purposes. Each of
owners of the corporation.
the incorporators of s stock corporation must
own or be a subscriber to at least one (1)
share of the capital stock of the corporation.
Sec. 11. Corporate term. - A corporation
Sec. 7. Founders' shares. - Founders' shares
shall exist for a period not exceeding fifty (50)
classified as such in the articles of
years from the date of incorporation unless
incorporation may be given certain rights
sooner dissolved or unless said period is
and privileges not enjoyed by the owners of
extended. The corporate term as originally
other stocks, provided that where the
stated in the articles of incorporation may be
exclusive right to vote and be voted for in the
extended for periods not exceeding fifty (50)
election of directors is granted, it must be for
years in any single instance by an
a limited period not to exceed five (5) years
amendment of the articles of incorporation,
subject to the approval of the Securities and
in accordance with this Code; Provided, That
Exchange Commission. The five-year period
no extension can be made earlier than five (5)
shall commence from the date of the
years prior to the original or subsequent
aforesaid approval by the Securities and
expiry date(s) unless there are justifiable
Exchange Commission.
reasons for an earlier extension as may be
Founder’s shares have been defined as “shares determined by the Securities and Exchange
issued to the organizers and promoters of a Commission.
corporation in consideration of some supposed
Sec. 13. Amount of capital stock to be
right or property.
subscribed and paid for the purposes of
incorporation. - At least twenty-five percent
(25%) of the authorized capital stock as
Sec. 8. Redeemable shares. - Redeemable stated in the articles of incorporation must be
shares may be issued by the corporation subscribed at the time of incorporation, and
when expressly so provided in the articles of at least twenty-five (25%) per cent of the
incorporation. They may be purchased or total subscription must be paid upon
taken up by the corporation upon the subscription, the balance to be payable on a
expiration of a fixed period, regardless of the date or dates fixed in the contract of
existence of unrestricted retained earnings in subscription without need of call, or in the
the books of the corporation, and upon such absence of a fixed date or dates, upon call for
other terms and conditions as may be stated payment by the board of directors: Provided,
in the articles of incorporation, which terms however, That in no case shall the paid-up
and conditions must also be stated in the capital be less than five Thousand (P5,000.00)
certificate of stock representing said shares. pesos.
Sec. 9. Treasury shares. - Treasury shares are Sec. 14. Contents of the articles of
shares of stock which have been issued and incorporation. - All corporations organized
fully paid for, but subsequently reacquired under this code shall file with the Securities
by the issuing corporation by purchase, and Exchange Commission articles of
redemption, donation or through some other incorporation in any of the official languages
duly signed and acknowledged by all of the least twenty-five (25%) percent of the
incorporators, containing substantially the authorized capital stock of the corporation
following matters, except as otherwise has been subscribed, and at least twenty-five
prescribed by this Code or by special law: (25%) of the total subscription has been fully
paid to him in actual cash and/or in property
1. The name of the corporation;
the fair valuation of which is equal to at least
2. The specific purpose or purposes for which twenty-five (25%) percent of the said
the corporation is being incorporated. Where subscription, such paid-up capital being not
a corporation has more than one stated less than five thousand (P5,000.00) pesos.
purpose, the articles of incorporation shall
state which is the primary purpose and which
is/are the secondary purpose or purposes: Sec. 16. Amendment of Articles of
Provided, That a non-stock corporation may Incorporation. - Unless otherwise prescribed
not include a purpose which would change or by this Code or by special law, and for
contradict its nature as such; legitimate purposes, any provision or matter
stated in the articles of incorporation may be
3. The place where the principal office of the
amended by a majority vote of the board of
corporation is to be located, which must be
directors or trustees and the vote or written
within the Philippines;
assent of the stockholders representing at
4. The term for which the corporation is to least two-thirds (2/3) of the outstanding
exist; capital stock, without prejudice to the
appraisal right of dissenting stockholders in
5. The names, nationalities and residences of accordance with the provisions of this Code,
the incorporators; or the vote or written assent of at least two-
6. The number of directors or trustees, which thirds (2/3) of the members if it be a non-
shall not be less than five (5) nor more than stock corporation.
fifteen (15); The original and amended articles together
7. The names, nationalities and residences of shall contain all provisions required by law to
persons who shall act as directors or trustees be set out in the articles of incorporation.
until the first regular directors or trustees Such articles, as amended shall be indicated
are duly elected and qualified in accordance by underscoring the change or changes made,
with this Code; and a copy thereof duly certified under oath
by the corporate secretary and a majority of
8. If it be a stock corporation, the amount of the directors or trustees stating the fact that
its authorized capital stock in lawful money said amendment or amendments have been
of the Philippines, the number of shares into duly approved by the required vote of the
which it is divided, and in case the share are stockholders or members, shall be submitted
par value shares, the par value of each, the to the Securities and Exchange Commission.
names, nationalities and residences of the
original subscribers, and the amount The amendments shall take effect upon their
subscribed and paid by each on his approval by the Securities and Exchange
subscription, and if some or all of the shares Commission or from the date of filing with
are without par value, such fact must be the said Commission if not acted upon within
stated; six (6) months from the date of filing for a
cause not attributable to the corporation.
9. If it be a non-stock corporation, the
amount of its capital, the names, nationalities
and residences of the contributors and the Sec. 22. Effects on non-use of corporate
amount contributed by each; and charter and continuous in operation of a
10. Such other matters as are not inconsistent corporation. - If a corporation does not
with law and which the incorporators may formally organize and commence the
deem necessary and convenient. transaction of its business or the construction
of its works within two (2) years from the
The Securities and Exchange Commission date of its incorporation, its corporate
shall not accept the articles of incorporation powers cease and the corporation shall be
of any stock corporation unless accompanied deemed dissolved.
by a sworn statement of the Treasurer
elected by the subscribers showing that at
However, if a corporation has commenced Provided, that no corporation, domestic or
the transaction of its business but foreign, shall give donations in aid of any
subsequently becomes continuously political party or candidate or for purposes
inoperative for a period of at least five (5) of partisan political activity;
years, the same shall be a ground for the
10. To establish pension, retirement, and
suspension or revocation of its corporate
other plans for the benefit of its directors,
franchise or certificate of incorporation.
trustees, officers and employees; and
This provision shall not apply if the failure to
11. To exercise such other powers as may be
organize, commence the transaction of its
essential or necessary to carry out its purpose
businesses or the construction of its works, or
or purposes as stated in the articles of
to continuously operate is due to causes
incorporation
beyond the control of the corporation as may
be determined by the Securities and Implied powers are those powers which are
Exchange Commission. reasonably necessary to execute the express
powers and to accomplish or carry out the
purpose for which the corporations was formed.
Sec. 36. Corporate powers and capacity. -
Every corporation incorporated under this
Code has the power and capacity: Sec. 37. Power to extend or shorten corporate
term. - A private corporation may extend or
1. To sue and be sued in its corporate name;
shorten its term as stated in the articles of
2. Of succession by its corporate name for the incorporation when approved by a majority
period of time stated in the articles of vote of the board of directors or trustees and
incorporation and the certificate of ratified at a meeting by the stockholders
incorporation; representing at least two-thirds (2/3) of the
outstanding capital stock or by at least two-
3. To adopt and use a corporate seal;
thirds (2/3) of the members in case of non-
4. To amend its articles of incorporation in stock corporations. Written notice of the
accordance with the provisions of this Code; proposed action and of the time and place of
the meeting shall be addressed to each
5. To adopt by-laws, not contrary to law, stockholder or member at his place of
morals, or public policy, and to amend or residence as shown on the books of the
repeal the same in accordance with this corporation and deposited to the addressee in
Code; the post office with postage prepaid, or
6. In case of stock corporations, to issue or served personally: Provided, that in case of
sell stocks to subscribers and to sell stocks to extension of corporate term, any dissenting
subscribers and to sell treasury stocks in stockholder may exercise his appraisal right
accordance with the provisions of this Code; under the conditions provided in this code.
and to admit members to the corporation if it
be a non-stock corporation;
Sec. 38. Power to increase or decrease capital
7. To purchase, receive, take or grant, hold, stock; incur, create or increase bonded
convey, sell, lease, pledge, mortgage and indebtedness. - No corporation shall increase
otherwise deal with such real and personal or decrease its capital stock or incur, create
property, including securities and bonds of or increase any bonded indebtedness unless
other corporations, as the transaction of the approved by a majority vote of the board of
lawful business of the corporation may directors and, at a stockholder's meeting duly
reasonably and necessarily require, subject to called for the purpose, two-thirds (2/3) of the
the limitations prescribed by law and the outstanding capital stock shall favor the
Constitution; increase or diminution of the capital stock, or
8. To enter into merger or consolidation with the incurring, creating or increasing of any
other corporations as provided in this Code; bonded indebtedness. Written notice of the
proposed increase or diminution of the
9. To make reasonable donations, including capital stock or of the incurring, creating, or
those for the public welfare or for hospital, increasing of any bonded indebtedness and of
charitable, cultural, scientific, civic, or the time and place of the stockholder's
similar purposes:
meeting at which the proposed increase or the Commission of its certificate of filing, the
diminution of the capital stock or the capital stock shall stand increased or
incurring or increasing of any bonded decreased and the incurring, creating or
indebtedness is to be considered, must be increasing of any bonded indebtedness
addressed to each stockholder at his place of authorized, as the certificate of filing may
residence as shown on the books of the declare: Provided, that the Securities and
corporation and deposited to the addressee in Exchange Commission shall not accept for
the post office with postage prepaid, or filing any certificate of increase of capital
served personally. stock unless accompanied by the sworn
statement of the treasurer of the corporation
A certificate in duplicate must be signed by a
lawfully holding office at the time of the filing
majority of the directors of the corporation
of the certificate, showing that at least
and countersigned by the chairman and the
twenty-five (25%) percent of such increased
secretary of the stockholders' meeting, setting
capital stock has been subscribed and that at
forth:
least twenty-five (25%) percent of the
(1) That the requirements of this section have amount subscribed has been paid either in
been complied with; actual cash to the corporation or that there
has been transferred to the corporation
(2) The amount of the increase or diminution property the valuation of which is equal to
of the capital stock; twenty-five (25%) percent of the
(3) If an increase of the capital stock, the subscription: Provided, further, That no
amount of capital stock or number of shares decrease of the capital stock shall be
of no-par stock thereof actually subscribed, approved by the Commission if its effect shall
the names, nationalities and residences of the prejudice the rights of corporate creditors.
persons subscribing, the amount of capital Non-stock corporations may incur or create
stock or number of no-par stock subscribed bonded indebtedness, or increase the same,
by each, and the amount paid by each on his with the approval by a majority vote of the
subscription in cash or property, or the board of trustees and of at least two-thirds
amount of capital stock or number of shares (2/3) of the members in a meeting duly called
of no-par stock allotted to each stockholder if for the purpose.
such increase is for the purpose of making
effective stock dividend therefor authorized; Bonds issued by a corporation shall be
registered with the Securities and Exchange
(4) Any bonded indebtedness to be incurred, Commission, which shall have the authority
created or increased; to determine the sufficiency of the terms
(5) The actual indebtedness of the thereof. (17a)
corporation on the day of the meeting;
(6) The amount of stock represented at the Sec. 39. Power to deny pre-emptive right. -
meeting; and All stockholders of a stock corporation shall
(7) The vote authorizing the increase or enjoy pre-emptive right to subscribe to all
diminution of the capital stock, or the issues or disposition of shares of any class, in
incurring, creating or increasing of any proportion to their respective shareholdings,
bonded indebtedness. unless such right is denied by the articles of
incorporation or an amendment thereto:
Any increase or decrease in the capital stock Provided, That such pre-emptive right shall
or the incurring, creating or increasing of not extend to shares to be issued in
any bonded indebtedness shall require prior compliance with laws requiring stock
approval of the Securities and Exchange offerings or minimum stock ownership by the
Commission. public; or to shares to be issued in good faith
One of the duplicate certificates shall be kept with the approval of the stockholders
on file in the office of the corporation and the representing two-thirds (2/3) of the
other shall be filed with the Securities and outstanding capital stock, in exchange for
Exchange Commission and attached to the property needed for corporate purposes or in
original articles of incorporation. From and payment of a previously contracted debt.
after approval by the Securities and
Exchange Commission and the issuance by
Sec. 40. Sale or other disposition of assets. - In non-stock corporations where there are no
Subject to the provisions of existing laws on members with voting rights, the vote of at
illegal combinations and monopolies, a least a majority of the trustees in office will
corporation may, by a majority vote of its be sufficient authorization for the
board of directors or trustees, sell, lease, corporation to enter into any transaction
exchange, mortgage, pledge or otherwise authorized by this section. (28 1/2a)
dispose of all or substantially all of its
property and assets, including its goodwill,
upon such terms and conditions and for such Sec. 41. Power to acquire own shares. - A
consideration, which may be money, stocks, stock corporation shall have the power to
bonds or other instruments for the payment purchase or acquire its own shares for a
of money or other property or consideration, legitimate corporate purpose or purposes,
as its board of directors or trustees may deem including but not limited to the following
expedient, when authorized by the vote of the cases: Provided, That the corporation has
stockholders representing at least two-thirds unrestricted retained earnings in its books to
(2/3) of the outstanding capital stock, or in cover the shares to be purchased or acquired:
case of non-stock corporation, by the vote of
at least to two-thirds (2/3) of the members, in 1. To eliminate fractional shares arising out
a stockholder's or member's meeting duly of stock dividends;
called for the purpose. Written notice of the 2. To collect or compromise an indebtedness
proposed action and of the time and place of to the corporation, arising out of unpaid
the meeting shall be addressed to each subscription, in a delinquency sale, and to
stockholder or member at his place of purchase delinquent shares sold during said
residence as shown on the books of the sale; and
corporation and deposited to the addressee in
the post office with postage prepaid, or 3. To pay dissenting or withdrawing
served personally: Provided, That any stockholders entitled to payment for their
dissenting stockholder may exercise his shares under the provisions of this Code. (n)
appraisal right under the conditions provided
in this Code.
Sec. 42. Power to invest corporate funds in
A sale or other disposition shall be deemed to another corporation or business or for any
cover substantially all the corporate property other purpose. - Subject to the provisions of
and assets if thereby the corporation would this Code, a private corporation may invest
be rendered incapable of continuing the its funds in any other corporation or business
business or accomplishing the purpose for or for any purpose other than the primary
which it was incorporated. purpose for which it was organized when
After such authorization or approval by the approved by a majority of the board of
stockholders or members, the board of directors or trustees and ratified by the
directors or trustees may, nevertheless, in its stockholders representing at least two-thirds
discretion, abandon such sale, lease, (2/3) of the outstanding capital stock, or by at
exchange, mortgage, pledge or other least two thirds (2/3) of the members in the
disposition of property and assets, subject to case of non-stock corporations, at a
the rights of third parties under any contract stockholder's or member's meeting duly
relating thereto, without further action or called for the purpose. Written notice of the
approval by the stockholders or members. proposed investment and the time and place
of the meeting shall be addressed to each
Nothing in this section is intended to restrict stockholder or member at his place of
the power of any corporation, without the residence as shown on the books of the
authorization by the stockholders or corporation and deposited to the addressee in
members, to sell, lease, exchange, mortgage, the post office with postage prepaid, or
pledge or otherwise dispose of any of its served personally: Provided, that any
property and assets if the same is necessary dissenting stockholder shall have appraisal
in the usual and regular course of business of right as provided in this Code: Provided,
said corporation or if the proceeds of the sale however, That where thein vestment by the
or other disposition of such property and corporation is reasonably necessary to
assets be appropriated for the conduct of its accomplish its primary purpose
remaining business.
as stated in the articles of incorporation, the (1) where a stockholder or stockholders
approval of the stockholders or members representing the same interest of both the
shall not be necessary. (17 1/2a) managing and the managed corporations
own or control more than one-third (1/3) of
the total outstanding capital stock entitled to
Sec. 43. Power to declare dividends. - The vote of the managing corporation; or
board of directors of a stock corporation may
(2) where a majority of the members of the
declare dividends out of the unrestricted
board of directors of the managing
retained earnings which shall be payable in
corporation also constitute a majority of the
cash, in property, or in stock to all
members of the board of directors of the
stockholders on the basis of outstanding
managed corporation, then the management
stock held by them:
contract must be approved by the
Provided, that any cash dividends due on stockholders of the managed corporation
delinquent stock shall first be applied to the owning at least two-thirds (2/3) of the total
unpaid balance on the subscription plus costs outstanding capital stock entitled to vote, or
and expenses, while stock dividends shall be by at least two-thirds (2/3) of the members in
withheld from the delinquent stockholder the case of a non-stock corporation. No
until his unpaid subscription is fully paid: management contract shall be entered into
for a period longer than five years for any
Provided, further, that no stock dividend one term.
shall be issued without the approval of
stockholders representing not less than two- The provisions of the next preceding
thirds (2/3) of the outstanding capital stock at paragraph shall apply to any contract
a regular or special meeting duly called for whereby a corporation undertakes to manage
the purpose. (16a) or operate all or substantially all of the
business of another corporation, whether
Stock corporations are prohibited from such contracts are called service contracts,
retaining surplus profits in excess of one operating agreements or otherwise:
hundred (100%) percent of their paid-in Provided, however, that such service
capital stock, except: contracts or operating agreements which
(1) when justified by definite corporate relate to the exploration, development,
expansion projects or programs approved by exploitation or utilization of natural
the board of directors; or resources may be entered into for such
periods as may be provided by the pertinent
(2) when the corporation is prohibited under laws or regulations. (n)
any loan agreement with any financial
institution or creditor, whether local or
foreign, from declaring dividends without Sec. 45. Ultra vires acts of corporations. - No
its/his consent, and such consent has not yet corporation under this Code shall possess or
been secured; or (3) when it can be clearly exercise any corporate powers except those
shown that such retention is necessary under conferred by this Code or by its articles of
special circumstances obtaining in the incorporation and except such as are
corporation, such as when there is need for necessary or incidental to the exercise of the
special reserve for probable contingencies. powers so conferred. (n)
(n)

STOCKS AND STOCKHOLDERS

Sec. 44. Power to enter into management
contract. - No corporation shall conclude a Sec. 60. Subscription contract. - Any contract
management contract with another for the acquisition of unissued stock in an
corporation unless such contract shall have existing corporation or a corporation still to
been approved by the board of directors and be formed shall be deemed a subscription
by stockholders owning at least the majority within the meaning of this Title,
of the outstanding capital stock, or by at least notwithstanding the fact that the parties refer
a majority of the members in the case of a to it as a purchase or some other contract.
non-stock corporation, of both the managing
1. In a stock corporation, a person may
and the managed corporation, at a meeting
become a shareholder:
duly called for the purpose: Provided, That
 a. By subscription contract with an 5. Amounts transferred from unrestricted
existing corporation for the retained earnings to stated capital; and
acquisition of unissued shares;
6. Outstanding shares exchanged for stocks
b. By purchase from the corporation of
in the event of reclassification or conversion.
treasury shares; or
c. By transfer from a previous Where the consideration is other than actual
stockholder of the outstanding shares cash, or consists of intangible property such
or existing subscription to shares. as patents of copyrights, the valuation thereof
2. In a non-stock corporation, membership shall initially be determined by the
is acquired by contract with the incorporators or the board of directors,
corporation, the modes of entering into subject to approval by the Securities and
which vary according to the charter and Exchange Commission.
by-laws of particular corporation.
Shares of stock shall not be issued in
exchange for promissory notes or future
service.
KINDS OF SUBSCRIPTION
The same considerations provided for in this
1. Pre-incorporation subscription or one
section, insofar as they may be applicable,
entered into before incorporation
may be used for the issuance of bonds by the
2. Post incorporation subscription or one
corporation.
entered into after the incorporation for
the acquisition of unissued stock. The issued price of no-par value shares may
3. Conditional subscription or one which is be fixed in the articles of incorporation or by
subject to a condition, which may be a the board of directors pursuant to authority
past event unknown to the parties or a conferred upon it by the articles of
future, uncertain event, that is, an event incorporation or the by-laws, or in the
which may or may not happen. absence thereof, by the stockholders
4. Absolute subscription or one which is representing at least a majority of the
not subject to any condition and, outstanding capital stock at a meeting duly
therefore, the subscriber becomes liable called for the purpose. (5 and 16)
on the subscription and acquires the
rights of a stockholder form the time it is Sec. 63. Certificate of stock and transfer of
accepted; and shares. - The capital stock of stock
5. Subscription with a special term or one corporations shall be divided into shares for
where the corporation agrees to do which certificates signed by the president or
something, the fulfillment of which not vice president, countersigned by the secretary
being a condition precedent of the rights or assistant secretary, and sealed with the
of a stockholder. seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock
so issued are personal property and may be
transferred by delivery of the certificate or
Sec. 62. Considering for stocks. - Stocks shall
certificates endorsed by the owner or his
not be issued for a consideration less than the
attorney-in-fact or other person legally
par or issued price thereof. Consideration for
authorized to make the transfer. No transfer,
the issuance of stock may be any or a
however, shall be valid, except as between the
combination of any two or more of the
parties, until the transfer is recorded in the
following:
books of the corporation showing the names
1. Actual cash paid to the corporation; of the parties to the transaction, the date of
the transfer, the number of the certificate or
2. Property, tangible or intangible, actually
certificates and the number of shares
received by the corporation and necessary or
transferred.
convenient for its use and lawful purposes at
a fair valuation equal to the par or issued No shares of stock against which the
value of the stock issued; corporation holds any unpaid claim shall be
transferable in the books of the corporation.
3. Labor performed for or services actually
rendered to the corporation;
4. Previously incurred indebtedness of the Sec. 64. Issuance of stock certificates. - No
corporation; certificate of stock shall be issued to a
subscriber until the full amount of his The remaining shares, if any, shall be
subscription together with interest and credited in favor of the delinquent
expenses (in case of delinquent shares), if any stockholder who shall likewise be entitled to
is due, has been paid. the issuance of a certificate of stock covering
such shares. Should there be no bidder at the
public auction who offers to pay the full
Sec. 65. Liability of directors for watered amount of the balance on the subscription
stocks. - Any director or officer of a together with accrued interest, costs of
corporation consenting to the issuance of advertisement and expenses of sale, for the
stocks for a consideration less than its par or smallest number of shares or fraction of a
issued value or for a consideration in any share, the corporation may, subject to the
form other than cash, valued in excess of its provisions of this Code, bid for the same, and
fair value, or who, having knowledge thereof, the total amount due shall be credited as paid
does not forthwith express his objection in in full in the books of the corporation. Title
writing and file the same with the corporate to all the shares of stock covered by the
secretary, shall be solidarily, liable with the subscription shall be vested in the
stockholder concerned to the corporation and corporation as treasury shares and may be
its creditors for the difference between the disposed of by said corporation in
fair value received at the time of issuance of accordance with the provisions of this Code.
the stock and the par or issued value of the
same.

- The board of directors may fill up vacancy only if

Sec. 68. Delinquency sale. - The board of
the ground is not due to expiration of term, removal
directors may, by resolution, order the sale of
or increase in the number of board seats. They
delinquent stock and shall specifically state remained in office in a hold-over capacity only until
the amount due on each subscription plus all their resignation. The hold-over period is not part of
accrued interest, and the date, time and place their term. The vacancies should be filled up by
of the sale which shall not be less than thirty election by the stockholders
(30) days nor more than sixty (60) days from
the date the stocks become delinquent. -Amotion is the premature ousting of a director or
officer from his post in the corporation Any director
Notice of said sale, with a copy of the or trustee of a corporation may be removed from
resolution, shall be sent to every delinquent office by vote of the stockholders holding or
stockholder either personally or by registered representing at least two-thirds (2/3) of the
mail. The same shall furthermore be outstanding capital stock, or in a nonstock
published once a week for two (2) consecutive corporation, by a vote of at least two-thirds (2/3) of
weeks in a newspaper of general circulation the member entitled to vote: Provided, That such
in the province or city where the principal removal shall take place either at a regular meeting
office of the corporation is located. of the corporation or at a special meeting called for
the purpose, and in either case, after previous
Unless the delinquent stockholder pays to the
notice to stockholders or members of the
corporation, on or before the date specified
corporation of the intention to propose such
for the sale of the delinquent stock, the
removal at the meeting. The Commission shall,
balance due on his subscription, plus accrued motu propio or upon verified complaint, and after
interest, costs of advertisement and expenses due notice and hearing, order the removal of a
of sale, or unless the board of directors director or trustee elected despite the
otherwise orders, said delinquent stock shall disqualification, or whose disqualification arose or is
be sold at public auction to such bidder who discovered subsequent to an election.
shall offer to pay the full amount of the
balance on the subscription together with -A corporation would be liable for the acts of its
accrued interest, costs of advertisement and Board of Directors and officers if the said acts were
expenses of sale, for the smallest number of performed by them in accordance with the powers
shares or fraction of a share. The stock so granted to them under the Corporation Code, the
purchased shall be transferred to such articles of incorporation and by-laws of the
purchaser in the books of the corporation corporation, the laws and regulations governing the
and a certificate for such stock shall be issued business of, or otherwise applicable to, the
corporation, and, in the case of officers, the
in his favor.
resolution approved by the Board of Directors. As
the directors have a personality separate from that shares of stock do not represent specific corporate
of the corporation, they would be personally liable property.
only if they acted willfully and knowingly vote for or
-Watered stocks are stocks issued for a
assent to a patently unlawful act of the corporation,
consideration less than its par or issued value or for
or when they are guilty of gross negligence or bad
a consideration in any form other than cash, valued
faith in directing the affairs of the corporation, or
in excess of its fair value. Any director or officer of a
when they acquire any personal or pecuniary
corporation consenting to the issuance of watered
interest in conflict with their duty as directors,
stocks or who, having knowledge thereof, does not
which acts result in damages to the corporation, its
forthwith express his objection in writing and file
stockholders or other persons, when they agree to
the same with the corporate secretary shall be
hold themselves personally and solidarily liable with
solidarily liable with the stockholder concerned to
the corporation, or when they are made, by a
the corporation and its creditors for the difference
specific provision of law, to personally answer for
between the fair value received at the time of
the corporate action.
issuance of the stock and the par or issued value of
-Appraisal right is the right of the stockholder to the same.
demand the payment of the fair value of his shares
-a stock and transfer book is a book which records
after dissenting from a corporate act in the cases
all stocks in the name of the stockholders
specified by law. Merger is one of those instances
alphabetically arranged; the installments paid or
(Section 81 of the Corporation Code). It is
unpaid on all stocks for which subscription has been
imperative, however, that she attends the
made and the date of payment of any installment, a
stockholders' meeting or files her written dissent,
statement of every alienation, sale or transfer of
and otherwise, she cannot exercise such right.
stock made, the date thereof, and by and to whom
-A minority stockholder may properly assert his made; and such other entries as the by-laws may
right to inspect the books and other corporate prescribe.
records under the following conditions:
-A decision to dissolve a corporation or to terminate
1. The purpose of his inspection is legitimate and its corporate existence would require a separate
germane to his interest as a stockholder approval by a majority of the Board of Directors of
the Corporation and its stockholders holding at
2. The right should be exercised during reasonable
least 2/3 of the total outstanding capital stock, as
hours in business day;
well as the separate approval by the Monetary
3. He has not improperly used any information Board.
secured in previous examination (Section 74 of the
-A corporation may be dissolved voluntarily under
Corporation Code; Terelay Investment v. Yulo, G.R.
Section 118 (where no creditors are affected) or
No. 160924, August 5, 2015, 765 SCRA I).
under Section 119 (where creditors are affected) or
-Derivative suit must have all the elements: by shortening of the corporate term under Section
120, or involuntarily by the SEC under Section 122,
a) exhaustion of intra-corporate remedies available all of the Corporation Code.
under the articles of incorporation, by-laws, and
rules and regulations governing the corporation to (NB We have to add that the the voluntary
obtain the remedy the stockholder desires; b) it is dissolution must be approved by the board of
not a nuisance suit; and c) appraisal right is not directors by at least majority vote and the by the
available. stockholders representing at least 2/3s of the
outstanding capital stock in a meeting duly called
-A quorum consists of the majority of the totality of for that purpose with proper notice to all
the shares which have been subscribed and issued. stockholders. In case of banks as in this case, the
-Under the Corporation Code, shares of stock favorable endorsement of the BSP must be
covered by a stock certificate may be transferred by obtained and that the dissolution is effective upon
the delivery of the certificate endorsed by the approval by the SEC. The SEC has the authority
stockholder-owner or his authorized representative under Section 6 of PD 902-A to revoke the
or other person legally authorized to make the certificate of registration of a corporation upon any
transfer. There is nowhere in the Code that requires grounds provided by law, including the
that the endorsement be specifically in favour of aforementioned Section 6-A.)
the purchaser. -A foreign corporation is deemed to be “doing
-Properties registered in the name of the business in the Philippines” if it is continuing the
corporation are owned by it as an entity separate body or substance of the business or enterprise for
and distinct from its stockholders. Stockholders which it was organized. It is the intention of an
only own shares of stock in the corporation. Such entity to continue the body of its business in the
country. The grant and extension of 90day credit - the mandatory Tender Offer Rule is still applicable
terms by a foreign corporation to a domestic even if the acquisition, direct or indirect, is less than
corporation for every purchase shows an intention 35% when the purchase would result in direct or
to continue transacting with the latter indirect ownership of over 50% of the total
outstanding equity shares of a public company.
-As required by the Corporation Code, there is a
need to appoint a Resident Agent as a condition - Under the SRC and its implementing rules, a
precedent to the issuance of a license to transact mandatory tender offer is required: When at least
business in the Philippines. 35% of the outstanding shares of a public company
is to be acquired in one transaction or a series of
-A foreign corporation not doing business in the
transaction during a 12-month period, or Even if any
Philippines can be sued by Philippine courts but it
acquisition is less than 35% threshold but the result
cannot sue.
thereof is the ownership of more than 51% of the
-Moreover, under Section 133 of the Corporation total outstanding shares of a public company. The
Code, while a foreign corporation doing business in mandatory offer rule also applies to share
the Philippines without license to do business, acquisition meeting the threshold, which is done at
cannot sue or intervene in any action, it may be the level of the holding or parent corporation
sued or proceeded against before our courts or controlling a public company.
administrative tribunal.

-A de facto merger is one where one corporation

acquires all or substantially all of the properties of
another corporation in exchange of shares of stock
of the acquiring corporation. The acquiring
corporation would end up with the business
enterprise of the target corporation; whereas, the
target corporation would end up with basically its
only remaining assets being the shares of stock of
the acquiring corporation

-A derivative suit would constitute an intra-

corporate dispute as it is a suit initiated by a
stockholder against other stockholders who are
officers and directors of the same corporation. Such
suit should be filed in the RTC designated by the
Supreme Court as a corporate or commercial court.

- under the SRC securities shall not be sold or

offered to be sold to the public within the
Philippines unless the securities are registered with
and approved by the Securities and Exchange
Commission. Public means 20 or more inventors.
The fact that the securities were sold during a 15
month period is immaterial. However, the sale of
securities to less than 20 investors if done during a
12 month period is an exempt transaction under the
Securities Regulation Code.

- Under the Margin Trading Rule, no registered

broker or dealer, or member of an exchange shall
extend credit on any security an amount greater
than whichever is higher of: a. 65% of the current
market price of the security; b. 100% of the lowest
market price of the security during the preceding 36
calendar months, but not more than 75% of the
current market price. The purpose of the Margin
Trading Rule is to prevent excessive use of credit for
the purchase of securities it is a counter to broker’s
desire to generate more sales by encouraging
clients to buy securities on credit