CORPORATION LAW PRE-WEEK LECTURE (PART TWO)

1
H. STOCKHOLDERS AND MEMBERS
(1) Fundamena! "#$%& '( a &')*%'!de"
1. Fundamental rights of stockholder as owner of shares of stock, which
represent an aliquot portion of corporation
a. right to vote
b. right to receive dividends
c. right to receive distributions upon liquidation of corporation
d. right to inspect books of corporation
(+) Pa"#)#,a#'n #n mana$emen (exercised indirectly through right to
elect directors [or trustees and directly through right to vote in
specified instances under the !orporation !ode"
(a) P"'-.
1. #equisites for validity of proxy
$
a. in writing
b. signed by stockholder (or member" of record
c. filed before the scheduled meeting
d. with the !orporate %ecretary
$. &ffects'effectiivity of proxy
(
a. since special form of agency, proxy must act in accordance with
instructions of stockholder (or member"
b. essentially revocable, unless coupled with interest
c. valid only for meeting for which it is intended
d. valid and effective only for maximum period of ) years at any one
time
1
*ased on +he !orporation !ode (sections indicated refer to the !orporation !ode, unless otherwise
indicated" and !esar ,. -illanueva, .hilippine !orporate ,aw, $/1/ &dition.
2
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3
1d.
(/) 0'#n$ "u&
1. #equisites for effectivity and enforceability of voting trust agreement
(-+2"
3
a. in writing
b. notari4ed
c. specify the terms and conditions thereof (may therefore cover
other rights apart from voting rights"
d. certified copy of such agreement shall be filed with corporation and
%&!
$. &ffects'effectivity of voting -+2
)
a. since special form of trust, title shall be placed in name of trustee5
hence, certificates of stock covered shall be cancelled and new
ones issued in the name of the trustee
b. essentially irrevocable
c. valid for duration of agreement
d. valid and effective only for maximum period of ) years at any one
time, except if -+2 specifically required as condition for a loan, in
which case, it may exceed ) years but shall automatically expire
upon full payment of the loan
()) Ca&e& 1%en &')*%'!de"&2 a)#'n #& "e3u#"ed
#. B. a ma4'"#. 5'e
##. B. a 1'-%#"d& 5'e
###. B. )umu!a#5e 5'#n$
1. 1nstances where all stockholders (even those with non6voting shares"
are entitled to vote7
8
(2/3 vote, unless otherwise specified)
a. amendment of 291
:
(which necessarily includes extension or
shortening of corporate term
0
"
b. adoption and amendment of by6laws
;
(majority vote only)
c. sale, lease, exchange, mortgage, pledge, or other disposition of all
or substantially all of the corporate property
1/
d. incurring, creating, or increasing bonded indebtedness
11
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1d.
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8
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10
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11
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2
e. increase or decrease in capital stock
1$
f. merger or consolidation of corporation with another corporation
1(

g. investment of corporate funds in another corporation or business
13
h. dissolution of corporation
1)
$. 1nstances where only stockholders with voting shares are entitled to
vote7
18
(2/3 vote, unless otherwise specified)
a. election of directors (or trustees"
1:
(by cumulative voting in stock
corporations; by straight voting in nonstock corporations, unless
!"# or bylaws provide otherwise)
b. removal of directors (or trustees"
10
c. grant of compensation to directors other than per diems
1;

(majority)
d. ratification of dealings of directors (or trustees" or officers with the
corporation
$/
e. ratification of acquisition by director of business opportunity which
should belong to the corporation
$1
f. issuance of shares in exchange for property needed for corporate
purposes or in payment of a previously contracted debt, so as to
exclude such issuance from coverage of preemptive rights
$$
g. declaration of stock dividends
$(
h. management contracts
$3
(majority only for both managing and
managed corporations, unless common control of involved
corporations, in which case, 2/3 of managed corporation)
i. delegation to *9< (or *9+" of power to amend, repeal, or adopt
new by6laws
$)

=. fixing of consideration of no par value shares
$8
(majority only)
(6) P"',"#ea". "#$%&
(a) R#$% ' d#5#dend&
$:
(%ee discussions under 1tem >[$[g
above"
12
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13
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15
%ecs. 110 and 11;
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17
%ec. $3
18
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21
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27
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3
(/) R#$% '( a,,"a#&a! (%ec. 01"
1. 1nstances when appraisal right may be exercised
a. in case any amendment to 291 has effect of7
$0
i. changing or restricting the rights of any stockholder or class of
shares5 or
ii. authori4ing preferences in any respect superior to those of
outstanding shares of any class5 or
iii. extending [or shortening
$;
term of corporate existence.
b. in case of sale, lease, exchange, transfer, mortgage, pledge or
other disposition of all or substantially all of the corporate property
and assets
(/
c, in case corporation invests funds in another corporation or
business outside of its primary purpose
(1
d. in case of merger and consolidation
($
$. ?ow appraisal right may be exercised
((
a. stockholder who votes against proposed corporate action shall
make written demand on corporation within (/ days from vote
(otherwise, waived" for fair market value of his shares
b. if proposed corporate action is implemented, corporation shall pay
such dissenting stockholder, upon surrender of stock certificates
c. if parties cannot agree as to valuation within 8/ days, referred to (
independent appraisers, who shall make an award, and payment
shall be made within (/ days of the award
d. @ote7 all rights to shares suspended, but if payment not made
within (/ days after the award (i.e., payment requires existence of
unrestricted retained earnings
(3
", then all rights restored.
()

(. Ahen right to payment ceases
(8
(assuming existence of unrestricted
retained earnings"
a. if demand for payment is withdrawn with consent of corporation
b. if proposed corporation is abandoned'rescinded by corporation
c. if proposed corporate action needs %&! approval but disapproved
d. if %&! determines that shareholder is not entitled to appraisal right
28
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29
@ote provided for in %ec. (:
30
%ecs. 3/ and 01($"
31
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32
%ecs. :: and 01(("
33
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34
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35
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36

4
()) R#$% ' #n&,e) (%ec. :3"
1. ,imitations on right to inspect corporate books
(:

a. right to inspect should be exercised at reasonable hours on
business days
b. shareholders, members, directors, and trustees of record of
corporation, whether in person or by respresentative, demanding
the right to examine and copy excerpts from the corporate records
and minutes has not improperly used any information secured
through any previous examination of the records of such
corporation or any other corporation
c. demand must be accompanied with statement of purpose of
inspection, which must show good faith or legitimate purpose
d. if corporation or its officers contest exercise of right to inspect,
burden is on them to show that right to inspect improper
$. #emedies in case right to inspect is denied
a. mandamus
b. intra6corporate case
c. damages
(0
d. criminal action
(;
(d) P"eem,#5e "#$% (the right of all stockholders of a corporation
to subscribe to all issues or disposition of shares of any class,
in proportion to their shareholdings,
3/
sub=ect to exceptions
provided by law [%ee discussions under 1tem >[$[c above"
1. <istinctions between preemptive right and right of first refusal
a. i. preemptive right is common law right exercisable even without
express provision of law
ii. right of first refusal is only by virtue of contractual stipulation
b. i. preemptive right pertains to unissued shares
ii. right of first refusal pertains to shares already issued
37
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38
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39
%ecs :3 and 133
40
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5
(e) R#$% ' 5'e (%ee <iscussions under 1tem ?[$ above"
1. Aho may exercise right to vote
a. stockholder of record, whether in person or by proxy
31
(except
treasury shares, which have no voting rights
3$
"
b. trustee pursuant to -+2
3(
(as he becomes stockholder or record"
c. if pledged or mortgaged shares, pledgor or mortgagor can vote,
unless pledgee or mortgagee is expressly given write to vote in
writing which is recorded in corporate books
33
d. if =oint owners of shares, then all must vote5 if Band'orC, then any
one can vote
3)
(() R#$% ' $li%uidating& d#5#dend&
38
(right to proportionate share
of remaining assets of corporation upon dissolution"
(7) Remed#a! "#$%&
(a) Ind#5#dua! &u# (in stockholdersD personal capacity"
(/) Re,"e&ena#5e &u# (for and in behalf of other stockholders"
()) De"#5a#5e &u# (for and in behalf of corporation itself"
1. #equisites for proper filing of derivate suits
a. party bringing the suit should be a shareholder as of the time of
the act or transaction complained of, and at the time of the filing of
the suit, the number of shares being immaterial
b. the party has tried to exhaust intra6corporate remedies, i'e', made
demand on *9< for appropriate relief, but *9< failed or refused
c. the cause of action actually devolves on the corporation, the
wrongdoing or harm having been, or being caused to the
corporation and not to the particular shareholder bringing the suit
d. derivative suit should be brought in the name of the corporation
@ote7 2dditional requirements under 1nterim #ules of .rocedure for
1ntra6!orporate !ontroversies7
3:

i. shareholder remains as such during pendency of the action
ii. no appraisal rights are available for act(s" complained of
iii. suit is not a nuisance or harassment suit
(8) O/!#$a#'n '( a &')*%'!de"
41
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42
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6
(9) Mee#n$&
(a) Re$u!a" '" &,e)#a!
#. W%en and 1%e"e
##. N'#)e (Se). 8: and 81)
(/) W%' )a!!& %e mee#n$& (Se). 8:)
()) ;u'"um (Se). 8+)
(d) M#nue& '( mee#n$& (record of meeting"
1. #ules on regular or special meetings
30
a. Ahen7
3;

i. 1f regular7 annually on date fixed in by6laws5 if none, any date in
2pril determined by *9< (or *9+"
ii. if special7 anytime deemed necessary or as provided in by6laws
b. Ahere7
)/
city or municipality where principal office of corporation is
located
c. @otice7
)1
(in writing, stating time and place
)$
5 may be waived,
expressly or impliedly, by any stockholder [or member
)(
"
i. 1f regular7 at least $ weeksD prior notice, unless different period
fixed by by6laws
ii. 1f special7 at least 1 weeksD prior notice, unless different period
fixed by by6laws
d. Aho calls7
)3
authori4ed person5 if none, %&! may order petitioning
stockholder to call meeting
e. Euorum7
))
stockholder representing ma=ority of 9!% (or ma=ority of
members"
f. @ote7 2ll proceedings had and any business transacted at any
meeting of the stockholders (or members", if within powers
or authority of corporation, shall be valid even if meeting
improperly held or called, provided all stockholders (or
members" are present or duly represented thereat
)8
48
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7
I. BOARD OF DIRECTORS AND TRUSTEES
(1) Re,'&#'". '( )'",'"ae ,'1e"&
1. .owers of *9< (or *9+"
):
a. exercise corporate powers of corporation
b. conduct all business of corporation
c. control and hold all property of corporation
d. perform duties en=oined on them by law and by6laws of coporation
(+) Tenu"e< 3ua!#(#)a#'n& and d#&3ua!#(#)a#'n& '( d#"e)'"&
1. +enure'term of office, qualifications and disqualifications of directors
a. +enure'term of office7
)0
i. +erm of office7
);
one (1" year (time during which director may
claim to hold office as a right"
ii. ?oldover principle7 hold office for one (1" year until their
successors are elected and qualified
iii. +enure7 represents period during which incumbent actually
holds office (may be shorter or, in case of holdover, longer"
iv. +erm not affected by hold6over principle
b. Eualifications7
8/

i. owns at least 1 share of stock of corporation in his own name
ii. ma=ority of directors must be residents of .hilippines
c. <isqualifications7
i. convicted by final =udgment of offense punishable by
imprisonment for period exceeding 8 years
ii. convicted by final =udgment of violation of !orporation !ode
committed within ) years prior to his election or appointment
d. @ote7 additional qualifications and disqualifications may be
provided under special laws, e'g', for independent directors
81
(6) E!e)#'n&
8$
(%ee discussions under 1tem F[0 above"
(a) Cumu!a#5e 5'#n$
(/) ;u'"um
57
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58
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59
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60
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61
%ec. (0, %#!
62
%ec. $3
8
(7) Rem'5a!
1. #equisites for removal of directors (or trustees"
8(
a. -ote requirement7 $'( of 9!% (or $'( of members entitled to vote"5
@9+ by *9< (or *9+" which has no power to discipline or remove
one of their own
b. Ahen7 at any regular or special meeting with prior notice of
intention to propose such removal5
c. !all7 if special meeting, must be called by !orporate %ecretary on
order of .resident, or on demand of ma=ority stockholders (or
ma=ority members"5 if !orporate %ecretary refuses, call may be
addressed directly to stockholders (or member"
d. >rounds7 with or without cause, but removal cannot be used to
deprive minority stockholders (or members" or representation to
which they may be entitled under %ection $3 of !orporation !ode
(8) F#!!#n$ '( 5a)an)#e&
1. #ules on filling of vacancies
83
a. if vacancy other than by removal or by expiration of term7 (election
shall be only for unexpired term of predecessor in office"
i. if still constituting a quorum, by vote of at least ma=ority of
remaining *9< (or *9+",
ii. if no quorum, by stockholders at regular or special meeting
b. if vacancy by removal, not filled
c. if vacancy by expiration of term (which includes resignation after
term had expired [during holdover", by stockholders
8)
d. if vacancy by reason of increase in number of directors (or
trustees", by stockholders (or members" at regular or special
meeting
(9) C'm,en&a#'n
1. #ules on compensation
88
a. 1n absence of by6laws provision fixing compensation, no
compensation as directors as such except reasonable per diems,
unless granted by vote of ma=ority of 9!%
b. total yearly compensation of directors as such shall not exceed
1/F of net income before tax of corporation for preceding year
c. @ote7 compensation may be given if director also an officer
63
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64
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65
-alle -erde !ountry !lub, 1nc. v. 2frica, );0 %!#2 $/$ ($//;"
66
%ec. (/
9
(=) D#&!'.a!.
1. <uties of directors, trustees and officers
a. duty of obedience7
8:
perform duties en=oined on them by law and
by the by6laws of corporation (%ee discussions under BclassicC
ultra vires acts"
b. duty of diligence7
80
must not
i. wilfully and knowingly vote for or assent to patently unlawful
acts of corporation
ii. be guilty of gross negligence in directing the affairs of the
corporation
iii. guilty of bad faith in directing the affairs of the corporation
c. duty of loyalty7
8;
no conflict of interest
$. 2cts constituting disloyalty of directors, trustees and officers
a. if director or trustee acquires pecuniary interest in conflict with their
duty as such7 he is liable =ointly and severally for all damages
resulting therefrom suffered by corporation, its stockholders or
members, and other persons
:/
b. if director, trustee or officer acquires, or attempts to acquire, any
interest adverse to the corporation in respect of any matter which
has been reposed in him in confidence, as to which equity
imposes a disability upon him to deal in his own behalf7 he is liable
as trustee for corporation and must account for profits which
otherwise would have accrued to the corporation.
:1

c. 1f director, by virtue of his office, acquires for himself a business
opportunity which should belong to the corporation, thereby
obtaining profits to the pre=udice of such corporation, and whether
or not he risked his own funds in the venture7 he must account to
the corporation for all such profits by refunding the same, unless
ratified by $'( vote of 9!%
:$
(>) Bu&#ne&& 4ud$men "u!e
1. 2pplications of business =udgment rule
a. acts of *9< done in good faith and within powers of corporation
are valid and binding and cannot be reversed by courts
b. directors and officers acting within business =udgment cannot be
held personally liable for consequences of such acts
67
%ec. $8
68
%ec. (1
69
%ecs. (1 and (3
70
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71
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72
%ec. (3
10
(?) S'!#da". !#a/#!##e& ('" dama$e&
(1:) L#a/#!#. ('" 1ae"ed &')*&
(11) Pe"&'na! !#a/#!##e&
1. .ersonal liabilities of director, trustee, officer (along, but not
necessarily, with corporation"
a. for violation of his duties as such7
:(
i. if he wilfully and knowingly votes for or assents to patently
unlawful acts of corporation
ii. if he is guilty of gross negligence or bad faith in directing the
affairs of the corporation
iii. if he has a conflict of interest, resulting in damages to the
corporation, its stockholders or other persons
b. for watered stocks7
:3
if he consents to the issuance of watered
stocks or who, having knowledge thereof, does not forthwith file
with the !orporate %ecretary his written ob=ection thereto
c. by agreement7 if he agrees to hold himself personally and solidarily
liable with the corporation
d. by specific provision of law7 if he is made, by specific provision of
law, to personally answer for his corporate action (e.g., %ec. 1(,
..<. @o. 11) or the +rust #eceipts ,aw"
(1+) Re&,'n&#/#!#. ('" )"#me& (if he is made, by specific provision of
law, criminally liable for his corporate action"
(16) S,e)#a! (a) d')"#ne
(17) In&#de #n('"ma#'n
1. Fiduciary duty of directors, trustees and officers to stockholders
a. *asis7 as insiders, directors, trustees and officers have Binside
informationC which they can use for personal advantage to the
pre=udice of stockholders, i'e', when he buys stocks from other
stockholders on the basis of Binside informationC
b. Ga=ority rule H no fiduciary to stockholders and may deal with
stockholders at armDs length, because fiduciary duty is to
corporation as an entity, and not to stockholders as individuals
c. &xception H where Bspecial factsC or circumstances are present
which make it inequitable for director to withhold information from
the stockholder, and therefore duty to disclose arises
d. @ote7 without pre=udice to insider trading and other rules under the
%#! for stocks traded on an exchange (.%&"
73
%ec. (1
74
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11
(18) C'n"a)&
(a) B. &e!(-dea!#n$ d#"e)'"& 1#% %e )'",'"a#'n
1. !ontract of corporation with its directors, trustees or officers is
voidable at the option of the corporation unless the following
conditions are present7
:)
a. presence of such director or trustee was not necessary to
constitute a quorum in the board meeting approving such contract
b. vote of such director or trustee was not necessary to for the
approval of such contract
c. contract is fair and reasonable under the circumstances
d. in the case of an officer, contract had been previously authori4ed
by *9<
@ote7 1f any of first $ conditions are absent, may be ratified by vote of
$'( of 9!% (or $'( of members"
(/) Be1een )'",'"a#'n& 1#% #ne"!')*#n$ d#"e)'"&
1. #ules on contracts between corporations with interlocking directors
:8
a. &xcept in cases of fraud, and provided contract is fair and
reasonable under the circumstances, contract shall not be
invalidated on that ground alone
b. 1f interest of interlocking director is substantial in one corporation
[exceeding $/F of 9!% and his interest in the other coporation(s"
is nominal, he is sub=ect to requirements on self6dealing insofar as
the latter corporation(s" are concerned
(19) E-e)u#5e )'mm#ee
==

(a) C"ea#'n (by6laws of corporation may create executive
committee composed of not less than ( members to be
appointed by *9<"
75
%ec. ($
76
%ec. ((
77
%ec. ()
12
(/) L#m#a#'n& 'n #& ,'1e"&
1. &xecutive committee may act on such specific matters which *9<,
within its competence, may delegate, except7
a. approval of any action for which shareholdersD approval is also
required
b. filling up of vacancies in the *9<
c. amendment or repeal of by6laws or adoption of new by6laws
d. amendment or repeal of any resolution of *9< which by its
express terms is not so amendable or repealable
e. distribution of cash dividends to shareholders
(1=) Mee#n$&
(a) Re$u!a" '" &,e)#a!
#. W%en and 1%e"e
##. N'#)e
(/) W%' ,"e&#de&
()) ;u'"um
(d) Ru!e 'n a/&en#'n (counted as affirmative vote insofar as it
may be construed as ac%uiescence to in the action those who
voted affirmatively5 but presumption is merely prima facie"
1. #ules on regular or special meetings
:0
a. Ahen7
:;

i. 1f regular7 monthly, unless by6laws provide otherwise
ii. if special7 anytime upon call of .resident as provided in by6laws
b. Ahere7
0/
anywhere in or outside the .hilippines, unless the by6
laws provide otherwise
c. @otice7
01
stating time and place shall be sent at least 1 day prior to
scheduled meeting, unless otherwise provided in by6laws5 may be
waived, expressly or impliedly
d. Aho presides7
0$
.resident, unless the by6laws provide otherwise
e. Euorum7
0(
unless 291 or by6laws provide for greater ma=ority, a
ma=ority of the number of directors or trustees as fixed in 291 shall
constitute quorum5 but ma=ority of those present shall be valid as a
corporate act, except election of officers, which require ma=ority of
all members of *9<
78
%ec. 3;
79
%ec. )(
80
%ec. )(
81
%ec. )(
82
%ec. )3
83
%ec. $)
13
$(()) *orporate "fficers&
1. Aho are corporate officersI
03
a. those provided under the !orporation !ode
i. .resident (must be a director"
ii. +reasurer (who may or may not be a director"
iii. !orporate %ecretary (must be a resident and citi4en of the
.hilippines"
b. such other officers as may be provided in by6laws
c. @9+ those appointed by *9<, even if by6laws authori4e *9< to
create new offices and appoint officers thereto (reversing former
rulings"
0)
$. <ifference between corporate officers and employees of corporation
a. i. officers have no security of tenure (serving at the pleasure of
the *9<"
ii. employees have security of tenure
b. i. officers may be removed by *9< (effect is expiration of term"
ii. employees may only be removed for =ust or authori4ed causes
under ,abor ,aw
c. i. if officer has claims against corporation, nature is intra6
corporate dispute5 therefore, #+! (commercial courts" has
=urisdiction
ii. if employee has claims against corporation, nature is labor
dispute5 therefore, @,#! has =urisdiction
@. CAPITAL AFFAIRS
(1) Ce"#(#)ae '( &')* (signed by .resident or -ice6.resident,
countersigned by !orporate %ecretary or 2ssistant %ecretary, with
the seal of the corporation, issued in accordance with the by6laws
08
"
(a) Nau"e '( %e )e"#(#)ae (merely evidence of shares of stock
covered, as distinguished from shares of stock, which are
personal property of the shareholder
0:
"
84
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85
+atling #ndustrial and *ommercial *orp' v' *oros, 8(( %!#2 1$ ($/1/"
86
%ec. 8(
87
%ec. 8(
14
(/) Un)e"#(#)aed &%a"e&
1. #ules on uncertificated shares7
00
@otwithstanding %ection 8( of the
!orporation !ode, corporation whose shares are registered pursuant
to %#! or listed on stock exchange may issue uncertificated shares7
a. if so resolved by its *9< and agreed to by a shareholder
b. without pre=udice to rights of securities intermediary to
subsequently require corporation to issue stock certificate
c. if so provided in 291 and by6laws and sub=ect to a condition that
investors may not require corporation to issue certificates in
respect of any shares recorded in their names
$. *inding effect on shares transactions7
0;

a. Jnder the %#!, transfers of securities, including uncertificated
securities, may be validly made and consummated in any of the
following manners7
i. by appropriate book6entries in the securities accounts
maintained by securities intermediaries
ii. in the %+* held by the corporation or the stock transfer agent,
and such bookkeeping entries shall be binding on the parties to
the transfer.
b. +ransfer made pursuant to the foregoing has effect of delivery of
security in bearer form or duly indorsed in blank representing the
quantity or amount of security or right transferred, including the
unrestricted negotiability of that security by reason of such
delivery.
c. ?owever, transfer of uncertificated shares shall only be valid, so
far as the corporation is concerned, when a transfer is recorded in
the books of the corporation so as to show the names of the
parties to the transfer and the number of shares transferred.
()) Ne$'#a/#!#. (merely quasi6negotiable in character"
#. Re3u#"emen& ('" 5a!#d "an&(e" '( &')*&
1. #equirements for valid transfer of stocks
;/
a. the certificate must be endorsed by owner or his authori4ed agent
b. there must be delivery of the stock certificate
c. to be valid against third parties, the transfer must be recorded in
books of the corporation (%+*"
@ote7 there are other ways to transfer, but to bind third parties,
observe the foregoing requirements
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(d) I&&uan)e
#. Fu!! ,a.men
##. Pa.men ,"'-"aa
1. #ules on issuance
a. no certificate of stock issued until full amount of subscription paid
;1
b. in absence of provisions in by6laws to the contrary, corporation
may, at its option, apply payments made by subscribers as follows7
i. full payment for corresponding number of shares, par value of
which is covered by such payment
ii. payment pro rata to each and all the entire number of shares
subscribed
c. ,-. /00 discussions under 1tem >[$[= above on doctrine of
indivisibility of subscription
$. #emedies available when corporation refuses to issue certificate
a. to file suit for specific performance of contract
b. to file for an alternative relief by way of damages where specific
performance cannot be granted
c. to file petition for mandamus to compel issuance
d. to rescind contract of subscription, and sue to recover payments
(e) S')* and "an&(e" /''* (%+*"
#. C'nen&
1. !ontents of %+*
a. all stocks in the names of stockholders alphabetically arranged
b. the instalment paid and unpaid on all stock for which subscription
has been made, and the date of payment of any instalment
c. a statement of every alienation, sale or transfer of stock made
d. such other entries as by6laws may prescribe
##. W%' ma. ma*e 5a!#d en"#e& (!orporate %ecretary or duly
authori4ed stock transfer agent5 but not others, even
.resident or !hairman"
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(() L'& '" de&"'.ed )e"#(#)ae&
1. .rocedure to be followed
;$
a. stockholder shall file affidavit in triplicate with corporation
b. after verification, corporation shall publish notice in newspaper of
general circulation within its principal place of business for (
consecutive weeks at expense of stockholder
c. if no contest presented within 1 year from date of last publication,
corporation will cancel certificate of stock and issue new one
d. if procedure followed, corporation not liable, except in case of
fraud, bad faith or negligence
($) S#u& '( %e &%a"e& '( &')* (domicile of coporation to which
they pertain"
(+) Wae"ed &')*&
?6
(a) De(#n##'n (shares issued for less than par or issued value or
for consideration in any form other than cash, valued in excess
of its fair value"
(/) L#a/#!#. '( d#"e)'"& ('" 1ae"ed &')*& (for issuance or,
having knowledge of issuance, for failure to file ob=ection in
writing with !orporate %ecretary, solidarily liable with
stockholder concerned to corporation and its creditors for
difference between fair value received at time of issuance of the
stock and the par or issued value thereof"
()) T"u& (und d')"#ne ('" !#a/#!#. ('" 1ae"ed &')*& (%ee
above and discussions under 1tem >[$[l above"
(6) Pa.men '( /a!an)e '( &u/&)"#,#'n
?7
(a) Ca!! /. /'a"d '( d#"e)'"& (sub=ect to subscription contract,
*9< may make call at any time5 no need if corporation
insolvent"
(/) N'#)e "e3u#"emen (must specify date of payment"
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(7) Sa!e '( de!#n3uen &%a"e&
?8
(a) E((e) '( de!#n3uen). (stockholder disqualified to vote or be
voted, or to exercise any rights of stockholder except right to
dividends [if cash, first applied to unpaid subscription, until full
payment of subscription, interest, costs and expenses"
(/) Ca!! /. "e&'!u#'n '( %e /'a"d '( d#"e)'"& (order sale of
delinquent shares not less than (/ days but not more than 8/
days from date of delinquency"
()) N'#)e '( &a!e (notice must be5 [i sent to stockholder
personally or by registered mail5 [ii published once a week for $
consecutive weeks in newspaper of general circulation within its
principal place of business"
(d) Au)#'n &a!e (if not paid, shares sold at public auction to
highest bidder, without pre=udice to right of corporation to file
court action to recover unpaid subscription
;8
"
(8) A!#ena#'n '( &%a"e&
(a) A!!'1a/!e "e&"#)#'n& 'n %e &a!e '( &%a"e&
1. 2llowable restrictions on the sale of shares (provided terms and
consideration are reasonable, and must be stated in 291 and in stock
certificates"
a. right of first refusal H stockholder must first offer to corporation
before selling to third person
b. right of first option H corporation granted right to buy shares at
fixed price
c. buy6back agreement H corporation granted right to buy back
shares assigned to officers or employees upon their resignation or
termination
c. @9+ right of prior consent or absolute prohibition to transfer
shares
(/) Sa!e '( ,a"#a!!. ,a#d &%a"e& (no shares of stock against which
corporation holds any unpaid claim shall be transferable in
books of corporation
;:
"
()) Sa!e '( a ,'"#'n '( &%a"e& n' (u!!. ,a#d (stockholder cannot
transfer part of subscription in vie of indivisibility of subscription5
see discussions under 1tem >[$[= above"
95
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18
(d) Sa!e '( a!! '( &%a"e& n' (u!!. ,a#d (stockholder may sell
entire subscription to a single transferee, who must assume
unpaid balance, provided corporation consents"
(e) Sa!e '( (u!!. ,a#d &%a"e& (corporation must register, provded
requisites for a valid transfer are complied with
;0
"
(() Re3u#&#e& '( a 5a!#d "an&(e" (%ee discussions under 1tem
K[1[c above"
($) In5'!una". dea!#n$&
1. #ules on registration of involuntary dealings'dealings less than sale
or transfer of shares
a. if execution sale H register certificate of sale in %+*, since it
involves a sale or transfer of shares
b. if attachment H leave with .resident or managing agent of
corporation a copy of writ of attachment
c. if chattel mortgage H register in chattel mortgage registry in
#egistry of <eeds of7 (i" principal office of corporation5 and (ii"
residence of mortgagor
d. if pledge H surrender possession of stock certificate to pledgee (no
registration"
98
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K. DISSOLUTION AND LI;UIDATION
(1) M'de& '( d#&&'!u#'n
;;
(a) 0'!una".
#. W%e"e n' )"ed#'"& a"e a((e)ed
1//

##. W%e"e )"ed#'"& a"e a((e)ed
1/1
###. B. &%'"en#n$ '( )'",'"ae e"m
1/$
(/) In5'!una".
#. B. e-,#"a#'n '( )'",'"ae e"m
1:6
##. Fa#!u"e ' '"$an#Ae and )'mmen)e /u&#ne&& 1#%#n +
.ea"& ("'m #n)'",'"a#'n
1/3
###. Le$#&!a#5e d#&&'!u#'n
#5. D#&&'!u#'n /. %e SEC 'n $"'und& unde" e-#&#n$
!a1&
1/)
(+) Me%'d& '( !#3u#da#'n
1/8
(a) B. %e )'",'"a#'n #&e!(
(/) C'n5e.an)e ' a "u&ee 1#%#n a 6-.ea" ,e"#'d
()) B. mana$emen )'mm#ee '" "e%a/#!#a#'n "e)e#5e"
(d) L#3u#da#'n a(e" %"ee .ea"&
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L. OTHER CORPORATIONS
(1) C!'&e )'",'"a#'n&
(a) C%a"a)e"#&#)& '( a )!'&e )'",'"a#'n
1/:
(/) 0a!#d#. '( "e&"#)#'n& 'n "an&(e" '( &%a"e&
1/0
()) I&&uan)e '" "an&(e" '( &')* #n /"ea)% '( 3ua!#(.#n$
)'nd##'n&
1/;
(d) W%en /'a"d mee#n$ #& unne)e&&a". '" #m,"',e"!. %e!d
11/
(e) P"eem,#5e "#$%
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(() Amendmen '( a"#)!e& '( #n)'",'"a#'n
11$
($) Dead!')*&
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(+) N'n-&')* )'",'"a#'n&
(a) De(#n##'n
113
(/) Pu",'&e&
11)
()) T"eamen '( ,"'(#& (prohibited from distributing dividends5
deriving profits from activities does affect status"
(d) D#&"#/u#'n '( a&&e& u,'n d#&&'!u#'n
118
(6) Re!#$#'u& )'",'"a#'n&
11:
(a) C'",'"a#'n &'!e
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#. Na#'na!#. (none for disqualification purposes"
##. Re!#$#'u& &')#e#e&
11;
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(7) F'"e#$n )'",'"a#'n&
(a) Ba&e& '( au%'"#. '5e" ('"e#$n )'",'"a#'n&
1$/
#. C'n&en
##. D')"#ne '( Bd'#n$ /u&#ne&&C ("e!ae ' de(#n##'n unde"
%e F'"e#$n In5e&men& A)< RA =:7+)
(/) Ne)e&&#. '( a !#)en&e ' d' /u&#ne&&
#. Re3u#&#e& ('" #&&uan)e '( a !#)en&e
1$1
##. Re&#den a$en
1$$
()) Pe"&'na!#. ' &ue
1$(
(d) Sua/#!#. '( ('"e#$n )'",'"a#'n&
1$3
(e) In&an)e& 1%en un!#)en&ed ('"e#$n )'",'"a#'n& ma. /e
a!!'1ed ' &ue
- I&'!aed "an&a)#'n&
(() D"'und& ('" "e5')a#'n '( !#)en&e
1$)
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M. MERDER AND CONSOLIDATION
(1) De(#n##'n and )'n)e,
1$8
(+) C'n&#uen 5. )'n&'!#daed )'",'"a#'n
1$:
(6) P!an '( me"$e" '" )'n&'!#da#'n
1$0
(7) A"#)!e& '( me"$e" '" )'n&'!#da#'n
1$;
(8) P"')edu"e
1(/
(9) E((e)#5#.
1(1
(=) L#m#a#'n&
1($
(>) E((e)&
1((
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