TITLE X APPRAISAL RIGHT

Instances when appraisal right is available

Appraisal right – refers to the right of a stockholder to his right to demand payment of the fair
value of his shares, after dissenting from a proposed corporate action involving a fundamental
change in the charter or articles of incorporation
1. 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
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets
3. In case of merger and consolidation
4. In case of investment of corporate funds for any purpose other than the primary purpose
of the corporation
How right is exercised
1. The dissenting stockholder shall make a written demand on the corporation within 30
days after the date on which the vote was taken for payment of the fair value of his
shares within 30 days from the date on which the vote was taken
Failure to make demand within such period shall be deemed a waiver of the appraisal
right
2. If the proposed corporate action is implemented, the corporation shall pay the
stockholder, upon surrender of the certificate or certificates of stock representing
the stockholder’s shares, the fair value thereof as of the day before the vote was taken,
excluding any appreciation or depreciation in anticipation of such corporate action

3. If, within sixty (60) days from the approval of the corporate action by the stockholders,
the withdrawing stockholder and the corporation cannot agree on the fair value of the
shares, it shall be determined and appraised by three (3) disinterested persons, one of
whom shall be named by the stockholder, another by the corporation, and the third by
the two (2) thus chosen

The findings of the majority of the appraisers shall be final, and their award shall be paid
by the corporation within thirty (30) days after such award is made

4. Upon payment of the agreed or awarded price, the stockholder shall transfer his shares
to the corporation

no payment shall be made to any dissenting stockholder unless the corporation has
unrestricted retained earnings in its books to cover such payment
Effect and demand and termination of right
From the time of demand for payment of the fair value of a stockholder’s shares until either
the abandonment of the corporate action involved or the purchase of the said shares by the
corporation
1. all rights accruing to such shares, including voting and dividend rights, shall be
suspended
2. He shall be entitled to receive payment of the fair value of his shares
if the dissenting stockholder is not paid the value of the said shares within thirty (30) days after
the award, the voting and dividend rights shall immediately be restored
When right to payment ceases
GR: A dissenting stockholder who demands payment of his shares is no longer allowed to
withdraw from his decision
XPN:
1. unless the corporation consents thereto
2. the proposed corporate action is abandoned or rescinded by the corporation
3. the proposed corporate action is disapproved by the Commission where such
approval is necessary
4. if the Commission determines that such stockholder is not entitled to the appraisal right
the right of the stockholder to be paid the fair value of the shares shall cease, the status as the
stockholder shall be restored, and all dividend distributions which would have accrued on the
shares shall be paid to the stockholder
Who bears cost of the appraisal
1. By the corporation
a. Where the price which the corporation offered to pay the dissenting stockholder is
lower than the fair value as determined by the appraisers
b. Where an action is filed by the dissenting stockholder to recover such fair value and
the refusal of the stockholder to receive payment is fond by the court to be justified
2. By the dissenting stockholder
a. Where the price offered by the corporation is approximately the same as the fair
value ascertained by the appraisers
b. Where the same action is filed by the dissenting stockholder and his refusal to
accept payment is found by the court to be unjustified
Notation on certificates; rights of transferee
1. Within ten (10) days after demanding payment for shares held, a dissenting
stockholder shall submit the certificates of stock representing the shares to the
corporation for notation that such shares are dissenting shares
2. Failure to do so shall, at the option of the corporation, terminate the appraisal
rights
If shares represented by the certificates bearing such notation are transferred, and the
certificates consequently cancelled, the rights of the transferor as a dissenting
stockholder under this Title shall cease and the transferee shall have all the rights of a regular
stockholder; and all dividend distributions which would have accrued on such shares shall be
paid to the transferee
1. The transferee shall become a regular stockholder with the right to receive all dividend
distributions which would have accrued to such shares
2. The right of the transferor as a dissenting stockholder to be paid the fair value of the
shares shall cease