Razel D.

Jelianggao
Mr. Daniel Espina

BSA-III
M/Thu 7:30-9:00pm

Summary for Title V, VI, VII and VIII

Title V- By Laws
By-laws are the rules of action adopted by corporation for its own government and the government of its stockholders or
members and those having the direction, management and control of its affairs.
Requisites:
1. Consistent with the character of corporation and public policy
2. Must be uniform and general application and not directed against a particular individual
3. Must reasonable
4. Must not impair the obligations of contracts
When by laws are adopted and Filed; by whom adopted
1. Prior to incorporation- submitted together with the articles of incorporation, to the SEC and approved and signed
by all the incorporators.
2. After incorporation- submitted within 1 month after receiving the official notice of the issuance of certificate of
incorporation, and; approved by the stockholders representing at least majority of the outstanding capital stock, or
by a majority of the members.
The failure to file by laws on time, the SEC may revoke or suspend the certificate of registration of the corporation. When
by-laws effective, upon the issuance of the SEC of certification that the by-laws are not inconsistent with the Corporation
Code.
Amendment, repeal, or adoption of new by-laws
1. Vote required
a. Majority vote of the board of directors or trustees
b. Majority of the outstanding capital stock or majority of the members (voting or non-voting) in a meeting called
purpose.
2. Delegation or revocation
a. Delegation of power- the owners of 2/3 of the outstanding capital stock or 2/3 of the members may delegate
the board of directors or trustees the power to amend or repeal by-laws or adopt new by-laws.
b. Revocation- the owners of the majority of the outstanding capital stock or majority of the members may revoke
the power previously delegated to the board.
3. When by-laws effective whether amended or the once made new
It is when the issuance by the SEC of a certification that the amended or new by-laws are not inconsistent with the
corporation code.
Distinction between articles of incorporation and by-laws
1. Articles of incorporation constitute the charter of the corporation, while by-laws are the rules of action adopted by
a corporation.
2. Articles of incorporation are executed before incorporation, while by-laws are adopted before or after
incorporation.
3. Articles of incorporations are adopted by the incorporators, while by-laws if adopted before incorporation, are
adopted by the incorporators, and if after, by the stockholders are members.
4. The filling of articles of incorporation is a condition precedent for the acquisition by the corporation of a juridical
personality while filing of the by-laws is a condition subsequent thereto.

Title VI- MEETINGS

Meetings, whether those of the board of directors or trustees, or of the stockholders or members are necessary in
order that any corporate act may be decided upon only after deliberation and consultation among themselves. Meetings
will give them the opportunity to deliberate and vote on matter affecting the corporation.
Meetings of the members or stockholders
Kinds of meeting
a. Regular meeting- held annually on a date fixed in the by-laws. If not fixed, any date in April every year as
determined by the board of directors or trustees. The written notice must be stating the time and place and sent to
all stockholders or members at least 2 weeks prior the meeting unless stated in the by-laws. The notice may be
waived, expressly or impliedly, by any stockholder or member.
b. Special meeting- this may be held at any time deemed necessary or as provided in the by-laws. The written notice
must be stating the time and place and sent to all stockholders or members at least 1 week prior the meeting
unless stated in the by-laws.
Place of meeting
They shall be held in the city or municipality where the principal office of the corporation is located, and if
practicable in the principal office of the corporation.
Quorum in Meetings
Majority of the outstanding capital stock or majority of the members unless a greater majority is provided for in the
Corporation Code or in the by-laws.
Presiding Officer
The president shall preside at all meetings of stockholders or members, unless the by-laws provide otherwise.
Who may call meeting
a. The person authorized in the by-laws
b. If none is authorized in the by-laws, the call may be made by the director, trustee or officer entrusted with the
management of the corporation.
c. A petitioning stockholder or member, on order of the SEC, may call a meeting, if for any cause, there is no person
authorized to call a meeting.
d. The secretary of the corporation or by a stockholder or member in case of a special meeting to remove directors or
trustees.
Manner of Voting
a. Stockholders vote by shares. Members vote on a per head basis unless stated in the by-laws
b. Right to vote
1. Personally by the members or stockholders
2. Through representative voting (means of proxy)- Proxy concept is the formal authority given, person given
authority or written instrument evidencing the authority by the stockholder or member to another person to
exercise the voting right. Thus, it has limitations. It must be in writing signed by the member or stockholder and
it is valid.
Voting Trust Concept
It is an agreement in writing whereby one or more stockholders of a corporation transfer their shares to a trustee,
for the purpose of conferring in the latter, voting and other rights pertaining to such shares. This voting trust is designed to
enable stockholders to dispose their shares but still retain control over the corporation and thus assure continuity of policy
and management.

Meeting of directors or trustees

Kind of Meeting
a. Regular Meeting- this is held monthly, unless the by-law so provide otherwise and notice stating the date and
place of meeting. Must be sent at least 1 day prior to the scheduled meeting. A director or trustee may waive
this requirement, expressly or impliedly.
b. Special Meeting- this may be held at any time upon the call of the president or as provided in the by-laws. In
terms of the notice, notice must be stating the date, time and place of meeting must be sent to every director
or trustee at least 1 day prior to the scheduled meeting.
Place of meeting
Meetings may be held anywhere in or outside the Philippines, unless stated by the by-laws
Quorum in the meetings
Majority of the number of directors or trustees stated in the articles of incorporation, unless such articles
or the by-laws provide for a greater majority.
Presiding Officer
The president shall preside at all meetings of the directors and trustees, unless the by-laws provide
otherwise.
Manner of voting
Directors or trustees vote during meeting per head. Directors or trustees cannot attend or vote by proxy at
board meetings.
Distinction between proxy and voting trust agreement
The proxy has no legal title to the shares, while a trustee acquires the title of the transferor.
The proxy is generally revocable, while a voting trust agreement is irrevocable for the duration of its term.
A proxy is valid only for the meeting for which it was intended except as provided therein and in the case
of continuing proxy. A voting trust agreement is not limited to a particular meeting.
A proxy votes in the absence of the stockholder, while a trustee can vote and exercise the rights of the
transferor even in the latters presence in the meeting.

TITLE VII
STOCKS AND STOCKHOLDERS
SEC. 60 Subscription contract
Any contract for the acquisition of unissued stock in an existing corporation or corporation still to be formed
How can a person become a shareholder in a stock corporation?
by subscription contract with an existing corporation for the acquisition of unissued shares
by purchase from the corporation of treasury shares
by transfer from a previous stockholder of the outstanding shares or existing subscription to shares
SEC. 61 Pre-incorporation subscription
Pre-incorporation subscription is mandatory at least 25% of the authorized capital stock has been subscribed and at least
25% of the total subscription has been fully paid.
Subscription for shares of stock of a corporation still to be formed shall be irrevocable for a period of at least 6 months
The irrevocability of pre-incorporation prevents a subscriber from speculating on the stocks of the proposed corporation
and protects the corporation from financially irresponsible subscrribers

SEC. 62 - Consideration for stocks

Stocks shall not be issued for a consideration less than the par or issued price
Consideration for issuance of stock may be any or any combination of any two or more of the ff:
1. cash
2. property tangible or intangible
3. labor performed or services actually rendered
4. previously incurred indebtedness by the corporation
5. amounts transferred from unrestricted retained earnings to stated capital
6. outstanding shares exchanged for stock in the event of reclassification or conversion
Sources of corporate capital
1. funds furnished by shareholders
2. borrowings
3. profits and stock dividends
Different modes by which a corporation may issue shares of stock
1. by subscription before and after incorporation, to original, unissued stocks
2. by sale of treasury stock after incorporation for money property, or service
3. by subscription to new stocks, when all the original stocks have been issued and the amount of the capital stock
increased
4. by making a stock dividend
Limitations in the issuance of of stocks
1. shall not be issued for a consideration less than the par or issued price thereof except treasury shares so long as the
price is reasonable
2. shall not be issued in exchange of promissory notes or future services
3. when the consideration is other than actual cash or consists of intangible property, the value thereof shall be
initially determined by the incorporators or the board of directors, subject to the approval of the SEC
4. the issued price of no par value shares must be fixed as provided in Sec, 62
issued price may vary from time to time but value may not be less than P5
SEC. 63 Certificate of stock and transfer of shares
The capital stock of stock corporation shall be divided into shares
Certificate of stock shall be issued for said shares
Nature of a certificate of stock
1. It is a written instrument signed by the proper officer of a corporation stating or acknowledging that the person
named therein is the owner of a designated number of shares of stock
2. It indicates the name of the holder, the number, kind and class of shares represented, and the date of issuance
3. It i merely the evidence of the holder's interest in the corporation, his ownership of the share represented thereby
4. It is not essential to make one a stockholder in a corporation
Every stockholder has a right to have proper certificate issued to him as soon as he has complied with the conditions which
entitle him to one
A corporation cannot issue shares in excess of the maximum authorized in its AOI
An over issued stock is absolutely void even if possessor is in good faith
Shares can be transferred represented by the certificate by its endorsement by the owner or his agent and delivery to the
transferee

Restrictions on transfer of stock

1. a by-law prohibits a transfer of stock without the consent or approval of all stockholders or of the president or
board of directors is ILLEGAL
2. a provision in the certificate that is transferable only to some person first approved by the board of directors
unlawfully restricts the right of the stockholder
3. the condition non-transferable appearing on certificates of stock is VOID
4. corporations which will engage in any business reserved for Filipino citizens are required to indicate in AOI and all
certificates

SEC. 64 Issuance of stock certificates

It is prohibited to issue certificates of stock to a subscriber who has not paid the full amount of his subscription together
with interest and expenses
Derivative suit one brought by one or more stockholders or members in the name and in behalf of the corporation to
redress wrongs committed against it or to protect or vindicate corporate rights
Individual suit one brought by a stockholder in his own name against the corporation for direct violation of his contractual
rights such as right to vote, to dividends etc.
Representative suit a group of stockholders may bring a direct suit against the corporation. This is when a wrong is
committed against a group of stockholders.

Liabilities of a stockholders
1.
2.
3.
4.
5.
6.

Liability to the corporation for unpaid subscription

Liability to the corporation for interest on unpaid subscription
Liability to creditors of the corporation on unpaid subscription
Liability for watered stock
Liability for dividends unlawfully paid
Liability for failure to create a corporation

SEC. 65 Liability of directors for watered stocks

watered stocks stock issued for no value at all or for a value less than its equivalent either
in cash, property, shares, stock dividends, or services the law prohibits the issuance of watered stocks (only refers to
original issue)
1. to protect persons who may acquire stock and those who may become the creditors of the corporation on the
faith of its outstanding capital stock being fully paid to secure equality among subscribers and prevents discrimination
against those who have paid in full the par or issued value
Who are liable for watered stocks?
Both consenting director or officer and the stockholder concerned for the whole amount of difference
SEC. 66 Interest on unpaid subscription
In the meantime that the entire amount of the stock subscription has not been paid, subscribers for stock shall be liable to
the corporation for the interest from the date of subscription.

SEC. 67 Payment of balance of subscription

Remedies to enforce payment of stock subscription
1. Extra-judicial sale at public auction permits the corporation to put up unpaid stock for sale and dispose of it for the
account of the delinquent subscribers
2. Judicial action/by court action
3. Collection from cash dividends and withholding stock dividends
Sanctions on stock delinquent
1. Rights denied to stockholder
shall not be voted or be entitled to vote or representation at any stockholders' meeting, nor entitled the
holder thereof to any of the rights of a stockholder except
the right to dividends
2. Right given to the corporation
the corporation has the right to apply cash dividends due on delinquent stock to the
unpaid balance on
the subscription plus cost and expenses
while stock dividends, corporation to withhold the same from the delinquent stockholder until his
unpaid subscription is fully paid
When is the balance of subscription payable?
1. On the date specified in the contract of subscription
2. In the absence of any specified date in the contract of subscription, on the date stated in the call made by the
board of directors
When does the stock become delinquent?
A stock becomes delinquent upon failure of the holder to pay the unpaid subscription or balance thereof within 30
days from the date specified in the contract of subscription or on the date stated in the call
Call a declaration officially made by a corporation usually expressed in the form of a resolution of the board of directors
requiring payment of all or a certain prescribed portion of a subscriber's stock subscription
Requisites for a valid call
1. It must be made in the manner prescribed by law
2. It must be made by the board of directors
3. It must operate uniformly upon all shares
SEC. 68 Delinquency sale
Procedure:
1. The board of directors passes a resolution declaring payable the whole or certain percentage of the unpaid
subscription stating the date fixed for payment. If the date of payment is specified in the contract of subscription,
no call is necessary
2. The stockholders are given notice of the resolution by the secretary of the corporation. If the stockholders fails to
pay within 30 days from date specified, the stocks becomes delinquent
3. the board of directors, by resolution, orders the sale of delinquent stocks, stating the amount due and the date,
time, and place of sale with notice to the delinquent stockholders which notice shall be published
4. On the date of sale, will be sold at public auction to higher bidder for cash
Highest bidder the person offering at the sale to pay the full amount of the balance on the subscription together with
accrued interest, cost of advertisement and expenses of sale, for the smallest number of shares
In the absence of bidders or highest bidder, the corporation may purchase for itself the delinquent stock

SEC. 69 When sale may be questioned

Grounds for the recovery of stock unlawfully sold for delinquency are:
1. irregularity or defect in the notice of sale
2. irregularity or defect in the sale itself of the delinquent stock
SEC. 70 - Court action to recover unpaid subscription
As a general rule, a corporation may not maintain a suit for the enforcement of unpaid subscription without first making a
call.
Judicial remedy is limited to the amount due on any unpaid subscription with accrued interest, costs and expenses
SEC. 71 Effect of delinquency
Stock delinquency does not deprive the holder of all his rights as a stockholder except the right to be voted for or be
entitled to representation at any stockholders' meeting. He shall still receive dividends. But delinquent stocks shall be
subject to delinquency sale
SEC. 72 Rights of the unpaid shares
Before unpaid shares become delinquent, the holder thereof is not considered to have violated any contract with the
corporation, and, therefore, he has all the rights of a stockholder which rights include the right to vote
SEC. 73. Lost or destroyed certificates
The registered owner of certificates of stock in a corporation or his legal representative shall file with the corporation an
affidavit setting forth how certificate were lost, stolen or destroyed, the number of shares represented by each certificate,
the serial numbers of the certificate and name of the corporation which issued the same.
The affidavit shall be verified
Corporation shall publish a notice in a newspaper in general circulation published in the place where the corporation has its
principal office for 3 consecutive weeks
After 1 year from the date of the last publication, if no contest presented to the corporation, corporation shall cancel in the
books the lost certificates and issue new certificates

TITLE VIII - CORPORATE BOOKS AND RECORDS

Section 74
Books to be kept; stock transfer agent. - Every corporation shall keep and carefully preserve at its
principal office a record of all business transactions and minutes of all meetings of stockholders or members, or
of the board of directors or trustees, in which shall be set forth in detail the time and place of holding the
meeting, how authorized, the notice given, whether the meeting was regular or special, if special its object, those
present and absent, and every act done or ordered done at the meeting. Upon the demand of any director,
trustee, stockholder or member, the time when any director, trustee, stockholder or member entered or left the
meeting must be noted in the minutes; and on a similar demand, the yeas and nays must be taken on any motion
or proposition, and a record thereof carefully made. The protest of any director, trustee, stockholder or member
on any action or proposed action must be recorded in full on his demand.

The records of all business transactions of the corporation and the minutes of any meetings shall be open
to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business
days and he may demand, in writing, for a copy of excerpts from said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any director, trustees, stockholder or member
of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions
of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall
be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is
made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for
such action shall be imposed upon the directors or trustees who voted for such refusal: and Provided, further,
That it shall be a defense to any action under this section that the person demanding to examine and copy
excerpts from the corporation's records and minutes has improperly used any information secured through any
prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in
good faith or for a legitimate purpose in making his demand.
Stock corporations must also keep a book to be known as the "stock and transfer book", in which must be
kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and
unpaid on all stock for which subscription has been made, and the date of payment of any installment; a
statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and
such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office
of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or
stockholder of the corporation at reasonable hours on business days.
No stock transfer agent or one engaged principally in the business of registering transfers of stocks in
behalf of a stock corporation shall be allowed to operate in the Philippines unless he secures a license from the
Securities and Exchange Commission and pays a fee as may be fixed by the Commission, which shall be
renewable annually: Provided, That a stock corporation is not precluded from performing or making transfer of
its own stocks, in which case all the rules and regulations imposed on stock transfer agents, except the payment
of a license fee herein provided, shall be applicable.
Section 75.
Right to financial statements. - Within ten (10) days from receipt of a written request of any stockholder
or member, the corporation shall furnish to him its most recent financial statement, which shall include a balance
sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in
reasonable detail its assets and liabilities and the result of its operations.
At the regular meeting of stockholders or members, the board of directors or trustees shall present to
such stockholders or members a financial report of the operations of the corporation for the preceding year,
which shall include financial statements, duly signed and certified by an independent certified public accountant.
However, if the paid-up capital of the corporation is less than P50,000.00, the financial statements may be
certified under oath by the treasurer or any responsible officer of the corporation.