LADIA CORPO LECTURE PART 4 (JUNE 8)

TOPICS:

STOCKHOLDERS MEETINGS
REQUISITES FOR A VALID MEETING
TRUSTEES MEETINGS
REGULAR & SPECIAL
o QUORUM AND VOTING REQUIREMENT
o PROXY
STOCKS AND STOCKHOLDERS
o SUBSCRIPTION CONTRACT V DEED OF SALE
CONSIDERATION FOR THE ISSUANCE OF SHARES
TRANSFER OF CERTIFICATE OF STOCKS
UNPAID SUBSCRIPTIONS REMEDIES

MEETINGS
Sec 49-55 governs meetings. There are 2 types, stockholders and or members meetings and the directors
or trustees meetings. Whether what kind of meeting, there are regular and special meetings.
STOCKHOLDER OR MEMBERS MEETINGS
Stockholder or members meeting
There are 5 essential requisites for a valid meeting.
1) It must be held on the date fixed in the by laws or in accordance with law. Sec. 50 - if there are no
provisions in the by laws as to when meetings are to be held or conducted, then the law will supplement
the same and it says on any date on April as may be fixed by the BOD. The law chose April because that
would be the time when the audited financial statements of the corporation would have been prepared and
signed by their external auditors. During annual meetings, the financial statements are handed to them so
that they may go over the financials of the corporation. That would also be the day or month when
financial statements are submitted to the BIR.
2) Prior notice must be given, the stockholders meeting (regular) that would refer to the annual meeting
of the stockholders. If it is the annual or regular meeting, then the notice requirement is at least 2 weeks.
(special) At least 1 week before the said meeting. Note the law says, the by laws require a different period.
Thus, by this provision, the corporation may provide for more time or shorter duration to send out said
notices. Take note of Directors v. Tan where the by laws provided a 5 day notice rule. and the notices were
posted 2 days before the scheduled meeting. At the objection of one of the stockholders, the resolution
passed was invalidated.
3) Must be held at the proper place. Under sec. 51, of the code, meetings of the stockholders shall be held
in the city or municipality where the principal office of the corporation is located or established. It goes
further stating and as far as practicable, at the principal office of the corporation. Under Sec 93, it
empowers, non stock corporation to validly provide in the by laws that members meeting may be held
anywhere in the Philippines, provided that proper notice is sent to all members. There is no such grant in a
stock corporation. Thus a stock corporation cannot provide in the AOI or by laws that meetings may be
held anywhere in the Philippines. But note that sec 51 provides that Metro manila shall be considered one
single city or municipality. Either stock or non-stock corporation, can hold anywhere in manila. Venue is
properly laid.
4) It must be called by the proper person or officer. Under Sec. 54, on jurisprudence, the president or
secretary on orders of the president, unless the by laws provide for a different person. Again, the by laws
will govern if that will be the case.
Question: if there is a person authorized to call a meeting, but fails, refuses or neglects to call one, may a
stockholder petition the proper forum for an authority to call the same. I said proper forum because if it is
intra-corporate, it is the special commercial court. Now that would have jurisdiction over the case but
meetings can also be called by the SEC if it is not intra-corporate. Like for instance, under Sec 5 of the

Securities regulation code, the SEC can call for a meeting to elect the board of the directors on the petition
of the creditor. It will be the SEC that will have jurisdiction, kaya proper forum. Speaking of the
stockholders right to demand the corporate officer to call a meeting if there is a person authorized to call
but fails, refuses or neglects to do so. The stockholder cannot go to the special commercial court to apply
for an authority to call one and preside thereat until a majority of them elected a presiding officer.
The resolution of the high court in PONCE V. ENCARNACION -NO LONGER APPLIES TODAY. Last paragraph
of sec 50 was removed. Dati under the old law, if there is no person authorized to call the meeting or the
person authorized fails, refuses or neglects to call one, stockholder may petition the court to preside to call
and preside thereat until a presiding officer is elected is no longer applicable today.
Dati walang forum. Remedy is a writ of mandamus as sustained by the SC in the case of AFABLE V.
AGELION (?)
XPN is removal of directors or trustees under sec 28 where stockholder may still be authorized to call a
meeting to remove or oust a director if the proper officer fails, or refuses to call the same. The 5th requisite
for a valid meeting is that the quorum and voting requirements be met. Under Sec. 52, majority of the
members, unless by laws provide otherwise.
Sec. 6 - non voting shares are not included in determining the voting requirements imposed by law in order
to have a valid corporate act or transaction unless they are nonetheless entitled to vote under the
penultimate paragraph of sec. 6. In entering management contract, majority. If there are non-voting
shares, not based on the entire stocks but only voting stocks.
Now, what would be the effect of a stockholders or members meeting improperly held or called? For
instance not held on the date fixed in the by laws or notice requirement not complied with? Or it was held
in an improper place? Or called by an improper officer? What will happen to the resolutions passed during
a meeting improperly held or called? Note in DIRECTORS V. TAN - notice requirement not complied with invalid.
Qualify your answer, under the last paragraph of Sec. 51, any meeting of the stockholders or members
improperly held or called shall nonetheless be valid if ALL of the stockholders or members are present or
duly represented. Kunwari kung nagpadala ng proxy. Valid and binding pa rin ang mga resolutions.
TRUSTEES MEETINGS
53 and 54 talks about trustees meetings (regular and special) Regular are those held monthly or as
provided for by laws. Special are those upon call by the President or as provided for in the by laws. The
venue of meeting in directors/trustees meetings is anywhere within or without the Philippines unless
provided for in the by laws. This was a consequence by a hearing held by SMC in the bylaws, where they
went to HongKong- San Miguel brewery in Hong Kong. What the members of the board did was to look at
the facilities and meeting was held then bought it. It was questioned but nonetheless was subsequently
ratified by the stockholders, SMC included in the minutes of meetings that they were ratified by the
stockholders. Although improperly laid, was ratified by the stockholders.
BP 68 - board may hold meetings within or without the Philippines unless the by laws provide otherwise.
There maybe instances that they want to go to a certain place. Baka gusto tignan pagtatayuan ung lugar.
Must have something to do with the business itself.
QUORUM AND VOTING REQUIREMENTS
Quorum requirement in directors or trustees meeting is majority of their number as fixed in the AOI. If
there are 9 members of the board, the quorum requirement would be 5. Majority is divided by 2 +1.
Irrespective of the absence, death, resignation or otherwise of any or some of them, it is majority of their
number as fixed in the articles of incorporation.
We were saying likewise, may the vote of 2 members of a 5 man governing board pass a valid corporate
act or transaction? Yes, because the quorum requirement is majority of their number as fixed in the article
corporation. The voting requirement is majority of those present at which there is a quorum. Except in the
election of corporate officers which would require the majority of their own number or and unless the by
laws require a greater majority. Because the by laws may require greater requirement. Board of directors

must sit and act as a body at a validly constituted meeting. Their physical presence is not necessary. They
need not be physically present at the place where the meeting is being conducted because the eCommerce law allows the BOD to meet via teleconference or audio conference. Note that this is not yet
allowed in stockholders meeting this is only allowed in case of directors meetings. However, in a non-stock
corporation, it may be allowed also in non-stock corporation. Under Sec. 89, voting by mail or similar
means maybe allowed in a non-stock corporation subject to the conditions that may be set by the SEC.
In the stockholders or members meeting. The stockholders may vote by proxy, it cannot be denied by the
AOI. In a non-stock, the AOI or bylaws may broaden, limit or deny. So in non-stock they may deny proxy
voting.
PROXY VOTING
May directors vote by proxy? No by specific provision of Sec. 25. They are elected precisely for their
expertise in the management of the corporate affairs so much so that they should cast their votes
personally. Imagine if Manny Pangilinan, may supposed merger or consolidation, sabi niya sa driver niya
siya magattend ng meeting. Anong alam niya sa merger or meeting? Thats why the law requires they
should cast their votes personally, they cannot vote by proxy. Application of the powers and functions
granted to them by those who elected them in office.
What is the effect of directors meeting if they are improperly held or called?
GR: without any force and effect
but may be ratified expressly or impliedly or even by estoppel.
Lopez Realty v Fotecha
-A meeting was held and conducted for the purpose of passing a resolution, granting the employees of
Lopez Realty Corp. to grant gratuity pays to its employees. One of the directors was abroad at that time
and he was not notified of the meeting. Hindi siya pinadalhan ng notice of meeting. When he came home,
he questioned the validity of the resolution granting a pay. It appears that he was aware of the questioned
board resolutions, in fact he signed the two vouchers for the gratuity pay.
SC: She is now estopped. Pwedeng maratify and resolutions passed by the board in an improperly held
meeting, expressly, impliedly and even by estoppel.
STOCKS AND STOCKHOLDERS
Stocks and Stockholders.
Sec. 60 all the way down
A person natural or juridical may become a stockholder in only 3 ways.
1. by a contract of subscription
2. by acquisition or purchase of shares of exisiting stockholders
this would include those that are traded in the Stock Exchange. Nagpunta ka sa broker, ung broker
maghahanap ng seller of the same amount, you acquire the share from existing stockholders
3. by purchase of shares of treasury shares from the corporation
Take note of the meaning of treasury shares.
SUBSCRIPTION CONTRACT V. DEED OF SALE
Subscription refers to a contract for the acquisition of shares of stocks of an existing corporation or a
corporation that is still to be formed and the agreement to pay for the same.
Under Sec 60, any contract for the acquisition of unissued stocks in an existing corporation or a
corporation that is to be formed is considered a SUBSCRIPTION CONTRACT no matter how the parties will
refer to them.
Deed of sale, is that subject to the Civil Code? Instance, ang stipulation, he shall not be considered a
stockholder until and unless he fully pays the acquisition cost. Agreement, bayad lang siya 50%. May
nangyari, nasunog property ng corporation, can you compel the acquiring person of the shares of stock to
pay? No. Wala nang consideration, the corporation must be ready and able to issue a valid stock certificate
and the person must be will to pay the amount of the acquisition of shares of stock if it is a sale. But the
law is now very clear. No matter how the parties refer to it, as long as you are acquiring unissued shares of

stocks, that is a SUBSCRIPTION CONTRACT. No matter how you refer to it. There is no such thing as
Contract to sell of unissued shares of stock.
Contract to sell yan tapos may stipulation kanina, hindi siya stockholder until and unless binayaran niya
ung acquisition cost pero kung Subscription Contract, once the subscription is valid and subsisting, the
stockholder becomes a subscriber and is bound to pay the amount of subscription is bound to pay amount
of subscription even if the Corporation would eventually become insolvent because the subscriptions as we
were saying. Any amount unpaid thereof constitutes a fine which the creditors have the right to rely upon
for the satisfaction of their claims. Once there is a valid subscription agreement, the acquiring person
acquires all the rights and corresponding liabilities that attach to the stockholder. Kung sale yun, hindi.
CONSIDERATION FOR THE ISSUANE OF SHARES
Of course, we have the consideration for the issuance of shares under sec 62.
Shares of stocks cannot be issued for a consideration less than its par or issued value. If they are issued
below the par or issued value, they will considered as watered stocks under sec 65. Watered stocks are
thereof shares of stocks issued by the corporation as fully paid up when in fact the full value thereof has
not been paid or promised to be paid. The consideration for the issuance of shares of stocks should not be
less than the par or issued value. When you talk about the issued value, you talk about the no par value
shares. The basis for determining whether there is stock watering is checking the par value not the fair
market value or book value. So kanina sabi natin, the par value is 1 peso per share in the course of time,
the fair value increased to 12 pesos per share. If the BOD decides to issue the unissued stocks of the
corporation at 2 pesos per share, instead of 12 pesos per share. Will there be stock watering? Wala.
Because the basis in determining whether there has been stock watering is the par value or in cases where
a no par value share, the issued value. The BOD determine the value price of the no par value share
pursuant to the authority that has been given to them in the articles of incorporation but please note that
the issue value of no par value shares should not be less than 5 pesos per share. The stockholder acquiring
a watered stock will be solidarily liable with the responsible corporate officers for the water in the stock.
The water in the stock would refer to the difference between the par value and the amount for which it is
issued. If the par value of the share is 10pesos, it was sold at 8pesos, then there is a water in the extent of
the 2 peso per share. If that is the case in par value, the stockholder acquiring the said shares will be
solidarily liable with the responsible corporate officers for the difference between the actual par value and
the value for which it is issued. As we were saying, what happens if the shares are no par value shares? Let
us assume that the BOD decided that the issue value of the no par value pursuant to the authority granted
them in the articles of incorporation, is 10 pesos per share. The BOD decided to issue these for only 8
pesos per share, so there is a water of 2 water per share. Will the stockholder acquiring the no par value
share be solidarily responsible? NO. Under the law, no par value shares once issued are deemed FULLY
PAID AND NON ASSESSABLE. So much so that the only responsible corporate officers will be liable for the
water in the shares of stock if it is a no par value share.
The consideration for the issuance of share may either be in any or a combination of the following.
1) Actual cash
2) Property - tangible or intangible actually received by the corporation
3) Labor or services actually rendered to the corporation
4) Previously incurred indebtedness
5) Amounts transferred from unrestricted retained earnings to stated capitals (Stock DividendsCapitalization of Unrestricted Retained Earnings)
6) Outstanding stocks exchange of stocks in the event of reclassification. (Founder shares - under the law,
Founder shares maybe given the exclusive right to vote and be voted upon for a maximum period as
members of the board of officers for a maximum period of 5 years from the approval of the SEC. 5 years
already elapsed, no more exclusive right to vote and be voted upon. They can have their shares
reclassified into common shares or the AOI or by laws require them to classify. What is the consideration?
kung ano yung consideration na binayad nila sa founders shares nila.)
Note: labor or services ACTUALLY rendered which means that services to be rendered in the future is not a
valid consideration for the issuance of shares of stocks, the reason being that it is not being capable of any
valuation or rather, it may not happen at all. Sabi mo, i will issue 1 million shares of stock as corporate
secretary of the corporation, eh hindi naman nagrender. Tapos. That is why the law is certain as "Labor or
services ACTUALLY rendered.

Same as in properties. Same as in promissory notes, the realization is not certain so the promissory notes
cannot be a valid consideration for the issuance of shares of stocks.
TRANSFER OF CERTIFICATE OF STOCKS
Certificate of stocks maybe transferred by delivery of the stock certificate endorsed by the owner or
attorney-in-fact. No transfer shall be valid as between the parties until the transfer are recorded in the
books of the corporation. From the wordings, a transfer of share of stocks maybe affected by the delivery
of the endorsed stock certificate. Endorsement alone that is without delivery of the stock certificate is not
sufficient to effect a valid transfer. The manner and mode that shares of stocks, the law must be complied
with. The law says, endorsement of the stock certificate by the owner or the attorney in fact and delivery
to the transferee. Endorsement alone is not sufficient as held by the Court in "EMBASSY FARMS V. CA". The
same holds true in RAZON V. IAC, in that case, stock certificate was delivered by the supposed transferor
to the transferee but the certificate of stock was never endorsed by the owner thereof. No valid or effective
transfer of shares of stock. Sec 63 uses the word "may". May be transferred by endorsement coupled with
the delivery of the stock certificate. Meaning that there may be other modes of transferring shares of
stocks. Such as in the case of SALINAS V. COURT OF APPEALS that a duly notarized deed is also a valid and
effective mode of transferring shares of stocks. OY BIACO V. MAKMIKING?! (LOL) the higher court ruled that
a transfer set in a notarial deed is equivalent to the delivery of the thing itself. Note however, the decision
of the higher court in RURAL BANK OF LIPA V. CA that when a certificate of stock has already been issued, a
mere notarized deed of transfer will not suffice for a valid transfer of shares of stock. It must also be
coupled with the delivery of the endorsed stock certificate. To avoid fraudulent and fictitious transfer of
shares. Ang sabi ng 63, maybe transferred by endorsement or delivery of the stock certificate. So there will
be nothing to prevent a wise person to endorse and delivery his stock certificate and later on execute a
notarized deed for transfer of his shares resulting to double sales. It would result to a fraudulent
transaction with respect to shares of stocks. If the certificate of stock has already been issued, a mere
notarized deed will not suffice. A mere endorsement and delivery is sufficient but a mere notarized deed
will not suffice, it must be coupled with the delivery of the endorsed stock certificate. RURAL BANK OF LIPA
V. CA. Of course, we note further that even without the delivery of the endorsed certificate of stock, or
even without delivery and/or endorsement of stock certificate, a transfer of shares of stocks may be valid
and effective if the transferor is in estoppel. I am talking about TAN V. SEC. In that case the transferee of
shares of stock is the brother of the transferor himself and the former already exercised all his rights as a
stockholder and was in fact elected as a member of the BOD when his transferor was the President of the
corporation. You all know that you cannot be a director if you are not a stockholder, and he was not an
original stockholder, it was only due to the transfer of this brother. The transferor may be considered at
that time in estoppel. The court ruled that endorsement and delivery is not essential when the person
sought to be considered as a stockholder is an officer of the corporation and has custody of the stock and
transfer? Inexercise na niya a right niya as a stockholder. In other words, the transferor is in estoppel.
Now, we said that shares of stocks maybe transferred by endorsement and the delivery of the stock
certificate. Question is: Are they negotiable instruments? NO. While they may be transferred by delivery of
the endorsed stock certificate, they are merely quasi negotiable but non negotiable in the sense that the
transferee takes it without prejudice to all the rights and defenses which the true or lawful owner may
have as may be obtained in a particular set of facts and circumstances. Subject only to the rules governing
estoppel. Of course, for instance, si A is the owner of stock certificate, owned by A. 100,000 shares, A is
the owner. B stalled the certificate, si B forged the signature of A, B transfers it to C purchaser in good faith
and for value. Will C acquire title better than A? NO. It is subject to all the rights and defenses of A. It is non
negotiable in the sense that the transferee takes it without prejudice to all the rights and defenses which
the true or lawful owner may have as may be obtaining in a particular set of facts and circumstances. Now
if that stock certificate is a negotiable instrument, ninakaw ni B, binenta kay C, under Nego Law, C
becomes a holder in due course, that does not apply in case of a stock certificate. In that sense that the
transferee takes it without prejudice to all the rights and defenses which the true or lawful owner may
have subject to the rules governing estoppel. So the story would be different if lets say si A, at the back of
the instrument is what we call the endorsement form, nakalagay dito: "for value received, I hereby
transfer, sell, assign and to ___ this certificate of stock and hereby authorize the transferee to make proper
representations with the corporation for the transfer of shares in his name. Signed by A. Siya mismo
pumirma, sabi niya, tol pakitago muna ito, punta ako ng abroad. Ginawa niya binigay niya kay B. Si B
binenta kay C. C is a purchaser for value and in good faith, will C acquire title? Yes. Estoppel si A. Eh bakit
niya pinirmahan? Sec. 63. Endorsement of stock certificate and delivery to the transferee, it is a valid

transfer. Once the stockholder, the owner of the share endorses the stock certificate, and it is found in the
hands of any other person, the possessor will be presumed the owner of said shares. Once it is signed, it
shall be considered as "streaked certificate" (not sure if streaked nga ba) Who ever is in possession will be
presumed the owner thereof. Unless, the rules governing estoppel will apply, it is not negotiable. It is
subject to all the rights and defenses which the true or lawful owner may have.
Is the registration of transfers of shares of stock in the stock and transfer book necessary for the transfer
of shares of stock to be considered valid and effective? In so far as the valid contracting parties
themselves are concerned, no. Under Sec. 63, no transfer shall be valid except as between the parties.
Until the transfer has been recorded in the books of the corporation. So if it has not been registered in the
books, it is valid and binding between the parties. But to be valid and binding against the corporation and
other third parties, it must be registered in the "stock and transfer book". The case law being OSON V.
JOSONITO. Now, if the corporation, lets say the transferee goes to the corporate officers and hands the
stock certificate duly endorsed and delivered to him so that the transfer maybe recorded in the name of
the particular transferee but the corporation fails or refuses to register the transfer. What would be the
appropriate remedy? It is mandamus. The ruling again by the high court in RURAL BANK OF SALINAS V. CA,
which held that the right of an assignee or transferee to have the stock transferred in his name is an
inherent right flowing from his ownership of shares of stocks. Such as when a corporation refuses to
register the transfer without good cause, mandamus will compel the officer to transfer the said stock in the
stock and transfer book. The SC said that the duty of the corporation to record transfer shares of stocks is
ministerial in nature. If they refuse to enter the such transaction without good cause, it maybe compelled
to do so by mandamus. That statement "without good cause" is not without any legal implication because
the corporation may not be compelled to record transfer if there are good causes to refuse the registration
of the transfer in the "stock and transfer book". Just like for instance the case of TAI V. CA (TAI?!) where the
creditor sought to compel the corporation to record the transfer. Sinangla ng stockholders ung shares nila
dahil sa minortgage nila and this debtors failed to pay the creditor the amount due them on time, the
creditor foreclosed the shares of stocks of the debtors, can he compel a case for mandamus? SC, in order
that mandamus may issue, the transferee must have a clear legal right to the thing demanded. That it is
the imperative duty of the defendant to perform the act required. It neither imposed duty or never issued
in doubtful cases. Under the Civil Code, the pledgor remains the owner until the plegee sells the thing
pledged at a public auction sale. Since the creditor did not sell the share at public auction, the mortgagor
remains the owner, he does not have any ownership right at all, until unless it sold at a public auction.
That is a good cause.
Another for instance if the transfer of the shares is violative of the law itself. What law? Nationalization
laws, 2 shares of stocks, as we were saying classification of shares. Class A shares like 60% 40%, utilization
of natural resources. 60% minimum stock ownership of Filipinos, 40% Foreigner. Binenta nung Filipino
citizen sa foreigner, nabawasan ung 60%, may the corporation be compelled to record the transfer? No.
Because it is violative of the Philippine laws. That is also a good cause for the refusal of the corporation to
record the transfer.
Sec. 63, nakalagay diyan if the corporation has unpaid claims over the shares sought to be recorded as
transferred, it cannot register or record the same. Unpaid claims as ruled by the high court in CITIBANK V.
CA, refers to the unpaid subscription of the stockholder and not any kind of indebtedness of the
shareholder to the corporation. So there may be good cause or causes for the failure or refusal of the
corporation to record the transfer in the "stock and transfer book" but absent any, as ruled in the case of
RURAL BANK OF SALINAS V. CA, it is a ministerial duty on the part of the corporation to record transfers of
shares of stock and if it is refused without good cause, it may be compelled to do so by mandamus.
May the right to transfer shares of stocks be regulated or restricted? Generally, NO. As held in the case of
PHIZER V. BOTICA NOLASCO (PHLIZER? I DUNNO) but it may be regulated and reasonably restricted by law
or by agreement of the parties. In that particular case of LAMBERT V. FOX (?) the two major stockholders
agreed not to dispose of their shares within a period of 1 year. 1 of them violated the agreement and
wanted to transfer his shares because of course, shares of stock are personal properties which he may
dispose if he wants to. The SC ruled that if there is an advantage of not only of the stockholders but also of
the corporation by virtue of their agreement, it is reasonable as to period of time it is valid by agreement
of the parties. Restricted by law, of course, madam diyan like nationalization laws, hindi mo maitransfer
kasi hindi naman qualified yung bibili ng shares. Also Sec. 63, sabi hindi matransfer because the
corporation has unpaid claims over the shares sought to be recorded in the stock and transfer book. Meron
ding mga regulations for instance Central Bank, transfer of shares in a banking institution where a

transferee would result to holding more than 20% of the outstanding stocks requires the consent of the
central bank. That is a regulation by law. Or even, Title 12 of the Corporation Code regarding close
corporations. Under Sec. 96, all shares of stocks of any class shall be held of record by not more than 20
specified persons, tinransfer sa hindi naman kasali sa 20, hindi pwede.
Speaking of shares of stocks, subscribed shares of stocks, we have noted that the requirement of the law
that only 25% of the total subscriptions is required to be paid. There are instances where a person has not
paid any or little amount only. Now, if that is the case, are subscribers to shares of stock not fully paid
required to pay interest on their unpaid subscriptions? Generally, NO. Generally no, that the by laws, or
contract of subscription may require the payment of interest for the unpaid portion of the subscriptions of
the subscribers at the rate indicated therein. If there is not indicated in the by laws, they are not required
to pay interest. Yung mga corporation kumikita naman, bakit nila kailangan ung interest? Unless the by
laws requires, if there is nothing in the by laws as to the rate, it shall be the legal rate.
UNPAID SUBSCRIPTIONS REMEDIES
In case of unpaid subscriptions, there are 2 possible remedies for the corporation to enforce payment of
unpaid subscriptions.
First, by a delinquency sale under Sec 67 and 68 of the Code.
Second, by a direct action in court under Sec 70 of the Code.
In delinquency sale, of course there must be a call made by the BOD. Normally, the BOD will make a call
requiring stockholders to pay unpaid subscriptions, stating the date and day on when it will become due. If
the holder does not pay on the date specified, his shares will then become delinquent and will subject the
shares to delinquency sale. The shares will thereafter be subjected to auction sale subject to notice and
publication and the sale shall be made not be made earlier than 30 days but not later than 60 days from
the date of delinquency and will be sold to the bidder who tenders or offers to pay the full balance of
subscription inclusive of interest cost and expenses if any, for the least number of shares. The winning
bidder in a delinquency sale is the lowest bidder dahil the provisions is clear, the winning bidder is the one
who tenders or offers to pay the full amount of the balance of the subscriptions inclusive of interest, cost
and expense for the least number of shares. Ibig sabihin, pare parehas ang itetender na amount. Si A
subscribed to 100,000 worth of shares, he paid 50,000, the corporation made a call, A did not pay on the
date specified, and the board decides to sell. It was sold at public auction, 3 bidders appeared, 1 peso per
share. Binenta at public auction, B offered 55,000 plus interest cost and expenses for 97,000. A - parehas
55,000 for 95,000. There is no such thing as a highest bidder. Mananalo sino ang pinaka maliit na shares of
stocks. There is a remainder, 5,000. The 5,000 will be recorded in the name of the delinquent stockholder.
Now the entire 100,000 is fully paid up. Now, under the same provision of Sec. 70, there are no bidders,
may the corporation bid? Yes. Under Sec. 70 also provided it has unrestricted retained earnings. If the
corporation is losing money, pero walang URE, is the corporation left without recourse to enforce payment
of the unpaid subscriptions? Meron parin, Sec. 70, it can go in a direct collection case in court. Unpaid
subscription to the capital stock of a corporation is a debt owing to the corporation by the subscriber which
he is bound to pay like any other kind of indebtedness. Now what, if the shares are sold at public auction
but there are flaws in the manners it was sold, it requires publication, eh hindi pala napublish, it was
bidded out irregularly, not in accordance with the law, may the stockholders whose shares were sold at
public auction irregularly, question? Yes, but subject to the provisions of Sec. 69 of the Corporation Code.
He must tender payment of the acquisition cost the winning bidder and must institute the complaint within
6 months from the date of the sale. These are the twin requirements in order that a stock holder whose
shares are sold in a delinquency sale may question the validity of the propriety in which his shares was
sold. Bakit 6 months? Stability of transaction of shares of stock. Kaya nga siya nagbid alam niya sa sooner
or later makakabangon ang corporation. Pagnakabangon, ibebenta ko mas malaki. Kung may claim na
irregularly held na pwede mo ifile within 1 year, eh di wala ring assurance ung bumili na matatransfer niya,
stability of stock transactions. Now what is the effect of delinquency? Vis a vis the right of the delinquent
stock holders? Shares are delinquent - he loses the right to vote and be voted upon and not entitled to any
rights of any stockholder except the right to receive dividends as provided by Sec. 43. So even if they
maybe delinquent, they maybe entitled to receive dividends, as we have mentioned, cash dividends &
stock dividend (part 3). Assuming that the delinquent stockholder is also a director, his shares are declared
as delinquent by the BOD, sabi niya, pay your unpaid portions, hindi nagbayad, nadeclare na delinquent
shares, will he be disqualified to be and act as a director? NO, until and unless all his shares are sold to the
winning bidder. Until then, he remains to be the owner of at least of the shares pending the sale at public

auction and of course, he may nonetheless, remain a stockholder, if not all of his shares are taken or
bidded for by the winning bidder.