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SEC. 60 (Subscription contract) any contract for the acquisition of unissued stock in an existing corp.
-stock corp- person may become a SH subscription contract to acquire unissued shares, purchase Treasury, transfer of OutS/SubS
Corporator must be a SH, honorary membership in business corp not allowed by law
SEC. 61 pre-incorp subscription irrevocable at least 6months from date of subscription
-sec not accept AI of stock corp unless at least 25% of authorized CS has been subscribed and 25% of total Subscription paid
-conditions for revocation revocation of PreIS contract either by subscriber or corp.
-when revocable for at least 6 mos. From date of subscription, cannot be revoked after submission of AI in SEC- beyond 6mons.
-reasons for irrevocability prevents subscriber from speculating on stocks of proposed corporation
(effects of filling AI) after submission PreIS no longer be revoked although 6mons has elapsed
-subscribers not bound indefinitely for the period of irrevocability is limited, both incorp and subscribers became SH
SEC. 62 (sources of corporate capital)
-funds furnished by SH capital of corp is principally derived from contribution of SH received by it as consideration for issuance
-borrowings corp may raise capital to finance business from loans & advances by crs in return the latter get securities bonds
.corp bonds written promised by corp to pay definite sum of money at future date at fixed interst rate
.funded debt debt of corp represented by bond issued, secured and unsecured
.profit & stock dividends capital from profits & earnings w/c are reinvested in the business
(Modes shares may be issued)
-subscription before/after incorp, to original, unissued stock; sale of TS; subs new stocks and CS increased; making stock dividend
(consideration for issue of stocks)
-Shares of stock not issued for consideration less than par/issued price; except TS as long as price is reasonable
-shall not be issued in exchange for promissory notes/future service
-consideration is other than actual cash value shall be initially determined by the incorp or BOD
(consideration other than cash) value worth the value of stocks issued
(fixed of issued of no par shares) not fixed in IA cannot be issued less than 5 per shares
SEC. 63 (Certificate of Stock) written instrument signed, owner of designated number of shares of stock
-indicates name of holder, #, kind & class of shares, date of issuance
-over issued stock is absolutely void, cannot issue in excess of max authorized in AI.
(Restrictions on transfer of stock)
-prohibits transfer of stock w/o consent/approval of all SH or BOD
-provision in the certificate that is transferrable only to some person approved by BOD, restrict right to dispose shares
-condition non-transferrable appears in the Cert of stock is null and void
(Modes of transfer of stock) - requirement to effect the transfer indorsement by registered owner & delivery of certificate
- valid transfer if there is indorsement but not delivery, or delivery but no indorsement
-unless transfer in a separate instrument different from law, authorized by statute
-Judicial/extrajudicial settlement of the estate dies intestate, transfer in favour of heirs
(Validity of stock transfer) -between parties merely the delivery of certificate. Registration not necessary if between parties
-as against 3rd persons must be entered & noted in books, names of transaction, date, # of shares transferred (valid bet. Parties)
(Effects of unregistered transfer of shares)
-valid and binding as bet. The transferor and the transferee
-invalid insofar as corp is concerned except notice is given to corp for registration\
-invalid as against corporate crs, transferor still liable to corp, transfer does not relieve from liability for unpaid subscription
-invalid as against the crs of the transferor w/o notice of the transfer
(non transferability of unpaid stock) no unpaid claims against the stock when no unpaid subscriptions due & payable
SEC. 64 prohibits issuance COS to subscriber who has not paid full amount w/ interest and exp if any is due
-in partial payment, deemed pro-rated among all shares subscribed, no COS can be issued
(Liability of SH on unpaid subscription to corporate crs)
-treated as crs, subscribers who have not paid in full, unless validly released , unpaid subs is an asset w/c corporate crs collects
(Nature of relation of SH to the corp) -relation based on contract; share not an indebtedness of corporation; corp owns its property
as a distinct entity (Right & remedies of SH)
- attend & vote - issuance of SOC - inspect books/records - elect/remove directors
- receive dividends when declared - furnish most recent FS & receive report - approve certain corporate acts
- participate distribution of asset - bring individual/representative suits - adopt and amend/repel by-laws, new
-transfer stock on books - recover stock unlawfully sold for delinquency -compel the calling meetings of SH -
pre-emption in issues - enter voting trust agreement - demand payment, withdrawal of shares -D corp
Derivative suit 1 brought by 1 or more SH/members in the name and on behalf of the corp to redress wrongs committed against it
or protect corporate rights, if tries to sue/ hold control of corp
SEC. 65 (Watered Stock) stock issued for no value at all or for a value less than its equivalent; includes:
Issued w/o consideration, issued as fully paid when the corp has receive a lesser sum of money than its par/issued value
Issued for consideration other than actual cash less than its par value; stock dividend when there are no sufficient RE/surplus
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(Issued of watered stock prohibited) prohibited to protect persons who may acquire stock & those who may become crs
-secures equality among subscribers and prevents discrimination (Effects of issue of watered stock)
-the issuance of WS is not merely ultra vires but is illegal per se violation of Sec.62
-as so crs, law makes no distinction bet. Those who become prior and subsequent to issuance of stock
- SEC issuance would not amount to an issue of watered stock w/in its authority to inquire view of its power and duty to enforce law
SEC. 66 (Interest on unpaid subscription) subscribers for stock shall pay to the corp interest on all unpaid subscription from the date
of subscription, if so required by, and at the rate of interest fixed in by laws. If no rate of int is fixed, deemed legal rate.
SEC. 67 -remedies to enforce payment of stock subscription
Extra-judicial sale at public auction, judicial action, collection from cash dividends and w/holding of stock dividends
Statutory sanctions on stock delinquency -right denied to SH, stock delinquent for unpaid subscription shall not be vote except right
to dividends -corp. right apply cash dividends due on delinquent stock to unpaid bal on subscription plus cost & expenses
(Payment of unpaid subs/ % ) made on date specified on contract/ if not, date stated in call made by BOD
-effect to failure to pay the entire balance due SH is liable to interest at legal rate, unless diff. Rate provided by-law
-stocks becomes delinquent upon failure to pay the unpaid sub/balance w/in 30 days subj to sale at public auction unless BOD
Call declaration officially made by corp expressed in the form of resolution requires a payment of all/certain prescribed subs
Assessment both paid and unpaid.. unpaid subs same w/ call/instalment
paid subs a levy made upon stock of a corp for correcting impairment of capital, indicates amount required
-power of board to make call may declare due & payable unpaid subs, can call anytime unless no date in subs contract
(Requisites for valid call made in manner prescribed by law, by BOD, operate uniformly on all SH
-necessity to call (insolvent) provisions /no date on contract, notice given to SH/ no notice to subscriber no call at all
SEC. 68 (Procedure for sale of delinquent stock) - delinquent stock subject to sale
-BOD passes resolution declaring payable whole/%-stating date fixed for payment, if in contract no call necessary
-SH given notice of resolution by secretary of corp not paid w/in 30 days call/contract sale is delinquent
-if unpaid yet not delinquent then not subj to sale - sale should have amount due, date, time, place of sale
-highest bidder offering to pay the full amount of the bal of subs w/ accrued interest- subscriber cannot incur liab
SEC. 69 recovery of stock unlawfully sold-irregularity/defect in the notice of sale, sale itself of delinquent stock
SEC.70 court action to recover unpaid subscription the corp may not maintain a suit for the enforcement of unpaid subs w/o call
SEC. 71 effect of delinquency stock delinq does not deprived rights as SH except right to be voted/SH meetings/dividends
SEC. 72 right of unpaid shares before unpaid shares be delinq, holder not considered violated any contract w/ corp
SEC. 73 lost/destroyed certificates issuance by corp of new certificates unless fraud, negligence, bad faith
-owner file affidavit (triplicate) evidence, after file- shall publish notice to newspaper -if fraud no action, be bought against corp
SEC. 74 Corporate books and records (under corp code)
-record of all business transactions, minutes of all meetings (SH/Members, directors/trustees), stock & transfer book
-right to inspect book granted by expressed provision - director, trustee SH, members at reasonable hours of business
(Remedies and sanctions for enforcement of right)
Action for mandamus file action - officer in corp wrongfully denies a SH/members right to inspect
Civil & criminal liab officer who refuse- shall be liable to such person, for damages, guilty of offense and is punishable
(Basis & purpose of right to inspect corp books) right to make copies, abstract and memoranda, but SH cannot take books
beneficial ownership of corp assets SH right to know/informed conditions
-right not absolute purpose of inspection, books of foreign corp - corp not organized in phil, trade secrets, reasonable hours
SEC. 75 right to FS bal. sheet/ P/L statement assets and liabs in result of operation - duty of BOD to present FS/ audit report
SEC. 76 (plan of merger & consolidation) 2 or more corp may merge into a single corp w/ch shall be one of the constituent corp
or may consolidate into a new single corp w/c shall be the consolidated corp. have term/name/mode of carrying
SEC. 77 (SH/members approval) notice/plan of merger SH 2/3 of outstanding CS amendments-majority or 2/3
SEC. 78 (Art. of merger or consi) - after approval of SH arts are executed same AI signed, # of shares outstanding/ # members
SEC. 79 (SECs approval & effectivity of merger or consolidation) quadruplicate-if contrary to law, set hearing corp and be heard
SEC. 80 Effects of MorC come to single corp, separate existence cease, surviving/consolidated corp shall possess all
rights/privilege//power and also responsible and liable to obligations
-common forms of corporate combinations 1. sale of asset 1 corp selling all asset to another
2. Lease of asset w/o being dissolve 3. Sale of stock
4. Merger 2 or more corp unite, 1 corp remains 5. Consolidation - 2 or more corp unite, give rise to new corp
SEC. 81 Appraisal right of SH right to demand payment of the FV of his shares : in case;
-amendment to articles that has effect of changing/ authorizing preference in respect to outstanding shares
-case of sale, lease, exchange, transfer, mortgage, pledge, and other disposition case of merger and consolidation
SEC. 82 How right is exercised by any SH -dissenting SH shall make a written demand on corp for w/in 30 days after payment
of FV of shares -proposed corporate action implemented/ corp shall pay SH
-upon payment of the agreed/awarded price, SH shall transfer his shares to corp
SEC. 83 effect of exercise rights once dissenting SH demands payment of FV of shares: -all rights acquiring to such
shares(voting/dividend right) shall be suspended received payment FV-if not paid w/in 30 days rights are restored
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SEC. 84 when right to payment ceases dissenting SH demands payment is no longer allowed unless corp. consent :SH
w/draws his demands for payment and corp consent; proposed corporate action disapproved by SEC, SH not entitled to AR.
SEC. 85 (bear cost of appraisal)
-corporation price w/ch corp offered to pay the DSH is lower than FV determined by appraisers named by them
-by DSH price is offered by corp approximately the same as the FV ascertained by the appraiser
SEC. 86 Notation on certificate of dissenting shares requires the DSH to submit to the corp w/in 10 days after demanding shares
SEC. 87 (Non stock corp) no part of its income is distributable as dividends to its members, trustees, officers profits of NSC
may obtain as incident to its operations.
SEC. 88 Purpose : for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social
--Chapter 1Members (right to vote maybe by mail)
SEC. 89 right to vote of members of any classes to vote may be limited, broadened, denied to extent of AI or by-laws
SEC. 90 - Non-transferability of membership all rights arising are personal and non-transferable unless provided by-law/AI
SEC. 91 termination of membership causes provided by AI/by-laws, extinguished all rights
--Chapter 2 Trustees .. Election & term of trustees trustees term is 3 yrs (no person shall be elected as trustees unless member
SEC. 92 unless stipulated by-laws/AI, BOD of NSC may be more than 15- term of office 1/3 of # shall expire every year
SEC. 93 Place of meetings outside the place where principal office of corp is located notice sent, time, date w/in phil
--Chapter 3 Distribution of assets in NSC
SEC. 94 rules for distribution in dissolution its assets shall be applied and distributed are:
-liab & oblig shall be paid -asset requiring return, assets received & held permitting use for charitable, religious not held for return-
shall be transferred -asset shall be distributed in accordance in AI/by-laws, distributed to person, society, organization
SEC. 95 Plan of distribution of asset plan distribution shall be adopted upon approval of 2/3 of members
(Rules applicable only to NSC)
-no part of income is distributable as dividends -membership terminated causes provided in AI/by-laws
-cannot engage in business w/ objective of making profits -trustees be members may be more than 15
-right to vote may be limited, broadened or even denied in AI/by-laws -terms of office of trustees with 1 yr interval
-entitled to one vote in election of trustees -subsequent elected trustees have term of 3 yrs
-voting by mail or other means -distribution of assets -place of meetings
SEC. 96 (Close corporation) held in few hands, few families and w/ch stock is not at all or only rarely dealt in buying/selling
- classes of stock issued held record by not more than a specified # of persons not exceeding 20, its issued stock shall be subject to
1 or more restriction on transfer, the Ccorp- any stock shall be not listed in any stock exchange/offered to public.
-2/3 of voting stock/rights is owned/controlled by another corp not close corp.
SEC. 97 AI of CC: -classification of share/rights greater quorum/voting requirements in meeting of SH or directors
-no meetings of SH need be called to elect directors, SH of corp subject to all liab of directors
-mgt of corp by SH and not BOD then those SH shall be deemed BOD
-officers shall be elected directly by SH instead of BOD (SH in CC are like partnership same duty they owe to one another)
SEC. 98 restrictions on the right to transfer share must appear in AI/by-laws, they shall not be onerous than granting the SH or the
corp right of first refusal or option to purchase the share of transferring SH w/ reasonable terms, conditions, period.
-a restriction fixing the purchase price very much below the FMV of shares may be invalid
SEC. 99 Effects of issuance or transfer of stock of a CC in breach of qualifying conditions
-if stock is issued/transferred to one who is not entitled under provision in AI, presumed notice the fact of his ineligibility to be SH
- transfer/issuance if AI only state not exceeding 20 if exceed person whom stock is issued should notice the fact in violation
Notice: person not eligible to be SH, transfer- hold the # of person in AI SH, transfer in violation so corp may refuse to register
SEC. 100 Agreement by SH valid between parties the agreement mentioned when executed by SH
SEC. 101 BOD meeting is unnecessary or improperly held: - before/after action is taken written consent is signed by all
-all SH has actual/implied knowledge
SEC. 102 pre-emptive right in a CC all stock to be issued including TS absolute right of the SH
SEC. 103 Amendments of AI delete/remove any provision shall not be valid unless 2/3
SEC. 104 Deadlocks upon any petition by any SH have the power to arbitrate the dispute SEC orders:
-cancelling or altering any provision -directing/prohibiting any act (successful)appoints provisional director (not)dissolving corp
SEC. 105 w/drawal of SH or dissolution w/draw if corp has sufficient asset to cover liab and purchase share at par
-petition of any SH to dissolve in acts of one who control are crap SEC must find illegal grounds w/ proper notice & hearing
SEC. 106 Special corporation ---- Chapter 1 (Educational Corp)-EC- stock or NSC provides facilities for teaching or instruction
SEC. 107 Pre-requisite of incorp SEC shall not accept/approve AI unless accompanied by favourable recommendation DepEd
SEC. 108 Board of trustees (for SEdC provisions on SC (for NSEdC) trustees elected term 5yrs
-powers of trustees accrd w/ by-laws -not <5 >15 -#s should be 5,10,15 -term 1 yr interval
SEC. 109 -----Chapter 2 (Religious Corporation) -may be incorp by 1 or more NSC
SEC. 110 corporation sole e.g. chief bishop, priest, minister, rabbi, other sect of church
SEC. 111 AI file SEC that he is sect/church he desire to become corp sole, he charge w/ administration with his jurisdiction
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-file regulations & discipline of denominations -place of principal office (w/in phil)
SEC. 112 Submission of AI must be verified before filing, along with certificate of election/letter of appointment by notary
SEC. 113 acquisition & alienation of property CS may hold/purchase real estate for church and may receive gifts
SEC. 114 filling of vacancies person authorized and empowered by rules manage affairs, estate, propertied during vacancy
SEC. 115 Dissolution declare to SEC have name, reason to dissolution, authorization, name to supervise winding up
SEC. 116 Religious society religious order, diocese, synod, sect or church (does not expressly require approval SEC)
SEC. 117 (Dissolution)- extinguishment of corp, termination of existence - methods of D voluntarily and involuntarily
-the law itself has granted, the law may take it away, the extinguishment only by act/consent of state where it is established
-2 legal step (termination of corporate existence) (winding up of its affairs payment of debts, distribution of asset)
(Voluntary) vote of BOD/trustee/SH/members(no crs affected) -amending AI to shorten term
-judgement by SEC after hearing of petition voluntary (crs affected) -Csole-submit declaration
(Involuntary) expiration of term -legislative enactment -order of SEC (change name does not dissolve)
SEC. 118 voluntary dissolution(no crs affected) no necessary go to SEC & does not affect crs (SEC issue cert of D) fact of D
SEC. 119 voluntary dissolution(crs affected) commission may appoint receiver to take charge of liquidation
-contemplates where consent of crs to dissolve corp cant be obtained petition is filed
SEC. 120 D by shortening corps term VD shall be deemed dissolve and no crs shall be prejudiced by D
-D by expired term fixed in the AI unless extended and amends AI. must reincorp the expires corp sec 10-15
-if corp does not formally organize/commence transaction w/in 2 yrs corp deemed D
SEC. 121 involuntary D by SEC(Grounds)-violation of corp, deadlock in CC, mismgt, suspension/revocation of certificate
-fraud, serious misinterpretation, refusal to comply, continuous inoperation at least 5 yrs (Effect of D)
-ceases to continue business -continue as body corporate 3 yrs for winding up (after 3 yrs, ceases to exist, no longer be sued/sue)
SEC. 122 Corporate liquidation winding up of affairs, reducing asset to money, settling crs, apportionating P/L
-methods (by corp itself) (by trustees BOD conveyed) (duly appointed receiver)
(Distribution of corporate asset) -no corp shall distribute any of its asset except upon lawful dissolution and after payment of liab
-trust fund doctrine subscribed capital as trust fund for payment of debts until liquidation no part of it would be returned/release
SEC. 123 (Foreign corp) formed & organize or existing other than laws in phil. Created under law of another country/state
-FC can have no legal existence beyond the grounds of the state its created however does not prevent corp from acting on another
-Objective of FC) place them on an equality w/ domestic corp, subj to inspection, protect resident of state (incidental taxes)
-FC not permitted to transact business until have secure licences to SEC and other govt agencies
SEC. 124 application to existing FC- license issued before effectivity of the code
SEC. 125 Application for license submission of required documents, shall be under oath, date/term, name, AuthoCS, OutsCS
SEC. 126 issuance of license SEC satisfied
SEC. 127 - resident agent individual in good character & sound financial standing, residing on the phil.
SEC. 128 Resident agent: service process theres a resident of the phil do legal process, other proceedings
SEC. 129 Law applicable FC bound by all rules/law/regulations applicable to domestic, except laws of home creation/D
SEC. 130 amendments AI of FC: take effect upon approval of SEC
SEC. 131 amendment license: changes corporate name, pursue in the phil
SEC. 132 merger/consol of FC- w/ domestic corp either phil law/home (if w/ another FC same, w/drawal of license)
SEC. 133 doing business w/o license not permitted to maintain action maybe sued
SEC. 134 revocation of license failure to file annual report/pay fees, appoint Resident agent, submit amendments,
misinterpretation, pay taxes, transact business outside purpose, acting on behalf of other FC not license
SEC. 135 issuance of certificate of revocation contracts entered after revocations are invalid and unenforceable
SEC. 136 w/drawal of FC claims in phil have been paid, taxes, penalties, petition of W been published
SEC. 137 (Miscellaneous provisions) outstandingCS total shares of stock issued (fully paid/partially paid) held other than corp
SEC. 138 designation of governing boards BOD/BOT/ NS edCorp- BOregents
SEC. 139 incorporation 7 other fees SEC collects
SEC. 140 Stock ownership on a certain corp (limitation vested in public int) congress may set max limit declared in public
SEC. 141 Annual report of corp submit to SEC w/ FS certified by CPA
SEC. 142 confidential nature of examination results power of the state to examine business, keep limits of their powers
SEC. 143 rule making power of SEC power to implement provisions, promulgate rules, impose fines
SEC. 144 violation of the code fine of not less than1000 not more than 10000, imprisonment not less 30days<5yrs (D corp)
SEC. 145 Amendment/repeal rights acquired/liability shall not be removed/impaired by subsequent D or amend of code
-right to amend does not authorize the taking of corp property w/o just compensation
SEC. 146 repealing clause (unless provided) all laws are inconsistent w/ any provision shall also deemed repealed
SEC. 147 separability of provisions provisions should be invalid/unconstitutional, so far as they are separated
SEC. 148 all lawfully existing corp on date of effectivity of this code are authorized if not affected by new code give 2 years
to comply
SEC. 149 Effectivity this code shall take effect immediately upon its approval (May 1, 1980)