*** APRIL 28 ASSIGNMENT:

Chapter VIII. DUTIES OF DIRECTORS AND CONTROLLING STOCKHOLDERS

(1) Duty of Diligence: Business Judgment Rule

• Otis & Co. V. Pennsylvania Railroad

• Montelibano v. Bacolod-Murcia Milling
• Litwin v. Allen
• Walker v. Man
• Steinberg v. Velasco
• Barnes v. Andrews
• Pool v. Pool
• Foster v. Bowen
• Lowell Hoit & Co. V. Detig
• Bates v. Dresser

(a) The self-dealing director

• Palting v. San Jose Petroleum, Inc.

• Mead v. McCullough
• Piccard v. Sperry Corporation

(b) Fixing compensation of directors and officers

• Govt. v. El Hogar
• Barreto v. La Previsora
• Central Coop Exchange v. Tibe
• Fogelson v. American Woolen Co.
• Kerbs v. California Eastern Airways

(c) Using inside information

• Strong v. Repide
• Taylor v. Wright
• Gokongwei v. SEC

(d) Seizing corporate opportunity

• Singer v. Carlisle
• Irving Trust v. Deutsch
• Litwin v. Allen

(e) Interlocking directors

Globe Woolen Co. V. Utica Gas & Electric

(2) Close Corporation

(3) Duty of Controlling Interest

Insuranshares Corp. V. Northern Fiscal Corporation

 (4) Duty to Creditors

Chapter IX. THE RIGHT OF INSPECTION

(1) Basis of Right

(2) What Records Covered

(3) Extent of and Limitations on Right

(4) Who may exercise Right

(5) Remedies available if Inspection Refused

• Pardo v. Hercules Lumber

• Gonzales v. PNB
• Veraguth v. Isabela Sugar Co.
• Gokongwei v. SEC
• Cojuangco v. Roxas

Chapter X. DERIVATIVE SUITS

(1) Nature and Basis of derivative suit: distinguished from individual and representative
suit

(2) Requirements relating to derivative suits

• Evangelista v. Santos
• Republic Bank v. Cuaderno
• Reyes v. Tan
• SMC v. Kahn

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***May 12 Assignment:

Chapter XI. FINANCING THE CORPORATION

(1) Sources of Financing

(2) Capital Structure

(3) Capital and Capital Stock Distinguished

(4) Shares of Stock: Kinds

(a) Common stocks

(b) Preferred stocks

(i) Preference as to dividends

 • Participating v. Non-participating
• Cumulative v. Non-Cumulative
• Discretionary Dividend Type
• Mandatory Dividend Type
• Earned cumulative or dividend credit type

(ii) As to voting right

• Ellingwood v. Wolf’s Head Oil Refining

(iii) Preference upon liquidation

• Hay v. Hay

(iv) Preference stockholder is not a creditor

• Augusta Trust Co. V. Augusta Hallowell

(c) Par or no par shares

(d) Treasury Shares

(e) Redeemable Shares

(f) Founder’s Shares

(5) Nature of Subscription Contract

• Garcia v. Lim Chu Sing

(a) Pre-incorporation subscription

• Utah Hotel Co. V. Madsen

• Wallace v. Eclipse Pocahontas Coal Co.

(b) Post-incorporation subscription

• Bayla v. Silang Traffic Co.

(6) The Pre-Emptive Right to Shares

(a) Basis of Right

(b) Extent and limitations under Code

(c) In close corporations

(d) Waiver of pre-emptive right

(e) When issue is in breach of trust

(f) Remedies when denied

 • Stokes v. Continental Turst Co.
• Thom v. Baltimore Trust Co.
• Fuller v. Krogh
• Dunslay v. Avenue M. Garage & Repair
• Ross Transport Inc. v. Crothers

(7) Debt Securities

(a) Form of borrowings

(b) Bonds and Debentures

(c) Convertible Securities; stock options

• Meritt-Chapman & Scott Corp. v. New York Trust Co.

(d) Hybrid Securities

• John Kelley Co. v. CIR

• Jordan Co. v. Allen

(e) The Trust Indenture

• Aladdin Hotel Co. v. Bloom

Chapter XII. CONSIDERATION FOR ISSUANCE OF SHARES

(1) Form of Consideration

(2) Liability on Watered Stocks

• Triplex Shoe Co. V. Rice & Hutchins, Inc.

• McCarty v. Langdeau
• Rhode v. Dock-hop Co.
• Bing Crosby Minute Maid Corp. V. Eaton

(3) How Payment of Shares Enforced

(a) Delinquency sale; requisites

(b) Court Action

• Velasco v. Poizat
• Lingayen Gulf Electric v. Baltazar
• Miranda v. Tarlac Rice Mill Co.
• Da Silva v. Aboitiz
• National Exchange v. Dexter
• Lumanlan v. Cura

(4) Effect of Delinquency

(5) Rights and Obligations of Holders of Unpaid but Non-delinquent Stock

• Fua Cun v. Summers

 • Baltazar v. Lingayen Gulf Electric Power
• Nava v. Peers Marketing

(6) Issuance of Certificate

(7) Lost or Destroyed Certificate

Chapter XIII. DIVIDENDS AND PURCHASE BY CORPORATION OF ITS OWN SHARES

(1) Form of Dividends

• Nielson & Co. v. Lepanto Consolidated Mining Co.

(2) Source of Dividends

• Berks Broadcasting Co. v. Crammer

• Lich v. United States Rubber

(3) Dividend Declaration discretionary with Board

* Keough v. St. Paul Milk Co.

* Dodge v. Ford Motor Co.

(4) Preference as to Dividends

* Wabash Railway Co. V. Barclay

* Burk v. Ottawa Gas & Electric Co.

(5) When Right to Dividends Vests; Rights of Transferee

* McClaran v. Crescent Planning Mill

(6) Liability for Illegal Dividends

(7) Purchase by Corporation of its own shares

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**** May 19 Assignment:

Chapter XIV. AMENDMENTS OF CHARTER

(1) Amendment by Legislature

(2) Amendment by Stockholders

(a) Limitations on power

(b) Grounds for rejection of amendment

(c) Amendment changing stockholder’s rights

* Marcus v. RH Macy
 (d) Effectivity of amendment

(e) Special amendments

(1) Increase of capital stock

(2) Decrease of capital stock

* Philippine Trust Co. V. Rivera

(3) Change in corporate term

(f) Amendments in close corporations

Chapter XV. TRANSFER OF SHARES

(1) Manner and Effectivity of Transfer

a) Indorsement of stock certificate; registration in corporate books

b) Effect of lack of registration

• Uson v. Diosomito

c) No registration of transfer of unpaid shares

d) Remedy if registration refused

• Rivera v. Florendo

(2) Restrictions on Transfer; Close Corporations

a) General rule: free transferability of shares

b) Exceptions: in close corporations

c) Intrinsic validity of various kinds of restrictions

1) Consent restriction

2) Option restriction

3) Prescribing qualifications of stockholders

4) Redeemable common stock

(d) Formal validity of restrictions

(3) Unauthorized Transfers

(a) Certificate indorsed in blank; when quasi-negotiable

 (b) Forged transfers

• Santamaria v. Hongkong & Shanghai Banking

• De los Santos v. McGrath, Atty. General

(4) Collateral Transfers

• Chua Guan v. Samahang Magsasaka

(5) Non-transferability and termination of membership in non-stock corporations

Chapter XVI. DISSOLUTION

(1) Cause of Dissolution

a) Expiration of original, extended or shortened term

b) Voluntary dissolution when no creditors affected

c) Voluntary dissolution when creditors affected

d) Dissolution by minority in close corporations

• Financing Corporation v. Teodoro

e) Failure to organize and commence business; cessation of business for 5

years

f) Involuntary dissolution

1) Revocation of certificate of registration by SEC

2) Quo Warranto proceedings

• Republic v. Bisaya Land Trans. Co.

(2) Effects of Dissolution; Winding up and liquidation

(a) Loss of juridical personality

* National Abaca Corp. v. Pore

(b) Executory contracts

(c) Methods of liquidation

(d) Distribution of assets after payment of debts

• China Banking Corp. v. Michelin & Co.

• Republic v. Marsman Development
• Tan Chiong Bio v. CIR

(3) Distribution of Assets of Non-stock corporations

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***May 26 Assignment:

Chapter XVII. CORPORATE COMBINATIONS

(1) Purposes of Combinations; Methods

(2) Merger and Consolidation

(a) Nature and distinction

(b) Only de facto merger under Corporation Law

(c) Express authority to merge granted by code; requirements

(d) Remedies of creditors and dissenting stockholders; appraisal right

(3) Sale of substantially all assets

(a) Legal requirements

(b) No assumption of liabilities; exceptions

(c) Remedies of dissenting stockholders; appraisal right

(d) Compared with merger and consolidation

• Reyes v. Blouse
• Edward J. Nell Co. v. Pacific Farms

Chapter XVIII. FOREIGN CORPORATIONS

(1) Definition, Status

(2) Methods of Entry of Investment

(3) Permitted Areas of Investment

(a) Partially nationalized areas

(b) Preferred areas; incentives for investment therein

(c) Non-preferred areas of investment

(4) Legal Requirements Prior to Transaction of Business

(a) BOI certificate

(b) SEC license to do business

(c) Certificate from appropriate government agency

(5) Effects of Failure to Secure SEC license

 • Marshall Wells v. Elser
• Atlantic Mutual v. Cebu Stevedoring
• General Garments Corp. v. Director of Patents
• Le Chemise Lacoste v. Fernandez
• Home Insurance v. Eastern Shipping

(6) What Constitutes Transacting Business

• Mentholatum v. Mangaliman
• Facilities Management Corp. v. de la Osa
• Merryl Lynch Futures v. CA
• Pacific Vegetable Oil v. Singson
• Aetna Casualty & Surety Co. v. Pacific Star Line
• Topweld Manuel v. ECED
• Antam Consolidated v. CA

(7) How Courts Acquire Jurisdiction over Foreign Corporations

• General Corp. of the Phils. v. Union Insurance

(8) Laws Governing Licensed Foreign Corporations

(9) Merger of Licensed Foreign Corporation

(10) Withdrawal of Foreign Corporation

(11) Revocation and Suspension of License

(12) Existing Licensed Foreign Corporations

Chapter XIX. SPECIAL AND MISCELLANEOUS PROVISIONS

(1) Educational corporations

(a) Stock or non-stock

(b) Temporary permit

(c) Government recognition

(d) Special requirement to be University

(e) Incorporation under the Code

(f) Educational foundations

(2) Religious corporations

(a) Corporation sole

(b) Religious societies

 (3) Close Corporations

(4) Miscellaneous Provisions

SECURITIES REGULATION CODE (RR..AA.. NO.. 8799) -> Provisions included in

the 2018 Bar Mercantile Law Exam

A.. State Policy,, Purpose

B.. Definition of Securities

C.. Kinds of Securities

1.. Exempt Securities

2.. Exempt Transactions

3.. No n Exempt

D.. Procedure for Registration of Securities

E.. Prohibitions on Fraud,, Manipulation and Insider Trading

1.. Manipulation of Security Prices

2.. Fraudulent Transactions

3.. Insider Trading

F.. Protection of Investors

1.. Tender Offer Rule

2.. Rules on Proxy Solicitation

3.. Disclosu re Rule

G.. Civil Liability