SEC.

57
Voting rights of treasury shares

TREASURY SHARES SHALL HAVE NO VOTING RIGHT AS

LONG AS SUCH SHARES REMAIN IN THE TREASURY.
 SEC. 58
proxies
Stockholders and members may vote in person or by proxy in all
meetings of stockholders or members. Proxies shall in writing, signed
by the stockholder or member and filed before the scheduled meeting
with the corporate secretary. Unless otherwise provided in the proxy,
it shall be valid only for the meeting for which it is intended. No
proxy shall be valid and effective for a period longer than five (5)
years at any one time. (n)
proxies
Definition:
A Proxy, as the term is used, designates the formal
written authority given by the owner or holder of the
stock, who has a right to vote it, or by a member, as
principal, to another person, as agent, to exercise the
voting rights of the former.
 Right to vote
Members in Trustees under
Joint ownership
non-stock voting trust
of stock
corporation agreement

LIMITATIONS ON PROXIES:
1. Proxies must be in writing signed by the stockholder or member and filed
before the scheduled meeting with the corporate secretary;
2. Unless otherwise provided in the proxy, it is valid only for the meeting for which
it is intended.
3. A continuing proxy must be for a period not exceeding five (5) years at any
one time, otherwise, it shall not be valid and effective after such period.
Revocation of proxy
Proxies are revocable at any time unless made by notifying the proxy-
holder of the same, or by signing a new proxy in favor of another, or by
attending the meeting and voting oneself.
 SEC. 59 – VOTING TRUST
One or more stockholders of a stock corporation may create a voting trust for the
purpose of conferring upon a trustee or trustees the right to vote and other rights
pertaining to the shares for a period not exceeding five (5) years at any one time:
Provided, That in the case of a voting trust specifically required as a condition in a
loan agreement, exceeding five (5) years but shall automatically expire upon full
payment of the loan. A voting trust agreement must be in writing and notarized, and
shall specify the terms and conditions thereof. A certified copy of such agreement
shall be filed with the corporation and with the Securities and Exchange Commission;
otherwise, said agreement is ineffective and unenforceable. The certificate or
certificates of stock covered by the voting trust agreement shall be canceled and new
ones shall be issued in the name of the trustee or trustees stating that they are issued
pursuant to said agreement. In the books of the corporation, it shall be noted that the
transfer in the name of the trustee or trustees is made to pursuant to said voting trust
agreement.
The trustee or trustees shall execute and deliver to the transferors voting trust
certificates, which shall be transferable in the same manner and with the same effect
as certificates of stock.
The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner as any other
corporate book or record: Provided, That both the transferor and the trustee or
trustees may exercise the right of inspection of all corporate books and records in
accordance with the provisions of this Code.
Any other stockholder may transfer his shares to the same trustee or trustees
upon the terms and conditions stated in the voting trusts agreement, and thereupon
shall be bound by all the provisions of said agreement.
No voting trust agreement shall be entered into for the purpose of circumventing
the law against monopolies and illegal combinations in restraint of trade or used for
purposes of fraud.
Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period, and the voting trust certificates
as well as the certificates of stock in the name of the trustee or trustees shall thereby
be deemed canceled and new certificates of stock shall be reissued in the name of
the transferor.
The voting trustee or trustees may vote by proxy unless the agreement provide
otherwise.

Voting Trust Agreement – It may be defined as an agreement in

writing whereby one (1) or more stockholders of a stock corporation transfer his or their
shares to any person/s or to a corporation having authority to act as trustee for the
purpose of vesting in such person/s or corporation as the trustee/s voting or other rights
pertaining to the shares for a certain period not exceeding that fixed by the Code and
upon the terms and conditions stated in the agreement.
Powers or rights of voting trustees
• Right to vote and other rights pertaining to the shares so transferred and registered
in his or their names subject to terms and conditions of and for the period specified in
the agreement.
• They may vote in person or by proxy unless the agreement provides otherwise
• They may exercise, like the transferor, the rights of inspection of all corporate books
and records
• The trustee is the legal title holder or owner of the shares so transferred under the
agreement. He is, therefore, qualified to be a director.

Limitations on voting trust agreement

(1) No voting trust agreement shall be entered into:
 (a) Period exceeding 5 years at any one time except in the case of a
voting trust specifically requiring a longer period as a condition in
a loan agreement
(b) Purpose of circumventing the law against monopolies and illegal
combinations in restraint of trade
(2) The agreement must not be used for purposes of fraud
(3) The agreement must be in writing and notarized, and specify the terms and
conditions thereof;
(4) Certified copy of said agreement must be submitted in the SEC
(5) Agreement shall be subject to examination by any stockholder of the corporation
(6) Unless expressly renewed, all rights granted in the agreement shall automatically
expire at the end of the period
PROXY AND VOTING TRUST DISTINGUISHED
PROXY TRUSTEE
Has no legal title to the shares of the Acquires legal title to the shares of
stockholder transferring stockholder
Irrevocable at any time If validly executed, is irrevocable
Can only act at specified stockholders’ or Not limited to any particular meeting
members’ meeting

Votes only in the absence of the owner of Can vote and exercise all rights of the
the stock transferring stockholder even when the latter
is present
Need not be notarized nor file a copy to Must be notarized and file a copy to SEC
SEC
Do not have a right of inspection of have a right of inspection of corporate
corporate books books
 SEC. 60
Subscription contract
ANY CONTRACT FOR THE ACQUISITION OF UNISSUED STOCK IN AN EXISTING CORPORATION
OR A CORPORATION STILL TO BE FORMED SHALL BE DEEMED A SUBSCRIPTION WITHIN THE
MEANING OF THIS TITLE, NOTWITHSTANDING THE FACT THAT THE PARTIES REFER TO IT AS A
PURCHASED OR SOME OTHER CONTRACT.
HOW PARTICIPATION IN A CORPORATION ACQUIRED.
1. STOCK CORPORATION

A. BY SUBSCRIPTION CONTRACT WITH AN EXISTING CORPORATION FOR THE ACQUISITION OF

UNISSUED SHARES

B. PURCHASED OF TREASURY SHARES

C. TRANSFER FROM A PREVIOUS STOCKHOLDER OF THE OUTSTANDING SHARES OR EXISTING

SUBSCRIPTION TO SHARES.

TRUST FUND DOCTRINE

 SEC 61
PRE-INCORPORATION SUBSCRIPTION
A SUBSCRIPTION FOR SHARES OF STOCK OF A CORPORATION STILL TO BE FORMED FOR
SHARES OF STOCK OF A CORPORATION STILL TO BE FORMED SHALL BE IRREVOCABLE
FOR A PERIOD OF AT LEAST SIX (6) MONTHS FROM THE DATE OF SUBSCRIPTION UNLESS
ALL OF THE OTHER SUBSCRIBERS CONSENT TO THE REVOCATION OR UNLESS THE
INCORPORATION OF SAID CORPORATION FAILS TO MATERIALIZE WITHIN SAID PERIOD
OR WITHIN A LONGER PERIOD AS MAY BE STIPULATED IN THE CONTRACT OF
SUBSCRIPTION: PROVIDED, THAT NO PRE-INCORPORATION SUBSCRIPTION MAY BE
REVOKED AFTER THE SUBMISSION OF THE ARTICLES OF INCORPORATION TO THE
SECURITIES AND EXCHANGE COMMISION.
• PRE-INCORPORATION SUBSCRIPTION MANDATORY.

• REVOCABILITY OF PRE-INCORPORATION SUBSCRIPTION

1. CONDITIONS FOR REVOCATION

2. WHEN IRREVOCABLE

3. REASON FOR IRREVOCABILITY

• EFFECT OF FILING OF ARTICLES OF INCORPORATION

 SEC. 62.
CONSIDERING FOR STOCKS
STOCKS SHALL NOT BE ISSUED FOR A CONSIDERATION LESS THAN THE PAR OR
ISSUED PRICE THEREOF. CONSIDERATION FOR THE ISSUANCE OF STOCK MAY BE
ANY OR A COMBINATION OF ANY TWO OR MORE OF THE FOLLOWING:

1. ACTUAL CASH PAID TO THE CORPORATION;

2. PROPERTY, TANGIBLE OR INTANGIBLE, ACTUALLY RECEIVED BY THE CORPORATION

AND NECESSARY OR CONVENIENT FOR ITS USE AND LAWFUL PURPOSES AT A FAIR
VALUATION EQUAL TO THE PAR OR ISSUED VALUE OF THE STOCK ISSUED
3. Labor performed for or services actually rendered to the corporation;

4. Previously incurred indebtedness of the corporation;

5. Amounts transferred from unrestricted retained earnings to stated

capital; and

6. Outstanding shares exchanged for stocks in the event of

reclassification or conversion.
Where the consideration is other than actual cash, or consists of intangible property
such as patents of copyrights, the valuation thereof shall initially be determined by the
incorporators or the board of directors, subject to approval by the Securities and
Exchange Commission.

Shares of stock shall not be issued in exchange for promissory notes or future service.

The same considerations provided for in this section, insofar as they may be
applicable, may be used for the issuance of bonds by the corporation.

The issued price of no-par value shares may be fixed in the articles of incorporation
or by the board of directors pursuant to authority conferred upon it by the articles of
incorporation or the by-laws, or in the absence thereof, by the stockholders
representing at least a majority of the outstanding capital stock at a meeting duly
called for the purpose. (5 and 16)
Sources of Corporate
capital
1. Funds furnished by shareholders
2. Barrowings
3. Profit and Stock dividends
Different modes which
shares may be issued
1. Subscription
2. Sale if treasury stock
3. Subscription to new stocks
4. making stock dividend

Consideration for issue of

stocks
limitations:
1. Consideration other than cash.
2. Fixing of issued price of no par shares.
 Sec. 63.
Certificate of stock and transfer of shares.
The capital stock of stock corporations shall be divided into shares for which
certificates signed by the president or vice president, countersigned by the secretary or
assistant secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock so issued are personal property and may
be transferred by delivery of the certificate or certificates endorsed by the owner or his
attorney-in-fact or other person legally authorized to make the transfer. No transfer,
however, shall be valid, except as between the parties, until the transfer is recorded in
the books of the corporation showing the names of the parties to the transaction, the
date of the transfer, the number of the certificate or certificates and the number of
shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation. (35)
 Meaning and nature of a certificate of stock

1. A certificate of stock is a written instrument

2. Indicate the name of the holder, the number, kind and class of shares
represented and the date of issuance
3. Certificate is not stock
4. It express the contract between the corporation and the stock holder

Right to issuance of certificate of stock

• Certificate of stock must be signed by the president or vice president of

the corporation countersigned by the corporate secretary and sealed with
the sealed of the corporation
• Only stock corporation can issue stock certificates
 Effect of over issuance of shares
• Corporation cannot issue shares in excess of the maximum authorized in its
articles of incorporation for they do not exist

1. Over issued stock is absolutely void

2. Corporation may be held liable in damages or for restitution

Right to transfer full paid shares of stock

Restriction on transfer of stock

 Modes of stock transfer

1. Indorsement and delivery of stock certificate

2. Transfer made in a separate instrument
3. Judicial or extra judicial settlement of the estate

Validity of stock transfer

1. As between the parties

2. In order to be valid as against third person
Only absolute transfers need to be
registered

Reason for requiring registration of stock

transfer

Effects of an unregistered transfer of

shares

Non- transferability of unpaid stock

SEC. 64. ISSUANCE OF
STOCK CERTIFICATE
NO CERTIFICATE OF STOCK SHALL BE ISSUED TO A
SUBSCRIBER UNTIL THE FULL AMOUNT OF HIS
SUBSCRIPTION TOGETHER WITH INTEREST AND
EXPENSES (IN CASE OF DELINQUENT SHARES) IF
ANY IS DUE, HAS BEEN PAID.
 FULL PAYMENT OF SUBSCRIPTION
REQUIRED FOR ISSUANCE OF
CERTIFICATE OF STOCK
SECTION 64 PROHIBITS THE ISSUANCE OF
CERTIFICATE OF STOCK TO A SUBSCRIBER
WHO HAS NOT PAID “THE FULL AMOUNT OF
HIS SUBSCRIPTION TOGETHER WITH
INTEREST AND EXPENSES” IN CASE OF
DELINQUENT SHARES IF ANY IS DUE”.
 IN CASE OF PARTIAL PAYMENTS ON A
SUBSCRIPTION, SAID BY PAYMENTS
SHOULD BE DEEMED PRO-RATED AMONG
ALL THE SHARES SUBSCRIBED AND
THEREFORE, NO CERTIFICATE OF STOCK
CAN BE ISSUED SHOWING ANY OF THE
SHARES TO FULLY PAID UP. BUT UNLESS
PROHIBITED BY ITS BY-LAWS,
LIABILITY OF STOCKHOLDERS ON UNPAID
SUBSCRIPTION TO CORPORATE
CREDITORS
1. PERSONS DEALING WITH CORPORATIONS ARE PRESUMED TO KNOW THAT
THEY CAN HAVE RECOURSE ONLY TO THE PROPERTY OF THE CORPORATION
AND THAT IF THE CORPORATION IS UNABLE TO MEET ITS OBLIGATIONS, ITS
SHAREHOLDERS CANNOT BE COMPELLED TO MAKE GOOD THE DEFICIENCY.

2. SUBSCRIBERS WHO HAVE NOT PAID IN FULL, UNLESS THEY HAVE VALIDLY
RELEASED FROM THEIR UNDERTAKING, ARE THE DEBTORS OF THE
CORPORATION FOR THE BALANCE, AND ID HE CORPORATION DOES NOT
ENFORCE THE LIABILITY, ITS CREDITORS MAY DO SO.
3. AN UNPAID SUBSCRIPTION IS AN ASSET TO WHICH CORPORATE
CREDITORS MAY LOOK FOR PAYMENT AND THEY ARE ENTITLED
TO INSIST THAT IT BE COLLECTED. HENCE, A STOCK
CORPORATION HAS NO POWER TO RELEASE AN ORIGINAL
SUBSCRIBER FROM PAYING FOE HIS SHARES WITHOUT
VALUABLE CONSIDERATION FOR SUCH RELEASE OR WITHOUT
THE UNANIMOUS CONSENT OF THE STOCKHOLDERS. THE
SUBSCRIBER IS AS MUCH BOUND PAY HIS SUBSCRIPTION AS HE
WOULD BE TO PAY ANY OTHER DEBT.
ACTION BY STOCKHOLDERS
OR MEMBERS
1. WRONG OR INJURY DONE DIRECTLY AGAINST THE CORPORATION-
CORPORATION REPRESENT THEIR STOCKHOLDERS (MEMBERS) IN ALL MATTERS
WITHIN THE SCOPE OF THEIR CORPORATE POWERS. THIS IS TRUE RESPECTING
LITIGATIONS AS WELL AS IN OTHER MATTERS. AS A RESULT OF THE SEPARATE
IDENTITIES OF THE CORPORATION AND ITS STOCKHOLDERS, IT FOLLOWS THAT
ANY WRONG AND INJURY DONE DIRECTLY AGAINST THE CORPORATION GIVE
RISE TO A CAUSE OF ACTION IN THE PART OF THE CORPORATION THROUGH THE
BOARD OF DIRECTORS (OR TRUSTEES) AND NOT PRIMARILY OF AN INDIVIDUAL
STOCKHOLDER.
2. LACK OF ACTION ON THE PART OF OFFICIALS OF
CORPORATION- BUT, WHENEVER THE OFFICIALS OF A
CORPORATION REFUSE, OR FAIL TO BRING SUIT TO REDRESS
THE WRONG, SUCH AS WHEN THEY ARE THE ONES TO BE
SUED, A STOCKHOLDER MAY MAINTAIN A DERITATIVE SUIT TO
ENFORCE THE CORPORATE RIGHT OF ACTION IN BEHALF OF
HIMSELF, THE OTHER STOCKHOLDERS, AND FOR THE BENEFIT
OF THE CORPORATION. AND THE FACT THAT NO OTHER
STOCKHOLDER HAS MADE COMMON CAUSE WITH THE
SUING STOCKHOLDER IS IRRELEVANT BECAUSE THE
SMALLNESS OF HIS STOCKHOLDING IS NO GROUND FOR
DENYING RELIEF.
 RIGHTS OF STOCKHOLDERS IN
GENERAL
1. RIGHT TO ATTEND AND VOTE IN PERSON OR BY PROXY AT STOCKHOLDERS’
MEETINGS
2. RIGHT TO ELECT AND REMOVE DIRECTORS
3. RIGHT TO APPROVE CERTAIN CORPORATE ACTS
4. RIGHT TO ADOPT AND AMEND OR REPEAL THE BY-LAWS OR ADOPT NEW BY-
LAWS
5. RIGHT TO COMPEL THE CALLING OF MEETINGS OF STOCKHOLDERS WHEN
FOR ANY CAUSE THERE IS NO PERSON AUTHORIZED TO CALL A MEETING
6. RIGHT TO ISSUANCE OF CERTIFICATE OF STOCK OR OTHER
EVIDENCE OF STOCK OWNERSHIP AND BE REGISTERED AS
SHAREHOLDER
7. RIGHT TO RECEIVE DIVIDENDS WHEN DECLARED
8. RIGHT TO PARTICIPATE IN THE DISTRIBUTION OF CORPORATE ASSETS
UPON DISSOLUTION
9. RIGHT TO TRANSFER OF STOCK ON THE CORPORATE BOOKS
10. RIGHT TO PRE-EMPTION IN THE ISSUE OF SHARES
11. RIGHT TO INSPECT CORPORATE BOOKS AND RECORDS AND TO
RECEIVE FINANCIAL REPORT OF THE CORPORATION’S OPERATIONS
12. RIGHT TO BE FURNISHED THE MOST RECENT FINANCIAL
STATEMENT UPON REQUEST AND TO RECEIVE A FINANCIAL REPORT
OF THE CORPORATION’S OPERATIONS
13. RIGHT TO BRING INDIVIDUAL AND REPRESENTATIVE OR
DERIVATIVE SUITS
14. RIGHT TO RECOVER STOCK UNLAWFULLY SOLD FOR
DELINQUENCY
15. RIGHT TO ENTER INTO A VOTING TRUST AGREEMENT
16. RIGHT TO DEMAND PAYMENT OF THE VALUE OF HIS SHARES
AND WITHDRAW FROM THE CORPORATION IN CERTAIN CASES
17. RIGHT TO HAVE THE CORPORATION VOLUNTARILY DISSOLVED
 DERIVATIVE SUIT
A DERIVATIVE SUIT IS THUS DEFINED AS ONE BROUGHT
BY ONE OR MORE STOCKHOLDERS OR MEMBERS IN THE
NAME AND ON BEHALF OF THE CORPORATION TO REDRESS
WRONGS COMMITTED AGAINST IT OR TO PROTECT OR
VINDICATE CORPORATE RIGHTS, WHENEVER THE OFFICIALS
OF THE CORPORATION REFUSE TO SUE, OR ARE THE ONES O
BE SUED OR HOLD CONTROL OF THE CORPORATION.
 INDIVIDUAL SUIT
STOCKHOLDER’S INDIVIDUAL SUIT IS AN ACTION BROUGHT
BY A STOCKHOLDER AGAINST THE CORPORATION FOR
DIRECT VIOLATION OF HIS CONTRACTUAL RIGHTS A SUCH
INDIVIDUAL STOCKHOLDER, SUCH AS THE RIGHT TO VOTE,
THE RIGHT TO SHARE IN THE DECLARED DIVIDENDS, THE
RIGHT TO INSPECT CORPORATE BOOKS AND RECORDS, AND
SIMILAR OTHER EXAMPLES. ANY RECOVERY BY THE
STOCKHOLDER BELONGS TO HIM.
 REPRESENTATIVE SUIT
A GROUP OF STOCKHOLDERS MAY BRING DIRECT SUITS
AGAINST A CORPORATION IN THE FORM OF A
REPRESENTATIVE SUIT OR CLASS ACTION. WHEN A WRONG
IS COMMITTED AGAINST A GROUP OF STOCKHOLDERS, A
STOCKHOLDER MAY BRING A SUIT IN BEHALF OF HIMSELF
AND ALL OTHER STOCKHOLDER MAY BRING WHO ARE
SIMILARLY SITUATED. THIS IS CALLED A SHAREHOLDER
REPRESENTATIVE SUIT WHICH IS KIND OF CLASS SUIT.
LIABILITIES OF STOCKHOLDER
1. LIABILITY TO THE CORPORATION FOR UNPAID SUBSCRIPTION
2. LIABILITY TO THE CORPORATION FOR INTEREST ON UNPAID
SUBSCRIPTION;
3. LIABILITY TO CREDITORS OF THE CORPORATION ON UNPAID
SUBSCRIPTION;
4. LIABILITY FOR WATERED STOCK;
5. LIABILITY FOR DIVIDENDS UNLAWFULLY PAID; AND
6. LIABILITY FOR FAILURE TO CREATE CORPORATION