Professional Documents
Culture Documents
Corpo Finals Questions
Corpo Finals Questions
Q: Enumerate three (3) specific instances when this right may be exercised?
A: 1) In case any amendment to the articles of incorporation has the effect of changing
or restricting the rights of any stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence;
2) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate property and assets as provided in this Code; and
3) In case of merger or consolidation.
4) Investment of corporate funds
EXPLAIN:
d) The statement that certificates of stock are merely quasi-negotiable and are not
negotiable instruments.
A: While it may be transferred by endorsement coupled with delivery, and therefore
merely quasi-negotiable, it is nonetheless non-negotiable in that the transferee takes it
without prejudice to all the rights and defenses which the true and lawful owner may
have except in so far as the principles governing estoppel may apply.
e) A director/stockholder whose shares are declared delinquent is not automatically
disqualified to be and act as director.
A: Section 23 of the Corporation Code requires that the director must own at least one
(1) share which shall stand in his name in the books of the corporation. Delinquency
does not deprive the director of ownership of shares.
ENUMERATE:
b) The three (3) requisites before a foreign corporation licensed to do business in the
Philippines may validly withdraw its license. (A-A-P)
A: 1) All claims which have accrued in the Philippines have been paid, compromised or
settled;
2) All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine
Government or any of its agencies or political subdivisions have been paid; and
3) The petition for withdrawal of license has been published once a week for three (3)
consecutive weeks in a newspaper of general circulation in the Philippines.
c) The three (3) methods of liquidation and their effects on the 3-year period to
liquidate the corporate affairs. (C-A-T)
A: Liquidation may be undertaken in either of three (3) ways:
i) By the corporation itself through the Board of Directors - The Board will only
have three (3) years to finish its task of liquidation. Claims for or against the corporation
not filed within the period will become unenforceable as there exist no corporate entity
against which they can be enforced.
Actions pending for or against the corporation when the three year period expires
are abated.
ii) By a trustee appointed by the corporation - The three year period limitation
will not apply provided the designation of the trustee is made within that period. A
dissolved corporation is still liable for all its debts and liabilities in an action filed
against it, even if the case is filed beyond the three year period.
iii) By appointment of a receiver - The three year period limitation will not apply
because the dissolved corporation is substituted by the receiver who may sue or be sued
even after that period.
g) Instances when the stockholder cannot avail of its voting rights. (S-T-U-N)
A: 1) Shares of stock which are declared delinquent
2) Treasury Shares have no voting rights while they remain in the treasury
3) Unregistered transfers of shares of stock
4) Non-voting shares except in those instances under Sec. 6 of the Code
h) Grounds for revocation of license (foreign corporation) (5F-M-A-T-T)
A: 1) Failure to file its annual report or pay any fees as required by the Code;
2) Failure to appoint and maintain a resident agent in the PH;
3) Failure, after change of its resident agent or of his address, to submit to the SEC a
statement of such change;
4) Failure to submit to the SEC an authenticated copy of any amendment to its articles
of incorporation or by-laws or if any articles of merger or consolidation within the time
prescribed by the Code;
5) Misrepresentation of any material matter in any application, report, affidavit, or other
document submitted;
6) Failure to pay any and all taxes, impost, assessment or penalties, if any, lawful due to
the Phil. Government or any of its agencies or political subdivisions;
7) Transacting business in the Philippines outside of the purpose for which such
corporation is authorized under its license;
8) Transacting business in the Philippines, as agent of or acting for and in behalf of any
foreign corporation or entity not duly licensed to do business in the Philippines;
9) Any other grounds as would render it unfit to transact business in the Philippines.
o) The person or persons who may call the meeting are the following: (P-A-B-O)
A: 1) The person or persons authorized under a by-law provision;
2) Absent of any provision in the by-laws, it may be called by the president;
3) By the secretary on order of the president or on written demand of the stockholders
representing or holding at least a majority of the OCS or majority of the members
entitled to vote in a non-stock corporation, or the stockholder or member making the
demand if there is or secretary on he refuses to do so, under section 28; and
4) On order of the proper forum pursuant to Section 50 of the Code.
p) The three (3) tests in order to distinguish a VTA from proxies and other voting
pools and agreements: (V-V-P)
A: 1) That the voting rights of the stock are separated from the other attributes of
ownership;
2) That the voting rights granted are intended to be irrevocable for a definite period of
time; and
3) That the principal purpose of the grant of voting rights is to acquire voting control of
the corporation.
DEFINE:
1) Wash Sale
A: Any transaction in a security which involves no change in the beneficial ownership
thereof. Thus, a series of buy and sale transaction may be placed by one and the same
beneficial owner in the Exchange which would not affect any change of ownership of
the shares transacted.
2) Matched Order
A: An order or orders for the purchase or sale of security with the knowledge that a
simultaneous order or orders of substantially the same size, time and price, for the sale
or purchase of such security has, or will be entered by or for the same or different
parties.
NOTE: Wash sale and matched orders are not by themselves illegal. To be illegal, they
must be used as a means "to create a false or misleading appearance of active trading" in
the security concerned.
3) Short Sale
A: It is selling security which the vendor does not own, unless it is done in accordance
with the rules and regulations of the SEC.
NOTE: It is illegal per se. It shall be legal, only if it is in accordance with the rules and
regulations of the SEC.
4) Insider Trading
A: The act of an "insider" to buy or sell security of the issuer while in possession of
material information with respect thereto that is not generally available to the public is
illegal unless the conditions set forth in Section 27 of the SRC are present.
5) Marking the Close
A: The placing of purchase or sale order, at or near the close of the trading period. The
person making the order would post a higher or lower price for the security just barely
before the close of the market thereby increasing or lowering the closing price. The price
of the security on the following trading day will be the same price as marked on the
close the day before.
MULTIPLE CHOICE
1. A stockholder whose shares are declared delinquent will have
a. No voting and dividend rights
b. No voting rights at any meeting
c. Voting and dividend rights
d. Voting rights but no dividend rights
4. The fair market value of the shares of a stockholder exercising his appraisal right
should be determined on the date
a. Of the meeting where he interposed his objection
b. Of receipt of his written demand that he paid the value of his shares
c. Prior to the meeting where the matter was taken up
d. Of the payment of his shares
True
2. A corporation sole may validly sell/transfer its old van for purposes of
acquiring a new one without court intervention
True
False, no par value shares once issued are deemed fully paid and
non-assessable.
True
6. Absent any rules and regulations of SEC regarding short sale, any person
engaging thereto may be subjected to the penal sanctions of section 73 of
SRC
True
False, the winning bidder is the lowest bidder from the wordings of
statute. The bidder who tenders to pay the full amount of delinquency
plus cost and expenses for the least number of shares.
10. The beneficial owner of a voting trust agreement may validly transfer his
shares by a mere notarized deed.
OBJECTIVES
1.
a. Four instances when a stockholder may be able to exercise his appraisal right
(4pts)
1.) In case of any amendment to the articles of incorporation has the effect of
changing or restricting the rights of any stockholder or class of shares or of
authorizing preferences in any respect superiors to those of outstanding
shares of any class, or of extending or shortening the term of corporate
existence.
2.) In case of sale, lease, mortgage, pledge or disposition of all or substantially all
of the corporate property and assets as provided in the code.
3.) In case of merger or consolidation
b. The twin requirement in order that the Special Commercial Court may be
justified in appointing a management committee, board or body in a
corporation (4pts)
1.) Dissipation, loss, wastage or destruction of assets or other properties and;
2.) Paralyzation of its business operations which maybe prejudicial to the interest
of the minority stockholders, parties litigant or the general public.
b. The ruling of the High Court in EB Villarosa v. Benito that service of summons
upon a corporation must be made to a person named in the statute, i.e.,
president, general manager, treasurer, corporate secretary or in-house counsel,
does not apply if the action brought against the corporation is an
intra-corporate controversy. (3pts)
In case of intra-corporate controversy, Rule 2 Section 5 of the Interim Rules of
Procedure on Intra-Corporate controversy, service of summons shall be deemed
adequate if made upon any of the statutory or corporate officers as fixed in the
by laws or their respective secretary.
c. Wash sale and matched order are not illegal per se (3pts)
d. The three (3) year period of liquidation will not apply if a trustee/assignee/
receiver is appointed to undertake the same (3pts)
The three year period of liquidation will not apply if a trustee is appointed to
undertake the same because from and after any such conveyance by the
corporation of its property in trust for benefit of stockholder, members, creditors
and others in interest which the corporation had in property terminates, the legal
interests vest in trustee and beneficial interest in stockholders, members,
creditors or other persons in interest.
3. What are the three (3) qualifying conditions required to be indicated in AOI in
order that the corporation may be considered as a close one (6pts)
1.) All the corporation’s issued stock of all classes exclusive of treasury shares, shall
be held of record by not more than specified number of persons not exceeding
(20)
2.) All the issued stock of all classes shall be subject to one or more specified
restriction on transfer permitted by this title.
3.) The corporation shall not list in any stock exchange or make any public offering
of any of its stock of any class.
CASE ANALYSIS
1. X Co., Inc., engaged in the manufacturing concern. It leased a parcel of land
where it erected its plant warehouse and offices. It has an authorized
capital stock of Php100M divided into 100M shares with a par value of
Php1.00 per share. Php50M has been subscribed. One of the stockholders
thereof is “A” who subscribed to Php5M and has paid Php2.5M out of his
subscription.
a.) May “A” be issued a stock certificate covering 2.5M shares? Why or
why not? (3pts)
Assume that the corporation has been incurring loses to the tune of
php5M and to raise much needed funds to pay its liabilities, the BOD
decided to make a call for the unpaid portion of the subscriptions of its
stockholders including “A” who did not pay the same on the date
specified in the call. The Corporation this decided to sell his shares at
public auction but no bidders appeared.
b.) May the corporation bid? Why or why not? (3pts)
No. The corporation may bid subject to the provisions of the corporation code.
Section 41 provides that the corporation shall have the power to acquire its own
shares provided that it has unrestricted retained earnings. In this case, the
corporation has no unrestricted retained earnings because it is incurring loses.
Assume that the corporation and “Y” entered into a contract of sale in
January 2016 for the latter to acquire 10M of the remaining unissued
stocks of the corporation with a stipulation that “Y” shall pay a down
payment of Php5M, the balance to be paid on or before the end of June
2016, and that until and unless he shall have paid the balance of his
acquisition cost he shall have paid the balance of his acquisition cost he
shall not be considered as a stockholder. A meeting of the acquisition of
the stockholders is called to be held in June 7, 2016 to elect a new set of
directors, at a point in time when he has not yet paid his full acquisition
cost.
c.) Is “Y” qualified to vote and be voted for as a director? Why or why
not? (3pts)
Yes. The corporation code provides that any contract for the acquisition of
unissued stock in an existing corporation or a corporation still to be formed shall
be deemed a subscription, nowithstanding the fact that the parties refer to is as a
purchase or some other contract. Thus, a person whether deemed a purchaser or
subscriber of the unissued stocks of an existing corporation or a corporation still
to be formed becomes entitled to all the rights and of stockholder and subjected
to all liabilities that attach thereunder upon execution and effectivity of the
contract, and the corporation can compel the payment of the balance of the
unpaid portion of the subscription.
e.) Assume further that the by-laws of the corporation provided for the
election of an Assistant Finance Manager to be elected by the board.
Pursuant thereto, the board elected “Z” as such. He is not a
stockholder of the corporation. Later, however, he was
removed/ousted as such Assistant Finance Manager. He files a case
before the Special Commercial Court questioning the validity of his
removal therefrom. The corporation moves for the dismissal of the
case in that it is the NLRC that is possessed with jurisdiction and
case in that it is the NLRC that there is no-intra corporate
relationship between the parties. Rule and explain (5pts)
The Special Commercial Court has exclusive and original jurisdiction to hear and
decide cases involving controversies in the election or appointment of directors,
trustees, officers or managers of such corporation as provided under Section 5 (c)
of PD902-A in this case, the officer asserts his right as such officer and questions
his removal or outster. A corporate officer’s dismissal is always a corporate act
and/ or an intracorporate controversy. ( Lozon vs. NLRC and PAL)
f.) Disregarding letter D., and assume that 3 of the 5-man member
board reconstituted the AOI falsely adding new purposes not
originally included thereat such as lumber concession, cattle ranch,
mining and agriculture, thereby misapplying and misusing
corporate funds and assets. May a stockholder file a dissolution
proceedings against the corporation? Why or why not? (3pts)
No. Dissolution of the corporation is warranted only when the acts of the
directors constitute or threaten a substantial injury to the public or such as to
amount to a violation of the fundamental conditions of its charter, or its conduct
is characterized by obduracy or pertinacity in contempt of law.
g.) If a case is instituted and you were the Judge, will you grant the
prayer for dissolution? Why or why not? (3pts)
No.
h.) Will your answer be the same if the corporation is a close one? Why
or why not? (3pts)
No my answer will not be the same if the corporation is a close one. Even mere
dishonesty, any act that maybe detrimental to any of the stockholder or
corporation itself is a ground for dissolution in a close corporation.
a.) Director committed an insider trading. An act of an insider to buy or sell security
of the issuer while in possession of material information with respect thereto that
is not generally available to the public is illegal. In this case, the director acquired
or purchased the shares of the corporation while in possession of material non
public information.
b.) Yes the printer committed the same violation. His relationship to the issuer gives
him material access to material information about the issuer or the security that
is not generally available to the public. In this case, he had access to material
information.
PART I
a. De Facto
b. De Jure
c. Corporation by Estoppel
d. It does not exist as a Corporation at all.
2. A director who was compensated and paid 15% of the net income before tax of the
corporation for the preceding year for the services rendered by him as corporate
secretary by a mere Board resolution is
a. valid id not tainted with fraud and the contract is fair and reasonable
b. valid if previously approved by the Board of Directors
c. voidable is the president holds a substantial interest in the corporation
d. voidable at the option of the corporation
5. It is common practice in X CO., INC. for the general manager to enter into contracts
for an in behalf of the corporation without prior approval of the Board of Directors.
Said contracts are
a. invalid since the power and authority is lodged to that of the Board of Directors
b. valid because approval of the Board is not required for its validity
c. invalid because the general manager is not authorized by law to enter into
contracts for and in behalf of the corporation
d. valid because similar acts were approved and allowed by the Board as a matter
of practice, custom and policy and thus binding on the corporation even without
formal Board resolution
6. Non-voting shares are not included in determining the voting requirements imposed
by the code in cases of
7. X CO., INC. declared cash dividends of P1.00 per share on January 18, 2011 to be
paid to the stockholders of record on January 31, 2011. Said declaration was duly
announced to the stockholders. On January 20, 2011, “A”, one of the stockholders
holding 100,000 shares valued at P100,000 sold his shares for the same amount to
“B”, who is not a stockholder of the same corporation, and on January 25, 2011 the
transfer in favor of “B” was duly recorded in the books of the corporation. Absent
any agreement to the contrary, as between “A” and “B” who has better right to the
dividends?
a. “A” because the transfer of his share was in violation of a by-law provision
granting existing stockholders the preferential right to buy the shares of a selling
stockholders
b. “A” because he was the owner of the shares at the time of the declaration of the
dividend
c. “B” because he was the recorded owner of the share even before payment of the
dividend
d. “B” because he was the owner of the share at the time/date of payment
8. A stock corporation shall have the power to reacquire its own shares irrespective of
the existence of unrestricted retained earnings
a. Yes, because there are only seven (7) living members of the Board and the vote of
four (4) constitutes a majority
b. No, because the vote required is majority of the Board as fixed in the Articles of
Incorporation
c. No, because the quorum requirement was not complied with
d. Yes, because the vote required is only a majority of those present at which there is
a quorum
11. X CO., INC. paid A CO., INC. 10% of the property dividend declared by the Board
of Directors of the former pursuant and in consideration of messengerial services
actually rendered by the later. Is the payment valid?
12. All persons who assume to act as a corporation knowing it without authority to do
so shall be liable
a. only to the extent of their subscription to the capital stock of the corporation
b. only to the extent of the corporate assets
c. as limited partners for all debts, liabilities and damages arising therefrom
d. as general partners for all debts, liabilities and damages arising therefrom
13. A, B, C, D and E are the 5-man member of the Board of Directors of X CO., INC. On
January 15, 2011, the remaining members of the Board of Directors consisting of A, B
and C conducted a meeting to fill up two (2) vacancies in the Board cause by the
removal of D by the stockholders and by the death of E. D was unanimously
replaced by F, and E by G. The election of F and G is
15. The Board of Directors cannot, without stockholders’ approval, pass a valid
corporate act
16. A contract between corporations with interlocking directors will be subject to the
provisions of section 32 of the Code (voidable) when
a. the interlocking director owns 20% of the outstanding capital stock in one
corporation while 18% in the other
b. the interlocking director owns 22% in one corporation while 25% in the other
c. the interlocking director owns 20% in one corporation while 22% in the other
d. the interlocking director owns 22% in both corporation
18. X CO., INC. is engaged in the realty business with no other purpose indicated in the
article of incorporation. It entered into a catering service with Y CO., INC. for the
retirement of the latter’s president for a consideration of Php150,000. X CO. fully
complied with its obligation but Y CO., later refused to pay the agreed amount
claiming that X CO., is not empowered/authorized to engage in the food catering
business. In an action brought before the Court, may Y CO., INC. be compelled to
pay?
a. No, because the actuation of X CO., INC. is beyond its corporate powers and
authority. (Doctrine of Limited Capacity)
b. Yes, because the party who has received the benefits of the contract is estopped
to set up that contract is beyond the corporate powers of X CO., to defeat an
action on the same.
c. Yes, because the contract is valid per se
d. No, because the court cannot interfere with the business judgment of the Board
of Directors
20. “A”, the President of X CO., INC. which is engaged in the realty business, bought (in
his personal and individual capacity) from his friend a parcel of land for Php5M and
later sold it at Php5.5M thereby making a profit of Php.5M. May his act be validly
ratified by the stockholders at the objection of any one single stockholder?
a. Yes, because he acted as a natural person separate and distinct of the corporation
which he is the President
b. No, because he acquired a personal interest in conflict with his duty as a director
c. No, because he serves in a fiduciary position and should not advance his selfish
motives to the damage and prejudice of the corporation
d. Yes, because he merely acquired a business opportunity rightfully belonging to
the corporation
PART II
1. What is the test in determining whether a corporation has the implied power to do a
certain act? log.rel. b/w act done direct and immediate furtherance corp biz, fairly
incident to its express powers, reasonably necessary to their exercise
2. What is the limitation imposed by law on the right of a corporation to decrease its
capital stock? Trust fund doc
5. Explain the statement that the failure of a corporation to adopt/file its by-laws
within the time frame provided for by law does not result to the automatic
dissolution of the corporation.
6. Enumerate four (4) instances when the purchaser of all or substantially all of the
corporate assets/properties may be held liable for the debts and liabilities of the
selling corporation. Apo notes
7. Enumerate the defenses available to the directors for their failure or refusal to
declare dividends.
PART III
X CO., INC. which is engaged in land transportation business has an authorized capital
stock of Php100M divided into 100M shares with a par value of Php1.00 per share. 50M
has been subscribed and 25M was duly paid up. The Board of Directors consist of 10
members as fixed in the Articles of Incorporation. The by-laws are silent as to whether
or not the company may create an Executive Committee. One of its stockholders, “A”,
recently graduated Magna Cum Laude in Business Administration from Yale University
and the Board firmly believes that he (A) will be able to help bring the company to its
highest level of competence. The company approaches you if
1. The Board of Directors may create an executive committee. If yes, why and if not,
why not, and what should be done in order that one may be created? No.sec.35
3. May the company validly engage in water transportation without amending the
articles of incorporation to include such an activity in the purpose clause? Explain.
No.entirely diff line of biz
4. May the company put up a 12 story building, occupy 3 stories for its offices and rent
out the rest to the public? Why or Why not? Yes. Power to invest other than its
primary purpose
5. If the company made Php30M surplus profits (unrestricted retained earnings) may
the Board be compelled to declare dividends even if there are no preferred
shareholders? If Yes, to what extent or how much may they be compelled to
declared? If no, why not? No.discretionary of the board. Unless. Apo notes
6. If X CO., INC. earlier entered into a contract with Z CO., which represented itself as
a corporation for the lease/rental of 5 of the buses of the former who was aware that
Z CO., INC. is not in fact registered as a corporation, and X CO., INC., fully
complied with its obligation, on a suit brought to by it (X CO., INC.) directly against
the person/s who assumed to act as such corporation, may the latter interpose that
X CO., INC. has no cause of action against them because he dealt with Z CO., INC.
as a corporation and thus admitted its legal existence as a corporate body? May
claim. Transaction with fraud. Doc. Of estoppel
7. Assuming that Z CO., INC., (as stated in no. 6) is a de facto corporation, may the
stockholder who made representation of the existence of the corporation be sued in
their personal/individual capacities? No. Defacto corp..corporate entity applies
9. In relation to item 8, may service of summons be validly served upon a director who
is neither the president, managing director, in house counsel, corporate secretary or
treasurer. Explain.provided in the by-laws.
10. If the president X CO., issues a corporate check to pay corporate liabilities and the
check bounced for insufficiency of funds, may he successfully advance the
Corporate Entity Theory to evade liability in an action filed against his person? Why
or why not? B.p.22. No.
1. A corporation sole can acquire, alienate and/or dispose of its real properties in the
same way and manner as any other ordinary corporation.
FALSE. The extent of its power to sell or mortgage real properties is however,
subject to a certain restriction not otherwise imposed in any other corporation.
That is, a proper court order must be first be secured for that purpose. Sec. 113.
2. The by-laws of a stock corporation can validly provide that meetings of the
stockholders may be held anywhere in the Philippines.
FALSE. Only in the non-stock corporation may hold their regular or special
meetings at any place even outside the place where the principal office of the
corporation is located and not in stock corporation. Sec. 93.
TRUE. p.161,436
4. It is not the lack of the requisite license but doing business without a license that bars
a foreign corporation from access to ours courts.
TRUE. p.537
FALSE. The distributor appointed must transacts business in the name or for the
account of a principal or foreign corporation in order to imply that foreign
corporation is doing business. p.570
TRUE daw. not sure.. see Sec. 11 Rule 14 of Rules of Court and Sec. 5 Rule 1 p.679
9. All religious corporations commence to exist and are vested with juridical personality
upon filing of the Articles of Incorporation with the Securities and Exchange
Commission.
FALSE. Even if the meeting be improperly held or called, provided all the
stockholders or members of the corporation are present or duly represented at the
meeting the same shall be valid. Sec. 51.
II. WHICH OF THE FOLLOWING STATEMENTS ARE CORRECT? Write down the
letters in your test booklet. (Right minus wrong)
III. OBJECTIVE:
2. Define: a) Wash Sale, b) Matched Order, and c) Short Sale. State whether they are
illegal per se or when they may become illegal. (6pts.)
1. Popeye subscribed to shares of stock and paid it. He did not however register it. On
February 14, 2000, he assigned said shares of stock to his girlfriend Olive through a duly
notarized deed. Olive asked the corporate secretary to register it but refused to do so. So
Olive filed mandamus. The corporate secretary filed a motion to dismiss contending
that there is no cause of action because there is no proper party.
The only limitation imposed by law is when the corporation holds any
unpaid claim against the shares intended to be transferred, which is absent here.
What if it was transferred to Olive through a pledge where it was provided that in case
of failure to pay Popeye was authorized to foreclose said mortgage.
b. Will mandamus lie? (Tay vs. CA)
No, mandamus will not lie. In order that a writ of mandamus may issue, it
is essential that the person petitioning for the same has a clear legal right to the
thing demanded and that it is the imperative duty of the respondent to perform
the act required. It neither confers powers nor imposes duties and is never issued
in doubtful cases. It is simply a command to exercise a power already possessed
and to perform a duty already imposed.
In the case at bar, petitioner has failed to establish a clear legal right. He
does not have any ownership rights at all by mere being ledge of the property
What if Olive stole it from Popeye and forged his signature and sold it to her other
boyfriend Brutus (in good faith and for value).
c. Who has better right/title to the shares of stock? (forged and unauthorized transfer of
stocks)
What if Olive after stealing and forging signature asked to corporation to register it in
her name? The corporation thinking that the signature was genuine cancelled the
certificate of Popeye and issued a new certificate to Olive. Olive then sold it to Brutus.
d. Who is the owner? Who has better title? (unauthorized issuance of stock)
Brutus has the better title to the shares of stock. This falls under the
unauthorized issuance of certificate of stock which refers to the act of the
corporation in issuing the certificate, either fraudulently or by mistake.
1. Non-voting shares are not entitled to vote except in those instances provided for
in the penultimate paragraph of section 6 of the Code; (It is to be observed,
however, that only preferred and redeemable shares may be deprived of the right
to vote);
2. Treasury shares have no voting rights while they remain in the treasury;
3. Shares of stock declare delinquent are not entitled to vote at any meeting; and,
4. Unregistered transferees of shares of stock.
Consideration for the issuance of stock may be any or a combination of any two or more
of the following:
Stock watering is proscribed in view of its evil effects. Among them are:
1. The corporation is deprived of its capital thereby hurting its business prospects,
financial capability and responsibility;
2. Stockholders who paid their subscription in full, or promised to pay the same,
are injured and prejudices by the reduction of their proportionate interest in the
corporation; and
3. Present and future creditors are deprived of the corporate assets for the
protection of their interest.
1. The contract of subscription provides for the date or dates when payment is due
2. When the corporation become insolvent.
1. In case any amendment to the articles of incorporation has the effect of changing
or restricting the rights of any stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding shares of any class, or
of extending or shortening the term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of
all or substantially all of the corporate property and assets as provided in the
Code; and
3. In case of merger or consolidation. Sec.81
4. Investment of funds in another corporation or business or for any purpose other
than its primary purpose.
Instances when the right of a dissenting stockholder to be paid the fair value of his
shares ceases:
1. When he withdraws his demand for payment and the corporation consent
thereto;
2. When the proposed action is abandoned or restrained by the corporation;
3. When the proposed action is disapproved by the SEC where such approval is
necessary;
4. When the SEC determines that he is not entitled to exercise his appraisal right.
5. When he fails to submit the stock certificate within 10 days from demand to the
corporation for notation that such shares are dissenting shares; and
6. If shares are transferred and the certificates subsequently cancelled. Sec. 84