REVISED CORPORATION CODE services; thus the issuance pf such stocks is
REPUBLIC ACT NO. 11232 prohibited.
PART 3. FINAL CONSIDERATIONS
CERTIFICATE OF STOCK
It is a written evidence of the shares of stock but it
is not the share itself.
HOW ARE SHARES OF STOCK TRANSFERRED?
 If represented by a certificate, the following
must be strictly complied with: (1) delivery of
the certificate, (2) indorsement by the owner or
his agent, and (3) recorded in the books of the
corporation;
 If not represented by a certificate: (1) by means
of a deed of assignment, and (2) such fact is
duly recorded in the books of the corporation.
BASIC RIGHTS OF SHAREHOLDERS
• Direct or indirect participation in management; •
Voting rights;
• Right to remove directors;
• Proprietary rights;
• Right to inspect books and records;
 Right to be furnished with the most recent
financial statement or financial report;
 Right to recover stocks unlawfully sold for
delinquent payment of subscription;
 Right to the issuance of new certificates in lieu
of lost, stolen or destroyed
certificate; and
 Right to file individual suit, representative suit,
and derivative suit.
OBLIGATIONS OF A STOCKHOLDER
 Liability to the corporation for unpaid
subscription;
 Liability to the corporation for interest on
unpaid subscription if so required by the By-
Laws;
 Liability to the creditors of the corporation for
unpaid subscription subject to the Limited
Liability Rule;
• Liability for watered stock. Watered stocks are
those issued not in exchange for its equivalent
either in cash, property, share, stock dividends, or
SUITS BY STOCKHOLDERS/MEMBERS
• DERIVATIVE ACTIONS. Those brought by one or
more stockholder(s) / member(s) in the name and
on behalf of the corporation to redress wrongs
committed against it, or protect/vindicate
corporate rights whenever the officials of the
corporation refuse to sue, or are the ones to be
sued, or have control of the corporation.
 INDIVIDUAL ACTIONS. Those brought by the
shareholder in his own name against the
corporation when a wrong is directly inflicted
against him.
 REPRESENTATIVE ACTIONS. Those brought by
the stockholder in behalf of himself and all
other stockholders similarly situated when a
wrong is committed against a group of
stockholders.
PRE-EMPTIVE RIGHT
• A pre-emptive right is the shareholder’s right to
subscribe to all issues or disposition of shares of
any class in proportion to their stockholdings. The
purpose of the pre-emptive right is to enable the
shareholder to retain his proportionate control in
the corporation and to retain his equity in the
surplus.
RIGHT TO ATTEND AND VOTE AT MEETINGS
• A stockholder is given the right to participate in
the corporate affairs by giving him the right to
attend meetings upon due notice and the right to
vote thereat in person, or through a proxy or
trustee, or when so authorized in the By-Laws or by
a majority of the Board, through remote
communication or in absentia.
LIMITATIONS ON RIGHT TO VOTE
 Where the Articles of Incorporation provides
for classification of shares, non- voting shares
are not entitled to vote except as provided by
law.
 Preferred or redeemable shares may be
deprived of the right to vote unless otherwise
provided in the Code;
 Fractional shares of stock cannot be voted
unless they constitute at least one full share;
 Treasury shares have no voting rights as long as
they remain in the treasury;
• Delinquent stocks shall not be entitled to vote or
be represented at any stockholder’s meeting;
• A stockholder is still entitled to vote even if
his/her shares are mortgaged or pledged.
APPRAISAL RIGHT
• Right of dissenting stockholders to withdraw from
the corporation and demand payment of the fair
value of his/her shares, which right is exercised
after dissenting from or voting against proposed
corporate acts involving fundamental changes in
the corporate structure.
WHEN TO EXERCISE APPRAISAL RIGHT
 In case of change in corporate term;
 In case an amendment to the articles of
incorporation has the effect of: (1) changing or
restricting the rights of any stockholder or class
of shares, or (2) authorizing preferences in any
respect superior to those of outstanding shares
of any class;
 In case of sale, lease, exchange, transfer,
mortgage, pledge, or other disposition of all or
substantially all of the corporate property and
assets;
• In case of merger or consolidation; and
• In case of investment of corporate funds for any
purpose other than the primary purpose of the
corporation.
RULES FOR THE EXERCISE OF APPRAISAL RIGHT
 The stockholder must be a dissenting
stockholder;
 The stockholder must make a written demand
on the corporation within 30 days after the
vote was taken;
 The proposed action is any one of the instances
enumerated in the preceding slides;
 The fair value of the shares shall be agreed
upon;
 The dissenting stockholder shall submit his
certificate of stocks within 10 days from
demanding payment for notation.
RIGHT OF APPRAISAL IS LOST WHEN
 The shareholder withdraws the demand with
the corporation’s consent;
 The proposed action is abandoned or rescinded
by the corporation;
 The SEC disapproves of the action;
 The dissenting stockholder fails to make a
demand within the 30-day period;
 There is transfer of the shares by the dissenting
stockholder;
 The dissenting stockholder fails to submit his or
her stock certificates within 10 days from
demand of payment.
RIGHT OF STOCKHOLDERS TO INSPECT AND
REPRODUCE BOOKS
• Corporate records, regardless of the form in
which they are stored, shall be open to inspection
by any director, trustee, stockholder or member in
person or by a representative and a written
demand may be made by said person to secure
copies of or excerpts from the records.
CONDITIONS TO INSPECT AND REPRODUCE BOOKS
 The right must be exercised at reasonable
hours on business days;
 The person requesting has not improperly used
any information he or she
secured through any previous examination;
 Demand is made in good faith or for a
legitimate purpose;
 The inspecting or reproducing party must
respect and is bound by confidentiality rules
under prevailing laws;
MERGER VS. CONSOLIDATION
 MERGER is when one corporation absorbs
another one or more corporations into a single
corporation.
 CONSOLIDATION is one where a new committing, aiding or concealing certain
corporation is created, and the existence of all criminal actions.
the constituent corporations shall cease. REVOCATION OF CERTIFICATE OF INCORPORATION
 The approval of SEC is required through  Refusal or obstruction, without justifiable
issuance of a certificate approving the articles cause, of the SEC’s exercise of its visitorial
and plan of merger or consolidation. powers;
DISSOLUTION OF CORPORATIONS  Failure to comply with SEC’s order to
• It is the extinguishment of the franchise of a immediately cease and desist from using
corporation and the termination of its corporate corporate name or remove visible signages of
existence. such corporate name;
MODES OF DISSOLUTION  Non-filing of By-Laws.
• Voluntary dissolution where no creditor is CONVERSION
affected; • Voluntary dissolution where creditors • A stock corporation may be converted into a
are affected; • Involuntary dissolution; stock non-corporation by mere amendment
• Shortening of term; provided all the requirements are complied with.
• Expiration of term; Its rights and liabilities will remain
• Revocation of the certificate of incorporation by • A non-stock corporation can be converted into a
SEC; stock corporation only if the members dissolve it
(Note: Sale of all the assets does not necessarily first and then organize as a stock corporation.
dissolve the corporation.) However, there is a resulting new corporation.
VOLUNTARY DISSOLUTION END
o Where no creditor is affected: Source:
o Majority vote of directors/trustees REVIEWER ON COMMERCIAL LAW, 2019 Edition,
o Majority vote of outstanding capital Jose R. Sundiang, Sr. and Timoteo B. Aquino
stock/members
o Verified request for dissolution with SEC
o Where creditors are affected:
o Majority vote of directors/trustees
o 2/3 vote of outstanding capital
stock/members
o Verified petition for dissolution with SEC
INVOLUNTARY DISSOLUTION
 Non-use of corporate charter;
 Continuous inoperation of a corporation;
 Upon receipt of a lawful court order dissolving
the corporation;
 Upon finding by final judgement that the
corporation procured its incorporation through
fraud;
 Upon finding by final judgement that the
corporation was created for the purpose of