Diana A.

Acosta BSA-2 AcctgEd08- A

TITLE VI
MEETINGS

Purpose of meetings: (generally)

1. For electing directors or trustees
2. For transacting some ether business calling for or requiring the action or consent
of the shareholders or members, such as the:
• amendment of the articles of incorporation and by laws,
• sale or disposition of all or substantially all corporate assets,
• consolidation and merger and the like,
• or any other business that may properly come before the meeting.
In the absence of an express charter or statutory provision to the contrary
General rule: every member of a nonstock corporation, and every legal owner of
shares in a stock corporation, has a right to be present and to vote in all corporate
meetings.
• those who are not stockholders or members have no right to vote.
• Voting may be expressed personal, or through proxies who vote in their
representative capacities.
• the right to be present and to vote in a meeting is determined by the time
in which the meeting is held.
Teleconferencing is interactive group communication (three or more people in two or
more locations) through an electronic medium. In general terms, teleconferencing can
bring people together under one roof even though they are separated by hundreds
of miles.
This type of it group communication may be used in a number of ways, and have three
basic no types:
(1) video conferencing - television-like communication augmented ad with sound;
(2) computer conferencing - printed communication through keyboard terminals, and
(3) audio-conferencing – verbal communication via the telephone with optional capacity
for telewriting or telecopying.
 SEC. 48. Kinds of meetings - Meetings of directors, trustees, stock holders or
members may be REGULAR or SPECIAL
SEC. 49. Regular and special meetings of stockholders or members
1. Regular Meetings
- Shall be held annually on a date fixed in the by-laws. If not so fixed, on any
date after April 15 of every year as determined by the board of directors or
trustees
Provided that:
- Written notice shall be sent to all stockholders or members of record of at least
21 days prior to the meeting. Unless a different period is required by the by-
laws.
2. Special meetings
- Stockholders or members shall be held at any time deemed necessary or as
provided in the bylaws:
• Provided, however, That at least one (1) week written notice shall be
sent to all stockholders or members, unless a different period is provided
in the bylaws, law or regulation.
*A stockholder or member may propose the holding of a special information on the a
meeting and items to be included in the agenda.
➢ Notice of any meeting may be waived, expressly or impliedly
➢ Whenever for any cause, there is no person authorized or the person authorized
unjustly refuses to call a meeting the Commission, upon petition of a stockholder
or member on a showing of good cause may issue an order to call for a meeting.
➢ Unless the by-laws provide a longer period the membership or stock and transfer
books shall be closed:
• Regular meeting- 20 days before the scheduled meeting
• Special meeting- 7 days before the scheduled meeting
• In case of postponement notice shall be sent 2 weeks prior to the meeting unless
a period is stated in the by-laws.

SEC. 50. Place and time of stockholders or members

1. Regular meeting:
• When: if not fixed in the by-laws, on any date after April 15 of every year
as determined by the board of directors or trustees.
• Where: In the principal office of the corporation. if not practicable, in the
city or municipality where the principal office of the corporation is
located.
2. Special meeting:
• When: At any time deemed necessary or as provided in the bylaws.
 • Where: In the principal office of the corporation. if not practicable, in the
city or municipality where the principal office of the corporation is
located.
• All proceedings and any business transacted at a meeting of the stockholders or
members, if within the powers or authority of the corporation, shall be valid even
if the meeting is improperly held or called:
- Provided, That all the stockholders or members of the corporation are present
and not one of them expressly states at the beginning of the meeting that they
object to the transaction of any business because the meeting is not lawfully
called or convened.
SEC. 51. Quorum in meetings

* Unless otherwise provided in this code or in the by-laws, a quorum shall consist
of the stockholders representing a majority of the outstanding capital stock or
a majority of the members in case of non-stock corporations.

• the majority of the members representing the actual number of voting rights,
not the number or numerical constant that may originally be specified in the articles
of incorporation, constitutes the quorum.
- Thus, quorum is based on the totality of the shares which have been
subscribed and issued, whether it be founders' shares or common shares.
• The stock and transfer book cannot be used as the sole basis for determining the
quorum as it does not reflect the totalitv of shares which have been subscribed,
more so when the articles of incorporation show a significantly larger amount of
shares issued and outstanding as compared to that listed in the stock and transfer
book.

1. Participation in Stockholders' or Members' Meetings Through Remote

Communication
• When so provided in the bylaws or by majority of the board of directors,
Stockholders may attend the meeting by remote communication.
• If a stockholder or member intends to participate in a meeting through
remote communication, he/she shall notify in advance the Presiding Officer
and the Corporate Secretary of his/her intention. The Corporate Secretary
shall note such fact in the Minutes of the meeting.
2. Quorum in Meetings
• A stockholder or member who participates through remote communication
or in absentia shall be deemed present for purposes of quorum.
3. Voting in the Election of Directors, Trustees and Officer Through Remote
Communication.
• The right to vote of stockholders or members may be exercised also through
remote communication or in absentia when authorized by a resolution of
 the majority of the board of directors; Provided, That the resolution shall
only be applicable for a particular meeting.
SEC. 52. Regular and special meeting of directors or trustees; Quorum
*Unless the articles of incorporation or the bylaws provides for a, greater majority, a
majority of the directors or trustees as stated in the articles of incorporation shall constitute
a quorum to transact corporate business, and every decision reached by at least a
majority of the directors or trustees constituting a quorum, except for the election of
officers which shall require the vote of a majority of all the members of the board, shall be
valid as a corporate act.
➢ An action of the board of directors during a meeting which was illegal for
lack of notice, may be ratified by the directors at a subsequent legal
meeting.
Quorum at a regular or special meeting of directors or trustees:
General Rule: Majority number of directors or trustees stated in the articles of
incorporation.
Exception: The by-laws require a greater majority
Valid corporate act
General Rule: Decisions by at least a majority of the directors or trustees reached a
quorum is valid as a corporate act.
Exception: The election will require all the majority vote of the members of the board.
Meeting of directors and trustees:
WHERE: May be held anywhere in or outside of the Philippines unless the laws provide
otherwise. (special or regular)
WHEN: (Regular) Shall be held monthly, unless the by-laws provide otherwise
(Special) May be held at any time upon the call of the president or as provided
in the by-laws
SEC. 53. Who shall preside at meetings

General Rule: The chairman shall preside at all meetings, In his absence the president
may preside.
Exception: unless stated in the by-laws
 SEC. 54. Right to vote of secured creditors and administrators

Stockholder grants security interest in his shares, The stockholder grantor:

• Have the right to attend and vote at meetings of stockholders, unless he
has give his creditor such right in writing which is recorded in the corporate
books.
Executors, administrators, receivers and other legal representatives duly appointed by
the court may attend and vote in behalf of the stockholders or members without need of
written proxy.
SEC. 55. Voting in case of joint ownership of stock

General Rule: The consent of all the co-owners shall be necessary

Exception:
1. there is a written proxy, signed by all the co-owners authorizing one or some of
them or any other person to vote such share or share.
2. The shares are owned in an “and/or” capacity by the holders thereof.

SEC. 56. Voting right for treasury shares

➢ Shall have no voting rights as long as such shares remain in the Treasury.
* In case of sale or reissue, treasury shares regain whatever dividends and
voting rights to which they were originally entitled.

SEC. 57. Manner of voting: Proxies

Stockholders may vote by proxy when:

➢ Authorized by the by-laws or the majority of the board of directors.
➢ May also vote in remote communication or by absentia, provided that the
vote is received prior to the tallying of votes.
*The corporation shall establish the appropriate requirements and procedures for voting
through remote communication and absentia.
Requirements for the validity of a proxy:
1. In any form of writing authorized in the by-laws
2. Must be signed by the stockholder or member
3. Filed before the scheduled meeting with the corporate secretary.
4. Unless otherwise provided in the proxy, it is valid only for the meeting for which it
is intended
5. A continuing proxy must be for a period not exceeding 5 years at any one time,
otherwise it shall not be valid and effective after such period.
* Directors or Trustees cannot attend or vote by proxy at board meetings, but not
prohibited to attend stockholders’ meetings as proxies
Purposes of proxy:
1. For convenience
2. It assures the presence of the quorum
3. It protects the interest of those who are not in the meeting
4. It secures voting control
Revocation of proxies: may be made through
1. Formal notice
2. Verbal communication
3. Conduct
SEC. 58. Voting trusts
Voting trusts: created by an agreement between a group of the stockholders of a
corporation and the trustee whereby the shares in a company of one or more
shareholders and the voting rights attached thereto are legally transferred to a trustee.
Nature of voting trust agreement:
The nature of the voting trust agreement results in the separation of the other
rights of the stockholder.
Three test of voting trust agreement: (to distinguish from proxies)
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.
.
 TITLE VI
STOCKS AND STOCKHOLDERS

* In stock corporations, shareholders may generally transfer their shares.

* Membership in and all rights arising from a nonstock corporation are personal and non-
transferable, unless the articles of incorporation or the by-laws of the corporation provide
otherwise.
1. Derivative suit- constitute a wrong to the corporation itself
2. Individual suit- constitute wrong to him personally
3. Representative suit- The wrong is done to a group of stockholders.
SEC. 59. Voting trusts

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,
even if the parties refer to it as a purchase or some other contract.
*its nature is that it is a consensual and an indivisible contract
SEC. 60. Pre-incorporation subscription

KINDS OF SUBSCRIPTION
1. Pre-incorporation subscription- A subscription for shares of stock of a
corporation still to be formed.
Rules:
• A pre-incorporation subscription is irrevocable for a period of at least 6
months from the date of subscription.
• No pre-incorporation subscription may be revoked after the submission of
the articles of incorporation to the SEC.
Exceptions:
• All of the other subscribers consent to the revocation.
• The corporation fails to incorporate within the same period or within a longer
period stipulated in the contract of subscription
2. Post-incorporation subscription- A subscription entered into after the
incorporation for the acquisition of unissued stock.
 Rule:
• A subscriber becomes a stockholder upon perfection of the subscription
contract even though he has not paid for his shares.
*As long as the shares are not considered delinquent, stockholders are entitled to all
rights granted to it whether or not subscribed capital stocks are fully paid.

SEC. 61. Consideration for stocks

Amount of consideration:
• Stocks shall not be issued for a consideration less than the par or
issued price, but the provision does not prohibit consideration above the
par or issued price.
Consideration consists of property Requisites:
1. It must be subject to a fair valuation equal to the par or issued value of the stock
issued;
2. The property is actually received by the corporation; and
3. If it consists of intangible property, the valuation thereof shall initially be
determined by the incorporators or the board of directors subiect to the
approval by the SEC.

➢ Shares of stock shall not be issued in exchange for promissory notes or

future service.

SEC. 62. Certificate of stock and transfer of shares

The capital stock of corporation shall be divided into shares in which the formal certificate
can be issued only upon compliance with certain requisites:
First, the certificates must be signed by the president er vice-president. countersigned by
the secretary or assistant secretary, and sealed with the seal of the corporation. Without
authentication it is not considered as a formal certificate of stock.
Second, delivery of the certificate is an essential element of its issuance, the stock
certificate should always be attached to the stock books.
Third, the par value, as to par value shares, or the full subscription as to no par value
shares must first be fully paid
Fourth, the original certificate must be surrendered where the person requesting the
issuance of a certificate is a transferee from a stockholder.
*No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.
➢ From the corporation’s point of view, the transfer is not effective or valid until it is
recorded. In other words the stock and transfer book is the basis for ascertaining
the persons entitled to the rights and subject to the liabilities of a999999
stockholder.
Unpaid claim- any unpaid claim arising from unpaid subscription not to any other
indebtedness.
Mode of transfer of stocks as provided by law
For valid transfer of stocks the requirements are:
(a) There must be delivery of the stock certificate;
(b) The certificate must be endorsed by the owner or his attorney-in-fact or other
persons legally authorized to make the transfer; and
(c) To be valid against third parties, the transfer must be recorded in the books of the
corporation.
Transfer of shares by means of succession
Simply stated, the transfer of title by means of succession, though effective and valid
between the parties involved (ie., between the decedent's estate and her heirs), does not
bind the corporation and third parties. The transfer must be registered in the books of
the corporation to make the transferee-heir a stockholder entitled to recognition as such
both by the corporation and by third parties.

SEC. 63. Issuance of stock certificates

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.
*Presumption on when the certificate stock is issued it is prima facie evidence that the
stock is legally issued, However this may be rebutted with the books and records of the
corporation as also a prima facie evidence.
*Stock issued without authority in violation with the law is VOID.
 SEC. 64. Liability of directors for watered stocks.

Watered stocks- stocks issued in consideration less than its par value
➢ A director or officer of a corporation who:
(a) consents to the issuance of stocks for a consideration less than its par or issued
value;
(b) consents to the issuance of stocks for a consideration other than cash, valued in
excess of its fair value; or
(c) having knowledge of the insufficient consideration, does not file a written objection
with the corporate secretary,
shall be LIABLE to the corporation or its creditors, SOLIDARILY with the stockholder.

*Basis of solidary liability- fiduciary character of their position.

SEC. 65. Interest on unpaid subscription

➢ Subscriber to stock shall pay to the corporation interest on all unpaid subscriptions
from the date of subscription:
• If so required by and at the rate of interest fixed in the subscription contracts.
• If no rate is fixed in the contract, then the prevailing legal rate shall apply.

SEC. 66. Payment of balance of subscription

The BOD of any stock corporation may at any time declare due and payable to the
corporation unpaid subscriptions to the capital stock and may collect the same or such
percentage of said unpaid subscription, in either case with interest accrued, if any, as it
may deem necessary.
-Any payment shall be made on the date specified in the contract of subscription or on
the date stated in the call made by the board.
-Failure to pay on such date shall produce interest, unless a different date of interest is
provided in the by-laws.
-If within 30 days from the said date no payment is made, all stocks covered by said
subscription shall thereupon become delinquent and shall be subject to sale as
hereinafter provided, unless the BOD orders otherwise.
 SEC. 67. Delinquency sale

The Board of directors, by resolution may order the sale of delinquent stock and shall
specifically state the amount due on each subscription plus all accrued interest, and the
date, time and place of the sale which shall not be less than 30 days nor more than 60
days from the date the stocks become delinquent.
➢ Notice of said sale, with a copy of the resolution, shall be sent to every delinquent
stockholder either personally or by registered mail.
➢ It shall be published once a week for two consecutive weeks in a newspaper
of general circulation in the province or city where the principal office of the
corporation is located
Unless the delinquent stockholder pays to the corporation, on or before the date specified
for the sale of the delinquent stock, or unless the board of directors otherwise orders, said
delinquent stock shall be sold at a public auction to such bidder who shall offer to pay
the full amount of the balance on the subscription.
Should there be no bidder at the public auction who offers to pay the full amount of the
balance on the subscription, the corporation may, subject to the provisions of this Code,
bid for the same.

SEC. 68. When sale may be questioned

Grounds for recovery of stock unlawfully sold

1. Irregularity or defect in the notice of sale
2. Irregularity or defect in the sale itself of the delinquent stock
*Irregularity or defect in the call for unpaid subscription in the notice of delinquency is no
longer included among the grounds for questioning the sale, and no such action shall be
maintained unless it is commenced by the filing of a complaint within 6 months from the
date of sale.

SEC. 69. Court action to recover unpaid subscription

➢ Nothing in this Code shall prevent the corporation from collecting by action in
a court of proper jurisdiction the amount due on any unpaid subscription, with
accrued interest, costs and expenses.
 SEC. 70. Effect of delinquency

➢ No delinquent stock shall be voted or be entitled to vote or to representation at

any stockholder’s meeting,
➢ nor shall the holder thereof be entitled to any of the rights of a stockholder
except the right to dividends in accordance with the provisions of this Code,
➢ until and unless he pays the amount due on his subscription with accrued interest
and the costs and expenses of advertisement, if any.

SEC. 71. Rights of unpaid shares, Non-delinquent

Holders of subscribed shares not fully paid which are not delinquent shall have all
the rights of a stockholder.

SEC. 72. Lost or destroyed certificates

The following procedure shall be followed for the issuance by corporation of new
certificates in lieu of those which have been lost, stolen or destroyed.
1. The registered owner of a certificate of stock in a corporation or his legal representative
shall file with the corporation an affidavit in triplicate setting forth, if possible, the
circumstances as to how the certificate was lost, stolen or destroyed, the number of
shares represented by such certificate, the serial number of the certificate and the name
of the corporation which issued the same. He shall also submit such other information
and evidence which he may deem necessary;
2. After verifying the affidavit and other information and evidence with the books of the
corporation, said corporation shall publish a notice in a newspaper of general circulation
published in the place where the corporation has its principal office, once a week for
three (3) consecutive weeks at the expense of the registered owner of the certificate of
stock which has been lost, stolen or destroyed.
• The notice shall state the name of said corporation, the name of the registered
owner and the serial number of said certificate, and the number of shares
represented by such certificate, and that after the expiration of one (1) year from
the date of the last publication,
• if no contest has been presented to said corporation regarding said certificate of
stock, the right to make such contest shall be barred and said corporation shall
cancel in its books the certificate of stock which has been lost, stolen or
destroyed and issue in lieu thereof new certificate of stock,
 • unless the registered owner files a bond or other security in lieu thereof as may
be required, effective for a period of 1 year,
• in which case a new certificate may be issued even before the expiration of the
one (1) year period provided herein:
- Provided, That if a contest has been presented to said corporation or if an
action is pending in court regarding the ownership of said certificate of stock
which has been lost, stolen or destroyed, the issuance of the new certificate
of stock in lieu thereof shall be suspended until the final decision by the court
regarding the ownership of said certificate of stock which has been lost, stolen
or destroyed.
Except in case of fraud, bad faith, or negligence on the part of the corporation and its
officers, no action may be brought against any corporation which shall have issued
certificate of stock in lieu of those lost, stolen or destroyed pursuant to the procedure
above-described.

SEC. 73. Books to be kept; stock transfer agent.

General rule: Every corporation shall keep and carefully preserve at its principal
office a record of all business transactions and minutes of all meetings of stockholders
or members, or of BOD/T.
Exception: The stock and transfer book may be kept in the office of its stock and
transfer agent.
Right to inspect4
➢ The stockholder's right of inspection of the corporation's books and records is
based upon their ownership of the assets and property of the corporation. It
is, therefore, an incident of ownership of the corporate property.
➢ Records of all business transaction and minutes of the meeting shall be open to
inspection of any director, trustee, stockholder or member of the corporation at
reasonable hours on business days.
➢ They may also demand in writing for a copy of excerpts from said records or
minutes at his expense.
*Requesting party who is not a stockholder or member of record, or is a competitor,
director, officer, controlling stockholder or otherwise represents the interests of a
competitor shall have no right to inspect or demand reproduction of corporate records.
➢ Any stockholder who shall abuse the rights granted under this section shall be
penalized under Section 158 of this Code, without prejudice to the provisions of
Republic Act No. 8293.
Refusal for inspection
➢ Any officer or agent of the corporation who refuse to allow shall be liable to
such for damages and shall be guilty of an offense punishable under Section 144
• If such refusal is made pursuant to an order or resolution of the BOD/T, the
liability shall be imposed upon the directors/trustees who voted for such
refusal
➢ Or it may be a defense for refusal because of improperly using information of
such corporation or other and acting in bad faith.

SEC. 74. Right to financial statement

➢ Within 10 days from receipt of written request of any stockholder or member, the
corporation shall furnish to him its most recent Financial statement which shall
include a balance sheet and a profit and loss statement for said taxable year.
➢ At a regular meeting the BOD/T, stockholders or directors shall present to such
stockholders or members a financial report of the operations of the corporation for
the preceding year, which shall include Financial statements duly signed and
certified in accordance with this code and the rules the commission may give.
• if the total assets or total liabilities of the corporation are less than 600,000
or such other amount as may be determined appropriate by the Department
of Finance, the financial statements may be certified under oath by the
treasurer and the president.