LAW

Section 73: Corporate Books and

Records
Summary:
● Requirement: Every corporation
must maintain and safeguard certain
essential records at principal office.
● Types of Records: These include
articles of incorporation, bylaws,
ownership structure, board of
directors' details, business
transactions, meeting resolutions,
and minutes.
● Access to Records: Directors,
trustees, stockholders, or members
have the right to inspect these
records during reasonable business
hours.
● Confidentiality: Those inspecting
the records must adhere to
confidentiality rules, such as those
related to trade secrets and data
privacy.
● Limitations: Individuals who are not
stockholders or members of record,
or who represent competitive
interests, cannot demand access to
corporate records.
● Penalties: Any abuse of the rights
granted under this section may
result in penalties or liabilities.
● Responsibility: Officers or agents of
the corporation who refuse access
to records may be liable for
damages or offenses, especially if
such refusal is not justified.
● Defense: It's a defense against any
action under this section if the
person demanding access has
misused information from prior
examinations or is not acting in good
faith.
● Reporting: If access to records is
denied, the aggrieved party may
report it to the Commission, which
will then investigate and issue an
order if necessary.
 ● Stock and Transfer Book: Stock
corporations must maintain a record
of stocks, transfers, and related
details, open for inspection by
directors or stockholders.
● Stock Transfer Agent: A stock
corporation can operate its own
transfers, but if it engages a transfer
agent, it must comply with
regulations and obtain a license
from the Commission.

Section 74: Right to Financial Statements

Summary:
● Requirement: A corporation must
provide its most recent financial
statement to a stockholder or
member within ten days of receiving
a written request.
● Form of Financial Statement: The
financial statement must be in the
format required by the Commission.
● Annual Presentation: At the regular
meeting of stockholders or
members, the board of directors or
trustees must present a financial
report of the corporation's
operations for the previous year.
● Content of the Financial Report:
The report must include financial
statements signed and certified
according to the provisions of the
Code and any rules set by the
Commission.
● Exception: If the corporation's total
assets or liabilities are less than Six
hundred thousand pesos
(P600,000.00), or as determined
appropriate by the Department of
Finance, the financial statements
may be certified under oath by the
treasurer and president.

Section 75: Plan of Merger or

Consolidation
Summary:
● Merger or Consolidation: Two or
more corporations can merge to
 form a single corporation or
consolidate to create a new one.
● Approval of Plan: The board of
directors or trustees of each
corporation involved in the merger
or consolidation must approve a
plan outlining the details.
● Contents of the Plan:
○ Names of the corporations
involved (referred to as
constituent corporations).
○ Terms of the merger or
consolidation and how it will
be implemented.
○ Changes, if any, in the articles
of incorporation of the
surviving corporation in the
case of a merger.
○ For consolidation, all
necessary statements
required for the articles of
incorporation of corporations
under this Code.
○ Any other provisions deemed
necessary or desirable for the
merger or consolidation.

Section 76: Stockholders' or Members'

Approval
Summary:
● Board Approval: After the board of
directors or trustees of each
merging corporation approves the
plan of merger or consolidation, it
must be submitted for approval by
the stockholders or members of
each corporation.
● Meeting Notice: Notice of the
meetings must be provided to all
stockholders or members, following
the procedures for regular or special
meetings as outlined in Section 49
of the Code. The notice must state
the purpose of the meeting and
include a copy or summary of the
plan.
● Voting Requirement: Approval of
the plan requires a two-thirds (2/3)
majority vote of the outstanding
 capital stock for stock corporations
or two-thirds (2/3) of the members
for nonstock corporations in each
corporation.
● Right of Appraisal: Any dissenting
stockholder has the right to demand
an appraisal of their shares in
accordance with the Code. However,
if the board decides to abandon the
plan after stockholder approval, the
right of appraisal is extinguished.
● Amendment: Amendments to the
plan can be made with the approval
of the respective boards of directors
or trustees of all constituent
corporations and ratified by a two-
thirds (2/3) majority vote of the
outstanding capital stock or
members of each corporation.

Section 77: Articles of Merger or

Consolidation
Summary:
● Execution of Articles: After
approval by the stockholders or
members, each constituent
corporation must execute articles of
merger or articles of consolidation.
● Signatories: The articles must be
signed by the president or vice
president and certified by the
secretary or assistant secretary of
each corporation.
● Contents of Articles:
○ Plan: Details of the merger or
consolidation plan.
○ Shares/Members: For stock
corporations, the number of
shares outstanding; for
nonstock corporations, the
number of members.
○ Vote Count: The number of
shares or members voting for
or against the plan.
○ Assets and Liabilities:
Carrying amounts and fair
values of assets and liabilities
of each corporation as of the
agreed cut-off date.
 ○ Accounting Method: Method
used in merging or
consolidating accounts.
○ Provisional Values:
Provisional or pro forma
values of the merged or
consolidated entity, using the
chosen accounting method.
○ Additional Information: Any
other information required by
the Commission.

Section 78: Effectivity of Merger or

Consolidation
Summary:
● Submission to the Commission:
After execution, the articles of
merger or consolidation must be
submitted to the Commission for
approval.
● Special Cases: For certain types of
corporations like banks, loan
associations, insurance companies,
and others governed by special
laws, a favorable recommendation
from the appropriate government
agency is required before
submission to the Commission.
● Commission Approval: If the
Commission determines that the
merger or consolidation complies
with the provisions of the Code and
existing laws, it will issue a
certificate approving the articles and
plan.
● Effective Date: Upon issuance of
the approval certificate by the
Commission, the merger or
consolidation becomes effective.
● Investigation and Hearing: If the
Commission has reason to believe
that the proposed merger or
consolidation violates the Code or
existing laws, it will conduct an
investigation and set a hearing to
allow the concerned corporations to
present their case.
● Notice: Written notice of the hearing
must be provided to each
 constituent corporation at least two
weeks before the hearing date.

Section 79: Effects of Merger or

Consolidation
Summary:
● Single Corporation: The merger or
consolidation results in the
formation of a single corporation. In
a merger, the surviving corporation
specified in the plan continues to
exist, while in a consolidation, a new
consolidated corporation is formed.
● Cessation of Separate Existence:
The constituent corporations cease
to exist separately, except for the
surviving or consolidated
corporation.
● Transfer of Rights and Liabilities:
The surviving or consolidated
corporation inherits all the rights,
privileges, immunities, powers,
duties, and liabilities of the
constituent corporations.
● Transfer of Assets and Liabilities:
All assets, receivables, interests,
and property of the constituent
corporations are transferred to and
vested in the surviving or
consolidated corporation without
further action.
● Responsibility for Liabilities: The
surviving or consolidated
corporation assumes all liabilities
and obligations of each constituent
corporation as if it had incurred
them itself. Any pending claims,
actions, or proceedings involving
the constituent corporations may be
continued against the surviving or
consolidated corporation.
● Protection of Creditors' Rights:
The merger or consolidation does
not impair the rights of creditors or
liens on the property of the
constituent corporations.

Section 80: When the Right of Appraisal

May Be Exercised
Summary:
● Dissenting Right: Any stockholder
of a corporation has the right to
dissent and demand payment of the
fair value of their shares in specific
situations.
● Instances for Exercising the Right:
○ Amendment to Articles of
Incorporation: When an
amendment to the articles of
incorporation changes or
restricts the rights of any
stockholder or class of
shares, authorizes
preferences superior to those
of existing shares, or extends
or shortens the corporate
existence term.
○ Sale or Disposition of
Assets: When all or
substantially all of the
corporate property and assets
are sold, leased, exchanged,
transferred, mortgaged,
pledged, or disposed of.
○ Merger or Consolidation: In
the case of a merger or
consolidation involving the
corporation.
○ Investment of Corporate
Funds: When corporate funds
are invested for any purpose
other than the primary
purpose of the corporation.

Section 81: How Right is Exercised

Summary:
● Exercise of Appraisal Right: A
dissenting stockholder who votes
against a proposed corporate action
can exercise the right of appraisal
by submitting a written demand to
the corporation for payment of the
fair value of their shares.
● Deadline for Demand: The written
demand must be made within thirty
(30) days from the date of the vote
 on the proposed corporate action.
Failure to do so within this period
will result in the waiver of the
appraisal right.
● Payment of Fair Value: If the
proposed corporate action is
implemented, the corporation must
pay the dissenting stockholder the
fair value of their shares, excluding
any appreciation or depreciation
anticipated due to the corporate
action.
● Dispute Resolution: If the
withdrawing stockholder and the
corporation cannot agree on the fair
value of the shares within sixty (60)
days from stockholder approval,
three disinterested persons will
determine and appraise the fair
value. Each party selects one
appraiser, and these two appraisers
choose a third appraiser. The
majority decision of the appraisers is
final.
● Payment and Transfer of Shares:
Upon determination of the fair value,
the corporation must pay the agreed
or awarded price within thirty (30)
days. Payment is subject to the
corporation having unrestricted
retained earnings to cover the
payment. Once paid, the dissenting
stockholder must transfer their
shares to the corporation.

Section 82: Effect of Demand and

Termination of Right
Summary:
● Suspension of Rights: Upon the
demand for payment of the fair
value of a stockholder's shares, all
rights associated with those shares,
including voting and dividend rights,
are suspended until either the
abandonment of the corporate
action or the purchase of the shares
by the corporation.
● Exception: The only right that
remains active during this period is
 the right of the dissenting
stockholder to receive payment of
the fair value of their shares.
● Restoration of Rights: If the
dissenting stockholder is not paid
the value of their shares within thirty
(30) days after the appraisal award,
their voting and dividend rights are
immediately restored.

Section 83: When Right to Payment

Ceases
Summary:
● Withdrawal of Demand: A demand
for payment of fair value under this
Title cannot be withdrawn without
the consent of the corporation.
● Conditions for Ceasing Payment
Right:
○ If the demand for payment is
withdrawn with the
corporation's consent.
○ If the proposed corporate
action is abandoned,
rescinded by the corporation,
or disapproved by the
Commission (if necessary).
○ If the Commission determines
that the stockholder is not
entitled to the appraisal right.
○ Consequences of Ceasing
Payment Right:
○ The stockholder's right to be
paid the fair value of the
shares ends.
○ The stockholder's status as a
shareholder is restored.
○ Any dividend distributions
that would have accrued on
the shares are paid to the
stockholder.

Section 84: Who Bears Costs of

Appraisal
Summary:
● Costs and Expenses: The
corporation is responsible for
bearing the costs and expenses of
 the appraisal process.
● Exception: If the fair value
determined by the appraisers is
approximately the same as the price
offered by the corporation to the
stockholder, then the stockholder
must bear the appraisal costs.
● Legal Action Costs: If legal action is
taken to recover the fair value of the
shares, all costs and expenses are
typically covered by the corporation.
● Exception to Legal Action Costs: If
the stockholder's refusal to receive
payment was unjustified, the costs
and expenses of legal action may be
assessed against the stockholder.

Section 85: Notation on Certificates;

Rights of Transferee
Summary:
● Submission of Certificates: Within
ten (10) days of demanding payment
for shares, a dissenting stockholder
must submit their stock certificates
to the corporation. The corporation
will then make a notation on the
certificates indicating that they are
dissenting shares.
● Consequences of Failure to Submit
Certificates: If a dissenting
stockholder fails to submit their
certificates for notation within the
specified timeframe, the corporation
has the option to terminate the
dissenting stockholder's rights
under this Title.
● Transfer of Shares: If shares with
the notation indicating they are
dissenting shares are transferred,
and the certificates are cancelled as
a result, the rights of the original
dissenting stockholder under this
Title cease. The transferee then
assumes all the rights of a regular
stockholder.
● Payment of Dividends: Any
dividend distributions that would
have accrued on the dissenting
shares are paid to the transferee.