I n casesofsl ander,l i beland ot herf orms msofdef am ma ati on ( shoul d notqual i f y becausethe code does notqual i f y
whe t hernat ur alorj ur i di c al )Ar t .2219oft heci vi lc ode :
Cor por at i on i s one of t he t ype s of busi nes s organi zat i ons.I ti sal sothemosti mport anti n economi mi c deve l opme ment .
Ar t .2219.Mo r aldamag es ma y be r e cov er ed i nt hef ol l owi ngandanal ogouscases:
I NTR RO ODUCTI ON ( 1 )Ac r i mi na lo ffe ns er e s ul t i ngi np hy s i c a li nj ur i e s ;
So l ep r o pr i e t o r s hi p
-
Onema man f orm ofbusi nessenti t y ,personal l yansw we er sal l
( 2)Qua si d e l i c t sc a us i ngphy s i c ali nj ur i e s ;
l i a bi l i t i e s ,b ute nj o y sa l lt h epr o fit swi t ht hee xc l us i o no f
-
o t h e r s L i mi t e ds ha r e ho l de r sr e s po ns i bi l i t y Pa i ds ubs c r i p t i o ni nf ul l ,y o ua r enol o ng e rl i a bl e
P ar t ne r s hi p
-
Base don mutualt r ustandconfidence
-
( 3 )Se duc t i o n,a bduc t i o n,r a pe ,o ro t he rl a s c i v i o usac t s ; ( 4)Adul t eryorconcubi nage; ( 5)I l l e g alo rar bi t r ar yde t e nt i o no rar r e s t ; ( 6)I l l e gals ear c h;
Joi ntv e nt ur e ( 7 )L i be l ,s l a nd ero ra nyo t he rf o r mo fd ef a m ma a t i o n;
-
onet i megr oupi ngofpersonsw wh het hert heybenat ur alor
-
j ur i di c al doesnotentai lcont i nui t ybecauseaf t ert heundertaki ng
-
i sc o mp mpl e t e di ti sa l r e a dyt h ee nd part i cul ar part ners hi p and j oi nt ve nture woul d be
( 8 )Ma Ma l i c i o uspr o s e c ut i o n; ( 9 )Ac t sme nt i o ne di nAr t i c l e3 09;
si mi l ar ,butt her ei sal ready adeci si on oft heSuprem me e -
( 1 0)Ac t sand a c t i o nsr e f e r r e dt oi n Ar t i c l e s21,2 6,2 7, 28,29,30,32,34,and35.
Courtdecl ari ngt hem asdi ffer ent whent he ydonotr egi s t er ,i tdoe snote xi s t Forei gn corpor ati onsent er si nt o an agree mentw wi i t ha
Thepar ent soft hef emal es educe d,abduc t e d,r aped,or abused,ref err ed t oi n No.3 oft hi s art i cl e,ma may al so r ecove rmoraldamages.
domest i c corporati on,i tm mu ustbe regi st ered.General l y t heydonotneedt oberegi st ered. Corporat i ons
-
Thes pous e,de scendant s,asc endant s,andbr ot he r sand si st ersma maybri ngtheact i on ment i oned i n No.9oft hi s a r t i c l e ,i nt heo r d ern ame d.
The y ma y ent e ri nt oj oi ntv ent ur e,butge ne r al l yt he y cannot ent er i nt o a part ner shi p, but t her e ar e except i onsal l owedbytheSEC:t he3except i onsmu mustgo hand i nhand 1. Theart i cl esofi ncorporat i on express l yaut hori zed
t he cor por at i on t o ent er i nt o cont r act s of
-
part nershi p; 2. The agr ee ment or ar t i cl es of par t ner shi p must
-
pro vi de t hat al lt he part ners wi l lm ma anage t he 3.
Adv ant ages( SEE LADI ABOOK) No.2ma mayal sobeadi sadvant age No.5ma mayal sobeadi sadvant age Acor por at i oni saper s on,t he r ef or epr ot ec t e dbyt hedue proc ess cl ause and equal pr ot ect i on cl ause of t he
part nershi p;and Theart i cl esofpart ner shi p mustst i pul at et hatal l
Co ns t i t ut i o n
t hepart nersareand shal lbe j oi nt l yand sever al l y l i a bl ef o ral lo bl i g at i o nso ft hepa r t ne r s hi p. DEF EFI NI TI ON AND ATTR RI I BUTES
4a t t r i but e sofac o r po r a t i o n
1. 2. 3. 4.
Art i fici albei ng Cr eat edbyoper at i onofl aw Ri ghtofsucc es si on Power s,at t ri but es and propert i es expres sl y aut hori zed
CLASSI FI CATI ONOF OFCO OR RPO OR RATI ONS
Sect i on3St ockandnonst ock
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I mport anceofknowi ng,det er mi ni ngwh whatpr ovi si onsof t hecodeort hel aw maybeappl i cabl e
Sect i on 3. Cl asses of cor por at i ons. Corpor at i ons f orme medoror gani ze d undert hi sCodema may bes t oc k ornons t oc k cor por at i ons .Cor por at i onswhi c h have capi t al st oc k di vi ded i nt o shar es and ar e aut hori zed t o di st ri but etothe hol dersofsuch shares di vi dends oral l ot mentsoft he surpl usprofit s on t he basi soft heshar eshel dar es t oc kc or por at i ons.Al lot he r c o r po r a t i o nsa r eno ns t o c kco r po r a t i o ns .( 3 a)
byl aw ori nci de ntt oi t se xi s t enc e.
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Do c t r i neofl i mi t e dc a pa c i t y Onl ysuch power sasareexpressl ygrant ed t oi tbyl aw and by i t s art i cl es of i ncorporati on i ncl udi ng ot hers whi c h ar ei nci de nt alt o suc h conf er r e d power s,t hos e r easonabl y necess ary t o accom mp pl i sh i t s purpose and
No ns t o c k-t i t l e10
St o c k -s e c t i o n 51
t hosewh whi chmaybei nci dent alt oi t sexi st ence -
Can dot hi ngsasthel aw asksoral l owsi tt odo I fi tdoes anyt hi ng beyond,i tshal lbe consi dered as ULTRAVI RES
Gener al r ul e: Mo Mor al dama mage s cannot be gr ant ed t o
Stockhol ders must general l y cast t hei r vot es i nt he mee t i ng; sect i on 4 gov er ned pri mari l y by t he l aw c r e a t i ngt he m
c o r po r a t i o ns Cor por at i ons cr eat ed by speci al Sect i on 4.
Excepti on:F i l i p i n as Br o adc a s t i n g Ne t wo r kI n c .v s .A go Med
l a ws wso rc h ar t e r s . -Corporati onscreat ed byspeci all aws o rc h ar t e r ss ha l lb ego v e r ne dp r i ma r i l yb yt hep r o v i s i o ns o ft hes pe c i a ll a wo rc ha r t e rc r e a t i ngt h e m o ra ppl i c a bl e t othem, m,suppl em me entedby t heprovi si onsoft hi sCode, i ns o f a rast he ya r eapp l i c a bl e .( n)
2
Sect i on3
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Thet wor e qui s i t esmus tal way sconc ur 1. Thatt heyhaveacapi t alst ockdi vi dedi nt oshar es;and, 2. That t hey ar e author i ze dt o di st r i but e di vi dends or
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Def act o e x i s t sbyv i r t ueo fc o l o r a bl ec o mp mpl i a nc e At t ac hed di r ec t l y onl y by t he s t at ei n a quo war r ant o proceedi ng
al l ot ment sassurpl usprofitst oi t sst ockhol derson t he bas i soft heshar e shel dbye ac hoft hem.
Sect i on4
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Corporat i onbyest oppel So de f e c t i v e l yf o r me me d,b uts t i l lc o ns i de r e dc o r po r a t i o n, butonl yi nr e l at i on t ot hose who cannot deny t he i r
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Creat edbyaspeci all aw,t heyhavethei rowncharact er The yar enoti mmu mmunef r om s ui tunl e sspr ovi ded byt he l a wo ft he i rc r e at i o n Pri mari l ygovernedbyt hel aw cre ati ngthem
exi st encesect i on20and21 FORM RMATI ON AND ND OR ORGA GANI ZATI ON 3st ages 1. Cr e a t i o n
The i rsubs i di ar i e sar eent i r el y di ffer e ntori nde pe nde nt f rom t hatoft heother
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Cl o s ec o r po r a t i o n The r ei snoe xemp t i oni ti sabs ol ut e
Publ i cc or p or a t i o n Pol i t i calorgovernme ment alpurposes Those f or me d or or g ani z e df or t he gov e r nme nt or a
Re o r g a ni z a t i o no rqua s i r e o r g a ni z a t i o n Di ssol ut i on/w wi i ndi ng-up Purposec l ause Defini ng t he sc ope of aut hori t y of t he cor por at e
2. 3.
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po r t i o no ft he St a t eorany o fi t s po l i t i c a ls ub di v i s i o n
ente rpri seprundert aki ng.Bot hconfirme medandl i mi t ed 4l i mi t a t i o nso fpur p os ec l a us e 1. Lawf ul 2. Speci ficorst at edconci sel y 3. Mor et han one,t he pr i mar y and se c ondar y mu must bes pe ci fie d 4. La wf ul l yco mbi ned Provi si on t hatst ates ,c annotbe i ssued l essthan par , except i on i st re asurysharesbecause i tcan be i ssued
andw wh hi ch havef ort hei rpurposet hegeneralgood and
l esst hanpar
wel f ar e
Pr i v a t eCo r po r a t i o n
-
I mmedi at e benefit , ai m
-
cer t i ficate,pri orthere t oi thas no bei ng and cannot
i ndi v i dua l s Thosef or me df ors omepr i v at epur pose ,be ne fit ,ai m or end Di st i nct i on:publ i cf orgovernment alpurpose Corporat i onSol e
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Exem mp pt i on t ot he r ul ebecause i ti scom mp posed onl yof
-
t ransactbusi ness.Promo mot erscannotactf oraproj ect ed
or adv ant age of pr i va t e
-
A c or por at i on comme mmenc es onl y upon i s suance oft he
oneper son Ani nc or por at orma yal sobeaj ur i di calper son Cl o s ec o r po r a t i o n The r ei sexcl usi vi t yofs har esofs t oc k Sect i on96105 Re s t r i c t i o nst ot r a ns f e rs har e s Onl yt hosei ndi cat edcan ownshar es Ar t i cl emus tpr ovi det hatt her ewi l lbenopubl i coffe r i ng
c o r po r a t i o n
Met roMa Mani l a-pai dupcapi t alre qui reme menti s10M
Non-st ock-me merement i onoft heoperati ngcapi t al
Ment i ont heaut hori zedcapi t al
Re s t r i c t i o ns
-
Mandat oryi ncl ose Notmandat oryi nordi nary
Nonst ock
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I fval uei snotmo moret han 100, 000
A c or por at i on c annotus eanyot he rnameunl es si thas be ename nded
Open corporat i on
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openl yadm mi i ti nvest ors examp mpl e:st ockexchange
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Dom me est i c/Forei gn
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Tes t I nc o r po r a t i o nt e s t I fi nc o r po r a t e dunde rt h el a wsoft h ePhi l i ppi ne si ti sa
ME Gr ayvs .CA
-
ParentorHol di ng/subsi di ari esandaffil i ates Affil i at es -noma j or i t yv ot e SMC MC 12%
HERSHEY
CBP BPl12%
CBP
12%
I f conf usi ngl y si mi l ar i t wi l l not be al l owed t o be r e g i s t e r e d Ve r i ficat i onsl i pf r om t her ec or dsoffic er
Sect i on 19. Comm mmenc eme ment of c or por at e e xi s t e nc e . -A pri vat e corporat i on f orme med ororgani zed undert hi sCodecomm mmencest ohavecorporat eexi st ence and j uri di calper sonal i t y and i s deeme med i ncorpor at ed f r om t hedat et heSecuri t i esandExchangeCom mm mi ssi on i ssues a cer t i ficateofi ncorporat i on under i t s offi ffic ci al se al ; and t he r eupon t he i ncor po r at or s , st ockhol der s/me mem mb ber s and t hei r succe ss or s shal l const i t ut eabodypol i t i candcorporat eundert henam me e s t a t e di nt hear t i c l e sofi nc o r po r a t i o nf o rt hepe r i o do f t i mem me ent i oned t here i n,unl esssai d peri od i sext ended orthe corpor at i on i s sooner di ssol ved i n accor dance wi t hl aw.( n)
domest i ccorporati on
-
Sect i on 19
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Wo r ds c or por at i on ori nc .e i t heri nf ul lorabbr e vi at ed f orm mustbei ncl uded
Affil i at ei ss ubj e ctt ocommo mmoncont r olbyt he12% owne r s
Dej ur e
-
cannotbeatt ached bythest at eeve ni naquowarr ant o proceeding
Sect i on 18. Cor por at e nam me e. -Nocorporat e name mema maybe al l owedby t he Securi t i esand Exc hange Com mm mi ss i on i ft he pr opose d name me i s i dent i cal or de c e pt i v e l yo rc onf us i ng l ys i mi l a rt ot ha to fa nye xi s t i ng
3
corporat i on ort oany ot hernameal r eady prot ect ed by l aw ori s pat ent l y decept i ve,conf usi ng orcont raryto exi st i ng l aws.When achangei nt he cor porat enam me ei s appr ov ed, t he Comm mmi ss i on shal li ss ue an ame mended cer t i ficateofi ncorporat i onundert heam me endednam me e.( n)
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Doct ri neofsecondarym me eani ng A wor d or phr ase or i gi nal l yi nc apabl e of e xcl us i v e
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Generalrul e:onl ynaturalpersons Except i on: cooperat i ves and corporat i on pri mari l y o r g a ni z e dt oh ol de qui t i e si nr ur a lb anks
How aboutmi nor s?
-
NO,becauset heymu mustbeofl egalage
appropri ati on [ usual l y generi c] wi t h re f erence t o an
Mayacorporati on organi zedbyi ncorporator sconsi st i ng s ol e l yo ff o r e i g ne r s
art i cl ei n t he market , because of geographi cal l y or ot herwi se descri pt i ve, mi mi ght neve rt hel ess have been
-
used sol ong and soexcl usi vel y by one producerwi t h
Ye s,t her ei snonat i onal i t yr e qui r eme ntonl yr e si de nc e, a sl o nga sma j o r i t ya r er e s i de nt so ft h ePhi l
r e f e r e nc et ohi sar t i c l et ha t ,i nt h att r a deand t ot h at br anc hoft hepur c has i ngpubl i c,t hewor dorphr asehas be comet ome ant hatt hear t i cl ewashi spr oduct .
Definei ncorporat ors<sec. 5> Those per s on me nt i oned i nt he ar t i cl es as or i gi nal l y
Sect i on18
f ormi mi ngthe corporat i on and whoaresi gnat ori esoft he
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Lyc eum
a r t i c l e so fi nc o r po r at i o n. Mustbesi gnator i estobei ncorporator s
-
geogr aphi calnamedoesnotm ma akei tc onf usi ngl ysi mi l ar act ual conf usi on i s not necess ary- P hi l i p sc a se “ i ti s
of t he Phi l i ppi nes c ase , t he addi t i onal
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Co r p o r a t o r s a nd i n c o r p o r a t o r s , Sect i on 5. st oc khol der sand memb mber s. -Corporat orsar et hosewho comp mpose acorporat i on,whet heras st ockhol dersoras mem mb ber s. I ncor por at or s ar e t hose st ockhol der s or mem mb bersme menti oned i nt he art i cl esofi ncorpor at i on as ori gi nal l yf ormi mi ngand comp mposi ng t hecorporat i on and whoar esi gnat or i e st her e of .
enought hatt herei sprobabl econf usi on”
2requi si t esmu mustbeproven
-
t hatt hecomp mpl ai nantcorporati on acqui re d apri orri ght
-
overt heuseofsuchcorporat enam me e us i ng l y ,pat e nt l yde c ep t i v e i de nt i c al ,de c e pt i v e l yorc o nf
pri nci paloffi ffic ce
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st ate mentofpri nci paloffic fficei srequi re d ci t y and muni ci pal i t y not onl y pr ov i nce must be
-
speci fied pri nci paloffic fficeNOToperat i onsoffi ffic ce necess ary because i t wi wi l l es t abl i sh t he r esi dence of
-
c o r po r a t i o ns v enueofact i onsf ororag ai ns tt hec or por at i ons v enueofme e t i ngs sect i on 51 meet i ngsm ma ayonl ybew wi i t hi nt heboundari es
-
oft heci t ywheret hepri nci paloffic ffi ce nonst ock maybehel d anywher ei nt hePhi l i ppi nes,i f
-
-
Corporator si n ast ock corporati on arecal l ed st ockhol ders or sharehol ders.Corporat ors i n a nonst ockcorporati onarecal l edme mem mb bers.( 4a)
-
Definecorporat ors<sec. 5> Al lper sonswho composet hecor por at i on atanygi v e n t i me and nee d not be amo mong t hose who ex ec ut et he a r t i c l e sofi nc o r po r at i o na tt hes t a r to fi t sf o r ma ma t i o na nd
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o r g a ni z a t i o n. Or i g i na l l yo rs ubs e q ue nt l y Sect i on 5provi des: Corporator si n ast ock corporati on arecal l ed st ockhol ders or sharehol ders.Corporat ors i n a non-
pr o v i de di ni t sby l a ws wher esummo mmonsma ybese r v ed regi st rat i on ofchat t elmo mort gage mustbe regi st ered i n
st ockcorporati onarecal l edme mem mb bers.( 4a)
t h er e g i s t e ro fde e dswhe r et hep r i nc i pa lo ffic ffic ei sl o c at e d
Cl a v e c i l l aRa di oSy s t e mv s .Ant i l l o n
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Mayacorpor at i onbeacorporat or? YES.The r ei s not hi ng t o pr ev enta c or por at i on f r om be i ngas t oc khol de r
-
acti onnotuponawri t t encont ract ci t ywh wheret hedef endantr esi des
t e r mo fe x i s t e nc e
The r ear et hoset hatar eexcl usi v el yr es er v edt oFi l i pi nos
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corporatet erm requi red de t e r m mi i ni ngwha tp o i nti nt i met hej ur i d i c a lpe r s o na l i t y
An i ncor por at orma ybea c or por at orasl ongashei sa
-
-
wi l lce aset oe xi s t e nt e ri nt oc ont r a c to nl ywh whe ni th asj ur i di c a lp e r s o na l i t y o nc ei tc e as e st oe x i s t ,i tnol o ng e rha spe r s o na l i t y e x i s tf o rano t h e r3y e a r sonl yf o rpur p os e sofl i q ui d at i o n Di s s o l ut i o n-i ti saut o ma ma t i c
Whenshoul de xt ens i onbema de ?
-
-
Ge ne r a lr ul e :No te a r l i e rt ha n 5y e ar s Ex c e pt i o n:unl e s st he r ea r ej us t i fia bl er e a s o ns
Ma yi tb ee xt e nde da f t e re x p i r a t i o n?
-
Al hambr ac i g arv s.SEC o nc ei tc e a s e st oe x i s ti th asno
v es t ed pol i t i c,e xi s tonl yf oraper i od of3 y e ar sonl yf or l i qui dat i onandf orthatpurposeonl y
Ar t i cl e5How manyi nc or por at or ss houl dt he r ebe?
Sect i on 6. Cl a s si fi c at i o no fs ha r e s . - The sharesofs t ockofst ockcorporati onsm ma aybedi vi ded i nt o c l a s s eso rs e r i e so fs h ar e s ,o rb ot h,a nyo fwhi c hc l a s s es orseri esofsharesma may havesuch ri ght s,pri vi l egesor r est ri ct i ons as may be st at ed i n t he art i cl es of i ncorpor at i on:Pr ovi ded,Thatnoshar em ma aybedepri ved ofvot i ng ri ght s exceptt hose cl assi fied and i ssued as " pref err ed" or " r edeema mabl e" shar es,unl ess ot herwi se pr o v i d edi nt h i sCo de :P r o v i de d,f ur t he r ,Tha tt he r es ha l l al way s be a cl ass or ser i es of s hare s whi ch have c o mp mp l e t ev o t i ngr i g ht s .Anyora l lo ft hes ha r e sors e r i e s ofsharesma mayhaveaparv al ueorhaveno parval ueas may be provi ded f or i nt he art i cl es ofi ncorpor at i on: Pro vi ded, howev er , That banks, t r ust comp mpani es , i nsurancecompani es,publ i cut i l i t i es,and bui l di ngand l oan associ ati onsshal lnotbepermi mi t t edt oi ssueno-par v al ueshar esofs t oc k. Pr ef er r ed shar es of st ock i ss ued by any corporati on maybe gi ven pref erencei nt hedi st ri but i on
4
oft he asset s oft he corporati on i n case ofl i qui dat i on and i nt he di st ri but i on of di vi dends, or such ot her pr ef er ence s as may be st at ed i n t he ar t i cl es of i nc o r po r a t i o n whi c ha r eno tv i o l a t i v eo ft hepr o v i s i o nsof t hi sCode:Provi ded,Thatpref err ed sharesofst ock may be i s sued onl y wi t h as t at ed parv al ue .The boar d of di r ec t or s, wher e aut hori ze d i n t he ar t i cl es of i ncor por at i on, ma may fix t he t er ms and condi t i ons of pr e f e r r e ds ha r e sofs t o c ko ra nys e r i e st he r e o f :P r o v i de d, Thats uc ht er msand c ondi t i onsshal lbee ffec t i v eupon t h efil i ngofac e r t i fi ca t et he r e o fwi t ht heSe c ur i t i e sand Exc hangeCom mm mi ss i on.
awaywi wi t ht he mi ni mum di squal i ficat i ons l aydown by t heCode.
Qual i ficat i onsoft hegoverni ngboard
-
Requi re sm me er eres i dency<sec.23>
Secti on 23. Thebo ar do fd i r e c t o r so rt r u s t e e s . -Unl essotherwi seprovi ded i nt hi sCode,t hecorporat e powe wer sofal lcorporat i onsf orme medundert hi sCodeshal l bee xe r ci sed,al lbus i ne ssconduct edandal lpr ope r t yof such corporat i onscont r ol l ed and hel d by t heboardof di r ect or s or t rust ees t o be el ect ed f r om am mo ong t he hol ders ofst ocks,or wher et her ei s no st ock,f r om
Shares of capi t al s t ock i ssued wi t hout par v al ue s hal lbe de eme df ul l y pai d and nonass es sabl e andt hehol derofsuch sharesshal lnotbel i abl etot he corporat i on or t o i t s cr edi t ors i n r espect t her et o: Prov i ded; That shar es wi t hout par val ue m ma ay not be i ssued f ora consi derat i on l essthan t he val ue offive ( P5. 00)pesos per shar e:Provi ded,f urt her ,That t he e nt i r ec o ns i d er a t i o nr e c e i v e db yt h ec o r po r a t i o nf o ri t s no-parval uesharesshal lbet reat edascapi t alandshal l no tb ea v ai l a bl ef o rdi s t r i but i o na sdi v i de nds .
am mo ong t he mem mb ber soft he cor porat i on,who shal lhol d offi ffic cef orone( 1)yearunt i lt hei rsuccessorsareel ect ed andqual i fied.( 28a) Everydi rec t ormu mustownatl eastone( 1)share oft hecapi t als t ock oft hecorporati on ofwhi ch hei sa di r ect or ,whi ch shareshal ls t and i n hi s name on t he booksoft hecor por at i on.Anydi r ec t orwhoc eas est obe t h eowne ro fa tl e a s to ne( 1)s ha r eo ft hec a pi t a ls t o c ko f t hecorporati on ofwhi ch hei sa di rect orshal lt her eby ce ase t o be a di r ec t or . Tr ust ee s of nonst oc k cor porat i ons mustbe mem mb ber sther eof .A maj ori t y of t h e di r e c t o r so rt r u s t e e sofa l lc o r p o r at i o nsor g a ni z e d undert hi sCodem mu ustberesi dent soft hePhi l i ppi nes.
A c or por at i on ma y ,f ur t her mo r e,c l as si f yi t s share sf or the purpose of i nsuri ng com mp pl i ance wi t h c o ns t i t ut i o na lo rl e g alr e q ui r e m me e nt s . Ex c e pta so t he r wi s epr o v i de di nt h ear t i c l e so f i nc o r po r a t i o na nds t a t e di nt h ec e r t i fic a t eo fs t o c k,e a c h s ha r es ha l lb ee q ua li na l lr e s p e c t st oe v e r yo t h e rs ha r e .
May a dome mes t i c cor por at i on have a gov er ni ng boar d c o ns i s t i ngs o l e l yo ff o r e i g ne r s ?
Whe r et hear t i c l e sofi ncor por at i onpr ovi def or nonvot i ngsharesi nt hecasesal l owedbythi sCode,t he ho l de r so fs uc hs ha r e ss ha l lne v e r t he l e s sbee nt i t l e dt o v ot eont hef ol l owi ngma t t er s :
-
YES,se ct i on 23 ma j or i t yoft he m mus tber e si de nt sof t h ePhi l i pp i n e s ,nona t i o na l i t yr e q ui r e me me nt
Ant i dummy mmyact<s ec. 2A>
1.Ame mendm me entoft heart i cl esofi ncorporati on; -
2.Adopt i onandam me endme m entofbyl aws;
[ unl esst hel aw provi des ot herwi se]butt hei rnumber
3. Sal e, l ease, exc hange, mo mort gage, pl edge or other di s po s i t i o no fa l lo rs ubs t a nt i a l l ya l lo ft he c o r po r a t e property; 4. I ncurr i ng, cr eat i ng i ndebt edness;
or
i ncr ea si ng
bonded
shal l onl y be i n pr opor t i on t o t hei r equi t y or pa r t i c i p at i o ni nt hec api t a ls t o c ko ft hec or p or a t i o n.
-
pr ov i de
8.Di s s o l ut i o no ft hec o r po r a t i o n.
Generalrul e:Notl esst han5notmoret han15 Excepti ons: 1. Educat i onal cor por at i ons r eg i st er ed as non st ock
addi t i onal
qual i fic at i ons
and
Codecomm mmi t t edwi wi t hi n five( 5)yearspri ort othedateof hi se l e c t i o no rap po i nt me nt ,s ha l lq ua l i f ya s adi r e c t o r , t rusteeoroffic fficerofanycorporat i on.( n)
orbusi nessi naccor dancewi t ht hi sCode;and
-
f or
Di Sect i on 27. s q ua l i fic a t i o n o f di r e c t o r s , t r ust ees or offic fficer s. - No per so n co nvi ct ed by final j udgme ntofan offe nsepuni s habl ebyi mpr i sonme ntf or ap er i o de x c e e di ng s i x( 6)y e a r s ,o ra v i o l a t i o no ft hi s
7.I nvestm me entofcorporatef undsi n anot hercorporat i on
How manydi r ect or sshoul dt herebe?
The di squal i fic at i ons pr ov i ded f ori s abs ol ut e and ma y
di s q ua l i fic a t i o ns .
6. Me Mer ger or consol i dat i on of t he corporat i on wi t h anot hercorporati onorothercorporat i ons;
Exc ep t as pr ov i ded i n t he i mmedi at el y prece di ng paragr aph,t hevot eneces sarytoapprov ea part i cul arcorporat eactasprovi ded i nt hi sCodeshal l bede eme dt or ef eronl yt os t oc kswi t hv ot i ngr i ght s .( 5a)
Di squal i ficat i ons<sec. 27>
notbedoneawaywi t h.Corporat ebyl awsma may,howeve r ,
5.I nc r e a s eord e c r e as eofc a pi t a ls t o c k;
I ft heb us i ne s sund er t a ki ngo rac t i v i t yi sonl ypa r t i a l l y nati onal i zed,al i ens can be el ect ed as such di rec t ors,
Sec t i on 27 and 23 mi ni mum di sq ual i ficat i ons and q ua l i fic a t i o ns Leevs.CA
-
Byl awsma mayprovi def oraddi t i onal
Go v ’ tv s .Elh og arFi l i p i no ,Go k ong w we e iv s .SMC
-
Ca pi t a ls t r uc t ur e
corporat i on whosenumberoft rust ees,t hough notl ess t han fiveandnotmoret han [ 15]shoul dbedi vi si bl eby
Foundat i on-mi mi ni mum pai d-upcapi t al3M
five [ 5] ,me meani ng t hey musthaveei t her five,t en,or 2.
fift eent rusteesand noot her; I n cl ose corpor at i ons where al lt he st ockhol ders ar e
Aut hor i z edcapi t al1M
consi deredasme mem mb bersoft heboardofdi r ect orst her eby 3.
effect i vel yal l owi ngtwentyme memb mbersi nt heboard. Thebyl awsofacorpor at i on mayprov i def oraddi t i onal qual i ficat i onsanddi squal i ficat i onsofi t sme mem mb bersoft he
F orfle x i b i l i t yi n pr i c e ,p a r t i c ul a r l y ,no p ars ha r e sma ma y be i ss ue d ors ol df r om t i met ot i meatdi ffe r entpr i ce
C
250K
dependi ng on t he networt h oft he comp mpanysi ncethey donotpurportt orepresentanact ualoffixedval ue.
D
Sect i on 6
-
Ea c hs ha l lbee q ua li na l lr e s p e c t st oe v e r yo t he rs h ar e
Pr e f e r r e ds ha r e s
-
Speci ficpref ere nce Di v i de nd sord ur i ngl i q ui da t i o n
Nopar
-
Ca ns e l li twi t ht h ene t wo r koft hec o r po r a t i o n
Di st i nct i on bet ween t he subscr i bed and outs t andi ng
E PAI D UP=62, 500 Cor por at i on cannote xc ee d mor et han 1 M i ti st he maxi mum am mo ounti tcannoti ssuemo mor eunl essam me ended Maxi mum share si tcani ssuei s1M sharesunl essam me ended
How muchshare sshoul dbesubsc r i bed?
-
Mustbeatl east25% oft heaut hori zedcapi t alst ock
Pai d-upmu mustbeatl eas t25%%mi ni mum
Sect i on30
-
s t o c k s ? -
Tot als ubsc r i pt i onc ompl i anc ewi t hmi ni mum 25% t ot al Any combi nat i on woul d c ompl y wi t h t he mi ni mum
Sect i on 137. Out st andi ng capi t al st ock defined. -Thete rm " out st andi ngcapi t als t ock",asused i nt hi s Code,me meansthe t ot alsharesofs t ock i ssued underbi ndi ng subscr i pt i on agree mentst osubscri bers o rs t o c k ho l de r s ,whe t he ro rno tf ul l yorpa r t i a l l ypa i d, e x c e ptt r e a s ur ys ha r e s .( n)
requi redbysecti on30
Sect i on 30. Co mp mp e ns at i o no fd i r e c t o r s . -I n t heabsenceofany provi si on i nt heby-l awsfixi ngthei r comp mpensat i on, t he di r ect or s shal l not r ece i ve any comp mpensati on,assuch di re ct ors,exceptf orreasonabl e pe r di e ms : Pr ov i de d, howev er , That any suc h comp mpensat i on ot hert han perdi em ms sm ma aybegrant edt o di r e c t o r sbyt h ev ot eo ft hes t o c kho l de r sr e p r e s e nt i ngat l easta maj ori t y oft he out st andi ng capi t alst ock ata r e g ul a ro rs pe c i a ls t o c kho l de r s 'me e t i ng .I nnoc as es ha l l t he t ot al year l y comp mpensat i on of di r ect ors , as such di r ect ors,excee dt en ( 10%)per centoft he neti ncom me e be f or e i nc ome t ax of t he c or por at i on dur i ng t he pr e c e d i ngy e a r .( n)
-
Vot i ngand di v i dend r i ght s ,i tr e f e r st ot heout s t andi ng
-
c api t a ls t o c ks Onl yout st andi ngst ocksareal l owed t ovot eandrece i ve
-
di vi dends Ac t ual l yt hes ame
Tr e asur yshar e s
-
areal sosubscri bed shares whi l et he yr e mai n i n t he t r e as ur y , no v ot i ng and
Mi ni mum f oradome mes t i ccorpor at i on?
-
I nnocaseshal lt hepai d-upcapi t albel esst han 5k
I st hereami mi ni mum aut hori ze d capi t ali mposed bythe code?
-
I ft herei smi mi ni mum pai d-upl ogi cal l ythereshoul d al so beami ni mum c api t al=5000
Sect i on137
-
di v i de ndr i g ht s maybere i ssuedbythecorporat i on oncere i ssuedt heybecome meout st andi ngst ocksagai n
co mmons har e s
-
c ar r yt h er i g htt ov o t e
pr e f e r r e ds ha r e s
-
g r a nt st heh ol de rpr e f e r e nc e pr e f e r e nc ea st od i v i de nds pref erence as t o di st ri but i on oft he rema mai ni ng asset s
-
Mi ni mum pai dupcapi t alf orafinanci ngcom mp panym me et r o
-
mani l a10M i fl ocat edi nMM MM
-
upondi ssol ut i onor
Sha r e so fs t o c k
Pur p os eofc l a s s i fi c a t i o n
-
-
bot h YOU MUST STATE THE PREFERENCE BECAUSE I F
-
NO OT T THEY ARE PRESUME MED TO BE EQU QUAL I tmayi ncl ude such ot herpref erencesnoti nconsi st ent wi t ht heCode .Thi si ssobec aus eSe ct i on 6oft hesai d
To spec i f y and de fine t he r i ght s and pr i vi l e ge s oft he
l aw al l owsa st ockcorporati on t oi ssuepref err edshares
s t o c kho l de r s ;
subj ectonl ytothe l i mi t ati onsi mposed t here i n whi ch -
For r egul at i on and contr oloft he i ssuanceofsal e of c o r po r a t es e c ur i t i e sf o rt h epr o t e c t i o no fpur c h as e r sa nd s t o c kho l de r s .
a r e : a. Theyc anbei ss uedonl ywi t hsat edparv al ue;and, b. The pr ef er e nces mus t be s t at e d i n t he ar t i cl es of i ncorporati on and i nt hecert i ficat eofst ock,ot herwi se,
-
e a c hs ha r es ha l lbe ,i na l lr e s p e c t ,e q ua lt oe v e r yo t h e r
Asama nage me ntcont r olde v i ce .
share. -
To comp l y wi t h s t at ut or y r equi r eme nt s par t i cul ar l y t hose whi ch provi de f or cert ai nl i mi t ati ons on f orei gn
Pa r t i c i pa t i ng
owner shi p and shar es l i ke ov er se as emp mpl oy ment agenci esre qui ri ngtoown atl east75% oft hesharesof
-
s t o c kt h e r e o f . -
To be t t er i ns ur er e t ur n on i nv es t me nt whi c h can be
Mustbe st at ed because t he pre sump mpt i on i st hati ti s pa r t i c i pa t i ng
Maybedeni ed Unl e s sde ni e dt h e ya r es t i l le nt i t l e d
pr o v i d edi nt hi sc o de
Whati fhi ndii de cl ar ekahi tnama ydi vi dendsr i ght sf or
-
t he previ ousyears?Ma Maytheybedeni eddi vi dend ri ght s
SHARES
MERON
SI LANG
YOU
PWEDE SI LANG BUMOTO WI TH
CANNOT COMP EL THE CORPORATI ON
TO
REGARDS TO
DECLARE DI VI DENDS DS UN UNLESS I T EXCEED DS S 100 %
SOM ME ETHI NG NA HI NDI NA SAKOP NG COMM MMON
PAI D UPCAPI TALSEC.43
SHARE RI GH HT TS
be en s ec ur ed;or( 3)whe ni tcan bec l e ar l ys hown t hat suchre t ent i oni snecessaryunderspeci alci rcum ms st ances obt ai ni ngi nt hecorporati on,suchaswhent her ei sneed f o rs pe c i a lr e s e r v ef o rpr o ba bl ec ont i ng e nc i e s .( n) I t depends because t her e ar et hre et ypes of non-
-
cumul ati vepref err edshares Di s c r e t i o na r ydi v i d endt y p e Mandat oryi fearned Earnedcumul ati veordi vi dendcr edi tt ype
Comp mparecum mu ul at i vesharef r om noncum mu ul at i ve ,ear ned
-
FOUNDER’ S
EXCLUSI VE RI GH HT TS NA SI LA LANG ANG MERON ON,SO
Stoc k cor porat i ons ar e prohi bi t ed f r om r et ai ni ng surpl us profit si n exc ess of one hundr ed ( 100 %) %)pe r c e nto ft he i rpa i di nc a pi t a ls t o c k,e x c e p t :( 1) when j us t i fied by defini t ec or por at ee xpans i on pr oj e ct s orprograms msappro ved by t heboard ofdi r ect ors;or( 2) when t he c or por at i on i s pr ohi bi t ed unde r any l oan agree ment wi t h any financi ali nst i t ut i on or cr edi t or , whe t he rl ocal or f or e i gn, f r om dec l ar i ng di v i dends wi t houti t s/hi sconse nt ,and suc hc ons enthasnoty e t
-
PWEDENG MADENY YUNG COM OMMON SHARES,KASI YUNG
be causet he yar enonhol de r sofnonc umul at i v e ?NOTE:
Secti on43. P o we we rt ode c l a r edi v i de n ds .-The boar d ofdi r e ct or s ofa s t oc k cor por at i on ma y dec l ar e di vi dends out of the unr est ri ct ed r et ai ned earni ngs whi c hs hal lbepay abl ei nc ash,i n pr ope r t y ,ori ns t oc k t o al lst ockhol ders on t he basi s ofout st andi ng st ock hel dbyt hem m: :Provi ded,Thatanycashdi vi dendsdueon del i nquent st ock shal lfirs tbe appl i ed t ot he unpai d bal ance on t he subs cr i pt i on pl us c os t s and e xpense s, whi l e s t oc k di v i de nds shal l be wi t hhe l d f r om t he del i nquentst ockhol derunt i lhi sunpai d subscri pti on i s f ul l y pai d:Provi ded,f urt her ,Thatno st ock di vi dend shal lbe i ssued wi t houtt he appro valofs t ockhol ders r eprese nt i ng not l ess t han t wot hi r ds ( 2/3) of the o ut s t a nd i n gc ap i t a ls t o c ka tar e g ul a ro rs p ec i a lme e t i ng dul yc al l e df o rt h epur p os e .( 16a )
Examp mpl e:f oundersshares -ma maybegi ven cer t ai n ri ght s a ndpr i v i l e g e s
-
Eve n comm mmon sharesmaybedeni edt heri ghtt ovot eof f ounders’sharesi ssued<sec. 7>
Sect i on 7. Founder s' shar es. - Founder s' s ha r e sc l a s si fie da ssuc hi nt h ear t i c l e sofi nc o r po r a t i o n maybegi vencert ai nri ght sandpri vi l egesnote nj oyedby t he ownersofot her st ocks,pr ovi ded t hatwherethe e x c l us i v er i g htt ov ot eandbev o t e df o ri nt hee l e c t i o no f di r e c t o r si sg r a nt e d,i tmu mus tbef o ra l i mi t e d pe r i o d no t t o exceed five ( 5)yearssubj ectt ot heapprovaloft he Securi t i es and Exc hange Com mm mi ss i on. The five ye ar peri od shal lcomm mmence f r om t hedat eoft heaf ore sai d appr ovalbytheSecuri t i esand ExchangeCom mm mi ssi on. ( n)
Do you i ncl ude nonvo t i ng share si n passi ng a val i d c o r po r a t ea c t ?
-
Eve n nonvot i ng share s are ent i t l ed t o vo t e under s e c t i o n6
Redeema mabl eshares
-
Di scre t i onary/opti onal
-
Obl i gat oryormandat ory
General l ya corporati on can reacqui rei t sown sharesi f i tha sunr e s t r i c t e dr e t a i ne de a r ni ng s
Exce pt i on: r edee mabl e shar es may be r eac qui r ed i r r e s pe c t i v eo fr e t ai ne de ar ni ng s
c umul a t i v eo rd i v i de ndc r e di tt y pe -
Cumul at i ves hare–whet herornotearned Non-c umul at i ve ear ned cum mu ul at i ve or di vi dend cr edi t
Tr e asur yshar e s
-
The yar et r e asur ywhi l ei nt het r e as ur yac countoft he
t y pe -o nl yi fe a r ne d
c o r po r a t i o n
Par
-
st ate dparval ue;shal lnotbei ssuedl essthanpar
-
Maytheybere i ssuedbythecorporat i on?
YES
-
Nopar wi t houts t at e dparv al ue
I ft h e ya r er e i s s ue dwi l lt h e ybede ni e dt her i g htt ov ot e ?
-
Once r ei ssued t hey shal l bec om me e outs t andi ng st ocks agai n and purc hasersshal lbe ent i t l ed t oal lt heri ght s
-
o nc ef u l l ypa i dnol o ng e rl i a bl e
Corpor at i ons cannot use i t s capi t al s i n decl ari ng
andpri vi l egesast heotherhol dershave
di v i de nds ;no ta l lc a ni s s uenopa rv a l ues e c t i o n6
Vot i ng
-
ent i t l edt ovoteatanymot i onbroughtupi nwri t i ng
Non-v ot i ng
-
no te nt i t l e dt ov o t e
Whatt ypesofs har e sma ybedeni edoft her i ghtt ov ot e ?
Sect i on 57 t r easuryshar eshavenovot i nganddi vi dend ri ght s.Whynot ?
Secti on57. Vo t i ngr i g htf o rt r e as ur yshar e s. Tr e asur ys har e s shal lhav e no v ot i ng r i ghtas l ong as suchsharesr em ma ai ni nt heTreasury .( n) -
Answe r :commi ssi onervs.manni ng page62 firstpar . “ Al t hough aut hori t i esma maydi fferon t heexact l e g a la ndac c o unt i ngs t a t uso fs o c a l l e dt r e a s ur ys ha r e s , t heyaremo moreorl essi nagree mentt hatt r easuryshares
-
Pref err edandr edeema mabl eshar es
arest ocks i ssued and f ul l ypai df orand r eacqui r ed by t h ec o r po r a t i o ne i t h e rbypur c h as e ,do na t i o n,f o r f e i t ur e
I si tc orr ectt ost at et hatcom mm mon shar escan neve rbe
orotherme means.Tre asurysharesarether ef orei ssued
de ni e dt h er i g htt ov o t e ?
shar esbutbei ngi nt het r easuryt heydo nothavet he
st atusofout st andi ngshares.Consequent l y,al t hough a
Sect i on 17. Gr ounds when ar t i c l es of i nco r por at i on or am me endme ment may be r ej ec t ed or di sappr oved. - The Se cur i t i es and Exc hang e Com mm mi ssi on mayrej ectt heart i cl esofi ncorporati on or di sappro veanyame mendmentt her et oi ft hesame mei snoti n co mpl i ance wi t h t he r eq ui r eme ment s of t hi s Code : Pr ov i ded, That t he Com mm mi ss i on shal l gi v e t he i ncorporator sareasonabl et i mewi t hi n whi ch t ocorrect ormodi f yt he obj ect i onabl e port i ons oft he art i cl es or ame mendme ment . The f ol l owi ng ar e gr ounds f or suc h r e j e c t i o no rd i s a ppr o v al :
t r eas ury shar e, not havi ng been r et i r ed by t he corporati on reacqui ri ng i t ,m ma ay be re -i ssued orsol d agai n, such shar es , as l ong as i ti s hel d by t he c o r po r a t i o na sa t r e a s ur ys ha r e ,pa r t i c i pa t e sne i t he ri n di vi dends,becausedi vi dendscannotbedecl aredbyt he c o r po r a t i o nt oi t s e l f ,n ori n me e t i ng so ft hec o r po r a t i o n a sv o t i ngs t o c k,f o ro t he r wi s ee qua ldi s t r i but i o no fv o t i ng powe wer s amo mong st ockhol dersw wi i l lbeeffect i vel yl ostand t h e di r e c t o r swi l lbea bl et op er p e t r a t et he i rc o nt r o lo f t he corporati on,t hough i tst i l lr epresent s a pai df or
1.Thatt heart i cl esofi ncorporat i on oranyame m endment t h e r e t oi sno ts u bs t a nt i a l l yi na c c or d anc ewi wi t ht h ef o r m prescri bed here i n;
i nt e r e s ti nt hepr o p e r t yo ft hec or p or a t i o n.T hef o r e g o i ng e s s e nt i a lf e a t ur e so fat r e a s ur ys t o c k sa r el a c ki ngi nt h e quest i onedshar es.
2.Thatt hepurposeorpurposesoft he corpor at i on are pa t e nt l y unc o ns t i t ut i o na l ,i l l e g a l ,i mmo r a l ,o rc ont r a r y t ogovernme mentrul esandregul ati ons;
I nt hi scase,andundert het erm ms soft het rust agreeme ment ,t hesharesofst ock ofReese
part i ci pat ed
i n di vi dends whi ch t he t rust eerece i ved and t he sai d shareswer evot eduponbyt het rust eei nal lcorporati on
3.Thatt heTr easur er ' sAffid ffi davi tconcerni ngt heamo mount o fc a pi t a ls t o c ks ubs c r i be da nd /o rpa i di sf a l s e ;
me e t i ng s .T he ywe r en ot ,t he r e f o r e ,t r e a s ur ys ha r e s . ”
When t hel aw speaksofout s t andi ngr i ght si tdoe snot 4.Thatt hepercentageofownershi poft hecapi t als t ock t obeowned byci t i zensoft hePhi l i ppi neshasnotbeen comp mpl i ed wi t h as r equi r ed by exi st i ng l aws or the Co ns t i t ut i o n.
i ncl udet reasuryshares
Tr e asur ys har e sma yber e i s sued
-
The yar eac t ual l yas se t soft hecor por at i on
-
Noart i cl esofi ncorporat i on orame mendmentt o art i cl esofi ncorporati on ofbanks,banki ngand quasi banki ng i ns t i t ut i ons , bui l di ng and l oan ass oc i at i ons, t rust comp mpani es and ot her financi al i nte rm me edi ari es, i nsurance comp mpani es, publ i c ut i l i t i es, educat i onal i nst i t ut i ons,andot hercorporat i onsgoverned byspeci al l awsshal lbe acce pt ed orapprov ed bytheC Co om mm mi ssi on
st andi ngst ocksagai n Oncerei ssuedtheybecome meout Thec or por at i onma yc ance lt he m;i ne ffec tt her ewi l lbe ar e d uc t i o ni nt heo ut s t a ndi ngc a pi t a ls t o c ks
-
The code doe s not r equi r e or di nar yc or por at i ons t o pr o v i def o rr e s t r i c t i o ns ,buti td oe sno tl i ke wi s epr o hi bi t
unl essacc om mp pani edbyaf avor abl ere comm mmendat i on of t he appr opri at e gov er nm me entagency t ot he effectt hat such art i cl esorame mendmenti si n accor dancewi wi t hl aw. ( n)
r e s t r i c t i ons -
Ex ampl e :r i g hto ffi r s tr e f us a l -
-
-
Butt hegroundsi nsect i on17 arenotexcl usi ve
The r es t r i ct i on mus t be cont ai ne di nt he ar t i cl es of i nc o r po r a t i o n
I f prov i ded i n byl aws but not i n t he art i cl es of
-
Whenwi l lt hecor por at i oncomme mme ncet oe xi s t ? Sect i on 19
i nc o r po r a t i o nt h e ni twi l lno tb ebi ndi ng -
Sect i on 19. Comm mmenc eme ment of c or por at e e xi s t e nc e . -A pri vat e corporat i on f orme med ororgani zed undert hi sCodecomm mmencest ohavecorporat eexi st ence and j uri di calper sonal i t y and i s deeme med i ncorpor at ed f r om t hedat et heSecuri t i esandExchangeCom mm mi ssi on i ssues a cer t i ficateofi ncorporat i on under i t s offi ffic ci al se al ; and t he r eupon t he i ncor po r at or s , st ockhol der s/me mem mb ber s and t hei r succe ss or s shal l const i t ut eabodypol i t i candcorporat eundert henam me e
Re s t r i c t i o nsa ndpr e f e r e nc e sa r em ma a nda t o r i l yr e q ui r e di n c l o s eco r po r a t i o ns
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I fi t does not provi de res t ri ct i ons i ti s not a cl ose c o r po r a t i o n
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-
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Speci fiedpersons-cl osecorporat i ons
Shoul dal sobei nt hebyl awsnotonl yi nt heart i cl esof i nc o r po r a t i o n
Not r a ns f e rc l a us e
Execut i oncl ause
Ac knowl edgme nt
Tr e asur eraffidav i tpar toft hear t i c l e sofi ncor por at i on
s t a t e di nt hear t i c l e sofi nc o r po r a t i o nf o rt hepe r i o do f t i mem me ent i oned t here i n,unl esssai d peri od i sext ended orthe corpor at i on i s sooner di ssol ved i n accor dance wi t hl aw.( n)
I f not one of t hose speci fied you ar e not i ncl uded be causet her ei se xcl usi vi t yi ncl os ec or por at i ons
Sect i on2327mi ni mum qual i ficat i ons,butt herem ma aybe a ddi t i o na l
Gr oundsf ordi sappr oval
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Onl ys ubs t a nt i a la ndno ts t r i c ti sr e q ui r e d
Ma yt h eSEC r e f us eo rr e j e c tr e g i s t r a t i o n?
Acor por at i ondej ur ec anc omei nt oe xi s t e nceonl yupon t he i ssuance oft he cert i ficat e ofregi st rat i on by t he SEC?TRUEORFALSE?
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TRUE EXCEPTI ON:CO OR RPOR ORATI ON SOLE<se c.112>
Su bmi s s i o no ft h ea r t i c l e so f Sect i on 112. i nc o r p or at i o n. -The art i cl esofi ncorporat i on mustbe v er i fie d,be f or e fil i ng,by affidav i toraffir mat i on oft he chi ef arc hbi shop, bi shop, pri est , mi mi ni st er , rabbi or presi di ngel der ,asthecasema maybe,andaccomp mpani edby ac o pyoft h ec o mm mmi s s i o n,c e r t i fic a t eo fe l e c t i o no rl e t t e r ofappoi nt mentofsuchchi efarchbi shop,bi shop,pri est , mi ni st er ,rabbiorpresi di ng el der,dul y cert i fied t o be corr ectbyanynot arypubl i c. Fr om and af t ert hefil i ngwi t ht heSecuri t i es and Exchange Comm mmi ss i on of t he sai d ar t i cl es of
8
i ncorpor at i on,ver i fied by affi ffid davi tor affi ffir rma mat i on,and ac c omp mpani ed by t he doc ume ment s ment i one d i n t he prece di ng paragr aph,such chi ef ar chbi shop, bi shop, pr i e s t ,mi ni s t e r ,r a bbio rpr e s i di nge l d e rs ha l lbe c o m me ea corporat i on sol e and al l te mporal i t i es, est at e and pr o p e r t i e so ft her e l i g i o usde no mi mi na t i o n,s e c to rc hur c h t here t of or e adm mi i ni st er ed or m ma anaged by hi m as such chi ef arc hbi shop, bi shop, pri est , mi mi ni st er , rabbi or pre si di ng el der shal l be hel di nt r ust by hi m as a corporati on sol e,f orthe use,purpose,behal fand sol e be nefitofhi sr el i gi ous denomi nat i on,se ctor c hur c h, i ncl udi nghospi t al s,school s,col l eges,orphan asyl ums, parsonagesandcem me et eri esthereof .( n) -
Muni ci pal i t yofMal abangvs.Beni t o -
Whati st hemi s si ngl i nks oast oconsi de ri tadef ac t o? Al aw,be causet hee xe cut i v eor de ri suncondi t i onal
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Anunc ondi t i onalac taffor dsnor i ght s ,cr e at e snooffic e
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Legalcont em mp pl ati oni twasneverpassedatal l
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I tcant her ef orebequest i onedbyanyperson
I ft hec e r t i fi ca t eo fr e g i s t r a t i o n ha sno tb e e ni s s ue d,ma y
CORPO OR RATI ON SO OL LE-upon fil i ngoft hever i fiedart i cl es o fi nc o r po r a t i o n,o nc efil e di ti sv e s t e d wi t h aj ud i c i a l c a p a c i t y
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Exi st ence ofade f act o can be quest i oned onl ybythe St atedi re ct l yi naquow wa arrantoproceedi ngonl y
ac o r po r a t i o ndef a c t oe xi s t ?
Generalrul esect i on19 Ves t ed wi t h j udi ci al c apaci t y upon i s suance of t he
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NO!
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Number4requi re ment,goodf ai t hi ncl ai mi ngt obeand
cert i ficat ebyt heSEC o
doi ngbusi nessasacorporat i on
Howeve ri ti snotaccurat eaccor di ngt o at t y .
Hal lv s .Pi c c i o
becauset her earet hoset hatcani ssue Ladi a f or ex amp mpl e co ope r at i v es - BUREAU OF
COO OOPER RA ATI VES whi c h
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Mi s s i ngl i nki sg o odf a i t h
r eg i s t er , hom me e
i nsur ance guar ant y co r por at i on- HOME
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The c er t i ficat e was not y e ti s sued by t he SEC, t he mem mb ber s knew and t her ef or et hey wer e notact i ng i n
OWN WNERS
g o odf a i t h,t he r e f o r ea ny bo dyc anq ue s t i o ni t se x i s t e nc e CagayanFi shi ngvs.Sandi ka -
Corporat i onsarecreat edbyl aw Comm mmenc et oe xi s tupon i ss uancebyt heCO ON NCERNED gover nmentcorpor at i onoragency
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Corporat i onbyest oppel
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So def ec t i ve l y f or med so t hat t hey ar e not t o be consi deredadej ureordef acto
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Generalpart ner s-l i abl eeve n beyond hi spromi mi seeven hi spersonalpropert i esarepronet oatt achment
Pr i o rt h e r et oi tha snobe i ng
Lozanovs.Del osSant os
Thet r ans f e roft hepr oper t ywasnotv al i d,i tl i ke wi sedi d no th av et h er i g htt ot r a ns f e r
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Founded onpri nci pl eofequi t y
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Exerci secorporatepowe wers
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Ent er swi t hbusi nesswi t h3rd par t i e s
Dej ur e
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St r i c to rs ub s t a nt i a lc o mp mp l i a nc e
Def acto -
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When t he r ei sno3rd per sons i nvol vedand t hepr obl em
4r equi si t esm mu ustgohand i n hand t akeoutanyo ne of
ar i se s bet wee n
t hem t herecanbenodef actocorporati on
t hems mse l ve s know t hat t her e i s no cor por at i on by
t her e mem mb ber s, t her ef or e t hey
estoppel 1. Ther ei s a val i d st at ut e underwhi ch t he cor por at i on Al be r tv s.Uni v er si t y
coul dhavebeen cr eatedasadej urecorporati on. 2. An at t emp mpt ,i n goo d f ai t h, t o f or m a co r por at i on
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1965case,nosect i on21yet
accor di ng t ot herequi r em me entsofl aw,whi ch goesf ar enough t oamo mountt oa“col orabl ecomp mpl i ance”wi t ht he
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Appl i e dwher et her ul esgov er ni ngag enc y
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A per son pur por t i ng i n be hal f of a non e xi s t i ng
l aw; 3.
c o r po r a t i o n
A userofcor porat epowe wer s,t het r ansact i on ofbusi ness i nsom me ewayasi fi twereacorporati on;and, -
Sect i on 21,youarri veatt hesame medeci si on
4. Goodf ai t hi n cl ai mi ng t obeand doi ng busi nes sas a Chi angKaiSi ekvs.CA
c o r po r a t i o n.
Ar et he r i ght s and obl i gat i ons be t wee n offic e r s and
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di rec t orsofadej ureanddef actot hesam me e? -
YES.Gov er ne dbyt hes amel aw,r ul esandr e gul at i ons
SC based i t s deci si on f r om t he pr ov i si on of t he educat i onact
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I tc annoti mmunei t sel fbyvi rt ueofi t snon comp mpl i ance wi t ht hel aw
Onl yi mport ant i n det erm mi i ni ng, i sf or t he purpose of appl yi ng t he rul es wi t h r egar ds t ot he di r ect and
As sumi ngt her ewasnol aw?
c ol l at e r a la t t a c k
Thee xi s t enc eofadej ur ec annotbeque s t i onede v en by t heSt a t e ,e i t he rdi r e c t l yori ndi r e c t l y
YES,i tma ys t i l lbe s ue d as a s c hoolf ort he pas t32 y e ar st he sc hool r epr esent e d i t se l f as poss es sed of j ur i di c alpe r s onal i t y
9
Generalrul e:a3rd part ytr ansacti ngwi wi t hanon exi st ent
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Chi angkaisi ekcase
corporati onshal lbeest opped t odeny -
Al be r tcas e
Whatwoul d be t he e ffe cti ft he cor por at i on f ai l ed t o
Asi abanki ngv s.s t andar dpr oduct s -
comm mmencet r ansact i on?
Generalrul e:absenceoff r auda personw wh hohasdeal t wi t hanon i nc or por at e dc or por at i onshal lbes t oppedt o
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denyf rom act i onsi nwhi chi thadbenefit ed
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Exem mp pt i ons:when t her ei sf raud t hegener alr ul eshal l
Aut oma t i c Oper at ed butbecome mes subsequent l yi noper at i vef or5 y e ar sonl ya gr ound f ors uspe ns i on,pr opernot i ceand
notappl y
heari ng Sa l v a t i e r r av s .Ga r l i t o s -
Comm mmenc ement
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Examp mpl er eal t ycompany
As a gener alr ul e a per s on who has c ont r ac t ed i ta c o r po r a t i o nl a c ki ngpe r s o na l i t y
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Doct ri nei snotappl i cabl ewheref raudt akesparti nt he
CORPORA RATECHARTER AND I TSAM ME ENDME MENTS
t r a ns ac t i o n
s a mea me sar t i c l e so fi nc o r po r a t i o n?
Anot here xemp t i on I nt e r na t i o na le x pr e s st r a v e la ndt o ur sv s .CA
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Nof raudi nt hi scase
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How co meKahn wasma madel i abl e?
Whatdoy ou unde r s t and byt hewor dc har t e r ?I si tt he
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Corporat echart eri sbroader
Franchi se
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Pri marypowergr ant ed bythest at et obeand actasa c o r po r a t i o n
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Do c t r i neo fi nc o r po r a t i o n -
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Secondary f ranchi se i st he ri ghtorpri vi l ege t hatthe corporati onmayexerci se
Appl i e s onl yi ft hatper son i st r yi ng t o es cape f r om a cont ractwherehei sbenefited
You cannot i s sue i nv es t me nt c ont r ac t s wi t hout a
I nt h i sc as e pe t i t i o ne ri s no tt r y i ng t oe s c ape l i a bi l i t y , butr at he rt heonec l ai mi ngf r om t hec ont r ac t
se condary f r anchi se , kai l angan pri mary muna hi ndi pwedema mauna sec ondarykasisasec t i on 19 i tdoesnot
Wo W oul dt hi sappl yt of or e i gncor por at i on?
i nc o r po r a t i o n
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YES,i tma yappl y
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e x i s tunt i li s s ue d wi t h ac e r t i fi ca t eofr e g i s t r a t i o no r
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Geor gGr Gr ot j ahnvs.I snami
Co r po r a t ee n t i t y
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Corporat i onexi stseparat el yandi ndependent l yf rom t he s t o c kho l de r s
A f or ei gn c or por at i on c annotgai n acc es st oourc our t s unl esstheyat t ai nal i censet oengagei nbusi nessi nt he
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Stockhol derscannotbri ngan act i on,t obri ngback t he pr o pe r t i e so fac or po r at i o n
Phi l i ppi nes butappl yi ng corporati on by est oppel s,t he c o ur ta l l o we d -
Co r po r a t i o n ha snoi nt e r e s ti nt h ei ndi v i dua lpr o p e r t i e s
Mu ni c i p al i t yofMa l a ba ng case
ofi t sme mem mb bers
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Nol aw,hencema maybeques t i onedbyanypers on
Sul ongBayanvs.Ar anet a
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Anunc ons t i t ut i onalac ti snotal aw,tc onf er snor i ght s,
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Corporat i on cannotbri ngan act i on f ortherecov eryof t hepropert i esofi t sm me em mb bers
i ti mpo s e snodut i e s ,i ta ffo r d snopr o t e c t i o ns ,i tc r a t e so offic ffice, i ti si nl egal cont emp mpl ati on, as i noperat i ve as t houghi thadneve rbeenpasses
Car am vs .CA
Hal lv s.Pi c c i o
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Nog oo df a i t h
i ndependentl yf r om oneanother
Corporat i onbyest oppel
Cruzvs.Dal i say
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St ockhol ders cannotbe hel dl i abl ef or t he l egi t i mate o bl i g a t i o nso ft heco r po r a t i o n,t h e ye x i s ts e p ar a t e l ya nd
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Admi ss i on,conductoragr ee me nt
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Fi nalj udgmentagai nstacorporat i oncannotbeenf orced a g ai ns ts t o c kho l de r s
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Wi l lnotappl y amo ngme mber st he ms e l v est her emus t bea3rd p ar t y
Rust anPul pvs.CA
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Cannotes capewhenbenefit ed
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Corporat i onexi stseparat el yandi ndependent l y
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Ge ne r a lr ul e :y o u de a lwi t hac o r po r a t i o n,a st oe s t o pi t
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Co r po r at i o na r ej u r i d i c ale nt i t i e s ,t he yex i s to nl yi nl e g a l
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Excepti ons: 1. f raudul ent l ym mi i srepres ent s the thi rd
contempl at i on, can act onl yt hr ough i t s aut hori zed r e p r e se nt a t i v e s
personma mayfil ean act i on di r ect l yt ot hosem me em mb bers,2. 3rd pa r t ywi l lno tb ee s t o p pe di fhei sno tt r y i ngt oe s c a pe
The ywher esi gnedf orandi nbehal foft hecor por at i on
Mer esubst ant i alo wners hi p doesnotme mean t hati t hasasame mecorporat eent i t y
Pa l a yi nc .v s .Cl a v e LaCam mp panaCoffeeFact ory ,I nc.vs.KKM -
Li abi l i t i es i ncurr ed by t he cor porat i on cannot be e nf o r c e da g ai ns ts t o c kho l de r s ,e t c . ,e v e ni fs t o c kho l de r s ,
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Twoc or por at i onsmanag ed byt hesamef ami l y ,wor ke r s wer emadei nt er c hangeabl y
et c. happens t o own a subst ant i al i nte r est i n t he cor porat i on, me m er e owners hi p does not di sr egar dt he c o r po r a t ee nt i t yt he o r y
Co r po r a t ee nt i t yf o rl e g a lo rl e g i t i ma t epur p os e sonl y Twoormo r ecor por at i ons,oneoft hem wi l lbet r e at e das
Emi l i oCanovs.CI R -
Suedi nt hereoffi ffic ci alcapaci t y
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Reve r se of Sori si gned i n t hei r offic ffi ci al ano vs. CA ( c a pa c i t y )
ame me r ea l t e r e g o
You c annot pi e r ce t he v ei lofcor por at e fict i on when
Tes cov s .WCC
t herearenof actsat t endanti nt hecase
Thet woc or por at i onswher el ocat edi nt hes ameoffic e
Corporat eEnt i t yTheory Cl a pa r o l sv s .CI R
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Thec or por at i oni sposs es sedwi t hape r sonal i t ys epar at e and di st i nct f r om t he i ndi vi dual st ockhol ders or
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Same mea sNAFLU andA. C.Rans om
memb mber s and i s notaffec t ed by t he per sonalr i ght s, o bl i g at i o nsort r a ns ac t i o nsoft h el a t t e r
I ns t r ume nt a l i t yr ul e
Conceptbui l dersv s.NLRC -
I nst rume m ent al i t yrul e.Wh Whati st hei nst rume m ent al i t yrul e? “ wher e one corporat i on i s so org ani zed and contr ol l ed
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Wher e one c or por at i on i s so or gani z ed and c ont r ol l e d
a ndi t saffa i r sa r ec o nduc t e ds ot ha ti ti s ,i nf a c t ,am me e r e
a ndi t sa ffa i r sa r ec o nduc t e ds ot ha ti ti s ,i nf a c t ,ame me r e
i ns t r ume nt a l i t yo radj unc to ft heo t h e r ,t h efic t i o no ft he
i ns t r ume nt a l i t yo rad j u nc to ft h eo t he r ,t h efic t i o no ft he
cor porat e ent i t y of t he “ i nst rume ment al i t y” may be
cor porat e ent i t y of t he “ i nst rum me ent al i t y” may be
di s r e g a r d ed. ”
di s r e g a r d ed -
Hasnoseparat emi mi nd ofi t sown.Wh Whati st he degr eeof
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Court sareconcernedwi t hreal i t yandnotf orm
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Mereownershi p ofal lorsubstant i al l yal loft heshares
1. Contr ol ,not me mer e ma maj ori t y or comp mpl et e st ock cont r ol ,
ofst ock ofa corporati on i s not ,i ni t sel f ,i nsuffici ent
butcompl e t e domi nat i on,notonl y offinanc es butof
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c o nt r o l ?
gr ound f or di sr eg ar di ng t he se parat e cor por at e
pol i cy and busi ness prac t i ce i n r es pect t o t he
personal i t y. And f or t he separat e personal i t y of t he
t ransact i on att acked so t hatthecorporateent i t yas t o
corporat i on t obedi sr egar ded,t hewr ongdoi ngmu mustbe
t hi str ansact i on hadatt heti menoseparat em mi i nd,wi l l
c l e a r l yandc o nv i nc i ng l ye s t a bl i s he d
o re x i s t e nc eofi t so wn wn.
Fra ud must be pr ov en by cl ear and co nvi nci ngl y
2. Suc h co nt r olmusthavebe enuse d byt hedef endantt o
ev i dence amo mount i ng t o mor et han pr eponder ance. I t
comm mmi tf raudorwrong,t operpet uatet hevi ol ati on ofa
cannot be j ust i fied by specul at i on and can never be
st atutoryorotherposi t i vel egaldut y ordi shonestand
presumed.Andonl yi fi tsoughtt ohol dt hest ockhol ders
unj us ta c ti nc o nt r a v e nt i o no fpl a i nt i ff’ sl e g a lr i g ht s ;
l i a bl edi r e c t l yf o rc or po r at e de bt
and,
Pa l a c i ov s .F e l y
3. The af or es ai d c ont r ol and br e ac h of dut y must proxi matel ycauset hei nj uryorunj ustl osscomp mpl ai ned
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Pi e r c i ngt hev e i lo fc o r po r at efic t i o n Fel yt r ans and t he ot her cor porat i on i s one and t he
of . -
sam me e
Theabse nce ofone oft heel eme nt spr e v ent s“ pi e r c i ng t h ec o r po r a t ev e i l . ”I na ppl y i ngt he“ i ns t r ume nt a l i t y ”o r “ al t er ego” doctr i ne, t he court s are concer ned wi t h
Ma r v e lbl dg .v s .Da v i d
real i t yandnotf orm, m,wi t hhow t hecorporat i on operat ed and t he i ndi vi dual def endant ’ sr el at i onshi p t ot hat
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The r emus tbef act sbe f or et hec our twi l lbej us t i fied i n
o pe r a t i o n.
pi e r c i ngt hev e i lo fc o r po r at efic t i o n
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Corporat i on wasa mer eext ensi on oft heper sonal i t yof
The r e mus tf ac t s and ci r cums t ance s bef or e war r ant pi e r c i ngt hev e i lo fc o r po r at efic t i o n
t heperson
Thec ont r olnec ess ar ydoesnotme ans t oc kowne r s hi p
Yut i v oandsonsv s.Cour tofTaxAppe al s MCConnelvs .CA -
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Whatwher et hef ac t s orc i r cums t ances ar r i v e d by t he courther e?
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Subscri bed capi t alwher e al ladvanced by Yut i vo,t he
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boar dwhe r et hesameasYut i v o
wer el ocat edi nt hes amefloor “ whi l et he mer e owner shi p ofal lornear l y al loft he capi t alst ockofacorporat i on doesnotnecessaryme mean t hati ti s a mer e busi ness condui toft he st ockhol der ,
Comm mmi ss i oner of I nt er nal Rev enue vs . Nor t on and
t hatconcl usi on i samp mpl yj ust i fied wher ei ti sshown,as
Harri son
i n t he case bef or e us, t hat t he oper at i ons of t he corporat i on wer esomer gedwi t ht hest ockhol dersast o
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Courtappl i edt hegeneralrul e
bepr act i cal l yi ndi s t i ngui s habl ef r om t he m.Tohol dt he l a t t e rl i a bl ef o rt h ec or po r at i o n’ so bl i g at i o ns i s no tt o
i g no r et hec or p or a t i o n’ ss epa r a t ee nt i t y ,b utm me e r e l yt o
t heri ght sofany st ockhol derorcl ass ofshare s,orof aut hori zi ngpref erencesi nanyres pectsuperi ortothose ofoutst andi ngsharesofany cl ass,orofext endi ngor s ho r t e ni ngt h et e r mo fc o r po r a t ee x i s t e nc e ;
appl ethe est abl i shed pri nci pl ethatsuch ent i t ycannot be i nv oked orus ed f orpur pos es t hatc oul d nothav e be en i nt e nde d by t he l aw t hatcr eat e dt hats epar at e pe r s onal i t y . ”
2.I nc a s eo fs a l e ,l e a s e,e x c ha ng e ,t r a ns f e r ,mo r t g a g e , pl e dg eo ro t h e rd i s p o s i t i o no fa l lo rs ubs t a nt i a l l ya l lo f t hecorporat epr oper t y and asset saspro vi ded i nt he Code;and
Tanboonbe ev s .Jar e nci o -
Whywoul dadr ugc ompanyne edapr i nt i ngmac hi ne
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The pr oper t y mus t be i n pur s uance of a company
3.I nc a seo fm me e r g e ro rc o ns o l i da t i o n.( n)
busi ne ss -
Ceasev s.CA -
Al t e r ego ort hee xt e ns i on oft he pe r s on off or e s twar e
Ri ghtgr ant edonl yi nspeci fied i nst ances
Ar e nonv ot i ng s har es i nc l ude d i n ame ndi ng t he ar t i c l e s of i nc o r po r a t i o n
do e st h eco ur tpi e r c e dt hev e i lo fc o r p o r a t efic t i o n 1 -
Ast onotdepr i v et hehol de r soft he i rsucc es si onalr i ght s
-
Mer e owner shi p of al l or subst ant i al l y al li s not a
100/s XYZABC
2
100/s
j us t i fic at i onofpi er ci ngt hev ei lofcor por at efic t i on To
Fraud mustbepr ove n bycl earand convi nci ng ev i dence cannotpr esume meorspecul at e,t herem mu ustbe f act sand ci r cumst ances
Fraud mustbecl earandconvi nci ngev i dencem mo or et han preponderance Remo moJr .vs.I AC
-
edt odef raud anyone Ther e sol ut i onwasnote nt er
10 100/s =1M/ M/S
whatwoul dbe
t he2/3? Sect i on6l astparagraph Vot i ngshar esar ee xc l udede xc eptt hef or e goi ngi ns t ances 1
1
DelRosari ovs.Nat i onalLaborComm mmi ssi on
2
2
-
Thewr ongdoi ngmus tbec l e ar l ye s t abl i s hed
3
3
-
The r emus tbef act st os uppor t
4
4
5
5
6
6
-
Payme mentofcl ai mscannott husbepr esum me ed I nd ophi lT e x t i l eM Mi i l lv s .CAL I CA
-
How do you di st i ngui sh t hi s rul i ng t o La Camp mpa na, havi ngt hesam me ei ssues:
1& 2=abs e nt 1& &2 2=absentbutgavet hei rwri t t enassent
-
r ol l , empl oy ee s wer e made La c ampan a, one pay i nt erc hangeabl e.Acryl i chadi t sownst andards
3& 4=obj ect ed 3& &4 4=obj ect ed
PNB vs.Ri t rat t oG Gr r oup 5& 6=appr ov e dt heamendment
5&6=appr ov ed
-
Co nt r o lt e s t -
Wo W oul dt he r ebeav al i dame ndme nt
Notm me er ema maj ori t ybutr athercom mp pl et e
-
Twi nacewasonl yasubs equenti nt er es t edpar t y
-
Ass e t sandmac hi ner i es
Ame ndme ntoft hear t i c l e sofi ncor por at i on
-
Expresspowergrant edt oacorporati on
Sect i on16
-
Appr ai salr i ght Sect i on81 t oobj ectoncert ai nactsandt ransacti ons
Sect i on 81. I nst ances ofapprai salri ght . Anys t oc khol de rofacor por at i on shal lhav et her i ghtt o
Speci ala mendme ment s 37 & 38 shor t eni ng t hatwoul d r e s ul tt odi s s o l ut i o nr e q ui r ep r i o ra ppr o v a lb yt heSEC
Sect i on 37. Power t o ext end or shor t en c o r p o r a t et e r m. -A pri vat ecorpor at i on mayext end or shor t en i t s t er m as s t at ed i n t he ar t i cl es of i ncorpor at i on when appr oved by a maj ori t yvot eoft he boar d ofdi r ec t or sort r us t ee sand r at i fie d atame e t i ng by t he s t oc khol de r sr e pr ese nt i ng at l eas tt wot hi r ds ( 2 /3)o ft h eout s t a ndi ngc api t a ls t o c ko rb ya tl e a s tt wo t hi r ds ( 2/3) of the mem mb ber si n cas e of nonst oc k corporati ons.Wri t t en not i ceoft heproposed acti on and oft heti meandpl aceoft hem me eet i ngshal lbeaddress ed t oeach st ockhol derorme mem mb berathi spl aceofres i dence asshownont hebooksoft hecorporat i onanddeposi t ed t otheaddress eei nt hepostoffic fficewi t h post agepr epai d, o rs e r v e dpe r s o na l l y :Pr o v i de d,Tha ti nc a s eo fe x t e n s i o n of cor porat et er m, any di sse nti ng st ockhol der may
di sse ntand dema mand payme mentoft he f ai rval ueofhi s s ha r e si nt hef o l l o wi ngi ns t a nc e s :
e e r c i s e hi s ap p r a i s a l ght under t he condi t i ons px r o v i d e di n t h i s c o d e . ( n ) ri
1. I n c as e any ame me ndm me ent t o t he ar t i c l e s of i ncorporati on has t he effectofchangi ng orrest ri ct i ng
Sect i on 38. Powe wert oi ncr ease ordecr ease capi t al st oc k; i ncur , cr eat e or i ncr ease bonded
approvedbytheCom mm mi ssi on i fi t seffectshal lprej udi ce t h er i g ht so fc o r po r at ec r e di t o r s .
- No cor por at i on shal li ncr eas e or i ndebt edness. de c r e a s ei t sc api t a ls t o c ko ri nc ur ,c r e a t eo ri nc r e a s ea ny bondedi ndebt ednes sunl e ssappr ov edbyama j or i t yv ot e o ft hebo ar dofd i r e c t o r sa nd,a tas t o c kho l d er ' sme me e t i ng dul y cal l ed f or t he purpose,t wot hi r ds ( 2/3)of t he out st andi ng capi t al st ock shal lf avor t he i ncrease or di mi nut i on of t he capi t al st ock, or t he i ncurri ng, cr eat i ng or i ncre asi ng of any bonded i ndebt edness . Wr i t t e n not i ceoft hepr oposedi nc r easeordi mi nut i onof t he capi t al st ock or of the i ncurri ng, creat i ng, or i ncr easi ngofanybonded i ndebt ednessand oft het i me and pl ace oft he st ockhol der' s mee t i ng atwhi ch t he proposed i ncre ase ordi mi nut i on oft hecapi t alst ock or t hei ncurri ngori ncr easi ngofanybonded i ndebt edness i s t o be co nsi der ed, mu must be addr es se d t o ea ch st ockhol derathi spl aceofr esi denceas shown wn on t he booksoft hec or por at i onandde pos i t edt ot headdr essee i n t he post offic ffice wi t h post age pr epai d, or se rv ed pe r s o na l l y . A ce r t i fic at ei ndupl i cat emus tbesi gnedbya maj ori t y of the di r ect or s of the cor porat i on and counter si gnedbythechai rm ma an andt hesecr et aryoft he s t o c kho l de r s 'me e t i ng ,s e t t i ngf o r t h: ( 1) That t he r equi r em me ents of thi s sect i on have been comp mpl i edwi t h;
Nonst ock corporat i ons ma may i ncur or cr eat e bonded i nde bt edne ss,ori nc r e ase t he same ,wi t ht he approvalbyam ma aj ori t yvot eoft heboardoft rustee sand ofatl eastt wo-t hi rds( 2/3)oft hem me em mb bersi nam me eet i ng dul yc al l e df o rt hepur p os e . Bonds i ss ued by a co r por at i on shal l be r eg i s t er ed wi t h t he Sec uri t i es and Exchange Comm mmi ss i on, whi c h shal l hav e t he aut hor i t y t o deter mi net hesuffici encyoft het erms mst here of .( 17a)
The v ot e mus tbe c as tatt he me e t i ng cal l e df or t hat purpose
Wr i t t e nass entwoul dnots uffice
Whendoame ndme nt sbe comev al i dandeffe ct i v e?
-
Onl yupont heappr ov aloft heSEC TRUE UE OR FALSE?
-
FALSE becausei tcan beval i d upon t hedat eoffil i ngi f not act e d upon wi t hi n 6 mont hs wi t hout f aul t a t t r i but a bl et ot h ec or po r at i o n
( 2)The am mo ountoft he i ncre ase ordi mi nut i on oft he c api t a ls t o c k; ( 3)I fan i ncre ase oft hecapi t als t ock,t heamountof capi t al st ock or number of share s of no-par st ock t hereof act ual l y subscri bed, the name mes, nati onal i t i es andresi dencesoft hepersonssubscri bi ng,t heam mo ount o c a pi t al t oc o r n u m e r of n p a rs t oc k su s c r i b e d b y ef ac h , a n ds t h ek a m mo o u n tb p a i d b yo e a c h o n h i s sb u b s c r i p t i on i n cash orpropert y,ort heamountofcapi t als t ock or numberofsharesofno-parst ockal l ot t edt oeach st ockhol deri fs uch i ncr easei sf orthepurposeofm ma aki ng e ffe c t i v es t o c kdi v i de ndt h e r e f o raut h or i z e d; ( 4)Anybonded i ndebt ednesst obei ncurr ed,c r eat ed or i nc r e a s e d; ( 5)The act uali ndebt ednessoft he corporat i on on t he dayoft hem me eet i ng;
Whyi si tr e t r oact i v e?
Whatpr ovi si onma ybeame nded,al t e r edorr epeal ed
Can youchangename me,addr essf orexamp mpl eshema marr i ed orc hangedaddr ess ?
-
NO.youcannotchanget hat
F ai ta c c o mp mp l i ,arebeyondt hepowe wersoraut hori t yoft he
corporat i on t o change, al t er or modi f y.These woul d i nc l udet hef o l l o wi ng : -
Name mesoft hei ncorpor at orsand
-
Thei ncor por at i ngdi r ect or sort r us t ees ,
-
Thenameoft het r eas ur e ror i gi nal l yorfir s tel ec t ed by t he subscr i ber s orme mem mb ber stoactassuch unti lhi s
Thenumberofshar esandamo untor i gi nal l ys ubsc r i be d and pai d outoft heori gi nalaut hori zedcapi t als t ock of t hecorporati on,
-
The dat e and pl ace of e xe cut i on of t he ar t i cl es of i nc o r po r a t i o n,
-
Thes i gnat or i e sandac knowl edgme ntt her e of .
-
Al lot he rpr ovi si ons orma t t e r ss t at ed orcont ai ned i n t heart i cl esaresubj ectt oame mendm me ent .
F ounde r ’ so rs i g na t o r i e sh i n dipwe dep al i t a n
Nam me es,nati onal i t i es-youcannot
Ca pi t a l -r i g htg r a nt e db yl a wt oa l lc o r po r a t i o n
Pai dupcapi t al -NO
Rest ri ct i on and t r ansf er ofshares i n ordi nary st ock c o r po r a t i o ns
-
-
Youcan,butc l os ecor por at i oncannot Se c t i o n9 6,o t h e r wi wi s ei twi l lno tb eac l o s ec o r po r a t i o n
Sect i on 96. De fin i t i o na nd a pp l i c a bi l i t yo f l osecorporat i on,wi t hi nt heme meani ngoft hi s Ti t l e.-A c
13
Code,i s one whose art i cl es ofi ncorporat i on provi de t h at :( 1)Al lt h ec or po r at i o n' si s s ue ds t o c ko fa l lc l a ss e s , excl usi veoft re asuryshares,s hal lbehel d ofr ecordby not mo mor et han a spe ci fied number of pe r so ns, not exceedi ng t went y( 20) ;( 2)al lt he i ssued st ock ofal l cl ass es shal l be subj ec tt o one or mor e spec i fied r e s t r i c t i o nso nt r a ns f e rpe r mi mi t t e db yt h i sTi t l e ;a nd ( 3) Thecor por at i on shal lnotl i s ti n anys t oc ke xc hangeor makeanypubl i cofferi ngofanyofi t sst ockofanycl ass. Not wi t hst andi ng t hef oregoi ng,acorporati on shal lnot bede eme d acl os ec or por at i on when atl e as tt wot hi r ds ( 2/3)ofi t s vot i ng st ock orvoti ng ri ght si s owned or cont rol l ed by anot hercorporati on whi ch i snotacl ose corporati onwi t hi nt heme meani ngoft hi sCode.
di r ect or ,whi ch shareshal ls t and i n hi s name on t he booksoft hecor por at i on.Anydi r ec t orwhoc eas est obe t h eowne ro fa tl e a s to ne( 1)s ha r eo ft hec a pi t a ls t o c ko f t hecorporati on ofwhi ch hei sa di rect orshal lt her eby ce ase t o be a di r ec t or . Tr ust ee s of nonst oc k cor porat i ons mustbe mem mb ber sther eof .A maj ori t y of t h e di r e c t o r so rt r u s t e e sofa l lc o r p o r at i o nsor g a ni z e d undert hi sCodem mu ustberesi dent soft hePhi l i ppi nes. -
-
Any cor por at i on ma y be i nc or por at e d as a c l o s ec or p or a t i o n,e x c e ptmi ni ngo ro i lc o m mp pa ni e s ,s t o c k exchanges,banks,i nsurancecom mp pani es,publ i cut i l i t i es, e duc a t i o na li ns t i t ut i o nsa ndc or p or a t i o nsd ec l a r e dt obe v es t ed wi t h publ i ci nt e r es ti n ac cor dance wi t h t he pr o v i s i o nsoft h i sCo de . The pr ovi si ons oft hi s Ti t l es hal lpr i ma r i l y g o v e r nc l o s ec or p or a t i o ns :Pr o v i de d,Tha tt hep r o v i s i o ns ofother Ti t l es ofthi s Code shal lappl y suppl et ori l y e x c ep ti ns o f a ra st h i sT i t l eo t he r wi s epr o v i de s .
Co nt r o l l e db yt hebo ar do fd i r e c t o r s Aut hor i t yar ehowe v e rr es t r i c t edt ot hedayt oday Stockhol dersma mayhaveal lt hepr ofitbutwi l lt urn over t hema manageme mentt ot hegover ni ngboard
-
Butunl esst hel aw provi dest hepowe wermaybedel egat ed
Generalrul e
-
Corporat i onsm mu ustsi tandactasabody
-
Wi l lbeboundbycor por at eoffic e r si ft he yact e d wi t hi n t he5cl assi ficat i onpage150 Ra m mi i r e zv s .Or i e nt a l i s tc o .
Tr ans f e r c l aus e, e xecut or c l aus e, ac knowl edgme nt , t r easuryaffi ffid davi t NO
-
What was t he posi t i on of Fer nande zi n t hi sc ase ? TREASURER
Phi l i pp i n eFi r s tI ns ur a nc ec a s e -
Whydi dt hecour tr ul et hatact i onsofFer nandezbound t hecorporati onwhenhei snotevenaboardofdi rec t or?
Mer echangei nt henameofacorpor at i on orbyme mer el y comp mpl yi ngwi t ht hel aw i sge neralam me endm me ent
“ i fa man i sf ound act i ng f ora corporat i on -
wi t ht he e xt e r nali ndi c i a ofaut hor i t y ,any pe r son not
I tdo e sno tc h ang ei t spe r s o na l i t y .I ti st h es a m me epe r s o n
havi ng noti ce ofwantofaut hori t y,may usual l yr el y
i nadi ffer entname.t hechart eri st hesam me e
upon t hose appear ances ;and i fi tbe f ound t hatt he
Ame ndme ntofacor por at et e r m
di r ect or s had permi mi t t ed t he agent t o exe r ci se t hat aut hor i t y and t her eby hel d hi m out as a per so n
-
Ext endi ng t he sam me ecan neve rbem ma ade7 ye ar spri or ?
comp mpetentt obi ndthecorporat i on,orhadacqui escedi n
TRUE orFALSE
a cont r actand r et ai ned t he benefitsupposed t o have be en conf er r ed by i t ,t he c or por at i on wi l lbe bound,
-
FALSE. I tcan be i ft her ear ej ust i fiabl ereasons f or
not wi t hst andi ng t he act ualauthori t y may neverhave
ear l i ere xt ensi onasma maybedet er mi nedbytheSEC
Can you ext end t he cor porat et er m i fi thas al r eady
be engr ant ed. ” -
e x pi r e d ? -
Once t he t er m ex pi r es wi t hout a n am me endm me ent hav i ng
Cont r act smu mustbema made by t he di r ec t orand nott he s t o c kho l de r s
-
ha ppe ni tc e a s est oe x i s ta sabo dypo l i t i c .I ti sdi s s ol v e d
Ac t i ons oft he s t oc khol der si ns uc h ma t t er si s onl y advi soryandnoti nanywaybi ndi ngi nt hecorporati on
a ut o m ma a t i c a l l yo nt h eda yi te x pi r e s . Ba r r e t ov s .L apr e v i s o r aFi l i p i n a
Al hambr ac i g arandPNBc ase
I nst anceswhen t he SEC al l owedext ensi on whosete rm
-
Everyt hi ngema manatesf rom t heboardofdi rec t ors
hasal readyexpi red
-
Stockhol ders act i on i s me mer el y advi sory except t hei r approvalorvot ei snecessarytoprov eaval i d corporate
-
Al loft hem i nv ol v e d ar ei ns t i t ut i onsofl ear ni ng,i twas
act
t he casei n ordert o avoi d conf usi on t hatwoul d ari se l at e ro n.
BOARD RD O OF F DI RECTOR ORS/TRUSTEES
Qual i ficat i ons:
-
No ci t i zenshi pr equi re ment,atl eastma maj ori t y mustbe r e s i de nt s
Can have a gov er ni ng boar d consi st i ng sol el y of f o r e i g ne r s
-
But we hav e t o t ake i nt o co nsi der at i on par t l y nati onal i zed i ndust ri esand ot herl awswh whi ch prohi bi t s o rl i mi t sf o r e i g no wne r s hi p
-
Ant i dummy mmyact
-
Ut i l i zat i on devel opme m entofnat ur alr esources60% must be owned by Fi l i pi no c i t i z ens ,t he r ef or et he y onl y own 40%10 mem mb ber st heycan onl yhave4seat s,butnot ent i rel ycorrectbecauset hel aw mayprovi de ot herwi se;
14
e duc at i o na li ns t i t u t i o nsr e s t r i c t e dt oFi l i pi no s,butt he r e
Doyou i ncl udet hevot eof1 & 2 t ohav eaquor um t o
areexcepti onswh when creat edbyre l i gi ousandchari t abl e
haveaval i dm me eet i ng?
i ns t i t ut i o ns . -
Byl aws may prov i de addi t i onal qual i ficat i ons and di s q ua l i fic a t i o ns
-
NO,quorum r equi r em me ent si s401, 000
Toqual i f yasadi r e ct orhemus townatl e as t1s har e
Quorum r equi r em me enti s501k Ho l de r so fno nv o t i ngs ha r e sar eo nl ye nt i t l e dt ov o t ei nl a s tp ar .Of s e c t i o n6
Shoul dt hest ockhol derbethe equi t abl eorbenefici al
-
o wne ri no r d e rt oq ua l i f yasadi r e c t o r ?
1-200k
NO,i ti snotnecessary ,asl ongasyou arel i st ed i nt he
2-200k
booksasownerofoneshar e 3-200k Leevs.CA 4-100k -
Asl ongasy ou ar el i s t ed i nt hebooksasowne rofone
-
share
5-100k
Undert heol dl aw hemu mustbet hebenefici alownerand
6-100k
l egalownert here ofbuti nt henew l aw i ti snotr equi red asl ongasi tst andsi nhi sname mehei squal i fies 1A100t /S
B( owni nt het r ustofX)i sBqual i fie dt obea
di r e c t o r ?
7-50k 8-40k 9-5k
2
10-5k
3-10
=1MS
2–t r a ns f e r r i ngt he r ev o t i ngr i g ht si nf a v oro fVT
1&2 i s abs ent , 3&4 ay aw t um ma akbo and hi ndi nagv ot e 610, t umakbo and ni nom mi i nat eni l a yung sari l ini l a and castal lt hei r
Ot h e rr i g ht swi l la c c r uei nf a v o roft h e m m, ,b utno tt hev o t i ngr i g ht s v ot i ngr i ght smus tber e cor deri nt hebooksoft hec or por at i ont hat i ti st r a ns f e r r e d PNBI FL-whol l yownedsubsi di aryofPNB
share sonthems msel ves
-
Whowi ns ?Orwhog e t sel ec t e d? Novot er equi r em me ent ,t heonewhoge t st hemo mostnumber o fv o t e sg et se l e c t e d,s e c t i o n24.
PNB wi l lassi gntoPNBI FL nom mi i nalshare sand PNBI FL now wi l l beabl et obenomi nat ed
Gen.Rul e:
-
Whati sc umul at i v ev ot i ng? Proc ess of mu mul t i pl yi ng t he number of shares t ot he numbe ro fd i r e c t o rt obee l e c t e d
-
Ter m ofone y ear who wi l ls er v e as suc h unt i lt he r e successorsareel ect edandqual i fied
-
Mat t er of ri ght grante d t o st ockhol ders i n a st ock c o r po r a t i o n
Excepti on: 1t o5has200k/sandme mem mb ber soft hesame mef am mi i l y-maj ori t y800k
-
Non-s t ockcorporati oncanservef orat erm of3years
t heyhave4M vot est heyareguarante ed4seat s
-
Educat i onalnonst ock-t erm oft hegover ni ngboardcan
6to10 arenotr el ated-1seat1M vot es
be5y ear s
-
r e p r e s e nt a t i o ni nt heb oa r d
Mayt hi st er m excee doneye ar? Ye s,t he yma ys er v ei n a hol d ov erc apaci t yunt i lt hei r
Cumul at i ve t o al l ow t he mi nori t yt o have a r i ght f ul
I si ta l l o we di nano ns t o c kc o r po r a t i o n?
-
No tg e ne r a l l ya va i l a bl e
successorshavebeendul yel ect edandqual i fied De t e c t i v ea ndpr o t e c t i v eb ur e a uv s .Cl o r i b el -
I nt heby-l aws,managi ngdi rect ormu mustbeel ect ed f rom
-
Sect i on 89 unl ess t he art i cl es or byl aws al l ow cumul ati vevoti ng
am mo ongt hems mse l ve s -
Mustbedul yel ect edandqual i fied
How arethedi rect orsel ect ed? 1-100T/S
Sect i on 89. Ri g htt ov o t e . -Theri ghtoft he mem mb bersofanycl assorcl assest ovot ema maybel i mi t ed, br oade ne d or deni ed t ot he e xt e nt s pe ci fie di n t he art i cl es of i ncorporat i on or t he byl aws. Unl ess so l i mi t ed,broadened ordeni ed,each mem mb ber ,r egar dl ess o fc l a ss ,s hal lbeent i t l e dt oo nev ot e .
2-100T/S
Unl essotherwi wi seprovi ded i nt heart i cl esof i ncorpor at i on or t he byl aws,a mem mb ber ma may vot e by
3-100T/S
proxyi naccordancewi t ht heprovi si onsoft hi sCode.( n)
Vot i ng by ma i lor ot he rs i mi l ar me ans by mem mb ber sofnonst ock cor porat i ons maybe aut hori ze d by t he by l aws of nons t oc k c or por at i ons wi t h t he
15
appr ovalof ,and unders uch condi t i ons whi chm ma aybe pr e sc r i bed by , t he Sec uri t i e s and Exc hange Comm mmi ss i on.
Ot herc orporat eoffic fficer sot hert han t hegover ni ngboard
Excepti on:
-
De l e g at i o n
-
Ex pr e s s l yc o nf e r r e d
-
apparentaut hori t y
s e c t i o n 25
Cor Sect i on 25. por at e offic fficer s, quor um. m. I mmedi atel y af t er t hei r el ect i on, the di re ct ors of a corporati on mustf orma mal l yorgani zeby t heel ect i on ofa presi dent ,whoshal lbeadi re ct or ,atr easure rwhom ma ay orma may notbe a di r ect or ,a sec r et aryw wh ho shal lbe a res i dentand ci t i zen oft hePhi l i ppi nes,and such ot her offi ffic cer sasmaybeprov i ded f ori nt he byl aws.Any t wo ( 2)ormo moreposi t i onsma maybehel d concurr entl ybythe same meper son,exc eptt hatno oneshal lactaspresi dent andsecr et aryoraspre si dentand t re asur eratt hesam me e t i me. The di r e ct or s ort r us t e es and offic e r st o be el ect edshal lperf orm t hedut i esenj oi nedont hem byl aw a ndt heb y l a wso ft hec o r po r a t i o n.Unl e s st h ear t i c l e so f i ncorporat i on or t he byl aws provi de f or a gr eat er maj ori t y , a maj ori t y of t he number of di r ect or s or t rusteesas fixed i nt he art i cl es ofi ncorporati on shal l const i t ut e a quorum f orthe t ransact i on ofcor porat e busi ne ss ,ande v er yde ci si onofatl eas tama j or i t yoft he di rec t orsortr ust eesprese ntatam me eet i ngatwhi cht here i saquorum shal lbeval i dasa corporateact ,exceptf or t heel ect i on ofoffi ffic cerswhi ch shal lre qui ret hevoteofa maj ori t yofal lt heme memb mbersoft heboard.
-
Thec hai r ma nma ybeanot he rpe r son
Thepr e si dentma yal sobeanot herpe r son
-
Mustpassfirstt hecont r ol l erandcounsel Whati ft henot i c er equi r e me nti snotc ompl i e dwi t h?
Not i ce r equi r em me ent mu must be comp mpl i ed wi t h hence i t t he SC C, ,i tm ma ay be r at i fied expr ess l yi ft here i sa subsequentmeet i ngcal l edf ort hatpurpose
-
I mpl i edl ythroughacts
-
As unci onwasawar eoft hecor por at i onsobl i gat i on
-
The r ewasi mpl i edr at i ficat i onors hewase s t opped
Puaca si m vs .Neuma mar kandCo. -
Consi dered3c i r cumst anced
-
Chec k whi c h wast he pr oc ee d oft he l oan whi c h was endorse danddeposi ti nt hecorporat eaccount
-
Prohi bi t ed i s presi dentt o be secr et ary ortr easurerat
Neumarkaspres i dentandal sost ockhol der Yuc huc kv s .KongLiPo
-
Boardofdi rec t ormu mustsi tandactasabodyt oarri veat
Gener almanagerusual l yhasthepowert ohi r ebutt he SC sai dthecontr actmustbere asonabl e
acorporat eact
Onl y bi nd t he corpor at i on t ot he ext ent ofaut hori t y
shoul dhavebeen wi t hf orc eandeffect ,butacc ordi ngto
t hesam me et i me
Yaokas i nt r adi ngc ase“ al r e adyaskedi nt hebar ”
L ope zr e a l t yv s .F ot e nc ha
I st hep r e s i de ntr e q ui r e dt ob eas t o c k ho l de r .YES
Ot h e r wi wi s ei twi l lno tb i ndt h ec or p or a t i o n
confinedtohi m orvi rt ueofcust om ms s,usageandpol i cy
Di rec t orsortrust eescannotat t endorvot eby proxyatboardm me eet i ngs.( 33a)
Wher et he offic e r or ag ent i sc l ot he d wi t h act ualor
Whatwoul d cons t i t ut ea quor um i f5 t he n 3 mus tbe
Thec ont r ac the r ei ss ooner oust hati twoul dt hr ow t he c o r po r a t i o ni nt oi n s ol v e nc y
present
boar dpas sav al i dc or por at eact ? -
Franci scovs.GSI S
May t he vot e of2 memb mber s pasta 5 man go v er ni ng
YES.Vot i ngr equi r eme nti sma j or i t yofdi r e ct or spr ese nt
-
GSI Scannotevadet hebi ndi ngeffectoft het el egram
-
Onl y15 mont hsl at ert hatt hecorporat i on sai dt her e
atwhi chther ewhereaquorum 1
1 and 2 pr ese nt =v al i d v ot i ng
r equi r em me ent
wasami s t ake -
Thes i l encecoupl ed wi t ht heuncondi t i onalacc ept anc e oft heothersubsequentremi mi t t ancesi sbi ndi ng t ot he
2
1and2v ot e dy e s
3
3v ot edno
c o r po r a t i o n Bo ar dofl i q ui da t o r sv s .Ka l a w “ Set t l ed j uri sprudence has i tt hat where
4
si mi l aractshave been approve d by t hedi r ect orsas a mat t er of general pract i ce, cust om and pol i cy , the
5
ge ner almanagermaybi nd t hecomp mpany wi t houtf or mal
I si tabs ol ut e ?
aut hori zat i on of the boar d of di r ect ors. I n varyi ng l a ng ua g e,e x i s t e nc eofs uc ha ut h or i t yi se s t a bl i s he d,b y
-
NO, exce pt i n t he el ect i on because i t requi r es t he
pr oof of t he cour se of busi ness ,t he usag es and
maj ori t yofal lt heme memb mbersoft heboard
pract i cesoft he comp mpanyand bytheknowl edgewhi ch t he boar d ofdi r ec t or s has,ormu mustbe pr es um me ed t o
I fb y l a wso rar t i c l e spr o v i deahi g he rv o t i ngr e q ui r e m me e nt
have,ofact s and doi ngs ofi t s subor di nat es i n and about the affai r s of t he cor porat i on. So al so, “ xx
Ar t i fic i albe i ngsmus tac tt hr ough i t sme mbe r sand ac t
aut hori t yt o act f or and bi nd a cor porat i on may be
asabodyt ohaveaval i dcorporateact
presume med f r om act sofr ecogni t i on i n ot heri nst ances whe r et hepowerwasi nf acte xer c i s ed. ”“ xxThus ,whe n,
i nt heusualc ours e ofbusi nessofa corporat i on,an
offi ffic ce r has been al l owed i n hi s offic ffici al capac i t yt o
Mee t i ngs cal l ed by t he pre si dent or t he sec r et ary orderedbythepre si dent
manage i t s affai r s, hi s aut hori t y t o r epr ese nt t he cor porat i on maybei mpl i edf r om t he manneri n whi ch
he has been permi mi t t ed by t he di r ect or st o managei t s
I tdepends i ft heremo movali swi wi t houtcauset heycannot do sobecauser emo movalwi t houtcauseshal lnotdepri ve t he mi mi nori t y st ockhol ders or me mem mb bers oft he ri ght of
busi ne ss . ”
r e p r e se nt a t i v e I n t he cas e at bar ,t he pr act i ce of t he corporat i on hasbeen t o al l ow i t s generalmanagert o
I fwi t hc a us et he yca ne v e ni fi twi l lpr e j udi c et h er i g ht s
negot i at e and execut e contr act si ni t s copra t r adi ng
of t he mi nori t y , pr ovi ded of cour se addi t i onal
act i vi t i es f or and i n NAC CO OCO’ s behal f wi t hout pri or
r e q ui r e me me nt sb y l a wsa ndar t i c l e so fi nc o r po r a t i o n
boar d appr ov al .I ft he by l aws wer et o be l i t er al l y f ol l owed, the board shoul d gi ve i t s st amp mp of pri or
approval on al l cor porat e contr act s. But t hat Board i t s e l f ,b yi t sa c t sand t h r o ug ha c qui e s c e nc e ,p r a c t i c a l l y
am me em mb beroft heboar dofdi r ect ors<sect i on29>
l a i das i det heb y l a wr e q ui r e m me e nto fpr i o ra ppr o v a l . -
Secti on 29. V ac a nc i e si nt h eo ffic ffic eo fd i r e c t o r - Any vac ancy occ ur r i ng i nt he boar d of o rt r u s t e e . di r ect or s or tr ust ees ot her t han by r em mo oval by t he st ockhol dersorme mem mb bersorbyexpi r at i on oft erm, m,may be fil l ed by t he v ot e of at l e as t a ma j or i t y of t he r e ma ma i ni ng di r e c t o r so rt r us t e e s ,i fs t i l lc o ns t i t ut i ng a quorum; m;ot herwi se,sai dvacanci esmu mustbefil l edbythe st ockhol dersi n a regul arorspeci alme meet i ng cal l ed f or t hatpurpose.A di rec t orortr ust ee so el ect ed t o fil la v acanc yshal lbeel ec t ed onl yort heune xpi r ed t er m of hi spredecess ori noffi ffic ce.
Kal aw si gnedal oneand sai dcont ract swer esubm mi i t t ed t otheboardofdi rec t orsaf t eri t sconsummati on andnot be f or e Buenase davs.Bowen
-
Expre ss rat i ficat i on i s made t hrough a f orm ma al boar d a c t i o n
-
I mp l i e dr a t i fi ca t i o ni st h r o ug h:s i l e nc eo ra cq ui e s c e nc e ,
Anydi r ect or shi p ort r us t ee shi pt obefil l edby r eason ofan i ncre ase i nt he numberofdi r ect or s or t r us t e e ss ha l lbefil l e do nl ybyane l e c t i o na tar e g ul a ro r ataspeci alme meet i ngofst ockhol dersorme mem mb bersdul y cal l ed f or t he purpos e, or i n t he sa me mee t i ng a ut h o r i z i ng t h ei nc r e a s eo fd i r e c t o r so rt r u s t e e si fs o s t a t e di nt heno t i c eoft h eme me e t i ng .( n)
acceptancebenefitsandl ast l yrecogni t i onoradopti on
Anunaut hor i z e dactma yne v e r t hel essbebi ndi ngei t he r bye xpr essori mpl i edbye s t oppe l s
Whowi l lfil lupt hev ac ancyc r e at edduet ot heous t erof
Byvi rt ueofsi l encetheboardhadi mpl i edl yaccept edt he act
Ot hert hanbyremo movalorexpi rat i on oft er mt heydonot havet hepower
Byrecogni t i onoradopti on
By vi rt ue ofpaym me entofobl i gati ons ari si ng t heref ore-
Whenwi l lt hev acanci esbefil l edup?
L ope zr e al t y
-
I sno t i c er e q ui r e d ,t ofil lupv ac a nc i e sduet or e mo mo v a l ?
Whati ft hev ac ancyi sduet oani ncr e ase ,cani tbefil l ed
Maydi rec t orsort rusteesbedi squal i fied t oactassuch? up i n t he s am me e me e t i ng wher ei n t he numb mbe ri s
YES,c r i me ,e t c.di s qual i ficat i onsi nbook
i ncr eased? -
Posses s or di sposse ss any of t he qual i ficat i ons or
di s q ua l i fic a t i o ns,c e as et oho l da tl e a s to nes ha r e
El ect i on duetoremo moval i nt he same meme meet i ng not i cei s no tr e q ui r e d
Maydi r ect or sbeoust edf r om offi ffic ce?
-
At l e as t 2/3 of me mber s r e pr ese nt i ng out s t andi ng
El ect i on duet oi ncre asei nnumber-i tmustbesost ated i nthem me eet i ng
capi t al st oc k. Agai n not i ce r equi r eme ment must be
comp mpl i edwi t h 1200
15
same
Sect i on 30. Co mp mp e ns a t i o no fd i r e c t o r s . -I n t heabsence ofanyprovi si on i nt heby-l awsfixi ngthei r comp mpensati on, t he di r ect or s shal l not r ece i ve any comp mpensati on,as such di rec t ors,exceptf orreasonabl e pe r di e ms : Pr ov i de d, howev er , That any s uch comp mpensati on ot hert han perdi em ms sma maybegrant edt o di r e c t o r sbyt h ev ot eo ft hes t o c kho l de r sr e p r e s e nt i ngat l easta maj ori t y oft he out st andi ng capi t alst ock ata r e g ul a ro rs pe c i a ls t o c kho l de r s 'me e t i ng .I nnoc as es ha l l t he t ot al year l y comp mpensat i on of di r ect ors , as such di r ect ors ,exc eed t en ( 10%)per centoft he neti ncome me be f or e i ncome t ax of t he cor por at i on dur i ng t he pr e c e d i ngy e a r .( n)
General l ynotenti t l ed t orecei vecomp mpensati on because
out st andi ng
-
Unl esst heby-l awsal l ows
-
St ockhol dersma mayal sograntpursuantt oama maj ori t yvot e
-
Mustnotexcee dneti ncome meof10% t axoft heprec edi ng y e ar
17
-
Ac t i ngi ns pec i alc apaci t y
-
Wa W at er ed s t oc ks -i s sued,f ul l ypai d up when i nf actt he y havenotbeenf ul l ypai dorpromi mi sedassuch
-
I n,sum di re ct orsma mayr ecei vec omp mpensat i onwhen Ll am ma adovs.CA
1.
t herei saprovi si oni nt hebyl awst ot hateffect -
2. When t he s t oc khol de r s, b y a maj or i t yv ot e of t he
Thecor por at ee nt i t yt he or yc annotbeus edasade f e ns e t oe s capel i abi l i t yi nv i o l a t i o no fB. P .2 2
out st andi ngcapi t alst ockgrantt hesam me e;and, -
3.
I ft hedi re ct orr endersext raordi naryorunsualservi ce
whosi gnedt hec he c kshal lbel i abl e.
Cent ralcooperat i veexchangevs.Ti be -
Ui chi covs.NLRC
Byl awsma mayal l ow,st ockhol dersmayal soal l ow such -
Wher et hec he c ki sdr awn byacor por at i on t heper s ons
What do y ou unde r s t and by t he phr as e“ as s uc h
em mp pl oyme mentofcorporat eemp mpl oyeedonewi t hma mal i ceand
di r e c t o r s ” We W es t er ni ns t i t ut ev s .Sal as
Laborcasecorporat edi rec t orsandoffi ffic cersaresol i dari l y l i abl e wi t h t he corporat i on f or t he t ermi mi nat i on of badf ai t h
3f o l ddut yo fdi r e c t o r s
-
Com mp pensat i onwasgr ant edwi t houtbyl awsaut hori t y
-
obedi ent
-
Pr o hi bi t i o ni sno tas we e pi ngr ul e
-
di l i g ent
Mem mb bersoft heboardmayre cei vewhen t heyr ece i vei n
-
l o y a l
Busi nessj udgme mentr ul e
-
Quest i onsofpol i cyand manageme mentar el ef tsol el yt o
-
as pe c i a lc a pa c i t y -
Mer eactoft heboar dwi wi l lsuffi ffic ce
oot heroffi ffic cer s? I st h e10 %c e i l i ngapp l i c a bl et
-
NO. t he phr ase “ as such di r ec t or ” was use dt wi ce
as agai nstt he f orme mer .The di r ect orsar et he busi ness
<Sect i on30>
manager soft hecorporat i on and asl ongast heyacti n
t he honestdeci si on oft heboard ofdi r ect orsand t he court sarewi t houtaut hori t ytosubsti t ut ei t sj udgment
-
good f ai t h,i t s actuat i ons are notsubj ectto j udi ci al r e v i e w.Mo nt e l i b anov s .Bac o l o dMu r c i aM Mi i l l i ng
TheSC r ul e dt hatt he10% c ei l i ngwi l lnotl i ke wi seappl y i ft he yac t e di nac apa c i t yo t h e rt h an“ a ss uc hdi r e c t o r s ” -
Gove rnme mentvs .ElHogar -
Judi ci ali nt e r v ent i oni snotpr oper
quest i onsofpol i cyandmanageme mentar el ef tsol el ytot he boar dofdi r ec t or s
-
BOD,busi nessma manageroft hecorpor at i on and asl ong a st he yac ti ng o od f a i t h ,i t sac t ua t i o nsar en ots ubj e c t
-
Theappr opr i at e sr eme dyi st ot hosewhocan makeor
t oj udi c i a lr e v i e w
unmaket hebyl aws
L i a bi l i t yofc o r po r a t eo ffic ffic e r s
The y ar e noti ns ur e roft he pr oper t y oft he company , t heywer eguarantor sthatt heent erpr i seundert aken by t hecorporat i onshal lbesuccessf ul
-
Obl i gati onsi ncurr edbyt hoseact i ngf orandi nbehal fof t he cor por at i ons ar e not t her e’ s BUT t her e ar e
Mont el i banovs.Bacol odMur ci aM Mi i l l i ngCo.
e x c e pt i o nse v e ni ft he yar ea c t i ngf o ra ndi nbe ha l fo ft he c o r po r a t i o n
-
Di r ect orsarenotl i abl eduet oi mprudenceorhonest err orofj udgme ment
Tr ama tv s.CA -
Generalrul ewasappl i edi nt hecase
-
Ong act edasoffi ffic cer sandact edw wi i t hi nt hescopeofhi s a ut ho r i t y
-
Dut yo fl o y al t yo fc o r po r at edi r e c t o r s
-
31, 32, 33, 34
-
31, 32, 33- speci fic i nst ances wh when cor porat e offi ffic cer s ma yvi o l a t el o y al t y
-
Courtl ai ddown wn 4i nst anceswhen eve ni fact i ngw wi i t hi n t h es c opeo fh i sa ut h or i t yhei she l ds ol i da r i l yl i a bl e
1. He as se nt s ( a) t o a pat ent l y unl awf ul act of t he
-
32, 33s e l f d e al i nga ndi nt e r l o c ki ngdi r e c t o r
Corporat eopport uni t ydoct ri ne
-
I tp l a c e s adi r e c t o rofac o r po r a t i o ni nt hepo s i t i o no fa
c o r po r a t i o n,o r( b)f o rba df a i t h ,o rg r o ssne g l i g e nc ei n di r e c t i ng i t sa ffa i r s ,o r( c )f o rc o nfli c to fi nt e r e s t , r e s ul t i ngi nd ama g e st ot h ec or p or a t i o n,i t ss t o c kho l de r s
fiduci ary and prohi bi t s hi m f orm sei zi ng a busi ness
orot herpersons;
opport uni t y and/or deve l opi ng i tatthe expense and wi t h t he f ac i l i t i es of t he cor por at i on. He c annot
2. Heconse nt st ot hei ss uanceofwat er edst ocksorwho,
appropri atet ohi msel fabusi nessopport uni t ywhi ch i n
havi ng knowl edge t her eof ,does notf ort hwi t h fil e wi t h
f ai rnessshoul dbel ongt othecorporat i on.
t h ec o r po r a t es e c r e t a r yhi swr wr i t t e no bj e c t i o nt he r e t o ;
3.
Heagr eest ohol dhi msel fpersonal l yand sol i dari l yl i abl e
sect i on 34 make r ef er ence t or ecov ery of “ f orbi dden
wi t ht hec or por at i on; 4.
Hei sm ma ade,bya speci ficprov i si on ofl aw,t oper sonal l y a ns we rf o rh i sc o r p or a t ea c t i o n.
Last parag r aph of se ct i on 31 and t he pr ovi si on of
profits”
Di st i nct i on bet ween sect i on 31 and 34 r el at i vetothe r a t i fi ca t i o nb yt h es t o c k ho l de r s
18
-
The s ec ond par agr aph ofs ec t i on 31 whi c h makes a
-
YES.I fal lt he4condi t i onsar epr ese ntt he ywi l lbev al i d perse
di rec t or l i abl et o accountf orprofit si fhe att emp mptsto acqui r e or acqui r es any i nt er es t adve r se t o t he corporat i on i nr espectt oanym ma at t err eposed i n hi mi n
1. That t he pr es ence of s uch di r ec t or or t r ust ee i nt he
confidenceastowhi chequi t yi mposesa di sabi l i t yupon
boar d me e t i ngi n whi c ht hecont r actwasappr ov ed was
hi m t o deal i n hi s own behal fi s not subj ec tt o
notnecess aryt oconst i t ut eaquorum f orsuchmeet i ng;
rat i ficat i on by t hestockhol ders.Wher eas,i n sect i on 34 i fadi r e c t o rac q ui r e sf o rhi ms e l fabus i ne s soppo r t uni t y
2. That t he vo t e of suc h di r ec t or or t r ust ee was not ne c e s s ar yf o rt hea ppr o v a lo ft h ec o nt r a c t ;
whi c hs houl dbe l ongt ot hecor por at i on,hei sbound t o accountf orsuch profit sunl esshi sacti srat i fied byt he st ockhol dersowni ngorer epresent i ngatl east2/3 oft he
3. That t he co nt r ac ti sf ai r and r eas onabl e under t he ci r cumst ances;and
o ut s t a nd i n gc api t a ls t o c k.
4. That i n c as e of an offi ffic ce r ,t he co nt r ac t has bee n -
I f re pose d i n hi m i n co nfidence, not subj ec tt o r a t i fic at i o n
-
I ft he acqui si t i on i s mer el y t hat of a busi ness
pr e v i o us l yaut ho r i z e dbyt h ebo ar do fdi r e c t o r s .
Whendot he ybe comev oi dabl e?
-
When anyoft het wor e qui s i t e sar eabse nti ti sv oi dabl e,
opport uni t y whi ch has not been r epose di n hi m i n confidence,t he sam me ema maybesubj ectt or at i ficat i on by
buts ubj e ctt or at i ficat i on by 2/3 oft he out s t andi ng
t hest ockhol ders.
capi t alst ockor2/3oft hemem mb ber Di r e c t o rxc o .
Re q ui s i t e sf o rr a t i fi ca t i o n( s ubj e c tt or a t i fic a t i o nb yt he st ockhol dershol di ngorrepresenti ngatl east2/3oft he
AREALTY
out st andi ngcapi t alst ockor2/3oft heme mem mb bers. ) B C
-
i tmustbeatame meet i ngcal l edf ort hepurpose
-
f ul ld i s c l o s ur eoft he a dv e r s ei nt e r e s to ft he d i r e c t o r
Z owns pr oper t y and i s goi ng abroadnev ert oRet urn,he want s
co nce r nedmu mustbema made
t os e l lf o r2 5M t hef a i rma ma r k e tv a l ue i s30M -
t he co nt r ac t i s f ai r and r eas onabl e under t he ci r cumst ances
D
E
Probl em i f sel f -deal i ng di rec t or i nvol ved owns al l or s ubs t a nt i a l l yal lo ft h eshar e so fs t o c ko ft h eco r po r at i o n
E goest oZ and offer st opay t he proper t yf or26 M and l at erhe
t her eby maki ngi teasi l ypossi bl etohavethe cont ract
sel l si tf or30M maki ng4M profit ,oneoft hest ockhol dersl earned
r a t i fi e d
and com mp pl ai ns t hathe shoul d submi tt he profit s.E sai dt hathe wi l lmo v ef orr at i ficat i onofhi sac t uat i on.Cani tber at i fied?
-
l astsent enceofsect i on 32 shoul d bema m adet oappl yby det er mi ni ng t he r easonabl eness and f ai rness of t he
-
cont ract
I tcan berat i fied heme mer el yacqui r edabusi nessowni ng t ot hec or p or a t i o n
-
Sect i on 32. De al i ng so fdi r e c t o r s ,t r u s t e e so r offic ffice r s wi t h t he cor por at i on. - A cont r act of t he c o r po r a t i o n wi t ho neo rmo mo r eo fi t sdi r e c t o r so rt r us t e e s oroffic ffi cersi svoi dabl e,att heopt i on ofsuchcorporati on, unl e s sal lt h ef o l l o wi ngc ondi t i o nsar epr e s e nt :
I twoul dbedi fferenti fi twasent rustedi nhi sconfidence
Anot he rs ce nar i o:
HadA notat t ended t hem me eet i ng hewoul dnothaveknow wn noft he sal ei ti st henama matt err eposedi nhi mi nconfidence
1.Thatt hepre senceofsuch di re ct orortr ust eei nt he boar d me e t i ngi n whi c ht hecont r actwasappr ov ed was notnecess aryt oconst i t ut eaquorum f orsuchmeet i ng;
A cor por at i on cannot r e aqui r ei t s shar ei fi t has no r e s t r i c t e dunr e t a i ne de a r ni ng s
2. That t he vot e ofsuch di r ect or or tr ust ee wa was not ne c e s s ar yf o rt hea ppr o v a lo ft h ec o nt r a c t ;
St rongvs.Rapi de -
Whatdut ydi dhev i ol at e?
3.Thatt hecont racti sf ai rand r easonabl e underthe ci r cumst ances;and
Hev i o l a t e dhi sdut yo fl o y al t y 4. That i n case of an offi ffic cer ,t he cont r act has been pr e v i o us l yaut ho r i z e dbyt h ebo ar do fdi r e c t o r s .
The l aw woul d be i mpot ent i ft he sal e wer e not i nv al i dat e d
-
Whe r eanyoft hefir s tt wocondi t i onsse tf or t h i nt hepr ecedi ng paragr aph i sabsent ,i nt hecase ofa cont ractwi t hadi re ct orort rust ee,suchcont ractmaybe rat i fied by t hevoteoft hestockhol dersrepresent i ng at l e a s tt wo t hi r d s( 2 /3)o ft heo ut s t a ndi ngc api t a ls t o c ko r ofatl eastt wo-t hi rds( 2/3)oft hem me em mb bersi nam me eet i ng c a l l e df o rt hepur p os e :P r o v i de d,Tha tf ul ldi s c l o s ur eo f t h ea dv e r s ei nt e r e s to ft h edi r e c t o r sort r us t e e si nv o l v e d i s made atsuch mee t i ng:Pro vi ded,howe wev er ,Thatthe cont r ac t i s f ai r and r e as onabl e under t he ci rcums mst ances.( n)
Se l f d e al i ngdi r e c t o randi nt e r l o c ki ngdi r e c t o r Whati sas el f deal i ngdi r ec t or ? Di r e c t o ro fac o r po r a t i o nd ea l i ngo rt r a ns a c t i ngbus i ne s s wi t hhi scor por at i on
Ar et hecont r act sand de al i ngofase l f 0de al i ngdi r e ct or v al i d?
Ge ne r a lr ul e :v o i da bl e
Ma yt h eco nt r a c t so fase l f d e al i ngdi r e c t o rbev al i d pe r s e .
adi r e c t o ro fac o r po r a t i o no we sapo s i t i o ni nt r us t
19
-
i n case of confli ct bet ween hi msel f and t hat of t he
Av ai l abl esui t s
corporat i on, he cannot sacri fice t he i nt er est of the
-
corporat i ont ohi sownadvant age
•
asadi r ect orheshoul dhaveact edi nam ma annerasnott o
-
i ndi vi dualorpersonal Wr ongdoneagai ns thi spe r sonasas t oc khol de r
undul ypre j udi cethecorporati on -
•
Cl asssui t
-
Fi l ed by a st ockhol der i n r epr ese ntat i on of ot her
hecannotbeal l owedt oenri chhi msel f
May cor por at e di r ec t or s pur chase t he cor por at e
s t o c kho l de r s
property? -
Awr ongorr e dr e ssdone ,ader i v at i v esui ti nnat ur e
Meadvs .Mccul l ogh -
I nt r a c o r p o r a t er e me me di e s
-
Dem ma andt ot heBOD t oi nst i t ut esuchact i on
-
Neg at edbyt heBOD
i nt e r l o c ki ngdi r e c t o r -a di r e c t o ro fo nec or p or a t i o n who deal sand t r ansact sbusi nessw wi i t h anot hercorporat i on whoi shi ms e l fadi r ec t or
A- di r ec t orofX companyal soadi r ec t orofYc or por at i on -
The one who i ns t i t ut e d mus tbe a s t oc khol de ratt he dat e when t he ac t was done, mu must hav e be e n a
B-
st ockhol derbythatt i me C
Dem ma andwi l lnotber equi re di ft hema maj ori t yoft heBOD aretheone’ sgui l t yoft hew wr rongcharged
D
E-
The cor por at i on mus t be made a par t yi nt he c ase what ev e rsi dewi l lnotma t t erbe causeunde rPhi l i ppi ne
l aw mi sj oi nderi snotagroundf ordi sm mi i ssal
Bot h com mp pani esent eri nt oa contr actand A si t s,i sthe c o nt r a ctv al i d?
-
Nonj oi nderi sagroundf ordi sm mi i ssal
Ye sont hegr oundoff r audori fi ti sunf ai r
-
Maybesubj ectt otheprovi si on ofsect i on 32
-
Sect i on 32 cont r actm ma aybecom me evoi dabl e,hencei tma may
Anybe ne fits houl di nur et ot hecor por at i on St ockhol der bri ngi ng t he act i on i s ent i t l ed t o r ei mbur seme mentsuch asat t orney’ sf eeON ONLYI Ft hecase
a l s ob er a t i fi ed
i s SU UC CCESSFUL t o av oi d har ass ment sui tt ot hei r mana ge ment
XCo. YCo. Aowe20%
Pascualvs.Oroz co -
Aowe20%
By vi rt ue oft he f actt hathe i s a st ockhol der ,ma may ma i nt a i nade r i v a t i v es ui t
I si tg e ne r a l l yv al i do rv oi dabl e ?VALI D
-
Depe ndonhow,whenandwh whatr eas on
25%
-
Seeki ngf ort heyear s1898 al lt heway1907
-
Onl ybecame meast ockhol deri n1903
-
Hecansueonl yi n 1903 f or war dbec ausehemu mustbea
25% VALI D 15% 25% VOI DABLESUB UBJECTTO s ect i on32
st ockhol der Mor et han20subst ant i al
BOD mi s manag es c or por at e offi ffic c er s.Who may fil ea
Ther i ghtofact i on i sper s onali n nat ur e.Hebe camea st ockhol deronl yi n1902
s ui t ? -
De r i v at i v es ui t
-
Bya st ockhol dert oaddr essa wr ong doneagai nstt he
Generalrul e:BOD whi chcani nst i t ut eacasebecausei t hasal lt hepowers.Toal l ow st ockhol derstofil ewoul d vi ol at et hedoct r i neofc or por at ee nt i t yandma yr e sul tt o
c o r po r a t i o na ndt hes t o c kho l d eri nd i r e c t l y
mul t i pl i c i t yofs ui t s -
Stockhol ders cannot ther ef ore general l y fil e a case
Essent i alre qui si t emu musthavebeen astockhol derf rom t het i met heactcomp mpl ai nedoft ookpl ace
EXCEPTofco urs ei naDERI VATI VE SUI UI T
-
De r i v a t i v es ui t
Cannoti nst i t ut ean act i on f r om t heyearshewa was st i l l notast ockhol der
An ac t i on bas ed on i nj ur yt ot hec or por at i ont oe nf or ce
Ever et tv s.Asi aBanki ng
ac or po r at er i g ht -whe r e i nt h eco r po r at i o ni t s e l fi sj o i ne d asanecessarypart y,andrecov eryi si nf avorofandf or
-
t hecorporati on.
Stockhol derscannotor di nari l ycomm mmencesui ti n equi t y and such i si nt he handsofi t sBOD howe wev ert herear e exc ept i ons when t he BOD wi l lnotsue si nce t hey ar e
-
Rem me edy gr ant ed by l aw t o st ockhol derst oi nst i t ut ea caset oreme medyawr wrongdonedi rec t l yt othecorporat i on
t hem ms sel vespri nci pal stothef raud.
a nd i ndi r e c t l yt ot h es t o c kho l de r s ,i ft h ebo ar dr e f us e s
Thef ac t sc ons t i t ut es uffici entcaus eofac t i on
20
-
Thenumbe rofhi shar esi si mma mmat e r i alsi nc ehei snot
I ti s not t he corpor at ei nt er estt o shi el d one f r om
sui ng i n hi s own behal f or f or t he pr ot ec t i on or
c r i mi na lp r o s e cut i o n whi c hi sp e r s o na li nt e r e s t
vi ndi cat i on ofhi sown r i ght ,ort her e dr e ssofa wr ong -
Perezi snotsui ng i n hi sbehal f ,buti n behal foft he
do nea g ai ns thi m,i ndi v i d ua l l y ,b uti nbe ha l fa ndf o rt he
c o r po r a t i o n We W es t er ni ns t i t ut ev s .Sal as
be nefitoft hec or por at i on. 2. Hehast ri edt oexhausti ntr acor porat er em me edi es,hehas made a dema mand on t he boar d of di r ec t or sf or t he
-
Ass umi ngi twasfil e di nt hepr operf or um woul dt he r e
a ppr o p r i a t er e l i e fb utt hel a t t e rha df a i l e do rr e f us e dt o
argumentt hati ti saderi vati vesui tprosper?NO.i ti s
heed hi spl ea.Dem ma and,howe weve r ,i snotr equi r ed i ft he
pe o pl eo ft hePhi l i ppi ne sv s .i ndi v i d ua ld i r e c t o r ,i tm mu us t
comp mpanyi sunderthecomp mpl et econt roloft hedi r ect ors
bes t at e di nt hecomp l ai ntt hati ti sbe i ngi ns t i t ut edasa
whoar et hev er yonest obesued ( orwhe r ei tbec ome s
-
de r i v a t i v es ui ta ndf o randi nb eha l fo ft hec o r po r a t i o n
obv i ous t hat a de mand upon t hem woul d hav e bee n
Granti ng arguendo,t hatthi si s a deri vati ve sui t ,t he
f ut i l e and usel ess)si nce t he l aw does notr equi rea l i t i g antt ope r f o r m us e l e s sac t s ;
same me i s st i l l out ri ght l y di smi mi ssi bl ef or havi ng been wr ongf ul l y fil e di n t he r e gul ar cour t dev oi d of any
3. The st ockhol derbri ngi ng t he sui tmu mustal l eg ei n hi s
j ur i s di ct i on t oe nt er t ai nt hecomp l ai nt .Thecases houl d
comp mpl ai nt t hathe i s sui ng on a deri vat i vecauseof act i on on behal f of t he cor porat i on and al l ot her
have been fil ed wi t ht he SEC whi ch exe r ci sesori gi nal a nd e x c l us i v ej ur i s di c t i o n o v e r de r i v a t i v es ui t s ,t he y
s t o c kho l de r ss i mi l a r l ys i t ua t e d ,o t h e r wi wi s e ,t heca s ei s
be i ngi nt r acor por at edi sput e s,perSe ct i on 5( b)ofP . D.
di s m mi i s s i bl e .T hi si sbe c a us et h ec aus eo fa c t i o na c t ua l l y devol ves on t he corporat i on and not t o a part i cul ar
902-A
s t o c kho l de r . SanMi Mi guelvs .Khan 4. Thecor porat i onshoul dbem ma adeapart y ,ei t heraspart y-
pl ai nt i ff or def endant ,i n order t o make t he court ’ s
Wa W asadema ndma de ?NO
j udgme nt bi ndi ng upon i t , and t hus, bar f ut ur e -
I ti snotnecessarybecauseheobj ect ed i nt heboard
l i t i gat i on of t he same me i ss ues. On On what si de t he
me e t i ng ,b uts t i l li twa sa do pt e dt he r e f o r ei twa sus e l e s s
cor por at i on appear s l ose s i mport ance when i ti s consi deredthati tl ay wi t hi nt hepoweroft hecourtt o di r ectt he maki ng ofam me endme ment oft he pl eadi ng, by
Chasev s.Buencam mi i no
addi ngordroppi ngpart i es,asma mayberequi re di nt he -
Ar gume ntt hatheshoul d bei n es t oppe l ssi ncehefil e d
i nt e r e s to fj us t i c e .Mi Mi s j o i nde rofp ar t i e si sno tag r o und
i nt heU. S. -
Ass umi ng t he cas e pr osper ed i nt he U. S.woul d not
t odi sm mi i ssact i on;and, 5. Anybenefitordama mage sr ec ov er edshal lper t ai nt ot he
est oppel sappl yasagai nsthi m?NO f orest oppel st ost ep
cor porat i on. Thi s i s so because i n al li nst ances ,
i ni tmustbeacasebythecorporati on
deri vati ve sui ti si nst i t ut ed f or and i n behal fofthe c o r po r a t i o na ndno tf o rt h epr o t e c t i o no rv i ndi c a t i o no fa
Re y e sv s .t a n
r i g hto rr i g ht so fapa r t i c ul a rs t o c kho l de r ,o t he r wi s e ,t h e
Co r po r a t ed i r e c t o rar eg ui l t yofbr e a c ho ft r us t
i nd i v i d ua lo rp e r s o na ls u i tt ov i n di c a t ehi spe r s o na lo r
aggri eve d st ockhol der shoul d i nst i t ut e, i nst ead, an -
i nd i v i d ua lr i g ht .Or ,f o rt ha t ma t t e r ,r e p r e s e nt a t i v eo r -
As t oc khol de rma yi ns t i t ut eanac t i ont or e me dyawr ong
cl ass sui tf oral lot herst ockhol ders whose ri ght s are
done
s i mi l a r l ys i t ua t e d ,i nj ur e do rv i o l a t e d , pe r s o na l l yo r i ndi v i dual l y .
-
Fraudi ntheconductofcorporateaffai rs
Executi vecomm mmi t t ee
-
Notal l owedundert heOL OLD l aw
How mayexec ut i vecomm mmi t t eecr eat edandconst i t ut ed?
-
Sect i on 35
Gam mb boavs.Vi ct ori ano -
-
I sde r i v at i v es ui ta ppr o pr i a t ei nt h i sc a s e
The y ar e not vi ndi cat or y dama g e done t o t he corporat i on,butr at hert heywh wher evi ndi cat i ngdamage a g ai ns th i m
-
Sect i on 35. Ex e c u t i v ec o m mm mi t t e e . - The by l aws of a co r por at i on may cr eat e an ex ec ut i v e comm mmi t t ee,comp mposedofnotl esst hant hreeme mem mb ber sof t heboar d,t obeappoi nt edbyt heboar d.Sai dcomm mmi t t ee mayact ,by maj ori t y vot eofal li t sme mem mb bers,on such speci ficmat t er sw wi i t hi nt hecomp mpet enceoft heboar d,as maybedel egat ed t oi ti nt he byl awsoron a maj ori t y v ot eoft heboar d,e xce ptwi t hr e spec tt o:( 1)appr ov alof any act i on f or whi ch share hol ders'approval i s al so r e q ui r e d ;( 2)t h efi l i ngofv a c anc i e si nt hebo ar d ;( 3)t he am me endmentorr epealofbyl awsort headopti on ofnew by l aws ;( 4)t heame ndme ntorr epealofanyr es ol ut i on of t he boar d whi ch by i t s expr es st er ms i s not so am me endabl eorre peal abl e;and ( 5)adi st ri but i on ofcash di vi dendst othesharehol ders.
Vi ol at i on oft he i rr i ght sasi ndi vi dual s,henc eder i v at i v e sui ti snott herem me edy Ev a ng e l i s t av s .Sa nt o s
-
De r i v a t i v es ui ti sno tp r o pe r
-
Cl ai m i s notf orthe benefitoft he cor porat i on,but rat herhi si ndi vi dualbenefit
Fr om t hecasesaboveci t ed,t hesearet herequi r em me ents andtheprocedurest hatmustbef ol l owedi nordert hata deri vati vesui tm ma ayprosper
1.
Thatt hepart ybri ngi ngt hesui tshoul dbeast ockhol der
-
Sai dcomm mmi t t eema mayactandbi ndthecor porat i onbyt he
asoft heti metheactort ransacti on comp mpl ai nedoft ook
maj ori t yvot eofal li t sme mem mb bersexceptwi t h respectt o
pl ace,orwhoseshare shaveev ol vedupon hi m si nceby operat i on ofl aw.Thi srul e,however ,does notappl yi f
t hosema matt ersprovi ded f ori nsec.35 t heseare:
1. Approv alofany act i on f orwhi chshare hol der s’appr oval i sal s or e q ui r e d
21
2.
Thefil i ngofvacanci esi nt heboard;
8. To ente ri nt o mer ger or consol i dat i on wi t h ot her corporati onsasprovi ded i nt hi sCode;
3. Am me endme mentorr epealofbyl awsort headopt i onofnew by l aws; 4. Am me endme ment o rr epe alofany r es ol ut i on oft he boar d whi c h by i t se xpr ess t er ms i s not so ame nabl e or r e p e al a bl e ;a nd, 5.
Di st ri but i onofcashdi vi dendst ot hesharehol ders.
May t he boar d al one cr eat e an ex ec ut i ve com mm mi t t ee wi t houtanyaut hor i t ypr ov i dedf ort heby l aws?
-
NO boar dofdi r ect orsmu mustsi tandactasabodyt ohave av al i dt r a ns ac t i o n
9.Toma make re asonabl edonat i ons,i ncl udi ng t hosef or t h e publ i cwe l f a r eo rf o rho s pi t a l ,c h ar i t a b l e ,c ul t ur a l , s c i e nt i fic ,c i v i c ,o rs i mi l a rpur p os e s :P r o v i de d,Tha tno c o r po r a t i o n,do m me e s t i co rf o r e i g n,s h al lg i v edo na t i o nsi n a i do fa nypo l i t i c a lpa r t yo rc a ndi d at eo rf o rpur p os e sof par t i s anpol i t i c alac t i v i t y ; 10.Toest abl i shpensi on,re t i re ment ,and ot herpl ansf or t he benefit of i t s di r ect or s, t rust ees , offi ffic cer s and em mp pl oyees ;and 11.Toexer ci sesuchot herpower sasmaybeessent i alor necessaryt ocarryouti t spurposeorpurposesasst ated i nt h ea r t i c l e sofi nc or p or a t i o n.( 13a )
May a nonmemb mber oft he boar d ofdi r ec t or s be a mem mb beroft hee xecuti vec om mm mi t t ee?
-
NO, a l loft hem must be me memb mbe r s of t he boar d of di r e c t o r s
-
BOD cannot actby pr oxy i t woul d be abdi cat i on of power s
Purposecl ausesneces sarybecausei tc onf er sand al so l i mi t st heac t ua la ut h o r i t yoft hec or p or a t i o n
CORPORA RATE POW WE ERS AND AUTHOR ORI TY
Corporat eaut hori t ym ma aybecl assi fied i nt othreecl asses name mel y:
1.
Thoseexpr ess l ygrant edoraut hori ze d byl aw i ncl usi ve o ft hec o r po r a t ec ha r t e ro rar t i c l e so fi nc o r po r a t i o n;
2.
Thosei mpl i edl y gr ant ed asareesse nti alorr easonabl y necessaryt othecarryi ngoutoft heexpresspow we ers;
3.
Thoset hatarei nci dent alt oi t sexi st ence.
Sect i on36t o45-POWE W ER GRANTED BY LAW
Sect i on 36. Cor por at e power s and capaci t y. - Eve ry cor por at i on i ncor por at ed under thi s Code has t he power and c a pa c i t y : 1.Tosueandbesuedi ni t scor porat ename; 2.Ofsuccessi on byi t scorporatenamef ort heperi od of t i me st at ed i nt he art i cl es ofi ncorpor at i on and t he c e r t i fic at eo fi nc or po r at i o n; 3.Toadoptanduseacorporat eseal ; 4.Toamend i t sart i cl esofi ncorporati on i n accordance wi t ht hepr ovi s i onsoft hi sCode ; 5.To adoptby-l aws,notcont rar yt ol aw,m mo or al s,or publ i c pol i cy , and t o ame mend or re peal t he sam me ei n accor dancewi t ht hi sCode; 6.I nc as eofs t o c kc o r po r at i o ns ,t oi s s ueo rs e l ls t o c kst o subscri bersandt osel lst ockst osubscri bersandt osel l t r e a s ur ys t o c ksi na c c or d anc ewi t ht h epr o v i s i o nso ft h i s Code;andt oadmi tme mem mb berst othecorporat i oni fi tbea nonst ockcorporati on; 7.T opur c h as e ,r e c e i v e ,t a keorg r a nt ,ho l d,c o n v e y ,s e l l , l ease,pl edge,mo mort gageand ot herwi sedealwi t h such r ealand personal propert y,i ncl udi ng securi t i es and bonds ofot he rcor por at i ons ,ast he t r ansac t i on oft he l awf ulbusi nessoft hecorporat i on mayreasonabl yand ne c e ss ar i l yr e q ui r e ,s ubj e c tt ot hel i mi t a t i o nspr e s c r i be d byl aw andt heCons t i t ut i on;
Secti on 37. P o we we rt oe xt e n do rs h o r t e nc o r p o r a t et e r m. A pr i v at ecor por at i on ma ye xt e nd orshor t e ni t st er m ass t at e di n t heart i cl esofi ncorporati on when approved by a maj ori t yvot eof t heboardofdi re ct orsort rusteesandrat i fied atame meet i ngbythe st ockhol ders r epres enti ng at l east t wot hi r ds ( 2/3) of t he out st andi ng capi t alst ock orby atl eastt wo-t hi rds ( 2/3)oft he memb mbersi n caseofnonst ock corporat i ons.Wri t t en not i ceoft he proposed act i on andoft het i meandpl aceoft hem me eet i ngshal lbe address edt oeach st ockhol derorme mem mb berathi spl aceofr esi dence asshown on t he books oft he cor porat i on and deposi t ed t othe addr ess ee i n t he post offic ffice wi wi t h post age pre pai d, or ser ved personal l y:Provi ded,Thati n caseofext ensi on ofcorporat eter m, anydi ssent i ngst ockhol derma mayexerci sehi sapprai salri ghtunder t hec ondi t i o nspr o v i de di nt h i sc ode .( n) Secti on 38. P o we we rt oi n c r e a seo rde c r e as ec ap i t als t o c k ; i n c ur ,c r e at eo ri n c r e a se b o nde di n de b t e dn es s . -No corpor at i on shal li ncr ease or decrease i t s capi t alst ock or i ncur ,cr eat e or i ncr easeanybonded i ndebt ednessunl essappr ovedbya maj ori t y v ot eoft heboar dofdi r ec t or sand,atas t oc khol de r ' sme e t i ngdul y c a l l e df o rt hepur p os e ,t wo t hi r d s( 2/ 3)o ft heo ut s t a nd i n gc api t a l s t o c ks ha l lf a v o rt hei nc r e a s eord i mi nut i o no ft hec api t a ls t o c k,o r t hei ncurr i ng,cr eati ngori ncre asi ngofanybonded i ndebt edness. Wr i t t e nnot i ceoft hepr opose di ncr e aseordi mi nut i onoft hec api t al st ock oroft he i ncurr i ng,c reat i ng,ori ncre asi ng ofany bonded i ndebt edness and of t he t i me and pl ace of t he st ockhol der ' s mee t i ng at whi ch t he proposed i ncre ase or di mi nut i on of t he capi t al st ock or t he i ncurr i ng or i ncre asi ng of any bonded i ndebt edness i st o be consi der ed, mu must be addr ess ed t o each st ockhol derathi spl aceofre si denceasshown on t hebooksoft he corporat i on anddeposi t edt otheaddr esseei nt hepostoffi ffic cewi t h po s t a g epr e p ai d,o rs e r v e dpe r s o na l l y . A c er t i fic at ei n dupl i c at e mus tbe s i gne d by a ma j or i t y oft he di r ect orsoft hecorporat i on and count er si gned by t hechai rm ma an a ndt hes e c r e t a r yoft h es t o c kho l d er s ' me e t i ng ,s e t t i ngf o r t h : ( 1) That the r equi r em me ents of t hi s sect i on have been comp mpl i edwi t h; ( 2)The am mo ountoft he i ncre aseor di mi nut i on oft he c api t a ls t o c k; ( 3)I fan i ncr ease oft he capi t alst ock,t he am mo ountof capi t al s t ock or number of share s of no-par st ock t her eof act ual l y subscri bed, t he nam me es, nati onal i t i es andresi dencesoft he personssubscri bi ng,t he am mo ount ofcapi t alst ockornumberofno-parst ocksubscri bed by each,andt heam mo ountpai dbyeach on hi ssubscr i pt i on i n cash orpropert y,ort heamountofcapi t als t ock or numberofs haresofno-parst ockal l ot t edt oeach st ockhol deri fs uch i ncr easei sf orthepurposeofma maki ng e ffe c t i v es t o c kdi v i de ndt h e r e f o raut ho r i z e d ; ( 4)Anybonded i ndebt ednesst obei ncurr ed,c r eat ed or i nc r e a s e d; ( 5)The act uali ndebtedness oft he corpor at i on on t he dayoft hem me eet i ng; ( 6)Theamo mountofst ockrepresentedatt heme meet i ng;and
22
( 7)Thevoteaut hori zi ngthe i ncr ease ordi mi nut i on of t he capi t al st ock, or t he i ncurr i ng, cr eat i ng or i ncreasi ngofanybondedi ndebt edness. Any i nc r e ase ordec r eas ei nt he c api t als t oc k ort he i ncur r i ng, cr eat i ng ori ncr easi ng ofany bonded i ndebt ednessshal lr equi r e pri orappr ovaloft heSecuri t i esandExchangeComm mmi ssi on. Oneoft hedupl i catecer t i ficat esshal lbekeptonfil ei nt heoffi ffic ceof t hecorporat i onandt heothershal lbefil edwi t ht heSecuri t i esand Exchange Com mm mi ssi on and at t ached t ot he ori gi nalar t i cl es of i ncorporat i on. From and af t er approvalby t he Securi t i es and ExchangeCom mm mi ssi onand t hei ssuancebyt heCom mm mi ssi onofi t s cert i ficat e of fil i ng, t he capi t al st ock shal l st and i ncreased or decreased andthei ncurri ng,cre ati ngori ncre asi ngofanybonded i ndebt ednessaut hori zed,ast hecert i ficat eoffil i ngm ma aydecl are: Provi ded,Thatt heSecuri t i esandExchangeComm mmi ssi on shal lnot a c c e ptf o rfil i nganyc er t i fic a t eo fi nc r e a s eo fc a pi t a ls t o c k unl e s s acc om mp pani ed by t he swor n st at eme ment of t he t r eas ure r of t he corporati on l awf ul l yhol di ng offi ffic ceatt heti meoft hefil i ngoft he cert i ficat e,s howi ngt hatatl eastt went yfive( 25%)percentofsuch i ncr eased capi t al s t ock has been subscri bed and t hat at l east t wenty five( 25%)perce ntoft heam mo ountsubscri bed hasbeenpai d ei t heri n act ualcash t ot he corpor at i on orthattherehas been t ransf err ed t ot hecorporati on propert yt heval uati on ofwhi ch i s equalt otwent yfive ( 25%)percentoft hesubscri pti on:Provi ded, f urt her ,Thatnodecre aseoft hecapi t alst ockshal lbeapprovedby t heCo mm mmi s s i o ni fi t se ffe c ts h al lp r e j ud i c et her i g ht so fc o r po r a t e c r e di t o r s . Nonst ockcorpor at i onsma mayi ncurorc r eat ebondedi ndebt edness, ori ncreaset hesame me,wi t ht heapprovalby am ma aj ori t yvot eoft he boar doft r us t e esandofatl eas tt wot hi r ds( 2/3)oft heme mbe r si n am me eet i ngdul ycal l edf ort hepurpose.
Bonds i ssued by a cor porat i on shal l be r egi st er ed wi t h t he Securi t i es and Exc hange Comm mmi ss i on, w wh hi ch shal l have the aut hori t yt odet ermi mi nethesuffici encyoft het erm ms st here of .( 17a) Powe - Al l Sect i on 39. wer t o deny pr eem mp pt i ve r i ght . s t o c kho l de r so fas t o c kc o r po r a t i o ns ha l le nj o ypr e e mp mp t i v er i g htt o subscri be t o al li ssues ordi sposi t i on ofshares ofany cl ass,i n p r o po r t i o nt ot he i rr e s pe c t i v es ha r e ho l di ng s ,u nl e s ss uc hr i g hti s deni ed byt heart i cl esofi ncorporat i on oran am me endmentther et o: Provi ded,Thatsuchpreem mp pti veri ghtshal lnotext endt osharest o be i ss ue di nc ompl i ance wi t hl aws r equi r i ng s t oc k offer i ngs or mi ni mum st ockown wner shi pbythepubl i c;ort osharest obei ssued i n good f ai t h wi t ht heapprovaloft hest ockhol dersrepresent i ng t wo-t hi rds( 2/3)oft heout st andi ngcapi t alst ock,i n exchangef or pr oper t y needed f or corpor at e purpos es or i n paym me ent of a p r e v i o us l yc ont r a c t e dde bt .
r i g ht so ft hi r dpa r t i e sund era nyc ont r a c tr e l a t i ngt he r e t o ,wi t h out f urt heract i onorapprovalbythest ockhol dersorme mem mb bers. Not hi ng i nt hi ssecti on i si nt ended t o res t ri ctt hepowerofany corporat i on, wi t hout the aut hori zat i on by t he st ockhol ders or mem mb bers,t osel l ,l ease,e xchange,mort gage,pl edge orotherwi se di sposeofany ofi t spropert yandasset si ft hesame m ei snecessary i nt heusualandregul arcourseofbusi nessofsai dcorporati on or i ft h epr o c e e dso ft hes a l eo ro t h e rdi s po s i t i o no fs uc hp r o pe r t yand asset sbeappropri atedf ort heconductofi t srema mai ni ngbusi ness. I nnonst ockcorporat i onswheret her earenome mem mb berswi t hvot i ng r i g ht s ,t hev o t eo fa tl e a s tama j o r i t yoft het r u s t e e si no ffi ffic c ewi wi l lb e suffici ent aut hori zat i on f or t he corporat i on t o ente ri nt o any t r a ns a c t i o na ut ho r i z e db yt h i ss e c t i o n. Power t - A st ock Sect i on 41. o acq ui r e own wn shar es. corporat i on shal lhavethe powert o pur chase oracqui r ei t sown wn sharesf ora l egi t i matecorporatepurpose orpurposes,i ncl udi ng but not l i mi t ed t o t he f ol l owi ng c ase s: Pr ov i ded, That t he corporat i on has unr est ri ct ed r et ai ned earni ngs i ni t s books t o covert hesharest obepurc hasedoracqui red: 1.T oe l i mi na t ef r a c t i o na ls h ar e sa r i s i ngouto fs t o c kd i v i de nds ; 2.Tocol l ectorcomp mpromi mi sean i ndebt ednesstot hecorporat i on, ari si ngoutofunpai d subscri pti on,i n a del i nquencysal e,and t o purc hasedel i nquentsharessol dduri ngsai dsal e;and 3. To pay di ssent i ng or wi t hdrawi ng st ockhol ders enti t l ed t o pa y m me e ntf o rt he i rs h ar e su nd ert hep r o v i s i o nso ft h i sCo de .( a )
Sect i on 42. P o we we rt oi n v e s tc o r p o r a t ef u ndsi na no t h er -Subj ectt othe c o r p o r a t i o no rb us i n e sso rf o ra ny o t h erp ur p o se . pr o v i s i o nso ft h i sCo de ,apr i v a t ec o r p or a t i o n ma yi nv e s ti t sf unds i nanyot hercor porat i onorbusi nessorf oranypurposeothert han t hepri marypurposef orwhi chi twasorg ani ze dwhen appr ove dby amaj ori t yoft heboardofdi rec t orsortr ust eesandrat i fied byt he st ockhol ders r epres enti ng at l east t wot hi r ds ( 2/3) of t he out st andi ng capi t alst ock,or by atl eastt wo t hi rds ( 2/3)oft he mem mb bersi nt hecaseofnon-s t ockcorporati ons,atast ockhol der' s orme mem mb ber' sme meet i ngdul ycal l edf ort hepurpose.Wri t t en not i ceof t he propose di nves t mentand t he t i meand pl aceoft he mee t i ng shal lbeaddr essedt oeach st ockhol derorme mem mb berathi spl aceof r esi denceasshown ont hebooksoft hecorpor at i on anddeposi t ed t otheaddres seei nt hepostoffic fficewi t h post agepr epai d,orser ved personal l y:Provi ded,Thatany di ssent i ng st ockhol der shal lhave apprai salri ghtasprovi ded i nt hi sCode:Provi ded,however ,That wher et hei nv es t me ntbyt hecor por at i on i sr e asonabl ynec ess ar y t o accomp mpl i sh i t s pri mary purpose as st at ed i nt he art i cl esof i ncorporat i on,t heappr ovaloft he st ockhol dersormem mb bersshal l notbenecessary.( 171/2a) P o we we rt ode c l a r edi v i de n ds .-Theboardof Secti on 43. di rec t orsofastockcorporati on maydecl aredi vi dends outoft he unres t ri ct ed re t ai ned earni ngswh whi ch shal lbe payabl ei n cash,i n pr o p e r t y ,o ri ns t o c kt oal ls t o c kho l d er so nt h eba s i so fo ut s t a ndi ng st ock hel d by t hem: m:Prov i ded,Thatany cash di vi dends dueon del i nquents t ockshal lfirstbeappl i edt otheunpai dbal anceont he subscri pti on pl uscost sand expenses,whi l est ock di vi dends shal l be wi t hhel df r om t he de l i nquent s t oc khol de r unt i lhi s unpai d s ub sc r i p t i o ni sf ul l ypa i d:P r o v i d ed,f ur t he r ,T ha tnos t o c kd i v i de nd shal lbe i ssued wi t houtt heapprovalofs t ockhol dersrepresent i ng no tl e s st ha nt wo t hi r d s( 2/ 3)o ft h eout s t a ndi ngc api t a ls t o c ka ta r e g ul a ro rs pe c i a lme e t i ngdul yc al l e df o rt h epur p os e .( 1 6a ) St ockcorporati onsareprohi bi t edf rom re t ai ni ngsurpl usprofit si n exc ess ofone hundr ed ( 100%)per centofthei r pai di n capi t al st ock,except:( 1)when j ust i fied by defini t ecorporateexpansi on proj ect s orpr ograms ms approve d by t he boar d ofdi r ect ors;or( 2) whent hecor por at i oni spr ohi bi t e dunderanyl oanagr e eme ntwi t h a nyfinanc i ali ns t i t u t i o no rc r e di t o r ,whe t h erl o c alo rf o r e i g n,f r o m decl ari ngdi vi dendswi wi t houti t s/hi sconsent ,andsuchconsenthas notyetbeen secured;or( 3)wheni tcan becl earl yshownt hatsuch re t ent i on i snecessaryunderspeci alci rc umst ancesobt ai ni ngi n t hecorporat i on,suchaswh whent herei sneedf orspeci alr eservef or pr o b abl eco nt i ng e nc i e s .( n) Powe wert oent eri nt omanageme mentcont r act . Secti on 44. No cor por at i on shal l concl ude a manageme ment cont r act wi t h anot her cor por at i on unl es s such cont r act shal l hav e been
23
approve d bytheboardofdi r ect orsandbyst ockhol dersowni ngat l e a s tt h ema j o r i t yoft h eo ut s t a nd i n gc a pi t a ls t o c k,o rbyatl e a s ta maj ori t yoft heme mem mb bersi nt hecaseofanonst ockcorporati on,of bot ht he ma nagi ng and t he ma naged cor por at i on,ata me e t i ng dul ycal l edf ort hepurpose:Provi ded,That( 1)wher east ockhol der or st ockhol der s r epr ese nti ng t he same me i nte r es t of both t he managi ngandt hema managedcor porat i onsownorcont r olmor et han o ne t hi r d( 1/ 3)o ft he t o t a lo ut s t a ndi ng c a pi t a ls t o c ke nt i t l e dt o v ot eoft hemanagi ng cor por at i on;or( 2)wher ea ma j or i t y oft he mem mb ber s oft he board ofdi r ect orsoft he managi ng cor porat i on al soconst i t ut eamaj ori t yoft heme memb mbersoft heboardofdi rec t ors oft hem ma anagedcor porat i on,t hen t hem ma anagem me entc ontr actmust be appr ov e d by t he s t oc khol der s of t he manag ed cor por at i on owni ng atl eastt wo-t hi rds ( 2/3)oft he t ot alout st andi ng capi t al st ock ent i t l ed t o vot e, or by at l east two-t hi rds ( 2/3) of t he
t hepart i cul arr evi si on underSect i on 11 ofRul e14 was expl ai ned by r et i r ed Supre me Court Just i ce Fl or enz Regal ado,t hus: “ xxx t hethen sect i on 13 oft hi sRul eal l owed serv i ceupon a def endantcor porat i on t o“ be made on t he pre si dent ,ma manager ,sec r et ary , cashi er ,agentor any ofi t s di rect ors. ”The af or esai d t er ms wer e obvi ousl y am mb bi guous and susc ept i bl e of br oad and so me t i mes i l l o gi c ali nt e r pr e t at i o ns ,e s pe c i a l l yt h e wo r d “ agent ”oft he corporati on.The Fi l oi lcase, i nvol vi ng
mem mb ber si nt hecaseofanon-s t ockcor porat i on.Nom ma anageme ment c o nt r a c ts h al lbee nt e r e di n t of o rape r i o dl o ng e rt ha n fiv ey e a r sf o r anyonete rm m. .
t he l i t i gat i on
l awyer of t he
cor por at i on who pr ec i se l y appear ed t o chal l engetheval i di t yofser vi ceofsumm mmons butwhosev er yappe ar anc ef ort hatpur pos e was se i z e d upon t ov al i dat et he def e ct i v e
Thepr ov i s i onsoft hene xtpr ec edi ngpar agr aph shal lappl yt oany contr actwher ebyacorporat i on undert akest om ma anageoroperat e al lorsubstant i al l y al loft he busi ness ofanot hercorporati on, whe t he r suc hc ont r ac t s ar ec al l ed s er v i c e cont r act s ,oper at i ng agre em me ents or ot herwi se:Provi ded, however , That such ser vi ce cont ract soroperati ngagreeme ment sw wh hi ch re l atet otheexpl orat i on, devel opment ,expl oi t ati on orut i l i zat i on ofnaturalre sourc es may be ent e r e di nt of or suc h per i ods as ma y be pr ovi ded by t he pe r t i ne ntl a w ws so rr e g ul a t i o ns .( n)
Sect i on 45. Ul t ra vi r es act s of corporat i ons. - No cor porat i on under thi s Code shal l posse ss or exe r ci se any corpor at epower s exceptt hoseconf err ed by t hi s Code orby i t s art i cl es of i ncorpor at i on and except such as are neces sary or i nc i de nt a lt ot h ee x e r c i s eo ft hepo we r ss oc o nf e r r e d .( n)
s e r v i c e ,i san i l l us t r a t i o no ft hene e df o rt hi s revi sedsect i onwi t hl i mi t edscopeandspeci fic t er mi nol ogy.Thus the absur dr esul ti nt he Fi l oi l cas e nece ss i t at ed t he am me endme ment permi mi t t i ng ser vi ce onl y on t he i n-house counseloft hecorporati on whoi si n effectan em mp pl oyeeoft hecorporati on,asdi st i ngui shed f rom ani ndependentpracti t i oner . ” o
-
not es:addi t i onalknowl edge speci alappearanceent erf ort hatpart i cul arappearance y ouar enott hec ounse li nt hec ase
-
woul d appl y onl yi fi t doe s not i nv ol v e an i nt r acorporat econt r over sy( cont rov er sybet ween and am mo ong
Sect i on36
t hestockhol ders)
Wher eshoul dt hec or por at i onbesued? -
-
pri nci paloffic fficei si mport antbecausei te st abl i shesthe
upon anyoft hest at ut oryoffic fficer soroffi ffic cer sfixedi nt he by l aws any se cr e t ar y , any of t he di r ec t or s ; any manager si nthebyl aws
res i denceoft hecorporat i on and deter mi ni ngservi ceof summ mmons,ve nueofact i on -
Seal
pri nci paloffi ffic cei sf ound
-
me r e l ym mi i ni s t e r i a lo rpe r mi mi s s i v e
Pri nci paloffi ffic cei sal soi mport antf orvenueofmeet i ngs
Powert oame mend
Nonst ock corpor at i on may provi de i ni t s byl aws t hat
-
s e c t i o n 16
-
speci al37, 38, 120
Powert oadoptbyl aws
ent i t y-whent hedef endanti sacorporati on,part nershi p
-
sect i on4648
or ass oci at i on or gani ze d under t he l aws of the Phi l i pp i n e s wi t ha j ur i d i c a lpe r s o na l i t y ,s e r v i c em ma a y be
Powert oi ssueorsel lst ocksandtoadmi mi tmem mb bers
-
st ockofst ockhol dersandprovi si ongoverni ngnonst ock
P owe rt oac q ui r eo ra l i e na t er e a lo rp er s o na lpr o p e r t y
-
i st he r ea nyl i mi t a t i o n?YES
i tcan be sued i nt he ci t y orm mu uni ci pal i t y wher ei t s
t hevenueofmeet i ngbeanywher ei nt hePhi l i ppi nes
Uponwh whom se r vi ceofsum mm monsbemade ?
-
Sect i on 11. Serv i ce upon dom me est i c pri vat ej uri di cal
made upon t he pr es i dent ,m ma anagi ng part ner ,ge ner al manager ,corporat e secr et ary,t r easur er ,or i n house counsel . Del t amo mot orv s.Mangosi ng -
s t r i c tc o m mp pl i a nc ei sne c e s s ar y shoul dbeservedt othosenam me edi nt hest at ut e
-
1. Sect i on 36, as l awf ult r ansact i ons ofbusi ness of t he corporati onmayreasonabl yandnecessari l yrequi re
s e c r e t a r yo fade p’ ta r en ott h os ei nc l ude di nt h es t a t u t e E. B.Vi l l a r os av s .Be ni t o
-
deci si onEnBancr epeal sal lot herpronouncem me ent
-
sect i on13Rul e14wasrepeal ed
-
t heol drul eswasamb mbi guousandbroadandatal lt i me i l l ogi c al
2. Const i t ut i onandl aw Lunet avs.A. D.Sant os -
I mport anceoft hepurposecl ause
-
Cannothavet hepowert oacqui r e
-
Cannotengagei nl andtr ansport ati on
-
Do c t r i neofl i mi t e dc a pa c i t y
24
Gov’ tvs.ElHogar -
Nati onalPowe wervs.Vera
As t he l awf ul t r ans act i on of i t s bus i ne ss ma y
-
Forpurposeofprohi bi t i ngt heNA NAPO OC COR
reasonabl yr epresent -
The c our tmus tde ci de whe t he r or nota l ogi caland necess ary re l at i on exi st s bet ween t he actquest i oned
Di re ct orofLandsvs.CA
and t he co r por at e purpos e ex pr es se d i n t he NPC -
chart er
Ex c e pt i o nt ot her ul ei nt hec o ns t i t ut i o n Al i enabl epubl i cl and Convert sthe propert yt oa pri vat el and aut oma mati cal l y
I mport anceofPLACE ofregi st rat i on
-
Resi dence
onceconvert edi tcannow beregi st ered
-
-
Powert om ma akedonat i on
Ve nue
-
Pl aceofmeet i ngs
-
Pl ac eo rr e g i s t r a t i o no fc ha t t e lmo r t g a ge
Powe wert oext endi t st erms ms
-
Once i t st erm expi res,al ready di ssol ved aut om ma ati cal l y,
L i mi t a t i o ns e c t i o n 36pa r . 9 The se ar e ci r c ums t ances, howe v er , unde r whi c h a donat i on by a cor porat i on maybetoi t sbenefitas a mea ns of i ncr eas i ng i t s busi nes s or pr omo mot i ng pat r onage.Thus,paragraph 9 ofs ect i on 36 expres sl y
t huscannol ongeraskf orext ensi on
aut hori zesacorporat i on t om ma ake donat i ons.Theonl y l i mi t a t i o nsi mpo s e da r et h ef o l l o wi ng : -
Af t e rdi s sol ut i on,i thas3y ear st owi ndup
Whatar et hemo desofi ncr e as i ngcapi t als t oc k?
1. Thedonat i onmu mustbe“ r eas onabl e” ; 2.
I tmustbef orpubl i cwel f are,orf orhospi t al ,chari t abl e, s c i e nt i fic ,c ul t ur a lo rs i mi l a rpur p os e ;a nd,
1. I ncr eas i ng t he par val ue of t he e xi s t i ng number of shar eswi t houti ncreasi ngt henumberofshar es;
3.
I tshal lnotbei n ai d ofpol i t i calpart yorcandi dat e,or f o rpur po s eso fp ar t i s anpo l i t i c ala ct i v i t y .
2. I ncr eas i ng t he number of e xi s t i ng shar es wi wi t hout i ncr easi ngtheparval uethereof ;and,
Powe wert oestabl i shpensi on
-
I ncl ude any ac t t o pr om mo ot e and i mpr ov e t he
3. I ncr eas i ng t he number ofex i st i ng shar es and at t he same met i mei ncre asi ngt heparval ueoft heshares .
conveni ence,wel f ar e and benefit oft he em mp pl oye es or
offic ffice s
Whyacor por at i oni ncr e as esi tcapi t als t oc k?
-
Re pub l i cv s .Ac o j e
Gener at ef unds, busi ness expansi on, or payme ment of l i abi l i t i es, purposes of acqui ri ng ot her busi ness.
-
Whi l e as a r ul e an ul t r av i r es ac ti s one comm mmi i t t ed
( exampl e: t o buy car sf or the offi ffic ce r s, purpose of
out si det heobj ectf orwhi ch acorporati on i screat edas
acqui ri ng ot her busi ness, expansi on, ot her val i d
definedbyl aw,t herearehoweverc ert ai ncorporateact s
reasons)
t hat m ma ay be per f or med out si de of t he sc ope of t he powe wer s express l y conf err ed i ft hey are neces sary t o
How do y ou de cr e as e c api t al s t oc k and why a corporati ondecreases?
pr o mo mo t et h ei nt e r e s to rwe l f a r eo ft h ec o r po r a t i o n.Thus , i t has bee n hel d t hat “ al t hough not ex pr es sl y aut hori ze dt odosoacorpor at i on maybecom me easure t y wher e t he par t i c ul ar t r ans act i on
-
woul dt he r ebybee ffec t ed
i s r e asonabl y
necessaryorpropert otheconductofi t sbusi ness, ”and herei ti sundi sput ed t hatt heest abl i shmentl ocalpost offi ffic cei sar easonabl eandpr operadj unctt ot heconduct oft hebusi nessofappel l antcomp mpany.I ndeed,suchpost o ffic ffic ei sav i t a li mp r o v e me me nti nt hel i v i ngc ondi t i o no fi t s
Reduceorwi peoutexi st i ng defici twher e no cr edi t ors
-
When c api t ali smo r et han nec essar yt o pr oc r eat et he busi nessorr e duct i onofcapi t als ur pl us
-
To wr i t e down t he v al ue ofi t s fixe d ass e t st or e fle ct t hosepre sentandact ual
emp mpl oyeesandl aborer swhocam me et oset t l ei ni t sm mi i ni ng camp mp whi ch i sf arrem mo oved f rom t hepost alf aci l i t i esor
NOTE:anyi ncr easeordecreaseofcapi t alst ockrequi res
o
meansofcomm mmuni cat i on accor ded t opeopl el i vi ngi na
appr ovalofg ove rnme mentagency l i ke SEC i tcan never
c i t yo rmu muni c i pa l i t y .
Power t o ex er ci se such ot her power s es se nt i al or necessaryt ocarryouti t spurpose( i mpl i edpow we er)
1. Act si nt heusualcour seofbusi ness ; 2.
Act st oprot ectdebt sowi ngt ot hecor porat i on;
t akepl aceunl essSEC appr ove st hesame me
Re l e v a nc eofd ec r e a s eofc a pi t a l ?
1. Tore duceorwi peoutexi st i ngdefici twherenocr edi t or s woul dt he r ebybeaffec t ed; 2. When t he capi t ali s mo mor et han what i s nece ss ar yt o procreat ethebusi nessorreduct i on ofcapi t alsurpl us;
3. Embar ki ngi nadi ffer entbusi nes s; 4.
Act si npartorwhol l yt oprot ectorai dem mp pl oyees ;and,
or , 3.
presentact ualv al uei n casewher etherei sa decl i nei n
5. Act st oi ncr eas ebusi ness Ter esaEl ec t r i candPowe rCo.v s .P. S. C. -
Exam mi i ned t heart i cl esofi ncorporati on t o arri veati t s de c i s i o n
Towri t edownt heval ueofi t sfixedasse t st ore flectt her e t h ev al ueo ft h efix e da s s e t so ft h ec o r po r a t i o n.
-
Examp mpl es:Php10M capi t alf orgr ocerybusi ness,mayor di dn’ twantt oi ssuel i cense/permi mi tbecausema mayorhas3 o t h e rgr o c e r ys t o r e s ,o nl yal l o we ds a r i s a r is t o r epe r mi mi t ,
25
reducecapi t alf orsari sariso t hatt hemo moneyw wi i l lnot
Provi ded,Thatsuch pre-e mpti veri ghtshal lnotext end t osharest obei ssuedi ncomp mpl i ancewi t hl awsrequi ri ng s t oc k offer i ngs or mi mi ni mum s t oc k owner shi p by t he publ i c;ort osharest obei ssued i n good f ai t h wi t ht he approval of t he st ockhol ders re pre sent i ng t wo-t hi rds ( 2/3)oft heout st andi ng capi t alst ock,i n exchange f or propert yneededf orcor porat epurposesori npayme mentof apr e v i o us l yc o nt r a c t e dde bt .
sl eepi nbank -
Exam mp pl e:c ar r ent alagenci esPhp 10M capi t alf or20 t axi ’ s,af t ersome met i meeach t axii sonl y250K,nagm mu ura a ngt a x i ,t or e duc ec api t a li st os ho wa c t ua la s s e t s
Li mi t ati oni mposedbyl aw
-
Decr easeshal lnoti n anyw wa ay affectt heri ght soft he c r e di t o r s
-
-
-
st ockshasnoeffect
-
TRUSTFUND DOCTRI NE:
Ye s,i fpr ov i ded by ar t i c l e s ofi nc or por at i on or by an am me e ndme me nt
Phi l i ppi neTrustComp mpanyvs.Ri ver a Wi t hout t he appr ai s alofSEC,a de cr e ase i nc api t al
Mayi tbedeni ed?How?
However ,preem mp pti veri ght si sunavai l abl et osharesi n t r adi ngi n st ock exchangeotherwi sest ockhol dersmu must wai v efir s tt he i rr i ghtbe f or et he yma ys el lsuc h.
Subs c r i p t i o nt oca pi t a ls t o c ko fac o r po r a t i o nc o ns t i t ut e
Excepti ons 1. Whent heshare st obei ss uedi si ncompl i ancewi t h
af undt ow wh hi cht hecredi t orshaveari ghtt ol ook upon
l aws r equi ri ng st ock offer i ngs ormi mi ni mum st ock
f o rs at i s f a c t i o no ft he i rc l a i msand t h att heas s i g ne ei n
ownershi pbythepubl i c
i nsol ve ncy can mai ntai n an act i on upon any unpai d st ock subscri pti on i n order t o re al i ze asset sf or t he
2.
payme mentofi t sdebt s.
Shar est obei ssuedi ngood f ai t hwi t htheappr oval of t he st oc khol der s r epr es ent i ng 2/3 of t he o ut s t a ndi ngc api t a ls t o c ke i t he r
Madri galvs.Zamora a. I n exc hangef orpr opert yneededf orc orpor at e -
-
Decr easei ncapi t alhasasubte rf uget oevadepaym me ent
purposeor ,
Thusnotv al i dandeffec t i v e Must not pr ej udi ce cr edi t or s whi ch i ncl udes t he
b. I npayme ntofapr e vi ousl yc ont r ac t eddebt -
em mp pl oye es
Bond
-
Com mm monl y unders t ood as an obl i gat i on ofa st at e,i t s
a cl ose cor porat i on by vi rt ue of a subsequent and speci fic provi si on oft he Code whi ch provi des t hatt he “ p r e e m mp p t i v er i g hto fas t o c kho l d eri nac l o s ec o r po r a t i o n shal l ext end t o al l st ock t o be i ssued, i ncl udi ng r ei ssuance of t r easury share s, whet her f or money,
subdi vi si on ora pri vat ecorporati on,r epresent ed by a
pr oper t y or per sonal se rv i ce s or i n payme ment of a
cer t i ficateor an i nst rum me entf orthe pri nci paland by
corporate debt , unl ess t he art i cl es of i ncorporati on
detachabl ecouponsf orthepayme mentofi nt er est s.I ni t s
pr o v i d eo t h e r wi wi s e ,i fn ote nt i r e l ya bs o l ut e ,i nt h ati t
si mpl estt erm, m,i ti sonewh wher ean obl i gorobl i geshi msel f
e x t e n dst oa l li s s ua nc ea nddi s po s i t i o no fs ha r e s
t o pay a ce r t ai n sum ofmoney t o anot her at a day name me d. -
-
f a i l ur et oe xe r c i s ei ta f t e rha v i ng b ee n no t i fie do ft he
i ssued orfloat edbyt hecor porat i on,t he same mem mu ustbe
proposedi ssuanceordi sposi t i onofshares
r egi st er edandapprove dbyt heSEC subj ectt otherul es Thepr oc edur eandr equi r eme nt sse tf or t hi ns ec t i on 38 i st hesame m easi ni ncr easi ng ordecreasi ng t he capi t al
Such ri ghtofpr eem mp pt i on maybel ostbywai veroft he s t o c kho l de r ,e x pr e s s l yo ri mp l i e dl yb y hi si na bi l i t yo r
The r ear edi ffe r entki ndsofbondbutbe f or et he yma ybe
and r egul at i ons t hatma maybeadopt ed by t hatag ency.
Thee xce pt i ons,howe v e rwi l lnotappl yt os t oc khol der sof
Wheni si tunav ai l abl e ?
-
I nshar est radedopenl yi nst ockexchange/ma market
t hema matt ersr equi redi nsub-sect i on2& 3thereof .
I si ta ppl i c abl et oc l o sec or po r at i o ns ?
Pr e e m mp p t i v er i g ht s
-
st ock exceptthatt hecert i ficat edoes nothavetost ate
Seesect i on 96,cl osecorporati onsmu mustprovi de i tfirst o ni t sa r t i c l e sofi nc o r po r at i o n,t h ati t sa r t i c l e sdo e sno t
-
A r i ghtgr ant e d byl aw t oal le xi s t i ngs t oc khol de r sofa
r e a l l yd e nys uc hpr e e m mp p t i v er i g ht s .
st ock cor por at i on t o subscr i be t o al li ss ues or di s po s i t i o no fs h ar e so fa nycl a s s,i n pr o p or t i o nt ot he i r
Se c t i o n1 02,wi l lno ta p pl yt oc l o s ec or p or a t i o ns
r e s p e c t i v es t o c kho l di ng s ,s ubj e c to nl yt ot hel i mi t a t i o ns i mposedunders ect i on39oft heCode.
The r i ght of pr e e mp t i v er i ght si s abs ol ut ei n cl os e c o r po r a t i o ns
-
I nt e r nat i o nal l yg r a nt e d
Pr e e m mp p t i v er i g ht s ,whyi ti sg r a nt e d?
-
I n ordert hatthe exi st i ng st ockhol ders may mai nt ai n
“ A l li s s ue so rd e po s i t i ngs ha r e so fa nyc l a s s”f o r m pa r to fACS
Cert ai ni nst anceswhen ast ockhol derma mayneve rt hel ess beunabl et oe xer ci set hi sr i ght :
t h ei rp r opo r t i o nat er i g htasno tt odi l ut et he i rr i g ht
-
I ssuedf orpubl i cown wnershi p
-
I ssuedi ngood f ai t h,wi t happrovalof2/3ofout st andi ng
capi t alst ock ei t hera)i n exchangef orpropert yneeded orb)f orpaym me entofapre vi ousl ycont ract eddebt
Pre-emp mpti ve ri ght s ofst ockhol ders i n ordi nary st ock corporat i onsm ma aybedeni ed
26
-
i ft hesharesaret obei ssued i n com mp pl i ancewi t hl aws
SUBSCRI BED
1M
r equi ri ngst ockofferi ngormi ni mum st ockowner shi pby PAI D UP 1M
t hepubi c -
I nexchangef orpropert yneededf orcorporat epurposes
1
100K
-
I npayme mentofprevi ousl ycont ract eddebts
2
100K
Thi sr ul e ,howe v e r ,doe snotappl yi nac l osecor por at i on
TO
a st h epr e e mp mp t i v er i g ht so ft hes t o c k ho l de r st h e r e o fi s 10 100K
br oadened t oi ncl ude al li ssue s wi t hout e xcept i ons unl ess,ofcourse,deni ed orl i mi t ed by t he art i cl es of
i ncorporati ons.Sect i on102provi des:
I f15became me200K each,may610dem ma andt heexer ci se t h ei rpr e e mp mp t i v er i g ht ?
P Sect i on 102. r e e mp mp t i v e r i g ht i n c l o s e c o r p o r a t i o n s . -Thepreemp mpti veri ghtofs t ockhol dersi n c l o s ec o r po r a t i o nss ha l le x t e n dt oal ls t o c kt obei s s ue d, i ncl udi ng r ei ssuance oft r easury shar es,whet herf or money ,propert yorpers onals erv i ces,ori n paym me entof corporate debt s,unl ess t he art i cl es ofi ncorporati on pr o v i deo t h e r wi wi s e .
YES May15subscr i bet otheunsubscri bed capi t alst ockt o t heexcl usi onof6-10?
-
I f a cor por at i on makes 2M unr es t r i ct ed r et ai ned earni ngs,i ti st hesharesand nott henumberofpersons t hatma matt ers
Deni alwi l lnotappl yt oacl osecorporati on,ABSOLUT UTE
-
s e c t i o n 96
May a st ock hol deri n acl ose corporati on i nsi sti nt he
-
Ma y61 0c o mp mpl a i nf o radi l ut i o no ft h e i ri nt e r e s t ? YES,i t ’ san i nt er nat i onal l yr ec ogni z ed r i ghtbec aus ei t i ncl udes “ al li ssues and di sposi t i on ofsharesofany
e x e r c i s eo fhi spr e e mp mp t i v er i g ht s ?
cl ass”andal lki ndsofsharesnew orol d -
Ye s,s ec t i on102 -
i ssuanceofanycl ass
Whatt ypeorshar e sar ecov e redbypre-e mpti veri ght s?
Doesi ti ncl udet hoseori gi nal l yunsubscri bed?
-
NO.Be n i t ov s .SEC
I ft herema mai ni ngunsubscri bed sharesarei ssued,i t ’ san
Ma yac o r po r a t i o ns e l l / di s po s ea l lo rs ub s t a nt i a l l yal lo f i t sc o r po r at ea s se t sa ndl i abi l i t i e s ? YES
Wi l lt he s t oc khol der s be abl et oe xer c i s et he i r pr e -
emp mpti veri ghtwi t hrespectt otheol duni ssuedshares?
1)RESOL OLUTI ON 2)AUTHORI ZATI ON 3)RATI FI CATI ON 4)PRI OR WRI TTEN NO OT TI CE 5)SALE SUBJECT TO
-
Preem mp pt i ve ri ght si s appl i cabl e onl yt o new i ssued
PROVI SI ONS OF EXI TI NG LAWS WS 6) DI SSENTI NG
shar esandnott otheol duni ssued shar esbecausei ti s
STOCKHOL OLDERS HAVE THE RI GH HT T TO EXERCI SE THEI R APPRAI SALRI GHT
pre sume med t hatt he ori gi nalsubscr i bersi s deem me ed t o havet aken hi ssharesknowi ngt hatt heyf orm adefini t e
proport i onat epartoft hewh whol enumberofauthori zed
pr o pe r t i e s ,wi l lt h ebuy e ra ss umel i a bi l i t y ?
shares -
I fa c o r po r a t i o ns e l l ss ubs t a nt i a l l ya l lo fi tas s e t sa nd
-
When t he shar e s,l ef tuns ubsc r i bed ar er e offer ed,he
NO O, ,EXCEPT
cannott here f or ec l ai m.DI LUTI ON OFI NTEREST 1) Expr es sori mpl i edagr ee mentt ot hepur chase
Wi l lt heacqui r i ng pur c hase rbe l i abl ef orde bt soft he 2) Wher et he t r ansac t i on amo mount st o co nsol i dat i on or
f orme mercorporati on?
mer geroft hecorporat i ons -
General l yno,corporatee nt i t yt heorybecauset her em ma ay 3) When pur chasi ng cor por at i on i sme mer el ya cont i nuat i on
bei ns t ance swhe n pur c hasi ngc or por at i on ma ybehe l d
o ft hes el l i ngco r po r at i o n
l i abl e
4) Wheret he t r ansact i on i sent er ed i ntof r audul ent l yi n
Mayacorporat i onacqui rei t sownshar es?
o r d e rt oe s c a pel i a bi l i t yf o rs uc hde bt -
Ye s
Legi t i matepurpose:f or a corporati on t o reacqui rei t s ownshare s
I s t here any r es t ri ct i on prov i ded f or by l aw i n reacqui ri ngi t sownshares? -
-
Li mi t ati on:i tmu musthavesurpl us/unres t ri ct ed re t ai ned earni ngs
Ye s,i tmus thav e bee n unr e s t r i ct ed r e t ai ned ear ni ngs appeari ngi nt hebooksofcorporati on -
Except i on: ma may re deem i rr espect i ve of unr est ri ct ed re t ai nedearni ngs
A cor por at i on c an ne v erac qui r ei t sown shar e si fi thas nounre st ri ct edre t ai nedearni ngs
1) Exe r ci se of st ockhol der s’ r i ght t o comp mpel “ cl ose -
corporati on”t opurc hasehi sshares
Fal se, exce pt i on cl ose cor porat i on and r edeem ma abl e shares
2) Wher ecor por at i on hassuffici entas se t si ni t sbookst o c ov e ri t sd ebt sa ndl i abi l i t i e sex cl us i v eofc api t a ls t o c k
Powe wert oacqui r eown wnshare s. -A Secti on 41. st ock corpor at i on shal lhavet hepowert opur chase or
CLOSE
CORPORATI ON I T CAN USE THI S TO REACQUI UI RE I SSUED STOCKS
acqui r e i t s own share s f or a l egi t i mat e cor porat e purpose orpurposes,i ncl udi ng butnotl i mi t ed t ot he f ol l owi ng cases: Provi ded, That the corporat i on has unres t ri ct ed re t ai ned earni ngsi ni t sbookst ocovert he sharest obepurc hasedoracqui re d:
X–REALTYCORPORATI ON •
THE ONLY PROPERTY 1.To el i mi natef ract i onalshares ari si ng outofst ock di v i de nds ;
OFTHECO OR RPORATI ON •
BOARD OF D DI I RECTORS 2. To col l ect or comp mpromi mi se an i ndebt edness t ot he corporati on,ari si ng outofunpai d subscri pti on,i na del i nquency sal e,and t o pur chase del i nquent shares sol dduri ngsai dsal e;and
DECI DED TO SELLI T Wi l li tnee dt heappr ov aloft hes t oc khol de r s? -
NO,i ft he sam me ei snece ssar yi nt he usualand r egul ar 3. To pay di sse nti ng or wi t hdr awi ng st ockhol ders e nt i t l e dt op ay m me e ntf o rt he i rs ha r e sunde rt hep r o v i s i o ns o ft hi sCo de .( a )
c o ur s eo fb us i ne s so fs a i dc or p or a t i o no ri ft h epr o c e e ds oft he sal e orotherdi sposi t i on ofsuch propert y and asset sbeappropri atedf ort heconductofi t srem ma ai ni ng busi ne ss
I fX i sa manuf act uri ng com mp pany,t hen i tcan sel li t s
St e i nbe r gv s .V e l a s c o
onl ypropertyuponapprovaloft hest ockhol dersbecause i twi l lr e nde ri t s e l fc a pa bl eo fc o nt i nui ng i t sb us i ne s s , BUT i ft hepr oceeds wi l lbe usedtopurc hasea bet t er
The cor por at i on mus tatal lt i me s hav e“ unr es t r i c t ed r e t a i ne dea r ni ng s ”t oe x e r c i s et h i sc o r po r a t ep o we we r
-
For as l ong as t here ar e debt s and l i abi l i t i es, a
onef orthecont i nuanceofi t sbusi ness,t heni tdoesnot
corporat i on may notreacqui r ei t s shar es ( subj ectt o
needtheapprovaloft hest ockhol ders
e x c e pt i o ns )
Condi t i ons f ortheval i d exerc i se oft hi spow we erarethe
-
Credi t orsofacorporat i on havet heri ghtt oassumet hat so l ong as t hereare out st andi ng debt s and l i abi l i t i es,
f o l l o w wi i ng
t he boar d ofdi r ect orswi wi l lnotuse t he asset s oft he corporati on t opurc hase i t sown wn st ock,and t hati twi l l
1. Res ol ut i on by t he maj or i t y v ot e of t he boa r d of
not decl ar e di vi dends t o st ockhol der s when t he
di r e c t o r s /t r us t e e s
c o r po r a t i o ni si ns o l v e nt . 2. Aut hori zat i on f r om t he st ockhol der sr epr es ent i ng at l east2/3oft heout st andi ngcapi t als t ock or2/3 oft he
Powe wert oi nvestf unds<sec. 42>
me mbe r s ;
Secti on42. P o we we rt oi n v es tc o r p o r a t ef u ndsi n a no t h e rc o r p o r a t i o no rb us i n es so rf o ra nyo t h e rpu r p o s e. - Subj ect t ot he provi si ons of t hi s Code, a pri vat e co r por at i on may i nve s t i t s f unds i n any ot her corporat i on orbusi nessorf oranypurposeothert han
3. Ther at i ficat i onoft hest oc khol der sorm me emb mber smu mustbe madeatame meet i ngdul ycal l edf ort hatpurpose 4.
Pri orwri t t en not i ceoft he propose d act i on and oft he
t he pri marypurposef orwhi ch i twasorg ani ze d when appr ove d by a maj ori t y oft he board ofdi r ect or s or t rusteesandrat i fied byt hest ockhol dersrepresenti ngat l e a s tt wo t hi r d s( 2/ 3)o ft heout s t a ndi ng c a pi t a ls t o c k, orby atl eastt wothi r ds ( 2/3)oft heme mem mb bersi nt he case of nonst ock corporati ons, at a st ockhol der' s or mem mb ber' smeet i ngdul ycal l ed f ort hepurpose.Wri t t en not i ce of t he proposed i nves t ment and t he t i me and pl ace of t he mee t i ng shal l be addre ss ed t o eac h st ockhol der or mem mb ber at hi s pl ace of r esi dence as shown wn on t hebooksoft hecorporat i on anddeposi t edto t headdress eei nt hepostoffi ffic cewi t hpost agepr epai d,or ser ve d per sonal l y: Pro vi ded, That any di sse nti ng st ockhol dershal lhave apprai salri ghtas provi ded i n t hi sCode:Provi ded,however ,Thatwher et hei nvest ment by t he cor por at i on i s r e as onabl y ne ce ss ar y t o accomp mpl i shi t spri marypurposeasstat edi nt hearti cl es of i ncorporati on, t he approval of t he st ockhol ders or mem mb bersshal lnotbeneces sary .( 171/2a)
t i meand pl aceofmee t i ng mustbem ma adeaddr es se dt o al ls t ockhol ders ofr ecord,ei t herby mai lorpersonal s e r v i c e ; 5.
Thesal eoft heasset sshal lbesubj ectt otheprovi si ons ofexi st i ngl awson i l l egalcom mb bi nati onsandmonopol i es
6. Any di ss ent i ng st ockhol der shal l hav et he opt i on t o e x e r c i s eh i sa ppr a i s alr i g ht I DPvs.CA -
Consento ft heme mem mb ber swasnotsec ur ed Edw wa ardNel lCo.vs.Paci ficFarm ms s
-
Gener al l y where one cor porat i on sel l s or ot herwi se t r a ns f e r sa l lo fi t sa s se t st oa no t h e rc o r po r a t i o n,t he l a t t e ri sno tl i abl ef o rt h e de bt sand l i abi l i t i e so ft h e
-
s t o c kho l de r ’ sc o ns e nto ra p pr o v a li sn e c es s a r y
t r a ns f e r o r ,e x c e pt : 1.
Wheret hepur chaserexpr ess l yori mpl i edl yagr ees t oassume mes uchdebt s;
Foranyot herpurposeot hert han t hepri marypurpose ,
-
Thus,i fi t ’ sf ort hes ec ondar ypur pos e,i ti snec es sar y
28
-
I fi t ’ si n connect i on wi t ht he pri mary purpose,onl y
-
I tbecome mest r easuryshar es
Stockhol der’ s consent / approvali snotnecessaryand
boar dr es ol ut i oni snec essar y
1.
Requi r em me ent s and st eps t o be f ol l owed f or a val i d
mer e board act i on i s suffic ffi ci enti fi n accor dance wi t h
i nvest mentofcorporatef undsare:
pri marypurpose
Resol ut i on by t he maj ori t yoft he board ofdi r ect orsor
Thel ogi c alr el at i on ofac tdoneandpr i ma r ypur pos eof
t r us t e e s ;
cor porat i on and bet ween t he board of di r ect or st o undert ake submi mi ss i on of act si s a sound cor por at e
2.
Rat i ficat i on by t he st ockhol ders re pre sent i ng at l east
pr a c t i c e
2/3 of t he outs t andi ng capi t al s t ock or 2/3 of t he mem mb bersi ncaseofnonst ockcorporat i ons;
P o we we rt ode c l a r edi v i de n ds .-The Secti on43. boar d ofdi r e ct or s ofa s t oc kc or por at i on ma y dec l ar e di vi dends out of the unr est ri ct ed r et ai ned earni ngs whi c hs hal lbepayabl ei nc as h,i n pr ope r t y ,ori ns t oc k t o al lst ockhol ders on t hebasi sofoutst andi ng st ock hel dbyt hem: m:Provi ded,Thatanycashdi vi dendsdueon del i nquent st ock shal lfirs tbe appl i ed t ot he unpai d bal anc e on t he subs cr i pt i on pl us c os t s and e xpe ns es, whi l e s t oc k di vi de nds s hal l be wi t hhe l d f r om t he del i nquentst ockhol derunt i lhi sunpai d subscri pti on i s f ul l y pai d:Provi ded,f urt her ,Thatno st ock di vi dend shal lbe i ssued wi t houtt he approvalofst ockhol ders r eprese nti ng not l ess t han t wot hi r ds ( 2/3) of the o ut s t a ndi ngc api t a ls t o c ka tar e g ul a ro rs p e c i a lme e t i ng dul yc al l e df o rt h epur p os e .( 16a )
3. Ther at i ficat i onmu m ustbem ma adeatam me ee t i ngdul ycal l ed f ort hatpurpose; 4.
Pri orwri t t ennot i ceoft hepropose di nves t mentand t he t i meandpl aceoft heme meet i ngshal lbem ma ade,address ed t oeach st ockhol derormem mb berbym ma ai lorbyper sonal s e r v i c e ,a nd ;
5. Any di ss ent i ng st ockhol der shal l hav et he opt i on t o e x e r c i s eh i sa ppr a i s alr i g ht Del ar ama mavs .MaaoSugar -
Di vi dends
The r ei sa s ubs t ant i al and not r emo t ec onnec t i on be t wee nt he sugar bags and t he sugar manuf act ur e , t h uss t o c k ho l de r ’ sap pr o v a li sno tne c e s s ar yf o rv al i d i t y
-
Stoc k cor porat i ons ar e prohi bi t ed f r om r et ai ni ng surpl us profit si n exc ess of one hundr ed ( 1 00%)p e r c e nto ft he i rpa i di nc a pi t a ls t o c k,e x c e p t :( 1) whe nj us t i fie d by de fini t ec or por at ee xpansi on pr oj e ct s orprograms msappro ved by t heboard ofdi r ect ors;or( 2)
Apr i v at ecor por at i on,i nor dert oacc ompl i shi t spur pose a ss t a t e di ni t sa r t i c l e so fi nc o r po r a t i o n,a ndi mp os e db y t he Corpor at i on Law,has t he powert o acqui r e,hol d,
w h e n h e o r p a t i onfin i s r o hi b i t e d u n de r y l o a n ag r e e mt e n tc w i t hor a n y anp ci a l i n s t i t ut i o n oran cr ed i t or , whe t her l ocal or f or e i gn, f r om de cl ar i ng di vi de nds wi t houti t s/hi scons ent ,and suc hc ons enthasnoty e t be en se cur ed;or( 3)when i tcan becl ear l yshown t hat suchret ent i on i snecessaryunderspeci alci rcums mst ances obt ai ni ngi nt hecorporati on,suchaswhent herei sneed f o rs pe c i a lr e s e rv ef o rpr o ba bl ec ont i ng e nc i e s .( n)
mort gage,pl edge,ordi sposeofs haresbonds,securi t i es andot herev i dencesofi ndebt ednessofanydom me est i cor f orei gncorporati on.Suchanact,i fdonei npursuanceof t hecorporatepurpose,doesnotneedt heapprovaloft he st ockhol der s; but when t he pur chase of shar es of anot hercorporat i on i s done sol el yf ori nvest ment and nott oaccomp mpl i sh t hepurposeofi t si ncorporati on,t he v ot eofappr ov aloft hes t oc khol de r si sne ce ss ar y .
Gokongweivs .SEC -
-
BoardofDi re ct orst obepai dt othest ockhol ders.
Subm mi i ssi on of pr evi ous act i on i s a sound cor porat e pr a c t i c e
-
Corporat eprofitssetasi de,decl aredandorderedbyt he
I nvest mentsmadebySMC MC i snecessari l yconnect edwi t h i t spri marypurposeandt hi swasrat i fiedi nam me eet i ng
-
Whatar edi v i dends ?
Whatar epr ope r t ydi vi de nds?
-
Thosepai di npr ope r t ysur pl us
Redeema mabl eshare s
Li ke tabl es and chai r s? Can t abl es and chai r s ma make surpl usprofit s?
Cl osedcorporati on( seesect i on 105)
-
Foranyreason,c om mp pelt heval ueofshar es“ wi t hdrawal
share s” prov i ded cor porat i on has suffi ffic ci ent f unds t o c ov e ri t sde bt sa ndl i abi l i t i e s
No,t heydonotmakesurpl us,bonds,et c. Wher eshoul ddi v i dendscomef r om?
-
St ock di vi dends aredecl ar ed as st ocks comi mi ng f r om c o r po r a t i o n
Sect i on 105. Wi t hdr aw wa alofst ockhol der or - I n addi t i on and wi t hout di s s ol ut i o no fc o r p or at i o n. prej udi ce t o ot herri ght sand rem me edi esavai l abl et oa st ockhol derundert hi sTi t l e,any st ockhol derofacl ose cor por at i on may ,f or any r eas on, compel t he sai d corporati on t o purc hase hi ssharesatt hei rf ai rval ue, whi c h shal lnotbel es st han t he i rparori s sue dv al ue, when t hecor por at i on hass uffic i entass e t si ni t sbooks t oc o v e ri t s de bt sa nd l i a bi l i t i e se x c l us i v eo fc api t a l st ock: Pr ovi ded, That any st ockhol der of a cl ose corporati on may,by wri t t en peti t i on t ot he Securi t i es and Exc hange Comm mmi ss i on,com mp pelt he di ss ol uti on of such corporati on wheneverany ofactsoft hedi re ct ors, o ffic ffic e r so rt ho s ei nc o nt r o lo ft hec or p or a t i o ni si l l e g a l , or f raudul ent ,or di shonest ,or oppressi ve or unf ai rl y prej udi ci al t ot he corporati on or any st ockhol der , or whene v er c or por at e as se t s ar e bei ng mi s appl i e d or was t ed.
Whode cl ar esdi v i de ndst obedec l ar e d?Dos t oc khol de r s haveanysay?
pr o fi t so ft h ec o r po r a t i o n) 1-100k 2-100k To 10-100k
BoardofDi re ct ors,i fst ock approvalof2/3out st andi ng
1MU. R. E.
( sur pl us
29
1M
2
Boar d dec i des t o dec l ar e 1M, M, how much wi l le ac h
100K
TO
rec ei ve?Ma Maytheboarddecl arest ockdi vi dend 10 -
NO.t hatwoul d beoveri ssuanceofshares,vi ol ati on of 1M
s e c ur i t i e sr e g ul a t i o nc ode -
100K
I tmus tha v eaf r e ep or t i o n Thec or por at i onma yi nc r easei t sc api t al
Mayt heybecomp mpel l ed?
-
NO. You cannot dec l ar ei fi t does not come me f r om unr e s t r i c t e dr e t a i ne dea r ni ng s .
Z co . 1M t o X Co. i s 2/3 of Xco . St oc khol der s reacqui red?
1. 1M MU. R. E.( i si tt ruet herei snowayt ocomp mpel ?)
No,becausei npropert y2/3i snotrequi red
2. 2MU. R. E.
What i st he e ffec t of dec l ar at i on of di vi dends wi t h
Maytheybecomp mpel l edt odecl aredi vi dends
-
Mandat or yi fe ar ned,t he boar d maybe compel l ed t o
r egar dst otheasset sofacomp mpany? -
de c l a r ed i v i de nds
Asc ompar edt os t oc kdi v i de nds,t hede cl ar at i onofc ash or pr oper t y di vi dends have t he effect of r educi ng -
c o r po r a t ea s s e t st ot h ee xt e nto fdi v i de ndsde c l a r e d.
i fexcee ds100% oft hepai d-up capi t alt heboar dsma may becompel l e d
-
Nei t her
woul d
s t oc k
di v i de nds
i ncr ea s e
t he
proport i onat e i nt er est of t he st ockhol ders of t he
ACS
2M
SUB
1M
PU
800K
1100K
50K PU
2100K
50K
1M
U. R. E.
c o r po r a t i o na l t h oug hi twi l lha v et hee ffe c to fi nc r e a s i ng t hesubscri bed andpai d-upcapi t aloft hecorporat i on.I t nt h ewa yofd i s t r i but i o n g i v e st h es t o c k ho l de r sn ot hi ngi of asset s but m me er el y di vi des hi s exi st i ng shares i nt o s ma ma l l e runi t s .
Earni ngs bel ong t ot he corporat i on unt i ldecl ared or g i v e n
TO
Re v o c at i o n
-
Norev ocat i on ofdi vi dend maybe hasunl essi thasnot be enoffic i al l ycommu mmuni cat edt ot hes t oc khol der sori si n t he f orm ofs t ock di vi dends whi ch i srev ocabl e atany
10-100K 1M
t i mepr i o rt od i s t r i but i o n.
Stock di vi dends- no r educt i on, you capi t al i ze your
Wi l l1and2r ec ei v ef ul lamo untofdi v i dends?
-
YES.The y ar e ent i t l ed howe v er i ft he y ar e de cl ar ed
r e s t r i c t e dr e t a i ne de a r ni ng s ,wha ti si s s ue di sa pi e c eof
del i nquent,t he am mo ountduet hem shal lfirstbeappl i ed
paper.Therest ri ct edearni ngsrem ma ai ni nt hecorporat i on
t ohi sdel i nquencypl usexpenses.
Cashandpropert y-r educescorporat easset s
St ock di vi dends i ncre ase corporateasset s? No,i twi l l
ho l de rwi l lno tb ee nt i t l e dt h e r e t ount i lheha s pa i d hi s
onl yhavetheeffectofi ncr easi ngthe subscri bed and
s ubs c r i p t i o ni nf ul l .
pa i du pc a pi t a lo ft hec or p or a t i o n
Wi l lt her e be a cor r es pondi ng i ncr e ase i n t he i r pr o po r t i o na t ei nt e r e s t ?
-
REMA MAI NS THE SAM ME E
-
Exce pt i on: wh when st ock di vi dends wi l l re sul ti n a
* VOTI NG AND
-
-
10%
SUB
1M
Whe t he rc ash,pr oper t yors t oc k,onl ys t oc khol de r sma y rec ei ve di vi dends.Di Di vi dends are f rui t s ofi nvest ment s. The yc ome f r om t he U. R. E.or s ur pl us pr ofit s oft he
10100K 2M
Stockdi vi dendscannotbei ssued t oaper sonwhoi snot ast ockhol deri npaymentofservi cesre ndered.
SUB1M TO
ACS
How di dt he cour t deci de di vi dends i nt he cas e of Ne i l s e n
DI VI DEND RI GHTSSTI LLTHE SAME ME
PU1M
No, t ock di vi dends are ci vi lf rui t s of the ori gi nal c i v i lf r ui t s .
f r a c t i o na ls ha r e 1100K 200( 10%)
Ar enons t oc khol de r sent i t l edt or ec ei v edi vi dends ?
i nvest ment,and t otheowner soft hesharesbel ongthe
-
ACS2M
De l i nq ue nc yoc c ur s ,y o ua r ec a l l e dt op ay ,buty o uf a i l e d t o pay.I n case ofst ock di vi dend,t hedel i nquentst ock
The pr ov i s i ons of t he ne xt pr ec edi ng parag r aph shal l appl y t o any cont r act wher eby a cor porat i on under t akes t o manage or oper at e al l or s ubs t a nt i a l l yal lo ft hebus i ne s sofa no t h e rc or p or a t i o n, whe t her suc h cont r act s ar ec al l ed se r vi ce cont r act s , operat i ng agre em me entsorotherwi se:Prov i ded,howeve r , That s uc hs er v i ce c ont r ac t s or ope r at i ng agr ee me nt s whi c h r el at e t o t he e xpl or at i on, dev el opme nt , exploi t ati on orut i l i zat i on ofnaturalre sourcesma may be ente r edi nt of orsuch peri odsasma maybeprovi ded bythe pe r t i ne ntl a w ws so rr e g ul a t i o ns .( n)
ONE WASDECLARED TO Y)JULY30-100K 2 TO
TO
HAVE
THE
TRANSFER
RECORDED 10
100K
1M
I nsof aras 1 and Y who has a bet t err i ght ? Al r eady
Ther equi r e me ntf orav al i dma nag eme ntc ont r ac tar eas f o l l o w ws s :
de c l a r e d,butno ty e tpa i d? 1. -
t het i meofdecl arati onownst hedi vi dends -
Resol ut i onoft heboardofdi re ct ors
Ri ghtt orecei vevestupondecl arati on.Whoeverownsat
Unl e s st he r ei sas t i pul a t i o nt ot h ec o nt r a r y
TRUSTFUND DOCTRI NE
-
The power t o de cl ar ei ti f pai dup c api t al i s not
2. Approv albythest ockhol der shol di ng orr epr ese nti ng a maj ori t yoft heout st andi ngcapi t als t ock orma maj ori t yof t heme mem mb bersi n caseofnonst ock corporat i on ofboth t hema managi ngandt hema managedcor porat i on 3. Theappro va loft hest oc khol der sorme memb mber smu mustbe madeatt hem me eet i ngcal l edf ort hatpurpose
mai nt ai nedori si mpai red -
Tr us tf und mus tbe kepti nt actf or t he pr ot e ct i on of cre di t orswhohavetheri ghtt orel yon suchsubscri pti on and t he pai d-up capi t al f or t he sati sf acti on of t hei r cl ai ms
Cannotac cumu mul at esurpl usunr easonabl y
Basi si sthepai d-upcapi t al
Ent i t l e dt odi v i de nds
I r r e s pe c t i v eofwhe t he rt h es ubs c r i p t i o ni sf u l l
4. Thecont r actshal lnotbe f ora per i od l ongert han 5 y e ar sf or any one t e r m,e xceptt hos e whi c hr e l at et o expl orat i on, devel opme m ent or ut i l i zat i on of nat ural r esourceswhi chma m aybeent er edi nt of orsuchperi odsas maybeprovi dedbyper t i nentl awsandr egul at i ons
I l l e gal l yde cl ar e d
-
Decl aredi vi dend wi t ht hebel i eft hati tf orm me ed partof
st ockor2/3 oft heme mem mb bersi nanonst ockcorporat i on c o nt r a c ti nt h ef o l l o wi ngi ns t a nc e s : 1. Wher et he st oc khol der sr epr es ent i ng t he same mei nt er es t ofbot ht hema managi ngand managedcor por at i on own or contr olmo mor et han 1/3 oft hetot alouts t andi ngcapi t al
Di r e c t o r sar eno tl i a bl e ,unl e s ss e c 31a c t e di nb adf a i t h
st ockoft hema managi ngcorporati on;and
orgrossnegl i gencei nt heconductofcorporateaffai rs
Di r e c t o r se v e ni fa c t i ngi nbe ha l fo ft hec o r po r a t i o n,ma y
2. Wher e a maj or i t y oft he membe r s of t he boar d of di rec t orsoft hem ma anagi ngcorporati on al soconst i t ut ea
s t i l lbehe l ds ol i dar i l yl i abl e
Powert oente ri nt oma managem me entc ont r act
-
New provi si on
Secti on 44. Powert oent eri nt om ma anagement -No cor porat i on shal lconcl udea managem me ent c o nt r ac t . contr actwi t h anot hercorporat i on unl esssuch contr act shal lhavebeen appr ovedbytheboar d ofdi r ect orsand by s t oc khol de r s owni ng at l eas tt he ma j or i t y oft he o ut s t a nd i n gc a pi t a ls t o c k,o rbyatl e a s tam ma a j o r i t yoft h e mem mb bersi nt hecaseofanonst ockcorporat i on,ofboth t he managi ng and t he manage d co r por at i on, at a meet i ngdul ycal l ed f orthe purpose:Provi ded,That( 1) wher eas t oc khol der or s t oc khol de r sr e pr e se nt i ng t he same mei nt er es tofbot ht he managi ng and t he managed corporati onsownorcont rolmoret han onet hi rd( 1/3)of t h et o t a lo ut s t a ndi ngc api t als t o c ke nt i t l e dt ov ot eoft h e managi ng corporat i on;or( 2)wher e a maj ori t y oft he memb mber s of t he boar d of di r ec t or s of t he managi ng corporati on al soconst i t ut eam ma aj ori t yoft hem me em mb bersof t heboardofdi re ct orsoft hem ma anaged corporati on,t hen t he manage ment c ont r ac tm mu ust be appro v ed by t he st ockhol dersoft hema managedcorporati on owni ngatl east t wo t hi r d s( 2/ 3)o ft h et o t a lo ut s t a ndi ng c a pi t a ls t o c k e nt i t l e dt ov o t e ,o rby a tl e a s tt wo t hi r d s( 2 /3)o ft he ma en mb ma b e r se i n t h e c a s es o f a n on s t o c ki c o r pf o r aa t i o n . N o m g e me m n tc o nt r a c t h al lb e en t e r e d n t o o r p e ri od l ongert hanfiveyearsf oranyonet erm m. .
Notonl ya maj ori t ybut2/3 oft he out st andi ngcapi t al woul d be r e qui r ed f or t he appr ov alofa ma nag eme nt
t heU. R. E. ,butyunpal asacapi t al
I st he vot i ng re qui r em me ents ofa maj ori t y st ockhol der ABSOLUTE?
-
Eve ryc orpor at eactem ma anat esf r om t heBOARD
maj ori t yoft hedi rect orsoft hem ma anagedcorporati on 3. Wher et hecont r actwoul dconst i t ut et hema manageme mentor o pe r a t i o no fa l lo rs ubs t a nt i a l l ya l lo ft he b us i ne s so f anot hercorporati on,whet hersuch cont ract sarecal l ed ser vi ce contr act s. I f i t wi l l not const i t ut e t he manageme mentofal lorsubstant i al l yal loft hebusi nessof anot hercorporat i on t he firstparagr aph ofse ct i on 44 wi l lappl yand nott hatoft hes ec ond,t hati s,onl yt he v ot eoft hes t oc khol der shol di ngorr epr es ent i ngatl eas t am ma a j o r i t yo ft heo ut s t a ndi ngc api t a ls t o c ko rma ma j o r i t yo f t heme memb mbersi nt hecaseofnonst ock corporat i on wi l l ber equi r ed.
How l ong?
-
Notl ongert han 5yearsf oranyonet erm
-
Excepti on: expl orat i on, devel opment or ut i l i zat i on of naturalresources
-
Whati sanul t r avi r e sac torc ont r ac t ? Doct ri ne ofl i mi t ed capaci t y.Corporat i on can do such a c t sa ndt hi ng sasi ti sa l l o we dt odo
-
Ac t sbe y ond i twi l lbe ul t r av i r es,al l owi ng a c ol l at er al a t t a c k
I fnoti l l egalper se mere l y voi dabl e.Can be rat i fied
-
PTC-t rustcomp mpanyassuch,i tal sohasi mpl i edpower s
express l y or i mpl i edl y or eve n st opped as equi t abl e
ast om ma akethem mor eat t r act abl e
grounds -
No tul t r a v i r e si np ur s ua nc eofi t sl e g i t i ma t eb us i ne s s
Ul t ravi re sact swhi charenoti l l egalpersema m aybecome me bi ndi ngande nf or ce abl ee i t herbys at i s f act i on,es t oppe l s
Japanes ewarnot esv s .SEC
orequi t abl egrounds
Nons t oc k co r por at i ons cannot make pr ofit s and
Consequencesoful t ravi re sacts?
1. Ont hecor por at i oni t se l f
di s t r i but epr o fit st oi t ss ha r e ho l d e r s -
Ul t ravi r esbecauseJapanesewarnot esi sa nonst ock c o r po r a t i o n
-
Thepr ope rf or um,i n acc or dancewi t ht hepr ov i si onsof PD 902A,asame mendedandR. A.No.8799m ma ays uspend o rr e v o k e ,a f t e rp r o pe rno t i c eandhe a r i ng ,t hef r a nc hi s e
Cri sol og oJo se v s . CA ( ALWA WAYS ASKED BY DEAN SUNDI DI ANG)
or cert i ficat e of regi st rat i on of t he corporati on f or ser i ous mi sr eprese nt at i on as t o whatthe corporat i on
-
The ne got i abl e i ns t r ume nt s l aw whi c h hol ds an
can do ori sdoi ngtot hegre atdam ma ageorprej udi ceof
acc om mm modat i on part yl i abl e on t he i nst r um me ent t oa
t h eg e ne r a lpubl i c
hol derf orval ue,al t hough such hol deratthe t i meof t aki ng t he i nst r um me ent knew hi m t o be onl y an
2. Ont heri ght soft hest ockhol der s
accomm mmodati on part y , does not i ncl ude nor appl yt o corporat i onswh whi ch areaccomm mmodat i on part i es.Thi si s
-
A s t oc khol de r ma y br i ng e i t her an i ndi v i dual or
be causet hei ss ueori ndor se me ntofnegot i abl epaperby
de r i v a t i v es ui tt oe nj o i n at h r e a t e n ed ul t r a v i r e sac to r
a cor por at i on wi t hout consi der at i on and f or t he
cont r act .I f the act or cont r act has al r eady been
accomm mmodati onofanot heri sul t ravi res
perf orm me ed,a deri vat i ve sui tf or damages agai nstt he di r e c t o r sma ma yb efi l e d ,b utt he i rl i a bi l i t yw wi i l lde pe nd o n
-
Cor por at e offic ffice r s may guar ant e e or endo r se an
whe t he rt he y act e di n good f ai t h and wi t hr e as onabl e
accomm mmodati ononl yi fspeci fical l yaut hori zed
di l i g e nc ei ne nt e r i ngi nt ot hec o nt r ac t . Sect i on36par agraph 11 3. Ont hei mme di at epa r t i e s Sect i on10 -
The c our t s hav e notagr ee d as t ot he l eg ale ffec tofa corporatecont ractout si de ofi t s aut hori zed busi ness but Bal l at i ne gi v es t he f ol l owi ng s umm mma ar y of t he do c t r i ne se v o l v e d :
Sect i on14and15
Cor por at e power s depe nd on t he agr ee ment of t he st ockhol dersr atherthananydi re ct or
a.
I ft hecont racti sf ul l yexecutedon bothsi des,t he c o nt r a c ti se ffe c t i v eandt h ec o ur t swi wi l lnoi nt e r f e r e
-
I t may se l l and i t may guar ant ee , cont r act not
t odepri veei t herpart yofwhathasbeen acqui re d
ne c e ss ar i l yi l l e g al ,i twi l li nt h ea bs e nc eo fp r o oft ot h e
underi t
contr ary pres umed wi t hi ni t spower .Corporat i onsar e pre sume medt ocont r actwi t hi ni t spower s-CARLO OS SC CA ASE
b. I ft he c ont r ac ti se xec ut or y on bot h si de s,as a rul e,nei t herpart ycan mai nt ai n an acti on f ori t s
-
Purposecl ausema maybest r et chedt ocoverPLDT DTi nt er net .
nonperf orm ma ance c. Wher et he cont r acti sexe cut oron onesi deonl y ,
I tm ma aybew wi i t hi ni t sbusi ness. -
May i tsel lcomp mput ers?NO!ot herl i neofbusi ness.I t s
and hasbeen f ul l y perf orm me ed on t he ot her ,t he
t r a di ng !
court sdi fferastowhet heran acti on wi l ll i eon t he cont r act agai nst t he part y who has r ec ei ve d
BYLAW WS S
benefit s ofper f or mance unde ri t .Ma j or i t y oft he cour t s, howev er , hol d t hat t he part y who has
r ecei vedbenefitsf r om t heper f orm ma ancei sest opped t os e tup t h att heco nt r a c ti sul t r a v i r e st ode f e a t
-
ByLaws Rul e adopte d by t he cor porat i on f or i t s i nte rnal governance
an act i on on t he cont r act . Thi s i s mor e i n conf ormi mi t ywi t ht hedoct ri nethatnoperson shal l be al l owed t o enr i c h hi ms e l fat t he e xpe nse of
I stheadopti onofbyl awsm ma andat ory?
another
beadopt e dear l i er ?
Pri vanovs .Del aRam ma a -
Courtl ookedi nt othepurposecl ause
Whens houl dt heby l awsbeadopt edorfil ed?Cani tnot
-
Af t e ri ncor por at i on-wi t hi n1mo nt h( e ma nat e sf r om t he BOARD)
-
Thepur posecl aus ee mpower sandl i mi t s -
-
-
Ar t i cl esl i ke wi sepr ovi det hati tma yde alwi t h anyofi t s mone y
“ deal ”broad enough t ocovert hedonati on i ti snott hen
-
No ti l l e g a lpe rs eh e nc e( l a wo fa g e nc y )e x c e s spo we r sa r e
s ubj e c tt or a t i fic at i o n -
Whowi l lsi gnt headopt i oncl aus e? Maj ori t yoft hest ockhol dersorme m em mb bersatt est ed t oby t h ec o r po r a t es e c r e t a r y
ul t r a v i r e s -
Pri or moreconveni ent( si gnedbyt hei ncorporator s)
Whathappensi ft hec or por at i on f ai l st oadoptt heby l awsf r om t het i eprovi dedbythel aw?W Wo oul dt her ebean aut om ma ati cr evocati onorsuspensi on?
Rati fied bypassi ngthere sol ut i oni nquest i on -
Propernot i ceandheari ng,mustfirstbecomp mpl i edwi t h
32
L oy o l ag r a ndv i l l a sv s .CA -
Nott heSEC,butt heHI HI GC
Gov’ tvs.ElHogar -
Di dt h ec our tc a t e g o r i c a l l yr ul e dhe r et ha tt hepr o v i s i o n i nt h e5th c aus eofa ct i o ni sv al i d?
-
Must–notal waysi mperat i ve
-
Fi l i ngofby-l awsm ma andat ory
-
Emp mpower edbySEC
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Rul esgoverni ng equi t y,consi deri ng t hef actthatt here wasal waysl ac kofquor um
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Sect i on 29 BOD i fst i l lconst i t ut i ngaquorum mayfil lup avacancyot hert hanbyremo moval ,et c.
-
Mer el y a gr ound, t her e must be pr oper not i ce and heari ng
-
Notaffectt he st at us oft he corporat i on as a j uri di cal person
-
Subj ectt he cor porat i on t oa fine,asm ma aybei ssued by
Gokongweivs .SEC -
Sect i on 48al l owsacorporat i ont oame mendi tby-l aws Sect i on 47 oft hecode,t hebyl awsm ma aypr ovi def ort he q ua l i fic a t i o na nddi s q ua l i fic a t i o n
t heSEC
I tcannotbesai dG Go okongweihasavest edri ght s
Whendoby l awsbec omee ffec t i v e ? -
-
Unt i landunl esst heSEC gi vesi tst amp mpedofapproval
-
Suspensi on ofany gov er nm me entagency .Theper mi ssi on
-
mustfirstbesecured-se ct i on46
El e m me e nt so fav al i db y l a w
Preventdi rec t orsf rom t aki ng advant age ofposi t i on t o promo mot ehi si ndi vi duali nt ere stt othedamageofot hers Thev al i di t yorr e asonabl e ne ssofaby l awsi saques t i on ofl a w
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Subj ectt ot hel i mi t ati onsthatr easonabl enessofa byl aw i same mer ema mat t erofj udgme ment
i cpol i cyormo r al s; 1. I tmustnotbecont r aryt o w l a ,publ -
Rul eoft hem ma aj ori t yandnott het yrannyoft hem mi i nori t y
i nc o r po r a t i o n;
Mayt hebyl awsbeame mendedal t er edorappeal ed?
3.
I tmustbegeneralanduni f orm i ni t seffectorappl i cabl e t oa l la l i k eo rt ho s es i mi l a r l ys i t u at e d;
-
4.
I tmu mustnoti mpai robl i gat i ons and cont r act sorves t ed
maj ori t y vo t e of the outs t andi ng capi t al st ock or
r i g ht s ;a nd’
mem mb ber si n a nonst ock cor porat i on,ata r egul aror
2. I t mu must not be i nconsi s t ent w wi i t h t he ar t i cl es of
YES.HOW?Twomo des
1. Bya maj ori t yvot eoft he di r ect or sort rust eesand t he
s pe c i a lme e t i ngc a l l e df o rt ha tp ur p os e ; 5. I tmustber e as onabl e . 2. Byt heboardofdi r ect or sal onewhendel egat edby2/3 of -
Must not be i nconsi st ent w wi i t h exi st i ng l aws. Not be
t heout st andi ngcapi t alst ockor2/3 oft heme mem mb bersi n
i nc ons i s t e ntwi t har t i c l e sofi nc o r po r at i o n
anonst ockcorporati on.
Byl aws
-
None fil i ng woul d not affec t t he s t at us of t he
-
Thi s de l e gat ed powe r ,howev er ,i sc ons i der e dr ev oked whe ne v e rama j or i t yoft heout s t andi ngcapi t als t oc k or mem mb bersshal lsovot eataregul arorspeci almeet i ng.
c o r po r a t i o n,L o yo l ag r an dv i l l asc as e -
-
I fi ti st obeame mendedwhati st heproceeding?
-
Sect i on482nd paragr aphprovi des:
Thewor d“ mus t ”i snotal way si mpe r at i v e St ockhol der s ar e conl usi ve l y pre sum me ed t o know t he pr o v i s i o nso ft heb y l a ws
-
Howabout3rd pers ons? NO.unl esst her ei sact ualknowl edgeoft hesam me et hey arenotpr esume med t oknow oft heprovi si onsoft hebyl aws Fl e i s c he rv s .Bo t i k aNo l a s c o
-
Sha r e so fs t o c ka r ep e r s o na lpr o p e r t i e s
-
Sharesofst ockma mayt r ansf ert owhom everhewi shes
-
Theby l awsi sc ont r ar yt ol aw
Ar t i cl esofi ncor por at i on
-
Ma ypr o v i der e a s o na bl er e s t r i c t i o n
-
Byl awsme mer el yi nt ernall aws
-
Ar t i cl esi st hec ont r ac tbe t we en and amo ngt hepar t i e s andcorporat i on
mendment st o byl aws. - The Sect i on 48 A . boar dofdi r e ct or sort r us t e es,byama j or i t yv ot et he r eof , andt heownersofatl eastama maj ori t yoft heout st andi ng capi t als t ock,oratl eastama m aj ori t yoft hem me em mb bersofa nonst ock corporati on,ata re gul arorspeci alme meet i ng dul ycal l ed f ort he purpose ,mayame mend orr epealany by l awsoradoptne w by l aws .Theowner soft wot hi r ds ( 2 /3)o ft h eout s t a ndi ngc api t a ls t o c ko rt wo t hi r d s( 2/ 3) oft hem me em mb bersi nanonst ockcorporat i onmaydel egat e t otheboardofdi rect orsort rustee sthepowert oamend orre pealany byl awsoradoptnew byl aws:Provi ded, Thatany powerdel egat ed t ot he boar d ofdi r ec t or s or t rust eest o am me end orr epealany byl awsoradoptnew by l aws s hal l be c ons i der e d as r e v oked whe ne v e r st ockhol ders owni ng orrepre senti ng a maj ori t y oft he out st andi ngcapi t als t ockoramaj ori t yoft he mem mb bers i n nonst ock corporati ons,s hal lsovot eataregul aror s pe c i a lme me e t i ng . Whe ne v eranyame ndme ntorne w by l awsar e adopt ed, s uch ame mendme ment or new by l aws shal l be at t ached t ot he ori gi nalbyl aws i nt he offi ffic ce oft he corporat i on,and a copy t her eof ,dul y cer t i fied under oath by t hecorporat esecr et aryand a maj ori t yoft he di r e c t o r so rt r us t e e s ,s ha l lbefil e d wi t ht heSe c ur i t i e s and Exc hangeCom mm mi ss i on t hesame met obeat t achedt o
33
t h eo r i g i na la r t i c l e so fi nc o r po r a t i o na nd o r i g i na lb y l a w ws s . The ame nde d or ne w by l aws shal lonl y be effect i ve upon t he i ss uance by t he Securi t i es and ExchangeCom mm mi ssi on ofa cer t i ficat i on t hatt he sam me e arenoti nconsi st entwi t ht hi sCode.( 22aand23a)
Whati ft henot i c er equi r e me nti snotc ompl i e dwi t h?
Whathappened t o any ac tpass ed i n a me e t i ng whe n not i cer equi re mentwasnotrequi redwi t h?
-
Voi dabl e ,subj ec tt or at i ficat i on Bo ar dofdi r e c t o r sv s .T an
Ba r e t t ov s.L aP r e v i s o r a -
Anyc or por at eacte manat e sf r om t heboar d Di r ect orst hem ms sel vescannotam me end t heby-l awsi ft hey
-
wer enotgr ant e dt hes ame
Not i ce r equi r em me ent i st he byl aws i s a mandat or y r equi r em me ent I mpr o p e r l ys er v e d ,a nyac t i o n wi l lb ei nv a l i da t e da tt he obj ect i onofanyst ockhol derorme mem mb ber
Sect i on48
Thepowe rgr ant e di snots ubj e ctt or e v oc at i onTorF?
Mustbehel di nt heproperpl ace
Wher eshoul di tbehel d?
-
Appar entf r om t hef or egoi ng pr ovi s i on i st hatme e t i ngs
-
FALSE
I ft hebyl awsareame mendedw wh hen wi l lt heybecom me eval i d?
muni ci pal i t y wher e t he pr i nci pal offic ffice of t he
-
Upon i ssuanceoft heSEC t hatt heyarenoti nconsi st ent
pri nci paloffi ffic ceoft hecorporat i on.
o fs t o c kho l d er smu mus t ,a ta l lt i me s ,b ehe l di nt h eci t yor c o r po r a t i o ni sl o c at e da nd,a sf a raspr a c t i c a bl e ,i nt he
Whati ft heSEC f ai l e dt oac twi t hi n 10mo nt hswi t hout
f a ul ta t t r i but a bl et ot hec o r po r at i o n?
Mayt hebyl awsofacorporat i on provi det hatme meet i ngs behe l danywher ei nt hePhi l i ppi nes ?
TorFanyame ndme ntoft heby l awswi l lne v e rbecome
-
v al i dunt i li tgi v e si t ss t ampofappr ov ale v enaf t er1y ear
Whi l e t her e i s no pr ovi si on aut hor i z i ng a s t oc k c o r po r a t i o nt oho l ds t o c kho l de r s ’ me e t i ng so ut s i deo ft he Ci t yofMu Muni ci pal i t yw wh heret hepri nci paloffi ffic cei sl ocated,
-
TRUE.Ar t i cl esofi ncor por at i onandby l awsar edi ffe r ent
t hel aw al l owsa nonst ock corporati on t oprovi de i ni t s by l awsany pl ace ofme mber s ’ me e t i ng pr ovi ded t hat
MEETI NGS
propernot i cei ssentt oal lmem mb bersi ndi cati ngthedat e, t i meandpl aceoft hem me eet i ngw wh hi chshal lbewi t hi nt he
Meet i ngs
-
Meet i ngsofst ockhol ders
Phi l i ppi ne s . 1. Dat e fixed
i nt h eby l a wsorb y l a w
T orF t he by l aws ofa s t oc kc or por at i on ma yv al i dl y prov i de t hatme mee t i ngs shal lbe hel d anywh wherei nt he Phi l i ppi ne s ?
-
Me e t i ng so fd i r e c t o rort r us t e e s
Meet i ngsarer egul arandspeci al
Meet i ngsofst ockhol ders
-
FALSE. Non-s t ock corpor at i ons l ang pwe wede prov i ded nakal agaysabyl awsandprovi ded propernoti cei sgi ven
Corporat i oncan doonl ysuchthi ngsast hel aw al l owsi t t odo ,DOCTRI NEOF OFLI MI TED CAPACI TY
Whati sr e gul arandwhati sspe ci al ?
Whenar er egul arme e t i ngsoft hes t oc khol der shel d?
Fi xeddateprovi dedbythebyl aws Whati ft he r ei snodat e?
-
Apr i l
Whyapr i l ?
-
-
Whati fi nt hedat es pe ci fie di nt heby l awsorbyt hel aw
YES.Me t r oMa ni l a,onesi ngl ec i t y
Mustbecal l edbytheproperpart y Whocal l s ? Pre si dent unti l and unl ess t here i s a prov i si on , secre t aryonorderoft hepre si dent
Poi nti nt i metheaudi t edfinanci alst at eme menthavebeen prepared
San Mi guel o ffice l oc at ed i n Or t i gas Cent er . Ma May st ockhol dersmeet i ngbehel di nPI CC cent er?
Whati ft he r ei snobodywhocanc al l ?
-
Thepe t i t i one r ,s t oc khol de rma ype t i t i ont hecour t
Whati ft her ei sa pe r s on whocan cal l ,buthef ai l sor
i t sel ft heme meet i ngwa wasnotconvened,f ori nst ancel ackof quorum orf or cema maj eure ?
ne g l e c t st oc al lt heme me e t i ng ?Ma Ma ya s t o c kho l de rp e t i t i o n -
I tmaybepost ponedonare asonabl edat e
Not i cere qui rem me ent ?
-
Regul ar-2weekspri ornot i ce
-
Speci al -1we week
Maythenot i cere qui r em me entbel esse ned?
-
Byl awsma mayprovi deal ongerorashort erdurat i on
Ponce cas e onl y appl i es when t her ei s NO per so n aut hori zedt ocal lt hemeet i ng.I ft her ei saperson,but ne g l e c t shi sdut y .P onc ewi l lno ta pp l y .
Wr i tofi nj unc t i onma yne v erbei s suede xpar t e
I st he r ea nye x c e pt i o n?
-
Sect i on 28onl yi nst ance
34
Secti on28. Re m mo o v alo fdi r e c t o r so rt r u s t e e s . Anydi r ect orort r us t e eofacor por at i on ma yber e mo v ed f r om offi ffic ce by a vo t e oft he st ockhol ders hol di ng or r e p r e s e nt i ngatl e a s tt wo t hi r d s( 2/ 3)o ft h eout s t a nd i n g capi t al st ock, or i ft he corpor at i on be a nonst ock c o r po r a t i o n,b yav o t eofa tl e a s tt wo t hi r d s( 2 / 3)o ft he mem mb bersenti t l ed t ovot e:Provi ded,Thatsuch r em mo oval shal lt ake pl ace ei t her at a r egul ar meet i ng of t he cor porat i on or at a speci al m me ee t i ng cal l ed f or t he purpose,and i n ei t hercase,af t erprev i ous not i ce t o st ockhol ders or mem mb ber s of t he cor porat i on of t he i nte nti on t o proposesuch r em mo ovalatt he mee t i ng.A speci alme mee t i ng oft he st ockhol der s orm me em mb ber s ofa corporati on f orthe purpose ofr em mo ovalofdi rec t orsor t rustees ,oranyoft hem, m,mustbecal l edbyt hesecre t ary on or deroft he pre si dentoron t he wri t t en dem ma and of t he st ockhol ders r epres enti ng or hol di ng at l east a ma j o r i t yo ft heout s t a ndi ng c a pi t a ls t o c k,o r ,i fi tb ea nonst ock cor porat i on, on t he wri t t en dem ma and of a maj ori t y oft hem me em mb bersent i t l ed t o vot e.Shoul dt he s e c r e t a r yf a i lo rr e f us et oc al lt hes pe c i a lm me e e t i ngupo n such dem ma and orf ai lorref usetogi vethe not i ce,ori f t herei sno secr et ary ,t hecal lf orthe meet i ng may be address ed di re ct l ytot he st ockhol dersorm me emb mbersby anyst ockhol derorm me emb mberoft hecorporat i on si gni ng t he dem ma and. Not i ce of t he t i me and pl ace of such meet i ng,as wel lasoft he i nt enti on t o propose such r em mo oval ,mu mustbe gi ve n by publ i cat i on orby wri t t en not i cepresc ri bed i nt hi sCode.Rem mo ovalmaybewi t h or wi t houtcause :Pr ovi de d,Thatr emo v alwi t houtcause maynotbe used t o depri vem mi i nori t y st ockhol dersor mem mb bersoft heri ghtofr epres entat i on t o whi ch t hey maybeent i t l edunderSect i on24oft hi sCode.( n)
Casesofre movaloroust erofadi rect or
Mandam mu us woul d be appro pri at ere medyi ft her ei sa personaut hori zedbutre f uses
-
I ft hevoti ngre qui re menti sme met ,any res ol ut i on passed i nt heme me e t i ng ,e v e ni fi mp r o pe r l yhe l do rc al l e d wi l lbe v al i di fal lt hes t oc khol der sorme mbe r sar epr es entor dul yrepresent ed t her eat.Thel astparagraph ofsect i on 51 i scl earont hem ma att erwheni tprovi des: “ al l pr oc ee di ngs had and any busi nes s t ransact edatanym me eet i ngoft hest ockhol ders orme mem mb bers,i fwi t hi nt hepowersoraut hori t y o ft hec or p or a t i o n,s h al lbev al i de v e ni ft he me e t i ngb ei mpr o p er l yhe l dorc a l l e d,pr o v i de d al lt he st ockhol der s or me m em mb ber s of t he corporati onarepresentordul yrepresentedat t hem me eet i ng. ”
Di r e c t o r s / t r us t e e sme e t i ng
Regul ar( mont hl y)andspeci al( anyt i me)
Ma yt ha tb er e s t r i c t e d( wi t h i no ro ut s i d et hePhi l )
YES.unl e sst heby l awspr ov i deot her wi s e. I sthereanynot i cerequi re ment ?
-
YES.1dayunl es sot he r wi sepr ovi dedbyt heby l aws
Whathappensi fnot i c ei snotcomp l i edwi t h?
-
I ft he not i ce r equi r em me ent i s not comp mpl i ed wi t h t he meet i ng i si l l egal and wi l l not bi nd t he corporati on exceptwhen subsequentl yrat i fied ori nt hecaseofa cl osecorporat i on wheret heactofanyonedi rec t orma may
Quorum andvo t i ngre qui r eme ment
-
Maj ori t yst ockhol dersorm me emb mbersconst i t ut eaquorum
bi nd t hecor por at i on e v en wi t houtame e t i ngundert he speci alprovi si onofSect i on101oft heCode.
Sect i on 53. Regul arand speci almeet i ngs of di r e c t o r sort r u st e es . -Regul arme meet i ngsoft heboardof di r e c t o r sort r us t e e so fe v e r yc o r po r a t i o ns ha l lbehe l d mont hl y,unl esst heby-l awsprovi deot herwi se.
I s t he pr es ence of t he maj or i t y owner s of t he out st andi ngcapi t alst ockABS BSO OL LUTE t ohaveaquorum m? ?
-
NO.when t hecodere qui r esahi gherquor um i tmust Speci alme meet i ngsoft heboard ofdi rect orsor t rust eesma maybehel d atany t i meupon t he cal loft he pr e s i de nto ra spr o v i de di nt heb y l a ws .
a l s obee qui v a l e ntt ot hev o t er e q ui r e d
Cannot i cebewai ved?<sec. 53>
Do you i ncl ude nonvo t i ng share si n arr i vi ng att he v ot i ngr equi r e me ntt ohav eav al i dcor por at eac t ?
-
Mee t i ngs of di r ec t or s or t r ust ee s of corporat i onsma maybehel danywher ei n oroutsi deoft he Phi l i ppi ne s ,unl e s st h eb y l a wspr o v i d eo t h e r wi wi s e .No t i c e o fr e g ul a ro rs pe c i a lme e t i ng ss t a t i ngt h eda t e ,t i mea nd pl ace oft heme meet i ng mustbe sentt oeverydi r ect oror t rust ee at l east one ( 1) day pri or t ot he schedul ed meet i ng,unl essotherwi sepr ovi ded by t he byl aws.A di rec t oror t rust eema m ay wai vethi srequi reme ment ,ei t her e x pr e s s l yo ri mpl i e dl y .( n)
I td epe nd s. Se c t i o n 6l a stp ar .I fi tf a l l swi wi t h i nt hepe nul t i mat epa r . Ofs e c t i o n6
Fi v er e q ui s i t e sofav al i dme me e t i ng
1. I tmustbehel d on t hedat efixedi nt hebyl awsori n accordancewi t hl aw
-
2. Pri ornot i cem mu ustbegi ve n
-
3. I tmustbehel dathepr operpl ace
YES.Expr ess l yandi mpl i e dl y SEC rul i ng A s pe ci al me e t i ng i sv al i d wi t hout not i ce whe r et hedi r e ct or sar eal lpr es entorwher e
4. I tmustbecal l edbyt heprope rpar t y
t heyconsentt ot heme meet i ng.Prese nceatt he
5. Quor um andv ot i ngr eq ui r e me nt sm mu ustbeme t
i t has been rul ed t hat t he mee t i ng of t he
meet i ngwai vest hewa wantofnot i ce.More over ,
-
di r e c t o r swi t h o utaf o r ma ma lc a l lfir s tbe i ngha d, Datenotcomp mpl i edwi t h,not i ce,pl ace,notcom mp pl i edwi t h
and not i cether eofgi vent othemem mb bers,di d
and t he per so n who ca l l ed not aut hor i z ed, what
notoperat et oi nval i dat ei tor t o renderthe
happenst oanyre sol ut i oncal l ed?
proceedi ngs whi ch wer et aken ati tvoi d,f or
Sect i on 51,anym me eet i ngshal lbe val i d provi ded al lt he st ockhol ders ar e pre sent or dul y r epr ese nte d and provi ded i ti swi wi t hi nt hepoweroft hecorporati on.3RD paragr aph of324
ev er yme mem mb beroft heboardwe wer epres ent ,and t hei rj oi ntact i on had comp mpl et el y bound t he corporati on asi ft heme meet i nghasbeen cal l ed wi t h due f or mal i t y , and e v er y one of t he di r e c t o r sha dr e c e i v e dp r o pe rno t i c e .
35
What i st he quor um and v ot i ng r e qui r eme nt i nt he
Sect i on 58. Pr o x i e s . - St ockhol ders and
di r e c t o r sme me e t i ng ?
mem mb ber sm ma ayvot ei nper sonorbyproxyi nal lmee t i ngs
Ma j o r i t yo ft h eme me m mb b er so ft heb oa r dofd i r e c t o r s( e nt i r e
si gned bythest ockhol derorme mem mb berand fil ed bef or e
ofst ockhol ders orme m em mb bers.Proxi es shal li n wri t i ng, -
memb mber shi p)
t he schedul ed meet i ng wi t ht he corpor at e secr et ary . Unl e s sot h e r wi wi s epr o v i de di nt hepr o x y ,i ts h al lbev al i d
Vot er equi r edt opas sav al i dc or por at eact ?
onl yf ortheme m eet i ngf orwhi ch i ti si nt ended.Noproxy shal lbeval i dand effect i vef ora peri od l ongert han five
-
Maj ori t yoft hosepr esentatwhi cht her ei saquorum ( 3
( 5 )y e a r sata nyo net i me .( n)
present ,vot eof2suffici ent ) -
How l ongma m ayaproxye xi st ?
-
Maxi mum of5ye ar s
Except i on,ma maj ori t yofal lt hem me em mb bersoft he boar di n c a s eo fe l e c t i o no fc o r p o r at eo ffi ffic c e r s ,unl e s st hear t i c l e s provi def oragr eate rquorum orvot i ngrequi rem me ent -
Sho ul dt hedi r e c t o ro rt r us t e e sbep hy s i c a l l ypr e s e nt ?
-
Generalrul e,mustsi tandactasabodyt ohaveaval i d
Val i df ort heme e t i ngi nwhi c hi ti si nt e nde d
I spr o x yr e v o c ab l e ?
corporateact
-
Ge ne r a l l yr e v o c a bl e ,unl e s sc o upl e dwi wi t hi nt e r e s t
Fi vema man memb mberboar d,am me ee t i ng wascal l edt oday ,
Re v o c at i o n
shoul dt hephysi calprese nceorwarm bodi esre qui re st o const i t ut eaquorum?
-
A pr oxy ,l i ke age ncy i n g ene r al i sr e v oc abl e unl es s coupl ed wi t h an i nte r es tand r ev ocat i on need notbe
-
NO.i ti sno tr e q ui r e d .T e l e c o nf e r e nc eorv i d eoc onf e r e n ce
made by f orma malnot i cei n wri t i ng.Rev ocat i on may be
i sal l owed,E-com mm mercel aw
express edt otheproxyhol der,t otheel ect i on comm mmi t t ee, by a s ubse quentpr oxy t o anot he r or by s al e oft he
Mem mb bers hi psubj ectt ol aws
share s.Thus i tma may be r ev oke or al l y by conducts uch t hat appeari ng and asser t i ng t he ri ght to vot e at a
St ockhol dernotyet
meet i ngby t heregi st eredowneroft hesharesre vokesa pr o x ypr e v i o us l yg i v e n.
Maydi rec t orvot ebyproxy?
-
NO
I fA i sadi r e c t o ra nda me e t i ngi sc al l e df o rt hepur p os e
Mustbesubm mi i t t edtoaval i dat i oncomm mmi t t ee
Byl aws of nonst oc k cor por at i ons may deny pr oxy v ot i ng
ofel ect i nganew setofBOD canAvot ebypr oxy?
-
Whati sv ot i ngt r us tagr e eme nt ?
YES.Be caus ei ti sas t oc khol de r sme e t i ng -
One c r ea t ed by an agr e em me ent be t wee n a gr oup of
I fd i r e c t o r sme me e t i ng ,c a nno tv o t ebypr o x y
st ockhol dersofacorporati on and atr ust ee,oragroup ofi dent i calagreeme ment sbetween i ndi vi dualst ockhol ders
St o c kho l d e r ’ sr i g htt ov ot e
-
I nherenti nst ockownershi p
-
Howeve rthi s ri ghti s notal ways i nher ent,because i t
andacomm mmon t rust ee,wher ebyi ti sprovi ded t hatf ora t erm oyearsorf ora peri od conti ngentupon a cer t ai n e v e nt ,o runt i lt hea gr e e me me nti st e r mi mi na t e d ,c o nt r o lo v e r t hest ockownedbysuchstockhol ders,shal lbel odgedi n t he t rust ee,ei t herwi wi t h orwi wi t houtre servat i on t ot he
maybede ni ed: 1.
Redee mabl e and pr ef er r ed shar es , howev er i f f ounder s share sar ei ssued ot hersm ma aybedeni ed t h er i g htt ov ot e .
2.
Maytheri ghtt ovot ebyproxybedeni ed?
Mayt hearti cl esofi ncorporati ondeny?
Mayt hebyl awsval i dl yprovi de t hatproxyvot i ngi snot al l owed?
-
NO
Onl y nonst oc k may be deni ed pr oxy vot i ng ( may be br oaden,l i mi t e dorde ni e d)
-
I ti sa devi seofbi ndi ngst ockhol derst ovot eas a uni t a ndt husa s s ur i ngade s i r a bl es t a bi l i t ya ndc ont i nui t yi n manageme menti nsi t uat i onswher ei ti sneeded.
Whati st heeffe ctofav ot i ngt r us tagr ee me ntr el at i v et o t h er i g ht s ?
Whennotde ni e dt he yma ydos oi npe r sonorbypr oxy
-
May be deni ed by t heart i cl esofi ncorporat i on or c o nt r a c t s
-
owner s or per sons des i gnat ed by t hem t he power t o di rec thow suchcont rolshal lbei ssued.
-
L e ev s .CA m mu ustpasst hesecri t eri a
1. Thatt he vot i ng ri ghtsoft he st ock arese parat ed f r om t h eo t h e ra t t r i but e so fo wne r s h i p ; 2. That t he vo t i ng r i ght s gr ant ed ar ei nt ended t o be i r r e v o c ab l ef o rade fini t epe r i o do ft i me ;a nd, 3.
Thatt hepri nci palpurposeoft hegr antofvot i ngri ght s i st oac q ui r ev o t i ngc o nt r o lo ft hec or p or a t i o n.
Duri ng t he dur at i on oft he t rustt hey arei rr evocabl e unl e s st he r ei sav i o l a t i o ne i t h erb yf r a ud
Pr o x yv o t i ngi sama t t e ro fr i g htg r a nt e db yl a w
Sect i on 59. Vo t i ng t r u s t s . - One or m mo or e st ockhol dersofastockcorporat i on maycreat ea vot i ng t rustf orthe purpose ofconf err i ng upon a t rust eeor t r us t e e st her i g htt ov ot eando t h e rr i g ht spe r t a i ni ngt o t hesharesf oraperi odnotexceedi ngfive( 5)ye arsatany t i me: Pro vi ded, That i n t he case of a vot i ng t rust speci fical l yrequi redasacondi t i on i nal oan agreem me ent , sai d vot i ng t rustma maybe f ora peri od excee di ngfive( 5) y e ar sbutshal laut oma t i cal l ye xpi r eupon f ul lpayme nt oft hel oan.A vot i ngtr ustagreem me entm mu ustbei nwri t i ng and not ari ze d, and shal l spec i f y t he t er ms and condi t i ons t her eof .A cer t i fied copy ofsuch agree ment shal l be fil ed wi t h t he cor por at i on and wi t h t he Securi t i es and Exchange Com mm mi ssi on;ot herwi se,s ai d agr ee ment i s i neffec t i ve and unenf or ce abl e. The c e r t i fi ca t eo rc er t i fic a t e sofs t o c kc o v e r e db yt hev o t i ng t rustagr eem me entshal lbe cancel l ed and new onesshal l bei s suedi nt henameoft het r us t eeort r us t e ess t at i ng t hatt heyarei ssued purs uantt osai dagree ment.I nt he books oft he cor por at i on,i t shal lbe not ed t hatt he t r ansf eri nt hename meoft hetr ust eeortr ust eesi sm ma ade pursuantt osai dvot i ngtr ustagreeme ment .
Le g alt i t l ei st r a ns f e r r e dt ot h ev o t i ngt r us t e e
Maythevoti ngt rust eevot ebyproxy?
-
Ye s,l eg alowne rma yv ot ebypr oxy
Maytheproxyhol dervot ebypr oxy?
-
NO,( AG GE ENT)an age ntcan haveno ot herage ntunl es s s pe c i fi ca l l ya l l o we db yt hep r i nc i pa l
Stockhol derexecut i ng as a proxy ,i shequal i fied t o be v ot edasadi r ect or ?
Whyi shequal i fiedt oac tasadi r e ct ori ft hes t oc khol de r e x e c ut e sasadi r e c t o r ?
-
Thebenefic i alowneroft heshar e si n av ot i ng t r us ti s di s q ua l i fie dt obead i r e c t o ri nav o t i ngt r u s twhe r e a si n aproxy ,t heowneroft heshar esma maybeel ect edassuch s i nc el e g alt i t l et he r e o fr e m ma a i n swi t hhi m
The t r us t ee or t r us t e es s hal le xec ut e and de l i v e rt ot h et r a ns f e r o r sv ot i ngt r us tc e r t i fic at e s ,whi c h shal lbet r ansf er abl ei nt he same mema mannerand wi t ht he s a mee me ffe c ta sc e r t i fic a t e so fs t o c k.
-
YESher emai nst obet heowner
I sthest ockhol derexecut i ngi navot i ngtrustagreeme ment , i sheq ua l i fi edt oac ta sadi r e c t o r ?
The v ot i ng t r us t agr ee me nt fil e d wi t h t he cor porat i on shal l be subj ect t o exam mi i nat i on by any st ockhol deroft he cor porat i on i nt he sam me ema manneras anyothercorporatebook orr ecord:Provi ded,Thatboth t hetr ansf erorand t hetr ust eeortr ust eesm ma ayexerci se t he ri ght of i nspect i on of al l cor porat e books and rec ordsi naccordancewi wi t ht heprovi si onsoft hi sCode. Anyot he rs t oc khol derma yt r ans f e rhi sshar es t ot he same me t r ust eeort r ust ee s upon t he t er ms and condi t i ons st at ed i nt he vot i ng t rustagreem me ent,and t hereupon shal lbe bound by al lt hepro vi si onsofs ai d agree ment.
-
NO.c easestobe st ockhol derofr ecor d,no l ongert he l egalownerofshares
Maythecorporat i on enf orcet hevot i ngt rustagreeme ment s e x e c ut e dbyi t ss t o c kho l de r s ?
-
NO.NI DC v s .AQU QUI NO
-
Notapri vytot hecont ract
-
Ri ght sl i abi l i t i es ofa st ockhol der are t here i nt hei r i nd i v i d ua lc a pa c i t y -c o r po r a t ee nt i t yt he o r y
No vot i ng t rustagree mentshal lbe ente r ed i nt of orthe purpose ofc i r cumvent i ng t hel aw agai nst mo no po l i e sandi l l e g a lc o m mb b i n at i o nsi nr e s t r a i nto ft r a de orusedf orpurposesoff raud.
Vot i ngt r us tagr e eme nt s
-
Norma mal l y exe cut ed i nf avor ofbanki ng and financi al i ns t i t ut i o ns
Unl ess expressl y re newed,al lr i ght s grant ed i navot i ngt rustagreem me entshal laut om ma ati cal l yexpi reat t he end of t he agr eed peri od, and t he vot i ng t rust cert i ficat es as wel las t he cert i ficat es ofst ock i nt he nam me eoft het rust eeort rust eesshal lt her ebybedeem me ed cancel l edandnew cert i ficat esofst ockshal lbere i ssued i nt henam me eoft hetr ansf eror s.
-
Sot ha tt he yc anv o t eac e r t a i ns e to fdi r e c t o r s
The v ot i ng t r us t e e or t r us t e es ma yv ot e by
-
Ye s,ot her wi s ei ti si neffe ct i v eandunenf or ce abl e
-
By pul l i ng t hei rvot es t hey can decl i ne t he res ol ut i on passedbyt heboar d
Onl yl e g a lo wne r s hi pi st r a ns f e r r e d
Bei ngsti l lt hebenefici alownert heym ma aytr ansf ert hese
E ND O F M ID TE R M S
r i g ht s
I s t he r i ght gr ant ed t o a vo t i ng t r ust agr ee ment a bs o l ut e ?( t oi ns pe c t )
-
NO. The v ot i ng t r us tagr ee me ntfil ed wi t ht he c or por at i on
STOCKS KSAND STOCK KH HO OL LDERS
3mo mode s
1.
Byacont ractofsubscri pt i onwi wi t hthecor porat i on;
shal lbe subj ectt o exami mi nat i on by any st ockhol derof t he co r por at i on i n t he sa me manner as any ot her
2. Bypurc haseoft r eas uryshare sf r om t he cor por at i on; and,
cor porat e book or r ecor d. Pro vi ded, t hat bot h t he t r ansf erand t he t rust ee ortr ust ees may exer ci se t he r i g hto fi ns pe c t i o no fa l lc o r po r a t eb oo ksandr e c o r d si n
3. By pur chase or acqui si t i on of s hare sf r om ex i st i ng st ockhol ders.
NO sucht hi ngaspur chaseofuni ssuedst ocks A subs cr i pt i on cont r act can be condi t i onal pr ovi ded t h e r ei sno t h i ngi nt hec ha r t e ro rs t a t ut epr o hi bi t i ngi t
Secti on 60. Subs c r i p t i o nc o nt r ac t . -Anycont ractf ort he acqui si t i on ofuni ssued st ock i n an exi st i ngcorporati on ora corporati on st i l lt obef orme medshal lbedeem me edasubscri pti on wi t hi nt heme ani ngoft hi sTi t l e,not wi t hs t andi ngt hef actt hat t hepart i esref ert oi tasapurc haseorsome meothercont ract . ( n)
a ndno ta g a i ns tp ubl i co r d er ,l a w,e t c .
Mus ti tbei nwr i t i ng ?
-
NO,i tmaybeor al
5M shoul di tbei n wri t i ngtobeval i d andbi ndi ngasa
t h
Undert heol dl aw t he4 m mo odei sPURCHASE
Purchase
-
Re c i pr o c a li nna t ur e
-
Purc hasercannei t herr equi ret hei ssuance
s ubs c r i p t i o n?
-
NO,st atutesoff raudsonl yappl i est oSALES Tr i l l anav s .Quez onCol l eg e
-
Counte rpr oposal ,t here f or et herewa was a need f oran acceptance
Xc o.I nc. -
P
Fa cul t a t i v ebe c aus ei ti si nhi sownf r e ewi wi l l ,i ti sv oi d Whatma y be use d as a cons i de r at i on and how muc h shoul dbet heconsi derati on?
Aut hor i z e dcapi t al 1M 500
SUBSCRI BED
500
UNI SSUED STOCKS ( ASLONG ASGALI NG DI TO)
-
Secti on 62. Co ns i de r a t i o nf o rs t o c ks.-S t o c ks shal lnotbei ssuedf oraconsi derati on l essthant hepar ori ssued pri cet her eof .Consi derati on f orthe i ssuance ofst ockma maybeanyoracomb mbi nat i onofanytwoormo mor e o ft hef o l l o w wi i ng :
Zwa want st oacqui re100K
Ent er edi nJune50% shal lbedownpayme mentr ema mai nderDec emb mber 08 o
1.Act ualcashpai dt othecorporat i on; 2.P r o pe r t y ,t a ng i bl eo ri nt a ng i bl e ,a c t ua l l yr e c e i v e db y t hecorporat i on andnecessaryorconveni entf ori t suse andl awf ulpurposesataf ai rval uati on equalt othepar o ri s s ue dv a l ueo ft hes t o c ki s s ue d;
hew wi i l lnotbeconsi dereda st ockhol derunl esshehas pa i di nf ul l
Augus t08pr ope r t yi sr av agedbyfir eal lar et ur ne di nt oshar e s
-
-
Sect i on 62provi des:
3.Laborperf orme med f ororservi cesact ual l yrendered t o t h ec or p or a t i o n;
I sZl i a bl et opa yt heba l a nc eofhi sac q ui s i t i o ns ? YES,noma t t erhow t hepar t yr e f e rt oi t ,i ti sconsi der ed s ubs c r i p t i o n
4.P r e v i o us l yi nc ur r e di nd ebt e dne s so ft h ec o r po r a t i o n;
Onceyousubscr i be,youbecom me east ockhol derwhi chi s
5. Amounts t r ansf er r ed f r om unres t ri ct ed r et ai ned e a r ni ng st os t a t e dc api t a l ;a nd
e nt i t l e dt oal lt hel i abi l i t i e so fas t o c kho l d er Z-subscr i bedto100T/SofXCo.
6.Out st andi ngsharesexc hangedf orst ocksi nt heevent o fr e c l a ss i fic at i o no rc o nv e r s i o n.
Amo unthepai d50k Whe r et heconsi de r at i on i sot hert han ac t ual cash,orconsi st sofi nt angi bl epropert ysuchaspat ent s o fc op yr i g ht s ,t h ev a l ua t i o nt h e r e o fs ha l li ni t i a l l y be det er mi ned by t he i ncor por at or s or t he boar d of di r ect ors ,subj ectt o appr ovalby t he Securi t i es and Exc hangeCom mm mi ss i on.
Z di d notpayon t he dat ecal l ed and wasdecl are d a del i nquent share
Corpor at i on pai d 100T/S t here f or e t he cor porat i on reacqui redthesharesagai n,whataret heycal l ed?
-
Shar es of st ock shal l not be i ss ued i n exchangef orpromi mi ssorynot esorf ut ureservi ce.
Tr e asur ys har e s
Y-80T/SDECEMBER 08 Thes amec ons i der at i onspr ov i ded f ori nt hi s sect i on,i nsof arastheyma maybeappl i cabl e,maybeused f ort hei ssuanceofbondsbyt hecorporat i on.
40% ( AUGUST)WASDE DESTROYED BYFI RE,I SH HE ESTI LLLI ABLE TO PAYTHEUNPAI D PORTI ON?
I TWA WASAGREED THATI TW WA ASAPURCHA HASEAND WI LL
Thei ss ued pr i ceofnoparv al ueshar esma y befixed i nt hear t i cl esofi ncor por at i on orbyt heboar d ofdi re ct orspursuantt oaut hori t yconf err ed upon i tby t he art i cl es ofi ncorporati on ort he by-l aws,ori nt he absence t her eof ,by t he st ockhol ders r eprese nt i ng at l easta maj ori t y oft he out st andi ng capi t alst ock ata meet i ngdul ycal l edf ort hepurpose.( 5and16)
BE A STOCKHO HOLDER ONLY I F PAI DI N FULL I S HE LI ABLE? -
NO,becauset hatwasapur chase
-
Fi rs texam mp pl egal i ngsauni ssuedstock
-
2nd examp mpl egal l i ngsatr easuryshareshi ndisauni ssued share
St o c k di v i de ndswi l li ne ffe c tc a pi t a l i z et heunr e s t r i c t e d
-
Quasi negot i abl e
re t ai nedearni ngs
Af t er5y ear st hef ounder sshar e sma ybec onv er t edi nt o
Why ar et he yc ons i der e d quas i ne got i abl ewhe ni tma y bet r ansf er r edt hr oughendor seme ntandde l i v er y?
comm mmonshare soro t herki ndsofshares
Mayshare sofst ocks be i ssued wi t houtc onsi derat i on?
001
10/s
Why? -
100t/s
NO,t woreasonsbytheSC,di scr i mi nat oryagai nstot her
st ockhol ders and second unl awf ul ,i t prej udi ces t he r i g hto ft h ec r e d i t o r s“ T r us tFundD Do o c t r i ne ”
I fi s s ue dwi t ho utac ons i de r a t i o n
-
Sect i on65,t heywi wi l lbeconsi deredasw wa ate redst ocks
Sect i on 65. Li abi l i t yo fdi r e c t o r sf o rwa wat e r e d s t o c k s. - Any di r ec t or or offi ffic ce r of a cor por at i on consent i ngt ot hei ssuanceofs t ocksf ora consi derati on l e s st ha ni t spa ro ri s s ue dv a l ueo rf o rac o ns i de r a t i o ni n any f orm ot hert han cash,val ued i n exces s ofi t sf ai r v al ue , or who, hav i ng knowl edge t her e of , doe s not f ort hwi t h expresshi s obj ect i on i n wri t i ng and fil et he same me wi t ht he corporatesecret ary,shal lbe sol i dari l y, l i a bl ewi t ht hes t o c kho l de rc o nc e r ne dt ot hec o r po r a t i o n a ndi t sc r e d i t o r sf o rt h edi ffe r e n cebe t we e nt hef a i rv a l ue rec ei vedatt het i meofi ssuanceoft hest ockandt hepar ori ssuedval ueoft hesame me.( n)
Abc co.
B st ol eandf orgedthesi gnature Ci spur c h as e ri ng o odf a i t handf o rv a l uewi l lC a c qui r et i t l e
Endor seme mentf r om Wheni s sue dbyowne r Endorsedbyown wner -s t ri ctc om mp pl i ance
ANSWER:ace r t i fic at eofs t oc ki snotr eg ar dedasne got i abl ei nt he s ames e ns et ha tabi l lo rno t ei sne g ot i abl e ,e v e ni fi ti se ndo r s e di n
-
Subscri bersma maybecomp mpel l edt opaytheval ue
bl ank.Thus ,whi l ei tma ybet r ansf er r ed bye ndor s eme ntc oupl e d wi t h de l i v er yt he r eof ,and t her ef or eme r el y quasi ne got i abl e,i ti s
I s s ua nc eo fac e r t i fi ca t eo fs t o c ki sano t h e rt h i ng
no ne t he l e s sno nn e go t i a bl ei nt h att het r a ns f e r e e st a ke si twi t h o ut prej udi cet oal lt heri ght sanddef enseswhi cht het rueandl awf ul
What ar et he r equi s i t es f or t he i s suance ofa v al i d
1.
owner may have exc ept i n so f ar as t he pri nci pl es gover ni ng
c e r t i fic at eofs t o c k?
est oppel sm ma ayappl y.
I tmustbesi gnedbythepres i dentorvi cepre si dentand
Heacqui r ed i tbyvi rt ueofa f org ed i nst rume ment;no mat t erhow
c o unt e r s i g ne dbyt hes e c r e t a r yo ra s s i s t a nts e c r e t a r y ;
i nno c e ntt h epur c h as e ri sbe c a us ei ti ss ubj e c tt oal lt h er i g ht sa nd def enses
2.
I tmustbeseal edwi t hthecorporat eseal ;andtheenti r e v al uet her e of( t oge t herwi t hi nt er e s tore xpense s,i fany)
Whati fAe ndor sedi t ?
shoul dhavebeenpai d. -
Hei se s t o pp ed ,u nl e s st h e r ea r eo t h e ra v a i l a bl ed ef e ns e s
Whi l ei tappear s,t hata s ubsc r i bert os har es ofs t oc k cannot be enti t l ed t ot he i ssuance ofa cer t i ficateof
Tr ans f e ri sr e qui r e dt ober ec or de di nt hebooksoft he
st ock unt i lt hef ul lamo mountofhi ssubscri pti on t oget her
c o r po r at i o n,ho w we e v e re v e ni fno tr e c or d ed,i twi l lbev al i d
wi t hi nt e r e s tande xpenses( i nc as eofde l i nquents har e s)
be t ween t he par t i es.Nonr e gi s t r at i on wi l lnothowev er ,
i fanyi sdue,hasbeen pai d,asubscri bert oshar esof
affectt he val i di t yt her eofat l easti n so f ar as t he
s t o c k,e v en i fno ty e tf ul l ypai d,i se nt i t l e dt oe x er c i s eal l
cont ract i ngpart i esareconcerned.
t he ri ghts of a st ockhol der and t he cor r espondi ng l i abi l i t y t hat at t ach t here under . Thus, t he Code
Secti on63. Ce r t i fic at eo fs t o c kandt r ans f e ro f shares .-T hec api t a ls t o c ko fs t o c kc o r po r a t i o nss ha l lbe
pr o v i de s :
di vi ded i nt osharesf orwhi ch cert i ficat essi gned by t he pre si dent or vi ce pre si dent , count er si gned by t he s e c r e t a r yora s s i s t a nts e c r e t a r y ,a nds e a l e dwi t ht hes e al oft he corporat i on shal lbe i ssued i n accor dance wi t h t he byl aws.Shar es ofs t ock so i ssued ar e per sonal proper t y and may be t r ansf er r ed by del i ve ry of t he cert i ficat eorcert i ficat esi ndorsedby t heown wnerorhi s att orneyi nf act or ot her person l egal l y aut hori zed t o make t het ransf er .No t ransf er ,howe wever ,shal lbeval i d, exceptas bet ween t he part i es,unt i lt he t r ansf er i s r ecor ded i nt hebooksoft hecorporat i on showi wi ngthe nam me esoft hepart i estot hetr ansacti on,t hedateoft he t r a ns f e r ,t h enumbe ro ft h ec e r t i fi ca t eo rc e r t i fic a t e sa nd t henumberofsharest ransf err ed.
Sect i on 72. Ri ght s of unpai d shar es. Hol dersofsubscr i bed shar esnotf ul l y pai d whi ch are no td e l i nq ue nts h al lha v eal lt h er i g ht so fas t o c kho l de r . ( n)
I st he i ssuance ofa cer t i ficateofst ock necess ary t o consi dert hesubscri berast ockhol der?
-
NO,shal lbe consi dereda st ockhol dereven wi t houta c e r t i fic at eo fs t o c k
I nst anceswhenhem ma aynotbeabl et oexerci sehi sri ght s assuchst ockhol der
-
No shar e s of st oc k ag ai nst whi c h t he corporati onhol dsanyunpai dcl ai m shal lbet ransf erabl e i nt h ebo ok so ft h ec or p or a t i o n.( 3 5)
Decl areddel i nquent Whenhee xe r c i seshi sappr ai s alr i ght Ar ec er t i ficat eofs t oc kst r ans f e r r abl e ? YES
“ Unt i lr e g i s t r a t i o ni sa c c omp l i s he d,t het r a ns f e r ,t ho ug h v al i dbe t ween t hepar t i es ,c annotbeeffec t i v easag ai ns t t hecorporat i on.Thusthe,unr ecor ded t r ansf ercannot enj oythestat usofast ockhol der;hecannotv ot enorbe v ot ed f or ,and hewi l lnotbee nt i t l e dt odi v i dends.The
Ar ec er t i ficat eofs t oc ksc ons i der ednegot i abl e ?
corporati on wi l lbe prot ect ed when i tpays di vi dend t o t h er e g i s t e r e do wn wne rd e s pi t eapr e v i o ust r a ns f e ro fwhi c h
i t had no knowl edge. The purpose of r egi st r at i on
-
Abs ol ut eandunc ondi t i onalt r ansf er
t h er e f o r ei st wo f o l d:t oe na bl et het r ans f e r e et oe x er c i s e al lt he ri ghts of a st ockhol der and t oi nf orm t he
-
Onl y t he t r ansf er or absol ut e conv ey ance of t he
corporati onofanychangei nsharesownershi psot hati t
owner shi p oft heti t l et o a shar eneed be enter ed and
can ascer t ai nt he persons enti t l ed t ot he ri ght s and
not ed upon t he books oft he cor porat i on i n or dert hat
s ubj e c tt ot hel i abi l i t i e so fas t o c kho l d er . ”
such t ransf erma may be val i d,t her ef ore ,i nasmu much as a c ha t t e lmo r t g a geoft h ea f o r e s a i dt i t l ei sno tac ompl e t e
Thus,i twasal sor ul ed byt heHi gh Cour ti n
and absol ut eal i enat i on oft hedomi ni on andowner shi p
Naut i ca Canni ng Cor p. v s. Yum mu ul t hat “ A
t her eof ,i t sent ryand not at i on upon t hebooksoft he
t ransf erofsharesnotr ecorded i nt hestock
c o r po r at i o ni sno tne c e ss ar yr e qui s i t et oi t sv a l i di t y
and t ransf erbook oft he corporat i on i snonexi st ent i n so f ar as t he cor porat i on i s
Chuaguanvs .Mags asa ka
co nce r ned. ” Thi s i s s o be ca use “ t he corporati on l ooksonl ythrough i t sbooksf or t he pur pos e of de t er mi ni ng who i t s
-
Was t Wa he mo r t g ag e v al i d and effec t i v e as ag ai ns t subsequentt hi rdpart i es
-
Regi st erofdeeds wher et hecorpor at i on r esi des and i f
s t o c kho l de r sar e . ”
Re g i s t r a t i o ni sne c e ss ar yf o rt h ef o l l o wi wi ng :
1.
Toenabl et hecorpor at i ontoknow whoi t ss t ockhol der s
di ffe r e nti nt h er e g i s t e ro fd e e dsofo wne r ’ sdo m mi i c i l e
Unsonvs .Di nami t o
a r e ; -
Al lt r ansf e r r ednotr e gi s t erwi l lnothav eav al i df or c eand effect
2. To enabl et he t r ansf er ee t o ex er ci se hi sr i ght sa s s t o c kho l de r s ;
Ri ghtt otr ansf erma mayberegul ated
r e f us er e g i s t r a t i o no ft het r a ns f e ri nc a s ea l l o we db yl a w;
Maynotbeunre asonabl yr est ri ct ed
Toavoi dfict i t i ousandf r audul entt ransf er s;and,
3. Toaffor dt he cor por at i on an opport uni t yt o obj ec tor
4.
5. Topr ot ec tcr edi t or swh who havet he r i ghtt ol ook upon
Vi ol at i onofnat i onal i z at i onl aw-Cent r alBank Lamb m bertvs.Fox
st ockhol ders,i n caseofno-payme mentorwat er ed shar es, f o rt hesa t i s f ac t i o no ft he i rc l a i ms ms .
-
Val i d , ma y be r e as onabl yr egul at e d, r e s t r i c t ed by agreeme mentofpart i es
Dut yoft hesecr et aryi sm mi i ni st er i al ,hencem ma andam mu us wi l ll i ei ft hese cr e t ar yr ef use st or e cor dt het r ansf e r ,but
-
Reasonabl eagree mentbyt hepart i es
-
Reasonabl east ol engthoft i me
hecannotbecompel l edwhent hetr ansf eree’ sti t l etot he s a i ds ha r e sha snopr i maf a c i ev a l i d i t yo runc e r t a i n
Padget tvs.Babcock
Tr ans f e r -absol ut eandunc ondi t i onalt r ansf e rt owar r ant regi st rat i on i nt hebooksoft hecorporati on i n orderto bi ndt hel at t erandot hert hi r dper s ons .
Ot h e rr e s t r i c t i o nso nt h er i g htt ot r a ns f e rs ha r e swo ul d
-
Anyat t emp tt or es t r ai nt r ans f e r SC,i nt heabsenceofaval i dl i enuponi t sshares
i nc l ud e: 1.
-
Val i dr es t r i c t i onsshar esar eappl i c abl e
-
Anyr e s t r i ct i on onas t oc khol de r ’ sr i ghtt odi sposeofhi s
I ti s not val i d, exc ept as bet ween t he part i es,unti l rec ordedi nt hebooksoft hecorporat i on;
shar esmu mustbeconst rued st ri ct l y;and anyat t em mp ptt o Shar esofst ockagai nstwhi cht hecorpor at i onhol dsany
res t rai nat ransf erofsharesi sregarded as bei ng i n
unpai d cl ai m shal lnotbetr ansf er abl ei nt hebooks of
r e s t r a i nto ft r a de ,i nt h ea bs e nc eo fav al i dl i e n upo ni t s
t he corporati on;unpai d cl ai ms,r ef ertocl ai ms ari si ng
s ha r e s ,a nd e x c e ptt ot he e x t e n tt h atv a l i dr e s t r i c t i v e
f r om unpai d subscr i pt i on and nott oany i ndebt edness whi c h as t oc khol de rma yowe t hec or por at i on suc h as
r egul at i ons and agree mentsexi stand areappl i cabl e. Subj ectonl ytosuch res t ri ct i ons,ast ockhol dercannot
2.
bec ont r ol l e di norr e s t r ai nedf r om e xer c i si nghi sr i ghtt o
mont hl ydues ;
t r ansf erby t he corporat i on ori t s offi ffic cer s orby ot her 3.
4.
Rest ri ct i ons r equi r ed t o be i ndi cat ed i nt heart i cl esof
st ockhol ders,event hough t hesal ei st oa comp mpeti t orof
i ncorporati on,by-l awsand st ock cert i ficat esofa cl ose
t hecomp mpany,ort oan i nsol ventper son,orev en t hough
c o r po r a t i o n;
ac o nt r o l l i ngi n t e r e s ti ss ol dt oo nepur c h as e r .
Res t ri ct i ons i mposedbyspeci all aw,such ast he Publ i c
Ce r t i fic at eo fs t o c ksa r et r a ns f e r r a bl e
-
Byendors em me entand del i ver yoft hest ock cer t i ficatet o
Serv i ceActr equi ri ng t heappro valoft hegovernm me ent a g e nc yc onc e r ne di fi twi l lv e s tunt ot het r a ns f e r e e40%
t h et r a ns f e r e e
oft hecapi t aloft hepubl i cservi cecom mp pany; 5. Sal et o al i ensi n vi ol at i on ofmaxi mum owner shi p of
sharesundert heNati onal i zat i onLaw ws s; 6.
I n ordert obe val i d,mu mustbe regi st eredi nt hebooks.I f not ,wi l lonl ybebi ndi ngamongpart i es
Thosec ove r edbyre asonabl eagr eem me entoft hepart i es.
How mayshare sofst ockbet r ansf err ed?
Monser atvs.Cer on
-
Endorseme mentofs t ock cer t i ficateby ownerorat t orneyi nf ac twi t hde l i v e r y
-
Doesi ti ncl udemo mort gage? Embass yf ar msv s.CA
-
NO,i ti sno ta na bs o l ut et r a ns f e r -
-
Wi l lnotaffec tt het r ansf ert hr oughmo r t g age
Mustbe endors ed byownerorat t orneyi nf actcoupl ed wi t hdel i v e r y
40
-
Endorsednotdel i ver ed
-
Pr opermodeandm ma annermustbecompl i edwi t h
Endor se mentand del i ve ry i s notnec es sar y( TAN vs. SEC)
Tanv s .SEC ( FULLKNOWLEDGE,HE I SESTOPPED) Razonvs.I AC -
Per sons sought t o be st ockhol der i s offi ffic ce r and has
-
Del i ver ednote ndorsed
-
Rev er seofEmbassyFarms ms
Ge ne r a lRul ef o rv a l i dt r a ns f e r
Endorseme mental onei snotsuffici entnordel i ver ywi t hout
-
Cer t i ficat e of s t ock must be endor se d by owner or
-
cust odyoft hebook( est opped)
endorse menti snotal l owed
a t t o r ne y i nf a ctc oupl e dwi wi t hde l i v e r y
-
Endorseme mentpl usdel i ver yi sma mandat ory
Excepti ons
I sthereanyothermo modeoft ransf err i ngstock?
-
Sect i on63usest hewo wor d“ma may”
-
Not ari zeddeed
-
Showi ngt hatt her ema maybeothermo modesoft r ansf err i ng shares
-
Deedofassi gnme ment
I sther ea t i mef r am me eorfixed peri od aswhen t r ansf er
RuralbankofSal i nasvs.CA -
I fdeni edorr ef usedwi t houtgoodcause,mandamuswi l l
ca nbema made ? -
NO,( WON v s.WACK WACK)
l i e Wo nv s .Wac kWac k Tayv s .CA -
Val i dbe t wee ncont r act i ngpar t i e sev e ni fnotr ec or dedi n
-
Mandamusma mayi ssuei fpeti t i onhasacl earl egalri ght
-
Neveri ssuedi ndoubtf ulcases
-
Ri g hta c c r ue so nl yi fr e f us e d
-
P e t i t i o ne rf a i l e dt oe s t a b l i s h ac l e a rl e g a lr i g ht and
-
St a t ut eofl i mi t a t i o nsdo e s no ta ppl yi nr e g i s t r a t i o no f
corporat i onbooks
al l egedown wners hi pi swi t houtmeri t -
Di d notacqui r eow wn ner shi p by vi rt ueoft hecont r actof
s ha r e so fs t o c k -
Mustdet ermi mi nedf r om t het i meofr ef usal
pl edge
-
I nacont ractofpl edget her emu mustbef orecl osure
-
I nt hecasetherewasnoat t emp mptt of orecl ose
-
Peti t i onermu musthaveapri maf aci eri ght
Why ar e t he y nonnegot i abl e when t he y ma y be t r a ns f e r r e d?
-
Tr ans f e r ee s pays i twi t houtpr ej udi ce t o al lt he r i ght s and def ense sas t he t r ueand l awf ulo wnerma mayhav e under t he l aw ex ce pt i nsof ar as such r i ght s and def ensesaresubj ectt othe l i mi t ati onsi mposed by t he
Navavs.PeersM Ma arket i ng -
pr i nc i pl e sgo v e r ni nge s t o ppe l s
A s t oc k subsc r i pt i on i s a subs i s t i ng l i abi l i t yf r om t he
Del osSant osvs.Republ i c
t i met hesubscri pti oni sm ma ade -
Whyi she,notconsi de r edast heownerofshar e s?When
The subs cr i ber i s as muc h bound t o pay hi s
i thasbeen sai dt hatwhen endors ed bytheown wneri ti s
subscri pt i onashewoul dbet opayanyot herdebt -
consi dered as st ri ctcert i ficat e? Because cert i ficat e of st ocksarenonnegot i abl e
No st oc k ce r t i ficat e was i ss ued. Wi t hout st ock cer t i ficat e, whi ch i s t he evi dence of owners hi p of
-
Al t hough a s t oc kc er t i fic at ei ss ome t i me sr eg ar ded as
corporatest ock,t heassi gnmentofcorporatesharesi s
q ua s i n e g ot i a bl e ,i nt hes e ns et h ati tm ma a ybet r a ns f e r r e d
e ffe c t i v eo nl ybe t we e nt h epa r t i e st ot het r a ns a ct i o n
byendor seme nt ,c oupl ed wi t h de l i v e r y ,i ti swe l lse t t l e d t hat the i nst rume ment i s nonnegot i abl e, because t he
Ex c e pt i o nt ot h eg e ne r a lr ul e
hol dert here oft akesi twi t houtprej udi cet osuch ri ght s ordef ensesastheregi st eredownerorcr edi t orma mayhave
RuralBankofLi pavs.CA
underthel aw,excepti nsof arassuchri ght sordef enses a r es ub j e c tt ot h el i mi t a t i o nsi mpo s e sb yt h epr i nc i pl e s
-
Bynot ari zeddeed
-
Cert i ficate of st ocks al r eady i ssued must be coupl ed
governi ngest oppel s.
Unaut hori zedi ssuanceofs t ockcert i ficat es
wi t hdel i v e r y ,e xcept i on( TAN vs .SEC)
St ock cer t i ficat e has al r eady been i ssued i tm mu ustbe
100/s
c o up l e dwi t ht hed e l i v e r y
100
Af t erc er t i ficat eofs t oc ki si ss ue d,ma yi tbee ffec t i v e l y t ransf err edevenwi t houtendorsem me entordel i veryoft he
-
s t o c kc e r t i fic at e ?
100 pesospershare
Per sonsoughtt obeast ockhol deri san offic fficerand has
St ol enbyB andf orgedthesi gnatureofA Bs e l l st oC wi l lC ac q ui r et i t l e ?NO
Al lar esubs cr i be d whowi l lt hec or por at i on r e cogni z eas
ri ght f ulownerA orD? D?i fboth wi l lbe re cogni zed t here ENDORSEME MENTFORM
C arm me edwi wi t ht heendors eme mentf orm cer t i ficate ,sol dt oD
wi l lbeov eri s suance -
( i nno c entp ur c ha se rf o rv al ue ) ,wi l lD a cq ui r et i t l e ?
onl y A ci t i ng c i t i z e n s n at i o na lb an k v s .s t a t e( b ut i f r e c o g ni t i o no fb o t hs t o c k ho l de r sw wo o ul dr e s ul ti n an o v e r i s s ueo fs har e s ,t h enonl yt heo r i g i n alan dt r u eo w wn ne rc a n
-
NO,subj ectt osuch ri ghtsand def ensesast het rueand
b er e c o g ni z e da sas t o c k ho l de r )
l awf ulownerma mayhave Wh ati fC now goe st ot hec or por at i on and pr e se nt st he
b yv i r t ueoft h edo c t r i neofno nn eg ot i a bi l i t yo fc e r t i fic at e o fs t o c ks
f orm? m?
Thet r ueandl awf ulowne rwi l lne v e rbede pr i v ed ofhi s
r i g ht s Whathappenst oD?
- The nt he c or por at i on s hal lc ance lt he ol dc er t i ficat e and
i ssuesanew one,now i nt henameofC,now r egi st er ed i nt h ena me meo fC,wi l lC a c qui r et i t l e ?
D wi l lhavea causeofact i on agai nstt hecorporat i on f or
A f oundoutwhathappe nedandgoe st ot hecor por at i on
t heval ueofhi s acqui si t i on costi ncl usi veofdama mages,
whohasabe t t e rt i t l eC orA?
a t t o r ne y ’ sf e e sa ndc o s to fs ui t
- A,A c annot be de pr i v ed ofhi sr i ght by v i r t ue ofan
unaut hori zedt ransf er
D suesthe corporati on f orthe val ueofhi sacqui si t i on cost ,i ncl usi ve ofdama m ages,att orney’ sf ees and costof sui t .Whatmayt hecorpor at i ondo?
Cor por at i on can comp mpel C t o del i ve rt he new st ock cer t i ficatebecausehema madea r epres entat i on t hatt he
-
cert i ficat ewheregood. Ar me dwi t ht hene wc er t i ficat ei ss ue dt oC,C de l i v e r st o
NO def ense,no val i d def ense,becausei twasr eprese nt ed t oo t h e r pa r t i e st ha tt h ec e r t i fic a t eofs t o c ks i sv a l i d, s ubs i s t i ng ,e t c .
D apurc haseri ngood f ai t h andf orval uewi l lD acqui re t i t l e ?
2nd si t uati on,whatcauseofacti on maythecorporati on have ?Reme medy ?
-
D wi l la c qui r et i t l et o o kt h es ha r e sno tb yv i r t ueofaf o r g e d orunaut hori zed t ransf er ,buton t herel i ancethatt he st ockcert i ficat ei sval i dandownedbyC
- Thi r d par t y compl ai nt ag ai ns t C, but what i fhe i sa
Stockcer t i ficatenow i npossessi on ofD.Aknew ofwhat
purc haserf orval ue?4th part ycl ai m agai nstB Whenma yce r t i ficat eofs t oc ksbei ss ue d?
happenedand wentt ot hecorpor at i on and com mp pl ai ns. Whowi l lhav eabe t t e rt i t l e? -
-
t hecorporat i onmaybecomp mpel l edtor ecogni zebot h,Aas
Secti on64. I s suanc eofs t o c kc e r t i fic at e s.-No c e r t i fi ca t eo fs t o c ks ha l lbei s s ue dt oa s ub sc r i be runt i l t he f ul l amo mount of hi s subscr i pt i on t oge t her wi t h i nt er estand expenses( i n case ofdel i nquentshares) ,i f anyi sdue,hasbeenpai d.( 37)
s t o c kho l de r( no nne g o t i a bl e )D,r e l i a nc et ha tt hes t o c k cert i ficat ei sval i dandexi st i ngandownedbyC
F or g e dt r a ns f e r s
-
I ft he corporat i on shoul di ssue a new cer t i ficate i n
A c er t i ficat e ofs t oc k cannotbei s sued unl e ss hef ul l y
pai dtheamo mountsubscr i bed Subs c r i p t i o nt ot h ec a pi t a ls t o c kso ft hec o r po r a t i o na r e
i ndi v i s i bl e Cl earma mandat e ofs ect i on 148 oft he code i sthatt he
pursuanceofa f orged t ransf er ,t hecorporat i on i ncurs nol i a bi l i t yt ot h ep er s o ni nwho s ef a v o ri ti si s s ue da nd i t may dem ma and i t s r et urn f or cance l l at i on. The co r por at i on i n suc h cas e has bee n gui l t y of no
Sect i on 64provi des:
mi sre prese nt ati on.On t heotherhand,i ti st hedut yof
rul i ng oft he courti n Ba l t az a rv s.L i n ga ye n Gul f ,no
t hepur chasert odet er mi nethatt hei ndorsem me entoft he owneri sgenui ne.However ,i ft henew cert i ficat ei ssued
l ongerhol dst rue
t othepur chase rcom me esi nt othehands ofa bona fide
Sect i on 148. Appl i c abi l i t y t o e x i s t i ng c o r p or at i o ns . - Al l corporati ons l awf ul l y exi st i ng and doi ng busi ness i nt hePhi l i ppi neson t hedat e oft he effect i vi t y of thi s Code and her et of ore aut hori zed, l i censed orregi st er ed by t he Securi t i es and Exchange Com mm mi ssi on,s hal lbedeeme medtohavebeen aut hori ze d, l i c e ns e do rr e g i s t e r e dunde rt hepr o v i s i o nso ft h i sCo de , subj ectt ot heter msand condi t i onsofi t sl i cense,and shal lbe gover ned by t he provi si ons hereof :Provi ded, Thati fany suc hc or por at i on i s affe ct ed by t he ne w r equi re ments of t hi s Code, sai d corpor at i on shal l , unl essotherwi seher ei n provi ded,begi ven a peri od of notmo moret han t wo( 2)year sf rom t heeffect i vi t yoft hi s Codewi wi t hi nwhi chtocomp mpl ywi t ht hesame me.( n)
purc haser f or val ue,t he corpor at i on wi l lbe st opped f rom denyi ngval i di t ythere of ,si ncebyi ssui ngsuchnew c e r t i fi ca t ei tr e p r e s e nt st ha tt hep e r s o n na me me dt he r e i ni s as t o c kho l de ro ft h ec o r po r a t i o n.T hec o r po r a t i o ni st hus f o r c e dt or e c o g ni z ebo t ht heo r i g i na lc e r t i fic a t ea ndne w cert i ficat et he ori gi nal ,because t he t rue ownercoul d no tb ed epr i v e do fh i st i t l ebyaf o r g e dt r a ns f e r ,a ndt he new, because of i t sr epres entat i on t hat t he person nam me edtherei ni st heownerofsharesi nt hecorporati on. Buti ft herecogni t i on ofbothst ockhol dersw wo oul d res ul t i n an overi ssue ofshares,t hen onl yt heori gi naland t rueown wnerc anberecogni zedasast ockhol der .Thebona fidepurc haseroft henew cert i ficat ewi l lhoweverhavea r i ght of dam ma age s aga i nst t he co r por at i on. The
corporat i on, i n t urn, woul d have a ri ght of acti on
Subs c r i p t i o nt os ha r e sofs t o c ksar ei ndi v i s i bl e Al so appar enti st hatonc ea s ubsc r i be rhas pai d hi s
agai nstt he personwhom ma adef al sere present at i onsand
subscri pti on i nf ul l ,hebecome mesent i t l edt obe i ssued a
i n whose f avori ti ssued a new cer t i ficat e.The t rue
st ock cert i ficat eand i nt heeventt hatt hecorporati on
owneroft heshareswhi ch wer ewr ongf ul l yt r ansf err ed
ref usestodoso,t hest ockhol dermy myi nst i t ut ea casef or mandam mu uswi wi t h dama mage s.Thus,i thasbee n sai dt hat
woul d ofcour s ehav ear i ghtt ocompelt hecor por at i on t oi ssue hi m a cer t i ficate i nl i eu oft he ori gi nalone whi c hwaswr ongf ul l yc ance l l ed.
t he dut y of t he cor por at e offi ffic ce r s t o i ss ue st ock c e r t i fic at e st ot ho s ee nt i t l e dt h er e t oi sami mi ni s t e r i a ld ut y enf or ce abl ebyma mandam mu us.
t hepartoft het ransf er eeofwat er ed st ock i smade t o
FuaCunvs .Summer sa ndChi naBanki ngCor p. Thec our te r r ed i n hol di ngt hepl ai nt i ff ast heownerof
depe nd upon whet her he acq ui r ed t he sa me wi wi t hout
250 shares ofst ock; “ t he pl ai nt i ff’ s ri ght s consi sti n
not i ce , ei t her as pur chase r or donee. I f he had
equi t yi n 500 shar esand upon paym me entoft he unpai d
kno wl e dg et h er e o f ,hei ss ub j e c tt ot h es a me mel i a bi l i t yas
port i on oft hesubscri pti on pri cehebecom me esent i t l edt o t he i ssuance ofcer t i ficatef orsai d 500 shar es i n hi s
pai d. Wa W at er eds t oc k Onewhi chi si ssuedbythecorporat i on asf ul l ypai d-up
shar es ,when i nf actt he whol e am mo ountoft he val ue t hereofhasnotbeen pai d.
-
Be a s i s i s6 p ar v a l u e n dt n o t t h ef a i r ma m r k et v al u e S c t i on 2 s t a t e sa t ha s t oc ks s h al la n o t b e i ss ued f ora
-
-
hi st r a ns f e r o r . What i st he nat ur e oft he l i abi l i t y oft he c or por at e di rec t orsconsent i ngtothe i ssuanceofwater ed st ocks
f av or . ” No cer t i ficateofst ock unti lt he f ul lam mo ounthas been
-
-
andt hee xt e nto ft he i rl i abi l i t i e s ? So l i d ar i l yl i a bl ew wi i t ht heho l d ero ft hew wa a t e r e ds t o c kst o t heexte ntoft hewaterf rom sai dsharesofs t ocks Wi l lal lt hedi r ect or sbel i abl e ?Whati fy ou obj ec t edwi l l y oual s obel i abl e? I fy o u dono ti s s ueawr i t t e no bj e c t i o n,y o ua r es t i l ll i a bl e Evenpassi vedi rec t orsma maybel i abl e Those hav i ng knowl edget he r eof ,butdi d noti nt er pose t h ei ro bj e c t i o ns ha l lbel i a bl e
consi derat i on l ess t han par or i ssued pri ce t her eof , whi l ese ct i on 13s t at est hati n nocas eshal lbepai dup
1. 2.
capi t albel esst hanfivethousand[ P5000]pesos. I fi ssuedbel ow par ,i ssuedval ueconsi deredasw wa ater How maywat er edst ocksbei ssued? Foramo monet aryconsi derat i onl esst hani t sparori ssued
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Sect i on 65. Li abi l i t yo fdi r e c t o r sf o rwa wat e r e d s t o c k s. - Any di r ec t or or offi ffic ce r of a cor por at i on consent i ngt othei ssuanceofst ocksf oraconsi derati on l e s st ha ni t spa ro ri s s ue dv a l ueorf o rac o ns i de r a t i o ni n any f orm ot hert han cash,val ued i n exces s ofi t sf ai r v al ue , or who, hav i ng knowl edge t her e of , does not f ort hwi t h express hi sobj ect i on i n wri t i ng and fil ethe same me wi t ht he corporatesecret ary,shal lbe sol i dari l y, l i a bl ewi t ht hes t o c kho l de rc o nc e r ne dt ot hec o r po r a t i o n a ndi t sc r e d i t o r sf o rt hedi ffe r e n cebe t we e nt hef a i rv a l ue rec ei vedatt het i meofi ssuanceoft hest ockandt hepar o ri s s ue dv a l ueo ft hes a me me .( n)
v al ue ; Fora consi derat i on i n propert y,t angi bl eori nt angi bl e,
v al ue di ne xc essofi t sf ai rmar ke tv al ue; 3. Gr at ui t ousl yorunderanagre em me entt hatnot hi ng shal l bepai datal l ;or 4. I nt he gui se ofs t oc k di vi dends when t her e ar e no surpl usprofit soft hecorporat i on. Whyi ss t oc kwat e r i ngi l l eg al ? 1. Thecorporat i oni sdepri vedofi t scapi t alt her ebyhurt i ng
i t s busi ness pros pect s, financi al capabi l i t y and 2.
r e s po ns i b i l i t y ; St ockhol der s who pai dt hei r subscr i pt i ons i nf ul l , or
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c o r po r at eas s e t sf o rt hepr o t e c t i o no ft he i ri nt e r e s t . Co r po r a t i o ni sp r e j udi c e d St o c kho l d e r s ,d i l ut i o no fi nt e r e s t Credi t ors are prej udi ced,vi rt ue ofri ghtt ol ook upon corporati ons propert i es f or t he sati sf acti on of t hei r
cl ai ms Wh ati st heeffe ctofi ss uanc eofwat er eds t oc ks 1. Ast othecor porat i on -when acorpor at i on i sgui l t yof ul t r a v i r e so ri l l e g ala c t swhi c hc o ns t i t ut eani nj ur yt oo r f raud upon t he publ i c,orwhi ch wi l lt end t oi nj ur e or def r aud t he publ i c, t he Stat e may i nst i t ut e a quo war r ant opr oce edi ngt of or f e i ti t sc har t e rf ort hemi suse o rab us eofi t sf r a nc hi s e . 2. As be t wee nt he co r por at i on and t he subsc r i ber - The subscri beri sl i abl et o payt hef ul lparori ssued val ue
3. As t ot he conse nt i ng st oc khol der s-Theyar est opped f r o mr a i s i nganyo bj e c t i o nt h e r e t o ; 4. Ast odi ssent i ng st ockhol ders-I nvi ew oft hedi l ut i on of t h e i rp r o po r t i o na t ei nt e r e s ti nt hec o r po r a t i o n,t h e ym ma a y
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and
I st h e r es t o c kwa t e r i ngi ft hef a i rm ma a r k e tv a l uei s12 . 0 0? Nost ockwa wat eri ng Thebas i si st heparv al ue Thes har eswhe r ei nf actpai d mo r et han t heparv al ue i ndi c at e di nt hear t i c l e sofi nc o r po r at i o n
3 days l at er t hey sol dt hei r 10M share f or P11. 00 eac h, t heref orema maki ngaprofit .
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offic fficersi ncl usi veoft hehol deroft hewate redst ocks; 5. As t o cr e di t or s - They ma may enf or ce pay ment o ft he
Can youques t i on t hereact uat i ons?Wh W hatwoul d bethe causeofact i on? I tmaybequest i oned. Dut yofl oyal t yorfiduci arydut yassuchdi rec t ors The ycannotadv anc et he i rown mo t i v est ot hedama ge prej udi ceoft hecorporat i on whi ch t heyrepresentsand
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sol i dari l yagai nstt here sponsi bl edi rec t ors/offic ffi cersand 6.
FAI R MARKET VALUE-
subscr i bedf or10M eachat2pers hare.
agai nstt he r esponsi bl e and consent i ng di r ect orsand
t hest ockhol dersconcer ned;and’ Asagai nstt r ansf er eesoft hewat er edst ock–H Hi i sri ghti s
VALUE-
Ther e i s a deni al of pr e emp t i v e r i ght s and di r ec t or s
comp mpelt hepaym me entoft he“wat er”i nt hest ocksol i dari l y
di ffer ence i n t he pri ce, or t he wat er i n t he st ock,
PAR
A, B, C, D, E dec i ded t o i s sue t he r e mai ni ng 50M
subscr i pt i on i s vo i d. Such bei ng t he cas e, t he t h er e o f ,t or e nde ri tv a l i da nde ffe c t i v e .
100M/S
SUBSCRI BED50M 12. 00/S UNSUBSCRI BEDD50M A B C D E
t he reduct i on of thei r proport i onate i nt er est i n t he corporati on;and, 3. Pr es ent and f ut ure cr edi t or s ar e depr i v ed of t he
-
ACS100M 1. 00
promi mi sedtopaythesame me,arei nj ur edandprej udi cedby
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Sect i on 65provi des:
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t he same me as t hat of hi st ransf er or .I f , how we eve r ,a cert i ficat eofst ockhasbeeni ssuedanddul yi ndorse dt o
a bona fide pur chaser , wi t hout knowl edge,act ualor
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s t o c kho l de r sa sawh who l ei ns t e a do fi tbe i ngs o l dout s i de 500M woul dhavegonet ot hecoffersoft hecor porat i on, 500M shoul dbet her ef ort heprot ect i on ofcredi t ors The yar epl ace di nafiduci ar yr el at i onshi p Si l al angbaangki ki t a,pano naman yungcorpor at i on, opport uni t ynayun parakumi t a Whenar eunpai dsubs cr i pt i onsdueandpay abl e? Sect i on 67. Payment of bal ance of subscr i pt i on. -
c o ns t r uc t i v e ,t h el a t t e rc anno tb ehe l dl i a bl e ,a tl e as ta s
Subj e c tt ot hepr o v i s i o nsoft h ec ont r a c to fs ub sc r i p t i o n,
agai nstt he corporat i on,s i ncehe t ook t he shar es on
t heboard ofdi r ect orsofany st ock corporat i on mayat
r el i ance of t he mi sr epr es ent at i on made by t he
any t i me decl ar e due and payabl et ot he cor porat i on
corporat i on t hat t he st ock cer t i ficate i s val i d and
unpai d subscr i pt i ons t ot he capi t al s t ock and may
subsi st i ng.Thi si sbecausea corporati on i sprohi bi t ed
col l ectt hesameorsuch percent age t here of ,i n ei t her
f r o m i s s ui ngce r t i fi ca t e sofs t o c k unt i lt hef u l lv a l ueof t he subsc r i pt i ons hav e bee n pai d and co ul d not ,
case wi t h accrued i nt er est ,i f any, as i t ma may deem necessary.
Payme mentofany unpai d subscr i pt i on orany per cent age t h e r e o f ,t o g e t h erwi t ht h ei nt e r e s ta c c r ue d,i fa ny ,s ha l l
43
any, shal l be cr edi t ed i n f avor of the del i nquent st ockhol der who shal ll i kewi se be ent i t l ed t o t he i s s ua nc eo fac e r t i fi ca t eo fs t o c kc o v e r i ngs uc hs ha r e s .
be ma de on t he dat e spe ci fie d i n t he c ont r ac t of subscri pt i on oron t hedat est at ed i nt hecal lmadeby t he boar d.Fai l ur etopayon such dateshal lr endert he ent i r e bal ance due and payabl e and shal lm ma ake t he s t o c kho l de rl i a bl ef o ri n t e r e s ta tt hel e g a lr a t eo ns uc h bal ance ,unl es sadi ffer e ntr at eofi nt er es ti spr ov i de di n t he byl aws, co mput ed f r om such dat e unt i lf ul l payme ment .I fwi t hi nt hi rt y( 30)daysf rom t hesai ddat eno payme menti sma made,al lst ockscover edbysai dsubscri pti on shal lt her eupon become medel i nquentandshal lbesubj ect t o sal e as her ei naf t er prov i ded, unl ess the boar d of di r e c t o r sor d e r so t he r wi s e .( 38)
Shoul d t her e be no bi dder at t he publ i c auct i onwhooffer st opayt hef ul lam mo ountoft hebal ance o nt h es ubs c r i p t i o nt o g e t h erwi t hac c r ue di nt e r e s t ,c o s t s ofadvert i seme mentand expensesofsal e,f ort hesma mal l est numberofsharesorf ract i on ofashare,t hecorporat i on may,subj ectt ot heprovi si onsoft hi sCode,bi df orthe same me,and t he t ot alam mo ountdueshal lbe cr edi t ed as pa i di nf ul li nt h eb oo ksoft h ec o r po r a t i o n.T i t l et oal l t hesharesofst ock cover edbyt hesubscri pti on shal lbe v es t edi nt hec or por at i onast r e asur yshar e sandma ybe
Rem me edi es of t he cor por at i on t o enf or ce payme ment of
di sposed ofbysai d corporat i on i n accor dance wi t ht he pr o v i s i o nso ft hi sCo de .( 39 a46a )
unpai dsubscri pti on 1. Byboardact i on i n acc or dancewi t ht he pr oce dur el ai d down wni nsect i ons67t o69oft hecode
Whoi st hewi nni ngbi dde ri nade l i nquenc ys al e?
2.
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Bi dderwh who shal l“ offert o pay t he f ul lam mo ountoft he bal anc e on t he subs cr i pt i on t oge t her wi t h ac cr ued i nt e r e s t ,c o s to fa d v e r t i s e me me nta nde x pe ns e sofs a l e ,f o r t hesma mal l estnumberofsharesorf ract i onofashare. ”
Bya col l ect i on casei n courtaspr ovi ded f ori n sect i on 70 Ar es ubsc r i ber sofs har esofs t oc ksnotf ul l ypai d,l i abl e t opa yi nt e r e s t ?
X Co.has1M aut hor i z edcapi t als t oc k -
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General rul ei st hey are not l i abl et o pay i nt er est be causet hec odes aysunl e ssr equi r esi nt heby l aws
500t housandi sal re adysubscri bed
Asi def r om t hemandat eoft hel aw t hatsubscri bersto shar es of st oc k must pay t he f ul l val ue of t hei r subscr i pt i on, t hey may l i kewi se be r equi r ed t o pay i nt e r e s to na l lunpa i ds ubs c r i p t i o nsi fs oi mp os e di nt h e cont ractori nt hecorporatebyl awsatsuch rat easma may be i ndi cat ed t her e ator t he l e galr at ei fnotso fixed.
A subsc r i bed t o 100 t hous and s har es ,50 t hous and i s al r eadypai dl eavi ng50t housandunpai d
Unl essso re qui redorprovi ded,however ,subscri bersto shares ofst ock,notf ul l y pai d,arenotl i abl et o pay i nt er eston t hei runpai d subscri pt i ons.The code t hus pr o v i de s :
s b s r i p i on s , ho w e v e rs Ac ous l dl no t pa i d ,r h en c ea dec a r e d du el i nc q u et n t a n d d e c i d e t o e l h i s s h a e a t pl u b l i c a uc t i o n
Thec or por at i on i satal os sof250t hous and,t heboar d deci des t o make a cal lf ort he payme mentoft he unpai d
55 t housandi st obepai d,r em ma ai ni ng bal ancepl uscost andex penses
Secti on 66. I nt e r e s to nu np ai ds ub sc r i p t i o ns. -Subscri bers f or st ock shal lpay t ot he corpor at i on i nt er eston al lunpai d subscri pt i ons f rom t he dat e of s ubs c r i p t i o n,i fs or e qui r e dby ,a nda tt her a t eo fi nt e r e s t fix e di nt heby l a ws .I fnor at eo fi nt e r e s ti sfix e di nt he by l aws,suc hr at es hal lbedee me dt obet hel e galr at e. ( 37)
BI DDERS: X55K FOR99, 900shar es Y55K FOR 99, 500shar es
Unt i lacal li sma made,t heyarenotdueand payabl e,but s t i l ls ubj e c tt ot h epr o v i s i o nsoft h ec o nt r a ct s Pr o c e dur e si nc a seo fs a l eo fde l i nq ue nts t o c ks
Z-55K FO OR R 99, 000share s( wi nni ngbi dder)
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Sect i on 68. De l i n q ue n c ys a l e.-T heboard ofdi rect ors may,by res ol ut i on,or der t he sal e ofdel i nquentst ock and shal lspeci fical l y st at et he am mo ount due on eac h
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Shoul d t her e be no bi dder at t he publ i c auct i onwhooffer st opayt hef ul lam mo ountoft hebal ance o nt h es ubs c r i p t i o nt o g e t h erwi t hac c r ue di nt e r e s t ,c o s t s ofadvert i seme mentand expensesofsal e,f ort hesma mal l est numberofsharesorf ract i on ofashare,t hecorporat i on may ,subj bi df o r ecttothe provi si onsoft hi sCode, t hesame me,andtheto t alam mo ountdueshal lbecredi t edas pa i di nf ul li nt h eb oo ksoft h ec o r po r a t i o n.T i t l et oal l t hesharesofst ock cover edbyt hesubscri pti on shal lbe v es t edi nt hec or por at i onast r e asur yshar e sandma ybe di sposed ofbysai d corporat i on i n accor dance wi t ht he pr o v i s i o nso ft hi sCo de .( 39 a46a )
Not i ce of sai d sal e, wi t h a copy of t he r e s o l ut i o n,s ha l lbes e ntt oe v e r yde l i nq ue nts t o c kho l de r ei t herpersonal l y orby re gi st eredm ma ai l .Thesameshal l f ur t herm mo or e be publ i shed once a wee k f or t wo ( 2) consecut i veweeksi n anewspaperofgeneralci rc ul ati on i nt heprovi nceorci t ywheret hepri nci paloffic ffi ceoft he c o r po r at i o ni sl o c at e d.
NO.I tcannotbi d becausethel aw says,subj ectt ot he prov i si ons oft hi sCODE.Sect i on 68 and 41 shoul d be r e c o nc i l e d.Se c t i o n6 8s t a t e st h at :
subscri pt i on pl us al laccrued i nt er est ,and t he dat e, t i meand pl aceoft hesal ew wh hi ch shal lnotbel esst han t hi rt y( 30)daysnormo moret han si xt y( 60)daysf rom t he dat et hest ocksbecome medel i nquent .
Unl essthedel i nquentst ockhol derpayst othe corporati on,onorbef orethedat especi fied f orthesal e of t he del i nquent st oc k, t he bal ance due on hi s subscr i pt i on, pl us acc rued i nt er es t , cos t s of advert i sem me entandexpensesofsal e,orunl esst heboard o fd i r e c t o r so t he r wi s eor d e r s ,s a i dde l i nq ue nts t o c ks ha l l besol datpubl i cauc t i on t osuc h bi dde rwhos hal loffer t o pay t he f ul l amo mount of t he bal ance on t he subscri pti on t oget her wi wi t h accrued i nt ere st , cost s of adver t i seme mentand expenses ofsal e,f orthe sm ma al l est numberofs haresorf ract i on ofa shar e.Thest ock so purc hasedshal lbet r ansf err edt osuchpur chaseri nt he booksoft hec or por at i onandac er t i fic at ef orsuc hs t oc k shal lbe i ssued i n hi sf avor .Therem ma ai ni ng shares,i f
As sumet her ei snobi dder ,ma yt hec or por at i onbi d?
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The r e was no unr e s t r i c t ed r e t ai ned ear ni ngs i nt he examp mpl e gi ven t heref ore t he corporat i on cannot bi d, s e c t i o n 41,i ts t a t e st ha t :
Secti on 41. Powe wert oacqui r eown wnshare s. -A st ock corpor at i on shal lhavet hepowert opur chase or acqui r e i t s own share s f or a l egi t i mat e cor porat e purpose orpurposes,i ncl udi ng butnotl i mi t ed t ot he f ol l owi ng cases: Provi ded, That the corporat i on has
44
unres t ri cted re tai ned earni ngs i ni t sbookstocover t hesharest obepurc hasedoracqui re d:
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I twasprema mat ur e
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Unpai dsubscri pt i onswi l lbecome medueandpayabl eonl y uponcert ai ni nst ance
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Cal lo ri ft h er ei sas t i pul a t i o ni nc o nt r a ct
1.To el i mi nat ef ract i onalshares ari si ng outofst ock di v i de nds ; 2. To col l ect or com mp promi mi se an i ndebt edness t ot he corporati on,ari si ng outofunpai d subscri pti on,i na del i nquency sal e,and t o pur chase del i nquent shares sol dduri ngsai dsal e;and
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Lumanl anvs.Cura
3. To pay di sse nti ng or wi t hdr awi ng st ockhol ders e nt i t l e dt op ay m me e ntf o rt he i rs ha r e sunde rt hep r o v i s i o ns o ft hi sCo de .( a )
Whati ft hes har esofA wer es ol dwi t houtc ompl i anc eof t her equi r em me ents?Ma MayAquest i ont hesal e?
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The l aw pr esc r i bes t wo c ondi t i ons bef or e an act i on t o r eco ve r del i nquent st ocks i rr egul ar l y sol d may be al l owed.Theseare:
1. Thepart ysee ki ng t oma mai ntai n suchact i on fir stpaysor t enderst othepart yhol di ngthest ockt hesum f orwhi ch t he sam me ewa wassol d,wi t hi nt er estf r om t hedat eoft he s al eatt h el e g alr a t e ;a nd,
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-
Wher ei tnotf ort hepr omi s e,t hede f e ndant swoul dhav e notsubscri bed
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Tr us t Fund Doc t r i ne ,i ti se s t abl i s hed doct r i ne t hat s ubs c r i p t i o nst ot h ec a pi t a lo fac o r po r a t i o nc o ns t i t ut ea f und t o whi ch cr edi t or s have a ri ght t o l ook f or sati sf acti on oft hei rcl ai ms and t hatthe assi gnee i n i nsol ve ncy can mai ntai n an act i on upon any unpai d st ock subscri pti on i n order t o re al i ze asset sf or t he paym me entofi t sdebts.
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A c or por at i on has no power t or el eas e an or i gi nal subscri berto i t s capi t alst ock f rom t he obl i gati on of payi ngf orhi sshares,wi t houtaval uabl econsi derati on f orsuchrel ease;andasagai nstcr edi t orsareduct i on of t hecapi t alst ockcan t akepl aceonl yi nt hem ma annerand undert hecondi t i ons prescr i bed by t hestat ut eort he c ha r t e ro rt hea r t i c l e sofi nc o r po r at i o n.
Ther e as onf orsuc hi st hes t abi l i t yoft r ans act i onsoft he s ha r e sofs t o c k
Supposei nt heexam mp pl e,si ncet herear enounres t ri ct ed re t ai ned earni ngs,hencethecorporati on cannotbi d,i s t h ec o r po r a t i o nl e f twi t ho uta nyr e c o ur s e ?
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Secti on 70. Co ur tac t i o nt or e c o v e ru np ai ds ub sc r i p t i o n. Not hi ngi nt hi sCodeshal lpreventthecorporati on f rom c o l l e c t i ngb ya c t i o ni n ac o ur to fpr o p e rj ur i s di c t i o nt he am mo ountdueon any unpai d subscr i pt i on,wi t h accr ued i nt e r e s t ,c o s t sa nde x pe ns e s .( 49 a)
EdwardKel l erandCo.vs .COB -
May t hest ockhol derbehel dl i abl ef ort hedebtsoft he cor por at i on? YES. To t he ext ent of thei r unpai d s ubs c r i p t i o n
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Ast ot hel i abi l i t yoft hes t oc khol der s,i ti ss e t t l edt hata st ockhol der i s per sonal l y l i abl e f or t he financi al obl i gati onsofacorporati on t ot heext entofhi sunpai d s ubs c r i p t i o ns
Ve l as cov s.Poi z at -
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Thesubs cr i beri sasmuc h boundt opayt heamo untof t heshar esubscr i bedbyhi m ashewoul dbet opayany ot herdebt ,and t he ri ghtoft he com mp pany t o dem ma and payme menti snol essi ncont est abl e. Two av ai l abl er eme di es: t he fir s t and mo s t spec i al r em me edy gi ven by t he st at ut e consi sti n permi mi t t i ng t he corporati on t oputuptheunpai dstockanddi sposeofi t f ort heaccountoft hedel i nquentsubscri ber.Theother reme medyi sbyact i oni ncourt .
Di scre t i onaryon t hepartoft heboardofdi re ct orstodo what e v e ri s pr ov i de di nt hesai d ar t i c l er el at i v et ot he appl i cat i on oft he partoft he 70 perce ntoft he profit di st ri but abl ei n equal part s on t he paym me ent of the sharessubscri bed t oandf ul l ypai d
Li ngayenGul fvs.Bal t azar -
Except i on:purs uantt oabonafidecom mp prom mi i seort oset off adebtduef r om t hecorporat i on,arel easesupport ed byc onsi der at i on,wi l lbeeffec t ualasag ai ns tdi s sent i ng st ockhol dersand subsequentand exi st i ng cr edi t ors .A rel ease whi ch mi ghtori gi nal l y havebeen hel di nval i d maybesust ai nedaf t eraconsi derabl el apseoft i me
I st here a pre scr i pt i ve peri od where i n a dema mand f or unpai dsubscr i pt i onshoul dbema made?
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DeSi l vavs.Aboi t i zandCo. -
Tr us tFund Doc t r i ne -subs cr i pt i on t ot he c api t alofa corporat i on const i t ut ea f und t o whi ch t he cr edi t ors ha v ear i g htt ol o o kf o rs at i s f a c t i o no ft he i rc l a i msand t hatt heassi gneei ni nsol vencycan mai nt ai n an act i on upon anyunpai d st ock subscri pt i on i n ordert or eal i ze a s s e t sf o rt hep ay m me e nto fi t sde bt s .
PNB vs.Bi t ul ak
2. The ac t i on shal l be co mmenced by t he fil i ng ofa rom t hedateoft hesal e. comp mpl ai ntwi t hi nsi xmo mont hsf -
I fnoc a l la ndnos t i pul a t i o ni nc o nt r a c tt he ni twi l lno t bede mandabl eorpayabl eatal l
NO.Ga r c i av s .Su ar e zc a s e
Garci avs.Suarez -
Neve rbecame medueandpayabl eunt i lt her ei sacal lmade
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Presc ri pt i on wi l l not run unti l and unl ess t her ei s de mand
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Pr es cr i pt i on shoul d be det er mi ned f r om t he t i me de mand has bee n made and not f r om t he t i me of s ubs c r i p t i o n
I fdecl areddel i nquent,whatwoul d be t heeffectas t o t heownerofsai dshares?
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-Nodel i nquentst ock Secti on 71. Effe c to fde l i n q ue nc y . shal l be vo t ed f or or be ent i t l ed t o vo t e or t o representat i on atany st ockhol der' s meet i ng,nor shal l t h e ho l de rt he r e o fbee nt i t l e dt oanyoft h er i g ht sofa st ockhol derexceptt heri ghtt odi vi dends i n accordance wi t ht he pr ov i si ons oft hi s Code ,unt i land unl e ss he
45
payst he am mo ountdueon hi ssubscr i pt i on wi t h accr ued i nt er est ,and t hecostsandexpensesofadvert i sem me ent ,i f a ny .( 50a ) -
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Howeveri ft hesharesarenotdel i nquent ,subscri berst o t h ec a pi t a lo fa c o r po r a t i o n,t h o ug h no tf ul l ypa i d,a r e e nt i t l e dt oa l lt her i g ht so fa s t o c kho l de r ,a c c or d i ng t o s e c t i o n 72
1. The r egi st er ed owner of a cer t i ficate of s t o c ki n ac o r po r a t i o no rhi sl e g a lr e pr e s e nt a t i v es ha l l fil ew wi i t ht hec o r po r a t i o na na ffi ffid da v i ti nt r i pl i c a t es e t t i ng f ort h, i f possi bl e, t he ci r cumst ances as t o how t he cert i ficat ewa was l ost ,st ol en ordestr oyed,t henumberof share s r epr ese nte d by such cer t i ficat e, the ser i al numb m be r of t he c er t i fic at e and t he name me of t he cor por at i on whi ch i ss ued t he same me. He shal l al so submi ts uch ot heri nf orma mat i on and ev i dencewhi ch he
Sect i on 72. Ri ght s of unpai d shar es. Hol dersofsubscr i bed shar esnotf ul l y pai d whi ch are no td e l i nq ue nts h al lha v eal lt h er i g ht so fas t o c kho l de r . ( n)
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Acor por at i onpai d50% ofsubs cr i pt i onandwasl at e ron decl areddel i nquentwhenhecoul dnotpayupon cal l ;A i s al so a di r ect or of t he corporat i on. W Wi i l l A, upon de c l a r a t i o no fd el i nq ue nc y,s t i l lb ea bl et oe x e r c i s ehi s r i g hta sadi r e c t o r ?
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Ye s,he l ose s al lhi sr i ghtas a s t oc khol dere xcepthi s r i g htt or e c e i v ed i v i de nds
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Her em ma ai nst o be a di r ect or ,onl y qual i ficati on t o be a di r e c t o ri shem mu us to wna tl e a s t1s ha r ea nds i nc ei ts t i l l st andsi n hi snam me ependi ng t he sal e,he r em ma ai ns t obe andactasadi re ct or
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Ev e ni ft he r ei ss al e ,hema ma ys t i l lbedi r e c t o rbe c a us et h e wi nni ngbi dde rma ynotbi dorpayf oral lt hes har esor t her e mi ght be r ema mai ni ng shar es , whi c h woul d be c r e d i t e di nf a v o roft hede l i nq ue nts t o c kho l de r Sect i on43 provi des: Secti on43. P o we we rt ode c l a r edi v i de n ds .-The boar d ofdi r e ct or s ofa s t oc k cor por at i on ma y dec l ar e di vi dends out of the unr est ri ct ed r et ai ned earni ngs whi c hs hal lbepay abl ei nc ash,i n pr ope r t y ,ori ns t oc k t o al lst ockhol ders on t he basi s ofout st andi ng st ock hel dbyt hem m: :Provi ded,Thatanycashdi vi dendsdueon del i nquent st ock shal lfirs tbe appl i ed t ot he unpai d bal ance on t he subs cr i pt i on pl us c os t s and e xpense s, w h i l e t o c k d i v i d e n d sun sh a l li be wa i t hh e l d f r o m t h e de l i n qus e n t st o c k h o l d e r t i l h s unp i d s u bsc r i p ti on i s f ul l y pai d:Provi ded,f urt her ,Thatno st ock di vi dend shal lbe i ssued wi t houtt he appro valofs t ockhol ders r eprese nt i ng not l ess t han t wot hi r ds ( 2/3) of the o ut s t a nd i n gc ap i t a ls t o c ka tar e g ul a ro rs p ec i a lme e t i ng dul yc al l e df o rt h epur p os e .( 16a ) Stoc k cor porat i ons ar e prohi bi t ed f r om r et ai ni ng surpl us profit si n exc ess of one hundr ed ( 100 %) %)pe r c e nto ft he i rpa i di nc a pi t a ls t o c k,e x c e p t :( 1) when j us t i fied by defini t ec or por at ee xpans i on pr oj e ct s orprograms msappro ved by t heboard ofdi r ect ors;or( 2) when t he c or por at i on i s pr ohi bi t ed unde r any l oan agree ment wi t h any financi ali nst i t ut i on or cr edi t or , whe t he rl ocal or f or e i gn, f r om dec l ar i ng di v i dends wi t houti t s/hi sconse nt ,and suc hc ons enthasnoty e t be en s ec ur ed;or( 3)whe ni tcan bec l e ar l ys hown t hat suchre t ent i oni snecessaryunderspeci alci rcum ms st ances obt ai ni ngi nt hecorporati on,suchaswhent her ei sneed f o rs pe c i a lr e s e r v ef o rpr o ba bl ec ont i ng e nc i e s .( n)
2. Af t er ve ri f yi ng t he affi ffid davi t and ot her i nf or mat i on and ev i dence wi t h t he books of t he c o r po r a t i o n,s a i dc o r po r a t i o ns ha l lp ub l i s h ano t i c ei na newspaperofgeneralci rcul ati on publ i shed i nt hepl ace whe r et he cor por at i on has i t s pr i nc i paloffic e ,once a week f ort hr ee( 3)c ons ec ut i v eweeksatt hee xpenseof t heregi st er edowneroft hecert i ficat eofst ockwhi chhas be en l os t ,s t ol en ordes t r oy ed.Thenot i ces hal ls t at et he nam me eofsai d corporat i on,t henam me eoft heregi st er ed ownerandt heseri alnumberofs ai dcer t i ficate ,andt he numberofshare srepr esent ed bysuch cer t i ficate ,and t h ata f t e rt hee x pi r a t i o no fo n e( 1)y e a rf r o mt heda t eo f t h el a s tp ubl i c a t i o n,i fnoc o nt e s th asbe e np r e s e nt e dt o s a i dc o r po r a t i o nr e g a r d i ng s a i dc e r t i fic a t eo fs t o c k,t h e ri ghtt o make such cont es tshal lbe barr ed and sai d corporati on shal lcanceli ni t s books t he cert i ficat e of st ockwhi chhasbeenl ost ,st ol enordest royedandi ssue i n l i eu t her eof new cer t i ficate of st ock, unl ess t he regi st eredownerfil esa bond orothersecuri t yi nl i eu t her eofasma mayberequi red,effect i vef oraperi od ofone ( 1)ye ar ,f orsuch am mo ountand i n such f orm and wi t h such sure t i esas may be sat i sf act ory t ot he board of di rec t ors,i n whi chcaseanew cert i ficat ema maybei ssued even bef orethe expi rat i on oft he one ( 1)yearperi od provi ded her ei n:Provi ded,Thati fa contes thas been present ed t osai d corporati on ori fan acti on i spendi ng i n courtr egar di ng t he owner shi p ofsai d cer t i ficateof st ock whi ch has been l ost , st ol en or dest ro yed, t he i ssuanceoft henew cert i ficat eofs t ock i nl i eu t here of shal lbesuspended unt i lt hefinaldeci si on byt hecourt r egar di ng t he owner shi p of sai d cer t i ficate of st ock whi c hhasbe enl os t ,s t ol enordes t r oy ed.
Rul es gover ni ng st ock corpor at i ons,when appl i cabl e, a l s oapp l i e st oano ns t o c kc o r po r a t i o n The r e ar edel i nquentshar e hol der s al s oi n a nons t oc k cor porat i on.Examp mpl ei sme mem mb ber shi pdues
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maydee m nece ss ary ;
May t he r ul es gov er ni ng del i nquency sal e appl yt oa nonst ock cor porat i on? Ar et hereunpai d share si na nonst ockcorporati on?
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When a c er t i fic at e ofs t oc ki sl oss ordes t r oy ed,what mustbedonebyt heown wnert here of ?
Secti on 73. L os to rd es t r o ye dc e r t i fic at e s. -Thef o l l o w wi i ng proc edur e shal l be f ol l owed f or t he i ssuance by a corporati on ofnew cert i ficat esofst ock i nl i eu oft hose whi c hhav ebee nl os t ,s t ol enordes t r oye d:
Exce pt i n cas e of f r aud, bad f ai t h, or negl i gence on t he part of the cor porat i on and i t s offic ffice r s, no ac t i on may be br ought agai nst any corporati on whi ch shal lhavei ssued cert i ficat eofst ock i nl i e uo ft ho s el o s t ,s t o l e no rde s t r o y e dpur s ua ntt ot he procedureabovedescri bed.( R. A.201a) -
The r at i onal e of t he abov equot ed l aw i st o av oi d dupl i cati on ofcer t i ficat esofst ock and t heavoi danceof fic t i t i o usandf r a udul e ntt r a ns f e r s .
Whenwi l lt her e pl ace me ntc er t i ficat ebei ss ued?
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Thec odepr ovi dest hat : af t e rt h eexpi rat i on ofone( 1)yearf rom the date of the l ast publ i cati on, i fno cont esthas been present ed t osai d corporati on regar di ng sai d cert i ficat e ofst ock,t heri ghtt om ma akesuchcont estshal lbebarr ed and sai d cor porat i on shal l cancel i n i t s books t he cer t i ficat e of st ock whi ch has been l ost , st ol en or dest r oyed and i ssue i nl i eu t her eofnew cer t i ficateof s t o c k ,
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Coul di tbei ssuedearl i ert han1year? Ye si tcanbe ,t hec odes t at est hat : unl esst he r egi st er ed ownerfil esa bond or ot her sec uri t yi n l i eu t here of as may be r equi r ed, effect i vef ora peri od ofone ( 1)ye ar ,f orsuch am mo ount and i n suc hf or m and wi t h suc h sur et i esasma maybe
46
sati sf actorytothe board ofdi re ct ors,i n whi ch case a new cer t i ficat e may be i ssued even bef or e t he expi rat i on oft heone( 1)yearperi od provi dedherei n: Provi ded,Thati fa cont esthas been present ed t osai d c o r po r a t i o no ri fa na c t i o ni spe ndi ngi nc o ur tr e g a r d i ng t heownershi pofsai dcert i ficat eofst ockwhi chhasbeen l ost , st ol en or dest r oyed, the i ssuance of t he new cert i ficat e ofst ock i nl i eu t her eofshal lbe suspended unti lt he final deci si on by t he court re gar di ng t he owner shi p ofs ai d cer t i ficateofs t ock whi ch hasbeen l o st ,s t o l e no rde s t r o y ed.
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5. To be i ssued a cer t i ficat e of s t ock f or f ul l y pai dup shar esi naccor dancewi t h64; 6.
Toexerc i sepr eem mp pt i veri ght sasprovi ded f ori n sect i on 39;
7.
Toexer ci set hei rapprai salri ghti n accor dancewi t ht he provi si on ofsect i on 81 andi nt hosei nst anceal l owedby l aw suchasse ct i on42and105;
8.
Toi nst i t ut eandfil eaderi vat i vesui t ;
May c or por at e offic ffice r s be hel d l i abl e f or t he unaut hori zedi ssuance? YES,t hec odepr ov i dest hat : Exce pt i n cas e of f r aud, bad f ai t h, or negl i gence on t he part of the cor porat i on and i t s offic ffice r s, no ac t i on may be br ought agai nst any corporati on whi ch shal lhavei ssued cert i ficat eofst ock i nl i e uo ft ho s el o s t ,s t o l e no rde s t r o y e dpur s ua ntt ot he procedureabovedescri bed.( R. A.201a)
comp mpelt heregi st rat i on oft hetr ansf eri nt hebooksof t h ec o r po r a t i o na spr o v i de df o ri ns e c t i o n 63;
Ass umi ngt hel as tpar agr aph i snott her e ;woul di tbe nott he same me,t hattheyshoul d be hel dl i abl e dueto f r a ud ,b adf a i t horne g l i g e nc e ?
9. To r e co v er shar e s of st oc k unl awf ul l y s ol d f or del i nquencyasma maybeal l owedunders ect i on69; 10. Toi nspectt hebooksoft he corporat i on subj ectonl yt o t hel i mi t ati onsi mposedbysect i on73; 11. Tobef urni shedbyt hemo mostr ece ntfinanci alst at em me ent oft hecorporat i onasbysect i on75; 12. Tobei ssued anew st ockcer t i ficatei nl i eu oft hel ostor dest r oye d one subj ectt ot he proc edur el ai d down i n sect i on73;
YES.Se ct i on31pr ov i de st hat :
Sect i on 31. Li abi l i t yo fdi r e c t o r s ,t r u st e eso r offic ffic er s. - Di r ect ors or t rust ees who wi l l f ul l y and knowi ngl yvot ef ororassentt opatentl yunl awf ulactsof t h e o r p or a t i o n o r w ae re g u i l t y f r o ss n e g l i g e n c eo r b a dc f a i t h i n d i r e c t i nh go t h a ff a i r so o fg t h e co r p o r a t i o n o r acqui r e any personalor pecuni ary i nt er esti n confli ct wi t ht he i rdut y as suc h di r e ct or s ort r us t e es s hal lbe l i abl ej oi nt l y and sever al l yf or al ldam ma ages res ul t i ng t heref rom suffere d byt hecorporat i on,i t sst ockhol ders orme memb mber sandot herper sons. Whe n adi r e ct or ,t r us t eeoroffic erat t e mp t st o a cq ui r eo ra cq ui r e s ,i nv i o l a t i o no fhi sdut y ,a nyi nt e r e s t adver se t ot he cor porat i on i nr espec tofany mat t er whi c h has bee nr e posed i n hi m i n confidence ,as t o whi c he qui t yi mpos es a di sabi l i t yupon hi m t o deali n hi s own behal f ,he shal lbe l i abl e as a t rusteef orthe cor por at i on and mustaccount f or t he pr ofit s whi ch ot herwi sewoul dhaveaccr ued t ot hec or p or a t i o n.( n)
Cert i ficat e of s t ock was l ost ,t he ow wn ner t ransf ers hi s s ha r e sbywa yofano t a r i z e dde e dwi l li tbev a l i d?
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Hecannotdo so,i facert i ficat eofst ock i si ssued by a corporati on,ame mer enot ari zeddeedw wi i l lnotsuffice
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Deedofassi gnm me entwasnots uffici ents i ncet herewas noendor se ment( RuralBankofLi pavs.CA)
Ri g ht sa ndl i abi l i t i e so fs t o c kho l d e r s
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RI GHTS
1. Part i ci pat i oni nt hema managem me entoft hecorpor at eaffai r s bye xe r ci s i ngt he i rr i ghtt ov ot eandbev ot e dupone i t her personal l yorbyproxyasprovi ded f orundersect i ons50 and58oft hecode; 2. To ent eri nt o a vo t i ng t r ustagr ee mentsubj ec tt ot he procedur e,r equi re mentsandl i mi t at i onsi mposed under sect i on50; 3.
Torec ei vedi vi dends and t o com mp pelt hei rdecl arat i on i f
war r ant e dunde rs ec t i on43; 4.
To t r ansf ershare s ofst ock subj ectonl yt or easonabl e r est ri ct i onssuch asopt i onsand pref er encesasmaybe a l l o we db yl a wi nc l us i v eoft h er i g hto ft h et r a ns f e r e et o
13. Tohavet he cor porat i on di ssol vedunderse ct i on 118 t o 121,andsecti on105i nacl osecorporat i on; 14. To part i ci pat ei nt he di st ri but i on oft he asset s oft he corporati onupondi ssol ut i onundersect i on122; 15. I nt hecaseofacl osecorporat i on,t opet i t i on t heSEC t o arbi t r at ei nt he eve ntofadeadl ock as al l owed under sect i on104;and, 16. Al so i nt he caseofa cl osecorpor at i on,t o wi t hdr aw t her ef rom, m,f ormy myreason,andcomp mpelt hecorporat i on t o purc hasehi ssharesaspr ovi dedf orundersect i on105.
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St ockcorporat i onsmu mustal sokeep abook t o be known as t he " s t oc k and t r ans f e rbook" ,i n whi c h mustbekeptarec ordofal lst ocksi nt henam me esoft he st ockhol ders al phabet i cal l y arranged;the i nst al l ment s pai dandunpai donal lst ockf orwhi chsubscr i pt i on has be en ma de,andt hedat eofpayme ntofanyi ns t al l me nt ; as t a t e me me nto fe v e r yal i e na t i o n,s a l eort r a ns f e rofs t o c k made,t hedat et her eof ,and byandt owhom made;and such ot herentr i esas t hebyl awsma maypre scr i be.The st ock and t ransf erbook shal lbe kepti nt he pri nci pal offi ffic ce oft he cor porat i on ori nt he offi ffic ceofi t s st ock t r ansf eragentand shal lbe open f ori nspect i on by any di r e c t o ro rs t o c kho l de ro ft hec o r po r a t i o na tr e a s ona bl e hoursonbusi nessdays.
LIABI LITI ES
1. To pay t o the cor por at i on t he bal ance of hi s unpai d subscri pti ons subj ectt ot heprovi si on ofsect i on 67 t o 70; 2.
Topayi nter estonhi sunpai dsubscri pt i on i fr equi r edby t he byl aws or by t he cont r act of subscr i pt i on i n accor dancewi t hsect i on66;
3.
Toanswert othecr edi t or sf ort heunpai dport i on ofhi s subsc r i pt i onundert heTRU US STFUND DOCTRI NE;
4.
Toanswert he “ wat er ”i n hi sst ocksas pro vi ded f ori n sect i on65;
No st oc k t r ansf er agent or one engag ed pr i nc i pa l l yi nt h e bus i ne s so fr e g i s t e r i ng t r a ns f e r sof st ocksi n behal fofast ock corporati on shal lbeal l owed t oo pe r a t ei nt h ePhi l i p pi ne sunl e s shes e c ur e sal i c e ns e f r om t heSecuri t i esandExchangeCom mm mi ssi onandpays af eeasma maybefixedbyt heCom mm mi ssi on,whi chshal lbe renewabl eannual l y:Provi ded,Thatast ock corporati on i snotpr ecl uded f rom perf ormi mi ngorma maki ng t ransf erof i t s own st ocks ,i n whi ch cas e al lt he r ul es and regul ati onsi mposedon st ockt ransf eragent s,exceptt he payme ment of a l i cense f ee here i n prov i ded, shal l be a ppl i c a bl e .( 51aand32a ;P . B.No .268 . )
5. T ob el i a bl e ,a sg e ne r a lp a r t n e r s ,f o ral lde bt s ,l i a bi l i t i e s and dam ma ag es of a de t er mi nabl e co r por at i on as envi si oned undersecti on 21 ( corporati on by est oppel ) ; and, 6.
To be per sonal l yl i abl ef ort or t s,i nt he ev entthata s t o c kho l de ri n ac l o s ec o r po r a t i o na c t i v e l y pa r t i c i p at e s i nt hema manageme mentoft hecor porat eaffai rs .
CORPORATE BOOKS AND RE RECORDS
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Whatar et he sebooksand r ec or dst hatar er e qui r ed t o bekept ? Books t .Sect i on 74. o be kept ;st ock t r ansf eragent Every corpor ati on shal lkeep and caref ul l y preserve
at i t s pri nci pal offi ce a r ecor d of al l busi ness t r ansact i ons and mi nutes of al l meet i ngs of st ockhol der s or memb mber s, or of the boar d of dir ectorsortr ust ees,i n whi ch shal lbe setf orth i n detai lt he t i me and pl ace of hol di ng t he m me eet i ng, how aut hori zed, t he not i ce gi ven, wh whet her t he meeti ng wasregul arorspeci al ,i fspeci ali tsobj ect, t hose pr es ent and abs ent , and ever y act done or or der ed done at t he meet i ng.Upon t he dema mand of any di r ect or ,t r ust ee,st ockhol der or memb mber ,t he t i me when any di r ect or , tr ust ee, st ockhol der or memb mberenter ed or l ef tt he meet i ng m mu ustbe not ed i nt he mi nut es;and on asi mi l ardem ma and,t he yeas and nays mus t be t ake n on any mot i on or proposi t i on, and a r ecord t hereof care f ul l y made. The pr ot estofany di r ect or ,t r ust ee,st ockhol deror mem mb beron any act i on or pr oposed act i on mustbe recor ded i nf ul lon hi sdema m and.
Tosumm mma ar i z e:
1. Rec or ds of al l busi ness t r ansact i ons whi ch i ncl ude, am mo ongothers,j ournal s,l edger,cont ract s,vouchersand r ec ei pt s, financi al st at em me ent s and ot her books of acc ount s, i ncome me t ax r et urns, and vo t i ng t r ust agree mentswhi chmu mustbekeptandcaref ul l yprese rve d a ti t spr i nc i p alo ffi ffic c e ; 2. Mi nut esofal lmee t i ngsofst ockhol der sorme mem mb ber sand o ft h ed i r e c t o r so rt r us t e e ss e t t i ng f o r t hi n de t a i lt he dat e,t i me,and pl ace ofme meet i ng,how aut hori zed,t he not i cegi venwh whet hert hesame meberegul arorspeci al ,and i fs pe c i a l ,t h e pur p os et he r e o fs ha l lbes pe c i fie d,t h o se prese ntandabsent ,andeveryactdoneoror dereddone t her e atwhi ch , mustl i kewi sebekeptatt hepri nci pal offi ffic ceoft hecorporat i on;and, 3. St oc k and t r ansf er bo ok sho wi ng t he name mes oft he st ockhol ders,t heamo mountpai d orunpai d on al lst ocks f orwhi ch subscr i pt i on hasbeen made,ast at em me entof e v e r yal i e na t i o n,s a l eort r a ns f e ro fs t o c k ma de ,i fa ny t he dat et her e of ,a nd by wh whom and t o whom made whi c h mus tal s o be keptatt hepr i nc i paloffic e oft he c o r po r a t i o no ri nt heo ffic ffic eo fi t ss t o c kt r a ns f e ra g e nt .
Ther ec or dsofal lbus i ne sst r ans ac t i onsoft he
The se c or por at e books and r ec or ds, i ncl us i v e of al l busi ness t r ans act i ons and mi nut e s of me e t i ngs, ar e
cor porat i on and t he mi nut esofany mee t i ngs shal lbe o pe nt oi ns pe c t i o nb ya nydi r e c t o r ,t r us t e e ,s t o c kho l de r orme mem mb beroft he cor porat i on atr easonabl ehourson busi ne ss day s and he ma y dema nd,i n wr i t i ng,f ora copy ofe xcer pt sf r om sai dr ecor ds orm mi i nut es,athi s expense.
s ubj e c tt oi n s pe c t i o nb ya nyoft h e di r e c t o r s ,t r us t e e s , s t oc khol der s or memb mber s of t he co r por at i on at r eas onabl e hours on busi nes s day s and a co py of excerpt sofsai drecordsma maybedema manded.I nf act,i nso f arasfinanci alst ateme menti sconcerned,t heCodecl earl y p r o v i d e s :
Any offic erorage ntoft he cor por at i on who s ha l lr e f us et oa l l o wa nyd i r e c t o r ,t r us t e e s ,s t o c kho l de r or me mem mb ber of t he co r por at i on t o ex ami mi ne and co py excerpt sf rom i t srecor dsorm mi i nut es,i naccordancewi t h t he provi si ons oft hi s Code,shal lbe l i abl et o such di r ect or ,t rust ee,s t ockhol der orm me em mb ber f ordam ma ages, andi naddi t i on,shal lbegui l t yofanoffensewhi chshal l bepuni s habl eunderSec t i on144oft hi sCode:Pr ovi ded, Thati fsuc hr e f us ali sma depur s uantt oar e sol ut i on or o r de roft h e bo ar do fd i r e c t o r sort r us t e e s ,t h el i a bi l i t y under thi s sect i on f or such act i on shal l be i mposed upon t he di r ect or s or tr ust ees w wh ho vot ed f or such r e f us a l :a ndPr o v i d ed ,f ur t he r ,Tha ti ts h al lbead ef e ns e t o any act i on under t hi s se ct i on t hat t he per son dema mandi ng t o ex ami mi ne and co py ex ce r pt sf r om t he corporat i on' srec ordsandmi nut eshasi mproperl yused anyi nf orma mat i on securedthrough anypri orexam mi i nat i on oft herecor dsormi mi nut esofsuch corporat i on orofany o t h e rc or p or a t i o n,o rwa sno ta c t i ngi ng o odf a i t ho rf o r al egi t i mat epurposei nma maki nghi sdem ma and.
Sect i on 75. Ri g htt o fin an c i a ls t a t e me me nt s . Wi t hi nt e n( 10)daysf r om r e ce i ptofawr i t t en r eques tof any st oc khol der or mem mb ber , the cor por at i on shal l f urni sh t o hi m i t s most r ece nt financi al st at em me ent , whi c hs hal li ncl udeabal anceshee tasoft hee ndoft he l astt axabl eyearand aprofitorl ossstat em me entf orsai d t a x abl ey e a r ,s ho wi ngi nr e a s o na bl ede t a i li t sa ss e t sa nd l i abi l i t i e sandt her e s ul to fi t so pe r at i o ns .
Att her egul arme e t i ngofs t oc khol der sorme mber s ,t he boar d ofdi r e ct or s or t r us t ee s shal lpr e se nt t os uc h st ockhol der s or me m em mb ber s a financi al r epor t of t he operat i ons of t he corporati on f or the precedi ng year , whi c h shal li nc l ude financi als t at eme nt s ,dul ys i gned and ce r t i fied by an i ndependent ce r t i fied publ i c account ant . Ho we v e r ,i ft h epa i d upc a pi t a lo ft hec or p or a t i o ni sl e s s t han P50, 000. 00, t he financi al s t at em me ent s may be
48
At t he r e gul ar me e t i ng of s t oc khol de r s or mem mb ber s, t he board of di r ect or s or t rust ees shal l pr es entt o such st oc khol der s orme mem mb ber s a financi al r eport of the operat i ons of t he corporat i on f or t he precedi ngyear ,whi chshal li ncl udefinanci alst ate ment s, dul y si gned and cer t i fied by an i ndependentcert i fied publ i caccount ant .
cert i fied underoathbythetr easure roranyresponsi bl e o ffic ffic e ro ft hec o r po r a t i o n.( n)
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May bo oks and r e cor ds be e xa mi ned? Who may exami mi ne?Cantheyc opyt hem m? ?I nw wh hosee xpense? Ye s,ac cor di ngt ot hecode:
“Therecordsofal lbusi nesstr ansacti onsof t he cor porat i on and t he mi nut es of a ny meet i ngs shal lbe open toi nspecti on by anydi rect or,tr ustee, st ockhol der or mem mb ber of t he cor por at i on at r easonabl e hours on bus i ness days and he may dema m and,i n wri t i ng,f oracopy ofexcer ptsf r om sai d recor dsorm mi i nutes,athi sexpense.“
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I sthereanydef enseavai l abl ethatcoul d be rai sed? By t h ec or p or a t eo ffic ffic e r st oj us t i f yt h er e f us a l ? Ye s,t hec odepr ov i dest hat : “ and Provi ded, f urt her , That i t shal l be a def ensetoanyact i onunderthi ssect i ont hatt hepers on dema mandi ng t o exami ne and copyexcer pt sf r om t he corpor at i on' s recor ds and mi nutes has i mproper l y used any i nf or mat i on se cur ed t hrough any pr i or exami mi nat i on of t he r ecor ds or mi mi nutes of such corpor at i on orofany ot hercorporat i on,orwasnot acti ng i n good f ai t h orf ora l egi t i matepurposein ” maki nghi sdemand.
Howev er , i f t he pai dup capi t al of t he cor porat i on i sl ess t han P50, 000. 00, t he financi al st at em me entsma maybecert i fiedunderoat hbythet r easur er oranyresponsi bl eofficeroft hecorporat i on.( n) -
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Audi t e d financi als t at eme ntfil e di nt heSEC,120 days f r om t he end oft he finalye ar ,ormu mustbe fil ed on or be f or eApr i lofe ac hy ear Mustbest amp mprec ei vedbyt heBI R
Thosei nt hes t oc ke xc hang e
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Di scl osureofanym ma att ert hathavet odow wi i t hi ncr easi ng anddecr easi ng
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I fno t“ kul o ng ”v i o l a t i o no fs e c ur i t i e sandr e g ul a t i o n ac t
Whyi st hi sr i ghtofi nspec t i ongr ant e dt oas t oc khol de r ?
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Thebasi soft her i ghtoft hes t oc khol dert oi nspectt he books and r e cor ds of t he c or por at i on f or a pr ope r pur p os ei st opr o t e c thi si nt e r e s ta sas t o c kho l de r .Thus , i thasbeensai dt hat:
Whati st hes t oc kandt r ansf e r ?Wher es houl ds t oc kand
“ The ri ghtoft he sharehol ders t o ascert ai n how t he affai r s of hi s co mpany ar e bei ng conduct ed by i t s di r ect or s and offi ffic cer si s f ounded by hi s benefici al i nt er est t hrough ownershi pofsharesandthenecessi t yofs e l f protection. Manager s of some me corpor at i ons del i ber at el y kee p t he shar ehol der s i n i gnor ance orundermi mi sappr ehensi on as t o t he t rue condi t i on of i t s affai rs . Busi ness prudence dema mands that t he i nvest or kee pa wat c hf ule y e on t he ma nag eme nt and t he condi t i on oft hebusi ness.Thosei n chargeof t he c om mp pany may be gui l t y of gr os s i ncomp mpet ence or di shones t yf or year s and escape l i abi l i t yi ft he sharehol ders cannot i nspectt herecordsandobt ai ni nf orma mati on. ”
t ransf erbekept?Can i tbekepte l sewhere? “ Stockcorporat i onsm mu ustal sokeep abook t o be known as t he " s t oc k and t r ansf e rbook" ,i n whi ch mustbekeptarecor d ofal lst ocksi nt he name mesof t he st ockhol der s al phabet i cal l y ar r anged; t he i nst al l ment spai d and unpai d on al lst ock f orwhi ch subs cr i pt i on has been made, and t he dat e of payme ment ofany i nst al l ment ;ast at eme mentofever y al i enati on,sal eort ransf erofst ock made,the date t her eof ,andby andtowhom made;andsuchother Thest oc k and ent ri esasthe byl awsma m aypr escri be. t ransf erbook shal lbe kepti nt he pri nci paloffi ceof thecorporati on ori n theoffi ceofi t sst ock t ransf er agentand shal lbe open f ori nspect i on by anydi r ect or orst ockhol deroft hecorporat i on atr easonabl e hours on busi nessdays.“
Stockandt r ansf eragent
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Rec or dsev er ymo mov eme ment
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Per so n who moni t or smo mov eme mentb ythem mi i nut esorby t hehour s
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Non-s t ockcorporati on-st ockandtr ansf erbooks
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Cl ub shar e-memb mber shi p
Ar es t oc khol der se nt i t l edt ofinanc i als t at eme nt s ?
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Ye s,t he yar eent i t l e dt oacopy ,t hec odepr ov i dest hat :
Sect i on 75. Ri g htt o fin an c i a ls t a t e me me nt s . Wi t hi nt e n( 10)daysf r om r e ce i ptofawr i t t en r eques tof any st oc khol der or memb mber , the cor por at i on shal l f urni sh t o hi m i t s most r ece nt financi al st at em me ent , whi c h shal li ncl udeabal ances hee tasoft hee ndoft he
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I st he r eany di s t i nc t i o no ft her i g hto fi ns pe c t i o no fa s t o c kho l de ra ndt ha to fadi r e c t o r ? Ye s,ascomp ar ed t oas t oc khol de rorme mber ,t her i ght ofadi re ct orort rust eet oi nspectandexami mi necorporat e books and r e cor ds i s c ons i der ed absol ut e and unqual i fied and wi t hout re gar d t o mot i ve . Thi s i s be cause a di r ec t or s uper v i s es, di r ec t s and manag es cor por at e busi ness and i ti s nece ss ary t hat he be equi ppedwi t h al lt hei nf orma mati on anddat awi t hr egar d t ot he affai r s of t he comp mpany i n or der t hat he may manage and di r ect i t s operat i ons i nt el l i gentl y and a c c or d i ngt ohi sbe s tj ud gme nti nt h ei nt e r e s to fa l lt h e st ockhol ders he repr esent s. Thus,whi l e st ockhol ders and mem mb ber sareent i t l edtoi nspectand exami mi ne t he books and r ec or ds as pr ov i ded i ns ec t i ons 74 and 75 t hey may not gai n acc es st o hi ghl y se nsi t i ve and c o nfide nt i a li nf o r ma ma t i o n.I nt h ec a seo fdi r e c t o r s .“ i ti s not deni ed” t hat t hey have such acce ss.Thi s woul d i ncl ude,am mo ongot her s, a.
Market i ngst r at egi esandpri ci ngs t ruct ur e;
b. Budge tf ore xpans i onanddi v e r si ficat i on; c. Res e ar c handde v e l opme ment ;
l astt axabl eyearand aprofitorl ossstat em me entf orsai d t a x ab l ey e a r ,s ho wi ngi nr e a s o na bl ede t a i li t sa s se t sa nd l i abi l i t i e sandt her e s ul to fi t so pe r at i o ns .
d. Sour ce s of f undi ng, av ai l abi l i t y of per sonnel , proposal sofmerg ersort i eupswi wi t hot herfirms ms
49
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May t hi s r i ght be ex er ci se d, ot her t han by t he st ockhol derst hems msel ves? Ye s,whi l et her i ghti sf ounde don s t oc kowner s hi pt hus personali n nat ur ei tmaybem ma adeby t hest ockhol der’ s agentorrepresentat i vesi ncei tm ma ay be unavai l i ng i n manyi nst ances
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Thecor por at i on,ori t sr e spons i bl edi r ec t or sandoffic er s cannotundul yrest ri ctt hi sri ghtofi nspecti on and may notarbi t rari l ysetaf ew daysoft heyearwi wi t hi n whi ch t hest ockhol derma mayma makethei nspect i on.
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A by l aw undul yr es t r i ct i ng t he r i ghtofi ns pec t i on i s undoubtedl yi nval i d
Whati ft her i ghtoft hes t oc khol de rt oi nspec ti sdeni ed? Whati shi sr eme dy?
Ve gar ut hv s .I s abel aSugarCo. -
Di rec t orsofacorporat i on havetheunqual i fied ri ghtt o i nspectt hebooksand rec ordsoft hecorporat i on atal l r easonabl ehour s.
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We do not c We onc ei v e, howe v er ,t hat a di r ec t or or st ockhol derhas anyabsol ut eri ghtt osecurecert i fied copi es oft he mi nut es oft he corporat i on unt i lt hese mi nut es have been wr i t t en up and appr ov ed by t he di r e c t o r s .
May a st oc khol derofa hol di ng company i nspectt he booksandr e cor dsofas ubsi di ar y?
1. Mandamus 2.
3.
Dam ma agesei t heragai nstt he cor porat i on orr esponsi bl e offi ffic cerwhor ef usedthei nspect i on Cri mi nalcomp mpl ai ntf orvi ol at i on ofhi sri ghtt oi nspect and copy exc er pt s of al l busi ness t r ansact i ons and mi nut esofmeet i ng.Sect i on 74 provi desthatAnyoffi ffic cer oragentoft hecorporat i onwhoshal lre f usetoal l ow any di r ect or ,t rust ees , st ockhol der or mem mb ber of t he cor porat i on t o exami mi ne and copy exc er pt sf r om i t s rec ordsorm mi i nut es,i naccordancewi t ht heprovi si onsof t hi s Code, shal l be l i abl et o such di rect or ,t rust ee, st ockhol derorm me em mb berf ordam ma ages ,and i n addi t i on, shal lbe gui l t yofan offensewhi ch shal lbepuni shabl e under Sect i on 144 oft hi s Code.The l att erprovi si on i mposesapenal t yofafineofnotl esst han P1, 000 but notmo mor et han P10, 000orani mpri sonme mentf ornotl ess t han30 daysbutnotmor et han5years,orbot h,att he di s c r e t i o no ft hec our t .I ft her e f us a li spur s ua ntt oa r e s o l ut i o no ro r d e ro ft he bo ar d ,t he l i a bi l i t ys ha l lb e i mposed upon t hedi re ct orsort rust eeswhovot ed f or suchref usal .
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Def enseoft her esponsi bl ecorporat eoffi ffic cer
I tdepends The r i ght of t he s t oc khol der st oe xami ne c or por at e books e xt ends t o whol l y owned s ubsi di ar y whi c h i s comp mpl et el y undert he cont r oland manageme mentoft he parentc om mp panywh wherehei ssuchast ockhol der .Buti f t h et woent i t i e s( s ubs i d i a r yandpa r e nt )a r el e g a l l ybe i ng operat ed as separat e and di st i nctent i t i es,t her ei s no s uc hr i g hto fi ns pe c t i o no nt hep ar to ft hes t o c kho l de ro f t heparentcomp mpany . AYALA-HOLDI NG COMP ANY/PARENTCOMP ANY
1. That t he per s on de mandi ng has i mpr ope r l y use d any i nf orm ma at i on securedthrough anypri orexami mi nat i on of t he r ecor ds orm mi i nut esofsuch cor porat i on orofany o t h e rc o r p o r at i o n;
SUB UBSI DI ARI ES:BPI /GLOBE/AYALA LAND ( notwhol l y ownedsubsi di ary)
o
2.
3.
Thathewa wasnotact i ng i n goodf ai t h orf oral egi t i mat e pur posei nma maki nghi sdema mand; Theri ghti sl i mi t ed orre st ri ct ed by speci all aw ort he l a wo fi tc r e at i o n.
HOLD ATLEAST 50 +1 s har es i n or de rt o be a PARENTCOM OMPANY
A,i sa s t oc khol derofAy al a,doe s he hav ear i ghtt o i ns pe c tt her e c o r dso fi t ss ubs i di a r i e s ?
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I fwhol l y owned pwede,buti t s subsi di ari es ar e not whol l yownedkay ahi ndipwe de
W. W . G.Phi l pot t sv s .Phi l i ppi neMa nuf act ur i ngCo. Gokongweivs .SEC -
The r i ghtofi nspec t i on gi v e nt oas t oc khol de rcan be ex er ci se d ei t her by hi mse l f or by any pr ope r represe nt ati ve or att orneyi nf act,and ei t her wi t h or
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San Mi guelcorporati onownsal loft hesharesofst ockof SanMi guelI nt ernati onal
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I ti swho l l y o wne d
wi t houtt heat t e ndanceoft hes t oc khol der -
Ther i ghtma yber e gar de daspe r s onal ,i nt hes enset hat onl ya st ockhol derm ma ayenj oyi t ;butt hei nspecti on and ex ami mi nat i on may be made by anot her . Ot her wi se i t woul dbeunav ai l i ngi nmanyi ns t ances.
o
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Not e:Usual l y hi r esan audi t ororaccount antt o s a f e g ua r dhi si nt e r e s t
Pardovs .Her cul esLumb mberCo. -
Thel aw i scl ear ,i tma ybee xer c i sed dur i ngr e as onabl e hour son any busi nessdays,t he byl awscannotdeny t hi sr i g hta l lt o g e t he r
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The ge ner al r i ght gi v en by t he s t at ut e ma y not be l awf ul l y abri dged t o t he ext ent at t em mp pt ed i n t hi s r esol ut i on. I t ma may be adm mi i t t ed t hat t he offi ffic ci al si n char ge of a cor por at i on may deny i nspect i on when so ught at unusual hour s or under ot her i mpr ope r condi t i ons;butnei t hert he exec ut i veoffi ffic cer s northe boar d of di r e ct or s hav e t he power t o de pr i v e a s t o c kho l de ro ft h er i g hta l t o g e t he r .
I twoul d be i n accor d wi t h equi t y,good f ai t h and f ai r de a l i ng t oc o ns t r uet hes t a t u t o r yr i g hto fpe t i t i o ne ra s st ockhol dertoi nspectt hebooks and r ecor ds ofs uch whol l y owned subs i di ar y whi c h ar e i n r es ponde nt corporati on’ spossessi onandcont rol
I fbei ngoperat ed asseparat eand di st i nctcorporati ons, t her ei snosuchri ght
Tel ecommu mmuni c at i ons-spec i alf r anc hi se ,i ti sal e gi s l at i v e grant
Gonzal esv s.PNB -
Pro vi si ons of t he ol dl aw was unqual i fied, when i t g r a nt e ds t o c k ho l de r st her i g htt oi ns pe c t
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Howev er , whol e se em mi i ngl y enl ar gi ng t he ri ght of i nspecti on,t henew codehas prescri bed l i mi t ati onsto t hesame m e.I ti snow expressl yrequi redasacondi t i on f or such exami mi nat i on t hatt he one r equest i ng i tmu mustnot
50
havebeen gui l t y ofusi ng i mproperl y any i nf orm ma at i on se cur ed t hrough a pri or exami mi nat i on and t hat the per son aski ng f orsuch exam mi i nat i on mustbe act i ng i n good f ai t h and f ora l egi t i mat epurposei n maki ng hi s de mand -
Admi t t edl y ,hesoughtt obeas t oc khol de ri nor dert opr y i nt ot ransact i onsente r ed i ntoby t her espondentbank ev en bef or e he bec am me e a st oc khol der .H Hi i s obvi ous purposewast oarm hi msel fwi t h mat er i al shecan use agai nstt here spondentbank f oract sdoneby t hel att er whent hepe t i t i one rwasat ot als t r ange rt ot hes ame .
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Bankw wa ascreat edbyaspeci all aw,i thasi t sownchart er andpri mari l ygoverned bythel aw cr eati ngthem
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Thebanki sonl ys ubj e ctt ot hei nspec t i onoft heCe nt r al Bank and any i nf orm ma at i on pert ai ni ng t ot he bank i s confident i aland shal lnotbe r ev eal ed t o any per son ot her t han t he Pre si dent of the Phi l i ppi nes, the Secr et aryofFi nanceand t heBoard ofDi r ect ors ,nor s ha l la nyi nf o r ma ma t i o nr e l a t i v et ot hef undsi ni t sc us t o dy , i t s curr ent account s or deposi t s bel ongi ng t o pri vat e i ndi vi dual s,corporat i ons or ot her ent i t i es except by or der of a Court of Com mp pet ent Juri sdi ct i on, hence i ns pe c t i o ns o ug htt ob yt hepe t i t i o ne ri sv i o l a t i v eo ft he provi si onsofi t schart erand i seven subj ectt o penal sanct i ons
Ass umi ngy ouar eas t oc khol derofPNB,andthen i twas pr i v a t i z e d ,ma ma yy o ua l r e a dyha v et h er i g htt oi ns pe c t ?
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No ,u nl e s si t sc ha r t e rh asbe e na l t e r e do rr e p e al e di ti s s t i l ls ubj e c tt ot hes amel a w
3s t a g e si nt h el i f eofaco r po r at i o n
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Sect i on 79. Effec t i vi t y of mer ge r or consol i dat i on. - The ar t i cl es of mer ge r or of consol i dat i on, si gned and cer t i fied as her ei n above r equi re d, shal l be subm mi i t t ed t ot he Securi t i es and ExchangeCom mm mi ssi on i nquadrupl i cat ef ori t sapproval : Pr ovi ded, That i n t he ca se of mer ger or consol i dati on of banks or banki ng i nsti t uti ons, bui l di ng and l oan associ at i ons, t r ust compani es, i nsurance comp m pani es, publ i c uti l i ti es, educati onal i nst i tuti onsandotherspeci alcorporati onsgoverned by speci all aws, t he f avor abl er ecommendat i on of t he appropr i at e gover nme m ent agency shal l firs t be obtai ned. I ft heCom mm mi ssi on i ssat i sfied t hatt heme merg er or consol i dat i on oft he corporat i ons concerned i s not i nconsi st ent wi t h t he prov i si ons of t hi s Code and e x i s t i ngl a ws ,i ts ha l li s s uea c e r t i fic a t eofme r g e ro ro f consol i dat i on,atwhi cht i methemerg erorconsol i dat i on s ha l lbee ffe c t i v e . I f , upon i nvest i gati on, the Securi t i es and Exchange Com mm mi ssi on has re ason t o bel i ev e that t he proposed mer ger or consol i dat i on i s cont r ary t o or i nc o ns i s t e ntwi t ht hepr o v i s i o nso ft hi sCo deo re xi s t i ng l aws, i t shal l se t a heari ng t o gi ve t he corporati ons concerned t heopport uni t yt obeheard.Wri t t ennot i ceof t he date,t i me and pl ace ofheari ng shal lbe gi ven t o each const i t uent corporat i on at l east t wo ( 2) weeks be f or e sai d hear i ng.The Commi mmi s si on s hal lt her e af t er proceedasprovi ded i nt hi sCode.( n)
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Mer ge r A uni on effe ct e d by absor bi ng one or mo r ee xi s t i ng corporat i onsby anot herwh whi ch survi vesand conti nues t hecomb mbi nedbusi ness
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Forma mati onorbi rt h
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We W enow di s cus st heuni onoft hec or por at i on
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Thel as twoul dbei t sdeat hordi ss ol ut i on
I ti st he uni t i ng oft wo ormo morecorporat i ons by t he t r ansf erofpr opert yt o oneoft hem whi ch conti nuei n exi st ence,t heotherort heothersbei ng di ssol ved and mer gedthere i n. A
A t r ans f er s al lass e t s ,pr ope r t i e s,r i ght s,obl i gat i ons , l i abi l i t i e st oB
MERGE GER AND CONS NSOLI DATI ON
Merge randconsol i dat i on
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I nc or po r at epa r l a nc ei ti sc al l e ds pi no ff
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Al mo s ta y e ar ago San Mi gue ls epar at e di t s br e wer y busi ne ss
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San Mi guel Cor por at i on i s now a f ul lt i me hol di ng comp mpany;i tcanl at eronabsorbt hecom mp pany
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Bi ssuessharesofst ocksi nexchangeoft hetr ansf er Ai st hendi s sol v edandB SURVI VES
o
mostcomm mmont ypeofc orporat er ecogni t i on
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nott hesamei never ycase
Co ns o l i da t i o n The uni t i ng or amal gama t i on oft wo or mo r ee xi s t i ng corporati onst of orm anew corporati on
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I n merg ertherei sa survi vi ng corporati on,t heothers a r edi s s ol v e d,whi l ei nc o ns o l i da t i o n,a l lc ons t i t u entar e di ssol vedandanew oneorg ani zed
A -
Part i es t o a mer ge r ar e cal l ed cons t i t uent c o r po r a t i o n
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Cor por at i ons ar e gr ant ed by t he code t o mer ge or c o ns o l i da t e
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B
B
butmo s t comm mmo on i nt he wealfinanc i alor i nsol v e nt condi t i on, ai m i st o bri ng i t back t oi t s financi al c apabi l i t y C
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a l s oame t ho do fr e c a pi t a l i z a t i o n o
pur chaseand sal eofcor porat easse t si sanot her f o r mo fc o r po r a t er e o r g a ni z a t i o n
How doyouval uet heasset soft hem me er gi ngcorporat i on, doyouconsi dergoodw wi i l l ?
Fi r stse cure f avor abl yr eco mmendat i on ofgov er nm me ent agency
L i k ea l lo t h e rc o r po r a t ea c t s ,i te m ma a na t e sf r o mt h ebo ar d
1. The boar d ofdi r e ct or s ort r us t ees ofe ac h cons t i t ue nt cor porat i ons shal l appr ove a pl an of mer ge r or consol i dat i on set t i ng f ort h t he mat t er sr equi r ed i n sect i on76;
51
2. Appr oval o ft h epl a n byt b hest ockhol der sr epr esent i ng 2/3 oft he out st andi ng capi t alst ock or2/3 oft he memb mber i n nonst ock cor pora t i ons ofeach ofsuch corporati ons atseparat e corporatem me eet i ngs cal l ed f or t hepurpose ; 3. Pr i o rnoti ce ofs uchmeet i ng wi w , i t h acopyorsummar y oft hepl an ofm me ergerorconsol i dat i on s ha l lbegi v e n t o al lst ockhol dersorm me em mb bersatl eastt wo ( 2)weeks pri ortothe schedul ed meet i ng,ei t her personal l y or s t a t i ngt h epur p os et he r e o f ; regi st eredma mai l
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each const i t uent cor porat i ons t o be s i gned by t he pres i dent or vi cepres i dent and cert i fied by t he corpor ate secr etar y or assi st ant secr et ary set ti ng f ort hthem ma att ersr equi r edi nsect i on 78;
6. I ssuance of t he cer t i ficat e of mer ger or consol i dati on byt heSEC atwhi chti met hemer geror c o ns o l i da t i o ns ha l lb ee ffe c t i v e .I ft hepl a n,h o w we e v e r ,i s be l i e v ed t o be cont r ar yt ol aw,t he SEC s hal lse ta hear i ng t o gi v e t he co r por at i ons co nce r ned an oppor t uni t y t o be hear d upon pr ope r not i ce and t hereaf t er ,t heComm mmi ssi on shal lproceed asprovi ded i n
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Wi t houtf ur t herac t s,me ani ngi ti saut oma t i c
When do me r ge r and c ons ol i dat i on bec ome e ffec t i v e? What i ft he SEC f ai l st o ac t on i t wi t hout f aul t a t t r i but a bl et ot hec or p or a t i o ni nv o l v e d?
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I twi l lneverbecomeval i dunt i landunl esst heSEC gi ves i t sst am mp pofapproval
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I twi l lbeupt ot hec o ns t i t ue ntc o r po r at i o nt of o l l o wi tup
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I twi l lnevert ake effectunt i lt heSEC gi vesi t sapproval andi ssuestheart i cl esofme mer ger
t heCode.
Al t hough me r g erandc ons ol i dat i on i san e xpr esspower g r a nt e dt oc o r po r a t i o n,i ti ss ub j e c tt ol i mi t a t i o ns ,a s maybepr oscri bedbyl aw
Whatwoul d be t he effe ctofme r ge rorconsol i dat i on? <sec.80>
1. Ther e wi l lo nl y be a si ngl e cor por at i on. I n cas e of mer ger ,t hesurvi vi ng corporati on orthe consol i dat ed c o r po r a t i o ni nc a s eo fc o ns o l i d at i o n; 2. The t er mi nat i on of t he co r por at e ex i s t enc e of t he const i t uentcorporat i ons,exceptthatofthe survi vi ng c o r po r a t i o no rt hec o ns o l i da t e dc o r po r a t i o n; 3. The s urv i v i ng c or por at i on or t he c ons ol i dat e d corporati on wi l l possess al l the ri ght s, pri vi l eges, i mmuni t i esand pow we er sand shal lbesubj ectt oal lt he
o
Thesurvi vi ngorc onsol i dat edcorporat i on shal lpossess a l lt her i g ht s ,p r i v i l e g e s ,i mmuni t i e sand f r a nc hi s e so f t heconst i t uentcorporati ons,and al lpropert y and al l rec ei vabl esdue,i ncl udi ng subscri pti ons t o sharesand ot herchoses i n acti on,and everyother i nt eres tof ,or be l ongi ngt oorduet ot hec ons t i t uentcor por at i onss hal l bede eme dt r ansf e r r ed t oand v es t e di n suc hs ur v i v i ng or consol i dat ed corporat i on wi t hout f urt her act and deed;and,
5.
Theri ght sofcr edi t orsoranyl i enont hepropert yoft he const i t uentcorporat i ons shal lnotbe i mpai r ed by t he mer gerorconsol i dat i on.
I st her eal i qui dati on proces si n case of m me er ger or c o ns o l i da t i o n?
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No ne ,t he r ei sno t h i ngt odi s t r i but e
Coul dt herebel i qui dat orsand wi ndi ngupwi t hr espect t othecorporati oni nconsol i dat i onandmerger ?
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No,t herei snone
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No asset s propert i es or ri ghts t o col l ect , they are t r a ns f e r r e d
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Nodebtsandl i abi l i t i est opaybecauset heybecomet he l i abi l i t i e soft hes ur v i v i ngc or po r at i o ns
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No proper t i es t r ansf er r ed because t hey wi l l be t he pr o p er t i e soft hes ur v i v i ngc or p or a t i o ns
Hardestparti st he financi alact ,r egar di ng how many shar es woul d be i ss ued, pr obabi l i t y of c o l l e c t i o na ndt h el i k e I n mer gerandconsol i dat i on,t herei sduedi l i gence andaneconomi mi sti susual l yhi r ed
APPRAI SALRI GHT
Defineapprai sal
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Ri ght t o wi t hdr aw f r om t he cor por at i on and dema mand paym me entoft hef ai rval ueofhi ssharesaf t erdi ssenti ng f r om cer t ai n cor porat e act s i nvol vi ng f undam me ent al changesi ncorporatest ructure<sec.81>
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Ass oci at edBankv s.CA
Gr ant ed 3 ye ar st o wi ng up unl es st her ei sa t r us t e et owi ngupi t sa ffa i r s
dut i es and l i abi l i t i es ofa corporati on organi zed under t heCode; 4.
Se c t i o n8 0 pa r .4s t a t e s : Thesur v i v i ngort heconsol i dat e dcor por at i on shal lt her eupon and t her eaf t erpossess al lt he ri ght s, pri vi l eges,i mmuni t i es and f ranchi ses ofeach oft he const i t uent corporat i ons; and al l pr opert y, real or personal ,and al lr ecei vabl esdueon what eve raccount, i ncl udi ng subscri pt i ons t o shar esand ot herchosesi n a c t i o n,a nd a l la nd e v e r yot he ri nt e r e s to f ,o rbe l o ng i ng t o,or due t o each const i t uent corpor at i on,shal lbe deeme med t r ansf err ed t oand ves t ed i n such survi vi ngor consol i dat ed corpor at i on wi t houtf urt heractor deed; and
4. Execut i on oft heart i cl esofm me er gerorconsol i dat i on by
5. Submi mi ss i on oft heart i cl esofmer gerorconsol i dati on i nquadrupl i catet otheSEC subj ectt otherequi rem me ent ofsect i on 79 t hati fi ti nvol ve corporati ons under t he di r ectsupervi si on ofanyothergover nmentagencyor gover ned byspeci all awsthef avor abl erecom mm mendat i on of t he gov er nm me ent agency conce r ned shal l fir st be sec ur edand;
Al t hough t hesubj ec tpr omi ssor y not ename sCBTC as t hepayee,t heref er ence t o CBTC i nt he not eshal lbe const rued, under the ve ry prov i si on of t he mer ger a gr e e me me nt ,a sar e f e r e n cet op e t i t i o ne rb ank ,“ a si fs uc h r e f e r e nc e( wa sa )di r e c tr e f e r e nc et ot he l a t t e rf o ra l l i nt entsandpurposes
Whatpr ope r t y?Whenma yt hi sr i ghtbee xer c i s es? Sect i on 81provi des: I nst ances ofapprai salri ght .Sect i on 81. Anys t oc khol derofacor por at i on shal lhav et her i ghtt o di sse ntand dema mand payme mentoft he f ai rval ueofhi s s ha r e si nt hef o l l o wi ngi ns t a nc e s :
52
1. I n c as e any ame me ndm me ent t o t he ar t i c l e s of i ncorporati on has t he effectofchangi ng orrest ri ct i ng t he ri ght sofany st ockhol derorcl ass ofshare s,orof aut hori zi ngpref erencesi nanyres pectsuperi ortothose ofoutst andi ngsharesofany cl ass,orofext endi ngor s ho r t e n i ngt h et e r mo fc o r po r a t ee x i s t e nc e ; 2.I nc a s eo fs a l e ,l e a s e,e x c ha ng e ,t r a ns f e r ,mo r t g a ge , pl e dg eo ro t h e rdi s po s i t i o no fa l lo rs ub s t a nt i a l l ya l lo f t he corporat epr opert y and asset saspro vi ded i nt he Code;and
A obj e ct sand makesa wr i t t en dema nd f orpayme ntof f ai rval ueofshares .Can hema makeadema mandofpayme ment ofshare s?
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3.I nc a s eo fme me r g e ro rc o ns o l i da t i o n.( n)
Tr ueorFal se ,nos t oc khol de ri nas t oc kcor por at i oncan eve rdema mandi ft hepri nci paloffi ffic cei same mended,changi ng i tf r om QC t oM Ma ani l a Fal se,ast ockhol deri n acl osecorporati on mayf orany reasoncomp mpelt hecl osecorporat i on t hathebepai dthe f a i rv al ueo fh i ss ha r e s Can heexerci sehi sapprai salr i ght si nt hefirs tpl ace? Heha s n’ te v e npa i dhi ss ubs c r i p t i o ni nf ul l .
Maya st ockhol derwh who hasn’ tpai d hi ssubscri pt i on i n f ul le x e r c i s ehi sappr a i s alr i g ht s ?
X Co.i nc -
Pri nci paloffi ffic ce i si n Quez on ci t y ,i twas changed t o Paranaque
Sect i on 72. Ri ght s of unpai d shar es. Hol dersofsubscr i bed shar esnotf ul l y pai d whi ch are not del i nquent s hal l have al lt he r i ght s of a st ockhol der .( n)
A obj e ct sandma kesawr i t t e nde mand.Ma yhee xer ci s e hi sr i g hto fa ppr a i s al ? -
I ti sno ta v a i l a bl ei na l la me me ndme nt so ft hec o r po r a t i o n I tmu mustbe changi ng orres t ri ct i ng t he ri ght s ofany st ockhol der
Whati ft hepr i nci paloffic ei sc hang edf r om QC t oTAWI TAWI ,wi l li tc hangeoraffe ctt her i ght sofA?
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Tos omei tma yc hangeorr es t r i c tt her i ght st oot he r si t maynot
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Sect i on 82. How r i ght i s exer ci sed. - The apprai salri ghtm ma aybeexer ci sedbyanyst ockhol derwho shal lhavevot ed agai nstt heproposed corporateact i on, byma ki ngawr i t t en dema nd on t hec or por at i on wi t hi n t hi rt y( 30)days af t ert he dateon whi ch t he vot e was t aken f or payme ment of the f ai r val ue of hi s share s: Provi ded,Thatf ai l ur et oma makethedem ma and wi t hi n such pe r i o ds ha l lb ede e me me dawa i v e ro ft hea ppr a i s a lr i g ht .I f t he pr opose d cor por at e act i on i s i mpl em me ent ed or affec t e d, t he cor por at i on shal l pay t o such st ockhol der , upon surr ender of t he cert i ficat e or t hef a i r certi ficatesofs tock representi nghi sshares, v al uet he r e ofasoft hedaypr i ort ot hedat eon whi c h t he vo t e was t aken, excl udi ng any appr eci at i on or de pr e c i a t i o ni na nt i c i pa t i o no fs uc hc o r po r a t ea c t i o n.
How i stheri ghte xerci sed? Ac cor di ngt os ec t i on82oft hecode : How r i ght i s exer ci sed. - The Sect i on 82. apprai salri ghtmaybeexer ci sedbyanyst ockhol derwho shal lhavevot ed agai nstt heproposed corporateact i on, byma ki ngawr i t t e n de mand on t hec or por at i on wi t hi n t hi rt y( 30)days af t ert hedat e on whi ch t hevot e was t aken f or payme ment of the f ai r val ue of hi s share s: Provi ded,Thatf ai l ur et om ma akethedem ma and wi t hi n such pe r i o ds ha l lb ede e me me dawa i v e ro ft hea pp r ai s a lr i g ht .I f t he pr opose d cor por at e act i on i s i mpl em me ent ed or affect ed,t hecorporat i on shal lpaytosuch st ockhol der, upon surr enderoft hecert i ficat eorcert i ficat esofst ock r e p r e s e nt i nghi ss ha r e s ,t hef a i rv a l uet h er e o fa so ft he day pri or t ot he dat e on whi ch t he vo t e was t aken, ex cl udi ng any appre ci at i on or depr ec i at i on i n
I fwi t hi n a peri od ofsi xt y( 60)daysf rom t he dat e t he co r por at e ac t i on was appr ov ed by t he st ockhol ders , the wi t hdr awi ng st ockhol der and t he corporati on cannotagre eon t hef ai rval ueoft heshares, i t shal l be det er mi ned and appr ai sed by t hree ( 3) di si nte r es t ed per sons,one ofwhom shal lbe named by t he st ockhol der ,anotherby t he corpor at i on,and t he t hi r d by t he t wo t hus chose n. The findi ngs of t he maj ori t yoft heapprai sersshal lbefinal ,andt hei raward shal lbe pai d by t hecorporati on wi t hi nt hi rt y( 30)days af t ers uchawa wardi sma made:Pro vi ded,Thatno payme ment shal lbemadet oany di ssent i ngst ockhol derunl esst he corporati on has unres t ri ct ed re t ai ned earni ngs i ni t s books t o cov e rs uc h payme nt :and Pr ovi ded,f ur t he r , Thatupon payme ntbyt hecor por at i on oft heagr ee d or awarded pri ce,t hest ockhol dershal lf ort hwi t ht ransf er hi ss ha r e st ot hec or p or a t i o n.( n)
a nt i c i pa t i o no fs u c hc o r po r a t ea c t i o n. I fwi t hi n a peri od ofsi xt y( 60)daysf rom t he dat e t he co r por at e ac t i on was appr ov ed by t he st ockhol ders , the wi t hdr awi ng st ockhol der and t he corporati on cannotagr eeon t hef ai rval ueoft heshares, i t shal l be det er mi ned and appr ai sed by t hree ( 3) di si nte r est ed per sons,one ofwhom shal lbe named by t he st ockhol der ,anotherby t he corporat i on,and t he t hi r d by t he t wo t hus chose n. The findi ngs of t he maj ori t yoft heapprai sersshal lbefinal ,andt hei raward shal lbepai dby t hecorporati on wi t hi nt hi rt y( 30)days af t ers uchawa war di sma made:Pro vi ded,Thatnopaym me ent shal lbemadet oany di ssent i ngst ockhol derunl esst he corporati on has unres t ri ct ed re t ai ned earni ngs i ni t s books t o cov e rs uc h payme nt :and Pr ovi ded,f ur t he r , Thatupon payme ntbyt hecor por at i on oft heagr ee d or awarded pri ce,t hest ockhol dershal lf ort hwi t ht ransf er hi ss ha r e st ot hec or p or a t i o n.( n)
Sect i on 86. No t at i o no nc e r t i fic at e s;r i g ht so f - Wi Wi t hi n t en ( 10) days af t er dema mandi ng t r ans f e r e e . paym me entf orhi sshares,adi ssenti ngstockhol dershal l subm mi i tt hecert i ficat esofst ock represent i nghi sshares t othecorporati on f ornot ati ont here on t hatsuchshares a r edi s s e nt i ngsha r e s .Hi sf a i l ur et odos os ha l l ,att he opti on oft he corporat i on,t ermi mi natehi sri ght sunder t hi s Ti t l e. I f shares repres ent ed by t he cert i ficat es be ar i ng s uc h not at i on ar e t r ansf er r ed, and t he cert i ficat es consequent l y cancel l ed,the ri ght s ofthe t ransf eroras a di ssent i ng st ockhol der under t hi s Ti t l e s ha l lc e as eandt het r a ns f e r e es ha l lha v eal lt h er i g ht so f a regul ar st ockhol der; and al l di vi dend di st ri but i ons whi c h woul dhav eacc r ue donsuc hs har e sshal lbepai d t ot h et r ans f e r e e.( n)
X Co. Pri nci palOffice-QC,i twaschangedt oM Ma ani l a
Ye s,hecan e xe r ci sehi sappr ai s alr i ght s ,byr e conci l i ng t h epr o v i s i o nso fs e c t i o n 72,s e c t i o n 82ands ec t i o n86
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Not at i on i s not ma mandator y, i ti s eve n di scr et i onary be cause t he code pr ov i des “ at t he opt i on of t he corporati on”becausei tneveri ssuedonef ort hatma matt er s i nc et hes ubs c r i p t i o nsar eno ty e tf ul l ypa i d
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Maythecorporat i on becomp mpel l edt opaythei nter estof A
Whati fa s t oc khol de re xer c i si nghi sappr ai salr i ght si s al so a di r ect or , wi l l he al so l ose hi s ri ghts as a s t o c kho l de r ?
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Thes har esr e mai nt os t andi nhi snameunt i lhei spai d, unl e s st he r ei sas t i pul a t i o ni nt h eby l a ws
When ma yt her i ghtt obepai dt hev al ueofhi ss har e s cease?Can hewi t hdraw hi sri ghtofapprai sal ?
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Ye s,hema ywi t hdr aw,butt he r emus tbec onse ntbyt he corporati onasprovi ded f orbysect i on83oft hecode:
300T,150T,150Tand0unr est ri ct edr et ai nedearni ngs
Nost ockhol derm ma aybeabl et ocom mp pelt hecorporat i ont o pay t heval ueofhi sshare si ft he corpor at i on has no unr e s t r i c t e dr e t a i ne de a r ni ng s
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Fal se,ast ockhol derofacl osecorporati on mayf orany r eason,provi dedonl ythatt hecorporat i onhassuffici ent as s et st oco v eri t sd ebt sa ndl i abi l i t i e s
o
o
Ge ne r a lr ul e :t he r es h oul dbeunr e s t r i c t e dr e t a i ne d earni ngs
Sect i on 84. When r i ghtt opayme mentc eases. No dema mand f or pay me nt under t hi s Ti t l e may be wi t hdr awn unl e sst he c or por at i on c ons ent st he r e t o.I f , howev er ,s uch dema mand f orpayme menti swi wi t hdr awn wi t h t he consent of t he cor porat i on, or i ft he propose d cor porat e act i on i s abandoned or re sci nded by t he cor porat i on or di sapprov ed by t he Securi t i es and Exc hang e Com mm mi ss i on wher e such appr ov al i s nec es sar y , or i f t he Sec uri t i es and Exc hange Com mm mi ssi on det er mi nes t hat such st ockhol der i s not e nt i t l e dt ot h ea ppr a i s a lr i g ht ,t he nt h er i g hto fs a i d st ockhol dert obepai dt hef ai rval ueofhi ssharesshal l cease,hi s st at usasa st ockhol dershal lt her eupon be r est ore d, and al ldi vi dend di st ri but i ons whi ch woul d haveaccruedonhi ssharesshal lbepai dtohi m.( n)
Ex c e pt i o n:s e c t i o n1 05“ c l o s ec or p or a t i o n”
Thepr oc edur eandr e qui r e me nt sf ort hev al i de xer c i s eof t h i sr i g ht sa r e :
1. Thest oc khol dermu musthav evot edagai nstt he pr opose d corporateacti on i n anyoft hei nst ancesal l owed by l aw f o rt hee xe r c i s eoft h er i g hto fa ppr a i s al ; 2. Thewr i t t e ndema mandf orpay me ntmustbem ma adeb yt he di s s e nt i ngs t o c kho l de rwi t h i nt h i r t y( 30)d ay saf t e rt he dat e on whi ch t he vot e was t aken t here on.Fai l ur et o make t he dema mand wi t hi n t he sai d per i od shal l be dee med a wai v er on t he par t of t he s t oc khol der c o nc e r ne dt oe x e r c i s ehi sa ppr a i s a lr i g ht ;
I nst anceswh when t heri ghtofadi ssent i ngstockhol derto bepai dt hef ai rv al ueofhi sshar e sceas es.
1. When he wi t hdr aws hi s de mand f orpaym me entand t he corporati onconsent st here t o; 3.
Surr enderoft he cer t i ficat e ofst ock by t he di sse nti ng st ockhol derf ornot ati on i nt hecorporatebooksandt he payme mentby t hecorporat i on oft hef ai rm ma arketval ueof t hesai dsharesasoft hedaypri ort othedateonw wh hi ch t he v ot e was t ake n. I ft he s t oc khol der and t he cor porat i on cannot agre e on t he f ai r mar ket val ue t here of ,t he same me shal lbe det er mi ned i n accor dance wi t ht hepr ovi s i onofpar agr aph2ofse ct i on82;
4.
Thef ai rval ueoft heshar esoft hedi ssent i ngst ockhol der must be pai d by t he co r por at i on onl y i fi t has “ unres t ri ct ed re t ai ned earni ngs”i ni t s books t o cover such payme ment.I ft he corpor at i on hasno unrest ri ct ed re t ai ned earni ngs,t hedi ssenti ngst ockhol derm ma aynot , t heref ore,be abl et o effect i vel y exerc i se hi s apprai sal r i g ht s ;
5. Upon pay ment o ft he shar es by t he co r por at i on,t he di ssent i ng st ockhol der shal lt ransf erhi s sharest ot he c o r po r a t i o n.
Whatwoul dbet heeffec ti ft hes t oc khol dere xe r ci seshi s apprai sal r i ght s? What happens t o hi s vo t i ng and di v i de ndr i g ht si fhee x er c i s e shi sappr a i s alr i g ht s ?
2. Whenthepr opose dact i oni sabandonedorr es ci ndedby t hecorporati on; 3. When t he pro pos ed act i on i s di sappr ov ed by t he SEC whe r esuc happr ov ali sne ce ssar y; 4. When t he SEC det er mi nes t hat he i s notent i t l ed t o e x e r c i s ehi sappr a i s alr i g ht ; 5. When he f ai l st osubm mi i tt hest ockcert i ficat ewi t hi nt en ( 10)days f r om dema mand t ot hecorporat i on f ornot at i on t hatsuchsharesaredi ssenti ngshares;and, 6. I ft he shar es ar e t r ansf er r ed and t he ce r t i ficat e subsequent l ycancel l ed.
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I twi l lbe suspended,wi t h al i mi t ati on of30 days,as provi ded f orbysect i on83 oft hecode:
How do yo u co mpar et he r i ght s of a s t oc khol der , dec l ar ed del i nquent co mpar ed t o a di ss ent i ng s t o c kho l de re x e r c i s i nghi sappr a i s a lr i g ht s
I tdepends Thec or por at i onbear st hecos ti f a. The pri ceoffer edbyt he cor por at i on i sl owert han t he f ai r val ue of t he shar es of t he di ssent i ng st ockhol derasdet ermi mi nedbyt heapprai ser s;
Effectofdema mandand t er mi nat i on Secti on83. o fr i ght . -From t he t i meofdem ma and f orpaym me ento ft he f ai r val ue ofa st ockhol der' s shares unt i lei t her t he abandonmentoft he cor porat e act i on i nvol ve d orthe pur chase of t he sai d share s by t he cor porat i on, al l
ri ghtsaccrui ngtosuch shares,i ncl udi ngvoti ngand di vi dend r i ghts,shal lbe suspended i n accordance wi t ht hepr ovi si onsoft hi sCode,exceptt her i ghtof such st ockhol der t or ecei ve paym me ent of t he f ai r Provi val ue t her eof : ded, That i f the di ss ent i ng st ockhol deri snotpai dtheval ueofhi sshareswi thi n 30 days af t er the awar d, hi s vot i ng and di vi dend ri ghtss hal li mmedi atel yberest ored.( n)
Whobe ar st hec os tofappr ai sal ?
b. Wher e an ac t i on i s fil e d by t he di ss ent i ng st ockhol der t or ecove r such f ai r val ue and t he re f usal of t he stockhol der t o rec ei ve payme ment i s f oundbythecourtt obej ust i fied. -
Di ssenti ng st ockhol derwi wi l lbe l i abl ef or t he costand expensesofapprai salwhen a. When t he pr i ce offer ed by t he c or por at i on i s appr oxi mat el y t he sa me as t he f ai r va l ue ascert ai nedbyt heapprai sers ; b. Wher e t he act i on fil ed by t he di s se nt i ng st ockhol derand hi sr ef usalt o acceptpayme menti s f oundbyt hecourtt obeunj ust i fied.
54
“ Vot i ng by mai l or ot her si mi l ar me means by mem mb ber sofnonst ock cor porat i ons maybe aut hori ze d by t he by l aws of nons t oc k c or por at i ons wi t h t he appr ovalof ,and unders uchcondi t i ons whi chma maybe pr e sc r i bed by , t he Sec uri t i e s and Exc hange Com mm mi ss i on.“
The di ss ent i ng s t oc khol der ma y al s os el l ,t r ansf er or assi gnhi sshares
Secti on 86. No t at i o no nc e r t i fic at e s;r i g ht sof - Wi Wi t hi n t en ( 10) days af t er dem ma andi ng t r ans f e r e e . payme mentf orhi sshares,adi ssent i ngst ockhol dershal l subm mi i tt hecert i ficat esofst ock represent i nghi sshares t othecorporati on f ornot ati on t her eon t hatsuch shares a r edi s s e nt i ngs ha r e s .Hi sf a i l ur et odos os ha l l ,a tt h e opti on oft he corporat i on,t erm mi i nat e hi s ri ght s under t hi s Ti t l e .I f shares repres ent ed by the cert i ficates
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bear i ng such not at i on ar e t r ansf er r ed, and t he certi ficatesconsequentl ycancel l ed,theri ghtsofthe t r ansf er or as a di ss enti ng st ockhol der under t hi s Ti t l eshal lceaseandt het r ansf er eeshal lhaveal lt he ri ghts of a r egul ar st ockhol der ; and al l di vi dend di s t r i buti ons whi ch woul d have accr ued on such sharesshal lbepaidtothetransf eree.( n)
NONSTOCK COR RP PORATI ONS
Whati sanons t oc kc or por at i on?
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A nons t oc kc or por at i on i s one whe r e no par tofi t s i ncome me i s di st ri but abl e as di vi dends t oi t s mem mb bers, t rustees ,orofficers,subj ectt ot he provi si ons oft hi s c o deo nd i s s o l ut i o n
What pr ovi si on of t he code wi l l gov er n nons t oc k cor porat i ons? Woul d t he pro vi si on gov er ni ng st ock corporati onsal soappl ytononst ockcorporati ons?
-
Ye s,2nd p ar .Ofs e c t i o n8 7 pr o v i de s :
-
Generalrul ei sNO
Mayi tbegrant edoral l owedbyt heby-l aws?
How i sthegoverni ng boardconst i t ut ed i n a nonst ock co r por at i on?How manyme memb mber s? I tma mayexceed15i n anonst ockcorpor at i on unl esst he AOIor by l aws pr ovi de ot her wi s e,as pr ovi de df or by sect i on92 oft hecode:
( 1/3)oft heboardoft rusteesshal lbehel dannual l yand t r us t e e ss oe l e c t e ds ha l lha v ea t e r mo ft hr e e( 3)y e a r s . Tr us t ee st her e af t er el ec t ed t o fil lv acanc i e s occ ur r i ng be f or et he e xpi r at i on ofa par t i cul ar t e r m shal lhol d offi ffic ceonl yf ort heunexpi redperi od. No person shal lbeel ect ed ast rust eeunl ess hei samem mb beroft hecorporat i on.
How i st he ri ght t o vo t e exe r ci sed i n a nonst ock corporati oncomp mparedt oast ockcorporati on May a me mbe r i n a nons t oc k c or por at i on v ot e cumul ati vel y?
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Vot i ng by ma i lor ot he rs i mi l ar me ans ma y al s o be aut hori ze d and al l owed by t he byl aws of nonst ock c o r po r a t i o ns .Ge ne r a l l y ,i ns t o c kc o r po r a t i o ns ,t hev o t e mustbecastata dul y const i t ut ed mee t i ng.The onl y excepti on, i n case of t he l att er ,i si nt he matt er of general ame mendment of t he art i cl es of i ncorporat i on whe r et he wr i t t en ass ent oft he s t oc khol de r ma y be suffic ffi ci ent .
Sect i on 92. El e c t i o na nd t e r mo ft r u s t e e s . Unl es s ot her wi se pr ov i ded i n t he ar t i cl es of i ncorporati on orthe by-l aws,t heboard oft ruste esof nonst ockcorporat i ons,whi chma m aybemo moret han fif t een ( 15) i n number as may be fixed i nt hei r art i cl es of i nc o r po r a t i o no rb y l a ws ,s ha l l ,a ss oo na sor g a ni z e d ,s o cl assi f ythem ms sel vesthattheter m ofoffi ffic ceofonet hi rd ( 1/3) of t hei r number shal l expi r e ev er y ye ar ; and subsequentel ect i ons oft ruste es comp mpri si ng onet hi rd
The pr ov i s i ons gov er ni ng s t oc kc or por at i on, when per t i nent ,s hal l be appl i cabl e t o nons t oc k cor porat i ons, exce pt as may be cov er ed by speci fic pr o v i s i o nso ft hi sTi t l e .( n)
How abouti nst ock?
Unl essotherwi wi seprovi ded i nt heart i cl esof i ncorpor at i on or the byl aws, offic fficer s of a nonst ock corporati onmaybedi re ct l yel ect edbythem me em mb bers.( n)
Qual i ficat i ons?
1. Hei same memb mberoft heass oc i at i on; -
Ye s 2. Maj ori t yt here ofmu mustbe r esi dent s oft he Phi l i ppi nes; and,
Maytheri ghtt ocumul ati vevot i ngbedeni edi n ast ock c o r po r a t i o n?
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No,Doct ri neofLi mi t edCapaci t y
3. Ot herqual i ficat i onsas maybepr ovi ded f ori nt he byl aws.
Maym me em mb bersi nanonst ockcorporat i onvot ebyproxy?
Gover ni ngboardi nanonst ock
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BoardofTrust ees,howeversect i on138provi desthat :
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Ye s,s ec t i on89pr ovi dest hat : “ Unl essot herwi se provi ded i nt heart i cl esof i ncor por at i on ort he byl aws,a mem mb berm ma ay vo t e by proxyi naccordancewi wi t ht heprovi si onsoft hi sCode.( n) “
Desi Sect i on 138. gnat i on of gover ni ng boards. -The provi si ons ofspeci fic provi si ons oft hi s Code t ot he cont r ary not wi t hst andi ng, nonst ock or speci alcorporat i ons may,t hr ough t hei rart i cl es of i ncor porat i on or t hei r byl aws, desi gnate t hei r governi ngboar dsbyanyname meot hert hanasboardof t r us t e es .( n)
May t heri ghttovot e by proxybeval i dl y deni ed i na s t o c kc or p or a t i o n?
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No ,i ti sama ma t t e ro fr i g hti nas t o c kc o r po r at i o n
Di s q ua l i fi ca t i o ns
Maym me em mb berofanonst ock corpor at i on castt hei rv ot e
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Sect i on 27 al soappl i est oanonst ockcorporati on,same me
byt e xt ? -
Ye s,subj ec tt ot heappr ov alandt er msandcondi t i onsof t heSEC <se c.89>
hol dst ruet ot hem ma annerofr em mo oval<sec.29ad30>
Sect i on 27. Di s q ua l i fic a t i o n o f di r e c t o r s , t r ust ees or offic fficer s. - No per so n co nvi ct ed by final j udgme ntofan offe nsepuni s habl ebyi mpr i sonme ntf or
55
a pe r i o de x c e e di ng s i x( 6)y e a r s ,o ra v i o l a t i o no ft hi s Codecom mm mi t t edwi wi t hi n five( 5)yearspri ort othedateof hi sel e c t i o no rap po i nt me nt ,s ha l lq ua l i f yasa di r e c t o r , t rusteeoroffic fficerofanycorporat i on.( n)
t he st ockhol der s, i nst ead of by t he boar d of di rectors.
Secti on 29. V ac a nc i e si nt h eo ffic ffic eo fdi r e c t o r o rt r u s t e e . - Any vac ancy occ ur r i ng i nt he boar d of di r ect ors or t r ust ees ot her t han by r em mo oval by t he st ockhol dersorm me em mb bersorbyexpi rat i on oft er m,may be fil l ed by t he v ot e of at l eas t a ma j or i t y of t he r e ma ma i ni ng di r e c t o r so rt r us t e e s ,i fs t i l lc o ns t i t ut i ng a quorum m; ;ot herwi se,sai dvacanci esm mu ustbefil l edbythe st ockhol dersi n a regul arorspeci alm me eet i ng cal l ed f or t hatpurpose.A di rec t or ortr ust ee so el ect ed t o fil la v ac anc yshal lbee l e ct ed onl yort heune xpi r e dt er m of hi spredecessori noffi ffic ce. Anydi r ect or shi p ort r us t e eshi pt obefil l e dby r eason ofan i ncre ase i nt he numberofdi r ect or s or t r us t e e ss ha l lbefil l e do nl ybyane l e c t i o na tar e g ul a ro r ata speci alme mee t i ng ofs t ockhol der s orm me em mb ber s dul y cal l ed f or t he purpos e, or i n t he sa me mee t i ng a ut ho r i z i ng t h ei nc r e a s eo fd i r e c t o r so rt r us t e e si fs o s t a t e di nt h eno t i c eoft h em me e e t i ng .( n)
Nont ransf er abi l i t y of Sect i on 90. mem mb ber shi p.-Mem mb bers hi pi n a nonst ockcorpor at i on and al lri ght sari si ngtheref rom arepersonalandnont r a ns f e r a bl e ,unl e s st h ea r t i c l e so fi nc o r po r a t i o no rt he by l awsot he r wi sepr ov i de.( n)
B goest othecorporat i on and comp mpel sthecorporat i on t orecordthetr ansf eri nhi snam me e -
Di r ect l ybythegener almem mb bersunl esst heby-l awsor a r t i c l e sp r o v i deo t h e r w wi i s e .< s e c . 9 2>
I nstockcorporati onswhoel ectoffic fficers ?
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Di r e c t o r s
6.I nc as eofs t o c kc o r po r at i o ns ,t oi s s ueo rs e l ls t o c kst o subscri bersandt osel lst ockstosubscri bersandt osel l t r e a s ur ys t o c ksi na c c or d anc ewi t ht h epr o v i s i o nso ft h i s Code;andt oadmi tm me em mb berst othecorporat i oni fi tbea nonst ockcorporati on;
Whoe l e ct st heot he roffic e r s ?
“ Unl essot herwi se provi ded i nt heart i cl esof i ncorporat i on or the byl aws, offi ffic cer s of a nonst ock corporat i on maybedi r ect l yel ect edbyt heme mem mb bers.( n) “
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The y c an pr ov i de t he ma nne ri n whi c h t o admi t dependi ngont hei rownrul es
Thepoweroraut hor i t yt ot er mi nat eme mbe r si n nonst ock corpor at i ons i s sai dt o be i nher ent butst ri ct comp mpl i ancewi t ht hema mannerandproc edur el ai ddowni n t heby-l awsmu mustbeobserve d,ot herwi sei tmayrender t h ee x pul s i o ni ne ffe c t i v ea ndi nv a l i d.
Sect i on 91. Te r mi nat i on of me mem mb ber shi p. Mem mb bers hi pshal lbet er mi nate di nt hema mannerand f or
The pr ovi si on t hat s t oc k cor por at i ons cannot v al i dl y
t hecausesprovi ded i nt heart i cl es ofi ncorporati on or t heby-l aws.Ter mi nat i on ofmem mb bershi p shal lhavet he effectofext i ngui shi ng al lri ghtsofa mem mb beri nt he c o r po r a t i o no ri ni t spr o p e r t y ,unl e s so t he r wi s epr o v i de d i nt h ea r t i c l e sofi nc or p or a t i o no rt h eb yl a w ws s .( n)
prov i de t hatme mem mb ber scannotbe vot ed by st ockhol ders i s onl y a generalr ul e because t her ei s an exce pti on s e c t i o n 97oft h ec odes t a t e st h at :
The ar t i cl es of i ncor por at i on of a cl ose vi de t hat the busi ness of t he corporation may pro corporati on shal lbema m anaged bythest ockhol dersof the corporati on r atherthan by aboard ofdi r ector s. Sol o nga st hi sp r o v i s i o nc o nt i nue si ne ffe c t : 1.No meet i ng ofs t ockhol dersneed be cal l ed t o el ect di r e c t o r s ; 2. Unl ess t he cont ext cl earl y requi res otherwi se, t he st ockhol dersoft hecorporat i on shal lbe deem me ed t o be di rec t orsf orthe purpose ofappl yi ng t heprovi si ons of t hi sCode;and 3.Thest ockhol dersoft hecorporat i on shal lbe subj ect t oal ll i abi l i t i e sofdi r e ct o r s.
Mem mb bers hi pi n nonst ockcor porat i onsmaybeacqui r ed byc ompl yi ngwi t ht hepr ov i si onsofi t sr ul espr e scr i be d i nt hebyl aws.Thi si si n consonancewi wi t ht heexpre ss powergr ant edbyl aw unders ect i on 36,paragr aph 6 of t he code,aut hori zi ng t hem t oadm mi i tme mem mb ber sther eof andt hataut hori t ycarri eswi wi t hi tt hepowert oprescri be rul eson mem mb ber shi p.I thas t husbeen st at ed t hati n t he absence ofchart eror st atutoryrest ri ct i ons,nonst ockcorporat i onsm ma aydet er mi newhoshal lbeadm mi i t t ed t om me em mb ber shi pandhow t heyshal lbeadmi mi t t ed. Cor por at epow we er sand capaci t y. Secti on36. Ever ycorporat i oni ncorpor at edundert hi sCodehasthe powe werandcapaci t y:
di r ect ors,excee dt en ( 10%)per centoft he neti ncom me e be f or e i nc ome t ax of t he c or por at i on dur i ng t he pr e c e d i ngy e a r .( n)
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How i s a mem mb ber shi p r eq ui r em me ent i n a nons t oc k c o r po r a t i o n Ahol dsame mber s hi pc er t i ficat e
Co mp mp e ns at i o no fd i r e c t o r s . -I n Sect i on 30. t heabsenceofany provi si on i nt heby-l awsfixi ngthei r comp mpensat i on, t he di r ect or s shal l not r ece i ve any comp mpensati on,assuch di re ct ors,exceptf orreasonabl e pe r di e ms : Pr ov i de d, howev er , That any suc h comp mpensat i on ot hert han perdi em ms sm ma aybegrant edt o di r e c t o r sbyt h ev ot eo ft hes t o c kho l de r sr e p r e s e nt i ngat l easta maj ori t y oft he out st andi ng capi t alst ock ata r e g ul a ro rs pe c i a ls t o c kho l de r s 'me e t i ng .I nnoc as es ha l l t he t ot al year l y comp mpensat i on of di r ect ors , as such
Nat ureofmem mb bershi pi snont ransf er rabl eandper sonal i nna t ur eunl e s st h ea r t i c l e sofi nc o r po r a t i o no rb y l a ws provi deot herwi se
Power i si nher ent and may be exe r ci sed i n cer t ai n s i t u at i o ns : 1. When an offens ei sco mmi t t edwhi c h,al t hough i t hasnoi mmedi at er el at i on t oa mem mb ber ’ sdut yas such,i ti ssoi nf am mo ousas t orenderhi m unfitf or soci et y of honest me men, wh whi ch i si ndi ct abl e at c om mm monl aw; 2. When t he offens ei s a vi ol at i on ofhi s dut y as mem mb beroft hecor porat i on;and, 3. When t heoffens ei sofami mi xe d nat ure ,bei ngbot h agai nsthi sdut yasa mem mb beroft he cor porat i on, andal soi ndi ct abl eatcomm mmonl aw.
The ar t i cl es ofi ncor por at i on may l i kewi se pr o v i det ha ta l loffi cer soremp mpl oyeesort hats peci fied offi ffic cer sorem mp pl oyee s s ha l lbee l e c t e do rappoi nt edby Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
I ft he conductoft he mem mb bercome meswi t hi n any oft hi s cases,i ti sagroundf orval i dexpul si on al t hough i tm ma ay notbeexpr essl ym ma adesobythebyl aws
re qui ri ngre t urn,t ransf erorconveyancebyre ason o ft hedi s s o l ut i o n,s ha l lb et r a ns f e r r e do rc onv e y e d t o one or mor e cor por at i ons, soc i et i es or or gani zat i ons engaged i n act i vi t i es i n t he Phi l i ppi nes substant i al l y si mi l ar t ot hose ofthe di ssol vi ng cor porat i on accor di ng t o a pl an of di st ri but i onadoptedpursuantt othi sChapt er;
Chi neseYM MC CAvs.Chi ng -
Ri ghtoft he cor por at i on t o choos e who t he memb mber s are,cannotbei nqui redori nt ervenedbythecourt
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The appe al e d de ci si on t hus c ont r av ened t he e s t abl i s h pri nci pl ethatt hecourt scannots t ri p a mem mb berofa nonst ock cor por at i on of hi s mem mb ber shi p t her ei n wi t houtc aus e.
4. Ass et s ot her t han t hose ment i oned i n t he p r e c e di ngpa r a gr a phs ,i fa ny ,s ha l lb e di s t r i but e d i na c c or d anc ewi wi t ht h epr o v i s i o nso ft hea r t i c l e so f i nc o r po r a t i o no rt heb y l a ws ,t ot h ee xt e ntt ha tt he a r t i c l e sofi nc o r po r a t i o no rt h eb y l a ws ,de t e r mi mi ne t hedi st ri but i veri ght sofmem mb bers,oranycl assor
Li onsCl ubI nt ernat i onalvs.CA
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cl asses of me mem mb bers, or provi de f or di st ri but i on; and
Co ur t swi wi l lno tg e ne r a l l yi nt e r f e r eo n ma t t e r si nv o l v i ng t he i nt ernalaffai r s ofan uni ncorporat ed associ at i on such asel ect i on cont estunl esst heact scom mp pl ai ned of a r ea r bi t r a r y ,o ppr e s s i v e ,f r a udul e nt ,v i o l a t i v eo fc i v i l r i g ht sandt hel i k e Ge ne r a lr ul ei st ha tt hec our t swi wi l lno ti nt e r f e r ewi t ht he i nt ernalaffai rsofan uni ncorporatedassoci ati on soas t oset t l edi sput esbet weent heme mem mb bers,orquest i onsof po l i c y ,di s c i pl i ne ,o ri nt e r na lg o v e r nme nt ,s ol o ngast he gov er nm me ent of the soci et y i s f ai r l y and hones t l y admi ni st eredi n conf ormi mi t ywi wi t hi t sby-l awsandt hel aw o ft hel a nd,a ndnopr o p e r t yo rc i v i lr i g ht sar ei nv o l v e d.
5.I n anyothercase,asset sma maybedi st ri but ed t o such per sons, soc i et i es , or gani zat i ons or corporati ons,whet herornotor gani zed f orprofit , as may be spec i fied i n a pl an of di st r i but i on adoptedpursuantt othi sChapt er .( n)
Nonst ock corpor at i ons wi t h 4Bi l l i on f unds,ma may i tbe di st ri but edf orandam mo ongi t sm me em mb bers?
-Sect i on94number3provi des: -
Ex c e pt i o nsa r et hef o l l o wi ng : 3.Assetsr ecei vedandhel dbyt hecorporat i on subj ect to l i mi t ati ons permi mi t t i ng t hei r use onl yf or c ha r i t a b l e ,r e l i g i o us ,be ne v o l e nt ,e duc a t i o na lors i mi l a r purpose s, but not hel d upon a condi t i on r equi ri ng r et ur n, t r ansf er or conv ey ance by r eas on of the di ssol ut i on,shal lbet ransf err ed orconveyed t o oneor
a. Wher e l aw and j ust i ce so r e qui r e, and t he proc eedi ngs of t he assoc i at i on ar e subj ect to j udi c i alr e v i e w wher et her ei sf r aud,oppr es si on,or bad f ai t h,or whe r et he act i on compl ai ned ofi s c apr i c i o us ,a r bi t r a r y ,o runj us t l ydi s c r i mi na t o r y b. To gr antr e l i efi n cas epr ope r t y orc i v i lr i ght sar e i nvaded,al t hough i thas al sobeen hel dt hatt he i nv o l v e me me nto fpr o p er t yr i g ht sd oe sno tne c e s s ar i l y aut hori ze j udi ci ali nt erventi on,i nt he absence of a r bi t r a r i n e ss ,f r a udo rc o l l us i o n. c.
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Arevi ol ati veoft hel awsoft hesoci et y,ort hel aw of t hel and,asbydepri vi ngthepersonofdueprocess ofl aw
d.
mo r ec o r po r a t i o ns ,s o c i e t i e so ro r g a ni z a t i o nse ng a ge di n a c t i v i t i e si n t he P hi l i p pi ne ss ub s t a nt i a l l ys i mi l a rt o t h o seo ft hed i s s o l v i ngc o r po r a t i o na c co r d i ngt oapl a no f di st ri but i on adoptedpursuantt othi sChapt er ;
Pl ano fdi s t r i but i o no fa ss e t s . -A Secti on 95. pl an provi di ng f or t he di st ri but i on of asse t s, not i nconsi st entwi t ht he provi si ons oft hi s Ti t l e,ma may be adopte d by a nonst ock cor porat i on i nt he proc essof di s s o l ut i o ni nt hef o l l o wi ngm ma a nne r :
Ther ei sl ack ofj uri sdi ct i on on t he part oft he t ri bunal c onduct i ng t he procee di ngs, wher et he or gani zat i on exc eeds i t s power s, or where t he p r o c ee di ng sar eo t he r wi s ei l l e g al
Theboar d oft r us t e ess hal l ,byma j or i t yv ot e, adoptaresol ut i on rec om mm mendi ngapl an ofdi st ri but i on and di r ect i ng t he submi ssi on t here oft o a vot e ata r egul ar orspeci alme mee t i ng ofme mem mb ber s havi ng vot i ng r i g ht s .Wr i t t e n no t i c es e t t i ngf o r t ht hepr o p os e d pl a no f di st ri but i on orasummaryt her eofand t hedat e,t i me and pl ace of s uch mee t i ng shal l be gi ve n t o eac h
Corporat i ons,st ock andnonst ock,maybedi ssol vedi n accor danceand purs uantt othe provi si onsofSect i ons 118 t o121 oft he Corpor at i on Codeand t he pert i nent prov i si ons ofP . D.902A,asam me ended.I fs uch be t he
mem mb berent i t l ed t o vot e,wi t hi nt he t i me and i nt he mannerprovi ded i nt hi sCodef ort hegi vi ngofnoti ceof meet i ngst om me em mb bers.Suchpl an ofdi st ri but i onshal lbe adopteduponapprovalofatl eastt wo-t hi rds( 2/3)oft he mem mb bershavi ngvot i ngri ght spr esentorr epres entedby proxyatsuch meet i ng.( n)
c a s e,t h eas s e t so ft hec or p or a t i o na r et obedi s t r i but e d i naccordancewi t hl aw andest abl i shedj uri sprudence.
I fa nonst ock corporat i on i s di ssol ved how wi l li t s pr o p e r t i e sb ed i s t r i b ut e d?
Sect i on 94. Rul e so fdi s t r i but i o n. -I n case di ss ol uti on of a nonst oc k cor por at i on i n accor dance wi t ht he provi si ons oft hi s Code,i t s a s s e t ss ha l lb ea ppl i e da ndd i s t r i b ut e da sf o l l o ws : 1.Al ll i a bi l i t i e sa nd o bl i g at i o nso ft h ec or po r at i o n shal lbepai d,sat i sfied anddi scharged,oradequate p r o v i s i o ns ha l lbema ma det he r e f o r e ; 2.Asset shel dbythecorporat i on upon acondi t i on r equi ri ng re t urn, tr ansf er or conveyance, and whi c h c ondi t i on o c cur s by r eason o f t he di ssol ut i on, shal l be re t urned, t r ansf err ed or conveyedi naccor dancewi t hsuchr equi r em me ents; 3. Asse t sr ecei ved and hel d by t he corporat i on s ubj e c tt ol i mi t a t i o nspe r m mi i t t i ngt h e i rus eonl yf o r c ha r i t a bl e ,r e l i g i o us , be ne v o l e nt ,e duc a t i o na lo r si mi l arpurposes,butnothel d upon a condi t i on Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
I ft herei snodi st ri but i veagreeme mentt hent heyma maydoso t hroughapl an ofdi st ri but i onundersect i on95
CLOSE CORP RPORATI ONS
De fini t i o nandappl i c abi l i t yofTi t l e .-Ac l o s e Secti on 96. corporat i on,wi t hi nt heme meani ng oft hi sCo Code,i sone whosear t i cl esofi ncor por at i on pr ovi det hat :( 1)Al lt he corporati on' si ssued stock ofal lcl asses,exclusi ve of tr easury shares,shal lbehel d ofr ecord by notm mo ore t han a speci fied number ofper sons,not exceedi ng twenty ( 20) ;( 2)al lt he i ssued st ock ofal lcl asses shal lbesubj ectt ooneormo morespeci fied r est ri cti ons on t r ansf er per mi t t ed by t hi s Ti t l e; and ( 3) The corporat i on shal lnotl i sti n any st ock exchangeor make any publ i coffer i ngofany ofi t sst ock ofany class. Not wi t hst andi ngt hef oregoi ng,acorporat i onshal l notbe deeme med a cl osecor porat i on when atl eastt wot h i r d s( 2/ 3)o fi t sv ot i ngs t o c ko rv o t i ngr i g ht si sowne d
orcont rol l edbyanot hercorporati on whi chi snotacl ose corporati onwi t hi nt heme meani ngoft hi sCode.
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Ordi naryst ock-nosuchri ght
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Cl o s ec or p or a t i o ny e st h e r ei ss uc har i g ht
Se c t i o n9 7i sape r mi mi s s i v epr o v i s i o n
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Bet weenandamongthems msel ves,t heyf eelandactal i ke
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Notmoret han20st ockhol ders
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Speci fied persons,i fyouarenotspeci fied,youcannotbe ast ockhol der
Sect i on 97. A r t i c l es ofi nc or por at i on. - The art i cl es ofi ncorporat i on ofa cl ose corpor at i on may pr o v i de :
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Al lt he i ss ue d s t oc ks of al l cl ass es i ss ubj e ct t o r e s t r i c t i ons
1. For a cl assi ficat i on of share s or ri ght s and t he qual i ficat i ons f or owni ng or hol di ng t he same me and
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Shal lnotbe l i st ed i nt hestock exchangenotpubl i cl y offer ed
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3. For a gr eat er quorum or vot i ng r equi r em me ent si n mee t i ngs of st ockhol der s or di r ect or s t han t hose provi dedi nt hi sCode.
Eve ni f100 % i sowned by one per son i twi l lnotbe consi dere d acl osecorporati on wi t houtt he3 qual i f yi ng pr o v i s i o ns
Af t e rc l as si ficat i onwhatt he n?
I d ent i t yofs t o c kho l d er s ,s pe c i fie dp er s o ns
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Af t e rcl ass i fic at i on,qual i ficat i on and t hen r es t r i ct i on as pr o v i d edf o runde rt he3q ua l i f y i ngc o ndi t i o nsi ns e c t i o n 96
Cumul a t i v ev o t i ngi s r e s t r i c t e di nc l o s ec or p or a t i o nsi f wi l lbeel ec t edsol e l ybyapar t i c ul arcl as s
I n ac l o s ec o r po r a t i o n,t h ear t i c l e so fi nc o r po r a t i o n ma y provi def oragr eat erquorum andvot i ngrequi r em me enti n meet i ngs ofboth st ockhol ders ordi re ct orstoi ncr ease t he ve t o powe werofmi mi nori t y st ockhol ders,unl i ke i na st ock corporat i on wher ei n onl ydi r ect orsme meet i ngsma m ay pr ov i de f or gr ea t er quor um r eq ui r eme ment and i n st ockhol der s mee t i ng whi ch may not be al t er ed or i ncr eased,as provi de f or i n sect i on 25,f ol l owi ng t he do c t r i neo fl i mi t e dc apa ci t y
Thear t i cl esofac l os ecor por at i on ma yl i ke wi sepr ovi de t hatt hebusi nessoft hecorporat i on shal lbe managed by t he s t oc khol de r s r at her t han by t he boar d of di r ec t or s . Howev er t he sa me must c ont ai n t he cont i nui ngprovi si onsrequi redi nparagraph 2ofs ect i on 97,t h ati s :
Ac t i v e ma nage me nte i t her as di r ec t or s orpar t ner si n mana ge ment Com mb bi nat i on oft hecorporat i on andpart ner shi pt ypeof busi ne ss
Mayanyt ypeofcorporat i on,beorg ani zedassuchcl ose c o r po r a t i o n?
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No,t he3qual i f yi ngcondi t i onsm mu ustbepre sent
2.Fora cl assi ficati on ofdi r ect orsi nt o one ormo more cl asse s,each ofwhom may be vot ed f or and el ect ed s o l e l ybyapa r t i c ul a rc l a s so fs t o c k;a nd
3qua l i f y i ngc o ndi t i o nsmu mus tb ec ont a i ne di nt h ear t i c l e s of i ncor por at i on, t o be consi der ed as a cl ose c o r po r a t i o n,i fno t ,i twi l lno tb ec ons i de r e da ss uc ha nd wi l lbegov er ne dbyt hege ner alpr ovi s i onsoft hecode
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r e s t r i c t i o ns o npt h e i r t r a no s f e r s a s m a y b e s t a t e d; t he r e i n, s u b j e c t t o t h e r o v i s i o n s f t h e f o l l o w wi i n g s e c t i o n
Whati f2/3oft heout s t andi ngcapi t als t oc ki sownedby anot hercorporati on whi ch i sal soa cl osecorporati on, wi l li tbeac l os ec or por at i on?
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No,i twi l lonl y be a cl osed corporati on i f2/3 oft he v ot i ngs t oc ksofacl osecor por at i on i sal soowned bya c l o s ec o r po r a t i o n.I tm mu us tb e“ v o t i ng ”s t o c ks
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Eveni fanot hercorporat i on ownsorcont rol s2/3oft he v ot i ngs t oc ksofac l os ecor por at i on,t hel at t e rma ys t i l l be c ons i der ed as suc h cl ose c or por at i on i f t he corporati on owni ngorcont rol l i ng t hesharesi sal so a c l o s eco r po r a t i o n.
1.
2. “ No t wi t hs t a nd i n gt hef o r e g o i ng ,ac or p or a t i o n shal lnotbedeeme med acl osecorporat i on when atl east t wo t hi r d s( 2 /3)o fi t sv o t i ng s t o c ko rv o t i ng r i g ht si s ownedorcontr ol l edbyanot hercorporat i on whi chi snot acl osecorporat i onwi t hi nt heme meani ngoft hi sCode. ”
What ki nd of c or por at i ons cannot be a cl ose c o r po r a t i o n?
Nome mee t i ng ofst ockhol der sneedbecal l edt oel ect d i r e c t o r s ;
Unl esst hecontextcl ear l yrequi r esot herwi se,t he st ockhol dersoft hecorporat i on shal lbedeeme medt o bedi r e ct or s ;and;
3. The s t oc khol der s of t he co r por at i on shal l be s ubj e ctt oal ll i abi l i t i e sofdi r e ct o r s.
L i a b i l i t yo fs t o c kho l de r sac t i ng a sd i r e c t o r si n ac l o s e cor por at i on ar e mor e ext ensi ve si nce t hey ar e per sonal l y l i abl e f or cor porat e t or t s unl ess t he c o r po r a t i o n ha sob t a i ne dar e a s o na bl ea de q ua t el i a bi l i t y i nsurance,unl i keaordi naryst ockcorporati on,wherei n di r e c t o r st he r e o fa r eonl yl i a bl ef o rc or p or a t et o r t sonl yi f t hey havebeen negl i gentor act ed f raudul entl yi nt he perf orma manceoft hei rf unct i ons.
Re s t r i c t i o ns
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I n ordi nary st ock corporati ons, t he rest ri ct i ons must appeari nt heart i cl esofi ncorporati on as wel lasthe
1. Mi ni ngoroi lco mpani es , 2. St oc ke xc hang e 3. Banksandi nsur anc ec omp mpani e s, 4.
Publ i cut i l i t i es
5.
Educat i onali nst i t uti ons
6.
Corpor at i onsve st edwi wi t hpubl i ci nte r es t
c e r t i fic at eofs t o c ks
Cl a ss i fic at i o no fdi r e c t o r s
Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
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I n a cl ose corporati on,t herest ri ct i onsmustappeari n t he art i cl es of i ncorpor at i on, the byl aws and t he cert i ficat eofst ocks.Ot herwi se,t hesame m eshal lnotbe bi ndi ngonanypur c hase rt her e ofi ngoodf ai t h
Whati ft hes t oc khol der s do notwantt oe xer c i se t hei r ri ghtoropti ont opurc hasem ma ayi tbesol dtoanyperson?
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Ye s,anyt hi r dper s on,s ec t i on98pr ov i des : Secti on98. Val i di t yo fr e st r i c t i o nso nt r a ns f e r o fs h ar e s . -Re s t r i c t i o nson t h er i g htt ot r a ns f e rs ha r e s mustappeari nt hearti cl esofi ncorporati on andi nt he by l awsaswel lasi nt hec er t i ficat eofs t oc k;ot her wi s e, t hesam me eshal lnotbebi ndi ngon anypurc hasert her eof i n good f ai t h. Sai d r est ri ct i ons shal l not be more oner ousthan grant i ngtheexi st i ngst ockhol dersorthe corporat i on t he opt i on t o pur chase t he shar esoft he t r ansf err i ng st ockhol der wi t h such r easonabl et erm ms s, condi t i ons or peri od st at ed t here i n. I f upon t he expi rat i on ofsai d peri od,the exis ti ngstockhol ders or the corpor ati on f ai l s to exerci se the opt i on t o purchase,t he tr ansf err i ng st ockhol der may sel lhi s sharest oanythir dperson.
o
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o r d i na r ys t o c kc o r po r a t i o nsar el i a bl eonl yi f act ed i n Bad f ai t h,f raud or negl i gence i n perf orm ma anceofdut y
pet i t i on t ot he Securi t i esand Exchange Com mm mi ssi on, comp mpelt he di ssol ut i on ofsuch cor porat i on whenev er a nyo fa c t so ft h edi r e c t o r s ,o ffi ffic c e r so rt ho s ei nc o nt r o lo f t h ec o r po r at i o ni si l l e g al ,o rf r a udul e nt ,o rdi s ho ne s t ,o r o pp r e s s i v eorunf a i r l y pr e j udi c i a lt ot hec or p or a t i o no r anyst ockhol der,orwhenevercorporateasset sarebei ng mi sappl i edorwast ed.
Agr ee me nt sma yal sobee nt er ed i n ac l osec or por at i on <sec. 100>
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The ycane v e nagr e et obepar t ne r si nma nag eme nt
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Pr e i nc o r po r a t i o n Manneri n whi ch t hebusi nessoft hecorporat i on shal l bema nage d
Boardres ol ut i on
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Ordi naryst ockcorporat i ons-s i tand actasabodyata dul yconst i t ut ed meet i ng,t heyma maydoso by vi rt ueof t he ECom mm mer ce Act t hrough t el econf er ence or vi deo conf er ence
Exce pt i on t ot he rul e:ot her offi ffic cer s may be di r ect l y appoi nt edandhi r edbythest ockhol ders
Cl ose cor porat i ons may val i dl y act eve n wi t hout a meet i ngprovi dedthecondi t i onsareobt ai ned
Whati ft her ear eal r e ady20s t oc khol de r sandt he ywant t oadd2mor e,mayi tcom mp pel ? I n or di nary st ock cor porat i ons, t hey may com mp pel by mandamus I n cl osecorpor at i ons,ma may notbe com mp pel l ed t o adm mi i t be causei tbr eac hest hequal i f yi ngc ondi t i ons
Sect i on 101. Whe n bo ar d mee t i ng i s
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Ye s,pr ov i ded al lt hes t oc khol de r sc ons ent e d ori ns t ead of consent i ng t hey deci de t o am me end t hei r art i cl es of i nc o r po r a t i o n
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1.Bef oreoraf t ersuch acti on i staken,wri t t en consent t h er e t oi ss i g ne dbyal lt h edi r e c t o r s ;o r
Wi l l hav et o ame nd t he ar t i c l e s of i ncor por at i on t o accomm mmodat eot herpur chaser sofshare
2.Al lt hest ockhol dershaveact ualori mpl i edknowl edge oft heact i on and make nopromp mptobj ect i on t her et oi n wr i t i ng;or
Wi l lc eas et o be a c l ose cor por at i on i fi tame nds and be come si nexc es sof20
o
unnecessary ori mpr oper l y hel d.- Unl ess the byl aws pr o v i d eo t h e r wi wi s e ,a nyac t i o nb yt h edi r e c t o r so fac l o s e corporat i on wi t hout a meet i ng shal l never t hel ess be de e me me dv a l i di f :
Si ncet heycannotbecom mp pel l ed,mayt heyadm mi i t ?
3.Thedi re ct orsareaccust om me edt otakei nf orma malacti on wi t ht he e xpr ess or i mpl i ed acqui es ce nce of al lt he s t o c kho l de r s ;o r
Unl ess al lt he st ockhol ders consent t hey “ may ”
4.Al lt hedi rec t orshaveexpressori mpl i edknowl edgeof t heact i on i nques t i onand noneoft hem makespr om mp pt o bj e c t i o nt h er e t oi nwr i t i ng .
Whati ft heot hers t oc khol der sobj ec tt or egi s t e r ?What wi l lbet her eme dyoft het r ans f er ee ? Hi sr em me edy i sr esci ssi on.The effectofre sci ssi on i s mut ua lr e s t i t ut i o n
How aboutt hest ockhol der,whati shi sr ecourse?
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Hema maycomp mpelt he cl osecor porat i on t opur chasehi s sharesatthei rf ai rval uef orany reason,provi ded t he corporat i on has suffici entasset si ni t sbooks t o cove r t h ede bt sa ndl i a bi l i t i e sex c l us i v eofc api t a l
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I n a cl ose cor por at i on, t her e i s a wi t hdr awi ng st ockhol der ,unl i ke i n an ordi nary st ockhol der wher e t herei snone,t heyma mayonl ydo soi nt heexer ci seof a ppr a i s alr i g ht s
Sect i on 105. Wi t hdr aw wa alofst ockhol der or di s s ol ut i o no fc o r p or at i o n. - I n addi t i on and wi t hout prej udi ce t o ot herri ght sand rem me edi esavai l abl et oa s t o c kho l de runde rt h i sTi t l e ,anyst ockhol derofacl ose corpor at i on may,f or any r eason, com mp pel t he sai d corpor at i on t o pur chase hi s shares at t hei rf ai r val ue, whi ch shal l not be l ess t han t hei r par or i ss ued val ue, when t he cor pora t i on has suffic ffi ci ent assetsi ni tsbooksto coverit sdebtsand l i abil i ti es Pro vi ded, That any excl usi ve of capi t al st ock: st ockhol der of a cl ose corporat i on may,by wri t t en Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
Pr e e m mp p t i v er i g ht si nac l o s ec o r po r a t i o ni sabs o l ut e P Sect i on 102. r e e mp mp t i v e r i g ht i n c l o s e c o r p or at i o ns . -Thepreem mp pti veri ghtofs t ockhol dersi n c l o s ec o r po r a t i o nss ha l le x t e n dt oal ls t o c kt obei s s ue d, i ncl udi ng r ei ssuance oft r easury shar es,whet herf or money ,propert yorpersonalse rvi ces,ori n payme mentof corporate debt s,unl ess t he art i cl es ofi ncorporati on pr o v i d eot he r wi s e .
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Whyi si tsai dt obeabsol ut e? Bec ause t her e i s no publ i c offer i ng i n a cl os e c o r po r a t i o n,o t h e r wi wi s ei twi l lno tb ec o ns i d er e dasc l o s e
I n a cl ose cor porat i on t he pre em mp pt i ve ri ghts i s br oade ne dt oi ncl udeal li ss ue swi t houte xc ept i onunl e ss de ni e do rl i mi t e dbyt h ear t i c l e so fi nc or po r at i o n
Sect i on 39 i sthegoverni ngprovi si on concerni ngri ght s oft hest ockhol deri n an ordi naryst ock corporati on and i tma maybedeni ed.I fi ti snotdeni ed a st ockhol dercan e x e r c i s e hi spr e e m mp p t i v er i g ht sf o ral li s s ue so fs ha r e s whe t her mo ne y , pr oper t y or pr e vi ous l y i nc ur r e d i ndebtedness.
Secti on 39. P o we we rt ode n yp r e e mp mp t i v er i g ht . Al ls t oc khol der sofa s t oc kc or por at i on s hal lenj oypr ee mp mp t i v er i g htt osubs c r i bet oal li s s ue sord i s po s i t i o no f shares ofany cl ass,i n proport i on t ot hei rrespecti ve share hol di ngs, unl ess such ri ght i s deni ed by t he art i cl es of i ncorpor at i on or an am me endm me ent t here t o: Provi ded,Thatsuch preemp mpti veri ghtshal lnotext end t osharest obei ssuedi ncom mp pl i ancewi t hl awsrequi ri ng s t oc k offer i ngs or mi mi ni mum st oc k owner shi p by t he publ i c;ort osharest obei ssued i n good f ai t h wi t ht he approval of t he st ockhol ders re pre sent i ng t wo-t hi rds ( 2/3)oft heout st andi ng capi t alst ock,i n exchange f or propert yneededf orcor porat epurposesori npaym me entof apr e v i o us l yc o nt r a c t e dde bt .
absence ofagr eeme mentori nt he ev entofdi sagr eeme ment be t weent hepr ov i s i onaldi r e ct orandt hecor por at i on. -
Power soft heSEC i ni ntr a-c orporat econcer nshasbeen t ransf err edt othepropercomm mmerc i alcourt s Pr o hi bi t ,e v e ni fa ct i ngi ng oo df a i t h
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Pr o v i s i o na ld i r e c t o ra ppo i nt e dbyt h ec o ur t
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Requi ri ng t he purc hase, i rr especti ve of unres t ri ct ed re t ai nedearni ngs
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Thepr ov i s i on oft hel aw abov e quot ed gi v est heSEC a v er ywi dedi s cr e t i oni nr es pe ctt omanage me ntofacl os e corporati oni nt heeventofadeadl ock.I tm ma ay:
Ar et r eas ur y shar es cov e r ed i nt he e xe r c i se ofpr ee mp mp t i v er i g ht si no r d i na r ys t o c kc or p or a t i o ns ? Asr e gar dsame ndme nt s
Sect i on 103. A Amendment o f ar t i c l e s of i nc o r p or at i o n. - Any am me endm me ent t o t he ar t i cl es of i ncorpor at i on whi ch see ks t o del et e or rem mo ove any provi si on requi red by t hi sTi t l et o be cont ai ned i nt he art i cl esofi ncorporati on ort oreduceaquorum orvot i ng r e q ui r e me me nts t a t e di ns a i da r t i c l e sofi nc o r po r a t i o ns ha l l not be val i d or effect i ve unl es s appro ve d by t he affi ffir rm ma at i ve vot e of at l east t wot hi r ds ( 2/3) of t he out st andi ng capi t al st ock, w wh het her wi t h or wi t hout v ot i ngr i ght s,orofs uc h gr e at erpr opor t i on ofs har e sas may be spec i fical l y pr ovi ded i n t he ar t i cl es of i ncorporati on f oram me endi ng,del et i ngorrem mo ovi ngany of t h eaf o r e s a i dpr o v i s i o ns ,a tam me e e t i ngdul yc al l e df o rt h e purpose.
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Sect i on104provi desf orareme medy
o ft hec or p or a t i o no ri t sbo ar do fd i r e c t o r s ,s t o c kho l de r s , orofficers ;( 3)di rect i ng orprohi bi t i ng any actoft he corporati on or i t s board of di rec t ors, st ockhol ders , offi ffic cer s, or ot her per sons part yt o t he act i on; ( 4) requi ri ng t hepurc hase att hei rf ai rval ueofsharesof anyst ockhol der,ei t herby t hecorporati on regar dl essof t h ea v ai l a bi l i t yo funr e s t r i c t e dr e t a i ne de a r ni ng si ni t s books ,orby t he ot he rs t oc khol der s;( 5)appoi nt i ng a pr o v i s i o na ld i r e c t o r ;( 6)di s s ol v i ngt h ec o r po r at i o n;o r( 7) gr ant i ng such ot her r el i efas t he ci r cum ms st ances may war r ant . A pr ovi s i onaldi r ect or shal lbe an i mpar t i al person whoi snei t herast ockhol dernoracredi t oroft he cor porat i on or of any subsi di ary or affi ffil l i at e of t he corporati on, and whose f urt her qual i ficat i ons, i f any, maybe det er mi ned by t he Com mm mi ss i on.A pr ov i si onal di r e c t o ri sno tar e c e i v e ro ft h ec or p or a t i o na nddo e sno t havethe t i t l eand powe wersofacust odi an orrecei ver .A pr o v i s i o na ld i r e c t o rs ha l lha v eal lt h er i g ht sandp owe r s o fadul ye l e c t e d di r e c t o roft hec or p or a t i o n,i nc l ud i n g t h er i g htt ono t i c eofa ndt ov o t ea tm me e e t i ng sofdi r e c t o r s , unt i lsuch t i meas heshal lbe r em mo ovedbyorderoft he Comm mmi s si on or by al l t he s t oc khol de r s. Hi s co mpensat i on shal l be de t er mi ned by agr ee ment be t wee n hi m andt hecor por at i on subj ec tt oappr ov alof t heCom mm mi ssi on,whi chm ma ayfixhi scompensati on i nthe Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
Cancelor al t er any pro vi si on i nt he art i cl es of i ncor por at i on, byl aws or any st ockhol der s agr ee ment
2.
Cancel ,al t erorenj oi n anyre sol ut i on orot heract of the corpor at i on or i t s boar d of di r ect ors, st ockhol dersoroffic fficer s
3.
Prohi bi tanyactoft he cor porat i on ori t sboar d of di rec t ors,st ockhol dersoroffic fficersorot herpersons p ar t yt ot h eac t i o n;
4. Requi r i ng t he purc hase of t he par val ue oft he shar es of any st ockhol der s, ei t her by t he cor porat i on r egar dl ess of avai l abi l i t y of unre s t r i ct e d e ar ni ngs , or by t he ot her sharehol ders,
Whathappe nsi ft he r ei sadeadl oc k?
Deadl - Not wi t hst andi ng Sect i on 104. ocks. a nyc ont r a r ypr o v i s i o ni nt h ea r t i c l e sofi nc o r po r a t i o no r by l aws or agr ee me nt of s t oc khol der s of a c l ose corporati on, i ft he di re ct ors or st ockhol ders are so di vi ded respect i ngthema managem me entoft hecorporati on' s busi ne ss and affai r st hat t he v ot es r e qui r e df or any co r por at e ac t i on cannot be obt ai ned, wi t h t he co nseq uence t hat t he busi nes s and affai r s of t he co r por at i on can no l onge r be co nduct ed t o t he advant age oft hest ockhol ders general l y,t heSecuri t i es andExchangeCom mm mi ssi on,upon wri t t enpet i t i onbyany st ockhol der , shal l have t he pow we er t o arbi t rat et he di sput e.I nt heexerc i seofsuch pow we er ,t heCom mm mi ssi on shal lhaveaut hori t ytoma make such or deras i tdeem ms s appropri at e, i ncl udi ng an order :( 1) cancel l i ng or al t eri ng any provi si on contai ned i n t he art i cl es of i ncorporati on,byl aws,oranyst ockhol der' sagreem me ent ; ( 2)c anc e l l i ng ,a l t e r i ngore nj o i n i nganyr e s ol ut i o no ra ct
1.
5.
Appoi ntme mentofapr ovi si onaldi r ect or
6.
Di sso l vi ngt hecorpor at i on;or
7. Ot herr el i efast heci r cums mst ancesma maywarr ant .
Sect i on105
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Di shones t y i s a gr ound f or di ssol ut i on of a cl ose c o r po r a t i o n
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Ev e no nes t o c kho l de rma ma ype t i t i o nf o rd i s s o l ut i o n
o
whe nt her ei sa r e l i efav ai l abl e ,di s sol ut i on woul d not be av ai l abl e i n an or di nar y c o r p o r a t i o n
CLOSE CORPORATI ON
ORDI NARYSTOCK CO OR RPORATI ON
1.The numberofs t oc khol der s cannotexcee d20
No l i mi t at i on as to number of shar ehol der
2.To t he e xt ent t hat al l Maxi mum number o fdi r ec t or s st ockhol der scan bedeeme med i s15 di r ec t or s, t he number of di rec t ors can effect i vel y be mor et han15 3.Shar es ofs t ock aresubj ect Gener al l y no r es t ri ct i on on t os pe c i fie dr e s t r i c t i o ns t r a ns f e ro fs ha r e s 4.Sha r e s of s t oc k ar e Nop r o hi bi t i o n p r o hi b i t e df r o m b ei ng l i s t e d i n t he s t oc k ex change or o ffe r e df o rs a l et ot hepubl i c 5.St oc khol der s may t ake an act i ve part i n cor por at e mana g eme nt by v es t i ng
Manage ment i sl odg ed i n t he BoardofDi re ct ors
Cannotactbothaspr esi dentandtr easur eratt hesame me t i me
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Si nce i ti sa cl osecorporat i on owned by t hef am mi i l y of ManuelDul ay,saveand exceptt hesecre t ary,i ts houl d begov er ne dbyTi t l eXI I
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Pet i t i oner i s cl assi fied as a cl ose corpor at i on and consequent l ya boardres ol ut i on aut hori zi ngthesal eor mort gage oft he subj ectpropert yi s notnecessary t o bi nd t hec or por at i on f ort heac t i on ofi t spr es i de nt .At anyrat e,a corporat eact i on t aken ataboard meet i ng wi t houtpr opercal lornot i ce i n ac l ose cor por at i on i s deeme med rat i fied by t heabsentdi rec t orunl essthel att er pr o mp mp t l yfil e shi swr i t t e no bj e c t i o n wi t ht h es e c r e t a r yof t he corporat i on af t erhavi ng knowl edge oft heme m eet i ng whi c h,i nt hi scase ,pe t i t i onerVi r gi l i oDul ayf ai l e dt odo.
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Vi r gi l i oDul ayi sas i gnat or ywi t ne ss ,heknowsv er ywe l l aboutt hedeedofabsol ut esal e,hei sest opped
manage mentt ot hem r at her t hanaBo BoardofDi r ect or 6.Thoseact i vei n manageme ment Di r e c t o r sa r e l i a bl e f o rt o r t s are personal l y l i abl e f or onl y i f t he y hav e ac t ed corpor at et ort s unl ess t he ne g l i g e nt l yo rf r a udul e nt l y corpor at i on hasobtai ned an a de q ua t el i a bi l i t yi ns ur a nc e 7.Di r e c t o r sc anv a l i dl yac te v e n wi t houtame e t i ng
Di r e c t o r sm mu us t ,a sar ul e ,a c ta s a body at a dul y const i t ut ed meet i ng
8.Ag r e ement s be t wee n st ockhol ders r egar di ng t he operat i ons of t he busi ness canval i dl ybema made
Not val i d and bi ndi ng si nce st ockhol ders’agre em me entcannot l i mi tt hedi s c r e t i o no ft heBo Bo ar d t oma managecorporat eaffai rs
nar i l y , no suc h 9.To t heextentthatdi re ct ors Ordi l ass i fic at i on and no maybe cl assi fied i nt ooneor c es t ri ct i ons on cum mu ul at i ve morecl assesandt obevot ed r ot i ng s o l e l yb yapa r t i c ul a rc l a s so f v st ock, cumu mul at i ve vo t i ng ma y ,i ne ffe c t ,ber e s t r i c t e d
Nagui atvs.NLRC -
Sect i on 100par .5.Totheextentt hatt hest ockhol ders areact i vel yengagedi nt hema manageme mentoroperat i on of t he busi ness and affai r s ofa cl ose cor porat i on,the st ockhol dersshal lbe hel dt o st ri ctfiduci ary dut i es t o each ot her and am mo ong t hems msel ve s.Sai d st ockhol der s s ha l lbepe r s o na l l yl i a bl ef o rc or p or a t et o r t sunl e s st he corporati on has obt ai ned reasonabl y adequatel i abi l i t y i nsurance.
Fami mi l y cor porat i ons i s not aut om ma at i cal l y a cl ose corporati ont he3qual i f yi ngcondi t i onsm mu ustbepresent .
10.The ar t i c l e s of Offic er s ar e e l e ct ed by t he i ncorpor at i on may prov i de BoardofDi rect ors t hat al l offi ffic ce r s shal l be el ect ed orappoi nt ed by t he s t o c kho l d er s t hough 11.I t ma may provi de f or great er Al
t he
ar t i c l e s
of
ncorpor at i on or byl aws may quo r um and v ot i ng i def orgr eat erquorum and r equi r em me ent si n mee t i ngs of provi s t o c kho l d er sa nddi r e c t o r s v ot i ng r equi r e me nt s i n di r e c t o r s ’me e t i ngund ers e c t i o n 25, t hose f or st ockhol ders ’ mee t i ng cannot ge ner al l y be a l t e r e d
SPECI ALCOR ORPO OR RATI ONS NS
2t y pe so fs p e c i a lc o r p o r at i o ns
1. Educat i onalcor por at i ons 12.Rest ri ct i on on t ransf er of Val i dandbi ndi ngi fi ndi cat edi n share s shoul d be i ndi cat ed t he art i cl es of i ncorporati on i n t he ar t i cl es of a nds t o c kc e r t i fic a t e s i ncorporat i on, byl aws and s t o c kc e r t i fic at e s eempt i ve r i ght s may be 13.Pr e empt i v e r i ght s of Pr ed as pr ov i ded f or i n st ockhol dersi sbroaderasi t deni i ncl ude al li ssues wi t hout s e c t i o n39 e x c e pt i o n may
Unl ess he sel l s hi s shar es, a
w i t h d r a w dpu c o mp e l h e co r p or a t i onan t o r cha s et h i s share sf orany r eason wi t h t he l i mi t ati on onl yt hatthe co r por at i on has suffic ffici ent as s et st oc ov e ri t sl i abi l i t i e s e x c l u si v eo fc a pi t a ls t o c k
s t o c k h ol d e rca n g e tp ba ckt h i s i n v e s t m e n t n on rotc o mp m e l h e corporat i on t o buy hi s shares except i n t he exer ci se of hi s a pp r ai s a lr i g ht
14.A
s t oc khol de r
s cannot i nt er f er e It he 15.The pr ope r f or um may Court i ne ss j udgme nt of t he i nte r f er ei nt he manageme ment bus r e c t o r s /s t o c kho l de r s o fac l o s eco r po r a t i o ni nc a s e di BUSI NESSJUD DG GME MENTRU UL LE” ofdeadl ocks under Sect i on “ 104, e v en of t he di r ect ors /st ockhol ders are a ct i ngi ng oo df a i t h 16.Any s t oc khol de r may pe t i t i on t he SEC f or cor porat e di ssol ut i on on gr ounds am mo ong ot he r s , p r o v i de sf o ri ns e c t i o n 105
Di sso l ut i onmaybehadonl yon t he gr ounds pr ovi ded by t he pr ov i si ons of t he Code on di ssol ut i on and P. D.902A,as ame mende d
2. Rel i gi ouscor por at i ons 2. 1 Cor por at i onSol e 2. 2 Rel i gi ousSoci et i es
Whatpr ovi si ongov er nseduc at i onalcor por at i ons?
Sect i on 106. I nc o r po r at i o n. - Educat i onal corporat i onsshal lbe gover ned by speci all awsand by t h eg e ne r a lp r o v i s i o nsoft hi sCo de .( n) -
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Spe c i a ll a wsl i k et he yEd uc a t i o nAc to ft h ePhi l i ppi ne s The se i ns t i t ut i ons ofl ear ni ng,once r e cogni z e d by t he go v er nm me ent as such ar e mandat ed by l aw t o be i ncor por at ed wi t hi n ni net y ( 90) days under t he provi si onsoft heCorporat i on Code and must ,perf orc e, comp mpl ywi wi t ht her equi r em me ent sand proc edur el ai d down t her e under .Thei rf ai l uret o sowi wi l lnoti mmune t he educat i onal i nst i t ut i on f r om sui t as a corpor at i on. ( Chi angKaiSi ekCase) Fav or abl e r ec omm mmendat i on of go v er nm me ent age ncy i nv ol v e d Twot ypesofeduc at i onalc or por at i ons Cert i ficat eofcomp mpl et i on i nt heacademi mi cfiel d Vocat i onalandt e c hni calone ’ s
ManuelDul ayEnter pri sesv s.CA o
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Whatwast heposi t i onofMa nuelDul ayhe r e?Pr e si de nt , Gener alManagerandTr easure r
Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
Rec om mm mendat i on of DECS i fc er t i ficat e of comp mpl et i oni nt heacadem mi i cfiel d
How i sthegoverni ngboardofan educati onali nst i t ut i on i ns t i t ut e d ?
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Non-s t ock-m mu ul t i pl esof5onl y( exam mp pl e:5, 10, 15)
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St ock-canbeanywherebe t ween5t o15
Cant heyconsi stof7or9me mem mb ber s?
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pa r t i c i p at i o ni na l le d uc a t i o na li ns t i t ut i o ns .T hec o nt r o l and admi ni st rat i on ofeducati onali nst i t ut i onsshal lbe v es t ed i n ci t i z e ns of t he Phi l i ppi nes . No educat i onal i nst i t uti on shal l be es t abl i shed excl usi vel yf or al i ens and no gr oup of al i ens shal l comp mpri semo mor et han onet hi r d oft he enrol l menti n any s c ho ol .Thepr o v i s i o nso ft h i ss ubse c t i o ns ha l lno ta p pl y t o school s est abl i shed f orf orei gn di pl om ma ati c personnel andt hei rdependent sand,unl essot herwi seprovi ded by l a w,f o ro t he rf o r e i g nt e m mp po r a r yr e s i de nt s .
Ye s,i fs t oc k -
Cant heybei ncorporat edal soasnonst ock?
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Ma na g eme nti sl e f ts o l e l yt oc i t i z e nsoft h ePhi l i ppi ne s Boar d of Di Di r ec t or s manages t he cor por at e affai r s, f o r e i g ne r sc a nno tt he r e f o r ebee l e c t e di nt hebo ar d
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Ye s B. P. 232 al l ows t he or gani zat i on of an educat i onal i ns t i t ut i o nt h ati ss t o c kc o r po r a t i o n,o nl yi ft he ydono t i ssueacert i ficat eofcomp mpl et i oni nt heacademi mi cfiel d Qual i ficati onsand di squal i ficati onsoft hem me em mb bershi p i nt heboardofan educati onalcorporati on Educat i onalcor porat i ons aregover ned by speci all aws a ndg e ne r a lp r o v i s i o ns ,he nc ei ft h e r ei snopr o v i s i o ni n t hespeci all aw,you gobackt osect i on 25 and27 oft he g e ne r a lpr o v i s i o ns
-
Stock-mustbeast ockhol der
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Nonst oc k-mustbeamem mb ber
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Byl aws may provi de f oraddi t i onalqual i ficati ons and di s q ua l i fic a t i o ns Cor por at e offic fficer s, quor um. m. Sect i on 25. I mmedi atel y af t er t hei r el ect i on, the di re ct ors of a corporati on mustf orma mal l yorgani zeby t heel ect i on ofa presi dent ,whoshal lbeadi re ct or ,atr easure rwhom ma ay orma may notbe a di r ect or ,a sec r et aryw wh ho shal lbe a res i dentand ci t i zen oft hePhi l i ppi nes,and such ot her offi ffic cer sasmaybeprov i ded f ori nt he byl aws.Any t wo ( 2)ormo moreposi t i onsma maybehel d concurr entl ybythe same meper son,exc eptt hatno oneshal lactaspresi dent andsecr et aryoraspre si dentand t re asur eratt hesam me e t i me. The di r e ct or s ort r us t e es and offic e r st o be el ect edshal lperf orm t hedut i esenj oi nedont hem byl aw a ndt heb y l a wso ft hec o r po r a t i o n.Unl e s st h ear t i c l e so f i ncorporat i on or t he byl aws provi de f or a gr eat er maj ori t y , a maj ori t y of t he number of di r ect or s or t rusteesas fixed i nt he art i cl es ofi ncorporati on shal l const i t ut e a quorum f orthe t ransact i on ofcor porat e busi ne ss ,ande v er yde ci si onofatl eas tama j or i t yoft he di rec t orsortr ust eesprese ntatam me eet i ngatwhi cht here i saquorum shal lbeval i dasa corporateact ,exceptf or t heel ect i on ofoffi ffic cerswhi ch shal lre qui ret hevoteofa maj ori t yofal lt heme memb mbersoft heboard.
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Except i ons are,mi ssi on boar ds and r el i gi ous order s, whi c h ma y hav e a gov e r ni ng boar d c onsi s t i ng of f o r e i g ne r s
Ter m ofoffic e ofgov er ni ng boar di n an e ducat i onal i ns t i t ut i o ns
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Can ser veat er m of5year s.I ft hatbethecase,1/5 of t hei rnumbershal lexpi reev eryyear
Nonst ock orst ock,can t heyservef ora 1 yeart erm onl y?
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Ye s,t hear t i c l e sofi ncor por at i on ma ypr ov i det hati tbe 1yearonl y
Whatar et he ser el i gi ousc or por at i onss pokenoff?
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Ar t i cl e14s ec t i on4par .2oft heCons t i t ut i ons Educat i onal i nst i t ut i ons,other t han t hose es t abl i shed by r el i gi ous gr oups and mi ssi on boards, shal lbeow wn ned sol el y by ci t i zens oft he Phi l i ppi nes or corporati onsorassoci ati onsatl eastsi xtypercent um of t he capi t alofwhi ch i s owned by such ci t i ze ns.The Congressma may,however ,r equi rei ncre asedFi l i pi noequi t y
Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
Whati sac or por at i ons ol e?
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Consi st sofoneper son onl yand hi ssucce ssori n some me part i cul arst ati on,whoarei ncorporatedbyl aw i n order t o gi ve them some me l egalcapaci t i es and advant ages, part i cul arl yt hatofperpet ui t y,whi ch i nt hei r natural personstheycoul dnothavehad
Maya cor porat i on be or gani ze d byl esst han 5 nat ur al persons?
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Gene r al r ul e, 5 t o 15 nat ur al pe r so ns( e xc ep t cooperat i ves and corporat i ons pri mari l y org ani zed t o hol d equi t i esi n ruralbanksand mayri ght f ul l ybecome me i nc o r po r a t o r st h e r e o f )
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Ex c e pt i o n,c o r po r a t i o ns o l e ,c o ns i s to fo nl yo nepe r s o n
Mayanyper sonf orm oror gani zeacorporat i onsol e?
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No,notanyperson can f orm acorporat i on sol e,sect i on 110provi des:
Sect i on 110. Corpor a t i o n s o l e . - For t he purposeofadmi mi ni st eri ng andmanagi ng,astr ust ee,t he affai rs , propert y and t em mp poral i t i es of any r el i gi ous denom mi i nat i on,sectorchurc h,acorpor at i onsol em ma aybe f o r me me db yt hec hi e fa r c hbi s ho p,b i s h op,pr i e s t ,mi ni s t e r , r abbi or ot her pre si di ng el der of such r el i gi ous denom mi i nati on,sectorchurc h.( 154a)
Di re ct orsort rust eescannotat t end orvot ebyproxyat boar dme e t i ngs.( 33a)
Sect i on 27. Di s q ual i fic a t i o n o f di r e c t o r s ,t r u s t e e so r offic ffice r s. - No per son conv i ct ed by final j udgm me ent ofan offense puni shabl ebyi mpri sonmentf oraperi odexceedi ngsi x( 6)years,or av i o l a t i o no ft hi sCo dec o mm mmi t t e dwi t h i nfiv e( 5)y e a r spr i o rt ot h e dat e ofhi s el ect i on orappoi nt ment ,shal lqual i f y as a di rect or , t rusteeoroffic fficerofanycorporat i on.( n)
Co r po r a t i o ns o l ea ndr e l i g i o usso c i e t i e s
I si tr e q ui r e dt ofi l et h ea r t i c l e so fi nc o r po r a t i o ni nt h e SEC?
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Ye s
What shoul d be c ont ai ne d i n i nc o r po r a t i o n?
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t he ar t i cl es of
Sect i on 111 and sect i on 112 provi des f ort hecont ents andpr ocedures
SEC, i mmedi at el y bec ome mes endowed wi t h co r por at e pe r s o na l i t y ,t h i ss e r v e sasa ne x c e pt i o nt ot her ul et h at a corporati on acqui re sj uri di calpersonal i t y onl y upon t h ei s s ua nc eo fac e r t i fic a t eo fi nc o r po r a t i o nb yt hes ai d gov er nm me entag ency.
Sect i on 111. A r t i c l es ofi nc or por at i on. - I n or der t o bec ome me a co r por at i on so l e, the c hi ef a r c hbi s ho p,b i s ho p,p r i e s t ,mi ni s t e r ,r a bbio rpr e s i di ng el derofanyrel i gi ousdenomi mi nati on,sectorchurc hmust fil e wi t h t he Securi t i es and Exc hange Comm mmi ss i on a r t i c l e so fi nc o r po r at i o ns e t t i ngf o r t ht h ef o l l o wi ng : -
1. That he i st he chi ef arc hbi shop, bi shop, pri est , mi ni st er , rabbi or presi di ng el der of hi s rel i gi ous denomi mi nat i on,sec torchur ch and t hathe desi r esto be comeac or por at i onsol e;
Upon fil i ngofver i fied art i cl esofi ncorporati on wi t ht he SEC,wi l lnotrequi ret heapprovalofSEC
A cor por at i on sol ei s posse ssed wi t ht he s amepowe r , ri ght sandpri vi l eges,t oown wn,acqui reandhol dorconvey pr o p er t i e sl i k eanyo t h e rc o r po r a t i o n?T r ueo rF al s e
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Fal se,t heyhavethesame mepowerri ght sand pri vi l eges, butwhe ni tcome st oal i e nat i onandac qui s i t i on,i tmus t possessacourtorder ,howeverwhent herei saregul ated met hod, a courtor der ma may be di spense d wi t h <se c. 113>
2. That t he rul es,r egul at i ons and di sci pl i ne ofhi s r ec l i g i o u s d ew no m mi n a t i o n , se cg ta or c h r c h ao r e n o t i n o n s i s t en t i t hi h i s b e comi m i n cor p ou r a t i on s l ea n d dono tf o r bi di t ; 3. That as such chi ef arc hbi shop, bi shop, pri es t , mi ni s t e r ,r a bbio rpr e s i d i n ge l d er ,hei sc ha r g e d wi t ht he admi ni st rat i onoft het em mp poral i t i esandt hemanagem me ent ofthe affai rs,e st ate and propert i es ofhi s rel i gi ous denom mi i nat i on, sect or chur ch wi t hi n hi st err i t ori al j ur i s di ct i on,des cr i bi ngsuc ht e r r i t or i alj ur i sdi c t i on;
Sect i on 113. A c q ui si t i on and al i enat i on of -Anycor porat i on sol em ma aypur chaseandhol d pr oper t y. r eal est at e and per sonal proper t y f or i t s chur ch, chari t abl e, benevol ent or educat i onal purposes, and mayrecei vebequest s orgi f t sf orsuch purposes.Such corporati on maysel lormo mort gagere alpropert yhel dbyi t byobt ai ni nganor de rf ort hatpur pos ef r om t heCour tof Fi rs tI nst ance oft he provi nce wher et he propert yi s si t uate duponproofma madet othesati sf acti onoft hecourt t h atno t i c eoft h ea ppl i c at i o nf o rl e a v et ose l lo rmo mo r t g a ge has been gi ve n by publ i cat i on or ot herwi se i n such manner and f or s uch t i me as sa i d co urtmay have di r e c t e d ,a ndt h ati ti st ot h ei nt e r e s to ft h ec o r po r at i o n t hatl eavet o sel lormo mort gageshoul d be grant ed.The appl i cat i on f orl eavet osel lormo mort gagemu mustbe made by pe t i t i on, dul yv e r i fied, by t he c hi ef ar c hbi shop, bi shop,pr i es t ,mi ni s t er ,r abbiorpr es i di ng el de ract i ng as co r por at i on so l e, and may be oppos ed by any mem mb beroft herel i gi ousdenomi mi nat i on,sectorchur ch represent ed by t he corporati on sol e:Provi ded,Thati n caseswher ethe rul es,regul ati onsand di sci pl i neoft he r e l i g i o usde no m mi i na t i o n,s e c to rc hur c h ,r e l i g i o uss oc i e t y oror derconcernedrepresent edbysuchcorporati onsol e regul atet he met hod ofacqui ri ng,hol di ng,sel l i ng and mort gagi ng r eal es t at e and personal propert y, such r ul e s ,r e g ul a t i o nsand di s c i pl i nes ha l lc o nt r o l ,a nd t h e i nt e r v e nt i o no ft hec o ur t ss ha l lno tb ene c e s s ar y .( 159 a)
4.Thema manneri n whi ch any vac ancy occ ur r i ng i nt he o ffic ffic eo fc hi e fa r c hbi s ho p,b i s h op,pr i e s t ,mi ni s t e r ,r a bb i o fp r e s i di ng e l de ri sr e q ui r e dt ob e fil l e d,a c c o r d i n gt o t he rul es, regul ati ons or di sci pl i ne of t he rel i gi ous denom mi i nat i on,sectorc hurc ht owh whi chhebel ongs;and 5.Thepl acewheret hepri nci paloffi ffic ceoft hecorporati on sol ei st obeest abl i shed and l ocated,whi ch pl acem mu ust bewi t hi nt hePhi l i ppi nes . Thear t i c l e sofi ncor por at i on ma yi nc l udeany o t h e rpr o v i s i o n no tc o nt r a r yt ol a wf o rt h er e g ul a t i o no f t h ea ffa i r so ft hec or p or a t i o n.( n)
Sect i on 112. Su bmi s s i o no ft h ea r t i c l e so f i nc o r p or at i o n. -The art i cl esofi ncorpor at i on mustbe v er i fie d,bef or e fil i ng,by affidav i toraffir mat i on oft he chi ef arc hbi shop, bi shop, pri est , mi mi ni st er , rabbi or presi di ngel der ,asthecasem ma aybe,andaccom mp pani edby ac o pyoft h ec o mm mmi s s i o n,c e r t i fic a t eo fe l e c t i o no rl e t t e r ofappoi nt mentofsuchchi efarchbi shop,bi shop,pri est , mi ni st er ,rabbiorpresi di ng el der,dul y cert i fied t o be corr ectbyanynot arypubl i c. Fr om and af t ert hefil i ngwi t ht heSecuri t i es and Exc hange Com mm mi ss i on of t he sai d ar t i cl es of i ncorpor at i on,ver i fied by affi ffid davi tor affi ffir rma mat i on,and ac c omp mpani ed by t he doc ume ment s ment i one d i n t he prece di ng paragr aph,such chi ef ar chbi shop, bi shop, pr i e s t ,mi ni s t e r ,r a bbio rpr e s i di nge l d e rs ha l lbe c o m me ea corporat i on sol e and al l te mporal i t i es, est at e and pr o p e r t i e so ft her e l i g i o usde no mi mi na t i o n,s e c to rc hur c h t here t of or e adm mi i ni st er ed or m ma anaged by hi m as such chi ef arc hbi shop, bi shop, pri est , mi mi ni st er , rabbi or pre si di ng el der shal l be hel di nt r ust by hi m as a corporati on sol e,f orthe use,purpose,behal fand sol e be nefitofhi sr el i gi ous denomi nat i on,se ctor c hur c h, i ncl udi nghospi t al s,school s,col l eges,orphan asyl ums, parsonagesandcem me et eri esthereof .( n)
I si tr equi red t oi ndi catei t st erm ms s ofexecuti on? Why not ?
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Not r equi r ed because t hey are supposed t o exi st i n pe r p e t ui t y
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However ,i tdoesnotme mean t hati tshal lcont i nuetoexi st f ore ver ,i t me mer el y means t hat i t has t he capaci t y of conti nuous exi st ence duri ng a part i cul ar peri od unt i l di ssol vedi naccordancewi wi t hl aw
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Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
No,i twi l lnotve stunt ot hehead,t hehead i sact i ng mer el yasaguardi an
Rom ma an Cathol i cApost ol i cAdm m. .OfDavao,i nc.vs.Land Reg.Com mm m,etal . -
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Ac tonl yasaguar di an Owner shi p devol vesupon t hecongre gat i on orrel i gi ous denom mi i nat i on
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A c or por at i on consi s t s of one pe r son onl y and hi s success ors( whowi wi l lal waysbe oneatati me,i n some me pa r t i c ul a rs t a t i o n) ,whoar ei nc o r po r a t e dbyl a wi no r d e r t o gi ve them some me l egalcapaci t i es and advant ages, part i cul arl yt hatofperpet ui t y,whi ch i nt hei r natural personstheycoul dnothavehad
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Rom ma an Cat hol i cChur chhasnonat i onal i t yandthatt he f r am me er s of t he Const i t uti on, as wi l l be here under ex pl ai ned, di d not hav e i n mi nd t he r el i gi ous corporat i onssol ew wh hent heypr ovi ded t hat60perce ntof t h eca pi t a lt h e r e o fb eowne db yFi l i pi noc i t i z e ns .
When wi l li tacqui r ej udi c i alpe r sonal i t y? How do y ou comp mparet hi stoot hert ypesofcorporati on? Af t ert hefil i ngt hev er i fiedar t i cl esofi nc or por at i onal ong wi t ht he docume nt sr e qui r ed i n Sec t i on 112 wi t ht he
Si ncea corporati on sol ei sconsi st sonl yofonepers on, wi l lt her egi s t r at i on oft hepr oper t yi nt henameoft he cor por at i on sol e ve st unt o t he head t her eof t he ownershi poft heproperty?
Di rec t orofLandsvs.CA -
Al i enabl e publ i cl and i sc onv er t e di nt o pr i v at el and whe n t he s ame has be en openl y ,c ont i nuous l y and
Ma yac or p or a t i o ns o l eb edi s s o l v e dbyj udi c i a lde c r e e ?
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Generalrul e:No,becausea corporati on sol e,i sby i t s v er y nat ur e ec cl e si as t i c al and r el i gi ous ( doct r i ne of separat i onofchurc handstat e)
Det erm mi i nati on oft hecharact eroft hel andshoul dbei n mi nd
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I ft heyst i l lf orm partofpubl i cdom ma ai nt heycannotbe owned,buti ft heyareconvert ed i nt o pri vat el and,t he c o ns t i t u t i o na lp r o hi bi t i o n wi l lno ta ppl y
Excepti on:pol i ce powe werofthe st ate,i fi t s purpose i s be i ng c ar r i e d outand i si ns t ead bei ng used f ori l l eg al purpose,i tmaybesodi ssol ved
Whatar er e l i gi ouss oci e t i es ?
excl usi vel yi n possessi on oft hepropert y as conceptof anownerf or30years,aut oma mati cal l ythati s
Re pub l i coft h ePhi l i pp i n e sv s .I AC -
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Ac cor di ngt os ec t i on114:
Sect i on 114. Fi l l i ng o fv ac a nc i e s . - T he success or si n offi ffic ce ofany chi efar chbi shop,bi shop, pr i e s t ,mi ni s t e r ,r a bbio rpr e s i di nge l d e ri naco r po r at i o n sol e shal l bec om me e t he cor por at i on sol e on t hei r acce ssi on t o offi ffic ceand shal lbeper mi t t ed t ot r ansact busi ne ssass uc h on t hefil i ngwi t ht heSec ur i t i e sand Exc hangeCom mm mi ss i on ofa copyoft hei rcom mm mi ss i on, c e r t i fi ca t eo fe l e c t i o n,o rl e t t e r so fa ppo i nt me nt ,d ul y cert i fiedbyanynot arypubl i c.
U n d e r comm m m o l a w ,a r e l i g i o usf s oc i e t y s a b o d yo pe r s o ns as s on ci a t e d t og e t h e r o r t h ei pu rp o s e of f mai nt ai ni ngrel i gi ousw wo orshi p.
I ft herei svacancywh who wi l lfil lup t he sam me e?Wh Whati f t herei snone,whatmustt hesuccessordo?
I si ta l s or e q ui r e dt ofil ei t sar t i c l e so fi nc o r po r at i o nt o t heSEC?
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No <se c.116>“ may”
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What shoul d be c ont ai ne d i n i nc o r po r a t i o n?
t he ar t i cl es of
Sect i on 116provi des:
Duri ng any v aca ncy i nt he offic ffice of c hi ef a r c hbi s ho p,b i s ho p,p r i e s t ,mi ni s t e r ,r a bbio rpr e s i di ng el der of any r el i gi ous denom mi i nat i on, sect or chur ch i ncorpor at ed as a cor porat i on sol e, t he per son or per so ns aut hor i z ed and empower ed by t he r ul es , r e g ul a t i o nso rdi s c i pl i neoft her e l i g i o usde no mi mi na t i o n,
Sect i on 116. Re l i g i o us s o c i e t i e s. - Any rel i gi ous soci et y or re l i gi ous order , or any di ocese, synod, or di st ri ct org ani zat i on of any r el i gi ous denom mi i nat i on,s ectorc hur ch,unl essf orbi dden by t he c o ns t i t ut i o n, r ul e s ,r e g ul a t i o ns , or d i s c i pl i ne o ft he rel i gi ousdenom mi i nati on,s ectorchurc h ofwhi ch i ti sa
sectorchur ch r epres ented by t he corpor at i on sol et o admi mi ni st erthe t em mp poral i t i es and manage t he affai r s, est ateandpropert i esoft hecorporati on sol eduri ngt he v ac anc y shal le xer ci se al lt he powe r s and aut hor i t y of t hecorporat i onsol eduri ngsuchvacancy.( 158a)
part , or by com mp pet ent aut hori t y , ma may , upon wri t t en co nsent and/or by an affir ffir mat i v ev ot e at a mee t i ng c a l l e df o rt hepur p os eo fa tl e a s tt wo t hi r d s( 2/ 3)o fi t s mem mb bershi p,i ncorporatef orthe admi ni st rat i on ofi t s t em mp poral i t i es or f or t he manageme ment of i t s affai r s, propert i esand est ateby fil i ngwi wi t ht heSecuri t i esand ExchangeCom mm mi ssi on,art i cl esofi ncorporati on veri fied byt heaffidav i toft hepr esi di ngel der ,s ec r e t ar y ,orcl er k orotherme mem mb ber ofsuch rel i gi oussoci et y orrel i gi ous o r d e r ,o rdi o c e s e ,s yno d,o rdi s t r i c to r g a ni z a t i o no ft he r e l i g i o usde no m mi i na t i o n,s e c to rc h ur c h ,s e t t i ngf o r t ht he f o l l o w wi i ng :
I faco r po r a t i o ne x i s t si ne q ui t ym ma a yi tno tb edi s s o l v e d?
Sect i on 115. Di s so l ut i o n. -Ac or p or a t i o ns o l e may be di ssol ved and i t saffai rsset t l ed vol unt ari l y by submi t t i ngt ot heSecuri t i esandExchangeCom mm mi ssi on av e r i fie dde c l a r at i o no fdi s s ol ut i o n.
1. That t he re l i gi ous soci et y or re l i gi ous order , or di o c e s e,s y no d,o rd i s t r i c tor g a ni z a t i o ni sa r e l i g i o us o r g a ni z a t i o no far e l i g i o usd e no m mi i na t i o n,s e c to rc h ur c h ;
Thedec l ar at i onofdi ss ol ut i onshal lse tf or t h: 1.Thenameoft hecorporat i on;
2.Thatatl eastt wo-t hi rds( 2/3)ofi t sm me em mb bershi phave g i v e nt he i rwr i t t e nc o ns e nto rha v ev o t e dt oi nc o r po r a t e , atadul yconvenedmeet i ngoft hebody;
2.There ason f ordi ssol ut i onandwi wi ndi ngup;
3. The aut hori zat i on f or t he di ssol ut i on of the corporati on by t he part i cul ar rel i gi ous denomi mi nati on, sectorc hurc h;
3. That the i ncorporati on of t he re l i gi ous soci et y or r el i gi ous or der , or di oces e, synod, or di st ri ct o r g a ni z a t i o n de s i r i ngt oi nc o r po r a t ei sno tf o r bi dd en b y comp mpet ent aut hori t y or by t he const i t ut i on, rul es, r e g ul a t i o nsord i s c i pl i neoft h er e l i g i o usde no m mi i na t i o n, s e c t ,o rc h ur c hofwhi c hi tf o r ms msapa r t ;
4.Thenamesand addr ess esoft heper sonsw wh hoar et o super vi se t he wi ndi ng up of t he affai r s of t he c o r po r a t i o n.
4. That t he re l i gi ous soci et y or re l i gi ous order , or di ocese, synod, or di st ri ct organi zat i on desi res t o i ncorpor at e f or t he admi mi ni st r at i on of i t s affai r s, pr o p er t i e sande s t a t e ;
Upon appr ov al of s uch de cl ar at i on of di ss ol ut i on by t he Sec uri t i e s and Exc hange Com mm mi ssi on,t hecorporati on shal lceasetocarryoni t s oper at i ons exc eptf or t he purposeofw wi i ndi ng up i t s affai r s .( n) -
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5.Thepl acewheret hepri nci paloffi ffic ceoft hecorporati on i st o be est abl i shed and l ocat ed,whi ch pl acemu mustbe wi t hi nt hePhi l i ppi nes;and
Whi l ese ct i on 115 oft hec odepr ov i desf ort hepr oces s and proceduref orthe di ssol ut i on ofacorporat esol e, t h e r ei sno t h i ngi nt h el a wi t s e l fwhi c hwo ul dpr o hi bi ti t f r o ma me me nd i n gi t sa r t i c l e sofi nc o r po r a t i o n I ti sb el i e v e dt h ata ut ho r i z a t i o nf o rt he di s s o l ut i o nb y t h epa r t i c ul a rr e l i g i o usd e no mi mi na t i o n,s e c to rc hur c h ,a s r equi re di n sub-paragr aph 3 ofse ct i on 115 woul d st i l l be ne ce ss ar yi nt he case ofame ndi ng t he ar t i c l e s of i nc o r po r a t i o nt oaffe c td i s s o l ut i o n.
o
Expi rat i on ofacorporat eter m wi l lnotappl y t oar e l i g i o usc or po r at i o n
Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
6. The names, nati onal i t i es, and r esi dences of the t r us t e e se l e c t e db yt h er e l i g i o us s o c i e t yo rr e l i g i o us o r d e r ,o rt h e di o c e s e ,s y no d,o rdi s t r i c to r g a ni z a t i o nt o serv ef ort hefirs ty earorsuch ot herperi od asma maybe presc ri bed by t he l aws of the r el i gi ous soci et y or rel i gi ous order ,or ofthe di ocese,synod,or di st ri ct organi zat i on,t heboard oft rusteest o be notl essthan five( 5)normo moret han fif t een( 15) .( 160a)
I si tr e q ui r e dt oi n di c at ei t st e r mo fe x i s t e nc e ?
L i k e w wi i s et oe x i s ti n pe r p e t ui t y ,t hel a w do e sno tr e q ui r e t oi n di c at ei t st e r mo fe x i s t e n ce
o
Whenwi l li tacqui r ej ur i di c alper s onal i t y?
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Onl yacorporat i onsol ema maycom me ei ntoexi st encew wi i t hout
3mo m odesof di ssol ut i on,3mo modesofvol unt ary di ssol ut i on and 3 modes ofl i qui dat i on and wi ndi ng up- FREQUENTLY ASKED I N THE FI NALS
Whatar et he3mo de sofv ol unt ar ydi ss ol ut i on?
SEC approval ,s ect i on 19 wi l lt husgovern,Vest ed wi t h j udi c i alc apaci t yupon i s suanceoft hece r t i fic at ebyt he SEC o
Howeve ri ti snotaccurat eaccor di ngt o at t y .
1. Vol untar y di sso l ut i on where no cr edi t or s are affect ed; <sec. 118> 2.
Ladi a becauset her earet hoset hatcani ssue
Vol unt arydi ssol ut i on wher ecr edi t orsar eaffect ed;<sec. 119>
f or ex amp mpl e co ope r at i v es - BUREAU OF
COO OOPER RA ATI VES whi c h
r eg i s t er , hom me e
i nsur ance guar ant y co r por at i on- HOME
OWN WNERS
How mayrel i gi oussoci et i esbedi ssol ved?
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Gotot hegeneralrul esgoverni ngdi ssol ut i on,because t herul esunderspeci alcorporat i onsdonotprovi de f or suchrul e
DI SSOLUTI ON
Whati sdi s sol ut i on?
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Ext i ngui shme ment of the cor porat ef r anchi se and t he t e r mi mi na t i o no fc o r po r a t ee x i s t e nc e
3modesofdi ssol ut i on
1.
Bye xpi r at i onofi t st er m;
2. By v ol unt ar y sur r ende r of i t s pr i mar y f r anc hi se ( v o l u nt a r ydi s s ol ut i o n) ; 3.
By r ev ocat i on ofi t s cor porat ef r anchi se ( i nvol untar y di s s ol ut i o n)
Phi l i ppi neNati onalBankvs.CFI -
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When t he pe r i od of c or por at e l i f e e xpi r es, t he corporat i on ceasest obeabodycorporat ef orpurposes ofconti nui ngthebusi nessf orwhi chi ti sorgani zed.But i tshal lnevert hel essbecont i nued asa body corporate f ort hreeyear s af t ert he t i me when i twoul d have be di ssol ved,f ort hepurposeofprosecuti nganddef endi ng sui t s by oragai nsti tand f or enabl i ng i tgradual l yt o set t l eand cl osei t saffai rst odi sposeofand conveyi t s propert yand t o di vi dei t sasset s.Therei sno need f or t he i nst i t ut i on of a proceedi ng f or quo warr ant ot o det er mi ne t he t i me and dat e oft he di ssol ut i on ofa corporati on becausetheperi od ofcorporat eexi st encei s provi ded i nt he art i cl es ofi ncorporat i on.W Wh hen such peri od expi r esand wi t houtanyexte nsi on havi ngbeen made pur suant to l aw, t he cor porat i on i s di sso l ve d a ut o m ma a t i c a l l yi ns o f a rast hec o nt i nua t i o no fi t sbus i ne s s i sconcer ned. The r i ght s of t he l es sor and t he l e ss ee ov e rt he i mpr ov eme ment s whi ch t he l at t er cons t r uct ed on t he l easedpremi mi sesaregoverned byArt i cl e1678oft heCi vi l Code.Theprovi si on gi vesthel esseetheri ghtt orem mo ove t he i mprove mentsi ft hel essorc hoosesnott opayone ha l fo ft h ev al uet h e r e o f .Ho we v e r ,i nt hec as eatb art he l aw wi l l not appl y because t he part i es here i n have st i pul at ed i n t he cont r act t hei r own t er ms and condi t i ons concer ni ng t he i mprov em me ent s bef or et he t ermi mi nati on oft hel ease.Pet i t i onerPN NB B as assi gneeof PBM BM succeeded t otheobl i gati on oft hel att erunderthe cont ractofl ease.I tcoul dnotpossessri ght smo morethan whatPBM had as l e ss ee under t he cont r act .He nce , pet i t i onerwasdul ybound t orem mo ovet he i mprov eme ment s be f or et hee xpi r at i on oft heper i odofl eas e.I t sf ai l ur et o dosowhen t hel easewast er mi nate dw wa ast antam mo ountt o awai verofi t sri ght sandi nt er estove rthei mprovem me ent s ont hel easedpr em mi i se.
Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
3. Short eni ngofcor porat et er m.<sec.120>
Vol unt ar y di s sol ut i on whe r e no c r edi t or s ar e affec t e d <sec. 118>
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Thef or maland pr ocedur alr equi r eme nt sne ce ss ar yar e t h ef o l l o wi ng :
1.
Maj ori t yvot eoft heboardofdi rec t orsort rustees;
2. Sendi ngofnot i ceofeachst ockhol dersormem mb bere i t her byr egi s t er e dma i lorper s onalde l i v e r yatl e as tt hi r t y( 30) days pri ort ot heme meet i ng ( schedul ed by t heboard f or t hepurposeofsubmi t t i ngt heboar d act i on t odi ssol ve t he cor porat i on f or appr oval of the st ockhol der or mem mb ber s. ) ; 3. Publ i cat i on oft he not i ceoft i me,pl aceand subj ectof t he mee t i ng f or t hre e ( 3) conse cut i ve wee ks i n a newspaperpubl i shed i nt he pl acewh wheret he pri nci pal offi ffic ceofs ai dcorporat i oni sl ocat edori nanewspaperof g e ne r a lc i r c ul a t i o ni nt h ePhi l i ppi ne s ; 4. Res ol ut i on ado pt e d by t he affi ffir r mat i v e v ot e of t he st ockhol ders own wni ng at l east 2/3 of t he out st andi ng capi t alst ockor2/3 oft hem me em mb bersatt hem me eet i ngdul y c a l l e df o rt hep ur p os e ; 5. A copy of t he r eso l ut i on aut hori zi ng t he di ssol ut i on mustbecert i fied byam ma aj ori t yoft heboardofdi rect ors or t r ust ee s and count er si gned by t he cor por at e s e c r e t a r y ; 6.
I ssuanceofacer t i ficateofdi ssol ut i onbyt heSEC.
Sho ul dt hi sb es t r i c t l yc o mp mpl i e dwi wi t h?
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Ye s,compl i ance wi t ht her equi r e me nt sand f or mal i t i es pre scr i bed above i s mandat ory such t hat f ai l ur et o comp mpl y t her ewi t h wi l l have no effect on t he l eg al e x i s t e nc eoft hec or p or a t i o n.
Wi l l di ss ol ut i on be effe ct i v e and v al i d by a me r e r esol ut i onoft heBOD andst ockhol ders?
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No,ame mer er esol ut i on bythest ockhol dersort heBOD of a corporat i on t o di ssol vet hesame medoesnotaffectt he di ssol ut i on butt hatsome meotherst eps,admi ni st rat i veor j udi ci ali sne ce ss ar y .( Da gu ho yEn t e r p r i s e sv s .P o nc e )
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Si nc ei ti st heSt a t ew wh hi c hg r a nt si t sr i g htt oe x i s t ,i ti s onl ythrough t heSt at ew wh hi chcan al l ow t het er mi nat i on o fi t se xi s t e nc e ;wi t h o utc o ns e nto ft heSt a t e ,i twi l ln o t bedi ss ol v ed.
Vol unt ar y di s sol ut i on wher e c r edi t or s ar e affec t ed <sec. 119>
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Byv i r t ueo fape t i t i o n,whe nt h e r ea r ec r e d i t o r sa ffe c t e d Thef ol l owi ngf or mal i t i eswoul dt husber e qui r ed:
1.
Affirma mat i vevot eoft hes t ockhol dersr epres enti ngatl east 2/3 oft heout st andi ngcapi t alst ock oratl east2/3 of t hem me em mb bersatam me eet i ngdul ycal l edf ort hatpurpose;
2. Pet i t i on f or di ss ol uti on shal l be fil ed wi t ht he SEC s i g ne db yama j o r i t yofi t sbo ar dofdi r e c t o r sort r us t e e s orot heroffic ffi cer shavi ng t he managem me entofi t saffai r s, v er i fie d by t he pr es i dent or s ec r e t ar y or one of i t s di rec t ors or t ruste es, set t i ng f ort h al l cl ai ms and dema mandsagai nsti t . 3. I ss uanceofan or derbyt heSEC r ec i t i ngt hepurposeof t he pet i t i on and fixi ng t he dat e on or bef or e whi ch obj ect i ons t here t o may be fil ed by any per son,whi ch dat eshal lnotbel esst han t hi rt ydaysnorm mo oret han s i x t yda y sa f t e re nt r yo ft h eor d er . 4.
comp mpl ai ntand af t erpr opernot i ceand heari ngon t he gr ounds pr ov i ded by e xi s t i ng l aws, r ul es and r e g ul at i o ns .( n) -
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Bef or esuchdat e,acopyoft heordermustbepubl i shed once a wee k f or thr ee ( 3) conse cut i ve wee ks i n a newspaperofgeneralci rcul ati on publ i shedi nt heci t yor muni ci pal i t ywh wher ethepri nci paloffi ffic cei ssi t uatedori n ane ws pa pe ro fg e ne r a lc i r c ul a t i o ni nt heP hi l i p pi ne s .
Di ssol ut i on i st ant am mo ountt ot he i mposi t i on ofdeath pe na l t y I nst ead ofdi ssol vi ng t he corporati on,court s norma mal l y enj oi nt hef urt hercomm mmi ssi onoft hequest i onedact Ther el i e fofdi s sol ut i on wi l lbeawar ded onl ywher eno ot herreme medy i s avai l abl e and i twi l lnotbe al l owed whe r et he r i ght s oft he s t oc khol de r s can be ,or ar e, pro t ect ed i n some meot herway( Republ i cvs.Bi saya Land T r a ns .Co .I nc . )
Whatar et hegr oundsf ori nv ol unt ar ydi ss ol ut i on?
5.
Post i ngoft hesame meor derf ort hr ee( 3)consecut i veweeks i nt h r e e( 3)publ i cpl a c esi ns uc hc i t yorm mu uni c i p al i t y .
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I ti scomm mmenced t hrough aver i fied comp mpl ai ntormo mot u propri obyt hepropercourts
6.
Upon five( 5)days’not i ce,gi venaf t ert hedateon whi ch t he ri ghtt o fil e obj ect i ons has expi r ed,t he SEC shal l hear t he pet i t i on and t r y any i ss ue made by t he o bj e c t i o nsfil e d.
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Sect i on 6 of PD 902-A pro vi des f or t he gr ounds f or i nv o l unt a r ydi s s o l ut i o na sf o l l o ws :
1.
Fraudi nprocuri ngi t scer t i ficat eofre gi st rat i on;
7.
Judgm me entdi ssol vi ngt hecorporat i on anddi r ect i ngofi t s asset s as j ust i ce requi r es and t he appoi nt ment of a r e c e i v e r( i fne c e ss ar yi ni t sdi s c r e t i o n)t oc o l l e c tsuc h asset sandpaythedebtsoft hecorporati on.
o
The f or e goi ng r equi re ments
ar e
al s o
mandat or y
I stheappoi nt mentofarecei verm ma andat ory?
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No,i ti sme mere l ypermi mi ssi veordi scre t i onaryon t hepart oft he court .The code usest he wor d“ may” ;t he l aw i nt ended t ol ett hesharehol dershavethecont roloft he asset soft hecorporat i on upon di ssol ut i on and wi ndi ng up.
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The di r e ct or s ma y al so unde r t ake l i qui dat i on and wi ndi ngupofi t sc or por at eaffai r s ,ands oundbusi nes s j udgme nt ,onhow t he ywi l lwi ndup
Di ssol ut i onbyshort eni ngofcorporatet erm <sec. 120>
2. Seri ous mi sr epr es ent at i on as t o whatthe cor por at i on can doori sdoi ngtot hegreatprej udi ceofordamageto t h eg e ne r a lp ub l i c ; 3. Ref usalt ocomp mpl yordefianceofanyl awf ulor deroft he Com mm mi ss i on r es t r ai ni ng comm mmi ss i on of act s whi ch woul damo untt oagr av evi ol at i onofi t sf r anc hi s e; 4. Conti nuousi noper at i on f ora peri od ofatl eastfive( 5) y e ar s; 5.
6. Fai l ur etofil erequi r ed r eport si n appr opri at ef orms msas det er mi ned by t he Com mm mi ssi on wi t hi nt he pre scr i bed peri od. -
Ot hergr ounds areprovi ded f ori nt hecorporat i on code i t sel f :am mo ongt hem are:
1. Vi ol at i onofanypro vi si onoft heCodeunders ect i on144; 2.
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Wi l lbev al i d upon appr ov aloft heSEC,unl i keg ener al am me endme ment s,whi c h wi l l be dee med appr ov ed i f not act eduponbyt heSEC wi t hi n6monthsf r om t hedat eof fil i ngf o rac aus eno ta t t r i b ut a b l et ot hec o r po r a t i o n. Short eni ngoft hecorporat ete rm part akest henat ur eof an am me endm me entoft hearti cl esofi ncorporati on.Sect i on 16 underge ner alam me endment sal l ows“wri t t en asse nt” sec t i on 37 mandat est hatt he vo t em mu ustbecastata dul yconst i t ut edmeet i ng. Di Sect i on 120. ssol ut i on by short eni ng c o r p o r a t et e r m. m. -Avol unt arydi ssol ut i on maybeeffect ed byame ndi ngt hear t i c l e sofi nc or por at i ont os hor t ent he corporatet erm pursuantt otheprovi si onsoft hi sCode. A copyoft heame ndedar t i cl esofi ncor por at i onshal lbe submi t t edtot he Securi t i esand ExchangeCom mm mi ssi on i n accor dance w wi i t ht hi s Co Code. Upon appr ovalof t he ame mended art i cl esofi ncorporati on oft heexpi rat i on of t heshort ened t erm, m,asthecasem ma aybe,t hecorporat i on shal l be dee med di ss ol v ed wi t hout any f urt her proceedings,subj ectt ot heprovi si ons oft hi sC Co odeon l i qui dat i o n.( n)
o
I n acl osecorporat i on,anyact sofdi r ect ors ,offi ffic cer sor t hose i n cont roloft he corporati on whi ch i si l l egalor f r audul ent or di shonest or oppres si ve or unf ai r l y prej udi ci alt ot he corpor at i on or any st ockhol der or whe ne v e r cor por at e ass e t s ar e be i ng mi s appl i e d or was t edunderse ct i on105.
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Meredi shonest yi sal soagroundi nacl osecorporat i on
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Ot hergr ounds can be f ound i n ot herspeci all awsl i ke t heSecuri t i esRegul at i onCodeandtheGe GeneralBanki ng Ac taswel last heI nsur anceCode.
Gover nmentvs.Phi l i ppi neSugarEst at e -
I ti sne c e s s ar yi no r d e rt os e c ur ej udi c i a lf o r e c l o s ur eo f res pondent ’ schart ert oshow ami suserofi t sf ranchi se j us t i f yi ngs uc haf or f ei t ur e
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Obj e c ti st opr o t e c tt hepub l i c ,a ndno tt or e dr e s spr i v a t e gr i ev ances ,t he mi susermustbe such ast owo wor k or t h r e a t e nas ub s t a nt i a li nj ur yt ot h ep ub l i c ,o rs uc ha st o am mo ountt o a vi ol at i on oft hef undamentalcondi t i on of t he cont r actby whi ch t he f r anchi sewa was gr ant ed and t husdef eatt hepurposeoft hegrant
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Court spr oceedwi wi t hext r em me ecaut i onwhi chhasf ort hei r obj ect t he f orf ei t ur e of corpor at e f ranchi se, and f orf ei t ure wi wi l l not be al l owed, except under express l i mi t at i on,orf orpl ai n abuseofpowe werby whi ch t he c o r po r a t i o nf a i l st of ul fil lt h ede s i g na nd pur p os eofi t s
Anot her way of di s sol v i ng a c or por at i on i st hr ough
Sect i on 121. I n vo l unt ar y di s s o l ut i o n. - A cor porat i on may be di ssol ved by t he Securi t i es and Exc hange Comm mmi ss i on upon fil i ng of a v er i fied Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
I ncaseofdeadl ocki nacl osecorpor at i onasprovi dedf or i nsect i on105;
3.
I nt r a c o r p o r at e -s pe c i a lc o m mm me r c i a lc o ur t s
i nv o l unt a r yd i s s o l ut i o n
Fai l ur et ofil ebyl awswi t hi nt her equi r edper i od;
or gani z at i on. But when t he abuse or vi ol at i on const i t ut es or t hreat ens a subst ant i ali nj ury t ot he publ i c or such as t o am mo ount t o a vi ol at i on of t he f unda m me e nt a lc o ndi t i o nsofi t sc ha r t e r ,o ri t sc o nd uc ti s charact eri zedbyobduracyorpert i naci t yi n cont em mp ptof l a w,di s s ol ut i o n wi l lbeg r ant e d -
offic ffice r s,except i n cases wher et he i nt ervent i on of t he Stat e, f or one r eas on or another , cannot be obt ai ned, as when t he Stat e i s not i nter es t ed because t he compl ai nti s st r i ct l y a mat t erbet ween t he st ockhol der s and does not i nvol ve, i n t he opi ni on oft he l egaloffi ceroft he Gover nme m ent,any oft he act s orom mi i ss i ons war r anti ng quo war r anto proce edi ng , i n whi ch mi nori t y st ockhol ders are ent i t l ed t o have such di ss ol uti on. I t shoul d be e x e r c i s e di fne c e s s ar yi no r d e rno tt oent i r e l yi g no r eand di sr egar d t he ri ghts of sai d mi nori t y st ockhol ders, especi al l yw wh hensai dmi nori t yst ockhol dersareunabl et o obt ai n redres sand prot ect i on oft hei rri ght swi t hi nt he corporat i on i t sel f . Stoc khol ders shoul d not be l ef t wi t houtr e cour s e
Di dt h ec our tdi s s o l v et h ec o r po r a t i o n?No ,i td i dno t ,i t gr ant ed t he cor porat i on 6 months t o ceas eand desi st t heperf orm ma anceoft hequest i oned actot herwi sei twi l l bedi s sol v ed
Gove rnme mentvs .ElHogar -
3 causes ofact i on,t he firsti st hatthe corporat i on vi ol at e dt hel aw byhol di ngon t hepr ope r t ybe yond t hat provi de f orby l aw,t hesecond i sthatt hecorporati on under t ook t he manageme ment fpet i t i oners bel ongi ng t o del i nquentsharehol ders oft he associ ati on,and l ast l y t hatt he byl aw prov i si on,whi ch em mp power stheB BD Dt o cancelshar esand t oret urn t othe ownerst her eoft he bal ancer e t ur ni ngf r om t hel i qui dat i on
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Com mp par et oPhi l i ppi neSugarEst at e,wher ei nt hecourt rul ed condi t i onal di ssol ut i on. W Wh hy decree condi t i onal di ssol ut i oni noneandnoti nt heothercase? Becausei n ElHogart he gov er nme mentwasatf aul t ,t he g o v e r nme ntwa s n’ ta bl et oi s s uet h ec e r t i fic a t eo ft i t l eo n t i me
Presents etup Any s t oc khol de r or me mbe r of a cor por at i on can i nst i t ut e a di ssol ut i on proceedi ng agai nst hi s own c o r po r a t i o n be f o r et hep r o pe rf o r um Speci alCom mm merc i alCourt s,shal lhearanddeci dei nt racorporatedi sput es
Mayacorporati on ask f ordi ssol ut i on oft hecorporat i on whe nt her ei snopr e j udi c et ot hege ner alpubl i c ?
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Ye s,i nac l osecor por at i on,ape t i t i onf ort hedi s sol ut i on of t he cor por at i on may be i nst i t ut ed by any one i ndi vi dual s har ehol der on t he gr ound, e ven by mer e di shonest y
r eadyabl e Whent hec as ewasi ns t i t ut ed,ElHogarwasal t o di spose the propert i es i n quest i on, i n Phi l i ppi ne SugarEst atei twas st i l lt he hol di ng t hepropert i es i n
Effe c t so fd i s s o l ut i o n
o r d e rt oe nr i c hi t s e l fa tt hee x pe ns eoft het a x pa y e r s
Republ i cvs.Securi t yCre di tand AcceptanceCorp.etal .
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Thedi ss ol ut i on ofacor por at i on notonl yt er mi nat esi t s pri mary f r anchi se t o be a corporat i on,butgeneral l y preventsi tf rom f urt herexer ci si ng ot herorsecondary f r anchi se s whi ch have been conf er r ed t o i t s. I t t ermi mi nat es i t s power to ent er i nt o contr act s or t o conti nuet hebusi nessasagoi ngconcer n.
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Basedont hi sgeneralrul e,t heSupreme meCourthel dthat a corporat i on, whose corporat el i f e expi r ed, cannot l awf ul l ypursuethebusi nessf orwhi chi twasorg ani zed. I tcannotappl yf ora new cer t i ficat e ora sec ondary f r a nc hi s ef o ri ti si nc apabl eofr e c e i v i nga g r ant .Ne i t h er c a ni te nf o r c ea c o nt r a c te x e c ut e d pr i o ri t sdi s s o l ut i o n f or t he purpose of cont i nui ng t he busi ness of i t s o r g a ni z a t i o n.
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I ng e ne r a lt he r i g ht sa nd l i a bi l i t i e so ft h ec o r po r a t i o n a r eno te x t i ng ui s he db yi t sdi s s o l ut i o n.
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Thecor por at i on he r ei sal endi ngi ns t i t ut i on and nota banki ngi ns t i t ut i on
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Def endantcor porat i on vi ol atedthel aw becausebef orea corporat i on mayengagei ntoa banki ngact i vi t yi tm mu ust firstobtai nasecondaryf ranchi sef r om t heCentr alBank
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Def endantcorporati on t hreat enssubstant i ali nj uryto t h eg e ne r a lpubl i c ,d i s s o l ut i o ni swa r r a nt
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I ft herei sabankrun kawawanam ma anyungdeposi t or s
Republ i cvs.Bi sayaLandTransport ati onCo.I nc -
Ther el i e fofdi s sol ut i on wi l lbeawar ded onl ywhe r eno ot herreme medy i s avai l abl e and i twi l lnotbe al l owed
A mendme nto rr epeal . -Nori ght Sect i on 145 . orreme medy i nf avorofor agai nstany corpor at i on,i t s st ockhol ders,mem mb bers,di re ct ors,t rustees,oroffic ffi cers, nor any l i abi l i t yi ncurre d by any such corpor at i on, st ockhol ders,mem mb bers,di re ct ors,t rustees,oroffic ffi cers, shal lberemo movedori mpai r edei t herbyt hesubsequent di ssol ut i on ofs ai d corporat i on orby any subsequent am me endmentorr epealoft hi sCodeorofanypartt her eof . ( n)
wher et he r i ght s oft he s t oc khol de r s can be ,or ar e, prot ect edi nsom me eot herway -
Mi suse and mi sappl i cat i on oft he f unds and asse t sof t he r espondent wer e comm mmi t t ed part i cul ar l y by t he cor por at e offi ffic ce r s, wher et hey can i nst ead be hel d pe r s onal l yl i abl e
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Si nce t herei sanot herrem me edy avai l abl e di ssol ut i on i s notwarr ant ed
Buenaflorvs.Cam ma ari nesSurI ndust ryCorp.
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Ass umi ng t he abov e s t at e d cor por at i on i sa c l ose corporati on,woul dt hecourtdecreeot herwi se? Ye s,bec aus ei nacl osec or por at i on,me r edi shones t yi sa g r o undf o rt hed i s s o l ut i o n
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Fr om t hat t i me on Cam ma ar i nes Sur was pl yi ng i n an ac t i v i t yt ha twasi l l e g al
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A cor por at i on wher et he cor por at el i f e has e xpi r e di t cannotl awf ul l ypurs uethe busi nessf orwhi ch i twas organi zed.
Can ev en be di ss ol v ed by pet i t i on of onl y one st ockhol der on t he gr ounds st at ed i n the code < sec. 105> -
Fi nanci ngC Co orporat i onoft hePhi l i ppi nesvs.Teodoro -
Mi nori t yst ockhol dersm ma aynotask f ort hedi ssol ut i on of a corpor at i on i n pri vat e sui t s and t hatsuch act i ons shoul d bebroughtbyt he Gove rnm me entt hrough i t sl egal
Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
t he Supr em me e Court hel dt hat a cor por at i on, whose corporat e l i f e expi re d, cannot l awf ul l y pur sue t he busi nessf orwhi c hi twasor g ani z e d.I tcannotappl yf or a new cer t i ficate or a secondary f ranchi se f or i ti s i nc a pa bl eo fr e c e i v i ngag r a nt .
Awar di ngi tt oCamar i nesSuri st ant amo untt oame dal f ori t si l l e galac t s
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I tcannotappl yf ora new cer t i ficat e ora sec ondary f r a nc hi s ef o ri ti si n c apa bl eo fr e c e i v i ngag r a nt .I twa s notev en a corpor at i on de f act o.And t hen,t her ei sno appl i cati onsubscri bedbyt henew corporati on
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Andy e tass t at e d,t hene w cor por at i onhasnotfil e dany appl i cati on f or cert i ficat e of publ i c conveni ence i n Sabang,andhasnotpubl i shedsuchappl i cat i on.
Atany t i medur i ng s ai dt hr e e( 3)y ear s ,t he corporat i on i saut hori zedand em mp powe wer ed t oconveyal l o fi t spr o p e r t yt ot r us t e e sf o rt h ebe ne fito fs t o c kho l de r s , mem mb bers,credi t ors,andot herpersonsi ni nt er est .From andaf t eranysuchconveyancebythecorporat i on ofi t s propert yi nt rust f or t he benefit of i t s st ockhol ders, mem mb bers,cr edi t ors and ot hersi ni nt eres t ,al li nt ere st whi c ht hec or por at i on had i nt hepr oper t yt e r mi nat e s, t h el e g a li nt e r e s tv e s t si nt het r u s t e e s ,a ndt hebe ne fic i a l i nt e r e s ti nt hes t o c kho l de r s ,me m mb be r s ,c r e d i t o r so ro t he r pe r s o nsi ni nt e r e s t . Upon t hewi ndi ngupoft hecorpor at eaffai rs , a nyas s e tdi s t r i but a bl et oanyc r e d i t o ro rs t o c kho l de ro r
CebuPortLaborUni onvs .Stat eM Ma ari neCo -
memb mberwho i sunknown orcannotbef ound shal lbe escheat ed t otheci t yormu muni ci pal i t ywher esuch asset s a r el o c at e d.
Eve n a cursor yr eadi ng oft he pro vi si on woul d convey t h ei de ac l e a r l yma ma ni f e s t e di nt hel i mi t a t i o n“ butn otf o r t hepurposeofc ont i nui ngthebusi nessf orwhi chi twas e s t a bl i s he d, ”t ha tt he3y e a rpe r i o da l l o we db yt h el a wi s onl yf ort hepurposeofwi ndi ngupi t saffai rs.
Exce ptby decr easeofcapi t als t ock and as ot herwi se al l owed by t hi s Co Code, no corporat i on shal l di st ri but e any ofi t s asset s or propert y exceptupon l a wf uldi s s o l ut i o na nda f t e rp a yme nto fa l li t sde bt sa nd l i abi l i t i e s .( 77a,8 9a,1 6a)
Gonzal esvs.SugarRegul atoryAdmi ni st rat i on -
I nst ead of appl yi ng t he corpor at i on code, t he court a ppl i e dt h eco ns t i t u t i o na lpr o v i s i o n
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Cannotbereadasperm mi i t t i ngt odestr oythesubstant i ve r i g ht s
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Suc h woul d co l l i de wi t h t he noni mpai r ment of c o nt r a ct sc l a us eo ft h ec ons t i t ut i o n
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Com mp pl ai nant sw wi i l lhavetheri ghtt of ol l ow t heasset sof t hecorporat i oni nt hehandsofSRAoranyotherage ncy f o rt ha tma ma t t e r
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Af t erdi s sol ut i onwhatne xt ?
1. Byt hecor porat i oni t sel ft hrough t heBOD -
Usualmet hod orprocedureofl i qui dat i ngacorporati on and al t hough t herei sno l aw aut hori zi ngi t ,nei t heri s t her eanyt hi ngt hatprohi bi t st heBOD f r om undert aki ng t hes ame me
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I ft hi smet hod i sresort ed t o,t heboardwi l lonl yhavea pe r i o do f3y e ar st ofini s hi t st a sko fl i q ui dat i o n
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Cl ai ms f or or agai nst t he corpor at e enti t y not fil ed wi t hi nt he pe r i od wi l lbe come unenf or c eabl e as t her e exi stno cor porat e ent i t y agai nstwh whi ch t hey can be e nf o r c e d
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Ac t i onspendi ngf ororag ai ns tt hec or por at i onwhe nt he 3yearperi od expi res,areabat edsi nceaf t ert heperi od, t hecorporat i on ceasesf oral li nt ent sandpurposesand i snol ongercapabl eofsui ngorbei ngsued
Li qui dat i onandwi wi ndi ngupshoul df ol l ow Whati st hedefini t i onofl i qui dat i onandwi ndi ngup? Co l l e c t i o no fa l lc o r po r at eas s e t s ,t h epa yme nt so fa l li t s debt sandset t l eme mentofi t sobl i gati onsandt heul t i mate di s t r i b ut i o no ft hec or p or a t ea s s e t s ,i fa nyo fi tr e ma ma i ns , t o al l s t oc khol der s i n acc or dance wi t h t hei r proport i onat e st ockhol di ngs i nt he corporat i on or i n acc or dance wi t h t hei r r es pect i ve cont r act s of s ubs c r i p t i o n.
Howevert he3yearperi odi snotabsol ut e Li qui dat i onmaybeundert aken i nei t heroft he3ways
2. Byat r ust eeappoi nte dbyt hecorpor at i on -
Thecor por at i on ma yoptt oc onv eyal lcor por at eass e t s t oat r us t e e swh whow wi i l lt a kec ha r g eo fl i q ui da t i o n
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I ft hi sme me t ho di sus e d,t h et hr e ey e a rpe r i o dl i mi t a t i o n
Pr e f e r e nc eupo nl i q ui da t i o n
i mposed by sec t i on 122 wi l l not appl y prov i ded t he desi gnati onoft hetr ust eei sm ma adew wi i t hi nt hatperi od
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I ft h e r ear ep r e f e r r e ds ha r e s ,t hepr e f e r e nc egr a nt e dt o suchshoul dbecomp mpl i edwi t h
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Pref err edsharesma maygi vethehol dert here of ,pref erence onl yi nt he di vi dends butal so i nt he di st ri but i on of corporateasset supon l i qui dat i on ort erm mi i nati on oft he c o r po r a t ee x i s t e nc e .I fs uc hi st hei nt e nt ,t h ec o nt r a c to f subscri pt i on mustso i ndi cat el estt hey arepl aced on equalf oot i ngwi t hcom mm monshar ehol ders
3. Byappoi nt mentofar ec ei v er -
A r ec ei v er ma y be appoi nt e d by t he pr oper f or um on pet i t i on ormo mot u propri o upon t he di ssol ut i on oft he c o r po r a t i o n
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Pr e f e r e nc em ma a ybep ar t i c i pa t i ngo rn onp a r t i c i pa t i ng
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Di ssol vedcorporati onsaregrantedaperi odof3yearsto l i q ui dat e
The appoi nt me ntofa r ece i v e ri s ,howe v er ,pe r mi s si v e r at hert han mandat oryand t he l aw t ends t or ecog ni ze t hat i n cases of vol untary di ssol ut i on t her ei s no occasi on f ort heappoi nt mentofarecei verexceptunder speci alci r cumst ancesandupon propershowi wi ng
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I far e c e i v e ri sa ppo i nt e d,t h e3 y e a rpe r i o d fix e db yl a w wi t hi n whi c ht oc ompl e t et het as kofl i qui dat i onwi l lnot l i kewi se appl y because t he di ssol ved corporat i on i s subst i t ut edbyt her ecei verwhom ma aysueorbesuedeven a f t e rt hatp e r i o d
Co - Ever y Sect i on 122. r p or a t el i q ui dat i o n. corporati on whosechart erexpi resby i t sow wn nl i mi t ati on or i s annul l ed by f orf ei t ur e or otherwi se, or w wh hose corporateexi st encef orotherpurposes i ster mi nate di n anyotherm ma anner ,shal lnevert hel essbeconti nuedasa bodycor por at ef ort hr e e( 3)y ear saf t e rt het i mewhen i t woul d hav e be en s o di s sol v e d, f or t he pur pos e of prosecut i ng and def endi ng sui t s by oragai nsti tand e na bl i ng i tt os e t t l ea nd c l o s ei t saffa i r s ,t o di s po s eo f andconveyi t spropert yandt odi st ri but ei t sasset s,but notf ort hepurposeofconti nui ngthebusi nessf orwhi ch i twa se s t a bl i s he d. Not eson Corpora ti on Law “Not esc om me ei nhandyonl ywh whenyouhavest udi ed… …” ”
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Mer e appoi nt ment of a r ec ei v er wi t hout anyt hi ng moredoes i mpl yi nt hedi ssol ut i on o fac or p or a t i o n
Republ i cv s.Mar sma manDe Dev el opme mentCom mp pany& Chung KaBi ovs.I AC
Nati onalAbacaotherFi bersCo.vs.Pore -
Ac t i onspendi ngf ororag ai ns tt hecor por at i on whe nt he 3y e a rpe r i o de x pi r e s ,a r eab at e ds i nc eaf t e rt ha tp e r i o d, t hecorporat i on ceasesf oral li nt ent sandpurposesand i snol ongercapabl eofsui ngorbei ngsued
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Maybe cont i nued by t he t rust eepr ovi ded donew wi i t hi n t he3yearperi od
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Shoul dt hecorporati on,t heref ore,finds i tdi fficul tt o fini sh i t sl i qui dat i on,i tm ma ay,atany t i me duri ng t he t h r e ey ea rpe r i o d,c o nv e yal li t sa s s e t sa ndr e c ei v abl e st o atr ust eet oprosecuteanddef endsui t sbyoragai nstt he c o r po r a t i o nb eg unbe f o r et hee x pi r a t i o no fs a i dpe r i o d
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Thee ffec toft hec onv ey ancei st omaket het r us t ee st he l egalowner s oft he propert y conveyed,subj ectt ot he be nefici ali nt e r es tt he r e i nofc r e di t or sands t oc khol de r s
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Duri ngthethreeyearperi odgrant edt oacorporati on t o l i qui dat eorwi ndupi t saffai rs,t heBOD i snotnorma mal l y permi mi t t ed t o undert ake any act i vi t y out si de t he usual l i q ui d at i o no ft hec or p or a t i o n.The r ei s ,ho we v e r ,no t h i ng t o pre vent t he st ockhol ders f r om convey i ng t hei r res pect i vesharehol di ngstoward t hecreat i on ofa new corporati on t ocont i nuethebusi nessoft heol d.Thi si s be causewi ndi ngup i st hesol eact i vi t yoft hedi ss ol v ed corporati on t hatdoesnoti nt endt oi ncorporateanew.I f i tdoes,however ,i ti snotunl awf ulf ortheol d board of di rec t ors t o negot i ateand t ransf erthe asset s oft he di ssol vedcorporati ont othenew corporati on i nt ended t o bec r e at ed asl ongast hes t oc khol der shav egi v en t he i r consent( Republ i cv s.Mar sma manDevel opm me entComp mpany)
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Wi ndi ngupi st hesol eac t i v i t yofadi ssol v edc or por at i on t hatdoes not i nt end t oi ncorporat e anew.I fi tdoes, ho we v e r ,i ti sno tunl a wf ulf o rt h eo l dbo ar dofdi r e c t o r s t o negot i ateand t ransf erthe asset s oft he di ssol ved cor porat i on t ot he new cor porat i on i nte nded t o be cr eat ed as l ong as t he st ockhol dershavegi ven t hei r consent( ChungKaBi ovs.I AC)
Whathappe nst ot her e mai ni ngass e t sandpr oper t i esof t hedi ssol ved corporati on i fl i qui dat i on and wi ndi ngup as provi ded i n sect i on 122 i snotcomp mpl i ed wi t h,as a res ul tofwhi cht he3yearperi odhasel apsed
Sumer avs.Val enci a -
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Thusi twashel dt hatwhen a cor por at i on i sdi ss ol v ed andt hel i qui dat i on oft heasset si spl aced i nt hehands o fr e c e i v e ro ras s i g ne e ,t h epe r i o do f3y e ar sp r e s c r i be d byl aw i snotappl i c abl eand t heass i gne ema yi ns t i t ut e a l la c t i o nsl e a di ngt ot hel i q ui d at i o no ft hec o r po r a t i o n e v e na f t e rt hee x pi r a t i o no f3y e ar s . I ft h ec or po r at i o nc ar r i e soutt hel i q ui da t i o no fi t sa s s e t s t hrough i t sown offi ffic cer sandcont i nuesand def ends t he acti ons brought by or agai nst i t ,i t s exi st ence shal l t er mi nat e att he end oft hreeyear sf r om t he t i meof di s s o l ut i o n;b uti fa r e c e i v e ro ras s i g ne ei sap po i nt e d, wi t h or wi t houta t r ans f er ofi t s pr ope r t i e s wi t hi n3 y e ar s,t he l eg ali nt er es t pass es t ot he ass i gne e,t he be nefici al i nt er es t r e mai ni ng i n t he me membe r s, s t o c kho l de r s ,c r e d i t o r sa ndo t he ri nt e r e s t e dpe r s o nsa nd sai dassi gneem ma aybri ngan acti on,prosecut et hatwhi ch has al r eady bee n co mmence df or t he benefit oft he c o r po r a t i o n,o rde f e ndt hel a t t e ra g ai ns ta nyo t he ra c t i o n al r eady i nst i t ut ed or w wh hi ch may be i nst i t ut ed eve n out si deoft heperi od oft hr eeyearsfixed f ort heoffic ffi ces o ft hec o r po r a t i o n.
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BoardofLi qui dat orsvs.Kal aw -
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“ Trust ee”asused i nt hecorporat i on st at ut em mu ustbe unders t ood i ni t sgener alconceptwhi ch coul di ncl ude t hecounselt owhom wasentr ust edi nthei nst antcase, t heprosecuti on oft hesui tfil edbyt hecorporat i on.The purposei nt het ransf eroft heasset soft hecorporati on t oa t rust ee upon i t s di ssol ut i on i s mor ef or t he pr o t e c t i o no fi t sc r e d i t o r sa nds t o c kho l de r s .De bt o r sl i k e t he pet i t i oner s her ei n may nott ake advantageoft he f ai l ure ofthe corporati on t ot ransf er i t s asset st oa t r us t e e ,a s s umi ngi tha sanyt ot r a ns f e rwhi c hpe t i t i o ne r has f ai l ed t o show, i n t he firs t pl ace. To sust ai n peti t i oners ’cont ent i on woul dbet oal l ow t hem t oenri ch t hem ms se l ve s at t he ex pense of anot her ,w wh hi ch al l enl i ght enedl egalsyst em ms scondem mn n.
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Thec ounse lwho pr ose cut ed and de f e nded t hei nt e r es t oft hecorporat i on maybeconsi deredas a “ t rust ee”at l e as twi t hr e spe c tt ot hem ma a t t e ri nl i t i g at i o no nl y
Ye s,pr ov i de d al lt he s t oc khol de r s gav et hei r conse nt ( ChungKaBi ovs.I AC)
Not eson Corpora ti on Law
Acc or di ng t o at t y . Ladi at he r ul i ng of t he Supr em me eCo Courti nt he cas eofCl em me ent evs. CA i s wr ong,opi ni on i sf urt her di scusse d af t ert heCl em me enteCase
Cl em me ent evs.CA -
Whoownst hepr oper t i es ?SOCI EDAD ANONI MA
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Thet er mi nat i on oft hel i f eofaj ur i di cale nt i t ydoe snot byi t s el fcauset hee xt i nct i onordi mi nut i onoft her i ght s a nd l i a bi l i t i e sofs uc he nt i t yort ho s eo fi t so wn wne r sand cre di t ors.I ft he t hree year ext ended l i f e has expi red wi t hout a t r us t e e or r ec ei v er hav i ng been e xpr essl y desi gnat ed by t he corporat i on wi t hi nt hatperi od,the boar d of di r e ct or s o t r us t ee s i t s el f ,f ol l owi ng t he rat i onal eoft heSupreme meCourt ’ sdeci si on i n Gel anovs. CA maybepermi mi t t edtodosocont i nueas”t rust ees”by l e g ali mpl i c at i o nt oco m mp pl e t et h el i q ui da t i o n.St i l li nt h e absenceofaBOD orBOT OT,t hosehavi ng anypec uni ary i nt er es t i n t he ass et s, i ncl udi ng not onl y t he shar ehol der s but l i kewi se t he cr edi t or s of t he corporat i on,act i ng f orand i ni t s behal f ,mi mi ght make pr oper r epr es ent at i ons wi t h t he SEC, whi ch has pri maryandsuffic ffi ci entl ybroadj uri sdi ct i on i nmat t er sof t hi s nat ur e,f orworki ng outa finalse t t l em me entoft he corporat econcerns
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Ma yac o r po r a t i o nt ha ti sa l r e a dydi s s o l v e d,t r a ns f e ra nd assi gn i t s asset s and propert i es t o a new corporat i on whi c hwi l lc ont i nuet hebus i ne ssoft hedi s sol v e done ?
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I fthere i sat rustee ,assi gnee or l i qui dat or ,i t can cont i nueprosecut i ngsui tevenbeyondthe3 yearperi od fixedbyl aw becausehebecome mest hel egalowneroft he r i g ht s ,a s s e t sa ndpr o p e r t i e sc o nv e y e dt ohi m
Gel anovs.CA
I ft he t hr ee yearext ended l i f e has expi r ed wi t houta t rusteeorrece i verhavi ngbeen expressl ydesi gnatedby t he cor por at i on wi t hi n t hat per i od, t he boar d of di r e c t o r so t r us t e e si t s e l f ,f o l l o w wi i ngt h er a t i o na l eo ft he Supr em me e Cour t ’ s dec i si on i n Gel ano vs . CA may be permi mi t t ed t o do so cont i nue as” t rust ees ” by l egal i mpl i cati on t o comp mpl et et he l i qui dat i on. St i l li n t he absenceofaBOD orBOT OT,t hosehavi ng anypec uni ary i nt er es t i n t he ass et s, i ncl udi ng not onl y t he shar ehol der s but l i kewi se t he cr edi t or s of t he corporat i on,act i ng f orand i ni t s behal f ,mi mi ght make pr oper r epr es ent at i ons wi t h t he SEC, whi ch has pri maryandsuffic ffi ci entl ybroadj uri sdi ct i on i nmat t er sof t hi s nat ur e,f orworki ng outa finalse t t l em me entoft he corporatec o n c e r n s( Cl e me me nt ev s .CA)
therul i ngi swrongaccordi ngtoatty.Ladia
Ac cor di ngt oat t yLadi a:Whathappe nst oac or por at i on t hati s al r eady di ssol ved,t hathas notbeen abl et o appoi ntat ruste ew wi i t hi nt he3yearperi od?
ac or po r at i o n di s s ol v e dwhi c hf a i l e dt oe x er c i s ei t sr i g ht s gr ant ed i n sec t i on 122 af t er t he 3 year peri od has e l a ps e d,c e a s e st oe x i s tf o ral li nt e nt sand pur p os e s ,i t cannol ongersueorbesued accor di ngto122 oft hecode,t hepr opert yshoul d be e s c he a t e d ,a c c or d i ng l y :
Sect i on 122. Co r p or a t el i q ui dat i o n. - Ever y corporati on whosechart erexpi resby i t sow wn nl i mi t ati on or i s annul l ed by f orf ei t ur e or otherwi se, or w wh hose corporateexi st encef orotherpurposes i ster mi nate di n anyotherm ma anner ,shal lnevert hel essbeconti nuedasa bodycor por at ef ort hr e e( 3)y ear saf t e rt het i mewhen i t woul d hav e be en s o di s sol v e d, f or t he pur pos e of prosecut i ng and def endi ng sui t s by oragai nsti tand e na bl i ng i tt os e t t l ea nd c l o s ei t saffa i r s ,t o di s po s eo f andconveyi t spropert yandt odi st ri but ei t sasset s,but notf ort hepurposeofconti nui ngthebusi nessf orwhi ch i twa se s t a bl i s he d. Atany t i medur i ng s ai dt hr e e( 3)y ear s ,t he corporat i on i saut hori zedand em mp pow we er ed t oconveyal l o fi t spr o p er t yt ot r u s t e e sf o rt h ebe ne fito fs t o c kho l de r s , mem mb bers,cre di t ors,andot herpersonsi ni nt er est .From andaf t eranysuchconveyancebyt hecorporati on ofi t s propert yi nt rust f or the benefit of i t s st ockhol ders, mem mb bers,cr edi t ors and ot hersi ni nt eres t ,al li nt er est whi c ht hec or por at i on had i nt hepr oper t yt er mi nat e s, t h el e g a li nt e r e s tv e s t si nt h et r us t e e s ,a ndt hebe ne fic i a l i nt e r e s ti nt hes t o c kho l de r s ,me mb mb er s ,c r e d i t o r so ro t he r pe r s o nsi ni nt e r e s t . Upon t hewi ndi ngupoft hecor porat eaffai rs , as se t di st r i but abl e t o any cr edi t or or
any st ockhol derormem mb berwhoi sunknownorcannotbe f ound shal lbeescheatedtotheci tyorm mu uni ci pal i ty wher esuchasset sar el ocat ed.
Exce ptby decr easeofcapi t als t ock and as ot herwi se al l owed by t hi sC Co ode, no corporat i on shal l di st ri but e any ofi t s asset s or propert y exceptupon l a wf wf uldi s s o l ut i o na ndaf t e rp a yme nto fa l li t sde bt sa nd l i abi l i t i e s .( 77a,8 9a,1 6a)
FORE REI GN COR RP PORATI ONS NS
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Defini t i on
Sect i on 123. Defini t i on and r i ght s of f or ei gn c o r p o r a t i o n s . -Fort hepurposes oft hi sCode,af orei gn corporati on i sonef orm me ed,or gani zedorexi st i ngunder anyl awsot hert han t hoseoft hePhi l i ppi nesandwhose l aws al l ow Fi l i pi no ci t i zens and corporat i ons t o do busi ne ssi ni t sown c ount r yors t at e.I ts hal lhav et he ri ghtt ot ransactbusi ness i nt he Phi l i ppi nes af t eri t shal lhaveobtai ned a l i censetotr ansactbusi ness i n t hi s co unt r yi n ac co r dance wi t h t hi s Code and a cert i ficat eofaut hori t yf rom t heappropri ategover nment a ge nc y .( n) Whati ft hel aw oft hes t at e oft hef or ei gn c or por at i on do e s no ta l l o w Fi l i pi noc i t i z e nst odobus i ne s si nt h e i r countr y? Thephr ase“ and whos el awsal l ow Fi l i pi noc i t i z ensand corporati onst odobusi nessi ni t sown count ryorst ate” i snot ,however ,an accurat ei ncl usi on i nt hedefini t i on asaycorporat i on re gi st eredororgani zedunderthel aws ofanot her st ate i s necessari l yaf orei gn corporati on whe t he r or not t he s t at e of i t si nc or por at i on al l ow Fi l i pi noci t i z e nso rc or p or a t i o nst od o bus i ne s si nt h at f or um m. . Thes ai d phr asewasi nse r t e d byt hef r ame r soft hel aw onl yasacondi t i on precedentt othegrantofal i censeof af o r e i g nc o r po r a t i o nt odobus i ne s si nt h ePhi l i pp i n e s .
Comp mposedof100% Amer i cans;or gani ze dundert hel aws ot hert han t hePhi l i ppi nes
Not eson Corpora ti on Law
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Thet es ti st he“ i ncor por at i ont es t ”
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Ge ne r a lr u l e :t hepl a c eo fi t si nc o r po r a t i o ni r r e s p e c t i v e o ft hena t i o na l i t y
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Excepti on:cont rolt estwoul d appl yi n det ermi mi ni ngthe corporate nati onal i t y, i . e. , t he ci t i zenshi p of t he cont rol l i ng st ockhol ders dete rm mi i nes t he nati onal i t y of t h ec or p or a t i o n
I faf orei gn corporati on want st ot ransactbusi nessi n t hePhi l i ppi nes,whatmu musti tdo?
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Obtai nal i cense
How mayi tdoso?
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Ac cor di ngt ose c.125: A ppl i c at i on f ora l i c ense. - A Sect i on 125. f orei gn corporati on appl yi ng f or a l i cense t ot ransact busi ness i n t he Phi l i ppi ne s s hal l submi t t o t he Securi t i es and Exc hange Co Com mm mi ss i on a copy of i t s art i cl es of i ncorporat i on and byl aws, cer t i fied i n accordancewi t hl aw,andthei rt ransl ati on t oan offi ffic ci al l a ng ua g eo ft hePhi l i pp i n e s ,i fne c e s s ar y .Theapp l i c a t i o n shal lbe underoat h and,unl essal r eady st at ed i ni t s a r t i c l e so fi nc or po r at i o n,s ha l ls pe c i fi c al l ys e tf o r t ht h e f o l l o w wi i ng :
1.Thedat eandt erm ofi ncorporati on;
2.The addr ess ,i ncl udi ng t he st r eetnumber ,oft he pri nci paloffi ffic ceoft hecorporat i oni nt hecount ryorst ate o fi nc or po r at i o n; 3. The name me and addr e ss of i t s r es i dent age nt aut hori zedt oacceptsumm m monsand processi n al ll egal proceedi ngsand,pendi ng t heest abl i shme mentofal ocal o ffi ffic c e ,a l lno t i c e saffe c t i ngt h ec or p or a t i o n; 4.The pl ace i nt he Phi l i ppi nes where t he corpor at i on i nt e ndst oo pe r a t e ; 5. The s pe ci fic purpo s e or pur pos es whi c h t he corporati on i nt ends t opursue i nt hetr ansacti on ofi t s busi nessi nt hePhi l i ppi ne s:Pr ov i ded,Thats ai dpur pos e or pur pose s ar e t hose spec i fical l y st at ed i n t he cer t i ficat e of aut hori t y i ssued by t he appr opri at e gov er nm me entagency; 6.The namesand addr ess esoft he pre sentdi r ect or s andoffic ffi cersoft hecorporat i on; 7.A st ateme mentofi t saut hori zed capi t alst ock and t he aggr egat enumberofshare swh whi ch t he cor porat i on has aut hori t yt oi ssue,i t em mi i zed by cl asses,par val ue of s ha r e s ,s ha r e swi t h o utp arv a l ue ,a nds e r i e s ,i fa ny ; 8.A st ateme mentofi t sout st andi ngcapi t alst ock and t he aggr egat enumberofshare swh whi ch t he cor porat i on has i ssued,i t em mi i zedbycl asses,parval ueofshares,shares wi t houtparv al ue,ands er i es ,i fany; 9.Ast ateme mentoft heamo mountactual l ypai di n;and 10.Suchaddi t i onali nf orma mat i on asma maybenecess aryor appr opri at ei n or der t o enabl et he Securi t i es and Exc hange Comm mmi s si on t o de t er mi ne whe t her suc h c o r po r a t i o ni se nt i t l e dt oal i c e ns et ot r a ns a ctb us i ne s s i nt hePhi l i ppi nes,andt odet ermi mi neandassessthef ees pa y ab l e . At t ac he dt ot he appl i cat i on f orl i ce ns e shal l be a dul y e xec ut e d ce r t i fic at e unde r oat h by t he aut hori zed offi ffic ci aloroffici al s oft he j uri sdi ct i on ofi t s i nc o r po r a t i o n,a t t e s t i ngt ot hef a c tt h att hel a wsoft he c o unt r yors t a t eoft heapp l i c a nta l l o w Fi l i pi noc i t i z e ns
addi t i onalsecuri t i esequi val enti n act ualma marketval ue t ot wo ( 2%) %) per c ent of t he am mo ount by whi c h t he l i censee' sgrossi ncome mef orthatfiscaly earexceedsfive mi l l i on ( P5, 000, 000. 00) pesos. The Securi t i es and Exc hange Com mm mi ss i on shal l al so r equi r e deposi t of addi t i onalsecuri t i es i ft he act ualma marketval ue oft he securi t i eson deposi thasdecreasedbyatl eastt en( 10%) perce ntoft hei ract ualma marke tval ue att he t i me t hey wer e de posi t ed. The Se cur i t i es and Exc hange Com mm mi ssi on may ati t sdi scr et i on r el easepartoft he addi t i onal securi t i es deposi t ed wi t h i ti f the gross i ncome me oft he l i censee has decre ased,ori ft he act ual market val ue of t he t ot al sec uri t i es on deposi t has i ncr eased,bymo m oret hant en( 10%)perce ntoft heact ual
and corporat i onstodo busi ness t her ei n,and t hatt he a ppl i c a nti sa ne x i s t i ngc or p or a t i o ni ng o ods t a ndi ng .I f such cert i ficat ei si n af orei gn l anguage,a t ransl ati on t hereofi n Engl i sh underoat h oft hetr ansl atorshal lbe a t t a c he dt he r e t o . The appl i cat i on f or a l i cense t o t r ansac t busi ne ss i n t he Phi l i ppi nes s hal l l i ke wi se be accomp mpani edbyastat em me entunderoat hoft hepre si dent or any ot her per son aut hori ze d by t he cor porat i on, showi ng t o t he sat i sf act i on of t he Securi t i es and Exc hangeComm mmi ss i on and ot hergo ve rnm me ent alage ncy i nt hepropercasest hatt heappl i canti ssol ventandi n sound financi alcondi t i on,and set t i ngf ort ht heasset s
m a r k e t a l u e of h e s e c u t i e sa t t h e t i me t he yi w e r e de p o s i t ev d . T he St e c ur i t i e sri a n d E xc h a ng e Co m mm m s s i o n may,f rom t i metoti me,al l ow t hel i censeetosubsti t ut e ot hersecuri t i esf orthoseal readyon deposi tasl ongas t h el i c e ns e ei ss ol v e nt .Suc hl i c e ns e es ha l lbee nt i t l e dt o col l ect t he i nt er est or di vi dends on t he securi t i es deposi t ed. I n t he ev ent t he l i censee ceas es t o do busi nessi nt hePhi l i ppi nes,t hese cur i t i esdeposi t ed as af or esai d shal l be r et urned, upon t he l i censee ' s a ppl i c a t i o nt he r e f o ra ndupo npr o o ft ot h es a t i s f a c t i o no f t he Sec uri t i es and Exc hange Comm mmi ss i on t hat t he l i censee has no l i abi l i t y t o Phi l i ppi ne r esi dent s, i ncl udi ng t he Gov er nm me ent of the Republ i c of t he Phi l i ppi ne s .( n)
and l i abi l i t i es of t he corporati on as of t he dat e not exceedi ngone( 1)yeari mmedi atel ypri ort ot hefil i ngof t h eappl i c at i o n. For ei gn banki ng, financi al and i nsurance co r por at i ons shal l , i n addi t i on t o t he abov e r equi re ments,comp mpl y wi t ht he provi si ons ofexi st i ng l a wsap pl i c a bl et ot h e m. m .I nt hec as eofa l lo t h e rf o r e i g n corporati ons, no appl i cati on f or l i cense t ot ransact busi ne ss i nt he Phi l i ppi ne ss hal lbe ac ce pt e d by t he Securi t i esand ExchangeCom mm mi ssi on wi t houtpr evi ous aut hori t yf r om t he appr opri at e gov er nm me ent agency , whene v err equi r edbyl aw.( 68a)
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I sthereanydeposi torsecuri t yrequi rem me ent ? Ye s,wi t hi n 60 daysaf t e rt hei s suanceoft hel i c ens e,a f orei gn corporati on, except those engaged i n f orei gn banki ng ori ns ur anc e,s hal ldeposi twi t ht he SEC,f or t h ebe ne fito fc r e d i t o r s ,s e c ur i t i e sc ons i s t i ngo fb o nd so r ot her evi dence of i ndebt edness of t he Phi l i ppi ne g o v e r nme nto ri t spo l i t i c a ls ubd i v i s i o n,o ro fg o v e r nme nt owned or contr ol l ed corporat i on, shar es of st ock i n “ re gi st ere d ent erpri ses”as t hi ster m i sdefined i n R. A. 5186,shar esofst ocki n dom me est i ci nsurancecom mp pani es and banksoranycomb mbi nat i on t here ofwi t h an act ual marke tval ueof100, 000 Addi t i onalse cur i t i e sma yber e qui r ed byt heSEC i ft he act ualm ma arketv al ue oft he securi t i es on deposi thas decr ease d by at l eas t 10%. %. Sect i on 126 of t he code pr o v i de s : I -I ft he Sect i on 126. s s ua nc eo fa l i c e n s e . Securi t i esand ExchangeCom mm mi ssi on i ssati sfied t hat t heappl i canthascom mp pl i edw wi i t h al lt her equi re ment sof t hi sCodeandot herspeci all aws,rul esandre gul ati ons, t heComm mmi ssi on shal li ssueal i censet otheappl i cantt o t ransactbusi nessi nt hePhi l i ppi nesf orthepurposeor purposesspeci fiedi nsuchl i cense.Upon i ssuanceoft he l i cense,such f or ei gn cor porat i on may comm mmence t o t ransactbusi nessi nt hePhi l i ppi nesandcont i nuet odo so f oras l ong as i tr et ai ns i t s aut hori t yt o actas a corporati on underthel awsoft hecount ryorstat eofi t s i ncor por at i on, unl es s suc h l i ce nse i s so oner surr ender ed, r ev oked, suspended or annul l ed i n accordancewi t ht hi sCodeorot herspeci all aws. Wi t hi ns i xt y( 60)day s af t ert he i ss uanc e of t h el i c e ns et ot r a ns a c tbus i ne s si nt hePhi l i pp i n e s ,t he l i ce nse, ex ce pt f or ei gn banki ng or i nsur ance corporat i on, shal l deposi t wi t h t he Securi t i es and Exc hange Com mm mi ss i on f or t he benefit ofpr es ent and f ut ure cr edi t ors of the l i censee i n t he Phi l i ppi nes, securi t i es sati sf actoryto t he Securi t i es and Exchange Comm mmi ssi on,consi st i ng ofbonds orot her evi dence of i ndebt ednessoft heG Go overnme mentoft hePhi l i ppi nes,i t s pol i t i cal subdi vi si ons and i nst rume m ent al i t i es, or of gov er nm me ent owned or cont r ol l ed cor por at i ons and e nt i t i e s ,s ha r e so fs t o c ki n" r e g i s t e r e de nt e r p r i s e s "a s t hi st erm i sdefinedi nRepubl i cActNo.5186,shar esof st ock i n domest i c corporati ons re gi st ered i nt he st ock exc hange, or share s of st ock i n dom me est i ci nsur ance compani es and banks,or any com mb bi nat i on oft hese ki nds ofs ecuri t i es,wi t h an actualmarketval ueofat l eas t one hundre d t housand ( P100, 000. ) pes os ; Provi ded,however ,Thatwi t hi nsi x( 6)m mo ont hsaf t ereach fiscalyearoft hel i censee,t heSecuri t i esand Exchange Comm mmi ssi on shal lr equi r e t he l i censee t o deposi t
Not eson Corpora ti on Law
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Ot her t han s ec t i on 125 and 126. Wh What ot her r equi r em me ent s are set under Phi l i ppi ne Law bef or ea f or ei gn cor porat i on may t r ansact busi ness i n t he Phi l i ppi ne s Ye s. A Res i dent ag ent i sr equi r ed. As a c ondi t i on prece dentt ot he grantofa l i cense t o do ort ransact busi ness i nt he Phi l i ppi ne s,t he f or e i gn cor por at i on i s r equi r ed t o desi gnate i t sr esi dent agent on whom summ mmonsand ot herl egalproc ess esma maybeserv edi nal l a c t i o nso rl e g alpr o c e e di ng sag a i ns ts uc hco r po r a t i o n Sect i on 128provi des: Resi dent agent ; servi ce of Sect i on 128. pr oc ess. - The Securi t i es and Exc hange Com mm mi ss i on shal lrequi reasacondi t i on precedentt othei ssuanceof t hel i censetotr ansactbusi nessi nt hePhi l i ppi nesby anyf orei gn corporati on t hatsuch corporati on fil ewi wi t h t he Securi t i es and Exc hange Com mm mi ss i on a wr i t t en powerofat t orneydesi gnati ngsome mepers onwhomustbe ar es i dentoft he Phi l i ppi nes,on whom any summ mmons andot herl egalprocessesma maybeservedi nal lacti onsor ot herl egalproceedi ngs agai nsts uch corporati on,and consent i ngt hatser vi ceupon such r esi dentagentshal l beadmi t t e dandhe l dasv al i dasi fs er v e dupont hedul y aut hori zedoffic ffi cersoft hef orei gncorporati onati t shom me e offi ffic ce. Any such f or ei gn cor porat i on shal ll i kewi se ex ec ut e and fil e wi t h t he Securi t i es and Exc hange Com mm mi ssi on an agr eeme mentorst i pul at i on,exe cut ed by t heproperaut hori t i esofsai d corporati on,i nf orm and s ubs t a nc ea sf o l l o ws : " The ( name m e of f or ei gn cor porat i on) does he r e b ys t i pul a t ea nda gr e e ,i nc o ns i de r a t i o no fi t sbe i ng gr ant edby t heSecuri t i esand ExchangeCom mm mi ssi on a l i c e ns et ot r a ns a c tbus i ne s si nt h eP hi l i p pi ne s ,t ha ti fa t any t i me sai d cor porat i on shal l cease t o t r ansact busi ness i nt he Phi l i ppi nes,or s hal lbe wi t houtany r es i dent age nt i n t he Phi l i ppi nes on whom any summ mmons orot herl egalproc ess esma maybe ser ved,t hen i n anyact i on orproceedi ngari si ngoutofanybusi ness o rt r a ns a c t i o n whi c ho c c ur r e di nt h ePhi l i pp i n e s ,s e r v i c e ofanysumm mmonsorot herl eg alpr oc es sma maybe made upontheSecuri t i esandExchangeCom mm mi ssi onandt hat such ser vi ceshal lhavet hesame mef orc eand effectasi f made upon t he dul y aut hor i z ed offi ffic ce r s of t he corporati onati t shomeoffic ffice. " Whe ne v ers uc h se r vi ceofs ummo mmonsorot he r pr oc es s shal l be made upon t he Sec uri t i es and Exc hange Com mm mi ss i on,t he Com mm mi ss i on shal l ,wi t hi n t en( 10)daysthereaf t er ,t ransmi mi tbyma mai lacopyofsuch summonsorot herl egalprocesst othecorporat i on ati t s home meorpri nci paloffi ffic ce .Thesendi ng ofsuch copyby
t he Comm mmi ssi on shal lbe necess arypartofand shal l comp mpl et e such ser vi ce.Al le xpenses i ncurre d by t he Com mm mi ssi onf orsuchser vi ceshal lbepai di nadvanceby t hepart yatwhosei nst ancet heservi cei sma made. I n caseofachangeofaddressoft heresi dent a ge nt ,i ts ha l lbehi so ri t sdut yt oi mme di a t e l yno t i f yi n wr i t i ngt heSec ur i t i e sandExc hangeComm mmi i s si on oft he new address .( 72a;andn) -
Thenece ss i t yoft heappoi nt me ntofar e si de ntag enti s onl yf ort he purposeofr ece i vi ng sum mm mons and ot her l e g alpr o c e s s e si na nyl e g a la c t i o no rp r o c ee di ngag a i ns t
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i ft heydoso,t heresponsi bl eoffic ffi cer sma maybesubj ect ed t othepenalsancti onsprovi dedf ori nsect i on 144oft he code,whi chma mayei t herbefineori mpri sonme ment
Whati fi ti snotdoi ngbusi nes swi t houtal i c ense ?
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I fi ti sno tt r a ns a c t i ngb us i ne s si nt hePhi l i pp i n e s ,e v e n wi t hout a l i ce nse ,i t can sue be f or et he Phi l i ppi ne Cour t s
Thege ner alr ul ei st hat“ i ti snott hel ac k ofr e qui r e d l i censebutdoi ngbusi nesswi t houtal i censewhi chbars af o r e i g nc o r po r a t i o nf o r ma c c e sst oo urc o ur t s . ”
t h ef o r e i g nc o r po r a t i o n
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Whoma ybeappoi nt edasar es i dentag ent ?
1.
Sect i on127provi desthat : Sect i on 127. Whom ma aybea r esi dentagent . A r es i dentage ntma ybeei t he rani ndi v i dualr e si di ngi n t he Phi l i ppi nes or a dom me est i c corpor at i on l awf ul l y t ransact i ngbusi nessi nt hePhi l i ppi nes:Provi ded,That i nt hecaseofan i ndi vi dual ,he mustbeofgood moral charact erandofsoundfinanci alst andi ng.( n)
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Excepti on: Fore i gn cor porat i onscan suebef or ethePhi l i ppi ne Court si ft he actor t ransact i on i nvol ved i s an “ i sol ate dt ransacti on” or t he corporati on i s not seeki ng t o enf orceany l egalorcont ract ualri ght s ari si ngf rom, m,orgrowi ngoutof ,anybusi nesswhi ch i th ast r a ns a c t e di nt hePhi l i p pi ne s
2. Nei t her i sa l i ce nse r equi r ed bef or ea f or ei gn cor por at i on may sue bef or e t he f or um i ft he purpose oft he sui ti st o prot ecti t st radema mark, t r ade name me, cor por at e name me, r eput at i on or g o odwi l l ;
Mayapart ner shi pbeappoi nt edasaresi dentagent? Ye s,dome s t i ccor por at i on t aken i ni t sg ener alse nsenot l e g als e ns e
3.
Orwherei ti sbased on avi ol at i on oft he Rev i sed PenalCode;
4.
Orm me er el ydef endi ngasui tfil edagai nsti t
I ft her ei sares i dentagentappoi nted.Maysummonsbe servedt oanyoffic fficersoft hecorporati on?
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No,i ft her ei sa r esi dent agent,t he desi gnat i on i s excl usi veandser vi cemu mustbem ma adeonl ytot here si dent agent orel se t he ser vi ce i s wi t houtf or ce and effect unl essm ma adet ohi m
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Thus ,whi l et hel aw al l owsse r vi ceupont heSEC orany o fi t so ffi ffic c e r so ra g e nt swi t h i nt h ePhi l i pp i n e s
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Thet womo desma ybe comee ffe ct i v eonl yi ft hef or ei gn corporat i on f ai l ed or negl ect ed t o desi gnat e such a per sonoranagent
5. Or wh wher e a par t yi ss t oppe dt oc hal l eng et he personal i t y oft he corporati on by ent eri ng i nt oa c o nt r a ctwi t hi t .
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Summonsmu mustbema madeonl yt or es i dentag entex ce pt whent her ei snor e si de ntag entappoi nt ed
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Wher esuc hf or e i gn c or por at i on act ual l ydoi ngbus i ne ss herehas notappl i ed f ora l i censet o do and hasnot desi gnat edanagentt orece i vesummons,t hen ser vi ceof summ mmonson i twi l lbema madepur suantt otheprov i si ons oft herul esofcourt .I fsuch f orei gn corporati on has a l i cense to do busi ness, t hen summ mmons t oi t wi l lbe servedon t heagentdesi gnatedbyi tf ort hepurpose,or ot herwi se i n acc or dance wi t h t he Cor por at i on Law ( Gener al Cor porat i on of t he Phi l i ppi nes vs. Uni on I nsur anceSoc. OfCant onLt d. )
I ft he f or ei gn corporat i on conduct s busi ness i nt he Phi l i ppi neswi wi t houtt hel i censerequi re ment .Whati sthe effect ?
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Sect i on133provi des:
A. As t o whe t her or noti tcansue
Not eson Corpora ti on Law
B. As t o whe t he r or noti tcanbesued
A f or ei gn c or por at i on A f or e i gn c or por at i on t r ans ac t i ng or doi ng t r ansact i ng busi ness i nt he busi ne ss i nt he Phi l i ppi ne s Phi l i ppi ne swi t ht h er e q ui s i t e wi t h al i c ens ecan s uebe f or e l i ce nse can be sued i nt he Phi l i ppi neCourt s Phi l i ppi neCourt s f or e i gn c or por at i on Subj ec t t o c er t ai n A r ansact i ng busi ness i nt he ex ce pt i ons, a f or ei gn t l i ppi neswi t houta l i cense cor porat i on doi ng busi ness Phi n Phi l i ppi ne i n t he co unt r y wi t hout a can be sued i s l i ce nse ca nnot sue i n Court Phi l i ppi neCourt s I f i t i s not t r ansact i ng i fi ti sno tdo i ngbus i ne s si n busi ne ss i nt he Phi l i ppi nes, t hePhi l i ppi nes,i tcannotbe e v e nwi t h outal i c e ns e ,i tc a n suedi n Phi l i ppi neCourt sf or sue bef ore t he Phi l i ppi ne l ac ko fj ur i s di c t i o n Court s A f or e i gn c or por at i on not doi ng busi nes s i n t he Phi l i ppi nes,mayi tbesued? -
Doi Sect i on 133. ng busi ness wi t hout a l i c e ns e. -Nof o r e i g nc o r po r a t i o nt r a ns a c t i ngbus i ne s si n t he Phi l i ppi nes wi t houta l i cense,ori t ssuccessorsor assi gns,shal lbe permi mi t t ed t omai nt ai n ori nt ervene i n any ac t i on, sui t or pr oc ee di ng i n any co urt or admi ni st rat i ve agency of the Phi l i ppi nes; but such cor porat i on may be sued orproce eded agai nstbef or e Phi l i ppi ne court s or adm mi i ni st rat i ve t ri bunal s on any v al i dc aus eofac t i on r e cogni z e d unde rPhi l i ppi nel aws. ( 69a )
Rul esl ai ddownbyt heSC
I fi ti sno tt r a ns a ct i ngbus i ne s si nt h ec ount r yi tc a nno t besue df orl ac kofj ur i s di c t i on
I st her e any sanct i on t hatcan be enf orc ed t of ore i gn cor porat i ons whi ch ar e doi ng busi ness wi t hout t he r e q ui r e dl i c e ns e ?
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Penalsanct i onsunderse ct i on144
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Any v i ol at i on of t he code i ss ubj e ct t o suc h penal sanct i ons
Thet r uet es t ,howev er ,se emst obewhe t hert hef or e i gn corporat i on i scont i nui ngt hebody orsubst anceoft he busi ne ss or ent e r pr i s ef or whi c hi twas or g ani z e d or whe t he ri thassubs t ant i al l yr e t i r edf r om i tandt ur ne di t ove rt o anot her . The t er m i mpl i es a cont i nui t y of com mm mer ci al de al i ngs and ar r ang e me nt s , and cont em mp pl ates,t othate xt ent ,t heperf orm ma anceofact sor wor ksort hee xer ci s eofsomeoft hef unc t i onsnor ma l l y i nci dent t o, and i n progr essi ve prosec ut i on of , the purposeandobj ectofi t sorgani zat i on ( Ment hol at um Co. I n c .v s .Ma ng al i ma n)
t r a ns a c t i o n,i s o l a t e doro t he r wi s e ,butd uet oami mi s t a ke n be l i eft hatt he ywe r epar toft heshi pme ntoff or t ys i mi l ar bundl es consi gned t o per sons or e nt i t i es i n t he Phi l i ppi nes, t here i s no j ust i ficat i on t here f ore, f or i nv o ki ngt hes e c t i o n
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Thet r uet es t ,howev er ,se emst obewhe t hert hef or e i gn corporat i on i scont i nui ngt hebody orsubst anceoft he busi ne ss or ent e r pr i s ef or whi c hi twas or g ani z e d or whe t he ri thassubs t ant i al l yr e t i r edf r om i tandt ur ne di t ove rt o anot her . The t er m i mpl i es a cont i nui t y of com mm mer ci al de al i ngs and ar r ang e me nt s , and cont em mp pl ates,t othate xt ent ,t heperf orm ma anceofact sor wor ksort hee xer ci s eofsomeoft hef unc t i onsnor ma l l y i nci dent t o, and i n progr essi ve prosec ut i on of , the pur p os eando bj e c to fi t so r g a ni z a t i o n
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What e v ert r ans ac t i on t hePhi l i ppi neAme r i can Dr ugCo. had exe cut edi n vi ew oft he l aw,t he Ment hol at um Co. di di ti t sel f .And t heMe Ment hol atum Co.bei nga f orei gn corporat i on doi ng busi ness i nt he Phi l i ppi nes wi t hout t he l i cense r equi re d by sect i on 68 oft he Corporat i on Law,i tma may notprosecut et hi s act i on f orvi ol ati on of t r adem ma arkandunf ai rcomp mpet i t i on
Why i sf or e i gn cor por at i ons bar r ed acc es sf r om our c o ur t si ft he ydobus i ne s swi t ho utal i c e ns e ?
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I nt hecaseatbar,t hetr ansacti on ent eredi nt obythe r espondent wi t ht he pet i t i oner s are not a ser i es of comm mmer ci aldeal i ngswh whi chsi gni f yani nt enton t hepart oft heres pondentt odo busi nessi nt hePhi l i ppi nesbut const i t ut ean i sol atedonew wh hi chdoesnotf al lunderthe c a t e g o r yof“ d o i ngbus i ne s s . ”
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The r e cor ds show t hat t he onl y r eas on why t he r es pondent ent er ed i nt o t he se co nd and t hi r d t ransact i onswi wi t ht hepet i t i onerwasbecausei twant ed t or e c o v e rt h el o s si ts us t a i ne df r o m t hef a i l ur eo ft he peti t i onerst o del i verthe crude coconutoi lunder t he firstt ransact i on andi n ordert ogi vethel att erachance t o make good on t hei r obl i gat i on. Fr om t hese f act s al one,i tcan bededuct ed t hati n re al i t yther ew wa asonl y one agr ee ment bet wee n t he pet i t i oner s and t he respondent.
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Thet hr e es ee mi ngl ydi ffe r entt r ans act i onswer eent e r e d i nt oby t hepart i esonl yi n an effortt of ul fil lt hebasi c agr eeme mentand i n no wayi ndi cat ean i nte nton t hepart of t he r es pondent t o eng age i n a co nt i nui t y of t r a ns a c t i o nswi t hpe t i t i o ne r swh whi c h wi l lc a t e g or i z ei ta s af o r e i g nc o r po r a t i o ndo i ngbus i ne s si nt h ePhi l i ppi ne s
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3 contr act s,butaccor di ngtot hecourtwasnotdoi ng busi nessi nt hePhi l i ppi ne s
Marshal l Wel l sCo.vs.HenryW W. .El serandCo Co.
Marshal l Wel l sCo.vs.HenryW W. .El serandCo Co. -
The obj ec t oft he s t at ut e was t o subj ec tt he f or e i gn corporat i on doi ng busi ness i nt he Phi l i ppi nes t ot he j ur i s di ct i on ofi t scour t s.Theobj ec toft hes t at ut ewas nott opre ventthe f orei gn corporati on f rom perf orm mi i ng si ngl eacts,butt opreventi tf rom acqui ri nga domi ci l e f ort hepurposeofbusi nesswi wi t houtt aki ng t hest eps ne c e s s ar yt or e nd eri ta me me na bl et os ui ti nl o c alc o ur t s .
Bul akhi dasvs.Navarr o -
FarEastI nt ’ li mportvs.NankaiKogyoCo Co.Ltd. -
Onl yonecontr act,butaccor di ngt ot heSupreme meCourt wasdoi ngbusi nes si nt hePhi l i ppi nes
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Everycaseshal lbe j udged i nt he l i ghtofi t specul i ar ci r cums mst ances , wh where a si ngl e act or t r ansact i on ho we v e r ,i sno tme r e l yi nc i de nt a lo rc a s ua lb uti nd i c a t e s
I ti ss e t t l e dt h ati faf o r e i g nc or p or a t i o ni sno te ng ag e di n
t h ef o r e i g nc o r po r a t i o n’ si nt e nt i o nt odoo t he rb us i ne s s i n t he Phi l i ppi nes, sai d si ngl e act or t r ansact i on const i t ut es “ doi ng” or “ engagi ng i n” or “ t ransact i ng” busi nessi nt hePhi l i ppi ne s
busi ne ss i nt he Phi l i ppi nes,i tma y notbe deni ed t he r i g htt ofi l ea na c t i o ni n Phi l i ppi ne c o ur t sf o ri s o l a t e d t r a ns a c t i o ns -
Theobj ectofse ct i on 68 and 69 oft heCor por at i on l aw was not t o pr e v ent t he f or e i gn c or por at i on f r om perf orm mi i ngsi ngl eacts,butt opreventi tf rom acqui ri ng a domi mi ci l ef ort hepurposeofbusi nessw wi i t houtt aki ng t hest epsnecessarytor enderi tame menabl et osui ti nt he l o c alc o ur t s .I twa sne v e rt hepur p os eo ft heL eg i s l a t ur e t o exc l ude a f or ei gn cor porat i on whi ch happens t o obt ai n an i sol at ed or der f or busi ness f r om t he Phi l i ppi nes, f rom securi ng redress i nt he Phi l i ppi ne court s
TheSwe di shEas tAs i aCo. ,Lt d.Vs .Ma ni l aPor tSe r vi c e -
I tmu mustst atedthatt hesecti on i snotappl i cabl etoa f o r e i g nc o r po r a t i o np er f o r m mi i ng s i ng l ea c t sor“ i s o l a t e d t r ansact i ons. ” Ther e i s nothi ng t o show t hat t he pet i t i oner has been i n t he Phi l i ppi nes engaged i n cont i nui ng busi ness or ent er pri se f or whi ch i t was org ani zed,when t hesi xt een bundl eswer eerr oneousl y di sc har ged i n mani l a, f or i t to be consi der ed as t r a ns a c t i ngbus i ne s si nt hePhi l i pp i n e s .T hef a c ti st h at t he bundl es ,t he v al ue of whi ch i s so ught t o be r ecove re d,wer el anded notasa r esul tofa busi ness
Not eson Corpora ti on Law
Everycaseshal lbe j udged i nt he l i ghtofi t specul i ar ci r cums mst ances , wh where a si ngl e act or t r ansact i on ho we v e r ,i sno tme r e l yi nc i de nt a lo rc a s ua lb uti nd i c a t e s t h ef o r e i g nc o r po r a t i o n’ si nt e nt i o nt odoo t he rb us i ne s s i n t he Phi l i ppi nes, sai d si ngl e act or t r ansact i on const i t ut es “ doi ng” or “ engagi ng i n” or “ t ransact i ng” busi nessi nt hePhi l i ppi ne s
Ment hol at um vs .Mangal i man -
The r e wer e 3 cont r ac t s ent er ed i nt o,how c ome t he y wer es t i l lnot c ons i der ed as doi ng bus i ness? A (nt am Co ns ol i dt e d,I nc .v s .C A)
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I n t he i nst ant case , the t es t i mony of At t y . Pabl o Ocamp mpo, t hat appel l ant wa was doi ng busi ness i n t he Phi l i ppi nescorr oborat edbynol esst hanNabuoToshi da, one of appel l ant ’ s offi ffic cer s, t hat he was sent t ot he Phi l i ppi nest ol ook i nt ot heoperat i on ofmi mi nes,t hereby r e v e a l i ngt hede f e nd ant ’ sde s i r et oc ont i nuee ng a gi ngi n busi nesshe r e,af t e rr e ce i v i ngt hes hi pme ntoft hesc r ap i ronunderconsi derat i on,maki ngthePhi l i ppi nesabase t h er e o f .
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I n such a case,t he si ngl e act of t ransact i on i s not mer el yi nci dent alorcasual ,buti sofsuch charact eras di st i nct l yt oi ndi cat e a purpose on t he part of t he operat i ons f or t he conductofa partofcorporati on’ s ordi narybusi ness
I f a co r por at i on appoi nt s a di s t r i but or or a r e p r e s e nt a t i v e ,wi l li tne c e s s ar i l yi mp l ydo i ng b us i ne s s i nthecount ry?
I ft he f ore i gn corporat i on mai nt ai ned an i ndependent s t a t usd ur i ngt h ee x i s t e nc eo ft hed i s put e dc ont r a c t .
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Appoi nt me ntofa di s t r i but or or r e pr e sent at i v ei nt he Phi l i ppi nes, unl es s i t has an i ndependent st at us ( t ransactsanddoesbusi nessi ni t sownnam me eandf ori t s accountandnotoft hef orei gncorporati on)
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i ft hatbethecaset heme mer eappoi nt mentofadi st ri but or wi l lnotcons t i t ut edoi ngbusi ne ss
How doyou know i fi thasani ndependents t at us?
comp mpeti t i on,orf al se desi gnati on ofori gi n and f al se descri pti on,“ whet herornoti thasbeen l i censed t odo busi ness i n t he Phi l i ppi nes under Ac t Numbe r ed Fourt eenhundredandfif t yni ne,asame mended,ot herwi se known as Cor por at i on Law, at t he t i me i t bri ngs comp mpl ai nt .
Puma Spor sc huf abri ken Rudol fDassl er ,K. G.v s.I AC andMI MI LORO MFG.Cor p. -
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Comm mmuni cat i onsMa Mat er i al sand Desi gnvs.CA
A pe r usaloft heagr ee me nt sbe t we en pe t i t i one rASPAC and t he r espondent s show t hat ther e ar e prov i si ons whi c h ar ehi ghl yr es t r i c t i v ei nnat ur e ,suc hast or educ e pet i t i onerASPAC t oa mer eext ensi on ori nst rum me entof t hepri vat erespondent s
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I TEC was doi ng busi ness wi t hout a l i cense,how we ev er ASPAC i ses t opped
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by e nt e r i ng i nt ot he Re pr e sent at i v e Agr ee me nt ” wi t h I TEC, pet i t i oner i s char ge wi t h knowl edge t hat I TEC wasnotl i ce ns ed t oe ngag ei n busi nes sac t i v i t i esi nt he countr y,and i sthusst opped f r om rai si ng i n def ense suchi ncapaci t yofI TEC,havi ngchosent oi gnoreorev en presump mpt i vel ytakeadvantageoft hesam me e
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I nt op-wel d werul ed t hataf ore i gn corporat i on maybe exe mpt ed f r om t he l i cense r equi r em me ent si n or der to i ns t i t u t ean a ct i o ni no urc o ur t si fi t sr e pr e s e nt a t i v ei n t he count ryma mai ntai ned an i ndependentst at usduri ng t he exi st ence of the di sput ed cont ract . Peti t i oner i s deeme medt ohaveacc ededt osuchi ndependentc har act er when i tent e r edi nt ot heRe pr ese nt at i v eAgr ee me ntwi t h I TEC
“ Bythesame metoken,t hepet i t i onershoul d be gi ven t hesame t r eat menti nt he Phi l i ppi nes aswema makeavai l abl et oourown ci t i zens.We a r eobl i g e dt oas s ur et ona t i o na l so fc o unt r i e s oft he Uni on an effect i vepr ot ect i on agai nst unf ai rcomp mpet i t i on on t hesame mewayt hatt hey a r e o bl i g a t e d t o s i mi l a r l y pr o t e c t Fi l i pi no Ci t i ze nandfirm ms s -
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Thecomp anyi snothe r ese eki ngt oe nf or ceanyl eg alor contr act ri ghts ari si ng f r om m, , or growi ng out of any busi ne ss whi c h i t has t r ans act ed i n t he Phi l i ppi ne I s l a nd s.T hes ol epur p os eoft heac t i o ni st opr o t e c ti t s reput ati on,i t s corporatename me,i t sgoodwi l l ,whenever t hat reputat i on, cor porat e nam me e or goodwi l l have t hr ough t he nat ural dev el opm me ent of i t s t r ade, est abl i shedt hem ms sel ves Andi tcont endst hati t sr i ght st ot heus eofi t sc or por at e and t r ade name,i s a proper t y ri ght ,a ri ghti nr em m, ,
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TheFr e nc hc ompanyma yg ai n ac ce sst oourc our t s ,i n t he firs t pl ace i t wa was not doi ng busi ness i n t he Phi l i ppi ne s
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Themar ke t i ngofi t spr oduc t si nt hePhi l i ppi nesi sdone t hrough an exc l usi ve di st ri but or ,Rust an Com mm mer ci al Corporat i on.Thel att eri san i ndependententi t ywh whi ch buys and t he n mar ke t s not onl y pr oduct s of t he peti t i onerbutal soma manyotherproduct sbeari ngequal l y wel l known and es t abl i shed t r ade mar ks and t r ade name s
As sumi ng Rus t ans had no i ndependents t at us woul d t heSC grantLacost eaccesst oourcourt s?
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Even i fLacost e di d busi nessi nt hePhi l i ppi nesi tcan br i ngac t i onbe causet hecas ei nv ol v esavi ol at i onofour penalcode
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Such was a vi ol at i on of ar t i cl e 189 of t he RPC, i f pros ecut i on f ol l ows af t er t he comp mpl et i on of t he prel i mi naryi nvest i gati onbei ngconduct edbyt heSpeci al Prosecut ort hei nf orma mat i on shal lbe i nt henam me eoft he Peopl eoft hePhi l i ppi nes and no l ongert hepet i t i oner whi c hi sonl yanaggr i e v edpar t ysi nceacr i mi naloffe nse i se s s e nt i a l l ya na c ta g ai ns tt h e St a t e .I ti st he l a t t e r whi c hi spr i nc i pal l yt hei nj ur e d par t yal t hough t he r ei s apr i v at er i g htv i o l a t e d
whi c h ma yass er tand pr ot ectagai ns tal lt hewor l d,i n any oft he court s oft he wor l d even i nj uri sdi ct i ons wher ei tdoesnott r ans actbus i ne ssj us tt hes ameasi t may prot ect i t st angi bl e propert y,r ealor personal , a g ai ns tt r e s p as s ,o rc o nv e r s i o n -
Si nce i ti st he t r ade and nott he mar kt hati st o be pro t ect ed a t r adema mar k acknow wl l edges no t er ri t ori al boundar i es ormuni c i pal i t i es ors t at e s ornat i ons ,but ext endstoeve ryma marketwher ethetr ader ’ sgoodshave be comeknownandi dent i fiedbyt heuseoft hemar k
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GeneralGarm me ent sCorporati onvs.Di rec t orofPat ent s -
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A f or e i gn c or por at i on whi c h hasne v erdonebus i ne ssi n t he Phi l i ppi ne I sl ands and whi ch i s unl i censed and unr egi st er ed t o do busi ness her e, but i s wi wi del y and f avor abl yknown i nt heI sl andst hr ough t heuset her ei n ofi t sproduct sbeari ngi t scorporateand t radename mehas al e g a lr i g htt oma ma i nt a i na na c t i o ni nt h eI s l a nd s Ment hol at um cas e wa was subse quent l y der ogat ed when Congress,purposel yto“count eractt heeffect s”ofsai d case,enact ed R. A.638,i nser t i ng Sect i on 21Ai nt he Tr ademar k Law,whi c h al l ows a f or e i gn cor por at i on or j ur i s t i cpe r s on t obr i ngan ac t i on i n Phi l i ppi neCour t s f ori nf ri ngem me entofa mark ort r adename,f orunf ai r
Not eson Corpora ti on Law
Ther ul i ngi nt heaf or ec i t ed cas ei si nc ons onanc ewi t h t heConventi onoft heUni onofPari sf ortheprot ect i on of I ndust ri alPropert yt o whi ch t he Phi l i ppi nes became me a part y.Art i cl e8 t here ofprovi dest hatat radenam me eshal l be pr ot ect e di n al lt he c ount r i e soft heUni on wi t hout t h eo bl i g a t i o no ffi l i ngo rr e g i s t r a t i o n,whe t he ro rno ti t f orms mspartoft het radema mark
LeChem mi i st eLacost evs.Fernandez
We W es t er nEqui pme ntandSuppl yCo.v s .Re ye s -
Quot i ng t he Pari s Convent i on and t he caseofVani t y F ai rM Mi i l l sI n c .v s .T .Ea t o nCo .t hi sc our tf ur t he rs a i d:
Comm mmuni cat i onsMa Mat er i al sand Desi gnvs.CA -
Tr e at i e sf orpar toft hel aw oft hel and
The r e cor ds s how t hatt he goodwi l land r e put at i on of t hepet i t i oner’ sproduct sbeari ngthet radema markLacost e dat e back ev en bef or e 1964 when Lacos t e cl ot hi ng a ppa r e l swe r ef o r s tma r k e t e di nt h ePhi l i pp i n e s .T oal l o w Hem ma andast ocont i nueusi ng t het r adema mar k Lacost ef or t hesi mpl ereason t hathewasthefirs tr egi st ranti nt he Suppl em me ent al Reg i s t er of a t r adema mar k used i n i nt er nat i onalcomm mmer ceand notbel ongi ngtohi m i st o r ender nugat or y t he ve r y es se nce of t he l aw on t r adema mar ksandt r adename mes
At l ant i cMut ualI ns ur anceCo.v s.Ce buSt e v edor i ngCo. -
The l aw de ni es t oaf or e i gn cor por at i on t he r i ght t o mai nt ai n sui tunl essi thasprev i ousl ycomp mpl i ed wi t ha cer t ai nr equi r eme ment,t hen such comp mpl i ance,ort hef act t hat t he sui ng cor por at i on i s ex em mp pt t her e f r om m, , be come sane ce ss ar yav er me nti nt hec ompl ai nt
Securi t i esand Exc hangeCom mm mi ss i on upon any oft he f o l l o wi ngg r o unds :
The se ar e ma t t er s pec ul i ar l y wi t hi nt he knowl edge of appel l ant sal one,andi twoul dbeunf ai rt oi mposeupon appel l ee t he bur den of asse r t i ng and pr ov i ng t he contr ary .I ti s enough t hat f ore i gn corporat i ons are al l owed by l aw t o see kr edr ess i n our court s under c e r t a i nc o ndi t i o ns :t hei nt e r p r e t a t i o no ft hel a ws ho ul d notgoso f arastoi ncl ude,i n effect ,an i nf erencet han t hosecondi t i onshavebeen metf r om t hem me er ef actt hat t h epa r t ys ui ngi saf o r e i g nc o r po r a t i o n
1.Fai l ur et o fil ei t s annualr eportorpay any f eesas requi redbythi sCode; 2.Fai l uret oappoi ntand mai ntai n ar esi dentagenti n t h ePhi l i ppi ne sasr e q ui r e db yt h i sT i t l e ; 3.F a i l ur e ,a f t e rc ha ng eo fi t sr e s i d enta g e nto rofh i s addr ess ,t o submi tt ot he Securi t i es and Exchange Com mm mi ssi on ast at em me ento fsuch changeasr equi r edby t hi sTi t l e ;
Ol ym mp pi aBusi nessMa Machi nesCo.vs.E.Razon -
How doyoudi st i ngui sht hi scasew wi i t hAt l ant i c?
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I nAt l a nt i ci td i s mi mi s s e dt hec as e ,whi l ei nOl y mp mp i ai tdi d not
4.Fai l ur et o submi tt ot he Securi t i esand Exchange Comm mmi ss i on an aut hent i cat ed co pyofanyame mendme ment t oi t s art i cl es ofi ncorporati on or by-l aws or ofany art i cl es of me mer ger or consol i dat i on wi t hi n t he t i me pr e s c r i be db yt h i sT i t l e ;
Ti meI nc .v s .Re y es -
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Wef We ai lt ose ehow t he sedoc t r i ne scanbeapr oposi nt he c a s ea tb ar ,s i nc et hepe t i t i o ne ri sno t“ ma i nt a i ni ngany s ui t ”buti sme me r e l yde f e ndi ngoneag ai ns ti t s e l f ;i tdi dno t fil eanyc omp l a i ntb uto nl yac o r o l l a r yde f e ns i v epe t i t i o n t oprohi bi tt hel owercourtf rom f urt herproceedi ngwi wi t h asui tt h ati tha d noj ur i s di c t i o nt oe nt e r t a i n
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6. Fai l ure t o pay any and al lt axe s, i mpos t s, assessme ment s or penal t i es, i f any, l awf ul l y due t ot he Phi l i ppi neGo v e r nme nto ra nyo fi t sa g enc i e so rpo l i t i c a l s ubd i v i s i o ns ;
What l aw g ov e r n f or ei gn c or por at i on doi ng and t r a ns a c t i ngbus i ne s si nt hePhi l i p pi ne sw wi i t hal i c e ns e Laws wsoft heRepubl i coft hePhi l i ppi nessaveandexcept t hatwoul dnorm ma al l ybethosema mat t er swhi chconcer ni t s f orma mati on,organi zat i on or di ssol ut i on,or t hose fixi ng t her e l at i o ns hi p,l i abi l i t i e s ,r e spo ns i bi l i t i e s,o rdut i e so f
7.T r a ns a c t i ngbus i ne s si nt hePhi l i pp i n e sout s i deo ft he pur pose or purpose sf or wh whi ch such cor por at i on i s a ut h o r i z e dunde ri t sl i c e ns e ;
t he st ockhol ders ,m me em mb ber s or offi ffic cer s of t he f or ei gn c o r po r a t i o no rt h e i rr e l a t i o nst oe ac ho t h e r .
8.Transacti ngbusi nessi nt hePhi l i ppi nesasagentofor acti ng f orand i n behal fofany f orei gn corporati on or ent i t y not dul y l i ce nsed t o do busi ness i n t he Phi l i ppi ne s ;o r
I n effect ,i ntr acor porat e or i nte rnal mat t er s not affect i ngcr edi t orsorthepubl i ci n generalaregoverned notby Phi l i ppi ne l aws butt he l aw underwhi ch t he f orei gncorporati onwasf orm me edororgani zed
Sect i on 129. Law appl i cabl e. -Anyf o r e i g n corporati on l awf ul l y doi ng busi ness i nt he Phi l i ppi nes shal l be bound by al ll aws, r ul es and r egul at i ons appl i cabl etodomest i ccorporat i onsoft hesam me ecl ass, exceptsuch onl yasprovi de f orthecre ati on,f orm ma ati on, organi zat i on or di ssol ut i on of corporati ons or t hose whi c h fix t he r e l at i ons ,l i abi l i t i es ,r es ponsi bi l i t i e s,or dut i es of st oc khol der s, me memb mber s, or offi ffic ce r s of c o r po r a t i o nst oe ac ho t h e ro rt ot h ec or p or a t i o n.( 73a )
5.A mi sr epres entat i on ofany mat eri alma mat t eri n any appl i cat i on, r epor t , affi ffid davi t or ot her docume ment subm mi i t t edbysuchcorporati onpursuantt othi sTi t l e;
9.Anyot hergr oundaswoul dr enderi tunfitt ot r ansact busi nessi nt hePhi l i ppi ne s.( n)
Wi l lt hepr ee mp t i v er i ght s ofa f or e i gn cor por at i on be gover ned by t hesame mesect i on oft hecode? I st hepreem mp pt i v e r i ght s of a s t oc khol der i n a dom me es t i c
Sect i on 135. I ssuance of cer t i ficat e of -Upon t herev ocati on ofanysuch l i censet o r e v oc at i o n. t r a ns a c tb us i ne s si nt h ePhi l i ppi ne s ,t h eSe c ur i t i e sa nd
corporat i on sam me easthepreem mp pti veofast ockhol derof af o r e i g nc or po r at i o n.
Exc hange Com mm mi ss i on shal li ss ue a cor r es pondi ng c e r t i fi ca t eo fr e v o c at i o n,f ur ni s hi ngac o pyt he r e o ft ot he appropri at egovernme mentagencyi nt hepr opercases.
No The Se cur i t i es and Exc hange Commi mmi ss i on s ha l la l s oma ma i lt ot hec o r po r a t i o na ti t sr e g i s t e r e do ffi ffic c e i n t he Phi l i ppi nes a not i ce of such r ev ocat i on accomp mpani ed by a copy oft hecert i ficateofr evocat i on. ( n)
M. E.Gr eyv s.I nsul arLum mb berComp mpany -
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SEC doesnothav ethe sol e author i t yt o suspend or r ev oke t he l i cense of a f or ei gn cor porat i on doi ng busi nessi nt hePhi l i ppi ne s,ot he rgov er nme ntage nci es l i ket he Cent r alBank ,t heI nsur anceCom mm mi ssi on may al sodo sowi t hi nt hei rrespect i vedom mi i ni on,despi t et he pr o v i s i o no fs e c t i o n13 4 I ft h eSEC be l i e v e st h atr e v o c at i o ni swa r r a nt e d,s e c t i o n 135provi desthat :
PNB vs . Gonzal es , wi l l thi s appl y t o a f or ei gn cor porat i on? How do you di st i ngui sh t hi s casef r om a Phi l i pp i n el a w w? ? Si nc ei tc o nc e r nst her i g ht sofs t o c kho l de r si ti st hel a w ofNew Yor kt hats houl dgovern
I st he l i cense t o do busi ness ofa f orei gn corporati on subj ect t o suspensi on or re voc at i on? What are the grounds?
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Sect i on134provi des: -Wi t hout Sect i on 134. Re v oc at i o no fl i c e ns e. prej udi cetoothergroundsprovi ded byspeci all aws,t he l i c e ns eo faf o r e i g nc o r po r a t i o nt ot r a ns a ctb us i ne s si n t he Phi l i ppi nes may be r ev oked orsuspended by t he
Not eson Corpora ti on Law
Vol unt ar ywi t hdr awalofl i ce nse
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Al l3condi t i onsmus tbec ompl i e dwi t h
Sect i on 136. Wi t hdr aw wa al of f or ei gn c o r p or at i o ns . -Subj ectt oexi st i ngl awsandregul ati ons, af orei gn corporati on l i censed t ot ransactbusi ness i n t he Phi l i ppi nes maybeal l owed t o wi t hdr aw f r om t he Phi l i ppi ne sb yfil i ngap e t i t i o nf o rwi wi t hdr a wa lo fl i c e ns e . No cer t i ficat e of wi t hdr awal shal l be i ssued by t he Securi t i es and Exc hange Com mm mi ss i on unl es s al lt he f ol l owi ngrequi re ment sareme met ; 1.Al lcl ai mswhi chhaveaccruedi nt hePhi l i ppi neshave be enpai d,c ompr omi sedorse t t l e d;
2.Al lt a xe s ,i mp os t s ,a s s e ss me me nt s ,a ndp ena l t i e s ,i fa ny , l awf ul l yduet othe Phi l i ppi neG Go overnm me entorany ofi t s a g e nc i e so rp ol i t i c a ls ub di v i s i o nsha v ebe e npa i d ;a nd
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Jur i sdi c t i on l i e s or i gi nal l y and e xc l us i v e l yt os peci al
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comm mmer ci alcourt sandnoti nt heNLRC SEC has j uri sdi ct i on ov er cas es of re mov al f r om
3. The pet i t i on f or wi t hdrawal of l i cense has been publ i shedonceaweekf ort hree( 3)consecut i veweeksi n ane ws pa pe ro fg e ne r a lc i r c ul a t i o ni nt hePhi l i p pi ne s .
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em mp pl oyme mentofcor porat eoffic fficer s Ther e l at i ons hi p ofa pe r s on t o a cor por at i on,whe t he r asoffic ffi cerorasagentorem mp pl oye eornotdet er mi ned by t he nat ure of t he se rv i des per f or med, but by t he
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i nc i d ent so ft her e l a t i o ns hi po nt h e ya c t ua l l ye x i s t Corporat eoffic fficersdi sm mi i ssali sal waysacorporat eactor i nt r a c o r p o r at ec o nt r o v e r s y
P. D.902A
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P. D. 902A was ame me nde d by R. A. 8799 or t he
SECURI TI ES REGULATI ON COD ODEi nt hey e ar2000 Thej ur i sdi ct i on ofSEC f orc ase sf al l i ngunde rs ec t i on 5
appl yt om me er ere covery -
Mai nconsi derati on As se r t shi sr i ghtt ot heoffic eorque s t i onst hepr opr i e t y
comm mmer ci alcourt sandnott heNLRC Securi t i esRegul ati onCode Tr ans f e r r ed j ur i s di c t i on o f t he SEC
o rv al i di t yofhi sous t e ro rr e mo mo v al ,i twi l lbet hes pe c i al
t her eof wa was t r ansf er r ed t o t he court s of ge ner al j ur i s di ct i on des i gnat e d by t he SC, t he y we r e cal l ed speci al comm mmer ci al court s, t he onl y except i ons wer e
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r e v o c a t i o no fc o r p or a t ef r a nc hi s ea ndc a l l i ngo fe l e c t i o ns Howeve rt he SEC r et ai ned r ecei ver shi p or suspensi on
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payme ment swi t hi nJune20, 2000 Jur i sdi c t i on ofspec i alcomm mme e r ci alcour t sar ee xc l usi v e a nd o r i g i na l ,j ur i s di c t i o ni sc onf e r r e db yl a w; w;1 Spe c i a l
Mi dl andconst ruct i onvs.Movi l l a NL RC wi l lbep os s e s s e do fj ur i s di c t i o ne x c e pt i o n wi l lno t
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t o Spec i al
Com mm mer ci alCourt s Suspe nsi on ofpa yme ment ,appoi nt mentofma manage ment r e c e i v e r s hi p Whati st her e asonf orsuspens i onofal lcl ai ms ? Ther e asonf orsus pendi ngac t i onsf orc l ai msagai ns tt he
Comm mmer c i al Cour t pe rr e gi on e xc ep t MAKATI and
cor porat i on i s not real l yt o enabl et he manageme ment
QUEZON ON CI TYwh whi c hhast wo Devi cesorSchem me es Pyr am mi i d sc heme me ( mi sr epr es ent at i on) Speci al
def endanti n any pendi ng act i on agai nsti tbef oreany
effect i vel yexerc i sehi spowe wersf reef rom anyJudi ci alor
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Comm mmer ci alCourt s Sy nd i c a t e de s t a f a -no tb ai l a bl e Al l ej ec ase Fal l s squarel y under sec. 5 ( a) Speci al Comm mmer ci al
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Court s Al l eg at i on cor por at e offic e r s empl oyi ng sc heme s i n
such ot heract i ons t o cont i nue woul d onl y add t ot he
c o mmi mm t t e eort h er e h abi l i t a t i o nr e c e i v e rt osubs t i t ut et he c o ur t ,t r i buna lo rb ody .T her e a lj us t i fic a t i o ni st oe na bl e t hema manageme mentcomm mmi t t eeorr ehabi l i t ati on re cei vert o ext raj udi ci ali nt erf erence t hatmi mi ghtundul y hi nder or prev entthe “ r escue”oft he debt orcomp mpany.Toal l ow
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di v e r t i ng Not onl y det ri ment al to cor porat i on, but gener al
bur den oft hemanag eme ntc ommi mmi t t e eprr ehabi l i t at i on r ece i ve r , whose t i me, e ffort and r esour ces wo woul d be was t ed i n def e ndi ng c l ai ms ag ai ns tt he c or por at i on
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memb mber shi p Fraudmustbestat edwi wi t hpart i cul ari t y
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i nst ead of bei ng di r ect ed t owards r est ruct uri ng and
Abadv s.CFIofPang asi nan Fraud mustbe st at ed wi t h part i cul ari t y ot herwi se i t
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maybefil edt oanycourt I nt r a c o r po r at e Ex c l us i v ea ndor i g i na lj ur i s di c t i o no fs pe c i a lc o m mm me r c i a l
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court s Sol e cr i t er i a i s t here must be an i ntr acor porat e
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r e l at i o ns hi p Pert ai ni ng t o a contr over sy ( speaks al so of i ntr a-
part ners hi p cont r ove r sy ,t hat part ners hi p must be
1. 2.
regi st eredwi t ht heSEC) Rul enow Necess ari l ybeani nt r a-c orporat ere l at i onshi p;and, Thecontr over symu mustari seoutofsai drel at i onshi p I nt racorporaterel ati onshi pal onewi wi l lnotsufficetoput
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rehabi l i t ati on. ( PALvs.SpousesSadi candKurangki ng) To e nabl et her ec ei v ert oe ffec t i v e l ye xer ci sehi sorhe r powe werf reef orm anyj udi ci alorext raj udi ci alt hatma may
di s t ur b 3typesofsuspensi onofpayme ments 1. Si mpl esus pens i onofpay me nt s wher edef erme mentofpaymentofcl ai msagai nstadi st ress
comp mpany;askthecourtt obegi ve nt i met ot hepayme ment -
ofl i abi l i t ybypost poni ngthepaym me ent When i thas s uffic i entass e t s and l i abi l i t i e s butf or ces t hei mpossi bi l i t yofme meet i ngthem whent heyrespect i vel y
f al ldue 2. Suspe nsi on ofr ec ei ve r wi t h a ma manage mentco mmi t t ee wi t h ar ehabi l i t at i on pl ay or s us pe nsi on ofpayme nt s accomp mpani ed by a proposalf orrehabi l i t at i on ( wi t h or
i ti nt heam mb bi tofspeci alcom mm mer ci alcourt sandcourt s
wi t houtr e habi l i t at i on) co r po r a t i o n ha ss uffic i e nta s s e t st oc ov e ri t sl i a bi l i t i e s , but s ee st he poss i bi l i t y;i s or wi t hout r ehabi l i t at i on
o f g e ne r a l u r i s d i c t i o no m a y t a k e o gn i z a n c e C a s e o f aj tr a n s f e r e e f s h a r e sc o f s t o c k t o com mp pelt he
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corporati ont orecogni zehi m asast ockhol der How can i tbe i nt racorporatewhen hei snotyetf ul l y
pl a ns ;no r ma ma l l ywo ul dat t a c ht her e h abi l i t a t i o npl a n Forpurposeofeconomi mi cdeve l opme ment 3. Suspe nsi on ofpayme ment s when t he co r por at i on has no
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pa i d When t het r ans f e r eehasdoneal lhec an ber equi r e dt o
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do t orendert het ransf ereffect ualand t hecorporat i on
r e f us e st or e g i s t e rt h et r a ns f e r ,t her e q ui r e m me e nto ft he
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regi st rat i on i swai ved and t he t ransf ereei s consi dered
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c o nt i nuei t so pe r a t i o nsp r o fit a bl y ? Eveni ft hedi st re ssedcomp mpany hasnosuffici entasse t s
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a ndl i a bi l i t i e si tc a ng of o rs us pe ns i o n I taskedf orama manageme mentcomm mmi t t eewi t houtarec ei ver
t echni cal l y a st ockhol derw wh ho maysuetoenf orcet he
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r i g htt oha v et h et r ans f e rr e g i s t e r e d Fl or endovs.ri ver a,EmbassyFarms ms The t r ansf er or wi t hhel dt he de l i v e r y ,t he y ar e noty e t
s uffic i e nta s se t st oi t sl i abi l i t i e s Ma yi ts t i l lber e v i v e d ? Ye s,i tma ys t i l lber e vi v e d How can acorporat i on wi t h morel i abi l i t i esthan asset s
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pl an( Vi c t o r i usM Mi i l l i ngc as e ) Co nv e r tt he i rc l a i msi nt oe qui t y The i rl i abi l i t y was al mo s t wi ped out t he y be came
orappoi nt edbytheBOD i sal waysacor porat eact The f ac tt hat pe t i t i oner soughtpayme nt ofhi s bac k
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s t o c kho l de r si ns t e adofc r e di t o r s Af t e r5 y ear st hose who conv e r t e d sol di tbac kt ot he
wag es,ot he rbe ne fit s as we l las mo r aland e xempl ar y
corporati on,t here byma maki ngprofit s Ame ndme nt i sf or t he e conomi c dev el opme nt oft he
pr i maf a ci e ;i twi l lno tb ec ons i de r e di nt r a c o r po r at e Cont rov ersi esi nt heappoi nt ment( askedi nt hebar) Casesi nvol vi ngel ect i on,appoi nt mentandrem mo oval I nAndayathecourtsai dthatacorporat eoffic fficerel ect ed
count ry
damages and at t orney’ sf eesi n hi scom mp pl ai ntwi l lnot oper at e t o pr ev ent t he SEC f r om
ex er ci si ng i t s
j ur i s di ct i on unde rP . D.902A.Thej ur i sdi c t i on wi l lnot wr e s tont heNLRC j us tbec aus eoft hat Tabangv s .NLRC
Not eson Corpora ti on Law
Whati fwal angame ndme nt ,ema sma r ami ngl i abi l i t i es kesaasset s Suspensi on order - al lact i ons f or cl ai ms agai nstthe cor porat i on ar e accor di ngl y suspended at wh whate ve r st aget heprocee di ngsm ma aybe
Effectofsuspensi on-youcannotf orecl ose Whatar ecl ai ms ? Debt s ordema mands ofpecuni arynat ur e.Asse rt i on ofa
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ri ghtt ohavemo moneypai d Cl ai ms agai nst the cor porat i on shal l be suspended,
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Serv i ceofsummons-rul e2sect i on5 Summ mmonsmaybema madet oany one I nc a seo fi nt r a c o r p o r at ed i s p ut e ,e l e c t i o ns ,f r a ud,e t c ;
i ft heyar e gover ned by i nt eri m rul esofpr ocedur e on
assert i on ofari ghtt ohavemo moneypai d;i tmustpresent
amonet arycl ai m,l i qui dat edorunl i qui dat ed Nul l i ficat i on of cor porat i ons does not pre sent a
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i nt r a c o r po r at ec o nt r o v e r s i e s Ve nue Speci al comm mmer ci al court s where pri nci pal offic ffi ce i s
monet arycl ai m ofpecuni arynat ur e
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l o c at e d/ es t a bl i s he d( s e c t i o n 5r ul e1) Mat t er s of pay ment /suspensi on must be fil ed i nt he
Uni onvs .CA I tdoes notal l ow a merei ndi vi dualt o fil et he peti t i on
c i t y /muni c i pa l i t yw wh he r ec o r po r a t i o ni sl o c at e d Under ol d rul e,cr edi t orshaveno ri ghtt oi nst i t ut e an a c t i o nf o rr e c e i v e r s hi p;n o wc r e d i t o r s ,i ft he ys o l d2 0%
whi c h i s l i mi t e d t o c or por at i ons par t ne r shi p or
t h e yc ani ns t i t ut ea na ct i o nf o rr e c e i v e r s hi p
a s s oc i a t i o ns . -
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Wher e no aut hor i t yi s gr ant ed t o he ar pe t i t i ons of i ndi vi dual sf orsuspensi on ofpayme ment s,such peti t i on ar ebeyondt hecomp mpet enceoft heSEC Whathappe nsi ft he r ei sas uspe nsi onor de r ? Ex pl a i nt h eke yphr a s e“ q ua l i t yi se q ui t y ” Al lc r edi t or ss t andone qualf oot i ng,se cur eoruns ec ur e,
Sect i on 5 Serv i ceo fsumm mmonsma maybema madebyf ax/emai l
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E. B.Vi l l ar o s av s .Be ni t o Wi l lappl yonl yi fi ti snotani nt r ac or por at econt r ov er sy I ft he contr over sy arose out of an i nt racorporat e di sput e rul es on i nt er i m rul es ofprocedureofi ntr ac o r po r a t ec o nt r o v e r s i e ss ha l lg o v e r n Rul e4sect i on17-i mmuni t yf r om sui t Re ha bi l i t a t i o nr e c e i v e rs ha l lno ts ub j e c tt oa nyac t i o n,
ho l di ngo rl i e no rwi t h o utal i e n,noc r e di t o rm ma a ye nf o r c e hi sl i e nwhi l er e habi l i t a t i o ni sg oi ng( Al e ma ma rc as e ) Nopr e f e r e nc es ha l lb eg i v e n
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RCBC vs .I AC Deci ded onmot i onf orreconsi derat i on I tc o ur t7y e a r st ode c i deaut h e nt i c a t i o n Rul eoft het humb Aut oma t i c s uspe ns i on e v en i f not de cr ee d i n t he
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de c i s i o ni t s e l f Once l i f t ed t he pref err ed cr edi t ors wi l l regai n t hei r
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pr e f e r e nc e Appoi nt me ntofama nag eme ntcomm mmi i t t ee Takeov ert hema nage me ntcomm mmi i t t eeoft hedi s t r es se d
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Wi t houtanyr e me dy Whati sani nt r ac or por at econt r ov er sy? Sect i on5( B) So l ecr i t e r i ai swh whe t he rt h e r ee x i s t san i nt r a c o r p o r at e
di s put ei st ha ti ft h er ei sani nt r a c o r po r at er e l a t i o ns hi p Why i st her es us pe nsi on ofal lac t i ons ag ai ns tc l ai ms
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whenar ec ei v e ri sappoi nt e d? To e nabl et he manag eme ntcomm mmi i t t ee t oe xe r ci se i t s
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power s SyCh Chi m vs .SySi yHo( bef or eam ma anagem me entcom mm mi t t ee maybeoptbyacourt ) 2r equi si t es f or a val i d appoi ntm me ent of m ma anagem me ent
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comm mmi t t ee 1. I mmi nent dange r of di ss i pat i on, l os s, was t age or 2.
de s t r uc t i o no fa s s e t so ro t he rc o r po r a t ep r o pe r t i e s Paral ysi sofbusi nessoper at i ons,t hemer eappre hensi on
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off ut ur emi mi sconductbaseduponpri ormanagem me ent Saveand excepti nt hecaseofa cl osecorporat i on i n caseofdeadl ockma m anagem me entcom mm mi t t eei sal l owed t o t akeoverr i ghtaway
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Jaci nt oc ase 2nd parofpage676 2re qui si t eswherepresent Wa W al angma paut ang,t her ewasapar al yz at i on SyChi m Di dnotappoi ntama managem me entcom mm mi t t ee I nt he absence ofa st r ong showi ng ofan i mmi nent danger of di ssi pat i on, l oss wastage or dest ruct i on of a s s e t so ro t he rp r o pe r t i e so fac or p or a t i o na ndp ar a l y s i s ofi t sbusi nessoper at i ons,t heme m er e apprehensi on of f ut uremi mi sc onductbase d upon pr i orm mi i sma manage ment wi l lnotaut hor i z et he appoi nt me ntofa manag eme nt
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comm mmi t t ee Sect i on 5 and 6( D)governed by separat erul es;i nt eri m r ul e sa ndi nt r a c o r p or a t ec o nt r o v e r s y Ve nueofac t i ons Rul e so fc o ur t -whe r et hep ar t i e sa r er e s i d i n g I ntr acor porat e- no mat t er where t he part i es ar e r e s i d i n gi twi l lb ei nt h ec i t yorm mu uni c i pa l i t yw wh he r et h e
pr i nc i pa lo ffi ffic c ei sl o c at e d Rehabi l i t ati onproceedi ngsvenue
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I nr e m Ac qui r e d upon publ i c at i on wi t hout f ur ni s hi ng t he
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cre di t orsacopyoft hepet i t i onandatt achment sthereof A cr e di t or ma y now fil et he s us pe ns i on pr oce edi ngs;
cl ai m or dema mand i n co nnect i on wi t h any act do ne om mi i t t ed by hi m i n good f ai t hi nt he exe r ci se ofhi s
pr o v i de st h atc r e d i t o r so wnsa tl e a s t2 5% I nt r a c o r p o r at e -r ul e1s e c t i o n6
Not eson Corpora ti on Law
f unct i onsandpowershere i nconf err ed Cl a i m Ri ght t o payme ment , whet her or not i ti sr educed t o
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j udgme nt , l i qui dat e d
or unl i qui dat ed, fixe d
or
co nt i nge nt , mat ure d or unmat ure d, di sput ed or
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c o r po r a t i o n Ext raor di naryanddrast i cre medy
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undi sput ed,l egalorequi t abl eandsecuredorunsecured I nvest mentc ont ract s A c ont r ac t ,t r ansac t i on or s c he me wher eby a per s on i nvest shi smo moneyi n acomm mmon ente rpri seandi sl edto
expectprofitspri mari l yf rom t heeffect sofot hers Themanage me ntc ommi mmi t t e eand r ehabi l i t at i on r e ce i v er
1. 2.
ar eemp mpower edt o: Takecust odyandcontr olofal lasset soft hecorpor at i on Eval uat e asset s and l i abi l i t i es,earni ngs operat i ons of
t h ec or p or a t i o n 3. Det er mi ne t he bes t way t o pr ot ec tt he i nves t or s and c r e di t o r s 4. Study, re vi ew ev al uat et he f easi bi l i t y of cont i nui ng operat i onandstr uct ures 5. Submi mi t r ec om mm mendat i ons t o t he RTC 6.
r eg ar di ng
r e ha bi l i t a t i o n pl a n Rehabi l i t at ethecorporat i on i fdet ermi mi nedt obef easi bl e
byt heRTC 7. Reportt ot heRTC unti lt hecor porat i oni sdi ssol ved
THE SECURI TI ESREGULATI ON CODE ( RA8799) -Al soknown ast heBl ueSkyLaw si ncei twasenacte dt oprot ect t he publ i cf r om unsc rupul ous pr om mo ot er s who st ake busi ness whi c h hav e no basi s and se l ls har es and i nt er e s tt he r e i nt o i n v e s t o rs ,o w ht o a re t h e nt l e f tsq h oa l d i no g c e r t i fi c at e s r epres ent i ng n o t h i n g m mo re ha n ac l ai m o a u r e ft h e b l u e s k y. S EC.2.De c l a r a t i o no fS t a t ePo l i c y .–TheSt a t es ha l le s t a bl i s ha s o c i a l l yc o ns c i o us ,f r e ema ma r k e tt h atr e g ul a t e si t s e l f ,e n c our a g et h e wi de s t par t i c i pat i on of owne r s hi pi n ent e r pr i s es, enhanc et he demo mocrat i zat i on ofweal t h,promo mot ethedevel opmentoft hecapi t al market ,prot ecti nvest ors,ensuref ul land f ai rdi scl osureabout s e c ur i t i e s ,mi mi ni mi z ei fno tt o t a l l ye l i mi na t ei ns i d ert r a di ng a nd ot her f raudul ent or ma mani pul at i ve devi ces and pract i ces wh whi ch c r e a t edi s t o r t i o nsi nt hef r e ema ma r k e t . BROKER -per sonwhobuysand sel l ssecuri t i esf ort heaccountof o t h e r s . DEALER -per son who buysand sel l ssec uri t i esf orhi s/herown accounti ntheordi narycourseofbusi ness. NOTE: Nop er s o ns ha l le ng ag ei nt h eb us i n e ss o fb uyi ngo rs el l i ngs ec ur i t i e si nt hePhi l i ppi ne sasa br oker or deal er , or act as a sal esm ma an, or an associ at ed per son ofany br okerordeal erunl ess r e g i s t e r e da ss u c hwi t ht h eCo mm mmi s s i o n .( Se c2 8)
SECURI TES -shares,part i ci pat i on ori nt er est si nacorporati on or i nacomm mmer ci alenter pri seorprofit maki ngventureandevi denced byac er t i fic at e ,cont r ac t ,i ns t r ume nt ,whe t herwr i t t enore l e ct r oni c i nc ha r ac t e r .I ti nc l ude s :
COD ODE:CO OF FDI PS a) Ce r t i fic a t e so fa s s i g nme nt s ,c e r t i fic a t e so fp ar t i c i pa t i o n, t r us tc e r t i fi ca t e s ,v o t i ng t r us tc e r t i fic a t e so rs i mi l a r i nst rume ments; b) Ot heri nst rume mentsasm ma ayi nt hef ut ur ebedet erm mi i ned byt heComm mmi i s si on; c) Fract i onal undi vi ded i nt er est si n oi l , gas or ot her mi ne r a lr i g ht s ; d) De r i v a t i v e sl i k eop t i o na ndwa r r a nt s ; e) I nves t ment cont r act s, cer t i ficat es of i nte r es t or part i ci pat i on i n a profitshari ngagreem me ent ,cer t i ficat es o fd e po s i tf o raf ut ur es ub sc r i p t i o n; f ) Propri et aryornon propri et arym me emb mbershi p cert i ficat es i nc o r po r a t i o ns ;a nd g) Sharesofs t ock,bonds,debent ure s,not es,evi dencesof i nde bt e dne s s ,a s s e t b ac k e ds e c ur i t i e s ;
GR: Se c ur i t i e ssha l lno tb es o l do roffe r e df o rs al eordi s t r i b ut i o n wi t hi nt he PH,wi t houta r e gi s t r at i on s t at e me ntfil ed wi t h and approvedbySEC.Pri ort osuchsal e,i nf orm ma ati on on t hesecuri t i es, i n suc hf or m and wi t h suc h subs t anceast heC Co omm mmi ss i on may prescri be,shal lbe madeavai l abl etoeach prospect i vepurc haser . ( Sec8) EXCEPT:Exemp mptSecuri t i esunderSec9 a) Anyse curi t yi ss uedorguarant ee dbyt heGov er nm me entof t h ePH,o rb yanypo l i t i c a ls ub di v i s i o no ra g e nc yt h e r e o f , orbyanypers on cont rol l edorsupervi sedby,andact i ng asan i nst rume mental i t yofsai dG Go over nment. b) Anys ec ur i t yi ss ue dorguar ant e edbyt hegov er nme ntof anycount rywi t hdi pl oma mati cre l ati onswi t ht hePH H, ,orby a nys t a t e ,p r o v i nc eo rpo l i t i c a ls ubd i v i s i o nt he r e o fo nt h e bas i sofr ec i pr oci t y:Pr ovi ded,t hatt heSEC ma yr equi r e comp mpl i ancewi t ht hef orm andcontentofdi scl osure sthe Comm mmi ssi onma maypre scr i be. c) Cer t i ficat es i ss ued by a r ec ei ve r or by a t r ust ee i n bankr upt cy dul y appr ov ed by t he pr ope r adj udi cat or y body . d) Any securi t y or i t s deri vat i ves t he sal e or tr ansf er of whi c h,byl aw,i sundert hesupe r vi si onandr egul at i onof t he O Offi ffice o ft he I nsurance Comm mmi ss i on,Housi ng and Land UseRegul at oryBoard,ort he Bur eau ofI nte rnal Revenue. e) Anyse curi t yi ss uedbyabank ex ce pti t sown shar eso f s t o c k . AND Exem mp ptTr ansact i onsunderSec10 a) A j udi ci al s al e,or sal e by an execut or ,admi ni st rat or , guar di an or r ece i ver or t rust ee i n i nsol ve ncy or bankr upt cy . b) Byorf ort heacc ountofapl e dgehol der ,ormo r t gag eeor a nyot he rs i mi l a rl i e nho l d ers e l l i ngoro ffe r i ngf o rs al eor del i veryi nt heordi narycourseofbusi nessand notf or t hepurpose ofavoi di ng t heprovi si onsoft hi sC Co ode,t o l i qui dat e a bona fide debt,a securi t y pl edged i n good f a i t hass e c ur i t yf o rs uc hde bt . c) An i sol at ed t r ansact i on i n whi ch any sec uri t yi ssol d, offer ed f orsal e,subscri pti on ordel i veryby t heow wn ner t h e r e o f ,o rb yhi sr e p r e s e nt a t i v ef o rt heo w wn ne r ’ sac c o unt , such sal eorofferf orsal e,subscri pti on ordel i verynot be i ng ma de i nt he cour s e ofr epe at e d and s uc ce ss i v e t ransact i onsofal i kecharact erbysuchowner ,oron hi s acc ount by such r epr es ent at i ve and such owner or r epr ese ntat i ve not bei ng t he under wri t er of such s e c ur i t y . d) Di st ri but i on by a cor porat i on,act i ve l y engaged i nt he busi ne ss aut hor i z e d by i t s AOI , of s ec ur i t i e st oi t s st ockhol ders or ot her sec uri t y hol der s as a st ock di v i de ndo ro t h e rdi s t r i b ut i o no uto fs ur p l us . e) Sal e of ca pi t al s t oc k of a co r por at i on t o i t s own st ockhol dersexcl usi vel y,wher enocom mm mi ssi on orother remu munerat i on i s pai d or gi ven di rec t l y or i ndi rec t l yi n connect i onwi t ht hesal eofsuchcapi t als t ock. f ) I ss uanceofbondsornot ess ec ure d bym mo or t ga geupon r ealest at e or t angi bl e personal propert y,wher et he enti r e mort gage t oget herw wi i t h al lt he bonds ornot es sec ur ed t here by ar e sol dt o a si ngl e pur chaserata s i ng l es al e . g) I ssueand del i ver yofany sec uri t yi n exc hangef orany ot hersecuri t yoft hesame mei ssuerpursuantt oari ghtof conver si on ent i t l i ng t he hol der of t he sec uri t y surr ender ed i n ex change t o make such conv er si on: Prov i ded,Thatt he sec uri t y so surr endere d has been r egi st er ed undert hi sCo Code orwas,when sol d,e xem mp pt f rom t heprovi si onsoft hi sCode,and t hatt hesecuri t y i ssued and del i ver ed i n exc hange, i f sol d at t he Not eson Corpora ti on Law
conver si on pri ce,woul d att heti meofsuch conver si on f al lwi t hi nt hecl as so fs e c ur i t i e se nt i t l e dt or e g i s t r a t i o n undert hi sCode. Upon suchconver si ontheparval ueof t he sec uri t y surr endere di n such exc hange shal l be deeme med t he pri ceatwhi ch t he sec uri t i es i ssued and del i ver edi nsuchexchangearesol d. h) Br oker ’ str ansact i ons,e xec ut edupon cust om me er ’ sor der s, onanyr egi st eredExchangeorot hert radi ngma market . i ) Subscr i pt i ons f or share s of t he capi t al s t ock of a corporati on pri or t ot he i ncorporati on t here of or i n pursuanceofan i ncr easei ni t saut hori zedcapi t als t ock under t he Cor por at i on Code , when no ex pense i s i ncur r e d, or no c om mm mi s si on, c om mp pens at i on or r em mu uner at i on i spai d orgi ven i n connect i on wi t ht he sal eordi sposi t i on ofs uchsecuri t i es,andonl yw wh hent he purpose f or sol i ci t i ng, gi vi ng or t aki ng of such subscri pti onsi st ocomp mpl yw wi i t ht herequi reme ment sofsuch l aw as t ot he per cent age of t he capi t al st ock of a corporat i on whi chshoul dbesubscri bed bef orei tc an be r egi st er ed and dul yi ncorporat ed, or i t s aut hori zed c a pi t a li nc r e a s e d. j ) Thee xc hangeofs ec ur i t i e sbyt hei s suerwi t hi t se xi s t i ng securi t y hol ders excl usi vel y,wher e no comm mmi ssi on or o t h e rr e mune mu r a t i o ni spa i do rg i v e nd i r e c t l yo ri nd i r e c t l y f o rs o l i c i t i ngs uc he x c ha ng e . k) Thesal eofs ecuri t i esbyan i ssuert of ewert han t went y ( 20)personsi nt hePhi l i ppi nesduri nganytwel vemont h peri od. l ) The sal e ofse curi t i est o any numberoft he f ol l owi ng qual i fied buyers :( i ) Bank; ( i i ) Regi st ered i nvest ment house; ( i i i ) i nsurance comp mpany; ( i v) Pensi on f und or r et i r em me entpl an mai ntai ned by t he Gove rnme mentoft he Phi l i ppi nes or any pol i t i cal subdi vi si on t her eof or managedbyabankorot herper sonsaut hori ze dbyt he Bangko Sent r al t o engag e i n t rust f unct i ons; ( v) i nves t mentcomp mpany or ;( vi )Such ot her per son as t he Cn om mm m i s s i o n ay b y u l e d e t e r mfi i n e a s q us a l i fi e d b u y e r s , o t h e b a si sm of su c hr f a c to r s a s n an c i a l o p h i st i c a ti o n , networt h,knowl edge,and exper i ence i n financi aland busi ness ma t t e r s, or amo unt of ass e t s unde r manage ment .
PROTECTI ON OFSH HA AREHO HOLDER RS SI NTEREST 1. TenderOffer s( Sec19) 2. Proxysol i ci t at i on( Sec20) 3. I nte rnalr ecor dkeepi ngandaccount i ng( Sec22)
TENDER OFFER –Apubl i cl yannouncedi nt ent i on acti ngal oneor i n concertwi t h ot herst oacqui reequi t ysecuri t i esofa comp mpany. ( 2002BarExams ms) I nst anceswhen TenderOfferi sRequi r ed 1. Whenthepe r so ni nt endst oacq ui r e15% ormor eoft he eq ui t y shar e of a publ i c co mpany purs uant t o an agr ee mentmadebet wee n ora mongt heper so n and one o rmo mo r es e l l e r s ; 2. Whenthepe r so ni nt endst oacq ui r e30% ormor eoft he equi t yshareofapubl i ccomp mpany wi t hi n aper i od of12 mont hs; 3. When t he per so ni nt endst oacqui r eshar est hatwoul d r esul ti n an owners hi p ofmor et han 50% oft he equi t y shar esofapubl i ccomp mpany.
PROX OXYSO OL LI CI TATI ON NOTE: A br okerordeal erw wh ho hol ds oracqui r est he pro xy f orat l eastt en percent um ( 10%)orsuchper cent age as t he Com mm mi ssi on ma yp r e s c r i b eo ft heo ut s t andi ngsha r eo ft hei s s ue r ,s hal ls ub mi mi ta r e p or ti de n t i f y i n gt h eb e ne fic i a lo w wn n e r wi t h i nt e n( 1 0)d ay sa f t e r s uc hac q ui s i t i o n,f o ri t so w wn nac c o unto rc u s t o m me e r ,t ot hei s sue ro ft he s e c u r i t y ,t ot h e Ex c h a ng ewh er et h es e c u r i t yi st r a de da nd t ot h e Comm mmi ssi on.( Sec20. 5)
FRAUDULENT TRANSACTI ONS MANI PULATI ONS
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OTHER
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1. Wash Sal e ( Sec 24. 1( a) ( i ) ) – any t ransact i on i n a sec uri t y whi ch i nvol ves no change i n t he benefici al ownershi pthereof . 2. Mat ( Se c24. 1( a) ( i i ) )–or de roro r de r sf o rt he ched Or der purc haseorsal eofsec uri t ywi wi t ht heknowl edge t hata si mul t aneousorderororder sofs ubst ant i al l yt he same me si ze,t i me and pri ce f orthe sal e orpur chase ofsuch securi t y has,orwi l lbe ente r ed by orf orthesameor di ffe r e ntp ar t i e s .
i mport antundert he ci r cum ms st ances i n det er mi ni ng hi s c o ur s eofac t i o nwhe t he rt obuy ,s e l lo rh ol dase c ur i t y .
Not e: W Wa ashsal eandmat chedor dersbecom me ei l l egalwhen t hey ar eused asa meanst ocr eat ef al seappear anceof ac t i v et r adi ngi nt h ese c ur i t yc onc e r ne d.
3. Marki ng t he cl ose –pl aci ngthepurc hase order ,ator neart hecl oseoft hetr adi ngperi od.Thepri cethatwas cl osed wi l lt hen be t hepri cethatwi l lbe post ed on t he f o l l o w wi i ngt r a di ngda y . 4. Pai nt i ng t he t ape –i nv o l v e sas e r i e so ft r a ns a c t i o ns t hatarere port ed publ i cl yt o gi vethe i mpressi on ofan ac t i v i t yi nas e cur i t y . 5. Squeezi ng t he float – t he part ofan out st andi ng securi t yi nt ent i onal l y hel d by deal ersor ot herpersons wi t havi e w ofr ese l l i ngt he ml at e rf orpr ofit . 6. Hypeand dum mp p –Actem mp pl oye dbyaper sonorg r oupof personsofpurc hasi ngtheout st andi ngcapi t alst ockofa dorma mant publ i c shel lcom mp pany f or a nom mi i nal a mount and mer gei twi t ht hei rpri vat el yhel d com mp pany. They woul dt he n gai nc ont r oloft he ma j or i t ys t oc ks oft he me r g e de nt i t y . St o c kc e r t i fic a t e sa r eo f t e nr e i s s ue di n t hename meoft heme mer gedent i t ytor el ati vesandassoci ates whoac tasnomi ne esoft heper s onorper sonsemp l oyi ng t he devi ce. They woul dt hen l ook f or a br oker deal er whowoul dbewi l l i ngt omakea“ hype ”oft hes ec ur i t i e s. The br oke r de al e rt hen g ene r at es v ol umeand adv anc e bi d pr i ce . When t hemar ke tr eac hesahi gh pr i ce ,t he y woul d“ dump”t he i rshar ehol di ngsandbai lout . 7. Boi l erRoom Oper ati ons –i nv o l v e sa ni nt e ns i v ese l l i ng camp mpai gn t hrough numer ous sal es menby t el ephone or t hrough di rectma mai lofferi ngs f orsecuri t i es ofei t hera cert ai nt ype or f rom a speci fic i ssuer . I nvest ors are i nduce d t o purc hase t hr ough har dse l l base d on unf oundedpredi ct i onsandmai l i ngofmi sl eadi ngma market l e t t e r s . M Ma ar k i n gt h ec l o s e,P ai nt i ngt het ap e,Sq ue e z i ngt h e Not e: float ,Hypeand dump,Boi l erRoo m Oper at i onsbec o me unl awf uli fi ti seffe c t e dt oei t he rr a i s et hepr i c eori nduc e t hepur c has eo fas e c ur i t yo ro fac o nt r o l l i ng ,c o nt r o l l e d,o r commonl ycont r ol l edcompanybyot hersort odepr esst he pr i c et oi nduc et hesal eo fas ec ur i t y,whe t heroft hesame or of a di ffer ent cl ass, of t he sam me ei ssuer or of a c o n t r o l l i n g, c o n t r o l l e d c o mp mp an y o rc o mm mmo n c o n t r o l l e d c o mp mp an yb yo t h e r so rt oc r e at ea c t i v et r a di n gt oi n du c e t h epu r c h as et h r o u g hs a i dde v i c e so rs c h e me me s .
8. Ci r cul at i ng or Di ss emi mi nat i ng I nf or mat i on – c i r c ul a t i ngani nf o r ma ma t i o nt ha ta nyoft h es e c ur i t yl i s t e d i nt hee xc ha ng ewi l lo ri sl i k e l yt or i s eorf a l lb ec a us eo f mani pul at i ve mar ket oper at i ons of any one or mo mor e per sons conduct ed f or t he pur pose of r ai si ng or depre ssi ng t he pri ceoft hesecuri t yand t husi nduci ng t hepurc haseofsuchsecuri t y. 9. Maki ng Fal seorMi sl eadi ng St ate ment s wi t h re spect t oany mat er i alf actwhi ch he knew orhad r easonabl e gr ound t o bel i eve was so f al se or m mi i sl eadi ng f or the pur pose of i nduci ng t he pur chase or sal e of such s e c ur i t y . 10. Peggi ng orFi xi ng OrSt abi l i zi ng t h e pr i c eofs e c ur i t y effect edei t heral oneorwi t hot herst hroughanyseri esof t r a ns a c t i o nsf o rt h epur c h as eors a l et he r e o f ,i fd onef o r suchpurpose . 11. Shorts ale – sel l i ngofsecuri t yw wh hi ch t hevendordoes notown unl essdone i n accor dancewi t ht he rul esand regul ati onsoft heSEC. 12. I nsi der Tr adi ng –the actofan i nsi dertobuy orsel l securi t y oft hei ssuerwhi l ei n possessi on ofma mater i al i nf orm ma at i on wi t h re spectt o such securi t yt hati s not ge ner al l y made known wn t ot he publ i c unl es s( a) The i nsi derprovest hatt hei nf orm ma ati on wasnotgai nedf rom s uc hr e l a t i o ns hi p ;o r( b )I ft heo t h e rpa r t ys e l l i ngt oo r buyi ngf r om t hei nsi de r( orhi sag ent )i si de nt i fied,t he i ns i de rpr o v e s :( i )t ha thedi s c l o s e dt h ei nf o r m ma a t i o nt o t h eo t h e rpa r t y ,o r( i i )t ha theha dr e a s o nt ob el i e v et ha t t heother part yot herwi sei sal so i n possessi on oft he i nf orm ma ati on. Not e:When i si nf orma mat i on “ma mat eri alnonpubl i c”?i f :( a)I thasno tb e eng e ne r a l l ydi s c l o s edt ot h epubl i cand wo ul dl i k e l yaffe c tt h e ma r k e tp r i c eo ft hese c ur i t yaf t e r bei ng di ssemi nat ed t ot he publ i c and t he l apse ofa r e as o na bl et i mef o rt h ema r k e tt oa bs o r bt h ei n f o r ma t i o n ; or ( b) woul d be consi der ed by a r easonabl e per son
Not eson Corpora ti on Law
Not e:Whoi san “i nsi der”? -“ I ns i de r ”m me e ans :( a )t he i s s ue r ;( b )a di r e c t o ro ro ffic ffic e r( o rp e r s o np e r f o r mi n g s i mi l arf unc t i o ns )o f ,o rape r s onc o nt r o l l i ngt hei s s ue r ;( c ) ap er s o n who s er e l at i o ns hi po rf o r me rr e l a t i o ns hi pt ot h e i s s ue rg i v e so rg av eh i ma c c e s st o ma t e r i a li n f o r ma t i o n a bo u tt h ei s s ue ro rt h es e c u r i t yt h ati sn o tg e ne r a l l y a v ai l a bl et ot h ep ub l i c ;( d)a g o v e r n m me e n te m mp p l o y e e ,o r di r e c t o r ,o ro ffi ffic c e ro fa ne x c h an g e,c l e ar i n ga g en c ya nd/ o r s e l f r e g ul a t o r yo r g an i z a t i o n wh oh as a c c e s st o ma t e r i a l i nf or mat i on aboutan i ssuer ora secur i t yt hati s not g e ne r a l l ya v ai l a bl et ot h ep ub l i c ;o r( e )a p e r s o n wh o l earnssuchi nf or mat i onbyacomm mmuni cat i onf r om anyof t hef o r e g oi ngi ns i de r s .
I NDE DEPEND DE ENT DI REC CT TOR OR Pe r so n ot her t han an offi ffic ce r or emp mpl oy ee of t he corporati on,i t s parentor subsi di ari es,orany ot heri ndi vi dual havi nga rel ati onshi p wi t ht hecorporat i on,whi ch woul di nt erf ere wi t ht he e xe r c i se ofi nde pe ndentj udgme nti nc ar r yi ng outt he r e s po ns i b i l i t i e so fadi r e c t o r . Corporat i onsw wh hi chr equi r ean I ndependentDi r ect or 1. Ane xc hang e;or 2. Any corpor at i on wi t h a cl ass ofequi t y securi t i esl i st ed f ort r adi ngon an Exchangeorwi t h asset si n exces sof P50M and havi ng 200 ormo mor ehol der s,atl eas t200 of whi c h ar ehol di ngatl e as t100 shar esofa c l assofi t s equi t y securi t i es orwh whi ch has sol d a cl ass ofequi t y sec uri t i es t o t he publ i c pur suant t o an effect i ve r egi st rat i on st at em me ent shal l have at l east two ( 2) i ndependent di r ect ors or such i ndependent di r ect ors shal lconst i t ut eatl east20% oft heme mem mb bersofsuch boar d,whi c hev eri st hel e ss er . OPTI ON TR RA AD DI I NG Put–a t ransf err abl e opti on oroffert o del i vera gi ven numberofsharesofst ockatast atedpri ceon anygi ven t i meduri ngthestat edperi od. Cal l–a t ransf err abl eopti on t obuya speci fied number o fs h ar ea tas t a t e dp r i c e St raddl e–acomb mbi nati onofputandcal l . •
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SETTLEM ME ENT OFFERS Atanyt i me ,dur i ngani nv es t i gat i onorpr oc eedi ngunder t hi sC Co ode,part i esbei ngi nvest i gat ed and/orchar gedmaypr opose i n wr i t i ng an offer of s et t l em me ent wi t ht he Com mm mi ss i on. The Com mm mi ss i on mayonl y agr eet o a se t t l em me entofferbased on i t s findi ngs t hat such se t t l em me ent i si n t he publ i ci nte r es t . Any agree ment t o set t l e shal l have no l egal effect unti l publ i cl y di scl osed.Suchdeci si on maybem ma adewi t houtadet er mi nat i on of gui l tont hepartoft hepersonmaki ngt heoffer . DAMAGES Al lsui t st or e cov erdamag ess hal lbebr oughtbe f or et he Regi onalTri alCourt ,whi ch shal lhave excl usi ve j uri sdi ct i on t o hearand deci de such sui t s.TheCourti s aut hori ze dt oawa war d dama mage si n an am mo ountnote xce edi ng t r i pl etheamo mountoft he t r ansact i onpl usactualdama mages.
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I ft here are goods i nvol ved i nt he mul t i market ,i ti s be y ondt hej ur i s di ct i onofSEC ( ExFi r s tQuadr ant ) Cri mi nal charge f or vi ol ati on of SRC i s a speci al i zed di sput e, hence i t mu must be fir st r ef er r ed wi t h SEC ( Bavi er avs.Pagl i nawan G. R.No.168380 Feb8, 2007) T3 Rul ei nt r adi ng ofSecur i t i es – Tr adi ng day + 3 moredaysyoumu mustcomp mpl ywi t hyourobl i gat i ons.