Quick Info Bits on Corporation Law

1. A stockholder whose shares are delinquent has no voting rights at any meeting.

2. In the case of bidding in a delinquency sale of stocks, the bidder who tenders to pay the amount of delinquency plus cost, expenses, and interests (if any), for the lowest number of shares is the winner.

3. The stockholder of a regular or ordinary corporation may exercise his demand from the corporation to be paid the fair market value of his shares if there is an amendment in the AOI that allows them so.

4. A matched order is a transaction of the sale/purchase of a security that does not mean to involve a change in beneficial ownership.

5. Generally, when a corporation’s principal office is in a city in metro manila, the stock holder’s meeting can be held anywhere within metro manila because metro manila is considered a single city for this purpose. In other cases, a stockholder’s meeting must be held in the city or municipality where the corporation’s principal office is located.

Exception: if it is stated in the articles of incorporation that the stockholder’s meeting can be held anywhere in the Philippines.

6. If a corporation accepted a forged stock certificate of transfer and issued a new one, it is estopped from questioning the validity of the forged stock certificate.

7. A foreign corporation generally cannot file a suit in the PH where the corporation has no license to do business locally. Exceptions:
a. Isolated transactions
b. When the case is not about enforcing a legal or contractual right
c. When the issue is about trademark, trade name, or goodwill
d. When the violation is under the RPC
e. When the foreign corp is the defendant in a suit
f. When the party is estopped from questioning its locus standi

8. If the stock certificate was mortgaged, it needs to be registered in a chattel mortgage of the residence of the corporation and residence of the owner of the stock.

9. A stockholder of an unpaid subscription of stocks has the same rights as other stockholders whose subscription has been paid. However, a declared delinquent stockholder/shareholder may not, or when exercising appraisal right (can exercise but limited to the amount paid).

10. The books of a corporation that is fully owned by a parent corp can be examined by the stockholders of the parent corp subject to specific rules regarding fairness.

11. Metro Manila is considered as one city for purposes of annual stockholder meetings.

12. A corp can acquire its own shares only when there is unrestricted retained earnings. Except if shares are redeemable shares.

13. A director must have at least 1 share to hold his position in the company as a director.

14. A director with delinquent shares shall remain as director until such time that his ownership of the stock is properly transferred to another shareholder as a product of delinquency sale.

15. A corporation sole begins its corporate life upon submission of AOI and other requisites to the SEC.

16. Stock dividends are not earnings and as such, not subject to income tax.

17. If a corporation gave away shares of another corporation as a Christmas gift, it does not need the approval of 2/3 of the stockholders for it is considered as a property dividend, not a stock dividend.

18. Upon dissolution of a corporation. It has 3 years to liquidate and wind up its affairs. Such 3 year period shall not apply if a receiver or trustee was elected within the 3 year period.

19. Non-voting shares can vote on matters contemplated under Sec. 6 of the code

20. Only the board can declare dividends and cannot be forced to do so. Exception: if the shares are preferred shares that are mandatory if earned and any amount outside 100% of its paid-up capital.

21. Dissolution of a corporation is warranted only when the acts of the directors constitute or threaten a substantial injury to the public or such as to amount to a violation of the fundamental conditions of its charter, or its conduct is characterized by obduracy or pertinency in contempt of the law. However, a closed corporation can be dissolved for issues that do not warrant the same penalty as regular corporations.

22. A stockholder of a regular corporation can demand the corp to be paid the fair market value of his shares when there is an amendment in the AOI.

23. A close corporation may validly provide in its AOI or by-laws that quorum and voting requirements in stockholders’ meetings imposed by the code shall be more than that required by law.

24. If a transaction of a security does not involve a change in beneficial ownership, it is called a matched order.

25. The performance within the PH of any act enumerated in Section 1(I) of RA 5455 shall constitute doing business in PH, including appointing a representative or distributor who is domiciled in PH, unless said representative or distributor has an independent status such as transacting in the name for its own account and not the account of the principal.

25. In the case of a merger, the absorbing corporation does not automatically absorb the employees of the absorbed corporation. Employees are not assets nor liabilities in legal parlance.

26. Pending the issuance of the replacement of the lost/destroyed cert, the owner/stockholder concerned cannot transfer his shares covered by the lost/destroyed cert. The mode of transfer of shares is only by endorsement and delivery. In absence of any cert, there is nothing to deliver for transfer.

27. A dissolved corporation, may transfer its assets and liabilities to a new corporation.

28. A subscriber to a shares of stock to a company shall only be entitled to a certificate of stock when he/she has paid for his subscription in full (100%)

29. a trustee in a voting trust agreement cannot vote by proxy.

30. The filing of by-laws is not necessary for OPC (one person corporation)

31. The 30-day period for filing the submission of by-laws has been removed. There is no specific period for filing.

32. A foreigners can be a member of the board in educational institutions established by religious order, mission boards, and charitable organizations.

33. Cumulative voting may be exercised by a non-stock corporation if it is allowed in the AOI. Generally, it is not allowed, in a non-stock corporation.

34. Short sale is illegal. The SEC has no rules and regulations relative thereto.

35. The security/surety used by a stockholder/corporate officer for corpo debts cannot be foreclosed by creditor once suspension of payments order is issued by the proper forum.

36. Business Judgement rule is not applicable in deadlocks in a close corporation. Proper forum may interfere with the management of a close corporation in case of deadlock, although directors/stockholders are acting in good faith. The principle of business judgment rule is where questions of policy and management are left solely to the honest decision of the BOD and the courts are without authority to substitute its judgment and as long as they act in good faith, its actuations are not subject to judicial review.


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