PART II:

LAW ON
CORPORATION
By : Ira L oui se A. Ac iba r
S HA R ES O F
ST OCK S
 SHARES OF • C omm on S tocks
• F ounder s' Sha res
ST OCK S • P refe rred St ocks
• P ar a nd N o -P ar Val ue Sha res
is a un it of ow n ers hi p in th e
• Wa tered St ocks
bu si ne ss . Th e nu mb er of • R edee mabl e S har e

s hare s de ter mi nes ho w bi g of • Tre asury S har es

• P rom oter' s S har es
a pi ec e of own ers hi p in a
• E scrow S har es
bu si ne ss y ou ha ve . • S ubscri pt io n C ontr act
 COM MON FO UNDER S'
ST OCKS SH AR ES

are those shares of stocks with are shares issued to the founders of
complete voting rights. Common the corporation which grant certain
stocks are a type of security that rights and privileges.
represents ownership in a corporation.
PREF ERRED S TO CK S
Participating Preferred Shares

Non-participating Preferred Shares

Cumulative Preference Shares

Non-cumulative Preference Shares

 PAR VAL UE NO PAR VALU E
SH AR ES SH AR ES

are those whose par values are are those whose issue price or stated
indicated in the Articles and shown on value are not indicated in the
the certificate. certificate of stock but may be fixed in
the AOI.
 WATE RED RE DEEMA BLE
ST OCKS SH AR ES

watering of stocks happened when are shares which may be purchased

the shares are issued at less than its or redeemed by the corporation from
par value or issue price. the holders of such shares upon the
expiration of a fixed period.
 TR EAS UR Y PR OMO TER S'
SH AR ES SH AR ES

are shares of stock which have been are those shares issued to the
issued and fully paid for, but promoter’s of the corporation as a way
subsequently reacquired by the of reward for establishing it.
issuing corporation.
 SU BSCR I PTI ON
ES CRO W SH ARE S
CONT RACT
is an agreement between a
are those shares, the issuance of
corporation and a subscriber for the
which, is subject to a suspensive
acquisition of unissued shares of
condition.
stocks of a corporation at a specified
amount.
EXAMPLE:
Mev subscribed 10,000 shares for its
par value, P1 per share. He was able
to pay P9,500 already. Is he entitled
to receive a certificate of stock?
 R IG HT S OF A
ST OC KH OL DE R
 01 Right to vote

02
Right to receive DIVIDENDS
R I GH T S OF A
S TO C KH O LD ER 03 To exercise pre-emptive
rights

04 Right to dissent and

appraise shares
 05 To inspect the books of the corporation
subject only to the limitations imposed

06 To be furnished by the most recent

financial statement of the corporation
R I GH T S OF A
S TO C KH O LD ER 07 To enter into a voting trust
agreement and the right to execute
a proxy

08 To sell or transfer shares of

stock
 09 To be issued a certificate of stock
for fully paid-up shares

10 To institute and file a derivative suit

R I GH T S OF A
S TO C KH O LD ER 11 To have the corporation dissolved within the
grounds provided for by law and participate in
the distribution of assets upon dissolution

12 Right of first refusal

BY - LA WS
ADO PT IO N AMENDMENT
VI SION By a majority of vote of the directors or
Prior to incorporation trustees and the majority vote of the
outstanding capital stock or members, at a
regular or special meeting called for that
purpose.

By the Board of Directors alone when

After incorporation delegated by stockholders owning 2/3 of
the outstanding capital stock or 2/3 of the
members.
S TO CK AN D
T RA NS FE R
BOOKS
 M EE T ING S :
DI R E CT O R S VS .
S T O C K HO L DE R S
 ME R G E R A N D
C O NS OL ID A TI ON
 MER GER CONS OL IDAT IO N

is a combination of two or more is the combination of two or more

corporations whereby one corporation corporations and forming a new
absorbs the other corporation corporation.
 NON -ST OCK
C ORPO RATIO N
N ON - S TOC K CO RP OR A TIO N
A n on - sto ck co r po r ati o n i s o ne wh e re n o p ar t o f i ts i nco me
i s d ist ri bu ta b le a s d ivi d en d s to i ts me mb e rs , tr u ste es, o r
o ffi ce rs . No n - sto ck co r po r ati o ns ma y b e fo r me d o r
o rg a ni ze d fo r ch a ri ta bl e , r el ig i ou s, e du ca ti on a l .
p ro fe ssi o na l, cu lt ur a l, fr a ter n al , l ite r ar y, sci e nti fi c, so ci al ,
ci vic se r vice , o r si mi la r p ur p os es, l ike tr a de , i nd u str y,
a gr i cul tu r al a nd l ike ch a mb er s, o r a ny co mb in a ti on th e re o f,
su b je ct t o th e sp e cia l p ro vi sio n s g ov er n in g p ar ti cu la r
cl as ses o f n on - sto ck co r po r ati o ns .
 CLOSE
C ORPO RATIO N
 C L O S E COR P OR A TIO N
A c l os e c o rp o ra t i on , wi t hi n t he m e a n in g o f t hi s Co d e , i s o n e wh o s e a rt i c le s o f
i nc o r p or a ti o n p ro v i d e t ha t :

1 . Al l t he c o rp o ra t i on ' s i s s ue d s t oc k o f a ll c l as s e s , e x c lu s i v e o f t re a s u ry s h a re s ,
s h a ll b e h e ld o f re c o r d b y n o t m o re t ha n a s p e c if i ed n u m b er o f p e rs o n s , n o t
e x c e ed i n g t we n ty ( 2 0) .
2 . Al l t he i s s ue d s t oc k o f a ll c l as s e s s h a ll b e s u b je c t t o o n e o r m o re s p e c if i ed
re s t ri c t io n s o n t ra n s fe r p e rm i t te d b y t hi s Ti t le .
3 . T he c o rp o ra t i on s h a ll n o t l is t i n a n y s t oc k e x c h an g e o r m a k e a n y p u bl i c
o ff er in g o f a n y o f i ts s t oc k o f a n y c l as s . No t wi th s t a n di n g t he f or e g oi n g , a
c o rp o ra t i on s h a ll n o t b e d e em ed a c l os e c o rp o ra t i on wh e n a t l ea s t t wo - t hi r ds
( 2 / 3 ) o f i ts v o ti n g s t oc k o r v o ti n g ri g h ts i s o wn e d o r c o n tr o ll e d b y a n ot h e r
c o rp o ra t i on wh i c h i s n o t a c l os e c o rp o ra t i on wi t hi n t he m e a n in g o f t hi s Co d e .
 ONE PERSON
C ORPO RATIO N
ON E PE R S ON C OR POR A TI ON
A On e P er s on Co r po ra tio n ( OP C) is de fin ed un de r th e
Re v is ed Co r po ra tio n Co de as a c or po r ati on wi th a
s in gl e s toc k ho ld er wh o m ay be ei the r a na tur a l pe r so n,
tr us t, or an es ta te . Th is s in gl e s toc k ho ld er s er v es as
bo th th e in c or po r ato r an d th e s ol e di r ec to r of th e
c or po r ati on , el im i na tin g th e ne ed fo r m ul tip le
in c or po r ato rs an d bo ar d m em be r s as r eq ui re d in
tr ad iti on al c or po r ati on s .
 FO REIG N
C ORPO RATIO N
 F O R E IG N COR P OR A TIO N
F o rei g n C orp or at i on i s on e f orm ed, or ga ni z ed or
ex i s ti ng un de r an y l aw s ot he r t han t hos e of t he
P hi l i pp i ne s an d w hos e l aw s al l o w F i l i pi n o c i ti z ens an d
c orp or at i ons t o do bu si n es s i n i t s ow n c oun tr y or
s ta te .
DISS OLUTION
AND
LIQUIDATIO N
 DISS OLUTI ON
is the extinguishment of the
corporate franchise and the
termination of corporate existence.
 EXPIRATION OF ITS
CORPORATE TERM

VOLUNTARY
SURRENDER OF ITS
PRIMARY FRANCHISE

TH R E E W AYS OF THE REVOCATION

OF ITS CORPORATE
D IS S OL U TI O N FRANCHISE
 LIQUIDATION
th e p roc ess o f se llin g o ff a ll th e co mp a ny's
a sset s to g en era te ca sh, wh ich is th en u sed
to p ay o ff cr ed it or s a ccor din g to a p rior ity
sys tem, with a ny re main in g fu nd s d is trib ute d
to sh ar eh old er s, e ffec tively clo sing d own th e
b usin ess a nd d is solvin g th e co rp or atio n
 LI QUIDA TI ON

THE RIG HTS THE REM AININ G

THE AS S ET S
AN D C L AIMS AS S E TS , IF AN Y,
ARE
OF ARE DI S TRI B UTE D
C O LL EC TE D
C REDIT ORS TO
AN D S O LD
ARE S ETTL ED S TO C KH OL DERS
THANK
YOU
By : I r a L ou is e A . A cib a r