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CCkCkA1ICN LAW IINALS kLVILWLk 2012

(A|ex.au|a.Mae.I|an.Macr|.Venus.A|thea)
1) lnLroducLlon
1. kINDS CI 8USINLSS CkGANI2A1ICN

4 lC8MS Cl 8uSlnLSS LS1A8LlSPMLn1S ln 1PL PlLS:
! Sole proprleLorshlp
! arLnershlp
! !olnL venLure
! CorporaLlon
CorporaLlon ls Lhe mosL lmporLanL, because lL allows comblnaLlon
of resources of lnvesLors Lo ralse Lhe much needed caplLal for
large scale buslness or enLerprlse.
lL creaLes employmenL opporLunlLles.

2. SCLL kCkIL1CkSnI

A one-man form of buslness enLlLy
owns all Lhe asseLs
personally answers all llablllLles
suffers all Lhe losses
and en[oys all Lhe proflLs Lo Lhe exluslon of oLhers
8CS:
! has none of Lhe bureaucraLlc processes ln a corporaLlon
! makes hls own declslons, can acL wlLhouL delay or formallLles
! he owns all Lhe proflLs, does noL share Lhemselves
CCnS:
! Lhe owner has unllmlLed llablllLy for all debLs of Lhe
enLerprlse, can be held answerable even beyond hls caplLal or
lnvesLmenL ln Lhe buslness
! even hls personal properLles nC1 uSLu ln 1PL 8uSlnLSS may
be sub[ecL Lo aLLachmenL/foreclosure by credlLors
! llmlLed caplLal and resources

3. Ak1NLkSnI

1767 Clvll Code -"by a conLracL of parLnershlp, 2 or more persons
blnd Lhemselves Lo conLrlbuLe money, properLy, or lndusLry Lo a
common fund, wlLh Lhe lnLenLlon of dlvldlng Lhe proflLs among
Lhemselves.
May be broughL abouL by express or lmplled consenL
esLabllshed for Lhe common beneflL of all parLles
presupposes a personal relaLlonshlp beLween Lhe parLners -
based on muLual LrusL and confldence
deaLh or lncapaclLy of one parLner resulLs ln ulSSCLu1lCn

4. ICIN1 VLN1UkL
ln Lhe naLure of a parLnershlp conLracL, creaLed for Lhe purpose of
prosecuLlng a parLlcular buslness LransacLlons
a one-Llme grouplng of 2 or more persons ln a speclfled
underLaklng
SlmllarlLles wlLh a parLnershlp
! ln boLh, Lhere ls a communlLy of lnLeresL ln Lhe underLaklng
! sharlng of proflLs and losses
! muLual rlghL of conLrolled
ulfference from parLnershlp
C8: CorporaLlons cannoL enLer lnLo parLnershlps
Lx: When allowed by Lhe SLC when Lhe followlng condlLlons are
meL:
1. lf Lhe ArLlcles of lncorporaLlon expressly auLhorlzes Lhe
corporaLlon Lo enLer lnLo conLracLs of parLnershlp
2. Lhe ArLlcles of arLnershlp MuS1 8CvluL: LhaL all parLners
wlll manage Lhe parLnershlp
3. 1he ArLlcles of arLnershlp MuS1 8CvluL: LhaL ALL
A81nL8S are !Cln1L? Anu SLvL8ALL? LlA8LL for Lhe
obllgaLlons of Lhe parLnershlp



#

4. CCkCkA1ICN = Sec. 1:

An arLlflclal belng,
creaLed by operaLlon of law,
wlLh Lhe rlghL of successlon,
and wlLh Lhe powers, aLLrlbuLes and properLles
! expressly auLhorlzed by law
! or lncldenL Lo lLs exlsLence

nl51OklcAl 8AckCkOuNu
ln Lhe hlllpplnes, Lhe concepL evolved from Spanlsh law
on socledad anonlmas," slmllar Lo Amerlcan
corporaLlons
governed by Code of Commerce of Spaln, whlch was
exLended Lo Lhe hlllpplnes ln 1988


2) Def|n|t|on and Attr|butes
A118l8u1LS
1. lL ls an A81lllClAL 8LlnC
lL has a [urldlcal personallLy, separaLe and dlsLlncL from
Lhe persons composlng lL
LxlsLs lndependenLly from Lhe sLockholders, members or
offlcers
2. C8LA1Lu 8? CL8A1lCn Cl LAW
Mere agreemenL of Lhe persons composlng lL does noL
granL lLs lndependenL exlsLence as a [urldlcal enLlLy
SLaLe's consenL can only be granLed Lhrough compllance
wlLh Lhe requlremenLs lmposed by law
3. 8lCP1 Cl SuCCLSSlCn
unllke ln parLnershlp, Lhe deaLh, lncapaclLy or clvll
lnLerdlcLlon of one or more of Lhe sLockholders does noL
resulL ln lLs dlssoluLlon.
A corporaLlon's exlsLence ls lndependenL of Lhe
lndlvlduals or persons composlng lL.
4. W/ CWL8S, A118l8u1LS, Anu 8CL81lLS Lx8LSSL?
Au1PC8lZLu 8? LAW C8 lnCluLn1 1C l1S LxlS1LnCL
A corporaLlon can exerclse only such powers, and hold
such properLles as are granLed Lo lL by Lhe enabllng
sLaLuLes.
L8C v. CA
1. CarloLo, lncumbenL resldenL-Manager of 8ural 8ank of Labason
alleged:
1haL on nov 12, 1984 - he was ln Cebu ClLy LransacLlng
buslness wlLh Lhe CenLral 8ank 8eglonal Cfflce
Pe was lnsLrucLed Lo go Lo Manlla on or before nov. 21,
1984 Lo follow-up Lhe 8ural 8ank's plan of paymenL of
redlscounLlng obllgaLlons wlLh Lhe maln offlce of CenLral
8ank.
Pe purchased a round Lrlp LlckeL Lo Manlla, phoned hls
slsLer ro send hlm hp1000 for pockeL money and some
redlscounLlng papers Lhru L8C ulCLCC.
2. nov 16, 1984 - documenLs arrlved wlLhouL Lhe cashpack.
!"#$% '($%)*( !"#$%&#'()!
!" $"% &'() ' !*+%*$,% '$! +)-'.'%)
!"#$%&'()*+ -#%. */" !"#$%&$
!"#$"%&'( &*
!"#$%&#'()*' (",& -)'$)%.$ "%-
!"#$%$&" #"%!()$*+&,
!"#$ &'( ) !"#$%&'("# *# +%,-(.
!"#$%#&!'($
!"#$%& () * +$,$-*. "/)(,$)) 01 *
!"#$%&'("# *%+, -./$01 "($2/'32 $20#0
!"# %& '"()*&(+,-' ./( " +-*01&
!"#$%#&!'($
!"#$"#%&'"() +%, -(&-# '(&" ."'(&
!"#$%&"'
!"#$"#%&'"() %#+ ,+(+#%--. ("& +-','/-+
!" $% & '&(!)%( *) & '&!"#$!%&'(
!"#$%& ()*"+,) -./ 01)2 " *%34%3"#$%2
!"#!$% '"#( ) *)$#"!$%+'*, '#% '-!"#'#. '%
!"#$ "& '(&)(* +,$- $-.$ "/ .0"$-(&1
!"# %&' ()*+,'%)-. -/ %&' -//)+)01* )*
!"#$%& () *+,%- ,#)&. +,#) +,*.%
!"#$%&&"' )* &+" ,-. /0 %&1 2#"-&%/3
$
3. nov 24, 1984 - he was compelled Lo go Lo ulpolog ClLy Lo clalm
Lhe money aL L8C, buL Lo no avall.
4. nov 27, 1984 - he wenL back Lo Cebu ClLy aL L8C, was advlsed LhaL
Lhe money was reLurned Lo L8C ulpolog.
3. uec 13, 1984 - only on Lhls daLe dld he recelve Lhe money.
6. CarloLo flled acLlon for uAMACLS arlslng from non-performance
of CbllgaLlon:
8ecause of Lhe delay of Lhe cashpack, he falled Lo submlL
Lhe redlscounLlng documenLs Lo CenLral 8ank on Llme. So
hls rural bank was made Lo pay hp32000 as penalLy
lnLeresL, and he suffered embarrassmenL and humlllaLlon.
1haL L8C wanLonly and recklessly dlsregarded lLs
obllgaLlons
W 8ural 8ank of Labason (an arLlflclal person) can be awarded moral
damages - nC.
1. A corporaLalon, an arLlflclal person, and havlng exlsLence only ln
legal conLemplaLlon, has no feellngs, no emoLlons, no senses. lL
cannoL experlence physlcal sufferlng and menLal angulsh.
A corporaLlon ls noL enLlLled Lo moral damages.
A corporaLlon may have a good repuLaLlon whlch lf besmlrched,
may also be a ground for Lhe award of moral damages (Mambulao
Lumber vs. n8)
ln Slmex vs. CA (1990), Lhe courL awarded moral damages Lo a
[urldlcal enLlLy, ln lleu of nomlnal damages. 1he courL clLed ArLlcle
2203 Clvll Code: acLual and compensaLory damages may be
awarded Lo a [urldlcal enLlLy for ln[ury Lo plalnLlff's buslness or
commerclal credlLs."

AuvAN1AC5 Ol cOklOkA1 lOkM Ol 8u5lN55
1. CapaclLy Lo acL as a slngle unlL
2. LlmlLed Shareholder's llablllLy
3. ConLlnulLy of exlsLence
4. leaslblllLy of greaLer underLaklng
3. 1ransferablllLy of shares
6. CenLrallzed managemenL
7. SLandardlzed meLhod of organlzaLlon, managemenL and flnance


ul5AuvAN1AC5 Ol 1n cOklOkA1 lOkM Ol 8u5lN55
1. A formal proceedlng ls requlred before a valld and blndlng
corporaLe acL can be had.
2. 1he buslness LransacLlons of a corporaLlon ls llmlLed Lo Lhe SLaLe
of lLs lncorporaLlon. SLlll requlres a llcense from a forelgn sLaLe.
3. 1ransfers of shares may resulL ln unlLlng lncompaLlble and
confllcLlng lnLeresLs (because of Lhe very naLure of shares of sLock
whlch are personal properLles, Lransferable aL wlll of Lhe owners)
4. MlnorlLy shareholders have pracLlcally no say ln Lhe conducL of
corporaLe affalrs
3. ln large corporaLlons, sLockholders' voLlng rlghLs may become
flcLlLlous because of: dlslnLeresL ln managemenL, wlde-scale
ownershlp and lnaccesslble place of meeLlng.
6. uouble LaxaLlon" may be lmposed on corporaLe lncome.

ul51lNc1lON5 81. A cOklOkA1lON ANu A lAk1Nk5nll

CCkCkA1ICN Ak1NLkSnI
CreaLed by law or by operaLlon of
law. (2, 3)
CreaLed by mere agreemenL of Lhe
parLles(1767, nCC)
8equlres aL leasL (3) lncorporaLors,
excepL a corporaLlon sole. (10, 100)
8equlres aL leasL (2) naLural
persons. (1767, nCC)
Can exerclse only Lhose powers and
funcLlons expressly granLed Lo lL by
law, and Lhose LhaL are necessary/
lncldenLal Lo lLs exlsLence. (2, ln re:
43)
Can do anyLhlng by agreemenL of
Lhe parLles.
rovlded: noL conLrary Lo law,
morals, good cusLoms and publlc
pollcy or order. (1306, nCC)
MusL LransacL buslness Lhough Lhe
8Cu, unless valldly delegaLed
expressly or lmplledly. (23)
Any one of Lhe parLners may valldly
blnd Lhe parLnershlp. unless:
agreemenL Lo Lhe conLrary. (1308,
nCC)
Pas Lhe rlghL of successlon,
conLlnues Lo exlsL desplLe deaLh,
wlLhdrawal, lncapaclLy or clvll
lnLerdlcLlon of Lhe SP/ members. (2)
Slnce a parLnershlp ls based on
muLual LrusL and confldence, Lhe
deaLh, lncapaclLy, lnsolvency, clvll
lnLerdlcLlon or wlLhdrawal of one of
Lhe parLners wlll resulL ln
dlssoluLlon. (1830, pars. 6 and 7,
nCC)
%
Any SP can Lransfer, sell or asslgn
hls shares of sLock wlLhouL Lhe
consenL of oLher SP. 1he Lransferee
becomes SP of Lhe corp (63)
A parLner cannoL Lransfer hls rlghLs
or lnLeresL ln Lhe parLnershlp
wlLhouL Lhe consenL of Lhe oLher
parLners (1813, nCC)
LlablllLy of each sP ls llmlLed only Lo
Lhe exLenL of Lhelr subscrlpLlon or
Lhelr promlsed conLrlbuLlons.
All parLners, lncludlng lndusLrlal
ones (excepL a llmlLed parLner, ln
llmlLed parLnershlp) are llable 8C
8A1A wlLh all Lhelr properLy and
afLer all Lhe parLnershlp properLy
has been exhausLed, for all Lhe
parLnershlp llablllLy. (1824, nCC)
CorporaLe exlsLence ls llmlLed Lo
only 30 years. unless: LxLended by
amendmenL ln accordance wlLh Sec.
11. AfLer Lhls Lerm, lL wlll exlsL only
for (3) years for Lhe purpose of
llquldaLlon. (122)
May exlsL for an lndeflnlLe perlod,
sub[ecL only Lo Lhe causes of
dlssoluLlon provlded for by Lhe law
of lLs creaLlon. (1830, nCC)
A corporaLlon cannoL be dlssolved
by Lhe mere agreemenL of SP. 1he
consenL of Lhe SLaLe ls necessary for
lL Lo cease as a body corporaLe.
arLners may dlssolve Lhelr
parLnershlp aL wlll or any Llme Lhey
deem flL.

COvkNMN1 lOwk5 lN klA1lON 1O cOklOkA1lON5.
1. 1he SLaLe regulaLes corporaLlons Lhrough Lhe exerclse of lLs pollce
power, emlnenL domaln, and LaxaLlon.
2. Powever, a corporaLlon ls proLecLed by sLaLuLory provlslons (esp:
ConsLlLuLlon), from arblLrary exerclse of Lhe powers of Lhe
governmenL.
uue rocess Clause
Lqual roLecLlon Clause
non-lmpalrmenL of obllgaLlons and conLracL - Sec.
143: no rlghLs or remedy ln favor or agalnsL any
corporaLlon, lLs sLockholders, members, dlrecLors or
offlcers, nor any llablllLy lncurred by any such
sLockholders, members, dlrecLors or offlcers, shall be
removed or lmpalred elLher by Lhe subsequenL
dlssoluLlon of sald corporaLlon or by any subsequenL
amendmenL or repeal of Lhls Code or any parL
Lhereof."
3. 1he Corpo Code places all corporaLlons reglsLered under lLs
provlslon Lo be under Lhe conLrol and supervlslon of Lhe SLC. (19,
144) (u 902-A, Sec. 3)


CLASSIIICA1ICN CI CCkCkA1ICNS

A. Sec. 3 CLASSLS Cl CC8C8A1lCnS - corporaLlons formed under
Lhls Code may elLher be SLock or non-sLock corporaLlons.
S1CCk corporaLlons - corporaLlons whlch have
caplLal sLock, dlvlded lnLo shares, and are auLhorlzed
Lo dlsLrlbuLe Lo Lhe holders or such shares dlvldends
or alloLmenLs of Lhe surplus proflLs on Lhe basls of
Lhe shares.
nCn S1CCk corporaLlons - all oLher prlvaLe
corporaLlons.
8. (2) requlslLes Lo be classlfled as sLock corporaLlons:
caplLal sLock dlvlded lnLo shares
auLhorlLy Lo dlsLrlbuLe dlvldends or alloLmenLs of
surplus proflLs Lo lLs sLockholders, based on Lhe
shares held by each of Lhem
C. Whereas non-sLock corporaLlons !Lhose where no parL of Lhelr
lncome ls dlsLrlbuLable as dlvldends Lo lLs members, LrusLees or
offlcers sub[ecL Lo Lhe provlslon on dlssoluLlon (87)
Cl8 vs. CLu8 llLllnC lnC. uL CL8u (1968)
Club operaLes a clubhouse, and a bar resLauranL
where lL sells wlnes and llquors, meals and shorL
orders Lo lLs members and Lhelr guesLs.
1931 - Lhe club declared sLock dlvldends because of
caplLal surplus arlslng from re-evaluaLlon of lLs real
properLles. no cash dlvldends were dlsLrlbuLed Lo Lhe
sLockholders.
1932 - 8l8 assessed Lhe Club flxed and percenLage
Laxes as a keeper of resLauranL /bar where wlnes and
llquors are served.
W Club ls llable for Lhe Laxes - no.
&
Mere operaLlon of a bar and resLauranL does noL lpso
facLo glve rlse Lo llablllLy for flxed and percenLage.
lor llablllLy Lo aLLach, Lhe operaLor musL be engaged
ln Lhe buslness as a barkeeper and resLauranLeur.
8uslness" means acLlvlLles for proflL or llvellhood.
Pere, Lhe bar and resLauranL (alLhough generaLes
proflLs) ls a necessary lncldenL Lo Lhe purpose of Lhe
club.
1haL a club makes some proflL does noL make lL a
proflL-maklng club.
1he facL LhaL Lhe caplLal of Lhe club ls dlvlded lnLo
shares does noL deLracL from Lhe facL LhaL lL ls noL
engaged ln Lhe buslness of operaLor of bar and
resLauranL. WheLher or noL Lhe Club ls engaged ln
buslness ls deLermlned by lLs purpose as sLaLed ln lLs
arLlcles/by-laws.
W Club ls a sLock corporaLlon - no.
1here are (2) requlslLes before a corporaLlon can be
consldered a sLock corporaLlon. Pere, Lhe 2
nd

requlslLe ls noL presenL. nowhere ln lLs ArLlcles of
lncorporaLlon or by-laws could be found an auLhorlLy
for Lhe dlsLrlbuLlon of lLs dlvldends or surplus proflLs.

cOklOkA1lON5 ckA1u 8 5lclAl lAw5 Ok cnAk1k5
Sec. 4 !"#$"#%&'"( *#+%&+, -. /$+*'%0 0%1/ "# *2%#&+#/ -
CorporaLlons creaLed by speclal laws or charLers shall be governed
prlmarlly by Lhe provlslons of Lhe speclal law or charLer creaLlng
Lhem , supplemenLed by Lhe provlslons of Lhls Code, ln so far as
Lhey are appllcable.
1hese are corporaLlons creaLed Lhrough leglslaLlve acL, noL by
vlrLue of Lhelr compllance wlLh Lhe requlremenLs under Lhe
CorporaLlon Code.
Lxamples are: (1) nCC, (2) nuC, (3) CSlS.
1hese corporaLlons are governmenL-owned or conLrolled, Lhey
operaLe under a speclal law or charLer. 8eglsLraLlon wlLh Lhe SLC
ls noL requlred for Lhem Lo acqulre legal and [urldlcal personallLy.
1here are noL lmmune from sulLs, unless provlded so by Lhe law of
Lhelr creaLlon. noLe: When Lhe governmenL engages ln a
parLlcular buslness Lhrough Lhe lnsLrumenLallLy of a corporaLlon, lL
dlvesLs lLself of lLs soverelgn characLer, hence lL sub[ecLs lLself Lo
Lhe rules governlng prlvaLe corporaLlons.
Cfflcers and employees of CCCC creaLed by speclal law are
governed by Lhe Clvll Servlce Law. 8uL Lhelr subsldlarles, organlzed
under Lhe provlslons of Lhe CorporaLlon Code, are governed by
Lhe Labor Code.
1LS1: 1o deLermlne wheLher employees are governed by Clvll
Servlce Law, look aL Lhe manner of Lhelr creaLlon. lf by speclal law
! covered. lf by CorporaLlon Code ! Labor Code.

NCC-LDC vs. NLkC (1991)
1. uanllo Merced, an LL of nCC-LuC, a subsldlary of nCC flled a
complalnL for lllegal dlsmlssal, reLlremenL beneflLs, separaLlon pay,
unpald wages agalnsL nCC-LuC wlLh Lhe NLkC.
2. nCC-LuC flled M2u: 1he C|v|| Serv|ce Comm|ss|on, noL Lhe nL8C,
has [urlsdlcLlon over Lhe case.
wbot low qovetos tbe s of lNOc-uc? lobot coJe.
1. nCC-LuC vs. Leogardo (1989) - under Lhe presenL law, Lhe LesL
ln deLermlnlng wheLher a CCCC ls sub[ecL Lo Lhe CSL ls Lhe
manner of lLs creaLlon. CCCCs creaLed by speclal charLer are
sub[ecL Lo Lhe Clvll Servlce Law. CCCCs lncorporaLed under Lhe
CorporaLlon Law are sub[ecL Lo Labor Code.
2. Slnce Lhe nCC-LuC was lncorporaLed under Lhe CorporaLlon Law,
Lhen lLs employees are sub[ecL Lo Lhe provlslons of Lhe Labor Code.

O1nk clA555 Ol cOklOkA1lON5
1. u8LlC Anu 8lvA1L CC8C8A1lCnS (under AcL 1439)
1hls classlflcaLlon was ellmlnaLed because of confuslon
re: governmenL's shareholdlngs ln corporaLlons
lncorporaLed under Lhe CorporaLlon Law. CorporaLlons,
alLhough prlvaLe, were referred Lo as publlc because Lhe
shares of sLock are owned and conLrolled by Lhe
governmenL.
u8LlC CC8S - Lhose formed/organlzed for Lhe
governmenL, or any of lLs pollLlcal subdlvlslons. lLs
'
purpose ls Lhe general good and welfare. lL ls creaLed for
pollLlcal/ governmenta| purposes. lL ls vesLed wlLh
pollLlcal powers Lo be exerclsed for purposes connecLed
wlLh Lhe publlc good, ln Lhe admlnlsLraLlon of clvll
governmenL. ln shorL, lL's an lnsLrumenL of Lhe
governmenL.
Note: Lhe facL LhaL some/all of Lhe sLocks ln a
corporaLlon are held by Lhe governmenL does noL make
lL a publlc corporaLlon.
8lvA1L CC8S - Lhose formed for a prlvaLe purpose,
for Lhe lmmedlaLe beneflL and advanLage of Lhe
lndlvlduals or member composlng lL.

nA1lCnAL CCAL CCMAn? vS. Cl8
nCC flled sulL Lo recover sum of money whlch lL pald as Laxes Lo
8l8 under proLesL. lL clalms exempLlon from Laxes under Lhe
AdmlnlsLraLlon Code. 1he hlllpplne governmenL owns
subsLanLlally all of Lhe shares of nCC.
w Ncc ls o pobllc cotpototloo - nC, lL ls a prlvaLe corporaLlon. 1he mere
facL LhaL Lhe governmenL ls Lhe ma[orlLy SP does noL make lL a publlc
corporaLlon. Slnce lL ls a prlvaLe corporaLlon, lL cannoL clalm any
preference/rlghL/prlvllege over oLher prlvaLe corporaLlon ln Lhe mlnlng of
coal.

2. LCCLLSlAS1lCAL Anu LA? CC8C8A1lCnS
LCCLLSlAS1lCAL/ 8LLlClCuS
Composed excluslvely of eccleslasLlcs
Crganlzed for splrlLual purposes or for admlnlsLerlng properLles
held for rellglous one
Crganlzed Lo secure publlc worshlp/ Lo perpeLuaLe Lhe rlghL of a
parLlcular rellglon
1hey are fuLher classlfled as (1) rellglous socleLles, and (2)
corporaLlon sole.
LA? CC8C8A1lCnS
LsLabllshed for purposes oLher Lhan rellglon.
LxlsL for secular or buslness purpose
May be furLher classlfled lnLo (1) Lleemosynary, or (2) Clvll
o LLLLMCS?nA8? - creaLed for charlLable and benevolenL
purposes (eg. CorporaLlons organlzed for Lhe purpose of
malnLalnlng hosplLal and houses for Lhe slck, aged and
poor.)
o ClvlL - creaLed for Lhe beneflL of lLs members (pecunlary
or oLherwlse)

3. ACC8LCA1L Anu SCLL CC8C8A1lCnS
ACC8LCA1L CC8C8A1lCnS
Composed of a number of lndlvlduals vesLed wlLh corporaLe
powers
1hese are corporaLlons reglsLered under Lhe CorporaLlon Code,
conslsLlng of aL leasL (3) lncorporaLors.
CC8C8A1lCn SCLL
ConslsL of one person only
CreaLed as a body corporaLe and pollLlc ln order Lo glve Lhem
some legal capaclLy and advanLage whlch Lhey can noL have as
naLural persons.
A CorporaLlon Sole may be formed by:
o Chlef Archblshop
o 8lshop
o rlesL, mlnlsLer, rabbl or oLher presldlng elder of rellglous
denomlnaLlons, secLs or churches

4. CLCSL Anu CLn CC8C8A1lCnS
CLCSL CC8C8A1lCnS (Sec. 96)
1hose whose shares of sLock are held by llmlLed number of
persons llke Lhe famlly or oLher closely-knlL group.
1here are no publlc lnvesLors.
1he shareholders are acLlve ln Lhe conducL of Lhe corporaLe affalrs.
CLn CC8C8A1lCnS
Cpenly accepLs ouLslders or sLockholders or lnvesLors.
Compared Lo close corporaLlons, Lhey are auLhorlzed and
empowered Lo llsL ln Lhe sLock exchange
Can offer Lhelr shares Lo Lhe publlc, so sLock ownershlp can be
wldely dlspersed.

(
3. uCMLS1lC Anu lC8LlCn CC8C8A1lCnS
uCMLS1lC CC8C8A1lCnS
1hose organlzed/creaLed by vlrLue of hlllpplne Laws, elLher by
leglslaLlve acL (speclal law) or under Lhe Ceneral CorporaLlon Law.

lC8LlCn CC8C8A1lCnS (123)
1hose organlzed under any laws oLher Lhan Lhose of Lhe
hlllpplnes, and whose laws allow llllplno clLlzens and
corporaLlons Lo do buslness ln lLs own counLry or sLaLe.

6. A8Ln1/PCLulnC CCMAnlLS Anu Su8SlulA8lLS/AlllLlA1LS
PCLulnC CCMAnlLS
corporaLlon LhaL conflne Lhelr acLlvlLles Lo ownlng sLocks ln, and
supervlslng managemenL of oLher companles.
usually owns a conLrolllng lnLeresL ln Lhe companles whose sLocks
lL holds
lL exerclses conLrol by Lhe power Lo elecL managemenL
Pave a passlve porLfollo
Polds securlLles merely for purposes of conLrol and managemenL.
Compared Lo:
lnvLS1MLn1 CCMAnlLS
AcLlve ln Lhe buy and sell of shares of sLock or securlLles

Su8SlulA8lLS
Companles whlch a parenL company owns aL leasL a ma[orlLy of
shares
lL ls a corporaLlon under Lhe conLrol of anoLher corporaLlon

AlllLlA1LS
CorporaLlons whlch are sobject to commoo coottol and operaLed
as parL of a sysLem.
Also called slsLer companles" slnce Lhe sLockholdlngs of a
corporaLlon ls noL subsLanLlal enough Lo conLrol Lhe former.

7.CuASl-u8LlC CC8C8A1lCnS
1hese are prlvaLe corporaLlons whlch have accepLed from Lhe
SLaLe Lhe granL of a franchlse or conLracL lnvolvlng Lhe
performance of publlc duLles
noL sLrlcLly publlc ln Lhe sense of belng organlzed for governmenL
purposes buL whose operaLlons conLrlbuLe Lo Lhe convenlence or
welfare of Lhe general publlc (eg. 1elegraph, Lelephone companles,
gas, waLer, elecLrlc companles)
Also called u8LlC SL8vlCL CC8C8A1lCnS"

CuASl CC8C8A1lCnS

Applles Lo publlc bodles or munlclpal corporaLlons (eg. 1ownshlps,
counLrles, school dlsLrlcLs, road or hlghway dlsLrlcLs) whlch,
Lhough noL vesLed wlLh Lhe general powers of corporaLlons, are
organlzed by sLaLuLes or lmmemorlal usage, as aggregaLe
corporaLlons wlLh preclse duLles whlch may be enforced, and
prlvlleges whlch may be malnLalned, by sulLs of law.
ossess some corporaLe funcLlons and aLLrlbuLes, buL Lhey are
prlmarlly pollLlcal subdlvlslons - agencles ln Lhe admlnlsLraLlon of
clvll governmenL - and Lhelr corporaLe funcLlons are granLed Lo
enable Lhem more readlly Lo perform Lhelr publlc duLles.

uL !u8L CC8C8A1lCnS
!urldlcal enLlLles whlch are creaLed or organlzed ln compllance
wlLh Lhe sLaLuLory requlremenLs of lncorporaLlon
lLs rlghL Lo exlsL as a corporaLlon cannoL be aLLacked even by Lhe
SLaLe ln a Cuo WarranLo proceedlng.

uL lAC1C CC8C8A1lCnS
CorporaLlons whlch exlsL by vlrLue of an lrregularlLy or defecL ln
Lhe organlzaLlon or consLlLuLlon or from some omlsslon Lo comply
wlLh Lhe condlLlons precedenL by whlch corporaLlons de [ure are
creaLed
Powever, Lhere ls a CCLC8A8LL CCMLlAnCL wlLh Lhe
requlremenLs of Lhe law
lLs exlsLence can only be aLLacked by a dlrecL acLlon of CW
proceedlngs
)

CC8C8A1lCn 8? LS1CLL
! 1hose defecLlvely formed
! nelLher a corporaLlon de [ure or de facLo
! Consldered as corporaLlons ln relaLlon only Lo Lhose who
cannoL deny Lhelr corporaLe exlsLence due Lo Lhelr agreemenL,
admlsslon or conducL.
! Sec. 21 - all persons who assume Lo acL as a corporaLlon
knowlng lL Lo be wlLhouL auLhorlLy Lo do so sha|| be ||ab|e as
genera| partners for all debLs, llablllLles and damages
lncurred or arlslng as a resulL Lhereof."

3) Iormat|on and Crgan|zat|on
3 S1ACLS:
1. C8LA1lCn
2. 8LC8CAnlZA1lCn
3. ulSSCLu1lCn Anu WlnulnC u

CkLA1ICN
1. 8CMC1lCn - Lhe acL of geLLlng a corporaLlon organlzed
romoLer/organlzer/pro[ecLor brlngs persons Lo unlLe Lo form
a corporaLlon
lncludes: procuremenL of subscrlpLlon Lo caplLal sLock
2. 8CCLSS Cl lnCC8C8A1lCn
lormal drafLlng of Lhe arLlcles of lncorporaLlon + preparlng of
oLher documenLs
SubsequenL flllng
Approval of SLC
SLC lssues cerLlflcaLe of lncorporaLlon
3. C8CAnlZA1lCn Anu CCMMLnCLMLn1 Cl 8uSlnLSS
AdopLlon of by laws
LlecLlon of corporaLe offlcers
1ransacLlng buslness

lkOMO1lON 51AC
C: WhaL ls Lhe llablllLy of corporaLlon ln conLracL enLered lnLo by Lhe
promoLer?
A: 1. lf corporaLlon adopLs/raLlfles/accepLs Lhe beneflLs ! CorporaLlon
becomes llable.
2. C8: romoLer ls personally llable for conLracLs made by hlm for Lhe
beneflL of proposed corporaLlon

lkOc55 Ol lNcOklOkA1lON
SLC 14 CCn1Ln1S Cl A81lCLLS Cl lnCC8C8A1lCn
All CorporaLlons shall flle wlLh Lhe SLC lLs Al
" ln any of Lhe offlclal languages
" uuly slgned and acknowledged by all lncorporaLors
" Su8S1An1lALL? conLalnlng Lhe followlng, excepL as oLherwlse
provlded by code/speclal law
1. name
2. urpose
3. lace of rlnclpal Cfflce ! musL be wlLhln hlllpplnes
4. 1erm
3. lncorporaLors
6. Pow many dlrecLors?
7. name, naLlonallLy and 8esldence of acLlng dlrecLors &
LrusLees unLll elecLlon
8. lf sLock corporaLlon:
AmounL of auLhorlzed caplLal sLock ln lawful money
# of shares lnLo whlch lL ls dlvlded
1. lf A8 vALuL SPA8LS:
1. 1he par value of each
2. nn8 of orlglnal subscrlbers
3. AmounL subscrlbed by each
4. AmounL pald by each
2. ll SCML/ALL A8L W/C A8 ! SLaLe so.
9. lf non SLock:
AmounL of caplLal
ConLrlbuLors
1. nn8
2. AmounL conLrlbuLed by each
10. CLher maLLers whlch lncorporaLors may deem necessary and
convenlenL ! basLa noL lnconslsLenL wlLh law.
*

8LlA1C8? A8AC8AP ! ArLlcles musL speclfy Lhe naLure of Lhe
corporaLlon (sLock, nonsLock, close, corporaLlon sole, rellglous corp)

CC8C8A1L nAML
Why lmporLanL?
1. Corp can acL and perform legal acLs Lhrough lLs name
2. ueslgnaLes Lhe corporaLlon
3. ulsLlngulshes Lhe corporaLlon from SP and members
4. ulsLlngulshes Lhe corporaLlon from all oLher
corporaLlons
" CorporaLlon cannoL use any oLher name, unLLSS AMLnuLu (37)
" Sec. 18. no corporaLe name may be allowed lf name ls:
1. ldenLlcal or decepLlvely/confuslngly slmllar ! Lo an exlsLlng
corporaLlon, or any oLher name already proLecLed by law
2. aLenLly decepLlve/confuslng/ conLrary Lo laws
" When change of name ls approved !SLC lssues Amended
CerLlflcaLe of lncorporaLlon
" noLe: SLC requlres verlflcaLlon SLl from lLs records dlvlslon.
" Culdellnes:
1. 8equlred: CorporaLlon" or lncorporaLlon" ln full/
abbrevlaLed form
2. lf proposed name has a word already used as parL of
name/sLyle of a reglsLered enLlLy ! dapaL may (2) oLher
words dlfferenL and dlsLlncL from company name
3. CLher guldellnes: see book.


u8CSL CLAuSL
ueflnes, confers, llmlLs Lhe scope of auLhorlLy of Lhe corporaLlon
(43) - a corporaLlon has such powers as are expressly granLed Lo lL
by law, and by lLs ArLlcles, and Lhose whlch are lncldenLal Lo such
powers
lmporLanL so:
1. SP can know Lhe llne of buslness where he rlsks hls money
2. 8Cu may know llmlLs of lLs auLhorlLy
uapaL lawful purpose
MusL noL be for pracLlce of professlon ! reserved excluslvely for
professlonal parLnershlps
lf purpose/ob[ecLlve ls under Lhe supervlslon of a governmenL
agency ! 8lC8 CLLA8AnCL & A8CvAL 8LCul8Lu
urposes should be capable of belng lawfully comblned

8lnClAL ClllCL
Muse be wlLhln Lhe hlllpplnes
Speclfy Lhe provlnce and clLy/munlclpallLy
ulsLlngulshed from buslness operaLlons
Why lmporLanL?
1. 8ecause lL esLabllshes Lhe resldence of Lhe corporaLlon
2. lor venue of acLlons for/agalnsL Lhe corporaLlon
3. Where chaLLel morLgage of shares should be reglsLered

1L8M
Why lmporLanL?
8ecause lL deLermlnes when corporaLlon wlll lose lLs [urldlcal
personallLy
nC1L: desplLe LermlnaLlon of exlsLence, corporaLlon conLlnues as
a body corporaLe for (1) defendlng sulLs for or agalnsL lL, (2)
gradually closlng lLs affalrs
Sec. 11 - perlod noL exceedlng 30 years from daLe of
lncorporaLlon. unless: (1) sooner dlssolved, (2) exLended
! LxLenslon allowed for perlods noL exceedlng 30 years ln any
slngle lnsLance, by an amendmenL
! rovlded: exLenslon musL noL be made earller Lhan 3 years
before explry unless [usLlflable reasons for earller exLenslon

lnCC8C8A1C8S - Sec. 3
1. CorporaLors - SP/M - Lhose composlng a corporaLlon
2. lncorporaLors - Lhose SP/M menLloned ln Lhe Al as (1) orlglnally
formlng and composlng and (2) who are slgnaLorles Lo Lhe ArLlcles.
Pe can be a corporaLor lf he conLlnues Lo be a SP/M.

CuallflcaLlons for lncorporaLors of rlvaLe CorporaLlons (Sec. 10)
naLural person
"+
3 Lo 13 ln number
legal age
ma[orlLy dapaL hlllpplne 8esldenL
! LxCL1: lndusLrles where ownershlp of shares ls reserved
excluslvely Lo llllplnos
ll sLock - SP musL own/subscrlbe Lo aL leasL 1 share of Lhe caplLal
sLock

!urldlcal enLlLles (CorporaLlons and parLnershlps) can be sLockholders.

ul8LC1C8S/18uS1LLS
C8: (3) Lo (13) ulrecLors or LrusLees
Lx:
o LducaLlonal lnsLlLuLlons na nonsLock ! number of
LrusLees musL be dlvlslble by (3)
o Close CorporaLlons ! all SP are consldered as parL of
8Cu
Mlnlmum dlsquallflcaLlon ! lald down ln Code (sec. 23, 27) ! by
laws may provlde addlLlonal dlsquallflcaLlon
CuallflcaLlons (sec. 23):
o Lvery dlrecLor musL own aL leasL (1) share
o 1rusLees of non-sLock corp musL be a member Lhereof
o Ma[orlLy of ulrecLors and 1rusLees musL be resldenLs of
Lhe hlls
noLe:
o Lven allens may be dlrecLors
# rovlded: resldency requlremenL ls meL
LxCL1: lndusLry excluslvely reserved
for llllplno clLlzens
# 1helr number shall only be ln proporLlon Lo Lhelr
equlLy ln Lhe caplLal sLock
ulsquallflcaLlons: (sec. 27) - AbsoluLe
o ConvlcLlon of llnal !udgmenL of
# Cffense punlshable by lmprlsonmenL 6yrs ++
# vlolaLlons of Corpo Code commlLLed wlLhln 3
years before daLe of hls elecLlon/ appolnLmenL

CAl1ALlZA1lCn 14(8)
Au1PC8lZLu CAl1AL
o 1he maxlmum amounL Lo be secure and pald ln or
secured Lo be pald
o 1he maxlmum number of shares LhaL corporaLlon can
lssue
Su8SC8l8Lu CAl1AL S1CCk
o 1he number of shares (and lLs LoLal value) for whlch
Lhere are conLracLs of purchases or subscrlpLlons
o 1haL parL of Lhe auLhorlzed caplLal sLock whlch has been
subscrlbed by subscrlbers/SP
Alu u CAl1AL S1CCk/Alu ln CAl1AL
o AcLual amounL already pald Lo Lhe corporaLlon ln
conslderaLlon of subscrlpLlon made Lhereon
# LlLher ln cash/properLy/servlces rendered
# 8asLa capable of valuaLlon
# lf properLy, lLs falr value musL be equal Lo Lhe
par value of shares subscrlbed
o SLC. 62
CLASSlllCA1lCn Cl SPA8LS Cl S1CCk
o SPA8LS Cl S1CCk - Lhe unlL of proprleLary lnLeresL ln Lhe
corporaLlon
# 1he lnLeresL of Lhe owner ln Lhe managemenL of
Lhe corporaLlon ln Lhe surplus proflLs and ln Lhe
dlsLrlbuLlon of asseLs
o S1CCk CL81lllCA1L - Lhe documenL evldenclng Lhe
lnLeresL
CLASSLS:
o CCMMCn S1CCkS
# LnLlLles owner Lo equal pro raLa dlvlslon of
properLles, lf any
# usually wlLh rlghL Lo voLe (unless oLherwlse
sLaLed)
o 8LlL88Lu SPA8LS
# Sub[ecL Lo llmlLaLlons ln Sec. 6
lssued wlLh a sLaLed par value
""
reference musL be sLaLed ln ArLlcles
and CerLlflcaLe of SLock. CLherwlse: no
preference.
# lklkkNc A5 1O ulvluNu5
rlvllege of belng pald flrsL over oLher
SP, ll Lhere are proflLs avallable for
paymenL of dlvldends
Cnly lf Lhere are proflLs Anu lf 8Cu
declares dlvldends
1he amounL of preference ls sLaLed ln
Lhe conLracL of subscrlpLlon
# cuMulA1lv lklkku 5nAk5
8lghL Lo clalm back dlvldends noL
prevlously pald regardless lf declared or
noL
C8: nCn CuMuLA1lvL
Lx: S1A1Lu nA CuMuLA1lvL
# NONcuMulA1lv lklkku 5nAk
8lghL Lo clalm paymenL of Cu88Ln1
dlvldends only, noL back dlvldends,
WPLn Anu ll dlvldends are pald
AdvanLageous Lo corporaLlon lf Lhere
are years where proflLs where noL
earned

# lklkkNc A5 1O vO1lNC klCn15
usually, doe noL have voLlng rlghLs
8uL ln llghL of SecLlon 6:
o C8: 8LlL88Lu SPA8LS PAS
vC1lnC 8lCP1S
o Lx: ll CLLA8L? Wl1PPLLu

# lklkkNc ulON llOuluA1lON
As Lo (1) llquldaLlon of dlvldends, (2)
dlsLrlbuLlon of corporaLe asseLs
C8: nC 8LlL88LnCL
Lx: SC S1A1Lu

A8 vALuL vS. nC-A8 vALuL SPA8LS
A8 vALuL SPA8L
o Shares whose value ls flxed ln Lhe ArLlcles/ CerLlflcaLe
o urpose ls Lo flx Lhe mlnlmum subscrlpLlon prlce
o lndlcaLes Lhe amounL whlch Lhe orlglnal subscrlbers are
supposed Lo conLrlbuLe Lo Lhe caplLal as basls of prlvllege
of 8Cll1 SPA8lnC wlLh llmlLed llablllLy
o nC1L: par value may noL be Lhe (1) Lrue value, (2) falr
markeL value, (3) book value
WA1L8Lu S1CCkS
o Shares lssued aL les Lhan par
o SP remalns llable for dlfference beLween whaL he pald
and acLual par value
nC A8 vALuL SPA8LS
o uo noL represenL any sLaLed proporLlonaLe lnLeresL ln Lhe
caplLal sLock, buL only an ALlCuC1 parL of Lhe whole
number of such shares
o Can be lssued by S1CCk CC8C8A1lCn ! sub[ecL Lo
llmlLaLlons
# When lssued ! deemed fully pald and non-
assessable
# Should noL be worLh 3 or less
# ConslderaLlon pald consLlLuLes caplLal
# Can nC1 be lssued as preferred sLock
# Can noL be lssued by banks, eLc.
o AdvanLages:
# llexlblllLy ln prlce
# ueemed fully pald

vC1lnC vS. nCnvC1lnC - SLC. 6
C8: ALL klnuS Cl SPA8LS PAvL vC1lnC 8lCP1S
LxCL1: 8LlL88Lu SPA8LS, 8LuLLMA8LL SPA8LS ! can be
deprlved of voLlng rlghLs

When do you voLe:
1. elecLlon of dlrecLors
2. oLher maLLers requlrlng SP Lo voLe/ approval
"#

lCunuL8S SPA8LS - SLC. 7
have cerLaln rlghLs and prlvlleges noL en[oyed by oLher SP
may be provlded for by Lhe arLlcles of lncorporaLlon

8LuLLMA8LL SPA8LS - SLC. 8
Lhose lssued by a corporaLlon sub[ecL Lo redempLlon (as provlded
by Lhe subscrlpLlon conLracL
redeemable shares granLs Lhe corporaLlon Lhe 8lCP1 1C
8LACCul8L Lhe shares, aL lLs opLlon/ aL opLlon of Lhe holder
o based on face/lssued value + premlum
o dependlng on Lhe Lerms of Lhe conLracL
aL a flxed or fuLure daLe
o redempLlon may be elLher opLlonal or mandaLory
C8: A corporaLlon may acqulre lLs own shares ll l1 PAS
un8LS18lC1Lu 8L1AlnLu LA8nlnCS
Lx: SLC. 8 - corporaLlons can redeem redeemable shares
regardless lL has u8L.

18LASu8? SPA8LS - SLC. 9
Can be lssued agaln, for a prlce (even for less Lhan par)
So purchaser wlll noL be llable for Lhe dlfference beLween Lhe
purchase prlce and Lhe par value (kasl Lhe full value had
prevlously been pald ln full)
Whlle Lhe corporaLlon has possesslon of Lhe Lreasury shares:
o 1hey have no dlvldends
o 1hey have no voLlng rlghLs
o 8uL Lhey can be declared as dlvldends
Cl8 v. Mannlng: A S1CCk ulvluLnu CAnnC1 8L uLCLA8Lu Cu1
Cl Cu1 Cl Cu1S1AnulnC CC8C8A1L S1CCk. lL can only be
declared from reLalned earnlngs.

CAl1AL 8LCul8LMLn1
SLC. 12 - S1CCk CorporaLlons ! mlnlmum caplLal sLock requlred
SLock corporaLlons lncorporaLed under Lhls code are noL requlred
Lo have any mlnlmum auLhorlzed caplLal sLock
Lx: oLherwlse speclflcally provlded for by Speclal Law and sub[ecL
Lo provlslons of Sec. 13
no mlnlmum caplLallzaLlon requlremenL, buL Lhere ls mlnlmum
pald up caplLal
Law does noL requlre LhaL each subscrlber pay 23 of hls
subscrlpLlon
o 8asLa 23 of LoLal subscrlpLlon pald
SLC can requlre paymenL of hlgher mlnlmum pald-up caplLal

8LS18lC1lCnS Anu 8LlL8LnCLS Cn 18AnSlL8 Cl SPA8LS:
C8: CorporaLlons are noL requlred Lo provlde
resLrlcLlons/preferences re: Lransfer of shares, sale or asslgnmenL
ln Lhelr ArLlcles.
Lx: Closed CorporaLlons (sec. 96) -requlred Lo sub[ecL Lhelr shares
Lo resLrlcLlons
CorporaLlons can resLrlcL or granL preferences (eg. 8lghL of flrsL
refusal)
o 8uL musL be lndlcaLed ln ArLlcles, and ln all sLock
cerLlflcaLes
1he no-Lransfer Lo allens clause
o 8equlred by SLC, as a maLLer of pollcy Lo be lncluded ln
Lhe ArLlcles of lncorporaLlon of all sLock corporaLlons
# noL [usL corporaLlons LhaL wlll engage ln a
buslness reserved Lo clLlzens o Lhe hlllpplnes
(Sec. 13

18LASu8L8
Sec. 13 - CorporaLlon musL lndlcaLe Lhe name of Lhe Lreasurer,
unLll hls successor has been elecLed and quallfled ln accordance
wlLh Lhe C8L
Pe ls auLhorlzed Lo recelve ln Lhe name of Lhe corporaLlon all
subscrlpLlons, conLrlbuLlons, donaLlons pald by
subscrlbers/members

LxLCu1lCn CLAuSL
arL of Lhe ArLlcles where lncorporaLors slgn Lhe documenL
o WlLnessed by (2) dlslnLeresLed persons
"$
lmporLanL bec. Lhe arLlcles serve as a CCn18AC1 beL Lhe
slgnaLorles Lhereof

nC1A8lAL ACknCWLLuCMLn1
arL of Lhe arLlcles where lncorporaLors acknowledge before a
noLary publlc LhaL Lhey have execuLed and slgned ln Lhelr own
free, volunLary accounL

8LClS18A1lCn 8CCLuu8L Anu 8LCul8LMLn1S
2 MCuLS:
1. Lx8LSS LAnL
2. 8LCuLA8/C88ulnA8? 8CCLuu8L
Lx8LSS LAnL
lor companles wlLh only one buslness purpose
WlLhouL need of hlrlng a lawyer
ros: (1) fasL, (2) Llme and cosL-savlng
Cons: (1) can only have one purpose, (2) lf corp wlll expand, flle
amendmenL Lo lnclude Lhe purpose

8LCuLA8 8CCLSS
lor corporaLlons wlLh more Lhan (1) purpose
Also for corporaLlons whlch provlde classes of shares of sLock
1akes an average of (3) worklng days before Lhe cerLlflcaLe of
lncorporaLlon ls released
AfLer Lhe flllng of Lhe arLlcles and Lhe supporLlng documenLs, Lhe
SLC wlll examlne Lhem Lo deLermlne compllance wlLh
requlremenLs.
Cnly subsLanLlal and noL sLrlcL compllance ls requlred.
lrom Lhe Llme of lssuance of cerLlflcaLe of lncorporaLlon, Lhe
corporaLlon becomes vesLed wlLh a [urldlcal personallLy, wlLh
power Lo sue and be sued

C8CunuS lC8 8LluSAL - SLC. 17 - noL excluslve
1haL Lhe arLlcles/ any amendmenL LhereLo ls nC1 Su8S1An1lALL?
ln ACCC8uAnCL Wl1P 1PL lC8M prescrlbed ln Lhe Corpo Code
1haL Lhe purpose/s are A1Ln1L? unCCnS1l1u1lCnAL ,lLLLCAL,
lMMC8AL or conLrary Lo governmenL rules and regulaLlons
1haL Lhe Lreasurer's affldavlL re: Lhe amounL of caplLal sLock
subscrlbed and/or pald ls false
1haL Lhe percenLage of ownershlp of Lhe caplLal sLock Lo be
owned by clLlzens of Lhe hlllpplnes has noL been complled wlLh
CLher grounds:
o 1haL Lhe corporaLe name ls noL legally permlsslble
o 1haL Lhe mlnlmum caplLal requlremenL ls noL sufflclenL

CCMMLnCLMLn1 Cl CC8C8A1L LxlS1LnCL - Sec. 19
lrom Lhe daLe of lssuance of lLs cerLlflcaLe of lncorporaLlon or
reglsLraLlon

CACA?An llSPlnC uLv1 CC. vS. 1LCuC8C SAnulkC (1937)
May 31, 1930 - Manuel 1abora sold hls (4) parcels of land Lo
Cagayan llshlng, whlch ls under Lhe process of lncorporaLlon.
1abora has a loan from n8, whereln hls lands where morLgaged
as securlLy
CondlLlon of Lhe sale: LhaL Lhe land LlLle shall noL be Lransferred Lo
corporaLlon's name unLll lL has fully and compleLely pald 1abora's
lndebLedness Lo n8.
CcL 22, 1930 - CorporaLlon flled lLs ArLlcles of lncorporaLlon.
CcL 28, 1931 -8Cu adopLed resoluLlon selllng Lhe (4) parcels Lo
Sandlko.
W Lhe subsequenL sale of Lhe properLles Lo Sandlko ls valld - nC, bec.
CorporaLlon was noL yeL ln exlsLence when sale made.
AL Lhe Llme of Lhe sale Lo Cagayan llshlng,lL was noL yeL
lncorporaLed. lL was noL even a de facLo corporaLlon aL LhaL Llme.
Slnce lL dld noL have legal exlsLence Lhen, lL dld noL possess
[urldlcal personallLy Lo enLer ln Lhe conLracL.
Cnly a duly organlzed corporaLlon has Lhe power Lo purchase and
hold real properLy, enLer lnLo conLracL or LransacL buslness.

uLlLC1lvLL? lC8MLu CC8C8A1lCnS
under hlllpplne [urlsprudence, a corporaLlon may be consldered
as exlsLlng desplLe non-compllance, subsLanLlal compllance of Lhe
CorporaLlon Code.
1hese are:
"%
o uL lAC1C CC8C8A1lCn
o CC8C8A1lCn 8? LS1CLL

uL lAC1C CC8C8A1lCn
lL ls noL a de [ure corporaLlon, buL lL exlsLs for all pracLlcal
purposes as a corporaLe body by vlrLue of lLs (1) bona flde aLLempL
Lo lncorporaLe, and (2) exerclse of corporaLe powers.
lL exlsLs as a corporaLlon lf Lhe ff. condlLlons are meL:
o 1here ls a valld sLaLuLe
o An aLLempL ln good falLh Lo form Lhe corporaLlon,
enough Lo be a colorable compllance"
o Lxerclse of corporaLe powers (eg. 1ransacLlon of
buslness)
o Cood falLh ln clalmlng Lo be and dolng buslness as a
corporaLlon
A de facLo corporaLlon cannoL be collaLerally aLLacked, buL can be
dlrecLly aLLacked by 1PL S1A1L ln A CuC WA88An1C
8CCLLulnC.
lL ls ln all respecLs a de [ure corporaLlon, Lhe only dlfference belng
Lhe SLaLe may quesLlon lLs exlsLence ln a dlrecL proceedlng.

uL !u8L uL lAC1C
CorporaLe exlsLence cannoL be
dlrecLly aLLacked, elLher dlrecLly or
collaLerally, even by Lhe sLaLe
CorporaLe exlsLence can be dlrecLly
aLLacked on a CW proceedlng by
Lhe S1A1L. (rlvaLe persons cannoL
dlrecLly or collaLerally aLLack lLs
exlsLence)

MunlClALl1? Cl MALA8AnC vs. 8Lnl1C L1 AL (1969)







4) Corporate Charter and Its Amendments
CorporaLe CharLer
ueflnlLlon: lnsLrumenL or auLhorlLy from Lhe soverelgn power
Synonymous wlLh: Act of lncorporaLlon" (where corporaLlon
formed under speclal acL of leglslaLure) and Art|c|es of lncorporaLlon"
(where formed under a general law)
A Lhree-fold conLracL:
1. beLween corporaLlon-sLaLe re. prlmary franchlse Lo be and acL as a
corporaLlon
2. beLween corporaLlons-sLockholders/members re. rlghLs &
obllgaLlons
3. beLween and among sLockholders/members re. Lhelr relaLlonshlp
wlLh each oLher
rlmary v. Secondary lranchlse of a corporaLlon
rlmary franchlse: sLaLe confermenL Lo be and acL as a
corporaLlon (le, Lhe cerLlflcaLe of lncorporaLlon)
Secondary/speclal franchlse: powers and prlvlleges vesLed ln Lhe
corporaLe body (le, llcenses and auLhorlLy)

CorporaLe LnLlLy" 1heory
Sec. 19: 1he corporaLlon acqulres [urldlcal personallLy only upon Lhe
lssuance of Lhe cerLlflcaLe of lncorporaLlon. lLs properLy ls vesLed ln Lhe
corporaLlon lLself, noL on Lhe SP/members, hence, personal credlLors of
Lhe laLLer cannoL aLLach corporaLe properLles Lo saLlsfy Lhelr clalms.
340" (5 6%.%( 78 9#%(+&%
l: 8elvlndlcaLory acLlon flled by Sulo ln behalf of lLs members who were
e[ecLed by AraneLa.
P: ulsmlssed. 1he corporaLlon has no personallLy Lo brlng an acLlon for and
ln behalf of lLs SPs/members - absenL proof of asslgnmenL of rlghLs Lo Lhe
"&
corporaLlon - for recovery of properLy whlch belongs Lo Lhe laLLer ln Lhelr
personal capaclLles.
1he corporaLe enLlLy Lheory ls conflned Lo leglLlmaLe LransacLlons
and ls sub[ecL Lo equlLable llmlLaLlons Lo prevenL lLs belng used as a cloak
for fraud or lllegallLy or Lo work an ln[usLlce.
!%#%: 78 !9
l: 1he Carams, clalmlng Lo be mere lnvesLors, quesLloned belng held
personally and solldarlly llable wlLh co-defendanL corporaLlon.
P: CranLed. ClrcumsLances were consldered. 1here was a facLual flndlng
LhaL Lhe Carams were flnanclers and LhaL Lhe corporaLlon was bona flde,
hence Lhe former were absolved from llablllLy. 1he corporaLlon alone ls
llable for corporaLe acLs duly auLhorlzed by lLs dlrecLors and offlcers.
;4/&%( <40$ 78 =9!
P: 1he resldenL and manager of a corporaLlon who enLered lnLo and
slgned a conLracL ln hls offlclal capaclLy, cannoL be made llable ln hls
lndlvldual capaclLy ln Lhe absence of sLlpulaLlon Lo LhaL effecL.
!#4> 78 ?%0'/%.
P: 1he corporaLlon ls noL llable for Lhe debLs, obllgaLlons or llablllLles of lLs
sLockholders even lf Lhe sLockholder concerned ls lLs presldenL.
1he sherlff has no dlscreLlon Lo plerce Lhe vell of corporaLe flcLlon
and levy Lhe corporaLe properLy Lo execuLe a personal [udgmenL on any of
lLs offlcers.
<%0%. =(*8 78 !0%7+
l: 1he CorporaLe resldenL was belng made Lo solldarlly refund a sum of
money wlLh Lhe corporaLlon because he allegedly was one and Lhe same
wlLh Lhe corporaLlon as he was Lhe conLrolllng SP.
P: no badge of fraud on hls parL. Mere ownershlp by a slngle SP of all or
nearly all of Lhe caplLal sLock ls noL, of lLself, sufflclenL ground Lo dlsregard
Lhe separaLe corporaLe personallLy.
3"#'%(" 78 !9
l: eLlLloners held solldarlly llable ln Lhelr personal capaclLy because Lhey
lndlcaLed ln Lhe recelpL Lhelr offlclal deslgnaLlon ln Lhe corporaLlon.
P: 8eversed. 1here was a facLual flndlng LhaL Lhe recelpL perLalned Lo Lhe
assoclaLlon raLher Lhan Lo Lhe underslgned offlclals. 1here was no proof
LhaL Lhe peLlLloner-slgnaLorles used Lhe personallLy of Lhe corporaLlon as a
proLecLlve shleld for any wrongdolng. 1hus, Lhe general rule on corporaLe
llablllLy applles, cause of acLlon lles solely agalnsL Lhe corporaLlon.
lerclng Lhe vell of CorporaLe llcLlon
Ceneral 8ule: CorporaLlons are separaLe and dlsLlncL enLlLles from lLs
SPs/members and from oLher corporaLlons Lo whlch lL ls connecLed.
LxcepLlon: 1he law wlll regard Lhe corporaLlon as a mere
assoclaLlon of persons and hold offlcers and SPs dlrecLly llable when Lhe
noLlon of corporaLe enLlLy ls used Lo:
, defeaL publlc convenlence,
, [usLlfy wrong,
, proLecL fraud,
, defend crlme,
, acL as a mere dummy wlLh no buslness purpose for Lhe sole
beneflL of Lhe SPs
<%0%*'" 7 @+0. A#%(/$"#&%&'"(
l: A [eep owned by Callngasan ln[ured alaclo. AfLer hls employee's
convlcLlon ln a crlmlnal case, Callngasan sold Lhe [eep Lo lely
1ransporLaLlon (wlLh Callngasan as resldenL and CM).
l: Won lely 1ransporLaLlon can be held subsldlarlly llable wlLh Lhe
employee
"'
P: ?LS. Callngasan and lely regarded as one person. lL ls evldenL LhaL Lhe
maln purpose of formlng Lhe corporaLlon was Lo evade Lhe subsldlary clvll
llablllLy resulLlng from Lhe employee's convlcLlon.
AlLhough Callngasan was noL yeL a parLy ln Lhe case, Lhe courL can
subsLlLuLe hlm ln Lhe place of Lhe defendanL corporaLlon as a real parLy ln
lnLeresL.
B%#7+0 64'0,'(5 !"#$8 78 ?%7',
l: lalnLlff-sLockholders soughL Lo en[oln Cl8 from selllng aL publlc aucLlon
varlous properLles reglsLered ln Lhe name of Lhe corporaLlon Lo saLlsfy lLs
clalm for Lhe war proflLs Laxes assessed agalnsL Marla CasLro (who
allegedly owns all Lhe shares).
P: uenled. ClrcumsLanLlal evldence held Lo be sufflclenL Lo declare LhaL Lhe
plalnLlffs were dummles. 1hey should have come Lo courL Lo asserL LhaL
Lhey acLually pald for Lhelr subscrlpLlons. 8eal SPs would never have
consenLed LhaL CasLro keep Lhe funds wlLhouL recelpLs or accounLlng and
manage Lhe buslness wlLhouL Lhelr knowledge.
C4&'7" D 3"(/ !"8 78 !A9
l: C1A wenL afLer ?uLlvo Lo collecL Laxes assessed agalnsL SouLhern MoLors.
?uLlvo ralsed separaLe corporaLe enLlLy as a defense.
P: SM was a mere lnsLrumenLallLy of ?uLlvo. ?uLlvo prlnclpally flnanced lLs
buslness and acLually exLended all Lhe credlL Lo Lhe laLLer - sLarLlng caplLal,
vehlcles, advances and loans. lL was creaLed Lo be a mere subsldlary Lo sell
Lhe vehlcles aL reLall and malnLaln sLores for spare parLs and servlce repalr.
!=; 78 E"#&"( D F%##'/"( !"8
l: norLon and !ackbllL enLered lnLo an agreemenL whereby norLon was
made excluslve dlsLrlbuLor of concreLe blocks manufacLured by Lhe laLLer.
!ackbllL would dellver Lhe producLs and norLon would recelve Lhe paymenL.
norLon Lhen boughL all Lhe ouLsLandlng sLock of !ackbllL. C1A relleved
norLon of llablllLy for !ackbllL's deflclency sales Laxes.
P: 8eversed. !ackbllL ls merely a deparLmenL of norLon. Cwnershlp of all
Lhe sLocks ln a corporaLlon does noL necessarlly breed an ldenLlLy of
corporaLe lnLeresL beLween Lhe Lwo companles and be consldered as a
sufflclenL ground for dlsregardlng Lhelr dlsLlncL personallLles. Powever, ln
Lhls case, Lhere were sufflclenL grounds Lo dlsregard Lhe noLlon - norLon
owned all of !ackbllL's sLocks, consLlLuLed lLs board of dlrecLors, flnanced
lLs operaLlons, LreaLed lLs employees as lLs own, and gave compensaLlon Lo
Lhe board.
G% !%:$%('% !"HH++ 78 IIB
P: La Campanla Cawgaw and La Campanla Coffee were under Lhe same
managemenL wlLh Lhe same offlce and payroll. Laborers of one were
someLlmes made Lo do work for Lhe oLher. Pence, Lhey were consldered as
one corporaLlon. 1he noLlon of separaLe corporaLe enLlLy noL avallable
when Lhe purpose ls Lo defeaL Lhe ends of Lhe law.
J:'0'" !%(" J(&+#$#'/+/ 78 !"4#& "H =(,4/&#'%0 ;+0%&'"(/
l: uL case. 1he properLy of Lhe corporaLlon was belng made Lo answer for
Lhe [udgmenL rendered agalnsL lLs offlclals. eLlLloner moved Lo quash wrlL
of execuLlon.
P: ulsmlssed. lL ls a closed famlly corporaLlon. lL was sufflclenL
represenLaLlon of Lhe corporaLlon LhaL Lmlllo and 8odolfo Cano were sued
ln Lhelr offlclal - noL prlvaLe - capaclLles. verlly, Lhe order agalnsL Lhem ls
an order agalnsL Lhe corporaLlon. SplrlL of Lhe law Lrumps LechnlcallLles.
A+0+$2"(+ J(5'(++#'(5 3+#7'*+ !"8 78 K!!
l: 1he wldow of an uMACC8 employee sued 1LSCC for deaLh
compensaLlon. WCC rendered an award agalnsL 1LSCC. 1LSCC only
dlspuLed Lhe er-ee rel on appeal.
P: ulsmlssed. 1LSCC admlLLed LhaL uMACC8 ls a slsLer corporaLlon. Also, lL
represenLed and defended lLself as Lhe employer of Lhe deceased.
!0%$%#"0/ 78 !"4#& "H =(,4/&#'%0 ;+0%&'"(/
"(
P: CSC was a successor of CSn and lLs emergence was Llmed Lo avold Lhe
flnanclal llablllLy aLLached Lo lLs predecessor. 8oLh were owned and
conLrolled by Lhe same person and Lhere was no break ln Lhe successlon.
nlneLy percenL of Lhe subscrlbed shares of CSC was owned by peLlLloner
hlmself and all Lhe asseLs of CSn were Lurned over Lo CSC.
E%&'"(%0 @+,+#%&'"( "H G%-"# L('"( ME9@GLN 78 O$0+
l: Lawman lndusLrlal Lransferred lLs buslness operaLlons Lo Llbra CarmenLs,
whlch laLer changed lLs name Lo uolphln CarmenLs. uefendanL cannoL
deny relnsLaLemenL Lo Lhe plalnLlffs slmply because Lawman has ceased lLs
operaLlons.
P: vell should be plerced as lL was dellberaLely and mallclously deslgned Lo
evade lLs flnanclal obllgaLlons Lo lLs employees.
9! ;%(/": G%-"# L('"( 78 EG;!
l: 1he offlcers of AC 8ansom were belng held solldarlly llable wlLh Lhe
corporaLlon for Lhe paymenL of backwages Lo Lhe 22 sLrlkers. AL Lhe Llme
Lhe uL case was proceedlng before Lhe Cl8, 8ansom organlzed a run-
away" corporaLlon, 8osarlo, Lo evade lL flnanclal obllgaLlons. 8oLh
corporaLlons were closed corporaLlons owned and managed by members
of Lhe same famlly. lL engaged ln Lhe same llne of buslness, offerlng Lhe
same llne of producLs and occupled Lhe same bulldlngs, facLorles and
bodegas.
P: Cfflcers of 8ansom are solldarlly lllable. AnoLher lnsLance when Lhe
flcLlon should be dlsregarded ls when Lhe organlzaLlon proves Lo be a
convenlenL lnsLrumenL Lo avold paymenL of backwages and relnsLaLemenL
of employees.
!"(*+$& 64'0,+#/ =(*8 78 EG;!
robaLlve facLors of ldenLlLy LhaL wlll [usLlfy plerclng Lhe corporaLe vell:
1. SLock ownershlp by one or common ownershlp of boLh
corporaLlons
2. ldenLlLy of dlrecLors and offlcers
3. Manner of keeplng corporaLe books and records
4. MeLhods of conducLlng Lhe buslness
Instrumenta||ty ku|e: Where one corporaLlon ls so organlzed and
conLrolled and lLs affalrs are conducLed so LhaL lL ls, ln facL, a mere
lnsLrumenLallLy of Lhe oLher, Lhe flcLlon of Lhe corporaLe enLlLy of Lhe
lnsLrumenLallLy" may be dlsregarded. 1he conLrol necessary Lo lnvoke Lhe
rule ls noL compleLe or ma[orlLy sLock conLrol, buL such domlnaLlon of
flnances, pollcles and pracLlces LhaL Lhe corporaLlon has no separaLe wlll.
ConLrol musL be shown Lo have been exerclsed aL Lhe Llme Lhe acLs
complalned of Look place. Moreover, Lhe conLrol and breach of duLy musL
proxlmaLely cause Lhe ln[ury or un[usL loss for whlch Lhe complalnL ls made.
* 1he quesLlon of wheLher a corporaLlon ls a mere alLer ego ls purely
facLual.
B**"((+0 78 !9
l: ark 8lLe occupled anoLher's loL wlLhouL lLs knowledge or consenL. AfLer
lL was lncorporaLed, Lwo of Lhe flve lncorporaLors boughL ouL 1496/1300
shares from Lhe oLher Lhree. 1he offlce of one lncorporaLor was Lhe same
offlce of Lhe corporaLlon. 1he funds of Lhe corporaLlon was also kepL ln Lhe
lncorporaLor's vaulL. 1he corporaLlon lLself had no vlslble asseLs.
P: 1he corporaLlon was a mere exLenslon of Lhe personallLles of Lhe Lwo
lncorporaLors. 1he operaLlons of Lhe corporaLlon were so merged wlLh Lhe
sLockholders as Lo be pracLlcally lndlsLlngulshable from Lhem.
A%( 6""( 6++ D !"8 78 P%#+(*'"
l: Lvldence esLabllshed LhaL AuCC was never engaged ln Lhe prlnLlng
buslness, LhaL Lhe board and Lhe offlcers of Craphlc and AuCC were Lhe
same, LhaL AuCCC holds 30 share of sLock of Craphlc. AuCC's own
evldence shows LhaL Lhe prlnLlng machlne had been ln Lhe premlses of
Craphlc slnce May 1963 long before AuCC even acqulred LlLle on !uly
1966 from CaplLol ubllshlng. lL shows LhaL AuCC's clalm of ownershlp
over Lhe prlnLlng machlne ls noL only farce and sham buL also unbellevable.
P: vell should be plerced.
")
!+%/+ 78 !9
l: Won Lhe asseLs and properLles of Lhe corporaLlon ls also Lhe esLaLe of
loresL Cease.
P: 1he 8oard of dlrecLors and sLockholders belong Lo one famlly Lhe head
of whlch ls loresL Cease who reLalned Lhe ma[orlLy sLocks, and hence
conLrol and managemenL of lLs affalrs.
G',,+00 D !"8 78 !=;
8evenue offlcers may dlsregard Lhe noLlon of separaLe corporaLe enLlLy
and LreaL Lhe person who ls acLually beneflLLed as Laxable where lL serves
as a shleld for Lax evaslon. 1o hold oLherwlse would be Lo allow
clrcumvenLlon of our Lax laws.
When noL [usLlfled
When Lhe corporaLlon ls belng used Lo defeaL publlc convenlence,
[usLlfy wrong, proLecL fraud, defend crlme, confuse leglLlmaLe
lssues, or Lo clrcumvenL Lhe law or perpeLuaLe decepLlon, or acL as
an alLer-ego, ad[uncL, or buslness condulL for Lhe sole beneflL of
Lhe sLockholder/s of anoLher corporaLlon.
lor separaLe personallLy of Lhe corporaLlon Lo be dlsregarded, Lhe
wrongdolng musL be clearly and convlnclngly esLabllshed.
lf Lhe peLlLloner does noL seek Lo lmpose a clalm agalnsL Lhe
offlcers or sLockholders, plerclng Lhe vell would noL be avallable or
[usLlfled.

;+:" 78 =9!
P: Whlle lL ls Lrue LhaL on uec. 1977, peLlLloner was sLlll a member of Lhe
board of Akron, and LhaL he parLlclpaLed ln Lhe adopLlon of a resoluLlon
auLhorlzlng Lhe purchase of 13 Lrucks Lo be pald ouL of a loan Lo be secured
from a lendlng lnsLlLuLlon, lL does noL appear LhaL sald resoluLlon was
lnLended Lo defraud anyone and more parLlcularly Lhe prlvaLe respondenL.
lL was Lhe resldenL of Akron who negoLlaLed wlLh Lhe respondenL. 1he
word we" ln Lhe promlssory noLe refers Lo Lhe corporaLlon. eLlLloner dld
noL slgn Lhe sald n so he can be held personally bound Lhereby. Slnce he
has no personal obllgaLlon Lo Lhe respondenL, lL ls hls lnherenL rlghL as
sLockholder Lo dlspose of hls share of sLok anyLlme he so deslres.
?+0 ;"/%#'" 78 EG;!
uocLrlne: SubsLanLlal ldenLlLy of lncorporaLors of Lwo corporaLlons does
noL necessarlly lmply fraud.
=(,"$2'0 A+Q&'0+ B'00 K"#R+#/ L('"( 78 !%0'*%
l: eLlLloner seeks Lo plerce Lhe vell of Lhe corporaLe enLlLy of Acryllc,
alleglng LhaL Lhe creaLlon of Lhe corporaLlon ls a devlce Lo evade Lhe
appllcaLlon of Lhe C8A beLween Lhe unlon and Lhe respondenL company.
1he buslnesses of prlvaLe respondenL and Acryllc are relaLed, Lhey have Lhe
same employees who man and provlde auxllllary servlces Lo unlLs of Acryllc,
and Lhe physlcal planLs, offlces and faclllLles are slLuaLed ln Lhe same
compound.
P: lacLs noL sufflclenL Lo [usLlfy plerclng Lhe corporaLe vell. 1he legal
corporaLe enLlLy ls dlsregarded only lf lL ls soughL Lo hold Lhe offlcers and
sLockholders dlrecLly llable for corporaLe debL or obllgaLlon. Pere,
peLlLloner does noL seek Lo lmpose a clalm agalnsL Lhe members of Acryllc.
<E6 78 ;'&#%&&" S#"4$
uocLrlne: 1he parenL-subsldlary relaLlonshlp beLween n8 and n8-llL ls
noL Lhe slgnlflcanL legal relaLlonshlp lnvolved ln Lhls case slnce Lhe
peLlLloner was noL sued because lL ls Lhe parenL company of n8-llL.
8aLher, Lhe peLlLloner was sued because lL acLed as an aLLorney-ln0facL of
n8-llL ln lnlLlaLlng Lhe foreclosure proceedlngs. A sulL agalnsL an agenL
cannoL, wlLhouL compelllng reasons, be consldered a sulL agalnsL Lhe
prlnclpal. Case dlsmlssed.
AmendmenL of CorporaLe CharLer
Cne of Lhe powers granLed Lo all reglsLered corporaLlons.
See Sec. 36 cf Sec. 16
8equlremenLs for AmendmenL:
"*
1. 8esoluLlon - by ma[orlLy of Lhe board of dlrecLors/LrusLees
2. 2/3 voLe or wrlLLen assenL - of SPs holdlng ouLsLandlng caplLal
sLocks or of members
3. SubmlL and flle amendmenLs wlLh Lhe SLC
a. underscore changes ln Lhe amended arLlcles. SubmlL Lhe
orlglnal as well.
b. A copy of Lhe amended arLlcles cerLlfled under oaLh by
Lhe corporaLe secreLary and a ma[orlLy of Lhe board
sLaLlng LhaL such amendmenLs have been duly approved
by Lhe requlred voLe
c. lavorable recommendaLlon of approprlaLe governmenL
agency
Any amendmenL shall Lake effecL upon approval of Lhe SLC or
from Lhe daLe of flllng lf noL acLed upon wlLhln 6 monLhs from Lhe
daLe of flllng (excepL when amendmenL concerns l.) lncreaslng or
decreaslng Lhe caplLal sLock, or ll.) shorLenlng Lhe corporaLe Lerm).

Speclal AmendmenLs
As Lo:
, lncrease or decrease ln caplLal sLock
, CreaLe or lncrease bonded lndebLedness
, ShorLenlng or exLendlng corporaLe Lerm
AddlLlonal requlremenLs: MeeLlng of SPs/members ls requlred. 1he voLe
musL be Laken aL a duly-consLlLuLed ln Lhe formal requlremenLs. SLC may
re[ecL Lhe amendmenLs.
See Secs. 37-38
rovlslons sub[ecL Lo AmendmenLs
Ceneral 8ule: Any provlslon or maLLer sLaLed ln Lhe arLlcles of
lncorporaLlon ls sub[ecL Lo amendmenL
LxcepL:
, oLherwlse provlded by Lhe Code or by speclal law
, maLLers whlch are folt occompll (le. names of lncorporaLors,
lnLerlm Lreasurer, number of shares and amounL orlglnally
subscrlbed and pald ouL of Lhe orlglnal auLhorlzed caplLal
sLock of Lhe corporaLlon, Lhe daLe and place of execuLlon of
Lhe AlC, Lhe slgnaLorles and acknowledgmenL Lhereof)

Changlng Lhe corporaLe name
<2'0'$$'(+ @'#/& =(/4#%(*+ 78 F%#&'5%(
uocLrlne: Any change ln Lhe corporaLe ldenLlLy or name does noL affecL Lhe
rlghLs and obllgaLlons of Lhe corporaLlon. A mere change ln Lhe name does
noL affecL Lhe ldenLlLy of Lhe corporaLlon nor ln any manner affecL Lhe
rlghLs, prlvlleges and obllgaLlons prevlously acqulred or lncurred by lL.
;+$4-0'* <0%(&+#/ 6%(R 78 !9
uocLrlne: A change ln Lhe corporaLe name does noL make a new
corporaLlon, and wheLher effecLed by speclal acL or under a general law, lL
has no effecL on Lhe ldenLlLy of Lhe corporaLlon, or on lLs properLy rlghLs or
llablllLles. 1he corporaLlon conLlnues, as before, responslble ln lLs new
name for all debLs or oLher llablllLles whlch lL has prevlously conLracLed or
lncurred.

AmendmenL of CorporaLe 1erm

Ceneral 8ule: CorporaLe exlsLence cannoL exceed 30 years
LxcepL: ulssolved sooner or Lhe perlod lndlcaLed ln Lhe AlC ls
amended exLendlng Lhe same
rocedure:
1. Approval - Ma[orlLy of Lhe board
#+
2. Servlce (personal or Lhrough mall) of wrlLLen noLlce and Llme and
place of meeLlng Lo every sLockholder or member
3. 8aLlflcaLlon - 2/3 of SP holdlng ouLsLandlng caplLal sLock or
LrusLees
4. ln case of exLenslon: LxLenslon should noL be for perlods
exceedlng 30 years aL a slngle lnsLance, provlded LhaL no
exLenslon can be made earller Lhan 3 years prlor Lo Lhe orlglnal
explry daLe (unless Lhere are [usLlflable reasons for an earller
exLenslon as may be deLermlned by Lhe SLC0
3. ln case of exLenslon: ulssenLlng sLockholder ay exerclse hls
appralsal rlghLs

902%:-#% !'5%# 78 3J!
uocLrlne: 1he prlvllege of exLenslon ls purely sLaLuLory, hence all Lhe
condlLlons precedenL musL be complled wlLh before Lhe explraLlon of Lhe
Lerm as sLaLed ln Lhe AlC.
S) 8oard of D|rectors] 1rustees
owers of Lhe 8oard
See Sec. 23
, conducL all buslness
, conLrol and hold all properLles

1erm: 1 year unLll Lhelr successors are elecLed and quallfled (unless
oLherwlse provlded ln Lhe Code)
;%:'#+> 78 O#'+(&%0'/&
uocLrlne: 1he board of dlrecLors ls Lhe supreme auLhorlLy ln maLLes of
managemenL of Lhe regular and ordlnary buslness affalrs of Lhe
corporaLlon. 1helr auLhorlLy, however, does noL exLend Lo Lhe fundamenLal
changes ln Lhe corporaLe charLer such as amendmenLs or subsLanLlal
changes Lhereof whlch belong Lo SPs as a whole. 1he equlLable prlnclple ls
LhaL Lhe sLockholders may have all Lhe proflLs buL shall Lurn over Lhe
managemenL of Lhe enLerprlse Lo Lhe 8oard of ulrecLors.

ClasslflcaLlon of owers
1. Lxpressly conferred - granLed by Lhe AlC, by-laws or offlclal acL of
Lhe board
2. lncldenLal - acLs as are naLurally and ordlnarlly done whlch are
reasonable and necessary Lo carry ouL Lhe corporaLe purpose/s
3. lnherenL - acLs LhaL go wlLh Lhe offlce
4. ApparenL - acLs, whlch alLhough noL acLually granLed, Lhe
prlnclpal knowlngly allows or permlLs Lo be done
3. owers arlslng ouL of cusLoms, usage or emergency

CorporaLe powers and funcLlons may be delegaLed Lo lndlvldual
dlrecLors or oLher offlcers or agenLs. Powever, wheLher or noL
such acLs blnd Lhe corporaLlon depends on Lhe naLure of Lhe
agency creaLed or Lhe powers conferred by sLaLuLe, corporaLe
charLer, Lhe corporaLe acLlon of Lhe board, or wheLher lL was
necessary or lncldenLal Lo one's offlce.
A corporaLlon ls bound by Lhe acLs of lLs corporaLe offlcers lf Lhey
acL wlLhln Lhe scope of Lhe powers above enumeraLed


963T!6E 78 !9
uocLrlne: CorporaLe powers, such as power Lo enLer lnLo conLracLs, are
exerclsed by Lhe board of dlrecLors. Powever, Lhe board may delegaLe such
powers Lo elLher an execuLlve commlLLee or offlclals or conLracLed
managers
;%:'#+> 78 O#'+(&%0'/&
u: lf a man ls found acLlng for a corporaLlon wlLh Lhe exLernal lndlcla of
auLhorlLy, any person noL havlng noLlce of wanL of auLhorlLy may rely upon
#"
Lhose appearances, and lf lL be found LhaL Lhe dlrecLors had permlLLed Lhe
agenL Lo exerclse LhaL auLhorlLy and Lhereby held hlm ouL as a person
compeLenL Lo blnd Lhe corporaLlon, or had acqulesced ln a conLracL and
reLalned Lhe beneflL supposed Lo have been conferred by lL, Lhe
corporaLlon wlll be bound, noLwlLhsLandlng Lhe acLual auLhorlLy may never
have been granLed.
1he publlc ls noL supposed nor requlred Lo know Lhe LransacLlons
whlch happen around Lhe Lable where Lhe corporaLe board of dlrecLors or
SPs are convoked.
1he facL LhaL Lhe power Lo make corporaLe conLracL ls vesLed ln
Lhe board does noL slgnlfy LhaL a formal voLe of Lhe board musL always be
Laken before conLracLual llablllLy can be flxed upon a corporaLlon.
6%##+&" 78 G% <#+7'/"#% @'0'$'(%
l: 1he appellees conLend LhaL Lhe arLlcle ls only a provlslon for
compensaLlon of dlrecLors. lL auLhorlzed Lhe glvlng of conLlnuous
compensaLlon Lo parLlcular dlrecLors afLer Lhelr employmenL has
LermlnaLed for pasL servlces rendered graLulLously by Lhe Lo Lhe
corporaLlon.
P: noL allowed. MlsappllcaLlon of funds Lo Lhe pre[udlce of Lhe subsLanLlal
rlghLs of Lhe SPs (appellanLs ln Lhls case).
Whlle corporaLlons are expressly auLhorlzed by Lhe Code Lo adopL
by-laws, Sec. 20 llmlLs such auLhorlLy Lo Lhe adopLlon of by-laws whlch are
noL lnconslsLenL wlLh Lhe law.
ConLracLs beLween a corporaLlon and Lhlrd persons musL be made
by or under Lhe auLhorlLy of Lhe board and noL by Lhe SPs. Pere, Lhere was
no consenL (SPs voLed agalnsL Lhe provlslon) and conslderaLlon.

(uls)CuallflcaLlons
See Sec. 23 par. 2
CuallflcaLlon, ulrecLor: owns aL leasL one share of Lhe caplLal sLock (sLock
corporaLlons) or ls a member of Lhe non-sLock corporaLlon
ma[orlLy of Lhe board musL be hlllpplne resldenLs
See Sec. 27
ulsquallflcaLlons:
, ConvlcLed by flnal [udgmenL of an offense punlshable by
lmprlsonmenL for a perlod exceedlng 6 years
, ConvlcLed for a vlolaLlon of Lhe CorporaLlon Code commlLLed
wlLhln 3 years prlor Lo Lhe daLe of elecLlon or appolnLmenL

G++ 78 !9
l: eLlLloners, by vlrLue of Lhe v1A, dlsposed of all Lhelr shares Lhrough
asslgnmenL and dellvery ln favor of u8 as LrusLee.
P: 1he mosL lmmedlaLe effecL of a voLlng 1rusL AgreemenL on Lhe sLaLus of
a sLockholder who ls a parLy Lo lLs execuLlon - from legal LlLleholder, he
becomes Lhe equlLable or beneflclal owner
1he change ln hls sLaLus deprlves Lhe sLockholder of Lhe rlghL Lo
quallfy as a dlrecLor.
?+&+*&'7+ %(, <#"&+*&'7+ 64#+%4 78 !0"#'-+0
P: Cne who could noL be a dlrecLor (because of non-ownershlp of even a
slngle share) could noL be a managlng dlrecLor.
lf no elecLlon ls conducLed or no quallfled candldaLe ls elecLed, Lhe
lncumbenL dlrecLor shall conLlnue Lo acL as such ln a hold-over capaclLy
unLll an elecLlon ls held and a quallfled candldaLe ls elecLed.

LlecLlon and voLlng
See Sec. 24
##
Ma[orlLy of Lhe ouLsLandlng caplLal sLock, ln person or by Lhelr
duly auLhorlzed represenLaLlve (Lhrough a wrlLLen proxy), musL be
presenL aL Lhe elecLlon of Lhe dlrecLors
ln non-sLock corporaLlons: Ma[orlLy of Lhe members enLlLled Lo
voLe, ln person or by proxy (lf allowed by Lhe AlC), musL be
presenL ln Lhe elecLlon
lf quorum ls noL reached, Lhe meeLlng may be ad[ourned
voLlng: vlva voce (defaulL), 8y balloL (upon requesL of any voLlng
SP or member)
CumulaLlve voLlng ls a maLLer of rlghL. 8uL ln non-sLock
corporaLlons, cumulaLlve voLlng ls noL avallable, unless allowed by
Lhe AlC or by-laws.
o lormula: no. of dlrecLors x shares
o voLlng SP may dlsLrlbuLe hls voLes among Lhe candldaLes
as he may see flL
o 1hls allows Lhe mlnorlLy Lo have a rlghLful represenLaLlon
ln Lhe board
See Sec. 23
LxcepL ln a close corporaLlon where oLher corporaLe offlcers may
be elecLed dlrecLly by Lhe sLockholders, Lhe Code requlres Lhe
board Lo elecL sald offlcers
Cfflcers Lo be elecLed:
, resldenL (musL be a dlrecLor)
, SecreLary (8esldenL and ClLlzen of Lhe hlls)
, CLher offlcers provlded for ln Lhe by-laws
Any Lwo or more poslLlons may be held concurrenLly by Lhe same
person, excepL res-Sec and res-1reas.
valldlLy and 8lndlng LffecL of AcLlons of CorporaLlon Cfflcers
See Sec. 23 par 2.
Cuorum requlremenL for a valld board meeLlng: Ma[orlLy of Lhe
board as flxed ln Lhe AlC (unless AlC provldes for a greaLer
ma[orlLy)
...for valld corporaLe acL: Ma[orlLy of Lhe dlrecLors/LrusLees
presenL aL Lhe meeLlng aL whlch Lhere ls a quorum
o LxcepL when lL concerns Lhe elecLlon of corporaLe
offlcers: Ma[orlLy of all Lhe members of Lhe board.

G"$+> ;+%0&. 78 <"(&+*2%
u: Any acLlon of Lhe board wlLhouL a meeLlng and requlred voLlng and
quorum requlremenL wlll noL blnd Lhe corporaLlon unless subsequenLly
raLlfled, expressly (ln a subsequenL meeLlng) or lmplledly (corporaLlon's
subsequenL conducL).
lndlvldual dlrecLors, however, can rlghLfully be consldered as
agenLs of Lhe corporaLlon. And alLhough Lhey cannoL blnd Lhe corporaLlon
by Lhelr lndlvldual acLs, Lhls ls sub[ecL Lo cerLaln excepLlons such as:
, by delegaLlon of auLhorlLy
, where expressly conferred
, where Lhe offlcer or agenL ls cloLhed wlLh acLual or apparenL
auLhorlLy

C%" I% 3'( A#%,'(5 78 !9
(1he courL looked lnLo Lhe by-laws Lo arrlve aL Lhe concluslon LhaL Lhe by-
laws does noL confer upon Lhe presldenL Lhe auLhorlLy Lo enLer lnLo
conLracLs for Lhe corporaLlon lndependenLly of Lhe 8oard of ulrecLors)
<4% !%/': D !"8 78 E+4:%#R %(, !"8
1he general rule ls LhaL a buslness manager or oLher offlcer of a
corporaLlon, has no lmplled power Lo borrow money ln lLs behalf. Powever,
when Lhe buslness manager ls cloLhed wlLh apparenL auLhorlLy Lo borrow
money and Lhe amounL borrowed does noL exceed Lhe ordlnary
requlremenLs of Lhe buslness, lL has ofLen been held LhaL Lhe auLhorlLy ls
lmplled, Lhen Lhe corporaLlon ls bound.
Pere, Lhere were ample lndlcaLlons LhaL Lhe corporaLlon was ln
need of funds Lo carry on lLs buslness and lL does noL appear LhaL Lhe
amounL borrowed was dlsproporLlonaLe Lo Lhe volume of Lhe buslness.
#$
C4 !24*R 78 I"(5 G' <"
1he general rule ls LhaL Lhe power Lo blnd a corporaLlon by conLracL lles
wlLh lLs board, buL Lhls power may elLher expressly or lmplledly be
delegaLed Lo oLher offlcers or agenLs of Lhe corporaLlon, and lL ls well-
seLLled LhaL excepL where Lhe auLhorlLy of employlng servanLs and agenLs
ls expressly vesLed ln Lhe board, an offlcer or agenL who has general
conLrol and managemenL of Lhe corporaLlon's buslness, or a speclflc parL
Lhereof, may blnd Lhe corporaLlon by Lhe employmenL of such agenLs and
employees as are usual and necessary ln Lhe conducL of such buslness. 8uL
Lhe conLracLs of employmenL musL be reasonable.
8e lengLh of employmenL: ln Lhe absence of express llmlLaLlons, a
manager has auLhorlLy Lo hlre an employee for such a perlod as ls
cusLomary and proper under Lhe clrcumsLances. 8uL unless he ls expressly
auLhorlzed or held ouL as havlng such auLhorlLy, he cannoL make a conLracL
of employmenL for a long perlod (such as for 3 years), alLhough Lhe
conLracL ls noL rendered lnvalld by Lhe mere facL LhaL Lhe employmenL
exLends beyond Lhe Lerm of Lhe manager's own employmenL.
8e raLlflcaLlon: 8efore a conLracL can be raLlfled, knowledge of lLs
exlsLence musL be broughL home Lo Lhe parLles who have auLhorlLy Lo
raLlfy lL or clrcumsLances musL be shown from whlch such knowledge may
be presumed. 1he facL LhaL Lhe presldenL was requlred by Lhe by-laws Lo
slgn Lhe conLracLs does noL mean he has Lhe power Lo make such conLracLs.
@#%(*'/*" 78 S3=3
P: 1he Lelegram senL by one purporLlng Lo be auLhorlzed by Lhe
corporaLlon Lo enLer lnLo LransacLlons was held Lo be blndlng. 1he
defendanL dld noL dlsown Lhe Lelegram senL, and lL also kepL on recelvlng
Lhe remlLLances senL by Lhe plalnLlff.
6"%#, "H G'U4',%&"#/ 78 I%0%1
naLure of Ceneral Manager's poslLlon: Pas lmplled auLhorlLy Lo make any
conLracL or do any oLher acL whlch ls necessary or approprlaLe Lo Lhe
conducL of Lhe ordlnary buslness of Lhe corporaLlon.
P: ln Lhls case, Lhe by-laws provlde for prlor dlrecLoraLe approval of
conLracLs. Powever, because of Lhe naLure of Lhe copra lndusLry (where
Llme ls of Lhe essence) and Lhe facL LhaL prevlous conLracLs noL approved
by Lhe board were noL quesLloned, Lhe courL held Lhe conLracLs slgned by
kalaw Lo be blndlng.
Where slmllar acLs have been approved by Lhe dlrecLors as a
maLLer of general pracLlce, cusLom and pollcy, Lhe general manager may
blnd Lhe company wlLhouL formal auLhorlzaLlon of Lhe board of dlrecLors.
64+(%/+,% 78 6"1+( D !"8V =(*8
Acqulescence, avallmenL of Lhe beneflLs afforded by Lhe agreemenL, and
recognlLlon/adopLlon are equlvalenL Lo an lmplled raLlflcaLlon of Lhe
agreemenL and blnds Lhe corporaLlon even wlLhouL formal resoluLlon
passed and recorded.
8emoval and lllllng up of vacancles
CorporaLe dlrecLors may be removed or ousLed wlLh or wlLhouL
cause may noL be used Lo deprlve mlnorlLy sLockholders or
members of Lhe rlghL of represenLaLlon whlch Lhey may be
enLlLled by law and provlded furLher LhaL Lhe requlremenLs
lmposed by Sec. 28 are complled wlLh.

See Sec. 28
CorporaLe by-laws may provlde for causes/ grounds for Lhe
removal of a dlrecLor
o lf for a cause, Lhe provlso LhaL removal shall noL deprlve
Lhe mlnorlLy of Lhelr rlghLful represenLaLlon ln Lhe board
shall noL be appllcable
8equlremenLs for removal:
1. 8emoval should Lake place aL Lhe general or speclal
meeLlng duly called for LhaL purpose
2. 8emoval musL be by Lhe voLe of Lhe sLockholders
holdlng or represenLlng 2/3 of Lhe ouLsLandlng
#%
caplLal sLock or Lhe members enLlLled Lo voLe ln
cases of non-sLock corporaLlons
3. 1here musL be prevlous noLlce Lo Lhe
sLockholders/members of Lhe lnLenLlon Lo propose
such removal aL Lhe meeLlng elLher by publlcaLlon or
on wrlLLen noLlce Lo Lhe SPs/members
o MeeLlng musL be called by Lhe SecreLary
# Cn order of Lhe resldenL or wrlLLen demand of
Lhe SPs represenLlng a ma[orlLy of Lhe CCS or
members
# Should Lhe SecreLary fall or refuse, of lL Lhere ls
no one auLhorlzed Lo make Lhe call, Lhe same
may be addressed dlrecLly Lo Lhe SPs or
members by and SP/member slgnlng Lhe
demand
u 902-A as amended by 8A 8799, Lhe courL has proper courL has
power and auLhorlLy Lo hear and declde cases lnvolvlng
conLroversles ln Lhe elecLlon or appolnLmenL of dlrecLors, LrusLees,
offlcers or managers of such corporaLlon, parLnershlp or
assoclaLlon. Pence, Lhe courL has power Lo remove or ousL a
dlrecLor even moLu proplo by appolnLmenL of a managemenL
commlLLee" Lo underLake Lhe managemenL of Lhe corporaLlon.
o ln case of deadlock ln a close corporaLlons, SLC ls
auLhorlzed Lo lssue and order as lL deems approprlaLe
cancellng, alLerlng or en[olnlng any resoluLlon or oLher
acL of Lhe corporaLlon or lLs board of dlrecLors" or
dlrecLlng or prohlblLlng any acL of Lhe corporaLlon or Lhe
board Lhereby effecLlvely Laklng away Lhe rlghLs of Lhe
dlrecLors Lhereby affecLlvely Laklng away Lhe rlghLs of Lhe
dlrecLors Lo acL as manager of Lhe corporaLlon.
o ln case of vacancy due Lo removal: 1here may be an
elecLlon of a replacemenL aL Lhe same meeLlng wlLhouL
furLher noLlce or aL any subsequenL general or speclal
meeLlng afLer proper noLlce.

See Sec. 29
vacancles ln Lhe board may occur noL only by removal or by
explraLlon of Lerm, may be fllled by Lhe voLe of aL leasL a ma[orlLy
of Lhe remalnlng dlrecLors/LrusLees , ll sLlll consLlLuLlng a quorum.
o CLherwlse, vacancles musL be fllled ouL ln a regular or
speclal meeLlng
o lf Lhere ls an lncrease ln Lhe number of dlrecLors/LrusLees,
Lhe dlrecLorshlp/LrusLeeshlp musL be fllled by an elecLlon
ln a regular or speclal meeLlng
See Sec. 26
Any change ln Lhe consLlLuLlon of Lhe board of dlrecLors/LrusLees
musL be reporLed Lo Lhe SLC wlLhln 30 days from Lhe elecLlon
Should a dlrecLor, LrusLee or offlcer dle, reslgn or ln any manner
cease Lo hold offlce, hls helrs, Lhe secreLary or any offlcer shall
lmmedlaLely reporL such Lo Lhe SLC

<#+:'4: B%#-0+ 78 !9
1he ob[ecLlve of Sec. 26 ls Lo glve Lhe publlc lnformaLlon, under sancLlon of
oaLh of responslble offlcers, of Lhe naLure of Lhe buslness, flnanclal
condlLlon and operaLlonal sLaLus of Lhe company so LhaL Lhose deallng wlLh
lL and Lhose who lnLend Lo do buslness wlLh lL may know.
CompensaLlon of ulrecLors
Ceneral 8ule: ulrecLors are noL enLlLled Lo any compensaLlon excepL
reasonable per dlems
LxcepL: When by-laws provlde, or
by voLe of SPs represenLlng Lhe ma[orlLy of Lhe CCS and
provlded LhaL Lhe yearly compensaLlon does noL exceed 10 of
Lhe neL lncome before lncome Lax of Lhe corporaLlon, or
when Lhe dlrecLor performs speclal or exLraordlnary
servlce, or
Lhe corporaLe offlcers are noL dlrecLors
#&
See Sec. 30
8aLlo: 1he offlce ls usually fllled up by Lhose chlefly lnLeresLed ln Lhe
welfare of Lhe lnsLlLuLlon by vlrLue of Lhelr lnLeresL ln sLock or oLher
advanLages
1he courLs may look lnLo Lhe reasonableness of compensaLlon of dlrecLors
and corporaLe offlcers. 8allanLlne sLaLes LhaL courLs wlll generally noL
underLake Lo revlew falrness of offlclal salarles, aL Lhe sulL of a sLockholder
aLLacklng Lhem as excesslve unless wrongdolng and oppresslon or posslble
abuse of flduclary poslLlon are shown.
;"5+#/ 78 F'00
l: A mlnorlLy sLockholder of Lhe Amerlcan 1obacco Company broughL sulL
Lo quesLlon Lhe bonus paymenL and sLock subscrlpLlon prlvllege (aslde
from Lhe dlrecLors flxed salary of over $2M)
P: lf a bonus paymenL has no relaLlon Lo Lhe value of Lhe servlces for whlch
lL ls glven, lL ls ln reallLy a glfL ln parL, and Lhe ma[orlLy sLockholders have
no power Lo glve away corporaLe properLy agalnsL Lhe proLesL of Lhe
mlnorlLy.
lf Lhere ls wasLage of corporaLe asseLs, Lhe courLs may be [usLlfled Lo look
lnLo Lhe reasonableness and falrness of Lhe compensaLlon desplLe Lhe facL
LhaL Lhe granL Lhereof ls auLhorlzed pursuanL Lo Lhe by-laws and by Lhe
voLe of Lhe ma[orlLy of Lhe holders of Lhe CCS.


!+(&#%0 !""$+#%&'7+ 78 A'-+
l: ComplalnL flled by CCL agalnsL 1lbe for Lhe cerLlan amounLs he recelved
from Lhe corporaLlon (cash advances, commuLable per dlems for aLLendlng
board meeLlngs, Lranspo and represenLaLlon exoenses) where he served as
board member. All Lhese sums were wlLh Lhe approval of Lhe general
manager, Lreaurer and audlLor.
P: CranLed. ConLrary Lo Lhe by-laws provlslon granLlng Lo Lhe sLockholders
Lhe power Lo deLermlne Lhe compensaLlon.
K+/&+#( =(/&'&4&+ "H A+*2("0"5. 78 3%0%/
P: When Lhe compensaLlon ls belng glven Lo a person ln hls capaclLy as an
offlcer, and noL as a board member, Sec. 30 does noL apply.
S"7+#(:+(& 78 J0 F"5%# @'0'$'("
lssue: Won Lhe courLs may declare Lhe provlslons of a corporaLe by-laws
granLlng compensaLlon Lo Lhe members of Lhe board as null and vold.
P: nC. lf a mlsLake has been made (such as ln Lhls case where Lhe
compensaLlon for Lhe dlrecLors has become dlsproporLlonaLe Lo Lhe servlce
Lhey render), or Lhe rule adopLed ln Lhe by-laws has been found Lo work
harmful resulLs, Lhe remedy ls ln Lhe hands of Lhe SPs who have Lhe power
aL any lawful meeLlng Lo change Lhe rule. 1he remedy lles ln publlclLy and
compeLlLlon, raLher Lhan ln a courL proceedlng.
LlablllLy of CorporaLe
Ceneral 8ule: CorporaLe dlrecLors, offlcers and agenLs are noL llable for
obllgaLlons lncurred by Lhe corporaLlon Lhrough Lhelr acLs ll Lhey dld so
wlLhln Lhe scope of Lhelr auLhorlLy and ln good falLh.
B9B ;+%0&. 78 EG;!
P: A corporaLe offlcer cannoL be held solldarlly llable wlLh Lhe corporaLlon
ln Lhe LermlnaLlon of an employee ln Lhe absence of mallce or bad falLh. A
corporaLlon, belng a [urldlcal enLlLy, may acL only Lhrough lLs dlrecLors,
offlcers and employees. CbllgaLlons lncurred by Lhem, acLlng as such
corporaLe agenLs, are noL Lhelrs buL Lhe dlrecL accounLablllLles of Lhe
corporaLlon Lhey represenL. Powever, secondary llablllLy may be lncurred
when excepLlonal clrcumsLances warranL.
A#%:%& 78 !9
ersonal llablllLy of a corporaLe offlcer may valldly aLLach ln lnsLances
allowed by law (Secs. 31, 32, 34, 63, 74, 97) where a sLockholder, Lo Lhe
#'
exLenL LhaL he Lakes an acLlve parL ln Lhe managemenL and operaLlon of
Lhe buslness affalrs of a close corporaLlon, ls llable for corporaLe LorLs.
lnsLances when personal llablllLy aLLaches:
, Pe assenLs Lo a paLenLly unlawful acL of Lhe corporaLlon, or
for bad falLh or gross negllgence ln dlrecLlng lLs affalrs, or for
confllcL of lnLeresL, resulLlng ln damages Lo Lhe corporaLlon,
lLs sLockholders or oLher persons, or
, Pe consenLs Lo Lhe lssuance of waLered sLocks, or havlng
knowledge of lL, does noL flle hls wrlLLen ob[ecLlon LhereLo
wlLh Lhe corporaLe secreLary, or
, Pe agrees Lo hold hlmself personally and solldarlly llable wlLh
Lhe corporaLlon, or
, Pe ls made, by speclflc provlslon of law, Lo personally answer
for hls acLlon

G0%:%," 78 !9
ersonal llablllLy may also aLLach Lo Lhe exLenL LhaL Lhe sLaLuLes so provlde
as ln Lhe case of 8 22 whlch makes Lhe responslble offlcer of a
corporaLlon lssulng a bounclng check crlmlnally llable Lherefor. As a
Lreasurer of Lhe corporaLlon who slgned a check ln hls capaclLy as an
offlcer, lack of lnvolvemenL ln Lhe negoLlaLlon for Lhe LransacLlon ls noL a
defense.
L'*2'*" 78 EG;!
ln labor cases, corporaLe dlrecLors and offlcers are solldarlly llable wlLh Lhe
corporaLlon for Lhe LermlnaLlon of employmenL of corporaLe employee
done wlLh mallce or ln bad falLh. ln Lhls case, lL ls undlspuLed LhaL
peLlLloners have a dlrecL hand ln Lhe lllegal dlsmlssal of respondenL
employees. 1hey were Lhe ones who, as hlgh-ranklng offlcers and dlrecLors
of Crlspa lnc, slgned Lhe 8oard resoluLlon reLrenchlng prlvaLe respondenLs
on Lhe felgned ground of serlous buslness losses LhaL had no basls aparL
from an unslgned and unaudlLed roflL and Loss SLaLemenL whlch had no
evldenLlary value. 1hls ls lndlcaLlve of bad falLh on Lhe parL of peLlLloners
for whlch Lhey can be held solldarlly llable wlLh Crlspa for all money clalms
of Lhe lllegally LermlnaLed employees.

3-lold uuLy of ulrecLors
O8ulNc. ulllCNc. lOAl1.
See Sec. 31

Wlllfully and knowlngly voLlng or assenLlng Lo paLenLly unlawful acLs =
vlolaLlon of obedlence
Cross negllgence or bad falLh ln dlrecLlng Lhe affalrs of Lhe corporaLlon =
vlolaLlon of dlllgence
Acqulrlng personal or pecunlary lnLeresL ln confllcL wlLh duLy as dlrecLor =
vlolaLlon of loyalLy

uegree of dlllgence requlred ls relaLlve. 1esL: 1haL whlch an
ordlnary prudenL dlrecLor could reasonably be expecLed Lo
exerclse ln a llke poslLlon under slmllar clrcumsLances.
lf dlrecLors wlllfully do acLs whlch Lhey know or oughL Lo know Lo
be unauLhorlzed, Lhey are clearly llable for Lhe resulLlng damage.


B"(&+0'-%(" 78 6%*"0", B4#*'% B'00'(5
8uslness [udgmenL rule": CuesLlons of pollcy and managemenL are lefL
solely Lo Lhe board and Lhe courLs are wlLhouL auLhorlLy Lo subsLlLuLe lLs
[udgmenL. 1he dlrecLors are Lhe buslness managers of Lhe corporaLlon, and
as long as Lhey acL ln good falLh, lLs acLuaLlons are noL sub[ecL Lo [udlclal
#(
revlew. Pence, dlrecLors are noL llable for losses due Lo lmprudence or
honesL error of [udgmenL.
l: Won dlrecLors are llable for Lhe acLs of Lhelr co-dlrecLors
P: Cenerally nC.
LxcepL:
, he connlves/parLlclpaLes ln lL
, he ls negllgenL ln noL dlscoverlng or acLlng Lo prevenL lL

ulrecLors of prlvaLe corporaLlons, whlle noL sLrlcLly regarded as
LrusLees, are consldered ln equlLy as bearlng a flduclary relaLlon"
Lo Lhe corporaLlon and lLs SPs. 1hey are expecLed Lo acL wlLh
uLmosL candor and falr deallng for Lhe lnLeresL of Lhe corporaLlon
and wlLhouL LalnL of selflsh moLlves.
When duLy of loyalLy ls vlolaLed (Secs. 31 and 34)
, acqulres personal or pecunlary lnLeresL ln confllcL wlLh hls
duLy
, aLLempLs/acqulres an adverse lnLeresL ln respecL Lo any
maLLer whlch has been reposed ln hlm ln confldence
, acqulres for hlmself, by vlrLue of hls offlce, a buslness
opporLunlLy whlch should belong Lo Lhe corporaLlon

S4&2 78 G"H&
l: CuLh, presldenL of LofL lnc., engaged ln Lhe manufacLure and sale of
beverages and candles boughL Lhe epsl secreL formula and Lrademark
from a bankrupL corporaLlon, and wlLh M organlzed a new corporaLlon
wlLh Lhe flnanclal ald of LofL. CuLh used LofL's caplLal, planL faclllLles,
maLerlals, credlL and employees Lo perfecL Lhe mlxLure, and Lhe producL
was sold Lo LofL for dlsLrlbuLlon aL cosL plus 10.
P: CuLh had approprlaLed a buslness opporLunlLy so closely assoclaLed wlLh
Lhe exlsLlng buslness acLlvlLles of LlfL so essenLlal Lo Lhem as Lo brlng lL
wlLhln Lhe scope of CuLh's flduclary duLy, even lf he had noL uLlllzed Lhe
corporaLe faclllLles Lo engage ln compeLlng buslness.

ulsLlncLlon beLween Secs. 31 and 34 regardlng raLlflcaLlon:
Sec 31 par.2 makes a dlrecLor llable Lo accounL for proflLs lf he
aLLempLs Lo acqulre or acqulres any lnLeresL adverse Lo Lhe corporaLlon ln
respecL Lo any maLLer reposed ln hlm ln confldence as Lo whlch equlLy
lmposes a dlsablllLy upon hlm Lo deal ln hls own behalf ls noL sub[ecL Lo
raLlflcaLlon by Lhe sLockholders
ln Sec, 34, lf a dlrecLor acqulres for hlmself a buslness opporLunlLy
whlch should belong Lo Lhe corporaLlon, he ls bound Lo accounL for such
proflLs unless hls acL ls raLlfled by Lhe SPs represenLlng 2/3 of Lhe CCS.
AcqulslLlon here ls merely LhaL of a buslness opporLunlLy whlch has noL
been reposed ln hlm ln confldence.
3&#"(5 78 ;+$',+
lf lL were conceded LhaL Lhe ordlnary relaLlons beLween dlrecLors and
shareholders ln a buslness corporaLlon are noL of such a flduclary naLure as
Lo make lL Lhe duLy of a dlrecLor Lo dlsclose Lo a shareholder Lhe general
knowledge whlch he may possess regardlng Lhe value of Lhe shares of Lhe
company before he purchases any from a shareholder, yeL Lhere are cases
wherem by reason of speclal facLs, such duLy exlsLs.
ln Lhls case, he was noL only Lhe dlrecLor, buL he owned of Lhe
shares, he was Lhe admlnlsLraLor general wlLh broad powers, and he was
Lhe one who engaged ln Lhe negoLlaLlons whlch flnally led Lo Lhe sale of Lhe
company's lands Lo Lhe governmenL aL a prlce whlch very greaLly enhanced
Lhe value of Lhe sLock.
Self-deallng ulrecLors

Self-deallng dlrecLor - one who deals buslness wlLh hls own corporaLlon
#)
See Sec. 32
Whlle conLracLs of dlrecLors wlLh hls own corporaLlon are voldable
aL Lhe opLlon of Lhe laLLer, lf all Lhe condlLlons seL forLh LhereaL
are presenL, Lhe conLracL ls valld and enforceable.
Where ay of Lhe flrsL 2 condlLlons ls absenL, Lhe conLracL becomes
voldable buL ls sub[ecL Lo raLlflcaLlon by Lhe SPs holdlng aL leasL
2/3 of Lhe CCS or 2/3 of Lhe members
1he law, however, lmposes 3 requ|rements |n order for
rat|f|cat|on to set |n:
o MusL be aL a meeLlng duly called for LhaL purpose
o lull dlsclosure of Lhe adverse lnLeresL of Lhe dlrecLor
musL be made
o ConLracL ls falr and reasonable under Lhe clrcumsLances
CuesLlon ls always facLual. And Lhe ulLlmaLe quesLlon ls wheLher
Lhe conLracL was honesL and beneflclal

<#':+ K2'&+ !+:+(& 78 =9!
P: ln Lhe absence of an express delegaLlon, a conLracL enLered lnLo by Lhe
presldenL may sLlll blnd Lhe corporaLlon lf Lhe board should raLlfy Lhe same
expressly or lmplledly. And even ln Lhe absence of such express/lmplled
auLhorlLy by raLlflcaLlon, Lhe presldenL as such may as a general rule, blnd
Lhe corporaLlon by a conLracL ln Lhe ordlnary course of buslness, provlded
LhaL Lhe same ls reasonable under Lhe clrcumsLances.
PCWLvL8, ln Lhls case, respondenL 1e was noL an ordlnary SP, he
was a member of Lhe 8oard and audlLor of Lhe corporaLlon.
A dlrecLor of a corporaLlon holds a poslLlon of LrusL and such, he
owes a duLy of loyalLy Lo Lhe corporaLlon. ln case hls lnLeresLs confllcL wlLh
Lhose of Lhe corporaLlon, he cannoL sacrlflce Lhe laLLer Lo hls own beneflL.
As corporaLe managers, dlrecLors are commlLLed Lo seek Lhe maxlmum
amounL of proflLs for Lhe corporaLlon. 1hls LrusL relaLlonshlp ls noL a
maLLer of sLaLuLory or Lechnlcal law. lL sprlngs from Lhe facL LhaL dlrecLors
have Lhe conLrol and guldance of corporaLe affalrs and properLy and hence
of Lhe properLy lnLeresLs of Lhe SPs.
B+%, 78 B*!400"452
uocLrlne: A dlrecLor or an offlcer - by auLhorlLy of a ma[orlLy of Lhe
sLockholders and board of dlrecLors - may deal wlLh Lhe corporaLlon. So
long as a purely prlvaLe corporaLlon remalns solvenL, lLs dlrecLors are
agenLs or LrusLees of all Lhe stockbolJets. Cnce lnsolvenL, becomes
LrusLees of all cteJltots.
1he sale or Lransfer made by Lhe quorum of Lhe board of dlrecLors
and ma[orlLy of sLockholders was held Lo be valld ln Lhls case because Lhe
corporaLlon has been golng from bad Lo worse. Also, Lhe sale was done ln
good falLh and for adequaLe conslderaLlon.
lnLerlocklng ulrecLors

lnLerlocklng dlrecLors" - ulrecLors ln x corporaLlon deals wlLh ?
corporaLlon of whlch Lhey are also dlrecLors
, may lnvolve a vlolaLlon of Lhe duLy of loyalLy
, Lhere may be a dual agency

See Sec. 33:
Ceneral 8ule: ConLracLs enLered lnLo by lnLerlocklng dlrecLor/s are upheld
lf tbete ls oot boJ foltb ot oofoltoess ot collosloo.
Powever, lf Lhe lnLeresL of Lhe lnLerlocklng dlrecLors/s ln one
corporaLlon ls subsLanLlal (more Lhan 20) and merely nomlnal ln Lhe
oLher, Lhe conLracL becomes voldable sub[ecL Lo Lhe provlslons on self-
deallng dlrecLors.

uerlvaLlve SulL
uerlvaLlve SulL - a rellef avallable Lo mlnorlLy shareholders agalnsL
errlng dlrecLors or offlcers (aslde from Lhe personal sulL and
#*
represenLaLlve/class sulL), an acLlon based on ln[ury Lo Lhe
corporaLlon - Lo enforce a corporaLe rlghL - whereln Lhe
corporaLlon lLself ls [olned as a necessary parLy and recovery ls ln
favor of and for Lhe corporaLlon.
ersonal sulL - one broughL for dlrecL ln[ury of a SP's rlghLs, eg
denled Lhe rlghL Lo lnspecL corporaLe books or exerclse of
preempLlve rlghLs
Class sulL - one or more members of a class sue as a class for all Lo
whom Lhe rlghL was denled.
<%/*4%0 78 O#">*"
uocLrlne: A derlvaLlve sulL ls granLed Lo any sLockholder Lo lnsLlLuLe a case
Lo remedy a wrong done dlrecLly Lo Lhe corporaLlon and lndlrecLly Lo Lhe
sLockholders.
Where corporaLe dlrecLors have commlLLed breach of LrusL elLher
by Lhelr frauds, ulLra vlres acLs or negllgence, and Lhe corporaLlon Lhrough
Lhe sald board, ls unable or unwllllng Lo lnsLlLuLe Lhe sulL Lo remedy Lhe
wrong, a slngle sLockholder on behalf of hlmself and oLher sLockholders
and for Lhe beneflL of Lhe corporaLlon, may lnsLlLuLe Lhe case Lo brlng
abouL redress of Lhe wrong done dlrecLly Lo Lhe corporaLlon and lndlrecLly
Lo Lhe sLockholders.
A sLockholder ln a corporaLlon who was noL such aL Lhe Llme of
Lhe LransacLlons complalned of, or whose shares had noL devolved upon
hlm slnce by operaLlon of law, cannoL malnLaln sulLs of Lhls characLer,
unless such LransacLlons conLlnue and are ln[urlous Lo Lhe sLockholder, or
affecL hlm speclflcally ln some way.
J7+#+&& 78 9/'% 6%(R'(5 !"#$"#%&'"(
P: lnvoklng Lhe well-known rule LhaL shareholders cannoL ordlnarlly sue ln
equlLy Lo redress wrongs done Lo Lhe corporaLlon, buL LhaL Lhe acLlon musL
be broughL by Lhe 8oard, Lhe appellees argue LhaL Lhe corporaLlon ls a
necessary plalnLlff and LhaL plalnLlff sLockholders, noL havlng made any
demand on Lhe 8oard Lo brlng Lhe acLlon, are noL proper plalnLlffs. 8uL, llke
mosL rules, Lhe rule has lLs excepLlons. lL ls alleged ln Lhe complalnL LhaL
Lhe corporaLlon ls under Lhe compleLe conLrol of Lhe appellees and lL ls
obvlous LhaL Lhe demand on Lhe 8oard Lo lnsLlLuLe acLlon and prosecuLe
Lhe same effecLlvely would have been useless, and Lhe law does noL
requlre llLlganLs Lo perform useless acLs.
;+$4-0'* 6%(R 78 !4%,+#("
l: 1hls ls an appeal from a dlsmlssal of Lhe case agalnsL respondenL
8oman for alleged fraudulenL granL of loans Lo relaLlves (whlle he was
chalrman of Lhe 8oard of ulrecLors of 8epubllc 8ank and lLs LxecuLlve Loan
CommlLLee) and for Lhe selecLlon of respondenLs Cuaderno and ulzon (as
Lechnlcal consulLanL and chalrman of Lhe board respecLlvely) ln order Lo
shleld hlmself from Lhe alleged wrongdolng and from any prosecuLlon LhaL
may be lnsLlLuLed agalnsL hlm. 1he complalnL also alleges LhaL Lhe presenL
composlLlon of Lhe board of dlrecLors of Lhe bank are consLlLuLed by men
chosen by respondenL 8oman so LhaL lL was fuLlle Lo ask Lhem, ln Lhe flrsL
place, Lo lnsLlLuLe Lhls acLlon on behalf of Lhe bank.
P: ln a derlvaLlve sulL, Lhe corporaLlon ls Lhe real parLy ln lnLeresL and Lhe
sLockholder ls merely a nomlnal parLy. normally, lL ls Lhe corporaLlon
Lhrough lLs board of dlrecLors LhaL should brlng Lhe sulL. 8uL where, as ln
Lhls case and lL ls alleged ln Lhe complalnL, LhaL Lhe members of Lhe board
of dlrecLors of Lhe bank were Lhe nomlnees and creaLures of respondenL
8oman, Lhus, any demand for an lnLra-corporaLe remedy would be fuLlle,
Lhe sLockholder ls permlLLed Lo brlng a derlvaLlve sulL.
As Lo Lhe quesLlon of should Lhe corporaLlon be made a parLy",
Lhe Lngllsh pracLlce ls Lo make Lhe corporaLlon a parLy plalnLlff whlle ln Lhe
uS Lhe pracLlce ls Lo make lL a parLy defendanL. Powever, ln our [urlsdlcLlon
whaL ls lmporLanL ls LhaL Lhe corporaLlon should be made a parLy ln order
Lo make Lhe courL's [udgmenL blndlng upon lL, and Lhus bar fuLure llLlgaLlon
of Lhe lssues.
Mls[olnder of parLles (ln a derlvaLlve sulL) ls noL a ground Lo dlsmlss Lhe
acLlon.
K+/&+#( =(/&'&4&+ 78 3%0%/
P: 1he case ls noL a derlvaLlve sulL buL merely an appeal from Lhe clvll
aspecL of Lhe crlmlnal cases for esLafa and falslflcaLlon of documenLs.
$+
Among Lhe baslc requlremenLs for a derlvaLlve sulL Lo prosper ls LhaL Lhe
mlnorlLy shareholders who ls sulng for and on behalf of Lhe corporaLlon
musL allege ln hls complalnL before Lhe proper forum LhaL he ls sulng on a
derlvaLlve cause of acLlon on behalf of Lhe corporaLlon and all oLher
shareholders slmllarly slLuaLed who wlsh Lo [oln.
3B! 78 I2%(
l: 14 corporaLlons lnlLlally acqulred shares of ouLsLandlng caplLal sLock of
San Mlguel CorporaLlon and consLlLuLed a voLlng 1rusL Lhereon ln favor
of Andres Sorlano, !r. When Lhe laLLer dled Lduardo Co[uanco was elecLed
as Lhe subsLlLuLe LrusLee. Powever, afLer Lhe LuSA revoluLlon, Co[uanco
fled ouL of Lhe counLry, and subsequenLly an agreemenL was enLered lnLo
beLween Lhe 14 corporaLlons and Andres Sorlano lll (as an agenL of several
persons) for Lhe purchase of Lhe shares held by Lhe former.
AcLually Lhe buyer of Lhe shares was nepLunla CorporaLlon, a
forelgn corporaLlon and wholly-owned subsldlary of anoLher subsldlary
wholly owned by San Mlguel CorporaLlon. nepLunla pald Lhe
downpaymenL from Lhe proceeds of cerLaln loans. CCC Lhen sequesLered
Lhe shares sub[ecL of Lhe sale so San Mlguel suspended all Lhe oLher
lnsLallmenLs of Lhe prlce Lo Lhe sellers. 1he 14 corporaLlons Lhen sued for
resclsslon and damages.
Meanwhlle, CCC dlrecLed San Mlguel Lo lssue quallfylng shares
Lo seven (7) lndlvlduals lncludlng Lduardo de los Angeles from Lhe
sequesLered shares for Lhem Lo hold ln LrusL.
1hen, Lhe San Mlguel board of dlrecLors passed a resoluLlon
assumlng Lhe loans lncurred by nepLunla for Lhe down paymenL. ue los
Angeles assalled Lhe resoluLlon alleglng LhaL lL was noL passed by Lhe board
aslde from lLs deleLerlous effecLs on Lhe corporaLlon's lnLeresL. When hls
efforLs Lo obLaln rellef wlLhln Lhe corporaLlon proved fuLlle, he flled Lhls
acLlon wlLh Lhe SLC.
8espondenL dlrecLors alleged LhaL de los Angeles has no legal sLandlng
havlng been merely lmposed" by Lhe CCC and LhaL Lhe LwenLy (20)
shares owned by hlm personally cannoL falrly and adequaLely represenL
Lhe lnLeresL of Lhe mlnorlLy.
P: 1he requ|s|tes of a derlvaLlve sulL are:
1. Lhe parLy brlnglng Lhe sulL should be a sLockholder as of Lhe Llme
of Lhe acL or LransacLlons complalned of, Lhe number of shares
noL belng maLerlal,
2. exhausLlon of lnLra-corporaLe remedles (has made a demand on
Lhe board of dlrecLors for Lhe approprlaLe rellef buL Lhe laLLer has
falled or refused Lo heed hls plea), and
3. Lhe cause of acLlon acLually devolves on Lhe corporaLlon and noL
Lo Lhe parLlcular sLockholder brlnglng Lhe sulL.
1he bona flde ownershlp by a sLockholder ln hls own rlghL sufflces
Lo lnvesL hlm wlLh Lhe sLandlng Lo brlng a derlvaLlve sulL for Lhe beneflL of
Lhe corporaLlon. 1he number of hls shares ls lmmaLerlal slnce he ls noL
sulng ln hls own behalf, or for Lhe proLecLlon or vlndlcaLlon of hls own
parLlcular rlghL, or Lhe redress of a wrong commlLLed agalnsL hlm
lndlvldually buL ln behalf and for Lhe beneflL of Lhe corporaLlon. lL ls
undlspuLed LhaL aparL from Lhe quallfylng shares glven Lo hlm by Lhe CCC,
he owns 20 shares ln hls own rlghL, as regards whlch he cannoL from any
aspecL be deemed Lo be beholden Lo Lhe CCC, hls ownershlp of hls shares
belng preclsely whaL he lnvokes as Lhe source of hls auLhorlLy Lo brlng Lhe
derlvaLlve sulL. lurLhermore, lL was noL necessary for de los Angeles Lo be a
dlrecLor ln order Lo brlng a derlvaLlve sulL.
ue los Angeles' complalnL ls conflned Lo Lhe lssue of Lhe valldlLy of
Lhe assumpLlon by Lhe corporaLlon of Lhe lndebLedness of nepLunla,
allegedly for Lhe beneflL of cerLaln of lLs offlcers and sLockholders and ls
dlsLlncL from Lhe ownershlp of Lhe sequesLered shares. 1he dlspuLe
concerns Lhe acLs of Lhe board of dlrecLors clalmed Lo amounL Lo fraud and
mlsrepresenLaLlon whlch may be deLrlmenLal Lo Lhe lnLeresL of Lhe
sLockholders, or ls one arlslng ouL of lnLra-corporaLe relaLlons beLween and
among sLockholders, or beLween any or all of Lhem and Lhe corporaLlon of
whlch Lhey are sLockholders (meanlng LhaL Lhe cause of acLlon sLlll belongs
Lo Lhe corporaLlon).
ln effecL Lhe resulL of Lhe acLs of Lhe dlrecLors of San Mlguel ls Lhe
use of corporaLe asseLs for Lhe beneflL of cerLaln dlrecLors/sLockholders Lo
Lhe exLenL LhaL Lhe corporaLlon wlll noL be able Lo devoLe lLs asseLs ln
acqulrlng lLs own shares. 8uL even wlLhouL Lhe presence of a self-
$"
lnLeresLed dlrecLor, sLlll Lhe LransacLlon would resulL Lo a premaLure
reLlremenL of Lhe shares (meanlng a reducLlon of caplLal).
ln a derlvaLlve sulL, Lhe number of shares of a sulng sLockholder ls
lmmaLerlal. Lven assumlng LhaL Lhe sulng sLockholder had only quallfylng
shares, Lhe law requlres only one share" wlLhouL any dlsLlncLlon or
quallflcaLlon. 8esldes, lL ls preclsely wlLhln Lhe scope of CCC's duLy Lo
preserve Lhe asseLs of Lhe corporaLlon.
!2%/+ 78 64+(*%:'("
P: Chase has personallLy Lo flle derlvaLlve sulL as an AmparLus sLockholder.
Lvldence show LhaL he was recognlzed as a sLockholder and was even an
lncorporaLor wlLh 600 pald-up shares represenLlng 1/3 lnLeresL ln
AmparLus, and LhaL would be enough for Chase Lo have personallLy Lo
lnsLlLuLe a derlvaLlve sulL.
More lmporLanLly, Chase flled Lhe acLlon noL for hls own beneflL,
buL for Lhe corporaLlon's.
;+.+/ 78 A%(
P: lL ls noL denled by peLlLloners LhaL Lhe allocaLlon of dollar Lo Lhe
corporaLlon for Lhe lmporLaLlon of raw maLerlals was suspended. 1he
lmporLaLlon of LexLlles lnsLead of raw maLerlals, as well as Lhe fallure of Lhe
board of dlrecLors Lo Lake acLlon agalnsL Lhose dlrecLly responslble for Lhe
mlsuse of dollar allocaLlons consLlLuLe fraud, or consenL LhereLo on Lhe
parL of Lhe dlrecLors. 1herefore, a breach of LrusL was commlLLed whlch
[usLlfled Lhe derlvaLlve sulL by a mlnorlLy sLockholder on behalf of Lhe
corporaLlon.
S%:-"% 78 W'*&"#'%("
P: An lndlvldual sLockholder ls permlLLed Lo lnsLlLuLe a derlvaLlve sulL on
behalf of Lhe corporaLlon whereln he holds sLock ln order Lo proLecL or
vlndlcaLe corporaLe rlghLs, whenever Lhe offlclals of Lhe corporaLlon refuse
Lo sue, or are Lhe ones Lo be sued or hold Lhe conLrol of Lhe corporaLlon. ln
such acLlons, Lhe sulng sLockholder ls regarded as a nomlnal parLy, wlLh Lhe
corporaLlon as Lhe real parLy ln lnLeresL. ln Lhe case aL bar, Lhe plalnLlffs
alleged LhaL Lhey were vlndlcaLlng Lhelr own lndlvldual lnLeresL or
pre[udlce, and noL LhaL of Lhe corporaLlon. AL any raLe, lL ls yeL Loo early ln
Lhe proceedlngs slnce Lhe lssues have noL been [olned. 8esldes, mls[olnder
of parLles ls noL ground Lo dlsmlss an acLlon.
J7%(5+0'/&% 78 3%(&"/
P: ln Lhe presenL case, Lhe plalnLlff sLockholders have broughL Lhe acLlon
noL for Lhe beneflL of Lhe corporaLlon buL for Lhelr own beneflL, slnce Lhey
ask LhaL Lhe defendanL make good Lhe losses occasloned by hls
mlsmanagemenL and pay Lo Lhem Lhe value of Lhelr respecLlve holdlngs.
Clearly, Lhls cannoL be done unLll all corporaLe debLs, lf Lhere be any, are
pald and Lhe exlsLence of Lhe corporaLlon LermlnaLed by Lhe llmlLaLlon of
lLs charLer or by lawful dlssoluLlon ln vlew of Lhe provlslons of Sec. 16. lL
resulLs LhaL Lhe plalnLlff's complalnL shows no cause of acLlon ln Lhelr favor
so LhaL Lhe lower courL dld noL err ln dlsmlsslng Lhe complalnL on LhaL
ground.

LxecuLlve CommlLLee
1he board may delegaLe Lhe powers and funcLlons LhaL may be
lawfully delegaLed Lo oLher corporaLe offlcers or agenLs for
convenlence and approprlaLe acLlon on maLLers LhaL may requlre
lmmedlaLe aLLenLlon
1he Code, ln facL auLhorlzes every corporaLlon Lo creaLe, ln
accordance wlLh lLs by-laws, execuLlves commlLLees or perform
speclflc powers wlLhln Lhe compeLence of Lhe board (See Sec. 33)
Composed of noL less Lhan 3 members of Lhe board
CommlLLee may acL and blnd Lhe corporaLlon by Lhe ma[orlLy voLe
of all lLs members excepL wlLh respecL Lo Lhose maLLers provlded
ln Sec. 33, le:
o Approval of any acLlon for whlch shareholders approval ls
also requlred
o lllllng of vacancles ln Lhe board
o AmendmenL or repeal of by-laws or Lhe adopLlon of new
by-laws
$#
o AmendmenL or repeal of any resoluLlon of Lhe board
whlch by lLs express Lerms ls noL so amendable or
repealable
o ulsLrlbuLlon of cash dlvldends Lo Lhe shareholders

6) Corporat|on ower and Author|ty
ALLx
7) 8y-Laws
Sec. 46. 9,"$&'"( "H -.T0%1/8 - Lvery corporaLlon formed under Lhls Code
musL, wlLhln one (1) monLh afLer recelpL of offlclal noLlce of Lhe lssuance of
lLs cerLlflcaLe of lncorporaLlon by Lhe SecurlLles and Lxchange Commlsslon,
adopL a code of by-laws for lLs governmenL noL lnconslsLenL wlLh Lhls Code.
lor Lhe adopLlon of by-laws by Lhe corporaLlon Lhe afflrmaLlve voLe of Lhe
sLockholders represenLlng aL leasL a ma[orlLy of Lhe ouLsLandlng caplLal
sLock, or of aL leasL a ma[orlLy of Lhe members ln case of non-sLock
corporaLlons, shall be necessary. 1he by-laws shall be slgned by Lhe
sLockholders or members voLlng for Lhem and shall be kepL ln Lhe prlnclpal
offlce of Lhe corporaLlon, sub[ecL Lo Lhe lnspecLlon of Lhe sLockholders or
members durlng offlce hours. A copy Lhereof, duly cerLlfled Lo by a
ma[orlLy of Lhe dlrecLors or LrusLees counLerslgned by Lhe secreLary of Lhe
corporaLlon, shall be flled wlLh Lhe SecurlLles and Lxchange Commlsslon
whlch shall be aLLached Lo Lhe orlglnal arLlcles of lncorporaLlon.
noLwlLhsLandlng Lhe provlslons of Lhe precedlng paragraph, by-laws may
be adopLed and flled prlor Lo lncorporaLlon, ln such case, such by-laws shall
be approved and slgned by all Lhe lncorporaLors and submlLLed Lo Lhe
SecurlLles and Lxchange Commlsslon, LogeLher wlLh Lhe arLlcles of
lncorporaLlon.
ln all cases, by-laws shall be effecLlve only upon Lhe lssuance by Lhe
SecurlLles and Lxchange Commlsslon of a cerLlflcaLlon LhaL Lhe by-laws are
noL lnconslsLenL wlLh Lhls Code.
1he SecurlLles and Lxchange Commlsslon shall noL accepL for flllng Lhe by-
laws or any amendmenL LhereLo of any bank, banklng lnsLlLuLlon, bulldlng
and loan assoclaLlon, LrusL company, lnsurance company, publlc uLlllLy,
educaLlonal lnsLlLuLlon or oLher speclal corporaLlons governed by speclal
laws, unless accompanled by a cerLlflcaLe of Lhe approprlaLe governmenL
agency Lo Lhe effecL LhaL such by-laws or amendmenLs are ln accordance
wlLh law.
8ules and ordlnances made by a corporaLlon for lLs own
governmenL
1o regulaLe Lhe conducL and deflne Lhe duLles of Lhe
sLockholders or members Lowards Lhe corporaLlon and
among Lhemselves
rlvaLe laws enacLed by Lhe corporaLlon Lo regulaLe, govern
and conLrol lLs own acLlons, affalrs and concerns
1he power Lo make and adopL by-laws ls lnherenL ln every
corporaLlon as one of lLs necessary and lndlspensable legal
lncldenLs
Lxpress power granLed Lo all corporaLlons and speclflcally
requlred
SubordlnaLe Lo Lhe arLlcles of lncorporaLlon as well as Lhe
CorporaLlon Code
ln case of any dlscrepancy: arLlcles of lncorporaLlon > by-laws
Contents of the 8y-Laws - Sec 47
1. 1he Llme, place and manner of calllng and conducLlng regular or
speclal meeLlngs of Lhe dlrecLors or LrusLees,
2. 1he Llme and manner of calllng and conducLlng regular or speclal
meeLlngs of Lhe sLockholders or members,
3. 1he requlred quorum ln meeLlngs of sLockholders or members
and Lhe manner of voLlng Lhereln,
4. 1he form for proxles of sLockholders and members and Lhe
manner of voLlng Lhem,
3. 1he quallflcaLlons, duLles and compensaLlon of dlrecLors or
LrusLees, offlcers and employees,
6. 1he Llme for holdlng Lhe annual elecLlon of dlrecLors of LrusLees
and Lhe mode or manner of glvlng noLlce Lhereof,
7. 1he manner of elecLlon or appolnLmenL and Lhe Lerm of offlce of
all offlcers oLher Lhan dlrecLors or LrusLees,
$$
8. 1he penalLles for vlolaLlon of Lhe by-laws,
9. ln Lhe case of sLock corporaLlons, Lhe manner of lssulng sLock
cerLlflcaLes, and
10. Such oLher maLLers as may be necessary for Lhe proper or
convenlenL LransacLlon of lLs corporaLe buslness and affalrs

LffecLlve only upon Lhe approval of Lhe SLC
May adopL and flle prlor Lo lncorporaLlon - musL be
slgned by all lncorporaLors wlLhouL Lhe need of Lhe
afflrmaLlve voLe
lf flled afLer lncorporaLlon - sLockholders/members -
musL consenL or approve
1lML: wlLhln one monLh afLer recelpL of noLlce
1hey are lnLernal rules whlch can'L blnd, effecL or
pre[udlce Lhlrd persons unless Lhey have knowledge of lLs
exlsLence and conLenLs
Amendments to the 8y-|aws: Sec 48
1he board of dlrecLors or LrusLees, by a ma[orlLy voLe Lhereof, and Lhe
owners of aL leasL a ma[orlLy of Lhe ouLsLandlng caplLal sLock, or aL leasL a
ma[orlLy of Lhe members of a non-sLock corporaLlon, aL a regular or speclal
meeLlng duly called for Lhe purpose, may amend or repeal any by-laws or
adopL new by-laws.
1he owners of Lwo-Lhlrds (2/3) of Lhe ouLsLandlng caplLal sLock or Lwo-
Lhlrds (2/3) of Lhe members ln a non-sLock corporaLlon may delegaLe Lo
Lhe board of dlrecLors or LrusLees Lhe power Lo amend or repeal any by-
laws or adopL new by-laws: ltovlJeJ, 1haL any power delegaLed Lo Lhe
board of dlrecLors or LrusLees Lo amend or repeal any by-laws or adopL
new by-laws shall be consldered as revoked whenever sLockholders
ownlng or represenLlng a ma[orlLy of Lhe ouLsLandlng caplLal sLock or a
ma[orlLy of Lhe members ln non-sLock corporaLlons, shall so voLe aL a
regular or speclal meeLlng.
Whenever any amendmenL or new by-laws are adopLed, such amendmenL
or new by-laws shall be aLLached Lo Lhe orlglnal by-laws ln Lhe offlce of Lhe
corporaLlon, and a copy Lhereof, duly cerLlfled under oaLh by Lhe corporaLe
secreLary and a ma[orlLy of Lhe dlrecLors or LrusLees, shall be flled wlLh Lhe
SecurlLles and Lxchange Commlsslon Lhe same Lo be aLLached Lo Lhe
orlglnal arLlcles of lncorporaLlon and orlglnal by-laws.
1he amended or new by-laws shall only be effecLlve upon Lhe lssuance by
Lhe SecurlLles and Lxchange Commlsslon of a cerLlflcaLlon LhaL Lhe same
are noL lnconslsLenL wlLh Lhls Code
2 modes of amend|ng or repea||ng by-|aws or adopt|ng a
new one
1) ma[orlLy voLe of Lhe dlrecLors or LrusLees +
ma[orlLy voLe of Lhe ouLsLandlng caplLal
sLock or members aL a regular or speclal
meeLlng called for LhaL purpose
2) by Lhe board of dlrecLors alone when
delegaLed by 2/3 of Lhe ouLsLandlng caplLal
sLock or members

Loyo|a Grand V|||as Assoc|at|on v CA
LCv Pomeowners Assoc dldn'L flle lLs corporaLe by-laws. 1hus lL
was dlssolved auLomaLlcally. 1here was allegedly non-user of
corporaLe charLer because PlCC, Lhe homeowners organlzaLlon
had noL recelved any reporL on Lhe assoclaLlon's acLlvlLles.
W/n Lhe fallure Lo adopL and flle lLs by-laws resulLed ln lLs
dlssoluLlon: nC.
A copy Lhereof, duly cerLlfled . SnALL be flled wlLh Lhe SLC."
MandaLory buL auLomaLlc dlssoluLlon was never Lhe lnLenLlon of
Lhe leglslaLure. 8y-laws are only subordlnaLe Lo Lhe arLlcles of
lncorporaLlon. 1he SLC ls only empowered Lo suspend or revoke
Lhe franchlse or cerLlflcaLe of reglsLraLlon of a corporaLlon only
afLer nC1lCL and PLA8lnC. Consequence: penalLy only
I|e|sher v 8ot|ca No|asco
Conzales, orlglnal owner of shares of sLock asslgned and dellvered
sald shares Lo llelshcer ln conslderaLlon of a large sum of money.
Mlclano, secreLary-Lreasurer of corporaLlon offered Lo buy from
$%
llelshcer on behalf on Lhe corporaLlon. 8y vlrLue of ArL 12 of Lhe
by-laws, corporaLlon had Lhe preferenLlal rlghL Lo buy from
Conzales sald shares.
W/n llelscher ls bound by Lhe provlslons of Lhe by-laws: nC
8y-laws musL noL be lnconslsLenL wlLh Lhe CorporaLlon Code.
Shares of sLock are personal properLy and may be Lransferred by
dellvery of Lhe cerLlflcaLe lndorsed by Lhe owner. Code
conLemplaLes no resLrlcLlon as Lo whom Lhey may be Lransferred
or sold.
8y-laws are lnLended merely for Lhe proLecLlon of Lhe corporaLlon
and prescrlbe regulaLlon, noL resLrlcLlon. lL can'L Lake away or
abrldge Lhe subsLanLlal rlghLs of a sLockholder.
8y-laws are valld lf Lhey are reasonable and calculaLed Lo carry
lnLo effecL Lhe ob[ecLs of Lhe corporaLlon.

Gov't v L| nogar I|||p|no
8y-law provlslon: board of dlrecLors empowered Lo cancel shares
and reLurn Lo owner Lhe balance resulLlng from Lhe llquldaLlon by
reason of Lhelr conducL or for oLher moLlve, Lhe conLlnuaLlon as
members ls noL deslrable. - valld or noL? nC
aLenLly null. lL ls ln dlrecL confllcL wlLh Corpo Law whlch expressly
declares LhaL Lhe board of dlrecLors shall noL hve Lhe power Lo
force Lhe surrender and wlLhdrawal of unmaLured sLock excepL ln
case of llquldaLlon of Lhe corporaLlon or of Lhe forfelLure of Lhe
sLock for dellnquency.
AnoLher provlslon: because of Lhe fallure of Lhe corporaLlon Lo
hold annual meeLlngs, dlrecLors flll Lhe vacancles ln Lhe
dlrecLoraLe by chooslng sulLable persons from among Lhe
sLockholders - valld or noL? ?LS
SP's non-aLLendance aL such meeLlngs ls doubLless Lo be
lnLerpreLed ln parL as expresslng Lhelr saLlsfacLlon aL Lhe way ln
whlch Lhlngs have been conducLed. upon Lhe fallure of a quorum
aL any annual meeLlng, Lhe dlrecLoraLe naLurally holds over and
conLlnues Lo funcLlon unLll anoLher dlrecLoraLe ls chosen and
quallfled. Mere fallure of a corporaLlon Lo elecL offlcers does noL
LermlnaLe Lhe Lerms of exlsLlng offlcers nor dlssolve Lhe
corporaLlon.
Gokongwe| v SLC
Cokongwel wanLs SMC by laws Lo be declared null and cancelled
on ground LhaL dlrecLors amdended Lhe by-laws wlLhouL auLhorlLy
from aL leasL 2/3 of Lhe ouLsLandlng caplLal sLock. Also, ln
amendlng Lhe by-laws, dlrecLors purposely provlded for hls
quallflcaLlons: oo petsoo sboll poollfy ot be ellqlble fot
oomlootloo ot electloo to tbe 8ou lf be ls eoqoqeJ lo ooy bosloess
wblcb competes wltb ot ootoqoolstlc to tbot of tbe cotpototloo of
lf be ls oo offlcet, moooqet ot coottollloq petsoo of ot tbe owoet of
10X mote of ooy ootstooJloq closs of sbotes. - Alleged LhaL Lhe
corporaLlons have no lnherenL power Lo dlsquallfy a SP from
belng elecLed as dlrecLor
Peld: vALlu. Cokongwel (presldenL and subsLanLlal SP of u8C,
dlrecL compeLlLor) cannoL devoLe an unselflsh and undlvlded
loyalLy Lo Lhe corporaLlon belng an owner of a compeLlLor corp.
1hls provlslon ls essenLlally a prevenLlve measure Lo assure SP of
SMC of reasonable proLecLlon from Lhe unresLralned self-lnLeresL
of Lhose charged. Access Lo confldenLlal lnformaLlon may resulL
elLher ln Lhe promoLlon of Lhe compeLlLor aL Lhe expense of SMC.
CorporaLe offlcers are noL permlLLed Lo use Lhelr poslLlon of LrusL
and confldence Lo furLher Lhelr prlvaLe lnLeresLs. 8ou has access
Lo senslLlve and hlghly confldenLlal lnformaLlon. Sound prlnclples
of corporaLe managemenL counsel agalnsL sharlng senslLlve
lnformaLlon wlLh a dlrecLor whose flduclary of loyalLy may well
requlre LhaL he dlsclose Lhls lnfo Lo a compeLlLlve rlval.
CorporaLe opporLunlLy - recognlLlon by Lhe courLs LhaL Lhe
flduclary sLandards could noL be upheld where Lhe flduclary was
acLlng for 2 enLlLles wlLh compeLlng lnLeresLs.
Summary: elemenLs of a valld by-laws
1) noL conLrary Lo law, publlc pollcy or morals
2) noL lnconslsLenL wlLh arLlcles of lncorporaLlon
$&
3) general and unlform ln lLs effecL or appllcable Lo all allke or Lhose
slmllarly slLuaLed
4) noL lmpalr obllgaLlons and conLracLs or vesLed rlghLs
3) reasonable

8) Meet|ngs
Sec 49: MeeLlngs of dlrecLors, LrusLees, sLockholders or members
may be regular or speclal.
MeeLlngs - uuly convened assembly elLher of sLockholders,
members, dlrecLors, LrusLees, managers for any legal purpose or
for Lhe LransacLlon of buslness of a common lnLeresL

1) Stockho|der's Meet|ng
8egular meeLlngs of sLockholders or members shall be held annually on a
daLe flxed ln Lhe by-laws, or lf noL so flxed, on any daLe ln Aprll of every
year as deLermlned by Lhe board of dlrecLors or LrusLees: rovlded, 1haL
wrlLLen noLlce of regular meeLlngs shall be senL Lo all sLockholders or
members of record aL leasL Lwo (2) weeks prlor Lo Lhe meeLlng, unless a
dlfferenL perlod ls requlred by Lhe by-laws.
Speclal meeLlngs of sLockholders or members shall be held aL any Llme
deemed necessary or as provlded ln Lhe by-laws: rovlded, however, 1haL
aL leasL one (1) week wrlLLen noLlce shall be senL Lo all sLockholders or
members, unless oLherwlse provlded ln Lhe by-laws.
noLlce of any meeLlng may be walved, expressly or lmplledly, by any
sLockholder or member.
Whenever, for any cause, Lhere ls no person auLhorlzed Lo call a meeLlng,
Lhe SecreLarles and Lxchange Commlsslon, upon peLlLlon of a sLockholder
or member on a showlng of good cause Lherefor, may lssue an order Lo Lhe
peLlLlonlng sLockholder or member dlrecLlng hlm Lo call a meeLlng of Lhe
corporaLlon by glvlng proper noLlce requlred by Lhls Code or by Lhe by-laws.
1he peLlLlonlng sLockholder or member shall preslde LhereaL unLll aL leasL a
ma[orlLy of Lhe sLockholders or members presenL have been chosen one of
Lhelr number as presldlng offlcer
Ceneral: managemenL of corporaLe affalrs vesLed ln Lhe board of
dlrecLors (alLhough ln some lnsLances Lhe sLockholders' or
members' consenL or voLe ls requlred
SLockholders have no power Lo acL as or for Lhe corporaLlon
LxCL1 aL a corporaLe meeLlng called and conducLed accordlng Lo
law
8egular meeLlngs - held annually, Speclal meeLlngs - any Llme
deemed necessary
kequ|rements for a va||d Stockho|der's Meet|ng
X8 B4/& -+ 2+0, "( &2+ ,%&+ H'Q+, '( &2+ -.T0%1/ "# '( %**"#,%(*+
1'&2 0%1
a. AbsenL any daLe, musL be held on any day of Aprll as may
be deLermlned by Lhe board of dlrecLors
b. LxcepLlons: where Lhe annual meeLlng can'L be held on
Lhe appolnLed Llme for valld and merlLorlous reasons
such as force ma[eure or Lhe lnablllLy Lo obLaln Lhe
requlred quorum - may be posLponed Lo a reasonable
fuLure daLe.
Y8 <#'"# ("&'*+ :4/& -+ 5'7+(
a. AL leasL 2 weeks prlor Lo Lhe regular meeLlngs
b. 1 week prlor noLlce for speclal meeLlngs
c. allows by-laws Lo provlde a dlfferenL perlod for sendlng
ouL noLlce
d. fallure Lo glve Lhe same - render resoluLlon voldable aL
Lhe opLlon of Lhe sLockholder who was noL noLlfled
e. noLlce may be walved.
f. SP who ls presenL and parLlclpaLes wlLhouL ob[ecLlon
can'L complaln of fallure Lo glve noLlce or defecLs ln
noLlce
g. MeeLlng - duly called for Lhe purpose Lhus noLlce may
sLaLe Lhe agenda or buslness maLLers
Lxamples of Lhe agenda and buslness maLLers whlch need Lo be sLaLed:
1) removal of dlrecLors/LrusLees
2) flllng up of vacancles ln Lhe offlce of dlrecLors or LrusLees
$'
3) raLlflcaLlon of conLracL of Lhe corporaLlon wlLh any of lLs dlrecLors
or LrusLees
4) exLenslon or shorLenlng of corporaLe Lerm
3) lncrease or decrease caplLal sLock or lncurrlng, creaLlng or
lncreaslng bonded lndebLedness
6) sale or oLher dlsposlLlon of all or subsLanLlally all of Lhe asseLs of
Lhe corporaLlon
7) lnvesLmenL of corporaLe funds ln anoLher corporaLlon or buslness
or for any oLher purpose
8) declaraLlon of sLock dlvldends
9) enLerlng lnLo a managemenL conLracL wlLh anoLher corporaLlon
10) amendmenL or repeal of Lhe by-laws or adopLlon of a new one
11) flxlng Lhe lssue prlce of no-par value shares by Lhe sLockholders
12) merger or consolldaLlon
13) dlssoluLlon of Lhe corporaLlon
8oard of D|rectors v 1an
8y- law provlslon: noLlce of a regular annual meeLlng or of a
speclal meeLlng ma be glven by posLlng coples of sald noLlce aL
dlfferenL deparLmenLs nC1 LLSS 1PAn 3 uA?S 8lC8 Lo Lhe daLe
of Lhe meeLlng.
noLlce of elecLlon was glven Lwo days prlor Lo Lhe seL elecLlon -
noLlce requlremenL noL complled wlLh. LlecLlon null and vold.

Z8 =& :4/& -+ 2+0, %& &2+ $#"$+# $0%*+
SecLlon 31: SLockholders' or members' meeLlngs, wheLher regular or
speclal, shall be held ln Lhe clLy or munlclpallLy where Lhe prlnclpal offlce of
Lhe corporaLlon ls locaLed, and lf pracLlcable ln Lhe prlnclpal offlce of Lhe
corporaLlon: ltovlJeJ, 1haL MeLro Manlla shall, for purposes of Lhls secLlon,
be consldered a clLy or munlclpallLy.
noLlce of meeLlngs shall be ln wrlLlng, and Lhe Llme and place Lhereof
sLaLed Lhereln.
All proceedlngs had and any buslness LransacLed aL any meeLlng of Lhe
sLockholders or members, lf wlLhln Lhe powers or auLhorlLy of Lhe
corporaLlon, shall be valld even lf Lhe meeLlng be lmproperly held or called,
provlded all Lhe sLockholders or members of Lhe corporaLlon are presenL
or duly represenLed aL Lhe meeLlng
ClLy or munlclpallLy where Lhe prlnclpal offlce of Lhe
corporaLlon ls locaLed
As far as pracLlcable: lnslde Lhe prlnclpal offlce
Law allows a non-sLock corp Lo provlde ln lLs by-laws any
place of members' meeLlngs provlded LhaL 8CL8 nC1lCL ls
senL lndlcaLlng Lhe daLe, Llme and place
MusL be wlLhln Lhe hlllpplnes
MeLro Manlla - consldered as one clLy or munlclpallLy

[8 =& :4/& -+ *%00+, -. &2+ $#"$+# $%#&.
AuLhorlLy resLs wlLh Lhe board of dlrecLors
resldenL has nC power Lo call a meeLlng ln Lhe absence of a
by-law provlslon or a board resoluLlon maklng lL hls duLy Lo
do so
resldenL may preslde aL Lhe meeLlng of dlrecLors
Law empowers Lhe proper forum Lo lssue an order upon
peLlLlon of a SP or member Lo Lhe peLlLlonlng sLockholder or
member dlrecLlng hlm Lo call a meeLlng by glvlng proper
noLlce
eLlLlonlng sLockholder or member shall preslde
once v Lncarnac|on
Capol prayed for an order dlrecLlng hlm Lo call a meeLlng of Lhe
sLockholders and Lo preslde aL such meeLlng. 2 days laLer, wlLhouL
noLlce Lo Lhe peLlLloner, Lhe courL lssued Lhe order. eLlLloners
learned only of Lhls order laLer.
ne|d: Lhe requlremenL LhaL on Lhe showlng of good cause
Lherefor", Lhe courL may granL Lo a sLockholder Lhe auLhorlLy Lo
call such meeLlng and Lo preslde LhereaL does nC1 mean LhaL Lhe
peLlLlon musL be seL for hearlng wlLh noLlce served upon Lhe
board of dlrecLors. 1he courL was saLlsfled LhaL Lhere was a
showlng of good cause auLhorlzlng Capol Lo call a meeLlng for Lhe
purpose of elecLlng Lhe 8ou because Lhe chalrman had falled Lo
do so.
$(

SLC Case (Afab|e v Age||on): under Lhe presenL seL-up of Lhe law, Lhe
once cause would apply only where Lhere ls nC person auLhorlzed Lo call
Lhe meeLlng, Lhus an ex parLe proceedlng may be allowed. Powever, where
Lhere ls an offlcer auLhorlzed Lo call Lhe meeLlng and LhaL offlcer refuses,
falls or neglecLs Lo call Lhe meeLlng, Lhen Lhe once case wlll nC1 apply.

Llkewlse, whlle Lhe once case held LhaL Lhe quesLloned order was llkened
Lo a wrlL of prellmlnary ln[uncLlon, now Lhe sald wrlL can no longer be
lssued wlLhouL noLlce of hearlng under 8 224 amendlng 8ules of CourL
8ule 38.

Summary: persons who may call Lhe meeLlng
1) auLhorlzed under Lhe by-laws
2) absenL any provlslon, presldenL
3) secreLary, on order of Lhe presldenL or on wrlLLen demand of Lhe
SPs represenLlng ma[orlLy
4) on order of Lhe proper forum pursuanL Lo Sec 30
\8 ]4"#4: %(, 7"&'(5 ;+U4'#+:+(&/ :4/& -+ :+&
SecLlon 32: unless oLherwlse provlded for ln Lhls Code or ln Lhe by-laws, a
quorum shall conslsL of Lhe sLockholders represenLlng a ma[orlLy of Lhe
ouLsLandlng caplLal sLock or a ma[orlLy of Lhe members ln Lhe case of non-
sLock corporaLlons
C8:Cuorum requlremenL: ma[orlLy of Lhe ouLsLandlng caplLal
sLock
o L: e.g. removal of a dlrecLor - aL leasL 2/3
voLlng requlremenL: ma[orlLy
no quorum= no blndlng force
8asls: LoLal number of reglsLered voLlng members for non-sLock,
LoLal subscrlpLlon of Lhe sLockholders for sLock
CorporaLlons are auLhorlzed Lo prescrlbe ln Lhelr by-laws Lhe
number of members or ouLsLandlng caplLal sLock requlred Lo be
presenL Lo consLlLuLe a quorum
Powever, where Lhe number necessary Lo consLlLuLe a quorum ls
prescrlbed by Corpo Code, Lhe by-law wlll have Lo be conslsLenL
wlLh Code or else lL wlll have no force and effecL
lf Lhe voLlng requlremenL ls meL, any resoluLlon passed ln Lhe
meeLlng, even lf lmproperly held or called wlll be vALlu lf all SP or
mems are presenL or duly represenLed.

2) D|rectors' ]1rustees' MLL1ING
SecLlon 33: 8egular meeLlngs of Lhe board of dlrecLors or LrusLees of every
corporaLlon shall be held monLhly, unless Lhe by-laws provlde oLherwlse.
Speclal meeLlngs of Lhe board of dlrecLors or LrusLees may be held aL any
Llme upon Lhe call of Lhe presldenL or as provlded ln Lhe by-laws.
MeeLlngs of dlrecLors or LrusLees of corporaLlons may be held anywhere ln
or ouLslde of Lhe hlllpplnes, unless Lhe by-laws provlde oLherwlse.
noLlce of regular or speclal meeLlngs sLaLlng Lhe daLe, Llme and place of
Lhe meeLlng musL be senL Lo every dlrecLor or LrusLee aL leasL one (1) day
prlor Lo Lhe scheduled meeLlng, unless oLherwlse provlded by Lhe by-laws.
A dlrecLor or LrusLee may walve Lhls requlremenL, elLher expressly or
lmplledly
8egular - monLhly, Speclal - any Llme upon resldenL's call or any
person auLhorlzed Lo do so provlded ln Lhe by-laws
May be held An?WPL8L even ouLslde Lhe hlllpplnes unless Lhe
by-laws provlde oLherwlse
noLlce - aL leasL 1 day before. noLlce deLermlnes legallLy and
blndlng effecL.
SLC oplnlon: speclal meeLlng conducLed ln Lhe absence of some of
Lhe dlrecLors and wlLhouL any noLlce Lo Lhem ls lllegal and Lhe
acLlon aL such meeLlng, alLhough by a ma[orlLy of Lhe dlrecLors ls
lnvalld unLLSS raLlfled subsequenLly
$)
SLC Cplnlon 2: speclal meeLlng held where ALL dlrecLors were
presenL and parLlclpaLed even wlLhouL formal noLlce ls consldered
valld.
1eleconferenclng and vldeoconferenclng: a reallLy ln Lhe llghL of
8A 8792
Gk: ma[orlLy of Lhe members of Lhe board of dlrecLors or LrusLees
as flxed ln Lhe arLlcles of lncorporaLlon wlll consLlLuLe a quorum
for Lhe LransacLlon of corporaLe buslness
o L: |n case of elecLlon of corporaLe offlcers whlch requlres
Lhe voLe of a ma[orlLy of ALL members of Lhe board
nC 8Cx? lC8 ul8LC1C8/18uS1LL - unllke a sLockholder or a
member, a dlrecLor or LrusLee cannoL aLLend or voLe by proxy aL
any board meeLlng
SecLlon 34: 8LSluLn1 shall 8LSluL unless by-laws provlde oLherwlse
1he presldenL shall preslde aL all meeLlngs of Lhe dlrecLors or LrusLee as
well as of Lhe sLockholders or members, unless Lhe by-laws provlde
oLherwlse
Sec 30: a peLlLlonlng sLockholder may preslde

Stockho|ders' k|ght to Vote and Manner of Vot|ng
8lghL Lo voLe - lnherenL ln and lncldenLal Lo Lhe ownershlp
roperLy rlghL - a sLockholder can voLe hls shares Lhe way he
pleases excepL only ln so far as lL may be resLrlcLed by law. CourL
can'L deprlve a sLockholder of hls rlghL Lo voLe excepL upon a clear
showlng of Lhe lawful denlal under arLlcles or by-laws
LxcepLlons Lo lnherenL rlghL Lo voLe: (U1-D)
1. non-voLlng shares: preferred and redeemable shares
2. 1reasury shares whlle Lhey remaln ln Lreasury
3. Shares of sLock of declared dellnquenL
4. UnreglsLered Lransferees of shares of sLock

May voLe personally or Lhrough a rep by way of proxy, voLlng LrusL
agreemenL or by execuLor/admlnlsLraLor/recelver/legal rep
ledgees/morLgagees - noL enLlLled Lo voLe ln absence of Lhe
agreemenL Lo conLrary.
Sect|on SS: ln case of pledged or morLgaged shares ln sLock corporaLlons,
Lhe pledgor or morLgagor shall have Lhe rlghL Lo aLLend and voLe aL
meeLlngs of sLockholders, unless Lhe pledgee or morLgagee ls expressly
glven by Lhe pledgor or morLgagor such rlghL ln wrlLlng whlch ls recorded
on Lhe approprlaLe corporaLe books. (n)
LxecuLors, admlnlsLraLors, recelvers, and oLher legal represenLaLlves duly
appolnLed by Lhe courL may aLLend and voLe ln behalf of Lhe sLockholders
or members wlLhouL need of any wrlLLen proxy
lf legal LlLle remalns wlLh pledgor/morLgagor - Lhey sLlll have Lhe
rlghL Lo voLe, lf Lransferred and reglsLered - pledgee and
morLgagee wlll have Lhe rlghL Lo voLe
AdmlnlsLraLors - musL be appolnLed by courL. SLaLuLory granL Lo
voLe on shares belonglng Lo Lhe esLaLe of Lhe decedenL alLhough
noL quallfled Lo be elecLed as dlrecLor
Sec. S6. W"&'(5 '( *%/+ "H ^"'(& "1(+#/2'$ "H /&"*R8 - ln case of shares of
sLock owned [olnLly by Lwo or more persons, ln order Lo voLe Lhe same, Lhe
consenL of all Lhe co-owners shall be necessary, unless Lhere ls a wrlLLen
proxy, slgned by all Lhe co-owners, auLhorlzlng one or some of Lhem or any
oLher person Lo voLe such share or shares: rovlded, 1haL when Lhe shares
are owned ln an "and/or" capaclLy by Lhe holders Lhereof, any one of Lhe
[olnL owners can voLe sald shares or appolnL a proxy Lherefor.
!olnL-ownershlp - boLh musL agree upon Lhe voLe
o ConsenL ls noL requlred lf Lhere ls a wrlLLen proxy slgned
by all co-owners

Sec. S7. W"&'(5 #'52& H"# &#+%/4#. /2%#+/8 - 1reasury shares shall have no
voLlng rlghL as long as such shares remaln ln Lhe 1reasury
1reasury shares - shares of sLock whlch have been lssued and fully
pald 8u1 reacqulred by Lhe corporaLlon elLher by purchase,
redempLlon, donaLlon or oLher lawful means
$*
8eason for no voLlng rlghL- prevenL or deLer Lhe lncumbenL
dlrecLors and offlcers from perpeLuaLlng Lhemselves as such or
from prolonglng Lhelr sLay
roxy and Cther kepresentat|ve Vot|ng
Sec. S8. <#"Q'+/8 - SLockholders and members may voLe ln person or by
proxy ln all meeLlngs of sLockholders or members. roxles shall ln wrlLlng,
slgned by Lhe sLockholder or member and flled before Lhe scheduled
meeLlng wlLh Lhe corporaLe secreLary. unless oLherwlse provlded ln Lhe
proxy, lL shall be valld only for Lhe meeLlng for whlch lL ls lnLended. no
proxy shall be valld and effecLlve for a perlod longer Lhan flve (3) years aL
any one Llme
Specles of absenLee voLlng by mall by a one way balloL for Lhe
slaLe or proposals suggesLed by Lhe managemenL
roperly Lhe auLhorlLy glven by Lhe SP or mem Lo anoLher Lo voLe
for hlm aL a SP/Mem meeLlng
Also refers Lo Lhe lnsLrumenL or paper evldenclng Lhe auLhorlLy
8lghL granLed Lo all sLockholders, noL absoluLe lf ln non-sLock (lL
may be denled)
8equlremenLs
1) ln wrlLlng
2) slgned by Lhe sLockholder or member or hls duly auLhorlzed
represenLaLlve
3) flled on or before Lhe scheduled meeLlng wlLh corporaLe secreLary
4) noLarlzaLlon unless noL provlded
3) SLC Memo Clrcular: for publlcly llsLed corporaLlons
2 1ypes
1. Ceneral - general dlscreLlonary power of aLLorney Lo voLe for
dlrecLors and all ordlnary maLLers. nC1 an auLhorlLy Lo voLe for
fundamenLal changes ln Lhe corporaLe charLer or for unusual
LransacLlons
2. LlmlLed - resLrlcLs Lhe auLhorlLy Lo voLe on speclfled maLLers and
may dlrecL Lhe manner ln whlch Lhe voLe wlll be casLed.
uuraLlon and LffecLlvlLy: flxed by lLs own Lerms buL noL for more Lhan 3
years sub[ecL Lo exLenslon for noL more Lhan 3 years for each renewal

8evocablllLy: need noL be made by formal noLlce ln wrlLlng, may be
expressed Lo Lhe proxy holder, Lo Lhe elecLlon commlLLee by a subsequenL
proxy Lo anoLher or by Lhe sale of Lhe shares
unless coupled wlLh lnLeresL
Crally or by conducL

Vot|ng 1rust
Sec. S9. W"&'(5 &#4/&/8 - Cne or more sLockholders of a sLock corporaLlon
may creaLe a voLlng LrusL for Lhe purpose of conferrlng upon a LrusLee or
LrusLees Lhe rlghL Lo voLe and oLher rlghLs perLalnlng Lo Lhe shares for a
perlod noL exceedlng flve (3) years aL any Llme: ltovlJeJ, 1haL ln Lhe case
of a voLlng LrusL speclflcally requlred as a condlLlon ln a loan agreemenL,
sald voLlng LrusL may be for a perlod exceedlng flve (3) years buL shall
auLomaLlcally explre upon full paymenL of Lhe loan.
A voLlng LrusL agreemenL musL be ln wrlLlng and noLarlzed, and shall
speclfy Lhe Lerms and condlLlons Lhereof. A cerLlfled copy of such
agreemenL shall be flled wlLh Lhe corporaLlon and wlLh Lhe SecurlLles and
Lxchange Commlsslon, oLherwlse, sald agreemenL ls lneffecLlve and
unenforceable. 1he cerLlflcaLe or cerLlflcaLes of sLock covered by Lhe voLlng
LrusL agreemenL shall be canceled and new ones shall be lssued ln Lhe
name of Lhe LrusLee or LrusLees sLaLlng LhaL Lhey are lssued pursuanL Lo
sald agreemenL. ln Lhe books of Lhe corporaLlon, lL shall be noLed LhaL Lhe
Lransfer ln Lhe name of Lhe LrusLee or LrusLees ls made pursuanL Lo sald
voLlng LrusL agreemenL.

1he LrusLee or LrusLees shall execuLe and dellver Lo Lhe Lransferors voLlng
LrusL cerLlflcaLes, whlch shall be Lransferable ln Lhe same manner and wlLh
Lhe same effecL as cerLlflcaLes of sLock.
1he voLlng LrusL agreemenL flled wlLh Lhe corporaLlon shall be sub[ecL Lo
examlnaLlon by any sLockholder of Lhe corporaLlon ln Lhe same manner as
%+
any oLher corporaLe book or record: rovlded, 1haL boLh Lhe Lransferor
and Lhe LrusLee or LrusLees may exerclse Lhe rlghL of lnspecLlon of all
corporaLe books and records ln accordance wlLh Lhe provlslons of Lhls Code.
Any oLher sLockholder may Lransfer hls shares Lo Lhe same LrusLee or
LrusLees upon Lhe Lerms and condlLlons sLaLed ln Lhe voLlng LrusL
agreemenL, and Lhereupon shall be bound by all Lhe provlslons of sald
agreemenL.
no voLlng LrusL agreemenL shall be enLered lnLo for Lhe purpose of
clrcumvenLlng Lhe law agalnsL monopolles and lllegal comblnaLlons ln
resLralnL of Lrade or used for purposes of fraud.
unless expressly renewed, all rlghLs granLed ln a voLlng LrusL agreemenL
shall auLomaLlcally explre aL Lhe end of Lhe agreed perlod, and Lhe voLlng
LrusL cerLlflcaLes as well as Lhe cerLlflcaLes of sLock ln Lhe name of Lhe
LrusLee or LrusLees shall Lhereby be deemed canceled and new cerLlflcaLes
of sLock shall be relssued ln Lhe name of Lhe Lransferors.
1he voLlng LrusLee or LrusLees may voLe by proxy unless Lhe agreemenL
provldes oLherwlse.
ueflned as one creaLed by an agreemenL beLween a group of
sLockholders of a corporaLlon and a LrusLee or a group of ldenLlcal
agreemenLs beLween lndlvldual sLockholders and a common
LrusLee, whereby lL ls provlded LhaL for a Lerm of years or for a
perlod conLlngenL upon a cerLaln evenL or unLll Lhe agreemenL ls
elLher wlLh or wlLhouL reservaLlon Lo Lhe owners or person
deslgnaLed by Lhem Lhe power Lo dlrecL how such conLrol shall be
lssued
uevlse of blndlng sLockholders Lo voLe as a unlL and Lhus assurlng
a deslrable sLablllLy and conLlnulLy ln managemenL ln slLuaLlons
where lL ls needed
1hlnk: SPAM CWnL8
Lee v CA
8esulLs ln Lhe separaLlon of Lhe voLlng rlghLs of a sLockholder form
hls oLher rlghLs such as Lhe rlghL Lo recelve dlvldends, Lhe rlghL Lo
lnspecL Lhe books of Lhe corporaLlon, Lhe rlghL Lo sell cerLaln
lnLeresLs ln Lhe llquldaLlon of Lhe corporaLlon
1hree crlLerla
o voLlng rlghLs of Lhe sLock are separaLed from Lhe oLher
aLLrlbuLes of ownershlp
o voLlng rlghLs granLed are lnLended Lo be lrrevocable for a
deflnlLe perlod of Llme
o rlnclpal purpose: acqulre voLlng conLrol of Lhe
corporaLlon
voLlng LrusL agreemenL may confer upon a LrusLee noL only Lhe
sLockholder's voLlng rlghLs buL also oLher rlghLs perLalnlng Lo hls
shares as long as Lhe v1A ls noL enLered for Lhe purpose of
clrcumvenLlng Lhe law
8eneflclal owner - ceases Lo be recognlzed as a shareholder of
record and may be deprlved noL only of any rlghL Lo voLe for
dlrecLors buL also Lo b elecLed as such, noLlce of lnfo as agalnsL
Lhe corporaLlon or any volce ln maklng mosL fundamenLal changes
such as mergers and consolldaLlon, sale of asseLs, eLc.
VC1ING 1kUS1 V kCk - see tab|e
VC1ING 1kUS1 kCk
1) beneflclal owner of Lhe shares
ceases Lo be SP of record of Lhe
corporaLlon - legal LlLle of shares ls
Lransferred Lo LrusLee
1) legal LlLle remalns Lhe beneflclal
owner
2) LrusLee voLes as owner of Lhe
shares
2) roxy holder voLes merely as an
agenL
3) beneflclal owner of Lhe shares ls
dlsquallfled Lo be a dlrecLor
3) owner of Lhe shares may be
elecLed
4) purpose ls Lo acqulre voLlng
conLrol of Lhe corporaLlon
4) generally used Lo secure voLlng
and quorum requlremenLs or for
represenLlng absenLee SP
3) lrrevocable 3) revocable unless coupled wlLh
lnLeresL
6) LrusLee can acL and voLe aL any
meeLlng durlng Lhe duraLlon of Lhe
agreemenL
6) holder acL as such only aL a
parLlcular meeLlng
%"
7) voLe ln person or by proxy 7) musL voLe ln person
8) duraLlon of a voLlng LrusL
agreemenL may exceed flve years
May noL exceed flve years aL any
one Llme
9) for lL Lo be valld and effecLlve
musL be noLarlzed and flled wlLh
SLC
9) need noL be noLarlzed unless
requlred nor ls lL requlred Lo be
flled

NIDC v Aqu|no
V1A execuLed for flve years over 60 of Lhe ouLsLandlng pald up
and subscrlbed shall execuLed by sLockholders ln favor of nluC
(for loans) - Lhe parLles were nluC and cerLaln sLockholders of
8aL[ak (corp). 8aL[ak was noL a slgnaLory lLself.
8aL[ak also morLgaged some of Lhelr properLles. loreclosed for
fallure Lo pay. unable Lo redeem. now, 8aL[ak wanLs nluC Lo glve
back Lhelr properLles conslderlng Lhe v1A has been LermlnaLed.
ne|d: from Lhe provlslons of Lhe v1A, lL ls clear whaL was asslgned
Lo nluC was Lhe power Lo voLe Lhe shares of sLock (60) and Lhe
auLhorlLy Lo execuLe any agreemenL or documenL necessary Lo
express Lhe consenL or assenL Lo any maLLer. nowhere ln Lhe sald
provlslon ls menLlon made of any Lransfer or asslgnmenL Lo nluC
of Lhe asseLs, operaLlons and managemenL. nluC was consLlLuLed
as LrusLee only of Lhe voLlng rlghLs
What was to be returned by NIDC as trustee of 8at[aks' Sn upon
the term|nat|on of the V1A were the cert|f|cates of shares of
stock be|ong|ng to the stockho|ders, not the propert|es or assets
of 8at[ak |tse|f wh|ch were never de||vered under the terms of
V1A.
1he acqulslLlon by Lhe nluC of Lhe properLles ln quesLlon was noL
made or effecLed under Lhe capaclLy of a LrusLee buL as a
forecloslng credlLor.

9) Stock and Stockho|ders
A person may become a sLockholder ln Lhree ways
o 8y a conLracL of subscrlpLlon wlLh Lhe corporaLlon
o 8y purchase of Lreasury shares from Lhe corporaLlon
o 8y purchase or acqulslLlon of shares from exlsLlng
sLockholders
SU8SCkI1ICN CCN1kAC1
SubscrlpLlon - MuLual agreemenL of Lhe subscrlbers Lo Lake and
pay for Lhe sLocks of a corporaLlon
Subscr|pt|on contract (Sec 60) - any conLracL for Lhe acqulslLlon of
unlssued sLock ln an exlsLlng corporaLlon or a corporaLlon sLlll Lo be formed
shall be deemed a subscrlpLlon wlLhln Lhe meanlng of Lhls LlLle,
noLwlLhsLandlng Lhe facL LhaL Lhe parLles refer Lo lL as a purchase or some
oLher conLracL
once a person buys or subscrlbes Lo Lhe unlssued sLocks, Lhe
person Lhen becomes enLlLled Lo all Lhe rlghLs Lo a sLockholder
and sub[ecLed Lo all llablllLles LhaL aLLach Lhereunder upon
execuLlon and effecLlvlLy of Lhe conLracL or upon accepLance
a subscrlpLlon conLracL need nC1 be ln wrlLlng such LhaL an oral
conLracL ls subscrlpLlon ls valld and enforceable.
May be condlLlonal, may be upon speclal Lerms
subscrlpLlon upon speclal Lerms ls an absoluLe subscrlpLlon,
maklng Lhe subscrlber a sLockholder and renderlng hlm llable as
such as soon as Lhe subscrlpLlon ls accepLed, Lhe speclal Lerm
belng an lndependenL sLlpulaLlon.
ln case of doubL: absoluLe subscrlpLlon!
CondlLlonal subscrlpLlons are valld provlded Lhere ls noLlng ln Lhe
charLer or enabllng acL prohlblLlng Lhe same
o rovldlng Lhe condlLlons are noL such as Lo render Lhelr
performance beyond Lhe powers of Lhe corporaLlon or ln
vlolaLlon of law or conLrary Lo publlc pollcy.
1r|||ana v uezon Co||ege, Inc.
CrlsosLomo senL a leLLer Lo Lhe board of LrusLees of corp Lo enLer
hls subscrlpLlon of 200 shares. Powever he wasn'L able Lo pay
before hls deaLh. now Lhe corp ls clalmlng for Lhe collecLlon of
20,000 represenLlng Lhe value of Lhe subscrlpLlon.
%#
SubscrlpLlon ls noL valld and enforceable. 1here was a condlLlon
whlch sald: babayaran ko ang lahaL pagkaLapos na ako ay
makapgpahull ng lsda". 1here ls noLhlng Lo show LhaL corp
accepLed Lhe Lerms of Lhe paymenL. Sald accepLance ls essenLlal.
lL was a faculLaLlve obllgaLlon Lhus vold under Lhe clvll code. lL
solely depended upon her own wlll.
re-Incorporat|on Subscr|pt|ons
SubscrlpLlons for shares of sLock of a corporaLlon sLlll Lo be
formed
Powever, Lhe valldlLy and blndlng effecL of a pre-lncorporaLlon
subscrlpLlon ls now recognlzed aL leasL by analogy
Sect|on 61: A subscrlpLlon for shares of sLock of a corporaLlon sLlll Lo be
formed shall be lrrevocable for a perlod of aL leasL slx (6) monLhs from Lhe
daLe of subscrlpLlon, unless all of Lhe oLher subscrlbers consenL Lo Lhe
revocaLlon, or unless Lhe lncorporaLlon of sald corporaLlon falls Lo
maLerlallze wlLhln sald perlod or wlLhln a longer perlod as may be
sLlpulaLed ln Lhe conLracL of subscrlpLlon: ltovlJeJ, 1haL no pre-
lncorporaLlon subscrlpLlon may be revoked afLer Lhe submlsslon of Lhe
arLlcles of lncorporaLlon Lo Lhe SecurlLles and Lxchange Commlsslon
Clves an lmmedlaLe blndlng effecL on pre-lncorporaLlon
subscrlpLlons as agalnsL Lhe subscrlbers of Lhe caplLal sLock of a
corporaLlon sLlll Lo be formed
MAnuA1C8?. Why? Coz of sec 13 and 14 whlch mandaLe LhaL a
corporaLlon may be reglsLered as such only lf aL leasL 23 of lLs
auLhorlzed caplLal sLock has been subscrlbed and aL leasL 23
pald.
1hese subscrlpLlons are lrrevocable for aL leasL 6 monLhs
o Un|ess a) all subscrlbers consenL Lo Lhe revocaLlon
o b) Lhe lncorporaLlon of sald corporaLlon falls Lo
maLerlallze wlLhln sald perlod or wlLhln a longer perlod as
may be sLlpulaLed ln Lhe conLracL of subscrlpLlon
Lhey are lrrevocable Al1L8 Lhe submlsslon of Lhe arLlcles of
lncorporaLlon
SLock lssuance - generally Lhe lnlLlal and prlmary source of corporaLe
caplLal Lhus Lhe conslderaLlon Lhereof should noL be less Lhan lLs par or
lssued prlce.
Sec. 62. !"(/',+#'(5 H"# /&"*R/8 - SLocks shall noL be lssued for a
conslderaLlon less Lhan Lhe par or lssued prlce Lhereof.
Cons|derat|on for Lhe lssuance of sLock may be any or a comblnaLlon of
any Lwo or more of Lhe followlng:
1. AcLual cash pald Lo Lhe corporaLlon,
A corporaLlon ls noL resLrlcLed ln recelvlng money
Code allows a corporaLlon Lo lssue lLs sLocks ln
exchange of properLy Langlble or lnLanglble

2. roperLy, Langlble or lnLanglble, acLually recelved by Lhe
corporaLlon and necessary or convenlenL for lLs use and lawful
purposes aL a falr valuaLlon equal Lo Lhe par or lssued value of Lhe
sLock lssued,
value of Lhe properLy musL be aL leasL equal Lo Lhe
par
1anglble
o appralsal reporL of an lndependenL
appralser
o Zonal valuaLlon as cerLlfled by Lhe 8l8
o MarkeL value lndlcaLed ln Lhe real esLaLe Lax
declaraLlon
lnLanglble
o aLenLs or copyrlghLs
o value - lnlLlally deLermlned by Lhe
lncorporaLors/board of dlrecLors
o Sub[ecL Lo SLC approval

3. Labor performed for or servlces acLually rendered Lo Lhe
corporaLlon,
MusL be capable of valuaLlon, and musL be falrly
valued
1rue value rule - moLlves of Lhose maklng Lhe
%$
valuaLlon are dlsregarded and Lhe sole and declslve
facLor ls w/n Lhe properLy or servlces are ln facL
worLh Lhe value placed on Lhem
Cood falLh rule - based on Lhe proposlLlon LhaL Lhe
value of Lhe properLy or servlces ls a maLLer abouL
whlch Lhere can be an honesL dlfference of oplnlon

4. revlously lncurred lndebLedness of Lhe corporaLlon,
SeL-off or saLlsfacLlon of debL - lawful and valld
LqulvalenL Lo paymenL for Lhe sLock ln cash

3. AmounLs Lransferred from unresLrlcLed reLalned earnlngs Lo
sLaLed caplLal, and
ueclaraLlon and dlsLrlbuLlon of sLock dlvldend where
corporaLe earnlngs are caplLallzed raLher Lhan belng
dlsLrlbuLed as cash dlvldend
ConverLs lncome lnLo caplLal

6. CuLsLandlng shares exchanged for sLocks ln Lhe evenL of
reclasslflcaLlon or converslon.
Shares of sLock surrendered Lo Lhe corporaLlon ln
exchange for new or dlfferenL Lype of shares
1ake place by amendmenL of Lhe arLlcles of
lncorporaLlon ln Lhe evenL LhaL Lhe corporaLlon may
wlsh Lo provlde for a classlflcaLlon of lLs shares or by
vlrLue of exlsLlng provlslons Lhereof
Where Lhe conslderaLlon ls oLher Lhan acLual cash, or conslsLs of lnLanglble
properLy such as paLenLs of copyrlghLs, Lhe valuaLlon Lhereof shall lnlLlally
be deLermlned by Lhe lncorporaLors or Lhe board of dlrecLors, sub[ecL Lo
approval by Lhe SecurlLles and Lxchange Commlsslon.
Shares of sLock shall noL be lssued ln exchange for promlssory noLes or
fuLure servlce.
1he same conslderaLlons provlded for ln Lhls secLlon, lnsofar as Lhey may
be appllcable, may be used for Lhe lssuance of bonds by Lhe corporaLlon.
1he lssued prlce of no-par value shares may be flxed ln Lhe arLlcles of
lncorporaLlon or by Lhe board of dlrecLors pursuanL Lo auLhorlLy conferred
upon lL by Lhe arLlcles of lncorporaLlon or Lhe by-laws, or ln Lhe absence
Lhereof, by Lhe sLockholders represenLlng aL leasL a ma[orlLy of Lhe
ouLsLandlng caplLal sLock aL a meeLlng duly called for Lhe purpose
Issue - LransacLlon by whlch a person becomes Lhe owner of Lhe
shares
ar]|ssue pr|ce - whlle lL may noL reflecL Lhe Lrue value of Lhe
shares whlch consLanLly flucLuaLes, lL merely lndlcaLes Lhe amounL
whlch Lhe orlglnal subscrlbers are supposed Lo conLrlbuLe Lo Lhe
corporaLe caplLal as Lhe basls of Lhe prlvllege of proflL sharlng wlLh
llmlLed llablllLy
Nat|ona| Lxchange Co v Dexter
l hereby subscrlbe Lo 300 shares.payable from Lhe flrsL
dlvldends declared of Lhe caplLal sLock of shares of sald company
owned by me aL Lhe Llme Lhe dlvldends are declared, unLll Lhe full
amounL of Lhls subscrlpLlon has been pald."
uexLer had a balance of 13000 sLlll unpald on hls subscrlpLlon as
Lhere were no furLher dlvldends declared.
AcLlon Lo recover Lhe value of shares. Pe's noL relleved from
personal llablllLy. Pe sLlll has Lo pay. Subscrlbers are bound Lo pay
full par value ln cash or lLs equlvalenL and any aLLempL Lo
dlscrlmlnaLe ln favor of one subscrlber by rellevlng hlm of Lhls
llablllLy wholly or ln parL ls forbldden.
C8: an agreemenL beLween a corporaLlon and a parLlcular
subscrlber by whlch Lhe subscrlpLlon ls noL Lo be payable or ls Lo
be payable ln parL only ls lllegal and vold as ln fraud of oLher
credlLors or sLockholders or boLh and cannoL be enforced.
Cert|f|cate of Stock and the|r 1ransfer
1he plece of paper or documenL whlch evldences Lhe ownershlp
of shares and a convenlenL lnsLrumenL for Lhe Lransfer of Lhe LlLle
Shares of sLock are personal properLles and Lhe owners Lhereof
have Lhe unbrldled rlghL Lo Lransfer Lhe same Lo anyone Lhey
please sub[ecL only Lo reasonable charLer provlslons
%%

Sec. 63. !+#&'H'*%&+ "H /&"*R %(, &#%(/H+# "H /2%#+/8 - 1he caplLal sLock of
sLock corporaLlons shall be dlvlded lnLo shares for whlch cerLlflcaLes slgned
by Lhe presldenL or vlce presldenL, counLerslgned by Lhe secreLary or
asslsLanL secreLary, and sealed wlLh Lhe seal of Lhe corporaLlon shall be
lssued ln accordance wlLh Lhe by-laws.
Shares of sLock so lssued are personal properLy and may be Lransferred by
dellvery of Lhe cerLlflcaLe or cerLlflcaLes endorsed by Lhe owner or hls
aLLorney-ln-facL or oLher person legally auLhorlzed Lo make Lhe Lransfer.
no Lransfer, however, shall be valld, excepL as beLween Lhe parLles, unLll
Lhe Lransfer ls recorded ln Lhe books of Lhe corporaLlon showlng Lhe names
of Lhe parLles Lo Lhe LransacLlon, Lhe daLe of Lhe Lransfer, Lhe number of
Lhe cerLlflcaLe or cerLlflcaLes and Lhe number of shares Lransferred.
no shares of sLock agalnsL whlch Lhe corporaLlon holds any unpald clalm
shall be Lransferable ln Lhe books of Lhe corporaLlon.
Slgned by Lhe resldenL C8 vlce presldenL
CounLerslgned by secreLary or asslsLanL secreLary
Sealed wlLh Lhe corporaLe seal
and Lhe enLlre value Lhereof should have been pald
full paymenL = rlghL Lo have Lhe lssuance of cerLlflcaLe of sLock +
exerclse all rlghLs of a sLockholder
even lf noL yeL fully pald Lhough, he can exerclse ALL rlghLs of a
sLockholder and Lhe correspondlng llablllLy LhaL aLLach
Sect|on 72: k|ghts of unpa|d shares: Polders of subscrlbed shares noL fully
pald whlch are nC1 dellnquenL shall have all Lhe rlghLs of a sLockholder.
1he lssuance of a sLock cerLlflcaLe ls nC1 a condlLlon slne quanon
Lo conslder a subscrlber a sLockholder
negoLlablllLy
CerLlflcaLe of sLock = noL regarded as a negoLlable lnsLrumenL
Whlle lL may be Lransferred by endorsemenL + dellvery, lL ls
merely quasl-negoLlable, lL ls non-negoLlable ln LhaL Lhe
Lransferee Lakes lL wlLhouL pre[udlce Lo all Lhe rlghLs and defenses
whlch Lhe Lrue and lawful owner may have
o LxcepL ln so far as Lhe prlnclples governlng esLoppel may
apply
1he docLrlne LhaL a bona-flde purchaser of such cerLlflcaLe wlll
acqulre no beLLer LlLle Lo Lhe shares Lhan hls Lransferor had, and
LhaL he Look Lhe shares sub[ecL Lo all rlghLs, remedles and
defenses whlch Lhe Lrue and lawful owner may have no maLLer
how lnnocenL or lgnoranL, wlll have nC appllcaLlon where
esLoppel governs
lf Lhe legal owner Lhereof by hls acL or negllgence ls esLopped
from clalmlng ownershlp (when he cloLhes anoLher wlLh apparenL
auLhorlLy Lo dlspose of Lhe same), a purchaser ln good falLh and
wlLhouL noLlce wlll acqulre a beLLer LlLle as agalnsL Lhe owner so
esLopped.
1ransfer and uellvery of CerLlflcaLe
MusL be recorded ln Lhe books of Lhe corporaLlon Lo be valld
De Lrqu|aga v CA: unLll reglsLraLlon ls accompllshed, Lhe Lransfer,
Lhough valld beLween Lhe parLles cannoL be effecLlve as agalnsL
Lhe corporaLlon
o urpose of reg|strat|on: 2 fold
o 1) enable Lhe Lransferee Lo exerclse all Lhe rlghLs of a
sLockholder
o 2) Lo lnform Lhe corporaLlon of any change ln shares of
ownershlp so LhaL lL can ascerLaln Lhe person enLlLled Lo
Lhe rlghLs and sub[ecL Lo Lhe llablllLles of a sLockholder
Necess|ty of keg|strat|on
1. enable Lhe corporaLlon Lo know who Lls sLockholders are
2. enable Lhe Lransferee Lo exerclse hls rlghLs as sLockholder
3. afford Lhe corporaLlon an opporLunlLy Lo ob[ecL or refuse
reglsLraLlon of Lhe Lransfer
4. avold flcLlLlous and fraudulenL Lransfers
%&
3. proLecL credlLors who have Lhe rlghL Lo look upon sLockholders ln
case of non-paymenL or waLered shares
8emedy for refusal Lo record: Mandamus
1wo Modes for 1ransferrlng Shares of SLock
1) by LndorsemenL of Lhe sLock coupled wlLh dellvery
2) by a duly noLarlzed deed
noLe: SLC: when a corporaLlon has already lssued sLock
cerLlflcaLes, any Lransfer of Lhe shares can only be effecLlvely
made by endorsemenL and dellvery of Lhe sLock cerLlflcaLe
o Whlle a formal conLracL of sale ln a noLarlzed documenL
ls equlvalenL Lo acLual dellvery of Lhe cerLlflcaLe lLself,
Lhls mode of Lransfer ls avallable only lf no cerLlflcaLe of
sLock has been lssued
referenLlal 8lghLs: rlghL of exlsLlng sLockholders and or Lhe corporaLlon,
glvlng Lhem Lhe flrsL opLlon Lo purchase Lhe shares of a selllng sLockholder
wlLhln a reasonable perlod noL exceedlng 30 days provlded LhaL Lhe same
ls conLalned ln Lhe arLlcles of lncorporaLlon and ln all of Lhe sLock
cerLlflcaLes
Monserrat v Ceron
MonserraL asslgned Lo Ceron Lhe usufrucL of half of Lhe common
shares of sLock of Lhe corporaLlon (cerLlflcaLe of sLock 7). Sald
Lransfer gave Lhe Lransferee only Lhe 8lCP1 1C Ln!C? durlng hls
llfeLlme, Lhe proflLs . 8CPl8l1lnC hlm from . exerclslng any acL
lmplylng absoluLe ownershlp. SLock CerL 7 lssued Lo Ceron
Ceron morLgaged shares of sLock Lo MaLuLe. Ceron endorsed Lo
maLuLe Lhe cerLlflcaLe of sLock. Pe dldn'L lnform MaLuLe of Lhe
usufrucL. Ceron defaulLed Lhus MaLuLe foreclosed shares.
MonserraL ls now clalmlng ownershlp
W/n lL ls necessary Lo enLer upon Lhe books of Lhe corporaLlon a
morLgage consLlLuLed on common shares of sLock ln order LhaL
such morLgage may be valld and may have Lhe force and effecL as
agalnsL Lhe Lhlrd persons
ne|d: lor any Lransfer Lo be valld, lL musL be reglsLered ln Lhe
books. ls Lhere Lransfer here? nC. ChaLLel morLgage ls noL Lransfer.
lL's only a mere securlLy.
1ransfer - any acL by whlch properLy of one person ls vesLed ln
anLoher and Lransfer of shares lmplles any means whereby one
may be dlvesLed of and anoLher acqulre ownershlp of sLock.
Cnly Lhe Lransfer or absoluLe conveyance of Lhe ownershlp of Lhe
LlLle Lo a share need be enLered and noLed upon Lhe books ln Lhe
corporaLlon.
MaLuLe acqulred ln good falLh Ceron's rlghL and LlLle Lo shares.

Chua Guan v Samahang Magsasaka
1oco morLgaged hls shares Lo Chua Chlu Lo guaranLee Lhe
paymenL of a debL. 1he cerLlflcaLes of sLock were dellvered Lo Lhe
morLgagee. 1he morLgage was duly reglsLered.
Chua Lhen asslgned all hls rlghLs and lnLeresLs ln Lhe morLgage Lo
plalnLlff. 1hls was agaln reglsLered. 1oco havlng defaulLed, plalnLlff
foreclosed on Lhe morLgage and dellvered Lhe cerLlflcaLe of sLock
and coples Lo Lhe sherlff. Sherlff execuLed ln plalnLlff's favor a
cerLlflcaLe of sale of sald shares.
rlor Lo Lhls, nlne aLLachmenLs had been lssued and served and
noLed on Lhe books of Lhe corporaLlon agalnsL Lhe shares of 1oco.
Whlch Lakes prlorlLy? MorLgage or WrlL of aLLachmenL?
ne|d: 8eglsLraLlon of sald chaLLel morLgage ln Lhe offlce of Lhe
corporaLlon was noL necessary and had no legal effecL.
1he aLLachlng credlLors are enLlLled prlorlLy over Lhe defecLlvely
reglsLered morLgage. 8eglsLraLlon should be ln Lhe provlnce where
Lhe owner ls domlclled:
o SlLus of Lhe shares of sLock ls aL Lhe domlclle of Lhe
owner.

Uson v D|osom|to
Levy upon ulosomlLo's 73 shares of sLock. Powever, he already
sold Lhese shares Lo 8arcelon and dellvered Lo hlm Lhe
correspondlng cerLlflcaLes. Powever, 8arcelon dldn'L presenL
Lhese cerLlflcaLes Lo Lhe corporaLlon for reglsLraLlon unLll afLer
levy was made.
%'
ne|d: ulosomlLo, aL Lhe Llme of Lhe levy ls sLlll Lhe owner of Lhe
shares of sLock. 1he bona flde Lransfer of Lhe shares, noL
reglsLered or noLed on Lhe books of Lhe corporaLlon ls noL valld as
agalnsL a subsequenL lawful aLLachmenL.

adgett v 8abcocks & 1emp|eton
adgeLL was an employee of Lhe corporaLlon and boughL 33
shares. Pe was also Lhe reclplenL of 9 shares by way of bonus Lhe
word non-Lransferable appears on each and every one of Lhese
cerLlflcaLes. ls Lhls resLrlcLlon valld? May Lhe corporaLlon be
compelled Lo buy Lhe shares of a selllng sLockholder?
ne|d: 1he resLrlcLlon ls null and vold on Lhe ground LhaL lL
consLlLuLes an unreasonable llmlLaLlon of Lhe rlghL of ownershlp
and ls ln resLralnL of Lrade. Any resLrlcLlon on a sLockholder's rlghL
Lo dlspose musL be consLrued sLrlcLly. 1here ls no exlsLlng law nor
auLhorlLy ln supporL of Lhe clalm LhaL Lhe corporaLlon ls obllged Lo
buy hls shares of sLock aL par value.


Lambert v Iox
AgreemenL of lncorporaLors: noL Lo sell, Lransfer or oLherwlse
dlspose of any parL of Lhelr presenL holdlng of sLock Lll afLer on
year from Lhe daLe.
noL an lllegal resLralnL. 1he suspenslon of Lhe power Lo sell has a
beneflclal purpose, resulLs ln Lhe proLecLlon of Lhe corporaLlon as
well as of Lhe lndlvldual parLles Lo Lhe conLracL and ls reasonable
as Lo LhelengLh of Llme of Lhe suspenslon.

Lmbassy Iarm v CA
lL ls clear LhaL alLhough L8L has lndorsed ln blank Lhe shares
ouLsLandlng ln hls name, he has noL dellvered Lhe cerLlflcaLe of
sLock Lo ACA because Lhe laLLer has noL fully complled wlLh hls
obllgaLlons under Lhe MCA.
1here belng no dellvery of Lhe lndorsed shares of sLock, ACA
cannoL Lherefore effecLlvely Lransfer Lo oLher person or hls
nomlnees Lhe undellvered shares of sLock.
1lLle may be vesLed ln Lhe Lransferee by Lhe dellvery of Lhe duly
lndorsed cerLlflcaLe of sLock. Powever, no Lransfer shall be valld
excepL as beLween Lhe parLles unLll Lhe Lransfer ls properLy
recorded ln Lhe books of Lhe corporaLlon.

kazon v IAC
Lhe shares of sLock here were reglsLered ln Lhe name of Chuldlan
only as nomlnal sLockholder and wlLh Lhe agreemenL LhaL sald
shares of sLock were owned and held by Lhe peLlLloner buL
Chuldlan was glven Lhe opLlon Lo buy Lhe same
1he peLlLloner had ln hls possesslon Lhe cerLlflcaLe of sLock unLll
Lhe Llme he dellvered lL for deposlL wlLh 8C under Lhe parLles'
[olnL cusLody. Chuldlan dled. Admln of esLaLe now clalms Lhe
shares. Who ls Lhe rlghLful owner?
ne|d: Chu|d|an. lor an effecLlve Lransfer of shares of sLock , Lhe
mode and manner of Lransfer as prescrlbed by law musL be
followed. 1lLle may be vesLed ln Lhe Lransferee by dellvery of Lhe
duly lndorsed cerLlflcaLe of sLock. Powever, no Lransfer shall be
valld excepL as beLween Lhe parLles unLll Lhe Lransfer ls properly
recorded ln Lhe books of Lhe corporaLlon.
nere, Lhere ls no dlspuLe LhaL Lhe quesLloned shares are ln Lhe
name of Chuldlan ln Lhe book of Lhe corporaLlon. lrom Lhe polnL
of vlew of Lhe corporaLlon, Chuldlan was Lhe owner. ln order for a
Lransfer of sLock cerLlflcaLe Lo be effecLlve, Lhe cerLlflcaLe musL be
properly lndorsed and LhaL LlLle Lo such cerLlflcaLe of sLock ls
vesLed ln Lhe Lransferee by Lhe dellvery of Lhe duly lndorsed
cerLlflcaLe of sLock.
INDCkSLMLN1 IS MANDA1Ck!

kura| 8ank v Sa||nas
Sec 63 conLemplaLes no resLrlcLlon as Lo whom Lhe sLocks may be
Lransferered. 1he only llmlLaLlon lmposed by law ls when Lhe
corporaLlon holds any unpald clalm agalnsL Lhe shares lnLended Lo
be Lransferred.
Whenever a corporaLlon refused Lo Lransfer and reglsLer sLock
mandamus wlll lle Lo compel Lhe offlcers of Lhe corporaLlon Lo
Lransfer. - 8LClS18A1lCn - MlnlS1L8lAL uu1?
%(

1ay v SLC
ledged hls shares of sLock. Lndorsed Lhese shares and dellvered
Lhe same Lo peLlLloner. lalled Lo pay Lhus peLlLloner flled a
peLlLlon for mandamus praylng LhaL an order be lssued dlrecLlng
Lhe corporaLe secreLary Lo reglsLer Lhe sLock Lransfers and lssue
new cerLlflcaLes
ne|d: L1l1lCnL8'S ownershlp over Lhe shares was noL eL
perfecLed when Lhe complalnL was flled. 1he conLracL of pledge
does noL make hlm Lhe owner of Lhe shares pledged.
ln order LhaL a wrlL of mandamus ay lssue, lL ls essenLlal LhaL Lhe
person peLlLlonlng for Lhe same has a clear legal rlghL Lo Lhe Lhlng
demanded and LhaL lL ls Lhe lmperaLlve duLy of Lhe corporaLlon Lo
perform Lhe acL requlred.
Mandamus w||| not |ssue to estab||sh a |ega| r|ght but on|y to
enforce one that |s a|ready c|ear|y estab||shed.
1here's no showlng here LhaL peLlLloner made any aLLempL Lo
foreclose or sell Lhe shares Lhrough publlc or prlvaLe aucLlon.


Nava v eers Market|ng
o, subscrlber has noL pald fully Lhe amounL of hls subscrlpLlon.
x paymenL of Lhe subscrlpLlon does noL enLlLle Lhe subscrlber Lo a
cerLlflcaLe of sLock.
no shares of sLock agalnsL whlch Lhe corporaLlon holds any unpald
clalm shall be Lransferable on Lhe books of Lhe corporaLlon
WlLhouL a sLock cerLlflcaLe, whlch ls Lhe evldence of ownershlp of
corporaLe sLock, Lhe asslgnmenL of corporaLe shares ls effecLlve
only beLween Lhe parLles Lo Lhe LransacLlon.

kura| 8ank of L|pa v CA
WlLh no endorsemenL, sald asslgnmenL was noL sufflclenL Lo effecL
Lhe Lransfer of shares.
1he rule ls LhaL Lhe dellvery of Lhe sLock cerLlflcaLe duly endorsed
b Lhe owner ls Lhe operaLlve acL of Lransfer of shares from Lhe
lawful owner Lo Lhe Lransferee. 1hus, LlLle may be vesLed ln Lhe
Lransferee only by dellvery of Lhe duly lndorsed cerLlflcaLe of sLock.
lor a valld Lransfer of shares, Lhere musL be
o uellvery of Lhe sLock cerLlflcaLe
o CerLlflcaLe musL be endorsed by Lhe owner or hls
aLLorney-ln-facL or oLher persons legally auLhorlzed
o 1o be valld agalnsL Lhlrd parLles, Lhe Lransfer musL be
recorded ln Lhe books of Lhe corporaLlon.

1an v SLC
Slnce Lhe cerLlflcaLe of sLocks were already cancelled, whlch
cancellaLlon was also reporLed Lo Lhe commlsslon, Lhere was no
necesslLy for Lhe same cerLlflcaLe Lo be endorsed
1he cerLlflcaLe ls noL sLock ln Lhe corporaLlon, lL ls merely
evldence of Lhe holder's lnLeresL and sLaLus ln Lhe corporaLlon.

Won v Wack Wack Go|f
non-sLock corporaLlon lssued Lo 1eruyaa membershlp cerLlflcaLe
whlch was asslgned Lo M1 8eyes. 8eyes flled an acLlon seeklng for
an order Lo have hls shares reglsLered ln corp's books Lhe
asslgnmenL and Lo lssue a new cerLlflcaLe.
Powever, when Lhe complalnL was flled, eleven years have
already lapsed and LhaL Lherefore Lhe complalnL was flled beyond
Lhe 3-year perlod flxed ln ArL 1149 of Lhe Clvll Code.
1here ls no flxed perlod for reglsLerlng an asslgnmenL, so Lhls
clalm lsn'L barred. lmmedlaLe reglsLraLlon ls only lmporLanL and
corporaLlon may be compelled Lo do so because Lhe reglsLraLlon ls
proof of ownershlp agalnsL Lhlrd persons.

De Los Santos v McGrath
1here ls no evldence LhaL Lhere was a Lransfer of shares. WhaL
was evldenL was only a mere LrusL agreemenL.
1ransfer shall noL be valld excepL as beLween Lhe parLles unLll lL ls
enLered and noLed upon Lhe books of Lhe corporaLlon. no such
enLry ln Lhe name of Lhe plalnLlffs have been made. 1he Lransfer
allegedly effecLed ls vold and good as non-exlsLenL
CerLlflcaLe of sLock are noL negoLlable lnsLrumenLs. ConsequenLly
a Lransferee under a forged asslgnmenL acqulres no LlLle whlch
%)
can be asserLed agalnsL Lhe Lrue owner unLLSS hls own
negllgence has been such as Lo creaLe an esLoppel agalnsL hlm.

Lopez kea|ty v Lxpert 1rave|

ICkGLD and UNAU1nCkI2LD 1kANSILkS
lorged and unauLhorlzed Lransfer musL be dlsLlngulshed from an
unauLhorlzed lssuance of sLock cerLlflcaLe
ICkGLD 1kANSILk UNAU1nCkI2LD ISSUANCL
whaL ls forged ls Lhe Lransfer of Lhe
cerLlflcaLe from Lhe Lrue and lawful
owner Lo anoLher person
acL of Lhe corporaLlon ln lssulng Lhe
cerLlflcaLe
urchaser no maLLer how lnnocenL
Lhey may have been wlll acqulre no
LlLle as agalnsL Lhe lawful owner by
vlrLue of non-negoLlablllLy of
cerLlflcaLes of sLock
lf good falLh buyer, he may
rlghLfully acqulre LlLle slnce Lhe
corporaLlon wlll be esLopped Lo
deny Lhe valldlLy Lhereof

urchaser wlll have no remedy or
rlghL agalnsL Lhe corporaLlon
because he Look Lhe shares noL by
vlrLue of mlsrepresenLaLlon made
by Lhe corporaLlon buL on Lhe falLh
of a forged endorsemenL or
unauLhorlzed Lransfer
1he subsequenL purchaser ln gf
Look Lhe shares, noL by vlrLue of a
forged Lransfer buL on rellance of
Lhe genulneness of Lhe cerLlflcaLe
lssued by Lhe corporaLlon.


CorporaLlon lncurs no llablllLy Lo Lhe
person ln whose favor Lhe
cerLlflcaLe ls endorsed or lssued
1hus he may compel Lhe
corporaLlon Lo recognlze hlm as a
sLockholder or clalm
relmbursemenL and damages.

Issuance of Stock Cert|f|cates
Sec. 64. =//4%(*+ "H /&"*R *+#&'H'*%&+/8 - no cerLlflcaLe of sLock shall be
lssued Lo a subscrlber unLll Lhe full amounL of hls subscrlpLlon LogeLher
wlLh lnLeresL and expenses (ln case of dellnquenL shares), lf any ls due, has
been pald.
SubscrlpLlons Lo shares of sLock are lndlvlslble such LhaL a
subscrlber Lo such shares wlll noL be enLlLled Lo Lhe lssuance of a
sLock cerLlflcaLe unLll he has pald Lhe full amounL of Lhe
subscrlpLlon.
Cnce a subscrlber pays ln full hls subscrlpLlon, he becomes
enLlLled Lo be lssued a sLock cerLlflcaLe
Sec 148: App||cab|||ty to ex|st|ng corporat|ons
All corporaLlons lawfully exlsLlng and dolng buslness ln Lhe hlls
on Lhe daLe of Lhe effecLlvlLy of Lhls code and auLhorlzed llcensed
or reglsLered by Lhe SLC shall be deemed Lo have been auLhorlzed
llcensed or reglsLered under Lhe provlslon of Lhls code
rovlded LhaL any such corp ls affecLed by Lhe new requlremenLs
of Lhls code, sald corporaLlon shall be glven a perlod of noL more
Lhan 2 years from Lhe effecLlvlLy of Lhls code wlLhln whlch Lo
comply.
Iua Cun v Summers
Impt: 1he lower courL erred ln rullng LhaL Chua Soco by paylng x
of Lhe subscrlpLlon prlce of 300 shares, ln effecL became Lhe
owner of 230 shares.
1he plalnLlff's rlghLs conslsL ln an equlLy ln 300 shares and upon
paymenL of Lhe unpald porLlon of Lhe subscrlpLlon prlce he
becomes enLlLled Lo Lhe lssuance of Lhe cerLlflcaLe for sald 300
shares. So, he musL pay Lhe full prlce flrsL before he could be
lssued a cerLlflcaLe.
Watered Stocks
Sect|on 6S: Any dlrecLor or offlcer of a corporaLlon consenLlng Lo Lhe
lssuance of sLocks for a conslderaLlon less Lhan lLs par or lssued value or for
a conslderaLlon ln any form oLher Lhan cash, valued ln excess of lLs falr
value, or who, havlng knowledge Lhereof, does noL forLhwlLh express hls
ob[ecLlon ln wrlLlng and flle Lhe same wlLh Lhe corporaLe secreLary, shall be
solldarlly, llable wlLh Lhe sLockholder concerned Lo Lhe corporaLlon and lLs
%*
credlLors for Lhe dlfference beLween Lhe falr value recelved aL Lhe Llme of
lssuance of Lhe sLock and Lhe par or lssued value of Lhe same
Cne whlch ls lssued by Lhe corporaLlon as fully pald-up shares,
when ln facL Lhe whole amounL of Lhe value has noL been pald
WaLered means flcLlLlously pald-up
1here ls a solldary llablllLy upon all consenLlng dlrecLors and
offlcers of Lhe waLer ln Lhe sLocks.
1he law does noL make any dlsLlncLlon as Lo Lhe rlghL of Lhe
corporaLlon and lLs credlLors Lo enforce paymenL of Lhe waLer ln
Lhe sLocks Lhus lL applles Lo all credlLors wheLher prlor or
subsequenL Lo Lhe lssuance of Lhe waLered sLock
now Watered stock may be |ssued
1) lor a moneLary conslderaLlon less Lhan lLs par/lssued value
2) lor a conslderaLlon ln properLy (Langlble/lnLanglble) valued ln
excess of lLs falr value
3) CraLulLously or under agreemenL LhaL noLhlng shall be pald aL all
4) ln Lhe gulse of sLock dlvldends when Lhere are nC surplus proflLs
of Lhe corporaLlon
Lffects
1) corporaLlon ls derlved of lLs caplLal - hurLlng buslness prospecLs
2) sLockholders who pald Lhelr subscrlpLlons ln full are ln[ured by Lhe
reducLlon of Lhelr proporLlonaLe lnLeresL
3) presenL and fuLure credlLors are deprlved of Lhe corporaLe asseLs
8ases for L|ab|||ty
1) 1rusL lund uocLrlne - LreaLs Lhe caplLal sLock of Lhe corporaLlon
lncluslve of Lhe unpald porLlon of subscrlpLlons Lo sald caplLal as a
LrusL fund whlch Lhe credlLors have a rlghL Lo look up Lo or
mandaLed Lo pay Lhe value ln full of Lhelr shares
2) lraud or MlsrepresenLaLlon 1heory - llablllLy ls based on Lhe false
rep made by Lhe corporaLlon and Lhe sLockholder concerned Lo
Lhe credlLors LhaL Lhe Lrue par value/lssued prlce has been
pald/promlsed Lo be pald ln full
lleLcher's effecLs of lssuance of waLered sLocks
1) as Lo corporaLlon ln[ury Lo or fraud upon Lhe
publlc
SLaLe may lnsLlLuLe a quo-
warranLo proceedlng Lo forfelL
lLs charLer for mlsuse or abuse
of franchlse
2) as beLween corporaLlon and
subscrlber
SubscrlpLlon ls vold
Subscrlber llable Lo pay Lhe full
par or lssued value Lo render lL
valld and effecLlve
3) as Lo consenLlng sLockholders LsLopped from ralslng nay
ob[ecLlon
4) as Lo dlssenLlng sLockholders May compel Lhe paymenL of
Lhe waLer ln Lhe sLock
solldarlly agalnsL Lhe
responslble and consenLlng
dlrecLors and offlcers lncluslve
of Lhe holder
3) as Lo credlLors May enforce paymenL of Lhe
dlfference ln prlce or Lhe waLer
ln Lhe sLock solldarlly agalnsL
Lhe responslble
dlrecLors/offlcers
6) as agalnsL Lransferees of Lhe
waLered sLock
8lghL ls Lhe same as LhaL of
Lransferor
8uL lf a cerLlflcaLe of sLock has
been lssued and duly lndorsed
Lo a bona flde purchaser, he
can'L be held llable as agalnsL
Lhe corporaLlon



&+
Sec. 66. lotetest oo oopolJ sobsctlptloos.
Subscrlbers for sLock shall pay Lo Lhe corporaLlon lnLeresL on all
unpald subscrlpLlons from Lhe daLe of subscrlpLlon,
lf so requlred by, and aL Lhe raLe of lnLeresL flxed ln Lhe by-laws.
lf no raLe of lnLeresL ls flxed ln Lhe by-laws, such raLe shall be
deemed Lo be Lhe legal raLe. = 12
Lnforcement and ayment of Unpa|d Subscr|pt|ons
unpald subscrlpLlons shall be pald elLher

1. on Lhe daLe flxed ln Lhe conLracL of subscrlpLlon
2. on Lhe daLe speclfled by Lhe board of dlrecLors pursuanL
Lo a CALL declarlng any or all unpald porLlon payable

2 remedles for enforcemenL of paymenL
1. by board acLlon ln accordance wlLh procedure ln 67-79
2. collecLlon case under 70

lallure or refusal of corp Lo collecL wlll noL prevenL Lhe
credlLors/recelver of Lhe corp Lo lnsLlLuLe a courL acLlon
Sec. 67. <%.:+(& "H -%0%(*+ "H /4-/*#'$&'"(8 - Sub[ecL Lo Lhe provlslons of
Lhe conLracL of subscrlpLlon, Lhe board of dlrecLors of any sLock
corporaLlon may aL any Llme declare due and payable Lo Lhe corporaLlon
unpald subscrlpLlons Lo Lhe caplLal sLock and may collecL Lhe same or such
percenLage Lhereof, ln elLher case wlLh accrued lnLeresL, lf any, as lL may
deem necessary.
aymenL of any unpald subscrlpLlon or any percenLage Lhereof, LogeLher
wlLh Lhe lnLeresL accrued, lf any, shall be made on Lhe daLe speclfled ln Lhe
conLracL of subscrlpLlon or on Lhe daLe sLaLed ln Lhe call made by Lhe board.
lallure Lo pay on such daLe shall render Lhe enLlre balance due and payable
and shall make Lhe sLockholder llable for lnLeresL aL Lhe legal raLe on such
balance, unless a dlfferenL raLe of lnLeresL ls provlded ln Lhe by-laws,
compuLed from such daLe unLll full paymenL. lf wlLhln LhlrLy (30) days from
Lhe sald daLe no paymenL ls made, all sLocks covered by sald subscrlpLlon
shall Lhereupon become dellnquenL and shall be sub[ecL Lo sale as
herelnafLer provlded, unless Lhe board of dlrecLors orders oLherwlse. (38)
Sec 68: De||nquency Sa|e
Summar|zed rocedure (Lad|a $ )
1) 1he 8oard of ulrecLors, by a formal resoluLlon, declares Lhe
whole/percenLage of unpald subscrlpLlons Lo be due and payable on a
speclfled daLe.
lf conLracL of subscrlpLlon provldes Lhe daLes when paymenL
ls due, nC CALL/uLCLA8A1lCn ls necessary
2) SLockholders concerned - glven noLlce of Lhe board resoluLlon = 1)
personally or 2) by reglsLered mall.
ubllcaLlon = noL requlred unless by-laws say so
noLlce of Call = noL requlred lf conLracL of subscrlpLlon
sLlpulaLes a speclflc daLe
3) aymenL shall be made on Lhe daLe speclfled ln Lhe call or on Lhe daLe
provlded for ln Lhe conLracL
4) lallure Lo pay: render Lhe enLlre balance due and payable. May be
llable for lnLeresL
De||nquency sa|e
3) lf wlLhln 30 days l8CM daLe sLaLed ln Lhe call or as provlded ln Lhe
conLracL of subscrlpLlon, no paymenL ls made, all sLock covered by Lhe
subscrlpLlon shall become dellnquenL and shall be sub[ecL Lo a
dellnquency sale.
6) 1he board, by resoluLlon, orders Lhe sale of Lhe dellnquenL sLock,
sLaLlng Lhe amounL due and Lhe daLe Llme and place of sale
7) Sale = from 30-60 days from daLe sLocks became dellnquenL
8) noLlce of Lhe sale (w/copy of board resoluLlon) = senL Lo every
dellnquenL sLockholder elLher personally or by reglsLered mall
9) ubllcaLlon of Lhe noLlce of sale = made 1s week for 2 consecuLlve
weeks ln Lhe newspaper of general clrculaLlon ln Lhe provlnce or clLy
where Lhe prlnclple offlce ls locaLed
10) Sale aL publlc aucLlon lf no paymenL ls made by Lhe dellnquenL
sLockholder ln favor of Lhe bldder who offered Lo pay Lhe full amounL
&"
of Lhe balance lnCLuSlvL of lnLeresL, cosL of ad, expenses for Lhe
smallesL number of shares
11) 8eglsLraLlon or Lransfer of Lhe shares ln Lhe name of Lhe bldder +
lssuance of Lhe sLock cerLlflcaLe
12) 8emalnlng shares = credlLed ln favor of Lhe dellnquenL sLockholder
(enLlLled Lo lssuance of a cerLlflcaLe of sLock coverlng such shares
13) lf nC 8ldder = corporaLlon may bld for Lhe same and Lhe LoLal amounL
due shall be credlLed or pald ln full ln Lhe corporaLe books
14) 1he shares so purchased by Lhe corporaLlon shall be vesLed ln Lhe
laLLer as 18LASu8? SPA8LS.
PlghesL 8ldder
Who offers Lo pay Lhe full amounL of Lhe balance
lrregularlLles
no recovery of Lhe sLock sold may be had unless: See 69
Sec. 69. K2+( /%0+ :%. -+ U4+/&'"(+,. - no acLlon Lo recover dellnquenL
sLock sold can be susLalned upon Lhe ground of lrregularlLy or defecL ln Lhe
noLlce of sale, or ln Lhe sale lLself of Lhe dellnquenL sLock, unless Lhe parLy
seeklng Lo malnLaln such acLlon flrsL pays or Lenders Lo Lhe parLy holdlng
Lhe sLock Lhe sum for whlch Lhe same was sold, wlLh lnLeresL from Lhe daLe
of sale aL Lhe legal raLe, and no such acLlon shall be malnLalned unless lL ls
commenced by Lhe flllng of a complalnL wlLhln slx (6) monLhs from Lhe
daLe of sale
2 condlLlons before an acLlon Lo recover dellnquenL sLocks lrregularly sold
1) parLy seeklng Lo malnLaln such acLlon flrsL pays or Lenders Lo Lhe
parLy holdlng Lhe sLock Lhe sum for whlch Lhe shares were sold
plus lnLeresL from Lhe daLe of Lhe sale
2) acLlon shall be commenced by Lhe flllng of Lhe complalnL wlLhln
slx monLhs from sale
Sec. 70. !"4#& %*&'"( &" #+*"7+# 4($%', /4-/*#'$&'"(8 - noLhlng ln Lhls Code
shall prevenL Lhe corporaLlon from collecLlng by acLlon ln a courL of proper
[urlsdlcLlon Lhe amounL due on any unpald subscrlpLlon, wlLh accrued
lnLeresL, cosLs and expenses

Ve|asco v o|zat
a subscrlpLlon for shares of sLock does noL requlre an express
promlse Lo pay Lhe amounL subscrlbed.
8uL a sLock subscrlpLlon ls a subslsLlng llablllLy from Lhe Llme Lhe
subscrlpLlon ls made slnce lL requlres Lhe subscrlber Lo pay
lnLeresL quarLerly from Lhe daLe unless he ls rellved from such
llablllLy by Lhe by-laws
2 remedles: 1) permlLLlng Lhe corporaLlon Lo puL up Lhe unpald
sLock and dlspose of lL for Lhe accounL of Lhe dellnquenL
subscrlber and 2) acLlon ln courL

De S||va v Abo|t|z and Co
plalnLlff was declared dellnquenL Lhus he flled a complalnL agalnsL
Lhe corporaLlon. Pe alleged LhaL accordlng Lo arLlcle 46 of Lhelr
by-laws, all shares subscrlbed Lo by Lhe lncorporaLors LhaL were
noL pald of aL Lhe Llme of Lhe lncorporaLlon, shall be pald ouL of
Lhe 70 percenL of Lhe proflL obLalned and Lhe subscrlber shall noL
recelve any dlvlded unLll sald shares were pald ln full.
8y declarlng hlm Lo be dellnquenL, lL vlolaLed and dlsregarded hls
rlghL under Lhe by-laws.
ne|d: lL ls dlscreLlonary on Lhe parL of Lhe 8ou Lo do whaLever ls
provlded relaLlve Lo Lhe appllcaLlon of Lhe parL of Lhe 70 perceL of
Lhe proflL. lf Lhe board does noL wlsh Lo make use of sald
auLhorlLy lL has 2 oLher remedles (quoLlng velasco v olzaL)
ArLlcle 46 of by-laws cannoL be malnLalned LhaL sald arLlcle has
prescrlbed an operaLlve meLhod for Lhe paymenL of sald
subscrlpLlon conLlnuously unLll full paymenL. Pere, 8ou made use
of lLs dlscreLlonary power Lo Lake advanLage of Lhe flrsL 2 of Lhe
remedles.

L|ngayen Gu|f v 8a|tazar
law requlres LhaL noLlce of any call for Lhe paymenL of unpald
subscrlpLlon should be made noL only personally buL also by
publlcaLlon.
Sec 40 ls mandaLory as regards publlcaLlon: MuS1
&#
C8: valld and blndlng subscrlpLlon for sLock of a corporaLlon
cannoL be cancelled so as Lo release Lhe subscrlber from llablllLy
Lhereon wlLhouL Lhe consenL of all Lhe sLockholders/subscrlbers
L: pursuanL Lo a bona flde compromlse or Lo seL off a debL due
from Lhe corporaLlon, a release supporLed by conslderaLlon

Apocada v NLkC
unpald subscrlpLlons are noL due and payable unLll a call ls made
by Lhe corporaLlon for Lhe paymenL
Call = board resoluLlon

Luman|ac v Cura
SubscrlpLlon Lo Lhe caplLal of a corporaLlon consLlLuLe a fund Lo
whlch Lhe credlLors have a rlghL Lo look for saLlsfacLlon of Lhelr
clalms and LhaL Lhe asslgnee ln lnsolvency can malnLaln an acLlon
upon any unpald sLock subscrlpLlon ln order Lo reallze asseLs for
Lhe paymenL of lLs debLs.

N8 v 8|tu|ok Sawm|||
A corporaLlon has no power Lo release an orlglnal subscrlber Lo lLs
caplLal sLock wlLhouL a valuable conslderaLlon
Llngayen gulf case case: corporaLlon lnvolved was lnsolvenL, ln
whlch case all unpald sLock subscrlpLlons became payable on
demand and are lmmedlaLely recoverable ln an acLlon lnsLlLuLed
by Lhe asslgnee.

ke||er v CC8 Group
A sLockholder ls personally llable for Lhe flnanclal obllgaLlons of a
corporaLlon Lo Lhe exLenL of hls unpald subscrlpLlons.

Garc|a v Suarez
CbllgaLlon Lo pay lnLeresL and Lo pay Lhe amounL of Lhe
subscrlpLlon ls dlfferenL
SubscrlpLlon Lo Lhe caplLal sLock of Lhe corporaLlon, unless
oLherwlse sLlpulaLed, ls noL payable aL Lhe momenL of Lhe
subscrlpLlons buL on a subsequenL daLe may be flxed by Lhe
corporaLlon
Pere, Lhe board of dlrecLors of Lhe compoolo blspooo llllploo, noL
havlng declared due and payable Lhe sLock subscrlbed by Lhe
appellanL, Lhe prescrlpLlve perlod of Lhe acLlon for Lhe collecLlon
Lhereof only commenced Lo run from !une when plalnLlff ln hls
capaclLy as recelver and ln Lhe exerclse of Lhe power conferred
upon hlm by Lhe sald secLlon 38 of Lhe corporaLlon law,
demanded of Lhe appellanL Lo pay Lhe balance of hls subscrlpLlon.

Lffects of De||nquency
Sec. 71. JHH+*& "H ,+0'(U4+(*.8 - no dellnquenL sLock shall be voLed for be
enLlLled Lo voLe or Lo represenLaLlon aL any sLockholder's meeLlng, nor
shall Lhe holder Lhereof be enLlLled Lo any of Lhe rlghLs of a sLockholder
excepL Lhe rlghL Lo dlvldends ln accordance wlLh Lhe provlslons of Lhls Code,
unLll and unless he pays Lhe amounL due on hls subscrlpLlon wlLh accrued
lnLeresL, and Lhe cosLs and expenses of adverLlsemenL, lf any
Any cash dlvldends due on dellnquenL sLockholders shall flrsL be
applled Lo Lhe unpald balance on hls subscrlpLlon plus cosL and
expenses whlle sLock dlvldends shall be wlLhheld unLll hls unpald
subscrlpLlon ls pald ln full
k|ght of unpa|d Shares
Sec. 72. ;'52&/ "H 4($%', /2%#+/8 - Polders of subscrlbed shares noL fully
pald whlch are noL dellnquenL shall have all Lhe rlghLs of a sLockholder.
lf Lhe shares are noL dellnquenL however, subscrlbers Lo Lhe
caplLal sLock of a corp, Lhough noL fully pald, are enLlLled Lo all Lhe
rlghLs of a SP = Lhey can voLe and be voLed and enLlLled Lo recelve
all dlvldends due Lhelr shares
1he only excepLlon: shares of sLock, noL fully pald are nC1 enLlLled
Lo be lssued a cerLlflcaLe of sLock

Lost or destroyed cert|f|cates
Sec. 73. G"/& "# ,+/&#".+, *+#&'H'*%&+/8 - 1he followlng procedure shall be
&$
followed for Lhe lssuance by a corporaLlon of new cerLlflcaLes of sLock ln
lleu of Lhose whlch have been losL, sLolen or desLroyed:
1he reglsLered owner of a cerLlflcaLe of sLock ln a corporaLlon or hls legal
represenLaLlve shall flle wlLh Lhe corporaLlon an affldavlL ln LrlpllcaLe
seLLlng forLh, lf posslble, Lhe clrcumsLances as Lo how Lhe cerLlflcaLe was
losL, sLolen or desLroyed, Lhe number of shares represenLed by such
cerLlflcaLe, Lhe serlal number of Lhe cerLlflcaLe and Lhe name of Lhe
corporaLlon whlch lssued Lhe same. Pe shall also submlL such oLher
lnformaLlon and evldence whlch he may deem necessary, 2. AfLer verlfylng
Lhe affldavlL and oLher lnformaLlon and evldence wlLh Lhe books of Lhe
corporaLlon, sald corporaLlon shall publlsh a noLlce ln a newspaper of
general clrculaLlon publlshed ln Lhe place where Lhe corporaLlon has lLs
prlnclpal offlce, once a week for Lhree (3) consecuLlve weeks aL Lhe
expense of Lhe reglsLered owner of Lhe cerLlflcaLe of sLock whlch has been
losL, sLolen or desLroyed. 1he noLlce shall sLaLe Lhe name of sald
corporaLlon, Lhe name of Lhe reglsLered owner and Lhe serlal number of
sald cerLlflcaLe, and Lhe number of shares represenLed by such cerLlflcaLe,
and LhaL afLer Lhe explraLlon of one (1) year from Lhe daLe of Lhe lasL
publlcaLlon, lf no conLesL has been presenLed Lo sald corporaLlon regardlng
sald cerLlflcaLe of sLock, Lhe rlghL Lo make such conLesL shall be barred and
sald corporaLlon shall cancel ln lLs books Lhe cerLlflcaLe of sLock whlch has
been losL, sLolen or desLroyed and lssue ln lleu Lhereof new cerLlflcaLe of
sLock, unless Lhe reglsLered owner flles a bond or oLher securlLy ln lleu
Lhereof as may be requlred, effecLlve for a perlod of one (1) year, for such
amounL and ln such form and wlLh such sureLles as may be saLlsfacLory Lo
Lhe board of dlrecLors, ln whlch case a new cerLlflcaLe may be lssued even
before Lhe explraLlon of Lhe one (1) year perlod provlded hereln: rovlded,
1haL lf a conLesL has been presenLed Lo sald corporaLlon or lf an acLlon ls
pendlng ln courL regardlng Lhe ownershlp of sald cerLlflcaLe of sLock whlch
has been losL, sLolen or desLroyed, Lhe lssuance of Lhe new cerLlflcaLe of
sLock ln lleu Lhereof shall be suspended unLll Lhe flnal declslon by Lhe courL
regardlng Lhe ownershlp of sald cerLlflcaLe of sLock whlch has been losL,
sLolen or desLroyed.

LxcepL ln case of fraud, bad falLh, or negllgence on Lhe parL of Lhe
corporaLlon and lLs offlcers, no acLlon may be broughL agalnsL any
corporaLlon whlch shall have lssued cerLlflcaLe of sLock ln lleu of Lhose losL,
sLolen or desLroyed pursuanL Lo Lhe procedure above-descrlbed
kat|ona|e: avold dupllcaLlon of cerLlflcaLes of sLock and
Avoldance of flcLlLlous and fraudulenL Lransfers
lor Lhe proLecLlon of Lhe corporaLlon agalnsL damage
8ou has Lhe auLhorlLy Lo declde Lhe amounL and Lhe klnd of sureLy
bond LhaL may be requlred for Lhe lssuance of a cerLlflcaLe of
sLock

k|ghts and ||ab|||t|es of Stockho|ders
1) parLlclpaLlon ln Lhe managemenL of Lhe corporaLe affalrs by
exerclslng Lhelr rlghL Lo voLe and be voLed upon elLher personally
or by proxy
2) enLer lnLo v1A
3) recelve dlvldends
4) Lransfer shares of sLock
3) lssued a cerLlflcaLe of sLock upon full paymenL
6) exerclse pre-empLlve rlghLs
7) exerclse Lhelr appralsal rlghL
8) recover shares of sLock unlawfully sold for dellnquency
9) lnsLlLuLe and flle a derlvaLlve sulL
10) lnspecL Lhe books of Lhe corporaLlon
11) furnlshed by Lhe mosL recenL flnanclal sLaLemenLs
12) lssued a new sLock cerLlflcaLe for losL/desLroyed one
13) have Lhe corpo dlssolved
14) parLlclpaLe ln Lhe dlsLrlbuLlon of Lhe asseLs of Lhe corpo
13) for closed corporaLlon - peLlLlon Lhe SLC Lo arblLraLe ln Lhe evenL
of deadlock
16) for closed corporaLlon - wlLhdraw for any reason and compel
corporaLlon Lo purchase hls shares
CbllgaLlons and LlablllLles
1) pay corpo Lhe balance of unpald shares
2) pay any lnLeresL on hls unpald subscrlpLlon
3) answer Lo Lhe credlLors for Lhe unpald porLlon
&%
4) Lo answer Lhe waLer ln hls sLocks
3) llable as general parLners for all debLs llablllLles and damages
6) personally llable for LorLs (closed corpo, acLlve parclpaLlon ln Lhe
managemenL of corpo affalrs)

10) Corporate 8ooks and kecords
8ooks and kecords to be kept

Sec. 74. 6""R/ &" -+ R+$&_ /&"*R &#%(/H+# %5+(&8 - Lvery corporaLlon shall
keep and carefully preserve aL lLs prlnclpal offlce a record of all buslness
LransacLlons and mlnuLes of all meeLlngs of sLockholders or members, or of
Lhe board of dlrecLors or LrusLees, ln whlch shall be seL forLh ln deLall Lhe
Llme and place of holdlng Lhe meeLlng, how auLhorlzed, Lhe noLlce glven,
wheLher Lhe meeLlng was regular or speclal, lf speclal lLs ob[ecL, Lhose
presenL and absenL, and every acL done or ordered done aL Lhe meeLlng.
upon Lhe demand of any dlrecLor, LrusLee, sLockholder or member, Lhe
Llme when any dlrecLor, LrusLee, sLockholder or member enLered or lefL
Lhe meeLlng musL be noLed ln Lhe mlnuLes, and on a slmllar demand, Lhe
yeas and nays musL be Laken on any moLlon or proposlLlon, and a record
Lhereof carefully made. 1he proLesL of any dlrecLor, LrusLee, sLockholder or
member on any acLlon or proposed acLlon musL be recorded ln full on hls
demand.

1he records of all buslness LransacLlons of Lhe corporaLlon and Lhe mlnuLes
of any meeLlngs shall be open Lo lnspecLlon by any dlrecLor, LrusLee,
sLockholder or member of Lhe corporaLlon aL reasonable hours on buslness
days and he may demand, wrlLlng, for a copy of excerpLs from sald records
or mlnuLes, aL hls expense.

Any offlcer or agenL of Lhe corporaLlon who shall refuse Lo allow any
dlrecLor, LrusLees, sLockholder or member of Lhe corporaLlon Lo examlne
and copy excerpLs from lLs records or mlnuLes, ln accordance wlLh Lhe
provlslons of Lhls Code, shall be llable Lo such dlrecLor, LrusLee, sLockholder
or member for damages, and ln addlLlon, shall be gullLy of an offense
whlch shall be punlshable under SecLlon 144 of Lhls Code: rovlded, 1haL lf
such refusal ls made pursuanL Lo a resoluLlon or order of Lhe board of
dlrecLors or LrusLees, Lhe llablllLy under Lhls secLlon for such acLlon shall be
lmposed upon Lhe dlrecLors or LrusLees who voLed for such refusal: and
rovlded, furLher, 1haL lL shall be a defense Lo any acLlon under Lhls secLlon
LhaL Lhe person demandlng Lo examlne and copy excerpLs from Lhe
corporaLlon's records and mlnuLes has lmproperly used any lnformaLlon
secured Lhrough any prlor examlnaLlon of Lhe records or mlnuLes of such
corporaLlon or of any oLher corporaLlon, or was noL acLlng ln good falLh or
for a leglLlmaLe purpose ln maklng hls demand.
SLock corporaLlons musL also keep a book Lo be known as Lhe "sLock and
Lransfer book", ln whlch musL be kepL a record of all sLocks ln Lhe names of
Lhe sLockholders alphabeLlcally arranged, Lhe lnsLallmenLs pald and unpald
on all sLock for whlch subscrlpLlon has been made, and Lhe daLe of
paymenL of any lnsLallmenL, a sLaLemenL of every allenaLlon, sale or
Lransfer of sLock made, Lhe daLe Lhereof, and by and Lo whom made, and
such oLher enLrles as Lhe by-laws may prescrlbe. 1he sLock and Lransfer
book shall be kepL ln Lhe prlnclpal offlce of Lhe corporaLlon or ln Lhe offlce
of lLs sLock Lransfer agenL and shall be open for lnspecLlon by any dlrecLor
or sLockholder of Lhe corporaLlon aL reasonable hours on buslness days.

no sLock Lransfer agenL or one engaged prlnclpally ln Lhe buslness of
reglsLerlng Lransfers of sLocks ln behalf of a sLock corporaLlon shall be
allowed Lo operaLe ln Lhe hlllpplnes unless he secures a llcense from Lhe
SecurlLles and Lxchange Commlsslon and pays a fee as may be flxed by Lhe
Commlsslon, whlch shall be renewable annually: rovlded, 1haL a sLock
corporaLlon ls noL precluded from performlng or maklng Lransfer of lLs own
sLocks, ln whlch case all Lhe rules and regulaLlons lmposed on sLock
Lransfer agenLs, excepL Lhe paymenL of a llcense fee hereln provlded, shall
be appllcable

What must be kept:
1) records of all buslness LransacLlons - [ournals, ledger, conLracLs,
vouchers and recelpLs, flnanclal sLaLemenLs and oLher books of
accounLs, lncome Lax reLurns, v1A - prlnclpal offlce
2) mlnuLes of all meeLlngs of SP and dlrecLors/LrusLees
a. daLe, Llme and place of meeLlng
b. how noLarlzed
c. noLlce glven
&&
d. wheLher meeLlng ls regular or speclal and lf speclal, Lhe
purpose speclfled
e. presenL and absenL members/sLockholders
f. every acL done
3) SLock and 1ransfer book - names of Lhe SP, amounL pald or unpald,
sLaLemenL of every allenaLlon, sale or Lransfer
d. kepL ln prlnclpal offlce of corp
e. Cr ln Lhe offlce of lLs sLock Lransfer agenL



k|ght of Inspect|on
Sub[ecL Lo lnspecLlon by any dlrecLor, LrusLee,
sLockholder/member
8easonable hours on buslness day
Copy of excerpLs of sald records may be demanded


Sec. 7S. ;'52& &" H'(%(*'%0 /&%&+:+(&/8 - WlLhln Len (10) days from recelpL
of a wrlLLen requesL of any sLockholder or member, Lhe corporaLlon shall
furnlsh Lo hlm lLs mosL recenL flnanclal sLaLemenL, whlch shall lnclude a
balance sheeL as of Lhe end of Lhe lasL Laxable year and a proflL or loss
sLaLemenL for sald Laxable year, showlng ln reasonable deLall lLs asseLs and
llablllLles and Lhe resulL of lLs operaLlons.

AL Lhe regular meeLlng of sLockholders or members, Lhe board of dlrecLors
or LrusLees shall presenL Lo such sLockholders or members a flnanclal
reporL of Lhe operaLlons of Lhe corporaLlon for Lhe precedlng year, whlch
shall lnclude flnanclal sLaLemenLs, duly slgned and cerLlfled by an
lndependenL cerLlfled publlc accounLanL.

Powever, lf Lhe pald-up caplLal of Lhe corporaLlon ls less Lhan 30,000.00,
Lhe flnanclal sLaLemenLs may be cerLlfled under oaLh by Lhe Lreasurer or
any responslble offlcer of Lhe corporaLlon


k|ght of d|rector]trustee to |nspect
AbsoluLe and unquallfled
WlLhouL regard Lo moLlve
8eason: necessary LhaL Lhey may be equlpped wlLh all Lhe lnfo
and daLa wlLh regard Lo Lhe affalrs of Lhe company ln order LhaL
he may manage and dlrecL lLs operaLlons
8lghL Lo ccess Lo hlghly senslLlve and confldenLlal lnformaLlon -
whlch Lhe sLockholders don'L have
o MarkeLlng sLraLegles
o rlclng sLrucLure
o 8udgeL for expanslon/dlverslflcaLlon
o 8esearch and developmenL
o Sources of fundlng, avallablllLy of personnel, proposals of
mergers or Lle-ups

8emedles of SLockholders for un[usLlflable refusal of Lhelr rlghL Lo lnspecL
1) Mandamus
CorporaLe secreLary shall be lncluded as a parLy slnce he ls
charged wlLh Lhe cusLody of all documenLs or records

2) uamages
AgalnsL Lhe corporaLlon or responslble offlcer

3) Crlmlnal complalnL
vlolaLlon of hls rlghL Lo lnspecL and copy
Cffense punlshable (flne or lmprlsonmenL)
LlablllLy lmposed upon Lhe dlrecLors or LrusLees lf refusal ls
pursuanL Lo board resoluLlon

osslble uefenses
1) person demandlng has lmproperly used any lnfo
2) bad falLh
3) rlghL ls llmlLed /resLrlcLed by speclal law or law of lLs creaLlon

WG h||potts v h|| Manufactur|ng Corp
held: rlghL exerclsable elLher by hlmself or by any proper
represenLaLlve or aLLorney-ln-facL, elLher wlLh or wlLhouL Lhe
aLLendance of Lhe sLockholder
&'
rlghL ls personal buL lnspecLlon/examlnaLlon may be made by
anoLher
may be alded by experLs and counsel

ardo v nercu|es Lumber
by-|aw: every shareholder may examlne Lhe books of Lhe
company upon Lhe days whlch Lhe 8ou shall annually flx - vClu.
board of dlrecLors CAnnC1 choose speclflc performance and
parLlcular daLes, Lhe general rlghL glven by Lhe sLaLuLe may noL be
lawfully abrldged Lo Lhe exLenL aLLempLed ln Lhls resoluLlon LhaL
sLockholders can only lnspecL from Lhe 13
Lh
Lo 23
Lh
of every monLh
a by-|aw unduly resLrlcLlng Lhe rlghL of lnspecLlon ls undoubLedly
lnvalld

Vegaruth v Isabe|a Sugar
Lhe secreLary was [usLlfled when he refused Lo furnlsh Lhe
shareholder cerLlfled coples of Lhe mlnuLes of Lhe meeLlng
because sald resoluLlon wasn'L slgned yeL.
AlLhough Lhe records of all buslness LransacLlons of Lhe
corporaLlon and Lhe mlnuLes of any meeLlng shall be open Lo
lnspecLlon, Lhe mlnuLes musL be approved flrsL before coples are
secured.
AlLhough prlor approval of presldenL before Lhe books can be
lnspecLed by any shareholder = vold resoluLlon

Gokongwe| v SLC
lnspecLlon as Lo wholly-owned subsldlary: where a corporaLlon
owns approxlmaLely no properLy excepL Lhe shares of sLock of
subsldlary corporaLlons whlch are merely agenLs, Lhe legal flcLlon
of dlsLlncL corporaLe enLlLles may be dlsregarded
urpose of lnspecLlon musL be germane Lo peLlLloner's lnLeresL as
a shareholder, proper and lawful ln characLer and noL lnlmlcal Lo
Lhe lnLeresL of Lhe corporaLlon
Mandamus aL Lhe sulL of a SP was refused where Lhe subsldlary
corporaLlon ls a separaLe and dlsLlncL corporaLlon and wlLh lLs
books and records ln anoLher [urlsdlcLlon
A|||ed corporat|ons: persons lnspecLlng musL have an lnLeresL
Gonza|es v N8
ku|es:
o 8ecords musL be kepL aL prlnclpal offlce of Lhe
corporaLlon
o lnspecLlon musL be made on buslness days
o SP may demand a copy of Lhe excerpLs of Lhe records or
mlnuLes
o 8efusal Lo allow such lnspecLlon shall sub[ecL Lhe errlng
offlcer/agenL Lo clvll and crlmlnal llablllLles
LlmlLaLlons
o Lxpressly requlred as a condlLlon for such examlnaLlon
LhaL Lhe one requesLlng lL musL noL have been
# CullLy of uslng lmproperly any lnfo secured
Lhrough a prlor exam
# erson asklng for such exam musL be acLlng ln
good falLh and for a leglLlmaLe purpose
o MusL sLaLe reasons and purposes for lnspecLlon

11) Merger and Conso||dat|on

8equlremenLs and rocedure
Sect|on 76. lloo ot metqet of coosollJotloo. - 1wo or more corporaLlons
may merge lnLo a slngle corporaLlon whlch shall be one of Lhe consLlLuenL
corporaLlons or may consolldaLe lnLo a new slngle corporaLlon whlch shall
be Lhe consolldaLed corporaLlon.
1he board of dlrecLors or LrusLees of each corporaLlon, parLy Lo Lhe merger
or consolldaLlon, shall approve a plan of merger or consolldaLlon seLLlng
forLh Lhe followlng:
1. 1he names of Lhe corporaLlons proposlng Lo merge or
consolldaLe, herelnafLer referred Lo as Lhe consLlLuenL
corporaLlons,
2. 1he Lerms of Lhe merger or consolldaLlon and Lhe mode of
carrylng Lhe same lnLo effecL,
&(
3. A sLaLemenL of Lhe changes, lf any, ln Lhe arLlcles of
lncorporaLlon of Lhe survlvlng corporaLlon ln case of merger, and,
wlLh respecL Lo Lhe consolldaLed corporaLlon ln case of
consolldaLlon, all Lhe sLaLemenLs requlred Lo be seL forLh ln Lhe
arLlcles of lncorporaLlon for corporaLlons organlzed under Lhls
Code, and
4. Such oLher provlslons wlLh respecL Lo Lhe proposed merger or
consolldaLlon as are deemed necessary or deslrable. (n)
Sect|on 77. 5tockbolJet's ot membet's opptovol. - upon approval by
ma[orlLy voLe of each of Lhe board of dlrecLors or LrusLees of Lhe
consLlLuenL corporaLlons of Lhe plan of merger or consolldaLlon, Lhe same
shall be submlLLed for approval by Lhe sLockholders or members of each of
such corporaLlons aL separaLe corporaLe meeLlngs duly called for Lhe
purpose. noLlce of such meeLlngs shall be glven Lo all sLockholders or
members of Lhe respecLlve corporaLlons, aL leasL Lwo (2) weeks prlor Lo Lhe
daLe of Lhe meeLlng, elLher personally or by reglsLered mall. Sald noLlce
shall sLaLe Lhe purpose of Lhe meeLlng and shall lnclude a copy or a
summary of Lhe plan of merger or consolldaLlon. 1he afflrmaLlve voLe of
sLockholders represenLlng aL leasL Lwo-Lhlrds (2/3) of Lhe ouLsLandlng
caplLal sLock of each corporaLlon ln Lhe case of sLock corporaLlons or aL
leasL Lwo-Lhlrds (2/3) of Lhe members ln Lhe case of non-sLock
corporaLlons shall be necessary for Lhe approval of such plan. Any
dlssenLlng sLockholder ln sLock corporaLlons may exerclse hls appralsal
rlghL ln accordance wlLh Lhe Code: rovlded, 1haL lf afLer Lhe approval by
Lhe sLockholders of such plan, Lhe board of dlrecLors decldes Lo abandon
Lhe plan, Lhe appralsal rlghL shall be exLlngulshed.
Any amendmenL Lo Lhe plan of merger or consolldaLlon may be made,
provlded such amendmenL ls approved by ma[orlLy voLe of Lhe respecLlve
boards of dlrecLors or LrusLees of all Lhe consLlLuenL corporaLlons and
raLlfled by Lhe afflrmaLlve voLe of sLockholders represenLlng aL leasL Lwo-
Lhlrds (2/3) of Lhe ouLsLandlng caplLal sLock or of Lwo-Lhlrds (2/3) of Lhe
members of each of Lhe consLlLuenL corporaLlons. Such plan, LogeLher wlLh
any amendmenL, shall be consldered as Lhe agreemenL of merger or
consolldaLlon. (n)
Sect|on 78. Attlcles of metqet ot coosollJotloo. - AfLer Lhe approval by Lhe
sLockholders or members as requlred by Lhe precedlng secLlon, arLlcles of
merger or arLlcles of consolldaLlon shall be execuLed by each of Lhe
consLlLuenL corporaLlons, Lo be slgned by Lhe presldenL or vlce-presldenL
and cerLlfled by Lhe secreLary or asslsLanL secreLary of each corporaLlon
seLLlng forLh:
1. 1he plan of Lhe merger or Lhe plan of consolldaLlon,
2. As Lo sLock corporaLlons, Lhe number of shares ouLsLandlng, or
ln Lhe case of non-sLock corporaLlons, Lhe number of members,
and
3. As Lo each corporaLlon, Lhe number of shares or members
voLlng for and agalnsL such plan, respecLlvely. (n)
Sect|on 79. ffectlvlty of metqet ot coosollJotloo. - 1he arLlcles of merger
or of consolldaLlon, slgned and cerLlfled as hereln above requlred, shall be
submlLLed Lo Lhe SecurlLles and Lxchange Commlsslon ln quadrupllcaLe for
lLs approval: rovlded, 1haL ln Lhe case of merger or consolldaLlon of banks
or banklng lnsLlLuLlons, bulldlng and loan assoclaLlons, LrusL companles,
lnsurance companles, publlc uLlllLles, educaLlonal lnsLlLuLlons and oLher
speclal corporaLlons governed by speclal laws, Lhe favorable
recommendaLlon of Lhe approprlaLe governmenL agency shall flrsL be
obLalned. lf Lhe Commlsslon ls saLlsfled LhaL Lhe merger or consolldaLlon of
Lhe corporaLlons concerned ls noL lnconslsLenL wlLh Lhe provlslons of Lhls
Code and exlsLlng laws, lL shall lssue a cerLlflcaLe of merger or of
consolldaLlon, aL whlch Llme Lhe merger or consolldaLlon shall be effecLlve.
lf, upon lnvesLlgaLlon, Lhe SecurlLles and Lxchange Commlsslon has reason
Lo belleve LhaL Lhe proposed merger or consolldaLlon ls conLrary Lo or
lnconslsLenL wlLh Lhe provlslons of Lhls Code or exlsLlng laws, lL shall seL a
hearlng Lo glve Lhe corporaLlons concerned Lhe opporLunlLy Lo be heard.
WrlLLen noLlce of Lhe daLe, Llme and place of hearlng shall be glven Lo each
consLlLuenL corporaLlon aL leasL Lwo (2) weeks before sald hearlng. 1he
Commlsslon shall LhereafLer proceed as provlded ln Lhls Code. (n)
&)
LffecLs of Merger/ConsolldaLlon
Sect|on 80. ffects of metqet ot coosollJotloo. - 1he merger or
consolldaLlon shall have Lhe followlng effecLs:
1. 1he consLlLuenL corporaLlons shall become a slngle corporaLlon
whlch, ln case of merger, shall be Lhe survlvlng corporaLlon
deslgnaLed ln Lhe plan of merger, and, ln case of consolldaLlon,
shall be Lhe consolldaLed corporaLlon deslgnaLed ln Lhe plan of
consolldaLlon,
2. 1he separaLe exlsLence of Lhe consLlLuenL corporaLlons shall
cease, excepL LhaL of Lhe survlvlng or Lhe consolldaLed
corporaLlon,
3. 1he survlvlng or Lhe consolldaLed corporaLlon shall possess all
Lhe rlghLs, prlvlleges, lmmunlLles and powers and shall be sub[ecL
Lo all Lhe duLles and llablllLles of a corporaLlon organlzed under
Lhls Code,
4. 1he survlvlng or Lhe consolldaLed corporaLlon shall Lhereupon
and LhereafLer possess all Lhe rlghLs, prlvlleges, lmmunlLles and
franchlses of each of Lhe consLlLuenL corporaLlons, and all
properLy, real or personal, and all recelvables due on whaLever
accounL, lncludlng subscrlpLlons Lo shares and oLher choses ln
acLlon, and all and every oLher lnLeresL of, or belonglng Lo, or due
Lo each consLlLuenL corporaLlon, shall be deemed Lransferred Lo
and vesLed ln such survlvlng or consolldaLed corporaLlon wlLhouL
furLher acL or deed, and
3. 1he survlvlng or consolldaLed corporaLlon shall be responslble
and llable for all Lhe llablllLles and obllgaLlons of each of Lhe
consLlLuenL corporaLlons ln Lhe same manner as lf such survlvlng
or consolldaLed corporaLlon had lLself lncurred such llablllLles or
obllgaLlons, and any pendlng clalm, acLlon or proceedlng broughL
by or agalnsL any of such consLlLuenL corporaLlons may be
prosecuLed by or agalnsL Lhe survlvlng or consolldaLed
corporaLlon. 1he rlghLs of credlLors or llens upon Lhe properLy of
any of such consLlLuenL corporaLlons shall noL be lmpalred by such
merger or consolldaLlon. (n)
Merger - a unlon affecLed by absorblng one or more exlsLlng
corporaLlons by anoLher whlch survlves and conLlnues Lhe buslness.
ConsolldaLlon - Lhe unlLlng or amalgamaLlon of Lwo or more exlsLlng
corporaLlons Lo form a new corporaLlon.
1he parLles, called Lhe const|tuent corporat|ons, ln a consolldaLlon
are all dlssolved, whlle Lhe consLlLuenL corporaLlons excepL Lhe
surv|v|ng or absorb|ng corporat|on, ln Lhe case of a merger, are Lhe
only ones dlssolved.
Merger and consolldaLlon are Lhe Lwo mosL common Lypes of
corporate reorgan|zat|on. lL slgnlfles Lhe varlous proceedlngs and
LransacLlons by whlch a successlon of corporaLlons ls broughL abouL,
lnvolvlng as lL does Lhe carrylng ouL, by proper agreemenLs and legal
proceedlngs of a buslness plan or scheme for wlndlng up Lhe affalrs of
or forecloslng Lhe morLgage or morLgages upon Lhe properLy of Lhe
lnsolvenL corporaLlon.
Merger and consolldaLlon ls also a meLhod of vo|untary
reorgan|zat|on or recap|ta||zat|on.
Whlle merger and consolldaLlon ls a rlghL granLed by law, Sec. 20 of
AcL 3318 proscrlbes lllegal comblnaLlons (LhaL lessen compeLlLlon,
resLralns commerce and creaLes monopolles) and ArLlcle 186 of Lhe
8evlsed enal Code lmposes a penalLy lmprlsonmenL and/or flne.

Assoc|ated 8ank v h|||pp|ne Is|ands
uefendanL SarmlenLo execuLed a promlssory noLe ln favor of
AssoclaLed 8ank. 1wo years prlor, AssoclaLed 8anklng CorporaLlon
and ClLlzens 8ank & 1rusL Company (absorbed company) merged
Lo form AssoclaLed 8ank. A8 Lrled Lo collecL buL uefendanL
malnLalned hls conLenLlon LhaL Lhe noLe was execuLed ln favor of
C81C only. AlLhough SLC records do noL show when Lhe merger
was approved, Lhe agreemenL lLself provlded all conLracLs,
lrrespecLlve of execuLlon daLe, enLered lnLo wlLh C81C shall be
undersLood as perLalnlng Lo Lhe survlvlng corporaLlon.

&*
8I v 8I Lmp|oyees Un|on
ln lLs merger, 8l absorbed Lhe employees of lL81C. 8l
Lmployees unlon wanLed Lhese employees Lo [oln Lhem buL Lhe
laLLer refused, compelllng Lhe former Lo enforce lLs unlon shop
clause - requlrlng Lhem Lo [oln lf Lhey wanLed Lo remaln as regular
employees. 8l proLesLed Lhelr lncluslon, conLendlng LhaL Lhey
cannoL be consldered new employees.
1he Supreme CourL sald lL ls more ln keeplng wlLh Lhe dlcLaLes of
soclal [usLlce and Lhe SLaLe pollcy of accordlng full proLecLlon Lo
labor Lo deem employmenL conLracLs as auLomaLlcally assumed
by Lhe survlvlng corporaLlon ln a merger, even ln Lhe absence of
an express sLlpulaLlon ln Lhe arLlcles of merger or Lhe merger plan.
8uL Lhe legal flcLlon ln Lhe law on mergers (LhaL Lhe survlvlng
corporaLlon conLlnues Lhe corporaLe exlsLence of Lhe non-
survlvlng corporaLlon) ls malnly a Lool Lo ad[udlcaLe Lhe rlghLs and
obllgaLlons beLween and among Lhe merged corporaLlons and Lhe
persons LhaL deal wlLh Lhem.

Such a legal flcLlon cannoL be unduly
exLended Lo an lnLerpreLaLlon of a unlon Shop Clause so as Lo
defeaL lLs purpose under labor law.

12) Appra|sa| k|ght

ueflnlLlon and When Lxerclsed

Appralsal rlghL ls Lhe meLhod of paylng a shareholder for Lhe Laklng of
hls properLy, a means of avoldlng Lhe converslon of hls properLy lnLo
anoLher noL of hls own chooslng, and compensaLlon for Lhe
abrogaLlon of Lhe common-law rule LhaL a slngle sLockholder could
block a cerLaln corporaLe acL.
lL ls a sLaLuLory rlghL granLed Lo dlssenLlng sLockholders on cerLaln
corporaLe or buslness declslons, Lo demand paymenL of Lhe falr
markeL value of Lhelr shares.
Sect|on 81. lostooces of opptolsol tlqbt. - Any sLockholder of a corporaLlon
shall have Lhe rlghL Lo dlssenL and demand paymenL of Lhe falr value of hls
shares ln Lhe followlng lnsLances:
1. ln case any amendmenL Lo Lhe arLlcles of lncorporaLlon has Lhe
effecL of changlng or resLrlcLlng Lhe rlghLs of any sLockholder or
class of shares, or of auLhorlzlng preferences ln any respecL
superlor Lo Lhose of ouLsLandlng shares of any class, or of
exLendlng or shorLenlng Lhe Lerm of corporaLe exlsLence,
2. ln case of sale, lease, exchange, Lransfer, morLgage, pledge or
oLher dlsposlLlon of all or subsLanLlally all of Lhe corporaLe
properLy and asseLs as provlded ln Lhe Code, and
3. ln case of merger or consolldaLlon. (n)
1hls llsL ls noL excluslve:
1he lnvesLmenL of funds ln anoLher corporaLlon or buslness for
any purpose oLher Lhan lLs prlmary purpose. (Sec. 42)
1he rlghL of a sLockholder ln a close corporaLlon wlLh sufflclenL
asseLs Lo compel Lhe laLLer, for any reason, Lo purchase hls shares
aL Lhelr falr value whlch shall noL be less Lhan lLs par or lssued
value. (Sec. 103)
8equlremenLs and rocedure
Sect|on 82. now tlqbt ls exetclseJ. - 1he appralsal rlghL may be exerclsed
by any sLockholder who shall have voLed agalnsL Lhe proposed corporaLe
acLlon, by maklng a wrlLLen demand on Lhe corporaLlon wlLhln LhlrLy (30)
days afLer Lhe daLe on whlch Lhe voLe was Laken for paymenL of Lhe falr
value of hls shares: rovlded, 1haL fallure Lo make Lhe demand wlLhln such
perlod shall be deemed a walver of Lhe appralsal rlghL. lf Lhe proposed
corporaLe acLlon ls lmplemenLed or affecLed, Lhe corporaLlon shall pay Lo
such sLockholder, upon surrender of Lhe cerLlflcaLe or cerLlflcaLes of sLock
represenLlng hls shares, Lhe falr value Lhereof as of Lhe day prlor Lo Lhe
daLe on whlch Lhe voLe was Laken, excludlng any appreclaLlon or
depreclaLlon ln anLlclpaLlon of such corporaLe acLlon.
'+
lf wlLhln a perlod of slxLy (60) days from Lhe daLe Lhe corporaLe acLlon was
approved by Lhe sLockholders, Lhe wlLhdrawlng sLockholder and Lhe
corporaLlon cannoL agree on Lhe falr value of Lhe shares, lL shall be
deLermlned and appralsed by Lhree (3) dlslnLeresLed persons, one of whom
shall be named by Lhe sLockholder, anoLher by Lhe corporaLlon, and Lhe
Lhlrd by Lhe Lwo Lhus chosen. 1he flndlngs of Lhe ma[orlLy of Lhe appralsers
shall be flnal, and Lhelr award shall be pald by Lhe corporaLlon wlLhln LhlrLy
(30) days afLer such award ls made: rovlded, 1haL no paymenL shall be
made Lo any dlssenLlng sLockholder unless Lhe corporaLlon has
unresLrlcLed reLalned earnlngs ln lLs books Lo cover such paymenL: and
rovlded, furLher, 1haL upon paymenL by Lhe corporaLlon of Lhe agreed or
awarded prlce, Lhe sLockholder shall forLhwlLh Lransfer hls shares Lo Lhe
corporaLlon. (n)
LffecL of Lxerclse of 8lghL
Sect|on 83. ffect of JemooJ ooJ tetmlootloo of tlqbt. - lrom Lhe Llme of
demand for paymenL of Lhe falr value of a sLockholder's shares unLll elLher
Lhe abandonmenL of Lhe corporaLe acLlon lnvolved or Lhe purchase of Lhe
sald shares by Lhe corporaLlon, all rlghLs accrulng Lo such shares, lncludlng
voLlng and dlvldend rlghLs, shall be suspended ln accordance wlLh Lhe
provlslons of Lhls Code, excepL Lhe rlghL of such sLockholder Lo recelve
paymenL of Lhe falr value Lhereof: rovlded, 1haL lf Lhe dlssenLlng
sLockholder ls noL pald Lhe value of hls shares wlLhln 30 days afLer Lhe
award, hls voLlng and dlvldend rlghLs shall lmmedlaLely be resLored. (n)
When 8lghL Lo aymenL ceases
Sect|on 84. wbeo tlqbt to poymeot ceoses. - no demand for paymenL
under Lhls 1lLle may be wlLhdrawn unless Lhe corporaLlon consenLs
LhereLo. lf, however, such demand for paymenL ls wlLhdrawn wlLh Lhe
consenL of Lhe corporaLlon, or lf Lhe proposed corporaLe acLlon ls
abandoned or resclnded by Lhe corporaLlon or dlsapproved by Lhe
SecurlLles and Lxchange Commlsslon where such approval ls necessary, or
lf Lhe SecurlLles and Lxchange Commlsslon deLermlnes LhaL such
sLockholder ls noL enLlLled Lo Lhe appralsal rlghL, Lhen Lhe rlghL of sald
sLockholder Lo be pald Lhe falr value of hls shares shall cease, hls sLaLus as
a sLockholder shall Lhereupon be resLored, and all dlvldend dlsLrlbuLlons
whlch would have accrued on hls shares shall be pald Lo hlm. (n)
CosL of Appralsal
Sect|on 8S. wbo beots costs of opptolsol. - 1he cosLs and expenses of
appralsal shall be borne by Lhe corporaLlon, unless Lhe falr value
ascerLalned by Lhe appralsers ls approxlmaLely Lhe same as Lhe prlce whlch
Lhe corporaLlon may have offered Lo pay Lhe sLockholder, ln whlch case
Lhey shall be borne by Lhe laLLer. ln Lhe case of an acLlon Lo recover such
falr value, all cosLs and expenses shall be assessed agalnsL Lhe corporaLlon,
unless Lhe refusal of Lhe sLockholder Lo recelve paymenL was un[usLlfled.
(n)
8orne by Lhe corporaLlon lf:
lf Lhe prlce offered by Lhe corp ls lower Lhan Lhe falr markeL value,
and
AcLlon ls flled by Lhe sLockholder Lo recover Lhe falr value, where
Lhe refusal Lo recelve paymenL ls found [usLlfled by Lhe courL.
8orne by Lhe dlssenLlng sLockholder lf:
Lhe prlce offered by Lhe corp ls approxlmaLely Lhe same as Lhe falr
markeL value, and
acLlon ls flled by Lhe sLockholder and hls refusal Lo recelve
paymenL ls noL [usLlfled.
Sect|on 86. Nototloo oo cettlflcotes, tlqbts of ttoosfetee. - WlLhln Len (10)
days afLer demandlng paymenL for hls shares, a dlssenLlng sLockholder
shall submlL Lhe cerLlflcaLes of sLock represenLlng hls shares Lo Lhe
corporaLlon for noLaLlon Lhereon LhaL such shares are dlssenLlng shares.
Pls fallure Lo do so shall, aL Lhe opLlon of Lhe corporaLlon, LermlnaLe hls
rlghLs under Lhls 1lLle. lf shares represenLed by Lhe cerLlflcaLes bearlng
such noLaLlon are Lransferred, and Lhe cerLlflcaLes consequenLly cancelled,
Lhe rlghLs of Lhe Lransferor as a dlssenLlng sLockholder under Lhls 1lLle shall
cease and Lhe Lransferee shall have all Lhe rlghLs of a regular sLockholder,
and all dlvldend dlsLrlbuLlons whlch would have accrued on such shares
shall be pald Lo Lhe Lransferee. (n)
'"
noLaLlon ln Lhe books of Lhe corporaLlon ls necessary Lo glve noLlce
and gulde Lo Lhe corporaLlon Lo deLermlne Lhe respecLlve rlghLs of Lhe
sLockholder.

13) Non-Stock Corporat|on
ueflnlLlon
Sect|on 87. uefloltloo. - lor Lhe purposes of Lhls Code, a non-sLock
corporaLlon ls one where no parL of lLs lncome ls dlsLrlbuLable as dlvldends
Lo lLs members, LrusLees, or offlcers, sub[ecL Lo Lhe provlslons of Lhls Code
on dlssoluLlon: rovlded, 1haL any proflL whlch a non-sLock corporaLlon
may obLaln as an lncldenL Lo lLs operaLlons shall, whenever necessary or
proper, be used for Lhe furLherance of Lhe purpose or purposes for whlch
Lhe corporaLlon was organlzed, sub[ecL Lo Lhe provlslons of Lhls 1lLle.
1he provlslons governlng sLock corporaLlon, when perLlnenL, shall be
appllcable Lo non-sLock corporaLlons, excepL as may be covered by speclflc
provlslons of Lhls 1lLle. (n)
non-sLock corporaLlons are also known as non-proflL corporaLlons.
1he old noLlon LhaL lL has no caplLal sLock dlvlded lnLo shares may no
longer hold Lrue because even lf lL has, a corporaLlon ls consldered as
non-sLock so long as lL does noL dlsLrlbuLe dlvldends.
lLs proflLs shall be used for Lhe furLherance of lLs purposes and Lo
defray lLs operaLlng expenses. Powever, mere lnLanglble or pecunlary
beneflLs Lo Lhe members do noL change Lhe naLure of Lhe
corporaLlon.
Cl8 v Club llllplno de Cebu
1he Cl8 assessed Lhe respondenL clvlc corporaLlon llable Lo pay
percenLage Laxes on Lhe gross recelpLs of lLs bar and resLauranL. 1he Club
declared sLock dlvldends buL no acLual cash dlvldends were dlsLrlbuLed Lo
Lhe sLockholders. 1he Supreme CourL held LhaL Lax llablllLy cannoL aLLach Lo
Lhe respondenL because Lhe proflLs derlved from lLs bar and resLauranL
were lncldenLal Lo lLs prlmary ob[ecLlve of developlng and culLlvaLlng
sporLs for Lhe recreaLlon and enLerLalnmenL of sLockholders and members.
1he facL LhaL lLs caplLal ls dlvlded lnLo shares does noL deLracL from Lhe
flndlng LhaL lL ls noL engaged ln Lhe buslness of operaLlng a bar and
resLauranL.
urpose
Sect|on 88. lotposes. - non-sLock corporaLlons may be formed or
organlzed for charlLable, rellglous, educaLlonal, professlonal, culLural,
fraLernal, llLerary, sclenLlflc, soclal, clvlc servlce, or slmllar purposes, llke
Lrade, lndusLry, agrlculLural and llke chambers, or any comblnaLlon Lhereof,
sub[ecL Lo Lhe speclal provlslons of Lhls 1lLle governlng parLlcular classes of
non-sLock corporaLlons. (n)
1hls enumeraLlon ls noL excluslve as Lhe law lLself recognlzes slmllar
or allled purposes for whlch non-sLock corporaLlons may be
organlzed.
Membershlp and voLlng 8lghLs
Sect|on 89. klqbt to vote. - 1he rlghL of Lhe members of any class or classes
Lo voLe may be llmlLed, broadened or denled Lo Lhe exLenL speclfled ln Lhe
arLlcles of lncorporaLlon or Lhe by-laws. unless so llmlLed, broadened or
denled, each member, regardless of class, shall be enLlLled Lo one voLe.
unless oLherwlse provlded ln Lhe arLlcles of lncorporaLlon or Lhe by-laws, a
member may voLe by proxy ln accordance wlLh Lhe provlslons of Lhls Code.
(n)
voLlng by mall or oLher slmllar means by members of non-sLock
corporaLlons may be auLhorlzed by Lhe by-laws of non-sLock corporaLlons
wlLh Lhe approval of, and under such condlLlons whlch may be prescrlbed
by, Lhe SecurlLles and Lxchange Commlsslon.
'#
CumulaLlve voLlng, granLed as a maLLer of rlghL ln sLock corporaLlons
(Sec. 24), ls noL generally allowed ln non-sLock corporaLlons.
voLlng by mall or oLher slmllar means ln Lhls provlslon, ls Lhe only
excepLlon Lo Lhe rule LhaL voLes musL be casL a duly consLlLuLed
meeLlng (Sec. 16).
Sect|on 90. Noo-ttoosfetoblllty of membetsblp. - Membershlp ln a non-
sLock corporaLlon and all rlghLs arlslng Lherefrom are personal and non-
Lransferable, unless Lhe arLlcles of lncorporaLlon or Lhe by-laws oLherwlse
provlde. (n)
Sect|on 91. 1etmlootloo of membetsblp. - Membershlp shall be LermlnaLed
ln Lhe manner and for Lhe causes provlded ln Lhe arLlcles of lncorporaLlon
or Lhe by-laws. 1ermlnaLlon of membershlp shall have Lhe effecL of
exLlngulshlng all rlghLs of a member ln Lhe corporaLlon or ln lLs properLy,
unless oLherwlse provlded ln Lhe arLlcles of lncorporaLlon or Lhe by-laws.
(n)
non-sLock corporaLlons have Lhe rlghL Lo adopL rules, ln Lhelr by-laws,
prescrlblng Lhe mode and manner ln whlch membershlp LhereaL can
be obLalned or malnLalned, ln consonance wlLh Sec. 36. 1hls lncludes
Lhe rlghL Lo llmlL membershlp. ln Lhe absence of resLrlcLlons, lL may
acL arblLrarlly and exclude any persons lL may see flL, and Lhe courLs
have no power Lo lnLerfere so long as Lhe manner and procedure lald
down ln Lhe by-laws are sLrlcLly complled wlLh.
AbsenL any provlslon ln Lhe by-laws as Lo who ls auLhorlzed Lo admlL
members, Lhe auLhorlLy musL necessarlly be lodged wlLh Lhe board of
LrusLees (Sec. 23).
Chlnese ?MCA v Chlng
SubsequenL Lo a membershlp campalgn by ?MCA, several
members complalned LhaL Lhere were any counLlng and/or approval of
membershlp appllcaLlons LhaL Look place as requlred by Lhe ConsLlLuLlon
and 8y-Laws of Lhe corporaLlon. 1he CourL Look as evldence Lhe
appllcaLlons and recelpLs for paymenLs of membershlp fees duly flled. 1he
Lrlal courL cannoL sLrlp members of Lhelr membershlp wlLhouL cause.
CLherwlse, LhaL would be an unwarranLed and undue lnLerference wlLh Lhe
well-esLabllshed rlghL of a corporaLlon Lo deLermlne lLs membershlp.

Cebu CounLry Club v Lllzagaque
eLlLloner was accused of vlolaLlng Lhe rules governlng human
relaLlons, Lhe baslc prlnclples Lo be observed for Lhe rlghLful relaLlonshlp
beLween human belngs and for Lhe sLablllLy of soclal order when lL re[ecLed
respondenL's appllcaLlon for proprleLy membershlp. 1he amendmenL Lo
Lhe peLlLloner corporaLlon's 8y-Laws requlrlng Lhe unanlmous voLe of Lhe
dlrecLors presenL aL a speclal or regular meeLlng was noL prlnLed on Lhe
appllcaLlon form respondenL fllled and submlLLed. WhaL was prlnLed
Lhereon was Lhe orlglnal provlslon LhaL was sllenL on Lhe requlred number
of voLes needed for admlsslon. 8ad falLh characLerlzed Lhelr re[ecLlon of
respondenL's appllcaLlon. When Lhe rlghL ls exerclsed arblLrarlly, un[usLly
or excesslvely and resulLs ln damage Lo anoLher, a legal wrong ls
commlLLed for whlch Lhe wrongdoer musL be held responslble

1rusLees and Cfflces
Sect|on 92. lectloo ooJ tetm of ttostees. - unless oLherwlse provlded ln
Lhe arLlcles of lncorporaLlon or Lhe by-laws, Lhe board of LrusLees of non-
sLock corporaLlons, whlch may be more Lhan flfLeen (13) ln number as may
be flxed ln Lhelr arLlcles of lncorporaLlon or by-laws, shall, as soon as
organlzed, so classlfy Lhemselves LhaL Lhe Lerm of offlce of one-Lhlrd (1/3)
of Lhelr number shall explre every year, and subsequenL elecLlons of
LrusLees comprlslng one-Lhlrd (1/3) of Lhe board of LrusLees shall be held
annually and LrusLees so elecLed shall have a Lerm of Lhree (3) years.
1rusLees LhereafLer elecLed Lo flll vacancles occurrlng before Lhe explraLlon
of a parLlcular Lerm shall hold offlce only for Lhe unexplred perlod.
no person shall be elecLed as LrusLee unless he ls a member of Lhe
corporaLlon.
'$
unless oLherwlse provlded ln Lhe arLlcles of lncorporaLlon or Lhe by-laws,
offlcers of a non-sLock corporaLlon may be dlrecLly elecLed by Lhe
members. (n)
1rusLees refer Lo Lhe governlng board or body. Sec. 138, however,
allows a non-sLock corporaLlon Lo deslgnaLe Lhelr governlng board by
any oLher name.
Whlle Sec. 92 allows Lhe Lerm Lo be deLermlned by Lhe arLlcles of
lncorporaLlon or Lhe by-laws, Sec. 7 llmlLs lL Lo 3 years as lL would
unduly deprlve oLher members of Lhe chance Lo Lake an acLlve parL ln
corporaLe managemenL.
1he CourLs wlll noL generally lnLerfere ln maLLers lnvolvlng Lhe
lnLernal affalrs of an unlncorporaLed assoclaLlon unless Lhe acLs
complalned of are arblLrary, oppresslve, fraudulenL, vlolaLlve of clvll
rlghLs and Lhe llke. Cn Lhe oLher hand, an lncorporaLed assoclaLlon or
lLs members may avall of Lhe remedy of lnsLlLuLlng an lnLra-corporaLe
dlspuLe case pursuanL Lo Sec. 3 of .u. 902-A as amended by 8.A.
8799.
Sect|on 93. lloce of meetloqs. - 1he by-laws may provlde LhaL Lhe
members of a non-sLock corporaLlon may hold Lhelr regular or speclal
meeLlngs aL any place even ouLslde Lhe place where Lhe prlnclpal offlce of
Lhe corporaLlon ls locaLed: rovlded, 1haL proper noLlce ls senL Lo all
members lndlcaLlng Lhe daLe, Llme and place of Lhe meeLlng: and rovlded,
furLher, 1haL Lhe place of meeLlng shall be wlLhln Lhe hlllpplnes. (n)
ln Lhe absence of a by-law provlslon Lo Lhe conLrary, a non-sLock
corporaLlon cannoL hold membershlp meeLlngs ouLslde Lhe borders of
Lhe clLy or munlclpallLy where Lhe prlnclpal offlce ls locaLed (Sec. 31)
Llons Club lnLernaLlonal v CA
1here was an elecLlon dlspuLe beLween Lwo candldaLes whereln
one accused Lhe oLher, ln consplracy wlLh oLher offlcers, of holdlng an
lllegal elecLlon wlLhouL balloLs, balloL boxes and supervlslon of requlred
voLlng delegaLes. 1he courL sald Lhe lssue ls noL [usLlclable because Lhe
declslon of an unlncorporaLed assoclaLlon on Lhe quesLlon of an elecLlon Lo
offlce ls a maLLer pecullarly and excluslvely Lo be deLermlned by Lhe
assoclaLlon and, ln Lhe absence of fraud, ls flnal and blndlng on Lhe courLs.

ulsLrlbuLlon of AsseLs upon ulssoluLlon
Sect|on 94. koles of Jlsttlbotloo. - ln case dlssoluLlon of a non-sLock
corporaLlon ln accordance wlLh Lhe provlslons of Lhls Code, lLs asseLs shall
be applled and dlsLrlbuLed as follows:
1. All llablllLles and obllgaLlons of Lhe corporaLlon shall be pald,
saLlsfled and dlscharged, or adequaLe provlslon shall be made
Lherefore,
2. AsseLs held by Lhe corporaLlon upon a condlLlon requlrlng
reLurn, Lransfer or conveyance, and whlch condlLlon occurs by
reason of Lhe dlssoluLlon, shall be reLurned, Lransferred or
conveyed ln accordance wlLh such requlremenLs,
3. AsseLs recelved and held by Lhe corporaLlon sub[ecL Lo
llmlLaLlons permlLLlng Lhelr use only for charlLable, rellglous,
benevolenL, educaLlonal or slmllar purposes, buL noL held upon a
condlLlon requlrlng reLurn, Lransfer or conveyance by reason of
Lhe dlssoluLlon, shall be Lransferred or conveyed Lo one or more
corporaLlons, socleLles or organlzaLlons engaged ln acLlvlLles ln
Lhe hlllpplnes subsLanLlally slmllar Lo Lhose of Lhe dlssolvlng
corporaLlon accordlng Lo a plan of dlsLrlbuLlon adopLed pursuanL
Lo Lhls ChapLer,
4. AsseLs oLher Lhan Lhose menLloned ln Lhe precedlng
paragraphs, lf any, shall be dlsLrlbuLed ln accordance wlLh Lhe
provlslons of Lhe arLlcles of lncorporaLlon or Lhe by-laws, Lo Lhe
exLenL LhaL Lhe arLlcles of lncorporaLlon or Lhe by-laws, deLermlne
Lhe dlsLrlbuLlve rlghLs of members, or any class or classes of
members, or provlde for dlsLrlbuLlon, and
'%
3. ln any oLher case, asseLs may be dlsLrlbuLed Lo such persons,
socleLles, organlzaLlons or corporaLlons, wheLher or noL organlzed
for proflL, as may be speclfled ln a plan of dlsLrlbuLlon adopLed
pursuanL Lo Lhls ChapLer. (n)
Sect|on 9S. lloo of Jlsttlbotloo of ossets. - A plan provldlng for Lhe
dlsLrlbuLlon of asseLs, noL lnconslsLenL wlLh Lhe provlslons of Lhls 1lLle, may
be adopLed by a non-sLock corporaLlon ln Lhe process of dlssoluLlon ln Lhe
followlng manner:
1he board of LrusLees shall, by ma[orlLy voLe, adopL a resoluLlon
recommendlng a plan of dlsLrlbuLlon and dlrecLlng Lhe submlsslon Lhereof
Lo a voLe aL a regular or speclal meeLlng of members havlng voLlng rlghLs.
WrlLLen noLlce seLLlng forLh Lhe proposed plan of dlsLrlbuLlon or a
summary Lhereof and Lhe daLe, Llme and place of such meeLlng shall be
glven Lo each member enLlLled Lo voLe, wlLhln Lhe Llme and ln Lhe manner
provlded ln Lhls Code for Lhe glvlng of noLlce of meeLlngs Lo members.
Such plan of dlsLrlbuLlon shall be adopLed upon approval of aL leasL Lwo-
Lhlrds (2/3) of Lhe members havlng voLlng rlghLs presenL or represenLed by
proxy aL such meeLlng. (n)
14) C|ose Corporat|on
ueflnlLlon
Sect|on 96. uefloltloo ooJ oppllcoblllty of 1ltle. - A close corporaLlon,
wlLhln Lhe meanlng of Lhls Code, ls one whose arLlcles of lncorporaLlon
provlde LhaL: (1) All Lhe corporaLlon's lssued sLock of all classes, excluslve
of Lreasury shares, shall be held of record by noL more Lhan a speclfled
number of persons, noL exceedlng LwenLy (20), (2) all Lhe lssued sLock of all
classes shall be sub[ecL Lo one or more speclfled resLrlcLlons on Lransfer
permlLLed by Lhls 1lLle, and (3) 1he corporaLlon shall noL llsL ln any sLock
exchange or make any publlc offerlng of any of lLs sLock of any class.
noLwlLhsLandlng Lhe foregolng, a corporaLlon shall noL be deemed a close
corporaLlon when aL leasL Lwo-Lhlrds (2/3) of lLs voLlng sLock or voLlng
rlghLs ls owned or conLrolled by anoLher corporaLlon whlch ls noL a close
corporaLlon wlLhln Lhe meanlng of Lhls Code.
Any corporaLlon may be lncorporaLed as a close corporaLlon, excepL mlnlng
or oll companles, sLock exchanges, banks, lnsurance companles, publlc
uLlllLles, educaLlonal lnsLlLuLlons and corporaLlons declared Lo be vesLed
wlLh publlc lnLeresL ln accordance wlLh Lhe provlslons of Lhls Code.
1he provlslons of Lhls 1lLle shall prlmarlly govern close corporaLlons:
rovlded, 1haL Lhe provlslons of oLher 1lLles of Lhls Code shall apply
suppleLorlly excepL lnsofar as Lhls 1lLle oLherwlse provldes.
1lLle xll of Lhe CorporaLlon Code prlmarlly governs close corporaLlons.
8uL ln Lhe absence of a speclal provlslon Lo Lhe conLrary, Lhe general
provlslons governlng ordlnary corporaLlons wlll apply.
rovlslons on close corporaLlons are a recognlLlon of Lhe conLlnued
exlsLence of famlly corporaLlons. 1hey provlde a Lype of buslness
organlzaLlon especlally deslgned for buslness assoclaLes belonglng Lo
a small closely-knlL group - a de facLo corporaLlon wlLh a corporaLe
shell". lL ls referred Lo, someLlmes, as a hybrld of boLh Lhe corporaLe
and parLnershlp forms, an lncorporaLed parLnershlp" or a
corporaLlon de [ure buL a de facLo parLnershlp". 1hls ls because a
close corporaLlon may parLake Lhe naLure of a parLnershlp ln LhaL Lhe
sLockholders Lhereof Lake an acLlve role ln Lhe managemenL of Lhe
corporaLe affalrs elLher as dlrecLors, offlcers, or even perhaps as
parLners ln managemenL whlch ls akln Lo Lhe parLnershlp form of
managemenL.
AnenL Lhe lasL paragraph, Sec. 140 lays down a slmllar pollcy by
auLhorlzlng Lhe nLuA Lo recommend Lo Lhe leglslaLure Lhe seLLlng of
maxlmum llmlLs Lo famlly or group ownershlp of sLock corporaLlons
vesLed wlLh publlc lnLeresL, and Lhe deLermlnaLlon of wheLher or noL
lL should be vesLed wlLh publlc lnLeresL ls wlLhln lLs domaln.
ermlsslve rovlslons
Sect|on 97. Attlcles of locotpototloo. - 1he arLlcles of lncorporaLlon of a
close corporaLlon may provlde:
1. lor a classlflcaLlon of shares or rlghLs and Lhe quallflcaLlons for
ownlng or holdlng Lhe same and resLrlcLlons on Lhelr Lransfers as
'&
may be sLaLed Lhereln, sub[ecL Lo Lhe provlslons of Lhe followlng
secLlon,
2. lor a classlflcaLlon of dlrecLors lnLo one or more classes, each of
whom may be voLed for and elecLed solely by a parLlcular class of
sLock, and
3. lor a greaLer quorum or voLlng requlremenLs ln meeLlngs of
sLockholders or dlrecLors Lhan Lhose provlded ln Lhls Code.
1he arLlcles of lncorporaLlon of a close corporaLlon may provlde LhaL Lhe
buslness of Lhe corporaLlon shall be managed by Lhe sLockholders of Lhe
corporaLlon raLher Lhan by a board of dlrecLors. So long as Lhls provlslon
conLlnues ln effecL:
1. no meeLlng of sLockholders need be called Lo elecL dlrecLors,
2. unless Lhe conLexL clearly requlres oLherwlse, Lhe sLockholders
of Lhe corporaLlon shall be deemed Lo be dlrecLors for Lhe
purpose of applylng Lhe provlslons of Lhls Code, and
3. 1he sLockholders of Lhe corporaLlon shall be sub[ecL Lo all
llablllLles of dlrecLors.
1he arLlcles of lncorporaLlon may llkewlse provlde LhaL all offlcers
or employees or LhaL speclfled offlcers or employees shall be
elecLed or appolnLed by Lhe sLockholders, lnsLead of by Lhe board
of dlrecLors.
under 1, a close corporaLlon may Lhus classlfy lLs shares lnLo dlfferenL
classes Lo be held of record only by speclfled persons.
under 3, Lhe veLo power of mlnorlLy sLockholders may be lncreased.
unllke ln ordlnary corporaLlons, a greaLer quorum and voLlng
requlremenL ln sLockholder's meeLlngs may be lncreased as provlded
for ln Lhe arLlcles of lncorporaLlon or by-laws.
LlablllLy of dlrecLors ln close corporaLlons ls more exLenslve, ln LhaL
Lhey are personally llable for corporaLe LorLs unless Lhe corporaLlon
has obLalned a reasonably adequaLe llablllLy lnsurance. ulrecLors of
ordlnary corporaLlons are llable for corporaLe LorLs only lf Lhey have
been negllgenL or acLed fraudulenLly ln Lhe performance of Lhelr
funcLlons.
Sect|on 98. vollJlty of testtlctloos oo ttoosfet of sbotes. - 8esLrlcLlons on
Lhe rlghL Lo Lransfer shares musL appear ln Lhe arLlcles of lncorporaLlon and
ln Lhe by-laws as well as ln Lhe cerLlflcaLe of sLock, oLherwlse, Lhe same
shall noL be blndlng on any purchaser Lhereof ln good falLh. Sald
resLrlcLlons shall noL be more onerous Lhan granLlng Lhe exlsLlng
sLockholders or Lhe corporaLlon Lhe opLlon Lo purchase Lhe shares of Lhe
Lransferrlng sLockholder wlLh such reasonable Lerms, condlLlons or perlod
sLaLed Lhereln. lf upon Lhe explraLlon of sald perlod, Lhe exlsLlng
sLockholders or Lhe corporaLlon falls Lo exerclse Lhe opLlon Lo purchase,
Lhe Lransferrlng sLockholder may sell hls shares Lo any Lhlrd person.
8esLrlcLlons on Lransfers of shares need Lo appear ln Lhe arLlcles of
lncorporaLlon, by-laws and cerLlflcaLes of sLock. Crdlnary sLock
corporaLlons only need Lo provlde for lL ln Lhe arLlcles of
lncorporaLlon and sLock cerLlflcaLes. lf Lhe by-laws of close
corporaLlons do noL conLaln such resLrlcLlon, lL wlll noL blnd Lhlrd
persons.
Sect|on 99. ffects of lssoooce ot ttoosfet of stock lo bteocb of poollfyloq
cooJltloos. -
1. lf sLock of a close corporaLlon ls lssued or Lransferred Lo any
person who ls noL enLlLled under any provlslon of Lhe arLlcles of
lncorporaLlon Lo be a holder of record of lLs sLock, and lf Lhe
cerLlflcaLe for such sLock consplcuously shows Lhe quallflcaLlons of
Lhe persons enLlLled Lo be holders of record Lhereof, such person
ls concluslvely presumed Lo have noLlce of Lhe facL of hls
lnellglblllLy Lo be a sLockholder.
2. lf Lhe arLlcles of lncorporaLlon of a close corporaLlon sLaLes Lhe
number of persons, noL exceedlng LwenLy (20), who are enLlLled
Lo be holders of record of lLs sLock, and lf Lhe cerLlflcaLe for such
''
sLock consplcuously sLaLes such number, and lf Lhe lssuance or
Lransfer of sLock Lo any person would cause Lhe sLock Lo be held
by more Lhan such number of persons, Lhe person Lo whom such
sLock ls lssued or Lransferred ls concluslvely presumed Lo have
noLlce of Lhls facL.
3. lf a sLock cerLlflcaLe of any close corporaLlon consplcuously
shows a resLrlcLlon on Lransfer of sLock of Lhe corporaLlon, Lhe
Lransferee of Lhe sLock ls concluslvely presumed Lo have noLlce of
Lhe facL LhaL he has acqulred sLock ln vlolaLlon of Lhe resLrlcLlon, lf
such acqulslLlon vlolaLes Lhe resLrlcLlon.
4. Whenever any person Lo whom sLock of a close corporaLlon has
been lssued or Lransferred has, or ls concluslvely presumed under
Lhls secLlon Lo have, noLlce elLher (a) LhaL he ls a person noL
ellglble Lo be a holder of sLock of Lhe corporaLlon, or (b) LhaL
Lransfer of sLock Lo hlm would cause Lhe sLock of Lhe corporaLlon
Lo be held by more Lhan Lhe number of persons permlLLed by lLs
arLlcles of lncorporaLlon Lo hold sLock of Lhe corporaLlon, or (c)
LhaL Lhe Lransfer of sLock ls ln vlolaLlon of a resLrlcLlon on Lransfer
of sLock, Lhe corporaLlon may, aL lLs opLlon, refuse Lo reglsLer Lhe
Lransfer of sLock ln Lhe name of Lhe Lransferee.
3. 1he provlslons of subsecLlon (4) shall noL be appllcable lf Lhe
Lransfer of sLock, Lhough conLrary Lo subsecLlons (1), (2) or (3), has
been consenLed Lo by all Lhe sLockholders of Lhe close
corporaLlon, or lf Lhe close corporaLlon has amended lLs arLlcles of
lncorporaLlon ln accordance wlLh Lhls 1lLle.
6. 1he Lerm "Lransfer", as used ln Lhls secLlon, ls noL llmlLed Lo a
Lransfer for value.
7. 1he provlslons of Lhls secLlon shall noL lmpalr any rlghL whlch
Lhe Lransferee may have Lo resclnd Lhe Lransfer or Lo recover
under any appllcable warranLy, express or lmplled.
lL appears LhaL a selllng sLockholder may noL be able Lo Lransfer hls
shares lf Lo do so would vlolaLe Lhe quallfylng condlLlons lndlcaLed ln
Lhe arLlcles of lncorporaLlon unless number 3 ls made Lo apply.
1he sLockholder concerned ls noL lefL wlLhouL any recourse as he may
compel Lhe close corporaLlon Lo purchase hls shares aL Lhelr falr value
for any reason, sub[ecL only Lo Sec. 103.
1he Lransferee may resclnd Lhe LransacLlon or recover from Lhe
Lransferor under any appllcable warranLy, express or lmplled.
SLockholders AgreemenLs
Sect|on 100. Aqteemeots by stockbolJets. -
1. AgreemenLs by and among sLockholders execuLed before Lhe
formaLlon and organlzaLlon of a close corporaLlon, slgned by all
sLockholders, shall survlve Lhe lncorporaLlon of such corporaLlon
and shall conLlnue Lo be valld and blndlng beLween and among
such sLockholders, lf such be Lhelr lnLenL, Lo Lhe exLenL LhaL such
agreemenLs are noL lnconslsLenL wlLh Lhe arLlcles of lncorporaLlon,
lrrespecLlve of where Lhe provlslons of such agreemenLs are
conLalned, excepL Lhose requlred by Lhls 1lLle Lo be embodled ln
sald arLlcles of lncorporaLlon.
2. An agreemenL beLween Lwo or more sLockholders, lf ln wrlLlng
and slgned by Lhe parLles LhereLo, may provlde LhaL ln exerclslng
any voLlng rlghLs, Lhe shares held by Lhem shall be voLed as
Lhereln provlded, or as Lhey may agree, or as deLermlned ln
accordance wlLh a procedure agreed upon by Lhem.
3. no provlslon ln any wrlLLen agreemenL slgned by Lhe
sLockholders, relaLlng Lo any phase of Lhe corporaLe affalrs, shall
be lnvalldaLed as beLween Lhe parLles on Lhe ground LhaL lLs effecL
ls Lo make Lhem parLners among Lhemselves.
4. A wrlLLen agreemenL among some or all of Lhe sLockholders ln a
close corporaLlon shall noL be lnvalldaLed on Lhe ground LhaL lL so
relaLes Lo Lhe conducL of Lhe buslness and affalrs of Lhe
'(
corporaLlon as Lo resLrlcL or lnLerfere wlLh Lhe dlscreLlon or
powers of Lhe board of dlrecLors: rovlded, 1haL such agreemenL
shall lmpose on Lhe sLockholders who are parLles LhereLo Lhe
llablllLles for managerlal acLs lmposed by Lhls Code on dlrecLors.
3. 1o Lhe exLenL LhaL Lhe sLockholders are acLlvely engaged ln Lhe
managemenL or operaLlon of Lhe buslness and affalrs of a close
corporaLlon, Lhe sLockholders shall be held Lo sLrlcL flduclary
duLles Lo each oLher and among Lhemselves. Sald sLockholders
shall be personally llable for corporaLe LorLs unless Lhe
corporaLlon has obLalned reasonably adequaLe llablllLy lnsurance.
re-lncorporaLlon agreemenLs under par. 1 do noL ordlnarlly survlve
ln ordlnary corporaLlons unless lL has been raLlfled or adopLed by Lhe
corporaLlon afLer lncorporaLlon, ln whlch case blnds Lhe corporaLlon.
AgreemenLs may also be enLered lnLo by and beLween Lhe
sLockholders of a close corporaLlon whlch relaLes Lo Lhe managemenL
of Lhe corporaLe affalrs whlch would noL oLherwlse be valld and
blndlng ln oLher corporaLlons. 1hls ls because sLockholders'
agreemenL ln Lhe laLLer cannoL llmlL or resLrlcL Lhe dlscreLlon and
powers of Lhe 8oard of ulrecLors Lo manage Lhe corporaLe affalrs.
When 8oard MeeLlng noL necessary
Sect|on 101. wbeo bootJ meetloq ls oooecessoty ot lmptopetly belJ. -
unless Lhe by-laws provlde oLherwlse, any acLlon by Lhe dlrecLors of a close
corporaLlon wlLhouL a meeLlng shall neverLheless be deemed valld lf:
1. 8efore or afLer such acLlon ls Laken, wrlLLen consenL LhereLo ls
slgned by all Lhe dlrecLors, or
2. All Lhe sLockholders have acLual or lmplled knowledge of Lhe
acLlon and make no prompL ob[ecLlon LhereLo ln wrlLlng, or
3. 1he dlrecLors are accusLomed Lo Lake lnformal acLlon wlLh Lhe
express or lmplled acqulescence of all Lhe sLockholders, or
4. All Lhe dlrecLors have express or lmplled knowledge of Lhe
acLlon ln quesLlon and none of Lhem makes prompL ob[ecLlon
LhereLo ln wrlLlng.
lf a dlrecLor's meeLlng ls held wlLhouL proper call or noLlce, an acLlon Laken
Lhereln wlLhln Lhe corporaLe powers ls deemed raLlfled by a dlrecLor who
falled Lo aLLend, unless he prompLly flles hls wrlLLen ob[ecLlon wlLh Lhe
secreLary of Lhe corporaLlon afLer havlng knowledge Lhereof.
ln comparlson, dlrecLors ln ordlnary sLock corporaLlons musL acL as a
body aL a duly consLlLuLed meeLlng Lo have a valld corporaLe
LransacLlon.
re-empLlve 8lghL
Sect|on 102. lte-emptlve tlqbt lo close cotpototloos. - 1he pre-empLlve
rlghL of sLockholders ln close corporaLlons shall exLend Lo all sLock Lo be
lssued, lncludlng relssuance of Lreasury shares, wheLher for money,
properLy or personal servlces, or ln paymenL of corporaLe debLs, unless Lhe
arLlcles of lncorporaLlon provlde oLherwlse.
Compared wlLh Sec. 39 - governlng Lhe pre-empLlve rlghLs of
sLockholders ln ordlnary corporaLlons and lLs llmlLaLlons, ls a maLLer
of rlghL (wlLh no llmlLaLlons) ln close corporaLlons unless oLherwlse
provlded ln Lhe arLlcle of lncorporaLlon.

Sect|on 103. AmeoJmeot of ottlcles of locotpototloo. - Any amendmenL Lo
Lhe arLlcles of lncorporaLlon whlch seeks Lo deleLe or remove any provlslon
requlred by Lhls 1lLle Lo be conLalned ln Lhe arLlcles of lncorporaLlon or Lo
reduce a quorum or voLlng requlremenL sLaLed ln sald arLlcles of
lncorporaLlon shall noL be valld or effecLlve unless approved by Lhe
afflrmaLlve voLe of aL leasL Lwo-Lhlrds (2/3) of Lhe ouLsLandlng caplLal
sLock, wheLher wlLh or wlLhouL voLlng rlghLs, or of such greaLer proporLlon
of shares as may be speclflcally provlded ln Lhe arLlcles of lncorporaLlon for
amendlng, deleLlng or removlng any of Lhe aforesald provlslons, aL a
meeLlng duly called for Lhe purpose.
')
ursuanL Lo Sec. 96, Lhe general provlslons of Lhe CorporaLlon Code
wlll be made Lo apply Lo a close corporaLlon.
Sect|on 104. ueoJlocks. - noLwlLhsLandlng any conLrary provlslon ln Lhe
arLlcles of lncorporaLlon or by-laws or agreemenL of sLockholders of a close
corporaLlon, lf Lhe dlrecLors or sLockholders are so dlvlded respecLlng Lhe
managemenL of Lhe corporaLlon's buslness and affalrs LhaL Lhe voLes
requlred for any corporaLe acLlon cannoL be obLalned, wlLh Lhe
consequence LhaL Lhe buslness and affalrs of Lhe corporaLlon can no longer
be conducLed Lo Lhe advanLage of Lhe sLockholders generally, Lhe
SecurlLles and Lxchange Commlsslon, upon wrlLLen peLlLlon by any
sLockholder, shall have Lhe power Lo arblLraLe Lhe dlspuLe. ln Lhe exerclse
of such power, Lhe Commlsslon shall have auLhorlLy Lo make such order as
lL deems approprlaLe, lncludlng an order:
(1) cancelllng or alLerlng any provlslon conLalned ln Lhe arLlcles of
lncorporaLlon, by-laws, or any sLockholder's agreemenL,
(2) cancelllng, alLerlng or en[olnlng any resoluLlon or acL of Lhe corporaLlon
or lLs board of dlrecLors, sLockholders, or offlcers,
(3) dlrecLlng or prohlblLlng any acL of Lhe corporaLlon or lLs board of
dlrecLors, sLockholders, offlcers, or oLher persons parLy Lo Lhe acLlon,
(4) requlrlng Lhe purchase aL Lhelr falr value of shares of any sLockholder,
elLher by Lhe corporaLlon regardless of Lhe avallablllLy of unresLrlcLed
reLalned earnlngs ln lLs books, or by Lhe oLher sLockholders,
(3) appolnLlng a provlslonal dlrecLor,
(6) dlssolvlng Lhe corporaLlon, or
(7) granLlng such oLher rellef as Lhe clrcumsLances may warranL.
A provlslonal dlrecLor shall be an lmparLlal person who ls nelLher a
sLockholder nor a credlLor of Lhe corporaLlon or of any subsldlary or
afflllaLe of Lhe corporaLlon, and whose furLher quallflcaLlons, lf any, may be
deLermlned by Lhe Commlsslon. A provlslonal dlrecLor ls noL a recelver of
Lhe corporaLlon and does noL have Lhe LlLle and powers of a cusLodlan or
recelver. A provlslonal dlrecLor shall have all Lhe rlghLs and powers of a
duly elecLed dlrecLor of Lhe corporaLlon, lncludlng Lhe rlghL Lo noLlce of
and Lo voLe aL meeLlngs of dlrecLors, unLll such Llme as he shall be removed
by order of Lhe Commlsslon or by all Lhe sLockholders. Pls compensaLlon
shall be deLermlned by agreemenL beLween hlm and Lhe corporaLlon
sub[ecL Lo approval of Lhe Commlsslon, whlch may flx hls compensaLlon ln
Lhe absence of agreemenL or ln Lhe evenL of dlsagreemenL beLween Lhe
provlslonal dlrecLor and Lhe corporaLlon.
WlLhdrawal of SLockholders/ulssoluLlon
Sect|on 10S. wltbJtowol of stockbolJet ot Jlssolotloo of cotpototloo. - ln
addlLlon and wlLhouL pre[udlce Lo oLher rlghLs and remedles avallable Lo a
sLockholder under Lhls 1lLle, any sLockholder of a close corporaLlon may,
for any reason, compel Lhe sald corporaLlon Lo purchase hls shares aL Lhelr
falr value, whlch shall noL be less Lhan Lhelr par or lssued value, when Lhe
corporaLlon has sufflclenL asseLs ln lLs books Lo cover lLs debLs and
llablllLles excluslve of caplLal sLock: rovlded, 1haL any sLockholder of a
close corporaLlon may, by wrlLLen peLlLlon Lo Lhe SecurlLles and Lxchange
Commlsslon, compel Lhe dlssoluLlon of such corporaLlon whenever any of
acLs of Lhe dlrecLors, offlcers or Lhose ln conLrol of Lhe corporaLlon ls
lllegal, or fraudulenL, or dlshonesL, or oppresslve or unfalrly pre[udlclal Lo
Lhe corporaLlon or any sLockholder, or whenever corporaLe asseLs are
belng mlsapplled or wasLed.
WlLhdrawal of a sLockholder Lhrough Lhe exerclse of hls appralsal
rlghL, ln ordlnary corporaLlons, can only be allowed under Lhe
condlLlons provlded ln Sec. 81.
Du|ay Lnterpr|ses v CA
eLlLloner uulay sold Lhe properLy Lo respondenL veloso who ln
Lurn morLgaged lL Lo respondenL 1orres. 1he laLLer flled a peLlLlon
for lssuance of wrlL of possesslon over Lhe properLy when he
boughL lL aL publlc aucLlon afLer foreclosure. eLlLloner
corporaLlon conLesLs uulay's auLhorlLy ln dlsposlng of corporaLe
properLy.
1he Supreme CourL held Lhe sale was valld and blndlng
conslderlng LhaL Lhe corporaLlon ls a close corporaLlon run by Lhe
uulay famlly, wlLh peLlLloner uulay acLlng as presldenL, Lreasurer
and general manager wlLh almosL absoluLe conLrol over Lhe
buslness and affalrs of Lhe corporaLlon.
'*

Nagu|at Lnterpr|ses v CA
8espondenL Laxl drlvers, who were prevlously employed by
peLlLloner Cl1l, flled a complalnL for paymenL of separaLlon pay
due Lo LermlnaLlon/phase-ouL. 1he nL8C granLed separaLlon pay
and held peLlLloner Cl1l llable, as well as holdlng peLlLloners
Serglo nagulaL (as resldenL of Cl1l and nagulaL LnL.) and nagulaL
LnLerprlses [olnLly and severally llable.
1he Supreme CourL held LhaL even Lhough Cl1l and nagulaL LnL.
were close famlly corporaLlons owned by Lhe nagulaL famlly, Lhe
respondenLs falled Lo subsLanLlaLe Lhelr clalm LhaL lL was nagulaL
LnL. LhaL managed, surprlsed and conLrolled Lhelr employmenL. lL
cannoL, Lherefore, be llable. Powever, Serglo nagulaL ls solldarlly
llable for corporaLe LorL, pursuanL Lo par. 3 of Sec. 100 of Lhe Corp.
Code, because he had acLlvely engaged ln Lhe managemenL and
operaLlon of Cl1l, a close corporaLlon, whlch falled Lo comply wlLh
lLs law-lmposed obllgaLlon of granLlng separaLlon pay ln case of
closure noL due Lo serlous buslness losses.

1S) Spec|a| Corporat|ons
LducaLlonal CorporaLlons
Sect|on 106. locotpototloo. - LducaLlonal corporaLlons shall be governed by
speclal laws and by Lhe general provlslons of Lhls Code. (n)
LducaLlonal corporaLlons are Lhose whlch provlde faclllLles for
Leachlng or lnsLrucLlon. lL lncludes boLh publlc or prlvaLe schools.
ubllc schools, or Lhose creaLed by Lhe governmenL, are sub[ecL Lo
Lhe law of Lhelr creaLlon, wlLh provlslons of any speclal law or Lhe
CorporaLlon Code as supplemenL.
Sect|on 107. lte-tepolsltes to locotpototloo. - LxcepL upon favorable
recommendaLlon of Lhe MlnlsLry of LducaLlon and CulLure, Lhe SecurlLles
and Lxchange Commlsslon shall noL accepL or approve Lhe arLlcles of
lncorporaLlon and by-laws of any educaLlonal lnsLlLuLlon. (168a)
1hese lnsLlLuLlons of learnlng, once recognlzed by Lhe governmenL as
such, are mandaLed by law Lo be lncorporaLed wlLhln 90 days under
Lhe provlslons of Lhe CorporaLlon Code and musL, perforce, comply
wlLh Lhe requlremenLs and procedure lald down Lhereunder. 1helr
fallure Lo do so, however, wlll noL lmmune Lhe educaLlonal lnsLlLuLlon
from sulL as a corporaLlon.
Sect|on 108. 8ootJ of ttostees. - 1rusLees of educaLlonal lnsLlLuLlons
organlzed as non-sLock corporaLlons shall noL be less Lhan flve (3) nor more
Lhan flfLeen (13): rovlded, however, 1haL Lhe number of LrusLees shall be
ln mulLlples of flve (3).
unless oLherwlse provlded ln Lhe arLlcles of lncorporaLlon on Lhe by-laws,
Lhe board of LrusLees of lncorporaLed schools, colleges, or oLher
lnsLlLuLlons of learnlng shall, as soon as organlzed, so classlfy Lhemselves
LhaL Lhe Lerm of offlce of one-flfLh (1/3) of Lhelr number shall explre every
year. 1rusLees LhereafLer elecLed Lo flll vacancles, occurrlng before Lhe
explraLlon of a parLlcular Lerm, shall hold offlce only for Lhe unexplred
perlod. 1rusLees elecLed LhereafLer Lo flll vacancles caused by explraLlon of
Lerm shall hold offlce for flve (3) years. A ma[orlLy of Lhe LrusLees shall
consLlLuLe a quorum for Lhe LransacLlon of buslness. 1he powers and
auLhorlLy of LrusLees shall be deflned ln Lhe by-laws.
lor lnsLlLuLlons organlzed as sLock corporaLlons, Lhe number and Lerm of
dlrecLors shall be governed by Lhe provlslons on sLock corporaLlons. (169a)
Among oLher laws LhaL govern educaLlonal lnsLlLuLlons, par. 2 of Sec.
4, ArL. xlv of Lhe ConsLlLuLlon llmlLs Lhe ownershlp of forelgners Lo a
maxlmum of 40 of Lhe caplLal sLock. 1he same provlslon llmlLs such
ownershlp Lo non-conLrolllng lnLeresL as well, for allens cannoL slL as a
member of Lhe governlng board, and nelLher can Lhey acL as an
offlcer wlLh Lhe power of conLrol and admlnlsLraLlon of Lhe
lnsLlLuLlon.
8ellglous CorporaLlons
(+
Sect|on 109. closses of tellqloos cotpototloos. - 8ellglous corporaLlons may
be lncorporaLed by one or more persons. Such corporaLlons may be
classlfled lnLo corporaLlons sole and rellglous socleLles.
8ellglous corporaLlons shall be governed by Lhls ChapLer and by Lhe
general provlslons on non-sLock corporaLlons lnsofar as Lhey may be
appllcable. (n)
A rellglous corporaLlon ls one composed enLlrely of splrlLual persons,
creaLed for Lhe furLherance of rellglon or perpeLuaLlng Lhe rlghLs of
Lhe church or for Lhe admlnlsLraLlon of church or rellglous work or
properLy.
CorporaLlon Sole
Sect|on 110. cotpototloo sole. - lor Lhe purpose of admlnlsLerlng and
managlng, as LrusLee, Lhe affalrs, properLy and LemporallLles of any
rellglous denomlnaLlon, secL or church, a corporaLlon sole may be formed
by Lhe chlef archblshop, blshop, prlesL, mlnlsLer, rabbl or oLher presldlng
elder of such rellglous denomlnaLlon, secL or church. (134a)
A corporaLlon sole conslsLs of one person only and hls successor ln
some parLlcular sLaLlon, who are lncorporaLed by law ln order Lo glve
Lhem some legal capaclLles and advanLages, parLlcularly LhaL of
perpeLulLy, whlch ln Lhelr naLural persons Lhey could noL have had.
Sect|on 111. Attlcles of locotpototloo. - ln order Lo become a corporaLlon
sole, Lhe chlef archblshop, blshop, prlesL, mlnlsLer, rabbl or presldlng elder
of any rellglous denomlnaLlon, secL or church musL flle wlLh Lhe SecurlLles
and Lxchange Commlsslon arLlcles of lncorporaLlon seLLlng forLh Lhe
followlng:
1. 1haL he ls Lhe chlef archblshop, blshop, prlesL, mlnlsLer, rabbl or
presldlng elder of hls rellglous denomlnaLlon, secL or church and
LhaL he deslres Lo become a corporaLlon sole,
2. 1haL Lhe rules, regulaLlons and dlsclpllne of hls rellglous
denomlnaLlon, secL or church are noL lnconslsLenL wlLh hls
becomlng a corporaLlon sole and do noL forbld lL,
3. 1haL as such chlef archblshop, blshop, prlesL, mlnlsLer, rabbl or
presldlng elder, he ls charged wlLh Lhe admlnlsLraLlon of Lhe
LemporallLles and Lhe managemenL of Lhe affalrs, esLaLe and
properLles of hls rellglous denomlnaLlon, secL or church wlLhln hls
LerrlLorlal [urlsdlcLlon, descrlblng such LerrlLorlal [urlsdlcLlon,
4. 1he manner ln whlch any vacancy occurrlng ln Lhe offlce of
chlef archblshop, blshop, prlesL, mlnlsLer, rabbl of presldlng elder
ls requlred Lo be fllled, accordlng Lo Lhe rules, regulaLlons or
dlsclpllne of Lhe rellglous denomlnaLlon, secL or church Lo whlch
he belongs, and
3. 1he place where Lhe prlnclpal offlce of Lhe corporaLlon sole ls Lo
be esLabllshed and locaLed, whlch place musL be wlLhln Lhe
hlllpplnes.
1he arLlcles of lncorporaLlon may lnclude any oLher provlslon noL conLrary
Lo law for Lhe regulaLlon of Lhe affalrs of Lhe corporaLlon. (n)
Sect|on 112. 5obmlssloo of tbe ottlcles of locotpototloo. - 1he arLlcles of
lncorporaLlon musL be verlfled, before flllng, by affldavlL or afflrmaLlon of
Lhe chlef archblshop, blshop, prlesL, mlnlsLer, rabbl or presldlng elder, as
Lhe case may be, and accompanled by a copy of Lhe commlsslon, cerLlflcaLe
of elecLlon or leLLer of appolnLmenL of such chlef archblshop, blshop,
prlesL, mlnlsLer, rabbl or presldlng elder, duly cerLlfled Lo be correcL by any
noLary publlc.
lrom and afLer Lhe flllng wlLh Lhe SecurlLles and Lxchange Commlsslon of
Lhe sald arLlcles of lncorporaLlon, verlfled by affldavlL or afflrmaLlon, and
accompanled by Lhe documenLs menLloned ln Lhe precedlng paragraph,
such chlef archblshop, blshop, prlesL, mlnlsLer, rabbl or presldlng elder
shall become a corporaLlon sole and all LemporallLles, esLaLe and
properLles of Lhe rellglous denomlnaLlon, secL or church LhereLofore
("
admlnlsLered or managed by hlm as such chlef archblshop, blshop, prlesL,
mlnlsLer, rabbl or presldlng elder shall be held ln LrusL by hlm as a
corporaLlon sole, for Lhe use, purpose, behalf and sole beneflL of hls
rellglous denomlnaLlon, secL or church, lncludlng hosplLals, schools,
colleges, orphan asylums, parsonages and cemeLerles Lhereof. (n)
1he arLlcles of lncorporaLlon of a corporaLlon sole does noL requlre a
provlslon relaLlve Lo lLs Lerm of exlsLence slnce lL ls supposed Lo exlsL
ln perpeLulLy. lL may be dlssolved Lhough, ln accordance wlLh Sec.
113.
A corporaLlon sole, afLer flllng Lhe verlfled arLlcles of lncorporaLlon
along wlLh Lhe documenLs requlred, lmmedlaLely becomes endowed
wlLh corporaLe personallLy. 1hls ls an excepLlon Lo Lhe rule LhaL a
corporaLlon acqulres [urldlcal personallLy only upon Lhe lssuance of a
cerLlflcaLe of lncorporaLlon.
Sect|on 113. Acpolsltloo ooJ olleootloo of ptopetty. - Any corporaLlon sole
may purchase and hold real esLaLe and personal properLy for lLs church,
charlLable, benevolenL or educaLlonal purposes, and may recelve bequesLs
or glfLs for such purposes. Such corporaLlon may sell or morLgage real
properLy held by lL by obLalnlng an order for LhaL purpose from Lhe CourL
of llrsL lnsLance of Lhe provlnce where Lhe properLy ls slLuaLed upon proof
made Lo Lhe saLlsfacLlon of Lhe courL LhaL noLlce of Lhe appllcaLlon for
leave Lo sell or morLgage has been glven by publlcaLlon or oLherwlse ln
such manner and for such Llme as sald courL may have dlrecLed, and LhaL lL
ls Lo Lhe lnLeresL of Lhe corporaLlon LhaL leave Lo sell or morLgage should
be granLed. 1he appllcaLlon for leave Lo sell or morLgage musL be made by
peLlLlon, duly verlfled, by Lhe chlef archblshop, blshop, prlesL, mlnlsLer,
rabbl or presldlng elder acLlng as corporaLlon sole, and may be opposed by
any member of Lhe rellglous denomlnaLlon, secL or church represenLed by
Lhe corporaLlon sole: rovlded, 1haL ln cases where Lhe rules, regulaLlons
and dlsclpllne of Lhe rellglous denomlnaLlon, secL or church, rellglous
socleLy or order concerned represenLed by such corporaLlon sole regulaLe
Lhe meLhod of acqulrlng, holdlng, selllng and morLgaglng real esLaLe and
personal properLy, such rules, regulaLlons and dlsclpllne shall conLrol, and
Lhe lnLervenLlon of Lhe courLs shall noL be necessary. (139a)
Whlle Lhe corporaLlon sole ls empowered Lo acqulre and allenaLe
properLles, Lhe exLenL of lLs power Lo sell or morLgage real properLles
ls sub[ecL Lo Lhe resLrlcLlon LhaL a proper courL order musL flrsL be
secured for LhaL purpose. 1hls llmlLaLlon can be llfLed accordlng Lo Lhe
lasL provlso.
1he reglsLraLlon of real properLy ln Lhe name of a corporaLlon sole wlll
noL vesL unLo Lhe head Lhereof ownershlp of Lhe properLy whlch
would devolve upon Lhe church or congregaLlon acqulrlng lL.
1he consLlLuLlonal requlremenL LhaL 60 of Lhe caplLal of Lhe
corporaLlon musL be owned by llllplno clLlzens before lL may reglsLer
land ln lLs own name does noL apply Lo a corporaLlon sole.
A corporaLlon sole cannoL acqulre land of Lhe publlc domaln, unless
Lhe land has become prlvaLe Lhrough open, conLlnuous and excluslve
possesslon for 30 years.

koman Catho||c Aposto||c Church v LkC
1he Land 8eglsLraLlon Commlssloner was of Lhe vlew LhaL
peLlLloner cannoL acqulre and reglsLer hlllpplne land ln Lhe
absence of proof LhaL aL leasL 60 of lLs caplLal, asseLs or properLy
were acLually owned or conLrolled by llllplno clLlzens. 1he
Supreme CourL recognlzed Lhe peLlLloner as a corporaLe sole, an
unhappy freak of Lngllsh Law".
1he corporaLlon sole merely admlnlsLraLors of church properLy
LhaL Lhey hold ln LrusL. lL ls glven Lhe power Lo purchase properLy,
and corollary Lo Lhls, ls able Lo reglsLer for Lhe same.

D|rector of Lands v CA
lglesla nl CrlsLo flled an appllcaLlon for Lhe reglsLraLlon of land lL
acqulred by vlrLue of absoluLe sale, conLendlng LhaL lL and lLs
predecessor-ln-lnLeresL had been ln acLual, conLlnuous, publlc,
peaceful and adverse possesslon and occupaLlon of Lhe land ln Lhe
concepL of owner for more Lhan 30 years. 1he ulrecLor of Lands
opposed Lhelr clalms.
1he Supreme CourL held LhaL Lhe 1973 consLlLuLlonal prohlblLlon
cannoL apply because Lhe land Lhe 30 year perlod of open,
(#
conLlnuous, excluslve and noLorlous possesslon and occupaLlon
requlred by law was compleLed ln 1966. And under Lhe
ConsLlLuLlon Lhen ln force, prlvaLe corporaLlons were noL
prohlblLed from acqulrlng publlc lands less Lhan 1,124 hecLares ln
slze.

kepub||c v IAC
1he 8oman CaLhollc 8lshop of Lucena flled an appllcaLlon for
conflrmaLlon of LlLle Lo 4 loLs, clalmlng LlLle elLher Lhrough
purchase or donaLlon daLlng as far back as 1928. 1he lower courL
approved and ordered Lhe reglsLraLlon buL Lhe SollclLor Ceneral,
Lhrough a moLlon for reconslderaLlon, quesLlons Lhe legal capaclLy
of Lhe corporaLlon sole and wheLher or noL Lhe consLlLuLlonal
prohlblLlon should apply.
1he Supreme CourL asserLed Lhe vesLed rlghL of a corporaLlon sole
Lo purchase and hold real and personal properLy pursuanL Lo Lhe
CorporaLlon Code. 1herefore, lL cannoL be LreaLed as an ordlnary
prlvaLe corporaLlon as Lo whlch Lhe consLlLuLlonal prohlblLlon
should apply.

lllllng up of vacancles
Sect|on 114. llllloq of vocoocles. - 1he successors ln offlce of any chlef
archblshop, blshop, prlesL, mlnlsLer, rabbl or presldlng elder ln a
corporaLlon sole shall become Lhe corporaLlon sole on Lhelr accesslon Lo
offlce and shall be permlLLed Lo LransacL buslness as such on Lhe flllng wlLh
Lhe SecurlLles and Lxchange Commlsslon of a copy of Lhelr commlsslon,
cerLlflcaLe of elecLlon, or leLLers of appolnLmenL, duly cerLlfled by any
noLary publlc.
uurlng any vacancy ln Lhe offlce of chlef archblshop, blshop, prlesL,
mlnlsLer, rabbl or presldlng elder of any rellglous denomlnaLlon, secL or
church lncorporaLed as a corporaLlon sole, Lhe person or persons
auLhorlzed and empowered by Lhe rules, regulaLlons or dlsclpllne of Lhe
rellglous denomlnaLlon, secL or church represenLed by Lhe corporaLlon sole
Lo admlnlsLer Lhe LemporallLles and manage Lhe affalrs, esLaLe and
properLles of Lhe corporaLlon sole durlng Lhe vacancy shall exerclse all Lhe
powers and auLhorlLy of Lhe corporaLlon sole durlng such vacancy. (138a)
ulssoluLlon
Sect|on 11S. ulssolotloo. - A corporaLlon sole may be dlssolved and lLs
affalrs seLLled volunLarlly by submlLLlng Lo Lhe SecurlLles and Lxchange
Commlsslon a verlfled declaraLlon of dlssoluLlon.
1he declaraLlon of dlssoluLlon shall seL forLh:
1. 1he name of Lhe corporaLlon,
2. 1he reason for dlssoluLlon and wlndlng up,
3. 1he auLhorlzaLlon for Lhe dlssoluLlon of Lhe corporaLlon by Lhe
parLlcular rellglous denomlnaLlon, secL or church,
4. 1he names and addresses of Lhe persons who are Lo supervlse
Lhe wlndlng up of Lhe affalrs of Lhe corporaLlon.
upon approval of such declaraLlon of dlssoluLlon by Lhe SecurlLles and
Lxchange Commlsslon, Lhe corporaLlon shall cease Lo carry on lLs
operaLlons excepL for Lhe purpose of wlndlng up lLs affalrs. (n)
8ellglous SocleLles
Sect|on 116. kellqloos socletles. - Any rellglous socleLy or rellglous order, or
any dlocese, synod, or dlsLrlcL organlzaLlon of any rellglous denomlnaLlon,
secL or church, unless forbldden by Lhe consLlLuLlon, rules, regulaLlons, or
dlsclpllne of Lhe rellglous denomlnaLlon, secL or church of whlch lL ls a parL,
or by compeLenL auLhorlLy, may, upon wrlLLen consenL and/or by an
afflrmaLlve voLe aL a meeLlng called for Lhe purpose of aL leasL Lwo-Lhlrds
(2/3) of lLs membershlp, lncorporaLe for Lhe admlnlsLraLlon of lLs
LemporallLles or for Lhe managemenL of lLs affalrs, properLles and esLaLe by
flllng wlLh Lhe SecurlLles and Lxchange Commlsslon, arLlcles of
($
lncorporaLlon verlfled by Lhe affldavlL of Lhe presldlng elder, secreLary, or
clerk or oLher member of such rellglous socleLy or rellglous order, or
dlocese, synod, or dlsLrlcL organlzaLlon of Lhe rellglous denomlnaLlon, secL
or church, seLLlng forLh Lhe followlng:
1. 1haL Lhe rellglous socleLy or rellglous order, or dlocese, synod,
or dlsLrlcL organlzaLlon ls a rellglous organlzaLlon of a rellglous
denomlnaLlon, secL or church,
2. 1haL aL leasL Lwo-Lhlrds (2/3) of lLs membershlp have glven
Lhelr wrlLLen consenL or have voLed Lo lncorporaLe, aL a duly
convened meeLlng of Lhe body,
3. 1haL Lhe lncorporaLlon of Lhe rellglous socleLy or rellglous order,
or dlocese, synod, or dlsLrlcL organlzaLlon deslrlng Lo lncorporaLe
ls noL forbldden by compeLenL auLhorlLy or by Lhe consLlLuLlon,
rules, regulaLlons or dlsclpllne of Lhe rellglous denomlnaLlon, secL,
or church of whlch lL forms a parL,
4. 1haL Lhe rellglous socleLy or rellglous order, or dlocese, synod,
or dlsLrlcL organlzaLlon deslres Lo lncorporaLe for Lhe
admlnlsLraLlon of lLs affalrs, properLles and esLaLe,
3. 1he place where Lhe prlnclpal offlce of Lhe corporaLlon ls Lo be
esLabllshed and locaLed, whlch place musL be wlLhln Lhe
hlllpplnes, and
6. 1he names, naLlonallLles, and resldences of Lhe LrusLees elecLed
by Lhe rellglous socleLy or rellglous order, or Lhe dlocese, synod,
or dlsLrlcL organlzaLlon Lo serve for Lhe flrsL year or such oLher
perlod as may be prescrlbed by Lhe laws of Lhe rellglous socleLy or
rellglous order, or of Lhe dlocese, synod, or dlsLrlcL organlzaLlon,
Lhe board of LrusLees Lo be noL less Lhan flve (3) nor more Lhan
flfLeen (13). (160a)
under common law, a rellglous socleLy ls a body of persons
assoclaLed LogeLher for Lhe purpose of malnLalnlng rellglous worshlp.
1he rellglous socleLy and Lhe church are dlsLlncL bodles, lndependenL
of each oLher, Lhough Lhey may exlsL wlLh Lhe oLher.
A rellglous socleLy ls noL mandaLed by law Lo reglsLer as a corporaLlon
buL lL may do so Lo acqulre [urldlcal personallLy and for Lhe purpose of
admlnlsLraLlon and LemporallLles and properLles and even Lo acqulre
properLles of lLs own. lL has been held LhaL an unlncorporaLed
rellglous assoclaLlon cannoL acqulre prlvaLe agrlculLural lands ln Lhe
hlllpplnes.
Llke Lhe corporaLlon sole, Lhe arLlcles of lncorporaLlon of a rellglous
socleLy need noL conLaln a Lerm of lLs exlsLence as lL ls supposed Lo
exlsL ln perpeLulLy.


16) D|sso|ut|on and W|nd|ng Up

LxLlngulshmenL of Lhe corporaLe franchlse and Lhe
LermlnaLlon of corporaLlon.
A corporaLlon ceases Lo be a [urldlcal enLlLy and can no longer
pursue Lhe buslness for whlch lL ls lncorporaLed 8u1 may
conLlnue as a body corporaLe for anoLher 3 years from Lhe
Llme lL was dlssolved for Lhe purpose of wlndlng up lLs affalrs
and llquldaLlon of asseLs.
3 Ways of D|sso|ut|on (Accordlng Lo LAulA, Lhere are 3 ways Lo dlssolve a
corporaLlon however Lhe Code (Sec. 117) only provldes for 2 because Lhe
explraLlon of Lerm can rlghLfully be consldered volunLary dlssoluLlon- Lhe
lnLenLlon of Lhe sLockholders ls only for Lhe corporaLlon Lo exlsL for such
perlod.
1. Lxp|rat|on of 1erm
A corporaLlon ceases Lo exlsL and deemed auLomaLlcally
dlssolved upon Lhe explraLlon of Lhe Lerm lndlcaLed ln Lhe
arLlcles of lncorporaLlon wlLhouL Lhe need for any formal
proceedlngs.
(%
Powever, Lhe orlglnal Lerm of exlsLence lndlcaLed ln Lhe
arLlcles of lncorporaLlon ls sub[ecL Lo exLenslon (Sec. 11 and
37). LxLenslon of Lhe corporaLe Lerm musL be made before
Lhe explraLlon of Lhe orlglnal Lerm oLherwlse Lhe corporaLlon
ls dlssolved, lpso facLo. LxLenslon should noL be made earller
Lhan 3 years prlor Lo Lhe orlglnal explraLlon unless for
[usLlflable reasons deLermlned by Lhe SLC (Sec. 11).
Case: N8 v. CII (1992)
rlvaLe 8espondenLs enLered lnLo a conLracL of lease wlLh
hlllpplne 8loomlng Mllls (8M) for 20 years and exLendlble for
anoLher 20 years aL Lhe opLlon of lessee should Lhelr corporaLe
Lerm of exlsLence be exLended ln accordance Lo law. 8M
execuLed ln favour of n8 a ueed of AsslgnmenL Lransferrlng all
rlghLs under Lhe conLracL of lease (Lhls was annoLaLed on Lhe LlLle).
rlvaLe 8espondenLs flled moLlon Lo cancel Lhe annoLaLlons on Lhe
cerLlflcaLe of LlLle regardlng asslgnmenL of leasehold rlghLs,
lmprovemenLs and real esLaLe morLgages. 1hey were clalmlng LhaL
Lhe lease had already explred for 8M's fallure Lo renew a second
20 year lease and Lhe fallure Lo exLend lLs corporaLe exlsLence.
lssue: WCn CancellaLlon of enLrles on Lhe cerLlflcaLe of LlLle ls
valld? ?LS
8aLlo: 1he lease conLracL provldes LhaL only lf Lhere ls exLenslon of
corporaLe Lerm can Lhe lease be exLended. 8M's fallure Lo
exLend LermlnaLed Lhelr rlghLs over Lhe land. 1he parLles have
sLlpulaLed ln Lhe conLracL Lhelr own Lerms and condlLlons
concernlng Lhe lmprovemenLs before Lhe LermlnaLlon of Lhe lease.
n8 as asslgnee of 8M succeeded Lo Lhe obllgaLlon of Lhe laLLer
under Lhe conLracL of lease. lL could noL possess rlghLs more Lhan
whaL 8M had as lessee under Lhe conLracL. Pence, n8 was duly
bound Lo remove Lhe lmprovemenLs before Lhe explraLlon of Lhe
perlod of lease. lLs fallure Lo do so when Lhe lease LermlnaLed was
LanLamounL Lo a walver of lLs rlghLs and lnLeresL over Lhe
lmprovemenLs on Lhe leased premlses.

2. Vo|untary D|sso|ut|on]Surrender of Iranch|se
- 3 modes of volunLary dlssoluLlon: 1.volunLary ulssoluLlon where
no credlLors are affecLed, 2. volunLary ulssoluLlon where credlLors
are affecLed, 3. ShorLenlng of CorporaLe Lerm.
a. volunLary ulssoluLlon where no credlLors are affecLed
(Sec. 118) - lormal and rocedural 8equlremenLs
(MandaLory, fallure Lo comply wlll have no effecL on Lhe
legal exlsLence of Lhe corporaLlon)
1. Ma[orlLy voLe of board of dlrecLors of LrusLees
2. noLlce Lo each sLockholder/member by
reglsLered mall C8 personal dellvery 30 days
prlor Lo Lhe meeLlng (scheduled by board, for
dlssoluLlon)
3. ubllcaLlon of noLlce of Llme, place and sub[ecL
of Lhe meeLlng for 3 consecuLlve weeks ln a
newspaper publlshed ln Lhe place where Lhe
prlnclpal offlce of corp ls locaLed or ln a
newspaper of general clrculaLlon ln Lhe
hlllpplnes.
4. 8esoluLlon adopLed by Lhe afflrmaLlve voLe of
Lhe sLockholders ownlng aL leasL 2/3 of Lhe
ouLsLandlng caplLal sLock or 2/3 of Lhe members
aL Lhe meeLlng duly called for Lhe purpose.
3. Copy of resoluLlon auLhorlzlng Lhe dlssoluLlon-
cerLlfled by ma[orlLy of board of dlrecLors or
LrusLees and counLerslgned by corporaLe
secreLary.
6. lssuance of cerLlflcaLe of dlssoluLlon by SLC.

b. volunLary ulssoluLlon where credlLors are affecLed (Sec.
119) - 8equlremenLs are mandaLory excepL for Lhe
appolnLmenL of a recelver whlch ls only permlsslve slnce
Lhe law lnLended Lo leL Lhe shareholders have Lhe conLrol
of Lhe asseLs of Lhe corporaLlon upon dlssoluLlon ln
wlndlng up lLs affalrs.
1. AfflrmaLlve voLe of sLockholders represenLlng aL
leasL 2/3 of ma[orlLy of ouLsLandlng caplLal sLock or
aL leasL 2/3 of members aL a meeLlng duly called for
LhaL purpose
(&
2. eLlLlon for dlssoluLlon shall be flled wlLh SLC slgned
by ma[orlLy of lLs board dlrecLors or LrusLees or oLher
offlcers havlng Lhe managemenL of lLs affalrs,
verlfled by Lhe presldenL or secreLary or one of lLs
board of dlrecLors or LrusLees seLLlng forLh all clalms
and demands agalnsL lL.
3. lssuance of an order of SLC- musL sLaLe Lhe purpose
of peLlLlon and flxlng Lhe daLe on or before whlch
ob[ecLlons LhereLo may be flled by any person, whlch
daLe shall be 30-60 days afLer enLry of order.
4. 8efore such daLe, copy of Lhe order musL be publlshed
once a week for 3 consecuLlve weeks ln a newspaper of
general clrculaLlon publlshed ln Lhe clLy/munlclpallLy
where Lhe prlnclpal offlce ls slLuaLed or ln a newspaper of
general clrculaLlon ln Lhehlllpplnes.
3. osLlng of Lhe same order for 3 consecuLlve weeks ln 3
publlc places ln such a clLy/munlclpallLy.
6. upon 3 days' noLlce, glven afLer Lhe daLe on whlch Lhe
rlghL Lo flle ob[ecLlons has explred, Lhe SLC shall hear Lhe
peLlLlon and Lry any lssue made by Lhe ob[ecLlons flled.
7. !udgmenL dlssolvlng Lhe corporaLlon and dlrecLlng
dlsposlLlon of lLs asseLs as [usLlce requlres and Lhe
appolnLmenL of a recelver (lf necessary ln lLs dlscreLlon)
Lo collecL such asseLs and pay Lhe debLs of Lhe
corporaLlon.
c. ShorLenlng of CorporaLe 1erm (Sec. 120)
-1hrough amendmenL of arLlcles of lncorporaLlon
alLhough sec. 16 does noL apply ln Lerms of wrlLLen
assenL and auLomaLlc dlssoluLlon. Sec. 37 mandaLes LhaL
Lhe voLes musL be casL aL a duly consLlLuLed meeLlng. Sec.
120 ls also very clear LhaL lL ls only upon Lhe approval of
Lhe SLC LhaL Lhe corporaLlon ls deemed dlssolved.

3. Invo|untary D|sso|ut|on (Sec. 121)

May be dlssolved by SLC (concurrenL [urlsdlcLlon wlLh
Speclal Commerclal CourLs) upon flllng of a verlfled
complalnL and afLer proper noLlce and hearlng on Lhe
grounds provlded by exlsLlng laws, ruled and regulaLlons.

Crounds (Sec. 6, u 902-A):
1. lraud ln procurlng lLs cerLlflcaLe of reglsLraLlon
2. Serlous mlsrepresenLaLlons as Lo whaL Lhe corporaLlon can do
or ls dolng Lo Lhe greaL pre[udlce of or damage Lo Lhe general
publlc
3. 8efusal Lo comply or deflance of any lawful order of Lhe
Commlsslon resLralnlng commlsslon of acLs whlch would
amounL Lo a grave vlolaLlon of lLs franchlse
4. ConLlnuous lnoperaLlon for a perlod of aL leasL 3 years
3. lallure Lo flle by-laws wlLhln Lhe requlred perlod
6. lallure Lo flle requlred reporLs ln approprlaLe forms as
deLermlned by Lhe Commlsslon wlLhln Lhe prescrlbed perlod
Crounds (Corpo Code)
1. vlolaLlon of Sec. 144
2. ueadlock ln a close corporaLlon (Sec. 103)
3. ln a close corporaLlon, any acLs of dlrecLors, offlcers or Lhose
ln conLrol of Lhe corporaLlon whlch ls lllegal or fraudulenL or
dlshonesL or oppresslve or unfalrly pre[udlclal Lo Lhe
corporaLlon or any sLockholder or whenever corporaLe asseLs
are belng mlsapplled or wasLed (Sec. 103)

CLher grounds can be found ln oLher speclal laws llke S8C
and Lhe Ceneral 8anklng AcL.
1he rellef of dlssoluLlon wlll be awarded only where no
oLher adequaLe remedy ls avallable and lL wlll noL be
allowed where Lhe rlghLs of Lhe sLockholders can be, or
are, proLecLed ln some oLher way.
Cases:
Government v. h|||pp|ne Sugar Lstate Co.(SLC)
('
lacLs: CuC WarranLo was broughL by 8epubllc agalnsL SLC. lor a
perlod of 18monLhs lL had conLlnuously offended agalnsL laws and
mlsused lLs corporaLe auLhorlLy, franchlse and prlvlleges and had
assumed prlvlleges and franchlses noL granLed. lL enLered lnLo a
conLracL wlLh 1ayabas Land Lo purchase lands along Lhe rlghL of
way of Lhe Manlla 8allroad Company Lhrough Lhe rovlnce of
1ayabas wlLh a vlew of selllng Lhe same Lo Lhe Manlla 8allroad
Company for proflL.
Peld: ulSSCLvLu!
8aLlo: 1he scope of Lhe remedy furnlshed by quo warranLo ls Lo
forfelL Lhe franchlse of a corporaLlon for mls-user or non-user. lL ls
necessary ln order Lo secure a [udlclal forfelLure of charLer Lo
show a mls-user of lLs franchlse [usLlfylng such a forfelLure. 1he
mls-user musL be such as Lo work or LhreaLen a subsLanLlal ln[ury
Lo Lhe publlc, or such as Lo work or LhreaLen a subsLanLlal ln[ury Lo
Lhe publlc, or such as Lo amounL Lo a vlolaLlon of Lhe fundamenLal
condlLlon of Lhe conLracL by whlch Lhe franchlse was granLed and
Lhus defeaL Lhe purpose of Lhe granL and ordlnarlly Lhe wrong or
evll musL be one remedlable ln no oLher form of [udlclal
proceedlng. 1he purpose of lnLervenLlon of Lhe defendanL ln Lhls
case was Lo enrlch lLself aL Lhe expense of Lhe Laxpayers of hll,
who had, by a franchlse granLed, permlLLed Lhe defendanL Lo exlsL
and Lo buslness as a corporaLlon. 1he conducL of defendanL ln Lhe
premlse merlLs Lhe severesL condemnaLlon of Lhe law.

Government v. L| nogar I|||p|no
lacLs: eLlLlon Lo dlssolve Ll Pogar for vlolaLlon of Sec 73 AcL of
Congress and Sec 13.3 Corp Code- musL dlspose of real esLaLe
obLalned wlLhln 3 years afLer recelpL of LlLle and also cerLaln parLs
of by-laws are ln confllcL wlLh Corpo Code.
nLLD: nC1 ulSSCLvLu. AlLhough Lhere was vlolaLlon of Lhe law,
lLs conducL noL characLerlzed by obduracy and perLlnaclLy ln
conLempL of law. A falr lnLerpreLaLlon of acL of congress sec 73
would lndlcaLe LhaL Lhe daLe of recelvlng Lhe LlLle was Lhe daLe
when Lhe respondenL recelved Lhe owners cerLlflcaLe. 1he fallure
of respondenL Lo recelve Lhe cerLlflcaLe sooner was noL due Lo lLs
faulL buL Lo unexplalned delay on Lhe parL of Lhe reglsLer of deeds.
lor Lhls delay Lhe respondenL cannoL be held accounLable. lor by-
laws ln confllcL wlLh Corpo Code, provlslon wlll only be declared a
nulllLy and shall noL be enforced even lf dlrecLors were Lo
aLLempL Lo do so.

kepub||c v. Secur|ty Cred|t and Acceptance Corp
lacLs: Cuo WarranLo Lo dlssolve corp for engaglng ln banklng
operaLlons wlLhouL auLhorlLy requlred by Ceneral 8anklng AcL.
Also, Lhe corporaLlon lgnored Lhe MoneLary 8oard resoluLlon
declarlng lLs lllegal LransacLlon and conLlnued lLs operaLlon-
managed Lo lnduce publlc Lo open 39,643 savlngs deposlL
accounLs.
nLLD: ulSSCLvLu. uefendanL corp has vlolaLed Lhe law by
engaglng ln banklng wlLhouL securlng Lhe admlnlsLraLlve auLhorlLy
requlred ln 8A 337. 1he lllegal LransacLlons underLaken by corp
warranL dlssoluLlon ls apparenL from facL LhaL Lhe foregolng mls-
user of Lhe corporaLe funds and franchlse affecLs Lhe essence of
lLs buslness, LhaL lL ls wllful and has been repeaLed 39,643 Llmes
and LhaL lLs conLlnuance lnfllcLs ln[ury upon publlc, owlng Lo Lhe
number of persons affecLed Lhereby.

kepub||c v. 8|saya Land 1ransporat|on Co, Inc.
lacLs: 9 causes of acLlon for dlssoluLlon: 1. lalsely reconsLlLuLed
arLlcles of lncorporaLlon by addlng new purposes noL orlglnally
lncluded- lumber concesslon, caLLle ranch, agrl, gen merch, 2.
AdopLed resoluLlon auLhorlzlng acqulslLlon of publlc land and
Llmber concesslons- vlolaLlon of AcL 143, 3. 8esoluLlon auLhorlzlng
corp Lo lease pasLure land of caLLle ranch on a publlc land, 4.
CperaLed a gen merch sLore (noL necessary, lncldenLal Lo
accompllshmenL of prlnclpal buslness), 3. Corp allowed non
sLockholders Lo be offlcers, 6. Lngaged ln mlnlng, 7. lmporLed and
sold black markeL prlces Lo 3
rd
persons, 8. ald laborers below
mlnlmum wage, manlpulaLed books Lo make lL appear LhaL
laborers were pald ln accordance Lo mln wage, 9. lalled Lo
malnLaln accuraLe and falLhful sLock and Lransfer books.
nLLD: nC1 ulSSCLvLu. 1he courL found LhaL Lhe several acLs of
mls-use of and mlsappllcaLlon of Lhe funds and/or asseLs of Lhe
corp were commlLLed more parLlcularly by Lhe presldenL and
((
anoLher offlcer for Lhe commlsslon of whlch Lhey may be held
personally llable. 1he courL also found a quo LhaL Lhe conLroversy
beLween Lhe parLles was more personal Lhan anyLhlng else and
dld noL aL all affecL publlc lnLeresL. CLher parLles who mlghL feel
aggrleved, would noL be wlLhouL Lhelr remedles slnce Lhey can
sLlll malnLaln whaLever clalms Lhey may have agalnsL each oLher.
A rellef by dlssoluLlon wlll be awarded only where no oLher
adequaLe remedy ls avallable and ls noL avallable where Lhe rlghLs
of Lhe sLockholders can be, or are, proLecLed ln some oLher way.

I|nanc|ng Corp of the h|| v. 1eodoro
lacLs: ulssoluLlon was flled by sLockholders agalnsL corp and
general manager/presldenL for alleged gross mlsmanagemenL and
fraudulenL conducL of Lhe corporaLe affalrs. 1he corp quesLloned
Lhe appolnLmenL of a recelver and Lhe capaclLy of Lhe
sLockholders Lo flle for dlssoluLlon.
PLLu: Ceneral 8ule: MlnorlLy sLockholders of a corp cannoL use
and demand lLs dlssoluLlon. LxcepLlon: when such mlnorlLy
members, ls unable Lo obLaln redress and proLecLlon of Lhelr
rlghLs wlLhln Lhe corporaLlon, musL noL and should noL be lefL
wlLhouL redress and remedy. lL was held ln Pall v. lcclo LhaL even
Lhe exlsLence lf a de [ure corporaLlon may be LermlnaLed ln a
prlvaLe sulL for lLs dlssoluLlon by Lhe sLockholders wlLhouL Lhe
lnLervenLlon of Lhe SLaLe.

Lffects of D|sso|ut|on
1. 1ermlnaLes all franchlses- wheLher prlmary or secondary
2. CannoL apply for a new cerLlflcaLe or a secondary franchlse for lL ls
lncapable of recelvlng a granL
3. CannoL enforce a conLracL execuLed prlor lLs dlssoluLlon for Lhe
purpose of conLlnulng Lhe buslness of lLs organlzaLlon.
4. uebLs are noL exLlngulshed. lL may be broughL wlLhln Lhe 3 year
perlod of llquldaLlon.
3. 8lghLs and llablllLles are noL exLlngulshed by lLs dlssoluLlon. lor
example ln lease, a lease Lo a corp may, by lLs Lerms, LermlnaLe
where Lhe corporaLlon ceases Lo exlsL buL unless Lhe lease so
provldes, Lhe rlghLs and obllgaLlons Lhereunder are noL
exLlngulshed by Lhe corp's dlssoluLlon. Leases affecLs properLy
rlghLs and survlve Lhe deaLh of Lhe parLles.
upon explraLlon of Lhe 3 year perlod Lo wlnd up affalrs, Lhe [urldlcal
personallLy of Lhe corporaLlon ceases for all lnLenLs and purposes, and as a
general rule, lL can no longer sue and be sued.
Cases:
8uenaf|or v. Cam Sur Industry Corp
lacLs: Cam Sur lndusLry flled opposlLlon Lo 8uenaflor's proposed
lce planL and flled appllcaLlon Lo consLrucL and manage lLs own lce
planL. 8uenaflor challenged Lhe personallLy of Lhe corporaLlon
alleglng LhaL lLs corporaLe llfe had explred. lnsLead of flllng lLs
answer, Cam Sur flled for exLenslon of Llme Lo answer. 1he
corporaLors reglsLered new arLlcles of lncorporaLlon and flled for
cerL of publlc convenlence. ln lLs answer, lL alleged lLs recenL
lncorporaLlon plus acqulslLlon of new asseLs and cpcs.
nLLD: When Cam Corp dockeLed lLs appllcaLlon, lL had no longer
[udlclal personallLy slnce lL had ceased Lo exlsL as a corporaLlon
and could noL sue nor apply for cerLlflcaLe, for lL was lncapable of
recelvlng granL. 1he new corp ls merely a Lransferee of Lhe
properLles of old plus Lhe cpc Lo operaLe lce planL. lL has noL flled
any appllcaLlon for cpc and has noL publlshed such appllcaLlon.

Cebu ort Labor Un|on v. State Mar|ne Co. Lt a|.
lacLs: 1he Cebu orL Labor unlon flled for peLlLlon for recognlLlon
of sLevedorlng servlce and ln[uncLlon agalnsL SLaLes Marlne Corp.
1he unlon was awarded a conLracL for Lhe excluslve rlghL of
loadlng and unloadlng of cargoes of vessel formerly owned by
Lllzalde and Co whlch ownershlp was Lransferred Lo SLaLe Marlne.
Corp flled MoLlon Lo ulsmlss alleglng LhaL lL havlng been dlssolved,
had no longer personallLy Lo enLer or refuse Lo enLer lnLo any
conLracL.
nLLD: 1he 3 year perlod allowed by law ls only for Lhe purpose of
wlndlng up lLs affalrs. unlon prayed LhaL lL be declared Lo have Lhe
rlghL Lo sLevedorlng work Lhereby respecLlng Lhe conLracL
enLered lnLo by Lhem and Lllzalde and subsequenLly enforced and
()
conLlnued by SLaLe Marlne". lL appearlng LhaL sLaLe marlne was
already dlssolved aL Lhe Llme peLlLlon was flled and Lhe vessels
sub[ecL of Lhe agreemenL havlng changed hands, lL cannoL be
compelled now Lo respecL such agreemenL speclally conslderlng
Lhe facL LhaL lL cannoL be made a parLy Lo Lhls sulL.

Gonza|es v. Sugar kegu|atory Adm|n|strat|on
lacLs: Sps. Conzales flled for cancellaLlon of morLgage of recovery
of money agalnsL 8epubllc lanLers, hllsucom and S8A. LC 28
abollshed hllsucom. Sps assalled lLs consLlLuLlonallLy because ln
effecL, lL desLroyed Lhelr rlghL Lo recover. Sps. AsserL LhaL Lhey had
been deprlved of properLy wlLhouL due process of law and LhaL
Lhe abollLlon of hllSuCom and Lhe Lransfer of asseLs Lo S8A are
unconsLl and lneffecLlve. ls S8A llable Lo clalm of spouses?
nLLD: 1he LermlnaLlon of Lhe llfe of a [urldlcal enLlLy does noL by
lLself lmply Lhe dlmlnuLlon or exLlncLlon of rlghLs demandable
agalnsL such [urldlcal enLlLy. hllsucom's conLracLual obllgaLlons
carry wlLh lL subsLanLlve rlghLs whlch cannoL be desLroyed by Lhe
LC. Should Lhe asseLs of hllsucom remalnlng ln hllsucom aL Lhe
Llme of lLs abollLlon noL be adequaLe Lo pay for all lawful clalms
agalnsL hllsucom, S8A musL be held llable for such clalms Lo Lhe
exLenL of Lhe falr markeL value of asseLs acLually Laken over by
S8A.
L|qu|dat|on and W|nd|ng Up
- CollecLlon of all asseLs, paymenLs of all lLs debLs and seLLlemenL of
lLs obllgaLlons and Lhe ulLlmaLe dlsLrlbuLlon of Lhe corporaLe
asseLs, lf any of lL remalns, Lo all sLockholders ln accordance wlLh
Lhelr proporLlonaLe sLockholdlngs ln Lhe corporaLlon or ln
accordance wlLh Lhelr respecLlve conLracLs of subscrlpLlon.
3 ways (L|qu|dat|on)
1. 8y Lhe corporaLlon lLself Lhrough 8oard of ulrecLors- Lhe board
wlll have 3 years Lo flnlsh lLs Lask of llquldaLlon. Clalms for or
agalnsL Lhe corp noL flled wlLhln Lhe perlod wlll become
unenforceable as Lhere exlsL no corporaLe enLlLy agalnsL whlch
Lhey can be enforced. AcLlons pendlng for or agalnsL Lhe corp
when Lhe 3 year perlod explres are abaLed slnce afLer LhaL perlod,
Lhe corporaLlon ceases for all lnLenLs and purposes and ls no
longer capable of sulng or belng sued.
2. 8y a 1rusLee appolnLed by Lhe corporaLlon- 3 year perlod wlll noL
apply provlded deslgnaLlon be made wlLhln LhaL perlod. ln effecL,
corp, as represenLed by LrusLee, can sue and be sued beyond 3
year perlod. 1rusLee may lnclude counsel Lo whom case ls
enLrusLed.
3. 8y appolnLmenL of a recelver- Lhrough a peLlLlon or moLu proprlo
upon dlssoluLlon of corp. 3 year explraLlon wlll noL apply because
Lhe corp ls subsLlLuLed by recelver.



Cases:
Nat|ona| Abaca Cther I|bers Co. V. ore
lacLs: naLlonal Abaca flled agalnsL ore for recovery of money. ore
moved Lo dlsmlss on Lhe ground LhaL corp has no capaclLy Lo sue. lL was
abollshed by LC 372.
PLLu: endlng acLlons by or agalnsL a corporaLlon are abaLed upon
explraLlon of Lhe perlod allowed by law for Lhe llquldaLlon of lLs affalrs. lL ls
generally held LhaL where a sLaLuLe conLlnues Lhe exlsLence of a
corporaLlon for a cerLaln perlod afLer lLs dlssoluLlon for Lhe purpose of
prosecuLlng and defendlng sulLs, Lhe corporaLlon becomes defuncL upon
Lhe explraLlon of such perlod, aL leasL ln Lhe absence of provlslon Lo Lhe
conLrary, so LhaL no acLlon can afLerwards be broughL by or agalnsL Lhe lL,
and musL be dlsmlssed. AcLlons pendlng by or agalnsL Lhe corporaLlon
when Lhe perlod allowed by Lhe sLaLuLe explres, ordlnarlly abaLe.
Sumera v. Va|enc|a
(*
lacLs: eLlLlon was flled for volunLary dlssoluLlon of corp. uamaso nlcolas
was appolnLed asslgnee and was laLer on replaced by 1lburclo Sumera. Pe
flled a moLlon asklng Lugenlo Lo dellver 400 belonglng Lo Lhe funds of
corporaLlon. valencla alleged prescrlpLlon slnce acLlon Lhe acLlon was
commenced on !une 3, 1936 whlle Lhe dlssoluLlon of corporaLlon was on
leb 14, 1928.
PLLu: lf a recelver/asslgnee ls appolnLed wlLh or wlLhouL Lransfer of lLs
properLles wlLhln 3 years, Lhe legal lnLeresL passes Lo Lhe asslgnee- where
he ls allowed Lo brlng an acLlon ouLslde of Lhe 3 year perlod.
8oard of L|qu|dators v. ka|aw
lacLs: nacoco seeks Lo recover sum of money from Lhe general manager
and board chalrman Maxlmo kalaw and oLher dlrecLors. lL charges Lhem
negllgence, bad falLh and/or breach of LrusL for havlng approved conLracLs
for dellvery of copra. uefendanLs quesLloned legal personallLy of 8oard of
LlquldaLors.
PLLu: no Llme llmlL has been Lasked Lo Lhe 8oard of LlquldaLors and lLs
funcLlon of closlng Lhe affalrs of Lhe varlous governmenL owned
corporaLlon- nacoco. And nowhere ln Lhe execuLlve order was Lhere any
menLlon of Lhe llfe-span of Lhe 8oard of LlquldaLors. 1he compleLe loss of
nACCCC's corporaLe exlsLence afLer Lhe explraLlon of Lhe perlod of 3 years
for seLLlemenL of lLs affalrs ls whaL lmpelled Lhe resldenL Lo creaLe a
8oard of LlquldaLors, Lo conLlnue Lhe managemenL of such maLLers as may
be pendlng. nacoco has personallLy Lo proceed.
Ge|ano v. CA
AlLhough Lhere was no LrusLee appolnLed, Lhe counsel who prosecuLed and
defended Lhe sulLs by or agalnsL Lhe corp- appeared ln behalf of Lhe corp
may be consldered a LrusLee of a corp wlLh respecL Lo llLlgaLlon. 1here was
subsLanLlal compllance wlLh Sec. 78, as such prlvaLe respondenL may
prosecuLe presenL case even beyond 3 year perlod.
kepub||c v. Marsman
lacLs: 8l8 ls demandlng Lax deflclencles from Marsman uev Co. Powever,
defendanL conLends LhaL acLlon ls already barred by Sec 77 of Corp Code-
Lhey were saylng LhaL flllng of complalnL was beyond Lhe 3 year perlod.
PLLu: 1he assessmenLs of 8l8 were made before Lhe corp's dlssoluLlon and
wlLhln Lhe 3 year perlod. 1he governmenL, Lherefore, became Lhe credlLor
of Lhe corporaLlon before Lhe compleLlon of lLs dlssoluLlon by llquldaLlon of
lLs asseLs. Also, Lhere was a llquldaLor appolnLed whlch ln effecL became
Lhe LrusLee of all asseLs for Lhe beneflLs of all persons ln Sec. 78 lncludlng
credlLors.
Chung ka 8|o v. IAC
lacLs: hll 8loomlng Mllls execuLed a deed of asslgnmenL of all lLs accounL
recelvables, obllgaLlons and llablllLles Lo Chung Slong ek (ln hls capaclLy as
Lhe Lreasurer of Lhe new 8M). Chung ka 8lo and oLher sLockholders of Lhe
old 8M, flled wlLh SLC peLlLlon for llquldaLlon of boLh old and new 8M.
1hey conLend LhaL board of dlrecLors of an already dlssolved corp does noL
have Lhe lnherenL power, wlLhouL Lhe express consenL of sLockholders, Lo
convey all asseLs Lo a new corporaLlon.
PLLu: lL ls noL unlawful for Lhe old board of dlrecLors Lo negoLlaLe and
Lransfer Lhe asseLs of Lhe dlssolved corporaLlon Lo Lhe new corporaLlon
lnLended Lo be creaLed as long as Lhe sLockholders have glven Lhelr
consenL. Also, Lhe peLlLloners are barred by laches slnce lL was only afLer 4
years of uCA execuLlon when Lhey quesLloned Lhe Lransfer and flled for
llquldaLlon of assLs.
C|emente v. CA
lacLs: boLh plalnLlffs and defendanLs were clalmlng ownershlp over cerLaln
parcel of land. Cnly plalnLlffs presenLed evldence. 1C found LhaL Socledad
opular Calambena organlzaLlon was Lhe owner of parcel of land acqulred
from Lhe lrlar Lands LsLaLe of Calamba Laguna.
PLLu: all LhaL appear Lo be cerLaln are LhaL Lhe Socledad opular
Calambena, engaged ln Lhe managemenL and operaLlon of a cockplL, has
exlsLed someLlme ln Lhe pasL, lL has acqulred Lhe parcel of land ln quesLlon
and LhaL plalnLlffs' predecessors were orlglnal sLockholders of Lhe socledad.
)+
Powever, peLlLloners were noL able Lo come up wlLh any evldence Lo
subsLanLlaLe Lhelr clalm of ownershlp of corporaLe asseL. lf Lhe socledad
have long been defuncL, peLlLloners should have Laken approprlaLe
measures before a proper forum for a perempLory seLLlemenL of lLs affalrs.




17) Iore|gn Corporat|ons

- Any corporaLlon whlch owes lLs exlsLence Lo Lhe laws of anoLher
sLaLe, governmenL or counLry.
- one formed, organlzed or exlsLlng under any laws oLher Lhan
Lhose of Lhe hlllpplnes and whose laws allow llllplno clLlzens and
corporaLlons Lo do buslness ln lLs own counLry or sLaLe. (Sec. 123)
- lncorporaLlon LesL- Lo deLermlne wheLher domesLlc/forelgn. lf lL ls
lncorporaLed ln anoLher sLaLe, lL ls a forelgn corp, lf reglsLered
under hll laws, deemed a domesLlc corp lrrespecLlve of
naLlonallLy of sLockholders.
- A forelgn corp, ln order Lo do buslness ln Lhe hll, musL flrsL
obLaln a llcense Lo LransacL buslness ln hll and a cerLlflcaLe from
Lhe approprlaLe governmenL agency.
- lf wlLhouL llcense, lL cannoL be permlLLed Lo malnLaln or lnLervene
ln any acLlon, sulL or proceedlng ln any courL or admlnlsLraLlve
agency of Lhe hll buL lL may be sued on any valld cause of acLlon
recognlzed under hll laws.
Pow Lo obLaln a llcense (Sec. 123)
1. SubmlL Lo SLC copy of lLs arLlcles of lncorporaLlon and by-laws,
cerLlfled ln accordance wlLh law and LranslaLlon Lo an offlclal
language of Lhe hll, lf necessary.
2. AppllcaLlon musL be under oaLh shall seL forLh:
a. uaLe and Lerm of lncorporaLlon
b. Address (lncludlng sLreeL number) of prlnclpal offlce of
corp ln Lhe counLry or sLaLe of lncorporaLlon
c. name and address of lLs resldenL agenL auLhorlzed Lo
accepL summons and processes ln all legal proceedlngs
and, pendlng Lhe esLabllshmenL of a local offlce, all
noLlces affecLlng Lhe corporaLlon
d. lace ln Lhe hll where corp lnLends Lo operaLe
e. Speclflc purpose/s of Lhe corp whlch lL lnLends Lo pursue
ln Lhe LransacLlon of lLs buslness ln Lhe hll: provlded LhaL
sald purpose/s are Lhose speclflcally sLaLed ln Lhe
cerLlflcaLe of auLhorlLy lssued by Lhe governmenL agency
f. names and addresses of Lhe presenL dlrecLors and
offlcers of Lhe corporaLlon
g. SLaLemenL of lLs auLhorlzed caplLal sLock and Lhe
aggregaLe number of shares whlch Lhe corporaLlon has
auLhorlLy Lo lssue, lLemlzed by classes, par value of
shares, shares wlLhouL par value, and serles, lf any
h. SLaLemenL of lLs ouLsLandlng caplLal sLock and Lhe
aggregaLe number of shares whlch Lhe corp has lssued,
lLemlzed by classes, par value of shares, shares wlLhouL
par value, and serles, lf any.
l. SLaLemenL of accounL acLually pald ln
[. AddlLlonal lnfo necessary or approprlaLe Lo enable SLC Lo
deLermlne wheLher such corp ls enLlLled Lo a llcense Lo
LransacL buslness ln hll
3. 1here musL also be a duly execuLed cerLlflcaLe under oaLh by
auLhorlzed offlclal/s of Lhe [urlsdlcLlon of lLs lncorporaLlon,
aLLesLlng Lo Lhe facL LhaL Lhe laws of Lhe counLry or sLaLe of Lhe
appllcanL allow llllplno clLlzens and corporaLlons Lo do buslness
Lhereln, and LhaL Lhe appllcanL ls an exlsLlng corporaLlon ln good
sLandlng.
4. SLaLemenL under oaLh of resldenL showlng LhaL appllcanL ls
solvenL and ln sound flnanclal condlLlon and seL forLh asseLs and
llablllLles of corp noL exceedlng 1 year prlor Lo flllng of appllcaLlon.
WlLhln 60 days afLer lssuance of llcense, forelgn corp, excepL Lhose
engaged ln forelgn banklng or lnsurance, shall deposlL wlLh SLC, for beneflL
)"
of credlLors, securlLles conslsLlng of bonds or oLher evldence of
lndebLedness of hll gov or pollLlcal subdlvlslon, shares of sLock ln
reglsLered enLerprlses, domesLlc lnsurance companles and banks or any
comblnaLlon wlLh an acLual falr markeL value of 100k.
Necess|ty of obta|n|ng a ||cense to do bus|ness:
1he reason for Lhe llcense ls Lo sub[ecL Lhe forelgn corporaLlon dolng
buslness ln Lhe hlllpplnes Lo Lhe [urlsdlcLlon of Lhe courLs, oLherwlse a
forelgn corporaLlon lllegally dolng buslness here may successfully
Lhough unfalrly plead such neglecL or lllegal acL so as Lo avold servlce
and Lhereby lmpugn Lhe [urlsdlcLlon of Lhe local courLs.
Appo|ntment of res|dent agent
A resldenL agenL may be elLher an (Sec. 127):
o lndlvldual resldlng ln Lhe hlllpplnes of good moral
characLer and of sound flnanclal sLandlng
o uomesLlc corporaLlon lawfully LransacLlng buslness ln Lhe
hlllpplnes:
1he SLC shall requlre as a condlLlon precedenL Lo Lhe lssuance
of Lhe llcense Lo LransacL buslness ln Lhe hlllpplnes by any
forelgn corporaLlon LhaL such corporaLlon flle wlLh Lhe SLC a
wrlLLen power of aLLorney:
o ueslgnaLlng some person who musL be a resldenL of Lhe
hlllpplnes, on whom any summons and oLher legal
processes may be served ln all acLlons or oLher legal
proceedlngs agalnsL such corporaLlon, and
o ConsenLlng LhaL servlce upon such resldenL agenL shall be
admlLLed and held as valld as lf served upon Lhe duly
auLhorlzed offlcers of Lhe forelgn corporaLlon aL lLs home
offlce.
Any such forelgn corporaLlon shall llkewlse execuLe and flle
wlLh Lhe SLC an agreemenL or sLlpulaLlon, execuLed by Lhe
proper auLhorlLles of sald corporaLlon, ln form and subsLance
as follows:
o "1he (name of forelgn corporaLlon) does hereby sLlpulaLe
and agree, ln conslderaLlon of lLs belng granLed by Lhe
SecurlLles and Lxchange Commlsslon a llcense Lo LransacL
buslness ln Lhe hlllpplnes, LhaL lf aL any Llme sald
corporaLlon shall cease Lo LransacL buslness ln Lhe
hlllpplnes, or shall be wlLhouL any resldenL agenL ln Lhe
hlllpplnes on whom any summons or oLher legal
processes may be served, Lhen ln any acLlon or
proceedlng arlslng ouL of any buslness or LransacLlon
whlch occurred ln Lhe hlllpplnes, servlce of any
summons or oLher legal process may be made upon Lhe
SLC and LhaL such servlce shall have Lhe same force and
effecL as lf made upon Lhe duly-auLhorlzed offlcers of Lhe
corporaLlon aL lLs home offlce."
Whenever such servlce of summons or oLher process shall be
made upon Lhe SLC, Lhe Commlsslon shall, wlLhln Len (10)
days LhereafLer, LransmlL by mall a copy of such summons or
oLher legal process Lo Lhe corporaLlon aL lLs home or prlnclpal
offlce.
1he sendlng of such copy by Lhe Commlsslon shall be
necessary parL of and shall compleLe such servlce. All
expenses lncurred by Lhe Commlsslon for such servlce shall
be pald ln advance by Lhe parLy aL whose lnsLance Lhe servlce
ls made.

ln case of a change of address of Lhe resldenL agenL, lL shall
be hls or lLs duLy Lo lmmedlaLely noLlfy ln wrlLlng Lhe SLC of
Lhe new address.
What are the consequence of do|ng bus|ness |n the h|||pp|nes w|thout a
||cense? (Sec. 133)
no forelgn corporaLlon LransacLlng buslness ln Lhe hlllpplnes
wlLhouL a llcense, or lLs successors or asslgns, shall be permlLLed
Lo malnLaln or lnLervene ln any acLlon, sulL or proceedlng ln any
courL or admlnlsLraLlve agency of Lhe hlllpplnes,
Such corporaLlon may be sued or proceeded agalnsL before
hlllpplne courLs or admlnlsLraLlve Lrlbunals on any valld cause of
acLlon recognlzed under hlllpplne laws.
)#
ln addlLlon, Sec. 134 makes lL a ground for revocaLlon of llcense
when a forelgn corporaLlon LransacLs buslness ln Lhe hlllpplnes
as agenL of or acLlng for and ln behalf of any forelgn corporaLlon
or enLlLy noL duly llcensed Lo do buslness ln Lhe hlllpplnes.
Cases:
Mentho|atum v. Manga||man
lacLs: MenLholaLum flled case agalnsL Mangallman for lnfrlngemenL of
Lrademark and unfalr compeLlLlon. lL prayed for resLralnlng Mangallman
from uslng MenLhollman whlch accordlng Lo peLlLloner was reglsLered ln
1919 ln lLs corporaLlon. MenLholaLum was a forelgn corp no llcensed Lo do
buslness ln hll.
PLLu: no general rule or governlng prlnclple can be lald down as Lo whaL
consLlLuLes dolng" or engaglng" ln or 'LransacLlng" buslness. lndeed, each
case musL be [udged ln Lhe llghL of lLs pecullar envlronmenLal
clrcumsLances. 1he Lrue LesL, however, seems Lo be wheLher Lhe forelgn
corporaLlon ls conLlnulng Lhe body or subsLance of Lhe buslness or
enLerprlse for whlch lL was organlzed, or wheLher lL has subsLanLlally
reLlred from lL and Lurned lL over Lo anoLher. 1he Lerm lmplles a conLlnulLy
of commerclal deallngs and arrangemenLs, and conLemplaLes Lo LhaL
exLenL Lhe performance of acLs or works or Lhe exerclse of Lhe funcLlons
normally lncldenL Lo and ln Lhe progresslve prosecuLlon of Lhe purpose and
ob[ecL of lLs organlzaLlon.
Marsha||-We||s Co. v. nenry W. L|ser & Co.
lacLs: Marshall-Wells(lC)sued Penry W. Llser & Co. (uC) for Lhe unpald
balance of a blll of goods. uefendanL demurred Lo Lhe complalnL on Lhe
sLaLuLory ground LhaL lC has no legal capaclLy Lo sue- complalnL dld noL
show LhaL lC has complled wlLh Lhe laws of hll nor lL was auLhorlzed Lo do
buslness ln Lhe hll.
PLLu: Lhe law slmply means LhaL no forelgn corp shall be permlLLed Lo
LransacL buslness ln Lhe hll", unless lL shall have Lhe llcense requlred by
law, and unLll lL complles wlLh Lhe law, shall noL be permlLLed Lo malnLaln
any sulL ln Lhe local courLs. A conLrary holdlng would brlng Lhe law Lo Lhe
verge of unconsLlLuLlonallLy. Lhe effecL of sLaLuLe musL noL be unduly
exLended or lmproperly applled. lL was noL Lhe purpose of leglslaLure Lo
exclude forelgn corps from seeklng redress on hll courLs and Lhus permlL
persons Lo avold Lhelr conLracLs made wlLh Lhese forelgn corps.
8u|akh|das v. Navarro
lacLs: eLlLloner (lC) flled for recovery of damages for fallure of ulamond
Shlpplng Corp (uC) Lo dellver Lhe goods shlpped Lo lL Lo Lhelr proper
desLlnaLlon. lL ls alleged ln complalnL LhaL lC ls sulnd under an lsolaLed
LransacLlon. uC moved Lo dlsmlss complalnL on Lhe ground LhaL lC has no
capaclLy Lo sue.
PLLu: lL ls seLLled LhaL lf a forelgn corporaLlon ls noL engaged ln buslness ln
Lhe hll, lL may noL be denled Lhe rlghL Lo flle an acLlon ln hll courLs for
lsolaLed LransacLlon. 1he ob[ecL of Sec. 68 and 69 was noL Lo prevenL Lhe
forelgn corp from performlng slngle acLs buL Lo prevenL lL from acqulrlng
domlclle for Lhe purpose of buslness wlLhouL Laklng Lhe sLeps necessary Lo
render lL amendable Lo sulL ln Lhe local courLs. lL was noL Lhe purpose of
Lhe leglslaLure Lo exclude forelgn corp whlch happens Lo obLaln an lsolaLed
order for buslness from Lhe hll, from seeklng redress ln Lhe hll courLs.
Swed|sh Last As|a Co, L1D v. Man||a ort Serv|ce
lacLs: eLlLloner (lC) flled complalnL for recovery of money (value of
mlsslng goods whlch were noL dellvered ln Pongkong buL lnsLead was
lncluded ln cargo dellvered ln Manlla) agalnsL Manlla orL Servlce.
PLLu: Sec. 69 ls noL appllcable Lo forelgn corp performlng slngle acLs or
lsolaLed LransacLlons. 1here ls noLhlng ln Lhe record Lo show LhaL lC has
been ln Lhe hll engaged ln conLlnulng buslness or enLerprlse for whlch lL
was organlzed. 1he value of whlch ls soughL Lo be recovered, were landed
noL as a resulL of buslness LransacLlon, lsolaLed or oLherwlse, buL due Lo a
mlsLaken bellef LhaL Lhey were parL of Lhe shlpmenL Lo Lhe hll, Lhere ls no
[usLlflcaLlon Lherefore, for lnvoklng Sec 69.
AN1AM Conso||dated v. CA
lacLs: SLokely van Camp (lC) flled agalnsL several domesLlc corps
complalnL for collecLlon of money. lL purchased crude coconuL oll from uC
)$
under 3 LransacLlons. uCs flled moLlon Lo dlsmlss on Lhe ground LhaL belng
a corp noL llcensed Lo do buslness ln hll, lL has no personallLy Lo malnLaln
Lhe sulL.
PLLu: 1he LransacLlon enLered lnLo by Lhe respondenL wlLh Lhe peLlLloners
area noL a serles of commerclal deallngs whlch slgnlfy an lnLenL on Lhe parL
of lC Lo do buslness ln Lhe hll buL consLlLuLe an lsolaLed one whlch does
noL fall under Lhe caLegory of dolng buslness. 1he only reason why lC
enLered lnLo Lhe 2
nd
and 3
rd
LransacLlons was because lL wanLed Lo recover
Lhe loss lL susLalned from Lhe fallure of Lhe peLlLloners Lo dellver Lhe crude
coconuL oll under Lhe flrsL LransacLlon and ln order Lo glve Lhe laLLer a
chance Lo make good on Lhelr obllgaLlon. ln reallLy Lhere was only one
agreemenL beLween lC and uCs.
Iac|||t|es Management Corp v. De |a Csa
lacLs: ue La Csa soughL hls relnsLaLemenL wlLh full backwages and
recovery of overLlme compensaLlon, swlng shlfL and graveyard shlfL
dlfferenLlals as palnLer, houseboy and cashler of lC. lC denled allegaLlons
saylng LhaL lL was beyond Lhe LerrlLorlal [urlsdlcLlon of Lhe hll governmenL.
PLLu: lC ls dolng buslness ln Lhe hll wlLhln Lhe scope of Sec 14 8ule 14 of
8CC. lC had Lo appolnL !alme CaLulra as lLs agenL wlLh auLhorlLy Lo execuLe
employmenL conLracLs and recelve on behalf of LhaL corporaLlon legal
servlce from and be bound by processes of Lhe hll courL of [usLlce for as
long as lL remalns an employee of lC. Summons was also served on hlm. ln
effecL, Mr. CaLulra was a llalson offlcer represenLlng lC ln Lhe hll.
Accordlng Lo lorelgn lnvesLmenL AcL, dolng buslness ln Lhe phll means
elLher:
SollclLlng orders
Servlce conLracLs
AppolnLlng represenLaLlves or dlsLrlbuLors domlclled ln Lhe
hlllpplnes or who ln any calendar year sLay ln Lhe counLry for a
perlod or perlods LoLallng 180 days or more
Cpenlng offlces, wheLher called llason offlces or branches
Any oLher acL or acLs LhaL lmply a conLlnulLy of commerclal
deallngs or arrangemenLs, and conLemplaLe Lo LhaL exLenL,
performance normally lncldenL Lo , and ln progresslve prosecuLlon
of, commerclal galn or of Lhe purpose and ob[ecL of Lhe buslness
organlzaLlon
lf a forelgn corp noL engaged ln buslness ln hll ls noL banned from seeklng
redress from hll courLs, a forLlorl, LhaL same corp cannoL clalm exempLlon
from belng sued ln phll courLs for acLs done agalnsL a person/s ln Lhe hll.

Iar Last Int'| Import v. Nanka| kogyo Co. Ltd

lacLs: lar LasL flled for speclflc performance, damages and a wrlL of
prellmlnary ln[uncLlon dlrecLed agalnsL nankal Lo lssue and dellver Lo
plalnLlff compleLe seL of negoLlable 8lll of Ladlng for 1,038 meLrlc Lons
scrap of meLal. nankal flled moLlon Lo dlsmlss Lhe complalnL and dlssolve
Lhe prellmlnary ln[uncLlon for lack of [urlsdlcLlon over Lhe person of
defendanL.

PLLu: 3 modes of effecLlng servlce of summons upon prlvaLe forelng corp:
1. upon agenL deslgnaLed ln accordance wlLh law Lo accepL servlce of
summons, 2. lf no resldlng agenL, servlce on Lhe governmenL offlclals
deslgnaLed by law Lo LhaL effecL, 3. 8y servlng on any offlcer or agenL of
corp wlLhln hll. 1he plalnLlff complled wlLh 3
rd
, lL was shown LhaL
summons was served Lo offlcers of company. ln Lhe LesLlmony of offlcers,
Lhey were senL Lo Lhe hll Lo look lnLo Lhe operaLlon of mlnes, Lhereby
reveallng lCs deslre Lo conLlnue engaglng ln buslness here, afLer recelvlng
Lhe scrap meLal , maklng Lhe hll a base Lhereof.

Commun|cat|on Mater|a|s and Des|gn Inc. v. CA

lacLs: l1LC enLered lnLo a represenLaLlve agreemenL wlLh ASAC where lL
engaged ASAC as lLs excluslve represenLaLlve ln Lhe hll. ASAC was able
Lo lncorporaLe and use l1LC ln lLs own name. ASAC sold elecLronlc
producLs exporLed by l1LC Lo lLs sole cusLomer, Lu1. l1LC declded Lo
LermlnaLe conLracL wlLh Lu1 because ASAC allegedly vlolaLed lLs
conLracLual commlLmenL. l1LC charged ASAC wlLh uslng knowledge of
lnformaLlon of l1LC's producLs speclflcaLlons Lo develop Lhelr own llne of
equlpmenL and producL supporL, whlch are slmllar, lf noL ldenLlcal Lo l1LC's
own and offerlng Lhem Lo l1LC's former cusLomers. ASAC flled moLlon Lo
dlsmlss on Lhe ground LhaL l1LC has no capaclLy Lo sue as a forelgn corp
dolng buslness ln Lhe hll wlLhouL llcense.
)%

PLLu: l1LC ls consldered Lo be dolng buslness ln Lhe hll- lL enLered lnLo
several conLracLs and agreemenLs wlLh varlous buslness conLacLs- ASAC,
1LSSl eLc). lLs arrangemenLs wlLh Lhese enLlLles lndlcaLe convlnclngly l1LC's
purpose Lo brlng abouL Lhe slLuaLlon among lLs cusLomers and Lhe general
publlc LhaL Lhey are deallng dlrecLly wlLh l1LC and LhaL lL ls acLlvely
engaglng ln buslness ln Lhe counLry. Powever, ASAC ls sLopped from
ralslng lssue on [urlsdlcLlon agalnsL l1LC. A parLy ls sLopped Lo challenge
Lhe personallLy of a corporaLlon afLer havlng acknowledged Lhe same by
enLerlng lnLo a conLracL wlLh lL.

Western Lqu|pment and Supp|y Co. v. keyes

lacLs: WesLern LqulpmenL Lhrough agenL lellx applled for lssuance of
llcense Lo do buslness ln Lhe hll- granLed a provlslonal llcense whlch
evenLually became permanenL. 1elephone equlpmenL ln Manlla was
manufacLured by WesLern LlecLrlc (bearlng lLs Lrademark, WesLern
LlecLrlc)- noL llcensed Lo do buslness ln hll. WesLern LqulpmenL reglsLered
WesLern LlecLrlc as lLs Lrademark Lhrough AcL of Congress ln WashlngLon.
Penry Perman as presldenL and general manager of LlecLrlc Supply (phll
corp) flled for arLlcles of lncorporaLlon for purpose of organlzlng a
domesLlc corporaLlon of WesLern LlecLrlc Company. WesLern LlecLrlc flled
for Lemporary ln[uncLlon agalnsL Penry Perman resLralnlng Lhem from
organlzlng corporaLlon.
PLLu: Lrade name ls a properLy rlghL, a rlghL ln rem, whlch may asserL and
proLecL agalnsL all Lhe world, ln any of Lhe courLs of Lhe world- even ln
[urlsdlcLlons where lL does noL LransacL buslness- [usL Lhe same as lL may
proLecL lLs Langlble properLy, real or personal, agalnsL Lrespass or
converslon. lL ls very apparenL LhaL Lhe purpose and lnLenL of Perman and
hls assoclaLes ln seeklng Lo lncorporaLe under Lhe name WesLern LlecLrlc
Company was Lo unfalrly and un[usLly compeLe ln Lhe hll wlLh Lhe
WesLern LlecLrlc Company.

Genera| Garments Corporat|on v. D|rector of atents

lacLs: urlLan SporLwear Corp flled peLlLlon for cancellaLlon of Lrademark
urlLan reglsLered ln Lhe name of Ceneral CarmenLs alleglng ownershlp
and prlor use of ln Lhe hll. WCn urlLan SporLswear, a forelgn corp, has
legal capaclLy Lo sue ln phll courLs.

PLLu: ?es. 1he requlremenL for a llcense ln order Lo malnLaln a sulL ln hll
does noL make a corporaLlon any less a [urldlcal person. An excepLlon Lo
Lhe llcense requlremenL ls where a forelgn corp sues on an lsolaLed
LransacLlon. 8A 638 Sec 21-A allows a forelgn corp/[urlsLlc person Lo brlng
an acLlon ln hll courLs for lnfrlngemenL, unfalr compeLlLlon or false
deslgnaLlon of orlgln and false descrlpLlon- lnclude Lhose prevlously used
Lrademark ln Lhe hll by anoLher and noL abandoned.

uma v. IAC

lacLs: uMA flled peLlLlon for lnfrlngemenL of paLenL or Lrademark agalnsL
MlL-C8C. uefendanL flled moLlon Lo dlsmlss on Lhe ground LhaL uMA had
no legal capaclLy Lo sue. eLlLloner alleged LhaL lL subsLanLlally complled
wlLh requlremenLs of Sec 21 8A 166- speclflcally alleged LhaL lL ls noL dolng
buslness ln Lhe hll and lL ls sulng under Lhe sald 8A. lL also conLended LhaL
Lhe facL of reclproclLy arrangemenL under Lhe arls convenLlon need noL
be averred slnce as a slgnaLory, Lhe LreaLy auLomaLlcally becomes a law ln
Lhe hll, and LhaL courLs are bound Lo Lake [udlclal noLlce Lhereof.

PLLu: a forelgn corp noL dolng buslness ln Lhe hll needs no llcense Lo sue
before hll courLs for lnfrlngemenL of Lrademark and unfalr compeLlLlon.
1hls ls provlded for ln Lhe arls ConvenLlon, of whlch Lhe hll ls a slgnaLory,
saylng: Lhe hll ls obllged Lo assure Lo naLlonals of counLrles of unlon an
effecLlve proLecLlon agalnsL unfalr compeLlLlon on Lhe same way LhaL Lhey
are obllgaLed Lo slmllarly proLecL llllplno clLlzen and flrms.

Le Chem|se Lacoste v. Iernandez

lacLs: Le Chemlse LacosLe flled wlLh n8l complalnL on acLs of unfalr
compeLlLlon belng commlLLed by Pemandas. n8l, afLer conducLlng
lnvesLlgaLlon flled wlLh courL for lssuance of search warranLs on premlses
used and occupled by Pemandas- granLed. n8l found and selzed varlous
goods and arLlcles descrlbed ln Lhe warranL. Pemandas flled MoLlon Lo
Cuash alleglng LhaL Lrademark used by hlm was dlfferenL- granLed, search
)&
warranLs were recalled. Pemandas alleged LhaL peLlLloner was noL dolng
buslness ln Lhe hll and noL llcensed Lo buslness here.

PLLu: 1he peLlLloner ls a forelgn corp noL dolng buslness ln Lhe hll. 1he
markeLlng of lLs producLs ls done Lhrough an excluslve dlsLrlbuLor, 8usLan's.
1he laLLer ls an lndependenL enLlLy whlch buys and Lhen markeLs noL only
producLs of Lhe peLlLloner buL also many oLher producLs bearlng equally
well-known esLabllshed Lrademark and Lradenames. 8usLan's ls acLually a
mlddlemen acLlng and LransacLlng buslness ln lLs own name and or lLs own
accounL and noL ln Lhe name of Lhe peLlLloner. 8uL peLlLloner may sLlll sue
for lnfrlngemenL of Lrademark and unfalr compeLlLlon. 1he naLure of Lhe
case ls crlmlnal and evenLually, Lhe lnformaLlon shall be ln Lhe name of Lhe
people of Lhe hll and no longer Lhe peLlLloner whlch only becomes an
aggrleved parLy slnce a crlmlnal offense ls an acL agalnsL Lhe sLaLe.
eLlLloner's capaclLy Lo use would become noL much of slgnlflcance ln Lhe
maln case. Also Lhere ls recognlLlon of duLles and Lhe rlghLs of sLaLes under
Lhe arls convenLlon for proLecLlon of lndusLrlal properLy. A LreaLy or
obllgaLlon ls noL a mere moral obllgaLlon Lo be enforced or noL aL Lhe
whlms of an lncumbenL head. lL creaLes a legally blndlng obllgaLlon on Lhe
parLles founded on Lhe generally accepLed prlnclple of lnLernaLlonal law of
pacLa sunL servanda whlch been adopLed as parL of Lhe law of Lhe land.

At|ant|c Mutua| Insurance Co. v. Cebu Stevedor|ng Co, Inc.

lacLs: ALlanLlc and ConLlnenLal sued Cebu SLevedorlng for recovery of a
sum of money for damaged copra. MoLlon Lo dlsmlss on Lhe ground of lack
of legal personallLy and no capaclLy Lo sue-> based upon Lhe fallure of Lhe
complalnL Lo allege compllance wlLh SecLlon 69. 81C ordered ALlanLlc Lo
amend complalnL wlLhln 10 days. lC dld noL comply.
PLLu: 1here should be compllance wlLh Lhe rule on avermenL of reason for
excepLlon. lL ls enough LhaL forelgn corps are allowed by law Lo seek
redress ln phll courLs under cerLaln condlLlons: Lhe lnLerpreLaLlon of law
should noL go so far as Lo lnclude, ln effecL, an lnference LhaL Lhose
condlLlons have been meL from Lhe mere facL LhaL Lhe parLy sulng ls a
forelgn corporaLlon.

C|ymp|a 8us|ness Mach|nes v. L. kazon

lacLs: Clympla shlpped 300 LypewrlLers Lo lLs slsLer company ln Manlla
(Lhls was lssued agalnsL all rlsk by Callfornla lnsurance Co.). When lL was
Lransferred Lo L. 8azon, parL of Lhe shlpmenL was sLolen. Callfornla and
Clympla sued L. 8azon, L.8azon was declared ln defaulL. ln lLs MoLlon for
reconslderaLlon, L. 8azon quesLloned Lhe legal personallLy of lC, buL he
falled Lo appear aL Lhe pre-Lrlal agaln. WCn fallure of Callfornla Lo aver lLs
capaclLy Lo sue ls faLal?

PLLu: noL ln Lhls case. uefense of lack of capaclLy was noL ralsed unLll afLer
Lhe 1
sL
declaraLlon of defaulL of defendanL. 1here ls also a pronouncemenL
of CA LhaL Lhe defendanL had no merlLorlous defences save LhaL of lack of
capaclLy Lo sue on Lhe parL of plalnLlff. Moreover, ln case of dlsmlssal of
case, would noL bar Callfornla from lnsLlLuLlng slmllar acLlon Lhls Llme
alleglng LhaL lL was sulng on a slngle, lsolaLed LransacLlon. 8uL Lhls would
become an ldle, clrculLous ceremony ln Lhe llghL of Lhe unchallenged
declaraLlon of CA of Lhe absence of any merlLorlous subsLanLlal defense on
Lhe parL of 8azon.

1|me, Inc. v. keyes

lacLs: vlllegas and Lnrlle soughL Lo recover damages upon an alleged llbel
arlslng from a publlcaLlon of 1lme. SubsequenLly Lhere was an lssuance of a
wrlL of aLLachmenL on Lhe real and personal properLy of Llme. M1u by
1lML on Lhe ground of lack of [urlsldlcLlon and lmproper venue.

PLLu: lorelgn CorporaLlon ls noL malnLalnln any sulL buL ls merely
defendlng one agalnsL lLself, lL dld noL flle any complalnL buL only a
corollary defenslve peLlLlon Lo prohlblL Lhe lower courL from furLher
proceedlng wlLh a sulL LhaL lL had no [urlsdlcLlon Lo enLerLaln.

lnLra-corporaLe or lnLernal maLLers noL affecLlng credlLors or Lhe publlc ln
general are governed noL by hlllpplne laws buL Lhe law under Lhe forelgn
corp was formed or organlzed.
M.L. Grey v. Insu|ar Lumber Company
)'
lacLs: M.L. Crey- owner and possessor of 37 shares of caplLal sLocks was
noL allowed Lo examlne Lhe books of records of LransacLlons when he
requesLed Lo do so. Accordlng Lo Lhe law of new ?ork, only sLockholders
ownlng 3 of shares may make a wrlLLen requesL for lnspecLlon. Powever,
Crey conLends LhaL under hll Corp Law, slnce a corp was reglsLered Lo do
buslness ln Lhe hll, each ls enLlLled Lo lnspecL records.
PLLu: Lhe rlghL under common law can only be granLed aL Lhe dlscreLlon of
Lhe courL. 1he sLockholder musL show LhaL: 1.he seeks lnformaLlon for an
honesL purpose or Lo proLecL hls lnLeresL as a sLockholder, 2. 1he rlghL Lo
examlne musL be exerclsed ln good falLh, for a speclflc and honesL purpose
and noL Lo graLlfy curloslLy or for speculaLlve or vexaLlous purposes. 1he
peLlLloner made no efforL Lo prove any of Lhe aforemenLloned.
Merger or conso||dat|on |nvo|v|ng a fore|gn corporat|on ||censed |n the
h|||pp|nes (Sec. 132)
Cne or more forelgn corporaLlons auLhorlzed Lo LransacL buslness
ln Lhe hlllpplnes may merge or consolldaLe wlLh any domesLlc
corporaLlon or corporaLlons lf :
o Such ls permlLLed under hlllpplne laws and by Lhe law of lLs
lncorporaLlon
o 1he requlremenLs on merger or consolldaLlon as provlded ln
Lhls Code are followed
Whenever a forelgn corporaLlon auLhorlzed Lo LransacL buslness ln
Lhe hlllpplnes shall be a parLy Lo a merger or consolldaLlon ln lLs
home counLry or sLaLe as permlLLed by Lhe law of lLs lncorporaLlon,
such forelgn corporaLlon shall, wlLhln slxLy (60) days afLer such
merger or consolldaLlon becomes effecLlve, flle wlLh Lhe SLC, and
ln governmenL agency, a copy of Lhe arLlcles of merger or
consolldaLlon duly auLhenLlcaLed by Lhe proper offlclal or offlclals
of Lhe counLry or sLaLe under Lhe laws of whlch merger or
consolldaLlon was effecLed
rovlded, however, LhaL lf Lhe absorbed corporaLlon ls Lhe forelgn
corporaLlon dolng buslness ln Lhe hlllpplnes, Lhe laLLer shall aL
Lhe same Llme flle a peLlLlon for wlLhdrawal of lLs llcense.

kevocat|on of ||cense (Sec. 134)
pre[udlce Lo oLher grounds provlded by speclal laws, Lhe llcense of
a forelgn corporaLlon Lo LransacL buslness ln Lhe hlllpplnes may
be revoked or suspended by Lhe SLC upon any of Lhe followlng
grounds:
o lallure Lo flle lLs annual reporL or pay any fees as requlred by
Lhls Code,
o lallure Lo appolnL and malnLaln a resldenL agenL ln Lhe
hlllpplnes as requlred by Lhls 1lLle,
o lallure, afLer change of lLs resldenL agenL or of hls address, Lo
submlL Lo Lhe SecurlLles and Lxchange Commlsslon a
sLaLemenL of such change as requlred by Lhls 1lLle,
o lallure Lo submlL Lo Lhe SecurlLles and Lxchange Commlsslon
an auLhenLlcaLed copy of any amendmenL Lo lLs arLlcles of
lncorporaLlon or by-laws or of any arLlcles of merger or
consolldaLlon wlLhln Lhe Llme prescrlbed by Lhls 1lLle,
o A mlsrepresenLaLlon of any maLerlal maLLer ln any appllcaLlon,
reporL, affldavlL or oLher documenL submlLLed by such
corporaLlon pursuanL Lo Lhls 1lLle,
o lallure Lo pay any and all Laxes, lmposLs, assessmenLs or
penalLles, lf any, lawfully due Lo Lhe hlllpplne CovernmenL or
any of lLs agencles or pollLlcal subdlvlslons,
o 1ransacLlng buslness ln Lhe hlllpplnes ouLslde of Lhe purpose
or purposes for whlch such corporaLlon ls auLhorlzed under
lLs llcense,
o 1ransacLlng buslness ln Lhe hlllpplnes as agenL of or acLlng
for and ln behalf of any forelgn corporaLlon or enLlLy noL duly
llcensed Lo do buslness ln Lhe hlllpplnes, or
o Any oLher ground as would render lL unflL Lo LransacL
buslness ln Lhe hlllpplnes. (n)
Issuance of cert|f|cate of revocat|on (Sec. 13S)
upon Lhe revocaLlon of any such llcense Lo LransacL buslness ln
Lhe hlllpplnes, Lhe SecurlLles and Lxchange Commlsslon shall
lssue a correspondlng cerLlflcaLe of revocaLlon, furnlshlng a copy
Lhereof Lo Lhe approprlaLe governmenL agency ln Lhe proper cases.
1he SecurlLles and Lxchange Commlsslon shall also mall Lo Lhe
corporaLlon aL lLs reglsLered offlce ln Lhe hlllpplnes a noLlce of
such revocaLlon accompanled by a copy of Lhe cerLlflcaLe of
revocaLlon.
)(
W|thdrawa| by a fore|gn corporat|on (Sec. 136)
lf a forelgn corporaLlon duly llcensed Lo do buslness deslres Lo
wlLhdraw, lL musL flle a peLlLlon for wlLhdrawal, and musL meeL
Lhe followlng requlremenLs:
o All clalms accrued ln Lhe hlllpplnes musL be seLLled
o All Laxes musL be pald
o eLlLlon musL be publlshed once a week for Lhree (3)
consecuLlve weeks.
18) M|sce||aneous rov|s|ons

19) D 902-A


20) Secur|t|es kegu|at|on Code kA 8799
kLSIDLN1IAL DLCkLL 902-A, AS AMLNDLD 8 D NCS. 16S3, 17S8 AND
1799
SecLlon 1 Lransferred Lhe admlnlsLraLlve supervlslon of Lhe SLC from
Lhe ueparLmenL of 1rade Lo Lhe Cfflce of Lhe resldenL. lL ls now under
Lhe supervlslon of Lhe ueparLmenL of llannce by vlrLue of LC 788 of
!uly 27, 1981.
SecLlon 3 provldes LhaL Lhe SLC shall have absoluLe [urlsdlcLlon,
supervlslon, and conLrol over:
1. all corporaLlons, parLnershlps, and assoclaLlons, who are:
a. granLees of prlmary franchlse and/or
b. granLees of a llcense or permlL lssued by Lhe
governmenL Lo operaLe ln Lhe hlllpplnes,
under Lhe same secLlon, SLC also has Lhe power Lo enllsL Lhe ald and
supporL of:
1. any and all enforcemenL agencles of Lhe governmenL, clvll or mlllLary
2. any prlvaLe lnsLlLuLlon, corporaLlon, flrm, assoclaLlon, or person.

SecLlons 2 (ComposlLlon, 1erms, and CuallflcaLlons), 4 (8eorganlzaLlon
and resLrucLurlng of Lhe sLaff and personnel) and 8 (SLC ueparLmenLs)
had been repealed by Lhe SecurlLles 8egulaLlon Code.
SecLlon 3 enumeraLes cases over whlch Lhe SLC has quasl-[udlclal
[urlsdlcLlon. 1hese were Lransferred and are now under Lhe orlglnal
and excluslve [urlsdlcLlon of Lhe deslgnaLed Speclal Commerclal CourLs
by vlrLue of A.M. no. 00-11-03.
SecLlon 6 enumeraLes Lhe powers necessary for Lhe SLC Lo effecLlvely
exerclse lLs powers under SecLlon 3, u 902-A. uesplLe Lhe Lransfer of
lLs quasl-[udlclal powers, slnce only SecLlons 2, 4 and 8 of .u. 902-A
had been repealed, Lhe powers and funcLlons under SecLlon 6 u 902-
A are reLalned lnasmuch as Lhey are conslsLenL wlLh Lhe powers and
funcLlons of Lhe SLC under SecLlon 3 of Lhe S8C .
1he SLC and Lhe Speclal Commerclal CourLs have concurrenL
[urlsdlcLlon Lo:
1. compe| the off|cers of corporat|ons to ca|| meet|ngs of
sLockholders or members, and
2. suspend and revoke, after due not|ce and hear|ng, the
franch|se or cerLlflcaLe of reglsLraLlon of corporaLlons.

CASLS UNDLk SLCIAL CCMMLkCIAL CCUk1S IUkISDIC1ICN (former|y
w|th SLC):
DLVICLS Ck SCnLMLS AMCUN1ING 1C IkAUD
SecLlon 3. .[SLC] shall have orlglnal and excluslve [urlsdlcLlon Lo hear and
declde cases lnvolvlng:
(a) Dev|ces or schemes employed by or any acLs, of Lhe board of dlrecLors,
buslness assoclaLes, lLs offlcers or parLnershlp, amounLlng Lo fraud and
mlsrepresenLaLlon whlch may be deLrlmenLal Lo Lhe lnLeresL of Lhe publlc
and/or of Lhe sLockholder, parLners, members of assoclaLlons or
organlzaLlons reglsLered wlLh Lhe Commlsslon.
- Now w|th|n the or|g|na| and exc|us|ve [ur|sd|ct|on of the Spec|a|
Commerc|a| Courts

))
L|ements of S(a):

1. uevlces and schemes
2. AmounLlng Lo fraud and mlsrepresenLaLlon
3. 8y Lhe 8oard of ulrecLors, AssoclaLes, Cfflcers, lLs arLnershlp
4. ueLrlmenLal Lo lnLeresL of Lhe publlc, sLockholder, parLners,
members or organlzaLlons reglsLered wlLh Lhe SLC

Lven lf Lhe acLlon ls for recovery of sums of money pald, lf such
sums are glven Lo Lhe corporaLlon Lhrough devlces or schemes
amounLlng Lo fraud or mlsrepresenLaLlon deLrlmenLal Lo Lhe
lnvesLlng publlc, Lhe same musL be flled, heard, and Lrled by Lhe
Speclal Commerclal CourLs. (Crosa vs. CA)
When Lhe complalnL alleges LhaL one of Lhe offlcers of Lhe
corporaLlon employed fraud, an oLherwlse ordlnary acLlon for
recovery of properLy and sum of money wlLh damages ls
Lransposed lnLo an lnLracorporaLe conLroversy under Lhe
[urlsdlcLlon of SLC. (Alle[e vs. CA)
1he allegaLlon of fraud under SecLlon 3(a) of u 902-A musL be
sLaLed wlLh parLlcularlLy Lo place Lhe case wlLhln SLC [urlsdlcLlon
because SecLlon 3 8ule 8 of Lhe 8ules of CourL provldes LhaL
avermenLs of fraud or mlsLake musL be sLaLed wlLh parLlcularlLy.
(Abad vs. Cll angaslnan)

IN1kA-CCkCkA1L CCN1kCVLkSILS
(b) ConLroversles ar|s|ng out of |ntra-corporate or partnersh|p re|at|ons,
beLween and among sLockholders, members, or assoclaLes, beLween any
or all of Lhem and Lhe corporaLlon, parLnershlp or assoclaLlon of whlch
Lhey are sLockholders, members or assoclaLes, respecLlvely, and beLween
such corporaLlon, parLnershlp or assoclaLlon and Lhe sLaLe lnsofar as lL
concerns Lhelr lndlvldual franchlse or rlghL Lo exlsL as such enLlLy.
- now wlLhln Lhe orlglnal and excluslve [urlsdlcLlon of Lhe Speclal
Commerclal CourLs

lnLracorporaLe 8elaLlonshlp exlsLs beLween/among:
1. SLockholders, Members, AssoclaLes
2. SLockholders, Members, AssoclaLes and Lhelr Corp/arL/Assn
3. Corp/arL/Assn and Lhe SLaLe
4. Corp/arL/Assn and Lhe ubllc (unlon Class vs. CA)
1he old rule ln uoloo Closs ls LhaL any conLrovery where Lhere ls an
lnLracorporaLe relaLlonshlp beLween parLles ls an lnLracorporaLe dlspuLe
cognlzable by Lhe SLC.
Intracorporate Controvers|es, under Lhe new rule lald down ln l58A vs
leooo, now have 2 elemenLs:
1. An lnLra-corporaLe relaLlonshlp
2. 1he conLroversy arose ouL of Lhe sald relaLlonshlp.
Slmllarly, 5peeJ ulsttlbotoq cotpo vs. cA held LhaL Lhe followlng 2 elemenLs
musL be presenL:
1. 1he conLroversy musL arlse ouL of Lhe lnLracorporaLe
relaLlonshlp
2. 1he dlspuLe among Lhe parLles musL be lnLrlnslcally
connecLed wlLh Lhe regulaLlon of Lhe corporaLlon
CCN1kCVLkSILS IN 1nL ACIN1MLN1, LLLC1ICN, AND kLMCVAL CI
DIkLC1CkS AND CIIICLkS
(c) ConLroversles ln Lhe e|ect|on or appo|ntments of dlrecLors, LrusLees,
offlcers or managers of such corporaLlons, parLnershlps or assoclaLlons.
- now wlLhln Lhe orlglnal and excluslve [urlsdlcLlon of Lhe Speclal
Commerclal CourLs

1he ff. are wlLhln Lhe SLC [urlsdlcLlon under SecLlon 3(c):
- 1he case of a board of dlrecLors member who was noL reelecLed and who
alleged LhaL hls ousLer was a scheme Lo deprlve hlm of hls [usL and falr
reLurn on lnvesLmenL (S8A vs Leano).
)*
- ueLermlnaLlon of rlghLs arlslng from an alleged lllegal convenlng of a
meeLlng of Lhe 8oard of ulrecLors leadlng Lo ousLer from offlce (Andaya vs.
Abadla)
-1he quesLlon of remuneraLlon belng asserLed by an offlcer of Lhe
corporaLlon (Lozon vs nL8C and AL)

1esL: WCn Lhe corporaLe offlcer aserLs hls rlghLs as such offlcer
or quesLlons hls removal or ousLer. lf ?LS, wlLhln SLC [urlsdlcLlon
Powever lf Lhe maln cause of acLlon ls for recovery of unpald
wages and separaLlon pay, Lhe case falls wlLhln Lhe labor courLs.

kLCLIVLkSnI AND SUSLNSICN CI AMLN1S
d) eLlLlons of corporaLlons, parLnershlps or assoclaLlons Lo be declared ln
Lhe sLaLe of suspens|on of payments ln cases where Lhe corporaLlon,
parLnershlp or assoclaLlon possesses sufflclenL properLy Lo cover all lLs
debLs buL foresees Lhe lmposslblllLy of meeLlng Lhem when Lhey
respecLlvely fall due or ln cases where Lhe corporaLlon, parLnershlp or
assoclaLlon has no sufflclenL asseLs Lo cover lLs llablllLles, buL ls under Lhe
managemenL of a kehab|||tat|on kece|ver or Management Comm|ttee
creaLed pursuanL Lo Lhls uecree.
- 1hls SecLlon as well as SecLlon 6(c) and (d)
1
of u 902-A perLalnlng Lo
suspenslon of paymenLs and appolnLmenL of recelver and managemenL
commlLLee ls now wlLhln Lhe [urlsdlcLlon of Speclal Commerclal CourLs.

1
u 902-A, SecLlon 6 (c) 1o appolnL one or more recelvers of Lhe properLy, real and
personal, whlch ls Lhe sub[ecL of Lhe acLlon pendlng before Lhe Commlsslon ln
accordance wlLh Lhe perLlnenL provlslons of Lhe 8ules of CourL ln such oLher cases
whenever necessary ln order Lo preserve Lhe rlghLs of Lhe parLles-llLlganLs and/or
proLecL Lhe lnLeresL of Lhe lnvesLlng publlc and credlLors: rovlded, however, 1haL
Lhe Commlsslon may, ln approprlaLe cases, appolnL a rehablllLaLlon recelver of
corporaLlons, parLnershlps or oLher assoclaLlons noL supervlsed or regulaLed by
oLher governmenL agencles who shall have, ln addlLlon Lo Lhe powers of a regular
recelver under Lhe provlslons of Lhe 8ules of CourL, such funcLlons and powers as
are provlded for ln Lhe succeedlng paragraph d) hereof: rovlded, furLher, 1haL Lhe
Commlsslon may appolnL a rehablllLaLlon recelver of corporaLlons, parLnershlps or
oLher assoclaLlons supervlsed or regulaLed by oLher governmenL agencles, such as

banks and lnsurance companles, upon requesL of Lhe governmenL agency
concerned: rovlded, flnally, 1haL upon appolnLmenL of a managemenL commlLLee,
rehablllLaLlon recelver, board or body, pursuanL Lo Lhls uecree, all acLlons for clalms
agalnsL corporaLlons, parLnershlps or assoclaLlons under managemenL or
recelvershlp pendlng before any courL, Lrlbunal, board or body shall be suspended
accordlngly..

(d) 1o creaLe and appolnL a managemenL commlLLee, board, or body upon peLlLlon
or moLu proprleLy Lo underLake Lhe managemenL of corporaLlons, parLnershlps or
oLher assoclaLlons noL supervlsed or regulaLed by oLher governmenL agencles ln
approprlaLe cases when Lhere ls lmmlnenL danger of dlsslpaLlon, loss, wasLage or
desLrucLlon of asseLs or oLher properLles of parallzaLlon of buslness operaLlons of
such corporaLlons or enLlLles whlch may be pre[udlclal Lo Lhe lnLeresL of mlnorlLy
sLockholders, parLles-llLlganLs or Lhe general publlc: rovlded, furLher, 1haL Lhe
Commlsslon may creaLe or appolnL a managemenL commlLLee, board or body Lo
underLake Lhe managemenL of corporaLlons, parLnershlps or oLher assoclaLlons
supervlsed or regulaLed by oLher governmenL agencles, such as banks and
lnsurance companles, upon requesL of Lhe governmenL agency concerned..

1he managemenL commlLLee or rehablllLaLlon recelver, board or body shall have
Lhe power Lo Lake cusLody of, and conLrol over, all Lhe exlsLlng asseLs and properLy
of such enLlLles under managemenL, Lo evaluaLe Lhe exlsLlng asseLs and llablllLles,
earnlngs and operaLlons of such corporaLlons, parLnershlps or oLher assoclaLlons,
Lo deLermlne Lhe besL way Lo salvage and proLecL Lhe lnLeresL of Lhe lnvesLors and
credlLors, Lo sLudy, revlew and evaluaLe Lhe feaslblllLy of conLlnulng operaLlons and
resLrucLure and rehablllLaLe such enLlLles lf deLermlned Lo be feaslble by Lhe
Commlsslon. lL shall reporL and be responslble Lo Lhe Commlsslon unLll dlssolved by
order of Lhe Commlsslon: rovlded, however, 1haL Lhe Commlsslon may, on Lhe
basls of Lhe flndlngs and recommendaLlon of Lhe managemenL commlLLee, or
rehablllLaLlon recelver, board or body, or on lLs own flndlngs, deLermlne LhaL Lhe
conLlnuance ln buslness of such corporaLlon or enLlLy would noL be feaslble or
proflLable nor work Lo Lhe besL lnLeresL of Lhe sLockholders, parLles-llLlganLs,
credlLors, or Lhe general publlc, order Lhe dlssoluLlon of such corporaLlon enLlLy and
lLs remalnlng asseLs llquldaLed accordlngly. 1he managemenL commlLLee or
rehablllLaLlon recelver, board or body may overrule or revoke Lhe acLlons of Lhe
prevlous managemenL and board of dlrecLors of Lhe enLlLy or enLlLles under
managemenL noLwlLhsLandlng any provlslon of law, arLlcles of lncorporaLlon or by-
laws Lo Lhe conLrary..chan robles vlrLual law llbrary
1he managemenL commlLLee, or rehablllLaLlon recelver, board or body shall noL be
sub[ecL Lo any acLlon, clalm or demand for, or ln connecLlon wlLh, any acL done or
*+
1hree kemed|es for a Cash-Strapped Corporat|on seek|ng Suspens|on of
ayment:
1. S|mp|e Suspens|on - corporaLlon has sufflclenL asseLs buL foresees
lmposslblllLy of meeLlng due Lo Lemporary llquldlLy problems.
2. Suspens|on w|th proposa| for rehab|||tat|on - suspenslon wlLh a plan for
rehab and repaymenL scheme for all debLs
3. Suspens|on where the corpo |s under a Management Comm|ttee or
kehab|||tat|on kece|ver - may be avalled of by a:
a. corporaLlon whlch has oo sofflcleot ossets Lo cover llablllLles
b. corporaLlon havlng mete llpolJlty ptoblems provlded lL prays for
Lhe appolnLmenL or ls under a managemenL comm or rehab recelver

1wo k|nds of ent|t|es may be appolnLed for a corporaLlon under
suspenslon of paymenL:
1. 8ehablllLaLlon 8ecelver
a. lor Corp/arL/Assn nC1 SuL8vlSLu by governmenL
agencles
% AppolnLed ln approprlaLe cases
b. lor Corp/arL/Assn SuL8vlSLu
% AppolnLed upon 8equesL of Lhe governmenL
agency concerned
Lx.: 8anks,lnsurance Companles
2. ManagemenL CommlLLee
a. lor Corp/arL/Assn nC1 SuL8vlSLu by governmenL
agencles
% AppolnLed upon peLlLlon or moLu proprlo
ll. 8equlslLes:
1. when Lhere ls lmmlnenL danger of
dlsslpaLlon, loss, wasLage or
desLrucLlon of asseLs or oLher
properLles
2. aralysls of buslness operaLlons of such
corporaLlons or enLlLles whlch may be
pre[udlclal Lo Lhe lnLeresL of mlnorlLy

omlLLed Lo be done by lL ln good falLh ln Lhe exerclse of lLs funcLlons, or ln
connecLlon wlLh Lhe exerclse of lLs power hereln conferred.

sLockholders, parLles-llLlganLs or Lhe
general publlc:
b. lor Corp/arL/Assn SuL8vlSLu by governmenL agencles
% AppolnLed upon 8LCuLS1 by Lhe governmenL
agency concerned

owers and Iunct|ons of the kk and the MC [Sect|ons 6(c) and (d)]

8ehablllLaLlon 8ecelver
a. A regular recelver under Lhe 8CC
b. ManagemenL CommlLLees under SecLlon 6(d)

ManagemenL CommlLLee
a. 1ake cusLody and conLrol over all exlsLlng asseLs of
enLlLles managed
b. LvaluaLe exlsLlng asseLs and llablllLles
c. ueLermlnaLe Lhe besL way Lo salvage and proLecL Lhe
lnLeresL of Lhe lnvesLors and credlLors
d. SLudy, revlew, and evaluaLe Lhe feaslblllLy of conLlnulng
operaLlons and resLrucLure and rehablllLaLe such enLlLLles
lf deLermlned Lo be feaslble by Lhe Commlsslon
e. 8eporL Lo Lhe Commlsslon unLll dlssolved. 1he
Commlsslon deLermlnes Lhe feaslblllLy of conLlnuance on
Lhe basls of Lhe MC's recommendaLlon
f. Cverrule or revoke Lhe acLlons of Lhe prevlous
managemenL/8oard of ulrecLors
g. lmmune from any acLlon, clalm, or demand ln connecLlon
wlLh any acL done by lL ln good falLh and ln Lhe exerclse
of lLs powers and funcLlons

LIILC1 CI SUSLNSICN CI AMLN1S


SecLlon 6(c): upon ACln1MLn1 of a MC, 88, board, or body, all acLlons
for clalms agalnsL corporaLlons, parLnershlps or assoclaLlons under
managemenL or recelvershlp pendlng before any courL, Lrlbunal, board or
body shall be suspended accordlngly.

*"
CLAlMS - debLs or demands of pecunlary naLure.

Pence an acLlon for nulllflcaLlon of corporaLe documenLs ls noL suspended
by appolnLmenL of a recelver (llnasla lnvesLmenL and llnance vs CA).

1he clalm musL be agalnsL Lhe corporaLlon and noL lLs sureLy. CredlLors
may proceed agalnsL Lhe properLles of an lndlvldual sLockholder, dlrecLor
or offlcer whlch sLood as surey Lo Lhe corporaLlon (Chung ka 8lo vs lAC).

1he reason for suspendlng clalms ls Lo enable Lhe MC or 88 Lo effecLlvely
exerclse lLs powers wlLhouL any [udlclal or exLra[udlclal lnLerference LhaL
mlghL prevenL Lhe rescue of Lhe company (AL vs Sadlc and kurangklng).

lf Lhe credlLor's acLlon already became flnal buL pendlng execuLlon aL Lhe
Llme Lhe suspenslon order was lssued, execuLlon of Lhe flnal [udgmenL ls
also suspended (8agong 8ayan vs Lxec !udge)

Suspenslon of paymenL lncludes:
1. LxLra[udlclal foreclosure of morLgage
2. llnal [udgmenL pendlng execuLlon
3. All clalms of pecunlary naLure (!lmenez vs 8l Pomes)

When a corporaLlon ls Laken over by a recelver, all credlLors, secured or
noL, sLand on equal fooLlng. loreclosure ls noL allowed and Lhe preference
of credlLs ls noL appllcable (Alemars Slbal and Sons vs Lllbenas)

8ules of 1humb:
1. All clalms pendlng before any courL wheLher flled by a credlLor
secured or unsecured, shall be suspended upon appolnLmenL of a
MC, 88, board or body.
2. Secured credlLors reLaln Lhelr preference over unsecured ones buL
Lhey cannoL enforce Lhls preference once suspenslon ls effecLed.
Powever ln Lhe evenL LhaL rehablllLaLlon has become no longer
feaslble (llquldaLlon), Lhey may enforce Lhelr preference of credlL.
(8C8C vs lAC)

ACIN1MLN1 CI MANAGLMLN1 CCMMI11LL 8CAkD Ck 8CD

S CnIM VS S SI nC & SCNS
Sy Chlm, mlnorlLy sLockholder of respondenL corporaLlon, flled MoLlon for
Lhe AppolnLmenL of a ManagemenL CommlLLee alleglng masslve
dlsslpaLlon and loss of corporaLe asseLs and funds and lmmlnenL danger of
furLher dlsslpaLlon. Ceneral Manager Sy 1long opposed, conLendlng LhaL Sy
Chlm falled Lo allege and esLabllsh Lwo requlslLes for Lhe creaLlon of a
managemenL commlLLee.

SC held LhaL SecLlon 1 8ule 9 of Lhe lnLerlm 8ules provlde for 2 requlslLes
for Lhe creaLlon of a MC:
1. ulsslpaLlon, loss, wasLage, desLrucLlon of asseLs or oLher
properLles Anu
2. aralyzaLlon (slc) of lLs buslness operaLlons whlch may be
pre[udlclal Lo Lhe lnLeresL of Lhe mlnorlLy sLockholders, parLles-
llLlganLs, or Lhe general publlc.
1he word Anu musL noL be Laken Lo mean C8" hence Lhe Lwo musL
concur.
Slnce Lransference of Lhe corporaLlon's managemenL wlll cerLalnly have a
negaLlve, lf noL crlppllng effecL, on Lhe operaLlons/affalrs of Lhe
corporaLlon, Lhe creaLlon and appolnLmenL of a managemenL commlLLee
and a recelver ls an exLraordlnary and drasLlc remedy Lo be exerclsed wlLh
care and cauLlon,
WhaL ls "lmmlnenL danger"? u 902A, Lhe S8C noL Lhe lnLerlm 8ules do noL
deflne. "uanger" refers Lo exposure or llablllLy Lo ln[ury. "lmmlnenL" refers
Lo someLhlng whlch ls LhreaLenlng Lo happen aL once, close alLhough noL
yeL happenlng, and on Lhe verge of happenlng.
ln Lhe presenL case, peLlLloners falled Lo make a sLrong showlng LhaL Lhere
was an lmmlnenL danger of dlsslpaLlon, loss, wasLage or desLrucLlon of
asseLs or oLher properLles of respondenL corporaLlon and paralysls of lLs
buslness operaLlons whlch may be pre[udlclal Lo Lhe lnLeresL of Lhe parLles-
llLlganLs, peLlLloners, or Lhe general publlc.
IACIN1C vs IWCC
*#
Shlg kaLayama, dlrecLor and mlnorlLy sLockholder of lWCC, flled a
derlvaLlve sulL praylng for Lhe appolnLmenL of an lnLerlm ManagemenL
CommlLLee Lo avold dlsslpaLlon of funds slnce 8amon !aclnLo was allegedly
dlverLlng lWCC funds Lo Lhe 8! Croup of Companles. SC held LhaL mere
dlsagreemenL among sLockholders as Lo Lhe affalrs of Lhe corporaLlon ls
noL sufflclenL ground Lo appolnL an MC. Powever, ln Lhe CA8, Lhe flndlngs
of Lhe exLernal audlLor of lWCC show lmmlnenL danger of dlsslpaLlon, loss,
wasLage and desLrucLlon of corpo asseLs due Lo Lhe conLlnuance of Lhe
peLlLloner's managemenL. 1he courL added LhaL Lhe MC ls noL an agenL of
Lhe sLockholder upon whose lnsLance Lhe commlLLee was appolnLed, Lhe
appolnLmenL of MC ls for Lhe beneflL of all lnLeresLed parLles. Also, LhaL
kaLayama knew of Lhe lllegal dlverslon of funds does noL [usLlfy Lhe
lmproprleLy of Lhe deallngs.



SLCUkI1ILS kLGULA1ICNS CCDL or kA 87899

S8C or 8A 8799 became effecLlve AugusL 8, 2000 replaclng 8 178 or Lhe
8evlsed SecurlLles AcL. lL almed Lo esLabllsh a free securlLles markeL LhaL
regulaLes lLself, proLecL lnvesLors, and mlnlmlze fraudulenL markeL
manlpulaLlons whlch dlsLorL free markeL.
S8C Look away from SLC lLs quasl-[udlclal funcLlons and Lransferred lL Lo
Lhe courLs Lhrough SecLlon 3.2, pursuanL Lo whlch AM no. 00-11-03-SC was
promulgaLed on november 21, 2000.

lraudulenL and manlpulaLlve devlces ln securlLles LransacLlons are more
spelled ouL ln Lhe S8C esp. ln ChapLer vll.

SLCUkI1ILS DLIINLD

SecLlon 3.1. 5ecotltles" are shares, part|c|pat|on or |nterests |n a
corporat|on or |n a commerc|a| enterpr|se or prof|t-mak|ng venture and
ev|denced by a cert|f|cate, contract, |nstrument, whether wr|tten or
e|ectron|c |n character. lL lncludes:
(a) Shares of sLock, bonds, debenLures, noLes, evldences of
lndebLedness, asseL-backed securlLles,
(b) lnvesLmenL conLracLs, cerLlflcaLes of lnLeresL or parLlclpaLlon ln
a proflL sharlng agreemenL, cerLlflcaLes of deposlL for a fuLure
subscrlpLlon,
(c) lracLlonal undlvlded lnLeresLs ln oll, gas or oLher mlneral rlghLs,
(d) uerlvaLlves llke opLlon and warranLs,
(e) CerLlflcaLes of asslgnmenLs, cerLlflcaLes of parLlclpaLlon, LrusL
cerLlflcaLes, voLlng LrusL cerLlflcaLes or slmllar lnsLrumenLs,
(f) roprleLary or non proprleLary membershlp cerLlflcaLes
lncorporaLlons, and
(g) CLher lnsLrumenLs as may ln Lhe fuLure be deLermlned by Lhe
Commlsslon.
kLGULA1ICN CI SLCUkI1ILS

1. SLC AS AN ADMINIS1kA1IVL AGLNC (SecLlon 4)
a. ComposlLlon:
l. Colleglal body of 3 members. 1 Chalrperson, 4
Commlssloners
1. 1erm: AppolnLed by Lhe resldenL for a
Lerm of 7 years
2. CuallflcaLlons:
a. naLural 8orn llllplno
b. AL leasL 40 yo for Chalrperson,
aL leasL 33 for Commlssloners
c. Cf good moral characLer or of
unquesLlonable lnLegrlLy
d. Cf known problLy and
paLrloLlsm
e. wlLh recognlzed compeLence
ln soclal and econ dlsclplles
f. Ma[orlLy of Lhe 3 members
musL be LAW?L8S
*$
ll. 2 ALLached Cfflces
1. Cfflce of Lhe Ceneral Counsel
2. Cfflce of Lhe Ceneral AccounLanL
lll. 8 ueparLmenLs:
1. Lconomlc 8esearch and lnformaLlon
ueparLmenL
2. MarkeL 8egulaLlon ueparLmenL
3. CorporaLlon llnance ueparLmenL
4. non-LradlLlonal SecurlLles and
lnsLrumenLs ueparLmenL
3. Company 8eglsLraLlon and MonlLorlng
ueparLmenL
6. Compllance and LnforcemenL
ueparLmenL
7. Puman 8esource and AdmlnlsLraLlve
ueparLmenL
8. llnanclal ManagemenL ueparLmenL
b. MeeLlngs:
l. AL leasL once a week or as ofLen as necessary
ll. upon Lhe
1. Call of Lhe Chalrperson
2. 8equesL of Lhe Lhree (3) Commlssloners
c. luncLlons of Lhe Chalrperson:
l. Chlef Lxec Cfflcer of Lhe Commlsslon
ll. LxecuLe and AdmlnlsLer pollcles, orders,
resoluLlons of Lhe Commlsslon
lll. Ceneral LxecuLlve ulrecLlon and Supervlslon of
all Lhe bodles, offlces, personnel and
admlnlsLraLlve buslness of Lhe Commlsslon

2. CWLkS AND IUNC1ICNS CI 1nL CCMMISSICN (Sect|on S)
(a) Pave [urlsdlcLlon and supervlslon over all corporaLlons,
parLnershlps or assoclaLlons who are Lhe granLees of
prlmary franchlses and/or a llcense or permlL lssued by
Lhe CovernmenL,
(b) lormulaLe pollcles and recommendaLlons on lssues
concernlng Lhe securlLles markeL, advlse Congress and
oLher governmenL agencles on all aspecLs of Lhe
securlLles markeL and propose leglslaLlon and
amendmenLs LhereLo,
(c) Approve, re[ecL, suspend, revoke or requlre amendmenLs
Lo reglsLraLlon sLaLemenLs, and reglsLraLlon and llcenslng
appllcaLlons,
(d) 8egulaLe, lnvesLlgaLe or supervlse Lhe acLlvlLles of persons
Lo ensure compllance,
(e) Supervlse, monlLor, suspend or Lake over Lhe acLlvlLles of
exchanges, clearlng agencles and oLher S8Cs,
(f) lmpose sancLlons for Lhe vlolaLlon of laws and Lhe rules,
regulaLlons and orders lssued pursuanL LhereLo,
(g) repare, approve, amend or repeal rules, regulaLlons and
orders, and lssue oplnlons and provlde guldance on and
supervlse compllance wlLh such rules, regulaLlons and
orders,
(h) LnllsL Lhe ald and supporL of and/or depuLlze any and all
enforcemenL agencles of Lhe CovernmenL, clvll or
mlllLary as well as any prlvaLe lnsLlLuLlon, corporaLlon,
flrm, assoclaLlon or person ln Lhe lmplemenLaLlon of lLs
powers and funcLlons under Lhls Code,
(l) lssue cease and deslsL orders Lo prevenL fraud or ln[ury Lo
Lhe lnvesLlng publlc,
([) unlsh for conLempL of Lhe Commlsslon, boLh dlrecL and
lndlrecL, ln accordance wlLh Lhe perLlnenL provlslons of
and penalLles prescrlbed by Lhe 8ules of CourL,
*%
(k) Compel Lhe offlcers of any reglsLered corporaLlon or
assoclaLlon Lo call meeLlngs of sLockholders or members
Lhereof under lLs supervlslon,
(l) lssue sobpoeoo Joces tecom and summon wlLnesses Lo
appear ln any proceedlngs of Lhe Commlsslon and ln
approprlaLe cases, order Lhe examlnaLlon, search and
selzure of all documenLs, papers, flles and records, Lax
reLurns, and books of accounLs of any enLlLy or person
under lnvesLlgaLlon as may be necessary for Lhe proper
dlsposlLlon of Lhe cases before lL, sub[ecL Lo Lhe
provlslons of exlsLlng laws,
(m) Suspend, or revoke, afLer proper noLlce and hearlng Lhe
franchlse or cerLlflcaLe of reglsLraLlon of corporaLlons,
parLnershlps or assoclaLlons, upon any of Lhe grounds
provlded by law, and
(n) Lxerclse such oLher powers as may be provlded by law as
well as Lhose whlch may be lmplled from, or whlch are
necessary or lncldenLal Lo Lhe carrylng ouL of, Lhe express
powers granLed Lhe Commlsslon Lo achleve Lhe
ob[ecLlves and purposes of Lhese laws.
kLGIS1kA1ICN CI 8kCkLkS, DLALLkS, SALLSMLN

;+5'/&#%&'"( "H 6#"R+#/V ?+%0+#/V 3%0+/:+( %(, 9//"*'%&+, <+#/"(/.

SLC. 28.1-.2. ersons who engage ln Lhe buslness of buylng or selllng
securlLles ln Lhe hlllpplnes as a broker or dealer, or acL as a salesman, or
an assoclaLed person of any broker or dealer need Lo reglsLer wlLh Lhe
Commlsslon.

Also no reglsLered broker or dealer or lssuer shall employ any salesman or
any assoclaLed person who ls noL reglsLered.

28.3. 1he Commlsslon may condlLlonally or uncondlLlonally exempL from
reglsLraLlon any broker, dealer, salesman, assoclaLed person of any broker
or dealer, or any class, conslsLenL wlLh Lhe publlc lnLeresL and Lhe
proLecLlon of lnvesLors.

28.4. Mlnlmun condlLlons for reglsLraLlon:
(a) lf a naLural person, Lhe appllcanL saLlsfacLorlly pass a wrlLLen
examlnaLlon as Lo hls proflclency and knowledge ln Lhe area of acLlvlLy for
whlch reglsLraLlon ls soughL,
(b) ln Lhe case of a broker or dealer, Lhe appllcanL saLlsfy a
mlnlmum neL caplLal as prescrlbed by Lhe Commlsslon, and provlde a bond
or oLher securlLy as Lhe Commlsslon may prescrlbe Lo secure compllance
wlLh Lhe provlslons of Lhls Code, and
(c) lf locaLed ouLslde of Lhe hlllpplnes, Lhe appllcanL flles a
wrlLLen consenL Lo servlce of process upon Lhe Commlsslon pursuanL Lo
SecLlon 63 hereof.

F"1 &" #+5'/&+#`

28.3. A broker or dealer musL flle wlLh Lhe Commlsslon a wrlLLen
appllcaLlon Lhe form and conLenLs of whlch Lhe Commlsslon by rule shall
prescrlbe.

28.6. A salesman or of an assoclaLed person of a reglsLered broker or
dealer musL flle a wrlLLen appllcaLlon, separaLely slgned and cerLlfled by
Lhe reglsLered broker or dealer Lo whlch such salesman or assoclaLed
person ls Lo become afflllaLed, or by Lhe lssuer ln Lhe case of a salesman
employed, appolnLed or auLhorlzed solely by such lssuer. Any employee of
an lssuer whose compensaLlon ls noL deLermlned dlrecLly or lndlrecLly on
sales of securlLles of Lhe lssuer ls noL a salesman under Lhls provlslon.

28.7. AppllcanL musL pay a reglsLraLlon fee prescrlbed by Lhe Commlsslon.

28.9. 1he names and addresses of all persons approved for reglsLraLlon
shall be recorded ln a 8eglsLer of SecurlLles MarkeL rofesslonals (open Lo
publlc lnspecLlon.)

28.10. Lvery person reglsLered shall flle lnformaLlon necessary Lo keep Lhe
*&
appllcaLlon for reglsLraLlon currenL and accuraLe (ex. changes ln salesmen,
assoclaLed persons and owners)

28.11. Lvery person reglsLered shall pay Lo Lhe Commlsslon an annual fee
as Lhe Commlsslon shall prescrlbe. nonpaymenL suspends reglsLraLlon.

28.12. 1he reglsLraLlon of a salesman or assoclaLed person auLomaLlcally
LermlnaLed upon Lhe cessaLlon of hls afflllaLlon wlLh sald reglsLered broker
or dealer, or wlLh an lssuer. 1he laLLer musL flle noLlce of separaLlon wlLh
Lhe Commlsslon.

Grounds for ;+7"*%&'"(V ;+H4/%0 "# 34/$+(/'"( "H ;+5'/&#%&'"( "H 6#"R+#/V
?+%0+#/V 3%0+/:+( %(, 9//"*'%&+, <+#/"(/.

29.1. 8eglsLraLlon under SecLlon 28 of Lhls Code may be refused, or any
reglsLraLlon granLed Lhereunder may be revoked, suspended, or llmlLaLlons
placed Lhereon, by Lhe Commlsslon lf, afLer due noLlce and hearlng, Lhe
Commlsslon deLermlnes Lhe appllcanL or reglsLranL:
(a) Pas wlllfully vlolaLed any provlslon of Lhls Code, any rule,
regulaLlon or order made hereunder, or any oLher law admlnlsLered by Lhe
Commlsslon, or ln Lhe case of a reglsLered broker, dealer or assoclaLed
person has falled Lo supervlse, wlLh a vlew Lo prevenLlng such vlolaLlon,
anoLher person who commlLs such vlolaLlon,
(b) Pas wlllfully made or caused Lo be made a maLerlally false or
mlsleadlng sLaLemenL ln any appllcaLlon for reglsLraLlon or reporL flled wlLh
Lhe Commlsslon or a self-regulaLory organlzaLlon, or has wlllfully omlLLed
Lo sLaLe any maLerlal facL LhaL ls requlred Lo be sLaLed Lhereln,
(c) Pas falled Lo saLlsfy Lhe quallflcaLlons or requlremenLs for
reglsLraLlon prescrlbed under SecLlon 28 and Lhe rules and regulaLlons of
Lhe Commlsslon promulgaLed Lhereunder,
(d) Pas been convlcLed, by a compeLenL [udlclal or admlnlsLraLlve
body of an offense lnvolvlng moral LurplLude, fraud, embezzlemenL,
counLerfelLlng, LhefL, esLafa, mlsapproprlaLlon, forgery, brlbery, false oaLh,
or per[ury, or of a vlolaLlon of securlLles, commodlLles, banklng, real esLaLe
or lnsurance laws,
(e) ls en[olned or resLralned by a compeLenL [udlclal or
admlnlsLraLlve body from engaglng ln securlLles, commodlLles, banklng,
real esLaLe or lnsurance acLlvlLles or from wlllfully vlolaLlng laws governlng
such acLlvlLles,
(f) ls sub[ecL Lo an order of a compeLenL [udlclal or admlnlsLraLlve
body refuslng, revoklng or suspendlng any reglsLraLlon, llcense or oLher
permlL under Lhls Code, Lhe rules and regulaLlons promulgaLed Lhereunder,
any oLher law admlnlsLered by Lhe Commlsslon,
(g) ls sub[ecL Lo an order of a self-regulaLory organlzaLlon
suspendlng or expelllng hlm from membershlp or parLlclpaLlon Lhereln or
from assoclaLlon wlLh a member or parLlclpanL Lhereof,
(h) Pas been found by a compeLenL [udlclal or admlnlsLraLlve body
Lo have wlllfully vlolaLed any provlslons of securlLles, commodlLles,
banklng, real esLaLe or lnsurance laws, or has wlllfully alded, abeLLed,
counseled, commanded, lnduced or procured such vlolaLlon, or
(l) Pas been [udlclally declared lnsolvenL.
competeot joJlclol ot oJmlolsttotlve boJy -- lncludes a forelgn
courL of compeLenL [urlsdlcLlon and a forelgn flnanclal regulaLor.

29.3. 1he suspenslon or revocaLlon of Lhe reglsLraLlon of a dealer or broker
shall also auLomaLlcally suspend Lhe reglsLraLlon of all salesmen and
assoclaLed persons afflllaLed wlLh such broker or dealer.

30.1. 8rokers and dealers are prohlblLed from deallng ln securlLles llsLed
and lssued by any corporaLlon where any sLockholder, dlrecLor, assoclaLed
person or salesman, or auLhorlzed clerk of sald broker or dealer and all Lhe
relaLlves of Lhe sald lndlvlduals wlLhln Lhe fourLh clvll degree of
consangulnlLy or afflnlLy, ls aL Lhe Llme holdlng offlce ln sald lssuer
corporaLlon as a dlrecLor, presldenL, vlce-presldenL, manager, Lreasurer,
compLroller, secreLary or any offlce of LrusL and responslblllLy, or ls a
conLrolllng person of Lhe lssuer.

30.2. 8rokers and uealers musL deal wlLh securlLles ln compllance wlLh
such rules and regulaLlons as Lhe Commlsslon shall prescrlbe Lo ensure falr
and honesL deallngs.

*'
Cases:

IUS1LL 1LkM LN1LkkISL VS SLC
1he CerLlflcaLe of Level of ALLalnmenL whlch expresses Lhe Lerms: ?ou
have [usL recelved your cerLlflcaLe ln clalmlng a greaL sum of money.
Share your cerLlflcaLe and recover rlghL away your lnvesLmenL of 1.3k"
well falls wlLhln Lhe deflnlLlon of securlLles under SecLlon 2 of Lhe 8evlsed
SecurlLles AcL. !usLee 1erm ls Lherefore lllegally selllng securlLles havlng noL
prevlously reglsLered wlLh Lhe SLC.

CnINA 8ANkING VS CA
CalapaLla, sLockholder of (valley Colf) vCCCl, pledged hls sLock wlLh
Chlna8anklngCorp (C8C). vCCCl duly recorded Lhe pledge ln lLs book of
records. C8C foreclosed and boughL Lhe sLock ln Lhe aucLlon. vCCCl
however, puL Lhe sLocks of CalapaLla on a dellnquency sale due Lo non-
paymenL of hls overdue accounL wlLh vCCCl. C8C flled complalnL wlLh SLC
seeklng nulllflcaLlon of Lhe dellnquency aucLlon sale and Lhe lssuance of
Lhe sLock lnlLs name.
ls lL an lnLracorporaLe conLroversy wlLhln SLC [urlsdlcLlon? ?LS. 1he prlor
purchase of C8C of Lhe shares ln Lhe publlc aucLlon Lransferred ownershlp
Lo Lhe same and enLlLled C8C Lo have Lhe share reglsLered ln lLs name as a
new vCCCl member. Pence C8C ls a sLockholder and Lhe confllcL ls
lnLracorporaLe ln naLure.

LCLL VS L1kAL8A
1he forelgn exchange Lradlng LransacLlon LhaL Lransplred beLween
complalnanL and Lansdale appears Lo be an |nvestment contract or
part|c|pat|on |n a prof|t shar|ng agreement LhaL falls wlLhln Lhe deflnlLlon
of Lhe law [on securlLles]. When Lhe lnvesLor ls relaLlvely unlnformed and
Lurns over hls money Lo oLhers, essenLlally dependlng upon Lhelr
represenLaLlons and Lhelr honesLy and sklll ln managlng lL, Lhe LransacLlon
generally ls consldered Lo be an lnvesLmenL conLracL. Powever, Lhe
accused accounL execuLlve eLralba was acqulLLed because whlle lL ls
esLabllshed by Lhe prosecuLlon LhaL Lansdale was noL duly reglsLered and
appellanL was noL llcensed as a broker, Lhe manner by whlch appellanL
connlved wlLh her co-accused and lnduced her Lo lnvesL are devold of any
cerLalnLy as Lo Lhe acLual parLlclpaLlon of appellanL ln Lhe commlsslon of
Lhe offenses charged agalnsL her.

1LNDLk CIILk kULL
SLC. 19.1. (a) Any person or group of persons acLlng ln concerL who lnLends
Lo acqulre aL leasL flfLeen per cenL (13) of any class of any equlLy securlLy
of a llsLed corporaLlon or of any class of any equlLy securlLy of a
corporaLlon wlLh asseLs of aL leasL llfLy Mllllon esos (30,000,000.00) and
havlng Lwo hundred (200) or more sLockholders wlLh aL leasL one hundred
(100) shares each or who lnLends Lo acqulre aL leasL LhlrLy per cenL (30)
of such equlLy over a perlod of Lwelve (12) monLhs shall make a Lender
offer Lo sLockholders by flllng wlLh Lhe Commlsslon a declaraLlon Lo LhaL
effecL, and furnlsh Lhe lssuer, a sLaLemenL conLalnlng such of Lhe
lnformaLlon requlred ln SecLlon 17 of Lhls Code as Lhe Commlsslon may
prescrlbe. Such person or group of persons shall publlsh all requesLs or
lnvlLaLlons for Lender, or maLerlals maklng a Lender offer or requesLlng or
lnvlLlng leLLers of such a securlLy.

INDLLNDLN1 DIkLC1Ck kULL
SLC. 38. loJepeoJeot ultectots. - Any corporaLlon wlLh a class of equlLy
securlLles llsLed for Lradlng on an Lxchange or wlLh asseLs ln excess of llfLy
mllllon pesos (30,000,000.00) and havlng Lwo hundred (200) or more
holders, aL leasL of Lwo hundred (200) of whlch are holdlng aL leasL one
hundred (100) shares of a class of lLs equlLy securlLles or whlch has sold a
class of equlLy securlLles Lo Lhe publlc pursuanL Lo an effecLlve reglsLraLlon
sLaLemenL ln compllance wlLh SecLlon 12 hereof shall have aL leasL Lwo (2)
lndependenL dlrecLors or such lndependenL dlrecLors shall consLlLuLe aL
leasL LwenLy percenL (20) of Lhe members of such board, whlchever ls Lhe
lesser. lor Lhls purpose, an lndependenL dlrecLor" shall mean a person
oLher Lhan an offlcer or employee of Lhe corporaLlon, lLs parenL or
subsldlarles, or any oLher lndlvldual havlng a relaLlonshlp wlLh Lhe
corporaLlon, whlch would lnLerfere wlLh Lhe exerclse of lndependenL
[udgmenL ln carrylng ouL Lhe responslblllLles of a dlrecLor.

C1nLk ICkMS CI IkAUDULLN1 1kANSAC1ICNS AND MAkkL1
MANIULA1ICN

WASn SALL [Sect|on 24.1(a)(I)]
Any LransacLlon ln a securlLy whlch lnvolves no change ln Lhe
beneflclal ownershlp Lhereof. A serles of by and sell LransacLlon may be
*(
placed by one and Lhe same beneflclal owner ln Lhe Lxchange whlch would
noL affecL change ln ownershlp of Lhe shares exchanged.

MA1CnLD CkDLk [24.1 (a)(II)]
Crder/orders for Lhe purchase or sale of securlLy wlLh Lhe
knowledge LhaL a slmulLaneous order or orders of subsLanLlally Lhe same
slze, Llme and prlce for Lhe sale or purchase of such securlLy has, or wlll be
enLered by or for Lhe same or dlfferenL parLles.

Wash Sale and MaLched Crder are noL per se lllegal. Cnly lf Lhey
are used as ameans Lo creaLe a false or mlsleadlng appearance of acLlve
Lradlng do Lhey become lllegal.

MAkkING 1nL CLCSL
1he placlng of purchase or sale order aL or near Lhe close of Lhe
Lradlng perlod so LhaL Lhe prlce of Lhe securlLy on Lhe ff Lradlng day ls Lhe
same prlce as Lhe one marked or Laped on Lhe close of Lhe prevlous Lradlng
day.

AIN1ING 1nL 1AL
Same as Marklng Lhe Close only LhaL lL ls made durlng normal
Lradlng hours, causlng flcLlLlous reporLs Lo appear on Lhe Llcker Lape.

SULL2ING 1nL ILCA1

AlLhough parL of Lhe lssue ls ouLsLandlng, Lhe dealers hold Lhem
lnLenLlonally wlLh a vlew of reselllng Lhem for proflL. 1he resulL ls a shorL
supply vls-a-vls Lhe demand hence ralslng Lhe prlce.

nL AND DUM
1he group buys Lhe ouLsLandlng caplLal sLock of a dormanL
company. 1hey merge lL Lo Lhelr own prlvaLe company and Lhey galn
conLrol of Lhe ma[orlLy of Lhe sLocks of Lhe merged company. 1he number
of shares ls reduced and sLock cerLlflcaLes are relssued Lo nomlnal
sLockholders (relaLlves and oLher persons ln Lhe scheme). 1hey geL a
broker-dealer who would wllllngly make a markeL for Lhe sLocks of Lhe
newly merged company. 1hey hlre a promoLer Lo hype Lhe vlrLues of Lhe
company. 1he broker advances a hlgh bld prlce. 1he sLockholders would
Lhen dump Lhelr shareholdlngs (sell lL for a low prlce) and ball ouL.

8CILLk kCCM CLkA1ICNS
lnLenslve selllng campalgn lnduclng lnvesLors Lo purchase based
on unfounded predlcLlons and mlsleadlng markeL leLLers.

Marklng Lhe close/alnLlng Lhe 1ape, Squeezlng Lhe lloaL, Pype and uump
and 8oller 8oom are all under SecLlon 24(b). 1hey become unlawful lf
effecLed Lo elLher:
1. 8alse Lhe prlce or lnduce Lhe purchase of securlLy or of a commonly
conLrolled company
2. uepress Lhe prlce Lo lnduce Lhe sale of securlLy
3. CreaLe acLlve Lradlng Lo lnduce purchase or sale of securlLy

1he followlng are lllegal per se:

CIkCULA1ICN Ck DISSLMINA1ICN INICkMA1ICN [Sect|on 24(c)]
Spreadlng lnfo LhaL Lhe prlce of any securlLy llsLed ls llkely Lo fall
because of manlpulaLlve markeL operaLlons for Lhe purpose of ralslng or
depresslng Lhe prlce and lnduclng Lhe purchase or sale of Lhe securlLy.

MAkING IALSL Ck MISLLADING S1A1LMLN1S [24(d)]
SLaLlng any maLerlal facL, whlch he knew or had reasonable
grounds Lo belleve Lo be false and mlsleadlng for Lhe purpose of lnduclng
purchase or sale of Lhe securlLy.

LGGING Ck IIkING Ck S1A8ILI2ING 1nL kICL [24(e)]
egglng Lhe prlce of securlLy Lhrough any serles of LransacLlons for
Lhe purchase and sale Lhereof.

INSIDLk 1kADING
An acL of a person who buys and sells securlLy whlle ln possesslon
of maLerlal lnformaLlon wlLh respecL LhereLo LhaL ls noL generally avallable
Lo Lhe publlc.
lnSluL8 under SecLlon 3.8:
(a) Lhe lssuer,
*)
(b) a dlrecLor or offlcer (or person performlng slmllar funcLlons)
of, or a person conLrolllng Lhe lssuer,
(c) a person whose relaLlonshlp or former relaLlonshlp Lo Lhe
lssuer glves or gave hlm access Lo maLerlal lnformaLlon abouL Lhe
lssuer or Lhe securlLy LhaL ls noL generally avallable Lo Lhe publlc,
(d) a governmenL employee, or dlrecLor, or offlcer of an exchange,
clearlng agency and/or self-regulaLory organlzaLlon who has
access Lo maLerlal lnformaLlon abouL an lssuer or a securlLy LhaL ls
noL generally avallable Lo Lhe publlc, or
(e) a person who learns such lnformaLlon by a communlcaLlon
from any of Lhe foregolng lnslders.

C1nLk IkAUDULLN1 1kANSAC1ICNS

SLC. 26. lL shall be unlawful for any person, dlrecLly or lndlrecLly, ln
connecLlon wlLh Lhe purchase or sale of any securlLles Lo:

26.1. Lmploy any devlce, scheme, or arLlflce Lo defraud,

26.2. CbLaln money or properLy by means of any unLrue sLaLemenL of a
maLerlal facL of any omlsslon Lo sLaLe a maLerlal facL necessary ln order Lo
make Lhe sLaLemenLs made, ln Lhe llghL of Lhe clrcumsLances under whlch
Lhey were made, noL mlsleadlng, or

26.3. Lngage ln any acL, LransacLlon, pracLlce or course of buslness whlch
operaLes or would operaLe as a fraud or decelL upon any person.

SANC1ICNS

ADMINIS1kA1IVL

SLC. 34.1.
(l) Suspenslon, or revocaLlon of any reglsLraLlon for Lhe offerlng of
securlLles,

(ll) A flne of no less Lhan 1en Lhousand pesos (10,000.00) nor more Lhan
Cne mllllon pesos (1,000,000.00) plus noL more Lhan 1wo Lhousand pesos
(2,000.00) for each day of conLlnulng vlolaLlon,

(lll) ln Lhe case of a vlolaLlon of SecLlons 19.2, 20, 24, 26 and 27,
dlsquallflcaLlon from belng an offlcer, member of Lhe 8oard of ulrecLors, or
person performlng slmllar funcLlons, of an lssuer requlred Lo flle reporLs
under SecLlon 17 of Lhls Code or any oLher acL, rule or regulaLlon
admlnlsLered by Lhe Commlsslon,

(lv) ln Lhe case of a vlolaLlon of SecLlon 34, a flne of no more Lhan Lhree (3)
Llmes Lhe proflL galned or loss avolded as a resulL of Lhe purchase, sale or
communlcaLlon proscrlbed by such SecLlon, and

(v) CLher penalLles wlLhln Lhe power of Lhe Commlsslon Lo lmpose.
1hls shall be wlLhouL pre[udlce Lo Lhe flllng of crlmlnal charges agalnsL Lhe
lndlvlduals responslble for Lhe vlolaLlon.

CIVIL

SLC. 36. clvll llobllltles oo Accooot of lolse keqlsttotloo 5totemeot. - 36.1.
Any person acqulrlng a securlLy, Lhe reglsLraLlon sLaLemenL of whlch or any
parL Lhereof conLalns on lLs effecLlvlLy an unLrue sLaLemenL of a maLerlal
facL or omlLs Lo sLaLe a maLerlal facL requlred Lo be sLaLed Lhereln or
necessary Lo make such sLaLemenLs noL mlsleadlng, and who suffers
damage, may sue and recover damages from Lhe followlng enumeraLed
persons, unless lL ls proved LhaL aL Lhe Llme of such acqulslLlon he knew of
such unLrue sLaLemenL or omlsslon:chan robles vlrLual law llbrary
(a) 1he lssuer and every person who slgned Lhe reglsLraLlon sLaLemenL,
(b) Lvery person who was a dlrecLor of, or any oLher person performlng
slmllar funcLlons, or a parLner ln, Lhe lssuer aL Lhe Llme of Lhe flllng of Lhe
reglsLraLlon sLaLemenL or any parL, supplemenL or amendmenL Lhereof
wlLh respecL Lo whlch hls llablllLy ls asserLed,
(c) Lvery person who ls named ln Lhe reglsLraLlon sLaLemenL as belng or
abouL Lo become a dlrecLor of, or a person performlng slmllar funcLlons, or
a parLner ln, Lhe lssuer and whose wrlLLen consenL LhereLo ls flled wlLh Lhe
reglsLraLlon sLaLemenL,
**
(d) Lvery audlLor or audlLlng flrm named as havlng cerLlfled any flnanclal
sLaLemenLs used ln connecLlon wlLh Lhe reglsLraLlon sLaLemenL or
prospecLus.
(e) Lvery person who, wlLh hls wrlLLen consenL, whlch shall be flled wlLh
Lhe reglsLraLlon sLaLemenL, has been named as havlng prepared or cerLlfled
any parL of Lhe reglsLraLlon sLaLemenL, or as havlng prepared or cerLlfled
any reporL or valuaLlon whlch ls used ln connecLlon wlLh Lhe reglsLraLlon
sLaLemenL, wlLh respecL Lo Lhe sLaLemenL, reporL, or valuaLlon, whlch
purporLs Lo have been prepared or cerLlfled by hlm.
(f) Lvery selllng shareholder who conLrlbuLed Lo and cerLlfled as Lo Lhe
accuracy of a porLlon of Lhe reglsLraLlon sLaLemenL, wlLh respecL Lo LhaL
porLlon of Lhe reglsLraLlon sLaLemenL whlch purporLs Lo have been
conLrlbuLed by hlm.
(g) Lvery underwrlLer wlLh respecL Lo such securlLy.
36.2. lf Lhe person who acqulred Lhe securlLy dld so afLer Lhe lssuer has
made generally avallable Lo lLs securlLy holders an lncome sLaLemenL
coverlng a perlod of aL leasL Lwelve monLhs beglnnlng from Lhe effecLlve
daLe of Lhe reglsLraLlon sLaLemenL, Lhen Lhe rlghL of recovery under Lhls
subsecLlon shall be condlLloned on proof LhaL such person acqulred Lhe
securlLy relylng upon such unLrue sLaLemenL ln Lhe reglsLraLlon sLaLemenL
or relylng upon Lhe reglsLraLlon sLaLemenL and noL knowlng of such lncome
sLaLemenL, buL such rellance may be esLabllshed wlLhouL proof of Lhe
readlng of Lhe reglsLraLlon sLaLemenL by such person.

SLC. 37. clvll llobllltles Atlsloq lo coooectloo wltb ltospectos,
commoolcotloos ooJ kepotts. - 37.1. Any person who:
(a) Cffers Lo sell or sells a securlLy ln vlolaLlon of ChapLer lll, or
(b) Cffers Lo sell or sells a securlLy, wheLher or noL exempLed by Lhe
provlslons of Lhls Code, by Lhe use of any means or lnsLrumenLs of
LransporLaLlon or communlcaLlon, by means of a prospecLus or oLher
wrlLLen or oral communlcaLlon, whlch lncludes an unLrue sLaLemenL of a
maLerlal facL or omlLs Lo sLaLe a maLerlal facL necessary ln order Lo make
Lhe sLaLemenLs, ln Lhe llghL of Lhe clrcumsLances under whlch Lhey were
made, noL mlsleadlng (Lhe purchaser noL knowlng of such unLruLh or
omlsslon), and who shall fall ln Lhe burden of proof LhaL he dld noL know,
and ln Lhe exerclse of reasonable care could noL have known, of such
unLruLh or omlsslon, shall be llable Lo Lhe person purchaslng such securlLy
from hlm, who may sue Lo recover Lhe conslderaLlon pald for such securlLy
wlLh lnLeresL Lhereon, less Lhe amounL of any lncome recelved Lhereon,
upon Lhe Lender of such securlLy, or for damages lf he no longer owns Lhe
securlLy.
37.2. Any person who shall make or cause Lo be made any sLaLemenL ln
any reporL, or documenL flled pursuanL Lo Lhls Code or any rule or
regulaLlon Lhereunder, whlch sLaLemenL was aL Lhe Llme and ln Lhe llghL of
Lhe clrcumsLances under whlch lL was made false or mlsleadlng wlLh
respecL Lo any maLerlal facL, shall be llable Lo any person who, noL knowlng
LhaL such sLaLemenL was false or mlsleadlng, and relylng upon such
sLaLemenLs shall have purchased or sold a securlLy aL a prlce whlch was
affecLed by such sLaLemenL, for damages caused by such rellance, unless
Lhe person sued shall prove LhaL he acLed ln good falLh and had no
knowledge LhaL such sLaLemenL was false or mlsleadlng.chan robles vlrLual
law llbrary

SLC. 38. clvll lloblllty lot ltooJ lo coooectloo wltb 5ecotltles 1toosoctloos.
- Any person who engages ln any acL or LransacLlon ln vlolaLlon of SecLlons
19.2, 20 or 26, or any rule or regulaLlon of Lhe Commlsslon Lhereunder,
shall be llable Lo any oLher person who purchases or sells any securlLy,
granLs or refuses Lo granL any proxy, consenL or auLhorlzaLlon, or accepLs
or decllnes an lnvlLaLlon for Lender of a securlLy, as Lhe case may be, for
Lhe damages susLalned by such oLher person as a resulL of such acL or
LransacLlon.
SLC. 39. clvll lloblllty lot Moolpolotloo of 5ecotlty ltlces. - Any person
who wlllfully parLlclpaLes ln any acL or LransacLlon ln vlolaLlon of SecLlon 24
shall be llable Lo any person who shall purchase or sell any securlLy aL a
prlce whlch was affecLed by such acL or LransacLlon, and Lhe person so
ln[ured may sue Lo recover Lhe damages susLalned as a resulL of such acL or
LransacLlon.
"++

SLC. 60. clvll lloblllty wltb kespect to commoJlty lototes coottocts ooJ
lte-oeeJ lloos. - 60.1. Any person who engages ln any acL or LransacLlon ln
wlllful vlolaLlon of any rule or regulaLlon promulgaLed by Lhe Commlsslon
under SecLlon 11 or 16, whlch Lhe Commlsslon denomlnaLes aL Lhe Llme of
lssuance as lnLended Lo prohlblL fraud ln Lhe offer and sale of pre-need
plans or Lo prohlblL fraud, manlpulaLlon, flcLlLlous LransacLlons, undue
speculaLlon, or oLher unfalr or abuslve pracLlces wlLh respecL Lo
commodlLy fuLure conLracLs, shall be llable Lo any oLher person susLalnlng
damage as a resulL of such acL or LransacLlon.

60.2. As Lo each such rule or regulaLlon so denomlnaLed, Lhe Commlsslon
by rule shall prescrlbe Lhe elemenLs of proof requlred for recovery and any
llmlLaLlons on Lhe amounL of damages LhaL may be lmposed.
SLC. 61. clvll lloblllty oo Accooot of loslJet 1toJloq. - 61.1. Any lnslder who
vlolaLes SubsecLlon 27.1 and any person ln Lhe case of a Lender offer who
vlolaLes SubsecLlon 27.4 (a)(l), or any rule or regulaLlon Lhereunder, by
purchaslng or selllng a securlLy whlle ln possesslon of maLerlal lnformaLlon
noL generally avallable Lo Lhe publlc, shall be llable ln a sulL broughL by any
lnvesLor who, conLemporaneously wlLh Lhe purchase or sale of securlLles
LhaL ls Lhe sub[ecL of Lhe vlolaLlon, purchased or sold securlLles of Lhe same
class unless such lnslder, or such person ln Lhe case of a Lender offer,
proves LhaL such lnvesLor knew Lhe lnformaLlon or would have purchased
or sold aL Lhe same prlce regardless of dlsclosure of Lhe lnformaLlon Lo
hlm.

61.2. An lnslder who vlolaLes SubsecLlon 27.3 or any person ln Lhe case of a
Lender offer who vlolaLes SubsecLlon 27.4 (a), or any rule or regulaLlon
Lhereunder, by communlcaLlng maLerlal non-publlc lnformaLlon, shall be
[olnLly and severally llable under SubsecLlon 61.1 wlLh, and Lo Lhe same
exLenL as, Lhe lnslder, or person ln Lhe case of a Lender offer, Lo whom Lhe
communlcaLlon was dlrecLed and who ls llable under SubsecLlon 61.1 by
reason of hls purchase or sale of a securlLy.



LNAL

SecLlon 73.
Any person who:
!" vlolaLes any of Lhe provlslons of Lhls Code, or Lhe rules and
regulaLlons promulgaLed by Lhe Commlsslon under auLhorlLy
Lhereof,
#" ln a reglsLraLlon sLaLemenL flled under Lhls Code, makes any
unLrue sLaLemenL of a maLerlal facL or omlLs Lo sLaLe any maLerlal
facL requlred Lo be sLaLed Lhereln or necessary Lo make Lhe
sLaLemenLs Lhereln noL mlsleadlng,

Shall suffer Lhe penalLy of:
1. a flne of noL less Lhan llfLy Lhousand pesos (30,000.00) nor more
Lhan llve mllllon pesos (3,000,000.00) or
2. lmprlsonmenL of noL less Lhan seven (7) years nor more Lhan
LwenLy- one (21) years, or
3. boLh, ln Lhe dlscreLlon of Lhe courL.

lf Lhe offender ls a [urldlcal enLlLy, Lhe penalLy be lmposed upon
1. such [urldlcal enLlLy and
2. upon Lhe offlcer or offlcers of Lhe corporaLlon, parLnershlp,
assoclaLlon or enLlLy responslble
3. lf such offlcer ls an allen, he shall suffer Lhe above penalLles
and be deporLed wlLhouL furLher proceedlngs afLer servlce of
senLence.