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Share of Stock

- One of the units into which the capital stock is divider; it represents the intangible interest or right
which an owner has in the management, profits, and assets of the corporation
Represents the rights and interest of a stockholder in a corporation
Intangible personal property
May be issued even if not full paid, except shares w/o par value which are deemed fully paid and nonassessable upon issuance

Certificate of Stock
- The written acknowledgment by the corporation of a stockholders interest in the management, profits,
and assets of the corporation
The written evidence of such rights and interest
Tangible personal property
Issued only if the subscription is fully paid

Sec. 16 Amendments of AOI

> Requirements for amendment of AOI:
- Majority vote of the BOD & vote or written assent of 2/3 stockholders or members
> Effectivity
a. Upon approval by the SEC; or
b. From the date of filing with the SEC if not acted upon within 6 months for a cause not attributable to the Corporation
Sec. 17 Grounds for rejection or disapproval of the AOI or any amendment:
No substantial compliance with the required form
Purpose/s are unconstitutional, illegal, immoral, and contrary to rules and regulation
Falsity in the Treasurers Affidavit on the subscription and paid-up capital
Non-compliace with the required percentage of ownership of the capital stock by Filipinos
Sec. 19 Commencement of Corporate Existence
> Commences to have corporate existence and juridical personality and is deemed incorporatied from: THE DATE THE SEC ISSUES A CERTIFICATON OF INCORPORATION UNDER ITS OFFICAL SEAL.
> Effect:
Incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the name stated in the AOI for the period mention, unless period is extended or dissolved
Sec. 20
De Jure Corporation
Created in strict compliance with all the legal requirements
Whose right to exist as a corporation cannot be successfully attacked in a direct proceeding for that
purpose by the State

De Facto Corporation
Defectively created but there is franchise resulting from an attempt in good faith to incorporate & an
exercise of corporate powers on the part of its members.
Has all the powers of a de jure corporation but its due existence can be attacked directly in a quo
warranto proceeding

> Requisites of a De Facto Corporation:

1. There must be a valid law which it is incorporated
2. Attempt in good faith to incorporate
3. Actual exercise of corporate powers
4. A certificate of incorporation is issued despite a defect in its incorporation
Sec. 21
CORPORATION BY ESTOPPEL Not in reality a corporation but is considered as one with respect to those who are precluded by their admission or conduct from denying its existence
> Liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof
> Lack of Corporate personality of ostensible corporation not a defense in suit
> 3rd persons contracting with ostensible cannot resist performance of their obligation on the ground that there was in fact no corporation
Sec. 22
Effects of Non-use of Corporate Charter within 2 years
Automatically dissolved unless cause is beyond the control of the corporation as may be determined by
the SEC

Effects on Continuous inoperation for at least 5 years

Not automatically dissolved. Notice and Hearing required to SEC.
A ground for suspension or revocation of its corporate franchise or certificate of incorporation unless
cause is beyond the control of the corporation as may be determined by the SEC

Sec. 23
> Powers of the BOD, extent:
a. To exercise corporate powers
b. to conduct all business of the corporation
c. to control and hold corporate property
> Principle of Holdover Directors or trustees continue to hold office until the stockholders or members elect their successors and the latter take office. Accordingly, the incumbent directors do not automatically cease to hold office upon the expiration of their term if they have yet no successors
Sec. 25 Corporate Officers, quorum
> Corporate Officers:
- President: must be a director
- Treasurer
- Corporate Secretary: resident and citizen
- Other officers may be provided in the by-laws
> Quorum
- the number sufficient to transact business
- GR: The quorum in the meeting of the directors or trustees is the majority of the total number of directors or trustees fixed in the AOI

Exception: if the AOI or by-laws so provide for a greater number

- Voting Requirement
GR: Majority or the directors or trustees present provided there is quorum
Exception: In the election of officers where the vote required is the majority of the total number of the directors or trustees
Sec. 27 Persons disqualified to become directors, trustees or officers:
Persons convicted by final judgment of an offence punishable by imprisonment for a period exceeding 6 years
Persons guilty of violating the Corporation Code committed within 5 years prior to the date of election or appointment
Sec. 29 Vacancies in the office or director or trustee
> Causes of vacancy in the office:
Removal, Expiration of term, Increase in the # of Directors, Resignation, Death, Abandonment, Disqualification
> Power to fill vacancy
By the Stockholders or members:
Cause Removal, Expiration of term, or Increase in the number of directors or trustees
If the cause of vacancy is other than Removal, Expiration of term, or Increase in the number of directors or trustees, but doesnt not constitute a quorum
By the BOD
If the cause of vacancy is other than Removal, Expiration of term, or Increase in the number of directors or trustees
+ Quorum
> Term of office elected to fill vacancy
Serve only for the unexpired portion of the term of his predecessor in office
Sec. 30 Compensation of Directors
GR: Not allowed to compensation
fixed in the by-laws
approved by the stockholders
compensation refers to reasonable per diems for attending board meetings
- Total yearly compensation of directors, should not exceed 10% of the net income before income tax of the corporation during the preceding year.
BUSINESS JUDGMENT RULE protects directors who act with due care and in good faith, provided their decisions are within the law and made in the best interests of the corporation
Liability of directors or trustees for damages:
consenting or voting to patently unlawful acts
guilty of gross negligence or bad faith in directing the affairs of the corporation
acquiring any interest in conflict with their duty
Liability for secret profits
Liable as trustee for corporation and must account for the profits which otherwise would have accrued to the corporation

Sec. 32
> Requisites for validity of contract of the corporation with one or more of its directors of trustees:
VOIDABLE at the option of such corporation, unless:
the presence of such director or trustee was not necessary to constitute a quorum for such meeting
the vote of such director or trustee was not necessary for the approval of the contract
the contract is fair and reasonable under the circumstances
> Ratification of contract with a director or trustee
When any of the first 2 conditions required is absent, may be raitified by 2/3 and full disclosure of the adverse interest of the director or trustee involved must be made at such meeting
> Requisite for validity of contract with an officer who is not a director:
the contract is fair and reasonable under the circumstances
contract must have been previously authorized by the BOD
INTERLOCKING DIRECTORS When a director holds seats in the BOD of 2 or more corporations
* Stockholdings exceeding 20% of the outstanding capital stock shall be considered substantial for purposes of interlocking directors
DOCTRINE OF CORPORATE OPPORTUNITY prohibits directors from usurping for, or diverting to themselves business deals or opportunities that in equity or fairness belong the corporation

Required to account to the latter for all such profits by refunding the same unless ratified
EXECUTIVE COMMITTEE a committee within a corporation composed of not less than 3 direcrtors and whose creation is provided in the by-laws
Duty: Give the authority to act of routine matters or on those that are required to be taken expeditiously w/o need of BOD meeting which may be difficult to convene
Acts that cannot be delegated to the Committee:
Approval of any action for which shareholders approval is also required
Filling of vacancies in the board
Amendment, repeal or adoption of by-laws
Amendment or repeal of any board resolution which by its express terms is not so amenable or repealable
Distribution of cash dividends
Sec. 36 Corporate Powers and Capacity

EXPRESS POWERS powers expressly granted to a corporation by its charter

IMPLIED POWERS powers which are reasonable necessary to carry into effect the powers that are expressly granted and which must therefore be presumed to have been the intention in the grant of the franchise
INCIDENTAL POWERS powers that a corporation may exercise by reason of its very existence as a corporation; inherent
APPRAISAL RIGHTS the right of a stockholder to demand payment of the fair value of his shares when he dissents from certain corporate acts; Secs. 16, 37, 42
PRE-EMPTIVE RIGHT the right of existing stockholders to purchase or subscribe to all issuances or disposition of shares of any class, in proportion to their respective stockholders, before such shares are offered to the public
right is denied by the AOI
shares are issued in compliance with existing laws
shares are issued in good faith in exchange of property needed for corporate purpose or in payment of a previously contracted debt