CAPITAL STRUCTURE

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ABC Corp rendered printing services to XYZ Corp
XYZ did not pay
ABC filed an action for collection
ABC discovered that subscribers of XYZ have not paid in full the subscription
ABC moved to amend the complaint to include subscribers of XYZ
SC: You can file against both because of the Trust Fund Doctrine
No need to wait for the declaration of insolvency on the part of the corp
While you can file a case against subscribers, any judgment against the subscribers
will be deferred until you can show that the assets of the corporation are not
enough to pay the obligation
The president of the corp cannot condone payment because of the trust fund
doctrine
GR: liability of subscriber limited to his unpaid subscription
XPN: He is a director and officer of the corp at the same time
He can be held liable beyond his subscription
BAR: A is a SH of ABC corp
He paid in full the subscription
B has unpaid subscription equivalent to 50%
C has fully paid subscription but he is an officer and director of the corp
Corp became insolvent due to mismanagement of directors
Can you file a case against A, B, C?
A- No

B- Yes to the extent of unpaid subscription

C- Yes, not because he is a SH but because he is a director who is responsible for
the insolvency of the corp
BAR: A subscribed to 100,000 shares of ABC Corp
Agreement: subscription price shall be paid from the dividends to be declared by
the corp
Is he relieved from the obligation of paying the subscription?
No. Only the condition is void but not the contract of subscription. You cannot
condone the payment of obligation, otherwise, you violate the trust fund doctrine
Consideration for stocks
1. Cash
Can it be in dollars?
Yes. Contracting parties are now free to stipulate any currency to be used in
paying the obligation.
2. Property
Conditions:
a. Necessary or convenient to the lawful purpose of the corp
Should not be alien to its purposes
b. Must be fairly valued
c. Subject to SEC approval
Purpose is to prevent issuance of watered stocks
3. Labor performed or services actually rendered
BAR: Can shares of stock be issued for future services? No
Can the corp grant stock options? Yes
Are stock options violative of Sec 62? No
Its an options to subscribe to shares of stock at par value at a pre-agreed
price on a pre-agreed date
Ex: Steve Jobs
He was fired. He was convinced to come back on a 1M salary with stock
options of $10 per share for 3 years. After 3 years, its $140 per share. So it is
wise to exercise your option if the price went up.
4. Previously incurred indebtedness

5. Amounts transferred for retained earnings to capital

Basically stock dividends- forced used of cash dividends to subscribe shares
at par value and issue stock dividends to SH.
6. Convertible shares
Ex: Corp has preferred renewable shares convertible to common shares after
3 years