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Definitions.

1. a foreign corporation is done, formed, organized or existing under any laws other
than those of the Philippines and whose laws allow Filipino citizens and corporations
to do business in its own country or State. It shall have the right to transact business
in the Philippines after it shall have obtained a license to transact business in this
country in accordance with this Code and a certificate of authority from the
appropriate government agency

2. Foreign Investment Act of 1991 (R.A. 7042), considers for purpose of investment a
"Philippine national" as a corporation organized under the laws of the Philippines of which
at least 60% of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines, or a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and at least 60% of the fund
will accrue to the benefit of Philippine nationals.

3.Securities

4. Stock option.

A stock option is a privilege granted to a party to subscribe to a certain portion of the
unissued capital stock of a corporation within a certain period and under the terms and
conditions of the grant exercisable by the grantee at any time within the period granted

6. Dissolution – the extinguishment of the corporate franchise and the termination of
corporate existence.
General rule: When a corporation is dissolved, it ceases to be a juridical
entity and can no longer pursue the business for which it is incorporated.

Exception: The corporation will continue as a body corporate for
another period of 3 years from the time it is dissolved for the purpose of
winding up its affairs and the liquidation of its assets.

Three modes of dissolution:

1. By expiration of the corporate term;

2. By voluntary surrender of its primary franchise (voluntary
dissolution); or

3. By the revocation of its corporate franchise (involuntary
dissolution)Republic v. Tancinco 394 SCRA 386 (2002)

to dispose of and convey its property. (b) The reason for dissolution and winding up. is allowed to continue as a juridical entity for 3 years for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs. Upon approval of such declaration of the dissolution by SEC. to which the creditors look for satisfaction. 95. no part of the subscribed capital may be returned or released to the stockholder (except in the redemption of redeemable shares) without violating this principle.) It is not allowed to distribute any of the assets of the corporation or any incidental income or profit made by the corporation during its exist 7. Dissolution . subscription commitments cannot be condoned or remitted. Until the liquidation of the corporation.[181] In case of dissolution. after dissolution. does not by itself cause the extinction or diminution of the rights and liability of such entity. Usually such entity. (c) The authorization for the dissolution of the corporation by the particular religious denomination. The declaration of dissolution shall set forth: (a) The name of the corporation. and to distribute its assets. Trust fund doctrine. 94. or the official termination of the life of a juridical entity for purpose of commercial endeavors.) or as may be specified in a plan of distribution adopted by the corporation.A corporation sole may be dissolved and its affairs settled voluntarily by submitting to SEC a verified declaration of dissolution. Thus. its assets shall be applied and distributed in accordance with certain specific rules laid down by law (Sec. provided it is not inconsistent with such rules.) considers the subscribed capital as a trust fund or equity in trust for the payment of the debts of the corporation. — The "trust fund" doctrine (see Sec. (Sec. sect or church. Dissolution. The Trust Fund Doctrine (see Sec. dividends must never impair the subscribed capital. 41. (d) The names and addresses of the persons who are to supervise the winding up of the affairs of the corporation.) is the underlying principle behind the stringent procedural requirements to be complied with for the distribution of capital assets of the corporation in the instances when such distribution is allowed by the Corporation Code. the corporation shall cease to carry on its operations except for the purpose of winding up its affairs. 41. nor can the corporation buy its own shares using the subscribed capital as the .

(Sec.consideration therefor. 2[2] thereof. 18. Thus. all of said shares shall be recorded as owned by Filipinos. 127. but if the percentage of Filipino ownership in the corporation or partnership is less than 60%.1993. Under the "control test.) and now expressly embodied in the Foreign Investments Act (infra. — Under existing laws. only 50. or a domestic corporation lawfully transacting business in the Philippines (Sec. — There are two rules for determining the corporate nationality of a corporation: Under the "incorporation test.) Once it is established that a corporation is at least 60% owned by Filipinos. only the number of shares corresponding to such percentage shall be counted as of Philippine nationality." the nationality of a corporation is that of the state of incorporation regardless of the nationality of its stockholders.).000 shares shall be recorded as belonging to aliens. it is no longer necessary to conduct any .) 10. 1989).) in the determination of the nationality of corporations formed or organized under Philippine law with alien equity as follows: "Shares belonging to corporations or partnerships at least 60% of the capital of which are owned by Filipino citizens shall be considered as of Philippine nationality. respectively. The application of either test depends on the particular situation." it depends on the nationality of the controlling stockholders. But if less than 60% or.000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital. The resident agent is an individual who must be of good moral character and of sound financial standing. the basis is the total outstanding capital stock. (National Telecommunications 8. designated in a written power of attorney. Dec. communications and coordination center for its subsidiaries. branches or affiliates in the Asia-Pacific Region and other foreign markets and which does not earn or derive income in the Philippines. Nationality of corporations with foreign equity. if 100. "on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation. irrespective of the amount of the par value of the shares. (see Sec." 9. Regional or Area Headquarters (RHQs) means an office whose purpose is to act as an administrative branch of a multinational company engaged in international trade which principally serves as a supervision. in an opinion (No." (2) BASIS of computation of 60-40 percentage requirement. 137. by a foreign corporation authorized to transact business in the Philippines. The Department of Justice.000 shares shall be counted as owned by Filipinos and the other 50. applying the "control test. say only 50% of the capital stock or capital belong to Filipino citizens. 19. residing in the Philippines. 7. of which belong to Filipino citizens. Jan." has laid down the rule adopted by the Securities and Exchange Commission (SEC Opinion. (1) Determination of nationality.

" thus: a.) The preferred stocks without voting rights are considered in the computation of the Filipino-foreign equity percentage requirement. 2. Right to vote of pledgors. Validity of by-laws. 07-18. 28. Article XII. unless the law covering the type of business to be undertaken provides otherwise.) Sec. the nationality of the corporation is also determined by the "control test.). further inquiry as to the ownership of the shareholders since the entire company is already considered a Filipino entity..e. 2007. Exploitation of Natural Resources .. (5) They must be consistent with the charter or articles of incorporation. (SEC Opinion. and administrators. 21. the capital or ownership of which.) However. 734. Nov. SPECIAL RULES: In the following cases. in addition to the place of incorporation test. p.). 55. and (6) They must be reasonable. Nov. b. which is the primary test in Philippine jurisdiction. 1987 Constitution provides that only Filipino citizens or corporations whose capital stock are at least 60% owned by Filipinos can qualify to exploit natural resources. under the Constitution or special laws. are limited to Filipino citizens. The following are considered as the elements of valid bylaws: (1) They must not be contrary to existing law and inconsistent with the Code (2) They must not be contrary to morals and public policy 3) They must not impair obligations of contract (Ibid.[31] This is termed as the "place of incorporation" test.The corporation is a national of the country under whose laws it is organized or incorporated. (SEC Opinion No. Therefore. the Constitution allows foreign equity into corporations owning land up to the extent of 40% of the outstanding capital stock.Section 2. 1. while a corporation with a 60% Filipino equity ownership may be considered a Filipino corporation. 1989. (4) They must be general and uniform in their operation and not directed against particular individuals (8 Fletcher.The 1987 Constitution provides that only corporation with at least 60% Filipino equity can own land in the Philippines. . i. mortgagors. ( Nationality of Corporation . it is not qualified to invest in or enter into a joint venture agreement with corporations or partnerships. Ownership of Land . not discriminatory.

or without a formal transfer of the shares on the books of the corporation to them. 24. or (b) by a trustee under a voting trust agreement (Sec. (2) Pledgee or mortgagee of stockholder's shares.) However.) Under Article 225 of the Family Code (Exec. vs. 42 R 225. Jan. (Market St. 209. unless there is a judicial order to the contrary. receivers.) because they have legal title to the stock of the deceased owner or their principal.) Voting may be either straight or cumulative. however. receivers. 570. they have the power to vote the stocks in the name of the stockholders (Schmidt vs. or other legal representatives duly appointed by the court to attend and vote in behalf of the stockholders or members on shares under their administration without need of any written proxy (see Sec. administrators. (see Sec. unless the pledgee or mortgagee is expressly given such right in writing which is recorded on the appropriate corporate books by the pledgor or mortgagor. as the latter remains the owner of the stock pledged or mortgaged. Order No. 109 Cal. (Sec. or (2) indirectly.— In case of pledged or mortgaged shares in stock corporations. administrators.) Representative voting. or other legal representatives duly appointed by the court. the pledgor or mortgagor shall have the right to attend and vote at meetings of stockholders. they shall have the right to attend and vote at meetings of stockholders only when expressly given such right in writing by the pledgor or mortgagor. through a representative as stated above. Apart from the above statutory provision. 55. 56. A stockholder or member may vote: (1) directly (in person).1963. 58. — As to pledgees or mortgagees of shares in stock corporations. (Sec.). par. administrators. (1) Legal representative of stockholder or member. (SEC Opinion. Hellman. RR. This is an exception to the rule in Section 24 that only stockholders of record may vote. par. The authorization is required by the Code to be recorded on the appropriate corporate books by such pledgor or mortgagor.). 1.) and this even if the shares still stand on the books of the corporation in the name of the stockholder. 28. the father's decision shall prevail. and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholders or members without need of any written proxy. Mitchell. or (c) by executors.) Their signature can create a legal and valid proxy. 2. represent and vote for their minor child in a stockholders' meeting inasmuch as said acts are embraced in the administration of the child's property. if the . B Manner of voting. 55. receivers. 2. the father and the mother shall jointly exercise legal guardianship over the property of their unemancipated common child without the necessity of a court appointment. 58. Executors. A stockholder or member may vote. The parents may. and 89.541. through a representative — (a) by means of a proxy (Sees. therefore. 59. it is clear that by virtue of their position as legal representatives. — Section 55 authorizes executors. directly or indirectly. In case of disagreement. 55. 101 Ky. par.).

Jur. — Where the estate of a deceased stockholder is still undivided and there is no administrator or other legal representative duly appointed by the court nor an executor designated in a will to administer said estate. where the by-laws of the corporation do not contain any provision on the matter. would be tantamount to reacquisition by the corporation of its own shares. (SEC Opinion.1987.) Thus.) (3) Officer or agent of corporation owning shares. in the absence of a provision in the by-laws. the administrator or executor should present proof or evidence of his judicial appointment. (SEC Opinion. this scheme. (19 Am. or any vice-president but always under the ultimate direction of the board. and assigns. However. (1) Where a legal representative has been appointed. or they may be voted by the chairman of the board. judicial or extrajudicial partition of the estate is necessary if he died intestate. no person can vote the shares of the deceased since nobody can legally represent his estate under the second paragraph of Section 55. the disqualification extends as well to the pledgee or mortgagee. whereby an insurance company shall pay the insured stockholder.1988.) Voting rights for shares of stock of a deceased stockholder. agent or proxy as the bylaws of such other corporation may prescribe or. his heirs.1991. Oct. Furthermore. 28. it will be necessary to wait for the termination of the testamentary proceedings and the final adjudication of the shares of stock in accordance with the will of the decedent.) (a) An heir of a deceased stockholder whose stock still remains pro indiviso among the heirs. the sum insured corresponding to the approximate value of his shares upon his death.1976. July 26. the stock of the decedent belongs to said administrator or executor as his personal representative. (SEC Opinions. Thus. (SEC Opinions. 1988. — Shares standing in the name of another corporation. or without a formal transfer of the stock in the books of the corporation.) (2) Where no legal representative has been appointed. This is true even if the shares stand in the books of the corporation in the name of the decedent. 16. president. his administrator or executor becomes vested with the legal title to the stock and entitled to vote the same at all meetings. March 1. — On the death of a stockholder. may be voted by such officer. in the absence of a judicial appointment.pledgor or mortgagor of the shares of stock is disqualified to vote it. . and until a settlement and division of the estate is effected. In the light of the above. as its board of directors may determine. an agreement between a corporation and a stockholder which provides that the former shall provide a life insurance policy for the latter.1988 and March 13.) (b) To transfer the shares of stock in favor of the heirs of the deceased stockholder. is not valid for purposes of transfer of stocks of said deceased stockholder in favor of the corporation. 2d 163.1967 and April 11. if allowed. whether domestic or foreign. cannot be considered a stockholder of a stock corporation in his own right until the share is registered in his own name on the books of the corporation. otherwise. May 12. the board of directors may authorize the stockholders of the company to vote for and in behalf of the corporation but the authority granted would in no way qualify any one of the stockholders as eligible for membership in the board in view of the stock ownership requirement under Section 23. (SEC Opinion. a person has no right to vote a proxy signed by his mother in connection with the shares of his deceased father. Feb.

). 51. The requisites of proper notice may be enumerated as follows: (1) It must be issued by one who has authority to issue it.) (3) Where partition has been executed by the heirs. and (6) Further. a corporation cannot purchase its own shares unless the conditions provided therein are compliedwith. The following requisites must be complied with in order that there will be a valid meeting of stockholders or members: (1) It must be held at the proper place (Sec. p. Section 77 requires that the notice of meeting for the approval of merger or consolidation "shall state the purpose of the meeting and shall include a copy or a summary of the plan of merger or consolidation." (b) Section 118 prescribes that the notice of meetings for voluntary dissolution shall be made by publication. (2) It must be held at the stated date and at the appointed time or at a reasonable time thereafter (Ibid.1991. dividing among themselves the shares of the deceased.) in the absence of waiver. in addition to written notice which shall be sent by registered mail or personal delivery.). (Sec. last par. (a) For instance. cit. unless a different period is required by the by-laws (Ibid.). 25. (5) It must be sent at a certain time before the scheduled meeting as fixed by law.). 50. 2. Requisites of notice of meeting. (3) It must be called by the proper person(Sec. Nov. estoppel.). Requisites for a valid meeting of stockholders or members. . and (5) There must be a quorum. 51.) If the meeting is held at an unauthorized place or without proper notice and not all the stockholders or members are present. (2) It must be in writing (3) It must state the date. 52. and place of the meeting. or ratification. time. 50. 196. — Where a judicial or extrajudicial settlement has been executed by the heirs in accordance with law and registered in the proper register of deeds. (SEC Opinion. unless otherwise provided in the by-laws (4) It must state the business to be transacted thereat.Under Section 41. op. the notice must comply with any other requirements prescribed by the law or by the by-laws of the corporation. the presentation thereof will entitle the heirs to vote the shares alloted in their respective names at the meeting. as the case may be. 3. (4) There must be a previous notice (Sees.. those who have a right to complain may take steps to set aside any action taken at such meetings even though a majority of the stockholders or members were present (Fisher.

among others. Presidential Decree No. (b) While the power to amend the by-laws may be delegated to the board of directors or trustees. (4) The special meeting for the removal of directors or trustees may be called by the secretary of the corporation or by a stockholder or member as provided by Section 28. a corporation may adopt other rules and regulations for its government. on the other hand. July 12.) Section 50 (last par. (3) Under Section 50 (last par. It may consist of direction to thesecretary of the corporation to notify the stockholders or members of the meeting. 5. situation or occasion. such delegated power is temporary in nature and may be revoked at any time by the vote of the majority of the outstanding capital stock or of the members. not merely in name. The "call" for a meeting is exercised by the person who has the power to call the meeting. the meeting may be called by a director or trustee or by an officer entrusted with the management of the corporation unless otherwise provided by law. In addition to the by-laws. and operations. (2) In the absence of such provision in the by-laws. Proper person to call meeting. (a) So-called election laws adopted by a corporation as mere rules on motion and not by the procedure specified in the by-laws for adoption of a by-law. functions. applying usually to a single act or transaction of the corporation or to some specific person. partake of the nature of resolutions and are not operative as by-laws. Any interested stockholder or member may petition the Commission to authorize him to call a meeting or to compel the officers of the corporation to call a meeting.) Generally speaking. but with regard to their respective offices. (1) Nature and subject matter. (SEC Opinion. to meet a particular situation then existing." (Sec. is a permanent rule of action (except only insofar as it may be repealed or amended) of the conduct of corporate affairs while a resolution is ordinarily limited in its operation.1993.) applies only where there is no person authorized to call a corporate meeting or the officers authorized fail or refuse to call a meeting. (1) The person or persons designated in the by-laws have authority to call stockholders' or members' meeting. which may be in the form of a board resolution. hence. 902-A empowers the Securities and Exchange Commission.). "to compel the officers of any corporation or association registered by it to call meetings of stockholders or members thereof under its supervision. there is no person authorized to call a meeting. By-laws and resolutions distinguished. by-laws and resolutions are recognized and treated by the courts as distinct and different. without any intention to legislate for similar future situations. — A resolution is merely a declaration of the will of the corporation in a given matter and in the nature of a ministerial act A by-law. it cannot be permanently be . 6[f] thereof. a stockholder or member may make the call on order of the Securities and Exchange Commission whenever for any cause.

where the first resolution of the members of a non-stock corporation disqualifies trustees who have served for three (3) consecutive terms from mrming for reelection and the second resolution provides "that not more than ten (10) members of the outgoing board shall be reelected.) (2) Similarly. Proxies shall be in writing. Unless otherwise provided in the proxy. . (SEC Opinion. (SEC Opinion. and in such case. Sec. the additional qualifications that a member of a non-stock corporation would have before he could be elected to the board should be provided for in the by-laws by amending the same pursuant to Section 48. or by a member. other rules and regulations do not need its approval. signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. unless they involve matters where the law requires such approval. Nov. otherwise. designates the formal written authority given by the owner or holder of the stock. does not have the force and effect of by-laws and cannot be considered as an amendment to the same. its constitution. and since the second resolution was embodied in the by-laws. (2) It is also used to apply to the holder of the authority or person authorized by an absent stockholder or member to vote for him at a stockholders' or members' meeting.) (2) Rule in case of conflict.1976. July 4. (1) A proxy. July 13.) But the resolution of the stockholders or members of a corporation not inconsistent with the by-laws should be given effect. — Stockholders and members may vote in person or by proxy in all meetings of stockholders or members.) Resolution adopted as a by-law. — The by-laws of a corporation are. it shall be valid only for the meeting for which it is intended. as the term is used. ( 5.embodied in the by-laws but merely in a stockholders' or members' resolution. No proxy shall be valid and effective for a period longer than five (5) years at any one time. repeal a previous by-law. 1984. Feb. (1) By way of illustration. to another person. 58.1993. in effect. as agent. (SEC Opinion. 9. (n) Meaning of proxy. as principal.1994. — While corporate by-laws are subject to the approval of the SEC. and will prevail over a resolution of the board of directors/trustees. the same cannot be enforced. Proxies. who has a right to vote it. (3) Necessity of approval by SEC." the first resolution which was not embodied as a provision in the by laws. (3) The term is also applied to refer to the instrument which evidences the authority of the agent. to exercise the voting rights of the former. (SEC Opinion. Although a by-law may be in the form of a resolution. a simple resolution in favor of some object which is inconsistent with or forbidden by a bylaw does not repeal or override the by-law. trustees who have served for three (3) consecutive terms are eligible for reelection so long as they are included in the first ten (10) re-electionists. 10.

in person or by mail. No.). and in voting by members in non-stock corporations. 1876.A proxy is thus a special form of agency." (SEC Opinion.) and 58.). 412. 2. 59. Feb. (see Sec. the right to have access to the list of the corporation's stockholders or members needed in order to be able to solicit proxies. The advantages derived from their use cannot be disregarded. 24. (Ballantine. 56.) (2) Exercise of right to vote though absent. (3) Voting and management control. Voting by proxy. (Sec. (1) Presence of quorum in meetings. 74. (SEC Memo. The proxy holder is in the eye of the law an agent and as such a fiduciary. Civil Code. 4. the inability of the stockholders [or members] to attend in person might make it impossible to secure the quorum necessary to take corporate action. Agbayani. voting by proxy is expressly allowed by Sections 55 (par. proxy voting enables those who do not wish to attend a stockholders' or members' meeting to protect their interest by exercising their right to vote through a representative. and in voting by trustee under voting trust agreements (Sec. .) Purpose and use of proxies. Series of 2004.) (4) The stockholder may deliver. Without this device. — The system of proxy voting is not a mere convenience or favor to the distant and indifferent shareholders. Commentaries and Jurisprudence on the Commercial Laws of the Phils. "Proxy voting is a development which necessarily accompanied the increase in the size and geographical dispersion of corporate membership. 2. Who may be a proxy. (Art. 2.. (1) The right to vote by proxy is specifically recognized in the election of the board of directors or trustees (Sec. — At the same time. it goes without saying." (3) The right to vote by proxy may also be justified on principles of agency. citing III A. 470. p. p. last par.) Voting by proxy is not allowed in board meetings pursuant to Section 25.) (2) In considering other matters. 1976. 89. Section 47(4) provides that a corporation may provide in its by-laws the "form for proxies of members or stockholders and the manner of voting them.) The right to vote by proxy necessarily includes the right to solicit proxies and. Cir. It also assures the presence of a quorum in meetings of stockholders of larger corporations.) when it speaks of stockholders or members of the corporation present or "represented at the meeting.). — The solicitation and use of proxies is also one of the devices of securing voting control or management control in the corporation." Voting by proxy is also recognized by implication under Section 51 (par. his proxy vote directly to the corporation. 6. par. in voting in case of joint ownership of stock (Sec.

a stockholder or member may appoint any person he sees fit to represent him. and by-laws restricting his right in this respect are likewise void. signed by the stockholder or member.) but they may act as proxies in stockholders' meetings Nature of proxies. it is valid only for the meeting for which it is intended. 25. therefore. 902-A empowers the Securities and Exchange Commission. An alternate proxy can only act as proxy in case of non-attendance of the other designated proxy. Thus. vote by proxy. last par. among others. (SEC Opinion. he may act as such although he himself is disqualified to vote his shares. Dec. a stockholder disqualified to vote because his stock has been declared delinquent (see Sec. Sec. Presidential Decree No. The authority may be general or limited. and (3) A continuing proxy must be for a period not exceeding five (5) years at any one time. Limitations on proxies of stockholders or members. . 58.) It follows that unless the stockholder or member who executed a proxy gives his consent in writing.Section 58 imposes no limitation as to the persons who may be appointed as proxy. 71. may vote the stock of his principal which is not delinquent. (3) Directors or trustees cannot attend or vote by proxy at board meetings (Sec. purely personal and to be valid. 6[g] thereof. Hence." (Sec. 2053.9 (1) Since a proxy acts for another. Oral proxies are not. otherwise. Under Section 58. valid. 1993. "to pass upon the validity of the issuance and use of proxies and voting trust agreements for absent stockholders or members.) A proxy sold for a consideration is obviously contrary to public policy.) The appointment of proxy is. (2) The same person may act as proxy for one or several stockholders or members. (2) Unless otherwise provided in the proxy. Proxies shall be in writing. they are as follows: (1) Proxies must be in writing signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. A stockholder or member who himself is not entitled to vote cannot. (Sec. it shall not be valid and effective after such period.). therefore. a designated proxy may not further re-designate another under the same proxy. citing 5 Fletcher. of course. a proxy to vote stock must have been given by the person who is the legal owner of the stock entitled to vote the same at the time it is be voted. 3.