B.
SPECIFIC POWERS, THEORY OF
VI. Corporate Powers
A. GENERAL POWERS, THEORY OF
GENERAL CAPACITY [SEC. 36]
(1) Sue and be sued in its corporate name;
(2) Succession;
(3) Adopt and use a corporate seal;
(4) Amend its Articles of Incorporation;
(5) Adopt and amend by-laws;
(6) For stock corporations - issue or sell stocks to
subscribers and sell treasury stocks; for non-
stock corporation - admit members to the
corporation;
(7) Purchase, receive, take or grant, hold, convey,
sell, lease, pledge, mortgage and otherwise
deal with such real and personal property,
pursuant to its lawful business;
(8) Enter into merger or consolidation with other
corporations as provided in the Code;
(9) Make reasonable donations, including those
for the public welfare or for hospital, charitable,
cultural, scientific, civic, or similar purposes:
Provided, no corporation, domestic or foreign,
shall give donations in aid of any political party
or candidate or for purposes of partisan
political activity;
(10)Establish pension, retirement, and other plans
for the benefit of its directors, trustees, officers
and employees; and
(11)Exercise such other powers as may be
essential or necessary to carry out its purposes
NOTE:
The Corporation has implied powers which are
deemed to exist because of the following
provisions:
(1) “Except such as are necessary or incidental to
the exercise of the powers so conferred” [Sec.
45]
(2) “Such powers as are essential or necessary to
carry out its purpose or purposes as stated in
the Articles of Incorporation” – catch-all phrase
[Sec.
36(11)].
SPECIFIC CAPACITY [SECS. 37-44]
(1) Power to Extend or Shorten Corporate Term
(2) Power to Increase or Decrease Capital Stock
or Incur, Create, Increase Bonded
Indebtedness
(3) Power to Deny Pre-Emptive Rights
(4) Power to Sell or Dispose of Corporate Assets
(5) Power to Acquire Own Shares
(6) Power to Invest Corporate Funds in Another
Corporation or Business
(7) Power to Declare Dividends
(8) Power to Enter Into Management
Contract
B.1. EXTEND OR SHORTEN THE CORPORATE
TERM [SEC. 37]
(1) Must be approved by majority vote of the BOD/
BOT
(2) Ratified at a meeting by shareholders
representing 2/3 of the outstanding capital
stock/ 2/3 of members of nonstock
corporations
(3) Written notice of meeting (includes proposed
action, time and place of meeting) shall be
addressed to each shareholders/member at
his place of residence and deposited to the
addressee in the post office, or served
personally
(4) Appraisal right may be exercised by the
dissenting stockholder for BOTH extension
and shortening of corporate term [See also
Sec. 81]
B.2. INCREASE OR DECREASE CAPITAL
STOCK OR INCUR, CREATE, INCREASE
BONDED INDEBTEDNESS [SEC. 38]
(1) Same requirements above from 1-3
(2) A certificate in duplicate must be signed by a
majority of the directors of the corporation
(countersigned by the chairman and the
secretary of the shareholders meeting), setting
forth:
(a) That requirements of this section have
been complied with
(b) The amount of the increase or diminution of
the capital stock (c) In case of increase,
 (i) the amount of capital stock or number
of shares of no-par stock actually
subscribed
(ii) names, nationalities and residences of
the persons subscribing
(iii) the amount of no-par stock subscribed
by each
(iv) the amount paid by each on his
subscription, or the amount of capital
stock or number of shares of no-par
stock allotted to each stockholder if
such increase is for the purpose of
making effective stock dividend
(d) any bonded indebtedness to be incurred,
created or increased
(e) the actual indebtedness of the corporation
on the day of the meeting
(f) the amount of stock represented at the
meeting
(g) the vote authorizing the increase or
diminution of the capital stock, or the
incurring, creating or increasing of any
bonded indebtedness
(3) prior approval of SEC is required
(4) duplicate certificates shall be kept on file in the
office of the corporation and the other shall be
filed with the SEC, attached in the original
articles of incorporation.
(a) From and after approval of the SEC of its
certificate of filing, the capital stock shall
stand increased or decreased and the
incurring, creating or increasing of any
bonded indebtedness authorized
(b) SEC shall not accept for filing any
certificate of increase unless accompanied
by the sworn statement of the treasurer of
the corporation showing:
(i) That at least 25% of such increased
capital stock have been subscribed and
(ii) that at least 25% of the amount
subscribed has been paid or that there
has been transferred to the corporation
property the value of which is
equivalent to 25% of the subscription
(c) SEC shall not approve any decrease in the
capital stock if its effect shall prejudice the
rights of corporate creditors
(5) Bonds issued by a corporation shall be
registered with the SEC
B.3. DENY PREEMPTIVE RIGHT [SEC. 39]
General Rule: All shareholders of a stock
corporation have preemptive right to subscribe to
all issues or disposition of shares of any class, in
proportion to their respective shareholdings
Exception: If such right is denied by the Articles
of Incorporation or an amendment thereto
Pre-emptive right shall not extend to:
(1) shares to be issued in compliance with laws
requiring stock offerings or minimum stock
ownership by the public
(2) shares to be issued in good faith with the
approval of 2/3 of the stockholders
representing outstanding capital stock, in
exchange for property needed for corporate
purposes or in payment of a previously
contracted debt
B.4. SELL OR DISPOSE OF SUBSTANTIALLY
ALL ITS ASSETS [SEC. 40]
(1) Same requirements from 1-3 as Sec. 37 above
(2) Any dissenting shareholders may exercise his
appraisal right
(3) Deemed to cover substantially all the corporate
property and assets
(4) After authorization by the
shareholders/members, the BOD/BOT may
abandon such sale, lease, exchange,
mortgage, pledge or other disposition, subject
to the rights of third parties under any contract
relating thereto, without further action or
approval by the shareholders/ members
(5) Corporation is not restricted in its power to sell
or dispose of its assets without the
authorization of shareholders or members:
(a) if the same is necessary in the usual and
regular course of business of the
corporation or
(b) if the proceeds of the sale will be
appropriated for the conduct of its
remaining business
While the Corporation Code allows the transfer of
all or substantially all the properties and assets of
a corporation, the transfer should not prejudice the
creditors of the assignor. The only way the transfer
can proceed without prejudice to the creditors is to
hold the assignee liable for the obligations of the
assignor. The acquisition by the assignee of all or
substantially all of the assets of the assignor
necessarily includes the assumption of the
assignor’s liabilities, unless the creditors who did
not consent to the transfer choose to rescind the
transfer on the ground of fraud. To allow an
assignor to transfer all its business, properties and
assets without the consent of its creditors and
without requiring the assignee to assume the
assignor’s obligations will defraud the creditors.
The assignment will place the assignor’s assets
beyond the reach of its creditors. [Caltex (Phils.)
Inc. v. PNOC Shipping and Transport Corp. (2006)]
B.5. ACQUIRE ITS OWN SHARES [SEC. 41]
(1) For a legitimate corporate purpose/s, including
but not limited to the following:
(a) To eliminate fractional shares arising out of
stock dividends
(b) To collect or compromise an indebtedness
to the corporation, arising out of unpaid
subscription, in a delinquency sale, and to
purchase delinquent shares sold during
said sale;
(c) To pay dissenting or withdrawing
stockholders
(2) Provided there are unrestricted retained
earnings in the corporate books to cover the
shares purchased or acquired
B.6. INVEST IN ANOTHER CORPORATION OR
BUSINESS [SEC. 42]
(1) Same requirements from 1-3 as Sec. 37 above
(2) Any dissenting shareholders shall have
appraisal right
(3) Where the investment is reasonably necessary
to accomplish the corporation’s primary
purpose, the approval of the shareholders/
members is not necessary
Notes:
If it is for the same purpose, or incidental, or related
to its PRIMARY purpose, the board can invest the
corporate fund WITHOUT the consent of the
stockholders. No appraisal right.
If the investment is in another corporation of
different business or purpose BUT in pursuance of
the SECONDARY purpose, the affirmative vote of
majority of the board consented by stockholders/
members is required.
If the investment is OUTSIDE the purpose/s for
which the corporation was organized, Articles of
Incorporation must be amended first, otherwise it
will be an Ultra Vires act.
A private corporation, in order to accomplish its
purpose as stated in its articles of incorporation,
and subject to the limitations imposed by the
Corporation Law, has the power to acquire, hold,
mortgage, pledge or dispose of shares, bonds,
securities, and other evidences of indebtedness of
any domestic or foreign corporation. Such an act,
if done in pursuance of the corporate purpose,
does not need the approval of the stockholders;
but when the purchase of shares of another
corporation is done solely for investment and not
to accomplish the purpose of its incorporation, the
vote of approval of the stockholders is necessary.
[De La Rama v. Ma-ao Sugar Central Co. (1969)]
B.7. DECLARE DIVIDENDS [SEC. 43]
(1) Out of unrestricted retained earnings
(2) Payable in cash, in property, or in stock to all
shareholders on the basis of outstanding stock
held by them
(3) Any cash dividend due on delinquent stock
shall first be applied to the unpaid balance on
the subscription plus costs and expenses
(4) Stock dividends shall be withheld from the
delinquent stockholder until his unpaid
subscription is fully paid
(5) Should be approved by 2/3 of shareholders
representing the outstanding capital stock at a
regular/special meeting called for that purpose
(6) Stock corporations- prohibited from retaining
surplus profits in excess of 100% of their paid-
in capital stock, except:
(a) When justified by definite corporate
expansion projects or programs approved
by the BOD
(b) When the corporation is prohibited under
any loan agreement with any financial
institution or creditor from declaring
dividends without its consent, and such
consent has not yet been secured
(c) When it can be clearly shown that such
retention is necessary under special
circumstances obtaining in the corporation
Stock dividends cannot be issued to a person who
is not a stockholder in payment of services
rendered.
A corporation may legally issue shares of stock in
consideration of services rendered to it by a person
not a stockholder, or in payment of its
indebtedness. A share of stock issued to pay for
services rendered is equivalent to a stock issued
in exchange of property, because services is
equivalent to property. It is the shares of stock that
are originally issued by the corporation and
forming part of the capital that can be exchanged (4) 1-3 above applies to any contract whereby a
for cash or services rendered, or property. A share corporation undertakes to manage or operate
of stock coming from stock dividends declared all or substantially all of the business of another
cannot be issued to one who is not a stockholder corporation, whether such are called service
of a corporation. [Nielson and Co. v. Lepanto contracts, operating agreements or otherwise
Consolidated Mining (1968)]
(5) Service contracts or operating agreements
which relate to exploration, development,
Cash Dividends v. Stock Dividends exploitation or utilization of natural resources
may be entered into for such periods as may
Cash Stock Dividend be provided in the pertinent laws and
Dividend regulations
Voting Board of Board of
Requirements Directors Directors + 2/3 NOTES: 2 general restrictions on the power of the
for Issuance of SH holding corporation to acquire and hold properties:
OCS
(1) property must be reasonably and necessarily
Effect on Shall be Shall be required by the business
delinquent applied to withheld from
stock the unpaid the delinquent (2) that the power shall be subject to the limitations
balance on stockholder until prescribed by other special laws and the
the his unpaid Constitution (corporation may not acquire more
subscription subscription is than 30% of voting stocks of a bank;
plus costs fully paid corporations are restricted from acquiring
and public lands except by lease of not more than
expense 1000 hectares)

Can be issued No. [Sec. No, since this

by Executive 35] requires SH
Committee approval
B.8. ENTER INTO MANAGEMENT
CONTRACTS [SEC. 44]
(1) Should be approved by the BOD and by
shareholders owning at least the majority of
the outstanding capital stock or at least a
majority of the members of both the managing
and the managed corporation at a meeting duly
called for that purpose
(2) Should be approved by the 2/3 of stockholders
owning outstanding capital stock/members of
the managed corporation when:
(1) A stockholder or stockholders representing the
same interest of both the managing and
managed corporations own more than 1/3 of
the total outstanding capital stock entitled to
vote of the managing corporation; or
(2) A majority of the members of the BOD of the
managing corporation also constitute a
majority of the BOD of the managed
corporation
(3) No management contract shall be entered into
for a period longer than 5 years for any one
term
B.9. ULTRA VIRES ACTS
Definition
Ultra Vires acts are those acts which a corporation
is not empowered to do or perform because they
are not conferred by its Articles of Incorporation or
by the Corporation Code, or not necessary or
incidental to the exercise of the powers so
conferred [Sec. 45].
Types of Ultra Vires Acts
(1) Acts done beyond the powers of the
corporation as provided in the law or its articles
of incorporation;
(2) Acts or contracts entered into in behalf of a
corporation by persons who have no corporate
authority (Note: This is technically Ultra Vires
acts of officers and not of the corporation);
(3) Acts or contracts, which are per se illegal as
being contrary to law. [Villanueva]
I. APPLICABILITY OF ULTRA VIRES
DOCTRINE
It is a question, therefore, in each case of the
logical relation of the act to the corporate purpose
expressed in the charter. If that act is one which is
lawful in itself, and not otherwise prohibited, is
done for the purpose of serving corporate ends,
and is reasonably tributary to the promotion of (2) Stockholders
those ends, in a substantial, and not in a remote
(a) Injunction
and fanciful sense, it may fairly be considered
within the charter powers. The test to be applied is (b) Derivative suit
whether the act in question is in direct and
(c) Ratification (except when a 3rd party is
immediate furtherance of the corporation’s
prejudiced or the act is illegal)
business, fairly incident to the express powers and
reasonably necessary to their exercise. If so, the (3) Creditors
corporation has the power to do it; otherwise, not.
(a) Nullification of contract in fraud of creditors
[Montelibano v. Bacolod-Murcia Milling Co., Inc.
(1962)]
C. HOW (CORPORATE POWERS)
II. CONSEQUENCES OF ULTRA VIRES ACTS EXERCISED
(1) Executed contract – courts will not set aside
or interfere with such contracts; C.1. BY THE SHAREHOLDERS
(2) Executory contracts – no enforcement even I. CORPORATE ACTS REQUIRING APPROVAL
at the suit of either party (void and OF STOCKHOLDERS OR MEMBERS
unenforceable); (VOTING AND NON-VOTING SHARES)
(3) Partly executed and partly executory – General Rule: Vote necessary to approve a
principle of “no unjust enrichment at expense particular corporate act as provided in this Code
of another” shall apply; shall be deemed to refer only to stocks with voting
(4) Executory contracts apparently authorized rights [Sec. 6]
but Ultra Vires – the principle of estoppel shall
apply. Exceptions [Sec. 6]
Voting and non-voting shares shall
Ultra Vires v. Illegal Acts be entitled to vote in the following cases: (1)
Ultra Vires Acts Illegal Acts Amendment of Articles of Incorporation
Not necessarily Unlawful; against law, (2) Adoption, Amendment and Repeal of By-Laws
unlawful, but morals, public policy, and [Sec. 48]
outside the powers public order (3) Sale, Lease, Mortgage or Other
of the corporation Disposition of Substantially all corporate
Can be ratified Cannot be ratified assets [Sec. 40]
Can bind the parties Cannot bind the (4) Incurring, Creating or Increasing Bonded
if wholly or partly parties Indebtedness [Sec. 38]
executed
(5) Increase or Decrease of Capital Stock [Sec.
Voidable, and may Void and cannot be
38]
be enforced by validated
performance, (6) Merger and Consolidation [Sec. 76-80]
ratification or (7) Investment of funds in another corporation or
estoppel business or for any purpose other than the
primary purpose for which it was organized
Remedies in Case of Ultra Vires Acts [Sec. 42]

(1) State Requisites [Sec. 42] (Bar 1995):

(a) Approval of majority of the BOD or trustees
(a) Dissolution of the corporation thru a quo
warranto proceeding (b) Ratification by the stockholders
representing at least 2/3 of the Outstanding
(b) Injunction Capital Stock or the members at a meeting
(c) Suspension or revocation of the certificate duly called for the purpose
of registration by the SEC (c) Written notice addressed to each
stockholder or member at his place of
residence as shown on the books of the
corporation
 (d) Appraisal right available to dissenting
stockholders or members
(8) Dissolution of the Corporation [Sec. 118-
121]
II. CORPORATE ACTS REQUIRING
APPROVAL OF STOCKHOLDERS OR
MEMBERS (VOTING SHARES ONLY)
(1) Declaration of Stock Dividends [Sec. 43]
(2) Management Contracts [Sec. 44]
series of 2001, in relation to Sec. 16 of R.A.
8792)
(b) There must be a VALIDLY constituted meeting.
(c) Their act must be supported by a MAJORITY
OF THE QUORUM duly assembled
(Exception: Election of officers requires a
vote of majority of ALL the members of the
board)
(d) The act must be within the powers conferred to
the Board.

(3) Fixing the Consideration of No-Par shares

[Sec. 62] C.3. BY THE OFFICERS
(4) Fixing the Compensation of Directors [Sec. 30] Corporate Officer Corporate Employee
Position is provided Employed through the
for in the by-laws or action of the managing
C.2. BY THE BOD under the Corp. officer of the corporation
Board as Repository of Corporate Powers Code
RTC has jurisdiction NLRC has jurisdiction in
General Rule (Doctrine Of Centralized in case of labor case of labor
Management): The corporate powers of the dispute disputes
corporation shall be exercised, all business
conducted, and all property of controlled and held
by the BOD or trustees. [Sec. 23] I. WHO ARE CORPORATE OFFICERS
[SEC. 25]
Exceptions:
President Secretary Treasurer
(1) Executive Committee duly authorized in the by-
laws [Sec. 35]; Director YES NO NO
Filipino NO YES YES
(2) A contracted manager which may be an
Citizen
individual, a partnership, or another
corporation. Residency NO YES YES
Prohibited Secretary President President
NOTE: In case the contracted manager is
another corporation, the special rule in Sec. 44 concurrent or
applies. positions Treasurer

(3) In case of close corporations, the stockholders

may manage the business of the corporation
rather than by a BOD, if the Articles of
Incorporation so provide [Sec. 97]
The power to purchase real property is vested in
the BOD or trustees. While a corporation may
appoint agents to negotiate for the purchase of real
property needed by the corporation, the final say
will have to be with the board, whose approval will
finalize the transaction. [Spouses Constantine
Firme v. Bukal Enterprises and Development
Corporation (2003)]
Requisites of a VALID Corporate Act by the
BOD [Sec. 25]:
(a) The Board must act as a BODY in a meeting.
Note: Current SEC regulations allow BOD
meetings by teleconferencing or
videoconferencing (SEC Memo Circular No.15,
(1) President – must be a director;
(2) Treasurer – may or may not be a director; as a
matter of sound corporate practice, must be a
resident and citizen of the Phil (SEC opinion)
(3) Secretary – need not be a director unless
required by the by-laws; must be a resident and
citizen of the Philippines; and
(4) Other officers as may be provided in the by-
laws.
NOTE: Any 2 or more positions may be held
concurrently by the same person, EXCEPT that no
one shall act as president and secretary or as
president and treasurer at the same time.
Additional qualifications of officers may be
provided for in the by-laws [Sec. 47(5)]
Conformably with Sec. 25 of the Corporation Code,
a position must be expressly mentioned in the by-
Laws in order to be considered as a corporate
office. Thus, the creation of an office pursuant to or
under a by-Law enabling provision is not enough
to make a position a corporate office. Guerrea v.
Lezama (1958), the first ruling on the matter, held
that the only officers of a corporation were those
given that character either by the Corporation
Code or by the By-Laws; the rest of the corporate
officers could be considered only as employees or
subordinate officials. [Matling Industrial and
Commercial Corp. v. Coros (2010)]
A different interpretation can easily leave the way
open for the BOD to circumvent the constitutionally
guaranteed security of tenure of the employee by
the expedient inclusion in the By-Laws of an
enabling clause on the creation of just any
corporate officer position.
“An ‘office’ is created by the charter of the
corporation and the officer is elected (or appointed)
by the directors or stockholders” [Real v. Sangu
Philippines citing Easycall Communications Phils.,
Inc. v. King, 2005,
(2011)]
“Corporate officers’ in the context of PD No. 902-A
are those officers of the corporation who are given
that character by the Corporation Code or by the
corporation’s bylaws. There are three specific
officers whom a corporation must have under Sec.
25 of the Corporation Code. These are the
president, secretary and the treasurer. The
number of officers is not limited to these three.
A corporation may have such other officers as may
be provided for by its by-laws like, but not limited
to, the vice-president, cashier, auditor or general
manager. The number of corporate officers is thus
limited by law and by the corporation’s by-laws”
(citing Garcia v. Eastern Telecommunications
Philippines, Inc., 2009).
ii. DISQUALIFICATIONS [SEC. 27]
(1) Convicted by final judgment of an offense
punishable by imprisonment for a period
exceeding 6 years
(2) Convicted by final judgment of a violation of the
Corporation Code committed within 5 years
prior to the date of his election or appointment.
This includes violations of rules and
regulations issued by the SEC to implement
the provisions of the Corporation Code.
III. AUTHORITY OF CORPORATE
OFFICERS
A person dealing with a corporate officer is put on
inquiry as to the scope of the latter’s authority but
an innocent person cannot be prejudiced if he had
the right to presume under the circumstances the
authority of the acting officers.
Associated Bank v. Pronstroller (2008,
Nachura):
Q: What is the Doctrine of Apparent Authority?
A: If a corporation knowingly permits one of its
officers, or any other agent, to act within the scope
of an apparent authority, it holds him out to the
public as possessing the power to do those acts;
the corporation will, as against anyone who has in
good faith dealt with it through such agent, be
estopped from denying the agent’s authority.
D. TRUST FUND DOCTRINE
Trust Fund Doctrine means that the capital stock,
properties and other assets of a corporation are
regarded as equity in trust for the payment of
corporate creditors. Stated simply, the trust fund
doctrine states that all funds received by the
corporation in payment of the shares of stock shall
be held in trust for the corporate creditors and other
stockholders of the corporation. Under such
doctrine no fund shall be used to buy back the
issued shares of stock except only in instances
specifically allowed by the Corporation Code.
[Boman Environmental Development Corporation
v. CA (1988)]
The subscribed capital is the same amount that
can loosely be termed as the “trust fund” of the
corporation. The “Trust Fund” doctrine considers
this subscribed capital as a trust fund for the
payment of the debts of the corporation, to which
the creditors may look for satisfaction. Until
the liquidation of the corporation, 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. Thus, dividends must never impair the
subscribed capital; subscription commitments
cannot be condoned or remitted; nor can the
corporation buy its own shares using the
subscribed capital as the consideration therefor.
[NTC v. CA (1999)]
Under Sec. 43 of Code, the corporation can
declare dividends only out of "unrestricted retained
earnings;" and that under Sec. 122, no corporation and thereby steps into the shoes of the corporation
shall distribute any of its assets or property except for the satisfaction of its debt.
upon lawful dissolution and after payment of all its
To make out a prima facie case in a suit against
debts and liabilities. These provisions in essence stockholders of an insolvent corporation to compel
provide for the "trust fund doctrine" where the them to contribute to the payment of its debts by
"subscription to the capital of a corporation making good unpaid balances upon their
constitute a fund to which creditors have a subscriptions, it is only necessary to establish that
right to look for satisfaction of their claims." the stockholders have not in good faith paid the par
[Philippine Trust Co. v. Rivera (1923)] value of the stocks of the corporation. [Donnina
"The Trust Fund Doctrine, first enunciated by this Halley v. Printwell, Inc. (2011)]
Court in the 1923 case of Philippine Trust Co. v.
Rivera' is the underlying principle in the procedure
for the distribution of capital assets, embodied in
Corporation Code, which allows the distribution of
corporate capital only in three instances:
(1) amendment of the Articles of
Incorporation to reduce the authorized
capital stock,
(2) purchase of redeemable shares by the
corporation, regardless of the existence of
unrestricted retained earnings, and
(3) dissolution and eventual liquidation of the
corporation.
Furthermore, the doctrine is articulated in Sec. 41
on the power of a corporation to acquire its own
shares and in Sec. 122 on the prohibition against
the distribution of corporate assets and property
unless the stringent requirements therefore are
complied with. [Ong Yong v. Tiu (2003)]
The creditors of a corporation have the right to
assume that so long as there are debts and
liabilities, the BOD will not use corporate assets to
purchase its own shares of stock or to declare
dividends to its stockholders when the corporation
is insolvent. [Steinberg v. Velasco (1929)]
The trust fund doctrine is not limited to reaching the
stockholder’s unpaid subscriptions. The scope of
the doctrine when the corporation is insolvent
encompasses not only the capital stock, but also
other property and assets generally regarded in
equity as a trust fund for the payment of corporate
debts. All assets and property belonging to the
corporation held in trust for the benefit of creditors
that were distributed or in the possession of the
stockholders, regardless of full payment of their
subscriptions, may be reached by the creditor in
satisfaction of its claim.
Also, under the trust fund doctrine, a corporation
has no legal capacity to release an original
subscriber to its capital stock from the obligation of
paying for his shares, in whole or in part, without a
valuable consideration, or fraudulently, to the
prejudice of creditors. The creditor is allowed to
maintain an action upon any unpaid subscriptions