SECTION 36
May the corporation extend or shorten its
term?
Yes, provided the following:
1. Approved by the majority vote of the
directors
2. Ratified at a meeting by the stockholder
or members representing at least 2/3
for outstanding capital stock or
members.
How is it done?
 Written notice sent to the stockholders
or members at their addresses as
shown in the books of the corporation.
 Must be deposited to the addresses in
the post office with postage prepaid,
served personally
May it sent electronic notice?
Yes, provided it is allowed:
 In their by-laws
 Consent of the shareholder
 In accordance with the rules of the
Commission on the use of electronic
data messages
What may the dissenting shareholder do?
Exercise his appraisal right.
SECTION 37
When may the corporation increase or create
bonded indebtedness?
 Approved by a majority vote of the
directors
 2/3 of the members or the shareholders
representing the outstanding capital
stock
How is it done?
 Written notice sent to the stockholders
or members at their addresses as
shown in the books of the corporation.
 Served to the stockholders personally
May it sent electronic notice?
Yes, provided it is allowed:
 In their by-laws
 Consent of the shareholder
 In accordance with the rules of the
Commission on the use of electronic
data messages
What must the certificate indicate?
Signed by majority of the stockholders and
countersigned by the chairperson and secretary
of the stockholder’s meeting.
It must set forth the following:
1. The requirements of this section are
complied with.
2. The amount of the increase or decrease
of the capital stock
3. If an increase in the capital stock
a. The amount of capital stock or
the number of shares of no-par
stock thereof actually
subscribed
b. Names, nationalities, and
residences of the person
subscribing
c. The amount of capital stock or
the number of shares of no-par
stock subscribed by each and
paid by them on his
subscription
d. The amount of capital sotck or
the number of shares of no-par
stock allocated to each
stockholder if such increase is
for the purpose of making stock
dividend therefore authorized.
e. The amount paid by each in
cash or property or The amount
of capital sotck or the number
of shares of no-par stock
allocated to each stockholder if
such increase is for the purpose
 of making stock dividend
therefore authorized
4. Any bonded indebtedness to be
incurred or created
5. The amount of stock represented at the
meeting
6. The vote authorizing the increase or
decrease of capital stock or the increase
or creation of bonded indebtedness
7. It shall require the approval of the
commission, or if appropriate the
Philippine Competition Commission.
The application shall be made within 6
months from the date of approval.
Copies of the certificate
 It shall be kept in the corporation
 Filed with the commission
 Attached to the original articles of
incorporation
What will happen after the approval by the
commission and issuance of the certificate?
The capital stock shall be deemed increase or
decrease or creating or incurring the bonded
indebtedness as the certificate of filing may
declare.
What is further needed before the commission
may accept the filing for certificate?
The sworn statement of the treasure to the
effect that:
 At least 25% of the increase capital
stock is subscribed
 At least 25% amount subscribed is paid-
up in cash or property the valuation of
which is equal to 25% of the
subscription
There shall be no decrease in capital stock if its
effect shall prejudice the right of creditors.
Non-stock corporation may increase, decrease
or create bonded indebtedness
 Majority of the trustees
 2/3 of the members
 In a meeting called for such purpose
Bonds issued by a corporation shall be
registered with the commission which will
determine the sufficiency thereof.
SECTION 38
What is preemptive right?
The shareholders shall have preemptive right to
subscribe to all issues or disposition of shares of
any class in proportion to their respective
shareholdings
When is such right denied?
 Denied in the by-laws
 When the by-laws is amended
Provided
 It shall not extend to shares issue in
compliance with laws requiring stock
offerings
 Minimum stock ownership of the public
 Share issued in goodfatih approved by
2/3 representing the outstanding
capital stock. In exchange for property
needed for corporate purposes in
payment of previously contracted debt.
SECTION 39
When may a corporation sell, lease, exchange,
pledge or otherwise dispose of its property and
assets?
It must be subject to the following:
  By a majority of the board
 Philippine competition act
 Other special laws
They may dispose it upon such terms and
conditions for such consideration. It can also be
the following:
 Money
 Stocks
 Bond
 And other instruments for payment of
money or other property or
consideration as the board may deem
expedient.
When may be goodwill or substantial
corporation assets of the corporation be sold?
 It mus be authorized by 2/3 of board in
OCS or 2/3 of members
 In a stockholder’s or member’s meeting
called for such purpose.
What is the rule in non-stock corporation?
If there are no members with voting rights, vote
of a majority of the trustees is sufficient
authorization to enter in any transaction.
How do we determine whether a sale involves
substantial interest of corporate properties or
assets?
We determine it from the net assess value from
the latest financial assessment.
When it is considered substantial conveyance?
When the corporation is rendered incapable to
continue its business or accomplishment of
purpose for which it was incorporated.
TN: Notice and right of appraisal is same in this
section.
When may the board abandon the conveyance?
After approval or authorization the board may
abandon the conveyance, without further
approval by the stockholder or members.
TN: Nothing in this section shall prejudice the
right of the corporation to dispose or convey
the property or assets in its regular course or
business or if the proceeds shall be
appropriated in the conduct of business.
SECTION 40
What is the condition before the corporation
may acquire its own share for legitimate
purpose?
There must be a unrestricted retained earnings.
It also includes the following cases:
 To eliminate fractional shares arising
out of stock dividends
 To collect and compromise the
indebtedness of the corporation, arising
out of unpaid subscription, in a
delinquency sale, and to purchase
delinquent shares sold during such sale
 To pay dissenting or withdrawing
shareholders to payment of their
shares.
SECTION 41
When may a corporation invest funds to any
other corporation?
 Approved by a majority of the board
 2/3 of the SH of the OCS or 2/3 of the
trustees
 In a meeting called for such purpose
Provided: This shall be follow when it invest
which is not within its primary purpose
TN: Notice and Right of appraisal same with
other provisions
What if the investment is reasonably necessary
to accomplish its primary purpose?
The approval of SH or members is not necessary
SECTION 42
Where does the payment of dividends come
from?
From unrestricted retained earnings
Kinds of dividends
Stocks, Cash and Property
What happens in the case of a delinquent
stocks?
1. CASH Dividends shall first be applied to the
unpaid balance plus COST and EXPENSES
2. if STOCK dividends, it shall be withheld until
the unpaid balance is fully paid
When may Stock Dividends be issued?
 By the SH representing 2/3 of the OCS
 In a regular or special meeting called for
such purpose
What is prohibited in Stock Corporations?
They are prohibited from retaining surplus
profits in excess of 100% of the paid-in capital
stock
XPN:
 When justified by definite expansion
projects as approved by the BOD
 When the corporation is prohibited
under any loan agreement with
financial institutions without their
consent
 Under special circumstances E.G.
special reserve for probable
contingencies
SECTION 43
When may corporation enter to a management
contract with another corporation?
By a vote of majority of the BOD and majority of
the SH of OCS or trustees at a meeting called for
such purpose
In cases of:
1. Wherein a SH has interest of both
the managing or Managed
corporations, more than 1/3 of OCS
entitled to vote
2. Where the Majority of the BOD of
managing corporation is majority of
the managed corporation.
It must be approved by:
 2/3 of the SH representing OCS
 2/3 of the members in non-stock
TN: this shall also apply where a corporation
manages substantially all business of the
corporation, whether or not there is another
denomination of such contract name.
TN: IN CASES OF EXPLOITATION, DEVELOPMEN
OR UTILIZATION OF NATURAL RESOURCES, it
may be entered for such period as provided in
pertinent laws
What is the term of management contract?

Not longer than 5 years for any 1 term.