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    11 views71 pages

    DeLeon CorpSec1 36

    Uploaded by

    Frylle Kanz Harani Pocson

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    © All Rights Reserved
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    of 71
    liability in excess ofthe total contributions of the partners Hs W aight > cbocler tn separ pope of 5. Same prtncnblp Civ the nce (a) Ydies Part IL. wee PRIVATE CORPORATIONS 00> ‘The Corporation Code Title t GENERAL PROVISIONS Definitions and Classifications [Section 1. Tie ofthe Code. — This Code shall be 28 “The Corporation Code of the Philippines.” lave governing private corporations in the Philippines is in Batas Pambansa Big, 68 which took effect on ofits approval on May 11980 (ace Sec. 149 rmpplante 1459, as amended, popularly known asthe Corporation which was enacted on March 1, 1906 by the Philippine the then legislative body ofthe Philippines, during regime, Ac No. 1489 took elect on Apri 1, 1906, ew Code reproduced with amendments many ‘of the old Corporation Law. In ts explanatory note, Bill No.3 which became Batas Pambansa Big. 6, states: “Thisbil isintended to supplant the present Law, Act No. 1459, as amended, and to behereafter known 38 the Corporation Cade ofthe Philipines. ‘The proposed Code socks to establish a new concept of business corporations s0 that they are not merely entities ‘established for private gain but effective partners of the National Government in spreading the benefits of capitalism for the social and economic development of the nation Article XIL, Section 16 ofthe Constinition provides: “The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations ‘maybe created or established by special chartersin the interest ‘ofthe common good and subject tothe test of viabilt ‘The Corporation Code cof the Philippines, the new generallaw ‘governing private corporations in the Philipines, implements the above provision ofthe Constitution? ‘Scope of the Code. ‘The Corporation Code ofthe Philippines is «law which: (1) provides fr the incorporation, organization, and regula- tion of private corporations, Both stock and non-stock, including ‘sducational and religious corporations; (@) defines this powers and provide fr their dissolution; (2) fxe8 the duties and iailies of directors or trustees ant other officers thereof; (4) declares the rights and Lables of stockholders or members; (5) prescribes the conditions under which. corporations inching foreign corporations may transact business; We Gap Cane ncn nde 973 Cnt wh poe source th opts ps pons (6) provides penalties for violations of thé Code; and () repeals all laws and parts of laves in conflict and inconsistent with the Code, ‘Sec. 2. Corporation defined.— A corporsion is an artifical bing created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incldent to its existence. (2) ‘Statutory definition of corporation. Section 2 gives a definition ofthe “corporation,” The above Satutory definition refers only to private corporations or 10 corporations organized under the corporation law. Attributes of a corporation. An analysisof the definition in Setion2 reveals the following attributes ofa corporation: (21) Tes an artificial being: (@) Its cwated by operation of law; (©) Ithas the right of succession; and. (4 Ithasonl the powers tutes, and properisexpess -suthorized by law or incident to its existence, shi Corporation as an artificial personaly. corporation ina legal orc person with « peso separate and apart from it atockholders (tock corporations) or Inividual members (norstock corporation) whe a6 natal pons, are menged inthe cxporate body Isao in fact and In reality a person but the law teats tas though iti a person "The stockholders ox members compose the corporation but hey ‘ar not the corporation, ors the debt o ri othe ater that ofthe former ‘As consaquonc ofthis gal concep of parte personal ‘af a corporation: a vn : (1) Libilty for deblmonersip of creit, — AS a rule, & corporation is n0t liable forthe debs ofits stockholders, and theater ae nt nda abe forthe corporation's deb ‘ca lose no more than ther investment on the corporation. ‘The slockholder's debt or credits not the debt or credit of the corporation. (2) Right to bring actions. — A corporation may incur ‘obligations and bring civil and criminal actions (Arts. 48, 46, Civil Code) in its own name in the same manner as a natural person. AA corporation his no to bring. an action for and in behalf ofits stockholders er members for the purpose Of recovering property which belongs to said stockholders or ‘members inthis personal capacities (Sulo ng Bayan In. va. G ‘Araneta Inc, 72SCRA 347), and vie vers. (2) Right foacquire and possess property — Property conveyed to or acquired by the corporation isin law the property of the Corporation itself as a distinct legal entity and not that of the Stockholders ae or members as such, and may not be sold by the Iatter without express authorization of is board of directors or trustees. Therinferest in corporate property is only inchoate and indirect (4) Liability for contracts. — All contracts entered into in its name by ils regular appoirued officers and agents are the Contracts of the corporation and not those ofthe stockholders ‘oe members. Again. a corporation cannot be held lable for the personal indebledness or obligation ofa stockholder even if he ‘Should be its president, (Smith & Co, Inc. vs Ford, 63 Phil. 786.) [Netter Ure lates lable for the indcbtednes ofthe former (6) Tex exemption/iablty, — A tax exemption granted to a ‘corporation cannot be extended to include the dividends paid ‘by such comporatin tits stockholders (Manila Gas Corporation ve. Collector of Revenue, 71 Phi. $13.) if such dividends are rot exempted from tax. In the same vei, the tax lability of a Corporation cannot be enforced against the stockholders nor the ‘ertonal tax lability ofthe ate, gainst the former (6) Changes in individual membership. — Likewise, 28 an catty dstine! ftom its members or stockholders, a corporation | remains unchanged and unaffected in ts entity by changes in 1s individual membership. It has continuous exits sce ‘would exist even fall the stockholders de fi mie xeon! amt, — Peenor soldary nblty may be inosred by corporate agents acting in beat tthe corporton oly hex ncopnal crecmetanes are Tw ac edict malicoly erin ba faith o with rose negligence (Ge Secs. 3,65), oFapred to hold himsell personally and seldany liable with the corporation or mate, by specie provision of aw, personally lable for corporate Acton, rowenta the offer he ed the fico of separate corporate Personality to defraud a hind party orfor wrong end Disrogarding fition of corporate ony. ‘The doctrine that a corporation is a legal entity or a person ~ som drat nh pone comes ng cry Indice for purposes convenient ano promot the eds of juts This ton, therefore, crm be extended fo a pont ‘ot within teresson ond porpose 13 Amar 160) Being a mere creature of the law corporation may be Allowed to exist soll or awl pape but where the Eon ‘of corporats entity i being used a2 coal or owt foc fem rill shi fction wil be disregard and the individuals omposing it wil be tested ot ier with the corporation fr merely as an assodation of individuals andertaking certain svn a «group although no corporation had been formed. Wee threo ori iy wit mend an one) one xing merely eganded asthe instrumental “go of the other. (infra, inoter nee me prvarecomroRaTons | wer finaocilly troubled coeporations benefit when they succeed in piercing the corporate vel fr they can go after the assets of the [dividual stockholders, Instances where fction dlsregerded. {in the following instances and in furtherance of the ends of justice the courts have pierced the veil of corporate entity, omsiering. the corporation merely as an association of ‘oF where there are two (2) corporations, they will be Eonsidered as one (1), the one being mercly regarded as part oF ‘the instrumentality ofthe other. (Cease vs. Court of Appeals, 99 SCRA 483) (0) Where comration nto othe nh fase erin. who has onlrol over the funds and the said person hereof. In such case, the corporate entity is ‘bt an for the business conduit ofthe owner and the ofthe corporation may be consigered the property of Fhe controling individual nd may be seized in an action against the later (Marvel Bldg. Corp. vs. David, 94 Phil. 376; Collector vs, University of Viayas, 12 SCRA 193 (2) Where the carporatin is a mere instrumentality of the. ni tai er ust individually answer for ‘Brporateobligational To hold the stockholders liable fr the Corporate obligations is not really 10 ignore the corporation's separate ett butmerly to apply theese ping at such entity cannot be law. that created that separa a rasliyaicConnel ve Court of Appeals. 1 SCRA 722. (@) Where domestic or Phillie cooratin i contd nao nately sal ba dened it of he ening Slockholders thereof uring wartime, for reasons of national Secu Fiipinas Cla de Seguros. Christer Hueneteld & Com inc, 89 Phi 51 Davis, Winship vs. Philippine Trust Company, 9 Phi 768) Thisis the contra ist in determining the nationality of, private omporntion: (A). Where a oration rgb an inn dee nda Hs cet and heaters properties to i ana moMSONS furterance of such fraudulent purpose (ee Palco v8. ‘Transp. Co, 5 SCRA 1011.); ni co at corporation is forme person for the purpose of indicat Vay Tot ne. Fret its employes, both rma being owned and person, withthe result that the second corporation should ‘considered a continuation and successor of the Best ety Paparols vs. Cour of Industral Relations supra) oration ssa cretion of aw OF by operation of aw. (0) Spi etry or rit by th tte rege. — A corpo- iene by law or by operon ofl craton ep cay as anes by operation ln persons desing o be and acta corperation may Coin seul nc! no, — In he Pipi <2 rt which governs the ceston of private corpo pel tats Panbstss it circ Lowen ae Garton ote of te Pippo” Pvt spoons ws, (Constitution PRIVATE CORPORATIONS (0) Exception. — An exception to the rule that legislative «grant or authority i necesary forthe creation ofa corporation ‘htane with espect a sorporations by ina) > ackne Right of succession of a corporation. : ‘A corporation has a capacity of continous exsence.— imeapectve ofthe deth withrawal insolvency, or incapacity ‘ofthe individual members or stoctolders and regardless ofthe ‘carter of heir interes or share of stock But the corporation i | by no means immoral a 4 (1) Under the Corporation Coe; theo the earporations | 0, ctimited othe period ime tated in the articles oconporation | tot eneningb il om in date of erpntn ex Sec. cs 1415,) unless} dissolved or unless said period is extended. ecu) (2) Corporations crested by special laws have the ight of succession forthe term provided inthe laws erecting them. Powors, attributes, and properties ‘of a corporation. A corporation, being a mere creation of law, may ex ‘only such powets as are granted by the law of its creation. express grant, however. is not necessary. All powers which efay te implied from those expressly provided by law and those ~ ‘which are incidental or eseential 16 the corporation's exist may also be exercised. : (1) Thus,acorporationincorputated as arailsond. ‘has the incidental power to build rallroads because ouch is necessary forthe accomplishment ofthe purpose for whigh the corporation i reated, (2) Similarly, corporation expeessly authorized to in agriculture Ras implied authority to buy agriclturaf lands ‘because such authori is esonaly appropri 0 cy out is xpos autor (9) Likewise, corporation engaged in the manufacture of coment could operate and maintain an elec pant forte purpose excise of supplying elect tot cement actory Indios employee angina facory compound whee f Speers that the operon of ach pla essay connected tw the busines of the manufacturing cf cement. (Terese Electric and Power Co, Inc vx. Pi Service Commision, 2 SCRA 252) () Batacorpraton organize othe purpanet cy othe tic har powertobey ard elagobord Jands because its ot within the power expel o pled erly hornets eS and (6) Neither may corporation be authorized under it articles ‘incorporation to operate and otherwise deal in automobiles ‘accessories and to engage in water transportation, engage ‘the business of land transportation by operating a taxicab ce because such would have no necessary connection with thy corporation’ legitimate business. (Luncta Motor Cos. A.D. The, SSCRA 809.) between a partnership 8 corporation. following are the distinctions: () Monner of creation. — A partnership is cated by mere pent the parties, while a corporation is created Bylaw Or Number of icopraers. — A pasneship may be yen two @) persons, whe corporation (except ole) requires tes ive) corporat See 10. ° 4fjuralperonliy. — A parteahip to acquit iial peronality from the moment of ton of he contac artes, whe a erpration thave corporate enistence snd nical persona ony from the date ofthe esac ofthe cette of incorporation by the Seren and Exchange Commission unde sofia sel (See. 19.); () Pavers. — A partneip may exercise any power authain! by the purer provided isn corny law ‘morals, good customs, pub ondet oc publi oley (AP. 1306, an eerie only the powers (6) Menagemen— In a partnership, when the management {snot agreed upon every partner isan eget ofthe partnership, | while ite corptratn te power odo Bases ra manage ‘Main ie vested inthe boar of decom or tuners Se. 23), | (6) Eft of mismanagement. — In a parinership, a parter | as much can sue a corpartner who mismanages, while i) poration the suit against member ofthe bord of director of {ruses who miamanages mustbein the nae of thecorpration (Goel) ] ©) Right of sucesion. — A partnership has 0 ight succession while a corporation has such right Gee 2); | (8) Extent of lialty to third persons. — na partners the partners (exept limited partes) are able personally subsidiary (sometimes solidarly for partnership debts 0 Fersons, whe na corporation the stockholder ae ible To the extent of ther investments as represented by the shjres subseribed by them (ee Secs. 6567); 0) Tr intr. — in a parte, 2 cane tantra st nto parbestap soa transferee a partner without the consent of ll the other partners because the ip Is based on the principle of {dlectus prsonarum, while in a stock corporation, 2 has the sight to transfer his shares without the prior the other stockholders Because a corporation isnot based hn this principle (see See 63. (10) Term of existence. — A partnership may be for any period of time stipulated by the partners, fihile a ‘corporation may not be formed for term in excess of f0 years | ext et mo hea nay nein Gi. teste, Aleta nace ens law ton the wor i tots eam when oration ny sagan fn ane red ts tees gy ‘similar to any registered firm name, or contrary to existing laws (see See. 18.); of e a) Paes pb ar aay ebplocalitajet Inidepecmtmmrtese, elaecnentnbemenacmcseetan yaad (3) ti sal gee A pera wot er oor larities between a partnership ‘and a corporation. ‘The simaite ar allows: (1) Like a partnership. coportion has «jr i va at of the Inals (9) Like a partnership, a corporation (except ¢ corporation composed of _ is an organization an aggregate of individuals; fle ervey poi ctu profi. args in partnership profits); Lie» pen crporton cn band ny (GA partnership, no mater how created or organized is asa corporation, subst oincomg a(S fl, NIRC) rtd ret cpa ey pes Bi preheat rs pc sree coe ele To gy tore MEN) ‘Advantages ofa busines: corporation. ‘The advantages are thefllowing: (0) The corporation ps egal capacity to actasaegal unit. (2) It has Geel o_itence_crue_of_it_nom: dependence onthe lives ofhose who compose it (3) Its credit is strengtlened by such continuity of existence; (4) Is managements ntalized inthe board of decors {© ts creation, organtation, management and dissolution -are_standardized.as they are governed under_one_general “incorporation ae: (6) It makes feasible ggantic financial enterprises since it, enables many individual vest tel separate funds i the emerpie (0) The shareholders hve limited Hiabity: oh 0) Hare not eT yand i See | consent of the other stockblders. Disadvantages of a busiess corporation. ‘They ae as follows: (1) The corporation ismatiely complicated in formgtion and management: (2) Itentals elatvely gh cost of formation and (0) Is credit is weakned by the limited the stockholders; (4) Theres ordinarily ick af personal elemeninviey of “transferability of i (7) The stockholders have ite voice inthe conduct ofthe busine’. and (6) In large corporations, management and control are Separate from ownership. ‘Sec. 3. Classes of corporations. — Corporations. {formed or organized under this Code may be stock ‘oF non-stock corporations. Corporations which have capital stock divided into shares and are authorized to distribute tothe holders of such shares dividends | or allotments of the surplus profits on the basis of the shares held are stock corporations. All other corporations are non-stock corporations. (3a) Classicaton of corporations der he Code, ‘The Corporation Cade cases private corporations no sick and nso corporations acrdng to wheter Bie tmanterahipis epee by share of tak rt (1) A [stock corporation}is the ordinary business: ation reaped eps aking ep ih rm of div et detierotercase rata mentioned Jn Section 3 must be present to make’a private corporation fall the definition of a stock corporation. (2) Unlike stock eoeporations, norstock corporations do not Issue stock and are created not for profit but for and welfare. Of tus characer are most of the Telighus, sal, Titerary scientific, civic and politcal organizations and societies | Nonstock corporations their members. Their captal are sourced fom fection ae donations They ate pinay gover by “Title XI (Gees. 87-98, of the Code: Other clagsitications of corporations. + Tat other clascatos of omporations such as those ‘enumerated below. hak dived (0) As to number of persons sho compose them: (@) Corporation aggregnc.oc corporation consisting of more than one member oF corportot oF (b) Corporation sole oc a religious corporation which consists of one member or corporat nly and his succesors ach as bishop. (0) Astor they are for reliiws puro ont: (a) Eclesiastcl corporation or one organized fr religious itposes or (©) Ley corporation or one organized fora purpose other shan slg, Ly corporations in tm ay be ter Tansee ks anaiozmscal (a) Eleemdaynary corporation or one established for chartble purposes or (©) Cit corporation or one established for business ot prot (4) As sae or country under or by those Los they have ben or one incorporated under the (a) Domestic eonporation, laws ofthe Philippines: or oa es organized, xg ander evar hn howe ofthe Pipes (Gee See 123) (©) As tothe ga sght to corporate existence val ener reoperation evsingin it and) (&) De facto copraion or a corporation visting infact inlaw. (ee Se. 21) (6) As toeter they are open tothe public not (2) Close corporation ox one whichis ii _porond of members of fay (ee Ses 96-105 oF run aoe (b) Open corporation or one which is to any person who may wish fo become a ohholer of member thereto. (7) As to their elation to another corporation: aera a coe ener Indirect cs he ay oh dc ch tr comportion; or =i 2 af dea mee © 1) Sir Sin oe eke ihe ate to svcthes corporation tt ‘fs discon conte Sis ely orediecthtpaachodeesoan, (8) As to whether they are corporations in a true sense or only in @ BD Deere cannes x one which exits wth formal lative grant. It is an exception to the general rule that & ep ean pe 1) Corporation by prescription or one which Interference on and which by ton of i tiven the datas of cxporaion (1 Facer Cylopedia on the Law of Private Corporations, p.Al5) The x een recognized having acted as such And asstmed corporate powers for along period of time (Balin vs. Ramicez,7Phl 41); oF 2 ‘or one which in reality ie nota ‘ether de jure or de facto, because iis £0 defectively formed, but {s considered a corporation relation to those only who, by reason oftheir act or ‘rom asserting that i isnot a ‘Sorporation. (6 Fletcher 218-219; see Sec. 2.) 9) As to whether they are for public (government) or private (2) Public coporation or those formed or organized for the government ofa portion of the State oF () Prise corporations or thove formed for somefrivate purpose, bnefit, Or end: it may be either a stock or ‘Corporation, government-owned or -contrlled corporation, ‘or quasi-public corporation. ire) ‘Test of citinction between public 3 ‘and private corporations. «if cawti® At golly pus ‘The true fest is the pinpose of the corporation: the corporation is ceated for political or public purpose connected ‘withthe administration of government, then iti. 2 public ‘Corporation. Ifnot itis a private corporation although the whole ‘ruta the whole intrest in the corporation belongs to the Sat. (0) In the Philippines, the public corporations are the provinces, ces, municipalities, and Barangays. In addition {he Constitution mandates the crstion of autonomous reins in Muslim Mindanao and the Cordillera, Gee Art X, See. thereof) The local unite are ls called mui tonto decal gosenments s ‘The Cee eliminate the dlasificaton of corporat into public private obviously for de reason Ua i apples only to private corporations. (2) Private corportionsincude: (a) Gavenment owed or th od Wadd ak dint ‘Therearethree(3) other asses of persons whe play mportant ‘oes in the formation and organization os corporation, noms (1) Promoters or “persons who bring about oF cause to tring about the formation and organization ofa corporation by together the incorporate or the persons intersted Bets starprina, provesing acbexiptinrs or capital x the corporation se sting in motion the machinery which leads the incorporation ofthe corporation isle” (13 Am, ut 243264), “They lay the groundwork for comporate existence, (2) Suscribers or “persons who have agro to take and Se scetat antoces Gave orc copccton towel rte formed.” (Ballantine on Corporations, 375 see Secs. 61.) Se, tubvasbers may not be stockholders, They becone vockhoiders from the me thetr subscriptions are acepledby the corporation nt (2) Undenorter or “a person, usually an investment banker, ‘who: (has agreed, alone or with others, to buy at sated terms tn entire issue of securities or a substantial part thereof or (©) has guaranteed the sale of an issue by agreement to buy fom the fsuing party any unsold portion at a stad price; or (e) has toed to use his "best efforts to market allo part ofan issue oF (a) hosoflered for sate stock he has purchased froma controling Stockholdex” (EL Kohler, op. cit, p. 480.) ‘Sec. 6, Classification of shares. — The shares of stock corporations may be divided Into classes fr serles of shares, or both, any of which classes OF series of shares may have such rights, priviloges fr restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified tnd issued as “preferred” or “redeemable” shares, Unless otherwise provided In this Code: Yorther, That there shall always be a class or series ‘of shares which have complete voting rights. Any or {il ofthe shares or serigs of shares may have a par Yalue or have no par value as may be provided for {nthe articles of Incorporation: Provided, however, ‘That banks, trust companies, insurance companies, public utlties, and bullding and, loan associations ‘shall not be permitted to Issue'no-par value shares of stock. Preferred shares of stock Issued by any corpora tion may be given preference in the distribution of he fassets of the corporation in case of liquidation and In the distribution of dividends, or such other profe- ences as may be stated inthe articles of incorpora- tion which are not violative of the provisions ofthis Code: Provided, That preferred shares of stock may be Issued only with a stated par value. The board of ‘irectors, where authorized inthe articles of incorpo- ‘ation, may ix the terms and conditions of ‘hares of stock or any series thereof: Provided, That ‘such terms and conditions shall be effective upon the fling of a certificate thereof with the Securities ‘and Exchange Commission. ‘Shares of capital stock Issued without par value ‘shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to Its creditors in respect thereto: Provided, That shares without par value may not be Issued for a consideration ess than the value of Five pesos (P5.00) per share: Provided, further, That the ‘entre consideration received by the corporation for ts no-par value shares shall be treated as capital and shall not be availabe for distribution a dividends. ‘A corporation may, furthermore, classlty Its ‘shares for the purpose of insuring compliance with ‘constitutional or legal requirements. Except as otherwise provided In the articles of Incorporation and stated in the certificate of stock, ‘each share shall be equal in all respects to every ‘other share. Where the articles of incorporation provide for ‘non-voting shares in the case allowed by this Code, the holders of such shares shall nevertheless be ‘entitled to vote on the folowing matters: 1. Amendment ofthe articles of Incorporation; 2. Adoption and amendment of by-aws; 3. Sale, lease, exchange, mortgage, pledge or ‘other disposition of all or substantially all of the ‘corporate proper 4, Incurring, ereating or increasing bonded in- debtedness; 5. Increase or decrease of capital stock: 6. Merger or consolidation of the corporation ‘with another corporation or other corporations; 2 PRIVATE CORPORATIONS 7. tnvestment of corporate funds in another cor- poration or business In accordance with this Code; and ‘8, Dissolution ofthe corporation. Except as provided in the immediately preceding ‘paragraph, the vote necessary to approve a particular Corporate ‘act as provided in this Code: shall be ‘deemed to refer only to stocks with voting rights. (Sa) Power to clasly sare. : {Dion no car ari hares, ~The sar sock corprstions “nay oe dived it cases or seo shares see ny of wich cams reir faery have sch ihe pvfoges or msttons mn beaten ote ‘Biopratin” See 6 por 1) Unless th law rth rvs of tc, « ton may tetors os ach Cameo eres of shares {tbe psp ond neds fib nyo Aes” tio fon tabivon of das of hae (2). Primary clifton of sheet. — 1s common and prcered enh ch mayb ied chet Gases nf) ‘hus shares ofc mal ier with repecovoung hts Aiden Sate and ef hua: gh eorperate = () Al on) clef ses withing gts There smth at ato stk edb Sen 6 a 2 Saporton mth set ne Gd of sk i tng = When clasiteation of shares ‘maybe made () By he incon ~The nes and number of tas wiih Peach un ade doce ye ‘bee ss sedi hetero noproon ed wih ‘sZt andichageComenaln Oy te ard of cis nh stata. — Aer he comport ss secs, hey aye abe by a a i boar of directors and the stockholders by amending theartictes| of incorporation to Section 16. If the amendment ‘anges or restricts the rights of any class of share, oe authorires| preference in any respect superior to those of outstanding shares of any cass, any stockholder shall have the right to dissent and demand payment ofthe fair value of his shares, (Se. 81) mes ie Deen aaeaponemenl SS neta teers eae SS a le eo Rear Siemans ee eri pee spe een esses meres Beir ise rama Sn ae “erent reper eer eae ee eorenerananmennane Soa ee pao eer See estes roan eens cceecrse arr Thala provide tt “aceptoeherin provide bythe ics of torpor and ted nw crea of set cach share shall bein all respects equal to every other share” ‘Ubi, par 5) This the doctrine of equality of shar. 1 means that in the absence of any provision in the articles of incorporation and in the certificate of stock tothe contrary, Sil stocks enjoy equal righis and privileges. Thus, if one class ‘Of shares has the right fo vote all ther cases ae presumed to have the same voting power. 2 peatacueeeoome Sie rose eee ae eee oan peer eec carat ate fe nerarcge ime iiresiseeuesearans See tesnierm eee Se ee ee joa eee ies eetemes sire eee: ee eeeae cede: miueiecanteremcreua: omaeneeunie eae fereneecnoes aSeemimaeermes a ie centimeter Siete Nepal st the cnt whi sot pci inthe eee eal isa et a Ceara Ded earns reese ce ni Seceneeneearoee Seelam {ee (© Outstoning capital stocks the portion ofthe capital stock which is mae and held by" persons other than the corporation fel. The Code defies the term as “the toa shares of ack nue fo submcbes or octal, ‘wheter fly o partially pai ong mee a binding Subscription agreement xcept treasury shares” (Se 137) tis tia broader than “subse capital stock, ‘The tems “subsrbed capital stock” and “noua” or ‘oulstanding” capital stock ae used ynonymennly ince suerte capital tock 98 fromthe cericte ‘fsck, can be sed even iota ai. But whe every Suerte share (assuming tere is «binding nabscrpion Sgreren ix “outstanding” an ad share ny not have the satus of oustanding share This strc inthe case of toenury shares (ee 9) (iy pa inc tnt poo ft edo outage toa (Une pl snk tpn cp sat ct tore Went draweno dividends, (2) Copital is used broadly to indicate the entire a sss he corporation. cade te amour vented ectopic os — Ghee prt he et ply Sls cto re D sheet fer ich id i pon long 2s they remain inthe reaury (See. 97), e, urcanclled land abject fo rtsue A conporaon cannot i any proper sence ieastockholder in itll and shares of sown stock, tel by itcannot be voted or be ented to vote for oherise the ‘iectors could be abl to perpetuate contol ofthe corporation (Comm. ve. Manning supa) (5) Rig fo diidends — Neither are tresury shares ened to dividends or assets because dividend canot be declare by ‘corporation to tet a5 such distribution would be Ike taking ‘money or stock from one of is pockets and putting the same in another, which would be pointless. Hence, stock dividend (Gee Sec. 43.) may not be declared on treasury stock even on the expres condition that such dividend will also be treated as treasury stocks. (SEC Opinion, Nov 2, 1966) STUDY GUIDE 1 Deltona ei ree meting of the flowing: corporation: fen ofcrprne ety, eeeses capa ck, cutstandiog cpt ick, cout pefered hae foal aig een 1 Discussions 1. Ge F nan eg (0 itn ep isting char of od tom cap sek 2. Give at let thee) advantages od the () dlovatages fo pa value hs. {We we hfe (4) clans porns compen 4 conportn! ety ct Give at lot thw @) advanags andthe () Gaatratng of beeetcxportion sik ccies attr exe eeene 7. Give atleast four (4) similarities between a corpora: tion and a partnership. 18, Distinguish share of stock from cortifeateof stock, UL Problems ‘Explain orstate briefly the ruleor reason for youranswers 1. Congres passed apropocedlaw creating acorperaion to engage in agricultural activities. I the law valid? 2. X:lne and Y Tne are sisters companies with the same set of officers: May Xe held liable forthe obligations of Y? 3, Ifthe book vale of the share of stock ina corporation is PLOn, is this amount also its par value and marke value? 4, The artes of incorporation that particular clas of shares shall be deprived ofthe right to ‘ote, Nevertheless, may they be stil entitled to vote? 5. A corporation isoued redeemable shares in favor of 'S who informs the corporation of his option to redeem the same as provided in the articles of incorporation. Has C, a ‘corporate creditor, the right to objet? 6 corporation voted it treasury shar and received

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