Activity 2Synchronous Activity 2

Corporation and the Revised Corporation Code

1.Enumerate and define the components of a corporation
Provided under Sec 5 of this code states that the components of a corporation is as follows:
 Corporators and Incorporators
- corporators are those that compose a corporation whether as stockholders or
shareholders in a stock corporation or as members in nonstock corporation.
- Incorporators are those which are mentioned in the articles of incorporation originally
forming and composing the corporation and who are signatories thereof.
 Stockholder
- are those that compose a stock corporation
 Members
- are those that compose a nonstock corporation.
 Promoters
- is a self-constituted organizer who finds an enterprise or venture and helps
to attract investors, form a corporation and launch it in business, all with a
view to promotion profits

2.Define and distinguish the following capital stocks

Authorized
- Is synonymous with capital stock where the share of the corporation has par value and is
specifies in the articles of incorporation and if the shares of stock but the amount of which
cannot be identified.

Subscribed
- is the amount of the capital stock that is subscribed whether fully paid or not.
Outstanding
-The term "outstanding capital stock", as used in this Code, means the total shares of stock
issued under binding subscription agreements to subscribers or stockholders, whether
or not fully or partially paid, except treasury shares.
Paid up
- is the portion of the capital stock that is issues and was paid by the shareholder.
Unissued
- is the portion of the capital stock that is not issued or subscribed and does not contain vote and
dividends.

3.In tabular form distinguish between capital stock and capital?

CAPITAL STOCK CAPITAL

is the amount of common and preferred -denotes the Sum Total of the shares
shares that a company is authorized to subscribed and paid-in or promised to be
issue—recorded on the balance sheet under paid by the stockholders irrespective of
shareholders' equity. The amount the nomenclature issued by the corporation.
of capital stock is the maximum amount of
shares that a company can ever have
outstanding.

4.In tabular form enumerate and give the definition of the different classes of share.

Class of share Definition

Treasury - Re-owned by the corporation

having been reacquired by the issuing
corporation by “purchase, redemption,
donation or through some- other
lawful means.” It has no voting rights
or rights as to dividends or
distributions.

Redeemable (“Callable”) shares - which are usually preferred are

frequently issued subject to
redemption at the option of either
the corporation, the stockholder, or
both, at a definite price
representing premium above the
amount originally paid.

Promotion Shares - are such stocks issued to those who

may originally own the mining
ground or valuable rights connected
therewith, in consideration of their
 deeding the same to the mining
company when the company is
incorporated, or it may mean such
stock as is issued to promoters.

Shares of Escrow - are shares subject to an escrow

agreement, that is, an agreement
under which the shares are
deposited by the grantor or his
agent with a third person, to be
delivered by the depositary to
the vendee or subscriber only
upon the happening of certain
conditions.

Founders’ shares - generally common stock, are given to

the founders or promoters of a
corporation in payment of money
expended or services rendered in the
promotion of it.
Par Value - Par value is the given fixed or
definite value of a share in the
articles of incorporation

5.In tabular form distinguish founder’s share, redeemable share and treasury shares.
FOUNDER’S SHARE REDEEMABLE SHARE
- Given certain rights and privileges not - Usually issued subject to redemption
enjoyed by other owners most at the option of either the
specifically the right to vote and be corporation, the stockholder, or
voted for the election of directors. both, at a definite price
representing premium above the
amount originally paid.

6.In tabular form enumerate the corporation which require a certain percentage in the ownership
of capital stock.
Type of corporation Percentage owned by Filipino citzens
Mining and agricultural -at least 60 %
incorporation, or corporation

Domestic insurance company -paid up capital stock equal to at least two

million pesos
Insurance company is to engage in -paid-up capital stock of at least five million
 insurance business pesos
Financing companies -at least sixty per centum of the capital and
shall have a paid-up capital of not less
than five hundred thousand pesos
Commercial banks - required to have a paid-up capital of 100
million pesos.
Commercial bank having licence to operate -It must have a paid-up capital of at least
an expanded foreign currency deposit 150 million pesos and when a commercial
system bank is authorized to engage in
universal banking it must have a paid up
capital of at least 500 million pesos.
Mass media - limited to citizens of the Philippines or
to corporations or association wholly-owned
and manage by such citizen
Retail trade business. -must be wholly-owned by citizens of the
Philippines.
vessels of domestic ownership -any corporation or company created under
the laws of the Philippines, provided at
least 75% of the capital stock thereof or
of any interested in said capital is
wholly owned by the citizens of the
Philippines

Submit not later than 5 PM of May 15

7.In tabular form distinguish the contents of the Articles of Incorporation vs. corporate By Laws
Articles of Incorporation
The name of the corporation
The specific purpose or purposes for which
the corporation is being formed. Where a
corporation has more than one stated purpose,
the articles of incorporation shall indicate the
primary purpose and the secondary purpose or
purposes: Provided, That a non-stock
corporation may not include a purpose which
would change or contradict its nature as such
The place where the principal office of the
corporation is to be located, which must be
within the Philippines;
The term for which the corporation is to exist,
if the corporation has not elected perpetual
existence
The names, nationalities, and residence
Corporate By-laws
The time, place and manner of calling and
conducting regular or special meetings of the
directors or trustees
The time and manner of calling and
conducting regular or special meetings and
mode of notifying the stockholders or
members thereof
The required quorum in meetings of
stockholders or members and the manner of
voting therein
The modes by which a stockholder, member,
director, or trustee may attend meetings and
cast their votes
The form for proxies of stockholders and
 addresses of the incorporators members and the manner of voting them
The number of directors, which shall not be The directors’ or trustees’ qualifications,
more than fifteen (15) or the number of duties and responsibilities, the guidelines for
trustees which may be more than fifteen (15) setting the compensation of directors or
trustees and officers, and the maximum
number of other board representations that an
independent director or trustee may have
which shall, in no case, be more than the
number prescribed by the Commission;
The names, nationalities, and residence The time for holding the annual election of
addresses of persons who shall act as directors directors or trustees and the mode or manner
or trustees until the first regular directors or of giving notice thereof
trustees are duly elected and qualified in
accordance with this Code
If it be a stock corporation, the amount of its The manner of election or appointment and
authorized capital stock, number of shares the term of office of all officers other than
into which it is divided, the par value of each, directors or trustees
names, nationalities, and residence addresses
of the original subscribers, amount subscribed
and paid by each on the subscription, and a
statement that some or all of the shares are
without par value, if applicable
If it be a nonstock corporation, the amount of The penalties for violation of the bylaws
its capital, the names, nationalities, and
residence addresses of the contributors, and
amount contributed by each
Such other matters consistent with law and In the case of stock corporations, the manner
which the incorporators may deem necessary of issuing stock certificates
and convenient.
Such other matters as may be necessary for
the proper or convenient transaction of its
corporate affairs for the promotion of good
governance and anti-graft and corruption
measures.

.8.In tabular form distinguish between a Self-Dealing Director, Inter-locking director and a
Disloyal Director
Self-Dealing Director
Inter-locking Director -interlocking directors are persons who serve
as member of the board of directors of
two or more competing corporations or
corporations engaged in practically the
same kind of business.
Disloyal Director -Where a director, by virtue of such office,
acquires a business opportunity which should
 belong to the corporation, thereby obtaining
profits to the prejudice of such corporation,
the director must account for and refund to
the latter all such profits, unless the act has
been ratified by a vote of the stockholders
owning or representing at least two thirds
(2/3) of the outstanding capital stock. This
provision shall be applicable, notwithstanding
the fact that the director risked one’s own
funds in the venture.

9. Distinguish between appraisal right and the right of first refusal.

-Appraisal Right refers to the right of any stockholder of a corporation to dissent and demand
payment of the fair value of his or her shares in the corporation. is a contractual right to enter
into a business transaction with a person or company before anyone else can. If the party with
this right declines to enter into a transaction, the obligor is free to entertain other offers

10.What is dividend? Is dividend similar to profit? Explain.

* “Dividends” means the profits or that portion of the profits of the corporation which its
board of directors, by proper resolution, sets apart for rotable distribution among the
stockholders.
Yes it is similar to profit since it is a part of the profit of the corporation which was designated
and separated yet they are different in ways that profit shall be in circulation of the corporate
activities while dividends are those that are designated for the stockholders.

11.In tabular form, enumerate and define the different classes of dividends.
Cash dividend Cash dividend is one payable in money
Stock dividend Stock dividend is a dividend payable in stock
instead of cash or property
Property dividend The directors in their discretion may
authorize distributions in bonds or in
property, such as warehouse receipts for
whiskey or shares of stock of a subsidiary
corporation
Scrip dividend Scrip dividend is a writing or a certificate
issued to a stockholder entitling him to
the payment of money or the like at
some future time inasmuch as the
 company, at the time the scrip dividends
are declared, has profits not in cash.
Liquidating dividend Liquidating dividend involves the distribution
of assets by a corporation to its stockholders
upon dissolution

12.What is an ultra vires act? Is an ultra vires act an illegal act?

- Acts or transacts business beyond such powers or authority, the act performed. Ultra Vires act
is not allowed in corporation as stated in art 44 of the revised corporation code.
Give an example of an ultra vires act : Corporation entering into a partnership.
13.In tabular form distinguish proxy voting from voting trust agreement.
PROXY TRUST AGREEMENT
In corporate law, is a person who votes for an agreement by which stockholders
and this represents the stockholders or surrender their voting power and place it
members. irrevocably in the hands of others for a
definite period of time. In exchange for
the certificates of stock the trustee delivers
to the stockholder voting trust certificates.
right to vote shall be exercised by the The voting trustee or trustees may vote
stockholders themselves or by their duly by proxy unless the agreement
authorized representatives. provides otherswise

14.Make twotables for majority votes and 2/3 votes

Enumerate the corporate acts where the required number of votes of the BOARD OF
DIRECTORS are 2/3 or majority
Majority2

MAJORITY 2/3 VOTES

-Amendment of Articles of -written assent of the
Incorporation. stockholders in the amendment of the articles
of incorporation
-Election of the members of the board -
-removal of directors -
- Power to enter into management contract. -ratification on the act of a disloyal director
- Amendments to by-laws -removal of directors
- Stockholder’s or member’s approval. - Investment of Corporate Fund in another
business or purpose other than the Primary
purpose.
- Voluntary dissolution where creditors are - To enter into mergers or consolidations.
affected
-- Extension or Shortening of the - Sale or other disposition of assets
Corporate
Term
- Increase or Decrease in Capital Stock - Stockholder’s or member’s approval.
- certificate in duplicate in the increase or - Power to invest corporate funds in another
decrease of Capital Stock corporation or business or for any other
purpose.
- Power to declare dividends
- Voluntary dissolution where creditors are
affected