How about creating bonded indebtedness?

This will apply to

both stock and non-stop corporation. So do not get fused. When
you talk about however to increase or decrease authorized
capital, because the power to increase capital should only
apply to corporations That issue shares of stock.

When the corporation would like to need would like to borrow,

would need to have additional funds. Okay. That action of
creating bonded indebtedness in this is not limited to stock
corporation because even non stock corporation. But an
example, red cross can also come up with a bond offering.

But that is to say that the law also allows non-stock

corporation to incur to increase bonded indebtedness. On the
procedure to apply in case of power to increase or decrease
capital stock.
1. There should be approval by a majority of the board of
directors
2. written notice of the stock holders meeting

So there should be a meeting where the stockholders will

approve the proposal by mastering, the required two thirds of
both of the outstanding capital stock at the meeting called
for that purpose. And then of course, after that, once the
required procedure has been obtained 3. the certification will
now be filed with the sec.So the secretary will make that
certification, submitted to sec.
4. Approval will be coming from the sec.

And where the applicable rules of the PCC, the Philippine

competition commission is necessary, then there should be a
corresponding by the PCC. Okay. So those are the procedures in
so far as the exercise of the power to increase this authorized
capital.

If you recall, in BP 68there is a subscription requirement. The

so-called 25 25 rule Subscription requirement, 25 25 rule.
Authorized capital 25% must be subscribed. 25% of the
subscribed must be paid up and again, 25 25 in the revise
corporation code, that requirement was eliminated,
removed.

So there is no more 25 25 rule in the subscription. During the

pre incorporation because they thought that the requirement. 25
by 25 has been removed altogether by the RCC. No,take note of
this, the removal of that 25 25 requirement is only during the
pre incorporation stage. So the subscribers will simply
Subscribe, but we'll not need to observe the 25% capital and the
25% paid up limit that is not as been removed under the RCC.

When the corporation has already been established. If it's

already operating, the corporation would like to increase its
authorized capital. Is there a subscription requirement,
additional shares to be issued because of the increase in the
authorized capital.

Remember the corporation is authorized is empowered to

increase its authorized capital.

Q: Will there still be observance of the 25 25 rule?

A: The answer is yes.
Let's read through the sec shall not accept for filing any
certificate of increase of capital stock, unless accompanied by a
sworn statement of the pressure of the corporation. Showing that
at least 25% of the increase in capital stock has been subscribed.
And at least 25 of the amount of percent of the amounts of
scribe has been paid in actual cash to the corporation or that
property, the valuation, which is equal to 25% of the
subscription

Q: What is therefore the consequence of this?

A: Always remember the removal of the 25 25 percent

subscription requirement is only during the pre
incorporation stage. Once the whole operation has been set
up that 25 25 rule will apply in case the corporation decides
to increase it's authorized capital.

Subscription requirement is still applies in so far as increase in

authorized capital is concerned.

The power of a non-stock corporation to create or increase

bonded indebtedness. So the power to incur the power to
create the power to increase bonded indebtedness is not
limited to stock corporation. In fact non stock corporations
may incur, create or increase bond indebtedness when approved
by the majority of the board of trustees and also approved by at
least two thirds of the members in a meeting called for such
purpose.

We move on to the power to deny pre emptive right. All

stockholders of stock or operation shall enjoy pre emptive right
to subscribe to all issues or disposition of shares of any class in
proportion to their respective shareholder. Unless I actually like
is denied by the articles of incorporation or an amendment there
too.

When you look into this power of the corporation to deny pre
emptive right we need to connect this with the right of their
stockholder to emptive right. While the corporation can deny
this right under the corporation.

How do we best appreciate this rule is emptive right statutory

right granted stock holders. It being a statutory, right unless it is
denied in the articles of incorporation that is statutory right
applies to a stockholder.

Meaning to say, if there is not denial of the right in the

articles of incorporation, the presumption is that the
corporation allows the stockholders to exercise preemptive.

This is based on the provision of the law. The right of the

Stockholder to subscribe to issues to be disposed of by the
corporation so that if the shares are already in the name of a
stock holder, but not yet fully paid that share cannot be
disposed of under the the so-called pre emptive right.

The shares already subscribed is already allotted to the stock

holder. Okay to the subscriber so while it is not completely paid,
it is already in the name of the stock holder. Now the moment
the corporation would need additional capitalization, additional
fees that directors now may make a capital called by requiring
all those subscribers with unpaid subscription to pay their
balance to the corporation. That capital call will render the the
unpaid obligation over these subscribed shares due and
demandable. So the stockholder will have to pay if the stock
holder fails to pay, then that shares would be considered
delinquent.

But when the disposition is no longer in the course of the regular

business of the corporation, because that disposition is already
on the centered on all or substantially all of the assets of the
corporation, then we apply a different rule.

And this is what I am referring to the disposition of all or

substantially all of the Corporations assets.

The rule is this a sale of all or substantially all of the

corporations properties and assets, including its Goodwill
must be authorized by a vote of the stockholders
representing at least two thirds of the outstanding capital or
at least two thirds of the members in a stockholder's meeting
all for the purpose.

I'd like to make a distinction in so far as the disposition of the

properties of the corporation in the regular course of business, as
against the disposition of the properties of the corporation in
perceived to be a disposition of all or substantially all of the
assets of the corporation.

Remember that the general corporate act of disposing

corporate assets will only require a board approval. So the
board will approve the disposition of certain properties of the
corporation. Or in fact, the board can make a delegated authority
in favor of one of the corporate officers to effect the disposition
of such property in the regular course of business.

Suppose the corporation is engaged in the buying and the selling

of a certain real property. And of course the corporation may
have in its inventory, certain properties the corporation
corporation's board of directors may authorize the president to
sign any and all documents relating to disposition of these
properties sold in the regular course of business.

Okay, this would be different. If the disposition would be on all

of the assets of the corporation or substantially all of the assets
of the corporation, this one will not be covered solely by a board
approval. Or a simply a board delegation of authority in favor of
a corporate officer know that if the disposition is covering all or
substantially all of the assets of the corporation, it would require
stockholder's consent or member's consent.

What is the requirement?

A: Two thirds of the outstanding capital or two thirds of the
members of the non-stock corporation as the case may be. If the
question centers on disposition of assets that is not considered
all or substantially all. No need for stock holders approval,
no need for members approval to the extent of two thirds.

Disposition concerning all or substantially all, then you

observe the, the requirement under the law for the approval
of the stockholders comprising two thirds of the outstanding
capital or members, at least two thirds of the membership.
The same or or other disposition shall be deemed to Cover
substantially all of the corporate property and assets if the
corporation would be rendered incapable of continuing the
business or accomplishing the purpose for which it was
incorporated.

Suppose there was a corporation this corporation is engaged in

the manufacturing, distribution, and sale. Of animal feeds. Okay.
In pursuit of its primary purpose, they acquired a real property
where the manufacturing plant was located. However, because
of business loss, et cetera, the corporation started closing down
its operation. So much so that there were no more operations
ongoing and the board of directors decided to just sell the
remaining assets