RECIT NOTES.

CORPORATE BOOKS AND RECORDS

Section 73. Books to be Kept; Stock Transfer Agent.

a. AOI and Bylaws of the corporations including their amendments.

b. Current ownership structure and voting rights of the corporation.
c. Names and addresses of all the members of the Board.
d. Record of all business transactions.
e. Record of all resolutions.
f. Copies of the latest reportorial requirements submitted to the SEC.
g. Minutes of all the meetings.
 Corporate records shall be OPEN TO INSPECTION BY ANY DIRECTOR, TRUSTEE, STOCKHOLDER,
MEMBER in person or by a representative at reasonable hours on business days.
 It may demand in writing the copies of such records at their expense.
 Any stockholder who shall abuse the rights granted shall be penalized under Sec. 158 of RCC,
without prejudice to the IP Law, Data Privacy Act.
o Fine of 5K-2M, not more than 1K per day and in no case exceeding 2M.
o Cease and desist order.
 Any officer or agent who shall refuse to allow inspection/reproduction of records shall be liable
FOR DAMAGES, and shall be guilty of an OFFENSE punishable under Sec. 161.
o Fine 10K-200K discretion of the Court; 20K-400K if detrimental to the public.
o Exception: if such refusal was made pursuant to a resolution or order of the Board, the
action shall be imposed against such director or trustee who voted for such refusal.
 If the person demanding to inspect or reproduction has improperly used any
information before, or was not acting in good faith, or without a legitimate
purpose, or the one who requested is not entitled to the records.
 If the corporation denies or does not act on a demand for inspection/reproduction,
o REPORT TO THE Commission.
o Within 5 days upon receipt of the report, the SEC will conduct a summary investigation
and issue an order.
 STOCK TRANSFER BOOK
o All stocks in the names of the stockholders.
o Installments paid and unpaid on all subscribed stocks.
o Date of payment.
o Statement of any alienation, sale or transfer of stock, its date, and to whom.
o Such other entries as the bylaws may prescribe.
 STOCK TRANSFER AGENT
o One engaged principally in the business of registering transfers of stocks in behalf of a
stock corporation.
 Must have a license from the SEC and payment must be made.
o Corporation is not precluded from performing or make a transfer of its own stocks
 All the rules and regulations imposed on a stock transfer agent shall be
applicable to the corporation
  SEC may require corporations which transfer or trade stocks in secondary
markets to have an independent transfer agent.

Section 74. Right to Financial Statements.

 Upon their written request = within 10 days

 Regular meeting = financial report for preceding year including financial statements
 If total assets or total liabilities of the corporation is less than P600K or such other amount as
determined by DOF, financial statements may be certified under oath by the treasurer and the
president.

MERGER AND CONSOLIDATION.

Section 75. Plan of Merger or Consolidation.

 Merger – 2 or more corporations merge into 1 surviving corporation.

o Mergers may be horizontal or vertical
o Horizontal – competing firms
o Vertical – corporation absorbs another who uses/distributes its products
o Conglomerate – neither competing nor related
 The surviving corporation shall acquire all the assets, rights, and liabilities of the
disappearing corporation.
 Consolidation – a new corporation is created. The consolidating corporations are extinguished.
 The new corporation acquires all the assets, rights, and liabilities of all the
constituent corporations.
 Plan of Merger or Consolidation
o Board of each corporation shall approve a plan of merger or consolidation setting forth:
 The names of the constituent corporations.
 Terms and mode of merger/consolidation.
 Changes, if any, in the AOI of the surviving corporation if merger; new AOI in
case of consolidation.
 Such other provisions as deemed necessary or desirable.

Section 76. Stockholders’ or Members’ Approval.

 To approve a merger/consolidation plan:

o Majority of each Board of each constituent corporation.
o Affirmative vote of stockholders representing 2/3 of the outstanding capital stock or of
members.
 Notice of such meetings shall be governed by Section 49.
o Regular: 21 days prior to the regular meeting
o Special: 1 week prior to the special meeting
 Any dissenting stockholder may exercise the right of appraisal.
o Extinguished if the board abandons the plan.
 Amendment to the plan of merger/consolidation:
o Affirmative vote of Majority of each Board of each constituent corporation.
 o Affirmative vote of stockholders representing 2/3 of the outstanding capital stock or of
members.

Section 77. Articles of Merger/Consolidation.

 Articles take place of the AOI of the consolidated corporation; or amend the AOI of the surviving
corporation.
 After approval by the stockholders/members, articles of merger/consolidation shall be executed
by each constituent corporations.
 To be signed by the President or VP and certified by the Secretary or the Asst. Secretary of each.
 Setting forth:
o Plan of the merger or consolidation.
o Stock: # of outstanding shares; Nonstock: # of members.
o Number of shares/members voting for or against.
o Amounts of assets and liabilities of each as of the agreed date.
o Method to be used in the merger/consolidation of accounts.
o Provisional/pro forma values using the accounting method.
o Such other information prescribed by the Commission.

Section 78. Effectivity of Merger/Consolidation.

 The signed and certified articles of merger/consolidation shall be submitted to SEC for approval.
 Favorable recommendation of appropriate government agency shall first be obtained before
Merger/Consolidation can be effected:
o Banks, banking institutions,
o LA, Insurance Companies, Trust Companies
o Public Utilities
o Educational Institutions
o Other special corporations governed by special laws.
 If the SEC is satisfied, it shall issue a certificate approving the articles and the plan.
 If upon investigation, SEC is unsatisfied; inconsistency; contrary to law:
o Set a hearing.
o Written notice shall be given to the constituent corporations at least 2 weeks prior the
date of set hearing.
 Merger/consolidation does not take effect by mere agreement. Approval of SEC is required.

Section 79. Effects of Merger/Consolidation.

 Constituent corporations will become a single corporation in a merger, which is the surviving
corporation.
 Constituent corporations will become a new corporation, which is the consolidated corporation.
 Existence of the absorbed corporations in a merger and the constituent corporations in the
consolidation will cease to exist.
 The surviving corporation/consolidated corporation shall possess all the rights, privileges,
immunities, and powers, duties, and liabilities under the Code.
  It shall possess all the rights, privileges, immunities, and franchises of each constituent
corporation; and all real or personal property, including subscriptions, choses in action and
every interest belonging to each constituent corporation. These shall be deemed transferred to
and vested in such surviving/consolidated corporation without further act or deed.
 The liabilities and obligations of each constituent corporation will be assumed by the
surviving/consolidated corporation.

Advantages of Merger/Consolidation

1. Unlike regular transfer/acquisition, it is able to achieve a continuous flow of juridical

personalities and business of the constituent corporations. Thus, merger/consolidation is not a
violation of non-transfer clause.
2. Unlike regular transfer of assets/business, there is no gain or loss in merger/consolidation. Thus,
no taxable gains under NIRC.

APPRAISAL RIGHT

Section 80. When the Right of Appraisal May Be Exercised.

Appraisal Right – the right to withdraw from the corporation and demand payment of the fair value of
the shares after dissenting from certain corporate acts involving fundamental changes in the corporate
structure.

Who may avail?

- A prejudiced stockholder who dissented in the meeting where the proposal was approved.

Amount paid?

- FV of the shares on the date prior to the date of voting.

When available?

a. In case an amendment to the Articles of Incorporation results in:

o Changing the rights of any stockholder or class of shares [increasing/decreasing capital
stock; incurring bonded indebtedness; denial of pre-emptive right]
o Authorizing preferences in any respect superior to those of outstanding shares of any
class
o Extending or shortening of the corporate term
b. In case of SATLEMPO of all or substantially all of the corporate property and assets.
c. Merger/consolidation
d. Investment of corporate funds for any purpose other that the primary purpose

Section 81. How Right is Exercised.

 By voting against and making a written demand for the payment WITHIN 30 DAYS from the date
on which the vote was taken.
 Failure to demand = WAIVER.
 Corporation shall pay, upon surrender of certificates of stock representing stockholder’s shares,
FV of the shares held as of the day before the vote was taken.
  If the WITHDRAWING STOCKHOLDER and the CORPORATION cannot agree on the FV within 60
days from the approval of the corporate action voted against by the withdrawing stockholder,
o It shall be determined and appraised by 3 disinterested persons.
o 1 chosen by the stockholder, 1 by the corporation, and 1 by the 2 chosen.
o Findings of the majority of the appraisers shall be FINAL and SHALL BE PAID BY THE
CORPORATION WITHIN 30 DAYS.
o NO PAYMENT SHALL BE MADE = NO UNRESTRICTED EARNINGS
o Upon PAYMENT, the STOCKHOLDER SHALL TRANSFER THE SHARES TO THE CORP.

Section 82. Effect of Demand and Termination of Right.

 From the time of demand until the corporate action is abandoned, or until the payment of the
shares held by the withdrawing stockholder, ALL RIGHTS ARE SUSPENDED.
 If not paid within 30 days after the award, RIGHTS ARE RESTORED (DIVIDEND, VOTING)

Section 83. When Right to Payment Ceases.

 No demand for payment may be withdrawn without the consent of the corporation.
 If such demand was:
o Withdrawal
o Abandonment
o Disapproval
o Non-entitlement
 THE RIGHT TO BE PAID CEASES. STATUS OF THE STOCKHOLDER IS RESTORED. ALL DIVIDEND
ACCRUED SHALL BE GIVEN.

Section 84. Who Bears Cost of Appraisal.

 Generally, the corporation.

 UNLESS, the FV given by the appraisers is approximately the same as the price, the stockholder
shall bear.
 In an action to recover such fair value, all costs and expenses are borne by the corporation
unless the refusal of the stockholder to receive payment was unjustified.

Section 85. Notation on Certificates; Rights of Transferee.

 Within 10 days after the demand, the dissenting stockholder shall submit to the corporation the
certificates of stock representing his shares for the NOTATION that such shares are dissenting
shares.
 Failure to do so may terminate the rights at the option of the corporation.
 If the shares with notation are transferred and the certificates are consequently cancelled
o Transferor: rights are terminated.
o Transferee: shall have all the rights of a regular stockholder and all dividend distribution
accrued.