You are on page 1of 10

Requirements of a valid proxy? Section 58 Section 58.Proxies.

- Stockholders and members may vote in person or by proxy in all meetings of stockholders or members. Proxies shall in writing, signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time. (n) How long may a proxy exist? Maximum of 5 years Valid for the meeting in which it is intended Is proxy revocable? Generally revocable, unless it is coupled with interest Revocation A proxy, like agency in general is revocable unless coupled with an

interest and revocation need not be made by formal notice in writing. Revocation may be expressed to the proxy holder, to the election committee, by a subsequent proxy to another or by sale of the shares. Thus it may be revoke orally by conduct such that appearing and asserting the right to vote at a meeting by the registered owner of the shares revokes a proxy previously given. Must be submitted to a validation committee By-laws of non-stock corporations may deny proxy voting What is voting trust agreement? One created by an agreement between a group of stockholders of a

corporation and a trustee, - or a group of identical agreements between individual stockholders and a common trustee, - whereby it is provided that for a term of years or for a period contingent upon a certain event, or until the agreement is terminated, - control over the stock owned by such stockholders, - shall be lodged in the trustee, either with or without reservation to the owners or persons designated by them the power to direct how such control shall be issued.

and

It is also considered as a devise of binding stockholders to vote as a unit

- thus assuring a desirable stability and continuity in management in situations where it is needed. What is the effect of a voting trust agreement relative to the rights? 1. there are 3 criteria pass in the case of Lee vs CA. That the voting rights of the stock are separated from the other attributes

of ownership; 2. That the voting rights granted are intended to be irrevocable for a

definite period of time; and, 3. That the principal purpose of the grant of voting rights is to acquire

voting control of the corporation. During the duration of the trust they are irrevocable unless there is a violation either by fraud Requisites Section 59

Section 59.Voting trusts. - One or more stockholders of a stock corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at any time: Provided, That in the case of a voting trust specifically required as a condition in a loan agreement, said voting trust may be for a period exceeding five (5) years but shall automatically expire upon full payment of the loan. A voting trust agreement must be in writing and notarized, and shall specify the terms and conditions thereof. A certified copy of such agreement shall be filed with the corporation and with the Securities and Exchange Commission; otherwise, said agreement is ineffective and unenforceable. The certificate or certificates of stock covered by the voting trust agreement shall be cancelled and new ones shall be issued in the name of the trustee or trustees stating that they are issued pursuant to said agreement. In the books of the corporation, it shall be noted that the transfer in the name of the trustee or trustees is made pursuant to said voting trust agreement. The trustee or trustees shall execute and deliver to the transferors voting trust certificates, which shall be transferable in the same manner and with the same effect as certificates of stock. The voting trust agreement filed with the corporation shall be subject to examination by any stockholder of the corporation in the same manner as any other corporate book or record: Provided, That both the transferor and the trustee or trustees may exercise the right of inspection of all corporate books and records in accordance with the provisions of this Code.

Any other stockholder may transfer his shares to the same trustee or trustees upon the terms and conditions stated in the voting trust agreement, and thereupon shall be bound by all the provisions of said agreement. No voting trust agreement shall be entered into for the purpose of circumventing the law against monopolies and illegal combinations in restraint of trade or used for purposes of fraud. Unless expressly renewed, all rights granted in a voting trust agreement shall automatically expire at the end of the agreed period, and the voting trust certificates as well as the certificates of stock in the name of the trustee or trustees shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of the transferors. The voting trustee or trustees may vote by proxy unless the agreement provides otherwise. (36a) Does it need to be notarized? Yes, otherwise it is ineffective and unenforceable Only legal ownership is transferred Being still the beneficial owner they may transfer these rights Is the right granted to a voting trust agreement absolute? (to inspect) NO. The voting trust agreement filed with the corporation shall be subject to

examination by any stockholder of the corporation in the same manner as any other corporate book or record. Provided, that both the transfer and the trustee or trustees may exercise the right of inspection of all corporate books and records in accordance with the provisions of this Code. Legal title is transferred to the voting trustee May the voting trustee vote by proxy? Yes, legal owner may vote by proxy May the proxy holder vote by proxy? NO, (AGENT) an agent can have no other agent unless specifically

allowed by the principal Stockholder executing as a proxy, is he qualified to be voted as a director? Why is he qualified to act as a director if the stockholder executes as a director?

No, The beneficial owner of the shares in a voting trust is disqualified to

be a director in a voting trust whereas in a proxy, the owner of the shares may be elected as such since legal title thereof remains with him YES he remains to be the owner Is the stockholder executing in a voting trust agreement, is he qualified to act as a director? NO. ifceases to be stockholder of record, no longer the legal owner of

shares May the corporation enforce the voting trust agreements executed by its stockholders? NO. NIDC vs. AQUINO Not a privy to the contract Rights liabilities of a stockholder are there in their individual capacity-

corporate entity theory Voting trust agreements Normally executed in favor of banking and financial institutions So that they can vote a certain set of directors They will be more secured Voting pull agreement Case: Natl Investment &Dev t Corp v Aquino (1988) Batjak, a Fil-Am corp, owed money to PNB. Its oil mills were also mortgaged to other banks. They further borrowed money from NIDC, a wholly owned subsidiary of PNB, to pay off the mortgages. In return, NIDC got preferred shares, convertible into common shares. Batjak executed a 1st mortgage on all its properties to PNB in exchange for a credit facility and others. Enters into an agreement Pull all their shares to cast one vote Covered by rules governing contracts By pulling their votes they can decline the resolution passed by the board

Next, Voting Trust Agreement was executed in favor of NIDC by SHs representing 60% of Batjak, the said VTA exist only for 5 years and revocable. During this time, all dividends to be paid to SHs. Batjak became insolvent, PNB foreclosed the mortgaged properties. When Batjak failed to redeem, it transferred ownership to NIDC. Batjak later sued NIDC, asking for the turn-over of all the assets and in the alternative, asked for receivership. Issue: WhetehrBatjak has the personality to enforce the VTA executed by its SHs and whether it may compel the trustee to turn over the assets of he corp? Held: no, *Receiver is appointed if applicant has interest in property. But title of properties is now with NIDC. *Batjak did not impugn validity of the foreclosure sales. Also, no evidence that prop is in danger of loss, removal or material injury if receiver not appointed. What was assigned to NIDC was only power to vote shares of stock of Batjak. Such power includes authority to execute any agreement or document necessary to express consent or assent to any matter by SHs. Voting trust did not provide for transfer of assets. What was stipulated to be returned were only certifs of stock. Voting trust transfers only voting or other rights pertaining to shares or control over the stock.

STOCK AND STOCKHOLDERS

3 modes to become a stockholder in a corporation. 1. 2. 3. By a contract of subscription with the corporation; By purchase of treasury shares from the corporation; and, By purchase or acquisition of shares from existing stockholders. Section 60 subscription Any contract Whether existing or still to be formed

Section 60.Subscription contract. - Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase or some other contract. (n) Under the old law the 4th mode is PURCHASE Purchase Reciprocal in nature Purchaser can neither require the issuance

Xco.Inc. Authorized capital 500 500 SUBSCRIBED UNISSUED STOCKS (AS LONG AS GALING DITO) 1M

Z wants to acquire 100K Entered in June 50% shall be down payment remainder December 08 o he will not be considered a stockholder unless he has paid in full

August 08 property is ravaged by fire all are turned into shares Is Z liable to pay the balance of his acquisitions? YES, no matter how the party refer to it, it is considered subscription Once you subscribe, you become a stockholder which is entitled to all the

liabilities of a stockholder Z- subscribed to 100T/S of XCo. Amount he paid 50k Z did not pay on the date called and was declared a delinquent share Corporation paid 100T/S therefore the corporation reacquired the shares again, what are they called? Treasury shares

Y- 80T/S DECEMBER 08 40 % (AUGUST) WAS DESTROYED BY FIRE, IS HE STILL LIABLE TO PAY THE UNPAID PORTION? IT WAS AGREED THAT IT WAS A PURCHASE AND WILL BE A STOCKHOLDER ONLY IF PAID IN FULL IS HE LIABLE? NO, because that was a purchase

First example galingsa unissued stock 2nd example galling sa treasury shares hindisa unissued share NO such thing as purchase of unissued stocks A subscription contract can be conditional provided there is nothing in

the charter or statute prohibiting it and not against public order, law, etc. Must it be in writing? NO, it may be oral 5M should it be in writing to be valid and binding as a subscription? NO, statutes of frauds only applies to SALES

Case: Trillanavs Quezon Colleges Inc. Facts: y y y Crisostomo sent a letter to the Board of Trustees of Respondent. In the letter it says. Pls enter my subscription to dalawangdaan (200 shares) of your capital stock with par value of 100 each . Enclosed you will find (babayaran kung lahatpagkataposnaako ay makapagpahulingsda) y It also included their that Pesos as my initial payment and the balance payable in accordance with law and the rules and regulations of the Quezon Colleges. y y y y However, DamasaCrisostomo died And as no payment appears to have been made on the subscription. So QC Inc, filed a claim before CFI in her testate proceedings for the collection of sum of money, However, the claim was opposed by the administrator of the estate and which the case was dismissed. Issue: Is the subscription valid and enforeceable? Held: No, Because there is nothing in the record to show that Respondent accepted the terms and condition suggested by Damasa Or that if there was any acceptance the same came to her knowledge during her lifetime. Counter proposal, therefore there was a need for an acceptance Facultative because it is in his own free will, it is void. Indeed, the need for express acceptance on the respondent. What may be used as a consideration and how much should be the consideration?

Section 62 provides:

Section 62.Consideration for stocks. - Stocks shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or more of the following: 1. Actual cash paid to the corporation; 2. Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued; 3. Labor performed for or services actually rendered to the corporation; 4. Previously incurred indebtedness of the corporation; 5. Amounts transferred from unrestricted retained earnings to stated capital; and 6. Outstanding shares exchanged for stocks in the event of reclassification or conversion. Where the consideration is other than actual cash, or consists of intangible property such as patents of copyrights, the valuation thereof shall initially be determined by the incorporators or the board of directors, subject to approval by the Securities and Exchange Commission. Shares of stock shall not be issued in exchange for promissory notes or future service. The same considerations provided for in this section, insofar as they may be applicable, may be used for the issuance of bonds by the corporation. The issued price of no-par value shares may be fixed in the articles of incorporation or by the board of directors pursuant to authority conferred upon it by the articles of incorporation or the by-laws, or in the absence thereof, by the stockholders representing at least a majority of the outstanding capital stock at a meeting duly called for the purpose. (5 and 16) Amounts transferred from unrestricted retained earnings to stated capital what does it mean? Stock dividends will in effect capitalize the unrestricted retained

earnings After 5 years the founders shares may be converted into common shares or other kinds of shares May shares of stocks be issued without consideration? Why? NO, two reasons by the SC, discriminatory against other stockholders and

second unlawful, it prejudices the right of the creditors Trust Fund Doctrine

If issued without a consideration Section 65, they will be considered as watered stocks

Section 65.Liability of directors for watered stocks. - Any director or officer of a corporation consenting to the issuance of stocks for a consideration less than its paror issued value or for a consideration in any form other than cash, valued in excess of its fair value, or who, having knowledge thereof, does not forthwith express his objection in writing and file the same with the corporate secretary, shall be solidarily, liable with the stockholder concerned to the corporation and its creditors for the difference between the fair value received at the time of issuance of the stock and the par or issued value of the same. (n) Subscribers may be compelled to pay the value Issuance of a certificate of stock is another thing What are the requisites for the issuance of a valid certificate of stock? 1. It must be signed by the president or vice-president and countersigned by

the secretary or assistant secretary; 2. It must be sealed with the corporate seal; and the entire value thereof

(together with interest or expenses, if any) should have been paid. While it appears, that a subscriber to shares of stock cannot be entitled to the issuance of a certificate of stock until the full amount of his subscription together with interest and expenses (in case of delinquent shares) if any is due, has been paid, a subscriber to shares of stock, even if not yet fully paid, is entitled to exercise all the rights of a stockholder and the corresponding liability that attach thereunder. Thus, the Code provides: Section 72.Rights of unpaid shares. - Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a stockholder. (n) Is the issuance of a certificate of stock necessary to consider the subscriber a stockholder? NO, shall be considered a stockholder even without a certificate of stock Instances when he may not be able to exercise his rights as such stockholder Declared delinquent When he exercises his appraisal right Are certificate of stocks transferrable? YES Are certificate of stocks considered negotiable? Quasi-negotiable

Why are they considered quasi-negotiable when it may be transferred through endorsement and delivery?

B stole and forged the signature C is purchaser in good faith and for value will C acquire title