Capital

Capital – includes all properties and assets of the corporation that are
used for its business or operations.

Authorized Capital – is the amount fixed in the AOI to be subscribed and

paid by the stockholders of the corporation.

Subscribed Capital – is that portion of the authorized capital stock that

is covered by subscription agreements whether fully paid or not.

Paid-up Capital – is that portion of the authorized capital stock that has
been subscribed and actually paid.

Watered Stock – stocks issued for a consideration less than the par value
or issued price

Par Value - the minimum price per share fixed in the articles of
incorporation of stock corporations. The shares or series of shares
may or may not have a par value. Stocks shall not be issued for a
consideration less than the par or issued price thereof.

No-Par Value - while shares in stock corporations may be issued with

no-par value, these shares must be issued for a consideration of at
least Five pesos (P5) per share.

Issued Price – it is necessary to fix the issued price of no-par value

shares either thru (a) the AOI, (b) resolution of the Board of
Directors, or (c) resolution of majority of stockholders at meeting
duly called for the purpose. “Issued value” of shares may be higher
than the par value. A share is a property that may appreciate in
value. Hence, it may happen that the fair market value or the book
value may be greater than the par value. The Board therefore can
fix a selling/subscription price that is greater than the par value.

 corporation may increase its subscribed capital by (1) issuing the

remaining balance of the authorized capital stock or (2) by increasing
the authorized capital stock that necessarily involves additional
subscription

 when share are issued at a premium or for more than their par value,
the additional amount that is paid is treated as additional paid-in
capital (APIC)

 the issuance of shares out the unsubscribed shares of the authorized

capital stock does not need stockholder’s approval. what is necessary
is only a resolution of the Board of Directors approving the same.

 pre-incorporation subscription is irrevocable for 6 months prior to

submission of AOI to SEC

 pre-incorporation subscription is irrevocable after submission of AOI to

SEC (to prevent injustice to subscribers who already exerterd efforts
and resources to organize) and after issuance of Certificate of
Incorporation by SEC (Trust Fund Doctrine already applies)
 revocation of pre-incorporation subscription may only be under
the following cases:

a. if all other subscribers consent to the revocation before the

expiration of the 6-month period

b. upon expiration of 6-month period but before filing of AOI with

SEC, even without the consent of other subscribers or within a
longer period as may be stipulated in the subscription agreement

 Conditions for Issuance of Stocks

a. stocks shall not issued for a consideration less than the par or
issued price

b. stocks shall not be issued in exchange of promissory notes or

future services

c. where the consideration is property (whether tangble or intangible

such patents or copyrights), the valuation thereof shall initially be
determined by the stockholders or board of directors, subject to the
approval by the SEC

 Consideration for the issuance of stocks may be:

a. actual cash paid to the corporation

b. property, tangible or intangible (capable of valuation), actually
received by the corporation and necessary or convenient for its use
and lawful purposes at a fair valuation equal to the par value of the
stock
c. labor performed or services actually rendered to the corporation
d. previously incurred indebtedness of the corporation
e. amounts transferred from unrestricted earnings to stated capital
f. outstanding shares exchanged for stocks in the event of
reclassification or conversion
g. shares of stocks in another corporation
h. other generally accepted form of consideration

 Tangible or intangible property (capable of valuation) as consideration

for stocks:

a. property is actually received by the corporation

b. property is necessary or convenient for its use and lawful purposes
c. must be subject to a fair valuation equal to the par or issued value
of the stock
d. valuation shall initially be determined by the stockholders or board
of directors
e. valuation is subject to approval by SEC

 labor or services actually rendered to the corporation are acceptable

consideration for stocks

 shares of stocks in another corporation are also property, thus subject

to the rule on approval of valuation of property