‭POWERS OF A CORPORATION‬

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‭Express Powers‬‭– those expressly authorized by the‬‭RCCP and other laws, and its Articles of‬
‭Incorporation or Charter.‬
‭Implied Powers‬‭– those that can be inferred from or‬‭necessary from the exercise of the express powers.‬
‭Incidental Powers‬‭– those that are incidental to the‬‭existence of the corporation.‬

-‭ Test to determine if the power is an implied power: Whether the act in question is in direct and‬
‭immediate furtherance of the corporation’s business, fairly incident to the express powers and reasonably‬
‭necessary to their exercise (Montelibano vs. Bacolod-Murcia Milling, 115 Phil. 18 [1962])‬
‭Express Powers under the RCCP‬
‭General Powers‬‭(Sec. 35)‬
‭1. Sue and be sued in its corporate name;‬
‭UPON WHOM SERVICE OF SUMMONS IS TO BE MADE?‬
‭GR‬‭: Section 11, Rule 14, Rules of Court‬
‭(1) President;‬
‭(2) Managing Partner;‬
‭(3) The General Manager;‬
‭(4) The Corporate Secretary;‬
‭(5) The Treasurer; or‬
‭(6) The In-House Counsel‬
‭2. Right of succession;‬
‭3. Adopt and use a corporate seal;‬
‭4. Amend AOI;‬
‭5. Adopt, amend, or repeal BL;‬
‭6. For stock corporations – issue and sell stocks to subscribers and to sell treasury stocks; for‬
‭non-stock corporations – admit members;‬
‭7. Purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise‬
‭deal with real and personal property – including bonds and securities of other corporations –as the‬
‭transaction of its lawful business may reasonably and necessarily require;‬
‭8. Enter into partnership, joint venture, merger, consolidation, or any commercial agreement with‬
‭natural or juridical persons;‬
‭9. Make reasonable donations for public welfare, or for hospital,charitable, cultural, scientific,‬
‭civic, or similar purposes‬
‭➔‬ ‭Prohibition – Foreign corporations shall not give donations in aid of any political party or‬
‭candidate or for purposes of partisan political activity.‬
‭10. Establish pension, retirement, and other plans for the benefit of directors, trustees, officers,‬
‭and employees; and‬
‭11. Exercise other powers essential or necessary to carry out its purpose/s.‬

‭Specific Powers‬‭(Sec. 36 to Sec. 43)‬

‭1. Extend or Shorten Corporate Term (Sec. 36)‬
‭-‬ ‭when approved by a majority vote of the board of directors or trustees and ratified at a‬
‭meeting by the stockholders representing at least two-thirds (2/3) of the outstanding capital‬
‭stock or by at least two-thirds (2/3) of the members in case of non-stock corporations‬
‭2. Increase or decrease capital stock (Sec. 37)‬
‭-‬ ‭No corporation shall increase or decrease its capital stock or incur, create or increase any‬
‭bonded indebtedness unless approved by a majority vote of the board of directors and, at a‬
‭stockholder’s meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital‬
‭stock shall favor the increase or diminution of the capital stock, or the incurring, creating or‬
‭increasing of any bonded indebtedness.‬
‭-‬ ‭A certificate in duplicate must be signed by a majority of the directors of the corporation‬
‭and countersigned by the chairman and the secretary of the stockholders’ meeting, setting‬
‭forth:‬
‭(1) That the requirements of this section have been complied with;‬
‭(2) The amount of the increase or diminution of the capital stock;‬
 (‭ 3) If an increase of the capital stock, the amount of capital stock or number of shares of‬
‭no-par stock thereof actually subscribed, the names, nationalities and residences of the‬
‭persons subscribing, the amount of capital stock or number of no-par stock subscribed by‬
‭each, and the amount paid by each on his subscription in cash or property, or the amount‬
‭of capital stock or number of shares of no-par stock allotted to each stock-holder if such‬
‭increase is for the purpose of making effective stock dividend therefor authorized;‬
‭(4) Any bonded indebtedness to be incurred, created or increased;‬
‭(5) The actual indebtedness of the corporation on the day of the meeting;‬
‭(6) The amount of stock represented at the meeting; and‬
‭(7) The vote authorizing the increase or diminution of the capital stock, or the incurring,‬
‭creating or increasing of any bonded indebtedness.‬
‭TRUST FUND DOCTRINE‬‭- means that assets of the corporations‬‭are considered trust fund reserved for‬
‭payment of liabilities to creditors of the corporation‬
‭MODES OF DECREASING CAPITAL STOCK‬
‭Just do the reverse of the modes to Increase‬
‭1. Decrease the number of shares without decreasing the par value;‬
‭2. Decrease the par value without decreasing the number of shares; or‬
‭3. Decrease both the number of shares and the par value‬
‭3. Incur, Create or Increase Bonded Indebtedness (Sec. 37)‬
‭4. Deny pre-emptive right (Sec. 38)‬
‭-‬ ‭Pre-emptive right is the right granted by law to all existing stockholders to subscribe to all‬
‭issues or dispositions of shares of any class so as to maintain the respective proportionate‬
‭interest in the corporation, that is, their voting and dividend rights. If you are holding, for‬
‭instance, 10% of the OCS of a corporation, and the corporation issues additional 1M‬
‭shares of stocks, being a holder of 10% of the Outstanding Capital Stock, you are entitled‬
‭to subscribe to 10% of the 1M that will be issued by the corporation so that you will retain‬
‭your 10% dividend right and voting right for that matter.‬
‭-‬ ‭The Articles of Incorporation or the Amendment of the Articles may deny the stockholders‬
‭their right of Pre-Emption.‬
‭5. Sell, dispose, lease, encumber property and assets (including all or substantially all of corporate‬
‭assets)(Sec. 39)‬
‭-‬ ‭If the corporation sells disposes all or substantially all of its assets and/or properties. The‬
‭stockholders or members consent or approval is required for its validity, 2/3 of the‬
‭Outstanding Capital Stock, or 2/3 of the members, in cases of a non-stock corporation.‬
‭6. Purchase or acquire own shares (Sec. 40)‬
‭LEGITIMATE PURPOSE FOR A CORPORATION TO ACQUIRE ITS OWN SHARES‬
‭1. To eliminate fractional shares—arising out of stock dividends;‬
‭2. To collect or compromise an indebtedness to the corporation arising out of unpaid‬
‭subscription in a delinquency sale and to purchase delinquent stocks sold during that sale;‬
‭3. To pay dissenting or withdrawing stockholders entitled thereto, as provided for in Section‬
‭81;‬
‭4. To redeem redeemable shares;‬
‭5. To pay withdrawing stockholders in a close corporation, as provided for in Section 105;‬
‭6. To eliminate capital surplus;‬
‭NB‬‭: This is not exclusive because the law provides‬‭that “including but not limited to the‬
‭following”‬
‭GR‬‭: The Corporation must have Unrestricted Retained‬‭Earnings‬
‭XPN‬‭:‬
‭1. Redemption of redeemable shares, as provided for in Section 8.‬
‭2. Withdrawing stockholders in a Close Corporation; A stockholder in a close corporation‬
‭may, for any reason, withdraw therefrom and compel the corporation that he be paid the‬
‭value of his shares. Provided only that the corporation has sufficient assets to cover debts‬
‭and liabilities exclusive of capital, as provided for in Section 105.‬
‭3. In cases of Deadlocks in a Close Corporation; the remedy available is for a stockholder‬
‭to file a case in court to settle the matter in cases of deadlocks. The court, the proper‬
‭forum, may appoint a provisional director in order to break the deadlock. The court or the‬
‭provisional director may compel any stockholder to sell his shares in favor of the‬
 c‭ orporation irrespective of the existence of unrestricted retained earnings, as provided for‬
‭in Section 104.‬
‭7. Invest in another corporation, business or for any other purpose (Sec. 41)‬
‭-‬ ‭It may do so with the concurrence or vote of at least 2/3 of the Outstanding Capital Stock‬
‭or 2/3 of the Members in case of Non-Stock Corporation The approval or consent of the‬
‭stockholders will not be required for its validity if it is necessary to accomplish the primary‬
‭purpose of its organization.‬
‭8. Declare dividends (Sec. 42)‬
‭-‬ ‭available only to stock corporations‬
‭-‬ ‭must have unrestricted retained earnings‬
‭-‬ ‭Board of Directors determine the nature of the dividends to be declared whether they be in‬
‭cash, property or stock.‬
‭-‬ ‭But if the Board decides to declare or pay stock dividends the approval of at least 2/3 of the‬
‭Outstanding Capital Stock will be required for its validity. Stock dividends, if they are to be‬
‭declared, require the consent of the stockholders.‬
‭9. Enter into management contract (even if it is called a service contract, operating agreement or‬
‭otherwise) – the manager undertakes to manage or operate all or substantially all of the business‬
‭of the corporation. (Sec. 43)‬
‭The corporation may enter into a management contract by:‬
‭(1) Majority vote of the members of the Board of Directors‬
‭(2) Subject to the vote of the stockholders owning or representing a majority of the‬
‭Outstanding Capital Stock.‬
‭Higher voting percentage is required, 2/3 of the Outstanding Capital Stock is‬
‭required‬‭:‬
‭(1) When a stockholder or stockholders representing the same interest of the‬
‭managing and managed corporation owns or controls more than 1/3 of the total‬
‭outstanding stocks entitled to vote, of the managing corporation;‬
‭(2) when a majority of the Board of Directors of the managing corporation also‬
‭constitutes a majority of the members of the Board of the managed corporation‬
‭Implied Powers under the RCCP‬
‭a. To issue checks or promissory note or bill of exchange or mercantile documents‬
‭b. To establish a local post office in case of a mining company‬
‭c. To operate power plant in case of a cement factory company‬
‭d. To sell, supply or manage advertising materials in case of an advertising company‬
‭Incidental Powers under the RCCP‬
‭a. Right of succession‬
‭b. Right to have corporate name‬
‭c. Right to make by-laws for its governance‬
‭d. Right to sue and be sued‬
‭e. Right to acquire and hold properties for the purposes authorized by the charter‬

‭Ultra Vires Acts‬‭(Sec. 44)‬

‭-‬ ‭An ultra vires act is one committed outside the object for which a corporation is created as defined‬
‭by the law of its organization and therefore beyond the power conferred upon it by law Atrium‬
‭Management Corporation vs. CA, GRN 109491, February 28, 2001)‬
‭-‬ ‭Section 44: No corporation shall possess or exercise corporate powers other than those conferred‬
‭by this Code or by its articles of incorporation and except as necessary or incidental to the‬
‭exercise of the powers conferred.‬
‭-‬ ‭Ultra vires act vs. illegal acts‬‭: Ultra vires act‬‭– voidable; may be enforced by performance,‬
‭ratification, or estoppel. Illegal acts – void and cannot be validated. (University of Mindanao vs.‬
‭BSP, January 11, 2016)‬

‭Status of Ultra Vires Acts by the Corporation‬

‭ . Ultra vires acts which are illegal per se – Null and void‬
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‭2. Ultra vires acts for failure to comply with voting formality required by law – Null and void but the‬
‭declaration of nullity may be barred by estoppel‬
 ‭ . Ultra vires acts for being outside the primary and secondary purposes of the corporation –‬
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‭Voidable on the part of the other party‬

‭ ffects:‬
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‭1. Executed contract – courts will not set aside or interfered with such contracts.‬
‭2. Executory contracts – no enforcement even at the suit of either party (void and unenforceable)‬
‭3. Part executed and part executory – principle against unjust enrichment shall apply.‬

‭-‬ I‭f certain procedures or formalities are prescribed in the AOI or BL and the same are not complied‬
‭with, the resulting act is not ultra vires act of the corporation.‬
‭-‬ ‭Acts not within the powers of the particular officer is not an ultra vires act of the corporation but is‬
‭sometimes referred to as an ultra vires act of the officer. The law on agency applies.‬

‭ xercise of Powers‬
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‭The BOD/BOT exercises the power of the corporation. (Sec. 22)‬

‭-‬ ‭ he stockholders/members cannot overrule the directors in the latter’s exercise of the corporate‬
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‭powers.‬
‭-‬ ‭The powers are not exercised by the Board directly if:‬
‭1. There is a management contract (Sec. 43); and‬
‭2. The powers of the Board are delegated by majority vote (of the Board) to an executive committee.‬
‭(Sec. 34)‬
‭-‬ ‭Under Section 34, the executive committee may not act on the following:‬
‭1. Approval of action requiring concurrence of stockholders;‬
‭2. Filling of vacancies in the board;‬
‭3. Adoption, amendment or repeal of BL‬
‭4. Amendment or repeal of board resolutions which by its express terms cannot be amended or‬
‭repealed; and‬
‭5. Distribution of cash dividends to stockholders.‬

‭➔‬ T ‭ he executive committee is composed of at least 3 directors and may be created by the Board if‬
‭the BL so provide (Sec. 34).‬
‭➔‬ ‭The Board may not by itself create the executive committee if there is no provision in the BL.‬
‭➔‬ ‭The Board, as the governing body, may create special committees of temporary or permanent‬
‭nature and determine the members’ term, composition, compensation, powers and responsibilities‬
‭(Sec. 34)‬

-‭ Corporate officers like the President can also bind the corporation. The authority of such individuals to‬
‭bind the corporation is generally derived from:‬
‭i. Law;‬
‭ii. Corporate by-laws; or‬
‭iii. Authorization from the Board, either expressly or impliedly by habit, custom or acquiescence in‬
‭the general course of business (Inter-Asia Investment Industries, Inc. vs. CA, GRN 125778, June‬
‭10, 2003)‬

‭-‬ ‭ corporate officer or agent may represent and bind the corporation in transactions with third‬
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‭persons to the extent that the authority to do so has been conferred upon him, and these include:‬
‭i. Powers that, in the usual course of the particular business, are incidental to those‬
‭expressly provided;‬
‭ii. Powers that may be implied from the powers intentionally conferred;‬
‭iii. Powers added by custom and usage, as usually pertaining to the particular officer or‬
‭agent; and‬
‭iv. Such apparent powers as the corporation has caused the person dealing with the officer‬
‭or agent to believe that it has conferred (Inter-Asia Investment Industries, Inc. vs. CA, ibid.)‬

-‭ An officer may also bind the corporation if he has apparent authority. Apparent authority is derived not‬
‭merely from practice. Its existence may be ascertained through:‬
 ‭ . The general manner in which the corporation holds out an officer or agent as having the power‬
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‭to act; or‬
‭2. The acquiescence in his acts of a particular nature, with actual or constructive knowledge‬
‭thereof, within or beyond the scope of his ordinary powers.‬

‭➔‬ I‭t requires presentation of evidence of similar act(s) executed either in its favor or in favor of other‬
‭parties. It is not the quantity of similar acts which establishes apparent authority, but the vesting of‬
‭a corporate officer with power to bind the corporation (Georg vs. Holy Trinity College, Inc., July 20,‬
‭2016)‬

‭➢‬ I‭n what instances is concurrence (or ratification) of the stockholders/members necessary for the‬
‭exercise of the powers of the corporation?‬

-‭ Approval by majority of the Board and concurrence (or ratification) of the stockholders‬
‭representing at least 2/3 of the outstanding capital (or 2/3 of the members whenever applicable) is‬
‭necessary in the exercise of the following powers:‬

‭ . To extend or shorten corporate term (Sec. 36)‬

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‭2. To increase/decrease corporate stock (Sec. 37)‬
‭3. To incur, create or increase bonded indebtedness (Sec. 37)‬
‭4. To deny pre-emptive right after incorporation – since the denial is required to be in the AOI or‬
‭any amendment thereto, and approval of amendments to the AOI requires the vote or written‬
‭assent of stockholders representing 2/3 of the outstanding capital stock or 2/3 of the members‬
‭(Secs. 15 and 38);‬
‭5. To sell, dispose, lease encumber all or substantially all of corporate assets (Sec. 39)‬
‭6. To invest in another corporation, business other than the primary purpose like the secondary‬
‭purpose (Sec. 41, RCCP)‬
‭7. To declare stock dividends (Sec. 42); and‬
‭8. To enter into management contract (Sec. 43), if:‬
‭i. A stockholder or stockholders representing the same interest of both the managing and‬
‭the managed corporations own or control more than 1/3 of the total outstanding capital‬
‭entitled to vote of the managing corporation; or‬
‭ii. A majority of the members of the board or directors of the managing corporation also‬
‭constitute a majority of the members of the board of the managed corporation; The 2/3‬
‭vote of the total outstanding stock or of the members applies to the managed corporation.‬
‭(Sec. 43)‬
‭9. To amend the AOI (Sec. 15)‬
‭10. Voluntary dissolution where creditors are affected (Sec. 135)‬

-‭ Approval at a meeting duly called for the purpose by the stockholders representing majority of the‬
‭outstanding capital, or majority of the members, is necessary, together with Board approval, in the‬
‭following instances:‬

‭ . To enter into a management contract under circumstances not covered by either of the two instances‬
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‭stated above (#8 (i) and (ii))‬
‭➔‬ ‭The majority vote of the outstanding capital or of the members is required for both the‬
‭managed and managing corporation (Sec. 43)‬
‭2. To adopt, amend or repeal the BL (Sec. 46 and 48)‬
‭3. Voluntary dissolution where no creditor is affected (Sec. 134)‬
‭- Without Board resolution, the stockholders/members may by:‬
‭1. 2/3 of outstanding capital or of the members – Delegate to the Board the power to‬
‭amend the BL (Sec. 48)‬
‭2. Majority of outstanding capital or of the members – Revoke the power of the Board to‬
‭amend the BL, which was previously delegated (Sec. 47)‬

‭MEETINGS‬
‭ ection 49. Kinds of meetings. – Meetings of directors, trustees, stockholders, or members may be‬
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‭regular or special. (n)‬

‭ wo Types of meetings:‬
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‭1. Board of Directors or Trustees’ Meeting‬
‭2. Stockholders’ Meeting‬

(‭ Section 50) Regular and special meetings of stockholders or members.‬

‭Regular meetings‬‭of stockholders or members shall‬‭be held annually on a date fixed in the by-laws, or if‬
‭not so fixed, on any date in April of every year as determined by the board of directors or trustees:‬
‭Provided, That written notice of regular meetings shall be sent to all stockholders or members of record at‬
‭least two (2) weeks prior to the meeting, unless a different period is required by the by-laws.‬

‭ pecial meetings‬‭of stockholders or members shall‬‭be held at any time deemed necessary or as‬
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‭provided in the by-laws: Provided, however, That at least one (1) week written notice shall be sent to all‬
‭stockholders or members, unless otherwise provided in the by-laws‬

‭Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member.‬

‭ henever, for any cause, there is no person authorized to call a meeting, the Securities and Exchange‬
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‭Commission, upon petition of a stockholder or member on a showing of good cause therefor, may issue‬
‭an order to the petitioning stockholder or member directing him to call a meeting of the corporation by‬
‭giving proper notice required by this Code or by the by-laws. The petitioning stockholder or member shall‬
‭preside thereat until at least a majority of the stockholders or members present have chosen one of their‬
‭number as presiding officer. (24, 26)‬

‭ EQUISITES FOR A VALID MEETING‬

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‭1. Insofar as stockholders’ or members’ meetings are concerned, under Section 50, it must be held on the‬
‭date fixed in the ByLaws or in accordance with law;‬
‭If there is no date fixed in the by-laws it shall be on any date of April as may be determined by the‬
‭Board of Directors.‬
‭2. Prior Notice must be given;‬
‭In stockholders’ meetings, the requirement is that, notice must be sent two weeks before the‬
‭annual or regular meeting;‬
‭If it is a special meeting one week before the meeting;‬
‭NB‬‭: The two weeks or one week requirement of sending‬‭out notices may be shortened or extended‬
‭validly by a provision in the Articles of Incorporation or By-laws;‬

‭3. It must be held at the Proper Place‬

‭ ection 51.‬‭Place and time of meetings of stockholders‬‭of members‬‭. – Stockholder’s or member’s‬

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‭meetings, whether regular or special, shall be held in the city or municipality where the principal office of‬
‭the corporation is located, and if practicable in the principal office of the corporation: Provided, That Metro‬
‭Manila shall, for purposes of this section, be considered a city or municipality.‬

‭Notice of meetings shall be in writing, and the time and place thereof stated therein.‬

‭ ll proceedings had and any business transacted at any meeting of the stockholders or members, if within‬
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‭the powers or authority of the corporation, shall be valid even if the meeting be improperly held or called,‬
‭provided all the stockholders or members of the corporation are present or duly represented at the‬
‭meeting. (24 and 25)‬

‭ ection 52.‬‭Quorum in meetings‬‭. – Unless otherwise‬‭provided for in this Code or in the by-laws, a‬
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‭quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a‬
‭majority of the members in the case of non-stock corporations.‬
‭ R‬‭: The stockholders owning or representing at least a majority of the Outstanding Capital Stock would‬
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‭constitute a quorum;‬

‭ PN‬‭: If the voting requirement would be more than‬‭a majority necessarily, the quorum requirement must‬
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‭also be at least equal to the voting requirement imposed by the law The‬

‭ OTING requirement would VARY.‬

V
‭2/3 in some instances and majority in other instances.‬

‭ ection 6 provides that non-voting shares are not included in determining the voting requirement imposed‬
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‭by the Code, unless:‬

‭ B: Five Essential requisites for a valid Meeting‬

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‭1. It must be held on the date fixed in the bylaws or in accordance with law;‬
‭2. Prior notice must be given;‬
‭3. It must be held at the proper venue;‬
‭4. It must be called by the proper person/officer; and‬
‭5. The quorum and voting requirements must be complied with.‬

‭Section 53.‬‭Regular and special meetings of directors‬‭or trustees‬‭. –‬

‭ WO TYPES OF DIRECTORS MEETINGS‬

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‭Regular‬‭meetings of the board of directors or trustees‬‭of every corporation shall be held monthly, unless‬
‭the by-laws provide otherwise.‬

‭ pecial‬‭meetings of the board of directors or trustees‬‭may be held at any time upon the call of the‬
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‭president or as provided in the by-laws.‬

‭ eetings of directors or trustees of corporations may be held anywhere in or outside of the Philippines,‬
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‭unless the by-laws provide otherwise. Notice of regular or special meetings stating the date, time and‬
‭place of the meeting must be sent to every director or trustee at least one (1) day prior to the scheduled‬
‭meeting, unless otherwise provided by the by-laws. A director or trustee may waive this requirement,‬
‭either expressly or impliedly.‬

‭ R: Anywhere within or without the Philippines‬

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‭XPN: Unless otherwise provided for in the bylaws‬

‭ UORUM AND VOTING REQUIREMENT IN DIRECTORS’ MEETINGS‬

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‭Majority of their number as fixed in the articles of incorporation would constitute a Quorum. Majority of‬
‭those present at which there is a quorum would constitute Voting Requirement‬

‭ AY THE VOTE OF 3 MEMBERS OF A 7- MAN GOVERNING BOARD PASS A VALID CORPORATE‬

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‭ACT OR TRANSACTION?‬
‭GR‬‭: Yes. Because the voting requirement is majority‬‭of those present at which there is a quorum.‬‭XPN‬‭:‬
‭(1) Election of corporate officers because the law requires a majority vote of the entire number of the‬
‭board.‬
‭(2) Unless the Articles of Incorporation or ByLaws provide for a higher quorum or voting requirement.‬

‭ irectors are elected because of their business acumen or their expertise in the day-to-day management‬
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‭of the corporate affairs‬

‭ HOULD THEY BE PHYSICALLY PRESENT DURING DISCUSSIONS OF MATTERS THAT IS‬

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‭BROUGHT BEFORE THEM?‬
‭No. Because of the E-Commerce Law, Directors can meet via teleconference or video conference.‬

‭MAY THE DIRECTORS DURING DIRECTORS’ MEETING VOTE BY PROXY?‬

‭No. Sec. 25 is very clear and specific, Directors cannot vote by proxy in directors’ meetings.‬

‭THE AGENDA IN THE STOCKHOLDERS’ MEETING IS ELECTION‬‭OF DIRECTORS. CAN HE VOTE‬

‭ Y PROXY?‬
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‭Yes, because it is a stockholders’ meeting. What Sec. 25 is saying is that they cannot vote by proxy in‬
‭Directors’ meetings. So if they are acting as ordinary stockholders, then they can vote by proxy‬

‭ HAT IS THE EFFECT OF DIRECTORS’ MEETING IF IT IS IMPROPERLY HELD OR CALLED?‬

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‭GR‬‭: They are without any force and effect.‬
‭XPN‬‭: They may be ratified expressly or impliedly,‬‭or even by estoppel.‬
‭Express, if there is a subsequent formal meeting of the board ratifying the act or contract. Implied, from‬
‭the actuations of the responsible corporate officers/directors‬

‭ ection 54.‬‭Who shall preside at meetings‬

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‭Meetings are to be called by the President or the Secretary, on orders of the President, unless the‬
‭By-laws provide for a different person.‬

‭ ECTION 54.‬‭Right to Vote of Secured Creditors and‬‭Administrators‬‭. — In case a stockholder grants‬

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‭security interest in his or her shares in stock corporations, the stockholder-grantor shall have the right to‬
‭attend and vote at meetings of stockholders, unless the secured creditor is expressly given by the‬
‭stockholder-grantor such right in writing which is recorded in the appropriate corporate books.‬
‭Executors, administrators, receivers, and other legal representatives duly appointed by the court‬
‭may attend and vote in behalf of the stockholders or members without need of any written proxy.‬
‭SECTION 55.‬‭Voting in Case of Joint Ownership of Stock‬‭. — The consent of all the co-owners shall‬
‭be necessary in voting shares of stock owned jointly by two (2) or more persons, unless there is a written‬
‭proxy, signed by all the co-owners, authorizing one (1) or some of them or any other person to vote such‬
‭share or shares: Provided , That when the shares are owned in an "and/or" capacity by the holders‬
‭thereof, any one of the joint owners can vote said shares or appoint a proxy therefor.‬

‭ ECTION 56.‬‭Voting Right for Treasury Shares‬‭. — Treasury‬‭shares shall have no voting right as long‬
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‭as such shares remain in the Treasury.‬

‭ ECTION 57.‬‭Manner of Voting; Proxies‬‭. — Stockholders‬‭and members may vote in person or by‬
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‭proxy in all meetings of stockholders or members.‬
‭When so authorized in the bylaws or by a majority of the board of directors, the stockholders or‬
‭members of corporations may also vote through remote communication or in absentia: Provided , That the‬
‭votes are received before the corporation finishes the tally of votes.‬
‭A stockholder or member who participates through remote communication or in absentia shall be‬
‭deemed present for purposes of quorum.‬
‭The corporation shall establish the appropriate requirements and procedures for voting through‬
‭remote communication and in absentia, taking into account the company's scale, number of shareholders‬
‭or members, structure and other factors consistent with the basic right of corporate suffrage.‬
‭Proxies shall be in writing, signed and filed, by the stockholder or member, in any form authorized‬
‭in the bylaws and received by the corporate secretary within a reasonable time before the scheduled‬
‭meeting. Unless otherwise provided in the proxy form, 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.‬

‭ ECTION 58.‬‭Voting Trusts‬‭. — One or more stockholders‬‭of a stock corporation may create a voting‬
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‭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 Commission;‬
‭otherwise, the 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. The books of the corporation shall‬
s‭ tate that the transfer in the name of the trustee or trustees is made pursuant to the 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 trustor 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 the 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 purposes of circumventing the laws against‬
‭anti-competitive agreements, abuse of dominant position, anti-competitive mergers and acquisitions,‬
‭violation of nationality and capital requirements, or for the perpetuation of fraud.‬
‭Unless expressly renewed, all rights granted in a voting trust agreement shall automatically expire‬
‭at the end of the agreed period. 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 trustors.‬
‭The voting trustee or trustees may vote by proxy or in any manner authorized under the bylaws‬
‭unless the agreement provides otherwise.‬

‭STOCKS AND STOCKHOLDERS‬

‭ person can be a stockholder, whether natural or juridical, only in 3 ways:‬
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‭1. By a contract of subscription;‬
‭2. By acquisition or purchase of shares from existing stockholders;‬
‭3. By purchase or acquisition of treasury shares‬

‭ ection 60.‬‭Subscription contract‬

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‭A contract for the acquisition of shares of stocks of an existing corporation or a corporation still to be‬
‭formed and the agreement to pay the same. Any contract for the acquisition of unissued stocks in an‬
‭existing corporation or a corporation still to be formed, is deemed a Subscription Contract, no matter how‬
‭the parties will refer to it.‬

‭ he unambiguous interpretation is that the person acquiring the unissued stock of a corporation‬
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‭immediately becomes a stockholder from the effectivity of the contract and acquires all the rights and the‬
‭corresponding liability to pay the full value of the shares. The unpaid portion of the subscription will‬
‭become a debt owing to the corporation and just like any other indebtedness, he is bound to pay the‬
‭same.‬

‭ ECTION 61.‬‭Pre-incorporation Subscription‬‭. — A subscription‬‭of shares in a corporation still to be‬

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‭formed shall be irrevocable for a period of at least six (6) months from the date of subscription, unless all‬
‭of the other subscribers consent to the revocation, or the corporation fails to incorporate within the same‬
‭period or within a longer period stipulated in the contract of subscription. No pre-incorporation subscription‬
‭may be revoked after the articles of incorporation is submitted to the Commission.‬

‭ ection 62.‬‭Consideration for stocks‬‭. – Stocks shall‬‭not be issued for a consideration less than the par‬
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‭or issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or‬
‭more of the following:‬

(‭ a) Actual cash paid to the corporation;‬

‭(b) 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;‬
‭(c) Labor performed for or services actually rendered to the corporation;‬
‭(d) Previously incurred indebtedness of the corporation;‬
‭(e) Amounts transferred from unrestricted retained earnings to stated capital;‬
‭(f) Outstanding shares exchanged for stocks in the event of reclassification or conversion;‬
‭(g) Shares of stock in another corporation; and/or‬
‭(h) Other generally accepted form of consideration.‬
‭Where the consideration is other than actual cash, or consists of intangible property such as‬
‭patents or copyrights, the valuation thereof shall initially be determined by the stockholders or the board of‬
‭directors, subject to the approval of the Commission.‬

‭ hares of stock shall not be issued in exchange for promissory notes or future service.‬
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‭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)‬

‭Shares of stocks cannot be issued for a consideration less than its par or issued value. If they are‬
i‭ssued below the par/issued value, they are considered as “watered stocks”.‬‭Watered stock‬‭are shares of‬
‭stocks issued by the corporation as fully paid up when in fact, the full value thereof has not been paid or‬
‭promised to be paid.‬

‭ ection 63.‬‭Certificate of stock and transfer of shares‬‭.‬‭– The capital stock of stock corporations shall‬
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‭be divided into shares for which certificates signed by the president or vice president, countersigned by‬
‭the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in‬
‭accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by‬
‭delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person‬
‭legally authorized to make the transfer. No transfer, however, shall be valid, except as between the‬
‭parties, until the transfer is recorded in the books of the corporation showing the names of the parties to‬
‭the transaction, the date of the transfer, the number of the certificate or certificates and the number of‬
‭shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be‬
‭transferable in the books of the corporation‬

‭ tock certificates may be transferred by the Delivery of the stock certificate Duly Endorsed by the‬
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‭owner or his attorney-in-fact.‬
‭No transfer, however, shall be valid except as between the parties, until the transfer is recorded in‬
‭the books of the corporation.‬
‭No shares of stocks against which the corporation holds any unpaid claims shall be transferrable‬
‭in the books of the corporation.‬
‭This word Unpaid Claims means, unpaid portion of the subscription of the particular stockholder‬
‭concerned.‬
‭It does not include any other kind of indebtedness which the shareholder may have that is due to‬
‭the corporation.‬

‭ ertificates of stocks cannot be issued until:‬

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‭The full amount of the subscription together with the interest and expenses has been paid. No certificate‬
‭can thus be issued to a subscriber of shares of stocks to cover what he may have already‬
‭correspondingly paid for.‬

‭GR‬‭: The mode and manner of transferring shares as‬‭provided for by law must be complied with.‬

‭Endorsement alone, without delivery, of the certificate of stock is not sufficient to effect a valid‬
‭transfer. (Embassy farms vs. CA)‬
‭On the other hand, delivery alone (without endorsement is not also a valid transfer of shares of‬
‭stocks. (Razon v. IAC)‬
‭NB‬‭: Section 63 uses the word may be transferred.‬

‭ PN‬‭:‬
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‭(1) It was ruled that a duly notarized deed is also an effective mode of transferring shares (Rural Bank v.‬
‭Salinas)‬
‭ PN to (1)‬‭: Where a certificate of stock has already been issued by the corporation, a mere notarized‬
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‭deed will not be sufficient for a valid transfer of shares of stocks. It must also be coupled with the delivery‬
‭of the endorsed stock certificate to the transferee. (Rural Bank of Lipa vs. CA)‬

‭ ationale‬‭: It is necessary to avoid fraudulent and‬‭fictitious transfers. For what would prevent a scrupulous‬
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‭businessman or stockholder to transfer his shares by a notarized deed and then subsequently selling his‬
‭shares by endorsing and delivering the same to the transferee? That would result to a Double Sale.‬
‭While it may be transferred by endorsement coupled with the delivery of stock certificate, it cannot‬
‭be by a mere notarized deed without the certificate being delivered and endorsed to the transferee, if the‬
‭certificate of stock has already been issued by the corporation.‬

‭(2) The transferor is in Estoppel.‬

‭In the case of Tan v. SEC, the transferee is the brother of the transferor and the transferee already‬
‭exercise his rights as a stockholder and was in fact elected as a member of the Board of Directors at a‬
‭point in time when the transferor was still the President of the corporation. The transferor in this case was‬
‭rightfully considered as in Estoppel. The Supreme Court held that Endorsement or Delivery is not‬
‭essential, where the person sought to be considered as a stockholder is an officer of the corporation and‬
‭has custody of the stock and transfer.‬

‭ UMMARY:‬
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‭GR‬‭: The basic rule is Endorsement and Delivery of‬‭the stock certificate.‬
‭XPN‬‭:‬
‭(1) It may be effected by a mere notarized deed, if there is no stock certificate issued yet;‬
‭(2) The transferor is considered as in Estoppel.‬

‭ PN to the XPN‬‭: (1) If a stock certificate has already‬‭been issued, then it cannot be effected by a mere‬
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‭notarized deed. It must still be coupled with the Delivery of the Endorsed Stock Certificate‬

‭CERTIFICATES OF STOCK ARE NON-NEGOTIABLE INSTRUMENTS‬

‭-‬ ‭they are merely quasi-negotiable therefore, they are nonnegotiable in the sense that the transferee‬
‭takes it without prejudice to all the rights and defenses which the true or lawful owner may have as‬
‭may be obtaining under a particular set of facts or circumstances, subject only to the rules‬
‭governing estoppel.‬

I‭ssuance of Stock Certificates‬‭. — No certificate‬‭of stock shall be issued to a subscriber until the full‬
‭amount of the subscription together with interest and expenses (in case of delinquent shares), if any is‬
‭due, has been paid.‬

‭ ECTION 64.‬‭Liability of Directors for Watered Stocks‬‭. — A director or officer of a corporation who:‬
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‭(a) consents to the issuance of stocks for a consideration less than its par or issued value;‬
‭(b) consents to the issuance of stocks for a consideration other than cash, valued in excess of its fair‬
‭value; or‬
‭(c) having knowledge of the insufficient consideration, does not file a written objection with the corporate‬
‭secretary,‬
‭Shall be‬‭liable‬‭to the corporation or its creditors,‬‭solidarily‬‭with the stockholder concerned for the‬
‭difference between the value received at the time of issuance of the stock and the par or issued value of‬
‭the same.‬

‭ ECTION 65.‬‭Interest on Unpaid Subscriptions‬‭. — Subscribers‬‭to stocks shall be liable to the‬

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‭corporation for interest on all unpaid subscriptions from the date of subscription, if so required by and at‬
‭the rate of interest fixed in the subscription contract. If no rate of interest is fixed in the subscription‬
‭contract, the prevailing legal rate shall apply.‬

‭ ECTION 67.‬‭Payment of Balance of Subscription‬‭. —‬‭Subject to the provisions of the subscription‬

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‭contract, the board of directors may, at any time, declare due and payable to the corporation unpaid‬
‭subscriptions and may collect the same or such percentage thereof, in either case, with accrued interest,‬
‭if any, as it may deem necessary.‬
 ‭Payment of any unpaid subscription or any percentage thereof, together with the interest accrued,‬
i‭f any, shall be made on the date specified in the contract of subscription or on the date stated in the call‬
‭made by the board. Failure to pay on such date shall render the entire balance due and payable and shall‬
‭make the stockholder liable for interest at the legal rate on such balance, unless a different rate of interest‬
‭is provided in the by-laws, computed from such date until full payment. If within thirty (30) days from the‬
‭said date no payment is made, all stocks covered by said subscription shall thereupon become delinquent‬
‭and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise.‬

‭ ection 68.‬‭Delinquency sale‬‭. – The board of directors‬‭may, by resolution, order the sale of delinquent‬
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‭stock and shall specifically state the amount due on each subscription plus all accrued interest, and the‬
‭date, time and place of the sale which shall not be less than thirty (30) days nor more than sixty (60) days‬
‭from the date the stocks become delinquent.‬
‭Notice of said sale, with a copy of the resolution, shall be sent to every delinquent stockholder‬
‭either personally or by registered mail. The same shall furthermore be published once a week for two (2)‬
‭consecutive weeks in a newspaper of general circulation in the province or city where the principal office‬
‭of the corporation is located.‬
‭Unless the delinquent stockholder pays to the corporation, on or before the date specified for the‬
‭sale of the delinquent stock, the balance due on his subscription, plus accrued interest, costs of‬
‭advertisement and expenses of sale, or unless the board of directors otherwise orders, said delinquent‬
‭stock shall be sold at public auction to such bidder who shall offer to pay the full amount of the balance on‬
‭the subscription together with accrued interest, costs of advertisement and expenses of sale, for the‬
‭smallest number of shares or fraction of a share. The stock so purchased shall be transferred to such‬
‭purchaser in the books of the corporation and a certificate for such stock shall be issued in his favor. The‬
‭remaining shares, if any, shall be credited in favor of the delinquent stockholder who shall likewise be‬
‭entitled to the issuance of a certificate of stock covering such shares.‬
‭Should there be no bidder at the public auction who offers to pay the full amount of the balance on‬
‭the subscription together with accrued interest, costs of advertisement and expenses of sale, for the‬
‭smallest number of shares or fraction of a share, the corporation may, subject to the provisions of this‬
‭Code, bid for the same, and the total amount due shall be credited as paid in full in the books of the‬
‭corporation. Title to all the shares of stock covered by the subscription shall be vested in the corporation‬
‭as treasury shares and may be disposed of by said corporation in accordance with the provisions of this‬
‭Code.‬

‭ ection 69.‬‭When sale may be questioned‬‭. – No action‬‭to recover delinquent stock sold can be‬
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‭sustained upon the ground of irregularity or defect in the notice of sale, or in the sale itself of the‬
‭delinquent stock, unless the party seeking to maintain such action first pays or tenders to the party‬
‭holding the stock the sum for which the same was sold, with interest from the date of sale at the legal‬
‭rate; and no such action shall be maintained unless it is commenced by the filing of a complaint within six‬
‭(6) months from the date of sale. (47a)‬

‭ ection 70.‬‭Court action to recover unpaid subscription‬‭.‬‭– Nothing in this Code shall prevent the‬
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‭corporation from collecting by action in a court of proper jurisdiction the amount due on any unpaid‬
‭subscription, with accrued interest, costs and expenses. (49a)‬

‭ R‬‭: Unpaid portion of subscriptions of the shareholders‬‭will never become due and demandable.‬
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‭XPN‬‭:‬
‭(1) A call is made by the board of directors for the payment of the unpaid portion or any part thereof.‬
‭(2) The contract stipulates the date or dates when they will respectively fall due.‬

‭If a call is made specifying the date or dates when the shareholders or subscribers should pay‬
t‭heir unpaid subscription and the stockholder concerned did not pay on the date specified, the shares will‬
‭thereby become deliquent and will subject the shares to a delinquency sale. The shares will become‬
‭subjected to an auction sale subject, of course, to:‬
‭Notice and Publication, not earlier than 30 days but not more than 60 days from the date of‬
‭delinquency.‬
 ‭It will be sold to the bidder who tenders or offers to pay the full amount of the balance of the‬
‭subscription or inclusive of interest and/or cost and expenses, if any, for the least number of shares.‬
‭The winning bidder in this particular case is the bidder who tenders to pay the balance of the‬
‭unpaid portion of the subscription of the stockholder‬
‭NB‬‭: if there is no bidder, the corporation may bid‬‭subject to the provisions of this Code‬
‭: as a rule, a corporation cannot generally reacquire its own shares if it has no Unrestricted Retained‬
‭Earnings. The corporation cannot bid. It must have unrestricted retained earnings as a General Rule.‬
‭: NO UNRESTRICTED RETAINED EARNINGS = go for a Direct Action in Court.‬

‭ EQUISITES TO ASSAIL A DELIQUENCY SALE‬

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‭(1) He must tender payment of the acquisition cost to the winning bidder; and‬
‭(2) He must institute the claim or complaint within six months from the date of the sale‬
‭Absence of any one of them, he cannot question the validity of the sale of his shares at public‬
‭auction even if it was irregularly or illegally bidded out.‬

‭ ationale of the 6-month period‬‭: There may be an instance‬‭that a certain person is interested because‬
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‭if the corporation can raise money, he knows that it will be back in its two feet.‬

‭ HO IS THE WINNING BIDDER IN A DELINQUENCY SALE?‬

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‭The bidder who tenders to pay the full amount of the delinquency plus cost and expenses, if any, for the‬
‭least number of shares‬

‭ o highest bidder in delinquency sale, the winning bidder is the lowest bidder from the wordings of the‬
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‭statute, that is.‬

‭ ection 71.‬‭Effect of delinquency.‬‭– No delinquent‬‭stock shall be voted for or be entitled to vote or to‬
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‭representation at any stockholder’s meeting, nor shall the holder thereof be entitled to any of the rights of‬
‭a stockholder except the right to dividends in accordance with the provisions of this Code, until and unless‬
‭he pays the amount due on his subscription with accrued interest, and the costs and expenses of‬
‭advertisement, if any‬

‭ HAT HAPPENS IF A’S SHARES HAS BEEN DECLARED DELINQUENT? WHAT IS THE EFFECT OF‬
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‭DELINQUENT SHARES VIS A VIS THE RIGHTS OF THE DELINQUENT STOCKHOLDER?‬
‭He loses his right to vote and be voted upon and is not entitled to any of the rights of a stockholder,‬
‭except the right to receive dividends in accordance with Section 43.‬

‭ ection 72.‬‭Rights of unpaid shares‬‭. – Holders of‬‭subscribed shares not fully paid which are not‬
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‭delinquent shall have all the rights of a stockholder. (n)‬

‭ ECTION 73.‬‭Lost or Destroyed Certificates‬‭. — The‬‭following procedure shall be followed by a‬

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‭corporation in issuing new certificates of stock in lieu of those which have been lost, stolen or destroyed:‬

(‭ a) The registered owner of a certificate of stock in a corporation or such person's legal‬

‭representative shall file with the corporation an affidavit in triplicate setting forth, if possible, the‬
‭circumstances as to how the certificate was lost, stolen or destroyed, the number of shares represented‬
‭by such certificate, the serial number of the certificate and the name of the corporation which issued the‬
‭same. The owner of such certificate of stock shall also submit such other information and evidence as‬
‭may be deemed necessary; and‬
‭(b) After verifying the affidavit and other information and evidence with the books of the‬
‭corporation, the corporation shall publish a notice in a newspaper of general circulation in the place where‬
‭the corporation has its principal office, once a week for three (3) consecutive weeks at the expense of the‬
‭registered owner of the certificate of stock which has been lost, stolen or destroyed. The notice shall state‬
‭the name of the corporation, the name of the registered owner, the serial number of the certificate, the‬
‭number of shares represented by such certificate, and shall state that after the expiration of one (1) year‬
‭from the date of the last publication, if no contest has been presented to the corporation regarding the‬
‭certificate of stock, the right to make such contest shall be barred and the corporation shall cancel the‬
‭lost, destroyed or stolen certificate of stock in its books. In lieu thereof, the corporation shall issue a new‬
c‭ ertificate of stock, unless the registered owner files a bond or other security as may be required, effective‬
‭for a period of one (1) year, for such amount and in such form and with such sureties as may be‬
‭satisfactory to the board of directors, in which case a new certificate may be issued even before the‬
‭expiration of the one (1) year period provided herein. If a contest has been presented to the corporation or‬
‭if an action is pending in court regarding the ownership of the certificate of stock which has been lost,‬
‭stolen or destroyed, the issuance of the new certificate of stock in lieu thereof shall be suspended until the‬
‭court renders a final decision regarding the ownership of the certificate of stock which has been lost,‬
‭stolen or destroyed.‬
‭Except in case of fraud, bad faith, or negligence on the part of the corporation and its officers, no‬
‭action may be brought against any corporation which shall have issued certificate of stock in lieu of those‬
‭lost, stolen or destroyed pursuant to the procedure above-described.‬

‭MAY IT BE ISSUED EARLIER THAN 1 YEAR?‬

‭Yes. If the owner files a bond satisfactory to the Board of Directors.‬

‭CORPORATE BOOKS AND RECORDS‬

‭ ection 74.‬‭Books to be kept; stock transfer agent‬‭.‬‭– Every corporation shall keep and carefully‬
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‭preserve at its principal office a record of all business transactions and minutes of all meetings of‬
‭stockholders or members, or of the board of directors or trustees, in which shall be set forth in detail the‬
‭time and place of holding the meeting, how authorized, the notice given, whether the meeting was regular‬
‭or special, if special its object, those present and absent, and every act done or ordered done at the‬
‭meeting. Upon the demand of any director, trustee, stockholder or member, the time when any director,‬
‭trustee, stockholder or member entered or left the meeting must be noted in the minutes; and on a similar‬
‭demand, the yeas and nays must be taken on any motion or proposition, and a record thereof carefully‬
‭made. The protest of any director, trustee, stockholder or member on any action or proposed action must‬
‭be recorded in full on his demand.‬
‭The records of all business transactions of the corporation and the minutes of any meetings shall‬
‭be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable‬
‭hours on business days and he may demand, in writing, for a copy of excerpts from said records or‬
‭minutes, at his expense.‬
‭Any officer or agent of the corporation who shall refuse to allow any director, trustees, stockholder‬
‭or member of the corporation to examine and copy excerpts from its records or minutes, in accordance‬
‭with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for‬
‭damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this‬
‭Code: Provided, That if such refusal is made pursuant to a resolution or order of the board of directors or‬
‭trustees, the liability under this section for such action shall be imposed upon the directors or trustees who‬
‭voted for such refusal: and Provided, further, That it shall be a defense to any action under this section‬
‭that the person demanding to examine and copy excerpts from the corporation’s records and minutes has‬
‭improperly used any information secured through any prior examination of the records or minutes of such‬
‭corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in‬
‭making his demand‬
‭Stock corporations must also keep a book to be known as the "stock and transfer book", in which‬
‭must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the‬
‭installments paid and unpaid on all stock for which subscription has been made, and the date of payment‬
‭of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, and by‬
‭and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book‬
‭shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be‬
‭open for inspection by any director or stockholder of the corporation at reasonable hours on business‬
‭days.‬
‭No stock transfer agent or one engaged principally in the business of registering transfers of‬
‭stocks in behalf of a stock corporation shall be allowed to operate in the Philippines unless he secures a‬
‭license from the Securities and Exchange Commission and pays a fee as may be fixed by the‬
‭Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from‬
‭performing or making transfer of its own stocks, in which case all the rules and regulations imposed on‬
‭stock transfer agents, except the payment of a license fee herein provided, shall be applicable. (51a and‬
‭32a; P.B. No. 268.)‬
 (‭ a)The articles of incorporation and bylaws of the corporation and all their amendments;‬
‭(b) The current ownership structure and voting rights of the corporation, including lists of‬
‭stockholders or members, group structures, intra-group relations, ownership data, and beneficial‬
‭ownership;‬
‭(c) The names and addresses of all the members of the board of directors or trustees and the‬
‭executive officers;‬
‭(d) A record of all business transactions;‬
‭(e) A record of the resolutions of the board of directors or trustees and of the stockholders or‬
‭members;‬
‭(f) Copies of the latest reportorial requirements submitted to the Commission; and‬
‭(g) The minutes of all meetings of stockholders or members, or of the board of directors or‬
‭trustees. Such minutes shall set forth in detail, among others: the time and place of the meeting held, how‬
‭it was authorized, the notice given, the agenda therefor, whether the meeting was regular or special, its‬
‭object if special, those present and absent, and every act done or ordered done at the meeting‬

‭ ection 75.‬‭Right to financial statements.‬‭– Within‬‭ten (10) days from receipt of a written request of any‬
S
‭stockholder or member, the corporation shall furnish to him its most recent financial statement, which shall‬
‭include a balance sheet as of the end of the last taxable year and a profit or loss statement for said‬
‭taxable year, showing in reasonable detail its assets and liabilities and the result of its operations.‬
‭At the regular meeting of stockholders or members, the board of directors or trustees shall present‬
‭to such stockholders or members a financial report of the operations of the corporation for the preceding‬
‭year, which shall include financial statements, duly signed and certified by an independent certified public‬
‭accountant.‬
‭However, if the paid-up capital of the corporation is less than P50,000.00, the financial statements‬
‭may be certified under oath by the treasurer or any responsible officer of the corporation. (n)‬

‭All corporations registered under the general provisions of the Code are required to keep certain books‬
‭and records.‬
‭(1) Records of all business transactions.‬
‭(2) Minutes of meetings of all stockholders and the directors‬
‭(3) Stock and transfer book‬
‭(4) Membership book, in cases it is non-stock corporation‬
‭(5) Financial statements‬
‭These books and records are subject to inspection by the stockholders or members during‬
‭reasonable hours on any business day‬
‭Either personally, or through his authorized representative, either with or without the presence of‬
‭the stockholder himself‬
‭Non-stockholders, even if they are the heirs of the deceased stockholder cannot inspect corporate‬
‭books and records of the corporation where their parent may have been such a shareholder.‬

‭ R‬‭: The corporation Cannot Refuse the stockholders‬‭to inspect the books and records if it is during‬
G
‭reasonable hours on any business day;‬
‭And if they are refused, the remedy available to the stockholders again would be:‬
‭(1) Mandamus with a claim for damages and/or attorney’s fees‬
‭(2) Criminal Complaint for a violation of its right under Section 144 of the Code.‬
‭XPN‬‭: The corporate officers involved have some defensive‬‭positions that they may advance in order to‬
‭justify their failure or refusal to allow the right of inspection:‬
‭(1) Improper use of information secured through previous examination; or‬
‭(2) That he is not acting in Good Faith or for a Legitimate Purpose.‬
‭NB‬‭: Note that this right‬‭of inspection may also be Restricted or Regulated.‬