8.

Stockholders and members

STOCK -STOCKHOLDER

NON-STOCK-MEMBER

8.1. Fundamental rights of a stockholder

1. RIGHT TO VOTE – INHERENT RIGHT

2. RIGHT TO DIVIDENDS

3.Right to inspect corporate book and record

4. Right to elect and remove directors

5. Right to stock certificate

6. Right to preemption
7. Right to enter into voting trust agreement
8. Right to ask for the dissolution of the corporation in certain cases
9. Right to recover shared illegally sold
10. Right to withdraw and demand payment for the fair value of
his shares 11. Right to bring derivative, representative, individual suit

8.2. Participation in management

One of the rights of a stockholder is the right to participate in the control and management of the
corporation that is exercised through his vote. The right to vote is a right inherent in and
incidental to the ownership of corporate stock, and as such is a property right. The stockholder
cannot be deprived of the right to vote his stock nor may the right be essentially impaired, either by
the legislature or by the corporation, without his consent, through amending the charter, or the by-
laws.
8.2.1. Proxy – A PERSON WHO HAS GIVEN THE AUTHORITY IN VOTING RIGHTS (SEC 57)
(WHETHER STOCK OR NON-STOCK)

Stockholders and members may vote in person or proxy in all meetings of stockholders or
members.
But if authorized in the bylaws or by a majority of the board of directors - 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.
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 5 YEARS AT ANY
ONE TIME
-SHOULD BE IN PRIVATE INSTRUMENT
-FILED ONLY WITH THE CORPORATE SECRETARY
- SH DOES NOT DELIVER STOCK CERTIFICATE TO THE PROXY
-TAKE INSTRUCTION TO THE SH ON HOW TO VOTE
-PERIOD -5 YEARS BUT CAN BE RENEWED FOR A PERIOD OF 5 YEARS
-MAY BE REVOKED -IMPLIED OR EXPRESS
-IF CONTRACT -MAY NOT BE REVOKED WITHOUT THE CONSENT
8.2.2. Voting trust – (IN STOCK CORPO ONLY) An agreement in writing whereby one or more
stockholders of a corporation transfer their share to a trustee, for the purpose of conferring the latter ,
voting and other right.
- Designed to enable SH to dispose their shares , but still control the corporation
- SHOULD BE PUBLIC INSTRUMENT
- FILED IN SEC
- SH DOES DELIVERS STOCK CERTIFICATE TO THE VOTING TRUSTEE, WHO IN EXCHANGE, THE
VTA DELIVERS THE VOTING STOCK CERTICATE TO SH
-VOTE FOR THE SH
- MAXIMUM 5 YEARS ALSO
8.2.3. Cases when stockholder’s action is required -
8.2.3.1. By majority vote
i.By a majority vote (outstanding capital or majority of the members)

1.Election of directors/trustees (sec23)

2.Management contract
3.Adoption of by-laws
4.Amendment or repeal of by-laws
5.Fixing the issued price of no-par value shares, if BOD is not authorized by the articles of
incorporation
 8.2.3.2. By two-thirds vote
a.Amendment of articles of incorporation
b.Removal of directors/trustees
c.Ratification of a contract of self-dealing directors
d.Ratification of an act of a disloyal director
e.Extension or shortening of corporate term
f.Increase or decrease of capital stock
g.Incur, create or increase bonded indebtedness
h.Denial of pre-emptive right(Sec. 39, CC)
i.Sale, lease, exchange, mortgage, pledge or disposal of all or substantially all of
corporate assets j.Investment of corporate funds in another corporation or business or for any
other purpose other than the primary purpose(Sec. 42, CC) k.Issuance of stock dividends
l.Managed corporation in a management contract:
i.where a stockholder or stockholders representing the same interest of both the managing and
the managed corporations own or control more than one- third (1/3) of the total outstanding
capital stock entitled to vote of the managing corporation; or
ii.where a majority of the members of the board of directors of the managing corporation also
constitute a majority of the members of the board of directors of the managed corporation
m.Delegation of the power to amend, repeal or adopt new by-laws to BOD
n.Merger or consolidation
8.2.3.3. By cumulative voting
8.2.4. Manner of voting
PROXY VOTING TRUST
Stockholders and members may vote in May vote in person or by proxy
person or 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
5 YEARS AT ANY ONE TIME.

May only vote in the absence of the SH Trustee can vote even in the presence of the
SH

MANNER OF VOTING OF BOD-BOT -VOTE DURING MEETING PER HEAD, PROXY IS NOT ALLOWED BUT
CAN VOTE THROUGH REMOTE COMMUNICATION (TELECONFERENCING, VIDEOCONFERENCING
BUT MUST NOTIFY IN ADVANCE THE PRESIDING OFFICER OR CORPORATE SECRETARY OF HIS
INTENTION. MAY VOTE THROUGH ELECTRONIC MAIL

8.3. Proprietary rights

8.3.1. Right to dividends
The right to share in the corporation’s assets, or what is commonly known as the dividend right, is one of
the three most important rights of a stockholder (the other two being the right to vote and the right to a
proportional share in the corporate assets upon liquidation). Dividends are of three kinds—cash,
property, and stock. Dividends are declared by the board of directors out of a corporation’s unrestricted
retained earnings.131 Unrestricted retained earnings are the undistributed earnings of the corporation
which have not been allocated for any managerial, contractual, or legal purposes, and which are free for
distribution to the stockholders as dividends. The right to dividends is always proportional to the
outstanding capital stock owned by the stockholder.
This right is protected by the Revised CorporationCode in Section 42 which states that “stock
corporations are prohibited fromretaining surplus profits in excess of one hundred (100%) percent of
their paid-in capital stock, except: (1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or (2) when the corporation is prohibited under any loan
agreement with any financial institution or creditor, whether local or foreign, from declaring dividends
without its/his consent, and such consent has not yet been secured; or (3) when it can be clearly shown
that such retention is necessary under special circumstances obtaining in the corporation, such as when
there is need for special reserve for probable contingencies.”

8.3.2. Appraisal right- refers to the right of any stockholder of a corporation to

dissent and demand payment of the fair value of his or her shares in the
corporation
8.3.2.1. When available
a. In case an amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding shares of any class, or
of extending or shortening the term of corporate existence;
b. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of
all or substantially all of the corporate property and assets as provided in the
Revised Corporation Code;
c. In case of merger or consolidation; and
d. In case of investment of corporate funds for any purpose other than the primary
purpose of the corporation.

8.3.2.2. Manner of exercise of right

by making a written demand on the corporation for the payment of the fair
value of shares held. Said written demand shall be made within thirty (30)
days from the date on which the vote was taken. If the dissenting
stockholder failed to make demand within 30 days from the date on which
the vote was taken, the dissenting stockholder shall be deemed to have
waived his or her appraisal right. If the proposed corporate action is
implemented, the corporation shall pay the stockholder the fair value of his
or her shares upon surrender of the certificate or certificates of stock
representing the stockholder’s shares. The basis of the value of the shares of
the dissenting stockholder shall be the day before the vote was taken
excluding any appreciation or depreciation in anticipation of such corporate
action.

If, within sixty (60) days from the approval of the corporate action by the
stockholders, the withdrawing stockholder and the corporation cannot agree
on the fair value of the shares, it shall be determined and appraised by three
(3) disinterested persons. One of whom shall be named by the withdrawing
stockholder, another by the corporation. The third member of the appraisers
shall be chosen by both the withdrawing stockholder and the corporation.
The findings of the majority of the appraisers shall be final, and their award
shall be paid by the corporation within thirty (30) days after such award is
made. However, please take note that payment by the corporation of the
value of the shares to the withdrawing stockholder shall be made only when
the corporation has unrestricted retained earnings in its books to cover such
payment. Upon payment by the corporation of the agreed or awarded price,
the stockholder shall transfer the shares to the corporation.

8.4. Remedial rights

8.4.1. Individual suit -THE WRONG AFFECTS ONLY TO A PARTICULAR SH, SUCH AS DENIED THE
RIGHT TO INSPECT CORPORATE BOOKS AND HE INSTITUTE A SUIT IN HIS OWN NAME TO INSTITUTE
SUSCH RIGHT.

8.4.2. Representative suit – COMMITTED AGAINST THE GROUP OF STOCKHOLDER , AS WHERE

PREFERRED RIGHTS OF THE STOCKHOLDER ARE VIOLATED.
OR A GROUP OF SH ARE DENIED TO RECEIVE DIVIDENDS, OR TO VOTE IN CERTAIN
STOKCHOLDER’S MEETING, AND SUCH SUIT IS PROTECTION FOR THE SH BELONGING TO THE GROUP

8.4.3. Derivative suit – THE WRONG SOUGHT TO BE REDRESS IS COMMITTED AGAINTS THE
CORPORATION ITSELF
A derivative suit is an action brought by a stockholder on behalf the corporation to enforce
corporate rights against the corporation’s directors, officers or other insiders.
Under Sections 23 and 363 of the Corporation Code (Now Section 22 and 35, Revised
Corporation Code) the directors or officers, as provided under the by-laws, have the right to
decide whether or not a corporation should sue.
Since these directors or officers will never be willing to sue themselves, or impugn their
wrongful or fraudulent decisions, stockholders are permitted by law to bring an action in the
name of the corporation to hold these directors and officers accountable.
In derivative suits, the real party in interest is the corporation while the stockholder is a
mere nominal party.

8.5. Obligations of a stockholder

 Subscribers to stocks shall be liable to the corporation for interest on all unpaid
subscriptions from the date of subscription.
  Payment of unpaid subscription or any percentage thereof, together with any
interest accrued shall be made on the date specified in the subscription contract
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 interest rate is provided in the subscription contract.

“SEC. 65. Interest on Unpaid Subscriptions. – Subscribers to stocks shall be liable to the
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.
SEC. 66. Payment of Balance of Subscription. – Subject to the provisions of the
subscription 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 unpaid subscription or any percentage thereof, together with any interest
accrued shall be made on the date specified in the subscription contract 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 interest rate is provided in the subscription
contract. The interest shall be computed from the date specified, until full
payment of the subscription. If no payment is made within thirty (30) days
from the said date, all stocks covered by the subscription shall thereupon
become delinquent and shall be subject to sale as hereinafter provided,
unless the board of directors orders otherwise.”

8.6. Meetings
8.6.1. Regular or special - MEETINGS OF SH AND MEETING OF BOD AND BOT
MEETING OF STOCKHOLDER OR MEMBERS
Regular SPECIAL
These are meetings that are These are meetings that are
held at a predetermined date held on call by corporation
and time as fixed in the bylaws
WHEN Annually on a date fixed in the Any time deemed necessary or
bylaws or dated after April 15 as provided in the by-laws
OF every year determined by
the BOD/BOT
MEETINGS OF DIRECTORS or TRUSTEES
Regular SPECIAL

WHEN MONTHLY USE ,UNLESS THE ANYTIME UPON THE CALL

BY-LAWS PROVIDE OF THE PRESIDENT OR
OTHERWISE PROVIDED IN THE BY-LAWS

8.6.2. Notice of meetings

MEETING OF STOCKHOLDER OR MEMBERS

Notice REGULAR SPECIAL

The written shall be sent to SH or members of AT LEAST ONE WEEK, Unless

record at least 21 DAYS PRIOR TO THE MEETING. a different period provides in
Unless a different period provides in the by the by laws, law ,regulation
laws, law ,regulation

IT SHALL BE SENT THROUGH ELECTRONIC MAIL

OR SUCH OTHER MANNERS AS THE
COMMISSION SHALL ALLOW

MEETINGS OF DIRECTORS or TRUSTEES

NOTICE REGULAR
Must be given atleast 20days
before the intended meeting,
stating the time and place of the
meeting. This may be waived
SPECIAL
Notice must be given at least
2 days before the intended
meeting stating the time and
place of the meeting. This
may be waived

8.6.3. Place and time of meetings

MEETING OF STOCKHOLDER OR MEMBERS
REGULAR SPECIAL
 WHERE In the principal office of the
corporation as set forth in
the AOI, OR IF NOT
PRACTICABLE, in the CITY OR
MUNICIPALITY WHERE THE
PRINCIPAL OFFICE OF THE
CORPORATION IS LOCATED
In the principal office of the
corporation as set forth in
the AOI, OR IF NOT
PRACTICABLE, in the CITY OR
MUNICIPALITY WHERE THE
PRINCIPAL OFFICE OF THE
CORPORATION IS LOCATED

Provided that, ANY CITY OR MUNICIPALITY IN METRO MANILA, METRO CEBU, METRO DAVAO, AND
OTHER METROPOLITAN AREAS SHALL, FOR PURPOSES OF THIS SECTION, BE CONSIDERED A CITY OR
MUNICIPALITY

MEETINGS OF DIRECTORS or TRUSTEES

WHERE REGULAR SPECIAL
Anywhere in or outside of Anywhere in or outside of
the, Philippines, unless the the, Philippines, unless the
by-laws provide otherwise by-laws provide otherwise

8.6.4. Quorum

Quorum in Meetings.
Unless otherwise provided in this Code or in the bylaws, a 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.

OUTSTANDING CAPITAL STOCK

Sec. 173 of RCC defines OCS, to wit:
The total shares of stock issued under binding subscription contracts to subscribes or
stockholders, whether fully or partially paid, except treasury shares

8.6.5. Minutes and agenda of meetings

10. Capital affairs
10.1. Certificate of stock
10.1.1. Nature of the certificate
10.1.2. Uncertificated shares
10.1.3. Negotiability; requirements for valid transfer of stocks
10.1.4. Issuance
10.1.4.1. Full payment
10.1.4.2. Payment pro-rata
10.1.5. Stock and transfer book
10.1.5.1. Contents
8 10.1.5.2. Who may make valid entries
10.1.5.3. Stock transfer agent
10.1.6. Lost or destroyed certificates
10.1.7. Situs of shares of stock
10.2. Watered stocks
10.2.1. Definition
10.2.2. Liability of directors for watered stocks
10.2.3. Trust fund doctrine for liability for watered stocks
10.3. Payment of balance of subscription 10.3.1. Call by board of directors
10.3.2. Notice requirement
10.4. Sale of delinquents shares
10.4.1. Effect of delinquency
10.4.2. Call by resolution of board of directors
10.4.3. Notice of sale
10.4.4. Auction Sale
10.5. Alienation of shares
10.6. Corporate books and records
10.6.1. Records to be kept at principal office
10.6.2. Right to inspect corporate records
10.6.3. Effect of refusal to inspect corporate records
10.7.
Cases:
a. Pena v. CA, GR No. 91478 February 7, 1991
b. Guy v. Guy, G.R. No. 184068 (2016)
c. Bernas v. Cinco, G.R. NOS. 163368-
d. Villongco v.
e. Gamboa v. Teves, 28 June 2011
f. Yatco Real Estate v. Bel-Air Village, 21 November 2018
g. SEC v. CA and Omico Corporation, 22 October 2014
h. Gokongwei v. SEC, No.L- 45911 April 11, 1979
i. Gonzales v. PNB, No. L- 33320 May 30, 1983