CAPITAL STRUCTURE

□ DESCRIBE THE CAPITAL STRUCTURE

○ NUMBERS AND QUALIFICATIONS OF INCORPORATORS

⚫ Under RA 11232 (RCC) Sec. 10
✓ Natural or Artificial person
□ Person,
□ Partnership,
□ Association,
□ Corporation (cannot organized corporation for practice of profession)
✓ Of Legal Age (requirement for natural person-incorporators)
✓ Not more than 15 (previously 5-15)
✓ Must own or subscribe to at least 1 share

○ SUBSCRIPTION REQUIREMENTS
⚫ Under RA 11232 (RCC) Sec. 12
▪ Initial subscription requirement were removed in the Revised Corporation Code
▪ Stock Corporation shall not be required to have minimum capital stock
□ Except as other specially provided by special law

○ CORPORATER TERM
⚫ Under RA 11232 (RCC) Sec. 11
▪ CORPORATE TERM (under Revised Corporation Code)
 GR: Perpetual Existence
 EXC: There is Provision in Article of Incorporation

▪ Corporations (under Old Corporation Code)

1. With certificates of incorporation issued (Old Corporation Code) prior to the
effectivity of this Code (Revised Corporation Code), and,
2. Which continue to exist
✓ Shall have perpetual existence, UNLESS the corporation:
1) 1.Upon a vote of its stockholders representing a majority of its outstanding
capital stock

2) Notifies the Commission that it elects to retain its specific corporate term
pursuant to its articles of incorporation

3) Provided, that any change in the corporate term under this section is
without prejudice to the appraisal right of dissenting stockholders in
accordance with the provisions of this Code

▪ PERIOD OF RENEWAL OF CORPORATE TERM

- A corporate term for a specific period may be extended or shortened by
amending the articles of incorporation

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 amending the articles of incorporation
1) Provided, That no extension may be made earlier than three (3) years prior
to the original or subsequent expiry date(s) unless there are justifiable
reasons for an earlier extension as may be determined by the Commission:

2) Provided, further, That such extension of the corporate term shall take
effect only on the day following the original or subsequent expiry date(s).

▪ EFFECT OF FAILURE TO RENEW THE CORPORATE TERM WITHIN THE DEADLINE

1. Corporation with a fixed term whose term has expired
a. May apply for revival of its
i) corporate existence
1. Upon approval by SEC
2. The corporation shall be deemed revived
3. A Certificate of Revival of Corporate Existence shall be issued
4. Giving perpetual existence
5. Unless, its application for revival provides otherwise

ii) All Rights and Privileges under it Certificate of Incorporations and

iii) Subject to all duties, debts and liabilities existing prior to it revival

▪ No application for revival of certificate of incorporation shall be approved by

the Commission unless accompanied by a favorable recommendation of
the appropriate government agency:
• banks,
• banking and quasi banking institutions,
• preneed,
• insurance and trust companies,
• non-stock savings and loan associations (NSSLAs),
• pawnshops,
• corporations engaged in money service business,
• and other financial intermediaries

○ CLASSIFICATION OF SHARES

⚫ As to RIGHTS
COMMON STOCK • Those shares of stock with complete voting rights
(ORDINARY • They must be present in every stock corporation
SHARES) • May be issued as
✓ Par value shares, or
✓ No Par Value Share
PREFERED STOCK • Those shares of stocks with special privilege in dividend

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 PREFERED STOCK • Those shares of stocks with special privilege in dividend
(PREFERENCE distribution or liquidation
SHARES) • Must be issued with stated Par value
• If Silent, Preferred Stock are Noncumulative,
Nonparticipating and preferred as to net income or
dividend.
• TYPES OF PREFERENCE SHARES:
1. Cumulative Preference - Entitle the owner thereof to
Shares payment of current
dividend but also back
dividend not previously paid
whether or not during the
past year's dividend were
declared or paid.
2. Noncumulative - Grant the holder of such
Preference Shares share only the payment of
current dividend but not
back dividend when and if
dividends are paid to the
extent agreed upon before
any other stockholders are
paid the same.
3. Participating Preference - Entitle the shareholder to
Shares participate with the
common shares in excess
distribution at some
predetermined or at fixed
ratio as may be determined.
4. Nonparticipating - Entitle the shareholder
Preference Shares thereof to receive the
stipulated preferred
dividend and no more.

FOUNDERS' • Those shares issued to founders of the corporation and may

SHARES be given special privilege such as exclusively right to be
elected in the Board of Directors.
• Such privilege shall not exceed 5 years.
REDEEMABLE • Those shares of stock which may be redeemed by the
SHARES issuing corporation at the period stated despite the
absence of unrestricted retained earning provided that
Total assets are still higher that it total liabilities after
payment to redeemable preferred stockholders
TREASURY SHARES • Those shares of stock which have been issued and fully paid
for, but subsequently reacquired by the issuing corporation
through purchase, redemption, donation, or some other
lawful means.
• They have no voting rights whatsoever and may be issued
even below par value so long as the price is reasonable
• May be acquired only if there is unrestricted retained
earnings in order not to violate the concept of Trust Fund
Doctrine.
⚫ As to VOTING
VOTING SHARES • Those which have complete voting rights which are the
common stocks.
NONVOTING • Those classified as such in the Articles of Incorporation and
SHARE shall have limited voting rights

 Nonvoting Preferred Shares-----> may still vote (I³ AM SAD)

I Incurring, creating or increasing bonded Maj. Of 2/3 of
indebtedness BOD OCS

I Investments of corporate funds in another Maj. Of 2/3 of

corporation or another business purposes BOD OCS

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 corporation or another business purposes BOD OCS

I Increase or decrease capital stock Maj. Of 2/3 of

BOD OCS

A Amendment of Articles of Incorporation including Maj. Of 2/3 of

changing the Corporate term BOD OCS

M Merger and Consolidation of corporation Maj. Of 2/3 of

BOD OCS

S Sale or disposition or pledge or mortgage of all or Maj. Of 2/3 of

substantially all of corporate property BOD OCS

A Adoption or Amendment of By-laws Maj. Of Maj. Of

BOD OCS

D Dissolution, rehabilitation or liquidation of the Maj. Of 2/3 of

BOD OCS
corporation (Creditors are affected) (TA<TL)
D Dissolution (Creditors are not affected) (TA>TL) Maj. Of Maj. Of
BOD OCS

 Nonvoting Preferred Shares-----> NOT ALLOWED TO VOTE (EG-RADAR)

E Election of Directors
G Granting of compensation of Directors None Maj. Of
OCS

R Removal of Directors None 2/3 of

OCS

A Approval of management contract without Maj. Of Maj. Of

BOD OCS
interlocking directors
D Distribution of stocks dividends Maj. Of 2/3 of
BOD OCS

A Approval of management contract with interlocking Maj. Of 2/3 of

BOD OCS
directors
R Ratification of disloyalty of directors or voidable None 2/3 of
contract involving self-dealing directors or OCS
interlocking directors
⚫ As to Presence of Par Value

PAR VALUE SHARES • Those shares with face value stated in the certificate of
stock
Minimum Par value - no minimum or maximum par value
Minimum Issue Price - Minimum issue price is the par vale
of Par value - GR: shall not be issued below par
- EXC: Treasury share, can be issued
below as long as the price is
reasonable
Legal Capital - Issued Share and Subscribed shares
(excluding Share Premium)

NO PAR VALUE • Those shares without face value in the certificate of stock
SHARES but must have issued value.
Minimum Stated - none, as long as the minimum issue
value price is P5.
Minimum Issue Price - P5.
of No Par value share
Legal Capital - Issued Share, Subscribed shares and
Share Premium.

NOTE:
 Corporations that cannot issue no par value shares (BLTB-PIPO)
B Building and Loans Associations
T Trust Company

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 B Bank
P Public Utility
I Insurance Company
P Preneed Company
O Other corporation authorized to obtain or access
funds from public whether listed or not
⚫ Other Types of Shares
PROMOTER'S • Those shares issued to the promoters of the corporation
SHARE
ESCROW SHARES • Those share the issuance of which is subject to suspensive
condition
WATERED SHARES • Those share issued for a price even below par resulting to
overstatement of capital, overstatement of assets or
understatement of liability.
• It violates the Trust Fund Doctrine

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