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Corporations created by special

laws or charters shall be governed

primarily by the provisions of the
special law or charter creating them
or applicable to them,
supplemented by the provisions of
this Code, insofar as they are
 Subject to Constitutional
 Owned and controlled by
the government.
1. It is chiefly to prevent
granting of special privileges
to one body of men without
giving all others to obtain
them in the same conditions
2. To prevent bribery and
corruption of the legislature.
 A corporation created by a special law or
charter is primarily governed by such law
and suppletorily, by the provisions of the
code “insofar as they are applicable” either
because they are not inconsistent with, or
are expressly made applicable by the
special law.
 Officers and employees of government
owned or government controlled
corporations are placed under the Civil
 A government owned or controlled
corporation may be organized under the
provisions of the Corporation Code and not
by special law. Therefore, it would be proper
to increase capitalization by amending its
articles of incorporation pursuant to the
Corporation Code.
 Corporators – who compose the corporation

 Incorporators – those corporators mentioned

in the articles of corporation as originally
forming and composing the corporation.
 Stockholders – the owners of shares of stock
in a stock corporation. They are the owners of
the corporation.

 Members – corporators of a corporation

which has no capital stock.
 Promoters – persons who bring about or
cause to bring about the formation and
organizationof a corporation by bringing
together the incorporators or the persons
interested in the enterpise.
 Subscribers – persons who have agreed to
take and pay for original , unissued shares of
a corporation formed or to be formed.
 Underwriter – a person, usually an investment
banker who:
◦ Has agreed , alone or with others, to buy stated
terms an entire issue of securities or a substantial
part thereof.
◦ Has guaranteed the sale of an issue by agreement
to buy from the issuing party any unsold portion at
a stated price
◦ Has agreed to use his “best efforts” to market all
part of an issue
◦ Has offered for sale stock he has purchased from
controlling stock holder.
Classification of Shares
 Stock or Share of Stock- a stock or shares of
stock is one unit into which the capital stock
has been divided.

 Stock Certificate- a stock certificate certifies

that one is holder or owner of a certain
number of shares of stocks in the
 The shares of stock corporations may be
divided into classes or series of shares or
both, any of which classes or series may have
such rights, privilege or restrictions as may
be stated in the articles of incorporations.
1. Shares shall not be deprived of voting rights except
preferred or redeemable shares but non- voting shares
must still be entitled to vote on matters.

2. Where non- voting shares are provided for there must

always be a class or series of shares with complete
voting rights.

3. Banks, Trust companies, Insurance Companies, Public

Utilities, and building and Loan Associations shall not
be permitted to issue non- par value shares of stock;
4. Preferred shares of stock may be given preference in
the distribution of assets in case of liquidation and
distribution of dividends or other preferences may be
issued only with stated par value;

5. The term and conditions of preferred shares or series

thereof may be fixed by the board of directors only
when authorized by the articles of incorporation by the
effectivity thereof shall be reckoned from the filing of a
certificate with the Securities and Exchange

6. Shares w/o par value may not be issued for a

consideration less than the value of P5.00 per share.
7. Unless otherwise provided by law the rights,
privileges or restrictions on classes or series of
shares must be stated in the articles of
incorporation and in the stock certificates.

Presumed equality of Shares- “ each share shall be

equal in all respects to every other share”.
1. Voting and Non- voting Non- Participating
Shares; 4. Promotion Shares;
2. Par Value and No- Par 5. Shares of Escrow;
Value Shares; 6. Founder’s Shares;
3. Common and Preferred 7. Redeemable “ Callable”
Shares. Shares;
3.1 Preferred as to 8. Treasury Shares;
asset 9. Other Shares classified
3.2 Preferred as to to comply with
dividends constitutional or legal
a. Cumulative or requirements.
Non- Cumulative
b. Participating or
 General rule: Every member of a non-stock
corporation and every legal owner of shares in a
stock corporation, has a right to be present and
vote at all corporate meetings.
 Exception to the rule: Unless there is a stipulation
in contrary.

Par Value and No- Par Value

 Par value is the given fixed or definite value of a

share in the articles of incorporation.
 No- par value is a share of stock that has no fixed
 One that entitles the holder to preference in the
distribution of dividends over common stock.

Kinds of Preferred Stocks as to Dividends

A. Cumulative Preferred Stock- those w/c entitle the

holder to payment not only of current dividends
but also those in arrears, when dividends are
declared, to the extent stipulated, before holders
of common shares are paid.
 Those that entitle the holder to payment of current
dividends but not those in arrears, before holders
of common shares are paid.
C. Participating Preferred Stock
 Those that entitle the holder to participate with the
holder to participate with the holders of common
shares in the surplus profits after the amount
stipulated has been paid to the holder of preferred
D. Non- Participating Preferred Stock
 Those that entitle the holders only to the stipulated
preferred dividend.
 Issued to those who may originally own the
mining ground or valuable rights connected

 In consideration of their deeding the same to the

mining company when the company is
incorporated, or it may mean such stock as is
issued to promoters.
 The holders such shares shall nevertheless be entitled
to vote on the ff. matters.

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other
disposition of all substantially all of the corporate
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with
another corporation or other corporations;
7. Investment of corporate funds in another corporation
of business in accordance with the Corporation Code;
8. Dissolution of the Corporation.
 They refer to basic or fundamental changes in the
 A vote of stockholders represents 2/3 of the
outstanding capital stock or 2/3 of the members is
required to approve any of the changes mentioned

Par Value and No- Par Value

 It indicates the amount which the original
subscribers are supposed to contribute to capital
as basis privileges of profit sharing with limited
 Shares of capital stock issued without par value
shall be deemed fully paid.
 Shares without parr value may not be issued for a
consideration less than the value of five (P5.00).

 Banks, trust Companies, insurance companies

public utilities and building and loan associations
shall not be permitted to issue no- par value
shares of stock.
 A common shares of stock entitles the owner of it
to an equal pro rata division of profits, if there are
any, with no stockholder or class of stockholders
having preference or advantage in that respect over
any other stockholder or class of stockholder.

Shares in Escrow
 Subject to an escrow agreement,
 It is in effect the issuance of shares subject to
suspensive condition.
Treasury shares are shares of stock which
have been issued and fully paid for, but
subsequently reacquired by the issuing
corporation by purchase, redemption,
donation or through some other lawful
means. Such shares may again be disposed
of for a reasonable price fixed by the board
of directors.
a. Treasury shares are not retired shares.
b. Treasury shares are issued shares.
a. Stockholders may rightfully complain if the
price is lower than reasonable
b. In case of sale or reissue, it again becomes
outstanding stock and regains whatever
dividends and voting rights it originally held.
c. Expressly authorizes stock corporations to
sell treasury shares subject to the provision
of section 9.
4. Voting rights
5. Right to dividends