Professional Documents
Culture Documents
I.
What
Does
Share
Represent?
A.
Sources
of
Shares:
1. Shares
acquired
from
the
company
itself
these
are
shares
that
are
sold
from
the
unissued
shares
of
the
company.
2. Shares
acquired
from
a
stockholder
of
the
company
these
are
shares
sold
by
a
stockholder
of
the
company
to
another
person
who
may
or
may
not
be
an
existing
stockholder.
II.
Preemptive
Rights
(Section
39)
Section
39.
Power
to
deny
pre-emptive
right.
All
stockholders
of
a
stock
corporation
shall
enjoy
pre-emptive
right
to
subscribe
to
all
issues
or
disposition
of
shares
of
any
class,
in
proportion
to
their
respective
shareholdings,
unless
such
right
is
denied
by
the
articles
of
incorporation
or
an
amendment
thereto:
Provided,
That
such
pre-emptive
right
shall
not
extend
to
shares
to
be
issued
in
compliance
with
laws
requiring
stock
offerings
or
minimum
stock
ownership
by
the
public;
or
to
shares
to
be
issued
in
good
faith
with
the
approval
of
the
stockholders
representing
two-thirds
(2/3)
of
the
outstanding
capital
stock,
in
exchange
for
property
needed
for
corporate
purposes
or
in
payment
of
a
previously
contracted
debt.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
A.
Pre-emptive
rights
defined
SEC
Opinion,
11
August
1997,
XXXII
SEC
QUARTERLY
BULLETIN
15
(No.
2,
Dec.
1997);
SEC
EAD
Memo,
dated
29
July
1997.
B.
Extent
of
Coverage
of
Pre-emptive
Rights
C.
Exceptions
to
Pre-emptive
Rights
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
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.
(35)
Issue
v.
Disposition
o
o
III.
Right
to
Transfer
or
Dispose
of
Shareholdings
(Section
63)
Section
63.
Certificate
of
stock
and
transfer
of
shares.
The
capital
stock
of
stock
corporations
shall
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
endorsed
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
SEC
Opinion,
6
Dec.
1994,
XXIX
SEC
QUARTERLY
BULLETIN
10
(No.
2,
June
1995);
SEC
Opinion,
12
Dec.
1994,
XXIX
SEC
QUARTERLY
BULLETIN
14
(No.2,
June
1995);
SEC
Opinion,
1
October
1981.
Lambert
v.
Fox
Facts:
John
R.
Edgar
&
Co
found
itself
in
such
condition
financially
that
its
creditors,
including
Lambert
and
Fox,
agreed
to
take
over
the
business,
incorporate
it
and
accept
stock
in
payment
of
their
respective
credits.
Eventually,
Lambert
and
Fox
became
the
two
largest
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
terms
and
considerations
which
are
reasonable,
and
only
when
the
corporation
or
the
other
stockholders
do
not
or
fail
to
exercise
their
option,
is
the
offering
stockholder
at
liberty
to
dispose
of
his
shares
to
third
parties.
Before
you
can
sell
your
shares
you
must
offer
Reasonableness
Time-boundedness
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Void
o
SEC
Opinion,
20
February
1995,
XXIX
SEC
QUARTERLY
BULLETIN
4
(No.
3,
Sept.
1995).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Fleishcher
v.
Botica
Nolasco
Facts:
Manuel
Gonzales
was
the
original
owner
of
five
shares
of
stock
of
Botica
Nolasco
Inc.
Gonzales
assigned
and
delivered
said
five
shares
to
Henry
Fleischer
to
repay
his
debt
to
the
latter.
Doctor
Miciano,
who
was
the
secretary-treasurer
of
said
corporation,
offered
to
buy
from
Henry
Fleischer,
on
behalf
of
the
corporation,
said
shares
of
stock
invoking
Article
12
of
the
by-laws,
which
states
that
the
corporation
had
a
preferential
right
to
buy
from
Manuel
Gonzalez
said
shares.
Fleischer
refused.
Thereafter,
Fleischer
requested
Doctor
Miciano
to
register
said
shares
in
his
name
but
the
latter
refused
to
do
so,
saying
that
it
would
be
in
contravention
of
the
by-laws
of
the
corporation.
Issue:
Whether
or
not
Article
12
of
the
by-laws
of
the
Botica
Nolasco,
Inc.,
is
in
conflict
with
the
provisions
of
the
Corporation
Law
(Act.
1459)
Held:
YES.
Section
13,
paragraph
7
of
the
Corporation
Law,
empowers
a
corporation
to
make
by-laws,
not
inconsistent
with
any
existing
law,
for
the
transferring
of
its
stock.
Section
35
of
the
same
specifically
provides
that
the
shares
of
stock
are
personal
property
and
may
be
transferred
by
delivery
of
the
certificate
indorsed
by
the
owner,
etc.
A
stock
corporation
in
adopting
a
by-law
governing
transfer
of
shares
of
stock
should
take
into
consideration
the
specific
provisions
of
Section
13
and
35
of
The
Corporation
Law,
and
said
by-law
should
be
made
to
harmonize
with
said
provisions.
It
should
not
be
inconsistent
therewith.
Doctrine:
Section
35
defines
the
nature,
character
and
transferability
of
shares
of
stock.
Under
said
section
they
are
personal
property
and
may
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
the
corporation
and
its
stockholders
are
separate
juridical
entities.
In
this
vein,
the
right
of
first
refusal
over
shares
pertains
to
the
shareholders
whereas
the
capacity
to
own
land
pertains
to
the
corporation.
J.G.
Summit
Holdings,
Inc.
v.
Court
of
Appeals,
450
SCRA
169
(2005).
SEC
Opinion,
12
August
1998,
XXXIII
SEC
QUARTERLY
BULLETIN
14
(No.
1,
June,
1999).
SEC
Opinion,
12
August
1998,
XXXIII
SEC
QUARTERLY
BULLETIN
14
(No.
1,
June,
1999).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
shares
of
stock
being
offered
for
sale
by
any
stockholder
before
the
same
may
be
offered
to
third
parties.1
B.
Remedy
If
Registration
Refused:
Hager v. Bryan
Facts:
Hager
files
a
petition
for
mandamus
to
compel
the
company
secretary
to
transfer
certain
shares
of
stock
of
the
Visayan
Electric
Company
to
a
Mr.
Levering.
The
company
had
refused
to
do
so
because
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
corporate
books
as
required
under
the
by-laws
and
without
providing
when
registration
should
be
made,
would
mean
that
the
cause
of
action
and
the
determination
of
prescription
period
would
begin
only
when
demand
for
registration
is
made
and
not
at
the
time
of
the
assignment
of
the
certificate.
Won
v.
Wack
Wack
Golf
&
Country
Club,
104
Phil.
466
(1958).
The
claim
for
damages
of
what
the
shares
could
have
sold
had
the
demand
for
their
registration
in
the
name
of
the
buyer
been
complied
with
is
deemed
to
be
speculative
damage
and
non-
recoverable.
Batong
Buhay
Gold
Mines
v.
CA,
147
SCRA
4
(1987).
Note
on
Sale
of
Shares:
It
is
only
when
all
these
things
have
been
complied
that
you
can
really
compel
the
corporate
secretary
to
record
your
transaction
in
accordance
with
his
or
her
ministerial
function.
Legal
Advice
for
the
transferee:
Section
43.
Power
to
declare
dividends.
The
board
of
directors
of
a
stock
corporation
may
declare
dividends
out
of
the
unrestricted
retained
earnings
which
shall
be
payable
in
cash,
in
property,
or
in
stock
to
all
stockholders
on
the
basis
of
outstanding
stock
held
by
them:
Provided,
That
any
cash
dividends
due
on
delinquent
stock
shall
first
be
applied
to
the
unpaid
balance
on
the
subscription
plus
costs
and
expenses,
while
stock
dividends
shall
be
withheld
from
the
delinquent
stockholder
until
his
unpaid
subscription
is
fully
paid:
Provided,
further,
That
no
stock
dividend
shall
be
issued
without
the
approval
of
stockholders
representing
not
less
than
two-thirds
(2/3)
of
the
outstanding
capital
stock
at
a
regular
or
special
meeting
duly
called
for
the
purpose.
(16a)
Stock
corporations
are
prohibited
from
retaining
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
When there are board of meetings, you can ask the transferor
to
give
you
a
proxy
who
will
vote
for
you
in
the
meeting.
IV.
Rights
to
Dividends
(Section
43)
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
apart
for
ratable
division
among
the
holders
of
it
capital
stock
it
is
a
payment,
and
the
right
thereto
is
an
incident
of
ownership
of
stock.
Cojuangco
v.
Sandiganbayn,
586
SCRA
790
(2009).
V.
Right
to
Vote
and
to
Attend
Meetings
(Sections
6
and
89)
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
consideration
less
than
the
value
of
five
(P5.00)
pesos
per
share:
Provided,
further,
That
the
entire
consideration
received
by
the
corporation
for
its
no-par
value
shares
shall
be
treated
as
capital
and
shall
not
be
available
for
distribution
as
dividends.
7.
Investment
of
corporate
funds
in
another
corporation
or
business
in
accordance
with
this
Code;
and
8.
Dissolution
of
the
corporation.
Except
as
provided
in
the
immediately
preceding
paragraph,
the
vote
necessary
to
approve
a
particular
corporate
act
as
provided
in
this
Code
shall
be
deemed
to
refer
only
to
stocks
with
voting
rights.
Section
89.
Right
to
vote.
The
right
of
the
members
of
any
class
or
classes
to
vote
may
be
3.
Sale,
lease,
exchange,
mortgage,
pledge
or
other
disposition
of
all
or
substantially
all
of
the
corporate
property;
4.
Incurring,
creating
or
increasing
bonded
indebtedness;
5.
Increase
or
decrease
of
capital
stock;
Voting
by
mail
or
other
similar
means
by
members
of
non-stock
corporations
may
be
authorized
by
the
by-laws
of
non-stock
corporations
with
the
approval
of,
and
under
such
conditions
which
may
be
prescribed
by,
the
Securities
and
Exchange
Commission.
A.
Who
has
the
right
to
vote
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
be voted.
SEC
Opinion,
3
December
1993,
XXVIII
SEC
QUARTERLY
BULLETIN
5
(No.
2,
June
1994).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
707 (1933).
interest.
Inasmuch
as
the
subject
UCPB
shares
in
the
present
case
were
undisputably
acquired
with
coco
levy
funds
which
are
public
in
character,
then
the
right
to
vote
them
shall
be
exercised
by
the
PCGG.
In
sum,
the
"public
character"
test,
not
the
"two-tiered"
one,
applies.
Republic
v.
COCOFED,
372
SCRA
462
(2001);
Trans
Middle
East
(Phils)
v.
Sandiganbayan,
490
SCRA
455
(2006).
B.
Instances
When
Stockholders
Entitled
to
Vote:
1. Amendment
of
articles
of
incorporation
(Section
16)
2. Election
of
directors
and
trustees
(Section
24)
3. Investment
in
another
business
or
corporation
(Sections
36
and
4.
5.
6.
7.
8.
42)
Increase
and
Decrease
of
capital
stock
(Section
38)
Incurring,
or
increasing
bonded
indebtedness
(Section
38)
Sale,
disposition
or
encumbrance
of
all
or
substantially
all
of
the
corporate
assets
(Section
40)
Declaration
of
stock
dividends
(Section
43).
Management
contracts
(Section
44)
C.
Joint
Ownership
(Section
56)
Section
56.
Voting
in
case
of
joint
ownership
of
stock.
In
case
of
shares
of
stock
owned
jointly
by
two
or
more
persons,
in
order
to
vote
the
same,
the
consent
of
all
the
co-owners
shall
be
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
deceased.
When
no
administrator
has
been
appointed,
there
is
all
the
more
reason
to
recognize
the
heirs
as
the
proper
representatives
of
the
deceased.
Gochan
v.
Young,
354
SCRA
207
(2001).
E.
Treasury
Share
No
Voting
Rights
(Section
57)
F.
Voting
Rights
of
Members
G.
Conduct
of
Stockholders'
Meetings:
1. Kinds
and
Requirements
of
Meetings
(Sections
49
and
50);
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
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.
Special
meetings
of
stockholders
or
members
shall
be
held
at
any
time
All
proceedings
had
and
any
business
transacted
at
any
meeting
of
the
stockholders
or
members,
if
within
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)
Section
93.
Place
of
meetings.
Regular
Meetings
o
o
Special
Meetings
o
Stock
Corporation
Principal
office
or
city
where
it
is
located
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Non-Stock
Corporation
Any
place
in
the
Philippines,
even
if
it
is
outside
the
city
or
place
of
the
principal
office
3. Quorum
(Section
52)
Section
52.
Quorum
in
meetings.
Unless
otherwise
provided
for
in
this
Code
or
in
the
by-
laws,
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.
(n)
VI.
Contracts
and
Agreement
Affecting
Shareholdings
A.
Proxy
(Section
58)
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
The
SEC
has
appropriately
observed
that
a
person
acting
as
proxy
for
a
stockholder
is
in
the
eyes
of
the
law,
the
latters
agent
and
as
such,
a
mere
fiduciary
who
has
the
duty
of
acting
in
strict
accord
with
requirements
of
a
fiduciary
relation;
and
that
accordingly,
the
proxy
holder
must
act
in
accordance
with
the
instructions
given
to
secretary.
2. Who
May
be
Appointed
Proxy:
Section
58
of
the
Corporation
Code
imposes
no
limitation
as
to
the
persons
who
may
be
appointed
as
proxy
and
by-law
provisions
restricting
the
right
of
a
stockholder
to
appoint
a
proxy
would
be
void.
However,
in
the
case
of
non-stock
corporation,
Section
89
of
the
Corporation
Code
the
articles
of
incorporation
or
by-laws
may
restrict
the
right
of
a
member
to
vote
by
proxy.
The
SEC
has
opined
that
under
Section
89
the
right
of
members
to
vote
by
proxy
may
be
denied
entirely
by
appropriate
provisions
in
the
articles
of
incorporation
or
by-laws
of
a
non-stock
corporation.2
SEC
Opinion,
15
July
197,
XXXII
SEC
QUARTERLY
BULLETIN
4
(No.
2,
Dec.
1997).
SEC
Opinion,
20
September
1994,
XXIX
SEC
QUARTERLY
BULLETIN
20
(No.1,
March
1995).
2
B.
Voting
Trust
Agreements
(Section
59)
Section
59.
Voting
trusts.
One
or
more
stockholders
of
a
stock
corporation
may
create
a
voting
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
Securities
and
Exchange
Commission;
otherwise,
said
agreement
is
ineffective
and
unenforceable.
The
certificate
or
certificates
of
stock
covered
by
the
voting
trust
agreement
shall
be
canceled
and
new
ones
shall
be
issued
in
the
name
of
the
trustee
or
trustees
stating
that
they
are
issued
pursuant
to
said
agreement.
In
the
books
of
the
corporation,
it
shall
be
noted
that
the
transfer
in
the
name
of
the
trustee
or
trustees
is
made
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
pursuant
to
said
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
trustee
or
trustees
may
vote
by
proxy
unless
the
agreement
provides
otherwise.
(36a)
the
transferor
transfers
the
right
to
votes,
etc.
but
not
the
right
to
own,
the
transferor
remains
to
be
the
owner.
A
transfer
of
the
right
to
own
the
shares
amounts
to
a
disposition/sale
of
the
shares.
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
transferor
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
his
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
the
purpose
of
circumventing
the
law
against
monopolies
and
illegal
combinations
in
restraint
of
trade
or
used
for
purposes
of
fraud.
Unless
expressly
renewed,
all
rights
granted
in
a
voting
trust
agreement
shall
automatically
expire
at
the
end
of
the
agreed
period,
and
the
voting
trust
certificates
as
well
as
the
certificates
of
stock
in
the
name
of
the
trustee
or
trustees
shall
thereby
be
deemed
canceled
and
new
certificates
of
stock
shall
be
reissued
in
the
name
of
the
transferors.
Lee
v.
Court
of
Appeals
Facts:
Herein
petitioners
were
served
summons
in
accordance
with
a
third
party
complaint
filed
against
Alfa
Integrated
Textile
Mills
of
which
Lee
and
Lacdao
was
president
and
vice
president
respectively.
They
claim
that
the
summons
for
Alfa
was
erroneously
served
upon
them
considering
that
the
management
of
Alfa
had
been
transferred
to
Development
Bank
of
the
Philippines.
They
claim
that
the
voting
trust
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
agreement
between
Alfa
and
DBP
vests
all
management
and
control
of
Alfa
to
the
DBP.
DBP
claimed
that
it
was
not
authorized
to
receive
summons
on
behalf
of
Alfa
since
DBP
had
not
taken
over
the
company
which
has
a
separate
and
distinct
corporate
personality
and
existence.
voting
rights
of
a
stockholder
from
his
other
rights.
This
may
create
a
dichotomy
between
the
equitable
or
beneficial
ownership
of
the
corporate
shares
of
a
stockholder,
on
the
one
hand,
and
the
legal
title
thereto
on
the
other.
With
the
omission
of
the
phrase
"in
his
own
right"
[in
the
new
corporation
code]
the
election
of
trustees
and
other
persons
Issue:
Whether
or
not
the
5-year
period
of
the
voting
trust
agreement
in
question
had
lapsed
in
1986
so
that
the
legal
title
to
the
stocks
covered
by
the
said
voting
trust
agreement
ipso
facto
reverted
to
Lee
and
Lacdao
as
beneficial
owners
pursuant
to
the
6th
paragraph
of
Section
59
of
the
new
corporation
code
Held:
NO.
It
is
manifestly
clear
from
the
terms
of
the
voting
trust
who
in
fact
are
not
the
beneficial
owners
of
the
shares
registered
in
their
names
on
the
books
of
the
corporation
becomes
formally
legalized.
Hence,
this
is
a
clear
indication
that
in
order
to
be
eligible
as
a
director,
what
is
material
is
the
legal
title
to,
not
beneficial
ownership
of,
the
stock
as
appearing
on
the
books
of
the
corporation.
agreement
between
ALFA
and
the
DBP
that
the
duration
of
the
agreement
is
contingent
upon
the
fulfillment
of
certain
obligations
of
ALFA
with
the
DBP.
Had
the
five-year
period
of
the
voting
trust
agreement
expired
in
1986,
the
DBP
would
not
have
transferred
all
its
rights,
titles
and
interests
in
ALFA
"effective
June
30,
1986"
to
the
national
government
through
the
Asset
Privatization
Trust
(APT)
as
attested
to
in
a
Certification
dated
24
January
1989
of
the
Vice
The
trustor
has
a
right
to
terminate
the
VTA
for
breach
thereof.
Voting
trust
agreement
as
part
of
a
loan
arrangement.
NIDC
v.
Aquino,
163
SCRA
153
(1988).
C.
Pooling
Agreements
or
Shareholders
Agreements
(Section
100)
Section
100.
Agreements
by
stockholders.
1.
Agreements
by
and
among
stockholders
executed
before
the
formation
and
organization
of
a
close
corporation,
signed
by
all
stockholders,
shall
survive
the
incorporation
of
such
corporation
and
shall
continue
to
be
valid
and
binding
between
and
among
such
stockholders,
if
such
be
their
intent,
to
the
extent
that
such
agreements
are
not
inconsistent
with
the
articles
of
incorporation,
irrespective
of
where
the
provisions
of
such
agreements
are
contained,
except
those
required
by
this
Title
to
be
embodied
in
said
articles
of
incorporation.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
2.
An
agreement
between
two
or
more
stockholders,
if
in
writing
and
signed
by
the
parties
thereto,
may
provide
that
in
exercising
any
voting
rights,
the
shares
held
by
them
shall
be
voted
as
therein
provided,
or
as
they
may
agree,
or
as
determined
in
accordance
with
a
procedure
agreed
upon
by
them.
3.
No
provision
in
any
written
agreement
signed
by
the
stockholders,
relating
to
any
phase
of
the
corporate
affairs,
shall
be
invalidated
as
between
the
parties
on
the
ground
that
its
effect
is
to
make
them
partners
among
themselves.
4.
A
written
agreement
among
some
or
all
of
the
stockholders
in
a
close
corporation
shall
not
be
invalidated
on
the
ground
that
it
so
relates
to
the
conduct
of
the
business
and
affairs
of
the
corporation
as
to
restrict
or
interfere
with
the
discretion
or
powers
of
the
board
of
directors:
Provided,
That
such
agreement
shall
impose
on
the
stockholders
who
are
parties
thereto
the
liabilities
for
managerial
acts
imposed
by
this
Code
on
directors.
5.
To
the
extent
that
the
stockholders
are
actively
engaged
in
the
management
or
operation
of
the
business
and
affairs
of
a
close
corporation,
the
stockholders
shall
be
held
to
strict
fiduciary
duties
to
each
other
and
among
themselves.
Said
stockholders
shall
be
personally
liable
for
corporate
torts
unless
the
corporation
has
obtained
reasonably
adequate
liability
insurance.
VII.
Rights
to
Inspect
and
Copy
Corporate
Records
A.
Basis
of
Right
Facts:
John
Gokongwei,
a
stockholder
of
San
Miguel
Corporation
(and
a
president
and
stockholder
of
Robina
Corp.
and
Consolidated
Foods
Corp.,
a
competitor
of
SMC,
in
various
areas,
such
as
Instant
Coffee,
Ice
Cream,
Poultry
and
Hog
Feeds
and
many
more),
filed
a
petition
for
declaration
of
nullity
of
amended
by-laws,
cancellation
of
certificate
of
filing
of
the
amended-by
laws,
injunction
and
damages
against
the
majority
of
the
members
of
the
Board
of
Directors
of
the
SMC
based
on
the
following
grounds:
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
the
demand
is
made
in
good
faith
or
for
a
legitimate
purpose.
Africa
v.
PCGG,
205
SCRA
39
(1992).
C.
Specified
Records
(Sections
74,
75
and
141)
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Section
74.
Books
to
be
kept;
stock
transfer
agent.
Every
corporation
shall
keep
and
carefully
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
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
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
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;
B.
P.
No.
268.)
Section
75.
Right
to
financial
statements.
Within
ten
(10)
days
from
receipt
of
a
written
request
of
any
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
may
require.
Such
report
shall
be
submitted
within
such
period
as
may
be
prescribed
by
the
Securities
and
Exchange
Commission.
(n)
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
the
same.
D.
Remedies
If
Denied:
Mandamus
E.
Criminal
Sanction
under
Section
144
Section
144.
Violations
of
the
Code.
Violations
of
any
of
the
provisions
of
this
Code
or
its
amendments
not
otherwise
specifically
penalized
therein
shall
be
punished
by
a
fine
of
not
less
than
one
thousand
(P1,000.00)
pesos
but
not
more
than
ten
thousand
(P10,000.00)
pesos
or
by
imprisonment
for
not
less
than
thirty
(30)
days
but
not
more
than
five
(5)
years,
or
both,
in
the
discretion
of
the
court.
If
the
violation
is
committed
by
a
corporation,
the
same
may,
after
notice
and
hearing,
be
dissolved
in
appropriate
proceedings
before
the
Securities
and
Exchange
Commission:
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
of
the
records
or
minutes
of
such
corporation
or
for
any
other
corporation;
or
b. The
one
requesting
to
inspect
was
not
taking
in
good
faith
or
for
a
legitimate
purpose
in
making
his
demand.
Exception:
o
o
VIII.
Appraisal
Right
(Sections
81
to
86
and
105)
Section
81.
Instances
of
appraisal
right.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
date
on
which
the
vote
was
taken
for
payment
of
the
fair
value
of
his
shares:
Provided,
That
failure
to
make
the
demand
within
such
period
shall
be
deemed
a
waiver
of
the
appraisal
right.
If
the
proposed
corporate
action
is
implemented
or
affected,
the
corporation
shall
pay
to
such
stockholder,
upon
surrender
of
the
certificate
or
certificates
of
stock
representing
his
shares,
the
fair
value
thereof
as
of
the
day
prior
to
the
date
on
which
the
vote
was
taken,
excluding
any
appreciation
or
depreciation
in
anticipation
of
such
corporate
action.
If
within
a
period
of
sixty
(60)
days
from
the
date
the
corporate
action
was
approved
by
the
stockholders,
the
withdrawing
stockholder
and
the
corporation
cannot
agree
on
the
fair
value
of
the
shares,
it
shall
be
cover
such
payment:
and
Provided,
further,
That
upon
payment
by
the
corporation
of
the
agreed
or
awarded
price,
the
stockholder
shall
forthwith
transfer
his
shares
to
the
corporation.
(n)
Section
83.
Effect
of
demand
and
termination
of
right.
From
the
time
of
demand
for
payment
of
the
fair
value
of
a
stockholder's
shares
until
either
the
abandonment
of
the
corporate
action
involved
or
the
purchase
of
the
said
shares
by
the
corporation,
all
rights
accruing
to
such
shares,
including
voting
and
dividend
rights,
shall
be
suspended
in
accordance
with
the
provisions
of
this
Code,
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
shares.
This
right,
known
as
the
right
of
appraisal,
is
expressly
recognized
in
Section
81
of
the
Corporation
Code.
Clearly,
the
right
of
appraisal
may
be
exercised
when
there
is
a
fundamental
change
in
the
charter
or
articles
of
incorporation
substantially
prejudicing
the
rights
of
the
stockholders.
It
does
not
vest
unless
objectionable
corporate
action
is
taken.
It
serves
the
B.
Who
is
Entitled
to
Exercise
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
extension
was
abandoned,
the
right
of
the
stockholder
to
exercise
appraisal
rights
ceases
also.
C.
Instances
When
Right
is
Exercisable:
D.
Denial
of
Appraisal
Right:
May
the
right
be
denied
in
the
articles
of
incorporation?
Is
a
contractual
stipulation
in
the
articles
of
incorporation
waiving
the
appraisal
right
void?
Rights
granted
by
law
can
be
waived
individually,
unless
such
waiver
would
contravene
public
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
as
the
real
party
in
interest.
Chua
v.
Court
of
Appeals,
443
SCRA
259
(2004).1
B.
Nature
of
the
Power
to
File
Derivative
Suit
A
stockholders
right
to
institute
a
derivative
suit
is
not
based
on
any
express
provision
of
the
Corporation
Code,
or
even
the
Securities
Regulation
Code,
but
is
impliedly
recognized
when
the
said
laws
make
corporate
directors
or
officers
liable
for
damages
suffered
by
the
corporation
and
its
stockholders
for
violation
of
their
fiduciary
duties.
Yu
v.
Yukayguan,
589
SCRA
C.
Requisites
of
Derivative
Suit
588 (2009).
behalf
and
for
the
benefit
of
the
corporation
and
all
other
stockholders
who
may
wish
to
join
him.
The
corporation
must
be
impleaded
as
a
party
and
must
be
served
with
process.
Filipinas
Port
Services,
Inc.
v.
Go,
518
SCRA
453
(2007);
Yu
v.
Yukayguan,
589
SCRA
588
(2009);
Hi-Yield
Realty,
Inc.
v.
Court
of
Appeals,
590
SCRA
548
(2009).
Hi-Yield
Realty,
Inc.
v.
Court
of
Appeals,
590
SCRA
548,
556
(2009);
Strategic
Alliance
Dev.
Corp.
v.
Radstock
Securities
Ltd.,
607
SCRA
413
(2009).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
caused
to
the
corporation
and
not
to
the
particular
stockholder
bringing
the
suit.
San
Miguel
Corp.
v.
Kahn,
176
SCRA
447
(1989).1
the
time
the
action
was
filed;
(2)
He
exerted
all
reasonable
efforts,
and
alleges
the
same
with
particularity
in
the
complaint,
to
exhaust
all
remedies
available
under
the
articles
of
incorporation,
by-laws,
laws
or
rules
governing
the
corporation
or
partnership
to
obtain
the
relief
he
desires;
(3)
No
appraisal
rights
are
available
for
the
act
or
acts
complained
of;
and
(4)
The
suit
is
not
a
nuisance
or
harassment
suit.
Yu
v.
Yukayguan,
the Court.
Filipinas
Port
Services,
Inc.
v.
Go,
518
SCRA
453
(2007)Reyes
v.
Regional
Trial
Court
of
Makati,
Br.
142,
561
SCRA
593
(2008);
Hi-Yield
Realty,
Inc.
v.
Court
of
Appeals,
590
SCRA
548
(2009).
2
Hi-Yield
Realty,
Inc.
v.
Court
of
Appeals,
590
SCRA
548,
556
(2009);
Strategic
Alliance
Dev.
Corp.
v.
Radstock
Securities
Ltd.,
607
SCRA
413
(2009);
Cua,
Jr.
v.
Tan,
607
SCRA
645
(2009).
Go v. Distinction Properties Dev. and Construction, Inc., 671 SCRA 461 (2012).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
uphold
this
as
a
derivative
suit,
since
it
is
required
that
the
minority
stockholder
suing
for
and
on
behalf
of
the
corporation
must
allege
in
his
complaint
that
he
is
suing
on
a
derivative
cause
of
action
on
behalf
of
the
corporation
and
all
other
stockholders
similarly
situated
who
may
wish
to
join
him
in
the
suit.
There
is
now
showing
that
petitioner
has
complied
with
the
a
derivative
suit.
The
Court
held
that
where
the
director
of
the
corporation
permitted
the
fraudulent
transaction
to
go
unpunished
by
allowing
the
importation
of
finished
textile
instead
of
raw
cotton
for
the
textile
mill,
and
nothing
appears
to
have
been
done
to
remove
the
erring
purchasing
managers,
the
appointment
of
receiver
may
have
been
thought
of
by
the
court
so
that
the
dollar
allocation
for
raw
material
may
be
reviewed
and
the
textile
mill
placed
on
an
operating
basis,
because
it
is
F.
Exhaustion
of
Intra-Corporate
Remedies:
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
constitution
of
the
Board
lies
at
the
center
of
the
issues.
DBP
v.
Pundogar,
218
SCRA
118
(1993).
G.
Nature
of
Relief
or
Remedies
Prayed
For:
Also R.N. Symaco Trading Corp. v. Santos, 467 SCRA 312 (2005).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
and
indirectly
to
the
stockholders.
This
is
what
is
known
as
a
derivative
suit,
and
settled
is
the
doctrine
that
in
a
derivative
suit,
the
corporation
is
the
real
party
in
interest
while
the
stockholder
filing
suit
for
the
corporations
behalf
is
only
nominal
party.
The
corporation
should
be
included
as
a
party
in
the
suit.
Hornilla
v.
Salunat,
405
SCRA
220
(2003).
H.
Venue
for
Derivative
Suit
J.
Nuisance
Suits2
I.
Business
Judgment
Rule1
relief
for
a
wrong
done
to
it.
Since
the
primary
duty
of
the
directors
is
to
increase
the
net
asset
value
of
the
corporation,
by
deriving
profits,
certain
remedies
may
actually
cost
the
corporation
more
in
terms
of
future
profits.
Therefore,
when
wrong
is
committed
against
the
corporation,
whether
to
bring
a
suit
for
the
corporation
or
not
primarily
lies
within
the
discretion
and
exercise
of
business
judgment
of
the
board.
And
consequently,
when
the
board
has
in
the
exercise
of
its
business
judgment,
decided
in
good
faith
that
it
will
not
pursue
remedies
on
behalf
of
the
corporation,
then
the
use
of
the
derivative
suit
mechanism
by
the
stockholder
would
be
improper.
It
is
only
when
the
board
itself
has
the
be
author
of
the
wrong
being
done
or
having
been
done
to
the
corporation,
where
X.
Right
to
Proportionate
Share
of
Remaining
Assets
Upon
Dissolution
(Section
122)
Section
122.
Corporate
liquidation.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Every
corporation
whose
charter
expires
by
its
own
limitation
or
is
annulled
by
forfeiture
or
otherwise,
or
whose
corporate
existence
for
other
purposes
is
terminated
in
any
other
manner,
shall
nevertheless
be
continued
as
a
body
corporate
for
three
(3)
years
after
the
time
when
it
would
have
been
so
dissolved,
for
the
purpose
of
prosecuting
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)