STOCKHOLDERS

RIGHTS OF STOCKHOLDERS

1) Right to vote, including the right to

appoint a proxy;
2) Right to a share in the profits of the
corporation, including the right to
declare stock dividends;
3) Right to a proportionate share of the
assets of the corporation upon
liquidation
 RIGHTS OF STOCKHOLDERS

4) Right of appraisal;
5) Pre-emptive right;
6) Right to inspect corporate books and
records;
7) Right to elect directors;
8) Such other rights as may
contractually be granted to the
stockholders by the corporation or by
special law.
 VOTING RIGHTS

Sales versus SEC 169 SCRA

A court will not deprive a stockholder of

this right to vote except upon a clear
showing of its denial under the Articles
of Incorporation and By-Laws as it is an
inherent right in stock ownership.
 HOW VOTING RIGHTS
ARE EXERCISED

1) Proxy
2) Voting trust agreement
3) Legal
4) Personal
 VOTING TRUST AGREEMENT

- is an agreement between a
stockholder and a trustee, wherein for a
term not exceeding five years, control
over the stocks owned by such
stockholder is lodged in the trustee.
 RIGHT TO DIVIDENDS

Dividend: unrestricted retained earnings

set apart from the general mass of the
funds of the corporation and distributed
among the stockholders in proportion to
their shares or interest in the
corporation, in the form of cash, property
or stocks.
 RIGHT TO DIVIDENDS

Dividend has no existence until

declared, while profit is part of the
assets of a corporation and does not
belong to the stockholders individually.
 CASH DIVIDEND
VERSUS STOCK DIVIDEND
1) Cash dividends withdraw assets from the
corporation, while stock dividends do not;
2) In cash dividend, money is received by the
stockholders, in stock dividend, stock
instead of money is received;
3) Cash dividend is taxable, while stock is not;
4) Cash dividend may be declared by majority
by the board, while stock dividend must be
confirmed by 2/3 of the outstanding capital
stock
 APPRAISAL RIGHT

- Refers to a stockholders right to

demand payment of the fair value of his
shares, after dissenting from a
proposed corporation action involving a
fundamental change in the corporate
setting, in the specific instances
provided for in the Corporation Code.
 WHEN RIGHT MAY BE
EXERCISED
1) In case any amendment to the articles of
incorporation has the effect of changing or
restricting the rights of any stockholder;
2) In case of extending or shortening
corporate term;
3) In case of sale, lease, transfer, mortgage,
pledge or other disposition of all or
substantially all of the corporate property
and assets
 WHEN RIGHT MAY BE
EXERCISED
4) In case the corporation decides to invest its
funds in another corporation or business
outside of the primary purpose;
5) In case of merger or consolidation.
 PRE-EMPTIVE RIGHT
Section 39 of the Corporation Code:

- All stockholders of a stock corporation shall

enjoy pre-emptive rights to subscribe to all
issues or disposition of shares of any class, in
proportion to their respective shareholdings.
 PRE-EMPTIVE RIGHT
Right of first refusal - contractual
 RIGHT TO INSPECT
1) Financial statements;
2) Annual Report;
3) Minutes of Meetings;
4) Books that record all business
transactions;
5) Stock and transfer book;
6) Report of election.
 RIGHT TO INSPECT
Basis:

-ownership of assets/corporate properties

-Access to information on corporate affairs
(how can the stockholder vote well)
 DERIVATIVE SUIT
- A suit brought by a stockholder, for and in
behalf of a corporation and against any
person be he also a stockholder, director,
officer or third person

Jurisdiction: RTC
 DERIVATIVE SUIT
Requisites:

1)Cause of action in favor of the corporation;

2)Refusal of the corporation to sue;
3)Party filing the suit is a stockholder;
4)Plaintiff has exhausted all administrative
remedies;
5)Filed in good faith.
LIABILITIES OF A STOCKHOLDER

1)Unpaid subscription plus interest;

2)Watered stock