THE REVISED CORPORATION CODE OF THE PHILIPPINES

Republic Act No. 11232

POWERS OF CORPORATION

Section 35. Corporate Powers and Capacity.

Section 36. Power to Extend or Shorten Corporate Term
Section 37. Power to Increase or Decrease Capital Stock; Incur, Create or Increase Bonded
Indebtedness.
Section 38. Power to Deny Pre-Emptive Right.
Section 39. Sale or Other Disposition of Assets.
Section 40. Power to Acquire Own Shares.
Section 41. Power to Invest Corporate Funds in Another Corporation or Business or For Any Other
Purpose.
Section 42. Power to Declare Dividends.
Section 43. Power to Enter into Management Contract.
Section 44. Ultra Vires Acts of Corporations.

BY LAWS
Section 45. Adoption of By Laws.
Section 46. Contents of By Laws.
Section 47. Amendment to By Laws
 MEETINGS

Section 48 - Kinds of meetings

Section 49 - Regular and special meetings of stock holders or members
Section 50 - Place and time if meetings of stockholders or members
Section 51 - Quorum meeting
Section 52 - Regular and special meetings of directors or trustees; quorum
Section 53 - Who shall preside at meetings
Section 54 - Right to vote of secured creditors and administrators
Section 55 - Voting in case of joint ownership of stock
Section 56 - Voting right for treasury shares
Section 57 - Manner of voting
Section 58 - Voting trust

SHARES AND SHAREHOLDERS

Section 59 - Subscription contract

Section 60 - Pre-incorporation subscription
Section 61 - Consideration for Stocks
section 62 - Certificate of Stock and Transfer of Shares
Section 63 - Issuance of Stock Certificates
Section 64 - Liability of Directors for Watered Stocks
Section 65 - Interest on Unpaid Subscription
Section 66 - Payment of Balance of Subscription
Section 67 - Delinquency Sale
Section 71 - Rights of Unpaid Share, Non-Delinquent
Section 72 - Lost or Destroyed Certificates
Section 70 - Effect of Delinquency
 THE 8989
CORPORATION CODE
OF THE
PHILIPPINES
[Batas Pambansa Bilang 68]

three parties sharing power and control:

1. Directors - are the managers of the corporation
2. Officers - control the day-to-day decisions and work more closely with the employees
3. Shareholders - are the owners of the corporation, but they have little decision-making
authority. 

A corporation can only do acts that are with in its express powers. These are power that are granted
by the revised corporation code, by the articles of incorporation and by corporate by laws.

3 Powers
1. Express Power are powers that are written directly into the Constitution
2. Implied Power are powers that aren't listed but suggested in the Constitution
3. Inherent Power historically possessed by national government

Any act outside of those 3 is considered as ultra vires act (beyond the powers).
Ultra vires act - are any acts that lie beyond the authority of a corporation to perform. Ultra vires acts
fall outside the powers that are specifically listed in a corporate charter or law. This can also refer to
any action that is specifically prohibited by the corporate charter.
 POWERS OF CORPORATIONS
Section 35 enumerate the corporate powers – the corporation can only do or act based on the
powers granted through express, implied and inherent.
Section 35. Corporate powers and capacity.
Every corporation incorporated under this Code has the power and capacity:
a. To sue and be sued in its corporate name;
b. The power of succession – the corporation can remain or exist despite the death or removal of its
shareholder or members, or transfer of ownership of shares from one shareholder to another.
c. To adopt and use a corporate seal;
d. To power to amend (baguhin) its articles of incorporation.
e. The power to adopt by laws – provided they are not contrary to law, morals, or public policy, and
observing the procedures under Revised Corporation Code.
f. Power to issue or sell stocks to subscribers and to sell treasury stocks if a stock corporation.
g. Power to admit members, if it be a non-stock corporation. As an organization it has the power to
establish qualifications, in admitting members.
h. Power to own or dispose of real and personal property – this power includes, the purchase, receipt,
take, or grant, hold otherwise deal with such real and personal property; including securities and
bonds of the other corporations, as the transaction of the lawful business of the corporation may
require.
i. The power to enter into merger, joint venture, partnership or consolidation with two or more
corporations may agree to merge under one corporation, or may consolidate into a single corporation.
j. The power to make reasonable donations – no foreign corporation is allowed to donate with any
candidate or political party.
j. before a corporation cannot make any donation whether it is a foreign or domestic corporation but
now, they are allowed to donate to any candidate or political party. A domestic corporation – when
it is organized under the Philippine law or under the Revised Corporation code.
k. Power to establish pension, retirement, and other provident funds.
l. Power to exercise such other powers as may be essential or necessary to carry out its purposes.
Section 36. Power to extend or shorten corporate term.
Upon approval of the majority of the vote of the board of directors or trustees, and ratified (to
approved formally) by stockholder or members representing 2/3 of the outstanding capital stock or
membership.
Before a corporation can only exist up to maximum of 50 years, pag malapit na ma expire yung
corporation it must renew its corporate term but under the revised code the corporation now can
have an infinite corporate term, however by the majority vote of the board of directors and upon
ratification of the 2/3 of the outstanding capital stock or membership if it is a non-stock corporation it
can reduce or shorter its corporate term or dissolve the corporation.
Pag majority vote means kung ano ang Majority sa mga present na umattend pero kung majority of
the board of directors ang nakalagay sa batas kailangan if 15 ang umattend sa meeting 8 ang mag
approved pero kung 10 lang ang umattend out of 15, 8 parin ang majority.
When the law says the majority of the board of directors’ kung ilan lang ang majority sa umattend sa
meeting pero pag sinabi ng batas na approval majority of the board of directors, kahit di umattend
ang majority parin ng lahat ng members ng BoD

Section 37. Power to increase or decrease capital stock; incur, create or increase bonded
indebtedness.
It requires majority vote of the board of directors or 2/3 of the outstanding capital stock. Bonded
indebtedness means secured by a specific corporate property.
Bonded indebtedness - Nakasangla yung specific property. If walang spefic property na isasangla
or hindi siya bonded indebtedness it does not require the majority vote or not requires the
requirement of section 37.
Capital stock – is nag increase ng capital ung corporation, to determine capital stock through its
outstanding capital stock: Kung ilan ang share na naka issue sa public o sa shareholders. If there’s
allowable 1000 shares to be issued pero 500 share lang issued and held by public, but public wants
to increase 1200 shares it requires the approval of the majority votes of the board of directors or 2/3
of shareholders.
The increase or decrease of bonded indebtedness requires approval of Securities and
Exchange Commission or Philippine competition commission. After ma approved ng SEC ng
issuance ng bonded indebtedness, it will issue a certificate of filing.
Philippine competition commission is the agency which ensures that there are a level Plainfield in
the market – kumbaga walang kumpanya na monopoly yung siya yung dominant market player, siya
lang may control. Gusto ng Philippine competition commission there is competition in the market.

Pag hawak ng shareholder yung stock that is what we called as outstanding share.
--
Example ABC corporation allowed the issue 1,000 shares worth 100 pesos per share, however 500
shares are only issued yung 500 share are treasury shares after 1-month ABC company issued the
remaining 500 shares so nakalabas na lahat yung 1000 shares that is authorized capital stock, so
1000 na yung outstanding share. Tapos nag increase ang ABC corporation ng stock and approved ng
majority and 2/3 ng shareholder increase additional 500 shares so 1500 na yung authorized issue.
Yung 500 na additional should be subscribe or bilhin and then yung 25% of that 500 and 25% of that
shares must be paid in cash or property. 25% ng 500 which is 125 Must be bought by public para
maaproved ng SEC ung increase ng capital stock and 25% ng 125 which is 31.25 must be paid
immediately by cash or property para maapproved ng SEC yung increased ng authoriezed capital
stock. Sa 125 pwedeng hindi lahat magbayad muna basta yung 31.25 e mayroong nagbayad ng cash
or property,
Any increase or decrease of capital stock, requires the ff.
A certificate in duplicate must be signed by a majority of the directors of the corporation and
countersigned by the chairman and the secretary of the stockholders' meeting, setting forth:
(1) That the requirements of this section have been complied with;
(2) The amount of the increase or diminution of the capital stock;
(3) If an increase of the capital stock, the amount of capital stock or number of shares of no-par stock
thereof actually subscribed, the names, nationalities and residences of the persons subscribing, the
amount of capital stock or number of no-par stock subscribed by each, and the amount paid by each
on his subscription in cash or property, or the amount of capital stock or number of shares of no-par
stock allotted to each stock-holder if such increase is for the purpose of making effective stock
dividend therefor authorized;
(4) Any bonded indebtedness to be incurred, created or increased;
(5) The actual indebtedness of the corporation on the day of the meeting;
(6) The amount of stock represented at the meeting; and
(7) The vote authorizing the increase or diminution of the capital stock, or the incurring, creating or
increasing of any bonded indebtedness.
Any increase or decrease in the capital stock or the incurring, creating or increasing of any bonded
indebtedness shall require prior approval of the Securities and Exchange Commission.
One of the duplicate certificates shall be kept on file in the office of the corporation and the other shall
be filed with the Securities and Exchange Commission and attached to the original articles of
incorporation. From and after approval by the Securities and Exchange Commission and the issuance
by the Commission of its certificate of filing, the capital stock shall stand increased or decreased and
the incurring, creating or increasing of any bonded indebtedness authorized, as the certificate of filing
may declare: Provided, That the Securities and Exchange Commission shall not accept for filing any
certificate of increase of capital stock unless accompanied by the sworn statement of the treasurer of
the corporation lawfully holding office at the time of the filing of the certificate, showing that at least
twenty-five (25%) percent of such increased capital stock has been subscribed and that at least
twenty-five (25%) percent of the amount subscribed has been paid either in actual cash to the
corporation or that there has been transferred to the corporation property the valuation of which is
equal to twenty-five (25%) percent of the subscription: Provided, further, That no decrease of the
capital stock shall be approved by the Commission if its effect shall prejudice the rights of corporate
creditors.
Non-stock corporations may incur or create bonded indebtedness, or increase the same, with the
approval by a majority vote of the board of trustees and of at least two-thirds (2/3) of the members in
a meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with the Securities and Exchange Commission,
which shall have the authority to determine the sufficiency of the terms thereof. (17a)
Section 38. Power to deny pre-emptive right.
pre-emptive right - are a contractual clause giving a shareholder the right to buy additional shares in
any future issue of the company's common stock before the shares are available to the general
public.
Reason behind section 38 is to protect the interest of the shareholder. Pag nag iisue kasi ng new
shares yung company, bababa yung percentage ng share ng shareholders.
Example: Juan has 100 shares sa ABC corporation, from 1,000 shares ABC increase its capital
stock to 1500, under section 38 Juan has preemptive right kung may 100 siya or 10% in ABC
corporation before the increase, he is allowed to subscribe or buy the shares equivalent to 10% of the
newly issued shares which is 50. In proportion to his 10% share in the company, however sec 38 also
can deny that right, if it is specified or stated in the articles of incorporation or corporate by laws that
shareholders can be denied the pre emptied right.
Before a share may be issue, it must be offered first to the current shareholders. The purpose of
the preemptive right is to maintain the interest of the shareholders in the corporation. This
includes re issuance of treasury shares.

Exception:
1. If it denied in the Articles of Incorporation
2. The new issuance is in compliance of the law; and
Minsan may I comply yung corporation na reuirement ng batas, o ibenta isyon sa mga specific
na tao.
3. Issuance of new share in good faith and with the approval of 2/3 of the outstanding capital
stock.
Section 39. Sale or other disposition of assets.
(disposition - gustong bitawan na asset ng company)
substantially all – when the corporation cannot continue its business then I dispose or sell na lahat
ng asset. representing more than 75% of the Company’s total assets or revenues
In case of sale or disposition of substantially all property and assets of a corporation shall require
the ff.
a. Approval of the majority vote of the board of directors;
b. Ratification of the 2/3 of the outstanding capital stock or 2/3 of the membership;
c. Notice to shareholders
In case the disposition or sale is not substantial, only approval of the majority is required.
In case of dissenting shareholder, he/she may exercise right of appraisal. In case of non-stock
corporations, where the members have no voting rights, the vote at least majority of the trustees is
sufficient for the transaction in this provision.
Right of appraisal – if the shareholders do not want the corporate act, pwedeng ung corporation
bilhin niya yung shares nang against sa act na gagawin ng corporation.
Example si pedro against sa pag benta ng asset ng corporation pwede niyang I exercise yung right
of appraisal niya, yung corporation bibilhin yung shares niya.
A sale or disposition shall be deemed to cover substantially all the corporate property and assets if
the corporation would be incapable of continuing the business or accomplishing the purpose for which
it was incorporated.
Section 40. Power to acquire own shares.
In acquiring shares, the corporation must have unrestricted retained earnings. The
requirement of unrestricted retained earnings is based on trust fund doctrine.
The corporation wants to buy the shares that held by public. Requirements is that corporation should
have
unrestricted retained earnings – corporation must have surplus profit. meron siyang pundo na hindi
nakalaan sa expansion or suweldo ng kumpanya. Sobra lang surplus lang. that is based on;
trust fund doctrine - that the capital stock and property and other asset of the corporation are held
for the benefit of the creditors.
1. To eliminate fractional shares arising out of stock dividends;
Dividend – distribute ng kita or profit
however the corporation instead cash pang bayad ayaw niyang mag issue ng cash, stock
dividend nalang or share nalang pambayad.

Example si Juan meron siyang 100 shares sa ABC corporation, ABC corporation has 1,000
authorize capital stock kumita siya for the year 2020, kaya mag didistribute siya ng dividend
kaya lang ayaw niya mag distribute ng cash dividend, increase nalang ng stock ng 500 so
naging 1500 yung authorize capital stock na. Magkano ang shares na matatanggap ni Juan?
50 additional in proportional to his shares. Pano kung nabigay sa kanya e 72.5 ang halaga ng
bawat shares is 100 pesos to eliminate .5 pwede bilhin un ng corporation how much. Divide by
half sa give 50 pesos to juan, para yung alanganin na .5 mawala na.

2. To collect or compromise an indebtedness to the corporation, arising out of unpaid

subscription, in a delinquency (a debt on which payment is overdue) sale, and to purchase
delinquent shares sold during said sale; and

Example si Juan bumili siya ng 100 shares sa corporation, 100 pesos per share. So 10,000
worth of subscription niya, pero yung bayad lang niya ay 5,000 sabi ni ABC corporation
babayaran kanalang naming ng 5,000 pesos yung 50 na subscription ibalik mo nalang samin.

3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the
provisions of this Code. (n)

Example: Yung ayaw magbenta ng corporate asset or properties. (example like sa section 39)
Section 41. Power to invest corporate funds in another corporation or business.
Only when the corporation will invest in another business or corporation other that its primary purpose
will Apply on section 41. In that case, majority of the board of Directors and ratification of the 2/3
of the outstanding capital stock or membership is required.
Stock holder who dissents (ayaw mag invest sa ibang business) can exercise the right of appraisal.

Section 42. Power to declare dividends.

The corporation CAN declare dividends. Pag kumita yung corporation, yung portion ng kita niya
pwede niyang ibigay sa shareholder para may makuhang benefit yung shareholder para sa
investment nila.
General rule: a corporation cannot be compelled to declare dividends. Only the boards of Directors
can declare dividends, an in appropriate case, ratified by shareholders. Baka kasi gustong I laan ng
corporation yung kita nila for other staff like pag expand ng company, or pag invest sa other company
What is dividend? It is a portion of profit, that is set aside, declared and ordered by the board of
directors to be distributed to the shareholders.
Different kinds of dividends
A. Cash – in proportion to your shares – board approval
Equation: Cash dividends times your share
In case, there is unpaid subscription, the dividend shall be applied first on the balance of
subscription. (babayaran muna yung kulang)
B. Stock – board approval and ratification of 2/3 of the shareholders
Stock dividend will Increase shareholders share
Equation: (shareholder share divided by outstanding shares) times (additional share)
In case there is unpaid subscription, the dividends shall withhold (or not issued) until full
payment.
C. Property – the board of approval can suffice to ( be competent or capable) for its issuance
General rule: a corporation cannot be compelled to declare dividends
Exception: in case corporation exceeded 100% of its paid-in capital.
Example: If ayala corporation has 1000 shares, ayala has 1M capitalization does not issue dividends
for 10 years, its capital umabot nan ang 2M. that is not allowed by law, so any increase more than 2M
pesos must be distributed as a dividend to share holders
Exception to the exception:
a. Justified by corporate expansion as approved by the BOD.
b. If the corporation is under law agreement preventing it to declare dividend.
c. To meet contingencies. Para ma meet yung emergency ng company. (Contingencies - a
provision for an unforeseen event or circumstance. an incidental expense.)

Section 43. Power to enter into management contract.

Management contracts refers to an agreement whereby one (1) corporation called the managing
corporation, shall manage, control, administer the corporate affairs and operation of another
corporation, called the managed corporation. To be valid, the following must be complied with;
a. The period which shall not exceed 5 years;
b. Approval of the majority of the board and shareholders representing the majority of the
outstanding capital stock;
c. 2/3 of the outstanding capital stock is required if the board of directors constitute a majority of
the managed ang managing corporations respective board, or if 1 shareholder control at least
1/3 of the capital stock.
Management contracts – yung isang corporation will be managed by the another corporation called
the managing corporation

Section 44. Ultra vires acts of corporations

Ultra vires acts are beyond the scope of the corporation’s authority and, therefore, null and void and
cannot be given any effect. Any act outside the express, implied and necessary powers is ultra vires.

The corporation is not allowed to benefit from any of its ultra vires acts, and then later on raise the
issuances of its illegality to shield itself from any liability, or from performing its obligation under
contract.
- May be held liable.
- Any shareholder can suit

What is derivative suit?

It is an action brought by a stock holder on behalf of the corporation to enforce corporate rights
against corporations’ directors, officers and insiders.
 By-Laws

Section 45. Adoption of By-laws

What are by-laws?
These are set of rules for the internal government of the corporation. It defines the relationship
between the corporation and the board of directors, the relationship of corporation and the
shareholders, the relationship of corporation and the corporate officers, the relationship of the
shareholders among themselves, and the shareholders with the board, the relationship of the board
among themselves and the relationship of the board and the corporate officers.
In essence, the corporate by laws is the document which governs the internal rules and regulations
of the corporation. Mas detalyado sa articles of incorporation.
By law can be adopted before incorporation or and after magkaroon ng issuance ng certificate of
incorporation by the SEC.
The by-laws can be adopted by the corporation prior the incorporation, or after the incorporation.
However, if they are submitted before incorporation the effectivity will only commence upon
issuance by SEC of the certificate of incorporation.
Example: ABC corporation before being incorporated and granted the issuance of certificate of
incorporation by SEC adopted already a by laws on June 1 2020, however the certificate of
incorporation is only issued on August 1 2020. The effectivity of by-laws only take effect on
August 1 2020 not on the day of adoption which was on June 1 2020.
However, if the corporation was incorporated on August 1 2020, but the by-laws is adopted on
October 1 2020. The effectivity of by-laws only take effect on October 1 2020.

The by-laws shall be adopted upon approval of the shareholders representing the majority of the
outstanding capital stock, or members of the non-stock corporation.
Section 46- Contents of By laws.
By-laws ang naglalagay ng details kung paano patatakbuhin ang corporation. Yung
relationship ng mga tao, inside the corporation

A. provisions on the calling of regular or special meeting of the board of directors and
shareholders;
kailan ang regular at special meeting at kung paano nagpapatawag ng meeting, is it through
regular mail, pwede bang through email. Kalian ba ang meeting is it every quarter, monthly,
every year? Ilang days ba required magbigay ng notice. Dapat nakalagay sa by laws.

B. provision on quorum and manner of voting;

ang required quorum ba for the BOD meeting is dapat out of 15 BOD does it require 15
members to be present for the effectivity of quorum, pwede ilagay ng by-laws. And it is valid as
a requirement.

C. provision on proxy voting;

is it through proxy vote by executing a spe or only required vote by being actually present on
meeting. Pwede yan ilagay ng by laws

D. provision on the qualification and powers of members of the board of directors.

Pwedeng maglagay ng by laws dapat ang director mai elect has no business with competitor.
That’s a valid requirement.

E. provision on the date of the annual shareholders meeting;

F. provision on the corporate officer other than a member of the board;

can specify the position in the corporation, if nakalagay sa by-laws ang position mo you are
considered as a corporate officer but if your position is not written on by-laws you are
merely an employee of the corporation.

G. provision on penalties.
Example you are not paying subscription on time, you did not disclose your disqualification
when you are elected as BOD

H. provision on the issuance stock certificate and other matters that are connected to the
day to day operations of the corporations.
Section 47. Amendment of by-laws
amendment is a formal or official change made to a law, contract, constitution, or other legal
document. It is based on the verb to amend, which means to change for better.
Procedure for amendment
- the proposed amendment should be by a vote of majority of all the board members or trustees
and majority of the outstanding capital stock or members.
Can it be delegated to BOD kaysa naman lagging may meeting o botohan. Yes the delegation
can be made, BOD can amend the by-laws provided that there is delegation by 2/3 of the
standing capital stock or membership of the non-stock corporation.
- The amendment can be delegated to the board of directors or trustees, subject to 2/3 of the
outstanding capital stock or membership approval.
- The delegation shall be deemed revoked upon the vote of the majority of the outstanding
capital stock or membership
The amended by-laws shall be filed before the SEC, shall be effective upon issuance of the certificate
by the same agency stating it is not inconsistent with the Revised Corporation code (RCC)
 MEETINGS
(REVISED CORPORATION CODE)

Meetings- it implice concurrence or face to face of at least of a two person. Pero ngayon hindi na
kailangan face to face kasi meron ng video conferencing or virtual meeting.

Section 48 - Kinds of meetings

Regular - Is a meeting that is scheduled there is pre-determined date or dates known in advance or
the occurrence and frequency of which is known to the board/trustees or to the
shareholders/members.
(section 48. refers to meeting of the board of directors)
It is stated of the articles of incorporation or the corporate by-laws. Advance to a member.
Example: Every isang corporation scheduling meeting every 15th of April
every year. minsan yung corporation merong regular meeting sa mga stock
holder nila every 3 quarters.
Sketch/Special - walang scheduled date sa meetinghowever due to circumstances or reason special
meeting is called.
Example: may emergency na requires ng approval ng shareholders,mag sscheduled yung board of
directors or board of trustees’ ng special meeting. Kahit na walang specific date para sa special
meeting, yung dahilan is must be stated in the articles of corporate by laws.
Section 49. Regular and special meetings of stock holders or members.
(sec.49 refers to meeting of shareholders or members)

Regular meeting shall be held either on:

A. the date fixed by laws; and
B. on any date after April 15, provided written notice shall be given to all
shareholders or members at least 21 days or prior to meeting.
Take note: under letter
B. any meeting that will be conducted after April 15
meron laging 21 days’ notice sa mga shareholders or members.
Bakit? Para mabigyan pa sila ng opportunity para makapag ready .
It is to prevent a raill roading of the decisions of the corp.
Rail roading is ang pwedi lang maka attend ay yung mga kakampi lang ng
mga BoD. para ma protektahan ang interest ng mga board of directors
under require yung mga BOD na yung mga shareholders ay bibigyan ng
saktong oras if it is not in the by laws a 3 weeks notice .
Cancellation or postponement will be send to a shareholders for atleast 2
weeks prior to the date of the meeting unlesstheres a different date fixed by
the by laws.
Example: Pwedi ba yung notice nay un ay mas maikli kunware ang
nakalagay sa by laws ay 1-week notice lang before the date of cancellation
of the meeting or kailangan 5 days lang magbigay ang corporation ng
notice of postponement don sa kanilang schedule date of the meeting .
It is a law so the by laws must follow the sec. 49 pwedi siyang mas mahaba
doon sa 2 weeks period .pero hindi dapat iikli sa 2 weeks kasi yug rules ng
corporation should follow the law . ,mas mataas ang RCC sa corporate by
laws.

Special meetings - it can be held at anytime deemed necessary or as

provided in the by-laws.
The written notice of meeting must be given to the shareholders for atleast
1 week. Unless the by-laws provide a longer notice lalo na kun emergency
Verbal notice kung may meeting yung mga BOD hindi siya valid notice.

The requirement of the law must be written. it can be send through email for the notice.
Example: ABC corp. nakalagay sa kanyang art.of incorporation yung notice of meeting hindi na
record ipadala sa alahat ng members, will that be legal?
The answer is NO, because the general waiver of lock of notice shall be void. the requirement of the
notice of meeting should be sent by the ABC corp to all shareholders.di pwedi sabihin ni shareholder
na hindi siya makaka attend. Ang iniiwasan ng bata is yung corporation maging tamad sa pagbibigay
ng notice.
The stock and transfer book/book of membership shall be closed before the scheduled date of
meeting unless different period is provided by by-laws and rules
a. 20 days for regular meeting it cannot be opened
b. 7 days for special meeting. Will be closed
The stock transfer book shall be closed hindi siya pweding galawin ng corporate secretary.
The corporate secretary is the person who has the position of the stock and transfer book hindi
pweding I alter.

The right to vote during the meeting may be exercised:

a. in person
b. proxy
c. or when authorized by-laws through remote communication.
Section 50 - Place and time if meetings of stockholders or members.
Whether regular or special meeting it shall be held in:
a. principal office of the corporation;
example: san miguel corp .sa ortigas pa yung office nila. kung subrang daming shareholder
nila it might not possible

b. if not practicable in the principal office it shall be held at city of the municipality where the
principal office is located

Notice shall be sent through the means of communication provided in the by-laws which also mention
the time, place and purpose of meeting.
The meeting will be valid if all shareholder is represented the validity can’t be questioned.

Section 51 - Quorum meeting

Quorum means the required number of the corporation is not for the conduct of the meeting. The
question of the quorum can be depending on its definition under corporate by laws.
Under RCC the quorum is defined as where the shareholders represent of majority of outstanding
capital stock in case of a nonstock corp.
Pag quorum any business that was conducted in that meeting be considered as valid. however, if the
corporate by laws provide for a higher number kunyari for the conduct there must be 60%
shareholders representing capital stock should be present.? yes, it can be valid.
Section 52 - Regular and special meetings of directors or trustees; quorum
To constitute a quorum a majority of the directors or trustees as stated in the articles of incorporation
shall constitute a quorum to transact business.
Any business or any agenda that was decided during meeting will be valid because there is quorum.
Example: pano kung anim lang ang umattend sa15 na BOD sa meeting nag approve sila ng sweldo
ng empleyado? the answer is NO because there is no Quorum.

Regular when it is conducted every month unless the by laws provide, Special may called anytime
upon call by the president.
Note that the notice must be given to every trustee or director at least 2 days of the meeting.
The meetings of directors may be held whether outside or within the phils. Director who has potential
in any interest in any related party transactions that is up for approval of BOD.
Example: director si juan sa ayala corporation,however ayala corporation will be procuring the
services of the company of Juan,juan also ows janitorial corp ,ayala is planning to hire that janitorial
services ,for the approval of BOD andoon din si juan during the meeting,wherein yung agenda ng
meeting is for the approval of the procurement of ayala corp in the janitorial services owned by juan .
Under sec.52 juan, should refused himself from voting hindi siya pweding bumuto..

Section 53 - who shall preside at meetings

Unless otherwise provided by the by-law, the chairman shall preside the meetings of the board, in
his/her absence or incapacity the president may preside.
Kung wala si chairman si president ang mag preside ng meeting. If the president is also the chairman
kung walang naka lagay sa by laws the vice chairman will preside.
Section 54 - Right to vote of secured creditors and administrators
Example: yung mga shares mo may 1000 naman ako na shares sa ABC corporation nangailangan
ako ng pera tapos para makakuha ng instant cash sinangla ko sa Bangko.i am still allowed to vote
during the meetings of abc corp kung sinangla kuna yung shares ko sa bangko .
The answer could be yes, i can still attend the meeting and vote for the shares,however kung yung
loan ko sa bangko. I allowed the bangko to attend in my behalf instead of me,

Section 55. Voting in case of joint ownership of stock

If two or more persons jointly own shares in a corporation, there is a need to secure the consent of all
owners. unless a written proxy is executed by all, authorizing one person to vote in behalf of the
shares co-owned by them.
Example: yung 1000 shares nag asawa ako kaming dalawa may joint account kami tapos yung pera
naming doon pinangbibili naming ng shares.
So sino ang may ari ng shares? it cannot be determined kung tag ilan
shares na sila it will be considered as joint ownership. Sino ang authorize umattend or who will vote
during the election of BOD in behalf of those shares .silang mag asawa can authorized each other
kung sino ang mag boboto sa mga shares namin. Or we can appoint a third party like lawyer

Section 56 - Voting right for treasury shares.

Treasury shares have no voting rights, unless re issued. This is to prevent incumbent directors or
officers from using them in their own ends. Will be suspended until they are re-issued.
Section 57 - Manner of voting
If proxy voting is allowed, the corporation must receive the vote before the tally of the votes finished.
During the voting of the corporation kung yung proxy or if you authorized another person to vote on
your behalf the shares that you own ,the proxy must be submitted before the corporate secretary
bago ma tally lahat ng boto.
Requirements of proxy are those documents authorizing another person to vote in your behalf. Meron
limit, yung proxy hindi lang siya sa pang specific meeting pwedi siyang mag expand for a specific
period the only limit is di siya pwedi mag exceed for the period of 5 years.
Proxy voting is also called a delegated voting.to create a voting bloc.
Section 58 - Voting trust
It is an agreement between group of shareholders of corporation whereby a certain circumstance It is
provided control over the shareholders by the said shareholders.
Example: a group of shareholders can authorize another person to used that shares in an election or
voting. Kunwari ako shareholder ng ayala corporation meron share ang nanay at kapatid ko. now we
can execute a voting trust agreement in my behalf authorizing me that in a certain situation, iboboto
ko yung mga shares nila for that matter.in that voting trust agreement I will always vote against any
distribution of stock dividend that would be valid yun ang tinatawag na voting trust.
Now, it must be noted that a voting trust only endows voting and other rights pertaining to the shares
subject of the agreement. voting trust should not exceed for a period of 5 years at any time. no voting
trust agreement shall be entered to circumvent completion laws and nationality requirements

Section 59. Subscription contract

Subscription contract is a subscription of the stock of the corporate whereby the subscriber agrees to
take a certain number of shares of the capital stock of a corporation, paying for the same, or
expressly or impliedly promising to pay for the same.
Sir: Subscription contract - It is where in the shareholder intends to buy the shares of a corporation.
States: In a subscription contract it states the number of shares and the authorized stocks to be
issued by the corporation, yung kanyang capital stock at kung paano niya babayaran yun, whether
impliedly or expressly.
Essence: the essence of the subscription contract is that it is an agreement to take the unissued
shares of the corporation.
Question: Pwede bang magkaroon ng subscription contract even though the shareholder is yet
unpaid to the number of shares he intends to buy in the corporation? YES!
For example, I signed a subscription contract to the AYALA corporation, binigyan na ako ng
subscription contract, pero that doesn’t mean na automatically bayad na ako nung shares na binili ko.
It is nearly a promise to subscribe on the shares to be issued by the corporation
Includes there: Number of shares to be issued by the corporation, on how to pay it, what is the date in
the payment and the promise to pay.
Section 60. Pre-incorporation subscription.
It is an agreement by the subscriber to which he/she subscribe to a certain number of the proposed
capital stock of a corporation still undergoing incorporation. It shall be irrevocable for a period of six
months.
Bago pa ma incorporates ang corporation, bago pa maapproved nang SEC yung incorporation ng
isang kompanya, a subscriber or a person can already subscribe to the number of shares of a
corporation.
VALID: This pre-incorporation subscription shall be valid for a period of six months.
Question: What will happen if a corporation did not push through? O di natuloy? It can be revoked!
(revoke means to take back or withdraw; annul, cancel, or reverse; rescind or repeal in tagalog
bawiin)

Instances when pre-incorporation subscription may be revoked

a. All other subscribers agree to the revocation;
b. The incorporation of the proposed corporation does not push through; and (Or kung yung
registration sa SEC did not push through)

c. The revocation is before the articles of incorporation is filed with the SEC. The revocation is
MADE before the filing of articles with the SEC,

GENERAL RULE: As a general rule kahit hindi magtayo or naka incorporate ang isang
corporation, subscription is allowed and it is valid for the period of six months.
Section 61. Consideration for Stocks
Sir: The payment for the shares of stocks is not only money or cash,
it can be property, labor or services, or if ang corporation ay may utang sa corporation din it can issue
a shares which is pambabayad niya doon sa pinagkakautangan niyang corporation, it can also be a
surplus profit in case of stock dividends, ( when you issue a stock dividend that surplus profit will be
transferred into the capital of the corporation, so the retained earnings now will be transferred to
capital and operation will issue a stock dividend)
Money is not the only consideration on acquiring shares of a corporation. A share may be acquired in
exchange for the following:
a. Cash
b. Property
c. Labor or services
d. Debt or equity
e. Retained earnings
f. Outstanding shares
g. Shares of stock of another corporation
Example bibili ako nang shares sa ibang company, pwede kong ipang bili yung hawak kong
shares doon sa bibilhin kong bagong shares.
h. Other generally accepted form of consideration
Example: Promissory note, is a kind of an asset, a promise to pay debt.

Take note: If consideration is other than cash, the value of the property or services shall be
determined by the shareholders or the board subject to SEC approval. The property or service should
not be less than the value of the share.
Example: You are a lawyer, and ABC corp wants your legal services. However, ABC corporation has
no cash, ABC corporation then issue 1000 shares sa halagang 1000 per share which is 1,000,000.
Your contribution then is services as a lawyer to ABC corporation in return of that the corporation will
issue share, then you will be a shareholder of the corp. then who will determine or sinong
magdedecide kung ilang share iissue sayo at bakit halagang 1 000 000. It is the shareholder and the
board of directors however it will be subsequently submitted before the SEC for its approval, kasi
pwedeng gawing fraud un, kahit di naman talga 1Million ung halaga ng services mo, what if 200k lang
talaga halaga ng services mo for the representation in court for the abc corporation. pero ang binigay
na value ng board at shareholder is 1Million so the purpose of this is to protect the interest of the
corporation, yung trust fund doctrine which states that the assets of the corporation shall always be
for the benefit of the corporation and its creditors. (creditors meaning a person or company to whom
money is owed.)
Section 62. Certificate of stock and transfer of shares
Sir: A stock certificate is a document evidence issued by the corporation in favor of the
shareholder, stating that the shareholder is owning a share in the corporation.
A stock certificate is a written acknowledgement by the corporation of the interest of the
shareholder in the corporate property. To be a valid issuance, it must comply with the following:
a. Signed by the president and counter-signed by the corporate secretary;
b. Sealed with the seal of the corporation
c. In accordance with by-laws

Sir: It is only valid if it is registered or recorded in the stock and transfer book. And only the
corporate secretary is allowed to record the stock certificate. What if chairman yung nagrecord sa
book? INVALID. Any record made under than this corporate secretary is void and without effect.
The stock and transfer book is the book of the corporation stating who are the shareholder of the
corporation, how much do they own in the corporation.
No transfer shall be valid, unless it is recorded in the books of corporation. Furthermore, only the
corporate secretary is authorized to record the same in the books.

Section 63. Issuance of stock certificates

The corporate secretary is prohibited from issuing stock certificate unless the subscription is not
fully paid.
Hanggat hindi ka bayad completely, hindi maiissue ang iyong stock certificate. You can
subscribe without paying but corporation will not issue you a stock certificate.
Section 64 Liability of Directors for watered stocks.
Sir: Concept of watered stock it is the issuance of the stock for less than its value. Example ang
halaga ng isang share is 1k at gusto mo isang lawyer maghandle nang isang kaso ng corp
however the corp has no money to pay for lawyer, board of director give him 1k shares w/ par
value of 1k per share, lawyer is now shareholder. But the services of the lawyers is determined
the real value of services of the lawyer is only 250k. there’s is a liability of the director for issuing
a watered stock, because the issued shares for less than the consideration that the corporation
received. In that case the director or officer is liable in that act of issuing a watered stock.
A watered stock is that which is issued as fully paid up, when in fact the whole amount of the par
value thereof has not been paid in. if any amount less than the whole face value of the stock has
not be paid, and the stock has been issued as fully paid, then the stock is watered to the extent
of the deficit.
The director or officer shall be liable, based on the following acts:
a. Consents to the issuance of stock for a consideration less than its par or issued value;
b. Consents to the issuance of stocks for a consideration other than cash, valued in excess
of its fair value
Alam niyang lagpas yung totoong value nang isang services ng lawyer compared sa share
na inissue ng corp
c. Having knowledge of the insufficient consideration and does write an objection with the
corporate secretary. The director or officer shall be liable to corporation and creditors,
solidarity with the shareholder concerned for the difference between the value received by
the corporation and the issued or par value.
The director did not object or filed a written objection before the corporate secretary, kahit
na alam niya yung insufficient consideration, in that case he is liable to the difference of
the real value of the services of that lawyer minus the shares that is issued. Example 1M
issued – 250k real value = 750k then the directors and officers who approved and did not
file objection that issuance of share will be liable in 750k pesos solidarily (paghahati hatian
nila) at ibibigay nila un sa corporation. This is to protect the corporation’s asset.
Section 65 Interest on unpaid subscription
The law allows the imposition of interest on the unpaid subscription. The interest is not
stated in the subscription contract, it shall follow the prevailing legal rate which is 6%.
The law allows the corporation to impose interest kapag nakalagay sa subscription
contract na hindi nakapagbayad on time new subscriber o yung taong gustong bumili ng
share within 1 month from the signing of the subscription contract then it will earn an
interest of 12% it is allowed however if there is no provision or hindi nakalagay sa
subscription contract kung magkano ang interest for late payments then it will be
prevailing legal rate which is 6%.

Section 66 payment of balance of subscription

The unpaid subscription shall be due as specified in the contract or on the date call made
by the board. in case, the shareholder failed to pay upon demand the interval and shall be
due and demandable. If no payment was made within 30 days from the demand, the
shares subscribed shall become delinquent subject of sale.
If the payment of the balance of the subscription is a specified on contract for there was a
call. Call means meron ng demand board of directors. that shareholder who failed to
pay from the date of the call of the board of directors or on the dates specified on the
subscription contract th the shares now is shall be considered as delinquent and they can
be sold by the corporation.
An unpaid subscription and its due date is stated in subscription contract the promise to
buy 100 shares worth 1000 per share on september 1, demandable on september 30. but
on september 30 you did not paid and there's already a call from board of directors,
after 30 days or on october 30 they are now considered as delinquent and they can be a
subject on sale in a public auction.
Section 67 delinquency sale
The board of directors shall order the sale by resolution, of the shares which are
delinquent. The resolution shall state the amount due on each subscription + interest,
date, time and place sale which shall not be less than 30 days nor more than 60 days from
the date the stock became delinquent.
The delinquent shareholder shall be sent a notice, whether, personally, registered mail,
or any other means allowed by the by-laws. in addition, the notice of sale shall be
published in a newspaper of the general circulation in the province or city where the
principal office of the corporation is situated.

Example: The share has been delinquent on october 30 maaaring ibenta iyong ng
corporation a board resolution by the board of directors for not less than 30 days from the
date they become delinquent not exceeding 60 days maaaring ibenta ng corporation the
event incorporation on november 29 december 29 2020. the delinquent shareholder shall
be notified a papadalhan siya ng notice either personally or registered mail or any other
means allowed why the corporate by laws pwede email lang yan pwede facebook
messenger. furthermore, the notice shall be published on the newspaper on general
circulation in the province or city where in the principal office of the corporation is situated.
Publish once a week for three consecutive weeks
Unless the delinquent shareholder pace to the corporation, on or before the scheduled
date of sale, the delinquent shares shall be sold at public auction. The bidder with the offer
to pay the full amount of balance of subscription together with accrued interest, cause of
advertisement and expense of sale for the smallest number of shares shall be chosen.
If there is a remaining share it shall be credited in favor of the delinquent shareholders.

In the absence of bidder, the corporation is allowed to be the delinquent shares.

Delinquent Shareholder 50 000 unpaid subscription + 20 000 advertisement and other

expense.

Pedro bid and bought it 200 000.

70 000 will go to Corporation

130 000 goes to delinquent Shareholder
If there is no bigger in the auction the corporation can be for the for the delinquent share.
Section 72 Lost Or Destroyed Certificates.
The shareholder must file an affidavit before the corporation, detailing the loss, destruction
of the certificate.
At the expense of the shareholder, a publication in a newspaper of general circulation for a
period of once a week for three consecutive weeks, is stating the fact of loss or destruction
of the certificate.
After publication a one-year week period after the last date of publication, before a new
stock certificate may be issued, provided no one contest the same the one year waiting
period may be dispensed with if a security is provided by the applicant.
In case, there is a party contesting the application it shall be resolved by the court and the
issuance of the stock certificates shall be held abeyance until final judgment.
The corporation allows to issue stock certificate even if 1 year is not finish when there is a
strict security that was provided the applicant or shareholder.

Example of strict security is a 300 million house and lot.

The corporation is prohibited to issue stock certificate if merong issue sa shareholder na
nakawala, merong other shareholder na against na nagsasabi na sa kanya yung nawalang
stock certificate. It should be resolved muna by the court before issuance of the stock
certificate meron ng final judgement on court.
No person shall be allowed to sue the corporation if there was an issuance of stock unless
it is by the reason of a fraud for negligence, hindi mo pwedeng kasuhan ang corporation

Section 70 – effect of delinquency

The holder of delinquent shares is prevented from voting, or be voted, or to be representation

in a meeting, except the right to dividends. Until full payment of the subscription plus interests,
costs and expenses, the rights of the shareholder shall not be restored nor be exercised.

Cannot exercise right unless fully paid. The right to attend meeting, the right to vote.

Section 71 – rights of unpaid share, non-delinquent.

They may be exercise certain rights of shareholders. Unpaid pero di pa lumalagpas sa specific
contract deadline or wala pang call ng bod. Shareholders of that share can still exercise the
right of the share
VOCABULARY WORDS
Ratification the action of signing or giving formal consent to a treaty, contract, or agreement, making
it officially valid.
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