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1. Please comment on the ff.

proposal of a group of individuals who want to

organize a building and loan association.
a. P20 billion divided into 10 billion non-par value shares of preferred stock
to be offered at an issue value of P1.00 per share, and 10 billion shares of
common stock, with a par value of P1.00 per share.
b. All shares shall have the same voting rights except that only common
shares shall vote on any proposed increase or decrease of the authorized
capital stock.
c. The authority to declare all dividends shall be lodged in the board of
d. Only holders of fully paid shares of stock may vote to elect members of
the board of directors
e. Directors may not be elected as officers of the corporation
f. The directors annual bonuses shall be equivalent to 10% of gross
revenues of the preceding year
g. A candidate for director must own at least 100 fully paid shares
h. Meetings of the board of directors shall be held in the principal office of
the corporation or in any place in/out of the country.
2. Juan dela Cruz, is a director of both ABC and XYZ Corporations. He owns 1%
of the outstanding capital stock of ABC and 40% of XYZ. ABC plans to enter
into a contract with XYZ that will both companies earn substantial profits. The
contract is presented to the board of both corporations.
a. In order that the contract will not be voidable. What conditions will have to
be complied with?
b. If these conditions arent met, how may this contract be ratified?

3. XYZ Corp is in need of land used in the expansion of its business. Jose Cruz
owns a piece of land ideal for the purpose and the corporation offers to buy it
. As payment Jose Cruz will be paid in shares of stocks of the corporation. The
board decided to accept the terms of Cruze but since that authorized capital
stock of the corporation has been fully paid, it proposes to increase the
authorized capital stock so it can consummate the sale. Thus, proposal of
issuance of new shares was submitted to the stockholders special meeting
for the purpose.
Pedro Reyes, who has 100 shares in the corporation, insists that the
corporation allocate to him his proportionate share of the new issue which he
offers to pay in case, alleging his pre-emptive right. Holders of 80% of the
outstanding capital stock are in favor of the proposal to increase the capital
stock including the exchange of land for new shares of stock.
Is Pedro within his rights in claiming a pre-emptive right?