Meetings 2 types of meetings: 1. Stockholders 2. Directors 2 kinds: 1. Regular 2. Special 5 essential requisites for a valid SHs meeting: 1.

It must be held on the date fixed by the by-laws or in accordance with law (if there is no date fixed, it may be held on any date on April as may be fixed by the BOD) 2. Prior notices must be given (posted or sent at least 2 weeks prior to the meeting [regular/annual]; and 1 week [special]); unless the by-laws requires a different period. The by laws may extend or shorten the sending out of notices. Directors vs. Tan the by-laws provided for a 5 day notice rule which upheld its validity, nonetheless, it posted 2 days prior to the meeting, thus the court held that the meeting and resolution passed was not valid for want of notice. 3. Must be held at the proper place/venue. As far as practicable, in the province or municipality where the principal office is located [stock]; meetings may held anywhere in the Philippines provided that proper notices shall be posted/sent [non-stock] Metro Manila is considered as one municipality) 4. It must be called by the proper person or officer. By the president or the secretary on orders of the president, unless the by-laws provide for a different person If there is a person who authorize to call the meeting but neglects or fails to call one, the court is not authorized to grant the SH may not be granted to call one, the proper remedy is mandamus) 5. The quorum and voting requirements must be met. Majority of the SH/members owning or representing at least a majority of the outstanding capital stock is the requisite quorum, unless the law requires a higher voting percentage) For instance in the voting for amendment of AOI, the vote requires 2/3 of the outstanding capital stock, but only majority of SH representing OCS, there is a quorum if there is a majority SH but cannot amend the AOI because the vote required is 2/3 as provided by the law. Amendment of the by-laws majority Amendment of the AOI 2/3 Non-voting shares are not including in determining the voting requirement, unless they are nonetheless entitled to vote in the penultimate paragraph of Sec. 6. (in amendments of AOI, can vote; If 1M ACS, 20% NVS, 800k VS, election of directors (quorum requirement is 400k), amendments of AOI include NVS because they are entitled to vote. 2/3 will be based on 1M shares. The effect of a SHs meeting improperly held or called, the resolutions passed will not be necessarily be without force and effect. It shall nonetheless be valid if all of the SHs/members are present or duly represented (proxy). During annual meetings of the SH, the audited financial statement is presented to SH for their perusal. Thats why the law choose the date of April (if no provision in the by-law) because it is the time when the financial statement is audited (filing of the Income Tax).

Directors/Trustees meetings (S53 and S54) Regular or Special Regular held monthly or provided for in the by-laws Special called at any time upon call of the president or provided in the by-laws Venue is anywhere within or outside the Philippines, unless provided in the by-laws. For purposes of convenience. SMC acquired brewery in HK, SMBHI they went to see the facility in HK before they acquired the property. They held a meeting and decided to purchase the property in HK. The court ruled that they can hold their meetings anywhere for their convenience The quorum requirement is fixed. Majority of the number is fixed in the AOI is the quorum requirement. If 9, the quorum is 5. If 2 died, the quorum requirement is still 5. The vote of the majority of those present at which there is a quorum will pass a valid corporate act. Except in the case of election in the other corporate officers the vote requires of the entire membership of the board; or unless the AOI or By-laws provided greater requirement. 9 members, 5 present there is a quorum. Of the 5, 3 voted of a particular corporate act is still valid, 3 of 9 quorum SH meetings, proxy is matter of right; in members and directors meetings (s25), proxy may be denied. If they vote by proxy, they have abdicated the powers granted to them. But if a director but it is a SHs meeting, may send a proxy but if directors meeting, no. A directors meeting improperly held/call, generally, it would be without force and effect. But they may be ratified, express or implied or by way of estoppel. Lopez realty vs Fontecha Dirs meeting was called granting employees incentive benefits. One of them was abroad and not notified but evidence presented that she knew of the resolution taken by the board in the meeting improperly held and she did not interpose any objections and signed the two vouchers and resolutions. The Court held that that director is in estoppel. Express if it is in a subsequent formal meeting of the same board. Implied from the acts of the responsible corporate officers.

PRE-INCORPORATION SUBSCRIPTIONS 2 types of subscription as to time of execution: 1. Pre-incorporation subscriptions subscriptions for shares of stock of a corporation still to be formed; and 2. Post-incorporation those made or executed after the formation or organization of the corporation GR: a subscription for shares of stock of a corporation still to be formed is irrevocable EXCEPTIONS: Lapse of a period of 6 months from the date of subscription; all subcribers consent to the revocation; or the incorporation of said corporation fails to materialize within 6 months or within a longer period as may be stipulated in the contract of subscription. EXCEPTION TO THE EXCEPTION: No pre-incorporation subscription may be revoked after the submission of the AOI to the SEC Pre-incorporation subscriptions are mandatory which mandates that a corporation may be registered as such only if at least 25% of its ACS has been subscribed and that at least 25% of the total subscription has been paid. Stocks shall not be issued for a consideration less than the par or issued price thereof.

S62 CONSIDERATION FOR STOCKS: 1. Actual cash paid 2. Property, tangible or intangible, actually received by the corporation 3. Labor/services actually rendered to the corporation 4. Previously incurred indebtedness 5. Amounts transferred from URE to stated capital (Stock Dividends) The corporation makes profits and instead distributing cash to SH, it will issue SD. The consideration will be the URE of the corporation 6. Outstanding stocks exchange for stocks in the event for reclassification i.e. Founders shares because it may be granted rights and privileges not accorded to other SH. Such as Exclusive right to vote or be voted upon from the period of 5 years with approval of the SEC and after the 5 yr period the holders thereof shall surrender the founders shares and be converted to common stock. The amount paid will be the same consideration of the common shares by virtue of reclassification The consideration for the issuance of stocks of a corporation may consist of any of the six forms indicated in S62 or combination of two or more of them. A corporation is allowed to issue its stocks, in exchange of properties tangible or intangible, which must be: 1. Actually received by the corporation; 2. Necessary and convenient for its use and lawful purposes; 3. The value of the property should be at least equal to the par or issued value of the stocks. S64- Issuance of Certificate of Stocks CS cannot be issued unless it is fully paid CS cannot be issued for the corresponding number of shares which the subscribers may have already been paid for subscribed 1M shares, 500k paid, the corporation cannot issue CS unless fully paid Stock subscriptions are indivisible. Transferability of shares of stock in the corporate form of business. The CS may be transferred by the delivery of the stock certificates endorsed by the owner/atty-in-fact. No transfer shall be valid except as between the parties, until the transfer is recorded in the books of the corporation. If not recorded, insofar as the parties are concerned, the transfer shall be valid For a valid transfer of shares of stocks may transferred when endorsed and delivery of the certificate of stocks. Endorsement without delivery is not a valid and effective mode of the transfer of stocks (embassy farms vs ca) Delivery alone without endorsement is also ineffective mode of transferring shares. (Razon vs IAC) Other modes of transferring shares of stocks: 1. Duly notarized deed (Rural Bank of Salinas vs CA) A transfer set in a notarized deed is equivalent to the delivery of the thing itself. (Upiaco case) 2. But when a certificate of stock has already been issued to the owner thereof, a mere notarized deed may not be sufficient for a valid transferred share of stocks. It must be coupled with delivery avoid fraudulent or fictitious transfers of shares. (Rural Bank vs. CA) 3. Exception to the exception: Even without a delivery/endorsement of Stock Cert which have already been issued, transfer is valid if the transferor is in estoppel Tan vs SEC- the transferee is the brother of the transferor, the transferee already exercised his right as a director and was elected as such during the time the transferor was the president of the corporation. The court ruled that endorsement/delivery is not essential where the person

sought to be considered as a SH is an officer of the corporation and has the custody of the stock and transfer book. He is considered as an estoppel. Are certificates of stocks negotiable instruments? No. they are merely quasi-negotiable but nonnegotiable. The transferee takes it without prejudice to all the rights and defenses which the true and lawful owner may have and obtaining in a particular set of circumstances subject to the rules governing estoppel. (delos santos vs mcgruise) No matter how innocent the purchaser may be, if there is no endorsement and delivery, no valid and effective transfer, because it is subject to all defenses and rights in which the true owner may have. Registration of the transfer in the stock and transfer book must be had in order to be valid and binding to third parties even to corporation and subsequent creditors. Failure or refusal to record such transfer, the remedy is mandamus. (Rural bank of Salinas vs. CA) the right of the assignee/transferee to have the stocks transferred in his name in the books of the corporation is his inherit right flowing from his ownership of shares of stock. The court ruled that when a corpo refuses the transfer, mandamus will issue to compel the officer to transfer the said stocks in the books of the corporation. The duty of the corporation to record the transfer of shares of stock in the stock and transfer book is ministerial. If refused without good cause, may be compelled to do so by mandamus. Exception: in order that mandamus may issue, the alleged transferee must have a clear and legal right to the thing demanded. It is the imperative duty of the Corporation to perform the act required. It neither confers nor imposes duties and never issued in doubtful cases. TAY vs CA creditor sought to compel the corporation to record the transfer, the debtor SH pledged his share to the creditor certain amount of money. SH failed to pay, the creditor sought the recording of the shares of stocks in his name in the books by failure of the SH to pay pursuant to contract of pledged. Corporation refused. The Court denied the mandamus because the owner of the thing pledged remains to be the owner thereof until a sale of public auction has made under the Civil Code. The creditor never failed to do so, thus he has no clear and legal right. The pledgor remains the owner of the thing unless sold in public auction Transfer may be restricted or regulated by law or agreement of the parties. Restrictions: 1. The corporation cannot be compelled to record transfers of shares if it has unpaid claims over the shares sought to be transferred in the books. (S63) Unpaid Claim is the unpaid portion of the subscriptions (CBC case) 2. May be imposed by Special Laws 3. Imposed by the Corporation Code, 63, 96 Close corporation, it must contain all the three provisions, all of which shares of stocks of any class shall be subjected to one or more specified restrictions allowed by the code. All close to provide restrictions in the transfers of shares. All shares of stocks, exclusive of treasury shares, shall be held of record by not more than 20 specified persons If the transferee is not one of those specified person, cannot transfer or have the transfer recorded in the books of the corporation.) Unpaid subscription or any percentage thereof, together with interest if required by the by-laws or contract of subscription, shall be paid either:

1. On the date or dates fixed in the contract of subscription 2. On the date or dates that may be specified by the BOD pursuant to a call declaring any or all unpaid portion thereof to be so payable. Trust Fund Doctrine subscriptions to the capital of a corporation constitute a fund to which creditors have the right to look up to for the satisfaction of their claims. The minimum requirement of capital structure is at least 25 % of the ACS must be subscribed and 25% of the subscription must be paid. (remedies to enforce payment): a. By way of a delinquency sale (S67-68) b. Direct action in court (S70) (S67-70) The unpaid portion of the subscription may be payable or demandable upon call made by the board of directors for the payment of the unpaid portions thereof fixing the date when they are to pay the same, failure to do so, the shares will become delinquent and would subject the shares to a delinquency sale. The shares will be subjected to an auction sale not earlier 30 days and not later than 60 days. It will be sold to the bidder who tenders to pay the full amount of the balance of the subscription + cost and expenses FOR THE LEAST NUMBER OF SHARES. X subscribed 1M shares, 500k paid out of subscriptions, the corpo incurs loses and needs money, in order to raise money, it calls to the unpaid portions of the subscribers and specified the date when they are due. X did not pay on the date specified on the call. The corporation may now proceed to sell the same at a delinquency sale (30-60 days) The winning bidder shall be the one who pays all balance of the subscription plus cost and expenses, if any, for the least number of shares. (3 bidders, A-505k for 990k shares; B-505k for 980k shares; C-505k for 970k shares. The winning bidder will be C because he tendered the full amount of the unpaid subscription + cost and expenses for the least number of shares) (970k shares will be listed under the name of C in the books of the Corporation. X will still be a SH to the extent of the difference between the bid of C and 1M subscription of X, 30k shares left in his name. the effect, X paid 505k for only 30k shares, and C paid 505k for 970k shares) If no bidders, the corporation may also bid subject to the provisions of the code. Through the power of the corporation to reacquire shares and it should have URE in order that it may reacquire its shares. If the corporation has losses, it has no URE, thus corporation cannot bid its own shares But the corporation may still file a collection case to recover payment from the unpaid portions of the SH because the unpaid portions is considered debt of the SH. Redeemable shares, in case of close corporation. If the auction sale was irregularly held, the validity of the sale may be questioned by the SH subject to the provision of S69. If SH tenders payment of the acquisition cost to the winning bidder, and he must institute the complaint within 6 months from the date of the sale. Failure to do so, SH cannot validly question the sale. (was inserted for the purpose of the stability of shares)

 If the shares are declared delinquent/due and demandable, and corporation made a call, it will be the bound duty of the subscriber to pay when they became due and demandable as provided in the contract, failure to do so may still be subject to delinquency sale. Effect of delinquent SH. The delinquent SH loses his right to vote and be voted upon and will not be entitled to any rights of a SH except the right to receive dividend. (S71) Delinquent SH may still be entitled to cash dividends. But must be first be applied to his delinquency + cost and expenses due him If it is by way of stock dividend, it shall be withheld from him If the SH is also a director, who is delinquent, he will likewise loses his right to vote and be voted upon and shall not be entitled to any of the rights of the SH except the rights to receive dividends. But he shall not be disqualified to be a director as long as he owns at least one share of the stock. Even if he is delinquent, he is still qualified to act as a director(Bar) until all his share is sold in public auction. If he predeceases to be a SH, he is also automatically disqualifies to act as a Director. Lost or destroyed Stocks Certificates The SH must execute an affidavit stating: 1. The manner and conditions on how it was lost/destroyed 2. Number of shares represented by such certificate 3. Serial number of the certificate and 4. Name of the corporation which issued the same The replacement will be issued after 1 year from the date of the last publication. But may be issued earlier than 1 year if the owner files a bond satisfactory to the owners. Purpose is to avoid duplication of certificates of stock and the avoidance of fictitious and fraudulent transfers. The BOD has the authority to decide the amount and the kind of surety bond. Corporate Books and Records (S74, S75) The following shall be kept and maintained by the corporation: 1. Every corporation registered under this provisions to keep a record of all business transactions (S74) 2. Minutes of meetings of both the SH and Directors 3. The Stock and Transfer Book or Membership Book if non-stock 4. Financial statements (S75) All this books and records shall be subject to inspection by members and SH during reasonable hours on any business day and either personally or through his authorize representative, with or without the presence of the particular SH concerned. W. Philpotts case, inspection may be done with the SHs representatives Non-Stockholders, or assuming even the heirs of the deceased stockholder cannot inspect the books and records of the corporation of the SH. Puno vs Puno Ent. (599S685) the SHs right to inspection of the corporate books and records is based upon his ownership of shares and the necessity of self-protection. A SH has the right to be intelligently informed about the corporate affairs and such right rest upon the underlying ownership of the corporate assets and properties. Only the SH of record are entitled to receive dividends from the corporation as an inherit right. In this case, the SH died, the heirs wanted to exercise the ownership over the shares left by their deceased father. Upon the death of SH, the heirs do not automatically

become SH of the corporation and acquire the rights and privileges of the deceased SH. The stocks must first be distributed to the heirs upon estate proceedings and the transfer of the stocks should be recorded in the books as required under S63. During the interim period, the heirs stand as the equitable owners of the stocks. The executor/administrator duly appointed by the court being vested with the legal title of the stocks until the settlement and division of the estate are effected, the estate of the decedent are held by the executor/administrator who are entitled to exercise the rights of the deceased SH. An estate proceeding must first be effected before the heirs can exercise ownership over the shares A SH of a holding/parent company cannot inspect the books and records of the subsidiary if he is not a SH of the subsidiary. The holding company must own wholly all the shares of the stocks of the subsidiary before a SH of the holding/parent company may inspect the books and records of the subsidiary. Case of Gokongwei vs. SEC If wholly owned, even if not a SH of the subsidiary, the SH of the parent may inspect the books of the subsidiary. If the two entities, parent and subsidiary, are legally being operated as separated and distinct copy, no right of inspection on the part of the parent to inspect the books of the subsidiary. (rogers vs. Sherman oil) If a SH/member is refused the right of inspection, the remedy is mandamus with claim for damages and/or attorneys fees; or criminal complaint for the violation of his right under Sec. 144 of Corporation Code where a fine of 1k-10k or imprisonment of 30 days 5 years (it is the penal provision of the Corporation Code) (S74(2))The defenses of the officers/directors may advance to avoid liability are: a. Improper use of information secured through previous examination b. Not acting in good faith or for a legitimate purpose PNB vs. Gonzales, Gonzales acquired 1 share of stock of PNB in order to pry into the activities of the bank even before he was a SH. The bank officers refused. The court ruled that there was improper use of information secured through previous examination and not acting in good faith. PNB was created by special law and primarily governed by law creating them and supplemented only by Corporation Code whenever applicable. A SH of PNB cannot examine the financial records of the bank. The charter of the bank only allows the monetary board of the Central Bank itself and the result can be divulged to the President of the Philippines, Secretary of Finance and the board themselves. c. The right is limited or restricted by special law or the law of its creation S76-80 Mergers and Consolidations 78 and 79 are procedures of mergers and consolidations The requirements and procedure necessary to accomplish a merger or consolidation are as follows: 1. The BOD/Trustees of each constituent corporation shall approve a plan of merger or consolidation setting forth the matters required in Section 76; 2. Approval of the plan by the SH representing 2/3 of the OCS or 2/3 of the member in Non-Stock of each of such corporations at separate corporate meetings called for that purpose 3. Prior notice of such meeting, with copy or summary of the plan of merger or consolidation shall be given to all SH or members at least 2 weeks prior to the scheduled meeting

4. Execution of articles of merger or consolidation by each constituent corporations to be signed by the president or VP and certified by the corporate secretary or asst. secretary setting forth the matters required in Sec. 78 5. Submission of articles of merger or consolidation in quadruplicate to the SEC subject to the requirement of Sec. 79 that if it involve corporations under the direct supervision of any other govt agency or governed by special laws, the favourable recommendation of the said govt agency shall be first be secured; and 6. Issuance of the certificate of merger or consolidation by the SEC at which it shall be effective. If the plan is contrary to law, the SEC shall set a hearing to give the corporations an opportunity to be heard upon proper notice and the SEC shall proceed as provided. S80: Effects of Mergers 1. The constituent corporation or the parties to the mergers and consolidation shall become a single corporation, in the case of merger would be the surviving or absorbing corporation; in consolidation, the consolidated corporation. 2. The separate existence of the corporation shall cease except that of the surviving or consolidated. 3. The surviving or consolidated corporation shall possess all the rights, immunities and powers and shall be subjected to all the duties and liabilities of the corporation organized under the code. 4. The surviving or consolidated shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations and any and all properties and all receivables due and whatever account including subscriptions to shares and other choses in action and all and any other interest of, or belonging to or due to each of the constituent corporations shall be transferred to surviving or consolidated corporation without any further act or deed. No need to indicate in the contract to the effect that all rights, properties, or remedies shall be vested to the surviving/consolidated corporation. The law provides for its effect and it is automatic. 5. The surviving and the consolidated corporations shall be responsible and liable to all the liabilities and obligations of the constituent in the same manner as if the surviving/consolidated corporation have itself incurred such liabilities and obligations; and any pending claim brought by or against any of the constituent corporation may be prosecuted against the surviving/consolidated corporation. Merger union effected by absorbing one or more existing corporations by another which survives and continues the combined business. Consolidation the uniting or amalgamation of two or more existing corporations to form a new corporation. Associated Bank vs CA F: Associated Bank Corporation and Citizens Bank and Trust Company merged to form just one banking corporation by virtue of the Amended AOI. The defendant Lorenzo Sarmiento executed in favor of AB a promissory note undertaking to pay the latter P2.5M on or before March 6, 1978. However, due to failure of Sarmiento to pay, AB filed this complaint. The defendant denied all the allegations and alleged as affirmative and special defenses that the complaint states no valid cause of action and AB is not the proper party in interest because the prom note was executed in favor of CBTC. The court ruled in favor of AB and ordered Sarmiento to pay AB his remaining balance + interest and attys fees. CA set aside the decision of the tc and dismissed the complaint. Hence, this appeal.

I: W/N the AB may enforce the prom note made by provate respondent in favor of CBTC, the absorbed company after merger? R: Yes. In the merger of two or more existing corporations, one of the combining corporations survives and continues the combined business, while the rest are dissolved and all their rights, properties and liabilities are acquired by the surviving corporation. Although there is a dissolution of the absorbed corporations, there is no winding up of their affairs or liquidation of their assets because the surviving corporation automatically acquires all their rights, privileges and powers, as well as their liabilities. The merger, however, does not become effective upon the mere agreement of the constituent corporations. There should be approval by the SEC of the articles of merger which, in turn, must have been duly approved by a majority of the respective SH of the constituent corporations. In this case, an agreement of merger with AB and CBTC was entered on September 16, 1975 and provided that its effectivity shall be the date when the necessary papers to carry out this merger shall have been approved by the SEC. the agreement likewise provided for the transfer of the properties, rights, privileges, powers, franchises, assets, including goodwill and tradename, and all debts due to CBTC and all other actions belonging to CBTC shall be vested in AB as the surviving bank without need of further act or deed. The records do not show when the SEC approved the merger, however, assuming that the effectivity date of the merger was the date of execution, the Court cannot agree that petitioner no longer has any interest in the promissory note. The fact that the promissory note was executed after the effectivity date of merger does not militate against petitioner. The agreement itself clearly provides that all contracts irrespective of the date of execution entered in the name of CBTC shall be understood as pertaining to the surviving bank AB. Although the promissory note names CBTC as the payee, the reference to CBTC in the note shall be construed as a reference to petitioner bank. The Court holds that petitioner has a valid cause of action against Sarmiento. Consolidated/surviving corporation will not absorb the employees of constituent corporation absent specific provision in the merger agreement because the employees are not considered assets nor liabilities of the corporation. Management of the surviving/consolidated corporation has the discretion to deny or absorb the employees, while the employees may likewise refuse to be absorbed otherwise there will be forced labor.

S81 APPRAISAL RIGHT vs Pre-emptive right Appraisal right granted to dissenting or objecting SH uncertain corporate or business decisions and demand the payment of the fair value of his share. Not available in any or all instances when a SH objects on a particular corporate act or transactions. Only available as provided for the corporation code. Instances of appraisal right any SH of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances: 1. In case of any amendment of AOI that has the effect of changing or restricting the rights of any SH; or class of shares or authorizing preferences in any respect superior to those outstanding shares of any class; or shortening or extending the corporate term or existence It is not available in all instances where there is an amendment of AOI under S16 subject to the appraisal right or provisions governing general amendment. Unless such appraisal right is subject to the preceding paragraph. 2. In case of the sale, lease, transfer, mortgage, exchange, pledge or other disposition of the corporate assets

3. In cases of mergers and consolidation 4. May be exercised by dissenting SH in cases falling under S42 5. However, a SH in closed corporation may for any reason under S105 compel the corporation to purchase his share at the fair value effectively granting the SH absolute right of appraisal, if not denied by AOI and provided only that the corporation has sufficient assets to cover debts and liabilities exclusive of capital. This rule does not apply in ordinary corporation. The effect of appraisal right from the time the demand of payment until the abandonment of corporate action, all rights accruing to such shares including voting and dividend right shall be suspended provided the SH is not paid the value of the shares within 30 days from the date of the award, his voting and dividend right shall be restored The delinquent SH is entitled to receive dividends, but a SH exercising his appraisal right is not entitled to any of it. However, both of them have no voting rights. A SH exercising his appraisal right who is also a director does not lose his right as a director unless his shares are fully paid for by the corporation. The shares will still stand and remain in his name in the books of the corporation. A SH who does not paid his subscription in full may exercise his appraisal right under S72. Subscribers to shares of stocks not fully paid shall have all the rights of a SH. The annotation of the Stocks Certificate under S86 in order that appraisal right may be exercised is not mandatory; it is in the option of the corporation.

Title 11 Non-stock Corporation Sec. 3 with 87, one where no part of its income is distributable as dividends, members, trustees or officers. The provisions governing stock corporation when pertinent except may be covered by specific provisions of title 11. S89 VOTING RIGHTS Each member is entitled to one vote, thus cumulative is not generally allowed in NS. (Whereas cumulative voting is a matter of right granted to SH in a Stock Corporation) Except where the AOI or by-laws of non-stock may broaden, limit or deny voting rights of the members. i.e voting rights by proxy, honorary members, inactive or active members, etc. Doctrine of limited capacity in the corporate form of business Membership in a non-stock is personal in nature and non-transferable unless the by-laws provide otherwise. Membership acquired in a non-stock corporation Pursuant to the powers to issue stocks and admit under S36(6), A non-stock corporation can provide manner of admission of its members. Cebu Country Club vs. Elizagake can set criteria and standards to admit their member. The transferee of a membership certificate does not have the same right or privilege to compel the corporation to transfer in his name to become a member of the non-stock. However, in this case, it effectively upholds the non-profit, non-stock corporation to determine who its members shall be. It has the right to approve or disapprove an application for propriety membership. As long as the right should not be exercised arbitrarily. (In this case, Elizagake is a transferee of Cebu Country Club. He filed an application and used the application form of the club, however, it appears that that form does not impose or require a unanimous vote of the members to admit a member. He did not know that there was already an amendment of that provision in the application form which was amended more than 19 years ago. He only presumed that the requirement for the vote is only the

majority. But he was denied membership because one of the members objected. One of the defenses was that the amendment was not printed due to economic reason. The Court ruled that the said excuse was flimsy and unconvincing. The Court cannot fathom why such a prestigious country club whose members are all affluent did not have enough money to cause the printing of an updated application form. The court though admitted that a non-stock have the right to set standards and criterias, it should not be, however, be arbitrary as provided under Art. 19 of the Civil Code.) (S93) Place of Meetings In non-stock corporation, anywhere within the Philippines, otherwise provided in for the by-laws. Board of Directors GR: in a Stock corporation, BOD is composed of a 5-15 members except in close corporations, or banks EXCEPTION in non-stock, BOD can be more than 15 members Term of Office In Stock, not more than 1 year; In Non-stock it can be 3 years Term of office is fixed by law Tenure of Office May be shorter or be longer; In non-stock, the other corporate officers, i.e president, secretary or treasurer, may be directly elected by the members unless provided for in the AOI In Stock, the officers are voted by the BOD DIFFERENT TYPES OF CORPORATIONS ARE GOVERNED BY THE DIFFERENT PROVISIONS OF THE CODE

TITLE 12 CLOSE CORPORATION S96 a close corporation is one whose AOI provides for 3 specific provisions: 1. All of the corporations issued stocks, exclusive of treasury shares, should be held of record by not more specified number of persons not exceeding 20 2. All of the issued stocks of all classes shall be subjected to one or more specified restrictions on transfers permitted by this title 3. The corporation shall not issue or lease in any stock exchange or make any public offering of any of its stocks of any class There is exclusivity of stock ownership in the close corporation. The three qualifying conditions must be indicated and present in the AOI in order to be considered legally or technically a close corporation. Absence of one of the requirements it will render not a close corporation and will be governed by the general provisions which apply to ordinary stock corporation. Otherwise stated, the mere fact the hubby and wife owns 99% in a corporation does not render a corporation close corporation.