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MEETINGS
SEC. 49 Kinds of meetings - meetings of directors. Trustees , stockholders or
members may be REGULAR OR SPECIAL.
SEC. 50 REGULAR AND SPECIAL meeting of STOCKHOLDERS or MEMBERS
1. REGULAR MEETINGS of Stockholders and Members
- held annually on a date fixed in the by-laws
- if not so fixed, on any date in April of every year as determined by the Board of
Directors or
Trustees
- written notice of regular meetings shall be sent AT LEAST 2 WEEKS prior to
the meeting, unless
a different period is required by the by laws
Regular meeting is principally for the purpose of electing another set of
directors or trustees
2. SPECIAL MEETINGS OF STOCKHOLDERS OR MEMBERS
- Held at any time deemed necessary as provided in the bylaws
- Provided, that AT LEAST 1WEEK written notice shall be sent prior, unless
otherwise provided in the by laws
Notice of any meeting MAY BE WAIVED, expressly or impliedly, by any
stockholder or member
For any cause, SEC, upon petition of a stockholder or member on showing of
good cause, may issue an order directing him to call for a meeting.
MEETINGS OF DIRECTORS OR TRUSTEES
1. REGULAR those held by the board MONTHLY, unless the by laws provide
otherwise
2. SPECIAL those held by the board AT ANY TIME UPON THE CALL OF THE
PRESIDENT or as provided in the by-laws
NECESSITY OF MEETINGS
The corporate powers are vested in the board of directors or stockholders AS
A BODY AND NOT AS INDIVIDUALS.
They can act only in meetings properly convened or assembled.
GR: Where the law expressly requires a meeting for a particular transaction, any
action taken by the corporation WITHOUT A MEETING PROPERLY HELD FOR SUCH
PURPOSE IS VOID.
EXCEPTIONS:
1. Amendment of Articles of Incorporation by majority vote of the BD and the
vote or writtem assent of the 2/3 of the stockholders representing at least 2/3
of the outstanding capital stock
2. Unanimous act or agreement of its stockholders
3. In any cases mentioned in Art. 101, any action taken by the directors of a
close corporation without a meeting SHALL BE DEEMED VALID, unless
otherwise provided in the by laws
Pres. Decree 902-A, SEC. 6 The SEC has the power to COMPEL THE
OFFICERS OR ANY CORPORATION OR ASSOCIATION REGISTERED BY IT TO
CALL MEETINGS OF STOCKHOLDERS OR MEMBERS THEREOF, under its
supervision
Notice of meetings shall be in WRITING and the TIME AND PLACE thereof shall
be stated therein.
All proceedings had and any business transacted, if within the authority of
the corporation, SHALL BE VALID EVEN IF THE MEETING BE IMPROPERLY HELD
OR CALLED, PROVIDED, all the stockholders are present or duly
represented at the meeting.
The proper place for the holding of stockholders meeting as provided in Sec.
51 IS MANDATORY. The by-laws CANNOT PROVIDE OTHERWISE, EXCEPT by
SEC. 93 with respect to meetings of members of non-stock corporation (at
any place even outside the place where the principal office of the
corp, with date and time and within the Phils.)
DIRECTORS OR TRUSTEES MEETINGS
May be held at ant pace fixed in the by-laws EVEN BEYOND THE BOUNDS OF
THE STATE where the corporation exist.
The directors and Trustees ARE NOT A CORPORATE BODY; they are, when
acting as a board, BUT AGENTS OF THE CORPORATION.
The notice must comply with any other requriements prescribed by the law or
by laws
1. Sec. 77 requires that the notice of meeting for the approval of merger or
consolidation, SHALL STATE THE PURPOSE OF THE MEETING AND SHALL
INCLUDE A SUMMARY OF THE PLAN OF MERGER OR CONSOLIDATION
2. SEC. 118 prescribes the the notice of meeting for VOLUNTARY DISSOLUTION,
shall be made by publication, in addition to written notice, which shall be sent
by registered mail or personal delivery.
A substantial compliance as to notice will be sufficient
A special meeting may NOT CONSIDER BUSINESS OTHER THAN THOSE LISTED
in the notice of meetings, UNLESS THERE IS UNANIMOUS WAIVER.
FAILURE TO COMPLY WITH REQUISITES FOR MEETING
Under Sec. 51, all proceedings had and any business transacted at any
meeting of the stockholders SHALL BE VALID, EVEN IF THE MEETING BE
IMPROPERLY HELD OR CALLED provided the two requisites are present:
1. That the proceedings had and the business transacted are within the power
or authority of the corporation, that is, THEY ARE NOT ULTRA VIRES ACT
2. That all the stockholders or members of the corporation are present or duly
represented in the meeting.
Without signature of the secretery of the meeting, an alleged minute taken
by a mere clerk has neither probative value nor credibility.
SEC. 52 QUORUM
- Consist of the stockholders representing a majority of the outstanding capital
stock or a majority of the members in case of non-stock corp.
- In the absence of the quorum, no action can be taken except to adjourn.
- Only those who are actual, living members with voting rights shall be counted
in determining the existence of a quorum during members meeting. DEAD
MEMBERS SHALL NOT BE COUNTED
EFFECT OF DEATH OF A STOCKHOLDER
- Shareholders may generally transfer their shares.
- On the death of the shareholder, the executor or administrator duly
appointed by the court is vested with the legal title to the stock and entitled
to vote it.
- For NON-STOCK CORP membership and all rights are NOT TRANSFERRABLE
since it is PERSONAL.
POSTPONEMENT OF STOCKHOLDERS OR MEMBERS ANNUAL MEETING
GR : Where the date of annual meeting is fixed in the by-laws, the board of
directors/ trustees CANNOT CHANGE THE DATE, so as to lengthen their term of
office.
EXCEPTION: 1. Where the annual meeting cannot be held on the date fixed for some
VALID REASON. (EX. ERRONEOUS
Voting is based on the number of shares of stock standing at the time fixed in
the by laws.
A transferee of stock cannot vote upon it if his transfer is not registered in the
books of the corporation.
Except as otherwise provided in the articles of inc. and stated in the cert. of
stock, HOLDERS OF PREFERRED SHARES HAVE THE RIGHT TO VOTE.
Common shares may not be deprived of voting rights, but preferred and
redeemable shares may be deprived of the right to voye.
Shares not fully paid holders of subscribed shares not fully paid which are
not delinquent are entitled to vote.
In stock corporation, voting is based on the number of shares owned and not
on the number of stockholders or per capita.
1.
2.
By
By
By
2. Continuing proxy One which authorizes the holder thereof to vote for the
absent stockholder for a fixed or an indefinite period of time. But it shall be
valid only for 5 years from its date.
SEC. 59 VOTING TRUST
- Stockholders confer upon a trustee the right to vote and other rights
pertaining to the shares for a period NOT EXCEEDING 5years at any time.
- LOAN AGREEMENT exceeding 5 yrs but automatically expires upon full
payment of the loan.
- A voting trust agreement must be in writing, notarized and shall specify the
terms and conditions thereof.
- A certified copy of such agreement shall be filed with corp and sec,
otherwise, said agreement is ineffective and unenforceable.
- The trustee or trustees shall execute and deliver to the transferors voting
trust certificates, which shall be transferable in the same manner and with
the same effect as cert of stock.
- The viting trustee or trustees may vote by proxy unless the agreement
provides otherwise.
a. For a period exceeding 5years at any one time (except loan agreement)
b. For the purpose of circumventing the law against monopolies and illegal
combinations in restraint of trade
2. The agreement must not be used for purposes of fraud
3. The agreement must be in writing and notarized
4. A certified copy of said agreement must be filed with the Corp and with SEC,
otherwise, it is INEFFECTIVE and UNENFORCEABLE
5. The agreement shall be subject to examination by any stockholder of the
corp in the same manner as any other corp book or record
6. Unless expressly renewed, all rights granted shall automatically expired at
the end of the agreed period.
PD 902-A empowers the SEC to pass upon the validity of the issuance and use
of proxies and voting trust agreements for absent stockholders or members.
PROXY VS VOTING TRUST
1. A Proxy has no legal title to the shares of the stockholder giving the agency
-A trustee acquires legal titles to the shares of the transferring stockholder
(The proxy votes as a mere agent while the trustee as owner)
2. A proxy, unless coupled with interest, IS REVOCABLE ANYTIME
-While a voting trust agreement, if validly executed, is intended to be
irrevocable for a definite and limited period of time.
3. A proxy can only act at a specified stockholders meeting (if the proxy is not in
continuing nature)
- WHILE A trustee is not limited to a particular meeting
4. A proxy votes in the absence of the owner of the stock
- While a trustee can vote and exercise all the rights of the transferring
stockholder even when the latter is present
5. A proxy is usually of shorter duration than a voting trust agreement although
under the law the maximum duration of both cannot exceed 5yrs
6. A proxy need not be notarized nor a copy filed with CHED, while it is a must
for VOTING TRUSTEE
7. A proxy does not have a right of inspection of corporate books, while a
trustee has such a right.
POWER TO ACT AS GUARANTOR gr: No corporation has the power, by any form of
contract or endorsement to become a guarantor or surety or otherwise lend its
credit to another person.
EXCEPTION:
1. Where Corporate Business will advance
2. Where risk considerable and benefit remote or disproportionate.
POWER TO EXTEND OR SHORTEN CORPORATE TERM when approved by a
MAJORITY VOTE of the BD and ratified at a meeting by the stockholders
representing at least 2/3 of the outstanding capital stock or 2/3 of the members for
non-stock.
- Written notice and of the time and place shall be addressed to each
stockholder AT HIS PLACE OF RESIDENCE as shown on the books of inc. and
deposited to the addresse in the post office, with postage prepaid, or served
personally.
- PROVIDED, that in the case of EXTENSION of corporate term, any dissenting
stockholder may exercise his appraisal right under the conditions provided in
this code.
- A voluntary dissolution of a corporation may be effected BY AMENDING THE
ARTICLES OF INCORPORATION to SHORTEN THE CORP. TERM.
An attempted unauthorized increase of capital stock amounts to an OVERISSUE and such stock is therefore ABSOLUTELY VOID AND CANNOT BE
VALIDATED by application of the doctrine of estoppel.
It necessarily follows that:
1. Subscriptions for such stock are likewise void
2. Subscribers acquire none of the rights of stockholders
3. Subscribers for or purchases of such shares do not become liable to
creditors of the corp
That the SEC shall not accept for filing any certificate of increase of capital
stock unless accompanied by the sworn statement of the treasurer of the
corporation SHOWING AT LEAST 25% OF such increased capital stock has
been subscribed and that AT LEAST 25% OF THE AMOUNT SUBSCRIBED HAS
BEEN PAID EITHER in actual cash
NO treasurers affidavit is required to be attached in case of DECREASE OF
CAPITAL STOCK.
Under the prohibitions in Sec. 62, the unissued shares cannot be sold for less
than the par value
Stock dividends are ordinarily declared out of the authorized but unissued
shares of corp.
GR: Where capital stock is impaired and a reduction is made merely to meet
that impairment, there will be no distribution of assets among the
shareholders
Distribution NOT MANDATORY The distribution to stockholders of surplus
remaining after a reduction of capital stock is authorized by the code
same as increasing or decreasing the capital stock except that the certificate
NEED NOT STATE THE MATTERS SET FORTH AND IS NOT REQUIRED TO BE
ACCOMPANIED BY SWORN STATEMENTS OF THE TREASURER OF THE CORP
Prior approval of and registration of bonds with SEC
TYPES OF BONDS
1. THEY may be SECURED OR UNSECURED
2. Major type of secures bonds are:
1. Mortgage bonds
2. Collateral trust bonds
3. Equipment obligations
3 . Examples of UNSECURED BONDS
A. Straight debentiture bonds or general credit bonds
B. Guaranteed Bonds
C. Subordinated debentiture bonds
SEC. 39 POWER TO DENY PRE-EMPTIVE RIGHT
PRE-EMPTIVE RIGHT whenever the capital stock of the corporation is increased and
new shares of stocks are issued, the new issue must be offered first to the
stockholders who are as such at the time the increase was made in proportion to
their EXISTING SHAREHOLDINGS
- This right extends only to new issues of shares
- It extends to the unsubscribed portion of the capital stock and even to the
treasury shares
- This right is not absolute as it admits of certain excemption
- The purpose of the right is to protect from impairment and dilution the basic
rights of the existing stockholders in the corporation.
POWER TO DENY PRE-EMPTIVE RIGHT may be denied by the articles of
incorporation
A stockholder whose pre-emptive right is violated may maintain an action to
compel the corp to give him that right
If denial is by an amendment to the artices of incorporation, he may exercise
his APPRAISAL RIGHT
Time within which the right may be exercised is generally fixed in the
resolution authorizing the increase of capital stock
SEC. 40 POWER TO SELL, LEASE, ETC ALL OR SUBSTANTIALLY ALL CORPORATE
ASSETS INCLUDING ITS GOODWILL
- By the action of majority vote of board of directors or trustees supported by
tast 2/3 of the outstanding capital stock
REQUISITES FOR THE VALIDITY OF SALE:
1. The sale etc., must be approved by the BD
2. The action of the board must be authorized by the vote of stockholders
representing 2/3 of the outstanding capital stock including holders of nonvoting shares
As a safeguard against abuse of power, SEC 40 provides that the sale, etc.
SHALL BE SUBJECT TO THE PROVISIONS OF EXISTING LAAWS ON ILLEGAL
COMBINATION AND MONOPOLIES.
SALE OF ALL ASSETS WITHOUT DISSOLUTION if such sale is made to
another corporation and there is no intent to combine, the selling corp may
continue in a SUSPENDED ANIMATION, subject to the effect of NON-USE OF
CORP POWERS AND continued inoperation of the corporation
SEC. 41 POWER TO ACQUIRE OWN SHARES- a stock corporation shall have the
power to purchase or acquire its own shares for a legitimate corporate purpose,
PROVIDED, THAT the corporation has UNRESTRICTED RETAINED EARNINGS IN ITS
BOOKS TO COVER THE SHAREs to be purchased :
1. To eliminate fractional shares arising out of stock dividends
2. To collect or to compromise an indebtedness to the corporation, arising out of
unpaid subscription
3. To pay dissenting or withdrawing stockholders
UNRESTRICTED RETAINED EARNINGS - not appropriated for a particular purpose.
CONDITIONS FOR THE EXERCISE OF THE POWER
1. That its capital is not thereby impaired
2. That it be for a legitimate and proper corporate purpose
3. That there shall be unrestricted retained earnings
4. That the corporation acts on good faith and w/o prejudice to the rights of
creditors
5. That the conditions of corporate affairs warrant it.
TRUST FUND DOCTRINE
- Holds that the assets of the corporation as represented by its capital stock
are trust funds to be maintained unimpaired and to be used to pay
corporate creditors
- There can be no distribution of such assets among stockholders without
provison being first made for the payment of corporate debts.
- Corporation generally without power to purchase its own shares, as
repayment to stockholders constitute a fraud on corporate creditors
- A corporation has UNRESTRICTED RETAINED EARNINGS BEFORE ITS MAY
ACQUIRE its own shares
EFFECTS OF PURCHASE ON CORPORATE CREDITORS it will impair capital, hence,
prejudice the creditors who are preferred over stockholders in the distribution of
corporate assets
EFFECTS OF PURCHASE ON REMAINING STOCKHOLDERS - it injures remaining
shareholders rights, although it may be advantageous to those who do not sell.
SEC. 42 POWERS TO INVEST CORP FUNDS IN ANOTHER CORPORATION OR BUSINESS
FOR ANY OTHER PURPOSE OTHER THAN THE PRIMARY PURPOSE
- When approved by a majority of the board of directors or trustees
Dividends cannot be declared and paid on the basis of the paid up stock. The
basis is the number of shares held by the stockholders, not the amount paid.
Under NIRC, sec 29 of Tax Code imposes a 10% surtax on corp impropery
accumulating profits or surpluse
ACTION TO ENFORCE DECLARATION OF DIVIDENDS a stockholder cannot
maintain an action at law to recover his share of the accumulated profits.
Mandamus IS NOT A PROPER REMEDY.
If dividends are improperly declared and paid when there are no net earnings,
THEY MAY BE RECLAIMED BY THE CORPORATE CREDITORS or by a receiver or
assignee
If the capital stock is wrongfully paid away by the directors, it may be
pursued by the creditors into the hands of any one WHO IS NOT AN
INNOCENT PURCHASER
If such a wrong is threatened, a CREDITOR MAY MAINTAIN A SUIT FOR
INJUNCTION.
The assets of the corp diminish and correspondingy the property of the
individual stockholder increases