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1. Enters into a subscription contract with an existing corporation (he is a stockholder upon acceptance of the
corporation of his offer to subscribe whether the consideration is fully paid or not);
2. Purchase treasury shares from the corporation; or
3. Acquires shares from existing shareholders by sale or any other contract, or acquires shares by operation of law like
succession.
1. Management Right:
a. To attend and vote in person or by proxy at a stockholders’ meetings (CC, Secs. 50, 58);
b. To elect and remove directors (CC, Secs. 24, 28);
c. To approve certain corporate acts (CC, Sec. 58);
d. To adopt and amend or repeal the by-laws of adopt new by-laws (CC, Secs. 46, 48);
e. To compel the calling of the meetings (CC, Sec. 50);
f. To enter into a voting trust agreement (CC, Sec. 59);
g. To have the corporation voluntarily dissolved. (CC, Secs. 118, 119)
2. Proprietary rights
a. To transfer stock in the corporate book (CC, Sec. 63);
b. To receive dividends when declared (CC, Sec. 43);
c. To the issuance of certificate of stock or other evidence of stock ownership (CC, Sec. 64);
d. To participate in the distribution of corporate assets upon dissolution (CC, Sec. 118, 119);
e. To pre-emption in the issue of shares. (CC, Sec. 39)
3. Remedial rights
a. To inspect corporate books (CC, Sec. 74);
b. To recover stock unlawfully sold for delinquent payment of subscription (CC, Sec. 69);
c. To be furnished with most recent financial statements or reports of the corporation’s operation (CC, Sec. 74,
75);
d. To bring suits (derivative suit, individual suit, and representative suit);
e. To demand payment in the exercise of appraisal right. (CC, Secs. 41, 81)
PROXY
The term “proxy” designates the formal written authority given by the owner or holder of the stock, who has a right to
vote it, or by a member, as principal, to another person, as agent, to exercise the voting rights of the former.
It is also used to apply to the holder of the authority or person authorized by an absent stockholder or member to vote
for him at a stockholders’ or members’ meeting.
It also refers to the instrument which evidences the authority of the agent.
NOTE: A proxy is a special form of agency. A proxy holder is an agent and as such a fiduciary.
Purposes of proxies
The purposes and use of proxies are as follows:
1. Assures the presence of a quorum in meetings of stockholders of large corporations;
2. Enables those who do not wish to attend a stockholders’/ members’ meeting to protect their interest by exercising
their right to vote through a representative; and
3. One of the devices in securing voting control or management control in the corporation.
VOTING TRUST
Voting trust agreement A voting trust agreement (VTA) is an agreement whereby one or more stockholders transfer
their shares of stocks to a trustee, who thereby acquires for a period of time the voting rights (and/or any other specific
rights) over such shares; and in return, trust certificates are given to the stockholder/s, which are transferable like stock
certificates, subject, to the trust agreement.
Principal purpose:
acquire control of the corporation.
RIGHT TO DIVIDENDS
It is the right of the stockholder to demand payment of dividends after the board’s declaration. Stockholders are entitled
to dividends pro rata based on the total number of shares that they own and not on the amount paid for the shares.
APPRAISAL RIGHT
It refers to the right of the stockholder to demand payment of the fair value of his shares, after dissenting from a
proposed corporate action involving a fundamental change in the charter or articles of incorporation in the cases
provided by law.
RIGHT TO INSPECT
The duty to keep these books is imperative and mandatory.
GR: All the books and records must be kept at the principal office of the corporation
The right must be exercised during reasonable hours on business days.
The right to inspect extends to the books and records of the wholly-owned subsidiary of the corporation.
The right does not extend to trade secrets.
PRE-EMPTIVE RIGHT
It is the preferential right of shareholders to subscribe to all issues or disposition of shares of any class in proportion to
their present shareholdings. (CC, Sec. 39)
Purpose of pre-emptive right
To enable the shareholder to retain his proportionate control in the corporation and to retain his equity in the surplus
Exercise of pre-emptive right
RIGHT TO VOTE
The stockholders can exercise their right to vote through the election, replacement and removal of Board of Directors or
Trustees and on other corporate acts which require stockholders’ approval.
Nature of the right to vote
One of the rights of a stockholder is the right to participate in the control and management of the corporation that is
exercised through his vote. The right to vote is a right inherent in and incidental to the ownership of corporate stock,
and such is a property right.
GR: The right of first refusal can only arise by means of a contractual stipulation, or when it is provided for in the AOI
XPN: In the case of a close corporation, the right of first refusal is required to be found in the AOI.
When only the by-laws provide a right of first refusal without the corresponding provision in the AOI and not printed in
the stock certificate, it is null and void.
REMEDIAL RIGHTS
OBLIGATIONS OF A STOCKHOLDER
The following are the obligations of the stockholder:
1. Liability to the corporation for unpaid subscription (CC, Sec. 67-70);
2. Liability to the corporation for interest on unpaid subscription if so required by the by laws (CC, Sec. 66);
3. Liability to the creditors of the corporation for unpaid subscription (CC, Sec. 60);
4. Liability for watered stock (CC, Sec. 65);
5. Liability for dividends unlawfully paid (CC, Sec. 43); and
6. Liability for failure to create corporation. (CC, Sec. 10)
While a stockholder has no personal liability for the debts of the corporation beyond the amount of his capital
investment, he is personally liable for the above obligations.