CORPORATION LAW REVIEW 1

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

corporations may be created or established by special

charters in the interest of the common good and subject
to the test of economic viability.

CORPORATION LAW
INTRODUCTION

Feliciano vs. COA

Corporation Law whole body of laws, principles and

doctrines covering private corporations in the Philippines
Interpretation: liberal construction to promote and uplift
development of trade relations and which will encourage
friendly commercial intercourse among corporations
(Home Insurance Co. versus Eastern Shipping Lines,
123 SCRA 424)

CORPORATION VS. OTHER BUSINESS ENTITIES

1) Sole Proprietorship
2) Partnership
3) Business Trust
4) Joint Venture
5) Cooperative

BRIEF HISTORY OF PHILIPPINE CORPORATE LAW

CORPORATIONS CREATED BY A SPECIAL LAW OR
CHARTER

1) Sociedades Anonimas
2) Cuentas en Participacion
3) The Corporation Law (1906)
4) The Corporation Code (1980)

a. National Coal Co. v. Collector of Internal Revenue

b. Marilao Water Consumers Association, Inc. v. IAC

CORPORATION, DEFINED
A corporation is an artificial being created by
operation of law, having the right of succession and the
powers, attributes and properties expressly authorized
by law or incident to its existence.

1) THEORIES ON THE
CORPORATION

FORMATION

OF

Theory of Concession
Tayag vs. Benguet Consolidated, Inc.
Torres vs. CA

CLASSIFICATIONS OF CORPORATION
1.Under the Corporation Code (Sec. 3)
2. Sole and Aggregate
3. Ecclesiastic and Lay
4. Eleemosynary
5. Domestic and Foreign
6. De jure and de facto corporations
6.1 Requisite of De Facto Corporation
6.2 Quo Warranto
Cases:
a. Sawadjaan v. Court of Appeals, G.R. No.
141735, June 8, 2005

2) THEORY OF ENTERPISE ENTITY

PSE vs. CA

7. Close and Open Corporation

8. Parent, Subsidiary, and Affiliated
9. Private and Public
10. Corporation by Prescription and Corporation by
Estoppel

ATTRIBUTES OF A CORPORATION
1) Artificial Being
2) Creature of the Law
3) Right of Succession
4) Creature of Enumerated Powers,
Attributes and Properties

Public Corporations those created for political

purposes connected with the public good in the
administration of the civil government
Municipal corporation two-fold character

ARTICLE XII OF THE 1987 CONSTITUTION

Sec. 16. The Congress shall not, except by general law,
provide for the formation, organization, or regulation of
private corporations. Government-owned or controlled

a) Public police power

b) Private proprietary, can sue & be sued, can be
liable for torts

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CORPORATION LAW REVIEW 2

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

Public Corporations not based on the ownership of

the controlling interest
Many GOCCs private corporations

- a corporation is a national of a country under

whose laws it has been organized and registered.
CONTROL TEST

1) National Coal Co. vs CIR

2) Cervantes vs Auditor General (NAFCO)
3) Shipside, Inc. vs CA (BCDA for economic and
social development of Central Luzon)
Domestic corporation incorporated under the laws of
the Philippines
Foreign corporation incorporated under the laws of
another country
De jure corporation full and substantial compliance
with the requirements of an existing law
De facto corporation has a bona fide attempt to
incorporate
Corporation by estoppel a corporation precluded from
denying its corporate existence
Corporation by prescription Roman Catholic Church
(thousand years)
Parent Company has controlling interest
more corporations

in one or

Subsidiary corporation in which the parent corporation

has controlling interest
Affiliate a corporation being controlled by a holding
company

NATIONALITY OF CORPORATIONS
Nationality serves as the legal basis for subjecting the
enterprise or its activities to the laws, the economic and
fiscal powers, and the various social and financial
policies of the state to which it is supposed to belong
TEST OF NATIONALITY
1) PLACE OF INCORPORATION TEST
2) CONTROL TEST
3) GRANDFATHER RULE
Gamboa vs. Teves
G.R. No. 176579, June 28, 2011

- the nationality of a corporation is determined by the

nationality of the
majority of the stockholders on whom
equity control is vested
GRANDFATHER RULE
- the various nationality tests shall first be applied on
the shareholders of the holding company to determine
the nationality of the equity in the target corporation, and
thereby arrive at the nationality of such target
corporation
NATIONALIZED CORPORATIONS
1) 100% Filipino owned
- retail trade corporations
- rural banks
- mass media ownership and operation
- rice and corn industry
2) 75% Filipino owned
- Awardees of government supplies purchases
- Contract awardees for repair of public works and
national defense projects
- Coastwide trade
3) 70% Filipino owned
- domestic banks except rural banks
- awardees of government public
contracts

works

4) 60% Filipino owned

- public utility corporations
- corporations to utilize, develop or exploit
natural resources
- fishing licenses
- geothermal energy permits
- beneficiaries of Philippine Overseas
Shipping, domestic air commerce, financing
companies, awardees of supplies contracts
for GOCCs
- educational institutions
5) Majority owned by Filipinos
- investment houses

PLACE OF INCORPORATION TEST

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CORPORATION LAW REVIEW 3

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

5)
GRANDFATHER RULE THREE LEVEL
RELATIONSHIP TEST
TARGET COMPANY- grandson
HOLDING COMPANY father
PERSON OR ENTITY HOLDING SHARES IN THE
HOLDING COMPANY - grandfather

CORPORATIONS CREATED BY SPECIAL LAWS

Sec. 4. Corporations created by special laws or
charters. - Corporations created by special laws or
charters shall be governed primarily by the provisions of
the special law or charter creating them or applicable to
them, supplemented by the provisions of this Code,
insofar as they are applicable.

CORPORATORS, INCORPORATORS,
STOCKHOLDERS AND MEMBERS

A suit against the corporation cannot be

considered as a suit against its stockholders,
and vice versa;
6) A mother or holding corporation has no
proprietary interest in the property, rights and
interest of the subsidiary or affiliate corporation.
APPLICATION OF THE DOCTRINE OF PIERCING
THE VEIL
1) When corporate personality is used as enabling
tool
2) To benefit either those within and those outside
the intra-corporate relations
3) To prevent fraud or wrong and not available for
other purposes
4) Must be shown to be necessary and with factual
basis
5) Essentially a judicial prerogative
6) Has res judicata effect

TEST IN DETERMINING THE APPLICABILITY

Sec. 5. Corporators and incorporators, stockholders

and members. - Corporators are those who compose a
corporation, whether as stockholders or as members.
Incorporators are those stockholders or members
mentioned in the articles of incorporation as originally
forming and composing the corporation and who are
signatories thereof.
Corporators in a stock corporation are called
stockholders or shareholders. Corporators in a non-stock
corporation are called members.
CORPORATE JURIDICAL PERSONALITY

1) Control not mere majority of stock control but

complete domination
2) Control used to commit fraud
3) Control and breach of duty must proximately
cause the injury or unjust loss complained of
CLASSIFICATION OF THE PIERCING CASES
1)
2)
3)
4)

FRAUD CASES
ALTER EGO CASES
DEFEAT PUBLIC CONVENIENCE CASES
EQUITY CASES

ENTITLEMENT TO CONSTITUTIONAL RIGHTS

Doctrine of Separate Juridical Personality

1)
2)
3)
4)

Doctrine of Piercing the Veil of Corporate Entity

APPLICATION OF THE MAIN DOCTRINE
1) Such corporation may not be held liable for the
obligations of the persons composing it or that of
its officers;
2) Neither can its stockholders be held liable for the
obligations of such corporation;
3) Officers of a corporation are not personally liable
for their acts as such officers, unless it is shown
that they have exceeded their authority;
4) The property of the corporation is not the
property of its stockholders or members;

Due Process
Equal Protection of the Law
Against Unreasonable Searches and Seizures
Against Self-Incrimination

ENTITLEMENT TO MORAL DAMAGES

1) ABS-CBN Broadcasting Corp. vs Court of
Appeals (1999) not entitled to moral damages
2) Filipinas Broadcasting Network vs. Ago Medical
and Educational Center (2005) may claim
moral damages arising from libel
3) Crystal vs. BPI, 572 SCRA 697 (2008) while
the Court may allow the grant of damages, it is
not automatically granted

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CORPORATION LAW REVIEW 4

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

LIABILITY FOR TORTS

Preferred shares entitle the holder thereof to certain
preferences over the holders of common stock
a) Preferred shares as to assets
b) Preferred shares as to dividends

PNB vs. Court of Appeals, 83 SCRA 237

DOCTRINE OF CORPORATE NEGLIGENCE
Doctrine of Corporate Responsibility
Professional Services, Inc. versus CA, 611
SCRA 282 (2010)
a) Hospital and doctor
b) Doctor and patient
c) Hospital and patient

SHARE IN ESCROW

LIABILITY FOR CRIME

Philippine laws:
1) Only individuals can be criminally liable;
2) Only individuals can be imprisoned.
Anti-Money Laundering Act of 2001
corporation is an offender (Section 14)

Held by a third person to be released only upon

the performance of a condition or the happening
of a certain event contained in the agreement
Not entitled to the rights of a stockholder until
the conditions set forth for the release of such
shares are fully met.
FOUNDERS SHARE

- May be given certain rights and privileges not enjoyed

by the owners of other stocks, provided that where the
exclusive right to vote and be voted for in the election
of directors is granted, it must be for a limited period
not to exceed five (5) years subject to the approval of
the SEC. The five-year period shall commence fro the
date of the aforesaid approval by the SEC.

CLASSIFICATION OF SHARES

REDEEMABLE SHARE
PAR VALUE AND NO PAR VALUE

Par Value with a nominal value

No Par Value shares deemed fully paid and nonassessable, but may not be issued for a consideration
less than the value of P5.00
VOTING AND NON-VOTING

TREASURY SHARE
-

Voting can vote

Non-Voting cannot vote
CUMULATIVE AND NON-CUMULATIVE
Cumulative entitled not only to payment of current
dividends but also back dividends not previously paid
Non-cumulative entitled to payment of current
dividends that are paid from unrestricted retained
earnings
COMMON AND PREFERRED
Common shares the residual ownership interest in
the corporation; a basic class of stock ordinarily and
usually issued without extraordinary rights or privileges
and entitles the shareholder to a pro rata division of
profits

May be purchased or taken up by the corporation upon

the expiration of a fixed period, regardless of the
existence of unrestricted retained earnings in the books
of the corporation, and upon such terms and conditions
as may be stated in the articles of incorporation

A share of stock which has been issued and fully paid

for, but subsequently reacquired by the issuing
corporation by purchase, redemption, donation, or
through some other lawful means
Has no effect on the stated capital
Do not have voting rights, pre-emptive rights
No dividends are paid on treasury shares
CORPORATE POWERS AND AUTHORITY

ULTRA VIRES
1) Outside of the express, implied or incidental
powers of the corporation;
2) Which have been executed on behalf of the
corporation without proper authorization from the
BOD;
3) Which are per se contrary to law, morals or

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CORPORATION LAW REVIEW 5

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

public policy.
POWER TO EXTEND OR SHORTEN CORPORATE
TERM

Shipside, Inc. versus CA

352 SCRA 334 (2001)
1) conferred by the law or charter;
2) implied or incidental to its existence
- power can be exercised through the BOD.

- majority of BOD
- 2/3 of outstanding capital stock
- Appraisal right available in extension; not
available in shortening

EXPRESS POWERS
1) Power to sue and be sued;
2) Power to sell, lease, dispose or encumber
assets
3) Power to borrow
INCIDENTAL POWERS

POWER TO TEMPORARILY CEASE CORPORATE

OPERATIONS
- majority of BOD
- 2/3 of outstanding capital stock
POWER TO INCREASE OR DECREASE CAPITAL
STOCK

- incident to its existence

- those that attach to a corporation at the
moment of its creation without regard to its
express powers

- majority of BOD
- 2/3 of outstanding capital stock
25% requirement on subscribed capital stock;
25% requirement on paid-up capital
No appraisal right

MPLIED OR NECESSARY POWERS

- e.g. issuing of checks to finance the activity
of the corporation

POWER TO INCUR, CREATE

BONDED INDEBTEDNESS

ULTRA VIRES ACT

Montelibano versus Bacolod-Murcia Milling Co.,

Inc., 5 SCRA 36 (1962)
- Milling contract that granted favorable terms to
the planters
* act is lawful in itself
* direct and immediate furtherance of the
business

INCREASE

- those secured by mortgage

- majority of BOD
- 2/3 of outstanding capital stock

1) Test to determine if act or contract is ultra vires

Zomer versus International Exchange Bank, 581
SCRA 115
- attitude of the court - liberal and do not generally
sustain an ultra vires claim

OR

POWER TO SELL, DISPOSE, LEASE OR ENCUMBER

ASSETS
- of all or substantially all of its assets
- majority of BOD
- 2/3 of outstanding capital stock
Exceptions to 2/3 requirement:
1) Necessary in the usual or regular course of
business
2) Proceeds of the sale will be appropriated for the
conduct of its remaining business

2) Supervening Policies in Ultra Vires Issues

POWER TO PURCHASE OWN SHARES
-

time-consuming verification and contractual

safeguards
Business judgment rule
3) Doctrine of Estoppel or Ratification
4) Illegal Acts

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redeemable share
Treasury share
Unrestricted retained earnings
When Exercised:

CORPORATION LAW REVIEW 6

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

1) Eliminate fractional shares

juridical person to conduct its business affairs, and to

enter into contracts and transactions

2) To collect or compromise indebtedness (unpaid

subscription)

PRIMARY OBJECTIVE OF THE BOARD

3) To pay dissenting stockholders

1) maximize profit
2) enhance the value of the corporation

POWER TO DECLARE DIVIDENDS

-

Majority of BOD
2/3 of the outstanding capital stock
Applicability: stock dividend (paid
stockholders)

POWER
TO
CONTRACTS
-

CORPORATE GOVERNANCE

ENTER

INTO

only

to

MANAGEMENT

Majority of BOD
Majority of the outstanding capital stock
Exception:
organized
primarily
as
management company

POWER TO MAKE DONATIONS

-

DOCTRINE OF APPARENT AUTHORITY ***

- if a corporation knowingly permits one of its
officers, or any other agent, to act within the scope of
apparent authority, it holds him out to the public as
possessing the power to do those acts, and thus the
corporation will, as against anyone who has in good faith
dealt with it through such agent, be estopped from
denying the agents authority.

DELEGATED POWER
- delegated by the stockholders
- can be overridden by the stockholders

Majority of BOD
* Corporate Social Responsibility

POWER TO GRANT PENSION, RETIREMENT AND

OTHER GRATUITIES
-

- a system whereby shareholders, creditors and

other stakeholders of a corporation ensure that
management enhances the value of the corporation
as it competes in an increasingly global market place

Majority of BOD

BUSINESS JUDGMENT RULE ***

- when a resolution is passed in good faith by
the board, it is valid and binding, and whether or not it
will cause losses or decrease the profits of the
corporation, the court has no authority to review them
- laissez faire doctrine
2 BRANCHES OF THE BUSINESS JUDGMENT RULE
1) resolutions approved, contracts and
transactions entered cannot be reversed by the courts
2) directors/officers cannot be held personally
liable for the consequences of such acts

POWER TO ENTER INTO A PARTNERSHIP

- Majority of BOD

DIRECTORS, TRUSTEES AND OFFICERS

EXECUTIVE COMMITTEE
SECTION 23, CORPORATION CODE
- all corporate powers shall be exercised by, and
all corporate business shall be conducted through the
BOD of the corporation
- other powers: need the ratification of the
stockholders

- Section 35 of the Corporation Code

- composed of not less than 3 members of the
Board

CENTRALIZED MANAGEMENT
- human intervention is required in order to allow

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- can perform acts delegated by the Board

CORPORATION LAW REVIEW 7

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

ELECTION OF BOARD OF DIRECTORS/TRUSTEES

DUTIES
AND
LIABILITIES
TRUSTEES OR OFFICERS

majority of the outstanding capital stock

no delinquent stock shall be voted
- may be done:
a) cumulative
b) straight

DIRECTORS,

1) LOYALTY
2) OBEDIENCE
3) DILIGENCE

VACANCY IN THE BOARD

OF

other than removal or expiration of term

may be filled by the vote of at least a majority of
the remaining directors/trustees
if no quorum, must be filled by the stockholders
in a meeting called for the purpose

INTERLOCKING DIRECTORS
- shareholdings exceeding 20% of the
outstanding capital stock shall be considered substantial
for purpose of interlocking directors
MEETINGS

REPORT ON ELECTION
- 30 days after the election
- the Secretary shall submit the report to SEC

KINDS OF MEETINGS

TERM OF OFFICE
- ONE year and until their successors are
elected and qualified
- hold over principle
- non-permanency of Board Seat

--

REMOVAL OF DIRECTORS AND TRUSTEES*

PLACE
AND
TIME
OF
STOCKHOLDERS/MEMBERS

- 2/3 of the outstanding capital stock

- Board has no power to discipline or remove
one of their own
- cause: goes into the three duties: loyalty,
obedience, diligence

1) Stockholders or Members
2) Directors/Trustees
1) Regular

annual
stockholders/members
2) Special

KINDS OF MEETINGS
- regular or special
- no proxy
- minutes
- resolutions versus minutes

COMPENSATION OF DIRECTORS AND OFFICERS

- reasonable per diems
- if compensation is to be given: must be
approved by majority of the stockholders
- in no case shall exceed 10% of the net income
before tax

CORPORATE OFFICERS
- President must be a director
- Secretary must be a resident of the
Philippines
- Treasurer

meeting

for

MEETING

OF

shall be held in the city or municipality where the

principal office of the corporation is located
Metro Manila shall be considered a city or
municipality.
Notice of meetings shall be in writing, and the
time and place thereof stated therein.
All proceedings, if within the powers or authority
of the corporation, shall be valid even if the
meeting be improperly held or called, provided
all the stockholders or members of the
corporation are present or duly represented at
the meeting.

NOTICE OF MEETING
Regular Meeting: At least two (2) weeks before
the meeting
Special Meeting: At least one (1) week before
the meeting
exception: provided by the By-Laws
Notice of any meeting may be waived, expressly
or impliedly, by any stockholder or member.
Whenever, for any cause, there is no person
authorized to call a meeting, the Secretaries and
Exchange Commission, upon petition of a stockholder or

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CORPORATION LAW REVIEW 8

Based on the PowerPoint Presentations of Judge Cheryll Ann C. Chamen-Paronda

member on a showing of good cause therefor, may issue

an order to the petitioning stockholder or member
directing him to call a meeting of the corporation by
giving proper notice required by this Code or by the bylaws. The petitioning stockholder or member shall
preside thereat until at least a majority of the
stockholders or members present have been chosen
one of their number as presiding officer.
BAR QUESTION:
At least 2/3 of the stockholders of Solar
Corporation, upon recommendation of the Board of
Directors declared a 50% stock dividend during their
annual meeting. The notice of the annual stockholders
meeting did not mention anything about a stock dividend
declaration. The matter was taken up only under the
item Other Business in the agenda of the meeting.
C.K. Senwa, a stockholder, who received his copy of the
notice but did not attend the meeting, subsequently
learned about the 50% stock dividend declaration. He
desires to have the stock dividend declaration cancelled
and set aside and wishes to retain your services as a
lawyer for the purpose.
Will you accept the case? Discuss with reasons.
Expertravel & Tours, Inc. versus Court of Appeals, G.R.
No. 152392, May 26, 2005
QUORUM
1. Majority of the outstanding capital stock
2. Majority of the members

REGULAR
AND
SPECIAL
DIRECTORS/TRUSTEES

MEETINGS

BAR QUESTION:
The proposed Amended By-Laws of CXT, Inc., a
corporation listed in the Makati Stock Exchange, contain
a provision that the meetings of the Board of Directors
need not be held in the principal office, and may be held
outside the country.
As Corporate Secretary of CXT, you are asked
to comment on the validity of the above proposed
amendment.

WHO SHALL PRESIDE

- President, unless otherwise provided by the By-Laws
PLEDGORS,
ADMINISTRATORS

MORTGAGORS

AND

In case of pledged or mortgaged shares in stock

corporations, the pledgor or mortgagor shall have
the right to attend and vote at meetings of
stockholders, unless the pledgee or mortgagee is
expressly given by the pledgor or mortgagor such
right in writing which is recorded on the
appropriate corporate books.
Executors, administrators, receivers, and other
legal representatives duly appointed by the court
may attend and vote in behalf of the stockholders
or members without need of any written proxy.
VOTING IN CASE OF JOINT OWNERSHIP

OF

Regular meeting: monthly, unless the by-laws

provides otherwise.
Special meetings: any time upon the call of the
president or as provided in the by-laws.
Meetings of directors or trustees of corporations
may be held anywhere in or outside of the
Philippines, unless the by-laws provide
otherwise.
Notice of regular or special meetings stating the
date, time and place of the meeting must be sent
to every director or trustee at least one (1) day
prior to the scheduled meeting, unless otherwise
provided by the by-laws. A director or trustee
may waive this requirement, either expressly or
impliedly.

In case of shares of stock owned jointly by two

or more persons, in order to vote the same, the consent
of all the co-owners shall be necessary, unless there is a
written proxy, signed by all the co-owners, authorizing
one or some of them or any other person to vote such
share or shares: Provided, That when the shares are
owned in an "and/or" capacity by the holders thereof,
any one of the joint owners can vote said shares or
appoint a proxy therefor.

VOTING RIGHT FOR TREASURY SHARES

Treasury shares shall have no voting right as
long as such shares remain in the Treasury.
PROXIES
Stockholders and members may vote in person
or by proxy in all meetings of stockholders or members.
Proxies shall in writing, signed by the stockholder or

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CORPORATION LAW REVIEW 9

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member and filed before the scheduled meeting with the

corporate secretary. Unless otherwise provided in the
proxy, it shall be valid only for the meeting for which it is
intended. No proxy shall be valid and effective for a
period longer than five (5) years at any one time.

control over the stocks owned by such stockholder

is lodged in the trustee.
RIGHT TO DIVIDENDS
Dividend: unrestricted retained earnings set apart
from the general mass of the funds of the
corporation and distributed among the stockholders
in proportion to their shares or interest in the
corporation, in the form of cash, property or stocks.

VOTING TRUSTS
Section 59, Corporation Code
Lee vs. Court of Appeals, G.R. No. 14441, Dec. 17,
1996

Dividend: unrestricted retained earnings set apart

from the general mass of the funds of the
corporation and distributed among the stockholders
in proportion to their shares or interest in the
corporation, in the form of cash, property or stocks.

STOCKHOLDERS
CASH DIVIDEND VERSUS STOCK DIVIDEND

RIGHTS OF STOCKHOLDERS
1) Right to vote, including the right to appoint a
proxy;
2) Right to a share in the profits of the corporation,
including the right to declare stock dividends;
3) Right to a proportionate share of the assets of
the corporation upon liquidation
4) Right of appraisal;
5) Pre-emptive right;
6) Right to inspect corporate books and records;
7) Right to elect directors;
8) Such other rights as may contractually be
granted to the stockholders by the corporation or
by special law.

1) Cash dividends withdraw assets from the

corporation, while stock dividends do not;
2) In cash dividend, money is received by the
stockholders, in stock dividend, stock instead of
money is received;
3) Cash dividend is taxable, while stock is not;
4) Cash dividend may be declared by majority by
the board, while stock dividend must be
confirmed by 2/3 of the outstanding capital stock
APPRAISAL RIGHT
- Refers to a stockholders right to demand payment
of the fair value of his shares, after dissenting from
a proposed corporation action involving
a
fundamental change in the corporate setting, in the
specific instances provided for in the Corporation
Code.

VOTING RIGHTS
Sales versus SEC 169 SCRA
A court will not deprive a stockholder of this right to vote
except upon a clear showing of its denial under the
Articles of Incorporation and By-Laws as it is an inherent
right in stock ownership.

HOW VOTING RIGHTS ARE EXERCISED

1)
2)
3)
4)

Proxy
Voting trust agreement
Legal
Personal

VOTING TRUST AGREEMENT

- is an agreement between a stockholder and a
trustee, wherein for a term not exceeding five years,

WHEN RIGHT MAY BE EXERCISED

1) In case any amendment to the articles of
incorporation has the effect of changing or
restricting the rights of any stockholder;
2) In case of extending or shortening corporate
term;
3) In case of sale, lease, transfer, mortgage,
pledge or other disposition of all or substantially
all of the corporate property and assets
4) In case the corporation decides to invest its
funds in another corporation or business outside
of the primary purpose;
5) In case of merger or consolidation.

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PRE-EMPTIVE RIGHT
Section 39 of the Corporation Code:
- All stockholders of a stock corporation shall enjoy
pre-emptive rights to subscribe to all issues or
disposition of shares of any class, in proportion to
their respective shareholdings.
Right of first refusal - contractual
RIGHT TO INSPECT
1)
2)
3)
4)
5)
6)

Financial statements;
Annual Report;
Minutes of Meetings;
Books that record all business transactions;
Stock and transfer book;
Report of election.

Basis:
ownership of assets/corporate properties
Access to information on corporate affairs (how
can the stockholder vote well)
DERIVATIVE SUIT
A suit brought by a stockholder, for and in behalf of
a corporation and against any person be he also a
stockholder, director, officer or third person
Jurisdiction: RTC

REQUISITES:
1) Cause of action in favor of the corporation;
2) Refusal of the corporation to sue;
3) Party filing the suit is a stockholder;
4) Plaintiff has exhausted all administrative
remedies;
5) Filed in good faith.

LIABILITIES OF A STOCKHOLDER
1) Unpaid subscription plus interest;
2) Watered stock

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