San Beda College of Law 2005

CENTRALIZED BAR OPERATIONS

MEMORY AID IN COMMERCIAL LAW

CORPORATE ACT
1.Amendment of Articles of
Incorporation
2. Election of Directors/ trustees (Sec.
24)
3. Removal of Directors/ Trustees (Sec.
28)
4. Ratification of a contract of self-
dealing directors (Sec. 32)
Corporate Acts
NUMBER OF VOTES FOR BOD
Majority vote
NUMBER OF VOTES OFCORPORATORS
Vote or written assent of 2/3 of OCS/
members
Majority of OCS / members
2/3 of OCS / members
2/3 of OCS/ members
SALIENT POINTS
Non-voting shares can vote
Appraisal right is available in certain
cases
Effective upon approval by SEC, or
date of filing if not acted upon within
six months
Must be for a legitimate purpose
Candidates with the highest number
of votes get elected
Cumulative voting: No.of shares x No.
of directors to be elected
Non-voting shares cannot vote
Notice and statement of purpose are
necessary
Must be made in a meeting called by
the secretary on Presidents order or
on written demand of majority of OCS
Non-voting shares cannot vote
Removal without cause cannot be
used to deprive minority stockholders
of their right of representation
The contract must be fair and
reasonable under the circumstances
Full disclosure of adverse interest of
directors/ trustees involved is
necessary
Presence of director/ trustee must be
necessary to constitute quorum or the
vote of director/ trustee must be
necessary for the approval of the
contract
Non-voting shares can vote

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CENTRALIZED BAR OPERATIONS
MEMORY AID IN COMMERCIAL LAW

5. Extension or shortening of corporate Majority vote 2/3 of OCS/ members Appraisal right is available
term (Sec. 37) Notice requirement
Effected through an amendment of
the AOI

6. election of officers (Sec. 25) Majority vote of all the members of

BOD
Meeting is required
7. Increase or decrease of capital stock Majority vote 2/3 of OCS/ members Non-voting shares can vote
(Sec. 38) No appraisal right
Notice requirement
SEC approval is necessary
Treasurers statement is necessary
No decrease of capital stock if it will
prejudice right of creditors
Meeting is required
8. Incur, Create, Increase Bonded Majority Vote 2/3 of OCS/ members Non-voting shares can vote
Indebtedness (Sec. 38) No appraisal right
Notice is required
Registration of bonds with the SEC is
necessary
Majority can vote
9. Sale, Lease, Exchange, Mortgage, Majority vote 2/3 of OCS/ members Non-voting shares can vote
Pledge, Dispose of all or substantially all Appraisal right is available
of corporate assets (Sec.40) Notice is required
If sale is abandoned, directors action
is sufficient, no need for ratification
by stockholders
Non-voting shares can vote
10. Investment of Corporate Funds in Majority vote 2/3 of OCS/ members Appraisal right available
another Corporation or Business or for Notice is required
any other purpose other than primary Investment in the secondary purpose
purpose (Sec. 42) is covered
Stockholders ratification is not
necessary if the investment is
incidental to primary purpose

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CENTRALIZED BAR OPERATIONS
MEMORY AID
11. Issuance of Stock Dividends (Sec. 43)
12. Management Contract (Sec.
44)
13.Adoptionof By-laws (Sec. 46)
14. Amendment or repeal of By-laws or
Adoption of new By-laws (Sec. 48)
15.Delegation of the power to Amend,
Repeal or adopt New By-laws to BOD
16. Fixing the issued Price of No- Par
value shares (Sec. 62, last par.)
17. Merger or Consolidation (Sec. 77)
18. Dissolution of Corporation (Secs. 118
and 119)
19. Adoption of plan or distribution of
assets of non-stock corporation (Sec. 95
(2))
20. Ratification of act of disloyal
director (Sec. 34)
21. Vacancies in BOD if not due to
removal, expiration of the term or
increase in number of directors (Sec. 29)
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IN COMMERCIAL LAW
Majority of the quorum
Majority vote of BOD of both
managing and managed corporation
Majority vote
Majority of quorum of BOD, if
authorized by AOI
Majority of BOD of constituent
corporation
Majority vote
Majority vote of trustees
Majority vote of remaining directors
if quorum still exists
2/3 of OCS/ members
Majority of OCS/members of both managing
and managed corporation and in some
cases 2/3 of OCS/ members
Majority of OCS/ members
Majority of OCS
2/3 of OCS
Majority of OCS, if BOD is not authorized by
the AOI
2/3 of OCS/ members of constituent
corporation
2/3 of OCS/ members
2/3 of members having voting rights
2/3 of OCS
2005
There must be unrestricted retained
earnings
Non-voting shares can vote
Non-voting shares can vote
Delegation can be revoked by
majority OCS
Non-voting shares cannot vote
Non-voting shares can vote
Appraisal right is available, except
when the plan is abandoned
See Secs. 117-122
Non-voting shares canvote
If the directors do not constitute a
quorum, stockholders have the right
to elect
Provided that there is unrestricted
 San Beda College of Law 2005
CENTRALIZED BAR OPERATIONS
MEMORY AID IN COMMERCIAL LAW

22. Power to acquire own shares Directors action retained earnings

(Sec. 41) Only for legitimate purposes
Only if the AOI or amendment thereto
23. Denial of pre-emptive right (Sec. 39) 2/3 of OCS denies pre-emptive right
Denial extends to shares issued in
good faith in exchange for property
needed for corporate purposes or in
payment of previously contracted
debts
Reasonable per diems may be given
24. Fixing of compensation of directors By-laws may provide for compensation
(Sec.30) May be fixed by the majorityof the
OCS
Limit: not more than 10% of the net
income before tax

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CENTRALIZED BAR OPERATIONS
MEMORY AID IN COMMERCIAL LAW

COMPARISON OF DIFFERENT KINDS OF BANKS

UNIVERSAL BANKS COMMERCIAL BANKS THRIFT BANKS RURAL BANKS

GOVERNING LAW General Banking Law of 2000 General Banking Law of 2000 Thrift Banks Act of 1995 (RA Rural Banks Act of 1992 (RA No.
(RA No. 8791) (RA No. 8791) No. 7906) 7353

ORGANIZATION Must be organized in the form
of stock corporations
Must be organized in the form
of stock corporations
Must be organized in the
form of stock corporations
(Sec. 4)
May be organized in the form of
stock corporations either by:
Natural persons; Cooperatives;
and/or Holding companies
(Sec. 4)

Foreign individuals and non- Foreign individuals and non- At least 40% of the voting The capital stock shall be fully-
OWNERSHIP AND bank corporations may own up bank corporations may own up stock shall be owned by owned by Filipino citizens or
CAPITAL to 40 % of the voting stock to 40 % of the voting stock Filipino citizens (Sec. 8) corporations, associations or
REQUIREMENTS (Sec. 11) (Sec. 11) cooperatives except
shareholders of corporation
organized to hold equities in
rural banks and Filipino-
controlled banks (Sec. 4)
1. Powers authorized for a 1. General powers incident 1. Accept savings and 1. Accept savings and time
POWERS commercial bank; to corporations time deposits; deposits;
2. Powers of an investment 2. All such powers as may be 2. Open current or 2. Open current or checking
house; and necessary to carry on the checking accounts accounts when its net assets
3. Power to invest in non- business of commercial when its net assets are are at least P5M;
allied ent0erprises (Sec. banking: at least P20M; 3. Act as correspondent for
23) a. Accepting drafts and 3. Act as correspondent other financial institutions;
issuing letter of for other financial 4. Act as collection agent for
credits; institutions; government entities;
b. Discounting and 4. Act as collection agent 5. Act as official depository of
negotiating for government national agencies and of

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CENTRALIZED BAR OPERATIONS
MEMORY AID IN COMMERCIAL LAW

promissory notes, entities; local governments where

drafts, bills of 5. Act as official the bank is located;
exchange and other depository of national 6. Rediscount paper with PNB,
evidence of debt; agencies and of local Land bank, DBP or any other
c. Accepting or creating governments where the banking institution;
demand deposits; bank is located; 7. Offer other banking services
receiving other types 6. Rediscount paper with as provided in Sec. 72, RA
of deposits and PNB, Land Bank, DBP 337;
deposit substitutes; and other government- 8. Extend financial assistance
d. Buying and selling owned or controlled to private and public
foreign exchange and banks; employees.
other debt securities; 7. Issue mortgage and 9. With written permission of
and chattel mortgage and the MB, act as trustee over
e. Extending credit (Sec. chattel mortgage estates or properties of
29) certificates; farmers and merchants (Sec.
8. Purchase, hold and 12)
convey real estate
under the same
conditions governing
commercial banks;
9. Engage in quasi-banking
and money market
operations;
10. Open domestic letters
of credit;
11. Extend credit facilities
to private and
government employees;
12. Extend credit against
the security of jewelry,
precious stone and
articles of similar
nature
13. With the prior approval
of MB, engage in
commercial banking
services, and operating
under an expanded

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CENTRALIZED BAR OPERATIONS
MEMORY AID IN COMMERCIAL LAW

banking authority (Sec.

The total amount of loans that
LIMITATIONS ON may be extended to any
LENDING AUTHORITY person, partnership,
association, corporation or
other entity shall at no time
exceed 20% of the net worth of
the bank. May be increased by
10% (Sec. 35)
The total amount of loans shall
at no time exceed 20% of the
net worth of the bank. May be
increased by 10% (Sec. 35)
10)
Loans and credits must not Loans shall not exceed 15% of
exceed 15% of unimpaired the net worth of the bank (Sec.
capital and surplus of the 7)
bank. May be increased by
15% (Sec. 11)

POWER TO INVEST May invest in the equities of May invest only in the equities May invest only in the May invest only in the equities of
allied and non-allied of allied enterprises equities of allied allied undertakings. (Sec. 12)
enterprises (Sec. 24) (Sec. 30) undertakings. (Sec. 12)

TOTAL EQUITY Shall not exceed 50% of the net Shall not exceed 35% of the net Shall not exceed 25% of the Shall not exceed 25% of the net
INVESTMENTS worth of the bank (Sec. 24) worth of the bank (Sec. 30) net worth of the bank (Sec. worth of the bank
12) (Sec. 13)

EQUITY INVESTMENT IN Shall not exceed 25% of the net
ANY SINGLE worth of the bank
ENTERPRISE (sec. 24)
EQUITY INVESTMENT IN Up to 100% of the equity
ALLIED ENTERPRISES thereof (Sec. 26)
EQUITY INVESTMENT IN Must not exceed 35% of the
NON-ALLIED total equity nor shall it exceed
ENTERPRISES 35% of the voting stock (Sec.
27)
Shall not exceed 25% of the net Shall be limited to 15% of Shall be limited to 15% of the
worth of the bank (sec. 30) the net worth of the bank net worth of the bank and shall
and shall remain a minority remain a minority holding in that
holding in that enterprise. enterprise (Sec. 13)
(Sec. 12)
1. In a thrift bank or rural
bank up to 100% of the
equity thereof
2. In other financial allied Same as commercial banks N/A
enterprises, including (Sec 12)
another commercial bank
must remain a minority
holding in that enterprise
(Sec. 31)
N/A N/A
Up to 100% of the equity (Sec. (Sec.12) (Sec. 13)
32)

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 San Beda College of Law 2005
CENTRALIZED BAR OPERATIONS
MEMORY AID IN COMMERCIAL LAW

EQUITY INVESTMENT Must not exceed 40% of the Must not exceed 40% of the N/A
IN QUASI-BANKS equity thereof (sec. 28) equity thereof (Sec. 28)

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