APPRAISAL RIGHT

CHAPTER 13.
Appraisal Right
A R i t m o p s f t t o h p. I i a s m w a s c a t c o t p i a p n o h o c a i g t a s a c f t a
o t c l r t a s s c b a c c a s a m.
Definition
Appraisal Right is the method of paying shareholders for the taking of his property.
It is a statutory means whereby a stockholder can avoid the conversion of this
property into another property not of his own choosing and is given to a
shareholder as compensation for the abrogation of the common law rule that a
single stockholder could block a certain corporate act such as merger.
Pupose
T p i t p t p r o d s f a b t m s w a t n a c o t i. I e, i i a r g t d s o c c o b d t d p o t f
m v o t s.
Purpose of Appraisal Right
The purpose is to protect the property rights of dissenting stockholders form
actions by the majority shareholders which alters the nature and character of their
investment. In effect, it is a right granted to dissenting stockholders on certain
corporate or business decisions to demand payment of the fair market value of
their shares.
When exercised
S. 8. I o a r.-A s o a c s h t r t d a d p o t f v o h s i t f i:

1. I c a a t t a o i h t e o c o r t r o a s o c o s, o o a p i a r s t t o o s o a c, o o e o s t
t o c e;

2. I c o s, l, e, t, m, p o o d o a o s a o t c p a a a p i t C; a

3. I c o m o c.
When exercised
Sec. 81. Instances of appraisal right.-Any stockholder 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 any amendment to the articles of incorporation has the effect of

changing or restricting the rights of any stockholder or class of shares, or of
authorizing preferences in any respect superior to those of outstanding shares
of any class, or of extending or shortening the term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other
disposition of all or substantially all of the corporate property and assets as
provided in the Code; and
3. In case of merger or consolidation.
Enumeration not exclusive
1. I o f i a c o b o f a o p o t i p p a p i S. 4;

2. L, i a c c, a s h t u r t c t c f a r t p h s a t f v w s n b l t t p o i v, w t c h s a o i d
a l, e o c s (S. 1)
ENUMERATION NOT EXCLUSIVE: it may also cover:

1. Investment of funds in another corporation of business or for any other purpose other
than its primary purpose as provided in Sec. 42;
2. Likewise, in a close corporation, a stockholder has the unbridled right to compel the
corporation for any reason to purchase his shares at their fair value which shall not be
less than the par or issued value, when the corporation has sufficient assets over its
debts and liabilities, exclusive of capital stock (Sec. 105)
Not all amendments
NOT ALL AMENDMENTS
The right may only be exercised in cases of amendment which has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in
any respect superior to those of outstanding shares of any class, or of extending or
shortening the term of corporate existence.

Accordingly,if the amendment is to increase or decrease the number of directors, or change

the corporate name, or change of principal office, the appraisal right is not available.
Stockholder with unpaid subscription
Stockholder with unpaid subscription
He may exercise the appraisal right, since the subscriber is entitled to all the rights
of a stockholder under Sec. 72 and although Sec. 82 provides that the notation to
such certificate of stock is OPTIONAL at the instance of the corporation.
How exercised
How exercised
Sec. 82. How right is exercised. - The appraisal right may be exercised by any stockholder who shall have
voted against the proposed corporate action, by making a written demand on the corporation within thirty
(30) days after the date on which the vote was taken for payment of the fair value of his shares: Provided,
That failure to make the demand within such period shall be deemed a waiver of the appraisal right. If the
proposed corporate action is implemented or affected, the corporation shall pay to such stockholder, upon
surrender of the certificate or certificates of stock representing his shares, their fair value thereof as of the
day prior to the date on which the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action.

If within a period of sixty (60) days from the date the corporate action was approved by the stockholders,
the withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be
determined and appraised by three (3) disinterested persons, one of whom shall be named by the
stockholder, another by the corporation, and the third, by the two thus chosen. The findings of the majority
of the appraisers shall be final, and their award shall be paid by the corporation within thirty (30) days after
such award is made: Provided, That no payment shall be made to any dissenting stockholder unless the
corporation has unrestricted retained earnings in its books to cover such payment: and Provided, further,
That upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith
transfer his shares to the corporation.
Requirements and procedure for valid exercise
1. The stockholder must have voted against the proposed corporate action in any of the instances
allowed by law for the exercise of the right of appraisal;
2. The written demand for payment must be made by the dissenting stockholder within 30 days after
the date on which the vote was taken. Failure to make the demand within said period shall be
deemed a waiver on the part of the stockholder concerned to exercise his appraisal right;
3. Surrender of the certificate of stock by the dissenting stockholder for notation in the corporate books
and the payment of the corporation of the fair market value of the said shares as of the day prior to
the date on which the vote was taken. If the stockholder and the corporation cannot agree on the fair
market value thereof, the same shall be determined in accordance with the provisions of par. 2 of
Sec. 82;
4. The fair value of the shares of the dissenting stockholder must be paid by the corporation only if it
has unrestricted retained earnings in its books to cover such payment. If the corporation has no
unrestricted retained earnings, the dissenting stockholder may not, therefore, be able to effectively
exercise his appraisal right, EXCEPT in the case of a close corporation under SEC. 105;
5. Upon payment of the shares by the corporation, the dissenting stockholder shall transfer his shares
to the corporation.
Effect of exercise of appraisal right
S. 8. E o d a t o r. - F t t o d f p o t f v o t ss s u e t a o t c a i o t p o t s s b t c, a r a
t s s, i v a d r, s b s i a w t p o t C, e t r o s s t r p o t f v t: P, T i t d s i n p t v o h s w
3 d a t a, h v a d r s i b r.
Effect of exercise of appraisal right
Sec. 83. Effect of demand and termination of right. - From the time of demand for
payment of the fair value of the stockholders shares until either the abandonment
of the corporate action involved or the purchase of the said shares by the
corporation, all rights accruing to such shares, including voting and dividend rights,
shall be suspended in accordance with the provisions of this Code, except the
right of such stockholder to receive payment of the fair value thereof: Provided,
That if the dissenting stockholder is not paid the value of his shares within 30 days
after the award, his voting and dividend rights shall immediately be restored.
Suspension of stockholders rights
Suspension of the stockholders rights
Upon completion of the steps provided in Sec. 82, the stockholder concerned is
regarded as having made an election to withdraw from the corporate enterprise
and take the value of his stock. Such a procedure suspends (for a maximum
period of 30 days) certain ownership rights associated with stockholder status,
such as the right to receive dividends or distribution and the right to vote which
cannot be restored without compliance with the governing statutory condition.
Director exercising appraisal right
Director exercising appraisal right
A director exercising appraisal right may still continue to function as such, prior to
payment, unless there is contrary provision in the by-laws.
When right to payment ceases
S. 8. W r t p c. - N d f p u t T m b w u t c c t. I, h, s d f p i w w t c o t c, o i t p c a i a
o r b t c o d b t S a e c w s a i n, o i t S a E C d t s s i n e t t a r, t t r o s s t b p t f v
o h s s c, h s a a s s t b r, a a d d w w h a o h s s b p h.
When right to payment ceases
Sec. 84. When right to payment ceases. - No demand for payment under this Title
may be withdrawn unless the corporation consents thereto. If, however, such
demand for payment is withdrawn with the consent of the corporation, or if the
proposed corporate action is abandoned or rescinded by the corporation or
disapproved by the Securities and exchange commission where such approval is
necessary, or if the Securities and Exchange Commission determines that such
stockholder is not entitled to the appraisal right, then the right of said stockholder
to be paid the fair value of his shares shall cease, his status as a stockholder shall
thereupon be restored, and all dividend distributions which would have accrued on
his shares shall be paid him.
Instances when the right of a dissenting stockholder
to be paid the fair value of his shares ceases
1. W h w h d f p a t c c t;

2. W t p a i a o r b t c;

3. W t p a i d b t S w s a i n;

4. W t S d t h i n e t e h a r;

5. W h f t s t s c w t (1) d f d t t c f n t s s a d s; a

6. I t s a t a t c s c.
Instances when the right of a dissenting stockholder
to be paid the fair value of his shares ceases
1. When he withdraws his demand for payment and the corporations consents
thereto;
2. When the proposed action is abandoned or rescinded by the corporation;
3. When the proposed action is disapproved by the SEC where such approval is
necessary;
4. When the SEC determines that he is not entitled to exercise his appraisal
right;
5. When he fails to submit the stock certificate within ten (10) days from demand
to the corporation for notation that such shares are dissenting shares; and
6. If the shares are transferred and the certificate subsequently cancelled.
Cost of appraisal
If the corporation and the dissenting stockholder do not agree, an appraisal to be
made by three disinterested person may be made.
Sec. 85. Who bears the costs of appraisal.
S. 8. W b t c o a. - T c o a s b b b t c, u t f v a b t a i a t s a t p w t c m h o t p t s, i
w c t s b b b t l. I t c o a a t r s f v, a c a e s b a a t c, u t r o t s t r p w u.
Sec. 85. Who bears the cost of appraisal.
Sec. 85. Who bears the costs of appraisal. - The cost of appraisal shall be borne
by the corporation, unless the fair value ascertained by the appraisers is
approximately the same as the price which the corporation may have offered to
pay the stockholder, in which case they shall be borne by the latter. In the case of
an action to recover such fair value, all costs and expenses shall be assessed
against the corporation, unless the refusal of the stockholder to receive payment
was unjustified.
The corporation bears the cost if...
The corporation bears the cost if:
a. The price offered by the corporation is lower than the fair value of the shares
of the dissenting stockholder as determined by the appraisers;
b. Where an action is filed by the dissenting stockholder to recover such fair
value and the refusal of the stockholder to receive payment found by the court
to be justified.
Dissenting stockholder will be liable for the cost and
expenses of appraisal when:
Dissenting stockholder will be liable for the cost and
expenses of appraisal when:
a. When the price offered by the corporation is approximately the same as the
fair value ascertained by the appraisers;
b. Where the action filed by the dissenting stockholder and his refusal to accept
payment is found by the court to be unjustified.
Notation
S. 8. N o c; r o t. - W (1) d a d p f h s, a d s s s t c o s r h s t t c f n t t s s a d s. H f t
d s s, a t o o t c, t h r u t T. I s r b t c c c, t r o t t a a d s u t T s c a t t s h a t r o a r
s; a a d d w w h a o s s s b p t t t.
Notation
Sec. 86. Notation on certificates; rights of transferee. - Within (10) days after
demanding payment for his shares, a dissenting stockholder shall submit the
certificates of stock representing his shares to the corporation for notation thereon
that such shares are dissenting shares. His failure to do so shall, at the option of
the corporation, terminate his rights under this Title. If shares represented by the
certificates consequently cancelled, the rights of the transferor as a dissenting
stockholder under this Title shall cease and the transferee shall have all the rights
of a regular stockholder; and all dividend distributions which would have accrued
on such shares shall be paid to the transferee.
Purpose of notation
Purpose of notation
To give notice and guide to the corporation to determine the respective rights of
stockholders.
Sale
Sale
The law does not prohibit the dissenting stockholder to sell, transfer or assign his
shares. If such be the case, the right of the dissenting stockholder to be paid the
fair value of his shares shall cease and the transferee will acquire all the rights of a
regular stockholder inclusive of all dividends which would have accrued on such
shares.