XI. STOCKHOLDERS AND MEMBERS
56)
1. Shareholders Not Creditors of the Corporation (Garcia
v. Lim Chu Sing, 59 Phil. 562 [1934]).
2. Subscription Contracts (Sec. 59 and 71).
(a) Purchase Agreement (Bayla v. Silang Traffic Co.,
Inc., 73 Phil. 557 [1942]).
(b) Pre-Incorporation Subscription (Sec. 61)
(c) Release from Subscription Obligation (Velasco v.
Poizat, 37 Phil. 802 [1918]; PNB v. Bitulok Sawmill,
Inc., 23 SCRA 1968 [1968]; National Exchange Co.
v. Dexter, 51 Phil. 601 [1928])
(d) When condition of payment provided for in the by-
laws (De Silva v. Aboitiz & Co., 44 Phil. 755 [1923]).
3. Consideration (Sec. 61).
4. Watered Stocks (Sec. 64)
5. Payment of Balance of Subscription (Secs. 65 and 66).
6. Delinquency on Subscription (Secs. 67, 68, 69 and 70)
(a) Who May Question a Delinquency Sale (Sec. 67 and
68).
7. Certificate of Stock (Sec. 62)
(a) Nature of Certificate (De los Santos v. Republic, 96
Phil. 577 [1955], Bitong v. Court of Appeals, 292
SCRA 503 (1998).
(b) Quasi-negotiable Character of the Certificate of
Stock (Bachrach Motor Co. v. Lacson Ledesma, 64
Phil. 681 [1937], Razon v. IAC, 207 SCRA 234
(1992), Bitong v. Court of Appeals, 292 SCRA 503
(1998).
(c) Right to Issuance (Sec. 63).
(d) Lost or Destroyed Certificates (Sec. 62 and 72)
(e) Forged and Unauthorized Transfers (J.
Santamaria v. HongKong and Shanghai Banking
Corp., 89 Phil. 780 [1951]; Neugene Marketing, Inc.
v. Court of Appeals, 303 SCRA 295 [1999]).
8. Stock and Transfer Book (Secs. 62, 71 and 73; Fua Cun
v. Summers, 44 Phil. 704 [1923]; Monserrat v. Ceran,
58 Phil. 469 [1933]; Chua Guan v. Samahang
Magsasaka, Inc., 62 Phil. 472 [1935]; Uson v. Diosomito,
61 Phil. 535 [1935]; Escaño v. Filipinas Mining
Corporation, 74 Phil. 71 [1944]; Bachrach Motors v.
Lacson-Ledesma, 64 Phil. 681 [1937]; Nava v. Peers
Marketing Corp., 74 SCRA 65 [1976]), Garcia v.
Jomouad, G.R. No. 133969, 26 January 2000, Chemphil
Export & Import Corporation v Court of Appeals, 251
SCRA 257 (1995).
9. Situs of Shares of Stocks (Sec. 54)
XII. RIGHTS OF STOCKHOLDERS AND MEMBERS
1. What does a “share” represent?
2. Right to Certificate of Stock for Fully Paid Shares (Sec.
64; Tan v. SEC, 206 SCRA 740 [1992])
3. Preemptive Rights (Sec. 39; Datu Tagoranao Benito v.
SEC, 123 SCRA 722 [1983])
4. Right to Transfer of Shareholdings (Sec. 62).
(a) Non-transferability of Membership in
Non-Stock Corporation (Secs. 89 and 90).
(b) Restriction on Transfers (Lambert v. Fox, 26 Phil.
588 [1914])
- Right of Refusal (Padgett v. Babcock &
Templeton, Inc., 59 Phil. 232 [1933],
Fleishcher v. Botica Nolasco, 47 Phil. 583
(1925).
(c) Remedy If Registration Is Refused (Hager v.
Bryan, 19 Phil. 138 [1911])
5. Rights to Dividends (Sec. 42)
6. Right to Vote and to Attend Meetings (Sec. 6, Sec. 88)
(a) Instances When Stockholders Are Entitled to
Vote:
- Election of directors and trustees (Sec. 23).
- Amendment of articles of incorporation (Sec.
15).
- Investment in another business or
corporation (Secs. 35 and 41).
- Merger and consolidation (Sec. 76).
- Increase and Decrease of capital stock (Sec.
37).
- Adoption, amendment and repeal of by-laws
(Sec. 47).
- Declaration of stock dividends (Sec. 42).
- Management contracts (Sec. 43).
- Fixing of consideration of no par value
shares (Sec. 61).
(b) Joint Ownership (Sec. 55)
(c) Treasury Share No Voting Rights (Sec.
(d) Pledgor, Mortgagors and Administrators (Sec.
54)
(e) Conduct of Stockholders' or Members' Meetings:
(i) Kinds and Requirements of Meetings
(Secs. 48 and 49);
(ii) Place and Time of Meeting (Secs. 50 and
92);
(iii) Quorum (Sec. 51)
7. Rights to Inspect and Copy
(a) Basis of the Right (Gokongwei, Jr. v. SEC, 89 SCRA
336 [1979]).
(b) Limitations on the Right
(c) Specified Records (Secs. 73, 74 and 177)
(d) Remedies If Inspection Is Denied: Mandamus
(Gonzales v. PNB, 122 SCRA, 489 [1983];
Republic v. Sandiganbayan, 199 SCRA 39 [1991]).
(e) Confidential Nature of SEC Examinations (Sec. 178)
8. Appraisal Right (Secs. 80 to 85 and 104)
9. Derivative Suits (Sec. 5, Rule II, New Rules of Procedure
of the SEC; San Miguel Corp. v. Kahn, 176 SCRA 447
[1989]).
In case of nuisance or harassment suit, the court shall
forthwith dismiss the case.
(a) Who May Bring the Suit ((Pascual v. Orozco, 19 Phil.
83 [1911]).
(b) Exhaustion of Intra-Corporate Remedies (Everett v.
Asia Banking Corp., 49 Phil. 512 [1927]; Angeles
v. Sanmtos, 64 Phil. 697 [1937]).
(c) Nature of Relief (Evangelista v. Santos, 86 Phil. 387
[1950]; Republic Bank v. Cuaderno, 19 SCRA 671
[1967]; Reyes v. Tan, 3 SCRA 198 [1961];
Commart (Phils.) Inc. v. SEC, 198 SCRA 73
[1991]).
10. Right to Proportionate Share of Remaining Assets
Upon Dissolution of the Corporation
(a) Different rules apply to non-stock corporation and
foundations (Secs. 93 and 94; Section 34(H)(2)(c),
NIRC of 1997).
11. Contracts and Agreement Affecting Shareholdings
(a) Proxy (Sec. 57)
(b) Voting Trust Agreements (Sec. 59; Lee v. CA, 205
SCRA 752 [1992]).
(c) Pooling Agreements or Shareholders’
Agreements (Sec. 99)
XIII. CAPITAL STRUCTURE: SHARES OF STOCK
1. Concept of "Capital Stock" (Central Textile Mills v.
National Wage and Productivity Commission, 260 SCRA
368 [1996]).
2. Classification of Shares (Sec. 6)
(a) Common Shares
(b) Preferred Shares (Republic Planters Bank v. Agana,
269 SCRA 1 [1997]).
(b) Redeemable shares (Sec. 8)
(c) Founder Shares (Sec. 7)
(d) Treasury Shares (Sec. 9; Commissioner v. Manning,
66 SCRA 14 [1975]).
(e) Stock Warrants
(f) Stock Options
(g) Re-Classification of Shares
3. Hybrid Securities (Government v. Phil. Sugar Estates, 38
Phil. 15 [1918)
4. Quasi-Reorganization
(a) Reduction of Capital Stock (Sec. 37)
(b) Stock Splits
(c) Stock Consolidations
XIV. ACQUISITIONS, MERGERS AND CONSOLIDATIONS
A. Acquisitions and Transfers
See relevant portion of VILLANUEVA,
Restatement of the Doctrine of Piercing The
Veil of Corporate Fiction, 37 ATENEO L.J. 19
(No. 2, June 1993)
1. Concept of "enterprise" or "economic unit" or a
"going concern".
2. Types of Acquisitions\Transfers (Edward J. Nell Co.
v. Pacific, 15 SCRA 415 [1965]):
(a) In a pure "assets only" transfer
(b) In a transfer of the "business
enterprise,"
(c) In an "equity transfer"
 3. Business Enterprise Transfers (A.D. Santos v.
Vasquez, 22 SCRA 1156 [1968]; Laguna
Transportation Co., Inc. v. SSS, 107 Phil. 833
[1960], Pepsi-Cola Bottling Co., v. NLRC, 210
SCRA 277 (1992).
4. Equity Transfers (Philippine Veterans Investment
Development Corp. v. CA, 181 SCRA 669 [1990]).
5. Aspects as to Employees (Complex Electronics
Employees Association v. NLRC, 310 SCRA 403
[1999]).
B. Merger and Consolidation
1. Concepts
2. Procedure:
(a) Plan of Merger or Consolidation (Sec. 75);
(b) Stockholders' or Members' Approval (Sec. 76);
(c) Articles of Merger or Consolidation (Sec. 77);
(d) Approval by SEC (Sec. 78).
3. Effects of Merger or Consolidation (Sec. 79)
C. Effects on Employees of Corporation
1. Assets Only Transfers (Sundowner Dev. Corp. v.
Drilon, 180 SCRA 14 [1989])
2. Business-Enterprise Transfers (Yu v. NLRC, 245
SCRA 134 [1995]; Sunio v. NLRC, 127 SCRA 390
[1984]; Central Azucarera del Danao v. Court of
Appeals, 137 SCRA 295 [1985]).
3. Equity Transfers (Manlimos v. NLRC, 242 SCRA 145
[1995]; Robledo v. NLRC, 238 SCRA 52 [1994];
Pepsi-Cola Bottling Co. v. NLRC, 210 SCRA 277
(1992)
4. Mergers and Consolidations (Filipinas Port
Services, Inc. v. NLRC, 177 SCRA 203 [1989];
Filipinas Port Services, Inc. v. NLRC, 200 SCRA
773 [1991]
5. Spin-Offs (San Miguel Corp. Employees Union-
PTGWO v. Confessor, 262 SCRA 81 [1996])