01 General Provisions Flashcards
What is a corporation?
SEC. 2. 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 incidental to its existence.
What are the classes of corporations?
SEC. 3. Classes of Corporations. – Corporations formed or organized under this Code may be stock or nonstock corporations. Stock corporations are those which have capital stock divided into shares and are authorized to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held. All other corporations are nonstock corporations.
What are stock corporations?
SEC. 3. Classes of Corporations. – Corporations formed or organized under this Code may be stock or nonstock corporations. Stock corporations are those which have capital stock divided into shares and are authorized to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held. All other corporations are nonstock corporations.
What shall be the law governing corporations?
It depends on the law which created them or from which they derive existence from.
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.
Who are corporators, incorporators, stockholders, and members of a corporation?
SEC. 5. Corporators and Incorporators, Stockholders and Members. – Corporators are those who compose a corporation, whether as stockholders or shareholders in a stock corporation or as members in a nonstock corporation. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.
What specific details regarding the shares of a corporation must be indicated in the articles of incorporation?
SEC. 6. Classification of Shares. – The classification of shares, their corresponding rights, privileges, or restrictions, and their stated par value, if any, must be indicated in the articles of incorporation. Each share shall be equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock.
May common shares be derpvied voting rights?
No.
Sec. 6. Classification of Shares - [xxx] The shares in stock corporations may be divided into classes or series of shares, or both. No share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in this Code: Provided, That there shall always be a class or series of shares with complete voting rights.
May holders of nonvoting shares still vote on certain matters?
Yes.
Sec. 6. Classification of Shares. – [xxx] Holders of nonvoting shares shall nevertheless be entitled to vote on the following matters:
(a) Amendment of the articles of incorporation;
(b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another corporation or other corporations;
(g) Investment of corporate funds in another corporation or business in accordance with this Code; and
(h) Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote required under this Code to approve a particular corporate act shall be deemed to refer only to stocks with voting rights.
May corporations issue shares with no par value?
Yes.
Sec. 6. Classification of Shares – [xxx] The shares or series of shares may or may not have a par value: Provided, That banks, trust, insurance, and preneed companies, public utilities, building and loan associations, and other corporations authorized to obtain or access funds from the public, whether publicly listed or not, shall not be permitted to issue no-par value shares of stock.
What are the benefits of a preferred share of stock?
Sec. 6. Classification of Shares. – [xxx] Preferred shares of stock issued by a corporation may be given preference in the distribution of dividends and in the distribution of corporate assets in case of liquidation, or such other preferences: Provided, That preferred shares of stock may be issued only with a stated par value. The board of directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, further, That such terms and conditions shall be effective upon filing of a certificate thereof with the Securities and Exchange Commission, hereinafter referred to as the “Commission”.
What is the effect of issuing a no-par value share? And what is the condition required to issue a no-par value share?
Sec. 6. Classification of Shares. – [xxx] Shares of capital stock issued without par value shall be deemed fully paid and nonassessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided, That no-par value shares must be issued for a consideration of at least Five pesos (P5.00) per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends.
What is the rule for founders’ shares?
SEC. 7. Founders’ Shares. – Founders’ shares may be given certain rights and privileges not enjoyed by the owners of other stocks. 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 from the date of incorporation: Provided, That such exclusive right shall not be allowed if its exercise will violate Commonwealth Act No. 108, otherwise known as the “Anti-Dummy Law”; Republic Act No. 7042, otherwise known as the “Foreign Investments Act of 1991”; and other pertinent laws.
What are redeemable shares? And when may the right to redeem be exercised?
Redeemable shares are shares which may be purchased by the corporation from the holders of such shares upon the expiration of a fixed period.
They may be redeemed even when there are no unrestricted retained earnings.
Reqs: must be stated in the AOI and in the Certificate of Stock
SEC. 8. Redeemable Shares. – Redeemable shares may be issued by the corporation when expressly provided in the articles of incorporation. They are shares which may be purchased by the corporation from the holders of such shares upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books of the corporation, and upon such other terms and conditions stated in the articles of incorporation and the certificate of stock representing the shares, subject to rules and regulations issued by the Commission.
What are treasury shares?
SEC. 9. Treasury shares. – Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation through purchase, redemption, donation, or some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board of directors.
