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LAW2 > SEC 22-47 > Flashcards

SEC 22-47 Flashcards

1
Q

Who elects the BOD? Who appoints officers?

A

BOD- SHs

Officers - BOD

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2
Q

Who decides in the corpo? Exceptions?

A 
GR: BOD decides
Exceptions: 
1. close corp - SHS
2. excom
3. mngt contract
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3
Q

Give the terms of office for BOD, Coop., Non-stock, and NS Educ

A

BOD - 1
Coop. - 2
NS - 3
NS Educ - 5

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4
Q

How many qualifications for a BOD? What are they?

A

(1) Must own 1 share
(2) Share must be reg. in his name
(3) Must continuously reg. in his name

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5
Q

3 corps vested with public interest

A

Securities, Banks, and Other cases (SBO)

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6
Q

Req for corps vested with public interest

A

at least 20% of BOD are independent directors

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7
Q

Independent directors

A

must be elected by SHS & entitled to vote in absentia

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8
Q

Doctrine of hold-over

A

existing BOD will function as such until new BOD is elected

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9
Q

Limitations/conditions for elections

A

(1) Presence in person or by written proxy, remote comm, or absentee voting
(2) Election by ballot if requested (if not - VIVA VOCE - raise of hand)
(3) No delinquent stock shall be voted
(4) Election by plurality
(5) Required notice must be given
(6) Quorum
(7) Only voting shares can vote

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10
Q

Unpaid Shares

A
  • can votes
  • all rights are available
  • has 30 days to pay on call of BOD
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11
Q

Delinquent stock

A
  • cannot vote

- unpaid shares which are past the 30 day-period set on call of BOD

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12
Q

What constitutes a quorum?

A

M of the OCS - stock

M of members - non-stock

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13
Q

Why is the quorum needed? Why is the majority of the quorum needed?

A

Quorum - required to hold meeting

M of Quorum - decision to be valid

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14
Q

Formula for votes

A

VOTES = # of shares x # of directors to be elected

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15
Q

Methods of voting

A
  1. straight voting
  2. cummulative voting for one candidate
  3. cummulative voting by distribution
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16
Q

Rule for voting in non-stock

A
  • may cast as many votes but may not cast more than 1 votes for a candidate

GR: NO cummulative voting
EX: unless allowed by AOI/ By-laws

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17
Q

Manner of voting

A

Direct - SHs will attend and vote

Indirect - proxy, etc.

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18
Q

Qualification of BOT

A

must be a member

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19
Q

BOD’s power is original/undelegated

A

Theory of Original Power

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20
Q

What are the remedies in case of BOD mismanagement?

A

RID

  1. Receivership
  2. Injunction
  3. Dissolution
  4. Derivative Suit
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21
Q

Suit filed by SHs in the name of the corp, for the benefit of the corp. in case the BOD does not like to file or in case of mismanagement

A

Derivative Suit

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22
Q

Can the BOD be removed?

A

GR: Inherent Power of Amotion
EX: If elected by minority through cummulative voting

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23
Q

Inherent Power of Amotion

A

SHs can remove the BOD at any point in time without any valid ground

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24
Q

Corp Officers

Give GR and EX

A

GR: Officers are elected by BOD
EX: Non-stock & Close Corp.

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25
Q

What is the term of office of corp officers?

A
  • may be fixed in By-laws

- may be removed any time by the BOD

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26
Q

Is there a prohibition if a SH, BOD, or Officer has another position in another corp?

A

GR: NO prohibition (As per Atty. “Di kasalanan maging mayaman lol)
EX: If prohibited in the By-laws

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27
Q

Qualifications to be a Pres of the corp

A
  • must be a director

- must attend BOD

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28
Q

Qualifications of a corporate secretary

A
  • must be a resident and citizen
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29
Q

Qualification of a tresurer

A

must be a resident

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30
Q

Prohibitions in the coincidence of positions (2)

A

Pres and Sec
Pres & Treasurer

*IN OPC, Pres and Treasurer could be 1 person

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31
Q

Requisites for Board Meeting

A
  1. meeting of BOD/BOT actually assembled
  2. presence of quorum
  3. decision of M of quorum
  4. meeting at the time, place, manner provided in the By-laws
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32
Q

Can a BOD participate in proxy voting? Why?

A

No because what is delegated cannot be further delegated (Theory of Original Power)

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33
Q

Period to report election of BOD/Officers

A

within 30 days after election

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34
Q

In case of non-holding of election, what is the period to report?

A

within 30 days from date of scheduled election

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35
Q

In case of new date of election, what is the period to report?

A

not later than 60 days from scheduled date

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36
Q

If in case of non-holding of elections the 2nd time around, what happens?

A

SEC can order that an election be held

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37
Q

If a director, trustee, or officer dies, resigns, etc., what is the period to report?

A

report within 7 days from knowledge

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38
Q

What are the grounds for disqualification of directors, trustees, and officers

A

If within 5 years prior to election/appointment, he committed any of the FFF

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39
Q

FFF grounds for disqualification

A
  1. Convicted by final judgment - offenses exceeding 6 years like estafa, murder, theft, etc; violating the corp. code; violationg RA 8799 (securities regulation code)
  2. Found administratively liable for any offense including fraudulent acts (misappropriation, forgery, etc.)
  3. Violation of 1&2 of a foreign law
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40
Q

Vote required for election of BOD/BOT

A

M of OCS

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41
Q

Required for meeting for removal of BOD:

A

M of OCS

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42
Q

Vote required for removal of BOD

A

2/3 of OCS

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43
Q

T or F - SEC can now remove BOD if found to be disqualified

A

T

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44
Q

T/F - BOD can remove another BOD

A

F. Why? BOD cannot remove another BOD because only the SHs can remove by 2/3 vote of OCS

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45
Q

3 types of evidences

A

criminal, civil, and administrative

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46
Q

Proof beyond resonable doubt

A

criminal evidence

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47
Q

Preponderence of evidence

A

Civil

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48
Q

Substantial evidence

A

administrative

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49
Q

T/F - The SEC and PCC impose other qualifications/disqualifications

A

T

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50
Q

T/F - Any vacancies occurring in the board of directors and trustees may be filled by the vote of at least majority of the remaining directors and trustees

A

True, if it is other than by removal or expiration of term and if still constituting the quorum.

Otherwise, said vacancies must be filled by the stockholders or members in a regular or special meeting called for a purpose.

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51
Q

Who can fill the vacancies in the office of directors or trustees?

A
  1. By the stockholders or members
    a. removal or expiration of the term
    b. other than by removal or expiration, but no quorum
    c. other than by removal or expiration, there is a quorum but delegated
    d. increase in the number of the directors
  2. By member of the BOD
    - other than by removal or expiration, there is a quorum and they decided not to delegate
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52
Q

When the vacancy is due to term expiration, when shall the the election be held?

A

No later than the day such expiration at a meeting called for that purpose

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53
Q

When the vacancy arises as a result of removal by the stockholders or members, when shall the election be held?

A

It may be held on the same day of the meeting

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54
Q

What is the period to fill the vacancy for the other grounds? (Vacancy of directors and trustees, aside from term expiration and removal)

A

The election must be held no later than forty-five (45) days from the time the vacancy arose.

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55
Q

What do we call the director or trustee elected to fill a vacancy?

A

Replacement director or trustee

they shall serve only for the unexpired term of the predecessor in office

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56
Q

Emergency board

A

Unanimous consent of remaining directors or trustees

  • Happens when the vacancy prevents the remaining directors from constituting a quorum
  • May be filled from among the officers of the corporation
  • temporary only (the term shall cease within a reasonable time from termination of the emergency or upon election of the replacement director or trustee, WHICHEVER COMES EARLIER)
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57
Q

When must the corporation notify the commission for creating an emergency board?

A

Within three (3) days from the creation of emergency board, stating therein the reason for its creation

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58
Q

Compensation of directors

A

GR - BOD has no compensation

Exception - if granted by the vote of the MAJORITY OF THE OCS

Limitation - not to exceed 10% of the net income before the income tax of the corporate during the preceding year

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59
Q

T/F - Directors or Trustees can participate in the determination of their own per diems or compensation

A

False - they shall NOT participate

60
Q

T/F - Corporations vested with public interest shall not submit to their shareholders and the commission, an annual report of the total compensation of each of their directors and trustees

A

False - they SHALL submit

61
Q

Liability of directors, trustees or officers

A

GR - NOT liable (Business Judgement Rule)

Exception - liable if: (1st par) SOLIDARILY LIABLE

  1. Willfully and knowingly votes or assents to patently unlawful acts of the corporation (Obedience)
  2. Guilty of gross negligence or bad faith in directing the affairs of the corporation (Diligence)
  3. Acquires any personal or pecuniary interest in conflict with his duty (Loyalty)

(2nd par)
Liable as trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation

62
Q

Special Fact Doctrine

A

Attempts to acquire or acquires an interest adverse to the corporation in respect of any matter which has been reposed in them in confidence

63
Q

T/F - A contract of the corporation with (1) or more of its directors, trustees, officers or their spouses and relatives within the fourth civil degree of consanguinity or affinity is VOIDABLE

A

True

64
Q

What are the 5 requisites in Self-Dealing Directors?

A

a) The presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;
b) The vote of such director or trustee was not necessary for the approval of the contract;
c) The contract is fair and reasonable under the circumstances;
d) In case of corporations vested in public interest, material contracts are approved by at least two-thirds (2/3) of the entire membership of the board , with at least a majority of the independent directors voting to approve the material contract
e) In case of an officer, the contract has been previously authorized by the board of directors.

IF ANY OF THE 3 IS ABSENT OR VIOLATED - VOIDABLE

65
Q

What is the vote to ratify the contract in self-dealing directors (where any of the first 3 conditions is absent)

A

Vote of stockholders representing at least two-third (2/3) of the OCS

66
Q

Contracts between corporations with interlocking directors

A

GR - interlocking doctrine is VALID

Exception - if the requisites is Sec.32 are violated/absent

It can be invalidated if:

1) in case of fraud
2) contract is not fair and reasonable

Presumption - stockholdings exceeding 20% of the OCS shall be considered substantial for purposes of interlocking directors

Vote to ratify - two-thirds (2/3) of the OCS

67
Q

Corporate Opportunity Doctrine

A

acquires a business opportunity which should belong to the corporation

68
Q

Disloyalty of Directors

A

(obtaining profits to the prejudice of the corporation)

The director must account for and refund to the latter all such profits, unless the act has been ratified by a vote of the stockholders owning or representing at least two-third (2/3) of OCS

69
Q

Reason of the BOD for creating Executive Committee

A

To have lesser quorum requirement

70
Q

Who creates the Executive Committee?

A

Board of Directors (BOD)

71
Q

What are the 4 requisites to create the Executive Committee?

A
  1. By-laws must provide for it
  2. Composed of not less than 3 members of BOD
  3. Must be directors of the corp.
  4. The BOD will create the ExCom
72
Q

Minimum required members of Executive committee

A

3 members

73
Q

What is the vote to create the Executive Committee?

A

Majority of the BOD

74
Q

what is the vote to decide in ExCom?

A

Majority of ALL its members

75
Q

If there are 5 members of the ExCom:

(a) what is the quorum?
(b) what is the vote to decide

A

(a) 3 members

(b) 3 members - majority of All its members

76
Q

What are the 5 instances when the ExCom cannot change the decision of either the SH or the BOD?

A
  1. Approval of any action for which SH’s approval is required
  2. Filling the vacancies in the board
  3. Amendment or repeal of BY-LAWS
  4. Amendment or repeal of any resolution of the board
  5. Distribution of the cash dividends to the SH
77
Q

T/F: The BOD can create special committee of temporary or permanent nature.

A

True

78
Q

T/F: The BOD can create special committee of only permanent nature.

A

False. Because the BOD can create special committee of either temporary or permanent nature.

79
Q

The corporation cannot exercise power that is not found in the express, implied, and inherent powers.

A

Doctrine of Limited Capacity

80
Q

The corporation can exercise any power, except those which are prohibited.

A

Theory of General Capacity

81
Q

The corporation can exercise those powers which are specially prohibited unless it is allowed by law.

A

Theory of Special Capacity

82
Q

What are the three kinds or classes of powers of the corporation?

A

Express, Implied, Inherent

83
Q

This power of the corporation is stated in the Revised Corporation Code, primarily in the AOI.

A

Express

84
Q

This power of the corporation is reasonably necessary to carry out the express power.

A

Implied

85
Q

This power of the corporation is automatically given to the corporation.

A

Inherent / Incidental

86
Q

T/F: The power to sue and be sued of a corporation is an inherent power.

A

False. Sue and be sued is an express power.

87
Q

T/F: If a corporation is not registered, it can be sued but it cannot sue.

A

True

88
Q

Is the corporation entitled to moral damages?

A

GR: No, because it has no feelings.
E: Besmirch reputation; tainted or ruined reputation

89
Q

T/F: If a foreign corporation is not licensed to operate in the Philippines it can sue and be sued.

A

False. A foreign corporation without a license to operate cannot sue but can be sued.

90
Q

T/F: A corporation has an implied power to acquire property.

A

False. Power to acquire property is an express power.

91
Q

T/F: A corporation can acquire private land.

A

True

92
Q

T/F: A corporation can acquire public land.

A

False. Corporations are not allowed to acquire public land, only private land.

93
Q

What are the 2 requisites needed for a corporation to acquire its own shares?

A
  1. The presence of unrestricted retained earnings.

2. There must be a legitimate corporate purpose.

94
Q

Can a corporation acquire shares of another corporation?

A

If it is the primary purpose of the corporation, then YES.

But if not, then there is a need for the VOTE OF THE SHs and BOD to exercise the power.

95
Q

T/F: Domestic corporations are allowed to contribute to political parties, but foreign corporations are not allowed.

A

True

96
Q

It protects a person acting for and in behalf of the corporation from being personally liable for his authorized actions.

A

Doctrine of Corporate Immunity

97
Q

What is the vote needed for a private corporation to extend or shorten its term as stated in the AOI?

A

Majority of the BOD + ratified by 2/3 of the OCS

98
Q

T/F: In case of extension of the corporate term, a dissenting stockholder may exercise the right of appraisal.

A

True. Under Section 36, last sentence of the law.

99
Q

Can a corporation invest its corporate funds in another corporation of business or for any other purpose?

A

GR- if primary purpose, vote is M of BOD.

E- If not, M of the BOD and 2/3 vote of OCS.

E to E- but if implied power vote is M of BOD.

100
Q

Who has the power to declare cash dividends?

A

M of the Quorum of BOD

101
Q

Who has the power to declare stock dividends?

A

M of the Quorum of BOD and 2/3 of the OCS

102
Q

Cash Dividends belongs to whom?

A

Stock holder

103
Q

Stock Dividends belongs to whom?

A

Corporation

104
Q

Difference of Cash Dividends to Stock Dividends?

A
  • Stock Dividends increases corporate capital while Cash Dividends don’t
  • Cash Dividends are applied to the unpaid shares
  • Stock dividends are withheld from the stock holder
105
Q

Is declaration of dividends mandatory?

A

GR- no for it is the prerogative of the BOD

E- when it exceeds the 100% of the paid in capital

E to E- if it will be intended to be use in Expansion Projects, Loan Payments and Special Circumstances.

106
Q

How can a corporation have the power to enter into a management contract?

A

Majority votes of BOD & Majority votes of OCS are needed

107
Q

Manner of voting for corporation to enter into a management contract will change if the following instances occur:

A
  • if 1/3 of the OCS of the managing and the managed are the same
  • majority of the BOD of the both are the same
108
Q

How long is a management contract?

A

GR- Maximum of 5 years

E- when it is about exploration of natural resources

109
Q

It is when acts are inside the power of the corporation

A

Intra Vires Acts

110
Q

It is when acts are outside the power of the corporation

A

Ultra Vires Act

111
Q

It is when acts are prohibited by law

A

Illegal Act

112
Q

Vote to ratify Ultra Vires Act

A

2/3 of the OCs

113
Q

Vote to ratify Illegal Act

A

It cannot be ratified, it is prohibited by law

114
Q

Difference between Articles of Incorporation and By-Laws

A
  • AOI is made from the start
  • By-Laws is a condition subsequent which means it can be from the start or after
  • AOI is condition precedent which means a corporation cannot exist without it
  • AOI is more superior than By-Laws
  • AOI is more important to the Third Person While By-Laws is more important to the Stock Holders
115
Q

Can a corporation exist without the AOI?

A

No

116
Q

Can a corporation exist without the By-Laws?

A

Yes, but can’t operate

117
Q

These are the internal rules of the corporation

A

By-Laws

118
Q

If By-Laws are filed before the incorporation, who shall approve it?

A

All of the incorporators

119
Q

If the By-Laws are filed ater the incorporation, who shall approve it?

A

Majority of the OCS

120
Q

When is the By-Laws effective if filed before incorporation?

A

When AOI is approved and COI is given by SEC

121
Q

When is the By-Laws effective if filed after incorporation?

A

Separate approval for the By-Laws is needed

122
Q

TF: Certificate from appropriate government agency is needed for adoption or amendment purposes.

A

True

123
Q

TF: The content of the By-Laws are specific and must be detailed

A

True

124
Q

What is longer, AOI or By-Laws?

A

By-Laws

125
Q

What is the vote for the amendment of the By-Laws?

A

GR- M of BOD and M of OCS

126
Q

What happened when the stockholders delegated their power to amend the By-Laws?

A

2/3 of the OCS is needed

127
Q

In case the OCS decides to revoke, how many vote is needed?

A

M of the OCS

128
Q

T/F: The corporation can increase or decrease its capital stock.

A

True

129
Q

T/F: Only the capital stocks that are authorized by the BOD and the SHs can be increased.

A

True

130
Q

T/F: If the unauthorized capital stocks were increased, it will result in over-issued stocks.

A

True.

131
Q

T/F: Corporation cannot decrease the capital stock if it will prejudice corporate creditors.

A

True

132
Q

T/F: Corporation can decrease the capital stock if it will violate the Trust Fund Doctrine.

A

False. The corp. cannot decrease capital stocks if it will violate the trust fund doctrine

133
Q

What are the three ways to increase capital stocks?

A
  1. by increasing the number of shares
  2. by increasing the par value of the shares
  3. by increasing both the number of shares and the par value
134
Q

What is the vote required to increase or decrease the capital stock; or incur bonded indebtedness?

A

M + 2/3 (Majority of the BOD + 2/3 of OCS)

135
Q

Is there a need for prior approval from SEC to increase and decrease or to incur bonded indebtedness?

A

YES, in both cases.

136
Q

What is the general rule for the application in SEC to increase capital stock?

A

GR: The application of increase must be made 6 months from the date of approval.

E: Justifiable reasons

137
Q

T/F: The 25% 25% rule is required for increasing the capital stocks.

A

True

138
Q

T/F: When incurring bonded indebtedness, bonds must be registered in SEC.

A

True

139
Q

The right where before the shares of the corporation are sold to the third person or to the public, it must be first offered to the existing stockholders.

A

Pre-emptive right

140
Q

The general rule is that the pre-emptive right is automatically given, what is the exception to the rule?

What are the 2 ways to remove the pre-emptive right?

A

GR: The pre-emptive right is given.
E: When the right is DENIED

2 ways to remove the pre-emptive right:

  1. Stated in the AOI that there is no pre-emptive right
  2. After the creation of the corp., the vote needed to remove the pre-emptive right is: M + 2/3
141
Q

What is the vote needed to remove the pre-emptive right after the creation of the corp.?

A

Majority of the BOD + 2/3 of the OCS

142
Q

What are the three circumstances where there is no need to deny the pre-emptive right of the corporation as it will be already denied by the law?

A

L.C.D.

  1. Laws requiring minimum stock offerings
  2. Corporate purposes
  3. Contracted debt
143
Q

When is the sale of assets, a sale of all or substantially all assets?

A

If it would render the corporation INCAPABLE of continuing the business.

144
Q

If ALL shares are sold at the start, do the remaining unsubscribed shares still have pre-emptive rights?

A

NONE

145
Q

If only specific shares are sold at the start, do the remaining unsubscribed capital still have pre-emptive rights?

A

YES

LAW2 (2 decks)

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