Stocks and Stockholders Flashcards
What is a subscription?
Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription.
What is the rule with regards to the revocation of pre-incorporation subscriptions?
A subscription of shares in a corporation still to be formed shall be irrevocable for a period of at least six months from the date of subscription, unless:
(1) All of the other subscribers consent to the revocation, or
(2) The corporation fails to incorporate within the same period or within a longer period stipulated in the contract of subscription.
No pre-incorporation subscription may be revoked after the articles of incorporation is submitted to the Commission.
What are the consideration for stocks?
Consideration for the issuance of stock may be:
(1) Actual cash paid to the corporation
(2) Property actually received by the corporation and necessary or convenient for its use and lawful purposes
(3) Labor performed for or services actually rendered to the corporation
(4) Previously incurred indebtedness of the corporation
(5) Amounts transferred from unrestricted retained earnings to stated capital
(6) Outstanding shares exchanged for stocks in the event of reclassification or conversion
(7) Shares of stock in another corporation
(8) Other generally accepted form of consideration
How are shares transferred? When is a transfer of share considered valid?
The capital stock of corporations shall be divided into shares for which certificates are issued. Shares of stock so issued are personal property and may be transferred by delivery of the certificate indorsed by the owner, or any other person legally authorized to make the transfer.
No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates, and the number of shares transferred.
What is the rule with regards to the payment of subscription and issuance of the certificate of stock?
No certificate of stock shall be issued to a subscriber until the full amount of the subscription together with interest and expenses (in case of delinquent shares) if any is due, has been paid.
What is the rule regarding the liability of directors for watered stocks?
A director or officer of a corporation who:
(a) Consents to the issuance of stocks for a consideration less than its par or issued value;
(b) Consents to the issuance of stocks for a consideration other than cash, valued in excess of its fair value;
(c) Having knowledge of the insufficient consideration, does not file a written objection with the corporate secretary;
shall be liable to the corporation or its creditors, solidarily with the stockholder concerned for the difference between the value received at the time of issuance of the stock and the par or issued value of the same.
How are balance of subscription paid?
Subject to the provisions of the subscription contract, the board of directors may, at any time, declare due and payable to the corporation unpaid subscriptions and may collect the same or such percentage thereof, in either case, with accrued interest, if any, as it may deem necessary.
What is the rule regarding the payment of unpaid subscriptions? What is the effect of the failure to pay?
Payment of unpaid subscription or any percentage thereof, together with any interest accrued, shall be made on the date specified in the subscription contract or on the date stated in the call made by the board.
Failure to pay such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription contract.
How does a stock become a delinquent stock?
If payment of unpaid subscription is not made within thirty days from the date specified in the subscription contract or on the date stated in the call made by the board, all stocks covered by the subscription shall thereupon become delinquent and shall be subject to sale as provided by the Revised Corporation Code, unless the board of directors orders otherwise.
What is the process of the sale of a delinquent stock?
(1) The board of directors may, by resolution, order the sale of delinquent stock.
(2) A notice of the sale, with a copy of the resolution, shall be sent to every delinquent stockholder.
(3) Unless the delinquent stockholder pays to the corporation, on or before the date specified for the sale of the delinquent stock, or unless the board of directors otherwise orders, the delinquent stock shall be sold at a public auction.
(4) The stock purchased shall be transferred to the purchaser in the books of the corporation and a certificate for such stock shall be issued in the purchaser’s favor.
What is the effect of a stock becomes a delinquent stock?
No delinquent shall be voted for, be entitled to vote, or be represented at any stockholder’s meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder, except the right to dividends in accordance with the provisions of the Revised Corporation Code, until and unless payment is made by the holder of such delinquent stock for the amount due on the subscription with accrued interest, and the costs and expenses of advertisement, if any.
