Title XI Flashcards
NONSTOCK CORPORATIONS
Define What is a nonstock corporation.
It is a corporation where no part of its income is distributable as dividends to its members, trustees or officers.
Enumerate the essential requisites of a nonstock corporation.
- It does not have a capital stock divided into shares.
- No part of its income is distributable as dividends to its members; and
- Nonstock corporations must be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural and like chambers or any combination thereof.
As to component, what is the distinction of a nonstock and stock corporation?
Nonstock corporations has members while stock corporations has shareholders.
As to board members, what is the distinction of a nonstock and stock corporation?
Nonstock corporations has trustees while stock corporations has directors.
As to existence of shares, what is the distinction of a nonstock and stock corporation?
Nonstock corporations, has no capital stock divided into shares while stock corporations has capital stock divided into shares.
As to dividends, what is the distinction of a nonstock and stock corporation?
No dividends are declared in nonstock corporations while dividends are declared in stock corporations.
As to purpose, what is the distinction of a nonstock and stock corporation?
The primary purpose of nonstock corporations is non-profit; it is limited to those specified under Section 87 of the RCCP while the purpose of stock corporations are primarily for business.
As to business activities, what is the distinction of a nonstock and stock corporation?
Nonstock corporations can conduct business but only if it is incidental to the primary purpose while the business purpose of a stock corporation is its primary purpose.
As to voting rights, what is the distinction of a nonstock and stock corporation?
The voting rights can be modified, limited or broadened in nonstock corporations but in stock corporations, one share – one vote.
As to transferability of interest, what is the distinction of a nonstock and stock corporation?
In nonstock corporations, membership is generally non-transferable but in stock corporations shares are transferable.
As to termination, what is the distinction of a nonstock and stock corporation?
Membership can be terminated in nonstock corporations but in stock corporations, ownership of shareholder cannot be terminated until the transfer of the shares or upon liquidation.
As to effect of death, what is the distinction of a nonstock and stock corporation?
Death of a member terminates that membership; Generally, membership is not transferred in nonstock corporations but in stock corporations, shares can be acquired through succession.
As to dues, what is the distinction of a nonstock and stock corporation?
Payment of dues can be required in nonstock corporation but in stock corporation, no dues are paid.
As to the number of board members, what is the distinction of a nonstock and stock corporation?
There can be more than 15 trustees in nonstock corporations but in stock corporations, there should not be more than 15 directors.
As to term of board members, what is the distinction of a nonstock and stock corporation?
The term is three years in nonstock corporations but in stock corporations the term is one year.
As to voting, what is the distinction of a nonstock and stock corporation?
Cumulative voting is not allowed in nonstock corporation unless provided for in the Articles of By-laws; The general rules in Section 23 of the RCCP is that the members of a nonstock corporation may not cast more than one vote for one candidate but in stock corporations cumulative voting is expressly allowed.
As to liquidation, what is the distinction of a nonstock and stock corporation?
Generally, the members will not get a share in the assets unless provided for in the Articles and Bylaws in nonstock corporations but in stock corporations, shareholders will get their share in the net assets knows as liquidated dividends.
As to election of officers, what is the distinction of a nonstock and stock corporation?
The members may directly elect the officers of the nonstock corporation unless otherwise provided in the Articles of Incorporation and Bylaws but in stock corporations, officers are elected by the Board of directors.
What is a foundation?
A foundation is a nonstock, nonprofit corporation established for the purpose of extending grants and endowments to support its goal or raising funds to accomplish charitable, religious, educational, athletic, cultural, literary, scientific, social welfare or similar objectives.
Is there a need to amend the Articles of Incorporation when its capital is increased in nonstock corporations?
No, there is no need to amend the Articles of Incorporation.
What is a nonprofit corporation?
A corporation is a nonprofit corporation if it does not distribute any part of its income to stockholders or members.
What is the basis of the nationality of a nonstock corporation?
It is computed on the basis of the nationality of its members and not premised on the membership contribution.
What rules does the SEC provide that a nonstock corporation is considered Philippine National?
- If all of its member are Filipino citizens; or
- if at least sixty percent of its member entitled to vote are citizens of the Philippines; or
- If all the members of a foreign nonstock corporation licensed to do business by the SEC are citizens of the Philippines
What are the purposes that a nonstock corporation be organized?
- Charitable
- Religious
- Educational
- Professional
- Cultural
- Fraternal
- Literary
- Scientific
- Social
- Civic service
- Similar activities like trade, industry, agricultural and like chambers of any combination thereof.
Can a nonstock corporation have a purpose to do profitable business?
No. Section 87 of the RCCP limits the purposes for which a nonstock corporation may be organized.
Can a nonstock corporation be converted into a stock corporation?
No. The amendment would be inconsistent with the nature of a nonstock corporation because the same will have the effect of distributing the assets of the nonstock to its members so that the latter can become its shareholders. This scheme might defraud the public who may have contributed gifts, donations or grants to the corporation , the donated corporate assets would in effect be treated as paid-in capital or subscription payments.
What would a non stock corporation do to convert to a stock corporation legally?
The nonstock corporation should do is to dissolve itself and the members may thereafter decide to organize a stock corporation.
Can a stock corporation be converted to a nonstock corporation?
Yes. It can be changed by the mere amendment of the articles of incorporation. The effect of this is that after the conversion, the stockholders who now become the members of the nonstock corporation will no longer have any pecuniary interest in the corporate assets. Neither are they entitled to any share in any profit.
Who constitutes a quorum of members’ meeting in a nonstock corporation?
Only those who are actual members with voting rights.
Does the rules of delinquency likewise apply to nonstock corporations?
Disenfranchisement due to delinquency is
also applicable to members of a nonstock corporation with the result that these delinquent members are no included in the determination of the quorum.
Will the heirs of a deceased member acquire the membership of a nonstock corporation?
No. Membership in a nonstock corporation and all rights arising therefrom are personal and nontransferable unless the articles of incorporation or the bylaws otherwise provide.
What is the effect of the non-payment of dues in a nonstock corporation?
Non-payment of dues may be a ground for termination and suspension of membership.
Unpaid dues as Lien
What are the other grounds to expel members other than non-payment of dues?
- When an offense is committed which, although it has no immediate relation to a member’s duty as such, is of so infamous a nature as to render him unfit for the society of honest men, and which is indictable;
- When the offense is a violation of his duty as a member of the corporation
- Violations of a mixed nature, being both against his duty as a member and indictable
What are the requisites of a valid notice for the termination of membership?
- Reasonable notice to the member concerned.
- Fair opportunity to be heard in his defense.
If the bylaws indicate the manner of giving notice, the same should be complied with.
Are dead members counted in a quorum
No.
How many trustees can a nonstock corporation have?
A nonstock corporation may have more that 15 or more trustees.
Who elects the officers in a nonstock corporation?
General rule, the officers may be elected directly by the members, provided that the articles of incorporation and bylaws are silent on this matter.
Exception, corporate officers are required to be elected by the board.
Provide the qualifications needed to be a trustee of a nonstock corporation
The only qualification needed to be a trustee of a nonstock corporation is being a member of the said corporation.
What is the mode of election in a nonstock corporation?
As a general rule, for the election of trustees of nonstock corporations, “members may cast as man votes as there are trustees to be elected but may cast only one vote per candidate. By way of exception, a nonstock corporation may adopt other modes of casting votes, including, but not limited to, cumulative voting.
Who can fill vacancies in the Board?
Trustees may fill the vacancies in the Board, provided that those remaining still constitute a quorum. Filling the vacancies by the trustees is merely permissive, not mandatory. Corporations therefore, may choose how vacancies in there respective Boards may be filled up - either by the remaining trustees constituting a quorum, or by the members in a regular or special meeting called for the purpose.
