Meetings, Stocks and Stockholders, Corporate Books and Records under the Civil Code of the...

8/22/2019 Meetings, Stocks and Stockholders, Corporate Books and Records under the Civil Code of the Philippines

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Sections 49 & 50:

Kinds of Meetings

Meetings of Board of Directors/Board of Trustees, and

of the Stockholders/Members of the corporation,

may be regularorspecial.


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Regular Meetings

Held annually on a fixed date,stated in the by-laws.

If no date is fixed, regular

meetings are held on any date inthe month of April, to bedetermined by the Board of

Directors/Trustees

Written notice must be sent at

least two weeks prior to the

meeting.

Special Meetings

Held whenever necessary, or asprovided in the by-laws.

Written notice must be sent one

week prior to the meeting.

Meetings of Stockholders or Members


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Requisites for a Valid Meeting of Stockholders or Members

1. It must be held at the proper place.

2. It must be held at the stated date and at the appointed

time, or at a reasonable time thereafter.

3. It must be called by the proper person.

4. There must be a previous notice. (notice must state

the purpose of the meeting)

5. There must be a quorum.


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Meetings of Stockholders/Members, whether regular or

special, shall be held in the principal officeof the corporation,

or within the city or municipality in which it is located. Metro Manila shall be considered a city or municipality.

Notice of meetings shall be in writing.

Section 51:

Place and Time of Meetings of

Stockholders or Members


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Proper Person to Call a Meeting

1. The person/s designated in the by-laws.

2. In the absence of such provision in the by-laws, by

a director or trustee or by an officer entrusted with the

managementof the corporation.1. The stockholder or member upon order of the SEC.

2. In the case of special meetings to remove

directors/trustees, the corporations secretary or a

stockholder/member.


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All proceedings had, and any business transacted at anymeeting of stockholders/members (even if improperly

called), shall be considered valid, as long as they arewithin the power or authority of the corporation, and

that all stockholders/members are present orrepresented at the said meeting.


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Quorum: consists of a majority of the registered members, orstockholders representing a majority of the outstanding

capital stock. Section 47(2): corporations can determine the required

quorum in their by-laws (any number but at least 2).

In the absence of a quorum, no action can be taken.

Once a quorum is present, a majority vote is sufficient tocome to a decision. The result of such vote is binding, andcorporate action cannot be prevented by withdrawal ofmembers/stockholders

Section 52:

Quorum in Meetings


10/73

Amending Articles of Incorporation:

Majority vote of BOD/BOT + vote/written assent of 2/3 of

stockholders or members.

Election of Directors/Trustees:

Majority of outstanding capital stock (OCS) or membersentitled to vote.

To call a special meeting for the removal of directors/trustees:

2/3 of OCS or members entitled to vote

To ratify a contract of a director/trustee or officer with the

corporation:

2/3 of OCS or members

To extend/shorten corporate term:

Majority vote of BOD/BOT + 2/3 OCS or members

Matters Which Require Specific Number of Votes


11/73

Increase or decrease capital

stock:

Majority BOD + 2/3 OCS

To incur, create, or release

bonded indebtedness

To dispose of all or

substantially all of the

corporate assets

To invest corporate funds inanother corporation or

business for any purpose

other than the primary

purpose


Majority vote of

the BOD/BOT

+2/3 of OCS or

members


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To issue stock dividends:

Majority of the quorum of the BOD + 2/3 OCS

To enter into management contract:

Majority of the quorum of the BOD/BOT + Majority of OCS or

members of both the managing and managed corporations, and insome cases, 2/3 of the total OCS/members entitled to vote, with

respect to the managedcorporation.

To adopt by-laws:

Majority of OCS or members

To amend or repeal the by-laws or adopt new by-laws:Majority vote of BOD/BOT + OCS/members

To delegate to the BOD/BOT the power to amend or repeal the by-

laws, or adopt new by-laws:

2/3 OCS or members



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To revoke preceding power delegated to the BOD/BOT:

Majority of the OCS or members

To fix the issued price of no par value shares:

Majority of the quorum of the BOD if authorized by the

articles of incorporation. Otherwise, majority of the OCS

To effect/amend a plan of merger or consolidation:


To dissolve the Corporation:


To adopt a plan of distribution of assets of a non-stock corp:

Majority vote of the BOT + 2/3 of members with voting

rights.



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Regular meetings of the BOD or trustees of every company shall be

held monthly, unless otherwise stipulated in the by-laws.

Special meetings of the BOD or trustees may be held at any time

upon the call of the president or as provided in the by-laws.

Meetings of the BOD or trustees of a corporation may be held

anywhere in or outside of the Philippines, unless the by-laws

provide otherwise.

A notice of a regular or special meeting stating the date, time, and

location of the meeting must be sent to every director or trusteeone day prior to the said scheduled meeting.

*A director or trustee may waive the requirement of notice of any

meeting, expressly or impliedly

Section 53:

Regular and Special Meetings of

Directors or Trustees


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President/Chairman/Vice-Chairman. The president shall

preside at all meetings of the BOD or trustees as well as of the

stockholders or members, unless provided otherwise by the by-

laws. Thus, the by-laws may provide that the chairman, instead of

the president, shall preside at board meetings.

Stockholder or member in a temporary capacityWhere the

officer entitled to preside is not present at time for a meeting to

convene it is recognized that a stockholder or members who takes

the floor may temporarily preside at the meeting pending theselection of the presiding officer. Unless the contrary is provided

by the by-laws, the presiding officer may be selected by viva voce

vote of the stockholders or members present.

Section 54:

Who Shall Preside at Meetings


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Stockholder or member chosen whenever, for any cause, no

person is authorized to call a meeting, the petitioning stockholder

or member authorized by the SEC to call a meeting of thecorporation shall preside thereat until at least a majority of the

stockholders or members present have chosen one of their

number as presiding officer

Section 54:

Who Shall Preside at Meetings


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Section 55:

Right to Vote Off Pledgors,

Mortgagors , and Administrators

In case of pledged or mortgaged shares in stock corporations, the

pledgor or mortgagor shall have the right to attend and vote at

meetings of stockholders, unless the pledgee or mortgagee isexpressly given the right in writing by the mortgagor or pledgor

which is recorded on the appropriate corporate books.

Executors, administrators, receivers, and other legal

representatives appointed by court may attend and vote onbehalf of the stockholders or members without need of any

written proxy.


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In stock corporations the right to vote is an incident of

ownership of stock.

Ordinarily, only legal owners of shares in a stock corporation

have the right to be present and vote in any corporation

meeting.

Except as is provided in section 55, one who does not appear

to be a stockholder upon the books of the corporation is not

eligible to vote a stock although he may be entitled to the legal

title to the stock voted.

Non-voting share may vote in cases where the law provides

two-thirds or a majority of the outstanding capital stock

entitle to vote, holders of stock without voting rights may vote

in cases provided in Sec. 6.

Right to Vote in General


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In non-stock corporations:

the right of the members of any class or classes to vote may be

limited, broadened or denied to the extent specified in the

articles of incorporation or the by-laws.

Right to Vote in General


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A stockholder or member may vote Directly, or

Indirectly, through a representative

by means of proxy (Secs. 55, 56, 58 and 89 par.2) or

by a trustee under a voting trust agreement (Sec. 59) or

by court appointed personalities (Sec. 55 par 2)

Voting may bestrait or cumulative

Manner of Voting


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Legal representative of stockholder or memberSec. 55authorizes executors, administrators, receivers, or otherlegal representatives duly appointed by court to attend andvote in behalf of stockholders or members without need of

written proxy. Pledgee or mortgagee of stockholders shares as to

pledees or mortgagees of shares in stock corporations, theshall have the right to attend and vote at meetings onlywhen the said right to participate has been expressly been

given by the pledgor or mortgagor. The authorization isrequired by the Code to appear in the appropriatecorporate books of the said pledgor or mortgagor. (Sec. 55par .1)

Representative Voting


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Officers or agent of corporation owning shares shares

standing in the name of another corporation, whether

domestic or foreign, may be voted by such officer, agent or

proxy as the by-laws of such other corporation may

prescribe or, in the absence of a provision in the by-laws, it

is the BOD that may determine, or they may be voted by

the Chairman of the board, president, or vice-president but

always under the ultimate direction of the board.

Representative Voting

S ti 6


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Section 56:

Voting in Case of Joint Ownership

of Stock

In case of shares of stock owned by two or more persons, in order

to vote the same, the consent of all the co-owners shall be

necessary, unless there is a written proxy, signed by all the co-owners, authorizing one or some of them, or any other person to

vote on their behalf.

*when the shares are owned in an and/or capacity any one of thejoint owners may vote said shares.


24/73

Section 57:

Voting Right for Treasury Shares

Treasury sharesshall have no voting right as long as such

shares remain in the Treasury. In case of sale or reissue, Treasuryshares regain whatever dividends and voting rights to which they

were originally entitled.


25/73

Section 58:

Proxies

Stockholders and members may vote in person or by

proxy in all meetings of stockholders and members. Proxies

shall be in writing, signed by the stockholder or member andfiledbefore the scheduled meeting with the corporate

secretary.


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Proxy as the term is used, designates the formal writtenauthority given by the owner or holder of the stock, who

has a right to vote it, or by a member, as principal, to

another person, as agent, to exercise the voting rights of

the former.

It is also used to apply the holder of the authorityof

person authorized by and absent stockholder or member

to vote for him at a stockholders or members meeting.

The term is also applied to refer the instrument which

evidences the authorityof the agent.

Meaning of Proxy


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The right to vote by proxy is a special form of

agency specifically recognized in:

The election of BOD or trustees (Sec. 24)

Voting in case of joint ownership of stock (Sec. 56)

Voting by trustee under voting trust agreements

(Sec. 59, last par)

Voting by members in non-stock corporations

Voting by Proxy


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Proxies must be in writing signed by the stockholder or

member and filed with before the scheduled meeting with

the corporate secretary;

Unless otherwise provided in the proxy, it is valid only for

the meeting for which it is intended; and

A continuing proxy must be for a period not exceeding 5

years at any one time, otherwise, it shall not be valid and

effective after such period.

*Directors and trustees cannot attend or vote by proxy at

board meetings. (Sec. 25, last par)

Limitations on Proxies


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Proxies are revocable at anytime unless madeirrevocable by the giver. Revocation may be made by

notifying the proxy-holder of the same, or by signing a new

proxy in favour of another, or by attending meeting and

voting oneself.

A proxy becomes irrevocable when coupledwith interest, meaning the proxy holder has given or

promised the stockholder a consideration, for example inthe form of money, in return for the irrevocable proxy.

Revocation of Proxy


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Section 59:

Voting Trusts

One or more stockholders of a stick corporation may create a

voting trust for the purpose ofconferring upon a trustee ortrustees the right to vote and other rights pertaining to the

shares for a period not exceeding five (5) years at any one time:

Provided, that in the case of a voting trust specifically required as

a condition in a loan agreement, said voting may exceed five yearsbut shall automatically expire once loan is fully paid.


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Section 59:

Voting Trusts

A voting trust agreement must be in writing and notarized,

and shall specify the terms and conditions thereof. A certified

copy of such agreement shall befiled with the corporation andthe SEC; otherwise, said agreement is ineffective and

unenforceable. The certificates of stock covered by the voting

trust agreement shall be cancelled and new ones shall be

issued in the name of the trustees stating that they are issued

pursuant to said agreement and shall be noted in the books ofthe corporation that the transfer in the name of the trustees

made pursuant to said voting trust agreement.


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Section 59:

Voting Trusts

The trustee or trustees shall execute and deliver to thetransferors voting trust certificates, which shall betransferable in the same manner with the same effect as

certificates of stock.

The voting trust agreement filed with the corporation shallbe subject to examination by any stockholder of the

corporation in the same manner as any other corporate bookor record: Provided, thatboth the transferor and the trusteemay exercise the right of inspection of all corporate books andrecordsin accordance with the provisions of the Code.


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Section 59:

Voting Trusts

Any other stockholder may transfer his shares to the same

trustee upon the terms and conditions stated in the voting

trust agreement, and thereupon shall be bound by allprovisions of said agreement.

No voting trust agreement shall be entered into for the

purpose of circumventing the lawagainst monopolies and

illegal combinations in restraint of trade or used for purposesof fraud.


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Section 59:

Voting Trusts

Unless expressly renewed, all rights granted in a voting trust

agreement shall automatically expire at the end of the

trustees shall thereby be deemed cancelled and newcertificates of stock shall be reissued in the name of

transferor

The voting trustee or trustees may vote by proxy unless the

agreement provides otherwise. (36a).


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Sometimes it is desired to place the control of all or

part of the stock in the hands of one person or a few

persons. This may be done through a voting trust

agreement.It may be defined as an agreement in writing

whereby one or more stockholders of a stock corporationtransfer his or their shares to any person or persons or to a

corporation having authority to act as a trustee for the

purpose of vesting in such person o persons or corporation

as trustee or trustees voting or other rights pertaining tothe shares for a certain period not exceeding that fixed by

the Code and upon the terms and conditions stated in the

agreement. (Sec. 59)

Voting Under a Voting Trust Agreement


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It should be noted that in a voting trustagreement, a stockholder of a stock corporation

parts with the voting power but retains the

beneficial ownership of the stock.

Consequently, the transferring stockholder,

although he has ceased to be the stockholder of

record, retains the right of inspection of corporate

books which he can exercise concurrently with the

voting trustee.

Status of Transferring Stockholder


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Execution and delivery- in return for the certificates of stock,the voting trustee executes and delivers to the stockholdersvoting trust certificates to show that the latter are in reality, theowners of the shares held by the voting trustee.

Transfer and effect thereofthe certificates are intended to beand are transferable in much the same way stock certificates,subject, however to the trust agreement. (Ibid., par. 2.)

Cancellation Upon the expiration of the agreed period, thevoting trust certificates as well as the certificates of stock in thename of the trustee or trustees shall thereby be deemedcancelled and new certificates of stock shall be reissued in thename of the transferors. (Ibid., par. 6.)

Voting Trust Certificates


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The trustee or trustees shallposses the right to vote and

other rights pertaining to the shares so transferred and

registered in his or their names subject to the terms and

conditions of and for the period specified in the agreement

(par. 1.) They may vote in person or by proxyunless the agreement

provides otherwise (last par.);

They may exercise, like the transferor, the rights of

inspection of all corporate books and records (par. 3); and

The trustee is the legal title holder or owner of the shares so

transferred under the agreement. (see par. 1.) He is

therefore, qualified to be a director.(Sec. 23)

Powers or Rights of Voting Trustees


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The ultimate control of the corporation depends upon

the votes of the stockholder. Voting trust agreement are

devices that may be used with the aim of controlling these

votes. Such an agreement makes possible a unified control

of the affairs of the corporation and consistent policy bybinding the stockholders to vote as a unit.

Purpose of Voting Trust Agreement


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No voting trust agreement shall be entered

into:

For a period of five (5) years at any one time except in the

case of a voting trust specifically requiring a longer period as

a condition in a loan agreement. (par 1);

For the purpose of circumventing the law against monopolies

and legal combinations in restraint of trade. (par 5)

The agreement must not be used for purposed of fraud.

(Ibid); The agreement must be in writing and notarized and specify

the terms and conditions thereof;

Limitations on Voting Trust Agreement


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A certified copy of said agreement must befiled with the

corporation and the SEC, otherwise, it is ineffective and

unenforceable (par 1);

The agreement shall be subject to examination by any

stockholder of the corporation the same manner as anyother corporate book or record (par. 3.); and

Unless expressly renewed, all rights granted in the

agreement shall automatically expire at the end of the

agreed period.(par. 6. )

Limitations on Voting Trust Agreement


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Theproxy has no legal title to shares of the stockholder

giving the agency, while the trustee acquires legal title to

the shares of the transferring stockholder;

A proxy, unless couples with interest, is revocable at any

time, while a voting trust agreement, if validly executed, isirrevocable;

A proxy can only act at the specified stockholders or

members meeting, while the trustee is not limited to any

particular meeting; Aproxy votes only in the absence of the owner of the stock,

while a trustee can vote and exercise all the rights of the

transferring stockholder even when the latter is present;

Proxy and Trust Voting Distinguished


43/73

Aproxy is usually of shorter duration than a voting trust

agreement, although under the law the maximum duration

of both cannot exceed five (5) years at any one time.

Aproxy need not to be notarizednor a copy filed with the

SEC, while a voting trust must be notarized and a certifiedcopy filed with the Commission; and

Aproxy does not have a right of inspection of corporate

books, while a trustee has such right.

Proxy and Trust Voting Distinguished


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45/73

STOCKS AND STOCKHOLDERS

SEC. 60. Subscription Contract Any contract for the acquisition of

unissued stock in an existing corporation or a corporation still to be

formed shall be deemed a subscription within the meaning of this Title,

notwithstanding the fact that the parties refer to it as a purchase or

some other contract.

In a stock corporation, a person may become a shareholder by:

(1) subscription contract with an existing corporation

(2) purchase from the corporation of treasury shares

(3) transfer from previous stockholder of the outstanding shares or existing

subscription to shares

In a non-stock corporation, membership is acquired by contract withthe corporation which vary according to the particular corporations

charter and by-laws.


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SEC. 61. Pre-incorporation subscription A subscription for shares

of stock of a corporation still to be formed shall be irrevocable for a

period of at least six (6) months from the date of subscription, unless

all of the other subscribers consent to revocation, or unless the

incorporation of said corporation fails to materialize within said period

or within a longer period as may be stipulated in the contract ofsubscription: Provided, That no pre-incorporation subscription may be

revoked after the submission of the articles of incorporation to the

Securities and Exchange Commission.

Pre-incorporation subscription is mandatory

SEC shall not accept the articles of incorporation of any stockcorporation unless at least 25% of the authorized capital stock has

been subscribed and at least 25% of the total subscription has been

fully paid


47/73

Reason for irrevocability: It prevents a subscriber from speculating on the

stocks of a proposed corporation

It protects the corporation from financially

irresponsible subscribers

Effect of filing of articles of incorporation: Pre-incorporation subscription may no longer be

revoked Upon incorporation, both the incorporators and

subscribers become shareholders



48/73


SEC. 62. Consideration for stocks Stocks shall not be

issued for a consideration less than the par or issued price

thereof. Consideration for the issuance of stock may be any

or a combination of any two or more of the following:

(1) Actual cash paid to the corporation;(2) Property, tangible or intangible, actually received by the corporation

and necessary or convenient for its use and lawful purposes at a fair

valuation equal to the par or issued value of the stock issued;

(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; and

(6) Outstanding shares exchanged for stocks in the event.


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Where the consideration is other than actual cash, or consists of intangibleproperty such as patents or copyrights, the valuation thereof shall initiallybe determined by the incorporators or the board of directors, subject toapproval by the Securities and Exchange Commission.

Shares of stock shall not be issued in exchange for promissory notes orfuture services.

The same consideration as provided for in this section, insofar as the maybe applicable, may be used for the issuance of bonds by the corporation.

The issued price of no-par value shares may be fixed in the articles ofincorporation or by the board of directors pursuant to authority conferredupon it by the articles of incorporation or the by-laws, or in the absencethereof, by the stockholders representing at least a majority of theoutstanding capital stock at a meeting duly called for the purpose.


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Sources of corporate capital:

Funds furnished by shareholders

Borrowings

Profits and stock dividends

Different modes by which shares may be issued:

By subscription before and after incorporation, to original,

unissued stock;

By sale of treasury stock

By subscription to new stocks

By making a stock dividend



51/73

Consideration for issue of stocks:

Shall not be issued for a consideration less than the par or issued price

thereof

Shall not be issued in exchange for promissory notes or future services

* If consideration consists of intangible property, the value shall be

determined by the incorporators or the BOD but is subject to the approval of

SEC.

* If the issued price of no par value shares is not fixed in the articles of

incorporation, the BOD may fix the same only if authorized by the articles ofincorporation or by the by-laws, or in the absence thereof, the stockholders.

But they may not be issued for a consideration less than the value of P5.00 per

share.



52/73


SEC. 63. Certificate of stock and transfer of shares The capital

stock of stock corporations shall be divided into shares for which

certificates signed by the president or vice-president, countersigned by

the secretary or assistant secretary, and sealed with the seal of the

corporation shall be issued in accordance with the by-laws. Shares of

stock so issued are personal property and may be transferred bydelivery of the certificate or certificates endorsed by the owner or his

attorney-in-fact or 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 thetransfer, the number of the certificate or certificates and the number of

shares transferred.

No shares of stock against which the corporation holds any unpaid claim

shall be transferable in the books of the corporation.


53/73

Meaning and nature of certificate stock:

Written instrument signed by the proper officer acknowledging that the

person named therein is the owner of a designated number of shares of its

stock

Indicates the name of the holder, the number, kind and classification of

shares represented, and the date of issuance Merely evidence of the holders interest in the corporation

Not essential to make one a stockholder in a corporation

Every stockholder has a right to have a proper certificate as he has complied

with the conditions that entitles him to a stockholder.

A corporation cannot issue shares in excess of the maximum authorized in its

articles of incorporation therefore an over issued stock is absolutely void.



54/73

Stocks are transferable Modes of stock transfer:

Endorsement and delivery of stock certificate

Transfer in a separate instrument

Juridical or extra-judicial settlement of the estate

Only absolute transfer need to be registered Effects of an unregistered transfer of shares:

It is valid and binding between the transferor and the transferee

It is invalid insofar as the corporation is concerned except when notice is

given to the corporation for purposes of registration

It is invalid as against corporate creditors

It is invalid against the creditors of the transferor without the notice oftransfer



55/73


SEC. 64. Issuance of stock certificates No certificate of stock shallbe issued to a subscriber until the full amount of his subscriptiontogether with interest and expenses (in case of delinquent shares) ifany is due, has been paid.

Rights and remedies of stockholders in general:1. Right to attend and vote in person or by proxy at stockholders meetings

2. Right to elect and remove directors

3. Right to approve certain corporate acts

4. Right to adopt and amend or repeal the by-laws or adopt new by-laws

5. Right to compel the calling of meetings and stockholder when for anycause there is no person authorized to call a meeting

6. Right to issuance of certificate of stock

7. Right to receive dividends when declared

8. Right to participate in the distribution of corporate assets upon dissolution


56/73

9. Right to transfer of stock on the corporate books

10.Right to pre-emption in the issue of shares

11.Right to inspect corporate books and record and to receive

financial report of the corporations expenses

12.Right to be furnished the most recent financial statement uponrequest and to receive a financial report of the corporations

operations

13.Right to bring individual and representative or derivative suits

14.Right to recover stock unlawfully sold for delinquency

15.Right to enter into a voting trust agreement16.Right to demand payment of the value of his shares and withdraw

from the corporation in certain cases

17.Right to have the corporation voluntarily dissolved



57/73


SEC. 65. Liability of directors for watered stocks Any director or

officer of a corporation consenting to the issuance of stocks for a

consideration less than its par or issued value or for a consideration in

any form other than cash, valued in excess of its fair value, or who,

having knowledge thereof, does not forthwith express his objection in

writing and file the same with the corporate secretary, shall be solidaryliable with the stockholder concerned to the corporation and its

creditors for the difference between the fair value received at the time

of issuance of the stock and the par or issued value of the same.

The law prohibits the issuance of watered stockor stock issued forno value at all or for a value less than its equivalent either in cash,

property, shares, stock dividends, or services.


58/73


SEC. 66. Interest on unpaid subscriptions Subscribers for stockshall pay to the corporation interest on all unpaid subscriptions fromthe date of subscription, if so required by, and at the rate of interestfixed in the by-laws. If no rate of interest is fixed in the by-laws, suchrate shall be deemed to be the legal rate.

By virtue of Central Bank Circular No. 416, the legal rate is now

12% per annum

SEC. 67. Payment of balance of subscription Subject to the

provisions of the contract of subscription, the board of directors of anystock corporation may at any time declare due and payable to thecorporation unpaid subscriptions to the capital stock and may collectthe same or such percentage of said unpaid subscriptions, in eithercase with interest accrued, if any, as it may deem necessary


59/73


Payment of any unpaid subscription or any percentage

thereof, together with the interest accrued, if any, shall be

made on the date specified in the contract of subscription

or on the date stated in the call made by the board. Failure

to pay on 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 rate of

interest is provided in the by-laws, computed from such

date until full payment. If within thirty (30) days from the

said date no payment is made, all stocks covered by saidsubscription shall thereupon become delinquent and shall

be subject to sale as hereinafter provided, unless the board

of directors order otherwise.


60/73

Remedies to enforce payment of stock subscription:

Extra-judicial sale at public auction

Judicial action

Collection from cash dividends and withholding of stock dividends

A stock becomes delinquentupon failure of holder to paythe unpaid subscription or balance thereof within 30 days

from the date specified in the contract of subscription or

from the date stated in the call made by the BOD.

A call is a declaration officially made by the BODexpressed in a form of a resolution requiring the payment

of all or a certain prescribed portion of a subscribers stock

subscription.



61/73


SEC. 68. Delinquency sale The board of directors may,by resolution, order the sale of delinquent stock and shallspecifically state the amount due on each subscription plus allaccrued interest, and the date, time and place of the sale shallnot be less than thirty (30) days nor more than sixty (60) days

from the date the stocks become delinquent.

Notice of said sale, with a copy of the resolution, shall be sent toevery delinquent stockholder either personally or by registeredmail. The same shall furthermore be published once a week for two

(2) consecutive weeks in a newspaper of general circulation in theprovince or city where the principal office of the corporation islocated.


62/73


Unless the delinquent stockholder pays to the corporation, on

or before the date specified for the sale of the delinquent stock, the

balance due on his subscription, plus accrued interest, costs of

advertisement and expense of sale, or unless the board of directors

otherwise orders, said delinquent stock shall be sold at public auction to

such bidder who shall offer to pay the full amount of the balance on thesubscription together with the accrued interest, costs of advertisement

and expenses of sale, for the smallest number of share or fraction of a

share.

The stock so purchased shall be transferred to such purchaserin the books of the corporation and a certificate for such stock shall be

issued in his favor. The remaining shares, if any, shall be credited in

favor of the delinquent stockholder who shall likewise be entitled to the

issuance of a certificate of stock covering such shares.


63/73


Should there be no bidder at the public auction who

offers to pay the full amount of the balance on the

subscription together with accrued interest, costs of

advertisement and expenses of sale, for the smallest number

of shares or fraction of a share, the corporation may, subjectto the provisions of this Code, bid for the same, and the total

amount due shall be credited as paid in full in the books of the

corporation. Title to all the shares of stock covered by the

subscription shall be vested in the corporation as treasury

shares and may be disposed of by said corporation in

accordance with the provisions of this Code.


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Section 74

Corporate books and records must be kept in the

principal office

Corporate books and records compose of arecord of the ff:

1. Record of all business transactions

2. Minutes of all meetings of stockholders ormembers, or the BOD or BOT.

3. Time and Place


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Section 74

4. How authorized

5. Whether the meeting was regular or special

6. If special, the object of the meeting

7. Attendance8. Every act done or ordered done

9. The yes and nos must be taken on any

motion or proposition

10. Protest of any member


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Section 74

Books and records must be open to inspection of

any memberof the corporation atREASONABLE

HOURSon business days.

He may demand for a copyof excerpts or parts ofthe said records or minutes at his expense.

Right to inspection not absolute.(Purpose of

inspection, Foreign Corporation, Trade Secrets)

A stockholder or member cannot take the books

from the office unless permitted by the court


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Section 74

Any officer or agent of the corporation who refuses toallow any member to examine and copy the recordsshall be liable to the member asking for a copy underSection 144.

Section 144 states that he must pay an amount from1,000 10,000 Php or put to jail from 30 days to 5years.

If the refusal of an officer or agent was based on aresolution by the board of directors or trustees, theliability will be imposed upon the said directors ortrustees.


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Section 74

For stock corporations, they must keep a book calledSTOCK AND TRANSFER BOOK.

All stocks in the names of stockholders

alphabetically arranged.

Installments paid and unpaid from subscriptionsalong with the date

Every alienation and sale or transfer of stock made(Date, By and To whom made)


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Section 74

The Stock and Transfer Book can be kept in the

principal office or the office of its stock transfer

agent.

Astock transfer agent must be registered and

licenced by the SECand will have to pay a fee

fixed by SEC which will have to be renewedannually. (Provided they are allowed to do this)


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Section 75

Stockholders or members have the right to ask forrecent copies of financial statements (BalanceSheets, Income Statements etc.)

They must receive it10 days after the receipt of thewritten requestmade by the stockholder or member.

At regular meetings of stockholders or members, theBOT or BOD must present a financial reportof theoperations from the preceding year.


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Section 75

The financial statements must have

supplementary notesto explain and the

corporation must state the things activities

done in the last year and how it went andtheir activities they wish to take for the next

year.

Financial statements must be signed by

independent certified public accountant


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Section 75

If total paid-up capital is less than 50,000

the financial statements may be certified

under oath by the treasureror any

responsible officer of the corporation.

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