CHAPTER 8: BY-LAWS

WHAT ARE By-laws?

WHAT ARE THE Requirements and procedure for adoption of by-law? 1. 2. a. b. 3. a. b. c. d. e. 4. 5.

WHAT ARE THE Contents of by-laws: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.GIVE THE REQUISITES DURING Time of filing:

1. Prior to incorporation 2. After incorporation

WHAT ARE THE Two modes of amending or repealing by laws or adopting a new one: 1. 2.

WHAT ARE THE Elements of a valid by laws: 1. 2. 3. 4. 5.

BY-LAWS1. By-laws are______ to the articles of incorporation, the Corporation Code and other statutes which form part of the corporate charter. 2. By-laws become effective only upon the _______ 3. Failure to file by-laws may result to _______ of corporate franchise after proper notice and hearing 4. Failure to file by-laws does not result in ________. (LGVHA vs. CA) 5. By-laws are internal rules and cannot ________ third persons without knowledge. (Fleisher vs. Botica Nolasco)6. Delegated power to amend, repeal or adopt by-laws may be _______ 7. Incorporation of an invalid by-law provision is not a misdemeanor. It does not justify the ______ of the corporation. (Govt. vs. El Hogar) 8. The by-laws may disqualify a stockholder from being elected into office if he has a _______ in a competitor corporation to avoid any possible adverse effects of conflicting interest of a director. (Gokongwei, Jr. vs. SEC)9. The by-laws may provide for a different _______ (shorter or longer)

CHAPTER 9: MEETINGS

WHAT ARE THE INSTANCES WHEN Meetings APPLY? WHAT ARE THE Classes of meetings?1. 2.

STOCKHOLDERS MEETINGS

WHAT ARE THE Requirements to have a valid stockholder's meeting? 1. 2. 3. 4. 5.

WHEN SHOULD STOCKHOLDERS' MEETINGS BE HELD?a. Regular meetings b. Special meetings

WHEN MUST NOTICE BE given 1. Regular 2. Special

WHERE MUST MEETINGS BE HELD?1. General Rule: 2. Exceptions to the rule: A. B.

Who may call the STOCKHOLDERS meetinG? UNDER WHAT CIRCUMSTANCES?1. 2. 3.4.

GIVE The basis of determining the presence of a quorum: 1. Stock corporation 2. Non-stock corporation

MEETINGS STOCKHOLDERS MEETING1. Failure to give notice of a meeting would render the resolution made thereunder _____ at the option of the ________ who was not notified. (Board of Directors vs. Tan) 2. Notice may be_____ expressly or impliedly. 3. Notice must state the agenda otherwise it may become ______. 4. Notice of meetings shall be in _____ and the time and place thereof stated therein.5. A stockholder may only petition the SEC to issue an order directing the petitioner to call a meeting when there is no person authorized to call a meeting. Otherwise, the remedy is to file a petition for _______.6. A quorum once present is not broken by the subsequent _______ of a part or fraction of the stockholders. 7. If the ________ is met in a stockholders meeting, any resolution passed in the meeting, even if improperly held or called will be valid if all the stockholders or members are present or duly represented.

DIRECTORS/TRUSTEES MEETING

WHEN SHOULD DIRECTORS/TRUSTEES MEETINGS BE HELD?a. Regular meetings b. Special meetings

Where should directors meetings be held?

Where must notice be sent?

MEETINGS DIRECTORS MEETING1. If the _______ is not complied with in a directors'/trustees' meeting, the meeting is illegal and will not bind the corporation except when subsequently ratified. (Lopez vs. Fontecha) 2. In a _______, the act of any one director may bind the corporation without a meeting. 3. Presence at a meeting _____ want of notice. 4. _______ at the meeting is not required; teleconferencing and videoconferencing is allowed. (RA 8792)5. The ______ shall preside at the directors/trustees meeting, unless the by-laws provide otherwise. 6. A _____ or ______ cannot attend or vote by proxy at any board meeting.

STOCKHOLDERS RIGHT TO VOTE AND MANNER OF VOTING

General rule: The right to vote is an inherent right and the stockholder may vote any way he pleases. WHAT ARE THE EXCEPTIONS?1. 2. 3. 4.

General Rule: In case of shares jointly owned, the consent of all the co-owners shall be necessary. WHAT ARE THE Exceptions: 1. 2.

MEETINGS STOCKHOLDERS RIGHT TO VOTE AND MANNER OF VOTING1. General rule: _______or _______ may vote personally or through a representative by way of proxy, voting trust agreement or by the executor, administrator, receiver of other legal representative. Exception: In non-stock corporations, the right to vote may be ____, ______ or ______ in the articles of incorporation or in the by-laws. 2. The right to vote is vested with the ______ of the shares. 3. In case of pledged or mortgaged shares, the pledgor or mortgagor is______ in absence of a written agreement (recorded in the corporate books) to the contrary. (Sec. 55) 4. Executors, administrators, receivers, and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholders or members without need of any ______. (Sec. 50) 5. An executor or administrator of a stockholder may not be elected unless he owns at _______.

PROXY

DEFINE Proxy.GIVE THE Two types of proxies. Briefly describe each: 1. 2.

Give the requirements for proxy voting:1. 2. 3.

How may revocation be expressed? 1. 2. 3. 4.

MEETINGS - PROXY1. Proxy voting may not be denied except in a ______. 2. _____ may reasonably regulate the form and execution of proxies. 3. Unless otherwise provided in the proxy, it shall be valid _______ for which it is intended. 4. No proxy shall be valid and effective for a period longer than _____ years at any one time. 5. A proxy is _______ unless coupled with an interest.

VOTING TRUST

WHAT IS A VOTING TRUST? WHAT ARE THE Requirements?1234567

Voting trust distinguished from proxy 1as to ownership2as tovoting rights3director4purpose5revocability6acts7proxy8form9period

VOTING TRUST1. A corporation is not a party to a voting trust agreement therefore it is not a ____ in a suit to enforce the same. (NIDC vs. Aquino) 2. A voting trust transfers only voting and other rights pertaining to the shares subject of the agreement or control over the stock. It does not include the ________of the corporation. (NIDC vs. Aquino)

CHAPTER 10: STOCKS AND STOCKHOLDERS

3 ways in which a person may become a stockholder: 123

SUBSCRIPTION CONTRACT

WHAT IS A Subscription / SUBSCRIPTION CONTRACT?

DIFFERENTIATE CONDITIONAL SUBSCRIPTION FROM SUBSCRIPTION UPON SPECIALTERMS. General rule: Conditional subscriptions are valid. WHAT ARE THE Exceptions: 1. 2.

STOCKS AND STOCKHOLDERS SUBSCRIPTION CONTRACT1. A _____ is not required to be written; an oral contract for subscription is valid and enforceable. The statutes of fraud do not apply to a subscription contract because such subscription does not fall under the statutory definition of a sale. 2. In case of doubt, a subscription shall be considered one upon ______ in order to protect the creditors and other subscribers. 3. An application for subscription which is at variance with the terms evidenced in a general form of subscription must be accepted by the corporation to create a _______. (Trillana vs. Quezon College, Inc.) 4. A condition ______ as to the debtor renders the whole obligation void. (Trillana vs. Quezon College, Inc.)

PRE-INCORPORATION SUBSCRIPTIONS

Types of subscriptions as to time of execution. Briefly describe: 12

General rule: A subscription for shares of stock of a corporation still to be formed is irrevocable. GIVE THE Exceptions: 1period2consent3epic failGIVE THE Exception to the exceptions: when final

Consideration for the issuance of stock may be any or a combination of any two or more of the ff: 123456

Define Issue. WHAT IS Par or issue price?

Give the valuation of properties given as a consideration for issuance of stock: 1. Tangible properties (particularly real properties): ABC

2. Intangible properties (such as patents or copyrights): AB

Two theories in the valuation of property or services. Describe.12

What is meant by Outstanding shares exchanged for stocks in the event of reclassification or conversion. Give an example. STOCKS AND STOCKHOLDERS PREINCORPORATION SUBSCRIPTIONS1. ________ are mandatory in view of Secs. 13 and 14 which mandates that a corporation may be registered as such only if at least 25% of its authorized capital stock has been subscribed and that at least 25% of the total subscription has been paid. 2. Stocks shall not be issued for a consideration ________ thereof. 3. Stocks shall not be issued in exchange of ______ or ______. Their realization is uncertain. 4. The issuance of shares is not dependent on the delivery of a ___________. 5. Labor performed or services actually rendered to the corporation must be capable of ______. 6. The ____ or ______ due from the corporation is a lawful and valid consideration for the issuance of stock. 7. Amounts transferred from unrestricted retained earnings to stated capital refers to the ______ of stock dividends where corporate earnings are capitalized. 8. The prohibition against the issuance of shares by corporations except for actual cash or property at its _______ secures absolute equality among stockholders with respect to their liability upon stock subscriptions. 9. A stipulation in a stock subscription which obligates the subscriber to pay nothing for the shares except as dividends may accrue upon the stock is a ________ in favor of the particular subscriber, and hence, illegal. (National Exchange Co., Inc. vs. Dexter) 10. A corporation has no power to receive a subscription upon such terms as will operate as a fraud upon the other subscribers as stockholders by subjecting the particular subscribers to _____, or by giving him ______, or as fraud upon creditors of the corporation by ___________. Therefore, an agreement between a corporation and a particular subscriber, by which the subscription is not to be payable, or is to be payable in part only, is ______. (National Exchange Co., Inc. vs. Dexter)

CERTIFICATES OF STOCK AND THEIR TRANSFER

WHAT IS A Certificate of stock?

GIVE THE Requisites for the issuance of a certificate of stock: 123

General rule: Holders of subscribed shares not fully paid are entitled to all the rights of a stockholder. GIVE THE Exceptions: 12

GIVE THE Two modes of transferring shares of stock. DESCRIBE BRIEFLY: 12GIVE THE Reasons for the necessity of the registration of transfers of stock: 12345

WHAT ARE THE Other restrictions on the right to transfer shares: 1if not recorded2unpaid claims3a/i440%5alien6agreement

WHAT IS MEANT BY Transfer?

Mode of transfer for a valid transfer of stocks: 1d2e3r

STOCKS AND STOCKHOLDERS CERTIFICATES OF STOCKS AND THEIR TRANSFER1. The issuance of a ______ is not a condition sine quanon to consider a subscriber as a stockholder. 2. No transfer shall be valid, except as _______, until the transfer is recorded in the books of the corporation. 3. Until ________ is accomplished, the transfer of stock, though valid between the parties, cannot be effective as against the corporation. The corporation looks only though its books for the purpose of determining who its stockholders are. 4. ________ of a transfer of stock will not, however, affect the validity thereof at least in so far as the contracting parties are concerned. 5. The duty of the corporate secretary to record a valid transfer of shares of stock is ____. Thus, he may be compelled by ______. 6. General rule: A certificate of stock is not a ______. A bona-fide purchaser of a certificate of stock will acquire no better title to the shares than his transferor had and will be subject to all rights, remedies and defenses which the true and lawful owner may have. Exception: When the general principles of ______ apply. Thus, if the _______ thereof, by his act or negligence, is estopped from claiming ownership, (as when he clothes another with apparent title or authority to dispose of the same) a purchaser in good faith and without notice will acquire a better title as against the owner so estopped. 7. Shares of stock are ________ and the owners thereof have the unbridled right to transfer the same to anyone they please subject only to reasonable charter provisions. 8. The duty of the corporate secretary to register a valid transfer of shares is ______. Therefore, _______ will lie to compel registration in case the corporation or the corporate secretary refuses registration. (Rural Bank of Salinas vs. CA) However, the transferee has no such right when his title to said shares has no prima facie validity of is uncertain. (Tay vs. CA) 9. The right to transfer shares of stock may not be ___________. Every owner of corporate shares has the same uncontrollable right to alienate them and is under no obligation from selling them at his sacrifice and for the welfare and benefit of the corporation and other stockholders. (Padgett vs. Bobcock & Templeton; Fleischer vs. Botica Nolasco) 10. However, the right to transfer may be ______ to give the corporation protection against colorable or fraudulent transfer or to enable it to know who its stockholders are. Also, as a matter of policy, the SEC allows the grant of _______ to existing stockholders and/or the corporation, giving them the first option to purchase the shares of a selling stockholder within a reasonable period not exceeding ____provided that the same is contained in the articles of incorporation and in all of the stock certificates to be issued by the corporation. This is considered reasonable since it merely suspends the right to _____ within the period specified. 11. A corporation may classify its shares and grant such ____, _____,or ______ provided that such are made in the articles of incorporation and subject to reasonable terms, conditions or period. (Go Soc & Sons vs. IAC) 12. Only the transfer or absolute conveyance of the _________ to a share need be entered and noted upon the books of the corporation in order that such transfer may be valid, therefore, inasmuch as a chattel mortgage of the aforesaid title is not a complete and absolute alienation of the dominion and ownership thereof, its ____ and _____ upon the books of the corporation is not a necessary requisite to its validity. (Monserrat vs. Ceron) 13. Chattel mortgages over shares of stock should be registered both at the ________ and in the ______ where the corporation has its principal office or place of business in order to bind third persons. The ownership of shares in a corporation is property distinct from the certificates whicH are merely the _______ of such ownership. The property in the shares are deemed to be situated in the ______in which the corporation has its principal office or place of business. (Chua Guan vs. Samahang Magsasaka, Inc.) 14. All ______ of shares should be entered in the books of the corporation. Transfers not so entered are invalid as to ______or __________ of the assignors as well as to the corporation and to subsequent purchasers in good faith, and indeed, as to all persons interested, except the______ to such transfer. (Uson vs. Diosomito) 15. A clause contained in the by-laws of a corporation which provides that the owner of a share of stock cannot sell it to another person except to the defendant corporation is ____, violative of the _______ of shareholders, and in ________. (Fleischer vs. Botica Nolasco Co.) 16. Shares of stock being regarded as property, the owner of such shares may, as a general rule, dispose of them as they see fit, unless the corporation has been ________, or unless the right to do so is properly ________, or the owners privilege of disposing of his shares has been hampered by his own action. (Padgett vs. Babcock & Templeton) 17. Any restriction on a stockholder.s right to dispose of his shares must be construed ________; and any attempt to restrain a transfer of shares is regarded as being in ________, in the absence of a ________ upon its shares, and except to the extent that valid restrictive regulations and agreements exist and are applicable. Subject only to such restrictions, a stockholder cannot be controlled in or restrained from exercising his right to transfer by the corporation or its officers or by other stockholders, even though the sale is to a ___________ or the company, or to an ___________ person, or even though a ___________interest is sold to one purchaser. Therefore, restrictions consisting in the word non-transferable is illegal. (Padgett vs. Babcock & Templeton) 18. The suspension of the power to sell shares of stock which has a _________ purpose, results in the protection of the corporation as well as of the individual parties to the contract, and is reasonable as to the length of time of suspension is valid. (Lambert vs. Fox) 19. An indorsee of an _________certificate of stock has no power to effectively transfer the shares to other persons or his nominees. For an effective transfer of shares of stock the _________ and _________ of transfer prescribed by law must be followed. (Embassy Farms, Inc. vs. CA) 20. _________ of the certificate of stock is a mandatory requirement of law for an effective transfer of a certificate of stock. (Razon vs. IAC) 21. THe right of a transferee/assignee to have stocks transferred to his name is an inherent right flowing from his _________ of the stocks. The corporations obligation to register is _________. (Rural Bank of Salinas vs. CA) 22. The pledge of shares of stock does not vest ownership of such shares to the _________. The _________ remains the owner during the _________ of the pledge and prior to foreclosure and sale. Therefore, the pledgee has no right to demand the registration of the pledged shares in his name. In order that a writ of mandamus may issue, it is essential that the person petitioning for the same has a clear _________ right to the thing demanded and that is it the imperative duty of the respondent to perform the act required. (Tay vs. CA) 23. Without a _________, which is the evidence of ownership of corporate stock, the assignment of corporate shares is effective only between the parties to the transaction. (Nava vs. Peers Marketing) 24. 25. An assignment, without ______ and _____, while valid as among the parties, does not necessarily make the transfer effective. The assignees cannot enjoy the status of a stockholder, cannot vote nor be voted for, and will not be entitled to ______, insofar as the assigned shares are concerned. (Rural Bank of Lipa City, Inc. vs. CA) 26. _____ is not essential where it appears that the person sought to be held as stockholders are _____of the corporation, and have _____ of the stock books. (Tan vs. SEC) 27. After a valid transfer of share, the right to have such ______ commences to exist. However, it would not follow that said right should be exercised immediately or within a definite period. (Won vs. Wack Wack Golf & Country Club, Inc.) 28. Certificates of stock are not negotiable instruments. Consequently, a transferee under a _____ assignment acquires no title which can be asserted against the true owner, unless his own negligence has been such as to create an estoppel against him. If the owner of the certificate has endorsed it in blank, and it is stolen from him, no title is acquired by an innocent purchaser for value. (De Los Santos vs. Republic)

FORGED AND UNAUTHORIZED TRANSFERS

What is an Unauthorized issuance of certificate of stock?

STOCKS AND STOCKHOLDERS FORGED AND UNAUTHORIZED TRANSFER

1. Forged and unauthorized transfer what is forged or unauthorized is the ____ of the certificate from the true and lawful owner to another person.2. General rule: In ___or ____ transfer of stock the purchaser acquires no title as against the lawful owner and will have no ___ or _____ against the corporation (non-negotiability of stock certificates)Exception: If after such forged or unauthorized transfer, the corporation issues a ______ and such certificate passes into the hands of subsequent bona fide purchaser, the latter may rightfully acquire ____ thereto since the corporation will be _____ to deny the validity thereof. The subsequent purchaser in good faith took the shares by virtue of the _____ of the certificates issued by the corporation or of the representation made by the corporation that the same is valid and subsisting and that the person named therein is a stockholder of the corporation. He may therefore, ____ the corporation to recognize him as a stockholder or claim ___and ____ against the latter.

ISSUANCE OF STOCK CERTIFICATES

STOCKS AND STOCKHOLDERS ISSUANCE OF STOCK CERTIFICATES1. Subscriptions to shares of stock are ____. Thus, no certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid. 2. Once a subscriber has paid his subscription in full, he becomes entitled to be issued a ____.3. The duty of the corporate officers to issue stock certificates to those entitled is a _____ duty enforceable by ______. 4. A stockholder whose subscription is not fully paid may not be issued a _____ for that portion already paid. (Fua Cun vs. Summers and China Banking Corporation)

WATERED STOCK

What is a Watered stock? Directors or officers shall be solidarily liable 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 for the following acts:

12

Ways in which watered stocks may be issued: 1234

Evil effects of stock watering: 1ON CORPO2ON SHs3ON CRs

Two theories advanced as the basis for the liability on water stocks. Describe: 12

Effects of issuance of watered stock: 1. As to the corporation 2. As between the corporation and the subscriber 3. As to the consenting stockholders 4. As to dissenting stockholder 5. As to creditors 6. As against transferees of the watered stock

STOCKS AND STOCKHOLDERS WATERED STOCK1. All creditors, whether prior or subsequent to the issuance of watered stock may ____ payment of such water. 2. If however, a certificate of stock has been issued and duly indorsed to a bona fide purchaser, without knowledge, actual or constructive, the latter cannot be held liable, at least as against the corporation, since he took the shares on reliance of the _______ made by the corporation that the stock certificate is valid and subsisting. This is because a corporation is prohibited from issuing certificates of stock until the_______ of the subscriptions have been paid and could not, therefore, deny the validity of the stock certificate it issued as against a purchaser in good faith. 3. Subscribers for stock shall pay to the corporation interest on all ______ from the date of subscription, if so required by, and at the rate of interest fixed in the by-laws. If no rate of interest is fixed in the by-laws, such rate shall be deemed to be the legal rate.

ENFORCEMENT OF PAYMENT OF SUBSCRIPTIONS

When unpaid subscription or any percentage thereof, together with interest if required, shall be Paid?12

Two possible remedies available to the corporation to enforce payment of unpaid subscription: 12

Procedure for the enforcement of payment through board action: 1CALL / NO CALL2NOTICE / NO NOTICE3DATE OF PAYMENT4FAILURE TO PAY530D PD6RESO7DATE OF SALE8NOTICE OF SALE9PUBLICATION10STILL DQ NO PAY11TRANSFER12REMAINING SHARES13 IF NO BIDDER14TREASURY

Who is a Highest bidder

Grounds to question the delinquency sale: 1NOTICE 2SALE

Two conditions before an action to recover delinquent stocks irregularly sold may be allowed: 1AS TO THE DQ2AS TO COMPLAINT

Instances when a call is not necessary: 12

General rule: A valid and binding subscription for stock of a corporation cannot be cancelled so as to release the subscriber from liability thereon. What is the exception? Exceptions to the exception? 123

General rule: No delinquent stock shall not be entitled to: 123Exception: Requirements and procedure for issuance of new certificates of stock in lieu of those lost, stolen or destroyed: 1A/LABCD2OTHERS3PUBLICATION4XCONTEST5/CONTEST

Except in case of ___, ___, or ___ on the part of the corporation and its officers, no action may be brought against any corporation which shall have issued certificate of stock in lieu of those lost, stolen or destroyed pursuant to the procedure above-described.

STOCKS AND STOCKHOLDERS - ENFORCEMENT OF PAYMENT OF SUBSCRIPTIONS1. Failure or refusal of the corporation, through its board of directors to enforce or collect payment of unpaid subscription will not prevent the ___ or the ___ of the corporation to institute a court action to collect the unpaid portion thereof (trust fund doctrine). 2. A ___ is a condition precedent before the right of action to institute a recovery suit accrues. A ______ is required before a debtor may incur a delay in the performance of his obligation. 3. .A subscription for shares of stock does not require an ______ to pay the amount subscribed, as the law implies a promise to pay on the part of the subscriber. The subscriber is as much bound to pay the amount of the share subscribed by him as he would be to pay any other debt, and the right of the company to demand payment is no less incontestable. (Velasco vs. Poizat) 4. Notwithstanding the fact that the by-laws of the corporation provides for a method for the collection of the unpaid portion of stock subscriptions, the corporation may still make use of the methods provided by ________. (De Silva vs. Aboitiz & Co.) 5. The NLRC has no jurisdiction to determine intra-corporate disputes between the stockholder and the corporation as in the matter of ________. (Apocada vs. NLRC) 6. Unpaid subscriptions are not due and payable until a ________ is made by the corporation for payment. (Apocada vs. NLRC) 7. Subscription to the capital of a corporation constitutes a fund to which the creditors have a right to look for satisfaction of their claims and that the assignee in insolvency can maintain an action upon any ________ in order to realize assets for the payment of its debt. (Lumanlan vs. Cura) 8. The President of the Philippines is devoid of the prerogative of suspending the operation of any stature or any of its items. Thus the President cannot ________ the payment of stock subscriptions in the event that the counterpart fund to be invested by the government would not be available.(PNB vs. Bitulok Sawmill, Inc.) 9. A stockholder is personally liable for the financial obligations of a corporation to the extent of his ________. (Edward Keller & Co., Ltd. vs. Cob Group Marketing, Inc.) 10. The subscription to capital stock of the corporation, unless otherwise stipulated, is ________ at the moment of the subscriptions but on a ________ which may be fixed by the corporation. (Garcia vs. Suarez) 11. Shares of stock become ________ when no payment is made on the balance of all or any portion of the subscription on the date or dates fixed in the contract of subscription without need of call, or on the date specified by the board of directors pursuant to a call made by it. 12. General rule: Holders of ________ shares not fully paid which are not delinquent shall have all the rights of a stockholder. Exception: Shares of stock not fully paid are not entitled to be issued a ________.

RIGHTS AND LIABILITIES OF STOCKHOLDERS

Certain basic rights for the protection of stockholders: 12345678910111213141516

Certain obligations and liabilities of stockholders: 123456

CHAPTER 11: CORPORATE BOOKS AND RECORDS

Records to be kept and maintained by the corporation: 1R2M3S

General rule: Any officer or agent of the corporation who refuses to allow the inspection of corporate books and records, or any director or trustee who through a resolution by the board votes for such refusal shall be liable for damages and shall be guilty of an offense which shall be punishable under Sec. 144. WHAT ARE THE EXCEPTIONS?1INFO2PURPOSE Remedies of a stockholder who is denied inspection of corporate books: 123

CORPORATE BOOKS AND RECORDS1. These corporate books and records, inclusive of all business transactions and minutes of meetings, are subject to inspection by any director, trustee, stockholder or member of the corporation at ________on business days and a copy of excerpts of said records may be demanded. 2. Within ________ days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement, which shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in reasonable detail its assets and liabilities and the result of its operations. 3. At the regular meeting of stockholders or members, the board of directors or trustees shall present to such stockholders or members a ________ of the operations of the corporation for the preceding year, which shall include financial statements, duly signed and certified by an ________. However, if the paid-up capital of the corporation is less than P50,000.00, the financial statements may be certified under oath by the treasurer or any responsible officer of the corporation. 4. The basis of the right of the stockholder to inspect the books and records of the corporation for a proper purpose is to ________ as a stockholder. 5. General rule: The right of stockholders to examine corporate books extends to a ________________ which is completely under the control and management of the parent company where he is such a stockholder. (Gokongwei vs. SEC) Exception: The subsidiary and the parent are legally being operated as ________ and ________ entities. 6. The right to inspect corporate books, although personal, may be exercised through an ________ or ________ since it may be unavailing in many instances. (W.G. Philpotts vs. Philippine Manufacturing Co.) 7. The corporation, or its responsible directors and officers cannot unduly ________ the right of inspection and may not ________ set a few days of the year within which the stockholder may make the inspection. (Pardo vs. Hercules Lumber, Co.) 8. Directors of a corporation have the unqualified right to inspect the books and records of the corporation at all reasonable hours. However, there is no absolute right to secure certified copies of the minutes of the corporation until these minutes have been ________ and ________by the directors. (Vegaruth vs. Isabela Sugar Co., Inc.) 9. It is a required condition for the inspection of corporate books that the one requesting it must not have been guilty of using improperly any information secured through a ________ and that the person asking for such examination must be acting in good faith and for a ________ in making his demand. (Gonzales vs. PNB)

CHAPTER 12: MERGER AND CONSOLIDATION

DIFFERENTIATE Merger FROM Consolidation

Requirements and procedure for merger or consolidation: 1PLANABCD2APPROVAL3NOTICE4A/M OR CABC5SUBMIT6ISSUANCE

Effects of merger or consolidation: 112 345$$

MERGER AND CONSOLIDATION

1. Any amendment to the plan of merger or consolidation must be approved by majority vote of the respective _________ or _________ of all the constituent corporations and ratified by the affirmative vote of stockholders representing at least _________ of the outstanding capital stock or of _________ of the members of each of the constituent corporations. 2. Mergers and consolidations may not be entered into for the purpose of circumventing the law against _________ and _________ or for purposes of fraud. 3. Merger or consolidation does not become effective upon the mere _________ of the constituent corporations. It shall be effective only upon the issuance of a _________. (Associated Bank vs. CA)

CHAPTER 13: APPRAISAL RIGHT

What is Appraisal right?

Instances when a stockholder may have the right to dissent and demand payment of the fair value of his shares: 1AMENDMENTAAS TO RIGHTSBAS TO PREFERENCECAS TO TERM2SLTEMPO3M/COther instances provided for in the Code: 1$$2CLOSE CORPO

Requirements and procedure for the exercise of the appraisal right: 1VOTE2DEMAND3SURRENDER4PAYMENT 5TRANSFER

Effects of demand for payment of the fair value of a stockholders shares: 1. From the time of demand for payment 2. After either the right ceases or the purchase of the said shares by the corporation Instances when the right to payment ceases: 1. W2. A3. D4. S5. N6. T

APPRAISAL RIGHT

1. If the dissenting stockholder is not paid the value of his shares within _________ days after the award, his voting and dividend rights shall immediately be_________. 2. No demand for payment may be withdrawn unless the corporation _________ thereto.3. General rule: The costs and expenses of appraisal shall be borne by the _________.Exception: The fair value ascertained by the appraisers is _________ as the price which the corporation offered to pay the stockholder. 4. General rule: In an action to recover the fair value of stocks, all costs and expenses shall be assessed against the _________. Exception: The refusal of the stockholder to receive payment is _________. 5. A dissenting stockholder is required within _________ days after demanding payment for his shares to submit the stock certificates representing his shares to the corporation for _________. His failure to do so shall, at the option of the corporation, terminate his _________. 6. The dissenting stockholder is not prohibited from _________, _________ or _________ his shares. If such be the case, once the certificates are subsequently canceled, the rights of the transferor as a dissenting stockholder shall cease and the transferee shall have all the rights of a regular stockholder; and all dividend distributions which would have accrued on such shares shall be paid to the transferee. 7. A director who exercises his appraisal right remain to be a director until his shares are __________________. 8. A stockholder whose subscription is not fully paid is _________ to exercise his appraisal right.

CHAPTER 14: NON-STOCK CORPORATIONS

What Is a Non-stock corporation?

NON-STOCK CORPORATIONS1. Purposes: 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 (_________). 2. The provisions governing _________, when pertinent, shall be applicable to non-stock corporations. 3. Even if a corporation has capital stock divided into shares it is considered as non-stock so long as it does not distribute _________ to its members and officers. (CIR vs. Club Filipino de Cebu) 4. Any _________ which a non-stock corporation may obtain as an _________ to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized. 5. The fact that a non-profit corporation earns a profit, gain or income for the corporation or members does not make it a profit-making corporation where such profit or income is used for the purpose set forth in the articles of incorporation and is not _________ to its incorporators, members or officers, since mere _________ or _________ of the members does not change the nature of the corporation. 6. The determination of whether or not a non-stock corporation can engage in profit-making business or activity depends largely on the _________ indicated in the articles of incorporation. If the business activity is _________ in the said articles, _________, _________ or _________ thereto, the same may be undertaken by the corporation, otherwise, not, as it would be an ultra-vires act. MEMBERSHIP AND VOTING RIGHTS

In absence of any provision in the articles of incorporation or by-laws relative to the manner and causes of termination, the power is nonetheless inherent in the following situations: 1. I2. V3. M

NON STOCK CORP: Membership and voting rights:

10. General rule: Each member, regardless of class, shall be entitled to _________ vote (no cumulative voting). Exception: The right to vote is _________, _________ or _________ in the articles of incorporation or the by-laws. 11. General rule: A member may vote by _________. Exception: Proxy voting is _________ in the articles of incorporation or the by-laws. 12. Voting by mail or other similar means by members of non-stock corporations may be authorized by the by-laws of non-stock corporations with the _________ of, and under such conditions which may be _________ by the SEC. 13. General rule: Membership in a non-stock corporation and all rights arising therefrom are _________ and _________. Exception: The articles of incorporation or the by-laws provide otherwise. 14. Membership in non-stock corporations may be acquired by complying with the provisions of its rules prescribed in the by-laws. In absence of restrictions, a non-stock corporation may act _________ and exclude any persons it may see fit, and the _________ have no power to interfere. It is free to fix _________ for membership and to provide for termination of membership. 15. General rule: The board of directors of a non-stock corporation shall have the _________ to admit members. Exception: The _________ provide otherwise. 16. Membership shall be terminated in the _________ and for the _________ provided in the articles of incorporation or the by-laws. 17. General rule: Termination of membership shall have the effect of _________ all rights of a member in the corporation or in its property. Exception: The articles of incorporation or the by-laws provide otherwise. 18. In terminating membership, strict compliance with the _________ and _________ laid down in the by-laws must be observed, otherwise it may render the expulsion ineffective and invalid. (Carmoan vs, PED) 19. As to whether or not a member should be expelled or maintained is the established right of the corporation to determine and the _________ are without authority to strip a member of his membership without cause. 20. Courts cannot strip a member of a non-stock corporation of his membership therein without cause. Otherwise, that would be an unwarranted and undue _________ with the well established right of a corporation to determine its membership. (Chinese YMCA vs. Ching)

TRUSTEES AND OFFICERS Qualifications of trustees: 1. 2. 3.

General rule: The courts will not interfere on matters involving the internal affairs of an UNINCORPORATED association such as elections, the manner by which it was conducted and the results thereof. (Lions Club International vs. CA) WHAT ARE THE Exceptions: 1.F2A3P4P5L6O7P8IGeneral rule: Regular or special meetings of members of a non-stock corporation shall be held in the city or municipality where the principal office is located, and if practicable in the principal office of the corporation. Exceptions: 12

Requirements for meetings held outside the location of the principal office as provided for by the by-laws: 12

TRUSTEES AND OFFICERS21. Non-stock or special corporations may designate their _________ by any name through their articles of incorporation or their by-laws. 22. General rule: The number of trustees in a non-stock corporation may exceed _________. Exception: The articles of incorporation or the by-laws provide otherwise. 23. General rule: The term of office of the board of trustees may be staggered. They shall classify themselves in order that _________ of their number shall expire every year and subsequent elections of trustees comprising _________ shall be held annually. Exception: The articles of incorporation or the by-laws provide otherwise. 24. General rule: officers of a non-stock corporation may be directly elected by the _________. Exception: The articles of incorporation or the by-laws provide otherwise. 25. Trustees elected to fill vacancies occurring _________ the expiration of a particular term hold office only for the unexpired period. 26. General rule: All proceedings and business transactions at a meeting improperly held or called are _________. Exception: All of the members are _________ or _________at the meeting.

DISTRIBUTION OF ASSETS UPON DISSOLUTION

Rules of distribution: 1L-PSDA2C-RTC3L-CRBES4O-D5A

Procedure and requirements for a plan of distribution of assets: 1VOTE2APPROVAL3NOTICE

CHAPTER 15: CLOSE CORPORATIONS

WHAT ISA CLOSE CORPORATION?One whose articles of incorporation provide that: 1. 23 General rule: Any corporation may be incorporated as a close corporation. Exceptions: 1M2S3B4I5P6E7C

The articles of incorporation of a close corporation may provide: 1. AS TO shares or rights 2. AS TO directors 3. AS TO quorum or voting requirements 4. AS TO MANAGEMENT, So long as this provision continues in effect: A. AS TO ELECTION OF BODB. AS TO BOD C. AS TOLIABILITIES5. AS TO OFFICERS In order to bind purchasers in good faith, restrictions on the right to transfer shares must appear in: 12 3

Effects of issuance or transfer of stock in breach of qualifying conditions:

CONDITIONSEFFECTS 1. The stock is issued or transferred to a person not entitled under the articles of incorporation; and 2. The stock certificate conspicuously shows the qualifications of the persons entitled.

1. The articles of incorporation states the number of persons, not exceeding 20, who are entitled to be holders of record of its stock 2. The stock certificate conspicuously states such number; and 3. The issuance or transfer of stock causes the stock to be held by more than such number of persons.

1. The stock certificate conspicuously shows a restriction on transfer of stock; 2. The transfer violates the restriction.

General rule: A close corporation may refuse to register the transfer of stock in the name of the transferee who has or is conclusively presumed to have notice that: 123Exceptions: 12

Options granted to the transferee: 1. 2.

Sec. 101. When board meeting is unnecessary or improperly held. - Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: General rule: Any action by the directors of a close corporation without a meeting is invalid. Exceptions: 1234Exception to the exceptions: The by-laws provide otherwise.

REQUIREMENT IN ORDER THAT Any amendment to the articles of incorporation which seeks to: 1. Delete or remove any provision required by Title XV of the Code to be contained in the articles of incorporation, or 2. Reduce a quorum or voting requirement stated in said articles of incorporation, - (VOTING REQUIREMENT)

Define Deadlock.

In case of a deadlock and upon written petition by any stockholder, the SEC has the power to arbitrate the dispute and the authority to: 1. AS TO PROVISION 2. AS TO RESOLUTION 3. AS TO ACT 4. AS TO SHARE 5. AS TO MANAGEMENT 6. AS TO THE CORPORATION 7. OR AS TO RELIEF

WHO IS A Provisional director?1. A provisional director shall be an _____ ______ who is neither a _____ nor a _____ of the corporation or of any subsidiary or affiliate of the corporation, and whose further qualifications, if any, may be determined by the _____. 2. A provisional director is not a _____ of the corporation and does not have the _____ and ______ of a ______ or ______. 3. A provisional director shall have all the _____ and _____ of a duly elected director of the corporation, including the right to _____ of and to ____ at meetings of directors, until such time as he shall be _____by order of the ____ or by all the ______. 4. His ______ shall be determined by ______ between ___ and the ______ subject to approval of the ___, which may fix his _____ in the absence of ______ or in the event of _______ between the provisional director and the corporation.

Any stockholder of a close corporation may, by written petition to the SEC, compel the dissolution of such corporation whenever: 1. AS TO ACTS of the directors, officers or those in control of the corporation or 2. AS TO Corporate assets

DISTINGUISH Close corporations FROM ordinary stock corporations 1. AS TO The number of stockholders 2. AS TO The number of directors 3. AS TO restrictions4. AS TO prohibition. 5. AS TO Management 6. AS TO liability FOR CORPORATE TORTS7. AS TO ACTS OF Directors8. AS TO SHs Agreements 9. ASTO CLASSIFICATION OF directors10. AS TO ELECTION OF Officers11. AS TO quorum and voting requirements12. AS TO transfer of shares 13. AS TO Pre-emptive rights14. AS TO WITHDRAWAL AND COMPEL SALE OF SHARES15. AS TO COURT/PROPER FORUM INTERFERENCE 16. AS TO Dissolution

CHAPTER 15: CLOSE CORPORATIONS1. Absent any of the three requisites, a corporation cannot be considered a _________ corporation and would thus be governed by the general provisions on _________ corporations. 2. A corporation does not become a _________ corporation just because a husband and wife owns 99.86% of the capital stock. (San Juan Structural Steel vs. CA) 3. Sec. 140 authorizes the _________ to recommend to the legislature the setting of maximum limits to family or group ownership of stock in corporation vested with public interest, and the determination of whether or not it should be vested with public interest is within its domain. 4. The provisions of Title XV of the Code shall primarily govern close corporations. However, the provisions of other Titles of the Code apply _________. 5. A close corporation may partake the nature of a _________ in that the stockholders thereof take an active role in the _________ of the corporate affairs either as directors, officers or even perhaps as partners in management which is akin to the partnership form of business. 6. Restrictions on the right to transfer shares shall not be more onerous than granting the existing stockholders or the corporation the option to _________ the shares of the transferring stockholder within reasonable terms, conditions or period. If upon the expiration of said period, the existing stockholders or the corporation fails to exercise the option to purchase, the transferring stockholder may sell his shares to any _________. 7. The term "transfer" is not limited to a transfer for _________. 8. Agreements by and among stockholders executed _________ the formation and organization of a close corporation, signed by _________ stockholders, shall survive the incorporation of such corporation and shall continue to be valid and binding between and among such stockholders, if such be their intent, to the extent that such agreements are not inconsistent with the articles of incorporation, irrespective of where the provisions of such agreements are contained, except those required by this Title to be embodied in said articles of incorporation. 9. An agreement between two or more stockholders, if in _________ and _________ by the parties thereto, may provide that in exercising any voting rights, the shares held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. 10. No provision in any written agreement signed by the stockholders, relating to any phase of the corporate affairs, shall be invalidated as between the parties on the ground that its effect is to make them _________ among themselves. 11. A _________ among some or all of the stockholders in a close corporation shall not be invalidated on the ground that it so relates to the conduct of the business and affairs of the corporation as to _________ or _________ with the discretion or powers of the board of directors: Provided, That such agreement shall impose on the stockholders who are parties thereto the liabilities for managerial acts imposed by this Code on directors. 12. To the extent that the stockholders are actively engaged in the management or operation of the business and affairs of a close corporation, the stockholders shall be held to strict _________ _________ to each other and among themselves. Said stockholders shall be personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance.13. A corporation shall not be deemed a close corporation when at least _________ of its voting stock or voting rights is _________or _________ by another corporation which is not a close corporation.14. If a _________'s meeting is held without proper call or notice, an action taken therein within the corporate powers is deemed _________ by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof.15. General rule: The _________ of stockholders in close corporations shall extend to all stock to be issued, including reissuance of treasury shares, whether for money, property or personal services, or in payment of corporate debts. EXCEption: The articles of incorporation provide otherwise. 16. Any stockholder of a close corporation may, for any reason, _________ the said corporation to purchase his shares at their fair value, which shall not be less than their par or issued value, when the corporation has sufficient _________ in its books to cover its debts and liabilities exclusive of capital stock. 17. In a close corporation, a corporate action taken at a board meeting without proper call or notice is deemed _________by the absent director unless the latter promptly files his _____ with the secretary of the corporation after having knowledge of the meeting. (Manuel Dulay Enterprises vs. CA) 18. Stockholders who actively engage in the management or operation of the business and affairs of a close corporation shall be ____ for corporate torts unless the corporation has obtained reasonably adequate _______. Essentially a tort consists in the violation of a right given or the omission of a duty imposed by law. Article 283 of the Labor Code mandates the employer to grant separation pay to employees in case of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses. CFTI failed to comply with this law-imposed duty or obligation. Consequently, its stockholder who was actively engaged in the management or operation of the business should be held personally liable. (Naguiat vs. NLRC)

CHAPTER 16: SPECIAL CORPORATIONS

EDUCATIONAL CORPORATIONS

WHAT ARE Educational corporations?

EDUCATIONAL CORPORATIONS 1. Educational corporations are governed primarily by _____ and secondarily by the ____. 2. Educational institutions are required to incorporate within ___ days after their ____ as such. However, failure to comply will ______ the educational institution from suit as a corporation. 3. A favorable recommendation of the _____, ___ and ____ is required before the SEC accepts or approves the articles of incorporation or by-laws of any educational institution. 4. Trustees of non-stock educational corporations shall not be less than 5 nor more than ____, in multiples of __. 5. Unless otherwise provided in the articles of incorporation on the by-laws, the board of trustees of incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so classify themselves that the term of office of _______ shall ____every year. Trustees thereafter elected to fill vacancies, occurring before the expiration of a particular term, shall hold office only for the _____. Trustees elected thereafter to fill vacancies caused by ______ shall hold office for 5 years. A ______of the trustees shall constitute a quorum for the transaction of business. The powers and authority of trustees shall be defined in the _____. 6. For institutions organized as stock corporations, the ___ and _______s shall be governed by the provisions on stock corporations. 7. General rule: Educational institutions shall be owned solely by ______ or corporations or associations ____ of the capital of which is owned by such citizens. The control and administration of educational institutions shall be vested in ________. Exception: Educational institutions established by ____and ______. 8. General rule: No educational institution shall be established e____ for aliens and no group of aliens shall comprise more than ______ in any school. Exception: The rule shall not apply to schools established for ____ and _____ and, unless otherwise provided by law, for other foreign ____ residents.

RELIGIOUS CORPORATIONS

WHAT ARE Religious corporations? Classes of religious corporations: 1. 2

RELIGIOUS CORPORATIONS1. Religious corporations are governed by the appropriate chapter of the Code and the ____ on non-stock corporations.

Corporation Sole

Define corporation sole. PurposE OF CORPORATION SOLE Who COMPRISES CORPORATION SOLE?

Requirements and procedure of incorporation: 1. A BCDE 2. 3. 4.

Requirements for the voluntary dissolution of corporations sole: 1. a. b. c. d. 2.

CORPORATION SOLE1. All ____, ____ and _____ of the religious denomination, sect or church administered or managed by the corporation sole shall be held in ___ for the __, ____, ___and _____ of the religious denomination, sect or church, including hospitals, schools, colleges, orphan asylums, parsonages and cemeteries thereof. 2. A provision relative to its term of existence is not required since a corporation sole is supposed to exist in ____. 3. General rule: A corporation acquires juridical personality only upon the i___ of a certificate of incorporation by the SEC. Exception: A corporation sole becomes endowed with corporate personality after ____of the verified articles of incorporation together with other required documents. 4. A corporation sole may purchase and hold real estate and personal property for its ___, ____, ___ or ____l purposes, and may receive bequests or gifts for such purposes. 5. General rule: A ____ is required before a corporation sole may sell or mortgage __ _____ held by it. Before such an order is granted, a _____ must be made by the chief archbishop, bishop, priest, minister, rabbi or presiding elder acting as corporation sole and it must be shown that ______ has been given as directed by the court and that it is to the interest of the corporation that the petition be granted. However, such application may be opposed by ____ of the religious denomination, sect or church represented by the corporation sole. Exception: Court intervention is not necessary when the___ _, ___ and ____ of the religious denomination, sect or church, religious society or order concerned represented by such corporation sole ____ the ____, ___, ___ and _____ an______. 6. Registration of real property in the name of the corporation sole does not vest ______ unto the head thereof. 7. The constitutional requirement that _____ of the capital of a corporation must be owned by ______ before it may register land in its own name _____ to a corporation sole. A corporation sole has no _____ and the framers of the constitution did not have in mind the corporation sole when it provided for such requirement. (Roman Catholic Apostolic Adm. of Davao, Inc. vs. LRC) 8. Whether or not a corporation sole, or any private corporation for that matter, can acquire alienable land of the public domain depends upon the character of the land ______ of the registration proceeding. If it still forms part of the public domain, no. If it is private, __. (Republic vs. INC) 9. Under the Public Land Act, ______ land may be subject to registration by a possessor if he, personally or through his predecessor-in-interest, had openly, continuously, exclusively and notoriously possessed the same for __ years. The law creates the ______ whereby the land, upon completion of the requisite period ipso jure and without the need of ___or _____, ceases to ____ land and becomes ____property. (Director of Lands vs. CA) 10. In case of vacancy in the office of the head of the corporation, the _________, _____ or ______ shall exercise all the powers and authority of the corporation sole during such vacancy and until such vacancy has been filled-up. 11. The _______ shall become the corporation sole and shall be permitted to transact business as such only upon the ____ with the SEC of a copy of their ____, _____, or ______, duly certified by a ____.

Religious Societies

What is a Religious society?Purpose OF A RELIGIOUS SOCIETY?Who COMPRISES A RELIGIOUS SOCIETY? Requirements and procedure for incorporation: 1. 2. ABCDEF 3. 4.

RELIGIOUS SOCIETY1. The articles of incorporation of a religious society need not indicate a term since it is supposed to exist in perpetuity.

CHAPTER 17: DISSOLUTION

DEFINE Dissolution.

Three modes of dissolution: 1. E 2. V 3. R

DISSOLUTION1. General rule: When a corporation is dissolved, it ceases to be a _______ and can no longer pursue the business for which it is incorporated. Exception: The corporation will continue as a body corporate for another period of ______ from the time it is dissolved for the purpose of _________.EXPIRATION OF CORPORATE TERM

General rule: A corporation registered under the Corporation Code is required to indicate its term of existence in the articles of incorporation. Exceptions: 1. 2.

EXPIRATION OF CORPORATE TERM1. A corporation ceases to exist and is ________ upon the ______ of the term indicated in its articles of incorporation without the need of ______. There is no need to for the institution of a proceeding for _______ to determine the time and date of the dissolution of a corporation because the period of corporate existence is provided in the articles of incorporation. (PNB vs. CFI) SURRENDER OF FRANCHISE (VOLUNTARY DISSOLUTION)

Three modes of voluntary dissolution: 1. 2. 3.

SURRENDER OF FRANCHISE (VOLUNTARY DISSOLUTION)1. The requirements and formalities provided by law for the dissolution of corporations are ______such that failure to comply therewith will have ____ on the legal existence of the corporation. A corporation being a creation of law may only terminate its existence in the ________. or the board of directors of a corporation to dissolve the same does not affect the dissolution of a corporation. (Daguhoy Enterprises vs. Ponce)

Voluntary dissolution where no creditors are affected

Formal and procedural requirements for voluntary dissolution where no creditors are affected: 1. 23456

Voluntary dissolution where creditors are affected

Voluntary dissolution where creditors are affected 1. The appointment of a receiver is only ____and not _____. The law is intended to let the stockholders have _____of the assets of the corporation upon dissolution and winding up of its affairs.

Formal and procedural requirements for voluntary dissolution where creditors are affected: 1234567

Dissolution by shortening the corporate term

Procedure to shorten the corporate term: 12345

Dissolution by shortening the corporate term1. In case of a corporation sole, an ______ for the dissolution by the particular religious denomination, sect or church is necessary. 2. A vote must cast at a _______. Written assent is insufficient. 3. It is only upon _____ that the corporation is deemed dissolved.

INVOLUNTARY DISSOLUTION

Requirements for involuntary dissolution by the SEC: 12

Grounds for involuntary dissolution under Sec. 6, PD 902-A: 1 f2 s3 r4 c5 f6 f

Other grounds provided for the in Corporation Code: 1 v2 d3 a

INVOLUNTARY DISSOLUTION1. Notwithstanding the fact that _____ transferred the jurisdiction of the SEC under Sec. 5 of PD 902-A to the _______, the same law granted the SEC _______ jurisdiction over _____proceedings. Sec. 5 (m) of RA 8799 provides that the SEC shall have the power to suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any ground provided by law. 2. Other grounds can be found in special laws, e.g. the Securities Regulation Code and the General Banking Act. 3. Courts proceed with extreme caution in the proceeding which have for their object the forfeiture of corporate franchises, and a forfeiture will not be allowed, except under express limitation, or for a plain abuse of power by which the corporation fails to fulfill the design and purpose of its organization. But when such abuses and violations constitute or threaten a ______ or such as to amount to a ____________ (charter) by which the franchise were granted and thus _________ of the grant, then dissolution will be granted. (Government vs. Philippine Sugar Estates Co.) 4. The court has a discretion with respect to the infliction of capital punishment upon corporations and there are certain misdemeanors and misusers of franchises which should not be recognized as requiring their dissolution. (Government vs. El Hogar) 5. That the corporation is guilty of _____ and ______ and that its continuance inflicts _______ warrants its dissolution. (Republic vs. Security Credit) 6. Relief by dissolution will be awarded only where _______ is available, and is ______ where the rights of the stockholders can be, or are, protected in some other way. The several acts of misuse and misapplication of the funds and/or assets of the corporation were committed more particularly by the corporations president, for the commission of which they may be held personally liable. (Republic vs. Bisaya Land Transportation Co., Inc.) 7. Under the present state of law, ______ or ____ of a corporation can institute a dissolution proceeding against his own corporation before the proper forum. 8. The ______, shall hear and decide cases involving _____ or ______ between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity. (PD 902-A) 9. The SEC has _____ jurisdiction to suspend, revoke, after _____ and ____, the ____ or _______ of corporations, partnership or associations upon any of the grounds provided by law. (Sec. 5(m) RA 8799) 10. The existence of a de jure corporation may be determined in a _______ for its dissolution between stockholders, without intervention of the State. (Hall vs. Piccio) 11. In a close corporation, a petition for the dissolution of the corporation may be instituted by any shareholder on the ground of ______.

EFFECTS OF DISSOLUTION

EFFECTS OF DISSOLUTION 1. No _________ in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any _________ by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired by the subsequent dissolution of said corporation. 2. Dissolution ______ a corporations _____ and generally prevents it from further exercising other or secondary franchises which have been conferred to it. 3. Dissolution terminates the corporation.s power to ______ or ______ as a going concern. (Hall vs. Piccio) 4. General rule: In a lease to a corporation, the rights and obligations thereunder are not extinguished by the corporations dissolution since leases affect ______ and survives the death of parties. The ____succeed to the rights and liabilities of the dissolved corporation in an unexpired leasehold state which may be enforced by or against the receiver or liquidating trustee. Exception: The lease, by its terms, terminates when the corporation ceases to exist. 5. Contracts for _____ are deemed terminated by the dissolution of the corporation. There Is an ____ that the contract shall terminate in such event. (Gelano vs. CA)

LIQUIDATION AND WINDING UP

What is Liquidation and winding up? CPSD General rule: No corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. Exceptions: 1. D 2. C

Three methods of liquidation: 1. C 2. T 3. R

LIQUIDATION AND WINDING UP1. A dissolved corporation continues as a body corporate for a period of ___ from the time of dissolution for the purpose of ____ and _____ by or against it and enabling it to ___ and _____, to ____ and ____ and to _____, but not for the purpose of continuing the business for which it was established. 2. At any time during said three (3) years, the corporation is authorized and empowered to ____all of its property to ______ for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the _____ vests in the trustees, and the ______ in the stockholders, members, creditors or other persons in interest. 3. Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is ____ or _____ shall be escheated to the city or municipality where such assets are located. 4. Mere appointment of a ____ without anything more does not imply the dissolution of a corporation. 5. Pending actions by or against a corporation are ____ upon expiration of the period allowed by law for the liquidation of its affairs; but _____to whom the corporate assets have been conveyed ________ as such in all matters connected with the liquidation. The effect of conveyance is to make the trustees the _____ of the property conveyed, subject to the _____ therein of creditors and stockholders. (National Abaca Other Fibers Co. vs. Pore) 6. If the corporation carries out the liquidation of its assets through its own _____and continues and defends the actions brought by or against it, its existence shall terminate at the _______ from the time of dissolution; but if a _____ or ____- is appointed, as has been done in the present case, with or without a ______ of its properties within three years, the _______ passes to the assignee, the ______ remaining in the members, stockholders, creditors and other interested persons; and said assignee may bring an __, _____ that which has already been commenced for the benefit of the corporation, or ____ the latter against any other action already instituted or which may be instituted even outside of the period of three years fixed for the offices of the corporation. (Sumera vs. Valencia) 7. If there is a____, ___ or ___, it can continue prosecuting suit even beyond the 3yr period fixed by law because he becomes the legal owner of the _____,____and ____conveyed to him. (Board of Liquidators vs. Kalaw) 8. The _____l who prosecuted and defended the interest of the corporation and who appeared in behalf of the corporation may be considered a trustee of the corporation at least with respect to the ______ only. The word trustee must be understood in its general concept. (Gelano vs. CA) 9. A claim established against the corporation may be prosecuted against the _____ of such corporation even after the three years from its dissolution. (Republic vs. Marsman Development Company) 10. Upon ________of the corporation its assets are held for the benefit of its stockholder after payment of its debts and will be so distributed to the said stockholder in accordance with their proportionate interest in the corporation or their contracts of subscription. 11. Holders of ________ may be granted certain rights or privileges upon dissolution. 12. General rule: The board of directors of a dissolved corporation is _______ to undertake any activity outside of the usual liquidation of the corporation. 13. Exception: The stockholders of a dissolved corporation may convey their _________ toward the ____ of a new corporation to _____the business of the old. _____ is the sole activity of a dissolved corporation that does not intend to incorporate a new. (Chung Ka Bio vs. IAC) 14. If the three year period of liquidation has elapsed and no effort to finally settle or close the corporate affairs was undertaken, those having pecuniary interest in the corporate assets, including not only the stockholders but likewise the creditors, acting for and its behalf, may make proper representations with the SEC for working out a final settlement of the corporate concern. (Clemente vs. CA) Note: The above decision is an aberrant ruling. Once the three year period for liquidation and winding up has elapsed without any trustee or receiver being appointed, the assets of the corporation will be ______ in favor of the ______ thus barring the _____of stockholders and creditors.

CHAPTER 18: FOREIGN CORPORATIONS

What is a Foreign corporation?

Requisites for a foreign corporation to transact business in the Philippines: 1. L 2. C

Procedure for application of a license: 1. A/I 2. O a. D/Tb. PO c. RAd. Pe. P f. D/Og. ACSh. OCSi. Aj. AI3. C4. S5. F

CHAPTER 18: FOREIGN CORPORATIONS1. The phrase whose laws allow Filipino citizens and corporations to do business in its own country or state is a mere ______ to the grant of a _______of a foreign corporation to do business in the Philippines. 2. General rule: The _______ is applied in determining whether a corporation is domestic or foreign. If it is incorporated in _______, it is a foreign corporation, while if it is registered under Philippine laws, it is deemed a Filipino or domestic corporation irrespective of the _______ of its stockholders. Exception: In times of _____, the _____ would apply in determining the corporate nationality, i.e., the citizenship of the _______ stockholders determines the nationality of the corporation. 3. General rule: A corporation can have no _______ outside the boundaries of the sovereign by which it is created. Exception: By virtue of ________, a corporation created by _____ is usually allowed to _________ in other states and to _______ of the forum, subject to restrictions and certain requirements imposed therein. 4. Foreign corporations already issued a _____ to transact business in the Philippines _____to the effectivity of the Code ______to have such authority under the terms and conditions of its license, subject to the provisions of the Code and other special laws. 5. Upon compliance with the provisions of Sec. 125, other special laws and the rules and regulations implementing them, the ___ shall thereafter issue the license. 6. Upon issuance of the license, such foreign corporation may _____ to transact business in the Philippines and continue to do so for as long as it ___its authority to act as a corporation under the laws of the ____or _______, unless such license is sooner ___, _____, ____ or ____ in accordance with this Code or other special laws. 7. Within 60 days after the issuance of the license, a foreign corporation, except those engaged in ____or ______, shall deposit with the SEC, for the benefit of creditors, _____ consisting of _______ of the Philippine government or its political subdivisions or instrumentalities, or of government owned or controlled corporations and entities, shares of stock in _____, shares of stock in _______, or any _____ thereof, with an actual market value of ____. _____ may be required by the SEC if the actual market value of the securities on deposit has ___ by at least ___8. The objective of the law requiring the license is not to prevent the foreign corporation from performing isolated or single acts, but to prevent it from ______ for the purpose of pursuing its _____ without taking steps to render it amendable to suit in the local courts. (Marshall-Wells Co. vs. H. W. Elser & Co.) 9. A dissolved corporation has no ______; it ceases to exist as a corporation and cannot apply for a ____ or ______. (Buenaflor vs. Camarines Sur Industry Corp.) 10. The 3-year period allowed by the law is only for the purpose of ____ or _____ of corporate affairs. No act can be done for the purpose of continuing the business for which it waS established. Neither can it enforce a contract executed ___to its dissolution. (Cebu Port Labor Union vs. State Marine Co.) 11. The termination of the life of a juridical entity does not, by itself, imply the ___ or _____ demandable against such juridical entity. Debts due to or against the corporation will not be extinguished. Otherwise, it will amount to an ______ or a ____. (Gonzales vs. Sugar Regulatory Administration)

MODES OF ENTRY OF FOREIGN CORPORATIONS

Modes of entry of foreign corporations: 1. BO 2. R/LO 3. LS 4. R/AH 5. R/OH 6. RW 7. JV

RESIDENT AGENT

The following may be appointed as a resident agent: 1. I2. DC

Modes of service of summons upon a foreign corporation: 1. IF LICENSED 2. IF CEASED TO TRANSACT OR NO RA 3.

RESIDENT AGENT 1. The appointment of a _____ is a condition precedent to the issuance of a license to transact business in the Philippines by a foreign corporation. 2. The necessity of the appointment of a resident agent is only for the purpose of receiving ____and _____ in any legal action or proceeding against the foreign corporation.

DOING BUSINESS WITHOUT A LICENSE

General rules regarding whether or not a foreign corporation may sue or be sued in the Philippines: 1. As to whether or not it can sue. a. BUSINESS LICENSEb. BUSINESSLICENSE c. BUSINESSLICENSE

2. As to whether it can be sued or not. a. BUSINESS LICENSE b. BUSINESSLICENSE c. BUSINESS

General rule: A foreign corporation must have the requisite license to sue before the Philippine courts. Exceptions: 1. IT 2. L/CR 3. TTCRG 4. RPC5. D6. E

Exception to an exception: Where a ________ however, is not merely _______ but indicates the foreign corporations intention to do other business in the Philippines, said single act or transaction constitutes ____ or _____ or _____ in the Philippines.

DOING BUSINESS WITHOUT A LICENSE1. General rule: No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to ____or _____, ___or _____ or ________Exception: Such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any _______ recognized under Philippine laws. 2. A foreign corporation cannot transact ______ in the Philippines without the requisite _____. If it does so, the responsible officers may be subjected to the _______ of Sec. 144. 3. It is not the lack of required license but __________ which bars a foreign corporation from access to our courts. (Universal Shipping vs. IAC) 4. The true test regarding doing or engaging in or transacting business is whether the foreign corporation is ______ or _______ for which it was organized or whether it has ____ and ________. The term implies a ____ of commercial dealings and arrangements, and contemplates, to that extent, the ____ or ___or the ________, and in progressive __________, _________ and ____ of its organization. (Mentholatum Co., Inc. vs. Mangaliman) 5. The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from performing single acts, but to prevent is from _____ for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The law simply means that no foreign corporation shall be permitted to transact business in the Philippine Islands unless it shall have the license required by law, and until it complies with the law, shall not be permitted to maintain any suit in the local courts. (Marshall-Wells Co. vs. Henry W. Elser & Co.) 6. A foreign corporation _____ in business in the Philippines may _____ the right to file an action in Philippine courts for isolated transactions. (Bulakhidas vs. Navarro) 7. If A foreign corporation not engaged in business in the Philippines has the right to sue on an isolated transaction, more so may it sue based on a _____. (Swedish East Asia Co., Ltd. vs. Manila Port Service) 8. There was only one agreement between petitioners and the respondent. The three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic agreement and in no way indicate an intent on the part of the respondent to engage in a continuity of transactions with petitioners which will categorize it as a foreign corporation doing business in the Philippines. The respondent, being a foreign corporation not doing business in the Philippines, does not need to _________ in order to have the capacity to sue. (Atnam Consolidated, Inc. vs. CA) 9. Under the rules of the BOI, the phrase doing business has been exemplified with illustrations, among them being as follows: 1________ orders, purchase (sales) or service contracts. Concrete and specific solicitations by a foreign firm, _______ amounting to negotiation or fixing of the terms and conditions of sales or service contract, regardless of whether the contracts are actually reduced to writing, shall constitute doing business even in the enterprise has no office or fixed place of business in the Philippines. 2______ a representative or distributor who is domiciled in the Philippines unless said representative or distributor has an ______, i.e., it transacts business in its name and for its own account, and not in the name or for the account of the pricipal. 3. _____, whether called liaison offices, agencies or branches, unless provided otherwise. 4. Any other act or acts that ______ of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and objective of the business organization. (Facilities Management Corp. vs. De La Rosa) 10. A single act may bring the corporation within the purview of the statute where it is an ________. In such a case, the single act of transaction is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the operations for the conduct of a part of the corporations ordinary business. (Far East Int.l Import vs. Nankai) 11. ITECs arrangement with its various business contacts in the country indicate its purpose to bring about the situation among its customers and the general public that they are dealing directly with ITEC and that ITEC is actively engage in business in the country. In determining whether a corporation does business in the Philippines or not, aside from their ____ within the forum, reference may be made to the _______ entered into by it with other entities in the country. (Communication Materials and Design, Inc. vs. CA) 12. A foreign corporation doing business in the Philippines may sue in Philippine courts although noT authorized to do business here against a Philippine citizen or entity who had ____ and ____ by said corporation. To put it another way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. AnD the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic corporations. One who has dealt with a corporation of foreign origin as a ____ is estopped to deny its corporate existence and capacity. The principle will be applied to ___ a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract. (Communication Materials and Design, Inc. vs. CA) 13. The right of a corporation to use its corporate and trade name is a ____, _______, which it may assert and protect against _____, in any of the courts of the world even in jurisdictions where it does not transact business just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Since it is the trade and not the make that is to be protected, a trademark acknowledges no ______or municipalities or states or nations, but extends to every ____ where the traders goods have become known and identified by the use of the mark. (Western Equipment and Supply Co. vs. Reyes) 14. A foreign corporation which has never done business in the Philippine Islands and which is unlicensed and unregistered to do business here, but is ___ and _____ in the Islands through the use therein of its products bearing its corporate and trade name has _____ to maintain an action in the Islands. Parenthetically the Trademark Law allows a foreign corporation or juristic person to bring an action in Philippine courts for ______ of a mark or trade-name, for _____, or ____ and _______, whether or not it has been licensed to do business in the Philippines. (General Garments Corporation vs. Director of Patents) 15. Article 8 of the Paris Convention to which the Philippines became a party provides that a trade name shall be ______ in all the countries of the Union without the obligation of _____ or _____, whether or not it forms part of the trademark. (Puma vs. IAC) 16. A foreign corporation ______ in the Philippines needs _____ to sue before Philippine courts for infringement of trademark and unfair competition. (Le Chemise Lacoste vs. Fernandez) 17. In a suit involving the violation of the _______ the complainant foreign corporations capacity to sue is not significant. (Le Chemise Lacoste vs. Fernandez)

CAPACITY TO SUE

General rule: A foreign corporation must ________ its capacity to sue in order that it may proceed and effectively institute a case in Philippine courts. Exceptions: 1. RPC 2. D

CAPACITY TO SUE 1. The qualifying circumstance of whether or not a foreign corporation has engaged in business in the Philippines is an essential part of the element of a foreign corporations capacity to sue and must be _______. (Atlantic Mutual Insurance Co. vs. Cebu Stevedoring Co., Inc.) 2. If the dismissal of the case, based on _____ of the foreign corporation to aver its capacity to sue, would not, however, bar the institution of the same action, _____should not be allowed, especially so if it would be an idle, circuitous ceremony considering the absence of any meritorious substantial defense of the defense of the defendant. ______ should not be accorded ______ to frustrate and defeat a plainly valid claim. (Olympia Business Machines Co. vs. RAzon, Inc.) 3. Since petitioner is not maintaining any suit but is merely defending one against itself (it did not file any complaint but only a corollary defensive petition to prohibit the lower court from further proceeding with a suit that it had no jurisdiction to entertain), its failure to aver its legal capacity to institute the present petition is ___. (Time, Inc. vs. Reyes)

LAWS GOVERNING FOREIGN CORPORATIONS

General rule: Any foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class. Exceptions: 1. CFOD 2. RLRD

Instances when a foreign corporation authorized to transact business in the Philippines must obtain an amended license: 1. CN2. AP

Requirements in a merger or consolidation of a foreign corporation licensed in the Philippines: A. With a domestic corporation: 1. P 2. R B. With a foreign corporation: 1. P 2. AAMC3. P/WRequirements and procedure for the withdrawal of foreign corporations: 1. P/W 2. AS TO CLAIMS W/C ACCRUED3. AS TO taxes, imposts, assessments and penalties 4. AS TO Publication REQUIREMENT 5. I/C

Grounds for the revocation or suspension of license: 1. AS TO annual report or fees 2. AS TO resident agent 3. AS TO CHANGE OF RA 4. AS TO COPY OFAMENDMENT5. AS TO MATERIAL MATTER 6. AS TO PAYMENT OF TIAP 7. AS TO BUSINESS TRANSACTIONS I 8. AS TO BUSINESS TRANSACTIONS II9. OG

Other grounds for revocation of license under special laws:

1. GBA 2. IC 3. OIC In case the revocation is warranted the SEC shall: 1. C/R 2. FC3. MN

LAWS GOVERNING FOREIGN CORPORATIONS1. _____or _____ not affecting creditors or the public in general are governed not by Philippine laws but the _____ or _____. 2. Special laws may provide or grant certain ____, ____, ____or ___ to a foreign corporation not otherwise applicable or granted to domestic corporations (e.g. import duties and tax incentives under the Omnibus Investments Code). 3. A foreign corporation authorized to transact business in the Philippines which amends its articles of incorporation or by-laws must ____ of such amended articles of incorporation or by-laws with the SEC or the appropriate government agency within _____ from the effectivity of such amendment.

CHAPTER 18: MISCELLANEOUS PROVISIONS

What is Outstanding capital stock?

CHAPTER 18: MISCELLANEOUS PROVISIONS1. Non-stock or special corporations may, through their articles of incorporation or their by-laws, designate their governing boards by ____ other than as board of trustees. 2. The ____ shall, from time to time, make a determination of whether the corporate vehicle has been used by any corporation or by business or industry to frustrate the provisions thereof or of applicable laws, and shall submit to Congress, whenever deemed necessary, a __of its findings, including ____ or ___--. 3. __---- may be set by Congress for stockholdings in corporations declared by it to be vested with a _________ pursuant to the provisions of this section, belonging to individuals or groups of individuals _________ by consanguinity or affinity or by close business interests, or whenever it is necessary to __________, _________ or ___________ or ___, or to __________ declared in laws, rules and regulations designed to _________ and ____________. In recommending to Congress corporations, business or industries to be declared vested with a public interest and in formulating proposals for limitations on stock ownership, the NEDA shall consider the ____ and _________, the ________, the __________, _____________, _________, ___________, ___________, as well as other factors which are ______ and __________ of business and industry.

4. Every corporation, domestic or foreign, lawfully doing business in the Philippines shall submit to the SEC an ____ of its operations, together with a __________ of its assets and liabilities, __________ by any independent certified public accountant in appropriate cases, covering the _________ and such other ________. Such report shall be submitted within such _______. 5. _____ propounded by the SEC and the answers thereto, as well as the ______ made by the Commission or by any other official authorized by law to make an examination of the operations, books and records of any corporation, shall be kept ______, except insofar as the _______ the same to be made public or where such interrogatories, answers or results are necessary to be presented as _____ before any court. 6. The __ shall have the power and authority to _____ the provisions of this Code, and to ______rules and regulations reasonably necessary to enable it to perform its duties hereunder, particularly in the ____ and ____on the part of the ____ stockholders, members, directors, trustees or officers. 7. Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of ________ (P1,000.00) pesos but _______ (P10,000.00) pesos or by ___________, or ____, in the discretion of the court. If the violation is committed by a ____, the same may, after notice and hearing, be ____ in appropriate proceedings before the Securities and Exchange Commission: Provided, That such dissolution shall ____ the institution of appropriate action against the ____, ___ or _____ of the corporation responsible for said violation: Provided, further, That nothing in this section shall be construed to ______ the other causes for dissolution of a corporation provided in this Code.8. ______ in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, _____ by any such corporation, stockholders, members, directors, trustees, or officers, shall be ____ or ____either by the ______ of said corporation or by any _____ or _____ of this Code or of any part thereof. 9. All corporations lawfully existing and doing business in the Philippines on the date of the effectivity of this Code and heretofore authorized, licensed or registered by the Securities and Exchange Commission, shall be ______, ____ or _____ under the provisions of this Code, subject to the terms and conditions of its license, and shall be governed by the provisions hereof: Provided, That if any such corporation is affected by the ______ of this Code, said corporation shall, unless otherwise herein provided, be given a period of __