CORPORATE POWERS AND AUTHORITY Fleisher vs Botica Nolasco

Loyola Grand Villa Association vs CA

A. Classifications of Powers Government vs El Hogar Filipino
a. Inherent Gokongwei vs SEC
b. Implied
c. Express

Delta Motors vs Mangosing MEETINGS

E.B. Villarosa & Partners Co. vs Benito A. STOCKHOLDERS / MEMBERS MEETINGS
Luneta Motors Co. vs A. D. Santos Inc Board of Directors vs Tan
Government vs El Hogar Filipino Ponce vs Encarnacion
Director of Lands vs CA
Republic vs Acoje Mining Co. B. DIRECTORS / TRUSTEES MEETINGS
Teresa Electric vs PSC
SEC MEMO CIR. No. 15 s.2001
National Power Corporation vs Vera
Powers vs Marshall Experttravel & Tours Inc. vs CA
Philtrust vs Rivera
Madrigal & Co. vs Zamora C. RIGHT TO VOTE AND MANNER OF
Benito vs SEC VOTING
SEC OGC OPINION NO. 11-41, October 5, 2011 a. Proxy and other
SEC OGC OPINION MARCH 10, 2000
Representative Voting
SEC OGC OPINION SEPTEMBER 30, 1992
NIDC vs Aquino
Islamic Directorate of the Philippines vs CA Lanuza vs. CA
Edward Nell & Co. vs Pacific Farms
Steinberg vs Velasco SEC MEMO CIR. No. 4 s.2004
Dela Rama vs Maao Sugar Central
John Gokongwei vs SEC
Nielson & Co. vs Lepanto Consolidated Mining
STOCK AND STOCKHOLDERS

A. SUBSCRIPTION CONTRACT
B. Ultra Vires Acts
a. Consequences: SEC. 59 - Any contract for the
i. On the corporation acquisition of unissued stock in an
ii. On the immediate existing corporation or a corporation
parties still to be formed shall be deemed a
iii. On the stockholders subscription within the meaning of this
Title, notwithstanding the fact that the
Privano vs Dela Rama Steamship Co. parties refer to it as a purchase or
Carlos vs Mindoro Sugar Co. some other contract.
Japanese Warnotes Claimants
Association vs SEC NOTES:
Crisologo –Jose vs CA

BY-LAWS
How to voluntary acquire shares and When is a person deemed stockholder
become a stockholder in a of a corporation?
corporation? (must be onerous) - A person whose ownership to the
shares of stock are registered in
PURCHASE SUBSCRIPTION the stock and transfer book are
CONTRACT considered stockholders of record
to acquire shares contract by which - The rights of the stockholder
of capital stocks the subscriber accrue only upon entry of his name
agrees to take a
in the books of the corporation
certain number of
shares of the - A person cannot be recognized as a
capital stock, stockholder by mere presentation
paying the of dividend coupons
consideration - Original subscribers become
therefor express stockholders from the time of the
or impliedly
issuance of Certificate of
promising to pay
Incorporation by the SEC, even if
the same
As to the time, it can be made Corporate secretary failed to
they are entered; before or after the reflect such fact in the stock and
made only after incorporation transfer book
incorporation - The original subscribers whose
As payment; if if there is no name appears in the AOI are
there is no agreement as to already stockholders who are
agreement as to when payment
entitled to all rights
when to pay, the must be made the
purchaser under subscriber need
the a deed of not pay unless Shares are property to be transferred
absolute there is a call through any of the modes of acquiring
assignment or ownership under the Civil Code. It is by
sale must fully operation of law (succession), donation,
pay the purchase
sale.
price at the time
the shares are
transferred SUBSCRIPTION CONTRACT – any
a stockholder a subscriber contract for the acquisition of unissued
who sell his cannot released stocks in an existing corporation or
shares can from his obligation corporation still to be formed.
condone the to pay the
obligation to pay subscription price There is a binding contract of
Statute of frauds Statute of frauds subscription as soon as the offer to take
apply to a does not apply to the shares made by a person to a
purchase if the subscription
corporation is accepted by the
price is not less contracts
than P500.00 corporation.
The subscription contract may pertain Trillana vs Quezon College
to shares that are part of the original
authorized capital stock appearing in Damasa Crisostomo subscribed shares
the AOI or those that involve shares in of capital stock through a letter sent to
the increase of capital stock. It may be the Board of Trustees of the Quezon
conditional or unconditional, one which College, enclosed with the letter are a
confer rights until the condition is sum of money as her initial payment
satisfied. and her assurance of full payment.

The shares may be issued in trust for Crisostomo passed away. As no

another person. The shares may be payment appears to have been made
registered in the name of one person on the subscription mentioned in the
but the beneficial ownership may foregoing letter, the Quezon College,
belong to another. Inc. presented a claim before the CFI in
her testate proceeding, for the
Trustee may even be a nominee who collection of the sum of P20,000,
holds the shares for another. A representing the value of the
nominee is a person in whose name a subscription to the capital stock of the
stock certificate is registered but who is Quezon College, Inc. which was then
not the actual owner thereof. opposed by the administrator of the
estate.
KINDS OF SUBSCRIPTION CONTRACT
(1) PRE-INCORPORATION S.C. As the appellant offered its stock for
(2) POST-INCORPORATION S.C. subscription on the term stated in a
form letter, and Crisostomo applied for
TRUST FUND DOCTRINE subscription fixing her own plan of
- The subscribed capital stock of the
payment, the relation, in the absence
corporation is a trust fund for the of acceptance by the appellant of the
payment of debts of the counter offer of Crisostomo, had not
corporation which the creditors ripened into an enforceable contract.
have the right to look up to satisfy There was imperative need for express
their credits or claims. acceptance on appellant's part,
- Not limited to the unpaid portion because the proposal of Crisostomo to
of the subscribed capital. The pay the value of the subscription after
capital stock, property and other she had harvested fish, was a condition
assets of the corporation are obviously dependent upon her sole will
regarded as equity in trust for the and, therefore, facultative in nature,
payment of the corporations rendering the obligation void under
creditors. article 1115 of the old Civil Code.
- LIMITATION:
SEC MEMO CIR NO. 11 s.2016
CASE: SUBSCRIPTION CONTRACT
 In re: RA 9485 (anti red tape act) Sec. 60 – A subscription of shares in a
corporation still to be formed shall be
1. Bank certificate Of Deposit irrevocable for a period of at least six
- If portion of the subscription is (6) months from the date of
other than cash, shall be subscription, unless all of the other
proven by appropriate subscribers consent to the revocation,
supporting documents or the corporation fails to incorporate
within the same period or within a
2. Special Audit Report (SAR) longer period stipulated in the contract
- Mandatory for applications to of subscription. No pre-incorporation
increase the authorized capital subscription may be revoked after the
stock corporations where the articles of incorporation is submitted to
subscription to the increase is the Commission.
paid in cash
NOTES:
- Maybe made instead of SAR , The concept of pre-incorporation is a
Notarized Subscription departure from law on contracts under
Contract among the the civil code, not all the parties gave
stockholders , treasurer and their consent because one of the
president stating the number parties, the corporation, is still non-
of additional shares subscribed existent. Nevertheless, it is a valid and
to and paid binding and irrevocable for 6 months,
or still lapse of irrevocable after the
- Not Mandatory SAR if : filing of AOI with the SEC.
a. Listed Companies
b. Public Companies Irrevocability; it is to prevent injustice
c. Companies that offer or sell that may be inflicted on subscribers
securities to the public who already exerted efforts to organize
d. Payment to the subscription to the corporation and who already
the increase is more than P50 committed financial resources
Million) therefor.

3. Primary Entry (system of COVERED UNDER THE TRUST FUND

bookkeeping operation) DOCTRINE
-deed of assignment
-increase in authorized capital Pre-incorporation subscription
stock where land or real estate is agreement can be revoked:
offered as consideration (1) If all the subscribers consent to the
revocation before the expiration of
the 6 month period
B. PRE-INCORPORATION SUBSCRIPTION
(2) Upon the expiration of the 6- the stock to the same extent as if such
month but before the filing of AOI stipulation had not been inserted in the
with the SEC contract.

CASE: The law in force in the Philippine

National Exchange Co. vs Dexter Islands makes no distinction, in respect
Dexter subscribed to the corporate to the liability of the subscriber,
stock of the plaintiff amounting between shares subscribed before
P30,000, with a stipulation that it will incorporation is effected and shares
be paid from the dividends Dexter is to subscribed thereafter. All subscribers
receive from the shares. alike are bound to pay full par value in
Only P15,000 was paid out of the cash or its equivalent, and any attempt
declared dividends and, however no to discriminate in favor of one
other dividends was declared by the subscriber by relieving him of this
company thereafter. No other payment liability wholly or in part is forbidden.
was made for the subscription.

A special stipulation contained in a

subscription to corporate stock which,
if valid, would lessen the capital of the
company and relieve the subscriber
from liability to be sued upon the
subscription is illegal.

Pursuant to this provision the

Philippine Commission inserted in
section 16 of the Corporation Law of
March 1, 1906, a provision declaring
that no corporation shall issue stock
except in exchange for actual cash paid
to the corporation or for property
actually received by it at a fair
valuation equal to the par value of the
stock.

A stipulation in a stock subscription to

the effect that the subscription shall be
payable from the first dividends to be
paid on the shares is unlawful in so far
as it purports to relieve the subscriber
from liability to be sued; and the
subscriber is liable for the par value of