CHAPTER VIII-Stocks and stockholders ; corporate
books and records
1. Subscription Contract (RCC Sec. 60)
Definition: A subscription contract is an agreement to take and pay for
original unissued shares of a corporation.
Irrevocability: Subscriptions for shares are generally irrevocable for a period
of at least six (6) months from the date of subscription, unless:
The corporation consents to the revocation.
The subscription was made before the submission of the Articles of
Incorporation (AOI) to the Securities and Exchange Commission (SEC)
and the AOI Is not submitted within six (6) months.
No Release: A corporation cannot release a subscriber from their obligation
to pay for their shares without the consent of all other subscribers.
2. Pre-incorporation Subscription (RCC Sec. 61)
Definition: This is a subscription to shares of stock before the incorporation
and formation of a corporation.
Irrevocability: A pre-incorporation subscription is irrevocable for a period of
six (6) months from the date of incorporation, or prior to the six (6) months if
the corporation fails to incorporate within that period.
Effect: The subscriber is already considered a shareholder and is liable for
the full amount of the subscription upon incorporation, even if the contract
was made before the corporation legally existed.
3. Consideration for Stocks (RCC Sec. 62)
Definition: This refers to the price or value exchanged for the issuance of
shares of stock. The law requires this consideration to be fair and adequate.
Acceptable Forms of Consideration: The following may be considered valid
payment for shares:
Cash.
Property, tangible or intangible, actually received by the corporation
(valued at a fair valuation equal to the par or issued value of the stock).
Labor performed or services actually rendered to the corporation.
Previously incurred indebtedness of the corporation.
, Amounts transferred from unrestricted retained earnings to declared
dividends (stock dividends).
Outstanding shares exchanged for other shares in the event of
reclassification or conversion.
Unacceptable Forms: Promissory notes and future services are not valid
consideration for the issuance of stocks.
4. Certificate of Stock and Transfer of Shares (RCC Sec. 63)
Nature: The Certificate of Stock is the documentary evidence of the
shareholder’s ownership and interest in the corporation. It is not the share
itself.
Requisites for Valid Transfer (for the corporation to recognize it): For a
transfer of shares to be valid and binding against the corporation, it must
satisfy two requirements:
There must be an endorsement of the certificate of stock by the owner
(or his authorized representative).
The transfer must be recorded in the books of the corporation
(specifically, the stock and transfer book).
5. Issuance of Stock Certificate (RCC Sec. 63)
When a certificate can be issued: A stock certificate may only be issued to a
subscriber when the share/s are fully paid.
Par Value Rule: The issued price of shares must not be less than the par
value fixed in the Articles of Incorporation.
6. Rights of Shareholders
A. Political Rights
Core Idea: The right to participate in the management of the corporation.
Examples:
Right to vote in the election of directors (Sec. 23).
Right to attend and vote at corporate meetings (Sec. 50, 57).
Right to inspect corporate books and records (Sec. 73).
Right to demand financial statements (Sec. 74).
B. Economic Rights
Core Idea: The right to share in the profits and assets of the corporation.
books and records
1. Subscription Contract (RCC Sec. 60)
Definition: A subscription contract is an agreement to take and pay for
original unissued shares of a corporation.
Irrevocability: Subscriptions for shares are generally irrevocable for a period
of at least six (6) months from the date of subscription, unless:
The corporation consents to the revocation.
The subscription was made before the submission of the Articles of
Incorporation (AOI) to the Securities and Exchange Commission (SEC)
and the AOI Is not submitted within six (6) months.
No Release: A corporation cannot release a subscriber from their obligation
to pay for their shares without the consent of all other subscribers.
2. Pre-incorporation Subscription (RCC Sec. 61)
Definition: This is a subscription to shares of stock before the incorporation
and formation of a corporation.
Irrevocability: A pre-incorporation subscription is irrevocable for a period of
six (6) months from the date of incorporation, or prior to the six (6) months if
the corporation fails to incorporate within that period.
Effect: The subscriber is already considered a shareholder and is liable for
the full amount of the subscription upon incorporation, even if the contract
was made before the corporation legally existed.
3. Consideration for Stocks (RCC Sec. 62)
Definition: This refers to the price or value exchanged for the issuance of
shares of stock. The law requires this consideration to be fair and adequate.
Acceptable Forms of Consideration: The following may be considered valid
payment for shares:
Cash.
Property, tangible or intangible, actually received by the corporation
(valued at a fair valuation equal to the par or issued value of the stock).
Labor performed or services actually rendered to the corporation.
Previously incurred indebtedness of the corporation.
, Amounts transferred from unrestricted retained earnings to declared
dividends (stock dividends).
Outstanding shares exchanged for other shares in the event of
reclassification or conversion.
Unacceptable Forms: Promissory notes and future services are not valid
consideration for the issuance of stocks.
4. Certificate of Stock and Transfer of Shares (RCC Sec. 63)
Nature: The Certificate of Stock is the documentary evidence of the
shareholder’s ownership and interest in the corporation. It is not the share
itself.
Requisites for Valid Transfer (for the corporation to recognize it): For a
transfer of shares to be valid and binding against the corporation, it must
satisfy two requirements:
There must be an endorsement of the certificate of stock by the owner
(or his authorized representative).
The transfer must be recorded in the books of the corporation
(specifically, the stock and transfer book).
5. Issuance of Stock Certificate (RCC Sec. 63)
When a certificate can be issued: A stock certificate may only be issued to a
subscriber when the share/s are fully paid.
Par Value Rule: The issued price of shares must not be less than the par
value fixed in the Articles of Incorporation.
6. Rights of Shareholders
A. Political Rights
Core Idea: The right to participate in the management of the corporation.
Examples:
Right to vote in the election of directors (Sec. 23).
Right to attend and vote at corporate meetings (Sec. 50, 57).
Right to inspect corporate books and records (Sec. 73).
Right to demand financial statements (Sec. 74).
B. Economic Rights
Core Idea: The right to share in the profits and assets of the corporation.
