What rights must be protected when a corporation seeks approval to decrease its capital stock? Before approving a capital stock decrease, the SEC must ensure that its effect shall not prejudice the rights of corporate creditors (SEC. 37, Revised Corporation Code of the Philippines). This safeguard prioritizes the claims of external creditors over the interests […]
What is the general rule regarding the preemptive right of stockholders, and how can it be denied? The general rule dictates that all stockholders of a stock corporation shall enjoy the preemptive right to subscribe to all issues or disposition of shares of any class (SEC. 38, Revised Corporation Code of the Philippines). This right
When is a sale or disposition of corporate assets considered to cover “substantially all” of the corporate property? A sale or other disposition is deemed to cover substantially all the corporate property and assets if, by that action, the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it
What right is accorded to a stockholder who dissents from the sale or disposition of substantially all corporate assets? A stockholder who dissents from the resolution approving the sale or disposition of substantially all corporate assets is granted the right of appraisal (SEC. 39, Revised Corporation Code of the Philippines). This allows the dissenting stockholder
What financial requirement must be met before a stock corporation can acquire its own shares (other than redeemable shares)? A stock corporation has the power to purchase or acquire its own shares for a legitimate corporate purpose, provided that the corporation has unrestricted retained earnings in its books to cover the shares to be purchased
When is stockholder approval not necessary for a corporation to invest its funds in another business? Generally, a private corporation must obtain approval from a majority of the board and ratification by two-thirds (2/3) of the outstanding capital stock before investing funds in another business or for any purpose other than its primary purpose (SEC.
From what source must the board of directors declare dividends, and in what forms may they be paid? The board of directors of a stock corporation is authorized to declare dividends only out of the unrestricted retained earnings of the corporation (SEC. 42, Revised Corporation Code of the Philippines). Dividends may be made payable in
What is the rule concerning the retention of surplus profits by stock corporations? Stock corporations are generally prohibited from retaining surplus profits in excess of one hundred percent (100%) of their paid-in capital stock (SEC. 42, Revised Corporation Code of the Philippines). This rule, known as the “improperly accumulated earnings tax” principle, encourages the distribution
What is the rule concerning the retention of surplus profits by stock corporations? Read More »
What are the general voting requirements for a corporation to enter into a management contract with another corporation? A corporation cannot conclude a management contract with another corporation unless the contract is approved by the board of directors and by stockholders owning at least the majority of the outstanding capital stock of both the managing
When must a management contract be approved by a two-thirds (2/3) vote of the managed corporation’s stockholders? A management contract requires approval by the stockholders of the managed corporation owning at least two-thirds (2/3) of the total outstanding capital stock entitled to vote under two specific scenarios (SEC. 43, Revised Corporation Code of the Philippines).
