What sworn statement regarding payment must accompany a certificate of increase of capital stock? For the SEC to accept for filing any certificate of increase of capital stock, it must be accompanied by a sworn statement of the treasurer of the corporation (SEC. 37, Revised Corporation Code of the Philippines). This statement must explicitly show […]
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
When is a contract between a corporation and its director, officer, or relative considered voidable? A contract between the corporation and one or more of its directors, trustees, officers, or their spouses and relatives within the fourth civil degree of consanguinity or affinity is generally considered voidable, at the option of the corporation (SEC. 31,
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
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