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 of the corporation’s stockholders in receiving capital returns. Therefore, the decrease is only permitted if the company remains solvent and capable of meeting all existing obligations. Nonstock corporations are also allowed to incur, create, or increase bonded indebtedness with approval from a majority of trustees and two-thirds (2/3) of the members.
02 November 2025
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