Business Organization II - Transcriptions for the Finals

8/12/2019 Business Organization II - Transcriptions for the Finals

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February 2, 2011

If a stockholder oppose to a plan of merger or consolidation he may exercise his

appraisal right.

The appraisal right is not only available hen there is merger or consolidation but it

appears that it is an option or remedy on the part of any dissenting stockholder ho

is not agreeable ith the ma!ority

"xercised hen#

$mendment of the $%I

o &hanging rights of stockholder hich in e'ect ould reduce or adversely

a'ect their rights

(ife of the corporation ill be shorten or extended

)ale, lease, or disposition of all or substantially all of the corporate assets

*if it involves a fundamental change of the corporation

+nder hat circumstances could the stockholder exercise this option

-e must have dissented

uring the actual voting he must have voted against the act

/resent in the meeting hen the vote as taken

ritten demand

alue should be determine on the date prior to the voting

/ayment should be done only out of unrestricted retained earnings

Illustration#

%n the day hen payment as suppose to be due the % said sorry sorry kau...

e have unrestricted retained earnings but e have reserve this for expansionplans so e cannot pay you yet.

hat should you do

The board is not correct to refuse payment !ust because they have expansion plans.


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So if there is already full compliance with all the requirements for a valid

exercise of appraisal right and that the corporation has unrestricted

retained earnings, the corporation cannot refuse to pay the dissenting

stockholder. The stockholder may go to court to compel the corporation to

allow him to exercise his appraisal right.

efore e said that "ven if there is unrestricted earnings the corporation the board

cannot be compelled to declare dividend if among others it could establish that they

have an expansion plan, they are preparing or some contingencies, or if it is

re3uired in a load agreement. -ere so far as payment of dissenting stockholder the

only re3uirement is hen there is unrestricted retained earnings pay them.

ecause the ob!ective is to protect interest of the minority, if e give the board the

poer to ithhold payment, ho can e protect no the minority -ere the board

cannot refuse to pay !ust because they have expansion plans.

)ome notes in the course of ansering the above 3uestion....#

If you are not paid ithin 40 days your right to dividends and your right to

vote hich as suspended by exercising your appraisal right is restored.

If you o'er it to someone else you ill lose your option or you are in e'ect

abandoning your appraisal right5 you can no longer demand for payment.

-o can a stockholder 3uestion the acts of the corporation, hich ould have

alloed him to exercise his appraisal right

y going to court.

$ dissenting stockholder has to options#

"xercise his appraisal right5 and

6udicial action 7 bad faith of the director

-e might not able to 3uestion the decision of the ma!ority and say that it is rong,

but he could 3uestion it if he could establish bad faith.

This could be illustrated in this manner#

hen all the re3uirements of the dissenting stockholder to be paid but for some

other reason they pretend that there is some other problem and they do not ant to

pay.

%r perhaps, it is clear from the actuations of ma!ority of the stockholders that it !ust

anted to get rid of the minority. They !ust do not ant them anymore to be there,


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so they agreed to shorten the term5 but then they ere !ust reconstituted after the

minority as removed.

If the minority can establish this, he can go to court and seek the annulment of the

propose act hich is made in bad faith. $nd in some cases he may also ask for

damages.

289811

To hom is management vested in a :)& In the board of trustees.

o -o are they elected )ection ;2.

In a cumulative voting in a :)& ho is it done

$s a general rule, cumulative voting is not alloed. ecause this is

dependent on the number of stocks so it is inconsistent.

hat is the term 4 years provided elected annually.

o -ere, e have a %T hose term is for 4 years and every year they elect.

-o is this done

"x# 4 years#

issolution. hen they have to be dissolved, ho are the assets to be

distributed

o %n distribution of assets to members# epends on the provisons of the

articles. ?@9A;101112141>1?

4 Bears 2011C201> on 201> "lect

for 4 years

2 Bears 2011C2014 on 2014 "lect

for 4 years

1 Bear 2011C2012 on 2012 "lect for 4years %n 201?, electionagain


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D1E, e address the concerns of the creditors. 6ust because they are :)&,does not mean they dont need to pay creditors.

D2E$fter paying of all liabilities and obligations, those assets held by thecorporation upon a condition of retention or continued retention by thedonee and those conditions are no longer feasible. They have to return the

property if the conditions are not met. 6ust like the mabolo church. The open space has become a very

expensive area. )ince they have a big space fronting the mean road,so x grandfather,they ill take back the property. )o the church abandoned the pro!ect.

-eirs of donor ants to get back the lands of the school.

If the purpose for hich the donor intended ceases, then it should

be returned to the donor.

D4E$ssets received sub!ect to limitations.

Give this to the same institutions having the same purpose.

CLOS CO!"O!#T$O%S

&lose corporations are#

o In other ords, there are 4 kinds of close corporations#

Its stockoholders is not more than 20 incorporators

)tocks are not o'ered to the public.

ith restrictions on its transfer

%thers ould say that close corporations are partnership. ecause they have

some features very similar to a partnership. hat are these features

1.EThey oe to one another the same duty of utmost good faith and diligencethat partners oe one another.

o In other ords, that particular feature hich they cannot !ust transfer their

)%) ithout o'ering it to the other stockholders is very similar to apartnership. hy

ecause in a partnership, the relationship is based solely on trust

and con=dence. -ere, similar because e do not ant any stranger tocome in. The reason hy, before any one sells shares, e must =rsto'er among ourselves. )o it is similar because no one can becomepartner unless everyone consents.

2.E)econd, in partnership, in the absence of any determination on ho illmanage, all partners ill act as partners. hile in a &losed &orporation, thestockholders themselves can manage.


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ith these 2 characteristics , there is reason to say that a close

corporation is very similar to a partnership.

Heasons hy instead of a partnership it chooses to be incorporated

o Tax shelter. (esser tax liability, partners themselves do not ant to be

sub!ected to the individual tax rates in partnership but they prefer the 40percent tax rate of a corporation.

o &ontinuity of the business upon their death. In partnership, death of a

partner dissolves the partnership. eath of a stockholder, does not dissolvethe partnership.

o $chieve limited liability. %ne feature in of corporation is that the

stockholders are liable only up to their investment or shares in thecorporation it does not extend to their personal properties.

&ontinue ith special corporations.

February 11, 2011

&(%)" &%H/%H$TI%:

There is only 1 type of close corporation

There are 4 re3uirements to be considered as a close corporation#

1. $ll of its issued stock of all classes, exclusive of treasury shares,

shall be held of record by not more than a speci=ed number of persons,

not exceeding 20

2. $ll of the issued stock shall not be listed in the stock exchange or

o'ered to the public, and

4. $ll of the issued stock shall be sub!ect to one or more speci=ed

restrictions on transfer

:umber of directors

o :ot less than ?

:umber of stockholders

o :ot more than 20

hat is this restriction

o The right to transfer is sub!ect to the approval of all the stockholders


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o The shares should =rst be o'ered to the corporation or the existing

stockholders

e thought that as not alloed because it restricts the onership of the

stockholder

o It is alloed as long as it does not prohibit the right to transfer

oes it not prohibit

o :o, it merely regulates

-o

o The &orporation &ode provides that the restrictions shall not be more

onerous than granting the existing stockholders or the corporation the

right to purchase the shares of the transferring stockholder ith such

reasonable terms, conditions or period stated therein

These shares shall only be o'ered to the existing stockholders.J

o That could be a prohibition on the right to transfer and is void

To hom may management be vested

o %n the board of directors

In a closed corporation, to hom may management be vested

o Generally, on the board of directors

o If the articles of incorporation so provides, may be vested on the

stockholders themselves

In hich case, ho many directors should there be

o $s many as there are stockholders, but not exceeding 20

-o may they be identi=ed Is there a need for election

o There is no need to elect the board. If that is hat the articles provide,there is no point electing members of the board because the only

purpose of electing the board is to vest in that board the right to

manage. )ince the articles of incorporation already declared that

management is vested among the stockholders, then there is no more

need to elect. This is one peculiarity, e said.

Going back to restrictions, ho should the restriction be established


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o


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o The trust fund doctrine is not violated. It only applies only on the initial

or original subscription, upon the issuance of stocks. hen they ere

issued, the par value as already met, the par value has been

complied ith. The subse3uent sale of a stockholder to someone else

no longer a'ects the trust fund doctrine. If I ant to sell it at a loss, its

up to me. If I bought the share at /> and I ant to sell it at /4, its upto me. $nyay, the /> has already been paid to the corporation,

money has already been paid. It is a subse3uent transfer, not a

subscription.

)o restriction on transfers, ho is it stated

o :o transfers of shares in this certi=cate shall be made ithout =rst

o'ering this to the existing stockholders.J

)o you pledge your certi=cates of stocks to the bank and you failed to pay

your loan. The bank ill foreclose and then conduct a public sale. $ publicauction is held and the shares are sold. $fter the sale, you have no option to

redeem since this is a personal property. )o you 3uestion the sale. Bou hired a

layer ho told you that you can redeem the shares since the sheri' sold the

shares ithout =rst o'ering them to the existing stockholders, in violation of

the restriction found in the certi=cate. &an the sale be considered null and

void

o :o. The restriction applies only to voluntary sales.

$ll these restrictions should be indicated conspicuously on the face of the

certi=cate so that it ould be very easy for a transferee to notice anddiscover these restrictions. )o much so that insofar as the transferee is

concerned, is he considered to have knon the restrictions

o Bes. %nce they are indicated on the face of the certi=cate, there is a

conclusive presumption that the transferee must have knon, must

have read the restriction. $s a matter of fact, if it involves the number

of directors and therefore the number of certi=cates, that is also

binding on the transferee.

-o ill you kno that there are only 20 of these certi=cates available -o

ill the transferee kno that this is a close corporation, hence there are only20 stocks available

o If you ant to be safe, you can in3uire, you can ask the corporate

secretary. ut usually they ill indicate the number Deg. 1 of 20, 2 of

20E. )o if you bought 21 of 20 certi=cates, then there is a conclusive

presumption that you kno of such fact, and therefore presumed to be

a purchaser in bad faith.


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In this case, could you compel the corporation to register the transfer

o :o. Bou cannot compel the corporation to register but the corporation

may register if it ants to.

+nder hat circumstances

o 1. If the transfer has been consented to by all the stockholders.

o 2. If the close corporation has amended its articles of incorporation.

If they do not agree, hat is your remedy

o Bou could recover from the transferor the amount that you have paid.

eing a close corporation, other than those in the articles and byClas, the

stockholders among themselves may also execute other agreements. hat is

the e'ect of these agreements

o They are valid as long as they are not inconsistent ith the articles of

incorporation. )o maybe ? of the 20 stockholders may agree among

themselves that henever there is an issue to be resolved, that they

should vote as a block and that if somebody does not comply, then he

ill be liable for damages among us. They can make those side

agreements so long as these side agreements ould not violate or

contradict the provisions of the articles or byClas because e cannot

help it that even in a close corporation, it might be composed of 2

families. The corporation could start ith the father and hen the

father retired from the business, he decided to give it to his to sons,

so that the to sons are no the stockholders of the corporation. $nd

these to sons have their on children ho are also involved in the

business. )o the children of one son can !ust agree among themselves

that this is our agreement, this is ho e must vote, ho e must

manage, and if e are authoriKed to manage then this is hat e

should do. If all of them could agree, the children of the to brothers,

ell and good. ut that is hardly done. )o hat could be easily done is

for the children of one brother to agree among themselves. $nd this is

alloed, there is nothing rong ith this. This cannot be considered as

a treachery to the other group because they are free to determine theiron stockholdings. $nd still this is part of the right of an oner. They

on one block and they should be alloed to determine ho these

stocks should be protected.

In a family, hen there is a meeting of stockholders, usually hat happens

o they actually hold formal meetings


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o :o. Good if there is a gathering, usually they !ust call up each other. If

there is a resolution to be signed, they !ust call up or text each other.

The formalities are usually dispensed ith so much so that resolutions

can be adopted even ithout a formal meeting.

If there is no formal meeting, clearly this is a violation, being a collegial body.)o there is a defect there. ut this defect may be corrected, ho

o 1. efore or after such action is taken, ritten consent thereto is

signed by all the directors5 or

o 2. $ll the stockholders have actual or implied knoledge of the action

and make no prompt ob!ection thereto in riting5 or

o 4. The directors are accustomed to take informal action ith the

express or implied ac3uiescence of all the stockholders5 or

o >. $ll the directors have express or implied knoledge of the action in

3uestion and none of them makes prompt ob!ection thereto in riting.

e ill continue on ,2011

&LOC'S(

Is hen the directors or stockholders are so divided respecting the management of

the business and a'airs of the corporation that the votes re3uired for any corporate

action cannot be obtained and as a result business and a'airs can no longer be

conducted to the advantage of the stockholders.

They may rite a petition to )"& to arbitrate the dispute.

In this case the )"& shall have the poer to arbitrate the dispute and in the exercise

of such poer,the )"& shall have authority toL

1.E&ancel or alter any provision in the $%I, yC(as

2.E&ancel or alter, or en!oin any resolution of the corporation

4.Eirect or /rohibit any act of the corporation


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>.EHe3uire the purchase of the fair value of shares of any stockholder either by a

stockholder or by the corporation regardless of the availability of unrestricted

retained earnings

?.E$ppoint a provisional director

@.Eissolve a &orporation

9.E$ny other reliefs as the circumstances may arrant

-o many provisional directors

CIt depends on the situation, the )"& ill decide on ho many provisional directors

are needed to end the deadlock. The point in reason is that appointing a provisional

director is to do aay ith the deadlock.

? irectors, ho many votes can you get

CIts not alays 4C2,>C1 but 2C2C1, because there is alays somebody ho is neutral,

he ill abstain from making a vote. )o here , e need a provisional director.

e need to keep in mind that the function of a provisional director is not only to end

a tie beteen the board, but also the functions and has all the poers of a director.

-e also participates, hoping perhaps ith his experience he could inMuence the

decision of the board, therefore might be able to sing some votes to his side, not

necessarily to end a tie break.

ho pays the provisional directors

CThe parties may agree on ho ill pay, or they ill share the salary of the director,

or if the parties ont agree ith each other, the )"& ill =x his compensation.

hat are the other functions of a provisional director

C-e can recommend to the )"&, hat are the proper actions to be taken by the

corporation.

H"&"I"H vs /H%I)I%:$( IH"&T%H

C$ provisional director only comes in hen there is a deadlock, $ppointed by )"&

C$ receiver is di'erent from a provisional receiver, it is appointed more speci=cally

to administer the assets of the corporation and determine hether it is still

practicable to pursue the business of the corporation. -e is appointed by the court ,

and see it it that the assets are preserved, protect the interest of the creditors. -ere

he acts as an administrator, determine the appropriate moves in preserving the

business of the corporation.


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If there is no amount settlement can be achieved or arbitration ill resolve the

conMict, hat ill )"& do

C%rder the issolution of the corporation

-oever, short of dissolution, other stockholders might !ust opt to leave the

corporation, in hich case hat can they do

Cithdra from the corporation, by compelling the corporation to purchase his

shares at their fair value, hich shall not be less than the par or issued value, hen

the corporation has suNcient assets in its books to cover its debts and liabilities

exclusive of capital stock.

)o this means that they have unrestricted retained earnings

C:ot necessarily, as long as they have enough assets,

Is this an appraisal right hats the di'erence no

C:o, It involves a dissent in the fundamental changes in the corporation, there must

be enough unrestricted retained earnings.

Take note the ithdraal is only alloed in a closed corporationOOO

ecause if this is alloed in other type of corporation

CThis is a premature distribution of assets, the creditors ill be pre!udiced, but here

in a closed corporation one may opt to ithdra, as long as there is enough

assets,exclusive of capital stocks.

In determining hether e have enough assets to pay o' the liabilities, do not

include those investments from the stockholders, that should be preserved,

although you have other assets, ofcourse this other assets may include property

and cash. Bou should protect the stockholders investment or e3uity. e sure that

other than the capital stock of the stockholders e3uity , you have more than enough

to pay the liabilities.

S"C$#L CO!"O!#T$O%S(

ancing )chool ,

C:% ,favorable recommendation re3uired from ministry of education and culture,

because the re3uirement is only re3uired to those $&$"


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They may either be corporation sole, or corporation aggregate.

%nce you =le your papers ith the )"& , could you open your church already, do

they have to ait for the approval

CB"), approval is not needed, the mere =ling of the papers gives the church a

corporate personality.

hats the point, in =ling

C)o that they can have a legal personality to on lands

("T) &%:TI:+" :"PT


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In other ords it cannot say you cannot sue me because I do not have a license to

engage in business here, it cannot assume that position. If you did not ant to be

sued, then you should not have entered into any business transaction. )econdly you

are in estoppels, actually hen you decided to enter into business transaction you

are in e'ect brought yourself under the !urisdiction of /hilippine government. hile

you cannot avail of the !udicial facilities of the state by bringing yourself over orunder the !urisdiction of the state thru the contracts that you have executed, then

you are no prevented from denying the authority of the state from assuming

!urisdiction over you. That is the logic of itO

)ecuring a license, before a license is issued hat are you suppose to do as a

foreign corporation

Sec. )*+.Application for a license.C $ foreign corporation applying for a licenseto transact business in the /hilippines shall submit to the )ecurities and "xchange&ommission a copy of its articles of incorporation and byClas, certi=ed inaccordance ith la, and their translation to an oNcial language of the /hilippines,if necessary. The application shall be under oath and, unless already stated in itsarticles of incorporation, shall speci=cally set forth the folloing#

1. The date and term of incorporation5

2. The address, including the street number, of the principal oNce ofthe corporation in the country or state of incorporation5

4. The name and address of its resident agent authoriKed to acceptsummons and process in all legal proceedings and, pending theestablishment of a local oNce, all notices a'ecting the corporation5

>. The place in the /hilippines here the corporation intends tooperate5

?. The speci=c purpose or purposes hich the corporation intends topursue in the transaction of its business in the /hilippines# /rovided,

That said purpose or purposes are those speci=cally stated in thecerti=cate of authority issued by the appropriate government agency5

@. The names and addresses of the present directors and oNcers of thecorporation5

9. $ statement of its authoriKed capital stock and the aggregatenumber of shares hich the corporation has authority to issue,itemiKed by classes, par value of shares, shares ithout par value, andseries, if any5

A. $ statement of its outstanding capital stock and the aggregatenumber of shares hich the corporation has issued, itemiKed byclasses, par value of shares, shares ithout par value, and series, ifany5

;. $ statement of the amount actually paid in5 and

10. )uch additional information as may be necessary or appropriate inorder to enable the )ecurities and "xchange &ommission to determine


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hether such corporation is entitled to a license to transact business inthe /hilippines, and to determine and assess the fees payable.

$ttached to the application for license shall be a duly executed certi=cate underoath by the authoriKed oNcial or oNcials of the !urisdiction of its incorporation,attesting to the fact that the las of the country or state of the applicant allo

Filipino citiKens and corporations to do business therein, and that the applicant is anexisting corporation in good standing. If such certi=cate is in a foreign language, atranslation thereof in "nglish under oath of the translator shall be attached thereto.

The application for a license to transact business in the /hilippines shall likeise beaccompanied by a statement under oath of the president or any other personauthoriKed by the corporation, shoing to the satisfaction of the )ecurities and"xchange &ommission and other governmental agency in the proper cases that theapplicant is solvent and in sound =nancial condition, and setting forth the assetsand liabilities of the corporation as of the date not exceeding one D1E yearimmediately prior to the =ling of the application.

Foreign banking, =nancial and insurance corporations shall, in addition to the abovere3uirements, comply ith the provisions of existing las applicable to them. In thecase of all other foreign corporations, no application for license to transact businessin the /hilippines shall be accepted by the )ecurities and "xchange &ommissionithout previous authority from the appropriate government agency, heneverre3uired by la. D@AaE

Sec. )*. Issuance of a license.C If the )ecurities and "xchange &ommission issatis=ed that the applicant has complied ith all the re3uirements of this &ode andother special las, rules and regulations, the &ommission shall issue a license to theapplicant to transact business in the /hilippines for the purpose or purposesspeci=ed in such license. +pon issuance of the license, such foreign corporationmay commence to transact business in the /hilippines and continue to do so for aslong as it retains its authority to act as a corporation under the las of the country

or state of its incorporation, unless such license is sooner surrendered, revoked,suspended or annulled in accordance ith this &ode or other special las.

ithin sixty D@0E days after the issuance of the license to transact business in the/hilippines, the license, except foreign banking or insurance corporation, shalldeposit ith the )ecurities and "xchange &ommission for the bene=t of present andfuture creditors of the licensee in the /hilippines, securities satisfactory to the)ecurities and "xchange &ommission, consisting of bonds or other evidence ofindebtedness of the Government of the /hilippines, its political subdivisions andinstrumentalities, or of governmentConed or controlled corporations and entities,shares of stock in Qregistered enterprisesQ as this term is de=ned in Hepublic $ct :o.?1A@, shares of stock in domestic corporations registered in the stock exchange, orshares of stock in domestic insurance companies and banks, or any combination ofthese kinds of securities, ith an actual market value of at least one hundredthousand D/100,000.E pesos5 /rovided, hoever, That ithin six D@E months aftereach =scal year of the licensee, the )ecurities and "xchange &ommission shallre3uire the licensee to deposit additional securities e3uivalent in actual marketvalue to to D2RE percent of the amount by hich the licenseeSs gross income forthat =scal year exceeds =ve million D/?,000,000.00E pesos. The )ecurities and"xchange &ommission shall also re3uire deposit of additional securities if the actualmarket value of the securities on deposit has decreased by at least ten D10RE


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percent of their actual market value at the time they ere deposited. The )ecuritiesand "xchange &ommission may at its discretion release part of the additionalsecurities deposited ith it if the gross income of the licensee has decreased, or ifthe actual market value of the total securities on deposit has increased, by morethan ten D10RE percent of the actual market value of the securities at the time theyere deposited. The )ecurities and "xchange &ommission may, from time to time,

allo the licensee to substitute other securities for those already on deposit as longas the licensee is solvent. )uch licensee shall be entitled to collect the interest ordividends on the securities deposited. In the event the licensee ceases to dobusiness in the /hilippines, the securities deposited as aforesaid shall be returned,upon the licenseeSs application therefor and upon proof to the satisfaction of the)ecurities and "xchange &ommission that the licensee has no liability to /hilippineresidents, including the Government of the Hepublic of the /hilippines. DnE

$ foreign corporation is re3uired to put up a performance bond or a surety bond and

this surety bond ill serve as a security for any possible liability that a foreign

corporation might incur for doing business in the /hilippines. )o here, because they

might not have assets here, they might not have their deposits here, a foreign

corporation is re3uired to put up its paid up capital in a bank, and this paid upcapital could be use for the business of the corporation. $t least if a foreign

corporation deals ith the public, there is that capital here the public or third party

may go after. They have brought ith them the $%I registered ith the )"& and

bingo they can already deal ith the public, so if they incur liabilities here hat

ould be the assurance or guarantee that third persons5 that these corporations

might be dealing ith ill be protected from possible liabilities that these

corporation might incur. They do not have assets, at least e are not sure that

foreign capital came in because they is no such re3uirement. )o instead of

compelling the foreign corporation to bring in capital the la re3uires that the

corporation must put up security bond to secure any indebtedness that it mightincur, any liability that it might incur hile doing business here in the /hilippines. )o

that is a guarantee. %ther than that, they must prove that reciprocity.

Heciprocity

They can !ust bring a certi=cate from the foreign government here they came

from5 to the e'ect that the country here the foreign corporation as registered

extends similar privilege to Filipinos ho might be interested or planning to organiKe

a corporation in their country.

Finally, prove their solvency.

hy is proof of solvency and putting up of performance bond re3uired hat is the

point of re3uiring them to put up a performance bond Is it not overkill

$re /hilippine creditors already protected y the mere allegation or proof of

solvency :ot yet. ecause solvency may refer only to the present condition,

moreover hen e talk of solvency it refers to the assets of a corporation being

more than its liabilities5 and these assets could be in the foreign land so even if their


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books of account ould sho that they are very solvent, but that is not a guarantee

for a Filipino creditor. hat ill be the use of those assets if they are in a foreign

land, so hile e re3uire proof of solvency, that ill only sho as others have

stated, that this foreign corporation is legitimate ith sound =nancial condition. ut

that does not mean that those assets are readily available for creditors. ecause

these assets could be in the foreign land5 and no matter ho solvent it is, the localcreditors may not be amply protected, in the sense that if the foreign corporation

fails to pay its creditors, the creditors might not easily attach the assets of the

foreign corporation hich are in a foreign land. )o in addition to proof of solvency, it

is re3uired that the foreign corporation should put up a bond.

$mendment of articles of incorporation

Sec. )-.Amendments to articles of incorporation or by-laws of foreign

corporations.C henever the articles of incorporation or byClas of a foreign

corporation authoriKed to transact business in the /hilippines are amended, such

foreign corporation shall, ithin sixty D@0E days after the amendment becomese'ective, =le ith the )ecurities and "xchange &ommission, and in the proper cases

ith the appropriate government agency, a duly authenticated copy of the articles

of incorporation or byClas, as amended, indicating clearly in capital letters or by

underscoring the change or changes made, duly certi=ed by the authoriKed oNcial

or oNcials of the country or state of incorporation. The =ling thereof shall not of

itself enlarge or alter the purpose or purposes for hich such corporation is

authoriKed to transact business in the /hilippines. DnE

)o that the )"& ill be guided to these changes in the articles of incorporation, theforeign corporation is obliged to update the )"& from time to time on any of the

change either in the articles or in the byC las, so that should problem arise or

conMict ensue then the )"& ill be able to exercise its poers of authority more

appropriately if it is furnished an updated copy of the incorporation papers,

including the articles and the byClas. In the same manner that there could be


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There should be an amendment of its license. To reMect the changes in the articles

or the byClas5 or hether or not there as a merger and e said if the foreign

corporation as the absorbed corporation necessarily it can no longer exist, then it

has to ithdra its registration from the /hilippine government.

)o that a foreign corporation is alloed to ithdra hat is needed

(iabilites should be paid, otherise the claimants may go after the bond earlier

posted. $s e said these bonds serves to guarantee or protect the rights of local

creditors.

Sec. )-).Amended license.C $ foreign corporation authoriKed to transact

business in the /hilippines shall obtain an amended license in the event it changes

its corporate name, or desires to pursue in the /hilippines other or additional

purposes, by submitting an application therefor to the )ecurities and "xchange

&ommission, favorably endorsed by the appropriate government agency in the

proper cases. DnE

&auses for revocation#

Failure to =le annual reports5

Failure to appoint and maintain resident agent5

Failure to inform the )"& of the change of residence of the resident agent5

Failure to submit copy of the amended articles or byClas or articles of

merger or consolidation5

$ misrepresentation in material matters in reports5

Failure to pay taxes, imposts and assessments5

"ngage in business unauthoriKed by )"&5

$cting as dummy of a foreign corporation5 and

:ot licensed to do business in the /hilippines

Corporation Transcription /0arch )), *))1

hat is the composition of the capital of the capital structure of a

corporation


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$uthoriKed &apital )tock D$&)E 7 it is the maximum capital as reMected in the

$%I hich a corporation could invest.

)ubscribed &apital stock D)&)E 7 hich is 2?R of the $&) hich must be

subscribed by the corporation.

/aid up &apital 7 hich is 2?R of the )&) that is actually the amount paid up

by the stockholders.

hich among the three D4E is an outstanding capital stock D%&)E

It is the )&) since it is already issued to and in the name of the subscribers.

hat is then an %&)

It includes all shares of stock issued to stockholders hich are fully paid, and

if unpaid or only partially paid, as long as there is a binding subscription

agreement beteen the subscriber and the corporation. To be considered

outstanding the share of stock must be held by persons other than the

corporation itself.

/ossessor of such stock is already entitled to all the rights pertaining to a

stockholder like the right to receive dividends unless declared delin3uentcause if such he is deprived of the right to dividends even if in possession of

an %&).

hat is again the purpose of the performance bond as re3uired to a foreign

corporation hy is such bond not re3uired to a domestic corporation

It is intended to satisfy the liabilities hich a foreign corporation may incur

hile doing business in the /hilippines so as not to pre!udice and to protect

the interests of 4rdparty creditors ho may be dealing ith such F&, and for

the bene=t of the Filipino public in general.

It is not re3uired of a & since primarily most of its assets is situated in the

/hilippines. The 4rdparty creditors and the Filipino public are guaranteed

through the execution of the Treasurers aNdavit to prove payment is


20/23

e'ected and to signify compliance to the capital re3uirement as provided in

the &orporation &ode. This is also supported by a bank certi=cate to con=rm

and authenticate the deposit of the re3uired 2?R paid up capital.

ith respect to F&, the )"& is only able to receive more or less documents

hich are not enough to protect the interest of the 4rd

party creditors5 thus, aperformance is additionally re3uired so as to address such a concern.

hat is monopoly or combination in restraint of trade

The concept embraces any combination the tendency of hich is to prevent

competition in the broad and general sense, or to control prices to thedetriment of the public. It is the concentration of the business in the hands of

a fe.

/ublic utilities like electricity and ater facilities in the hands of several

people in order to facilitate e'ective competition, is it valid hat is sought

to be avoided is destructive competition herein due to extensive

competition, !ust to get ahead prices could be loered don to a very lo

level. The battle ill then be centered on the prices until one could no longer

compete since its already unpro=table as far as his business is concerned. $s

a result, he ill !ust opt to stop or close its business since he could no longer

cope ith the price competition. "ventually this can result to a monopoly

hich is the very evil sought to be avoided under the provisions of our &ode.

estructive competition destroys in the sense that public interest is

pre!udiced since the poer to raise prices and exclude competition henever

desired is placed in the hands of monopoliKed businesses to the detriment of

the general public. Thus, the need of regulation in the public utility sector.

hat are nationaliKed industries These are industries hich address or

cater to the needs of the public. It is re3uired in a nationaliKed industry thatat least @0R of its capital stock is oned by Filipinos. The reason behind

such is to assure that control in such an industry is retained or maintained in

the very hands of the Filipinos.


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hy are telecommunications considered as a nationaliKed industry It is

possible that if onership of telecommunication industries is not regulated

then likely if not all but more airtime is accorded to foreign shos to the

detriment of the people. Dmahibung nalng d ka ika mata nimo pag on !ud

nimo sa T puro na Instik ang ga yaCyaEO

hat kind of body is )"& )"& is a 3uasiC!udicial body, and in the same time,

an administrative body or a regulatory agency. $dministrative or regulatory in

the sense that )"& performs the folloing functions5

eals ith the =ling of the $%I and ylas to ensure the re3uirements

provided for under the &ode are duly complied ith.

It in3uires into the veracity of the fact %: the corporation is doing business

in accordance to its speci=ed purpose.

It can also exercise visitorial poers.

&orporations are also re3uired to =le ith )"& an annual report to shocase

its solvency as it must set forth in such report its assets and liabilities.

It is also obliged to facilitate a corporate structure.

The minutes of the meeting must also be duly recorded and copies of hich

furnished to )"& in proper cases or hen re3uired.

It must also account of the corporations capitaliKation %: theres an

increase in the capitaliKation.

)"& is a 3uasiC!udicial body since it also performs the folloing functions5

a.E It imposed sanctions for the violation of las and the rules and regulations,

and issues orders in pursuant thereto.

b.E It prepares, approves, amend or repeal rules, regulations, orders, and issue

opinions and provide guidance on and supervise compliance ith such rules,

regulations, and orders.

c.E It issues cease and desist orders to prevent fraud or in!ury to the investing

public.

d.E It punishes for contempt of the commission, both direct and indirect, in

accordance ith the pertinent provisions of and penalties prescribed by the

Hules of &ourt.


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e.E It issues subpoena duces tecum and summon itnesses to appear in any

proceedings of the commission and in appropriate cases, order the

examination, search and seiKure of all documents, papers, =les and records,

tax returns, and books of accounts of any entity or person under investigation

as may be necessary for the proper disposition of the cases before it, sub!ect

to existing provisions of la.

f.E It can also suspend or revoke, after proper notice and hearing, the franchise

or certi=cate of registration of corporations, partnerships, or associations,

upon any ground provided by lay.

ho has !urisdiction if a corporation fails to pay its income tax IH.

If a / of a corporation is removed ho has !urisdiction %riginally )"& butno transferred to HT& under / ;02C$ sec. ?. Dtantamount to intracorporate

disputeE

Issues regarding illegal dismissal 7 !urisdiction is vested ith :(H&.

$n example as given hen a stockholder has a building hich as rented

out by the corporation and the corporation fails to pay or settle its

obligations. uestion is ho has !urisdiction concerning such controversy It

should be the HT&. The renting of the building is separate and distinct from

him being a stockholder of the corporation. -is position as a stockholder is

only incidental to the issue of liability of unpaid rentals. This is an e!ectment

case and for nonCpayment of rentals sub!ect to the !urisdiction of the regular

courts.

hat is an intraCcorporate dispute

These are disputes or partnership relations, beteen and among

stockholders, members or associates5 beteen any or all of them and thecorporation, partnership or association of hich they are stockholders,

members or associates, respectively5 and beteen such corporation,

partnership or association and the )T$T" insofar as it concerns their

individual franchise or right to exist as such entity.


23/23

hat are the cases transferred to HT& hich ere originally vested to )"&

a.E &ontroversies in the election or appointment of directors, trustees, oNcers or

managers of such corporation, partnership, or association.

b.E &ontroversies arising out of intraCcorporate disputes or partnership relations,

beteen and among stockholders, members or associates5 beteen any or all

of them and the corporation, partnership or association of hich they are

stockholders, members or associates, respectively5 and beteen such

corporation, partnership or association and the )T$T" insofar as it concerns

their individual franchise or right to exist as such entity.

c.E /etitions of corporations, partnership or associations to be declared in the

state of suspension of payments in cases here the corporation, partnership,

or association possesses suNcient property to cover all its debts but foresees

the impossibility of meeting them hen they respectively fall due or in cases

here the corporation, partnership, or association has no suNcient assets to

cover its liabilities, but is under the management of a Hehabilitation Heceiver

or

Documents

Business Organization II - Transcriptions for the Finals