Share Capital Transactions

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Partnership and Corporation

Text of Share Capital Transactions

  • CORPORATIONIt is an artificial being created by operation of law having the rights of succession and the powers, attributes, and properties expressly authorized by law incident to tits existence

  • CHARACTERISTICS OF A CORPORATIONSeparate legal entityCreated by operation of lawRight of successionPowers, attributes, properties authorized by lawOwnership divided into sharesBoard of directors

  • ADVANTAGES OF A CORPORATIONThe power of succession enables the corporation to enjoy a continuous existence.The corporate existence enables to it obtain a strong credit lineLarge business undertakings are made possible because many individuals invest their funds in the enterprise.Limited liability of investorsTransfer of shares is effected without the consent of the othr shareholdersIts smooth operation is guaranteed due to centralized management

  • DISADVANTAGES OF A CORPORATIONDifficult to organize due to complicated legal requirements and high costs in its organization.Limited liability of shareholders may weaken credit capacity.Subject to rigid governmental controlSubject to more taxesCentralized management restricts a more active participation in the conduct of corporate affairs.

  • CLASSES OF CORPORATIONSAs to Membership HoldingsStock corporationNon-stock corporationAs to PurposePrivate corporationQuasi-public corporationAs to Compliance of LawDe jure corporationDe facto corporation

  • As to Law of CreationDomestic corporationForeign corporationAs to MembershipOpen corporationClosely held corporation

  • COMPONENTS OF A CORPORATION

    IncorporatorsCorporators/ShareholdersMembersPromotersSubscribersUnderwriters

  • ORGANIZING A CORPORATIONPromotionIncorporationDraft the articles of incorporation and by-laws nd have them notarized by a notary publicFile the documents with SEC.Pay the required feesSEC issues the certificate of incorporationCommencement of the Business

  • ARTICLES OF INCORPORATIONName of the corporationThe purpose or purposes of the corporationThe place of the principal officeThe term of existenceNames of the directorsAuthorized share capitalAmounts of subscription to the authorized sharesTotal amount on thee subscription

  • BY LAWSDate, place and manner of calling the annual shareholders meetingThe manner of conducting meetingsThe circumstances which may permit the calling of special meetings with shareholdersManner of voting and use of proxiesDirectors term of officeAuthority and duties of directorsAuthority and responsibilities of officersManner of selecting officersProcedure for amending the articles of incorporationProcedure for amending the by laws

  • CORPORATE RECORDSBooks of accountsMinutes of all meetingsMinutes of all meetings of shareholdersStock and transfer bookShareholders journalShareholders ledgerSubscribers ledgers

  • CLASSES OF SHARE CAPITAL

    Share capital ordinaryShare capital preference

    Both may be issued as:Par value share capitalNo-par but with stated value share capitalNo par, no stated value share capital

  • Par Value ShareP1,000

  • Par Value ShareP1,000

  • Par Value Share

    P1,000

  • Par Value Share

    P1,000

  • Par Value Share

    P1,000

  • SHARE CAPITAL - PREFERENCE Issued with a par value and a dividend rate.Have priority as to distribution of dividends or assets incase of liquidation.

  • CLASSES OF SHARE CAPITAL-PREFERNCECumulativeNon-cumulativeParticipatingNon participatingConvertibleRedeemable

  • SHARE CAPITAL -ORDINARYRepresents residual ownership equity.They carry the greater risk.

  • TWO METHODS OF RECORDING SHARE CAPITAL TRANSACTIONS:MEMORANDUM ENTRY METHODJOURNAL ENTRY METHOD

  • FIRST TRANSACTION: AUTHORIZATION FROM SEC

  • EXERCISESSTARBRIGHT CORPORATION

  • Starbright Corporation is authorized to issue 50,000 shares at P100 par value.Memorandum Entry methodJournal Entry methodThe corporation is authorized to issue 50,000 shares at P100 par valueUnissued shareCapital 5,000,000 Authorized share capital 5,000,000

  • WHEN INVESTORS SUBSCRIBE TO SHARE CAPITAL AND HAS NOT FULLY PAID FOR IT YET, FOLLOWING ENTRY SHALL BE PREPARED FOR BOTH METHODS:

    Cash (paid portion)xxxSubscription receivable xxx (unpaid portion) Subscribed share capitalxxx

    STOCK CERTIFICATES ARE NOT YET ISSUED UNTIL THEY ARE FULLY PAID

  • On July 15 five incorporators subscribed to 12,500 shares at par and paid 25% of the subscriptionMEMORANDUMJOURNAL ENTRY METHODSubscriptionReceivable-937,500Cash312,500 Subscribed share-capital 1,250,000SubscriptionReceivable937,500Cash312,500 Subscribed share -capital 1,250,000

  • August 1 M. Elcee subscribed to 10,000 shares at parMEMORANDUMJOURNAL ENTRY METHODSubscriptionReceivable1,000,000 Subscribed share capital 1,000,000SubscriptionReceivable1,000,000 Subscribed share capital 1,000,000

  • When investors make a full payment for the subscription, stock certificates are issued to them immediately

  • Aug. 2 Issued 200 shares for P20,000 cashMEMORANDUMJOURNAL ENTRY METHODCash20,000 Share capital-20,000Cash20,000 Unissued Share capital-20,000

  • Collected the subscription of Ms. Elcee.MEMORANDUMJOURNAL ENTRY METHODCash1,000,000 Subscription receivable 1,000,000Subscribed shareCapital-1,000,000 Share capital 1,000,000

    Cash 1,000,000 Subscription receivable- 1,000,000Subscribed shareCapital 1,000,000 Unissued Share capital 1,000,000

  • PAYMENTS IN THE FORM OF NON-CASH ASSETS SHALL BE RECORDED USING FAIR MARKET VALUE

  • Received a piece of land from Ms. Mariebic in exchange for 5,000 shares. Fair market value of the land was P500,000.MEMORANDUMJOURNAL ENTRY METHODLand 500.000 Share capital500,000 Land 500.000 Unissued Share capital500,000

  • Issued 50 shares to Ms. Jina for promotional services rendered during the formation of the corporation.MEMORANDUMJOURNAL ENTR,Y METHODOrganization Cost 5,000 Share capital-5,000Organization cost 5,000 Unissued Share capital 5,000

  • Subscriptions for 1,000 shares were received from Ms. Akino . Received 20% downpayment, balance in four equal monthly installments starting Nov. 1.Cash20,000SubscriptionReceivable80,000 Subscribed share Capital100,000

    Cash20,000SubscriptionReceivable80,000 Subscribed share Capital100,000

  • Collected half of the balance of the incorporators subscription .Cash468,750 Subscription receivable 468,750

    Cash468,750 Subscription receivable 468,750

  • Collected the first installment on the September 15 subscripions

    Cash20,000SubscriptionReceivable20,000

    Cash20,000SubscriptionReceivable20,000

  • Collected the other half of the incorporators subscriptions and issued the corresponding stock certificatesCash468,750 Subscription receivable 468,750Subscribed shareCapital-1,250,000 Share capital 1,250,000Cash468,750 Subscription receivable 468,750Subscribed shareCapital-1,250,000 Share capital 1,250,000

  • Collected the second installment on the Sept. 15 subscription

    Cash20,000 Subscription receivable20,000

    Cash20,000 Subscription receivable20,000

  • FRANKIE CORPORATION

  • Frankie Corporation was authorized to issue 50,000 shares at P100 par value.Unissued share capital 5,000,000 Authorized share capital 5,000,000

  • Cash312,500SubscriptionReceivable937,500 Subscribed share capital 1,250,000 The incorporatorsSubsribed 2,500 Shares and paid 25%.

    No. of sharesTotal amount25%Agatha2,500P250,000P62,500Prescilla2,500P250,000P62,500Kaye2,500P250,000P62,500Airel2,500P250,000P62,500Jhun2,500P250,000P62,500Total12,500P1,250,000P312,500

  • When shares are issued in excess of par value, the amount in excess is called Share Premium

  • Organization Cost4,000 Cash4,000

    Cash 240,000Share capital200,000Share premium 40,000

  • PrescillaP250,000P62,500P187,500Cash 187,500 Subscription Receivable187,500

    Subscribed shareCapital250,000 Share capital250,000Cash 187,500 Subscription Receivable187,500

    Subscribed shareCapital250,000 Share capital250,000

  • Total amountPayment25%BalanceAgathaP250,000P62,500P187,500Truck480,000 Subscription receivable187,500 Share capital200,000 Share premium 92,500

    Subscribed shareCapital250,000 Share capital 250,000

    Truck480,000 Subscription receivable187,500 Share capital200,000 Share premium 92,500

    Subscribed shareCapital250,000 Unissued Share capital 250,000

  • Subscription receivable187,500Subscribed sharecapital150,000Share premium 37,500

  • Organization cost 10,000 Share capital10,000Organization cost 10,000 Unissued Share capital10,000

  • Subscription receivable 180,000 SubscribedShare capital150,000 Share premium 30,000Subscription receivable 180,000 SubscribedShare capital150,000 Share premium 30,000

  • KayeP250,000P62,500P187,500MerchandiseInventory 187,500 Subscription Receivable 187,500

    Subscribed shareCapital 2