CORPORATIONS

The Corporation Code of the Philippines sets out the general rules governing all
corporations in the country. The Code defines a corporation as an artificial being
created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.

Unlike those in other counties like the US and the UK, we only have two types of
private corporations in the Philippines: stock and non-stock. Examples of non-stock
corporations include the following: educational institutions, non-profit
organizations, associations, foundations, etc. Stock corporations are easier to spot:
they are business enterprises whose main motivation for existence is to make profit
for its shareholders.

To form a new corporation, its founders (or incorporators) must file an application
for charter to the Securities and Exchange Commission. Once this application is
approved, this charter or articles of incorporation should state the following:

1. The name of the corporation.
2. The purposes and the nature of the corporation.
3. Location of the corporate headquarters.
4. Names, nationalities and addresses of the incorporators.
5. The maximum number of shares of authorized capital stock that may be issued,
the par value of each class of stock, and a description of the various classes of
such stock.
6. The names, nationalities and addresses of the original members of the Board of
Directors.
7. Capital stock, number of which it is divided and par value and NNR of original
subscriber and amount paid by each;
8. Treasurers Affidavit of subscription;
9. The rights of the stockholders;
10. Other matter not inconsistent with law.

Important facts:

A private corporation has a lifespan of 50 years.
At least 5 natural persons, but not more than 15, may form a private
corporation.
The corporation is primarily managed by its Board of Directors, who are
elected at the corporations annual stockholders meeting.

When forming a new corporation, the articles of incorporation should state the
following:

1. The maximum number of shares that may be issued.
2. The par value of each class of stock.

Both are arbitrary numbers.

The maximum number of shares essentially refers to the total pool of stocks (or
shares) that investors (including future investors) can buy or subscribe. The par
value is the amount of money, expressed in Peso, that you assign to be the price of
each share. Sometimes this is also called face value. When you multiply the
maximum number of shares by the par value of each share, you can what is called
the authorized capital stock.

The Corporation Law does not specify a minimum authorized capital stock
requirement, but it states in part that at least twenty-five percent (25%) of the
authorized capital stock as stated in the articles of incorporation must be subscribed
at the time of incorporation, and at least twenty-five (25%) per cent of the total
subscription must be paid upon subscription.

Subscribed capital This amount refers to the number of shares actually issued to
the shareholders.

Paid-up capital This is the amount that is actually paid in by the investors,
where payment may be in the form of cash, real property, equipment, service, or
anything of value.

The Corporation Code also specifies that in no case shall the paid-up capital be less
than five Thousand (P5,000.00) pesos.

The incorporators, stockholders/members and their successors shall constitute a
body politic and corporate under the name stated in the AOI for the period of time
mentioned therein, unless said period is extended or the corporation is sooner
dissolved in accordance with law.

Rights afforded to shareholders:

1. Examine the books of a corporation.
2. Receive dividends when paid.
3. Transfer shares from themselves to other investors.
4. Receive the remaining assets of the corporation after all other claims in the
property of the corporation are satisfied.
5. Vote at an annual meeting to elect the Board of Directors.
6. Receive a stock certificate.


BOARD OF DIRECTORS

All corporate powers, business conducted and all property of corporations are
exercised by the BOD. BOD are selected thru an election and they shall hold office
for one year and until their successors are elected and qualified. Stockholders
cannot interfere with the boards exercise of its powers and functions except when
the law expressly gives them the authority.

Directors owe their duties to corporation rather than to individual shareholders.
The directors or trustees shall not act individually nor separately but as a body in a
lawful meeting. Contracts entered into without a formal board resolution does not
bind the corporation except when majority of the board has knowledge of the
contract and the contract benefited the corporation.

Qualification of Directors Every director must own at least one (1) share of the
capital stock of the corporation, which share shall stand in his name on the books of
the corporation. Any director who ceases to be the owner of at least one (1) share of
the capital stock of the corporation of which he is a director shall thereby cease to be
a director. Majority of BOD should be resident of the Philippines.

Disqualifications: grounds:
1. Conviction by final judgment of an offense punishable by imprisonment for a
period exceeding six (6) years; or
2. Violation of corporation code committed within five (5) years prior to the date of
his election or appointment.

Election of BOD:
1. Notice to the stockholder/members of the election as provided in AOI;
2. Presence of, in person or by proxy, majority of the outstanding capital stock /
member entitled to vote;
3. Election by ballot;
4. Candidate receiving highest number of votes shall be declared elected; and
5. Report to the SEC, within 30 days, the names, nationality and residences of the
elected officers and directors. Deaths and resignation must likewise be reported.

Stockholders may exercise cumulative voting or straight voting. Cumulative voting
is done by casting as many votes as he has number of shares multiplied by the
number of directors up for election. This provides the minority an opportunity to
elect a representative to the board of directors.

Straight voting is done by casting votes as he has number of shares multiplied by
the number of directors to a single candidate. The total number of votes cast by a
stockholder shall not exceed the number of shares owned by him as shown in the
books of the corporation multiplied by the whole number of directors to be elected.

The BOD has authority to modify the proposed terms of the contracts of the
corporation for the purpose of making the terms more acceptable to the other
contracting parties. The test to be applied is whether the act in question is the
direct and immediate furtherance of the corporations business, fairly incidental to
the express powers and reasonably necessary to their exercise. If so, the
corporation has the power to do it; otherwise it is not

Self-Dealing Directors

Directors and officers may enter into contract with the corporation in which he is a
director or officer. However, this agreement is being frowned upon by law because
there can be no real bargaining where the same is acting on both sides of the trade.
In fact, all contracts entered into by directors and officers re considered voidable
unless the following requisites are present:

1. The presence of the director/trustee in the board meeting approving the contract
was not necessary for constituting a quorum for such meeting;
2. The vote of such director/trustee in the board meeting approving the contract
was not necessary for the approval of the contract;
3. The contract is fair and reasonable under the circumstances; and
4. In the case of an officer, there was previous authorization by the board of
directors.

Although the following requisite is not followed, such contract may be ratified by 2/3
affirmative vote of the outstanding capital stock, provided that there is full
disclosure of the adverse interest of the director involved is made at such meeting,
and that the contract is fair and reasonable.

Interlocking Directors

Interlocking directors are those who sit in the boards of two or more corporations
that contract with one other, whether on isolated or regular basis. Contracts
between two or more corporations having interlocking directors cannot be
invalidated on that ground alone, except cases of [1] fraud and [2] the contract is
fair and reasonable. If the interest of the interlocking director in one corporation is
merely nominal, the condition set in self-dealing directors will be imposed, thus, the
contract voidable.

Stockholdings exceeding 20 percent of the outstanding capital stock shall be
considered substantial for purposes of interlocking directors. Hence, nominal
interest means stockholdings of not exceeding 20 percent of the outstanding capital
stock.

Removal of BOD

Procedure:
1. Call for meeting for the purpose of removing the BOD, by BOD or majority of
stockholders;
2. Notice, by publication or registered mail, to the stockholder by the officer or by
majority of the outstanding stock;
3. Election; and
4. Affirmative vote of 2/3 of the outstanding capital stock;

Removal of BOD may be with cause or without cause, however, removal without
cause may not be used to deprive minority stockholders of the right of
representation.

Vacancy Any vacancy occurring in the BOD terms may be filled by the vote of at
least majority of the remaining directors, if still constituting quorum.

If quorum cannot be obtained, vacancies must be filled by the stockholders in a
regular or special meeting for that purpose. Same rule applies if the vacancy is due
to removal by the stockholder or by expiration of the directors term, or there is
increase of number of directors in a corporation. A director filling the vacancy shall
serve only for the unexpired term of his predecessor.

Corporate officers

The officers execute polices laid down by the board and perform the duties enjoined
by them by the AOI and by-laws. Immediately after the election of BOD, the
directors of a corporation must formally organize the election of:
1. A president, who shall be a director;
2. A treasurer who may or may not be a director;
3. A secretary who shall be a resident and citizen of the Philippines, and
4. Such other officers as may be provided for in the by-laws.

Any two or more positions may be held concurrently by the same person, except that
no one shall act as president and secretary or as president and treasurer at the
same time. Directors cannot attend or vote by proxy in a board meeting compared to
stockholders which can attend and vote by proxy in a stockholders meeting.

The Corporation Code does not require that one elected or appointed as vice-
president of a corporation should be the owner of shares of stock of the corporation.

Executive Committee

The by-laws of a corporation may create an executive committee, composed of not
less than three members of the board, to be appointed by the board. Such committee
may act on specific matter within the competence of the board as may be delegated
by the by-laws or majority vote of the board, except the following:
1. Approval of any action for which shareholders' approval is also required;
2. Filing of vacancies in the board;
3. Amendment, repeal or adoption of by-laws;
4. Amendment or repeal of any resolution of the board which by its express terms
is not so amendable or repealable; and
5. Distribution of cash dividends to the shareholders.

Quorum Majority of the number of director shall constitute the quorum for the
transaction of the business unless the AOI or by-provide otherwise. Majority of the
directors/trustees constituting the quorum shall be valid as corporate act except the
election of officer which requires majority of all the members of the board.

Compensation of Directors
1. Reasonable per diem;
2. Provision in the by-laws fixing their compensation; and
3. Compensation granted by majority of the stockholders.

In no case shall the total yearly compensation of directors, as such directors, exceed
10% of the net income before income tax of the corporation during the preceding
year. The said compensation is applicable only to directors; thus, when the director
is an officer as well, the BOD may grant compensation to them because the
prohibition in Sec. 30 does not apply.


POWERS OF CORPORATIONS

General Powers:

1. To sue and be sued in its corporate name;
2. Succession;
3. To adopt and use a corporate seal;
4. To amend its AOI;
5. To adopt by-laws;
6. to issue or sell stocks and admit members;
7. To acquire and encumber properties;
8. To enter into merger or consolidation;
9. To make reasonable donations except in political parties;
10. To establish pensions and benefits for the employees and officers; and
11. Essential and necessary powers to promote its purpose.

Specific Powers:

1. To Extend or Shorten Corporate Term

Procedure:
a. Majority vote of BOD;
b. Notice of the proposed action to the stockholders/members;
c. Affirmative vote of at least 2/3 of the outstanding capital stock;
d. Amended and original AOI copy, certified under oath by the corporate secretary
and majority of BOD shall be filed to SEC; and
e. Shall take effect upon approval of SEC or upon 6 months of inaction.

In case of extension of corporate term, any dissenting stockholder may exercise his
appraisal right. Appraisal right is also available in case of shortening the corporate
term under Section 81.

2. To Increase or Decrease Capital Stock

Procedure:
a. Majority vote of BOD;
b. Written notice to the stockholder;
c. Affirmative vote of (2/3) of the outstanding capital stock favoring the increase of
decrease of capital stock;
d. Certificate in duplicate must be signed by majority BOD and countersigned by
the chairman and secretary of the stockholders meeting;
e. Filing of the certificate with the original AOI to the SEC and Treasurers
affidavit indicating that at least 25% of the increased capital stock has been
subscribed and at least 25% of such subscribed stock has been actually paid;
f. Keeping of copy in the office of the corporation;
g. Approval of the SEC.

Any increase or decrease in the capital stock bonded indebtedness shall require
prior approval of the SEC. From and after approval SEC and the issuance of
certificate, the capital stock shall stand increased or decreased. Decrease of capital
stock shall not be approved if it will prejudice the creditors of the corporation.

3. To Incur, Create or Increase Bonded Indebtedness

Procedure:
a. Follow step a, b, c, d, e (certificate only), and 6 of the preceding number
(procedure to increase/decrease capital stock);
b. Bonds issued by a corporation shall be registered with the SEC, which shall have
the authority to determine the sufficiency of the terms thereof.

4. To deny pre-emptive rights

Pre-emptive right is the right to subscribe to all issues or disposition of shares of
any class, in proportion to their respective shareholdings, including subsequently
issued shares, treasury shares or unissued stocks before it can be disposed of in
favor of the others. The purpose of which is to enable the shareholder to retain his
proportionate control in the corporation and retain equity to the surplus profit.

This right may be denied by the AOI or by its amendment shall not extend to shares
to be issued in compliance with laws requiring stock offerings or minimum stock
ownership by the public; or to shares to be issued in good faith, with the approval of
the stockholders representing two-thirds (2/3) of the outstanding capital stock, in
exchange for property needed for corporate purpose.

5. To sell or dispose of corporate assets

Sale by the corporation is considered a sale of all or substantially all of the
corporate assets if thereby the corporation would be rendered incapable of
continuing the business or accomplishing its purpose; such sale may be made by a
majority vote of the BOD, sending notice to the stockholder and obtaining 2/3
affirmative votes of the stockholders. Take note that stockholders vote is not
necessary when the disposition is necessary in the usual and regular business of the
corporation or the proceeds of such sales was appropriated for its regular business.

Dissenting stockholder may exercise his appraisal right in relation to section 81.

The BOD has authority to abandon the said disposition after the approval of the
stockholders.

6. To Acquire Own Shares

A stock corporation shall have the power to purchase or acquire its own shares for
legitimate corporate purposes provided it has unrestricted retained earnings to
cover the shares to be acquired. This includes but not limited to the following:
1. To eliminate fractional shares;
2. To collect or compromise an indebtedness to the corporation:; and
3. To pay dissenting or withdrawing stockholders exercising appraisal rights.

The subscribed capital stock of the corporation is a trust fund for the payment of
debts of the corporation which the creditors have the right to look up to satisfy their
credits. Corporation may not dissipate this and the creditors may sue stockholders
directly for the unpaid subscription (Trust Fund doctrine).
.
7. Invest corporate funds in another corporation or business

A private corporation may invest its funds in any other corporation or business or
for any purpose other than the primary purpose for which it was organized. When
the investment is reasonably necessary to accomplish the primary purpose of the
corporation, stockholders voting requirement is not required and only the majority
approval of the BOD is necessary. Any dissenting stockholder may exercise his
appraisal rights.

Procedure:
a. Approval of majority of BOD/T;
b. Written notice of the proposed investment to the stockholder; and
c. Affirmative votes of two-thirds (2/3) of the outstanding capital stock.

If an act of investing corporate fund is done pursuance of the corporate purpose, it
does not need the approval of the stockholders but when the purchase of shares of
another corporation is done solely for investment and not to accomplish the purpose
of its incorporation, the vote of approval of the stockholders is necessary. When the
purposes are stated in its AOI, the approval of the stockholders is not necessary.

8. To declare dividends

Dividends are unrestricted retained earnings set apart from the general mass of
funds of the corporation and distributed among the stockholders, in proportion to
their shares or interest in the corporation, in the form of cash, property or stocks.

The BOD of a stock corporation may declare dividends out of the unrestricted
retained earnings which shall be payable in cash, in property, or in stock to all
stockholders on the basis of outstanding stock held by stockholder. If the
stockholder is a delinquent stockholder, his cash dividend shall be applied to the
unpaid balance on the subscription plus costs and expenses. If it be a stock
dividend, it shall be withheld from them until his unpaid subscription is fully paid.
Take note that the approval of the stockholders is not necessary in the approval of
cash dividend but such affirmative vote is necessary for declaring stock dividend.

Stock corporations are prohibited from retaining surplus profits in excess of 100
percent of their paid-in capital stock, except:
a. When justified by definite corporate expansion programs;; or
b. When the corporation is prohibited under any loan agreement with any creditors
from declaring dividends without its consent; or
c. When the retention is necessary under special circumstances.

9. To enter into management contract

Management contract is one where a corporation undertakes to manage or operate
all or substantially all of the business of another corporation, whether such
contracts are called service contracts, operating agreements or otherwise. No
management contract shall be entered into longer than five years for any one term.

Procedure:
a. Meeting duly called for the purpose;
b. Approval of the majority of the BOD and stockholders of both the managing and
the managed corporation;
c. If the interest of the stockholder of one of the corporation is more than 1/3 of the
total outstanding stock, or majority of the BOD of the managed corporation is
also the members of the majority of the managing corporation, then 2/3
affirmative votes of the outstanding stockholders of the managed corporation is
required.


MEETINGS

Meetings of directors or stockholders may be regular or special. Regular meetings of
stockholders are those held annually on the date fixed in the by-laws or on any date
of April on the absence of which. Regular meeting of BOD is conducted monthly
unless provided by the by-laws otherwise. Special meetings of stockholders are
those called for good cause, as ordered by SEC, upon petition of stockholders. Notice
in writing, indicating the time and place, is required before a meeting can be held.
Special meetings of BOD are those called by the President or as provided in the by-
laws.

Meetings of stockholders shall be held in the city/municipality where the principal
office of the corporation is located. In a non-stock corporation, the by-laws may
allow the meeting of its members to be held anywhere in the Philippines. Meetings
of BOD may be held in or outside of the Philippines unless the by-laws provide
otherwise.

Quorum in a stockholders meeting consists of the stockholders representing the
majority of the outstanding capital stock except the by-laws provide for a greater
number. Quorum in the BODs meeting consists of majority of numbers of director
fixed in AOI unless the AOI or by-laws provides for higher number.

The president shall preside at all meetings of the directors or trustee as well as of
the stockholders or members, unless the by-laws provide otherwise.

Right to Vote

A mortgaged/pledge shares of stock does not give the authority to the pledgee or
mortgagee the right to vote unless expressly given such right in writing and was
recorded in the corporate book. On the other hand, administrator, executor and
other legal representative appointed by court may attend and vote in behalf of the
stockholder without the need of any written proxy (ibid). In case of co-ownership of
stocks, consent of all the co-owners is necessary in order to vote for the said stocks
unless there is a written proxy signed by all the co-owners. If the shares are owned
in an and/or capacity, anyone can vote or appoint a proxy.


STOCKS AND STOCKHOLDERS

Subscription is an offer to acquire a specified number of unissued shares of an
existing corporation or one still to be formed. It is an entire and indivisible whole
contract; it cannot be divided into portions (Doctrine of Indivisibility of Subscription
Contract). Any contract for the acquisition of the unissued stock is considered
subscription notwithstanding the fact that the parties considered it as a purchase or
any other contract. However, sale of treasury stock by the corporation is a contract
of sale because the stock referred was already issued and was reacquired by the
corporation.

Subscription of shares of stock of a corporation still to be formed shall be irrevocable
at least six months from date of subscription, unless all of the other subscribers
consent to the revocation or the incorporation of said corporation fails to
materialize within six months or within a longer period as stipulated in the
contract. If AOI was submitted to SEC, pre-incorporation subscription cannot be
revoked.

Considerations in Subscription Agreement
d. Cash;
e. Property;
f. Labor or services actually rendered to the corporation;
g. Prior corporate obligations;
h. Amounts transferred from unrestricted retained earning to stated capital; and
i. Outstanding shares in exchange for stocks in the event of reclassification or
conversion.

Shares of stock shall not be issued in exchange for promissory notes or future
services. After payment of such shares, a certificate of stock, signed by the president
or VP and corporate secretary or asst. secretary, shall be issued to the stockholder.
However, no certificate of stock shall be issued until the full amount of his
subscription, including interest, has been paid.

Shares of stock are considered personal property and may be transferred by delivery
of the certificate of stock. The transfer will be valid to the contracting parties but
not to the corporation unless said transfer is recorded to the book of corporation.
However, if the corporation has an unpaid claim to that stock, the corporation may
refuse to record such transfer.

The purpose of registration is to enable the transferee to exercise all the rights of a
stockholder and to inform the corporation of any changes in share ownership so that
the latter may ascertain the persons entitled to the rights and liabilities of
shareholders. Until the transfer has not been recorded to the book of the
corporation, the transferee cannot vote or voted for; has inferior rights over
attaching creditor; is not entitled to dividends; and cannot participate in the
meeting.

Watered Stocks are those issued less than the par value of the stock. Water in
the stock refers to the difference between the fair market value at the time of the
issuance of the stock and the par value of the said stock. The existence of such
water is determined at the time of the issuance of stock.

Payment of delinquent stock

Payment of stock becomes due and payable in the following manner:
1. The term prescribed in the subscription contract; and
2. In the absence of the provision contract, at any time specified by BOD.

Failure to pay on such period shall render the entire balance due and payable and
renders the stockholder liable to interest. If no payment was made within 30 days
after such period, the stock shall be considered delinquent stock, which is subject to
delinquency sale. Take note that unpaid subscriber is different from delinquent
stockholder.

Delinquency Sale

Procedure:
1. BODs resolution indicating the time and place of sale which shall be not less
than 30 days nor more than 60 days from the date of the stock became
delinquent;
2. Notice of sale and resolution shall be sent to the delinquent stockholder;
3. Publication for two consecutive weeks in newspaper generally circulating in the
province where the principal office of the corporation. Is located;
4. Public auction on the specified date;
5. Transfer of stock to the purchaser and issuance of certificate of stock to the
highest bidder; and
6. Remaining shall be credited in favor of the delinquent stockholder.

If the delinquent stockholder pays the balance before the public auction, said sale
shall not commence and the certificate of stock shall be issued to him. In case there
is no bidder at the public auction who pays the full amount of the balance, the total
amount shall be credited as paid and its title to all the shares of stock shall be
vested in the corporation as treasury shares which may be disposed by the
corporation.

Actions questioning the delinquency sale should be commenced within six months
from the date of sale; otherwise, it shall be barred forever. Also, the complainant
should pay or tender to buyer of the stock the sum for which the stock was sold.
Ground for irregularity or defect in the notice of sale or the sale itself is also
unavailing for the complainant.

Delinquency sale does not bar the corporation to file a judicial action for the
collection of the unpaid subscription.

Effects of Delinquency
1. Stockholder have no right to vote or be voted upon; and
2. Not entitled to any right except dividends

Lost or destroyed certificates

Procedure
1. Owner shall file an affidavit on how the certificate is lost, number of shares and
certificate number;
2. Publication for three consecutive weeks;
3. If no contest was filed within one year, the corporation will cancel in its books
the certificate of stock and issue in lieu thereof new certificates of stock.
4. If a contest was filed or there is pending suit regarding such stocks, the issuance
of new certificate shall be suspended until the final decision of the court.

After the said procedure was followed, no action may be brought against the
corporation who issued the certificates of stock in lieu of those lost, stolen or
destroyed unless there is fraud, bad faith, or negligence on the part of the
corporation and its officers.


APPRAISAL RIGHT

Appraisal right is a right to demand payment of the fair value of his shares, after
dissenting from a proposed corporate action involving fundamental changes in the
corporation.

These fundamental changes in the corporation include the following instances:
1. Amendment of AOI which has an effect of changing or restricting the rights of
any stockholders or authorizing preferences in any respect superior to
outstanding shares or extending or shortening the corporate term;
2. Encumbering all or substantially all of its corporate properties;
3. Merger or consolidation;
4. Investing corporate funds in another corporation or business; and
5. For any reason in close corporation.

Procedure :
1. Written demand on the corporation within thirty (30) days after the date on
which the vote was taken;
2. Surrender of certificate of stock within 10 days for notation (Sec. 86);
3. Payment of fair value; and
4. Shareholder shall transfer his shares to the corporation.(Sec. 82)

If within 60 days after the corporate action was approved and the dissenting
stockholders and the corporation cannot agree in the fair value of the shares, it
shall be determined by three disinterested person: one chosen by the stockholder,
one by the corporation and the other one chosen by the two. Their determination of
the fair value is final and shall be paid within 30 days.

Purpose of Notation Notation is necessary so as to guide the secretary of the
corporation who shall deny to the dissenting stockholder the right to vote and the
right to receive dividends in the proper situation. Failure to do so shall give right to
the corporation to terminate the rights of the stockholder.

Transfer of Dissenting Shares When the shares of a dissenting stockholder are
transferred or assigned, the assignee becomes a regular stockholder and the
appraisal right of the dissenting stockholder shall cease. All dividends which accrue
on such shares shall be paid to the transferee.

Conditions for Valid Exercise of Appraisal Rights:
1. The demand for payment of shares arise from the instances provided in
Corporation Code;
2. Existence of unrestricted retained earnings;
3. The demand was made within 30 days after the corporate action; failure to
exercise of such constitutes waiver of this right


Effect of Demand of Payment of Stockholders Share:
1. All rights accruing to such shares, including voting and dividend rights, shall be
suspended;
2. The stockholder is entitled to payment of his shares;
3. If the dissenting stockholder is not paid within 30 days, his voting and dividend
will be restored; and
4. Demand for payment may not be withdrawn unless with consent of the
corporation.

Termination of Right of Appraisal
1. If demand for payment is withdrawn with the consent of the corporation;
2. If the proposed corporate action is abandoned or rescinded by the corporation;
3. If the proposed corporate action disapproved by the SEC; and
4. If the SEC determines that such stockholder is not entitled to the appraisal right

In these cases, the right of appraisal of the stockholder ceases, his status as a
stockholder shall be restored, and all dividend distributions which would have
accrued on his shares shall be paid to him.

Costs of Appraisal

1. By the corporation:
a. If the value as determined by the appraiser is higher than what was offered
by the corporation; and
b. If the action is filed to recover the fair value of the shares and the
stockholders refusal to receive payment is justified.
2. By the stockholder:
a. If the value is determined by the approximately the same as the price offered
by the corporation; and
b. Where an action to recover is filed and the refusal of such stockholder to
receive payment is unjustified.