CHAPTER 8: BY-LAWS

WHAT ARE By-laws?

WHAT ARE THE Requirements and procedure for adoption of by-law?
1.
2.
a.
b.
3.
a.
b.
c.
d.
e.
4.
5.
WHAT ARE THE Contents of by-laws:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
GIVE THE REQUISITES DURING Time of filing:
1. Prior to incorporation
2. After incorporation
WHAT ARE THE Two modes of amending or repealing by laws or adopting a new one:
1.
2.
WHAT ARE THE Elements of a valid by laws:
1.
2.
3.
4.
5.
BY-LAWS
1.

By-laws are______ to the articles of incorporation, the Corporation Code and

other statutes which form part of the corporate charter.
2. By-laws become effective only upon the _______
3. Failure to file by-laws may result to _______ of corporate franchise after proper
notice and hearing
4. Failure to file by-laws does not result in ________. (LGVHA vs. CA)

5. By-laws are internal rules and cannot ________ third persons without
knowledge. (Fleisher vs. Botica Nolasco)
6. Delegated power to amend, repeal or adopt by-laws may be _______
7. Incorporation of an invalid by-law provision is not a misdemeanor. It does not
justify the ______ of the corporation. (Govt. vs. El Hogar)
8. The by-laws may disqualify a stockholder from being elected into office if he
has a _______ in a competitor corporation to avoid any possible adverse
effects of conflicting interest of a director. (Gokongwei, Jr. vs. SEC)
9. The by-laws may provide for a different _______ (shorter or longer)
CHAPTER 9: MEETINGS
WHAT ARE THE INSTANCES WHEN Meetings APPLY?
WHAT ARE THE Classes of meetings?
1.
2.

STOCKHOLDERS MEETINGS
WHAT ARE THE Requirements to have a valid stockholder's meeting?
1.
2.
3.
4.
5.
WHEN SHOULD STOCKHOLDERS' MEETINGS BE HELD?
a. Regular meetings
b. Special meetings
WHEN MUST NOTICE BE given
1. Regular
2. Special
WHERE MUST MEETINGS BE HELD?
1. General Rule:
2. Exceptions to the rule:
A.
B.
Who may call the STOCKHOLDERS meetinG? UNDER WHAT CIRCUMSTANCES?
1.
2.
3.
4.
GIVE The basis of determining the presence of a quorum:
1. Stock corporation
2. Non-stock corporation

MEETINGS STOCKHOLDERS MEETING

1. Failure to give notice of a meeting would render the resolution made
thereunder _____ at the option of the ________ who was not notified. (Board of
Directors vs. Tan)
2. Notice may be_____ expressly or impliedly.
3. Notice must state the agenda otherwise it may become ______.
4. Notice of meetings shall be in _____ and the time and place thereof stated
therein.
5. A stockholder may only petition the SEC to issue an order directing the
petitioner to call a meeting when there is no person authorized to call a
meeting. Otherwise, the remedy is to file a petition for _______.
6. A quorum once present is not broken by the subsequent _______ of a part or
fraction of the stockholders.
7. If the ________ is met in a stockholders meeting, any resolution passed in the
meeting, even if improperly held or called will be valid if all the stockholders
or members are present or duly represented.
DIRECTORS/TRUSTEES MEETING
WHEN SHOULD DIRECTORS/TRUSTEES MEETINGS BE HELD?
a. Regular meetings
b. Special meetings
Where should directors meetings be held?
Where must notice be sent?
MEETINGS DIRECTORS MEETING
1. If the _______ is not complied with in a directors'/trustees' meeting, the
meeting is illegal and will not bind the corporation except when subsequently
ratified. (Lopez vs. Fontecha)
2. In a _______, the act of any one director may bind the corporation without a
meeting.
3. Presence at a meeting _____ want of notice.
4. _______ at the meeting is not required; teleconferencing and
videoconferencing is allowed. (RA 8792)
5. The ______ shall preside at the directors/trustees meeting, unless the by-laws
provide otherwise.
6. A _____ or ______ cannot attend or vote by proxy at any board meeting.

STOCKHOLDERS RIGHT TO VOTE AND MANNER OF VOTING

General rule: The right to vote is an inherent right and the stockholder may vote
any way he pleases. WHAT ARE THE EXCEPTIONS?
1.
2.
3.
4.
General Rule: In case of shares jointly owned, the consent of all the co-owners shall
be necessary. WHAT ARE THE Exceptions:
1.
2.

MEETINGS STOCKHOLDERS RIGHT TO VOTE AND MANNER OF VOTING

1. General rule: _______or _______ may vote personally or through a
representative by way of proxy, voting trust agreement or by the executor,
administrator, receiver of other legal representative. Exception: In non-stock
corporations, the right to vote may be ____, ______ or ______ in the articles of
incorporation or in the by-laws.
2. The right to vote is vested with the ______ of the shares.
3. In case of pledged or mortgaged shares, the pledgor or mortgagor is______ in
absence of a written agreement (recorded in the corporate books) to the
contrary. (Sec. 55)
4. Executors, administrators, receivers, and other legal representatives duly
appointed by the court may attend and vote in behalf of the stockholders or
members without need of any ______. (Sec. 50)
5. An executor or administrator of a stockholder may not be elected unless he
owns at _______.
PROXY
DEFINE Proxy.
GIVE THE Two types of proxies. Briefly describe each:
1.
2.
Give the requirements for proxy voting:
1.
2.
3.
How may revocation be expressed?
1.
2.
3.
4.
MEETINGS - PROXY
1. Proxy voting may not be denied except in a ______.
2. _____ may reasonably regulate the form and execution of proxies.
3. Unless otherwise provided in the proxy, it shall be valid _______ for which it is
intended.
4. No proxy shall be valid and effective for a period longer than _____ years at
any one time.
5. A proxy is _______ unless coupled with an interest.
VOTING TRUST
WHAT IS A VOTING TRUST?
WHAT ARE THE Requirements?
1
2
3
4
5
6
7

Voting trust distinguished from proxy

1as to ownership
2as tovoting rights
3director
4purpose
5revocability
6acts
7proxy
8form
9period
VOTING TRUST
1. A corporation is not a party to a voting trust agreement therefore it is not a
____ in a suit to enforce the same. (NIDC vs. Aquino)
2. A voting trust transfers only voting and other rights pertaining to the shares
subject of the agreement or control over the stock. It does not include the
________of the corporation. (NIDC vs. Aquino)
CHAPTER 10: STOCKS AND STOCKHOLDERS
3 ways in which a person may become a stockholder:
1
2
3
SUBSCRIPTION CONTRACT
WHAT IS A Subscription / SUBSCRIPTION CONTRACT?
DIFFERENTIATE CONDITIONAL SUBSCRIPTION FROM SUBSCRIPTION
SPECIALTERMS.
General rule: Conditional subscriptions are valid. WHAT ARE THE Exceptions:
1.
2.

UPON

STOCKS AND STOCKHOLDERS SUBSCRIPTION CONTRACT

1. A _____ is not required to be written; an oral contract for subscription is valid
and enforceable. The statutes of fraud do not apply to a subscription contract
because such subscription does not fall under the statutory definition of a
sale.
2. In case of doubt, a subscription shall be considered one upon ______ in order
to protect the creditors and other subscribers.
3. An application for subscription which is at variance with the terms evidenced
in a general form of subscription must be accepted by the corporation to
create a _______. (Trillana vs. Quezon College, Inc.)
4. A condition ______ as to the debtor renders the whole obligation void. (Trillana
vs. Quezon College, Inc.)

PRE-INCORPORATION SUBSCRIPTIONS
Types of subscriptions as to time of execution. Briefly describe:
1

2
General rule: A subscription for shares of stock of a corporation still to be formed is
irrevocable.
GIVE THE Exceptions:
1period
2consent
3epic fail
GIVE THE Exception to the exceptions: when final
Consideration for the issuance of stock may be any or a combination of any two or
more of the ff:
1
2
3
4
5
6
Define Issue.
WHAT IS Par or issue price?
Give the valuation of properties given as a consideration for issuance of stock:
1. Tangible properties (particularly real properties):
A
B
C
2. Intangible properties (such as patents or copyrights):
A
B
Two theories in the valuation of property or services. Describe.
1
2
What is meant by Outstanding shares exchanged for stocks in the event of
reclassification or conversion. Give an example.
STOCKS AND STOCKHOLDERS PREINCORPORATION SUBSCRIPTIONS
1. ________ are mandatory in view of Secs. 13 and 14 which mandates that a
corporation may be registered as such only if at least 25% of its authorized
capital stock has been subscribed and that at least 25% of the total
subscription has been paid.
2. Stocks shall not be issued for a consideration ________ thereof.
3. Stocks shall not be issued in exchange of ______ or ______. Their realization is
uncertain.
4. The issuance of shares is not dependent on the delivery of a ___________.
5. Labor performed or services actually rendered to the corporation must be
capable of ______.
6. The ____ or ______ due from the corporation is a lawful and valid consideration
for the issuance of stock.

7. Amounts transferred from unrestricted retained earnings to stated capital

refers to the ______ of stock dividends where corporate earnings are
capitalized.
8. The prohibition against the issuance of shares by corporations except for
actual cash or property at its _______ secures absolute equality among
stockholders with respect to their liability upon stock subscriptions.
9. A stipulation in a stock subscription which obligates the subscriber to pay
nothing for the shares except as dividends may accrue upon the stock is a
________ in favor of the particular subscriber, and hence, illegal. (National
Exchange Co., Inc. vs. Dexter)
10.A corporation has no power to receive a subscription upon such terms as will
operate as a fraud upon the other subscribers as stockholders by subjecting
the particular subscribers to _____, or by giving him ______, or as fraud upon
creditors of the corporation by ___________. Therefore, an agreement between
a corporation and a particular subscriber, by which the subscription is not to
be payable, or is to be payable in part only, is ______. (National Exchange Co.,
Inc. vs. Dexter)

CERTIFICATES OF STOCK AND THEIR TRANSFER

WHAT IS A Certificate of stock?
GIVE THE Requisites for the issuance of a certificate of stock:
1
2
3
General rule: Holders of subscribed shares not fully paid are entitled to all the rights
of a
stockholder. GIVE THE Exceptions:
1
2
GIVE THE Two modes of transferring shares of stock. DESCRIBE BRIEFLY:
1
2
GIVE THE Reasons for the necessity of the registration of transfers of stock:
1
2
3
4
5
WHAT ARE THE Other restrictions on the right to transfer shares:
1if not recorded
2unpaid claims
3a/i
440%
5alien
6agreement
WHAT IS MEANT BY Transfer?

Mode of transfer for a valid transfer of stocks:

1d
2e
3r
STOCKS AND STOCKHOLDERS CERTIFICATES OF STOCKS AND THEIR TRANSFER
1. The issuance of a ______ is not a condition sine quanon to consider a
subscriber as a
stockholder.
2. No transfer shall be valid, except as _______, until the transfer is recorded in
the books of the corporation.
3. Until ________ is accomplished, the transfer of stock, though valid between the
parties, cannot be effective as against the corporation. The corporation looks
only though its books for the purpose of determining who its stockholders
are.
4. ________ of a transfer of stock will not, however, affect the validity thereof at
least in so far as the contracting parties are concerned.
5. The duty of the corporate secretary to record a valid transfer of shares of
stock is ____. Thus, he may be compelled by ______.
6. General rule: A certificate of stock is not a ______. A bona-fide purchaser of a
certificate of stock will acquire no better title to the shares than his transferor
had and will be subject to all rights, remedies and defenses which the true
and lawful owner may have.
Exception: When the general principles of ______ apply. Thus, if the _______
thereof, by his
act or negligence, is estopped from claiming ownership, (as when he clothes
another with apparent title or authority to dispose of the same) a purchaser
in good faith and without notice will acquire a better title as against the
owner so estopped.
7. Shares of stock are ________ and the owners thereof have the unbridled right
to transfer the same to anyone they please subject only to reasonable charter
provisions.
8. The duty of the corporate secretary to register a valid transfer of shares is
______. Therefore,
_______ will lie to compel registration in case the corporation or the corporate
secretary refuses registration. (Rural Bank of Salinas vs. CA) However, the
transferee has no such right when his title to said shares has no prima facie
validity of is uncertain. (Tay vs. CA)
9. The right to transfer shares of stock may not be ___________. Every owner of
corporate shares has the same uncontrollable right to alienate them and is
under no obligation from selling them at his sacrifice and for the welfare and
benefit of the corporation and other stockholders. (Padgett vs. Bobcock &
Templeton; Fleischer vs. Botica Nolasco)
10.However, the right to transfer may be ______ to give the corporation
protection against
colorable or fraudulent transfer or to enable it to know who its stockholders
are. Also, as a matter of policy, the SEC allows the grant of _______ to existing
stockholders and/or the corporation, giving them the first option to purchase
the shares of a selling stockholder within a reasonable period not exceeding
____provided that the same is contained in the articles of incorporation and in
all of the stock certificates to be issued by the corporation. This is considered
reasonable since it merely suspends the right to _____ within the period
specified.

11.A corporation may classify its shares and grant such ____, _____,or ______
provided that such are made in the articles of incorporation and subject to
reasonable terms, conditions or period. (Go Soc & Sons vs. IAC)
12.Only the transfer or absolute conveyance of the _________ to a share need be
entered and noted upon the books of the corporation in order that such
transfer may be valid, therefore, inasmuch as a chattel mortgage of the
aforesaid title is not a complete and absolute alienation of the dominion and
ownership thereof, its ____ and _____ upon the books of the corporation is not
a necessary requisite to its validity. (Monserrat vs. Ceron)
13.Chattel mortgages over shares of stock should be registered both at the
________ and in the ______ where the corporation has its principal office or
place of business in order to bind third persons. The ownership of shares in a
corporation is property distinct from the certificates whicH are merely the
_______ of such ownership. The property in the shares are deemed to be
situated in the ______in which the corporation has its principal office or place
of business. (Chua Guan vs. Samahang Magsasaka, Inc.)
14.All ______ of shares should be entered in the books of the corporation.
Transfers not so entered are invalid as to ______or __________ of the assignors
as well as to the corporation and to subsequent purchasers in good faith, and
indeed, as to all persons interested, except the______ to such transfer. (Uson
vs. Diosomito)
15.A clause contained in the by-laws of a corporation which provides that the
owner of a share of stock cannot sell it to another person except to the
defendant corporation is ____, violative of the _______ of shareholders, and in
________. (Fleischer vs. Botica Nolasco Co.)
16.Shares of stock being regarded as property, the owner of such shares may, as
a general rule, dispose of them as they see fit, unless the corporation has
been ________, or unless the right to do so is properly ________, or the owners
privilege of disposing of his shares has been hampered by his own action.
(Padgett vs. Babcock & Templeton)
17.Any restriction on a stockholder.s right to dispose of his shares must be
construed ________; and any attempt to restrain a transfer of shares is
regarded as being in ________, in the absence of a ________ upon its shares,
and except to the extent that valid restrictive regulations and agreements
exist and are applicable. Subject only to such restrictions, a stockholder
cannot be controlled in or restrained from exercising his right to transfer by
the corporation or its officers or by other stockholders, even though the sale
is to a ___________ or the company, or to an ___________ person, or even
though a ___________interest is sold to one purchaser. Therefore, restrictions
consisting in the word non-transferable is illegal. (Padgett vs. Babcock &
Templeton)
18.The suspension of the power to sell shares of stock which has a _________
purpose, results in the protection of the corporation as well as of the
individual parties to the contract, and is reasonable as to the length of time of
suspension is valid. (Lambert vs. Fox)
19.An indorsee of an _________certificate of stock has no power to effectively
transfer the shares to other persons or his nominees. For an effective transfer
of shares of stock the _________ and _________ of transfer prescribed by law
must be followed. (Embassy Farms, Inc. vs. CA)
20._________ of the certificate of stock is a mandatory requirement of law for an
effective transfer of a certificate of stock. (Razon vs. IAC)
21.THe right of a transferee/assignee to have stocks transferred to his name is
an inherent right flowing from his _________ of the stocks. The corporations
obligation to register is _________. (Rural Bank of Salinas vs. CA)

22.The pledge of shares of stock does not vest ownership of such shares to the
_________. The _________ remains the owner during the _________ of the pledge
and prior to foreclosure and sale. Therefore, the pledgee has no right to
demand the registration of the pledged shares in his name. In order that a
writ of mandamus may issue, it is essential that the person petitioning for the
same has a clear _________ right to the thing demanded and that is it the
imperative duty of the respondent to perform the act required. (Tay vs. CA)
23.Without a _________, which is the evidence of ownership of corporate stock,
the assignment of corporate shares is effective only between the parties to
the transaction. (Nava vs. Peers Marketing)
24.
25.An assignment, without ______ and _____, while valid as among the parties,
does not necessarily make the transfer effective. The assignees cannot enjoy
the status of a stockholder, cannot vote nor be voted for, and will not be
entitled to ______, insofar as the assigned shares are concerned. (Rural Bank
of Lipa City, Inc. vs. CA)
26._____ is not essential where it appears that the person sought to be held as
stockholders are _____of the corporation, and have _____ of the stock books.
(Tan vs. SEC)
27.After a valid transfer of share, the right to have such ______ commences to
exist. However, it would not follow that said right should be exercised
immediately or within a definite period. (Won vs. Wack Wack Golf & Country
Club, Inc.)
28.Certificates of stock are not negotiable instruments. Consequently, a
transferee under a _____ assignment acquires no title which can be asserted
against the true owner, unless his own negligence has been such as to create
an estoppel against him. If the owner of the certificate has endorsed it in
blank, and it is stolen from him, no title is acquired by an innocent purchaser
for value. (De Los Santos vs. Republic)

FORGED AND UNAUTHORIZED TRANSFERS

What is an Unauthorized issuance of certificate of stock?
STOCKS AND STOCKHOLDERS FORGED AND UNAUTHORIZED TRANSFER
1. Forged and unauthorized transfer what is forged or unauthorized is the ____
of the certificate from the true and lawful owner to another person.
2. General rule: In ___or ____ transfer of stock the purchaser acquires no title as
against the lawful owner and will have no ___ or _____ against the corporation
(non-negotiability of stock certificates)
Exception: If after such forged or unauthorized transfer, the corporation
issues a ______ and such certificate passes into the hands of subsequent bona
fide purchaser, the latter may rightfully acquire ____ thereto since the
corporation will be _____ to deny the validity thereof. The subsequent
purchaser in good faith took the shares by virtue of the _____ of the
certificates issued by the corporation or of the representation made by the
corporation that the same is valid and subsisting and that the person named
therein is a stockholder of the corporation. He may therefore, ____ the
corporation to recognize him as a stockholder or claim ___and ____ against
the latter.

ISSUANCE OF STOCK CERTIFICATES

STOCKS AND STOCKHOLDERS ISSUANCE OF STOCK CERTIFICATES

1. Subscriptions to shares of stock are ____. Thus, no certificate of stock shall be
issued to a subscriber until the full amount of his subscription together with
interest and expenses (in case of delinquent shares), if any is due, has been
paid.
2. Once a subscriber has paid his subscription in full, he becomes entitled to be
issued a ____.
3. The duty of the corporate officers to issue stock certificates to those entitled
is a _____ duty
enforceable by ______.
4. A stockholder whose subscription is not fully paid may not be issued a _____
for that
portion already paid. (Fua Cun vs. Summers and China Banking Corporation)

WATERED STOCK
What is a Watered stock?
Directors or officers shall be solidarily liable with the stockholder concerned to the
corporation and its creditors for the difference between the fair value received at
the time of issuance of the stock and the par or issued value of the same for the
following acts:
1
2
Ways in which watered stocks may be issued:
1
2
3
4
Evil effects of stock watering:
1ON CORPO
2ON SHs
3ON CRs
Two theories advanced as the basis for the liability on water stocks. Describe:
1
2
Effects of issuance of watered stock:
1. As to the corporation
2. As between the corporation and the subscriber
3. As to the consenting stockholders
4. As to dissenting stockholder
5. As to creditors
6. As against transferees of the watered stock

STOCKS AND STOCKHOLDERS WATERED STOCK

1. All creditors, whether prior or subsequent to the issuance of watered stock

may ____ payment of such water.
2. If however, a certificate of stock has been issued and duly indorsed to a bona
fide purchaser, without knowledge, actual or constructive, the latter cannot
be held liable, at least as against the corporation, since he took the shares on
reliance of the _______ made by the corporation that the stock certificate is
valid and subsisting. This is because a corporation is prohibited from issuing
certificates of stock until the_______ of the subscriptions have been paid and
could not, therefore, deny the validity of the stock certificate it issued as
against a purchaser in good faith.
3. Subscribers for stock shall pay to the corporation interest on all ______ from
the date of subscription, if so required by, and at the rate of interest fixed in
the by-laws. If no rate of interest is fixed in the by-laws, such rate shall be
deemed to be the legal rate.

ENFORCEMENT OF PAYMENT OF SUBSCRIPTIONS

When unpaid subscription or any percentage thereof, together with interest if
required, shall be Paid?
1
2
Two possible remedies available to the corporation to enforce payment of unpaid
subscription:
1
2
Procedure for the enforcement of payment through board action:
1CALL / NO CALL
2NOTICE / NO NOTICE
3DATE OF PAYMENT
4FAILURE TO PAY
530D PD
6RESO
7DATE OF SALE
8NOTICE OF SALE
9PUBLICATION
10STILL DQ NO PAY
11TRANSFER
12REMAINING SHARES
13 IF NO BIDDER
14TREASURY
Who is a Highest bidder
Grounds to question the delinquency sale:
1NOTICE
2SALE
Two conditions before an action to recover delinquent stocks irregularly sold may be
allowed:
1AS TO THE DQ
2AS TO COMPLAINT

Instances when a call is not necessary:

1
2
General rule: A valid and binding subscription for stock of a corporation cannot be
cancelled so as
to release the subscriber from liability thereon.
What is the exception?
Exceptions to the exception?
1
2
3
General rule: No delinquent stock shall not be entitled to:
1
2
3
Exception:
Requirements and procedure for issuance of new certificates of stock in lieu of those
lost, stolen or destroyed:
1A/L
A
B
C
D
2OTHERS
3PUBLICATION
4XCONTEST
5/CONTEST
Except in case of ___, ___, or ___ on the part of the corporation and its officers, no
action may be brought against any corporation which shall have issued certificate of
stock in lieu of those lost, stolen or destroyed pursuant to the procedure abovedescribed.
STOCKS AND STOCKHOLDERS - ENFORCEMENT OF PAYMENT OF SUBSCRIPTIONS
1. Failure or refusal of the corporation, through its board of directors to enforce
or collect payment of unpaid subscription will not prevent the ___ or the ___ of
the corporation to institute a court action to collect the unpaid portion thereof
(trust fund doctrine).
2. A ___ is a condition precedent before the right of action to institute a recovery
suit accrues. A
______ is required before a debtor may incur a delay in the performance of his
obligation.
3. .A subscription for shares of stock does not require an ______ to pay the
amount subscribed, as the law implies a promise to pay on the part of the
subscriber. The subscriber is as much bound to pay the amount of the share
subscribed by him as he would be to pay any other debt, and the right of the
company to demand payment is no less incontestable. (Velasco vs. Poizat)
4. Notwithstanding the fact that the by-laws of the corporation provides for a
method for the collection of the unpaid portion of stock subscriptions, the

corporation may still make use of the methods provided by ________. (De Silva
vs. Aboitiz & Co.)
5. The NLRC has no jurisdiction to determine intra-corporate disputes between
the stockholder and the corporation as in the matter of ________. (Apocada vs.
NLRC)
6. Unpaid subscriptions are not due and payable until a ________ is made by the
corporation for payment. (Apocada vs. NLRC)
7. Subscription to the capital of a corporation constitutes a fund to which the
creditors have a right to look for satisfaction of their claims and that the
assignee in insolvency can maintain an action upon any ________ in order to
realize assets for the payment of its debt. (Lumanlan vs. Cura)
8. The President of the Philippines is devoid of the prerogative of suspending the
operation of any
stature or any of its items. Thus the President cannot ________ the payment of
stock subscriptions in the event that the counterpart fund to be invested by
the government would not be available.(PNB vs. Bitulok Sawmill, Inc.)
9. A stockholder is personally liable for the financial obligations of a corporation
to the extent of his ________. (Edward Keller & Co., Ltd. vs. Cob Group
Marketing, Inc.)
10.The subscription to capital stock of the corporation, unless otherwise
stipulated, is ________ at the moment of the subscriptions but on a ________
which may be fixed by the corporation. (Garcia vs. Suarez)
11.Shares of stock become ________ when no payment is made on the balance of
all or any portion of the subscription on the date or dates fixed in the contract
of subscription without need of call, or on the date specified by the board of
directors pursuant to a call made by it.
12.General rule: Holders of ________ shares not fully paid which are not
delinquent shall have all the rights of a stockholder.
Exception: Shares of stock not fully paid are not entitled to be issued a
________.

RIGHTS AND LIABILITIES OF STOCKHOLDERS

Certain basic rights for the protection of stockholders:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Certain obligations and liabilities of stockholders:
1
2

3
4
5
6
CHAPTER 11: CORPORATE BOOKS AND RECORDS
Records to be kept and maintained by the corporation:
1R
2M
3S
General rule: Any officer or agent of the corporation who refuses to allow the
inspection of
corporate books and records, or any director or trustee who through a resolution by
the board votes
for such refusal shall be liable for damages and shall be guilty of an offense which
shall be
punishable under Sec. 144. WHAT ARE THE EXCEPTIONS?
1INFO
2PURPOSE
Remedies of a stockholder who is denied inspection of corporate books:
1
2
3
CORPORATE BOOKS AND RECORDS
1. These corporate books and records, inclusive of all business transactions and
minutes of meetings, are subject to inspection by any director, trustee,
stockholder or member of the corporation at ________on business days and a
copy of excerpts of said records may be demanded.
2. Within ________ days from receipt of a written request of any stockholder or
member, the corporation shall furnish to him its most recent financial
statement, which shall include a balance sheet as of the end of the last
taxable year and a profit or loss statement for said taxable year, showing in
reasonable detail its assets and liabilities and the result of its operations.
3. At the regular meeting of stockholders or members, the board of directors or
trustees shall present to such stockholders or members a ________ of the
operations of the corporation for the preceding year, which shall include
financial statements, duly signed and certified by an
________. However, if the paid-up capital of the corporation is less than
P50,000.00, the financial statements may be certified under oath by the
treasurer or any responsible officer of the corporation.
4. The basis of the right of the stockholder to inspect the books and records of
the corporation for a proper purpose is to ________ as a stockholder.
5. General rule: The right of stockholders to examine corporate books extends
to a ________________ which is completely under the control and management
of the parent company where he is such a stockholder. (Gokongwei vs. SEC)
Exception: The subsidiary and the parent are legally being operated as
________ and ________
entities.
6. The right to inspect corporate books, although personal, may be exercised
through an ________ or ________ since it may be unavailing in many instances.
(W.G. Philpotts vs. Philippine Manufacturing Co.)

7. The corporation, or its responsible directors and officers cannot unduly

________ the right of inspection and may not ________ set a few days of the
year within which the stockholder may make the inspection. (Pardo vs.
Hercules Lumber, Co.)
8. Directors of a corporation have the unqualified right to inspect the books and
records of the
corporation at all reasonable hours. However, there is no absolute right to
secure certified copies of the minutes of the corporation until these minutes
have been ________ and ________by the directors. (Vegaruth vs. Isabela Sugar
Co., Inc.)
9. It is a required condition for the inspection of corporate books that the one
requesting it must not have been guilty of using improperly any information
secured through a ________ and that the person asking for such examination
must be acting in good faith and for a ________ in making his demand.
(Gonzales vs. PNB)

CHAPTER 12: MERGER AND CONSOLIDATION

DIFFERENTIATE Merger FROM Consolidation
Requirements and procedure for merger or consolidation:
1PLAN
A
B
C
D
2APPROVAL
3NOTICE
4A/M OR C
A
B
C
5SUBMIT
6ISSUANCE
Effects of merger or consolidation:
11
2
3
4
5$$
MERGER AND CONSOLIDATION
1. Any amendment to the plan of merger or consolidation must be approved by
majority vote of the respective _________ or _________ of all the constituent
corporations and ratified by the affirmative vote of stockholders representing
at least _________ of the outstanding capital stock or of _________ of the
members of each of the constituent corporations.
2. Mergers and consolidations may not be entered into for the purpose of
circumventing the law against _________ and _________ or for purposes of
fraud.

3. Merger or consolidation does not become effective upon the mere _________
of the constituent corporations. It shall be effective only upon the issuance of
a _________. (Associated Bank vs. CA)
CHAPTER 13: APPRAISAL RIGHT
What is Appraisal right?
Instances when a stockholder may have the right to dissent and demand payment
of the fair value
of his shares:
1AMENDMENT
AAS TO RIGHTS
BAS TO PREFERENCE
CAS TO TERM
2SLTEMPO
3M/C
Other instances provided for in the Code:
1$$
2CLOSE CORPO
Requirements and procedure for the exercise of the appraisal right:
1VOTE
2DEMAND
3SURRENDER
4PAYMENT
5TRANSFER
Effects of demand for payment of the fair value of a stockholders shares:
1. From the time of demand for payment
2. After either the right ceases or the purchase of the said shares by the corporation

Instances when the right to payment ceases:

1. W
2. A
3. D
4. S
5. N
6. T
APPRAISAL RIGHT
1. If the dissenting stockholder is not paid the value of his shares within
_________ days after the award, his voting and dividend rights shall
immediately be_________.
2. No demand for payment may be withdrawn unless the corporation _________
thereto.
3. General rule: The costs and expenses of appraisal shall be borne by the
_________.
Exception: The fair value ascertained by the appraisers is _________ as the
price which the corporation offered to pay the stockholder.
4. General rule: In an action to recover the fair value of stocks, all costs and
expenses shall be assessed against the _________.

Exception: The refusal of the stockholder to receive payment is _________.

5. A dissenting stockholder is required within _________ days after demanding
payment for his shares to submit the stock certificates representing his
shares to the corporation for _________. His failure to do so shall, at the option
of the corporation, terminate his _________.
6. The dissenting stockholder is not prohibited from _________, _________ or
_________ his shares. If such be the case, once the certificates are
subsequently canceled, the rights of the transferor as a dissenting
stockholder shall cease and the transferee shall have all the rights of a
regular stockholder; and all dividend distributions which would have accrued
on such shares shall be paid to the transferee.
7. A director who exercises his appraisal right remain to be a director until his
shares are __________________.
8. A stockholder whose subscription is not fully paid is _________ to exercise his
appraisal right.

CHAPTER 14: NON-STOCK CORPORATIONS

What Is a Non-stock corporation?
NON-STOCK CORPORATIONS
1. Purposes: Charitable, religious, educational, professional, cultural, fraternal,
literary, scientific, social, civic service, or similar purposes, like trade,
industry, agricultural and like chambers, or any combination thereof
(_________).
2. The provisions governing _________, when pertinent, shall be applicable to
non-stock corporations.
3. Even if a corporation has capital stock divided into shares it is considered as
non-stock so long as it does not distribute _________ to its members and
officers. (CIR vs. Club Filipino de Cebu)
4. Any _________ which a non-stock corporation may obtain as an _________ to its
operations shall, whenever necessary or proper, be used for the furtherance
of the purpose or purposes for which the corporation was organized.
5. The fact that a non-profit corporation earns a profit, gain or income for the
corporation or members does not make it a profit-making corporation where
such profit or income is used for the purpose set forth in the articles of
incorporation and is not _________ to its incorporators, members or officers,
since mere _________ or _________ of the members does not change the nature
of the corporation.
6. The determination of whether or not a non-stock corporation can engage in
profit-making business or activity depends largely on the _________ indicated
in the articles of incorporation. If the business activity is _________ in the said
articles, _________, _________ or _________ thereto, the same may be
undertaken by the corporation, otherwise, not, as it would be an ultra-vires
act.
MEMBERSHIP AND VOTING RIGHTS
In absence of any provision in the articles of incorporation or by-laws relative to the
manner and
causes of termination, the power is nonetheless inherent in the following situations:
1. I
2. V
3. M

NON STOCK CORP: Membership and voting rights:

10.General rule: Each member, regardless of class, shall be entitled to _________
vote (no cumulative voting).
Exception: The right to vote is _________, _________ or _________ in the articles
of incorporation or the by-laws.
11.General rule: A member may vote by _________.
Exception: Proxy voting is _________ in the articles of incorporation or the bylaws.
12.Voting by mail or other similar means by members of non-stock corporations
may be authorized by the by-laws of non-stock corporations with the
_________ of, and under such conditions which may be _________ by the SEC.
13.General rule: Membership in a non-stock corporation and all rights arising
therefrom are _________ and _________.
Exception: The articles of incorporation or the by-laws provide otherwise.
14.Membership in non-stock corporations may be acquired by complying with
the provisions of its rules prescribed in the by-laws. In absence of restrictions,
a non-stock corporation may act _________ and exclude any persons it may
see fit, and the _________ have no power to interfere. It is free to fix _________
for membership and to provide for termination of membership.
15.General rule: The board of directors of a non-stock corporation shall have the
_________ to admit members.
Exception: The _________ provide otherwise.
16.Membership shall be terminated in the _________ and for the _________
provided in the articles of incorporation or the by-laws.
17.General rule: Termination of membership shall have the effect of _________ all
rights of a member in the corporation or in its property.
Exception: The articles of incorporation or the by-laws provide otherwise.
18.In terminating membership, strict compliance with the _________ and _________
laid down in the by-laws must be observed, otherwise it may render the
expulsion ineffective and invalid. (Carmoan vs, PED)
19.As to whether or not a member should be expelled or maintained is the
established right of the corporation to determine and the _________ are
without authority to strip a member of his membership without cause.
20.Courts cannot strip a member of a non-stock corporation of his membership
therein without cause. Otherwise, that would be an unwarranted and undue
_________ with the well established right of a corporation to determine its
membership. (Chinese YMCA vs. Ching)

TRUSTEES AND OFFICERS

Qualifications of trustees:
1.
2.
3.
General rule: The courts will not interfere on matters involving the internal affairs of
an UNINCORPORATED association such as elections, the manner by which it was
conducted and the results thereof. (Lions Club International vs. CA)
WHAT ARE THE Exceptions:
1.F
2A
3P
4P

5L
6O
7P
8I
General rule: Regular or special meetings of members of a non-stock corporation
shall be held in
the city or municipality where the principal office is located, and if practicable in the
principal office
of the corporation.
Exceptions:
1
2
Requirements for meetings held outside the location of the principal office as
provided for by the
by-laws:
1
2
TRUSTEES AND OFFICERS
21.Non-stock or special corporations may designate their _________ by any name
through their articles of incorporation or their by-laws.
22.General rule: The number of trustees in a non-stock corporation may exceed
_________.
Exception: The articles of incorporation or the by-laws provide otherwise.
23.General rule: The term of office of the board of trustees may be staggered.
They shall classify themselves in order that _________ of their number shall
expire every year and subsequent elections of trustees comprising _________
shall be held annually.
Exception: The articles of incorporation or the by-laws provide otherwise.
24.General rule: officers of a non-stock corporation may be directly elected by
the _________.
Exception: The articles of incorporation or the by-laws provide otherwise.
25.Trustees elected to fill vacancies occurring _________ the expiration of a
particular term hold office only for the unexpired period.
26.General rule: All proceedings and business transactions at a meeting
improperly held or called are _________.
Exception: All of the members are _________ or _________at the meeting.

DISTRIBUTION OF ASSETS UPON DISSOLUTION

Rules of distribution:
1L-PSDA
2C-RTC
3L-CRBES
4O-D
5A
Procedure and requirements for a plan of distribution of assets:
1VOTE
2APPROVAL
3NOTICE
CHAPTER 15: CLOSE CORPORATIONS

WHAT ISA CLOSE CORPORATION?

One whose articles of incorporation provide that:
1.
2
3
General rule: Any corporation may be incorporated as a close corporation.
Exceptions:
1M
2S
3B
4I
5P
6E
7C
The articles of incorporation of a close corporation may provide:
1. AS TO shares or rights
2. AS TO directors
3. AS TO quorum or voting requirements
4. AS TO MANAGEMENT, So long as this provision continues in effect:
A. AS TO ELECTION OF BOD
B. AS TO BOD
C. AS TOLIABILITIES
5. AS TO OFFICERS
In order to bind purchasers in good faith, restrictions on the right to transfer shares
must appear in:
1
2
3
Effects of issuance or transfer of stock in breach of qualifying conditions:
CONDITIONS
EFFECTS
1. The stock is issued or transferred to a
person not entitled under the articles of
incorporation; and
2. The stock certificate conspicuously
shows the qualifications of the persons
entitled.
1. The articles of incorporation states the
number of persons, not exceeding 20,
who are entitled to be holders of record
of its stock
2. The stock certificate conspicuously states
such number; and
3. The issuance or transfer of stock causes
the stock to be held by more than such
number of persons.
1. The stock certificate conspicuously

shows a restriction on transfer of stock;

2. The transfer violates the restriction.
General rule: A close corporation may refuse to register the transfer of stock in the
name of the
transferee who has or is conclusively presumed to have notice that:
1
2
3
Exceptions:
1
2
Options granted to the transferee:
1.
2.
Sec. 101. When board meeting is unnecessary or improperly held. - Unless the bylaws provide
otherwise, any action by the directors of a close corporation without a meeting shall
nevertheless
be deemed valid if:
General rule: Any action by the directors of a close corporation without a meeting is
invalid.
Exceptions:
1
2
3
4
Exception to the exceptions: The by-laws provide otherwise.
REQUIREMENT IN ORDER THAT Any amendment to the articles of incorporation
which seeks to:
1. Delete or remove any provision required by Title XV of the Code to be contained
in the
articles of incorporation, or
2. Reduce a quorum or voting requirement stated in said articles of incorporation,
- (VOTING REQUIREMENT)
Define Deadlock.
In case of a deadlock and upon written petition by any stockholder, the SEC has the
power to
arbitrate the dispute and the authority to:
1. AS TO PROVISION
2. AS TO RESOLUTION
3. AS TO ACT
4. AS TO SHARE
5. AS TO MANAGEMENT
6. AS TO THE CORPORATION
7. OR AS TO RELIEF
WHO IS A Provisional director?

1. A provisional director shall be an _____ ______ who is neither a _____ nor a _____ of
the corporation or of any subsidiary or affiliate of the corporation, and whose further
qualifications, if any, may be determined by the _____.
2. A provisional director is not a _____ of the corporation and does not have the _____
and ______ of a ______ or ______.
3. A provisional director shall have all the _____ and _____ of a duly elected director
of the corporation, including the right to _____ of and to ____ at meetings of
directors, until such time as he shall be _____by order of the ____ or by all the ______.
4. His ______ shall be determined by ______ between ___ and the ______ subject to
approval of the ___, which may fix his _____ in the absence of ______ or in the event
of _______ between the provisional director and the corporation.
Any stockholder of a close corporation may, by written petition to the SEC, compel
the dissolution
of such corporation whenever:
1. AS TO ACTS of the directors, officers or those in control of the corporation or
2. AS TO Corporate assets
DISTINGUISH Close corporations FROM ordinary stock corporations
1. AS TO The number of stockholders
2. AS TO The number of directors
3. AS TO restrictions
4. AS TO prohibition.
5. AS TO Management
6. AS TO liability FOR CORPORATE TORTS
7. AS TO ACTS OF Directors
8. AS TO SHs Agreements
9. ASTO CLASSIFICATION OF directors
10. AS TO ELECTION OF Officers
11. AS TO quorum and voting requirements
12. AS TO transfer of shares
13. AS TO Pre-emptive rights
14. AS TO WITHDRAWAL AND COMPEL SALE OF SHARES
15. AS TO COURT/PROPER FORUM INTERFERENCE
16. AS TO Dissolution
CHAPTER 15: CLOSE CORPORATIONS
1. Absent any of the three requisites, a corporation cannot be considered a
_________ corporation and would thus be governed by the general provisions
on _________ corporations.
2. A corporation does not become a _________ corporation just because a
husband and wife owns 99.86% of the capital stock. (San Juan Structural
Steel vs. CA)
3. Sec. 140 authorizes the _________ to recommend to the legislature the setting
of maximum limits to family or group ownership of stock in corporation
vested with public interest, and the determination of whether or not it should
be vested with public interest is within its domain.
4. The provisions of Title XV of the Code shall primarily govern close
corporations. However, the provisions of other Titles of the Code apply
_________.
5. A close corporation may partake the nature of a _________ in that the
stockholders thereof take an active role in the _________ of the corporate
affairs either as directors, officers or even perhaps as partners in
management which is akin to the partnership form of business.

6. Restrictions on the right to transfer shares shall not be more onerous than
granting the existing stockholders or the corporation the option to _________
the shares of the transferring stockholder within reasonable terms, conditions
or period. If upon the expiration of said period, the existing stockholders or
the corporation fails to exercise the option to purchase, the transferring
stockholder may sell his shares to any _________.
7. The term "transfer" is not limited to a transfer for _________.
8. Agreements by and among stockholders executed _________ the formation
and organization of a close corporation, signed by _________ stockholders,
shall survive the incorporation of such corporation and shall continue to be
valid and binding between and among such stockholders, if such be their
intent, to the extent that such agreements are not inconsistent with the
articles of incorporation, irrespective of where the provisions of such
agreements are contained, except those required by this Title to be embodied
in said articles of incorporation.
9. An agreement between two or more stockholders, if in _________ and _________
by the parties thereto, may provide that in exercising any voting rights, the
shares held by them shall be voted as therein provided, or as they may
agree, or as determined in accordance with a procedure agreed upon by
them.
10.No provision in any written agreement signed by the stockholders, relating to
any phase of the corporate affairs, shall be invalidated as between the
parties on the ground that its effect is to make them _________ among
themselves.
11.A _________ among some or all of the stockholders in a close corporation shall
not be invalidated on the ground that it so relates to the conduct of the
business and affairs of the corporation as to _________ or _________ with the
discretion or powers of the board of directors: Provided, That such agreement
shall impose on the stockholders who are parties thereto the liabilities for
managerial acts imposed by this Code on directors.
12.To the extent that the stockholders are actively engaged in the management
or operation of the business and affairs of a close corporation, the
stockholders shall be held to strict _________ _________ to each other and
among themselves. Said stockholders shall be personally liable for corporate
torts unless the corporation has obtained reasonably adequate liability
insurance.
13.A corporation shall not be deemed a close corporation when at least _________
of its voting stock or voting rights is _________or _________ by another
corporation which is not a close corporation.
14.If a _________'s meeting is held without proper call or notice, an action taken
therein within the corporate powers is deemed _________ by a director who
failed to attend, unless he promptly files his written objection with the
secretary of the corporation after having knowledge thereof.
15.General rule: The _________ of stockholders in close corporations shall extend
to all stock to be issued, including reissuance of treasury shares, whether for
money, property or personal services, or in payment of corporate debts.
EXCEption: The articles of incorporation provide otherwise.
16.Any stockholder of a close corporation may, for any reason, _________ the said
corporation to purchase his shares at their fair value, which shall not be less
than their par or issued value, when the corporation has sufficient _________ in
its books to cover its debts and liabilities exclusive of capital stock.
17.In a close corporation, a corporate action taken at a board meeting without
proper call or notice is deemed _________by the absent director unless the
latter promptly files his _____ with the secretary of the corporation after
having knowledge of the meeting. (Manuel Dulay Enterprises vs. CA)

18.Stockholders who actively engage in the management or operation of the

business and affairs of a close corporation shall be ____ for corporate torts
unless the corporation has obtained reasonably adequate _______. Essentially
a tort consists in the violation of a right given or the omission of a duty
imposed by law. Article 283 of the Labor Code mandates the employer to
grant separation pay to employees in case of closure or cessation of
operations of establishment or undertaking not due to serious business losses
or financial reverses. CFTI failed to comply with this law-imposed duty or
obligation. Consequently, its stockholder who was actively engaged in the
management or operation of the business should be held personally liable.
(Naguiat vs. NLRC)

CHAPTER 16: SPECIAL CORPORATIONS

EDUCATIONAL CORPORATIONS
WHAT ARE Educational corporations?
EDUCATIONAL CORPORATIONS
1. Educational corporations are governed primarily by _____ and secondarily by
the ____.
2. Educational institutions are required to incorporate within ___ days after their
____ as such. However, failure to comply will ______ the educational institution
from suit as a corporation.
3. A favorable recommendation of the _____, ___ and ____ is required before the
SEC accepts or approves the articles of incorporation or by-laws of any
educational institution.
4. Trustees of non-stock educational corporations shall not be less than 5 nor
more than ____, in multiples of __.
5. Unless otherwise provided in the articles of incorporation on the by-laws, the
board of trustees of incorporated schools, colleges, or other institutions of
learning shall, as soon as organized, so classify themselves that the term of
office of _______ shall ____every year. Trustees thereafter elected to fill
vacancies, occurring before the expiration of a particular term, shall hold
office only for the _____. Trustees elected thereafter to fill vacancies caused
by ______ shall hold office for 5 years. A ______of the trustees shall constitute
a quorum for the transaction of business. The powers and authority of
trustees shall be defined in the _____.
6. For institutions organized as stock corporations, the ___ and _______s shall be
governed by the provisions on stock corporations.
7. General rule: Educational institutions shall be owned solely by ______ or
corporations or associations ____ of the capital of which is owned by such
citizens. The control and administration of educational institutions shall be
vested in ________.
Exception: Educational institutions established by ____and ______.
8. General rule: No educational institution shall be established e____ for aliens
and no group of aliens shall comprise more than ______ in any school.
Exception: The rule shall not apply to schools established for ____ and _____
and, unless otherwise provided by law, for other foreign ____ residents.

RELIGIOUS CORPORATIONS
WHAT ARE Religious corporations?

Classes of religious corporations:

1.
2
RELIGIOUS CORPORATIONS
1. Religious corporations are governed by the appropriate chapter of the Code
and the ____ on non-stock corporations.
Corporation Sole
Define corporation sole.
PurposE OF CORPORATION SOLE
Who COMPRISES CORPORATION SOLE?
Requirements and procedure of incorporation:
1.
A
B
C
D
E
2.
3.
4.
Requirements for the voluntary dissolution of corporations sole:
1.
a.
b.
c.
d.
2.
CORPORATION SOLE
1. All ____, ____ and _____ of the religious denomination, sect or church
administered or managed by the corporation sole shall be held in ___ for the
__, ____, ___and _____ of the religious denomination, sect or church, including
hospitals, schools, colleges, orphan asylums, parsonages and cemeteries
thereof.
2. A provision relative to its term of existence is not required since a corporation
sole is supposed to exist in ____.
3. General rule: A corporation acquires juridical personality only upon the i___ of
a certificate of incorporation by the SEC.
Exception: A corporation sole becomes endowed with corporate personality
after ____of the verified articles of incorporation together with other required
documents.
4. A corporation sole may purchase and hold real estate and personal property
for its ___, ____, ___ or ____l purposes, and may receive bequests or gifts for
such purposes.
5. General rule: A ____ is required before a corporation sole may sell or
mortgage __ _____ held by it. Before such an order is granted, a _____ must be
made by the chief archbishop, bishop, priest, minister, rabbi or presiding
elder acting as corporation sole and it must be shown that ______ has been

given as directed by the court and that it is to the interest of the corporation
that the petition be granted. However, such application may be opposed by
____ of the religious denomination, sect or church represented by the
corporation sole.
Exception: Court intervention is not necessary when the___ _, ___ and ____ of
the religious denomination, sect or church, religious society or order
concerned represented by such
corporation sole ____ the ____, ___, ___ and _____ an______.
6. Registration of real property in the name of the corporation sole does not vest
______ unto the head thereof.
7. The constitutional requirement that _____ of the capital of a corporation must
be owned by ______ before it may register land in its own name _____ to a
corporation sole. A corporation sole has no _____ and the framers of the
constitution did not have in mind the corporation sole when it provided for
such requirement. (Roman Catholic Apostolic Adm. of Davao, Inc. vs. LRC)
8. Whether or not a corporation sole, or any private corporation for that matter,
can acquire alienable land of the public domain depends upon the character
of the land ______ of the registration proceeding. If it still forms part of the
public domain, no. If it is private, __. (Republic vs. INC)
9. Under the Public Land Act, ______ land may be subject to registration by a
possessor if he, personally or through his predecessor-in-interest, had openly,
continuously, exclusively and notoriously possessed the same for __ years.
The law creates the ______ whereby the land, upon completion of the requisite
period ipso jure and without the need of ___or _____, ceases to ____ land and
becomes ____property. (Director of Lands vs. CA)
10.In case of vacancy in the office of the head of the corporation, the
_________, _____ or ______ shall exercise all the powers and authority of the
corporation sole during such vacancy and until such vacancy has been filledup.
11.The _______ shall become the corporation sole and shall be permitted to
transact business as such only upon the ____ with the SEC of a copy of their
____, _____, or ______, duly certified by a ____.

Religious Societies
What is a Religious society?
Purpose OF A RELIGIOUS SOCIETY?
Who COMPRISES A RELIGIOUS SOCIETY?
Requirements and procedure for incorporation:
1.
2.
A
B
C
D
E
F
3.
4.

RELIGIOUS SOCIETY

1. The articles of incorporation of a religious society need not indicate a term

since it is supposed to exist in perpetuity.
CHAPTER 17: DISSOLUTION
DEFINE Dissolution.
Three modes of dissolution:
1. E
2. V
3. R
DISSOLUTION
1. General rule: When a corporation is dissolved, it ceases to be a _______ and
can no longer pursue the business for which it is incorporated.
Exception: The corporation will continue as a body corporate for another
period of ______ from the time it is dissolved for the purpose of _________.
EXPIRATION OF CORPORATE TERM
General rule: A corporation registered under the Corporation Code is required to
indicate its term of
existence in the articles of incorporation.
Exceptions:
1.
2.
EXPIRATION OF CORPORATE TERM
1. A corporation ceases to exist and is ________ upon the ______ of the term
indicated in its articles of incorporation without the need of ______. There is no
need to for the institution of a proceeding for _______ to determine the time
and date of the dissolution of a corporation because the period of corporate
existence is provided in the articles of incorporation. (PNB vs. CFI)
SURRENDER OF FRANCHISE (VOLUNTARY DISSOLUTION)
Three modes of voluntary dissolution:
1.
2.
3.
SURRENDER OF FRANCHISE (VOLUNTARY DISSOLUTION)
1. The requirements and formalities provided by law for the dissolution of
corporations are ______such that failure to comply therewith will have ____ on
the legal existence of the corporation. A corporation being a creation of law
may only terminate its existence in the ________. or the board of directors of a
corporation to dissolve the same does not affect the dissolution of a
corporation. (Daguhoy Enterprises vs. Ponce)
Voluntary dissolution where no creditors are affected
Formal and procedural requirements for voluntary dissolution where no creditors are
affected:

1.
2
3
4
5
6
Voluntary dissolution where creditors are affected
Voluntary dissolution where creditors are affected
1. The appointment of a receiver is only ____and not _____. The law is intended
to let the stockholders have _____of the assets of the corporation upon
dissolution and winding up of its affairs.
Formal and procedural requirements for voluntary dissolution where creditors are
affected:
1
2
3
4
5
6
7
Dissolution by shortening the corporate term
Procedure to shorten the corporate term:
1
2
3
4
5
Dissolution by shortening the corporate term
1. In case of a corporation sole, an ______ for the dissolution by the particular
religious denomination, sect or church is necessary.
2. A vote must cast at a _______. Written assent is insufficient.
3. It is only upon _____ that the corporation is deemed dissolved.
INVOLUNTARY DISSOLUTION
Requirements for involuntary dissolution by the SEC:
1
2
Grounds for involuntary dissolution under Sec. 6, PD 902-A:
1f
2s
3r
4c
5f
6f

Other grounds provided for the in Corporation Code:

1v
2d
3a
INVOLUNTARY DISSOLUTION
1. Notwithstanding the fact that _____ transferred the jurisdiction of the SEC
under Sec. 5 of PD 902-A to the _______, the same law granted the SEC
_______ jurisdiction over _____proceedings. Sec. 5 (m) of RA 8799 provides
that the SEC shall have the power to suspend or revoke, after proper notice
and hearing, the franchise or certificate of registration of corporations,
partnerships or associations, upon any ground provided by law.
2. Other grounds can be found in special laws, e.g. the Securities Regulation
Code and the General Banking Act.
3. Courts proceed with extreme caution in the proceeding which have for their
object the forfeiture of corporate franchises, and a forfeiture will not be
allowed, except under express limitation, or for a plain abuse of power by
which the corporation fails to fulfill the design and purpose of its organization.
But when such abuses and violations constitute or threaten a ______ or such
as to amount to a ____________ (charter) by which the franchise were granted
and thus _________ of the grant, then dissolution will be granted. (Government
vs. Philippine Sugar Estates Co.)
4. The court has a discretion with respect to the infliction of capital punishment
upon corporations and there are certain misdemeanors and misusers of
franchises which should not be recognized as requiring their dissolution.
(Government vs. El Hogar)
5. That the corporation is guilty of _____ and ______ and that its continuance
inflicts _______ warrants its dissolution. (Republic vs. Security Credit)
6. Relief by dissolution will be awarded only where _______ is available, and is
______ where the rights of the stockholders can be, or are, protected in some
other way. The several acts of misuse and misapplication of the funds and/or
assets of the corporation were committed more particularly by the
corporations president, for the commission of which they may be held
personally liable. (Republic vs. Bisaya Land Transportation Co., Inc.)
7. Under the present state of law, ______ or ____ of a corporation can institute a
dissolution proceeding against his own corporation before the proper forum.
8. The ______, shall hear and decide cases involving _____ or ______
between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates,
respectively; and
between such corporation, partnership or association and the State
insofar as it concerns their individual franchise or right to exist as such
entity. (PD 902-A)
9. The SEC has _____ jurisdiction to suspend, revoke, after _____ and ____, the
____ or _______ of corporations, partnership or associations upon any of the
grounds provided by law. (Sec. 5(m) RA 8799)
10.The existence of a de jure corporation may be determined in a _______ for its
dissolution between stockholders, without intervention of the State. (Hall vs.
Piccio)
11.In a close corporation, a petition for the dissolution of the corporation may be
instituted by any shareholder on the ground of ______.

EFFECTS OF DISSOLUTION

EFFECTS OF DISSOLUTION
1. No _________ in favor of or against any corporation, its stockholders,
members, directors, trustees, or officers, nor any _________ by any such
corporation, stockholders, members, directors, trustees, or officers, shall be
removed or impaired by the subsequent dissolution of said corporation.
2. Dissolution ______ a corporations _____ and generally prevents it from further
exercising other or secondary franchises which have been conferred to it.
3. Dissolution terminates the corporation.s power to ______ or ______ as a going
concern. (Hall vs. Piccio)
4. General rule: In a lease to a corporation, the rights and obligations
thereunder are not extinguished by the corporations dissolution since leases
affect ______ and survives the death of parties. The ____succeed to the rights
and liabilities of the dissolved corporation in an unexpired leasehold state
which may be enforced by or against the receiver or liquidating trustee.
Exception: The lease, by its terms, terminates when the corporation ceases to
exist.
5. Contracts for _____ are deemed terminated by the dissolution of the
corporation. There Is an ____ that the contract shall terminate in such event.
(Gelano vs. CA)
LIQUIDATION AND WINDING UP
What is Liquidation and winding up? CPSD
General rule: No corporation shall distribute any of its assets or property except
upon lawful
dissolution and after payment of all its debts and liabilities.
Exceptions:
1. D
2. C
Three methods of liquidation:
1. C
2. T
3. R
LIQUIDATION AND WINDING UP
1. A dissolved corporation continues as a body corporate for a period of ___ from
the time of dissolution for the purpose of ____ and _____ by or against it and
enabling it to ___ and _____, to ____ and ____ and to _____, but not for the
purpose of continuing the business for which it was established.
2. At any time during said three (3) years, the corporation is authorized and
empowered to ____all of its property to ______ for the benefit of stockholders,
members, creditors, and other persons in interest. From and after any such
conveyance by the corporation of its property in trust for the benefit of its
stockholders, members, creditors and others in interest, all interest which the
corporation had in the property terminates, the _____ vests in the trustees,
and the ______ in the stockholders, members, creditors or other persons in
interest.
3. Upon the winding up of the corporate affairs, any asset distributable to any
creditor or stockholder or member who is ____ or _____ shall be escheated to
the city or municipality where such assets are located.
4. Mere appointment of a ____ without anything more does not imply the
dissolution of a corporation.

5. Pending actions by or against a corporation are ____ upon expiration of the

period allowed by law for the liquidation of its affairs; but _____to whom the
corporate assets have been conveyed ________ as such in all matters
connected with the liquidation. The effect of conveyance is to make the
trustees the _____ of the property conveyed, subject to the _____ therein of
creditors and stockholders. (National Abaca Other Fibers Co. vs. Pore)
6. If the corporation carries out the liquidation of its assets through its own
_____and continues and defends the actions brought by or against it, its
existence shall terminate at the _______ from the time of dissolution; but if a
_____ or ____- is appointed, as has been done in the present case, with or
without a ______ of its properties within three years, the _______ passes to the
assignee, the ______ remaining in the members, stockholders, creditors and
other interested persons; and said assignee may bring an __, _____ that which
has already been commenced for the benefit of the corporation, or ____ the
latter against any other action already instituted or which may be instituted
even outside of the period of three years fixed for the offices of the
corporation. (Sumera vs. Valencia)
7. If there is a____, ___ or ___, it can continue prosecuting suit even beyond the
3yr period fixed by law because he becomes the legal owner of the
_____,____and ____conveyed to him. (Board of Liquidators vs. Kalaw)
8. The _____l who prosecuted and defended the interest of the corporation and
who appeared in behalf of the corporation may be considered a trustee of the
corporation at least with respect to the ______ only. The word trustee must
be understood in its general concept. (Gelano vs. CA)
9. A claim established against the corporation may be prosecuted against the
_____ of such corporation even after the three years from its dissolution.
(Republic vs. Marsman Development Company)
10.Upon ________of the corporation its assets are held for the benefit of its
stockholder after payment of its debts and will be so distributed to the said
stockholder in accordance with their proportionate interest in the corporation
or their contracts of subscription.
11.Holders of ________ may be granted certain rights or privileges upon
dissolution.
12.General rule: The board of directors of a dissolved corporation is _______ to
undertake any activity outside of the usual liquidation of the corporation.
13.Exception: The stockholders of a dissolved corporation may convey their
_________ toward the ____ of a new corporation to _____the business of the old.
_____ is the sole activity of a dissolved corporation that does not intend to
incorporate a new. (Chung Ka Bio vs. IAC)
14.If the three year period of liquidation has elapsed and no effort to finally
settle or close the corporate affairs was undertaken, those having pecuniary
interest in the corporate assets, including not only the stockholders but
likewise the creditors, acting for and its behalf, may make proper
representations with the SEC for working out a final settlement of the
corporate concern. (Clemente vs. CA)
Note: The above decision is an aberrant ruling. Once the three year period
for liquidation and winding up has elapsed without any trustee or receiver
being appointed, the assets of the corporation will be ______ in favor of the
______ thus barring the _____of stockholders and creditors.

CHAPTER 18: FOREIGN CORPORATIONS

What is a Foreign corporation?

Requisites for a foreign corporation to transact business in the Philippines:

1. L
2. C
Procedure for application of a license:
1. A/I
2. O
a. D/T
b. PO
c. RA
d. P
e. P
f. D/O
g. ACS
h. OCS
i. A
j. AI
3. C
4. S
5. F
CHAPTER 18: FOREIGN CORPORATIONS
1. The phrase whose laws allow Filipino citizens and corporations to do
business in its own country or state is a mere ______ to the grant of a
_______of a foreign corporation to do business in the Philippines.
2. General rule: The _______ is applied in determining whether a corporation is
domestic or foreign. If it is incorporated in _______, it is a foreign corporation,
while if it is registered under Philippine laws, it is deemed a Filipino or
domestic corporation irrespective of the _______ of its stockholders.
Exception: In times of _____, the _____ would apply in determining the
corporate nationality, i.e., the citizenship of the _______ stockholders
determines the nationality of the corporation.
3. General rule: A corporation can have no _______ outside the boundaries of the
sovereign by which it is created.
Exception: By virtue of ________, a corporation created by _____ is usually
allowed to _________ in other states and to _______ of the forum, subject to
restrictions and certain requirements imposed therein.
4. Foreign corporations already issued a _____ to transact business in the
Philippines _____to the effectivity of the Code ______to have such authority
under the terms and conditions of its license, subject to the provisions of the
Code and other special laws.
5. Upon compliance with the provisions of Sec. 125, other special laws and the
rules and regulations implementing them, the ___ shall thereafter issue the
license.
6. Upon issuance of the license, such foreign corporation may _____ to transact
business in the Philippines and continue to do so for as long as it ___its
authority to act as a corporation under the laws of the ____or _______, unless
such license is sooner ___, _____, ____ or ____ in accordance with this Code or
other special laws.
7. Within 60 days after the issuance of the license, a foreign corporation, except
those engaged in ____or ______, shall deposit with the SEC, for the benefit of
creditors, _____ consisting of _______ of the Philippine government or its
political subdivisions or instrumentalities, or of government owned or
controlled corporations and entities, shares of stock in _____, shares of
stock in _______, or any _____ thereof, with an actual market value of ____.

_____ may be required by the SEC if the actual market value of the securities
on deposit has ___ by at least ___
8. The objective of the law requiring the license is not to prevent the foreign
corporation from performing isolated or single acts, but to prevent it from
______ for the purpose of pursuing its _____ without taking steps to render it
amendable to suit in the local courts. (Marshall-Wells Co. vs. H. W. Elser &
Co.)
9. A dissolved corporation has no ______; it ceases to exist as a corporation and
cannot apply for a ____ or ______. (Buenaflor vs. Camarines Sur Industry Corp.)
10.The 3-year period allowed by the law is only for the purpose of ____ or _____ of
corporate affairs. No act can be done for the purpose of continuing the
business for which it waS established. Neither can it enforce a contract
executed ___to its dissolution. (Cebu Port Labor Union vs. State Marine Co.)
11.The termination of the life of a juridical entity does not, by itself, imply the ___
or _____ demandable against such juridical entity. Debts due to or against the
corporation will not be extinguished. Otherwise, it will amount to an ______ or
a ____. (Gonzales vs. Sugar Regulatory Administration)
MODES OF ENTRY OF FOREIGN CORPORATIONS
Modes of entry of foreign corporations:
1. BO
2. R/LO
3. LS
4. R/AH
5. R/OH
6. RW
7. JV

RESIDENT AGENT
The following may be appointed as a resident agent:
1. I
2. DC
Modes of service of summons upon a foreign corporation:
1. IF LICENSED
2. IF CEASED TO TRANSACT OR NO RA
3.
RESIDENT AGENT
1. The appointment of a _____ is a condition precedent to the issuance of a
license to transact business in the Philippines by a foreign corporation.
2. The necessity of the appointment of a resident agent is only for the purpose
of receiving ____and _____ in any legal action or proceeding against the
foreign corporation.
DOING BUSINESS WITHOUT A LICENSE
General rules regarding whether or not a foreign corporation may sue or be sued in
the Philippines:
1. As to whether or not it can sue.
a. BUSINESS LICENSE

b. BUSINESSLICENSE
c. BUSINESSLICENSE
2. As to whether it can be sued or not.
a. BUSINESS LICENSE
b. BUSINESSLICENSE
c. BUSINESS
General rule: A foreign corporation must have the requisite license to sue before the
Philippine courts.
Exceptions:
1. IT
2. L/CR
3. TTCRG
4. RPC
5. D
6. E
Exception to an exception: Where a ________ however, is not merely _______ but
indicates the foreign corporations intention to do other business in the Philippines,
said single act or transaction constitutes ____ or _____ or _____ in the Philippines.
DOING BUSINESS WITHOUT A LICENSE
1. General rule: No foreign corporation transacting business in the Philippines
without a license, or its successors or assigns, shall be permitted to ____or
_____, ___or _____ or ________
Exception: Such corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any _______ recognized under
Philippine laws.
2. A foreign corporation cannot transact ______ in the Philippines without the
requisite _____. If it does so, the responsible officers may be subjected to the
_______ of Sec. 144.
3. It is not the lack of required license but __________ which bars a foreign
corporation from access to our courts. (Universal Shipping vs. IAC)
4. The true test regarding doing or engaging in or transacting business is
whether the foreign corporation is ______ or _______ for which it was organized
or whether it has ____ and ________. The term implies a ____ of commercial
dealings and arrangements, and contemplates, to that extent, the ____ or
___or the ________, and in progressive __________, _________ and ____ of its
organization. (Mentholatum Co., Inc. vs. Mangaliman)
5. The object of the statute was to subject the foreign corporation doing
business in the Philippines to the jurisdiction of its courts. The object of the
statute was not to prevent the foreign corporation from performing single
acts, but to prevent is from _____ for the purpose of business without taking
the steps necessary to render it amenable to suit in the local courts. The law
simply means that no foreign corporation shall be permitted to transact
business in the Philippine Islands unless it shall have the license required by
law, and until it complies with the law, shall not be permitted to maintain any
suit in the local courts. (Marshall-Wells Co. vs. Henry W. Elser & Co.)
6. A foreign corporation _____ in business in the Philippines may _____ the right
to file an action in Philippine courts for isolated transactions. (Bulakhidas vs.
Navarro)

7.

If A foreign corporation not engaged in business in the Philippines has the

right to sue on an isolated transaction, more so may it sue based on a _____.
(Swedish East Asia Co., Ltd. vs. Manila Port Service)
8. There was only one agreement between petitioners and the respondent. The
three seemingly different transactions were entered into by the parties only
in an effort to fulfill the basic agreement and in no way indicate an intent on
the part of the respondent to engage in a continuity of transactions with
petitioners which will categorize it as a foreign corporation doing business in
the Philippines. The respondent, being a foreign corporation not doing
business in the Philippines, does not need to _________ in order to have the
capacity to sue. (Atnam Consolidated, Inc. vs. CA)
9.
Under the rules of the BOI, the phrase doing business has been
exemplified with illustrations, among them being as follows:
1________ orders, purchase (sales) or service contracts. Concrete and specific
solicitations by a foreign firm, _______ amounting to negotiation or fixing of
the terms and conditions of sales or service contract, regardless of whether
the contracts are actually reduced to writing, shall constitute doing business
even in the enterprise has no office or fixed place of business in the
Philippines.
2______ a representative or distributor who is domiciled in the Philippines
unless said representative or distributor has an ______, i.e., it transacts
business in its name and for its own account, and not in the name or for the
account of the pricipal.
3. _____, whether called liaison offices, agencies or branches, unless provided
otherwise.
4. Any other act or acts that ______ of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, or in the progressive
prosecution of, commercial gain or of the purpose and objective of the
business organization. (Facilities Management Corp. vs. De La Rosa)
10.A single act may bring the corporation within the purview of the statute
where it is an ________. In such a case, the single act of transaction is not
merely incidental or casual, but is of such character as distinctly to indicate a
purpose on the part of the operations for the conduct of a part of the
corporations ordinary business. (Far East Int.l Import vs. Nankai)
11.ITECs arrangement with its various business contacts in the country indicate
its purpose to bring about the situation among its customers and the general
public that they are dealing directly with ITEC and that ITEC is actively
engage in business in the country. In determining whether a corporation does
business in the Philippines or not, aside from their ____ within the forum,
reference may be made to the _______ entered into by it with other entities in
the country. (Communication Materials and Design, Inc. vs. CA)
12.A foreign corporation doing business in the Philippines may sue in Philippine
courts although noT authorized to do business here against a Philippine
citizen or entity who had ____ and ____ by said corporation. To put it another
way, a party is estopped to challenge the personality of a corporation after
having acknowledged the same by entering into a contract with it. AnD the
doctrine of estoppel to deny corporate existence applies to a foreign as well
as to domestic corporations. One who has dealt with a corporation of foreign
origin as a ____ is estopped to deny its corporate existence and capacity. The
principle will be applied to ___ a person contracting with a foreign corporation
from later taking advantage of its noncompliance with the statutes chiefly in
cases where such person has received the benefits of the contract.
(Communication Materials and Design, Inc. vs. CA)

13.The right of a corporation to use its corporate and trade name is a ____,
_______, which it may assert and protect against _____, in any of the courts of
the world even in jurisdictions where it does not transact business just the
same as it may protect its tangible property, real or personal, against
trespass, or conversion. Since it is the trade and not the make that is to be
protected, a trademark acknowledges no ______or municipalities or states or
nations, but extends to every ____ where the traders goods have become
known and identified by the use of the mark. (Western Equipment and Supply
Co. vs. Reyes)
14.A foreign corporation which has never done business in the Philippine Islands
and which is unlicensed and unregistered to do business here, but is ___ and
_____ in the Islands through the use therein of its products bearing its
corporate and trade name has _____ to maintain an action in the Islands.
Parenthetically the Trademark Law allows a foreign corporation or juristic
person to bring an action in Philippine courts for ______ of a mark or tradename, for _____, or ____ and _______, whether or not it has been licensed to do
business in the Philippines. (General Garments Corporation vs. Director of
Patents)
15.Article 8 of the Paris Convention to which the Philippines became a party
provides that a trade name shall be ______ in all the countries of the Union
without the obligation of _____ or
_____, whether or not it forms part of the trademark. (Puma vs. IAC)
16.A foreign corporation ______ in the Philippines needs _____ to sue before
Philippine courts for infringement of trademark and unfair competition. (Le
Chemise Lacoste vs. Fernandez)
17.In a suit involving the violation of the _______ the complainant foreign
corporations capacity to sue is not significant. (Le Chemise Lacoste vs.
Fernandez)

CAPACITY TO SUE
General rule: A foreign corporation must ________ its capacity to sue in order that it
may
proceed and effectively institute a case in Philippine courts.
Exceptions:
1. RPC
2. D
CAPACITY TO SUE
1. The qualifying circumstance of whether or not a foreign corporation has
engaged in business in the Philippines is an essential part of the element of a
foreign corporations capacity to sue and must be _______. (Atlantic Mutual
Insurance Co. vs. Cebu Stevedoring Co., Inc.)
2. If the dismissal of the case, based on _____ of the foreign corporation to aver
its capacity to sue, would not, however, bar the institution of the same action,
_____should not be allowed, especially so if it would be an idle, circuitous
ceremony considering the absence of any meritorious substantial defense of
the defense of the defendant. ______ should not be accorded ______ to
frustrate and defeat a plainly valid claim. (Olympia Business Machines Co. vs.
RAzon, Inc.)
3. Since petitioner is not maintaining any suit but is merely defending one
against itself (it did not file any complaint but only a corollary defensive
petition to prohibit the lower court from further proceeding with a suit that it

had no jurisdiction to entertain), its failure to aver its legal capacity to

institute the present petition is ___. (Time, Inc. vs. Reyes)
LAWS GOVERNING FOREIGN CORPORATIONS
General rule: Any foreign corporation lawfully doing business in the Philippines shall
be bound by
all laws, rules and regulations applicable to domestic corporations of the same
class.
Exceptions:
1. CFOD
2. RLRD
Instances when a foreign corporation authorized to transact business in the
Philippines must obtain
an amended license:
1. CN
2. AP
Requirements in a merger or consolidation of a foreign corporation licensed in the
Philippines:
A. With a domestic corporation:
1. P
2. R
B. With a foreign corporation:
1. P
2. AAMC
3. P/W
Requirements and procedure for the withdrawal of foreign corporations:
1. P/W
2. AS TO CLAIMS W/C ACCRUED
3. AS TO taxes, imposts, assessments and penalties
4. AS TO Publication REQUIREMENT
5. I/C
Grounds for the revocation or suspension of license:
1. AS TO annual report or fees
2. AS TO resident agent
3. AS TO CHANGE OF RA
4. AS TO COPY OFAMENDMENT
5. AS TO MATERIAL MATTER
6. AS TO PAYMENT OF TIAP
7. AS TO BUSINESS TRANSACTIONS I
8. AS TO BUSINESS TRANSACTIONS II
9. OG
Other grounds for revocation of license under special laws:
1. GBA
2. IC
3. OIC
In case the revocation is warranted the SEC shall:
1. C/R

2. FC
3. MN
LAWS GOVERNING FOREIGN CORPORATIONS
1. _____or _____ not affecting creditors or the public in general are governed not
by Philippine laws but the _____ or _____.
2. Special laws may provide or grant certain ____, ____, ____or ___ to a foreign
corporation not otherwise applicable or granted to domestic corporations
(e.g. import duties and tax incentives under the Omnibus Investments Code).
3. A foreign corporation authorized to transact business in the Philippines which
amends its articles of incorporation or by-laws must ____ of such amended
articles of incorporation or by-laws with the SEC or the appropriate
government agency within _____ from the effectivity of such amendment.
CHAPTER 18: MISCELLANEOUS PROVISIONS
What is Outstanding capital stock?
CHAPTER 18: MISCELLANEOUS PROVISIONS
1. Non-stock or special corporations may, through their articles of incorporation
or their by-laws, designate their governing boards by ____ other than as board
of trustees.
2. The ____ shall, from time to time, make a determination of whether the
corporate vehicle has been used by any corporation or by business or
industry to frustrate the provisions thereof or of applicable laws, and shall
submit to Congress, whenever deemed necessary, a __of its findings,
including ____ or ___--.
3. __---- may be set by Congress for stockholdings in corporations declared by it
to be vested with a _________ pursuant to the provisions of this section,
belonging to individuals or groups of individuals _________ by consanguinity or
affinity or by close business interests, or whenever it is necessary to
__________, _________ or ___________ or ___, or to __________ declared in laws,
rules and regulations designed to _________ and ____________.
In recommending to Congress corporations, business or industries to
be declared vested with a public interest and in formulating proposals for
limitations on stock ownership, the NEDA shall consider the ____ and
_________, the ________, the __________, _____________, _________, ___________,
___________, as well as other factors which are ______ and __________ of
business and industry.
4. Every corporation, domestic or foreign, lawfully doing business in the
Philippines shall submit to the SEC an ____ of its operations, together with a
__________ of its assets and liabilities, __________ by any independent certified
public accountant in appropriate cases, covering the _________ and such other
________. Such report shall be submitted within such _______.
5. _____ propounded by the SEC and the answers thereto, as well as the ______
made by the Commission or by any other official authorized by law to make
an examination of the operations, books and records of any corporation, shall
be kept ______, except insofar as the _______ the same to be made public or
where such interrogatories, answers or results are necessary to be presented
as _____ before any court.
6. The __ shall have the power and authority to _____ the provisions of this Code,
and to ______rules and regulations reasonably necessary to enable it to

perform its duties hereunder, particularly in the ____ and ____on the part of
the ____ stockholders, members, directors, trustees or officers.
7. Violations of any of the provisions of this Code or its amendments not
otherwise specifically penalized therein shall be punished by a fine of ________
(P1,000.00) pesos but _______ (P10,000.00) pesos or by ___________, or ____,
in the discretion of the court. If the violation is committed by a ____, the same
may, after notice and hearing, be ____ in appropriate proceedings before the
Securities and Exchange Commission: Provided, That such dissolution shall
____ the institution of appropriate action against the ____, ___ or _____ of the
corporation responsible for said violation: Provided, further, That nothing in
this section shall be construed to ______ the other causes for dissolution of a
corporation provided in this Code.
8. ______ in favor of or against any corporation, its stockholders, members,
directors, trustees, or officers, _____ by any such corporation, stockholders,
members, directors, trustees, or officers, shall be ____ or ____either by the
______ of said corporation or by any _____ or _____ of this Code or of any part
thereof.
9. All corporations lawfully existing and doing business in the Philippines on the
date of the effectivity of this Code and heretofore authorized, licensed or
registered by the Securities and Exchange Commission, shall be ______, ____
or _____ under the provisions of this Code, subject to the terms and conditions
of its license, and shall be governed by the provisions hereof: Provided, That
if any such corporation is affected by the ______ of this Code, said corporation
shall, unless otherwise herein provided, be given a period of _______ from the
effectivity of this Code within which to comply with the same.
PD 902-A, AS AMENDED
Distribution of Special Commercial Courts:
1. 2
2. 2
3. 1
4. 1
PD 902-A, AS AMENDED
1. The SECs quasi-judicial functions under Sec. 5 of PD 902-A, as amended were
transferred to the _______ by RA 8799.
2. General rule: The Special Commercial Courts shall have ___and ____-- over
cases falling under Sec. 5 of PD 902-A.
Exception: The SEC shall retain jurisdiction over cases involving
_____and _____ filed on or before __, ____.
DEVICES OR SCHEMES AMOUNTING TO FRAUD AND MISREPRESENTATION (Sec. 5
[a])
Examples of acts amount to fraud or misrepresentation within the original and
exclusive jurisdiction
of the Special Commercial Courts:
1. F(Orosa, Jr. vs. CA)
2. CA (Mangalad vs. Premier Corporation)
3. COS A (Alleje vs. CA)
4. PS

1. DEVICES OR SCHEMES AMOUNTING TO FRAUD AND MISREPRESENTATION

(Sec. 5 [a])
INTRA-CORPORATE CONTROVERSIES (Sec. 5 [b])
CONTROVERSIES IN THE APPOINTMENT, ELECTION AND REMOVAL OF
DIRECTORS AND
OFFICERS (Sec. 5 [c])
RECEIVERSHIP AND SUSPENSION (Sec. 5 [d] and 6[c, d])
DEVICES OR SCHEMES AMOUNTING TO FRAUD AND MISREPRESENTATION (Sec. 5
[a])
2. General rule: The Special Commercial Courts shall have __and ___ to hear and
decide cases involving devices or schemes employed by or any acts of the
board of directors, business associates, its officers or partners, amounting to
__and _____ which may be detrimental to the interest of the ___ and/or _____,
____, ________.
Exception: The complaint is based on the __________ (Ex. Syndicated
Estafa)
3. Even if the action is for _________ paid or given to the corporation through
devices and schemes amounting to fraud or misrepresentation ______ , the
same must be filed, heard and tried by the Special Commercial Courts.
4. The ________ must be stated with _______ to place the case with the
jurisdiction of the Special Commercial Courts.
INTRA-CORPORATE CONTROVERSIES (Sec. 5 [b])
What are Intra-corporate controversies?
Elements of intra-corporate controversies:
1. ICR:
a. SMA/CPA
b. (a) and CPA
c. CPA and S
2. AS TO SOURCE OF CONTROVERSY
INTRA-CORPORATE CONTROVERSIES (Sec. 5 [b])
1. The dispute among the parties must be ________ with the regulation of the
corporation. If the nature of the controversy involves matters that are purely
civil in character necessarily the case does not involve an intra-corporate
controversy. (Speed Distributing Corp. vs. CA)
2. The fact that shares of stock were issued to be used as part payment for
lease rentals does not convert it into a intra-corporate controversy. (DMRC
Enterprises vs. Este del Sol Mountain Reserve, Inc.)
3. _____ and ______ of a corporation in the guise of a ________ of a memorandum
of agreement which vested such control and management is an intracorporate controversy. (DPB vs. Ilustre, Jr.)
4. If all of the requirements for a valid transfer have been _______ the dispute is
intra-corporate and is within the jurisdiction of the Special Commercial Court.
(Abejo vs. de la Cruz; Rural Bank of Salinas, Inc. vs. CA)
5. If the petitioner does not have a ________ to the share sought to be
recorded in his name the dispute is not intra-corporate and the ____ or _____
can assume jurisdiction over the case. (Rivera vs. Florendo; Tay vs. CA)
6. A dispute regarding the _______ of a Memorandum of Agreement regarding
the sale of shares of a group of stockholders to another group of stockholders
is intra-corporate. (Saavedra vs. SEC)

7. Where the conflict involves the enforcement of rights and obligations under
the Corporation Code or the inter and intra-corporate affairs of the
corporation, jurisdiction would fall with the _________. But if it requires a mere
determination of the contractual rights of the parties under an ordinary
agreement, the ________ can acquire jurisdiction thereto.
8. The factor which decides whether the action is within the jurisdiction of the
Special Commercial Courts is that the controversy _________ between and
among the parties. (SEC vs. CA)
9. The filing of the civil/intra-corporate case before the SEC _____ the ____ and
________ before the regular courts; such that, a fraudulent act may give rise to
liability for violation of the rules and regulations of the SEC cognizable by the
SEC itself, as well as criminal liability for violation of the Revised Penal Code
cognizable by the regular courts, both charges to be filed and proceeded
independently, and may be simultaneously, with the other. (Fabia vs. CA)
CONTROVERSIES IN THE APPOINTMENT, ELECTION AND REMOVAL OF DIRECTORS
AND
OFFICERS (Sec. 5 [c])
1. The Special Commercial Courts have original and exclusive jurisdiction to
hear and decide cases involving controversies in the ___or ______of directors,
trustees, officers or managers of corporations, partnerships or associations.
2. General rule: A corporate officers ___, _______ by the board of directors is
always a corporate act, and the fact that the officer asks for backwages does
not alter the picture. The original and exclusive jurisdiction rests with the
Special Commercial Courts.
Exception: The _______ is for the recovery of unpaid wages and
separation pay. (Midland Construction Co., Inc. vs. Movilla)
3. The main aspect to be considered is whether the corporate officer _______or
____l or ___. If so, the case would fall within the ambit of the jurisdiction of the
Special Commercial Courts and not the NLRC.
RECEIVERSHIP AND SUSPENSION (Sec. 5 [d] and 6[c, d])
Three types of suspension of payments. Briefly describe.:
1. SSP mere _________ and it refers to a _______ which is filed by a corporation
which possesses _________ to cover its _______ but foresees the possibility of meeting
them when they respectively fall due owing to temporary liquidity problems.
2. AS TO RECEIVER - The _______ is a plan under which the corporation will _______
the payment of its debts and liabilities. Either the petitioner corporation will
_________ or ask for the _________ who will study and make the plan.
3. AS TO ASSETS
RECEIVERSHIP AND SUSPENSION (Sec. 5 [d] and 6[c, d])
1. Petitions for _______ of corporations, partnerships or associations, and ____,
_______,____or ___ are lodged within the jurisdiction of the Special Commercial
Courts.
2. A corporation, partnership or association, whether or not insolvent, can file a
petition for suspension of payments provided it is placed under a ____ or
______.

EFFECTS OF SUSPENSION OF PAYMENTS

WHAT ARE Claims refers to _______ or demands of ____________; the assertion of

right to have ________.
EFFECTS OF SUSPENSION OF PAYMENTS
27.The proper court may issue an order suspending payments of claims due
from a _______.
28.Upon the appointment of a management committee, rehabilitation receiver,
board or body all actions for claims against the corporation, partnership or
association under management or receivership pending before any court,
tribunal, board or body shall be _____ accordingly.
29.The reason for suspension of payments for claims against a distressed
corporation is to enable the _____ to _____ free from ___or _____ that might
unduly hinder or prevent the rescue of the debtor company. (PAL vs. Sps.
Sadic and Kurangking)
30.The suspension of all actions for claims against a corporation embraces ___,
be it ____ or _____ or ____. No other action may be taken, including the
rendition of judgment during the state of suspension. It must be stressed that
what are automatically stayed or suspended are the _____ and _______during
the execution stage after the case had become final and executory. Once the
_______, however, is completed, this Court will proceed to complete the
proceedings on the suspended actions. Furthermore, the actions that are
suspended ________ against the corporation whether for damages founded on
a breach of contract of carriage, labor cases, collection suits or any other
claims of a pecuniary nature. No exception in favor of labor claims is
mentioned in the law. (PAL vs. Zamora)
31.Suspended proceedings include ______. You cannot even ______. All
proceedings ______ are suspended.
32.Even if the suspension order is issued after a creditors action in court has
already become _______, the execution of the decision is likewise suspended.
(Filinvest vs. Ejercito)
33.Note the words against the corporation.
If a corporation secures a loan, and one of its key officers uses his _______ to
guarantee the loan, corporation files for suspension, the bank want to
foreclose on the prop, may the bank foreclose?
Yes. It is not an action for a claim _______. Union bank case.
34._______, _____ or _____,of corporate liabilities,___, and ______ by the suspension
of payments order issued by the court pursuant to PD 902-A.
35.Same with regard to _____, _______l to corporate officer concerned.
36.Despite the appointment of a receiver for a corporation under PD 902-A, an
action against a corporation seeking the ________ cannot be suspended by
reason thereof, since the ____ does _________ against the corporation. (Finasia
Investment and Finance Corporation vs. CA)
37.The SEC does _____ to entertain petitions for suspension of payments filed by
parties ______, _____ or _____. (Union Bank vs. CA)
38.Equality is Equity during suspension the assets are held in _____for the
_____ of all creditors to preclude one from obtaining an ____ or ____ over
another by the expediency of an ____, ____ or otherwise. The creditors should
stand on ________. Not anyone of them should be given any preference by
paying one of them ahead of the others. (Alemars Sibal and Son, Inc. vs.
Elibenas)
39.The issue of whether or not ______ of distressed corporations stand on equal
footing with all other creditors gains relevance and materiality only upon the
______, ____, ___ or __. Suspension of claims against the corporation under

rehabilitation is counted or figured up only upon the appointment of a _____ or

_____. (RCBC vs. IAC)
40.VERY IMPORTANT!!!
1. ______ against corporations, partnerships or associations that are
____before any
court, tribunal or board, ________ as to whether or not a creditor is secured
or unsecured, shall be suspended effective upon the appointment of a _
___, ____, ___ or___ in accordance with the provisions of PD 902-A.
2. Secured creditors retain their ______over unsecured creditors, but ______ of
such preferences is _________ upon the appointment of a management
committee, rehabilitation receiver, board or body. In the event that the
assets of the corporation, partnership or association are _____, however,
___or ______ under the applicable provisions of the Civil Code will definitely
have _________ over unsecured ones.
41.If the rehabilitation of the corporation is _____, the ____ muto propio or the
______ may petition the lifting and the preferences will be there again.

APPOINTMENT OF MANAGEMENT COMMITTEE, BOARD OR BODY (Sec. 6 [d])

Requisites before a management committee, board or body may be appointed or
created:
1. DLWD
2. P AND EFFECT
APPOINTMENT OF MANAGEMENT COMMITTEE, BOARD OR BODY (Sec. 6 [d])
1. Special Commercial Courts may ____ or ____ a _______, _________ upon ____ or
____ to undertake the management of corporations, partnerships or
association _____ or _____ by other government agencies in appropriate cases
where there is ________ of dissipation, loss or wastage or destruction of assets
or other properties or paralyzation of business operations of such corporation
or entities which may be prejudicial to the interest of minority stockholders,
parties-litigant or the general public.
2. It may also create or appoint a management committee, board or body to
undertake the management of corporations, partnerships or other
associations ______or ______ such as banks and insurance companies,
___________.
3. Danger a general term, including peril, jeopardy, hazard and risk; refers to
exposure or liability to injury.
4. Imminent something which is threatening to happen at once, something
close at hand, something to happen upon the instant, close although not yet
happening, and on the verge of happening.
5. In the _____ of a strong showing of an imminent danger of dissipation, loss,
wastage or destruction of assets or other properties of a corporation and
paralysis of its business operations, the mere apprehension of ______ based
upon ______ will not authorize the appointment of a management
committee/receiver. (Sy Chim vs. Sy Siy Ho & Sons, Inc.)
6. Mere disagreement among stockholder as to the fairness of the corporation
would not in itself suffice as a ground for the appointment of a management
committee. However, where the dissention among the stockholders is such
that the corporation ______ its corporate functions, the appointment of a
management committee becomes imperative. (Jacinto vs. First Women.s
Credit Corporation)

7. A ______ shall have the power to ____ and _____ assets and properties owned
and possessed by the entity under management. It shall take the place of the
_____and _______ of the entity under management, assume their ___ and
_______, and preserve the _____ and ____in its possession.
8. The _______ shall not take over the management and control of the debtor but
shall closely ___ and ______ of the debtor during the pendency of the
proceedings. He shall be primarily tasked to __________ the debtor and to
ensure that the value of the debtors property is reasonably ____ pending the
determination of whether or not the debtor should be rehabilitated, as well as
implement the rehabilitation plan after its approval.
9. Venue of actions in intra-corporate controversies ________ which has
jurisdiction over the ______ of the corporation, partnership or association.
10.Nature of proceedings is ____. Jurisdiction acquired upon __________.
11.Creditors have the personality (at least _________) may file, ex. Bayantel.
12.Their compensation is subject to _________.
13.Actuations of the board, body, committee subject to.
14.Service of pleadings . Sec. 6 rule 1. may be ___ or ____. _______.
15.Service of summons. Sec. 5 rule 2. made _________ or ______ or _______. vs. Eb
Villarosa case. (Rule of Court)
SECURITIES REGULATION CODE (SRC)
Securities
Securities are SPI in a ______ or in a_________ or _________ and evidenced by a
CCIcertificate, contract, instrument, W OR E. It includes:
1. S OF S B D N E/I ABS
2. IC C1 C2
3. FUI IN OGM
4. D OW
5. C/A C/P TC VTC
6. P OR NONP MCI
7. Other IS

Full disclosure rule

Doctrine of primary jurisdiction
Investment contract
SECURITIES REGULATION CODE (SRC)
1. ________ as long as there is full and complete disclosure relative to the issue
of _____ the _______ should determine for themselves whether or not to invest.
2. _________ courts will not determine a controversy involving a question within
the jurisdiction of the administrative tribunal, where the question demands
the exercise of ________ requiring the _____ and ________l and intricate matters
of fact.
3. A criminal charge for violation of the SRC is a _________. Hence, it must first
be referred to an _______ of special competence, i.e., the SEC The SRC is a
special law. Its enforcement is particularly vested in the SEC. Hence, all
complaints for any violation of the Code and its implementing rules and
regulations should be filed with the SEC. Where the complaint is criminal in
nature, the SEC shall indorse the complaint to the DOJ for preliminary
investigation and prosecution as provided in Section 53.1. (Baviera vs.
Paglinawan)

SECURITIES
1. The definition of securities is extra-ordinarily broad. It is a _____ meant to
include all novel devices which are of the same nature. Investment contracts
and golf club shares are included in the definition of securities.
2. General rule: Securities cannot be sold or offered for sale or distribution to
more than 19 ____ without a ______ and _______. Once the securities are sold
or offered to more than 19 persons, it becomes a _______ requiring prior
registration with the ___. Violation thereof renders the person ______, __ and
______.
Exception: The securities involved are covered by ___ (________) and
____ (______).
3. Persons engaging in the business of ___ or ____ in the Philippines as a ___ or
____or, or acting as a _____ for such entities must be _____ and ____ as such by
the SEC.
4. ______ a contract or scheme whereby a person invests his money in a
common venture premised on a reasonable expectation of profits to be
derived from the entrepreneurial or managerial efforts of others.
5.
Issuance of certificates of participation in a ________, solely on the
management of others ____or ___ is an ______ and thus a security. (Justee vs.
SEC)
6. __________ partakes of a nature of an investing contract which cannot be sold
to _______.
7. When an investor is relatively uninformed and turns over his money to others,
essentially depending upon their ______and ___ and _______, the transaction
generally is considered as an investment contract. The touchstone is the
presence of an______ In a __________ premised on a reasonable expectation of
profits to be derived from the entrepreneurial or managerial efforts of others.
(People vs. Petralba)
Exempt Securities
. Exempt Securities (Sec. 9):
1. BY GOVT ETC
2. BY GOVT OTHERS
3. BY R/T
4. S/D
5. S
Exempt Transactions
. Exempt Transactions (Sec. 10):
1. J/S S-EAGRT
2. AS TO PLEDGE
3. IT
4. D OF S
5. S OF CS
6. I OF B
7. I & D OF S
8. BS T
9. S4S
10. X OF S
11. S OF S
12. S OF S TO
a. B;

b. RIH
c. IC
d. PF
e. IC
f. OP
Tender Offer
DEFINE Tender Offers
A tender offer is required of any person or group of persons acting in concert who
intend to acquire:
1. AS TO ES
2. AS TO ES WITHIN 12
Tender Offer
1. Tender Offers a ____________ by the purchaser to acquire a certain block of
____of a company through ______ or _______.
Proxies
Requisites for proxies:
1. W
2. S
3. F
Proxies
1. Proxies must be issued and proxy solicitation must be made in accordance
with rules and regulations to be issued by the Commission.
2. General rule: A proxy shall be valid ___________ for which it is intended.
Exception: It is otherwise provided in the proxy.
3. No proxy shall be valid and effective for a __________.
4. No broker or dealer shall give any proxy, consent or authorization, in respect
of any security carried for the _______, to a person other than the
customer____________.
5. A broker or dealer who holds or acquires the proxy for ______ or such
percentage as the Commission may prescribe of the __________, shall submit a
report identifying the beneficial owner _________ after such acquisition, for its
own account or customer, to the ________, to the______ where the security is
traded and to the _______.
Independent Director
Independent director
Independent Director
1. Any corporation with a class of equity securities _______ on an Exchange or
with assets __________and having ______, at least of 200 of which are holding
________ of a class of its equity securities or which has sold a class of equity
securities to the public pursuant to an effective registration statement shall
have at least 2 _______ or ___________, ______.

2. _________ a person other than an officer or employee of the corporation, its

parent or subsidiaries, or any other individual having a relationship with the
corporation, which would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director.
3. The SEC may exempt corporations from the required independent directors as
it did in the rehabilitation of Victorias Milling Co. Inc..

Insider Trading
Insider:
1. I
2. D OR I
3.
4. GE D O
5. AS TO PRIVITY
General rule: An insider may not sell or buy a security of the issuer while in
possession of material
information with respect to the issuer or the security that is not generally available
to the public. Exceptions:
1.
2.
Material non-public information has not been generally disclosed to the public and:
1.
2.
INSIDER TRADING
1. An insider may not communicate material non-public information to any
person who will likely buy or sell a security of the issuer while in possession of
such information.
2. Trading by persons who have material non-public information about a tender
offer ______.
Registration of Brokers, Dealers, Salesmen and Associated Persons
Broker
Dealer
Salesman
Registration of Brokers, Dealers, Salesmen and Associated Persons
1. Persons engaging in the business of buying or selling securities in the
Philippines as a broker or dealer, or acting as a salesman for such entities
must be ______ as such by the SEC.
2. Broker a person engaged in the business of _____________________.
3. Dealer any person who ________________ in the ordinary course of business.
4. Salesman - a natural person, _______ or as an agent, by a dealer, issuer or
broker to _________.
5. A _______ can have no other business than that.
6. Purchase of shares should be ________. However a private transaction can Be
made.
Fraudulent Transactions and Other Market Manipulations

Describe the following Fraudulent and manipulative devices:

1. Wash sale
2. Matched order
3. Marking the close
4. Painting the tape
5. Squeezing the float
6. Hype and dump
7. Boiler room operations
8. Circulating or dissemination information
9. Making false or misleading statements
10. Pegging or fixing or stabilizing the price of security
11. Short sale
12. Insider trading
1. Wash sale and matched order is illegal when used as a means to create a
false or misleading appearance of ______ in the security concerned.
2. Fraud akin to bad faith which implies a _____and _____ design to do a
wrongful act for a dishonest purpose or moral obliquity.
Marking the close, painting the tape, squeezing the float, hype and dump, and
boiler room
operations are illegal when they are effected to:
1. RP IP
2. DP
3. CAT
Other fraudulent transactions:
1. E DSA
2. OMP
3. E ATPC
WHAT IS Fraud
Settlement Offer
1. At any time, during an ________ under this Code, parties being investigated
and/or charged may propose in writing an _______ with the Commission.
2. Upon receipt of such offer of settlement, the Commission may consider the
offer based on ____, ______, _______.
3. The Commission may only agree to a settlement offer based on its findings
that such settlement is in the ______. Any agreement to settle shall have _____
until _____. Such decision may be made ______ on the part of the person
making the offer.
Limitation of Actions
1. SEC. 62. Limitation of Actions. - 62.1. No action shall be maintained to
enforce any liability created under Section 56 or 57 of this Code unless
brought within ___ years after the discovery of the untrue statement or the
omission, or, if the action is to enforce a liability created under Subsection
57.1(a), unless brought within ____ years after the violation upon which it is
based. In no event shall any such action be brought to enforce a liability
created under Section 56 or Subsection 57.1 (a) more than____ years after
the security was bona fide offered to the public, or under Subsection 57.1 (b)
more than ____ years after the sale.

2. 62.2. No action shall be maintained to enforce any liability created under any
other provision of this Code unless brought within ____ years after the
discovery of the facts constituting the cause of action and within ___ years
after such cause of action accrued.
3. Fasle registration statement - _____ - sec. 56
4. Ceeiling as to amount of damages - _____ of the amount involved
5. limitation of actions - not later than ______ after the cause of action accrues