1.

Intra-corporate proceeding

- One which arises out of intra-corporate or partnership relations

Corporation/Partnership/Association vs public

Corporation/Partnership/Association vs Stockholder/Partner/Members/Officers

Corporation/Partnership/Association vs State

Among the Stockholders, Partners, or Associates themselves

- coverage is broad as it covers all kinds of controversies including:

- devises or schemes or any act of the Board of Directors, business associates, its officers or
partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the
public and/or the stockholder, partners, members of associations or organizations

- election and appointments of directors, trustees, officers or managers of such c/p/a

- elements

Status of the relationship must arise out of relationship (incidents of relationship must also be
considered)

Nature of the question that is the subject of controversy the dispute among the parties be
basically connected with the regulation of the corporation

2. Voting rights

- Right to vote is a right inherent in and incidental to the ownership of corporate stock property right

- being a property right, a stockholder can vote his share the way he pleases except in the following

- non-voting shares are not entitled to vote except in those instances provided in the
penultimate paragraph of section 6

- treasury shares have no voting rights while they remain in the treasury

- shares of stock declared delinquent are not entitled to vote at any meeting

- unregistered transferee of shares of stock

- vital and valuable right which a stockholder cannot be deprived of, nor can such right be essentially
impaired by either the legislature, through amendment of the charter, or by the corporation, through
amendment or articles of incorporation or the by-laws, without his consent.

-court can deny right to vote upon clear showing of the lawful denial under the articles of
incorporation or by-laws

- right to vote may be limited, broadened, or denied only in non-stock corporations

3. Exercise of pre-emptive right

- Pre-Emptive Right is a right granted by law to all existing stockholders (all types of shares) of a stock
corporation to subscribe to all issues and dispositions of shares of any class, in proportion to their
respective stockholdings, subject to limitations under Section 39 of the Code.

- It may be denied only when shares are to be issued:

In compliance with nationalization laws

In good faith, in exchange of property or for payment of debt

- Purpose preservation of the stockholders relative and proportionate voting strength and control,
that is, the existing ratio of their proprietary interest and voting power of the corporation

- prevent the disproportionate dilution of the voting powers of the stockholders

- Right of preemption may be lost by waiver of the stockholder, either expressly or impliedly, by his
inability or failure to exercise it after having been notified of the proposed issuance or disposition of
shares

4. Right to inspect corporate books and records

- Records to be kept and maintained by the corporation:

Records of all business transactions

Minutes of all meetings

Stock and transfer book

- subject to inspection by any director, trustee, stockholder, of member of the corporation at reasonable
hours on business days and a copy of excerpts of said records may be demanded

- 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.

- Exception. It shall be a defense that the person demanding inspection:

Has improperly used any information secured through any prior examination of the records or
minutes of such corporation or of any other corporation; or

Was not acting in good faith or for a legitimate purpose in making his demand.

- Purpose: to protect interest as a stockholder

The right to ascertain how the affairs of the company are being conducted by its directors and
officers is founded by his beneficial interest through ownership of shares and the necessity of self-
protection. Those in charge of the company may be guilty of gross incompetence or dishonesty for years
and escape liability if the shareholders cannot inspect the records and obtain information

- stockholders may not gain access to highly sensitive and confidential information only
director/trustee

- Remedies of a stockholder who is denied inspection of corporate books:

1. Mandamus;

2. Damages either against the corporate or the responsible officer; or

3. Criminal complaint based on Sec. 144 of the Code.

5. Civil case for Quasi-Delict

Basis: In the exercise of his rights and in the performance of his duties, ever person is obligated to act
with justice, give everyone his due, and observe honesty and good faith (Article 19, NCC). Whether
willfully or negligently, a person in contravention of the law causes damage to another is required to
indemnify the latter for the damage done (Article 20, NCC). Only when willful, a person causing loss or
injury to another in a manner that is contrary to morals, good customs, or public policy is obligated to
compensate the latter for the damage (Article 21, NCC)

Quasi-delicts

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.

6. Criminal action - INCRIMINATORY MACHINATIONS

Article 363. Incriminating innocent person. - Any person who, by any act not constituting perjury, shall
directly incriminate or impute to an innocent person the commission of a crime, shall be punished
by arresto menor.

Article 364. Intriguing against honor. - The penalty of arresto menor or fine not exceeding 200 pesos
shall be imposed for any intrigue which has for its principal purpose to blemish the honor or reputation
of a person.