outstanding shares or
Amendment by Legislature — extends or shortens corporate term
(4) Extension of corporate term cannot exceed 50 years in
— Charter of a private corporation: any one instance
o AOI (5) Certified copy of amended articles be filed with the SEC
o Corpo Code (6) Original and amended AOI should contain all matters
o Special laws (ex General Banking Act, Insurance Code, etc) required by law
— Corporate charter is a contract between SHs and also between the State (7) Amendment to increase/decrease capital stock or
and the corporation extend/shorten corporate term cannot be made under
— The legislature has the power to make changes in existing corporations Sec 16, but under Sec 38 and 37—requires a meeting
through an amendment to the Corpo Code (8) Amendment must be in the prescribed form
o Subject to the limitation that no accrued rights or liabilities be
— Sec 16 in relation to Sec 42 implies power to add a purpose
impaired (AMS: and non-impairment of contracts in Consti)
entirely different from the original one
o Amendment to AOI + approval of SHs required
Sec 145
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--Marcus objected to the proposed amendment and notified the corporation. Exception to exception: delay is due to some cause
She also demanded payment for the common stock then owned by her. attributable to the corporation
During the said meeting, her common stock was voted against such
amendment.
--She then sues to determine the value of her stock as a basis of the 5. Special amendments (four kinds)
enforcement of payment therefor. Her application for the appointment of
appraisers having denied, and affirmed by the Appellate court. — Meeting is required in all these cases
— SEC approval is required
I: WON Marcus can invoke her appraisal right and to enforce payment of the — Grounds for rejection applicable
value of her stock.
(1) Increase of capital stock
H: YES.
--The amendment granted to the PS additional rights which increased their — Corporation may be organized with an authorized capital stock in
voting privileges from a right to vote only in specified contingencies to excess of what may be intended to cover shares presently issued
voting rights equal share for share to those which CS are entitled. The result (Sec 97[2])
was that the aggregate number of shares having voting rights equal to those o Board may dispose of unissued shares to obtain more capital
of the CS was substantially increased and thereby the voting power of each o But amendment needed if authorized capital stock is fully
common share outstanding was altered or limited by the resulting prorata subscribed and corporation needs to issue shares for more capital
diminution of its potential worth as a factor in the management of the o Overissuance or issuance of shares beyond authorized limit is
corporation. void
— Power to increase capital stock must be substantially in accordance
--Such alteration or limitation in the voting power of the CS held by Marcus, with the grant of power in the Code
considering that she objected to the amendment, notified the company, and
the corporation caused her shares to be voted against the proposal to Sec 38
amend, was sufficient to qualify her to invoke the statutory procedure which
is the basis for her present action. — Increase/decrease cannot retroact to the date of SH approval but
takes effect only upon issuance of certificate
-- By thus limiting the voting power of Marcus’ common shares to a o Subscription to the increase does not vest subscriber with right to
proportionate extent, the corporate action to which she objected was of such vote
a character as to afford her a legal basis to invoke the procedure as a means — Certificate of increase or decrease + Treasurer’s affidavit must be
to accomplish the appraisal of her stock and payment therefor. attached to original AOI; no need to file copy of amended AOI
--Even if she owns only 50 shares, which the corporation argues as de o At least 25% of increased capital stock subscribed
minimis compared to the entire universe of shares of the corporation, and o At least 25% of subscription to increased capital stock paid in
even if it is claimed that she is not in GF, as argued that if she did have a — SH meeting required: 2/3 OCS
bona fide desire to sell her CS she could have done so during the said o Includes transfer of profits to capital stock for distribution as
meeting for 3X the amount of her investment, the court ruled that since the stock dividends
law does not mention a minimum percentage or value of stock which must Consideration in this case must be in cash or property
be owned by a non-consenting SH to qualify him to invoke the statutory No increase allowed on the basis of mere revaluation of
procedure, it should be applied as is. corporate assets
— Three ways to effect the increase in capital stock:
4. Effectivity of amendment o Increase in par value of each share, but no increase in number of
shares
— GR: Amendment takes effect only upon approval by the SEC
o Increase in number of shares, but no increase in par value
o Made within 6 months from filing of amendment
o Increase in both par value and number of each share
o Exception: beyond 6 months, it takes effect even without approval,
— GR: No appraisal right in any of the three
on the date of filing
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o Except: where preferences were subsequently created superior to
the existing shares, SHs have appraisal right A corporation has no power to release an original subscriber to its capital
Covers special amendments under Sec 38, and general stock from the obligation of paying for his unpaid shares without a
amendment to create new classes of shares in Sec 16 valuable consideration for such a release. Strict compliance with the
Requirements in both must be met requirements of law is necessary.
SH meeting indispensable
— Existing SHs have pre-emptive right to the new shares issued The resolution releasing the SHs from their obligation to pay 50% of their
respective subscriptions was an attempted withdrawal of so much capital
(2) Reduction of capital stock from the fund which the company’s creditors are entitled to rely and,
having been effected without statutory compliance, was wholly
— No reduction will be approved by the SEC if it will prejudice the rights of ineffective.
corporate creditors
— Can an over-reduction of capital, resulting in a capital surplus, be CAMPOS: As a practical matter, even if requirements to reduce
declared and distributed as dividends? capitalization are complied with, if creditors would be prejudiced by the
o No. a distribution of corporate assets other than actual profits, is reduction, it is most unlikely that the SEC will approve it.
prohibited until after dissolution of the corporation.
o Exception: decrease of capital stock — Resolution releasing the SHs from their obligation to pay the 50% of
— Reasons for decreasing capital stock: their subscriptions was an attempted withdrawal of so much capital
o Prevent or arrest a capital deficit from the fund upon which the company’s creditors were entitled
o Creation of a capital surplus, against which declines in the value of ultimately to rely on and having been effected without compliance
fixed assets may be charged with the statutory requirements, was wholly ineffectual.
o Retire of eliminate treasury shares instead of reissuing them — The subscription to the capital of a corporation constitute a fund to
o When the corporation does not need any more additional capital which creditors have a right to look for satisfaction of their claims and
— Appraisal right is available if the reduction has the effect of altering the that the assignee in insolvency can maintain an action upon any
rights of any SH/SHs unpaid stock subscription in order to realize assets for the payments
of its debts
Philippine Trust Co. v. Rivera. F: PhilTrust is the assignee in the — Subscriptions payable can be cancelled if there is a reduction in
insolvency case of La Cooperativa Naval Filipina. It sues Marciano Rivera, capital stock:
an incorporator who subscribed for 450 shares of the insolvent, to recover o Which is possible if done with the consent of the creditors, or…
the balance of P22,500, alleged to have been due on his subscription to the o If they will not prejudiced by such move, in which case their
stock of the insolvent. (Orig capitalization of Naval = P100,000, at P100 par consent is not necessary
or 1,000 shares.
Rivera subscribed to 450 shares ((P45K) (3) Change in corporate term
--Rivera claims that during a SHs mtg, it was agreed that the capital of the — Shortening of term:
company be reduced by 50% and the subscribers released from the o When corporation desires to dissolve itself before expiration of
obligation to pay any unpaid balance of their subscription in excess of 50% term
of the total subscribed shares. o as soon as shortened term expires, corporation is ipso facto
--There was no compliance with the formalities of the statute relative to the dissolved
reduction of capital stock. TC ruled that the resolution was without effect and — Extension of term:
that Rivera was still liable for his unpaid subscription. o When business is prosperous
— Procedural requirements: Sec 37
H: Resolution invalid. subscriptions to the capital of a corporation constitute — Conditions required: Sec 11
a fund to which creditors have a right to look for satisfaction of their claims
and that the assignee in insolvency can maintain an action upon any unpaid Sec 37
stock subscription in order to realize assets for the payment of debts.
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Sec 11
— Any change in corporate term must be approved at SH meeting
— Dissenting SH has appraisal right
— Sec 37: appraisal right in extension of term
— Sec 81: appraisal right both in extension and shortening
— When does change take effect?
o Must be governed by general provisions on amendment in Sec 16
Certified copy of amended AOI filed with SEC, etc…
Takes effect upon SEC approval
Does not act within 6 mos: approved as of date of filing
o Amendment to extend must be approved and filed prior to expiration
of original term
But cannot be made earlier than 5 mos prior to expiration