Philippines Corporation Code NOTES:
Where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be effective upon filing of a certificate thereof with the Securities and Exchange Commission.
Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided, That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share; Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.
Except as otherwise provided by the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share.
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;
4. Incurring, creating or increasing of bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in. this Code shall be deemed to refer only to stocks with voting rights.
Classification or division of shares
The corporation is free to classify its shares of stock into such classes or series of shares, or both with such rights, privileges or restrictions as may be attached thereto as long as such classes or series of shares and their rights, privileges or restrictions should appear in the articles of incorporation and certificates of stock, but always subject to legal limitations.
Shares of stock may principally differ:
(1) As to dividend rights;
(2) As to rights in the surplus upon liquidation;
(3) As to voting rights.
The general rule is that, in the absence of provisions to the contrary as stated in the articles of incorporation and certificate of stock, shares shall be treated equally. Thus, all such shares shall have voting rights and no preference in dividend payments shall be observed.
The usual kinds of shares which are hereinafter defined (infra) are:
(1) Par value shares;
(2) No par value shares;
(3) Common shares; and
(4) Preferred shares.
Limitations on classification and issuance of shares of stock-
While corporations (or their incorporators) are free to classify corporate shares, there are certain limitations that they must observe in classifying or issuing shares of stock.
These are the limitations:
(1) No shares of stock can be classified as to prejudice corporate creditors unless authorized by law ; thus, there must be observed distinctions between shares and debts.
(2) As a general rule, shares shall not be deprived of voting rights and when there are shares deprived of voting rights like preferred or redeemable shares, along with these shares there must always be a class or series of shares which have complete voting rights.
(3) Shares of stock classified as without voting rights like preferred shares are entitled to vote on certain matters like amendment of the articles of incorporation, adoption and amendment of bylaws, increase or decrease of capital stock, etc.
(4) Banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be allowed to issue no-par value shares of stock.
(5) Preferred shares of stock may be issued only with a stated par value.
(6) Shares without par value (no par value shares) shall be issued as fully paid and non-assessable.
(7) Shares without par value may not be issued for a consideration less than five pesos (P5.00) per share.
(8) The entire consideration received by the corporation for its no par value shares shall be treated as capital and shall not be available as dividends; of course, the value in money or property paid for par value shares shall also be treated as capital from which no dividends shall be payable to shareholders.
(9) Terms and conditions of preferred shares or any series hereof may be fixed by the board of directors only when the latter is so authorized by the articles of incorporation and such terms and conditions shall take effect only upon filing of the corresponding certificate in the Office of the Securities and Exchange Commission.
Classes of shares-
Shares may be classified as:
(1) Common share, one which entitles the owner or holder to an equal prorata division of profits without any preference or advantage over any class of stockholders.
(2) Preferred share or stock, one which entitles the holder to some priority as to dividend or principal or both over some other class or classes of stockholders.
(3) Cumulative preferred shares, those which entitle the holder to payment not only of current dividends but also of back dividends not previously paid, when and if dividends are declared, to the extent stipulated, before holders of common shares are paid.
(4) Non-cumulative preferred shares, those which entitle the holders merely to the payment of current dividends but not of back dividends, before holders of common shares are paid.
(5) Participating preferred shares, those that entitle the holders to participate with holders of common shares in the surplus profits after the amount of the stipulated dividend has been paid to holders of preferred shares.
(6) Non-participating preferred shares, those that entitle the holders only to the stipulated preferred dividend and no more.
(7) Redeemable shares, those which grant to the issuing corporation the power to redeem (purchase) its own shares.
(8) Convertible shares, those which confer on the holders the option of exchanging such shares for another class of shares at a certain price or prices and within a certain period. (9) Option warrant, a stock which gives the holder the right to subscribe for or purchase shares of the issuing corporation, such as common shares, at a stipulated price or prices per share usually within a limited time.
(10) Par value share, one on the certificate of which or in the articles of incorporation, appears an amount in pesos as the nominal value of the share.
(11) No par value share, is a share without any nominal value in terms of peso or peso's worth.
(12) Treasury shares, those which have been issued as fully paid and have been reacquired by the corporation, and not retired.
(13) Retired shares, are shares which have been withdrawn and have disappeared altogether.
(14) Guaranteed shares, are those guaranteed by- a person, natural or juridical, other than the issuing corporation.
(15) Debenture shares, are those which are more of certificates of indebtedness not guaranteed by any specific property of the issuing corporation.
(16) Escrow shares, are those deposited with a person to be delivered to another upon fulfillment of a condition.
(17) Deferred shares, are those which are entitled to dividends after payment of holders of common shares.
(18) Watered shares, are those issued for no consideration or inadequate consideration.
(19) Bonus shares, are those issued gratuitously; they are watered shares.
(20) Overissued shares, are those issued beyond the authorized capital stock and are considered void.
(21) Vetoing shares, are those issued with the right to vote only on specific questions or proposals.
(22) Promotion shares, are those issued by mining corporations to owners of mines who transferred their rights over the latter to the former, or those shares issued to promoters who brought about the formation of the corporation.
(23) Street certificate, the certificate covering shares which is indorsed in blank and therefore transferable by mere delivery until the reaches the hands of a transferee who, deciding to effect registration in the books of the corporation can just place his name as transferee in the proper space provided for in the certificate .
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EXAMPLE DRAFT OF AN ARTICLES OF PARTNERSHIP:
ARTICLES OF PARTNERSHIP
of
_______________________
KNOW ALL MEN BY THESE PRESENTS:
That we, __Partner 1__, (single / married / widow), and __Partner 2__, (single / married / widow), and __Partner 3__, (single / married / widow), all Filipinos, of legal ages, and residents of _____________, Philippines, have on this day, covenanted to establish a partnership, in accordance with the laws of the Republic of the Philippines;
AND WE HEREBY CERTIFY:
1. That the names and addresses of the respective partners are as follows:
NameAddress
_______________________
_____________ ______________
_____________ ______________
2. That the name of this partnership shall be _____________ and it shall exist for _____________ (_____) years from the execution of this instrument, unless the partners mutually agree in writing to a shorter period. Should the partnership be terminated by unanimous vote, the assets and cash of the partnership shall be used to pay all creditors, with the remaining amounts to be distributed to the partners according to their proportionate share.
3. That the capital of this partnership shall be _____________ (P_________), Philippine Currency, broken down, in contributions, as follows:
Name of Partner Contribution
_____________ P_____________
_____________ P_____________
_____________ P_____________
The partnership shall maintain a capital account record for each partner; should any partner's capital account fall below the agreed to amount, then that partner shall (1) have his share of partnership profits then due and payable applied instead to his capital account; and (2) pay any deficiency to the partnership if his share of partnership profits is not yet due and payable or, if it is, his share is insufficient to cancel the deficiency.
4. That the purpose(s) for which this partnership is established (is/are) as follows: __________________________;
5. The partners shall provide their full-time services and best efforts on behalf of the partnership. No partner shall receive a salary for services rendered to the partnership. Each partner shall have equal rights to manage and control the partnership and its business. Should there be differences between the partners concerning ordinary business matters, a decision shall be made by unanimous vote. It is understood that the partners may elect one of the partners to conduct the day-to-day business of the partnership; however, no partner shall be able to bind the partnership by act or contract to any liability exceeding Pesos: __________________________ (P_____________), Philippine Currency, without the prior written consent of each partner.
6. That the profits and losses shall be divided among the partners pro rata, in proportion to their respective contributions.
7. In the event a partner withdraws or retires from the partnership for any reason, including death, the remaining partners may continue to operate the partnership using the same name. A withdrawing partner shall be obligated to give _____________ (______) days' prior written notice of (his/her) intention to withdraw or retire and shall be obligated to sell (his/her) interest in the partnership.
8. No partner shall transfer interest in the partnership to any other party without the written consent of the remaining partner(s). The remaining partner(s) shall pay the withdrawing or retiring partner, or to the legal representative of the deceased or disabled partner, the value of his interest in the partnership, or (a) the sum of his capital account, (b) any unpaid loans due him, (c) his proportionate share of accrued net profits remaining undistributed in his capital account, and (d) his interest in any prior agreed appreciation in the value of the partnership property over its book value. No value for good will shall be included in determining the value of the partner's interest.
9. A partner who retires or withdraws from the partnership shall not directly or indirectly engage in a business which is or which would be competitive with the existing or then anticipated business of the partnership for a period of _____________ (____) years within the City/Province of _____________ where the partnership is currently doing or planning to do business.
IN WITNESS WHEREOF, we have hereunto set our hands this _____________ at _____________, Philippines
(SIGNATURES OF PARTNERS)
SIGNED IN THE PRESENCE OF:
____________________________________
(ACKNOWLEDGMENT)
