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CORPO - Title VII - Stocks and Stockholders, Finish this portion, Class Qs…

- - - - Section 62. Certificate of Stock and Transfer of Shares
        
        Section 63. Issuance of Stock Certificates - No certificate of stock shall be issued to a subscriber until the full amount of subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid.
        
        Subscribed, unissued
        
        RCC amended, SEC can not require corporations whose securities are traded in trading markets to issue certificates/shares of stocks in uncertified or scripless form.
        
        Section 64. Liability of Directors for Watered Stocks. - Watered stocks refer to stocks issued for consideration less than the par or valued price or, for a consideration in any form other than cash valued in excess of its fair value.
        
        Water is the difference between the fair value at the time of issuance and, the par/issued value of the stocks
        
        Section 65. Interest on Unpaid Subscriptions. - Can refer to either:
        
        Stipulated Interest - Stipulated in the contract of the subscription
        
        Interest by Default/Legal Interest - Applies in default of stipulated interest beginning on the default or failure to pay the balance of the subscription on the due date.
        
        Section 66. Payment of Balance of Subscription. -
        
        GR - on the date specified in the contract of subscription
        
        XCPN - If none, board of directors may declare anytime due and payable unpaid corporations and collect the whole/percentage + interest as it may deem necessary.
        
        Section 67. Delinquency Sale - Refers to the sale of delinquent stocks.
        
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        Due Date - Stipulated date or, the call or demand by the Board of Directors.
        
        Demand is not necessary if there is a due date pursuant to NCC 1169
        
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        Liability of Directors/Officers - Solidarily liable to the corporation or its creditors with the stockholder concerned for the difference between between the fair value at the time of issuance and, the par/issued value of the stocks.
        
        Treasury Shares - sold below par value as watered stocks refer to issuance of original or primary shares and not the disposition of existing shares.
        
        When Liable - if they either:
        
        CONSENTS;LESS - to the issuance of stocks for a consideration less than its par or issued value;
        
        CONSENTS;EXCESS - to the issuance of stocks for a consideration in any form other than cash, valued in excess of its fair value; or
        
        KNOWLEDGE - of the insufficient consideration, does not file a written objection with the corporate secretary
        
        Rationale - the aggregated par value of the subscribed shares, regardless of the consideration paid is treated as equity int rust of the corporation's creditors. This is why subscription for less than par/issued value is violative of the trust fund doctrine.
        
        Stock Certificate - A written instrument, signed by the proper officer of a corporation stating or acknowledging that the named person is the owner of a designated number of shares of its stock.
        
        Negotiable Status - Quasi-negotiable, in the sense that transferable by mere delivery. But, non-negotiable as holder takes it without prejudice to rights/defenses of other creditors.
        
        Purpose of Certificate -
        
        Not the stock itself, but evidence of the stock and interests therein + status of the holder in the corporation and ownership of shares represented
        
        Expresses the contract between the corporation and the stockholder, but not essential to the existence of the stock nor the nature of the relation between the stockholder and the corporation.
        
        Thus, not indispensable for the exercise of stockholder's rights as prior to issuance of certificate, full subscription amount has already been paid.
        
        Continuing Character - Once issued, stock certificate is a continuing affirmation or representation that the stock described therein is valid and genuine, prima facie evidence that it was legally issued.
        
        Required Formalities for the Issuance of a Stock Certificate -
        
        Signed/SEALED - by the President or Vice-President
        
        Countersigned by the Secretary or Asst. Secretary, and Sealed with the seal of the corporation
        
        BYLAWS - Issued in accordance with the bylaws of the corporation
        
        DETACHED - Detached from the book of stock certificate and issued to the stockholder
        
        FULL PAYMENT - No certificate of stock shall be issued until payment of full amount of subscription, with interest and expenses, if any is due
        
        REQUIRED CONTENTS - Every certificate must state on its face:
        
        ORGANIZED - That the corporation is organized under the laws of the state
        
        NAME - The name of the person to whom issued
        
        NUMBER/CLASS The number and class of shares
        
        DESIGNATION - The designation of a series, if any, which the certificate represents
        
        PAR VALUE - of each share represented or a statement that the shares are without par value
        
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        Doctrine of Indivisibility of Subscription Contracts. - A subscription is one, entire and indivisible whole contract. This means that , a corporation cannot issue certificates of stock for the portion of the subscription that is paid and cancel the portion which remains unpaid
        
        Rationale - To prevent the partial disposition of a subscription which is not fully paid. Would violate trust fund doctrine as in effect release a part of the subscription.
        
        If permitted, and the stockholder subsequently becomes delinquent, the corporation may not be able to sell as many of his subscribed shares as would be necessary to cover the total amount from him
        
        sir says note this, often overlooked
        
        Bearer Stock Certificates - Prohibited, as certificates only to registered owners of a stock.
        
        Shares of Stock - Units of capital stock, representing aliquot portion of the corporation's property or the right to share in its proceeds to that extent when distributed.
        
        Personal property - may be transferred or encumbered as the stockholder sees fit.
        
        No need for the corporation to be a party to the transaction. But, to bind it must be recorded in its books.
        
        Mode of Transfer - must be in strict compliance with the mode prescribed by the RCC.
        
        DELIVERY - of the stock certificate
        
        ENDORSED - by the owner/attorney-infact other such authorized persons
        
        TIME OF VALIDITY -
        
        GR - Valid after recorded in the books of the corporation showing the following information:
        
        NAMES OF THE PARTIES
        
        DATE OF TRANSFER
        
        NUMBER OF CERTIFICATES
        NUMBER OF SHARES TRANSFERRED
        
        XCPN - Even prior, transaction is valid as between the parties.
        
        When Sale/Transfer Perfected - Upon compliance with the formalities required by law.
        
        Transfer of Common Shares - Mere endorsement of the certificate effects the transfer of title without need for execution of deed of assignment. So long as recorded.
        
        Usual mode - By indorsement ont he certificate.
        
        Documentary Requirements for Transfer
      - Allowable Forms of Consideration - These may also be used for issuance or bonds by the corporation.
        
        Actual cash paid to the corporation;
        
        Property, tangible or intangible
        
        Labor performed for or services actually rendered to the corporation;
        
        Previously incurred indebtedness of the corporation;
        
        Amounts transferred from unrestricted retained earnings to stated capital - this just refers to payment of stock dividends.
        
        Outstanding shares exchanged for stocks in the event of reclassification or conversion; - Such as in cases where corporation issues common shares in exchange for preferred redeemable convertible shares (Preferred shares may be converted to common stocks if corporation fails to redeem them on the date specified in the agreement)
        
        Shares of stock in another corporation; and/or
        
        Other generally accepted form of consideration. - This can cover cryptocurrency if it becomes generally accepted (Q. of metric for general acceptance)
        
        Specific Prohibitions - Shares of stock shall not be issued in exchange for promissory notes or future service
        
        Q. Bakit bawal promissory notes
        
        Conditions for Acceptance of Property - Subject to concurrence of (4) Conditions
        
        NECESSARY/CONVENIENT - for its use and lawful purpose
        
        FAIRLY VALUED - at-least equal to the par value of the issued shares
        
        VALUATION - Initially determined by the stockholders or board of directors,
        
        Subject to SEC approval
        
        2/3 STOCKHOLDER VOTE - In cases where the shares will not be issued in favor of existing stockholders
        
        In addition to approval of board of directors.
        
        Otherwise, violation of pre-emptive right.
        
        Rationale for SEC Approval - To prevent issuance of watered stocks in instances where property is below the fair value of the issued stocks.
        
        Use of Pro-Indiviso Interest in Real Property - Since intangible property, SEC Opinion No 02-08 says interest in a co-ownership may be used, subject to the following conditions
        
        Conditions for Shares as Payment of Debt -
        
        PREVIOUSLY EXISTING - Debt must be previously existing, not future debts.
        
        2/3 APPROVAL - If issued to non-existing stockholders 2/3 approval of outstanding capital stock.
        
        Otherwise, violation of pre-emptive right.
        
        OWN SHARES - If own shares acquired by bank in payment of debt, has to have BSP approval, and must be disposed of within 6 months from acquisition.
        
        Primary Right - Investor protection, then ease of doing business. This is why multiple forms of consideration allowed.
        
        Q. Change of Form of Consideration - Sir says yes, RCC does not prohibit,.
      - Fixing of price of No-Par value Shares - May be fixed in AOI or board of directors pursuant to AOI or bylaws.
        
        If no authority, must be by majority stockholders in a meeting.
        
        Divina comments - No sense to fix price in AOI, would lose flexibility.
        
        If board authorized, no longer need majority vote of board of directors, only majority of quorum.
    - - Rationale - Waiting for SEC approval might prejudice persons as no one knows status of corporation during tha tinterim period prior to approval of SEC.
        
        in contrast, date of submission is more determinable.
  - - - Right of Enforcement by Creditors - Corporate creditors may enforce the payment of unpaid subscriptions, made int he same collection suit against the corporation.
        
        Creditor steps into the shoes of the corporation (Confusion/Merger ba to?)
        
        Again, anchored on trust fund doctrine.
        
        Sir emphasized distinction between subscription contract and purchase/transfer of shares.