CORPORATION LAW Q: What are the differences between an incorporator and a subscriber, if there are any? A: Some of the differences are as follows: first, all the incorporators are required to sign and acknowledge the Articles of Incorporation while the subscribers, as such, are not subject to the same requirement; second, the incorporators could be either natural or juridical persons; and third, the number of incorporators cannot exceed fifteen while the number of subscribers could be more than fifteen (subject to compliance, in the appropriate cases, with the requirements of the Securities Regulation Code). Q: What are the rights of a stockholder? A: The rights of a stockholder are as follows: (1.) The right to vote, including the right to appoint a proxy; (2.) The right to share in the profits of the corporation, including the right to declare stock dividends; (3.) The right to a proportionate share of the assets of the corporation upon liquidation; (4.) The right of appraisal; (5.) The pre-emptive right to shares; (6.) The right to inspect corporate books and records; (7.) The right to elect directors; (8.) Such other rights as may contractually be granted to the
stockholders by the corporation or by special law. Q: What are the legal requirements in order that a corporation may be dissolved? A: A corporation may be dissolved voluntarily under Section 118 (where no creditors are affected) or under Section 119 (where creditors are affected), or by shortening of the corporate term under Section 120, or involuntarily by the SEC under Section 122, all of the Corporation Code. Dissolution under Section 118,119 and 120 require the same corporate approvals stated in (a) above. Q: What is an intra-corporate controversy? A: An intra-corporate controversy is a conflict between stockholders, members or partners and the corporation, association or partnership regarding the regulation of the corporation. The controversy must arise out of intra-corporate or partnership relations of the parties; or between such corporation, partnership or association and the State insofar as it concerns their individual franchises. It is further required that the dispute be intrinsically connected with the regulation of the corporation (Speed Distributing Corp., et al. v. Court of Appeals, et al, G.R. No. 149351, March 17, 2004; Intestate Estate of Alexander T.Tyv. Court of Appeals, G.R. No. 112872, April 19, 2001) Q: From what funds are cash and stock dividends sourced? Explain why. A: All cash and stock dividends are always paid out of the unrestricted retained earnings (also called surplus profit) of the corporation. If the corporation has no unrestricted retained earnings, the dividends would have to be sourced from the capital stock. This is illegal. It violates the ""TRUST FUND DOCTRINE"" that provides that the capital stock of the corporation is a trust fund to be kept intact during the life of the corporation for the benefit of the creditors of the corporation. (Commissioner of Internal-Revenue v. Court of Appeal®, G.R. No. 108576, January 20, 1999; Boman Environmental Development Corp. v. Court of Appeals, G.R. No.
- Fall '14
- Law, Corporation