for the 75% balance on the subscription price because SSI had become the new debtor underSubscription Agreements Nos. 1805, and 1808 to 1811."XI.Question:Yenetic Corporation wants to increase its Authorized Capital Stock (which is currently fullysubscribed and issued) to be able to increase its working capital to undertake businessexpansions.The Board of Directors consults with you as legal counsel on the proper answers to thefollowing issues:(a) Can Yenetic's AOI be formally amended to remove the right of appraisal on all dissentingstockholders in all matters under the law which requires a ratification vote of thestockholders?(b) If the increase in Authorized Capital Stock is formally submitted to the stockholders in ameeting duly called for the purpose, what is the vote necessary for the stockholders'ratification, and may the dissenting stockholders exercise their appraisal right?(c) Once the increase in the Authorized Capital Stock of Yenetic has been legally effectedwith the SEC, can the new shares from the unissued shares be offered to a new limited groupof investors without having to offer them to the shareholders of record since no pre-emptiveright is provided for in the AOI and By-laws of Yenetic?Answer:(a) No. Yenetic’s AOI cannot be formally amended to remove the right of appraisal on alldissenting stockholders in all matters under the law which requires a ratification vote of thestockholders.
Appraisal right is a statutory right. Sec. 80 of the Revised Corporation Code provides that anystockholder of a corporation shall have the right to dissent and demand payment of the fairvalue of his shares in the following instances: (1) In case any amendment to the articles ofincorporation has the effect of changing or restricting the rights of any stockholder or class ofshares, or of authorizing preferences in any respect superior to those of outstanding shares ofany class, or of extending or shortening the term of corporate existence; (2) In case of sale,lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all ofthe corporate property and assets; and (3) In case of merger or consolidation; and (4) In caseof investment of corporate funds for any purpose other than the primary purpose of thecorporation.One of the instances where a shareholder shall have the right of appraisal is when anyamendment to the articles of incorporation has the effect of changing or restricting the rightsof any stockholder or class of shares. Such right cannot be denied to the stockholders in caseswhere the law allows such right. Therefore, Yenetic’s AOI cannot be amended to removeappraisal right of the stockholders on matters requiring their approval in cases where the lawgrants them such appraisal right.