knowledge of the action in question and make no prompt objection thereto. (E) PRE‐EMPTIVE RIGHT
Q: What is the difference between pre‐emptive right in an ordinary corporation and in a close corporation?
A: In an ordinary corporation, the pre‐emptive
right extends only to new issues out of the increased capital stock. In a close corporation, pre‐emptive right extends to all stock, including treasury stock. (F) AMENDMENT TO THE ARTICLES OF INCORPORATION Q: Corporation A, a close corporation, amended its articles of incorporation and removed the provision that all shares of stock, exclusive of treasury stock, shall be held by a specified number of shareholders not exceeding 20.
What is the effect of such amendment to Corporation A?
A: It is a special feature of a close corporation
that its shares of stock exclusive of treasury shares shall be held by not more that 20 stock holders. The deletion of such special feature would render Corporation A, no longer a close corporation.
Q: What is the required number of vote for the deletion of such special feature?
A: The amendment by deletion of said special
feature and of the provision reducing a quorum or voting requirements requires the vote of 2/3 of all outstanding shares, regardless of their classifications, restrictions or voting rights. All other matters may be amended by an ordinary vote by stockholders constituting a quorum. (G) DEADLOCKS Q: What is deadlock in a close corporation? A: It is when the directors or stockholders are so
divided respecting the management of the business and affairs of the corporation that the votes required for any corporate action cannot be obtained and as a result, business and affairs can no longer be conducted to the advantage of the stockholders generally. Q: What is the remedy in case of deadlocks in a close corporation? A: The SEC may be asked to intervene and the SEC may perform such actions that may be necessary under the circumstances including the appointment of a provisional director who, as an impartial person will have all the powers of a duly elected director. (2) NON‐STOCK CORPORATION (A) DEFINITION
Q: What is the concept of a non‐stock corporation?
A: It is one where no part of its income is
distributable as dividends to its members.
Even if there is a statement of capital stock, for as long as there is no distribution of unrestricted retained earnings to its members, the corporation is non‐stock.
Any profit which it may obtain as an incident to its operations shall whenever necessary or proper, be used in furtherance of the purpose or purposes for which it was organized.
Note: They are governed by the same rules
established for stock corporations, subject however, to special provisions governing non‐stock corporations.
Q: What are the characteristics of a non‐stock corporation?
A:
1. It does not have capital stock divided into shares
2. No part of its income during its existence is distributable as dividends to its members, trustees, or officers
(B) PURPOSES
Q: For what purposes may a non‐stock corporation be organized?
A: Non‐stock corporation may be formed or
organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agriculture and like chambers, or any combination thereof.
(C) TREATMENT OF PROFITS
Q: May a non‐stock corporation earn profit?
A: Yes. Mere intangible or pecuniary benefit to
the members does not change the nature of the corporation. Q: If a non‐stock corporation earns profit, does it render such corporation a stock corporation? A: No. The fact that a non‐stock corporation earns
a profit does not make it a profit‐making corporation where such profit or income is used for purposes set forth in its articles of incorporation and is not distributed to its incorporators, members or officers. (D) DISTRIBUTION OF ASSETS UPON DISSOLUTION Q: What is the order of distribution of assets on dissolution of non‐stock corporations? A: 1. All its creditors shall be paid
2. Assets held subject to return on dissolution, shall be delivered back to their givers
3. Assets held for charitable, religious purposes, etc., without condition for their return on dissolution, shall be conveyed to one or more organizations engaged in similar activities as dissolved corporation;
4. All other assets shall be distributed to members, as provided for in the Articles or by‐laws
5. In case of there is no provision in the AOI or by‐laws, distribution may be made in accordance to a plan of distribution adopted by the board of trustees by majority vote and by at least 2/3 of the members. (Sec. 94)
Q: Can a non‐stock corporation offset unused contributions of members against the balance of receivables from the same members?
A: No. The unused contributions of members
cannot be offset against the balance of receivables because this would amount to distribution of the capital of the corporation. Members of Non‐stock Corporation are not
entitled to distribution of capital. They are only entitled to distribution of capital upon dissolution when it is provided for in the articles of incorporation or by‐laws. (SEC Opinion, Nov. 27,
1985) (3) RELIGIOUS CORPORATION Q: What is a religious corporation?
A: A corporation composed entirely of spiritual
persons and which is organized for the furtherance of a religion or for perpetuating the rights of the church or for the administration of church or religious work or property. It is different from an ordinary non‐stock corporation organized for religious purposes. (Secs. 109‐ 116) Q: Are religious groups required to be registered with the SEC? A: No, the Corporation Code does not require any religious groups to be registered as a corporation but if it wants to acquire legal personality, its members should incorporate under the Code.
Q: What are the kinds of Religious Corporation?
A:
1. Corporation sole – a special form of
corporation, usually associated with the clergy, consisting of one person only and his successors, who is incorporated by law to give some legal capacities and advantages (Sec. 110);
2. Religious societies or corporate aggregate – a non‐stock corporation
governed by a board but with religious purposes. It is incorporated by an
aggregate of persons, religious order,
diocese, synod, sect, etc. (Sec. 116) (A) CORPORATION SOLE Q: How is a corporation sole organized?
A: By the mere filing of a verified articles of
incorporation with the SEC without the need of an issuance of a certificate of incorporation. (Sec. 111) (i) NATIONALITY Q: What is the nationality of a corporation sole?
A: A corporation sole does not have any