unenforceable
3. The certificate/s of stock covered by the VTA shall be cancelled
4. A new certificate shall be issued in the name of the trustee/s stating that they are issued pursuant to the VTA
5. The transfer shall be noted in the books of the corporation, that it is made pursuant to said VTA
6. The trustee/s shall execute and deliver to the transferors voting trust certificates, which shall be transferable in the same manner and with the same effect as certificates of stock
7. No VTA shall be entered into for the
purpose of circumventing the law against monopolies and illegal combinations in restraint of trade or used for purposes of fraud. (Sec. 59) Q: What is the effect of a voting trust agreement with respect to the rights of the trustor and the trustee?
A: A voting trust agreement results in the
separation of the voting rights of a stockholder from his other rights such as the right to receive dividends and other rights to which a stockholder may be entitled until the liquidation of the corporation. It is the trustee of the shares who acquires legal title to the shares under the voting trust agreement and thus entitled to the right to vote and the right to be elected as board of directors while the trustor‐stockholder has the beneficial title which includes the right to receive dividends (Lee vs. CA 205 SCRA 752)
Note: Unless expressly renewed, all rights granted in a voting trust agreement shall automatically expire at the end of the agreed period, and the voting trust certificates as well as the certificates of stock in the name of the trustee or trustees shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of the transferors. (Sec. 59) Q: What are the distinctions between a voting trust agreement and proxy? A: VOTING TRUST PROXY The agreement is irrevocable Revocable anytime except one with interest Trustee acquires legal title to the shares of the transferring stockholder Proxy has no legal title to the shares of the principal Not only right to vote is given, other rights as well except the right to receive dividends Only right to vote is given The trust may vote in person or by proxy unless the agreement provides otherwise The proxy must vote in person The agreement must be notarized Proxy need not be notarized Trustee is not limited to act at any particular meeting Proxy can only act at a specified stockholder’s meeting (if not continuing) The share certificate shall be cancelled and transferred to the trustee No cancellation of the certificate shall be made A trustee can vote and exercise all the rights of the stockholder even when the latter is present A proxy can only vote in the absence of the owners of the stock The voting right is divorced from the ownership of stocks The right to vote is inherent in or inseparable from the right to ownership of stock An agreement must not exceed 5 years at any one time except when the same is made a condition of a loan. A proxy is usually of shorter duration although under Sec. 58 it cannot exceed 5 years at any one time Governed by the law on trust Governed by the law on agency Q: What is a pooling agreement?
A: This is an agreement, also known as voting
agreement, entered into by and between 2 or
more stockholders to make their shares as one unit (ex: Shareholders, A,B,C,D,E, holds 50% of the outstanding capital stock, entered into a pooling agreement to vote for F as a member of the board of director). This usually relates to election of directors where parties often provide for arbitration in case of disagreement. This does not involve a transfer of stocks but is merely a private agreement (Sec. 100).
Q: When are pooling agreements valid?
A: As long as they do not limit the discretion of
the BOD in the management of corporate affairs or work any fraud against stockholders not party to the contract.
Q: What is the difference between Pooling Agreement and Voting Trust Agreement?
A: In Pooling Agreement, the stockholders
themselves exercise their right to vote. On the other hand, the trustees are the ones who exercise the right to vote under the Voting Trust Agreement.
(c) CASES WHEN STOCKHOLDERS ACTION IS REQUIRED
Q: Give the summary of vote requirements for stockholder and directors
A: See Appendix E
Q: Is a provision stating that the consent of the board must be obtained before transfer of shares valid?
A: No. A shareholder has the right to transfer,
sell, assign or dispose his shares as an incident of ownership. A provision that requires any to first obtain the consent of the board of directors or other stockholders of the corporation before he can transfer his shares is void as it unduly restrains the exercise of the stockholder of his right to transfer.
(3) PROPRIETARY RIGHTS
Q: What are the proprietary rights of a stockholder? A: 1. Right to Dividend 2. Right of First Refusal 3. Appraisal Right 4. Right to Inspect 5. Preemptive Right 6. Right to Vote
Q: What is the right to dividend of a stockholder?
A: It is the right of the stockholder to demand
payment of dividends after board declaration. Stockholders are entitled to dividends pro rata based on the total number of shares that they own and not on the amount paid for the shares.
Q: Who is entitled to receive dividends?
A:
GR: Those stockholders at the time of
declaration. Dividends belong to the person who owns the stock when the dividend is declared.
XPN:
1. In case a record date is provided for. A record date is the future date specified in the resolution declaring dividend that the dividend shall be payable to those who are stockholders of record on such specified future date or as of the date of the meeting declaring such dividends. 2. Unpaid Subscribers. Section 72 provides
that holders of shares not fully paid which are not delinquent shall have all the rights of a stock holder.
Q: What are the instances where a stockholder may exercise his appraisal right?
A: Any stockholder of a corporation shall have
the right to dissent and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any 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 of the corporate property and assets as provided in the Code.
3. In case of merger or consolidation.
Q: What is the right of first refusal?
A: A right that grants to the corporation or
another stockholder the right to buy the shares of stock of another stockholder at a fixed price and only valid if made on reasonable terms and consideration.
Except in the case of a close corporation where the right of first refusal is required to be a feature to be found in the articles of incorporation, the right of first refusal can only arise by means of a