Oplan-corpo-2019-atty.-dela-cruz.pdf

SURVIVAL KIT | CORPORATION LAW CORPORATION: CONCEPT; KINDS [It is an artificial] Being kasi ang nag-create ay by operation of law. Talagang mahaba ang buhay niya, kasi meron siyang right of succession, at tignan mo, meron siyang powers, attributes, and properties. Saan galing? Conferred by law. How? Expressly, pwede rin impliedly, or meron dahil incidental to its existence. At dahil siya ay being, tao siya, yun nga lang hindi natin kaparehas. Tayo, natural, ito artificial. Pero meron din silang citizenship. Paano aalamin? Tignan ang underlying theory. Today ang ginagamit natin ay INCORPORATION THEORY (used during peace time), kung saan tinitignan, paano tinatatag aka tinitignan ang laws observed during the incorporation. Kapag ang batas ay sinunod natin ay PH laws, tatawagin tayong Filipinos. Applicable sa human being. Pero dito, tawag natin ay DOMESTIC. Pag sa ibang bansa, FOREIGN ka, kasi ginamit mo ay foreign law. Dalawang klase ang Foreign Corporation: RESIDENT and NONRESIDENT. Resident kasi siya ay already engaged in business in the PH, the other, not engaged in business. At sana hindi natin gamitin ang CONTROL TEST THEORY kung saan tinitignan natin ang citizenship ng mga owners or stockholders. At yung possibility na gamitin natin yan ay very remote—during wartime lang yan unlike incorporation theory. Bakit remote na magkakagyera? The Constitution provides that the PH renounces war as an instrument of national policy and adapts the generally accepted principles of international law as part of the law of the land. Kaya hindi natin idedeclare ang giyera, maliban na lang kung aatakihin tayo we would be in a state of war, but we’re not going to declare war. Kaya sana hindi natin magamit ang control test theory. Yung iba naman, tungkol sa DOMICILIARY—tintignan naman nasaan ang principal place of business, or yung kanyang principal place of office. Ngayon, dahil yan ay may citizenship, ano pag-aaralan natin? KINDS ang pag-aaralan. 1. PRIVATE CORPORATIONS (hindi natin concern ang Public Coproration dahil hawak ito ng gobyerno) How do we set this up? Sometimes, may mga taong maghahanap ng mga taong interesado na bumuo ng private corporations, ang tawag dun ay mga PROMOTERS sila magpapasimuno. Kaya sa bahay pag may nagaaway na kapatid ang hinahanap ng nanay ay yung promotor. Pero pwede namang wala sila, pero yung mga hinahanap nila ALWAYS NEEDED—mga INCORPORATORS of legal age, minimum nyan ay 5, max ay 15. As a rule, NATURAL persons, at majority ay resident ng PH. Therefore as a rule, hindi issue ang citizenship, pero sabi ko nga may exceptions yan. Kaya ironical ang rule nayan, tignan mo limang tao, human beings, Chinese nationals. 3 nakatira sa Binondo. Yung dalawa, Beijing. Can they organize a corpo? YES. Kaya mapapansin mo may mga Chinese nationals who own corporations in the PH. Just look at Binondo. Ironical, dahil tignan mo 5 Pilipino, 3 naninirahan na sa Beirut, Lebanon. Yung 2, sa Baywalk, PH (tama? Beijing Beirut Baywalk?). Can they organize? NO. Majority do not reside here. 2. QUASI-PUBLIC CORPORATIONS: Private pa rin pero ito affecting public welfare yung business niya. Example: MERALCO; It is owned by private individuals, but the business affects public welfare. It does not send, rather distributes electricity. (Manila Electric Railroad and Light Company—bakit may railroad? Kasi dati siya ang nagooperate ng railroad. FYI yang LRT di naman bago yan, inelevate lang, dati nasa ground yan. Iba ang PNR—Coal naman fuel nyan. LRT electricity yan. trabya (?) tawag from Intramuros to Malate yan ang mode of transportation noong araw walang jeep ~5 minutes of digression deleted~) Anong unang gagawin? ARTICLES OF INCORPORATION

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SURVIVAL KIT | CORPORATION LAW ARTICLES OF INCORPORATION Let’s now prepare our articles of incorporation. Ang unang ilalagay mo dyan, pangalan. We’re not free to choose the name we will use as name of the corporation if it violates yung limits. Dapat ang name natin ay not similar, not confusingly or deceptively similar with the name of an already existing corporation. Yun bang San Miguel magagamit mo pa? Yun bang Mercury? Ang salitang National ba? - Oo naman. Walang karapatan silang ia-appropriate yan. Kasi may National Bookstore. May Mercury Drug, may SM Corp. basta wag mo lang gagawing parehas. Wag mo lang gagawing San Miguel Corporation. Hindi pwede, kasi may existing. Pwede kang gumawa ng San Miguel Enterprises. Pwede San Miguel Grocery kasi that is not confusingly similar. Di ka pwede gumamit ng Mercury Drug Corporation kasi may Mercury Drug na. Pwede mo ba gamitin National Bookstore? – Syempre hindi kasi meron na. National Bank pwede? – Huwag, bawal yan Pero National Restaurant? – Pwede? Yes. Wag lang national bank. If the business is engaged in banking, you are not allowed to use the name national as part of the name of the bank. The word national can only be used by the government in putting up a bank kaya philippine national bank. Clear? Hindi ka pwede ng Mcdo kasi Mcdonalds. Pwede Donald, kung pangalan mo Donald. Wag mo lang gagayahin yung kulay, kasi misleading. Kahit ano pangalan pwede basta wag ka manggagaya. May 5 Filipino incorporators, nung inapply nila yung articles of incorporation nila, assuming ang banko na ginamit na pangalan ay, sobratorpeperogwapo, vinerify nila sa SEC, meron bang gumagamit nito? - Wala. So nagoperate na. Later here comes a representative of a foreign corporation questioning why are you using our name as your name. Syempre magtataka yung domestic kung bakit? Ginagamit na namin yan. Kailangan ba i-verify around the world whether or not this name is being used? - Syempre kung may gusto ka gamitin, gagamitin mo. Ang gagawin mo lang naman pupunta ka sa SEC. Alam mo ginawa nila? Nagdemanda sila. Yung final na decision eto. Anong bagay napatunayan nila? Yung aming corporate name is known not only in our country. Nagsubmit sila ng proof: in fact, we have agents, branches in all parts of the world. Meron sa europe, aasia, canada us based sila. Marami silang branches wala nga lang sa philippines. Meron sa japan, australia, spain, nakakalat. Nanalo sila. Considering we are known worldwide, people in the Philippines may think that they are agents in the Philippines considering that we have agents in all parts of the world. So mga tao sa inyo iisipin kami kausap, iisipin yung product niyo kami. So hindi pwede yun, pinapalitan yung pangalan. So ibig sabihin kahit pangalan yan sa ibang bansa, pero hindi sila worldwide, ang pinoprotectionan is the public. Kasi minsan tayo, brand conscious, pangalan binibili. Pagkatapos natin tignan pangalan, para tayong nagffill up ng resume, nilalagay san tayo san tayo maninirahan, so meron tayong principal office, tapos ilalagay natin expected life natin, syempre ito hindi nilalagay sa resume. Pero sa articles nilalagay. Ano gusto mo? Ako request ko basta pataas pag dating sa ceiling pababa naman.

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SURVIVAL KIT | CORPORATION LAW Tapos pataas ulit tas pababa ulit no? Ang life na ilalagay natin maximum ay 50 years. We cannot provide a period longer than that. Tapos maglalagay tayo ng purpose natin. Pag yung purpose natin lumampas ng isa, ilalagay natin yung principal purpose ha. Principal yun. Pag meron ka pang ibang mga purposes, ilalagay mo secondary. Kaya lang para payagan yung secondary purpose nirerequire ng law na dapat germane to the principal purpose. Ibig sabihin nung salitang germane, connected o related sa principal purpose. Ayos? Tapos lalagay mo yung mga names, nationalities and residencces ng incorporators, syempre nandun saka yung mga members of the board. Tapos ilalagay mo ano yung ating business, do we want money? Anong klaseng corporation ang ating itatayo? Kailangan natin sa capital natin. Kung gusto mo ng pera, inorganize tayo for profit, Stock Corporation. Pero pag inorganize tayo for happiness, enjoyment ang itatayo natin, non-stock kasi tayo ay non-profit. At dahil tayo naka-stock aalaminin natin ano classes of shares. Kung tayo may mga promoter bat hindi natin sila ng bayad by way of share? Promotion stock. Ibibigay lang to sa mga promoter. Matanong kita, gusto bang maramdaman ng iba at ng future generation, gano ka importante na ikaw ang nagtatag? Tayo ba magiging ordinary lang tulad ng ibang stockholders? Why don’t we make ourselves one step higher than the other stockholders. Kasi were it not for us hindi naman matatatag ito. Kaya bigyan natin ang sarili natin ng reward. Magbigay tayo ng founders’ shares. Ibinibigay lang ito sa mga incorporaters. Pwedeng bigyan ng exclusive right to vote and the exclusive right to be voted. Ibig sabihin sila lang pwede maging member ng board, kasi sila lang pwede iboto. Kaya lang pag binigyan mo ng exclusivity, hindi forever, maximum ay 5 years. Eh pano pag naghahanap tayo ng pandagdag puhunan? Sabi ng isa umutang tayo, sabi naman niya, naguumpisa palang tayo baka walang magpautang? Eh magbabayad naman tayo ng tubo sabi nung isa, ang pangit tignan sa libro, meron na agad tayong payable. Anong gusto mo? Kasi diba pag umutang tayo debit cash credit payable no? Bat di ba pwede debit cash credit capital stock? Ano ibig mong sabihin? Magdagdag tayo ng shares. Madadagdagan pa yung stockholders? Madadagdag pa ng hatian later? Hindi lalagyan natin ng limit ang pagiging stockholder niya. Imbes na tawagin natin siya na creditor twagin natin na stockholder. Diba ang creditor may agreement kelan babayaran na tatlong taon. Gawin din natin siya stockholder tatlong taon lang. Pero may limit, ito I-issue natin, imbes na may payable tayo, capital stock, kasi ang ibibigay natin redeemable shares, tinatawag din itong callable shares. These shares can be redeemed regardless whether meron o wala retained earnings. Provided the redemption will not result to insolvency of the corporation. Will not result in difficulty paying its maturing obligations. Ngayon gusto niyo bang gumawa rin tayo ng gwapo at magagandang shares? Kasi mas maraming may gusto sa maganda at gwapo. Ikaw ba sino gusto mong maging boyfriend? Gwapo o hindi gwapo? Eh syempre bigyan mo naman ng chance yung sarili mong magkaanak ng maganda. Kasi namamana minsan yan. So gagawa tayo ng gwapong shares kasi inuuna siya sa listahan ng manliligaw, una siyang pinapasok, preferred shares. At kung gusto mo, gwapo na mabango pa, gawin mo siyang participating. Ang tanong bakit may maganda? Kasi andyan ka. Correct no? Hindi mo kinuha positively yung sinabi ko. Bakit may maganda, kasi andyan ka. O diba? Inisip mo kasi sayo inihalintulad. Bakit may maganda? Bakit may mayaman? Kaya kung may maganda may matatapang, willing makipagsuntukan. Ito takot sa away to. Bihira mo makita ang gwapo makipagsuntukan, takot yan. Kasi kung ako pangit na pangit hahamunin mo ko ng suntukan tigan ko muna kung lugi ako o hindi. Lugi ako, wala na ko sisirain sayo e nakita ko gwapo, edi sige. Kasi may matatapang. Eto yung matatapang na shares, common. Madalas yan tinatawag na gambler share. Willing to take the gamble. Eto kasing preferred may priority, correct? Pwede ring dagdagan ng preference sa dividend, sa asset. Samantalang ang common walang preference, nagiintay lang siya. 3|OplanCorpo2019

SURVIVAL KIT | CORPORATION LAW Anong feature ibibigay sa gambler shares? They are willing to take the risks because they are the one to call the shots. Kasi yung stock natin aalamin natin, sino bibigyan natin ng voting rights. Merong with or without voting rights. Ang common, as a whole, may voting rights. Madalas ang preferred shares walang voting rights. Ano ibig sabihin, pwede ka magparticipate sa decision making pag may voting rights. Subalit may walong bagay na lahat boboto. It does not matter ke meron o walang voting rights. Dito lang makakaboto ang walang voting rights. In all other situations, only voting shares can vote. Saan nababalewala ang distinction? Yun nga lang may nagkahiwalay na isang act. Iba ang paraan para siya ay bumoto. Ang act na ito ay tumutukoy sa amendment ng bylaws. Pano ba ginagawa yan? Dapat inaapprove ng majority ng board. Saan nagkakaiba yan? Dapat ira-ratify yan ng stockholders kung stock corporation, members kung nonstock. Kailangan maratify yan eto 2/3. kaya dapat itanong sa board kasi iba yan at eto may exception pa. If there is no need to ratify, Bakit hindi na siya kailangan iratify if the right is delegated to amend the bylaws to the board. Dinelegate ng stockholders by 2/3 vote. Nadelegate na yung right to amend the by-laws to the board. Dinelegate by the stockholders by 2/3 votes. Delegation power to amend the by-laws can be done but it requires 2/3 votes except if the power is revoked; if the power is withdrawn by the stockholders by majority votes. Kapag silent ang problem ang ibig sabihin kailangang iratify ng stockholders. Pag sinilent iraratify nila. Kapag sinabing naidelegate, malamang ang tanong ilang boto ang kailangan para maidelegate? 2/3. Kapag tinanong naman kung gusto na nilang bawiin, ilan ang kailangang boto para mabawi? Majority. Ano itong A na ito at ito hindi ito nadedelegate. Ang nadedelegate lang yung isang A na yan. All others hindi mo madedelegate, dapat iratify. Yung A na ‘to Amendment of the Articles of Incorporation. ‘Yung letter S nako mahaba yan, yan any limang acts SLEM. Kala mo walo lang yung S pala lima. Sale, Lease, Exchange, Mortgage or Pledge all or substantially all of the corporate properties. Ano yung letter I? I.D; Increase or decrease in capital stock. May isa pang I, tatlo naman yon. Incurring, Creating, Increasing Bonded Indebtedness. Merger and Consolidation Ano naman yung M? yung M naman ay M.C in case of Merger, yung C Consolidation. Kelan may merger? If two or more corporations are united and one of them retains its identity. Kaya kung si A corporation at si B corporation pagsasamahin at mananatiling buhay si A or mananatiling buhay si B, merger. Kapag si A corporation iuunite kay B corporation at pareho silang mawawala, magkakaroon ng bagong corporation- C corporation- consolidation. Kaya nga C, consolidation. Basta namamatay consolidation. Letter I ulit, kung magkakaroon ng Investment in another corporation. And finally, yung letter D in case of Dissolution. Shares of stock; with Par and no Par Kadugtong ng stock ha, matapos nating malaman yung classes, yung voting, pano natin malalaman yung gusto nating amount ng capitalization? Kasi yung shares ba natin tungkol naman sa par. Lalagyan ba natin o gusto ba natin ng par? We have the luxury of determining how much will be the par. Pwedeng no par. Kung gusto mong lagyan ng par, sir magkano? It’s up to the incorporators ano gusto nila. Gusto nila masyadong mahal para konti lang ang maging stockholders. Gawin nilang 1 million ang par. Gusto naman nila kahit mahirap makabili, gawin nilang 1 centavo ang par, pwede yan. 4|OplanCorpo2019

SURVIVAL KIT | CORPORATION LAW Yun nga lang, the moment na naglagay ka ng par, ang original issue nyan can only be either at par or above par. Bawal yan iisue below par. Example: Ipagpalagay mo ang nilagay nating par 10 pesos, at inissue mo at par, you issued at 10 pesos. Lahat ng amount na matatanggap mo dyan ay legal capital. What if inissue mo sya ng 12? So above par. Yung 10 will be the legal capital of the corporation. Pano sir yung 2? Hindi, yan ay magiging additional, yan ay magiging paid in capital mo yan. Ano sir ang pagkakaiba? Later the corporation may decide to declare dividends, you do not get any amount of dividends from this. Huwag kang kukuha dito (legal capital) ng dividend, dito (paid in capital) pwede kang kumuha. Makakakuha kalang ng dividends sa legal capital kung liquidation. Pero as a rule, during its existence, huwag kang magdedeclare dyan. Ngayon kung ayaw mo ng par kasi ang gusto mo let the public determine how much will be the value, piliin mo ‘to. Yun nga lang ito may requirements din. May minimum issue price yan, P5. You do not issue it below 5 pesos. Kapag inissue mo yan ng P5, the P5 is legal capital. Kapag inissue mo yan ng P8, P8 is legal capital. There will be no paid in capital in excess of no par. Pwede lang yan sa par. Treasurer’s Affidavit Matapos yan papagawin na natin ng treasurer’s affidavit si ateng treasurer. So sa treasurer’s affidavit, dalawa ang iccertify nya, atleast, sasabihin nyan, atleast 25% of the authorized capital stock or atleast 25% authorized number of shares. Authorized capital stock kasi tayo naka par, authorized number of shares kasi naka no par. So tinitingnan sa no par yung authorized number of shares. Ang tinitingnan sa may par authorized capital stock ay na subscribe. At may isa pa syang certification, atleast 25% of the actual subscription has been paid, either in money and if it is paid in property, it must be at its fair market value. Hindi pwedeng part ng subscription ang promissory notes. Dapat pera lang or property. ***nagillustrate si Sir Ipagpalagay natin ito yung authorized capital stock. CASE 1: Malaki yung corporation. Authorized capital stock lagay natin 80M. Ang minimum subscription nyan dapat 20M. Tingnan natin yung actual. Ang naging actual subscription, 40M or 20M, hindi ka kasi bababa sa 20M. Magkano ang minimum na dapat binayaran? Ito ay 10M, ito 5M. (Sa board nya sinulat hindi natin alam kung ano yang mga ito na yan) Paano kung ang actual subscription ay 18M lang? hindi papayagan. Hindi ka bababa sa bayad na 20M. Minimum subscription e. Hindi ka papayagan na bumaba sa subscription na 20M. Paano sir kung 20M ang binayad 4M lang? Hindi rin papayagan. Kung nagkataon naman maliit lang ang puhunan 60K, minimum subscription nyan 15K. Ang naging actual 60K, pwede bang actual 60K? Yes. So ang bayad 15K. Paano kung ang sinubscribe lang 15K, pwede ba? Yes, ang bayad dapat 5K. Paano kung 15K ang binayad 3750? Pwede? Hindi. Diba 25-25 yan? Oo pero hindi papayagan kasi ang minimum 5K na. Then gagawa na tayo ng Deed of Undertaking. Sa Deed of Undertaking sasabihin na natin our name. Name is not similar, not confusingly, not deceptively similar sa isang existing corporation. And if it is the same we are to change our name. Matapos maiprepare ang ating documents, pupunta na tayo sa SEC. Anong gagawin ng SEC sa documents natin? Ieevaluate.

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SURVIVAL KIT | CORPORATION LAW SECURITY AND EXCHANGE DOCUMENTS Titignan ng SEC ang isusubmit nating document, tama? Isusubmit natin sa SEC eh. *change topic* Subject po ba sa VAT ang sale or importation of E-books? Ano yung E-book? May ganun ba? Papaano ‘yun? Electronic? So may mga gadgets? I-dodownload mo na lang? Eh wala, hindi natin alam kung saan galing eh, yung source, kasi imported. Pero kapag dito galing, yes. Sale of services ‘yun eh. O, diba. Subject din po ba sa VAT ang sale or importation ng rabbit? Ah, wala. Hindi naman kinakain yung rabbit. Kumakain ka ba niyan? Pero may kumakain niyan. Tax estate. Are donations to special welfare charitable? And cultural institutions considered exclusion from gross estate or are they transfer for public purpose? Bakit mo siya i-eexclude sa gross estate? Kasi lahat ng properties left by the decedent will be part of the gross estate. Lahat idagdag mo, tsaka mo na lang alisin ang dapat alisin. Sabi kasi, FMB of the properties of the decedent at the time of death. Kahit nga mag-donate ka sa government eh. I-donate mo ang agricultural land mo sa government, that land must be part of the estate. Then you deduct. *back to SEC topic* Yung SEC, my dear, i-eevaluate tayo. Ni-reject yung ating sinubmit na document. Bakit i-rereject? Kasi we failed. 1. Failure to observe the form prescribed. Diba nasa SEC na tayo? Tama ba ako? My dear, ang articles of incorporation, may format. Kapag hindi mo sinunod yung format, may problema ka. May pangalan, may purpose, sundin mo lang ‘yun. Kapag hindi ka marunong gumawa, pumunta ka lang sa SEC. Merong ready form, gawa na. I-fill mo lang yung blanko. 2. Next, failure to meet minimum Filipino ownership. Fortunately, meron pa ring businesses reserved to Filipinos. Retail trade, 100% Pinoy. Foreigners cannot engage in retail trade. Kasi kapag may nakikita ako mga engaged in retail trade, foreigners, siguro merong Filipinos na payag maging dummy. O minsan, ‘tong mga foreigners, they come here to have business realizing hindi sila pwede, mag-aasawa ng Filipino. Kaya ang may-ari ay Filipinos. Hindi naman po kasi ibig sabihin na nagpunta sila dito, para mag-negosyo, pero magasawa na rin. Two birds using one stone. May asawa ka na, may business ka pa. May mga ganun. Minsan, favorable din sa atin. Kagaya ng pagbili ng lupa, hindi pwede ang foreigner. Magaling yung isa, nagka-asawa siya ng foreigner, yung foreigner pangatlo nang asawa, dalawang asawa sa foreign country, pwede siya mag-asawa hanggang apat kasi yung religion niya, allows him to have four wives eh. Pumunta siya dito at na-meet niya yung babaeng yun, nagpakasal sila. Tapos, palagi rin siya sa ibang bansa. Ang gusto niya, magtayo ng negosyo dito. Eh matalino yung babae. Tinanong niya, anong magandang negosyo? Gusto ng babae, sa kanya nakapangalan. So sabi niya, magtayo tayo ng apartment houses, pa-uupahan natin para sigurado na may income tayo. Bibili ng lupa, so nasa pangalan ng babae kasi hindi pwede yung foreigner. So nagpagawa sila ng apartment houses, pero ang namamahala, kapag nandito, yung lalaki. Sa paper, ang may-ari, yung babae. Mag-away man sila, ang babae ang may-ari, kasi siya ang bumili. Tama noh? So kapag nag-asawa ka ng foreigner, ang business dapat, bibili ng lupa, para nasa pangalan mo. Kapag natural resources, 60% dapat Filipino-owned. At kung sakali tayo, yun ang business natin, and later i-acquire ‘to ng isang corporation, nagkaron ng parent or holding company, dapat ang hahawak sayo, ganun pa rin ang ownership, 60%. Grandfather rule. Am I clear? 6|OplanCorpo2019

SURVIVAL KIT | CORPORATION LAW 3. The failure to submit favorable recommendation from the appropriate government agency in charge of the corporation or corporation activities kasi special corporation. Ano ito? Corporations whose business affect public welfare, public interest. Kapag ang itatayo nating negosyo ay makaka-affect sa public, hindi tayo didiretso sa SEC. Dadaan tayo sa appropriate government agency to monitor and regulate our activity. Naisipan nating magtayo ng paaralan. Will it affect public welfare? Makakaapekto? (YES) Hindi ka didiretso sa SEC, saan ka pupunta muna? Sa appropriate government agency. Kung gusto mo mag-ooffer ka ng basic education, elementary, high school, daan ka muna sa DepEd. Kapag tertiary, daan ka muna sa CHED. Kapag vocational, sa TESDA. Hindi ka muna pwede dumiretso. Kapag gusto mo naman, transportation business, will this affect public welfare? If makaka-affect, daan ka muna sa appropriate agency. By land, daan ka muna sa LTO. Will banks affect public welfare? Daan ka muna sa BSP. Basta ang itatayo mo, makakaapekto sa public, daan ka muna sa appropriate government agency. Baka nakita ng SEC na ang purpose natin, magtatayo tayo ng red light district. Ano ang ibig sabihin ng red light district. Ikaw, gusto mo magtrabaho sa red light district? Hindi ka tatanggapin. Hindi, pwede ka rin dun. CPA ka dun. Ikaw ang accountant dun. Prostitution house, correct? Ito yung lugar kung saan nakatayo yung mga prostitution houses. Ironically, may mga bansa na legal ‘yan. And yet, wala silang sexually transmitted diseases. Sa mga bansang illegal ‘yan, dun pa meron? And some years ago, nakakatuwa yun, may dumating dito, dalawang magagandang babae. Nasa news ‘yun. Ang gaganda nila. Beautiful talaga. Pero pagbaba nila, na-check yung passport nila, pinabalik sila. Alam mo yung dahilan? Nakalagay sa passport nila na ang kanilang profession, prostitutes. Eh sa country nila, legal ang prostitution, kaya ‘yun ang nilagay nila. Pero dito kasi, illegal. Ang reason, ‘yun ang trabaho nila, and prostitution is prohibited here. So nakita ng SEC na magtatayo tayo ng prostitution houses, hindi tayo papayagan. Kasi ang purpose pala natin unconstitutional. Ang purpose natin ay contrary to existing government rules and regulations. Illegal, immoral. 4. Or baka nakita, na ang treasurer’s affidavit ay false. Tayo pala ay naka-Par Value. Pwede ring wala tayong Par. Kapag tayo ay may Par my dear, ang original issue price niyan (kasi baka re-issurance or treasury stock, hindi ito applicable) only at Par or above Par. Huwag na huwag mong i-issue ang shares below Par. That violates the Trust Fund Doctrine. Follow? How much is the Par? It will depend in the incorporators kung magkano ang gusto nila. Kung gusto mo na konti lang ang stockholders, mahalan mo. Gusto marami, mura. Gusto mo Par Value – Php1M, ilan lang makakabili niyan? Par Value – Php1, marami makakabili. Ipagpalagay mo, Php10 ang Par, so kapag binenta mo ‘yan at Par (10), ang amount na matatanggap mo legal capital. Pero kapag binenta above Par, say 12, out of the 12 ang napagbentahan, yung 10 ang legal capital. Yung excess na 2, hindi legal capital, paid-in-capital. Now ang tanong, bakit kailangan i-distinguish mo kung ang natanggap mo ay legal capital or hindi? Baka later, the corporation will decide to declare dividends. When you declare dividends, huwag kang kukuha ng dividends sa legal capital. Hindi siya profit, puhunan siya. Dito pwede. Sakali namang No Par, alam dapat. Kasi kapag may Par ka, makikita yung authorized capital stock. Kaya makikita, baka mali yung treasurer’s affidavit. Kapag No Par tayo, may minimum issue price ‘yan. Hindi siya dapat bumaba sa Php5, Minumum na ‘yun. Kapag binenta ‘yan ng Php5, yan ang legal capital. Kapag binenta ‘yan ng 8, it is legal capital. Therefore, we conclude, there will be no paid-in-capital in excess of No Par. At tatandaan mo, although libre tayo magsabi kung may Par o wala, subalit ang mga sumusunod not allowed, hindi sila pinapayagan to issue No Par. So you bet na naka-Par sila, kasi “not allowed No Par.” Kung sila ay mga BITPUB. B stands for bags, I for Insurance Companies, T for Trust Companies, PU for Public Utilities, and B for Buildings and Loan Associations. What if wala tayo sa limang ito? Ang SEC, i-approve tayo. Paano natin malalaman na ia-approve tayo? I-issue ng SEC ang ating Certificate of Incorporation. At dahil meron na tayong certificate, it marks the birth of the corporation. 7|OplanCorpo2019

SURVIVAL KIT | CORPORATION LAW At dahil ipinanganak na tayo, nagkaroon na tayo ng Secondary Franchise. Ano ang ibig sabihin nito? This is our right to commence our operations. Ano ang Primary Franchise? It is the right of the stockholders to organize the corporation. Yung primary, nasa stockholders, the incorporators. It is their right to organize. Yung secondary, it is the right of the corporation. Pero may limit. Yung ating right, may obligation. Ano yung obligation? Ang sabi kasi, within 2 years eh. Dapat daw ay magcommence from the issuance of the certificate. Otherwise, kapag hindi kayo nakapag-commence, ano mangyayari? Ang corporation natin, automatically ma-didissolve. Ano ang magandang proof na tayo ay nag-commence ng operation? Tatawag na tayo ng election. Iboboto na natin ang members ng board at ng officers natin. Board of Directors and Board of Trustees. Sino ang pumipili ng Board of Directors? Yung may-ari ng corporation. Sino sila? Yung stockholders. Sila ang pipili niyan. Sino naman ang pipili ng Board of Trustees? Yung may-ari ng corporation. At dahil non-stock, ano ang tawag sa may-ari? Members. Sino naman ang pipili ng officers? Ang mananalong members ng Board, sila ang pipili. Para manalo ka bilang part ng Board, ikaw my dear ay dapat: ● Hindi ka convicted by final judgement where there is imprisonment for more than 6 years. Today, si Mr. A ay naconvict ng Regional Trial Court, ang nagin hatol sa kanya ay Reclusion Perpetua. Is he still qualified? Yes, he is. He was just convicted. Hindi pa final judgement. Kapag ang hatol pwede pa i-appeal or pending appeal, hindi pa siya disqualified. ●

Hindi ka dapat guilty ng violation ng Corporation Code committed within 5 years prior to the election.

●

You must own at least 1 share. Except na lang if greater number is required ng corporation.

Kapag boboto ka naman ng Board of Trustees, ang No. 1 and 2 requisites ay mentioned above. Pangatlo, you must be a member of the corporation. Paano sila binoboto? Pwede kaya ang cumulative? Straight voting? Board of Directors, YES. Board of Trustees, NO. Straight lang pwede. Paano ginagawa nag cumulative voting? VOTING FOR THE BOARD OF DIRECTORS Ipagpalagay mo, my dear, boboto tayo ng director. Kapag director ang binoboto at may isang share ka, entitled ka sa 1 vote, kase may isang share ka. At yung vote mong yan, imumultiply sa number ng directors na boboto, equals your total votes available. By way of illustration, ipagpalagay mo, may limang directors na mananalo and meron kang 1 share, then meron kang 1 vote. Dahil meron kang 1 share, may 5 vote ka. 1 times 5 = kaya meron kang 5 votes. Dahil pwede ang cumulative [voting], pwede mo siyang ipunin so meron kang cumulative voting by total. Ano ibig sabihin niyan? Pwede yung 5 votes mo, ibigay mo lahat kay A. A = 5 votes, pwede. Pwede mo din gawin by distribution [voting], pwede yung 5 votes mo, hatiin mo. Bigyan mo si A ng 3 votes. Then, bigyan mo si B ng 2 votes. Pwede.

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SURVIVAL KIT | CORPORATION LAW Kaya nga sa ating election ng board directors, the election is yet to commenced but we already know who the winners are. Kase because of cumulative voting. Di pa nag-uumpisa, alam na ang mga nanalo. Bakit? Ipagpalagay mo tinanong ka ng kliyente mo. Ms. Accountant, I want to be elected, ilan ba ang kailngan kong minimum number of shares? Ang tanong niya, minimum na kailangan niyang shares — Anong sagot mo sa kanya? Sasagutin ko yung tanong, sagutin niyo din po ang tanong na to. Ilan po ang outstandig shares ng corporatin? Sabi niya nasa stock entrance per book. Ang outstanding shares, P1,000. Ilan po ang mananalong directors? Lima. So ang total number of votes, 5,000. Kase imumultiply mo e. 5,000 votes. Ano sagot mo sa kanya? Kung isang libo po ang outstanding, patingin po ng shares na na sainyong pangalan. Kapag yan umabot po kayo ng 167, panalo na kayo, kase 167 x 5, and you will have 825 votes. You only need this, di mo kailangan maraming boto. E sabi niyo 5,000, edi yung kalaban ko, sila may-ari ng 4,165. Okay lang yon. Di ako matatalo. 825 will definitely sit in the board. There’s no way the 4,165 can unsit the 825. 825 will definitely win. Kahit gaano ka pa kagaling na accountant, kahit gaano mo pa paghiwahiwalayin yung mga boto na yan, there’s no way, the 4,165 can elect 5 directors. At most, it can elect 4. Dahil 4 lang ang kaya niyang iboto, mananalo yon. Yun nga ang mananalo e. Am I clear? Paano nakuha yan? Pag tinatong ka, ang sagot mo, 167 shares or 825 votes pag boto ang tinanong. Kung ang number of shares, 1000. E paano pag ginawa ng examiner, 10,000? Or ginawang 5,000? Kapag naitanong yan, at ang tanong sa boards, “shares”, ang numerator mo outstanding shares, ididivide mo lang sa number of directors na iboboto, divided by 6. Para walang tie, plus 1. Pag boto ang tinatanong ni examiner, get the total votes. Ididivide mo lang siya sa number of directors to be elected, plus 1. At ang result, dyan nakukuha yan. VOTING FOR THE BOARD OF TRUSTEES Unlike sa board of trustees, sa board of trustees, my dear, hindi pwede ang cumulative. Kaya pag boboto tayo ng board of trustees, ang isang member, entitled lang sa 1 vote, to be multiplied by the number of trustees to be elected, yan na ang iyong total votes. Kaya kung may limang trustees tayong iboboto, at ikaw si A, at member ka, may isang boto ka. Imumultiply ng lima, meron kang 5 votes. Pero di ka pwedeng magcumulative. Ipagpalagay mo, ibibigay niya yung 5 votes: 1. lahat ibinigay niya kay A, hindi papayagan; 2. 2 votes, ibibigay niya kay B, di din papayagan. My dear, ang pwede mo lang ibigay, 1 vote per candidate. Ang bibilangin dito, ito isa, ito isa, ito isa. Isa lang ang mabibilang. Kaya kapag bumoboto ng board of trustees, itanim sa isip, parang bumoboto ng public officials. Nung nakaraang eleksyon ng barangay kagawad, may pitong barangay kagawad na mananalo. Kung ikaw ay isang botante, times 7, may seven votes ka, tama? E isa sa kandidato sa pagkakagawad, kapatid mo, kaya nung bumoto ka, nilagay mo sa pitong lines, kapatid, kapatid, kapatid, kapatid, kapatid, kapatid, kapatid. Pitong beses na nakita yung pangalan ni kapatid, ilang kapatid yung bibilangin? Isa lang. Ganyan sa board of trustees, klaro?

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SURVIVAL KIT | CORPORATION LAW VOTING REQUIREMENT FOR ELECTION OF OFFICERS OR BOARD RESOLUTION At dahil meron na tayong board, it’s high time now that we elect our officers. Correct? Tama? Ang officers natin, ieelect na natin. Para maboto ang officers, ang board ang magdedecide. Tama? At di pwedeng magdecide ang board, kung wala siyang quorum. Dapat may quorum siya. Ano ang ibig sabihin ng quorum? The minimum number who should be present.

“Minimum” Gaano karami yan? “As required by the by-laws of the corporation or its articles” E pag silent sir, paano? At malamang isisilent yan ni examiner. Pag silent, ang quorum ay majority. What is majority? Majority is 1/2 plus 1 And therefore, by way of illustration, kung ang ating members ng board ay 9, ang 1/2 nyan, 4 1/2. Plus, 1 [equals to] 5 1/2. Pero alam naman natin na walang taong 1/2, e inaalis nalang yan. Ibig sabihin, ang majority ay in effect, 5 is more than 1/2 of 9. So na establish na natin ang quorum, gagawa na ng decision. For them to make a decision, anong klaseng decision? “Election of Officer” Pag Election of Officer, dapat makuha natin, majority vote ng lahat ng members of the board. Yan ang kailangan na boto, ha. Majority vote ng members of the board. Kapag naman ang gagawing decision, other than that — other than election of officers, kailangan lang makuha mo ang majority ng present. So by way of illustration, ipagpalagay mo na ang members ng board, ay 9, at heto aattend, umattend lahat, pwedeng pito? Pwedeng lima lang? Pwedeng apat? Yan ang umattend, at nung magbotohan, ang in favor dito ay, 7, 5, 4. Dito ang in favor, 5, 7, 3. Dito ang in favor ay, 4. At bakit siya nagpulong, mag-eelect sila ng officer, o magpapasa ng resolution. Tanong, kung 9 ang members ng board, at ang aattend lahat, at ng magbotohan, 7 in favor. Is the officer elected? (Yes) Is the resolution approved? (Yes). If 5 [are] in favor, elected? (Yes) Approved? (Yes). If 4 [are] in favor, approved? (No). Any question? What if only 7 will be present, and out of the 7 who attended the meeting, 5 [are] in favor. Elected? (Yes) Approved? (Yes) If 4 [are] in favor? Elected? (No) Approved? (No) Magkaiba ng sagot. Tama? Of the 7 who attended, 3 are in favor. Elected? (No) Approved? (No) Klaro? What if only 5 attended, and out of the 5, all, so unanimous votes. Elected? (Yes) Approved? (Yes). If 3 [are] in favor? Elected? (No) Approved? (Yes). If 2 [are] in favor? Elected? (No) Approved? (No) Pwedeng magtanong kung di naiintindihan. Huwag mag-pretend kung di naiintindihan. What if, only 4 attended, and all the 4 who attended are in favor. Elected? (No) Approved? (No) Syempre hindi. Di pwedeng ma-clear ang meeting na to kase walang quorum. Sir, hindi ba pwedeng apat lang aattend? Eh, sasapakin kita. Sa example ko, hindi pwedeng apat. Kung ang members ng board, pito lang. Pwede ang apat. Ako ba ay naiintidihan mo? Kadiscuss-discuss palang. Sumabit ka na.

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SURVIVAL KIT | CORPORATION LAW Di ba? Yes? Walang tanong? Alam mo mas maganda, sa akin ka magtanong. Huwag sa kaklase mo, kase litong-lito din yan. Mamaya, magkagalit na kayo. Hindi niyo maintindihan. Dito, 3 lang bumoto, pwede. Dito, 3 bumoto, ayaw. Dito 4 bumoto, di pa din ayaw pa. Kulit e. Imagine kung ganon ka tanungin ng kaklase mo. Oo nga no. Oo nga dito pwede. Nagkamali lang si sir. Yan ang maganda dyan. Tandaan mo, pag nageelect ka ng officer, yung majority, dito ka titingin. Huwag kang titingin dito. Pag nag-aapprove ka ng resolution, dito ka titingin, huwag kang titingin don. Pero para sa kanilang dalawa, dapat muna, present ang majority nyan. Pag di present ang majority, forget the meeting. Tignan mo sa Congress, kung halimbawa, 300 ang miyembro ng House of Reps, at ng magroll-call ang present lang ay 150, anong gagawin? Ititigil yan. Adjourned. Any meeting without a quorum is void. And anything you will have in that meeting, is void. Even if what you agreed upon is good, commendable, or noble, forget it. [Because] you violated the rules, na dapat meron munang quorum. Imagine, tignan mo ha. Ironical e. Umattend yung 150, lahat sila gusto nila kase ang ganda ng proposition. 150 in favor. Forget it. Umattend ang 151, 76 ang may gusto, approved yun. 75 yung ayaw, panalo yung 76. Correct? Imagine, 76 outvoted 150. Kase pag 150 umattend, kahit gusto ng 150, balewala. Because the first requirement is, ayon, yun ang number 1 requirement. Kaya kung ikaw ay officer ng JPIA, siyam kayo, apat ang umattend. Di niyo dapat ituloy. Walang personality to continue the meeting. You don’t have the majority. Tama? Tama? Naiintindihan na ninyo? So iboto na natin yung officers, officers. Pipiliin na natin ang ating pangulo. ELECTION OF OFFICERS My dear, ang president should be a member of the board. And therefore, hindi ka magiging presidente, pag di ka member ng board. At ang presidente ang nagppreside — nagppreside siya sa lahat ng meetings. Ke-meetings ng stockholders, kemeeting ng board. Except kung, they provided otherwise. Baka nilagay nila ang magppreside si Chairman. Marami ang nagaakala, na ang nagppreside sa meeting, Chairman. Hindi. Ang nagppreside sa meeting ay ang presidente. Pero kung gusto niyo ay si Chairman, ilagay niyo na siya. Pero ordinarily, sa mga meeting ng malalaking corporations, the president is also the chairman. Pero hindi necessarily. Tapos pipiliin natin ang ating magiging taga-sulat, the Secretary. The Secretary, my dear is required to be a resident and citizen of the Philippines. Tapos may treasurer tayo, ito yung top three corporate officers. Subalit, walang requirement sa treasurer. At meron tayong tinatawag, however na, incompatible office. Ano ang pagkakaintindi mo sa salitang incompatible? Pag nagbreak kayo ng boyfriend mo at sinabi mong incompatible kayo, hindi maganda ang pagsasama niyo. Ganon ba yon? Ano ang ibig sabihin ng incompatible? Ang kape at asukal, compatible? Yes, nagsasama. Correct. Ang tubig at langis? Compatible? Ayaw e. Ayaw magdikit. So pag di pwedeng, pagsamahin, incompatible. Sabi ng [Corporation] Code, one person cannot be the President and Secretary. He cannot be the President and Treasurer. Pero pwede siya humawak ng ibang pwesto, kung gusto mo, president, siya na chairman of the board, pwede. President and Chairman. E sabi ni President, ako na din Vice-President, para pag nagresign ako, ako pa din. Tsaka pag namatay ako, ako pa din. Correct? Kase ako yung Vice e. So, he can hold any other position, huwag lang — Secretary and Treasurer.

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SURVIVAL KIT | CORPORATION LAW INTRODUCTION TO POWERS OF CORPORATION At ngayon meron ng board, may officers, we are now starting the business by availing ourselves of the powers of the corporation — the express, the implied and the incidental. Kung ako examiner, isa sa itatanong ko to: [Who is] most superior in the management of the corporation? A. President of the Corporation, B. Chairman of the Board, C. Board of Directors, D. Stockholders Sino ang pinaka-makapangyarihan? Sagot? Stockholders? Mali. Tignan mo, tignan mo yung mga mali mo. Matanong nga kita, meron bang San Miguel Corporation? (Meron) Pwede ka bang bumili ng shares of stocks? 1, 2, 10? Pwede? (Pwede) Pag bumili ka, ano ka? (Stockholder) May boses ka ba sa corporation? Sagot? Wala. Wala kang boses don. Wala kang power. Correct? Wala. Na kanino ang powers? Nasa President? Wala. Nasa Chairman? Wala. Nasa? Board of Directors [ang powers of the corporation]. Lahat ng powers ng corporation will be exercise through the Board. Siya ang most powerful. Kaya nga lahat ng stockholders, gusto nila manalong members ng Board. Umpisahan na natin ang powers. Pero bago natin pagtrabahuhin ang members ng board, siguraduhin muna natin na may laman ang tiyan. Kase pag walang laman ang tiyan, sasakit ang isipan. Kaya para magkalaman, lagyan mo muna to. Although yung iba, punong puno na to. POWERS OF THE CORPORATION Let us now have the POWERS OF THE CORPORATION to be exercised by the BOARD. But before we require them to start their job we must see to it that they are not hungy. Correct? Pakainin muna natin sila. As to COMPENSATION, they are entitled to REASONABLE PER DIEM and ALLOWANCES. PER DIEM meaning for every meeting that the board will have the members will receive compensation, kaya per diem.…every meeting. Allowances like baka may gasoline allowance. Now what is REASONABLE? It will depend on the size of the corporation. We have big corporations like San Miguel Corporation and there are also small corporations. So, big corporations may give big per diems and that is reasonable considering the nature of their… ng kanilang trabaho. Parang tao, kung ang height mo 7 feet kagaya nila, sino ba matatangkad… kagaya nila Jun Mar Fajardo, sa NBA madami matatangkad diba, kung 7 ft ang height nila… do you expect na ang size ng paa at shoes nila ay 3 inches? Parang hindi reasonable, correct? So, if you are that tall probably you will have bigger feet. Pero kung ang height mo, without offense sa mga mabababa ah, kung ang height mo naman wala pang 5 feet, alangan naman ang size ng paa mo 14 inches… correct? So hindi ka bibigyan ng ganoong COMPENSATION titignan pa rin yung SIZE NG CORPORATION. Parang ang hirap kasi mag lakad kung 7ft ka ang size ng paa mo 3, kaya yung REASONABLE depende sa SIZE. And then, PWEDE BA SILA BIGYAN NG STOCKHOLDERS NG SALARY? PWEDE DAW KUNG BIBIGYAN, PERO MAY LIMIT. Ang MAXIMUM na pwede bigay sakanila is only 10% OF THE NET INCOME BEFORE INCOME TAX DURING THE PRECEEDING YEAR. Nagkaintindihan? Salamat. Ang 10% na yan, for each member or for the board? Para hindi ka nalang mahirapan imaginine mo ang members ng BOARD ay 11, edi bigyan mo na lang ng tig-10, pag hindi edi pinatay mo utak mo sa kakaisip kung papano, correct? So, automatically alam mo na na yung 10 ay sakanila. Eh “sir paano pag yung members ng board ay lima lang? edi pwede.” Okay ang galing mo mag isip, tuloy mo yung ganyang kaisipan. Ngayong sila ay busog na, kung kayo ang members ng board at busog na, at may trabaho kayo. Ano na gagawin niyo? Ipasa sa iba ang trabaho, kasi baka ma appendecitis ka. Ipapagawa natin sa iba ang itinakda sa atin.

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SURVIVAL KIT | CORPORATION LAW Kaya ang gagawin ng BOARD ay mag create ng EXECUTIVE COMMITTEE: Is it a matter of right for the board? NO. They can create an EXECUTVE COMMITTEE if that is allowed sa BY-LAWS titignan natin kung andun. At kapag pinapayagan ng BY-LAWS then ATLEAST 3 MEMBERS of this EXECOM SHOULD COME FROM THE BOARD. At bakit tayo mag create ng EXECOM? Kasi nga ipapagawa natin sakanila yung dapat tayo ang gagawa. TO EXERCISE SUCH POWERS AS MAY BE DELEGATED BY THE BOARD. So, pwede lang nilang gawin ay yung ipapagawa ng board. ANO ANG MGA IYON? KAHIT ANO, kahit anong gusto ipagawa sa BOARD gagawin. MALIBAN SA MGA SUMUSUNOD. The following my dear, cannot be delegated to the EXECOM; 1. Those acts which require stockholders’ approval. 2. They cannot amend the by-laws. 3. Hindi din nila pwede i-amend, those acts previously approved by the board. Alangan namang baguhin nila yung mga ginawa ng board? 4. They cannot fill up vacancy in the board. - Ang tanong if the EXECOM cannot fill up vacancy in the Board, who fills up the vacancy? - Ang tanong sasagutin ng ganito, ANO ANG DAHILAN BAKIT MAY VACANCY? ● If the reason for vacancy is; ● --------1. EXPIRATION OF THE TERM OF A DIRECTOR 2. REMOVAL OF A DIRECTOR 3. INCREASE IN THE NUMBER OF DIRECTORS. - Then, this will be FILLED UP BY THE STOCKHOLDERS. On the other hand, if the reason will be other than the three mentioned above. THEN THERE IS A REASON FOR US TO COUNT HOW MANY REMAINING MEMBERS OF THE BOARD WE HAVE? If the REMAINING MEMBERS OF THE BOARD STILL CONSTITUTES A QUORUM, IT WILL BE FILLED UP BY THE BOARD. BUT IF THE REMAINING MEMBERS OF THE BOARD NO LONGER CONSTITUTE A QUORUM, then it will be filled up by the STOCKHOLDERS. And syempre, after having the theory, let us have the illustration; MAY DALAWANG CORPORATION. Yung isa si A CORP ang members ng Board ay 7. Yung isa ay si B CORP ang members ng Board ay 5. Out of the 7 members of the Board ni A CORP yung isa namatay, yung isa ang term nag expire, at yung isa nag resign. Ito namang si B CORP, yung isang member ng Board nila ay tinanggal ng mga Stockholders by majority vote, yung isa naman namatay, at yung isa nag-resign. So makikita mo vacant ito tatlo pareho. At dahil may vacancy kailangan tayo mag fill up. Ang tanong, WHO FILLS UP THE VACANCY? ● Kapag ang dahilan kaya may vacancy alin man sa tatlong to (previously stated), automatic STOCKHOLDERS na ang mag meeting para i-fill up ang vacancy. Eh paano yung kung ang dahilan ay wala sa tatlo, kagaya ng RESIGNATION, DEATH, or INCAPACITY? Sino ngayon ang mag fill up ng vacancy? Sabi, bibilangin mo daw ang REMAINING MEMBERS NG BOARD. Sa A CORP ang bakante tatlo, so apat ang natitira. Ang apat ba may QUORUM pa? At dahil may quorum pa, LET THE VACANCY BE FILLED UP BY THE BOARD. ● Dito naman sa B CORP, ang bakante ay tatlo and natitira dalawa. WALA na siyang QUORUM at dahil walang quorum ang mag fill up ay STOCKHOLDERS.

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SURVIVAL KIT | CORPORATION LAW Pang 5 na hindi pwedeng ipasa sa EXECOM ay, ang pag-DISTRIBUTE AT PAG DECLARE NG CASH DIVIDEND. Ngayon ang tanong ko sainyo, ang sabi ay hindi sila pwede magbigay at mag distribute ng CASH DIVIDEND… PWEDE KAYA ANG STOCK DIVIDEND? Kasi ang nakalagay CASH eh? Para malaman mo ang sagot diyan itatanong mo, SINO BA ANG NAG DIDECLARE NG DIVIDEND? SYEMPRE ANG BOARD. Kapag ang Board ba ay nagdi-declare ng dividend yan ba ay nangangailangan ng STOCKHOLDERS APPROVAL? KAPAG ANG DINECLARE nila ay CASH DIVIDEND, HINDI KAILANGAN. THE MOMENT THE BOARD DECLARES CASH DIVIDEND, THE RIGHT OF THE STOCKHOLDERS TO THE DIVIDEND ARISES. NO ONE IS EXPECTED TO OBJECT TO A CASH DIVIDEND, so why bring it for RATIFICATION? What if the Board declares STOCK DIVIDEND? Will this REQUIRE STOCKHOLDERS’ APPROVAL? YES, it requires 2/3 VOTE TO RATIFY. WHY? Because, YOU DON’T RECEIVE ANYTHING OUT OF STOCK DIVIDEND, while it is true that your number of shares will increase because of the stock dividend, your ownership of the corporation remains, because if your shares will be increased the OUTSTANDING SHARES WILL ALSO BE INCREASED. Kaya dapat pa-approve. So, dito sa sinabi, hindi sila pwede mag declare ng CASH DIVIDEND walang sinabi na they cannot distribute stock, can they? HINDI. Bakit hindi pwede? Ayan siya oh, nasa number one… (those which require stockholders’ approval). Ngayong meron na tayong BOARD at may EXECOM PA, paano KIKITA ANG BOARD? Siyempre dapat kumilos na sila, the CORPORATION WILL NOW ENTER INTO CONTRACTS. POWER ITO NG CORPORATION THROUGH THE BOARD. Anong klaseng contracts? REGULAR ba yan or ORDINARY or baka yan ay MANAGEMENT CONTRACT? If we will have ORDINARY CONTRACT, then we will check… with whom? Is the CONTRACT SIGNED BY THE BOARD WITH A THIRD PERSON? Is it WITH ITS OWN DIRECTOR OR OFFICER? Kapag ang contract ay signed by the members of the Board with a third person, see to it that they have QUORUM and see it that is APPROVED BY MAJORITY OF THOSE WHO ARE PRESENT. But if it is, a contract made by the board with its own director or officer… there are three things that should first be considered: 1. 2. 3. 4.

The contract with the director is fair and reasonable The presence of such Director in that meeting is not necessary to have a quorum The vote of such Director is not necessary for the approval of the contract. And if, in addition to being a Director he is also a officer, the fourth requirement is that such must be previously approved by the board.

Otherwise, if we do not meet all the requirements here; the contract is VOID. Meaning it is without effect. But it is not void as the way we understand void contracts, siya lang ay WALANG EFFECT. Kasi pwede siya magka-effect. “UNLESS IT IS RATIFIED BY THE STOCKHOLDERS THROUGH A 2/3 VOTE”. Illustration: Ang members ng Board ay 7, na ang mga pangalan ay A,B,C,D,E,F,G and today the corporation receives two offers from Mr. Y and Mr. A, kung titignan mo si Mr. Y he is a third person and Mr. A is not a third person, he is a member of the Board. Ang offer ni Mr. Y, “Corporation I will offer to supply the machinery that you will need.” Sabi naman ni Mr. A, “Mga kapwa director meron akong other business, I am engaged in selling these things that we need as raw materials. Both offers are fair and reasonable. Therefore, mag meeting ang board kung tatangapin or hindi.

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SURVIVAL KIT | CORPORATION LAW Scenario 1: Lahat present sa meeting. Possible? Oo naman, dito lang sa review lahat hindi present no? So nag botohan. Dalawa lang kailangan ni Y para ma-approve ang contract niya with the Board. First, there must be a quorum and second, it is approved by the majority of those who attended. Lima bumoto kay Y and 7 lang nag present. May contract with Y, it is approved. Look at the offer made by A dapat masatisfy natin, okay na yung fair and reasonable. Yung pangalawa at pangatlo nalang. Remove A from that meeting how many are left? Only 7 are present, so only 6, is there a quorum? Yes, therefore the presence of A is not necessary to have a quorum. Remove the vote of A will there be a quorum? Yes, so therefore the vote of A is not necessary and the contract will be approved. Am I clear? Scenario 2: Remove the vote of A and there are only 3, will the vote be majority? So is the vote of A necessary? Yes, because there would not be majority and the contract will not be approved. For A to say that there is a contract, he should bring it to the Stockholders and ask for a 2/3 vote, for it to be ratified. Was that example clearly illustrated? Case 2: Scenario 1: Umattend si A, B, C, D at E. Si F and G nasa honeymoon, siyempre naman ano pipiliin mo: meeting ng board o honeymoon? Ikaw pare? Honeymoon. Ikaw? Honeymoon. Oh, kita niyo kahit hindi nila alam meaning ng honeymoon they can answer. Siyempre hindi niyo pa na experience diba no? Okay. Pero alam niyo mas masarap ang honeymoon. Out of the 5 who attended, 4 voted in favor. Now what if 3 voted in favor of the offers made by Y and A. Kay Y muna tayo. How many attended; 5. Will 5 be a quorum—yes. How many votes will be needed by Y to say that his offer was accepted; majority—and majority of 5 will be 3, did he get that? And therefore, may contract with Y. Follow? Kay A tayo ah kay A naman. Remove A from the meeting how many attended? 4—will 4 be a quorum (yes) and there for the person of A is not necessary. Follow? Remove the vote of A, how many votes are left? 3 votes—will 3 votes still be majority? And therefore, the vote of A is not necessary. There is a contract of A. Nakukuha? Scenario 2: Remove the vote of A how many votes are left? 2— will 2 be majority (no) and therefore is the vote of A necessary? (Yes). And such being the case, no contract with A. Unless A brings the matter to the stockholders for ratification. Tandaan mo 4 ang choices ah sa board kaya babantayan mo ng mabuti. Unawain mo ng mabuti ang sinasabi ng choices. Case 3: A, B, C and D attended. Bakit hindi umatted si E? Kasi E is still nursing a wounded heart. Ex niya si A na nagpakasal kay F. Ah Siyempre naman. Out of the 4, lahat sila unanimously voted for the approval of the offer. Sa Offer ni Y at offer ni A. Ano kailangan ni Y: Quorum at may majority. May quorum? May majority? (Yes to both). Unanimous pa nga eh. Correct? May contract. Sa offer ni A: alisin mo si A sa meeting, how many are left? (3) Will 3 be a quorum? Therefore, is the presence of A necessary to have a quorum? Such being the case the case there is no contract with A. Unless he brings it to the stickholders for ratification. What if matapos ang meeting, pauwi na eh maaga natapos meeting nila mga mag 12 pa lang mga a little past 12 eh. Pag nag meeting ang board naalala ko hindi ako nasa member ng board pag nagmemeeting ang board pero nasa meeting ako dahil empleyado ako ng corporation. May 15 memebers ang board. Its a big corporation—non-stock and non-profit. 15 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW They are not after profit. They are really rich, yung mga members na yun. Pag nagmemeeting nga yun pakiramdam mo talaga na yagit ka eh. Grabe ang yayaman talaga nila but very low key at ang babait. Minsan kung sino pa yung totoong mayayaman sila pa yung mabait eh. Pag nagmemeeting yun, may caterer pa kami. 19 kami sa room—the 15 members of the board, ako na lawyer, 1 lang graduate, 2 babae na isa magaling sa shorthand at isang tagayos ng tape recorder. Magsasalita sila. Maguusapusap. Kailangan makuha namin lahat yun. Yung nagsho shorthand siya yung mabilis talaga, tapos may tape recorder. Matapos ang meeting, isusubmit nila dun sa law graduate. The law graduate prepares the minutes of the meeting, yung initail minutes of the meeting. Tapos bibigay niya sakin. Sasabihin ko: sigurado ka ito ang nilalaman nito ah. Yes Atty. yan po. Titignan ko yung ginawa kong sariling notes and then I will prepare the draft minutes of the board. Akala mo ba ang gumagawa niyan ay yung secretary? Hindi ah. Then I submit it to that corporate secretary. Na present din dun. Sasabihin niya “Dan sigurado ba ito yung laman?.” “Yes sir kahit pakinggan niyo pa yung recording. Tapos pipirmahan niya yan pag gusto niya. At duon makikita mo sila ang yayaman talaga nila. Bakit? Natatapos meeting namin ng 3 in the morning, pinaka maaga na yun. Although once a month lang yun. Pero expect mo na yun at may caterer. Mababait sila. Magpapa-recess muna. Let’s have muna our dinner. Kayong apat ah, join us. Kakain din kami. Eh one time yung isang member ng board nag suggest: “Mr. President can we have our dinner while the meeting is on going because I am in a hurry, I have to attend to an important activity”. Sabi oh sige lets have our dinner while we continue the meeting. So kumakain sila, tapos sabi samin nung chairman, oh Atty. kain na rin kayo. Hindi ko masabi sakanya ng hindi kami makakakain. Bakit? Eh nagmemeeting sila eh. Correct? Alam mo nung kumain kami, past 3 na. Kaya pakiramdam mo, ako abugado. Etong eto ‘di naman ‘to ano pero dahil mayaman talaga sila, sila yung boss. Correct? Although ang babait talaga nila. Talagang pinakakain kami kahit yung members sinasabi “come one lets eat”. Sir hindi po pwede kasi ayaw niyo itigil yung salita niyo eh. Ganun sila kayaman at alam mo ba dun minsan nagkaroon sila at balak nila mag extend sila ng clubhouse, papalakihin nila kasi its a big golf course. Tapos nag propose na we need addition money to have our clubhouse improve, to have additional hole. Mag nag suggest kaagad na mga ilang members iaaccept natin? I think 5 members will be enough. Nag motion yung isang member ng board, sabi niya, if the board will allow me, my 2 sons would want to be member here. I am preparing a check for 50M for admission of my 2 sons to be a member of this corporation. Imagine, 25M para maging member ka dun. At dala-dala niya yung cheke niya. Imaging may current account na 50M ang issue niya. Imagine gaano kayaman ang mga ‘to correct. At alam mo ang sagot sakanya ng chair, and we understand your desire to have your two sons being accepted, but we all know, membership in this organization will not be just 25M. Ni-reject yung 25M. Imagine that. Minsan nga yung isang presidente sabi presidente, “pare yung mga bata ko nahihirapan sa mga bata mo na isara yung contract. Ano ba problema?”. Sabi nung isa, pare sakin mo na papuntahin yung mga bata mo, its a done deal. Ganun lang sila mag usap. Mag barkada eh. Kaya you want to join. Para makilala mo sila. At ang babait nila. Pag mayayaman talaga mababait. Na-observe ko yun. Pero yung mga kunyari lang mayaman. Hindi eh. Kaya lang ang pakiramdam ko tuwing uuwi ako, ang hirap ko grabe. Grabe hirap ko. Sobra yaman nila. Hindi mo nga itatabi kotse mo sa kotse nila eh. Mahihiya ko. Kasi mga kotse nila iba talaga pag nandun sila. Nakikita mo sila dun once a month lang eh tuwing may board meeting lang. Dun mo lang sila makikita. Kaya halimbawa natapos wala pang 12 sabi ni A sa kanyang mga kasama, pare pag nag uwian tayo ngayon baka akalain ng wives natin laging maaga matapos. Wag natin sanayin correct. Mahirap yan baka makasanayan. Meron kasing isa the wife will not eat unless sabay kayo magdinner. Hihintayin ka niya. Yung isa naman, eto totoo rin ‘to, galing kami sa audit inabot kami ng past 2, yung ayaw niya umuwi pag hindi namin siya sasamahan. Grabe yung naawa kami dun. Natapat siya sa selosang masyado. Tapos sabi ni A, mga happy happy muna tayo. Iniwan na nila yung kots nila, Isang kotse lang sila tapos mga past 2 or 3 uwi na sila. Babalik sila sa office para kunin yung kanilang mga sasakyan. On the way back dun sa office, unfortunately yung car nila nabagsakan ng truck. Galing sa skyway. Napitpit yung kotse nila. Yung 4 namatay, ilan ang matitira sa members ng board? 3. There’s no quorum so we have to hold an election, tama? At sino mananalo? Yung heirs nila correct? Because they have the numbers, the shares. Kausap nila yung mga panganay nilang anak at sabi, anak ikaw ang mananalong member ng board. Sabi nung anak, mommy ayoko, I dont know anything about that business, its a transporation business, alam mo naman ang gusto ko, beauty parlor. Panganay na anak na lalaki yun. Anak hindi mo naman kailangan ng gusto, Kailangan kang andun, we have substantial interest in that business and we are talking here of millions of pesos and you will be a member of the board. Ano gagawin ko dun mommy? Wala aattend ka lang.

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SURVIVAL KIT | CORPORATION LAW Kasi wala ka pang alam, its your first time to be a member of the board. But as time passes by, you will learn the intricacies of the business. Ang gagawin mo lang sa first few meetings of the business, attended ka, makikinig ka at pagkailangan bumoto, tignan mo yung boto ng 4, gagaya ka na lang dun. Ganun kasi majority na yung apat eh. So here comes the first meeting of the board. Maaga dumating yung anak ni A—kinakabahn kasi first time. Dumating yung anak ni B. Pakilala si A. Sabi niya, guide me ha, hindi ko alam to eh first time ko. Sabi ng anak ni B, don’t worry, first time ko din eh. Imagine 4 ang may first time pero magbobotohan. Yung 3 in favor. Yung tatlo original. Yung 4 naghihintay ng pang 4. Imagine what will happen to the business when majority dont know how to run the business. It will collapse, correct. Let’s not allow it to happen. What should be done? If we do not know how to drive the car, then give the steering wheel to others for them to drive the car for us but only in the meantime correct? Because soon we will learn how to drive. Nagkataon lang, biglaan eh, yung nagmamaneho, namatay. Ikaw ngayon ang uupo and you dont know how to drive. Buti na lang meron nandiyan, pare ikaw muna until matuto ako. Ano pipirmahan natin? We will trust the management of the corporation to another. We will call it, a management contract. Kapag tayo my dear ay makikipag management contract, necessarily meron tayong, managing corporation. Tayo ang magiging manage corporation but the management contract should only be for a maximum of 5 years. So loob ng 5 taon dapat matutunan natin yung business except if the business involves natural resources, it will be a period longer pero bago ma prefect yan kailangan yung respective memebers ng board iaapprove yan by majority vote at kailangan iratify ng mga stockholders likewise by majority vote except if majority votes is not enough we need 2/3 vote. Bakit 2/3 vote kasi may interlocking directors. Ano ibig sabihin, ikaw ay directors on both the managing and the managed corporation or pwede stockholder ka ng dalawa at hindi director sa dalawa kaya meron interlocking stockholders. Dun sa isang corporation you own substantial interest, let’s say sa managing, at sa managed meron kang nominal interest. So stockholders ka ng dalawang corporation. Dun sa isa director ka, dun sa isa hindi bakit nangyari yun? Kasi dun sa isa siguradong uupo ka kasi you own 20% of the outstanding share. Or baka stockholder ka lang sa managed corporation but as a stockholder you own 1/3 of the outstanding shares. The next will be to acquire our own shares. Bakit natin iacquire? Kasi meron tayong retained earnings. Kapag walang retained earnings ‘di mo pwedeng iacquire ang shares except na lang kung ang iacquire mo ay redeemable shares. Bakit natin iacquire ang sariling shares? Una, in order for us to remove delinquent subscription. Kasi may subscription, may subscriber. What if isa kang delinquent. Ang subscriber ba may rights na kagaya ng stockholders? Meron na ba siyang karapatan bumoto? May karapatan na ba siyang tumanggap ng dividend kung hindi pa siya bayad. He is a mere subscriber. Yes. Entitled ka. Kasi ang subscription is already part of legal capaital. Pano kung nadeclare ka delinquent? Entitled ka pa ba? Yes, may nabawas lang. Andun yung right to vote pero andun yung right to dividend. At kung ang binigay ay cash dividend at ikaw ay delinquent, yung cash dividend, ibabawas na sa unpaid subscription. At kung stock dividend yan hindi muna ibibigay it will be withheld until you effect payment of your subscription. ------------------------------------------------------------S subscribes for one thousand shares at 100 per share. Good morning Atty. D, good morning also. Kapag may tie po sa votes ng board, paano po maresolve ‘yung issue? Applicable po ba ‘yung Controlling Interest Rule tulad ng sa Partnership? Hindi. Kaya hindi nangyayari sa board, yung nagta-tie, observe mo, laging ang ginagawa, odd number ang members ng board. No way na magtie ‘yan. Kase pag odd, laging kung lima ‘yan, three will be enough. Ang masakit nga lang sasabihin mo, Sir halimbawa seven, di ba? Umabsent ‘yung isa, eh di may six, nagdoble ‘yun, correct? ‘yung proponent ‘di s’ya nanalo. Halimbawa ikaw yung nagpropose, correct? Tama? Nagpropose ka, you need majority – ikaw ang nangangailangan noon. Halimbawa ito, one, two, three, four, five, six, seven, eight, nine, ten, sampu ang members ng board, okay? So ginawa, kase dapat eleven, eh yung isa nga nag-abstain so sampu. Meron syang proposal, syang magbbring noon sa board, dedesisyunan, correct? Kailangan makakuha sya ng majority. Pag hindi mo nakuha ang majority, hindi na approve yung sa’yo. Nagfive-five, you were not able to get the majority. Naintindihan? Kailangan makakuha ka ng six. Pag nakuha mo yung six, you win, pasok yung iyong proposal. 17 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW Number two. Ang contracts with own officers, pwede pa rin ba maratify ng shareholders? Yes kung yung officer ay member ng board, kung hindi, sapat na yung ang mag-aapprove lang yung board, kase officer ka eh. Pagdating natin sa duties ng board at officers, kase rights ang pinag-uusapan eh, di ba? Tapos ng rights, duties. Dapat nyang bayaran 100,000, ang ginawa nya, nagbayad ng 60,000 and therefore, unpaid ang 40,000. Dumating ang due date and the corporation made the call for payment, unfortunately si S, sa call na yan fails to pay, at dahil hindi yan nabayaran, magiging delinquent subscriber sya, tama? Tama. Hindi naman pwedeng iwrite-off ng corporation kase hindi yan ordinary accounts receivable na pag hindi nagbayad pwedeng iwrite-off. Ito ay legal capital. O so dahil hindi kay nagbayad, ikaw S magiging delinquent subscriber. Anong gagawin ngayon ng corporation eh hindi ka nagbayad? Itong iyong subscription na ‘to, ipapublic sale, correct? Ibebenta yan. So dahil ibebenta magkakaroon ng expenses, magkakaroon ng interest. Ipagpalagay ang total ay 5,000. Ang tanong, ilang shares ang available for sale? Abandoned na po yung doctrine dati sa Baltazar v. Lingayen Gulf case, baka mabasa mo eh, kung saan doon ang sabi ng naging hatol, kung may partial payment, “Let the number of shares that can be paid out of the partial payment be issued to the subscriber.” So kung hindi sana na-abandon, ang mangyayari dyan 600 shares will now be issued to S kase bayad na yung 600 shares kase 60,000 yung binayad nya eh. 400 lang ang available to the public for bidding eh inabandon kase unfair daw, baka walang magbid kase kokonti eh, walang advantage na makukuha and therefore ngayon, ang bagong ruling, “If you give partial payment per subscription, the partial payment will be applied to all the shares you subscribed.” So kagaya nyan, the 60,000 will be applied to the 1,000 shares, and therefore not a single share is paid and therefore available sa bidding ang 1,000. Am I clear sa bagong ruling? So dahil may sale, baka may mga interesado, correct? Correct. Okay. Tama. Una, may bidders for you to qualify -- to qualify pa lang ah -- you must be willing to pay not only the unpaid subscription but everything connected with the said expenses, the interest, so you are willing to pay 45,000. Kapag willing ka dyan, nagqualify ka, pwede kang manalo, so tatandaan, mananalo ka lang muna kung qualified tapos tatawagin kang highest bidder. Kung ang gusto mo ay least number of shares, ipagpalagay mo ang nagbid ay… o willing to pay 45,000 si A, si B, at si C. Ang gusto ni A bigay sa kanya 500 shares, yan ang gustong makuha. Si B sabi nya I’m willing to pay 45 for 480 shares. Sabi ni C, ako for 490. Magkakaroon ngayon ng highest bidder, ito ngayon ang highest bidder, follow? Follow? So dahil bayad na yan, babayaran nya. So B pays. Tama? Pag binayaran yan, ii-issue na. anong ii-issue? Ii-issue na yung 1,000 shares, correct? Ibibigay yung 480 shares kay B at ibibigay yung balance na 520 kay delinquent subscriber S. Ayan ang mangyayari. So hindi naman nalugi yung corporation kase fully paid pa rin. Well, kung nag-iisip kang bata, masasabi mo, Sir hindi yan responsive sa caption, kase Sir ang caption to acquire all shares. Tama? Hindi naman Sir na-acquire eh, naissue nga eh, yung certificate eh, di ba? So ibig-sabihin may kadugtong pa, correct? Kase hindi pa responsive doon sa caption na ginawa natin. Yan kase ay presuppose may bidder. What if wala? O walang nagbid. If there are no bidders what happens? Corporation will be a bidder – sya magbibid if meron syang retain earnings. Tama? Tama yun ang requirement doon eh. Kung may retain earning sya, ibibid nya. Corporation pays 45,000. Tama? And corporation acquires the 1,000 shares. O na-acquire na nya. Anong gagawin nya sa shares na yan? Option nya, gusto mo na bang iretire? Or gusto mo ilagay muna sa treasury para later pwede mong ibenta? Pangalawa… naintindihan yan? Pangalawa, if we are to… number one yan eh di ba? To acquire all shares… kailangan pa iexplain mo eh ‘no? To remove fractional shares. Bakit tayo may shares in fraction? Eh hindi naman sya dapat naka-fraction, di ba? Kase previously, ang corporation nagdeclare ng stock dividend. Wala sanang problema kung 100% stock dividend, kase kung 100% stock dividend, ang sampu mo may sampu, correct? Eh paano kung ang dineclare na stock dividend ay 20% stock dividend? Kaya ang lumalabas, kapag ang stockholders natin ay may 100 shares, yan ang shares nya, bibigyan mo sya ng 20, correct? Kase 20%. Eh paano kung meron syang 99 shares? Hindi mo sya mabibigyan ng 20, correct? Hindi naman sya papayag na ang ibibigay mo 19, correct? Kase magbibigay ka dito in effect one share for every five, tama? Tama? One share kase kung sya may five, bibigyan mo sya ng isa, di ba? Eh dito bibigyan mo sya ng 19 and 4/5, 19.8 eh. Paano kung yung stockholder natin tatlo lang, ilan ang ibibigay mo sa kanya? Alangan bigyan mo ng isa, bibigyan mo lang sya ng 3/5 or 0.6, correct? Eto yung naging fractional share, ayan… naka-fraction. Hindi tayo pwedeng mag-issue ng certificate na meron kang 19 and 4/5, dapat meron kang 19. Itong fractional shares na ito, the corporation, kung may retain earnings pays o… yung equivalent and acquires the fractional shares. Nakukuha mo? Maliwanag ha? 18 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW Pangatlo, if we are to pay dissenting stockholders. Sya nagdissent lang, umayaw lang, babayaran na, tama? Why are we to pay our dissenting stockholder? Kase po ang corporation ay may gagawing act. Ano yung act na gagawin nya? Baka sya magaamend, may amendment ng articles of incorporation, giving better advantage to the new issuance of shares or baka sya ay makikipag-slem ng all or substantially all of corporate property or ang corporation makikipag-merger or consolidation. Ano ngang itinuro sa’yo bago magawa yan? Dito lahat ng shares boboto, di ba? Tama? At para magawa yan iaapprove muna ng board di ba? Ilang boto kailangan ng board? Majority. Are you following? Tapos ipaparatify yan sa stockholders, di ba? Tama? Ilan lang kailangang boto? 2/3 lang, my dear 2/3, in favor. 1/3 voted against. Ano ang tawag sa 1/3 na ‘to? Sila ang ayaw kaya sila ang dissenting stockholders. Ipagpalagay natin magi-slem at ito, itong dalawang linyang ‘to voted in favor, in favor sila, ito lahat ng ‘to mula dito hanggang doon, voted against, tama? Sinong nanalo? Nagbotohan, yan sa nakikita mo dito, itong dalawang ‘to voted in favor, in favor kami, mula dito hanggang doon voted against, sinong nanalo? Sinong nanalo? Nanalo ‘to, correct? 2/3 sila eh, 1/3 lang kayo eh. My dear sa stockholders hindi binibilang ang number, ang binibilang shares, follow? Kung sya ang may-ari ng 2/3, eh lahat kayo ayaw nyo, nanalo sya, correct? Naintindihan? Sa stockholders hindi tayo paramihan, correct? Palakihan ng dami ng shares mo dyan. Kaya kahit ito lang yung 2/3 nanalo na ‘to, kahit nga isang tao 2/3 eh, correct? Tama? Kung gusto mong sa’yo ang corporation, 67% ikaw may-ari, yung 33 investors na lang yun, wala nang magagawa yung mga yun – you own the business – because you only need 2/3 to ratify any act of the board. Ganyan kaganda sa corporation, tama? Ganyan ka po yan. So nanalo. Talo ngayon ‘to. Talo kayo. Ngayon anong gagawin nyo eh ayaw nyo? Bumuto kayo against, anong gagawin nyo? Pwede kayong wala lang, tanggapin na lang ang kapalaran na sila ang masusunod, correct? So ang option mo ano? Just to follow the will of the 2/3, kaya be subservient, maging masunurin. The subservience of the minority to the will of the majority. Eh what if naniniwala kayo na mali? Halimbawa ito, sabi ng tatlong ‘to mali ang gagawin eh. Eh sabi naman nila, eh siguro tama sila, sila ang mas maraming investment eh. Ah hindi, basta kami aayaw na kami. Yan, baka yung iba sa inyo umayaw kaya… or to exercise your appraisal right – the right to demand payment of the fair value of your shares. Karapatan mo yan. Umayaw ka na, umayaw na sya. Yun ng ayaw di okay lang, option mo eh, kaya nga pipili ka eh. Igalang ang gusto ng madami or umalis sa corporation. Halimbawa sya, aalis na sya, tsaka sya, anong pangalan mo hija? Mariel? Marilyn? Moryene? Mar-ye? Mar-yeh? Ang hirap naman, ano ba yan? M-A-R-I-A-E, yung Maria nilagyan ng E sa dulo? Mariae? Yan si Mariae, Maryey ganun, Maryey. Ang galling ‘no, yung Maria nilagyan ng E sa dulo naging Maryey. Okay Maryey. Dapat pala ako Dantey. Eh kase kung nilagyan ng nanay ko ng A sa unahan Dantae, correct? Di ba? Buti hindi nilagyan ng A sa unahan, o eh di Dantae yun, correct? Dantey, ayun. Eh di syempre pag-grade 1 ang babasa, tinawag eh Dantae o di ba? Okay, at dahil nagdedemand sya ng payment, eto na, ang tawag dito appraisal right? Maliwanag? Sabi ng corporation, corporation says Mariae we are willing to pay you 1 million for your shares. Bahala ngayon si Mariae ‘no? si dissenting stockholder, pwede syang pumalag, correct? If dissenting stockholder, si Mariae, accepts the offer, then the corporation pays dissenting stockholder 1 million, then the dissenting stockholder surrenders the certificate – so the corporation acquires the share, follow? Follow? Ganun lang na-acquire. Eh what if ayaw ni dissenting stockholder? Dissenting stockholder rejects. Bakit mo tatanggihan ang 1 million? Nalalakihan ka? Naliliitan ka? Ano? Naliliitan ka. You want more. Sabi ni dissenting stockholder, “No, I deserve more than 1M.” Yan ang gusto nya. Magkakaroon ng tinatawag na deadlock, correct? One is saying one, one is saying greater. Anong gagawin to resolve the deadlock? An appraisal committee will now be created. So may appraisal committee. Ilan ang members ng committee na yan? Tatlo, isa sa members nyan ang pipili corporation, so magiging representative sya chosen by the corporation. Yung isang member is a representative chosen by the dissenting stockholder, so laging magttie yan, correct? Ito lagi nitong ipipilit 1M, ito langing ipipilit more than 1M, kase mga kinatawan sila noong dalawang nagbabanggaan. So to break the tie, let us have a third person acceptable to these two kase yung pangatlo ay chosen by, chosen by the representatives of the corporation and dissenting stockholder. So sila ngayon ang magdedetermine, yung committeeng yan, to determine the FMV – the fair value, to determine the fair value. At para madetermine nila yung fair value, malamang magmemeeting sila, at pag nagmemeeting malamang kakain, correct? Tingnan mo ang JPA pag nagmemeeting kumakain, correct? Naalala ko noon eh nagpapapirma sila kase naging adviser ako dati many years ago, pinapipirma. Sabi ko, “Teka, ilan ang umattend?” “Sir nine members.” “Okay, bakit eleven ‘to?” “May dalawang faculty na umattend.” “Bakit nyo sila isinama?” “Sir nakakahiya naman.” “Uy may sweldo yun. So yung dalawa rejected. Tapos teka, teka, teka, bakit parang ang dami nyong kinain? Eh pambihira, meron kayong chicken, may burger, may fries pa, aba. Fiesta?” sabi ko dapat approve for one cup of coffee and two pandesal. “Sir naman bakit?” “Oi hindi nyo pera ang ginagastos nyo eh. Tatanungin ko kayo, kung pera nyo yan, oorderin nyo yun ganito?” “Hindi Sir.” 19 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW “O so abuso kayo. Abuse of discretion. Hindi pwede yan. Anong napag-usapan, ‘to, ‘to, ‘to, ‘to, ‘to, tingnan nyo pati yung paggawa ng T-set.” Sabi ko, “Sinong gagawa ng T-set?” “Sir ito.” “Papaano nagawa?” “Sir nirecommend nung isa.” “Tingnan nyo yan, bakit payag kayong nirecommend? Paano dapat yan? Bidding. Get the highest bidder. Talk to at least three suppliers. Let them submit the materials. Di ba, negotiated sale. Ano kayo? Di ppwede yan. Bakit?” “Sir kase bibigyan kaming libreng…” “ O kita nyo, akala nyo ba libre yun? Hindi. Dinagdag yun sa selling price. Para kayong di accountancy.” Nung sumunod na taon di na ako adviser. Natuwa naman ako. Hindi ko kase matanggap eh kase you are working for yourselves, you are not working for the constituent, di ba? Bakit ganun? May libre kayo, ba’t kayo ang may libre? Bakit nila ishshoulder yung nilibre sa inyo? Dapat ibawas na lang sa cost di ba? Imbes na bigyan nyo kami ng libre, ibawas nyo sa cost para mas mababa, matutuwa yung mga bata, di ba? Hindi eh, tuwang-tuwa kayo na libre. Sino ba namang nagnegosyo ng… at bakit negotiated, yun ang ayaw ko sa lahat, negotiated sale. It must be by bidding. Maraming magbibid nyan, pababaan ngayon ang price nyan, pagandahan ng materials, matutuwa yung bata. Ay walang offense sa mga naging officer ha. Totoo naman nagmeryenda kayo libre di ba? Totoo namang may mga natanggap kayong freebies, tama? Tama? Kala nyo free yun, walang free, ginastusan yun ng mga members ng JPEA. Biro lang ha, baka nagagalit kayo. Natuwa naman ako nung… kase problema yun eh, eh kumikita sila bakit ganun? Maglilingkod eh. Now, so sila ang magdedetermine ng fair value, so may gastos ‘to, correct? Who shoulders the expenses? Nito, expenses. Who shoulders the expenses nyan? My dear aalamin natin magkano yung amount determined, yan ang importante, amount determined by the committee. If the amount determined is 1 million, then the dissenting stockholder shoulders – for one simple reason – if you did not object, if you did not reject, then this committee will not be created and it turned out that the offer of the corporation is fair, is reasonable. Tinanggihan mo eh. Pero kung ang naging hatol more than 1 million, yan yung corporation. Am I clear? What if hindi lang si Mariae ang umayaw, umaayaw din ‘to, umayaw, umayaw lahat yung 1/3, lahat umayaw. Imagine kung ang equivalent na fair value ng 1/3, let’s say 300 million, saan kukuha yung corporation nyan? Kinabahan yung corporation. Ano ba yan, akala ko si Mariae lang ang aangal, akala ko si… anong pangalan mo? Lisa? Liselle? Si Liselle ang aangal eh hindi pala from A to Z, umangal lahat, lahat nag-aappraisal right. Anong gagawin natin? Alisin natin yung appraisal right para hindi sila maka-alis, correct? Appraisal right exempt. If the act complained of is abandoned by the corporation, sabi nung corporation joke joke naman eh, hindi naman namin itutuloy, wala nang appraisal right kase wala namang itutuloy na act. Or yung act was rejected by the SEC. pag nireject ng SEC hindi kayo matutuloy, hindi kayo makakapag appraisal. Am I clear? Next would be to issue new shares. Dahil new shares yan, necessarily galing yan sa unissued shares, correct? Tama? At galing sa unissued shares, anong mangyayari sa outstanding? Tataas, correct? Correct? Pag tumaas ang outstanding at hindi nagalaw ang shares mo, anong mangyayari? Bababa ang interest mo. Anong dapat mangyari para maitaas ang outstanding pero hindi mababago ang interest mo? Assuming ang outstanding as of today is 1,000, you own 10 shares, ilang percent ang sa’yo? 10%. Mag-iissue ulit ng bagong 100 shares, follow? Mag-aadd ng another 1,000 shares, ilan na ang magiging outstanding? 2,000. Ilan ang sa’yo? 10, eh di magiging 5% ka na lang. Anong dapat mangyari para manatili kang 10%? Itong ibebentang ‘to, unissued shares, bibigyan ka na bilang isang existing stockholder, bibigyan ka ng tinatawag na preemptive right. Ano ang preemptive right? The right to subscribe, to issue one previously unissued shares before they are offered to the public. Am I clear? Except, nako, hindi pala absolute yan. Pwedeng wala kang preemptive right if the issuance of the shares will be one in compliance with law requiring the public offering of the shares. Was there ever a time na may pinass na law na yung shares, unissued shares at that, of an existing corporation were required to be directly sold to the public and not to the existing stockholders? Yes, Petron Corporation. For your info kase hindi ka pa pinapanganak noon. Alam mo bang ang daming gas stations sa Philippines, one of which is Petron, and Petron is the leader, sya ang leader. Walang laban sa kanya noon yung Shell, may Shell eh, hanggang ngayon may Shell, Caltex, meron nyan di ba? May Mobil, marami noon, at hindi tumataas ang presyo ng fuel dahil ang may-ari ng Petron, the government, subsidized. Kapagsinubsidize ibig-sabihin, our taxes are being used para sa gastos doon. Parang kagaya ng LRT, imagine, manggagaling ka ng Monumento aabot ka ng Baclaran, naka-aircon ka, ang pamasahe mo lang P20, tama? Hindi yan operating at a profit, operating at a loss yan. Ang dapat dyan, ang bayad dyan mga P50 eh kaso di naman madadagdagan yan, dalawampung istasyon lang yan eh, alangan namang dalawampung tren ang gagana. Pag dalawampung tren, di walang aandar, correct? 20 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW Dapat mababakante yung istasyon eh para umabante yung isa, so malamang 19 di ba? Paanong aabante, may mababakante, may papalit di ba? Hindi mo pwedeng gawing dalawampu yan, lahat kayo nasa istasyon. Lalong di pwedeng dalawampu’t lima, kaya crowded, kaya lugi talaga, lugi, pero nagsusurvive because of the subsidy. Kung gusto mong maging profitable yan, habaan mo yan. Doon lang yan, mula dito sa Monumento hanggang Visayas LRT. Kung gusto mong maging profitable yan habaan mo yan, dun lang yan. Mula dito sa Monumento hanggang Visayas LRT, ayan pahabain mo ng husto yan. Kikita na yan, correct? Kita mo sa ibang bansa puro mahahaba ang ruta hindi pwedeng maiksi, konti ang train na babiyahe eh. Itong Petron, na tuwing magtataas ang presyo sa world market, papasok yung subsidy. Kaya napakamura ng fuel mo, at matindi competition nun. Ask your great grandparents, iba noon. Yung iba nga alam mo promo nila? Ang gasoline attendant, mga babae, nakashorts, nakasleeveless at kayo ba ay doon lagi nagpapakarga. Correct? O gumawa naman yung isa ng gimik, libre sabon di ba? Libre tuwalya, maraming freebies noon. Kaya lang, dumating sa point na nagpass ng law, LET THE GOVERNMENT NOT EXPOSE ITSELF TO POSSBILE LOSSES, then for the government to concentrate only on governmental functions, not on proprietary functions. Lahat ng Government Owned and Controlled Corporations kung pwede iconvert na, ilipat na sa private. Hindi dapat nagtetake ng risk yung government na baka malugi. Eh Sir sayang naman yung profit? My dear, kapag binigay mo yan sa private sector at may profit, nakikinabang naman ang government eh. Correct? So na-privatize. Examples of privatized GOCCs Ang dami nating mga, property ng government, nilipat na sa private. PNB is government, kaya nga meron siyang word na National sa kanyang pangalan because government yan eh. Ang “National” hindi mo magagamit sa bangko kapag hindi ka government, PNB, now privatized. Manila Hotel is also owned by the government dati, was owned by the government. Nalipat na yan. Tama? Ang dami na, Philippine Airlines, tama? O, ngayon puro privatized na yan. Ang gaganda ng tinayo ng government dun, the best. Sir bakit naging based sa business yung government kailangan? Galing tayo sa giyera. 1940s may giyera correct? At walang gustong magbiyahe mula dito hanggang Apayao, Kalinga, walang gustong magbiyahe kasi ang pasahero tatlo apat lima. Ano ang ginawa ng government? Nagtatag ng PNR. Ang inabutan mo na na PNR, tren lang correct? Noong araw may bus, may bus ang PNR. Eh kaya lang dumami na tao naencourage na ang mga private sector magbukas na ng mga, mga buses nila. Kaya dati ang PNR noong araw, my dear, pupunta kami ng lola ko from Bicol papunta ng Manila, tren, galing ng Legaspi ang tren, tapos ang North hanggang Damortis La Union. Hanggang La Union na yan eh. Then, merong balak na iconnect ang North at South. Tren, aabutin na yang South di ba? Natigil yan. Ewan ko ibabalik na yata. Balak na ibalik. Marami tayong tinanggap na donation na tren sa Japan eh. Kaya lang may condition daw yun. Daw ha. Nung binibigay yun, ang sabi ng Japanese government, sabi, these trains must be operational within 5 years, if you cannot make it operational within 5 years, don’t accept the donation, we will give the trains to country who will use this for uh… serving the public but dapat in 5 years. Conditional donation eh. Pag di niyo naoperate in 5 years, you pay us interest, pag naoperate niyo, free yan. Ang ganda nung paglipat eh. Gusto magamit kaya malamang meron na niyan. At itong ginawa sa Petron, walang magawa eh, Asset Privatization Trust. Petron was also privatized. At dahil may mga unissued shares, ang nakalagay doon, let the shares be issued to the public, o walang nagawa yung mga existing stockholder. Or baka naman, the issuance of the shares is TO ACQUIRE A PROPERTY, needed by the corporation, whose acquisition was already, previously approved. Illustration: We are expanding, we need the adjoining land, sabi nung may-ari nung adjoining land, yes we’re willing to sell at FMV, ay thank you po, we pay in cash, sabi nung may-ari, no, I have lots of money, I don’t need cash. Ay ano pong ibabayad namin sa inyo? Shares. Give me shares and you have my land. Yan ang problema, ayaw ng may-ari ng pera, ang gusto niya, shares, so we bring this to you my dear stockholders. Ang ipambabayad natin to acquire the land, are the shares we have, galing sa unissued. 21 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW May magagawa ba tayo? Wala, pag hindi tayo pumayag, hindi natin makukuha yung lupa. Pero pag pumayag tayo, shares ang ibabayad, wala kayong pre-emptive right, nandon. Ay may ganun? Yung isang school natatawa ako dun, lumalaking school, naging popular eh, lumalaki, inofferan yung katabing lote, ayaw naman nung may-ari pag hindi shares, eh ayaw naman ng corporation kasi ang laki ng ibabayad nila eh. Tiyak uupo sa board yun eh, hindi nila nabili yun, ang nabili nila yung nasa likod nun. Kaya yung kanilang paaralan, nagging letter L. Kasi hindi nila nakuha ‘to eh, pagganun muna yun, binibili ‘to, hindi nabili, nabili yung likod, nagletter L sila, ayaw pa ito. Gusto nilang makuha ito para maging square ulit, correct? Ayaw talaga. Ginawa naman, yung nabili pagganun pala, at yung nabili, U type na sila ngayon, sa gitna nila merong, malaking space eh, anong ginawa nung may-ari, kinausap ang isang developer, tinayuan ng dalawang malalaking condominium units. Kaya yung likod natakpan na, hindi mo makikita yung nasa likod, kasi natayuan ng dalawa eh, o eh siguro sabi nung may-ari ayaw niyo ha. Ganung arrange. Hindi ko lang alam kung anong arrangement niya sa nagtayo ng condominium buildings. Ang taas nung tinayo eh. Syempre kung ikaw yung school, wala tayong magagawa, talagang property niya yan eh. Kaya minsan wala kang magawa kung yung may-ari, gusto ay shares. Finally, ito may reservation ako dito, kaya lang, reservation lang, kasi sabi, TO PAY OUR CREDITORS, oh, ipambabayad daw sa creditors yung shares, so instead of liability, convert to equity. Ako naman nagtataka, bakit dapat masama yan, sa tingin ko, why not sell the shares to the existing stockholders and out of the proceeds, pay the creditors. Correct? Kaya lang, on second thought, even if you give our stockholders pre-emptive right, not all of them will exercise. If not all of them will exercise, how can we pay the creditors, follow? Matapos mong malaman, ang mga magagawa mo, tignan naman natin ano ang magiging obligasyon natin pag miyembro ka ng board. Ang obligation mo ay observe, iobserve mo ang 3-FOLD DUTIES ng isang director. At ioobserve mo rin yung underlying doctrines. 3-FOLD DUTIES OF A DIRECTOR Dun muna tayo sa 3-FOLD DUTIES. The duty to be OLD. Para maging director ka, dapat OLD ka, at mapapatunayan ko yan sa’yo. Gusto mo bumaba tayo ngayon? Or baka siya ang teacher mo mamaya, Siya ba? Siya mamayang alas-diyes? Ano alasdiyes siya? O di ba kitang kita mo old siya? Tama ba ko? O mas matanda lang ako ng unti sa kanya siguro. (1/3) DUTY OF OBEDIENCE Now the duty of letter O THE DUTY OF OBEDIENCE. Obedience to the By-laws of the corporation. My dear, ang by-laws ay constitution of the corporation, diyan nakalagay lahat. Pag inamend yan, ibig sabihin gusto nila, ang ganda ng ginawang amendment diyan. Illustration: The SAN MIGUEL CASE, yung kay GOKONGWEI CASE, maganda yun, pag may time ka basahin mo, matutuwa ka. Alam mo naman ang San Miguel Corporation at Robina ay competitor, correct? Kasi kung ang San Miguel may San Miguel Beer, si Gokongwei meron siya Beer na Beer, di ba meron siyang ganun? At kung ano yung business ng San Miguel, yun din ang business niya eh. Competitors yan, tama? And some of the stockholders of San Miguel Corporation sold their shares to Mr. Gokongwei. The number of shares acquired by Mr. G, para mas mabilis, The number of shares acquired by Mr. G, will assure him of a seat in the board. Uupo siya, kasi may cumulative voting, di ba? Tama? He definitely will sit kahit anong gawin ng corporation, wala silang magagawa, nabili yung shares na enough eh para maupo. So nagparegister siya sa Stock and Transfer Book, naalarm yung present members ng board. Alam nilang may mawawala sa kanila kasi papasok ‘to eh, kasi naibenta na nga yung ibang shares ng stockholders eh, at naalarm sila. Imagine, he owns a corporation, whose business is in direct competition with our business, if he sits in the board, whatever we want to do, immediately he will know it before we can implement. Di ba hindi pa natin naiimplement, alam na niya. So what happens to our corporation? Agad-agad nagmeeting yung present members ng board, syempre wala pa siya, correct? Di pa nageeleksyon eh. Nagmeeting. Naalarm sila, anong ginawa nila? Let us amend. Let us amend the by-laws. Nilagay nila sa By-laws, No stockholder will qualify to sit in the board if he owns substantial interest in a corporation whose business is in direct competition with our business. Inapprove ng majority ng board. 22 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW Anong gagawin dahil amendment ng by-laws? Dadalhin sa stockholders for ratification, ilan lang ang kailangan? Majority lang eh hindi 2/3 eh. Correct? Amendment of by-laws will only require majority. Aattend siya ngayon, magoobject siya, correct? Eh pero nakuha yung, di naman kasi niya hawak yung, yung uhhh 51% eh. Correct? Kahit meron kang 40% eh 51 lang kailangan eh. Naratify. Pumayag yung 51%. Voted to ratify the amendment. Eh yun ang constitution nila eh, naratify. Dinala sa korte. Nadedeprive siya ng right to property. Correct? Kaya nga pwede ang cumulative voting eh. You are depriving me of my right to property, kasi hindi ko pwedeng desisyunan yung property ko. Alam mo naging hatol? A corporation is a being with a right to life. Dapat manatili siyang buhay. And if you are allowed to sit in the board, and you will know what the corporation intends to do before it can be done, you can now immediately, if he prepares a move to counter whatever this corporation wants to do, and the corporation may die. So let us not allow this to happen. Kung gusto mo, alisin mo yung interest mo sa competitor corporation. Kaya kung gusto, by-laws, susundin lagi ang by-laws. Kapag member ka ng Board, duty of obedience to the by-laws. Hindi siya nakaupo, naamend eh. (2/3) DUTY OF LOYALTY Letter L, DUTY OF LOYALTY TO THE CORPORATION. Mamaya, ididiscuss natin yan sa doctrines, kasi pwede kang loyal, pero hindi ka faithful, correct? Tama? Loyal ako sa’yo, kahit anong mangyari hindi kita iiwanan. Loyal ako eh. Kaya nga merong loyalist, correct? Ano ang nangyari? For better or for worse, loyal ako sa’yo di kita iiwanan. Eh bakit meron kang ibang girlfriend? Hindi ako faithful. Loyal. Ganun ba yun? Kaya lahat pwedeng sabihan mo, loyal ako sa’yo, loyal ako sa’yo, loyal ako sa’yo. Sino mang kumalaban sa’yo, kampi ako sa’yo. Sino mang kumalaban sa’yo, kampi ako sa’yo, kasi nga loyal ako sa’yo eh. Tama? Now, at may topic tayo niyan pagdating dito. (3/3) DUTY OF DILIGENCE And DUTY OF DILIGENCE o. Diligence, you are required to observe the diligence of a good father of a family. Makikita mo naman diligent eh noh? Araw-araw nandiyan, at diligent din matulog pag tanghali na di ba? Tapos makikita mo mga alas dos, alas tres andiyan na naman siya. Kaya talagang inoobserve niya yan. Tignan naman natin yung doctrine, ito yung maganda. Hindi mo pwedeng hindi mo sundin ang doctrine. DOCTRINES DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION Una, anong doctrine ang maganda? DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION. My dear, ano yan? Ito yung corporation, nilalagyan siya ng belo, meron siyang harang, para hindi makita yung mga taong andon. Para kung yung stockholder niyan, may stockholder yan na nandiyan eh, pag nakita yung stockholder na yan at yung stockholder na yan ay isa rin sa may-ari niyan, ikaw ay 3rd person creditor ka nito, hahabulin mo yan, correct? Correct? Eh ang gusto mong hahabulin yung corporation kasi nga stockholder siya. Can you go after this corporation? You cannot. Kaya nga may veil eh, tinatakpan siya para hindi mo iattack, ito kasi yung iaattack mo eh. Nagkataon lang na this person is a stockholder of the corporation. The properties inside are not his properties. The properties are properties of the corporation, kaya nga may veil. Alam mo yung veil, yung kumbaga sa simpleng salita, belo, yung takip. Nung araw, ang mga babae pag nagsisimba, itanong mo sa lola mo, naka-belo. Bakit tinatakpan? Kasi nung araw ang gaganda ng mga babae. Nagbebelo para yung nagsisimbang lalake, pag dumating sila, hindi nadidisturb, kasi may takip eh. Ngayon ba nagtatakip? So alam mo na bakit. Di nadidisturb eh. Noong araw pag nagsisimba ang babae, wala kang makikita eh, nakabelo ganyan. Nakadamit hanggang sakong, talagang wala eh, talagang balot na balot, para hindi madisturb yung mga lalaking church-goers. Kaya nilalagyan din ‘to ng belo. Ikaw ba kapag nagsisimba nagbebelo pa? May nadidisturb? Wala? Wala noh. Ako nagtatanong hindi ako nagaakusa ha.

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SURVIVAL KIT | CORPORATION LAW WHEN TO PIERCE THE VEIL OF CORPORATE FICTION? Ngayon kailan tayo papayagan ipierce, o… ano ibig sabihin ng to pierce? To puncture, to create a hole, butasin. Bakit bubutasin ‘to? Kasi itong stockholder na ‘to ginagamit yung corporate, tinatago sa corporation to commit fraud. O di ba, piercing the veil, if the corporation is being used: 1. To commit fraud; 2. To defeat legitimate issues; 3. To avoid taxes; or 4. A mere business conduit of another or an alter ego. Illustration: Gawin nating simple. Maganda yung decided case. Ito ay manufacturing firm, at matututunan mo later sa taxation pag manufacturer ka for domestic consumption may excise tax ka. Correct? Correct? Versus another manufacturing firm. Eh yung kanyang cost mas mataas, at ipagpalagay natin naka-ad valorem. Let’s say ad valorem is 10%, eh ang cost niya ipagpalagay mo ay 200. Ito ang cost nito ipagpalagay mo 120. So at the manufacturing level, may price difference na na 80. Correct? Tama? At dahil kakargahan pa ng excise tax na 10%, magdadagdag pa ng 20, ito magdadagdag ng 2, another 8 correct? So, palaki ng palaki. Alam mo ginawa niya? Si manufacturing, nagcreate siya ng distributing corporation. Masama magtayo ng another corporation? Hindi. So may distributing corporation, siya in-charge. Ang ginawa niya, ibebenta niya dito, tama? Ito na bahalang magdistribute sa wholesaler, at yung wholesaler, bahala nang magdala sa retailer, tama? Tama? Yan ang proseso. Alam mo ginawa niya? Nagpalugi siya. Ang nagging selling price niya, 100. Kaya ang naging tax niya, 10 lang, correct? Nakuha? Pwede niyang ginawa mababa pa para maemphasize, binenta lang niya ng P10, 10, so definitely, selling at a loss, tama? But actually, there is no loss, siya rin yan eh. Ang naging tax niya P1 lang, tama? Takang taka ngayon itong kalaban. ‘Bat ganun? Dapat may gap na tayo na 80, 81 lang ‘to, tapos tayo 12 pa rin, oh eh dapat maggap na tayo so magnegative na ‘to, correct? Tama? Imbis na, dapat 220 ‘to eh. Dapat selling price niya 220 di ba? Tama? Ito ang selling price niya 132. Correct? Correct? So lumabas ‘to dahil 10, ay ginawa niyang 11 lang ang selling price niya. Pero binawi niya noong ibinalik dito. Idinagdag niya uli yung 190, kaya ang selling price na niya 201. Follow? Follow? Nagtataka nagyon ‘to, ang gap nila, ay wala, hindi na 80, nasundan mo ko? Kasi nandaya siya ng 19, Yun ang natipid niya eh, 19. Kaya anong ginawa? Is it wrong for you to sell at a loss? No. Walang problema yan, pero bubutasin yan. Aalamin, how can you do that? May gumawa na dati ng ganyan, pero hindi naman corporation, isang review school sa province. May nagtayo, may kalaban siya, at ang promo ng kalaban niya, all reviewers come from Manila. Siya lahat ng reviewers niya, dun lang sa lugar nila. Kinabahan siya. Sabi niya, naku anong mangyayari sa’kin nito? Tiyak lilipat yung market niya di ba? Kasi galing sa Manila eh, napansin niya kaagad nangalahati, nakuha yung kalahati dun, kalahati na lang natira sa kanya. So sabi niya may problema, alam mo ginawa niya? May promo siya sa mga reviewees, come in 10, you pay only 1. So long as you come in 10, halimbawa ang tuition is 10,000, correct? Come in 10, pag kayong 10, 10 lang ang babayaran so tig-1,000 lang kayo. Correct? Sabi ko sa kanya, bakit di mo na lang i-1,000? Hindi, come in 10. Para wala siyang makuha correct? Mag-yayayaan yan eh. Halika na sayang yun. Sabi niya, paano niya ako lalabanan? Eh mas mahal ang cost niya. Ang cost niya may air-fare, may accommodation, ako taga-rito na, ay malulugi ka, talagang lugi. You would rather suffer loss than die. Hindi ako mamamatay. Maghihingalo lang ako ng mga 1 o 2 reviews, kasi sa susunod na batch kokonti na yan. Sa susunod na batch, malamang wala na yan. Dun na babalik ang kwan ko, 10,000 na ulit. Wala nang kalaban, pag may nagtayo, come in 10, pay 1. Ang galing ng promo, kaya ganun din dito. Ang ginawa ng government, inalam, binutas ‘to, Paano mo nagagawa yan? Di naman masama di ba, na malugi? Nakita how many employees do you have? Dalawa lang employee niya. Corporation yan. Anong delivery truck mo eh distributing ka, delivery truck niya nakita, pag-aari nito ni manufacturing. At nasaan ang office mo? Ang office nasa tabi ng office ng manufacturing, so para ka lang gumawa ng extension. At sabi ng government, hindi ka separate corporation. Kaya hindi mo pwedeng gawin. Kaya ibinalik siya sa 200. Follow?

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SURVIVAL KIT | CORPORATION LAW On a simple note, itong stockholder na ‘to nagmamaneho ng kotse niya, follow? Dahil approaching an intersection, may nasagasaan siya, nabangga ng kotse niya 69 people, and he knows these 69 people will sue, in addition to the criminal liability if convicted there will be civil liability. Afraid of the consequence, he will now put all his properties in the corporation. At nung mahatulan yung kaso wala na siyang assets, correct? Can these victims pierce the veil? Yes. Para malaman kalian trinansfer yung property. Am I clear? Pangalawa, ay time na pala. Next meeting continuation of doctrines. Tapos natin ang corporation next week, Nego na. Ingat Babye, Love you Marie. DOCTRINE OF DISPERSAL CIRCUMSTANCES Note: Audio is unclear. The duty to disclose to the stockholders what is happening to the corporation. So there is concealment – there is fraud. If you can remember our lecture in obligations and contracts, failure to disclose facts when there is duty to disclose is fraudulent. None, if there is no duty… eh dito mayroon duty. The duty to disclose to the stockholders was happening in the corporation. Presuppose today, a stockholder approaches Director B sabi ni Stockholder (the corporation is on a calendar year basis) Mister Director I am selling my share at per value are you willing to buy sabi ni Director Yes at nagbentahan sila. Did Director A violate a doctrine? Yes, hindi niya muna puwedeng bilhin yung shares ni Stockholder kasi siya ay director meron muna siya dapat ipagtapat. Last year 2016, the corporation had done transactions known to directors but not known to stockholders because structural* corporation like San Miguel Corporation wala kayong hands sa management. You don’t know what happened last year and up to today you don’t know yet yan ay dapat i-disclose muna. Parang sa partnership, if a partner is buying your share you must first disclose to the partner things not known by the partner and the things known to the director are things not known by the stockholders he must disclose first hindi niya puwedeng basta-basta bilhin. Walang problema kung parehong stockholder or parehong director ang issue ay director to stockholder. Pangatlo, the DOCTRINE OF BUSINESS OR CORPORATE OPPORTUNITY, in connection with your duty of loyalty. Ipagpalagay mo si Mr. Y, is calling up may offer siya ibibigay niya sa KL Corporation at dito isa sa member ng board si A. Si A ay member of the board who at the same time has a separate business and of course Y he cannot talk to the corporation it is an artificial being tinawagan niya ang telephone operator ang sabi ni Y Miss, connect me to any of your officer and the call was connected to A and so Y makes the offer and this offer will give profit. A is now thinking if I give the offer to the corporation the profit will go to the corporation but if I give the offer to my separate business the profit will go to my business, what is the better thing to do? Siyempre I love my own I protect my own and therefore I will give it to my own dinala niya yung offer sa separate business – he violated the Doctrine of Business Opportunity. Fourth, the Trust Fund Doctrine - the public in general the creditors in particular have the right to expect that the capital stock of a corporation is fully supported by its assets and therefore there should be no issuance of the shares unless fully paid. Kaya lang minsan narinig mon a ba yung utang na loob principle pakikisama syndrome akalain mo yun. Na dahil minsan nakikisama ka may utang na loob ka may mga bagay ka na ayaw mo gawin gagawin mo. Ayaw mo sana kagaya nito. Si Mr. S ay nagsubscribe 10M; ang 6M bayad, at 4M unpaid at next week magdudu-due. Wala siyang pambayad, made-declare siyang delinquent at alam niya ang mangyayari sa subscription niya kapag siya ay delinquent kaya ngayon palang pinuntahan ni S si A. Si A is a friend and at the same time is a member of the board sabi niya friend puwede ko ba itong bayaran ng property? Ay oo naman friend kaya lang ang FMV ay 3M sabi ni A pare mag-raise ka pa ng 1M pare wala na akong makukuhanan eh madedeclare pero kaya nga kita pinuntahan nakikiusap ako puwede ba today tanggapin mo itong bayad na ito? I-debit mo property 4M, i-credit mo rin yung subscription receivable 4M dahil diyan fully paid na ako maiissue na yung certificate diba?

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SURVIVAL KIT | CORPORATION LAW May kausap na akong creditor i-plepledge ko ito pare and it will take mga 5 to 7 days lang sa 7th day processing makukuha ko yung inuutang kong 2M pagkakuha ko ng 2M babayaran ko yung kulang na 1M kasi lahat papalabasin natin today we earned in effecting a valuation of 4M and 7 days later we realized the wrong and we corrected the error babayaran kita ng cash dedebit mo yung cash 1M icrecredit mo yung property 1M, pare adjusting entry lang yan diba? Correcting the erroneous entry. So in effect, the property is correctly valued because of the cash of 1 Million hindi mo ba ako mapagbibigyan? Eh nagkataon itong si S on certain occasions malaki nagawa kay A. Ang laki ng utang na loob ni A kay S sabi ni A pare matatanggihan ba kita? Sige pare payag ako kaya lang baka hindi ka parin maapprove kasi 5 (lima) kami sa board one voice lang ako eh decided my majority. So baka hindi ma-approve pero ikaw pare payag ka? Oo naman kala niya kasi hindi maapprove eh sabi niya pero no problem Pare. Kinausap ko na yung dalawang members ng board pag pumayag ka daw payag sila. Na-issue tuloy and therefore na violate. Bakit? Yung na-issue ito magkano nakalagay na asset – 10M, ang capital stock ay 10M, diba? Pero actually 9M lang yan, correct? Tama! Although on paper, it was 10M because it was reflected to be 4M but actually it must only be 3 so total 9M and therefore ang capital stock mo ay mas malaki sa cash mo and therefore it was not supported by the asset bakit siya lumaki? Pinataba mo siya – binasa mo yung property for it to look bigger kaya and share ay tatawagin nating “basa” – watered shares. Panglima, the DOCTRINE OF LIMITED CAPACITY bear in mind na ang corporation ay may powers at ang powers niya ay dapat doon ka lang sa express, nandoon ka sa implied, nandoon ka sa incidental powers dapat lahat ng gagawin mo ay inside that power eh paano ka kung mag-eexercise ka ng outside the powers? Within its powers (Intra) kapag nag-outside ka yan ay ultra kaya ito ay intravires at ultravires - you are acting outside the scope of the powers granted to the corporation at dalawang klase ng ultravires puwedeng legal at illegal. Kapag legal inaalam nagawa na ba – executed o baka naman siya ay executory – ang remedy ay dalhin sa mga stockholders baka gusto nila i-ratify kung balak palang gawin hindi siya puwede i-ratify so dapat siya ma-abandoned. Yung illegal walang remedy – illegal ultravires cannot be ratified – ang magiging liable diyan ay lahat ng members of the board maliban nalang kung ayaw maging liable you will object in writing and the written objection is given to the corporate secretary. Illustration: Ang franchise na binigay sa atin ng state ay to sell and distribute cars so tayo ay dealer ng kotse – kaya tayo ay nagbenta ng kotse – yan ay intravires. Ang kotse natin ay may accessories – may aircon, radio, tv, gadget – naisipan narin natin magbenta ng aircon kaya lang ang aircon natin ay split-type, window-type ang tv ay flat screen, nagbenta narin tayo ng computer kasi nga incidental na sa kotse so nagbenta pa tayo ng appliances – ito ay ultravires – we are not allowed pero legal. Nagbenta na tayo ng shabu mas malaki ang kita kaya ultravires pero illegal. Lahat ng gagawin mo dapat intravires kung sakaling ultra okay lang basta legal therefore there might be ultravires acts which are legal but all illegal acts are ultravires. Ang susunod na gagawin aattend sila ng meeting mga two meetings. And meetings ng board may regular meetings yan ginagawa yan once a month – monthly at puwede silang tumawag ng special meeting as the need arises at may notice kahit yan ay regular or special one day notice lang yan except na lang it will waive yung pagbibigay ng notice tapos yung place ng meeting anywhere puwede nilang gawin gusto nilang magmeeting sa Philippines or sa foreign country – puwede. Ang tanong paano sa attendance sa meeting sa attendance dapat ba sila to personally attend the meeting eh paano kung busy? Puwede bang magpadala ng proxy – bawal. Hindi nakakaattend sa meeting ng board of directors ang proxy it either you are present or absent you cannot be represented by a proxy. Sa meeting ng stockholders, ang stockholders may regular meeting – once a year as provided in their by-laws ay kung sakaling isisilent ni examiner gagawin nila yan any day in the month of April. Pero kailangan may notice yan – kailan? Tapos may special meeting as the need arises at may notice din magkaiba – ang regular two weeks ang special 1-week notice. 26 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW Tapos, yung tungkol sa place kung saan sila magmemeeting puwede sila sa city or in the municipality kung nasaan yung principal office and if impracticable dapat sila magmeeting sa principal office. At ang Metro Manila ay considered a city kaya kung ang principal office ay nasa Makati puwede kaya sila magmeeting sa Manila? Kung ang principal office ay sa Pasay puwede kaya magmeeting sa Pasig? Puwede. Kung ang office ay nasa Marikina puwede kaya magmeeting sa Mandaluyong? Puwede. Kung sa Cainta ang office sa Cainta ang meeting pero sa Metro Manila ay considered ng Law as one City. At yung mga naunang example ay nasa Metro Manila. Caloocan, Navotas, Malabon, Valenzuela, San Juan, Las Pinas, Paranaque, Muntinlupa, Taguig, Pateros, Quezon City – the 17 places comprise Metro Manila pag dating naman sa attendance sa meeting. Should they personally attend – of course! Can they send a person to represent them by way of proxy? Yes. Yan ang pagkakaiba sa board. Sino po ba si Proxy? Ikumpara natin siya sa voting trustee – kung titignan natin ang stock and transfer book ng corporation kaninong name nakaregister yung shares? Na kay stockholder dito na kay voting trustee. Hanggang kailan mo siya proxy? Ang proxy is only good for 1 meeting. A voting trustee ordinarily has a period of 5 years maximum. Except na lang kung ginawa kang continuing proxy, good ka for up to 5 years pag voting trustee. Except kung binigay yan by virtue of known agreement, pwede kang for duration of the loan. Kung 10 years yan, eh di hanggang 10 years. Pangatolong pagkakaiba nila, in case of presence of stockholder, who will vote for the shares? Dito ang boboto si stockholder, dito si voting trustee (?). Ipagpalagay mo today, nakatanggap ka ng notice of stockholder’s meeting, to be held on May 14, 2017, 1 PM, Shangri-La Hotel. May problema ka. Ang May 14, first day ng exam. Ala una, second subject, law. How can you be in Manila for the exam and Makati for the meeting ng stockholders? You cannot be in 2 places at the same time. So anong ginawa mo? Kinausap mo today yung kaibigan mo, ● “Friend, May 14, may dalawa akong gagawin sa ala una, take the exam and attend the meeting. Isa lang ang magagawa ko. Ikaw na gumawa nung isa.” ● “Alin dun, pare?” ● “Mag-exam.” Siyempre hindi pwedeng ipasa yun. Ang ipapasa mo lang yung pag-attend. Siya na ngayon ang aattend, siya ang boboto. Bakit may voting trustee? Hindi mo ito kinatawan, kasi ang kinatawan, proxy, representative. Ipagpalagay mo, lahat tayo stockholders, ang outstanding shares 1000. We will elect 5 directors. To be elected, we need 167 shares, correct? Nakaisip ako, sabi ko sainyo, “Alam niyo, tayo, para tayong walis tingting, kapag nagkanya-kanya tayong boto, walang mananalo satin. Bakit hindi natin bigkisin ang sarili natin. Let us unite and have one voice.” Kapag pinag-add kasi yung shares natin, tingnan mo yung total, 167. One of us will sit in the board, kung magkakasundo tayo. Papano? We will sign a voting trust agreement, where we will give to one of us the right to vote for the shares we own. Siya ang voting trustee. We will sign the voting trust agreement, give this to the corporation. The corporation will cancel our certificates, and in their place, it will issue a voting trust certificate in the name of our chosen voting trustee. So in the stock and transfer book, ilalagay ang pangalan niya as the person entitled to vote. Kahit mag-attend na lang tayo, kasi stockholder tayo eh. Hindi tayo pagbobotohin kasi binigay na natin sa kanya yung right to vote. Kung gusto nating maramdaman na lahat tayo bototo, simple lang. Sabihin nating good for one year ka, next year siya naman. Bahala tayong mag-agree, we can have it for 5 years. So it’s up to us, who will be appointed. Yun yung advantage ng voting trust. Ang walang boses, maririnig. At gaano ka katagal nandiyan? Ano ang term of office ng mga member ng board? As provided by the by-laws, or sa articles of incorporation kung dun nilagay. 27 | O p l a n C o r p o 2 0 1 9

SURVIVAL KIT | CORPORATION LAW Paano kung silent? Ang aalamin mo, anong klaseng corporation ang meron tayo. Yan ba ay stock corporation? Ang term ay 1 year. At dahil 1 year lang, expect there will be an election every year. Paano sir kung non-stock? Ang term niyan ay 3 years, pero may election every year. Kung tatlong taon ang term, bakit taon-taon may election? Kasi sa 1st year lang may staggered. All subsequent elections will be having 3 years. Ipagpalagay mo, ngayon nagtayo tayo, 2017 first year natin. Nagkasundo tayong magtatag ng non-stock, at nagkasundo tayong 15 ang members ng board of trustees. So paramihan ng boto. Yung pinakamaraming 1-to-5 will hold office for 3 years. Yung 6-to10 sa paramihan ng boto, 2 years. At yung 11-to-15, 1 year lang. Kaya ang term of office nila mage-expire, ito sa 2020, ito sa 2019, ito sa 2018. Thereafter, taon-taon may election. Lahat ng mananalo, magho-hold office for 3 years. Tatandaan mo, you will hold office for 3 years if you are elected to fill up a vacancy vacated by expiration of term. Kung na-elect ka to fill up a vacancy because of resignation, because of death, you will only serve the unexpired term. Kaya next year, 2018, may election tayo. Boboto tayo ng 5 members ng board, magho-hold office ng 3 years, hanggang 2021. Taon-taon yan, 5 ng 5, puro 3 years. Kapag naman ang itatayo natin ay private educational institution, 5 years ang term, pero may election every year. Spread mo lang yan into 5 groups, correct? Kung itong 3 years, spread into 3 groups, kapag 5 years, spread into 5 groups. Kung 15, 3 per group. Taon-taon boboto tayo, lahat nang mananalo, for a term of 5 years. Kung yan naman ay religious corporation, yung tinatawag na “corporation sole”, ang term niyan ay lifetime, kasi hindi yan board of directors or board of trustees. Yan ay si Pope. Isa lang kasi ang leader, kaya walang election every year. Alangan naman taontaon namamatay. Ang susunod, pwede bang nagdedemanda for the corporation, at nagdedemanda against the corporation? Kapag for the corporation, malamang, ang magdedemanda yung board. Kailan pwedeng magdemanda ang stockholder for the corporation? Pwede ring magdemanda ang stockholder at third person against the corporation. Diba meron tayong tinatawag na duties at doctrines? What if nagva-violate ang members ng board sa doctrines at sa duties? So dapat idemanda. You don’t expect the board to sue themselves. Pag nagdemanda ang stockholder, ang tawag, “derivative suit”, kasi nagdedemanda ang stockholder for the corporation. Pwede rin siyang magdemanda against. Yan ang tinatawag na “individual suit.” A stockholder is suing the corporation for violation of his right. Kung marami sila na nirerepresent niya, “representative suit” ang tawag. Stockholders versus the corporation. Pwede rin ang third person magsampa ng “individual suit” kaso baka magkaroon ng “class suit”, kasi maraming third persons suing the corporation in 1 complaint. Lagyan natin ng example kung bakit isa lang ang isasampa. Ang corporation, common carrier, at marami silang barko. Isa sa barko nila, on a voyage carrying 3000 passengers. So may 3000 contracts, correct? Ay bumangga yung barko, nag-sink because of collision with another vessel. Magdedemanda, correct? Imaginin mo kung magsasampa, 3000 cases kanya-kanya? Assuming it will take the court 1 year to decide the case, it will take 3000 years. By then, wala nang buhay sa kanila. Huwag kayong magkanya-kanya. Isa na lang ang isasampa, tatawagin nating “class suit.”

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SURVIVAL KIT | CORPORATION LAW DISSOLUTION It may happen AUTOMATICALLY: 1. If the term fixed in the articles of incorporation expires. You can only fix a maximum term of 50 years. If you do not want the corporation to die, something can be done: if the life is extended. And you will ask for extension on its last 5 years, except if there is meritorious reasons, it can be done even earlier than the last 5 years. However, the extension is only a maximum of 50 years. It is 50 years per extension. There is no limit as to the number of extensions. Example: Lets us suppose 2 corporations were incorporated: A corporation was incorporated in 1975, and B corporation in 1977. The term provided that day will be in existence for 50 years. As of today 2017, this corporations will be 42 and 40 years respectively. The remaining life for Corp. A 8 years, Corp. B 10 years. But there is a loan application filed in 2017. And it will be due in 5 years. This one due in 15 years and so before they file their application for loan, they decided to amend the articles of incorporation extending the life for another 50 years and they submitted it to SEC. Will the SEC approve the request for extension of life of A corporation? Chances are no. With B yes. Reason: if you will ask for the extension of life, it must be done on the last 5 years of its existence. Corporation A still has 8 years so it was done prematurely. Ask for extension when you celebrate your 45th birthday, and that would start the last 5 years. Chances are it will not be approved. However, with regard to B, looking at the remaining life is 10 years, however it may be granted. Reason: because Corporation B has meritorious reason for it to be granted extension: the loan application of B Corp. will not be approved. No creditor will grant a loan to you payable in 15 years if you will die in 10 years. So who will pay your obligation when it matures when you die on the 10th year? Lending firms, ie: banks, the moment the borrowers are juridical persons one of the requirements is the submission of the articles of incorporation, because we can see in the articles what is the remaining life of this corporation. 2. The non-use of its corporate franchise. There is failure to commence operation within 2 years counted from the issuance of the certificate of incorporation. ALL OTHERS WILL BE NON-AUTOMATIC. These will be reasons or grounds. a. Non-use of the corporate franchise. Failure of the corporation to resume operations within 5 years counted from the stoppage of operation. [The next 2 have been discussed in partnership.] b. By legislative act. Consider the possibility tomorrow a law will be approved by Congress and signed by the President, and this law makes the business of the corporation illegal if continued. Example: tomorrow a law is passed prohibiting all forms of gambling in the PH, what will we do with PAGCOR? With hotels having casino games, with races, cockpits? They will necessarily have to stop operations.

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SURVIVAL KIT | CORPORATION LAW c. If there will be a quo warranto proceedings instituted by the office of Solicitor General because our corporation is merely de facto and it will be attacked by direct attack. Because we know we do not institute quo warranto proceedings, we do not challenge a de jure corporation and we do not also allow collateral attack. d. Voluntary on the partners. Because they will affect an amendment on the articles of incorporation. And they can shorten the life of the corporation. If it can be extended it can also be shortened. It may be done by judicial proceedings by going to court. Now the corporation is dissolved is it dead? Not yet. It will be allowed to effect still winding up the affairs, in partnership liquidation. How long for the corporation to still survive? For 3 years. And in this 3 years, all actions whether for or against the corporation must be brought to court. If you do not do that it means you're waiving your right to go to court. But we also know it may be possible, 3 years is not enough to resolve a dispute so what happens if this 3-year period given by law to the corporation to wind up is about to expire so it will lapse already. And the sad part is there are still actions pending before the courts. What should be done if there are actions still to be resolved and the 3-year period is about to expire? The receiver. Who is the receiver? Person in charge of the winding up the affairs. The receiver is required to reserve enough funds in order to provide for actions still pending. These funds will now be held by the receiver in escrow. Panagot dun sa pending action. Issangtabe. Escrow is different from escheat. Escheat is the confiscation or forfeiture. Escrow is only reservation. Is it possible after setting enough funds to answer for actions still pending, to have an excess? Kung may sobra pa dapat idistribute sa owners or stockholders. And that will (_______) to the life of a domestic corporation. What happens if the life of the corporation is organized in another country? It is a foreign corporation. Hindi na natin aalamin pano inorganize yan kasi di naman yan inorganize dito. It came here as a corporation already. We call them resident. Resident because engaged in business in the PH. If no business here, non-resident, not engaged in business here. And it presupposes that for the government to allow you to conduct your business here, you need to have a license. But if not engaged in business they will not ask for a license because you are not engaged in the business in the PH. Except if engaged ka and you have no license, still without license. This is the one that gave you personality to transact business here and therefore, Can foreign corporations be sued? Can foreign corporations sue? No problem if you have a license. They can sue and be sued. For obvious reason, you are like a person (tao) because the government acknowledged you because of the license. Necessarily, if you have no license, you cannot sue, you cannot go to court, because you are not following the rules prescribed here. The PH law said bago kayo mag negosyo dito kumuha muna kayo ng license, but you don't acknowledge yung gusto namin, exempt. If the reason why this foreign corporation is suing there was a violation of their right to property, the right to their name, di ka papayagan iviolate ung corporate name (i.e. Miscrosoft), trade name, or business name, minsan kasi ang corporation may mga products silang may kanya-kanyang brand name or trade name, like Apple, Samsung.

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SURVIVAL KIT | CORPORATION LAW Now baka naman may trademark, wag ivviolate, minsan kasi may logo or insignia, like Apple, may mansanas na nakagat na, don't copy kasi magagalit sila, ginaya mo, they will complain. Kung gusto mo sayo walang kagat, walang misinformation kasi makikita mo pagkakaiba. If you invented something like plantsa na automatic or remote control ippapatent mo yun, or they have a copyright if you will use them without their consent. Di lang tayo nanggaya sila din ginaya tayo. PH is sikat, lahat ng export natin the best products. – FIN –

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