PART II

RESEARCH CITE/COPY THE PARTICULAR CODAL PROVISION/S ON THE

FOLLOWING;

1. SPECIFIC CORPORATE POWERS, SPECIFIC CAPACITY

AND HOW EXERCISED

Sec. 37. Power to extend or shorten corporate term. - A private corporation

may extend or shorten its term as stated in the articles of incorporation when
approved by a majority vote of the board of directors or trustees and ratified at a
meeting by the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock or by at least two-thirds (2/3) of the members in case of
non-stock corporations. Written notice of the proposed action and of the time and
place of the meeting shall be addressed to each stockholder or member at his
place of residence as shown on the books of the corporation and deposited to
the addressee in the post office with postage prepaid, or served personally:
Provided, That in case of extension of corporate term, any dissenting stockholder
may exercise his appraisal right under the conditions provided in this code. (n)

Sec. 38. Power to increase or decrease capital stock; incur, create or

increase bonded indebtedness. - No corporation shall increase or decrease its
capital stock or incur, create or increase any bonded indebtedness unless
approved by a majority vote of the board of directors and, at a stockholder's
meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital
stock shall favor the increase or diminution of the capital stock, or the incurring,
creating or increasing of any bonded indebtedness. Written notice of the
proposed increase or diminution of the capital stock or of the incurring, creating,
or increasing of any bonded indebtedness and of the time and place of the
stockholder's meeting at which the proposed increase or diminution of the capital
stock or the incurring or increasing of any bonded indebtedness is to be
considered, must be addressed to each stockholder at his place of residence as
shown on the books of the corporation and deposited to the addressee in the
post office with postage prepaid, or served personally.

A certificate in duplicate must be signed by a majority of the directors of the

corporation and countersigned by the chairman and the secretary of the
stockholders' meeting, setting forth:

(1) That the requirements of this section have been complied with;

(2) The amount of the increase or diminution of the capital stock;

(3) If an increase of the capital stock, the amount of capital stock or

number of shares of no-par stock thereof actually subscribed, the
names, nationalities and residences of the persons subscribing, the
amount of capital stock or number of no-par stock subscribed by
each, and the amount paid by each on his subscription in cash or
property, or the amount of capital stock or number of shares of no-
par stock allotted to each stock-holder if such increase is for the
purpose of making effective stock dividend therefor authorized;

(4) Any bonded indebtedness to be incurred, created or increased;

 (5) The actual indebtedness of the corporation on the day of the
meeting;

(6) The amount of stock represented at the meeting; and

(7) The vote authorizing the increase or diminution of the capital

stock, or the incurring, creating or increasing of any bonded
indebtedness.

Any increase or decrease in the capital stock or the incurring, creating or

increasing of any bonded indebtedness shall require prior approval of the
Securities and Exchange Commission.

One of the duplicate certificates shall be kept on file in the office of the
corporation and the other shall be filed with the Securities and Exchange
Commission and attached to the original articles of incorporation. From and after
approval by the Securities and Exchange Commission and the issuance by the
Commission of its certificate of filing, the capital stock shall stand increased or
decreased and the incurring, creating or increasing of any bonded indebtedness
authorized, as the certificate of filing may declare: Provided, That the Securities
and Exchange Commission shall not accept for filing any certificate of increase of
capital stock unless accompanied by the sworn statement of the treasurer of the
corporation lawfully holding office at the time of the filing of the certificate,
showing that at least twenty-five (25%) percent of such increased capital stock
has been subscribed and that at least twenty-five (25%) percent of the amount
subscribed has been paid either in actual cash to the corporation or that there
has been transferred to the corporation property the valuation of which is equal to
twenty-five (25%) percent of the subscription: Provided, further, That no
decrease of the capital stock shall be approved by the Commission if its effect
shall prejudice the rights of corporate creditors.

Non-stock corporations may incur or create bonded indebtedness, or increase

the same, with the approval by a majority vote of the board of trustees and of at
least two-thirds (2/3) of the members in a meeting duly called for the purpose.

Bonds issued by a corporation shall be registered with the Securities and

Exchange Commission, which shall have the authority to determine the
sufficiency of the terms thereof. (17a)

Sec. 39. Power to deny pre-emptive right. - All stockholders of a stock

corporation shall enjoy pre-emptive right to subscribe to all issues or disposition
of shares of any class, in proportion to their respective shareholdings, unless
such right is denied by the articles of incorporation or an amendment thereto:
Provided, That such pre-emptive right shall not extend to shares to be issued in
compliance with laws requiring stock offerings or minimum stock ownership by
the public; or to shares to be issued in good faith with the approval of the
stockholders representing two-thirds (2/3) of the outstanding capital stock, in
exchange for property needed for corporate purposes or in payment of a
previously contracted debt.

Sec. 40. Sale or other disposition of assets. - Subject to the provisions of

existing laws on illegal combinations and monopolies, a corporation may, by a
majority vote of its board of directors or trustees, sell, lease, exchange,
mortgage, pledge or otherwise dispose of all or substantially all of its property
and assets, including its goodwill, upon such terms and conditions and for such
consideration, which may be money, stocks, bonds or other instruments for the
payment of money or other property or consideration, as its board of directors or
trustees may deem expedient, when authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or in case
of non-stock corporation, by the vote of at least to two-thirds (2/3) of the
members, in a stockholder's or member's meeting duly called for the purpose.
Written notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence as
shown on the books of the corporation and deposited to the addressee in the
post office with postage prepaid, or served personally: Provided, That any
dissenting stockholder may exercise his appraisal right under the conditions
provided in this Code.

A sale or other disposition shall be deemed to cover substantially all the

corporate property and assets if thereby the corporation would be rendered
incapable of continuing the business or accomplishing the purpose for which it
was incorporated.

After such authorization or approval by the stockholders or members, the board

of directors or trustees may, nevertheless, in its discretion, abandon such sale,
lease, exchange, mortgage, pledge or other disposition of property and assets,
subject to the rights of third parties under any contract relating thereto, without
further action or approval by the stockholders or members.

Nothing in this section is intended to restrict the power of any corporation, without
the authorization by the stockholders or members, to sell, lease, exchange,
mortgage, pledge or otherwise dispose of any of its property and assets if the
same is necessary in the usual and regular course of business of said
corporation or if the proceeds of the sale or other disposition of such property
and assets be appropriated for the conduct of its remaining business.

In non-stock corporations where there are no members with voting rights, the
vote of at least a majority of the trustees in office will be sufficient authorization
for the corporation to enter into any transaction authorized by this section. (28
1/2a)

Sec. 41. Power to acquire own shares. - A stock corporation shall have the
power to purchase or acquire its own shares for a legitimate corporate purpose
or purposes, including but not limited to the following cases: Provided, That the
corporation has unrestricted retained earnings in its books to cover the shares to
be purchased or acquired:

1. To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation,

arising out of unpaid subscription, in a delinquency sale, and to
purchase delinquent shares sold during said sale; and

3. To pay dissenting or withdrawing stockholders entitled to

payment for their shares under the provisions of this Code. (n)

Sec. 42. Power to invest corporate funds in another corporation or

business or for any other purpose. - Subject to the provisions of this Code, a
private corporation may invest its funds in any other corporation or business or
for any purpose other than the primary purpose for which it was organized when
approved by a majority of the board of directors or trustees and ratified by the
stockholders representing at least two-thirds (2/3) of the outstanding capital
stock, or by at least two thirds (2/3) of the members in the case of non-stock
corporations, at a stockholder's or member's meeting duly called for the purpose.
Written notice of the proposed investment and the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence as
shown on the books of the corporation and deposited to the addressee in the
post office with postage prepaid, or served personally: Provided, That any
dissenting stockholder shall have appraisal right as provided in this Code:
Provided, however, That where the investment by the corporation is reasonably
necessary to accomplish its primary purpose as stated in the articles of
incorporation, the approval of the stockholders or members shall not be
necessary. (17 1/2a)

Sec. 43. Power to declare dividends. - The board of directors of a stock

corporation may declare dividends out of the unrestricted retained earnings
which shall be payable in cash, in property, or in stock to all stockholders on the
basis of outstanding stock held by them: Provided, That any cash dividends due
on delinquent stock shall first be applied to the unpaid balance on the
subscription plus costs and expenses, while stock dividends shall be withheld
from the delinquent stockholder until his unpaid subscription is fully paid:
Provided, further, That no stock dividend shall be issued without the approval of
stockholders representing not less than two-thirds (2/3) of the outstanding capital
stock at a regular or special meeting duly called for the purpose. (16a)

Stock corporations are prohibited from retaining surplus profits in excess of one
hundred (100%) percent of their paid-in capital stock, except: (1) when justified
by definite corporate expansion projects or programs approved by the board of
directors; or (2) when the corporation is prohibited under any loan agreement
with any financial institution or creditor, whether local or foreign, from declaring
dividends without its/his consent, and such consent has not yet been secured; or
(3) when it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation, such as when there is need for
special reserve for probable contingencies. (n)

Sec. 44. Power to enter into management contract. - No corporation shall

conclude a management contract with another corporation unless such contract
shall have been approved by the board of directors and by stockholders owning
at least the majority of the outstanding capital stock, or by at least a majority of
the members in the case of a non-stock corporation, of both the managing and
the managed corporation, at a meeting duly called for the purpose: Provided,
That (1) where a stockholder or stockholders representing the same interest of
both the managing and the managed corporations own or control more than one-
third (1/3) of the total outstanding capital stock entitled to vote of the managing
corporation; or (2) where a majority of the members of the board of directors of
the managing corporation also constitute a majority of the members of the board
of directors of the managed corporation, then the management contract must be
approved by the stockholders of the managed corporation owning at least two-
thirds (2/3) of the total outstanding capital stock entitled to vote, or by at least
two-thirds (2/3) of the members in the case of a non-stock corporation. No
management contract shall be entered into for a period longer than five years for
any one term.

The provisions of the next preceding paragraph shall apply to any contract
whereby a corporation undertakes to manage or operate all or substantially all of
the business of another corporation, whether such contracts are called service
contracts, operating agreements or otherwise: Provided, however, That such
service contracts or operating agreements which relate to the exploration,
development, exploitation or utilization of natural resources may be entered into
for such periods as may be provided by the pertinent laws or regulations. (n)
TRUST FUND DOCTRINE

It refers to the principle that the capital stock, property and other assets of the
corporation are regarded as equity in trust for payment of corporate creditors.
“The doctrine is the underlying principle in the procedure for the distribution of
capital assets, embodied in Corporation Code, which allows the distribution of
corporate capital only in three instances: (1) amendment of Articles of
Incorporation to reduce the authorized capital stock, (2) purchase of redeemable
shares by the corporation, regardless of the existence of unrestricted retained
earnings, and (3) dissolution and eventual liquidation of corporation. Futhermore,
the doctrine is articulated in Section 41 on the power of corporation to acquire its
own shares and in Section 122 on the prohibition against the distribution of
corporate assets and property unless the stringent requirement therefore are
complied with” (Ong Yong vs. Tiu, G.R. No. 144476, 8 April 2003)

DOCTRINE OF EQUALITY OF SHARES

Section 6, par. 5
The doctrine provides that “Except as otherwise provided by the article of
incorporation and stated in the certificate of stock, each share shall be in all
respects equal to every other share.” Section 6, par. 5

This means that in absence of any provision in the articles of incorporation and in
the certificate of stock to the contrary, all stocks enjoy equal rights and privileges.
Thus, if one class of shares has the right to vote, all other classes are presumed
to have the same voting power.

STOCKHOLDERS-MEMBERS FUNDAMENTAL RIGHTS

1. RIGHT TO ATTEND AND VOTE IN PERSON OR BY PROXY AT

STOCKHOLDER’S MEETINGS

Sec. 50. Regular and special meetings of stockholders or members. -

Regular meetings of stockholders or members shall be held annually on a date
fixed in the by-laws, or if not so fixed, on any date in April of every year as
determined by the board of directors or trustees: Provided, That written notice of
regular meetings shall be sent to all stockholders or members of record at least
two (2) weeks prior to the meeting, unless a different period is required by the by-
laws.

Special meetings of stockholders or members shall be held at any time deemed

necessary or as provided in the by-laws: Provided, however, That at least one (1)
week written notice shall be sent to all stockholders or members, unless
otherwise provided in the by-laws.

Notice of any meeting may be waived, expressly or impliedly, by any stockholder

or member.

Whenever, for any cause, there is no person authorized to call a meeting, the
Secretaries and Exchange Commission, upon petition of a stockholder or
member on a showing of good cause therefor, may issue an order to the
petitioning stockholder or member directing him to call a meeting of the
corporation by giving proper notice required by this Code or by the by-laws. The
petitioning stockholder or member shall preside thereat until at least a majority of
the stockholders or members present have been chosen one of their number as
presiding officer. (24, 26)
Sec. 58. Proxies. - Stockholders and members may vote in person or by proxy in
all meetings of stockholders or members. Proxies shall in writing, signed by the
stockholder or member and filed before the scheduled meeting with the corporate
secretary. Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time. (n)

2. RIGHT TO ELECT AND REMOVE DIRECTORS

Sec. 24. Election of directors or trustees. - At all elections of directors or

trustees, there must be present, either in person or by representative authorized
to act by written proxy, the owners of a majority of the outstanding capital stock,
or if there be no capital stock, a majority of the members entitled to vote. The
election must be by ballot if requested by any voting stockholder or member. In
stock corporations, every stockholder entitled to vote shall have the right to vote
in person or by proxy the number of shares of stock standing, at the time fixed in
the by-laws, in his own name on the stock books of the corporation, or where the
by-laws are silent, at the time of the election; and said stockholder may vote such
number of shares for as many persons as there are directors to be elected or he
may cumulate said shares and give one candidate as many votes as the number
of directors to be elected multiplied by the number of his shares shall equal, or he
may distribute them on the same principle among as many candidates as he
shall see fit: Provided, That the total number of votes cast by him shall not
exceed the number of shares owned by him as shown in the books of the
corporation multiplied by the whole number of directors to be elected: Provided,
however, That no delinquent stock shall be voted. Unless otherwise provided in
the articles of incorporation or in the by-laws, members of corporations which
have no capital stock may cast as many votes as there are trustees to be elected
but may not cast more than one vote for one candidate. Candidates receiving the
highest number of votes shall be declared elected. Any meeting of the
stockholders or members called for an election may adjourn from day to day or
from time to time but not sine die or indefinitely if, for any reason, no election is
held, or if there not present or represented by proxy, at the meeting, the owners
of a majority of the outstanding capital stock, or if there be no capital stock, a
majority of the member entitled to vote.

Sec. 28. Removal of directors or trustees. - Any director or trustee of a

corporation may be removed from office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the outstanding capital stock, or if the
corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of
the members entitled to vote: Provided, That such removal shall take place either
at a regular meeting of the corporation or at a special meeting called for the
purpose, and in either case, after previous notice to stockholders or members of
the corporation of the intention to propose such removal at the meeting. A special
meeting of the stockholders or members of a corporation for the purpose of
removal of directors or trustees, or any of them, must be called by the secretary
on order of the president or on the written demand of the stockholders
representing or holding at least a majority of the outstanding capital stock, or, if it
be a non-stock corporation, on the written demand of a majority of the members
entitled to vote. Should the secretary fail or refuse to call the special meeting
upon such demand or fail or refuse to give the notice, or if there is no secretary,
the call for the meeting may be addressed directly to the stockholders or
members by any stockholder or member of the corporation signing the demand.
Notice of the time and place of such meeting, as well as of the intention to
propose such removal, must be given by publication or by written notice
prescribed in this Code. Removal may be with or without cause: Provided, That
removal without cause may not be used to deprive minority stockholders or
members of the right of representation to which they may be entitled under
Section 24 of this Code.

RIGHT TO APPROVE CERTAIN CORPORATE ACTS

Sec. 49. Kinds of meetings. - Meetings of directors, trustees, stockholders, or

members may be regular or special. (n)

Sec. 54. Who shall preside at meetings. - The president shall preside at all
meetings of the directors or trustee as well as of the stockholders or members,
unless the by-laws provide otherwise. (n)

RIGHT TO ADOPT AND AMEND OR REPEAL THE BY-LAWS OR ADOPT

NEW LAWS

Sec. 46. Adoption of by-laws. - Every corporation formed under this Code
must, within one (1) month after receipt of official notice of the issuance of its
certificate of incorporation by the Securities and Exchange Commission, adopt a
code of by-laws for its government not inconsistent with this Code. For the
adoption of by-laws by the corporation the affirmative vote of the stockholders
representing at least a majority of the outstanding capital stock, or of at least a
majority of the members in case of non-stock corporations, shall be necessary.
The by-laws shall be signed by the stockholders or members voting for them and
shall be kept in the principal office of the corporation, subject to the inspection of
the stockholders or members during office hours. A copy thereof, duly certified to
by a majority of the directors or trustees countersigned by the secretary of the
corporation, shall be filed with the Securities and Exchange Commission which
shall be attached to the original articles of incorporation.

Notwithstanding the provisions of the preceding paragraph, by-laws may be

adopted and filed prior to incorporation; in such case, such by-laws shall be
approved and signed by all the incorporators and submitted to the Securities and
Exchange Commission, together with the articles of incorporation.

In all cases, by-laws shall be effective only upon the issuance by the Securities
and Exchange Commission of a certification that the by-laws are not inconsistent
with this Code.

The Securities and Exchange Commission shall not accept for filing the by-laws
or any amendment thereto of any bank, banking institution, building and loan
association, trust company, insurance company, public utility, educational
institution or other special corporations governed by special laws, unless
accompanied by a certificate of the appropriate government agency to the effect
that such by-laws or amendments are in accordance with law. (20a)

Sec. 48. Amendments to by-laws. - The board of directors or trustees, by a

majority vote thereof, and the owners of at least a majority of the outstanding
capital stock, or at least a majority of the members of a non-stock corporation, at
a regular or special meeting duly called for the purpose, may amend or repeal
any by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the
outstanding capital stock or two-thirds (2/3) of the members in a non-stock
corporation may delegate to the board of directors or trustees the power to
amend or repeal any by-laws or adopt new by-laws: Provided, That any power
delegated to the board of directors or trustees to amend or repeal any by-laws or
adopt new by-laws shall be considered as revoked whenever stockholders
owning or representing a majority of the outstanding capital stock or a majority of
the members in non-stock corporations, shall so vote at a regular or special
meeting.

Whenever any amendment or new by-laws are adopted, such amendment or

new by-laws shall be attached to the original by-laws in the office of the
corporation, and a copy thereof, duly certified under oath by the corporate
secretary and a majority of the directors or trustees, shall be filed with the
Securities and Exchange Commission the same to be attached to the original
articles of incorporation and original by-laws.

The amended or new by-laws shall only be effective upon the issuance by the
Securities and Exchange Commission of a certification that the same are not
inconsistent with this Code. (22a and 23a)

RIGHT TO COMPEL THE CALLING OF MEETINGS OF STOCKHOLDERS

WHEN FOR ANY CAUSE THERE IS NO PERSON AUTHORIZED TO CALL A
MEETING

Sec. 50. Regular and special meetings of stockholders or members. -

Regular meetings of stockholders or members shall be held annually on a date
fixed in the by-laws, or if not so fixed, X X X

Whenever, for any cause, there is no person authorized to call a meeting, the
Secretaries and Exchange Commission, upon petition of a stockholder or
member on a showing of good cause therefor, may issue an order to the
petitioning stockholder or member directing him to call a meeting of the
corporation by giving proper notice required by this Code or by the by-laws. The
petitioning stockholder or member shall preside thereat until at least a majority of
the stockholders or members present have been chosen one of their number as
presiding officer. (24, 26)

RIGHT TO ISSUANCE OF CERTIFICATE OF STOCK OR OTHER EVIDENCE

OF STOCK OWNERSHIP AND BE REGISTERED AS SHAREHOLDER

Sec. 63. Certificate of stock and transfer of shares. - The capital stock of
stock corporations shall be divided into shares for which certificates signed by
the president or vice president, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock so issued are personal property
and may be transferred by delivery of the certificate or certificates endorsed by
the owner or his attorney-in-fact or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the parties, until
the transfer is recorded in the books of the corporation showing the names of the
parties to the transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation. (35)

RIGHT TO VOTE:

Sec. 55. Right to vote of pledgors, mortgagors, and administrators. - In case

of pledged or mortgaged shares in stock corporations, the pledgor or mortgagor
shall have the right to attend and vote at meetings of stockholders, unless the
pledgee or mortgagee is expressly given by the pledgor or mortgagor such right
in writing which is recorded on the appropriate corporate books. (n)
Executors, administrators, receivers, and other legal representatives duly
appointed by the court may attend and vote in behalf of the stockholders or
members without need of any written proxy. (27a)

Sec. 56. Voting in case of joint ownership of stock. - In case of shares of

stock owned jointly by two or more persons, in order to vote the same, the
consent of all the co-owners shall be necessary, unless there is a written proxy,
signed by all the co-owners, authorizing one or some of them or any other person
to vote such share or shares: Provided, That when the shares are owned in an
"and/or" capacity by the holders thereof, any one of the joint owners can vote
said shares or appoint a proxy therefor. (n)

Sec. 58. Proxies. - Stockholders and members may vote in person or by proxy in
all meetings of stockholders or members. Proxies shall in writing, signed by the
stockholder or member and filed before the scheduled meeting with the corporate
secretary. Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time. (n)

Sec. 89. Right to vote. - The right of the members of any class or classes to
vote may be limited, broadened or denied to the extent specified in the articles of
incorporation or the by-laws. Unless so limited, broadened or denied, each
member, regardless of class, shall be entitled to one vote.

Unless otherwise provided in the articles of incorporation or the by-laws, a

member may vote by proxy in accordance with the provisions of this Code. (n)

Voting by mail or other similar means by members of non-stock corporations may

be authorized by the by-laws of non-stock corporations with the approval of, and
under such conditions which may be prescribed by, the Securities and Exchange
Commission.

Sec. 59. Voting trusts. - One or more stockholders of a stock corporation may
create a voting trust for the purpose of conferring upon a trustee or trustees the
right to vote and other rights pertaining to the shares for a period not exceeding
five (5) years at any time: Provided, That in the case of a voting trust specifically
required as a condition in a loan agreement, said voting trust may be for a period
exceeding five (5) years but shall automatically expire upon full payment of the
loan. A voting trust agreement must be in writing and notarized, and shall specify
the terms and conditions thereof. A certified copy of such agreement shall be
filed with the corporation and with the Securities and Exchange Commission;
otherwise, said agreement is ineffective and unenforceable. The certificate or
certificates of stock covered by the voting trust agreement shall be canceled and
new ones shall be issued in the name of the trustee or trustees stating that they
are issued pursuant to said agreement. In the books of the corporation, it shall be
noted that the transfer in the name of the trustee or trustees is made pursuant to
said voting trust agreement.

The trustee or trustees shall execute and deliver to the transferors voting trust
certificates, which shall be transferable in the same manner and with the same
effect as certificates of stock.

The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner as any
other corporate book or record: Provided, That both the transferor and the trustee
or trustees may exercise the right of inspection of all corporate books and
records in accordance with the provisions of this Code.

Any other stockholder may transfer his shares to the same trustee or trustees
upon the terms and conditions stated in the voting trust agreement, and
thereupon shall be bound by all the provisions of said agreement.

No voting trust agreement shall be entered into for the purpose of circumventing
the law against monopolies and illegal combinations in restraint of trade or used
for purposes of fraud.

Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period, and the voting trust
certificates as well as the certificates of stock in the name of the trustee or
trustees shall thereby be deemed canceled and new certificates of stock shall be
reissued in the name of the transferors.

The voting trustee or trustees may vote by proxy unless the agreement provides
otherwise. (36a)

APPRAISAL RIGHT OF THE STOCKHOLDER

Sec. 81. Instances of appraisal right. - Any stockholder of a corporation shall

have the right to dissent and demand payment of the fair value of his shares in
the following instances:

1. In case any amendment to the articles of incorporation has the

effect of changing or restricting the rights of any stockholder or
class of shares, or of authorizing preferences in any respect
superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or

other disposition of all or substantially all of the corporate property
and assets as provided in the Code; and

3. In case of merger or consolidation. (n)

Sec. 82. How right is exercised. - The appraisal right may be exercised by any
stockholder who shall have voted against the proposed corporate action, by
making a written demand on the corporation within thirty (30) days after the date
on which the vote was taken for payment of the fair value of his shares: Provided,
That failure to make the demand within such period shall be deemed a waiver of
the appraisal right. If the proposed corporate action is implemented or affected,
the corporation shall pay to such stockholder, upon surrender of the certificate or
certificates of stock representing his shares, the fair value thereof as of the day
prior to the date on which the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.

If within a period of sixty (60) days from the date the corporate action was
approved by the stockholders, the withdrawing stockholder and the corporation
cannot agree on the fair value of the shares, it shall be determined and appraised
by three (3) disinterested persons, one of whom shall be named by the
stockholder, another by the corporation, and the third by the two thus chosen.
The findings of the majority of the appraisers shall be final, and their award shall
be paid by the corporation within thirty (30) days after such award is made:
Provided, That no payment shall be made to any dissenting stockholder unless
the corporation has unrestricted retained earnings in its books to cover such
payment: and Provided, further, That upon payment by the corporation of the
agreed or awarded price, the stockholder shall forthwith transfer his shares to the
corporation. (n)

It is the right of dissenting stockholder to have his share assessed and paid by
the corporation when by a 2/3 vote of the stockholders, approved any of the
following:

a. EXTEND OR SHORTEN CORPORATE TERM

Sec. 11. Corporate term. - A corporation shall exist for a period not exceeding
fifty (50) years from the date of incorporation unless sooner dissolved or unless
said period is extended. The corporate term as originally stated in the articles of
incorporation may be extended for periods not exceeding fifty (50) years in any
single instance by an amendment of the articles of incorporation, in accordance
with this Code; Provided, That no extension can be made earlier than five (5)
years prior to the original or subsequent expiry date(s) unless there are justifiable
reasons for an earlier extension as may be determined by the Securities and
Exchange Commission.

b. RESTRICTION OF RIGHTS OR PRIVILEGES OF SHARES THROUGH

AMENDMENTS OF THE ARTICLES OF INCORPORATIONS

Sec. 16. Amendment of Articles of Incorporation. - Unless otherwise

prescribed by this Code or by special law, and for legitimate purposes, any
provision or matter stated in the articles of incorporation may be amended by a
majority vote of the board of directors or trustees and the vote or written assent
of the stockholders representing at least two-thirds (2/3) of the outstanding
capital stock, without prejudice to the appraisal right of dissenting stockholders in
accordance with the provisions of this Code, or the vote or written assent of at
least two-thirds (2/3) of the members if it be a non-stock corporation.

The original and amended articles together shall contain all provisions required
by law to be set out in the articles of incorporation. Such articles, as amended
shall be indicated by underscoring the change or changes made, and a copy
thereof duly certified under oath by the corporate secretary and a majority of the
directors or trustees stating the fact that said amendment or amendments have
been duly approved by the required vote of the stockholders or members, shall
be submitted to the Securities and Exchange Commission.

The amendments shall take effect upon their approval by the Securities and
Exchange Commission or from the date of filing with the said Commission if not
acted upon within six (6) months from the date of filing for a cause not
attributable to the corporation.

c. SALE OF ALL OR SUBSTANTIALLY ALL CORPORATE ASSETS

Sec. 40. Sale or other disposition of assets. - Subject to the provisions of

existing laws on illegal combinations and monopolies, a corporation may, by a
majority vote of its board of directors or trustees, sell, lease, exchange,
mortgage, pledge or otherwise dispose of all or substantially all of its property
and assets, including its goodwill, upon such terms and conditions and for such
consideration, which may be money, stocks, bonds or other instruments for the
payment of money or other property or consideration, as its board of directors or
trustees may deem expedient, when authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or in case
of non-stock corporation, by the vote of at least to two-thirds (2/3) of the
members, in a stockholder's or member's meeting duly called for the purpose.
Written notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence as
shown on the books of the corporation and deposited to the addressee in the
post office with postage prepaid, or served personally: Provided, That any
dissenting stockholder may exercise his appraisal right under the conditions
provided in this Code.

A sale or other disposition shall be deemed to cover substantially all the

corporate property and assets if thereby the corporation would be rendered
incapable of continuing the business or accomplishing the purpose for which it
was incorporated.

After such authorization or approval by the stockholders or members, the board

of directors or trustees may, nevertheless, in its discretion, abandon such sale,
lease, exchange, mortgage, pledge or other disposition of property and assets,
subject to the rights of third parties under any contract relating thereto, without
further action or approval by the stockholders or members.

Nothing in this section is intended to restrict the power of any corporation, without
the authorization by the stockholders or members, to sell, lease, exchange,
mortgage, pledge or otherwise dispose of any of its property and assets if the
same is necessary in the usual and regular course of business of said
corporation or if the proceeds of the sale or other disposition of such property
and assets be appropriated for the conduct of its remaining business.

In non-stock corporations where there are no members with voting rights, the
vote of at least a majority of the trustees in office will be sufficient authorization
for the corporation to enter into any transaction authorized by this section. (28
1/2a)

d. EQUITY INVESTMENTS IN NON-PRIMARY PURPOSE BUSINESS

ENTERPRISE

Sec. 42. Power to invest corporate funds in another corporation or

business or for any other purpose. - Subject to the provisions of this Code, a
private corporation may invest its funds in any other corporation or business or
for any purpose other than the primary purpose for which it was organized when
approved by a majority of the board of directors or trustees and ratified by the
stockholders representing at least two-thirds (2/3) of the outstanding capital
stock, or by at least two thirds (2/3) of the members in the case of non-stock
corporations, at a stockholder's or member's meeting duly called for the purpose.
Written notice of the proposed investment and the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence as
shown on the books of the corporation and deposited to the addressee in the
post office with postage prepaid, or served personally: Provided, That any
dissenting stockholder shall have appraisal right as provided in this Code:
Provided, however, That where the investment by the corporation is reasonably
necessary to accomplish its primary purpose as stated in the articles of
incorporation, the approval of the stockholders or members shall not be
necessary. (17 1/2a)

e. MERGER OR CONSOLIDATION

Sec. 77. Stockholder's or member's approval. - Upon approval by majority

vote of each of the board of directors or trustees of the constituent corporations
of the plan of merger or consolidation, the same shall be submitted for approval
by the stockholders or members of each of such corporations at separate
corporate meetings duly called for the purpose. Notice of such meetings shall be
given to all stockholders or members of the respective corporations, at least two
(2) weeks prior to the date of the meeting, either personally or by registered mail.
Said notice shall state the purpose of the meeting and shall include a copy or a
summary of the plan of merger or consolidation. The affirmative vote of
stockholders representing at least two-thirds (2/3) of the outstanding capital stock
of each corporation in the case of stock corporations or at least two-thirds (2/3) of
the members in the case of non-stock corporations shall be necessary for the
approval of such plan. Any dissenting stockholder in stock corporations may
exercise his appraisal right in accordance with the Code: Provided, That if after
the approval by the stockholders of such plan, the board of directors decides to
abandon the plan, the appraisal right shall be extinguished.

Any amendment to the plan of merger or consolidation may be made, provided

such amendment is approved by majority vote of the respective boards of
directors or trustees of all the constituent corporations and ratified by the
affirmative vote of stockholders representing at least two-thirds (2/3) of the
outstanding capital stock or of two-thirds (2/3) of the members of each of the
constituent corporations. Such plan, together with any amendment, shall be
considered as the agreement of merger or consolidation. (n)

PRE-EMPTIVE RIGHT IN CLOSE CORPORATIONS

Sec. 102. Pre-emptive right in close corporations. - The pre-emptive right of

stockholders in close corporations shall extend to all stock to be issued, including
reissuance of treasury shares, whether for money, property or personal services,
or in payment of corporate debts, unless the articles of incorporation provide
otherwise.