PHILIPPINES Law and Practice Contributed by: Francis L. Fragante and Jennifer Marie G. Castro, Cruz Marcelo & Tenefrancia
Pre-Emptive Right All stockholders of a stock corporation shall enjoy the pre-emptive right to subscribe to all issues or dis - position of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation. However, such right shall not extend to shares issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or to shares issued in good faith with the approval of the stockhold - ers representing two-thirds of the outstanding capital stock in exchange for property needed for corporate purposes or in payment of previously contracted debt. Cumulative Voting for Directors In cumulative voting, a shareholder’s votes are mul - tiplied by the number of directors to be elected and the shareholder can concentrate the total number of its votes on one candidate or group of candidates. Right to Call Special Meetings A stockholder may propose the holding of a special meeting and items to be included on the agenda. Whenever for any cause, there is no person author - ised, or the person authorised unjustly refuses to call a meeting, the SEC, upon petition of a stockholder on a showing of good cause, may issue an order directing the petitioning stockholder to call a meeting by giving proper notice. Further, SEC Memorandum Circular No 7, series of 2021, as applicable for publicly listed companies, allows any number of shareholders of a corporation who hold at least 10% or more of the outstanding capital stock to call a special stockholders’ meeting. Inspection of Books and Records Corporate records, regardless of the form in which they are stored, shall be open to inspection by any director, trustee, stockholder or member of the corpo - ration in person or by a representative at reasonable hours on business days, and a demand in writing may be made by such director, trustee or stockholder at their expense, for copies of such records or excerpts from them.
A requesting party who is not a stockholder or mem - ber of record, or is a competitor, director, officer, con - trolling stockholder or otherwise represents the inter - ests of a competitor shall have no right to inspect or demand reproduction of corporate records. Appraisal Right Any stockholder shall have the right to dissent and demand payment of the fair value of the shares in the following instances: • in case an amendment to the articles of incorpora - tion has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorising preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence; • in case of sale, lease, exchange, transfer, mort - gage, pledge or other disposition of all or substan - tially all of the corporate property and assets as provided in the RCC; • in case of merger or consolidation; and • in case of investment of corporate funds for any purpose other than the primary purpose of the corporation. In addition, the RCC requires certain acts to be approved by at least two-thirds of the outstanding capital stock, namely: • any amendment of the articles of incorporation; • removal of directors; • ratification of a contract of the corporation with a director where any of the first three conditions set forth in Section 31 of the RCC is absent, provided that there is full disclosure of the adverse interest of the director; • ratification of a director acquiring a business opportunity which should belong to the corpora - tion, thereby obtaining profits to the prejudice of such corporation; • shortening or extending the corporate term; • increase or decrease of capital stock • incurring, creating or increasing any bonded indebtedness;
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