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NO-PAR VALUE SHARES

Types of No-Par Value Shares


1. No-par without Stated Value – no nominal value on the face of the stock certificate and no stated
value in the articles of incorporation.
2. No-par with Stated Value – no nominal value on the face of the stock certificate but has a stated
value which may be fixed by:
a. Articles of Incorporation
b. Board of Directors
c. Holders of a majority of the shares entitled to vote
Legal Restrictions on the Issuance of No-Par value shares:
1. Banks, trust companies, insurance companies, public utilities and buildings and loan association
shall not be permitted to issue no-par shares of stock.
2. No-par value shares when issued shall be deemed fully paid and non-assessable and the holder of
such shares shall not be liable to the corporation or to its creditors in respect thereto.
3. Shares without par value may not be issued for a consideration less than five pesos per share
4. e entire consideration received by the corporation for its no-par value shares shall be treated as
capital, and shall not be available for distributions as dividends.
DELINQUENT SUBSCRIPTIONS
When a subscriber could not pay his subscription aer the corporation has issued a notice calling
for the uncollected balance, the subscriber is said to be delinquent. It should be noted, however, that
the subscriber is declared delinquent only aer a proper call has been made by the corporation.
A call is a declaration officially made by a corporation usually expressed in the form of a resolution
of the Board of Directors requiring the payment of all or a certain prescribed portion of a subscriber’s
stock subscription.
e corporation may collect from the defaulting subscriber by action in court or by selling the
delinquent shares in a public auction. Should the corporation decide to take the second alternative
course of action, then the corporation must sell as many of the delinquent shares as may be necessary
to the highest bidder.
e highest bidder is the person offering at such sale to pay the unpaid subscription, with interest
accrued, together with expenses of advertising and costs of sale, for the smallest number of shares of
fraction of a share.
Suppose there are no bidders? In such a case, the corporation may purchase for itself its delinquent
shares resulting to a treasury stock transaction.
Accordingly, the delinquent subscriber is released from liability of his unpaid subscription, but he
shall not be entitled for any number of shares in his subscription as provided by the law.
Illustrative transactions: Record the following transactions under both cases.
Case A.
1. Received subscriptions for 1,000 shares with a par value of ₧ 100 at ₧ 120.

Subscriptions Receivable 12,000

Subscribed Share Capital 12,000


2. Collected 60% of the subscriptions, balance subject to call.

Cash 7,200

Subscriptions Receivable 7,200


3. Upon default of Subscriber A, a proper call has been made.
- no entry -
4. Costs of advertising and other legal expenses incurred prior to delinquency sale, ₧ 1,200.

Receivable from Highest Bidder 1,200

Cash 1,200
5. Collection from the highest bidder. ere were three bidders during the auction sale namely: B
- 450 shares ; C - 500 shares; D - 600 shares.

Cash 6,000

Subscriptions Receivable 4,800

Receivable from Highest Bidder 1,200


6. Issuance of stock certificates.

Subscribed Share Capital 12,000

Share Capital 12,000


e distribution of the number of shares is based on the following provision of the law:
e stock so purchased shall be transferred to such purchaser in the books of the corporation and a certificate for such
stock shall be issued in his favor. e remaining shares, if any, shall be credited in favor of the delinquent stockholder
who shall likewise be entitled to the issuance of a certificate of stock covering such shares.
Case B. Assuming nobody bids during the auction sale.
Should there be no bidder at the public auction who offers to pay the full amount of the balance on the subscription
together with accrued interest, costs of advertisement and expenses of sale, for the smallest number of shares or
fraction of a share, the corporation may, subject to the provisions of this Code, bid for the same, and the total amount
due shall be credited as paid in full in the books of the corporation. Title to all the shares of stock covered by the
subscription shall be vested in the corporation as treasury shares and may be disposed of by said corporation in
accordance with the provisions of this Code.

Treasury Share 6,000

Subscriptions Receivable 4,800

Receivable from Highest Bidder 1,200

Subscribed Share Capital 12,000

Share Capital 12,000