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Common= voting

Preffered
Voting
Non voting- can vote in AOI
Treasury- stocks bought if with unretained earned or corporate purpose

Permit to sell. Sell in the stock exchange- buyers,sellers,brokers.management.SEC,
regulation to avoid fraud. Eg. Selling of stocks w/ useless corp.

List it with stock exchange. Stock exchange will determine if corp has potential.

Pre emptive rights- can be denied by AOI, SH 2/3 in payment of properties or
inpayment of an previously contracted debt

Certificate-evidence of shares signed by secretry and president

Stock and transfer Book-where stocks are registred

No stock certificate in listed companies- scriptless trading
No stock and transfer books. What they have are computed programs. Book entry
settlement system/

Equity investment= sink or swim with corp.

Sarbe Oxley act(SOX) corporate governance?

Preferred share- form of financing the corp. like just a credit.. fied rate ___% per
annum. If there is unrestricted retained earnings. L(look at audited financial
statements/independent auditors voted by the SH)(no other purpose for the funds)
Cumulative-if didnt pay promised dividends,it will cumulate to the other yrs.

Appraisal right- compel company to buy back shares if there are certain actios ($81)
1.sale lease of all or substantially all of assets(when it cant continue business)
2.extend life of corp.
3. mergers
4.investment of corp funds in another corp.

Corp books and records- stock and transfer book-munites,



Dities of directors and corp stockholders
Conflict of interest
Interlocking directors
Corporate opportunity.

Big separation b/w ownership and management.
Pre emptive right.

Beneficial ownership
Scriptless trading- book enrtry settlement system for uncertificated shares

Shares registered in the brokers books. Listed company doesnt know who its
shareholders are. You can uplift shares to transfer agent who issues certificate. If he
wants to sell, lodge it,

Rule 18 5% 10%
Report to SEC or exchange that you beneficially own shares in

Beneficial owner- voting power,disposition,investment decision
Enjoys benefits and prvileges.
Investment decision- right to buy

Control


report
Public com. And material info
All cases



Define public company SRC rule 3.1M
1.. comrp
2. shares listed in ecchange (and registered with SEC under securities regulation
code[which needs prospectus,registration statement declared effective] not by mere
articles of incorporation OR exempt security). you must get permit to sell which is
the end product of registration with SEC. publish in a newspaper. 1/10 of 1% of the
value of share.
or 50M and having 200 holders each having 100 shares. (need not comply with rules
of SEC however you are subject to reportorial reqirements.

General critera (PSE website)
1. positive stockholders equity (assets greater than liabilities)
2. operation for atleast 3 yrs.
3. Subscribed shares must be paid in full
4. Minimum offering to the public
5. Engage services of independent appraiser accredited by SEC in determining
the assets
6. Investor relation program

7. Cumulative earnings for 50M

Market capitalization
Price times outstanding shares


Define control
- power to govern the financial and operating policies(big advantage eg.) of an
enterprise so as to obtain benefits from itd activities. Change of control is
material.
presumed when
has > 50% of the voting power (including beneficial ownership). Unless you can
show you dont have control
Has < 50% with certain circumstances
- agreement eg. Voting trust agreement



Section 3. Definition of Terms. - 3.1. "Securities" are shares, participation or interests in
a corporation or in a commercial enterprise or profit-making venture and evidenced by a
certificate, contract, instruments, whether written or electronic(scriptless
trading/book entry settlement system) in character. It includes:
(a) Shares of stocks (always securities bcos it is written), bonds(indebtedness that is
widely distributed usually with security), debentures(unsecured bond), notes
evidences of indebtedness (promissory note), asset-backed securities(with secured
with property);
(b) Investment contracts, certificates of interest or participation in a profit sharing
agreement, certifies of deposit for a future subscription;
(c) Fractional undivided interests in oil, gas or other mineral rights;
(d) Derivatives like option and warrants;
(e) Certificates of assignments, certificates of participation, trust certificates, voting
trust certificates or similar instruments
(f) Proprietary or nonproprietary membership certificates in corporations; and
(g) Other instruments as may in the future be determined by the Commission.



Howey test to determine investment contracts
1. investment of money
2. in a common enterprise(participatation of many investors)
3. profits expected
4. derived from efforts of others.
5.


material info
SRC rule 3,1(I)
Eg. Declaration of dividents many times.
Plan for merging
No hard or fast rule- everything depends on the circumstances

See rule 14(1)
PSE disclosure rules
4.3
b- eg. When there is a rumor. They must deny that rumor isnt real.


1
st
case
foreman stcosks was for getting the house. Substance vs form.
Landrett 5 characteristics of stocks.
Sale of business doctrine didnt apply
Jones


Types of securities

SRC section 3.1a to g
Derivatives- derives its value from an underlying asset.
Options(call and put). Value of option right depends on stocs
Warrants
Stock option plan(employees get options to retain and motivate employees)
(there is a vesting period)(usually exempt transaction)
proprietary/non proprietary membership cert-golf clubs,country clubs.
G. other inst as may in the future maybe determined by the commission.

__

Exempt securities- because not needed to protect the public. This code is for
the protection of public from the wide distribution of securities.
Sec 8
(b) Any security issued or guaranteed by the government of any country with which
the Philippines maintains diplomatic relations, or by any state, province or political
subdivision thereof on the basis of reciprocity: Provided, That the Commission may
require compliance with the form and content for disclosures the Commission may
prescribe.
(c) Certificates issued by a receiver or by a trustee in bankruptcy duly approved by
the proper adjudicatory body.
(d) Any security or its derivatives the sale or transfer of which, by law, is under the
supervision and regulation of the Office of the Insurance Commission, Housing and
Land Use Rule Regulatory Board, or the Bureau of Internal Revenue.
(e) Any security issued by a bank except its own shares of stock

Note: this doesnt exempt them from the reportorial requirement.
Section 10. Exempt Transactions (need notice). 10.1. The requirement of registration
under Subsection 8.1 shall not apply to the sale of any security in any of the following
transactions:
(a) At any judicial sale, or sale by an executor, administrator, guardian or receiver or
trustee in insolvency or bankruptcy.
(b) By or for the account of a pledge holder, or mortgagee or any of a pledge lien
holder selling of offering for sale or delivery in the ordinary course of business and
not for the purpose of avoiding the provision of this Code, to liquidate
a bonafide debt, a security pledged in good faith as security for such debt.
Na pledge yung shares of stocks.
(c) An isolated transaction in which any security is sold, offered for sale, subscription
or delivery by the owner therefore, or by his representative for the owners account,
such sale or offer for sale or offer for sale, subscription or delivery not being made in
the course of repeated and successive transaction of a like character by such owner,
or on his account by such representative and such owner or representative not being
the underwriter of such security.
Only one. Not repeated .a private transaction.
(d) The distribution by a corporation actively engaged in the business authorized by
its articles of incorporation, of securities to its stockholders or other security holders
as a stock dividend or other distribution out of surplus.
Stock dividends or dustrbution out of surplus
A co. listed and registered. Stock dividends of stocks of B(subsidiary) a not listed and not
registered co.
The stock distributed must be listed and registered.but when the securities you distributed
are from another co. not listed and registered, Especially when you distribute it to your
stockholders which are 500, you must register the shares of the other co.
Ok na list beause of 1% stock transaction tax,ext mechanism (to sell shares if you wanna
get out)
(e) The sale of capital stock of a corporation to its own stockholders exclusively,
where no commission or other remuneration is paid or given directly or indirectly in
connection with the sale of such capital stock.
This is usually the Underwriter- gaurantes shares will be sold if public offering. He will buy
the remaining that wasnt bought.
In IPO, look at issue size,use of proceeds,offer price.
(f) The issuance of bonds or notes secured by mortgage upon real estate or tangible
personal property, when the entire mortgage together with all the bonds or notes
secured thereby are sold to a single purchaser at a single sale.
Single purchaser and single sale
(g) The issue and delivery of any security in exchange for any other security of the
same issuer pursuant to a right of conversion entitling the holder of the security
surrendered in exchange to make such conversion:Provided, That the security so
surrendered has been registered under this Code or was, when sold, exempt from
the provision of this Code, and that the security issued and delivered in exchange, if
sold at the conversion price, would at the time of such conversion fall within the class
of securities entitled to registration under this Code. Upon such conversion the par
value of the security surrendered in such exchange shall be deemed the price at
which the securities issued and delivered in such exchange are sold.
Refers to convertible preferred shares. Preferred shares convert into common
shares. Not need to register common shares.
(h) Brokers transaction, executed upon customers orders, on any registered
Exchange or other trading market.
(i) Subscriptions for shares of the capitals stocks of a corporation prior to the
incorporation thereof or in pursuance of an increase in its authorized capital stocks
under the Corporation Code, when no expense is incurred, or no commission,
compensation or remuneration is paid or given in connection with the sale or
disposition of such securities, and only when the purpose for soliciting, giving or
taking of such subscription is to comply with the requirements of such law as to the
percentage of the capital stock of a corporation which should be subscribed before it
can be registered and duly incorporated, or its authorized, capital increase.

When incorporating, you need 25% of 25%
(j) The exchange of securities by the issuer with the existing security holders
exclusively, where no commission or other remuneration is paid or given directly or
indirectly for soliciting such exchange.
(k) The sale of securities by an issuer to fewer than twenty (20) persons in the
Philippines during any twelve-month period.
Magic number 20
Do not cumulate after 1 yr period
12 month period will be renewed after the new issuance.
(l) The sale of securities to any number of the following qualified buyers:
(i) Bank;
(ii) Registered investment house;
(iii) Insurance company;
(iv) Pension fund or retirement plan maintained by the Government of the
Philippines or any political subdivision thereof or manage by a bank or other
persons authorized by the Bangko Sentral to engage in trust functions;
(v) Investment company or;
(vi) Such other person as the Commission may rule by determine as qualified
buyers, on the basis of such factors as financial sophistication, net worth,
knowledge, and experience in financial and business matters, or amount of
assets under management.
>Qualified buyers
10.2. The Commission may exempt other transactions, if it finds that the requirements of
registration under this Code is not necessary in the public interest or for the protection of
the investors such as by the reason of the small amount involved or the limited character
of the public offering.
Eg stock option
Sec acts as a collegiate body
10.3. Any person applying for an exemption under this Section, shall file with the
Commission a notice identifying the exemption relied upon on such form and at such
time as the Commission by the rule may prescribe and with such notice shall pay to the
Commission fee equivalent to one-tenth (1/10) of one percent (1%) of the maximum
value aggregate price or issued value of the securities.
Notice plus fee
If you dont want to pay just file.