(2) Second way is: when they are not
1. Preferred shares are allowed to vote on
8 instances:
2. Preferred shares are denied the rights
to elect directors and to be elected as
such.
3. Directors: all the qualifications in the
law and the by-laws, and none of the
disqualifications thereunder.
Must at least one share, regardless if
paid
Must be a member if it is a non-stock
corporation.
9. When it becomes treasury
4. Somebody sentenced to suffer
imprisonment for more than 6 years
cannot be a director of a corporation.
5. One who committed a violation of the
corporation code in the last five year
cannot be a director of a corporation.
6. Declaring of dividends when there is no
surplus is a violation of the corporation
code.
7. Watered stock
8. Delinquency of shares
(1) Shares become delinquent when
they are not fully paid according to
subscription agreement.
fully paid upon call by the
corporation.
(3) Delinquency takes place when there
is failure to pay in full the balance
of one’s subscription agreement by
the date stated in the subscription
agreement.
(4) When no date of payment is
mentioned in the subscription
agreement, and the corporation
had made a call on the subscription
(1) Becomes treasury shares when the
corporation eliminates a fractional
share
(2) Becomes treasury when
corporation buys buck its own share
from the stockholder or from the
open market
(3) Becomes treasury shares when
corporation pays appraisal right
(4) Becomes treasury shares when
corporation becomes the buyer in
the delinquency sale
(5) Becomes treasury shares when the
corporation receives these shares
by reason of donation intervivos or
mortis causa
 (6) Becomes treasury shares when the
corporation redeems its
redeemable preferred shares
10. Can redeem redeemable preferred
shares in the absence of unrestricted
retained earnings, without violating
trust fund doctrine
This is the exception
It can buy back its own shares without
surplus
But should not redeem it if as a
consequence, the corporation will not
be able to carry out its primary purpose
11. Treasury shares do not have voting
rights
They also do not participate in
dividends, regardless of form of
payments
12. When regular shares become treasury
shares, they lose voting rights, and will
not be entitled to any dividends
Reason: these shares are owned by the
corporation, and it by itself cannot act
Hence, it cannot vote.
13. TS do not participate in dividends. It is
like pulling money from one pocket and
putting it in another
14. TS are considered as properties of the
corporation, and may be used in
payments of dividends.
15. dividends that are paid with treasury
shares of the corporation are called
property dividends
they are not stock dividends
**
16. you cannot contribute industry in a
corporation
17. Right of succession exists in a
partnership. When a partner dies, that
is the end of partnership. In fact, he
does not need to die for the partnership
to be dissolved. His incapacity or
insolvency is enough.
Right of succession is given to the
corporation. It is found in the definition
of a corporation “having the right of
succession”
So even if the all the stockholders will
die, corporation still continues to exist.
It will not be dissolved with the death of
the stockholders.
A corporation has an existence
independent of the stockholders.
18. In a partnership, profits as well as losses
are shared according to the agreements
of the parties
But in a corporation, dividends are
always distributed pro-rata. Meaning,
 according to the participation in the
capitalization The subsidiary is called subsidiary.

19. In a corporation, once he paid his 21.

subscription, he cannot be obliged to
contribute some more. 22.

Unlike in partnership (7)

(8)
** (9)

20. A corporation can organize a

subsidiary.

A corporation cannot be an
incorporator because it cannot sign the
articles of incorporation (rule before)

The board will pass a resolution to form

a subsidiary.

Then they determine who will be the

incorporators.

They can designate themselves as

organizers (incorporators) of the
subsidiary; and each of them will be
subscribing to one share just for the
purpose of being incorporator.

The bulk of the shares will be

subscribed by the corporation.

The corporation owns the subsidiary. It

subscribes to the bulk of the shares.

Commonly, the corporation putting up

the subsidiary is called a mother
corporation.