7. Stockholders and Members

6. Stockholders and Members

• Doctrine of Equality of Shares
• Participation in Management; Voting Requirements
• Proprietary Rights
• Right to Dividends
• Right to Inspection
• Pre-emptive Right
• Appraisal Right
• Derivative Suit; Intra-corporate Suit
• Delinquency
• Certificate of Stock

Doctrine of Equality of Shares

Under the doctrine of equality of shares – all stocks issued by the corporation are presumed equal with the same privileges and liabilities, provided that the Articles of Incorporation is silent on such differences (CIR vs. CA, G.R. No. 108576)¹

Each share shall be equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock. (Sec. 6)²

The following are important rights of stockholders, which continue to exist even when the shares have been sequestered:

a. Right to attend meetings and to vote

b. Right to receive dividends

c. Right to receive distributions upon liquidation of the corporation

d. Right to inspect the books of the corporation

e. Pre-emptive rights (Cojuangco v. Roxas, G.R. No. 91925, 16 April 1991)³

The doctrine of equality of shares states that all stocks issued by the corporation are presumed equal with the same privileges and liabilities, provided that the Articles of Incorporation is silent on such differences [Sec. 6]⁴.

There is a presumption of equality of the rights and features of shares when nothing is expressly provided to the contrary.

• Although a corporation has the power to classify its shares of stock, provide for preferences and other conditions, no presumption should exist to distinguish one share from another.
• Sec. 6 of the RCC⁵ requires the classification of shares and their corresponding rights, privileges, restrictions, and stated par value, if any, to be indicated in the articles of incorporation. It also allows exceptions to equality of shares as provided in the articles of incorporation and certificate of stock.

Participation in Management; Voting Requirements

• Proxy – Section 57 of the Revised Corporation Code⁶ provides that stockholders and members may vote in person or by proxy in all meetings of stockholders or members.
• Voting Trust Agreements – A stockholder confers upon a trustee the right to vote and other rights pertaining to the shares for a period not exceeding 5 years at any one time. (Sec. 58)⁷.

However, if the voting trust was a requirement for a loan agreement, period may exceed 5 years but shall automatically expire upon full payment of the loan.

Pooling or voting agreements – two or more stockholders agree that their shares shall be voted as a unit. Usually concerned with the election of directors to gain control of the management.