h. Watered Stocks

Issuance of Shares, Par Value, and Accurate Valuation of Issued Capital

A stock corporation has the express power and capacity to issue or sell stocks to subscribers in accordance with the provisions of the Revised Corporation Code¹. The classification of shares, their corresponding rights, privileges, restrictions, and their stated par value, if any, must be set forth in the articles of incorporation². Each share is equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock².

With respect to the valuation and reporting of issued shares, issued capital, as a minimum, must be disclosed in the balance sheet pursuant to Securities Regulation Code Rule 68³. Disclosures in the notes to financial statements that fail to accurately report acquired assets and issued shares improperly understate corporate assets and equity, constituting sanctionable material deficiencies and misstatements³. In Abacus Coal Exploration and Development Corporation v. Securities and Exchange Commission, G.R. No. 262484, 22 October 2025, the Supreme Court ruled that a corporation improperly understates its assets and equity when it omits acquired property—such as mining rights—and fails to disclose the issued shares and the accurate values behind them as required by SRC Rule 68³.

Corporate powers, business, and properties are exercised and controlled by the board of directors, whose members are elected for a term of one year from among registered stockholders owning at least one share of stock⁴.