e. Classification of Shares

Non-Voting Shares Have Voting Rights In The Following Matters:

• Amendment of Articles
• Adoption/ Amendment of By- Laws
• Sale, lease, exchange, mortgage, pledge or dispose of all or substantially all of corporate property
• Incur, create, increase bonded indebtedness
• Increase, decrease capital stock
• Merger/ consolidation with another corporation
• Investment of corporate funds in another corporation or business, or for any purpose other than the corporation’s primary purpose
• Dissolution of corporation

Other Classes of Shares: (Secs. 7, 8, 9)

• Founder’s shares – Given rights and privileges not enjoyed by owners of other stocks; the exclusive right to vote and be voted for in the election of directors may last no more than five years from the date of incorporation.

Note: such exclusive right shall not be allowed if its exercise will violate the “Anti-Dummy Law¹”; the “Foreign Investments Act of 1991²”; and other pertinent laws.

Since Section 7³ makes no distinction (and is found under General Provisions), then it must mean that founders’ shares may be applied to both stock and nonstock corporations. Although [Section 88 of the Revised Corporation Code⁴] allows in a nonstock corporation to limit, broaden or deny the right of members of any class, the specific provision of Section 7 to founders’ share must prevail, and that the nonstock corporation can lawfully suspend or define the voting rights of its members, but with respect to founders’ share, the exclusive right to vote and be voted for in the election of directors may last no more than five years from the date of incorporation under Section 7. (Forest Hills and Country Club, Inc. v. Kings Properties Corp., G.R. No. 212833)⁵.

• Redeemable shares – Expressly provided in articles; may be purchased by the corporation from their holders upon expiration of a fixed period, subject to the terms and conditions stated in the articles of incorporation and the certificates of stock, whether or not there are unrestricted retained earnings; may be deprived of voting rights.
• Treasury stocks – stocks previously issued and fully paid for and reacquired by the corporation through lawful means (purchase, donation, etc.); not entitled to vote and no dividends could be declared thereon as corporations cannot declare dividends to itself.

Escrow shares – those held by a third person to be released only upon the performance of a condition or the happening of a certain event contained in the agreement.

Preferred cumulative participating share of stock - Share entitling its holder to preference in the payment of dividends ahead of common stockholders and to be paid the dividends due for prior years and to participate further with common stockholders in dividend declarations.

Over-Issued Stock – Stock issued in excess of authorized capital stock; null and void.

Articles of Incorporation - R.A. No. 11232, Sections 13-15⁶