d. Consideration for Stocks

Consideration for Stocks and Liability for Watered Stock

Under Republic Act No. 11232, stocks shall not be issued for a consideration less than the par or issued price thereof¹. Valid consideration for the issuance of stock may consist of:

• Actual cash paid to the corporation¹;
• Tangible or intangible property actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued¹;
• Labor performed for or services actually rendered to the corporation¹;
• Previously incurred indebtedness of the corporation¹;
• Amounts transferred from unrestricted retained earnings to stated capital¹;
• Outstanding shares exchanged for stocks in the event of reclassification or conversion¹;
• Shares of stock in another corporation; and/or¹
• Other generally accepted forms of consideration¹.

Shares of stock shall not be issued in exchange for promissory notes or future service¹. Where consideration is other than actual cash, or consists of intangible property, its valuation must initially be determined by the stockholders or the board of directors, subject to the approval of the Securities and Exchange Commission¹. Disclosures in financial statements that fail to accurately report acquired assets and issued shares improperly understate corporate assets and equity, constituting sanctionable material deficiencies and misstatements (Abacus Coal Exploration and Development Corporation v. Securities and Exchange Commission, G.R. No. 262484, 22 October 2025)².

A director or officer of a corporation is solidarily liable with the stockholder concerned to the corporation or its creditors for the difference between the value received at the time of issuance and the par or issued value if such director or officer consents to the issuance of stocks for a consideration less than par or issued value, consents to non-cash consideration valued in excess of fair value, or fails to file a written objection with the corporate secretary despite having knowledge of the insufficient consideration³.