4. Capital Structure, Shares, and Capital Affairs

Capital Structure, Shares, and Capital Affairs

A stock corporation is defined under the Revised Corporation Code as one having capital stock divided into shares and authorized to distribute to the holders thereof dividends or allotments of surplus profits on the basis of the shares held¹. The classification of shares, along with their corresponding rights, privileges, restrictions, and stated par value, if any, must be set forth in the articles of incorporation². Each share is deemed equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock². While the capital stock may be divided into classes, series, or both, no share may be denied voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in the Revised Corporation Code, provided that there shall always remain a class or series with complete voting rights².

Even when shares are classified as nonvoting, their holders retain the statutory right to vote on fundamental corporate affairs, including: (a) amendment of the articles of incorporation; (b) adoption and amendment of bylaws; (c) sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate property; (d) incurring, creating, or increasing bonded indebtedness; (e) increase or decrease of authorized capital stock; (f) merger or consolidation of the corporation with another corporation or corporations; and (g) investment of corporate funds in another corporation or business in accordance with the Code².

In managing corporate capital and financial reporting, issued capital must, at a minimum, be disclosed in the balance sheet under Securities Regulation Code Rule 68³. As pronounced in Abacus Coal Exploration and Development Corporation v. Securities and Exchange Commission, G.R. No. 262484, 22 October 2025, 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.