Committee on Corporations and Franchises

September 20, 1988 Committee on Corporations and Franchises House of Representatives Quezon City Attention : Congressman Dante O . Tinga Dear Sirs : This refers to your letter, dated September 15, 1988, requesting our comments on House Bill No. 13865, entitled: "An Act to Grant Subscribers of Public Utilities Voting Rights and Other Privileges allowed under Corporation C od e of the Philippines and for Other Purposes." Submitted hereunder are our comments thereon. Subscription to stock makes the subscriber a stockholder. (4 Fletcher, Cyc. Corp.,1985 rev. vol.,sec. 1375 at 27).Actual payment is not necessary to make the subscriber a stockholder, except when the subscription agreement provides otherwise, or when there is a constitutional, statutory or charter provision to the contrary, or except in instances of increase in authorized capital stock. cdlex As to voting power, under the modern corporation law, it is generally provided that stockholders shall have one vote for each share held by them, which excludes fractional voting. The Model Business Corporation Act provides that each outstanding share regardless of class is entitled to vote unless the right is specifically restricted by statute. This approach has been adopted in a number of jurisdiction. Most of the other dominions have statute provision of one vote per share. (5 Fletcher. Cyc. Corp., 1976 rev. vol., sec. 2045, p. 183). In our jurisdiction, the pertinent provision of the Corporation Code of the Philippines reads thus: "SECTION 52. Quorum in meetings . Unless otherwise provided for in the Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock. . . ." The vote required to carry out a stockholders' resolution would be as prescribed by the particular section of the Corporation Code, and where it is not covered by any provision of the Code, then the general rule would be applicable: the majority of the vote of the shares present provided there is a quorum. (Campos, Campos, The Corporation C od e, "Comments, Notes and Selected Cases," 1981 ed., p. 281). In stock corporation, the vote is based on the number of shares represented and not on the number of stockholders present, which shares must always form a part of the outstanding capital as the term is defined by the Code, thus: "SECTION 137. Outstanding capital stock defined . The term "outstanding capital stock", as used in this Code, means the total shares issued to subscribers or stockholders, whether or not fully or partially paid (as long as there is a binding subscription agreement), except treasury shares," (See Campos, Supra.). Subject to the foregoing observations, the Commission interposes no objection to House Bill No. 13865, which to our view is a social reform, a major legislative effort to strengthen participative decision making at the grassroots. The Bill is socially an attractive proposition because its organization is based on a more egalitarian social principle. cdlex We trust that the foregoing meets your request. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman