Article 24p. 24

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

of all or substantially all of its property and assets,

including its goodwill, upon such terms and conditions

and for such consideration, which may be money, stocks,

bonds or other instruments for the payment of money or

other property or consideration, as its board of directors

or trustees may deem expedient, when authorized by the

vote of the stockholders representing at least two-thirds

(2/3) of the outstanding capital stock; or in case of

non-stock corporation, by the vote of at least two-thirds

(2/3) of the members, in a stockholders' or members'

meeting duly called for the purpose. Written notice of the

proposed action and of the time and place of the

meeting

shall

be addressed to each stockholder or

member at his place of residence as shown on the books

of the corporation and deposited to the addressee in the

post office with postage prepaid, or served personally:

Provided , That any dissenting stockholder may exercise

his appraisal right under the conditions provided in this

Code.

A sale or other disposition shall be deemed to cover

substantially all the corporate property and assets if

thereby the corporation would be rendered incapable of

continuing the business or accomplishing the purpose

for which it was incorporated.

After

such

authorization

or

approval

by

the

stockholders

or members, the board of directors or

trustees may, nevertheless, in its discretion, abandon

such sale, lease, exchange, mortgage, pledge or other

disposition of property and assets, subject to the rights of

third parties under any contract relating thereto, without

further

action

or

approval

by

the

stockholders

or

members.

Nothing in this section is intended to restrict the

power of any corporation, without the authorization by

the stockholders or members, to sell, lease, exchange,

mortgage, pledge or otherwise dispose of any of its

property and assets if the same is necessary in the usual

and regular course of business of said corporation or if

the proceeds of the sale or other disposition of such

property and assets be appropriated for the conduct of its

remaining business.

In

non-stock

corporations,

where

there

are

no

members with voting rights, the vote of at least a majority

of the trustees in office will be sufficient authorization for

the corporation to enter into any transaction authorized

by this section. (28-1/2a)

SECTION 41. Power to Acquire Own Shares . — A

stock corporation shall have the power to purchase or

acquire its own shares for a legitimate corporate purpose

or purposes including but not limited to the following

cases: Provided , That the corporation has unrestricted

retained earnings in its books to cover the shares to be

purchased or acquired:

1. To eliminate fractional shares arising out of stock

dividends;

2. To collect or compromise an indebtedness to the

corporation, arising out of unpaid subscription, in a

delinquency sale, and to purchase delinquent shares sold

during said sale; and

3. To pay dissenting or withdrawing stockholders

entitled to payment for their shares under the provisions

of this Code. (n)

SECTION 42. Power to Invest Corporate Funds in

Another Corporation or Business or for Any Other

Purpose . — Subject to the provisions of this Code, a

private corporation may invest its funds in any other

corporation or business or for any purpose other than the

primary

purpose

for

which

it

was

organized

when

approved by a majority of the board of directors or

trustees and ratified by the stockholders representing at

least two-thirds (2/3) of the outstanding capital stock, or

by at least two-thirds (2/3) of the members in the case of

non-stock corporations, at a stockholders' or members'

meeting duly called for the purpose. Written notice of the

proposed investment and the time and place of the

meeting

shall

be addressed to each stockholder or

member at his place of residence as shown on the books

of the corporation and deposited to the addressee in the

post office with postage prepaid, or served personally:

Provided , That any dissenting stockholder shall have

appraisal

right

as

provided

in

this

Code:

Provided ,

however , That where the investment by the corporation is

reasonably necessary to accomplish its primary purpose

as stated in the articles of incorporation, the approval of

the stockholders or members shall not be necessary.

(17-1/2a)

SECTION 43. Power to Declare Dividends . — The

board of directors of a stock corporation may declare

dividends out of the unrestricted retained earnings which

shall be payable in cash, in property, or in stock to all

stockholders on the basis of outstanding stock held by

them:

Provided ,

That

any

cash

dividends

due

on

delinquent stock shall first be applied to the unpaid

balance on the subscription plus costs and expenses,

while

stock

dividends

shall

be

withheld

from

the

delinquent stockholder until his unpaid subscription is

fully paid: Provided , further , That no stock dividend shall

be

issued

without

the

approval

of

stockholders

representing

not

less

than

two-thirds

(2/3)

of

the

outstanding capital stock at a regular or special meeting

duly called for the purpose. (16a)

Stock

corporations

are prohibited from retaining

surplus profits in excess of one hundred (100%) percent of

their paid-in capital stock, except: (1) when justified by

definite

corporate

expansion

projects

or

programs

approved by the Board of Directors; or (2) when the

corporation is prohibited under any loan agreement with

any financial institution or creditor, whether local or

foreign, from declaring dividends without its/his consent,

and such consent has not yet been secured; or (3) when it

can be clearly shown that such retention is necessary

under special circumstances obtaining in the corporation,

such as when there is a need for special reserve for

probable contingencies. (n)

SECTION 44. Power to Enter into Management

Contract .

—

No

corporation

shall

conclude

a

management contract with another corporation unless

such contract shall have been approved by the Board of

Directors

and

by

stockholders

owning

at

least

the

majority of the outstanding capital stock, or by at least a

majority of the members in the case of a non-stock

corporation, of both the managing and the managed

corporation,

at

a

meeting

duly

called

for

the

purpose: Provided ,

That

(a)

where

a

stockholder

or

stockholders representing the same interest of both the

managing

and

the managed corporations own and

control more than one-third (1/3) of the total outstanding

capital

stock

entitled

to

vote

of

the

managing

corporation; or (b) where a majority of the members of

the Board of Directors of the managing corporation also

constitute a majority of the members of the Board of

Directors

of

the

managed

corporation,

then

the

management

contract

must

be

approved

by

the

stockholders of the managed corporation owning at least

two-thirds (2/3) of the total outstanding capital stock

entitled to vote, or by at least two-thirds (2/3) of the

members

in

case

of

a

non-stock

corporation.

No

management contract shall be entered into for a period

longer than five years for any one term.

The provisions of the next preceding paragraph shall

apply to any contract whereby a corporation undertakes

to manage or operate all or substantially all of the

business of another corporation whether such contracts

are called service contracts, operating agreements or

otherwise: Provided , however , that such service contracts

or operating agreements which relate to the exploration,

development,

exploitation

or

utilization

of

natural

resources may be entered into for such periods as may be

provided by the pertinent laws or regulations. (n)

SECTION 45. Ultra vires Acts of Corporations . — No

corporation under this Code shall possess or exercise any

corporate powers except those conferred by this Code or

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