Article 32p. 32

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

holders of record thereof, such person is conclusively

presumed to have notice of the fact of his ineligibility to

be a stockholder.

2. If the articles of incorporation of a close corporation

states the number of persons, not in excess of twenty (20),

who are entitled to be holders of record of its stock, and if

the certificate for such stock conspicuously states such

number, and if the issuance or transfer of stock to any

person would cause the stock to be held by more than

such number of persons, the person to whom such stock

is issued or transferred is conclusively presumed to have

notice of this fact.

3. If a stock certificate of any close corporation

conspicuously shows a restriction on transfer of stock of

the corporation, the transferee of the stock is conclusively

presumed to have notice of the fact that he has acquired

stock in violation of the restriction, if such acquisition

violates the restriction.

4. Whenever any person to whom stock of a close

corporation has been issued or transferred has, or is

conclusively presumed under this section to have, notice

either (i) that he is a person not eligible to be a holder of

stock of the corporation, or (ii) that transfer of stock to

him would cause the stock of the corporation to be held

by more than the number of persons permitted by its

articles of incorporation to hold stock of the corporation,

or (iii) that the transfer of stock is in violation of a

restriction on transfer of stock, the corporation may, at its

option, refuse to register the transfer of the stock in the

name of the transferee.

5.

The

provisions of subsection (4) shall not be

applicable if the transfer of stock, even though otherwise

contrary to subsections (1), (2) or (3), has been consented

to by all the stockholders of the close corporation, or if the

close

corporation

has

amended

its

articles

of

incorporation in accordance with this Title.

6. The term "transfer", as used in this section, is not

limited to a transfer for value.

7. The provisions of this section do not in any way

impair any right of a transferee regarding any right to

rescind the transaction or to recover under any applicable

warranty, express or implied.

SECTION 100. Agreements by Stockholders . —

1. Agreements by and among stockholders executed

before

the

formation

and

organization

of

a

close

corporation, signed by all stockholders, shall survive the

incorporation of such corporation and shall continue to

be

valid

and

binding

between

and

among

such

stockholders, if such be their intent, to the extent such

agreements are not inconsistent with the articles of

incorporation, irrespective of where the provisions of such

agreements are contained, except those required by this

Title to be embodied, in said articles of incorporation.

2. An agreement between two or more stockholders,

if in writing and signed by the parties thereto, may

provide that in exercising any voting rights, the shares

held by them shall be voted as therein provided, or as

they may agree, or as determined in accordance with a

procedure agreed upon by them.

3. No provision in any written agreement signed by

the stockholders, relating to any phase of the corporate

affairs, shall be invalidated as between the parties on the

ground that its effect is to make them partners among

themselves.

4. A written agreement among some or all of the

stockholders

in

a

close

corporation

shall

not

be

invalidated on the ground that it so relates to the conduct

of the business and affairs of the corporation as to restrict

or interfere with the discretion or powers of the board of

directors: Provided , That such agreement shall impose on

the stockholders who are parties thereto the liabilities for

managerial acts imposed by this Code on directors.

5. To the extent that the stockholders are actively

engaged

in

the

management

or

operation

of

the

business

and

affairs

of

a

close

corporation,

the

stockholders shall be held to strict fiduciary duties to

each other and among themselves. Said stockholders

shall be personally liable for corporate torts unless the

corporation has obtained reasonably adequate liability

insurance.

SECTION 101. When Board Meeting is Unnecessary

or

Improperly

Held .

—

Unless

the

bylaws

provide

otherwise,

any

action

by

the

directors

of

a

close

corporation without a meeting shall nevertheless be

deemed valid if:

1. Before or after such action is taken, written consent

thereto is signed by all the directors; or

2.

All

the

stockholders

have

actual

or

implied

knowledge of the action and make no prompt objection

thereto in writing; or

3. The directors are accustomed to take informal

action with the express or implied acquiescence of all the

stockholders; or

4. All the directors have express or implied knowledge

of the action in question and none of them makes

prompt objection thereto in writing.

If a director's meeting is held without proper call or

notice, an action taken therein within corporate powers is

deemed ratified by a director who failed to attend, unless

he promptly files his written objection with the secretary

of the corporation after having knowledge thereof.

SECTION

102.

Pre-emptive

Right

in

Close

Corporations . — The pre-emptive right of stockholders in

close corporations shall extend to all stock to be issued,

including

reissuance

of treasury shares, whether for

money or for property or personal services, or in payment

of corporate debts, unless the articles of incorporation

provide otherwise.

SECTION

103.

Amendment

of

Articles

of

Incorporation . — Any amendment to the articles of

incorporation

which

seeks

to delete or remove any

provision required by this Title to be contained in the

articles of incorporation or to reduce a quorum or voting

requirement stated in said articles of incorporation shall

not

be

valid

or

effective

unless

approved

by

the

affirmative

vote

of

at

least

two-thirds

(2/3)

of

the

outstanding capital stock, whether with or without voting

rights, or of such greater proportion of shares as may be

specifically provided in the articles of incorporation for

amending, deleting or removing any of the aforesaid

provisions, at a meeting duly called for the purpose.

SECTION 104. Deadlocks . — Notwithstanding any

contrary provision in the articles of incorporation or

bylaws

or

agreement

of

stockholders

of

a

close

corporation, if the directors or stockholders are so divided

respecting

the

management

of

the

corporation's

business and affairs that the votes required for any

corporate

action

cannot

be

obtained,

with

the

consequence

that

the

business

and

affairs

of

the

corporation

can

no

longer

be

conducted

to

the

advantage of the stockholders generally, the Securities

and Exchange Commission, upon written petition by any

stockholder, shall have the power to arbitrate the dispute.

In the exercise of such power, the Commission shall have

authority to make such order as it deems appropriate,

including an order: (1) cancelling or altering any provision

contained in the articles of incorporation, bylaws, or any

stockholders'

agreement;

(2)

cancelling,

altering

or

enjoining any resolution or other act of the corporation or

its

board

of

directors,

stockholders,

or

officers;

(3)

directing or prohibiting any act of the corporation or its

board of directors, stockholders, officers, or other persons

party to the action; (4) requiring the purchase at their fair

value

of

shares

of

any

stockholder,

either

by

the

corporation regardless of the availability of unrestricted

retained

earnings

in

its

books,

or

by

the

other

stockholders; (5) appointing a provisional director; (6)

dissolving the corporation; or (7) granting such other

relief as the circumstances may warrant.

© Compiled by RGL

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