Who are considered as corporators, incorporators, stockholders & members? How do we classify shares?

Summary

Attorney Marie Chris Baton Lasko's YouTube channel simplifies legal concepts in under 10 minutes. This video focuses on Sections 5 and 6 of the Revised Corporation Code, explaining key terms like corporators, incorporators, stockholders, and members. It clarifies the roles and distinctions between them. The video also delves into shares of stock, their classifications, and the voting rights of different share classes. It highlights the importance of par value and the special considerations for issuing no par value shares, particularly for financial institutions and public utilities.

Takeaways

• 📚 The video script is a legal tutorial by Attorney Marie Chris Baton Lasko, aiming to simplify the law and discuss concepts and principles within 10 minutes.
• 🏢 Section 5 of the Revised Corporation Code introduces key terms such as 'corporators', 'incorporporators', 'stockholders', and 'members', which are essential to understanding the roles within a corporation.
• 🔑 A 'corporator' is a broad term referring to members of a non-stock corporation or stockholders of a stock corporation, and can also include the original incorporators of the corporation.
• 👥 'Incorporporators' are the original corporators named in the articles of incorporation, who are instrumental in the initial formation of the corporation.
• 🤝 'Stockholders' are those who own shares in a stock corporation, which can include natural persons, corporations, or partnerships.
• 👫 'Members' are the corporators of a non-stock corporation, who do not own shares but are part of the corporation's ownership structure.
• 🔑 'Promoters' are individuals who facilitate the formation of a corporation by bringing together the incorporators, but are not necessarily stockholders themselves.
• 📝 'Subscribers' are individuals who have promised to purchase unissued shares of a corporation, but are not yet considered stockholders until their shares are fully paid for.
• 💼 'Underwriters' are typically investment bankers who agree to purchase or market a significant portion of a corporation's issued shares.
• 📈 Section 6 of the Revised Corporation Code discusses the concept of 'shares of stock', which represent a shareholder's interest in a corporation and are the basis for voting rights, dividends, and asset distribution upon liquidation.
• 🔄 Corporations have the power to classify and issue different classes of shares, with rights and privileges as outlined in the articles of incorporation.
• ⭐ Preferred shares must be issued with a par value and can be given priority in dividend distribution and asset distribution in the event of liquidation.
• 💰 Both par value and no par value shares can be issued, with specific regulations for no par value shares, including a minimum issue consideration of five pesos per share and restrictions for certain types of corporations.

Q & A

What is the primary goal of Attorney Marie Chris Baton Lasko's YouTube channel?

The primary goal of Attorney Marie Chris Baton Lasko's YouTube channel is to simplify the law and discuss concepts and principles of law in under 10 minutes.

What are the four terms introduced in Section 5 of the Revised Corporation Code?

The four terms introduced in Section 5 of the Revised Corporation Code are corporators, incorporators, stockholders, and members.

What does the term 'corporator' refer to in the context of the Revised Corporation Code?

In the context of the Revised Corporation Code, a 'corporator' refers to either members in a non-stock corporation or stockholders of a stock corporation, and can also refer to the incorporators of the corporation.

Who are 'incorporators' according to the Revised Corporation Code?

Incorporators are the original corporators named in the articles of incorporation as those who are originally forming the corporation.

What is the difference between 'incorporators' and 'corporators'?

The difference between 'incorporators' and 'corporators' is that incorporators are the original founders named in the articles of incorporation, while corporators refer to all members or stockholders of the corporation, whether original or subsequent.

What is the significance of 'shares of stock' in a corporation?

Shares of stock represent the interest of a shareholder in a corporation and serve as the basis for participation in the corporation, including the right to vote and share in dividends and assets upon liquidation.

Can a corporation issue different classes of shares according to Section 6 of the Revised Corporation Code?

Yes, according to Section 6 of the Revised Corporation Code, a corporation can issue different classes of shares, with each class having specific rights and privileges as indicated in the articles of incorporation.

What is the general rule regarding the voting rights of shares issued by a corporation?

The general rule is that all shares issued by a corporation must have complete voting rights, except for those classified as preferred shares or redeemable shares.

What are 'preferred shares' and why must they have a par value?

Preferred shares are shares that are given preference in the distribution of dividends or corporate assets in case of liquidation. They must have a par value, which is a specific money value fixed for the share and stated in the articles of incorporation and the certificate of stock.

What is the minimum consideration for issuing no par value shares according to Section 6?

The minimum consideration for issuing no par value shares according to Section 6 is at least five pesos per share.

What happens to the consideration received by the corporation for its no par value shares?

The entire consideration received by the corporation for its no par value shares must be treated as capital and shall not be available for distribution as dividends.

Why might a corporation classify its shares to ensure compliance with constitutional or legal requirements?

A corporation might classify its shares to ensure compliance with constitutional or legal requirements to meet specific ownership structures, such as those requiring a certain percentage of Filipino citizen ownership.

Outlines

00:00

📚 Introduction to Legal Terms in Corporation Code

Attorney Marie Chris Baton Lasko introduces viewers to her virtual classroom on YouTube, where she aims to simplify the law in under 10 minutes per video. In this session, she discusses Section 5 and 6 of the Revised Corporation Code, focusing on key legal terms such as corporators, incorporators, stockholders, and members. She explains that corporators can refer to members of a non-stock corporation or stockholders of a stock corporation, while incorporators are the original corporators named in the articles of incorporation. Stockholders are those who compose a stock corporation and can be either natural or juridical persons. Members are the corporators of a non-stock corporation. The video also touches on other roles such as promoters, subscribers, and underwriters in the formation of a corporation.

05:01

🏢 Understanding Shares and Stock Concepts

The second paragraph delves into the concept of shares of stock as outlined in Section 6 of the Revised Corporation Code. A share of stock represents a shareholder's interest in a corporation and is a unit of the capital stock. Shares can be issued in different classes with varying rights, which must be specified in the articles of incorporation. The principle of equality among shares is discussed, with the exception of preferred or redeemable shares that may be deprived of voting rights. The video explains that while preferred shares can have special rights regarding dividends and asset distribution, they must have a par value. The importance of the par value concept is highlighted, with certain limitations on issuing no par value shares, especially for banks, insurance companies, and other corporations dealing with public funds.

10:04

🗳️ Voting Rights and Matters for Shareholders

This paragraph explains the voting rights of shareholders, emphasizing that all shares must have complete voting rights except for preferred or redeemable shares. It outlines specific matters on which even non-voting shares can vote, such as amendments to the articles of incorporation, changes to bylaws, disposition of corporate property, and other significant corporate actions. The video clarifies that while non-voting shares have limited participation in regular corporate decisions, they retain the right to vote on critical issues that could affect the company's direction and their investment.

15:05

💰 Par Value and No Par Value Shares

The discussion continues with the concept of par value, which is a specific monetary value assigned to a share as stated in the articles of incorporation and the certificate of stock. The video explains that shares can be issued with or without a par value, but there are restrictions for certain types of corporations, such as banks and insurance companies, which cannot issue no par value shares. It also mentions that preferred shares must have a par value and that the minimum consideration for issuing no par value shares is five pesos per share, with the entire consideration treated as capital and not available for dividend distribution.

20:08

🏷️ Classification of Shares for Legal Compliance

The final paragraph of the script addresses the ability of a corporation to classify its shares to ensure compliance with constitutional or legal requirements, such as those pertaining to ownership percentages for Filipino citizens in certain types of corporations. This classification power is highlighted as a means for corporations to adapt to specific regulatory environments while maintaining the integrity of their capital structure.

Keywords

💡Corporators

Corporators are a broad term referring to members of a non-stock corporation or stockholders of a stock corporation, and can even include the incorporators of the corporation. They represent the collective body that composes the corporation, as explained in the script, indicating their importance in understanding the structure of a corporation under the revised corporation code.

💡Incorporate

Incorporate refers to the process of forming a corporation, and the term 'incorporate' is used to describe the original corporators named in the articles of incorporation who are responsible for this formation. The script distinguishes between incorporators and corporators, highlighting the role of the former in the initial establishment of the corporation.

💡Stockholders

Stockholders are individuals or entities that own shares in a stock corporation. The script explains that they can be natural persons or juridical persons, such as other corporations or partnerships, emphasizing the concept of share ownership and its significance in the corporate structure.

💡Members

Members are the corporators of a non-stock corporation, as opposed to stockholders. The script clarifies that they are called members because there are no stocks divided and distributed to the owners in a non-stock corporation, thus illustrating the difference in ownership representation between stock and non-stock corporations.

💡Promoters

Promoters are individuals who facilitate the formation and organization of a corporation by bringing together the incorporators. The script points out that promoters are not necessarily stockholders themselves but are instrumental in the corporation's creation, highlighting their role in the corporate formation process.

💡Subscribers

Subscribers are individuals who have promised to purchase unissued shares of a corporation. The script notes that they are not yet considered stockholders until they have fully paid for their shares, indicating the preliminary stage of share ownership represented by subscribers.

💡Underwriters

Underwriters are typically investment bankers who agree to purchase an entire issue of shares or a substantial portion of such shares, or who have promised to market those shares. The script explains their role in the capital-raising process of a corporation, emphasizing their importance in the issuance of shares.

💡Shares of Stock

Shares of stock represent the interest of a shareholder in a corporation and are a unit of the capital stock. The script discusses the significance of shares in terms of voting rights, dividend distribution, and asset distribution in the event of liquidation, illustrating the foundational aspect of shares in a stock corporation.

💡Preferred Shares

Preferred shares are a class of shares that may be given preference in dividend distribution and asset distribution upon liquidation. The script specifies that preferred shares must be issued with a par value and that their terms and conditions can be set by the board of directors, highlighting the special status and rights associated with these shares.

💡Par Value

Par value is a specific money value fixed for a particular share, stated in the articles of incorporation and the certificate of stock. The script explains that shares can have a par value or be issued as no par value, with certain limitations for specific types of corporations, such as banks and insurance companies, indicating the regulatory aspect of share valuation.

💡Voting Rights

Voting rights are the rights of stockholders to participate in the decision-making process of the corporation. The script details that all shares must have complete voting rights unless classified as preferred or redeemable shares, and even non-voting shares have the right to vote on certain significant corporate matters, underlining the democratic aspect of corporate governance.

Highlights

Introduction to Section 5 and 6 of the Revised Corporation Code, focusing on key terms and concepts.

Definition and distinction between 'corporators', 'incorporporators', 'stockholders', and 'members'.

Corporators encompass both members in a non-stock corporation and stockholders in a stock corporation.

Incorporporators are the original founders named in the Articles of Incorporation.

Stockholders compose a stock corporation and can be individuals or other legal entities.

Members are the corporators of a non-stock corporation without divided stocks.

Explaining the roles of 'promoters', 'subscribers', and 'underwriters' in corporation formation.

Promoters facilitate corporation formation by assembling incorporators.

Subscribers are individuals who commit to purchasing unissued shares.

Underwriters are typically investment bankers who agree to purchase or market shares.

Section 6 introduces the concept of 'shares of stock' and their significance in a stock corporation.

Shares represent a shareholder's interest and form the basis for voting rights and dividends.

The possibility for corporations to issue different classes of shares with varying rights.

Requirements for classifying shares and specifying rights in the Articles of Incorporation.

Principle that all shares are presumed equal unless stated otherwise in official documents.

Non-voting shares can still vote on specific corporate matters as outlined in Section 6.

Differentiation between par value and no par value shares and their implications.

Certain types of corporations are restricted from issuing no par value shares.

Preferred shares must have a par value and can be given priority in dividends and asset distribution.

No par value shares are considered fully paid and non-assessable, with specific minimum issuance considerations.

Corporations may classify shares to comply with constitutional or legal requirements.

Closing remarks summarizing the importance of understanding Sections 5 and 6 for simplified law comprehension.

Transcripts

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hi i am attorney marie chris baton lasko

this is my virtual classroom welcome to

my youtube channel in this channel i

shall aim to simplify the law i shall

discuss concepts and principles of law

in under 10 minutes

hello again everyone welcome to our

virtual classroom for this video i want

to talk about section 5 and 6 of the

revised corporation code what is in

section 5 and what is in section 6

section 5 and section 6 will now

introduce you to terms

that are important in understanding your

revised corporation code so let's talk

about these terms one by one so let's

look at section five

section five now we'll introduce you to

four terms what are these terms you have

corporators you have

incorporators you have

stockholders and members

so what do we mean by these terms who do

we refer to when we say you are a

corporator or you are an incorporator or

you are a stockholder or you are a

member

when we

talk about corporators or a corporator

this refers to either members in a

non-stop corporation or stockholders

of a stock corporation this can even

refer to

incorporators of your corporation

what does that tell you it tells you

then that the term corporator is a very

broad term

and this term refers to all those

who compose the corporation again be it

members in a non-stop corporation or be

a stockholders in a stock corporation

how about the term incorporator or

incorporators

they refer to the original corporators

they are those who are named in the

articles of incorporation as those

originally forming the corporation

so that's the difference between your

incorporator and cooperator

in incorporator they are the original

corporators the corporate or the term

cooperator would now refer to all the

members or stockholders whether they are

the original formers of the corporation

or they are stockholders who want their

shares

into the to become um to have a

shareholding rather in the corporation

or if they are new members in a

non-stock corporation the term

stockholders i have mentioned this

earlier this refers to those who compose

a stock corporation

your stockholders

may be

natural persons or juridical persons

because corporations or partnerships can

in fact buy shares in a stock

corporation they can buy shares of stock

so that they have share holdings now in

the stock corporation

how about the term members

members now refer to the corporators

of a non-stock corporation you do not

call them stockholders because there are

no stocks that are being divided and

distributed to the owners

they are called

members

so these are the

important terms that we also have to

learn and these are the terms that are

introduced to us

on section or in section five rather of

your revised corporation code

now there are other classes of people

who help form the corporation although

not stated or given in section 5. we

have your promoters you have your

subscribers and you have your

underwriters now who are the promoters

the promoters are those who bring about

the formation and organization of the

corporation by bringing together

the incorporators of the corporation

they are not necessarily

um the incorporators they are not

necessarily stockholders but they are

the ones who bring about the formation

of the corporation they just

bring together this these people who

might want to

form a particular corporation

how about subscribers

subscribers are those people who promise

to purchase

shares

and issued shares of the corporation do

we consider them as stockholders

technically not yet because you become a

stockholder only when you have already

fully paid for your share so if you have

if you have just promised to

purchase the unissued shares of the

corporation you are still called a

subscriber

not a stockholder yet it's only when you

pay for these shares that you become a

stockholder how about an underwriter an

underwriter is usually an investment

banker who has agreed to purchase an

entire issue of shares or a substantial

portion of such issued shares or perhaps

he has promised to

market those shares

so that is what an underwriter is

now let's talk about section 6 of your

revised corporation code it now

introduces you to the concept of shares

of stock

now remember

having shares of stock that would mean

that the corporation is a stock

corporation

now what are shares of stock

a share of stock represents

the interest of a shareholder in a

corporation

it is a unit in the capital stock of the

corporation

and what is the importance of this share

of stock as we said it represents the

interest of the shareholder

because then your share of stock will

now become the basis for your

participation

in the corporation in terms of your

right to vote

it will also become the basis

for your share in the dividends should

the corporation through the board of

directors declare dividends

it should it also rather becomes the

basis of your share in the assets of the

corporation if there are any left after

liquidation of a corporation having

discussed what a share of stock is

can the corporation

issue

several classes of shares

the answer is yes

now you might ask what do you mean by

different classes of shares

your shares

may also be issued and classified

depending on the rights

that would attach to such shares

and that is what section 6 is actually

talking about

now let's go over section six

the first paragraph of section six yes

the classification of shares their

corresponding rights privilege or

restrictions and their stated par value

if any must be indicated in the articles

of incorporation

each share shall be equal in all

respects to every other share except

otherwise in the articles of

incorporation and in the certificate of

stock

now let's study that first paragraph of

section six

what does that tell you

it basically tells you that your

corporation has the power

to classify

their shares

they can issue several classes of shares

and that the privileges the rights of

each share

must be indicated in the articles of

incorporation

in that paragraph also it will tell you

of the principle

that all shares are presumed equal

unless otherwise stated and that is why

it is important for the

incorporators

when they form the corporation when they

make the articles of incorporation

that they specify

the privilege or the right of each

classification of share now let's go

over the second paragraph of section 6.

it says the shares and stock

corporations may be divided into classes

or series of shares or both

no share may be deprived of voting

rights except those classified and

issued as preferred or redeemable shares

unless otherwise provided in this code

provided that there shall always be a

class or series of shares with complete

voting rights

what do we mean by the second paragraph

of section 6

it tells you

that the shares of stock

that is issued by the corporation

must have complete voting rights

except those shares that are classified

as preferred shares

or redeemable shares

in other words as a general rule

when the corporation issues shares or

series or classified series of shares

all of these shares must have complete

voting rights

except when they are preferred shares or

redeemable shares

i will talk about what preferred shares

are and what redeemable shares are in

another video

let's talk about just the general rule

here

so again

your corporation has the power to

classify several series of shares but

the corporation must put to mind

that

all those shares must have complete

voting rights except for preferred

shares or

redeemable shares

now you might ask what are these voting

rights

what will the stockholder vote on anyway

remember that a stockholder having a

share in the corporation they're

actually part owners of the corporation

and being so they must have a say in the

direction of the corporation and so if

there are matters that would need to be

voted on

like

if this corporation will make an

investment in a certain business

then a vote can be called upon

to determine whether the stockholders

would be amenable to it

another

matter that the stockholders would be

voting on would be the membership also

of the board of directors of course they

must have a c as to the leadership in

the corporation so these are just some

matters

that may be put up for a

vote

so that again of course the stockholders

being part owners of the corporation can

have a say

in the direction of the corporation now

let's move on to the third paragraph of

section six what does it say it says

holders of non-voting shares shall

nevertheless be entitled to vote on the

following matters

amendment of the articles of

incorporation

adoption and amendment of bylaws

sale lease exchange mortgage pledge or

other disposition of all or

substantially all of the corporate

property

incurring creating or increasing bonded

indebtedness

increase or decrease of authorized

capital stock

merger or consolidation of the

corporation with another corporation or

other corporation

investment of corporate funds in another

corporation or business in accordance

with this code and the solution of the

corporation

the third paragraph tells you that even

if

your share is a non-voting share like if

it's a preferred share

or any other share to which there are no

voting privileges

that paragraph

tells you

that

there are still matters that even

non-voting shares can vote on

and what are these matters

those matters enumerated under

your third paragraph of section six

for other corporate acts however where

the corporation would ask the

stockholders to vote

again

excluding those that is in those that

are rather enumerated in the third

paragraph of section six

they would refer only to shares with

voting rights

because those enumerated under the third

paragraph of section six

will also enable the non-voting shares

to also vote on these

matters

now let's move on to the next paragraph

a section 6 is quite long so what does

the next paragraph say it says

the shares or series of shares

may or may not have a par value

provided that banks trust insurance and

pre-need companies

public utilities building and loan

associations and other corporations

authorized to obtain or access funds

from the public whether publicly listed

or not shall not be issued to issue no

par value shares of stock

so this paragraph now introduces you to

another term

and such is par

value

what do we mean by

our

value

a par value of a share

is that specific money value that is

fixed for that particular share

and that is written or stated in your

articles of incorporation and in the

certificate of stock

now you might ask what is a certificate

of stock

a certificate of stock is that written

instrument which is actually proof that

you are a holder of a share so what does

section 6 tell you about the par value

of a share as what we have read earlier

on

it says there that the shares issued by

a corporation may have a par value

or may have no par value

meaning the corporation has the liberty

to decide whether to

give a specific money value to a

particular share if there is a specific

value that is fixed for a particular

share and is stated in the articles of

incorporation and stated in the

certificate of stock then that share has

a par value or that is a par value share

if there is none then that is a no par

value

now your section 6

will tell you of a limit of uh of a

certain limitation on issuing no par

value shares and what is this limitation

we stated it a while ago and it says

that banks

insurance companies pre-need companies

loan associations public utilities

they cannot issue shares that do not

have a par

value that is what your section 6 is

telling you

your section 6 will also tell you that

if the corporation issues preferred

shares

these preferred shares must also have a

par

value

what are preferred shares

you can actually

find

the description or definition of

preferred shares in the next paragraph

of section 6. let's read the next

paragraph it says

preferred shares of stock issued by a

corporation may be given preference in

the distribution of dividends and in the

distribution of corporate assets in case

of liquidation or such other preferences

provided that preferred shares of stock

may be issued only with a par value

the board of directors where authorized

in the articles of incorporation may fix

the terms and conditions of preferred

shares of stock or any series thereof

provided further that such terms and

conditions should be effective upon

filing of a certificate thereof with the

securities and exchange commission

herein after referred to as the

commission

in that paragraph it tells you that

preferred shares are those shares that

are being given a preference in the

distribution of dividends or in the

distribution of corporate assets if

there be liquidation of the corporation

preference meaning they would be the

first to be given dividends or the first

to receive a share in the assets as

opposed to the other types of

shares so that's why they are called

referred shares

so in that paragraph it tells you that

if there are preferred shares being

issued by the corporation then they

should be issued only with a par value

meaning that there must be a specific

money value fixed for preferred shares

and of course it must be stated in the

articles of incorporation and stated in

the certificate of stock now on to the

second to the last paragraph of section

six you're almost done with section six

what does the second to the last

paragraph say

it says

shares of capital stock issued without

par value

shall be deemed fully paid and

non-accessible and beholder of such

share shall not be liable to the

corporation or to its creditors in

respect their tool

provided that no poor value shares must

be issued for a consideration of at

least five pesos per share

provided further that the entire

consideration received by the

corporation for its no par value shares

shall be treated as capital and shall

not be available for distribution as

dividends

so what should we remember here

we should remember that yes a

corporation can issue no par value

shares

and that no par value shares do not have

a specific money value that is fixed

however your section 6 gives you the

minimum

value for no par value shares

and that it should not be less than

5 pesos

and such that once those shares are

being issued and paid for

no part

of the amount that was paid for no par

value shares

can be distributed as dividends because

it shall

all be part of your

capital of the capital of the

corporation

finally the last paragraph of section

six it states

a corporation may further classify its

shares for the purpose of ensuring

compliance with constitutional or legal

requirements

now

this just tells you again of the power

of the corporation to classify shares

and this time they may do so in

compliance with constitutional and legal

requirements

when certain corporations must have 60

percent ownership of

of filipino citizens or it should have

70 percent um ownership of filipino

citizens depending on the type of

corporation so that ends our discussion

on section 5 and section 6 of your

revised corporation code i hope i was

able to simplify the concepts under

section 5 and section 6.

see you next time in my next video

i hope you have learned something from

this video if you have please click like

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uploads thank you for watching see you

next time in mbl classroom

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