What is a capital stock? Should it be fully owned by Filipinos? (Section 12, RCC)

Summary

Attorney Marie Chris Mathan's video explains the concept of capital stock and its distinction from share of stock within a corporation. She clarifies that capital stock is the maximum capital that can be raised and distributed to shareholders, while share of stock represents units of this capital. The video also outlines the minimum capital stock requirements for certain types of corporations as per the Revised Corporation Code and the Constitution, emphasizing the Filipino ownership percentage requirements for businesses in sectors like natural resources, public service, mass media, banking, and retail trade, among others.

Takeaways

• 📜 Capital Stock is the amount indicated in the articles of incorporation, representing the capital that can be paid for or subscribed for by the corporation's stockholders.
• 🔄 The term 'capital stock' is synonymous with 'authorized capital stock', which is the maximum amount of capital that the incorporators decide to raise.
• 🔢 The Revised Corporation Code of the Philippines does not require a minimum capital stock for corporations, as it does not provide protection to creditors or third parties.
• 🏦 Certain types of corporations, like commercial banks, investment houses, and insurance companies, are required by special laws to have a higher paid-up capital due to their vested public interest.
• 📊 Share of stock refers to the units into which the capital stock is divided, allowing for distribution to shareholders.
• 🇵🇭 The Philippine Constitution and other laws specify minimum Filipino ownership requirements for various types of corporations.
• 🌋 Corporations involved in the exploration, development, and utilization of natural resources must be at least 60% Filipino-owned.
• 🏢 Public service and educational corporations are also required to have at least 60% Filipino ownership of their capital stock.
• 📰 Mass media corporations must be 100% Filipino-owned, as mandated by the Constitution.
• 🏦 Banking corporations require at least 60% Filipino ownership of voting stock, with foreign banks following guidelines set by the Bangko Sentral ng Pilipinas.
• 🛒 Retail trade corporations with capital less than $2.5 million must be wholly Filipino-owned, while rural banks allow up to 60% foreign investment, implying at least 40% Filipino ownership.
• 🚢 Corporations engaged in coastwise shipping must have at least 60% of their capital stock owned by Filipino citizens.
• 🔒 Pawnshop businesses require at least 70% of their voting capital stock to be owned by Filipino citizens.
• 🕵️‍♂️ Corporations involved in recruitment, private detective, watchman, or security guard agencies must be wholly Filipino-owned.

Q & A

What is the main focus of Attorney Marie Chris Mathan's YouTube channel?

The main focus of Attorney Marie Chris Mathan's YouTube channel is to simplify the law by discussing concepts and principles of law in under 10 minutes.

What is the definition of 'capital stock' as mentioned in the video?

Capital stock is the amount indicated in the articles of incorporation, representing the capital that can be paid for or subscribed for by the stockholders of the corporation. It is synonymous with 'authorized capital stock'.

What does 'share of stock' refer to in the context of the video?

A 'share of stock' refers to the units into which the capital stock is divided. It is how the capital stock is distributed to shareholders.

Is there a minimum capital stock required by law for incorporators to indicate in their articles of incorporation according to the revised corporation code?

No, the revised corporation code does not require a minimum capital stock to be raised by a corporation, except as specifically provided by special law.

Why might special laws require a higher paid-up capital for certain corporations?

Special laws may require a higher paid-up capital for certain corporations, such as commercial banks, investment houses, and insurance companies, because they are vested with public interest and it is needed for the protection of depositors, creditors, and the public.

What is the Filipino percentage of ownership requirement for corporations engaged in the exploration, development, and utilization of natural resources?

The constitution requires that corporations engaged in the exploration, development, and utilization of natural resources must be owned by at least 60 percent Filipino citizens.

What is the required Filipino percentage of ownership for public service and educational corporations?

For public service and educational corporations, at least 60 percent of the capital stock must be owned by Filipino citizens.

What is the ownership requirement for mass media corporations according to the constitution?

The constitution requires that mass media corporations must be 100 percent owned by Filipino citizens.

What is the minimum Filipino ownership requirement for advertising corporations?

For advertising corporations, at least 70 percent of the capital stock must be owned by Filipino citizens.

What is the Filipino ownership requirement for banking corporations?

Banking corporations must have at least 60 percent of the voting stock owned by Filipino citizens.

What are the minimum Filipino ownership requirements for corporations engaged in retail trade, rural banks, and coastwise shipping?

Corporations engaged in retail trade with a capital of less than 2.5 million USD must be wholly owned by Filipino citizens. Rural banks should have at least 40 percent Filipino ownership since foreign investors can invest up to 60 percent. For coastwise shipping, at least 60 percent of the capital stock must be owned by Filipino citizens.

Outlines

00:00

📚 Introduction to Capital Stock and Shares

Attorney Marie Chris Mathan introduces her virtual classroom YouTube channel, which aims to simplify the law in under 10 minutes. In this video, she discusses the concept of capital stock, its difference from a share of stock, and the specific Filipino percentage ownership requirements for various types of corporations. Capital stock is the amount indicated in the articles of incorporation, representing the maximum capital that can be raised by the corporation. It is synonymous with authorized capital stock. A share of stock, on the other hand, refers to the units into which the capital stock is divided for distribution to shareholders. The video clarifies that there is no minimum capital stock required by the Revised Corporation Code, except for specific corporations like commercial banks, investment houses, and insurance companies, which have higher paid-up capital due to their vested public interest.

05:01

🏢 Filipino Ownership Requirements for Corporations

The second paragraph delves into the specific Filipino ownership requirements for different types of corporations as stipulated by the Philippine Constitution and other laws. It outlines that corporations involved in the exploration, development, and utilization of natural resources, public service, and education must have at least 60% Filipino ownership. Mass media corporations require 100% Filipino ownership. Advertising agencies need at least 70% Filipino capital stock. Banking corporations mandate at least 60% Filipino voting stock ownership, with foreign banks following guidelines set by the Bangko Sentral ng Pilipinas. Retail trade corporations with capital less than $2.5 million must be wholly Filipino-owned. Rural banks now allow up to 60% foreign investment, implying at least 40% Filipino ownership. Coastwise shipping corporations require 60% Filipino capital stock ownership, pawnshops need at least 70% Filipino voting capital stock, recruitment and placement corporations must have 75% Filipino voting capital stock, and private detective, watchman, or security guard agencies must be wholly Filipino-owned. The video concludes by emphasizing the importance of adhering to these ownership requirements when forming a corporation.

Keywords

💡Capital Stock

Capital stock refers to the total amount of shares that a corporation is authorized to issue, as stated in its articles of incorporation. It represents the maximum amount of capital that can be raised by the corporation through the sale of these shares. In the video, the concept of capital stock is synonymous with authorized capital stock, indicating the maximum capital that incorporators can raise from stockholders.

💡Authorized Capital Stock

Authorized capital stock is the maximum amount of capital that a corporation is allowed to raise by issuing shares to its stockholders, as determined by the corporation's articles of incorporation. This term is used in the video to emphasize that the capital stock is the upper limit of funds that can be generated by the company through its stock offerings.

💡Share of Stock

A share of stock represents a unit of ownership in a corporation, which is part of the total capital stock. The capital stock is divided into these individual shares, allowing for the distribution of ownership among stockholders. In the script, the share of stock is explained as the units through which the collective capital stock is distributed to shareholders.

💡Articles of Incorporation

Articles of incorporation are the legal documents filed to create a corporation, which include the corporation's name, purpose, structure, and the amount of capital stock. In the video, the articles of incorporation are mentioned as the document where incorporators indicate the capital stock that the corporation is authorized to have.

💡Minimum Capital Stock

Minimum capital stock refers to the lowest amount of capital that a corporation must have, as required by law. The video explains that the Revised Corporation Code does not mandate a minimum capital stock for corporations, except for specific types of businesses that are governed by special laws.

💡Paid-up Capital

Paid-up capital is the amount of capital that has been actually paid in by shareholders for the shares they have purchased. It is a subset of the capital stock and represents the actual funds that a corporation has received from its stockholders. The video mentions that certain corporations, like commercial banks, are required to have a higher paid-up capital for the protection of depositors and creditors.

💡Filipino Percentage of Ownership

Filipino percentage of ownership refers to the requirement in Philippine law that certain types of corporations must be majority-owned by Filipino citizens. The video provides a list of corporations and the required percentage of Filipino ownership, such as 60% for corporations engaged in the exploration of natural resources and 100% for mass media corporations.

💡Public Interest

Public interest denotes the welfare or well-being of the general public. In the context of the video, certain corporations that are vested with public interest, such as commercial banks and insurance companies, are required to have a higher paid-up capital to ensure the protection of the public they serve.

💡Voting Stock

Voting stock is a type of share that gives shareholders the right to vote on corporate matters, such as electing the board of directors. The video specifies that for banking corporations, at least 60% of the voting stock must be owned by Filipino citizens, indicating the importance of Filipino control in decision-making.

💡Rural Banks

Rural banks are financial institutions that primarily serve rural areas and are subject to specific regulations. The video mentions that foreign investors are allowed to invest up to 60% of the capital stock of rural banks, with Filipino citizens required to maintain at least 40% ownership.

💡Coastwise Shipping

Coastwise shipping refers to the transportation of goods and passengers by sea within the coastal waters of a country. The video script specifies that corporations engaged in coastwise shipping must have at least 60% of their capital stock owned by Filipino citizens, reflecting the importance of Filipino control in this industry.

Highlights

Introduction to the virtual classroom by Attorney Marie Chris Mathan on YouTube, aiming to simplify the law.

Discussion on capital stock and its distinction from share of stock.

Capital stock defined as the amount indicated in the articles of incorporation, representing capital paid for or subscribed by stockholders.

Capital stock is synonymous with authorized capital stock, the maximum amount of capital that can be raised by the corporation.

Share of stock refers to the units of capital stock, which is how capital is distributed to shareholders.

There is no minimum capital stock required by law, except for specific corporations as provided by special laws.

Special laws require higher paid-up capital for commercial banks, investment houses, and insurance companies due to public interest.

Constitution and other laws set specific Filipino percentage ownership requirements for certain types of corporations.

Corporations exploring natural resources must be at least 60% Filipino-owned as per the constitution.

Public service and educational corporations require at least 60% Filipino ownership of capital stock.

Mass media corporations must be 100% Filipino-owned according to the constitution.

Advertising corporations require at least 70% Filipino ownership of capital stock.

Banking corporations need at least 60% Filipino ownership of voting stock.

Corporations engaged in retail trade with less than $2.5 million capital must be wholly Filipino-owned.

Rural banks allow up to 60% foreign investment, meaning Filipinos should own at least 40%.

Coast-wise shipping corporations require at least 60% Filipino ownership of capital stock.

Pawnshop businesses mandate at least 70% Filipino ownership of voting capital stock.

Recruitment and placement corporations need at least 75% Filipino ownership of voting capital stock.

Private detective, watchman, or security guard agencies must be wholly Filipino-owned.

Importance of remembering the minimum Filipino percentage ownership for compliance when forming a corporation.

Closing remarks encouraging viewers to like, subscribe, and turn on notifications for new uploads.

Transcripts

foreign

[Music]

hi i am attorney marie chris mathan

this is my virtual classroom welcome to

my youtube channel

in this channel i shall aim to simplify

the law i will discuss concepts and

principles of law in under 10 minutes

for this video i want to talk about

capital thought

and how it differs from the term share

of stock also in this video i will be

talking about the filipino percentage

ownership requirement for different

types of corporations so let's begin

so what is a capital stock a capital

stock is actually

the amount that the incorporators will

have to indicate in the articles of

incorporation

and this is the amount representing

capital that can be

that will be rather paid for or

subscribed for

by the stockholders of the corporation

your term capital stock is actually

synonymous also to the term authorized

capital stock

so this is the amount that the

incorporators have actually decided to

be the maximum amount that uh the

maximum amount of capital that that they

can raise

by having it available to be distributed

again to be paid for or subscribed by

the stockholders

on the other hand

the share of stock

actually refers to the units in a

capital stock because your capital stock

is the collective sense and this capital

stock will now then be divided into

units

and that is your share of stock because

how then can you distribute the capital

stock to shareholders it has to be

through units and that is what we call

your share of stock

so having said that

is there a minimum capital stock that is

required by law for incorporators to

indicate in their articles of

incorporation

the answer to that question is found in

your revised corporation code section

12.

let's read section 12. it says

stock corporations shall not be required

to have a minimum capital stock except

as otherwise specifically provided by

special law so your revised corporation

code does not give a minimum capital

stock that must be raised by a

corporation

because it actually does not afford any

protection to the creditors or third

persons dealing with the corporation

however

there are certain corporations

provided by special laws that must have

a higher

paid up capital like your commercial

banks because of course um these these

businesses or these corporations are

vested with public interest and so it is

needed that there is a higher paid up

capital for the protection of the

depositors and of the creditors of such

corporations

other corporations that special that

special laws may require a higher paid

up capital would be your investment

houses and your insurance companies

because again they are vested with

public interest

now let's talk about

filipino percentage of ownership

requirement

is there a particular percentage

ownership by filipinos

that would be required in certain

corporations

the answer is yes and you can find that

in your constitution and in several

other laws now i'm going to show here a

list

of

of corporations and the required

filipino

percentage ownership so first

corporations for the exploration

development and utilization of natural

resources your constitution requires

that it must be owned by at least 60

percent filipino citizens

public service corporations

there must also be at least 60 percent

of the capital stock owned by filipino

citizens that is also the same for

educational corporations which would

also require at least 60 percent of the

capital stock to be owned by filipino

citizens about corporations engaged in

mass media the constitution requires

that it must be 100

owned by filipino citizens how about

advertising your constitution requires

that the capital stock must be owned by

a rather at least 70 percent rather of

the capital stock must be owned by

filipino citizens

about banking corporations

at least 60 percent of the voting stock

must be owned by filipino citizens

of course foreign banking corporations

can now enter the philippines but they

have to follow the guidelines set forth

by your banco central philippines

corporations engaged in retail trade

with a capital of less than 2.5 million

us dollars must be wholly owned by

filipino citizens

for rural banks since foreign investors

are now allowed to invest up to 60

percent of the capital stock of rural

banks then that would mean that filipino

citizens should have

um at least 40 percent of the

of the ownership of the

of rural banks

how about corporations engaged in coast

wise shipping

there must at least be 60

of the capital stock being owned by

filipino citizens how about corporations

engaged in the pawnshop business

at least 70 percent of the voting

capital stock must be owned by filipino

citizens for corporations engaged in the

recruitment and placement of workers

it must be at least 75 percent of the

voting capital stock must be owned by

filipino citizens

how about for corporations engaged in

private detective watchman or security

guard agencies

it must be wholly owned by filipino

citizens

so you must remember

these types of corporations because

there is a minimum required filipino

percentage ownership so that you are

guided when you venture into a business

in any of these types of businesses when

you want to form a corporation you must

make sure to comply with these minimum

minimum filipino percentage ownership

requirements

so that's it for this video i hope you

now have learned what is a capital stock

and what is a share of stock and please

do remember the minimum filipino

percentage ownership requirement of

certain corporations i hope you have

learned from this video and i will see

you in the next

so if you find this video helpful please

click like subscribe and that

notification bell so that you will be

notified of new video uploads thank you

for watching see you next time in mbl

classroom

[Music]

you