Who are the true owners of a corporation? Corporations are owned by shareholders who invest money in the company by purchasing stock. The percentage of shares they own determines how much of the corporation percentage they hold.((Fundamentals of Business: Canadian Edition (2018), Forms of Business Ownership))
Section 22 of the Revised Corporation Code provides that the corporate powers of a corporation, as well as its exercise of attributes of ownership over its properties and the management of its business enterprise, are all centralized in the Board of Directors or Trustees.((Section 2, Republic Act [RA] No. 11232))
Pursuant to their attribute of ownership, stockholders are entitled to certain rights and privileges. This includes voting rights, dividend payments, and a claim to a portion of any remaining assets at the time of a corporation’s liquidation.((Indeed Editorial team, What is a Stockholder))
Who are the true owners of a corporation?
The shareholders or stockholders of a corporation who own the majority of the voting shares are considered to be the corporation’s “true owners.”
They have the power to elect the board of directors, make important decisions, and enjoy the benefits of ownership, such as dividends and capital appreciation, in proportion to their shareholdings.
Understanding Corporate Ownership and Stockholders
The Revised Corporation Code (RCC) defines a corporation as an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence.((Supra., RA 11232))
A corporation is classified as to the existence of stocks, which are stock corporation or non-stock corporation.
The RCC defines a stock corporation as a corporation which has capital stock divided into shares and is authorized to distribute to holders of such shares, dividends or allotments of the surplus profits on the basis of the shares held.((Section 3, RA 11232))
This classification of corporation results to corporate ownership by the stockholders/shareholders. A person becomes a stockholder/shareholder the moment he enters into a subscription contract with an existing corporation.
This is done by purchasing stocks from the corporation and/or by acquiring shares from existing shareholders by sale or any other contract or by getting them through operation of law like succession.
The stockholder/shareholder has a right to transfer shares without prior consent of other stockholders, as this proceeds from his right as owner thereof.
The Role of Stockholders in a Corporation
Stockholders are primarily the investors of a corporation. They accordingly do not run the day-to-day business operations of the corporation, unless they are at the same time directors or officers of the corporation.
Under the Revised Corporation Code, stockholders or members periodically elect the board of directors or trustees – who are charged with the management of the corporation. In turn, the board periodically elects its officers to carry out management functions on a day-to-day basis.
As co-owners of the corporation, the stockholders or members have residual powers over fundamental and major corporate changes.((Tan vs. Sycip, G.R. No. 153468, August 17, 2006))
As a general rule, the corporate powers of a corporation are exercised by the board of directors or trustees. All business matters and disposition of its assets and properties are within the discretion of the Board of Directors/ Trustees.
Nonetheless, there are corporate affairs that require the consent of the stockholders or members as to protect their interests and equity in the corporation.
Hence, stockholders or members are given voice in the management and operations of the corporation through their voting rights.
Their right to participate are usually manifested by the provisions in the Code either requiring two-third (2/3) votes or the vote of the majority as the case may be.
The primary rights and responsibilities of the stockholders are:
- Right to vote
- Right to receive dividends
- Right to receive distribution upon liquidation of the corporation
- Right to inspect the books of the corporation
Stockholders’ Right to Vote Directors or Trustees
A stockholder may exercise his right to vote through the following means:
- By straight voting: A stockholder may vote such a number of shares for as many persons as there are directors to be elected.
- By cumulative voting for one candidate: A stockholder may cumulate said shares and give one candidate as many votes as the number of directors to be elected, and be multiplied by the number of his shares.
- By cumulative voting by distribution: A stockholder may distribute them on the same principle among as many candidates as he shall see fit. However, the total number of votes cast by him shall not exceed the number of shares owned by him as shown in the books of the corporation multiplied by the whole number of directors to be elected. Provided, however, that no delinquent stock shall be voted.((Chavez, J. L. [2020], Revised Corporation Law Illustrated and Simplified, Volume IV))
Stockholders’ Right to Receive Dividends
It is also the right of the stockholder to demand payment of dividends after the board’s declaration. Stockholders are entitled to dividends pro rata based on the total number of shares that they own((SEC-OGC Opinion No. 22-03: Preferred Shares; Rural Banks)) and not on the amount paid for the shares.((SEC Opinion, October 10, 1992 and July 16, 1996))
Stockholders’ Right to Inspect the Books of the Corporation
One of the important rights of the stockholder is the right to inspect the books of corporations. The Supreme Court held that the stockholder’s right of inspection of the corporation’s books and records is based on their ownership of the assets and property of the corporation.((Gokongwei vs. SEC, G.R. No. L-45911, April 11, 1979))
Therefore, it is an incident of ownership of the corporate property – whether this ownership or interest be termed an equitable ownership, a beneficial ownership, or an ownership. Such a right is predicated upon the necessity of self-protection.((Ibid.))
Rights and responsibilities of a stockholder under the Revised Corporation Code
Stockholders have the right to attend and vote in general meetings, inspect corporate records, and receive dividends. They also have the right to transfer or sell their shares and participate in the management of the corporation through their voting power.
Nevertheless, stockholders are also responsible for adhering to corporate rules and regulations, acting in the best interest of the corporation, and fulfilling their financial obligations.
These rights and responsibilities aim to ensure transparency, accountability, and equitable participation in corporate governance.
As to Management Rights, a stockholder has the following rights and responsibilities
- To attend and vote in person or by proxy at a stockholders’ meetings;((Sections 49, 57))
- To elect and remove directors;((Sections 23, 27))
- To approve certain corporate;((Section 57))
- To adopt and amend or repeal the by-laws of adopt new by-laws;((Sections 45, 47))
- To compel the calling of the meetings;((Section 49))
- To enter into a voting trust agreement; and((Section 58))
- To have the corporation voluntarily dissolved.((Sections 117, 118))
As to Proprietary Rights, a stockholder has the following rights and responsibilities
- To transfer stock in the corporate book;((Section 62))
- To receive dividends when declared;((Section 42))
- To the issuance of certificate of stock or other evidence of stock ownership;((Section 63))
- To participate in the distribution of corporate assets upon dissolution; and1
- To pre-emption in the issue of shares.((Section 42))
As to Remedial Rights, a stockholder has the following rights and responsibilities
- To inspect corporate books;((Section 73))
- To recover stock unlawfully sold for delinquent payment of subscription;((Section 68))
- To be furnished with most recent financial statements or reports of the corporation’s operation;((Sections 73, 74))
- To bring suits (derivative suit, individual suit, and representative suit); and
- To demand payment in the exercise of appraisal right.((Sections 40, 81))
Stock ownership is a fundamental concept in the world of business, accounting, and finance. It represents a way for individuals, companies, organizations, institutions, or corporations to hold a stake in another company or corporation.
This entitles them to a portion of the corporation’s assets, a share in the profits, and the right to participate in the management or decision-making processes.
Shares, often referred to as stocks, are defined as units of ownership in a corporation.((What Are Shares? How They Compare to Stocks)) It represents the interest or right of a shareholder in the corporation.
According to Black’s Law Dictionary, shares refers to the intangible interest or right which an owner has in the management, profit, and assets of the corporation.
In other words, when you own shares of a corporation, you basically and essentially hold a proportionate or aliquot interest in the property of the corporation.
In one of the cases decided by the Supreme Court, quoting the case of Hall & Faley v. Alabama Terminal, it held that a share of stock only typifies an aliquot part of the corporation’s property, or the right to share in its proceeds to that extent when distributed according to law and equity.((Silverio vs. Filipino Business Consultants, Inc., G.R. No. 143312, August 12, 2005))
In another case, the Supreme Court further elucidated that the ownership of shares is indirect, contingent, remote, conjectural, consequential, and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations.((Magsaysay-Labrador, et al. vs. Court of Appeals, G.R. No. 58168, December 19, 1989))
However, while owning a share in the corporation entitles a stockholder to participate in the management or share in the profits, such stockholder, in the legal sense, does not become the owner of the corporate property.
As explained by the Supreme Court in one case, it does not vest the owner thereof with any legal right or title to any of the property even if a share of stock represents a proportionate or aliquot interest in the property of the corporation.((Ibid.))
His interest in the corporate property is merely equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person.((Ibid.))
The Revised Corporation Code of the Philippines provides for the different types or kinds of shares, namely:
- Common Shares: Basic class of stock which was usually issued without extraordinary rights or privileges and entitles the shareholder to a pro rata division of profits.((Commissioner of Internal Revenue vs. Court of Appeals, G.R. No. 108576, January 20, 1999))
- Preferred Shares: Issued at par value and entitles the shareholder to some priority on dividends and/or asset distribution. It may be subdivided into: 1) preferred shares as to assets in case of liquidation; and (2) preferred shares as to dividends.((Section 6, RA 11232))
- Voting Shares: Shares with entitlement to vote and participate in the decision-making of the corporation.((Id.))
- Non-voting Shares: Generally deprived of the right to vote in the election and on other matter except on the specifically enumerated instances under the Code
- Par Value Shares: Have value fixed in the certificates of stocks or articles of Incorporation.((Id.))
- No Par Value Shares: No value fixed in the certificates of stocks or articles of Incorporation.((Id.))
- Treasury Shares: Issued and fully paid for, but subsequently reacquired by the issuing corporation through the following means: purchase, redemption, and donation or through some other lawful means.((Section 9, RA 11232))
- Redeemable Shares: Stocks issued which allows corporations to redeem or repurchase said shares.((Section 8, RA 11232))
- Founder Shares: Shares issued for organizers and promoters.((Section 7, RA 11232))
- Each share has its own rights and privileges which can be exercised by its holder. The distinction of these shares in terms of rights and privileges are follows:
Under Section 6 of the Revised Corporation Code, each share “shall be equal in all respects to every other share, except as otherwise provided in the articles of incorporation and in the certificate of stock”. This is commonly known as the Doctrine of Equality of Shares.((Supra., Section 6))
Pursuant to the Revised Corporation Code of the Philippines, shares of stocks are personal property and may be acquired by individuals and entity through various means. This is in line with the inherent power of a stock corporation to issue or sell stocks((Section 35, RA 11232)) and the attribute of free transferability of shares under.((Section 62, RA 11232))
To be a shareholder in a particular corporation in the Philippines, an individual or entity may either: (a) acquire stocks directly from the company (b) acquire shares from existing stockholders in the company or (c) acquire directly from the stock market.
Stocks may be acquired in exchange of the following considerations:((Section 61, RA 11232))
- Actual cash paid to the corporation;
- Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued;
- Labor performed for or services actually rendered to the corporation;
- Previously incurred indebtedness of the corporation;
- Amounts transferred from unrestricted retained earnings to stated capital;
- Outstanding shares exchanged for stocks in the event of reclassification or conversion;
- Shares of stock in another corporation; and/or
- Other generally accepted form of consideration.
Prior to the creation of the corporation, an individual may already opt to enter into a pre-incorporation subscription agreement with an agent of the corporation.
A pre-incorporation contract is “any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed”.((Section 59, RA 11232))
It is irrevocable for 6 months, unless the following circumstances occurred: (a) all the other subscribers consent to its revocation or (b) the corporation fails to incorporate within the stipulated period
Shares of stock issued during the lifetime of the corporation may be transferred to an individual or corporation by the delivery of a stock certificate endorsed by the owner, his attorney-in-fact, or any other person legally authorized to make the transfer.((Supra., Section 62))
Such transfer shall upon payment of full purchase price be recorded in the books of the corporation as to be valid and binding.
An existing stockholder may also sell his shares of stock to any individual or entity pursuant to the attribute of free transferability of units of ownership.
Two concepts govern this sale of shares by the existing shareholder: the right of first refusal and the right of first option.
Under the right of first refusal, a shareholder who desires to sell his shares must first offer it to the corporation or other shareholders under reasonable terms and conditions.
Under the right of first option, the corporation is granted the right to buy the shares first at a fixed price if the terms and conditions are reasonable.((Villanueva, C. & Villanueva-Tiansay, T. [2021], Philippine Corporate Law))
There are other methods through which an individual or entity may acquire shares of stock in a Philippine corporation, namely through:
- Initial Public Offering
- Secondary Market Purchases
- Private Placements
Initial Public Offering (Primary Market)
A corporation may offer its shares to the public for the first time through the Philippine Stock Exchange – a process commonly known as Initial Public Offering or IPO. The proceeds from sale transactions over shares of stock in IPOs inure to the issuing company.
To be a publicly-traded corporation, the corporation shall file a registration statement and listing application to the Philippine Stock Exchange (PSE). The following are the requirements for for IPO listing, as provided by the PSE:((IPO Listing Requirements))
Main Board
- Operating History Requirement: Three (3) years of engaging in materially the same business
- Board of Directors Requirement: Minimum of seven (7) directors, two (2) of which or 20% of the board have to be independent, and each director should have at least one (1) share in his name
- Profit Test:
- Cumulative net income, excluding non –recurring items, of at least Php75 million for three (3) full fiscal years immediately preceding the application for listing; AND
- Minimum net income of Php50 million for the most recent fiscal year
- Stockholders’ Equity Requirement: Stockholders’ equity must be at least Php500 million for the most recent fiscal year
- Minimum Number of Stockholders upon Listing: At least 1000 stockholders, each owning stocks equivalent to at least one (1) board lot
- Minimum Public Offering: 20% upon and after listing
- Operating History Requirement: At least two (2) years prior to listing application
- Board of Directors Requirement: Minimum of seven (7) directors, two (2) of which or 20% of the board have to be independent, and each director should have at least one (1) share in his name
- Profit Test:
- Cumulative EBITDA, excluding non- recurring items, of at least Php15 million for the three (3) fiscal years immediately preceding the application or such shorter period as the company has been operating; OR
- Cumulative operating revenues or sales of at least Php150 million for the last three (3) fiscal years immediately preceding the filing of the listing application or such shorter period as the company has been operating, with an average net sales or operating revenue growth rate of at least 20% for the 2 fiscal years immediately preceding the listing application filing
- Stockholders’ Equity Requirement: Stockholders’ equity must be at least Php25 million for the most recent fiscal year
- Minimum Number of Stockholders upon Listing: At least 200 stockholders, each owning stocks equivalent to at least one (1) board lot
- Minimum Public Offering: 20% upon and after listing
- Other Requirements: Submission of a business plan containing steps to advance the company’s business over a period of five (5) years
Secondary Market Purchases (Secondary Market)
An individual or entity may also acquire shares through the secondary market – wherein original shareholders may sell their shares to other investors.
Subsequently, these investors sell these shares through the stock market. As such, the proceeds from sale transactions over shares of stock inure to the investors and not to the issuing company.
Secondary market purchases may be conducted through stock exchanges and over-the-counter markets.
Private Placements
A private placement is defined as the “sale of securities to less than 20 persons”.((Section 1, Article II, PSE Consolidated Listing and Disclosure Rules))
Usually, large banks, mutual banks and pension funds are the investors in private placements. Private placements may include the following means of acquisition of shares:
(a) new issuance of shares to less than 20 investors((Cayanan, A. S. [2017], Private Placements and Minority Interests: The Philippine Case, Philippine Management Review, 24, 49-62))
(b) sale of substantial number of shares of existing investors to another investor, and((Ibid.))
(c) top-up placement and subscription agreements.((Ibid.))
Importance of Stockholder Meetings
Shareholders’ meetings play an important part in corporate governance by giving shareholders and members an opportunity to have a voice in the corporation’s management and operations.
Through stockholders meetings, shareholders are informed of the performance of the corporation and ensure that their capital investments are being managed appropriately. They are kept abreast of the company’s financial position as well as any changes to its business plan and strategy.
As a general rule, a stockholder has a voice in important matters concerning the corporation. In a way, stockholders have a controlling hold over the corporation through their right to vote which is exercised during shareholders’ meetings.
The Revised Corporation Code provides for two types of meetings shareholders may attend as the case may be:
- Regular Meetings – meetings of shareholders and/or members held annually on the date fixed on the bylaws or on any date after the 15th of April.((Section 49, RA 11232))
- Special Meetings – meetings of shareholders and/or members held at any time deemed necessary or as provided by the bylaws with at least 1 week notice sent to all unless otherwise provided.((Id.))
As a general rule, a written notice shall be sent to all stockholders or members of record at least 21 days prior the meeting for regular meetings and at least 1 week prior for special meetings, unless a different period is provided in the bylaws, law, or regulation.((Id.))
Every decision reached by at least a majority of the directors or trustees constituting a quorum shall be deemed as a valid and enforceable corporate act.((Villanueva, C. & Villanueva-Tiansay, T. [2021], Philippine Corporate Law))
Corporate Dividends
Now that we have learned how stockholders partake in the ownership of a corporation, we begin to wonder what benefit they get in return for their shareholdings.
According to the Revised Corporation Code of the Philippines, a corporation, through its Board of Directors, may declare dividends out of the unrestricted retained earnings which shall be payable in cash, property, or in stock to all stockholders on the basis of outstanding stock held by them.((Section 42, RA 11232))
Dividends are corporate profits set aside, declared and ordered by the Board of Directors to be paid to the stockholders. It is the fruit of investment, the recurrent return, analogous to interest and rent upon other forms of invested capital.
If a company enjoys a profit and decides to pay a dividend to common shareholders, then it declares the dividend, the amount, and the date when it will be paid out to the shareholders.
Dividends typically are credited to a brokerage account or paid in the form of a dividend check. The dividend check is mailed to stockholders but can be direct-deposited to a shareholder’s account of choice, if preferred. The alternative to cash dividends is additional shares of stock.((How and When are Stock Dividends Paid Out?))
It is provided by law that corporations have the power to declare dividends. There is however a proviso on the dividend pay-out in accordance with Section 42 of the Republic Act. 11232 or The Revised Corporation Code, as follows:
- Dividend declaration is based on outstanding stock
- In case of delinquent stock, any cash dividends due shall be first applied to the unpaid balance plus costs and expenses, while stockholders until their unpaid subscription is fully paid
- No stock dividend shall be issued without the approval or stockholders representing at least two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose
The law and jurisprudence provide for the rights and protections of stockholders in a corporation. Such rights include the following:
1) the right to vote;
2) the right to attend shareholders’ meeting;
3) the right to receive dividends;
4) the right to inspect corporate records; and
5) the right to file a derivative suit.
Right to Vote
The Supreme Court held in Castillo vs. Balinghasay((G.R. No. 150976, October 18, 2004)) that the exercise of the right to vote intends to enable a shareholder to participate in the control and management of the corporation. However, his vote may not succeed since majority rule is observed in a corporation.
Section 49 of the Revised Corporation Code provides that, “The right to vote may be exercised in person, through a proxy or when so authorized in the bylaws, through remote communication or in absentia.”((Section 49, RA 11232))
Section 48 of the Revised Corporation Code provides that meetings of directors, trustees, stockholders, or members may be regular or special.((Section 48, RA 11232))
Regular meetings of shareholders shall be held annually on a date fixed in the bylaws; if not so fixed, on any date after April 15 of every year as decided by the Board of Directors or Trustees.
Notice of meetings shall be sent through the means of communication provided in the bylaws, which shall state the time, place and purpose of the meetings.
Right to Receive Dividends
When a corporation makes profits over and above its capital, a stockholder is entitled to receive a share in the profits in proportion to his stockholdings, which is known as dividend. The right to receive dividend emanates from his ownership of stock.
It is said that all shareholders are entitled to this right even without any express or enabling provision to that effect in the articles of incorporation or the bylaws.((Villanueva, C. & Villanueva-Tiansay, T. [2021] Philippine Corporate Law))
Right to inspect corporate records
A stockholder must have access to information in order for him to give an informed decision in connection with his right to participate in the management. This will also enable him to protect his interests against abuses of those running the corporation.
In Gokongwei vs. SEC,((Supra., G.R. No. L-45911, April 11, 1979)) the Supreme Court held that:
“The stockholder’s right of inspection of the corporate books and records is based upon their ownership of the assets and property of the corporation. It is, therefore, an incident of ownership of the corporate property. This right is predicated upon the necessity of self-protection.”((Ibid.))
Section 73 of the Code enumerates the records that the corporation shall keep and carefully preserve at its principal office.
The same section provides that “any officer or agent who shall refuse to allow the inspection and/or reproduction of records… shall be liable for damages and shall be guilty of an offense which shall be punished under Section 161 of the Code.”((Section 73, RA 11232))
Right to File Derivative Suit
A stockholder may also sue for the misconduct of corporate officers or mismanagement of corporate assets.
The Supreme Court pronounced in Bitong vs. Court of Appeals:((G.R. No. 123553, July 13, 1998))
“Where corporate directors are guilty of a breach of trust, not mere error of judgment or abuse of discretion, and intra-corporate remedy is futile or useless, a stockholder may institute a suit in behalf of himself and other stockholders and for the benefit of the corporation, to bring about a redress of the wrong inflicted directly upon the corporation and indirectly upon the stockholder.”((Ibid.))
As defined in Western Institute of Technology, Inc. vs. Salas,((G.R. No. 113032, August 21, 1997)) “A derivative suit is an action brought by minority shareholders in the name of the corporation to redress wrongs committed against the corporation, for which the directors refuse to sue.”((Ibid.))
This is an exception to the general rule that the power to sue in behalf of the corporation is exercised only by the Board of Directors or Trustees.
Limitations of Stockholder Ownership
One of the limitations of stockholder ownership is that the management of the corporation is generally vested upon its board of directors.
The board of directors are elected by the majority of the stockholders constituting a quorum for a meeting called for that purpose.
This results to a likelihood that the majority stockholders will connive to perpetuate into power the board of directors whom they can exercise control so that the direction of the management of the corporation would tilt in their favor.
To prevent this conflict, the Corporation Code provides for safeguards. The privilege of cumulative voting is permitted for the purpose of giving minority stockholders representation in the board of directors.
The cumulative voting allows for a candidate to have as many votes as the number of directors to be elected multiplied by the number of shares owned.
Also, the board of directors voted upon who represent the minority cannot be removed without just and valid cause.
Case Studies and Examples
Stockholder ownership may critically impact corporate decisions and outcomes mainly because of the voting power that comes with one’s ownership of stocks, regardless of whether it is a major or a minor corporate decision.
Under Section 6 of the Corporation Code, each share of stock is entitled to vote, unless otherwise provided in the articles of incorporation or declared delinquent under Section 67 of the Code.
With this, shareholders should be able to participate and intervene in decisions that can change in a significant way the status and nature of the company.((Philippine Corporate Governance Blueprint [2015]))
The extent of the effect of a stockholder’s influence on the company’s decision may depend on his/her ownership percentage.
The more shares a stockholder owns, the more influence they have on the corporate acts of a company.
It is also important to note that stockholders, especially those with significant ownership stakes, can voice their opinions on significant policy decisions, such as dividend distribution, capital expenditure plans, and corporate social responsibility initiatives.((Ownership structure of AboitizPower))
The Evolving Landscape of Corporate Ownership
The digital age and emerging technologies are revolutionizing how we live and work, and the world of finance is no exception. In the Philippines, as in many other countries, digital technologies make it easier for shareholders to own and engage with their investments.
After the pandemic subsided, virtual meetings continued and became the new norm. One of the most significant trends is the rise of online shareholder voting.
This allows shareholders to cast their votes from anywhere in the world, anytime, without attending a physical shareholder meeting.
This is a significant convenience for shareholders, especially those who live overseas or cannot participate in the discussions due to work or other commitments.
Also, according to World Bank Blogs,((Are virtual meetings for companies’ shareholders and board members the new normal?)) virtual meetings can enhance corporate governance and transparency by encouraging more shareholder participation through virtual meetings and increasing communication among shareholders, management, and directors.
As enumerated in a journal published by Broadridge about online shareholder participation in annual meetings,((Guidelines for protecting and enhancing online shareholder participation in annual meetings)) online participation in shareholder meetings also benefits in lowering operating costs and reducing companies’ carbon footprint.
This results in potential cost savings for companies and shareholders and, lastly, taking advantage of emerging and social technologies.
Digital technologies make it easier for shareholders to access corporate information involving their properties, finances, investments, and the company’s standing as a whole.
This keeps the relationship between the corporation and its shareholders more connected through the ease and convenience of doing business.
Conclusion
Stock ownership represents the way stockholders hold a stake in a corporation which entitles them to a portion of the corporation’s assets, share in the profits and participate in the management or decision-making processes.
However, according to the Supreme Court, a share of stock does not vest the owner thereof with any legal right or title to any of the property of the corporation due to the nature of a stockholder’s interest in the corporate property which is equitable or beneficial.((Supra., Magsaysay-Labrador vs Court of Appeals))
A limitation of stockholder ownership pertains to the management of the corporation which is generally vested upon its Board of Directors.
The crucial role stockholders play in corporate governance and decision-making may be attributed to the right to vote of stockholders. The right to vote represents the shareholder’s right to participate in the control and management of the corporation which is exercised through his vote.((Villanueva, C. & Villanueva-Tiansay, T. [2021], Philippine Corporate Law))
Section 49 of the Revised Corporation Code provides that the right to vote of stockholders or members may be exercised in person, through remote communication or in absentia. The right to vote is inherent in and incidental to the ownership of corporate stocks.((Supra., Tan vs. Sycip))
Further, Section 6 of the Revised Corporation Code provides that no share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares.
The Supreme Court also had the occasion to rule that until challenged in a proper proceeding, a shareholder of record to voting shares has a right to participate and vote in any meeting of the shareholders, in the absence of fraud, the action of shareholders at that cannot be collaterally attacked.((Price vs. Martin, G.R. No. L-37281, November 10, 1933))
Relatedly, Section 23 of the Revised Corporation Code provides that except when the exclusive right is reserved for holders of founders’ shares, each stockholder or member shall have the right to nominate any director or trustee who possesses all of the qualifications and none of the disqualifications set forth in the Code.((Section 23, RA 11232))
