|
Is a
minority stockholder—in the exercise of his appraisal
right as dissenting stockholder—entitled to the payment
of the fair value of his shares? If so, what steps
should be taken to protect his interest if the company
refuses to pay?
This can
be illustrated in a situation where a corporation that
is declaring cash dividends and has sufficient
unrestricted retained earnings in its books, is
nonetheless increasing its capital stock for the purpose
of raising capital for business expansion. There arises
a corresponding right of minority stockholders to
dissent on the decision or action taken by the board and
the majority stockholders of the corporation in the
event the increase will dilute the minority. As a
consequence, an objection to the declaration of
dividends and the increase of the capital stock may be
expressed and as a consequence thereof a request for the
fair value of his shares can be lodged.
By way
of amplification of the right, the appraisal right
contemplated under Section 81 of the Corporation Code of
the Philippines relates to the stockholder’s right to
demand payment of the fair value of his shares after
dissenting from certain corporate acts involving
substantial and fundamental changes in the corporate
structure or organization in the corporation i.e.,
increase in the authorized capital stocks. The said
appraisal right is equivalent to the right to withdraw
under the old corporation law.” (Lopez, The Corporation
Code of the Philippines, Annotated, Volume 2, page 945)
It
should be recalled that the conditions for the availment
of appraisal right under Section 81 of the Corporation
Code has been said to be nonexclusive. To borrow the
language of former Securities and Exchange Commission
(SEC) chairperson Rosario N. Lopez, “It would appear
that the above enumeration is not exclusive. There are
other situations where the appraisal right is recognized
in other provisions of the Code but does not appear in
Section 81” (Ibid. page 947).
The
conditions for the valid exercise of stockholders’
appraisal right may be summed up as follows:
1. Any
of the instances set forth by the law must be present as
in the case of any amendment to the articles of
incorporation which has the effect of changing or
restricting the rights of any stockholder or class of
shares, or of authorizing preferences in any respect
superior to those of outstanding shares of any class, or
of extending or shortening the term of corporate
existence, in case of sale, lease, exchange, transfer,
mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets
as provided in the Code and in case of merger or
consolidation (Section 81 of the Corporation Code).
2. The
dissenting stockholder must have voted against the
proposed corporate action.
3. The
demand for payment must be made by the dissenting
stockholder within 30 days from the date the vote (on
the controverted action) was taken. Failure to make such
demand within such period shall be deemed a waiver of
the appraisal right (Section 82).
4. The
price of the shares must be based on the fair value as
of the day prior to the date on which the vote was
taken; and the fair value must be determined in
accordance with the procedure set forth in Section 82 of
the Code.
5.
Submission by the withdrawing stockholder of his shares
to the corporation (thru the Corporate Secretary) for
notation of being a dissenting stockholder within 10
days from written demand (Section 86).
6.
Payment of shares must be made only when the corporation
has unrestricted retained earnings in its books to cover
such payment (Section 82).
7. Upon
such payment by the corporation, the stockholder must
transfer his shares to the corporation (Ibid. page 951).
If all
the foregoing conditions are complied with, particularly
the demand stated in number 3 above, “all rights
accruing to such shares, including voting and dividend
rights, shall be suspended in accordance with the
provisions of this Code, except the right of such
stockholder to receive payment of the fair value
thereof: Provided, that if the dissenting stockholder is
not paid the value of his shares within 30 days after
the award, his voting and dividend rights shall
immediately be restored” (Section 83).
If the
corporation unjustifiably refuses to pay the dissenting
stockholder despite the full compliance with all the
requirements for the valid exercise of appraisal right
and the fact that the corporation has sufficient
unrestricted retained earnings then the aggrieved
minority stockholder may file the appropriate action
before the proper Regional Trial Court ( (SEC Opinion
dated October 1, 2001) as a legitimate intracorporate
dispute. |
