Delinquent Shares -- Corpo. 3rd exam hangover

Question: May there be a public sale of delinquent shares by a corporation without unrestricted retained earnings?

Alia: (after 48 years of staring on the questionnaire)

Yes, a corporation may publicly sell such delinquent shares whether or not it has unrestricted retained earnings.

What's important is that the subscriber of such delinquent shares has been notified and that such pulic sale has been approved by majority of the Board of Directors.

(malay ko! huhu)


Fr. Gus' lecture: No, there can be no public sale of such delinquent shares by a corporation without unrestricted retained earnings.

Sec. 41. Power to acquire own shares. - A stock corporation shall have the power to purchase or acquire its own shares for a legitimate corporate purpose or purposes, including but not limited to the following cases: Provided, That the corporation has unrestricted retained earnings in its books to cover the shares to be purchased or acquired:

xxx

2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale; and

xxx

In case there will be an execution sale and nobody will buy the subscription, then the corporation will be the purchaser of the sale in default. The corporation will redeem its shares by buying them back, and it needs UrRE to buy back such shares.

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Jaz, let's move on. hehe