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    Datu Tagorana VS Sec

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    allyn
    This case involves a dispute over the issuance of additional shares by Jamiatul Philippine-Al Islamia, Inc. The petitioner alleged that his pre-emptive rights were violated when shares were issued without notice to stockholders. The court ruled that 1) under the corporation's by-laws, the board of directors has the power to issue shares and stockholder approval is not required; and 2) pre-emptive rights only apply to new issues of shares, not additional issues of originally authorized shares. Therefore, the issuance of additional shares without stockholder consent was valid.

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    Datu Tagorana VS Sec

    Uploaded by

    allyn
    161 views2 pages
    This case involves a dispute over the issuance of additional shares by Jamiatul Philippine-Al Islamia, Inc. The petitioner alleged that his pre-emptive rights were violated when shares were issued without notice to stockholders. The court ruled that 1) under the corporation's by-laws, the board of directors has the power to issue shares and stockholder approval is not required; and 2) pre-emptive rights only apply to new issues of shares, not additional issues of originally authorized shares. Therefore, the issuance of additional shares without stockholder consent was valid.

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    DATU TAGORANA VS SEC

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    This case involves a dispute over the issuance of additional shares by Jamiatul Philippine-Al Islamia, Inc. The petitioner alleged that his pre-emptive rights were violated when shares were issued without notice to stockholders. The court ruled that 1) under the corporation's by-laws, the board of directors has the power to issue shares and stockholder approval is not required; and 2) pre-emptive rights only apply to new issues of shares, not additional issues of originally authorized shares. Therefore, the issuance of additional shares without stockholder consent was valid.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    161 views2 pages

    Datu Tagorana VS Sec

    Uploaded by

    allyn
    This case involves a dispute over the issuance of additional shares by Jamiatul Philippine-Al Islamia, Inc. The petitioner alleged that his pre-emptive rights were violated when shares were issued without notice to stockholders. The court ruled that 1) under the corporation's by-laws, the board of directors has the power to issue shares and stockholder approval is not required; and 2) pre-emptive rights only apply to new issues of shares, not additional issues of originally authorized shares. Therefore, the issuance of additional shares without stockholder consent was valid.

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    CASE NO.

    117

    Datu Tagoranao Benito vs SEC


    123 SCRA 722

    FACTS:

    On February 6, 1959, the Articles of Incorporation of respondent Jamiatul


    Philippine-Al Islamia, Inc. were filed with the Securities and Exchange Commission and
    were approved on December 14, 1962. The corporation had an authorized capital stock
    of P200,000.00 divided into 20,000 shares at a par value of P10.00 each. Of the
    authorized capital stock, 8,058 shares were subscribed and fully paid for. Herein
    petitioner Datu Tagoranao Benito subscribed to 460 shares.

    The respondent corporation filed a certificate of increase of its capital stock


    showing that P191,560.00 worth of shares were represented in the stockholders'
    meeting at which time the increase was approved. Thus, P110,980.00 worth of shares
    were subsequently issued by the corporation from the unissued portion of the
    authorized capital stock of P200,000.00. Of the increased capital stock of
    P1,000,000.00, P160,000.00 worth of shares were subscribed by Mrs. Fatima A. Ramos,
    Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.

    Petitioner Datu Tagoranao filed with respondent Securities and Exchange


    Commission a petition alleging that the additional issue of previously subscribed shares
    of the corporation was made in violation of his pre-emptive right to said additional issue
    and that the increase in the authorized capital stock of the corporation from
    P200,000.00 to P1,000,000.00 was illegal considering that the stockholders of record
    were not notified of the meeting wherein the proposed increase was in the agenda.
    Petitioner prayed that the additional issue of shares of previously authorized capital
    stock as well as the shares issued from the increase in capital stock of respondent
    corporation be cancelled and that the corporation be ordered to render an accounting of
    funds to the stockholders.

    In their answer, respondents denied the material allegations of the petition and,
    by way of special defense, claimed that petitioner has no cause of action and that the
    stock certificates covering the shares alleged to have been sold to petitioner were only
    given to him as collateral for the loan of Domocao Alonto and Moki-in Alonto.

    ISSUE:

    Whether or not the issuance of the 11,098 shares without the consent of the
    stockholders or of the Board of Directors, and in the absence of consideration, is null
    and void.

    RULING:
    NO. The questioned issuance of the unsubscribed portion of the capital stock
    worth P110,980.00 is ' not invalid even if assuming that it was made without notice to
    the stockholders as claimed by petitioner. The power to issue shares of stocks in a
    corporation is lodged in the board of directors and no stockholders' meeting is
    necessary to consider it because additional issuance of shares of stocks does not need
    approval of the stockholders. The by-laws of the corporation itself states that 'the Board
    of Trustees shall, in accordance with law, provide for the issue and transfer of shares of
    stock of the Institute and shall prescribe the form of the certificate of stock of the
    Institute.

    Petitioner bewails the fact that in view of the lack of notice to him of such
    subsequent issuance, he was not able to exercise his right of pre-emption over the
    unissued shares. However, the general rule is that pre-emptive right is recognized only
    with respect to new issue of shares, and not with respect to additional issues of
    originally authorized shares. This is on the theory that when a corporation at its
    inception offers its first shares, it is presumed to have offered all of those which it is
    authorized to issue. An original subscriber is deemed to have taken his shares knowing
    that they form a definite proportionate part of the whole number of authorized shares.

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