Activity 4 - Corporations, Board of Directors

1. What are the components of a corporation?

 Shareholders - The shareholders have invested money into the business and are
owners of the company. Ownership interests are represented by "shares" of stock.

 Board of Directors - The shareholders elect a board of directors, which is a group

of people responsible for oversight and financial decision-making for the
corporation.

 Officers - the board appoints officers to handle the day-to-day operations. Officers
have the option to hire employees to help with managing and running the business.

2. In tabular form, enumerate distinctions between a partnership and a

corporation.

Partnership Corporation
- Owners share the business's risks and - Separation between the owners and the
benefits. In a partnership, two or more business. owned by shareholders. It can be
individuals who wish to do business together for-profit or nonprofit. For-profit corporations
form a company. They share profits, liabilities, reinvest profits in the business and pay out
and ownership. Partners in a partnership are dividends to shareholders. Corporate
at risk if something goes wrong with the shareholders are generally protected.
business.

3. What is a share of stock?

 represent the equity ownership of a corporation divided up into units, so that multiple
people can own a percentage of a business.

4. What are the different kinds of shares?

 Ordinary shares - are the most common type of shares and are standard shares
with no special rights or restrictions. They have the potential to give the highest
financial gains, but also have the highest risk. Ordinary shareholders are entitled to
voting rights; however, they are the last to be paid if the company is wound up.

 Non-voting ordinary shares - carry the same conditions as ordinary shares

except with regards to voting rights. Shareholders may have voting rights under
certain circumstances or they may have no voting rights at all.

 Preference shares - typically carry a right that gives the holder preferential
treatment when annual dividends are distributed to shareholders. Shares in this
category receive a fixed dividend, which means that a shareholder would not
benefit from an increase in the business' profits. However, usually they have rights
to their dividend ahead of ordinary shareholders if the business is in trouble.
Preference shares carry no voting rights.
  Cumulative preference shares - give holders the right that, if a dividend cannot
be paid one year, it will be carried forward to successive years. Dividends on
cumulative preference shares must be paid, despite the earning levels of the
business, provided the company has profits that can be distributed.

 Redeemable shares - come with an agreement that the company can buy them
back at a future date - this can be at a fixed date or at the choice of the business. A
company cannot issue only redeemable shares, so they must ensure that they also
issue non-redeemable shares.

5. In tabular form, enumerate the different laws requiring Filipino ownership of

corporate capital (left table) and the percentage of ownership (right table).

Ownership Of Corporate Capital Percentage Of Ownership

- The Foreign Investment Act (R.A. 7042, - states that at least 60% of the business should be
1991, amended by R.A. 8179, 1996) owned by a Filipino citizen, while the rest can be
owned by the foreign investor.

 Private radio network  Up to 20% foreign equity

 Private recruitment  Up to 25% foreign equity

 Contracts for public works that
are locally funded
 Contracts for the construction
of structures that are defense-
related
 Up to 30% foreign equity
 Advertising
 Up to 40% foreign equity

 Exploration, development, and

usage of natural resources
 Operation of public utilities
 Educational institutions aside
from those put up by religious
groups and mission boards
 Production and trading of rice
and corn
 Contracts for the supply of
materials, goods, and
commodities to government-
owned corporations
 Facility operator of an
infrastructure
 Deep-sea fishing operations
 Adjustment companies
 Owning condominium units

Powers of the corporation Definition

 Express Powers
A corporation generally has three parties
sharing power and control: directors,
officers, and shareholders. Directors are the
managers of the corporation, and officers
control the day-to-day decisions and work
more closely with the employees. The
shareholders are the owners of the
corporation, but they have little decision-
making authority. The corporation itself has
powers; while a corporation is not the same
as a person (e.g., a corporation cannot be
put in prison), it is allowed to conduct
certain activities and has been granted
certain rights.

 Implied Powers
The corporation may exercise all powers
expressly given it by statute and by its
articles of incorporation. Section 3.02 of the
Revised Model Business Corporation Act
(RMBCA) sets out a number of express
powers, including the following: to sue and
be sued in the corporate name; to purchase,
use, and sell land and dispose of assets to
the same extent a natural person can; to
make contracts, borrow money, issue notes
and bonds, lend money, invest funds, make
donations to the public welfare, and
establish pension plans; and to join in
partnerships, joint ventures, trusts, or other
enterprises. The powers set out in this
section need not be included in the articles
of incorporation.

6. Enumerate the different powers of the corporation (left table) and define each
power.

7. Define, distinguish, and illustrate the different modes of voting in the election
of the Board of Directors.
  A board of directors election is an election where voting members elect new/returning
board members for leadership positions in their organization. These nominations are
very common, as most organizations have a board of directors. Since a board has a
heavy influence on the leadership of an organization, the nomination and election are
extremely important

 Board members are usually given staggered terms in order to prevent all of the board
positions from being available for election at once. This ensures that there are always
experienced & knowledgeable along with new directors who can bring fresh ideas to
the table. New and current board members work together to lead the organization.

 An organization’s bylaws should contain specific information on how the board of

directors are nominated and elected, the length of the term served for each board
member, and how many voting members of the organization must vote in order for the
board of directors’ nomination to be valid. Organizations can decide how frequently to
hold nominations. Nominating committee members can happen every few months,
every year, or whenever your organization decides to hold an election.

 Preferential - use STV to calculate the results for a multiple-vacancy preferential

election. Preferential nominations are an excellent option for multiple-winner elections
because voters can indicate their preference for a specific candidate relative to
the other board members. In contrast, with plurality, voters are only stating their board
member preferences relative to nominees they didn't vote for; there is no way to
gauge preference among the candidates they chose. Preferential nominations give a
more precise picture of how the voters truly feel about the nominees.

 Cumulative - method like the preferential voting method, allows voters to express a
more accurate degree of preference for the board member nominees. This is because
voters can cast more than one vote for any candidate that they really prefer over the
others.

8. What is the meaning of unrestricted retained earnings?

 Unrestricted retained earnings are the portion of your total retained earnings that has
not been restricted. Subtract your total restricted retained earnings from your total
retained earnings to calculate your total unrestricted retained earnings.

9. Enumerate the matters requiring ⅔ votes of the stockholders of corporation.

 Every director must own at least one (1) share of the capital stock of the corporation of
which he is a director, which share shall stand in his name on the books of the corporation.
 Any director who ceases to be the owner of at least one (1) share of the capital stock of
the corporation of which he is a director shall thereby cease to be a director.
 Trustees of non-stock corporations must be members thereof. a majority of the directors or
trustees of all corporations organized under this Code must be residents of the Philippines.

10. Enumerate the matters requiring majority vote of the stockholders of a

corporation.

 a person or entity that owns and controls more than 50% of a company's
outstanding shares.
 As a majority shareholder, a person or operating entity has a significant amount of
influence over the company, especially if their shares are voting shares.
 voting shares give a shareholder permission to vote on different corporate
decisions, such as who should be on the company’s board of directors.