CORPORATION

Republic Act No. 11232

Revised Corporation Code (2019)

I. GENERAL PROVISIONS CORPORATION

Corporation

A corporation is 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. (Sec. 2)

Section 2 gives a definition of the "corporation." The above statutory definition refers
only to private corporations or to corporations organized under the corporation law.

Attributes of a corporation

1. It is an artificial being.
2. It is created by operation of law.
3. It enjoys the right of succession.
4. It has the powers, attributes and properties expressly authorized by law or incident
to its existence.

Corporation as an artificial personality

A corporation is a legal or juridical person with a personality separate and apart from its
individual members or stockholders who, as natural persons, are merged in the
corporate body. It is not, in fact, and, in reality, a person but the law treats it as though it
is a person. The stockholders or members composed the corporation but they are not
the corporation.

Consequences:

1. Liability for acts or contracts – obligations incurred by a corporation, acting

through its authorized agents are its sole liabilities. (Creese vs. CA, 93 SCRA 483)
2. Right to bring actions – may bring civil and criminal actions in its own name in the
same manner as natural persons. (Art. 46, Civil Code)
3. Right to acquire and possess property – property conveyed to or acquired by the
corporation is in law the property of the corporation itself as a distinct legal entity
and not that of the stockholders or members. (Art. 44(3), Civil Code)
4. Acquisition of court of jurisdiction – service of summons may be made on the
president, general manager, corporate secretary, treasurer or in-house counsel.
(Sec. 11, Rule 14, Rules of Court).
5. Changes in individual membership – remains unchanged and unaffected in its
identity by changes in its individual membership. (The Corporation Code of the
Philippines Annotated, Hector de Leon, 2002 ed.)
6. Entitlement to constitutional guaranties:
a. Due process
b. Equal protection of the law
c. Protection against unreasonable searches and seizures
d. A corporation is not entitled to invoke the right against self-incrimination.
7. Liability for torts – a corporation is liable whenever a tortuous act is committed
by an officer or agent under the express direction or authority of the stockholders
or members acting as a body, or, generally, from the directors as the governing
body.
 8. A corporation is not entitled to moral damages because it has no feelings, no
emotions, no senses. (ABS-CBN vs. Court of Appeals)
9. Liability for Crimes – since a corporation is a mere legal fiction, it cannot be
held liable for a crime committed by its officers, since it does not have the
essential element of malice; in such case the responsible officers would be
criminally liable.

Doctrine of piercing the veil of corporate entity or disregarding the fiction of

corporate entity

The doctrine that a corporation is a legal entity or a person law, distinct from the
persons composing it, is a legal theory introduced for purposes of convenience and to
promote the ends of justice. This fiction, therefore, cannot be extended to a point not
within its reason and purposes.

Being a mere creature of the law, a corporation may be allowed to exist solely for lawful
purposes but where the fiction of corporate entity is being used as a cloak or cover for
fraud or illegality, this fiction will be disregarded and the individuals composing it will be
treated as identical. In other words, the law will not recognize separate corporate
existence.

Instances where fiction disregarded

1. Fraud Cases – when a corporation is used as a cloak to cover fraud, or to do

wrong.
Rules:
a. There must have been fraud or evil motive in the affected transaction and
the mere proof of control of the corporation by itself would not authorize
piercing.
b. The main action should seek for the enforcement of pecuniary claims
pertaining to the corporation against corporate officers or stockholders.
2. Alter Ego Cases – when the corporate entity is merely a farce since the
corporation is an alter ego, business conduit or instrumentality of a person or
another corporation.
Rules:
a. It applies because of the direct violation of a central corporate law principle of
separating ownership from management.
b. If the stockholders do not respect the separate entity, others cannot also be
expected to be bound by the separate juridical entity.
c. Applies even when there are no monetary claims sought to be enforced.

Instrumentality/Alter Ego Rule

Where one corporation is so organized and controlled and its affairs are
conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the
fiction of the corporate entity of the “instrumentality” may be disregarded.

3. Equity cases – when piercing the corporate fiction is necessary to achieve justice
or equity.

Corporation as a creation of law or by operation of law

A corporation is created by law or operation law. This means that corporations cannot
come into existence by mere agreement of the parties as in the case of business
partnerships. They require special authority or grant from the State. This power is
exercised by the State through the legislative department either by a special
incorporation law which directly creates the corporation or by means of a general
incorporation law under which, by operation of said law, persons desiring to be and act
as a corporation may incorporate.
In the Philippines, the general law which governs the creation of private corporations is
Republic Act No. 11232 Revised Corporation Code (2019).

Private corporations owned or controlled by the government or any subdivision or

instrumentality thereof are created by special laws.

Right of succession of a corporation

A corporation has a capacity of continuous existence irrespective of the death,

withdrawal, insolvency, or incapacity of the individual members or stockholders and
regardless of the transfer of their interest or shares of stock.

A corporation shall have perpetual existence unless its articles of incorporation provides
otherwise. (Sec. 11)

Powers, attributes, and properties of a corporation

A corporation, being a mere creation of law, may exercise only such powers as are
granted by the law of its creation. An express grant, however, is not necessary. All
powers which may be implied from those expressly provided by law and those which
are incidental or essential to the corporation's existence may also be exercised.

Examples:

1. Corporation incorporated as a railroad corporation has the incidental power to

build railroads because such power is necessary for the accomplishment of the
purpose for which the corporation is created.
2. Corporation expressly authorized to engage in agriculture has implied authority to
buy agricultural lands because such authority is reasonably appropriate to carry
out its express authority.
3. Corporation engaged in the manufacture of cement could operate and maintain
an electric plant for the purpose exclusively of supplying electricity to its cement
factory and to its employees, living within its factory compound where it appears
that the operation of such plant is necessarily connected with the business of the
manufacturing of cement.

Distinctions between a partnership and a corporation

Partnership Corporation
1. Creation
Created by mere agreement of the Created by law or by operation of law
parties
2. Number of incorporators
May be organized by at least two Any person, partnership, association or
persons corporation, singly or jointly with others but
not more than fifteen (15) in number (Sec 10)
3. Commencement of juridical personality
Acquires juridical personality from the Acquires juridical personality from the date of
moment of execution of the contract issuance of the certificate of incorporation by
of partnership the Securities and Exchange Commission
4. Powers
Partnership may exercise any power Corporation can exercise only the powers
authorized by the partners (provided it expressly granted by law or implied from those
is not contrary to law, morals, good granted or incident to its existence
customs, public order, public policy)
5. Management
When management is not agreed The power to do business and manage its
upon, every partner is an agent of the affairs is vested in the board of directors or
partnership trustee
6. Effect of mismanagement
A partner as such can sue a co- The suit against a member of the board of
partner who mismanages directors or trustees who mismanages must
be in the name of the corporation
7. Right of succession
Partnership has no right of Corporation has right of succession
succession
8. Extent of liability to third persons
Partners are liable personally and Stockholders are liable only to the extent of
subsidiarily (sometimes solidarily) for the shares subscribed by them
partnership debts to third persons
9. Transferability of interest
Partner cannot transfer his interest in Stockholder has generally the right to transfer
the partnership so as to make the his shares without prior consent of the other
transferee a partner without the stockholders because corporation is not based
unanimous consent of all the existing on this principle
partners because the partnership is
based on the principle of delectus
personarum
10. Term of existence
partnership may be established for A corporation shall have perpetual existence
any period of time stipulated by the unless its articles of incorporation provides
partners otherwise. (Sec. 11)
11. Firm name
Limited partnership is required by law corporation may adopt any name provided it is
to add the word “Ltd.” To its name not the same as or similar to any registered
firm name
12. Dissolution
may be dissolved at any time by any can only be dissolved with the consent of the
or all of the partners State
13. Governing Law
governed by the Civil Code governed by the Revised Corporation Code of
2019

Advantages and Disadvantages of a Business Corporation

ADVANTAGES DISADVANTAGES
1. Has a legal capacity to act and 1. Complicated in formation and
contract as a distinct unit in its management
own name 2. High cost of formation and operations
2. Continuity of existence 3. Its credit is weakened by the limited
3. Its credit is strengthened by its liability feature
continuity of existence 4. Lack of personal element.
4. Centralized management in the 5. Greater degree of governmental
board of directors. supervision
5. Its creation, management, 6. Management and control are
organization and dissolution are separated from ownership.
standardized as they are 7. Stockholders have little voice in the
governed under one general conduct of the business.
incorporation law.
6. Limited liability
7. Shareholders are not the
general agents of the business
8. Transferability of shares
Classes of Corporation

Corporations formed or organized under the Revised Corporation Code may be:
(1) stock corporation or (2) Non-stock corporations.

Stock corporations are those which have capital stock divided into shares and are
authorized to distribute to the holders of such shares, dividends, or allotments of the
surplus profits on the basis of the shares held. (Sec 3)

Non-stock corporation are those do not issue stock and are created not for profit
but for the public good and welfare.

Other classes of Corporation

1. As to organizer
a. public – by State only; and
b. private – by private persons alone or with the State

2. As to functions
a. public – government of a portion of the territory; and
b. private – usually for profit-making

3. As to governing law
a. public – Special Laws; and
b. private – Law on Private Corporations

4. As to legal status
a. De jure corporation – organized in accordance with the requirements of
law.
b. De facto corporation – organized with a colorable compliance with the
requirements of a valid law. Its existence cannot be inquired collaterally.
Such inquiry may be made by the Solicitor General in a quo warranto
proceeding. (Sec.20)
c. Corporation by estoppel – All persons who assume to act as a corporation
knowing it to be without authority. (Sec 21)

5. As to existence of share of stocks

a. Stock corporation – a corporation:
1) Whose capital stock is divided into shares; and
2) Authorized to distribute to shareholders dividends or allotments of
the surplus profits. (Sec. 3)
b. Non-stock corporation – does not issue stocks nor distribute dividends to
their members.

6. As to place of incorporation
a. Domestic corporation- a corporation formed, organized, or existing under
Philippine laws.
b. Foreign corporation – a corporation formed, organized, or existing under
any laws other than those of the Philippines. (Sec. 140)

Tests to Determine the Nationality of Corporation

1. Incorporation test– determined by the state of incorporation, regardless of
the nationality of the stockholders.
2. Domicile test – determined by the state where it is domiciled.
The domicile of a corporation is the place fixed by the law creating or
recognizing it; in the absence thereof, it shall be understood to be the
place where its legal representation is established or where it exercise its
principal functions. (Art. 51, NCC)
 3. Control test – determined by the nationality of the controlling stockholders or
members. This test is applied in times of war. Also known as the WARTIME
TESTS.

Corporations Created by Special Laws or Charters (Sec. 4)

Corporations created by special laws or charters shall be governed primarily by the

provisions of the special law or charter creating them or applicable to them,
supplemented by the provisions of this Code, insofar as they are applicable.

Components of Corporation (Sec. 5)

1. Corporators - are those who compose a corporation, whether as stockholders or

shareholders in a stock corporation or as members in a non-stock corporation.

2. Incorporators - are those stockholders or members mentioned in the articles of

incorporation as originally forming and composing the corporation and who are
signatories thereof.

Qualifications: (Sec 10)

1. That natural persons;
2. Llicensed to practice a profession, and partnerships or associations
organized for the purpose of practicing a profession, shall not be allowed to
organize as a corporation unless otherwise provided under special laws.
Incorporators who are natural persons *
3. Must be of legal age.
4. Incorporator of a stock corporation must own or be a subscriber to at least
one (1) share of the capital stock.

3. Stockholders – owners of shares of stock in a stock corporation

4. Members – corporators of a corporation which has no capital stock

Other Classes
1. Promoter - A person who, acting alone or with others, takes initiative in founding
and organizing the business or enterprise of the issuer and receives
consideration therefor:
 He is an agent of the incorporators but not of the corporation.
 Contracts by the promoter for and in behalf of a proposed corporation
generally bind only him, subject to and to the extent of his
representations, and not the corporation, unless and until after these
contracts are ratified, expressly or impliedly, by its Board of
Directors/Trustees.
2. Subscriber – persons who have agreed to take and pay for original, unissued
shares of a corporation formed or to be formed.
3. Underwriter – a person who guarantees on a firm commitment and/ or declared
best effort basis the distribution and sale of securities of any king by another
company. (Sec. 3 R.A. 8799)

Classification of Shares (Sec 6)

The classification of share must be indicated in the articles of incorporation together

with their:
a. Corresponding rights;
b. Privileges;
c. Restrictions; and
d. Stated par value,

Shares are presumed to be equal in all respects.

Under the doctrine of equality of share 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.

The shares in stock corporations may be divided into classes or series of shares, or
both.

General Rule:
No share may be deprived of voting rights

Exception:
Those classified and issued as “preferred” or “redeemable” shares

Power to classify shares

The shares in stock corporations may be divided into classes or series of shares, or
both. A series refers to subdivision of a class or kind of share.

Classification to comply with constitutional or legal requirements

A corporation may further classify its shares for the purpose of ensuring compliance
with constitutional or legal requirements. Such as, those which prescribe the minimum
percentage of capital stock ownership of Filipino citizens in corporation engaged in any
business or activity reserved for Filipino citizen. (Sec. 14 (11))

The shares in stock corporations may be divided into classes or series of shares, or
both. No share may be deprived of voting rights except those classified and issued as
“preferred” or “redeemable” shares, unless otherwise provided in this Code: Provided,
that there shall always be a class or series of shares with complete voting rights.

Classes of Shares

1. Par value share is one with a specific money value fixed in the articles of
incorporation and appearing in the certificate of stock for each share of stock of
the same issue.
a) The primary purpose of par value is to fix the minimum issue price of the
shares thus assuring creditors that the corporation would receive a
minimum amount for its stock
b) It is not usually the price at which investors buy or sell the stock.

Advantages of par value shares

1. Par value shares are easily sold as the public is more attracted to buy
this kind of shares;
2. There is greater protection to creditors;
3. There is unlikelihood of sale of subsequently issued shares at a lower
price; and
4. There is unlikelihood of the distribution of dividends that are only
ostensible profits.

Disadvantages of par value shares

1. The subscribers are liable to corporate creditors for their unpaid
subscription; and
2. The stated face value of the share is not an accurate criterion of its true
value.
2. No par value share is one without any stated or par value appearing on the
face of the certificate of stock. In other words, it is a stock which does not state
how much money it represents.

a) The issued price of no-par value shares may be fixed in the articles of
incorporation or by the board of directors pursuant to authority conferred
by the articles of incorporation or the bylaws, or if not so fixed, by the
stockholders representing at least a majority of the outstanding capital
stock at a meeting duly called for the purpose.

b) A corporation may issue no par value share only, or together with par
value shares.
c) No par value stockholders have the same rights as holders of par value
stock.
d) A no par value share does not represent any proportionate interest in the
capital stock measured by value, but only on aliquot part of the whole
numbers of such shares of the issuing corporation.
e) Shares of capital stock issued without par value shall be:
i. deemed fully paid and non-assessable; and
ii. the holder of such shares shall not be liable to the corporation or
to its creditors
f) That no-par value shares must be issued for a consideration of at least
Five pesos (P5.00) per shar,
g) That the entire consideration received by the corporation for its no-par
value shares shall be treated as capital and shall not be available for
distribution as dividends.

Statutory restrictions regarding issuance of no par value shares

a) The following corporations are not allowed or permitted to issue no
par value share of stocks:
banks, trust, insurance, and preneed companies, public
utilities, building and loan associations, and other corporations
authorized to obtain or access funds from the public, whether
publicly listed or not.

Advantages of no par value shares

1. No par value shares are issued as fully paid and non-assessable;
2. Their price is flexible;
3. Low-priced stocks (most no par shares are low-priced) enjoy
wider distribution;
4. They tell no untruth concerning the value of the stockholder's
contribution; and
5. Stock dividends are more easily issued thereby simplifying
accounting procedure.

Disadvantages of no par value shares

1. They legalize large issues of stock for property;
2. They conceal the money or property represented by the shares;
3. They promote issuance of watered stock (19 Mich. L. Rev. 591-
595.); and
4. There is lesser protection to creditors.

3. Voting share is share with right to vote.

a) It is generally customary to give the right to vote to the common stock
and to withhold it from the preferred.
b) Under the Code, whenever a vote is necessary to approved particular
corporate act, such vote refers only to stocks with voting rights except in
certain cases when even non-voting shares may also vote.
 c) The rule is not "one stockholder, one vote" but “one share, one vote"
because representation in a corporation is commensurate to extent of
ownership.

4. Non-voting share is share without right to vote.

a) If stock is originally issued as voting stock, it cannot thereafter be

deprived of the right without the consent of the holder.
b) No share may be deprived of voting rights except those classified and
issued as “preferred" or "redeemable” shares, unless otherwise provided
in the Code.

When Non-voting shares shall be entitled to vote?

a) Amendment of the articles of incorporation;
b) Adoption and amendment of bylaws;
c) Sale, lease, exchange, mortgage, pledge, or other disposition of
all or substantially all of the corporate property;
d) Incurring, creating, or increasing bonded indebtedness;
e) Increase or decrease of authorized capital stock;
f) Merger or consolidation of the corporation with another
corporation or other corporations;
g) Investment of corporate funds in another corporation or business
in accordance with this Code; and
h) Dissolution of the corporation.

5. Common share of stock is stock which entitles the holder thereof to pro rata
division of the profits, if there are any, without any preference or advantage in
that respect over other stockholder or class of stockholders.

6. Preferred share of stock is stock which entitles the holder thereof to certain
preferences over the holders of common stock.

a) Issued by a corporation may be given preference in:

i. The distribution of dividends;
ii. In the distribution of corporate assets in case of liquidation; or
iii. Other preferences.
b) May be issued only with a stated par value. The board of directors, where
authorized in the articles of incorporation may:
i. Fix the terms and conditions of preferred shares of stock or any
series thereof
c) Terms and conditions shall be effective upon filing of a certificate thereof
with the Securities and Exchange Commission,

Kinds of preferred shares

1. Preferred share as to assets is share which gives the holder thereof
preference in the distribution of the assets of the corporation in case of
liquidation. It has been held that preferred stock standing alone creates a
preference only to dividends and not to assets in case of liquidation.

2. Preferred share as to dividends is share the holder of which is entitled-to

receive dividends on said share at fixed rates before any dividends at all
are paid to common stock- holders. There is no guaranty, however, that it
will receive any dividends. The corporation is not bound to pay dividends
unless the board of directors declare them.

Preference among preferred shares

A corporation may issue more than one class of preferred stock as to assets or
as to dividends. Thus, certain preferred shares may be given first preference or
second preference on earnings. But unless a classification is provided in the
articles of incorporation, the rule is that preferred shares of stock enjoy the
same preferences or privileges.

Preferred stockholders are not creditors of the corporation. Like common

stockholders, they are investors in the corporation. They can look only to what
is left after corporate debts are fully paid.

Limitations regarding issuance of preferred shares

1. Preferred shares deprived of voting rights in the articles of incorporation.

2. Preferred shares of stock issued by a corporation may be given
preference in the distribution of the corporate assets or dividends or
such other preferences as may be stated in the articles of incorporation
but they must not be violative of the provisions of the Code.
3. Preferred shares may be issued only with a stated par value; and
4. The board of directors may fix the terms and conditions of preferred
shares of stock or any series thereof only when so authorized by the
articles of incorporation and such terms and conditions shall be effective
upon filing a certificate thereof with the Securities and Exchange
Commission.

Kinds of preferred shares as to dividends

1. Cumulative preferred share is share which entitles the holder thereof
not only to the payment of current dividends but also to dividends in
arrears.

If the stipulated dividend is not paid in a given year, it shall be added to

the dividend which shall be due the following year and the accumulated
dividends must be paid to the holder of said preferred share before any
dividend may be paid to the holders of common stock.

EXAMPLE:

Suppose S owns 10 preferred shares of X with a par value of

P100.00 Corporation per share at 5% guaranteed cumulative
dividends.

lf after 4 years the corporation decided to declare the regular annual

dividend, S will receive a total of P250.00 to the 10 shares: P50.00
for each year or a total of P200.00 for the 4years (representing the
dividends in arrears) plus the dividend of P50.00 for the current year.

All these dividends must be paid to S before any dividends can be

paid to the holder of common shares. This kind of share protects
financial preferred stocks against manipulation of the accounts of the
corporation to conceal profits.

2. Non-Cumulative preferred share is share which entitles the holder

thereof to the payment of current dividends only in preference to
common stockholders. In other words, if dividends are not declared in a
given year, the right to the dividends for that particular year is
extinguished.

EXAMPLE:

In the preceding illustration, if the dividends of S were non-

cumulative, he would be paid only for the current year at P5.00 per
share, or a total of P50.00 for the 10 shares.
 3. Participating preferred share is share which gives the holder thereof
not only the right to receive the stipulated dividends at the preferred rate
but also to participate with the holders of common shares in the
remaining profits pro rata after the common shares have been paid the
amount of the stipulated dividend at the same preferred rate.

4. Non-participating preferred share is share which entitles the holder

thereof to receive the stipulated preferred dividends and no more. The
balance, if any, is given entirely to the common stocks.

EXAMPLE:

Suppose that X Corporation has a capital stock of P100,000.00

divided into 1,000 shares with a par value of P100.00 per share. 300
of the shares are preferred and 700 are common. The preferred
shares are entitled to dividends at the preferred rate of 10%.

It, at a given year, the corporation declares a dividend of P5,100.00,

the 10% preference must first be paid to the owners of preferred
shares at P10.00 per share or a total of P3,000.00. The balance of
P2,100.00 will be divided among the holders of Common shares at
P3.00 each share.

If the dividends declared amount to P11,400.00, then the holders of

common stock would be receiving P8,400.00 or P12.00 each share.
However, if the preferred shares are participating, the owners thereof
share also in the remaining profits of P1,400.00 with the holders otf
common stock after the latter have been granted a share (P7,000.00)
in the balance of P8,400.00 (P11,400.00 - P3,000.00) at the same
rate of 10 Thus, each share will be entitled to an additional dividend
of P1.40 (P1,400.00+ 1,000).

5. Cumulative-participating preferred share is share which is a

combination of the cumulative share and participating share. This means
that the holder is entitled not only to dividends in arrears but also, after
receiving his preferred share of dividends, to participation with the
holders of common stock in the remaining profits.

Founders Shares

Shares issued to the organizers and promoters of a corporation in consideration of

some supposed right or property. Such shares usually share in profits only after a
certain percentage has been paid upon the common stock, but are often given
special privileges over other stock as to voting and as to division of profits in excess
of a minimum dividend on the common stock.

a) Special rights and privileges.- The shares of stock of a corporation, close or

non-close (see Title XII.), may include founders' shares classified as such in the
articles of incorporation. Such shares may be given special rights and privileges
not enjoyed by the owners of other stocks, such as preference in the payment of
dividends

b) Exclusive right to vote and be vote.- Where, however, the exclusive right to
vote and be voted for in the election of directors is granted, such right must be for
a limited period not exceeding five (5) years and must be approved by the
Securities and Exchange Commission, the period to commence from the date of
said approval.
 c) Limitation of rights - exclusive right shall not be allowed if its exercise will
violate Commonwealth Act No. 108, otherwise known as the “Anti-Dummy Law”;
Republic Act No. 7042, otherwise known as the “Foreign Investments Act of
1991”; and other pertinent laws

Redeemable Shares

Redeemable shares may be issued by the corporation when expressly provided

in the articles of incorporation.

They are shares which may be purchased by the corporation from the holders of
such shares upon the expiration of a fixed period, regardless of the existence of
unrestricted retained earnings in the books of the corporation, and upon such
other terms and conditions stated in the articles of incorporation and the certificate
of stock representing the shares, subject to rules and regulations issued by the
Commission.

a) Voting rights - Redeemable shares may be deprived of voting rights in

the articles of incorporation, unless otherwise provided in the Code.

b) Terms and conditions - Section 8 requires that all the terms and
conditions affecting such shares must be stated not only in the articles of
incorporation but also in the certificate of stock representing said shares.

Treasury Share

Shares that have been earlier issued as fully paid and have thereafter been
acquired by the corporation by purchase, donation, and redemption or through
some lawful means.

If purchased from stockholders: The transaction in effect is a return to the

stockholders of the value of their investment in the company and a reversion of
the shares to the corporation. The corporation must have surplus profits with
which to buy the shares so that the transaction will not cause an impairment of
the capital.

If acquired by donation from the stockholders: The act would amount to a

surrender of their stock without getting back their investments that are instead,
voluntarily given to the corporation.

a) Treasury shares need not be sold at par or issued value but may be sold at the
best price obtainable, provided it is reasonable. When treasury shares are sold
below its par or issued value, there can be no watering of stock because such
watering contemplates an original issuance of shares.
b) Treasury shares have no voting rights as long as they remain in treasury
(uncalled and subject to reissue). Reason: A corporation cannot in any proper
sense be a stockholder in itself and equal distribution of voting rights will be
effectively lost.
c) Neither are treasury shares entitled to dividends or assets because dividends
cannot be declared by a corporation to itself.