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Close Corp

Title XII outlines the characteristics and regulations of close corporations, which are defined as having 20 or fewer stockholders, restrictions on share transfers, and no public offerings. It includes provisions on articles of incorporation, validity of transfer restrictions, stockholder agreements, and procedures for handling deadlocks and stockholder withdrawals. The document emphasizes the fiduciary duties of stockholders and the need for consent in various corporate actions.

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12 views3 pages

Close Corp

Title XII outlines the characteristics and regulations of close corporations, which are defined as having 20 or fewer stockholders, restrictions on share transfers, and no public offerings. It includes provisions on articles of incorporation, validity of transfer restrictions, stockholder agreements, and procedures for handling deadlocks and stockholder withdrawals. The document emphasizes the fiduciary duties of stockholders and the need for consent in various corporate actions.

Uploaded by

Rica Ochoa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Title XII – Close Corporations

SEC. 95 – Definition & Applicability of Title

• A close corporation is one with:

 ≤ 20 stockholder.

 Restrictions on share transfers.

 No listing or public offering.

• Not applicable to banks, insurance companies, utilities, schools, etc.

SEC. 96 – Articles of Incorporation

• May include:

 Share classifications, transfer restrictions.

 Director classes elected by specific share classes.

 Higher quorum/voting requirements.

• Stockholders can manage the business directly, assuming directors'


liabilities.

SEC. 97 – Validity of Restrictions on Transfer of Shares.

• Transfer restrictions must be in articles, bylaws, and stock certificate.

• Must be reasonable.

• Otherwise, restrictions are not binding on good faith buyers.

SEC. 98 – Effects of Issuance or Transfer of Stock in Breach of Qualifying


Conditions

• Transferees are presumed to know restrictions if stated on certificate.

• Violations may result in refusal to register the transfer.

• Exceptions if all stockholders consent or articles are amended.


SEC. 99 – Agreements by Stockholders

• Pre-incorporation agreements survive if consistent with articles.

• Voting and management agreements are valid.

• Active stockholders owe fiduciary duties and may be personally liable


for torts.

SEC. 100 – When a Board Meeting is Unnecessary or Improperly Held.

• Valid even without formal meetings if:

 All directors consent in writing, or

 All stockholders or directors are aware and don’t object.

• Non-attending directors presumed to ratify unless they promptly object


in writing.

SEC. 101 – Preemptive Rights in Close Corporation

• Stockholders have preemptive rights to all new or reissued shares


unless otherwise stated in the articles.

SEC. 102 – Amendments of Article of Incorporation

• Requires 2/3 approval of all outstanding capital stock (voting or not).

• Applies to deletion of Title XII provisions or reducing quorum/voting


requirements.

SEC. 103 – Deadlocks

• SEC can intervene if management deadlock harms the corporation.

• Remedies include:

 Altering corporate documents.

 Ordering stock buyouts.


 Appointing a provisional director

 Dissolving the corporation.

SEC. 104 – Withdrawal of Stockholder or Dissolution of Corporation.

• Stockholders can demand share buyout at fair value (not < par/issued
value) if the corp. has sufficient assets.

• Can petition for dissolution due to:

 Fraud, oppression, dishonesty.

 Misuse or waste of corporate assets.

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