Supplementary reading materials i.e. case studies, research articles and the likes.

1.Research also on other reasons why a corporation has to decrease its authorized capital stock?

2.Research the documentary requirements for applications for increase and decrease of capital stock in addition to the Certificate of Increase of Capital Stock and Certificate of Decrease of capital Stock.

ESSAY

1.When is there an ultra vires act on the part of (a) the corporation; (b) the board of directors; and (c) the corporate officers?

2.For the past three years of its commercial operation, "X Corp" an oil company, has been tremendously in excess of 100% of the corporation's paid-in capital. All of the stockholders have been claiming that they share in the profits of the corporation by way of dividends but the Board of Directors failed to lift its finger.

a)Is X Corp. guilty of violating a law? If in the affirmative, state the basis.

b)Are there instances when a corporation shall not be held liable for not declaring dividends?

WRITTEN

1.Cosmetics Corporation wants to increase its Authorized Capital Stock (which is currently fully subscribed and issued) to be able to increase its working capital to undertake business expansions.

The Board of Directors consults with you as the Internal Accountant on the proper answers to the following issues:

(a)If the increase in Authorized capital stock is formally submitted to the stockholders in a meeting duly called for the purpose, what is the vote necessary for the stockholders' ratification?

(b)Once the increase in the Authorized Capital Stock of Cosmetics has been legally effected with the SEC, can the new shares from the unissued shares be offered to a new limited group of investors without having to offer them to the shareholders of record since no-pre-emptive right is provided in the AOI and By-laws of Cosmetics?

2.X Corporation is in need of land on which to construct an additional factory to be used in the expansion of its business. Jose Cruz owns a piece of land in Taytay, Rizal, which is ideal for the purpose, and the corporation offers to buy it at a fair price. Jose is willing to part with the land on condition that he is paid in shares of stocks of the corporation. The Board of Directors decides to accept the terms of Jose, but since the authorized capital stock of the corporation has been fully subscribed, it proposes to increase the capital stock so that it could consummate the sale of the land. The proposal, including the purchase of Jose's land in exchange for the new shares, was submitted to the stockholders in a meeting called for the purpose. Pedro Reyes, who has 100 sharers in the corporation, alleging that he and all other stockholders have a pre-emptive right to the new shares, insists that the corporation issue to him his proportionate quota of the new shares, which he prefers to buy in cash. Holders of 80% of the outstanding capital stock are in favor of proposal to increase of stock. Is Pedro Reyes within his rights in claiming a pre-emptive right?