Corporation Law 3E
RULES GOVERNING REDEEMABLE AND TREASURY SHARES (1982)
corporation, in accordance with the provision expressly provided for in its articles of incorporation and certificates of stock representing said shares of the corporation,
The following rules governing redeemable shares (Section 8, CCP) and treasury
in accordance with the provisions expressly provided for in its articles of
shares (Section 9 and 41, CCP) are hereby promulgated:
incorporation and certificates of stock representing said shares;
SECTION 1.
b.
General Provisions. — The outstanding capital stock of a
corporation, including unpaid subscriptions, shall constitute a trust fund held by the
When the shares are reacquired to effect a decrease in the capital stock of
the corporation as approved by the Securities and Exchange Commission;
corporation for the benefit of its creditors which shall not be returned to the stockholders by repurchase of shares or otherwise, except in the manner as
c.
provided for under the Corporation Code and these rules. cdphil
order of the Securities and Exchange Commission acting to arbitrate a deadlock as
When the share are reacquired by a close corporation pursuant to the
provided for under Section 104 of the Corporation Code of the Philippines. SECTION 2.
Definitions. — The following terms shall have the respective
meanings when used in these rules:
2.
Treasury shares do not revert to the unissued shares of the corporation
but are regarded as property acquired by the corporation which may be reissued or a.
Treasury shares — Treasury shares are shares of stock which have been
sold by the corporation at a price to be fixed by the Board of Directors; provided,
issued and fully paid, but subsequently reacquired by the issuing corporation by
however, that in the case of redeemable shares reacquired, the same shall be
purchase, redemption, donation or through some other lawful means. b.
Redeemable shares. — Redeemable shares are shares of stock issued by a
considered retired and no longer issuable, unless otherwise provided in the Articles of Incorporation.
corporation which said corporation can purchase or take up from their holders as
3.
expressly provided for in its articles of incorporation and certificates of stock
compel the corporation to purchase his shares at a value not less than their par or
representing said shares.
issued value, provided that the corporation has, after the withdrawal of the
c.
Unrestricted retained earnings. — Unrestricted retain earnings refer to the
undistributed earnings of the corporation which have not been allocated for any managerial, contractual or legal purposes and which are free for distribution to the
stockholder, sufficient assets in its books to cover its debts and liabilities exclusive of capital stock. Cda SECTION 4.
stockholders as dividends. 1. d.
In the case of a close corporation, any stockholder may, for any reason,
Retained Earnings. —
The amount of unrestricted retained earnings equivalent to the cost of the
Sinking Fund. — Refers to a fund set up by the corporation where cash is
treasury shares being held, other than those acquired in accordance with the
gradually set aside in order to accumulate the amount necessary to meet the
exceptions provided in Section 3(1) of these rules, shall be restricted from being
redemption price of redeemable shares at special dates in the future.
declared and issued as dividends.
SECTION 3.
2.
1.
Redeemable Treasury Shares. —
No corporation shall redeem, repurchase or reacquire its own shares, of
whatever class, unless it has an adequate amount of unrestricted retained earnings to support the cost of the said shares, except: a.
When the shares are reacquired in the redemption of redeemable shares
of the corporation or pursuant to the conversion right of convertible shares of the
The dividend restriction on retained earnings on account of the treasury
shares being held shall be lifted only after the treasury shares causing the restriction are reissued or retained. Retirement of treasury shares shall be effected by decreasing the capital stock of the corporation in accordance with Section 38 of the Corporation Code of the Philippines for the purpose of eliminating the treasury shares.
Corporation Law 3E
SECTION 5.
Other Provisions. —
and such other sanctions as provided for under Section 144 of the Corporation Code of the Philippines.
1.
A corporation may reacquire its own shares for a legitimate corporate
purpose or purposes in accordance with these rules, including but not limited to the
SECTION 7.
Effectivity of Rules. —
following cases: These rules shall take effect fifteen (15) days after their publication in two (2) a.
To eliminate fractional shares arising out of stock dividends;
newspapers of general circulation in the Philippines. prcd
b.
To collect or compromise an indebtedness to the corporation, arising out
(SGD.) MANUEL G. ABELLO
of unpaid subscription, in a delinquent sale, and to purchase delinquent shares sold during said sale; and
Acting Chairman
c.
Approved:
To pay dissenting or withdrawing stockholders entitled to payment of their
shares under the provisions of the Corporation Code of the Philippines. 2.
Treasury shares shall have no voting rights as long as such stocks remains
in treasury. 3.
Treasury shares may be declared as property dividend to be issued out of
the retained earnings previously used to support their acquisition, provided that the amount of the said retained earnings has not been subsequently impaired by losses. Any declaration and issuance of treasury shares as property dividend shall be disclosed and properly designated as property dividend in the books of the corporation and in its financial statements. 4.
All corporations which have issued redeemable shares with mandatory
redemption features are required to set up and maintain a sinking fund. The fund shall be deposited with a trustee bank and not be invested in risky or speculative ventures. 5.
Redeemable shares may be redeemed, regardless of the existence of
unrestricted retained earnings, provided that the corporation has, after such redemption, sufficient assets in its books to cover debts and liabilities inclusive of capital stock. SECTION 6.
Violation of these Rules. —
Any violation of these rules shall be penalized by a fine of not less than One Thousand (P1,000.00) Pesos or not more than Ten Thousand (P10,000.00) Pesos
(SGD.) CESAR E.A. VIRATA Minister of Finance CIRCULAR NO. 7 December 27, 1982
