Appraisal Right in the Philippines
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Questions and Answers

What is the primary purpose of appraisal right in the context of corporate actions?

  • To allow for the amendment of articles of incorporation without shareholder approval
  • To provide a mechanism for majority shareholders to gain control
  • To protect minority shareholders from unfair treatment and ensure fair value for their shares (correct)
  • To facilitate the sale of corporate assets
  • In which scenario does appraisal right arise?

  • When a corporation issues new shares to the public
  • When a corporation merges with another corporation (correct)
  • When a corporation increases its authorized capital stock
  • When a corporation declares dividends to its shareholders
  • What is the first step for a shareholder who wishes to exercise their appraisal right?

  • To file a lawsuit against the corporation
  • To deliver a written demand to the corporation within the prescribed period (correct)
  • To sell their shares on the open market
  • To negotiate with the corporation's management team
  • What is the primary obligation of the corporation once appraisal right is exercised?

    <p>To make an offer to purchase the shares at a specified price</p> Signup and view all the answers

    What is the typical timeframe for a shareholder to deliver a written demand to the corporation?

    <p>20 days from the date of notice</p> Signup and view all the answers

    Which of the following is NOT a situation where appraisal right arises?

    <p>Declaration of dividends to shareholders</p> Signup and view all the answers

    Study Notes

    Appraisal Right under Title 10 of the Revised Corporation Code of the Philippines

    Definition and Purpose

    • Appraisal right is the right of a shareholder to demand payment for their shares in the event of certain corporate actions, such as mergers, consolidations, or sales of assets.
    • The purpose of appraisal right is to protect minority shareholders from unfair treatment and ensure they receive fair value for their shares.

    When Appraisal Right Arises

    • Appraisal right arises in the following situations:
      • Merger or consolidation with another corporation
      • Sale, lease, exchange, or disposition of all or substantially all of the corporation's assets
      • Amendment to the articles of incorporation that materially and adversely affects the rights of shareholders
      • Corporate reorganization or recapitalization

    Procedure for Exercising Appraisal Right

    • Shareholders who wish to exercise their appraisal right must:
      1. Deliver a written demand to the corporation within the prescribed period (usually 20 days from the date of notice)
      2. Specify the number of shares they own and the amount they believe to be the fair value of their shares
    • The corporation must then:
      1. Make an offer to purchase the shares at a specified price
      2. If the shareholder rejects the offer, the matter may be brought to court for determination of fair value

    Determination of Fair Value

    • Fair value is determined as of the day before the corporate action that triggered the appraisal right
    • Factors to be considered in determining fair value include:
      • The corporation's net asset value
      • The corporation's earning capacity
      • The market value of the shares
      • Any other relevant factors

    Consequences of Exercising Appraisal Right

    • Shares surrendered for appraisal will be cancelled and removed from the corporation's records
    • The corporation must pay the shareholder the determined fair value of the shares
    • Failure of the corporation to comply with the appraisal right may result in liability for damages and legal costs

    Appraisal Right under Title 10 of the Revised Corporation Code of the Philippines

    Definition and Purpose

    • Appraisal right is a shareholder's right to demand payment for their shares in certain corporate actions, protecting minority shareholders from unfair treatment.
    • The purpose of appraisal right is to ensure shareholders receive fair value for their shares.

    When Appraisal Right Arises

    • Appraisal right arises in situations such as:
    • Mergers or consolidations with another corporation
    • Sale, lease, exchange, or disposition of all or substantially all of the corporation's assets
    • Amendments to the articles of incorporation that materially and adversely affect shareholder rights
    • Corporate reorganization or recapitalization

    Procedure for Exercising Appraisal Right

    • Shareholders must:
      • Deliver a written demand to the corporation within the prescribed period (usually 20 days from notice)
      • Specify the number of shares owned and the believed fair value of shares
    • The corporation must:
      • Make an offer to purchase shares at a specified price
      • If the shareholder rejects the offer, the matter may be brought to court for fair value determination

    Determination of Fair Value

    • Fair value is determined as of the day before the corporate action that triggered the appraisal right
    • Factors considered in determining fair value include:
      • Net asset value
      • Earning capacity
      • Market value of shares
      • Other relevant factors

    Consequences of Exercising Appraisal Right

    • Shares surrendered for appraisal will be cancelled and removed from corporate records
    • The corporation must pay the shareholder the determined fair value of shares
    • Failure of the corporation to comply with appraisal right may result in liability for damages and legal costs

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    Description

    This quiz covers the appraisal right of shareholders in the Philippines, including its definition, purpose, and when it arises. Learn about the protections and rights of minority shareholders under the Revised Corporation Code.

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