Appraisal Right in the Philippines

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