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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Under Pre-emptive right grants the stockholders the option to subscribe to all new issues or disposition of shares of any class, in proportion to their shareholdings whereas right of first refusal grants the option to purchase the issued and outstanding shares of the transferring stockholder with such reasonable terms, conditions or period stated.
(Section 38 and 97 of the Revised Corporation Code of the Philippines)
The law says –
Section 38 provides that all stockholders of a stock corporation shall enjoy preemptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings unless such right is denied by the articles of incorporation or an amendment thereto. Provided that such preemptive right shall not extend to shares issued in compliance with laws requiring stock offerings or minimum stock ownership by the public or to shares issued in good faith with the approval of the stockholders representing two thirds of the outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a previously contracted debt.
Jurisprudence provides that –
Pre-emptive right under of the Corporation Code refers to the right of a stockholder of a stock corporation to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings. The right may be restricted or denied under the articles of incorporation, and subject to certain exceptions and limitations. The stockholder must be given a reasonable time within which to exercise their preemptive rights. Upon the expiration of said period, any stockholder who has not exercised such right will be deemed to have waived it.||| (Majority Stockholders of Ruby Industrial Corp. v. Lim, G.R. Nos. 165887 & 165929, [June 6, 2011], 665 PHIL 600-658)
On the other hand, the right of first refusal is enunciated in Section 97 of the Revised Corporation Code which provides that the existing stockholders or the corporation has the option to purchase the shares of the transferring stockholder with such reasonable terms, conditions or period stated. If upon the expiration of said period, the existing stockholders or the corporation fails to exercise the option to purchase, the transferring stockholder may sell their shares to any third person. It arises by virtue of stipulations in the contract, by which the right is construed against the person disposing or dealing with their property.
(Section 38 and 97 of the Revised Corporation Code of the Philippines)
Read also: What is the scope of the preemptive right of a shareholder?
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