a. NO, the transaction is not covered by the provisions of the Bulk Sales Law. Bulk Sales Law applies only to retail merchants, traders, and dealers. It does not apply to manufacturers. X Corporation is engaged in the manufacturing business.
b. To effect a valid sale, X Corporation must prepare an affidavit stating the names of all its creditors, their addresses, the amount of their credits and their maturities. X Corporation should give the affidavit to the buyer who, in turn, should furnish a copy to each creditor and notify the creditors of the proposed bulk sale to enable them to protect their interest.
NO. The sheriff’s sale is not covered by the Bulk Sales Law. If the sale and transfer in bulk is made by a public officer, acting under judicial process, as is true in this case, said sale or transfer is not covered by the Bulk Sales Law.
a. The transaction is deemed classified as sale of all or substantially all of the corporate assets because the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated.
b. YES, the law does not prohibit sale of all or substantially all of corporate assets to competitor-company provided said sale is subject to laws against illegal combination, monopoly or restraint of trade and Bulk Sales Law. Nowhere in the facts states that the competitor company lies within the restrictions provided for by law. For the transaction to be valid, it needs a majority vote of its board of directors and stockholder’s approval representing at least 2/3 of outstanding capital stock. Further, since bulk sales apply to sale of all or substantially all of corporate assets, it also requires the following:
i. list of creditors under oath must be given by the seller to the buyer 10 days before the sale containing the list of their respective names, addresses, due dates and amount owing to each;
ii. inventory of goods or properties to be sold, cost price and the amount for which it has been sold, and
iii. the list of inventory is filed with the DTI, otherwise, it will be null and void for being in fraud of creditors.
c. To protect the interest of the creditors, I will require the seller to prepare an affidavit stating the names of all its creditors, their addresses, the amount of their credits and their respective maturities, and to submit the affidavit to the buyer who, in turn, should notify the creditors about the transaction he is about to conclude with the seller.
If the transaction was made to defraud the creditors, the latter may have the contract rescinded. The creditors may also file a petition for involuntary insolvency and have the sale voided if it was made in fraud of creditors.
d. Top Grade Fashion Corporation may recover the amount paid if the sale was made in fraud of creditors and sue for damages.
YES. This is a sale of all the stock of goods, fixtures and entire business, not in the ordinary course of business or trade of the vendor. Before receiving from the vendee any part of the purchase price, the vendor must deliver to such vendee a written statement, duly sworn, of the names and addresses of all creditors to whom said vendor may be indebted, together with the amount of indebtedness due or owing, on the account of the goods, fixtures or business subject matter of the bulk sale.
a. YES. The sale involves all fixtures and equipment, not in the ordinary course of trade and the regular prosecution of business of Stanrus, Inc.
b. Crossroads should require from Stanrus, Inc. submission of a written waiver of the Bulk Sales Law by the creditors as shown by verified statements or to comply with the requirements of the Bulk Sales Law, that is, the seller must notify his creditors of the terms and conditions of the sale, and also, before receiving from the vendee any part of the purchase price, deliver to such vendee a written sworn statement of the names and addresses of all his creditors together with the amount of indebtedness due to each.
The corporation may acquire its own shares when it has unrestricted retained earnings in its books to cover the shares to be purchased/acquired and if it is for a legitimate corporate purpose/s.
a. A stock corporation may only acquire its own shares of stock if the trust fund doctrine is not impaired. This is to say, for instance, that it may purchase its own shares of stock by utilizing merely its surplus profits over and above the subscribed capital of the corporation.
b. The arrangement between the corporation and its President to the extent that it calls for the payment of the latter’s shares is covered by the trust fund doctrine. The only exceptions from the trust fund doctrine are the redemption of redeemable shares and, in the case of close corporation, when there should be a deadlock and the SEC orders the payment of the appraised value of a stockholder’s share.
a. Unless the power plant and the concrete road project are reasonably necessary to the manufacture of cement by STIKKI (and they do not appear to be so), then the approval of the said projects by a majority of the Board of Directors and the ratification of such approval by the stockholders representing at least 2/3 of the outstanding capital stock would be necessary.
As for the quarry operations for limestone, the same is an indispensable ingredient in the manufacture of cement and may, therefore, be considered reasonably necessary to accomplish the primary purpose of STIKKI. In such case, only the approval of the Board of Directors would be necessary.
b. The procedure in securing the approval of the Board of Directors is as follows:
1. A notice of meeting of the Board should be sent to all the directors. The notice should state the purpose of the meeting.
2. At the meeting, each of the project should be approved by a majority of the Board (not merely a majority of those present at the meeting).
The procedure in securing the approval of the stockholders is as follows:
1. Written notice of the proposed investment and the time and place of the stockholders’ meeting should be sent to each stockholder at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally.
2. At the meeting, each of the projects should be approved by the stockholders representing at least 2/3 of the outstanding capital stock.
a. Acme may not invest in the department store corporation since the Retail Trade Act allows, in the case of corporations, only 100% Filipino-owned companies to engage in retail trade.
b. Acme may invest in the realty corporation, on the assumption that the balance of 60% of ownership of the latter corporation, is Filipino-owned since the law merely required 60% Filipino holding in land corporate ownership.
c. The Anti-Dummy Law allows board representation to the extent of actual and permissible foreign investments in corporations. Accordingly, the President of Acme may not sit in the Board of Directors of the department store corporation but can do so in the realty corporation.
d. The Treasurer of Acme may not hold that position either in the department store corporation or in the realty corporation since the Anti-Dummy Law prohibits the employment of aliens in such nationalized areas of business except those that call for highly technical qualifications.
The Board of Directors cannot declare cash dividends out of the revaluation or appraisal surplus that may fluctuate from time to time. Dividends can only be declared from surplus profits arising from its operations.
