A stock corporation is a company with authorized capital stock that is divided into shares. As the company engages in business and improves its bottom line, it is mandated to share surplus profits – called dividends – with those who buy in it through its stocks. Higher dividends are given to those with more shares.
Corporators in a stock corporation are called stockholders or shareholders. In stock corporations, the following constitute the different types of stock made available to potential investors:
• Authorized capital stock
This is the maximum amount of shares a corporation is allowed to issue if the
shares have a definite value stipulated in its Articles of Incorporation or what
is called par value. A stock’s par value represents the lowest value to be paid
per share. It is also the value shown in a stock certificate.
• Subscribed capital stock
Once a corporation decides to offer stocks, this will constitute the amount
paid by investors to signify interest in partaking of the said corporation’s
• Paid-up capital stock
This is the total amount of money received from investors or shareholders in
exchange for shares of stock. This form of capital can be paid through:
o Actual cash
o Tangible or intangible property
o Labor or services rendered to company
o Debt previously incurred from the company
o Personal earnings
o Share swap for stocks in instances of reclassification or conversion.
The minimum capital stock for stock corporations
Section 12 of the Corporations Code of the Philippines states that stock corporations are not required to state a minimum authorized capital stock unless specified otherwise by a special law. This then becomes subject to the provisions of Section 13 that discuss the amount of capital stock subscribed and paid for the purpose of incorporation.
The amount of capital stock to be subscribed and paid for incorporation
Under Section 13 of the Corporation Code of the Philippines, when a private stock corporation decides to incorporate there is a minimum amount of capital stock that should be subscribed (referring to the designated amount of shares an investor holds) and paid for. At the time of incorporation, there has to be at least 25% of subscriptions made to the total authorized capital stock, as stated in the Articles of Incorporation. Then at least 25% of these confirmed subscriptions should be paid for once there is a fixed deadline or initial public offering (IPO) schedule. However, if there is no fixed date, the minimum 25% should be paid upon the prompting of the company’s board of directors. The total amount of paid-up stocks should be worth no less than P5,000.
The Articles of Incorporation for stock corporations must clearly stipulate the following:
• The amount of authorized capital stock in Philippine money
• The number of shares to be divided
• In the case of par value shares, their actual par value
• The original subscribers’ names, nationalities, and places of residence
• The amount subscribed and paid for by each investor in their subscription
• The number of shares without par value
It is important to note that the Securities and Exchange Commission (SEC) will not accept articles of any corporation unless it has a sworn statement of the treasurer elected by the subscribers. The sworn statement should attest that the company has accomplished the 25% requirement for subscribed capital stock and the corresponding payments made to the treasurer in cash or in any other acceptable mode of payment (See section on paid-up capital stock) that is of equal value.