DATU VS SEC CASE DIGEST

G.R. No. L-56655 July 25, 1983
DATU TAGORANAO BENITO, petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION and JAMIATUL PHILIPPINE-AL ISLAMIA, INC., respondents.

CORPORATION LAW; PRE-EMPTIVE RIGHTS

FACTS:

• The AOI of respondent Jamiatul Philippine-Al Islamia, Inc. (originally Kamilol Islam Institute, Inc.) were filed with the SEC. The corporation had an authorized capital stock of P200,000.00 divided into 20,000 shares. Petitioner Datu subscribed to 460 shares. 

• The respondent corporation filed a certificate of increase of its capital stock from P200,000.00 to P1,000,000.00.

• Datu filed with SEC a petition alleging that the additional issue of previously subscribed shares of the corporation was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock of the corporation from P200,000.00 to P1,000,000.00 was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda. 

• Respondents denied the material allegations .

• SEC after due proceedings, rendered a decision stating that the issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders, including the petitioner, herein; and that there is no sufficient legal basis to set aside the certificate issued by this Commission authorizing the increase in capital stock of respondent corporation.

• Hence, this petition for review by way of appeal

ISSUE:

  

Whether there is a violation of pre-emptive right of the petitioner

HELD:

• NO. As far as the petitioner is concerned, he had not waived his pre-emptive right to subscribe as he could not have done so for the reason that he was not present at the meeting and had not executed a waiver, thereof. Not having waived such right and for reasons of equity, he may still be allowed to subscribe to the increased capital stock proportionate to his present shareholdings."

• But the questioned issuance of the unsubscribed portion of the capital stock worth is not invalid even if assuming that it was made without notice to the stockholders as claimed by petitioner. The power to issue shares of stocks in a corporation is lodged in the board of directors and no stockholders' meeting is necessary to consider it because additional issuance of shares of stocks does not need approval of the stockholders. The by-laws of the corporation itself states that 'the Board of Trustees shall, in accordance with law, provide for the issue and transfer of shares of stock of the Institute and shall prescribe the form of the certificate of stock of the Institute.

• Petition is hereby dismissed.