ASG Law

Tag: Stock Ownership

  • Corporate Control and Stock Ownership: Resolving Disputes in Philippine Corporations

    In the case of Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee, the Supreme Court addressed a dispute over the rightful control of Philippine International Life Insurance Company, Inc. (Philinterlife). The Court ruled that the petitioners, representing the Estate of Dr. Ortañez, failed to prove they held the majority of the corporation’s outstanding capital stock during a contested stockholders’ meeting. This decision underscores the importance of presenting credible evidence to substantiate claims of majority ownership in corporate disputes, affecting how companies are managed and controlled. The ruling emphasizes that previous court decisions cannot be overstretched to invalidate corporate actions that were legitimately undertaken.

    Ortañez Estate vs. Lee Group: Who Really Controls Philinterlife?

    The central issue in Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee revolves around a protracted battle for control over Philinterlife. Dr. Ortañez, the founder, held a significant stake in the company. Upon his death, disputes arose among his heirs regarding the ownership and sale of his shares. The petitioners, representing Dr. Ortañez’s estate, challenged the validity of a stockholders’ meeting conducted by the Lee group, arguing that they, the petitioners, represented the majority ownership and therefore the election of the Lee group as directors was invalid.

    The petitioners relied heavily on a previous Supreme Court decision, G.R. No. 146006, to support their claim of majority ownership. They contended that this prior ruling invalidated all increases in the authorized capital stock of Philinterlife, implying that the company’s capital stock remained at 5,000 shares, of which they owned more than 51%. However, the Supreme Court clarified that G.R. No. 146006 only invalidated those increases in capital stock that were approved based on illegally acquired shares. This distinction was crucial to the Court’s present decision.

    The Court found that the petitioners failed to provide sufficient evidence to prove that Philinterlife’s outstanding capital stock was indeed 5,000 shares during the contentious stockholders’ meeting. The Court highlighted that the increases in capital stock before the illegal sales were never challenged and were in fact mandated by law. This underscores a crucial point: corporate actions undertaken before any legal challenges are presumed valid, unless proven otherwise.

    “We observed in the aforesaid decision that Juliana Ortañez (Juliana) and her three sons invalidly entered into a Memorandum of Agreement extra-judicially partitioning the intestate estate among themselves, despite their knowledge that there were other heirs or claimants to the Estate and before the final settlement of the Estate by the intestate court. Since the appropriation of the estate properties was invalid, the subsequent sale thereof by Juliana and Lee to a third party (FLAG), without court approval, was likewise void.”

    Furthermore, the Court examined the capital structure of Philinterlife over time, noting that the Estate’s percentage of ownership decreased as the company’s capital stock increased. By December 15, 1980, the Estate owned 40.58% of the outstanding shares. This percentage further diminished as the capital stock grew to 10,000 shares by 1988. Thus, the petitioners’ claim of always holding a majority stake was demonstrably false.

    The Supreme Court also emphasized the significance of a certification issued by the Insurance Commission, which mandated domestic insurance companies to increase their minimum paid-up capital. This legal requirement further validated the increases in Philinterlife’s capital stock. In essence, the Court recognized that corporations must comply with regulatory requirements, and these actions cannot be easily invalidated without concrete proof of illegality.

    The Court agreed with the lower courts that the election of the respondents as directors and officers of Philinterlife was presumed valid in the absence of compelling evidence to the contrary. This presumption of regularity is a cornerstone of corporate law, protecting the decisions and actions of corporate boards unless proven to be illegal or fraudulent. The decision reinforces the principle that those challenging corporate actions bear the burden of proof.

    In practical terms, this case underscores the importance of maintaining accurate corporate records and adhering to legal requirements for increasing capital stock. It serves as a reminder that previous court rulings must be interpreted narrowly and applied only to the specific issues they addressed. Moreover, parties seeking to challenge corporate actions must present clear and convincing evidence to support their claims, rather than relying on broad interpretations of past decisions.

    FAQs

    What was the key issue in this case? The central issue was whether the respondents were validly elected as the Board of Directors during the annual stockholders’ meeting of Philinterlife, based on the claim that the petitioners represented the majority of the outstanding capital stock.
    What was the basis of the petitioners’ claim? The petitioners claimed that a prior Supreme Court decision (G.R. No. 146006) invalidated all increases in Philinterlife’s capital stock, thereby maintaining their majority ownership based on the original capital structure.
    How did the Supreme Court rule on the capital stock increases? The Supreme Court clarified that G.R. No. 146006 only invalidated increases in capital stock approved based on illegally acquired shares, not all increases, especially those mandated by law.
    What evidence did the petitioners fail to present? The petitioners failed to present credible and convincing evidence that Philinterlife’s outstanding capital stock during the 2006 meeting was 5,000 shares and that they owned more than 51% of those shares.
    What role did the Insurance Commission play in this case? The Insurance Commission’s certification confirmed that domestic insurance companies were required to increase their minimum paid-up capital, supporting the validity of Philinterlife’s capital stock increases.
    What is the significance of the presumption of regularity in corporate law? The presumption of regularity means that corporate actions, such as the election of directors, are presumed valid unless proven otherwise, placing the burden of proof on those challenging the actions.
    What was the Estate’s ownership percentage over time? The Estate’s ownership percentage decreased as the company’s capital stock increased, starting from 50.72% and eventually dropping to 4.05%, negating their claim of always holding a majority stake.
    What is the key takeaway for corporations and shareholders from this case? The key takeaway is the importance of maintaining accurate corporate records, complying with legal requirements, and presenting clear evidence when challenging corporate actions to substantiate claims of majority ownership.

    In conclusion, the Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee case underscores the critical role of evidence and legal compliance in corporate disputes. Parties seeking to challenge corporate actions must present compelling evidence, and courts will generally uphold the validity of corporate actions undertaken in accordance with legal and regulatory requirements.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee, G.R. No. 184251, March 09, 2016

  • Citizenship and Stock Ownership: Examining Restrictions on Foreign Investment in Rural Banks

    The Supreme Court ruled that a naturalized U.S. citizen could not acquire shares of stock in a Philippine rural bank while still a foreign citizen. This case underscores the importance of adhering to legal restrictions on foreign ownership in specific sectors and highlights that laws granting new rights generally do not retroactively impair vested property rights. This means that a contract to sell shares to someone who is not a Filipino citizen is void because Philippine laws require that rural bank stock be owned only by citizens, whether directly or indirectly.

    Double Dealing and Disqualified Buyers: Who Truly Owns the Rural Bank Shares?

    This case arises from conflicting claims over shares of stock in the Rural Bank of Apalit, Inc. (RBA). Jesus Gonzalez, a stockholder, initially agreed to sell his shares to Francisco Nunga, Jr., who was then a naturalized U.S. citizen. A Contract to Sell was executed, and a partial payment was made. Before the final payment, Gonzalez then entered into a Deed of Assignment with Francisco Nunga III, who is a Filipino citizen, selling him the same shares. Francisco III paid the full purchase price, and Gonzalez was requested to transfer the shares to Francisco III.

    Subsequently, Francisco Jr. arrived from the U.S. and finalized the purchase with Gonzalez, who then executed a Deed of Absolute Sale. This situation led to two competing claims over the same shares, ultimately landing in court to determine which party had the superior right. Central to the legal dispute was Republic Act No. 7353, which governs the ownership of rural banks.

    Republic Act No. 7353 explicitly states that the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines. This requirement is at the heart of the dispute. The Supreme Court relied heavily on Section 4 of Republic Act No. 7353, which unambiguously states:

    Section 4. x x x With exception of shareholdings of corporations organized primarily to hold equities in rural banks as provided for under Section 12-C of Republic Act 337, as amended, and of Filipino-controlled domestic banks, the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines or corporations, associations or cooperatives qualified under Philippine laws to own and hold such capital stock: x x x.

    The court emphasized the mandatory nature of this provision, citing its previous ruling in Bulos, Jr. v. Yasuma, where a similar restriction on foreign ownership was upheld. Since Francisco Jr. was a U.S. citizen when he entered into the contracts with Gonzalez, his acquisition of the RBA shares violated Republic Act No. 7353. The contracts, therefore, were deemed void.

    The petitioners argued that Republic Act No. 8179, which grants former natural-born Filipinos the same investment rights as Philippine citizens, should be applied retroactively to validate Francisco Jr.’s purchase. The Supreme Court addressed this argument, acknowledging the general rule against retroactive application of laws unless expressly provided, with exceptions for curative, remedial, or rights-creating statutes. However, a crucial caveat exists: such retroactive application cannot prejudice vested rights.

    Here, the Court found that applying Republic Act No. 8179 retroactively would impair the vested rights of Francisco III, a Filipino citizen, who had acquired the shares through the Deed of Assignment. The Court underscored that vested rights had already been acquired. Although Francisco Jr. had entered into the first contract, the first contract he entered was in violation of existing laws.

    The court reasoned that since the Contract to Sell between Gonzalez and Francisco Jr. was void ab initio, it could not give rise to any enforceable rights. In contrast, Francisco III, who was qualified to own the shares, had a valid Deed of Assignment, conferring on him a superior claim. Since the Deed to Sell entered into by Gonzalez and Francisco Jr. violated the laws, there was in effect no contract whatsoever. So, when Francisco III purchased the same shares from Gonzalez, he had the standing of first buyer in a sale that conformed to the standing laws.

    Regarding the award of damages, the Court upheld the Court of Appeals’ decision to remove the moral and exemplary damages initially granted to Francisco Jr. The court maintained the grant of attorney’s fees in favor of Francisco III because it had been indeed made clear that he had incurred those fees because he had to go to court in order to defend his standing to acquire shares in RBA. Ultimately, the Court prioritized legal compliance and the protection of vested rights, reinforcing the integrity of the country’s banking regulations.

    FAQs

    What was the key issue in this case? The central issue was determining who had a superior right to the shares of stock in Rural Bank of Apalit, Inc. when the same shares were sold to two different individuals – one a U.S. citizen and the other a Filipino citizen.
    Why was Francisco Jr.’s purchase deemed invalid? Francisco Jr.’s purchase was invalid because he was a naturalized U.S. citizen at the time, and Republic Act No. 7353 requires that the capital stock of rural banks be owned by Filipino citizens. The contract violated Republic Act 7353.
    What is Republic Act No. 7353? Republic Act No. 7353 is the law governing the ownership and operation of rural banks in the Philippines. It stipulates that the capital stock of any rural bank must be fully owned and held by citizens of the Philippines.
    Why couldn’t Republic Act No. 8179 be applied retroactively? Republic Act No. 8179 could not be applied retroactively because doing so would impair the vested rights of Francisco III, who had already acquired the shares legally as a Filipino citizen. Francisco III purchased the shares conforming to all relevant regulations in place.
    What is the significance of a "vested right" in this context? A vested right is an interest that is already secured and protected by law, meaning it cannot be taken away or impaired by subsequent legislation without due process. It is that sense of the term, “vested” is most relevant in this matter.
    Why was the Deed of Assignment in favor of Francisco III considered valid? The Deed of Assignment in favor of Francisco III was considered valid because he was a Filipino citizen, and the transaction complied with the requirements of Republic Act No. 7353 at the time it was executed. His standing conferred full power for him to undertake it.
    What kind of damages was Francisco III entitled to? Francisco III was entitled to attorney’s fees and costs of suit because he had to litigate to protect his interest in the shares, but he was not awarded moral or exemplary damages. Therefore it may be considered to have been a minimal win.
    Was Gonzalez held liable for anything? Jesus Gonzalez was held jointly and severally liable for the sum of P20,000.00 as attorney’s fees, plus the cost of suit, because he had entered into two contracts for the same property that were not held to be valid. He would therefore pay an equal sum together with Francisco Jr. and Victor.

    This case offers crucial insights into the limitations faced by foreign nationals, even former Filipinos, in investing in specific sectors of the Philippine economy. It highlights the need for foreign nationals who have acquired former rights of purchase to be constantly informed with regard to standing laws. Parties intending to enter into transactions should therefore consult a legal professional and exercise care, to ensure all requisites for any such sales are met.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Francisco R. Nunga, Jr. v. Francisco N. Nunga III, G.R. No. 178306, December 18, 2008

  • Shareholder Rights: Inclusion in General Information Sheet vs. Corporate Book Registration

    The Supreme Court ruled that merely being listed as a shareholder in a corporation’s General Information Sheet (GIS) is not sufficient proof of ownership. To be recognized as a shareholder, an individual must have their shares registered in the corporation’s stock and transfer book, possess a stock certificate, and demonstrate a valid transfer of shares.

    From Paperwork to Proof: Unraveling Stock Ownership Disputes

    This case, David C. Lao and Jose C. Lao v. Dionisio C. Lao, revolves around a dispute over stock ownership in Pacific Foundry Shop Corporation (PFSC). David and Jose Lao claimed they were shareholders and directors of PFSC, relying on the company’s General Information Sheet (GIS) filed with the Securities and Exchange Commission (SEC). They sought to be formally declared stockholders, to receive stock certificates, and to inspect corporate books. The respondent, Dionisio Lao, the president of PFSC, contested their claims, arguing that their inclusion in the GIS was inadvertent and that they never legally acquired shares through subscription, purchase, or transfer. The central legal question is whether the mere inclusion of someone as a shareholder in a corporation’s GIS is sufficient proof of stock ownership, overriding the absence of stock certificates and registration in the corporate books.

    The Regional Trial Court (RTC) sided with Dionisio Lao, finding that David and Jose Lao did not appear to have acquired shares as subscribers or purchasers, nor did they possess stock certificates in their names. The Court of Appeals (CA) initially reversed this decision, giving weight to the GIS, but later reversed course and affirmed the RTC’s decision in its Amended Decision. The CA held that there was no evidence of a valid transfer of stocks to the petitioners.

    The Supreme Court upheld the CA’s Amended Decision. The Court emphasized that a stock certificate serves as prima facie evidence of stock ownership. The Court also pointed out the importance of registration of the stock transfer. Furthermore, no documentation for the transfer could be produced, failing to demonstrate sale or purchase. Section 63 of the Corporation Code governs the transfer of shares.

    Sec. 63. Certificate of stock and transfer of shares. – The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

    The Court found that Dionisio Lao had possession of Hipolito Lao’s stock certificates, properly endorsed to him, and that the transfer was registered in the corporate stock and transfer book. These actions supported that valid stock transfer occurred. David and Jose Lao failed to provide evidence of endorsement or stock certificate, further contributing to the dismissal.

    Building on this principle, the Supreme Court clarified the evidentiary weight of the General Information Sheet. The Court declared that the mere inclusion of names in the GIS is not conclusive proof of stock ownership. Information needs to be correlated with corporate books. As between the GIS and the official corporate records, the latter holds precedence in determining shareholder status. The Court stated:

    We agree with the trial court that mere inclusion in the General Information Sheets as stockholders and officers does not make one a stockholder of a corporation, for this may have come to pass by mistake, expediency or negligence. As professed by respondent-appellee, this was done merely to comply with the reportorial requirements with the SEC. This maybe against the law but “practice, no matter how long continued, cannot give rise to any vested right.”

    The Supreme Court highlighted that the burden of proof rested on David and Jose Lao to demonstrate their shareholding. Since they did not have stock certificates and their names were absent from the corporate books, this burden became critical. The Supreme Court thus denied the petition. The final verdict affirmed the importance of proper documentation and registration in establishing shareholder rights.

    FAQs

    What was the key issue in this case? The primary issue was whether being listed as a shareholder in a General Information Sheet (GIS) is sufficient proof of stock ownership without corresponding stock certificates and registration in the corporate books.
    What did the Supreme Court rule? The Supreme Court ruled that mere inclusion in the GIS is insufficient proof of stock ownership. Proper stock certificates, endorsement of shares, and registration in the stock and transfer book are all required.
    What is a General Information Sheet (GIS)? A General Information Sheet is a document that corporations are required to submit to the Securities and Exchange Commission (SEC), containing information about the corporation, its officers, directors, and shareholders.
    What is the significance of a stock certificate? A stock certificate is a written instrument acknowledging that a person is the owner of a designated number of shares of a corporation’s stock, serving as prima facie evidence of ownership.
    Why is registration in the stock and transfer book important? Registration in the stock and transfer book is crucial because it officially records the transfer of shares and allows the transferee to exercise the rights of a stockholder against the corporation.
    What evidence did David and Jose Lao present to support their claim? David and Jose Lao primarily relied on the General Information Sheet (GIS) submitted by PFSC to the SEC, where they were listed as shareholders.
    What evidence did Dionisio Lao present? Dionisio Lao presented evidence that he was in possession of Hipolito Lao’s stock certificates, that the certificates were properly endorsed to him, and that the transfer was duly registered in the stock and transfer book.
    What is the burden of proof in cases like this? In cases where individuals lack stock certificates or their names do not appear in the corporate books, they bear the burden of proving that they are shareholders.
    What does ‘prima facie’ evidence mean? Prima facie evidence refers to evidence that is sufficient to prove a fact unless rebutted by contrary evidence.

    This ruling underscores the importance of properly documenting stock transfers and ensuring they are recorded in the corporation’s books. Failing to comply with these requirements can lead to disputes and jeopardize one’s claim to shareholder rights, irrespective of appearances in the corporation’s General Information Sheet.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: David C. Lao and Jose C. Lao v. Dionisio C. Lao, G.R. No. 170585, October 06, 2008

  • Pledge vs. Corporate By-Laws: Who Wins? Understanding Stock Ownership Disputes in the Philippines

    Protecting Your Investment: Priority Rights in Stock Pledge Agreements

    G.R. No. 117604, March 26, 1997

    Imagine you’ve loaned money secured by shares of stock. Suddenly, the company claims it sold those same shares due to the original owner’s unpaid dues. Who has the right to those shares? This case clarifies the rights of a pledgee (the lender) versus a corporation asserting its by-laws, highlighting the importance of timely notification and the limitations of corporate by-laws against third-party pledgees.

    Understanding the Legal Landscape of Stock Pledges

    The central issue revolves around the interplay between pledge agreements and a corporation’s internal rules. A pledge is a contract where a debtor (pledgor) delivers property to a creditor (pledgee) as security for a debt. If the debt isn’t paid, the creditor can sell the pledged property to recover the amount owed.

    Philippine law, specifically the Civil Code, governs pledge agreements. Article 2093 states: “In addition to the requisites prescribed in Article 2085, it is necessary, in order to constitute the contract of pledge, that the thing pledged be placed in the possession of the creditor, or of a third person by common agreement.”

    Corporations, on the other hand, operate under their by-laws, which are internal rules governing their operations and the rights of shareholders. However, these by-laws generally don’t bind third parties unless they have knowledge of them.

    For example, imagine a homeowner’s association with a by-law prohibiting rentals shorter than six months. This by-law is binding on homeowners but not necessarily on a tourist who unknowingly rents a property for a week, unless the tourist was informed of the by-law beforehand.

    The Valley Golf Case: A Clash of Rights

    The China Banking Corporation (CBC) case against Valley Golf and Country Club, Inc. (VGCCI) illustrates this conflict. Here’s how the events unfolded:

    • Galicano Calapatia, Jr., a VGCCI stockholder, pledged his stock to CBC as security for a loan in 1974.
    • CBC notified VGCCI of the pledge, and VGCCI acknowledged it in writing.
    • Years later, Calapatia obtained another loan from CBC, again secured by the same pledge.
    • Calapatia defaulted on his loan. CBC initiated foreclosure proceedings.
    • CBC informed VGCCI of the foreclosure and requested the stock’s transfer.
    • VGCCI refused, citing Calapatia’s unpaid dues to the club.
    • VGCCI subsequently sold Calapatia’s stock at auction due to his delinquency.
    • CBC, having won the foreclosure sale, demanded VGCCI issue a new stock certificate in its name.
    • VGCCI refused, stating the stock had already been sold.

    The legal battle ensued, with CBC arguing its right as a pledgee and VGCCI asserting its right to sell the stock under its by-laws.

    The case went through several stages:

    • Regional Trial Court: Initially dismissed for lack of jurisdiction.
    • Securities and Exchange Commission (SEC): Initially ruled in favor of VGCCI, then reversed its decision, favoring CBC.
    • Court of Appeals: Nullified the SEC’s ruling, citing lack of jurisdiction.
    • Supreme Court: Reversed the Court of Appeals, upholding the SEC’s decision in favor of CBC.

    The Supreme Court emphasized the importance of notice and the limitations of corporate by-laws:

    “In order to be bound, the third party must have acquired knowledge of the pertinent by-laws at the time the transaction or agreement between said third party and the shareholder was entered into, in this case, at the time the pledge agreement was executed.”

    The Court further stated, “A bona fide pledgee takes free from any latent or secret equities or liens in favor either of the corporation or of third persons, if he has no notice thereof, but not otherwise.”

    Practical Implications: Protecting Your Rights in Pledge Agreements

    This case underscores the crucial importance of properly documenting and notifying all relevant parties in pledge agreements. Here’s what you need to know:

    • Due Diligence: As a pledgee, investigate the company’s by-laws *before* entering into the pledge agreement.
    • Timely Notification: Immediately notify the corporation of the pledge agreement in writing. Obtain written acknowledgment.
    • Priority of Rights: Understand that a valid pledge, properly notified, generally takes precedence over the corporation’s right to sell shares for unpaid dues *unless* the pledgee had prior knowledge of those by-laws.

    Imagine a small business owner pledges their shares in a family corporation to secure a loan. If the lender fails to notify the corporation and the corporation later sells the shares due to the owner’s internal debt, the lender’s security could be jeopardized. This case highlights the critical need for lenders to be proactive in protecting their interests.

    Key Lessons:

    • Corporate by-laws do not automatically bind third parties without knowledge.
    • A properly executed and notified pledge agreement creates a valid security interest.
    • Pledgees must conduct due diligence and provide timely notice to protect their rights.

    Frequently Asked Questions (FAQs)

    Q: What is a pledge agreement?

    A: A pledge agreement is a contract where a borrower (pledgor) gives possession of property to a lender (pledgee) as security for a debt. If the borrower defaults, the lender can sell the property to recover the debt.

    Q: What happens if a corporation has a by-law restricting share transfers?

    A: The by-law is generally not binding on third parties who are unaware of it when they enter into a transaction with a shareholder.

    Q: What is the significance of notifying the corporation about a pledge?

    A: Notification is crucial. It puts the corporation on notice of the pledgee’s interest and prevents the corporation from claiming ignorance of the pledge.

    Q: Does a corporation’s right to collect unpaid dues always override a pledge agreement?

    A: No. If the pledge agreement is valid and the corporation was properly notified, the pledgee’s rights generally take priority, *unless* the pledgee knew about the relevant by-laws regarding unpaid dues before the pledge.

    Q: What should a lender do to protect their interests when taking a pledge of shares?

    A: Conduct due diligence on the corporation’s by-laws, notify the corporation of the pledge in writing, and obtain written acknowledgment.

    Q: What is an intra-corporate dispute?

    A: An intra-corporate dispute is a conflict arising between a corporation and its stockholders, members, or officers. The SEC has jurisdiction over these disputes.

    Q: What is the effect of the lender’s knowledge of the corporation’s by-laws?

    A: If the lender knew about the corporation’s by-laws regarding share transfers or liens before entering into the pledge agreement, they may be bound by those by-laws.

    ASG Law specializes in corporate law and securities regulations. Contact us or email hello@asglawpartners.com to schedule a consultation.