Query: Can a company unilaterally retrieve shares from their shareholder who was later found out to be stealing from the company through its leasing?

In the Philippines, the rights and obligations of shareholders and companies are governed by the Revised Corporation Code (RCC). The RCC outlines specific procedures and legal remedies that companies can pursue when dealing with shareholders involved in fraudulent activities. It is essential to understand whether a company has the authority to unilaterally retrieve shares from a shareholder found to be stealing.

Shareholder Rights and Corporate Governance

Shareholders, as part-owners of a corporation, enjoy certain rights, including the right to vote, receive dividends, and transfer shares. These rights are protected under the RCC, and any action to remove or retrieve shares from a shareholder must comply with legal processes and corporate governance principles.

Legal Remedies for Corporate Fraud

When a shareholder is found to be involved in fraudulent activities, such as stealing from the company through its leasing operations, the company cannot unilaterally retrieve the shareholder's shares. Instead, the company must follow due process, which includes:

Internal Investigation and Evidence Gathering: The company must conduct a thorough internal investigation to gather evidence of the fraudulent activities. This may involve auditing financial records, reviewing lease agreements, and interviewing relevant parties.
Board Resolution: The company's board of directors must pass a resolution to address the issue. This resolution may include actions such as filing a legal case against the shareholder or initiating disciplinary measures.
Legal Action: The company can file a civil or criminal case against the shareholder. In a civil case, the company may seek restitution for the stolen amounts and damages. In a criminal case, the company can pursue charges such as theft, fraud, or estafa under the Revised Penal Code.
Court Order: The retrieval of shares must be done through a court order. The company cannot unilaterally cancel or retrieve shares without judicial intervention. If the court finds the shareholder guilty of the alleged fraudulent activities, it may order the forfeiture or transfer of the shareholder's shares as part of the judgment.

Shareholder Agreements and Bylaws

Companies may include provisions in their bylaws or shareholder agreements that address the handling of shares in cases of fraud or misconduct. These provisions can outline specific steps for the suspension or transfer of shares, subject to compliance with the RCC and other applicable laws.

Conclusion

In summary, a company in the Philippines cannot unilaterally retrieve shares from a shareholder found to be stealing. Instead, the company must follow due process, which involves conducting an investigation, passing a board resolution, and seeking judicial intervention. Legal remedies such as civil or criminal actions are available to address the fraudulent activities and potentially recover the stolen assets. It is crucial for companies to ensure that their actions comply with corporate governance principles and legal requirements to protect the rights of all shareholders.