Question

Aurora Company, a newly formed corporation engaged in manufacturing and distributing health products, is in the process of organizing its capital structure. Section 12 of the Corporation Code provides the guidelines for the capitalization of corporations.

Given the scenario below, answer the questions that follow:

1. Aurora Company has authorized capital stock of PHP 10,000,000 divided into 1,000,000 common shares with a par value of PHP 10 per share. The founders of the company intend to initially subscribe to 60% of the authorized capital stock and fully pay the subscription price upon incorporation. The remaining 40% will be offered to the public through an initial public offering (IPO).
2. Mr. Santos, one of the founders, wants to subscribe to 20% of the authorized capital stock but is short on funds to fully pay for his subscription. He proposes the inclusion of an installment plan for payment of the subscription price.

Questions:

1. Is the proposed plan of the founders in accordance with the provisions of Section 12 of the Corporation Code? Explain.
2. Can Mr. Santos be allowed to pay for his subscription on an installment basis? Discuss the legal implications and restrictions, if any.