Unit of interest in a
corporation Evidence of the holder’s ownership of the stock and of his right as a shareholder
Incorporeal or Concrete and
intangible property tangible May be issued by the corporation even if the subscription is not fully paid. May be issued only if the subscription is fully paid.
Requirements for Validity of Transfers of Stocks
a. In case of shares covered by a certificate, the indorsement of the owner or his agent coupled with delivery is essential
b. Where no certificate has been issued or for some reason it is not in the possession of the stockholder, it may be transferred by means of a deed of assignment duly recorded in the books of the corporation
c. To be valid against the corporation and third persons, the transfer must be recorded in the stock and transfer book
d. The transferee must present the indorsed certificate to the corporate secretary who shall effect the transfer in the corporate books, issue a new stock certificate in favor of the transferee and cancel the former certificate.
Note: Only absolute transfers need be
registered. The pledge or mortgage itself need not be recorded in the stock and transfer book, but a chattel mortgage must comply with the Chattel Mortgage Law, and a pledge would require the shares to be placed in the possession of the creditor/pledgee. The agreement must appear in a public instrument to take effect against third persons. (Chemphil vs.
CA, 251 SCRA 257)
Effects of Unregistered Transfer of Stocks
a. It is valid and binding as between the transferor and the transferee
b. It is invalid as to the corporation except when notice is given to the corporation for purposes of registration
c. It is invalid as against corporate creditors and the transferor is still liable to the corporation d. It is invalid as to the attaching or executing creditors of the transferor, as well as subsequent purchasers in good faith without notice of the transfer.
Issuance of Certificate of Stock
No certificate of stock shall be issued until the full amount of the subscription is paid. Basis:
Doctrine of Individuality of Subscription that
espouses that the subscription is one, entire, indivisible, and whole contract, which cannot be divided into portions.
Collection of Unpaid Subscription
a. Upon the date specified in the subscription contract
b. Upon call by the Board of Directors 2. Involuntary payment
a. Extra-judicial
i. Delinquency sale ii. Application of dividends b. Judicial action
Note: The prescriptive period in case of
subscription of shares begins to run only from the time the board of directors declares that the balance are due and payable. It does not begin to run from the date of the subscription. (Garcia
vs. Suarez, 67 Phil. 441) DELINQUENCY
1. If the subscription contract fixes the date for payment, failure to pay on such date shall render the entire balance due and payable with interest. Thirty days therefrom, if still unpaid, the shares become delinquent, as of the due date, and subject to sale, unless the board declares otherwise.
2. If no date is fixed in the subscription contract, the board of directors can make the call for payment, and specify the due date.
The notice of call is mandatory. The failure
to pay on such date shall render the entire balance due and payable with interest. Thirty days therefrom, if still unpaid, the shares become delinquent, as of the date of call, and subject to sale, unless the board declares otherwise.
Effect:
A. Upon the stockholder
1. Accelerates the entire amount of the unpaid subscription; 2. Subjects the shares to interest, expenses and costs;
3. Disenfranchises the shares from any right that inheres to a shareholder, except the right to dividends (but which shall be applied to any amount due on said shares or, in the case of stock dividends, to be withheld by the corporation until full payment of the delinquent shares.
B. Upon the director owning delinquent shares
1. He can continue serving in that capacity unless and until said shares are totally bidded away, he continues to be the owner thereof and in the interim he is not disqualified.
2. A delinquent stockholder seeking to be elected as director may not be a candidate for, nor be duly elected to, the board.
Note: No delinquency stock shall be voted for or
be entitled to vote or representation at any stockholders meeting, nor shall the holder be entitled to any of the rights of a stockholder except the right to dividends in accordance with
the provisions of this Code until and unless he pays the amount due on his subscription with accrued interest, and the cost and expenses of advertisement, if any.
Procedure for the Sale of Delinquent Stocks
Call by resolution demanding payment of the balance. However, if the contract of subscription prescribes the date of payment, no call is necessary.
Notice of the board resolution given to the stockholders by the corporate secretary, either personally or by registered mail. Publication of notice of call is not required. Failure of the stockholder to pay within a grace
period of 30 days from the date specified in the contract of subscription or in the call, the stocks shall be declared delinquent and shall be subject to sale.
Notice of delinquency served on the subscribers either personally or registered mail and publication in a newspaper of general circulation in the province or the city where principal office is located for once a week for 2 consecutive weeks. Notice shall state the amount due on each subscription plus accrued interest, and the date, time and place of the sale which shall not be less than 30 days nor more than 60 days from the date the stocks become delinquent.
Sale of the delinquent shares at public auction.
Highest Bidder in Delinquency Sale
a. The person participating in the delinquency sale who offers to pay the full amount of the balance of the subscription together with the accrued interest, costs of advertisement and expenses of sale, for the smallest number of shares. In other words, the amount of the bid does not vary but only the number of shares to be bought changes and determines the highest bidder.
b. If there is no bidder as mentioned above, the corporation may bid for the same, and the total amount due shall be credited as paid in full in the books of the corporation. Such shares shall be considered as treasury shares.
Procedure for Issuance of New Certificate of Stock in lieu of Lost, Stolen or Destroyed Ones
1. Filing with the corporation an affidavit in triplicate by the registered owner setting forth the circumstances as to how the certificate was lost, stolen or destroyed, the number of shares, serial number of the certificate and the name of the corporation that issued the same.
2. Publication of notice of loss by the corporation in a newspaper of general circulation in the
place of the principal office, once a week for 3 consecutive weeks.
3. After the lapse of 1 year from the date of the last publication, if no contest has been presented, the corporation shall cancel in its books the certificate of stock, which has been lost, stolen or destroyed, and issue in lieu thereof a new certificate of stock.
However, if the registered owner files a bond or other securities as may be necessary to the board, the new certificate of stock may be issued even before the expiration of one (1) year period.