Revised Corporation Code (RA 11232) – Title VII – Stocks and Stockholders

TITLE VII – STOCKS AND STOCKHOLDERS

Section 59. Subscription Contract. – Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase of some or other contract.

Section 60. Pre-incorporation Subscription. – A subscription of shares in a corporation still to be formed shall be irrevocable for a period of at least six (6) months from the date of subscription, unless all of the other subscribers consent to the revocation, or the corporation fails to incorporate within the same period or within a longer period stipulated in the contract of subscription. No pre-incorporation subscription may be revoked after the articles of incorporation is submitted to the Commission.

Section 61. Consideration for Stocks. – Stocks shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be:

• (a) Actual cash paid to the corporation;
• (b) Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purpose at a fair valuation equal to the par or issued value of the stock issued;
• (c) Labor performed for or services actually rendered to the corporation;
• (d) Previously incurred indebtedness of the corporation;
• (e) Amounts transferred from unrestricted retained earnings to stated capital;
• (f) Outstanding shares exchanged for stocks in the event of reclassification or conversion;
• (g) Shares of stock in another corporation; and/or,
• (h) Other generally accepted form of consideration.

 Where the consideration is other than actual cash, or consists of intangible property such as patents or copyrights, the valuation thereof shall initially be determined by the stockholders or board of directors, subject to the approval of the Commission.

Shares of stock shall not be issued for promissory notes or future service. The same considerations provided in this section, insofar as applicable, may be used for the issuance of bonds by the corporation.

The issued price of no-par value shares may be fixed in the articles of incorporation or by the board of directors pursuant to the authority conferred by the articles of incorporation or the bylaws, or if not so fixed, by the stockholders representing at least a majority of the outstanding capital stock at a meeting duly called for the purpose.

Section 62. Certificate of Stock and Transfer of Shares. – The capital stock of 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 stocks so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner, his attorney-in-fact, or any 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 showing the names of the parties to the transaction, the date of transfer, the number of certificate or certificates, and the number of shares transferred. The Commission may require corporations whose securities are traded in trading markets and which can reasonably demonstrate their capability to do so to issue their securities or shares of stock in uncertificated or scripless form in accordance with the rules of the Commission.

No shares of stock against which the corporation holds any unpaid claim shall be transferred in the books of the corporation.

Section 63. Issuance of Stock Certificates. – No certificate of stock shall be issued to a subscriber until the full amount of subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid.

Section 64. Liability of Directors for Watered Stocks. – A director or officer of a corporation who: (a) consent to the issuance of stocks for a consideration less than its par or issued value; (b) consent to the issuance of stocks for a consideration other than case, valued in excess of its fair value; or (c) having knowledge of the insufficient consideration, does not file a written objection with the corporate secretary, shall be liable to the corporation or its creditors, solidarily with the stockholder concerned for the difference between the value received at the time of issuance of the stock and the par or issued value of the same.

Section 65. Interest on Unpaid Subscription. – Subscribers of stocks shall be liable to the corporation for interest on all unpaid subscription from the date of subscription, if so required by and at he rate of interest fixed in the subscription contract. If no rate is fixed in the subscription contract, the prevailing legal rate shall apply.

Section 66. Payment of Balance of Subscription. – Subject to the provisions of the subscription contract, the board of directors may, at any time, declare due and payable to the corporation unpaid subscriptions and may collect the same or such percentage thereof, in either case, with accrued interest, if any, as it may deem necessary.

Payment of unpaid subscription or any percentage thereof, together with any interest accrued, shall be made on the date specified in the subscription contract or on the date stated in the call made by the board. Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription contract. The interest shall be computed from the date specified, until full payment of the subscription. If no payment is made within thirty (30) days from the said date, all stocks covered by the subscription shall thereupon become delinquent and shall be subject to the sale as hereinafter provided, unless the board of directors orders otherwise.

Section 67. Delinquency Sale. – The board of directors may, by resolution, order the sale of delinquent stocks and shall specifically state the amount due on each subscription plus all accrued interest, and the date, time and place of the sale which shall not be less than thirty (30) days or more than sixty (60) days from the date the stocks become delinquent.

Notice of the sale, with a copy of the resolution, shall be sent to every delinquent stockholder either personally, be registered mail, or through other means provided in the bylaws. The same shall be published once a week for two (2) consecutive weeks in a newspaper of general circulation in the province or city where the principal office of the corporation is located.

Unless the delinquent stockholder pays to the corporation on or before the date specified for the sale of the delinquent stock, the balance due on the former’s subscription, plus accrued interest, costs of advertisement and expenses of sale, or unless the board of directors otherwise orders, said delinquent stock shall be sold at a public auction to such bidder who shall offer to pay the full amount of the balance of the subscription together with accrued interest, cost of advertisement and expenses of sale, for the smallest number of shares or fraction of a share. The stock so purchased shall be transferred to such purchaser in the books of the corporation and a certificate for such stock shall be issued in the purchaser’s favor. The remaining shares, if any, shall be credited in favor of the delinquent stockholder who shall likewise be entitled to the issuance of a certificate of stock covering such shares.

Should there be no bidder at a public auction who offers to pay the full amount of the balance on the subscription together with accrued interest, costs of advertisement, and expenses of sale, for the smallest number of shares or fraction of share, the corporation may, subject to the provisions of this Code, bid for the same, and the total amount due shall be credited as fully paid in the books of the corporation. Title to all the shares of stock covered by the subscription shall be vested in the corporation as treasury shares and may be disposed of by said corporation in accordance with the provisions of this Code.

Section 68. When Sale May be Questioned. – No action to recover delinquent stock sold can be questioned upon the ground of irregularity or defect in the notice of sale, it in the sale itself of the delinquent stock, unless the party seeking to maintain such action first pays or tenders to the party holding the stock the sum for which the same was sold, with interest from the date of sale at the legal rate. No such action shall be maintained unless a complaint is filed within six (6) months from the date of sale.

Section 69. Court Action to Recover Unpaid Subscription. – Nothing in this Code shall prevent the corporation from collecting through court action, the amount due on any unpaid subscription, with accrued interest, costs and expenses.

Section 70. Effect of Delinquency. – No delinquent stock shall be voted for, be entitled to vote, or be represented at any stockholder’s meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except that right to dividends in accordance with the provisions of this Code, until and unless payment is made by the holder of such delinquent stock for the amount due on the subscription with accrued interest, and the costs and expenses of advertisement, if any.

Section 71. Rights of Unpaid Shares, Nondelinquent. – Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a stockholder.

Section 72. Lost or Destroyed Certificates. – The following procedures shall be followed by a corporation in issuing new certificates of stock in lieu of those which have been lost, stolen or destroyed:

(a) The registered owner of a certificate of stock in a corporation or such person’s legal representative shall file with the corporation an affidavit in triplicate setting forth, if possible, the circumstances as to how the certificates was lost, stolen or destroyed, the number of shares represented by such certificate, the serial number of the certificate and the name of the corporation which issued the same. The owner of such certificate of stock shall also submit such other information and evidence as may be deemed necessary; and,

(b) After verifying the affidavit and other information and evidence with the books of the corporation, the corporation shall publish a notice in a newspaper of general circulation in the place where the corporation has its principal office, once a week for three (3) consecutive weeks at the expense of the registered owner of the certificate of stock which has been lost, stolen or destroyed. The notice shall state the name of the corporation, the name of the registered owner, the serial number of the certificate, the number of shares represented by such certificate, and shall state that after expiration of one (1) year from the date of the last publication, if no contest has been presented to the corporation regarding the certificate of stock, the right to make such contest shall be barred and the corporation shall cancel the lost, destroyed or stolen certificate of stock in the books. In lieu thereof, the corporation shall issue a new certificate of stock, unless the registered owner files a bond or other security as may be required, effective for a period of one (1) year, for such amount and in such for and with such securities as may be satisfactory to the board of directors, in which case a new certificate may be issued even before the expiration of the one (1) year period provided herein. If a contest has  been presented to the corporation or if an action is pending in court regarding the ownership of the certificate of stock which has been lost, destroyed or stolen, the issuance of new certificate of stock in lieu thereof shall be suspended until the court renders a final decision regarding the ownership of the certificate of stock which has been lost, stolen or destroyed. Except in case of fraud, bad faith, or negligence on the part of the corporation and its officers, no action may be brought against any corporation which have issued certificate of stock in lieu of those lost, stolen or destroyed pursuant to the above-described.

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