Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
31Activity
0 of .
Results for:
No results containing your search query
P. 1
Chapter XV Transfer of Shares

Chapter XV Transfer of Shares

Ratings:

4.5

(2)
|Views: 4,497 |Likes:
Published by Sui

More info:

Published by: Sui on Aug 10, 2008
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOC, PDF, TXT or read online from Scribd
See more
See less

02/05/2013

pdf

text

original

 
Chapter XV – Transfer of Shares
 — 
Free transferability of units of ownership in a corporate setting is one of the attractive features of the corporation
 — 
Shares of stock in a corporation are personal property and the ownerthereof has an inherent right, as an incident of his ownership, to transferthe same at will
 — 
SEC has allowed reasonable restrictions on transfer of shares in the AOIif the restrictions comply with Section 93:
o
that the restriction must appear in the AOI, by-laws and certificatesof stock
o
restrictions must not be more onerous than granting the existing SHsor the corporation the option to purchase the shares underreasonable terms
Manner and effectivity of transfer
 — 
Shares of stock, though intangible, are personal property, and are freelytransferable by the owner thereof Sec 63
 — 
Endorsement and delivery of the certificate and the registration of thetransfer in the book of the corporation is only one of the modesrecognized by law by which to legally and effectively sale and assignshares that would be binding not only on the parties but also to thecorporation and to third parties who will deal with the covered shares
 — 
Magsaysay-Labrador case: the sale or assignment must be registered inthe stock and transfer book of the corporation in order to be binding onthird parties. A transferee cannot claim a right to intervene as SH incorporate issues on the strength of the transfer of shares allegedlyexecuted by a registered SH
The Stock Certificate
 — 
63: capital shall be divided into shares for which certificates signed bythe president or VP, countersigned by secretary, sealed with thecorporate seal shall be issued in accordance with the by-laws
 — 
64: no certificate shall be issued until the full amount of his subscription+ interest + expenses shall be paid
o
therefore a subscriber must pay his subscription totally before acertificate can be issued to him…
o
… but an unpaid and not declared delinquent subscription can bevote for and upon in corporate meetings
o
delinquent shares, however, are entitled to dividends subject to therules in Sec 43
Nature of stock certificate
 — 
De los santos: stock certificate is not a negotiable instrument, but isconsidered quasi-negotiable:
o
it may be transferred by endorsement + delivery but…
o
… is not negotiable because the holder take it without prejudiceto such rights or defenses as registered owners or transferor’screditor may have under the law, subject to limitations imposedby law on estoppel
 — 
SEC: evidence of ownership of shares and that a person may ownshares without possessing a stock certificate, provided as he is dulyrecorded in the books as a subscriber and owner, he is entitled to allthe rights of a SH
Probative value
 — 
 The stock certificate, once issued, is a continuing affirmation orrepresentation that the stock described is valid and genuine and is atleast prima facie evidence of ownership of stock
o
as long as the subscriber is duly recorded in the books as theowner of the shares, he is considered a SH of record and entitledto all rights of a SH
Issuance of the stock certificate
 — 
Issuance of shares must have the signature of the president or VP,countersigned by the corporate secretary or assistant secretary, andsealed with the corporate seal
 — 
Issuance is NOT necessary to constitute the subscriber a SH of thecorporation…
 — 
… but delivery of the certificate is an essential element of theissuance
 — 
63: Every SH has the right to have a proper certificate issued to himupon demand:
o
provided he complies with the requirements/conditions in 64 i.e.FULL payment of subscription
 — 
SEC: remedies available to a SH if a corporation wrongfully refuses toissue a certificate:
o
File a suit for specific performance
o
File for alternative relief by way of damages
o
File a petition for mandamus to compel the issuance
o
Rescind the contract of subscription and sue to recover payment
Negotiation of the certificate of stock 
 — 
Endorsement + delivery = quasi-negotiability
1
 
o
Endorsement: essential requisite
o
SEC: AOI cannot do away with the endorsement requisite for a validnegotiation
o
63 is mandatory
 — 
 Three (3) purposes:
o
Sale and assignment
o
Pursuant to a trust or nominee arrangement
o
Pledge or other encumbrance of the shares
1.Indorsement of stock certificate; registration in corporatebooks
 — 
At the back of ever stock certificate is a transfer form with blank spacesfor the transferee’s name
 — 
When a SH wants to transfer his shares, all he has to do is to sign theform. He need not fill the blanks as this may be done by the transferee
 — 
Sec 74: The stock and transfer book shall be kept in the principal officeof the corporation or in the office of its stock transfer agent and shall beopen for inspection to any director or SH at reasonable hours onbusiness days
2.Effect of lack of registration
 — 
Until registration is accomplished, the transfer, though valid between theparties, cannot be effective as against the corporation
 — 
Unrecorded transferees cannot enjoy the status of a SH—he cannot voteor be voted for and will not be entitled to dividends
 — 
Until challenged in a proper proceeding, a SH of record has the right toparticipate in any meeting
 — 
In order to be recognized as SH for voting purposes, his transfer must berecorded on the books
 — 
If refused, he can go to court to prove his right
 — 
Until transfer is registered, transferee is not a SH but an outsider, andany action he may wish to bring against the corporation must bebrought before the regular courts and not the SEC
 — 
An unregistered transfer, not being effective against persons other thanthe parties thereto, cannot prevail over the rights of a subsequentattaching creditor
Uson v Diasomoto
. F: Unson is the creditor of Diosomoto, who is originalowner of 75 shares of North Electric which were levied by a writ of attachment to satisfy the judgment creditor. Uson obtained judgmentagainst Diosomoto and the shares were sold at public auction to the judgment creditor Uson.--Diosomoto sold the shares attached to Barcelon and delivered thecorresponding certificates. The transfer to Barcelon was not registered andnoted on the books of the corporation until after 9 months after theattachment was levied and later (9 months after) transferred to HPE Jollye. HPL Jollye claims to be owner of the 75 shares and presents acertificate of stock issued by North Electric.I: W/n a bona fide transfer of shares of a corporation, not registered ornoted on the books, is valid as against a subsequent lawful attachment of said shares, regardless of whether the attaching creditor had actualnotice of the transfer or not . H: GR: NO> No transfer is valid except as between the parties unless it isduly registered. All transfers of shares must be entered on the books of the corporation. All transfers not so validly entered are invalid as toattaching or execution creditors of the assignors, of the corporation, andas to all subsequent purchasers in GF, and even to all parties interested.All transfers not so entered on the books are absolutely void, not becausethey are without notice or fraudulent in law, but because they are madevoid by the statute. Courts in the Phils adhere to the principle that theright of the owner of the shares to transfer to same by delivery of thecertificate, whether it be regarded as statutory or common law right, islimited and restricted by the express provision that “no transfer shall bevalid except as between the parties, until the transfer is entered andnoted upon the books of the corporation. The right of the owner of the shares of a corporation to transfer the sameby delivery of the certificate, whether it be regarded by the expressprovision that “no transfer however shall be valid except as between theparties, until the transfer is entered and noted upon the books of thecorporation.”--The transfer of 75 shares in the NEC, made by Diosomito to Barcelonwas not valid as to Uson, on Jan 18, 1932, the date on w/c they still stoodin the name of Diosomito on the books of the corp.
Nautica Canning Corp v Yumul
. F: Roberto C. Yumul was appointedCOO/General Manager of Nautica. On the same date, First DominionPrime Holdings, Inc., Nautica’s parent company, through its ChairmanAlvin Y. Dee, granted Yumul an
Option to Purchase
up to 15% of the totalstocks it subscribed from Nautica. A
Deed of Trust and Assignment 
wasexecuted between First Dominion Prime Holdings, Inc. and Yumul wherebythe former assigned 14,999 of its subscribed shares in Nautica to thelatter. The deed stated that the 14,999
shares were acquired and paid for in the name of the ASSIGNOR only for convenience, but actually executed in behalf of and in trust for the ASSIGNEE
.” After Yumul’sresignation from Nautica on August 5, 1996, he wrote a letter to Deerequesting the latter to formalize his offer to buy Yumul’s 15% share inNautica on or before August 20, 1996; and demanding the issuance of 
2
 
the corresponding certificate of shares in his name should Dee refuse to buythe same. Dee, through Atty. Fernando R. Arguelles, Jr., Nautica’s corporatesecretary, denied the request claiming that Yumul was not a stockholder of Nautica. Yumul requested that the
Deed of Trust and Assignment 
berecorded in the Stock and Transfer Book of Nautica, and that he, as astockholder, be allowed to inspect its books and records. Yumul’s requestswere denied allegedly because he neither exercised the option to purchasethe shares nor paid for the acquisition price of the 14,999 shares. Atty.Arguelles maintained that the cash dividend received by Yumul is held byhim only in trust for First Dominion Prime Holdings, Inc. Nautica et alcontend that Yumul was not a stockholder of Nautica; that he was just anominal owner of one share as the beneficial ownership belonged to Deewho paid for said share when Nautica was incorporated. They also allegethat Yumul was given the option to purchase shares of stocks in Nauticaunder the
Option to Purchase
, and since he failed to exercise the option,there was thus no cause or consideration for the
Deed of Trust and  Assignment 
, which makes it void for being simulated or fictitious.H: The SEC and CA correctly found Yumul to be a stockholder of Nautica, of one share of stock recorded in Yumul’s name, although allegedly held intrust for Dee. Nautica’s Articles of Incorporation and By-laws, as well as theGeneral Information Sheet filed with the SEC indicated that Yumul was anincorporator and subscriber of one share. Even granting that there was anagreement between Yumul and Dee whereby the former is holding the sharein trust for Dee, the same is binding only as between them. From thecorporation’s vantage point, Yumul is its stockholder with one share,considering that there is no showing that Yumul transferred his subscriptionto Dee, the alleged real owner of the share, after Nautica’s incorporation.Other than petitioners’ self-serving assertion that the beneficial ownershipbelongs to Dee, they failed to show that the subscription was transferred toDee after Nautica’s incorporation. The conduct of the parties also constitutesufficient proof of Yumul’s status as a stockholder. On April 4, 1995, Yumulwas elected during the regular annual stockholders’ meeting as a Director of Nautica’s Board of Directors. Thereafter, he was elected as president of Nautica. Thus, Nautica and its stockholders knowingly held respondent outto the public as an officer and a stockholder of the corporation. The SC refrained from ruling on whether or not Yumul can compel thecorporate secretary to register said deed. It held it to be a question which iscivil in nature and thus beyond the ambit of the SEC, the court of origin of the current action. It is only after an appropriate case is filed and decisionrendered thereon by the proper forum can the issue be resolved.
Razon v IAC
. F: Enrique Razon organized the E. Razon, Inc. for the purposeof bidding for the arrastre services in South Harbor. Vicente Chuidian is theadministrator of the intestate estate of Juan Telesforo Chuidian. A stockcertificate for 1,500 shares of stock of E Razon Inc was issued in thename of Juan T. Chuidian. On the basis of the 1,500 shares of stock, thelate Juan T. Chuidian and after him, Vicente Chuidian, were elected asdirectors of E. Razon, Inc. Enrique Razon had not questioned theownership by Juan T. Chuidian of the shares of stock in question and hadnot brought any action to have the certificate of stock over the saidshares cancelled. The certificate of stock was in the possession of defendant Razon who refused to deliver said shares to the plaintiff, untilthe same was surrendered by defendant Razon and deposited in a safetybox in Philippine Bank of Commerce. 1,500 shares of stook under StockCertificate No. 003 were delivered by the late Chuidian to Enriquebecause it was the latter who paid for all the subscription on the sharesof stock in the defendant corporation and the understanding was that he(defendant Razon) was the owner of the said shares of stock and was tohave possession thereof until such time as he was paid therefor by theother nominal incorporators/ stockholders. Since then, Enrique Razon wasin possession of said stock certificate even during the lifetime of the lateChuidian, from the time the late Chuidian delivered the said stockcertificate to Razon. By agreement of the parties delivered it for depositwith the bank under the joint custody of the parties. TC ruled Razon ownsthe shares, IAC reverses.Razon claims that the shares of stock were registered in the name of Chuidian only as nominal stockholder and with the agreement that thesaid shares of stock were owned and held by the petitioner but Chuidianwas given the option to buy the same. Vicente B. Chuidian insists that theappellate court's decision declaring his deceased father Juan T. Chuidianas owner of the 1,500 shares of stock of E. Razon, Inc. should haveincluded all cash and stock dividends and all the pre-emptive rightsaccruing to the said 1,500 shares of stock.I: Who owns the shares? Does ownership of the said shares include allcash and dividends?H: (1) Chuidian owns the shares. For an effective, transfer of shares of stock the mode and manner of transfer as prescribed by law must befollowed. As
 
provided
 
under the Corporation Code of the Philippines,shares of stock may be transferred by delivery to the transferee of thecertificate properly indorsed. Title may be vested in the transferee by thedelivery of the duly indorsed certificate of stock. However, no transfershall be valid, except as between the parties until the transfer is properlyrecorded in the books of the corporation. In the instant case, there is nodispute that the questioned 1,500 shares of stock of E. Razon, Inc. are inthe name of the late Juan Chuidian in the books of the corporation.Moreover, the records show that during his lifetime Chuidian was electedmember of the Board of Directors of the corporation which clearly showsthat he was a stockholder of the corporation. From the point of view of 
3

Activity (31)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
Leslie Octaviano liked this
Mike Llamas liked this
Mike Llamas liked this
Laurie Modeste liked this
roansalanga liked this
Janz Serrano liked this
Tenette liked this
jellypat liked this

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->