DEPARTMENT OF LEGAL MANAGEMENT

College of Arts and Sciences

San Beda University

CORPORATION LAW – WEEK 3

ADMANA – ANDRINO – ASUELO – ALAFRO – BAGACAY – BALINAS – BARRETTO – BORROMEO – COLIS – DE GUIA

ADVANTAGEOUS FEATURES OF THE CORPORATE MEDIUM

1. Strong Juridical Personality

Under Article 44 of the Civil Code, a corporation is a juridical person. It has an identity
granted to it by law.

Two Classifications of Juridical Persons:

a) Public Juridical Persons

b) Private Juridical Persons

A Corporation may be classified as both:

a) Public Corporations are classified as Public Juridical Persons. It is formed and

organized for the Government of a portion of the State. Its purpose is the general
good and welfare.
b) Private Corporations are classified as Private Juridical Persons. Such are formed
for some private purpose, benefit, aim, or end.

A corporation is an entity separate and distinct from its stockholder. While not in fact and
in reality, a person, the law treats the corporation as though it were a person by process of fiction
or by regarding it as an artificial person distinct and separate from its individual stockholders.
(Remo, Jr. v. IAC, G.R. No. L-67626, April 18, 1989)

The Corporation has a strong legal personality separate and distinct from the shareholders
or members composing it. (Art. 44 (3), Civil Code) The death, incapacity, withdrawal, or
insolvency of any of its shareholders or members does not affect its juridical personality. This
attribute guarantees business continuity and certainty of long-term contractual dealings.

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

Having a separate legal personality, a corporation may: (1) contract and transact in its own
name; (2) acquire and possess property of all kinds; (3) incur obligations; and (4) bring civil or
criminal actions, in conformity with the laws and regulations of their organizations. (Art. 46, NCC)

Like solemn/formal contracts, certain formalities of the law must be complied with before
the creation of a corporation. Unlike in partnership which can be constituted in any form, a
Corporation begins to exist as a juridical person from the moment a certificate of incorporation is
granted to it by the Securities and Exchange Commission (SEC); and thereupon the incorporators,
stockholders, members and their successors shall constitute a body corporate under the name
stated in the articles of incorporation for the period of time mentioned therein, unless said period
is extended or the corporation is sooner dissolved in accordance with the law. (Sec 18, Revised
Corporation Code)

To organize a corporation that could claim a juridical personality of its own and transact
business as such is NOT a matter of absolute right but a PRIVILEGE which may be enjoyed only
under such terms as the state may deem necessary to impose. (Ang Pue and Co. v. Secretary of
Commerce and Industry, G.R. No. L-17295, July 30, 1962)

In addition, a corporation’s creation, organization, management, and dissolution are

standardized by being governed by a general incorporation law [RA 11232] pursuant to Article 45
(2) of Civil Code that private corporations are regulated by laws of general application on the
subject. This standardization makes the commercial practice and jurisprudential law governing the
corporation tend to be more established and reliable when compared to other media of doing
business.

Article 1775 of the Civil Code.

Art. 1775. Associations and societies, whose articles are kept secret among the members,
and wherein any one of the members may contract in his own name with third persons, shall
have no juridical personality, and shall be governed by the provisions relating to co-ownership.

Importance of Giving Publicity to Articles of Incorporation

It is essential that the partners are fully informed not only of the agreement but of all matters
affecting the corporation. It is necessary that the articles be given publicity for the protection not
only of the members themselves but also third persons from fraud and deceit.

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

Jose Remo Jr. v. Intermediate Appellate Court and EB Marcha Transport Company Inc.
G.R. No. 67626. April 18, 1989

FACTS:

1. In the latter part of December, 1977 the board of directors of Akron Customs Brokerage
Corporation adopted a resolution authorizing the purchase of thirteen (13) trucks from EB
Marcha Transport Company to be paid out of a loan the corporation may secure from any
lending institution.

2. Feliciano Coprada, as President and Chairman of Akron, purchased the trucks from private
respondent for and in consideration of P525,000.00 as evidenced by a deed of absolute sale
with terms of payment as follows: P50,000 down payment, balance payable within the 60th
days from date of execution of agreement, and until said balance is fully paid, the down
payment shall accrue as rentals of the 13 trucks. Also, Akron’s failure to pay the balance
within 60 days, shall constitute as a chattel mortgage lien covering said cargo truck and the
parties may allow an extension of 30 days and thereafter private respondent may ask for a
revocation of the contract and the reconveyance of all said trucks.

3. The obligation is further secured by a promissory note executed by Coprada in favor of

Akron, noting that the balance shall be paid from the proceeds of a loan obtained from the
Development Bank of the Philippines (DBP) within sixty (60) days.

4. EB transport tried to collect from Coprada but the latter promised to pay only upon the
release of the Developmental Bank Loan. Meanwhile, two of the trucks were sold
authorized by a board resolution under a pacto de retro sale to Mr. Bais of the Perpetual
Loans and Savings Bank.

5. EB Transport found that no loan application was ever filed by Akron with DBP.

6. Coprada wrote to the EB Transport, begging for a grace period of until the end of the month
to pay the balance of the purchase price; that he will update the rentals within the week;
and in case he fails, then he will return the 13 units should the EB Transport elect to get
back the same.

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

7. Private respondent demands the return of the trucks and the payment of back rentals.
Coprada asked for another grace period as he was expecting the approval of his loan
application from a certain financing company, and that ten trucks have been returned to
Bagbag, Novaliches

8. EB Transport filed a complaint for the recovery of the purchase price or the return of the
13 trucks with damages against Akron and its officers.

9. Remo denied any participation in the transaction and alleged that Akron has a distinct
corporate personality. He was, however, declared in default for his failure to attend the pre-
trial.

10. Meanwhile, Remo sold all his shares to Coprada. Subsequently, Akron changed its name
to Akron Transport International, Inc. which assumed the liability of Akron to private
respondent.

11. The lower courts held that Akron’s officers should pay jointly and severally. Hence, this
petition.

ISSUE: Whether the petitioner is personally liable for the obligation of the Corporation.

RULING:

NO. A corporation is an entity separate and distinct from its stockholder. While not in fact
and in reality, a person, the law treats the corporation as though it were a person through fiction
by the law or by regarding it as an artificial person distinct and separate from its individual
stockholders. However, the corporate fiction may be disregarded when it "is used to defeat public
convenience, justify wrong, protect fraud, or defend crime". There are many occasions when the
Supreme Court pierced the corporate veil because of its use to protect fraud and to justify wrong.
In the instant case, there is no strong basis to pierce the corporate veil of Akron and hold Remo
personally liable for its obligation to private respondents.

Even if petitioner Remo was still a member of the board of directors, then, and he
participated in authorizing the purchase of Akron to be paid out of a loan to be secured from a
lending institution, it does not appear that it was intended to defraud anyone and EB Transport.

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

If there was any fraud or misrepresentation imposed on private respondent EB Transport,

it is Coprada who should account for the same and not Remo because it is Coprada who negotiated
with said respondent and signed a promissory note to guarantee the payment of the unpaid balance
of the purchase price out of the proceeds of a loan he supposedly sought from the DBP.
Furthermore, the word "WE' in the said promissory note refers to the corporation and Remo did
not sign the said promissory note so he cannot be personally bound thereby.

The sale through pacto de retro of the two units to a third person by the corporation does
not constitute fraud because the 13 units were sold through a deed of absolute sale hence Akron is
free to dispose of the same.

As to the amendment of the articles of incorporation of Akron thereby changing its name
to Akron Transport International, Inc., the new corporation confirmed and assumed the obligation
of the old corporation. There is no indication of an attempt on the part of Akron to evade payment
of its obligation to private respondents. Lastly, The sale of shares during the pendency of the case
does not constitute fraud since the petitioner as a stockholder has an inherent right to dispose of
his shares of stock anytime he so desires.

2. Centralized Management

Under Section 23 of the Revised Corporation Code, a corporation’s corporate powers, the
exercise of the attributes of ownership over its properties, and the management of its business
enterprise are all centralized in the Board of Directors Trustees. Following this, the corporate
attribute of “centralized management” presents a more stable and efficient system of governance
and dealings considering that the management prerogatives are centralized in its Board of
Directors.

The exercise of corporate power is usually embodied in board resolutions and confirmed
in the certificates issued by the corporate secretary. However, it bears great emphasis that the board
of directors may expressly delegate specific powers to any of its officers. Nonetheless the power
of the board is not without limitation. There are certain corporate acts which require the approval
of the stockholders. (Great Asian Sales Center Corp. v. Court of Appeals, G.R. No. 105774, April
25, 2002)

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

In line with this, it is worth noting that these stockholders are not agents of the corporation,
nor can they bind the corporations, unlike in a partnership setting, where each partner may bind
the partnership, even without the knowledge of other partners.

Sec. 23, BP 68 v. Sec. 22, RA 11232

1. Provided for terms as to election of Directors and Trustees;

2. Included the rule that if a trustee who ceases to be a member of the corporation shall cease
to be such;
3. Provided a definition of independent directors and their subjectivities;
4. Required the mandatory presence of independent directors in the Board of Directors of
corporations vested with public interest constituting at least 20% of such board:

a. Corporations covered by the SRC, whose securities are registered with the
Commission, corporations listed with an exchange or asset of at least P 50M and
having 200 or more holders of shares, each holding at least 100 shares of a class of
its equity shares;
b. Banks and quasi-banks, NSSLs, pawnshops, corporations engaged in money
service business, pre-need, trust and insurance companies, and other financial
intermediaries;
c. Other corporations engaged in the business vested with public interest similar to
the above, as may be determined by the Commission, after taking into account
relevant factors which are germane to the objective and purpose of requiring the
election of an independent director.

Great Asian Sales Center Corp v. Court of Appeals

G.R. No. 105774, April 25, 2002

FACTS

1. The Board of Directors of Great Asian Sales Center Corporation approved a resolution
which authorizes Arsenio Lim Piat Jr., its General Manager and Treasure, to secure a loan
from Bancasia and to sign all the necessary documents to secure the loan.

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

2. Thereafter, the Board of Directors of the said corporation approved another resolution
authorizing the latter to secure a discounting line with Bancasia and designated Arsenio
again as their authorized signatory to sign all the instruments, documents and checks.

3. To guarantee solidarily the debts of Great Asian to Bancasia, Tan Chong Lin signed a
Surety Agreement in favor of Bancasia. After sometime, Great Asia, through Arsenio,
signed four (4) Deeds of Assignment of Receivables assigning to Bancasia fifteen (15)
postdated checks which were subsequently dishonored by the drawee banks.
4. Subsequently, Great Asian filed a petition for insolvency and followed by Bacansia filing
a complaint for collection of a sum against Great Asian and Tan Cong Lin.

5. However, such claim was denied by Great Asian claiming that it was unfounded, malicious,
baseless and unlawfully instituted and even raised the alleged lack of authority of Arsenio
to sign the Deeds of Assignment.

6. The trial court decided in favor of the plaintiff. And on appeal, the Court of Appeals
sustained the decision of the lower court, deleting only the award of attorney’s fees. Hence,
this petition.

ISSUE: Whether Arsenio had authority to execute the Deeds of Assignment, and thus, bind Great
Asian

RULING:

YES. The Corporation Code of the Philippines vests in the board of directors the exercise
of the corporate powers of the corporation, save in those instances where the Code requires
stockholders’ approval for certain specific acts. Section 23 of the Code provides:

"SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be exercised,
all business conducted and all property of such corporations controlled and held by the
board of directors or trustees x x x."

The two board resolutions clearly show that Great Asian authorized Arsenio to secure a
loan or discounting line from Bancasia. It also categorized Arsenio as the authorized signatory to
sign and deliver all the implementing documents, including checks, for Great Asian. The second

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

board resolution even gave Arsenio full authority to agree with Bancasia on the terms and
conditions of the discounting line.

The only issue to determine is whether the Deeds of Assignment are indeed the transactions
the board of directors of Great Asian authorized Arsenio to sign under the two board resolutions.

In the financing industry, the term "discounting line" means a credit facility with a
financing company or bank, which allows a business entity to sell, on a continuing basis, its
accounts receivable at a discount. The term "discount" means the sale of a receivable at less than
its face value. The purpose of a discounting line is to enable a business entity to generate instant
cash out of its receivables which are still to mature at future dates.

Through the Deeds of Assignment, the Great Asian generated instant cash from its fifteen
checks, which were still not due and demandable then. In short, instead of waiting for the maturity
dates of the fifteen postdated checks, Great Asian sold the checks to Bancasia at less than the total
face value of the checks. In exchange for receiving an amount less than the face value of the checks,
Great Asian obtained immediately much needed cash.

The foregoing facts show that the discounting arrangements entered into by Arsenio under
the Deeds of Assignment were the very transactions envisioned in the two board resolutions of
Great Asian to raise funds for its business. Arsenio did exactly what the board of directors of Great
Asian directed and authorized him to do. He acted completely within the limits of his authority
under the two board resolutions. Therefore, he had all the proper and necessary authority from the
board of directors of Great Asian to sign the Deed of Assignment.

3. Limited Liability to Investors and Non-Liability to Officers

Shareholders of a corporation in the Philippines have limited liability. As such, they will
not be personally liable for the corporation’s debts. Should the company fail, their personal assets
will be safe. The extent of their liability is the same as the value of their investment. Thus, there
are ways to circumvent the law to make the shareholder liable for more than his actual share. (ex.
The chairman makes himself joint debtor for a loan)

Generally, a corporate officer is not held personally liable, as long as his or her actions fall
within the scope of their position and the parameters of the law. An officer of a corporation may
serve on the board of directors or fulfill a managerial role.

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

The liability in a corporation is limited to their shares as distinguished from partnerships

where even assets of the partnership are already exhausted, creditors can still go after the individual
properties of the partners. In a partnership, an investor can lose those assets that have not been
intended for the partnership venture, (ARTS. 1816, 1817, and 1824 NCC) while in a corporation,
every shareholder or member is assured limited liability.

However, the privilege of being considered as a separate and distinct entity is confined to
limited uses. Should this be exercised for fraudulent, unfair or illegal purposes (eg, to evade taxes,
escape liabilities to third parties, confuse legitimate issues of employer-employee relationship,
protect fraud), the veil of corporate entity may be pierced, and the stockholder may then be held
personally liable.

By virtue of the separate juridical personality of a corporation, the corporate debt or credit is not
the debt or credit of the stockholder. This protection from liability for shareholders is the principle
of limited liability. PNB v. Hydro Resources Contractors Corporation, 693 SCRA 631 (1998)

It is hornbook law that corporate personality is a shield against personal liability of its
officers — a corporate officer and his spouse cannot be made personally liable under a trust receipt
where he entered into and signed the contract clearly in his official capacity. Consolidated Bank
and Trust Corporation v, CA, 356 SCRA 761 (2001)

A corporation and its shareholders may choose whether or not to concede the advantage of
limited liability; while in a partnership, there is already an implied contract that if the partnership’s
assets are insufficient, the partners’ separate properties would be liable. Villanueva, C.L &
Villanueva-Tiansay, T.S. (2021). Philippine Corporate Law.

NON-LIABILITY OF OFFICERS

San Juan Structural and Steel Fabricators vs CA

G.R. No. 129459. September 29, 1998

FACTS:

San Juan Structural and Steel Fabricators, Inc. alleges that in February 14, 1989, it entered
through its president, Andres Co, into the disputed agreement with Respondent Motorich Sales
Corporation, which was in turn allegedly represented by its treasurer, Nenita Lee Gruenberg. San
Juan Structural insists that when Gruenberg and Co affixed their signatures on the contract, they

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

both consented to be bound by the terms thereof. San Juan Structural contends that the contract is
binding on the 2 corporations.

On March 2, 1989, San Juan Structural was ready with the amount corresponding to the
balance, covered by Metrobank cashier’s check payable to Motorich Sales Corporation; that the
parties were supposed to meet in the office of San Juan Structural but Motorich’s treasurer, Nenita
Lee Gruenberg did not appear; That San Juan Structural despite repeated demands and in utter
disregard of its commitments had refused to execute the transfer of rights/deed of assignment
which is necessary to transfer the certificate of title.

In its answer, Motorich and Nenita Lee Gruenberg interposed as affirmative defense that
the President and Chairman of Motorich did not sign the adverted agreement to in the amended
complaint and that Mrs. Gruenberg’s signature on the agreement is inadequate to bind Motorich.
That the signature of the President and Chairman of Motorich is required.

ISSUE: Whether the act of the company’s treasurer can bind the corporation without its
authorization

RULING:

No. Such a contract cannot bind Motorich, because it never authorized or ratified such sale.

A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or members
and may not be sold by the stockholders or members without express authorization from the
corporation’s board of directors.

In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita
Gruenberg, its treasurer, to sell the subject parcel of land. Consequently, San Juan Structural had
the burden of proving that Nenita Gruenberg was in fact authorized to represent and bind Motorich
in the transaction. Petitioner failed to discharge this burden. Its offer of evidence before the trial
court contained no proof of such authority.

A corporate officer or agent may represent and bind the corporation in transactions with
third persons to the extent that the authority to do so has been conferred upon him, and this includes
powers which have been intentionally conferred, and also such powers as, in the usual course of
the particular business, are incidental to, or may be implied from, the powers intentionally
conferred, powers added by custom and usage, as usually pertaining to the particular officer or

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

agent, and such apparent powers as the corporation has caused person dealing with the officer or
agent to believe that it has conferred.

As a general rule, the acts of corporate officers within the scope of their authority are
binding on the corporation. But when these officers exceed their authority, their actions, cannot
bind the corporation, unless it has ratified such acts as is estopped from disclaiming them.

Because Motorich had never given a written authorization to respondent Gruenberg to sell
its parcel of land, we hold that the February 14, 1989, agreement entered into by the latter with
petitioner is void under Article 1874 of the Civil Code. Being inexistent and void from the
beginning, said contract cannot be ratified.

Clearly then, Nenita Gruenberg did not testify that Motorich had authorized her to sell its
property. On the other hand, her testimony demonstrates that the president of Petitioner
Corporation, in his great desire to buy the property, threw caution to the wind by offering and
paying the earnest money without first verifying Gruenberg’s authority to sell the lot.

One of the advantages of a corporation is the limitation of an investor’s liability to the

amount of investment. This feature flows from the legal theory that a corporate entity is separate
and distinct from its stockholders.

EXCEPTION TO NON-LIABILITY OF OFFICERS

B.P. 68, Sec. 31 & RA 11232, Section 30. Liability of directors, trustees or officers. –
Directors or trustees who wilfully and knowingly vote for or assent to patently unlawful acts of
the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the
corporation or acquire any personal or pecuniary interest in conflict with their duty as such
directors or trustees shall be liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or members and other persons.

Solidary liability will then attach to the directors, officers or employees of the corporation
in certain circumstances, such as (Heirs of Fe Tan Uy v. International Exchange Bank Bank,
L-166282, February 13, 2013) :

1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for
or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross
negligence in directing the corporate affairs; and (c) are guilty of conflict of interest to the
prejudice of the corporation, its stockholders or members, and other persons;

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto;

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the corporation; or

4. When a director, trustee or officer is made, by specific provision of law, personally liable for
his corporate action.

LIABILITY FOR CORPORATE TORTS OF STOCKHOLDERS IN A CLOSED

CORPORATION

Section 100. Agreements by stockholders -

5. To the extent that the stockholders are actively engaged in the business and affairs of a
close corporation, the stockholders shall be held to strict fiduciary duties to each other and
among themselves. Said stockholders shall be personally liable for corporate torts unless the
corporation has obtained reasonably adequate liability insurance

Stockholders who are actively engaged in the management or operation of the business and
affairs of a close corporation shall be personally liable for corporate torts unless the corporation
has obtained reasonable adequate liability insurance. Naguiat vs. NLRC, 269 SCRA 564 (1996)

4. Free-Transferability of Units of Ownership (Shares) for Investors

Section 62, RA 11232 (Section 63, B.P. 68)

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 bylaws. Shares of stock 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 the transfer, the number of the certificate or

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

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 stocks 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
transferable in the books of the corporation.

General Rule: The shares of stocks can be transferred without the consent of the other
stockholders. Transfer of shares is a matter of right if the stockholder. (inherent right)

Ø The Corporation cannot PREVENT such transfer.

Rationale: It places more liquidity in the corporate setting and encourages investors to channel
their investments through corporate vehicles. (refers to legal persons and legal arrangements)

Transfer of Shares is a Matter of Eight of the Holder

● It is the inherent right of the stockholder to dispose of his shares of stock which he owns
as any other property of his shares of stock (which he owns as any other property of his)
anytime he so desires. (PNB vs Ritratto Group, G.R. No. 142616, July 31, 2001)

● “Until registration is accomplished, the transfer, though valid between the parties, cannot
be effective as against the corporation.” Thus, the unrecorded transfer cannot enjoy the
status of a stockholder; he cannot vote nor be voted for, and he will not be entitled to
dividends. The corporation will be protected when it pays dividend to the registered owner
despite a previous transfer of which it had no knowledge. The purpose of registration
therefore is twofold: to enable the transferee to exercise all the rights of a stockholder and
to inform the corporation of any change in shares ownership so that it can ascertain the
persons entitled to the rights and subject to the liabilities of a stockholder.

Authority to Transfer Stock Does Not Empower The Corporation to Restrict

● Authority granted to regulate the transfer of a shareholder’s stock does not empower the
corporation to restrict the right of a stockholder to transfer his shares, but merely authorizes
the adoption of regulations as to formalities and procedure to be followed in effecting
transfer. (Thomson vs Court of Appeals, G.R. No. 116631, October 28, 1998)

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 DEPARTMENT OF LEGAL MANAGEMENT
College of Arts and Sciences
San Beda University

Exception: Transfer would Cause Violations of the Law

● If the transfer would cause violations of the law (ex. Ratio requirement for local-foreign
holdings), then the corporation may restrict the right transfer of the holder’s shares.

Well-Developed Market

● The system of free transferability of the units of investments in the corporate setting
presumes a well-developed market for shares of stock.

To bind 3rd persons

● By provision of law, while it is true that in so far as the buyer and seller is concerned, the
sale (transfer of shares/certificate) is made by meeting of minds. However, there is a
provision in the law that before such sale is binding to 3rd persons, it must be recorded in
the Books of the Corporation - showing the names of the parties to the transaction, the date
of the transfer, the number of the certificate or certificates, and the number of shares
transferred.

● In order to be valid among 3rd persons, transfer must be registered in the books, if not, it
will only be binding among the parties.

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