January 12, 1996

Mr. Gregorio Tengco, Jr.

Form Multipurpose Cooperative
8867 Sampaloc Ave. cor Santol St.,
SAV, Makati City

Sir:

This refers to the letter dated January 5, 1996 informing this Commission that your corporation has
acquired all the outstanding shares of the corporations enumerated therein which are facing,
disenfranchisement as published in the Philippine Star newspaper and requesting not to disenfranchise
them as your corporation is determined to operate said firms.

In connection therewith, you are hereby advised to immediately communicate with the Supervision and
Monitoring Department of this Commission, the Department in charge of monitoring compliance with
SEC reportorial requirements.

Relative to the issue on whether or not a corporation can legally exist with only one (1) stockholder
brought about by transfer of ownership, the Corporation Code provides:

"SECTION 2. Corporation Defined. — A corporation is an artificial being created by operation of law,

having the right of succession and the powers attributes and properties expressly authorized by law or
incident to its existence. (Emphasis supplied)

One of the attributes granted to a registered corporation under the above provision is that it has the
right of "succession" which means that a corporation has a continuity of existence during its term of
existence stated in the articles of incorporation, independent from that of its stockholders. Thus, its
continued existence cannot be affected by any change in the stockholders, whether the change be the
consequences of death of a stockholder or transfer of shares by a stockholder to third persons.
Accordingly, transfer of shares to a qualified transferee neither dissolves a corporation nor renders the
same inoperative.

Furthermore, while Section 10 of the Corporation Code requires that at least five persons may form a
corporation, nevertheless, it only requires the ownership of at least one (1) share in order to be eligible
as an incorporator, stockholder or director. For purposes of stock ownership under said provision, the
general rule is that beneficial ownership is not necessary and that a person who holds the legal title to
the stock on the books of the corporation is qualified, although the beneficial ownership may be in
another. In other words it is sufficient that the title is what counts and it is the person whose name
appears as owner on the books of the company who is the stockholder. Thus, the Commission
previously opined that a person who holds the naked title to the stock as appearing in the stock and
transfer book of the corporation is eligible as directors notwithstanding absence of his beneficial right,
title, or interest in the proper. (SEC letter, dated Jan. 18, 1993 addressed to Mr. Fred P. Cladera citing
previous SEC opinions) Therefore, a corporation may be wholly or substantially owned by a single
individual or corporation. For purpose of complying with the statutory minimum number of
stockholder/directors, the owner may transfer one (1) qualifying share to each nominee stockholders for
purposes of qualifying them to become members of the Board, without giving them the beneficial
ownership of the shares. Said transfer would be more of a "trust" and not a transfer of "ownership",
hence , the beneficial interest in such share will remain with the assignor while the assignee will hold
only the legal title to the stock. In such case, the transferee should be described in the Deed of
Assignment, corporate books and certificate of stock merely as a qualifying shareholder or nominee of
the transferor. The fact that the stock standing on the corporate books is in the name of the person only
as a qualifying shareholder or that the holder of the stock certificate is described merely as a nominee
serves as a notice to the corporation and third parties that the holder thereof does not hold the share in
his own right, but holds it only as a nominee for the benefit of the real owner. (Ltr. to Attys. Elma
Christine R. Leogardo and Cynthia D. Nuval-Ambrosio dated August 4, 1995 citing previous SEC opinions)

Very truly yours,

(SGD.) PERFECTO R. YASAY, JR.

Acting Chairman

**********
January 8, 1990

Davao Integrated Port and

Stevedoring Service Corporation
c/o Mr. Isidro A. Panlasigue, Jr.
International Port of Davao
Sasa, Davao, City

Gentlemen :

This refers to your letter dated November 13, 1989, requesting opinion on the query posed therein.

You stated that Davao Integrated Port & Stevedoring Services Corporation (DIPSSCOR) is a stevedoring
corporation owned primarily by four constituent corporations, one of which is Luzon Stevedoring
Corporation (LUSTEVECO). One of the former members of the board of directors of DIPSSCOR is Mr.
Ambrosio J. Makalintal, Jr. who was issued a certificate of stock for one share to qualify him as member
of the board to represent LUSTEVECO. National Development Corporation (NDC) now claims to be the
owner of the LUSTEVECO shares of stocks including the one issued to Mr. Makalintal, but the shares of
stocks of LUSTEVECO have not yet been registered in the stock and transfer book as having been
transferred to NDC. The certificate of stock for one share issued to Mr. Makalintal had been lost. NDC is
now requesting that the lost stock certificate of Mr. Makalintal be replaced and that another one be
issued in the name of its nominee, Atty. Josephine A. Batiller to qualify her as member of the board of
directors of DIPSSCOR. The letter-request of NDC is without any supporting board resolution of either
LUSTEVECO or NDC. During the meeting of DIPSSCOR on October 30, 1989, Atty. Batiller was nominated
to become a member of the Board to represent LUSTEVECO, provided that she will subsequently qualify
by having a certificate of stock issued in her name. During the meeting, 34,999 shares out of the 35,000
shares of DIPSSCOR voted to waive the legal requirement of one share of stock to qualify Atty. Batiller,
with the understanding that if she is elected, she becomes a member of the Board as of the date when a
certificate of stock is issued in her name.

Your queries are:

1. Is it true that just because the lost certificate is only for one share to qualify Mr. Makalintal as a
director, the stock certificate can now be replaced on the basis of the affidavit of loss, without
complying with the publication requirement of Section 73 of the Corporation Code?
2. Should the request to replace the lost certificate and transfer to Atty. Batiller be supported by a
board resolution of LUSTEVECO?
3. Instead of LUSTEVECO board resolution, will an NDC board resolution be a valid and legal basis
to replace the lost certificate and transfer it to Atty. Batiller?
4. Was the nomination and election of Atty. Batiller valid and legal under the circumstances above-
stated.

Anent your first query, a corporation may be compelled to issue a new certificate if a bond of indemnity
is given; or might do so voluntarily, and it could be compelled to issue a new certificate without any
indemnity where, upon the facts, it is reasonably certain that the original certificate will not reappear, as
where there is clear proof that the original had been destroyed, or that it had been lost or stolen, not
having an assignment by the owner, or where the certificate was lost by the corporation itself by
carelessness, or if the corporation was otherwise protected for in such a case the corporation could not
incur any liability by reason of the original certificate. (11 Fletcher Sec. 5180).

In the light of the foregoing, a corporation may voluntarily issue a new certificate in lieu of the original
certificate of stock which has been lost without the publication requirement provided that the
corporation is certain as to the real transferee of the nominal share.

Relative to your second and third query, since the certificate evidencing the nominal share had been
lost, a board resolution of the corporation who appears in the stock and transfer book to be the
beneficial owner of the share represented by the lost certificate is necessary to transfer the share to the
new nominee. It is to be noted that a nominee or qualifying shareholder only possesses the naked
ownership of the share. The beneficial ownership of the stock remains with the transferor. The fact that
one stock standing on the corporate books is in the name of the person as nominee in the certificate or
that the holder thereof is described merely as a nominee in the corporate books, is a notice to the
corporation that the nominee does not hold the share in his own right. Therefore, the authority to
transfer the share in favor of a new nominee should come from the beneficial owner of the share as
appearing in the stock and transfer book of DIPSSCOR.

Your fourth query is answered by the following jurisprudence on the matter:

"Under statutes requiring that a director be a shareholder, the fact that a person does not own stock at
the time of his election or appointment to office does not disqualify him, if he becomes a shareholder
before entering upon the duties of the office." (2 Fletcher, sec. 304, citing Cupo v. Community Nat. Bank
& Trust Co. of New York, 324 F. Supp. 1390 (EDNY; 130 ALR 156).

Please be advised accordingly.

Very truly yours,

(SGD.) RODOLFO L. SAMARISTA
Associate Commissioner
 **********
September 2, 1997

Mayor Vicente B. Bermejo

Municipality of Panay
Province of Capiz

Sir:

This refers to your letter dated August 11, 1997 requesting opinion on whether or not a juridical entity
or a corporation is qualified to occupy the position of a director in a private stock corporation.
A corporation cannot act by itself being a mere juridical person, but it can be represented by its officers
or authorized agents who can be elected as members of the Board of Directors if they are qualified.
For purposes of compliance with the basic qualification required under Section 23 of the Corporation
Code re: stock ownership of at least one (1) share, the Commission, on several occasions, has opined
that "beneficial ownership" is not necessary and that a person who holds the "legal title" to the stock,
on the books of the Corporation is qualified, although the beneficial ownership may be in another. In
other words, it is sufficient that the title to the stock, as it appears on the books of the corporation, is in
the director, since the legal title is what counts and it is the person whose name appears as owner in the
books of the company who is the stockholder and eligible as director. For instance, a director may hold
his stock as "trustee" and yet be legally qualified. So a person to whom one share of stock has been
transferred for the express purpose of qualifying him as director is eligible. (SEC Opinion addressed
Rilloraza, Africa, De Ocampo & Africa dtd. 3-4-88 citing previous SEC Opinion and 2 Fletcher Cyc. Corp.
Sec. 300 pp. 91-92) The transfer, however, should contain a description that the trustee holds the stock
merely as a "nominee" for purposes of qualifying him as member of the Board. This situation normally
occurs in a parent-subsidiary relationship.

Accordingly, while a corporation cannot be "directly" elected as member of the Board of Directors, its
duly authorized officer, agent or trustee who has been designated as "nominee" in accordance with the
above procedure, may be eligible to be elected as director to represent a corporation.

Very truly yours,

(SGD.) PERFECTO R. YASAY, JR.

Chairman

***********

October 7, 1992
Mr. Conrado S. Reyes
Philippine Journalists, Inc.
The Journal Building, Railroad St.,
Between 19th and 20th Street,
Port Area, Metro Manila

Sir:
This refers to your letter requesting opinion on the following queries:
1. What is the nature of the title or ownership of a stockholder to a qualifying share which was
registered in his name without any monetary or pecuniary consideration but only to qualify him as a
director during his term? Is it absolute, legal or beneficial ownership, qualified or restrictive? prcd
2. If a director's term has expired and he was presented with his stock certificate for one qualifying
share registered in his name under the foregoing circumstances, may be lawfully retain it and refuse to
sign and return it?
3. May the Board of Directors under the foregoing circumstances and after appropriate demand or
due notice (without publication) cancel the aforesaid qualifying share or transfer it to another
stockholder also as a qualifying share as directed by the original owner?
4. If not, what is the most expeditious and least expensive legal remedy for the corporation?
5. In the event a director dies without endorsing his qualifying share, may the surviving spouse or
principal heir endorse it in blank for the estate or heirs of the deceased, if there be no objection?

If the purpose of the transfer of the stock is only to qualify the transferee for the election in the Board of
Directors without giving him the beneficial ownership thereof, said transfer would be more of a trust
and not a transfer of ownership. Hence, the beneficial interest in such share will remain with the
assignor while the assignee will hold only the legal title to the stock. (SEC Opinion dated March 5, 1980,
citing Fisher, The Philippine law of Stock Corporations, p. 234). In this case, the transferee should be
described in the corporate books and certificate to be issued merely as qualifying shareholder or
nominee of the transferor. The fact that the stock standing on the corporate books is in the name of the
person only as a qualifying shareholder or that the holder of the stock certificate is described merely as
a nominee serves as a notice to the corporation and third parties that the holder thereof does not hold
the share in his own right, but holds it only as a nominee for the benefit of the real owner.

Accordingly, the beneficial owner of the share as appearing in the stock and transfer book of the
corporation has the authority to transfer such qualifying share in favor of a new nominee even without
the endorsement of the stock certificate by the previous nominee, unless there is an agreement to the
contrary.

Please be advised accordingly.

Very truly yours,

(SGD.) ROSARIO N. LOPEZ

Chairman

**********

April 20, 1988

Atty. Jose Malvar Villegas, Jr.
2nd Floor, Muñoz Building
710 Epifanio delos Santos Avenue
Cubao, Quezon City
Metro Manila

Sir:
This refers to your letter dated March 25, 1988, requesting opinion on the following queries:

1. Can the person being nominated as representing the interest of a particular group in a
corporation being incorporated in the SEC, makes it appear that the money he/she is investing in the
said corporation is his/her own and does not belong to other corporation, firm or person(s)?
2. Can he/she later on, after the corporation is finally registered and operating, suddenly claim,
upon her investigation by the Bureau of Internal Revenue (BIR) that the money he/she invested in the
new corporation does not belong to her, but to some other entity or person(s) instead?
3. Is there an SEC requirement that nominees in a corporation being organized should be identified
as such by the corporation, firm or person(s) nominating him/her as such nominees and to whose
name(s) it/their investment in the corporation being organized, is/are being placed?
In relation to your first and second query please be informed that a subscription to the stock of a
corporation is a contract by which the subscriber agrees to take a certain number of shares of the capital
stock of a corporation paying for the same, or expressly, or impliedly promising to pay for the same. (4
Fletcher Cyc. Corp., 1985 rev. vol., sec. 1363, p. 3). When a person subscribes to the stock of a
corporation which is being incorporated, the Commission shall presume that he/she is investing in her
own personal capacity. Generally, therefore, he/she cannot evade any liability arising out of his/her
unpaid subscription. However, a subscriber may create a trust by his subscription, as where he
subscribes as trustee. (Fletcher, Supra., sec. 1399 citing Levi v. Evans, 57 F 677), and a trust may be
presumed in a proper case. (Butler v. Merchants Ins., Co., 14 ala. 777).

Anent your third query, the Commission had occasion to rule in a previous opinion that transfer of
shares of stock to a trustee for the purpose of qualifying him as a director, should contain a description
that the nominee holds the stocks merely as the trustee thereof . (SEC Opinion dated May 21, 1986
addressed to Atty. Rafael T. Durian). Your third query is therefore answered in the affirmative.

Please be advised accordingly.

Very truly yours,

(SGD.) JULIO A. SULIT, JR.

Chairman