Queries on the Transfers of Paid and Unpaid Subscriptions and the Issuance of Separate Certificate of Stock Thereon

October 28, 1964 CBP MEMORANDUM CIRCULAR TO ALL RURAL BANKS NO. 20-64 SUBJECT : Queries on the Transfers of Paid and Unpaid Subscriptions and the Issuance of Separate Certificate of Stock Thereon For your information and guidance, there is quoted hereunder our queries to the Securities and Exchange Commission in a letter dated July 3, 1964 and an opinion from the same Office dated August 24, 1964 on the above subject matter which is self-explanatory: LLjur "DEPARTMENT OF RURAL BANKS July 3, 1964 The Commissioner Securities and Exchange Commission Pasong Tamo, Makati Rizal Dear Sir : Your opinion is hereby requested on the following transactions in a Rural Bank: FACTS OF THE CASE : 'A' subscribed to 100 shares from the Rural Bank, paying only 50 shares thereof. Subsequently, 'A' transferred the paid 50 shares to 'B' and 'C' equally at 25 shares each, and later transferred the unpaid portion of 50 shares of the original subscription of 100 shares to 'D'. QUERIES : 1. Are the transfers of the paid 50 shares to 'B' and 'C' and the unpaid portion of 50 shares to 'D' legal and valid? 2. If so, can the Bank now issue separate Certificates of Stocks to 'B' and 'C' for the shares paid in and transferred? Your usual kind attention on the foregoing matters will be highly appreciated. Thank you. Very truly yours, S/HONESTO O. FRANCISCO T/HONESTO O. FRANCISCO Director " "Republic of the Philippines Department of Commerce and Industry SECURITIES AND EXCHANGE COMMISSION Almeda Building, Pasong Tamo Makati, Rizal August 24, 1964 Mr. Honesto O. Francisco Department of Rural Banks Central Bank of the Philippines Manila Sir: This has reference to your letter of July 3, 1964, requesting the opinion of this Commission on the queries posed therein. The answers thereto are given in the order in which they were presented. 1. A contract of subscription has been defined as 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 Cyclopedia of Corporation, 18). Thus in the case of Fua Cun vs. Summers [44 Phil.] it was held that when a subscriber pays for one-half () of the subscription price, he does not by virtue of such payment become entitled to the issuance of certificates for one-half the number of shares subscribed for, but that his rights consist in an equity in the total number of shares subscribed and upon payment of the unpaid portion of the subscription price he becomes entitled to the issuance of certificate of stock for his subscription. As a consequence of this principle, when a subscriber pays a part of the subscription price, the same is applied to the whole number of shares he subscribed for, so that no shares of stock covered by the subscription contract is considered to be paid in full until the subscription price has been fully paid. In other words, the partial payment of the subscription price will not split the shares covered by the subscription agreement into paid and unpaid shares. Consequently, there cannot be any such transfer of the paid shares of stock as the division never really existed. 2. Your second query need not be answered in view of the foregoing discussion. Very truly yours, S/MARIANO G. PINEDA T/MARIANO G. PINEDA Securities and Exchange Commissioner" Please be guided accordingly. (SGD.) HONESTO O. FRANCISCO Director