DOJ Opinion No. 151, s. 1993

DOJ OPINION NO. 151 , s. 1993 October 26, 1993 Ms. Caridad Valdehuesa Treasurer of the Philippines Bureau of the Treasury Intramuros, Manila M a d a m : This has reference to your request for opinion on whether or not non-stock government corporations may be required by your Office to issue certificates of stock to the National Government ("NG") as evidence of the latter's equity contributions therein. prcd You state that the charters of government corporations normally provide that their authorized capitalization shall be fully or partially subscribed by the NG; that equity releases to such corporations are covered by Advices of Allotment issued by the Department of Budget and Management; that the Bureau of the Treasury, on the other hand, requires these corporations to issue the corresponding certificates of stock to the NG as proof of its equity ownership therein; and that some of the entities, however, refuse to comply on the ground that they are non-stock corporations or that their charters do not provided for the issuance of such certificates of stock to the NG. Hence, the instant query. We believe it is unnecessary, even inappropriate, for non-stock government corporations to issue certificates of stocks. The reason is that a certificate of stock is that instrument which evidences the ownership of a share in the capital stock of a stock corporation in order that the holder thereof may share in the profits of such corporation and to deliver such certificate to any purchaser of his corporate share. Non-stock corporations, however, do not issue stocks and distribute dividends to their members since they are not created for profit but for the public good and welfare (De Leon, The Corporation Code, 1989 Ed., p. 38). While non-stock corporations are not prohibited from engaging in gainful activities, any profit derived therefrom cannot be distributed as dividends to the members, but can be used only for furtherance of corporate aims (see Sec. 87, Corporation Code). Besides, membership in non-stock corporations in non-transferable (Sec. 90, Id.), hence, the rationale for a stock certificate to facilitate transfer of shares does not apply to non-profit corporations. But although it may not be appropriate for non-stock corporations to issue stock certificates to its members, the latter's equity contributions therein may be evidenced in other ways. For one, pertinent regulations of the Securities and Exchange Commission require that non-stock corporations must have a book of membership in which shall be indicated the names, addresses and signatures of the members (See Agbayani; Commercial Laws, Vol. 3, 1990 Ed., P. 603). Additionally, it has been said that non-stock corporations may issue membership certificates in favor of its members, although such certificates should not entitle them to dividends (See Salonga, Philippine Law on Corporations, 1952 Ed., p. 40 citing Ballantine). Please be advised accordingly. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary