Dr. Raul D. Jara

September 3, 1990 Dr. Raul D. Jara Medical Center Manila United Nations Avenue M a n i l a S i r : This refers to your letter dated June 26, 1990 inquiring whether under the following facts, a majority stockholder can vote the shares of stock which he has subscribed but not fully paid as of the date prescribed by the Corporation. cdlex "Mr. X subscribed to one million shares of Corporation Y but paid only a fraction (64 shares) thereof as of December 1988 which is the prescribed period to fully pay the subscribed shares. Can Mr. X claim ownership of one million shares and vote on the stockholder's meeting of October 1989? Are the unpaid subscribed shares owned by Corporation Y or by Mr. X as of October 1989? What is the status of the unpaid shares as of October 1989?" Under Section 72 of the Corporation Code, quoted hereunder, subscriptions not fully paid but not delinquent have all the rights of a stockholder which include among others, the right to vote. "SECTION 72. Rights of unpaid shares . Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a stockholder ." (Emphasis supplied) The moment the unpaid subscription becomes delinquent, the holder thereof loses the right to vote. The Corporation Code provides thus: "SECTION 71. Effects of delinquency . No delinquent stock shall be voted for or be entitled to vote or to representation at any stockholders' meeting , nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to dividends in accordance with the provisions of this Code, until and unless he pays the amount due on his subscription with accrued interest, and the costs and expenses of advertisement, if any." (Emphasis supplied) As to when an unpaid subscription is considered delinquent, the pertinent provision of the Corporation Code provides in part: "SECTION 67. Payment of balance of subscription. .... Payment of any unpaid subscription or any percentage thereof, together with the interest accrued, if any, shall be made on the date specified in the contract of subscription or on the date stated in the call made by the board .Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different rate of interest is provided in the by-laws, computed from such date until full payment. If within thirty (30) days from the said date no payment is made ,all the stocks covered by said subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise." (Emphasis supplied) Thus, subscriptions are deemed delinquent upon failure of the stockholder to pay within 30 days from the date fixed in the subscription contract or on the date stated in the call made by the Board. As to whether the delinquent shares shall cover the entire or only the unpaid portion of the stockholder's subscription, Section 64 of the Corporation Code enunciates the doctrine that a subscription is one, entire indivisible whole contract. It cannot be divided into portions , so that the stockholder will not be entitled to a certificate of stock until he has paid the full amount of his subscription. The Code provides thus: "SECTION 64. Issuance of stock certificates . No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares),if any is due has been paid." Consistent thereto, Section 67 of the Corporation Code provides in part: "If within thirty (30) days from the said date no payment is made, all stocks covered by said subscription shall thereupon become delinquent. ..." (Emphasis supplied) Thus, the whole subscription shall be declared delinquent upon failure of the stockholder to pay the balance due and payable within the period stated in Section 67 of the Corporation Code. Accordingly, if the subscription referred to in your query is considered delinquent pursuant to the above provisions of the Corporation Code, the stockholder can not vote the shares covering the entire subscription. As to the status of delinquent shares, Section 68 of the Corporation Code permits the corporation to put the delinquent shares for sale at public auction. Unless the delinquent shares are sold in accordance with the said section, the ownership thereof remains with the stockholder. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner