Atty. Manuel M. Antonio

June 26, 1984 Atty. Manuel M. Antonio 2283 Pasong Tamo Extension Makati, Metro Manila Sir : This has reference to your letter dated May 29, 1984, requesting the opinion of this Commission on the queries posed therein. It appears therein that subscription to the shares of a stock corporation is paid up to 50%.The board called for payment an additional ten percent (10%) of the subscription and in due course the same was declared delinquent when it remained unpaid. You posed the following queries in view of the provision of the second paragraph of Section 67 of the Corporation Code: a) Does the term "entire balance" refer to the "call",i.e. only to the unpaid 10% additional call, or to the "subscription",i.e. 50% which consists of the additional call and 40% which was not subject to call? b) In either case, at the auction sale, what is due in addition to the accrued interests, costs of advertisement and expenses of sale? c) Should the answer be that the term "entire balance" only refers to the "call",what then would be the maximum number of shares a bidder in the auction sale can get, and what happens to the 40% which was not originally subject to call? The second paragraph of Section 67 of the Corporation Code is quoted hereunder: "...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 stock 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) As regards your first query, the term "entire balance" refers not only to the unpaid 10% additional call but also to the subscription. In a previous opinion, this Commission has ruled that: "Pursuant to the above-quoted rule, the sale of the entire subscription of the stockholder is therefore allowed. llcd In this regard, there is authority to the effect that the whole subscription be declared delinquent, to wit: Thus, partial payments shall be deemed forfeited and the whole subscription declared delinquent upon failure to pay on the date fixed in the contract or on the date fixed by the Board of directors." ( Ltr. to Atty. Adolfo Martinez dtd. September 3, 1982 citing Ltr. to Mr. Gregorio Ponce dtd.,Feb. 23, 1982 ). The reason for the above is because of the doctrine that a subscription is one, entire and indivisible whole contract, as set forth by Section 64 of the Corporation Code, quoted hereunder: "No certificate of stock shall be issued to a subscriber until full amount of his subscription together with interest and expenses (in case of delinquent shares),if any, is due, has been paid. Anent your second query, the pertinent provision of Section 68 of the Corporation Code expressly provides, and we quote: "xxx xxx xxx Unless the delinquent stockholder pays to the corporation, on or before the date specified for the sale of the delinquent stock, the balance due on his subscription plus accrued interests, cost of advertisement and expenses of sale or unless the board of directors otherwise orders, said delinquent stock shall be sold at public auction to such bidder who shall offer to pay the full amount of the balance on the subscription together with accrued interest, costs of smallest number of shares or fraction of a share ...." (Emphasis supplied) From the above-mentioned provision, it is clear that in addition to the accrued interests, costs of advertisement and expenses of sales, the balance on his subscription is likewise due. Relative to your third question, the same is rendered moot and academic by our answers to your first and second queries. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner