Mr. Eduardo L. De Jesus

August 24, 1992 Mr. Eduardo L. De Jesus 199 Dr. Alejos Street La Loma, Quezon City S i r : This refers to your letter of July 24, 1992 requesting clarification of the opinion of the SEC dated September 12, 1992 which states in part, to wit: "...If the stockholder has not paid the full amount of his subscription, he cannot transfer part of it in view of the indivisible nature of subscription contract ..." cdlex As stated, a certain lawyer opines that the above SEC opinion holds true only where there is a subscription contract in writing, and not where the subscription is by mere oral agreement, and where there is conformity of the corporation, the transfer of a part of a subscription not fully paid is allowable. Hence, your request for clarification on the matter. A subscription to the stock of a corporation is generally 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 Sec. 1363). Thus, Section 60 of the Corporation Code provides: " Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase or some other contract." (Emphasis supplied) Under the Civil Code of the Philippines, a "contract" need not be in writing for it to be valid. What the law requires is a "meeting of the minds" of the contracting parties. Said Law states thus: "ARTICLE 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service." (Emphasis supplied) As there appears to be no law or rule in this jurisdiction requiring a form of subscription to capital stock as a requisite for its validity, the same need not be in writing. A subscription, therefore, may arise out of mutual dealings between an individual and the corporation. Thus, "it was held that a person who accepts a certificate of stock from a corporation or who acts as stockholder by participating in stockholders' meetings, making payment, or otherwise, thereby becomes a stockholder, and liable as such, not only to creditors, but also to the corporation, although there may have been no express contract of subscription". (Agbayani, Corporation Code, citing Spielberges v. Nielson, Ballantine p. 400-401, quoting 4 Fletcher, 60-63) Accordingly, the above mentioned SEC opinion applies to all kinds of subscription to capital stock, regardless of whatever form they are constituted. cdlex Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman