Rolando A. Suarez & Associates

September 17, 1980 Rolando A. Suarez & Associates Suite 308, Amparo Bldg. United Nations Avenue Ermita, Manila Gentlemen: This has reference to your letter of May 19, 1980, inquiring on the following: "1. Can a stock certificate be issued with respect to the shares equivalent to the paid-up portion at the time of incorporation before the subscribed capital stock is paid or before there is a corporate call on the unpaid subscription? "2. With reference to the ruling in the Lingayen Gulf case, will the issuance of a "stock certificate be in order or justified under Article IV of the By-Laws which provides as follows: 'Each stockholder whose share(s) of stock has been paid in full shall be entitled to a stock; certificate or certification for such share(s) of stock. Every certificate shall be signed by the President and countersigned by the Secretary and sealed with the corporation seal and shall state on its face its number, the date of issue, and the number of shares for which it was issued, and the name of the person in whose favor it was issued. "3. Are there newly enunciated rulings of policies of the Securities and Exchange Commission on this matter?" Relative to your first question, pursuant to the Supreme Court ruling in Baltazar vs. Lingayen Gulf Electric Power Co., Inc., et al; Rose vs. Lingayen Gulf Electric Power Co., Inc. et al; and Baltazar and Rose vs. Acena Nos. L-16236, L-16237 and L-16238 decided June 30, 1965, a corporation at present, in the absence of provisions in its by-laws to the contrary, may apply payments made by subscribers on account of their subscriptions, either as (a) full payment for the corresponding number of shares of stock, the par value of each of which is covered by such payment; (b) as payment pro-rata of each and all the entire number of shares subscribed for. Should the corporation apply the payments under the first alternative and issue stock certificates corresponding to the number of shares paid for, its call for payment of the unpaid portion of the subscription and its subsequent declaration of delinquency will not affect the fully paid-up stock represented by stock certificates but only the unpaid shares for which no certificates of stock have been issued, and only those have been legally shorn of their voting right by said declaration of delinquency. A stockholder is not entitled as a matter of right to the issuance of a certificate of stock corresponding to the number of shares paid for by him if the entire subscription is not fully paid unless the corporation has adopted the first alternative hereinabove adverted to, that is to say, to issue stock certificates of stockholders corresponding to partial payments made on account of their subscription. Assuredly, if the corporation has not adopted the first alternative, it has to make use of the second alternative which is to apply the payments made "as payments pro-rata to each and all of the entire number of shares subscribed for",which means that until the entire subscription is paid, no stock certificate can be issued. prcd Anent your second question, in the light of the ruling aforecited, we believe that inasmuch as it is provided in Article IV of the by-laws you mentioned, which was approved before the effectivity of the New Code, it is in order and justified to issue certificates of stocks to stockholders whose share(s) of stock has been paid in full. Anent your third query, please be informed that the Corporation Code of the Philippines signed by His Excellency, Prime Minister Ferdinand E. Marcos, on May 1, 1980, provides that "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 (Section 64). Please be guided accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department