Mr. Gregorio S. Ponce

February 23, 1982 Mr. Gregorio S. Ponce No. 1026-D Conception Aguila St. Quiapo, Manila Dear Mr. Ponce: This has reference to your letter-query dated February 10, 1982 requesting enlightenment on the provision of Section 68 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and posing the following questions: "1. Are the delinquent shares limited only those shares which were subscribed but unpaid or do they include those which were partially paid for by the subscriber? LexLib 2. Can the corporation accept an offer to buy the delinquent shares at a price less than the par value thereof since the book value of the shares at the time of the sale is less than the par value. If so, who determines the selling price thereof, is it the Board of Directors or the Commission, and 3. Assuming that the offer to buy the delinquent shares is acceptable to less than the par value, can the price thereof be paid in installment. If so, to what extent? With respect to your first query, please note that Section 68 of the Corporation Code refers to the sale of delinquent stocks in general terms, without specifying whether or not the delinquent shares cover only the unpaid portion of stockholder's subscription. The same must therefore be construed and correlated with Sections 67 and 64 of said Code. Section 64 of the Code, unlike the old Corporation Law, enunciates the doctrine that a subscription is one, entire and indivisible 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 together with interest and expenses (in case of delinquent shares), if any is due, (CF. Section 64). Consistent thereto, Section 67 of the Corporation Code prescribes that "failure to pay on such date shall render its entire balance due and payable . . . If within thirty (30) days from the said date no payment is made all stocks covered by said subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided ..." In this regard, there is authority to the effect the whole subscription shall be declared delinquent, to wit: "Thus, partial payments shall be deemed fortified 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 on call of directors." (Balbin & Gloria, The Corporation Organization: New Dimensions, p 80, 1981 ed). Relative to your second and third queries, Section 68 of the Code clearly answers both in the negative. For facility and emphasis, the pertinent provisions of Section 68 are reproduced: "SECTION 68. Delinquent sale . The Board of Directors may, by resolution, order the sale of delinquent stock and shall specifically state the amount due on each subscription pus accrued interest, and the date, time and place of the sale ... xxx xxx xxx Unless the delinquent stockholder pays to the corporation on or before the date specified for the sole of the delinquent stock, ...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 the accrued interest costs of advertisement and expenses of sale for the smallest number of shares or fraction of a sale ... Should there be no bidder at the public auction who offers to pay the full amount of the balance on the subscription together with accrued interest costs of advertisement and expenses of sale for the smallest number of shares or fraction of a share, the corporation may subject to the provision of this Code bid for the same . . ." Accordingly, this Commission has no authority to fix and determine the selling price of the delinquent stocks, for the Corporation Code expressly prescribes that the resolution of the board of directors shall specifically state the amount due on each subscription plus all accrued interests, cost of advertisements and expenses of sale and the bidder must offer to pay the said amounts during the public auction. If there is no such bidder, then it is the corporation that may bid for the same in accordance with the provisions of the code. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner