Atty. Adolfo G. Martinez

September 3, 1982 Atty. Adolfo G. Martinez 2670 Taliba St. Makati, Metro Manila Sir : This has reference to your letter dated July 8, 1982, regarding the queries which you have posed therein: It appears therein that a stockholder subscribed to P100,000 worth of shares of a corporation and paid 25% of said subscription. Upon call by the Board of Directors for payment of another 15%,he paid P15,000 in compliance with the same. Subsequently, and upon call by the Board of Directors, another 10% was declared due for payment but he defaulted. He was declared delinquent and his total subscription of P100,000 was sold at public auction. The highest bidder bidded the amount equivalent to 10% which was called by the Board of Directors as due and payable, plus 60% or P60,000 representing the remaining portion of the subscription. You now want to be enlightened on the following queries: 1. Is the principle of indivisibility of subscription absolute? Section 64 of the Corporation Code provides, and we quote: "SECTION 64. Issuance of stock certificates . No certificates 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." The aforementioned provision sets forth the doctrine that a subscription is one, entire and indivisible whole contract. It cannot be divided into portions, so that the stockholders will not be entitled to a certificate of stock until he has paid the full amount of his subscription together with interest and expenses, if any is due. It must be noted that the above-mentioned provision does not speak of any exception. 2. Is the sale at public auction of the stockholders' entire subscription, which includes the 60% allowed? If it is allowed, would this not effect be inconsistent with Board's resolution requiring only 10% of the entire subscription as due and payable? Would the above situation be an exception to the principle of "indivisibility of subscriptions" so that the 60% portion of the stockholders' subscription should not be considered delinquent and therefore should not be included in the auction sale? The pertinent provision of Section 67 reads: prcd "SECTION 67. ... 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 stockholders 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 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) Pursuant to the above, the sole of the entire subscription of the stockholder is therefore allowed. The Commission has previously ruled and we quote: "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 on call of directors." ( Ltr. to Mr. Gregorio O. Ponce dated Feb. 23, 1982 citing Balbin & Gloria, the Corporate Organization: New Dimensions, p. 80, 1981 ed.) Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner