Manuel G. Tinio

January 21, 1980 Manuel G. Tinio 53-K Katipunan Road Loyola Heights Quezon City Sir : This has reference to your two letters both dated December 17, 1979 requesting opinion/information on the following questions: 1. In case of conflict between the entries in the stock and transfer book, the stock certificate book and the minutes of the stockholders' meeting regarding a question of who are the legitimate stockholders of record, which of these records will prevail? 2. May a corporation which is represented by less than the required quorum, proceed with the election of the board of directors? Sections 52 and 35 of the Corporation Law, and Section 1 of Article IV of your By-Laws set forth the test of determining the number of legitimate stockholders and the number of their respective shares in the corporation. Thus it is provided: "SECTION 52. Business corporations must also keep a book to be known as the stock and transfer book, in which must be kept a record of all stocks, the names of the stockholders or members alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made." "SECTION 35. No transfer, however shall be valid, except as between the parties, until the transfer is entered and noted upon the books of the corporation so as to show the manner of the names of the parties to the transaction, the date of the transfer, the number of certificate, and the number of share transferred." SECTION 1, Art. IV. ..but no transfer shall be valid until the certificate has been surrendered to the secretary for cancellation, the transfer annotated in the books of the corporation." The above-quoted provisions are mandatory and only entries made in the stock and transfer book of the corporation shall bind the same, except where it cannot deny any interest that a person may have therein by reason of its knowledge thereof, either express or implied. Consequently, where there is a conflict between the entries in the stock and transfer book and the stock certificate book, entries in the former prevails over the latter. With regards to the last question, the corporation law imposes a minimum vote requirement in the manner of electing the board of directors, Thus Section 31 of the Corporation Law provides: "At all elections of directors there must be present, either in person or by representative authorized to act by written proxy, the owners of the majority of the subscribed capital stock entitled to vote, or if there be no capital stock, then a majority of the members entitled to vote ...Any meeting of the stockholders or members called for an election may adjourn from day to day or from time to time if for any reason no election is had or if there are not present or represented by a proxy at the meeting the owners of a majority of the subscribed capital stock entitled to vote, or if there be no capital stock, a majority of the members entitled to vote." (Emphasis supplied) This requirement is mandatory in character and admit of no exception. Failure however of the corporation to obtain a quorum for the election of the board of directors, will simply result in the retention of the members of the board of directors in their present respective position as hold-over until their successors shall have been elected and qualified. Please be guided accordingly. Very truly yours, For the Chairman (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department