Atty. Jose Malvar Villegas, Jr.

April 20, 1988 Atty. Jose Malvar Villegas, Jr. 2nd Floor, Muoz Building 710 Epifanio delos Santos Avenue Cubao, Quezon City Metro Manila Sir : This refers to your letter dated March 25, 1988, requesting opinion on the following queries: llcd 1. Can the person being nominated as representing the interest of a particular group in a corporation being incorporated in the SEC, makes it appear that the money he/she is investing in the said corporation is his/her own and does not belong to other corporation, firm or person(s)? 2. Can he/she later on, after the corporation is finally registered and operating, suddenly claim, upon her investigation by the Bureau of Internal Revenue (BIR) that the money he/she invested in the new corporation does not belong to her, but to some other entity or person(s) instead? 3. Is there an SEC requirement that nominees in a corporation being organized should be identified as such by the corporation, firm or person(s) nominating him/her as such nominees and to whose name(s) it/their investment in the corporation being organized, is/are being placed? In relation to your first and second query please be informed that a subscription to the stock of a corporation is 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 Cyc. Corp., 1985 rev. vol., sec. 1363, p. 3). When a person subscribes to the stock of a corporation which is being incorporated, the Commission shall presume that he/she is investing in her own personal capacity. Generally, therefore, he/she cannot evade any liability arising out of his/her unpaid subscription. However, a subscriber may create a trust by his subscription, as where he subscribes as trustee. (Fletcher, Supra., sec. 1399 citing Levi v. Evans, 57 F 677), and a trust may be presumed in a proper case. (Butler v. Merchants Ins., Co., 14 ala. 777). Anent your third query, the Commission had occasion to rule in a previous opinion that transfer of shares of stock to a trustee for the purpose of qualifying him as a director, should contain a description that the nominee holds the stocks merely as the trustee thereof . (SEC Opinion dated May 21, 1986 addressed to Atty. Rafael T. Durian). Your third query is therefore answered in the affirmative. LexLib Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman