Mr. Conrado S. Reyes

October 7, 1992 Mr. Conrado S. Reyes Philippine Journalists, Inc. The Journal Building, Railroad St., Between 19th and 20th Street, Port Area, Metro Manila S i r : This refers to your letter requesting opinion on the following queries: 1. What is the nature of the title or ownership of a stockholder to a qualifying share which was registered in his name without any monetary or pecuniary consideration but only to qualify him as a director during his term? Is it absolute, legal or beneficial ownership, qualified or restrictive? prcd 2. If a director's term has expired and he was presented with his stock certificate for one qualifying share registered in his name under the foregoing circumstances, may be lawfully retain it and refuse to sign and return it? 3. May the Board of Directors under the foregoing circumstances and after appropriate demand or due notice (without publication) cancel the aforesaid qualifying share or transfer it to another stockholder also as a qualifying share as directed by the original owner? 4. If not, what is the most expeditious and least expensive legal remedy for the corporation? 5. In the event a director dies without endorsing his qualifying share, may the surviving spouse or principal heir endorse it in blank for the estate or heirs of the deceased, if there be no objection? If the purpose of the transfer of the stock is only to qualify the transferee for the election in the Board of Directors without giving him the beneficial ownership thereof, said transfer would be more of a trust and not a transfer of ownership. Hence, the beneficial interest in such share will remain with the assignor while the assignee will hold only the legal title to the stock. (SEC Opinion dated March 5, 1980, citing Fisher, The Philippine law of Stock Corporations, p. 234). In this case, the transferee should be described in the corporate books and certificate to be issued merely as qualifying shareholder or nominee of the transferor. The fact that the stock standing on the corporate books is in the name of the person only as a qualifying shareholder or that the holder of the stock certificate is described merely as a nominee serves as a notice to the corporation and third parties that the holder thereof does not hold the share in his own right, but holds it only as a nominee for the benefit of the real owner. Accordingly, the beneficial owner of the share as appearing in the stock and transfer book of the corporation has the authority to transfer such qualifying share in favor of a new nominee even without the endorsement of the stock certificate by the previous nominee, unless there is an agreement to the contrary. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman