Atty. Oscar Mercado

June 4, 1987 Atty. Oscar Mercado 64 Pag-asa St.,San Jose Caloocan City, MM Sir : Reference is made to your letter, dated April 27, 1987, requesting information on whether or not Mr. Ronald E. Flanery is still an incorporator or Director of American Security Systems International, Inc. Records show that American Security Systems International, Inc. was registered with this Office on August 2, 1983. Among its incorporators/subscribers was a certain Mr. Ronald Flanery, subscribing to Ninety (90) shares of stock. On February 7, 1984, we received a Deed of Assignment, dated January 16, 1984 executed by Mr. Flanery, assigning in favor of one Cynthia Manalang one hundred forty shares (140) in said corporation. Obviously, there was a previous additional subscription of fifty (50) shares of American Security Systems International, Inc.,in favor of Mr. Flanery. It appears from the records, however, that the subscriptions of Mr. Flanery were not fully paid. It is generally held that a subscriber may in good faith assign his subscription rights to another, but in order to relieve the transferor from liability to the corporation for the unpaid subscription, the transfer must be accepted by the corporation. (4 Fletcher, Cyc. Corp.,1985 Rev. Vol.,sec. 1604). The Corporation Code of the Philippines also prescribes as follows: "SECTION 63. ...No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of certificate or certificates and the number of shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation." Third parties may therefore refuse to recognize the transfer or is not recorded assignment of shares by Mr. Flanery if said transaction in the stock and transfer book of subject corporation. Stock books or ledgers are generally evidence of stockholdings and corporate books and records ordinarily are admissible and often are the best evidence. (5 Fletcher Cyc. Corp.,1967 rev. vol.,sec. 1976 at 754).It is a matter of common knowledge that the books and records are ordinarily kept in the custody and possession of officers or such of them as are in direct control or supervision of the business affairs and activities of the corporation. Its proper custodian is usually the secretary or some other officer performing the duties which are usually those of a secretary or clerk of the organization. (Fletcher, sec. 2193 at 718-719).Considering therefore that the Commission is not in possession of the stock and transfer book of the corporation, the Commission cannot properly comment as to whether or not Mr. Flanery is still a stockholder of record of subject company. In like manner, the record of American Security Systems International, Inc. on file with this Commission, fails to show a list of its present directors. Hence, much to our regret, we also could not confirm as to whether or not Mr. Flanery is still a director of the company as of April 27, 1987. On the matter, however, of Mr. Flanery being an incorporator of subject corporation, please be advised that his relationship as such to the corporation cannot be affected by any transfer or assignment of his interest in the corporation for the same was already an accomplished fact. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner