Mr. Arsenio L. Sebastian III

September 4, 1990 Mr. Arsenio L. Sebastian III Madonna and Child Hospital Vamenta Avenue, Carmen Cagayan de Oro City Sir : This refers to your letter dated March 26, 1990 requesting opinion on the effects of the New Family Code on the provisions of the Corporation Code relative to ownership and transfer of shares of stock of spouses. Your queries are: 1. Does it mean that all shares of stock covered by stock certificates will now be made in the name of Mr. & Mrs.? How about those in the name of one or the other spouse? 2. Do you still need to record in the stock and transfer book the transfer of shares between husband and wife as embodied in Section 63 of the Corporation Code or can you just add the name of the other spouse to conform with Section 90 of the new Family Code? 3. Can you consider husband and wife as one stockholder regardless of whether the certificate is in the name of either the husband or wife? or both? 4. How will this affect the counting of the number of stockholders? Are they counted as one? 5. Under the principle of co-ownership can both of them vote and be voted upon to be a Director? In states where the community property system prevails, corporate stocks may be regarded as community property, depending on the terms of the particular community property laws; and in such states, questions of right and title to the stock as between husband and wife, both during the continuance of marital community and upon its dissolution, will depend for their proper determination on the provisions of the community property laws of the particular state as construed and applied by the Courts. (11 Fletcher, Sec. 5102). In our jurisdiction, property relation of husband and wife is governed by the new Family Code. By virtue of Section * 75 thereof, spouses are given the freedom to choose which property regime may govern them during the marriage. The law provides: "ARTICLE 75. The future spouses may, in the marriage settlements, agree upon the regime of absolute community, conjugal partnership of gains, complete separation of property, or any other regime. In the absence of a marriage settlement , or when the regime agreed upon is void, the system of absolute community of property as established in this Code shall govern ." (Emphasis supplied) Thus, unless a different system of property relation is agreed upon by the spouses, the property relation between the husband and the wife shall be governed by the system of absolute community of property. Assuming, therefore, that the husband and wife failed to agree on what property regime to adopt, the shares they use to own individually would have to be deemed as community property and shall be governed by the rules on "co-ownership" pursuant to Article 90 of the Family Code which provides: "SECTION * 90. The provisions on co-ownership shall apply to the absolute community of property between the spouses in all matters not provided for in this Chapter." (Emphasis supplied) Accordingly, the spouses, being co-owners thereof, may at their option, request the Corporate Secretary to issue the certificate in the name of Mr. and Mrs. This is true even if the stock certificates are still in their respective names. However, if the shares are among the excluded properties under Section * 92 of the Family Code or where the spouses have chosen a different marriage settlement other than the system of absolute community property, the transfer of the shares between the husband and wife shall be recorded in the stock and transfer book only upon compliance with Section 63 of the Corporation Code. Relative to your third and fourth query, assuming that the property relation between the spouses is governed by the system of absolute community, as earlier mentioned, the same is covered by the rules on co-ownership. Consequently, the husband and wife as co-owners thereof shall be considered as one stockholder. Anent your fifth query, Section 23 of the Corporation Code provides that ". . .. Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which shall stand in his name on the books of the corporation . . . ." (Emphasis supplied) Accordingly, the husband or wife who desires to be elected as member of the Board must secure a standing by having their shares recorded in the corporate books as co-owned by them, in which case, any one of them, not both, may be voted for as director. For purposes of voting said shares, Section 56 of the Corporation Code, quoted hereunder, shall apply. "SECTION 56. Voting in case of joint ownership of stock . In case of shares of stock owned jointly by two or more persons, in order to vote the same, the consent of all co-owners shall be necessary, unless there is a written proxy, signed by all the co-owners, authorizing one of them or any other person to vote such share or shares. Provided, that when the shares are owned in an "and/or" capacity by the holders thereof, any one of the joint owners can vote said shares or appoint a proxy therefore." llcd (SGD.) ROSARIO N. LOPEZ Chairman * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .