Romulo, Mabanta, Buenaventura, Sayoc and De Los Reyes

April 27, 1990 Romulo, Mabanta, Buenaventura Sayoc & De Los Reyes Fourth Floor, King's Court 2129 Pasong Tamo Street Makati, Metro Manila Attention : Atty . Reynaldo G . Geronimo Gentlemen: This refers to your letter dated April 1, 1990 inquiring on whether the proposal mentioned therein requires formal approval or registration. prcd You stated that a corporation intends to offer or sell exclusively to its own stockholders its holdings in another corporation on a pro-rata basis, i.e. in proportion to their holdings in the selling corporation, where there are more than twenty (20) stockholders of record and the shares of stock being sold do not constitute more than 20% of the entire assets of the selling corporation. The contemplated transfer of shares is limited to the stockholders of the selling corporation. Section 63 of the Corporation Code expressly provides that "shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other persons authorized to make the transfer". As such, the owner, as in the case of other personal property has the absolute and inherent right, as an incident of the ownership, to sell and transfer the same at will except insofar as the right may be restricted by the charter of the corporation or the general law, or a valid agreement between him and the corporation, provided the transfer is made in good faith, and to a person capable of assuming the obligation of a stockholder. (12 Fletcher Cyc. Corp., Sec. 5452) However, your attention is invited to the provision of Section 64 of the Corporation Code which implicitly sets forth the doctrine that a subscription is one, entire and indivisible whole contract. It cannot be divided into portions so that the stockholders shall not be entitled to a certificate of stock until he has remitted the full payment of his subscription together with the interest and expenses if any is due. ( SEC letter dated January 6, 1983 addressed to Bay Sunset Tours and Travel Corporation ) Accordingly, if the stockholder has not paid the full amount of his subscription, he cannot transfer the same to several persons in view of the indivisible nature of subscription contract. It is only upon full payment of the whole subscription that a stockholder can transfer the same to several transferees. Likewise, it has to be emphasized that under Section 63 of the Corporation Code, no transfer shall be valid except as between the parties, until the transfer is recorded in the books of the corporation. The Commission, in a previous opinion, has ruled that a corporation is not required to secure prior approval of the SEC for the transfer of shares of its stocks because the question of whether or not such transfer should be recorded in its books is one that only the corporation itself can resolve. ( SEC Opinion dated September 29, 1964 and February 18, 1983). Likewise, even if the shares to be transferred are not registered pursuant to the Revised Securities Act, the transfer, notwithstanding that the transferees will be more than twenty (20), may be considered exempt transaction under the Revised Securities Act, such being an isolated one and not made in the course of repeated and successive transactions. Please be advised accordingly. prcd Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman