Ms. Corazon A. Formento

April 5, 1990 Ms. Corazon A. Formento 167-I Mother Ignacia Street Diliman, Quezon City M a d a m : This refers to your letter dated March 23, 1990 requesting opinion on whether or not a purchaser in good faith for value of shares of stock already submitted to the corporate secretary for registration in the corporate books, can be elected as a director, even though said stocks are not yet registered at the time of the election of directors due to non-payment of the "capital gains tax". Section 23 of the Corporation Code specifically provides: "Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks . . . . (emphasis supplied) Every director must own at least one (1) share of the capital stock of the Corporation of which he is a director, which share shall stand in his name on the books of the corporation . . . . (Emphasis supplied) As a general rule , where the statute governing the corporation provides that the directors shall be stockholders, and where such is the requirement, it had been held essential to render one eligible to such office that he appears as a stockholder on the books of the corporation (13 Am. Jur., sec. 870). However, it was held that "under statutes requiring that a director be a shareholders the fact that a person does not own a stock at the time of his election or appointment to office does not disqualify him, if he becomes a shareholder before entering upon the duties of the office ." (SEC Opinion dated November 9, 1987, addressed to Chemphil Industries of the Philippines, Inc. citing 2 Fletcher, sec. 304, citing Cupo v. Community Nat. Bank & Trust Co. of New York, 324 F.lipp. 1390 (EDNY); 130 ALR 156). Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner