Institute for Development Alternative

August 26, 1992 Institute for Development Alternative c/o Mr. Roberto A. De Los Reyes, Ed. D. Luzon College Graduate School Dagupan City S i r : This refers to your letter of July 22, 1992 requesting opinion on the following queries: 1. Can holders of the delinquent stocks be allowed to attend and vote at stockholders meeting? 2. Can holders of delinquent stocks who were elected to the Board before the delinquency call be allowed to continue sitting in Board meetings? 3. Can the holding in abeyance of the delinquency sale to give the stockholders a chance to pay their unpaid balance nullify the delinquent status of the shares? Relative to your first and second queries, the pertinent provision of the Corporation Code provides: "SECTION 71. Effect of delinquency . No delinquent stock shall be voted for or be entitled to vote or to representation at any stockholders' meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to dividends in accordance with provisions of this Code, until and unless he pays the amount due on his subscription with accrued interest, and the costs and expenses of advertisement, if any." (Emphasis supplied) Thus, the moment a stock becomes delinquent due to non-payment, the holder thereof loses all his rights as a stockholder, except the right to dividends under Section 43 of the Corporation Code. A delinquent stockholder, therefore, can not vote at the election of directors or at any meeting on any matter which requires stockholders' action Neither can he be voted for as director of the corporation nor continue sitting in the board if he has been previously elected as a member thereof Relative to your third query, the Corporation Code provides: "SECTION 67. Payment of balances of subscription . ...If within thirty (30) days from the said date no payment is made, all stocks covered by said subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise ." (Emphasis supplied) Under the above provision, the board of directors may order the removal of the delinquent status of unpaid subscription. Unless, there is such an order from the board, its delinquent status remains. However, should there be postponement or extension of the delinquency sale, the corporation should again comply with the procedure or manner required by law for the sale of delinquent stocks under Section 68 of the Corporation Code. Please be advised accordingly. LexLib Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman