Mr. T. Tam Ngo

August 7, 1991 Mr. T. Tam Ngo Philwood (Cebu),Inc. Philwood Compound 505 C. Padilla St.,Mambaling, Cebu City S i r : This refers to your letter dated July 16, 1991, requesting opinion on the following query: "May a subscriber who made partial or full payment on his subscriptions assign his holdings to another person directly prior to the issuance of certificates ." Shares of stock in a corporation may be transferred by means of a deed of assignment where no certificate has been issued or where it is not in the possession of the transferor. The Commission, in a letter dated May 2, 1983 addressed to Oriental Photographix & Equipment Corporation, previously opined that "indorsement of the certificate is not necessary to pass title where a deed has been executed assigning and authorizing the transfer on the books". (12 Fletcher Cyc. Corp., Sec. 5480 citing Curtis V. Crossly, 59 N.J. Eq. 358, 45 Atl. 905) "A formal contract of purchase and sale set in a notarial document is equivalent to the actual delivery of the certificates themselves." (Uy Piaoco vs. McMicking, G.R. No. L-4237, March 5, 1908, 10 Phil. 286) Accordingly, your query may be answered in the affirmative, provided that a deed of sale or assignment shall be executed in lieu of the indorsement of the certificate of stock. However, your attention is invited to the provision of Section 64 of the Corporation Code which implicitly sets forth the doctrine that subscription is one entire and indivisible contract. Thus, if the stockholder has not paid the full amount of his subscription, he cannot transfer part of it in view of the indivisible nature of subscription contract. It is only upon full payment of the whole subscription that a stockholder can transfer a portion of his subscription. However, the entire subscription although not yet fully paid, may be transferred to a single transferee. It is necessary, however, to secure the consent of the corporation since the transfer of subscription right contemplates a novation of contract which, under Article 1293 of the Civil Code of the Philippines, cannot be made without the consent of the creditor. 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. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman