Mr. Rolando Rosales

July 11, 1989 Mr. Rolando Rosales Union, Ubay, Bohol Sir : This refers to your letter, dated June 10, 1989, inquiring on the propriety of forming a one-man owned corporation whose membership of the Board of Directors are merely dummies. The Corporation Code of the Philippines provides: "SECTION 10. Number and Qualifications of Incorporators . Any number of natural persons not less than five (5) but not more than fifteen (15),all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the incorporators of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock of the corporation ." (emphasis supplied). Although the aforecited provision requires that at least five persons may form a corporation, nevertheless, it only requires the ownership of at least one (1) share in order to be eligible as an incorporator. A corporation, therefore, may be owned substantially by a single individual and the rest of the incorporators may only be called qualifying shareholders. On the matter as to who may be elected as directors, Section 23 of the Corporation Code provides, in part to wit: "Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which shares shall stand in his name on the book of the corporation (emphasis supplied). The above-quoted provision only requires a stock ownership of at least one (1) share to be eligible as director. As to the requirement of stock ownership, the general rule is that beneficial ownership is not necessary and that a person who holds the legal title to stock on the books of the corporation is qualified, although the beneficial ownership may be in another. In other words, it is sufficient that the title to the stock, as it appears on the books of the corporation, is in the director, since the legal title is what counts and it is the person whose name appears as owner on the books of the company who is stockholder and eligible as director. For instance, a director may hold his stock as trustee and yet be legally qualified. So a person to whom one share of stock has been transferred for the purpose of qualifying him as director is eligible. (2 Fletcher Cyc. Corp. Sec. 300 pp. 91-92). Thus, the Commission previously opined that a person who holds the naked title to the stock as appearing in the stock and transfer book of the corporation is eligible as director notwithstanding absence of his beneficial right, title or interest in the property. ( SEC letter, dated March 4, 1988, addressed to Rilloza, Africa, De Ocampo & Africa ). In the light of the foregoing, a single individual may form a corporation using others as qualifying stockholders for the purpose of complying with the statutory requirement of at least five (5) incorporators/directors. Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner