Mr. Pastora T. O'Connor

March 7, 1994 Mr. Pastora T. O'Connor Dumaguete Rural Bank, Inc. Dumaguete City M a d a m : This refers to your letter of January 26, 1994 inquiring as to who are entitled to vote in the coming stockholders meeting of Dumaguete Rural Bank, Inc. in the light of the Bank's approved participation in the CB Countryside Financial Institutions Enhancement Program taking into consideration that subscription deposits in connection therewith were made in the Land Bank of Dumaguete. In the absence of elements of estoppel, no person can become a stockholder in a corporation by virtue of a subscription of stock unless there is a valid contract between him and the corporation. (4 Fletcher Ch 12, Sec. 1400) Whether a subscription is made before or after the formation of the corporation, it is formed by an offer by one of the parties, the corporation or the subscriber, as the case may be, and an acceptance of this offer by the other. As soon as an offer to take shares made by a person to a corporation is accepted by the corporation, or as soon as an offer of shares by a corporation is accepted by the person to whom it is made, there is a binding contract of subscription. An offer and an acceptance of the offer is necessary to constitute a subscription to stock .(4 Fletcher Ch 12, Sec. 1404) Until the subscription paper has been presented to the corporation and assented to by it, the signers are not stockholders. (Ibid, citing Barlger Paper Co. v. Rose, 95 Wis 145, 70 NW 302, 37 LRA 162) A subscription upon a condition precedent or a conditional subscription, is a subscription which does not take effect so as to make the subscriber a stockholder, or confer or impose any right or liability as a stockholder, until the performance or fulfillment of some stated conditions. (4 Fletcher, sec. 1509, emphasis supplied) The rights of a stockholder accrue only upon entry of his name in the books of the corporation. Section 74 of the Corporation Code provides: "SECTION 74. Book to be kept; stock transfer agent . ... Stock corporations must also keep a book to be known as the " stock and transfer book ",in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection of any director or stockholder of the corporation at reasonable hours on business days. ..." (Emphasis supplied) Thus, as a general rule, only those whose ownership of shares are duly registered in the stock and transfer book are considered stockholders of record and are entitled to all rights of a stockholder. A person who desires to be recognized as a stockholder for purposes of exercising stockholder's right to vote must secure a standing by having his ownership of shares recorded on the corporate books. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman