T.J. Mulvany & Co.

January 12, 1996 T.J. Mulvany & Co. 2nd Flr. 51 Queen St., Melbourne S i r : This refers to your letter requesting information on how the shares of stock owned by a deceased stockholder be represented and how to get information on the financial status of the corporation of which he is a stockholder. LexLib It is well-settled that on the death of a stockholder, his executor or administrator becomes vested with the legal title to the stocks owned by the deceased stockholder who should hold them for the benefit of the legal heirs until a settlement and division of the estate of the deceased are effected. To transfer the shares of the stock in favor of the heirs of the deceased stockholder, a judicial or extra-judicial partition of his estate is necessary if he died interstate. Otherwise, it will be necessary to wait for the termination of the testamentary proceeding and the final adjudication of the shares of stock in accordance with The will of the decedent. Pending determination of the legal heir(s),the " executors, administrators, receivers and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholders or members without need of any written proxy ." (Sec. 55 Corporation Code) As soon as the estate of the deceased is legally settled in accordance with law, it would be a ministerial duty on the part of the corporation to register the transfer in the name of the legal heir(s). If a corporation wrongfully refuses to record a transfer of shares when it has the power and is under the obligation to record the same, it may be compelled to do so by a suit in equity for specific performance or mandamus. Mandamus is an appropriate remedy to compel the recording where the conditions, facts and circumstances of a given case bring it within the legal rules which govern the granting of the writ. Mandamus will lie to compel the corporation to register the transfer of stock if the transferee seeking relief has performed and complied with all the statutory requirements for a valid transfer of shares. (SEC Opinion dtd. June 23, 1993 addressed to Mr. Kurt Winiger) On how to get information on the financial condition of the corporation, the pertinent provision of the Corporation Code provides: "SECTION 74. Books to be kept . ... xxx xxx xxx The records of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, in writing, for a copy of excerpts from said records or minutes at his expense . Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its records or minutes , in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages ,and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal; and Provided, further, That it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation's records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand." ...." (emphasis supplied) "SECTION 75. Right to financial statements . Within ten (10) days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement ,which shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in reasonable detail its assets and liabilities and the result of its operations. At the regular meeting of stockholders or members, the board of directors or trustees shall present to such stockholders or members a financial report of the operations of the corporation for the preceding year, which shall include financial statements, duly signed and certified by an independent certified public accountant. ...." (Emphasis supplied) Thus, a stockholder of a corporation has the right to inspect the corporate books and records and/or request for copies of financial statements. This right is based on the principle that a stockholder has the right to be fully informed as to the status and condition of the corporation, the manner its affairs are conducted, and how its capital to which they have contributed is employed or managed. Said right may be exercised either by himself or by any proper representative or attorney-in-fact, who may be an accountant or a lawyer or any other person who can help the stockholder understand and interpret the corporate records, and either with or without the attendance of the stockholder. (Philpotts v. Philippine Manufacturing Co., & Berry, G.R. No. 15568, November 8, 1919, 40 Phil. 471). However, the exercise of the right of inspection of corporate books and records should be for a legitimate purpose. In the event the exercise of the above right is wrongfully denied to the person entitled thereto, he may enforce his right by filing with the Commission a petition for a writ of mandamus to compel the officer having charge of the above-mentioned corporate documents to permit him an inspection, or in the proper case maintain an action for damages which he may have sustained thereby. cdll Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner