Ms. Milagros E. Cruz

July 9, 1980 Ms. Milagros E. Cruz Investments Registry Incorporated R-810 Ortigas Building Ortigas Avenue, Pasig Metro Manila Dear Ms. Cruz: This has reference to your letter dated March 3, 1980 requesting opinion of this Commission on the query posed therein. It appears from your letter that your company, the Investments Registry Incorporated, as stock transfer agents received an Issue Order from an issuing corporation requesting the preparation and issuance of stock certificates in the name of said issuing corporation as shares of original issue; that said shares refer to the subscriptions which have become delinquent for which no corresponding certificates have yet been issued and that later, the same were reacquired by the said corporation. You wish to know the legality of the request, because the certificates being requested for issuance will naturally appear in the books of your company as shares of original issue. The status of stocks, which were offered for sale for unpaid subscription and which have been bought in by the corporation itself because there is no outside bidder, is found in Section 45 of the Corporation Law, as amended, to wit: "SECTION 45. The legal title to all stock purchased by the corporation at sales of stock for unpaid subscription is vested in the corporation, and the stock so purchased may be disposed of by the stockholders in accordance with law and the by-laws of the corporation by a majority vote of all the remaining shares." In other words, the stocks become treasury shares and may only be sold by the stockholders acting as a body. They do not represent shares by subscription from original issue and hence, they cannot and should not be recorded in the books as shares of original issue. The difference between treasury shares and shares of original issue has been distinguished in the following: "Treasury shares are not truly an asset to be sold, but merely a power to create or issue new shares. This power is distinguished from the power to create shares by subscription from original issue. The reason for this distinction is that the corporation has already received a capital contribution and created a stated capital "liability" in respect to the shares so issued and acquired, which was not yet reduced upon acquisition of the shares. Upon their re-issue, these shares do not increase the capital liability." (3 Agbayani, Commercial Laws of the Philippines, p. 1239, citing Ballantine 472) Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department