Feria, Feria, Lugtu & Lao

September 1, 1982 Feria, Feria, Lugtu & Lao Ferlaw Bldg. 366 Cabildo St., Intramuros, Metro Manila Attention : Atty . Ignacio Lugtu Sir : This has reference to your letter dated May 31, 1982 requesting for a ruling from this Commission whether or not the Board of Directors of a corporation existing under Philippine Laws may authorize the issuance of a certificate or certificates for such number of shares as the required minimum twenty-five percent (25%) payment on a subscription to the increase in the authorized capital stock of the corporation may cover or pay in full, leaving the balance of the subscription without any payment therefor. In reply thereto, please be informed that Sec. 64 of the Corporation Code provides, and we quote: "SECTION 64. Issuance of stock certificates . No certificate shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case delinquent shares) if any is due, has been paid." Under the above quoted provision, a corporation may now only have one procedure in issuing certificate of stock and that is only upon the full payment of the entire subscription.; "Before the effectivity of the said provision, this Commission opined that pursuant to the Supreme Court ruling in Baltazar & Lingayen Gulf Electric Power Co., Inc. L-16236-38, June 30, 1965, a corporation has two (2) options in issuing stock certificates to its stockholders, to wit: "1. It can issue certificates for shares considered fully paid or for the number of shares that may be fully covered by the payments made by the stockholders." "2. It can issue certificates only upon full payment to the entire subscription. However, if the corporation has chosen one option it cannot change to the other without the unanimous consent of the stockholders." "The aforementioned provision renders the ruling in the Lingayen Gulf case obsolete. Considering that this rule is mandatory, by-laws provisions following said ruling are therefore rendered of no effect." (Balbin & Gloria, the Corporate Organization: New Dimensions, p. 77, 1981 ed.) In a previous opinion, this Commission held that "Fully paid stock" refers to stock which has been fully paid in so that nothing is due to the corporation thereon (IV Martin Commercial Law of the Philippines, p. 1487) The subscription contemplated is considered one whole contract. It is deemed entire and indivisible, and it cannot be divided into portions that will entitle the stockholders to a certificate of stock until he has paid the full amount of his subscription ( Ltr. to Mr. Roberto Lugue, dated March 11, 1980 ) In view of the foregoing, therefore, your query is hereby answered in the negative. Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner