Honorable Sotero M. Laurel

December 1, 1988 Honorable Sotero M. Laurel Senate, Legislative Building P. Burgos Street, Metro Manila Dear Senator Laurel, This refers to S.B. No. 519, entitled "An Act requiring all partial payments on a stock subscription to be rated among all the shares subscribed by amending Section 64 of Batas Pambansa Blg. 68, otherwise known as the Corporation Code of the Philippines for the purpose" which was transmitted to our Office by the Committee on Trade and Commerce for appropriate comments. Section 64 of Batas Pambansa Blg. 68 is amended by S.B. No. 519 to read as follows: "SECTION 64. Issuance of stock certificates . No certificate of stock shall be issued to a subscriber until the full payment of his subscription together with interest and expenses (in case of delinquent shares),if any is due, has been paid. In accordance with the foregoing, all partial payments on one subscription shall be deemed prorated among all the shares subscribed therein, provisions of the corporation's articles of incorporation or by-laws to the contrary notwithstanding ." Section 64, paragraph 1 thereof, implicitly sets forth the doctrine that a subscription is one, entire and indivisible whole contract. It cannot be divided into portions, so that the stockholder shall not be entitled to a certificate of stock until he has remitted the full payment of his subscription together with interest and expenses, if any is due. (SEC opinions, dated October 15, 1984, June 26, 1984 , March 16, 1983 and January 6, 1983). A perusal of the proceedings of the legislative committee, considering Cabinet Bill No. 3 (now B.P. Blg. 68, otherwise known as the Corporation Code of the Philippines) held on March 11, 1980, clearly shows the legislative intention of abandoning the Supreme Court ruling laid down in Baltazar vs. Lingayen Gulf Electric Co., G.R. No. L-16236, June 30, 1965, that a corporation may, in the absence of provisions in the by-laws to the contrary, apply payments made by subscribers-stockholders, either as: a) full-payment for the corresponding number of stock the par value of each of which is covered by such payment; or b) as proportional payment to each and all entire number of subscribed shares. As aptly commented by former Assemblymen Emilio Abello: "To permit the issuance of certificates of stock for a payment of a subscription that does not cover the entire value of the shares subscribed is in effect permitting payment for the subscriptions in ways different from what the subscription agreement says or what the Corporation Code provides". (Proceedings of March 11, 1980). S.B. No. 519, applying all partial payments on one subscription proportionately among the number of shares subscribed will be in keeping with the legislative intention as expressed in the deliberation of Section 64 of the Corporation Code. In view of the foregoing, we do not interpose any objection to S.B. No. 519. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman