Triabo Development Corporation

September 1, 1995 Triabo Development Corporation Aboitiz & Co.,Inc. Bldg. Banilad, Cebu City 6000 Attention : Ms . Sylvia A . Paderanga M a d a m : This refers to your letter dated August 11, 1995, requesting opinion on the validity of Class B shares which Triabo Development Corporation intends to issue. Specifically, the corporation would like to amend paragraph 3 of Article VII of its Articles of Incorporation, to read as follows: "Class B Common Bearer shares shall have full voting rights and privileges and are bearer in form. They shall be negotiable without endorsement and shall be transferable by delivery. Dividends are payable by presentation of numbered dividend coupons ." (Emphasis supplied) You believe that the issuance of the above class of shares is valid and allowed by law as Section 63 of the Corporation Code does not categorically prohibit or disallow the issuance of shares in bearer form. Section 63 of the Corporation Code provides: "SECTION 63. Certificate of stock and transfer of shares . ...Shares of stock so issued are personal property and may be transferred by delivery of the certificate indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer .No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred." (Emphasis supplied) The above provision clearly requires the indorsement of the certificate of stock by the owner or duly authorized person in transferring ownership of shares of stock. Accordingly, the proposed bearer feature of the shares without the required indorsement by the owner of the certificate of stock evidencing the ownership thereof is not allowable under the present law. Relative to the other feature pertaining to dividend right by mere presentation of numbered coupons, the pertinent provisions of the Corporation Code provide: "SECTION 63. Certificate of stock and transfer of shares . ... No transfer, however, shall be valid ,except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. ...(Emphasis supplied) "SECTION 74. ... 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) Therefore, it is well-settled that the rights of a stockholder accrue only upon entry of his name in the books of the corporation .Hence, mere presentation of dividend coupons by the holder thereof, who is not recorded as a stockholder in the stock and transfer book, will not entitle him to receive dividends. A person who desires to be recognized as a stockholder for purposes of exercising stockholder's right, including the right to receive dividends, must secure a standing by having his ownership of shares recorded on the corporate books. Accordingly, the desired features attached to the aforementioned class of shares are not legally feasible under the present law. (SGD.) PERFECTO R. YASAY, JR. Acting Chairman