Ms. Ma. Luisa J. Hilado

November 12, 1993 Ms. Ma. Luisa J. Hilado Hilado, Hagad & Hilado Law Offices P.O. Box 199 Bacolod City 6100 M a d a m : This refers to your letter of October 27, 1993 requesting opinion on the queries posed therein summarized as follows: 1. Whether it is allowable to issue a stock certificate only on the number of shares of a subscription that can be covered by the partial payment for such subscription. 2. Whether the unpaid portion of a subscription can be paid by residential properties and if allowable, what requirements are to be complied with to support the issuance of stock certificate on the shares covered by such payment. Relative to the first query, the pertinent provision of the Corporation Code provides: "SECTION 64. Issuance of stock certificates . No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares),if any is due, has been paid." (Emphasis supplied) The above provision 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. A perusal of the legislative deliberation of Section 64 of B.P. Blg. 68, otherwise known as the Corporation Code of the Philippines, clearly shows the legislative intention of abandoning the Supreme Court ruling laid in Baltazar vs. Lingayen Gulf Electric Power Co., Inc. (G.R. No. L-16236, June 30, 1965) stating 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 proportionate payment of each and all entire number of subscribed shares. Accordingly, the present rule on the matter is that all partial payments on one subscription shall be deemed applied proportionately among the number of shares. Therefore, to permit the issuance of stock certificate for payment of a subscription that does not cover the entire number and value of the shares subscribed would be violative of the above provision. Anent your second query, the Corporation Code provides in part: "SECTION 62. Consideration for stocks . ...Consideration for the issuance of stock may be any or a combination of any two or more of the following: xxx xxx xxx. 2. Property ,tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued. xxx xxx xxx. Where the consideration is other than actual cash ,...the valuation thereof shall initially be determined by the incorporators or the board of directors, subject to the approval by the Securities and Exchange Commission .(Emphasis supplied) Thus, pursuant to the above provision, unpaid subscription may be paid in the form of property, provided that the property is necessary or convenient in carrying out the corporate business and the valuation thereof shall be subject to the approval by the Commission. Likewise, the following supporting documents must be submitted to the Commission. 1. Deed of Assignment of real property duly presented for Primary Entry in the Office of the Registry of Deeds where the property is located. 2. Appraisal Report of the real property assigned. 3. Copies of O.T.C. or T.C.T. duly certified by the Register of Deeds. 4. Copies of Real Estate Tax Declaration(s) and latest Real Estate Tax Payment Receipts. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman