Santiago Tinga & Associates

August 10, 1984 Santiago Tinga & Associates Ground Floor, Ortigas Bldg., Ortigas Avenue, Pasig Metro Manila Attention : Dante O . Tinga Gentlemen: This refers to your letter dated March 29, 1984 requesting for opinion of this Commission on the query posed therein. cdlex You alleged that your client, a domestic corporation, increased its authorized capital stock. In connection with the said increase, the corporation offered some shares to all its stockholders conformably to their preemptive rights. The stockholders who availed of their pre-emptive rights executed the corresponding subscription agreements with the corporation. The shares which were subscribed by the said stockholders represent the minimum percentage of the increase of capital stock required to be subscribed under the law. In due time, said stockholders paid in full the amounts due them under the subscription agreements. The stockholders who have paid in full the amounts due them under the subscription agreement are now asking that the corresponding stock certificates be issued to them. However, since the shares of the corporation had been previously registered with the Commission pursuant to the Revised Securities Act ,the shares would likewise have to be registered before the certificates could be issued. The application for registration is still pending with the Commission. You query is whether during the pendency of its registration the corporation could issue stock certificates to the subscriber who have fully paid their subscription imposing, however, a condition that stock certificates to be issued shall contain a common restriction to the effect that the shares cannot be transferred except in cases of hereditary succession, when the transfer is an exempt transaction and when the transfer is directed by court order. Under Section 64 of the Corporation Code, subscribers who have fully paid their subscription are entitled to stock certificates. The law provides, thus: "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." However, considering that the corporation's original issues were registered pursuant to the provisions of the Revised Securities Act, prior registration of the subsequent increase of capital stock must likewise be effected since such transaction is a new offering of securities under the Act. Pending approval of said registration by this Commission, the stock certificates covering fully paid subscriptions on the additional capital stock can be issued to the subscribers thereof, provided that the shares may not be sold or transferred in the course of repeated and successive transactions, or in any manner offered for sale to the public. This restriction shall be clearly indicated in the corresponding stock certificates to be issued by the corporation. Please be guided accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman