Oriental Photographix & Equipment Corporation

May 2, 1983 Oriental Photographix & Equipment Corporation 364 Escolta, Manila Attention : Edward C . Tan President Gentlemen: This has reference to your letter dated April 25, 1983 requesting the opinion of this Commission on the queries posed therein. It appears that Edward C. Tan, a stockholder of Oriental Photographix & Equipment Corporation offered to sell his 6,000 common shares to Amelia Tan. The board of directors in its meeting held on June 22, 1978 passed a resolution approving the said offer to sell. However, no deed of assignment was executed nor stock certificates delivered relative thereto. On December 15, 1981, Edward C. Tan and Amelia Tan formalized their agreement by signing a deed of assignment involving the common shares above-mentioned. During the annual meeting of the stockholders and the board of directors on March 27, 1982, it was approved and resolved that the sale be recorded in the corporate books. With these facts, the following queries are presented: 1. Was there a valid sale of stocks on the aforecited first case/offer which was duly approved by the board of directors on June 22, 1978? 2. Was ownership of stocks transferred to Amelia Tan only on December 15, 1981? 3. What are the requirements for a valid transfer of stocks? Section 63 of the Corporation Code, quoted hereunder, prescribes the manner by which transfer of shares of stocks may be accomplished: "Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates 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" (2nd and 3rd sentences). Considering that the offer to sell which was approved by the board of directors never materialized into an absolute sale due to the absence of indorsement and delivery of stock certificates, we answer your first query in the negative. Since a formal deed of assignment was executed on December 15, 1981, the indorsement and delivery requirements stated in the abovequoted Sec. 63 were substantially observed. Indorsement of the certificate is not necessary to pass the title where a deed has been executed assigning the stock and authorizing the transfer on the books" (12 Fletcher Cyc. Corps., Sec. 5480 citing Curtis V. Crossly, 59 N.J. Eq. 358, 45 Atl. 905). A formal contract of purchase and sale set in a notarial documents is equivalent to the actual delivery of the certificates themselves. (Uy Piaoco v. McMicking, GR No. L-4237, March 5, 1908, 10 Phil. 286). In view of the foregoing, your second query is answered in the affirmative. However, the transfer of ownership will be valid against third parties only when the same is finally recorded in the corporate books. prcd For your third query, Section 63 of the Corporation Code also provides the answer. Thus, to have a valid transfer of stocks, the following requirements must be complied with: 1. There must be delivery of the stock certificate; 2. The certificate must be indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer; and 3. To be valid against third parties, the transfer must be recorded in the books of the corporation. Please be advised accordingly. cdlex Very truly yours, (SGD.) JESUS J. VALDES Associate Commissioner