Rilloraza, Africa, De Ocampo & Africa

March 4, 1988 Rilloraza, Africa, De Ocampo & Africa 7th/10th Floors, Telecoms Plaza 316 Gil J. Puyat Avene Makati, Metro Manila Gentlemen : This refers to your letter, dated February 16, 1988, requesting the opinion of this Commission on the queries posed therein relating to Section 23 of the Corporation Code. Said provision of the law reads in part thus: "xxx xxx xxx Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which shares shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. ...". Apropos thereto, your queries are restated as follows: 1. To be eligible as director, does Section 23 of the Corporation Code require legal and beneficial ownership of the stock? Or, would it suffice that a person is the legal owner of the stock, and the beneficial ownership thereof stands in another person? 2. If the latter is sustained, would the entry in the stock and transfer book and the issuance of a certificate of stock in the name of "ABC" in trust for "XYZ",be sufficient to qualify the former for a director's seat? Section 23 of the Corporation Code requires stock ownership in order to be eligible as director. As to the requirement of stock ownership, the general rule is that " beneficial ownership is not necessary and that a person who holds the legal title to stock on the books of the corporation is qualified, although the beneficial ownership may be in another .In other words, it is sufficient that the title to the stock, as it appears on the books of the corporation, is in the director, since the legal title is what counts and it is the person whose name appears as owner on the books of the company who is stockholder and eligible as director. For instance, a director may hold his stock as trustee and yet be legally qualified. So a person to whom one share of stock has been transferred for the express purpose of qualifying him as director is eligible. ( SEC Letter to Peftok Integrated Services, Inc., dated February 12, 1985 ,citing 2 Fletcher Cyc. Corp.,sec. 300). Hence in connection with your first query, the Commission reiterates its previous opinion that a person who holds the naked legal title to the stock as appearing in the stock and transfer book of the corporation is eligible as director notwithstanding absence of his beneficial right, title or interest in the property. To rule otherwise would create an injustice to corporate stockholders who, under the law, have the right to be represented in the board. Your second query is answered in the affirmative. LibLex Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman