Atty. Cleto T. Villatuya

January 13, 1994 Atty. Cleto T. Villatuya Villadel Building No. 8 West Capitol Drive Kapitolyo, Pasig, Metro Manila S i r : This refers to your letter of January 3, 1994 requesting opinion regarding the validity of transfer of shares covered by a mere written agreement among the stockholders imposing a restriction that the transfer of shares must be offered in writing to the corporation. Please be advised that the Commission does not, as a matter of settled policy, render opinions on queries or transactions involving justiciable issues which may eventually be litigated in the future or which could only be clarified and determined in a proper proceeding, such as those presented in your letter. The opinion which may be rendered thereon would not be binding upon private parties who would in all probability, if the opinions happens to be adverse to their interest, take issue therewith and contest it before the Court. For this reason, the Commission refrains from giving opinion on the validity of the above transaction so that it will not be estopped to resolve any controversy pertaining thereto if brought before it in a proper proceeding. However, for purposes of information only, the following may be imparted. Shares of stock in a corporation are personal property, and it is well settled that the owner, as in the case of other personal property has an absolute and inherent right, as incident of his ownership, to sell and transfer the same at will except insofar as the right may be restricted by the charter of the corporation or the general law , provided the transfer is in good faith, and to a person capable of assuming the obligations of a stockholder. (12 Fletcher Cyc. Corp. Section 5452) Section 6 of the Corporation Code provides in part, thus: " ...The shares of stock of stock corporation may be divided into shares or series, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation ...." (Emphasis supplied) Thus, in order to be valid and enforceable, any allowable restriction on the transfer of shares of stock must be explicitly provided for in the articles of incorporation. Restrictions on the transfer of shares are essentially contractual in nature between the stockholders and the corporation, and hence, must be embodied in their contract, the articles of incorporation. Considering further that shares of stock burdened with restrictions on transferability may fall into the hands of innocent purchasers, the Commission, as a matter of policy, also requires that restrictions on transfer shares must be printed in the stock certificate. ( SEC Letter to Ozaeta, Gibbs & Ozaeta, dated October 13, 1964 ). Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman