Mr. Mariano N. Tan

April 1, 1987 Mr. Mariano N. Tan 388 B. Minerva St. San Miguel, Manila Sir : This has reference to your letter dated March 14, 1987, requesting for the opinion of this Commission on whether or not the corporation has the right to refuse accepting a Surety Bond in the amount of P250,000.00 from an insurance corporation with clearance from the office of the Insurance Commissioner, Supreme Court, National Capital Regional Trial Courts and Metropolitan Trial Courts in Metro Manila. It appears that Stock Certificate No. 15 of Poly-Air Industries, Inc. and registered in the name of a stockholder, Mr. Artemio G. Tan, was reported lost last September 1986 to the Corporate Secretary and Notices of Loss of said certificate were published in the Philippine Daily Express for three (3) consecutive weeks last October 31 to November 19, 1986. Said stock certificate was sold to Mrs. Rita Co Pung Ming with the understanding that either proceeds of the sale in the said amount be deposited in a Special Time Deposit for one year or a Surety Bond be filed with the corporation as guarantee for any claim/contest on the said lost certificate. Relative thereto, Sec. 73 of the Corporation Code, the provision relevant thereto, is hereunder quoted: "SECTION 73. Lost or destroyed certificates . The following procedure shall be followed for the issuance by a corporation of new certificate(s) of stock in lieu of those which have been lost, stolen or destroyed: 1. The registered owner of certificate(s) of stock in a corporation or his legal representative shall file with the corporation an affidavit in triplicate setting forth, if possible, the circumstances as to how the certificate was lost, stolen or destroyed, the number of shares represented by, such certificate, the serial number of the certificate and the name of the corporation which issued the same. He shall also submit such other information and evidence which he may deem necessary; 2. After verifying the affidavit and other information and evidence with the books of the corporation, said corporation shall publish a notice in a newspaper of general circulation published in the place where the corporation has its principal office, once a week for three (3) consecutive weeks at the expense of the registered owner of the certificate of stock which has been lost, stolen or destroyed. The notice shall state the name of said corporation, the name of the registered owner and the serial number of said certificate, and the number of shares represented by such certificate, and that after the expiration of one (1) year from the date of the last publication, if no contest has been presented to said corporation regarding said certificate of stock, the right to make such contest shall be barred and said corporation shall cancel in its books the certificate(s) of stock which have been lost, stolen or destroyed and issue in lieu thereof a new certificate of stock, unless the registered owner files a bond or other security in lieu thereof as may be required, effective for a period of one (1) year, for such amount and in such form and with such sureties as may be satisfactory to the board of directors, in which case a new certificate may be issued even before the expiration of the one (1) year period provided herein: Provided, That if a contest has been presented to said corporation or if an action is pending in court regarding the ownership of said certificate(s) of stock which have been lost, stolen or destroyed, the issuance of the new certificate(s) of stock in lieu thereof shall be suspended until the final decision by the court regarding the ownership of said certificate(s) of stock which have been lost, stolen or destroyed. Except in case of fraud, bad faith, or negligence on the part of the corporation and its officers, no action may be brought against any corporation which shall have issued certificate(s) of stock in lieu of those lost, stolen or destroyed pursuant to the procedure above described." (emphasis supplied) prcd From the underscored portion of the foregoing provision, it is clear, therefore, that it is the board of directors of the corporation which is given the authority to decide on the kind of surety bond, its amount and form and the identity of the surety. Please be advised accordingly. (SGD.) JULIO A. SULIT, JR. Chairman