Mr. Emmanuel J. Echon

November 22, 1991 Mr. Emmanuel J. Echon Fertile Valley Enterprises No. 3 Rizal Street Los Baos, Laguna S i r : This refers to your letter of November 18, 1991 requesting opinion on the following queries: 1. Is an agreement between a corporation and stockholder which provides that the former shall provide a life insurance policy for the latter, whereby an insurance company shall pay the insured stockholder, his heirs and assigns, the sum insured corresponding the approximate value of his shares upon his death ,valid for purposes of transfer of stocks of the deceased shareholder in favor of the corporation without the necessity of another deed of sale by the heirs and successors? 2. Can the stock of the deceased stockholder be distributed among the surviving stockholders as stock dividends? The Commission in a previous opinion has ruled that on the death of a shareholder, his executor or administrator becomes vested with the legal title to his stocks and entitled to vote the same at all meetings and that until a settlement and division of the estate is affected ,the stock of the deceased belong to said administrator or executor as his personal representative. ( Letter to Mr. S.F. dela Cruz dated October 10, 1979 ) This opinion finds support under Section 55 of the Corporation Code which provides that the administrator of the estate of the deceased duly appointed by the court may attend and vote in behalf of the stockholders or members without need of any written proxy. Likewise, the Commission previously opined that to transfer the shares of stock in favor of the heirs of the deceased stockholder, a judicial or extrajudicial partition of his estate is necessary if he died intestate. Otherwise, it will be necessary to wait for the termination of the testamentary proceedings and the final adjudication of the shares of stock in accordance with the will of the decedent. ( Letter dated February 9, 1961 addressed to Talakag Timber Inc. ) Furthermore, the scheme, if allowed, would be tantamount to re-acquisition by the corporation of its own shares. Under Section 41 of the Corporation Code, a corporation cannot purchase its own shares unless the conditions provided therein are complied with. In the light of the foregoing, the above-mentioned proposed scheme is not legally feasible. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman