Opinion No. 06-21 RE : Refusal to Issue Certificates of Stock; Remedies of a Successful Bidder in an Auction Sale of Shares of Stock

CURITIES AND EXCHANGE COMMISSION Mandaluyong City Metro Manila SEC Building, EDSA, Greenhills Republic of the Philippines Department of Finance Philippines

23 March 2006

Auction Sale of Shares of Stock SEC Opinion No. 06-21 Refusal to Issue Certificates of Stock: Remedies of a Successful Bidder in an

1100 Quezon City ATTY. JAMES DENNIS C. GUMPAL 18 East Avenue cor V. Luna"Road. Unit 401,LOCB III Brgy. Pinahan

Dear Atty. Gumpal:

shares of stocks of a corporation in the event that the corporate secretary refuses to in favor of the judgment creditor. remedies available to a creditor who is a successful bidder in an auction sale of issue certificates of stock and record the auction sale in the stock and transfer book We reply to your letter dated 25 February 2006 requesting opinion on the

It is stated in Section 63 of the Corporation Code that:

except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the be transferred by delivery of the certificate or certificates indorsed by :the owner or his attorney-in-fact or other person legally authorizcd to'make the transfer." No transfer, however, shall be valid. "xxx Shares of stock so issued are personal property and may

1atex ansfer the number of the certificate on ifea es andthenumb 011 ansferred.xxx

f transter Iowit: With certain' legal requirements

erem be atdelivery of the'stock certificates;,

2 there are no unpaid claims against the stock by the attorney-in-fact or other person legally authorized to make the transfer; corporation: ie certificate must be indorsed by the owner or his

4 payment of documentary stamp taxes; and 5 surrender of the original certificate of stock to the

corporation.

to those entitled thereto, upon demand, is a ministerial duty enforceable by mandamus.2 The writ will only be granted if it is shown that the transferee has no other plain, speedy and adequate remedy and that there are no unpaid claims against the stocks whose transfer is sought to be recorded.3 secretary or transfer agent in case of listed corporations to issue stock certificates The Commission had the occasion to opine that the duty of the corporate

Corporation, et al. vs. Peers Industrial, Corp., et al. where the Commission, citing the case of Rural Bank of Salinas, Inc. vs. Court of Appeals, held that: The foregoing pronouncement was reiterated-in the case of Aegis Holdings

register transferred shares of stock as ministerial. The court has consequently held that the corporation or the officers thereof who refuse registration of such transfer of stock may be compelled to do so through appropriate proceedings." "xxx the court characterized the corporation's obligation to

performance and pray for an alternative relief by way of damages, thus: Another remedy that may be availed of is to file an action for specific

.'Aegis Holdings Corporation, et al. vs. Peers Industrial, Corp., et al. SEC Case No. 10-99-6440 dated NOTES AND SELECTED CASES, Vol II, p. 309. 5 G.R. No. 96674, June 26, 1992, February 4, 2000. 2 SEC Opinion dated 06 January 1999 addressed to Mr. Rafael Llave. Campos, Jr., Jose and Lopez-Campos, Maria Clara. THE CORPORATION CODE: COMMENTS, Supra

corporation refuse upon demand to issue a stock certificate to the a entitled thereto, the latter may sue the corporation for Corporation is bound to issue a certificate of stock to a who has:fully paid for his subscription, and should the

TC IEaCG orporationtof a close corporation may provide restrictions on the iowever.that under Section 97 of the Corporation Code, the

aaTaf shares:7 Thus, if the transfer of stock is in breach of transfer

transfer in the corporate books and he cannot be held liable for such refusal. qualifying conditions; the. corporate secretary is not duty bound to record the

the followin In sum, if the corporation wrongfully refuses to issue a certificate of stock. gare the remedies available to an assignee or transferee of shares of stock:

2 file for an alternative relief by way of damages where file a suit for specific performance of an express or implied contract;

3 file a petition for'mandamus to compel issuance of a specific performance cannot be granted; and

certificate.

factual circumstances involved, the Commission shall refrain from identifying the Considering, however, that your letter failed to disclose the complete

shares of stock. best recourse that may be taken by the successful bidder in an auction sale of the

VERNETTE G. UMALI-PACO

General Counsel

D:\MSB\rep!y.gumpal.doc

Lopez,Rosario. THE CORPORATION CODE OF THE PHILIPPINES: ANNOTATED, Vol 2, p. 819 restrictions on the'ir transfers as may be stated therein, subject to the provisions of the following section; citing SEC Opinion dated February 10, 1981 addressed to Atty. Ofelia Francisco. provide "SECTION 97. Articles of incorporation. 1. For a classification of shares or rights and the qualifications for owning or holding the same and - The articles of incorporation of a close corporation may

8SEC Opinion dated 18 November 1992 addressed to Atty. Victor Africa. Ibid, p. 822.

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