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This article was originally published on June 1, 2022 and has been updated to reflect recent legal developments.
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Section 63 of the Revised Corporation Code is instructive that no certificate of stock shall be issued to a subscriber until the full amount of the subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid.
One practical way to invest one’s hard-earned money is by becoming a stockholder of a corporation. Under the Revised Corporation Code of the Philippines (Republic Act No. 11232), a person may become a stockholder by subscribing to the corporation’s shares.
Subscription Contract
Section 59 of the Revised Corporation Code states that any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of title VII of the Revised Corporation Code, notwithstanding the fact that the parties refer to it as a purchase or some other contract.
Issuance of Stock Certificates
Under Section 63 of the Revised Corporation Code is instructive that no certificate of stock shall be issued to a subscriber until the full amount of the subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid.
Section 62 of the Revised Corporation Code further provides that no shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.
Interest on Unpaid Subscriptions
Section 65, Revised Corporation Code provides that subscribers to stocks shall be liable to the corporation for interest on all unpaid subscriptions from the date of subscription, if so required by and at the rate of interest fixed in the subscription contract. If no rate of interest is fixed in the subscription contract, the prevailing legal rate shall apply.
Payment of Balance of Subscription
Under Section 66 of the Revised Corporation Code, subject to the provisions of the subscription contract, the board of directors may, at any time, declare due and payable to the corporation unpaid subscriptions and may collect the same or such percentage thereof, in either case, with accrued interest, if any, as it may deem necessary.
When should the unpaid subscription be made?
Also provided under Section 66 of the Revised Corporation Code that payment of unpaid subscription or any percentage thereof, together with any interest accrued shall be made on the date specified in the subscription contract or on the date stated in the call made by the board.
Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription contract. The interest shall be computed from the date specified, until full payment of the subscription.
If no payment is made within thirty (30) days from the said date, all stocks covered by the subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise.
Remedies of the Corporation in Case of Non-Payment
In the event of such failure to pay unpaid subscription, there are two remedies available to the corporation. The first remedy is the delinquency sale provided under Section 68 (Section 70, Revised Corporation Code)of the Corporation Code and the second is by a court action to recover unpaid subscription pursuant to Section 70 (Section 69, Revised Corporation Code) thereof. (Arias v. Vital Link Lending Corp., G.R. No. 227672 (Notice), November 10, 2021)
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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