Published — June 1, 2022
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 your own lawyer to address your legal concerns, if 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.
Read also: TAX AMNESTY ON DELINQUENCIES
Before a share in a stock corporation may be considered delinquent, the same must first be correlated with the pertinent provisions of the Revised Corporation Code (RCC) regarding the payment of balance of subscription (Section 66, RCC) and Delinquency Sale (Section 67, RCC).
Under Section 66, it is the board of directors which may, at any time, declare due and payable to the corporation unpaid subscriptions. Payment of unpaid subscription or its percentage, together with any interest accrued shall be made in accordance with the subscription contract or on the date stated in the call made by the board of directors. If there is no payment made on such date, the entire balance shall be considered due and payable. As a consequence, the holder of such share is liable for interest at the legal rate on such balance unless a different rate is provided in the subscription contract.
When does a share become delinquent then? If no payment was made within thirty (30) days from the date specified in the subscription contract on the date stated in the call made by the board of directors, all stocks covered by the subscription shall become “delinquent” and shall be subjected to sale, unless the board of director orders otherwise. The frequently asked question is, “Is there a need for the board of directors to make a call that such share is delinquent?” A categorical answer is not provided in the Revised Corporation Code. What is clear though is that, the RCC provides a specific period of thirty (30) days within which the stockholder may settle his obligations to the corporation. Said period is to be reckoned from the date specified in the subscription contract or on the date stated in the call made by the board of directors. Otherwise, the same shall become delinquent without the call made by the board of directors.
Is there a remedy of the holder of such delinquent share? There is. The holder of such delinquent share may pay the balance due on his subscription including accrued interest, costs of advertisement and expense of sale. Failure to pay the same shall render the delinquent share to be sold at a public auction.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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