IT is a well-settled rule that the rights of a stockholder accrue only upon entry of his name in the books of the corporation. A person who desires to be recognized as a stockholder for purposes of exercising stockholder’s right, including the right to receive dividends, must secure a standing by having his ownership of shares recorded on the corporate books (SEC Opinion dated September 1, 1995, Re: Triabo Development Corp.). According to Section 74 of the Corporation Code of the Philippines, stock corporations must keep a stock and transfer book containing the names of the stockholders composing the corporation. The entries cover the subscriptions of the shareholders thereof, including the date of payment of the installment, if there is any, and the statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made and such other entries as the bylaws may prescribe.

Thus, as a general rule, only those whose ownership of shares are duly registered in the stock and transfer book are considered stockholders of record and are entitled to all rights of stockholders. A person who desires to be recognized as a stockholder for purposes of exercising stockholder’s right to vote must secure a standing by having his ownership of shares recorded on the corporate books  (SEC Opinion dated March 7, 1994, Re: Pastora O’Connor).

Thus, to be able to give a definite information as to the present ownership of the corporation, much would depend on the identities of the stockholders as appearing in the stock and transfer book of the corporation which is kept in the principal office of the corporation. The stock and transfer book is the best evidence to establish stock ownership in a corporation (SEC Opinion dated 5-4-1995, Re: Commodore Francis Mallillin).

Once recognized as such, the stockholder shall possess equal rights in all respect to every other stockholder (SEC Opinion dated 4-18-85). Thus, if the articles of incorporation do not provide for any distinction of the shares of stock of the corporation, all shares shall enjoy the same rights and privileges (ibid). In fact, even a minority stockholder, though a holder of only one share, is entitled to all rights of a stockholder (SEC Opinion dated 10-9-92).

The rights of stockholders are generally enumerated as follows: first, to have a certificate or other evidence of his status as stockholder issued to him; second, to vote at meetings of the corporation; third, to receive his proportionate share of the profits of the corporation; and last, to participate proportionately in the distribution of the corporate assets upon the dissolution or winding up (Purdy’s Beach on Private Corporations, Sec. 554, Pascual v. Del Saz Orozco, 19 Phil. 82, 87 as cited in Razon vs. IAC, G.R. 74306, March 16, 1992).

Regarding stockholders’ rights to treasury shares, it was opined that inasmuch as they are not considered as outstanding capital stock, they are not entitled to any right or privilege of a stockholder for as long as they remain in treasury. The reason is that when a corporation reacquires it own stock, it does not become a subscriber thereof. The only right which a corporation has over treasury shares is to reissue the same for valuable consideration pursuant to the existing rule on the matter (SEC Opinion dated 10-1-99). As to the rights of stockholders with regard to escrow shares, holders thereof are not entitled to rights due them until the conditions set forth  for the release of such shares are fully met (SEC Opinion dated 11-20-89).

As to the matter of administrator or executor of a shareholder, on the death of the latter, the former, as duly appointed by the court, becomes vested with legal title to the stock and is entitled to vote the same at all meetings, and until a settlement and division of the estate is effected, the stock of the decedent belongs to said administrator or executor as his personal representative (SEC Opinion dated 5-14-93).

The forgoing examples of share transfers and/or acquisitions must, likewise, be recorded on the corporate books.

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The Corporate Corner: Recognition of a stockholder and subsequent rights

IT is a well-settled rule that the rights of a stockholder accrue only upon entry of his name in the books of the corporation.