Shares of stock in a corporation are personal property, and it is well settled that the owner, as in the case of other personal property, has an inherent right, as incident of his ownership, to sell and transfer the same at will, except insofar as the right may be restricted by the charter of the corporation or the general law, provided the transfer is in good faith, and to a person capable of assuming the obligations of a stockholder (12 Fletcher Cyc. Corp. Section 5452).

Section 6 of the Corporation Code provides in part: “the shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares have such rights, privileges or restrictions as maybe stated in the articles of incorporation.”  In order to be valid and enforceable, any restriction on the transfer of shares of stock must be explicitly provided for in the articles of incorporation.  Restrictions on the transfer of shares are essentially contractual in nature between the stockholders and the corporation, and hence, must be embodied in their contract, the articles of incorporation.  Considering further that shares of stock burdened with restrictions on transferability may fall into the hands of innocent purchasers, the Securities and Exchange Commission (SEC), as a matter of policy, also requires that restrictions on transfer of shares must be printed in the stock certificates (SEC Letter to Mr. Antonio P. Salvador dated April 12, 1994 citing SEC Letter to Ozaeta, Gibbs & Ozaeta, dated October 13, 1994).

Accordingly, in the absence of an express restriction in the articles of incorporation, a stockholder cannot be prevented from transferring his shares, unless there is a restraining order issued by a competent court (SEC Opinion dated April 6, 1995).

Only “reasonable restrictions” on transfers of shares may be provided in the articles of incorporation.  The underlying test is, whether the transfer restriction clause is reasonably needed by the corporation to justify its overriding the general policy against restraints or alienation of property.  A provision giving the existing stockholders the right of first refusal or option to purchase the offered shares at a given reasonable period before disposing it to third parties may be considered valid and enforceable.  A transfer restriction provision is not valid if it absolutely prohibits the sale or transfer of the stock without the approval of the stockholders, as this would violate the general law on free alienability of shares of stock as personal property (SEC Letter to Sycip Salazar Hernandez & Gatmaitan dated August 28, 1995, citing previous SEC Opinion). 

In other words, considerable latitude is allowed incorporators and shareholders in imposing transfer restrictions in articles of incorporation, and they will not usually be declared against public policy unless palpably unreasonable under the circumstances.  Under some corporations, acts on restrictions upon the transfer of shares can only be imposed in the charter or articles (12 Fletcher, Cyclopedia Corp. Sec. 5455, pp. 291-292).

In the event an existing shareholder is no longer interested to be a stockholder of the corporation, he may avail himself of Section 63 of the Corporation Code, which allow transfer of shares of stock.  “Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer.  No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction the date of the transfer, the number of the certificate or certificates and the number of shares transferred.  No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation” (Section 63 of the Corporation Code of the Philippines).

In the absence of a transfer restriction clause in the articles of incorporation, a bonafide transfer of shares to a third party does not require the consent of the corporation and cannot be prevented by it or by its officers (SEC Opinion dated January 16, 1996).

SINGAPORE—San Miguel Corp. (SMC), Philippines’ largest food and drink maker, is seeking a $1.2 billion loan as it expands into mining and other industries, two bankers arranging the financing said.

US broker gives new business to RP

E*TRADE Financial Corp., one of the largest US online discount stockbrokers that cater mainly to retail clients, has outsourced its customer services to the Philippines, the office of Rep. Joseph A. Santiago said Tuesday in a statement.

PHILIPPINE Long Distance Telephone Co. (PLDT) is again revising its core net income target this year from P33 billion to P34 billion on the heels of the firm’s first-half results that rode on its mobile-phone business and election-related spending.

PHILIPPINE stocks Tuesday rose the most in almost five months, rebounding from a four-day slide on speculation the US will limit losses from a housing slump.

Shares of stock in a corporation are personal property, and it is well settled that the owner, as in the case of other personal property, has an inherent right, as incident of his ownership, to sell and transfer the same at will, except insofar as the right may be restricted by the charter of the corporation or the general law, provided the transfer is in good faith, and to a person capable of assuming the obligations of a stockholder (12 Fletcher Cyc. Corp. Section 5452).