You need to sell or transfer your shares of stock issued in the Philippines. This article will discuss the things that you need to avoid in the transfer of shares in the Philippines to avoid errors.
Section 62 of the Revised Corporation Code (RCC) provides:
Section 62. Certificate of Stock and Transfer of Shares.— The capital stock of corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the bylaws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates endorsed by the owner, his attorney-in-fact, or any 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 showing 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. The Commission may require corporations whose securities are traded in trading markets and which can reasonably demonstrate their capability to do so to issue their securities or shares of stocks in uncertificated or scripless form in accordance with the rules of the Commission.
No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.
The Bureau of Internal Revenue (BIR) Memorandum Circular No. 37-2012, states:
SECTION 11. Effect of non-Payment of Tax.—No sale, exchange, transfer or similar transaction intended to convey ownership of, or title to any share of stock shall be registered in the books of the corporation unless the receipts of payment of the tax herein imposed is filed with and recorded by the stock transfer agent or secretary of the corporation. It shall be the duty of the aforesaid persons to inform the Bureau of Internal Revenue in case of non-payment of tax. Any stock transfer agent or secretary of the corporation or the stockbroker, who caused the registration of transfer of ownership or title on any share of stock in violation of the aforementioned requirements shall be punished in accordance with the provisions of Title X, Chapters I and II of the Tax Code, as amended. (Emphasis supplied)
Combining the above rules, the conditions for the transfer of shares in the Philippines are as follows:
- delivery of the stock certificate;
- the endorsement of the owner (or his agent) of the stock certificate;
- payment of taxes
- securing of the Certificate Authorizing Registration or BIR CAR
- the registration of the transfer of shares of stock in the stock and transfer book of the corporation.
Usual mistakes in stock transfer to avoid
If you do not wish to secure the services of a third-party transfer of shares service provider in the Philippines, and to ensure a correct and smooth shares of stock transfer, avoid committing the mistakes below:
Outright GIS change
The General Information Sheet (GIS) must be submitted by the corporations annually to the Securities and Exchange Commission (SEC). It is the company’s Corporate Secretary who signs and attests the GIS sheet. This is collected by the SEC to prevent fraud and protect investors. Others skip the above process and just outright change the information found in the GIS, which is incorrect.
Not updating stock and transfer book
Section 62 of the RCC expressly provides that a stock transfer would only be valid “until the transfer is recorded in the books of the corporation showing 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.” Thus, it is important for the Corporate Secretary to record the transfer of shares in the books of the corporation.
Not getting the BIR CAR
The Certificate Authorizing Registration (CAR) issued by the Bureau of Internal Revenue (BIR) is a very important requirement in stock transfer process. First, the Corporate Secretary needs the Certificate Authorizing Registration or CAR before he/she can record the transfer of shares in the books of a corporation. Second, the lack of a Certificate Authorizing Registration or CAR punishes the Corporate Secretary for not following the law. Lastly, the Certificate Authorizing Registration or CAR is necessary before the Corporate Secretary can issue new stock certificates bearing the new owner’s name.
Issuing stock certificates despite the shares not being fully paid
A stock certificate can only be issued if the full subscription price has been paid by the subscriber.
Not issuing the stock certificates despite full payment
Upon full payment of shares subscribed, the corporate secretary should make it a habit to issue the stock certificate as this evidences the full payment by the subscriber of the shares subscribed. Each stock certificate must be numbered as this needs to be consistent with the entries in the stock and transfer book of the corporation.
Consider securing the services of a third-party transfer of shares service provider in the Philippines to avoid the common mistakes above. This will save you time and money versus doing them on your own. Your third-party transfer of shares service provider in the Philippines should assist you every step of the way to ensure all the rules and regulations in the transfer of shares are complied with to avoid penalties and delays.
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Need further information and assistance in Transfer of shares and stocks? Talk to our team at FILEDOCSPHIL to know more about the requirements and process. Call us today at (+63) 917 149 2337 or send an email to info@filedocsphil.com for more information.