Atty. Jun De Zuñiga
Shares of stock represent the equity ownership in a corporation and are evidenced by stock certificates which name the company and the stockholder. Shares of stock so issued are personal property and enjoy the attributes of ownership which include “the right to enjoy and dispose of a thing, without other limitations than those established by law” (Art. 428, Civil Code).
For transfers of such shares, the Revised Corporation Code (RA No. 11232) provides that the same may be effected “by delivery of the certificate or certificates indorsed by the owner, his attorney-in-fact, or any other person legally authorized to make the transfer” provided that “no transfer, however, shall be valid, except as between the parties until the transfer is recorded in the books of the corporation.”
Where the shares subject of the transfer are those issued by banks, there are additional requirements prescribed under the New Central Bank Act (RA No. 7653 as amended by RA No. 11211) in case the “transfers or acquisitions, or a series thereof” comprise at least ten percent (10%) of the voting shares in a bank. The said law requires prior approval of the Bangko Sentral for such transfers and acquisitions and provides further that “without Bangko Sentral approval, no such transfer or acquisition shall have legal effect nor shall the same may be recognized in the books of the institution or by any government agency.”
It may be noted that the foregoing requirement in the New Central Bank Act is an amendment introduced by RA No. 11211, which the President signed into law on February 14, 2019, and was designed to enable the Bangko Sentral to pass upon “the fitness of the incoming stockholders as may be indicated in their integrity, reputation and financial capacity.” Under the same provision, if there is transfer of actual control or management of the institution to the new stockholders or their representatives prior to Bangko Sentral approval, the transferor, the transferee and any person responsible therefor shall be liable under Sections 36 (criminal sanctions) and 37 (administrative sanctions) of the same law.
As may be noted, the fit and proper rule being applied by the Bangko Sentral to bank directors and officers has been expanded to cover stockholders owning at least 10% of a bank’s voting shares. This is an enhancement of the State’s policy to afford better protection to depositors and the public in general, consistent with the Bangko Sentral’s mandate to promote financial stability. The new authority covers not only single transactions but also “a series thereof” which could result in at least 10% ownership by a stockholder. This means splitting the transfers into several transactions with each transaction involving less than 10% of the voting shares will not be allowed as a circumvention because all such transactions are subject to consolidation.
Moreover, the prohibition on the transfers of shares without Bangko Sentral approval covers likewise the transfer of actual control or management of the banks to new stockholders. In other words, prior to the grant of approval by the Bangko Sentral, it is prohibited for the incoming stockholders to take over the control and management of the bank.
Lastly, violations of these provisions would subject both the transferor and the transferee, together with any responsible person, to criminal and administrative sanctions. Such other “responsible person” would obviously refer to the corporate secretary who is the corporate registrar of these transactions.
The above comments are the personal views of the writer. His email address is [email protected]