X owns 10,000 shares in Z Telecoms Corp. As he is in immediate need of money, he offered to sell all his shares to his friend, Y, at a bargain price. Upon receipt of the purchase price from Y, X proceeded to indorse in blank the certificates of shares and delivered these to Y. The latter then went to the corporate secretary of Z Telecoms Corp. and requested the transfer of the shares in his name. The corporate secretary refused since X merely indorsed the certificates in blank to Y. According to the corporate secretary, the certificates should have been specifically indorsed to the purchaser, Y. Was the corporate secretary justified in declining Y’s request? Discuss. (5%)
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No, the corporate secretary was not justified in declining Y's request. Under Section 62 of the Revised Corporation Code (RA 11232), shares of stock covered by a certificate may be transferred by delivery of the certificate indorsed by the
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Quick check
Under Section 62 of the Revised Corporation Code (R.A. No. 11232), how may shares of stock covered by a certificate be validly transferred?
Section 62 allows the transfer of shares by delivery of the certificate indorsed by the owner, including indorsement in blank.
Was the corporate secretary of Z Telecoms Corp. justified in refusing Y's request to register the transfer of shares?
The corporate secretary was not justified because indorsement in blank coupled with delivery is legally valid.
What is the legal nature of the corporate secretary's duty to record a validly indorsed transfer of shares of stock?
The duty of a corporate secretary to record a valid transfer of shares is ministerial in nature.
What authority does the delivery of a stock certificate indorsed in blank confer upon the transferee?
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Which primary statute governs the transfer of shares of stock and corporate secretary duties in the Philippines?
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1. Indorsement in Blank
Under Section 62 of the Revised Corporation Code of the Philippines (Republic Act Number 11232), shares of stock covered by a certificate are personal property and may be transferred by delivery of the certificate indorsed by the owner, his attorney-in-fact, or any other person legally authorized to make the transfer. The statutory provision does not require a special indorsement naming a specific transferee. An indorsement in blank by the registered owner coupled with physical delivery of the certificate constitutes a complete and valid legal transfer of ownership between the parties.
2. Corporate Secretary Duties
Under Philippine corporate law jurisprudence, the duty of a corporate secretary to record a valid transfer of shares of stock in the corporate stock and transfer book is ministerial in character. Once a stock certificate properly indorsed in blank is presented by a transferee who has acquired ownership for value, the corporate secretary cannot arbitrarily refuse registration based on non-statutory formalities. Mandamus lies to compel the corporate secretary to record the stock transfer and issue a new stock certificate to the transferee.
3. Rights of Transferee
Under corporate law principles, the holder of a share certificate indorsed in blank by the registered owner possesses full legal authority as bearer to complete the indorsement by writing his name as transferee and presenting it for registration. Until the transfer is duly registered in the corporate books, the transfer is valid and binding between the transferor and transferee. Upon presentment, the corporate secretary is legally bound to enter the transfer to protect the transferee's rights against third parties.