I’d like to ask about stock certificates left to us by our father who recently passed away. Before he died, he told me and my siblings that we will get his stock certificates so that we can be stockholders in the company he invested in. After his death, we brought his stock certificates to the company and manifested our intention to have the stocks to be registered in our names. The company, however, refused and insisted that we cannot automatically transfer our father’s stocks to our names even though he left them to us. Because of this, we want to know what we have to do so we can be formally registered as holders of our father’s stocks. Thank you very much and more power to PAO.
To answer your question, we first need to establish that a stock certificate is a document representing a person’s share in the ownership of a corporation. Because of this, you and your siblings’ desire to take and transfer the stocks of your father to your name translates to the transfer of your deceased father’s property to you and your siblings. And this transfer of a deceased person’s property to his heirs is covered by the law of succession.
According to the Civil Code of the Philippines, rights to the succession are transmitted from the moment of the death of the decedent (Article 777). This means that you and your siblings’ right to succeed your father’s estate, which includes his stocks, is vested in you and your siblings upon the death of your father. Please note, however, that the vesting of the right to succeed does not equate to the instant transfer of a decedent’s property to his heirs because the law requires the settlement of the estate of the deceased before a legal transfer of his pieces of property to his heirs can be permitted.
The settlement of the estate of the deceased stockholder is necessary in your case for the valid transfer of the stockholder’s shares to his heirs because the Corporation Code of the Philippines requires that the transfer of shares be recorded in the books of the corporation before there can be considered a valid transfer of shares (Section 63). And related to this, one information required to be recorded in the books of the corporation is the number of shares transferred and to whom the shares will be transferred. This required information will not be available unless you undertake a settlement proceeding, which aims to determine how a property will be divided and shared among heirs. Through a settlement proceeding, you and your siblings will be able to know how much share will go to you and your siblings so that it may be registered with the corporation. This information is the necessary piece to complete the valid transfer of the stocks to you and your siblings’ names.
Applying the reasoning of the Supreme Court in the case of Reyes vs. Zenith Insurance Corp. (G.R. No. 165744, August 11, 2008), it is deemed that without the settlement of the estate, there can be no definite partition and distribution of the estate to the heirs. And without such partition and distribution, there can be no registration of the transfer, which ultimately prevents a transferee heir from being considered as a stockholder. Therefore, it is necessary that your father’s estate must be settled in a settlement proceeding to fully transfer his stocks to you and your siblings.
To do this, you may file a petition for the settlement of your father’s estate before the Regional Trial Court where your father last resided before his death (Rule 73, Rules of Court). After a hearing of the petition, the court will then determine and order the division of your father’s pieces of property among his heirs, including his stock certificates, so that you may have the necessary information on the number of shares to be transferred and to whom the shares will be given. You may then have this information recorded in the books of the corporation in order to complete the transfer of your father’s shares of stocks to you and your siblings’ names.
Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.
We hope that we were able to enlighten you on the matter.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to email@example.com