SEC. 66 PAYMENT OF BALANCE OF SUBSCRIPTION.

the stocks covered by the said subscription

delinquent and subject to sale at public auction.
Remedies to enforce payment of stick subscription. This means that the delinquent shares shall
1. Extra-Judicial sale at public auction – Permitting cover not only the unpaid portion of the
the corporation to put up unpaid stock for sale stockholder's subscription but his entire
and dispose of it for the account of the subscription consistently with the doctrine that
delinquent subscribers. a subscription is one, entire, indivisible, whole
2. Judicial Action – The statutory right to sell the contract, (see Sec. 64.)
subscriber’s stock is merely a remedy in
addition to that which proceeds by action in CALL ASSESSMENT
court. A declaration officially Used with reference to
3. Collection from cash dividends and withholding made by a corporation both paid and unpaid
of stock dividends – Authorized by Section 43. usually expressed in the subscriptions.
form of a resolution of the Paid Subscriptions – Levy
Statutory sanctions on stock delinquency. board of directors made upon the stock of a
1. Rights denied to stockholder. – No delinquent requiring the payment of corporation, generally for
stock shall be voted. all or a certain prescribed the purpose of correcting
2. Right given to corporation. – Corporation has portion of a subscriber’s an impairment of the
the right to first apply cash dividends due on stock subscription. capital and indicates the
delinquent stock to the unpaid balance on the proportionate amount
subscription plus cost and expense, while as to required to be paid by
stock dividends, to withhold the same from the each stockholder.
delinquent stockholder until his unpaid Unpaid Subscriptions – Call
subscription is fully paid. or installment.

Remedies limited to delinquent subscription. – Such VALID CALL requisites:

power of right is limited to delinquent subscription and
does not extend to any other debt of stockholders to
corporations.
 Corporations may sell shares of stockholders for
the satisfaction of the latter's debt to the
former.
 A lien upon stock in favor of corporations for
debt or liability of stockholders other than
unpaid subscription due and payable would be
an obstacle to the trading of shares. Before
accepting a transfer of corporate shares, a
prospective transferee would have to inquire
into unregistered claims against said shares in
favor of the corporation. (Bank of P.I. vs.
Caridad Estates, C.A.-G.R. No. 16, Aug. 22,1939.)
A provision creating a lien upon shares of stock
for unpaid debts, liabilities, or assessment of
stockholders to the corporation should be
embodied in the articles of incorporation, and
not merely in the by-laws, because Section 6
(par. 1.) prescribes that the shares of stock of a
corporation "may have such rights, privileges or
restrictions as may be stated in the articles of
incorporation." (SEC Opinion, April 13,1981.)
Section 91, dealing with termination of
membership in a non-stock corporation,
specifically states that the manner and causes
for such termination shall be provided in the
articles of incorporation or the by-laws.
Payment of unpaid subscription or percentage thereof:
1. Date specified in the contract of subscription;
2. In the absence of any specified date in the
contract of subscription, on the date stated in
the call made by the board of directors;
3. Failure to pay on such date shall render the
entire balance due and payable and make all
(To safeguard the rights of stockholders and subject
them only to equality of assessments)
1. It must be made in the manner prescribed by
law;
2. It must be made by the board of directors;
3. It must operate uniformly upon all the
shareholders.
Power of BOD to make call.
1. BOD may at any time declare due and payable
unpaid subscriptions.
2. Power not absolute, limited by the subscription
contract.
Necessity and purpose of call.
1. Depends upon the provisions of the contract of
subscription.
2. Necessary when required by the subscription
agreement.
3. If no time fixed for payment in the agreement,
the subscription is payable only upon call by the
board of directors which may be made “at any
time” as the board may decide.
4. Amount that may be called also depends upon
the terms of the contract.
5. PURPOSE of CALL is to fix the time of payment
of unpaid subscription and the percentage
thereof to be paid when they are not fixed in
the subscription contract.
When call NOT NECESSARY.
1. When insolvency supervenes upon a
corporation, the payment of stock subscription
may be enforced without the necessity of a
prior call.
2. Same where the subscriber becomes insolvent.
3. No call is necessary to fix the subscriber's
liability when the subscription is payable not
 upon call or demand by the directors but
immediately or on a specified day on or before
a specified day, or when it is payable in
installments at specified times.
Payment without call. - A stockholder can pay his
subscribed shares of stock even if there is no call for
their payment.
Necessity of notice of call. - Notice must be given to
the stock holder concerned. A call without notice to
the subscriber is practically no call at all.
SEC. 67 DELINQUENCY SALE
Procedure for the sale of delinquent stocks.
1. Resolution declaring unpaid subscriptions
payable.
2. Notice to stockholders of resolution.
3. Resolution ordering sale of delinquent stocks.
4. Notice and publication of delinquent sale.
5. Sale of delinquent stocks.
Highest Bidder - The highest bidder is the person
offering at the sale to pay the full amount of the
balance on the subscription together with accrued
interest, if any (see Sees. 66, 67.), cost of
advertisement32 and expenses of sale, for the
smallest number of shares or fraction of a share.
(Sec. 68, par. 3.) Thus, the subscriber cannot incur
any deficiency liability because the highest bid must
not be less than the full amount due.
The corporation has a right to reject the highest
bid. - The delinquent stock shall be sold to the
highest bidder "unless the board of directors
otherwise orders".
In the absence of bidders - the corporation may
purchase for itself the delinquent stock. The
delinquent subscriber shall also be released from
liability with regard to his subscription which is
deemed fully paid, for the total amount due shall be
credited as paid in full in the books of the
corporation.
Forfeiture of delinquent stock - without the
corporation paying for it under Section 68, is not
authorized under the Code.
Shares to be sold in case of delinquency. - The
unpaid subscription must be paid by the subscriber
pursuant to the terms and conditions of the
subscription contract with the corporation. Where
the subscription contract fails to fix the time and
amount to be paid, the same may be fixed in the
notice of call pursuant to a resolution of the board
of directors.
SEC. 68 WHEN SALE MAY BE QUESTIONED
(refers to unpaid subscription to capital stock)
Recovery of stock unlawfully sold.
The grounds for the recovery of stock unlawfully
sold for delinquency are:
(1) irregularity or defect in the notice of sale; and
(2) irregularity or defect in the sale itself of the
delinquent stock.
Irregularity or defect in the call for unpaid
subscription or in the notice of delinquency is no
longer included among the grounds for questioning
the sale.
SEC. 69 COURT ACTION TO RECOVER UNPAID
SUBSCRIPTION
Judicial remedy to recover unpaid subscription.
1. Necessity of prior call. GR: A corporation may
not maintain a suit for the enforcement of
unpaid subscription without first making a call
as provided by law.
2. Prescriptive period – The judicial action to
recover unpaid subscription:
a. Written subscription - contract must be
brought within 10 years from the time the
action accrues;
b. Verbal Subscription – 6 years.
Note: Prescriptive period begins from the date
demand is made of the subscriber by the
corporation to pay the balance of the
subscription.
3. Amount recoverable. — The judicial remedy is
limited to "the amount due on any unpaid
subscription with accrued interest, costs and
expenses." Therefore, the corporation cannot
recover any other claim against the subscriber.
The foregoing is also true in case of the extra-
judicial sale at public auction of delinquent
shares. (Sec. 68, par. 3.)
4. Nature of Controversy – SEC has original and
exclusive jurisdiction over controversies arising
out of intra-corporate relations between the
corporation and the stockholders.
5.
The Relationship Test
Under the relationship test, there is an intra-corporate
controversy when the conflict is:
(1) between the corporation, partnership, or association
and the public;
(2) between the corporation, partnership, or association
and the State insofar as its franchise, permit, or license
to operate is concerned;
(3) between the corporation, partnership, or association
and its stockholders, partners, members, or officers;
and (4) among the stockholders, partners, or associates
themselves.