UNPAID SUBSCRIPTION, DELINQUENT STOCKS AND DELINQUENCY SALE: REVISED CORPORATION CODE

By P&L Law | Services | 5 May 2020 in Corporate Law

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No shares of stock against which the corporation holds any unpaid claim shall be transferable in the
books of the corporation (RCC, S62). Still, holders of subscribed shares not fully paid which are not
delinquent shall have all the rights of a stockholder (RCC, S71). The stockholder loses the rights as a
stockholder, except the right to receive dividends, only when the stock becomes delinquent. 

I. WHEN DUE AND PAYABLE

The paid-in capital subscription may not cover the entire par value of each share. The unpaid
subscription or balance of the par value or issue price becomes due and payable: (a) if provided in
the subscription contract; or (b) when the board of directors issues a call for payment. The board of
directors may, at any time, declare the balance or any part thereof due and payable. The board of
directors may impose accrued interests on the unpaid balance. 

Payment shall be made on or before the date specified in the subscription contract or the call for
payment issued by the board of directors. 

Failure to pay on specified date shall render the entire balance due and payable and shall make the
stockholder liable for interest at the legal rate on such balance, unless a different interest rate is
provided in the subscription contract. 

II. WHEN DELINQUENT

If no payment is made within thirty (30) days from the said date, all stocks covered by the subscription
shall thereupon become delinquent and shall be subject to delinquency sale, unless the board of
directors orders otherwise. 

III. EFFECT OF DELINQUENCY

Until payment is made by the holder of the delinquent stock (the amount due on the subscription,
accrued interest, and the costs and expenses of advertisement, if any):

 (a) No delinquent stock shall be voted for, be entitled to vote, or be represented at

any stockholder’s meeting; and

 (b) The holder shall not be entitled to any of the rights of a stockholder.

However, the delinquent stock is still entitled to dividends in accordance with the provisions of
the Revised Corporation Code. [RCC, S70]

IV. DELINQUENCY SALE: RESOLUTION 

The board of directors may, by resolution, order the sale of delinquent stock and shall specifically state:

 (a) the amount due on each subscription, plus all accrued interest;

 (b) place of the sale;

  (c) time of the sale; and

 (d) the date of the sale, which shall not be less than 30 days NOR more than 60 days, from the
date the stocks became delinquent. [RCC, S67]

V. DELINQUENCY SALE: NOTICE

Notice of the sale, with a copy of the resolution, shall be sent to every delinquent stockholder either
personally, by registered mail, or through other means provided in the bylaws. [RCC, S67]

The notice shall also be published once a week for 2 consecutive weeks in a newspaper of general
circulation in the province or city where the principal office of the corporation is located. 

VI. SALE BY PUBIC AUCTION

The delinquency sale must be done by public auction. The auction may be cancelled in either of these
instances:

 (a) the delinquent stockholder pays to the corporation, on or before the date specified for the
sale of the delinquent stock: (i) the balance due on the former’s subscription; (ii) accrued
interest; (iii) costs of advertisement; and (iv) expenses of sale; or 

 (b) the board of directors otherwise orders.

The sale shall be made to a bidder who shall offer to pay the full amount of the balance on the
subscription together with accrued interest, costs of advertisement and expenses of sale, for the
smallest number of shares or fraction of a share. 

The stock so purchased shall be transferred to such purchaser in the books of the corporation and a
certificate for such stock shall be issued in the purchaser’s favor. 

The remaining shares, if any, shall be credited in favor of the delinquent stockholder who shall likewise
be entitled to the issuance of a certificate of stock covering such shares. 

Should there be no bidder at the public auction who offers to pay the total amount for the smallest
number of shares or fraction of a share, the corporation may, subject to the provisions of the Revised
Corporation Code, bid for the same, and the total amount due shall be credited as fully paid in the
books of the corporation. Title to all the shares of stock covered by the subscription shall be vested in
the corporation as treasury shares and may be disposed of by said corporation in accordance with the
provisions of the RCC. 

VII. WHEN SALE MAY BE QUESTIONED

Condition precedent. No action to recover the delinquent stocks sold (on the ground of irregularity or
defect in the notice of sale, or in the sale itself) may be filed, unless the party seeking to maintain such
action first pays or tenders to the party holding the stock, the sum for which the same was sold, with
interest from the date of sale at the legal rate. 

Prescriptive period: The complaint must be filed within six (6) months from the date of sale. [RCC, S68]

VIII. COURT ACTION TO COLLECT UNPAID SUBSCRIPTION

Nothing in the Revised Corporation Code shall prevent the corporation from collecting, through court
action, the amount due on any unpaid subscription, with accrued interest, costs and expenses. [RCC,
S69]