Liabilities of a Stockholder

What are the obligations of a

stockholder?
While a stockholder has no personal liability for the
debts of the corporation beyond the amount of his capital
investment, he is personally liable for some obligations
provided under this Code.

In addition, he may become personally liable for

damages or otherwise for any wrongful disposition of
corporate assets, breaches of fiduciary duties, fraud, gross
negligence, unauthorized acts, violations of law, or
improper use (e.g., to defraud his creditors to escape
personal debts) of the corporate form.
1. Liability to the corporation for unpaid
subscription (Secs. 60, 64-67.);

2. Liability to the corporation for interest on

unpaid subscription (Sec. 66.)

3. Liability to creditors of the corporation on

unpaid subscription (Sec. 60.);

4. Liability for watered stock (Sec. 65.);

Sec 60.

A stock subscription is a subsisting liability from

the time it is made. The subscriber is as much bound
to pay his subscription as he would be to pay any
other debt. The right of the corporation to demand
payment is no less incontestable (Nava vs. Peer
Marketing Corp., 74 SCRA 65 [1976].), and this is true
even in the absence of an express promise to pay the
amount subscribed.

And the fact that another subscriber fails to pay

his subscription or that it is impossible to collect from
some of them is not a valid defense to discharge a
subscriber from his obligation. (Brown vs. Allebach,
166 Fed. 488.
• Sec 64
Full payment of subscription required for
issuance of certificate of stock.

• Sec 65
The liability attaches whether or not
creditors have relied on an over-valuation of
corporate capital.
Basis/theory of liability under Sec 65.

Where the corporation issues watered stock and

thereby assumes an ostensible capitalization in
excess of its real assets, the transaction necessarily
involves the misleading of subsequent creditors,
and whether done with that purpose actually in
mind or not, is at least a constructive fraud upon
creditors.
• Sec 66
Liability of stockholder for interest on
unpaid subscriptions.

• Sec 67
Failure to pay on such date shall render the
entire balance due and payable and make all
the stocks covered by the said subscription
delinquent and subject to sale at public
auction.
5. Liability for dividends unlawfully
paid (Sec. 43)
What is dividend?

A dividend is that part or portion of the

profits of a corporation set aside, declared and
ordered by the directors to be paid ratably to the
stockholders on demand or at a fixed time. (Fisher
vs. Trinidad, 43 Phil. 480 [1922]; Nielson & Co.,
Inc. vs. Lepanto Consolidated Mining Co., 26
SCRA 540 [1968].)
Liability of stockholders to refund
them to corporation or its creditors

In case dividends are wrongfully or illegally

declared and paid, there is ample authority for the
rule that the stockholders who received them can
be held liable to refund them to the corporation or
its creditors.
6. Liability for failure to create
corporation (Sec 10)

• Sec 10.