that unpaid subscription to the capital stock are due and payable and the same or such percentage thereof shall be collected, together with all accrued interest, on a specified date and that if no payment is made within 30 days from said date, all stocks covered by said subscription shall thereupon become delinquent and shall be subject to public auction sale.
Q: Is the call of the board of directors always necessary to collect payment for unpaid subscription?
A: No. A call is not necessary where the
subscription contract specifies the date of payment. (B) NOTICE REQUIREMENT Q: What is the notice requirement in case there is a call of the board of directors for payment of subscription? A: The notice of the call has to be served on the stockholders concerned in the manner prescribed in the call, which may either be by registered mail and/or personal delivery and publication. (4) SALE OF DELINQUENT SHARES Q: When will the share become delinquent?
A: If within 30 days from expiry of the date of
payment or from the date stated in the call made by the board, no payment is made, all stocks covered by said subscription shall thereupon become delinquent and shall be subject to delinquency sale unless the BOD orders otherwise.
Note: “Call” means the resolution or formal
declaration of the board that the unpaid subscriptions are due and payable. Q: What are the remedies of corporations to enforce payment of stocks? A: 1. Extra‐judicial sale at public auction (Sec. 67) 2. Judicial action (Sec. 70)
Q: What is the procedure for the sale of delinquent stocks?
A:
1. Resolution – the board shall issue resolution ordering the sale of delinquent stock
2. Notice – notice of said sale, with a copy of the resolution, shall be sent to every delinquent stockholder either personally or by registered mail 3. Publication – the notice shall
furthermore be published once a week for two consecutive weeks in a newspaper of general circulation in the province or city where the principal office of the corporation is located 4. Sale – the delinquent stock shall be sold
at the public auction to be held not less than 30 days nor more than 60 days from the date stocks become delinquent;
5. Transfer – 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 his favor; and
6. Credit remainder – 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 the same
(Aquino, Philippine Corporate Law Compendium, 2006).
Q: Who is the winning bidder in a delinquency sale?
A:
1. The person participating in the delinquency sale who offers to pay the full amount of the balance of the subscription together with the accrued interest, costs of advertisement and expenses of sale, for the smallest number of shares;
2. If there is no bidder as mentioned above, the corporation may bid for the same, and he total amount due shall be credited as paid in full in the books of the corporation. Such shares shall be considered as treasury shares.
Note: The board is not bound to accept the highest
bid unless the contrary appears. This is for the reason that in public sale, the bidder is the one making the offer to purchase which the corporation is free to accept or reject.
Q: When may delinquency sale be discontinued or cancelled?
A: If the delinquent SH pays the unpaid balance
plus interest, costs and expenses on or before the date specified for the sale or when the BOD orders otherwise.
Q: Can a stockholder assail the delinquency sale?
A: The stockholder may file an action to nullify
the sale on the ground of irregularity or defect in the notice of sale or in the sale itself. But the stockholder must first pay the amount for which the shares are sold with interest from the date of sale at the legal rate. The action shall be commenced within 6 months from the date of sale. (Sec. 69) (A) EFFECT OF DELINQUENCY Q: What are the effects of stock delinquency? A: 1. Upon the stockholder
a. Accelerates the entire amount of the unpaid subscription;
b. Subjects the shares to interest expenses and costs;
c. Disenfranchises the shares from any right that inheres to the to a stockholder, except the right to dividends (but which shall be applied to any amount due on said shares, or, in the case of stock dividends, to be withheld by the corporation until full payment of the delinquent shares. (Sec. 43)
2. Upon the director owning delinquent
shares
a. If the delinquent stockholder is a director, the director shall continue to be a director but he cannot run for re‐election (Sundiang and Aquino, Reviewer in
Commercial Law, 2006)
b. A delinquent stockholder seeking to be elected as director may not be a candidate for, not be duly elected to, the board. (B) CALL BY RESOLUTION OF BOARD OF DIRECTORS Q: Does a call of the board of directors required to declare a stock delinquent?
A: No. Stocks become delinquent when the
unpaid subscription and accrued interests thereon are not paid within 30 days from their due date as specified in the subscription contract or in the call by the board of directors.
The delinquency is automatic after said 30 day period and does not need a declaration by the board making the stock delinquent. (C) NOTICE OF SALE Q: What is the notice requirement in case of sale of delinquent stock?
A: The notice of sale and copy of the board
resolution ordering the sale shall be:
1. Sent to every delinquent stockholder either personally or by registered mail or;
2. 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, as specified in its articles of incorporation, is located. (D) AUCTION SALE Q: What is the procedure for the auction sale of a delinquent share? A: The procedure is as follows:
1. The board of directors shall pass a board resolution ordering the sale of delinquent stock.
2. A notice of sale and copy of the board resolution ordering the sale shall be sent to every delinquent stockholder either personally or by registered mail or; 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, as specified in its articles of incorporation, is located.
3. The minimum bid shall be the full amount of the balance on the subscription plus the accrued interest, cost of advertisement and expenses of sale for the smallest number of shares. 4. The sale will be awarded to the highest
bidder who will be given a certificate of sale and the same will be registered in the books of the corporation.
5. Should there be no bidder, the corporation may bid for the same if it