A General Information Sheet (GIS) is a document that is required by the Revised Corporation Code (RCC, Republic Act No. 11232) to be submitted by corporations to the Securities and Exchange Commission. The RCC provides that every corporation, domestic or foreign, doing business in the Philippines shall submit the following to the Securities and Exchange Commission (SEC):
(a) annual financial statements
(b) a General Information Sheet
For corporations vested with public interest, the company must also submit:
(i) a director or trustee compensation report
(ii) a director or trustee appraisal or performance report (RCC, Section 177)
The GIS provides a snapshot of the company’s current status, including the names and addresses of its stockholders. However, it is important to note that a GIS is not a conclusive evidence of being a stockholder.
In practice, it is not unusual for lawyers to encounter clients that have simply updated the names of the stockholders, directors, and other corporate information, such as the registered address of the company, by changing entries in the GIS without complying with the formalities required by the law, rules and regulations.
One might then wonder, is the mere inclusion as shareholder in the GIS of a corporation, as well as subsequent appointment as director and officer of the corporation, sufficient proof that one is a shareholder in such corporation?
This was the issue decided by the Supreme Court in the case of David Lao and Jose Lao vs. Dionisio Lao (G.R. No. 170585, Oct 6, 2008).
In that case, David and Jose Lao filed a petition with the SEC against Dionisio Lao, president of Pacific Foundry Shop Corp (PFSC) praying, among others, that they be declared as stockholders and directors of PFSC.
David and Jose claim that for about 11 years, or for the years 1987-1998, the GIS of PFSC stated that they own 446 and 333 shares, respectively, in PFSC.
David claims that he purchased his shares in the company from one Lao Pong Bao, who in turn purchased the shares from Hipolito Lao. Jose, on the other hand, claims to have purchased his shares of stock in the corporation from Dionisio Lao.
The GIS indicated that David occupied various key positions in PFSC from 1987-1998, and Jose served as director in PFSC from 1990-1998.
The sworn statements of the corporate secretary of the PFSC also stated that David and Jose own shares of stock numbering 446 and 333, respectively.
The minutes of the annual stockholders meeting of PFSC likewise showed that David and Jose were present at the meeting. It is also indicated therein that David occupied various key positions in PFSC from 1987 to 1998 and that Jose served as director in PFSC from 1990-1998. The minutes were signed by the officers of PFSC, including David and Jose.
The trial court denied the petition of David and Jose to be declared stockholders of PFSC. On appeal, the Court of Appeals declared David and Jose to be stockholders of the corporation since 1987, owning 446 and 333 shares of stock respectively, and ordering the corporate secretary of the corporation to issue the stock certificates to David and Jose.
On motion for reconsideration, the Court of Appeals reversed its earlier decision and reinstated the decision of the trial court.
The Supreme Court upheld the ruling of the Court of Appeals and the trial court, denying recognition of David and Jose as stockholders of PFSC on the ground that they failed to prove that they were shareholders of PSFC.
In its decision, the Supreme Court stated:
1.) David and Jose did not have any share stock certificates in their names.
2.) David and Jose failed to present any deed of assignment or sale instrument. over the shares they claim to own. They claimed to have purchased the same from Dionisio Lao but there was no deed of assignment or similar instrument covering their purchase of the shares; and
3.) David and Jose did not have possession of certificate of shares of stock covering the shares they claim to own.
The Supreme Court declared that absent a written sale document, David and Jose must prove, at the very least, possession of the certificates of shares in the name of the seller. Section 63 of the Corporation Code provides that shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. (now Sec. 62, RCC)
In contrast, Dionisio Lao was able to prove that he is the owner of the shares claimed by David and Jose as he had in his possession the certificates of stocks of Hipolito Lao which were properly endorsed to him. More importantly, the transfer was registered in the stock and transfer book of the corporation.
Finally, the Supreme Court declared that the mere inclusion of David and Jose as shareholder in the GIS of PFSC is insufficient proof that they are shareholders of the company.
While it may be true that petitioners were named as shareholders in the GIS submitted to the SEC, that document alone does not conclusively prove that they are shareholders of PFSC. The information in the document will still have to be correlated with the corporate books of PFSC. As between the GIS and the corporate books, i.e. the stock and transfer book, it is the latter that is controlling.
In view of the foregoing, it is important to note that transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-existent as far as the corporation is concerned. As between the corporation on the one hand, and its shareholders and third persons on the other, the corporation looks only to its books for the purpose of determining who its shareholders are. It is only when the transfer has been recorded in the stock and transfer book that a corporation may rightfully regard the transferee as one of its stockholders.
Though, the Supreme Court did caution that a stock and transfer book, like other corporate books and records, is not in any sense a public record, and thus is not exclusive evidence of the matters and things which ordinarily are or should be written therein. It is also generally held that the records and minutes of a corporation are not conclusive even against the corporation but are prima facie evidence only, and may be impeached or even contradicted by other competent evidence. (G.R. No. 204089, July 29, 2015, Borgoña, et al. vs. Abra Valley Colleges Inc., et al.)
Accordingly, corporations and stockholders must keep in mind that certain minimum requisites must be complied with for there to be a valid transfer of stocks, such as: (a) there must be delivery of the stock certificate, (b) the certificate must be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer, and (c) to be valid against third parties, the transfer must be recorded in the books of the corporation.
It is the delivery of the certificate, coupled with the endorsement by the owner or his duly authorized representative that is the operative act of transfer of shares from the original owner to the transferee.
Moreover, to be valid against third parties and the corporation, the transfer must be recorded or registered in the books of corporation to enable the transferee to exercise all the rights of a stockholder, to inform the corporation of any change in share ownership so it can ascertain the persons entitled to the rights and subject to the liabilities of a stockholder, and to avoid fictitious or fraudulent transfers. (Teng vs. Securities and Exchange Commission (G.R. No. 184332, February 17, 2016)
The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, teaches law at the MLQU School of Law, and an Arbitrator of the Construction Industry Arbitration Commission of the Philippines. He may be contacted at jcs@tiongcosiaobellolaw.com. The views expressed in this article belong to the author alone.