Transferring Shares of Stock in the Philippines: A Legal Guide for Shareholders
Transferring shares of stock in a corporation is a common transaction, especially in closely held or family-owned corporations. Whether you're a business owner, investor, or heir, understanding the process is key to ensuring a smooth and legally compliant transfer. Below are answers to frequently asked questions about stock transfers in the Philippines.
1. Can you transfer ownership of shares of stock to another person?
Yes. Under Philippine law, shares of stock are considered personal property and may be transferred to another person, subject to applicable laws and the corporation’s by-laws. Transfers are usually made by sale, donation, or assignment. It can also be transferred via succession through extrajudicial or judicial settlement of estate. However, for the transfer to be valid and binding on the corporation and third parties, it must be properly documented and recorded in the Stock and Transfer Book, in accordance with Section 63 of the Revised Corporation Code (Republic Act No. 11232).
2. What is a Deed of Sale of Shares of Stock?
A Deed of Sale of Shares of Stock is a legal document used to record the voluntary sale of shares from one person (the seller) to another (the buyer). It sets out the essential details of the transaction, including the parties' names, the number of shares sold, the purchase price, and the name and details of the issuing corporation.
3. What are the requirements for a valid transfer of shares/What are the documents required for stock transfer?
To legally transfer shares of stock, the following requirements (among others) must be fulfilled:
Notarized Document evidencing the Transfer (Deed of Sale, Deed of Donation, Deed of Assignment, etc., as applicable);
The original stock certificate, endorsed by the seller to the buyer;
Payment of Documentary Stamp Tax (DST) under Section 175 of the National Internal Revenue Code;
Payment of Capital Gains Tax (CGT) under Section 24(C) of the National Internal Revenue Code (for shares of stock not traded in the exchange);
Proof of CGT and DST payment (e.g., BIR Form 2000 or eDST confirmation);
Valid government-issued IDs of the seller and buyer;
A Board Resolution, if applicable;
Compliance with Right of First Refusal, if applicable;
Submission of documents to the Corporate Secretary; and
Proper recording in the Stock and Transfer Book.
4. What is the process for transferring shares of stock?
The transfer process usually involves these steps:
Prepare a notarized Deed of Conveyance (e.g. Deed of Sale, Deed of Donation, Deed of Assignment, etc.) between the transferor and transferee;
Pay the applicable taxes to the BIR – note that the date/notarization of the Deed of Sale is usually the reckoning point for tax deadlines;
Surrender the endorsed stock certificate to the Corporate Secretary;
Submit all required documents to the corporation, including the BIR-issued eCAR and valid IDs; and
Request entry in the Stock and Transfer Book and the issuance of a new certificate in the buyer’s name.
Only when this process is completed and recorded can the buyer be recognized as a shareholder with full rights.
5. How do I transfer shares of stock to another person?
Please see items 3 and 4 above.
For corporations with restrictions (e.g., board approval or right of first refusal), remember that additional steps may be required based on the by-laws or shareholder agreements.
Conclusion
The transfer of shares of stock is not simply a private transaction. It must comply with legal and tax requirements to be fully effective. Failure to follow the proper procedure may result in the transfer not being recognized by the corporation, the government, or third parties.
Need help processing a stock transfer?
Download our free template from the Dulay Law Co. Resources Page at https://www.dulaylaw.com/resources.
Our legal team can assist with preparing documentation, and paying applicable taxes to ensure compliance. Contact us today for professional assistance at +63.927.487.0737, email us at contact@dulaylaw.com, or visit our website www.dulaylaw.com/contact-us to learn more about how we can help you.
Disclaimer: This blog post is for informational and general educational purposes only. It does not constitute legal advice or create an attorney-client relationship.
