Section 63. Certificate of stock and transfer of shares.

- The capital stock of stock

corporations shall be divided into shares for which certificates signed by the
president or vice president, countersigned by the secretary or assistant secretary,
and sealed with the seal of the corporation shall be issued in accordance with the
by-laws. 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-infact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the transaction, the
date of the transfer, the number of the certificate or certificates and the number of
shares transferred.

In the case of De los Santos, et al. vs. MacGrath, et al., G.R. No. L-4818, 28 February
1955, the Supreme Court interpreted the provisions of Section 63 of the Corporation
Code. The Supreme Court held that any voluntary transfer of shares of stock in a
corporation that is represented by a certificate of stock must strictly comply with
the following conditions:

a. There must be delivery of the certificate;

b. The share must be indorsed by the owner or his agent; and
c. To be valid to the corporation and third parties, the transfer must be recorded in
the books of the corporation.

One of the requirements to effect a valid transfer of shares of stock is that the
certificate of stock must be indorsed by the owner or his agent. Mere delivery or
handing over of the stock certificate is insufficient, and does not produce the effects
of a transfer or conveyance to another. Indorsement of the stock certificate is one of
the operative acts which validates the transfer. Without the act of indorsement by
the stockholder, the sale or disposition will not be binding upon the corporation. Of
course, there are remedies under the law to compel the owner to indorse the stock
certificate which he or she has already conveyed to another. But before
indorsement of the stock certificate, the corporation can refuse recognize the
transferee stockholder.
Moreover, as between the corporation on 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. Thus, as between the real owner of a stock

certificate and the registered owner or the person actually registered in the Stock
and Transfer Book of a corporation, it is the person registered in the Stock and
Transfer Book who must sign or endorse the certificate of stock to allow its sale or
transfer.

Two different government entities are involved in this process: The Securities and
Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR).

Before a share can be transferred and be reflected at the General Information Sheet
with SEC, this must first be cleared with BIR that will assess the
Documentary Stamp Tax and Capital Gains Tax to be paid.

A certain number of requirements must be prepared in order to fully process this

transfer:
Filing a Deed of Transfer
Audited Financial Statement
Stock certificate and other documents that maybe required depending on the
Revenue District Office

After the clearance with the BIR, you must file the GIS at the SEC to complete the
transfer of the shares. The new shareholder will need to provide the following
information:
Complete name
Address
TIN number A foreigner can apply for a one time TIN number with the BIR
Respective share that this new shareholder will hold
Capital Gains Tax for Onerous Transfer of Shares of Stocks Not Traded
Through the Local Stock Exchange
Tax Form
BIR Form 1707 - Capital Gains Tax Return (For Onerous Transfer of Shares of Stocks
Not Traded Through the Local Stock Exchange)
Documentary Requirements

1) One original copy and one photocopy of the Notarized Deed of Sale/ Exchange of
shares of stock
2) Photocopy of the Deed of Acquisition or proof of cost/ fair market value of the
stocks at the time of acquisition
3) Photocopy of certificate of shares of stock
4) Photocopy of evidences of expenses related to sale
5) Photocopy of Audited Financial Statements duly certified by an independent
certified public accountant with computation of fair market value per share at the
time of sale.
6) Duly approved Tax Debit Memo, if applicable
Additional requirements may be requested for presentation during audit of the tax
case depending upon existing audit procedures.
Procedures
File the Capital Gains Tax return in triplicate (two copies for the BIR and one copy for
the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where
the seller or transferor of stocks is registered. In places where there are no AAB, the
return will be filed directly with the Revenue Collection Officer or Authorized City or
Municipal Treasurer.
One-Time Transaction (ONETT) taxpayers shall mandatorily use the eBIRForms in
filing all of their tax returns. They may opt to submit their tax returns manually
using the eBIRForms Offline Package in the RDO where the seller or transferor of
stocks is registered or electronically through the use of the Online eBIRForms
System. (Sec. 3(2) RR No. 6-2014)
Tax Rates
For Shares of Stocks Not Traded in the Stock Exchange
Not
over
- Any amount in excess of P100,000 - 10%

P100,000

5%

Deadline
Within 30 days after each sale or disposition of shares of stocks or real property. In
case of installment sale, the return shall be filed within 30 days following the receipt
of the first down payment and within 30 days following the subsequent installment
payments. Only one return shall be filed for multiple transactions within the day.

Section 63. Certificate of stock and transfer of shares. - The capital stock of stock
corporations shall be divided into shares for which certificates signed by the
president or vice president, countersigned by the secretary or assistant secretary,
and sealed with the seal of the corporation shall be issued in accordance with the

by-laws. 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-infact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the transaction, the
date of the transfer, the number of the certificate or certificates and the number of
shares transferred.
The transfer of shares of stock in a Philippine corporation is not complete
until and unless the BIR issues a Tax Clearance and Certificate Authorizing
Registration (CAR), since the CAR is the document that authorizes the Corporate
Secretary of the company to effect and record the transfer of ownership of the
shares in the Stock and Transfer Book of the corporation. Both the seller and the
buyer of shares should know that the BIR will not issue the Tax Clearance and CAR
until the BIR determines that the correct taxes on the sale have been paid on the
transaction.
CAR is a tax clearance issued by the BIR relative to the transfer of certain
properties. Once issued, it would mean that applicable taxes on such transfers are
being paid. It is a mandatory requirement and the title of the property will not be
transferred in the absence of such CAR. The corporate secretary of a stock
corporation will not issue a new stock certificate in the name of the buyer in the
absence of CAR.
REQUIREMENTS:

Capital gains tax return

BIR Form No. 2000 ONETT Documentary Stamp Tax Return
Certification fee of P100
Legal document of transfer (Deed of Assignment)
Copy of stock certificate to be transferred
Copy of latest audited financial statements
Copy of the latest General Information Sheet
Copy of AOI and by-laws of the corporation
Copies of the documents on the previous acquisition of such shares of stock

After the clearance with the BIR, you must file the GIS at the SEC to complete the
transfer of the shares. The new shareholder will need to provide the following
information:

Complete name
Address
TIN number A foreigner can apply for a one time TIN number with the BIR
Respective share that this new shareholder will hold