Published — June 25, 2022
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
After reading “What are the obligations of a stockholder?”, read also “Rights of Stockholders in a Dissolved Corporation”
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Subscribers to stocks shall be liable to the corporation for interest on all unpaid subscriptions from the date of subscription.
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Payment of unpaid subscription or any percentage thereof, together with any interest accrued shall be made on the date specified in the subscription contract or on the date stated in the call made by the board.
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Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription contract.
A stockholder shall be liable for the payment of the balance of the subscription and any interest on the unpaid subscription.
The law says:
Section 65 and 66 of the Revised Corporation Code states that:
“SEC. 65. Interest on Unpaid Subscriptions. – Subscribers to stocks shall be liable to the corporation for interest on all unpaid subscriptions from the date of subscription, if so required by and at the rate of interest fixed in the subscription contract. If no rate of interest is fixed in the subscription contract, the prevailing legal rate shall apply.
SEC. 66. Payment of Balance of Subscription. – Subject to the provisions of the subscription contract, the board of directors may, at any time, declare due and payable to the corporation unpaid subscriptions and may collect the same or such percentage thereof, in either case, with accrued interest, if any, as it may deem necessary.
Payment of unpaid subscription or any percentage thereof, together with any interest accrued shall be made on the date specified in the subscription contract or on the date stated in the call made by the board. Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription contract. The interest shall be computed from the date specified, until full payment of the subscription. If no payment is made within thirty (30) days from the said date, all stocks covered by the subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise.” (Emphasis supplied.)
What is meant by “subscribed capital stock”?
Subscribed capital stock refers to the part or whole of the authorized capital over which there have been contracts of subscriptions. To put it in general terms, there is a promise to purchase shares of stock, a corresponding promise to pay, and the possession or holding of such shares by a stockholder.
When should a stockholder make payments?
- On the date specified in the subscription contract; or
- On the date stated in the call made by the Board of Directors. (RCCP, Section 66.)
What is the effect of failure to pay?
Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different interest rate is provided in the subscription contract. (RCCP, Section 65.)
What is the Doctrine of Indivisibility of Subscription Contract?
This doctrine states that a subscription contract cannot be divided into portions the failure to pay any of the installments due would necessarily affect all other installments, because subscription is to be treated as one, whole, entire and indivisible contract. The default of payment on any of the installment results to the entire subscription becoming due and demandable.
Jurisprudence says:
Are stockholders liable for the debts of the corporation? Up to what extent are they liable for such?
“The prevailing rule is that a stockholder is personally liable for the financial obligations of the corporation to the extent of his unpaid subscription.” (Donnina C. Halley v. Printwell, Inc., G.R. No. 157549, May 30, 2011)
“The liability of stockholders for the corporate debts is up to the extent of their unpaid subscription.” (Donnina C. Halley v. Printwell, Inc., G.R. No. 157549, May 30, 2011)
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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