THE SUPREME COURT (SC) ruled that inclusion in a corporation’s general information sheet (GIS) is not sufficient proof of shareholding, noting that the stock and transfer book is the official and primary record for determining a corporation’s shareholders.
“It is established in jurisprudence that the mere inclusion as [a] shareholder in the GIS of a corporation is by itself insufficient proof that such [a] person is a shareholder,” the 17-page ruling penned by Justice Ramon Paul L. Hernando read. “Between the stock and transfer book and the GIS, the former is controlling.”
The ruling, promulgated on April 21 but released only on Thursday, also emphasized that stock ownership must be proven through a stock certificate issued in the individual’s name.
It cited Section 62 of the Revised Corporation Code, which states that a transfer of shares is invalid, except between the parties, until it is properly recorded in the company’s books.
The case arose from special stockholders’ meetings convened by two companies to elect new members to their boards.
Two individuals attempted to participate by sending proxies, but the companies refused to recognize them, asserting that the individuals they represented were not registered stockholders. The meetings continued as scheduled, resulting in the election of new directors.
The individuals challenged the board elections before the Regional Trial Court (RTC), arguing that their exclusion rendered the proceedings invalid due to the absence of a quorum.
The RTC ruled in their favor, citing the GIS as sufficient evidence of their status as stockholders.
However, the Court of Appeals overturned the RTC’s ruling, noting that the individuals’ names were not listed in the companies’ stock and transfer books.
The SC initially affirmed the RTC’s decision, considering the GIS and witness testimonies as adequate proof of stockholder status. But upon the filing of a motion for reconsideration, the High Court revisited the case and ultimately reversed its earlier ruling.
In this case, the individuals failed to provide sufficient evidence to dispute the entries in the stock and transfer books. As a result, they were not recognized as stockholders of record, and their exclusion from the meetings had no bearing on the quorum or the validity of the board elections.
In a dissenting opinion, Associate Justice Ricardo R. Rosario agreed that stock certificates and stock and transfer books hold greater evidentiary weight than the GIS. However, he said that these records are not definitive or absolute proof of stock ownership. — Chloe Mari A. Hufana
