Corporations have been a staple in growing economies owing to various reasons including limited liability and greater access to capital as compared to other business vehicles. With such a significant role in business and the economy, corporations are vested with the need to maintain accurate and organized internal records.
In the Philippines, every corporation is generally required to submit its annual reportorial requirements to the Securities and Exchange Commission (SEC), such as that of the corporate General Information Sheet (GIS) outlining the corporation’s shareholdings, among other information. Similarly, upon incorporation, corporations are issued a stock and transfer book by the SEC which serves as the record of issuances and transfer of its shares.
Notably, the Supreme Court of the Philippines emphasized the significance of the stock and transfer book as proof of ownership of shares in the recent case of Lopez, et. al. v. Lopez, et. al, G.R. Nos. 254957-58, 21 April 2025. Accordingly, mere inclusion of a person in the GIS is insufficient proof that a person is a stockholder in a corporation.
In Lopez, the issue stemmed from an election contest under the Interim Rules Governing Intra-Corporate Controversies filed by Lily C. Lopez (Lily) and her children, Ma. Christina Patricia С. Lopez (Christina) and John Rusty Lito Lopez (John Rusty), against Mario S. Lopez, Andresito S. Lopez, Barbara O. Villas, Benedicto L. Villafuerte, Ma. Luisa I. Paras, Ruel S. Villacorta, Teresita C. Fernando, LC Lopez Resources, Inc. (LC Lopez), Conqueror International, Inc. (Conqueror), and Russ Marketing, Inc. (Russ Marketing) before the Marikina City Regional Trial Court (RTC-Marikina).
In the complaint, Lily, Christina, and John Rusty alleged that they are stockholders and directors of LC Lopez, Conqueror, and Russ Marketing and on 11 February 2019, Lolito S. Lopez (Lolito) and other respondents conducted special stockholders’ meetings and elections for the board of directors of LC Lopez, Conqueror, and Russ Marketing. Christina and John Rusty alleged that they sent proxies to the meetings, but they were turned away because Christina and John Rusty were purportedly not stockholders of the corporations. Meanwhile, Lily claimed that she was not allowed to have her lawyer present during the meetings, so she walked out of the venue. Despite these incidents, the meetings continued and they resulted in the election of new sets of boards of directors for the three corporations.
After trial, RTC-Marikina ruled in favor of Lily, Christina, and John Rusty finding that both Christina and John Rusty are actually stockholders and directors of LC Lopez and Conqueror notwithstanding the fact that their names were not listed in the corporations’ stock and transfer books, as they appeared as stockholders in the GIS of the corporations submitted to the SEC.
Aggrieved, Lolito, et. al. appealed the decision and the case eventually reached the Supreme Court.
Ruling on the status of Christina and John Rusty as stockholders of LC Lopez and Conqueror, the Supreme Court found that that their status as stockholders was not established by acceptable evidence.
The Supreme Court explained that as a rule, the stock and transfer book is the primary basis for determining the shareholders of a corporation, as it is only when the transfer of shares has been recorded in the stock and transfer book that a corporation may rightfully regard the transferee as one of its stockholders. Thus, the stock and transfer books of LC Lopez and Conqueror remain as a good basis for determining the stockholders of the respective corporations.
In this case, although the GIS of both LC Lopez and Conqueror indicate that Christina and John Rusty are stockholders of the respective corporations, their names do not appear as stockholders in the stock and transfer books of either corporation. The Supreme Court reiterated the well-settled rule that the mere inclusion as shareholder in the GIS of a corporation is by itself insufficient proof that such person is a shareholder. Between the stock and transfer book and the GIS, the former is controlling.
Additionally, the Supreme Court, in Lopez, went on further to discuss that the best proof of one’s status as a stockholder would be the certificate of stock issued in his or her name. If there is no documentary evidence of this nature, one must, “at the very least,” prove that they possess the stock certificates in the name of the alleged transferor. In this case, Christina and John Rusty do not have in their possession any certificates of stock issued in their names, nor have they shown any document to prove their ownership of shares in LC Lopez and Conqueror.
Finally, the Supreme Court highlighted the importance of good corporate record-keeping. The Supreme Court noted that any errors or anomalous entries in the GIS cannot be a source of right to claim status as a stockholder, in contravention to the procedures for transfer and registration of shares required under the law.
From the foregoing decision of the Supreme Court, we observe the significance of proper corporate housekeeping and records management. As juridical entities created by virtue of law and impressed with public interest, corporations must maintain accurate and orderly records to avoid controversies, liability, or breach of government regulations resulting in penalties.
For advice and guidance on corporate housekeeping and regulatory compliance for corporations, you may reach out to GODINEZ VILLANUEVA ESPIRITU & SOLIMAN (GVES Law).
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Rhaymund Lorenz Gratela is an Associate at GVES Law. He previously authored articles as a member of his law school’s official law journal publication.