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In the Philippine corporate world, shares of stock are traded and transferred everyday from one hand to another, whether in the stock exchange by public trading, or through private transactions. We are going to discuss transfer of shares not traded nor listed in the stock exchange.

First off, certain documentary requirements need to be met in order for the transfer of shares of stock to be valid. This depends if the stockholder is in possession of the actual stock certificates whereby he can simply deliver and endorse the same to the transferee. This transaction has to be recorded in the books of the corporation in order for third parties to be bound by such transaction. No deed of assignment is required in this particular scenario; such document is only required in the event that no certificate of stock has yet been issued or where the same is not in the possession of the transferor.

For such transfer to be valid as against third parties and the corporation, it must be recorded in the corporate books. This is important in cases where there is a question as to who has the right to dividends coming from such shares of stock. If a corporation is not duly notified of such transfer, it is only liable to the original stockholder and not the transferee. But in such case, the transferor is deemed the trustee of the real owner of the dividends and thus obligated to turn it over to the transferee.

As regards payment of capital gains tax assuming that there was a gain, non-payment thereof does not affect the validity of the transaction as between the parties thereto. However, in order for the transfer of shares to be registered in the books of the corporation, BIR rules dictate that capital gains tax be paid first.

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