What are the consequences if stock in a close corporation is issued or transferred in breach of a qualifying condition stated conspicuously on the certificate?
If a stock is issued or transferred in breach of a conspicuously stated qualifying condition, the transferee is conclusively presumed to have notice of the fact of the ineligibility to be a stockholder (SEC. 98, Revised Corporation Code of the Philippines). Similarly, if the transfer causes the stock to be held by more than the permitted number of persons (not exceeding twenty), and that number is conspicuously stated, the transferee is conclusively presumed to have notice of this fact. Whenever a person has or is conclusively presumed to have notice of a violation of a restriction, the corporation may, at its option, refuse to register the transfer in the name of the transferee. These provisions aim to maintain the small, private nature of the close corporation structure.
02 November 2025
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