What legal mechanism is required for a restriction on share transfer in a close corporation to avoid being considered overly burdensome?
The restrictions imposed on share transfer in a close corporation shall not be more onerous than granting the existing stockholders or the corporation the option to purchase the shares of the transferring stockholder (SEC. 97, Revised Corporation Code of the Philippines). The specific terms, conditions, or period for exercising this purchase option must be reasonably stated. If, upon the expiration of the stipulated period, neither the existing stockholders nor the corporation exercises this purchase option, the transferring stockholder is then free to sell their shares to any third person. This mechanism balances the desire to maintain a close structure with the stockholder’s right to liquidity.
02 November 2025
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