An electronic Certificate Authorizing Registration (eCAR) which is issued by the Bureau of Internal Revenue (BIR) must be secured before any transfer of shares is registered in the books of the corporation. Thus, the transfer of real and personal properties, including shares of stock, in the Philippines will not be registered to the new owner in the absence of a CAR issued by the BIR. A CAR certifies that taxes applicable to the transfer of registrable property have been paid.
In the absence of an eCAR, the SEC will treat the recording of the transfer of shares as invalid and puts the issuing corporation’s Corporate Secretary at risk of being liable to administrative penalties.
On 08 April 2019, the BIR issued Revenue Regulations No. 3-2019 prescribing the use of the eCAR System for these transactions.
Usually system-generated information shall be indicated or stamped on the reverse side of each page of the originals of the documents transferring such shares of stock indicating:
- eCAR number
- date of eCAR issuance
- amount paid
- date of payment, and
- signature of the authorized signatory of the eCAR
Note that an eCAR is valid for five (5) years from the date of issuance. The lapse of the five-year period will render the eCAR permanently expired and therefore of no force and effect.
In secondary sales of shares of stock not publicly listed i.e. the shares of stock has already been issued (“Original Issuance”), then transferred to another shareholder (“First Transfer”), and thereafter transferred again to another shareholder (“Second Transfer”), the processing of the BIR electronic Certificate Authorizing Registration or eCAR for the Second Transfer of shares will usually not be successful until the BIR eCAR or proof of payment of taxes for the First Transfer of shares has been presented.
For due diligence purposes, if the buyer is now buying shares from another shareholder, it is necessary that the BIR eCAR is presented to the potential buyer to avoid a tedious documentation process. If the buyer is really interested in buying the shares from the secondary market, then the buyer should hire a third party provider adept in the transfer of shares that can navigate these types of issues.
Thus it is necessary to seek the assistance of transfer of shares providers that can guide you with these roadblocks.
FileDocsPhil can surely assist you in every step of the transfer. Call us at +63.977.241.5709 or email us at info@filedocsphil.com.
