In order to transfer your shares of stock in a domestic stock corporation in the Philippines, you will need to secure a Electronic Certificate Authorizing Registration (CAR).
An Electronic Certificate Authorizing Registration (eCAR) is a verification that attest and confirm the taxes incurred in the transfer of real and personal properties have already been paid. The Bureau of Internal Revenue (BIR) Commissioner (or his duly authorized representative) is responsible for the issuance of eCAR.
This tax clearance document is one of the documentary requirements that is indispensable in property transfer. Without a eCAR, the title or ownership to such real or personal properties cannot be transferred to the new owner. It is important to note as well that The eCAR system has replaced the manually-issued CARs.
In this article, we will discuss why you need a eCAR in transferring your shares of stock. According to Section 63 of the Revised Corporation Code shares of stock are personal properties which may be transferred following certain rules.
- Sec. 63. Certificate of stock and transfer of shares. –The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates endorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.
From the above provision, shares of stocks are considered as personalty or personal property. It can also be gleaned that each share of stock must have a corresponding stock certificate. Such shares are validly transferred by following the three conditions below:
- the delivery of the certificate
- the endorsement of the owner (or his agent) of the certificates; and
- the registration of the transfer of shares of stock in the books of the corporation.
The eCAR is indispensable because:
- The Corporate Secretary needs the eCAR before he/she can record the transfer of shares in the books of a corporation.
- The lack of an eCAR renders the transfer of shares invalid.
- The eCAR is necessary before the Corporate Secretary can issue new stock certificates bearing the new owner’s name (BIR Revenue Regulations No. 32019 and 37-2012).
BIR Revenue Regulation No. 37-2012 provides that a CAR must be secured in order to transfer ownership of shares of stock not traded in the Stock Exchange, and must be filed and recorded by the corporate secretary pursuant to Section 11 of RR No. 0608.
Section 11 of RR No. 06-08 also mandates that failure to pay taxes pursuant to the stock transfer is punishable under the Tax Code, as amended
- SECTION 11. Effect of Non-Payment of Tax. No sale, exchange, transfer or similar transaction intended to convey ownership of, or title to any share of stock shall be registered in the books of the corporatio unless the receipts of payment of the tax herein imposed is filed with and recorded by the stock transfer agent or secretary of the corporation. It shall be the duty of the aforesaid persons to inform the Bureau of Internal Revenue in case of nonpayment of tax. Any stock transfer agent or secretary of the corporation or the stockbroker, who caused the registration of transfer of ownership or title on any share of stock in violation of the aforementioned requirements shall be punished in accordance with the provisions of Title X, Chapters I and Il of the Tax Code, as amended.
An eCAR certifies that all the taxes incurred in the transfer of shares of stock have already been paid, thus, the lack of an eCAR means that taxes have not been paid. The Corporate Secretary who registered the transfer of stocks without the eCAR will be held liable under the Tax Code, as amended.
Need further information and assistance in processing eCAR? Talk to our team at FILEDOCSPHIL to know more about the requirements and process. Call us today at (+63) 917 149 2337 or send an email to info@filedocsphil.com for more information or CLICK HERE for a free quote.