Q. Hi Atty. Wong, I came across one of your Q & A in balita.ca and I thought maybe you can give me some clarifications/ advise regarding my rights to the family corporation.
My mother died a couple of months ago and before she died she was a part of a family corporation together with her 5 sisters. They all have equal shares in the said corporation. My questions are:
1. What would be our rights as her children in the corporation? (I have one brother.)
2. What are the rights of my father?
3. Can we take her place as a shareholder in the corporation? If so, how many percent of the shares are we entitled?
I hope you can help me with my questions. Thanks in advance. Rose
Ans: Hello Ms. Rose, it is not clear what kind of family corporation that you mother was affiliated with. Such as for instance, whether the family corporation is a close corporation, a non-stock corporation, or simply a stock corporation .
Anyway, if the family corporation is engaged in business for profit and gains are distributed to its stockholders by way of dividends, then it can be inferred that the family corporation is a Stock Corporation.
As a rule, the rights and obligations of the stockholders and officers of the corporation are governed by its Articles of Incorporation and by-laws. This includes the voting rights, the transfer, sale, disposition and recording of the stocks of the corporation and the pre-emptive rights, if any, of the stockholders vis-à-vis the stock ownerships of the stockholder(common or preferred shares as the case may be ) .
Thus, it is suggested that you go over the articles of incorporation and by-laws of the family corporation as the information that you will obtain from the said documents will answer in whole or in part of your queries.
If you don’t have copies of the Articles of Incorporation and by-laws of the corporation, who can secure a certified true copies of the same from the Securities and Exchange Commission(SEC)-EDSA in Mandaluyong City.
Now, after going over the Articles and the By-laws of the Corporation and there’s nothing specific to answer your queries, then the Corporation Code of the Philippines and the law on Succession under the Civil Code and the Family Code of the Philippines, shall govern the disposition of the stock ownership of your deceased mother as the said stock/shares will now be considered as part of her estate .
Thus, assuming that your mother owns 20% of the Capital Stock of the corporation( the five(5) siblings owning equal shares), and this stock ownership of your mother does NOT form part of their conjugal/absolute community property of their marriage, then her children(meaning you and your brother) and your father are entitled to the 20% of the stock ownership of your mother and the said share shall be divided equally amongst you, your brother and your father.
However, if the shares or the 20% stocks of your mother in the said family corporation came from the conjugal funds or the absolute community funds of your mother and your father, then the division of the 20% share shall be : ½ of the 20% or the 10% thereof shall accrue as conjugal share of your father. The remaining 10% shall be divided equally into three, for you, your brother and your father , being the compulsory heirs of your mother.
However, in order that the shares of your mother be transferred to her heirs, you, your brother and your father(in the absence of a will of your mother) shall execute a Deed of Extrajudicial Settlement of Estate of your mother, providing therein the manner in which the estate shall be distributed and partitioned by the heirs after the payment of the corresponding estate,
documentary and transfer taxes and fees as prescribed by the tax code.
It is suggested that you may also confer with your lawyer for further professional guidance to fully address your concerns and the implications mentioned above. Thank you for writing and for being part of the “Batas Pinoy Global Community” .
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