Shares of stock in a corporation are classified as personal property. As a general rule, the owner of the stocks may dispose of them as he sees fit as an inherent attribute of his ownership thereof. However, because these are intangible personal properties, the manner of their transfer and conveyance is regulated by particular laws.

Section 63 of the Corporation Code specifies how a share of stock may be transferred. The provision on the transfer of shares of stock makes no restrictions as to whom they may be sold or transferred.

As the owner of personal property, a shareholder is free to dispose of it in favor of whomever he wishes, subject only to the general provisions of the law and the bylaws of the corporation to which it pertains.

SECTION 62. Certificate of Stock and Transfer of Shares. — The capital stock of 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 bylaws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates endorsed by the owner, his attorney-in-fact, or any 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. The Commission may require corporations whose securities are traded in trading markets and which can reasonably demonstrate their capability to do so to issue their securities or shares of stocks in uncertificated or scripless form in accordance with the rules of the Commission.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.

Under the above-mentioned provision, if the shares of stock are represented by a stock certificate, the following must be complied with for there to be a valid transfer of stocks:

(a) There must be the delivery of the stock certificates;

(b) The certificate must be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and

(c) To be valid against third parties, the transfer must be recorded in the books of the corporation. (Teng v. Securities and Exchange Commission, G.R. No. 184332, (17 February 2016).

From the foregoing, it is the delivery of the certificate, coupled with the endorsement by the owner or his duly authorized representative that is the operative act of transfer of shares from the original owner to the transferee. The delivery contemplated herein pertains to the physical delivery of the certificate of shares by the transferor to the transferee and not delivery to the corporation. It is also worth mentioning that surrendering the original certificate of stock is necessary before the issuance of a new one so that the old certificate may be canceled.

On the other hand, if the shares of stock are not represented by a certificate, they may be transferred as follows:

1. By means of a deed of assignment; and

2. Such is duly recorded in the books of the corporation.

It must be noted that whether or not the shares of stock are evidenced by a stock certificate, the transfer must be recorded or registered in the books of the corporation to be valid against third parties and the corporation. There are several reasons why such registration is necessary: (1) to enable the transferee to exercise all the rights of a stockholder; (2) to inform the corporation of any change in share ownership so that it can ascertain the persons entitled to the rights and subject to the liabilities of a stockholder; and (3) to avoid fictitious or fraudulent transfers, among others.