Deed of Sale of Shares (Philippines)

A Deed of Sale of Shares in the Philippines completes the transfer of the asset to the buyer, fixing the consideration paid and confirming the seller's right to sell.

Under Section 62 of the Revised Corporation Code (RA 11232), shares of stock 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. To be binding on the corporation and third parties, the transfer must be recorded in the Stock and Transfer Book (STB) maintained by the Corporate Secretary under Section 52 of RA 11232. A transfer not recorded in the STB is not effective against the corporation — a principle affirmed by the Supreme Court of the Philippines in Thomson v. Court of Appeals (G.R. No. 116631, October 28, 1998).

The Bureau of Internal Revenue (BIR) treats the sale of shares of stock not listed on the Philippine Stock Exchange (PSE) as subject to Capital Gains Tax (CGT) under Section 24(C) of the National Internal Revenue Code (NIRC, RA 8424), as amended by the Tax Reform for Acceleration and Inclusion Act (TRAIN, RA 10963). The CGT rate is 15% of the net capital gain — the excess of the selling price or fair market value, whichever is higher, over the cost or adjusted cost basis of the shares. The CGT return (BIR Form 1707) must be filed and the tax paid within 30 days from the date of each transaction. Documentary Stamp Tax under Section 176 of the NIRC at the rate of PHP 1.50 per PHP 200 of the par value also applies to share transfers.

For shares listed on the PSE, the Stock Transaction Tax under Section 127 of the NIRC at 0.6% of the gross selling price applies instead of CGT, collected by the PSE through the broker.

The legal framework governing the Deed of Sale of Shares (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Deed of Sale of Shares (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Revised Corporation Code (RA 11232, 2019) sets the foundational requirements.

A Deed of Sale of Shares is required in the Philippines in specific circumstances involving the transfer of existing issued shares between parties.

A Deed of Sale of Shares is needed when a stockholder of a Philippine corporation sells all or part of their shares to an outside buyer, an existing co-stockholder, or a new investor in a secondary share transaction. The deed serves as the BIR tax filing document for Capital Gains Tax under Section 24(C) of the NIRC and supports the Stock and Transfer Book recording with the Corporate Secretary.

A Deed of Sale of Shares is required when a corporation's Stockholders Agreement provides for a right of first refusal mechanism — where the selling stockholder must first offer shares to existing stockholders. The deed documents the consummated sale after the right of first refusal process has been completed.

A Deed of Sale of Shares is needed in corporate acquisitions where the buyer acquires a controlling interest in a Philippine corporation by purchasing shares from existing stockholders. Unlike an asset purchase, a share purchase subjects the buyer to the acquired corporation's historical tax liabilities, so buyers typically commission legal due diligence before executing the deed.

A Deed of Sale of Shares is required when the estate of a deceased stockholder transfers shares to heirs or legatees as part of estate settlement. Estate Tax under Section 84 of the NIRC must first be settled with the BIR, and the BIR issues a Certificate Authorizing Registration (CAR) or Electronic Certificate Authorizing Registration (eCAR) that authorizes the transfer of the shares in the STB.

A Deed of Sale of Shares is needed when a pledgee or mortgagee exercises a right of sale over pledged shares following the pledgor's default on a secured loan, as permitted under the Civil Code Articles 2087 and 2112.

A complete Philippine Deed of Sale of Shares must contain the following essential elements under the Civil Code (RA 386) and the Revised Corporation Code (RA 11232).

Parties: Full legal names, nationalities, addresses, and Tax Identification Numbers (TINs) of the seller and buyer. Nationality disclosures are mandatory for Foreign Investments Negative List compliance under Executive Order 175 (2022).

Description of Shares: The name of the corporation whose shares are being sold, SEC Registration Number, the number of shares being transferred, the class of shares, the certificate numbers, and the par value per share. If the shares are covered by a share certificate, the certificate number must be specified.

Purchase Price: The agreed purchase price per share and total consideration in Philippine Pesos (PHP). For CGT purposes, the BIR uses the higher of the agreed purchase price or the fair market value of the shares (typically the book value per share from the latest audited financial statements, or a valuation by a SEC-accredited appraiser).

Warranties on Title: The seller's warranties that they are the registered and beneficial owner of the shares, that the shares are free from liens, encumbrances, and adverse claims, and that no pre-emptive rights, rights of first refusal, or transfer restrictions under the By-Laws or Stockholders Agreement have been violated.

Tax Obligations: Acknowledgment that Capital Gains Tax under Section 24(C) of the NIRC at 15% of the net gain is the seller's obligation and that Documentary Stamp Tax under Section 176 of the NIRC at PHP 1.50 per PHP 200 of par value is the responsibility of the parties as agreed.

STB Transfer: The seller's undertaking to surrender the original share certificate to the Corporate Secretary for cancellation and reissuance in the buyer's name, and recording of the transfer in the Stock and Transfer Book under Section 52 of RA 11232.

Notarization: Execution before a Notary Public under the Rules on Notarial Practice (A.M. No. 02-8-13-SC) is essential. The BIR requires a notarized Deed of Sale as part of the CGT return filing under Revenue Regulations No. 6-2008.

Additional compliance elements for a Deed of Sale of Shares (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.