Inheriting Shares in a Family Corporation After a Parent’s Death (Philippine Law, 2025 update)

This article synthesizes the core statutes, regulations, and jurisprudence that govern the devolution of corporate shares held by a deceased parent in a Philippine family-owned corporation. It is meant for general information and does not replace tailored legal advice.

1. Legal Foundations

Source of Law	Key Provisions
Civil Code (Arts. 960 – 1101)	Defines heirs, legitimes, intestate & testate succession, collation, partition.
Revised Corporation Code (RCC) RA 11232, 2019	Sec. 62 (transfer of shares), Sec. 73 (stock & transfer book), Sec. 86–88 (closely-held & one-person corporations).
Tax Code (NIRC, as amended)	Estate tax (Sec. 84–97), Documentary Stamp Tax (DST) exemptions for transfers by succession.
BIR Revenue Regulations & Rulings	RR 12-2018 (6 % estate tax), RMO 15-2023 (One-Time Transactions), RMC 24-2020 (electronic estate tax filings).
Supreme Court & SEC Opinions	Gamboa v. Finance (2011), Heirs of Malate v. CA (1997), SEC Opinion 13-03 (estate as stockholder).

2. Nature of Corporate Shares in Succession

Personal property. Shares are intangible personalty; situs follows the domicile of the decedent for succession and estate-tax purposes.
Conjugal vs. exclusive. Under the Family Code:
- Absolute Community (default for marriages after Aug 3 1988): Shares acquired during marriage are community property unless proven otherwise.
- Conjugal Partnership (pre-1988 or by agreement): Income shares generally conjugal; inherited shares remain paraphernal.
Leverage of share restrictions. Right-of-first-refusal (ROFR) clauses, buy-sell agreements and voting trusts in the Articles or By-Laws are binding on heirs, except if they defeat compulsory legitimes.

3. Identifying the Heirs and Their Entitlements

Regime	Compulsory Heirs	Legitime*
With legitimate children & surviving spouse	Children & spouse	½ to children, ¼ to spouse ( = ¾ in legitimes); free portion ¼
No descendants, w/ parents/ascendants & spouse	Ascendants, spouse	Ascendants = ½; spouse = ¼; free ¼
Only spouse & collateral relatives	Spouse	½ legitime; free ½
Illegitimate children	Share = ½ of a legitimate child; governed by Art. 895 Civil Code

*Legitime = portion of the estate that cannot be impaired by a will or corporate restrictions.

Dividends and accretions:

Declared before death: part of the decedent’s estate.
Declared after death but before transfer: estate is the “stockholder of record” and receives them; they pass pro-indiviso to heirs upon partition.

4. Settlement of the Estate

4.1 Choice of Settlement Mode

Mode	When Advisable	Key Requirements
Extrajudicial Settlement (EJS)	No will and no outstanding debts (or debts fully paid)	Public instrument, unanimous agreement, published once a week for 3 weeks, BIR estate tax clearance, issuance of new share certificates.
Testate/Intestate Probate	There is a will or heirs disagree/debts exist/minor heirs	Petition with RTC; estate administrator appointed; letters testamentary/administration; judicial partition order.

4.2 Estate Tax Compliance

Tax base: Fair Market Value (FMV) of shares on date of death.
- Listed shares: closing price on Philippine Stock Exchange.
- Unlisted family-corporation shares: book value per latest audited financial statements (RMO 15-2023).
Rate & deadline: Flat 6 % on net estate; return & payment within one (1) year from death (extendable once for up to 30 days).
Documents for BIR “ONETT” processing:
- Certified copy of death certificate.
- Original share certificates.
- Secretary’s certificate attesting to holdings & book value.
- Audited FS & General Information Sheet (GIS).
- EJS deed or court order.
- Proof of payment of taxes (if dividends/cash on hand).

Tip: Estate-tax amnesties (e.g., RA 11956, extended to June 14 2025) may still be availed for deaths on or before May 31 2022.

5. Mechanics of Transferring Shares to Heirs

Endorsement & Surrender. Administrator/heirs endorse original certificates to the corporation; shares are canceled.
Board Approval. Board passes a resolution recognizing heirs upon proof of estate-tax clearance and settlement deed/order.
Issuance of New Certificates. Corporate secretary issues separate certificates in the names of individual heirs or in the name of the “Estate of ___” pending partition.
Stock & Transfer Book (STB) Entry. Mandatory annotation of:
- Date of death and BIR CAR number.
- Names & TINs of heirs.
SEC Filings (if applicable).
- Updated GIS reflecting new shareholders.
- Beneficial Ownership Declaration for corporations vested with public interest.

DST Exemption: Transfers by succession are expressly exempt from DST (Sec. 199 NIRC).

6. Voting & Management During Estate Settlement

Stage	Who Exercises Rights?	Basis
Between death & appointment of executor/administrator	Heirs as co-owners (Art. 777 CC) may vote collectively if recognized by corporation, but most boards require court/administrator proof.
After appointment	Executor/administrator votes the shares; entitled to dividends.
After partition	Each heir votes his/her proportionate shares; minors act through a court-appointed guardian.

Practical safeguards

Insert “Estate of X” as a single voting block to avoid paralysis.
Use voting trusts or family councils to preserve unified control.

7. Common Problem Areas & Solutions

Issue	Pitfall	Mitigation
Unsigned share certificates	Shares may be treated as uncertificated; delays transfer	Prompt certificate issuance while parent is alive; maintain updated stock ledger.
Unpaid subscriptions	BIR treats unpaid portion as asset of estate, raising tax base	Settle subscription or convert to advances before death.
Conflicting by-law restrictions	ROFR may block heir who is non-family spouse	Draft ROFR with carve-out for legitime or institute mandatory cross-purchase by other heirs.
Minor heirs	EJS impossible without guardian’s bond	Seek court approval for EJS & appointment of guardian ad litem.
Family disputes	Deadlock in management	Mediation clause in shareholders’ agreement; split voting classes; arbitration.

8. Estate-Planning Strategies to Minimize Disruption

Inter vivos transfers (donations) while alive to avail of the same 6 % flat donor’s tax but at lower FMV.
Holding company or family trust to centralize voting control while allowing economic benefits to flow to heirs.
Buy-Sell Agreement funded by life insurance so surviving principals buy shares from the estate, giving heirs liquidity.
Preferred-common split (parent keeps voting preferred, heirs get non-voting common) to ensure continuity of control until a succession plan matures.

9. Special Scenarios

Scenario	Key Points
Foreign Heirs	Need Philippine Tax Identification Number (TIN); dividends to non-residents subject to 25 %/15 % final tax even during estate settlement.
One-Person Corporation (OPC)	Designation of nominee & alternate nominee in Articles simplifies transfer; death triggers conversion to ordinary corporation if >1 heir becomes stockholder.
Publicly-listed Family Corp	Philippine Depository & Trust Corp. (PDTC) requires an account for the estate; heirs deal through broker.
Property Regimes with Multiple Marriages	Remember legitime of surviving spouse from each marriage; shares acquired under first marriage may be exclusive property of first set of heirs.

10. Step-by-Step Checklist

Secure documents: death certificate, will (if any), marriage & birth certificates.
Inventory shares & obtain FMV from latest AFS or PSE ticker.
File Notice of Death with BIR w/in 2 months (Sec. 89 NIRC).
Settle estate: choose EJS or probate; publish notice if EJS.
Pay estate tax; get Certificate Authorizing Registration (CAR).
Board resolution & STB entry; cancel old, issue new certificates.
Update SEC GIS & beneficial ownership filings.
Distribute dividends/ earnings per partition agreement.
Plan for future: shareholder agreements, training next-gen managers.

11. Conclusion

In a Philippine family corporation, corporate and succession laws intersect. Estate-tax compliance, familiarity with the RCC’s share-transfer mechanics, and proactive family governance instruments are the pillars of a smooth generational hand-off. Early planning—through lifetime transfers, shareholder agreements, and sound drafting of by-laws—minimizes litigation, preserves corporate value, and honors compulsory heirship rules.

Disclaimer: Laws and tax regulations change. Confirm current rates, amnesty deadlines, and SEC/BIR requirements, and consult a Philippine lawyer or tax professional for case-specific guidance.