Atty. Euney Marie J. Mata

May 31, 1996 Atty. Euney Marie J. Mata Sycip Salazar Hernandez & Gatmaitan 106 Paseo De Roxas, 1200 City of Makati M a d a m : This refers to your letter dated May 29, 1996 requesting the Securities and Exchange Commission to authorize Bataan Pulp and Paper Mills, Inc. to hold its annual stockholders meeting in Makati City instead of holding it in Samal Bataan , the place where the principal office of the corporation is located. As stated, the annual stockholders' meeting of the above-mentioned Corporation for this year is scheduled on June 18, 1996. However, the roads going to Samal, Bataan are affected by the lahar flows from Mt. Pinatubo, and portions of thereof are now impassable, especially if it rains. Thus, it will be greatly difficult as well as dangerous for the stockholder, to attend the meeting if held in Samal, Bataan. Consequently, during the meeting of the Board of Directors held on May 27, 1996, the Board decided to hold the annual stockholders' meeting of the Corporation in one of the hotels in Makati City instead of holding it in Samal, Bataan. This will assure the safe attendance of the stockholders of the Corporation. The Corporation Code is explicit that stockholders meeting shall be held in the city or municipality where the principal office of the corporation is situated. Section 51 reads thus: "SECTION 51. Place and time of meetings of stockholders or members . Stockholders,' or members' meetings, whether regular principal office of the corporation is located , and is practicable in the principal office of the corporation: Provided, That Metro Manila shall, for the purposes of this section, be considered a city or municipality. . . . xxx xxx xxx. All proceedings had and any business transacted at any meeting of the stockholders or members, if within the power or authority of the corporation , shall be valid even if the meeting be improperly held or called, provided all the stockholders or members of the corporation are present or duly represented at the meeting ." (Emphasis supplied) The legislative intent of the above requirement is to prevent the controlling stockholders to just call a meeting anywhere else which might be inconvenient to the minority stockholders as can be gleaned from the following deliberation/proceedings of the Batasan Pambansa on the Corporation Code, to wit: "MR. LEGASPI. . . . The purpose, Mr. Speaker, is to see to it that the will of the minority is not frustrated by the act of the majority in requiring or authorizing the place of the stockholders meeting in a place very far away where representatives or the minority stockholders could afford to attend." (Emphasis supplied) It is well-settled that statutes must necessarily be construed in accordance with the intent of the Legislature . Accordingly, as a general rule , the holding of stockholders meeting in any place, other than in the city or municipality where the principal office of the corporation is established or located would constitute a violation of the aforecited provision of the Corporation Code. However, take note that the requirement allows an exception . Under the last paragraph of the above provision, proceedings and any business transacted at any meeting of stockholders is nevertheless valid even if the meeting is improperly held or called, provided that the following conditions are present. 1. That the business transacted is within the powers or authority of the corporation, that is, the transaction is not an ultra vires act, and 2. That all the stockholders or members of the corporation are present or duly represented at the meeting. Thus, failure to comply with the above mandatory requirement of Section 51 of the Corporation Code will not render a meeting illegal, if all the stockholders are present and participate during the meeting. However, should the Board of Directors think the foregoing conditions the exception would not be met because some stockholders cannot afford to go to Makati City or are living in Samal, Bataan who cannot come to Makati because of the situation, the following remedies may be resorted to: 1. Postpone the scheduled stockholders meeting. The Commission, on several occasions, had opined that the annual stockholders meeting may be postponed for meritorious or justifiable reasons. The situation stated in your letter appears to be meritorious to warrant the postponement of the annual meeting. However, it is necessary that the postponement of the annual meeting should be for a reasonable time and provided that proper notice shall be sent to all the stockholders of the corporation in the manner prescribed by the by-laws. Further, it is the duty of the Board of Directors to determine the date and time to hold it taking into consideration the circumstances stated in your letter. In this connection, your attention is invited to the following provision of the Amended SEC Rules Requiring the Filing of the Information Sheet by Domestic Corporations. "3. If for any justifiable reason, the annual meeting has to be postponed, the company should notify the Commission in writing of such postponement within ten (10) days from the date of such postponement." In the event the meeting is legally postponed , the incumbent Directors and Officers may " hold-over " their office and continue their functions until their successors are duly elected and qualified. This hold-over principle is sanctioned under Section 23 of the Corporation Code which provides that the Board of Directors " shall hold office for one (1) year and until their successors are elected and qualified ". However, it has to be emphasized that "hold-over" is a situation that arises only when no successors are elected due to valid and justifiable reasons . Or 2. In anticipation of the continuous lahar flow of the Mt. Pinatubo for the next 10 to 15 years, the management may take steps to amend the Articles of Incorporation changing the place of the principal office of the corporation in accordance with Section 16 of the Corporation Code. Take note that under Section 16 of the Code, quoted hereunder, mere written assent of the stockholders will suffice. In other words, stockholders meetings is not necessary . "SECTION 16. Amendment of articles of incorporation . Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock , without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or the vote or written assent of two-thirds (2/3) of the members it is be a non-stock corporation. LibLex . . ." (Emphasis supplied) Please be advised accordingly. Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Acting Chairman