Mr. Raymundo O. Feliciano

July 21, 1981 Mr. Raymundo O. Feliciano Manila Gas Corporation 1536 Paz M. Guazon Manila Dear Mr. Feliciano: This refers to your letter dated June 17, 1981 requesting assistance of this Commission relative to its requirements on the contemplated quasi-reorganization of your companies. It appears from your letter that the Manila Gas Corporation recently acquired as fully owned subsidiaries the Borromeo Group of Companies, consisting of the Inter-Island Gas Service Inc., the Liquid Gas Philippines, Inc. and the Borromeo Group; that the said companies/subsidiaries have been consistently operating in the "red" even prior to the acquisition, and that to enable your company to continue the operations with a fresh start, you are contemplating of implementing a quasi-reorganization thereof, for which you sought the assistance of the Commission as to the requirements applicable on your projected reorganization. In this connection, please be informed that corporate reorganization or quasi-reorganization is not an exact science. No specific rules can be laid down, for every situation is a case unto itself. In fact, any corporate reorganization has to do with a recasting of the whole financial structure of a corporation which may involve a simple "internal" capital readjustment in one corporation or an "external" reorganization which involves major changes in the financial structure of two or more related corporations. (Law Institute Series, Aspects of Philippine Corporate Law, pp. 194-195). Under American Laws, there are at least six (6) definitions of reorganization, to wit: (a) statutory merger or consolidation; (b) the acquisition by one corporation, in exchange solely for all or a portion of its voting stock, of stock in another corporation if immediately after the acquisition the acquiring corporation is in control of the other corporation; (c) the acquisition by one corporation of substantially all of the properties of another corporation in exchange for the acquiring corporation's voting stock; (d) the transfer by a corporation of all or a part of its assets to another corporation, if immediately after the transfer, the transferor or its shareholders are in control of the transferee; (e) a recapitalization, and (f) a mere change in identity, form or place of organization (Sec. 368 of US Internal Revenue Code). In view of the keen judgment required for its promotion and accomplishment as well as the delicacy or complexity of the situation, would you kindly inform this Commission which method or reorganization you wish to pursue and thereafter, we can assist you in your contemplated corporate action. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department