Mr. Carlos G. Zulueta

December 14, 1989 Mr. Carlos G. Zulueta Philippine Cocoa Corporation Parang, Marikina Metro Manila Sir : This refers to your letter dated November 16, 1989, asking confirmation of your contention that subscriptions of Hershey International, Ltd. (HIL) and ASEAN Cocoa Products Ltd. (ACP) in the Philippine Cocoa Corporation (PCC) may be registered in the Central Bank and that they are entitled to cash and/or stock dividends that may be declared by PCC even if their subscriptions are not fully paid. cdll It appears that Philippine Cocoa Corporation (PCC) increased its authorized capital stock from P100,000,000.00 to P150,000,000 and out of the increase, P15,000,000.00 was offered for subscription. Two of the subscribers are foreign corporations, HIL and ACP, who subscribed to P5,013,850.00 and P1,261,490.00 worth of shares, respectively. HIL is a stockholder of record while ACP is not. Said corporations paid 25% of their subscriptions. The balance is payable on a semi-annual installment basis for a period of five years. The said increase of capital stock was approved by the Commission on December 9, 1988. PCC has applied for registration with the Central Bank of the foreign equity investment of HIL and ACP, which application was rejected on the ground that subscriptions of foreign investors must be fully paid to qualify for registration. Further, you alleged in your letter that it is CB's position that foreign investors' subscriptions are not entitled to any dividends prior to actual remittance of the full payment of their subscription. However, it is your contention that subscriptions not fully paid but not delinquent have all the rights of a stockholder which rights include, among others, the right to dividends. Hence, the present request. Relative thereto, Section 38 of the Corporation Code provides: ". . . . From and after approval by the Securities and Exchange Commission and the issuance by the Commission of its certificate of filing, the capital stock shall stand increased . . .". (emphasis supplied) Consequently, the subscriptions of HIL and ACP to the increase of capital of PCC were deemed effective as of December 9, 1988, the date of the approval of the increase by the Commission, thereby vesting them as of said date with all the rights pertaining to a stockholder including the right to dividends. Moreover, under Section 72 of the Corporation Code, full payment of subscription is not a requisite to make one a stockholder. The law provides, thus: "SECTION 72. Rights of unpaid shares . Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a stockholder ." (emphasis supplied) The foregoing ruling, however, should not be construed to restrain or preclude the implementation of the policy of the Central Bank relative to registration of foreign investments for purposes of repatriation and/or remittances of earnings as there is no actual remittance yet of the full payment of their subscriptions. Likewise, please be advised that in approving the increase of capital stock of PCC from P100,000,000.00 to P150,000,000.00 the Commission overlooked the fact that ACP was not a stockholder of record at the time it made subscriptions to said capital build up. As a matter of policy, the Commission requires foreign corporations who are not stockholders of record at the time of the increase of capital to have their subscriptions fully paid. In view thereof, the Commission, in its meeting of December 7, 1989, resolved to require ACP to fully pay its subscription to the aforementioned increase to conform with the said policy. Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner