Mr. Ling Haw Kee

December 10, 1985 Mr. Ling Haw Kee No. 87 Campaner St. Zamboanga City Dear Mr. Haw Kee, This relates to your letter, dated May 29, 1985, requesting information from this Commission as to the present juridical personality of Anoos-Soriano Agro Industrial Corporation in the light of the following: 1. It has not filed its by-laws since its incorporation in 1962; 2. Three of its incorporators have since been dead; 3. A surviving stockholder attempt to sell shares of stock under the corporate name Anoos Agro Industrial Corporation dropping "Soriano" from the original articles of incorporation. Anent your first query, quoted hereunder is Section 22 of the Corporation Code of the Philippines: "Effect of non-use of corporate charter and continuous inoperation of a corporation. If a corporation does not formally organize and commence the transaction of its business or the construction of its works within two (2) years from the date of its incorporation, its corporate powers cease and the corporation shall be deemed dissolved. However, if a corporation has commenced the transaction a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for a period of at least five (5) years, the same shall be a ground for the suspension or revocation of its corporate franchise or certificate of incorporation. This provisions shall not apply if the failure to organize, commence the transaction of its business or the construction of its works, or to continuously operate is due to causes beyond the control of the corporation as may be determined by the Securities and Exchange Commission." Anent your first query, please be informed that a corporation is deemed to have formally organized by the adoption of its by-laws, and the holding of meetings for the election of directors and corporate officers. The record of this Commission shows that Anoos-Soriano Agro Industrial Corporation has failed to submit its by-laws. In this connection, the failure of the company to complete its organization and proceed to transact business within the time prescribed ipso facto works a revocation and ends the corporate existence. (Agbayani, Commercial Laws of the Philippines, Vol. 3, 1984 ed., p. 166, citing People v. Mackay. 225 Ill 144, 99 NE 370). This seems to be the case under Sec. 22 of the Corporation Code which provides that where a corporation does not formally organize and commence the transaction of its business or the construction of works within two years, from the date of its incorporation its corporate powers cease and the corporation shall be deemed dissolved. However, the law further provides that this provision shall not apply if the failure to organize, commence the transaction of its business or the construction of its works, or to continuously operate is due to causes beyond the control of the corporation as may be determined by the Securities and Exchange Commission. (Agbayani, p. 166, citing Sec. 22, Corporate Code). In other words, under this circumstances, the corporation will not be deemed dissolved, or its corporate franchise or certificate of incorporation will not be subject to suspension or revocation (Ibid). prcd Corollary thereto, "Statutory conditions to the right to engage in business, to be performed after incorporation has been formed are conditions subsequent, and while a non-compliance therewith may give the state a right to proceed to forfeit the franchise, such non-compliance in the absence of such proceedings does not in anywise affect the legal existence of the corporation." (Skarda v. Commissioner of Internal Revenue, 250 F2d 429, citing Fletcher, Cyc. Corp. perm. ed.,sec. 130) "If a corporation fails to comply with a condition subsequent, the state may institute proceedings to enjoin or oust it from the right to exercise the power and privileges conferred upon it, but until such proceedings are instituted, and a judgment of forfeiture rendered, the existence of the corporation is not in any way affected." (1 Fletcher, Cyc. Corp.,1963 Rev. Vol.,sec. 130, pp. 554-555). Considering the foregoing, it is opined that the corporation continues to be such despite its failure to organize and commence its business within the required period, until it dissolution has been lawfully decreed. This interpretation is properly supported by the second paragraph of Section 22 which states that the corporate existence can be "revived" if it can prove that its failure to organize and/or commence business was due to causes beyond its control, (Campos, Campos, Corporation C od e, "Comments, Notes and Selected Cases", p. 899), which means that an automatic dissolution was not envisioned under this provision. However, considering the circumstances surrounding subject corporation, the Commission shall institute the proper revocation proceeding against it under Section 6 (1) * of P.D. 902-A as amended, which provides, thus: "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx 1) * To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: xxx xxx xxx 4. continuous inoperation for a period of at least five (5) years; 5. failure to file by-laws within the required period. cdlex xxx xxx xxx" For purposes of general information only, your queries 2 and 3 are answered as follows: As regard your second query, Section 2 of the Corporation Code provides thus: "A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence." On the other hand, incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof. (Sec. 5, Corporation Code). A corporation has a personality separate and distinct from that of each stockholder. (Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. 3, 1984 ed., p. 13). This has been generally considered as the privilege or attribute most characteristic of the corporation (Agbayani, p. 13, citing Ballantine, 287). Likewise, by corporate right of succession, a corporation has a continuity of existence independent of that of its members or shareholders. This continued existence of a corporation is, however, limited to the period stated in its articles of incorporation or in the act creating it. Subject only to this limitation, death of the shareholders of a corporation does not affect its corporate existence . (Agbayani, p. 43, citing Campos Rueda & Co. v. Pac. Com. Co., 44 Phil. 916). Relative to your third query, the pertinent provisions of the Corporation Code of the Philippines provide thus: "SECTION 16. Amendment of Articles of Incorporation . Unless otherwise prescribed by this Code or by special law, or 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, . . . xxx xxx xxx The amendments shall take effect upon its approval by the Securities and Exchange Commission or from the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation." SECTION 18. Corporate name . ...When a change in the corporate name is approved, the Commission shall issue an amended articles of incorporation under the amended name." Change of corporate name may be accomplished by an amendment of the articles of incorporation. It cannot be done otherwise. (Agbayani, p. 141). Please be advised accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman * Copied verbatim from documents obtained directly from the Securities and Exchange Commission.