Atty. Edward S. Serapio

February 27, 1991 Atty. Edward S. Serapio De Borja Medialdea Ata Bello Guevarra and Serapio Ground Floor, Greenbelt Mansion Peria St.,Legaspi Village Makati, Metro Manila S i r : This refers to your letter of February 15, 1991 requesting opinion on the queries posed therein. As stated, your client, Bio-Generics (Philippines) Corporation, a corporation organized and existing under Philippine laws and principally engaged in the business of manufacturing and selling pharmaceutical products, purchased and acquired from its affiliate, International Merona Ltd. more than a hundred pharmaceutical product formulations under a duly executed Memorandum of Agreement. The terms and conditions of the Memorandum of Agreement including the purchase price, have been approved by the Board of Directors of the Company and by its stockholders. Your queries are the following: 1. Whether the said purchase price of product formulations and the terms and conditions of the Memorandum of Agreement should be submitted to the Commission for approval? 2. Whether the approval of the Board and stockholders of the Corporation is sufficient for the validity and enforceability of the Memorandum of Agreement? Section 36 of the Corporation Code of the Philippines provides in part: "Every corporation incorporated under this Code has the power and capacity. xxx xxx xxx 7. To purchase ,take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal property, including securities and bonds of the corporation, as the transaction of the lawful business of the corporation may reasonably and necessarily require ,subject to the limitations prescribed by law and the Constitution." (Emphasis supplied) It is clear from the aforecited provision that every corporation has the power, among others, to purchase or acquire property as may be necessary to enable it to carry out the purpose(s) for which it was organized. Accordingly, if the purchase by the corporation of the pharmaceutical product formulations is necessary in carrying its authorized business, the approval thereof by the Commission is not necessary. The question of value or purchase price of the acquisition is for the management to determine. Unless tainted with bad faith or fraud, the Commission will not interfere with the exercise of business judgment by the management of the corporation. Anent your second query, the exercise of implied powers by the corporation is expressly recognized by law, particularly under paragraph 11 of Section 36 of the Corporation Code, quoted hereunder: "11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its articles of incorporation." The rule may thus be stated that the management of a corporation, in the absence of express restrictions, has discretionary authority to enter into contracts or transactions which may be deemed reasonably incidental to the business purposes of the Corporation. (Ballantine on Corporations, Sec. 83, p. 244) Accordingly, the Board of Directors, subject to any express restrictions in the charter, by-laws or the general law, has the power to bind the corporation by any contract which is within its express and implied powers, and which in their judgment is necessary or proper in order to carry out the object for which the corporation was created, and generally, to do or authorize any act which falls within what may properly be regarded as the management of the ordinary business of the corporation, without consulting with or obtaining consent of the stockholders. (2 Fletcher Ch. II Sec. 505) llcd Very truly yours, (SGD.) ARMANDO Z. GONZALES Associate Commissioner