Atty. Efifanio Sedigo, Jr.

May 24, 1999 Atty. Efifanio Sedigo, Jr. Guingona & Sedigo Suite 309, ITC Building 337 Sen. Gil Puyat Avenue Makati City S i r : This refers to your letter-query dated May 12, 1999 summarized as follows: 1. Can an absorbing corporation in a merger opt not to issue shares to itself if said absorbing corporation is also a stockholder of the absorbed corporation? 2. Can stockholder of the absorbing corporation waive the issuance of shares in his favor? The above situation is not prohibited under the Corporation Code. Hence, it may be allowed, provided that no creditor or stockholder of either constituent corporations will be prejudiced by the transaction. In the above situation, the accounting treatment in the merger will be as follows: 1. The investment account of the absorbing corporation will be closed against the net assets acquired and any excess shall be treated as additional paid-in capital. 2. Additional paid-in capital shall be credited corresponding to the net assets acquired. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner