Mr. P. B. Domingo

July 2, 1981 Mr. P. B. Domingo SGV & Co. P.O. Box 7658 MIA Airmail Exchange Metro Manila Dear Mr. Domingo : This has reference to your letter dated February 9, 1981 requesting opinion/clarification on the queries posed therein relative to the significant changes introduced by the new Corporation Code of the Philippines, Batas Pambansa Blg. 68. LibLex Regarding questions number 1, 4 7 and 8 on redemption of shares regardless of the existence of unrestricted retained earnings (Sec. 8);power to acquire own shares (Sec. 41);deposit required of foreign corporation (Sec. 126) and close corporations (Sec. 96),respectively, please be informed that they are covered by the implementing rules and regulations which this Commission would eventually release for public hearing. In view thereof, we deem it premature to answer your queries on said matters. Relative to query number 2, Section 13 and 38 of the Corporation Code of the Philippines prescribe the 25-25% ratio on the subscribed and paid-up capital of stock corporations. Being a new requirement, we believe that the same ratio should also cover or apply to existing subscriptions which constitute only 20% of the authorized capital stock. Existing corporation are given a period of not less than two (2) years from the effectivity of the Code within which to comply with the same. With respect to your third query, we believe that the same should be addressed to the Bureau of Internal Revenue, which is in the best position to answer the same. Relative to query number 5, our answer to the first question is in the affirmative. The same question has been posed to Solicitor Mendoza who replied that the Code was drawn not only from the provisions of Act 1459, as amended, but from various decrees which have been issued dealing with corporate practices so that if the Code is approved, the consequence would be that those decrees which deal on exactly the same points which are dealt with in the Code would be implicitly repealed or modified. Secondly, Section 43 would apply to all stock corporation. Lastly, it is sound corporate practice for corporations with financial statements showing surplus profits in excess of 100% of paid-up capital to disclose in the notes to financial statements the reason for the retention of the earnings. Regarding query number 6, it is clear from Section 62 that where the consideration is other than actual cash or consists of intangible property such as patents or copyrights, the valuation thereof shall be determined initially by the incorporators or by the board of directors, but subject to approval by the SEC. Secondly, the IBP members have already discussed that intangible property may include goodwill and that the SEC is authorized to determine whether or not the value attributed to that goodwill is real or fictitious or whether it is reasonable or unreasonable. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department