Atty. C.L. Orcullo

December 13, 1996 Atty. C.L. Orcullo Sycip Gorres Velayo & Co. 3rd Flr. Golden Heritage Building II Araneta Street Bacolod City S i r : This refers to your letter dated September 14, 1996 addressed to our Iloilo Extension Office requesting opinion whether Article 7 of Matemara, Inc., a domestic corporation incorporated in 1972, which denies Class A common stock the right to vote is not violative of Section 6 of the Corporation Code. Section 6 of the Corporation Code provides in part: SECTION 6. Classification of shares . The shares of stock of stock corporations may be divided into classes or series of shares, or both any of which classes or series of shares may have; such rights, privileges or restrictions as may be stated in the articles of incorporation; provided ,That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable shares , unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock. ...(Emphasis supplied) From the underscored phrases in the foregoing provision, it can be construed that common shares cannot be deprived of voting rights .The fact that the shares are denominated as common shares and have the same par value would suppose that they are to be treated in equal footing. In relation to the aforecited provision, Section 148 of the Corporation Code provides: "SECTION 148. Applicability to existing corporations . All corporations lawfully existing and doing business in the Philippines on the date of the effectivity of this Code and heretofore authorized, licensed or registered by the Securities and Exchange Commission, shall be deemed to have been authorized, licensed or registered under the provisions of this Code, subject to the terms and conditions of its license, and shall be governed by the provisions hereof; Provided, That where any such corporation is affected by the new requirements of this Code ,said corporation shall, unless otherwise herein provided, be given a period of not more than two (2) years from the effectivity of this Code within which to comply with the same " (Emphasis supplied) Under the aforecited provision, affected existing corporations are given two (2) years from the effectivity of the Corporation Code within which to comply with the provision thereof, and the Commission, in several occasions has ruled that, failure on their part to amend their articles of incorporation to comply with the applicable provisions of the Code on or before May 1, 1982, the expiry date of the two (2) year period, the Commission will consider the provisions therein as written into their Articles of Incorporation as of May 1, 1980, the date of effectivity of the Corporation Code. (SEC Opinion: dated Sept. 25, 1990, citing SEC Opinions dated April 26 and June 29, 1982) Thus, applying the above ruling in the instant case, since the corporation failed to amend its articles of Incorporation within the required period, the requirement under Section 6 is deemed inserted in the Articles of Incorporation of subject corporation as of May 1, 1980. After said date, holders of common shares shall enjoy equal rights and voting power .However, should it be the intention of the corporation to deny existing " Class A common shares" the right to vote, it may amend its Articles of Incorporation in accordance with Section 16 of the Corporation Code reclassifying said shares into "non-voting preferred shares". Under Section 6 of the Corporation Code, a corporation is allowed to classify its shares of stock into classes of shares which may be differentiated in terms of rights, privileges or restrictions to be stated in the Articles of Incorporation. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner