Ms. Paz Policarpio-Mendez

December 26, 1984 Ms. Paz Policarpio-Mendez Vice Pres. for Research & Dev. Ms. Minerva G. Laudico Vice Pres. for Academic Affairs Central Escolar University Manila Mesdames: This refers to your letter dated October 11, 1984, bringing to the attention of the Commission that some stockholders of the University holding majority shares are conducting negotiation for the sale of their stockholdings in favor of the Maharishi group, without giving the other stockholders the priority to purchase said shares. Hence, your request for the disapproval of the proposed share acquisition by the Maharishi group. prcd Anent thereto, Section 63 of the Corporation Code of the Philippines provides, thus: "SECTION 63. Certificate of stock and transfer of shares . ...shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. .. xxx xxx xxx "Shares of stock in a corporation are personal property, and as in the case of other personal property, the owner has absolute and inherent right, as an incident of ownership, to sell and transfer the same at will, except insofar as the right may be restricted by the charter of the corporation of the general law ....In the absence of such restrictions, a bonafide transfer does not require the consent of the corporation, and cannot be prevented by it or by its offices." ( SEC Opinion dated October 23, 1968 ,citing 12 Fletcher, Cyc. Corps.,sec. 5452. Emphasis supplied). A perusal of the amended articles of incorporation of Centro Escolar University fails to show any restriction on transfer of shares by the stockholders. For this reason, the stockholders of CEU may dispose of their shareholdings without first offering the same to the existing stockholders, provided, however, that in the disposition of said shares, the provisions of Article XV, Section 8(7) of the Constitution and P.D. 176 issued on April 16, 1973, are strictly observed . The difference lies, however, under Section 39 of the Corporation Code, where "all stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation or an amendment thereto: Provided, that such pre-emptive right shall not extend to shares to be issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or to shares to be issued in good faith with the approval of the stockholders representing two-thirds (2/3) of the outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a previously contracted debt". Thus, as far as mere issues of shares are concerned, the stockholders of that educational institution have the pre-emptive right or option to subscribe to such new allotment of shares, in proportion to their respective holdings, before the new shares are offered to others (Stevens, 499), subject to the exceptions provided for in Section 39 of the Corporation Code of the Philippines as quoted above. Please be advised accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman