Mr. Vicente A. Z. Araneta

June 24, 1991 Mr. Vicente A. Z. Araneta Facilities, Incorporated 3/F, Facilities Centre 548 Shaw Boulevard Mandaluyong, Metro Manila S i r : This refers to your letter of March 18, 1991 inquiring whether a domestic corporation can swap shares with a foreign corporation resulting in the former to be totally owned by the latter corporation. The pertinent provision of the Corporation Code provides in part, to wit: "SECTION 62. Consideration for stocks. ...Consideration for the issuance of stock may be any or a combination of any two or more of the following: xxx xxx xxx 2. Property ,tangible or intangible actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to par or issued value of the stock." (Emphasis supplied). From the above-quoted provision, a corporation is allowed to receive payment for shares of stock in the form of property. Shares of stock are personal property, and as such, may be legally accepted as capital contribution or payment in exchange for shares of stock of a corporation, provided however that the same is necessary or convenient in carrying out the corporate business for which the corporation is organized. Likewise, considering that the payment is not in the form of cash, the valuation therefore is subject to the approval by the Commission pursuant to the following provision of the Corporation Code: "Where the consideration is other than actual cash ,or consists of intangible property such as patents or copyrights, the valuation thereof shall initially be determined by the incorporators or the board of directors, subject to the approval by the Securities and Exchange Commission ." (Sec. 62, Emphasis supplied) cdll However, while shares of stock may be considered valid payment for subscription, the present policy of the Commission for purposes of incorporation is to require applicant corporation to have cash capital aside from the property that may be contributed, sufficient enough to start its operation taking into consideration the nature of its business. Furthermore, considering that the proposed corporation would be wholly owned by a foreign corporation, the registration thereof requires prior authority from the Board of Investments which has the jurisdiction to determine whether the proposed line of business is open to foreign participation or whether or not the same is already crowded or adequately exploited by Filipino citizens or corporations. llcd Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman