Ms. Judith Philips

February 2, 1996 Ms. Judith Philips William M. Mercer Limited, Dexter House, 2 Royal Mint Court, London, EC3N 4NA Madam : This refers to your facsimile message dated January 10, 1996, inquiring whether your client, a UK listed company that operates an " executive share option scheme " to selected employees on a world-wide basis, can grant option to an executive resident in the Philippines over the shares in the corporation, and if allowed, the requirements that need to be complied with. cdlex The pertinent provisions of the Revised Securities Act of the Philippines provide: "SECTION 4. Requirement of registration of securities . (a) No securities except of a class exempt under any of the provisions of Section five hereof or unless sold in any transaction exempt under any of the provisions of Section six hereof, shall be sold or offered for sale or distribution to the public within the Philippines unless such securities shall have been registered and permitted to be sold as hereinafter provided." (Emphasis supplied) "SECTION 6. Exempt transactions . . . . xxx xxx xxx (b) The Commission may, from time to time and subject to such terms and conditions as it may prescribe, exempt transactions other than those provided in the preceding paragraph, if it finds that the enforcement of the requirements of registration under this Act with respect to such transactions is not necessary in the public interest and for the protection of the investors by reason of the small amount involved or the limited character of the public offering ." (Emphasis supplied) LexLib Therefore, as a general rule , selling or offering for sale or distribution of securities within the Philippines are subject to registration. However , the Law allows exemptions by reason of the small amount or limited character of the offering . Thus, for invoking such justification, the Commission, on several occasions, had treated " stock option plans " granted by foreign companies in favor of qualified employees of their Philippine subsidiaries as exempt transactions. Accordingly, if it can be shown that the offering is limited only to the executive resident in the Philippines who is in a position to know the present affairs of the corporation and the risks of investing therein such that the registration of the shares to be offered is not necessary in the public interest and for the protection of the investor, the transaction may be exempted from the registration requirements under the Revised Securities Act, provided that the following requirements shall be complied with: 1. Filing of a request for exemption from the registration requirements stating the reasons why it should be exempted under Section 6(b) of the Revised Securities Act; 2. Payment of exemption fee amounting to one-tenth of one per centum of the maximum aggregate price or issued value of the securities as required under Section 6(c) of the Revised Securities Act. Please be guided accordingly. prcd Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner