Industrial Enterprises, Inc.

July 12, 1990 Industrial Enterprises, Inc. Marinduque Building 2283 Pasong Tamo Extension Makati, Metro Manila Attention : Jesus S . Cabarrus Gentlemen: This refers to your letter dated June 13, 1990 requesting confirmation that the corporation's stock offering under the facts presented therein does not require prior permit or licensing, and therefore, corresponding stock certificates may be issued on fully paid subscriptions. Anent thereto, Section 4 (a) of the Revised Securities Act provides that no securities, except of a class exempt under any of the provisions of Section Five thereof or unless sold in any transaction exempt under any of the provisions of Section Six thereof, shall be sold to the public within the Philippines, unless such securities shall have been registered and permitted to be sold in accordance with the said Act. The Commission, however, from time to time may exempt transactions other than those provided for under said sections if it finds that the enforcement of the registration requirements 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. (Sec. 6 (b) Revised Securities Act) Under the Revised Securities Act, subscriptions to the unissued shares of the corporation are not considered exempt per se. Consequently, appropriate request for exemption from the registration requirements is necessary, and any issuance from the unissued shares without SEC approval is subject to the SEC Rules and Regulations Prescribing Penalties For Issuance of Shares Without Prior Permit. Thus, pursuant to said SEC Rules, the corporation, when it issued P27,646,280.00 worth of shares out of its unissued shares without prior exemption therefrom secured from the Commission, was ordered to pay the amount of P54,292.56 as penalty for said violation. However, with respect to the subscription of the existing stockholders of the corporation to the increase of its capital stock from P100,000,000.00 to P200,000,000.00 the same is considered exempt transaction under Section 6(4) of the Revised Securities Act. Hence, there is no need to secure prior permit or exemption from the Commission. Relative to the issuance of certificates of stock, the pertinent provision of the Corporation Code provides: "SECTION 64. Issuance of stock certificates . No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares) if any is due, has been paid." Under the foregoing provision, it is clear that every stockholder has a right to have a stock certificate issued to him by the corporation as soon as he has fully paid his subscriptions to the above mentioned issuances. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner