Mr. George Lavadia

July 29, 1993 Mr. George Lavadia Joaquin Cunanan & Co. 8747 Paseo de Roxas St. Makati, Metro Manila S i r : This refers to your letter of May 24, 1993 questioning the present policy of the Commission requiring 25% subscription on increase of capital stock on the basis of the proposed additional amount of increase instead of 25% of the total capital stock as increased. cdlex The pertinent provision of the Corporation Code provides: "SECTION 38. Power to increase or decrease capital stock ;... "...,That the Securities and Exchange Commission shall not accept for filing any certificate of increase of capital stock unless accompanied by the sworn statement of the Treasurer of the corporation lawfully holding office at the time of the filing of the certificate, showing that at least twenty-five percent (25%) of such increased capital stock has been subscribed" ....(Emphasis supplied) The Commission construes the above-underlined phrase "of such increased capital stock" to mean the additional amount by which the capital stock is increased. Normally, the purpose of increasing the authorized capital stock is to infuse additional capital to cover the financial need of the corporation. If we will base the 25% subscription on the total capital as increased, there would be a possibility that subscription to the increase of capital stock would no longer be necessary as the required 25% subscription may already be complied with considering that the subscriptions to the original authorized capital stock will be included in the computation, thereby defeating the intention to infuse capital. Moreover, it is well-settled that where the language of a statute is fairly susceptible of two or more constructions, that should be adopted which will most tend to give effect to the manifest intent of the law maker and promote the object for which the statute was enacted, and a construction should be rejected which would tend to defeat the object which the legislature sought to attain by its enactment. (Statutes, Alcantara, Sec. 52) The history of the proceedings attending the actual passage of the statute through the legislature may be resorted to in order to discover legislative intent in case of ambiguity. (Ibid, Sec. 66) It appears from the proceedings of the Batasan Pambansa on the Corporation Code that the intention is to require at least 25% of the proposed increase as can be gleaned from the following statements in the deliberation. "xxx xxx xxx MR. VILLEGAS. Mr. Speaker, under Section 13, it is required that 25 percent at the time of incorporation of a corporation should be subscribed and 25 per cent of the subscription must be paid. Similarly, Mr. Speaker, under Section 38 of the same code, 25 percent of the proposed increase of capitalization is supposed to be subscribed and 25 percent thereof must be paid. However, Mr. Speaker, the proposed code is silent with respect to shares of stock voted by the Board of Directors to be issued out of the unissued existing authorized capital stock. . . ." (Emphasis supplied) Records of the deliberation show that nobody among the committee questioned or commented on the foregoing underlined statement, hence, it may be used as evidence of the intent of Section 38 of the Corporation Code. Thus, applying the above interpretation on the proposed increase of capital stock of Mead Johnson Philippines, Inc.,from P53 M to P400 M, applicant company should comply with the required 25% subscription on the proposed additional increase of P347M which is P86,750,000. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman