Mr. Gregorio Tengco, Jr.

January 12, 1996 Mr. Gregorio Tengco, Jr. Form Multipurpose Cooperative 8867 Sampaloc Ave. cor Santol St., SAV, Makati City S i r : This refers to the letter dated January 5, 1996 informing this Commission that your corporation has acquired all the outstanding shares of the corporations enumerated therein which are facing, disenfranchisement as published in the Philippine Star newspaper and requesting not to disenfranchise them as your corporation is determined to operate said firms. prcd In connection therewith, you are hereby advised to immediately communicate with the Supervision and Monitoring Department of this Commission, the Department in charge of monitoring compliance with SEC reportorial requirements. Relative to the issue on whether or not a corporation can legally exist with only one (1) stockholder brought about by transfer of ownership, the Corporation Code provides: "SECTION 2. Corporation Defined . A corporation is an artificial being created by operation of law, having the right of succession and the powers attributes and properties expressly authorized by law or incident to its existence. (Emphasis supplied) One of the attributes granted to a registered corporation under the above provision is that it has the right of " succession " which means that a corporation has a continuity of existence during its term of existence stated in the articles of incorporation, independent from that of its stockholders. Thus, its continued existence cannot be affected by any change in the stockholders, whether the change be the consequences of death of a stockholder or transfer of shares by a stockholder to third persons. Accordingly, transfer of shares to a qualified transferee neither dissolves a corporation nor renders the same inoperative. Furthermore, while Section 10 of the Corporation Code requires that at least five persons may form a corporation, nevertheless, it only requires the ownership of at least one (1) share in order to be eligible as an incorporator, stockholder or director. For purposes of stock ownership under said provision, the general rule is that beneficial ownership is not necessary and that a person who holds the legal title to the stock on the books of the corporation is qualified, although the beneficial ownership may be in another. In other words it is sufficient that the title is what counts and it is the person whose name appears as owner on the books of the company who is the stockholder. Thus, the Commission previously opined that a person who holds the naked title to the stock as appearing in the stock and transfer book of the corporation is eligible as directors notwithstanding absence of his beneficial right, title, or interest in the proper. ( SEC letter, dated Jan. 18, 1993 addressed to Mr. Fred P. Cladera citing previous SEC opinions) Therefore, a corporation may be wholly or substantially owned by a single individual or corporation. For purpose of complying with the statutory minimum number of stockholder/directors, the owner may transfer one (1) qualifying share to each nominee stockholders for purposes of qualifying them to become members of the Board, without giving them the beneficial ownership of the shares. Said transfer would be more of a "trust" and not a transfer of "ownership",hence ,the beneficial interest in such share will remain with the assignor while the assignee will hold only the legal title to the stock. In such case, the transferee should be described in the Deed of Assignment, corporate books and certificate of stock merely as a qualifying shareholder or nominee of the transferor. The fact that the stock standing on the corporate books is in the name of the person only as a qualifying shareholder or that the holder of the stock certificate is described merely as a nominee serves as a notice to the corporation and third parties that the holder thereof does not hold the share in his own right, but holds it only as a nominee for the benefit of the real owner. ( Ltr. to Attys. Elma Christine R. Leogardo and Cynthia D. Nuval-Ambrosio dated August 4, 1995 citing previous SEC opinions) llcd Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Acting Chairman