Atty. Gilbert Castillo

May 30, 1989 Atty. Gilbert Castillo Office of Senator Sotero H. Laurel 3/F ECJ Condominium, Real cor. Arzobispo Streets, Intramuros, Manila Sir : This refers to your letter dated April 17, 1989, referring to us for comments the proposed Bills Re: "An Act to Implement the Requirement of the Constitution and Laws on Nationality Requirements" and "An Act to Further Amend Commonwealth Act No. 108, As Amended, Otherwise Known as the Anti-Dummy Law. cdll Presented hereunder are comments on the above-mentioned proposed bills: A. An Act to Implement the Requirement of the Constitution and Laws on Nationality Requirements . (1) Section 4(2) Attention is invited to Section 63 of the Corporation Code which provides in part: "SECTION 63. Certificate of stock and transfer of shares . ...Shares of stock so issued are personal property and may be transferred by delivery of the certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. ...(emphasis supplied) Moreover, shares in a corporation are personal property and as in the case of other personal property the owner has an absolute and inherent right as an incident of ownership, to sell and transfer the same at will ,except insofar as the right may be restricted by the charter or the corporation of the general law. ...In the absence of such restrictions a bonafide transfer does not require the consent of the corporation and cannot be prevented by it or by its officers .(12 Fletcher Cyclopedia Corporations Sec. 5452) Therefore, prior approval from the SEC is not necessary. (2) Section 5(a) seems to be inconsistent with Section 3, Section 5(a) provides that the "grandfather rule" is to be strictly applied while Section 3 provides for a lenient interpretation of the rule since it does away with the computation of the grandfather rule for as long as Filipino investors have 60% ownership, that is, the grandfather rule is to be applied only if the ownership of Filipinos in the company goes down below the 60% limit. (3) Section 6(b) There is no citizenship requirement for close corporation unless the company is engaged in a nationalized or partially nationalized business. It is worth mentioning that in permitted investments, foreigners may be allowed to own more than 60% of the outstanding capital stock provided that a certificate of authority shall be secured from the Board of Investments pursuant to the provisions of the Omnibus Investments Code of 1987. The violation under said section therefore has no legal basis. B. An Act to Further Amend Commonwealth Act No. 108 as Amended Otherwise Known as Anti-Dummy Law . (1) Section 4 . We find it unfair to include violations on the part of relatives of public officials as a cause for the dismissal of such public official. We, therefore, recommend that the provision be limited to the act of the public official alone. (2) Section 5 . Instead of designating a particular official of the member agency, it is suggested that only the name of the agency should be specified therein. The member agency might be sending another official not the person designated therein. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman