Tristan A. Catindig

September 15, 1980 Tristan A. Catindig Sycip, Salazar, Feliciano, Hernandez & Castillo Law Offices PAIC Bldg.,Paseo de Roxas Makati, Metro Manila Sir : This has reference to your letter dated June 17, 1980, requesting confirmation of the opinion mentioned in said letter. LibLex A summary of the facts are as follows: 1. On January 25, 1979, a proposal to increase the authorized capital stock of the Producers' Bank of the Philippines from P120 million to P250 million was duly approved by the stockholders. As of said date, the outstanding capital stock consisted of 996,739 common shares. 2. In the proposed capital increase, 1,300,000 common shares were offered for subscription out of which 429,226 common shares were subscribed by the existing stockholders. 3. On the same date, 5% of stock dividend was declared on the issued and outstanding common shares equal to 49,821 common shares. 4. On March 24, 1980, the amended articles of incorporation and the certificate of increase of the capital stock were filed with the SEC which was approved on July 22, 1980. 5. On March 28, 1980 the stockholders declared another 5% stock dividend on the issued and outstanding common shares of record as of the date of the said meeting. The issue is whether or not the 5% stock dividend declared on March 28, 1980 should be computed on the basis of 1,046,560 common shares (i.e. the 996,739 common shares outstanding as of January 25, 1979 plus the 49,821 common shares issued on account of the 5% stock dividend declared on January 25, 1979),or on the basis of 1,475,786 common shares (the above-mentioned 1,046,560 common shares plus the 429,226 common shares subscribed in 1979 supporting the increase of capital stock.) It is your view that, in computing the number of shares of record issued and outstanding as of March 28, 1980 for purposes determining the entitlement to the 5% dividend declared on said date, the 429,226 common shares subscribed to support the increase in capital stock which was only approved on July 22, 1980 should be excluded on the ground that said shares were not yet of record on March 28, 1980, and a confirmation of this opinion is being requested from this Office. cdlex An examination of the stock and transfer book of the subject corporation showed that the 429,226 common shares worth P42,922,600 which is the subscription on the first set of subscription on the increase of capital stock approved on July 22, 1980 was not yet recorded on the date of declaration of the 5% stock dividend on March 28, 1980, hence, the same is not entitled to said 5% stock dividend. Secondly, Sec. 17 of the Corporation Law, particularly, paragraph 3 thereof, provides thus: "xxx xxx xxx One of the duplicate certificates shall be kept on file in the Office of the corporation and the other shall be filed with the SEC and attached by him to the original articles of incorporation. From and after the filing of the duplicate certificate with the Securities and Exchange Commission the capital stock shall stand increased ..." Under said provision, it is understood that it is only from the time of filing of the certificate of increase of capital stock with the Securities and Exchange Commission that the capital stock of the corporation shall be considered increased as stated in the certificate. The word "filing" is construed as the approval of the Securities and Exchange Commission, in as much as the same is still subject to examination to determine whether such increase is in accordance with the provision of Sec. 17 of the Corporation Law. On the basis of the foregoing observation, it is opined that the subscribers to the increase of capital stock filed on March 24, 1980, are considered stockholders of record only at the time of the approval of said increase on July 22, 1980, hence, not entitled to the 5% stock dividend declared on March 28, 1980. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department