Atty. Soledad Cagampang-De Castro

June 22, 1995 Atty. Soledad Cagampang-De Castro De Castro & Cagampang Law Office 7th Flr.,LTA Bldg.,118 Perea St., Legaspi Village, Makati, Metro Manila M a d a m : This refers to your letter of February 10, 1995 requesting opinion and/or clearance for the Manila Building and Loan Association (MBLA) to: (a) continue with its regular business in line with its objectives as a building and loan association as set forth in its Articles and By-laws as a duly organized "sociedad anonima" under the Code of Commerce until the expiration of its original term in the year 2003; and (b) recapitalize and/or increase its operating capital to enable it to serve its members, particularly in home mortgage financing and related activities. The pertinent provision of the Corporation Code provides: "SECTION 148. Applicability to existing corporation . All corporations lawfully existing and doing business in the Philippines on the date of the effectivity of this Code and heretofore authorized, licensed or registered by the Securities and Exchange Commission, shall be deemed to have been authorized, licensed or registered under the provisions of this Code ,subject to the terms and conditions of its license, and shall be governed by the provisions hereof . Provided ,That where any such corporation is affected by the new requirements of this Code , said corporation shall, unless otherwise herein provided, be given a period of not more than two (2) years from the effectivity of this Code within which to comply with the same ." (Emphasis supplied) The above provision authorizes all corporations lawfully existing before the effectivity of the Corporation Code to continue their operations. However, please take note that the Code is clear that said corporations shall be governed by the provisions thereof, and if the corporation is affected by the new requirements of the Code, it is given two (2) years from its effectivity within which to comply with the same. The SEC has ruled on several occasions that "failure on the part of the corporation to amend the articles of incorporation/by-laws to comply with the applicable provisions of the Code on or before May 1, 1982, the expiration date of the two-year period, the SEC will consider the provisions therein as written into the articles of incorporation as of May 1, 1980, the date of effectivity of the Corporation Code." ( Letter to Mr. Jose P. Llopis dated October 29, 1990 citing previous SEC Opinions) Accordingly, in the event the proposed increase of its operating capital would result in the increase of its present authorized capital stock, the corporation must comply with the requirements laid down under Section 38 of the Corporation Code, subject further to the favorable recommendation of the Bangko Sentral. Enclosed is a xerox copy of the opinion of Bangko Sentral on the matter for your information. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner