Mr. Marino Abad Santos

September 26, 1988 Mr. Marino Abad Santos United Coconut Planters Bank UCPB Building, Makati Avenue Makati, Metro Manila Sir : This refers to your letter dated August 17, 1988, requesting the opinion of this Commission on the legality of amending the original subscription contract between the United Coconut Planters Bank and the Rural Bank of Mayantoc, allowing the former to reduce its capital infusion in Rural Bank of Mayantoc from P20,000,000.00 to P5,000,000.00. It appears therein that the Rural Bank of Mayantoc has a pending increase of capital stock from P1,500,000.00 to P41,500,000.00 whereby UCPB agreed to subscribe P14,525,000 worth of shares, however, under the amendatory agreement of the original subscription contract, UCPB and Rural Bank of Mayantoc agreed to reduce UCPB's capital infusion to only P5,000,000.00. Allegedly, the reduction was approved by the Central Bank subject to SEC approval. Hence, your present query. Section 38 of the Corporation Code provides that the increase of capital shall become effective only upon approval by the Commission. The law provides thus: "From and after approval by the Securities and Exchange Commission of its certificate of filing, the capital stock shall stand increased ..." Considering that to date, the proposed increase of capital stock of the Rural Bank of Mayantoc has not been approved by the Commission, the same has not become effective. Therefore, UCPB's subscription to the increase may still be reduced by mutual agreement of the contracting parties. However, your attention is invited on the provision under Section 38 of the Corporation Code which requires that at least 25% of the increase of capital stock must be subscribed and that at least 25% of the amount subscribed must be paid. Since UCPB's subscription is to be reduced to only P5,000,000, there should also be a corresponding reduction of the proposed increase of capital stock to comply with the above requirement of the Code. Likewise, the reduction should be approved by at least majority of the Board and 2/3 of the outstanding capital Stock of the Bank. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman