Quasha Asperilla Ancheta Peña & Nolasco

April 5, 1988 Quasha Asperilla Ancheta Pea & Nolasco Don Pablo Bldg. 114 Amorsolo St. Makati, Metro Manila Sir : This refers to your letter, dated March 21, 1988, requesting the opinion of this Commission on the query posed therein. LibLex It appears therein that your client owns and holds founders shares in Philippine Petrochemical Products, Inc.,a corporation organized in 1969. Records of the Commission show that the amended articles of incorporation creating the company's founders' shares and common shares was approved by the Commission on May 11, 1973. Hence your query is: Can these founders' shares continue to have the exclusive right to vote and be voted for as directors? If not, what is the status of these founders' shares vis-a-vis the common shares? Section 7 of the Corporation Code reads as follows: "Founders' shares classified as such in the articles of incorporation may be given certain rights and privileges not enjoyed by the owners of other stock, provided that where the exclusive right to vote and be voted for in the election of directors is granted, it must be for a limited period not to exceed five (5) years subject to the approval of the Securities and Exchange Commission. The five (5) year period shall commence from the date of the aforesaid approval by the Securities and Exchange Commission." Section 7 of the Corporation Code of the Philippines is a remedial legislation designed to prevent the abuse of founders' shares (wherein the right to elect the directors is reserved only to a minority group holding the founders' shares) by limiting the privilege of the owners or holders thereof to a period of five (5) years. In relation thereto, Section 148 of the Corporation Code provides that existing corporations affected by the new requirements of the Code were given a period of two (2) years from effectivity thereof (May 1, 1980) within which to comply with the same. Thus, if a corporation does not file an amendment to its articles of incorporation on or before May 1, 1982, the Commission as a matter of policy, shall consider the limitation period set forth in Section 7 of the Code as written into the articles of incorporation as of May 1, 1980. (SEC letters to Atty. Edwin Reyes, dtd. April 26, 1982; Mr. Gilbert Rosales, dtd. June 29, 1982; The University Physicians Services, Inc., dtd. July 11, 1983; Torres, Campos, Hernandez & Lim, dtd. September 22, 1983; and others). In reply therefore to your queries, the Commission considers the limitation period of 5 years underlying the founders' shares as written into the articles of incorporation of Petrochemical Products, Inc.,such that the exclusive right to vote and be voted for in the election of directors earlier granted to the owners/holders of founders' shares had expired on April 30, 1985. Henceforth, common shares stand on equal footing with the founders' shares, both of classes of share enjoy equal rights and voting power. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman