Del Rosario, Lim De Vera Vigilia & Panganiban

November 28, 1990 Del Rosario, Lim De Vera Vigilia & Panganiban 3rd Floor, China Bank Bldg. Annex Dasmarias St., Manila Gentlemen : This refers to your letter dated October 22, 1990 requesting clarification on our reply to your query of August 31, 1990. It is your understanding from our answer to your second query that your client may legally recognize and honor (1) the subscriptions made by its stockholders who sold their shares after exercising their preemptive rights under the tentative old record date, despite their knowledge that the ex-date of the Bank's offering was not posted as yet in the Exchange, and (2) the subscriptions made by the transferees of said shares under the new and final record date. As stated, your client is apprehensive that with your interpretation, such may open a possible question by the stockholders who did not dispose of their shares, considering that those who sold their shares would get more shares to which they are entitled per offering, i.e., one in their names and another in the names of their transferees. We would like to correct your interpretation of our previous opinion. While it was stated that "when shares of original stock are sold by the holder after the increase of the capital stock has been voted, the purchaser acquires, as an incident to the stock, the same right to a preference in subscribing for or purchasing the new stocks as was possessed by the transferor", said principle does not apply to transfers where the assignors have previously exercised their preemptive rights to subscribe to new issues. The transferee steps into the transferor's right to exercise the preemptive right attached to the original stock only if the latter failed to exercise such right before the transfer was effected. To rule otherwise would allow the preemptive right attached to the original stock to be exercised twice. This would in effect violate the underlying foundation of preemptive right which is the preservation of the stockholders' relative and proportionate voting strength and control in the corporation. Therefore, the transferor and the transferee, under the circumstances mentioned in your previous letter dated August 31, 1990, must be treated as one (1) stockholder for purposes of exercising the preemptive right to subscribe to the proposed increase of capital stock of the Bank. prcd Please be advised accordingly. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner