V.E. Del Rosario & Associates

October 1, 1985 V.E. Del Rosario & Associates c/o Ms. Daisy G. Zambrano Rosadel Bldg.,1011 Metropolitan Ave. Makati, Metro Manila Gentlemen: This refers to your letter dated July 1, 1985 requesting that Kumho Construction and Engineering, Inc., a corporation organized and existing under the laws of the Republic of South Korea, be required to increase its security deposit under Section 126 of the Corporation Code from P100,000.00 to P2.5M. cdll It appears therein that you have a pending complaint against Kumho Construction & Engineering, Inc. for collection of Attorney's fees and damages amounting to P2.5M before the Regional Trial Court of Makati Branch. You claim that the corporation's existing bond of P100,000.00 will not be adequate to satisfy your claim as well as the claims of other possible creditors. Likewise, you believe that there is a strong possibility that the company will suddenly fold up not only because of the slump in the construction business but also because it will face a full-dress investigation by the Batasang Pambansa on its activities. The pertinent provision of the Corporation Code provides, in part: "SECTION 126. ....Within sixty (60) days after the issuance of the license to transact business in the Philippines, the licensee, ...shall deposit with the Securities and Exchange Commission for the benefit of present and future creditors of the licensee in the Philippines, securities satisfactory to the Securities and Exchange Commission ...in the actual market value of at least one hundred thousand (P100,000.00) Pesos. Provided, however, that within six (6) months after each fiscal year of the licensee, the Securities and Exchange Commission shall require the licensee to deposit additional securities equivalent in actual market value of two (2%) percent of the amount by which the licensee's gross income for that fiscal year exceed five million (P5,000,000.00) Pesos .The Securities and Exchange Commission shall also require deposit of additional securities if the actual market value of the securities on deposit has decreased by at least ten (10%) percent of their actual market value at the time they were deposited." (emphasis supplied) The aforecited provision of law clearly provides for a fixed amount of security deposit required for foreign corporations doing business in the Philippines and cites the instances when the Commission may require the licensee to deposit additional securities. The Commission, therefore, cannot in its discretion go beyond the letters of the law. This Office, however, will direct the corporation to deposit the corresponding amount of securities required of foreign firm under the law which to date cannot be determined yet for failure of the company to submit its financial statements. Further, it is worth mentioning that in addition to the protection granted to creditors of foreign corporations doing business in the Philippines under Section 126 of the Corporation Code, the Commission, does not allow withdrawal of license of foreign corporations unless the conditions imposed under Section 136 of the Code are fully satisfied. The Code partly provides, thus: "SECTION 136. Withdrawal of foreign corporation . ...No certificate of withdrawal shall be issued by the Securities and Exchange Commission unless all the following requirements are met; 1) all claims which have accrued in the Philippines have been paid, compromised or settled." xxx xxx xxx. Please be advised accordingly. LibLex Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner