Atty. Jesus M. Desini, Jr.

February 2, 1996 Atty. Jesus M. Desini, Jr. Unit 1611, Century Citadel Inn Makati, 5007 P. Burgos St., Bel-Air Village Makati City Sir : This refers to your letter dated January 30, 1996 requesting opinion on whether or not, Primetown Property Group, Inc. (PPGI) under its charter can legally invest in a proposed corporation which will engage in the business of providing clinical imaging and diagnostic services. cdll As stated, PPGI is a real estate developer and it plans to undertake a condominium project which will house, among others, a clinical imaging and diagnostic center. The center is an essential ingredients of the concept for the condominium projects. However, it is intended to be operated as a business separate and independent of PPGI and may also operate in areas other than in the said condominium project. It is well settled that a corporation, being a creation of law, can only exercise those powers expressly granted to it by its articles of incorporation the Corporation Code, those incident to its existence, and those reasonably necessary to carry out the purpose for which it was organized. The Articles of Incorporation of the corporation on file with the Commission provides the following as one its secondary purposes : "(3) To invest and deal with the money and properties of the corporation in such manner as may from time to time be considered and expedient for the advancement of its interests and to sell, dispose of the transfer the business, properties and goodwill of the corporation or any part thereof for such consideration and under such term as it shall see fit to accept." (Emphasis supplied) The underlined word in the aforecited purpose clause, make it very encompassing and may cover the above-mentioned proposed corporate investment. Furthermore, Section 42 of the Corporation Code , quoted hereunder, allows corporate investments in another corporation. "SECTION 42. Power to invest corporate funds in another corporation or business or for any other purpose . Subject to the provision of this Code, a private corporation may invest its funds in any other corporation or business or for any purpose other than the primary purpose for which it was organized when approved by the majority of the board of directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-third of the members in the case of the non-stock corporations, at a stockholders' or members' meeting duly called for the purpose. Written notice of the proposed investment and the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown in the books of the corporation and deposited to the addressee in the post office with postage prepaid, or serve personally: Provided, that any dissenting stockholder shall have appraisal right as provided in this Code Provided, however, That where the investment by the corporation is reasonably necessary to accomplish its primary purpose as stated in the articles of incorporation, the approval of the stockholders or members shall not be necessary." (Emphasis supplied) cdlex Accordingly, the corporation may undertake the proposed transaction, subject however to the approval by the Board of Directors and stockholders as required in the above-cited provision of the Corporation Code, and subject further to the " SEC Rules Requiring Statement of Reasons for Change in the Corporate Charter or Cessation of Business, and Filing of Corresponding Resolution Authorizing the Same " dated November 4, 1971, which provides in part: "2. Corporation investing in any other corporation or business or for any purpose other than the main purpose for which the company was organized, pursuant to Section 17 1/2 of the Corporation Law, as amended (now Section 42 of the Corporation Code), shall likewise file with the Commission , in duplicate a copy of the resolution adopted by the affirmative vote of the stockholders holding at least two-third of the voting power authorizing the board of directors to invest in another corporation or business . The copy of the resolution shall be signed and attested by the president and secretary of the corporation, and submitted to the Commission not later than thirty (30) days after the investment is made. "(Emphasis supplied) Please be guided accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner