Mr. Felipe L. Gozon

April 19, 1994 Mr. Felipe L. Gozon Belo Gozon and Elma 15th Flr., Sagittarius Condominiums H.V. dela Costa St., Salcedo Village Makati, Metro Manila S i r : This refers to your letter of December 28, 1993 requesting opinion on: a) whether "pre-emptive rights" are included in the definition of "securities" under the Revised Securities Act, b) whether the sale of pre-emptive right over the counter or through stockbrokers qualify under Section 6(a) (3) of the same Act and therefore, exempt from registration requirements; and c) whether there is a prohibition against the transfer of pre-emptive rights by way of Deed of Assignment and is a corporation bound to honor such assignment. Section 2 of the Revised Securities Act defines "securities" as follows: (a) "Securities" shall include bonds, debentures, notes, evidences of indebtedness, shares in a company, pre-organization certificates or subscriptions, investment contracts, certificates of interest or participation in a profit sharing agreement, collateral thrust certificates, equipment trust certificates (including conditional sale contracts or similar interests or instruments serving the same purpose), voting trust certificates, certificates of deposit for a security, or fractional undivided interest in oil, gas, or other mineral rights, or, in general, interests or instruments commonly considered to be "securities", or certificates of interests or participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants or rights to subscribe to or buy or sell any of the foregoing ; . . . " (Emphasis supplied) It is clear from the above-provision that "pre-emptive rights" to subscribe to shares are considered "securities" within the contemplation of the Revised Securities Act. llcd Regarding your second query, once the shares originally issued are registered under the Revised Securities Act, all shares covered by subsequent increases of authorized capital stock are required to be registered to place them in equal footing with the original shares already registered. Section 1 of the Amended Rules Governing Pre-emptive and other Subscription Rights and Declaration of Stock or Cash Dividends of Corporations Whose Securities are Registered Under the Revised Securities Act or Listed in the Stock Exchange provides: "SECTION 1. All corporations whose securities are registered under the Revised Securities Act and listed in the Stock Exchanges are required to first register with the Commission any or all offers to subscribe to shares from increases in the authorized capital stock". (Emphasis supplied) Thus, a corporation whose shares are registered under the Revised Securities Act cannot later on subject its subsequent issuances of shares to exemption from registration requirements. Anent your third query, it is well-settled that shares of stock are personal property, and as in the case of other personal property, the owner has an inherent right, as incident of his ownership, to sell and transfer the same will, and this right includes the right to transfer all the rights attached to it, such as pre-emptive right to subscribe to subsequent issuances of shares, except insofar as the right may be restricted by the charter of the corporation or law. Thus, "if the shareholder is not so situated as to be able to take and pay for his proportionate share of the new stock, he is entitled to sell his rights to others and such rights are often extensively traded in". (Ballantine on Corporations, p. 492 citing Dodd and Baker, Cases on Business Associations, 1217, 1273.) Accordingly, your third query is answered in the affirmative. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman