Radio Philippines Network, Inc

March 10, 2000 Radio Philippines Network, Inc. Broadcast City Complex Quezon City Attention: Mr . Lino A . A . Barte Chairman S i r : This refers to your letter dated February 28, 2000 requesting confirmation that there is no need to secure from existing shareholders of the Radio Philippines Network, Inc. (RPN) waivers of their pre-emptive rights to subscribe to the proposed issuance of additional shares of the unissued portion of the existing authorized capital stock of RPN. To summarize the facts stated in your letter, there is a proposal to issue the remaining unissued shares out of the existing authorized capital stock of RPN. The government of the Philippines is currently exercising rights over shares of stock representing approximately seventy-two percent (72) of the total outstanding capital of RPN. While the Articles of Incorporation of RPN do not contain a provision denying the stockholders of RPN the pre-emptive right to subscribe to future issuances of shares thereof in the case of Benito v. SEC, et al., G.R. No. L-56655, July 25, 1983 which was cited in the case of Dee v. SEC, G.R. No. 60502, July 16, 1991 and also cited in SEC-AC Nos. 392-393, 5/6/93 ,the Supreme Court ruled that stockholders are not entitled to pre-emptive right to additional shares to be issued from existing authorized capital before offering them to third parties. By virtue of said Supreme Court ruling, you are requesting confirmation that pre-emptive rights from the existing stockholders including that of the Philippine government, as a condition for the approval by the SEC of the issuance of the additional shares shall not be required. LexLib Please be advised that the issuance of shares referred to in the above-mentioned Supreme Court ruling occurred under the old Corporation Law (Act No. 1459, as amended) where the pre-emptive right of existing stockholders to subscribe to new issuances is not expressly provided. In the present law, the Corporation Code (BP Blg. 68) the grant of pre-emptive right is made mandatory except in those situations falling under the exceptions enumerated therein. The Corporation Code provides: "SECTION 39. Power to deny pre-emptive right . All stockholders of a stock corporation shall enjoy pre-emptive right to all issues or disposition of shares of any class, in proportion to their respective share holdings, unless such right is denied by the articles of incorporation or an amendment thereto :Provided, That such pre-emptive right shall not extend to shares to be issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or to shares to be issued in good faith with the approval of the stockholders representing two third (2/3) of the outstanding capital stock in exchange for property needed for corporate purposes or in payment of a previously contracted debt ." (Emphasis supplied) Thus, the Commission, in a letter addressed to Industrial Security Consultancy and Management, Inc. dated September 30, 1992, previously opined that unless denied in the articles of incorporation or except in cases where the issuance falls under any of the exceptions enumerated in the above cited provision, all existing stockholders of record are entitled to exercise their pre-emptive right to subscribe to all additional issuances of shares of stock of the corporation in proportion to their present stockholdings. Therefore, we regret to inform you that we cannot confirm your position. All issuances or disposition of shares by a corporation after the effectivity of the Corporation Code shall be subject to section 39 of the Corporation Code. Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Chairman