Atty. Marcial O.T. Balgos

December 6, 1994 Atty. Marcial O.T. Balgos Balgos and Perez Law Offices 5th Flr.,Corinthian Plaza Paseo de Roxas, Makati, Metro Mla. S i r : This refers to your letter of November 21, 1994 requesting opinion on the following queries: 1. Whether it is necessary to call a special stockholders' meeting to determine whether the existing stockholders of a corporation are subscribing to additional issuance of shares? 2. Considering that the issuance of additional shares may dilute existing shareholdings, should they be heard at a special meeting to be called for the purpose? 3. May a majority of the stockholders be sufficient to presume that the waiver had been made? 4. In case the stockholders fail to exercise their pre-emptive rights or deliberately shy away from the issuance, what happens to the shares allocated to them? Regarding the first two queries, there is no specific provision in the Corporation Code or SEC rules and regulations requiring a procedure to be followed in the exercise of stockholders' right to subscribe to additional issuances of shares. Whether there should be a meeting of the stockholders held for the purpose of notifying them of their right is best left to the decision of the Board of Directors, unless there is a specific provision on the matter in the by-laws. Written notice to the stockholders is sufficient, provided they are given a reasonable time to subscribe. For purposes of compliance, any evidence of waiver by the stockholders is acceptable to the SEC. Relative to the third query, under Section 39 of the Corporation Code all stockholders of record shall enjoy a pre-emptive right to subscribe to all issues or disposition of shares in proportion to their respective shareholdings, unless such right is denied in the articles of incorporation or the issuance fall under any of the exceptions enumerated in said Section. Accordingly, waiver of all non-subscribing stockholders is necessary. Being a personal right, such waiver should be given individually by the stockholders concerned or he may authorize somebody to execute the same for and in his behalf by way of a special power of attorney. (SEC Opinion dated October 1, 1981 addressed to Mr. Fernando C. Santico) Anent the fourth query, the Commission had previously ruled that if the shares corresponding to one stockholder are not subscribed or purchased by him, it is not necessary that said shares should again be offered on a pro-rata basis to the stockholders who took advantage of their right of pre-emption. This is because for as long as they exercise their pre-emptive rights, their relative and proportionate voting strength in the corporation will not be affected adversely. Thus, the shares may be offered to non-stockholders of record on a first come first serve basis without violating the pre-emptive rights of the stockholders. However, the Commission considers it a sound corporate practice to offer always the remaining shares to interested stockholders of record whenever practical and feasible before offering them to third parties. ( SEC Opinion dated September 24, 1974 addressed to Atty. Salvador P. De Guzman, Jr. ) LexLib Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner