Atty. Fernando P. Perito

May 16, 1991 Atty. Fernando P. Perito Fernando P. Perito & Associates Suite 320 Madrigal Building Escolta, Manila S i r : This refers to your letter of May 5, 1991 requesting opinion on the query posed therein. prcd As stated, a resolution was passed by the Board of Directors of the Heart & Lung Diagnostic Clinic, Inc. which sought to limit the number of shares to be held by each of the stockholders of the Corporation to only three hundred (300) shares. The resolution in effect limited or denied the existing stockholders who originally subscribed to 300 shares the right to acquire additional shares, while the rest who originally subscribed to less than 300 are allowed to acquire additional shares until they equal those already holding 300 shares. Your query is, whether said resolution is valid and enforceable. The pertinent provision of the Corporation Code provides: "SECTION 39. Power to deny pre-emptive right. All stockholders of a stock corporation shall enjoy pre-emptive right to subscribed to all issues or disposition of shares of any class, in proportion to their respective stockholdings, 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-thirds (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, unless denied in the articles of incorporation, the existing stockholders of record are entitled to exercise their pre-emptive right to subscribed to all additional issuances of shares of stock of the corporation in proportion to their present stockholdings. The foundation or underlying basis of this right is to maintain the relative and proportionate voting strength and control of existing stockholders, that is, the existing ratio of their interest and voting power in the corporation. A perusal of the articles of incorporation of Heart & Lung Diagnostic Clinic, Inc. disclosed that such right is not limited or denied to the stockholders. Accordingly, the above-mentioned Board Resolution is not enforceable. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman