Mr. T. J. Sumawang

March 25, 1991 Mr. T. J. Sumawang Suite 3-C, 3rd Flr.,RGM Bldg. No. 3 South (Timog) Avenue Quezon City, Metro Manila S i r : This refers to your letter of March 1, 1991 relative to the proposed transfer of property of Seaside Bible Camp, Inc. to Word of Life Philippines, Inc.. As stated, Seaside Bible Camp, Inc.,a non-stock corporation, is a registered owner of a real estate property on which it has established its camp and facilities to pursue its religious missionary work. Said property is the only property owned by the Corporation. Word of Life Philippines, Inc. also a non-stock corporation similarly engaged in a religious missionary work is being offered by Seaside Bible Camp, Inc. for the complete transfer of ownership of said property and is willing to acquire the same. LexLib Your queries are: 1. Would a simple deed of sale covering subject property be sufficient, or the two non-stock corporations be merged, the Word of Life Philippines, Inc. as the surviving corporation? 2. If a simple deed of sale is allowed by SEC, what are the requirements for approval? 3. If merger is most advisable, what are the requirements for SEC approval? Please be advised that either the procedure for the sale of corporate property laid down under Section 40 of the Corporation Code or merger under Title IX of the same Code may be followed to effect a valid transfer of the above-mentioned property. Section 40 of the Corporation Code reads thus: SECTION 40. Sale or other disposition of assets . Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient, when authorized by the vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly called for the purpose. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid or served personally: Provided, That any dissenting stockholder may exercise his appraisal right under the conditions provided in this Code. A sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of ...continuing the business or accomplishing the purpose for which it was incorporated. After such authorization or approval by the stockholders or members, the board of directors or trustees may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge or other disposition of property and assets, subject to the rights of third parties under any contract relating thereto, without further action or approval by the stockholders or members. Nothing in this section is intended to restrict the power of any corporation, without the authorization by the stockholders or members, to sell, lease, exchange, mortgage, pledge, or otherwise dispose of any of its property and assets if the same is necessary in the usual and regular course of business of said corporation or if the proceeds of the sale or other disposition of such property and assets be appropriated for the conduct of its remaining business. In non-stock corporation, where there are no members with voting rights, the vote of at least a majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction authorized by this section." However, it has to be emphasized that "a transfer of all the property and franchise of a corporation does not necessarily dissolve the corporation or terminate the corporate existence." (6A Fletcher Cyc. Corps.,1968 Rev. Vol.,sec. 2953).If one corporation sells all of its assets to another corporation and there is no intent to combine, the considerations for the sale could be in cash or other property, and the selling corporation may continue in a state of suspended animation." (Campos, Campos, 1981 ed.,p. 959, citing Ballantine on Corps.,666) The corporation, however, may opt to dissolve the corporation by means of amendment of the articles of incorporation shortening the term of its existence. Should the corporations choose to merge, the following requirements have to be complied with: 1. Articles of Merger signed by the President or Vice President and certified under oath by the Secretary or Assistant Secretary of the constituent corporations setting forth the following: a) The plan of merger; b) The number of members; and c) As to each corporation, the number of members voting for and against such plan, respectively. (The approval by majority vote of the board of directors on the constituent corporations and affirmative vote of at least two-thirds of the members of the constituent corporations shall be necessary for the approval of the plan of merger.) 2. Copies of the minutes of the board of directors' meeting and minutes of the members' meeting of the constituent corporations, approving and ratifying the plan of merger, certified under oath by their respective secretaries or assistant secretaries; 3. List of creditors of the absorbed corporation as of the date of approval of the plan of merger with their addresses and the amounts owing to each; 4. Audited financial statements (Balance Sheet and related statement of income and expenses) of the constituent corporations as of a date not earlier than 120 days prior to the date of filing of the application with the Commission. The financial statements shall be accompanied by a long form audit report of a certified public accountant; 5. Amended Articles of Incorporation and By-Laws of the surviving corporation, whenever necessary in accordance with the terms of the plan of merger. Upon compliance with the requirements, the Commission shall issue the necessary certificate of merger at which time the merger shall be effective. The constituent corporations shall become a single corporation which shall be the surviving corporation designated in the plan of merger and the separate existence of the absorbed corporation shall cease without formally dissolving the same. Subject to the condition that the transferee is qualified to acquire land in the Philippines, you may therefore choose any of the foregoing procedures to legally effect the above-mentioned proposed transfer of property. Please be advised accordingly. Very truly yours, (SGD.) ARMANDO Z. GONZALES Associate Commissioner