Mr. Rodolph E. Jularbal

July 10, 1991 Mr. Rodolph E. Jularbal 2nd Floor, FJE Building 105 Esteban Street, Legaspi Village Makati, Metro Manila S i r : This refers to your letter of June 11, 1991 requesting opinion on the queries posed therein. As stated, a corporation whose shares of stocks are registered and listed in the Stock Exchanges wishes to raise capital by opening its unsubscribed shares for subscription at a price higher than par. On the assumption that the conditions of the Listing Agreements with the Exchanges are complied with, you would like to seek opinion on the following queries: 1. Whether SEC approval is required if the shares will be offered at a price higher than par, and if so, what are the requirements? 2. If a third party is willing to finance the company's expansion project through the issuance of 15% of its equity in consideration of the funds, will the vote of 2/3 of the outstanding shares be sufficient to authorize the issuance of the shares at a premium of six (6) times its par value? 3. If a non-stockholder wishes to subscribe to a block of shares at a premium, will a waiver of pre-emptive rights in favor of the non-stockholder by 2/3 of the stockholders bind the remaining 1/3 who do not waive their pre-emptive rights. The Corporation Code provides in part, thus: "SECTION 62. Consideration for stocks. Stocks shall not be issued for a consideration less than the par or issued price thereof, ..." It can be implied from the above provision that a corporation may issue its shares at any price, provided that the price thereof is not less than par. However, considering that the shares of the above-mentioned corporation are registered and listed in the Stock Exchanges, the Commission requires the submission of the following requirements for evaluation before their issuance: 1. Amended/Revised Registration Statement 2. Audited Financial Statements as of December 31, 1990 3. Interim Financial Statement not earlier than March 31, 1991, preferably May 31, 1991 4. Revised Work Program 5. Basis for the price increase Likewise, the Company must secure permit/license prior to the issuance of the shares if the same has not yet been issued the required license. As regard your second query, since the power to issue shares of stock in a corporation is not one of those expressly granted to the stockholders under the Corporation Code, any additional issuance does not need approval by the stockholders. It is only necessary that there be appropriate resolution of the board of directors authorizing the additional issuance of the shares, subject however, to the aforementioned SEC requirements. Anent your third query, 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 subscribe to all issue, 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 or the issuance falls under any of the exceptions above-mentioned, 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. 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. We, therefore, answer your third query in the negative. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman