Mr. Manny L. Custodio

November 6, 1989 Mr. Manny L. Custodio 93 Gomez Street, San Francisco del Monte Quezon City Sir : In connection with your letter dated October 3, 1989, requesting comments on the validity of the provisions of the articles of incorporation and by-laws of the proposed "Super Pinoy Corporation", we are returning the same with the advise that the following corrections/revisions be reflected in the by-laws: 1. Article I Sec. 1 (Place of Meeting) The provision should be revised to conform with the following provision of the Corporation Code: "SECTION 51. Place and time of meetings of stockholders or members . Stockholders' or members' meeting whether regular or special, shall be held in the city or municipality where the principal office of the corporation is located , and if practicable in the principal office of the corporation: Provided, that Metro Manila shall, for the purposes of this section, be considered a city or municipality." (emphasis supplied). 2. Article I Sec. 4. (Quorum) Section 52 of the Corporation Code provides that "Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock. . . .". cdll The provision in the by-laws relative to quorum, however , will not hold true in those instances where the Corporation Code or applicable special law explicitly prescribes the proportion of stockholders or members necessary to resolve or carry out a particular corporate proposal. In such cases therefore, the quorum shall consist of such ratio of stockholders or members as may be declared by statutory provisions. 3. Article I Section 6 (Proxy Voting) Proxy voting cannot be denied in case of stock corporations. Section 58 of the Corporation Code expressly allows presence and voting of stockholders either in person or by authorized representative. The law provides thus: "SECTION 58. Proxies . Stockholders and members may vote in person or by proxy in all meetings of stockholders . . . .". (emphasis supplied). Proxy voting may be denied only in case of non-stock corporations. (Section 89, Corporation Code). 4. Article IV Sec. 4. (Compulsory Exchange of Certificates) The last sentence should be deleted. One may own shares of corporate stock and be entitled to all rights of a stockholder without possessing a certificate thereof which after all is but evidence of ownership of stock. The best evidence of stock ownership is the stock and transfer book which is kept at the principal office of the corporation. 5. Article IV Sec. 6 (Increase of Authorized Capital Stock) Increase in the authorized capital stock also requires the approval of two-thirds (2/3) of the outstanding capital stock. (Section 38 of the Corporation Code). 6. Sec. 5 Sec. 1 (Declaration of Stock Dividends) Stock dividends cannot be declared by board action alone. The Corporation Code requires the participation of the stockholders. To be valid, a declaration of stock dividend must be approved by the stockholders representing not less than 2/3 of the outstanding capital stock. (Section 43, Corporation Code). 7. Article V Sec. 2. (Stock dividend declaration) Stock dividends cannot be issued to a person who is not a stockholder. Under Section 43 of the Corporation Code, the board of directors of a corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis of outstanding stock held by them . 8. Article VIII Sec. 1. (Amendments of the By-laws). The provision should be revised to conform with Section 48 of the Corporation Code quoted hereunder: "SECTION 48. Amendments to by-laws . The board of directors or trustees, by a majority vote thereof, and the owners of at least a majority of the outstanding capital stock , . . ., at a regular or special meeting duly called for the purpose, may amend or repeal any by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the outstanding capital stock . . ., may delegate to the board of directors or trustees the power to amend or repeal any by-laws or adopt new by-laws: Provided, That any power delegated to the board of directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be considered as revoked whenever stockholders owning or representing a majority of the outstanding capital stock . . ., shall so vote at a regular or special meeting." . . . (emphasis supplied). Likewise, considering that the corporation shall offer for subscription its shares to the public, the shares should be registered in accordance with the Revised Securities Act. Please be guided accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman