Atty. Tomas F. Tuason IV

December 19, 1995 Atty. Tomas F. Tuason IV Philippine Stock Exchange, Inc. Philippine Stock Exchange Centre, Exchange Road Ortigas Center, Pasig, Metro Manila S i r : This refers to your letter dated December 11, 1995 requesting opinion on whether Filinvest Development Corporation can be classified as a " holding company ". As a general rule, the primary purpose of the corporation determines its classification. However, where the corporation actually engages in one of its secondary purpose, it may also be classified in accordance with said secondary purpose. "The purpose of a corporation as set forth in the articles of incorporation are not to be limited by the words of a single clause, but are to be ascertained by the reading of the entire declaration. All the clauses are to be considered together and in association with one another in determining what the corporation may do." (1A Fletcher, sec. 100) A perusal of the articles of incorporation of subject corporation, disclosed that the same provides only for a primary purpose. The presumption therefore is that all business activities stated therein are intended to be carried out in connection with its main business which is real estate development or realty business. The purpose clause of the Articles of Incorporation of subject corporation provides in part: " PRIMARY PURPOSE To engage in the business of an investment and development company, particularly, but not limited to the following: (a) To acquire by purchases or otherwise and to own, use, hold, administer, sell convey, exchange, lease, mortgages, dispose of, work, improve, develop, subdivide, and otherwise deal in real estate or real property of any kind, and any interest or right therein, and to manage, operate, service, equip, furnish, alter and keep in repair buildings or edifices of any kind, whether used for dwelling, commercial or industrial purposes; (Emphasis supplied) xxx xxx xxx (i) To acquire, take over, hold and control all or any party of the business, goodwill, property and other assets, and to assume or undertake the whole or any part of the liabilities and obligations of any person, firm or association or corporation , whether domestic or foreign, and whether a going concern or not, engaging in or previously engaged in a business which the corporation is or may become authorized to carry on or which may be appropriate or suitable for the purposes of the Corporation , and to pay for the same in cash or in stock, bonds or securities of the corporation or otherwise, and to hold, manage, operate, conduct and dispose of, in any manner, the whole or part of any such acquisitions, and to exercise the powers necessary or convenient for the conduct and management thereof : (Emphasis supplied) (j) To organize or cause to be organized under the laws of the Republic of the Philippines or any other state, territory, nation, colony, province or government, a corporation or corporations , associations, firms or entities for the purpose of accomplishing any or all of the objects for which the Corporation is organized and to dissolve, wind up, liquidation, merge, consolidate, combine or amalgamate any such corporation or corporations, associations, firms or entities, or to cause the same to be dissolved, wound up, liquidate, merged, consolidated, combined or amalgamated. (Emphasis supplied) It appears thereof that under paragraphs (i) and (j), subject corporation can hold shares of stock of other corporations engaged in the same line of business of which it is authorized to carry on. Accordingly, it can be a holding company, but only as an incident to its " REAL ESTATE DEVELOPMENT BUSINESS " which is its principal business . By a "holding company" is meant one which controls another as a subsidiary or affiliate by the power to elect its management. In other words, a holding company is a parent company which holds stock in other companies for purposes of control rather than for mere investment. (SEC Opinion dated September 30, 1986 addressed to Director Armando L. Suratos) Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner