Ms. Imelda P. Maiquez

July 19, 1993 Ms. Imelda P. Maiquez Cagayan Electric Power & Light Co., Inc. Eight Flr. Strata 100 Bldg. Emerald Ave. Ortigas Complex, Pasig, Metro Manila M a d a m : This refers to your letter of June 6, 1993 requesting opinion whether a stockholder can lawfully assign to another stockholder her pre-emptive right over a new allotment of shares brought about by the company's increase in capitalization. As stated, the Subscription Agreement which was distributed to all stockholders during the exercise of the pre-emptive rights contained the following provision: ". . . the subscription rights under these Contract are exclusive and non-transferable." The Commission, in a previous ruling, has held that in order to legally effect restrictions on the transfer of shares of stock, such restrictions must be provided for in the articles of incorporation. ( Ltr. to Ozaeta, Gibbs & Ozaeta dtd. October 13, 1964 ) Accordingly, it follows that in order to legally effect any restriction on transfer of shares of stock, including restrictions on the rights attached to it, e . g . transfer of pre-emptive right to subscribe , the same must be provided for in the articles of incorporation. Furthermore, considering that shares of stocks burdened with restrictions on transferability may fall into the hands of innocent purchasers, the Commission as a matter of policy, also requires that the restrictions shall be printed on the stock certificates of the corporation. (Ibid.) Thus, unless the restriction referred to in your letter is reflected in the articles of incorporation and in the certificate of stocks, it cannot be enforced. Please be advised accordingly. cdll Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman