Mr. Alexander S. Lim

August 30, 2001 SEC OPINION Mr. Alexander S. Lim President Morning Star Milling Corporation Penthouse, Morning Star Center, 347 Sen. Gil Puyat Ave., Makati City Dear Mr. Lim, This refers to your letter dated 09 July 2001 inquiring whether your corporation will be allowed to retain the land holdings it had earlier acquired should it increase its foreign equity to more than 40% by way of admission of additional foreign equity in its capital structure. Further, you stated that your corporation does not intend to acquire any additional land in the future. Pertinent to the question is Section 36 (7) of the Corporation Code, to wit: To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably or necessarily require, subject to the limitations prescribed by law and the Constitution; . . . Thus, corporations are allowed to acquire and convey properties, real or personal, as an incident to its existence. Whether or not such power is included in what the corporation could do and perform under its articles of incorporation, it is nevertheless deemed to be within the scope of its corporate powers by express declaration of Section 36 of the Code. (SEC opinions dtd September 6, 1982, Marble Corporation of the Philippines and January 24, 1991, Philippine Library Materials Project Foundation, Inc.) However, as stated in the above-captioned provision of law, there are limitations to the exercise of such power. Under the 4th Regular Foreign Investment Negative list, in relation to Art. XII, Section 7 of the Constitution and Ch. 5, Sec. 22 of CA 141, a corporation with a foreign equity of forty percent (40%) or less is allowed to own private lands. Conversely, if the foreign equity is more than forty percent (40%), it cannot own land. In view of the foregoing, we answer your question in the negative. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner