Mr. Michael B. Tantoco

October 2, 1992 Mr. Michael B. Tantoco Feria, Feria, Lugtu & Lao Law Office FERLAW Building, 366 Cabildo Street Intramuros, Metro Manila S i r : This refers to your letter of September 15, 1992 requesting opinion whether it is possible to offset the unpaid subscription of a stockholder worth P93,750.00 with the debt of a corporation to the same stockholder amounting to P100,000.00, resulting in the full payment of his subscription and the Corporation's debt being reduced to only P6,250.00. The pertinent provision of the Corporation Code provides: "SECTION 62. Consideration for stocks . Stocks shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or more of the following: 4) Previously incurred indebtedness by the corporations ; xxx xxx xxx Where the consideration is other than actual cash ,or consists of intangible property such as patents or copyrights, the valuation thereof shall initially be determined by the incorporators or the board of directors, subject to approval by the Securities and Exchange Commission . ..." (Emphasis supplied) The above provision allows stocks to be issued in consideration of previously incurred indebtedness by the corporation. Hence, your query may be answered in the affirmative, subject, however, to the approval of the Commission. In this connection the following requirements are to be submitted. 1. Detailed schedule of liabilities being offset, showing all debts and credit to such liability account, date, nature of account and amount. 2. Deed of assignment executed by the creditor[s] assigning the amount due to him in payment for the unpaid subscription[s]. 3. Company's book of accounts must be kept up to date and be made available for examination by the Commission to determine that the liabilities represent valid and legitimate claims against the company. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman