Atty. Monchito Rosales

February 22, 1991 Atty. Monchito Rosales Granja Site, Lipa City S i r : This refers to your letter of February 8, 1991 requesting opinion on the following queries. 1. Can a Corporation invest in another corporation engaged in the same purpose for which the former was organized if in the judgment of the Board of Directors the interest of the Corporation would thereby be promoted? cdlex If not, will the approval of such investment in another Corporation organized for the same purpose by the stockholders have curative effect or validate said investment? 2. May an individual be elected to the position of President/General Manager of two corporations organized for the same purpose and hold said positions at the same time? Anent your first query, the authority of corporations to purchase or subscribe shares of stock in another Corporation where the acquisition is reasonably necessary for the transaction of its lawful business is expressly granted under Section 36 of the Corporation Code, quoted hereunder: "7. 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 and necessarily require subject to the limitations prescribed by law and the Constitution." (Emphasis supplied) However, where the corporation acquiring another corporation's stock does so for the purpose of investment and not to accomplish the purpose for which it was organized, the following provision of the Corporation Code should be complied with: "SECTION 42. Power to invest corporate funds in another corporation or business or for any other purpose . Subject to the provisions of this Code, a private corporation may invest its funds in any other corporation or business or for any purpose other than the primary purpose for which it was organized when approved by a majority of the board of directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members in the case of non-stock corporations , at a stockholders' or members' meeting duly called for the purpose. Written notice of the proposed investment and the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or serve personally: Provided, That any dissenting stockholder shall have appraisal right as provided in this Code: Provided, however, That where the investment by the corporation is reasonably necessary to accomplish its primary purpose as stated in the articles of incorporation, the approval of the stockholders or members shall not be necessary ." (Emphasis supplied) Relative to your second query, it is not unusual to find a corporate officer occupying the same position in another corporation not only because one has big investments therein but also because his services may have proven to be valuable and efficient. The Corporation Code does not prohibit such a situation. However, there are special laws which forbid it. The Investment Houses Law prohibits a director or officer of an investment house to be concurrently a director or officer of a bank, except as otherwise authorized by the Monetary Board. Similarly, the Insurance Code does not allow a person to be a director and/or officer of an insurance company and adjustment company. Thus, unless otherwise expressly prohibited by special law, charter or by-laws, your query is answered in the affirmative. prcd Please be advised accordingly. Very truly yours, (SGD.) ARMANDO Z. GONZALES Associate Commissioner