Mr. C.A. Patiño, Jr.

July 17, 1981 Mr. C.A. Patio, Jr. Manager, Claim, Tax & Insurance Planters Products, Inc. Esteban St.,Legaspi Village Makati Metro Manila Sir : In your letter dated July 3, 1981, you would like to indicate in the PPI's stock certificate for class "A" shares, the following restriction in lieu of the general term expressed in the last sub-paragraph of Article VII of PPI Articles of Incorporation, thus: "No transfer of this stock or interest therein shall be allowed or permitted to be recorded in the proper books of the corporation unless the same is in favor of qualified Filipino farmers end-users." In connection thereto, you want us to rule on the following queries: 1. Whether or not said restriction is proper? May it not constitute an undue restraint of trade? 2. Assuming that the same is proper being in conformity with Section 22(b), R.A. No. 5186 and LOI No. 178, is there a need for us to amend our Articles of Incorporation so as to properly reflect the said restriction? Or in the alternative, can we consider the present provision of the transfer clause, which is expressed in general terms, sufficient authority for us to adopt the said newly worded restriction? Anent the first query, there seems to be no cogent justification to consider said restriction as improper, on the contrary, the same is in accordance with and in compliance with legal fiat. This, being the case, it should and could not be interpreted to constitute a restraint of trade. Besides, any condition which is not contrary to law, morals, public policy, public order or good custom may be stipulated or agreed upon in contracts. Nevertheless, said restriction should be modified in harmony with and in conformity with the statutes above-mentioned in the following words: "No transfer of stock or interest therein which will reduce the ownership of Filipino Citizens of the corporation to less than the required percentage of the capital stock, as may now or hereafter be required by law, and, unless the same is in favor of qualified Filipino farmer end-users shall be allowed or permitted to be recorded in the proper books of the corporation and this restriction shall be indicated in all its stock certificate. Whence, we tried to arrive at a fairly definitive applications of the pertinent laws and of the queries before us. Thus, the first clause from "No transfer of stock" up to "as may hereafter be required by law" is in accordance with Article VII of your charter, and in pursuance of Section 15 of the Corporation Code of the Philippines. The second and last clause from "and unless the name is in favor of Filipino" up to the end of the paragraph of the said transfer clause is in compliance with LOI No. 178, which ordained the ownership dispersal of fertilizers to as many Filipino farmers in the country and to ensure control and holding of such class of shares, it is of the essence of good management to provide for such restriction in order to forestall, if not eliminate causes of indiscriminate transfer of these stock certificates to unqualified farmers. prcd Finally, consistent with the above observations and in answer to your second and last query, you may avail of alternatives. Either, that you amend your Articles of Incorporation to properly reflect the said modified restriction, pursuant to Section 6 of the Corporation Code, or you may consider the present transfer clause sufficient authority for you to adopt the suggested, modified restriction which shall then be printed in the stock certificate, and, indicating at the end of the said clause the following words of reference: "(Pursuant to Art. VII, PPI Articles of Incorporation and LOI No. 178)". LibLex Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department