The Philippine American Life Insurance Company

February 23, 1988 The Philippine American Life Insurance Company Philamlife Building United Nations Avenue, Manila Attention : Mr . Rodolfo M . dela Rosa Sir : This refers to your letter, dated February 15, 1988, requesting the opinion of this Commission as to whether a financing company may issue preferred stock along with common stock which carries the following features: fixed dividend, cumulative, redeemable, non-voting and participating . prcd Section 6 of the Corporation Code of the Philippines reads as follows: " Classification of shares . The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, that no shares may be deprived of voting rights except those classified and issued as 'preferred' or 'redeemable' shares unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock. Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. . . . Except as otherwise provided by the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. xxx xxx xxx." Preferred shares take a multiplicity of forms. There are preferred shares with preference as to dividends or with preference as to distribution. Preferred shares as to dividends may be cumulative, participating or non-participating. Preferred shares may also be redeemable ,convertible, voting or non-voting .However, as to whether the preferred shares have any or all of the above features is a matter of contract, and the contract is to be found in the articles of incorporation and in the certificate of stock representing the preferred share. (Agbayani, Commercial Laws of the Phil.,Vol. 3, 1984 ed.,p. 95). cdlex We therefore answer your query in the affirmative. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman