Wire Rope Corporation of the Philippines

September 24, 1982 Wire Rope Corporation of the Philippines AG & P House, 345 Buendia Ave.,Ext. Makati, Metro Manila Attention : Atty . Salvador C . Cequera Sir : This has reference to your letter dated December 1, 1981, wherein you have posed the following queries to wit: 1. Is it necessary for that corporation to amend its Articles of Incorporation to enable it to undertake a goat-raising project? 2. Will engaging in goat-raising amount to deviation from the primary purpose of the Company? 3. What formalities are required so that the corporation can make the necessary disbursement for the project? 4. How will the proceeds from the sale be treated in the corporate books? Anent your first query, please be informed that the Commission had an occasion to render the following opinion: "There will always be instances when doubts may arise as to whether an act may be reasonably implied from the purposes of the corporation. These doubts will sometimes be due to poor draftsmanship or lack of foresight in the part of the original incorporators or their legal counsel or as in oftentimes the cause, situations or circumstances may come up which could not have been foreseen at the time of incorporation. Many times the purpose clause can be "stretched" as to impliedly cover these new and unexpected situations. But in those cases where it cannot, a proper amendment thereof would be necessary ." ( Letter to Mr. Amado J. Lansang, dated March 24, 1982 Citing Campos on Lopez-Campos, Notes and selected case on Corporate Law, p. 247. Emphasis supplied) Accordingly, your first query is hereby answered in the affirmative for nowhere in the purpose clause of subject corporation, both primary and secondary, do we find any provision authorizing the subject corporation to engage in livestock venture. Thus, the only remedy that may be resorted to by the corporation is to amend Article II of the amended articles of incorporation to include said purpose. As regards your second query, the same is likewise answered in the affirmative, goat-raising being a great departure from the primary purpose of that corporation. In connection with your third query, firstly, you have to amend Article II of the amended articles of incorporation of that corporation, incorporating said livestock venture, conformably with the formalities laid down in Section 16 of the Corporation Code of the Philippines. In the disposition or investment of corporate funds for any purpose other than the primary purpose for which the corporation was organized, it is essential that the same be approved by a majority of Board of Directors and ratified by stockholders representing at least two-thirds (2/3) of the outstanding capital stock in pursuance of the provision of Section 42 of the Corporation Code. Relative to your fourth query, proceeds from the sales of livestock should be treated as "Sales" in the corporate books of accounts. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner