Mr. Amado J. Lansang, Jr.

March 24, 1982 Mr. Amado J. Lansang, Jr. Hydro-Pipes (Phils.) Inc. 355 Maysan Road Valenzuela, Metro Manila Dear Mr. Lansang: This pertains to your letter-request of February 22. 1982 for opinion/view on whether or not the proposed amendment to the Articles of Incorporation of Hydro-Pipes (Phils.) Inc. is necessary so that said corporation may enter into an isolated transaction of guaranty or surety agreement for the purpose of accommodating a sister corporation, Concept Builders Incorporated. LibLex It appears from your letter that the Philippines Export and Foreign Loan Guarantee Corporation (Philguarantee) approved the application for the guarantee of the Concept Builders, Inc. (a sister corporation) in favor of the Consolidated Bank and Trust Corporation (SolidBank); that among Philguarantee's requirements for implementation are (1) a surety bond equivalent to 30% of the amount subject of the guarantee, (2) a joint and several undertaking by a corporation guaranteeing to Philguarantee such obligation in case of default, and (3) payment of application and guarantee fees; that Hydro-Pipes has already complied with all the requirements and the only problem is requirement No. 2; that Philguarantee required Hydro-Pipes to amend its articles to accommodate a sister corporation (Concept Builders) although it (Hydro-Pipes) does not intend to go into the surety and/or guarantee business. Your query is whether or not the proposed amendment required by Philguarantee is necessary, because you believe that it "is inherent in the power of the Corporation to enter into contract, especially if authorized by the Board and its stockholders at a meeting called for the purpose . . ." Relative thereto, please be informed that nowhere in the aforementioned corporation's articles of incorporation do we find a provision authorizing the same to enter into a contract of guaranty or suretyship with any individual, corporation or entity. It is settled that it is only in the business/es, for which it was lawfully organized and which is stated in the articles of incorporation, that a corporation should engage in. But if the business is necessary for the accomplishment of the purpose of the corporation or incident to it, the corporation may also engage in such business. (2 Oben and Oben, Comments on the Commercial Law of the Philippines, p. 54). As a matter of fact, it is even legal to "stretch" the meaning of the purpose clause to cover new and unexpected situations. cdll 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 sometime be due to poor draftsmanship or lack of foresight in the part of the original incorporators of their legal counsel or, as is oftentimes the case, situations or circumstances may come up which could not have been foreseen at the time of incorporation. Many times the purpose clause can be reasonably 'stretched' as to impliedly cover these new and unexpected situations. But in those cases where it cannot, a proper amendment thereof would be necessary. (Campos and Lopez Campos, Notes and Selected Cases on Corporation Law, p. 247). In the light of the foregoing and the fact that the powers expressly or impliedly conferred upon Hydro-Pipes (Phils.) Inc. cannot be "stretched" to cover the contemplated contract of guaranty or suretyship, the corporation may not enter into such contract without amending the articles of incorporation. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner