Ms. Melissa R. Leung

June 22, 1995 Ms. Melissa R. Leung Philippine Petrochemical Products, Inc. 8th Flr.,Vernida IV Cond.,Alfaro St., Salcedo Village, Makati, Metro Manila M a d a m : This refers to your letter dated March 2, 1995 asking the following queries: 1. Can the corporation pay the stockholders in cash for any fractional shares owned by them at book value? 2. After the purchase by the corporation of said fractional shares what will become of them? The Corporation Code provides: "SECTION 41. Power to acquire own shares . A stock corporation shall have the power to purchase or acquire its own shares for a legitimate corporate purpose or purposes, including but not limited to the following cases: Provided, That the corporation has unrestricted retained earnings in its books to cover the shares to be purchased or acquired: 1. To eliminate fractional shares arising out of stock dividends; 2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale; and 3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the provisions of this Code." (Emphasis supplied) Thus, the corporation pursuant to the above provision, may acquire fractional shares and pay the same in cash at book value, provided it has the necessary unrestricted retained earnings in its books to cover the shares to be purchased. Shares re-acquired shall be treated as treasury shares and may be re-issued pursuant to the following provision of the Corporation Code: "SECTION 9. Treasury shares . Treasury shares are shares of stock which have been issued and fully paid for but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board of directors." (Emphasis supplied) cdlex Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner