University of the East

April 18, 1983 University of the East Manila Gentlemen: Returned to you herewith is the amended articles of incorporation of that corporation with the advice that the proposed amendment of Article VII thereof, giving the founders' shares therein some convertible features, is premature, considering that the retain earnings of the corporation, as of March 31, 1982, amounted to only P1,069,034.00. For the Commission to rule otherwise would result to the watering of the common shares. Anent your other alternative of retiring the founders' shares thru corporate purchase, pertinent thereto is the following provisions of the Corporation Code, which provides thus: "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, . . . . . . Provided, that the corporation has unrestricted retained earnings in its books to cover the shares to be purchased or acquired." Should the corporate purchase of the founders' shares simply mean a retirement thereof by way of decreasing the number of outstanding and issued shares, we believe that the matter is an internal affair of the corporation. However, should the retirement of founders' shares mean a cancellation thereof, a decrease in the outstanding and issued shares, accompanied by a decrease in the number of authorized shares which may be issued, the provisions of Section 38 of the Corporation Code of the Philippines have to strictly be observed and complied with. Please be advised accordingly. Very truly yours, (SGD.) JESUS J. VALDES Associate Commissioner