Dr. Raul D. Jara, M.D.

December 4, 1990 Dr. Raul D. Jara, M.D. Suite 223, Medical Center Manila United Nations Avenue M a n i l a S i r : This refers to your letter dated November 11, 1990 inquiring on the requirements governing the sale of a property of a corporation. The statutory authority for sale of corporate assets is found in Section 40 of the Corporation Code. Said section provides that: "...a corporation may, by a majority of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets ,including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient, when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in the case of non-stock corporation, by the vote of at least two-thirds of the members, in a stockholders' or members' meeting duly called for the purpose ...." (Emphasis supplied) Said provision further requires that: ".... Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown in the books of the corporation. ...." (Emphasis supplied) Paragraph 2 of the same section defines the term "sale or disposition of all or substantially all the assets" as one which will render the corporation incapable of continuing the business or accomplishing the purpose for which it was incorporated . "Any disposition short of this will not need stockholders action." (Campos, Campos Corporation Code, "Comments, Notes and Selected Cases, 1981 ed., p. 960). In other words, if after the disposition of corporate assets, the disposing corporation can still continue the business for which it was organized, the disposition can be made without complying with the requirements set forth in Section 40 as it is not covered by said section. (Agbayani, Commercial Laws of the Philippines, Vol. 3, p. 355). The fourth paragraph of said Section provides thus: "Nothing in this section is intended to restrict the power of any corporation, without the authorization by the stockholders or members ,to sell, lease, exchange, mortgage, pledge or otherwise dispose of any of its property and assets if the same is necessary in the usual and regular course of business of said corporation or if the proceeds of the sale or other disposition of such property and assets be appropriated for the conduct of its remaining business ." (Emphasis supplied) Accordingly, if the property to be sold constitutes merely a part of the assets of the corporation and the sale thereof will not render the corporation incapable of continuing its business, the Board of Directors, as it may deem expedient, may dispose the same without the corresponding approval of the stockholders or members of the corporation. Please be advised accordingly. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner