Refractories Corporation of the Philippines

June 21, 1989 Refractories Corporation of the Philippines C/o 3rd Flr.,Vernida IV Bldg., Alfaro St.,Salcedo Village Makati, Metro Manila Gentlemen: This refers to the amended articles of incorporation of the Refractories Corporation of the Philippines seeking to reclassify all its authorized redeemable preferred shares to common shares. LibLex Records show that subject corporation has an authorized capital stock of P175,000,000.00 consisting of: Common Class A P60,000,000.00 Common Class B 40,000,000.00 Redeemable Class A 45,000,000.00 Redeemable Class B 30,000,000.00 Out of the 75,000,000 redeemable Class A and Class B shares P25,000,000.00 appears to be subscribed and subsequently redeemed . The Corporation now would like to reclassify the retired as well as the remaining unissued preferred shares to common shares by way of amendment of the articles of incorporation. Section III (2) of the SEC Rules Governing Redeemable and Treasury Shares provides in part: "...in the case of redeemable shares reacquired, the same shall be considered retired and no longer issuable, unless otherwise provided in the articles of incorporation ." A verification of the amended articles of incorporation of Refractories Corporation of the Philippines disclosed that the same are silent on the re-issuable nature of its redeemable preferred shares in the event of redemption. Accordingly, the redeemed shares shall be considered retired and no longer issuable. Acquired shares which by their term could not be reissued lost their status as either outstanding or authorized but unissued shares and the number of authorized shares of capital stock of the corporation is reduced accordingly .(Ballantine & Sterling, Sec. 145.02). Thus, the Commission previously ruled that where the reissuance of shares that have been reacquired or redeemed by the corporation is prohibited, the number of the class and series if any, for which the reacquired redeemed shares belonged, is reduced by the number of shares so reacquired or redeemed. Therefore, the corporation's articles of incorporation must be amended to reflect such reduction in the authorized capital stock. ( SEC letter dated December 18, 1985, addressed to LMG Chemicals, Inc. citing Ballantine & Sterling, Supra, Sec. 145. 02 at S-79 to S-80). Thus, applying the aforecited ruling insofar as the retired/redeemed shares are concerned, the same can no longer be reclassified as common shares since upon redemption, they lost their status as part of the outstanding or unissued authorized capital stock .However, insofar as the unissued and redeemed preferred shares the same can still be reclassified by amending the articles of incorporation pursuant to Section 16 of the Corporation Code: "SECTION 16. Amendment of articles of incorporation . Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a "majority" vote of the board of directors of trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code. In view of the foregoing, the corporation is advised to decrease its authorized capital stock to eliminate the redeemed shares in treasury and later to restore its capital via increase of common shares and at the same time reclassify the remaining preferred shares to common. LibLex Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner