Rizal Memorial Hospital, Inc.

September 22, 1987 Rizal Memorial Hospital, Inc. Km. 16, South Super Highway Bo. Bagumbayan, Taguig, Rizal Attention : Mr . Juan F . Lim President Gentlemen : This refers to your letter, dated September 18, 1987, requesting the opinion of this Commission on the query posed therein. It appears therein that Rizal Memorial Hospital, Inc. has ceased operations in 1975. The incumbent officers and directors of the hospital resolved to sell the hospital building as well as the land it now occupies, and eventually search for another location for its hospital. Considering that the sale of said hospital building and land would be tantamount to a disposition of all or substantially all of its property and assets, your queries are: Is such sale possible? What are the requirements of such sale under the law? Your queries are directly answered by Section 40 of the Corporation Code which reads thus: SECTION 40. Sale or other disposition of assets . Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote 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 case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly called for the purpose. 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 on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting stockholder may exercise his appraisal right under the conditions provided in this Code. A sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated. After such authorization or approval by the stockholders or members, the board of directors or trustees may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge or other disposition of property and assets, subject to the rights of third parties under any contract relating thereto, without further action or approval by the stockholders or members. 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. In non-stock corporations, where there are no members with voting rights, the vote of at least a majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction authorized by this section. Likewise, the said sale is subject to the Bulk Sales Law, which provides: "SECTION 2. Any sale, transfer, mortgage or assignment of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor or assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of this Act: Provided, however, That if such vendor, mortgagor, transferor, or assignor, produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements, then and in that case the provisions of this Section shall not apply". Please be guided accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Commissioner