Mr. Pedro M. Alaras

January 25, 1990 Mr. Pedro M. Alaras Batangas Sugar Central, Inc. Balayan, Batangas S i r : This refers to your letter dated November 29, 1989, requesting opinion on the following queries relative to the proposed increase of authorized capital stock of Batangas Sugar Central, Inc. from P10 M. to P50 M. LibLex 1. Who has the right to subscribe to the additional P40 M. authorized capital stock? 2. Can the original stockholders waive their right to subscribe to the additional P40 M. in favor of the present stockholders? 3. As to what extent may the present stockholders subscribe to the additional P40 M. authorized capital stock? The pertinent provision of the Corporation Code provides: "SECTION 39. Power to deny pre-emptive right . All stockholders, of a stock corporation shall enjoy pre-emptive right to subscription to all issued or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation or an amendment thereto: Provided, That such pre-emptive right shall not extend to shares to be issued in compliance with the law requiring stock offerings or minimum stock ownership by the public; or to shares to be issued in good faith with the approval of the stockholders representing two-thirds (2/3) of the outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a previously contracted debt." (emphasis supplied) The aforecited provision expressly recognizes the pre-emptive right of stockholders to subscribe to all issues and disposition of shares of any class, in proportion to their respective shareholdings. Thus, unless specifically denied in the articles of incorporation or the issuance falls under the exceptions, when a corporation increases its authorized capital stock, all existing stockholders at the time of the increase have the right, in preference to any other person, and as between themselves, to subscribe to the new stocks in proportion to the number of shares held by them. However, a stockholder who neither desires nor intends to buy any of the stocks may waive such right, in which event, the shares may be offered to any interested persons acceptable to the corporation. Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner