ACD, Inc.

May 11, 2000 ACD, Inc. 9th Floor PDCP Bank Centre Cor. Herrera & Alfaro Sts.,Salcedo Village Makati City Attention : Mr . Rufo B . Baculi Jr . Corporate Secretary Gentlemen: This refers to your letter dated May 2, 2000 requesting reconsideration of the disapproval by the Commission of the amended articles of incorporation of ACD, Inc.,extending its corporate life for having been filed after the expiry date of its original term of existence. prcd It is your contention that the Commission erred in adopting a policy requiring that the amended articles of incorporation of a corporation extending its corporate life should be filed prior to the expiry date of its original term as there is no such requirement under the Corporation Code. You believe that for as long as the requirements for the amendment of the articles of incorporation under Sections 16 and 37 of the Corporation Code are complied with, the Commission has no choice but to approve the application for extension. Hence, your request for consideration. Section 122 of the Corporation Code provides: "SECTION 122. Corporate Liquidation . Every Corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets but not for the purpose of continuing the business for which it was established ..." (Emphasis supplied) It is clear from the above provision that a corporation whose charter had already expired can no longer do corporate acts other than those for the purposes of liquidation. Likewise, the Supreme Court, in the case of Alhambra Cigar & Cigarette Manufacturing Company, Inc. vs. SEC, G.R. No. L-23606, July 29, 1968, ruled: "Since the privilege of extension is purely statutory, all of the statutory conditions precedent must be complied with in order that the extension may be effectuated. And, generally these conditions must be complied with ,and the steps necessary to effect the extension must be taken during the life of the corporation, and before the expiration of the term of existence as originally fixed by its charter or the general law, since as a rule, the corporation is ipso facto dissolved as soon as that time expires. So where the extension is by amendment of the articles of incorporation the amendment must be adopted before that time. And similarly, t he filing and recording of a certificate of extension after that time cannot relate back to the date of the passage of a resolution by the stockholders in favor of the extension so as to save the life of the corporation." (Emphasis supplied) It is also clear in the above-cited ruling that in extending corporate life, all necessary steps to effect the extension must be taken during the life of the corporation, and these steps necessarily include the filing of the amended articles of incorporation. After the expiration of its term of existence, a corporation can no longer file an application to extend its life because by the time the corporation has already been dissolved and consequently the attempt to revive the corporation would constitute an act which, under the law, is beyond the corporation's power. The above-cited provision of the Corporation Code and Supreme Court ruling serve as the basis of the Commission in adopting the policy of rejecting applications filed after the expiry date of the corporate term of existence. This long standing policy was again confirmed by the Commission En Banc in its meeting of May 4, 2000. However, the Commission may allow exceptions ,provided that the following two (2) conditions are met: 1. There is a clear and strong indication that steps have been taken to extend the term of existence prior to the expiry date when it still had the power to extend its life and during its original term when it could legally and lawfully amend the same re: approval by the stockholders and board of directors prior to the expiry date, and to establish this fact, the amended articles of incorporation should be accompanied by minutes of the meetings of the stock holders and board of directors duly notarized before a notary public, and 2. The delay in the submission of the amended articles of incorporation is caused by the existence of an insuperable interference which is tantamount to a force majeure or fortuitous event which restricted the corporation from filling the documents before the expiry date and this fact should be supported by an affidavit executed by the President and Corporate Secretary. cdll Thus, unless the foregoing conditions are complied with, your request for reconsideration cannot be granted. The corporation, however, is allowed to re-incorporate by filing new articles of incorporation. Very truly yours, (SGD.) SONIA M. BALLO Director Corporate and Legal Department