Industrial Security Consultancy And Management, Inc.

September 30, 1992 Industrial Security Consultancy And Management, Inc. M/F Pamilihan ng Tejeros Pasong Tirad, Makati, Metro Manila M.C.P.O. P.O. Box 2242 Attention : Benito M . Pajima, Jr . President Gentlemen: This refers to your pending request for exemption from registration requirements under the Revised Securities Act for the issuance of Thirty-Five Thousand Pesos (P35,000.00) worth of shares out of the unsubscribed portion of the authorized capital stock of the Corporation to non-stockholders of record. You claim that the exercise by the original stockholders of their pre-emptive rights is not applicable in the present case by virtue of the Supreme Court ruling Re: Benito vs. SEC, G.R. No. L-56655, July 25, 1983, which states that a stockholder enjoys no pre-emptive right to buy unissued shares of originally authorized capital stock. Hence, you believe that written waiver of the existing stockholders need not be submitted. It has to be emphasized that the issuance of shares referred to in the abovementioned Case occurred under the old Corporation Law (Act No. 1459, as amended), wherein the pre-emptive right of existing stockholders to subscribe to new issuances is not expressly provided. Under the present law the Corporation Code (BP Blg. 68), the grant of pre-emptive right to existing stockholders is made mandatory, unless, the issuance falls under any of the exceptions enumerated therein. The Code provides: "SECTION 39. Power to deny pre-emptive right . All stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues 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 laws 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) Thus, unless denied in the articles of incorporation or the issuance falls under any of the exceptions, all existing stockholders of record are entitled to exercise their pre-emptive right to subscribe to all additional issuances of shares of stock of the corporation in proportion to their present stockholdings. The foundation or underlying basis of this right is to maintain the proportionate voting strength and control of existing stockholders that is the existing ratio of their interest and voting power in the corporation. In view thereof, you are hereby advised to submit the necessary consent/waiver of the non-subscribing stockholders. Pending compliance with said requirement, action on your request for exemption will be held in abeyance. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman