Sycip Gorres Velayo & Co.

December 1, 1995 Sycip Gorres Velayo & Co. 6760 Ayala Avenue, Makati M a d a m : This refers to your letter dated August 3, 1995 requesting approval of the transfer of "intangible assets" to Regal Entertainment, Inc. consisting of "Movie Star Contracts","Film Library","Goodwill" and other intangible assets in exchange for the latter's shares. cdlex The Corporation Code provides: "SECTION 62. Consideration for stocks . Stock shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be any or combination of any two or more of the following: xxx xxx xxx. 2. Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a valuation equal to the par or issued value of the stock issued: 3. Labor performed for or services actually rendered to the corporation; xxx xxx xxx. Shares of stock shall not be issued in exchange for promissory notes or future services . ....(Emphasis supplied) While under the aforecited provision, payment in the form of "intangible properties" in exchange for shares of stock, as a general rule, is legally acceptable, the law imposes the conditions that they must be (1) capable of valuation ;(2) necessary or convenient for corporate use and (3) actually received by the corporation . However, in the case of " movie star contracts ",they cannot be accepted as payment for subscription inasmuch as the services of moviestars under such contracts are not yet considered as actually rendered/received as their services would still be performed in the future. Take note that the above-cited provision is explicit that future services cannot be used as payment for issuance of shares .Only such services which have been actually rendered are acceptable as subscription payment. Thus, the Commission in its meeting of November 29, 1995 resolved not to allow " movie star contracts " as payment in exchange for shares of stock. However, the rest of the properties mentioned in your letter may be accepted, provided they actually exist and are capable of being transferred in the name of the corporation and their pecuniary value can be ascertained. As to the mechanics in determining the pecuniary value of said intangible assets, you may seek the advice of our Examiners and Appraisers Department. cdlex (SGD.) FE ELOISA C. GLORIA Associate Commissioner