Composition of Board of Directors of Correa Zenitaka Inc.[SEC Registration No. 123016]

October 23, 2003 SEC OPINION NO. 50-03 Mr. Yasutaka Honda General Manager Correa Zenitaka Inc. 23rd Floor, Tower 2, Enterprise Center 6766 Ayala Avenue Makati City SUBJECT : Composition of Board of Directors of Correa Zenitaka Inc.[SEC Registration No. 123016] S i r : This refers to your letter dated 8 October 2003 regarding the above mentioned subject. As stated in the Articles of Incorporation, your company is engaged in the construction of all types of houses and buildings, site development as well as roads and bridges. Your latest General Information Sheet filed with this Commission on 18 October 2002 shows that of the total 24,750 subscribed shares, 14,850 shares (60%) are held by Filipinos, while 9,900 shares (40%) are held by foreign investors. On the other hand, the total paid-up capital is P1,000,000.00, of which P10,000.00 was paid by Filipino investors and P990,000.00 was paid by foreigners. Section 8 of RA 7042, as amended by RA 8179, or the Foreign Investments Act, provides in part: "Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of Two hundred thousand US dollars (US$200,000.00),are reserved to Philippine nationals: Provided ,That if (1) they involve advanced technology, or (2) they employ at least fifty (50) direct employees, then a minimum paid-in capital of One hundred thousand US dollars (US$100,000.00) shall be allowed to non-Philippine nationals." Moreover, pertinent provisions of Executive Order No. 139 (2002) or the Fifth Regular Foreign Investment Negative List provides: cSIADa List A : Foreign ownership is limited up to 25% foreign equity for entities which participate in the following construction projects: (1) contracts for construction and repair of locally-funded public works except [a] infrastructure or development projects covered by RA 7718; and, [b] projects which are foreign funded or assisted and required to undergo international competitive bidding; and, (2) contracts for construction of defense related structure. List B : Foreign ownership is limited up to 40% foreign equity for protection of small and medium scale enterprises: Domestic market enterprises with paid-in equity capital of less than the equivalent of US$ 200,000.00 ; Domestic market enterprises which involve advanced technology or employ at least 50 direct employees with paid-in equity capital of less than US$100,000.00. Since your company has paid-up capital of only P1,000,000.00 which is roughly equivalent to US$18,182.00, your company will be considered as engaged in an undertaking classified as partially nationalized activity. Section 2-A of the Anti-Dummy Law, reads in part: "The election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities." Now, in determining the representation of alien stockholders in the board of directors of corporations engaged in partially nationalized activities, the basis is the actual share of the alien shareholders. Based on the existing capital structure of your company, the foreign shareholders are entitled to two (2) of the six seats in the board of directors, while the Filipinos are entitled to four (4) seats . We hope we satisfactorily answered your query. cEDaTS Very truly yours, (SGD.) VERNETTE UMALI-PACO General Counsel