Purchase of firm’s own shares of stock

Title

Language

English

Source

Business Day XIV (99) July 15, 1980

Year

1980

Subject

Corporation law -- Philippines

Stocks -- Law and legislation -- Philippines

Rights

In Copyright - Educational Use Permitted

Fulltext

Page 8 Business Day Tuesday, July 15, 198C RP among possible beneficiaries Outflow of workers in critical OPEC to hike aid fund for LDCs industries restricted by gov’t The Organization of Petroleum Exporting Countries (OPEC) is increasing from $4 billion to $20 billion its aid fund for projects undertaken by less developed countries to meet their develop ment and energy needs, it was disclosed yesterday by Dr. Mana Saeed Al-Otaiba, oil minister of the United Arab Emirates and OPEC president last year, during a luncheon meeting with President Marcos. OPEC aims to further increase this development fund in the coming years to $100 billion, Otaiba added. This proposal will be taken up during the OPEC summit meeting to be held in November in Baghdad, Iraq. After the meeting with Otaiba and his delegation, President Mar cos told newsmen that the visit is a result of efforts of the Philip pines to establish contact with various sources of crude oil. He also said he has sent out several buying missions to the Middle East and South American countries to augment present oil supplies. The President said that during his meeting with Otaiba, he urged the OPEC to “work out solutions for the problems of countries that belong to the Third World, especially on the impact of OPEC policies on pricing.” Otaiba said OPEC, as an organ ization, is ready to “devote more contributions towards the Philip pines’ economic development.” He also demanded that indus trialized nations give a counter part contribution to the develop ment fund. OPEC FUND. The OPEC develop ment fund provides long-term dev elopment financing for develop ment projects of less developed nations on concessional terms. In some instances, it gives interestfree loans. The Philippines has availed of the OPEC development fund. Re cords show that as of June 30 this year, the Philippines had bor rowed $16.25 million from the fund for an irrigation project in Bukidnon ($3.5 million), the Cotabato-General Santos road ($8.25 million) and for fishpen development in Laguna Bay ($4.5 million). The Philippines also expects to get another $15 million from the OPEC fund which is administered by the Asian Development Bank (ADB). Half of this (or $7.5 mil lion) will be used to finance part of the construction of the Na tional Power Corporation’s trans mission and power transformer facilities in Mindanao and Negros island. The balance would be spent on infrastructure develop ment. IFC-PASAR talks still going on (Continued from page 1) firms, namely, Atlas Consolidated Mining and Development Corp., Philex Mining Corp., Marinduque Mining and Industrial Corp., Le panto Consolidated Mining Co., CDCP Mining Corp., Black Moun tain, Western Minolco, Marcopper Mining Corp, and Sabena Mining Corp. However, the smaller mining firms have indicated that they will be unable to come up with their required equity contribution. As this developed, the foreign investors had expressed their will ingness to put up part of the balanTo fill in the gap, PAS AR in vited IFC to invest in the project. Ventura emphasized that IFC’s participation is purely an invest ment undertaking. “There are no strings attached,” he said, debunk ing rumors that PASAR intends to acquire a loan from World Bank. THE1980 AIM-BMP PRESENTS Managerial Process & Practice This new development is of a progressive design and represents a material improvement in the Basic Management Programme. Its purpose is to develop and enhance those skills necessary for sound management, regardless of functional specialization. The Managerial Process & Practice course is a full-time programme of 22 days. It offers managerial development conscious companies an unparalleled opportunity to equip their employees with a comprehensive set of management skills, through one intensive, action-oriented programme. Specific subjects include control concepts, objective setting, organizational change, and financial analysis. ADMISSION REQUIREMENTS * The Programme is reserved for currently employed first-line to middle-level managers, functional specialists, staff officers, entrepreneurs and family firm executives. However, lesser positioned applicants will be admitted, provided their sponsoring companies make specific commitment to their advancement to these ranks upon completion of the programme. * Company sponsorship * Release of the Participant by the sponsoring company for the programme’s duration. * Proficiency in English N.B. Participants will be admitted on a first-come, first-served basis Board and lodging can be arranged by AIM. PROGRAMME CALENDAR The programme schedule for 1980 and 1981 is as follows: 21st BMP:MPP — August 25 — September 19 22nd BMP:MPP — November 17 — December 12 23rd BMP:MPP — February 16 — March 13 24th BMP:MPP — June 1 — June 26 DEADLINE FOR 21st BMP:MPP APPLICATIONS & RESERVATION FEE - July 28, 1980 ASIAN INSTITUTE OF MANAGEMENT Paseo de Roxas, Makati, Metro Manila - 3117 Philippines MCC P.O. Box 898 TEL. 87-40-11 TELEX: 63778 AIM PN *03616: AIMANILA (Continued from page 1) “If this trend con tinues, we may soon suffer a lack of suffi ciently trained personnel to run our mills, and may eventually affect domes tic flour production,” Maramba said. “We are not against our technical men wanting to improve their own selves econo mically. . . but govern ment should adopt pre ventive measures so that the flour milling industry will not be unduly hamp ered.” A ffected local flour millers were General Mill ing, Republic Flour Mills, Pacific Flour Mills, Universal Robina Corp., Wellington Flour, Pills bury Flour and Liberty Flour. Most employes who left these firms, Maramba said, had been actively connected with these companies for about 10-15 years. CE RTIFICATION. Under the MOLE system, the OEDB and the BES will require prospective overseas workers to secure a “certification of no objection” from their -present employers. This requirement will give em ployers time to look for replacements in jobs vacated by workers who resign and leave for abroad. Observers expressed apprehensions that the ministry’s policy violates the constitutional right of Filipinos to seek their own means of livelihood. Sought for comment, OEDB executive director Salvador P. Bigay said that the MOLE policy is premised on a “national need,” and the principle that the present man power export program should not be adverse to local industries. Although manpower ex portation is a major con tributor to the country’s total foreign exchange earnings, the overseas labor program must not negatively affect viability of local industries, he said. OTHER INDUSTRIES. Bigay said the MOLE policy will apply only to the identified critical in dustries, where replace ments for lost skills are relatively difficult and costly to acquire. He said, however, that the list of critical industries may be expanded by the labor ministry if other non-listed industries file complaints on the “brain and brawn drain. ” Bigay said the present brain and brawn drain problem has become “in evitable” inasmuch as the country has limited re sources and capabilities, compared to Middle East and other western coun tries. Apparently, he noted, Filipino industries could hardly meet the wage scales and other employment benefits offered by foreign em ployers, as evidenced by the increasing outflow of skilled labor. Among the other sectors affected by the loss of skilled workers are the transport and construction industries. Recently, the Bus Operators Association of the Philippines said that bus companies have been bugged by the problem that drivers and mecha nics have left the country for better work opportu nities. Also, a construction firm belonging to the Philippine Contractors Association has reported that it has been losing 50 to 100 workers a year, pirated by foreign com panies. As a result, the PCA said that Filipino contractors who bid in international construct ion contracts often end up competing against for eign companies employ ing skilled Filipino workPurchase of firm’s own shares of stock By MAT DEFENSOR A corporation, under Sec tion 16 of the Corporation Law, is allowed to issue shares of stocks in exchange for cash or property. When a corporation purchases its own shares by paying cash or pro perty, the corporation na turally reduces its financial capability. Situations being avoided when a corporation reacquires its own shares through cash purchase are the impairment of the rights, of creditors and the undue advan tage accruing to some stockholders at the ex pense of the remainder. Such situationscan hap pen when a corporation under financial trouble purchases the shares of stocks of favored stock holders to save their investments, leaving little or nothing to the creditors and remaining stock holders. Under the pre* ■■■■■■■■■ilMHMMB sent law, the power of a corporation to Rncinace reacquire stocks is DU3lllv33 expressly granted « .1 I—... to the corporation Ct 1116 IdW only when the appraisal right is given to dissenting stockholders (under sections 17-1/2, 18 and 28-1/2) and- in delinquency sales when there is no bidder for stocks for sale (Section 44). Minus those instances, a corporation’s right to purchase its own shares, though not prohibited, is not expressly authorized. Hence, in the case of Steenbert v. Velasco (10 Phil. 953), the Sup reme Court, knowing that the corporation is insolvent and about to be dissolved, denied the corporation’s right to purchase its own shares by invoking the doctrine that the directors of a corporation must act in good faith in preserving the assets of the corporation. However, the Securities and Exchange Com mission in a letter-opinion dated April 5, 1965, and again in a letter-opinion dated Feb. 1, 1979 addressed to Philippine National Bank reiterated the general rule that in the absence of prohibi tion, corporations have the implied power to pur chase their own shares of stock subject to the conditions that: 1. capital is not impaired; 2. a legitimate corporate object is advanced; 3. the condition of corporate affairs warrants it; 4. the transaction is designed and carried out in good faith; 5. it is intended and there results no undue advantage to a few favored stockholders at the expense of other stockholders; and 6. the rights of the creditors are not jeopar dized. Under Section 9 of the proposed code, which hopefully is now a law, a corporation has the power to purchase or reacquire its own shares subject to the limitations that the purchase must be for a legitimate corporate purpose and the corporation has an unrestricted earned surplus. The code enumerates instances considered as legi timate corporate purposes. These are: 1. “To eliminate fractional shares arising out of the declaration to stock dividends; 2. “To collect or compromise an indebtedness to the corporation, arising out of unpaid subs cription in a delinquency sale and to purchase delinquent shares sold during said sale; 3. “To pay dissenting or withdrawing stock holders entitled to payment for their shares under the provisions of this code; 4. “To redeem or retire redeemable or pre ferred shares issued by the corporation at a price not to exceed the redemption or issued value thereof.” Those instances as enumerated above are re cognized by the code as not exclusive. The status of reacquired shares will depend on the purpose of the corporation. If stocks are re acquired under Sections 17-1/2, 18, 28-1/2 and 44 of the Corporation Law or simply by re demption in case of redeemable shares, said shares have the effect of being treated as treasury shares and shall remain issued and outstanding. If shares are reacquired for the purpose of with drawing them for circulation, such shares may be reverted to the status of authorized but unissued shares. There are enough safeguards against the im pairment of the rights of stockholders and cre ditors in both the present law and the proposed code. The guidelines set by the Securities and Exchange Commission took care of what is lack ing under the present law.

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