Nestle Philippines Inc. v. Court of Appeals
G.R. No. 86738, November 13, 1991
Corporation Law Case Digest by John Paul C.
Ladiao (15 March 2016)
(Topic: Consideration for Stocks and
Transfer)
FACTS:
Sometime in
February 1983, the authorized capital stock of petitioner Nestle Philippines
Inc. ("Nestle") was increased from P300 million divided into 3
million shares with a par value of P100.00 per share, to P600 million divided
into 6 million shares with a par value of P100.00 per share. Nestle underwent
the necessary procedures involving Board and stockholders approvals and
effected the necessary filings to secure the approval of the increase of
authorized capital stock by respondent Securities and Exchange Commission
("SEC"), which approval was in fact granted.
Nestle has
only two (2) principal stockholders: San Miguel Corporation and Nestle S.A
On 16
December 1983, the Board of Directors and stockholders of Nestle approved
resolutions authorizing the issuance of 344,500 shares out of the previously
authorized but unissued capital stock of Nestle, exclusively to San Miguel
Corporation and to Nestle S.A. San Miguel Corporation subscribed to and
completely paid up 168,800 shares, while Nestle S.A. subscribed to and paid up
the balance of 175,700 shares of stock.
On 28 March
1985, petitioner Nestle filed a letter signed by its Corporate Secretary, M.L.
Antonio, with the SEC seeking exemption of its proposed issuance of additional
shares to its existing principal shareholders, from the registration
requirement of Section 4 of the Revised Securities Act and from payment of the
fee referred to in Section 6(c) of the same Act.
The
Commission then advised petitioner to file the appropriate request for
exemption and to pay the fee required under Section 6 (c) of the statute, which
provides:
(c) A fee equivalent to one-tenth of one
per centum of the maximum aggregate price or issued value of the securities
shall be collected by the Commission for granting a general or particular
exemption from the registration requirements of this Act.
ISSUE:
Whether or
not that there is a need to file a petition for exemption under Section 6(b) of
the Revised Securities Act with respect to the issuance of the said 344,600
additional shares to their existing stockholders out of their unissued capital
stock?
RULING:
Yes.
The reading
by the SEC of the scope of application of Section 6(a) (4) permits greater
opportunity for the SEC to implement the statutory objective of protecting the
investing public by requiring proposed issuers of capital stock to inform such
public of the true financial conditions and prospects of the corporation.
When capital
stock is issued in the course of and in compliance with the requirements of
increasing its authorized capital stock under Section 38 of the Corporation
Code, the SEC as a matter of course examines the financial condition of the
corporation, and hence there is no real need for exercise of SEC authority
under the Revised Securities Act.
In contrast,
under the ruling issued by the SEC, an issuance of previously authorized but
still unissued capital stock may, in a particular instance, be held to be an
exempt transaction by the SEC under Section 6(b) so long as the SEC finds that
the requirements of registration under the Revised Securities Act are "not
necessary in the public interest and for the protection of the investors"
by reason, inter alia, of the small amount of stock that is proposed to be
issued or because the potential buyers are very limited in number and are in a
position to protect themselves
The principle
that the contemporaneous construction of a statute by the executive officers of
the government, whose duty is to execute it, is entitled to great respect, and
should ordinarily control the construction of the statute by the courts, is so
firmly embedded in our jurisdiction that no authorities need be cited to
support it.
This is very supplemental case in the aid of understanding corporate law as well as statutory construction.
ReplyDeleteThank you so much for sharing this online. It helps a lot the struggling aspiring lawyers in first year like me..
God bless! and more sharing of case digest..