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SEC Opinion, SGV & Co. (December 13, 1985)

1) The letter is responding to a query about whether a Philippine corporation can merge with a foreign corporation abroad according to Philippine law. 2) While Philippine law does not expressly authorize mergers between foreign and domestic corporations, the parties can achieve a combination by having one corporation sell all its assets to the other in exchange for stock. 3) As long as the selling corporation dissolves according to Philippine law after distributing the shares received to its stockholders, this would have the same effect as a statutory merger.

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43 views2 pages

SEC Opinion, SGV & Co. (December 13, 1985)

1) The letter is responding to a query about whether a Philippine corporation can merge with a foreign corporation abroad according to Philippine law. 2) While Philippine law does not expressly authorize mergers between foreign and domestic corporations, the parties can achieve a combination by having one corporation sell all its assets to the other in exchange for stock. 3) As long as the selling corporation dissolves according to Philippine law after distributing the shares received to its stockholders, this would have the same effect as a statutory merger.

Uploaded by

Alyssa Marie Martinez
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December 13, 1985

SGV & Co.


6760 Ayala Ave.
Makati, Metro Manila

Attention : Mr. F .G. Tagao

Gentlemen:
This relates to your letter, dated December 4, 1985, requesting
clarification on the last paragraph of our previous letter to you of October 23,
1985. Specifically, your query is:
"Does it mean that the merger of VVI, a Philippine corporation,
with Smith Kline & French Overseas Company, a foreign company,
could be undertaken abroad and this would still be allowed in the
Philippines provided that the merger is allowed under the laws of
incorporation of Smith Kline & French Overseas Company and the
dissolution of SK & F Victoria Valley, Inc. is made in accordance with
Philippine laws? prcd

It is reiterated herein that there seems to be no express provision in


the Corporation Code nor in any other statute authorizing the merger of a
foreign corporation a domestic corporation. Considering that corporations
have no inherent power to merge with foreign corporations, in the absence
of any statutory authorization on such corporate act, merger per se between
said two kinds of corporations cannot be sustained by this Commission.
However, in order to achieve a combination, it is not always necessary
to resort to the statutory provisions on merger and consolidation. One
obvious alternative of two corporations, is to have one of them sell all of its
assets to the other in exchange for the latter's stock. If the acquiring
corporation also assumes the payment of the corporation's liabilities and the
latter shortens its terms, dissolves, liquidates and distributes the stock
received to its stockholders in exchange for its own stock, as a liquidating
distribution, the parties would end up in the same position they would have
been under the statutory provisions on merger." (Campos, Campos, the
Corporation Code, "Comments, Notes and Selected Cases," 1981 ed., p.
959). (Emphasis supplied)
"When the intention of the parties is to effect a corporate
combination, the consideration for the sale will be stocks of the
purchasing corporation. Unless the creditors have agreed to the sale
and have accepted the purchasing corporation as the new debtor,
sufficient assets should be reserved to pay their claims. In this case,
the selling corporation would normally dissolve by shortening its
corporate term. Upon dissolution, it will have to liquidate by paying all
creditors from the assets reserved! The stocks which it received in
considerations of the sale will then be distributed proportionally to its
stockholders as liquidation distribution. They thus become
stockholders of the purchasing corporation."
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
It has been held that where one company exchanges its shares for
property of another company, at least where the shares are distributed
among the stockholders of the selling company, a de facto merger is borne
out. (15 Fletcher, Cyc. Corps., 1973 Rev. Vol., Sec. 7025, p. 25)
llcd

Subject therefore to the foregoing observations, our answer to your


query is in the affirmative.

Very truly yours,

(SGD.) MANUEL G. ABELLO


Chairman

CD Technologies Asia, Inc. © 2021 cdasiaonline.com

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