December 5, 1984

Negros Navigation Company, Inc.

Negros Navigation Building
Pasay Road, Makati
Metro Manila

Attention : Mr. Manuel L. Garcia

Gentlemen:

This relates to your letter dated March 9, 1984, requesting the opinion of this
Commission on the queries posed therein.

The factual situation appears as follows:

Negros Navigation Company, Inc. was incorporated under Act. No. 1459, otherwise
known as the Corporation Law — where the issuance of NO PAR value shares by public
utilities was not prohibited, provided said companies where authorized by the Public
Service Commission (Section 20, Public Service Law). It has an authorized capital stock of
260,000 no par value shares, of which 233,200 shares appear to have been subscribed as
per the audited financial statement of the company as of December 31, 1983.

When the Corporation Code took effect on May 1, 1980, public utilities are no longer
authorized to issue no par value shares notwithstanding approval of the regulatory board.
Inasmuch as Negros Navigation Co., Inc. was registered under the former Corporation Law
(Act #1459), on the basis of no par value capital structure, it now seeks exemption from
Section 6 of the new Corporation Code. The queries posed for the resolution of the
Commission are quoted as follows:

1. Can the 232,666 issued and outstanding shares and the 534 subscribed shares
remain as no par value shares inasmuch as the owners and subscribers
bought/subscribed to said shares on the basis of a no par value under the former
Corporation Law?

2. Since the balance of 26,800 unsubscribed shares have been authorized as no par
value shares by the SEC, can said shares be issued still on a no par value basis?

3. If the answer to query No. 2 is in the negative, what are the steps to be taken to
convert said shares?

4. Is it legally permissible if we maintain two kinds of shares (par value and no par
value) in our corporate books?
 Under Act. No. 1459, otherwise known as the Corporation Law, public utilities were not
prohibited from issuing no par value shares, provided they were so authorized under
Section 20(e) of the Public Service Law, which provides in part, thus:

"Acts requiring the approval of the Commission. — Subject to established limitations

and exceptions and saving provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the approval and
authorization of the Commission previously had –

xxx xxx xxx

(e) . . . to issue any shares of stock without par value."

No par value shares as the name implies, is a stock without any nominal or par value
stated in terms of dollars or dollar's worth; and a share of such stock does not purport to
represent any stated proportionate interest in the capital stock measured by value, but
only an aliquot part of the whole number of such shares of the corporation issuing it. (11
Fletcher Cyc. Corps., sec. 5125, p. 146, 1971 Rev. Ed.). This is the major difference between
such stock and shares having a nominal or par value. (Ibid).

Section 20(e) of the Public Service Law was deemed repealed when the new
Corporation Code took effect on May 1, 1980. Sections 6 and 146 of the Code provide as
follows:

"SECTION 6. Classification of shares. — The shares of stock corporations may be

divided into classes or series of shares, or both, any of which classes or series of shares may
have such rights privileges or restrictions as may be stated in the articles of incorporation: .
. . Provided, however, that banks, trust companies, insurance companies, public utilities and
building and loan associations shall not be permitted to issue no par value shares.

xxx xxx xxx

(Emphasis supplied)

"SECTION 146. Repealing clause. — Except as expressly provided by this Code,

all laws or parts thereof inconsistent with any provision of this Code shall be deemed
repealed."

Under Section 148 of the Corporation Code, existing corporations affected by the
new requirements under the Code are given a period of two years from its effectivity (May
1, 1980) within which to comply with the same. Since the corporation did not file an
amendment to its articles of incorporation acceptable to the Commission on or before May
1, 1982, the Commission will consider the limitation laid down by Section 6 of the
Corporation Code as written into the said articles on May 1, 1980.
 Generally, therefore, if the proviso of Section 6 of the Code, prohibiting public
utilities, among others, from issuing no par value shares, is to be given a close and
conservative adherence to the literal or textual interpretation, it would appear that Negros
Navigation Co., Inc. has to reclassify its authorized capital stock from no par to par value
shares as of May 1, 1980.

On the other hand, sometimes we go beyond the language of the statute and seek the
assistance of extrinsic aids in its construction. In this regard, the intent of the legislature is
of supreme importance. (Crawford, Statutory Construction, Sec. 160, p. 246, 1949 ed.).
Considerable light is shed by the deliberations of the Batasang Pambansa on the matter.
As aptly stated by Minister Mendoza:

"There is a difference between a public utility as a corporation on the one hand, and
banks, trust companies, insurance companies and building and loan associations on the
other. If one may identify the unifying characteristics of banks, trust companies, insurance
companies and building and loan associations, it is a relationship or a high degree of trust
between the corporate entity as such; and in the case of banks, the depositors; in the case of
trust companies, the beneficiaries; as well as the trustors, in the case of building and loan
associations. However, in the case of a public utility corporation, that kind of trust
relationship really does not exist. Rather, the nature of the business of this public utility
corporation is affected with a public interest because the services it renders are to the
public in general. But there is no trust relationship between the public in general and the
public utility corporation. So the public character aspect of a public utility corporation is
somewhat distinct and different from the public character of banks, trust companies,
insurance companies and building and loan associations in the context of the particular
provision." (Proceedings of the Batasang Pambansa on the Corporation Code, dated
November 12, 1979, emphasis supplied).

It was evident from the Batasan deliberation that considering the nature of the
business of banks, trust companies, insurance companies and building and loan
associations, the amount of their capital should be made more or less easily identifiable by
the public.

And, in order not to leave any ambiguity, for others may argue that the Public
Service Act, being a special law, is not implicitly repealed by Sec. 6 of the Corporation Code,
and consequently the rule on implied repeal should not apply, upon suggestion of
Assemblyman Fuentebella the words "public utilities" were inserted in the subject proviso
of Section 6 of the Corporation Code (Consideration of C.B. No. 3 on second reading, dated
February 25, 1980).

In the light of the legislative intent on the matter, it is opined that anent your first
query, Negros Navigation Co., Inc. may retain the total of 233, 200 no par value shares
which have been already issued by the corporation as of December 31, 1983. (See attached
financial statements of the company as of December 31, 1983).
 Your second query is answered in the negative. And, as anticipated in your third
query, you have to file with this Commission the amended articles of incorporation of
Negros Navigation Co., Inc., duly executed in accordance with Section 16 of the Corporation
Code, converting its 26,800 unsubscribed no par value shares into shares with par value. It
is, however, vital that in the conversion of no par value shares to shares with par value,
there should be no alteration of interest giving rise to any substantial change in each
shareholder's percentage interest in the total assets of the corporation.

Subject to the limitations as above stated, our answer to your fourth query is in the
affirmative.

Please be advised accordingly.

Very truly yours,

(SGD.) MANUEL G. ABELLO
Chairman