Metroplex Berhad and Paxell Investment v.

Sinophil Corp

FACTS:
• Sinophil entered into Swap Agreement with Metroplex & Paxell: 40% of their
shareholdings in Legend in exchange of 35.5% stake in Sinophil
• Sinophil & Belle Opposition:
- Sinophil issued 2.41B shares to Metroplex and 1.45B Shares to Paxell (Total 3.87B)
in EXCHANGE for 46.38M shares of Legend
• Metroplex pledged 2B of its is Sinophil with Union Bank & Asian Bank to secure loans
• S&B executed an unwinding agreement to rescind the Swap agreement but M&P failed to
returned the 1.87B shares while the 2B remained pledged.
• SH of Sinophil voted for reduction of Sinophil ACS and CRMD and CFD (SEC depts)
approved the 1st amendment of the AI reducing its AC by 1.87B. This was discloded to
PSE
• SH again approved the reduction of its ACS by another 1B shares and CRMD and CFD
approved the 2nd amendment of AI. This was likewise disclosed to PSE
• Yaw, M&P filed a petition before SEC assailing the approval of the amendments of
Sinophil AI. They claimed that it failed to meet legal requirements under Sec 13 of
Securities Regulation Code such as
- Notice and Hearing
- Approval of All SH
- Legitimate business Purpose
- Approval of all Creditors
• Respondents claim that there was a full compliance with Sec. 38 of Corp Code
• SEC issued an Order affirming the acts of its Operating Departments regarding the
decrease in the capital stock of Sinophil
• SEC found the decrease in capital stock complied with the requirements imposed by the
Corporation Code, particularly Section 38.
• It held that the equal or unequal reduction of a corporation’s capital stock is a matter
solely between the stockholders and cannot be enjoined by the courts or creditors.

CA affirmed SEC order.

ISSUE:
WON the appellate court is correct in finding that the decrease in Sinophil’s capital stock was
legal and that the SEC’s approval thereof was proper.

RULING:
• YES. The Court held that the appellate court was correct in finding that the decrease in
Sinophil’s capital stock was legal and that the SEC’s approval thereof was proper.
• What applies to the case at bar is Section 38 of the Corporation Code.
• Under Section 38 of the Corporation Code, such decrease only requires:
(1) the approval of a majority of the board of directors and,
(2) at a stockholder's meeting duly called for the purpose, two-thirds (2/3) vote of the
outstanding capital stock.
• So long as written notice of the proposed increase or diminution of the capital stock was
made to all stockholders, the presence and approval of at least 2/3 of the capital stock is
enough to make the increase or diminution valid.