Opinion No. 06-04 RE : Effective Date of Merger

• 1 .r ..,."'it'~'\,.\. i;:CH'~' 1. .••.••.•• ~l. ~ '.' '. ; . ~ \~~~ Republic of the Philippines SECURITIES AND EXCHANCE COMMISSION OFFICE OF THE CENERAL COUNSEL SEC Building, EDSA, creenhills, City of Mandaluyong Janua!y 17, 2006 MR. ROMEO H. DURAN SEC Opinion No. 06-04 . Tax Principal . Effective Date of Merger Punongbayan & ArauIIo Sir: This is in response to your letter dated December 28, 2005 requesting opinion as to whether Total (Philippines) Corporation (hereafter referred to as TPC) and Su.perkalan Gaz Corporation (hereafter referred to as SGC) can make the following Rliplllniion in H10.il'plnn of nw..,~('r: : "EffectizJe Date of Merger. Upon approllal of this Plan of Merger by the stockholders of TPC and sec, the Articles of Merger shall be filed by TPC and sec with the Securities and Exchange Commission ("SEC"). The Merger shall be effective on January 1, 2006 (hereinnfter rf:ferred to as "Effective Date of Merger"), on the condition that this Effecth'e Date of Merger is approved the SEC. Accordingly, this Plal1 of Merger, as well as the Articles of Merger, will have no legal effect and will not be legally binding as between TPC and sec, nor will the rights and obligations of third parties as regards TPC or sec be l7!fi'('ted, without the issuance by the SEC of a Certifimte of Mdger. Upon the issuance of the Certificate of Merger by the SEC, tlle Effeelille Date of Merger'shall become operative and binding between TPC and Sec." . Under Sections 79 of the Corporation Code, it is provided that: "SECTION 79. Securities ami Exdrnnge Coml11ission's approllal and effectivity of merger or consolidation. - .... Where the Commission is satisfied .that the merger or consolidation of tllP corporations con('e/'1l{'dis not inconsistent 1uith the provisions of tlris Code and tlle existing laws, it shall issue a certificate of merger or of consolidation, as tire case may be, at whiclr time the merger or consolidation shall be effective ... ". (emphasis supplied) /

i' I ". .. .' . . " I' . " . "'~-, j • '. j v ". , I Stated differently, the above quoted 'provision provides that it is only upon the I j issuance by the Commission of the Certificate of Merger when the merger shall become effective. I I j A reading, however, of the proposed stipulation in the Plan of Merger reve~ls that TPC and sec have agreed that the effective date of merger shall be on January 1, 2006. N~tice should be taken of the fact that this date has already lapsed and there IS FlO I I indication that the Articl~s of Merger have already been filed with the Commission. I Hence even assuming that the said articles have already been filed, the Certificate of I Merger has yet to be issued. Clearly then, should the Commission approve the Articles I i of Merger the Certificate of Merger would only be issued after the effective date of I I merger set by the parties. I Following strictly Section 79 of the Corporation Code, the merger shall only be effective upon the issuance by the Commission of the Certificate of Merger. Jurisprudence dictates however that, in the' exercise of supervisory and regulatory functions over corporations and partnerships registered with the Commission, the Corporation Code should be given a reasonable or liberal construction which will best execute its purpose, even though such construction is not within its strict literal interpretation. A strict construction should not be permitted to defeat the policy find pnrpose of 11l1'Cndl'. Tll1'l'I.fol'l', ",1 lill'l'nl inll'l'pn'lnl ion ill III hl1 n'j.'I'II'" if il would be unjust 01; ICfld 10 flh~illnl l'l'slrlls" (!;oril/Ilo 7'. qa;;IIOI't' Slrill/'ing 11/111Mtllllrill::; Corp. 177 SCRA 513,519 [1989]). This principle was enunciated in the Opinion dated June 15, 200L11 addressed to , Division of sev & Co. rendered by the Commission Mr. Joel L. Tan-Torres, Partner, Tax which involved aquety similar to the one posed in thi~ letter request. In the said Opinion, the Commission opined that the stipulated cut-off date, or in this case the effective date of merger, shall be binding on the parties to the merger agreement. It was further noted therein that to promote and uplift the development of trade relations and encourage friendly commercial intercourse among corporations, the Corporation Code should be given a judicious, not a stern and discordant interpretation, provided that its primordial end (protection of public interests) is served. Likewise, we concur with your observation that the proposed stipulation ",muld not prejudice the rights of the general public or third parties transacting with either TPC or sec nor Would it result to any decrease iil the payment of tax of either of the parties . ./ I SEC OPINION NO. 36-04, Re: Effectivity of the Merger ",' •• t ••••••

; I With the foregoing, we confirm your position that the parties can make the proposed stipulation pertaining to the effective date of the merger. It shall be understood that the opinion rendered is based solely on facts disclosed in the query and relevant solely to the particular issues raised therein and shall not, be used in the nature of a standing rule binding upon the Commission in other cases whether of simlIar or dissimilar circumstances. ver Y q)1:' VERNETTE G. UMALI-PACO General Counsel / .