Opinion No. 17-06 Re: Equity restructuring through the increase of par value.

Securities and Commission Exchange JPPINFS

OFFICE OF THEGENERALCOUNSEI

24 July 2017

SEC-OGC Opinion No. |7-0 Re: Equity restructuring through the increase of par value

NEW TRANSCEND CONSTRUCTION & DEVELOPMENT CORPORATION Unit 309 Humana Wellness Center Sta. Rosa, Laguna 4026 Tagaytay Road, Brgy. Don Jose

Attention: Atty. Anna P. Cureg

Vice-President

Gentlemen:

regarding the intended equity restructuring of your company. This refers to your letter dated 19 September 2016 requesting for a legal opinion

company's authorized capital stock (ACS) is fully subscribed and fully paid up. On the without increasing the present number of shares. In addition, you disclosed that your basis of the foregoing, you sought clarification on the following matters: of Incorporation (Articles) to increase the parvalue of each share from10.00 to50.00 In your letter, you mentioned that you intend to amend your company's Articles

(b) The processes involved in the equity restructuring that will result after the (a) The requirements for the above application;

increase in par value;and (c) The laws and/or jurisprudence applicable to your case.

intend to increase the present number of shares, you did not categorically state whether, value while maintaining the ACS will necessarily result in the decrease in the number of shares. in applying for the increase in par value, you intend to maintain the current number of shares (i.e. 2 million shares),1 on the one hand, or to maintain the current ACS (i.e. P shares will, consequently,result in the increase of the ACS. In contrast, increasing the par 20,000,000.00),2 on the other. Increasing the par value while maintaining the number of At the outset, we note that, although you mentioned that your company does not

This opinion will, thus, provide a discussion on both scenarios

1 New Transcend's 2016 General Information Sheet (GIS). 2 Id.

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Scenario A -- Increase the par value while maintaining the number of shares

2 million shares will increase the ACS from 20 million to 100 million. If such an increase in the ACS is intended by the company, it may undertake the following: Increasing the par value from 10.00 to 50.00 while maintaining the company's

(1) Reverse stock split. - In SEC Opinion No. 05-01 dated 04 January 2005, we previously recognized a reverse stock split, i.e. the reduction of shares by increasing the par value thereof, as a valid mode of corporate restructuring.

In the case of your company, this will involve the amendment of the Articles by hereto as Annex A;3 and changing the equity structure from an ACS of 20 million divided into 2 million shares with a par value of 10,to an ACS of 20 million divided into 400,000 shares with a par value of P50. A list of the requirements for this step is attached

(2) Increase the ACS. - Proceeding from the reverse stock split, the company may

increase its ACS from 20 million to 100 million by amending its Articles and submitting the requirements provided in the list attached hereto as Annex B.4

Corporation Code, which provides: The requirements for the resulting increase in ACS are based on Section 38 of the

increase bonded indebtedness. - No corporation shall increase or decrease its stockholder's meeting at which the proposed increase or diminution of the approved by a majority vote of the board of directors and, at a stockholder's meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital stock shall favor the increase or diminution of the capital stock, or the incurring. capital stock or the incurring or increasing of any bonded indebtedness is to be office with postage prepaid, or served personally. capital stock or incur, create or increase any bonded indebtedness unless creating or increasing of any bonded indebtedness. Written notice of the proposed increase or diminution of the capital stock or of the incurring, creating or increasing of any bonded indebtedness and of the time and place of the considered, must be addressed to each stockholder at his place of residence as shown on the books of the corporation and deposited to the addressee in the post "Section 38. Power to increase or decrease capital stock; incur, create or

the corporation and countersigned by the chairman and the secretary of the stockholders' meeting, setting forth: A certificate in duplicate must be signed by a majority of the directors of

complied with; (1) That the requirements of this section have been

capital stock; (2) The amount of the increase or diminution of the

on the mode of payment for the new subscription, the submission of additional documents may be 3 A list of the requirements is also available on our website at: http://www.sec.gov.ph/services- 4 A list of the requirements is also available on our website at: http://www.sec.gov.ph/services- 2/company-2/amendment under the heading "Increase of Authorized Capital Stock." Depending 2/company-2/other-applications/ under the heading "Reclassification/Declassification/ Conversion of Shares." required.

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capital stock or number of shares of no-par stock thereof actually subscribed, the names, nationalities and residences of the persons subscribing,the amount of capital stock or number (3 If an increase of the capital stock, the amount of

on his subscription in cash or property, or the amount of capital of no-par stock subscribed by each,and the amount paid by each

holder if such increase is for the purpose of making effective stock dividend therefor authorized; stock or number of shares of no-par stock allotted to each stock

increased; (4) Any bonded indebtedness to be incurred, created or

day of the meeting; (5) The actual indebtedness of the corporation on the

ad (6) The amount of stock represented at the meeting;

the capital stock, or the incurring, creating or increasing of any bonded indebtedness. (7) The vote authorizing the increase or diminution of

increasing of any bonded indebtedness shall require prior approval of the kept on file in the office of the corporation and the other shall be filed with the Securities and Exchange Commission. One of the duplicate certificates shall be incorporation. From and after approval by the Securities and Exchange Securities and Exchange Commission and attached to the original articles of Commission and the issuance by the Commission of its certificate of filing, the Any increase or decrease in the capital stock or the incurring, creating or

increasing of any bonded indebtedness authorized, as the certificate of filing may capital stock shall stand increased or decreased and the incurring creating or declare: Provided, That the Securities and Exchange Commission shall not accept for filing any certificate of increase of capital stock unless accompanied by the

time of the filing of the certificate, showing that at least twenty-five (25%) sworn statement of the treasurer of the corporation lawfully holding office at the percent of such increased capital stock has been subscribed and that at least twenty-five (25%) percent of the amount subscribed has been paid either in actual cash to the corporation or that there has been transferred (25%) percent of the subscription: Provided, further, That no decrease of the rights of corporate creditors. to the corporation property the valuation of which is equal to twenty-five capital stock shall be approved by the Commission if its effect shall prejudice the

increase the same, with the approval by a majority vote of the board of trustees and of at least two-thirds (2/3) of the members in a meeting duly called for the purpose. Non-stock corporations may incur or create bonded indebtedness, or

sufficiency of the terms thereof." (Emphasis supplied.) Exchange Commission, which shall have the authority to determine the Bonds issued by a corporation shall be registered with the Securities and

applications may be filed simultaneously, in which case, the same will likewise be processed by the Commission simultaneously. Thus, the Company need not await requirements must be filed with the Commission for this Scenario, however, these To clarify, two (2) separate applications, with their respective documentary

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the approval of the reverse stock split before it can apply for the Acs increase, provided that all requirements for both applications are complied with.

Scenario B -- Increase the par value while maintaining the amount of Acs

ACS will result in the reduction of shares (i.e. authorized, subscribed and paid up) from 2 amending its Articles, as provided in number (1) of Scenario A above. million to 400,000. To do this, the company may undertake a reverse stock split by Increasing the par value from 10.00 to 50.00 while maintaining the company's

shares may arise. In this regard, the company may do well to consider the treatment thereof prior to commencing the restructuring process, e.g. repurchase by the company of the fractional shares (as treasury shares) at a pre-determined price. The company is advised that as a consequence of the reverse stock split, fractional

stock certificates and the issuance of new ones in replacement thereof, which reflects the new number of shares and/or par value thereof, as applicable. In this regard, the company is reminded to comply with the principle of indivisibility of subscription, as enshrined in Article 64 of the Corporation Code, thus: Both restructuring scenarios will necessarily result in the cancellation of current

interest and expenses (in case of delinquent shares), if any is due, has been paid." be issued to a subscriber until the full amount of his subscription together with "Section 64. Issuance of stock certificates. - No certificate of stock shall

facts and circumstances disclosed and relevant solely to the particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the Commission further inquiry or investigation it will be disclosed that the facts relied upon are different, in other cases or upon the courts whether of similar or dissimilar circumstances. If, upon this opinion shall be rendered void. It shall be understood that the foregoing opinion is rendered based solely on the

Please be guided accordingly.

CAMOCORREA

General Counsel

T

Other Applications -- Documentary Requirements ANEA

Reclassification/Declassification/Conversion of Shares

1.Directors' certificate - notarized and signed by majority of the directors certifying the (i) amendment of the articles of incorporation reclassifying/declassifying/converting the stockholders' meeting and (iv) the tax identification number of the signatories which shares of stock (ii) votes of the directors and the stockholders, (iii) date and place of shall be placed below their names.

2.Amended Articles of Incorporation 3. List of stockholders showing the names, nationalities and stockholdings before and secretary after the reclassification/declassification/conversion, as certified by the corporate

4.Audited financial statements as of the last fiscal year, stamped received by the SEC and the BiR. 5. Notarized Secretary's Certificate on no pending case of intra-corporate dispute 6. Compliance Monitoring Division (CMD) Clearance and/or clearance from other Department of the Commission or government agencies

Increase of Authorized Capital Stock A*

1. Certificate of Increase of Capital Stock signed by majority of the directors and certified by Chairman and Corporate Secretary of the stockholders meeting 2.Treasurer's Affidavit certifying the increase of capital stock, the amount subscribed and the amount received as payment thereto

3. List of stockholders as of the date of the meeting approving the increase, showing the nationalities of the subscribers and their respective subscribed and paid-up capital in the existing authorized capital stock certified by the corporate secretary 4. Amended Articles of Incorporation; 5. Notarized Secretary's Certificate on no pending case of intra-corporate dispute 6. Directors Certificate - notarized and signed by majority of the directors and the stockholders, (iii the date and place of the stockholders' meeting (iv) the tax identification number of the signatories which shall be placed below their names increasing the authorized capital stock, (ii the votes of the directors and the corporate secretary certifying i the amendment of the Articles of Incorporation

7. Notarized Secretary's Certificate attesting that non-subscribing stockholders have representing at least 2/3 of the outstanding capital stock approving the issuance of waived their pre-emptive rights or attesting the resolutionof the stockholders shares in exchange for a property or previously incurred indebtedness of the corporation.

8. If the foreign equity is increased to more than 40%, compliance with registration under Foreign Investments Act

9 Compliance Monitoring Division (CMD) Clearance and/or: clearance from other

Department of the Commission* 10.Endorsement/clearance from other governmen agencies,if applicable.

Additional Reguirements Depending on the Kind of Payment on Subscription