Corporation Law
3E
RULES GOVERNING REDEEMABLE AND TREASURY SHARES (1982)
The following rules governing redeemable shares (Section 8, CCP) and treasury
shares (Section 9 and 41, CCP) are hereby promulgated:
SECTION 1. General Provisions. — The outstanding capital stock of a
corporation, including unpaid subscriptions, shall constitute a trust fund held by the
corporation for the benefit of its creditors which shall not be returned to the
stockholders by repurchase of shares or otherwise, except in the manner as
provided for under the Corporation Code and these rules. cdphil
SECTION 2. Definitions. — The following terms shall have the respective
meanings when used in these rules:
a. Treasury shares — Treasury shares are shares of stock which have been
issued and fully paid, but subsequently reacquired by the issuing corporation by
purchase, redemption, donation or through some other lawful means.
b. Redeemable shares. — Redeemable shares are shares of stock issued by a
corporation which said corporation can purchase or take up from their holders as
expressly provided for in its articles of incorporation and certificates of stock
representing said shares.
c. Unrestricted retained earnings. — Unrestricted retain earnings refer to the
undistributed earnings of the corporation which have not been allocated for any
managerial, contractual or legal purposes and which are free for distribution to the
stockholders as dividends.
d. Sinking Fund. — Refers to a fund set up by the corporation where cash is
gradually set aside in order to accumulate the amount necessary to meet the
redemption price of redeemable shares at special dates in the future.
SECTION 3. Redeemable Treasury Shares. —
1. No corporation shall redeem, repurchase or reacquire its own shares, of
whatever class, unless it has an adequate amount of unrestricted retained earnings
to support the cost of the said shares, except:
a. When the shares are reacquired in the redemption of redeemable shares
of the corporation or pursuant to the conversion right of convertible shares of the
corporation, in accordance with the provision expressly provided for in its articles of
incorporation and certificates of stock representing said shares of the corporation,
in accordance with the provisions expressly provided for in its articles of
incorporation and certificates of stock representing said shares;
b. When the shares are reacquired to effect a decrease in the capital stock of
the corporation as approved by the Securities and Exchange Commission;
c. When the share are reacquired by a close corporation pursuant to the
order of the Securities and Exchange Commission acting to arbitrate a deadlock as
provided for under Section 104 of the Corporation Code of the Philippines.
2. Treasury shares do not revert to the unissued shares of the corporation
but are regarded as property acquired by the corporation which may be reissued or
sold by the corporation at a price to be fixed by the Board of Directors; provided,
however, that in the case of redeemable shares reacquired, the same shall be
considered retired and no longer issuable, unless otherwise provided in the Articles
of Incorporation.
3. In the case of a close corporation, any stockholder may, for any reason,
compel the corporation to purchase his shares at a value not less than their par or
issued value, provided that the corporation has, after the withdrawal of the
stockholder, sufficient assets in its books to cover its debts and liabilities exclusive
of capital stock. Cda
SECTION 4. Retained Earnings. —
1. The amount of unrestricted retained earnings equivalent to the cost of the
treasury shares being held, other than those acquired in accordance with the
exceptions provided in Section 3(1) of these rules, shall be restricted from being
declared and issued as dividends.
2. The dividend restriction on retained earnings on account of the treasury
shares being held shall be lifted only after the treasury shares causing the
restriction are reissued or retained. Retirement of treasury shares shall be effected
by decreasing the capital stock of the corporation in accordance with Section 38 of
the Corporation Code of the Philippines for the purpose of eliminating the treasury
shares.
Corporation Law
3E
SECTION 5. Other Provisions. — and such other sanctions as provided for under Section 144 of the Corporation Code
of the Philippines.
1. A corporation may reacquire its own shares for a legitimate corporate
purpose or purposes in accordance with these rules, including but not limited to the SECTION 7. Effectivity of Rules. —
following cases:
These rules shall take effect fifteen (15) days after their publication in two (2)
a. To eliminate fractional shares arising out of stock dividends; newspapers of general circulation in the Philippines. prcd

b. To collect or compromise an indebtedness to the corporation, arising out (SGD.) MANUEL G. ABELLO
of unpaid subscription, in a delinquent sale, and to purchase delinquent shares sold
during said sale; and Acting Chairman

c. To pay dissenting or withdrawing stockholders entitled to payment of their Approved:

shares under the provisions of the Corporation Code of the Philippines.
(SGD.) CESAR E.A. VIRATA
2. Treasury shares shall have no voting rights as long as such stocks remains
Minister of Finance
in treasury.
CIRCULAR NO. 7 December 27, 1982
3. Treasury shares may be declared as property dividend to be issued out of
the retained earnings previously used to support their acquisition, provided that the
amount of the said retained earnings has not been subsequently impaired by losses.
Any declaration and issuance of treasury shares as property dividend shall be
disclosed and properly designated as property dividend in the books of the
corporation and in its financial statements.

4. All corporations which have issued redeemable shares with mandatory

redemption features are required to set up and maintain a sinking fund. The fund
shall be deposited with a trustee bank and not be invested in risky or speculative
ventures.

5. Redeemable shares may be redeemed, regardless of the existence of

unrestricted retained earnings, provided that the corporation has, after such
redemption, sufficient assets in its books to cover debts and liabilities inclusive of
capital stock.

SECTION 6. Violation of these Rules. —

Any violation of these rules shall be penalized by a fine of not less than One
Thousand (P1,000.00) Pesos or not more than Ten Thousand (P10,000.00) Pesos
 Republic of the Philippines
Department of Finance
Securities and Exchange Commission
SEC Building, EDSA, Greenhills, Mandaluyong City

MEMORANDUM CIRCULAR No. _8_

Series of 2012

To facilitate the amendment of corporate and partnership names, the Commission En

Bane, in its meeting on September 27, 2012, resolved to amend SEC Memorandum
Circular NO.5, Series of 2008 (Guidelines and Procedures on the Use of Corporate and
Partnership Names) as follows:

1. Amendment of the first paragraph of Section 17 of the said Circular from:

"17. At the time of its registration, a corporation or partnership shall submit an

affidavit containing an unqualified undertaking to change its name immediately
upon receipt of notice or directive from the Commission that another corporation,
partnership or person has acquired a prior right to the use of that name or that the
name has been declared as misleading, deceptive, confusingly similar to a
registered name or contrary to public morals, good customs or public policy. The
affidavit shall be signed by at least two incorporators or partners in the form
prescribed by the Commission. This affidavit shall not be required if the undertaking
is already included as one of the provisions of the Articles of Incorporation or
Partnership of the registrant."

to -

"17. At the time of its registration, a corporation or partnership shall submit an

affidavit containing an unqualified undertaking to change its name, as originally
registered or as amended thereafter, immediately upon receipt of notice or directive
from the Commission that another corporation, partnership or person has acquired
a prior right to the use of that name or that the name has been declared as
misleading, deceptive, confusingly similar to a registered name or contrary to public
morals, good customs or public policy. The affidavit shall be signed by at least two
incorporators or partners in the form prescribed by the Commission. This affidavit
shall not be required if the undertaking is already included as one of the provisions
of the Articles of Incorporation or Partnership of the registrant."

2. Deletion of the last paragraph of Section 17 ot'the said Circular which reads "In
the case of amendment of the corporate name of an existing company or
partnership, the affidavit shall be signed by any of the directors or partners.
•

In view of the foregoing amendments, the relevant undertaking required to be included

in the Articles of Incorporation shall be written in the following manner:

"That we, on behalf of the said corporation/partnership, hereby undertake to change

its corporate/partnership name, as herein provided or as amended thereafter,
immediately upon receipt of notice or directive from the Commission that another
corporation, partn~rship or person has acquired a prior right to the use of that name
or that the name has been declared as misleading, deceptive, confusingly similar to
a registered name or contrary to public morals, good customs or public policy."

This Memorandum Circular shall be effective immediately.

October 8,2012, Mandaluyong City.

,;7./ -
Teresita J. Herbosa
Chairperson