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The terms of the merger provide that there shall be no issuance of shares of PPCI to certain
absorbed corporations (not all) in view of their capital deficiency. Shares were issued to
corporations who do not have capital deficiency.
http://www.puregold.webtogo.com.ph/images/items/uploads/Approval%20of%20Merger%20of%
20PPCI,%20PJSI,%20SC-
V%20Corp.%20&%20Gant%20Group%20of%20Companies,%20Inc.%20dated%20February%2
026,%202013.pdf
2. Merger allowed where only the absorbed corporation (not the surviving corporation)
had outstanding obligations/liabilities
Paper Industries Corp. v. Court of Appeals, G.R. Nos. 106949-50, 106984-85, [December 1,
1995], 321 PHIL 1-63
Query: Whether or not a corporation which has accumulated a sizable amount of deficit can
undergo a quasi-reorganization to erase such deficit by offsetting the amount of deficit against
the capital paid in excess of par value
Response: It has been the policy of the Commission to allow a corporation with prior SEC
approval to reduce or wipe out its deficit by applying the additional paid-in capital against the
deficit, provided that after such re-structuring process has been affected, the same shall be
disclosed in all subsequent financial statements of the corporation for a period of at least three
(3) years.
*foreign precedents:
Brief summary: GMO Media Holdings have been in capital deficiency. Liabilities owed to GMO
Internet will be waived and prior to the merger there will be no capital deficiency in the absorbed
company.
http://ir.gmo.jp/en/pdf/irlibrary/disclose_info20130722_01_e.pdf
Brief summary: Japan Lifeline Inc. decided to fully acquire the shares of its consolidated
subsidiary, Heart Brains Inc.
Heart Brains has been in capital deficit as of March 31, 2015; however, Japan Lifeline intends to
waive part of its claimable credit on Heart Brains so as to conduct the Merger after the
elimination of its capital deficit.
http://www.japanlifeline.com/investors/news/2016/1125.html