DON’T let the 50-year corporate life of your business end without renewing it by amending your company’s Articles of Incorporation before the expiry date. Otherwise, your company may end up in limbo without legal personality, like what happened to Hotel Enterprises of the Philippines Inc. (HEPI), the owner of what is now Midas Hotel.
In a recent ruling, the four of the five members of the Securities and Exchange Commission (SEC) denied HEPI’s appeal to allow it to amend its Articles of Incorporation extending its term. HEPI’s first 50-year term expired on July 30, 2012, but filed for the renewal of its SEC franchise only on December 26, 2012.
As provided for in the law cited by the SEC, a corporation “shall exist for a period not exceeding 50 years unless sooner dissolved or unless such period is extended.” Applied to HEPI, the law is clear: the company ceased to exist for failing to renew its SEC charter to provide for the extension of its corporate term.
Due Diligencer does know what HEPI and its lawyers plan to do. As far as the SEC is concerned, it would be best for the company to reregister as a new stock corporation.
Otherwise, its new owners would be left in a quandary on what to do with ownership in what could be a nonentity. SEC records showed that Leisure and Resorts World Corp. (LWRC), a listed company, is HEPI’s majority stockholder, having acquired a year ago 51 percent of the company’s voting shares.
In one of its filings posted on the website of the Philippine Stock Exchange, LWRC disclosed having paid an initial payment of P750 million in buying 47,846 HEPI shares, or 51 percent, from Eco Leisure and Hospitality Holdings Inc. The sale, according to LWRC, is expected to be finalized in 2013.
With P750 million only as partial payment for the 51-percent ownership, HEPI must be worth billions because it has 100,000 outstanding shares with par value of P1,000 each, for total outstanding capital of P100 million.
The problem with the deal between Eco Leisure and LWRC is only the latter’s insiders know what’s in store for its stockholders. As far as the public investors who own LWRC shares are concerned, they don’t know yet what to expect from HEPI as a subsidiary. Will the hotel holding company that owns Midas Hotel cum casino be as profitable as when its hotel was a member of the Hyatt chain?
Finally, LWRC has not fully explained the deal. After paying Eco Leisure P750 million, what would follow? Will the balance be in shares or in cash? If in cash, how would LWRC plan to raise the amount? How much did 51-percent ownership in HEPI cost LWRC and its stockholders?
By the way, what was the intramural at HEPI all about? How will this affect LWRC? How does owning a nonentity such as HEPI affect LWRC?
All these questions beg for answers, because LWRC is small—but not necessarily poor—stockholders need them before checking in at Midas Hotel and do some gambling.