CENTRAL TEXTILE MILLS V NATIONAL WAGES AND PRODUCTIVITY

COMMISSION

20 December 1990: Regional Tripartite Wages and Productivity Board

issued a wage order mandating the increase in the minimum wage in
NCR. The order included an exemption which could be granted to
corporations whose capital has been impaired by at least 25% in the
preceeding accounting year.

The Board defined “Capital” as paid up capital.

Pursuant to wage order, Central Textile Mills applied for exemption. The
Commission rejected petitioner’s application for exemption saying that
its capital was only impaired by 22%. The Commission based its
computation on the the total paid-up capital of the corporation which
was 305M.

Hence this case.

Central Textile contention: Computation should be based on its

authorized capital stock which is 128M. Wrong for Commission to include
the total paid up. The amount in excess of 128M

WON Central Textile Mills is exempted from the wage order. YES

The guidelines on exemption specifically refer to paid-up capital, not

authorized capital stock, as the basis of capital impairment for
exemption. The records reveal, however, that petitioner included in its
total paid-up capital payments on advance subscriptions, although the
proposed increase in its capitalization had not yet been approved by, let
alone presented for the approval of, the SEC.

Petitioner incurred a net loss of 68M in 1990, and its authorized capital
stock as of that time stood atP128M. On August 15, 1990, a Board
resolution increasing the capital stock of the corporation was affirmed
by the requisite number of stockholders. Although no petition to that
effect was ever submitted to the SEC for its approval, petitioner already
started receiving subscriptions and payments on the proposed increase,
which it allegedly held conditionally, that is, pending approval of the
same by the SEC.

Thus, by the end of 1990, the corporation had a subscribed capital stock
of P482,748,900.00 and, after deducting P176,981,000.00 in subscriptions
receivables, a total paid-up capital of P305,767,900.00. P177,767,900.00
of this sum constituted the unauthorized increase in its subscribed
capital stock, which are actually payments on future issues of shares.

These payments cannot as yet be deemed part of petitioner’s paid-up

capital, technically speaking, because its capital stock has not yet been
legally increased. Thus, its authorized capital stock in the year when
exemption from WO No. NCR-02 was sought stood at P128,000,000.00,
which was impaired by losses of nearly 50%. Such payments constitute
deposits on future subscriptions, money which the corporation will hold
in trust for the subscribers until it files a petition to increase its
capitalization and a certificate of filing of increase of capital stock is
approved and issued by the SEC. As a trust fund, this money is still
withdrawable by any of the subscribers at any time before the issuance
of the corresponding shares of stock.