THE Securities and Exchange Commission (SEC) has issued a legal opinion allowing a merger to take effect on the agreed date set by the merging companies.
       This goes against the pertinent provision of the Corporation Code that, as the SEC noted, “provides that it is only upon the issuance by the Commission of the Certificate of Merger when the merger shall become effective.”
       But citing jurisprudence, the SEC said the law should be given a liberal interpretation. “A literal interpretation is to be rejected if it would be unjust or lead to absurd results,” it ruled.
       The opinion, signed on January 17, 2006 by lawyer Vernette Umali-Paco, SEC general counsel, was in response to query posed by Romeo H. Duran, tax director of accounting firm Punongbayan & Araullo.
       In his query, Duran told the SEC that his firm’s clients wanted January 1, 2006 as their effective date of merger “on condition that this effective date of merger is approved by the SEC.”
       The SEC also cited previous opinion dated June 15, 2004, that said “the stipulated cut-off date, or in this case the effective date of merger, shall be binding on the parties to the merger agreement.”
       A more liberal interpretation of the law, the SEC said, is intended “to promote and uplift the development of trade relations and encourage friendly commercial intercourse among corporations.” The SEC emphasized the need for a “judicious” interpretation of the law that would best serve “the protection of public interest.”
       In responding to the query, the SEC, however, noted that the proposed effective date of merger—January 1, 2006—has “has already lapsed and there is no indication that the Articles of Meger have already been field with the Commission.”
       Even then, the SEC said, “should the Commission approve the Articles of Merger, the Certificate of Merger would only be issued after the effective date of merger.” (SEC Opinion No. 06-04)