DOJ Opinion No. 007, s. 1994

DOJ OPINION NO. 007 , s. 1994 January 26, 1994 Chairman Dante M. Lantin Land Transportation Franchising & Regulatory Board East Avenue, Quezon City Sir : This refers to your request for opinion on whether or not the purpose of engaging in transportation business must still be categorically indicated in the articles of incorporation of corporations applying for a Certificate of Public Convenience before the same may be granted in the light of the following provisions of the Corporation law (old and new): prcd Old Corporation Law (Act No. 1456) "SEC. 6. Five or more persons . . . may form a private corporation for any lawful purpose or purposes . . . setting forth: xxx xxx xxx (2) The purpose or purposes for which the corporation is formed: Provided, however, that no corporation hereinafter formed for the purpose of engaging in the business of transportation by land or by water, . . . shall, except as otherwise provided by law, exercise any powers, other than those necessary or incidental to the accomplishment of its said purpose . (Emphases supplied) New Corporation Code (Batas Pambansa Blg . 68) "SEC. 14. Contents of articles of incorporations. All corporations organized under this Code shall file with the Securities and Exchange Commission articles of incorporation in any of the official languages, duly signed and acknowledge by all of the incorporators, containing substantially the following matters, except as otherwise prescribed by this Code or by special law: xxx xxx xxx 2. The specific purpose or purposes for which the corporation is being incorporated. Where a corporation has more than one stated purpose, the articles of incorporation shall state which is the primary purpose and which is/are the secondary purpose or purposes . . ." You state that prior to the new Corporation Code: that Office, based on the provision of Section 6(2) of the then existing Corporation Law, required all corporations applying for a Certificate of Public Convenience to clearly state in their articles of incorporation that the business of transportation was their primary or secondary purpose. However, with the passage of the new Code, a view persists that, by virtue of Section 14(2) of the new Code which does not carry the proviso in Section 6(2) of the old Corporation Law (see underscored portion of Section 6(2), supra ), it is no longer necessary for a corporation desiring to engage in the transportation business to state in its articles of incorporation that such (transportation) business is its primary or secondary purpose. Allegedly, the rationale therefor is "to encourage all kinds of corporations to engage in transportation so as to stimulate the economy". We find nothing in the provision of Section 14(2) of the new Corporation Code which supports the aforestated view. The omission of the proviso in Section 6(2) limiting the powers of a corporation engaged in the business of transportation to those necessary and incidental to the accomplishment of its said purpose does not, by itself, imply that it is no longer necessary for a corporation which intends to engage in the transportation business to state such purpose in its articles of incorporation. In fact, Section 14(2) categorically requires every corporation to state in its articles of incorporation the "specific purpose or purposes for which the corporation is being incorporated", which means that any and all purposes of a corporation, whether it be for the purpose of engaging in the transportation business or for other lawful purpose/s, should be stated in the articles of incorporation. There are also other provisions in the new Corporation Code which explicitly require each and every intended purpose of a corporation to be stated in the articles of incorporation, such as Section 10 which provides that a corporation may be formed only for lawful purposes; Section 17(2) which provides that the articles of incorporation or any amendment thereto may be disapproved or rejected if the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral or contrary to government rules and regulations: Section 2 and 36(11) which authorize a corporation to exercise only such powers as are essential or necessary to carry out its purpose or purposes as stated in its articles of incorporation; and Section 45 which considers a corporate act to be ultra vires if it is not within its express, incidental or implied powers. In fine, the rationale for the requirement of stating the purpose or purposes of the corporation in its articles of incorporation is to map out the scope and limits of corporate powers. As provided for in Sections 2, 36(11) and 45, abovecited, a corporation has only such powers as are granted to it by law and by its articles of incorporation and those which may be necessary or incidental to such conferred powers. The purpose clause in the articles of incorporation is, therefore, necessary as it "confers as well as limits the powers which a corporation may exercise". (Campos, The Corporation Code, 1990 ed.) Based on the foregoing, it is our view that a Certificate of Public Convenience may be granted to a corporation only if the purpose of engaging in the business of transportation is clearly stated in its articles of incorporation. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary