DOJ Opinion No. 212, s. 1982

DOJ OPINION NO. 212 , s. 1982 October 5, 1982 The Chairman Presidential Commission on Reorganization 2934 Magsaysay Boulevard Manila This refers to the query of the Chief Legal Counsel of the PEFTOK Investment and Development Corporation (PEFTOK-IDC) as to the number of members of the Board of Directors of the aforesaid corporation who must be elected in accordance with Presidential Decree No. 257, as amended (the Decree creating the PEFTOK-IDC), which query you have referred to this Ministry for opinion. You state that your view is that "all the nine (9) members [six (6) PEFTOK veterans originally designated by the President plus three (3) ex-officio members] of the Board of Directors of the Corporation may be elected by the bona fide PEFTOK veterans who have been issued their corresponding shares of stock", in consonance with Section 2 of P.D. No. 257; that the three (3) ex-officio members (the Minister of National Defense, the AFP Chief of Staff, and the PEFTOK Veterans Association President) "shall serve and act as Directors until their successors are elected by the stockholders" in accordance with Section 3-A of the said Decree; and that even under such a situation the three (3) ex-officio members may continue to be members if this is so desired by the corporation. Subject to our extended discussion hereunder set forth, we concur with your view that all of the nine (9) members of the Board of Directors of the PEFTOK-IDC may be elected by the bona fide PEFTOK veterans in accordance with P.D. No. 257. LexLib Presidential Decree No. 257 provides insofar as is pertinent: "Section 2. The Corporation shall be governed and its activity shall be directed , controlled and managed by a Board of Directors which shall be composed of the Secretary of National Defense , the Chief of Staff of the Armed Forces of the Philippines the President of the PEFTOK Veterans Association , Incorporated and six (6) other persons who shall be designated by the President of the Philippines from a list of qualified PEFTOK veterans. The six (6) persons so designated shall serve and act as Directors from the date hereof until their successors are elected and qualified as provided for in the by-laws of the corporation." (Emphasis supplied.) "SEC. 3. . . . "At least fifty-one percent (51%) of the capital stock of the PEFTOK Corporation shall be fully subscribed by the Government of the Republic of the Philippines for and in behalf of the PEFTOK veterans and the amount of two million one hundred ninety-eight thousand and three hundred sixty (P2,198,360.00) pesos shall be initially paid and transferred to said corporation out of the PEFTOK savings under Republic Act No. 573; Provided, That within three years from the date of the proclamation of this decree all shares of capital stock subscribed and held by the Government of the Republic of the Philippines for and in behalf of the PEFTOK veterans shall be transferred to and in the name of PEFTOK veterans who shall thereafter vote said common shares . A PEFTOK veterans, his widow, or legitimate children shall only be entitled to thirty common shares: Provided, That after all the members of PEFTOK units shall have been determined, and declared to have been accounted for, by the Board of Directors, the Board shall immediately determine the number of unsubscribed capital stock of the corporation which shall be made available for subscription by PEFTOK veterana." (As amended by P.D. No. 536; Emphasis supplied.) xxx xxx xxx "Section 3-A. Until such time that the majority of all the bona fide PEFTOK veterans shall have been accounted for, issued their corresponding shares of stock, are able to vote said stocks and elect the members of the Board of Directors, the ex-officio members of the Board of Directors of the Corporation shall not be changed and the President of the Philippines shall continue to designate effective, on the first day of August every year beginning in the year 1976, from among a list of qualified PEFTOK veterans, the six (6) other members of the Board of Directors of the Corporation ." (As inserted by P.D. No. 959; emphasis supplied.) It will be noted that under Section 2 of the Decree afore-quoted, the six (6) members of the Board of Directors designated by the President shall serve and act as Directors until their successors are elected and qualified as provided for in the by-laws of the corporation. Section 3 of the same Decree, also afore-quoted, provides that the shares of stock (at least 51% of the capital stock) subscribed and held by the Government for and in behalf of the PEFTOK veterans shall, within three years from the date of the promulgation of the Decree, be transferred to and in the name of PEFTOK veterans who shall vote said shares. Until such transfer is effected and the conditions prescribed in Section 3-A, also afore-quoted, namely: (1) that a majority of all the bona fide PEFTOK veterans have been accounted for; (2) that they are issued their corresponding shares of stock and (3) that they are able to vote said shares of stock and elect the members of the Board of Directors, shall have been complied with, the President shall continue to designate the six (6) members of the Board. In other words, it is only after the afore-mentioned conditions have been complied with that the six (6) members of the Board may be voted upon and/or elected by the stockholders of the corporation in accordance with its by-laws. The same rule will apply with equal force to the three (3) ex-officio members specifically designated in the decree. The clear meaning of Section 3-A in relation to Section 3 of the decree, both supra , is that the three (3) ex-officio members may be changed only after compliance with the aforementioned condition and by means of the stockholders' action of electing their successors. It follows as a matter of course that upon the election and qualification of those elected, the ex-officio members shall cease to be members of the Board of the Corporation, unless they themselves shall have been elected by the stockholders, in which case they shall, upon their election and qualification, continue to act and serve as Directors no longer in an ex-officio capacity, but as regularly elected Directors for the term that they have been so elected. LexLib WHEREFORE, we reiterate our answer to the query hereinabove set forth. Very truly yours, For the Minister of Justice: (SGD.) JESUS N. BORROMEO Deputy Minister