Re: Directors With Dual Citizenship; Qualifications of Directors and Corporate Officers

August 10, 2010 SEC-OGC OPINION NO. 25-10 RE: DIRECTORS WITH DUAL CITIZENSHIP; QUALIFICATIONS OF DIRECTORS AND CORPORATE OFFICERS Atty. Ricardo C. Atienza Atty. Ricardo C. Atienza Law Office 3747 Gomez Subdivision Ligtasan, Tarlac City Sir : This refers to your query dated 4 March 2010, in relation to your function as counsel and Corporate Secretary of AVESTA REALTY INC. ("AVESTA"),a corporation engaged in the real estate business. You have requested the opinion of the Commission on the following: 1) Whether stockholders of a corporation who are concurrently directors of a corporation may continue in their position as directors of the corporation, considering that they are Filipino-American citizens, "possessed with dual citizenship;" and 2) Whether they can be elected as officers of the corporation, such as President/Chairman or Secretary. Section 5 of the Constitution provides that "Dual allegiance of citizens is inimical to the national interest and shall be dealt with by law." However, the 1986 Constitutional Commission preferred to leave the matter of dual citizenship to ordinary legislation, 1 inasmuch as citizenship once lost, may be reacquired either by naturalization or by repatriation or by a direct grant by law. 2 Thus, Republic Act No. 9225 (R.A. No. 9225), known as the "Citizenship Retention and Re-acquisition Act of 2003" was approved on August 29, 2003. It provides: "...Section 2. Declaration of Policy. It is hereby declared the policy of the State that all Philippine citizens of another country shall be deemed not to have lost their Philippine citizenship under the conditions of this Act. Section 3. Retention of Philippine Citizenship. Any provision of law to the contrary notwithstanding, natural-born citizenship by reason of their naturalization as citizens of a foreign country are hereby deemed to have re-acquired Philippine citizenship upon taking the following oath of allegiance to the Republic: IEAaST "I __________________, solemnly swear (or affirm) that I will support and defend the Constitution of the Republic of the Philippines and obey the laws and legal orders promulgated by the duly constituted authorities of the Philippines; and I hereby declare that I recognize and accept the supreme authority of the Philippines and will maintain true faith and allegiance thereto; and that I imposed this obligation upon myself voluntarily without mental reservation or purpose of evasion." Natural born citizens of the Philippines who, after the effectivity of this Act, become citizens of a foreign country shall retain their Philippine citizenship upon taking the aforesaid oath. . . ." We assume that the stockholders and directors of AVESTA were Filipino citizens ("natural born citizens of the Philippines") who lost their citizenship by assuming American citizenship, but who, in conformity with R.A. No. 9225, took the oath prescribed therein, and thus "retained their Philippine citizenship." Therefore, they are Filipino citizens within the contemplation of R.A. No. 9225. In view of the foregoing, 1) The stockholders of AVESTA who are concurrently directors of a corporation may continue in their position as directors of the corporation, provided they comply with the requirements for directors under Section 23 of the Corporation Code: "Sec. 23. The board of directors or trustees. Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified. (28a) Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock corporations must be members thereof. A majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines." (Emphasis supplied) 2) They may also be elected as officers of the corporation, such as President/Chairman or Secretary, provided that they comply with the requirements of Section 25 of the Corporation Code on officers of corporations. "Sec. 25. Corporate officers, quorum. Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time. HCTaAS The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings." It shall be understood that the foregoing opinion is rendered based solely on the facts and circumstances disclosed and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule binding upon the Commission in other cases whether of similar or dissimilar circumstances. If, upon investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void. Please be guided accordingly. Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel Footnotes 1. I RECORD 190-191, 233 cited in J.G. Bernas, S.J. The 1987 Cons titu tion of the Republic of the Philippines: A Commentary 575 (1996). 2. J.G. Bernas, S.J. The 1987 Cons titu tion of the Republic of the Philippines: A Commentary 573 (1996), citing Commonwealth Act No. 63, Sections 2, 3, 4.