Atty. Reynan B. Perez

January 3, 1986 Atty. Reynan B. Perez AFP Savings and Loan Association, Inc. Camp Aguinaldo cor. EDSA Sir : This has reference to your letter dated June 28, 1985, requesting the confirmation of this Commission on the legality of the proposed amendments to your by-laws mentioned therein. It appears, therein that the by-laws of AFP Savings and Loan Association, Inc. expressly provide: "ARTICLE V. Board of Directors . Section 2 Election and term of Office . The directors who shall be elected by secret ballot to be conducted by a committee on election of 3 members, at the annual meeting shall hold office for a term of one year until their successors shall have been duly elected and qualified. "SECTION 3. (Art. V) Vacancies occurring in the Board, for any cause other than removal may be filled for the unexpired term in a special meeting by the Board still constituting a quorum. xxx xxx xxx." It likewise appears that pursuant to a resolution unanimously approved by the members during the annual membership meeting on February 23, 1985, a committee was created to study the by-laws of subject association and to submit its recommended amendments for ratification by the members in a special membership meeting. Quoted hereunder are the proposed amendments: "a. Staggering of the term of office of the members of the Board such that one-third shall be elected yearly for a term of three (3) years without re-election, provided that initially the entire (15) shall be elected, with the first five (5) garnering the highest number of votes to serve a term of three (3) years, the next five (5) to serve a term of two (2) years, and the last five (5) to serve a term of one year. Sec. 2 Article V to be amended accordingly. b. Change of policy on filling up of vacancies, in the Board, such that vacancies not resulting in lack of quorum shall be filled up for the unexpired period by election during the next annual regular meeting while vacancies resulting in lack of quorum shall be filled up for the unexpired period by a special election by the members to be held within forty (40) days from the occurrence of the last vacancy that results in the lack of quorum. Sec. 3, Article V to be amended accordingly." Anent your first proposal, Section 92 of the Corporation Code provides, and we quote: LexLib "SECTION 92. Election and Term of Trustees . Unless otherwise provided in the articles of incorporation or the by-laws, the board of trustees of non-stock corporations, which may be more than (15) in number as may be fixed in their articles of incorporation or by-laws, shall, as soon as organized, so classify themselves that the term of office of one-third (1/3) of their number shall expire every year; and subsequent elections of trustees comprising one-third (1/3) of the board of trustees shall be held annually and trustees so elected shall have a term of three (3) years. Trustees thereafter elected to fill vacancies occurring before the expiration of a particular term shall hold office only for the unexpired period." Pursuant to the above-quoted provision it is clear that staggering of the term of office of the members of your Board may be allowed. The manner of filling up vacancies in the board is provided by Section 29 of the Corporation Code of the Philippines: "Vacancies in the office of directors or trustees. Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees if still constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only for the unexpired term of his predecessor in office. ..." (emphasis supplied). Allowing the remaining directors or trustees to fill up vacancies avoids the expenses and inconveniences attending the calling of stockholders' or members' meeting, specially where there are many of them. Needless to say, however, the board may refer the filling up of vacancies to the stockholders or members even in those cases where the Code allows the remaining directors to do so themselves . (Campos, Campos, The Corporation C od e, "Comments, Notes and selected Cases, 1981 ed., p. 314). Considering the foregoing, the Commission interposes no objection to the proposed amendments to by-laws of AFP Savings and Loan Association, Inc. Consequently, your attention is invited to the provisions of Section 48 of the Corporation Code which must be complied with. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman