Mr. Hans-Jachims Hanusch

May 12, 1995 Mr. Hans-Jachims Hanusch Business Center Davao, Inc. Suites 305-320 JLF Parkway Bldg. cor. Magallanes & Quirino Sts. Davao City S i r : This refers to the proposed Articles of Incorporation of Business Center Cagayan De Oro, Inc. and Butuan Business Center, Inc. which were disapproved by the SEC Cagayan De Oro Extension Office due to the following legal defects: 1. The Trustees thereof are not members of the corporation as required under Section 23 of the Corporation Code. 2. It is not legally feasible to incorporate a non-stock corporation without natural or individual persons as members thereof. Section 10 of the Corporation Code which took effect on May 1, 1980 requires that only "natural persons" are qualified to be incorporators. While under the Articles of Incorporation of the above-mentioned proposed corporations the incorporators are natural persons, they are not qualified to act as such inasmuch as they are not members thereof since under their By-laws the membership of the corporations is only limited to associations, organizations, cooperatives or other groups of small and medium enterprises (individual members not included). While there is no explicit provision in the Corporation Code which requires that an incorporator of a non-stock must be a member of the corporation, the requirement under Section 10 of the Code stating that incorporators of stock corporation must be a stockholder thereof is also applicable to non-stock corporation by virtue of Section 87 of the Code which provides that the provisions governing stock corporation, when pertinent, shall be applicable to non-stock corporations. Pursuant to this provision, the Commission also requires that incorporators of non-stock corporation must be members thereof, in the same way that in stock corporations the incorporators must be stockholders. Since the incorporators of the proposed corporations are not considered as members under the By-laws, they are not qualified to act as such. However, the defect in the present case can be legally remedied. It is well settled that non-stock corporations may provide for classification of membership. The corporation may thus classify its membership into (a) regular members consisting of the qualified members enumerated in the proposed by-laws and (b) duly designated representatives of qualified members under letter (a) but the membership of the latter shall only be for purposes of qualifying them as incorporators or directors. In the case of the membership in the Board while Sections 23 and 92 of the Corporation Code expressly provide that Directors or Trustees of a non-stock corporation must be members thereof, the Commission had occasions to rule that in stock corporations beneficial ownership is not necessary for one to become a director, and that a person who holds the legal title to a stock on the books of the corporation ( qualifying shareholder ) is qualified although the beneficial ownership thereof may be in another. Hence, a trustee or qualifying shareholder may be eligible as director notwithstanding absence of beneficial interest in the stock. Thus, the Commission, in the case of a condominium corporation where all the members thereof are corporate members or juridical persons, previously ruled that an officer or duly authorized agent or trustee who has been designated by a corporate unit owner/member or a condominium corporation as its representative for the express purpose of qualifying him as director, may be eligible to be elected as director. To rule otherwise would create a situation when there would be no Board of Directors of the Corporation. ( Ltr. to Atty. Augusto B. Sunico dated April 16, 1991 ,citing 2 Fletcher, Cyc. of Corps. 1982 rev. vol. sec. 300 at 93, citing Transamerica Corp. v. Parringtoa, 115 Cal. App. 2d 346, 252 P. 2d 385, 12 USC 72) This principle may also be applied in the case of non-stock corporations whose members consists of corporations, associations or juridical persons. While a corporation cannot act by itself being a juridical person, it can act through its officers or authorized agent or representative who has been duly designated in a Board Resolution. Thus, the articles of incorporation of the above-mentioned proposed corporations may be given due course, provided that a provision for the classification of members to include duly designated authorized representatives of juridical persons as members of the corporation for purposes of qualifying them as incorporators and/or members of the board, shall be inserted therein. llcd Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner