Mr. Conrado B. Roxas

February 24, 1989 Mr. Conrado B. Roxas Land Bank of the Philippines 317-319 Sen. Gil J. Puyat Avenue, Makati, Metro Manila Sir : This refers to your undated letter requesting for clarification on following queries: prcd 1. Are non-stock/non-profit farmers associations allowed to engage in business activities. If not, is it necessary that a non-stock/non-profit farmers association be converted to a non-stock/profit entity to be able to engage in business activities. What are the procedures to be taken? 2. Can non-stock/non-profit farmers association avail of loans from financial institutions for relending to their members. What will be the responsibility of said associations as channels of loans? 3. What are the requirements/procedures in the conversion of a non-stock corporation to a stock corporation? Relative to your 1st query, Section 87 of the Corporation Code defines a non-stock corporation as follows: "SECTION 87. Definition . For the purposes of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution; Provided, That, any profit which a non-stock corporation may obtain as an incident to its operation shall, whenever necessary or proper , be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this title ." (emphasis supplied). cdlex In line with the foregoing, non-stock corporations are not empowered to venture primarily in business activities. However, as incidental to the objects and purposes of the corporation, a non-stock, non-profit corporation may engage in certain economic activities as may be specified in its charter or articles of incorporation, provided, that profits realized as an incident to its operation shall be used for the furtherance of the purpose or purposes for which the corporation was organized. As regards your second query, it is advised that you inquire directly with the Central Bank, as the matter treated therein falls within the jurisdiction of the said office. With regard to your third query, the Commission has previously ruled that a non-stock corporation cannot be converted into a stock corporation by mere amendment of the articles of incorporation. For purposes of transformation, it is fundamental that the non-stock corporation be dissolved first under the methods specified in Title XIV of the Corporation Code. Thereafter, the members may organize a stock corporation directed to bring profits or pecuniary gains to themselves. ( Letter dated September 19, 1988, addressed to Estrella Virginia Contado, Liza Masaquel, Mardonia Ramos and Madeline Suva ). Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman