Mr. Zosimo O. Orille

May 18, 1993 Mr. Zosimo O. Orille Tiremakers Savings and Loan Association Inc. Km. 21 South Superhighway, Muntinlupa, Metro Manila S i r : This refers to your letter of May 6, 1993 requesting opinion on the following queries: 1. Whether incumbent Trustees who were elected in 1992 can legally continue to serve and function as such in a "hold-over" capacity for failure of the corporation to elect the new set of Board for 1993 due to lack of quorum and whether they can elect from among themselves the officers until the regular elections in the next annual meeting of members in 1994. llcd 2. If in the affirmative, whether the "hold-over" Trustees can elector appoint replacements for two (2) vacancies in the Board left by two (2) Trustees, who resigned towards the end of year 1992, to complete the composition of the Board and for said replacements to serve until the regular elections in the next annual meeting of members in 1994. The general rule is that, there must be an annual election of directors on the date fixed in the by-laws. However, in case of failure of the corporation to hold an election due to some valid and justifiable reasons, the incumbent members of the board may hold-over their office until their successors are duly elected and qualified. This hold-over principle is sanctioned under Section 23 of the Corporation Code which provides that the Board of Directors "shall hold office for one (1) year and until their successors are elected and qualified ".It can be construed from the preceding underlined phrase that the corporation should hold another meeting to elect a new set of Board. The non-hooding of annual meeting cannot be justified by mere reasons that big expenses is incurred if another meeting is to be held for the purpose and the uncertainty that quorum can be secured. The corporation should, as soon as possible, call a special meeting for such purpose with proper notice given to all members. Non-holding of annual meeting without justifiable reason is subject to the "SEC Rules Governing the Filing of Information Sheet by Domestic Corporation".It has to be emphasized that violation of said Rules carries with it the corresponding penalty prescribed therein. Relative to your second query, the corporation, under the circumstances mentioned in your letter, need not fill in the slots vacated by the two (2) directors, for as long as there is still a quorum in the board. As earlier advised, the Corporation must call a special meeting to elect a new set of Board for the year 1993. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman