Mr. Elmer E. Estrella

July 7, 1988 Mr. Elmer E. Estrella The Philippine Band of Mercy 22 East Avenue, Diliman, Quezon City P.O. Box 98 Dear Mr. Estrella: This has reference to your letter dated June 15, 1988 inquiring whether or not the Board of Directors of The Philippine Band of Mercy (PBM for short) can create a Board of Advisers pursuant to the provisions of its Articles of Incorporation and By-laws. Your letter states that the members of the Board of Advisers shall be appointed by the Board of Directors and shall act as advisers relative to the corporation's rehabilitation program for the physically handicapped. In this regard, the provisions of Section 8 and paragraph 1 of Section 1 of Article 111 of the corporate by-laws would be applicable, to wit: SECTION 1. Term of Office . . . . . "The Board shall have the power to lay down the policies, promulgate rules and regulations to implement the purpose of the organization and shall be the administrator of all its assets and properties." "SECTION 8. Special Committee . The Board of Directors from time to time create special committees for special purposes. Such committees shall cease to exist after it approved its specific purpose unless decided otherwise by the Board. It is clear from a careful perusal of the aforecited provisions the Board of Directors is given in clear and unequivocal terms, power and authority to lay down policies, promulgate rules and regulations to implement the purpose of the organization and to create special committee for a special purpose. Therefore, the creation of a Board of Advisers is patently within the context of the said provisions. More so because it is intended to advance the purpose or interest for which the corporation was organized. Further, jurisprudence on the matter stresses that the general authority or the power of the Board of Directors is to manage the corporate business and affairs of the stockholders who elect them, and the authority of the directors is absolute when they act within the law, and the questions of policy and internal management are, in the absence of non-feasance, misfeasance and malfeasance, kept wholly to their decision. (Fletcher, Chapter 2 Vol. 5, p. 417). In view thereof, PBM may create a Board of Advisers without amending its charter or by-laws. However, it must be emphasized that the functions thereof should be purely advisory and should not in any manner be granted authority to participate in the management control of the affairs of the corporation, since these powers exclusively belong to the Board of Directors. Moreover, to avoid confusion the said Board should be aptly called Advisory Committee which best suggests the nature of its functions. Please be guided accordingly. (SGD.) JULIO A. SULIT, JR. Chairman