Association For Islamic Development

December 23, 1988 Association For Islamic Development (AID),Inc. C/O Mr. Ustadz Ismael Calalagan P.O. Box 1502 Pagadian City Gentlemen : This refers to your letter dated December 16, 1988, requesting for opinion on the following query: cdll "Can the Association For Islamic Development, Incorporated (AID) in the name of its corporate entity as non-stock association invest donations coming from Samaritan Muslims and Islamic State to acquire assets, like lands, fish pond all within the limits of the law, rice mill and other profitable ventures, whose earnings if there is any will solely be devoted and to be expended exclusively in the maintenance and other operating expenses of the finished and unfinished projects of the AID?" Section 87 of the Corporation Code defines a non-stock corporation as one where no part of its income is distributable as dividends to its members, trustees, or officers (subject to the provisions of the 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 Title XI of the Code." The fact that a non-profit corporation earns a profit as a legal entity, as distinguished from profit, gain or income to the incorporators or members, does not make it a profit-making corporation where such profit or income is used for the purposes set forth in the articles of incorporation and is not distributed to its incorporators, members or officers, since mere intangible or pecuniary benefits to the members do not change the nature of the corporation." (A Fletcher Cyc. Corp., 1983 rev. vol., sec. 112 at 151). 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. (SEC Opinion dated September 9, 1988) Well-settled is the rule that a corporation has only such powers as are expressly granted in its charter or in the statute under which it is created or such powers as are necessary for the purposes of carrying out its express powers. (13 Am. Jur. sec. 739).The corporate business is limited by the corporation's charter, and "it is illegal for a corporation to apply either its capital or its profits to objects not contemplated by its charter." (Am. Jur. Supra, citing Dodge v. Voolsey, 18 How (US) 331, 15 L. ed. 401).Any such powers as are reasonably necessary to enable corporations to carry out the express powers granted and the purposes of the creation are to be implied as are to be deemed incidental (Am. Jur.,Supra, sec. 740).Powers merely convenient or useful are not implied if they are not essential, having in view the nature and object of incorporation. (Ibid, citing Planters Bank v. Sharp, 6 How (US) 301, 12 L. ed. 447). Accordingly, for the corporation to validly pursue the activity raised in your basic letter, it is advised that the corporation should first amend its articles of incorporation in accordance with Section 16 of the Corporation Code, likewise, it should amend its "Modus Operandi" to reflect the proposed activity therein and to clearly indicate that no income or profits derived therefrom should ever be distributed to the members, directors or officers of the corporation. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman