Victorias Milling Company, Inc.

July 19, 1991 Victorias Milling Company, Inc. VMC Bldg.,165 Legaspi Street, Legaspi Village, Makati Metro Manila S i r : This refers to your letter of June 26, 1991, requesting opinion whether Victorias Milling Co.,Inc. (VMC),a stock corporation, can legally pursue a socio-economic development program on a continuing basis for the public welfare and the common good in the Province of Negros Occidental. As stated, one of its subsidiary companies operates sugar cane plantations in the place. For some years now poverty has become widespread among the majority of the people in Negros Occidental, which has spawned insurgency and related problems of peace and order in the area. As one of the companies based in Negros Occidental, VMC has made modest contributions to community development projects or to non-stock, non-profit foundations undertaking such projects, to help alleviate poverty in the region. VMC would, however, like to make its program of general welfare community activities more effective and on a continuing basis because the socio-economic problems demand such corporate program. It now plans to implement a project, known as VMC Socio-Economic Development Assistance Project, which aims to enhance the living conditions of the people of Occidental Negros through (1) provision of credit to income-generating activities (fishing, micro-enterprise, cooperative, farming, integrated farming) designed to increase household income; (2) provision of training and direct service delivery for improved access to basic services (day care, health, potable water system);(3) sub-granting activity which will provide fund to viable non-government organizations (NGOs) operating in Negros Occidental to undertake similar loan support to livelihood activities of target beneficiaries as well as assist communities to have improved access to health, education, training and potable water service. VMC will undertake the Project as its donations for the public welfare and its contributions to the common good in the Province of Occidental Negros. It will finance the Project by appropriating a reasonable percentage of its income and/or accepting financial grants to be spent exclusively for the project. It is your position that VMC can lawfully undertake the Project. Hence, your present request for opinion on the matter. The power of the corporation to donate is expressly recognized by law, particularly, under paragraph 9 of Section 36 thereof, quoted hereunder: "SECTION 36. Corporate power, and capacity . Every corporation incorporated under this Code has the power and capacity: xxx xxx xxx 9. To make reasonable donations ,including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity;" xxx xxx xxx" The power granted under the aforecited provision is applicable to all existing corporations registered prior to the effectivity of the Corporation Code by virtue of the following provision thereof: "SECTION 148. Applicability to existing corporations . All corporation lawfully existing and doing business in the Philippines on the date of the effectivity of this Code and heretofore authorized, licensed or registered by the Securities and Exchange Commission, shall be deemed to have been authorized, licensed or registered under the provisions of this Code ,subject to the terms and conditions of its license, and shall be governed by the provisions hereof: ...." (Emphasis supplied) LexLib Therefore, whether or not such power is included in the articles of incorporation as to what the corporation could do and perform, it is, nevertheless, deemed to be within the scope of its corporate powers by express provision of the Corporation Code. However, it has to be emphasized that although stock corporations have the power to make donations, the board of directors should use good judgment in the exercise of the power. Donations should be reasonable in amount in the light of the corporation's financial condition, bear some reasonable relation to the corporation's interest, and not be so "remote and fanciful" as to excite the opposition of shareholders whose property is being used (6-A Fletcher Sec. 2939).Thus when doubtful as to the amount involved, the stockholders may review the exercise of such corporate power and may inquire into its reasonableness, and if found excessive to afford adequate relief therefrom. In the light of the foregoing, subject corporation may undertake the aforementioned proposed socio-economic development program, subject to the limitation that the donations must be reasonable and shall not prejudice the interest of the creditors and/or stockholders. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman