Arch. J.C. Marquez, FUAP

February 21, 1994 Arch. J.C. Marquez, FUAP National President United Architects of the Philippines Cultural Center of the Philippines, Roxas Boulevard, Metro Manila S i r : This refers to your letter of February 3, 1994 requesting opinion on whether the incumbent National Board of Directors of United Architects of the Philippines is legally authorized to decide and approve the bid on the hosting of an international congress beyond its present term of office, which may entail responsibilities, obligations and financial liabilities to be borne by future boards, officers and administrations, without necessarily consulting the general membership. LibLex It is well-settled that the Board of Directors is the governing body of the corporation with whom the management of the corporate affairs is vested. Section 23 of the Corporation Code provides: "The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate power of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock from among the members of the corporation, who shall hold office for one (1) year and until their successors are elected and qualified." (Emphasis supplied) It is thus within the duty and power of the Board to administer the corporate affairs and in the exercise of such corporate function, it must exert with best care, skill and judgment solely for the interest of the corporation. The peculiar relation the directors bear to the corporation and stockholders/members grows out of the inability of the corporation to act except through such managing officers and agents. The general power and authority in the directors to manage and conduct the affairs of the corporation are absolute so long as they act in accordance with their best judgment, and in the absence of a dishonest purpose, or of fraud, bad faith, or negligence so gross as to amount to a breach of trust, the stockholders/members cannot interfere with the exercise of corporate judgment by the Board relating to the management of the corporation. Accordingly, the acts of Directors within the power of the corporation done in good faith and in the exercise of an honest judgment are valid and binding on the corporation. The dealings of the Board may be subjected to review and scrutiny only where the corporation's or stockholders interest are prejudiced. However, it has to be emphasized that the corporate powers conferred upon the board of directors usually refer to the ordinary business transactions of the corporation and does not extend beyond the management of ordinary corporate affairs nor beyond the limits of its authority. There are some powers which are reserved to the shareholders/members and which cannot be exercised solely by the directors until they are approved or ratified by the stockholders/members. No board can usurp the power of control of the corporation vested by law in the shareholders or members. Thus, while the performance of the corporate functions pertaining to the management of the corporation is vested upon the Board of Directors, the Corporation Code has expressly restricted Board authority and made certain corporate actions to rest for their validity upon the concurrence of the required statutory votes of the stockholders/members by prior action or subsequent ratification, some of which are as follows: 1. Amendments of the articles of incorporation; (Section 16) 2. Adoption of new, amendment or repeal of by-laws; (Section 48) 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate assets. (Section 40) 4. Incurring, creating or increasing bonded indebtedness; (Section 38) 5. Increase or decrease of capital stock; (Section 38) (for stock corporations only) 6. Merger or consolidation of the corporation with another corporation or other corporations; (Section 76) 7. Dissolution of the corporation; (Sections 118-120) cdll 8. Investment of corporate funds in another corporation a business or for any purpose other than the primary purpose; (Section 42) 9. Power of the corporation to enter management contract with another corporation; (Section 43) 10. Power of the corporation to declare stock dividend. (Section 43) (for stock corporations only) Accordingly, since the above-questioned corporate act do not fall under any of the aforementioned transactions which require members' approval, it can be legally carried out by mere Board Resolution, provided the intention of the Board is in good faith and for the best interest of the corporation. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman