Ms. Maria Francisca Viado

July 3, 1989 Ms. Maria Francisca Viado 3 Pelayo Street BF Homes, Capitol Site Quezon City, Metro Manila Madam: This refers to your letter, dated May 3, 1989, inquiring on the propriety of the following acts of the Abra River Irrigators' Association, Inc. as explained therein: 1. Manner of holding its annual election; 2. Procedure in the adoption/amendments of its by-laws; 3. Hold-over status of its Directors/Officers. Relative to the manner of election, Section 24 of the Corporation Code provides in part as follows: "SECTION 24. Election of Directors or Trustees . At all elections of directors or trustees there must be present, either in person or by representative authorized to act by written proxy, the owners of majority of the outstanding capital stock, or if there be no capital stock a majority of the members entitled to vote . The aforequoted provision of law provides that for the election of the members of the Board of a non-stock corporation, it is necessary that at least a majority of all the members entitled to vote must be present either in person or by proxy at the meeting held for the purpose . Likewise, Section 47 of the Code provides: "SECTION 47. Contents of by-laws . Subject to the provisions of the Constitution, this Code, other special laws and the articles of incorporation, or private corporation may provide in its by-laws for: xxx xxx xxx 7. The manner of election or appointment and the term of office of all officers other than the directors or trustees ....(Emphasis supplied) In view of the foregoing, the association cannot adopt a manner of electing the members of the Board other than the method prescribed under Section 24 of the Corporation Code. Thus, pursuant to the said provision of law, the by-laws of the association provide: "SECTION 3 ...(article VIII) B. The Board of Trustees is composed of eleven (11) trustees elected by the members in the annual general assembly meeting ...." (Emphasis supplied) As to the election of officers, it is clear from the aforecited provision of Section 47 of the Code that the manner of election of the officers may be provided for in the by-laws of the corporation. Likewise Section 92 of the Corporation Code provides in part: "SECTION 92. ... xxx xxx xxx Unless otherwise provided for in the articles of incorporation or the by-laws, officers of non-stock corporation may be directly elected by the members ." (emphasis supplied) A verification of the by-laws of subject association disclosed that the officers of the corporation shall be elected by the members. The by-laws provides, thus: "SECTION 3. ...(Article VIII) c. Except the RCB trustee and the NIA trustee, immediately after their election, the General Assembly shall directly elect the officers of the association from among the trustees: ..." (emphasis supplied). Anent the procedure in the adoption/amendments of by-laws the pertinent provisions of the Corporation Code provide: "SECTION 46. Adoption of by-laws . ... For the adoption of by-laws by the corporation the affirmative vote of the stockholders representing at least a majority of the outstanding capital stock, or of at least a majority of the members, in case of non-stock corporation, shall be necessary .... SECTION 48. Amendments to by-laws . The board of directors or trustees, by a majority vote thereof,and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a non-stock corporation, at a regular or a special meeting duly called for the purpose may amend or repeal any by-laws or adopt new by-laws .The owners of two thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a non-stock corporation may delegate to the board of directors or trustees the power to amend or repeal any by-laws or adopt new by-laws: Provided, That any power delegated to the board of directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be considered as revoked whenever stockholders owning or representing a majority of the outstanding capital stock or a majority of the members in non-stock corporation, shall so vote at a regular or special meeting. xxx xxx xxx The amended or new by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code." Corollary thereto, the latest approved amended by-laws of the association provides thus: cdlex "ARTICLE XXI. These by-laws may be amended, repealed or altered in whole or in part by the affirmative vote of the majority of the members of the association and majority Board at any meeting, regular or special, duly called for the purpose .The members may also, by two-thirds (2/3) vote of all the members in good standing, delegate the power to amend, alter or repeal or adopt new by-laws to the Board of Trustees who may thus act by majority vote. It is worth mentioning that the by-laws are private laws of the corporation. They are in effect written into the charter and in this sense, they became part of the fundamental law of the corporation, and the corporation and its directors and officers are bound by and must comply with them. (8 Fletcher, 750-751). Relative to the hold-over status of its present Directors/Officers, generally, there must be an annual election of directors and officers. However, in case of failure of the corporation to hold an election due to any justifiable reason, the incumbent board may hold-over their office until their successors are duly elected and qualified. This hold-over principle is sanctioned under the provision 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 (Section 23, Corporation Code). However, it must be noted that hold-over is a situation that arises when no successor is elected in which case the incumbent holds over and continue the function until another officer is chosen and qualified . (Govt. vs. El Hogar 50 Phil. 399 p. 394, Philippine Legal Encyclopedia). Under the circumstances stated in your letter the reason for the hold-over of the present Board/Officers is not for failure to elect new set of Directors/Officers but to give the incumbents more time to learn. Thus, unless the hold-over is concurred by at least majority of the members, the same is in violation of the provision of the Corporation Code requiring for an annual election of the Directors/Officers. Please be guided accordingly. LexLib Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner