Atty. Rolando P. Nonato

June 2, 1993 Atty. Rolando P. Nonato Cebu Business and Investments Consultants Ground Floor, CRM Bldg.,Escario corner Molave Sts.,Lahug, Cebu City S i r : This refers your letter of May 21, requesting for a ruling that it is within the power of Word Broadcasting Corporation, a non-stock and non-profit corporation "to own and operate media communications equipment, radio and television stations for broadcasting and/or production purposes, and that it could legally engage commercially in the operation of an AM-FM station. Section 87 of the Corporation Code defines a non-stock corporation as follows: prcd "SECTION 87. Definition . For the purpose of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution: Provided, That any profit which a non-stock corporation may obtain as an incident to its operations 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 this title." (Emphasis supplied) The Corporation Code likewise provides: "SECTION 14. Contents of the articles of incorporation .... xxx xxx xxx (2) ...:Provided, That a non-stock corporation may not include a purpose which would change or contradict its nature as such :" (Emphasis supplied) Under the foregoing provisions, non-stock, non-profit corporations are not empowered to venture on economic business activities . However, as incident to its purpose[s], it may engage in such activities which are reasonably necessary to carry out the purpose[s] for which the corporation was organized. 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. (SEC Opinion dated February 18, 1993, addressed to Erlinda B. Ahorro, citing previous SEC opinion and Am. Jur., sec. 740). However, activities 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 (VS) 301, 121, ED. 447) Thus, while non-stock corporations are not empowered to venture on economic business activities, they may, as incident to their purpose[s], engage in economic business activities which are reasonably necessary or essential to carry out the purpose[s] for which they were organized, but unlike stock corporations, any profit that may be derived from such business activities are not distributable to the members, but are used for the furtherance of corporate purposes, and in case of dissolution, the corporate assets of non-stock corporations shall be distributed in accordance with Sections 94 and 95 of the Corporation Code. Therefore in determining whether subject corporation can engage in the above mentioned-activities, much would depend on the purpose clause provision in its articles of incorporation. If the proposed business activity is not expressly authorized in the articles of incorporation or is neither incidental nor necessary or essential to carry out the express objectives of the corporation as appearing in its articles of incorporation, it cannot undertake such activity. A distinction should be made whether or not the corporation would undertake the above-mentioned activity with the end in view of making profits for distribution to the members. If said business activity is to be pursued purely for the purpose of carrying out the intended purpose[s] for which it was organized which may be any of the purposes enumerated under Section 88 of the Corporation Code and without the end of making profit to be distributed to the members, officers or directors thereof, the same may be undertaken by the corporation. llcd Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman