Mr. Abraham L. Cu

December 27, 1993 Mr. Abraham L. Cu Renewable Energy Association of the Philippines, Inc., c/o DOE-NCED, Merritt Road, Fort Bonifacio, Makati, Metro Manila S i r : This refers to your letter of December 21, 1993 requesting opinion whether Renewable Energy Association of the Philippines (REAP),a non-stock, non-profit corporation is authorized to engage in consultancy, research, feasibility studies, data gathering in various fields of energy related activities being bidded out by government agencies, foundations, etc. and/or enter into contracts related thereto for a fee t o support the Association's objectives. LexLib Section 87 of the Corporation Code defines a non-stock corporation as follows: "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) Under the foregoing provision, non-stock, non-profit corporations, as a general rule, are not empowered to venture on profitable business activities . However, as incident to its purpose(s), it may engage in business activities which are reasonably necessary to carry out the purpose(s) for which the corporation was organized. Any such power which is reasonably necessary to enable a corporation to carry out its express powers granted and the purposes of its creation is to be deemed implied or incidental purpose. (SEC Opinion dated February 18, 1993 addressed to Erlinda B. Ahoro, 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 profitable business activities they may, as incident to their purposes, engage in such business activities which are reasonably necessary or essential to carry out the purpose(s) for which they are 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. Therefore, in determining whether a non-stock corporation can engage in business activities for profit, much would depend on the purpose clause provision in its articles of incorporation. If the business activity is not incidental, necessary or essential to carry out the express objectives of the corporation as appearing in its articles of incorporation, the same cannot be undertaken by a non-stock corporation. A perusal of the articles of incorporation of subject corporation disclosed that the above mentioned activities are not necessary or essential to carry out the purpose for which the corporation was organized as appearing in its articles of incorporation, quoted hereunder: ''Within the limits provided by law, to serve as an administrative arm of the members in the implementation of projects, plans and programs of common interest and as a vehicle by which policies may be formulated and effectively executed in the best interest of the members. In the furtherance of its primary objective, to foster and develop understanding, cooperation and fellowship among its members; to collaborate and coordinate with and assist the government and its agencies in the formulation of laws, policies, rules and regulations, relating to the promotion and use of renewable energy; to establish or affiliate and maintain relationship with foreign associations organized for similar purposes, to sponsor and promote scholarship or research in renewable energy engineering and technology; and to perform other activities necessary for the accomplishment of the purposes herein enumerated. Moreover, the Articles of Incorporation expressly enumerates the following sources of funds to finance the objectives of the corporation: That the Corporation shall have no capital stock and shall be maintained and financed by equitable contributions, assessments and levies imposed on the members by the Board of Directors." (Emphasis supplied) Hence, the above-mentioned proposed activities which will be undertaken for a fee cannot be considered as incidental powers of the corporation. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman