Mrs. Juanita Quiambao

September 30, 2002 SEC OPINION Mrs. Juanita Quiambao Bay #10 Stella Maris Bldg. 891 Aurora Blvd.,Cubao, Quezon City Dear Mrs. Quiambao, This refers to your letter dated September 23, 2002 requesting opinion on the issues raised therein: Firstly, an incorporator can not be removed as such by mere resolution of the board of directors. "An incorporator's relationship to the corporation, as such, cannot be affected by any transfer or assignment of his interest in the corporation." (Lopez, Corporation C od e, p. 79) Their being an incorporator is already an accomplished fact. An incorporating stockholder cannot be involuntarily deprived of his interest or right to his shareholdings by the directors. He may however transfer his shares anytime, at his option though .And the directors can not exercise this option which belongs to the shareholder himself. Hence, he cannot be removed as a stockholder by the directors. Shares of stock are personal property having the same characteristics as any other property, and the owner, has absolute control over his shareholdings to the exclusion of others including the board of directors. But a director can be removed in accordance with the procedure under the by-laws of the corporation and the Corporation Code. Section 28 of the Corporation Code provides for the procedure for the removal of directors/trustees: "Sec. 28. Removal of directors/trustees . Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing two-thirds (2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of two-thirds of the members entitled to vote; Provided, That such removal shall take place either at a regular meeting of the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be given by publication or by written notice as prescribed in this Code. The vacancy resulting from removal pursuant to this section may be filled by election at the same meeting without further notice, or at any regular or any special meeting called for the purpose, after giving notice as prescribed in this Code. Removal may be with or without cause: Provided, That removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code." THcEaS The authority to elect or remove the members of the board of directors/trustees is lodged in the stockholders/members of a corporation. Since the law expressly confers that authority to the stockholders/members, the directors cannot indirectly usurp or disregard the same. Hence, "the board of directors can not remove two of their directors who have been delinquent in the payment of their dues: (SEC Opinion dated May 23, 1985, Vernida I Condominium Corporation) Secondly, the period for sending notice of meetings to the stockholders or members is that provided for in the by-laws. In the absence thereof, Sec. 50 of the Corporation Code applies: "Sec. 50. Regular and Special Meetings of stockholders or members . Regular meeting of stockholders or members shall be held annually on a date fixed in the by-laws, or if not so fixed, on any date in April of every year as determined by the board of directors or trustees: Provided, That written notice of regular meetings shall be sent to all stockholders or members of record at least two (2) weeks prior to the meeting, unless a different period is required by the by-laws . Special meetings of stockholders or members shall be held at any time deemed necessary or as provided in the by-laws: Provided, however, That at least one (1) week written notice shall be sent to all stockholders or members unless otherwise provided in the by-laws . Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member. xxx xxx xxx" Based on the foregoing provision, the notice of regular meetings shall be sent two (2) weeks prior to the meeting, or in case of special meetings, one (1) week prior to the scheduled meeting. Very truly yours, (SGD.) BENITO A. CATARAN Director Company Registration and Monitoring Department