LBT & Sons Company, Inc.

March 25, 1986 LBT & Sons Company, Inc. 846 Sto. Cristo St. Binondo, Manila Gentlemen: This refers to your letter, dated March 14, 1986, requesting for a liberalization of the ruling of this Commission requiring alien membership in the board of directors of a corporation to be proportionate to their equity participation therein. prcd There is no specific provision in the Corporation Code which prescribes citizenship requirement for the members of the board of directors of a corporation. The only relative provision thereto is Section 23 of the Code which provides that "a majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines." Commonwealth Act No. 108, as amended, otherwise known as the "Anti-Dummy Law," penalizes the intervention of aliens in the management, operation, administration or control of a nationalized enterprise or activity. It had been settled, however, by PD No. 715, under Section 1 thereof, amending Section 2-A of Commonwealth Act 108, as amended, "that election of aliens as members of the Board of Directors of governing body of corporations or associations engaging in partially nationalized activity shall be allowed in proportion to their allowable participation or share in the capital of such entities." While the above-quoted section of PD 715 speaks of application to partially nationalized activity, it can be deduced from the objective in the enactment of PD 715 that the limitation on alien participation in the Board likewise applies to permitted investments under Section 67 of PD 1789 * , (Omnibus Investments Code). The prefatory clause of PD 715 provides thus: "Whereas, it is fair and equitable and in line with the constitutional policy expressed in Article XIV, Section 5 of the Constitution, that foreign investors be allowed limited representation in the governing board or body of corporations or associations in proportion to their allowable participation in the equity of the said entities ." Accordingly, the Commission, in its previous opinions, ruled that intention of the law is to grant alien investors only proportionate representation in the Board of Directors, (In re: The Nutcracker Far East Corporation; SEC Opinion dated October 3, 1983). Said ruling of the Commission has the support of the Board of Investments as expressed in its letter to this Commission, dated September 2, 1983, copy enclosed. cdll Considering the foregoing, you are hereby advised that alien membership in the board of directors of LBT & Sons Company, Inc. must be proportionate to their equity participation in the corporation. Conformably to your further request, action on your application for increase of capital stock shall be held in abeyance pending the court's resolution on the naturalization of Messrs. Alfonso and Carlos Lim. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .