Bengzon Zarraga Narciso Cudala Pecson & Bengson

August 10, 1987 Bengzon Zarraga Narciso Cudala Pecson & Bengson 6th Flr.,SOL Building Amorsolo St.,Legaspi Vill. Makati, Metro Manila Gentlemen : This refers to your letter, dated July 27, 1987, requesting the opinion of this Commission on the queries posed therein. LibLex It appears therein that your client, an American national, is married to a Filipina who is the sole proprietor of a beach resort in Puerto Galera, Oriental Mindoro. They have two (2) children who are both minors. The spouses would like to convert the single proprietorship into a corporation with 30% of the capital stock to be held by the American husband. Seventy (70%) percent of the capital stock shall in turn be held by the wife (30%),and the two minor children (40%),through three (3) Filipino nominees who will hold the children's shares in trust. Your query is, may the three Filipino incorporators hold the shares in trust for the two (2) minor children until the latter have attained the age of majority, and could then exercise acts of administration and ownership over subject shares? Who should appear as the registered owner on the corporate books? What rights could these nominees exercise over subject shares of stock? May the three nominees serve as directors in the proposed corporation? Corporators must have the capacity to contract, hence, it necessarily follows that unless sanctioned by statute, a minor cannot become one of the corporators in forming a corporation for he is not capable of making a binding contract. (2 Fletcher Cyc. Corp., 1983 rev. vol., sec. 83). In our jurisdiction, minority restricts the capacity to act (Art. 38, The Civil Code of the Philippines). Similarly, under Article 1380 of the same Code, minors cannot give consent to a contract and any contract entered into by them are voidable or annullable even though there may have been no damage to the contracting parties. Corollary thereto, the Corporation Code requires the incorporators to be of legal age. (Sec. 15, CCP). The following provisions of the Family Code of the Philippines (Executive Order No. 209), which are pertinent to your queries are quoted as follows: "ARTICLE 220. The parents and those exercising parental authority shall have with respect to their unemancipated children or ward the following rights and duties: xxx xxx xxx (6) To represent them in all matters affecting their interests." "ARTICLE 225. The father and the mother shall jointly exercise legal guardianship over the property of their unemancipated common child without the necessity of a court appointment. In case of disagreement, the father's decision shall prevail, unless there is a judicial order to the contrary. cdlex Where the market value of the property or the annual income of the child exceeds P50,000.00, the parent concerned shall be required to furnish a bond in such amount as the court may determine, but not less than ten per centum (10%) of the value of the property or annual income, to guarantee the performance of the obligations prescribed for general guardians. xxx xxx xxx." Considering that the parents of the minor children are still living and exercising parental authority over them, the three (3) Filipino nominees cannot act as their legal guardians or trustees. Furthermore, Article 226 of the Family Code provides that "The property of the unemancipated child earned or acquired with his work or industry or by onerous or gratuitous title shall belong to the child in ownership and shall be devoted exclusively to the latter's support and education, unless the title or transfer provides otherwise." Your other queries need not be answered for obvious reasons. LibLex Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner