Zamora Soller Baluyut & Mendoza

March 23, 1988 Zamora Soller Baluyut & Mendoza 4th Floor, Glass Tower Alvarado St.,Legaspi Village Makati, Metro Manila Gentlemen : This refers to your letter dated February 20, 1988, requesting opinion of this Commission on the queries posed therein. You quote the following constitutional provision: "The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate shares in the capital, and all executive and managing officers of such corporation or association must be citizens of the Philippines. (Sec. 11, Art. XII). In this connection, your queries are: 1. Who are included in the scope of the term "executive and managing officers of such corporation"? 2. Specifically, would the term include the counsellor, assistance secretary assistant treasurer, external auditor, internal auditor, and check signatory? In reply to your first query, please be advised that the president, vice-president, Secretary and treasurer are commonly regarded as the principal or executive officers of a corporation, and modern corporation statute usually specifically designate them as the officers of the corporation. (2 Fletcher, Cyc. Corp., 1982 rev. vol., sec. 269.1). Apropos thereto, Section 25 of the Corporation Code of the Philippines reads: " Corporate officers, quorum . Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who must be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws ....." (Emphasis supplied). The term "executive officer" as used in a statute, contract, insurance policy or corporate resolution generally implies some sort of managerial responsibility for the affairs of the corporation and imports a close connection with the board of directors. (Fletcher, Op. cit.,p. 29).The meaning and scope of the term "executive" or "executive officer" of corporation depends to a considerable extent on the content and purpose of the particular statute or instrument involved, and the term may be used to include a subordinate officer or even a Key employee and regardless of the title held. (Ibid.) The Commission, on several occasions, has ruled that in firms engaged in wholly or partially nationalized activities, aliens are banned from being appointed to management positions as president, vice-president, treasurers auditor , etc., of the same companies in line with a ruling of the Ministry of Justice, although they can be elected as directors in proportion to their allowable participation or share in the capital of such activities in accordance with the Anti-Dummy Law, as amended by P.D. No. 715. As to whether the assistant secretary, assistant treasurer and check signatory are deemed "executive officers",as earlier stated, much would depend on the provision of the by-laws, or an appropriate resolution of the board of directors. And, while an internal auditor is considered as holding an executive or management position, an external auditor is not so considered. Finally, merely because an individual is appointed attorney or counsellor to a company, without more, he does not become an officer of the company. "But the position of attorney is altered when he agrees to forego his ordinary right of refusing to take up any particular business offered to him, and agrees to do all the company work for a fixed salary, and either to take no fees or if he does to hand them over to the company." (Fletcher, Supra.,sec. 274 at 34). Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman