Sycip, Salazar, Feliciano & Hernandez

August 4, 1986 Sycip, Salazar, Feliciano & Hernandez 105 Paseo de Roxas, Makati, MM Attention : Atty . Emmanuel Paras Sir : This related to your letter, dated July 23, 1986, requesting the opinion of this Commission on the queries posed therein. It appears that your client, International Corporate Bank, Inc. (INTERBANK),is a banking institution duly organized and existing under the laws of the Philippines. Mr. Benigno Zialcita, Jr.,a stockholder owning one share of stock of INTERBANK wishes to inspect the corporate records (e.g.,stock and transfer book, canceled certificates of stock, Articles of Incorporation, by-laws) of said bank through an Attorney-in-fact. While INTERBANK is willing to accede to the demands of Mr. Zialcita, nevertheless, considering the confidential nature of banking practices and procedures, the bank requested for his purpose in inspecting and procuring copies of corporate records. The bank believes that certain persons, who are not stockholders of record, are after the information which Mr. Zialcita could obtain the exercise of his right of inspection. Such access by third persons can be prejudicial to the bank, and has, thus, expressed its apprehension on the matter to Mr. Zialcita. Hence, the following queries: 1. May the authority of a stockholder to inspect corporate records be properly delegated? 2. What are the limitations on a stockholder's right to inspect corporate records? cdll Your first query is answered in the affirmative. Our Supreme Court has held that the right of inspection given to a stockholder in Section 74 of the Corporation Code "can be exercised by himself or by any proper representative or attorney-in-fact, and either with or without the attendance of the stockholders. This is in conformity with the general rule that what a man may do in person he may do through another." (Agbayani, Commercial Laws of the Philippines, Vol. 3, 1984 ed., p. 558, citing Philpotts v. Phil. Manufacturing Co., G.R. No. 15568, November 8, 1919, 40 Phil. 471). As regards your second query, please be informed that the statutory right of inspection of corporate records accorded to the stockholders is not absolute and the corporation may show in defense that the stockholder is acting from wrongful motives. (Ballantine on Corporations, sec. 160, p. 377). The burden is usually held upon the corporation to establish a probability that the applicant is attempting to gain inspection for a purpose not connected with his interests as a shareholder, or that his purpose is otherwise improper .(Ballantine, Supra, at 378-379).Cited hereunder are some limitations or improper purposes which may justify denial of right of inspection, such as: "(1) obtaining of information as to business secrets or to aid a competitor; (2) to secure business prospects or investment or advertising lists; (3) to find technical defects in corporate transactions in order to bring 'strike suits' for purposes of blackmail or extortion." (Ibid). Please be advised accordingly. cdlex Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman