Mr. Arjay Ronnel H. Julve

July 29, 1999 Mr. Arjay Ronnel H. Julve Rural Bank of Cantilan (Surigao del Sur),Inc. Cantilan, Surigao del Sur S i r : This refers to your letter dated May 31, 1999 inquiring on the legality of the plan of some stockholders of the Rural Bank of Cantilan (Surigao del Sur),Inc. to amend the Bank's by-laws to bar a stockholder who is at the same time an employee of the Bank to run as director, unless he resigns as employee. A provision in the by-laws prescribing a qualification/disqualification of a director as a device to protect the interest of the corporation has been upheld as valid by-law provision. (Gokongwei v. SEC, Soriano, San Miguel, et al., GR L-45911, April 11, 1979). Likewise, Section 47 (5) of the Corporation Code expressly empowers a corporation to provide in its by-laws for the qualification/disqualification of the members of the board of directors. Accordingly, the Bank may validly impose the disqualification mentioned in your letter, provided that such disqualification is clearly and specifically spelled out in the by-laws, subject however to pertinent Rules and Regulations implemented by the Bangko Sentral, if there is any. Please take note that mere board/stockholders resolution or approval is not sufficient to legally enforce the disqualification. It has to be clearly provided for in the corporate by-laws. Very truly yours, (SGD.) SONIA M. BALLO Director Corporate and Legal Department