Atty. Raymundo N. Beltran

February 4, 1997 Atty. Raymundo N. Beltran Beltran Beltran & Beltran Rms. 400-403 Burke Building Escolta, Manila S i r : This refers to your letter dated January 10, 1997 requesting opinion on the interpretations of Article III, Section 4 of the By-Laws of the Philippine Columbian Association, to wit: cdlex "SECTION 4. Quorum . The presence in the meeting of at least thirty (30) Proprietary members, either in person or by proxy shall constitute a quorum to do business unless a greater number is required by the Corporation law or these By-Laws or by resolution of the Board of directors in special cases." As stated, one group of members says that the mere presence of at least thirty (30) Proprietary members, either in person or by proxy would suffice to constitute a quorum for the " annual membership meeting ".Another group insists that fifty (50%) percent plus one or a majority of the proprietary members in good standing should be present in person or by proxy in order to constitute a quorum at the "annual membership meeting".Since 1994 up to the present, the Association was not able to gather sufficient number of members in person or by proxy equivalent to 50% plus 1 or majority of the members in good standing. Consequently, the 1995 officers are exercising their powers on a mere hold-over capacity. Hence, the issue was raised as to what should constitute a quorum for purposes of annual meeting. While under Sections 47 and 52 of the Corporation Code, a corporation is authorized to provide in its by-laws a specific number of stockholders/members necessary to constitute a quorum for the transaction of corporate business, the provision in the by-laws relative to quorum will not hold true in those instances where the Corporation Code or applicable special law explicitly prescribes the proportion of stockholders or members necessary to resolve or carry out a particular corporate proposal. In such cases, therefore, a quorum shall consist of such ratio of stockholders or members as may be declared by statutory provisions. It is a cardinal rule that a by-law providing what shall constitute a quorum is invalid if it is in conflict with the provisions of statute on the subject. Thus, where the number requiring less than the proportion required by the particular legislation is subordinate to the statute (SEC Opinion dated August 24, 1988 addressed to Bito, Lozada, Ortega & Castillo citing 5 Fletcher Cyc. Corp. Sec. 2013) The pertinent provision of the Corporation Code relative to annual meeting/election of Directors provides: "SECTION 24. Election of directors or trustees . At all elections of directors or trustees, there must be present either in person or by representative authorized to act by written proxy, the owners of the majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote ....Any meeting of the stockholders or members called for an election may adjourn from day to day or from time to time but not sine die or indefinitely if, for any reason, no election is held, or if there are not present or represented by proxy, at the meeting, the owners of the majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote." (emphasis provided) Accordingly, since there is a specific provision in the Corporation Code imposing a required quorum for the election of directors/trustees, the provision in the by-laws of the Association prescribing a quorum shall not apply in the case of annual election of the Board of Directors/Trustees. cdll In the event there is unsuccessful attempt by the corporation or if it would be impossible for the corporation to get the required quorum, the corporation, if it feels necessary, may petition the SEC for the appointment of a management committee, board or body to undertake the management of the corporation pursuant to the provisions of Presidential Decree No. 902-A as amended. Very truly yours, (SGD.) PERFECTO R. YASAY Chairman