Mr. Manuel A. Serdan

September 18, 1990 Mr. Manuel A. Serdan 93 Esperas Avenue Tacloban City S i r : This refers to your letter inquiring on the legality of the operation of the Leyte-Samar Rural Development Workers Association, Inc.,a non-stock and non-profit corporation based in Tacloban City, which has allegedly been operating as manufacturer and dealer of construction materials. Section 87 of the Corporation Code defines a non-stock corporation as follows: "SECTION 87. Definition . For the purpose of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution: Provided, That any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this title." (Emphasis supplied) In line with the foregoing, non-stock corporations are not empowered to venture on economic business activities. However, as incident to its purpose(s) ,it may derive income or profit reasonably necessary to carry out the purpose(s) for which the corporation was organized. Any such powers as are reasonably necessary to enable corporations to carry out the express powers granted and the purposes of the creation are to be implied as are to be deemed incidental . (SEC Opinion dated January 25, 1988 citing AM. Jur., sec. 740) Powers merely convenient or useful are not implied if they are not essential ,having in view the nature and object of incorporation. (Ibid, citing Planters Bank v. Sharp, 6 How (VS) 301. 12L, ed. 447) A reading of the purposes of the corporation as enumerated in its articles of incorporation disclosed that the alleged business venture of the Association is neither incidental nor necessary to carry out the objectives for which the association was organized. Likewise, Section 14(2) of the Corporation Code provides: "SECTION 14. Contents of the articles of incorporation, ... 2. ....Provided, That a non-stock corporation may not include a purpose which would change or contradict its nature as such ." Emphasis supplied) Accordingly, the Association is not legally authorized to undertake the above-mentioned alleged business venture. In view of your allegations against the Association, the Commission, on even date, referred your letter to our Prosecution and Enforcement Department for further investigation. (SGD.) ROSARIO N. LOPEZ Chairman