Technology and Livelihood Resource Center

September 9, 1988 Technology And Livelihood Resource Center TLRC Bldg.,Gil Puyat Avenue, Ext. Makati, Metro Manila Attention : Director Sylvia M . Ordoez Sir/Madam : This refers to your letter, dated September 5, 1988, requesting the official stand of the Commission on the issue raised therein. prcd It appears therein that TLRC is working with a number of non-governmental organizations, in pursuance of a livelihood program involving private civic organizations. These NGOs were incorporated as non-stock, non-profit foundations. In this connection, your query is: Are these non-stock corporations empowered to engage in business? Under Section 88 of the Corporation Code, Non-stock corporations may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural and like chambers, or any combination thereof, subject to the special provisions of Title XI of the Code on non-stock corporations. Section 87 of the Corporation Code defines a non-stock corporation as one where no part of its income is distributable as dividends to its members, trustees, or officers (subject to the provisions of the Code on dissolution), provided, that any profit which a non-stock corporation may obtain as an incident to its operation 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 Title XI of the Code). The fact that a non-profit corporation earns a profit as a legal entity, as distinguished from profit, gain or income to the incorporators or members, does not make it a profit-making corporation where such profit or income is used for the purposes set forth in the articles of incorporation and is not distributed to its incorporators, members or officers, since mere intangible or pecuniary benefits to the members do not change the nature of the corporation." (1A Fletcher Cyc. Corp., 1983 rev. vol., sec. 112, at 151). In line with the foregoing, it is opined that non-stock corporations are not empowered to venture primarily in business activities. However, as incidental to the objects and purposes of the corporation, a non-stock, non-profit corporation may engage certain economic activities as may be specified in its charter or articles of incorporation, provided, however that profits realized as an incident to its operation shall be used for the furtherance of the purpose or purposes for which the corporation was organized. Well settled is the rule that a Corporation has only such powers as are expressly granted in its charter or in the statute under which it is created or such powers as are necessary for the purpose of carrying out its express powers. (13 Am. Jur. sec. 739).The corporate business is limited by the corporation's charter, and "it is illegal for a corporation to apply either its capital or its profits to objects not contemplated by its charter. (Am. Jur.,Supra.,citing Dodge v. Voolsey, 18 How (US) 331, 15 L.ed. 401).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. (Am. Jur.,Supra.,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 (US) 301, 12 L.ed. 447). LibLex Please be guided accordingly. Very truly yours, (SGD.) GONZALO T. SANTOS Associate Commissioner