Lt. Gen. Fidel V. Ramos

August 26, 1982 Lt. Gen. Fidel V. Ramos c/o PEFTOK Investment & Development Corp. Rm. 406, Sunrise Condominium I Ortigas, San Juan Metro Manila Sir : This has reference to your letter of August 5, 1982, requesting for opinions on the queries posed therein. LexLib It appears that PEFTOK Investment & Development Corporation (PIDC) was created under P.D. # 257, for and on behalf of the officers and enlisted men of the AFP, who served with the Philippine Expeditionary Forces to Korea (PEFTOK) or their widows and legitimate children. The original authorized capital stock of PIDC was P4,000,000 divided into 400,000 common shares of the par value of P10.00 per share, of which 51% has been subscribed and fully paid for by the government of the Republic of the Philippines out of the PEFTOK savings under R.A. # 573. On August 9, 1974, P.D. # 536, amending P.D. # 257, was proclaimed, providing, among others, that within three years from August 9, 1974 all shares of capital stock subscribed and held by the government of the Republic of the Philippines for and on behalf of the PEFTOK veterans shall be transferred to and in the name of the PEFTOK veterans who shall thereafter vote said common shares. Then, came P.D. # 959, dated July 14, 1976, further amending P.D. 257, proclaiming that until such time that the majority of all the bonafide PEFTOK veterans shall have been accounted for, issued their corresponding shares of stock, are able to vote said stocks and elect the members of the Board of Directors, the ex-officio members of the Board of Directors of the corporation shall not be changed and the President of the Philippines shall continue to designate effective, on the first day of August every year beginning in the year 1976, from among a list of qualified PEFTOK veterans, the six (6) other members of the Board of Directors of the corporation. From the facts presented, herein under are our answers to your queries in the order that were presented in your letter: "1. Whether there is no legal impediment for the conversion of PEFTOK Investment and Development Corporation into a purely private corporation; and if there is no such impediment, the mechanics for such conversion." The true criterion to determine the nature of a corporation as public or private is found in the relationship of the corporation to the state. (Agbayani, Commercial Laws of the Philippines, Vol. 3 p. 62).Accordingly, a corporation is private when the whole interest does not belong to the government or when the corporation is not created for the administration of political or municipal power (13 Am Jur.,Sec. 17 p. 172).Inasmuch as the PEFTOK Investment & Development Corporation was not created for political purpose with political powers to be exercised for purposes connected with the public good in the administration of civil government, said corporation may well be classified as private. Subject corporation, meets the requirements of a private corporation, having been formed for some private purpose, benefit, aim or end. It was organized wholly for the profit and advantage of the PEFTOK veterans, their widows and legitimate children. The fact that some or all of the stock in the corporation is held by the government does not even make it a public corporation (1 Fletcher, Cyc. of Corps. Sec. 58, p. 293).In view thereof, there exist no need for any proposed conversion, as PEFTOK Investment & Development Corporation already falls within the classification of a private corporation. "2. Whether six (6) or nine (9) members shall be elected to constitute the members of the board of Directors of PIDC." Section 3-A of P.D. # 959, further amending P.D. # 257, provides thus: "Until such time that the majority of all the bonafide PEFTOK veterans shall have been accounted for, issued their corresponding shares of stock, are able to vote said stocks and elect the members of the Board of Directors, the ex-officio members of the Board of Directors of the corporation shall not be changed and the President of the Philippines shall continue to designate effective, on the first day of August every year beginning in the year 1976, from among the list of qualified PEFTOK veterans, the six (6) other members of the Board of Directors of the corporation." (Emphasis supplied). Complementing this is Section 1, Article II of the by-laws of subject corporation, which in part, provides: "...the general management of the corporation shall be vested in a Board of nine (9) directors ..." Assuming, therefore, that the corporation has met all the conditions spelled out in Sec. 3-A of P.D. # 959, namely: that the majority of all the bonafide PEFTOK veterans have been accounted for, issued their corresponding shares of stock, are able to vote said stocks and elect the members of the Board of Directors, then at the forthcoming annual stockholders' meeting of the corporation, the owners of the majority of the outstanding capital stock may vote in person or by proxy, the nine (9) members of the board of directors of the corporation who shall hold office for one (1) year and until their successors are elected and qualified. "3. In the event of lack of quorum in the PIDC annual stockholders' meeting on September 19, 1982, occasioned by the non-appearance of the veteran-stockholders, in person or by proxies, whether their shares of stock may, by resolution, be voted upon by the PEFTOK Veterans Association, Incorporated (PVAI),an association to which all PEFTOK veterans belong on the premise that such association is the "trustee" of such shares of stock; or may there be other arrangement that can be made to legally constitute a quorum during the said annual stockholders meeting." The provision of Section 3-A of P.D. # 959 is reiterated herein. Thus, in the event that the majority of all the bonafide stockholders of PIDC cannot, as yet, vote their shares and elect the members of the Board of Directors due to some constraints, it is opined that the Minister of National Defense, the Chief of Staff and the President of the Philippine Veterans Association, Inc. shall not be changed and shall continue to serve as directors, together with six (6) other directors to be designated by the President in the manner laid out in Sec 3-A of P.D. # 959. The adoption of said procedure is in accordance with the provisions of Section 4 of the Corporation Code of the Philippines, which in part, reads: "xxx xxx xxx Corporations created by special laws or charter shall be governed primarily by the provisions of the special law or charter applicable to them ..." In view of the foregoing, the Commission finds it unnecessary to answer the queries posed in number 3 hereof. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman