Philippine Veterans Bank

July 11, 1984 Philippine Veterans Bank Bonifacio Drive, Port Area Manila Attention : Mr . Rafael Arnaldo President Sir : This has reference to your letter dated June 26, 1984, requesting the opinion of this Commission on the query posed therein. It appears therein that the Philippine Veterans Bank operates under a charter, Rep. Act No. 3518, as amended. Its board of directors is composed of eight (8) elective members, five (5) from Luzon, two (2) from Visayas and one (1) from Mindanao, for a term of one (1) year from their election as such. Four (4) members are in the Board in an ex-officio capacity, namely, the President of the bank who acts as Vice Chairman, the President of the Veterans Federation of the Philippines, the Administrator of the Philippine Veterans Affairs Office and the duly designated representative of the Minister of National Defense. It likewise appears that the pertinent provision of the Charter contains a "hold-over" provision. The elective members are directly elected by the veterans-stockholders in a meeting held for the purpose. Furthermore, it appears that on July 13, 1982, elections for the eight directors were held. Their one (1) year term would have terminated sometime on July 12, 1983 to pave the way for the new set of elected directors. However, no elections were held in 1983 based on an approval by the President of the Philippines due to the tremendous expenses involved, the Bank has started to incur losses, and the impending re-organization of the Bank. The incumbent directors continued in a hold-over capacity. Pending the re-organization of the Bank and the contemplated infusion of fresh capital by an agency of the AFP, the office of the President requested that all incumbent directors tender their respective resignations which everybody did. However, said resignations remain unaccepted/unacted upon up to the present. On February 29, 1984, the President signed Presidential Decree No. 1906, which directs the reorganization of the Bank within six (6) months therefrom and authorizes the infusion of fresh capital into the Bank by the AFP Retirement Separation and Benefits System (RSBS) after compliance with certain requirements therein specified in coordination with the Central Bank of the Philippines. Said decree likewise provides that all directors shall be elected by the stockholders in accordance with the Corporation Code except the Bank president and the Minister of National Defense who are to continue in an ex-officio capacity. However, aside from the fact that it is not dated, PD 1906 has not up to the present been officially released by the Office of the President. llcd Under the foregoing circumstances, the management of the Bank is at a quandary as to the status of its board of directors considering that the Charter charge it with responsibility over all the affairs, business and properties of the Bank. You now request this Commission to favor the Bank with an opinion on the status of the board of directors. Section 4 of the Corporation Code provides, and we quote: "SECTION 4. Corporations created by special laws or charters . Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable." Section 6 of Republic Act No. 3518, "An Act Creating the Philippine Veterans' Bank, and for other purposes, provides: "SECTION 6. Qualification and per diems of the Board of Directors. a) The affairs and business of the Veterans Bank shall be directed and its property managed, controlled and preserved, unless otherwise provided in this Act by a Board of Directors consisting of eleven (11) members to be composed of three (3) ex-officio members to wit: The Administrator of the Veterans Affairs Office, the President of the Veterans Federation of the Philippines, and the Ministry of National Defense, and the remaining members, of which five (5) shall come from Luzon, two (2) from the Visayas, one (1) from Mindanao, who shall be veterans of good standing, college graduates, with formal business training and/or experience in banking and finance for a period of five years and who are all actually and physically residing in their region, shall be appointed by the President of the Philippines during the existence of Proclamation No. 1081 dated September 21, 1972, as amended by Proclamation No. 1104 dated January 17, 1973, who shall hold office for one year and until their successors are duly appointed and qualified ." ...(emphasis supplied) The foregoing provision of the PVB Charter therefore, provides for a "hold-over" provision. In previous opinions, this Commission has ruled that: "Directors, trustees or other officers of a corporation elected or appointed for a certain time, may hold over after the expiration of their term until their successors are elected or appointed." (Sec. 334, 2 Fletcher 135, cited in ltr. to Mr. Santos Pascual dtd. Oct. 25, 1971 ). cdlex "Although the members of the Board are hold-over directors, they still possess the powers of bonafide directors until their successors are duly elected and qualified." ( Ltr. to Mr. Pablo Sarmiento dtd. August 3, 1976 ) . From the above provision and rulings and inasmuch as the Charter of the aforesaid bank contains a hold-over provision and since no election for board members has been held after the July 1982 election, it is clear that those elected as members of the Board of Directors in the 1982 election should hold-over said positions until the next election. The same is in consonance with the hold-over provision of the Corporation Code. Please be advised accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman