Ms. Sonia R. Tablizo

March 14, 1980 Ms. Sonia R. Tablizo Manager Crisden Enterprises 5 South Avenue, Quezon City Dear Ms. Tablizo: This is to formally acknowledge receipt of your letter dated February 20, 1980 relative to the forthcoming annual election of the Board of Directors of the Chamber of International Trade (CIT) on March 22, 1980. According to your letter, Section II of Article V of the CIT's Constitution and By-Laws provides that the members thereof shall elect fifteen (15) Directors by a plurality of votes at the annual election who shall serve for one year and until their successors shall have been duly elected and qualified; that should there be a tie for the fifteenth (15) place, the last two winning candidates shall split the term of office equally between them; that, nevertheless, the members of CIT practiced a scheme whereby they reserve the vote twelve (12) seats for Filipinos and three (3) seats for foreigners; that the first three (3) foreigners who garner the higher number of votes among themselves, and the first twelve (12) Filipinos also secure the higher number of votes among the locals are declared elected to the Board; that you are asking whether or not the Committee Election and/or present Board may rightfully discard this practice or whether the same is legally tenable. Please be advised that the Corporation Law, as amended, expressly provides in part that: "SECTION 31. At all election of directors, ....Directors receiving the highest number of votes shall be declared elected ...." This provision of law therefore squarely answers your query to the effect that the practice of the CIT is not legally tenable and may be discarded. However, this Commission sometimes makes allowance to such a scheme in order to preserve its international flavor, similar to nationwide organizations which reserves seats for delegates or directors from Luzon, Visayas and Mindanao in order to prevent Luzon delegates from monopolizing the Board. This is due to the fact that nowhere does Section 31 of the Corporation Law expressly provide that the system of reserving positions through proper nominations made by the members in the Board of Directors illegal per se. But this scheme must be stated in the by-laws, otherwise, it has no binding force and effect. cdlex Moreover, with respect to the provision of your Amended By Laws regarding the splitting of the term of office between the last two (2) winning candidates for the directorship of your corporation should there be a tie for the fifteenth place, please be advised that this Commission had occasion to rule on the invalidity of such a scheme or agreement, to wit: "The law fixes the term of office of the president and other officers of the corporation to one year and until their successors are elected and qualified. (Sec. 29, Corporation Law, as amended). This being the law it cannot be shortened by agreement of the parties or by those interested in the position. Authorities are replete on this point. The appointment of officers by the directors cannot be made the subject of a valid contract between the directors and persons seeking such appointment. (McQuade vs. Stoneham, 263 N.Y. 323, 189 N.E. 234, Revlg 238 App. Div. 827, 262 N.Y. Supp. 966 which affirmed 142 Misc. 842, 256 N.Y. Supp. 431, 2 Fletcher p. 78) "The appointment ought not to be made a matter of bargain and sale between applicants and members of the Board." (Noel v Drabe 128 Kan. 265, 42 Am. Jur. 162, 2 Fletcher p. 78). It is therefore our opinion that the above-mentioned agreement is contrary to law and public policy and is therefore void. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department