Mr. Roberto Jose Ramos

July 11, 1996 Mr. Roberto Jose Ramos PAL Employees' Mutual Aid Benefits Assn.,Inc. Facilities Maintenance Bldg.,Gate II, Nichols Field, Pasay City S i r : This refers to your letter dated June 17, 1996 inquiring whether PAL EMPLOYEES MUTUAL BENEFIT ASSOCIATION, INC. can borrow funds outside to help finance its members retirement benefits project. The general rule is that the management of a corporation, in the absence of express restrictions, has discretionary authority to enter into contracts and transactions which may be deemed reasonably incidental to its business purposes. (Ballantine on Corporations, sec. 83 at 224).The statement of the objects and purpose in the articles of incorporation sets the limit of the powers or authority of the management, both those stated in the articles or those given by statute. "So, the mention of general powers such those ...to borrow money ...must be deemed auxiliary or ancillary to the primary, authorized purposes and limited thereby" (SEC Opinion dtd. Sept. 21, 1987 addressed to Yap and Associates, citing Ballantine on Corporations) The exercise of implied powers is expressly recognized by the Corporation Code, particularly under paragraph eleven of Section 36 thereof. The law provides thus: "SECTION 36. Corporate Powers and Capacity . Every corporation incorporated under this Code has the power and capacity. xxx xxx xxx 11. To exercise such other powers as may be essential or necessary to carry out its purpose or stated in its articles of incorporation." (Emphasis supplied) In the light of the foregoing, your corporation, when necessary in the pursuit of its objectives, may borrow money. However, since your corporation is a " mutual benefit association ", the transaction is subject to the provisions of PD 1460, otherwise known as the INSURANCE CODE, particularly Chapter VII thereof relating to " Mutual Benefit Associations ",and pertinent Rules and Regulations implemented by the Office of the Insurance Commissioner. LexLib Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Chairman