Mr. Nelo R. Roldan

September 23, 1991 Mr. Nelo R. Roldan 21 Perlas Street, Pangilinan Compound, Project 6 Quezon City S i r : This refers to your letter of September 9, 1991 requesting clarification as to the validity of holding biennial election of the board of trustees of FORESTRY SAVINGS AND LOAN ASSOCIATION, INC. It is your contention that while under Section 92 of the Corporation Code the articles of incorporation or by-laws may provide for the term of office of the Board, elections should be held annually, otherwise, a situation might arise where there would be only two elections to be held during the lifetime of the corporation, if and when the by-laws provide for a term of 25 years for the Trustees. In your case, you believe that the two (2) year term may only be allowed if a corporation has two (2) sets of Trustees, 1/2 to expire every year, thus, allowing the holding of annual elections. llcd The pertinent provision of the Corporation Code provides: "SECTION 92. Election and term of trustees . Unless otherwise provided in the articles of incorporation or the by-laws ,the board of trustees of non-stock corporations ,which may be more than fifteen (15) in number as may be fixed in their articles of incorporation or by-laws, shall, as soon as organized, so classify themselves that the term of office of one-third (1/3) of their number shall expire every year; and subsequent elections of trustees comprising one-third of the board of trustees shall be held annually and trustees so elected shall have a term of three (3) years. Trustees thereafter elected to fill vacancies occurring before the expiration of a particular term shall hold office only for the unexpired period." (Emphasis supplied) xxx xxx xxx It is clear from the above-provision that non-stock corporations are allowed to provide in their articles of incorporation or by-laws the term of office to the Board, hence, biennial election for the Directors is allowable. However while the term of directors or trustees of non-stock corporations may vary under the articles of incorporation or by-laws, lifetime or unlimited term of the Board is not allowable. It is worth mentioning that under Section 7 of the Corporation Code the exclusive right or privilege to be voted as members of directors of stock corporations is limited only for a period of five (5) years. An analysis of the rationale behind the limitation reveals that it is a remedial legislation designed to prevent possible abuse of the Board. A lifetime or unlimited term of the Board absolutely deprives other stockholders or members of the opportunity to participate in the management of the corporation. In other words, unlimited term of the Board was not intended by the Legislature. While the restriction under Section 7 of the Corporation Code applies to stock corporations, the same is likewise applicable to non-stock corporations in view of Section 87 thereof which states that provisions of the Code governing stock corporations, when pertinent, shall be applicable to non-stock corporations. Thus, in line with the above limitation and the rationale behind it, the Commission limits the term of the members of the Board of non-stock corporations at one time to only (5) years. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman